First Solar  Power plant in UkraineMuch has been written and said about Ukraine’s high energy intensity and the lack of sustainable energy initiatives in the country, and it remains one of the most energy-intensive countries in the region. The EBRD has been addressing these issues actively by implementing projects and introducing new energy efficiency solutions, working in all sectors of the economy, with great success. Over €1.5 billion has been invested in Ukraine in sustainable energy since 2006, achieving over 9 million tonnes CO2 a year in emissions abatement, equivalent to 3.5 per cent of Ukraine’s 2009 emissions.

The latest EBRD initiative is aimed at promoting solar power generation and the development of a true renewable energy market in the country, because it not only promotes the use of renewable energy in Ukraine but also supports a truly independent and committed local project developer.

The project is part of the EBRD Ukraine Sustainable Energy Lending Facility (USELF), an investment facility of €70 million (€50 million from the EBRD and €20 million from the Clean Technology Fund) designed to provide finance to private local enterprises wishing to invest in renewable energy projects in Ukraine. Technical assistance on project preparation, regulatory framework development and strategic environmental review is funded by the Global Environmental Facility (GEF).

Sergey Evlancik and Narek Harutyunyan, the two local entrepreneurs who approached the EBRD with a request to finance this renewable project, were already well known to the EBRD (in April 2011, the Bank decided to lend them €11 million to support their London Stock Exchange-listed agribusiness company). They represent a new pedigree of Ukrainian businessman: energy-efficiency conscious and willing to adopt best international business and corporate governance principles.

Their project, which has now received financing worth €5.7 million from the EBRD (€4.1million from the EBRD and €1.6 million from the Clean Technology Fund), is aimed at the development, construction and operation of a 4.5 MW solar plant in the south of Ukraine. While this may not have the largest energy-production capacity, it clearly demonstrates that there are ways to reduce the country’s dependence on imported fossil fuel and to improve its energy security, while reducing CO2 emissions. It is also the first ever solar project to be financed directly by the Bank. While the EBRD portion of the loan is provided on market terms, the conditions of the Clean Technology Fund are more concessional, featuring a lower interest rate and a much longer repayment term of 15 years. This is an important concession which brings the payback of the loan in line with the payback horizon of the investment.

Apart from being a first in technology, the project will also be the first of its kind in the Ukraine power sector in terms of its structure. It is being constructed by Martifer Solar of Portugal, a company which is acting as an Engineering Procurement and Construction (EPC) contractor. Solar power plant EPC contracts, which are common in western Europe, represent a concept completely new and untried to Ukraine.

Evlancik and Harutyunyan are no strangers to the renewable energy business. Recognising the potential for synergies, once their primary business Ukrproduct Group Ltd (one of the leading producers and distributors of dairy products in Ukraine) was well established, they started looking at renewables – arguably one of the most promising, but also challenging sectors in Ukraine.

Thanks to the unique structure of the USELF direct lending facility, it took only three months to prepare, approve and sign this project, and it is now expected that the new solar power plant will be connected to the grid by the end of the year.