BIOMASS: TRENDS AND CHALLENGES IN THE CONTEXT OF LEGISLATIVE DEVELOPMENTS IN UKRAINE
RES in Ukraine: Biomass. Risks. Opportunities.
Kyiv | 2015
Renewables in terms State Policies and Strategies
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Energy independence and energy security as the State priority strategy
Related and interconnected objectives:
Natural gas replacement (stimulation vehicles under governmental Regulations Nos. 293, 453 and pending amendments thereto)
Reduction of fossil fuel imports
Diversification of energy sources
Enhancing the level of energy from renewable energy sources (RES), in alignment with the European standards and objectives (RES Directive 2009/28/EC, Fuel Quality Directive 2009/30/EC, Energy Efficiency Directive 2012/27/EU, etc.). 11% RES share in the energy consumption target from RES sources in the final energy consumption toward 2020, according to National Action on Plan on RES
Implementing a broader and complex energy efficiency framework RES in Ukraine: Biomass. Risks. Opportunities.
Kyiv I 2015
Why BioEnergy?
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The high and affordable potential to replace natural gas (in Ukraine: a robust agricultural and industrial complex, abundant land, forestry, waste)
Fit for “decentralized“ regional and local use, optimization of own consumption patterns and costs of private enterpises, public insitutions, municipalities, regions, etc.
Fairly cost-competitive *
Environmentally friendly, low carbon economy contributing*
* depending on the bioenergy source and the employed technology
RES in Ukraine: Biomass. Risks. Opportunities.
Kyiv I 2015
Law 514-VIII as of 4 June 2015: Implications for Bioenergy
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Feed-in tariff (FiT) guaranteed until 1.01.2030 Reference to is preserved, subject to quarterly revision
(not monthly, as before) State-guaranteed off-take and 100% payment by the
Wholesale Electricity Market/the Guaranteed Purchaser of the entire output, save for own consumption of an electricity object
Connection-related costs are not compensated Grid connection no longer requires a project to be included
into a 10-year Plan for the Development of Energy System of Ukraine
The term is aligned with RES 2009/28/EC Directive to include not only waste, but also products and residues
RES in Ukraine: Biomass. Risks. Opportunities.Kyiv I 2015
Law 514-VIII: Implications for Bioenergy. – Cntd.
5 RES in Ukraine: Biomass. Risks. Opportunities.
Kyiv I 2015
FiT coefficients with account for the facilities’ commissioning date
Until 31.03.2013 1.01.2015 – 1.07.2015
1.07.2015 – 31.12.2019
1.01.2020 – 31.12.2024
01.01.2025 –31.12.2029
Biomass 2.30 2.07 2.30 2.07 1.84
Biogas - 2.30 2.30 2.07 1.84
1.04.2013 – 31.12.2014
2.07
Surcharge to FiT, % Level of useof Ukrainian-made
equipment,%5 30
10 50
Law 514-VIII: Implications for Bioenergy. – Cntd.
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Qualifiers and Limitations to Consider
Commissioning date is the major FiT-determining factor for each type of RESFiT and reference to EUR are set for facilities commissioned until 31.12.2024Surcharge is set for facilities commissioned from 1.07.2015 until 31.12.2024
RES in Ukraine: Biomass. Risks. Opportunities.Kyiv I 2015
Law 514-VIII: Implications for Bioenergy. – Cntd.
7 RES in Ukraine: Biomass. Risks. Opportunities.Kyiv I 2015
Facilities producing power from biomass
Element of facilities
Share,%
Boiler 25 Turbine (steam engine)
25
Generator 15 Network pumps 10 Exhausters and combustion air fans
5
Fuel-supply system 5 Gas cleaning system 5 Water supply and treatment system
5
Cooling towers 5 Total, per facility 100
Facilities producing power from biogas
Element of facilities
Share,%
Anaerobic digesters
35
Stirring plant 10 Gas blowers 5 Biogas purification system
15
CHP 35 Total, per facility 100
Facilities producing power from LFG
Element of facilities
Share,%
Systems of gas extraction, collection and supply
35
Compressors 5 Gas dehydration system
10
Gas purification system
15
CHP / generators / turbine generators
35
Total, per facility 100
Share indicators (breakdown by elements)to determine the level of use of Ukrainian-made equipment
Doing a BioEnergy Project: Some Tips and Techniques
Due diligence of a target, whether assets and/or shares (e.g., a land plot, building or an entity). Consider: land designation, title and history behind, encumbrances and limitations, available engineering and transport infrastructure, storage facilities, etc.
Project launch and structuring relations with partners (shareholding in the charter capital of a legal entity, joint venturing and cooperation agreements, etc.), funding issues
Permits, licenses, regulatory compliance
Contracting for project life-cycle/stages: structuring a contract matrix for the project, elaboration of contracts for all stages of project implementation (supply, design, construction, EPC, O&M, technical assistance, etc.)
Mind: term of validity, warranty and service obligations, handover of works and transfer/retention of title, security instruments, esp. in case of shared/mixed obligations or project take-over
8 RES in Ukraine: Biomass. Risks. Opportunities. Kyiv I 2015
More Room for Improvement Stability and predictability of legal framework and policies, investment protection
and guarantees
Reform of the Energy Market and its impact on RES industry
Adoption of a revised and updated energy strategy of Ukraine
Adequate , grounded and consistent target-setting; quantification of targets
Synchronization of laws
Implementing by-laws aligned with the new Law 514-VIII:– Procedure of determination of level use of Ukrainian-made equipment and establishment of
surcharge on top of FiT
– Procedure of off-take, payments and metering of power produced at power plants from RES
– Restated procedure of establishment, revision and termination of FiT
– Rules of grid connection
– Template of a take-off agreement, etc.
Deregulation
Incentives for combined combustion of biomass and traditional fossil fuels
Simplification of land allocation procedures9Kyiv I 2015 RES in Ukraine: Biomass. Risks. Opportunities.
More Room for Improvement. – Cntd. Overcoming contraints related to land allocation and land use change in the absence of
approved city-development documentation
Facilitation of the grid connection : fair and equitable treatment, a non –discriminatory and secured access to the grid
Upgrading or replacing grid, production, storage, transportation, logistics and engineering facilities
Efficient cost-recovery mechanisms for grid connection and clear grid connection procedures
Forestry laws to amend to facilitate procurement, storage and transportation
Affordable project financing
Pre-qualification to determine participant and project eligibility for FiT
Public-private partnerships to become a workable tool
Quality and sustainable equipment and technology to ensure continued efficiency and saving gains and long-term effect, cost competitiveness, project liquidity and bankability
Formation of biomass products‘ market; sustainability criteria and certification to expand to other markets, etc.
10Kyiv I 2015 RES in Ukraine: Biomass. Risks. Opportunities.
• More than 100 employees, including more than 70 legal professionals• Over 13 years on the Ukrainian legal market • Broad local and international recognition. Among most recent achievements: CEE Energy
Awards as Best Professional Services Company of the Year – Legal; shortlisted by the Ukrainian Legal Awards 2015 in Energy
• Winner of the most-reputed Ukrainian Legal Awards 2015 in the nomination “Best Law Firm of the Year”
• Full-service law firm• Broad regional footprint: offices in Kyiv, Lviv and Odesa• Industry and business- oriented approach• Deep understanding of the international standards and best practices, account for local
business environment and regional peculiarities• Cost-awareness and efficiency• Advice on the entire lifecycle of projects or any stage thereof• Engagements with international law firms, established contacts in over 150 jurisdictions
worldwide to support cross-border transactions• Active policymaking and lobbyist activities• Participation in, or cooperation with, industrial and legal professional associations and alliances
(European-Ukrainian Energy Agency, GIZ, Amcham, EBA, Confederation of Builders, FIDIC, etc.)
About Arzinger
Energy Projects supported by Arzinger*Development of a partnership structure between a Swiss RES developer, the finance company and the municipal authorities regarding the operation of a municipally owned district heating boiler house and further conversion of the facility from natural gas to wood biomass
Legal support of an investor intending to acquire a group of companies producing power from RES on various legal issues related to the production and sale of solar energy, equipment importation, supplies and assignment of warranties, capacity increase and property reconstruction
Legal support of a large PV investor with respect to the legal issues involved in the production and sale of solar energy, equipment importation, property construction and commissioning, title registration, equipment supplies and assignment of warranties, capacity increase and property reconstruction; due diligence; advising in connection with the EPC contracts; representation vis-à-vis EPC contractors; transaction structuring and support
Advising the global leader in PV solar energy solutions and EPC contractor headquartered in US with respect to various legal aspects of the contemplated doing business in Ukraine and applicable legal framework
Advising on the establishment of wood pellets production and their exports to EU, including the commissioning of wood pellets production plant, title and property issues, exportation regulations and EU requirements
Legal support of land acquisition for the construction of a waste recycling facility, advice on property, land, construction and public procurement issues
Legal support in connection with joint implementation (JI) projects, including advising on JI-mechanism, combined power and heat generation, licensing and green tariff issues, drafting contracts related to the landfill methane gas projects, shareholder agreements, accompanying the full circle as provided by Kyoto Protocol up to the transfer of emission reduction units (ERU)
Advising an international energy company in connection with its bid for the participation in the Nuclear Power Plant Safety Upgrade Program in Ukraine funded by EBRD
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* A selection of certain projects is provided with a view to manifesting the most representative and industry-relevant expertise, which should not be understood to constitute a complete and exhaustive list of projects.
Names of the clients and project details are disclosed to the extent that the applicable confidentiality treatment so permits.
Energy Projects supported by Arzinger. – Cntd.Legal support of a foreign company in connection with entering into the existing oil processing and oil product retail business through a multi-jurisdictional transaction, merger clearance
Advising a German leading manufacturer and supplier of biofuels on biogas production and export issues
Advising a Czech PV developer with regards to the legal issues related to rooftop PV installations and construction of the renewable energy plant
Advising a large foreign coal company on the privatization of a coal mine in the Eastern Ukraine
Advice in connection with the construction of transport and engineering facilities under FIDIC conditions of contract
Advising an oil and gas exploration, development and production company on structuring a joint venture for geological exploration and extraction of oil and gas and their commercial and industrial operation, drafting and negotiation of a joint venture agreement, merger clearance, legal support during acquisition of the project companies holding exploration and development licenses
Advising an oil company in connection with establishment of a joint venture together with a major mining geological survey company for the development of deposits
Legal advice to an energy company due to the need to restructuring of businesses located in the temporarily occupied territory of Ukraine , the Crimea; analysis of force majeure and its possible influence on further relations between the parties, liaison with government authorities, development of a strategy for investment protection
Vendor due diligence of the Ukrainian subsidiary of an international EPC and project company engaged in power and heat supply issues, analysis of the corporate structure, material contracts, development of risk mitigation strategies
Legal support of a large agricultural holding in connection with restructuring for land acquisition and funding raising purposes
Advising the client on various legal matters related to a waste-to-energy (WtE) project
Full legal support to the client in connection with the acquisition of the oil and refinery businesses, including the refinery plant, depots and a number of filling stations across Ukraine
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Energy Projects supported by Arzinger. – Cntd.Representation of an international oil exporter in a proceeding concerning the illegal trademark use to the effect that the court affirmed the illegality of competitor’s actions and awarded recovery of losses to the client
Representing the Ministry of Justice of Ukraine (one of three defendants) in two international arbitrations related to energy disputes under VIAC Rules, for the total amount in disputes exceeding USD 360 mln
Advising an international group operating in RES in a dispute regarding compensation by the State Ukraine of USD 38 mln in regard to the alleged breach of the Agreement between the Government of Ukraine and the Government of the French Republic on the mutual promotion and mutual protection of investments
Advising a European wind energy company on labor and regulatory issues, including obtaining a building permit and permission to perform dangerous works
Successful defense of the interests of the oil refining company in a dispute with tax authorities
Representation of an American company engaged in the independent power producing and customized energy solutions business in a complex construction dispute under the Rules of the International Commercial Arbitration Court at the Chamber of Commerce and Industry of Ukraine; the dispute arose under a turn-key construction agreement and involved a performance bank guarantee
Legal due diligence of the target company and advising an investor on the acquisition of a wind park
Representation of the energy company in the bodies of the Antimonopoly Committee of Ukraine in a case regarding a dominant position in the market for the provision of technical conditions for connection of power generation plants to its electricity grids, etc.
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Head Office of ArzingerEurasia Business Center, 75 Zhylyanska St.Kyiv, 01032, UkraineТеl.: +38 (044) 390-55-33 Fax: +38 (044) 390-55-40
West Ukrainian Branch of Arzinger 6/1 Generala Chuprynky St.Lviv, 79013, UkraineTel.: +38 (032) 242-96-96Fax: +38 (032) 242-96-95
South Ukrainian Branch of ArzingerPokrovsky Business Center, 33 Zhukovskogo St.Оdessa, 65045, UkraineТеl./Fax: +38 (048) 711-74-74
www.arzinger.ua
We are looking forward to our future cooperation!
Best regards,Svitlana Teush, PhD
Our Offices