Kinstellar Energy Digest Ukraine, December 2018 In Review

January 2019 - Kinstellar Energy Digest Ukraine, December 2018 in Review

RENEWABLES: New rules may promote more environment-friendly solutions

In December 2018, the President of Ukraine signed the Law of Ukraine "On Amending the Tax Code of Ukraine and Other Legislative Acts of Ukraine on Improving Administration and Revision of Some Taxes and Fees" No. 2628-VIII dated 23 November 2018 ("Law No. 2628"). Law No. 2628 extends the period of VAT exemption for imports of electric cars by an additional three years and creates more opportunities for investors in renewable energy ("RE"), as described below.

Import VAT exemptions for RE plant equipment

Law No. 2628 exempts certain imported equipment for the construction of RE plants from VAT from 1 January 2019 until 31 December 2022. The VAT exemptions apply to:

wind power generation units (code 8502 31 00 00 under the Ukrainian Classification of Goods of Foreign Economic Activity (the "UCGFEA")); photovoltaic and related elements (UCGFEA code 8541 40 90 00); transformers with capacity exceeding 10,000 kV·A (UCGFEA code 8504 23 00 00); invertors with capacity exceeding 7.5 kV·A (UCGFEA code 8504 40 88 00). More solar panels at production plants: amended land regulations for RE installations

As a rule, a power station must be located on land specifically designated for such purpose. Typically, to install RE power stations, the investor must apply for a change of the designated purpose of the land plot to "J.14.01 - lands for placing and operating power plants" - a type of a designated land purpose belonging to the category of industrial lands ("J. Lands for industry, transport, telecommunications, energy, defence and other purposes").

Law No. 2628 introduces an exemption from the above rule for the development of certain RE installations. If the RE installation is to be located at a site already designated as industrial land, no change of designated land purpose is required.

It is expected that this change will promote the construction of RE installations on land adjacent to manufacturing facilities, warehouses and other industrial buildings.

RENEWABLES: The Draft Law introducing e-auctions passes the first reading

On 20 December 2018, the parliament adopted in the first reading draft law No. 8449-д "On Ensuring Competitive Terms of Production of Electricity from Renewable Sources" (the "Draft Law").

The most critical amendments to the Draft Law were presented during parliamentary debates and include a revision of the feed-in tariff (the "FIT") for RE plants, as follows:

solar stations: the FIT is reduced with immediate effect by 25% and by a further 1.5% annually over the following three years; wind parks: the FIT is reduced with immediate effect by 10%, and by a further 2.5% annually over the following three years. Under the Draft Law, successful bidders obtain the right to state support in the form of the obligation to off-take energy produced from RE sources...

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