Ukraine improves PPA for renewable energy

On 14 September 2017 the National Energy and Utilities Regulatory Commission (NEURC) in cooperation with the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) adopted amendments to the template Power Purchase Agreement (the"PPA") by the Resolution "On Approval of the Amendments to the Template Power Purchase Agreement between the State Enterprise "Energorynok" and Business Entity that Produces Electricity From Alternative Energy Sources" No. 1118 (the "Resolution"). The Resolution will become effective after its official publication.

The PPA is an agreement between a producer of electricity from renewable energy sources and the State Enterprise "Energorynok" ("Energorynok") which has a statutory obligation to purchase all electricity from renewable energy sources under the "green" tariff (i.e. a Ukrainian analog of feed-in tariff).

Key innovations include the following:

  • the PPA is effective until 1 January 2030: before amendments the template PPA did not fix term of the PPA and as a matter of practice it was usually executed for 1 year and then prolonged on a yearly basis. The revised template PPA states that the duration of the PPA will be until 1 January 2030;
  • pre-PPA: the PPA can be executed before construction and commissioning of the power plant. Executed pre-PPA becomes effective only when a producer of electricity from renewable energy sources fulfills all condition precedents listed in the template PPA, including gets a license for production of electricity, becomes a member of the Wholesale Electricity Market, receives "green" tariff and etc.;
  • extended force majeure clause: the list of force majeure situations was extended, now force majeure is more focused on armed conflicts and related situations;
  • assignment of rights under PPA: the revised PPA stipulates that costs received from Energorynok according to the PPA can be assigned by the producer of electricity from renewable energy sources to creditors for usage of such costs as financial instrument to secure creditors' rights. The only requirement for this assignment is a written form with the expressed consent of another party of the PPA to accept assignment;
  • and more options for dispute resolution: in particular, as a first step the PPA proposes to resolve the disputes by means of negotiations. For this purpose it is possible to engage the Dispute Resolution and Negotiation Centre of the Energy Community. In case of failure to resolve the dispute by negotiations, commercial courts of Ukraine or international commercial arbitration based on the Rules of the International Chamber of Commerce (ICC) with a place of arbitration in Paris are available.

In addition, the updated version of the template PPA foresees that Energorynok will be substituted by the Guaranteed Buyer in the PPA when all provisions of the Law of Ukraine "On Electricity Power Market" No. 2019-VIII dated 13 April 2017 come into force, i.e. from 1 July 2019.

The amendments are significant and important for the Ukrainian renewable energy market as they introduce more confidence and guarantees for potential investors.

For further information please contact Asters' counsel Yaroslav Petrov and associate Olena Sichkovska.

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