Ukrainian car production plant offers employment opportunities
Due in part to political instability, long-term financing is hard to source in Ukraine and is perceived as high risk. Lutsk Automobile Plant (LuAZ) produces cars, including Ladas, Hyundais and Kias. In 2006, the plant produced 40,000 cars, making it Ukraine’s second largest car producer. In order for the company to meet rapidly growing demand, LuAZ is undergoing an investment program totalling €227 million, of which LuAZ itself is contributing €100 million.
FMO, together with risk-sharing partners DEG, Cordiant Capital, HVBU and HVB-AG, is participating in a syndicated loan worth €62.5 million arranged by Unicredit Bank Ukraine. FMO’s investment of €17.5 million will enable LuAZ to expand its car and bus production facilities using the most modern equipment possible. As a result, 6,500 new jobs, on top of the existing 2,000 jobs, will be created in Cherkassy and Lutsk. Both cities suffer from high unemployment rates and are in economically less developed regions of Ukraine. A further 19,000 indirect jobs are expected to be created in the service and transport sectors.
Moreover, FMO will assist LuAZ in upgrading its governance standards via a Corporate Governance Action Plan and appointment of an independent member of the Supervisory Board. LuAZ is working towards international certification of its technical, environmental, and social standards, setting it high above the Ukrainian average.