Please find below a brief update on certain developments in the RES sector of Ukraine aimed at improvement of payments to RES Producers under “green” tariff.
The Ukrainian state offtaker may determine volumes of “green” electricity to be sold at auctions for bilateral contracts
On October 28, 2020 State Enterprise “Guaranteed Buyer” (the “GB”) based on Resolution No. 1002 dated 28 October 2020 On Amendments to Procedure on Running Electronic Auctions on Sales of Electrical Energy under Bilateral Contracts (available in Ukrainian at https://zakon.rada.gov.ua/laws/show/1002-2020-%D0%BF#n8) obtained a right to determine the volume of electricity for sales at auctions for bilateral contracts at its own discretion. Before 28 October the GB had to follow certain thresholds for sale of such electricity at the auctions which could detrimentally affect financial results of its operation, e.g. if the price at day-ahead market or intraday market was low. The first auction after the amendments takes place on 5 November according to GB’s site (see at https://www.gpee.com.ua/main/news?id=468)
The Ukrainian Regulator increased transmission tariffs to cover “green” electricity
On October 4, 2020 National Commission On State Regulation in the Sphere of Energy and Utilities (the “Regulator”) adopted Resolution No. 1998 On Introduction of Changes to Resolution of the Regulator dated 10 December 2019 No. 2668 (the “Resolution”). The Resolution increased the transmission tariff from UAH 240,23 per MWh to 312.76 per MWh. This tariff will allow obtaining revenues for payment of ongoing production by RES producers (it does not cover past debts). According to the amended structure of the transmission tariff the payments to the GB for RES Producers have been increased for more than UAH 6.5 bln which will allow to pay more to RES producers. The Resolution takes effect only on 1 December 2020, and most likely PjJSC “NPC “Ukrenergo” (the “TSO”) will be able to collect and direct to the GB more payments than it can do now but for sure not for the entire amount of the above mentioned increased amount of payments.
The Resolution is available in Ukrainian at http://www.nerc.gov.ua/?id=55568.
During the meeting the head of the Regulator also suggested industrial consumers to lobby 20% or 30% coverage of payments under “green” tariff by the state budget so it would be able to consider the decrease of the transmission tariff as well as suggest to implement direct sales by RES producers with coverage of difference between “green” tariff and day ahead market price by relevant compensation which will also improve the situation with the transmission tariff.
The Ukrainian parliament supported in the first reading the possibility of state guarantees for the TSO
The Ukrainian parliament adopted in the first reading a Draft Law No. 4119 dated September 18, 2020 (the “Draft Law”). Inter alia, the Draft Law establishes that the state guarantees in 2020 could be issued at the decision of the Cabinet of Ministers of Ukraine (the “CMU”) to secure performance of debts of state owned TSO. This will allow the TSO to seek from the government guarantees for obtaining loans from international financial institutions and Ukrainian banks to cover debts to the GB which in its turn shall make the payments to RES producers. Please note that in accordance with Memorandum of understanding on resolution of problematic issues in renewables sector (MoU) between the Ukrainian state authorities and RES producers and investors producers dated 10 June 2020 the debts owed to RES producers will be repaid until 31 December 2021 in accordance with the following schedule:
- 40% in the fourth quarter of 2020;
- 15% during each quarter of 2021.
Therefore, if the Draft Law is adopted in its entirety and enters into force, we could expect that the TSO would be able to procure from the CMU the respective decision on a state guarantee to obtain respective loans covering 40% of the current debts to RES producers.
Despite these positive developments we cannot exclude that recent legislative changes and developments in the RES market will be considered to be adverse to investors to such extent so they will be forced to initiate individual or collective (mass) claims via investment arbitration. Dentons held webinars on collective claims in arbitration and considers holding them to discuss the above mentioned and other developments as well as queries raised by interested investors. If you want to register for future webinars, please contact PR Specialist Myroslava Tretiak via e-mail myroslava.treitiak@dentons.com.
Maksym Sysoiev, Partner at Dentons
