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“Ukraine – First Mover” Seminar 17 December 2014 Kyiv, Ukraine

Current statusand future trends of infrastructure projects in Ukraine. Promising opportunities for energy and agricultural sectors


• Briefly about the firm

• Current status of infrastructure projects in Ukraine

• Future trends of infrastructure projects in Ukraine

• Opportunities for energy sector

• Opportunities for agricultural sector

CONTENT


• Strong Danish and Scandinavian Focus

• Danish legal partner

• IFC expert on “green” tariff mapping in Ukraine, and legal expert of Ukrainian Bioenergy Association and Ukrainian Wind Energy Association, and Pig Farm Association etc.

• Recognized in infrastructure in IFLR 1000, Ukrainian Law Firms and many other rankings

• Practical experience of implementing infrastructure projects, including Danish clients, at all stages

ABOUT FIRM

Clients (1)


Agriculture

Energy

IT

Aviation

Dan-Farm Ukraine

Clients (2)


Financial institutions

Consumer goods

Industry


• One of the largest land area in Europe, including arable lands, and huge construction potential

• Obsolete infrastructure in most of industrial sectors

• Needs for new construction and reconstruction of infrastructure, including one damaged in the Eastern Ukraine

• Despite the situation a number of projects on-going but most of projects are on hold and/or slowed down

• Still quite complicated construction and

land procedures, currency regulation restrictions

CURRENT STATUS


• Simplification of construction and land procedures and relaxing undue restrictions for investments

• Foreign sources of financing will prevail (IFC commits EUR 5 billion till 2020, U.S. financial institutions up to USD 17 billion, IFC, IFU, EKF, NEFCO keep financing)

• Privatization and PPP re sea ports, heat and power facilities…

• Key priorities: energy, agricultural and municipal sectors

• Consulting opportunities for Danish companies

(EBRD, EU and other consultants tenders)

FUTURE TRENDS


• Tender for investors to modernize gas transportation and storage system (EU or US companies may own up to 49%)

• Unconventional gas exploration/production, LNG terminal

• Unbundling in gas, power and heat sectors and reforms

• Liberalizing gas and electricity markets, decrease of subsidies and bringing prices of utilities services to market ones

• Transfer to stimulating tariffs in energy sector (RAB)

• Energy saving (gas substitution 30-50%) and ESCO

ENERGY SECTOR


Current production from renewables (power capacity)

• electricity – 1419 MW (wind – 497 MW, solar – 819 MW, small hydro 77

MW, biomass (biogas) – 26 MW)

• heat – 1070 MW

Governmental National Plan for Renewables till 2020

Electricity production

• Small hydro – 430 MW

• Solar – 2420 MW

• Wind – 5900 MW

• Biomass (biogas) – 4220 MW

Heat production

• Solar – 200 MW

• Biomass (biogas) – 5000 MW

• Heating pumps – 600 MW

ENERGY EFFICIENCY


Tax incentives

• exemption from import VAT and customs duties for energy efficient equipment

• decrease of land tax for RES power plants by 75%

• limits for rental payments for lands lease from state and municipal authorities

by 3% of appraisal value for RES power plants and simplified procedure for

receiving

• exemption from CIT of profit from simultaneous production of electricity and

heat and/or heat from biofuels till 2020

• exemption from 80% CIT for profit from sales of energy efficient equipment

• exemption from 50% CIT for profit from approved energy efficient projects

Stimulating heat tariff for renewables

• for municipal/state customers – average price for heat from natural gas

• if for commercial users – 90% of average price for heat from natural gas or up

to 21% rate of return

• if for population – average price for heat from natural gas in

a settlement

• upcoming compensation of substitution of natural gas in

state/municipal sectors (approximately ½ of substituted gas price)

ENERGY EFFICIENCY


Green Tariff (GT) mechanism

GT rates (if commissioned till 2020)

• biomass (biogas) – 11,1 eurocents per kW/h (expected changes: biomass -

14,4 eurocents per kW/h and biogas – 16,2 eurocents per kW/h)

• wind (if turbines more than 2 MW) – 10,2 eurocents per kW/h

• solar (depending on power capacity and other factors) – 30,5-33,2 eurocents

per kW/h (expected changes: to be lessened to apr. 20-25 eurocents per kW/h)

• small hydro (depending on power capacity and other factors – 10,5-17,4

eurocents per kW/h

Issues

• local content requirements (expected to be abolished)

• only 100% waste biomass is eligible to GT (expected to be abolished)

• approval GT after commissioning

• untimely adjustment of currency exchange fluctuation (planned

to be corrected in the beginning of the next year)

ENERGY EFFICIENCY


• In 2014 one of the best harvests in the Ukrainian history (over 63 mln tons of grain) despite everything

• No. 1 producer/exporter of sunflower and sunflower oil

• In top 10 of producers/exporters of maize, barley and wheat

• Increasing production and export of dairy products, pig meat, eggs and chicken

• 13 IPOs of Ukrainian agro businesses in

Europe

AGRICULTURAL SECTOR


• Inventory of lands, simplifications of land and construction procedures, land lease market vs. land market

• Simplified system of taxation till 2018 (based on value of lands rented)

• Adoption of EU standards and requirements

• Liberalization of export

• Construction of port terminals, farms and food

processing facilities

AGRICULTURAL SECTOR


CONTACTS

Maksym Sysoiev, LL.M. Counsel, Attorney-at-Law [email protected] MARCHENKO DANEVYCH www.marchenkodanevych.com Office 49 | 4-B, Ivana Franka Street | Kyiv 01054 | Ukraine Tel./Fax (Office): +380 44 220 0711

mailto:[email protected]

http://www.marchenkodanevych.com/


THANK YOU!

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