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Introducing competitive conditions to stimulate electricity production from the alternative energy sources

Minecoenergo https://menr.gov.ua/news/34323.html

December 27, 2019

Translation into English was done by A7 CAPITAL

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Introduction of “green auctions”

April 04, 2019 June’19 July’19 August- September’19

The Law of Ukraine “On Amendments to Certain Laws of Ukraine on Ensuring Competitive Conditions for Generation of Electricity from Alternative Energy Sources” # 2712-VIII was adopted by the Parliament of Ukraine The Plan for Organizing the Drafting of Acts Required to Ensure the Implementation

• f Law No. 2712-VIII was

approved by the Cabinet of Ministers of Ukraine (Minutes No. 24) The Ministry, by Order No. 308, created a Working Group to prepare for the introduction of competitive conditions for the production of electricity from alternative sources. Within the framework of the working subgroups, a number of drafts of key regulatory acts were developed, including the draft resolution of the CMU “On introducing competitive conditions for electricity production from alternative energy sources”

October- December’19 Dec 12, 2019

2020 March

First auctions

Sending a draft resolution for approval by interested bodies and conducting public consultations. Processing submitted comments and suggestions. CMU Resolution “On Introducing Competitive Conditions for Generation

• f Electricity from

Alternative Energy Sources” was adopted at a Government meeting

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Key provisions of the new RES support model

Features of quotas

The auctions will start in 2020 and will be held by 2030 Auctions will be held twice a year (spring, autumn) The term of construction of RES objects is: for SES - 2 years, other RES - 3 years Winner receives support for 20 years at auction price (PPA) SES participation> 1 MW, WPP> 5 MW - compulsory; Bio, MSPP - optional The quotas are approved by the CMU every 5 years Quotas are allocated by technology (technologically neutral auctions possible) The Bidder's price cannot be higher than the "green" rate at the auction date for the respective RES type Transparent auction system (auctions will be conducted via ProZorro electronic system)

25% 2

Feed-In Tariff

20 2020 80% 2-3 years

The quota allocated may not exceed 80% of the capacity declared by the participants One beneficial owner cannot receive more than 25% of the annual quota

CMU Resolution “On Introducing Competitive Conditions for Promotion of Electricity Generation from Alternative Energy Sources” was adopted at the Government meeting on December 27, 2019

Основні розділи Порядку

The procedure for holding auctions for the allocation of support quota has been approved Approved Procedure for Selection of Electronic Operators for Auctioning of Allocation of Support Quota The state-owned enterprise "PROZORRO. SALES" has been appointed responsible for ensuring the functioning of the electronic trading system - the administrator of the electronic trading system

By the resolution :

The procedure for holding auctions for the allocation of support quota

Functioning of electronic trading system

Formation of annual support quotas for electricity producers from alternative energy sources

Preparing for the auction Auction Determining the winner by auction results

Conclusion and publication of the contract of sale in the electronic trading system

Deposit and refund of bank guarantee Requirements for banks providing bank guarantees

Amount and procedure of payment of fees to operators of authorized electronic sites Other auction issues

Main sections

• f the

Resolution

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Scheme of functioning of the system of "green" auctions

Information, quotas

Determination of support quota parameters including land supply and TС (if applicable)

Unused quota allocation Analysis of results, preparation of changes to the NPA Approval of annual quotas, conditions and timing of auctions Approval of quota redistribution for subsequent auctions

Adoption of amendments to the NPA, submission of the draft law to the Verkhovna Rada

(Off-taker) Organization and holding of auctions

Market participants

Other authorities

NPA is a legal act ETC is an electronic trading system EM is an electronic platform CBD is the central database TU - specifications BG is a bank guarantee

SE "Prozorro. Sales" (ETC Administrator)

Ensuring the functioning of the ETC, CBD

Selection of EM operators (CMU Resolution on EM Operators Selection Procedure)

The EM operator

Accepting participants' statements, ensuring the functioning of EM

The EM operator

Accepting participants' statements, ensuring the functioning of EM

Conclusion of contracts with EM operators (Ministry of Energy and Energy Order Model agreement)

Publication of the auction announcement

Submission of applications, documents and BG of the participant (5 euros per 1 kW) Closed information!

Conclusion of the Purchase and Sale Agreement (NERC Decree Model Contract) Checking the documents of all participants after the auction. Formation of the final ETC protocol

Disqualified

Participant The loser Participant

Winner

Participant Participant Winner The participant provided incorrect information. The application does not take into account when determining the final quota volume of 80% of all applications.

The loser returns BG participant The participant has refused to sign the contract and loses the participant's BG

ü Signing the protocol ü BG comes back to the winner ü Bringing of BG 15 euro per 1 kW ü Construction of the facility 2 years SES, 3 years other, return BG ü (+ 1 year - BG $ 30 per 1 kW) ü 20 years e / e sale at auction price

Auction Results Report (Statistics, Issues) P a y m e n t t

• t

h e E M

• p

e r a t

• r

. 8 e u r

• s

p e r 1 k W

Fee for access to the ETC is 0.4 Euro per 1 kW

Article 9-3 of the Law of Ukraine "On Alternative Energy Sources"; CMU Resolution The procedure for holding auctions on the allocation of support quota

Cabinet of Ministers of Ukraine

Given the decision of the CMU Automatic holding auction at ETC Formation of the primary protocol Participants disclosure

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Administrator of electronic trading system

The system has received international recognition. In 2017 in India, as part of the CitiT4IChallenge competition, it became one of the best anti-corruption startups in the world. And in 2018, it received an anticorruption award from C5 Accelerate and the USA Institute of Peace as part of The Shield in the Cloud Innovation Challenge.

MAIN RESULTS

ProZorro.Sales is a state e-commerce system. It was initiated by the Ministry of Economic Development and Trade of Ukraine, Transparency International Ukraine, the Deposit Guarantee Fund, the National Bank of Ukraine and the Ukrainian electronic sites.

• state auctions

https://prozorro.sale/

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Number of auctions: 249,65 thousand Number of participants: 16,63 thousand Revenue: 22.12 billion UAH Bids: 2.55 trillion UAH Declared value: 1.15 Minimum Price Increase: 21.64%

Electronic Platforms Operators

Electronic Platforms Operators “Prozorro.Sales” are an accredited independent legal entities that, after selection, will be connected to the electronic trading system and, on the one hand, will cooperate with the auctioneer and, on the other hand, with potential auction participants. The sites provide consultative support to both the Offtaker and potential bidders, help to register in the electronic trading system, properly place the auction announcement, apply for participation, provide access to the auction module and in general - provide the technical ability to organize and conduct electronic auctions for auctioning support quotas.

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Off-taker and Auctions Organizer

The State Enterprise “Guaranteed Buyer”, created by the Cabinet of Ministers of Ukraine by the Resolution №324 of 17.04.2019 purchase of electricity produced from alternative energy sources fulfillment of special responsibilities for security public interest in the functioning of the market electricity (PSO)

• rganizing and conducting green auctions

Functions:

http://www.gpee.com.ua/

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Auction timeframes

until December 1st

• f each year

CMU, on the submission of the Ministry of Energy and Environmental Protection, sets support quotas for the next 5 years and a schedule of auctions for the next year

30 to 60 days within 15 minutes

• n the day the

auction ends

The Guaranteed Buyer checks the documents and information of ALL participants for compliance with the requirements of the Law and the Procedure of holding auctions for allocation of support quota

Guaranteed buyer and winners sign bilateral protocols. The winners provide the necessary documents (including a bank guarantee under the contract), pay the EM fee) and after verification the Guaranteed buyer concludes with him the contracts of purchase and sale of electricity.

Winner submits Power Purchase Certificate / Declaration to the Assured Buyer and begins to supply electricity to the grid

And the auction is until April 1, Second auction - until October 1 for 15 but not longer than 30 working days

within 10 business days within 15 minutes

The Guaranteed Buyer submits the auction results to the Ministry of Energy and Environment. If necessary, the Ministry

• f Energy adjusts the procedure, redistributes the unallocated quota volume and submits draft regulations to the CMU,

which approves the changes

Entities through electronic operators are registered with the ETC and submit bids with the price offer, capacity with additional documents, acquire the status of the auction participant

The Guaranteed Buyer enters into an agreement with the operators of the electronic sites and, based on the resolution of the CMU, publishes the announcement of the auction in the electronic trading system (hereinafter - ETS) (lot, terms) It is possible to deprive the participants of the status of the participant according to the results of the inspection, of which an act with indication of the reasons is drawn up by the Guaranteed Buyer. Automatic generation of a new protocol. Determining the winners

Auction

Auction Completion. Automatic ranking of ETC bidders' bids, formation of protocol on auction results. Auction module activation. Auction start. Holding a trading session. Ability to change bidders in the direction of reduction To acquaint participants with information about the lot being played

Not later than 2 years for SES and 3 years for other RES (+ 1 year possible) 20 years

The Guaranteed Buyer buys electricity from the winner at the auction price

until October 31 of each year

The Ministry elaborates the submitted proposals, determines the quotas of support, including the proposal of land plots for the construction of RES facilities (if necessary)

CAP, State Energy Efficiency submit to the Ministry of Energy and Environment the proposal

• f annual support quotas

until September 15, every year

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Land auctions

The Ministry of Energy is requesting the EFA / MSO to allocate land for the construction of RES facilities. The Ministry of Energy agrees with the GSP the technical parameters of the RES facility, which will be offered on the respective land plot and receives the draft agreement of accession, including the technical conditions, from the GSP /

• DSO. Power is reserved for 2 years

CMU on the submission of the Ministry of Energy approves land with certain technical specifications for auction The EFA / MLA provides the authorized body with a copy of the decision to allocate the land plot with the necessary information, certified by law.

Upon request, he submits proposals by the Ministry of Energy on energy units (territories) that are of priority for the integration of RES facilities into the Ukrainian UES

1 2 3 4 5 Auction of land plots 45-50 MW

Participant 2 Participant 1

47 MW 49 MW Ø The land auction is conducted separately from the general auction Ø The selection criterion is the price of the winner Ø The scope of the application within the proposed power range Ø 2 bids provide competition

№ Type

• f

RES Minimum power, MW Maximum power, MW Location KOATUU Category of land The manager

• f the land

Transmission System Operator / distribution The name of the substation

1 SES 10 20

Poltava

0000

Municipal Poltava City Council Poltavaoblenergo JSC SS Promvuzol 110/10

An example of a possible land offer

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Irrevocable bank guarantee

Irrevocable bank guarantee for participation in the auction 5 Euro per 1 kW (not less than 50 business days after auction

Irrevocable bank guarantee for the fulfillment of obligations under the contract of 15 Euros per 1 kW (SES-2 years, Other 3 years) Additional irrevocable bank guarantee for the fulfillment of obligations under the contract of 30 Euro per 1 kW (for 1 year)

Bank with a credit rating not lower than uaA on a national scale or at least A- on an international scale (Fitch Ratings, Moody's Investors Service, Standard & Poors)

Winner

Return of the guarantee to the winner within 5 working days from the date of publication of the contract

Auction participants

Signing a contract

Refusal to conclude a contract Expiration of construction, commissioning

Not provided certificate/ declaration

Provided certificate / declaration

Return of guarantee to the winner within 10 working days Performance of the Guarantee in favor of the Guaranteed Buyer

Extension of the construction period per year + additional warranty

Not provided certificate/ declaration

Return of the winner of 2 guarantees within 10 business days

B e f

• r

e t h e c

• n

c l u s i

• n
• f

t h e c

• n

t r a c t

Performance of the Guarantee in favor of the Guaranteed Buyer Execution of 2 guarantees in favor of the Guaranteed Buyer

Provided certificate / declaration

The loser

Return of guarantee within 5 years from the date of publication of all contracts, but not more than 30

• years. from the date of the

auction

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