Presentation Paritet law firm_Cissolar

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Presentation Paritet law firm_Cissolar

  1. 1. Certain practical legal aspects of implementation of solar energy projects under GT in Ukraine CISOLAR-2012 Maksym Sysoiev, LL.M., Attorney-at-Law, Senior Associate at PARITET law firm April 5-6, 2012, Odesa, Ukraine
  2. 2. Content  Legislative incentives for development of solar energy projects under GT in Ukraine  Rates change/decrease in the future  Ukrainian content for solar energy projects under GT  Procedure and main requirements/conditions for getting “green” tariff  Main legislative barriers and possible ways for their solution
  3. 3. Incentives for development of solar energy projects under GT Tax incentives under the Tax Code – exemption from import VAT and customs duties – decrease of land tax for RES power plants by 75% – limits for rental payments for lands lease from state and municipal authorities by 3% of appraisal value – exemption from corporate profit tax of profit derived from sales of electricity produced from renewables till 2021 (changes since 01.04.2012) Possibility to use JI for renewable energy projects Feed-in tariff scheme or “green” tariff (GT)
  4. 4. Recent changes in CPT exemptionBefore April 1, 2012, CPT exemption applied to•any profit from sales of “green” electricity were exemptedfrom CPTSince April 1, 2012, CPT exemption applies•if the company produces electricity solely from renewables•to profit from main activity of the company which is notnecessarily production of electricity from renewables Further clarifications of tax authorities are necessary!!!
  5. 5. Actual statistics1. In the middle of 2009 the core legislation on the current feed-in tariff scheme (GT) was enacted3. As of March 2012 GT is approved for:  8 companies operating 8 wind farms  2 companies operating 2 biomass power plants  1 company operating 1 landfill power plant  16 companies operating 16 solar power plants (1 key player owns 13 companies with 13 plants )  32 companies operating 86 small hydro power stations• If the legislation establishes quite good minimal fixed rates for “green” tariff, why the number of solar energy projects under GT is so scarce!?
  6. 6. Minimal fixed GT rates Power station capacity and other factors Rate of the Type of energy influencing the rate of GT tariff (€ / kW) less 600 kW 0,0646 Wind 600-2000 kW 0,0754 more 2000 kW 0,1131 Power plants on ground surface 0,4653 Power plants on the roofs of buildings with Solar energy power capacity exceeding 100 kW 0,4459 Power plants on the roofs of buildings with 0,4265 power capacity of up to 100 kW Should be at least partially of plant origin to Biomass 0,1239 be eligible Small hydropower not more than 10000 kW 0,0775 plants
  7. 7. Change/Decrease of GT in thefuture “Green” tariff is established until 2030 (grounds for termination are also established by a Decree of NERC) Decrease of the current rates of “green” tariff for power plants commissioned (significantly upgraded) after: 2014 – by 10% 2019 – by 20% 2024 – by 30%
  8. 8. Change/Decrease of GT in thefuture  Its rates are not tied to retail rates or average rates for producers of electricity  They are fixed as of January 1, 2009 in EUR and linked to EUR/UAH exchange rate (if more than 10.86 )  The State guarantees GT application to commissioned power plants and purchase of all electricity produced by them
  9. 9. Purchase of electricity at GT rates Wholesale Electricity Market of Ukraine (WEM) represented by State Enterprise “Energorynok”  State guarantee of purchase of all electricity produced by solar power plants under GT Direct sales of electricity to consumers  Legislative limitations  No economic and administrative incentives
  10. 10. Ukrainian content requirement If construction of power plant began in 2012, the share of the Ukrainian content (fixed assets, materials, works, services) in the total value of a power plant construction shall be at least • for plants commissioned in 2012 – 15 % • for plants commissioned in 2013 – 30% • for plants commissioned in 2014 – 50 % Additionally for solar power plants, value of materials and raw materials in production of solar modules shall be at least • for plants commissioned in 2013 – 30% • for plants commissioned in 2013 – 50 %
  11. 11. Ukrainian content requirement There is still no adopted procedure on determination of the share of the Ukrainian content However, draft procedure published on March 16, 2012 at NERC’s website  Formula to calculate the share of local content  Documents proving value of materials, raw materials, works, services  Ukrainian origin of raw materials, materials and fixed assets should be determined under the procedure established by the Cabinet of Ministers of Ukraine.  Origin of works and services should be determined by the country of their performer registration .  Documents proving the share of Ukrainian materials in generating equipment imported from abroad
  12. 12. Ukrainian content requirement Draft procedure establish 2 steps for calculation • PRELIMINARY CALCULATION (DISCRETIONAL) o By authorized expert organization after preparation of project documents o At producer’s discretion • ACTUAL CALCULATION (MANDATORY) o By authorized expert organization after commissioning o Requires filing of documents proving value of construction and local content o Conclusion of expert organization and list of documents submitted for calculation of local content are documents proving the actual share of local content and constitute grounds for establishing “green” tariff by NERC.
  13. 13. Ukrainian content requirement Shortcomings of the draft procedure• Unclear what specific types of expenses related to construction (for instance, lease of land plots, costs for connection etc.) shall count to the power plant construction• There are only 3 authorized expert organizations as of today• Issuance of certificate of origin shall be governed by the procedure established by Cabinet of Ministers of Ukraine which is absent• The procedure lacks formula and special information for calculation on special local content in solar power plants (share of materials in production of solar modules).• The procedure lacks any timeframes
  14. 14. Approval of GTRates of GT shall be approved by NERC for each producerafter filing the application and the required package ofdocuments regarding the constructed, commissionedand connected power plantTerm for passing a decision by NERC: – Consideration of documents package– 30 calendar days – Approval by NERC’s meeting– 15 calendar daysDocumentation of “green” tariff (stipulated by the respectiveNERC’s Resolution) GOOD NEWS! No Approval Fee
  15. 15. Conditions forImplementation of GT Projects  Set up a company  Electricity producer license  Connection to the grid (compensation of expenses related to grid connection)  Participation in WEM and signing WEM Agreement  Conclusion of agreement for sales of electricity with State Enterprise “Energorynok”  Execution of documentation for power plants construction (documents on the use of land plots, project documentation, commissioning etc.)
  16. 16. Conditions for Implementation of GT Projects Registration of Receipt of Change of Development of Registration of Registration of Examination of declaration re permission r edesignated purpose project declaration on ownership PD, if necessary preparatory construction documentation readiness works, if works Registration of necessary leases Registration of Issue of Receipt of Registration of Receipt of initial declaration re Certificate on Registration of technical easements and data beginning of readiness for ownership conditions superficies construction exploitation Acquisition of Connection to rights in land Construction the grid Set up of a License for Joining WEM and Signing Conclusion of agreement Connection of company electricity WEM Agreement with Energorynok other power plants (charter shall production provide that the Connection of certain types of company GT approval by NERC wind farms produces electricity) Exemption from import VAT and customs duties Tax and customs duties breaks Exemption from corporate profit Sale of tax till 2011 electricity at GT Maximal annual lease payments – 3% of appraisal value 25% of required land tax
  17. 17. Legislative barriersMain legislative barriers for development of solar powerprojects under the GT: State guarantee/ Stabilization clause Ukrainian content requirement Connection to the grid
  18. 18. Legislative barriersMain legislative barriers for development of solar powerprojects under the GT: Moratorium on use of agricultural lands New construction legislation Nontransparent procedure for import VAT and customs duties exemption
  19. 19. Thank you for your attention!
  20. 20. PARITET law firm Since 1998 in the Ukrainian market Strong international focus Actively involved into green energy legal environment for last 3 years IFC expert on “green” tariff mapping in Ukraine We are proud to provide Clients with services which make the environment better and the economy of Ukraine stronger MAKSYM SYSOIEV, LL.M., Attorney-at-Law, Senior Associate at PARITET law firm (energy, commercial and corporate law).t| . +38 044 207 08 98; е| maksym.sysoiev@paritet.ua

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