To:

Mr. Oleksiy Orzhel

Minister of Energy and Environmental Protection of Ukraine

Copy:

Mr. Oleksii Honcharuk                                                                                           

Prime Minister of Ukraine

Ms. Yulia Kovaliv

Deputy Head of the Office of the President of Ukraine

Mr. Dmytro Razumkov

Speaker of Verkhovna Rada of Ukraine

Mr. Andriy Gerus

Head of the Parliamentary Committee on Energy, Housing and Utilities Services

Mr. Valerii Tarasiuk

Chair of the National Commission for State Regulation of Energy and Public Utilities

Mr. David Arahamiya

Secretary of the National Investment Council

From

Mr. Mats Lundin

Chairman of the Board of the European-Ukrainian Energy Agency

Subject: Optimization options to stabilize the situation on RES market

Date: 27 November 2019

Dear Mr. Oleksiy Orzhel,

Association “European-Ukrainian Energy Agency” (EUEA), established in 2009, unites investors from Austria, Belgium, Great Britain, Norway, Spain, Switzerland, Turkey, Ukraine, USA and other countries which implement projects in Ukraine with total investments of more than 1.5 billion euros and with capacities which are under operation already 1251 MW, 1129,5 MW under construction and the joint capacity under already signed pre-PPAs 1720 MW.

 We would like to express deep respect to your everyday work and your initiative on being open with market players on the energy market of Ukraine. Having in mind that the solution to State Enterprise “Guaranteed Buyer” deficit can be found only via combination of different measures, we address you with the message below.

First of all we would like to underline the inadmissibility of any retroactive changes that will result in the loss of about $ 2.5 billion of direct investment. Retroactive changes to the existing RES support system will lead to more significant problems than the financing of the SE “Guaranteed Buyer”. The reasoning behind the inadmissibility of the retroactive changes was previously sent in a joint letter on behalf of the European-Ukrainian Energy Agency (EUEA) and the American Chamber of Commerce in Ukraine on September 20, 2019. Download

On behalf of EUEA we would like to propose the following optimization options to stabilize the situation on RES market:

1. We are against any additional reduction of terms of commissioning of the projects with signed Pre-PPA, which could violate the current legislation;

2. Figures for all Pre-PPAs voluntary restructuring:

1. for SPP – FiT reduction up to 15% relative to the FiT set for solar energy for 2020-2022 and +10 years extension of supporting period (20 years from the date of commissioning of the solar power plant for commercial operation);
2. for WPP – FiT reduction up to 7,5% relative to the FiT set for wind energy for 2020-2022 and +5 years extension of supporting period (15 years from the date of commissioning of the wind power plant for commercial operation);
3. for BPP – FiT reduction up to 5% relative to the FiT set for biomass/biogas energy for 2020-2022 and +10 years extension of supporting period (20 years from the date of commissioning of the bioenergy power plant for commercial operation).

3. All above proposed changes are possible under additional state guarantees to investors, in particular:

1. Stabilization clause in restructured prePPA and law applicable to RES, should cover no change in tariffs, taxation and averse changes in regulatory framework applicable to the RES producers which might result in decrease of revenues for RES producers;
2. Establishment of the FIT rate in the PPA;
3. The possibility to assign rights and obligations under the PPA in favour of producer’s creditors (lenders, EPCs etc.) in accordance with best international practices;
4. The possibility of step-in rights (direct agreements) in favour of producer’s creditors (lenders, EPCs etc.) in accordance with best international practices;
5. Termination of discriminatory legislative initiatives in the Verkhovna Rada for objects with a capacity above 150 MW;
6. Removal of PSO subsidy for technological losses of network operators;
7. Increase of TSO tariff;
8. Take measures to protect the tariff for the transmission of electricity from litigation and to achieve the proper level of payment discipline and to protect the cash flows of the SE “Guaranteed Buyer” through the mechanism of special accounts.
9. It is necessary to determine the mechanism and sources of compensation to producers of undelivered electricity when fulfilling generation restrictions by the system operator.

In case of any issues arising out of this letter, please contact Oleksandra Gumeniuk, EUEA Director: oleksandra.gumeniuk@euea.wsp.pp.ua.

Respectfully,

Mats Lundin

Chairman of the Board

European-Ukrainian Energy Agency

 

Copy also sent to:

EBRD

Energy Community Secretariat

EU Delegation to Ukraine

IFC

OPIC

Ukraine Invest

World Bank