UAH 3 bn of the “green” energy debt returned to DTEK VDE Group companies

Complainee: SE “Guaranteed Buyer” (GarPok)
Complaint in brief: DTEK VDE, an operational company managing four wind farms and three solar power plants in Ukraine, complained to the Business Ombudsman Council. SE Guaranteed Buyer (GarPok) did not pay the group a proportional share of the debt at the “green” tariff for electricity they had sold in YY2020-2021.
Back in the first half of 2020, the renewable energy sources electricity producers (RES Producers) faced the problem of receiving non-full and untimely payments from GarPok under the electricity contracts at the “green” rate. As a result, in the summer of 2020, a Memorandum of Understanding was signed between the State and the main specialized RES associations on settlement of problematic issues in the renewable energy field. It was hereby provided that by December 31, 2021, Ukraine would repay the existing debt for electricity incurred by GarPok starting from January 1, 2020.
As of November 12, 2021, the debt amount accumulated by GarPok to RES Producers amounted to UAH 28.5 bn, of which UAH 4.4 bn belonged to DTEK VDE Group companies.
Accordingly, in the autumn of 2021, the Cabinet of Ministers of Ukraine developed an instrument that would ensure payment of the major debt to RES Producers. This is granting of UAH 22.8 bn. state guarantees for issuance and placement by the PJSC “NEC “Ukrnerego” so-called “green” bonds (Green and Sustainability-linked bonds) on stock markets. At the same time, the Government decided to ensure targeting of these borrowings for settlements with electricity producers at the “green” tariff through GarPok.
Thus, on November 11, 2021, GarPok received UAH 19.3 bn on its account from PJSC “NEC “Ukrenergo”, which was sent the following day to be bank for the debts repayments to RES Producers on a proportional basis (including UAH 3.03 bn. to DTEK VDE). However, on Saturday, November 13, 2021, at the extraordinary meeting of the Government, the former GarPok head was fired due to “unprofessionalism and the alleged losses to the company as a result of selling significant electricity amounts by the Guaranteed Buyer at intentionally low prices in favor of certain financial and industrial groups”. It was promised to establish an interdepartmental commission to analyze the financial transactions in question. After that, on the nearest working day, a new head of the state-owned enterprise sent a letter to the bank asking to return funds not yet transferred to RES Producers. At that time, the bank had already processed payment orders amounting to UAH 16.27 bn, and the pending sum of UAH 3.04 bn (not yet transferred by the bank), was transferred back to GarPok account.
The complainant informed BOC that funds from GarPok had been received by all RES Producers, except for eight companies, seven of which were DTEK VDE.
Actions taken: BOC team, led by the Business Ombudsman, immediately processed the complaint and found it to be substantiated. The Council detected that DTEK VDE companies had a legitimate expectation to receive, along with other RES Producers, their payment share of proceeds received from sustainable development Eurobonds in November 2021, due to the following:
➔  During YY2019-2021, GarPok provided equal approach for all RES Producers, buying all the electricity produced, yet not fully ensuring timely and complete payments due to the long-lasting financial crisis in the electricity market.
➔  PJSC “NEC “Ukrenergo” Eurobonds with unconditional and irrevocable state guarantee of Ukraine shall be recognized as the fulfillment of the state’s obligations foreseen by the Memorandum with RES Producers. It is unknown whether such a measure will ever be repeated again in the future.
➔  The Council estimates are that the approximate share of debt accounted for the DTEK VDE Group companies is almost 15.5%. Thus, after targeted attraction of funds in the total amount of UAH 19.3 bn., DTEK VDE could count on receiving its proportional share, which is approximately UAH 3 bn.
➔ “Green” tariff debts to companies are overdue, and therefore a complete delay in their repayment, given the targeted, free funds available on the state enterprise’s (debtor’s) account, both negatively affects a business liquidity rate and investment prospects of the state.
On December 1, 2021, BOC sent its extensive and detailed legal position to state bodies competent to resolve the complainant’s issue on merits.
Result achieved: On January 21, 2022, GarPok transferred all UAH 3.03 bn. to the companies of DTEK VDE Group in order to repay its overdue debt ratio at the expense of funds received from the “green” Eurobonds. Therefore, the companies received the full amount of debt covered by the state that had been expected to be paid in mid-November 2021.