Ukraine energy firms ask IMF to avoid renewable tariff cuts

The green power companies wrote the to the International Monetary Fund with their request.

At the start of this week, green energy companies from Ukraine said they had written to the International Monetary Fund requesting the prevention of renewable tariff reductions. The government intends to decrease the tariffs, but the energy companies said that doing so would boost the complexity of Ukraine’s cooperation with the IMF.

On June 5, the IMF is expected to give its approval for a $5 billion loan package for the country.

Ukraine has suffered extensively from the pandemic crisis. The loan package is meant to help support the country in coming through the crisis, with the first $1.9 billion portion expected to be issued June 6.

Ukraine established special renewable tariff regulations for green energy companies a number of years ago. The purpose was to broaden renewable energy production. The country pledged to purchase all the energy produced through these means.

However, the country has found the high tariffs to be particularly burdensome, especially as it now teeters on the brink of recession as a result of the COVID-19 crisis. The Ukrainian government forecasts that the country’s economy will shrink by 12 percent in its second quarter, following a first quarter drop of 1.5 percent.

Ukraine has asked investors to take part in the voluntary reduction of the renewable tariff by 10-20 percent.

The amount of the reduction depends on the generator type. Moreover, signing the memorandum to take part in this reduction is voluntary for the investors.

“We are concerned that the government of Ukraine may be on verge of going beyond the mediated solution and seeking to impose punitive, retroactive unilateral changes to renewable energy sector contracts,” explained the companies in a letter to the IMF, as quoted by Reuters. They went on to state that pursuing this type of action would lead to a decrease in foreign investment. That would, said the letter, “weaken the microeconomic framework of Ukraine and render its goals (including under its IMF programme) more difficult to achieve.”

Ukrainian Prime Minister Denys Shmygal discussed the renewable tariff last week. He said that “Our calculations show that this is the minimum we should go for.” He went on to state that when it comes to green energy, everyone from the government to investors and the banks that funded the businesses are all currently in the same situation.