The EBRD is extending a €150 million sovereign-backed loan to Ukraine’s electricity transmission company, Ukrenergo, part of a major package to support Ukraine’s energy security despite the full-scale war being waged there by Russia.
The funding for Ukrenergo will support the continued functioning of the power transmission infrastructure and uninterrupted operations of Ukrainian electricity generators, including renewables, as well as help to provide power supply to the Ukrainian economy and households. It adds to a total package of €520 million already provided by the EBRD since the Russian invasion last year.
Ukrenergo is key to the functioning and further development of Ukraine’s power infrastructure, which includes renewables, vital to support the country’s energy independence. Around 50 per cent of Ukraine’s transmission grid was damaged or destroyed by Russian attacks last winter. While utility workers have since restored operational condition of Ukraine’s electricity grid, as winter temperatures drop, targeted Russian attacks are resuming.
All EBRD investments in Ukraine involve risk-sharing with donors and partners, in this case with Norway, which provides a first loss risk cover guarantee for up to 48 per cent of the loan through its contribution to the EBRD’s Crisis Response Special Fund. Since the beginning of the war, Norway has provided more than €350 million of donor support for the energy sector in Ukraine and affected countries through the EBRD.
Italy will provide a grant of around €10 million grant in addition to the EBRD’s €150 million, to be signed between Ukrenergo and EBRD separately soon.
The latest Ukrenergo loan follows a €200 million loan in November to Ukraine’s gas entity, Naftogaz (NAK), to help it build up strategic gas reserves in the second winter heating season since the country-wide Russian invasion in February 2022. It was also supported by Norway. Both are part of EBRD efforts to boost the country’s energy security – one of five investment priorities for the EBRD’s support of Ukraine’s real economy.
This signing brings to fruition an agreement initially made in June at the Ukraine Recovery Conference in London between EBRD President Odile Renaud-Basso and Ukraine’s Prime Minister, Denys Shmygal.
“We are proud to continue our support to Ukrenergo in these difficult times and would like to express our deepest appreciation for the exceptional work in keeping the power system operational during the war following the massive attacks on Ukraine’s energy infrastructure by the Russian military. This new financing is part of a comprehensive EBRD package to support energy security in the gas and electricity sectors,” said President Renaud-Basso.
Prime Minister Shmygal said, “Today we signed an agreement with the EBRD which allows us to attract €150 million to support operations of NPC “Ukrenergo” in the war environment and the difficult heating season.
“This is a significant contribution of our partners to Ukraine’s energy security and a stable energy supply for Ukrainian consumers. In cooperation with the Bank, we also are implementing projects for the comprehensive restoration and renewal of the Ukrainian high voltage transmission grid.
“We are grateful to the EBRD, President Odile Renaud-Basso personally, and all our partners for such support, which allows us to hold strong resistance to the aggressor on the energy front.”
“The current support of our partners enables us to remain strong and resilient. The survival of the entire country is dependent on the functionality of the energy industry. We are grateful to the EBRD and all our counterparts for their trust and support to our company in this very difficult period,” said Ukrenergo CEO Volodymyr Kudrytskyi.
The EBRD is Ukraine’s biggest institutional investor. With a relationship with Ukraine dating back more than three decades, working both on projects and on support for the Ukrainian authorities’ reforms, it has significantly increased its support there in wartime, focussing on energy security, vital infrastructure, food security, trade and support for the private sector.
In October, the Bank fulfilled its commitment to deploy €3 billion there in 2022-23. After deploying €1.7 billion in 2022 alone, the 2023 figure is now approaching €2 billion.
In November, directors asked the Board of Governors to approve a €4 billion capital increase to enable the EBRD to provide significant and sustained investment for Ukraine, raising its funding levels further when the time comes for full reconstruction.
Governors – who agree that support for Ukraine should be the Bank’s highest priority, now and in the future, following Russia’s full-scale invasion of the country, whilst also ensuring that the EBRD can continue to pursue its strategic priorities across all its economies of investment – will make a final decision on the proposed capital increase in the very near future.