Ukraine Cabinet Resolution Number 894-р specifies the following 15 oblenergos for privatization.  Each oblenergo name is listed below, followed by the shareholding percentages being offered for future sale, the amount of registered shares in the offered amount, the nominal value of the shares in Ukrainian Hrivnas. 

For more related information and updates, see http://jon-m-queen.blogspot.com

Vinnytsiaoblenergo

1,858,421 shares offered (nominal value UAH 18,584,210.00)

Volynoblenergo

60% plus 1 share

286,365,601 shares offered (nominal value UAH 14,318,280.05)

Dniprooblenergo

60% plus 1 share

3,594,971 shares offered (nominal value UAH 35,949,710.00)     

Zakarpattiaoblenergo

60% plus 1 share

74,761,946 shares offered (nominal value UAH 18,690,486.50)

Khmelnytskoblenergo

60% plus 1 share

80,730,817 shares offered (nominal value UAH 20,182,704.25)  

Krymenergo

60% plus 1 share

103,780,513 shares offered (nominal value UAH 25,945,128.25)

Mykolaivoblenergo

60% plus 1 share

95,184,001 shares offered (nominal value UAH 23,796,000.25)

Chernivtsioblenergo

60% plus 1 share

34,068,409 shares offered (nominal value UAH 8,517,102.25)

Donetskoblenergo

60% plus 1 share

39,310,306 shares offered (nominal value UAH 49,137,882.50)

Kharkivoblenergo

60% plus 1 share

153,924,457 shares offered (nominal value UAH 38,481,114.25)

Zaporizhiaoblenergo

60.25%

108,060,002 shares offered (nominal value UAH 27,015,000.50)

Luhanskoblenergo

60.06%

125,001,287 shares offered (nominal value UAH 31,250,321.75)

Ternopiloblenergo

51%

31,154,360 shares offered (nominal value UAH 7,788,590.00)

Kyivoblenergo

50% plus 1 share

54,182,141 shares offered (nominal value UAH 13,545,535.25)

Cherkasyoblenergo

46%

68,260,989 shares offered (nominal value UAH 17,065,247.25)

Article By Jon McKee Queen, FDEEM

In a move perhaps motivated in part by the desire to raise pre-January election funds for the government, Ukraine's Cabinet of Ministers has recently taken steps to open the way for near term privatization and auctioning of 15 regional power distribution companies ("oblenergos").  See Cabinet Resolution Number 894-р of July 29, 2009.

Specifically, Prime Minister Yulia Tymoshenko has instructed the Ministry of Fuel and Energy to transfer controlling stakes in these state owned oblenergos from the National Energy Company to the State Property Fund - which thereby opens the way for subsequent privatization through auctions. 

So far there has been no positive or negative feedback from President Viktor Yushchenko on this recent Cabinet Resolution.  Earlier in the year President Yushchenko had attempted block a similar Cabinet resolution allowing privatization of the state owned power generating companies Dniproenergo, Donbasenergo, Zakhidenergo and Centrenergo - only to have his decree overruled by Ukraine's Constitutional Court on April 30, 2009.

If there is no blocking attempt by the President then controlling shares of the 15 oblenergos in the table below could be set for auction before year end.  The government has specified controlling share amounts for auctioning in order to maximize potential investor interest.  However, market analysts nonetheless have expressed no estimation about whether these shares actually can or will be purchased by investors prior to the Presidential elections in 2010.

Cabinet Resolution Number 894-р specifies the following 15 oblenergos for privatization:

Oblenergo name

Share holdings for sale, %

Amount of shares, registration unit

Nominal value of share holdings, UAH

Vinnytsiaoblenergo

60+1 share

1,858,421     

    18,584,210.00

Volynoblenergo

60+1 share

286,365,601 

  14,318,280.05

Dniprooblenergo

60+1 share

3,594,971     

  35,949,710.00

Zakarpattiaoblenergo

60+1 share

74,761,946 

 18,690,486.50

Khmelnytskoblenergo

60+1 share

80,730,817   

  20,182,704.25

Krymenergo

60+1 share

103,780,513

25,945,128.25

Mykolaivoblenergo

60+1 share

95,184,001

23,796,000.25

Chernivtsioblenergo

60+1 share

34,068,409

8,517,102.25

Donetskoblenergo

60+1 share

39,310,306

49,137,882.50

Kharkivoblenergo

60+1 share

153,924,457

38,481,114.25

Zaporizhiaoblenergo

60.25

108,060,002

27,015,000.50

Luhanskoblenergo

60.06

125,001,287

31,250,321.75

Ternopiloblenergo

51

31,154,360  

7,788,590.00

Kyivoblenergo

50+1 share

54,182,141

13,545,535.25

Regardless of its timing, the further privatization Ukraine's aging and outdated energy infrastructure is a positive and important step for Ukraine.  Ukraine has roughly one third the energy efficiency of its European neighbors, and it even trails Russia in this regard.  Privatizing the regional power distribution companies and raising them to market efficiency will benefit Ukraine's commercial and private sectors, and it can also pave the way for the country's future ability to become an energy exporter.

Jon McKee Queen is a board member of the Foundation for the Development of Environmental and Energy Markets (www.fdeem.org.ua).

An article by Jon McKee Queen, FDEEM 

There is a technology on the horizon to help meet Ukraine's energy challenges, and it comes from chickens.

Swiss company Alter Energy Group AG (http://www.alterenergygroup.com/) is working to implement a sophisticated waste to energy process in Ukraine that converts poultry manure into clean, environmentally safe, industrial scale electricity and heat.

This is a highly uncommon type of energy project, and upon completion Alter Energy Group's Ukrainian projects will join a tiny handful of similar projects worldwide.

The company's technical approach involves burning chicken manure to create large amounts of electricity and heat. This heat and electricity then is supplied to Ukraine's wholesale energy market and the surrounding population. It all sounds simple enough, however the process is in fact highly complex due to poultry manure's tricky ammonia content and ash problems.

Poultry manure contains so much ammonia that it routinely destroys normal project equipment. It also causes toxic pollutants to be released into the air during the incineration process unless handled in a very delicate manner. The ash resulting from burned poultry manure also is uniquely disruptive. For this reason, only about seven commercial scale poultry waste to energy projects have been completed anywhere in the world thus far.

Alter Energy Group claims to have carefully dealt with all these chicken challenges by using a waste to energy methodology with a proven poultry-specific track record. In addition to heat and electricity, their projects will also produce large quantities of nutrient rich bio-fertilizers and animal feed for sale.

Ukraine is a country of large Soviet style poultry farms, and Ukrainian farmers presently have limited commercial use for their livestock waste. An opportunity therefore exists, with the right technology, for Ukrainian farmers to work with companies like Alter Energy Group to create a profitable new renewable energy niche market. Alter Energy Group's first Ukrainian chicken projects could be completed sometime during early 2010, if all goes well. These types of projects qualify for Ukraine's Green Tariff as biomass energy.

Making clean energy from chicken manure is a relatively uncommon thing. Even in the most advanced renewable energy countries these projects are relatively unknown. It will be interesting to observe how things unfold in Ukraine with Alter Energy Group's chicken projects, and to watch whether similar projects are undertaken in neighboring CIS countries.

Jon McKee Queen is a board member of the Foundation for the Development of Environmental and Energy Markets (www.fdeem.org.ua).

By Jon McKee Queen, Foundation for the Development of Environmental & Energy Markets

Ukraine's government has been quite proactive during the first half of 2009 with regard to the renewable energy and carbon sectors.  In April, the President approved a "revised" Green Tariff rate calculation methodology, resulting in even higher prices than before for alternative energy producers.

Also the government has been working to complete Ukraine's Green Investment Scheme through the National Agency for Environmental Investments, and has sold 30 million AAUs to Japan.  In the coming weeks, Ukraine will most probably complete transactions for over double this amount to additional buyers.

The higher Green Tariff rate schedule, along with the government's activity to complete Ukraine's Green Investment Scheme and to undertake ambitious AAU trades, means that right now we see the most fertile environment for Ukraine's alternative energy sector growth since the country's 1991 independence.

New Green Tariff prices are paid directly by Ukraine's Wholesale Energy Market as the counterparty buyer, which is good.  It means that under the present Green Tariff mechanism there is no necessary "purchase price negotiation" (at this moment) between local alternative energy providers and the local oblenergos - distribution companies - that power providers must link into.

As one can see from the current price calculations below, alternative energy sales prices make it very attractive to invest in Ukraine right now.  It is important to note that these rates are only available to new projects that are built from 2009 onwards. 

Ukraine's Green Tariff Rates in Euros per kWh (July 2009)

Alternative Energy Source Type

Old Green Tariff (Jan - April 2009)

NEW Green Tariff Rates

Wind Power < 0.6 MW

€ 0.0659

€ 0.0646

Wind Power > 0.6 MW but less than 2 MW

€ 0.0659

€ 0.0754

Wind Power > 2 MW

€ 0.0659

€ 0.1131

Biomass Power

€ 0.0659

€ 0.1239

Solar Power on land/ground

€ 0.0659

€ 0.4653

Solar Power on building roofs > 0.1 MW

€ 0.0659

€  0.4459

Solar Power on building roofs < 0.1 MW

€ 0.0659

€ 0.4265

Solar Power on fronts of buildings

€ 0.0659

€ 0.4265

Small Hydro Power

€ 0.0659

€ 0.0775

Answer to the Question "What Are Green Tariffs?"

Green Tariffs are an important factor in alternative energy investment decision making. Nations seeking to incentivize alternative energy investment, such as European Union countries and Ukraine also, establish higher electricity sales prices (and therefore revenues) for alternative energy power producers compared to traditional fossil fuel based power producers.

From a project investor's point of view, an alternative energy business plan must be financially attractive and typically must "stand on its own two feet" aside from any carbon credit component. Carbon credits are expected and documented, but an investor does not typically invest into an energy power project to collect carbon credits alone.

Green Tariffs increase the sales revenues from alternative energy power projects; likewise, they reduce the payback period and investment risk for such projects in emerging market economies. Alternative energy projects that otherwise would be regarded as difficult or risky for technology, cost or country risk reasons can experience refreshed interest and activity levels due to corresponding Green Tariff revenues. It is clear, for instance, that Ukraine's new Green Tariff has sustained foreign investors' interest in its clean and renewable energy markets during the present financial downturn.

Countries develop Green Tariffs on an independent basis. In Ukraine, the Green Tariff is set by the National Electricity Regulatory Commission (NERC). It covers alternative energy production facilities such as wind power plants, hydropower, biomass, biogas, and other methane utilization projects (except blast-furnace and coking gases). There is no present capacity cap on Ukraine's Green Tariff except for hydropower plants, where an eligible facility cannot exceed 10 MW in capacity.

Carbon credits and Green Tariffs together create an excellent incentive stew for new alternative energy project finance. In countries like Ukraine, where the Green Tariff roughly doubles historic project revenues and a streamlined Track 1 JI approval process eliminates international bureaucracy, investment conditions have never been better.

Please feel free to contact the Foundation for the Development of Environmental and Energy Markets (http://www.fdeem.org.ua/) to discuss specific questions or opportunities with regard to European Green Tariff structures and alternative energy markets.

Ukraine's Green Tariff:   Great News in 2008 But What Happens in 2009?

Jon Queen, Dallas TX (16 Dec 2008)

On 25 September 2008, Ukraine's Verkhovna Rada  adopted the Law "On Amendments to Certain Laws of Ukraine Concerning the Introduction of a Green Tariff" by an overwhelming 292 vote margin.

Nicknamed the "Green Tariff" within the Ukrainian investment community, the law aims to make investment into Ukraine's clean and renewable energy sectors more attractive by allowing these sectors to charge higher electricity tariffs to the wholesale energy market.  Tariffs are set by the National Electricity Regulatory Commission of Ukraine ("NERC").  Energy producers eligible under the Green Tariff alternatively may opt out of selling to Ukraine's wholesale energy market and instead sell their electricity to private end users under independent, commercially negotiated contracts. 

The Green Tariff covers "alternative" energy production facilities such as wind power plants, hydropower, biomass, biogas, and other methane utilization projects (except blast-furnace and coking gases).  For hydropower plants, an eligible facility cannot exceed 10 MW in capacity.

According to the presently adopted language, NERC will fix the Green Tariff for 10 years although it may revise tariffs annually if it chooses.  The Green Tariff shall be set at a level no more than double the average weighted tariff for electricity sold into the wholesale market, but no less than double the average tariff on electricity sold into the wholesale market the year previous to when the tariff was set.

Generally speaking, Ukraine's Green Tariff can be viewed as a landmark effort to take Ukraine's energy infrastructure and markets in a positive new direction.  Enhanced tariffs should trigger enhanced investment activity in these sectors and a corresponding new level of new technology transfers, jobs, energy security, export possibilities, and capital injection into the economy.  To actually achieve these possibilities, however, more work is required to take the Green Tariff from a conceptual legislative stage to a practical working stage.

President Victor Yushchenko still needs to sign off on the law.  After the President approves the Green Tariff, NERC must draft additional regulations clarifying how the Green Tariff will operate in practice from a functional point of view.  The definition of what constitutes renewable energy should also be re-examined and clarified, especially with regard to the 10 MW hydropower cut off that is inconsistent with key related investment markets (such as the Joint Implementation Mechanism under the Kyoto Protocol).

The investment community has responded positively thus far to the Green Tariff, despite the fact that it needs significant further work to become a functional market mechanism.  Traditionally overlooked energy sectors in Ukraine, such as wind power, are now experiencing a brand new level of interest and activity.  From a more grass roots point of view, it is clear that the Green Tariff buzzword has sustained investment interest in Ukraine's clean and renewable energy markets during the present financial downturn.

The Green Tariff could place Ukraine in a very strategic investment position compared to neighboring countries if it is finalized and implemented properly.  Theoretically the Green Tariff could create a Pareto optimal outcome for the Ukrainian government, investors, individual energy consumers, and the environment.  But with improper completion the Green Tariff will fall short of its intended effect and instead will represent an unfortunate example of missed opportunity.  The energy community is cautiously optimistic, with several large domestic and foreign stakeholders offering their insights and advisory services to the government. 

What will be the ultimate impact of the Green Tariff, and how will it affect Ukraine's energy markets in 2009?  As with many things, the answer will depend in part on the future domestic political picture.  Right now the Green Tariff represents a step in the right direction - one that hopefully will prompt astute and consistent follow-up measures in the near term.

Ukraine's Green Tariff:   Great News in 2008 But What Happens in 2009?

Jon Queen, Dallas TX (16 Dec 2008)

On 25 September 2008, Ukraine's Verkhovna Rada  adopted the Law "On Amendments to Certain Laws of Ukraine Concerning the Introduction of a Green Tariff" by an overwhelming 292 vote margin.

Nicknamed the "Green Tariff" within the Ukrainian investment community, the law aims to make investment into Ukraine's clean and renewable energy sectors more attractive by allowing these sectors to charge higher electricity tariffs to the wholesale energy market.  Tariffs are set by the National Electricity Regulatory Commission of Ukraine ("NERC").  Energy producers eligible under the Green Tariff alternatively may opt out of selling to Ukraine's wholesale energy market and instead sell their electricity to private end users under independent, commercially negotiated contracts. 

The Green Tariff covers "alternative" energy production facilities such as wind power plants, hydropower, biomass, biogas, and other methane utilization projects (except blast-furnace and coking gases).  For hydropower plants, an eligible facility cannot exceed 10 MW in capacity.

According to the presently adopted language, NERC will fix the Green Tariff for 10 years although it may revise tariffs annually if it chooses.  The Green Tariff shall be set at a level no more than double the average weighted tariff for electricity sold into the wholesale market, but no less than double the average tariff on electricity sold into the wholesale market the year previous to when the tariff was set.

Generally speaking, Ukraine's Green Tariff can be viewed as a landmark effort to take Ukraine's energy infrastructure and markets in a positive new direction.  Enhanced tariffs should trigger enhanced investment activity in these sectors and a corresponding new level of new technology transfers, jobs, energy security, export possibilities, and capital injection into the economy.  To actually achieve these possibilities, however, more work is required to take the Green Tariff from a conceptual legislative stage to a practical working stage.

President Victor Yushchenko still needs to sign off on the law.  After the President approves the Green Tariff, NERC must draft additional regulations clarifying how the Green Tariff will operate in practice from a functional point of view.  The definition of what constitutes renewable energy should also be re-examined and clarified, especially with regard to the 10 MW hydropower cut off that is inconsistent with key related investment markets (such as the Joint Implementation Mechanism under the Kyoto Protocol).

The investment community has responded positively thus far to the Green Tariff, despite the fact that it needs significant further work to become a functional market mechanism.  Traditionally overlooked energy sectors in Ukraine, such as wind power, are now experiencing a brand new level of interest and activity.  From a more grass roots point of view, it is clear that the Green Tariff buzzword has sustained investment interest in Ukraine's clean and renewable energy markets during the present financial downturn.

The Green Tariff could place Ukraine in a very strategic investment position compared to neighboring countries if it is finalized and implemented properly.  Theoretically the Green Tariff could create a Pareto optimal outcome for the Ukrainian government, investors, individual energy consumers, and the environment.  But with improper completion the Green Tariff will fall short of its intended effect and instead will represent an unfortunate example of missed opportunity.  The energy community is cautiously optimistic, with several large domestic and foreign stakeholders offering their insights and advisory services to the government. 

What will be the ultimate impact of the Green Tariff, and how will it affect Ukraine's energy markets in 2009?  As with many things, the answer will depend in part on the future domestic political picture.  Right now the Green Tariff represents a step in the right direction - one that hopefully will prompt astute and consistent follow-up measures in the near term.

10 Common Questions You Should Know How To Answer When Talking To Potential Carbon Credit Purchasers

Jon Queen, London UK (30 Nov 2008)

You've got an exciting new CDM project that is ready for ERPA negotiation with a CER purchaser.  Congratulations, great job!  The best CDM projects are ones that are great for the environment and good for your bank account also.  So with that in mind, it is important to prepare for all conversations with prospective CER purchasers.  You should be prepared to respond to these 10 basic questions commonly asked by CER purchasers, even if you can only give a partial answer.

1. What is the project's name, host country, and approved methodology number?

2. What documentation stage is the project at (PIN, PDD, Validation Report etc.)?

3. What approval stage is the project at (FSR, LOE, LOA or UNFCCC Registered)?

4. Who is the project owner and the project developer, and what track record do they have for undertaking carbon projects?

5. What is the financing source for the project's construction and equipment costs? Is financing complete?

6. When will the project begin validation? Has a time slot been pre-arranged with a particular DOE?

7. When is the expected project commissioning date?

8. When is the expected project registration date?

9. What are the expected annual CER volumes? What portions of these volumes are available for sale? If not 100%, then who has rights to the remainder and what priority status is the piece available for sale?

10. What are the "get it done" purchase price terms ... where if I agree to them we can cut the small talk and proceed directly into exclusive ERPA contract negotiations?