Thematic session №4 “Green” Deal Funding Opportunities for Ukraine” outlined the main drivers, market status overview and “Green” Deal in progress, key challenges and opportunities in Ukraine, as well as gaps and areas for improvement. A view of international financial institutions which have already provided significant financing for Ukrainian projects, and what are their future plans in the light of the recent changes.

The speakers of the thematic session №4 were: Vincent Duijnhouwer, EBRD, E2C2, AD, Lead; Kateryna Stasiuk, Principal Manager, Eastern Europe Energy Eciency and Environment Partnership (E5P); Olaf Zymelka, Director for Eastern Europe, Caucasus and Central Asia, KfW, and Chairman of the Board, Green for Growth Fund; Dejan Ostojic, Lead Energy Specialist of World Bank; Serhiy Porovsky, Senior Energy Eciency Financing and Policy Expert, UNIDO/GEF UKR IEE Project “Introduction of Energy Management System Standard in Ukrainian Industry”; Sergiy Makhin, VR Capital Group, Portfolio Manager; Natalia KatserBuchkovska, Ex-People’s Deputy, co-founder and head of the Ukrainian Fund for Sustainability. Brian Bonner, Chief Editor Kyiv Post, moderated the session.

Vincent Duijnhouwer, EBRD, E2C2, AD, Lead noted that in Ukraine, we consider investments in terms of what commitments the country has made to reduce emissions. And this is a long-term perspective. Another area is a stable and predictable policy. There has already been a lot of discussion about RES in Ukraine. The EBRD supports about 1 GW of capacity. And that’s a big share. But we are very concerned about the stability and predictability of the policy so that investors can be confident when investing in projects. And the third thing we want to promote is innovation. And not only in terms of our financial instruments. Now is the time when we focus only on grants, but that time is coming to an end. In some cases, some infrastructure projects, grants will still be possible. But in the future we will focus on more market mechanisms. There will be a program for the corporate sector that will have a serious impact. It will be aimed at reducing bank lending rates. The participating projects will have to meet certain requirements on environmental technologies and good corporate governance.

Olaf Zymelka, Director for Eastern Europe, Caucasus and Central Asia, KfW, and Chairman of the Board, Green for Growth Fund, outlined that Green for Growth Fund has a portfolio of “green” projects, which have already invested about EUR 114 million in Ukraine, 345 MW of RES facilities were built in cooperation with six local banks. The dominant area of funding is renewable energy and the efficiency of the agricultural sector. The GGF has been selected by the European Union as a key tool for implementing a “green” recovery with EUR 100 million additional funding package, 40% will be directed to the energy sector in Eastern Europe to facilitate the the resumption of green projects in the region and providing rapid funding and crisis technical assistance.

Serhiy Porovsky, Senior Energy Eciency Financing and Policy Expert, UNIDO/GEF UKR IEE Project “Introduction of Energy Management System Standard in Ukrainian Industry” stressed that implementation of energy efficiency measures – multisectoral – is perhaps the most necessary to strengthen Ukraine’s economy, improve energy system stability, prevent energy poverty and reduce CO2 emissions.

The issue is not the lack of finances, there is enough capital in Ukraine. However, key issues include a lack of awareness of energy efficiency projects, especially among banks, and skepticism about the rapid return on investment that these projects can provide. We seek to radically change this perception and unleash the potential of the industrial energy efficiency market in Ukraine. Our experience shows that this is quite possible.

Sergiy Makhin, VR Capital Group, Portfolio Manager, stressed that there are many parameters in choosing a country for investment, but the two main criteria are trust and transparency. After several months of negotiations on the “feed-in” tariff, we still have a bitter taste. The Memorandum is not implemented, the gap in the payments of the “Guaranteed Buyer” is not covered, and this has become an obstacle to further investment. Confidence faltered. It is also difficult to call a transparent market. The issue of energy in Ukraine has become very politicized. There are interests of certain oligarchic structures, and decisions by the regulator and various authorities are made opaquely.

Today, much needs to be done for modernization and energy efficiency of the country. It is necessary to attract private funds for this, but there is a question of balance of risks and rewards and predictability of the investment climate. And this situation is difficult for all parties, because investors are losing money and Ukraine is losing its image.

Mr. Makhin added that the biggest component in the tariff today, when it comes to new financing, construction of new projects, is the cost of capital. If you compare tariffs in Germany and Ukraine, how can it be that in Germany tariffs are low, and in Ukraine they are so high. The question of the cost of capital. If we can reduce the cost of capital in Ukraine, it can be done through the auction system or the reliability of the policy, then this can be achieved. There was also no reduction in risk premiums for foreign direct investment, if there was a direct guarantee from the government it could reduce the risk premium and it could be an effective model for Ukraine.

Speakers presentation: https://cutt.ly/CfBErzI

Web-page of Energy Day: https://cutt.ly/nfCdgVZ

Watch thematic session #4: https://cutt.ly/Cf1qTNX