INVEST Ukraine

Open for U

Yuliya Kovaliv

30 March, 2016

Energy sector: Challenges

0,11 0,13 0,13

0,20

0,32

0,00

0,05

0,10

0,15

0,20

0,25

0,30

0,35

Germany Romania Poland China Ukraine

Energy intensity of GDP, 2014 Extremely high energy intensity of GDP

Only 60% of energy resources produced domestically

Households:

Household gas bills didn’t reflect modern reality

Part of utility bills based on normative, rather than actual consumption

Industry and infrastructure:

Obsolete equipment and technology

High losses in power lines, hot water and central heating Households Infrastructure Industry

Drivers of inefficiency

Gas tariffs increased to cut out waste and eliminate pressure on state finances

0,73

1,18

3,6/7,19

0

1

2

3

4

5

6

7

8

2010-Apr 2014 2014-Mar 2015 from Apr 2015

Household gas tariff evolution (UAH/m3)

14,3 13,2 10,6

8,4

7,2

6,6

0,75

0,61

0,5

0

5

10

15

20

25

2013 2014 2015

Natural Gas Consumption For Heating (bcm)

Public enteties

District heating companies

Individual housholds

-10%

-16%

23.4

21.1

17.7

Market-based tariff schedule till 2017 adopted

New Electricity Market Law

Seeking competition and diversification

Privatization of regional power generation plants in 2016 (incl. Centrenergo 7,67 GWt)

Potential projects:

Reconstruction of Northern and Dnipro Energy transmission system (€150m KFW loan)

Construction of 6 Dnister hydropower stations with total capacity of 390 MWt

Construction of Kaniv hydropower plant

Power generation and transmission

4

45,24%

48,15%

5,66%

54,77%

39,43%

Power generation structure by source*

Coal & Gas

Nuclear

Hydro

Renewables 7M2015

7M2014

Required Investments in Energy Efficiency in Residential Sector

65

630

1 224

1 924

2 274

2 624 2 624 2 624 2 624 2 624 2 624 2 624 2 624 2 624 2 624 2 624

14

140 272 428 505 583 583 583 583 583 583 583 583 583 583 583

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Загальний обсяг необхідних інвестицій, млн євро

Державна підтримка, млн євро

2015-2030 • €35 billion of investment, including • €7,7 billion of Government support

Total volume of investment required, € mln

Government support (subsidy), € mln

€ 8,7 billon by 2020

25% of buildings

Goal of Program

3 billion cbm

annual natural gas savings in 2020

12 billion cbm

annual natural gas savings in 2030

6.5 mln individual houses

80 ths multi-dwelling buildings

First steps in Energy Efficiency of Residential Buildings

Loan Reimbursment Mechanism

private house/ separate flat

multifamily house

70% of the principal

30% of the principal

20% of the principal

40% of the principal

for the recipients of subsidies on utilities (since 27.08.15)

for energy-efficient equipment and materials

for non-gas boilers purchase

for energy-efficient equipment and materials

894 UAH million N

ov-

14

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Ap

r-1

5

May

-15

Jun

-15

Jul-

15

Au

g-1

5

Sep

-15

Oct

-15

No

v-1

5

Dec

-15

Jan

-16

State EE Program Dynamics Total loan amount, UAH mln

304,4 UAH million

80 ths loans

70% of the principal

for the recipients of subsidies on utilities (since 27.08.15)

Budget of State EE Program in 2016

Reimbursed in 2014 - 2015

Net savings (≈50% of initial value)

Energy Efficiency of public bodies’ buildings

700 million cbm

annual natural gas savings

Program description

100k public bodies’ buildings are to be renovated

4.4 Bln EUR

Investments needed

The new Directive 2012/27/EU (Oct-25, 2012) on energy efficiency requirement to renovate at least 1% of the central public bodies’ buildings annually (for Energy Community members).

Renovation is consistent with EU requirement

Ukraine selected “Shared savings” ESCO agreement model

Before ESCO During ESCO (< 10y) After ESCO

Public body’s energy spending Net savings (10-20% of savings)

ESCO payment (80-90% of savings)

Legal framework and next steps

The Concept of Energy Efficiency Fund “Turning Subsidies to Investments in Energy Efficiency“ («S2I»)

State budget of Ukraine

S2I

Consumers Energy Efficiency

Projects

Funding

Subsidies

International Donors

Steps done

• Developing of guidelines for Contracting Parties (on public purchasing procedures etc.)

• Creation of incentives for ESCO-market development (Bank involvement etc)

• Information campaign (Spring -2016)

1st step: Parliament

2nd step: Government

Next steps

• EPC Procurement • Long-Term Budget Guarantees for Private

Investor

• Sample Energy Saving Performance Contract was adopted on Oct 21, 2015

Financial Institutions

Loans funding and return

Preferential loans and their return

Government

Subsidies reduction (budget economy)

Grants

Political and economic reasons for subsidies reduction