Government of Ukraine Financial Offering - Nuclear Power Section - 2018

Nuclear Power Industry

Government of Ukraine Offering – Dated: October 2018

TABLE OF CONTENTS

OVERVIEW OF THE OFFERING
RISK FACTORS
TERMS AND CONDITIONS OF THE NOTES
USE OF PROCEEDS
DESCRIPTION OF UKRAINE
POLITICAL FRAMEWORKECONOMY OF UKRAINE
Nuclear Power Section, pp. 119-121, see below

THE LABOR MARKET
EXTERNAL SECTOR PUBLIC FINANCE AND FISCAL POLICY
PUBLIC DEBT
THE MONETARY SYSTEM
THE BANKING SYSTEM, SECURITIES AND FINANCIAL SERVICES MARKETS
TAXATION
FORM OF NOTES AND TRANSFER RESTRICTIONS
SUBSCRIPTION AND SALE
GENERAL INFORMATION
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Begins on p. 119 ….

Electricity Generation and Nuclear Power

The total electricity generating capacity of Ukraine was approximately 54.6 billion kWh (2014), 54.8 billion kWh (2015), 55.3 billion kWh (2016) and 51.8 billion kWh (2017).  Electricity production in 2016 was recorded at 154.8 billion kWh, as compared to 157.7 billion kWh in 2015 and 181.9 billion kWh in 2014. Of these amounts, 81.0 billion kWh, 87.6 billion kWh, and 88.4 billion kWh, respectively, were provided by nuclear energy. In 2018 and between January and August 2018, electricity production was recorded at 155.4 billion kWh and 104.3 billion kWh, respectively, of which 85.6 billion kWh and 54.1 kWh, respectively, were provided by nuclear energy.

In 2016, Ukraine produced:

• 81.0 billion kWh by nuclear power stations, compared with 87.6 billion kWh in 2015 and 88.4 billion kWh in 2014,
• 56.6 billion kWh  by thermal power stations, as compared with 55.5 billion kWh in 2015 and 75.0 billion kWh in 2014,
• 9.1 billion kWh by hydropower stations, as compared with 6.8 billion kWh in 2015, and 9.1 billion kWh in 2014, and
• 1.6 billion kWh by other energy stations (wind and solar) in 2016, as compared to 1.6 billion kWh in 2015 and 1.7 billion kWh 2014.

In 2017, Ukraine produced 55.8 billion kWh of energy by thermal power stations, 85.6 billion kWh by nuclear power stations, 10.6 billion kWh by hydropower stations and 1.9 billion kWh by other energy stations (wind and solar).

In January to August 2018, Ukraine produced of energy by:

• nuclear power stations, 54.1 billion kWh
• thermal power stations, 38.1 billion kWh  
• hydropower stations, 9.4 billion kWh and by
• other energy stations (wind and solar),1.7 billion kWh

Ukraine has exported electricity to Hungary, Slovakia, Poland, Moldova, Belarus and the Russian Federation. In 2017, Ukraine exported 5.2 billion kWh of energy, an increase of 30.0%. as compared to 2016, when 4.0 billion kWh of energy was exported; this was an increase by 44.4%. as compared to 2015, when 3.6 billion kWh of energy was exported; this was a decrease of 35.8%. as compared to 2014, when 8.1 billion kWh of energy was exported. This was a decrease of 4.7 billion kWh, or 47.5%, as compared to 2013.

In January 2018, Ukraine exported 0.5 billion kWh of energy. Ukraine currently exports electricity to Hungary, Slovakia, Poland, Moldova and Romania. Between January and August 2018, Ukraine exported 4 billion kWh of energy to Hungary, Slovakia, Poland, Moldova, and Romania.

Energoatom operates four active nuclear power stations in Ukraine. Ukraine currently operates 15 nuclear energy reactors located at four nuclear power stations (“NPSs”):

•  Zaporizhzhya NPS, with six reactors and a production capacity of 1,000 megawatts each;
• Rivne NPS, with four reactors and a production capacity of 415 megawatts, 420 megawatts and 1,000 megawatts (two reactors), respectively;
• Khmelnitsky NPS, with two reactors of 1,000 megawatts each; and
• Yuzhno-Ukrainska NPS, with three reactors with a production capacity of 1,000 megawatts each.

These four power stations have a total production capacity of 13,835 megawatts. In addition, Yuzhno-Ukrainskyi energy complex operates two hydroelectric units of the Tashlytska hydroelectric 120 pumped-storage power plant, with established capacity of 302 megawatts and 2 hydro units of Oleksandrivska hydroelectric power plant, with established capacity of 11.5 megawatts.

Most of the nuclear reactors in Ukraine commenced operation during the 1980s and 1990s, with one commencing operations in 1995 and two in 2004. The projected operational life of the active nuclear power stations in Ukraine is 30 years. Currently, out of 15 active NPSs, the operational life of 7 NPSs has been prolonged beyond the projected operational life. These are energy blocks No. 1 and No. 2 of Rivne NPS (operational life extended by 20 years), energy blocks No. 1 and No. 2 of Yuzhno-Ukrainska NPS and energy blocks No. 1, No. 2 and No. 3 of Zaporizhzhya NPS (operational life extended by 10 years each).

Currently, work is underway on energy block No. 4 of Zaporizhzhya NPS, No. 3 of Rivne NPS and No. 1 of Khmelnitsky NPS. Works aimed to extend operational life for the remaining 5 energy blocks are planned for 2019-2035.

International experts have been positively assessing the security level of Ukraine’s NPSs for many years. On IAEA there have been periodic meetings on compliance with the provisions of the Convention on Nuclear Safety; there continues to be ongoing monitoring by international experts in the framework of international cooperation (during missions OSART, ASSET, WANO). The main program, within the framework of which reliance and security of Ukrainian energy blocks is ensured, is the “Consolidated Program on the Enhancement of Safety at the Ukrainian NPSs”, adopted by CMU Resolution No. 1270, dated 7 December 2011.

Financing of the Program is done through Energoatom’s own funds and, starting from 2016, also through an EBRD/Euratom loan (CMU Resolution No. 356, dated 20 August 2014). The loan and guarantee agreements with EBRD and Euratom, for a total amount of €600 million, were executed on 25 March 2013 and 7 August 2013, respectively.

The term of the Program is 2012-2020 and its cost is UAH 20.1 billion. The aim of the above project is to ensure a level of safety at the Ukrainian NPSs which meets national and international safety standards and the fulfilment of Ukraine’s obligations to international organizations (EBRD, EU and the International Atomic Energy Agency) and national control agencies related to the implementation of measures on the enhancement of the NPSs’ safety.

On 15 May 2014, the law on the ratification of the guarantee agreement between Ukraine and Euratom was approved by the Parliament. After performance by the borrower of conditions precedent, the loan agreement with EBRD became effective on 19 December 2014. The loan agreement with Euratom became effective on 27 May 2015. As of 7 September 2018, €230.7 million of EBRD funds and €100.0 million of Euroatom funds have been drawn down for this project.

With the aim of diversifying nuclear fuel supply sources, Energoatom is currently working in co-operation with Westinghouse Electric Sweden AB (“Westinghouse”). Since 2011, Westinghouse has provided Ukraine’s NPSs with nuclear fuel. Starting from January 2018, the fuel from Westinghouse is loaded into nuclear units of six energy blocks of Energoatom: four energy blocks of Zaporizhzhya NPS and two energy blocks of Yuzhno-Ukrainska NPS. The other nuclear reactors are supplied with nuclear fuel by OJSC TVEL.

This practice is inherent to the European strategy of energy security, adopted in 2014, in particular regarding the general diversification of nuclear fuel sources. In 2016, Energoatom successfully completed its works on reconstruction of the open distribution facilities (750 kV) of Rivne and Khmelnitsky NPSs. This enabled the lifting of restrictions on the issuing capacity of these power plants.

In November 2016, at the Ukraine-EU Summit in Brussels, a Memorandum of Understanding was signed on Strategic Energy Partnership between Ukraine and the EU along with Euratom. By signing this document, Ukraine secured the achievements in the energy sphere over the last 10 years (the period of the previous Memorandum), in particular in the sphere of nuclear security.

The Ukraine Government puts significant efforts into reforming the energy sphere and integrating it into the energy system of the EU according to obligations determined by EU-Ukraine Association Agreement/ Currently, Energoatom is implementing a project “Energy Bridge Ukraine – EU” which is a pilot project for strategic synchronization of Ukraine’s energy system with the EU system. It is an important step in the direction of integration of Ukraine’s energy system into the EU energy system.

In February and October 2008, respectively, the Government signed a €150.0 million loan agreement with the EBRD and a €150.0 million loan agreement with the EIB under a joint EBRD-EIB-Ukraine project to construct an overhead transmission line between Rive NPP and Kyiv. State Enterprise “Ukrenergo”, Ukraine’s energy company, is a beneficiary under this project. The project aims to alleviate capacity limitations at the Rivne NPS and Khmelnitsky NPS and to improve the reliability of energy supply to consumers in Central Ukraine.

As of 7 September 2018, €150 million in EBRD funds and €97.45 million in EIB funds had been drawn down under this project. In accordance with a separate project, “Construction of the 750 kV Zaporizhzhya NPS Kakhovka Overhead Transmission Line”, Ukraine borrowed €175 million from each of the EBRD and the EIB. The agreements became effective on 19 October 2012 (EBRD) and 3 December 2012 (EIB), respectively. The project aims to maximize the available usage capacity of Zaporizhzhya NPS, as well as increase the reliability of energy supply to the southern energy system during times when Ukrainian Unified Energy System (UES)’s heat energy plants are operating at reduced capacity. The project further aims to increase the reliability of energy supply to consumers reliant on the Dnipro energy system through a 750 kV overhead transmission line running from Zaporizhzhya NPS to Kakhovka, improve the stability of energy supply to consumers in central Ukraine and Crimea; and to renovate substation 330/220 Novokakhovka.

As of 31 August 2018, €123.7 million of EBRD funds and €60 million of EIB funds had been drawn down for this project. On 21 September 2012, Ukraine entered separate agreements with the EIB and the EBRD regarding the “Rehabilitation of Hydro Electric Stations” project, whereby the EIB and EBRD each agreed to provide Ukraine with €200 million. The project aims to renovate hydroelectric stations in order to reach a general capacity of 1.4 MW; this would represent a 10 per cent. capacity increase. On 30 December 2015, Ukraine and the EBRD signed a Guarantee Agreement to supersede the undrawn part of the previous (2012) loan, and PJSC “Ukrhydroenergo” and the EBRD signed a €180 million loan agreement.

As of 31 August 2018, €20 million of EBRD funds under the loan agreement, €12.4 million of EBRD funds under the guarantee agreement and €24.0 million of EIB funds had been drawn down for this project. On 25 March 2013, Ukraine and the EBRD signed loan and guarantee agreements regarding a project aimed at increasing the level of safety of nuclear power plants. The project aims to bring all energy blocks of Ukraine’s NPSs to internationally accepted security levels. The agreements provide for state guarantees in the amount of €300 million. On 7 August 2013, Ukraine and Euratom signed a €300 million Guarantee Agreement. As of 31 August 2018, €130.7 million of EBRD funds and €100 million of Euratom funds had been drawn down under the project. On 30 December 2011, the Cabinet of Ministers and the Government of Germany signed an Agreement on Financial Cooperation for the amount of €40.5 million, which aims at reconstruction of two substations within the Dnipro energy system (330 kV substation “Kryvorizka” and 330 kV substation “Dnipro-Donbas”).

As of 31 August 2018, €10.1 million had been drawn down for this project. On 10 October 2016, the Cabinet of Ministers and KfW Development Bank signed an individual loan agreement, and State Enterprise NEC “Ukrenergo” and KfW signed a separate agreement under the project “Reconstruction of Substations in Eastern Ukraine”, for the amount of €150 million. The project aims at providing reliable and high-quality energy supply in the electricity grid in Eastern Ukraine, as well as ensuring the coverage of peak power consumption without additional losses. It is expected to make a significant contribution to increasing energy efficiency in the transmission of electricity and in the future integration of Ukraine’s UPS into the European Network of System Operators for Electricity Transmission (ENTSO-E).

On 24 May 2018, Ukraine and the EIB signed a guarantee agreement for the amount of €136 million, intended for the modernization of current energy infrastructure and increasing the level of safety and quality of energy. State Enterprise NEC “Ukrenergo” is implementing the program for the transfer of electricity, with financing from the International Bank for Reconstruction and Development (the “IBRD”) and the Clean Technology Fund. A U.S.$330.0 million credit facility agreement between State Enterprise NEC “Ukrenergo” and the IBRD and a U.S.$48.4 million credit facility agreement between State Enterprise NEC “Ukrenergo” and the Clean Technology Fund were signed on 10 February 2015. As of 31 August 2018, U.S.$17.6 million of IBRD funds and U.S.$0.22 million of Clean Technology Fund funds had been disbursed. 122 On 24 May 2018, Ukraine and EIB signed a guarantee agreement for the amount of €136.0 million (project “Program for increase of substations reliability”). Loan funds of EIB will be drawn down to increase effectiveness and reliability of the Unified Energy System of Ukraine by replacement of obsolete equipment and automation in the South-East region of Ukraine.

Continues on p. 121 …

[For 2019 Update and expanded descriptions of Ukraine energy production from nuclear power, see: 

https://www.world-nuclear.org/information-library/country-profiles/countries-t-z/ukraine.aspx ]

[An Update on the Chernobyl Accident of 1986: https://www.world-nuclear.org/information-library/safety-and-security/safety-of-plants/chernobyl-accident.aspx]