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30 March 2020

COVID-19 outbreak in Ukraine: impact on energy sector

In connection with the spread of the coronavirus COVID-19, the Cabinet of Ministers of Ukraine (the “CMU“), the parliament and other authorities in Ukraine have adopted a number of regulatory documents affecting the activities of enterprises in the energy sector. These regulations introduce certain measures to limit the spread of coronavirus COVID-19 in Ukraine.

What measures have been applied?

The following measures have been introduced to prevent the spread of coronavirus COVID-19 in Ukraine:

12 March 2020 – 24 April  2020

Quarantine throughout Ukraine:

  • transfer of workers to remote work
  • prohibition of mass events
  • prohibition of visits to educational institutions by applicants

25 March 2020 – 24 April  2020

An emergency regime, as special conditions in connection with a violation of normal living conditions due to epidemic or other dangerous event, which:

  • threatens life / health of the population
  • leads to a large number of dead / injured
  • causes significant material damage and leads to the impossibility of living and conducting business activities in a certain territory

What are the changes in the work of state authorities and enterprises?

 The quarantine and emergency regime provide for the implementation of the following measures at state authorities and enterprises of the energy sector:

  • changes in the operating mode of key state authorities and enterprises in the energy sector
  • restriction of access to the premises of state authorities and enterprises
  • transfer of work in telephone and online mode
  • preparation for the implementation of measures for the safe operation of the United Energy System of the country and others

What are the features of the work of participants in the energy sector?

During quarantine and emergency, participants in the energy sector have the following work regulations:

1. State authorities in the energy sector:

National Energy and Utility Regulatory Commission (the “NEURC”):

  • recommends that all participants take part in meetings remotely, for example via Skype
  • accepts applications for obtaining (canceling) licenses through the Unified State Portal of Administrative Services https://my.gov.ua/

The Ministry of Energy and Environmental Protection of Ukraine:

  • has created an Operational Headquarters, which coordinates the work of all subordinate enterprises and institutions, solves problematic issues through video conference calls in real time
  • together with government agencies and industry enterprises, prepares solutions so that the deterioration of the epidemiological situation does not affect energy security and environmental protection

2. Administrators and key enterprises of the electricity market:

NPC “Ukrenergo”:

  • reports a partial restriction on the receipt of incoming calls to the call center for servicing market participants
  • offers market participants prompt answers to questions by using the list of email addresses and telephones listed on the site

The State CompanyMarket operator”:

  • management of the company is present at workplaces
  • electricity trading and payments will continue 24/7

The State Company “Guaranteed buyer”:

  • offered to contact the company online or by phone (addresses and numbers by reference)
  • makes payments to RES producers

3. Electricity producers, including RES:

  • the right has been granted to instruct employees to perform work at home and to provide employees vacation with their consent, including without salary for the period of quarantine
  • quarantine established by the CMU is included in the list of force majeure circumstances
  • it is forbidden to carry out scheduled inspections
  • the term for the provision of administrative services has been stopped
  • limited application of penalties for violation of tax laws
  • from 1 March 2020 till 30 April  2020 land charges (land tax and rent for land plots of state and communal property) are not charged and not paid, nonresidential real estate objects are not taxed
  • for foreigners / stateless persons who were unable during the period or as a result of quarantine to leave Ukraine or contact the migration service, administrative liability for violation of the law in this area does not apply

4. Electricity suppliers and distribution system operators (in addition to measures for electricity producers):

  • for the period of quarantine validity and within 30 days from the date of its cancellation it is prohibited:

– accrual and collection of forfeit (fines, penalties) for violation of payment obligations by the consumer
– termination / stopping of the electricity supply / distribution to Ukrainian citizens due to violation of the terms of payment
– forced eviction / collection of accommodation due to late payment by the consumer of services for electricity supply / distribution

  • with proper information, the company can change the mode of work for the reception and servicing of individuals and legal entities
  • CMU should establish additional payments to employees who ensure the livelihoods of the population
  • NEURC in addition to the above activities, provides for licensees: maximum restriction on the operation of service centers; resolving contentious issues of consumers by telephone and/or online; suspension of warnings and other sanctions against domestic consumers

Conclusion:

Despite the quarantine and emergency conditions, Ukrainian energy sector enterprises provide uninterrupted electricity supply. At the same time, quarantine and emergency regime conditions have a negative impact on the industry. The cancellation of the penalty for violation of payment discipline by consumers can lead to significant amounts of debt to electricity suppliers. Quarantine measures, as a force majeure event, will lead to delays in the implementation of RES projects and other projects in the energy sector. In addition, the question of the budget deficit of the State Company “Guaranteed buyer” still remains unresolved, which leads to delays in payments to RES producers.

If you would like to discuss the issues raised in this paper in more detail, please contact the SK Energy team.

Information contained in this legal alert is for general information purposes only, does not constitute legal or other professional advice, and should not be relied upon as a substitute for specific professional advice tailored to particular circumstances.

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