Compromise reached: going ahead with the “green” deal for Ukraine

On June 10, 2020, the Ukrainian government and key energy industry associations (“Producers“) signed a Memorandum of Understanding on Regulation of Issues in the Renewable Sector (“Memorandum”). This Memorandum is an important milestone in efforts to resolve the crisis in the electricity market. The primary goal of the Memorandum is to make the Guaranteed Buyer position solid, including by reducing the so-called Green Tariff for renewable energy (“FIT”).

REDUCTION OF FIT

FIT restructuring will include:

For facilities put into operation from July 1, 2015 until December 31, 2019:

* Eurocent/KW

For wind and solar facilities put into operation from January 1, 2020:

For facilities put into operation until July 1, 2015:

Determined at the level of maximal FIT for land-based solar facilities put into operation until March 31, 2013 with the installed capacity exceeding 10 MW, the FIT rate will be reduced by 15%.

ACCELERATED RESPONSIBILITY FOR IMBALANCES

Producers shall bear financial liability for all errors in forecasting the electricity production with a tolerance margin for imbalances:

50% – after 1 January 2021

100% – after 1 January 2022

The tolerance margin is 5% for the solar and 10% – for wind.

 

PRE-PPAs

• Pre-PPAs for new solar facilities will be terminated by July 31, 2020.
• Pre-PPAs for wind farms remain as under the current law (commissioning within three years as of pre-PPA signing)

 

WHAT IS OFFERED

As a counteroffer for the reduction of FIT, the government promises to cover the debt and resume regular payments as well as to enhance the protection of investments into renewable energy.

• Repayment of the Guaranteed Buyer’s existing debt to renewables will be restructured until the end of 2021 and shall be settled as follows:

 

40% of the debt – IV quarter 2020

15% quarterly during 2021

• The Guaranteed Buyer will resume full settlement for the electricity dispatched by renewable energy producers following the month in which the new law reflecting the agreement reached in the Memorandum is passed.
• Protection of investments, including foreign investments, shall be incorporated via a stabilization clause in the law.

 

WHAT IS NEXT

As the next step of implementation of the Memorandum, its provisions shall be converted into a draft law and submitted to the Ukrainian parliament. The new law is expected to be passed before July 1, 2020.