• Gutovska & Partners

Electricity Investments in Ukraine: Solar VS Soviet Power


With a new program of renewable energies support launched in Ukraine and the competitive electricity market opened, despite of a highly increased interest, I saw only a few foreign capital projects passed the assessment stage and moved to the capital injection over last 2 years.

Yes, the highly-expected both by business and EU regulators Law on Electricity Market, signed by President of Ukraine in June, gave the field to operate with, but still a range of risks make investors look on another jurisdictions.

Not going to far, my own clients run away last year after more than 4 months of successful (I thought) negotiations done and very precise plans have been developed. I've almost seen that wind farm already with my own eyes and talked of it as it's been supported half of the country already, but then they just packed and left me with a huge external report indicating 22 pages contras more than pros.

Meanwhile, my local clients (who usually decide on projects faster, easier, and sometimes paperless) go very confidently not only to traditional sources and wind farms, but to waste & thermal and even substantial solar power projects, seen before as not so feasible.

Will the market be successfully monopolized by those who dared (or those who had an opportunity)? Or more players'll come? Lastly, will there be the market and profitability, or the risk managers who refused to approve the Ukraine projects for their clients will say that sadly familiar "aha!" in a couple of years?

Not persuaded enough of any of these to give a firm answer, I'll go with another one -- if the needed advice, support and environment will be given, there is a chance for both local and foreign projects to participate effectively.

Starting with environment, yes, it hurts me personally as a desperate Ukraine defender to admit that the current environment is not comfortable and understandable enough. For everyone, in all industries.

The domestic governmental atmosphere, even prior to financing and cashflow managing, becomes the first red flag for the potential investor. Reaching the conclusion on placing & land regime solely might take years, while the expectation of informal payments shown by local authorities to facilitate, honestly does not comply with neither with your internal compliance nor with FCPA.

Then we go to tariffs and deeper to business legislative grounds, tax, authorities openness -- and fail to receive a clear image. As one of my clients said once, and now I use it with my paralegals to teach them how something shall be explained, -- "give me colored diagrams". In case of investing in renewables and electricity in general in Ukraine now, our diagram still has too much blank spaces.

We hope to see understandable procedure of MoUs with local authorities, higher standard of service from the Ministry, increased liability of unfair practices, and, definitely, no briberies allusions in any form.

While hedge funds and global players wait for above, the bravest and adventurous ones -- welcome to the game!

#energy #doingbusinessinUkraine

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