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. 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. 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. Recent changes in CPT exemption
Before April 1, 2012, CPT exemption applied to
•any profit from sales of “green” electricity were exempted
from CPT
Since April 1, 2012, CPT exemption applies
•if the company produces electricity solely from renewables
•to profit from main activity of the company which is not
necessarily production of electricity from renewables
Further clarifications of tax authorities are necessary!!!

5. Actual statistics
1. In the middle of 2009 the core legislation on the current
feed-in tariff scheme (GT) was enacted
3. 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. 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. Change/Decrease of GT in the
future
 “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. Change/Decrease of GT in the
future
 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. 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. 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. 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. 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. 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. Approval of GT
Rates of GT shall be approved by NERC for each producer
after filing the application and the required package of
documents regarding the constructed, commissioned
and connected power plant
Term for passing a decision by NERC:
– Consideration of documents package– 30 calendar
days
– Approval by NERC’s meeting– 15 calendar days
Documentation of “green” tariff (stipulated by the respective
NERC’s Resolution)
GOOD NEWS!
No Approval Fee

15. Conditions for
Implementation 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. Conditions for
Implementation of GT Projects
Registration of Receipt of
Change of Development of Registration of
Registration of Examination of declaration re permission r e
designated 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. Legislative barriers
Main legislative barriers for development of solar power
projects under the GT:
State guarantee/
Stabilization clause
Ukrainian content
requirement
Connection to the grid

18. Legislative barriers
Main legislative barriers for development of solar power
projects under the GT:
Moratorium on use of
agricultural lands
New construction
legislation
Nontransparent
procedure for import
VAT and customs duties
exemption

19. Thank you for your attention!

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