The deal foresees Ukrzaliznytsia purchasing 200 locomotives from General Electric’s Pennsylvania plant and the modernization of 75 of its own locomotives at a cost of up to $110 million.
The seven-year deal envisions up to 40 percent of the locomotive parts being produced in Ukraine, making the country a part of General Electric’s global market infrastructure. This will help Ukraine to better meet demand for its rail freight services, easing a major bottleneck for exporters.
Ukraine’s railways monopoly Ukrzaliznytsia employs more than 270,000 Ukrainians and has a rail network of 21,000 kilometers of track. Altogether, this year Ukrzaliznytsia plans to invest about $1 billion in its rail fleet. This includes purchasing 60 new wagons, 30 General Electric locomotives, the production of 3,600 freight wagons, and the modernization of 226 passenger wagons and 10,000 freight wagons.
The U.S. conglomerate will be partnering with Ukraine’s public-joint stock company Kryukiv Railway Car Building Works plant, which manufactures locomotives and multiple-unit trains in the Poltava Oblast city of Kremenchuk.
The deal is secured with financing from Ukraine’s state-owned Ukreximbank and U.S.’s Citibank. The first delivery will be worth $120 million and is due by the end of 2018.
General Electric’s TE33A Evolution diesel-electric locomotive was tested on Ukrainian railroads for four months, two years ago.
Yuliya Kovaliv, head of the Office of the National Investment Council, a nongovernmental organization that partners with government to lure investors such as General Electric to Ukraine, says that the deal will bring many benefits to Ukraine’s economy such as providing easier logistical access for local businesses to be part of the global supply chain.
“It is also a good sign about improvements in Ukrainian business climate for potential investors who are considering stepping into country in the nearest future,” Kovaliv said. “General Electric is committed to further work in Ukraine, the next focus for them will be renewable energy and healthcare sectors.”
Back in October 2004, General Electric had a similar deal with Kazakhstan’s national railway Temir Zholy, where it delivered 200 locomotive kits to modernize the Central Asian republic’s locomotives. Since then, General Electric has built a $125-million plant there to manufacture locomotives.
General Electric is headquartered in Boston, Massachusetts and does business in a many different areas such as healthcare, financial services, pharmaceuticals, automotive industry, engineering and software development. Experts say that with a stronger General Electric presence in Ukraine, the conglomerate will also start investing into other areas, such as medical services.