State Guarantees Will Provide High Localization and Cheap Credits for HPSPP’s Construction – Ukrhydroenergo
Providing the state guarantees for Dnister and Kaniv HPSPPs’ construction will let raise funds at low interest rate (up to 4%), provide the high level of localization (85%) and involvement of the Ukrainian energy machine building producers and construction firms in the performance.
The General Director of PrJSC Ukrhydroenergo Igor Syrota noted necessity and importance of the state guarantees’ providing for the company’s projects in the comment for ExPro agency on September 11, 2020.
“The state guarantees must be provided in order to raise funds and reach the localization rate of 85%. A state guarantee grants us some advantages and possibility of holding talks with financial institutions on cheap credit resources,” he said.
Talking about funding, Syrota noted the company contemplates taking out credits at 4% in a foreign currency.
“It should be no more than 4% for the period of constriction and loans’ repayment. The credit is considered for 15-20 years’ period,” the Director informed. Concerning the localization rate, the CEO of Ukrhydroenergo underlined the company considers to reach 85% of the local component.
“We contemplate reaching the Ukrainian local component at 85% as it has already achieved for Dnister HPSPP project. There are our builders and projectors. It (local component – ed.) will allow us to multiply taxes payments,” said Syrota.
“We would want to involve maximally the internal resource and to engage our producers, and to leave the share of works in Ukraine… Localization moves economy forward as it creates new jobs. The constructions in Kaniv (Kaniv HPSPP in Cherkasy region – ed.) or at the Dnister River (in Chernivtsi region – ed.) are 2.5 thousand of workplaces. People are working from all Ukraine. The main point is that our plants (Turboatom amd Electrovazhmash – ed.) are provided by contracts by 2022 and we should think over their involving after 2022,” said Syrota adding the building of power plants and manufacturing of energy equipment (turbines and generators) should be performed by the Ukrainian companies.
The CEO informed the overall cost of Dnister and Kaniv HPSPPs construction constitutes around €2.2 billion.
“The project of Dnister and Kaniv HPSPPs costs around €2.2 billion. If an investor finances 85% of the project expenditures, the amount will be approximately €1.6-1.7 billion. Such a sum should be received due to the state guarantees, but it does not mean that all these funds will need in 2020-2021,” he said.
According to Syrota, Ukrhydroenergo contemplates the following variants of getting the external and the internal funds:
- The financing from the foreign banks offering the funds by involving their contractors, for example banks from China or Turkey. “If it is an external financing, for example banks from China or Turkey, they will want their constructors to provide 60% of the project. It is naturally that it will be less attractive situation for us,” Syrota said adding that even in this case Ukrhydroenergo will demand that the foreign investors create the consortium with Turboatom and Electrovazhmash. Nevertheless, the cap of localization will be up to 50%;
- Involvement of funds from the banks (for example the World Bank) not demanding to engage the certain contractor. In such a case, Ukrhydroenergo will hold an auction to choose a contractor according to the bank’s procedure. Therefore, the Ukrainian plants will take part in the auctions in full parity with the Chinese, the Turkish and another manufacturer;
- In the addition, the top management of Ukrhydroenergo discussed with the members of the parliament possibility to get credits from the state banks (Oshadbank, Ukrgasbank and Ukreximbank). Such a credit finance would be possible to raise at 5-9% in hryvnya, for example as a part of the state program The Large Construction. “Why don’t we start the same program The Large Energy Construction as we need to build grids and regulated capacities? It could be a part of the Large Construction Program,” said Syrota.
- One more option is to shift away from the Public Services Obligations in the electricity market and to allow Ukrhydroenergo to trade 30% of its electricity output freely. “It would be a large financial resource. For example, it would be enough to complete construction of Dnister HPSPP,” commented the CEO of Ukrhydroenergo.