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Apr 14, 2017

Bunge invests $180 million, employs 400 in Mykolaiv

KyivPost
 

One thing in Ukraine has stayed constant across decades: the amber waves of grain.

It is fitting, then, that U.S. agricultural giant Bunge would stay the course and build a $180 million grain and oilseed terminal complex to completion in Mykolaiv, a southern port city of nearly 500,000 people nearly 500 kilometers south of Kyiv. It provides 400 jobs.

Finished in June, the complex includes an oilseed refinery and terminal and grain storage, increasing its capacity by 1 million tons - for a projected 5 million tons in annual export The complex is made to conduct exports, company officials say. But to build it, they had to withstand difficulties ranging from political instability to a collapsed economy to recalcitrant local officials.

So why did they stay?

Growing with Ukraine

Bunge entered Ukraine in 2002 after buying out Cereol, a French edible oil company that owned an oilseed extraction plant in Dnipro, the eastern provincial capital of 1 million residents located 472 kilometers southeast of Kyiv.

"Bunge was buying one of the biggest oil processing companies in Europe, but it started in Dnipropetrovsk to develop its grain trading business," said Oleg Bigdan, Bunge-Ukraine’s legal director. Bigdan joined the company when it was still Cereol, and has seen Bunge through its entire Ukraine development.

The company grew steadily throughout the 2000s, investing in Dnipro and building a handling terminal in Mykolaiv in 2011, while fighting off a corporate raid attempt in 2006.

"In about 2010, Bunge took a strategic decision to invest, they saw the success of our Dnipropetrovsk facility," Bigdan added.

At the same time, the company was suffering from inefficiencies in its supply chain. Terminals were at over-capacity, limiting the company’s ability to export its production. Workers had to make do with "old-type, Soviet infrastructure," Bigdan said, which added more delays.

Mykolaiv solution

So from there, Bunge began to eye Mykolaiv as a potential center for building an independent, self-sustaining production and export system in Ukraine, with Bigdan calling it "uniquely positioned logistically" to move grain and sunflower oil from the country’s breadbasket down the River Dnipro to foreign markets.

Olga Kopiika, the company’s government relations counsel, said that construction began in 2013.

"Our first launch of the facility was in April 2016," she added.

Others are interested, as well.

COFCO Agri, whose parent company Noble was recently bought out by Chinese investors, completed another grain terminal in Mykolaiv in May. That comes with an annual shipping capacity of 2.5 million tons per year.

Natalia Shpygotska, an agriculture analyst at Dragon Capital, said that building these kinds of grain terminals was likely a good investment for commodity traders in Ukraine.

"Exports will likely increase, and so will their growth prospects," Shpygotska said. "So it makes sense for them to establish their position here before these niches are taken by local players."

Ukraine has been profitable for Bunge — the company has an annual turnover of $1 billion from its Ukraine operations.

Looking ahead

Nine months since the new port complex launched, Bunge is evaluating its options. The Black Sea region covers nearly one third of world grain production potential, giving it enormous potential.

President Petro Poroshenko lauded Bunge’s project at its June opening ceremony, calling it "one of the largest investments in the Ukrainian economy in recent years." He brought it up again at the European Union-Ukraine summit in Brussels in November.

But Bigdan was hesitant on further development, complaining of difficulties in obtaining value-added tax refunds.

"We have projects in our pipeline that we are ready to execute and that will allow to increase our capacity," he said. "But we still need to see the clear signs from the Ukrainian government that we will be supported."

The new terminal for American-based agricultural giant Bunge stands in Mykolaiv on April 12. The company invested $180 million to increase storage capacity to 5 million tons and employs 400 people at the complex for grain and oilseed. (Anastasia Vlasova)

 
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