Ukraine announces tender for implementing Ukraine – EU Energy Bridge project
On 21 January 2019, the Ministry of Energy and Coal industry of Ukraine announced on its website the tender for selecting a private partner to implement the Ukraine–EU Energy Bridge project. Prequalification applications may be submitted until 5 March 2019.
The Project is supposed to initiate an integration of the Ukrainian power system into ENTSO-E. It contemplates reactivation of the existing 750kV power line between the Khemelnitsky Nuclear Power Plant (the “KNPP”) (Ukraine) and Rzeszów (Poland), and interconnection of the no. 2 power unit at KNPP with the so-called Burshtyn Energy Island (formed by Burshtyn TPP, Kalush TPP and Tereblia-Rikskaya HPP), which is already synced with the European grid and allows exports of electricity to Slovakia, Hungary and Romania.
The Project will not only allow the export of more electricty (additional 1 GW) to EU countries, but will also allow for the transit of power from Germany, Poland to Hungary, Romania and Balkan countries. Revenues from electricity exports will be used to fund the construction of KNPP power units no. 3 and no. 4.
Main conditions of the tender
- Objectives of a public private partnership:
- modernisation and reconstruction of the existing objects:
- outdoor switgear unit 750 kV of KNPP;
- energy network of power units No. 1 and 2 of KNPP;
- 750 kV substation Zakhidnoukrainska; and
- 750 kV power lines KNPP–Rzeszow, and KNPP Zakhidnoukrainska substation–Albertirsa; and
- construction of a new transformer.
- modernisation and reconstruction of the existing objects:
The aforementioned objects will not be transferred to the private partner and will remain with their owners.
- State support to the private partner: the State will guarantee supply of all the electricity generated on power unit no. 2 of the KNPP to the private partner.
- Obligations of the private partner:
- interconnect power unit No. 2 of KNPP, part of 750 kV substation Zakhidnoukrainska and 750 kV power lines KNPP–Rzeszow with the Burshtyn Energy Island within 13 months after becoming a private partner under a public-private partnership (PPP) agreement signed with the Ministry representing Ukraine;
- after completing such works, export of all electricity generated at power unit no. 2 of the KNPP to EU countries by purchasing it from the State Enterprise “NNEGC “Energoatom”; and
- provide annual increases in production at Ukrainian nuclear power plants by 3.2 tWh through implementation of programs for the increase of capacity and the improvement of the nuclear power plant’s efficiency within 28 calendar quarters after becoming a partner under the PPP agreement.
Given that the tender was initiated jointly by Polenergia S.A.r.l., EDF Trading Limited and Westinghouse Electric Sweden AB, any other entity winning the tender shall be required to reimburse initiators their costs on preparing the tender (but not more than 2.5% of the whole amount of investments in the project).
- Reimbursement of private partners: the costs of a private partner will be reimbursed through deduction of the following amounts from the electricity price of SE “NNEGC “Energoatom”:
- private partner’s investments in the project and all other expenses under the PPP agreement;
- transactional expenses in relation to sale of electricity on EU markets;
- private partner’s profit margin from electricity trading (to be proposed by the bidder); and
- annual premium for private partner’s investments (to be proposed by the bidder).
- PPP duration: not more than 23 years and 3 month.
- Applicants: Ukrainian and foreign legal entities, individually or jointly (as a consortium).
- Qualification requirements:
- to have equipment and assets necessary for implementation of the project.
- to be able to engage a qualified workforce experienced in increasing the efficiency of NPPs.
- to have the following experience:
- within the last five years: (a) implementing projects that increase the reliability of equipment, technologies and methods of technical maintenance of nuclear power plants; (b) improvement of efficiency and increase of capacity of power units of nuclear power plants; and (c) production and handling of nuclear fuel, establishing limits and parameters of nuclear fuel safety;
- designing and operating the power units of nuclear power plants, production and supply of equipment for nuclear power plants valued at no less than EUR 100 million during the last five years;
- at least ten years of activity on EU electricity markets and five years on the electricity markets of two of the following countries: Poland, Romania, Hungary and Slovakia;
- participation in the power exchanges of Poland, Hungary, Romania and Slovakia; and
- annual sale of electricity on the EU electricity markets in volumes exceeding 20 times the amount that must be exported under the PPP agreement.
- have the financial capacity to implement the project with:
- assets in the amount of no less than EUR 2.5 billion; and
- credit standing equivalent to BBB (Standard & Poor’s) with one of the international credit rating agencies (Moody’s, Standard & Poor’s or Fitch Ratings).
Participants with 10% of shares that are owned by the residents of a country recognised as country-aggressor or have in total 50% of charter capital owned by entities of countries that are considered by the FATF to offer weak measures combatting money laundering will not be qualified to participate in the PPP Tender.
PPP Tender procedure
- Prequalification stage. Applicants have 45 calendar days from the tender announcement (5 March 2019) to submit their applications for qualification in the tender.
Upon receiving each application, the tender committee shall have five business days to consider if an applicant qualifies for the bidding stage, and another one day to submit minutes and a draft of the decision to the Ministry. The Ministry adopts the decision and will send a notification to the applicant by post within one day.
- Bidding stage. Applicants that have qualified must submit their tender proposals within 45 calendar days after the prequalification deadline of 20 April 2019. The tender committee opens the bids within the following five calendar days.
- After opening the bids, the tender commissions will have 45 calendar days (unless extended for another 20 calendar days) to consider bids and select the winner. Within the next 30 calendar days the Ministry will approve the winner and have one more day to notify the winner by postmail.
- After announcement of the winner, the Ministry and the winner shall negotiate the PPP agreement.
Vitaliy Radchenko, Partner, firstname.lastname@example.org
Volodymyr Kolvakh, Senior Associate, email@example.com
Anatolii Doludenko, Associate, firstname.lastname@example.org