More than 2 GW is an offer of potential solar power projects in Ukraine to sale. Only the web site of the State Agency on Energy Efficiency and Energy Saving of Ukraine offers more than 50 projects with a total capacity exceeding 1 GW for investment partnership. And even more investment projects and SPVs are offered off-market: information about such projects can be got only after signing non-disclosure agreement.
Taking into consideration the total installed solar plants’ capacity of 3.4 GW, the offer of additional 2 GW looks very significant, but it is not out of sync with the global forecasts of threefold growth in solar energy in the next 3 years. Forecasts say that in Ukraine, the total capacity of solar plants is expected to reach 8 GW in 2023.
Dmytro Kornienko, Eastern Europe Sales Manager at Trina Solar, analyzed exclusively for IB Centre the peculiarities of the Ukrainian solar energy projects’ investment attractiveness.
“Almost each of the proposed projects offers a payback period of up to 5 years, i.e. the yield exceeds 20% per annum. None of “safe” investment assets in Ukraine can provide such profitability: government bonds – 15%, deposits in UAH – 12-17%, real estate – 12%. But we know that the higher the yield, the greater the risk”, Dmytro Korniienko stated.
Why haven’t these solar projects found their investors despite such profitability?
The payback period of 5 years can be achieved under two conditions: 1) the costs of the plants’ construction and financing do not exceed the planned volume of costs; 2) the “green” tariff at the rate of 2019 is given for the launched solar power plant. Therefore, there exist two types of obstacles: financial and regulatory.
The financial obstacles exist due to the underdevelopment of financial markets that makes it’s difficult or impossible for the project owner to finance the project or the financing involved will be too expensive. That is why most of the constructed power plants were financed with equity.
The regulatory obstacle is purchasing the generated energy by the buyer at reasonable price. This is the main issue – no one can guarantee that.
What are the options that can be offered for the project owners? The main advice is to stop considering the projects as speculative assets that should be sold at the stage of Pre-PPA (preliminary purchase agreement). Instead, be prepared to finance at least 30% of the plant’s construction costs. In addition, splitting the plant into several phases and launching them one by one will make your project even more attractive to potential investors.
Other factors important for investors are as follows:
– Low credit exposure of the project: the owner should be able to provide additional guarantees or security;
– Reputation: successful experience of the owner in the implementation of other projects, credit rating of the owner, etc;
– Financial feasibility: detailed business plan, independent consultants’ statements regarding the project’s feasibility;
– Technical component: developed design with determined equipment. At the same time, the project should provide equipment from the manufacturers that have had good reputation in the industry for years.
As these projects are long-term, the investor must be sure that the solar power plant will operate beyond the warranty period, and the manufacturer will fulfill power output warranty obligations within the warranty period. Institutional investors and financial institutions consider integrated solutions to be the most trustful option. For example, TrinaPRO from Trina Solar: all the plant’s components are provided by one supplier who is responsible for design, construction, launch and life-cycle of the facility. At the same time, due to the perfectly selected components and control over their installation, TrinaPRO guarantees good performance of not only the PV panels but also of the plant as a whole.
The benefits of this TrinaPRO integrated solution for the clients are:
– Lower Levelized Cost of Electricity (LCOE);
– Higher efficiency and reliability of the plant, lower OPEX and CAPEX;
– Maintenance throughout the plant’s whole life-cycle;
– Coordinated delivery of all equipment from one supplier.
TrinaPRO’s set of benefits allows customers to get not only an integrated EPC solution but also an additional financing service, i.e. EPC+F. As a result, a solar power plant that has all above mentioned advantages would be a highly attractive project both for buyers and investors.
Trina Solar is a partner and participant of the SEF2019 KYIV forum and trade show.
Founded in 1997, Trina Solar is the leading global PV and smart energy solution provider. The company engages in PV product research and development, manufacturing and sales; PV project development, operation and maintenance; smart micro-grid system development and sales, and energy cloud-platform operation. Trina Solar is committed to becoming the leader of the global smart energy industry.
Web site: www.trinasolar.com
Trina Solar Ukraine
Tel.: +38 067 277 07 55
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