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World Bank Supports Renewing of Power Transmission System in Ukraine

November 9, 2007

KYIV, November 9, 2007 – A Loan Agreement between Ukraine and the World Bank for Power Transmission Project (PTP) was signed today by Paul Bermingham, World Bank Director for Ukraine, Belarus and Moldova, and  Yuri Boiko, Minister of Fuel and Energy of Ukraine.

The goal of the Power Transmission Project  is to improve reliability of power transmission through rehabilitating transmission substations and renewing the power transmission system.

The PTP also aims to strengthen the institutional capacity of the transmission system operator, the National Energy Company Ukrenergo, so that it could ensure the security and efficiency of power supply.
Achievement of the PTP objectives will make it possible adapting the operation of Ukraine`s national power grid to the technical requirements, conditions and principles of operation of the European power supply system.

Implementation of the Project will:

1. cut the cost of maintenance of Ukraine`s major high-voltage substations in the Dniprovska Donbas and Crimea  regional power systems as well as 75 kv substations;

2. reduce the amount of power short-supplied to customers (including due to power supply disconnection);

3. reduce power loss during its transportation over high-voltage transmission lines;

4. cut the fuel costs of power plants due to the Dniester Hydropower Pump Storage`s connection to Ukraine`s national grid and optimization of the system`s operating conditions;

5. introduce an information control system that will ensure the creation of a single efficient system of operational, technical and technological management of UKRENERGO in conditions of energy sector reform;

6. cut the costs of construction of additional and transmission facilities through optimizing the competitive systemic services market;

7. release the tariff burden on customers through promoting an environment conducive to the efficient operation of the bilateral contracts market under the concept of the wholesale electricity market in Ukraine.

Financial Terms of the Loan

The Power Transmission Project total cost is US$ 238 million. The World Bank Loan is US$ 200 million and Ukraine’s financial contribution is US$ 38 million. The disbursement of Loan funds is to begin in 2008.The Loan period is up to 17 years and the grace period is 4 years.

Following the recent approval of reduction in standard loan charges by the IBRD, lending rate applicable to Loan will be LIBOR flat.  Front-end fee will be at 0.25 % and no commitment fee will be applied.

Project Backgrounds

The PTP is the second investment project to be carried out under the energy sector reform and development program ( specified in the World Bank Country Assistance Strategy for 2004-2007)

The main purpose of the Program is to provide investments for the energy sector to make power supply more efficient and secure, contribute to the continuous operation of the electricity market in Ukraine and ensure support for legal, institutional and technical harmonization  of Ukraines` energy sector with the EU domestic energy market.

Under this Program, an investment project is being implemented by Ukrhydroenergo– the Hydropower Rehabilitation and System Control Project, with the  aim is to improve operating stability and reliability of power supply by increasing  the regulating capacities of Ukraine`s national grid and raise the efficiency and safety of hydropower plants. The expected outcomes of the Project include: revamping 46 hydraulic units of a total capacity of 2010 mw, increasing safety of dams of the Dnieper coordinated hydroelectric system and ensuring their environmental safety by modern standards.

The Project total cost is US$361.8 mln, of which the WB loan is $106 mln and own funds  constitute $255.8 mln. The Project completion date is 2011.

Media Contacts
In Ukraine
Dmytro Derkach
Tel : (380 44) 490 66 71