presentation paritet law firm_cissolar
TRANSCRIPT
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
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
Incentives for development of solar energy projects under GT
– 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)
Tax incentives under the Tax Code
Possibility to use JI for renewable energy projects
Feed-in tariff scheme or “green” tariff (GT)
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!!!
Actual statistics
1. In the middle of 2009 the core legislation on the current feed-in tariff scheme (GT) was enacted
2. 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
3. If the legislation establishes quite good minimal fixed rates for “green” tariff, why the number of solar energy projects under GT is so scarce!?
Minimal fixed GT rates
Type of energyPower station capacity and other factors
influencing the rate of GTRate of the
tariff (€ / kW)
Wind
less 600 kW 0,0646
600-2000 kW 0,0754
more 2000 kW 0,1131
Solar energy
Power plants on ground surface 0,4653
Power plants on the roofs of buildings with power capacity exceeding 100 kW
0,4459
Power plants on the roofs of buildings with power capacity of up to 100 kW
0,4265
BiomassShould be at least partially of plant origin to be eligible
0,1239
Small hydropower plants
not more than 10000 kW 0,0775
Change/Decrease of GT in the future “Green” tariff is established until 2030 (grounds for
termination are also established by a Decree of NERC)
2014 – by 10%2019 – by 20%2024 – by 30%
Decrease of the current rates of “green” tariff for power plants commissioned (significantly upgraded) after:
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
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 limitationsNo economic and administrative incentives
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 %
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
Ukrainian content requirement
Draft procedure establish 2 steps for calculation• PRELIMINARY CALCULATION (DISCRETIONAL)
o By authorized expert organization after preparation of project documentso At producer’s discretion
• ACTUAL CALCULATION (MANDATORY)o By authorized expert organization after commissioningo Requires filing of documents proving value of construction and local contento 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.
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
Approval of GT
Rates of GT shall be approved by NERC for each producerafter 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
Conditions for Implementation of GT Projects
Set up a companyElectricity producer license Connection to the grid (compensation of
expenses related to grid connection)Participation in WEM and signing WEM
AgreementConclusion 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.)
Set up of a company
(charter shall provide that the
company produces
electricity)
Acquisition of rights in land Construction
Registration of ownership
Registration of leases
Registration of easements and
superficies
Change of designated purpose
License for electricity
production
Joining WEM and Signing WEM Agreement
Conclusion of agreement with Energorynok
GT approval by NERC
Sale of electricity at GT
Tax and customs duties breaks
Exemption from import VAT and customs duties
25% of required land tax
Maximal annual lease payments – 3% of appraisal value
Exemption from corporate profit tax till 2011
Receipt of initial data
Receipt of technical
conditions
Development of project
documentation
Examination of PD, if necessary
Registration of declaration re preparatory
works, if necessary
Registration of declaration re beginning of construction
Receipt of permission r e construction
works
Issue of Certificate on readiness for exploitation
Registration of declaration on
readiness
Registration of ownership
Connection to the grid
Connection of certain types of
wind farms
Connection of other power plants
Conditions for Implementation of GT Projects
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
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
Thank you for your attention!
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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| [email protected]