Primorskaya onshore wind farm, Ukraine

The head of Ukraine’s state gas company Naftogaz expects deliveries from Russia to stop on 1 January 2020. Domestic production accounts for 54% of total gas consumption in Ukraine but the remainder of supply is met through imports from Europe and Russia.

In the past Russia supplied the majority of Ukraine’s natural gas but beginning in 2015 the country significantly reduced its Russian imports and ramped up supply from Europe. Much of the European gas originates in Russia and was brought into Ukraine via reverse flows from central and eastern European countries.

Russia is now preparing to cut the country off even if the Nord stream 2 pipeline is delayed or blocked altogether, though this could be avoided if both countries come to a compromise. The existing gas supply and transit deal will expire by the end of 2019 but before a new deal can be signed, disputes over the old one will have to be resolved.

The Stockholm arbitration court’s decision in December (2018) ordered Gazprom to pay compensation of $2.6 billion to Naftogaz, which the Russian company has refused to do.

Ukraine knows it cannot rely on Russian imports to fuel the country's power generation long-term and is pursuing alternative solutions.

Next year the country is set to deregulate the energy market and make it easier to raise debt from foreign investors. The plan is for the project financing of greenfield energy projects to enable the country to transition to energy independence.

In April (2019) Ukraine approved a law to introduce the RES incentive auction scheme with the 1st auction to be held in the beginning of 2020, however sources have suggested that the government may hold a pilot tender.

Ukraine's parliament is considering a number of draft laws relating to the introduction of auctions for electricity produced from renewable projects. Such electricity is sold by producers without auction prices set in the legislation.

DTEK Renewables on the other hand carried the 200MW Primorskaya wind farm in southern Ukraine to financial close via two €90 million ($102.3 million) debt packages.

Financing

The €300 million total capex for the Primorskaya wind farm was divided into two phases. Phase 1 reached financial close on the 28 August 2018, while phase 2 closed on 3 June (2019).

Both €150 million phases were funded on a 60:40 debt-to-equity basis, with senior 10-year debt provided by a group of German commercial banks. 

Each of the following lenders participated on the €90 million senior loan facility for phase 1, providing equal debt tickets:

  • AKA Bank 
  • BayernLB
  • Bremer Kreditbank
  • KfW IPEX-Bank

Under the first phase of the project, 100MW of generating capacity was developed. GE supplied the 26 wind turbines with a unit capacity of 3.8MW each. It began operations in March.

Phase 2 featured the following lenders, providing equal debt tickets:

  • BayernLB
  • KfW IPEX-Bank
  • ODDO BHF Aktiengesellschaft

The second phase is expected to come online by the end of Q3 2019.

German export credit agency Euler Hermes provided an export credit guarantee for both phases 1 and 2. Spain's CESCE also provided reinsurance for around a third of Euler Hermes' cover for phase 2.

The project

The Primorskaya wind farm has had a challenging past. The project began procurement in 2011 when DTEK received planning permission from the state. At that time the developer hoped to reach financial close the following year and for commercial operation to begin in 2013/2014.

The wind farm was put on hold however amidst political hostilities in Ukraine. It did not begin moving forward again in earnest until 2016.

Once complete the wind farm will be equipped with 52x GE 3.8-130/137-110HH wind turbines, one the most powerful GE onshore turbines, and is expected to generate enough electrical energy to power the equivalent of roughly 350,000 homes in Ukraine.

The project will ultimately assist Ukraine in meeting its target of generating 11% of its electricity from renewable sources by 2020.

Advisers on the deal included:

  • GE Energy Financial Services – financial
  • Deutsche WindGard – technical
  • Sayenko Kharenko – local legal
  • Baker McKenzie – lenders legal

Asset SnapshotNord Stream 2 Gas Pipeline (1225KM)

Est. Value:
EUR 9,500.00m (USD 10,460.91m)
Full Details

Asset SnapshotPrimorskaya Wind Farm Phase 1 (100MW)

Est. Value:
EUR 150.00m (USD 168.90m)
Full Details

Asset SnapshotPrimorskaya Wind Farm Phase 2 (100MW)

Value:
EUR 150.00m (USD 170.34m)
Full Details

Transaction SnapshotPrimorskaya Wind Farm Phase 1 (100MW)

Financial Close:
24/08/2018
Value:
$104.07m USD
Equity:
$0.00m
Debt:
$104.07m
Debt/Equity Ratio:
100:0
Full Details

Transaction SnapshotPrimorskaya Wind Farm Phase 2 (100MW)

Financial Close:
03/06/2019
Value:
$167.65m USD
Equity:
$67.06m
Debt:
$100.59m
Debt/Equity Ratio:
60:40
Full Details