US to sell diesel locomotives to Ukraine under $156.6 million loan – NV report

Who will pay for them, can Ukrainian railway workers operate the engines, and how this project relates to former Ukrainian President Petro Poroshenko and Donald Trump — those are some of the questions we will attempt to answer.

Trump’s trace

In February 2018, UZ and General Electric Transportation (GE) signed a framework agreement on the purchase and repair of diesel locomotives worth over $1 billion. It was supposed to be the largest U.S. investment in the Ukrainian economy at that time, expected to localize the production of locomotives at one of the Ukrainian machine-building enterprises.

“The 15-year agreement envisages the production of up to 225 new and upgrading up to 75 old mainline diesel locomotives with a significant [up to 40% production] localization in Ukraine,” said the then acting UZ CEO Yevhen Kravtsov.

The event was elevated by the presence of the then Ukrainian President Petro Poroshenko and the then U.S. Ambassador to Ukraine Marie Yovanovitch at the signing. Poroshenko touted the deal as a result of his negotiations with the then U.S. President Donald Trump in June 2017.

But in the end, Ukraine received only one batch of 30 locomotives worth about $140 million, which were purchased by the state-owned Ukreximbank and transferred to UZ under a lease.

Old friends, but without production localization

The original agreement dealt with GE TE33АС diesel locomotives, which have since been rebranded as Wabtec Evolution, after Wabtec acquired GE Transportation in 2019.

According to Ukraine’s Infrastructure Ministry, the Export-Import Bank of the United States (EXIM), with the approval of the U.S. government, greenlit an agreement to provide UZ with a loan worth $156.6 million for the purchase of about 40 pieces of these locomotives.

Ukrainian and U.S. officials, led by U.S. Special Representative for Ukraine’s Economic Recovery Penny Pritzker, announced the new deal on April 10.

“In any case, you’re worthy of support, and this agreement, which will be further implemented at the legislative level, is something we can do together, when the efforts of government and the private sector are aligned,” said Pritzker.

Oleksandr Kubrakov, Ukraine’s Infrastructure Minister, hailed the agreement as an important signal for international business regarding investing in Ukraine. UZ’s Chairman of the Board, Yevhen Lyashchenko, announced the railway operator was the first Ukrainian state-owned company to receive financing from EXIM.

But will Ukrainian railway workers be able to use the new equipment? Well, yes, since UZ already uses nearly three dozen such locomotives in its fleet.

UZ received the last batch of the 30 GE engines in March 2019. Kryukiv Railway Car Building Works (located in Kremenchuk, Poltava Oblast) reported then that the planned localization level of 7% was achieved when adapting the locomotives to the Ukrainian rail network.

This first stage of production localization included manufacturing road cleaners, masks, signal and radio systems, CCTV systems, fire extinguishing equipment, arranging the driver’s cabin, repainting, signage, as well as certification, transportation, and insurance services.

About 60 Ukrainian companies, including 10 manufacturers of basic equipment, took part in the project.

Ukraine lost only one locomotive out of 30 from that batch. According to Lyashchenko, it was destroyed Russia-occupied Melitopol, Zaporizhzhia Oblast.

Therefore, forthcoming shipments of TE33АС/Wabtec Evolution engines will significantly bolster UZ’s fleet. At the same time, the war has put any meaningful production localization of them out of Ukraine’s reach. The deal is expected to be finalized sometime in late 2024.