Renewables update: new procedure on support quota distribution auctions

On 31 January 2020, the Resolution of the Cabinet of Ministers of Ukraine (“CMU”) “On Implementation of Competitive Conditions of Stimulating the Production of Electric Power from Alternative Energy Sources”, dated 27.12.2019, No. 1175 (“Resolution”), came into force. The Resolution has adopted, inter alia, the procedure on holding the support quota distribution auctions (“Procedure”).

The Procedure is developed in order to replace the feed-in tariff. It specifies the order and manner in which the so-called “support quota for commercial entities which produce electric power from alternative energy sources” (“Quotas”) will be distributed.

In particular, the Procedure specified the following:

• All Quotas will be distributed through public online auctions (“Auction”);
• Each year CMU will approve a resolution on Quotas for the next 5 years; such resolution must be issued by 1 December of the relevant year and must specify the following information:

-> annual Quotas for the next 5 years;

-> if applicable, the non-distributed Quotas, which are offered for the next Auctions;

-> if applicable, the list of land plots (duly allocated) (“Plots”), which are offered for the construction of renewable energy sources (“RES”) facilities; each such Plot will be complemented by (i) duly approved technical conditions for RES construction and (ii) additional Quotas; and

-> Auction’s timetable.

• Auctions will be carried out in the following order:

The State Company “Guaranteed Buyer” (“GB”) announces an Auction and publishes relevant details on its website, including:

• bidding lots (i.e. Quotas) for each RES;
• details of Plots (if applicable);
• date of an Auction and deadline for submission of applications;
• list of documents, necessary for bidding; and
• starting (i.e. maximum) price for each lot;

Participants register themselves in the online bidding system and submit applications for participation in an Auction with the supporting documents (including an initial price proposal for Quotas, bank guarantee, grid connection agreement, title documents to land plots, etc.);

If noone applies for an Auction or only one application is submitted, the Auction is considered to be invalid;

If an Auction is valid, the bidding is carried out in the following way:

• the electronic bidding system (“EBS”) starts an Auction;
• during the first 15 minutes all applicants may cross-check general information about lots;
• during the next 15 minutes each applicant may (but not obliged to) decrease its initial price proposal;
• upon expiry of such 15 minutes, EBS automatically closes bidding, discloses all information submitted by all applicants (including price proposals), and generates an initial report on bidding; and
• during the next 10 business days, GB verifies tender documents and (if no breach is identified) EBS generates the final report on bidding, specifying all price proposals and the winner of the Auction (i.e an applicant who offered the lowest price);

The successful bidder and GB must execute a power purchase agreement within 15 business days following the date of the final report on bidding.