The document summarizes the official text of Ukraine's Procedure on Determination of Local Content for power plants using alternative energy sources. Some key points: 1. The procedure creates new local content requirements for renewable energy producers and will enter into force upon official publication. 2. It covers only licensed power plant producers and may delay approval of renewable energy tariffs if licensing is required before determining local content. 3. Local content is calculated by adding the fixed percentages contributed by various Ukrainian-origin elements used in construction. If any component within an element is foreign, that entire element cannot be counted. 4. Local content must be proven with certificates of Ukrainian origin from the Chamber of Commerce. NERC will decide

1. August 2, 2013
Procedure On Local Content Determination: Official Text
Please be informed that today on August 2, 2013, the official text of Procedure on Determination of Local
Content (the “LC”) for Power Plants, including Commissioned Construction Lines (Launching Complexes)
Producing Electricity from Alternative Energy Sources (Except for Blast Furnace and Coke Gases) (the
“Procedure”) approved by National Energy Regulation Commission (the “NERC”) on June 27, 2013 became
available, in particular at http://zakon4.rada.gov.ua/laws/show/z1179-13 . Please kindly note that, on April 23,
2013, NERC published draft of Procedure at its site (see in Ukrainian at
http://www.nerc.gov.ua/index.php?news=3203). The Ministry of Justice registered the procedure on July 15,
2013. It should be noted that the official text slight differs from the draft. However, as expected, there are no
substantial changes in comparison with its draft.
Procedure creates rules of game (new local content requirements (the “LCR”)) for producers of electricity
from renewables according to the changes in Power Industry Law which will enter into force since July 1,
2013. It shall enter into force after the registration with Ministry of Justice of Ukraine and official publication.
The main points of Procedure based on its draft are as (we cannot exclude that officially published version will
differ):
1. Effect of entry into force
In contrast with the draft, the official version says that Procedure will enter on the date of its official publication
and not on July 1, 2013. Procedure will not cancel currently effective procedure on local content
determination as was provided by the draft. Thus, the expert organizations which should determine LC in
power plants commissioned till July 1, 2013, will have legal grounds for this starting with July 1, 2013.
2. Eligible producers
Procedure covers only licensed producers. This means that the producer should first commission its plant and
get the electricity generation (cogeneration) license. Currently, the license is issued only after commissioning
and formalization of ownership rights in power plants. This may delay the process of “green” tariff
establishment.
Furthermore, the possibility to submit documents for both the license and “green” tariff as provided by the
effective procedure on “green” tariff approval makes no substantial sense for projects of new (non-licensed)
developers if NERC strictly interprets that the license is a prerequisite for the local content determination.
Without local content determination NERC may not approve “green” tariff.
Possibly, NERC will not invoke such a strict approach in practice. Furthermore, possibly NERC will allow to
submit documents for both local content determination and license and make a preliminary internal decision
on “green” tariff. Then, after determination of local content by NERC based on documents submitted upon
licensing it could right after approve “green” tariff. We will know for sure only after formation of the respective
practice.
3. How Is LC Calculated?
LC for power plants is calculated by adding up all elements (fixed shares as established by Power Industry
Law since July 1, 2013) of Ukrainian origin available at the power plants. For instance, wind farm developer
may add up construction works (20 % fixed share of LC) and assembly of nacelles (30% fixed share of LC).
The total sum of all elements of fixed shares of Ukrainian origin should equal or exceed the LCR established
by Power Industry Law as of the date of commissioning. Procedure provides the figures for various types of
renewables. It is in compliance with Power Industry Law. Inaccuracy concerning biogas in the draft has been

2. corrected.
If within one element (fixed share) the producer uses at least one component of foreign origin or cannot prove
the Ukrainian origin for each component, this element does not count towards fulfillment LCR. For instance, if
99% of solar cells contain Ukrainian polycrystalline silicon and 1% does not, the producer may use 0%
towards fulfillment of LCR. Thus, all components in one or another element should be of Ukrainian origin. The
value of elements or its components is disregarded for the purpose of LC determination.
4. How to prove LC?
LC is proofed by certificate of Ukrainian origin issued by Chamber of Commerce of Ukraine. Interesting that
the official version also contemplates the submission of other documents proving legislatively determined
transactions regarding elements of local content. The Procedure does not provide any clue what such
documents could be. Thus, it cannot be excluded that there will some abuse regarding such documents.
Interesting enough that these documents are not within the package to be submitted with NERC. In practice,
NERC will probably accept such documents as well or even require them.
The origin of construction works are determined by its performer (performers). Such performer should
produce the excerpt from the Unified State Register of Legal Entities and Private Entrepreneurs. It turns out
that representative offices of foreign companies formally may not provide this document because they are not
registered in the respective register.
If some operations with solar modules were conducted abroad, the producer may present certificate of origin
issued by an authorized agency of a foreign state. Such certificates should contain information that LC
elements (manufacturing polysilicon, ingots, cells, modules, assembly of modules) were used during
manufacturing of the respective solar modules.
5. How to Get LC Calculation by NERC?
The producer should file an application with the calculation of LC, certificates of origin, excerpts from the
Unified State Register of Legal Entities and Private Entrepreneurs, title documents etc.
NERC considers the documents within 30 calendar days and issue its resolution in this regard. Procedure
states that resolution on LC and establishment of “green” tariff may be passed during one meeting of NERC.
At the same time under the new procedure for “green” tariff establishment (entered into force on April 23,
2013) NERC decision on LC should precede the decision on “green” tariff establishment.
6. Lists of LC Elements
After each NERC decision on LC all elements which have been proofed to be of Ukrainian origin it shall add
such elements to special lists with the respective data in certificate of origins or other documents. There are
separate lists depending on the source of energy and published at NERC website.
Elements already mentioned by NERC in its lists may not be used for other power plants.
We always follow the changes in Ukrainian legislation and will keep you timely
updated thereon.
Should you have any additional questions and comments, please, contact us:
Maksym Sysoiev, Attorney-at-Law, Counsel Email maksym.sysoiev@danevychlaw.com