On February 28 at a meeting between Ukraine’s President Yushchenko with the President of the European Bank for Reconstruction and Development (EBRD) Jean Lemierre together with the Minister of Fuel and Energy Yuriy Prodan a loan agreement for the 750 kV Rivne-Kyiv High Voltage Line Construction Project was signed. This loan provides Ukraine with a EUR 150 million loan for the national power company Ukrenergo to substantially improve the efficiency, quality and reliability of electricity generation and transmission in western and central Ukraine.
On the same day an agreement for the 750 kV Rivne-Kyiv High Voltage Line Construction Project between Ukrenergo and the EBRD was also signed by Kostiantyn Ushchapovskiy, acting director of Ukrenergo and Lemierre on the premises of the company.
The second half of the EUR 300 million loan is expected to come from the European Investment Bank. The project is projected to be self-supporting and Ukrenergo as the recipient will take responsibility for returning the loan to the banks.
Linking up Ukraine’s power grid
The project includes four stages and enables Ukrenergo to construct a 750 kV high voltage transmission line linking the central regions of the country with western regions that currently enjoy surplus generation capacities. Once completed the total length of the new transmission lines will be around 488 kilometres.
The project, in which the EBRD and the EIB plan to jointly contribute about 70% of total cost by making identically-sized loans, is considered of crucial importance for the entire Ukrainian electricity system. Industry experts stressed that the new grid could help reduce the existing gap between the generation and consumption figures for domestically-generated electrical power and meet higher demand due to the growth of industrial needs.
“The realisation of this Project will have a positive impact for Ukrenergo, for all the other participants of the Ukrainian wholesale market and for the country as a whole,” the EBRD’s Lemierre commented during the official signing ceremony.
Spreading the energy around
The transaction will help reduce losses and allow supplies from existing excess generation capacity in western Ukraine to reach Kyiv as well as neighbouring oblasts. It will also reduce Ukraine’s dependence on imported fuels and help the energy sector link up with the Union for the Co-ordination of Transmission of Electricity - the association of transmission system operators in continental Europe. It might also play a significant role in allowing the country to eventually integrate into the EU’s internal energy market.
Some energy sector analysts have long stated that Ukraine’s power-generating capacities are not currently being fully exploited. The equipment used by the whole sector is mostly old and needs to undergo major renovation in order to be used productively and safely. “An example is the Khmelnytsk nuclear power station. It generates energy but there are not enough power lines [for distribution],” said Vitaliy Kulik, the director of the Centre for Research of Civil Society Problems.
In January, 2007 Viktor Yanukovych’s government approved the 750 kV Rivne-Kyiv High Voltage Line Construction Project and the reconstruction of the Rivne and Khmelnitsk power stations, and planned to involve EBRD and EIB money. The Minister of Fuel and Energy at the time, Yuriy Boyko, forecast the completion of the project by 2010.
