20 September 2011
Ukrainian state company Lisichanskugol plans to borrow around USD 85 mln from the China Development Bank for modernization at its Melnikova coal mine, Interfax reported yesterday. The government approved a state guarantee for the loan on June 6, 2011. Vitaly Gorovoy: Local coal mines have traditionally purchased their machinery from Ukrainian or Czech companies. However, though there has been no official confirmation, the Chinese loan is likely to have stipulated Lisichanskugol buy Chinese. Given our expect of the Ukrainian annual market for coal machinery equipment at USD 850-950 mln for 2012E, we believe the USD 85 mln order implies limited negative implications for listed coal equipment manufacturers Druzhkivka Machinery (UX: DRMZ, N/R) and Svitlo Shakhtarya (UX: HMBZ, N/R) in the short-term. The Ukrainian government can increase the volume of Chinese loans to USD 1 bln in the next few years though, which could pose a more material threat to local coal machinery producers in long-term.