The Ministry of Justice of Ukraine Approved the NERC Procedure on Calculation of Local Content in Renewable Energy Projects

In our last legal alert "Ukrainian Government Empowered Ukrainian Chamber of Commerce and Industry to Issue Certificates of Origin Evidencing Share of the "National Content" in Renewable Energy-Generating Facilities" as of 5 November 2012 we have emphasized that in 2012 investors have considered as a major obstacle in implementation of renewable energy projects under the Green Tariff mechanism, delays by the Ministry of Justice of Ukraine in approval of the Procedure on determination of proportion of raw materials, materials, fixed assets, works and services of Ukrainian origin in the price of construction of electro energy facilities, which produce electric energy using alternative energy sources (the "Local Content Calculation Procedure"), though, it had been adopted by the National Electricity Regulatory Commission ("NERC") on 14 June 2012.

On 2 October 2012 the Local Content Calculation Procedure was registered by the Ministry of Justice of Ukraine and it has already entered into force. The Local Content Calculation Procedure is applicable exclusively to companies that (a) have obtained an activity license on generation of electric energy or an activity license on combined generation of electric and heat energy, (b) own or use alternative energy generation facilities, construction of which commenced after 1 January 2012, and (c) plan to sell electric energy under the Green Tariff.

According to the formula on calculation of the local content share, the latter is defined as the sum of costs of goods and services originating from Ukraine (namely, raw materials, fixed assets, the main technical equipment, works and services) divided by total cost of the project and multiplied on 100%.

Ukrainian origin of raw materials, materials and fixed assets should be supported by certificates of origin, issued under relevant procedure approved by the Cabinet of Ministers of Ukraine Resolution No.878 on 24 September 2012 (please follow the link to see Asters' legal alert of 5 November 2012). The origin of works and services is determined based on the place of registration of the company, which renders the relevant works and services.

The local content share should be calculated by a relevant expert organization upon commissioning of the project. The list of expert organizations is available on the web-site of the Ministry of Regional Development, Construction and Housing and Communal Services of Ukraine, which was composed based on the criteria approved in the Ministry's Order No.53 as of 23 May 2011. Results of the local content calculation are rendered in a form of expert conclusion.

The expert conclusion and a list of documents supporting the local content, signed by the head of the expert organization, are the grounds for the NERC to grant the "Green Tariff" following the NERC procedure for issuance of "Green Tariff" No. 32 as of 22 January 2009.

For further information please contact associates Yaroslav Petrov and Yuriy Radko

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