Nova-Eco was founded in 2005 by a group of Ukrainian and international sponsors to develop the first large-scale privately owned wind power project of 300 MW installed capacity in the Autonomous Republic of Crimea. Being a pilot and thus, high-risk project in Ukraine, Nova-Eco has carefully selected and involved the best Western practices and experience in the wind farm development. Nova-Eco hired well-established international consultants for sites selection, wind measurements, technical, environmental, legal and other aspects of the project, folowing the EBRD policies and guidelines. ABB and ELTEL technical teams made a tremendous input in Ukrainian grid studies and recommendation as to the reliable and efficient interconnection of WPP-300 to the grid. Nova-Eco, Prowind, Enficon and Krim-Irey teams created know-hows, accumulated practices and experience. Up to date, the project still has all of the competitive advantage, quality and spirit.

Nova-Eco is fully aware that the project of this scope and complexity can only be successfully realized in Ukraine by the strongest team of partners and investors and, thus, must correspond to the highest levels of demand and best business practices.

Aside from the feed-in «green» tariff, as per law of Ukraine available to companies generating electricity from renewable sources, there are additional incentives.

Tax Exemptions available to alternative energy generators

Starting from 1 January 2008 tax credits for alternative energy field came into force, enacted by the Law of Ukraine "On amendments to some legislative acts of Ukraine on the promotion of energy saving" of 16 March 2007 № 760-V. Importantly, the new Tax Code did not eliminate incentives for alternative energy field.

The current Tax Code provides two kinds of benefits for the alternative energy industry: the import privileges and benefits for profits taxation.

Import Privileges

Para 197.16. Article 197 of the Tax Code provides tax exemption of value-added operations for import into the customs territory of Ukraine of:

• equipment that operates on renewable energy resources, energy saving equipment and materials, instrumentation, facilities of control and management of power resources costs, equipment and materials for power production from renewable energy sources;
• materials, equipment, components used to manufacture:

1. equipment that operates on renewable energy;
2. materials, raw materials, equipment and components to be used in energy production from renewable energy sources;
3. energy-saving equipment and materials, products, operation of which provides savings and rational use of energy resources;
4. means of measuring, monitoring and controlling the cost of fuel and energy resources.

Import transactions of indicated goods into the customs territory of Ukraine are exempted from tax, if the goods are used by the taxpayer and if identical products with similar quality indicators are not produced in Ukraine.

Benefits for profits taxation

In accordance with Section 158.1. Art. 158 of the Tax Code, 80 percent of the enterprises’ profits derived from sales of own-produced goods within the customs territory of Ukraine under the list established by the Cabinet of Ministers of Ukraine are exempted from profits taxation:

• Equipment that operates on renewable energy sources;
• Materials, raw materials, equipment and components to be used in power production from renewable energy sources;
• Energy-efficient equipment and materials, products, operation of which provides savings and rational use of energy resources;
• Instrumentation, facilities of controlling and management of energy resources costs;
  Equipment for production of alternative fuels.

This exemption is valid for 5 years after the first profit receiving due to the increase of energy-efficient production. Besides Clause 158.2. Article 158 of the Tax Code provides that 50 percent of revenue resulting from implementation of energy-efficient measures and realization of energy-efficient projects by enterprises is exempted from taxation.

Additional Transitional Tax Holidays and Exemptions

Commencing from 1 January 2011, an additional temporary tax holiday for the period of 10 years is available for income of electric power enterprises (class 40.11, group 40 KVED DK 009:2005) from sales of electric energy generated from renewable energy sources. Funds exempt from taxation must be channeled by enterprises-taxpayers for increase of production output (delivery of services), rehabilitation of material and technical base, implementation of innovative technologies connected with primary activities of the taxpayer, and/or reimbursement of credit used for indicated targets and payment for its interest

The first development project consists of two separate WPPs with a combined planned installed capacity of 300MW, located on two different sites, both of which have been identified by the company management and independent consultants, as having a unique potential to generate optimal wind conditions throughout the year.

Once fully completed, the combined Project is expected to generate more than 1TW of clean energy per annum, which would amount to approximately 10% of the electricity demand of the otherwise underfed region of Crimea.

With expect revenues of over EUR130 million (UAH equivalent) per annum. The project is expected to generate an excellent IRR of more than 20% per annum on a conservative basis and is expected to remain commercially viable in a long term.

UKRAINE

Power sector organization and participants

Generation

As depicted in the above scheme there are:

• 5 thermal power generation companies comprising 14 TPP; total installed capacity 36,6 GW
• 2 hydro power generation companies; total installed capacity 4,7 GW
• 4 nuclear power plants belonging to the state enterprise ”EnergoAtom“; total installed capacity of 12,8 GW.

In addition there is a number of smaller independent producers (for example: combined heat and power plants). The existing small hydro power plants and WPPs currently are not a significant line on the country's energy balance sheet: TPS under community property (557,76 MW), ТPS with an independent balance sheet (317 МW) and isolated generating plants (2304,4 МW).

Installed capacity as at January 2010 amounted to 52,957 MW including: ТPS – 33,625 МW (63,49%), NPP – 13,835 MW (26,12%), HPP – 4,552 МW (8,6%), PSPP – 861 MW (1,63%), alternative – 84 МW (0,16%).

Transmission

UkrEnergo is a state enterprise responsible for operating of the national grid with a voltage of more than 220 kV and the interstate power networks, with all relevant infrastructures, including the national dispatch centre.

Distribution and supply

There are 27 distribution companies (OblEnergos), which used to hold the licenses for electricity supply at regulated tariffs.

There are also many smaller independent suppliers, which hold the licenses for electricity supply at non-regulated tariffs and are allowed to use the OblEnergo's networks for distribution.

Energorynok (WEM)

www.er.gov.ua

The main intermediary is a state owned company Energorynok, which is a structural subdivision of the Cabinet of Ministers of Ukraine.

Energorynok performs the following main functions:

• Purchase of electricity from electricity generators and electricity importers
• Wholesale of electricity to distributors
• Administration of the WEM's settlements and funds
• Organization and maintenance of the WEM operations
• Secretariat of the WEPM Council
• Work under intrastate agreements and maintenance of the external economic relations with electric power systems of neighboring countries;
• Chief operator of the automatic system of electric power commercial accounting

Ukrenergo – National Power Company Ukrenergo

www.ukrenergo.energy.gov.ua

The main functions performed by Ukrenergo are the following:

• to ensure the integrity of the Integrated Power System of Ukraine - national grid with a voltage of more than 220 kV and the interstate power networks;
• to maintain centralized operations and process control of the national grid ensuring the reliable parallel operations of TPPs, NPPs and HPPs etc. interconnected by HV grids;
• to ensure functioning of the wholesale electricity market (WEM) in regard to dispatching and power transmission through the Backbone and International networks pursuant to contract with Energorynok and other participants of the WEM.

NERC – National Electricity Regulatory Commission.

http://www.nerc.gov.ua

Two of its main functions are to grant licenses for power generation, transmission and supply and to maintain the price and tariff policy in the electric power industry.

The National Electricity Regulatory Commission of Ukraine (“NERC”) is the independent agency regulating activities and monitoring the legal compliance of the energy market.

NERC is responsible for implementation of the government policy on:

• Regulation of the energy sector participants
• Implementation of the price and tariffs policy in electricity and oil &gas sector
• Promotion of competition in the energy sector
• Act as an arbitrator between the participants in the market place

The Ministry of Fuel & Energy (MintopEnergo)

with its four departments (oil, gas and oil processing department; nuclear power department; energy department) is the main government institution that determines the energy sector policy.

http://mpe.kmu.gov.ua