Ukraine Supports Use of Energy Service Agreements

The President of Ukraine signed two strategic bills on energy efficiency and energy modernization of the country, adopted by the Parlament of Ukraine on 9 April 2015, in particular Law No 327-VIII "On Implementation of New Investment Opportunities, Guaranteeing Rights and Legitimate Interests of Entrepreneurs for Conducting Large-Scale Energy Sector Modernization" ("Law No 327-VIII") and Law No 328-VIII "On Making Amendments to the Budget Code of Ukraine (Regarding Implementation of New Investment Opportunities, Guaranteeing Rights and Legitimate Interests of Entrepreneurs for Conducting Large Scale Energy Sector Modernization)" ("Law No 328-VIII").

These laws entered into force on 9 May 2015 and aim at implementing in Ukraine an international experience with energy service agreements, where private entrepreneurs will have an opportunity to invest own funds in energy modernization of state and municipally owned property and get profit deriving from such energy-efficiency measures.

An investor obtains guarantees of return of investments in 10 years after implementation of energy-efficiency measures on account of saving of resources deriving from such measures. The government will not make any investments; moreover, it will receive up to 10-20% of saved funds, while up to 80-90% will go to the investor.

The Law No 327-VIII defines an energy service agreement and its main terms and conditions, regulates mutual relationships of a customer and energy service provider, determines a mechanism for establishing price of services under energy service agreements, giving an opportunity to the institutions financed from municipal or state budgets to enter into energy service agreements for a period longer than 1 year, provides guaranties for entities investing in energy modernization regarding payment of compensation for the energy saving achieved under energy service agreements, specifies a clear mechanism for selecting a winning bidder in a tender for energy services, and secures monetary form of payments for energy services.

These measures will enable resolving the issue of energy efficiency in budgetary sphere and covering more objects within 10 years, that will reduce current expenditures of municipal budget for maintenance of buildings.

For further information please contact Asters' senior partner Armen Khachaturyan
and counsel Yaroslav Petrov.

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