As we previously reported, by the end of 2019, Ukraine faced difficulties in complying with its feed-in-tariff (“FiT”) regime for the renewable energy sector because the FiT that the government owed to renewable energy producers substantially exceeded market prices.
In June 2020, the Ukrainian government and industry associations representing some (but not all) producers of renewable energy signed a Memorandum of Understanding (the “MoU”). The primary goal of the MoU was to solidify the financial position of the State-owned entity “Guaranteed Buyer” (“GB”), which is the offtaker responsible for paying FiTs to producers. The MoU contemplated that the FiT would be reduced and was implemented into legislation enacted in August 2020. The Ukrainian government, in turn, undertook to ensure GB’s timely payment of the (reduced) FiT and gradually repay the existing debt to renewable energy producers that had accrued since the beginning of 2020.
However, a year after the MoU, the payment crisis has not been resolved, but indeed has worsened. Ukraine is currently facing the first of what may be numerous claims by foreign investors under bilateral and multilateral investment treaties in relation to Ukraine’s changes to the FiT regime. As we discuss in this alert, recent developments could give rise to additional investor-State disputes and claims against the Ukrainian government before national courts.
