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  • The court decides that the ministry of energy and coal unlawfully blocked payments within international projects

    On July 15, the Disctrict Administrative Court of Kyiv ruled for Ukrenergo and found unlawful the inactivity of the Ministry of Energy and Coal that since October 2018 had been blocking payment orders signing for Ukrenergos contracting parties.

    As a result, the implementation of the Ukrenergo’s investment projects financed by international financial institutions’ (IFIs) loans were jeopardized.

    In February 2019 Ukrenergo was resubordinated to the Ministry of Finance, but the Ministry of Energy and Coal remained responsible for managing costs within company’s projects with IFIs. For seven months the Ministry of Energy and Coal refused to approve payments within contracts concluded for implementation of the investment projects financed by the loans from World Bank, European Bank for reconstruction and development, German government’s bank KfW, Clean Technology Fund and others. Therefore in February 2019 Ukrenergo made a complaint and decelerate implementation of a number of projects crucial for energy sphere.

    The payments were unblocked only at the beginning of June 2019 with the help of the Ministry of Finance. In particular, the Cabinet of Ministers approved amendments to the CMU’s decision №70 of 27.01.2016 that allowed to designate Ukrenergo instead the Ministry of Energy of Coal as a spending agency within international loans. However, it required a durable procedure of resigning subloan agreements for all international projects and it was done with joint efforts of Ukrenergo, the Ministry of Finance and NEURC.

    Overall as a result of payments blocking within international projects, in the first 6 months of the year Ukrenergo’s program of investments was financed only for 9.9% (118.087 mln UAH instead of 1.191 bln UAH). As of now, debt to contractors, who are in charge of works within international investment projects, is 15.795 mln euro. It accounts for 67% of the debt aggregated during seven months when the Ministry of Energy and Coal blocked the payments.

    The main payment problems with contractors was within the following projects:

    • Construction of the high-voltage overhead line 750kV Rivnenska NPP-Kyivska financed equally by EBRD and EIB (loan totals 300 mln euro);
    • Construction of the overhead line 750 kV Zaporizka NPP-Kakhovska financed equally by EBRD and EIB (loan totals 350 mln euro);
    • The second electricity transmission project (ETP-2) (including the development of software for balancing market and ancillary services market – MMS platform) financed by IBRD and Clean Technology Fund (loan totals $378 mln);
    • Project of increase in electricity transmission efficiency (substations modernization) financed by KfW bank (loan totals5 mln euro).

    It worth noting that contractors, whom Ukrenergo is heavily indebted to, already began to make financial claims to Ukrenergo. In the near future it can cause complaints against Ukrenergo concerning debt settlement and fines for untimely performance of duties by Ukrenergo.

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