Report on UBBC conference at Hogan Lovells Cadwalader
‘Let’s think of Ukraine not as a distressed market, but as a frontier innovation country’
The first UBBC conference opened with a distinguished panel including Oliver Humphrey of HLC, Baroness Nicholson of Winterbourne, Lesia Vasylenko MP Rada, and Dmytro Natalukha head of Ukraine’s Privatisation fund.
Baroness Nicholson of Winterbourne spoke of her experience as an MEP as she worked to include Romania in the EU, which is now very relevant to Ukraine as it moves to enter the EU, while Lesia Vasylenko outlined the current situation in Ukraine, its challenges and the importance of support from allies through the coming winter.
Mark Irwin chaired the investment panel, which began with a presentation by Alina Slyusarchuk of KSE, outlining the resilience and future expected growth of the Ukrainian economy (see her presentation below). Alina discussed the transformation of the Ukrainian economy, something that became a recurring theme through the panels and a two speed economy based on innovation and the war, such as Tech, Miltech, renewable energy verses less evolving sectors. Dmytro Natalukha set out the case for Privatisation of assets, which are not only about raising finance, but also about ensuring responsibility for running operations and assets is transferred to private owners who can run them better, and more efficiently. Many assets are currently extremely good bargains, due to the war, including EUs largest Ammonia factory, picking up great interest due to the Gulf war, metal plants and key piers on Odessa port. There is a Dutch auction system that enables costs to reduce by 50% if no buyer found, then a further 25%. Details can be found below:
Mark then asked a series of questions around underwriting investment risk, IP and legality of asset sales. Panellists said that rule of law and governance are key to investor confidence, as well as political clarity, exit strategies and knowing how to navigate Ukraine, which may even outweigh risks of war. Derisking investment is being done by sovereign countries and IFIs like EBRD, IFC, EIB, DFC and EU mechanisms like export finance and credit, but are not yet sufficient to cover risks above £50m. The UK is behind other EU nations on derisking investment (covering £27.5bn) and needs to expand UKEF (£3.5bn already covered) or similar scheme to enable UK investors to take equity in Ukrainian businesses. There was strong agreement that Ukraine represent a significant opportunity, especially with Eu accession looming, but that UK is behind the curve at this time. Anna Rogers of TheCityUK said that investors are moving from observer status to more active interest in Ukraine and they are taking groups over to Kyiv, but mechanisms to derisk need to be available, and we need to move from interest to preparedness.
Henning Gloystein of Eurasia group then made a presentation on Ukraine’s strategic position in the war and likely outcomes for ceasefire ( 70% in 2027)( see presentation below) and the countries most likely to contribute to future reconstruction ( UK, Canada, Swiss, S Korea, Turkey).
Andrew Horsley of Innovate Ukraine outlined the successful collaboration between UK and UKR on energy transformation and innovation, siting £34m fund that has already yielded 4 winning product outcomes and over £104m in leveraged private capital (his presentation is at the end of this report).
Hans Nijkamp chaired the infrastructure panel, with leading companies including Aecom, Atkins Realis, SSB, ZHA who presented their work on modernising and attracting capital back into cities in Ukraine and building back better (see the presentation below). Discussions covered readiness and preparedness for companies to enter Ukraine, and current lack of priorities (apart from Military and energy restoration) will hamper post war reconstruction. But that companies should be as prepared with partners, invest in relationships, supply chains and plans now, as there will be a rush to start on ceasefire. We can take learnings from Ukraine and build resilience into reconstruction, as Russia is likely a long-term hostile neighbour. Enormous amounts of cash from a kind of Marshall fund will need to be mobilsed (£559m £1.3tr estimates) . Every sector will need to rebuild, reconstruction is going to happen, it will be the biggest transformation on the planet, for us all it will be an opportunity to learn from the Ukainians innovation solutions, and don’t not waste time now, do the due diligence, studies and preparation early.
The security and defence panel hosted by Malcolm Parry of HLC included the distinguished Victoria Vodychenko of Cambridge University’s Future Ukraine program, with her book due in November, who discussed integrating Ukraine into EU defence systems and analysis of the wider conflicts and solutions, James Westlake of Molfar, who has a white paper on security coming out, and Maksym Paraska of Bandera tech agency and IT Ukraine. Key outtakes included the observation is that war has transformed both Ukraine and Russia and the nature of war globally, that IP is important element of the transformation and who gets hold of it and that innovation is being telescoped into much shorter timescales.
For investors, it’s hard to understand the Ukrainian market, the cultural mindset of producers and how to ensure IP and tech can move out of Ukraine to allied nations. The UK Embassy and FCDO initiative to open the one stop miltech facility in Kyiv is being closely monitored as it should provide a transparent and validated way for vetted purchasers to source Ukrainian technology. This could also expand miltech into wider market areas and to mid-sized countries who will provide Ukraine with a source of ready exports, like agritech and provide international tech producers as way to showcase their products. Victoria said the pressure of war is driving adaptation and innovation from Ukraine where Time is the commodity they do not have enough of, time needed to adapt, to turn innovations into scalable production, and onto the battlefield, much of which is increasingly being done outside Ukraine. Time is key to investors, to understand how much advantage each product has in a fast-changing war.
Maksym pointed out that there is perceived and actual risk in investment with Ukraine, but a way to bridge the gap is to meet, prepare and connect with Ukrainian companies to reduce the risks. The Ukrainian government is also starting to underwrite strategic military projects, as are European nations like Denmark, Sweden, Germany. Increasingly there is need for closer collaboration in innovation and scaling, and the idea of co creation, with Ukrainian and allied companies. Maksym suggested that a risk mitigation strategy is to start small, test and amplify, do pilots now, and see where they go. There are over 1000 drone production companies, but few can scale and many will have to adapt and innovate to survive as the scaling squeeze continues. These may be useful partners for western companies to partner with, using their engineering innovation know how to create new products and dual, triple use for civilian purposes. Victoria asked the audience to think of Ukraine not as a distressed market, but a frontier innovation market and change the narrative. We were left with key thoughts for investors: Test, adapt, transform in this fast-moving market, think bigger and scale rapidly and see this to growth not just in miltech but more generally across engineering innovation. We all need to change the narrative on Ukraine and see it as a frontier innovation country and opportunity.
The Education panel chaired by Ian Gadd of Bath Spa University, explored how the Ukrainian university system is evolving in war, and the role of UK Universities in partnering with them. Dr Aziz Boussofiane of Cormack consultancy outlined over 200 projects evolved over the twinning project the FDCO funded and they ran. It has been hugely successful in many ways, not least for the collaboration on research between universities. This has also prompted the Ukrainians to adapt a more research-based strategy for universities, than more previously teaching based approach. Alina Slyusarchuk of KSE presented the range of the university’s activities described as a new model institution, including strategic economic guidance to the Government, research, rapid expansion of teaching from 50- 1700 economic students and a £160m impact fund. One area of increasing importance is the development and training of people, as Human Capital now and post war presents a challenge, which retraining and automation can help overcome.
Dr Nadiia Kopiika of UCL explained how the Bridge Ukraine project developed to provide research into reuse of rubble and concrete, now into a wider 50 strong team funded by Horizon, looking at a range of innovative aspects in construction with UK and Ukrainian expertise. Again, the idea of Ukraine is evolving as a frontier innovation country in conjunction with UK capabilities and support.
The day concluded with a lively reception at HCL with networking, collaboration and idea sharing ensued.
