28 October 2020
Denys Shmyhal, Prime Minister of Ukraine
Serhiy Marchenko, Minister of Finance of Ukraine
Olga Buslavets, Acting Minister of Energy of Ukraine
Dear Mr. Prime Minister,
During the period 2010-2020, renewable energy investors mobilized almost EUR 10 billion to build 800+ renewable power plants in Ukraine with a total installed capacity above 7 GW, not including 25,000+ households that built another 0.7 GW. A new industry has been established in Ukraine that triggered the creation of thousands of jobs and attracting modern technologies and new competences to the country.
During the past year, the industry has unfortunately found itself operating in a survival mode, suffering from severe non-payments from the Guaranteed Buyer. Investors are facing the “perfect storm”; combination of feed-in tariff reduction (according to the Law 810), introduction of balancing responsibility from 01 January 2021, debt from the Guaranteed Buyer continuously rising (now exceeding UAH 24 billion) and inefficient / non-stable operations of the electricity market. In its current state, the renewable energy sector is non-bankable, may lead to further significant losses for stakeholders (both national and international) and it will inevitably trigger a higher number of arbitration claims over the coming months.
Instead of organized actions from the Government aimed at stabilizing situation and implementing provisions of the Law 810 and the Memorandum of Understanding, concluded in June 2020 between the state authorities and industry associations, we observe hostile statements from top officials. In a recent interview to Interfax Ukraine, the Head of Ukraine’s Tax Service accused renewable energy companies of tax evasion and made several false statements that are inappropriate for public servants.
In particular, he mentioned that renewable power plants “are rich”, “paid back their investments in full”, “pay zero taxes”. He also threatened the industry with tax inspections that “will find UAH 20 billion in unpaid profit tax”. Such comments perfectly illustrate why Ukraine struggle with attracting FDI and an improved investment climate, and it need to be addressed immediately.
Below we explain why these statements are false:
- Majority of installed renewable capacity in Ukraine was built in 2018-2020. With standard payback period for renewable power plants of 5-7 years, majority of projects will only repay their loans after 2025. With the recent cut of the FiT, the payback time is further extended.
- Renewable energy sector paid significant amount of taxes to the state and local budgets: UAH 19.77 billion in 2019, including UAH 6.17 billion of profit tax and UAH 11.68 billion of VAT. This is more than was paid by Energoatom and Ukrhydroenergo combined, and 3 times more than was paid by thermal power plants.
- Significant amount of renewable power plants in Ukraine (~30% of all capacity and increasing) was built with international funds. Such projects comply not only to Ukrainian standards, but also to all relevant international standards related to accounting, transparency, social and environmental issues. Numerous projects were financed by the EBRD, DFC, Black Sea Trade Development Bank, NEFCO, FMO, IFU and other international financial institutions.
On this basis, we believe that such statements and any potential actions against renewable investors, either Ukrainian or international, should be treated as harassment of the industry (that is among TOP 3 sectors of the Ukrainian economy in terms of FDI).
We respectfully request you to ensure that the public servants abstain from the statement and actions that harm investment climate in Ukraine and instead focus on ensuring stable and fair business environment. We and our members remain available to you and fully committed to the success of a vibrant renewable energy sector in Ukraine.
Ms. Oleksandra Gumeniuk
Director of European-Ukrianian Energy Agency
Mr. Oleksandr Kozakevich
Head of the Ukrainian Association of the Renewable Energy
Mr. Anrii Konechenkov
Head of the Ukrainian Wind Energy Association
Download the original letter in Ukrainian – EUEA_UARE_UWEA_Letter 28.10.2020