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Inside Out: Framework Financing Agreement for Syvash Wind Farm Ukraine

Inside Out: Framework Financing Agreement for Syvash Wind Farm Ukraine

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In February 2019 CEE Legal Matters reported that Integrites and K&L Gates had advised Norwegian utility-scale wind power developer NBT and Paris-based renewable energy independent power producer Total Eren on their entrance into a framework agreement with a syndicate of foreign lenders, including the EBRD and the Nordic Environment Finance Corporation, for the construction of the Syvash wind farm – one of the largest in Europe. Redcliffe Partners and Clifford Chance advised the lenders and J.P. Morgan Securities Plc as debt coordinator.

We reached out to Integrites, K&L Gates, and Redcliffe Partners for more information about the deal, and how they made it happen.

The Players:

  •  Counsel for NBT and Total Eren: Alex Blomfield, Partner, K&L Gates; and Oleksiy Feliv, Managing Partner, Integrites
  •  Counsel for the Lenders: Olexiy Soshenko, Managing Partner and Head of Banking and Finance, Capital Markets and Debt Restructuring, Redcliffe Partners

CEELM: Alex and Oleksiy, how did you and K&L Gates/Integrites become involved in this matter?

Alex: I had acted for NBT on their wind projects in Pakistan at a prior firm but had fallen out of contact. I reconnected with Joar Viken (NBT’s CEO) and Thorstein Jenssen (SVP, Corporate Finance) in June of 2017 on a visit to Oslo (where I used to live) and learnt about NBT’s plans for the Syvash project. Following this meeting I made a number of useful introductions to NBT in relation to the Syvash project, most notably to potential lenders including the European Bank for Reconstruction and Development, the Black Sea Trade and Development Bank, and DEG, but also to advisers such as Marsh and Integrites. Following these introductions, NBT mandated us as international counsel.

Oleksiy (Integrites): I was originally contacted by Alex Blomfield at K&L Gates. Alex got my contact from his partner, Ian Meredith. At the time, Alex was already involved in assessing with the due diligence report that was prepared by another Ukrainian law firm. We discussed our experience in renewables (going back to 2009, when the feed-in tariff program was first established in Ukraine) and agreed that Integrites would assist with the due diligence report, which required further project-specific input. We provided our comments on the report to NBT, following which NBT decided to retain us as a local counsel in Ukraine. 

CEELM: What about you, Olexiy? How did you and Redcliffe Partners become involved in this matter?  

Olexiy (Redcliffe): We were approached by Clifford Chance, London office, at the end of October 2017, asking us to provide a fee quote and act as Ukrainian legal adviser to J.P. Morgan Securities plc, which was a mandated lead arranger in this deal. We also met with representatives of J.P. Morgan in London to present our capabilities.

CEELM: What, exactly, was your mandate when you were first retained for this project? 

Alex: Our original mandate in August 2017 was to advise NBT on political risk and structuring with particular focus on investment treaty protection and tax efficiency. 

Oleksiy (Integrites): The original mandate was to check the charter of the special purpose vehicle. We were then further mandated to evaluate the due diligence report as described above. 

Olexiy (Redcliffe): The initial mandate contemplated the implementation of a senior and mezzanine secured debt structure, which required a review of the senior and mezzanine level finance documentation and the preparation of two sets of Ukrainian security documents to provide for first and second ranking security. In general, the initial Ukrainian scope contemplated the preparation of limited legal due diligence of the borrower (including the corporate part), a review of the project agreement, licenses and permits, and limited title due diligence for the purposes of the Ukrainian security documents. We also undertook a corporate check for the purposes of the Ukrainian legal opinion with the provision of a “red-flag” due diligence report, a review of a set of finance documents from a Ukrainian law perspective, drafting, signing, and perfecting the Ukrainian security documents, reviewing and collecting CPs, and the issuance of a Ukrainian capacity and enforceability opinion.

CEELM: Who were the members of your teams, and what were their individual responsibilities?

Oleksiy (Integrites): I led the project at all stages. In particular, I worked on the project due diligence, the Share Purchase Agreement, and negotiations for the engineering, procurement, and construction contract and the signing and closing of the first loan segment with the banks. Since-departed Partner Vsevolod Volkov was involved in the negotiations, drafting, and closing of the financing. Partner Igor Krasovskiy, who replaced Vsevolod, was involved in the second financial close.

Senior Associate Olena Savchuk reviewed and elaborated on the transaction documentation, assisted with the execution and perfection of the security at the Ukrainian level, advised on financing issues related to the transaction (including the PowerPurchase Agreement), and led negotiations with the NBU and the client’s servicing bank. Counsel Gennadii Roschepii managed and supported on construction and energy matters, [helped with] obtaining all necessary permits, licenses, and other documents, drafted and organized the signing of EPC Contract and security documents, and advised on ongoing construction issues. Senior Associate Dmytro Kiselyov was involved in the SPA and Escrow Agreement drafting with respect to the project and drafting the EPC in relation to local law issues. Since-departed Senior Associate Anton Babak drafted and negotiated the SPA and coordinated all corporate work on the project. 

Partner Viktoriya Fomenko provided tax and customs support on the SPA, EPC, and financial documents. Partner Dmytro Marchukov and Counsel Serhii Uvarov, both from the arbitration and cross-border litigation practice, assisted in the preparation of a memorandum on enforceability of the contract for the electricity purchase in Ukraine and on a mechanism for guaranteeing investment in projects under the “green tariff,” and Associate Andrii Lasikov provided legal advice on merger concentration issues.

Alex: I led the K&L Gates team at all stages of the project. In particular, I worked on the initial acquisition of the Syvash project company, initial project development, project due diligence, construction and O&M tendering, EPC and negotiations, WMSA and negotiations, and both of the project financing segments. Since-departed Partner Mayank led project financing for Segment 1. Partner James Green led the corporate piece that included reviewing, negotiating, and drafting the SPA and ancillary documentation.

Senior Associate Joshua Spry was involved in the preparation of EPC and WMSA tender drafts, supported project financing for segment 1, and managed financial close for Segment 2, and Associate Francis Iyayi was involved with the negotiation of EPC and WMSA and supported project financing for Segments 1 and 2. Departed Associate Caroline Urban assisted on the corporate piece that included reviewing, negotiating, and drafting the SPA and ancillary documentation. Associate Peter O’Donnell supported project financing for Segment 1 and Segment 2, with Associate Sherry Scrivens and Trainee Hannah Davies supporting project financing for Segment 1. Finally, trainee Francesca Norman supported the tendering process, EPC negotiations, and WMSA negotiations.

Olexiy (Redcliffe): Apart from banking and finance work the team for this project involved a number of lawyers from different practice areas, such as regulatory in alternative energy, real estate, tax, and customs matters, and from dispute resolution for the analysis of potential future protections of lenders’ and investors’ rights in the event of a breach of the obligation to pay the feed-in tariff by the state. I was responsible for general coordination and supervision. Senior Associate Evgeniy Vazhynskiy was responsible for the ongoing structuring, banking, currency control and security-related advice, the preparation of the due diligence report, the review of finance documents, and for the drafting and negotiating of Ukrainian security documents. Counsels Svitlana Teush, Oleksandr Markov, Anastasia Usova, and Partner Sergiy Gryshko were also involved, and they were supported by Junior Associates Eduard Olentsevych and Bogdan Nykytiuk, who were responsible for legal due diligence, the review and collection of CPs, signing and perfecting security documents, and preparing the Ukrainian legal opinion.

CEELM: Please describe the deal in as much detail as possible. 

Oleksiy (Integrites): The Syvash Wind Farm Project of up to 250MW is situated on approximately 1,300 hectares of land in the Chaplynka district of the Kherson region of southern Ukraine. The sponsors were a subsidiary of utility-scale wind power developer NBT AS, Total Eren SA (a Paris-based renewable energy independent power producer), and Al Gihaz Holding, a Saudi Arabian conglomerate. Financial close was reached for Segment 1 of the project at the end of January and Segment 2 in mid-April 2019.

First, the customs and tax issues involved in the Syvash project were complex. In a new approach for wind farms in Ukraine, the project agreements for the Syvash project provided for delivery duty paid terms of delivery under Incoterms 2010, which made the relevant contractor in each case responsible for arranging carriage and delivery of the goods at the named place, cleared for import and with all applicable taxes and customs duties paid and wrapped up in an all-inclusive EPC contract price for the goods and therefore providing a level of certainty for sponsors and developers of projects. Resolution of these issues was a particularly good example of Integrites and K&L Gates working well together as it required deep knowledge and experience of local requirements as well as the ability to find a solution within those constraints that met the need of the sponsor and the preference of its lenders that the EPC contractor retain responsibility for customs clearance and payment of customs duties, fees, and charges.

The Syvash project was financed by a consortium of development finance institutions, third-party debt from financial institutions, and the sponsors’ equity. Segment 1 of the project financing involved the provision by the relevant banks of an A/B loan of up to EUR 155 million for the construction of the initial 133 MW of the wind park. The EUR 155 million of senior debt for Segment 1, containing 34 turbines, was signed on January 21, with the EBRD committing to EUR 150 million (including EUR 75 million in B loans from the Green for Growth Fund and the Netherlands Development Finance Company) and EUR 5 million from the Nordic Environment Finance Corporation.

Over EUR 107 million of further senior debt for Segment 2, for an additional 29 wind turbine generators, was signed on April 8, 2019, with EUR 30 million committed by the Black Sea Trade & Development Bank, EUR 15 million from Finnfund, EUR 15 million from the IFU, EUR 5 million from the Nordic Environment Finance Corporation, and EUR 42,638,036.90 committed by Proparco. The lenders agreed to allow the sponsors to enter into commitments for additional facilities following the commercial operations date and to adjust the project’s leverage if certain tests are met at the relevant time. 

Base equity contributions from the sponsors – NBT, Total Eren, and Al Gihaz Holding – exceeded EUR 110 million for Segments 1 and 2. 

Due to the quality of deal execution and the service provided, we managed to build up such confidence in the Syvash project that the debt financing could be arranged despite the imposition of martial law during a key period for finalizing the finance documents for Segment 1. In addition, the parties were able to finalize the finance documents for Segment 2 and reach the second financial close despite the volatility caused by the occurrence of presidential elections in the middle of the process.

The borrowers received technical, environmental, and social advice from Wood Group UK, insurance advice from Marsh, and Swedish legal advice from Advokatfirman Torngren Magnell. 

The sponsors and their advisers, with support from the lenders and relevant agent and account bank parties, worked closely with the NBU to agree on an accounts structure that met Ukraine’s new regulatory requirements (including the new regulatory framework for currency control that came into effect in the country on February 7, 2019) and allows for upstreaming of foreign currency to offshore secured accounts.

Finally, an important element of the financing of Syvash was the standard lender expectation for the parties to enter into a suite of acceptable construction and service contracts. As such, the parties agreed on an EPC with the Power Construction Corporation of China Ltd (PowerChina) and Powerchina Fujian Engineering Co Ltd, and a subcontract with the Nordex Group for the supply of 63 turbines from the N131/3900 series in multiples of 3.9MW, thereby combining a Chinese EPC contractor with a leading European turbine supplier. 

In addition, Syvash entered into a 15-year warranty service and maintenance agreement with Nordex Energy GmbH and a Nordex subsidiary in Ukraine as service provider. Traditionally, wind projects in Ukraine have been implemented under split contractual arrangements, separately for turbine supply on the one hand and installation and the balance of plant on the other hand. The Syvash project, however, benefits from a fully-wrapped single point of contact EPC, thereby enhancing bankability. To achieve this, NBT leveraged its deep experience of owning, financing, and operating wind farms in China to select and negotiate with PowerChina, one of China’s largest EPC contractors. As such, the Syvash project is one of the few wind farm projects in Ukraine with an internationally-recognized EPC contractor.

CEELM: Thank you for that extensive summary Oleksiy. Olexiy, what about from the Redcliffe Partners’ side?

Olexiy (Redcliffe): The deal was a traditional project financing to be arranged and syndicated by J.P. Morgan to institutional investors and IFI and DFI lenders. It initially contemplated several levels of debt, including senior secured debt by various financial institutions and mezzanine secured debt to be extended by institutional investors on the offshore HoldCo level. This was to be further on-lent to the Ukrainian SPV for the construction and operation of a wind power plant. Senior lenders expected to be involved included international financial institutions, development financial institutions, foreign commercial banks and Ukrainian banks. Private investors under the senior and junior facilities were expected to benefit from political risk insurance cover (PRI) to cover war/expropriation/convertibility/breach of PPA from OPIC, MIGA, or an equivalent provider. The transaction also contemplated the implementation of an offshore and onshore project accounts structure usually used in international project finance deals. Subsequently, the mezzanine facility and PRI were dispensed with, whereas the senior financing was split into two segments, with EBRD and NEFCO funding the first segment and the remainder of the DFI lenders –BSTDB, Finnfund, Proparco and IFU – later acceding to the deal to fund the second segment. Unfortunately, eventually neither foreign commercial nor Ukrainian banks joined the deal. The mezzanine facility was replaced with equity contributions to be made by the sponsors (NBT AS and Total Eren) as project support.

CEELM: What was the most challenging or frustrating part of the process?

Alex: There were four main challenges: First, we had to provide solid legal answers/responses and persuade all the lenders that the Ukrainian feed in tariff (or “FiT”) system is good enough to provide financing. This was not easy as the model PPA contains a parallel litigation and arbitration clause, no termination payments, and no change of law protection, along with other perceived and actual shortcomings. The foregoing meant real challenges for bankability from an international lender perspective. Thus our original report on structuring for NBT evolved into a major report which covered the potential of investment treaty protection to mitigate against some of the country risks related to the payment of the FiT. In addition, we produced separate reports on dispute settlement and other bankability issues in the PPA and generally speaking worked hard over many months to convince lenders of the bankability of the Ukrainian FiT system and PPA.

Second, we were advised on the project financing, which has not been executed at such scale and with such set-up in Ukraine before (among other things this was the first limited recourse financing of a wind farm in Ukraine). We faced difficulties in implementing internationally accepted project finance solutions in the Ukrainian legal and regulatory environment. The standard documentation required by Ukrainian authorities did not provide for the level of legal certainty and comfort that the sponsors wanted. There were no standard answers and very often we had to work closely to come up with and adapt solutions in parallel to the adoption of new laws and regulations.  

Third, we structured the deal with a full-wrapped EPC which has not been done before in the wind industry in Ukraine. This again required many non-standard approaches and legal solutions and no small amount of lateral thinking when obstacles arose. 

Finally, another bottleneck arose out of the February 7, 2019 change in the regulatory regime for currency control that affected the project’s closing. Apart from aligning all documentation to fit into the new rules, we were also met with a lack of understanding by the National Bank of Ukraine of transaction funds flow and had to walk them through it working jointly to elaborate the NBU’s new approaches to cross-border matters. We had to explain, among other things, such items as (i) how the debt service reserve accounts should work under the new rules, (ii) how the currency should flow from onshore to offshore accounts, (iii) whether or not the funds could be accumulated for future payments onshore and offshore, and (iv) what the approaches to interest rates should be now that the rate limits have been cancelled. Once again successfully resolving these matters required close cooperation between us.

Olexiy (Redcliffe): The most challenging part of the deal was the implementation of a complex offshore and onshore project accounts structure. The transaction was undertaken during Ukraine’s transition from an old, strict currency control regime (which made it virtually impossible to implement a traditional project financing account structure) to one that was more liberal but still evolving and largely untested. This resulted in quite difficult and protracted negotiations between the parties, the Ukrainian account bank selected to service the payments (Citibank Ukraine), and the National Bank of Ukraine as the regulator responsible for Ukraine’s currency control regulatory framework.

The most “frustrating” element, in our view, was the unsuccessful attempt to obtain political risk insurance for the private investors, which availability would likely attract more commercial lenders (such as foreign banks). Also, we believed the Ukrainian banks should express a greater appetite to participate in such deals, but it appeared that Ukrainian banks still experience various commercial and legal obstacles preventing them from providing project financing to Ukrainian SPVs.

CEELM: Was there any part of the process that was unusually or unexpectedly smooth/easy?

Oleksiy (Integrites): We were surprised by the extreme preparedness of all parties to meet the common goal and to move the deal to financial close and success. This went not only for sponsors and lenders, which is understandable, but also to third parties like insurers, servicing banks, and – much to our astonishment – the NBU. In particular, the NBU was willing to have numerous calls and hold several meetings to align on positions and provided general support in currency related matters. This is something very unusual in the Ukrainian realm.

Coordination among the lenders (and between the lenders and the borrower) was also something that went more efficiently than we expected. As the project consisted of a large international structure, the NBU could have dragged its feet on the process due to bureaucracy, but instead often took a business-oriented approach and endeavoured to help the project to come together and reach financial close sooner than expected.

Alex: I second everything Oleksiy says but would also add that such a close and enjoyable working relationship with local counsel in Ukraine was not something I necessarily expected at the beginning of the process. Not only have I gained a close professional working relationship with Integrites but I also have developed friendships with Integrites’ lawyers that provide another reason why I am eager to do more business in Ukraine.

Olexiy (Redcliffe): Compared with other, similar deals, the Ukrainian security documents negotiation process was quite smooth and straightforward and the documents were agreed promptly. On the funds debiting agreement, which often requires additional time to agree, the process was further complicated due to the changes in legislation and certain gaps in such legislation.

CEELM: Did the final result match your initial mandates, or did it change/transform somehow from what was initially anticipated? 

Oleksiy (Integrites): It expanded. The deal initially was expected to have a lot of standardized elements – FIDIC contract, EBRD and other IFIs templates and policies, etc. But during our due diligence checks and contractual deliberations we occasionally discovered something that required extra thought or clearance. Our scope and fees, therefore, grew ten times from what was agreed initially.

Alex: Not only did we act as international legal counsel throughout long and complex negotiations, with new challenges constantly arising, but also as project managers and trusted advisers. This was due to the closeness of our relationship with the NBT and the comparative smallness of the NBT team. This also meant that we spent a lot of hours that we did not anticipate at the beginning of the deal.

Olexiy (Redcliffe): Not exactly. Some parts fell away (such as the PRI, mezzanine facility, VAT facility, and having Ukrainian banks as lenders) whereas other matters became more extensive compared with the initial scope. For example, we undertook an exhaustive legal due diligence of the borrower, including in the report extensive renewables market advice, financing and currency control, and regulatory and tax advice, which usually are not included. It is important to note that the electricity market is undergoing fundamental reform [in Ukraine], including: the new electricity market to be created; the off-taker being replaced by a new entity called the “guaranteed buyer”; a new template of the power purchase agreement being created; auctions for the feed-in tariff being introduced; balancing; and many other issues. This reform makes the implementation of renewables projects somewhat of a moving target. Also, we received a lot of follow-up and related queries from all lenders involved (including from sub-participants). The accounts structure initially contemplated an NBU-licensing arrangement, which was initially “blessed” by the NBU, but the new currency control regime came into effect and a new arrangement had to be reached  with the NBU, the account bank, and the borrower.

CEELM: Oleksiy and Alex, what specific individuals at NBT and Total Eren directed your team’s work, and how did you interact with them?

Olexiy (Redcliffe): We were impressed by the fact that the client’s top management was not only always available for discussions or guidance, but also actively participated in pushing the deal through all authorities and negotiations. Thorstein Jenseen and Joar Viken were always available to meet and to talk and always willingly attended the all-party negotiations, including with Ukrainian authorities. CFO Ketil Sundal and Ukraine Country Manager Vlad Kazak were also supportive and fast in providing all necessary factual information and documents. 

On the Total Eren side, we are much obliged to Project Finance Director Victoire Potel, who at certain occasions stepped in to facilitate the reaching of an agreement among all parties and to coordinate the expedited closing of outstanding matters on all ends. On our calls she often was the one leading the process and pointing to clear and definite answers and instructions.

Alex: Our interaction with NBT and Total Eren (once they joined the project) was close and frequent. We worked closely with Walter Chang, the CEO, Asia Operations and then-VP Business Development Kyrre Lund of NBT over the long hours of many months negotiating the EPC contract with PowerChina and the WMSA with Nordex. Thorstein Jenssen led on the project financing for NBT and displayed a cool head, excellent judgment and a patient capacity for long hours and hard work throughout the process. We also worked with Ketil Sundal in relation to the Accounts Agreement and shareholder loans. Joar Viken was available for key meetings and always willing to act decisively when required to break logjams as well as maintaining optimism and belief in the project in the face of apparently bad news from time to time. 

On the Total Eren side, we were chiefly instructed by Victoire Potel and VP, Corporate & Business Development Yonatan Shek in relation to the financing, both of whom were tenacious in their pursuit of a better deal for sponsors. We also worked with Senior Business Developer Charles Vallee on the financing and General Counsel Thierry Clementz on the service agreements. For the EPC contract and WMSA, our instructions from Total Eren came via Head of Wind Procurement and Construction Catalina Acosta, Wind Procurement and Construction Manager Francesc Grau Castella, Executive Vice President – Global Head of Business Development Fabienne Demol, and Yonatan Shek. 

Olexiy (Redcliffe): The EBRD team was primarily represented by banker Pavle Milekic and legal counsel Joel Baranowski, who were actively involved in the loan documentation negotiation process and to whom we provided ongoing structural, legal due diligence, and renewables regulatory and currency control advice. The NEFCO team involved senior investment manager Amund Beitnes and senior legal counsel Ritva Kauppi, to whom we responded on legal due diligence queries and renewable regulatory issues

CEELM: Oleksiy and Alex, how would you describe the working relationship between your two firms on this? 

Oleksiy (Integrites): Approximately by the middle of the project everyone started seeing that numerous e-mails to the groups often exceeding 40 people were inefficient. That is when we started flying to London, Oslo, Paris, Kyiv – to simply look each other in the eyes while discussing yet another financial covenant or certification requirement. Being in one and the same room often helped [everyone] be more committed and get to the root of the matter and omit redundant overtures. Draft documents shortened to page pulls only, and everybody became more human (not forgetting professional ethics, of course). And I can say that we became friends, because we started sharing not only professional approaches, but also meals and personal insights. This helped me better understand Nordic culture and their way of approaching business. 

There were no final negotiations, as such. But it feels that the final destination point of the deal (and simultaneously the starting point for the project) was when the lenders’ advisors had issued the Conditions Precedent satisfaction letter and the first tranche reached the account of the borrower. The satisfactory feeling of congratulating each other, publishing press-releases and issuing invoices! But also seeing how the equipment is being imported and installed on the site and the new power plant being erected.

Alex: Too many emails, numerous calls, and comparatively efficient face to face meetings held over many months!

CEELM: And how would you describe the working relationship with Redcliffe Partners and Clifford Chance on the deal?

Oleksiy (Integrites): Clifford Chance and Redcliffe Partners conducted themselves highly professionally, and no less important, as result-oriented lawyers. 

CC took the role of project lead and managed the collection and exchange of all required documentation. They also introduced us to several interesting online platforms that help monitor the processes and reduce the usage of paper – we are looking closer on using them further in our work because this accelerates dealings drastically. Alas, not many firms in Ukraine are used to this.

Compared to CC, Redcliffe Partners’ team is smaller, but they managed to be efficient and deliver expedited support. When something could be delivered in scanned copy, they allowed it to be delivered in scanned copy. And when the laws were ambivalent, they opted for a choice that could advance the deal. They always were able to explain the rationale behind their selections and requirements, which is a rather rare occurrence among the Ukrainian legal fraternity. 

Alex: Clifford Chance’s lead partner on the financing, Simon Williams, did an excellent job managing the lender group and he was supported in dedicated, thorough, and tireless fashion by Natalia Veriasova and Tina Xu. CC’s project document lawyers Leo Rudolph and Tom Ward were rigorous but also commercial in their review of the EPC contract and warranty, maintenance and service agreement, as well as a number of amendments to each (largely caused by delays to financing). 

Redcliffe Partners had a reputation as technically good lawyers. Olexiy Soshenko and Evgeniy Vazhynskiy on RP’s financing team lived up to this reputation but also showed the necessary pragmatism and problem-solving skills to get the deal done despite ongoing challenges.

CEELM: Olexiy, how would you describe the working relationship between your side and Integrites/K&L Gates on the deal? 

Olexiy (Redcliffe): There was a lot of ongoing negotiation and communication between the lawyers. We had several lawyers’ meetings in Kyiv and had a lot of bilateral calls with Integrites’ lawyers on a daily basis to iron out various local law issues. Also, Redcliffe, Integrites and K&L Gates participated in several meetings with the National Bank of Ukraine to resolve the accounts structure issues. Aside from that, there were several all-party negotiating sessions held in London (arranged by Clifford Chance) and Paris (arranged by Total Eren) with physical signing of most of the finance documents. We were quite satisfied with the level of cooperation between legal counsel and their overall responsiveness. Despite being on different sides, the main goal of the lawyers was to complete the deal despite various hurdles, ensuring at the same time that the interests of their parties are protected. The lawyers worked hard, being proactive and practical at the same time.

CEELM: Finally, how would you all describe the significance of the deal?

Oleksiy (Integrites): The Syvash project is unique in the Ukrainian energy market, considering its size, the amount of finance involved, and its contribution to the development of wind energy in Ukraine. Once commissioned, it will be one of the largest renewable energy projects in Ukraine and will produce approximately 900,000 KWh of electricity per year. This will be enough to supply the electricity needs of approximately 100,000 households. It is planned that the project will create around 180 jobs in the long-term.

It is the first large-scale limited-recourse financing project in renewable energy in Ukraine and the first limited-recourse financing for a wind power project in Ukraine. It is also unique in the volume of financing, with the total syndicated loan amount reaching EUR 372 million.

The project also constituted the first investment or involvement in the Ukraine market for developers NBT and Total Eren, EPC contractor PowerChina, turbine supplier Nordex, and development finance institution lender Proparco. This vote of confidence in renewable energy in Ukraine creates positive dynamics for further foreign investment in Ukraine and shows the accessibility of the Ukrainian market for international investors and project financing.

The Syvash project demonstrates that foreign investors will commit to the market when presented with an attractive offering. There are ongoing challenges but with a project such as this as a blueprint, opportunities can only increase. It will also give a boost to the development of local infrastructure and neighboring power facilities necessary for the wind power plant’s proper functioning. Moreover, this project will create a precedent for structuring and realizing further renewable energy projects in Ukraine.

Olexiy (Redcliffe): In our view the Syvash deal is a landmark transaction in Ukraine as, in many respects, it is a unique, breakthrough deal which should give a new impetus to project financing in Ukraine and demonstrate that Ukraine is open to such investment opportunities. It may also provide borrowers and lenders with sufficient new precedent instruments and comfort to enable their participation in future similar projects. It is not the first renewables financing in Ukraine, but it is the largest (in terms of amount of financing attracted, and power plant capacity) and most complex so far. It has expanded the list of potential lenders who may be interested and willing to provide project financing to various development financial institutions, some of which were not very active, if at all, in Ukraine. This is the first deal to establish the offshore and onshore accounts structure that foreign investors typically expect to see in project financing, and which is now an important precedent for future reference..

This Article was originally published in Issue 6.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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