integrites and renewables in ukrainefrom the total energy consumption volume ukraine target 2020 11%...
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Dr. Oleksiy Feliv, LL.M.Managing Partner
INTEGRITES AND RENEWABLESIN UKRAINE
INTEGRITES AND RENEWABLES IN UKRAINE
Not-just-business approach:• We focus on projects beneficial for Ukrainian
economy and society
Our experience: • legal support to RES projects with over $3
billion value• Investors: NBT, Total Eren, EuroCape, Scatec,
United Green • Syvash wind plant for NBT – first large-scale
project financing in RES in Ukraine
UKRAINE: “GREEN” TREND
EUTarget 202020% of power generated from RES from the total energy consumptionvolume
Ukraine Target 202011% of power generated from RES from the total energy consumption volume
UKRAINE: “GREEN” TRENDKEY FIGURES
Since 2014, over € 2.5 billion invested into RES projects
In 1Q 2019, 861.1 MW facilities commissioned in Ukraine, which is 16% more than in the whole 2018
Installed capacities of renewable energy facilities in Ukraine exceed 3 GW*
*NCER report
UKRAINE: “GREEN” TREND BOOMING MARKET
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2014 2015 2016 2017 2018 2019(EXPECTED)
967 9971118
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2274
4700
Renewable energy facilities working under FiT (MW)
THINGS TO KNOW ABOUT CURRENT REGULATION
Fixed feed-in tariff introduced in 2009 and valid until 2030
Current support scheme provides three main guarantees:
In 2019 Ukraine introduces a new state support scheme as a game-changer for the industry
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FiT itself (10 Eurocent for 1 kWh wind and 15 Eurocent for 1 kWh solar facilities commissioned in 2019)
The state takes off all the power produced from RES
Investors get immunity from retroactive law changes
NEW STATE SUPPORT SCHEME
ü Auction Law becomes effective from July 2019ü Auctions will be conducted twice a year
ü Auctions will be mandatory for o WPP with an installed capacity 5+ MWo SPP with an installed capacity 1+ MW
ü Developers who have executed PPAs before 2020 can qualify for the FiT scheme
ANNUAL QUOTAS
ü Annual quotas for each type of RES will be approvedby the Government
ü Duration of PPA: 20 years
ü Quotas during 2020-2022 transition period: o SPPs – no less than 15%o WPPs – no less than 15%o other RES – no less than 15 %
FEED-IN TARIFF
The FiT will decrease gradually :
For micro-, mini- and small HPPs and geothermal facilities –
by 10% in 2020
For WPP – by 10% in 2020
For SPP – by 25% in 2020 and further by 2,5% each year within the following 3 years
“SYVASH” WIND FARM
TOP-10 FACTS ABOUT SYVASH
The biggest in Ukraine
First full wrap EPC
Capacity –
250 MW
Investment –
€ 380 mln
One of the biggest in
Europe
The first non-recourse
financing project in Ukraine of such volume
Financed by international lenders from
7 jurisdictions
Financial Adviser –
JP Morgan
5NBT, Total Eren,
Power China, Nordex entered
Ukraine
EBRD's Sustainability Award 2019
in Sustainable Energy
PROJECT DEVELOPMENT HIGHLIGHTS
All of these have undergone major reforms over the last four years:
ü New law on the Electricity Market in 2017ü New law on the EIA in 2017ü New grid connection codes in 2018ü Simplification of securing the land in 2018ü Simplification of construction permits in 2018
securing the land
grid connection
construction permit
environmental impact assessment
Main milestones in developing a project in Ukraine
PROJECT FINANCE HIGHLIGHTS
Signing of Syvash project financing documents in January, 2019 at the National Investment Council meeting in Davos (Switzerland)
Swedish Holding
SYVASHENERGOPROM LLC
EUR 263.6M
SENIOR DEBT
PROJECT FINANCE HIGHLIGHTS:KEY ISSUES TO CONSIDER
ü Non-Recourse or Limited Recourse ü Syndicated Financingü Collateral Agent ü Account Bankü Offshore vs Local Accounts Structureü FX Purchase and Accumulationü Loan Pricing. FX Conversion. Capital Distribution Limits. ü Viable Security Structure (Pledge over PPA, Step in Rights) ü Escrow Accounts
BANK ACCOUNTS STRUCTURE
ü Onshore and offshore accounts of (1) SPV, (2) shareholder(s)
ü UAH and EUR/USDü Special purpose for each account (usually)ü Distribution testsü Accounts are subject to pledgeü Accumulation of foreign currency (for hedging)ü Accounts bank - collateral agent (common)
FUNDS FLOW HIGHLIGHTS
Debt Service Accounts (DSA) ü Transferring and accumulation
of foreign currencyü Periodical replenishment (and
withdrawal) for debt servicingü Limit set by NBU – up to
nearest repayment date ü Final maturity for bullet loans
Debt Service Reserve Accounts (DSRA)ü Offshore vs Onshore DSRA Accountsü Transferring and accumulation of
foreign currencyü Minimum required amount kept at all
times (not used)ü At least equal to principal and interest
(1, 3, 6 etc. months)ü Payments made only when the
borrower would not otherwise have sufficient funds available to pay (default)
FUNDS FLOW HIGHLIGHTS
ü Accumulated funds must be used for the purpose for which they have been purchased (as declared to the accounts bank)
ü No default occurs – balance shall be used for loan repayment (NBU requirement)
ü Payment mechanics must be clearly described in the transaction documents
ü Funds accumulated onshore or offshore to service the repayments under one loan may not be used as security for the repayments under another loan (NBU position)
Purpose
Security
EPC
ü An important element of the financing is a standard lenders’ expectation for the parties to enter into a suite of acceptable construction and service contracts.
ü Traditionally wind projects in Ukraine would be implemented under split contractual arrangements, separately for turbines supply, installation and BOP part.
ü Syvash project benefits from a “fully wrapped” single point EPC Contract. It is the first EPC wind farm agreement in Ukraine with an internationally recognized EPC contractor.
ü An innovative solution was developed for Syvash where the EPC contractor would just establish a representative office in Ukraine (permanent establishment) and obtain the construction license on the name of that establishment. This allowed to keep the subordination of the EPC to foreign law and more flexible regulations.
OTHER ONGOING PROJECTS
Scatec Solar
Construction of several solar PV power plants in differentregions of Ukraine. Overall capacity – approx. 400 MW
Legal counsel on:o various transaction structures (1-4 international
lenders)o statutory changes important for renewables financing
in Ukraineo legal support for EPC and during the project
constructiono regulatory issues
LongWing
Construction of the first 98 MW phase of a planned 500 MWwind farm in Ukraine
Legal counsel on:o project financing issues, including negotiations with the
lender (OPIC)o finance documentation and the National Bank of
Ukraine regulations and licenseso advise on the BOP contracts, land securing and project
constructiono regulatory issues
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