Market Assessment RESIDENTIAL SECTOR OF UKRAINE: LEGAL, REGULATORY, INSTITUTIONAL, TECHNICAL AND FINANCIAL CONSIDERATIONS
FINAL REPORT
August 2011
Prepared for European Bank for Reconstruction and Development One Exchange Square, London, EC2A 2JN
Prepared by:
Reading, Pennsylvania, USA
IB
MunicipalDevelopment Oslo,Norway HousingInstitute Institute, Ltd. Bratislava,Slovakia Kyiv,Ukraine
Framework Contract FC474/EBSF-2010-08-124F Framework Contract FC474/EBSF-2010-08-124F ACKNOWLEDGEMENTS
Participants in the project include the following:
Name and Position in Project Name and Position in Project WorleyParsons Municipal Development Institute Mike DeLallo, Select Director Alyona Babak, Project Manager Andrew Popelka, Project Manager Gennadiy Farenyuk, Civil Engineer; David B. Stauffer, PE, Documents review Anatoly Kolienko, Heating Engineer Jason L. Sweigart, Documents review Roman Zherdystskyi, Financial Analyst Raymond Rice, Procurement Specialist Olga Olefirova, Lawyer ENSI, Energy Saving International, a.s Dmitry Levytsky, Lawyer Trond Dahlsveen, Financial Expert Ima Khrenova-Shimkina, Economist, Marketing Specialist Natalia Grytsenko, Energy Efficiency Viktora Pogorelova, Housing Specialist Expert Lubomir Tchervilov, Energy Expert Atatoly Nicheporchuk, Civil Engineer Ministry Steering Committee Kadria Safiulina, Sociologist Olga Romanyuk, Deputy Minister of Housing Institute Housing and Communal Economy Larisa Novikova, Head of Section on Jaroslava Zapletalova, PhD, Housing Energy saving, Department of Heat regulatory expert Energy Irina Savinkova – Chief specialist of the heating energy sector development, Department of Heat Energy Maria Savchenko-Belska, Chief specialist of the section of housing economy sector, Department of Housing Policy
Framework Contract FC474/EBSF-2010-08-124F iii Framework Contract FC474/EBSF-2010-08-124F iv TABLE OF CONTENTS LIST OF ANNEXES ...... VII LIST OF EXHIBITS...... IX EXECUTIVE SUMMARY ...... 11 1. INTRODUCTION ...... 19 1.1 Background ...... 19 1.2 Report Structure ...... 19 2. RESIDENTIAL SECTOR REVIEW...... 21 2.1 Review of Sector Statistics ...... 21 2.1.1 Housing Stock in Ukraine ...... 21 2.1.2 Recent Housing Stock Development ...... 23 2.1.3 Construction Activities and Volumes...... 23 2.1.4 Energy Consumption in Ukraine ...... 25 2.2 Review of Tariffs...... 27 2.2.1 District Heating ...... 27 2.2.2 Electricity ...... 30 2.2.3 Natural Gas ...... 30 2.2.4 Water Supply...... 31 2.2.5 Wastewater Services...... 34 2.2.6 Summary of Tariff Policies ...... 36 2.3 Energy Saving Potential in the Housing Stock of Ukraine ...... 36 2.3.1 Selection of Representative Objects ...... 38 2.3.2 Energy Saving Potential...... 38 2.3.3 Assessment of Energy Saving Economic and Market Potential ...... 42 2.4 Legislation on Energy Efficiency in Buildings, EPBD Transposition ...... 44 2.4.1 Main Ukrainian legislation and regulations related to energy efficiency in buildings ...... 45 3. OWNERSHIP AND MAINTENANCE ISSUES...... 47 3.1 Forms of Ownership ...... 47 3.2 Models of Ownership and Management in Residential Sector ...... 47 3.2.1 Ownership System ...... 47 3.2.2 Owners Organization Structures ...... 48 3.2.3 Land Issues ...... 49 3.2.4 Conclusions...... 50 3.3 Management Models ...... 51 3.3.1 General Management Principles...... 51 3.3.2 Model 1 - Apartment Building Management by Housing and Maintenance Organization...... 51 3.3.3 Model 2 - Apartment Building Management by a Condominium...... 53 3.3.4 Model 3 – Apartment Building Management by a Managing Company...... 54 3.3.5 Model 4 – Apartment Building Management by a Housing and Construction cooperative (HCC) ...... 55 3.4 Comparison of Ukrainian Model With Other Countries...... 56 3.5 Conclusions...... 57 3.6 Recommendations...... 58
Framework Contract FC474/EBSF-2010-08-124F v 4. RESIDENTIAL INSTITUTIONAL ARRANGEMENTS...... 59 4.1 Goods and Services in Housing and Communal Services Market ...... 59 4.2 Institutional Structures and Their Relationships ...... 61 4.2.1 Electricity and Gas Supply Contracts...... 63 4.2.2 Agreements between Customers and “Producers/Providers” of Housing and Communal Services...... 63 4.2.3 Role of Local Self-Government ...... 64 4.2.4 Issus to be Addressed...... 65 4.3 Price Setting in Housing and Communal Sphere ...... 65 4.4 Past Arrangements Used for Contracting and Financing of Building Reconstruction in Ukrainian Municipalities ...... 68 4.4.1 Project "Sustainable Self-Maintenance of Multi-Family Buildings" ...... 68 4.4.2 Housing Rehabilitation Project in Nizhyn...... 69 4.4.3 Housing Rehabilitation Project in Berdychiv...... 70 4.4.4 Housing Rehabilitation Project in the City of Lutsk (2010)...... 70 4.4.5 Housing Rehabilitation Project in the City of Chernivtsi (2004-2010)...... 70 4.4.6 Projects Implemented by GTZ (German Technical Assistance Organization) ... 71 4.5 Summary...... 71 4.6 Recommendations...... 71 5. FINANCING ARRAGEMENTS FOR ENERGY EFFICICIENCY IN RESIDENTIAL SECTOR ...... 79 5.1 Residential Sector Market Participants ...... 79 5.1.1 Contractors - ESCO and Construction Companies...... 79 5.1.2 Banks...... 80 5.1.3 Other Financial Institutions – Leasing Companies, Credit Unions...... 82 5.1.4 Building Managers...... 82 5.1.5 Market of Energy Efficiency Equipment Suppliers ...... 84 5.1.6 Market of Energy and Other Services Suppliers...... 84 5.1.7 Summary of Findings ...... 85 5.2 Funding Sources ...... 87 5.2.1 Funding from State and Local Budgets...... 87 5.2.2 International Development Assistance - Grants...... 90 5.3 Capacity and Willingness of Residents to Fund Investment Needs...... 91 6. FINANCING MODELS ...... 95 6.1 General Models ...... 95 6.2 Credit Line Models...... 95 6.2.1 Model N 1: Apartment Block Connected to the District Heating System ...... 97 6.2.2 Model N 2: Apartment Block Not Connected to the District Heating System...... 99 6.2.3 Model N 3: Individual Apartment in the Apartment Block...... 100 6.2.4 Model N 4: Single Family House...... 101 6.3 Energy Efficient Revolving Fund...... 103 6.4 ESCO Models...... 104 6.5 Conclusions and Recommendations...... 106
Framework Contract FC474/EBSF-2010-08-124F vi LIST OF ANNEXES
ANNEX 1: TERMINOLOGY...... 108 ANNEX 2: ENGLISH - UKRAINIAN LEGAL TERMINOLOGY...... 110 ANNEX 3: REFERENCES ...... 116 ANNEX 4: HOUSING STOCK OF URBAN AND RURAL LOCALITIES ...... 118 ANNEX 5: HOUSING STOCK OF URBAN SETTLEMENTS...... 119 ANNEX 6: HOUSING STOCK OF RURAL LOCALITIES...... 120 ANNEX 7: GROWTH OF THE TOTAL FLOOR AREA OF THE HOUSING STOCK IN UKRAINE ...... 121 ANNEX 8: STRUCTURE OF HOUSING STOCK IN URBAN AND RURAL AREA BY FORM OF OWNERSHIP ...... 122 ANNEX 9: STRUCTURE OF HOUSING STOCK IN URBAN AREAS BY FORM OF OWNERSHIP ...... 123 ANNEX 10: STRUCTURE OF HOUSING STOCK IN RURAL AREAS BY FORM OF OWNERSHIP ...... 124 ANNEX 11: DISTRIBUTION OF RESIDENTIAL HOUSES BY YEAR OF CONSTRUCTION (AS OF 2001) ...... 125 ANNEX 12: VOLUMES OF HOUSING BUILT BY REGIONS IN 2009...... 126 ANNEX 13: STATISTICAL DATA ON CONSTRUCTION ACTIVITIES IN 2010 ...... 127 ANNEX 14: HEAT PRODUCTION AND SUPPLY BY BOILER HOUSE IN URBAN AND RURAL AREAS IN 2008...... 128 ANNEX 15: HEAT PRODUCTION AND SUPPLY BY BOILER HOUSE IN URBAN AREAS IN 2008...... 129 ANNEX 16: HEAT PRODUCTION AND SUPPLY BY BOILER HOUSE IN RURAL AREAS IN 2008 ...... 130 ANNEX 17: HEAT PRODUCTION AND SUPPLY BY BOILER HOUSE IN URBAN AND RURAL AREAS IN 2009...... 131 ANNEX 18: HEAT PRODUCTION AND SUPPLY BY BOILER HOUSE IN URBAN AREAS IN 2009...... 132 ANNEX 19: HEAT PRODUCTION AND SUPPLY BY BOILER HOUSE IN RURAL AREAS IN 2009 ...... 133 ANNEX 20: HEAT PRODUCTION HISTORY...... 134 ANNEX 21: HEAT AND POWER CONSUMPTION BY NON-RESIDENTIAL SECTOR IN 2008 ...... 137 ANNEX 22: HEAT PRODUCTION AND SUPPLY BY BOILER HOUSE IN RURAL AREAS IN 2008 ...... 137 ANNEX 23: HEAT AND POWER GENERATION IN 2008...... 138 ANNEX 24: USAGE OF SECONDARY FUEL RESOURCES IN 2008...... 138 ANNEX 25: USAGE OF SECONDARY FUEL RESOURCES IN 2008...... 139 ANNEX 26: HEAT AND WATER METERING AND CONTROLS IN RESIDENTIAL BUILDING STOCK, 2008...... 140 ANNEX 27: HEAT TARIFFS 2002-2009...... 141 ANNEX 28: ELECTRICITY PRICES FOR RESIDENTIAL CUSTOMERS...... 141 ANNEX 29: NATURAL GAS PRICES FOR RESIDENTIAL CUSTOMERS...... 142 ANNEX 30: WATER SUPPLY TARIFFS, 2002-2009 ...... 143 ANNEX 31: WASTE WATER TARIFFS, 2002-2009 ...... 143 ANNEX 32: DISTRIBUTION MATRIX OF RESIDENTIAL BUILDING STOCK ENERGY USE ...... 144 ANNEX 33: CLASSIFICATION OF MULTI-STORY RESIDENTIAL BUILDINGS IN KYIV, 2004 ...... 145 ANNEX 34: NORMATIVE MAXIMUM HEAT CONSUMPTION OF MULTI-STORY BUILDINGS ...... 145 ANNEX 35: DISTRIBUTION OF HOUSING IN URBAN AND RURAL AREA BY TEMPERATURE ZONE...... 146 ANNEX 36: DISTRIBUTION OF HOUSING IN URBAN AREA BY TEMPERATURE ZONE ...... 147 ANNEX 37: DISTRIBUTION OF HOUSING IN RURAL AREA BY TEMPERATURE ZONE ...... 147 ANNEX 38: DISTRIBUTION MATRIX OF ENERGY SAVINGS BY EE MEASURES...... 148 ANNEX 39: DISTRIBUTION MATRIX OF SAVINGS IN MWH ...... 149 ANNEX 40: DISTRIBUTION MATRIX OF SAVINGS IN MW PER APARTMENT AND FAMILY HOUSES ...... 151 ANNEX 41: BERDICHEV PROJECT COSTS ESTIMATES...... 152 ANNEX 42: BERDICHIV PROJECT FINANCING PLAN ...... 152 ANNEX 43: LUTSK PROJECT COST ESTIMATES ...... 152 ANNEX 44: BANKS LOAN AND INVESTMENT PORTFOLIO , 2011 ...... 153 ANNEX 45: INTERVIEWS WITH BANKS ...... 157 ANNEX 46: DETAILED DESCRIPTION OF LEGAL AND REGULATORY NORMS FOR PROVISION OF HOUSING AND COMMUNAL SERVICES ...... 164
Framework Contract FC474/EBSF-2010-08-124F vii ANNEX 47 – CONTRACTUAL DETAILS OF CONCLUDING LOAN AGREEMENTS WITH CONDOMINIUMS; LEGAL BACKGROUND FOR LEASE AGREEMENTS ...... 181 ANNEX 48: GAP ANALYSIS – LAW OF UKRAINE “ON ASSOCIATION OF CO-OWNERS OF RESIDENTIAL BUILDINGS ...... 186 ANNEX 49: REVIEW OF AMENDMENT OF LAW ON CONDOMINIUMS ...... 187
Framework Contract FC474/EBSF-2010-08-124F viii LIST OF EXHIBITS
EXHIBIT 1: OWNERSHIP OF HOUSING STOCK IN UKRAINE BY FLOOR AREA ...... 22 EXHIBIT 2: DISTRIBUTION OF HOUSING STOCK IN THE UKRAINE BY NUMBER OF ROOMS...... 22 EXHIBIT 3: AGE GROUPS OF BUILDINGS IN SELECT EUROPEAN COUNTRIES...... 23 EXHIBIT 4: HOUSING CONSTRUCTION VOLUMES IN UKRAINE 1985 - 2008 ...... 24 EXHIBIT 5: TOTAL CONSTRUCTION VOLUME CHANGES IN UKRAINE FROM 2009 TO 2010...... 24 EXHIBIT 6: ENERGY CONSUMPTION BY RESIDENTIAL SECTOR IN UKRAINE, 2008...... 26 EXHIBIT 7: BASELINE ENERGY CONSUMPTION IN RESIDENTIAL BUILDINGS IN UKRAINE...... 27 .EXHIBIT 8: HEAT TARIFF TRENDS IN DISTRICT HEATING SYSTEMS IN UKRAINE ...... 28 EXHIBIT 9: TARIFF AND PRODUCTION COSTS OF HEAT SUPPLY BY THE REGION ...... 29 EXHIBIT 10: STRUCTURE OF AVERAGE PRODUCTION COST OF HEAT SUPPLY IN 2009...... 29 EXHIBIT 11: WATER SUPPLY TARIFF TRENDS IN UKRAINE...... 32 EXHIBIT 12: TARIFF AND PRODUCTION COSTS OF WATER BY THE REGION ...... 33 EXHIBIT 13: STRUCTURE OF AVERAGE PRODUCTION COST OF WATER SUPPLY IN 2009...... 33 EXHIBIT 14: WASTE WATER TARIFF TRENDS IN UKRAINE...... 34 EXHIBIT 15: TARIFF AND PRODUCTION COSTS OF WASTE WATER BY THE REGION...... 35 EXHIBIT 16: STRUCTURE OF AVERAGE PROCESSING COST OF WASTE WATER IN 2009...... 35 EXHIBIT 17: SPECIFIC ENERGY USE BY THE RESIDENTIAL BUILDINGS IN ZONE I ...... 37 EXHIBIT 18: MAP OF THE CLIMATIC ZONES OF UKRAINE...... 37 EXHIBIT 19: DISTRIBUTION OF RESIDENTIAL HOUSING IN CLIMATIC ZONES...... 39 EXHIBIT 20: DISTRIBUTION OF RESIDENTIAL HOUSING STOCK SPACE IN CLIMATIC ZONES...... 39 EXHIBIT 21: DISTRIBUTION OF RESIDENTIAL BUILDING AREA IN UKRAINE...... 40 EXHIBIT 22: SPECIFIC ENERGY SAVING POTENTIAL IN RESIDENTIAL BUILDINGS IN UKRAINE ...... 40 EXHIBIT 23: TECHNICAL ENERGY SAVING POTENTIAL FOR THE RESIDENTIAL BUILDINGS IN UKRAINE ...... 41 EXHIBIT 24: TECHNICAL ENERGY SAVINGS POTENTIAL IN RESIDENTIAL BUILDINGS BY MEASURES...... 41 EXHIBIT 25: INVESTMENTS ASSOCIATED WITH TECHNICAL ENERGY SAVINGS POTENTIAL IN RESIDENTIAL BUILDINGS BY MEASURES ...... 42 EXHIBIT 26: MARKET ENERGY SAVING POTENTIAL ESTIMATES ...... 43 EXHIBIT 27: ENERGY SAVING POTENTIAL AND ITS ECONOMICAL BENEFITS FOR THE APARTMENT BUILDING CONNECTED TO DISTRICT HEATING...... 44 EXHIBIT 28 BARRIERS FOR OBTAINING LOANS...... 57 EXHIBIT 29. RESPONSIBILITIES FOR TARIFF SETTING IN HOUSING AND COMMUNAL SPHERE...... 66 EXHIBIT 30 – LEGISLATION ON PRICING OF GOODS AND SERVICES IN HOUSING MARKET ...... 66 EXHIBIT 31. MODEL 1 – END USER “APARTMENT” OR A BUILDING WITHOUT CONDOMINIUM...... 73 EXHIBIT 32. PROS AND CONS OF MODEL 1...... 73 EXHIBIT 33. MODEL 2 – END USER BUILDING WITH CONDOMINIUM...... 75 EXHIBIT 34: PROS AND CONS OF MODEL 2 ...... 76 EXHIBIT 35: LIST OF ESCOS IN UKRAINE...... 80 EXHIBIT 36: SELECTED PERFORMANCE INDICATORS OF LARGEST 20 BANKS IN UKRAINE...... 80 EXHIBIT 37: SUMMARY OF PRICING PROCEDURE FOR INVESTMENT RECOVERY ...... 84 EXHIBIT 38: ENERGY TARIFFS USED IN FINANCING MODELS ...... 95 EXHIBIT 39: ASSESSMENT OF EE MEASURES FOR MODEL 1...... 98 EXHIBIT 40: ASSESSMENT OF EE MEASURES FOR MODEL 2...... 99 EXHIBIT 41: ASSESSMENT OF EE MEASURES FOR MODEL 3...... 101 EXHIBIT 42: ASSESSMENT OF EE MEASURES FOR MODEL 4...... 102 EXHIBIT 43: ENERGY EFFICIENCY REVOLVING FUND SCHEME...... 103 EXHIBIT 44: ESCO SCHEME...... 105
Framework Contract FC474/EBSF-2010-08-124F ix Framework Contract FC474/EBSF-2010-08-124F 10 EXECUTIVE SUMMARY
The market assessment study presented in this report provides a comprehensive review of the residential sector in the Ukraine including statistics related to housing stock energy use, current tariffs policies, and estimates of realistic and sustainable energy investment potential. The assessment covers the entire residential sector with a special effort focused on fundamental issues governing the proper operation, maintenance and reconstruction of multi-apartment housing stock, including ownership and maintenance models, institutional arrangements, roles and responsibilities of residents, municipalities the state, and current building maintenance organizations. Assessment of current institutional arrangements includes financial and legal framework, and the means of supplying utility services. The defined scope of the market assessment study specified five distinct tasks. Accordingly, this report is structured into five main sections, following the requirements of the assignment. These five sections are listed and discussed further below: Section 2: Residential Sector Review Section 3: Ownership and Maintenance Issues Section 4: Residential Intuitional Arrangements Section 5: Financing Arrangements for Energy Efficiency in the Residential Sector Section 6: Financing Models
Residential Sector Review
Sector Statistics The housing sector review was based on available official statistical data1 on housing and energy consumption maintained by the government of Ukraine, as well as on information gathered from the EU Commission and from International Energy Agency (IEA) reports. The residential sector review includes statistics of residential building stock, its recent development and information on energy consumption. Included are tariffs for heat, electricity, gas and water as they are a significant factor of economic viability of energy saving measures and are a prerequisite for the assessment of the energy saving potential in the residential building stock in Ukraine. According to the state statistics, the residential building stock of Ukraine in 2009 consisted of approximately 1,070 million m2 of total floor area in 19.3 million dwellings, with 64.2% of the housing stock located in urban areas. Nearly 50% of the residential stock in Ukraine is represented by single family houses. The residential housing stock is in majority - 92.2% owned privately, 6.3% is in communal ownership and only 1.5% is state owned. The age of the building stock in Ukraine is similar to the building stock in EU countries. While there are no official statistics available on energy consumption by residential buildings, available documents estimate the total energy consumption of the residential sector of Ukraine at 272 million MWh (2008) Tariffs Tariff policies for energy and water in the Ukraine continue to maintain tariffs below their production cost, which is obviously covered from other sources or subsidies and cross subsidies of the residential sector by the non-residential consumers. Residential customers have a much lower heat tariff compared to other categories of consumers: 220 UAH/MWh (approximately 20 EUR/MWh) in the beginning of 2011. For residential customers, the average tariff for heat supply has grown in Ukrainian currency by
1 The official statistical data was available only up to year 2009. Data for 2010 will not be available until the end of 2011.
Framework Contract FC474/EBSF-2010-08-124F 11 184% since 2002. However, in terms of hard currency (EUR), the heat tariffs increased by an average of 70% since 2002. Tariffs for electricity for the population in the Ukraine vary from 0.18 UAH/kWh to 0.24 UAH/kWh with an average of 0.22 UAH/kWh (0.02 EUR/kWh) which is about 4 to 13 times lower than in the EU. If the electricity prices are converted into Euro denomination, and the latest changes of prices are considered, it can be seen that the level of their growth varies greatly depending on the consumption. For all categories of consumers who use less than 150 kWh/month, the electricity prices in the last five years have decreased by 8%. For consumers who use more than 150 kWh/month, the prices have increased by 20%. Regarding gas prices for the residential sector - since 1999 it has increased by more than 400% in local currency. However in terms of hard currency (EUR), the average tariff increase was not as dramatically (approximately 175%) and they are still much lower compared to what residents pay in European countries. For an average household in the Ukraine, the current gas price is 72.54 kop/m3 (0.069 EUR/m3) for those inhabitants who consume less than 2,500 m3 of gas per year and have an installed gas meter, and to 79.8 kop/m3 (0.076 EUR/m3) for those without an installed gas meter. In the majority of regions, heat tariffs are set below the cost of heat production and although officially subsidies do not exist, the difference between the costs and revenues is “covered” either through cross-subsidies, exploitation of depreciation, or other financial means. This in fact constitutes tariff subsidy. Subsidized tariffs distort the economic relations in the energy sector, diminish motivation for investing in energy efficiency in residential housing and it also puts an unnecessary burden on the state budget. Tariff reform is very important for the introduction of a functional system similar to the process implemented in Slovakia, considering only limited well- targeted subsidies for economically vulnerable customers.
Energy Saving Potential: The energy saving potential was determined with respect to the existing residential housing stock, climatic zones and current available current energy consumption data. The results of the assessment show a substantial energy saving potential in residential stock in the Ukraine. The results of the calculations show that the introduction of energy efficiency in existing residential buildings in the Ukraine may technically result in savings of nearly 136 million MWh/year of energy, which is approximately 50% of the actual baseline consumption. The monetary value of the estimated technical savings would be about 29.9 billion UAH (€ 2.6 billion). In terms of CO2 reduction potential – this will correspond to 39 million tCO2. The investment associated with this technical energy saving potential is nearly 42 billion EUR. Obviously, this is only a theoretical value, as the reality in implementing the energy efficiency potential will be substantially lower, determined by the economic performance of energy efficiency measures and by what is realistically possible to implement under the current market environment. Economic energy saving potential in this study was defined as attainable energy savings by measures that produce reasonable payback of the investment of not more than 10 years. Considering the current low heat, gas, and electricity tariffs, combined with “regular” market prices of energy saving measures, only a few energy savings measures are economically feasible and worth considering for an investment. Among the measures that are economically feasible under the current conditions are, for example, modern district heating substations with automatic regulation of heat supply, new automated high efficiency boilers on building level, temperature controls in the building/apartment, and high efficiency lighting. Based on the available data and information, it is estimated that the economic energy savings potential would be approx. 32.6 million MWh per year, resulting in monetary savings of approx. 7.18 billion
UAH (€ 624 million). In terms of CO2 reduction potential this will correspond to 11.1 million
tCO2
Framework Contract FC474/EBSF-2010-08-124F 12 Based on the experience from other Eastern European countries, the energy efficiency measures will be introduced gradually over several years (a 5-10 year horizon is likely) with the penetration rate at a relatively low level, influenced by the availability of funds, availability and pricing of the energy conservation materials and equipment (as applicable), available manpower and public knowledge of the investment benefits and knowledge of implementation process. It was estimated that the market potential over the next 5 years can reach approximately 9% of total energy consumption, or 11.5 million MWh/year, representing a cumulative present value of about 2.64 billion UAH (€ 230 million) in savings. The Government of Ukraine might be interested in providing incentives to the population to invest in energy efficiency measures. Such incentives can be arranged through the provision of grants to cover part of the investment costs.
Ownership and Maintenance The residential building sector in the Ukraine is in state, municipal and private ownerships. Law on Privatization2 provided the basis for privatization of apartments and single apartment buildings with two or more tenants. Now, the majority of apartments in multi-apartment buildings are privatized, with only a small number owned by municipalities. In absence of a “single owner” of the multi-apartment building, the management role is to be assumed by the co-owners. The relevant laws of Ukraine3 established two types of residential sector management: Buildings without established condominiums. Management and maintenance of these buildings continues to be performed by the municipal maintenance organizations Buildings with established condominiums. Management and maintenance of these buildings is performed or organized by the co-owners. Privatization implies joint ownership of the common spaces by the new owners together with all relevant rights and responsibilities4, including the responsibility to share repair and maintenance costs for the common property, and responsibility for property maintenance. According to the Law, the apartment owners in multi-apartment buildings may establish associations or unions of individual apartment/building owners5 in a form of condominium or housing/construction association, or they may chose not to organize. It should be noted that an important clause of the Ukrainian Constitution is that participation in any union or association is voluntary. Therefore the Law does not oblige residents to join any associations, including condominiums or any other form of housing associations. Co-owners of apartment buildings who chose to be organized in condominium are capable of making all decision through the executive body and assume the responsibility for management and maintenance of their building, as well as for interrelations with utility services providers, etc. A different, more complicated situation is with the management and maintenance of buildings without established condominiums (so called, non-organized co-owners). In these cases, the co- owners are virtually not capable of making decisions and such buildings are managed and maintained by housing and maintenance organizations (HMO) – so called Zhek, selected and engaged by the local self-government. One of the critical issues associated with the organization of co-owners is the ability to create and maintain a capital repair fund. While the law requires condominiums to set up a capital repairs fund6, it does not oblige non-organized owners to establish such fund. In general the law suggests 4 different management models for apartment buildings, which are suited for a specific ownership and organization of co-owners. The buildings with organized co- owners may choose either Model that suits them the best. For the buildings with non-organized
2 Law of Ukraine on Privatisation of the State Residential Sector No. 2482-ХІІ of 19.06.1992. 3 Law of Ukraine on Privatisation of the State Residential Sector No. 2482-ХІІ of 19.06.1992, Law of Ukraine on Condominiums No. 2866-III of 29.11.2001. 4 Articles 368 and 369 of the Civil Code of Ukraine. 5 Law of Ukraine on Privatisation of the State Residential Sector No. 2482-ХІІ of 19.06.1992. 6 Law of Ukraine on Condominiums of 29.11.2001, No. 2866-III
Framework Contract FC474/EBSF-2010-08-124F 13 co-owners, the local self-government takes over the role of decision-maker and selects the housing and maintenance organization. This system, while currently widely used, should be phased out and the organization of co-owners should be promoted through various incentives, education and mainly by removing legal barriers that hinder the process, including resolving the issues related to: Land transfer to the co-owners, Mandatory establishment of a capital repair fund, which is protected from misuse and is available only for agreed upon repairs, Introducing enforcement mechanism of dues payment by owners, and Gradual phase out of municipal involvement in private residential housing. Comparison of the current models of ownership and maintenance of the multi-apartment residential housing with relatively well functioning models applied in Slovakia shows that several issues need to be addressed in the Ukraine’s housing policies. Comprehensive gap analysis of the current Ukrainian Law “On Association of Co-Owners of Residential Buildings” with the Slovak “Law on Condominiums” as well as with the Slovak Housing Policy shows that it will be advisable to re-evaluate the approach for renovation of 90% of the privatized residential sector in the Ukraine and create a legal and financial environment for the apartment owners, which will allow them to make their own decisions while they are provided with required technical support and government incentive programs for building stock renovation and energy efficiency.
Residential Institutional Arrangements The assessment of current residential institutional arrangements provided in this report include legal and contractual bases for required housing and communal services, description of types of services provided, types of arrangements used in the past and points out to some discrepancies in definitions of communal services by the law. The legal basis for contractual arrangements for providing communal services are set by the Law of Ukraine "On Housing and Communal Services" which classifies the services into categories according to the service provided, payment structure and other criteria. Its provisions set the minimum quality standards as well as the minimum qualifications of the provider. It also sets the user’s responsibilities related to the payment for the services. Affairs in the housing and communal sphere are built exclusively on contractual relations, regulated by requirements for development and approval of tariffs, quality of services, as well as approval of typical agreements for respective services. Over the past many years, decisions on providers of housing and communal services were made in large part by the local self-government bodies. This was mostly due to the fact that the maintenance companies (ZHEks) were in the role of “intermediary” between the utilities and the end consumers. Later, the local self-governments allowed utilities to conclude direct contracts with the end consumers in the multi-apartment buildings. This system of a vertically integrated monopoly is now used in the majority of Ukrainian localities with exception of some large cities such as Kyiv, Kharkiv and Lviv, and it is applied to heat supply, water supply and sewage services. This system is also riddled with many problems, such as deficiencies in metering, cost of heat allocations to individual apartments in the building, and metering equipment maintenance and calibration. Moreover, local self-government bodies, having very limited understanding of the complex ownership system in the multi apartment buildings mistakenly began defining condominiums as “service providers.” In addition to that, the Ukrainian mass media also contributed to the misunderstanding of the nature of condominiums by Ukrainian households, by referring to condominiums as an “alternative to ZHEKs”. One significant reason for such misunderstanding is the absence of clear requirements and guidance for condominiums in organizing billing and collection. Regarding the price setting - practically all prices in housing and communal sphere are subject to state regulation. There are two exceptions from this rule - the price of management service and
Framework Contract FC474/EBSF-2010-08-124F 14 the cost of capital repairs are defined by negotiation and shall be documented by respective contracts. The assessment of the current institutional arrangements of the residential sector in the Ukraine, including issues related to the residential buildings (ownership and management, as well as production, transportation and supply of water, heat, gas, electricity, sewage) showed several issues that need to be improved to mitigate the current deficiencies in residential sector operation. A summary of the main problems is as follows: Large number of participants defined by legislation for operating in the residential sector, which significantly complicates understanding of the residential stock organization by all stakeholders. Absence of clear division of responsibilities between the residential market participants. Absence of entity responsible/authorized for making decisions on capital investment and repairs in the buildings where condominiums are not established. Clear definition of jurisdiction of the National Regulator and local self-government to eliminate redundancy of the regulation for the utilities. Payments and tariff setting practices are not meeting all market needs. The provisions for requirement to contribute regularly to the building capital repair fund, transportation tariffs and introduction of tariffs for renewable energy need to be improved. Improving the system of regulation that eliminates unnecessary and regulates only natural monopoly services.
Financing Arrangements This section provides information on commercial structures and availability of funding for management and financing of energy efficiency investments for the residential buildings, and describes experience with budgetary and donor funding for residential energy efficiency. It also provides insight into the willingness and capacity of residents to fund investment needs obtained through the formation of resident’s focus groups. Review of the residential housing market has determined that relative to the size of perceived market, that the Ukraine has a small number of specialized service companies doing business in the residential housing sphere. The low cost of energy, service pricing policies and low understanding of the benefits of such services by local self-governments caused ESCO companies to re-orient themselves to other activities. Nevertheless, the situation is improving and a number of companies are now active and ready to be engaged in providing housing and communal services, as well as implementing energy conservation projects. The market is well supplied with materials and equipment from numerous local and international companies. While local banks have an active retail portfolio, lending to individuals, small and medium enterprises, and are interested in lending for energy efficiency project to residents, they point to lack of collateral and the inability to enforce payments by the condominium members as the main barrier for lending to condominium as a legal entity. Funding for energy efficiency improvement of residential housing stock is available under specific conditions from state and local budgets under programs specifically designed to improve residential housing and communal services. Substantial assistance is also provided by several international donor’s programs in the form of grants. An assessment of the capacity and willingness of residents to invest in energy performance improvement of their buildings was performed through a survey of apartment building residents, which showed a positive attitude of the majority of respondents towards the “concept” and a willingness to invest to energy efficiency through an affordable loan.
Financing Models
Framework Contract FC474/EBSF-2010-08-124F 15 This section analyses potential financing models that can be used to provide financial resources for implementing energy efficiency measures in residential building stock in Ukraine. Several financing models which can be used include: credit lines, an energy efficient revolving fund, and ESCO models. Loan financing though credit lines is the most typical model for financing energy efficient projects, especially in the residential sector. A number of credit line facilities for residential sectors in Slovakia and Bulgaria showed great success of such a model. However, considering the legal arrangements, the situation in Ukraine is far behind Slovakia and Bulgaria, which has created a number of obstacles for attracting loan funding in energy efficient projects in the residential sector. Under current conditions in the Ukraine, the Condominium Associations are not treated as a viable borrower, since the Law of Ukraine does not provide a clear procedure on collecting debts by the Condominium Associations from the individual owners. This situation has stopped the Banks from developing activities in this market. Therefore the implementation of the credit lines model in the apartment blocks will be complicated under current Ukrainian conditions. Nevertheless the local Banks are interested in penetrating the residential market and are willing to sign loan agreement with each apartment owner individually. The Consultant developed different sub-models under the credit line model: starting for Apartment Block connected to the District Heating System and ending with Single family houses. Details of the proposed models are given in Chapter 6. The lending market for implementation of energy efficient measures in the residential sector is gradually opening up within the Ukraine. At the same time, there are a number of legal obstacles related to Condominium Associations in multi-apartment buildings, which were mentioned above, to open a broader market for such lending. Therefore the Government of the Ukraine will need to take action as soon as possible with regards to improving laws on Condominium Associations to make them viable borrowers for the local banks. Financial education for consumers and education of the bankers with regards to investment in energy efficiency in the residential sector also needs to be addressed in Ukraine. As seen in other countries by international donors, the local banks will need extensive training and hand- holding before they will be willing/able to lend to energy efficiency projects in the residential sector. Implementation capacity is often considered as one of the major barriers for establishing a proper framework for energy efficiency in the residential sector. Another possible models for energy efficiency investment are revolving funds that offers loans under soft conditions, which are repaid from energy savings. The funds can function similar to credit lines, and therefore would have similar barriers. In addition to these barriers, the establishment of the Revolving Fund would require a longer time for negotiations with the main stakeholders to establish it as a transparent financial vehicle with clear operational procedures. The ESCO model usually includes energy auditing, arranging financing, implementation or supervision of the implementation of the proposed measures, equipment commissioning, maintenance of the installed equipment, measuring and verification of the savings. These activities are usually done through the Energy Performance Contract (repayment of the investments through the guaranteed energy savings). The ESCO model is one of the solutions that in many markets of Europe have proved to be efficient. Whilst the ESCO is typically considered as a good model for implementing energy efficient projects and developing the market of energy efficient services, it is also regarded as a complicated solution, as ESCO needs to settle down all issues related to the whole lifetime of the project, including measuring and verifying the savings, transfer of ownership and other. ESCO models require expertise in engineering, law and finance, and that building owners understand how to organize and operate such scheme with energy performance contracting. Substantial training will have to be introduced to ESCOs and Condominium Associations (OSBBs) to be able to mutually benefit from implementation of this model.
Framework Contract FC474/EBSF-2010-08-124F 16 Under current Ukrainian conditions, ESCO model will have additional challenges to function mainly related to complicated and unclear procedures for Energy Performance Contracting (related to the application in apartment block buildings): interconnection of tariffs for communal services; schemes for investment repayment by each apartment; connection of communal services tariffs with subsidies for the inhabitants with low income. Therefore the Consultant proposes the preferable financing model for energy efficiency projects in the residential sector of Ukraine to be the Credit line model.
Conclusions The residential market assessment study of all significant aspects that influence the developments in housing and communal services in the Ukraine is supported by a significant amount of data and information on technical, financial and legal issues and by information on current trends in management and maintenance of the housing stock and related communal services. It is without surprise that the current situation is not ideal and that substantial improvements are needed to guide the development in the right direction. As the most significant issues, the team has identified the following: 1. The complex issue of renovation of residential housing stock and the introduction of energy efficiency will require a complex, well designed “Master Plan” that will consider and address all relevant issues affecting development in housing and communal services market and will be used as a “road map”. It is suggested that the Ministry of Construction and Regional Development, Housing and Communal Economy leads the preparation of such a plan. 2. The legal framework governing the housing and communal services market is often confusing and ineffective, and in some instances contradicting. It is strongly suggested that the lawmakers utilize experience from neighbouring countries and amend the current laws or develop new, more effective legislation. 3. The role of the state and local self-government in management of private residential housing should be gradually reduced and directed towards the role of influence by incentives. Available state and municipal funds should be used for developing incentives for implementation of energy efficiency projects based on competitive selection. The co-owners of multi-apartment buildings should be encouraged and supported in taking responsibility for their own assets. 4. Establishment and full functionality of association of apartment owners should be encouraged and incentive programs should be introduced with support of government and utilizing the programs of international donors. Public awareness activities, including best international practices should also be part of the effort. 5. Implementation of energy efficiency in multi-apartment buildings is currently driven mostly by the desire of occupants to improve indoor comfort conditions due to low quality of heat supply. Low energy tariffs do not provide incentive for energy efficiency investment based on its economic merit. A socially sensitive approach and implementation plan to market-wide establishment of full cost recovery tariffs, accompanied by consideration of protection for vulnerable population should be developed and gradually implemented.
Framework Contract FC474/EBSF-2010-08-124F 17 Framework Contract FC474/EBSF-2010-08-124F 18 1. INTRODUCTION
1.1 BACKGROUND Building on a successful approach for providing the financing for residential energy efficiency investment that was applied in Slovakia and Bulgaria, and with an intention of creating an enabling environment and the demand for a similar financial vehicle in the medium term, EBRD under the agreement with the Ukrainian government initiated its support with developing a web based information platform and by implementing a comprehensive assessment of the residential sector in Ukraine. One of the major constraints for financing residential energy efficiency is a lack of a supportive legal and regulatory framework. In order to understand the current legal, regulatory and institutional framework of the urban housing stock in the Ukraine and relevant technical, financing and economic aspects, a gap analysis study was performed which provides insight on how financing products could be structured in the existing legal environment and how existing legislation needs to be optimized. The Market Assessment Study provides a comprehensive review of the residential sector in the Ukraine including statistics related to housing stock energy use, energy efficiency potential, current tariff policies and discussion on sustainable energy investment potential. The assessment focused on fundamental issues governing the proper operation, maintenance and reconstruction of multi-apartment housing stock, including ownership and maintenance models, institutional arrangements, roles and responsibilities of residents, municipalities and the state, as well as current building maintenance organizations. The assessment of current institutional arrangements includes the financial and legal framework, and the means of supplying services and commodities. The assessment of current practices and availability of financing for energy efficiency includes identification of potential sources of financing for improving energy efficiency in residential block housing, the capacity and willingness of residents’ to contribute directly to investment needs, the interest and capability of local banks to provide financing for residential building improvements, and the interest and capability of utilities to support energy efficiency by financing improvements recovered through utility bills. Potential financing models for residential building stock were also evaluated.
1.2 REPORT STRUCTURE The defined scope of the study specifies five distinct tasks to be performed. Accordingly, this report is structured into five main sections, following the requirement of the assignment. Section 2 provides information on residential sector statistics related to the housing fund of the Ukraine and provides a summary of statistical information. The statistics is analysed for the last 10 years (1999 to 2009). Section 3 provides information on issues of ownership and maintenance of multi- apartment residential buildings, models currently used for maintenance and for providing communal services. It also provides comparison of the Ukrainian and Slovak models and approaches. Section 4 provides information on residential institutional arrangements that include legal and contractual bases for required services, types of arrangements used in the past for contracting and for financing of building reconstruction in the Ukraine, and provides an assessment of existing procedures in the decision making process regarding the building reconstruction effort. Section 5 provides information on current housing policies and regulations related to investment by apartment owners, management by condominium associations, contracts for supply of services and commodities, funding options for energy efficiency, funding for general capital
Framework Contract FC474/EBSF-2010-08-124F 19 repair, and different options for structuring the financing through performance contracts, grants and bank loans. Section 6 analyses potential financing models that can be used to provide financial resources for implementing energy efficiency measures in residential building stock in the Ukraine. During the performance of the Market Assessment, a large quantity of valuable information was collected and used for analysis in all aspects of the residential housing and communal services. Selected information that was deemed important is included in the Annexes to this report. Terminology and vocabulary of terms used throughout the report is provided in Annex 1 and in Annex 2.
Framework Contract FC474/EBSF-2010-08-124F 20 2. RESIDENTIAL SECTOR REVIEW
2.1 REVIEW OF SECTOR STATISTICS This section provides a review of residential sector statistics related to the housing stock of Ukraine and provides a summary of information including the number of residential buildings, non-residential buildings and dormitories; urban and rural housing stock; number of flats; housing construction rates; total floor area; energy use in terms of overall annual heat utilization, fuel and electricity consumption, and also provides information on how energy use is measured. The statistics is analysed for the last 10 years (1999 to 2009). A comparison of select sector statistics for the Ukraine with several European countries is also provided in this section. 2.1.1 Housing Stock in Ukraine According to the state statistics as of January 1, 2010 the housing stock of Ukraine consisted of 1,070 million m2 of the total floor area, including 1.7 million m2 of housing stock that was on the balance sheet of bankrupt enterprises, which went bankrupt over the last several years and enterprises that terminated their activity, as well as 30.3million m2 of unoccupied houses. On average, there are 22.5 m2 per inhabitant. Compared to European countries, for instance Germany, where the average area per person is 40.1 m2 (according to statistics 2002), while the same indicator for the Czech Republic and Slovakia is approximately 27 m2 and for Latvia and Lithuania – approximately 23 m2 per inhabitant. As of January 1, 2010, there are 19.3 million dwellings in Ukraine. This implies an average residential area per dwelling in the Ukraine of approximately 55 m2. Comparing with European countries: Germany has nearly 90 m2 per dwelling, Czech Republic - approximately 76 m2, Slovakia - approximately 56 m2, Latvia approximately - 55 m2, and Lithuania approximately - 61 m2 per dwelling. The housing located in urban areas represented 64.2% of the total housing stock. Nearly 50% of the residential stock in the Ukraine is represented by single family houses. The space of dormitories and residential premises in non-residential buildings in the total housing stock constitutes only 1.9% or 20.7 million m2. The number of buildings that have more than 5 stories is 79.3 thousand, 78.3 thousands of which are located in urban areas. Occupancy averages 2.4 persons per dwelling. A comparison with European countries shows that this indicator is quite close: for Germany – 2.1 persons per dwelling, for Latvia – 2.5 persons per dwelling (according to statistics of 2004). By the number of rooms, dwellings are distributed as following: 19.3% - single room apartments 37.2% - two rooms apartments 33.0% - three rooms apartments, 10.5% apartments with four and more rooms. The average number of rooms per dwelling in the Ukraine is approximately 2.3, while for Germany this indicator is 4.4, for Check Republic – approximately 3, Slovakia – 3.2, Latvia – 2.4, Lithuania – 2.5. As of the beginning of 2009, the ownership of the housing stock was distributed by number floor area as follows: 92.2% - privately owned 6.3% - communal ownership 1.5% - state ownership
Framework Contract FC474/EBSF-2010-08-124F 21 As of January 1, 2009, the housing stock comprised 10,148,900 houses (building structures). This number includes 9,800 houses on the balance sheet of bankrupt enterprises, those entities that terminated their activity, as well as 598,700 unoccupied houses throughout the country. General data on the housing stock of Ukraine and in its breakdown by regions as registered by official statistics on January 1, 2009 are shown in Annex 4. The indicated information on urban settlements and rural localities are provided in Annex 5, and Annex 6, respectively. The growth of the total floor area of the housing stock in the Ukraine, in urban and rural areas for the past 18 years is shown in Annex 7. The distribution of ownership of the housing stock in urban and rural areas as of January 1, 2009, [1] is shown in Annex 8, Annex 9 and Annex 10. The housing stock data provided in the annexes do not include the housing stock on the balance sheet of bankrupt enterprises and those that have completely terminated their activity. Data provided in Annex 4 through Annex 6, are data on the general and residential space of apartments (residential premises) and are indicated according to the rules set by the Substantive Provisions for Houses and Buildings [27]. The ownership distribution of the housing stock of Ukraine as recorded on January 1, 2009, [1] is shown in Exhibit 1. Exhibit 1: Ownership of Housing Stock in Ukraine by floor area
1.5% 6.3%
92.2%
State Source [1] The distribution of the total number of apartments in the housing stock of Ukraine and their total floor area broken down by the number of rooms per dwelling as of January 1, 2009 [1] is shown in Exhibit 2 Exhibit 2: Distribution of Housing Stock in the Ukraine by Number of Rooms
4-room 5-room & 9% more 1-room 2% 19% 3-room 33% 2-room 37%
Source [1]
As of January 1, 2010, the number of buildings in urban area was 4,050,444 (or approximately 4.0 million) including 9,975 of dormitories.
Framework Contract FC474/EBSF-2010-08-124F 22 For comparison of the Ukrainian building stock ages with other European countries, Exhibit 3 presents information on the same age categories as in Germany, Czech Republic and Lithuania. Information is based on a 2008 European Commission Report [32]. Detailed information on the year of construction for residential houses in Ukraine as of January 1, 2001 is provided by regions in Annex 11. Exhibit 3: Age groups of buildings in select European countries Built period Ukraine Germany Czech Rep Lithuania Before 1919 5% 14 % 11% 6% Between 1919-1945 13% 14% 14% 23% Between 1946 –1970 51% 46% 25% 33% Between 1971-1980 16% 13% 22% 18% After 1981 15% 13% 28%. 20% % is defined from the number of buildings As the data shows, the age of the building stock in Ukraine is similar to the building stock in EU countries. 2.1.2 Recent Housing Stock Development During 2009, a total of 6,399,600 m2 of the housing floor area was commissioned, which is 39% less than the previous year. This reduction was mostly due to the reduction of individual housing construction volume by 60.8%, noting that the share of construction of individual housing represented 35.7% in 2009 and 55.6% in 2008. Out of the total commissioned housing, an overwhelming share of 80.7% was located in urban settlements. Even so, when compared to the previous year, its volume was reduced by 32.4%. In rural areas, the volume was reduced by 56.7%. Compared with 2008, housing construction was reduced in 25 regions of the country, most of all (by 85.9%) in Lugansk Oblast, as well as in Kherson and Zhytomyr Oblasts – by 67.3% and 64.1% respectively. At the same time, volumes of new housing increased in Kharkiv Oblast and Sevastopol City. Detailed information on the volume of new housing in 2009 by regions is shown in Annex 12. One quarter (25%) of the total volume of new housing was built in Kyiv City and in Kyiv Oblast, 33.2% in 5 regions (Odesa, Kharkiv, Lviv, Ivano-Frankivsk Oblasts and in the Autonomous Republic of the Crimea). In rural localities, 1,237,100 m2, or 19.3% of the total volume of new housing was constructed. Thus, the share of housing built in rural areas is the largest in the Kyiv Oblast with 49.9% of the total volume in the region, followed by Zhytomyr (45.3%) and Zakarpattia Oblasts (43.0%). On the low side, Donetsk, Kharkiv and Mykolaiv Oblasts make up only 4.7%, 5.1% and 7.0%, respectively. In 2009, a total of 107,600 m2 of housing stock was built with state funds, which is 37.6% less than in 2008. The share of housing built by state funds represents only 1.7% of the national volume (1.6% in 2008). During 2009, 65,600 apartments were completed and commissioned. The average size of the apartments is 96.1 m2 of total floor area, whereas in the urban areas it is 90.0 m2 and in rural areas it is 133.4 m2. Approximately one third ( 33.9%) of newly built apartments have two (2) rooms, 26.6% have one (1) room, 25% are with three (3) rooms and 14.5% are with four or more rooms. 2.1.3 Construction Activities and Volumes The construction volume of the housing stock was greatly influenced by the economic situation in the Ukraine. The relatively high construction volumes experienced in the late 80’s sharply declined until year 2000, followed by stagnation and a modest increase in recent years. The construction volume of housing stock during the period of 1985 through 2008 expressed in thousand m2 of newly constructed space is shown in Exhibit 4 [28].
Framework Contract FC474/EBSF-2010-08-124F 23 Exhibit 4: Housing Construction Volumes in Ukraine 1985 - 2008
25000
20000
15000 м . в к . с и т 10000
5000
0 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 8 8 8 8 8 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2
Source: [28] Рис.1.1 During the last two years, the construction activities in Ukraine, including the housing stock construction have experienced yet another decline. In 2008, the volume of housing stock construction was 1% of the total housing stock (10.5 million m2), in 2009 – 0.61% (or 6.4 million m2) and in 2010 – 0.88% (9.4 million m2). In January 2010, construction companies performed UAH 1.5 billion worth of construction work, which presents a 24.1% decline compared to January 2009. The overall picture summarizing the increase/decline of construction volumes in the Ukraine in all regions is presented in Exhibit 5 [29]. Exhibit 5: Total Construction Volume Changes in Ukraine from 2009 to 2010
Poltavska 39.2 Dnipropetrovska 15.1 Volynska -4.9 Zaporizka -9 Luganska -9.8 Odeska -10.9 Zhutomyrska -12.3 Kharkivska -12.6 Kirovogradska -18.1 UKRAINE -24.1 c. Kyiv -27.4 Lvivska -30.6 Ternopilska -32.2 Rivnenska -33.8 Donecka -35.1 Mykolaivska -37.1 Khersonska -37.8 c. Sevastopol -38.6 Khmelnytska -40.2 Sumska -40.7 AR Crimea -42.1 Vinnytsa -43.3 Zakarpatska -44.7 I.-Frankivska -46.3 Cherkaska -46.9 Chernigivska -47.4 Kyivska -55.7 Chernivecka -66.8
-80 -70 -60 -50 -40 -30 -20 -10 0 10 20 30 40 50 % change from January 2009 level
Source: [28]
Framework Contract FC474/EBSF-2010-08-124F 24 In general terms, the construction companies in 25 Ukrainian regions experienced decline in their annual construction volumes. The most dramatic decline of construction activities was a reduction of 66.8%, mostly caused by cutback on construction works of Dniester Hydro-Nuclear Power Plant in Chernivtsi Oblast, followed by the 55.7% decline in Kyiv Oblasts mostly caused by the reduction related to construction of non-residential premises, highways and main pipelines. On the other side, a 39.2% increase in construction volume was created in the Poltava region, mostly due to reconstruction and major repairs of gas pipelines and explorative drilling work. Also, the Dnipropetrovsk Oblast had a 15.1% increase in construction activities due to construction of an electric steel-making complex at LLC "Metallurgical factory "Dniprostal", a coal crusher at OJSC "Heidelberg Cement of Ukraine" (Kryvyi Rig), as well as work related to repair and laying of railways at the "North Metallurgical enrichment plant (MEC)" and "Central MEC". Overall, more than 60% of the total construction volume was performed by construction companies from 5 regions of the country (Kyiv, Kharkiv, Poltava, Donetsk and Dnipropetrovsk Oblasts). The volume of the construction work performed in the Ukraine in 2010 is characterized by the type of construction activity as shown in Annex 13. Reduction in construction volumes in January 2010 is mostly attributed to the decline in volumes by companies involved in construction of buildings, as they represent 80.0% of the construction activity. Companies involved in other civil works, such as construction of bridges, tunnels, and underground structures also contributed to the overall decline. At the same time, construction volume of companies engaged in the construction of power generation, mining and processing industries increased by 42.6%, and the construction volume of main pipelines, communication and power supply networks increased by 6.8%. As estimated by the Chairman of National Realtors’ Board of Ukraine, the average price of 1 m2 of housing in the primary market is 1,100 EUR, and in the secondary market – 900 EUR. There is no official data on the quantity of the thermo-modernization works of residential buildings. Similarly, the available statistical data does not allow for one to estimate the fraction of housing floor area in the total floor area within the existing buildings in the Ukraine. 2.1.4 Energy Consumption in Ukraine Compared to any other separate sector in the Ukraine, the residential sector is one of the largest consumers of energy, representing about 29.7% of the total final consumption (TFC) in 2008 with 272 million MWh, or 23.4 Mtoe. This figures did not fluctuate significantly over the past 10 years and the share of the residential sector in TFC remained around 30 % (or about 24 Mtoe) for every year following 2001 (Source IEA, data for 2002-2008). Consequently, in absence of the data for the most current year, the constant pattern of residential sector consumption allows the use of 2008 as a baseline year for further analyses. The share of natural gas in the final residential consumption grew from 35% of the total consumption in 1993 to 55% in 2004 and 59 % in 2008. This increase in consumption is likely driven by the low price of natural gas. The remaining share of the heating of the residential sector is covered by district heat supply (19 %), electricity (11%), coal (6%), oil (3%), and renewable resources including waste (2 %). Official statistics on the energy use in Ukraine do not include information on energy consumption by residential sector. Only limited information on heat supply for the residential buildings by heat- only boiler houses exists, however it does not provide any information on the distribution of heat consumption for space heating or water heating, or information on heat consumption by specific categories of buildings. The 272 million MWh TFC is consumed by the residential building stock of 1,066 million m2. The energy consumption of the residential buildings is provided by sources listed in Exhibit 6 below:
Framework Contract FC474/EBSF-2010-08-124F 25 Exhibit 6: Energy consumption by Residential Sector in Ukraine, 2008
Energy Source ktoe MWh % Coal and Peat 1,407 16,363,410 6 Oil Products 667 7,757,210 3 Gas 13,822 160,749,860 59 Combustible Renewable and Waste 422 4,907,860 2 Electricity 2,674 31,098,620 11 Heat 4,403 51,206,890 19 Total 23,394 272,072,220 100 Source: IEA, Energy statistics, 2008 Energy balance for Ukraine In addition to information provided by the IEA, the Ministry of Housing and Communal Services of Ukraine provided data on the production and sale of heat from boilers-only and in the regions broken down by urban and rural areas. Detail data for 2008 is provided in Annex 14, Annex 15 and Annex 16, and for 2009 in Annex 17, Annex 18 and Annex 19. The total heat generated by local boilers and heat received from other sources consists of heat provided to consumers, heat for the plant’s own consumption and loses. Heat from boiler houses is delivered to consumers (population, for communal and household needs, for production needs) and to other enterprises. The available data indicate that approximately 86% of the heat produced by the district heating boilers is sold to the population, approximately 11% is consumed by the boiler plants for their own needs, and approximately 3% are regarded as losses. The development of key indicators of production and supply of heat in boiler houses in the Ukraine during the period of 1997-2009 is provided in Annex 20. The data presented for recent years shows a trend towards a gradual reduction of heat consumption and consequently lower heat production. Thus, in comparison with 1997, 40% less heat was produced and 50% less heat was supplied to the final users. Heat and electric power consumption by industry and by non-residential users in the Ukraine in 2008 is presented in Annex 21, Annex 22 and Annex 23. The level of utilization of other energy resources in 2008 is presented in Annex 24 and Annex 25. Information on metering equipment in the housing stock is provided in Annex 26. Considering the lack of sufficient information from official statistic and from other resources for residential stock energy consumption in Ukraine, energy consumption by representative buildings in all four climatic zones covering Ukraine was developed using energy consumption computer modelling7 performed in accordance with the methodology provided by EN ISO 13790. The results of modelling and iteration that correlate the building stock distribution statistics versus the final energy balance and software simulations results are presented in Annex 32. The computer models were using the thermal characteristics of representative buildings, building age, type and meteorological data for all four climatic zones in the Ukraine. Additional information on developing baseline consumption for energy saving potential assessment is provided in Section 2.3 of this report. Summary results are presented in the Exhibit 7:
7 EAB software developed by ENSI International was used for the modeling
Framework Contract FC474/EBSF-2010-08-124F 26 Exhibit 7: Baseline energy consumption in residential buildings in Ukraine
Buildings Zone I Zone II Zone III Zone IV Residential sector, specific annual energy consumption, 209.6 – 326.5 187.5 - 294.3 148.4 - 261.2 139.0 – 226.3 kWh/m2 year Residential sector, annual 179,356,307 56,465,521 29,252,114 7,194,799 energy consumption, MWh Grand total, MWh, rounded 272,200,000*
* Deviation from the baseline statistic is less than 0.1%. The baseline energy consumption for the residential sector in the Ukraine is based on the statistical data of actual energy use in the residential sector as available from IEA, Energy statistics, 2008 Energy balance for Ukraine. This statistics do not reflect the actual indoor (dis)comfort and operation of building services, which very often in Ukrainian residential buildings do not correspond to normal comfort level. The reality is that during the cold period, apartments are often under-heated, which causes “unwilling energy saving”. Should normalized indoor climate and building services be considered, the baseline energy consumption would very likely increase by 50-100%. This assumption can be partially confirmed by the IEA Energy Policy Review of Ukraine for 2006, where statistics show a reduction of energy consumption in the residential sector of 50% during the period 1993 - 2004, which most probably was achieved at the expense of the low indoor comfort, not by energy performance improvement of buildings.
2.2 REVIEW OF TARIFFS 2.2.1 District Heating The weighted average tariff for district heating services in the Ukraine in 2009 was 198 UAH/MWh (229.8 UAH/Gcal) or approx 18 EUR8/MWh. Among the customer categories, the highest tariff in 2009 was for budgetary customers at 371 UAH/MWh (432.01 UAH/Gcal) or approximately 34 EUR/MWh. The tariff for “other” (non-budgetary, non-residential) customers in 2009 was 338 UAH/MWh (393.7 UAH/Gcal) or approximately 31 EUR/MWh. A much lower average tariff was set for residential customers: 153 UAH/MWh (179.45 UAH/Gcal) or approximately 14 EUR/MWh in 2009, and 220 UAH/MWh (approximately 20 EUR/MWh) in the beginning of 2011. Detailed information on the DH tariffs is provided in Annex 27. The trend of the weighted average tariff for district heating in Ukraine, as presented in Exhibit 8 shows that since 2005 that the tariffs have grown by 251%. The highest growth of 48% per year was in 2007, when the weighted average tariff rose from 89.73 to 133.22 UAH/GCal (from 13 to 19.3 EUR/GCal). If converted into Euro denomination, the weighted average tariff for district heating since 2005 has grown from 10.2 to 21.2 EUR/Gcal. This constitutes an increase by 107%. By customer categories, the highest growth since 2002 can be observed for the average tariff on district heating services for budgetary customers, which grew by 349% in Ukrainian currency. Since 2002 the tariff for budgetary customers has been significantly higher than for the residential customers, and since 2005 has remained the highest tariff of the customer categories.
8 In this section the conversion of tariff values from UAH to Euro has been done using the average exchange rate for the corresponding period, as published on the website of the National Bank of Ukraine www.bank.gov.ua
Framework Contract FC474/EBSF-2010-08-124F 27 For the past 5 years the tariff for budgetary customers has remained significantly higher than the weighted average tariff. .Exhibit 8: Heat tariff trends in district heating systems in Ukraine
400
350
300 l
a 250 c G / H
A 200 U
150
100
50
0 2002 2003 2004 2005 2006 2007 2008 2009
Weighted average Residents Budgetery Others
2002 – 2009, UAH/Gcal; Source [29] For residential customers, the average tariff for heat supply has grown in Ukrainian currency by 184% since 2002. However, it should be noted that in terms of hard currency (EUR), the heat tariffs increased in average by 70% since 2002. The highest growth occurred in 2007, when the tariff rose by 43% in going from 80.77 to 115.2 UAH/Gcal (from 11,7 to 16,7 EUR/Gcal). Since 2002 the tariff on district heating for residential customers has been the lowest among all the customer categories. The residential customer category is the only customer category where the tariff remained below the weighted average tariff. As can be seen from Exhibit 9, when comparing the regions of the Ukraine, the highest operational costs are in Zakarpatska oblast (533.52 UAH/Gcal or 49 EUR/Gcal), the lowest are in Mykolayivska oblast (215.46 UAH/Gcal or 19 EUR/Gcal). The highest heat tariffs for population are observed in Zakarpatska oblast (335.69 UAH/Gcal or approx. 30 EUR/Gcal), Ivano-Frankivska oblast (297.92 UAH/Gcal or 27 EUR/Gcal) and Chernivecka oblast (292.13 UAH/Gcal or approximately 26 EUR/Gcal). The lowest tariffs can be seen in the city of Kyiv (148.95 UAH/Gcal or approximately 14 EUR/ GCal), city of Sevastopol (186.76 UAH/Gcal or approximately 17 EUR/Gcal), and in Rivenska oblast (196.24 UAH/Gcal or approximately 18 EUR/Gcal.). Comparing heat prices in the Ukraine with heat prices, for instance, in Bulgaria (0.05 EUR/kWh) - the prices in the Ukraine are on average 2.5 times lower. If compared with Germany – the Ukrainian prices are 3.5 times lower. In terms of cost coverage, the tariff in Ukraine does not cover the operational costs in the majority of regions. Only in the single region of the Chernivecka oblast does the tariff cover operational costs. Operational costs are least covered by tariffs in the following regions: city of Sevastopol oblast (where the tariff is below operational costs by 45%), city of Kyiv (below costs by 44%), and Zakarpatska oblast (below costs by 37%).
Framework Contract FC474/EBSF-2010-08-124F 28 Exhibit 9: Tariff and production costs of heat supply by the region
Zakarpatska 335.69 533.52 Ivano-Frankivska 297.92 352.67
c. Sevastopol 186.76 338.59 Donecka 264.70 326.35 Kirovogradska 260.65 325.65 Khersonska 297.34 322.29
Lvivska 285.89 320.09 Dnipropetrovska 254.32 318.42 Luganska 257.44 318.29
Odeska 300.68 318.12 Crimean AR 256.18 314.70 Vinnitska 279.64 304.54
Sumska 285.79 301.23 Volynska 268.67 296.45 Cherkaska 270.14 288.32 Zhytomyrska 236.30 283.03
Chernigivska 250.72 278.36 Chernivecka 292.13 273.07 Ternopilska 253.83 270.56
Khmelnytska 239.27 267.85 c. Kyiv 148.95 265.41 Poltavska 243.15 261.49
Kyivska 234.69 256.83 Kharkivska 239.41 255.91 Zaporizhska 231.43 233.70 Rivenska 196.24 218.58
Mykolayivska 208.93 215.46
0 100 200 300 400 500
Weighted average tariff Operational Costs
2009, UAH/Gcal; Source [29] The build up of average operational costs of district heating services in the Ukraine is provided in Exhibit 10. The most significant operational cost component is the fuel costs at 53% of all the operational costs. The next highest value is remuneration of labour, which constitutes 14% of the total operational costs. These two categories compose the majority of the operational costs (67% altogether), and as such have the highest influence on the financial state of the district heating enterprises of Ukraine. Out of the rest, the largest operational cost components are electricity costs (7%), other operational costs (6%), purchased heat (5%), social charges (5%). Below the value of 5% are other material costs (4%), depreciation (3%), and purchased water (2%). Exhibit 10: Structure of average production cost of heat supply in 2009
Other material costs; 4% Social charges; 5% Purchased w ater; 2% Remuneration of labour; 14% Amortization; 3% Purchased heat; 5% Other operation costs; Electricity; 7% 6%
Fuel; 53%
Source [29] Information about responsible bodies for establishing and approving of the heat tariffs for population of Ukraine is provided in Section 4.
Framework Contract FC474/EBSF-2010-08-124F 29 2.2.2 Electricity Tariffs for electricity for the population in the Ukraine vary depending on a number of factors: on the availability of district heating in the area, location of the service (e.g., rural areas), and installation of electric cooking stoves. The tariffs vary from 0.18 UAH/kWh to 0.24 UAH/kWh with an average of 0.22 UAH/kWh (0.02 EUR/kWh) which is about 4 to 13 times lower than in the EU. For example, in Bulgaria the price of electricity for households is approximately EUR 0.08 per kWh, which is one of the cheapest prices in EU, while the most expensive EU Member State, like Denmark, has the price 0.27 EUR/kWh. Average electricity price for households in EU-27 is 0.17 EUR/kWh. The electricity prices in the Ukraine are regulated by the National Electricity Regulatory Commission of Ukraine (NERC). The electricity prices for residential customers are set pursuant to the Decree of NERC #309 from 10.03.99. Since 1999, there have been three (3) amendments to the mentioned decree, which resulted in a raise of electricity prices. Altogether the electricity prices have risen by 56% since 1999. The Decree #309 from 10.03.99 has defined seven (7) residential customer sub-categories and has set different prices for each of the sub-category. With an amendment to the Decree #309, the NERC has raised the electricity prices for the first time in May, 2006. The prices were raised by 25% for all of the customer sub-categories. Effective from September 2006, NERC raised the electricity prices for residential customers by another 25% for all sub-categories. Another amendment was approved by NERC in 2009. Effective from December 2009, the amendment did not raise electricity prices for the existing sub-categories of residential customers, but established a new sub-category of residential customers. The last amendment was approved by NERC in 2011. Effective from February 2011, it implemented a diversified scale of prices according to the amount of electricity consumption per month. As such, for those categories that consume electricity at or below a set limit (150 kWh/month for residential consumers and residential consumers in rural areas, and 250 kWh/month for residents that live in buildings equipped with electric kitchen appliances, electric heaters, including those living in rural areas) the price was not affected by the amendment. For consumers that use more electricity than the limit mentioned, the price has been raised by 30%. A separate sub-category for each of the consumers was implemented for families with many children, foster families and foster care homes with any amount of electricity consumption. For this category of consumers, the price has not been raised by the amendment. For the three (3) consumer categories on human settlements the prices were also raised by the amendment in 2011. For each of these categories a sub-category has been implemented for family type dormitories in the corresponding area. For those sub-categories the prices have remained unchanged. If the electricity prices are converted into Euro denomination, and the latest changes of prices are considered, it can be seen that the level of their growth varies greatly depending on the consumption amounts. For all categories of consumers who use less than 150 kWh/month, the electricity prices in the last five years have decreased by 8%. For consumers who use more than 150 kWh/month, the prices have increased by 20%. Detail information on electricity tariffs is presented in Annex 28. 2.2.3 Natural Gas The natural gas price for residential customers are also set by the National Electricity Regulatory Commission of Ukraine (NERC). In 1999, NERC prices for natural gas for residential customers
Framework Contract FC474/EBSF-2010-08-124F 30 was 17.5 kop/m3 (or 0.04 EUR/m3) if gas meters were installed, and 19 kop/ m3 (0.042 EUR/m3) if gas meters were not installed. In May, 2006 the gas prices were raised for the first time since 1999 with Decree #400 by 26%, to 22 kop./m3 (with meters) and 24 kop./m3 (without meters). In terms of EUR these gas tariffs remained at the same level. There were four (4) more changes to the natural gas prices for residential customers in the same year. From July 2006, the natural gas prices were raised by another 85% (Decree # 739) to 40.7 kop./m3 (0.06 EUR/m3, with meters), and 44.4 kop./m3 (0.07 EUR/m3, without meters). In November 2006, a separate lower price in the amount of 31.5 kop./m3 (0.049 EUR/m3, with meters) and 34.5 kop./m3 (0.05 EUR/m3, without meters) was set for customers who do not use natural gas for heating purposes (Decree #1345). From January 2007, the natural gas prices for all-purpose residential customers were raised by another 70% to 68.6 kop./m3 (approximately 0.1 EUR/m3, with meters) and 75.4 kop./m3 (0.11 EUR/m3 without meters) (Decree #1672). At the same time a diverse price scale according to the amount of natural gas a customer uses per annum was established, as presented on Annex 29. Since 2007, the Ukraine was repeatedly raising the gas prices for the residents in the Ukraine. The most recent Decree (June 2010) raised the price to 72.54 kop/m3 (0.069 EUR/m3) or 0.078 UAH/kWh (0.007 EUR/kWh) for those inhabitants who consume less than 2,500 m3 of gas per year and have installed gas meters, and to 79.8 kop/m3 (0,076 EUR/m3) for those without installed gas meters. It means that the gas price for residents was increased by more than 400% since 1999. However in terms of hard currency, as for instance EUR, the in average tariffs did not change so dramatically (approximately 175%) and they are still much lower compared to what residents pay in European countries: for instance in Bulgaria it is 0.43 EUR/m3. On average the gas price for households in EU-27 is 0.054 Euro/kWh, or approximately 0.5 Euro/m3. According to the latest Decree, gas consumers who use between 2,500 – 6,000 m3 annually have a tariff of 109.8 kop/m3 (0.09 EUR/m3 ); between 6,000 – 12,000 m3 – 224.82 kop/m3 (0.2 EUR/m3 ); more than 12,000 m3 – 268.56 kop/m3 (0.23 EUR/m3 ) If the price of natural gas for residential consumers is converted into Euro denomination, its growth over the past five years has changed differently depending on the amount of consumption and availability of metering. For consumer with meters and the lowest levels of gas usage, the prices have increased from 0.027 to 0.069 EUR/m3, for those without meters – from 0.03 to 0.076 EUR/m3. This constitutes an increase of 152% for consumers with meters and of 155% for consumers without meters. For consumer with meters and the highest levels of gas usage (more than 12,000 m3 annually), the prices have increased from 0.027 to 0.255 EUR/m3, for those without meters – from 0.03 to 0.281 EUR/m3. This constitutes an increase of 831% for consumers with meters and of 844% for consumers without meters. Information about responsible bodies for establishing and approving gas tariffs for the population of Ukraine is provided in Section 4. 2.2.4 Water Supply The weighted average tariff for centralized water supply services in the Ukraine in 2009 was 1.96 UAH/m3 (0.2 EUR/m3). Among the customer categories, the highest tariff in 2009 was set for budgetary customers at 4.03 UAH/m3 (0.4 EUR/m3). A much lower average tariff was set for other customers at 1.91 UAH/m3 (approximately 0.2 EUR/m3) and residential customers at 1.85 UAH/m3 (approximately 0.2 EUR/m3). Detail information on water supply tariffs are presented in Annex 30
Framework Contract FC474/EBSF-2010-08-124F 31 The weighted average tariff for water supply in Ukraine (Figure 1.30) grew since 2005 by 161%, with an annual growth rate for the same period of 27%. The highest growth of 30% per year occurred in 2007, when the weighted average tariff rose from 0.92 to 1.2 UAH/m3 (0.13 to 0.17 EUR/m3). By customer categories, the highest growth since 2002 can be observed for the average tariff on water supply for residential customers, which has grown by 236%. The highest growth was observed in 2007, when the tariff rose by 39% from 0.78 to 1.08 UAH/m3 (0.11 to 0.15 EUR/m3). In 2005 the tariff for residential customers declined by 15% from 0.72 to 0.61 UAH/m3. The tariff for residential customers has been lower than the other customer categories for the past 8 years, and has constantly remained below the level of the weighted average tariff for the Ukraine. The trend of weighted average growth is shown in Exhibit 11. Exhibit 11: Water supply tariff trends in Ukraine
4
3.5
3
. 2.5 m . b u c
/ 2 H A U 1.5
1
0.5
0 2002 2003 2004 2005 2006 2007 2008 2009
Weighted average Residents Budgetery Others
2002 – 2009, UAH/m3; Source [29] For budgetary customers, average tariff on water supply has grown by 222% since 2002. The highest growth was observed in 2009 when the tariff rose by 30% from 3.11 to 4.03 UAH/m3 (0.31 to 0.4 EUR/m3). In 2005 the tariff for budgetary customers declined by 12% from 1.92 to 1.69 UAH/m3. Prior to 2005 the tariff for budgetary customers was significantly higher than for residential customers, and since 2005 has remained significantly higher than the tariffs for all the other customer categories. For other customers, average tariff on water supply has grown by 23% since 2002. The highest growth was observed in 2008 when the tariff rose by 31% from 1.22 to 1.59 UAH/m3 (0.14 to 0.19 EUR/m3). In 2005, the tariff for other customers declined by 59% from 2.16 to 0.89 UAH/m3 (0.33 to 0.13). Prior to 2005 the tariff on water supply for other customer was the highest among all the customer categories. Since 2005 the tariff has been close to the weighted average. As can be seen from Exhibit 12 at the end of 2009, when comparing regions of the Ukraine, the highest operational costs per unit of service sold are in Lugansk oblast (4.55 UAH/m3 or approximately 0.45 EUR/m3), the lowest are in Dnipropetrovsk oblast (1.1 UAH/m3 or approximately 0.11 EUR/m3). The highest tariffs can be observed in Chernivtsi (3.57 UAH/m3 or approximately 0.36 EUR/m3), Lugansk (3.51 UAH/m3 or approximately 0.35 EUR/m3) oblasts and in the city of Sevastopol (3.14 UAH/m3 or approximately 0.31 EUR/m3). The lowest tariffs are in Dnipropetrovska oblast (1.06 UAH/m3 or approximately 0.12 EUR/m3) and in the city of Kyiv (1.35 UAH/m3 or approximately 0.14 EUR/m3). In Europe water tariffs differ significantly from country to country - from 1 EUR/m3 to 3,5 EUR/m3. In terms of cost coverage, in the majority of Ukrainian regions the tariffs do not cover operational costs. Only in 2 regions do the tariffs cover operational costs: Rivne and Odesa oblast.
Framework Contract FC474/EBSF-2010-08-124F 32 Operational costs are least covered by tariffs in the following regions: Zakarpattia oblast (where the tariff is below operational costs by 25%), Donetsk oblast (by 24%), Lugansk and Khmelnytsky oblast (by 23%). Exhibit 12: Tariff and production costs of water by the region
Luganska 3.51 4.55 Chernivecka 3.57 3.92 Zakarpatska 2.88 3.85 Donecka 2.80 3.68 Kirovogradska 2.98 3.49 c. Sevastopol 3.14 3.33 Ivano-Frankivska 2.42 2.91 Odeska 2.90 2.87 Kyivska 2.45 2.85 Crimean AR 2.62 2.84 Poltavska 2.55 2.77 Zaporizhska 2.67 2.70 Lvivska 2.07 2.66 Khmelnytska 2.05 2.66 Zhytomyrska 2.13 2.61 Kharkivska 2.43 2.54 Cherkaska 2.40 2.52 Mykolayivska 2.03 2.46 Sumska 2.14 2.36 Chernigivska 2.02 2.21 Vinnitska 1.99 2.17 Rivenska 2.15 2.09 Ternopilska 1.93 2.07 Khersonska 1.99 2.06 Volynska 1.76 1.93 c. Kyiv 1.35 1.52 Dnipropetrovska 1.06 1.10
0.00 1.00 2.00 3.00 4.00 Weighted average tariff Operational Costs
2009, UAH/m3; Source [29] The cost components of the average operational cost of water supply services in the Ukraine is provided in Exhibit 13. The largest operational cost components belong to electricity costs, which constitute 26% of the total operational costs, and to labour costs, which constitute 24%, other material costs constitute 14%, purchased water – 13%, labour related social charges – 9%, other operational costs – 8%, and depreciation – 7%. Exhibit 13: Structure of average production cost of water supply in 2009
Other operation costs; 8%
Amortization; 7% Electricity; 26% Social charges; 9%
Purchased water; 13% Remuneration of labour; 24% Other material costs; 14%
Source [29]
Framework Contract FC474/EBSF-2010-08-124F 33 Information about responsible bodies for establishing and approving of the water supply tariffs for population of Ukraine is provided in Section 4. 2.2.5 Wastewater Services As can be seen from Annex 31, the weighted average tariff for wastewater services in the Ukraine in 2009 was 1.81 UAH/m3 (0.16 EUR/m3). Among the customer categories, the highest tariff in 2009 was set for other customers at 3.14 UAH/m3 (0.3 EUR/m3). The tariff for budgetary customers in 2009 was 3.09 UAH/m3 (0.3 EUR/m3). A much lower average tariff was set for residential customers at 1.32 UAH/m3 (0.1 EUR/m3). The trend of the weighted average tariff for wastewater treatment in Ukraine, as presented in Exhibit 14 indicates that since 2005 the tariffs have grown by 199%. The highest growth of 37% per year was in 2007, when the weighted average tariff rose from 0.77 to 1.05 UAH/m3 (0.12 to 0.16 EUR/m3). If converted into Euro denomination, the weighted average tariff for wastewater services since 2005 has grown from 0.09 to 0.17 EUR/m3, or increased by 78%. By customer categories, the highest growth since 2002 is observed for the average tariff on wastewater services for budgetary customers, which grew by 267% in Ukrainian currency. The highest growth can be observed in 2006, when the tariff rose by 39% from 1.03 to 1.43 UAH/m3 (0.16 to 0.22 EUR/m3). Since 2002 the tariff for budgetary customers has been significantly higher than for residential customers. For residential customers, the average tariff on wastewater services has grown in Ukrainian currency by 229% since 2002. The highest growth can be seen in 2009, when the tariff rose by 46% from 0.90 to 1.32 UAH/m3 (0.08 to 0.12 EUR/m3). The tariff for residential customers has been lower than the other customer categories for the past 8 years, and has constantly remained below the level of the weighted average tariff. Exhibit 14: Waste water tariff trends in Ukraine
3
2.5
2 . m . b u c / 1.5 H A U
1
0.5
0 2002 2003 2004 2005 2006 2007 2008 2009
Weighted average Residents Budgetery Others
2009, UAH/m3; Source [29] A comparison of the regions within the Ukraine shows that the highest operational costs of wastewater services are in Kyivska oblast (3.43 UAH/m3 or approximately 0.32 EUR/m3), while the lowest are in the city of Kyiv (1.26 UAH/m3 or approximately 0.12 EUR/m3). The highest tariffs can be observed in Luganska (2.88 UAH/m3 or approximately 0.26 EUR/m3) and Kyivska (2.81 UAH/m3 or approximately 0.26 EUR/m3) oblasts. The lowest tariffs are in the city of Kyiv (1.02 UAH/m3 or approximately 0.1 EUR/m3) and in Lvivska oblast (1.36 UAH/m3 or approximately 0.1 EUR/m3). In terms of cost coverage, in the majority of regions the tariff does not cover the operational costs. Only in the following four (4) regions does the tariff cover operational costs: Kharkivska, Cherkaska, Zaporizhska and Luganska oblast. Operational costs
Framework Contract FC474/EBSF-2010-08-124F 34 are least covered by tariffs in the following regions: Ivano-Frankivska oblast (where the tariff is below operational costs by 30%), Poltavska oblast (by 20%), and in the city of Kyiv (by 19%). The Exhibit 15 shows the tariff and the production cost in all regions in 2009. Exhibit 15: Tariff and production costs of waste water by the region
Kyivska 2.81 3.43 Kirovogradska 2.63 3.17
Khersonska 2.55 2.83 Luganska 2.88 2.75 Rivenska 2.38 2.74
Poltavska 2.16 2.70 Zhytomyrska 2.27 2.68 Sumska 2.19 2.53
Ivano-Frankivska 1.76 2.50 Zakarpatska 1.90 2.29 Khmelnytska 1.94 2.23
Donecka 2.15 2.22 Odeska 2.15 2.20 Chernigivska 1.88 2.18
Crimean AR 1.93 2.13 Zaporizhska 2.08 2.09 Mykolayivska 1.74 2.03
Cherkaska 2.12 2.02 Ternopilska 1.93 1.95 Volynska 1.79 1.89
Vinnitska 1.73 1.88 Chernivecka 1.73 1.88 Dnipropetrovska 1.69 1.79
c. Sevastopol 1.61 1.75 Kharkivska 1.83 1.72 Lvivska 1.36 1.49
c. Kyiv 1.02 1.26
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50
Weighted average tariff Operational Costs
2009, UAH/m3; Source [29] The cost components for the average operational costs of waste water supply services in Ukraine is provided in Exhibit 16. The highest operational cost component belongs to labour costs, which constitute 33% of the total operational cost, and to electricity costs, which constitute 22%. Other costs contribute to the average operational cost as follows: other material costs - 13%, labour related social charges – 12%, other operational costs – 10%, and depreciation – 9%. Exhibit 16: Structure of average processing cost of waste water in 2009
Other operation costs; 10% Electricity; 22% Amortization; 9% Purchased water; 0%
Social charges; 12% Other material costs; 13%
Remuneration of labour; 33%
Source [29]
Framework Contract FC474/EBSF-2010-08-124F 35 2.2.6 Summary of Tariff Policies In conclusion, a review of energy tariffs provides information on current rates (tariffs) which are in most cases lower than the production cost. This will be a significant factor during the process of bringing the tariffs in line with the reality and will have a significant impact on the improvement of energy utilization efficiency in residential housing, similarly to what happened in Slovakia. Low prices of electricity and gas for the residential sector were not in line with the cost of production, transportation and distribution and thus did not allow the energy companies proper asset renovation and investment into the environmental improvements. The energy tariff policy therefore required gradual changes to provide the citizens with an incentive to save energy. It is well known that the cleanest and the cheapest is the energy that does not have to be produced. The result of “under-priced” subsidized energy prices is a lack of interest and lack of incentive for citizens to save energy. This is a reason why the Ukrainian tariff policies should follow the path to undistorted tariffs by removing subsidies and to bring the tariffs up to the level of full cost recovery with sufficient funds for reinvestment. Energy production companies will maintain their mostly monopolistic position within the market (as it happened in Slovakia and in other countries), thus it will be necessary to maintain regulatory policies to prevent abuse of this monopoly position. The most important part of the regulatory effort is to protect the socially vulnerable part of the population (households) who cannot afford the market prices of energy. For this part of the population, targeted direct subsidies should be applied. Currently within the scope of USAID project “Municipal Heating Reform” the assistance to the Government of Ukraine is provided to develop effective social safety net to make sure that the population would be able to pay their heat bills after the tariff rise.
2.3 ENERGY SAVING POTENTIAL IN THE HOUSING STOCK OF UKRAINE As mentioned earlier, official statistics on energy use by the residential sector is not maintained within the Ukraine, let alone the subdivision of energy use by different types of residential buildings in different climatic zones. Therefore the presented results on the energy saving potential in this report are approximate and are based on the baseline energy consumption data based on information provided by other studies in the Ukraine (IEA) and supported by energy consumption modelling of energy consumption by representative buildings in all climatic zones, projected to the entire building stock. According to the IEA energy statistics for 2008, “Energy balance for Ukraine” the total final energy consumption of the residential sector of the Ukraine in 2008 was 272 million MWh, consumed by residential building stock of 1,066 million m2. This data was used as the baseline for this study. The resulting specific energy consumption (EP – energy performance indicator) in average for the Ukraine is 255 kWh/m2 delivered energy and varies from 139 to 327 kWh/m2 depending on the type of building and climatic zone where the building is located. For instance, for climatic zone I, which is the coldest and covers the largest part of the Ukraine, the energy use can be summarized as shown in Exhibit 17: The year 1980 was selected as a milestone since in 1979 the Building Codes setting the new requirements on thermal properties of buildings were approved, even though in general the new requirements did not significantly improve the construction practices in Ukraine and the energy performance of buildings did not seem to improve. Selection of 1980 as milestone is based also on observation that construction of high rise residential buildings started to be a more frequent practice after this year. The software model of such buildings assumed that the overall structure of the building in combination with thermal bridges between wall panels was not favourable for
Framework Contract FC474/EBSF-2010-08-124F 36 improvement of energy performance; therefore the model shows slight increase in the energy consumption. In 1994 the Ministry of Construction and Architecture of Ukraine issued an Order N 247, carrying stronger requirements on thermal insulation of buildings. However, the statistical information on buildings constructed between 1995 and 2009 shows that such multi-story buildings constitute only about 4% of the total building stock (in terms of floor area) in Ukraine. Thus, this year was not considered as milestone for energy conservation analysis. Exhibit 17: Specific energy use by the Residential Buildings in Zone I Apartment blocks construction Apartment blocks Single family houses Climatic Zone I before 1980 construction after 1980 Delivered energy in Delivered energy in 2 Delivered energy in kWh/m kWh/m2 kWh/m2 Space heating (incl. vent.) 165,0 172,0 289,9 Domestic Hot Water 22,0 22,0 14,0 Lighting 10,0 10,0 10,0 Various equipment 12,6 12,6 12,6 Total 209,6 216,6 326,5 For the warmest climatic zone, Zone IV, the specific energy consumption by the residential sector is estimated to be approximately 145 kWh/m2 for the apartment building and 225 kWh/m2 for the single family house. Detailed information about baseline consumption of the residential buildings in different climatic zones of Ukraine is provided in Annex 32. The map of the Climatic Zones of Ukraine, as specified by the Ukrainian Building Codes (DBN B.2.6.-31:2006) is presented In Exhibit 18. Exhibit 18: Map of the Climatic Zones of Ukraine
Comparing the energy use with that of European countries, for example Norway – the statistic shows that the total energy use by households in the Oslo area is in average 140 – 170 kWh/m2. The Oslo climate is characterized by approximately 4,000 degree days, while for the coldest climatic zone I in the Ukraine, is characterized by 3,501 degree days. Comparing the specific energy consumption with other European country with a warmer climate, for instance Bulgaria, reveals an average specific energy consumption for the residential sector
Framework Contract FC474/EBSF-2010-08-124F 37 of 100 – 120 kWh/m2. On average, the climate of Bulgaria corresponds to the Ukrainian climatic zones III- IV. The baseline in this study is based on the data of actual energy consumption in Ukraine, which does not reflect the proper maintenance of indoor conditions and building services in the residential facilities. Very often it is the case in the Ukraine that such conditions and services are not properly maintained (and sometimes are even missing). If the proper indoor climate and services in the buildings would be assumed, the reference energy consumption in Ukrainian households would be even higher, and the baseline would increase by 50 to 100%. 2.3.1 Selection of Representative Objects Based on statistical data [1], a single story, private residential houses with an average living area of 62.5 m2 is the most common type of house in rural localities. Thus, it is considered to be a representative object for rural localities for the assessment of the potential energy saving. Urban areas have both, multi-apartments residential houses, as well as single family houses. Available official statistical sources have no information on the structural distribution of apartment buildings and single family residential houses in urban settlements, and only very general information is available. Thus, without an exhaustive new statistical effort, it is virtually impossible to exactly define the type of housing and to estimate heat consumption for space heating by the type of the housing. It is also not possible to define the percentage distribution of the typical objects compared to the total number of residential houses. This fact, in its turn, prevents a reasonable assessment of the percentage of every type of representative objects in the total amount of estimated specific costs of heating of the housing fund of urban settlements and some assumptions had to be made. Existing statistical data for Kyiv for 2004 presented in Annex 33 define the residential housing stock and its classification for multi-storey multi-apartments residential houses. According to this data, there are 12,062 multi-apartment residential houses in Kyiv, which is 36.4 % of the total amount of residential houses of Kyiv [5]. Thus, taking Kyiv data as the basis for calculations, we assume that the total amount of multi-apartment residential houses makes up approximately 30% of the number of residential houses in urban settlements overall in Ukraine. Based on the above, the following houses are considered as representative objects for calculation of specific heat consumption for heating of apartment dwellings in urban settlements: Single family house in rural area with floor size of 60 m2 5-storied residential building with 4 entrances, 6-storied residential building with one entrance, 2.3.2 Energy Saving Potential The main operating cost of the existing residential sector of the Ukraine is the cost of heating. This cost can be reduced by proper application of energy saving measures, mainly including improved thermal properties of the building envelope, new automated heat stations, thermostatic control, replacement of lighting, new high efficiency boilers on building level and other. The repair and reconstruction should be executed in accordance with the requirements of state construction norms and indicators for engineering systems providing the energy efficiency of buildings will not be lower than the minimum requirements set, as in SCN B.2.6-31 [30]. Development of the baseline heat consumption of the selected representative objects within each climatic zone in the Ukraine was carried out in accordance with the methodology provided by EN ISO 13790. Calculations produced average indicators of estimated specific consumption for different energy budget items in the building. The energy saving potential in the housing stock
Framework Contract FC474/EBSF-2010-08-124F 38 was then determined for applicable energy saving measures that will produce efficient housing stock. Average normative characteristics of maximum heat consumption for heating residential houses of urban settlements and rural localities set for every temperature operation zone of Ukraine pursuant to Ukrainian Building Codes are shown in Annex 34. The difference between the values of estimated baseline consumption and consumption after implementation of the measures determines the potential energy conservation in the housing stock. For defining quantitative characteristics and economic indicators, statistical data was used in relation to the structure of the housing stock by regions and the locality type, as well as indicators of average tariffs of Ukraine. According to the official statistics, the structure of the housing stock of Ukraine distribution by temperature zones in urban and in rural areas are illustrated in Exhibit 19 with detailed data as of January 1, 2009 shown in Annex 35, Annex 36 and Annex 37. There is a very small variation in housing stock distribution between the urban and rural areas, with differences not exceeding a few percentage points in each zone. Similarly, the variation of the housing stock living area correlates with the building stock distribution, as shown in Exhibit 20. Exhibit 19: Distribution of residential housing in climatic zones
Source [1]; Data as of 1. January 2009 Exhibit 20: Distribution of residential housing stock space in climatic zones
Distribution structure of the general space of residential houses by temperature zones of Ukraine
I 60.1%
II 23.0%
IV III 4.5% 12.4%
Source [1]; Data as of 1. January 2009 The main drawback of the official statistics is the lack of data sorted by types of residential housing. Nevertheless, based on the available statistic information, the following assumption can be made for the distribution of residential building area between the climatic zones, urban and rural buildings, different apartment blocks and single family houses as presented in Exhibit 21.
Framework Contract FC474/EBSF-2010-08-124F 39 Exhibit 21: Distribution of residential building area in Ukraine
2 Zone Building stock distribution, thousands m Zone I Zone II Zone II Total IV In urban areas 000'm2 000'm2 000'm2 000'm2 000'm2 Apartment blocks construction before 1980 251 379 80 631 48 616 14 624 395 250 Apartment blocks construction after 1980 52 710 16 907 10 194 3 066 82 877 Single family houses 131 111 42 055 25 356 7 628 206 150 Sum urban areas 435 200 139 592 84 166 25 318 684 277 In rural areas 000'm2 000'm2 000'm2 000'm2 000'm2 Apartment blocks construction before 1980 11 387 4 455 2 688 672 19 202 Apartment blocks construction after 1980 2 333 913 551 138 3 935 Single family houses 213 018 83 339 50 291 12 573 359 222 Sum rural areas 226 738 88 707 53 530 13 383 382 358 Total urban and rural 661 938 228 299 137 696 38 701 1 066 634 The technical energy saving potential that is attainable based on application of available practical and proven technical solutions regardless of the economic characteristics and market constrain, such as: insulation of walls insulation of roof installation of new energy efficient windows automatic controls for heat supply and installation of thermostatic valves energy efficient indoor lighting The results of modelling and iteration matrixes which satisfy mutually the building stock distribution statistics versus final consumption energy balance and software simulations are presented in Annex 38. The computer models utilized the thermal characteristics of representative buildings before and after the mentioned Energy Efficient measures accounting for norms, age, type and for all four climatic zones in Ukraine. The estimation of specific and final energy consumption for heating, hot water preparation, lighting and various equipment of the existing residential building stock was defined for several representative building characteristics. A summary of the results are presented in Exhibit 22. Exhibit 22: Specific energy saving potential in residential buildings in Ukraine Savings in kWh/m2: Zone I Zone II Zone II Zone IV Apartment blocks up to 7 floors construction* 97.2 81.8 54.7 53.3 Apartment blocks more than 7 floors construction** 111.6 97.8 81.8 68.9 Single family houses 173.5 152.9 131.8 105.4 * mostly before 1980 **mostly after 1980 As noted earlier in this report, these savings could increase by 50-100% if the “normalized” baseline of theoretical energy use (not actual) in the building that account for proper indoor climate and proper building services is used. Such a baseline would be accomplished if appropriate heat supply would be provided to heat apartments to the proper temperature as required by indoor quality standards.
Framework Contract FC474/EBSF-2010-08-124F 40 In terms of total technical energy saving potential, expressed in MWh and distributed between the Energy Efficient measures, apartment blocks and single family houses – the information is presented in Annex 39 and Annex 40. A summary of these annexes is provided in Exhibit 23. Exhibit 23: Technical energy saving potential for the residential buildings in Ukraine
Zone I Zone II Zone II Zone IV Total Sum savings MWh MWh MWh MWh MWh For the apartment blocks 31 687 000 8 700 250 3 685 000 1 036 700 45 109 800 For the single family houses 59 715 400 19 173 400 9 969 000 2 129 340 90 987 300 Total savings in MWh 91 402 400 27 873 650 13 654 000 3 166 040 136 096 100 The distribution of these savings between the energy efficient measures is presented in Exhibit 24: Exhibit 24: Technical Energy Savings potential in residential buildings by measures
Total for Ukraine Zone I Zone II Zone II Zone IV Total Measures/Savings MWh MWh MWh MWh MWh Additional insulation of walls 31 459 667 9 872 246 4 903 306 1 175 135 47 410 354 New windows 18 382 920 4 914 563 2 108 286 509 115 25 914 884 Additional insulation of roof 17 490 317 5 496 734 2 759 613 563 310 26 309 974 New automated substation and TRV 9 991 139 2 999 030 1 457 147 353 415 14 800 732 Indoor lighting replacement 3 243 497 1 118 667 674 711 189 634 5 226 509 Replacement heat generator with high efficient boiler 10 834 820 3 472 376 1 750 974 375 469 16 433 639 Total savings, Ukraine 91 402 000 27 873 650 13 654 000 3 166 040 136 096 100 The results of the calculations of technical energy saving potential show that the introduction of improvements in energy efficiency in existing residential buildings in the Ukraine and enhancing their energy efficiency will result in nearly 136 million MWh of total energy consumption reduction, which is approximately 50% from the actual baseline consumption (272 million MWh according to IEA, Energy statistics, 2008 Energy balance for Ukraine). Considering the low quality of input data based on official statistics that is lacking numerous information required for more accurate calculations, it is necessary to view the results of calculations as best estimates. However, the results should be sufficient to support the claim that the energy saving potential is very large and an effort to reduce heat consumption in residential sector is much needed. It can also be concluded that in order to make a more accurate assessment of the energy saving potential, a detailed analysis of housing stock by regions of Ukraine would be required. Investment potential, associated with this theoretical energy saving potential can be summarized as shown in Exhibit 25:
Framework Contract FC474/EBSF-2010-08-124F 41 Exhibit 25: Investments associated with Technical Energy Savings potential in residential buildings by measures Total for Ukraine Total Total Measures/Savings mln UAH mln EUR Additional insulation of walls 173 860 14 700 New windows 121 600 10 300 Additional insulation of roof 101 800 8 600 New automated substation and TRV 19 700 1 700 Indoor lighting replacement 2 700 200 Replacement heat generator with high 75 400 6 400 efficient boiler Total Investments, Ukraine 495 060 41 900
2.3.3 Assessment of Energy Saving Economic and Market Potential Economic energy saving potential is defined as the energy saving potential which can be achieved when economic parameters of the energy saving measures are considered. In general, this means that not all the technical potential available in energy savings measures can be achieved due to multiple reasons. When, for example a simple payback of all the applied measures would be five years, then theoretically the total investment in a single year to accomplish the technical energy saving potential would be about 29.9 billion UAH (€2.6 billion). The other issue hindering investment in energy efficiency is that the heat tariffs are still being held below the production cost, thus making investment in energy efficiency less economically attractive (or even economically unattractive under the current tariffs in Ukraine). Comparing heat prices in the Ukraine with heat prices, for instance, in Bulgaria - where energy efficiency measures are being actively implemented in residential sector, the prices in the Ukraine in average are 2.5 times lower. With regard to the electricity prices, they are nearly 4 times lower compared to Bulgaria. For the purpose of estimating the current monetary value of heat savings, the average cost of heat and heat from gas can be set at 220 UAH (€19.5) per MWh and for electricity at 224 UAH (€19.8) per MWh. The electricity prices are nearly the same in terms of kWh as for the heat. With the estimated technical energy saving potential of 136 million MWh per year, the monetary savings based on technical saving potential would be about 29.9 billion UAH (€ 2.6 billion). In
terms of CO2 reduction potential – this will correspond to 39 million tCO2. Obviously, this is only a theoretical value, as the reality in implementing the energy efficiency potential will be substantially lower, determined by the economic performance of energy efficiency measures and by what is realistically possible to implement under the current market environment. Economic energy saving potential in this study was defined as attainable energy savings by measures that produce reasonable payback of the investment of not more than 10 years. Considering the current low heat, gas, and electricity tariffs, combined with “regular” market prices of energy saving measures, only a few energy savings measures are economically feasible and worth considering for an investment. Among the measures that are economically feasible under the current conditions are, for example, modern district heating substations with automatic regulation of heat supply, new automated high efficiency boilers on building level,
Framework Contract FC474/EBSF-2010-08-124F 42 temperature controls in the building/apartment, and high efficiency lighting. Based on the available data and information, it is estimated that the economic energy savings potential would be approx. 32.6 million MWh per year, resulting in monetary savings of approx. 7.18 billion
UAH (€ 624 million). In terms of CO2 reduction potential this will correspond to 11.1 million
tCO2 Based on the experience from other Eastern European countries, such as the Czech Republic, Slovakia and Poland, the energy efficiency measures will be introduced gradually over several years (a 5 - 10 year horizon is likely) and the penetration rate will be at relatively low level. Penetration rate of implementing the measures will be influenced by the availability of funds, availability and pricing of the energy conservation materials and equipment (as applicable) and public knowledge of the investment benefits and knowledge of implementation process. The role of the government and international donors and IFI’s is very important in the later. It was estimated that the economics and market situation will have an impact on implementation that will follow the trend presented in Exhibit 26. Exhibit 26: Market energy saving potential estimates
Based on Technical Potential (136 mln MWh)
MWh/year Value of savings, Year Percent Percent Investment saved, cumulative each year cumulative EUR cumulative EUR/year 1st 0.5 % 0.5 % 680 000 13 600 000 200 000 000 2nd 1 % 1.5 % 2 040 000 40 800 000 400 000 000 3rd 2 % 3.5 % 4 760 000 95 200 000 800 000 000 4th 2 % 5.5 % 7 480 000 149 600 000 800 000 000 5th 3 % 8,5 % 11 560 000 231 200 000 1 200 000 000
In general the following measures are considered for market potential: New automated substation Thermostatic valves Indoor lighting replacement New high efficient boilers New energy efficient windows Insulation of walls Insulation of roof Economical benefits from these measures will very depending on location and type of building where they will be applied, as well as depending on combination of measures into the project package. Information about economical benefits from these measures are presented in Chapter 6 “Financing Models”. If to make an analysis of the economical benefits of energy efficient measures in the Ukrainian residential market, most of the measures (especially related to improvement of the building envelope) show quite long simple payback period. As an example, the results for the model of typical apartment block in Climatic Zone I is presented in Exhibit 27:
Framework Contract FC474/EBSF-2010-08-124F 43 Exhibit 27: Energy Saving potential and its economical benefits for the apartment building connected to district heating
EE Measures Investments per Net savings Pay- heated area per heated area back
[UAH/m2] [EUR/m2] [kWh/m2 UAH /m2.year] [EUR [years] ] /m2.year] 1. Additional insulation of walls 143.7 12.3 32.8 7.2 0.6 19.9 2. New windows 91.7 7.9 27.0 5.9 0.5 15.4 3. Additional insulation of roof 80.0 6.9 12.8 2.8 0.3 28.3 4. New automated substation 23.0 2.0 9.8 2.2 0.2 10.7 5. Thermostatic valves 14.3 1.2 9.8 2.2 0.2 6.6 6. Indoor lighting replacement 2.1 0.2 4.9 1.1 0.1 2.0 Total 354.8 30.3 97.2 21.4 1.9 16.6 It means that under current tariff conditions it will take quite a long period of time before the investments into energy efficiency measures are repaid due to the energy savings. As the tariffs most probably will increase significantly in the future, the Government of Ukraine might be interested to provide incentives to the population to invest in energy efficiency measures by meantime. Such incentives can be arranged through the provision of grants to cover part of the investment costs, especially where related to the investments into improvement of building envelopes, where the payback periods are too long to get the inhabitants’ interest for such investments. More information about economic benefits for different measures under different models is given in Chapter 6 “Financing Models”.
2.4 LEGISLATION ON ENERGY EFFICIENCY IN BUILDINGS, EPBD TRANSPOSITION In 2002, the EU adopted the Energy Performance of Buildings Directive No 2002/91/EC (EPBD), which set minimum efficiency standards for both residential and commercial buildings. The EPBD was revised in May 2010.(2010/31/EU). In September 2010 the Ukraine became a Contracting Party to the Energy Community Treaty and committed to implement relevant EU Directives, including the EPBD. This Directive mainly focuses on the following topics: the general framework for a methodology of calculation of the integrated energy performance of buildings, the application of minimum requirements on the energy performance of new buildings, the application of minimum requirements on the energy performance of large existing buildings that are subject to major renovation, energy certification of buildings, regular inspection of boilers and of air-conditioning systems in buildings and an assessment of the heating installation in which the boilers are more than 15 years old, necessity of involving independent experts for energy performance certification and drafting inspection reports.
The EU Directive requires that the member states achieve certain end results and that national authorities adopt relevant laws to meet these goals. It is the responsibility of individual member
Framework Contract FC474/EBSF-2010-08-124F 44 states to decide how the process will be organized (EU Directives often refer to a number of EU Standards). In the case of the EPBD, more than 50 Standards providing specifications and methods to be used are referenced. These EN Standards propose different methods and approaches allowing certain flexibility for National Authorities to select the most suitable approach for their respective country. Therefore, National Authorities of the Member States are supposed to reflect these EN Standards into their National Building Regulations depending on accepted calculation methods, accepted way of expression of minimum energy performance requirements, and energy performance certificates, as well as accepted procedures for inspection of boilers, heating systems, ventilation, and air conditioning.
2.4.1 Main Ukrainian legislation and regulations related to energy efficiency in buildings The Law on Energy Savings, enacted in 1994, defined the strategy of technical development in this sector as well as the main principles of the state policy for energy savings. However this Law has quite a declarative character and does not describe solution mechanisms for achieving the goals. Currently the Government of the Ukraine is preparing a revision of the Law “On Efficient Utilization of Fuel and Energy Resources.” It should be noted that since 2010 several Draft Laws on Energy Efficiency in Buildings intending to reflect the EPBD requirements were submitted to the Parliament by different parties for approval, and none of the versions has yet to be adopted. The Ministry of Housing and Municipal Economy of the Ukraine, being one of the main responsible authorities for the building stock in the Ukraine, also developed its Draft Law on Energy Efficiency in Buildings and submitted it for approval. However, it has been returned by the Cabinet of Ministries for further development. In terms of Building Codes, the first step to improve energy efficiency in buildings in the Ukraine was made in 1993–1995 when normative thermal requirements to building envelopes were significantly increased. In 2006-2007 the new standards for building envelope (ДБН В.2.6- 31:2006 “Building Structures Thermal Insulation of the Buildings”), were introduced and are enforced since 1.04.2007. After introduction of standard “ДБН В.2.6-31” during 2008-2010, the Ukraine started preparing a new set of norms and regulations that are supporting implementation of energy efficiency. New standards introduced requirements on energy efficiency in buildings, as well as classification of buildings with energy performance rates and procedures for issuing energy passports of buildings for new or reconstructed buildings. The new standards introduced a flexible approach of designing thermal protection of building envelope based on minimum requirements for the building elements or total maximum specific energy use for heating. However, the current Ukrainian regulations do not reflect the EN Standards and do not fully support implementation of the EPBD. Therefore a lot of effort is required from the Ukrainian Government to harmonize its legislative basis with the EPBD, including secondary legislation and regulations. In general, energy certification procedures for buildings are not yet established in the Ukraine. Thus, it is necessary to develop corresponding normative documents that will establish methodological principles, procedures, and legislation basis for energy certification of buildings, including but not limited to selection of energy rating, selection of calculations method/measurement method with adjustments, adjustment of national reference values according to newly accepted calculation method, defining procedures and rules for energy auditing and certification of buildings, defining national conversion factors (for primary energy and CO2 emissions), defining training requirements for certification experts and energy auditors, defining inventory of certified auditors, buildings, benchmarks, progress reporting, etc.
Framework Contract FC474/EBSF-2010-08-124F 45 Also, the Ukraine needs regulations for inspection of heating and air-conditioning systems in buildings, as well as relevant framework for independent verification of such inspections and energy performance certificates being performed by qualified experts.
It is highly recommended that the following assistance is provided to the Ministry to ensure gradual transposition of the EPBD requirements to Ukrainian legislation and building regulation: Support the Ministry in further development of the Law on Energy Performance of Buildings, to reflect the EPBD articles. Introduce calculation methods for energy need and energy use that follows EU methodologies, as indicated in EN ISO 13790 “Energy Performance of Buildings – Calculation of energy use for space heating and cooling” and EN 15603 “Energy performance of buildings – overall energy use and definition of energy ratings”, together with all necessary supportive EN Standards. Recalculate minimal energy performance requirements (currently presented in “ДБН В.2.6 – 31:2006”) in accordance with the new calculation methodology, taking into account modifications to the minimal requirements on building envelope and building technical systems and components, as mentioned in “Immediate” recommendations. Conduct a number of capacity building activities to enhance working knowledge of national building authorities and to raise awareness of the approach and impact of the revised standards. The next steps in supporting transposition of EPBD in the Ukraine could involve: Gradual acceptance of EU standards supporting the EPBD (in ventilation; domestic hot water, heat, and power generation; lighting; cooling; etc.). These accepted standards shall have corresponding national annexes or specifications. Energy Performance requirements for these systems will have to be developed. Introduce regulations stipulating main input parameters for feasibility assessment of energy efficiency solutions, with intention to establish a common basis for comparison of economics of energy savings interventions. Introduce legislation and regulatory basis for obligatory inspection of heating, air conditioning, and ventilation systems with the focus on energy efficiency, as described above in EU countries according to EN 15239 on inspection of ventilation systems and in EN 15240 on inspection of air conditioning systems. Introduce obligatory requirements for application of renewable energy sources for both heat and power generation and for new construction or reconstruction, unless it can be determined that such applications are not feasible for specific objects. Revise the Ukrainian standard for thermal protection of buildings, aiming at introducing “near-zero buildings” as it is currently stipulated in the EPBD of 2010 for EU Member States. Provide capacity building activities to and raise awareness of the approach and impact of the revised standards.
Framework Contract FC474/EBSF-2010-08-124F 46 3. OWNERSHIP AND MAINTENANCE ISSUES
This section describes the issues of ownership and maintenance of multi apartment buildings, models currently used for maintenance of residential buildings and models for providing housing and communal services. It also provides comparison of the Ukrainian and Slovak management models and approaches.
3.1 FORMS OF OWNERSHIP The residential sector in Ukraine is in general comprised of residential buildings and residential premises in other-then-residential buildings. By ownership, the residential sector is classified as: State sector - residential buildings and residential premises in other buildings belonging to the state, managed and maintained by public authorities and by other entities in the cases established by law; Municipal sector - residential buildings and residential premises in other buildings belonging to territorial communities, managed and maintained by such communities and local self-governance bodies Private sector - residential buildings, or parts of buildings and apartments owned by individuals and by legal entities Adoption of the Law on Privatization9 provided basis for privatization of apartments in multi- apartment buildings, rooms in apartments and a single apartment buildings with two or more tenants. Today, the majority of apartments in multi-apartment buildings are privatized, with only a small number owned by municipalities. In absence of a “single owner” of the multi-apartment building, the management role is to be assumed by co-owners. The privatization and condominium related laws of Ukraine10 established two types of the residential sector management: Buildings without established condominiums. Management and maintenance of these buildings continues to be performed by the municipal maintenance organizations Buildings with established condominiums. Management and maintenance of these buildings is performed or organized by the co-owners.
3.2 MODELS OF OWNERSHIP AND MANAGEMENT IN RESIDENTIAL SECTOR
3.2.1 Ownership System In principle, apartment buildings consist of apartments, common use premises and structural and engineering elements (internal engineering systems, stairs, elevators etc). Before privatization, buildings were fully owned and managed by the state. By privatization, the titles to the apartments were transferred to their respective tenants who became the new owners of the apartments and also joint owners of the common spaces of the apartment building with all relevant rights and responsibilities11 including the responsibility to share the cost of repairs and maintenance of the common property, in a level according to their respective share of ownership.
9 Law of Ukraine on Privatisation of the State Residential Sector No. 2482-ХІІ of 19.06.1992. 10 Law of Ukraine on Privatisation of the State Residential Sector No. 2482-ХІІ of 19.06.1992, Law of Ukraine on Condominiums No. 2866-III of 29.11.2001. 11 Articles 368 and 369 of the Civil Code of Ukraine.
Framework Contract FC474/EBSF-2010-08-124F 47 The apartment ownership is confirmed by the title deed, while the ownership of the joint property in an apartment building does not need to be attested by any documents.12 Owners of buildings or complexes of buildings and structures can be individuals or legal entities. The Civil Code of the Ukraine establishes13 that the owners are free to possess, to use, and to dispose of their property at their discretion. All owners are ensured equal opportunity for the exercising their rights. The legislation also establishes owners responsibility to maintain their property unless another entity is assigned by agreement or by the law14 to do so. It should be noted that the owners of non-privatized apartments in apartment buildings own auxiliary premises under the same conditions as the owners of the privatized apartments.15 Thus, all apartment owners in apartment buildings are obliged to maintain the commonly owned property. Private property (apartments) is managed by its owners (individuals and legal entities). Joint property (auxiliary premises in apartment buildings, etc.) is managed by a legal entity which holds the relevant apartment building on its balance. The Ukrainian system of apartment ownership is of a dual nature with private ownership of residential and non-residential premises in residential buildings alongside with the joint ownership of the common use property as established by the Civil Code of Ukraine.
3.2.2 Owners Organization Structures For the purpose of efficient management and maintenance of their buildings, apartment owners in multi apartment buildings may establish associations or unions of individual apartment/building owners16 in a form of condominium or housing/construction association, or they may chose not to organize. One of the features of the Ukrainian system is that participation in any union or association is voluntary, as it is envisaged by the Ukrainian constitution. The law does not oblige residents to join any associations, including condominiums or any form of housing associations. Condominiums Condominiums are established for the purpose of securing and protecting the rights of its members and to ensure execution of their obligations to properly maintain and use of the indivisible, joint property, to ensure timely receipt of funds for all payments envisaged by the law and by statutory documents. Co-owners of apartment buildings which are organized in condominium assume responsibility for management and proper maintenance of their building, for establishing and maintaining procedures for members relations and dealing with each other and to support relations with producers and providers of utility services, etc. The condominium and its “general meeting” as the management body operates in accordance with the law of Ukraine and its charter approved by the general meeting. The charter establishes all the procedure for decision- making process, including decisions related to capital repair of the building and on implementation of energy efficiency measures. Housing and Construction Cooperatives
12 Constitutional Court Judgement No. 4-рп/2004 of 02.03.2004. 13 Art. 319 of the Civil Code of Ukraine. 14 Art. 22 of the Civil Code of Ukraine. 15 Constitutional Court Judgement No. 4-рп/2004 of 02.03.2004 р. 16 Law of Ukraine on Privatisation of the State Residential Sector No. 2482-ХІІ of 19.06.1992.
Framework Contract FC474/EBSF-2010-08-124F 48 Another form of association of apartment owners is the “Housing and Construction Cooperatives” (HCC) that is registered and operates on the basis of its charter approved in accordance with the HCC Model Charter17 by its general meeting of the citizens joining the cooperative. The HCC members, who have fully paid for the residential premises and their share in non-residential premises and other property share, own such premises. HCC may be reorganized into condominiums by the decision of the general meeting. Non-Organized Owners The management and maintenance of buildings without organized condominiums should also be performed by the apartment owners. Currently, buildings without organized management body are maintained by housing and maintenance organizations (HMO) – so called Zhek (HMO), selected and engaged by the local self-government. HMO is contractually required to keep the respective buildings on their balance sheet, however, in most cases no such contract exists. It is usual occurrence that while the HMO performs the regular maintenance of buildings, they mostly fail to fulfill their management role and are not capable of performing or organizing the capital repairs.
3.2.3 Land Issues Use of the land plots, where the residential buildings and adjacent territories are located, remain to be an important issue for buildings with organized and non-organized owners. The Land Code of Ukraine establishes that18 local self-government bodies provide land plots to residential housing and construction cooperatives free of charge or lease them in the size established in accordance with the city development documentation. If an apartment building is privatized, the land plot where it is located, as well as the auxiliary premises and adjacent territories may be transferred into ownership of new owners free of charge or provided to condominiums for their use. If a number of persons acquire titles to a residential building or construction, the land titles are distributed in proportion to such persons ownership rights to the building or construction.19 The land plot becomes joint property of the residential building co-owners. The ownership titles and the right to use the land plot are confirmed by a relevant state deed. The size and configuration of such land plots are defined on the basis of the city block and micro-district designs and land arrangement documentation The procedure for the use of the land plots where residential apartment buildings are located, as well as use of auxiliary premises, constructions and adjacent territories is then established by the co-owners. The law grants the apartment building co-owners an explicit right to acquire the land plots on which the residential building is located, as well as the auxiliary premises and adjacent territories. In practice, however, co-owners of residential buildings are prevented from exercising their right to acquire such land due to lack of definition of borders of the “adjacent territories”. Such land plots have not been allocated, and thus there is no technical documentation for such land plots.
17 Resolution No. 186 of the Council of Minister of the Ukrainian Soviet Socialist Republic on Approval of the Model Charter for a Residential and Construction Cooperative of 30.04.1985. 18 Art. 41 of the Land Code of Ukraine. 19 Art.120 of the Land Code of Ukraine.
Framework Contract FC474/EBSF-2010-08-124F 49 3.2.4 Conclusions Dual Ownership System The dual nature of ownership introduces certain complications to management and maintenance of the multi apartment buildings, related premises and technical equipment. This is exaggerated by the lack of technical documentation of common property and lack of legal documents to its ownership that are essential for the common property disposal process. In reality, in spite of the legislative requirements, apartment owners fail to perform their obligations and buildings continue to be managed by the local self-government bodies. One of the substantial reasons is that apartment buildings co-owners are not used to be responsible for the condition of their building and are not very active in getting involved in the management and maintenance of their building, especially when it comes to capital repairs. The second, very important reason is that the law does not define co-owners’ direct liability for poor management and maintenance of their buildings. Thus, it is impossible to force co-owners of apartment buildings to engage in a process of executing capital repairs. Decision-Making Procedure There are considerable differences in the legal bases and in a practical process between the decision making by organized co-owners of multi-apartment building and those not organized. It is indisputable fact that organized co-owners enjoy many advantages. In case of organized co-owners, the condominium association or HOA and its executive body (general meeting) is authorized to make decisions on implementation of energy efficiency measures. The rules on eligibility of the meeting to vote, required number of votes for decision to pass in regular and in important issues is set by the Model Charter. Meeting vote is based on principle of “one-member-one-vote”20. The same decision-making procedure has been established also for the Housing and construction associations. The situation in decision making process is quite different in case of non-organized owners. The law does not provide any guidance for clear decision-making procedure for the owners of residential and non-residential premises in the residential buildings that are not organized either in condominium or in other form. In principle, decision making process by non-organized co- owners should be governed by the Civil Code of Ukraine21. Civil Code states that any decision related to a joint property, including its disposal, modification or capital improvements requires agreement of all co-owners and in certain cases the agreement must be in writing and notarized. In reality, obtaining agreement on such issues is unrealistic and makes it impossible to materialize any such activity as capital repairs of the building. Capital repair fund One of the mechanisms to ensure funding for energy efficiency measures in apartment buildings is establishment of a capital repair fund. The law establishes an obligatory requirement for condominiums to set up a capital repairs fund22 to accumulate funds for repairs of the indivisible joint property and for urgent repairs of any damage that may have been caused by an accident or unforeseen circumstances. This fund may as well be used for funding capital improvements and energy efficiency measures. The assets for such funds are deposited in the condominium’s bank account and are used only for the targeted purpose. The list of the obligatory payments for maintenance and repair of the indivisible and joint property, as well as the payment procedure are established by the condominium charter. In order to ensure that the owners fulfil their obligations, the condominium is entitled to demand timely
20 Law of Ukraine on Condominiums of 29.11.2001, No. 2866-III. 21 Art.369 of the Civil Code of Ukraine. 22 Law of Ukraine on Condominiums of 29.11.2001, No. 2866-III
Framework Contract FC474/EBSF-2010-08-124F 50 and full payment of contributions to the repairs funds. Condominium is entitled to file claims with courts against the property of the owners who refuse to make timely and full payments to the repairs funds. Establishment of a capital repairs fund in the buildings with non-organized owners could help to accumulate assets to finance energy efficiency measures. The law, however, does not oblige non-organized owners to establish such fund. Lack of understanding of their responsibility for maintenance of the joint property, gives no incentive to non-organized owners to make a voluntary decision on establishment of a capital repair fund and the procedure for its replenishment. Inability to establish and operate capital repair fund in this case is exaggerated by the inability of non-organized owners to make any decisions. Land Issues The Land Code of Ukraine establishes only general rights of the owners of residential buildings to own the land plot on which the building and the adjacent territory are located. It also sets the general procedure of the land allocation, which is far too complicated. Residential building owners could better exercise their rights to a land title if there were clear and transparent procedures for the definition of borders of adjacent territories and allocation of relevant land plots and other technical documentation. In relation to the energy efficiency improvements financing, it is important to note that as the procedure for the use of the land plots should be defined by the co-owners23, the land plot owned by the residential building co-owners may be used as collateral for securing loan for capital repairs and for implementing energy efficiency measures. The law grants the right to acquire and use the land only to the co-owners organized in condominium or in other forms only. The co-owners of buildings that are not organized do not have that right.
3.3 MANAGEMENT MODELS
3.3.1 General Management Principles The law defines that housing stocks are managed by balance keepers24 and that the indivisible joint property in a residential buildings is managed by the manger. The “balance keeper” is the owner or a legal entity which keeps the relevant property on its balance sheet on the basis of a contract. Such entity maintains accounting, statistical and other data required by law, performs calculations of funds necessary for the capital and current repairs and maintenance, and performs general management of the property including its proper use as required by law25. The act of “keeping residential building on the balance sheet” is interpreted as a requirement by the law to “manage the building”. The legislative provisions suggest that there are four models for the management of apartment buildings: . Model 1. Apartment building management by housing and maintenance organization; . Model 2. Apartment building management by condominium; . Model 3. Apartment building management by managing company; . Model 4. Apartment building management by housing and construction cooperative.
3.3.2 Model 1 - Apartment Building Management by Housing and Maintenance Organization M 1.1 Description
23 Art. 42 of the Land Code of Ukraine. 24 Law of Ukraine on Condominiums of 29.11.2001, No. 2866-III 25 Law of Ukraine on Housing and Municipal Services of 24.06.2004, No. 1875-IV .
Framework Contract FC474/EBSF-2010-08-124F 51 At this time, the majority of apartment buildings in Ukraine are kept on the balance sheet of specialized municipal companies – the housing and maintenance organizations (the HMOs). Practically all buildings without organized condominiums are managed by HMOs. Supposedly, the HMOs managing the buildings based contract supported by unanimous decision (100%) of the non-organized owners. Co-owners organized in condominium or in other form may, based on decision of the general meeting, also contract with HMO to keep their building on HMO balance sheet and perform management functions. As a balance keeper, the HMO performs the following functions: Keeps the building on its balance sheet; Manages the building; Ensures proper use of residential facilities; Provides housing and communal services to the residents; Maintains the residential building and the adjacent territory. М 1.2 Decision-Making Procedure Under a general rule, the co-owners of an apartment building should make their decisions on the management and maintenance of their buildings on their own. To adopt any decision on the joint property in an apartment building with no condominiums, there is a need for 100% of the owners’ votes, which is practically impossible to achieve. As non-organized owners are not able to make decisions on their building management and maintenance, the local self-governance body appoints an HMO as a housing and communal services provider to maintain the building. In this case, the HMO only provides services, but does not manage the building. The HMO keeps the respective buildings on their balance sheet without the relevant contracts, and in absence of any legal grounds. If organized owners decide to ask an HMO to provide the above services, the decision on the balance keeping and transfer of building management functions should be done by the condominium general meeting in accordance with the procedure established by the condominium charter. After the balance keeping and management contracts are concluded between the condominium and the HMO, the decision on capital repairs should be taken by the condominium general meeting in accordance with the procedure established by law, or by the manager in accordance with the contract and the charter. M 1.3 Energy Efficiency Measures Funding Possibilities This management form makes it practically impossible to implement any energy efficiency measures. Even though the majority of residents in such buildings realize the necessity to implement energy efficient technologies, their funds are insufficient for such projects. In view of the decline of the residential facilities and the necessity of their capital repairs, expectations of funding of energy efficiency measures by HMOs would be unrealistic. In addition, the building and adjacent territory maintenance tariff does not include a capital repair component, thus preventing HMOs from collecting funds to finance capital repairs. In order to fund energy saving projects, local self-governance authorities have adopted relevant programs within the framework of the National Program for the Utilities Sector Development in 2009-2014. The financial resources, however, that can be allocated by local self-governance authorities to implement energy efficiency projects are insufficient, as such funding is rather insignificant when compared to the needs of the residential facilities. The main obstacles in an effort to obtain funding for energy efficiency measures are as follows: Absence of a realistic mechanism for the co-owners of a residential building to make decisions on the building improvements (achievement of a 100% consent is unrealistic); Absence of legislative requirements to accumulate funds by non-organized co-owners for building improvements;
Framework Contract FC474/EBSF-2010-08-124F 52 Lack of contracts between non-organized owners and balance keepers (HMOs) on the building management that may include implementation of energy saving measures.
3.3.3 Model 2 - Apartment Building Management by a Condominium M 2.1 Description A condominium is established as a legal entity for apartment building management and maintenance. After a condominium becomes a legal entity, it may: Accept the apartment building on its balance and perform management through its executive body (general meeting); Contract with the previous owner as the balance keeper for the building or its parts,; Contract with any legal entity that has a charter for such activities. In this case, the building management is based on Model 3. М 2.2 Decision-Making Procedure Condominiums are established by founding meetings which require a quorum of more than 50% of the apartment owners. No less than 2/3 of the apartment owners present at the meeting should vote to support establishment of a condominium. Decisions that concern building management and maintenance, in particular the capital repairs and energy efficiency measures, should be passed in accordance with the procedure established by the condominium charter. Should the condominium fail to choose a housing and communal services provider (maintenance, management, and provision of district heating services, hot tap water supply, cold water supply, and water sewerage) on its own, such provider is appointed by the local self- governance body in accordance with its powers established by law. M 2. 3 Energy Efficiency Measures Funding Possibilities The National Program for the Utilities Sector Development in 2009-2014 envisages funding of the energy efficiency measures in the apartment buildings that established condominiums. Under the Program, the local self-governance bodies should allocate local budget funds to implement energy saving measures. However, considering the realistic needs for capital repairs, the level of allocated and available resources is far from sufficient. Even though the law requires that condominiums establish capital repairs funds, the contributions made by the apartment co-owners to these funds are insufficient for funding the energy saving projects. Condominiums as legal entities may request a loan from a bank to fund energy saving projects; however banks require collaterals to securing the loan that a condominium cannot provide at this time. High risks of a default on a loan and lack of collateral prevent condominiums from getting loans, or at least makes it very difficult. Condominiums may also request loans from construction companies, which may fulfil the necessary repair works, including energy saving measures, with deferred payment for such works. The repayment period is rather long, and therefore the construction companies are not interested in cooperating with condominiums. The main obstacles to the attraction of funding for implementation of energy saving measures in this case include: Lack of property that can be accepted as a collateral for loans, Lack of a mechanism for enforcing payment, including impossibility of claims against debtor’s property Lack of simple, transparent mechanisms for debt collection from individual owners (both members and not members of condominiums) for the current payments and targeted contributions;
Framework Contract FC474/EBSF-2010-08-124F 53 Lack of technical documentation for the land plot where the building and the adjacent territory is located, thus inability gain ownership and to offer the land plot as collateral.
3.3.4 Model 3 – Apartment Building Management by a Managing Company М 3.1 Description An apartment building can be managed by various organizations and legal form entities. Business operators, registered in accordance with the law as legal entities, may provide apartment building management services, if they meet the following requirements: Provision of apartment building management services is part of the business operator’s business activities; The business operator holds all permits and licenses required by law. Apartment building management services may also be provided by private entrepreneurs. In this case, such entrepreneurs should mention apartment building management among the types of their business activities in their registration documents. Relations between the apartment building co-owners (owners of apartment and non-residential premises) and the manager are based on contractual principles. A model agreement governing the relations between owners of residential and non-residential premises and the manager was approved by the Cabinet of Minister of Ukraine26. The manager’s main obligations are as follows: Operation of the building and the facilities located on the adjacent territories in accordance with the contracts, standards, norms, and rules; Provision of services on maintenance of buildings and adjacent territories; Ensuring high-quality water supply and sewerage collection and heat supply services.
М 3.2 Decision-Making Procedure This management form can be used to manage their buildings both by organized and non- organized owners. To pass the functions on the building management to a manager, the organized owners should make the relevant decision in their general meeting in accordance with the procedure established by the charter. The non-organized owners should pass their decision by 100% of votes. The transfer of management functions should be done on the basis of a residential building management contract between the owners and the manager. The owners may pass either all or part of their functions on the building management and maintenance. Since the manager’s obligations include maintenance of the building, the decision on the capital repair and implementation of energy efficiency measures may be made by the manager on the basis of the contractual requirements. Otherwise, the manager should arrange adoption of such decision by the apartment owners. Should apartment owners fail to appoint a manager on their own, the manager is supposed to be appointed by the local self-governance body.27 The local self-governance body should conclude a management service agreement with the manager, while the manager should, within 30 calendar days after the above contract is concluded, make management service contracts with the apartment owners. In practice, however, local self-governance bodies mainly appoint service providers for the maintenance of buildings, constructions, and adjacent territories, rather than for their management. This is, primarily, due to the fact that the manager’s functions, for which the
26 CMU Resolution No. 1521 11.10.2002 on Implementation of the Condominium Law. 27 Order of the State Committee for Housing and Communal Services on Approval of the Procedure Followed by the Housing and Communal Service Providers in the Residential Section (No.60 of 25.04.2005).
Framework Contract FC474/EBSF-2010-08-124F 54 manager is remunerated, are not clearly defined, and local self-government bodies are not able to ensure management of residential buildings. M 3.3 Energy Efficiency Measures Funding Possibilities Under this management form, energy efficiency measures may be funded only through financial assistance from the state or from local budgets and by securing loans. As mentioned above, however, financial resources available are insufficient for implementation of energy efficiency projects. Legal obstacles for attracting funding for implementation of energy saving measures in this case are the same as listed under Model 1 and 2.
3.3.5 Model 4 – Apartment Building Management by a Housing and Construction cooperative (HCC) М 4.1. Description The housing and construction cooperative is one of the forms for association of individual owners to manage and maintain their building. The HCCs28 can perform: Building management; Keep the building on their balance; Ensure proper use of their residential property; Provide housing and communal services to the residents; Maintain the residential building and the adjacent territory. HCCs may manage and maintain residential buildings through their statutory bodies. HCCs may also transfer management and maintenance functions to the manager. М 4.2. Decision-Making Procedure Decisions on the HCC operation are made by its executive body, the general meeting of the cooperative members. The decision making procedures for the general meetings should be established by the HCC charter. As a rule, the general meeting quorum is made up of more than 50% of its members present at the meeting, while decisions are made by no less than 2/3, and in some cases ¾ of the cooperative members present at the meeting. M 4.3 Energy Saving Measures Funding Options Under this management form, energy efficient measures can be financed through the funds accumulated by HCC members, from state budget, grants, or through loans. In practice, any improvements in the HCC buildings are done at the expense of the HCC members. HCC may set up capital repair funds to accumulate the financial means necessary to financing the improvement in buildings. In addition, the HCC charters or general meetings may establish mandatory targeted contributions for capital repairs and implementation of energy efficiency measures. In this case, legal barriers to the implementation of energy efficiency measures include the following: Lending institutions are unaware of the HCC particular legal status and the mechanism that can be used to secure the loan; Like condominiums, HCCs have no property that can be used as collateral to secure loan Absence of clear mechanism to collect debts from HCC members under the HCC obligations, which is regarded as a risk by lending institutions.
28 Residential Code of Ukraine
Framework Contract FC474/EBSF-2010-08-124F 55 3.4 COMPARISON OF UKRAINIAN MODEL WITH OTHER COUNTRIES Comparison of the current models of ownership and maintenance of the multi-apartment residential housing with relatively well functioning models applied in Slovakia shows that several issues need to be addressed in the Ukraine’s housing policies. Comprehensive gap analysis of the current Ukrainian Law “On Association of Co-Owners of Residential Buildings” with the Slovak “Law on Condominiums” as well as with the Slovak Housing Policy was performed as part of this assignment and it is provided in Annex 48. As part of this assessment, a review of the latest amendment of “ Draft Law of Ukraine “On Association of Co-Owners of Residential Buildings” was performed and the summary of this review is provided in Annex 49. Firstly, the terms “co-ownership of real estate” should not be confused with “apartment ownership based on condominium principles of ownership”, with the later entailing a direct ownership of an apartment and co-ownership of common parts of the building and the common installed equipment. Co-ownership is defined by civil code and it is applied in cases of family homes or in apartments owned by more than one owner (for example when inheritance is divided into several people). In Slovakia, the co-ownership is also applied in case of ownership of property by husband and wife. In Slovakia the entire state-owned residential housing sector was transferred in 1992 from state to municipal ownership, and in 1993 a new adopted law (amendment of civil code) provided the possibility for residents to purchase their apartments at reduced prices. In case of cooperative ownership, the remaining principle of state loan was paid to gain full ownership. Sale of the first apartment in the building transferred the ownership of all apartments to condominium-type of ownership. This means that apartments not yet sold remaining in the ownership of municipality were responsible to contribute to the fund and had the same rights and responsibilities as the sold apartment. As a principle, a decision cannot be made for the residents of the apartments by others - not the municipalities or any maintenance organization. The law also dictated that the apartment building with apartments owned by the residents cannot be without maintenance/management. Management can be performed either by the association of owners or apartment owners and can execute a contract with a specialized, licensed organization. Such organization could be selected based on the decision of the owners. This led to establishment of many maintenance organizations and individuals providing such services, which created a competitive environment, and thus better service quality. The former state maintenance organizations (“Zheks”) practically do not exist. Some were transferred to private organizations and some were dissolved. As an example, in Bratislava, all five state/municipal maintenance organizations (“Zheks”) were dissolved and in their place around 40 private maintenance organizations were created. As part of the apartment ownership transfer, each apartment has allocated part of the common part of the building. The allocated size of the common property depends on the total size of the living space and the size of the apartment ratio. This report does not provide information if and where the allocated part of the common property is registered. In Slovakia, the ownership of real estate is registered with Cadastre, who also issues the ownership documents. The definition of the allocation of common property is important for allocation and contribution to the maintenance fund, which must be established and operated according to the law. The payment size is defined by the owners, based on expected needs. This fund is a basis for implementing maintenance and improvements to the property and plays the decisive role in revocation of apartment buildings. Currently, many banks provide loans based on information on the creation and maintenance of the funds and do not require bank guarantees. The responsibility to create and maintain the fund is set by the law for all owners of the apartments as lean and the responsibility is registered in Cadastre (Land register) and has the highest priority during the execution event against a non-payer. Fund resources can also be combined with bank loan, grants (such as Eco-funds), and with state subsidies, if any. Municipalities do not provide any support to residential building stock maintenance or reconstruction and only have a role during the permitting period.
Framework Contract FC474/EBSF-2010-08-124F 56 After 1992, when the system of state-funded construction of apartment buildings was abolished, the analysis showed that the required investment to compensate for neglected maintenance of residential buildings would cost approximately two years of state budgets. This clearly showed that the State was not really a good owner of the residential stock assets, in spite of the quite high state subsidies provided over the years. This was one of the reasons for privatizing the residential sector. It also becomes apparent that the state must provide a legal environment for new financial resources to be used for construction of new buildings as well as for reconstruction of existing building stock. It is the rule that the owner of the property is the best manager of the resources. In Slovakia, after the laws were adopted in 1992, the following financial resources were created or reactivated: System of “construction savings” with state support (1992) Mortgage loans (1994) State fund for development of residential sector (1996) as revolving fund State grant system to compensate for design flaws (1996) State guarantees program (2000) The public funds are in principle and applied only as a motivation incentive tool and represent only a small part of the required investment. The rest of the investment is provided by the owners from different sources, and the repayment is based on savings resulting from improvements in energy efficiency. on average, energy savings of 35-40% were attained. In conclusion, it is possible to say that it is necessary to re-evaluate the approach for renovation of 90% of the privatized residential sector in the Ukraine and create a legal and financial environment for the apartment owners, which will allow them to make their own decisions while they provide the required technical support.
3.5 CONCLUSIONS Out of the four models of management of multi-apartment buildings defined by the Law of the Ukraine, the most efficient model is the management through established condominium and HCC through their executive bodies described in Model 2 and Model 3 respectively. However, all models face certain legal difficulties when it comes to legal mechanisms that can be used to obtain funding for capital improvements and for energy efficiency investments. Exhibit 28 summarizes the barriers for obtaining loans for capital improvements and for energy efficiency: Exhibit 28 Barriers for obtaining loans
Management model
Without condominium With condominium
Any decision needs to be taken by 100% The decision-making procedure is established by votes of the apartment building residents the condominium charter No management body that would arrange Quorum is required to solve issues on building decisions to be taken by the residents on the management or repair (introduction of energy building management and maintenance efficiency measures). (capital repairs, introduction of energy saving measures etc.); Local self-governance bodies define the Condominiums lack property that can be used as building maintenance service provider; collateral to secure borrowed resources; The property legal status principles are not No mechanisms for condominiums to claim the clear – the owners do not realise their non-payers’ property; and
Framework Contract FC474/EBSF-2010-08-124F 57 obligations to maintain joint property The joint property cannot be used as collateral No transparent and clear mechanisms to collect to secure borrowed resources; debts from individual owners on current payments and targeted contributions. A complicated and unclear procedure used to make decisions on the joint property management and maintenance (repairs, introduction of energy efficient measures); and No requirements on the setup of a reserve fund.
3.6 RECOMMENDATIONS The results of analysis of the residential buildings ownership and management forms support the following recommendations for removal legal barriers to the funding of energy efficiency measures: Building management models that are effective and provide for proper management, maintenance and improvements of the multi-apartment buildings, such as Model 2 and Model 3 should be preferred and incentive mechanism should be developed, introduced and supported by the state and by municipalities to make it attractive for the co-owners of such buildings to organize and take ownership of their assets seriously. Experience from other countries strongly suggests that such approach is the only way to ensure improvements of the residential stock and introduction of energy efficiency. To support introduction and expansion of effective management models, a significant public awareness campaign should be supported by the state and continuation of support by international donors should be encouraged. Resolution to the issue of land transfer to the co-owners should be sought to allow smooth transfer to the land. In this regard, the procedure should be established to define borders of adjacent territories (for buildings with and without condominiums) and to allocate land lots where buildings, constructions, and adjacent territories are located; To facilitate the lending process for funding, the capital improvements and introduction of energy efficiency in residential market, improvements of legal framework will be required to: Develop clear and effective mechanism for debt collection from individual apartment owners; Develop mechanisms for condominiums to secure loans acceptable to the lending institutions; Develop mandatory establishment and maintenance of capital repair fund. It is further recommended that state assistance for residential stock improvement and for introduction of energy efficiency measures through subsidies and other relevant financial assistance mechanisms are targeted to projects as “motivation assistance” rather than grants covering large part of the investment. Projects receiving such state support should be selected on competitive basis and should comply with certain criteria that may include energy saving potential, replicability, and overall impact on residents. The process of residential buildings improvements should be planned as a staged, multi- year process with gradual increase in funds collection and build up. Experience from other Eastern European countries will serve as good guidance.
Framework Contract FC474/EBSF-2010-08-124F 58 4. RESIDENTIAL INSTITUTIONAL ARRANGEMENTS
This section provides information on existing residential institutional arrangements that include legal and contractual basis for provision of required housing and communal services to residential customers and for capital improvements of residential buildings including energy efficiency measures.
4.1 GOODS AND SERVICES IN HOUSING AND COMMUNAL SERVICES MARKET Ukrainian housing and communal services market can be theoretically divided into two distinguished segments – housing (buildings) and supporting infrastructure that consist of production and supply of goods and services to the boundary of the building. For better understanding of the relationships between the market participants and consumers, it is useful to identify the list of goods and services that are provided to the consumers in the residential buildings: 1) Communal services include centralized cold and hot water supply, sewage, gas and electricity, centralized heating, household solid waste disposal, etc.; 2) Maintenance services for buildings and adjacent territories include cleaning of buildings internal premises and adjacent territory, sanitary and technical service, maintenance of internal buildings installations, maintenance of elevators, illumination of common areas, miscellaneous repairs, etc.; 3) Management services for single or multiple buildings include maintaining building assets on balance sheet, execution of service agreements, and control of implementation of the agreement's provisions, etc.; 4) Repair services of buildings, houses, and related premises include replacement and reinforcement of structural and networks elements, their reconstruction, bearing capacity retrofit, etc. The Ukrainian legislation uses the word “service”, for those services supplied to the customers in individual apartment, and the word “goods”, for those services supplied to the apartment block level. At the same time, electric energy and gas are defined by the laws as “goods”29, regardless of the fact that these utilities are supplied to the end user in the apartment as a communal service30. Such differentiation of terms creates a lot of misunderstanding for the market participants and customers. Specifically, a confusion is created by two different definitions of communal services: (1) according to the Law of Ukraine «On National Commission of Regulation Communal Services Market» the communal services are heating energy (as traded good), and centralized water supply and sewage collection services, (2) while according to the Law of Ukraine “On Housing and Communal Services” communal services include centralized heating, hot and cold water supply and sewage collection services. The latter definition by the law implies that the services are to be supplied to the level of the individual apartment. The licensees of the national regulator are supposed to supply the first group of communal services (which are mentioned above) within the requirements that are set by the terms and rules of the licensing conditions, from the text of which it is possible to conclude that the border of responsibility for the licensed company ends at the level of the apartment block31;. The second
29 LsoU «On Electric Energy», «On Functioning of the Gas Market» 30 Art.14, LoU «On Housing and Communal Services»
31 Order of the State Committee for Regulatory Policy and Entrepreneurship of Ukraine and the Ministry of Utilities of Ukraine on Approval of the Licensing Conditions for Business Operations on Heat Energy Production (Excluding Heat Energy Produced by Heating Plants, Co-Generation Plants, and Non-Traditional and Renewable Energy Plants) No. 167/417 of
Framework Contract FC474/EBSF-2010-08-124F 59 group of communal services is supplied by the so called “providers of services” to the end consumer in apartment. Local self-government body32 nominates such providers for supplying the service to the end consumer in the apartment of the multi-apartment building. Thus, the laws created a situation, when heating energy, water and sewage can be supplied by the same entity (utility) as goods and communal services (centralized heating, centralized cold and hot water supply, sewage). The impact of such differentiation on institutional arrangements in the sector is described in section 4.2 of this report. Maintenance services for buildings and adjacent territories (further – maintenance services) include a whole set of individual services. Cabinet of Ministers of Ukraine defines a detailed list of such services33 and it includes: Cleaning of the staircases, basement, technical floor, roof and adjacent territory and snow removal, Garbage collection (collection, storage, transportation, processing, utilization, disposal and burying) Maintenance of the systems of dispatching Technical; maintenance and repairs of the internal building systems including hot and cold water supply; sewage system; heating system;, elevator(s), ventilation channels rain water drainages and system located and fixed in a defined order to the adjacent territory (including sports grounds, play grounds for kids and others) Technical maintenance and current repair of fire fighting systems, gas removal systems and other building internal engineering systems if available Maintenance of number plates on the buildings Lighting of the common areas, basements, pumping of water and electric energy supply for elevators Regular testing, maintenance and repair of apartment meters of water and heat energy, including dismantling, transportation and set up after testing. Deracination; Disinfection Watering of yards, flower beds Garbage collection services can be excluded from the list of maintenance services by the decision of the local self-government body34 and defined as a separate service. In many cases this service is provided separately to the end consumers residing in buildings with organized condominiums, where services are usually provided based on contractual basis directly with the provider. In some cases, local self-governments excluded technical maintenance of lifts into a separate service and allowed direct contracts of lift companies with the end users in apartments. Such
30 December 2008; Order of the State Committee for Regulatory Policy and Entrepreneurship of Ukraine and the Ministry of Utilities of Ukraine on Approval of the Licensing Conditions for Business Operations on Heat Energy Transportation by Backbone and Local (Distribution) Heat Networks No. 168/4184 of 30 December 2008; Order of the Ministry of Utilities of Ukraine on Approval of the Licensing Conditions for Business Operations for Heat Energy Supply No. 370 of 24 November 2009; Order of the State Committee for Regulatory Policy and Entrepreneurship of Ukraine and the State Committee for Construction, Architecture, and Residential Policy of Ukraine on Approval of Licensing Conditions for District Water Supply and Sewerage No. 35/34 of 14 February 2001. 32 Order of the State Committee on Utilities “On Approval of the Procedure for Definition of a Utilities Service Provider in Residential Buildings” No. 60 of 25.04.2005 (further- Order #60 of 25.04.200) 33 CMU Decree on Approval of the Procedure for Formation of Tariffs for Maintenance of Buildings and Adjacent Territories and the Model Contract on Provision of Services for Maintenance of Buildings and Adjacent Territories No. 529 of 20.05.2009. 34 Order #60 of 25.04.2005
Framework Contract FC474/EBSF-2010-08-124F 60 decisions conflicts with current legal requirements and have no economic justification, since such arrangements usually increases the costs of service to the end consumer. Management services for buildings appeared in practice of housing and communal economy sector only after 2004, when the law included such service in list of housing and communal services35. One of the functions of the manager of the building that the law defined is so called “balance sheet holding”, which literally means accounting of the building on the balance sheets of the entity, which manages the building. A respective Cabinet of Ministers Decree36, stipulates that the management services include “Ensuring sustainable functioning of the building pursuant to its primary purpose, preserving its characteristics and organization of the owners’ needs, needs of co-owners, renters, and lease holders of individual residential and non-residential premises in timely housing and communal services of respective quality”. Such definition is not very specific and for most people it is actually not very clear. Repair services of buildings, houses, and related premises (primarily of capital nature) are placed into a separate group. The provision of such services is carried out on a sub contractual basis with the customers, which is described in more detail in the following section 4.2.
4.2 INSTITUTIONAL STRUCTURES AND THEIR RELATIONSHIPS Participants of the housing and communal services market can be classified according to the groups defined by various Ukrainian laws37: Customer of services - individuals or legal entity who uses or intends to use housing and communal services; or who uses heat energy based on contract; or who uses drinking water for satisfying physiological, sanitary and hygienic, house or commercial needs; or who uses energy for own needs based on the contact on buying and selling; or residential users of natural gas – physical entity, who receives natural gas for own needs, including for making food, heating of water and heating of residential premises; Collective customer – Condominium, that is a legal entity created by owners for assistance of their ownership usage and management, maintenance and use of indivisible and joint property; Producer of housing and communal services (HCS) - economic entity producing or creating housing and communal services; Provider of HCS - economic entity providing consumer with housing and communal services according to terms of agreement; Manager – legal entity managing indivisible and whole property of the housing complex under authority of the owner(s) of the property and ensures its reliable maintenance; (as defined by the Law of Ukraine “On housing and Communal services”); The balance sheet holder of a house, building, housing complex or complex of houses and buildings - is the owner or the legal entity that based on an agreement with the owner holds the respective property on its balance sheet, performs accounting, statistical and other reporting in accordance with legislation, carries out calculation of funds necessary for timely execution of major repairs and maintenance, as well as provides for this property management. According to the law, this entity is responsible for building operation;
35 Law of Ukraine “On Housing and Communal services” 36 CMU Decree No. 484 on Approval of the Model Contract on Provision of Management Services for Buildings, Constructions, Residential Complexes or Complexes of Buildings and Constructions of 20.05.2009 37 Laws of Ukraine “On Housing and Communal services, On the National Commission for Regulation of Communal services Market, On Heat Supply, On Electric Energy, On Potable Water and Potable Water Supply, On Condominium associations, and On the Natural Gas Market Functioning Principles
Framework Contract FC474/EBSF-2010-08-124F 61 Heat generating company – economic entity, which owns or operates heat generating equipment and produces heat energy; Heat transportation company – economic entity, which transports heat energy; Heat supply company – economic entity which supplies heat energy to customers; Energy supply companies – members of the electric energy wholesale market of Ukraine, who purchase electric energy at this market for resale to customers or for export; Gas supply company – economic entity, which supplies natural gas based on the license directly to the customers according to the concluded contracts; Bodies of executive power (central bodies of executive power in the HCE38, state collegial body39, oblast state administrations and other); Local self-governments bodies; Other market participants (subcontractors – construction companies, ESCO’s, private investors etc.). According to the laws, the relationships between customers of HCS and other market participants supplying goods and services to the building should be based exclusively on contractual terms. The legislation regulates such relations by setting requirements for development and approval of tariffs, quality of services, as well as approval of typical agreements for provision of the respective services. End user (customer) of the services, which are listed in section 4.1 of this report, can be either: Individual customer - apartment level or non-residential premise Collective customer - building block level for the buildings with condominiums. Depending on the types of services/goods provided /supplied to the building, the following types of agreements can be concluded between the end consumer and the provider/supplier: Energy supply contract40; (or Energy supply contract41 and other resources contract42) Agreement on providing gas-supply services for population 43; Agreement on maintenance services of houses and buildings and adjacent territories44 Agreement on provision of household waste transportation services The agreement on provision of services of district heating and hot water supply45, The agreement on provision of cold water supply and wastewater collection 46 Agreement on providing management services47.
38 Now, the Ministry for Regional Development, Construction, and Housing and Communal Economy of Ukraine. 39 Today, the National Commission for Regulation of the Electric Energy of Ukraine (NERC) 40 See Art. 275 of the Commercial Code of Ukraine and CMU Decree on Approval of the Electric Power Use Rules for Households No. 1357 of 26.07.1999. 41 See Art. 275 of the Commercial Code of Ukraine. 42 See Chapter 54 of the Civil Code of Ukraine
43 CMU Decree on Approval of the Gas Supply Rules for Households No. 2246 of 09.12.1999. 44 CMU Resolution on Approval of the Procedure for Formation of Tariffs for Maintenance of Buildings and Adjacent Territories and the Model Contract on Provision of Services for Maintenance of Buildings and Adjacent Territories No. 529 of 20.05.2009 45 CMU Resolution on Approval of the Procedure for Provision of District Heating Supply Services, Cold and Hot Water Supply and Water Sewerage, and the Model Contract for Provision of District Heating Supply Services, Cold and Hot Water Supply and Water Sewerage No. 630 of 21.07.2005.. 46 CMU Resolution #630 of 21.07.2005.
Framework Contract FC474/EBSF-2010-08-124F 62 Subcontract for capital construction 48 Energy performance contract49.
4.2.1 Electricity and Gas Supply Contracts Electricity and gas supply contracts are in most cases concluded by the electric and gas companies with the end users being the apartment occupants. However, concluding electricity and gas supply contracts with condominiums brings a serious practical problem that is caused by the specifics of defining customer groups for those commodities and related tariff setting procedures. Specifically, NERC Resolution of 10.03.99 No.309 "On Tariffs of Electric Power Provided for Population and Settlements" (with further amendments and extensions), and NERC Resolution of 31.07.96 No. 28 "On Approving the Rules of Using of Electric Power (with further amendments and extensions), allocate such category of consumer as a "settlement". In practice, NERC includes in this category (among others), also associations of consumers (population) – condominium associations, HCCs, etc. – thus artificially separating these associations from residential consumers. Considering the difference between the tariffs approved by NERC for population and for "settlements", consumers united in condominium associations or in HCCs find themselves in a less favourable tariff category than consumers who do not create such associations. It is important to note that the described division of consumers and their category called "settlement" are not stipulated in the Law of Ukraine "On Housing and Communal Services", nor in the Law of Ukraine "On Electric Power". I.e., the abovementioned NERC regulations in this part do not meet the higher level legislative acts. Respectively, we may conclude, that relationship of electric energy suppliers with the collective customer – condominium – are not well not defined.
4.2.2 Agreements between Customers and “Producers/Providers” of Housing and Communal Services. The decisions on institutional arrangements and contractual relations in housing and communal sphere are heavily influenced by the local self-government bodies and by owners of residential buildings, who define and select the so called “providers” of housing and communal services in the multi apartment buildings50 including building management, maintenance and repairs, as well as all utilities (district heating, cold and hot water and sewage). Review of the legal basis for this process has at least three issues that confuse the process and will eventually need to be improved in the legislation. They are: Definition of Provider: The “provider” of services of district heating, cold and hot water supply, and sewage can be a “producer” of such services, provider of management services or other economic entity. An option to choose a producer as a provider is confusing and needs to be addressed by the legislation. Specifically, it is necessary to differentiate between producer of services, transportation services and supply of goods and communal services. These categories are defined as entities that are subject to licensing required by the Law of Ukraine «On National
47 CMU Resolution on Approval of the Model Contract on Provision of Management Services for Buildings, Constructions, Residential Complexes or Complexes of Buildings and Constructions No. 484 of 20.05.2009 48 See Chapter 33 of the Commercial Code of Ukraine, CMU Resolution on Approval of the General Conditions for Conclusion and Implementation of Capital Construction Contracts No. 668 of 01.08.2005, Order of the Ministry for Construction, Architecture, and Utilities of Ukraine on Approval of a Model Capital Construction Contract No. 3 of 27 October 2005. 49 Not envisaged by law as a special type of contracts, See Chapter 61 “Contracts” of the Civil Code of Ukraine 50 Order #60 of 25.04.2005
Framework Contract FC474/EBSF-2010-08-124F 63 commission for regulating communal services market» and laws «On heat supply», «On Drinking water and drinking water supply». It appears that current legislation does not differentiate between the “producer of service” and the “licensed company”. Domestic Hot Water Supply: The responsibility for domestic hot water supply (DHW) is unclear and is not mentioned neither in the law «On Heat Supply» (as a product for purchase and sale), nor in the law «On National commission for regulating communal services market». Production of DHW was also omitted from the sphere of regulation by the national regulator. Consequently, the licensed heat supply company who is a natural supplier of the DHW was named a “producer of hot water supply service”. When considering the widely applied options of DHW production in central substations or in individual substations in buildings, the situation in determining the tariff becomes confusing and will need to be addressed. DHW provided by district heating is physically and integral part of heat supply system, and as such it needs to be regulated in monopoly arrangement and the tariff must reflect the way the DHW is being prepared. Currently, tariff for heat transportation is not differentiated for customers who are getting DHW from central or individual substations and thus, customers with individual substations pay for costs of heat, which includes costs of DHW prepared in central substations. Number of categories:The existence of numerous definitions of providers, producers, licensees, and artificially created differences in areas of activities of these entities are very confusing and counterproductive. There is no clear division of responsibilities between them and the respective tariff policies are not well defined ad it is not clear whether tariffs charged by the various entities for goods and services should, or should not be different for consumers . In practical terms, one could assume that tariff for resources to the boundary of the building should be different from the tariff for the service that is provided to the apartment by at least the sum of costs required to ensure billing and collection to the end consumer in the apartment. Since current boundary of responsibility for licensed companies (which supply goods) and service providers (providing services) does not exists, there is no difference between the wholesale and the retail tariffs. It is the simple reality that customers do not understand and do not care about the differences between goods and services, providers and producers of services.
4.2.3 Role of Local Self-Government Over the past many years, the decisions on providers of heating, hot and cold water and sewage services for multi-apartment buildings were made in large part by the local self-government bodies. This was mostly due to the fact that during the initial years of “relations development” in housing and communal sphere, the maintenance companies (ZHEks) were in the role of “intermediary” between the utilities and the end consumers. However, because ZHEKs did not have sufficient financial resources to perform these functions, they mostly defaulted with payments to utilities for the resources provided and used by the respective buildings and accumulated substantial debts which were then transferred into a “bad debts” (non-recoverable debts) category. In an attempt to solve this problem, the local self-governments allowed utilities to conclude direct contracts with the end consumers in the multi-apartment buildings. This system of vertically integrated monopoly is now used in majority of Ukrainian localities (with exception of some large cities such as Kyiv, Kharkiv and Lviv) and it is applied to supply of heat, water and sewage services. Each such monopoly took a function of customer billing and collection to the end consumer in the apartment, which consequently increased the cost of administering such system for the end consumer. This system is also riddled with many problems, such as deficiencies in metering, cost allocations for apartments, metering equipment maintenance and calibration.
Framework Contract FC474/EBSF-2010-08-124F 64 To make matter worse, local self-government bodies, having no understanding of the complex system of ownership in the multi apartment buildings, including a form of organizing owners of apartments in condominium, began defining condominiums as “providers of services” in their respective buildings. According to their understanding, condominiums are not really acknowledged as collective customer. Besides, the local press refers to condominiums as an “alternative to ZHEKs”. One significant reason for such misunderstanding is absence of clear requirements and guidance for condominiums in organizing billing and collection.
4.2.4 Issus to be Addressed Among the most critical issues to be addressed in the area of institutional structure are related to the large number of involved entities, and the decision process of implementing capital repairs of residential buildings. With the large number of various participants and absence of their division of responsibilities, the institutional arrangements in housing and communal services is complicated, not always clear and thus inefficient. In addition, the situation is exaggerated by limited financial resources. On the issue of capital repairs, it is almost inconceivable that in the whole institutional structure of relations in the residential market, there is not a single entity that would be responsible for making decisions on carrying out capital repairs of the residential building (including energy efficiency measures) in buildings without condominium. ZHEKs perform implementation function only in cases there the funding is available from the state or from local budget. Details of the typical contracts that are used in housing and communal sphere are described in Annex 47 to this report.
4.3 PRICE SETTING IN HOUSING AND COMMUNAL SPHERE Price setting in housing and communal sphere is performed according to the principles defined by applicable laws. Practically all prices in housing and communal sphere are subject to state regulation. There are two exceptions from this rule - the price of management service and the cost of capital repairs are defined by negotiation and fixed by respective contracts. Price setting system significantly affect efficiency of housing and communal market functioning. Since absolute majority of types of activity in this sphere and their respective tariffs are subject to state regulation, we need to analyses the system of regulation in greater detail. Currently, price setting functions in housing and communal sphere are divided between NERC and local self-governments. NERC sets prices to its licensees, which are defined according to the criteria that are specified in terms and conditions for carrying out licensed activity (as referenced above in section 4.1). Allocation of responsibility for tariff setting is shown in Exhibit 29.
Framework Contract FC474/EBSF-2010-08-124F 65 Exhibit 29. Responsibilities for tariff setting in housing and communal sphere
National commission for regulation Local self government bodies CS market (currently NERC)
. Tariffs for production of heat energy . Tariffs for production of heat energy (HE) (installed boilers’ capacity over (HE) (installed boilers’ capacity 20 GCal/h); below 20 GCal/h); . Tariffs for transportation of HE . Tariffs for transportation of HE (unclear criteria); (unclear criteria); . Centralised water supply and . Centralised water supply and sewerage services (towns with over sewerage services (all other); 100,000 citizens; services in more . Tariffs for centralised heating, hot than one oblast, or companies with and cold water supply, and foreign investments); sewerage collection service for . Retail prices for household natural service providers; gas; and . Garbage collection tariffs . Household electricity tariffs . Tariffs on maintenance services for buildings, constructions, and adjacent territories
As shown in Exhibit 29, division of responsibilities for tariff setting can hardly be called efficient. It is actually, a system of regulatory “power redundancy”, which in fact imposes on utilities two regulatory bodies– national and local. Tariff setting methodologies and responsibilities for their drafting are set by the legislation. Pursuant to the law «On housing and communal services» Cabinet of ministers of Ukraine drafts tariff setting orders for all types of housing and communal services except for those which should be drafted by the national regulator for its licensees. Exhibit 30 summarizes legislation, which sets requirements for tariff setting for services, goods and supplies.
Exhibit 30 – Legislation on Pricing of Goods and Services in Housing Market
Service Law Regulatory Act
Electric Power On Electric Energy CMU Resolution No. 1548 on Establishing Powers of Supply Executive Authorities and Executive Bodies of Local Councils on Price/Tariff Regulation of 25 December 1996 sets the powers of the National Electric Power Regulation Commission (NKRE) which regulates tariffs for the electric power supplied to households for everyday needs, etc. 1 Tariffs for electric and heat power produced by heat plants, heat and power plants, nuclear plants, and non- traditional/renewal energy plants/ NKRE Resolution No.896 on Approval of the Procedure for Calculation of Tariffs for Electric and Heat Power Produced by Heat Plants, Heat and Power Plants, Nuclear Plants, and Non-Traditional/Renewal Energy Plants of 12.10.2005 Gas Supply On Natural Gas CMU Resolution No. 1548 on Establishing Powers of 2
Framework Contract FC474/EBSF-2010-08-124F 66 Service Law Regulatory Act
Market Functioning Executive Authorities and Executive Bodies of Local Councils Principles on Price/Tariff Regulation of 25 December 1996 sets the powers of the National Electric Power Regulation Commission (NKRE) which establishes retail prices for household natural gas. The prices for liquefied gas supplied from grouped reservoir facilities are regulated/ established by the Council of Ministers of the Crimean Autonomous Republic, oblast, Kyiv and Sevastopol City State Administrations. Water Supply On National NKRE Resolution No.243 on Approval of the Procedure for and Sewerage Commission for Formation of District Water Supply and Sewerage Tariffs of 3 (for NERC Regulation of CS 17.02.2011 licensees) Market (currently NERC) Heat Energy On National NKRE Resolution No.242 on Approval of the Procedure for Production, Commission for Formation of Tariffs for Heat Energy, Its Production, Transportation, Regulation of CS Transportation and Supply of 17.02.2011 (for consumers 4 Supply (for Market (currently using more than 20 Gcal/h) NERC NERC) licensees) Centralised On Housing and CMU Resolution No. 955 on Approval of the Procedure for Heating and Hot Communal services Formation of Tariffs for Heat Energy Production, 5 Tap Water Transportation, and Supply and Centralised Heating and Hot Services Tap Water Supply Services of 10 July 2006 Centralised On Housing and CMU Resolution No. 959 on Approval of the Procedure for Water Supply Communal services Formation of District Water Supply and Sewerage Tariffs of 12 6 and wastewater July 2006 collection services Maintenance of On Housing and CMU Resolution No. 529 on Approval of the Procedure for Buildings, Communal services Formation of Tariffs for Maintenance of Buildings and Adjacent 6 Constructions, Territories and the Model Contract on Provision of Services for and Adjacent Maintenance of Buildings and Adjacent Territories of Territories 20.05.2009 Garbage On Waste CMU Resolution No. 1010 on Approval of the Procedure for 7 Collection Formation of Municipal Waste Removal Tariffs of 26.07.2006 Repair of On City The tariffs do not include capital repair expenses (including Buildings, Development energy efficiency measures). No requirements are set to Constructions, Operations establish reserve funds for investments. Capital works are Replacement, financed only if there are state or local budget funds available. 8 Reinforcement, In the buildings with condominiums the funds are raised and through targeted contributions made to solve specific Reconstruction problems. of Constructions Order No. 174 of the State Constructions Committee on and Networks, Approval of the Construction Value Assessment Rules (State
Framework Contract FC474/EBSF-2010-08-124F 67 Service Law Regulatory Act
Restoration of Construction Rules D.1.1-1-2000) of 27.08.2000 is obligatory the Bearing for assessment of the value of constructions (facilities) built Capacity of the with the use of public funds or funds provided by state Bearing companies, institutions, and organisations. Construction Elements Management On Housing and CMU Resolution No.484 on Approval of the Model Contract on Services Communal services Management Services for Buildings, Construction, Residential 9 Complexes or Buildings and Construction Complexes of 20.05.2009
4.4 PAST ARRANGEMENTS USED FOR CONTRACTING AND FINANCING OF BUILDING RECONSTRUCTION IN UKRAINIAN MUNICIPALITIES In Ukraine, as in other countries, more than 40% of primary energy resources are consumed in buildings of non-production sphere, such as in residential houses, schools, hospitals etc. This is the most energy consuming sector in national economies. Recent on-going and unsuccessful processes of reforming the municipal and housing sphere in Ukraine are to the large extent connected with inefficient use of energy in buildings. Missing integrated approach to problems in energy utilization, low quality of building construction, poor maintenance of buildings and low energy prices resulted in energy inefficient buildings. The main problem is high energy intensity of heating systems in buildings and low quality of the building envelope. Apart from heat losses in the buildings through building envelopes, huge amount of heating energy lost in external networks through obsolete piping system and inefficient insulation. Improvement of energy efficiency and energy saving is a strategic line of development of economy and social sphere of Ukraine in the near future and for further perspective. At the moment there are several housing energy efficiency programs in Ukraine being implemented by international organizations that envisage housing rehabilitation. They are described below.
4.4.1 Project "Sustainable Self-Maintenance of Multi-Family Buildings" The project for energy efficiency renovation of residential buildings was designed to be implemented in two cities: Nezhin and Berdychiv. It was implemented during the June 2005 – May 2008 period and funded by Program of Social Reforms in Central and Eastern Europe (MATRA) of the Dutch Ministry of Foreign Affairs. The project presumes creation of the conditions where a separate entity “ESCO Centre”, will perform energy efficiency rehabilitation works on a residential building through an organized financing. The investment into the building rehabilitation will then be repaid by residents through savings reached due energy efficiency measures. In more details the project description is provided below. ESCO Centre becomes a provider of district heating and hot water supply services for all residents in the building. Thereto, at the General Meeting, multi-family building co-owners association (OSBB) appoints ESCO Centre as a provider of the above mentioned services and concludes a corresponding agreement. To provide services to the customers ESCO Centre will buy heating energy from the Utility Enterprise “Teplokomunenergo” and pays it for actual Gcal based on the actual meter readings. The Customers will pay ESCO Centre for the provided services according to the norms (the rate is determined for 1m2. of the heated area). ESCO
Framework Contract FC474/EBSF-2010-08-124F 68 centre will perform energy efficiency rehabilitation works with the help of loan received from DIGH through a local bank.
4.4.2 Housing Rehabilitation Project in Nizhyn. DIGH issued a loan to “Central Energy Service Company “ESCO-Centre” LLC to finance an energy efficiency and renovation project, including energy measurements in two residential buildings with a total amount of apartments 294 in city of Nizhyn (Chernihiv oblast). This initiative was implemented under a project of technical assistance called "Sustainable self- management of apartment buildings" (June 2005 - May 2008), financed by the Program of social transformation in Central and Eastern Europe (MATRA) of the Ministry of Foreign Affairs of the Kingdom of the Netherlands. At the general meeting of the CAs, a decision has been achieved on the works to be implemented, and CEC “ESCO - Centre” has been chosen as the supplier of hot water and district heating services. The decision of the CA determining the supplier of those services has been agreed with the executive committee of Nizhyn City Council. This resulted in gaining by CEC ”ESCO-Centre” a status of service provider, which allowed the company to sign contracts51 on providing hot water and district heating services with every apartment owner, and signing a contract with the heat supplying organization on purchasing heat energy. The agreement between the CAs and CEC “ESCO-Centre” states average annual level of heat energy usage before the beginning of the implementation of the energy saving measures. The savings of energy on heating and hot water supply is expected to be up to 50%. For the ESCO, the difference between the stated level of energy usage (in the relations with CA) and the actual level of energy usage after implementation of works (in the relations with heat supplying organization) will be the source of loan repayment. The residents of the buildings that participate in the project will have comfortable living conditions and gradually will be repaying ESCO for the implementation of works through the monthly payments for the company’s services. CEC “ESCO-Centre” applied to DIGH for financing with a complete business plan, and DIGH agreed to be a partner in the implementation of this project. According to the accepted conditions, the fund finances 75% of the project, 25% has to be financed from other sources. In this example the funds of the city budget, the state budget and of the apartment owners have served as other sources of financing.52 Terms of the loan provided by DIGH to ESCO Centre: Total amount of the loan - 508,321 Euro, including commission of DIGH - 21 820 Euro and an additional fee for information processing, 5000 Euro. Term of the loan - 10 years. Repayment date - 26.02.2019. Grace period - none. Preterm repayment possible. Interest rate - 6.03%. Payment of interest and repayment of the loan - once per year. The loan is secured with chose in possession of payment liabilities.
51 A standard contract on providing services of district heating, water supply, hot water supply drainage, approved by the Decree No.630 of Cabinet of Ministers of Ukraine on July 21, 2005. 52 At the time of writing this material one of the buildings has not received financing from the state budget. This did not allow the usage of the loan in the full amount. The beginning of works on this building has been financed from CEC”ESCO- Center” own funds.
Framework Contract FC474/EBSF-2010-08-124F 69 Lending from DIGH to ESCO Centre was carried out according to general procedures established by the laws of Ukraine and according to regulations of National Bank of Ukraine.
4.4.3 Housing Rehabilitation Project in Berdychiv. In Berdychive there were 3 residential buildings selected for the project implementation. The cost of rehabilitation measures is presented in Annex 41. The presented investment costs were calculated in accordance to recommendations of State research and project institute “Ndiproektrekonstruktsija” (Zhytomir branch). Project financing plan is given in the following Annex 42. As of today DIGH provided funding for the project implementation to ESCO Centre company, however the residents in the building s selected refused to participate in the project and to take the responsibility for the investment. This project failure was especially because of inactivity of the local municipality in supporting the project initiative. At the moment ESCO and DIGH are to make decision on where to implement the project. One of the options is the city of Ivano-Frankivsk, where local government and the residents are willing to participate in the project.
4.4.4 Housing Rehabilitation Project in the City of Lutsk (2010). Lutsk city administration have learnt the experience of MATRA projects in Nizhyn and Berdychiv with the use of ESCO scheme for energy efficiency renovation of residential buildings developed for MATRA Project. For the project in Lutsk a 9 story residential building was selected. The total building area is 9 412 square meters. The energy efficiency rehabilitation cost of the building was calculated as shown in Annex 43. It was estimated that the payback period for this project will be 14.6 years at the prices for energy resources as of the end of 2010. At the same time due to the expected price increases in the cost of heating energy, electrical energy and water the payback period of the project can be cut to 5-7 years. The project was implemented in 2010 by ESCO Ukraine a contractor specializing in energy audits and energy rehabilitation projects. The financing of the project was obtained from private investors through a Management Company. The Management Company has concluded agreement with the Multifamily Building Co-owners association (OSBB) for provision of energy resources for the period of 10 years. At the same time the agreements with energy providers have not been signed yet with the energy producers. As the heat energy producer are not interested in cooperating in this kind of projects that hit their monopoly status and bring clarity to tariff setting and optimization of energy costs
4.4.5 Housing Rehabilitation Project in the City of Chernivtsi (2004-2010). The City council of Chernivtsi has implemented several projects for energy efficiency of housing buildings in the city. As part of those projects city administration has organized renovation works on many buildings. That way there were works performed on roof reconstruction and thermal insulation in 136 buildings, thermal insulations of walls was performed on 2 residential buildings in the city as part of the city program for reconstruction of housing and . The overall cost of the project was UAH 2,463,720, and it was financed from the following sources: State budget - UAH 1 601 420 (65%), City budget - UAH 492 750 (20%), Residents of the buildings - UAH 369,55 (15%). As part of further development of energy efficiency projects in the city, the city administration together with the Ministry of Housing and Municipal Economy have developed a pilot project of complex thermo rehabilitation of one of the residential buildings in Chernivtsi.
Framework Contract FC474/EBSF-2010-08-124F 70 The total cost of this project is UAH 8 386 984, the city budget will provide financing in the amount of UAH 3 453 464. As in other projects residents are supposed to cover 15% of the project cost and the rest to be covered by the state budget.
4.4.6 Projects Implemented by GTZ (German Technical Assistance Organization) GTZ is developing energy efficiency renovation program for municipal and residential buildings in Ivano Frankivsk, Myrhorod and Novograd Volynsky. At this stage the works performed include energy audits on all buildings, calculations for energy efficiency parameters and the cost of renovation for several buildings. The investments range from € 400,000 to € 1.2 million, with contribution from the residents (10%-15%), state budget (30%-40%), municipal budget (20%) and from other sources, such as donor’s funds
4.5 SUMMARY The assessment of the current institutional arrangements of the residential sector in the Ukraine, including issues related to the residential buildings (ownership, management, utilization) and to the infrastructure to the building boundary (production, transportation and supply of water, heat, gas, electricity, sewage) showed several deficiencies and issues that need to be improved to mitigate the current deficiencies in residential sector operation. The summary of the many problems is as follows: Large number of participants defined by legislation and operating in the residential sector, including condominiums (Associations of condominiums), managers of housing, utilities (heat, gas, electricity, water, sewage), lift operators, garbage collection companies, local self-government bodies,“balance holding” organizations and private investors etc. Each of these participants is focused on its own operation, without a comprehensive approach that would benefit the consumer. Absence of clear division of responsibilities between the residential market participants. Lack of clear definition of responsibilities and area of operation for the participants creates mayhem in decision making, supply of services and goods to the residential customers and cause inefficiency in operation and in resources utilization. Absence of entity responsible/authorized for making decisions on capital investment and repairs of the housing stock (including energy efficiency measures) in the buildings where condominiums are not established. Absence of Clear definition of jurisdiction of the National Regulator and local self- government needed to eliminate redundancy of the regulation for the utilities Payments and tariff setting practices are not meeting all market needs and need to be reconsidered and much improved by: Introduction of requirement to contribute regularly to the building capital repair fund and other needed building improvements, Tariff for transportation of heat energy needs to consider the location and associated cost of DHW produced in central or individual substation, Introduction of tariffs for renewable energy.
4.6 RECOMMENDATIONS The undesirable situation in the residential sector housing and communal services will require a comprehensive solution that will effectively address the maintenance and management of residential buildings and supply of services to the building. The very first step in implementing such a comprehensive solution is developing a model for well-functioning residential housing and communal services market, define all its criteria, requirements and all gaps as compared
Framework Contract FC474/EBSF-2010-08-124F 71 with the current situation. Once the model and all requirements are well understood, the results and all gained information and knowledge will be applied to amendment of the legislation and regulations. Consultant suggests for consideration two models of the residential housing and communal services market. Both models are based on choice by the consumer of the communal services supply method. It needs to be stressed that the propose models also consider the current situation and assumes short term realistic steps. Model No 1 – Provides a solution for improving relations between the end consumer and suppliers of housing and communal services in buildings without organized condominium. Model No 1 has two options – labelled “1 А” and “1 B”. Option 1А: An individual consumer in the apartment is party to contractual relations. This consumer receives all services (resources) directly from the suppliers: Gas supply Electric energy supply Heat supply (including heat for heating and hot water supply) Water supply and wastewater service Maintenance of the building Option 1B: A management company, selected by the local self-government body through open tender, concludes contracts with the suppliers of resources (except for gas and electricity supplied directly to the end consumers) and ensures billing and collection to the individual consumers in apartments. Billing and collection of payments from individual apartment owners will be part of the Manager’s responsibilities that will also include metering, ensuring comfort in premises and quality of resources in apartments, organization of energy efficiency measures (upon owners’ decision). Schematically both options are shown in Exhibit 31 .
Framework Contract FC474/EBSF-2010-08-124F 72 Exhibit 31. Model 1 – End user “apartment” or a building without condominium. Regulated monopoly on both sided both in housing and infrastructural segments)
Abbreviations Used in Exhibit 31: Ap. 1, 2 = apartment 1, 2 2 var = model 1B MC = Management Company LSC = local self government body 1 var = model 1 A CHS = central heating substation
Obviously, both options have their pros and cons, which are summaries in the Exhibit 32 below.
Exhibit 32. Pros and cons of Model 1 Option 1А: Individual consumer in the Option 1B: Management company, selected apartment is a party of contractual by local self government body through open relations. tender concludes contracts with the suppliers of resources (except for gas, electric energy, which are supplied directly to the end consumers) and ensures billing and collection to the individual consumers in apartments Pros: Pros: . This model has been used in many cities . A management body is established for the today making this type of relations clear. buildings without condominiums; . Establishment of prerequisites for development of the residential management market and energy efficiency in the residential area; . Cost-effective arrangement of the sale of resources in a building (not each resource separately, but all together).
Cons: Cons: . Vertically integrated monopoly (water, . It is local self-government that choose the heat) requiring state regulation; managing company and not the owners; . Overlapping of sale functions and . Lack of “new type” managers (not ZHEks);
Framework Contract FC474/EBSF-2010-08-124F 73 consequently duplication of expenses . The rules for calculation of maintenance tariffs incurred by monopolists and the building should be established by the state; maintenance company; . Energy efficiency investments can be arranged . The rules for calculation of maintenance by the managing company, but the issue of tariffs should be established by the state; owners’ quorum for voting on investments . Energy efficiency investments can be needs to be solved, and enforcement of made either by (1) the heat supply obligations of individual owners on joint monopolist, but heat tariff should be obligations for investment should be different for each building (which developed.. increases the administrative costs);ord (2) the maintenance company, but the tariff should envisage an investment component separately for each building; and . The owners’ rights to make decisions on investments should be established; enforcement of obligations of individual owners on joint obligations for investment should be developed. Considering the current situation in residential sector, the most practical option for implementation under the Model 1 seems to be the variant 1B. It is envisioned that this Model would be applied in parallel with the Model 2 in buildings where it would not be possible to establish condominium. Model No 2 – Provides solution for improving relations between consumers and suppliers of housing and communal services in buildings with established condominium. Model No 2 has also two options labelled “2А” and “2B”. Option 2А: Condominium manages the building through its management body as defined by the charter, and as legal entity acts in the contractual relations with the suppliers of communal services (excluding gas and electricity which are supplied directly to the end consumers) and organizes billing to the apartment level. Option 2B: Management company, selected by the condominium concludes contracts with the suppliers of resources (excluding gas and electricity energy which are to be supplied directly to the end consumers), ensures their billing and collection to the end consumers in the building, where condominium is established. Schematically both options are shown Exhibit 33.
Framework Contract FC474/EBSF-2010-08-124F 74 Exhibit 33. Model 2 – End user building with condominium.
Market (in housing segment and in future- production of heat energy) and regulated natural monopoly (production, transportation, supply of water and transportation of heat energy
Abbreviations for Exhibit 32: CA = condominium 2 var = model 2B MC = Management Company 1st stage tariff for heat supply is regulated and includes tariff for production and transportation 1 var = model 2 A 2 nd – customers will be able to choose stage producers of heat CHS = central heating substation
Both options have their pros and cons, which are summarized in the Exhibit 34 below. However, both options are acceptable in case that certain improvements in legislation are made.
Framework Contract FC474/EBSF-2010-08-124F 75 Exhibit 34: Pros and cons of Model 2 2.А: Condominium manages the building 2.B. Management company, which through its management body as defined condominium selects, concludes contracts with by the charter, which becomes an entity of the suppliers of resources (except for gas and the contractual relations with the suppliers electric energy which are to be supplied directly of communal resources (except for gas to the end consumers) ensures their billing and and electric energy which are to be collection to the end consumers in the building, supplied directly to the end consumers) where condominium is established and organized billing to the apartment level Pros: Pros: . This model has been used in many . Establishment of prerequisites for cities today making this type of development of the residential management relations clear; market and energy efficiency in residential . Cost-effective arrangement of the sale buildings; of resources in a building (not each . Cost-effective arrangement of the sale of resource separately, but all together). resources in a building (not each resource separately, but all together).
Cons: Cons: . Insufficient number of condominiums . Insufficient number of condominiums and . Responsibility of condominiums for managing companies; arranging delivery of communal . Existence of legal barriers for the energy resources and maintenance of the efficiency funding (establishment of reserve building should be defined by a law, funds, taking of loans, debt collection which is non-existent today; mechanisms), which need to be removed. . Existence of legal barriers for the energy efficiency funding (establishment of reserve funds, taking of loans, debt collection mechanisms), which need to be removed. Subject to selection and acceptance of a specific model by the Ministry of regional development, construction and housing and communal economy, it will be necessary to develop a comprehensive implementation plan that will include plan for amending legislation and drafting/amending regulatory documents: Define and outline changes in the relevant laws, including defining potentially competitive segments of the market; removing definitions of producer/provider of services and balance sheet holder; introducing DHW as a product supplied to the building without individual DHW substations. Introduce amendments to Laws of Ukraine “On Housing and communal services”,“On heat supply”, “On national commission for regulating communal services market” Define a system of contracts reflecting the changes in legislation (including defining division of responsibility of the parties, metering of resources, access to the networks, disconnection. Introduce the amendments to Law of Ukraine “On housing and communal services”,Cabinet of Ministries Decrees; Improve regulation of utilities (methods, methodologies). Introduce amendments to regulatory documents of NERC, Cabinet of Ministries Decrees Remove legal obstacles for attracting financing for capital repairs (including energy efficiency) in residential buildings (mechanisms for decision making in the buildings without condominiums; establishing of the reserve funds; borrowing; rules for
Framework Contract FC474/EBSF-2010-08-124F 76 enforcing collection from individual apartments). Introduce amendments to Civil Code of Ukraine, Law of Ukraine “On Condominiums”. In order to improve the system of state regulation of natural monopolists within their market and to support development of a competition in the housing and communal services sphere, it is necessary to: Define structure and composition of costs that can be recovered in tariffs in each step of the delivery (production, transportation, supply) Improve methodologies for tariff structure for water supply, sewage, heating, and hot water supply by allowing price cap with automatic indexing for costs of individual resources. In parallel, implement a system of benchmarking by the national regulator – or monitoring activity indicators of the licensees with the aim of setting efficiency targets, which will have to be accounted in the X factor in the price cap tariff setting formula Define market segments and prices not subject to regulation Introduce mandatory regular contributions by the building co-owners to the capital repair fund maintained by the entity responsible for building management
Framework Contract FC474/EBSF-2010-08-124F 77 Framework Contract FC474/EBSF-2010-08-124F 78 5. FINANCING ARRAGEMENTS FOR ENERGY EFFICICIENCY IN RESIDENTIAL SECTOR
This section provides information on commercial structures and availability of funding for management and financing of energy efficiency investments for the residential buildings, and describes experience with budgetary and donor funding for residential energy efficiency. It also provides insight into the willingness and capacity of residents to fund investment needs obtained through conducting resident’s focus groups.
5.1 RESIDENTIAL SECTOR MARKET PARTICIPANTS
5.1.1 Contractors - ESCO and Construction Companies The Ukraine has a small number of energy servicing companies, with the largest and best- known being CJSC "UkrESCO" (Kyiv), "ESCO-Rivne" (Rivne), "ESCO-North" (Kharkiv), ESCO "EcoSys" (Zaporizhya), CEC "ESCO-Centre" (Kyiv), "ESCO-East" (Zaporizhya), CE "Communal Energy Service Company of Kherson", ESCO "EnergoEngineering" (Dnipropetrovsk), LLC "Energoconsult" - ESCO (Kyiv), LLC ESCO "Systemotechnika" (Odesa). Currently, the CJSC "UkrESCO", LLC, CEC "ESCO-Centre", LLC and the Energy Service Company "Lutsk Communal Systems" appear to be the only Ukrainian energy service companies that use the funding mechanism based on the shared energy saving subcontract. The ESCO market started to develop in late 1990’s where some companies attempted to apply integrated approach to energy conservation in various industries. However, low energy cost did not provide sufficient incentive for enterprises to introduce energy conservation measures and almost all ESCOs had to change their profile and switch to other activities such as marketing and sale of energy-efficient equipment, operation of heating systems, or providing services in the municipal sector. Recently, the list of ESCO's activities in the Ukraine has been supplemented with energy consulting, energy auditing, drafting energy conservation programs in regions, drafting perspective plans for development of public utilities, project management, integrated environmental support of enterprises, electricity supply under unregulated tariffs, etc. Lack of clear understanding of the essence and opportunities of energy performance contracts by management of local self-governments bodies (LSGB) and housing and communal economy companies hinders development of the market of ESCO. Another hindrance is lack of experience in energy conservation, monitoring and verification of energy conservation by potential contractors. Also, potential customers are lacking experience and are unable to negotiate such contractual arrangements with potential contractors, thus having no confidence in ESCOs services. A charter of an NGO "Energy Alliance" (EA) (http://www.ea.org.ua/) that operates in the Ukraine is to bring together energy service companies and to promote their activities. The latest projects supported EA includes collaboration with Dnipropetrovsk Regional NGO "Unified Independent Coordination Centre for Management of the Housing Sector, Condominium Associations and HCC Reforms", The objective this project is reforming the housing and communal economy through condominiums. In particular, this collaboration aims at accelerating the process of reforming the housing and communal economy and support installing meters, support capital and current repairs of buildings using new technologies, and general fundraising. Another example of ESCO support is the "EcoSys" (Zaporizhya), that operated the the information project portal "Energy-Efficiency World" (http://www.esco.co.ua)
Framework Contract FC474/EBSF-2010-08-124F 79 According to the first issue of the electronic journal "Environmental Systems"53, issued in 2011 in Ukrainian energy-efficiency market successfully operate a lot of companies and associations in addition to those described above: "Arena-Eco", "Energy Alliance", CJSC "Thermo", "International Centre of Energy Efficiency Technologies" (SE ICEET), "Uralinvestenergo", "Service-Invest", OJSC "Donetskgormash", CJSC "VOZ-O", "VZLET-PREMIER", LLC Energy- Conservation Technologies, ESCO-Resource, ESCO-Zaporizhya, LLC "Komunenergo", "NIPO- Rubicon", NTE JSC "UKRPROMENERGO, CJSC "UkrNIIElektroterm", PE "Satori", LLC "Leader-Service", SE "Agroforce", "IMEPOWER", "INTEK", consulting laboratory "THERMA", LLC "Intersectoral Enterprise Energotehprom", "Demo LTD", Nokian Capacitors Ltd, etc. The list of some ESCOs and information on the Internet are offered in Exhibit 35: Exhibit 35: List of ESCOs in Ukraine WEB Company http://www.esco-rivne.com/ JSC ESCO-Rivne http://www.esco-center.com.ua/ ESCO-Centre. http://www.ukresco.com/ JSC UkrESCO http://ecosys.com.ua/ ESCO EcoSys. http://energoconsalt.com Energoconsult – ESCO http://www.esco-st.com.ua LLC ESCO "Systemtechnika"
5.1.2 Banks Based on data of the National Bank of Ukraine54, in 2010, 175 banks had the license of the National Bank of Ukraine for performance of banking transactions. The equity capital of the banks amounted to 136.8 billion UAH or 14.5% of liabilities of the banks. Banks' liabilities totalled to 807.8 billion UAH. The key components of liabilities: - individuals' funds – 262.6 billion UAH or 32.5% of liabilities; - term deposits of other banks and loans received from other banks – 173.1 billion UAH or 21.4%; - funds of economic entities – 140.3 billion UAH or 17.4%. The banks have the following structure of population's deposits in terms of maturity: term deposits amount to 200.4 billion UAH or 76.3% of the total amount of deposits from population, while deposits on demand – 62.3 billion UAH or 23.7%. In the Ukraine, the Association of Ukrainian Banks operates55 as a non-profit organization of commercial banks operating in the Ukraine, representing their systemic interests in relations with the National Bank, the Parliament, the Presidential Administration, the Cabinet, the State Tax Administration, the Supreme Court of Ukraine and other state and private agencies and organizations. The intention of AUB is to promote Ukraine's banking system. Members of the AUB are 120 out of 175 commercial banks operating in the Ukraine. Performance indicators of banks in the Ukraine in 2010 are provided in Annex 44 The share of the loans to individuals by the twenty (20) largest banks listed in Exhibit 36 represents more than 20% of their total loan portfolio. The leading banks with largest share of small loans are Ukrsotsbank (57%), Nadra (75%), Forum (40%), Swedbank (68%), Delta (46%), and Ukrgazbank (33%). Exhibit 36: Selected performance indicators of largest 20 banks in Ukraine
No Bank Loan and Share Incl. Share of loans
53 http://esco-ecosys.narod.ru/2011_1/art067.htm 54 http://bank.gov.ua/Publication/bank_sup/Results/2010/01122010.htm 55 http://aub.org.ua/
Framework Contract FC474/EBSF-2010-08-124F 80 Investment (%) Loans for legal Loans for for individuals Portfolio entities individuals in the LIP (%)
TOTAL 613285.1 100 476181.4 144121.5 1 PRIVATBANK 93189.87 15.195 79558.32 19046.33 20 2 UKREXIMBANK 53630.81 8.745 48881.91 1095.03 2 3 OSCHADBANK 49234.79 8.028 39034.64 4614.52 9 4 UKRSOTSBANK* 30799.11 5.022 16212.76 17496.9 57 5 PROMINVESTBANK* 26872.16 4.382 23948.54 1192.72 4 6 VTB BANK 26774.67 4.366 25817.96 2715.89 10 7 OTP BANK 21093.38 3.439 11591.53 9399.54 45 8 ALFA BANK 18575.75 3.029 16560.12 4306.14 23 9 FINANSY I KREDIT 17158.58 2.798 13550.62 3815.62 22 10 NADRA 16685.74 2.721 8568.87 12547.63 75 11 PUMB 12672.58 2.066 9763.36 3111.54 25 12 BROKBUSINESSBANK 11092.38 1.809 8364.82 2382.99 21 13 CREDITPROMBANK* 10784.91 1.759 7486 2525.59 23 14 FORUM 9692.43 1.58 8900.71 3889.05 40 15 PIVDENNY* 8246.29 1.345 7458.22 885.24 11 16 SVEDBANK 7958.36 1.298 8167.25 5427.42 68 17 SBERBANK ROSSII 7900.08 1.288 7397.06 1221.49 15 18 DELTA 7607.46 1.24 6732.24 3468.59 46 19 ING BANK UKRAINE 7599.73 1.239 6412.82 97.9 1 20 UKRGAZBANK 7579.05 1.236 5881.01 2517.64 33 Source: prepared by MDI based on materials of http://aub.org.ua/ Million UAH, 1st January 2011 As a result of interviews conducted with representatives of FORUM, Alfa-Bank, Raiffeisen Bank Aval, Ukrsibbank, it was noted that after the financial crisis of 2008 lending activity for individuals and small and medium enterprises was suspended by most of the abovementioned banks. Revival of this activity started only in early 2011. Detailed summary of the interviews with the banks is provided in the Annex 45 Currently, none of the abovementioned banks had in their credit portfolio, lending products for investments into energy efficiency of residential houses. Nevertheless, the banks have expressed their interest in providing funding for residents for houses' energy efficiency improvement measures. In terms of lending to individuals for energy efficiency investments, virtually all the banks that were interviewed have loan products for the purpose of repairs or equipment procurement. The main condition of such loans is real estate collateral (housing, etc.). Interest rates for such loans range from 15.6% to 29% per annum, with maturity term of 7-15 years. Practically all banks offer lending to individuals for investments in the individual residential houses without differentiating of the purpose of lending – for general repairs or for energy efficiency measures. For business entities involved in sale of equipment and materials, some banks offer conditions of lending for individuals-clients of such sellers under the pledge of this equipment. As for selling materials (such as insulation materials, mixtures, etc.), some banks are willing to consider lending conditions for individuals for each client-supplier of such materials. This loan allows suppliers of equipment and materials to offer to their customers deferred payment for the period of 3 years. Interest rates on such loans are at least 36% per annum.
Framework Contract FC474/EBSF-2010-08-124F 81 Thus, none of the banks is ready to lend to condominium associations as to legal entities. This is primarily due to the non-profit status of condominiums and lack of collateral for the loan. A barrier for lending to condominiums under non-collateral conditions is the legal uncertainty of the procedure of the condominiums' debt collection from its members and non-members. Lack of a clear, step by step procedure for collecting debts deters banks in offering financial products for condominiums as the borrower. Representatives of banks expressed the following vision of the necessary steps on the part of the government and legislators for development of the condominiums lending market: Stipulation in legislation of Ukraine of the procedure of debt collection by condominium from their members under loan obligations; The state's definition (for example, by central executive authorities in housing and communal economy and the construction sphere) of model energy efficiency projects for various typical models of residential houses and the kit of construction, permit documents needed to implement the proposed measures. Specific features of the bank loans to the condominium associations are described in Annex 47.
5.1.3 Other Financial Institutions – Leasing Companies, Credit Unions Ukraine has experience of implementing energy conservation projects in housing involving credit unions for their implementation. Lviv region, in particular, has such experience, as described above. Unfortunately, the consultants do not known any examples of funding of energy efficiency measures by leasing companies. However, leasing companies could potentially be providers of funding for energy efficiency measures in housing. Representatives of Raiffeisen Bank Aval and ALFA BANK expressed their desire to develop the direction of financial leasing for energy efficiency needs in the housing sector.
5.1.4 Building Managers Building management can be implemented by its owners, co-owners, or by the “balance sheet holder”. Legislation sets no limits on such activity. Building management rules only require compliance with these conditions in the management process: The person who manages the house shall open an account in a banking institution to receive and to make payments for housing and utility services for each separate object commissioned to his/her management. In order to accumulate funds for carrying out current and capital repair, the person managing the building shall open separate savings accounts. Therefore, management functions may be performed by any business entity of any legal form of ownership and with the activity scope that includes residential buildings management. Today in the Ukraine there are many housing maintenance enterprises that operate under the management contracts. However, as of now the authors are not aware of any cases of executing management contracts that can serve as a Model Agreement. As noted above, consumers usually execute contract with the management company for providing maintenance services for buildings, structures and adjacent territories. As was mentioned in the press56, according to data of the Ministry of Housing, the number of commercial companies in this market of residential buildings managers is shrinking, and with no
56 http://www.prostobiz.ua/layout/set/print/layout/set/print/biznes/biznes_start/stati/ v_2011_chastnye_zheki_stanut_vygodnym_biznesom_dlya_krupnyh_kompaniy
Framework Contract FC474/EBSF-2010-08-124F 82 more than 500 companies operating today. This phenomena is very likely due to the set of strict rules defining the management fees as the sum of money paid by the customer in addition to the cost of other communal services, which in a building include: Centralized cold water supply and wastewater collection ; Centralized heating and hot water supply; Maintenance of buildings, structures and adjacent territories (individually or within the service of SDW management); Electricity supply Natural gas The cost of each of these services above may include the additional cost that must be reimbursed via manager's fee. This system does not provide for clear distinction between the costs communal services and the cost of management. This creates preconditions for slow payments to the manager and thus in low interest for such activity from the side of managers. Another obstacle for development of the building management market under the current Model Agreement, is that management fees are not included into the list of services covered by housing subsidies and privileges. Interestingly, housing market participants also point out to the problems and barriers for the housing management market entry57 In the environment where a different tariff for utilities and communal services apply to individuals and to legal entities, some adverse situations may be created by introducing a building management entity. When tariffs for individual residents are lower then for businesses, individual users pay the lower tariff, while the management entity must pay to the supplier at the “business” tariff which is higher, thus ending losing money. In another words, the housing maintenance company has to pay to the natural monopoly more than it can charge from residents. The cost of entry into this market for a new stakeholder is relatively high. According to some practitioners, the cost of getting into the business is approximately 50 thousand Euro (500 thousand UAH). These funds must be used for renting premises, office equipment, training of personnel and purchase of necessary equipment. The level of investments for purchase of equipment depends on the scope of work to be performed in a certain city. Currently, houses, buildings and adjacent territories maintenance services are defined according to Resolution of the Cabinet of Ministers of Ukraine of 20.05.2009 No. 529, and the fee for such services does not ensure compensation for operational costs, thus housing maintenance companies cannot timely carry out all the scope of work planned and ensure profitable activity. Overhead associated with maintenance costs of a single house are quite high and virtually prohibit a “single building operation”. Market participants estimate that in order to break even and potentially make profit, it is necessary to manage a territory in a rage of 500 thousand m2 to 1.2 million m258 in a single city. Some experts claim that the profitability of this activity in 2010 was only 6%, so the ROI period is very long. For arrangement of organizational aspects of such a market, one needs more than one calendar year.
57 http://www.prostobiz.ua/layout/set/print/layout/set/print/biznes/biznes_start/stati /v_2011_chastnye_zheki_stanut_vygodnym_biznesom_dlya_krupnyh_kompaniy 58 http://www.prostobiz.ua/layout/set/print/layout/set/print/biznes/biznes_start/stati/ v_2011_chastnye_zheki_stanut_vygodnym_biznesom_dlya_krupnyh_kompaniy
Framework Contract FC474/EBSF-2010-08-124F 83 5.1.5 Market of Energy Efficiency Equipment Suppliers The number of economic entities involved in energy efficiency of residential buildings is rather substantial. In the field of “thermo-modernization” of buildings, the major market participants and the organizations that shape it are Henkel Bautechnik (Ukraine), Danfoss, Knauf Insulation Ukraine, and ROCKWOOL Ukraine. These companies have a broad regional representation and offer a wide range of products. The Ukrainian Association of "Foam Plastic Manufacturers", a non-profit organization representing interests of the leading Ukrainian producers of foam polyester (Styrofoam) insulation59. This association and the Industrial Marketing Agency are implementing the social project TeploDoma (http://www.teplodoma.org). Within the project, it is possible to obtain the list of companies in any region of Ukraine involved in insulation activity. Analysing information materials of the abovementioned manufacturers regarding their activities in Ukraine, we can conclude that all of them position themselves as active participants in the thermo modernization market and actually develop this business through marketing tools. This clearly demonstrates their interest in the energy conservation market in the Ukrainian housing sector. Information about businesses in the market of windows, doors and facade constructions production is contained in the thematic catalogue "Facade-Info"60. All of them are potentially interested in developing the energy efficiency market in the housing sector. International manufacturers of energy conservation equipment and technologies are promoted in the market of Ukraine by the trade missions of the countries that were described above. Most of the abovementioned companies implement projects in individual housing construction. The main obstacle for companies, suppliers of equipment and materials for energy conservation in apartment buildings is lack of a collective customer for their services.
5.1.6 Market of Energy and Other Services Suppliers The supply of energy, utilities and housing maintenance services are provided in the Ukraine by enterprises in municipal or in private ownership. Their interest and capacity to support energy efficiency by funding improvements through service fees directly depend on the possibility of recovering the investment through tariffs. Summary of information on pricing procedures provided in Exhibit 37 for supply of energy and other resources and provision of communal services described above, it can be concluded that among businesses there is a general interest to implement the following energy efficiency measures in residential buildings: Exhibit 37: Summary of pricing procedure for investment recovery
Type of investments in the Compensation source / No Sphere of activity residential building regulatory act 1 Water-supply Purchase and installation of in- The tariff on centralized water supply and building water meters; sewage services / Resolution of the CMU No 959, NERC Decree No. 243 of 02.17.2011 "On Approval of the Tariffs Setting Procedure for Centralized Water Supply and Wastewater collection " (not enacted) 2 Wastewater collection - - 3 Heat generation produced Installation of thermal power The tariff on electricity and heat produced
59 http://aspp.com.ua 60 http://fasadinfo.com
Framework Contract FC474/EBSF-2010-08-124F 84 Type of investments in the Compensation source / No Sphere of activity residential building regulatory act at thermoelectric power generation systems for residential by CHPs, NPPs and using alternative or stations, nuclear power houses using alternative or renewable energy/NERC Decree "On plants and using renewable energy sources Approval of the Calculation of Tariffs on alternative or renewable Electric and Heat Energy Produced by energy sources (for CHPs, NPPs and Using Alternative or business activity) Renewable Energy Sources" No. 896 of 12.10.2005 4 Thermal energy supply Purchase and installation of in- Tariff for heat / Resolution of the CMU No. building heat meters; 959 (for entities under 20 Gcal/hour, NERC Resolution of 17.02.2011 No. 242 "On Approval of Heat Tariffs, heat generation, transportation and supply" (not enacted) for entities above 20 Gcal / h 5 Providing CH and HWS Purchase and installation of in- Tariff on CH and HWS services / services building heat and hot water meters. Resolution of the CMU No.959 Replacement, reconstruction of in- building CH and HWS networks Installation, reconstruction, modernization of ETIs Installation, replacement, reconstruction of water pumps 6 Providing maintenance Investments in installation electrical Tariff maintenance services for buildings, services for buildings, meters in public places, elevators, structures and adjacent territories / structures and adjacent installation of energy saving Resolution of the CMU No.529 territories equipment in the housing stock; performance of energy saving measures for the winter period, investments in street lighting facilities (cost limitation – 2500 UAH – this amount is the cost criteria for attributing the tangible asset of MNTA according to the Tax Code of Ukraine for tax purposes) 7 Electric power supply for - - population 8 Gas supply for population - - Subject to possibility of recovering investment through tariffs, enterprises should be interested in investing in energy conservation. However, there are several reasons why companies are not actually interested in implementing investments in energy efficiency in residential buildings and in implementing energy consumption metering for accounting purposes:
5.1.7 Summary of Findings Heat supply companies, who in most cases also operate distribution network, provide heat for space and water heating to residential houses based on a “normative tariff” determined for a square meter of heated space and occupancy. The heat supplier is not interested in implementing heat supply metering, as it may reveal the real energy consumption and the level of loses, which could potentially have a detrimental impact on the financial situation of the company. Use of normative consumption in the network for the majority of heating enterprises are defined according to standards (KTM-204). Data of numerous energy audits have recently shown that the average heat losses in heat networks during the heating season is not less than 17% of heat supplied to the network and at least 29% - in the non-heating season (summer). As
Framework Contract FC474/EBSF-2010-08-124F 85 only 13% of the heat entering the distribution system is allowed to be included in calculation of tariffs, this creates an anti-incentive for introduction of heat metering. Metering of heat consumption at the input into a residential building usually leads to discovery of significant differences between the planned and actual volume of thermal energy consumption. The Tariff Setting Procedure (RCMU No.955) provides for the normative method of planning thermal energy volumes for heating in the building. While actual sales of heat (based on data of at least 50 district heating companies) appear to be 20-30% smaller than assumed values. This leads to the need for recalculation of consumers' fees, which in the case of one-tier tariffs has a negative financial impact, since companies could not fully cover their fixed costs. The thermal energy producer, which is simultaneously the heat transporter, supplier of water and DHW services in a house is not interested in establishing in-building hot water metering either, if he buys cold water for hot water supply needs. Accounting of hot water consumption at the input into the residential building in many cases would reveal extra-normative losses of hot water both at the stage of its transportation and in buildings. Despite the legal opportunity (according to RCMU No.955) to include into the tariff on provision of centralized hot water supply services normative heat and water losses in networks of centralized hot water supply systems, in practice it does not happen. Water and DHW services provider in a residential house, when investing into systems inside the building, must capitalize costs of these investments on its balance sheet, which, from the legal point of view, is not described in the modal contract for provision of the respective services. Accordingly, there are no standard regulations for the property right on assets created by investing into energy efficiency of a building. In case of termination of the contract between the service provider and consumers, investments into the object owned by co-owners of the apartment house acquire a legally uncertain status, and, therefore, creates potential problems in accounting and taxation. The heat supplier in case of a failure to provide services or failure to provide them in full or in lower quality, have no possibility to recalculate the cost of supply for individual apartments in case where the supply to the building is metered.61 In the case of water supply and wastewater services, the water supply company is unable to recover cost if a leak is inside the house62. The water supply company has no resources to update in-building water-supply systems up to technically acceptable conditions and to prevent leaks. The costs of current repairs and maintenance are part of the tariff on building maintenance services. Thus, the water-supply company does not have economic means to influence housing and service companies in case of poor maintenance of the water system within the buildings. There is no clear answer in legislation regarding the possibility of reimbursement of costs in case of installation and operation of, for instance, heating systems based on alternative energy sources63.
61 RCMU of 02.17.2010 No.151 "On Approval of Rules of Recalculating the Centralized Heating, Hot and Cold Water Supply and Wastewater collection Services Fee in the Case of a Failure to Provide Them or their Incomplete Provision, Provision at a Low Quality Level" 62 RCMU No.630 of 21.07.2005 "On Approval of Rules of Providing the Centralized Heating, Hot and Cold Water Supply and Wastewater collection Services and the Model Agreement for Provision of the Centralized Heating, Hot and Cold Water Supply and Wastewater collection Services" 63 "Alternative energy sources – renewable energy sources, which include solar energy, wind, geothermal, tidal and wave energy, hydropower, biomass, gas from organic waste, gas of sewerage treatment plants, biogas and secondary energy resources, which include blast furnace and coke gases, coal beds methane gas drainage, technological processes discharge energy potential conversion", the Law of Ukraine "On Alternative Sources of Energy", No.555-IV of 20.02.2003
Framework Contract FC474/EBSF-2010-08-124F 86 5.2 FUNDING SOURCES
5.2.1 Funding from State and Local Budgets Review of the practices of funding capital activities from the state budget (including energy conservation activities)64 in residential houses indicates that most of the funding of certain capital activities does not have clear requirements for co-funding by co-owners within the framework of the first post-privatization capital repair of the buildings. Quite typical is also allocation of funds to cities, ignoring the needs of co-owners of apartment houses located in villages and townships. One can also observe that the legislator refer to the apartment buildings with privatized apartments without a condominium association or HCC as to "state- and municipally-owned buildings". Certain positive, albeit insufficient, progress can be observed only in 2010. Resolution of the Cabinet of Ministers of Ukraine of June 16, 2010 No.461 adopted the "Procedure of Using the Stabilization Fund Allocations for Implementation of the National Program for Reforming and Development of the Housing and Communal Economy in 2009-2014 and National Program "Potable Water of Ukraine" for 2006 – 2020", which defines the mechanism of using the allocated funds in 2010. According to paragraph 5 of the Procedure adopted with Resolution of the Cabinet of Ministries in June 16, 2010 No.461, budgetary funds were allocated for implementation of the National Program for Reforming and Developing the Housing and Communal Economy in 2009-2014, including: Repayment of budgetary accounts payable for work already approved following the specific programs and already implemented during the 2007-2009 period under the budgetary programs "Repair and Reconstruction of Heating Networks and Boilers", "National Program for Reforming and Developing the Housing and Communal Economy", and "Compensation of the Interest Rate on Loans Aimed at Energy Conservation Projects Implementation in the Housing and Communal Economy"- amounting to 41 350 thousand UAH. These funds were provided for specific purposes and noted in Resolution of Cabinet of Ministries No _____. Reconstruction and capital repair of apartment houses using energy-efficient technologies and equipment (repair or replacement of elevators in disrepair) – amounting to 43 653 thousand UAH; Reconstruction of centralized water supply and wastewater collection systems using energy saving equipment and technologies – amounting to 84755.3 thousand UAH; Energy-efficiency, development and reconstruction of heat supply systems – amounting to 151 712 thousand UAH; Providing state support for investment projects' implementation: Technical upgrading and capital repair of residential buildings (put into operation before January 1, 1989), in which they create new or there are already operating condominium associations – amounting to 105.742.5 thousand UAH; Technical upgrading and capital repair of elevators in the residential buildings, in which they create new or there are already operating condominium associations – amounting to 40.909.2 thousand UAH; Ensuring broad public support for the state policy of reforming and developing the housing and communal economy – amounting to 650 thousand UAH;
64 The conclusions are mainly built on results of the MDI study in the course of performing the research project "Development of Methodological Guidance for Organizing the First Capital Repair of an Apartment Building by Its Owners, Co-Owners and the State through the Co-Financing Mechanism (final), 2010" prepared by LLC "MDI" under the contract with the Ministry of Housing and Communal Economy of Ukraine.
Framework Contract FC474/EBSF-2010-08-124F 87 Implementing pilot projects in the housing and communal economy aimed at improving the housing stock management system, reducing of relative indicators of use of energy and material resources, including introduction of alternative energy sources and fuels use – amounting to 20.000 thousand UAH, of which 10 % – for production of project estimates (the "working draft" phase). The funding of all projects was done only on a non-refundable basis pursuant to the procedures that were approved by the consequent decrees of the Ministry of housing and communal economy of Ukraine. According to the State Agency for Energy Efficiency and Energy Conservation, and as mentioned by Mykola Pashkevich during the press conference "Results of the Agency's Operation in 2010 Implementation of Priority Reforms in 2011", the government of Ukraine will launch the preferential loan program which will encourage all individuals to introduce energy efficient technologies. According to preliminary estimates, such a step will make it possible to reduce use of heat energy in routine activity by 5.2% of the current consumption rate water consumption by 4.8% of the current consumption rate, electricity consumption by 3.7% of the current consumption rate. In Ukraine, preferential loans will also have the form of interest repayment under loans. "We will initiate the respective amendments to the Energy Efficiency Program for 2010-2015, so that next year we could start reimbursement of the interest under loans"65.There are also a number of local initiatives implemented in Ukraine. One of the initiatives that should be described is the Energy Conservation Program for population of Lviv region for 2009 - 2012 years66. This is a specialized program focused on improving efficiency and reducing use of energy resources by population. The program's objective is implementation of a set of measures for thermo-insulation of buildings and alternative energy supply67. This program was based on a previous program called “Energy Conservation Program” for the public sector and population for 2006-2008, and has used the same mechanism, which is described below.
Within implementation of the regional Energy Conservation Program for the public sector and population for 2006-2008, for the first time in Ukraine an effective mechanism to stimulate energy efficiency measures has been developed. The essence of this mechanism is that the regional budget would reimburse the borrowers who received a loan for energy conservation measures 15% of the interest rate. Only individuals could participate in this mechanism and apply for reimbursement of the interest rate68.
For practical implementation of this mechanism, the Procedure of Interest Reimbursement for loans obtained by individuals for implementing energy conservation measures was developed and approved with the order of the Head of the Regional State Administration. According to this Procedure, reimbursement of interest shall be carried out on the basis of the General Cooperation Agreement between the main manager of regional budget funds allocated for funding energy efficiency measures and the loan and financial institution. Reimbursement of interest on loans shall be offered for implementation of the following energy conservation measures:
65 http://naer.gov.ua/archives/3654 66 http://www.loda.gov.ua/ua/priorities/energysaving/Programs/ 67 In this section, we use materials prepared by MDI for IBRD and described in the Report “Municipal Energy Efficiency Market Assessment in the Selected Ukrainian Cities VOLUME 1: General Review of the Technical Potential and Cost-Effectiveness of Energy Efficiency Improvements and Key Barriers in the Municipal Sector of Ukraine, 2010” 68 http://www.loda.gov.ua/ua/priorities/energysaving/Programs/
Framework Contract FC474/EBSF-2010-08-124F 88 Insulation of the building's walls, floors, roofs and attics. Installation of heat recuperators. Installation and replacement of windows, entrance doors and window and balcony constructions. Installation and reconstruction of electric heating based on energy-efficient technologies. Installation and reconstruction of individual heating systems, including natural gas alternatives. The measures would be implemented by a contractor chosen by the borrower. It could be any company that provides such services. During the term of the previous program (2006 – 2008), population received 5 320 loans totalling of more than 44 million UAH (about 8,300 UAH per loan in average), and compensation payment amounted to 3.3 thousand UAH (about 617 UAH/loan).. During 2008, there was a clear trend to increase the number of loans and their amount, indicating increased confidence of population to the state, as well as that people were increasingly more inclined to complex resolution of energy-efficiency problems. The regional budget compensated the borrower 15% of the interest rate for conventional energy conservation measures (insulation of walls, replacement of windows, doors) and 20% - for measures aimed at implementing alternative energy sources use. The loans were provided by credit and financial institutions defined as operators under the program. The most active operators during 2006-2008 were: Oschadbank, Bank Lviv, Kredobank, as well as the credit unions "Anisia", "Vygoda", "Samopomich." The commercial interest rates for energy efficiency loans during this period were 24.9% per annum and above, the resulting rate for the borrower to pay was 9.9% per annum and above69.
The report70 of the Head of one of rayons of Lviv region on implementation of the Program for Socio-Economic and Cultural Development of Gorodok Rayon in 2010 contains information on implementation of the regional energy-efficiency program in 2010. Thus, the report states that the Energy Conservation Program for population of Gorodok rayon in 2010-2012 envisages reimbursement for Program operators of 15% of the interest rate from the regional budget and 10% of the interest rate from the rayon budget, general agreements were signed between the Rayon State Administration and credit and financial institutions, namely: CCU "Anisia" (40% per annum), CC "Lvivska" (30% per annum), CC "Vygoda" (34% per annum), JSCB "Lviv" (24.9% per annum) and Oschadbank (30% per annum), loans were extended for the total amount of 587.8 thousand UAH for 91 residents of the rayon. The average loan amount is 6.5 thousand UAH, reimbursement from the rayon budget is 5.0 thousand UAH. The general problem that currently impedes creation of public-private partnership at implementation of energy-efficiency projects in the residential sector is the short term of budgetary support (3 years provided budgetary program implementation) and the annual changes in terms and procedure of budgetary funding according to the law on the state budget for the current year. Since implementation of capital measures in residential buildings provided their funding from the budget requires meeting a large number of compliance requirements for the design and
69 http://www.banklviv.com/page/ua/personcredits/ 70 http://www.gorodok-vlada.gov.ua/engine/2011/03/09/zvit-golovi-gorodocko%D1%97-rajderzhadministraci%D1%97-pro-vikonannya- programi-socialno-ekonomichnogo-ta-kulturnogo-rozvitku-gorodockogo-rajonu-za-2010-rik/
Framework Contract FC474/EBSF-2010-08-124F 89 compliance with the construction funding plan, the annual change in terms of allocation of budgetary funds actually does not allow state authorities and local self-governments bodies to implement a large-scale project to support energy efficiency in the residential sector. This requires creation development of a special state support mechanism. One of possible mechanisms for such support could be, for example, initially, the Energy Efficiency Fund in the form of a public law financial institution.
5.2.2 International Development Assistance - Grants Currently, a number of international technical assistance projects are being implemented in Ukraine, providing for co-funding of projects in the housing sector. Most of the programs are intended to support condominium associations and involve co-funding of projects. In Ukraine, a number of active trade missions of European countries are actively working to support creation of comfortable, safe, environmentally friendly products and energy-efficient technologies, as well as environmental awareness. The Netherlands-Ukraine sustainable energy platform supported by the State Agency of the Ministry of Economy of the Netherlands (NL Agency) recently suggested the possibility of funding (partial) for development of a feasibility study for projects in the energy conservation, energy efficiency and renewable energy sources use spheres. For this purpose, the representative office of NL Agency in Ukraine has announced a competition for selection of innovative energy efficiency projects. As a result of the competition, two (2) projects will be selected, for which Dutch experts in cooperation with Ukrainian partners will free-of-charge draft project estimates (business plan). One of key aspects of the documents is preparing the project for obtaining funding and working on criteria for potential creditors and investors. The cost of drafting the feasibility studies will be covered by the Netherlands counterparts. Participation in the competition is open to Ukrainian companies, organizations and municipalities that have projects in the sphere of energy conservation, energy efficiency, waste recycling and alternative energy sources that require a feasibility study. The Swedish Trade Council promotes export of goods, products and services from Sweden. It supports development of Swedish companies in international markets. Main activities – export information, export development, export consulting. http://www.swedishtrade.se/om- exportradet/in-english/ Norway – Ukraine Chamber of Commerce (NUCC) – a non-profit nongovernmental organization that offers assistance to Norwegian and Ukrainian companies in developing their trade and economic relations and investment projects. NUCC was founded in 2008 and since then the association has successfully expanded its membership and contact base, as well as has contributed into establishing new contacts and exchange of experience among existing and potential investors. http://www.nucc.no/nuhk-ukraine.aspx The European Ukrainian Energy Agency (EUEA)71 was established as a joint platform for representatives of politics, economy, science, financial institutions and consulting companies in Ukraine and Europe. The aim of the Association is to promote information exchange, making needs meet available resources in all areas of renewable energy and energy efficiency technologies, providing business support through legal and legislative initiatives. The Association aims to become the main partner in the energy sphere of Ukraine and make an effective contribution into environmental and coherent energy policy.
71 http://euea-energyagency.org/
Framework Contract FC474/EBSF-2010-08-124F 90 Co-funding by donors of projects in residential houses is planned and realized within the framework of such projects: "Municipal Heating Reform" project, USAID (http://mhrp.org.ua) "Energy efficiency in buildings" project, GTZ (www.eeib.org.ua) UNDP in Ukraine. Lists the project of UNDP in Ukraine, which cover four main areas: Prosperity, Poverty reduction and MDG's; Democratic Governance; Local Development and Human Security; Energy and Environment. Publishes UNDP reports, project updates, etc. http://www.undp.org.ua/ "Energy Efficiency: Local Partnership Initiatives" Project is aimed at supporting partnerships of local authorities and communities to improve energy efficiency /East Europe Foundation (EEF) – the international charitable organization founded by the Eurasia Foundation. The list of projects covering energy efficiency http://www.eef.org.ua/index.php?page=catalog&id=77&pid=1&prj International Renaissance Foundation and the list of projects on energy efficiency http://www.irf.ua/index.php?option=com_content&view=article&id=28186&Itemid=425 EU Delegation in Ukraine, with the list of projects, including demo projects in partner cities. http://ec.europa.eu/delegations/ukraine/projects/overview/index_en.htm. Netherlands-Ukraine Energy Platform supported by the State Agency of the Ministry of Economy of the Netherlands (NL Agency) www.nusep.org.
5.3 CAPACITY AND WILLINGNESS OF RESIDENTS TO FUND INVESTMENT NEEDS Capacity and willingness of residents to fund investments in energy efficiency was evaluated through conducting three focus groups of residents of apartment buildings with a process structured around the issues of enhancing energy-efficiency in the housing sector. Focus groups were held in Kyiv during the March-April, 2011 using the method of qualitative analysis based on focus group discussions. The objectives of the survey included obtaining residents' interpretation of the concept of "energy-efficiency" as applied to apartment houses, assessing the level of respondents' awareness of energy-efficiency measures and their costs, examining opinions of target groups representatives about relevance of the problem of energy-efficiency enhancement in the housing sector in Ukraine. An important objective was also to understand the residents' vision of the role of stakeholders in the energy efficiency enhancement process. The main focus of the discussion was on defining residents' readiness to fund implementation of energy- efficiency measures. The process and results of the focus groups are provided in a separate report, and this chapter offers the summary of main results. Focus group discussions were held with the following population categories: 1. Low-income citizens (including unemployed and retired citizens) – 9 persons; 2. Middle-income citizens (in particular, representatives of the budgetary sector – medical and teaching staff, further referred to as – budgetary employees) – 9 persons; 3. Citizens with incomes above the average (company top managers, managers, further referred to as – business representatives) – 10 persons. The main results from all three focus groups are summarized as follows: Interpretation of the "energy efficiency" concept: Interpretation of the term "energy efficiency" appeared to be problematic with a part the respondents. Budgetary employees and business representatives formulated this concept more clearly than low-income participants. Energy efficiency as applied to a house is seen by them as a condition for ensuring the necessary comfort of living at the lowest possible costs, and without wasting resources. Part of
Framework Contract FC474/EBSF-2010-08-124F 91 the low-income focus group participants understood energy efficiency rather narrowly, associating this term solely with energy conservation and reducing payments for it, without understanding of the energy conservation process. Awareness of energy efficiency measures and their cost: Almost all focus group participants have some ideas about what energy efficient measures may be. People were aware of some energy efficiency measures and their cost either from their own experience, or from friends, relatives and neighbours. Only few of them claimed to have heard or read “something” about energy efficiency in mass media. One woman expressed gratitude to organizers for the invitation to participate in the focus group, as in the discussion process she had learned so much new and interesting information. The most popular energy efficiency measures ensuring thermal comfort is replacement of windows, entrance doors and walls insulation. Thermal insulation of the roof or the basement as an energy efficiency measure was suggested by only a few respondents. Installation of an individual heat source (local heater or apartment boiler) as an energy efficiency measure was not mentioned by any of the participants. For many respondents, an important energy efficiency measure is the ability regulate/control heating supply inside the apartment, for example, by installation thermostatic valves. Some representatives of low-income categories and businesses believe that enhancement of energy efficiency and energy conservation can be provided by apartment level heat supply metering, which will make it possible to pay only for heat consumed, not the "mythical" square meters. Evaluation of perceived urgency of the energy efficiency and energy conservation issue for population of Ukraine. According to the overwhelming majority of respondents, population is not very serious about the issue of energy efficiency and energy conservation. Participants explained such situation in different ways. Some believed that in current challenging conditions people are concerned more about more pressing issues, such as plain survival. Others attribute low interest in energy conservation to the long-lasting habit of negligent use of resources due to their availability and low cost. Although the majority of focus group participants believe that an incentive to improve energy efficiency of the housing sector is increasing the cost of the energy for population, some respondents believe that it is also necessary to inform residents about the role of energy conservation and enhancing energy efficiency in the context of protecting the environment and preventing climate changes. Participation of the state, local authorities, utility companies and population in improving energy efficiency of the housing sector: A significant part of respondents could not offer clear answers to what should be done by the state, local government and utilities to improve energy efficiency. Their recommendations regarding involvement of authorities were mostly declarative and superficial. At the same time, a part of business representatives rather negatively assess actions of the state in the field of enhancing energy efficiency. Some participants would expect from the state improvement of the legislative framework for enhancing energy efficiency at all levels and activation of awareness activity in key energy conservation issues. The majority of respondents in all focus group attributed a decisive role in improving energy efficiency to residents. Participants living in cooperative houses and the houses where condominium associations have been created, based on their experience, believe that the future role in enhancing energy efficiency belongs to condominium associations. This opinion was supported by many participants. Readiness to fund implementation of energy efficiency measures: The majority of focus group participants of all categories are ready to invest in energy efficiency projects for apartment houses. The most appropriate funding terms for low-income residents and budgetary employees are instalment or a loan for the period of up to 4-5 years, while for business representatives it was for the period of from six months to one year. Less than half of business representatives are
Framework Contract FC474/EBSF-2010-08-124F 92 ready to pay the cost of improvements as a lump sum. Some respondents from among low- income residents and budgetary employees expect state participation in financing of energy efficiency enhancement or expect that state should provide guarantees for contractors' performance. Residents of buildings with condominium association are the “absolute supporters” of residents' participation in funding of energy conservation measures.
Framework Contract FC474/EBSF-2010-08-124F 93 Framework Contract FC474/EBSF-2010-08-124F 94 6. FINANCING MODELS
This section analyses potential financing models that can be used to provide financial resources for implementing energy-efficiency measures in residential building stock in the Ukraine.
6.1 GENERAL MODELS The Consultant has prepared several financing models, which can be presented under the following main categories: Credit line models Energy-Efficient Revolving Fund model ESCO model Each model is described in the following chapters. It should be noted that these models shall only be considered as a guide for the costs and benefits from the energy-efficiency investment. The calculations were made based on the following tariffs valid currently in Ukraine, as presented in Exhibit 38: Exhibit 38: Energy tariffs used in financing models Gas, Heat, Electricity, Tariff per m3, per kWh per kWh, average1) average2,3) average4) UAH 1.5 0.22 0.22 Euro 0.13 0.02 0.02
1) – tariffs for gas for the population in Ukraine are differentiated depending on the volume consumed for the previous year. Thus, for example, the consumers which use less than 2,500 m3 per year have tariff 0.72 UAH/m3 if there is installed meter, and 0.79 UAH/m3 of there is no meter installed. The consumers of gas from 2,500 – 6,000 m3 per year shall pay 1.1 UAH/m3, over 6,000 m3 per year – 2.25 UAH/m3 and over 12,000 m3 per year - 2.68 UAH/m3. 2) – tariffs for heat for the population in Ukraine are formed by each community. The Ministry of Energy of Ukraine publishes the heat tariffs for each Oblast centres, which vary from 122 UAH/MWh (142 UAH/GCal) to 344 UAH/MWh (400 UAH/GCal). 3) – tariffs for heat expressed in UAH/GCal are recalculated to UAH/kWh. 4) – tariffs for electricity for the population in Ukraine vary depending on a number of factors: on availability of district heating in the area, location of the object (rural areas), installed in the building electrical cooking stoves. The tariffs very from 0.18 UAH/kWh to 0.24 UAH/kWh. Energy tariffs are gradually growing in the Ukraine, so in the future the economic benefits from the implemented energy-efficient measures will be even more attractive for the residents.
6.2 CREDIT LINE MODELS Credit Line financing is the most typical model for financing energy-efficient projects, especially in the residential sector. A number of loan facilities for residential sectors in Slovakia (SLOVSEFF) and Bulgaria (EBRD Residential Energy Efficiency Credit Line) showed a large success of such a model. However, considering the legal arrangements, the situation in Ukraine is far behind other countries, such as Slovakia, creating a number of obstacles for attracting loan funding in energy- efficient projects in the residential sector. So far no bank in the Ukraine offers a product in the
Framework Contract FC474/EBSF-2010-08-124F 95 Ukrainian market for energy-efficient improvements. Interviews with the banks showed the following main obstacles: A Condominium Association (CA) is not treated as a viable borrower, since the Ukrainian Law does not give clear procedure on collecting debts by the CA from the individual owners. The CA market is considered by the local bankers as small for now – 12,000 CA are registered in the Ukraine, and yet the banks are not very interested to develop new product for such a market. However, the Government is actively promoting establishing CA’s in the Ukraine and it is expected that by 2014 this numbers will increase dramatically. Residential EE in multi-storied apartments is perceived to be a social project, which has to be supported by state and developed by state. Since flat owners have very different income in one building, low income residents may be an obstacle for EE investment; pensioners are viewed as the group that does not care about investment at all; so it is expected that this sector may offer very low profit; Usually simple investment payback period of retrofit investments exceed 5 years, while the bank has no long term capital in UAH; At the same time, the local Banks are interested to penetrate this market and do not see the obstacle to sign loan agreements with each apartment owner individually (similar to consumer loans with the apartment as collateral). Involvement of state banks, which would reduce the risks for the commercial banks for such loans, is also welcomed by the local banks. Advantages of Energy Efficient credit lines: credit lines are the most straightforward approach to financing the energy efficiency improvements, with good success rate, proven background, and are widely used internationally executed through existing network of professional lenders (commercial banks) credit lines with preferential loans (with advantageous interest rates) provide additional incentives for the population to invest into energy efficiency in their buildings develop the market for energy efficiency in residential sector: starting from the awareness raising among the population, developing demand for energy efficiency services and products, and ending with the development of interest towards energy efficient investments among the local commercial banks Disadvantages of Energy Efficient credit lines: uncertainty in energy savings require stable creditworthiness of the client (or provision of substantial technical assistance on development of the energy efficiency projects to the population to be able to develop project cash flow) depending on needed technical assistance in some cases the transaction costs may be quite high Preferential credit lines may support “artificial” demand for energy efficiency created by only by such incentives like soft interest rates or grant state support, depending on the level of such incentive. In terms of credit line financing, the following models can be considered by the Bank: Model N 1: Apartment Block connected to the District Heating System Model N 2: Apartment Block not connected to the District Heating System Model N 3: Individual apartment in the apartment block
Framework Contract FC474/EBSF-2010-08-124F 96 Model N 4: Single family house In terms of individual apartment in the block apartment buildings, the Consultant would recommend not to encourage insulation of the building envelope individually for each apartment – such arrangement is not attractive from aesthetical and architectural point of view. Besides, such arrangement was not very good in the National Grant Facility Program for residential sector in Bulgaria, so it was decided to drop such an option for individual apartments. In terms of a heating source for an individual apartment in the block apartment buildings, the Consultant would recommend not to encourage the switching off from the existing district heating and installation of individual gas boilers. During the recent years a lot of inhabitants disconnected themselves from the district heating networks and installed individual gas boilers at the level of the apartment, mainly due to poor district heating quality. This situation caused additional technical problems, destroying the district heating networks, carrying health risks for not proper venting the flue gases and overloading the capacity of existing gas distribution pipelines. The Ministry of Housing and Communal Services (Previously the Ministry of Communal Services of Ukraine) was repeatedly highlighting this problem and is taking actions to stop or hinder the process of unauthorized switching off from the district heating networks. 6.2.1 Model N 1: Apartment Block Connected to the District Heating System The assumption for this model is the apartment block, located in the climatic zone I of Ukraine (which includes most of the oblasts of Ukraine: Rivenska, Zhitomirska, Ternopilska, Chmelnitska, Vinnutska, Kyivska, Chernigivska, Sumska, Cherkasska, Poltavska, Kharkivska, Kirovogradska, Luganska, Donetska), built before 1980 and connected to the district heating networks. For the Apartment Block connected to the District Heating, the following measures could be suggested for the credit line application: Wall insulation: insulation of walls with, for instance, mineral wool to achieve the thermal resistance of the walls to be in accordance with the current Ukrainian building norms. For instance, in the climatic zone I the thermal resistance of the wall shall be minimum 2.8 m2∙К/W (or U-value 0.36 W/m2∙К). It means that the model building should have additional mineral wool or polystyrene boards insulation of approximately 100 mm. Initial investment is 360 UAH/m2 of outside wall. Roof insulation: insulation of roof with, for instance, mineral wool to achieve the thermal resistance of the roof to be in accordance with the current Ukrainian building norms. For instance, in the climatic zone I the thermal resistance of the roof shall be minimum 3.3 m2∙К/W (or U-value 0.3 W/m2∙К). It means that the model building should have additional mineral wool insulation or polystyrene boards 150-200 mm thick. Initial investment is about 300-350 UAH/m2 of flat roof excluding water proofing. New energy efficient windows: to correspond to the current building norms in the Ukraine for the climatic zone I the window in the building with more than 4 stories shall have thermal resistance minimum 0.5 m2∙К/W (or U-value lower than 1.8 W /m2∙К). To achieve this usually the double glazed windows shall have low emission coating and filled with inert gas (for instance, argon) according EN ISO 10077-1/2006. It can also be triple-glazed window with air filling but the gaps between the glazing shall be more than 12 mm. Initial investment is 800-900 UAH/m2 of new window. New automatic heating substation: such substation shall include central controller, which can regulate heat supply depending on the outside temperature and the day or night heat supply regimes. Such substation shall also include heat exchangers for the domestic hot water supply, circulation pumps, temperature controls. Besides this, such heating substation shall be equipped with the heat meter(s). The pipes in the heating substation shall be properly insulated to avoid the heat losses. Initial investment is – 90,000 – 100,000 UAH per block.
Framework Contract FC474/EBSF-2010-08-124F 97 Thermostatic valves on the radiators: it is assumed that the building has single pipe system with by-pass sections on each radiator. At the same time, most of the residential buildings in the Ukraine have single pipe system and such buildings should get additional technical expertise on selection of proper valves and balancing of the heating system to prevent disturbance of the heat distribution from apartment to apartment. It is also recommended to flush the heating system in the building (especially if it has not been done for years) before installing the thermostatic valves to avoid clogging of the valves with sediments. Initial investment is 250-350 UAH per radiator for TRV installed including balancing and cleaning the heating system. Replacement of lighting: it is assumed replacement of most used incandescent lamps 4-5 per apartment with CFL 15-20W. Initial investment is 35 UAH per lamp. The LED lamps are still too costly for average inhabitant with prices starting from 500 UAH per bulb. The Exhibit 39 presents the summarized economical results for this model: Exhibit 39: Assessment of EE measures for Model 1. Investments per Net savings Payback conditioned area per conditioned area EE Measures 2 2 2 [UAH /m . [€/ m . [UAH/m2] [€/ m2] [kWh/m ] [years] year] year] 1 Additional insulation of walls 144 12.5 32.8 7.2 0.6 19.9 2 New windows 92 8.0 27.0 5.9 0.5 15.4 3 Additional insulation of roof 80 7.0 12.8 2.8 0.3 28.3 4 New automated substation 23 2.0 9.8 2.2 0.2 10.7 5 Thermostatic valves 14 1.3 9.8 2.2 0.2 6.6 6 Indoor lighting replacement 2 0.2 4.9 1.1 0.1 2.0 Total 355 31.0 97.2 21.4 1.9 16.6 Based on the table above, the loans could be offered for the different set of measures, for instance: 1. Medium type loans: including package of measures such as: No 2. New windows, No 4. New automatic heating substation, No5. Thermostatic valves on radiators, and No 6. Lighting. (for 8,000 per apartment or about 700 EUR), which will have average pay back of 11 years 2. Total thermo - modernization type loans: including all measures from the table above. The current tariffs of 0.22 UAH/kWh will return the payback at level of 16 years. With average 60 m2 useful area per apartment, the average investment can be 21,300 UAH or 1,900 EUR per one apartment/household. The total savings of delivered energy (final consumption) is 46 %. The new EP (energy performance) indicator for the apartment building will be 112 kWh/m2 compared to the baseline energy consumption of 210 kWh/m2. For the apartment block with 60 apartments the investment for implementation of all EE measures per block will be about 1.3 million UAH or 115,000 EUR. Such investment should include big part of governmental subsidy to make the loan feasible for the inhabitants. It should be noted that some inhabitants have already replaced their old windows individually, and therefore would not be keen to re-invest in the new windows, even though with better thermal quality. Main economic assumptions to make the total thermo - modernization loans possible and feasible for the inhabitants: Lender: Credit line participating bank or local financial institution accepted as lender under the credit line conditions
Framework Contract FC474/EBSF-2010-08-124F 98 Borrower: Loan provided to group of individual apartment owners cooperating together through designated agreement or to CA (in case the Law defines clear mechanism for repayment the liabilities by CA); Equity level minimum 10 % (owners capital cash contribution) Grant level minimum 50% (state subsidy) available and payable on loan drawdown; Tenor up to 8 years (case dependent); Repayment: monthly annuities with no grace period Interest rate not more than 10% in euro. Loan should be determined according the risk evaluation of the client and project by the credit line participating lender. Higher interest rates will lead to increasing the state subsidy to keep loans feasible for the inhabitants; Technical assistance for the feasibility study/energy audit or preliminary design needed Technical assistance for determining the approved technologies, equipment and providers needed 6.2.2 Model N 2: Apartment Block Not Connected to the District Heating System The assumption for this model is similar to the previous one, but for blocks not connected to the district heating. Therefore the building envelope measures would be similar to the previous model. The measures for thermostatic valves would also be applicable for this model, while new automated heating substation measure will be replaced with: High efficiency or condensing gas boiler up to 300 kW: this measure also includes all necessary automatic controls allowing to regulate heat supply depending on outside temperature and day/night mode including preparation of domestic hot water. The tariff of 0.29 UAH/kWh used in this case is for consumers spending more than 12,000 m3 gas per year. The Exhibit 40 presents the summarized economical results for this model: Exhibit 40: Assessment of EE measures for Model 2.
Investments per Net savings Payback conditioned area per conditioned area EE Measures [UAH/m2] [€/ m2] [kWh/m2] [UAH /m2. [€/ m2. [years] year] year] 1. Additional insulation of walls 144 12.5 38.6 11.2 1.0 12.9 2. New windows 92 8.0 28.9 8.3 0.7 11.0 3. Additional insulation of roof 80 7.0 15.7 4.5 0.4 17.7 4. New high efficiency boiler 51 4.4 33.4 9.6 0.8 5.3 5. Thermostatic valves 14 1.3 12.0 3.5 0.3 4.1 6. Indoor lighting replacement 2 0.2 4.9 1.1 0.1 2.0 Total 383 33.4 133.5 38.2 3.3 10.0 Based on the table above, the loans could be offered for the different set of measures, for instance: 1. Medium type loans: including package of measures such as: No 2. New windows, No 4. New high efficiency boiler, No5. Thermostatic valves on radiators and No 6. Lighting (for 10,500 UAH per apartment or about 930 EUR) which will have average pay back of 7 years 2. Total thermo - modernization type loans: including all measures from the table above will give average payback of 10 years. With average 60 m2 useful area per
Framework Contract FC474/EBSF-2010-08-124F 99 apartment, the average investment can be 24,000 UAH or 2,125 EUR per one apartment/household. The total savings of delivered energy (final consumption) is 52 %. The new EP (energy performance) indicator for the apartment building will be 123 kWh/m2 compared to the baseline energy consumption of 256 kWh/m2. For the apartment block with 60 apartments the investment for implementation of all EE measures per block will be about 1.45 million UAH or 128,000 EUR. The investment should include governmental subsidy to make the loan feasible for the inhabitants. In the case that buildings already connected to the district heating will decide to switch off and develop their own boiler stations – the higher gas tariffs for such bigger consumers (0.29 UAH/kWh gas) is a stopper for such development. Main economic assumptions to make the total thermo - modernization loans possible and feasible for the inhabitants: Lender: Credit line participating bank or local financial institution accepted as lender under the credit line conditions Borrower: Loan provided to group of individual apartment owners cooperating together through designated agreement or to CA (in case the Law defines clear mechanism for repayment the liabilities by CA); Equity level minimum 15 % (owners capital cash contribution) Grant level minimum 40% (state subsidy) available and payable on loan drawdown; Tenor up to 6 years (case dependant); Repayment: monthly annuities with no grace period Interest rate not more than 12% in euro. Loan should be determined according the risk evaluation of the client and project by the credit line participating lender. Higher interest rates will lead to increasing the state subsidy to keep loans feasible for the inhabitants; Technical assistance for the feasibility study/energy audit and or preliminary design needed Technical assistance for determining the approved technologies, equipment and providers needed Model 2A: The model is the same but for heat supply with oil boiler and applicable to less than 1 % of the building stock apartment blocks. Such buildings should be treated separately and analyzed case-by-case for fuel switch to gas, heat pumps, or biomass. Model 2B: The model is the same but switching from gas or coal to high efficient biomass boiler returns negative cash flow because of the higher tariff for heat produced with biomass boilers. With current prices of about 0.35 UAH/kWh (1800 UAH/ton pellets) for biomass boiler compared to 0.29 UAH/kWh for gas or 0.15 UAH/kWh for coal boiler will make such case not feasible. Apartment blocks using coal boilers represent not more than 2% of the building stock. 6.2.3 Model N 3: Individual Apartment in the Apartment Block As mentioned earlier, in order not to encourage implementation of insulation not corresponding to norms and architectural requirements to the building envelope only for individual apartment, this model assumes that no work shall be done on partial insulation of walls and roof by individuals in apartment blocks. Typical measures and investments for the average apartment of 60 m2 could be as follows: The Exhibit 41 presents the summarized economical results for this model:
Framework Contract FC474/EBSF-2010-08-124F 100 Exhibit 41: Assessment of EE measures for Model 3.
Investments per Net savings Payback conditioned area per conditioned area EE Measures [UAH/m2] [€/ m2] [kWh/m2] [UAH /m2. [€/ m2. [years] year] year] 1. New windows 92 8.0 27.0 2.1 0.2 43.7 High Efficiency Individual Gas Condensing boiler (only in case 2. 160 14.0 30.5 2.4 0.2 66.7 there is no district or centralized heat supply) 3. Thermostatic valves 14 1.3 9.8 0.8 0.1 17.9 4. Indoor lighting replacement 2 0.2 4.9 1.1 0.1 2.0 Total 268 23.5 72.2 6.4 0.6 41.9
The average investment will be 16,100 UAH or 1,450 EUR per one apartment/household. The total savings of delivered energy (final consumption) is 30%. The current gas tariff of 0.078 UAH/kWh (0.007 EUR/kWh) doesn’t make such projects cost beneficial without substantial grants provided by state or donors. 6.2.4 Model N 4: Single Family House Unlike the multi-apartment buildings, the single family houses usually do not have juridical obstacles in entertaining the credit line facilities for retrofitting and improving their energy efficiency. It is also important to underline that this model would be important for the Ukraine, as nearly 53% of the buildings in Ukraine are single family houses. In addition to the energy-efficiency measures for the building envelope, high efficient gas, or biomass boiler, as well as installation of thermostatic valves, for this model the following measures could be applicable: Heat pump system: one should note that efficiency and cost of such system will very much depend on application conditions: starting from the climate, availability of heat sources, and ending with the operational conditions. Therefore technical evaluation will be important when applying credit line facilities for this measure. Solar systems for domestic hot water: for the Ukrainian climate the annual delivered heat from solar energy can vary from 300 to 800 kWh/m2 of solar collector, depending on the region, efficiency, pattern of use, type of solar energy system, level of automation, and accumulation. This measure can be especially of interest for southern parts of the Ukraine, especially Crimean area, as well as for application at the summer houses in the rest of the regions of Ukraine. The prices can vary from 2500 to 8000 UAH per m2 for “turn key” solar energy systems and are dependent on efficiency, type, complexity, and size. The payback for the solar heating system replacing domestic hot water preparation with electricity (tariff 0.22 UAH/kWh) will vary from 10 to 25 years. Even though these measures require usually high investments, their high efficiency can be attractive to the home owners with higher level of income. Besides, the interviews with the different focus groups showed the interest to invest in solar hot water systems on their summer houses even within medium income inhabitants. Thus, the typical measures and investments for the average single family house of 65 m2 could be as follows:
Framework Contract FC474/EBSF-2010-08-124F 101 The Exhibit 42 presents the summarized economical results for this model: Exhibit 42: Assessment of EE measures for Model 4.
Investments per Net savings Payback conditioned area per conditioned area EE Measures [UAH/m2] [€/ m2] [kWh/m2 [UAH /m2. [€/ m2. [years] ] year] year] 1. Additional insulation of walls 182 16.0 59.6 9.4 0.8 19.3 2. New windows 136 12.0 26.1 4.1 0.4 32.9 3. Additional insulation of roof 111 9.7 40.4 6.4 0.6 17.3 4. New high efficiency boiler 206 18.0 31.5 5.0 0.5 41.4 5. Thermostatic valves 17 1.5 11.0 1.7 0.2 9.7 6. Indoor lighting replacement 3 0.3 4.9 1.1 0.1 2.4 Total 655 57.5 173.5 27.7 2.6 23.6 With average useful area per single family house of 65 m2, the average investment can be 42,600 UAH or 3,800 EUR per house. The total savings of delivered energy (final consumption) is 53%. If all EE measures are implemented the new EP indicator for family house will be 153 kWh/m2 compared to the baseline energy consumption of 327 kWh/m2. The current gas tariff of 78 UAH/MWh (0.007 EUR per kWh) doesn’t make such projects cost beneficial unless new tariff policy or governmental subsidy on EE investments will be introduced. Main economic assumptions to make single family type loans possible and feasible for the inhabitants: Lender: Credit line participating bank or local financial institution accepted as lender under the credit line conditions Borrower: Single family house owner Equity level minimum 20 % (owners capital cash contribution) Grant level minimum 40% (state subsidy) available and payable on loan drawdown; Tenor up to 10 years (case dependent); Repayment: monthly annuities with no grace period Interest rate not more than 15% in euro. Loan should be determined according the risk evaluation of the client and project by the credit line participating lender. Higher interest rates will lead to increasing the state subsidy to keep loans feasible for the inhabitants; Technical assistance for the feasibility study/energy audit and or preliminary design needed Technical assistance for determining the approved technologies, equipment and providers needed Eligible projects to benefit from the low interest credit line and technical assistance can be implementation of any combination of separate energy efficient technology, equipment or building reconstruction/renovation which can return a minimum 20 % savings if the building owner (borrower) can meet the requirements of 25 % equity with tenor up to 5 years without grant subsidy. In such case the incentive reimbursement of 10-30 % of the loan amount can be executed when 50% of the loan is paid.
Framework Contract FC474/EBSF-2010-08-124F 102 6.3 ENERGY EFFICIENT REVOLVING FUND Energy Efficient Revolving Funds usually offers loans under soft conditions, which are repaid due to energy savings. The repaid loans are used to finance new energy efficiency projects. In 2005 Bulgaria launched Energy Efficiency Fund (BgEEF), which could serve as a good example for a similar fund in the Ukraine. For this Fund, GEF provided a grant of 10 million USD, co-financed by the Government of Bulgaria and bilateral donors. The Fund was flexible to employ debt finance or guarantees as needed. The Fund employed a Fund Manager on a Performance Contract. By May 2010 approximately 40 million USD had been invested in energy efficiency projects (with approximately 7 years payback period), and around half of the project were in municipal buildings. According to the World Bank, the Energy Efficiency Funds can provide good leverage of initial capital but money recycles slowly so there is a constant need for new capital. In the first phase, Energy Efficiency Funds are an excellent way of kick-starting an EE market and getting local banks involved. It is also worth mentioning that GEF provided a grant for EE Fund for municipal vehicle to achieve EE in residential buildings in Vilnius (Lithuania). This also attracted local banks to active involvement in financing of energy efficient measures in the residential sector. Large savings were demonstrated but uptake was very slow. The Energy Efficiency Revolving Fund can provide loans with soft conditions to the households similar to the models describe above (under “credit line” models). It should be noted that if such a fund is established for the residential sector in the Ukraine it may face similar juridical obstacles with CA and multi-apartment buildings as the credit line models described above. In addition to the loan products, the Fund can also provide guarantees (similar to the Residential Portfolio guarantee of the BgEEF), when beside the guarantee to the commercial banks, the Fund also helped households in the buildings to develop a bankable project. The Fund can guarantee that it will cover the first 5% of the defaults within the apartment block building (or portfolio of blocks). Schematically this Residential portfolio guarantee can be illustrated in the following way, as shown in Exhibit 43: Exhibit 43: Energy Efficiency Revolving Fund scheme.
Loan Commercial repayment Houselolds Bank (if there is no OSBB established, the agreement on the loan repayment can be concluded with each of the apartment, proportionally to Loan their built-up area)
Guarantee
Energy Technical assistance in Efficient Fund project development
Advantages of Energy Efficient Revolving Funds: Revolving Funds, similar to the credit lines are also straightforward approach to financing the energy efficiency improvements
Framework Contract FC474/EBSF-2010-08-124F 103 Similarly to credit lines, they provide initial capital outlay Usually such Funds provide preferential loans (with lower interest rates than average market rates) with longer payback periods Revolving Funds contribute to development of energy efficiency markets: starting from the awareness raising among the population, developing demand for energy efficiency services and products, and ending with the development of interest towards energy efficient investments among the local commercial banks The Funds re-invest into new energy efficiency projects, improving the use of state funds, which are usually initially allocated for state energy efficiency programmes Disadvantages of Energy Efficient Revolving Funds: due to needed technical assistance the transaction costs may be quite high compared to credit line usually takes longer negotiation period for establishing such fund (the Fund shall be registered as financial institution). compared to credit line usually takes longer period to launch the fund there is constant need in new capital as the money recycle quite slow, since the Revolving Funds functions on repayments of the investments based on energy savings Revolving Funds with their soft conditions may support “artificial” demand for energy efficiency created by only by such incentives High cost of operating such funds with longer administrative procedures In case of establishment of such Energy Efficiency Funds in the Ukraine aimed at the residential sector, the following main stakeholders can be proposed: The Government of Ukraine (providing funds into the Fund following the National programs on supporting the renovation of residential sector of Ukraine) EBRD Other commercial banks International and local donors The indicative financing conditions can be as follows: loans from 15,000 EUR – 500,000 EUR provided to single family houses, group of individual apartment owners cooperating together through designated agreement, or to CA (in case the Law defines clear mechanism for repayment the liabilities by CA); Equity of the borrower – minimum 10%; Loan Grace period 2 years with a 10 year repayment; Grant 20-35% payable on loan drawdown; Interest rate on the loan 10% per annum (can be negotiated, based on the risk evaluation of the specific project); Management fees (3%); Technical assistance cost
6.4 ESCO MODELS The basic role of an ESCO is to provide energy efficient services to the consumers. It usually performs the following services: energy auditing, arranging financing, implementation or supervision of the implementation of the proposed measures, equipment commissioning, maintenance of the installed equipment, measuring, verification of the savings. These activities
Framework Contract FC474/EBSF-2010-08-124F 104 are usually done through the Energy Performance Contract (repayment of the investments through the guaranteed energy savings). Simplified financing scheme for the ESCO model is illustrated In Exhibit 44: Exhibit 44: ESCO scheme.
Loans ESCO Bank(s)
(undertakes energy efficient (provides loans to ESCO, investments) can be based on individual Loan subprojects) repayment
EE investments Repayments
Consumers
The ESCO model is one of the solutions that in many markets of Europe have proved to be efficient in working with the consumers that might not have sufficient technical knowledge and skills, management capacities, technology information, and investment capital. However, it should be noted that in general the main focus of ESCO activities is in the public sector, while the ESCO model for residential sector is not so widespread in Europe. In some countries, such as Sweden, Estonia, and Lithuania ESCOs achieved good business development in the residential sector (according to ECEEE 2007 Study “Latest developments of the ESCO industry across Europe”). While ESCO is typically considered as a good model for implementing energy efficient projects and developing the market of energy efficient services, it is also regarded as a complicated solution. ESCO models for financing of energy efficient projects were introduced in the Ukraine some time ago. However their business is mainly developed in industrial or SME sectors, while the demand for such services in the residential sector is not yet created in the Ukraine. Advantages of ESCO models for operating in the residential sector: Good model for implementing energy efficient projects when dealing with single owner/decision maker (e.g. owners of single family houses or condominiums). Provides incentives to achieve as much energy saving as possible. ESCO is well motivated to achieve maximum energy savings as its revenues depend on measured and verified savings. If the ESCO is based on utility company, it provides advantages in terms of technical expertise and project implementations skills, name recognition, and the existing consumer’s network. This approach is applicable in the Ukraine. Similarly to credit lines, they provide initial capital outlay for the building owners. Disadvantages of ESCO models:
Framework Contract FC474/EBSF-2010-08-124F 105 Considered as more complicated solution, as need to settle down all issues related to the lifetime of the project (ESCO agreement), including measuring and verifying the savings, transfer of ownership and other. Requires that ESCO shall have expertise in engineering, law and finance. And vice versa – requires good capacities from the building’s owners to understand how to organize and operate such scheme with energy performance contracting. Substantial training will have to be introduced to ESCOs and CAs to be able to mutually benefit from implementation of this model. Usually is considered as more costly solution, as ESCO need to cover all the risks related to the operation, savings, verification and repayments In Ukrainian conditions this model will have additional challenges to function. They are mainly related to complicated and not clear procedures for Energy Performance Contracting (related to application in apartment block buildings): interconnection of tariffs for communal services, schemes for investment repayment by each apartment in multi-apartment buildings connection of communal services tariffs with subsidies for the inhabitants with low income ESCO has quite high operational risk related to Energy Performance Contracting - in verifying the real savings vs. “normalized” savings. This challenge, besides climate conditions, is related to “baseline” issue – poor indoor climate and poor functionality of the building services, which is quite often situation in the buildings in Ukraine. From the models presented above, under the current circumstances in the Ukraine, the Consultant would recommend this model as the least priority for the time being.
6.5 CONCLUSIONS AND RECOMMENDATIONS Ukraine is gradually opening for the lending market for implementation of energy efficient measures in the residential sector. At the same time there are a number of legal obstacles related to CA and multi-apartment buildings, which were mentioned above, to open broader markets for such lending. Therefore the Government of Ukraine will need to take action as soon as possible with regards to improving laws on Condominium Associations to make them viable borrowers for the local banks. Similarly, financial education for consumers and education of the bankers with regard to investment in energy efficiency in the residential sector still needs to be addressed in the Ukraine. As also seen in other countries by international donors, the local banks will need extensive training and hand-holding before they will be willing/able to lend to energy efficiency in the residential sector and develop a project pipeline. Furthermore, implementation capacity is often considered as one of the major barriers for establishing a proper framework for the energy efficiency in the residential sector. The interviews with the local banks and the households focus groups showed that there is an interest in investing in energy efficiency, especially under conditions of constantly increasing energy tariffs. So far it seems that the local banks prefer to fund households individually. However, as soon as legal obstacles with CA are eliminated, the bank would be happy to propose the product for the joint loans for CA.
Framework Contract FC474/EBSF-2010-08-124F 106 The Consultants proposed a number of relatively simple financial models highlighting the effects of funding a range of energy efficient investments, including the participation of the governmental funds. There are two alternatives that the consultant can offer to the Bank: 1. The Bank can consider providing a €250 Million credit line that can be shared amongst four to six (4-6) participating Ukrainian banks or financial institutions against similar obligation from the Ukrainian government to invest and subsidize EE reconstructions in the residential sector and in parallel revising the energy tariff policy. The financing model used by EBRD in Bulgaria and Slovakia proved to be successful and could be replicated in the Ukrainian residential market. This model shall also include technical assistance to the local banks and borrowers – which can be arranged through the expert team consisting of international and local experts (can be recruited by EBRD). Such a team, besides providing assistance in project development and project implementation, would assist in structuring, operating, and monitoring of the facility. The team shall also include marketing experts for planning and implementation of the promotion campaigns for the facility. Through the participating banks, the grant component (mainly provided by the Government) can be distributed. For this, the consistent procedure shall be established to avoid any frauds related to grant applications. As mentioned previously, current legislation in the Ukraine results in unattractiveness of the lending to CAs, therefore the Banks are more willing to conclude separate lending agreements with the individual apartment owner, than to work with such associations. However, such a loan arrangement is much less efficient, therefore relevant adjustments to the Condominium Law need to be promoted by the Bank to the Ukrainian Government. In the meantime the Banks are willing to arrange the loan repayment individually by each flat. 2. The Bank can consider providing a facility of €150 Million for the Energy Efficient Revolving Fund. Such a Fund can be based on the model used by the Bulgarian Energy Efficient Fund, which is mainly used by public sector, but also is open and available for the residential sector, with obligatory participation of the Governmental funds, and other possible donors. We believe that such a model would give the possibility to consolidate more easily the funds from the Government and other donors, interested to support energy efficiency in the residential sector in the Ukraine. At the same time, it will also contribute in attracting local banks to enter the market of energy efficiency investments in the residential sector. However, this model might require a longer time for negotiations with the Ukrainian Government as it will require proper establishment of such Funds (with the proper Statute documents reflecting the transparency of such institutions and the Board Members representing the donors) and its registration as financial institutions in accordance with the Ukrainian Law.
Framework Contract FC474/EBSF-2010-08-124F 107 Annex 1: Terminology
ARoC Autonomous Republic of Crimea ISO International Organization for AUB Association of Ukrainian Banks Standardization BgEEF Bulgaria Energy Efficiency Fund JSC joint stock company bln billion kWh kilowatt-hour СA Condominium Association LIP loan in process CCU Civil Code of Ukraine LLC limited liability company CEC Central Energy Service Company Ltd limited "ESCO-Centre" (Kyiv) MATRA Program of Social Reforms in Central CH centralized heat and Eastern Europe (MATRA) of the Dutch Ministry of Foreign Affairs CHP combined heat and power MDI Municipal Development Institute CoMU Cabinet of Ministries of Ukraine MEC North metallurgical enrichment plant Cub. M Cubic meter MHCE Ministry of Housing and Communal DH district heating Economy DHS district heating substation mln million DIGH Dutch International Guarantees for MPa megapascals Housing MRCHCE Ministry of Regional Development, EA Energy Alliance Construction and Housing and ECU Economic Code of Ukraine Communal Economy EE energy efficiency M.toe million tonnes of oil equivalent EEF East Europe Foundation mV millivolt ENSI Energy Saving International AS MV medium voltage EP Energy Performance MW megawatt ESCO energy service company MWh megawatt-hour EU European Union NATO North Atlantic Treaty Organization EUEA European Ukrainian Energy Agency NERC National Electricity Regulatory EUR Euro Commission of Ukraine FER Fuel and Energy Resources NIS Newly Independent States Gcal Gigacalorie NL Netherlands GDP gross domestic product NM3 normal cubic meter GEF Global Environment Fund NOx oxides of nitrogen GIZ Deutsche Gesellschaft für Internationale NPSH net pressure suction head Zusammenarbeit (German Company for NPV net present value International Cooperation) NUCC Norway – Ukraine Chamber of GTZ Deutsche Gesellschaft für Technische Commerce Zusammenarbeit (German Company for OSBB multi family building co-owners Technical Cooperation) association GWh gigawatt hour PDC power distribution centre HCC Housing and Construction Cooperative PLC Programmable Logic Control HCU Housing Code of Ukraine PPA power purchase agreement HCE Housing and Communal Economy HCS Housing and Communal Services PVC polyvinyl chloride (conduit or piping) HIS individual heating substation RGS rigid galvanized steel HWS hot water supply RO/EDI reverse osmosis / electro deionization IB Housing Institute (Bratislava) ROI return on investment IEA International Energy Agency RTD rigid temperature detector IFI International Financial Institution SCADA supervisory control and data acquisition IMC Inter Municipal Cooperation SCR selective catalytic reduction (for NOx)
Framework Contract FC474/EBSF-2010-08-124F 108 SDW solid domestic waste US, U.S. United States SEE Southeast Europe USAID United States Agency for International SI Strategic Investor Development SMP steam and water analysis system USD, US$ the United States Dollar SPB simple payback UNDP United Nations Development Program sq. m square meter UT unit transformer V voltage tce tons of coal equivalent VFD variable frequency drive (1 ton of c.e. = 7000 kcal/kg or 29.3 MJ) VSD variable speed drive tCO2 tons CO2 WAN wide area network TFC total final consumption y, yr year Toe tons of oil equivalent (1 toe=1,43 tce) ZheKs Housing and Communal Services TRV temperature regulating valve Maintenance Companies/or Housing UAH Ukrainian Hryvnia Maintenance Company UPS uninterruptable power supply
Framework Contract FC474/EBSF-2010-08-124F 109 Annex 2: English - Ukrainian Legal Terminology
Association of house owners – a legal Асоціація власників жилих будинків - entity that is formed for representing joint юридична особа, створена для interests of the condominium associations. представлення спільних інтересів об'єднань;
A housing complex - a uniform real estate Житловий комплекс - єдиний комплекс complex formed by a plot of land within set нерухомого майна, що утворений limits, a residential apartment house located земельною ділянкою в установлених межах, on it or its part together with constructions розміщеним на ній жилим багатоквартирним and engineering networks forming an integral будинком або його частиною разом із property complex; спорудами та інженерними мережами, які утворюють цілісний майновий комплекс;
Ajacent territory – territory around multi- Прибудинкова територія - територія apartment building that is defined by state act навколо багатоквартирного будинку, for owning or using of land parcel and aimed визначена актом на право власності чи at maintanence of multi-apartment building; користування земельною ділянкою і призначена для обслуговування багатоквартирного будинку;
Authorised person of the owner – physical Уповноважена особа власника - фізична or legal entity, which has formal authorization або юридична особа, яка має оформлене у of the owner to represent his interests встановленому порядку доручення власника according to his instructions within the scope представляти його інтереси відповідно до as defined by the law доручення та в межах, визначених законом;
Auxiliary premises – premises, which are Допоміжні приміщення used for ensuring maintenance of the house багатоквартирного будинку - and communal service provision of the приміщення, призначені для забезпечення residents of the building (staircases, експлуатації будинку та побутового hallways, corridors, stroller places, garbage обслуговування мешканців будинку (сходові shoots, chimneys, cellars, closets, storage клітини, вестибюлі, перехідні шлюзи, rooms, lift shoots and machine позаквартирні коридори, колясочні, кладові, compartments, ventilation cameras, and сміттєкамери, горища, підвали, шахти і other technical premises); машинні відділення ліфтів, вентиляційні камери та інші технічні приміщення);
Centralised cold and hot water supply - a Централізоване постачання холодної service which is aimed at satisfying needs of та гарячої води - послуга, спрямована на the customer in cold and hot water, which is задоволення потреб споживача у холодній provided by the provider who uses inter- та гарячій воді, яка надається виконавцем з building systems of hot and cold water використанням внутрішньобудинкових supply; систем холодного та гарячого водопостачання;
Framework Contract FC474/EBSF-2010-08-124F 110 Centralised heating - a service which is Централізоване опалення - послуга, aimed at satisfying needs of the customer in спрямована на задоволення потреб maintaining normative temperature in the flat споживача у забезпеченні нормативної premises (in the cottage type building), which температури повітря у приміщеннях is provided by the provider who uses inter- квартири (будинку садибного типу), яка building heating systems; надається виконавцем з використанням внутрішньобудинкових систем теплопостачання;
Centralised wastewater collection– a Централізоване водовідведення - service which is aimed at satisfying needs of послуга, спрямована на задоволення the customer in wastewater collection, which потреб споживача у відведенні стічних вод, is provided by the provider who uses inter- яка надається виконавцем з використанням building sewage networks; внутрішньобудинкових централізованих систем водовідведення;
Communal services - the result of economic Комунальні послуги - результат activity aimed at satisfaction of individual’s or господарської діяльності, спрямованої на legal entity’s needs in provision of cold and задоволення потреби фізичної чи юридичної hot water, sewage services, gas and energy особи у забезпеченні холодною та гарячою supply, heating and household waste водою, водовідведенням, газо- та transportation in accordance with legislation; електропостачанням, опаленням, а також вивезення побутових відходів у порядку, встановленому законодавством;
Condominium association - a legal entity Об’єднання співвласників created by owners for assistance of their багатоквартирного будинку (ОСББ) - ownership usage and management, юридична особа, створена власниками для maintenance and use of indivisible and joint сприяння використанню їхнього власного property; майна та управління, утримання і використання неподільного та загального майна;
Consumer – individual or legal entity who Споживач - фізична чи юридична особа, uses or intends to use housing and яка отримує або має намір отримати communal servises; житлово-комунальну послугу;
Heating area (volume) of the building – Опалювана площа (об'єм) будинку - total area (volume) of the building premises, загальна площа (об'єм) приміщень будинку, including in case of heating – the area в тому числі у разі опалення площа (об'єм) (volume) of the stairs, lifts’ and other shafts. сходових кліток, ліфтових та інших шахт;
Heating area (volume) of the flat (building Опалювана площа (об'єм) квартири of the cottage type) – total area (volume) of (будинку садибного типу) - загальна the flat, and of the cottage type building площа (об'єм) квартири, а також будинку without accounting the area of the terraces, садибного типу без урахування площі balconies, loggia; лоджій, балконів, терас;
Framework Contract FC474/EBSF-2010-08-124F 111 Housing and communal services - the Житлово-комунальні послуги - результат result of economic activity aimed at providing господарської діяльності, спрямованої на for conditions of persons' residence and stay забезпечення умов проживання та in residential and non-residential premises, перебування осіб у жилих і нежилих houses and buildings, complexes of houses приміщеннях, будинках і спорудах, and buildings, in accordance with norms, комплексах будинків і споруд відповідно до regulations, standards, procedures and rules. нормативів, норм, стандартів, порядків і правил;
Housing stock – residential houses and Житловий фонд - жилі будинки, а також residential premises in anjther buildings жилі приміщення в інших будівлях, що located on territory of Ukraine; знаходяться на території України;
Indivisible property – indivisible part of the Неподільне майно - неподільна частина housing complex which is comprised of the житлового комплексу, яка складається з part auxiliary premises, structural elements of частини допоміжних приміщень, the building, technical equipment of the конструктивних елементів будинку, building which ensure proper functioning of технічного обладнання будинку, що the housing building; забезпечують належне функціонування жилого будинку;
Joint property – part of auxiliary premises of Загальне майно - частина допоміжних the housing complex, which can be used приміщень житлового комплексу, що можуть according to their purpose and at terms, that використовуватися згідно з їх призначенням are defined in the charter of the на умовах, визначених у статуті об'єднання condominium association (storages, garages, (кладові, гаражі, в тому числі підземні, including underground ones, workshops, майстерні тощо); etc.)
Joint property – property that is owned by Спільне майно - майно, що є у власності tow or more persons (co-owners); двох або більше осіб (співвласників);
Maintanance of housing and ajacent Утримання будинків і прибудинкових territory - economic activity aimed at територій - господарська діяльність, satisfaction of individual’s and legal entity’s спрямована на задоволення потреби needs in provision of maintenace and/or фізичної чи юридичної особи щодо repair of residential and non-residential забезпечення експлуатації та/або ремонту premises, houses, buildings, housing жилих та нежилих приміщень, будинків і complexes or complexes of houses and споруд, комплексів будинків і споруд, а buildings and adjacent territory maintenance також утримання прилеглої до них according to normative, norm, standards and (прибудинкової) території відповідно до rules set by legislation; вимог нормативів, норм, стандартів, порядків і правил згідно із законодавством;
Manager – legal entity which manages Управитель - юридична особа, яка indivisible and whole property of the housing здійснює управління неподільним та complex under authority of the owner загальним майном житлового комплексу за 0owners) of the property and ensures its дорученням власника (власників) майна і reliable maintenance; (as defined by the Law забезпечує його належну експлуатацію; (у of Ukraine “On housing and Communal визначенні закону України «Про житлово-
Framework Contract FC474/EBSF-2010-08-124F 112 services”) комунальні послуги»);
Manager – person who according to the Управитель - особа, яка за договором з agreement with owner or the balance sheet власником чи балансоутримувачем holder performs management of house, здійснює управління будинком, спорудою, building, housing complexes or complexes of житловим комплексом або комплексом houses and buildings and provides its proper будинків і споруд (далі - управління usage according to Law and terms of будинком) і забезпечує його належну agreement; (as defined by the Law of експлуатацію відповідно до закону та умов Ukraine “On CAs”) договору; (у визначенні закону України «Про ОСББ»);
Non residential premise- a premise, which Нежиле приміщення - приміщення, яке belongs to the residential complex, but is not належить до житлового комплексу, але не a part of the housing stock and is an відноситься до житлового фонду і є independent object of civil and legal relations самостійним об'єктом цивільно-правових відносин;
Norms of consumption - quantitative Норми споживання - кількісні показники indicators of housing and communal споживання житлово-комунальних послуг, consumption approved by executive затверджені згідно із законодавством authorities and local self-government bodies відповідними органами виконавчої влади та according to legislation; органами місцевого самоврядування;
Producer – economic entity who produces or Виробник - суб'єкт господарювання, який creates housing and communal services; виробляє або створює житлово-комунальні послуги;
Provider - economic entity who provides Виконавець - суб'єкт господарювання, consumer with housing and communal предметом діяльності якого є надання services according to terms of agreement; житлово-комунальної послуги споживачу відповідно до умов договору;
Qualitative service indicator – the unit of Кількісний показник послуг - одиниця measurement for estimating qualitative виміру для обчислення кількісних показників indicators of consumed by customers отриманої споживачем послуги, визначена service, that is defined according to the law; відповідно до законодавства;
Structural elements of multi-apartment Конструктивні елементи building – parts of the facility, which provide багатоквартирного будинку - частини for its unity and necessary technical споруди, які забезпечують її цілісність та conditions of functioning (basement, carrying необхідні технічні умови функціонування construction walls, floors, flights of stairs, (фундамент, несучі стіни, міжповерхові constructions of the roof, entrances, etc.) перекриття, сходові марші, конструкції даху, покрівля, в'їзна група тощо);
Framework Contract FC474/EBSF-2010-08-124F 113 Tariffs for heat energy – money value of Тарифи на теплову енергію - грошовий expenditures for production, transportation вираз витрат на виробництво, (including costs of transporting via networks, транспортування, постачання одиниці which belong to other customers, to the теплової енергії (1 Гкал) з урахуванням boarder of property differentiation of the рентабельності виробництва, інвестиційної networks), and supply of 1 Gcal of heat та інших складових, що визначаються згідно energy and accounting for investment and із методиками, розробленими Мінбудом. other components, which are defined by the methodologies that are defined by Minbud;
Tariffs for heating services – cost of Тарифи на надання послуг з providing a unit of centralised heating service централізованого опалення - вартість of the respective quality, that is estimated надання одиниці послуги з централізованого based on economically justified planned опалення відповідної якості, розрахована на costs and accounting for planned profit and основі економічно обґрунтованих VAT; планованих витрат з урахуванням планованого прибутку та податку на додану вартість;
Tariffs for hot water supply services – cost Тарифи на надання послуг з of providing a unit of centralised hot water централізованого постачання гарячої supply service of the respective quantity and води - вартість надання одиниці послуги з quality, that is estimated based on централізованого постачання гарячої води economically justified planned costs and визначеної кількості та відповідної якості, accounting for planned profit and VAT; розрахована на основі економічно обґрунтованих планованих витрат з урахуванням планованого прибутку та податку на додану вартість;
The balance sheet holder of a house, Балансоутримувач будинку, споруди, building, housing complex or complex of житлового комплексу або комплексу houses and buildings - is the owner or the будинків і споруд (далі - legal entity that based on an agreement with балансоутримувач) - власник або the owner holds the respective property on юридична особа, яка за договором з its balance sheet, as well as keeps власником утримує на балансі відповідне accounting, statistical and other reporting in майно, а також веде бухгалтерську, accordance with legislation, carries out статистичну та іншу передбачену calculation of funds necessary for timely законодавством звітність, здійснює realization of major and maintenance repairs розрахунки коштів, необхідних для and maintenance, as well as provides for this своєчасного проведення капітального і property management and is responsible for поточного ремонтів та утримання, а також its operation under the law; забезпечує управління цим майном і несе відповідальність за його експлуатацію згідно з законом;
Framework Contract FC474/EBSF-2010-08-124F 114 The owner of an apartment, house, Власник приміщення, будинку, споруди, building, housing complex or complex of житлового комплексу або комплексу houses and buildings - an individual or a будинків і споруд - фізична або юридична legal entity having the right to own, use and особа, якій належить право володіння, dispose of an apartment, house, building, користування та розпоряджання housing complex or complex of houses and приміщенням, будинком, спорудою, buildings registered in accordance with the житловим комплексом або комплексом procedure set by the law; будинків і споруд, зареєстроване у встановленому законом порядку;
Two-tier tariff – tariff for production, Двоставковий тариф - тариф на transportation, supply of heating energy and виробництво, транспортування, постачання heating and hot water supply services, which теплової енергії та послуги з is comprised of an annual customer fee (cost централізованого опалення і постачання of maintain a unit of heating capacity of the гарячої води, який складається з річної heating consumption object), which абонентської плати (вартості compensates fixed part of tariff, and cost of обслуговування одиниці теплового the unit of the heat energy sold, heating and навантаження об'єкта теплоспоживання), hot water supply services, which яка компенсує умовно-постійну частину compensates variable part of tariff; тарифу, та вартості одиниці реалізованої теплової енергії, послуг з централізованого опалення і постачання гарячої води, яка компенсує умовно-змінну частину тарифу;
Unified tariff – cost of the unit of the service Одноставковий тариф - вартість одиниці sold which is defined as one rate and does реалізованої послуги, яка визначена однією not break into variable and fixed parts; ставкою і не розподіляється на умовно- змінну та умовно-постійну частини;
Framework Contract FC474/EBSF-2010-08-124F 115 Annex 3: References
1. Housing Stock of Ukraine in 2008. Statistical Bulletin. – The State Statistics Committee of Ukraine. – Kyiv, 2009. 2. Housing Stock of Ukraine in 2007. Statistical Bulletin. – The State Statistics Committee of Ukraine. – Kyiv, 2008. 3. Housing Stock of Ukraine in 2006. Statistical Bulletin. – The State Statistics Committee of Ukraine. – Kyiv, 2007. 4. Housing Stock of Ukraine in 2005. Statistical Bulletin. – The State Statistics Committee of Ukraine. – Kyiv, 2006. 5. Housing Stock of Ukraine in 2004. Statistical Bulletin. – The State Statistics Committee of Ukraine. – Kyiv, 2005. 6. Housing Stock of Ukraine in 2003. Statistical Bulletin. – The State Statistics Committee of Ukraine. – Kyiv, 2004. 7. Housing Stock of Ukraine in 2002. Statistical Bulletin. – The State Statistics Committee of Ukraine. – Kyiv, 2003. 8. Housing Stock of Ukraine in 2001. Statistical Bulletin. – The State Statistics Committee of Ukraine. – Kyiv, 2002. 9. Housing Stock of Ukraine in 2000. Statistical Bulletin. – The State Statistics Committee of Ukraine. – Kyiv, 2001. 10. Housing Stock of Ukraine in 1998. Statistical Bulletin. – The State Statistics Committee of Ukraine. – Kyiv, 1999. 11. Statistical Bulletin on Key Indicators of Heating Boilers and Thermal Networks Operation in Ukraine in 2009. – The State Statistics Committee of Ukraine. – Kyiv, 2010. 12. Statistical Bulletin on Key Indicators of Heating Boilers and Thermal Networks Operation in Ukraine in 2008. – The State Statistics Committee of Ukraine. – Kyiv, 2009. 13. Statistical Bulletin on Key Indicators of Heating Boilers and Thermal Networks Operation in Ukraine in 2007. – The State Statistics Committee of Ukraine. – Kyiv, 2008. 14. Statistical Bulletin on Key Indicators of Heating Boilers and Thermal Networks Operation in Ukraine in 2006. – The State Statistics Committee of Ukraine. – Kyiv, 2007. 15. Statistical Bulletin on Key Indicators of Heating Boilers and Thermal Networks Operation in Ukraine in 2005. – The State Statistics Committee of Ukraine. – Kyiv, 2006. 16. Statistical Bulletin on Key Indicators of Heating Boilers and Thermal Networks Operation in Ukraine in 2004. – The State Statistics Committee of Ukraine. – Kyiv, 2005. 17. Statistical Bulletin on Key Indicators of Heating Boilers and Thermal Networks Operation in Ukraine in 2003. – The State Statistics Committee of Ukraine. – Kyiv, 2004. 18. Statistical Bulletin on Key Indicators of Heating Boilers and Thermal Networks Operation in Ukraine in 2004. – The State Statistics Committee of Ukraine. – Kyiv, 2005. 19. Statistical Bulletin on Key Indicators of Heating Boilers and Thermal Networks Operation in Ukraine in 2003. – The State Statistics Committee of Ukraine. – Kyiv, 2004. 20. Statistical Bulletin on Key Indicators of Heating Boilers and Thermal Networks Operation in Ukraine in 2002. – The State Statistics Committee of Ukraine. – Kyiv, 2003.
Framework Contract FC474/EBSF-2010-08-124F 116 21. Statistical Bulletin on Key Indicators of Heating Boilers and Thermal Networks Operation in Ukraine in 2001. – The State Statistics Committee of Ukraine. – Kyiv, 2002. 22. Statistical Bulletin on Key Indicators of Heating Boilers and Thermal Networks Operation in Ukraine in 2000. – The State Statistics Committee of Ukraine. – Kyiv, 2001. 23. Statistical Bulletin on Key Indicators of Heating Boilers and Thermal Networks Operation in Ukraine in 1999. – The State Statistics Committee of Ukraine. – Kyiv, 2000. 24. Statistical Bulletin on Key Indicators of Heating Boilers and Thermal Networks Operation in Ukraine in 1998. – The State Statistics Committee of Ukraine. – Kyiv, 1999. 25. Statistical Bulletin on Key Indicators of Heating Boilers and Thermal Networks Operation in Ukraine in 1997. – The State Statistics Committee of Ukraine. – Kyiv, 1998. 26. Results of Using Boiler and Stove Fuel, Thermal Power and Electric Power in 2008. - The State Statistics Committee of Ukraine. - Kyiv, 2009. 27. SCN V.2.2-15-2005 Houses and Buildings. Residential Houses. Substantive Provisions ДБН В.2.2-15-2005 Будинки і споруди. Житлові будинки. Основні положення 28. Sector Program for Increasing Energy Efficiency in Construction for 2010-2014. The Ministry of Regional Development and Construction of Ukraine. Kyiv, 2009. 29. Statistical Data of the Ministry of Regional Development and Construction of Ukraine. Kyiv, 2010. 30. DBN В.2.6-31:2006 “Constructions of Buildings and Structures. Thermal Insulation of Buildings”. 31. DSTU-N B А.2.2-5:2007 “Designing. Guideline for development and making of buildings energy passport for new construction and reconstruction.” 32. European Commission Report, 2008
Framework Contract FC474/EBSF-2010-08-124F 117 Annex 4: Housing stock of urban and rural localities As on As of 01.01.2009 (based on data of [1])
Residential Total floor Residential Number of Total floor area Number of space of area of space of houses, of residential apartments, residential apartments, apartments, units premises, m2 units premises, m2 m2 m2
Ukraine 10148947 1066633755 681066201 19254567 1045752011 669005101 AR of Crimea 333941 39980967 24421912 786136 39139553 23902508 Vinnytsia Oblast 568479 43789177 29883789 748231 43137364 29481808 Volyn Oblast 233254 21788273 13819436 351207 21402311 13584137 Dnipropetrovsk Oblast 611023 78719660 49354799 1506662 76974189 48368614 Donetsk Oblast 852752 100846268 64071311 1987664 98983551 63050377 Zhytomyr Oblast 381158 33028542 21416738 591706 32552642 21141836 Zakarpattia Oblast 310202 27754400 16399794 383600 27522017 16261263 Zaporizhia Oblast 351272 40644176 25278839 758749 39484108 24613203 Ivano-Frankivsk Oblast 344002 31604619 19926601 483394 31168657 19669044 Kyiv Oblast 536764 52728288 33271446 828843 52035447 32853189 Kirovograd Oblast 313406 24665313 16210907 488952 24191640 15915218 Lugansk Oblast 517174 55429154 34542403 1083927 54492416 34000398 Lviv Oblast 457041 52866855 33287427 865997 51707446 32644219 Mykolaiv Oblast 266341 25912590 17109021 486958 25331167 16763212 Odesa Oblast 485788 53099344 35474887 937679 52001927 34813249 Poltava Oblast 422460 36950868 23791598 711154 36210441 23355267 Rivne Oblast 263302 24073153 15938068 389026 23575975 15629102 Sumy Oblast 328303 27694092 18399060 536794 27117180 18069259 Ternopil Oblast 286347 24791410 16137905 388378 24334560 15873616 Kharkiv Oblast 488307 62847569 40314824 1215282 61347494 39504361 Kherson Oblast 284515 24876666 16411662 449718 24358630 16108491 Khmelnytsky Oblast 380347 32827726 21891230 568350 32155713 21491859 Cherkasy Oblast 428148 33999371 22587857 626742 33348477 22211820 Chernivtsi Oblast 248061 20020952 12615696 323260 19761989 12465238 Chernigiv Oblast 391828 29581455 19270230 560773 29184553 19037372 Kyiv City 34063 57954500 34001152 1020182 56291254 33087443 Sevastopol City 30669 8158367 5237606 175203 7941310 5108998
Framework Contract FC474/EBSF-2010-08-124F 118 Annex 5: Housing stock of urban settlements as on 01.01.2009 (based on data of [1])
Number Total floor Residential Total floor Residential Number of of area of space of area of space of apartments, houses, residential residential apartments, apartments, units units premises, m2 premises, m2 m2 m2
Ukraine 4039333 684276025 424246794 12842983 665381955 413457397 AR of Crimea 125070 26965466 16106611 531102 26354335 15734672 Vinnytsia Oblast 127637 16173801 10442562 297629 15664910 10135995 Volyn Oblast 56417 9887043 6012978 170132 9524632 5792894 Dnipropetrovsk Oblast 360076 63772637 39662698 1237213 62127524 38743108 Donetsk Oblast 661953 90274769 57239429 1782989 88496459 56270733 Zhytomyr Oblast 111643 16410343 10131948 310728 15999682 9896778 Zakarpattia Oblast 80355 9715322 5442665 150245 9499402 5314125 Zaporizhia Oblast 166730 29633893 18123878 561829 28561423 17510291 Ivano-Frankivsk Oblast 72854 12635216 7804725 206310 12220473 7560568 Kyiv Oblast 163376 26590960 16139995 425115 26012022 15796262 Kirovograd Oblast 123439 14100437 8749800 291091 13685761 8494150 Lugansk Oblast 375550 47615392 29289782 930401 46729905 28778175 Lviv Oblast 115341 29041213 18060178 510082 27962622 17469230 Mykolaiv Oblast 110997 16961071 10955129 325154 16464517 10661988 Odesa Oblast 176118 33412937 21831172 614922 32420359 21248412 Poltava Oblast 129125 20045272 12320072 399032 19448828 11972192 Rivne Oblast 59488 10259934 6256081 178445 9805140 5974510 Sumy Oblast 133064 16967767 10761401 333597 16455053 10471127 Ternopil Oblast 57387 9940993 5985011 156080 9515561 5740461 Kharkiv Oblast 256876 49231896 31069790 958739 47838075 30325465 Kherson Oblast 128943 15349480 9760568 285495 14921521 9516941 Khmelnytsky Oblast 85197 14826062 9321071 268051 14223387 8964773 Cherkasy Oblast 122700 16047464 10054026 313034 15483808 9731083 Chernivtsi Oblast 53708 7636490 4479362 127171 7402882 4344752 Chernigiv Oblast 125580 14996202 9207357 289013 14658992 9011988 Kyiv City 34063 57954500 34001152 1020182 56291254 33087443 Sevastopol City 25646 7829465 5037353 169202 7613428 4909281
Framework Contract FC474/EBSF-2010-08-124F 119 Annex 6: Housing stock of rural localities as on 01.01.2009 (based on data of [1])
Number Residential Total floor Residential Total floor area Number of of space of area of space of of residential apartments, houses, residential apartments, apartments, premises, m2 units units premises, m2 m2 m2
Ukraine 6109614 382357730 256819407 6411584 380370056 255547704 AR of Crimea 208871 13015501 8315304 255034 12785218 8167836 Vinnytsia Oblast 440842 27615376 19441227 450602 27472454 19345813 Volyn Oblast 176837 11901230 7806458 181075 11877679 7791243 Dnipropetrovsk Oblast 250947 14947023 9692101 269449 14846665 9625506 Donetsk Oblast 190799 10571499 6831882 204675 10487092 6779644 Zhytomyr Oblast 269515 16618199 11284790 280978 16552960 11245058 Zakarpattia Oblast 229847 18039078 10957129 233355 18022615 10947138 Zaporizhia Oblast 184542 11010283 7154961 196920 10922685 7102912 Ivano-Frankivsk Oblast 271148 18969403 12121876 277084 18948184 12108476 Kyiv Oblast 373388 26137328 17131451 403728 26023425 17056927 Kirovograd Oblast 189967 10564876 7461107 197861 10505879 7421068 Lugansk Oblast 141624 7813762 5252621 153526 7762511 5222223 Lviv Oblast 341700 23825642 15227249 355915 23744824 15174989 Mykolaiv Oblast 155344 8951519 6153892 161804 8866650 6101224 Odesa Oblast 309670 19686407 13643715 322757 19581568 13564837 Poltava Oblast 293335 16905596 11471526 312122 16761613 11383075 Rivne Oblast 203814 13813219 9681987 210581 13770835 9654592 Sumy Oblast 195239 10726325 7637659 203197 10662127 7598132 Ternopil Oblast 228960 14850417 10152894 232298 14818999 10133155 Kharkiv Oblast 231431 13615673 9245034 256543 13509419 9178896 Kherson Oblast 155572 9527186 6651094 164223 9437109 6591550 Khmelnytsky Oblast 295150 18001664 12570159 300299 17932326 12527086 Cherkasy Oblast 305448 17951907 12533831 313708 17864669 12480737 Chernivtsi Oblast 194353 12384462 8136334 196089 12359107 8120486 Chernigiv Oblast 266248 14585253 10062873 271760 14525561 10025384 Sevastopol City 5023 328902 200253 6001 327882 199717
Framework Contract FC474/EBSF-2010-08-124F 120 Annex 7: Growth of the total floor area of the housing stock in Ukraine General housing fund development in Ukraine, Total Urban and Rural
mil. sq.m. 1100 1050 1000 950 900 850 800 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 as of 01.01 of each year General housing fund development in Ukraine, Urban Areas
mil. sq.m. 700 680 660 640 620 600 580 560 540 520 500 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 as of 01.01 of each year
General housing fund development in Ukraine, Rural locations
mil. sq.m. 390
380
370
360
350
340
330 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 as of 01.01 of each year Source: [1-10] Note: No reporting as of the beginning of 2000 was issued
Framework Contract FC474/EBSF-2010-08-124F 121 Annex 8: Structure of housing stock in urban and rural area by form of ownership Number of Out of them, units Out of them, m2 Out of them, m2 Total floor Residential houses, state communal private state communal private state communal private area, m2 space, m2 units property property property property property property property property property Ukraine 10139128 22392 238160 9878576 1064966652 16123830 67510716 981332106 680005898 9212962 42179966 628612970 AR of Crimea 332339 1507 16936 313896 39816972 528064 4523375 34765533 24316361 306765 2887082 21122514 Vinnytsia Oblast 568042 1128 3768 563146 43726428 707871 1404437 41614120 29842068 411308 913454 28517306 Volyn Oblast 233197 256 4487 228454 21778193 190888 849106 20738199 13812674 109117 508659 13194898 Dnipropetrovsk Oblast 610829 1186 19499 590144 78667807 1241322 7135968 70290517 49326604 696387 4477164 44153053 Donetsk Oblast 851835 1622 40137 810076 100742305 1101965 10961572 88678768 64004548 613048 6922558 56468942 Zhytomyr Oblast 380669 898 11110 368661 32969474 406098 1425074 31138302 21377615 246327 863091 20268197 Zakarpattia Oblast 310182 211 3282 306689 27739563 153541 553110 27032912 16389975 90025 338538 15961412 Zaporizhia Oblast 350575 779 9297 340499 40577866 542192 2521637 37514037 25235948 305723 1548281 23381944 Ivano-Frankivsk Oblast 343963 245 4288 339430 31593777 276769 762095 30554913 19919668 159979 489759 19269930 Kyiv Oblast 536577 1124 6974 528479 52591843 584552 2505856 49501435 33193175 338013 1549455 31305707 Kirovograd Oblast 313248 342 4259 308647 24626800 248795 844562 23533443 16186852 154185 527312 15505355 Lugansk Oblast 516902 3145 18391 495366 55266923 816386 4981942 49468595 34425030 488883 3163349 30772798 Lviv Oblast 456687 981 14981 440725 52681593 1096556 2389573 49195464 33162236 612268 1548800 31001168 Mykolaiv Oblast 266258 726 6739 258793 25904691 390812 1806541 23707338 17103764 232345 1124694 15746725 Odesa Oblast 485709 817 10155 474737 53081944 1341675 4486902 47253367 35463195 749272 2813551 31900372 Poltava Oblast 421068 1360 6706 413002 36784846 634384 1769114 34381348 23682732 374898 1068430 22239404 Rivne Oblast 263157 387 3314 259456 24031433 385904 674620 22970909 15912882 234949 423260 15254673 Sumy Oblast 327847 569 5186 322092 27620476 433128 1343481 25843867 18350819 250052 831202 17269565 Ternopil Oblast 286248 211 1792 284245 24780099 276316 453715 24050068 16130196 160760 271079 15698357 Kharkiv Oblast 487502 1353 14308 471841 62764102 1276307 4160459 57327336 40257529 697307 2716865 36843357 Kherson Oblast 283700 791 4121 278788 24809750 609752 844044 23355954 16363112 359008 547003 15457101 Khmelnytsky Oblast 380020 387 4470 375163 32783865 364120 1082898 31336847 21863100 205949 664312 20992839 Cherkasy Oblast 428000 527 3911 423562 33978328 398915 999335 32580078 22573788 226347 622101 21725340 Chernivtsi Oblast 248046 310 4381 243355 20016210 225052 420351 19370807 12612433 127682 256066 12228685 Chernigiv Oblast 391799 730 4869 386200 29573989 432007 1397585 27744397 19265577 255218 892117 18118242 Kyiv City 34060 584 8107 25369 57899008 1343111 6368432 50187465 33996411 735090 3713741 29547580 Sevastopol City 30669 216 2692 27761 8158367 117348 844932 7196087 5237606 72057 498043 4667506
Framework Contract FC474/EBSF-2010-08-124F 122 Annex 9: Structure of housing stock in urban areas by form of ownership Residential Number of Out of them, units Out of them, m2 Out of them, m2 Total floor space, m2 houses, state communal private area, m2 state communal communal private communal units state property state property property property property property property property property property Ukraine 4036939 14151 204276 3818512 683391577 14166697 62406628 606818252 423706922 7998821 38977389 376730712 AR of Crimea 124965 776 11630 112559 26921588 440215 3789500 22691873 16079631 252303 2426347 13400981 Vinnytsia Oblast 127572 645 3232 123695 16155383 561483 1249105 14344795 10430869 325357 810524 9294988 Volyn Oblast 56388 143 4146 52099 9880384 172299 802436 8905649 6008689 98056 479107 5431526 Dnipropetrovsk Oblast 359979 671 18027 341281 63736233 1117483 6824988 55793762 39644002 614265 4276070 34753667 Donetsk Oblast 661586 1328 38045 622213 90227146 1050074 10615470 78561602 57208777 580871 6710856 49917050 Zhytomyr Oblast 111586 450 5699 105437 16392148 322370 999097 15070681 10120179 194201 612540 9313438 Zakarpattia Oblast 80348 95 3016 77237 9706107 126552 421841 9157714 5435831 73595 257997 5104239 Zaporizhia Oblast 166620 377 7692 158551 29613525 485687 2307300 26820538 18110707 271342 1416036 16423329 Ivano-Frankivsk Oblast 72819 223 4087 68509 12625096 264175 726080 11634841 7798345 151375 467967 7179003 Kyiv Oblast 163302 502 4916 157884 26481011 427652 2150569 23902790 16078697 243379 1335970 14499348 Kirovograd Oblast 123384 155 3659 119570 14079582 195248 743557 13140777 8736776 118594 460130 8158052 Lugansk Oblast 375362 2906 17595 354861 47461229 755126 4857608 41848495 29178192 452474 3084967 25640751 Lviv Oblast 115123 713 14267 100143 28891040 967109 2217103 25706828 17958036 523812 1442650 15991574 Mykolaiv Oblast 110988 287 6041 104660 16960464 312074 1617021 15031369 10954711 182861 1005425 9766425 Odesa Oblast 176099 542 9540 166017 33404730 1163752 4220378 28020600 21825316 647875 2641872 18535569 Poltava Oblast 128926 534 5472 122920 20012755 485017 1555694 17972044 12300218 282326 937207 11080685 Rivne Oblast 59449 250 2669 56530 10243156 343354 573438 9326364 6246302 208126 358741 5679435 Sumy Oblast 132930 326 4141 128463 16926810 381804 1239283 15305723 10734778 217836 762981 9753961 Ternopil Oblast 57383 130 1646 55607 9937757 248831 423573 9265353 5982729 142896 252961 5586872 Kharkiv Oblast 256634 763 11578 244293 49204917 1174453 3800404 44230060 31052291 632224 2483062 27937005 Kherson Oblast 128782 589 1324 126869 15334739 561907 576296 14196536 9750732 330549 368451 9051732 Khmelnytsky Oblast 85100 262 3926 80912 14808676 320746 991159 13496771 9309986 178751 607742 8523493 Cherkasy Oblast 122648 254 3367 119027 16034680 300965 885190 14848525 10045910 167134 549139 9329637 Chernivtsi Oblast 53703 162 4180 49361 7634652 195136 375379 7064137 4478298 108311 227634 4142353 Chernigiv Oblast 125557 293 3668 121596 14989296 334879 1273191 13381226 9203156 194506 812939 8195711 Kyiv City 34060 584 8107 25369 57899008 1343111 6368432 50187465 33996411 735090 3713741 29547580 Sevastopol City 25646 191 2606 22849 7829465 115195 802536 6911734 5237606 72057 498043 4667506
Framework Contract FC474/EBSF-2010-08-124F 123 Annex 10: Structure of housing stock in rural areas by form of ownership Residential Number of Out of them, units Out of them, m2 Out of them, m2 Total floor space, m2 houses, state communal private area, m2 state communal communal private communal state units state property property property property property property property property property property Ukraine 6102189 8241 33884 6060064 381575075 1957133 5104088 374513854 256298976 1214141 3202577 251882258 AR of Crimea 207374 731 5306 201337 12895384 87849 733875 12073660 8236730 54462 460735 7721533 Vinnytsia Oblast 440470 483 536 439451 27571045 146388 155332 27269325 19411199 85951 102930 19222318 Volyn Oblast 176809 113 341 176355 11897809 18589 46670 11832550 7803985 11061 29552 7763372 Dnipropetrovsk Oblast 250850 515 1472 248863 14931574 123839 310980 14496755 9682602 82122 201094 9399386 Donetsk Oblast 190249 294 2092 187863 10515159 51891 346102 10117166 6795771 32177 211702 6551892 Zhytomyr Oblast 269083 448 5411 263224 16577326 83728 425977 16067621 11257436 52126 250551 10954759 Zakarpattia Oblast 229834 116 266 229452 18033456 26989 131269 17875198 10954144 16430 80541 10857173 Zaporizhia Oblast 183955 402 1605 181948 10964341 56505 214337 10693499 7125241 34381 132245 6958615 Ivano-Frankivsk Oblast 271144 22 201 270921 18968681 12594 36015 18920072 12121323 8604 21792 12090927 Kyiv Oblast 373275 622 2058 370595 26110832 156900 355287 25598645 17114478 94634 213485 16806359 Kirovograd Oblast 189864 187 600 189077 10547218 53547 101005 10392666 7450076 35591 67182 7347303 Lugansk Oblast 141540 239 796 140505 7805694 61260 124334 7620100 5246838 36409 78382 5132047 Lviv Oblast 341564 268 714 340582 23790553 129447 172470 23488636 15204200 88456 106150 15009594 Mykolaiv Oblast 155270 439 698 154133 8944227 78738 189520 8675969 6149053 49484 119269 5980300 Odesa Oblast 309610 275 615 308720 19677214 177923 266524 19232767 13637879 101397 171679 13364803 Poltava Oblast 292142 826 1234 290082 16772091 149367 213420 16409304 11382514 92572 131223 11158719 Rivne Oblast 203708 137 645 202926 13788277 42550 101182 13644545 9666580 26823 64519 9575238 Sumy Oblast 194917 243 1045 193629 10693666 51324 104198 10538144 7616041 32216 68221 7515604 Ternopil Oblast 228865 81 146 228638 14842342 27485 30142 14784715 10147467 17864 18118 10111485 Kharkiv Oblast 230868 590 2730 227548 13559185 101854 360055 13097276 9205238 65083 233803 8906352 Kherson Oblast 154918 202 2797 151919 9475011 47845 267748 9159418 6612380 28459 178552 6405369 Khmelnytsky Oblast 294920 125 544 294251 17975189 43374 91739 17840076 12553114 27198 56570 12469346 Cherkasy Oblast 305352 273 544 304535 17943648 97950 114145 17731553 12527878 59213 72962 12395703 Chernivtsi Oblast 194343 148 201 193994 12381558 29916 44972 12306670 8134135 19371 28432 8086332 Chernigiv Oblast 266242 437 1201 264604 14584693 97128 124394 14363171 10062421 60712 79178 9922531 Sevastopol City 5023 25 86 4912 328902 2153 42396 284353 200253 1345 23710 175198
Framework Contract FC474/EBSF-2010-08-124F 124 Annex 11: Distribution of residential houses by year of construction (as of 2001) incl. those built: Total houses, % before 1919 1919-1945 1946-1960 1961-1970 1971-1980 1987-1990 1991 and later Ukraine 100 5.4 12.9 26.4 24.2 16.1 10.3 4.7 AR of Crimea 100 6.3 8.6 21.5 28.1 18.5 11.7 5.3 Vinnytsia Oblast 100 7.8 14.4 25.6 24.1 14.9 8.6 4.5 Volyn Oblast 100 1.6 11.0 28.0 24.6 18.1 11.4 5.3 Dnipropetrovsk Oblast 100 5.3 12.4 28.6 25.0 14.7 9.5 4.5 Donetsk Oblast 100 3.6 14.7 27.3 23.7 16.4 10.4 3.9 Zhytomyr Oblast 100 4.5 14.0 26.5 24.0 15.8 9.8 5.3 Zakarpattia Oblast 100 3.2 11.6 22.4 21.7 18.6 14.9 7.7 Zaporizhia Oblast 100 7.2 14.9 29.2 22.5 14.0 9.0 3.2 Ivano-Frankivsk Oblast 100 6.8 14.4 20.5 20.6 17.9 13.4 6.4 Kyiv Oblast 100 2.1 9.7 24.5 25.5 17.7 13.8 6.6 Kirovograd Oblast 100 15.1 15.1 23.0 20.3 14.1 8.6 3.8 Lugansk Oblast 100 3.0 11.8 34.0 26.7 13.9 7.9 2.6 Lviv Oblast 100 5.8 17.2 23.8 21.6 16.0 10.6 4.9 Mykolaiv Oblast 100 10.7 11.7 27.4 22.5 15.8 8.5 3.4 Odesa Oblast 100 10.6 17.0 23.8 21.9 14.7 8.4 3.6 Poltava Oblast 100 4.2 13.3 27.4 22.9 15.1 11.0 6.1 Rivne Oblast 100 2.0 12.7 25.8 22.4 18.8 12.5 5.7 Sumy Oblast 100 4.7 12.8 23.4 25.3 16.5 12.0 5.3 Ternopil Oblast 100 3.6 13.7 22.3 26.8 19.1 10.6 4.0 Kharkiv Oblast 100 5.1 11.4 30.2 23.4 15.8 10.0 4.2 Kherson Oblast 100 4.9 9.3 25.1 27.6 17.7 10.4 4.9 Khmelnytsky Oblast 100 4.4 12.8 25.9 27.4 16.5 9.3 3.8 Cherkasy Oblast 100 3.2 9.0 32.1 27.4 15.4 8.9 3.9 Chernivtsi Oblast 100 6.4 15.7 20.1 20.5 17.6 12.9 6.9 Chernigiv Oblast 100 3.2 12.2 30.5 26.6 15.8 8.2 3.4 Kyiv City 100 11.0 8.8 23.5 25.4 13.8 10.0 7.5 Sevastopol City 100 1.7 3.5 16.3 24.6 21.8 18.4 13.8
Framework Contract FC474/EBSF-2010-08-124F 125 Annex 12: Volumes of housing built by regions in 2009
Launched during Growth (reduction) rates, 2009 % compared to the previous year thousand % to the m2 of the reference: general 2009 Total 2008 volume floor area Ukraine 6399.6 100.0 61.0 102.5 AR of Crimea 387.3 6.1 93.2 79.6 Vinnytsia 171.5 2.7 47.4 91.4 Volyn 138.7 2.2 71.1 108.4 Dnipropetrovsk 170.4 2.7 38.9 103.8 Donetsk 173.0 2.7 39.6 118.0 Zhytomyr 88.8 1.4 35.9 112.1 Zakarpattia 169.2 2.6 43.0 111.9 Zaporyzhia 101.2 1.6 46.6 98.6 Ivano-Frankivsk 380.6 5.9 73.7 113.4 Kyiv 680.1 10.6 58.4 135.9 Kirovograd 66.5 1.0 51.8 106.6 Lugansk 35.1 0.5 14.1 96.2 Lviv 391.6 6.1 50.2 116.6 Mykolaiv 86.2 1.3 53.6 105.1 Odesa 537.2 8.4 63.4 106.8 Poltava 155.5 2.4 59.5 93.9 Rivne 98.3 1.5 56.9 68.0 Sumy 138.6 2.2 69.7 107.5 Ternopil 146.2 2.3 48.0 100.1 Kharkiv 427.5 6.7 192.0 41.4 Kherson 75.2 1.2 32.7 122.8 Khmelnytsky 266.1 4.2 86.3 99.6 Cherkasy 144.8 2.3 88.7 79.9 Chernivtsi 164.8 2.6 45.2 119.6 Chernigiv 104.8 1.6 51.5 109.2 Kyiv City 947.9 14.8 66.3 102.1 Sevastopol City 152.5 2.4 184.9 82.3
Source [29]
Framework Contract FC474/EBSF-2010-08-124F 126 Annex 13: Statistical data on construction activities in 2010
Activity Work volumes % to in January, January, 2010, mln total volume UAH 2009
Construction 1478.0 75.9 100.0 including Preparation of construction sites 122.4 102.5 8.3 Construction of buildings and constructions 1183.3 74.3 80.0 among which General construction work 937.5 70.0 63.4 Construction of buildings 693.4 64.6 46.9
building of bridges, trestles, tunnels and the underground 20.6 38.9 1.4 building of main pipelines, communication and power networks 98.6 106.8 6.7 building of local pipelines, communication and power networks 27.2 73.6 1.8
building of power, mining and processing enterprises 64.4 142.6 4.4 building of other constructions 1.4 30.3 0.1 assemblage and installation of mountable constructions 31.9 91.1 2.1
Production of framework constructions and roofs 11.4 66.3 0.8 Building of roads, air fields and the surface of sports constructions 42.9 97.4 2.9 Building of water constructions 22.8 96.4 1.5 Other construction work 168.7 100.1 11.4 Installation of engineering equipment of buildings and constructions 164.0 74.2 11.1 Construction completion work 7.3 64.9 0.5 Lease of construction technique with an operator 1.0 32.2 0.1
Source [29]
Framework Contract FC474/EBSF-2010-08-124F 127 Annex 14: Heat production and supply by boiler house in urban and rural areas in 2008 Supplied to Thermal Losses of Thermal power Total thermal Thermal power incl. Thermal power another power for thermal produced power supplied for residential municipal industrial received from enterprise balance of power during during the supplied, own consumers, consumers, consumers outside during (reseller), plants, the year, year, thousand thousand consumers, thousand thousand , thousand the year, thousand thousand thousand Gcal Gcal thousand Gcal Gcal Gcal Gcal thousand Gcal Gcal Gcal Gcal Ukraine 104699.1 96114.9 88987.9 51818.6 23634.2 13535.3 7127 3574.8 7375.3 12385.2 AR of Crimea 2864.9 2661.5 2532.2 1405.6 1020 106.6 129.3 45.4 107 265.1 Vinnytsia Oblast 2187.7 1955.5 1944.2 795 851.1 298.1 11.3 69.7 13.4 175.9 Volyn Oblast 1399.1 1526 1273.2 659.8 504.8 108.6 252.8 25.8 279.1 126.5 Dnipropetrovsk Oblast 9471.5 8651.1 8357.8 5064.3 1925.6 1367.9 293.3 244.8 1096.4 1672 Donetsk Oblast 11289.7 9772.9 9709.9 6886.2 2077.6 746.1 63 236.7 54.1 1334.2 Zhytomyr Oblast 1773 1636.1 1622.6 750.6 669.7 202.4 13.4 30.2 25.2 132 Zakarpattia Oblast 626.4 539.8 537.7 125.4 397.7 14.7 2.1 9.8 14.7 91.6 Zaporizhia Oblast 6012.8 5776.1 5109.8 2713.2 930 1466.5 666.3 246.5 536.7 526.9 Ivano-Frankivsk Oblast 1576.5 1425.9 1171.3 504.6 513.1 153.6 254.6 60.2 90.9 181.3 Kyiv Oblast 4108 3444.9 3421.2 1665.4 992.4 763.4 23.7 573.1 226.3 316.3 Kirovograd Oblast 1138.2 1027.8 1021 499.5 438 83.6 6.8 22.3 4.8 92.9 Lugansk Oblast 6586.4 5855.7 5837.1 2109.1 985.1 2742.8 18.6 394.6 104.5 440.7 Lviv Oblast 4190.7 3622 3615 1794.2 1118.2 702.5 7.1 299.5 119.4 388.5 Mykolaiv Oblast 1748.3 1840.9 1582.4 922.3 497.6 162.5 258.5 20.1 271.6 158.9 Odesa Oblast 4270.9 4238 3754.6 2081.5 913.5 759.6 483.4 71.6 502.3 463.6 Poltava Oblast 5108.8 4893.5 3158.4 1191.9 671.9 1294.7 1735.1 45.7 162.2 331.8 Rivne Oblast 1828.8 1971.9 1673.8 831.9 574.1 267.8 298.1 31.8 315.4 140.6 Sumy Oblast 2410.2 1993.2 1978.8 1105.7 499.7 373.5 14.3 27.9 5.5 394.5 Ternopil Oblast 987 925.2 923.9 464.6 344.6 114.7 1.3 19.7 25.2 67.4 Kharkiv Oblast 9464.5 10397.8 7960.3 5425.4 1676.6 858.3 2437.5 348.5 2464.3 1182.5 Kherson Oblast 1059.3 861.4 859.9 471.9 344.2 43.9 1.5 37.9 6.7 166.7 Khmelnytsky Oblast 2226.1 1880.3 1879.2 1158.3 542.3 178.6 1.2 112.8 9.8 242.8 Cherkasy Oblast 2416 2140.3 2012.7 1116.4 629.2 267.1 127.6 25.3 136.7 387 Chernivtsi Oblast 532.6 516.1 515.4 221 278.4 16 0.7 7.1 20.7 30.2 Chernigiv Oblast 2080.7 1741.4 1738.6 1001 542 195.5 2.8 73 20.9 287.2 Kyiv City 16359.3 13975.6 13952.9 10167.2 3540.3 245.4 22.7 468 760.8 2676.5 Sevastopol City 981.7 844 844 686.6 156.5 0.9 – 26.8 0.7 111.6
Framework Contract FC474/EBSF-2010-08-124F 128 Annex 15: Heat production and supply by boiler house in urban areas in 2008 incl. Supplied to Thermal power Thermal power Thermal power Thermal power Losses of Total thermal another received from produced during supplied for own for balance of thermal power power supplied, residential municipal industrial enterprise outside during the year, consumers, plants, during the year, thousand Gcal consumers, consumers, consumers, (reseller), the year, thousand Gcal thousand Gcal thousand Gcal thousand Gcal thousand Gcal thousand Gcal thousand Gcal thousand Gcal thousand Gcal Ukraine 99385.2 90875.6 85148.2 51533.3 20817.9 12796.9 5727.4 3509.7 7302 12301.9 AR of Crimea 2782.1 2579.4 2450.1 1400.7 981.7 67.7 129.3 44.7 107 265 Vinnytsia Oblast 2123.6 1891.6 1880.2 791.1 817 272.1 11.3 69.5 13.4 175.9 Volyn Oblast 1238.5 1368.5 1116.7 656.3 352.6 107.8 251.8 22.5 274.6 122.2 Dnipropetrovsk Oblast 9388.3 8568.4 8276.4 5060.7 1849 1366.7 292 244.3 1095.7 1671.3 Donetsk Oblast 11143 9637.5 9574.9 6844.9 2008.8 721.2 62.6 232.7 54.1 1326.9 Zhytomyr Oblast 1563 1426 1412.6 748.6 463.5 200.4 13.4 30.1 24.8 131.7 Zakarpattia Oblast 587.5 501.2 499.1 122.5 364.2 12.4 2.1 9.7 14.7 91.3 Zaporizhia Oblast 5885.5 5646.3 4980 2712.3 801.9 1465.8 666.3 246.3 533.8 526.7 Ivano-Frankivsk Oblast 1374.1 1229.8 975.9 504.6 354.5 116.8 253.9 54.5 90.6 180.4 Kyiv Oblast 3637.7 3005.6 2983.1 1580.4 788.4 614.3 22.5 560.7 200.6 271.9 Kirovograd Oblast 1006.6 895 888.2 497.1 308.4 82.7 6.8 22 3.4 92.9 Lugansk Oblast 6524.4 5794.6 5776 2106.3 928.1 2741.6 18.6 394.4 104.5 439.9 Lviv Oblast 4033.4 3460.6 3453.7 1778.7 977.7 697.3 6.9 299 113.5 387.3 Mykolaiv Oblast 1619.2 1711.7 1453.9 921.4 371.1 161.4 257.8 19.8 270.8 158.5 Odesa Oblast 4137.6 4105.3 3626.9 2074.7 830.5 721.7 478.4 71.1 502.3 463.5 Poltava Oblast 4825.8 4611.8 2877.7 1159.5 513.7 1204.4 1734.2 44 161.6 331.5 Rivne Oblast 1649.9 1794.6 1496.5 828.9 414.3 253.4 298.1 29.7 314.1 139.7 Sumy Oblast 2266.5 1851.8 1837.5 1099.9 438.2 299.4 14.3 25.4 5.2 394.5 Ternopil Oblast 863.5 801.7 800.4 464.6 231.4 104.3 1.3 19.7 25.2 67.4 Kharkiv Oblast 7745.5 8701.1 7650.8 5370.9 1488 791.9 1050.3 323.6 2442.4 1163.2 Kherson Oblast 988.4 790.7 789.2 469.9 275.4 43.9 1.5 37.8 6.7 166.7 Khmelnytsky Oblast 2163.3 1818.6 1817.6 1158.3 489.6 169.6 1 111.7 9.8 242.8 Cherkasy Oblast 2080.7 1805.2 1677.6 1109.3 432.6 135.7 127.6 21.7 132.3 386.1 Chernivtsi Oblast 481.4 464.8 464.1 221 227.2 16 0.7 7.1 20.7 30.2 Chernigiv Oblast 1935.8 1595.3 1593.3 996.9 413.7 182.8 2 72.9 18.7 286.3 Kyiv City 16359.3 13975.6 13952.9 10167.2 3540.3 245.4 22.7 468 760.8 2676.5 Sevastopol City 980.6 842.9 842.9 686.6 156.1 0.2 – 26.8 0.7 111.6
Framework Contract FC474/EBSF-2010-08-124F 129 Annex 16: Heat production and supply by boiler house in rural areas in 2008 incl. Supplied to Thermal Thermal power Total thermal Thermal power Supplied to another power for produced power supplied for another residential municipal industrial enterprise balance of during the supplied, own incl. enterprise consumers, consumers, consumers, (reseller), plants, year, thousand thousand consumers, (reseller), thousand thousand thousand thousand thousand Gcal Gcal thousand Gcal thousand Gcal Gcal Gcal Gcal Gcal Gcal Ukraine 5314.2 5239.4 3840 285 2816.1 738.6 1399.5 65.4 73.4 83.2 AR of Crimea 82.8 82.1 82.1 4.9 38.3 38.8 – 0.7 – – Vinnytsia Oblast 64.2 64 64 3.9 34 26.1 – 0.2 – – Volyn Oblast 160.6 157.5 156.5 3.5 152.2 0.8 1 3.4 4.5 4.3 Dnipropetrovsk Oblast 83.2 82.7 81.4 3.6 76.6 1.2 1.3 0.5 0.7 0.7 Donetsk Oblast 146.7 135.4 135 41.2 68.8 24.9 0.4 4 – 7.3 Zhytomyr Oblast 210 210 210 1.9 206.2 2 – 0.1 0.4 0.3 Zakarpattia Oblast 38.9 38.6 38.6 2.9 33.5 2.3 – – – 0.2 Zaporizhia Oblast 127.3 129.8 129.8 0.9 128.1 0.8 – 0.2 2.9 0.2 Ivano-Frankivsk Oblast 202.4 196.1 195.5 – 158.6 36.9 0.6 5.7 0.4 1 Kyiv Oblast 470.3 439.3 438.1 85 204 149 1.2 12.3 25.7 44.4 Kirovograd Oblast 131.6 132.8 132.8 2.4 129.6 0.9 – 0.2 1.4 – Lugansk Oblast 62 61.1 61 2.8 57 1.2 0.1 0.2 – 0.8 Lviv Oblast 157.2 161.4 161.3 15.5 140.5 5.2 0.2 0.6 5.9 1.2 Mykolaiv Oblast 129.1 129.2 128.6 0.9 126.5 1.1 0.7 0.3 0.8 0.4 Odesa Oblast 133.3 132.7 127.7 6.8 83 37.9 5 0.5 – 0.1 Poltava Oblast 283 281.6 280.8 32.4 158.1 90.3 0.9 1.7 0.7 0.3 Rivne Oblast 179 177.3 177.3 3 159.8 14.4 – 2.1 1.3 0.9 Sumy Oblast 143.7 141.4 141.4 5.9 61.4 74 – 2.5 0.2 – Ternopil Oblast 123.5 123.5 123.5 – 113.2 10.4 – – – – Kharkiv Oblast 1719.1 1696.7 309.5 54.4 188.6 66.5 1387.2 25 21.9 19.3 Kherson Oblast 70.9 70.8 70.8 1.9 68.8 – – 0.1 – – Khmelnytsky Oblast 62.8 61.8 61.6 – 52.7 9 0.1 1.1 – – Cherkasy Oblast 335.3 335.1 335.1 7.1 196.5 131.5 – 3.7 4.4 0.9 Chernivtsi Oblast 51.3 51.3 51.3 – 51.3 – – – – – Chernigiv Oblast 144.9 146.1 145.2 4.1 128.4 12.7 0.8 0.2 2.2 0.9 Sevastopol City 1.1 1.1 1.1 – 0.4 0.7 – – – –
Framework Contract FC474/EBSF-2010-08-124F 130 Annex 17: Heat production and supply by boiler house in urban and rural areas in 2009 incl. Supplied to Thermal power Thermal power Thermal power Supplied to Total thermal another produced during supplied for own for balance of another enterprise power supplied, residential municipal industrial enterprise incl. the year, consumers, plants, (reseller), thousand Gcal consumers, consumers, consumers, (reseller), thousand Gcal thousand Gcal thousand Gcal thousand Gcal thousand Gcal thousand Gcal thousand Gcal thousand Gcal Ukraine 97971.3 90727.8 83844.1 52055 22241.7 9547.8 6883.4 3243.5 8279 12279.3 AR of Crimea 2815.1 2606.9 2533.1 1445.8 1005 82.3 73.8 45.5 110.5 273.1 Vinnytsia Oblast 2101.2 1913.2 1903.9 876.6 860 167.4 9.3 57 13.6 144.5 Volyn Oblast 1385.6 1528.6 1262.1 697.1 485.5 79.6 266.4 24 295.6 128.6 Dnipropetrovsk Oblast 8796.2 9076.3 8557 5458.3 1863.4 1235.3 519.4 227.3 2136.1 1628.7 Donetsk Oblast 10701.3 9195.3 9168.6 6676.1 1916.1 576.5 26.6 228.9 31.3 1308.5 Zhytomyr Oblast 1685.3 1554.3 1547.6 775 653 119.7 6.7 26.7 22.5 126.8 Zakarpattia Oblast 632.7 555.6 555.6 85.5 451.6 18.5 – 8.1 9.3 78.4 Zaporizhia Oblast 4977.2 4828.7 4196.3 2657.9 885.1 653.3 632.4 159.8 508.6 497.3 Ivano-Frankivsk Oblast 1326 1182.8 1127.2 514.2 505.4 107.6 55.6 53.4 101.1 190.9 Kyiv Oblast 3834.3 3283.9 3264.6 1653.1 845.7 765.8 19.3 463.7 226.9 313.5 Kirovograd Oblast 1051.6 935.2 932 475.5 400.2 56.3 3.2 24.8 3.5 95.1 Lugansk Oblast 4964.9 4466.1 4464.2 2027.5 920.8 1515.9 1.9 224.3 99.6 374.2 Lviv Oblast 4103.7 3508.4 3502.8 1953.3 1043.5 506 5.6 284.1 122.9 434.2 Mykolaiv Oblast 1537.1 1670.7 1398.3 799.9 447.6 150.9 272.4 10.7 285.4 141.2 Odesa Oblast 3958.9 3909.2 3397.1 1908 754.2 734.9 512.1 63.9 453 438.8 Poltava Oblast 4639.9 4426.1 2824.4 1243.5 619.8 961.1 1601.7 41.1 160.4 333.2 Rivne Oblast 1758.9 1908.7 1606.7 892.6 532 182.2 301.9 32.3 323.8 141.8 Sumy Oblast 2263.9 1830.2 1810.8 1088.1 453 269.7 19.4 25.5 4.5 412.7 Ternopil Oblast 883.8 826.1 825.5 469.5 322.6 33.4 0.6 17.7 25.1 65.2 Kharkiv Oblast 9333.9 10239.2 7852.7 5584.6 1618.2 649.8 2386.5 326.5 2432 1200.1 Kherson Oblast 1000 788.4 788.4 438.2 312.3 38 – 23.9 4.9 192.7 Khmelnytsky Oblast 2125.6 1821.2 1820.9 1122.5 504.2 194.1 0.3 97.8 11 217.6 Cherkasy Oblast 2293.9 2033.4 1884.9 1136.2 590.1 158.5 148.4 24.6 156.1 392 Chernivtsi Oblast 556.9 543.5 542.9 253.3 288.1 1.5 0.6 7.7 26.9 32.6 Chernigiv Oblast 2014 1705.6 1702.3 1021 537 144.3 3.3 66.8 43.9 285.5 Kyiv City 16425 13697.7 13681.7 10243.7 3293.3 144.7 16 655.6 670.5 2742.1 Sevastopol City 804.4 692.5 692.5 558 134 0.5 – 21.8 – 90
Framework Contract FC474/EBSF-2010-08-124F 131 Annex 18: Heat production and supply by boiler house in urban areas in 2009 incl. Supplied to Supplied to Thermal Thermal power Thermal power another Total thermal another power for produced during supplied for own enterprise power supplied, residential municipal industrial enterprise balance of incl. the year, consumers, (reseller), thousand Gcal consumers, consumers, consumers, (reseller), plants, thousand Gcal thousand Gcal thousand thousand Gcal thousand Gcal thousand Gcal thousand Gcal thousand Gcal Gcal Ukraine 93110.8 85916.3 80446.7 51832.9 19533.7 9079.8 5469.6 3183.4 8197.1 12208.6 AR of Crimea 2743.9 2534.4 2460.6 1442.8 955.3 62.5 73.8 45.5 109.2 273.1 Vinnytsia Oblast 2047.1 1859.6 1850.3 873.1 813.9 163.3 9.3 56.5 13.6 144.5 Volyn Oblast 1232.6 1376.6 1110.3 691.2 339.9 79.2 266.3 20.7 289.3 124.6 Dnipropetrovsk Oblast 8726.6 9006.8 8487.8 5455.7 1797.2 1234.9 519 227 2135.6 1628.4 Donetsk Oblast 10565.9 9062.4 9035.7 6663.2 1798.6 573.9 26.6 228.3 31.3 1306.6 Zhytomyr Oblast 1486.9 1355.8 1349.1 773.3 457.4 118.3 6.7 26.6 22.1 126.6 Zakarpattia Oblast 570 492.9 492.9 83.4 392.7 16.7 – 8.1 9.3 78.4 Zaporizhia Oblast 4860.3 4711 4078.6 2657.1 769 652.5 632.4 159.6 507.4 497.1 Ivano-Frankivsk Oblast 1155.2 1016.7 961.9 514 366.3 81.6 54.7 50.1 99 187.4 Kyiv Oblast 3428.2 2903.2 2885.4 1575 646.1 664.3 17.8 451.5 200.6 274.1 Kirovograd Oblast 930.1 813.1 809.9 473.5 280.7 55.7 3.2 24.5 2.6 95.1 Lugansk Oblast 4910.7 4412.2 4410.3 2025 869.8 1515.6 1.9 224.2 99.6 374 Lviv Oblast 3969.9 3370.4 3365.6 1948.1 915.6 501.9 4.8 283.8 117.7 433.4 Mykolaiv Oblast 1422.5 1556 1284.3 799.3 335 150 271.8 10.4 284.7 140.8 Odesa Oblast 3808.7 3759.4 3252.6 1899.1 666.2 687.3 506.8 63.4 453 438.8 Poltava Oblast 4346.9 4132.7 2532 1208.9 471.7 851.4 1600.7 39.6 158.2 332.9 Rivne Oblast 1587.7 1734.8 1432.8 889 367.2 176.7 301.9 30.2 317.5 140.3 Sumy Oblast 2196.6 1764.3 1744.9 1086.1 413.6 245.1 19.4 24.4 4.5 412.5 Ternopil Oblast 763.2 705.3 704.8 469.5 212.5 22.8 0.6 17.7 25 65.2 Kharkiv Oblast 7663.3 8592.4 7608.2 5542.9 1453.1 612.2 984.2 298.6 2411.1 1183.4 Kherson Oblast 921.4 709.8 709.8 437.3 234.5 38 – 23.9 4.9 192.7 Khmelnytsky Oblast 2075.4 1771.9 1771.7 1122.5 463.2 186 0.2 96.9 11 217.6 Cherkasy Oblast 2055.1 1795.4 1647 1129.8 410.7 106.5 148.4 20.1 151.6 391.2 Chernivtsi Oblast 537.7 524.3 523.7 253.3 268.8 1.5 0.6 7.7 26.9 32.6 Chernigiv Oblast 1875.9 1565 1562.6 1018.1 407.4 137 2.5 66.7 40.9 285.2 Kyiv City 16425 13697.7 13681.7 10243.7 3293.3 144.7 16 655.6 670.5 2742.1 Sevastopol City 804 692.2 692.2 558 134 0.2 – 21.8 – 90
Framework Contract FC474/EBSF-2010-08-124F 132 Annex 19: Heat production and supply by boiler house in rural areas in 2009 Thermal power Total thermal Thermal power incl. Supplied to Thermal power Supplied to another produced during power supplied for own another enterprise for balance of enterprise residential municipal industrial incl. the year, supplied, consumers, consumers, consumers, consumers, (reseller), plants, (reseller), thousand thousand Gcal thousand Gcal thousand Gcal thousand Gcal thousand Gcal thousand Gcal thousand Gcal thousand Gcal Gcal Ukraine 4860.5 4811.4 3397.5 221.9 2707.6 467.8 1413.7 60.4 81.8 70.6 Autonomous Republic of the Crimea 71.2 72.5 72.5 3 49.7 19.8 - - 1.4 - Vinnytsia Oblast 54.1 53.6 53.6 3.4 46.1 4.1 – 0.5 – – Volyn Oblast 153 152 151.8 5.9 145.5 0.4 0.1 3.2 6.2 4 Dnipropetrovsk Oblast 69.6 69.5 69.1 2.6 66.2 0.4 0.4 0.3 0.4 0.2 Donetsk Oblast 135.4 132.9 132.9 12.9 117.4 2.6 – 0.6 – 1.9 Zhytomyr Oblast 198.4 198.5 198.5 1.6 195.5 1.4 – 0.1 0.5 0.3 Zakarpattia Oblast 62.7 62.7 62.7 2.1 58.9 1.8 – – – – Zaporizhia Oblast 116.9 117.8 117.8 0.8 116.1 0.8 – 0.2 1.1 0.1 Ivano-Frankivsk Oblast 170.8 166.2 165.3 0.2 139.1 26 0.8 3.2 2.1 3.5 Kyiv Oblast 406.1 380.7 379.2 78.1 199.7 101.5 1.5 12.2 26.3 39.4 Kirovograd Oblast 121.5 122.1 122.1 2 119.5 0.6 – 0.4 1 – Lugansk Oblast 54.2 53.8 53.8 2.5 51 0.3 – 0.2 – 0.2 Lviv Oblast 133.8 138 137.2 5.2 127.9 4 0.8 0.3 5.2 0.8 Mykolaiv Oblast 114.6 114.7 114 0.6 122.6 0.8 0.6 0.3 0.7 0.4 Odesa Oblast 150.3 149.8 144.5 8.9 88 47.5 5.3 0.5 – – Poltava Oblast 293 293.4 292.5 34.6 148.1 109.7 0.9 1.5 2.2 0.3 Rivne Oblast 171.2 173.9 173.9 3.6 164.8 5.5 – 2.2 6.3 1.5 Sumy Oblast 67.3 65.9 65.9 1.9 39.3 24.6 – 1.2 – 0.2 Ternopil Oblast 120.6 120.8 120.8 – 110.1 10.7 – – 0.1 – Kharkiv Oblast 1670.6 1646.7 244.5 41.8 165.1 37.6 1402.3 27.9 20.8 16.7 Kherson Oblast 78.6 78.6 78.6 0.9 77.7 – – – – – Khmelnytsky Oblast 50.2 49.3 49.2 – 41.1 8.1 0.1 0.9 – – Cherkasy Oblast 238.8 237.9 237.9 6.4 179.5 52 – 4.6 4.5 0.8 Chernivtsi Oblast 19.2 19.2 19.2 – 19.2 – – – – – Chernigiv Oblast 138.1 140.6 139.7 2.9 129.5 7.3 0.9 0.1 3 0.3 Sevastopol City 0.3 0.3 0.3 – – 0.3 – – – –
Framework Contract FC474/EBSF-2010-08-124F 133 Annex 20: Heat production history
Dynamics of heat production by boilers in Ukraine during the period of 1997-2009 [11-25]
700000
654640
615004 600000 590330
546819 536796 532731 517897 521693 498094 497535 500000 469466 E.TJ 4 38354 410186 400000
300000
Dynamics200000 of heat received from outside in Ukraine for the period of 1997-2009 [11-25] 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 250000
198589 200000 179345
150000
E. TJ
100000 97047
54776 43406 50000 39659 37417 34663 3 2740 33267 32747 29687 30879
Heat used for0 boiler house own consumption in Ukraine for the period of 1997-2009 [11-25] 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
30000
26060 26471 25000 22225
20000 18550 18550 17917 16329 15682 14967 15000 13919 13580 12358 E. TJ 11612
10000
5000
0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Dynamics of total heat supplied in Ukraine in the period of 1997-2009 [11-25]
900000
800000 7 7332 2
700000 689620 637340 600000 519412 50 5253 496291 493089 500000 481180 472244 479967 431071 E. TJ 4024 14 400000 3 79859
300000 Framework Contract FC474/EBSF-2010-08-124F 134 200000
100000
0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Dynamics of heat provided for own consumers in Ukraine in the period of 1997-2009 [11-25]
800000
700000 667006
600000 558938 565160
500000 476200 462126 457118 454350 440003 432154 443064 398910 400000 372575 E. TJ 351038
300000
200000
100000
0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Dynamics of heat provided for population in Ukraine in the period of 1997-2009 [11-25]
400000
350000 337248 322487
300000 284155 282030 266331 264709 261045 248140 251585 253987 250000 230316 216954 217944 E. TJ 200000
150000
100000
50000
0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Dynamics of heat supplied to communal and household users in Ukraine in the period of 1997-2009
200000
180000 172895
160000 138956 140000 127947
120000 110335 112197 106547 109442 104242 103952 E. TJ 98080 99210 98952 100000 93122
80000 60000
40000
20000
0 Dynamics1997 of1998heat sup1999ply2000for production2001 2002 needs2003 in2004 Ukraine2005 in the2006 period2007 of2008 1997-2009 [11-25]
Framework Contract FC474/EBSF-2010-08-124F 135 180000
160000 156863
140000 135827
120000 114724
100000 87621 88455 85460 86758 82490 E.TJ 81973 79633 80000 69384 60000 56670
39975 40000
20000
0 1997Dynamics1998 1999 of heat2000losses2001 in Ukraine2002 2003 in the2004 period2005 of 19972006 -20092007 [112008-25] 2009
60000 58000 55924 56000 54696 54991 53846 53584 54000 53149 52486 51739 51751 51854 52000 51411 50350 50000 E. TJ 48708 48000 46000 44000
42000 40000 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Framework Contract FC474/EBSF-2010-08-124F 136 Annex 21: Heat and power consumption by non-residential sector in 2008
Actual use per Actual use for the production unit in the entire production in Product reporting period, the reporting period, c.e.kg c.e.ton
Power generated by general use CHPs operating 330.1 4221952 on organic fuel, thousand kW-hour Power generated by CHPs operating on organic 396.2 649772 fuel-block stations, thousand kW-hour Power generated by CHPs operating on organic fuel, not connected to the power system, thousand 191.8 67582 kW-hour Power generated by general use thermal plants, except for CHPs, operating on organic fuel, 399.0 26482195 thousand kW-hour Electric power generated by thermal plants, except for CHPs, operating on organic fuel, not connected 190.8 23901 to the power system, thousand kW-hour Thermal power generated and supplied by electric 166.8 7088658 power plants, Gcal Thermal power generated and supplied by boiler 164.6 16461403 plants, Gcal Thermal power generated and supplied by individual boilers not connected to a boiler plant 167.7 289388 (conditional boiler plants), Gcal
Annex 22: Heat production and supply by boiler house in rural areas in 2008
Actual use per Actual use for the entire production unit in the Product production in the reporting period, reporting period, c.e.ton c.e.kg
Losses of thermal power in main thermal networks of power system of the Ministry of Fuel 15.3 7268270 and Energy of Ukraine, Gcal
Electric power generated by CHPs operating on 996.9 3825 organic fuel-block stations, thousand kW-hour
Framework Contract FC474/EBSF-2010-08-124F 137 Annex 23: Heat and power generation in 2008
Actual use per Actual use for the production unit in the entire production in Product reporting period, the reporting period, c.e.kg c.e.ton
Losses of electric power in electric networks of power system of the Ministry of Fuel and Energy 11.0 14611182 of Ukraine, thousand kW-hour Electric power generated by general use CHPs 128.2 2222 operating on organic fuel, thousand kW-hour
Thermal power generated and supplied by 20.0 6985 electric power plants, Gcal Thermal power generated and supplied by boiler 31.1 2075052 plants, Gcal Thermal power generated and supplied by individual boilers not connected to a boiler plant 238.8 75208 (conditional boiler plants), Gcal
Annex 24: Usage of secondary fuel resources in 2008
Output Actually used Consumption Losses Name tce tce coefficient, % Absolute tce % Ukraine 11024169 9672427 87.7 1351742 12.3 Vinnytsia Oblast 35504 33678 94.9 1826 5.1 Volyn Oblast 15789 14285 90.5 1504 9.5 Dnipropetrovsk Oblast 2685981 2203586 82.0 482395 18.0 Donetsk Oblast 5768438 5247960 91.0 520478 9.0 Zhytomyr Oblast 32060 21176 66.1 10884 34.0 Zakarpattia Oblast 52449 46532 88.7 5917 11.3 Zaporyzhia Oblast 1298449 1180780 90.9 117669 9.1 Ivano-Frankivsk Oblast 78268 76710 98.0 1558 2.0 Kirovograd Oblast 55023 48223 87.6 6800 12.4 Lugansk Oblast 903706 712252 78.8 191454 21.2 Lviv Oblast 17953 15014 83.6 2939 16.4 Mykolaiv Oblast 132 132 100.0 0 0.0 Poltava Oblast 45790 45691 99.8 99 0.2 Sumy Oblast 28442 20310 71.4 8132 28.6 Khmelnytsky Oblast 6170 6083 98.6 87 1.4 Cherkasy Oblast 15 15 100.0 0 0.0
Framework Contract FC474/EBSF-2010-08-124F 138 Annex 25: Usage of secondary fuel resources in 2008
Possible heat Actually Losses Output Consumption generation used Absolute Name Gcal coefficient, % % Gcal Gcal Gcal Ukraine 16655766 13935294 11935024 85.7 2000270 12.0 Autonomous Republic of Crimea 511346 372620 258856 69.5 113764 22.3 Vinnytsia Oblast 13602 13602 13602 100.0 0 0.0 Dnipropetrovsk Oblast 1583399 1583399 1244714 78.6 338685 21.4 Donetsk Oblast 6263586 5137855 4514742 87.9 623113 9.9 Zhytomyr Oblast 13018 11518 10709 93.0 809 6.2 Zakarpattia Oblast 60104 60104 60104 100.0 0 0.0 Zaporyzhia Oblast 526705 520681 497647 95.6 23034 4.4 Ivano-Frankivsk Oblast 498166 442866 351976 79.5 90890 18.2 Kyiv Oblast 44882 38249 13544 35.4 24705 55.0 Kirovograd Oblast 146060 146060 0 0.0 146060 100.0 Lugansk Oblast 2012490 1891424 1778959 94.1 112465 5.6 Lviv Oblast 12887 12887 12887 100.0 0 0.0 Odesa Oblast 217600 140600 117498 83.6 23102 10.6 Poltava Oblast 221469 130608 96436 73.8 34172 15.4 Rivne Oblast 2687197 1701290 1491795 87.7 209495 7.8 Sumy Oblast 480257 418015 237760 56.9 180255 37.5 Kharkiv Oblast 216674 177592 134480 75.7 43112 19.9 Kherson Oblast 14645 14645 12313 84.1 2332 15.9 Khmelnytsky Oblast 7257 7257 7257 100.0 0 0.0 Cherkasy Oblast 1121850 1111450 1077173 96.9 34277 3.1 Chernigiv Oblast 969 969 969 100.0 0 0.0 м.Kyiv 1603 1603 1603 100.0 0 0.0
Framework Contract FC474/EBSF-2010-08-124F 139 Annex 26: Heat and water metering and controls in residential building stock, 2008 Cold water meters Hot water meters Thermal power meters Temperature regulators Region Adjusted As on As on % to the Adjusted As on As on % to the Adjusted As on As on % to the Adjusted As on As on % to the Program 01.01. 01.01. Program Program 01.01. 01.01. Program Program 01.01. 01.01. Program Program 01.01. 01.01. Program objectives 2007 2008 objective objectives 2007 2008 objective objectives 2007 2008 objective objectives 2007 2008 objective AR of Crimea 8 791 7 245 7 475 85.03 4 899 215 244 4.98 5 150 1943 2031 39.44 5 150 9 15 0.29 Vinnytsia 6 487 902 858 13.23 4 290 110 97 2.26 5 993 637 1180 19.69 5 993 89 62 1.03 Volyn 2 272 345 431 18.97 550 30 33 6.00 1 399 93 119 8.51 1 399 3 1 0.07 Dnipropetrovsk 16 453 1 010 1 405 8.54 9 069 94 119 1.31 9 453 831 1579 16.70 9 453 71 8 0.08 Donetsk 20 051 6 597 6 831 34.07 5 731 361 443 7.73 19 398 4626 4596 23.69 19 398 2164 1390 7.17 Zhytomyr 5 126 492 607 11.84 1 305 87 84 6.44 4 132 320 269 6.51 4 132 221 46 1.11 Zakarpattia 4 532 357 328 7.24 903 11 5 0.55 1 860 68 17 0.91 1 860 40 2 0.11 Zaporyzhia 9 530 1 284 1 362 14.29 3 639 729 445 12.23 9 127 1054 1513 16.58 9 127 199 362 3.97 Ivano-Frankivsk 5 543 958 1 471 26.54 1 812 197 356 19.65 2 970 204 194 6.53 2 970 11 2 0.07 Kyiv 5 418 1 208 1 445 26.67 2 573 113 119 4.62 4 361 467 609 13.96 4 361 161 8 0.18 Kirovograd 1 605 788 652 40.62 388 11 11 2.84 893 538 596 66.74 893 8 0 0.00 Lugansk 16 631 1 197 2 026 12.18 6 549 45 26 0.40 11 735 220 376 3.20 11 735 20 5 0.04 Lviv 16 828 939 1 052 6.25 2 432 648 755 31.04 4 814 3438 3697 76.80 4 814 36 75 1.56 Mykolaiv 3 974 508 522 13.14 1 861 217 209 11.23 2 984 423 425 14.24 2 984 102 44 1.47 Odesa 18 853 5 992 5 198 27.57 4 085 291 307 7.52 4 309 696 572 13.27 4 309 161 130 3.02 Poltava 7 743 390 601 7.76 5 068 127 92 1.82 6 162 475 453 7.35 6 162 102 30 0.49 Rivne 2 485 183 153 6.16 615 22 20 3.25 1 718 176 170 9.90 1 718 27 17 0.99 Sumy 3 533 143 148 4.19 2 626 49 43 1.64 3 189 287 525 16.46 3 189 163 43 1.35 Ternopil 2 191 485 451 20.58 502 65 58 11.55 1 376 86 67 4.87 1 376 5 0 0.00 Kharkiv 22 230 1 882 2 415 10.86 14 609 228 225 1.54 22 148 1221 1237 5.59 22 148 81 37 0.17 Kherson 3 370 132 164 4.87 918 6 6 0.65 2 507 532 527 21.02 2 507 0 0 0.00 Khmelnytsky 3 159 220 211 6.68 1 012 57 54 5.34 2 462 362 483 19.62 2 462 49 20 0.81 Cherkasy 2 700 431 396 14.67 1 014 96 64 6.31 4 423 462 401 9.07 4 423 141 10 0.23 Chernivtsi 4 366 493 609 13.95 490 1 3 0.61 887 67 134 15.11 887 2 1 0.11 Chernigiv 3 521 288 330 9.37 1 434 84 90 6.28 2 351 283 284 12.08 2 351 9 6 0.26 Kyiv City 9 808 20 460 8 862 90.35 8 120 1616 2046 25.20 9 510 2096 1974 20.76 9 510 496 260 2.73 Sevastopol City 2 535 1 859 1 891 74.60 2 455 4 4 0.16 2 535 280 307 12.11 2 535 0 0 0.00 Total: 209 735 56 788 47894 22.84 88 949 5 514 5 958 6.70 147 846 21885 24335 16.46 147 846 4 370 2 574 1.74
Framework Contract FC474/EBSF-2010-08-124F 140 Annex 27: Heat tariffs 2002-2009
Customer Category 2002 2003 2004 2005 2006 2007 2008 2009 UAH/Gcal Weighted average 65.44 89.73 133.22 172.23 229.80 Residents 63.22 64.17 67.52 58.23 80.77 115.20 144.56 179.45 Budgetary 96.25 102.62 109.50 94.21 126.99 214.79 282.75 432.01 Others 102.19 109.13 116.74 83.28 108.75 179.97 242.72 393.70
Annex 28: Electricity prices for residential customers Date from which the price is in effect 01.04.1999 01.05.2006 01.09.2006 01.12.2009 kopeks per 1 kWt/hour including VAT, as defined in the NERC Decree #309 from 10.03.99 and its amendments Residents 15.60 19.50 24.36 24.36 Residents that live in rural areas 14.40 18.00 22.50 22.50 Residents that live in buildings equipped with electric kitchen appliances, electric heaters (including those living in 12.00 15.00 18.72 18.72 rural areas) Residents that live in condominium buildings of human settlements (cities, villages, towns) that have no natural gas 18.72 supply and which have non-functioning or no district heating systems Residential settlements 15.12 18.90 23.64 23.64 Residential settlements in rural areas 13.92 17.40 21.78 21.78 Residential settlements with buildings equipped with electric kitchen appliances, electric heaters (including those living in 11.52 14.40 18.00 18.00 rural areas)
Date from which the price is in effect 01.12.2009 01.02.2011 The tariffs are shown in kopiyka for 1 kWt/hour including VAT, and are shown according to the Decree of NERC #309 from 10.03.99 and its amendments Residents: 24,36 if the amount of electricity consumption is not more than 150 kWh/month 24,36 if the amount of electricity consumption is more than 150 kWh/month 31,68 for families with many children, foster families and foster care homes with any amount of 24,36 electricity consumption Residents that live in rural areas: 22,50 if the amount of electricity consumption is not more than 150 kWh/month 22,50 if the amount of electricity consumption is more than 150 kWh/month 29,28 Residents in buildings with electric kitchen appliances, electric heaters 18,72 if the amount of electricity consumption is not more than 250 kWh/month 18,72 if the amount of electricity consumption is more than 250 kWh/month 24,36 for families with many children, foster homes with any amount of electricity consumption 18,72 Residents that live in condominium buildings (cities, villages, towns) w/o gas supply or DH 18,72 18,72 Residential settlements 23,64 30,78 family type dormitories 23,64 Residential settlements in rural areas 21,78 28,32 family type dormitories in rural areas 21,78 family type dormitories which are in buildings equipped with electric kitchen appliances, 18,00 electric heaters (including those living in rural areas)
Framework Contract FC474/EBSF-2010-08-124F 141 Annex 29: Natural gas prices for residential customers
# of the decree of NERC that sets the price 310 400 739 1345 1672 1672 934 1239 812 Date of the decree 10.03.99 30.03.06 08.06.06 19.10.06 19.12.06 19.12.06 07.08.08 25.10.08 13.07.10 Date from which the price is in effect 01.04.99 01.05.06 01.07.06 01.11.06 01.01.07 01.03.07 01.09.08 01.12.08 01.08.10 Diversification of price according to consumption amount if the amount of natural gas consumption is not more than 2500 sq.m/year: in case gas meters are installed 31.5 31.5 35.82 48.36 72.54 in case gas meters are not installed 34.5 34.5 39.36 53.16 79.80 if the amount of natural gas consumption is not more than 6000 sq.m/year: in case gas meters are installed 47.8 47.8 54.24 73.20 109.80 in case gas meters are not installed 52.6 52.6 59.64 80.52 120.78 if the amount of natural gas consumption is not more than 12000 sq.m/year: in case gas meters are installed 98.0 98.0 111.00 149.88 224.82 in case gas meters are not installed 107.8 107.8 122.10 164.82 247.32 if the amount of natural gas consumption is more than 12000 sq.m/year: in case gas meters are installed 117.3 117.3 132.60 179.04 268.56 in case gas meters are not installed 129.0 129.0 145.86 196.86 295.41 The price of natural gas that is used for cooking and warming of water, but is not used for heating purposes: in case gas meters are installed 31,5 in case gas meters are not installed 34,5 The price of natural gas that is used by residents in for all purposes, including for heating, cooking and warming of water: in case gas meters are installed 17.5 22.0 40.7 40.7 68.6 in case gas meters are not installed 19.0 24.0 44.4 44.4 75.4 *Prices are provided in kopiykas/m3including VAT
Framework Contract FC474/EBSF-2010-08-124F 142 Annex 30: Water supply tariffs, 2002-2009
Customer Category 2002 2003 2004 2005 2006 2007 2008 2009 UAH/m3 Weighted average 0.75 0.92 1.20 1.53 1.96 Residents 0.55 0.65 0.72 0.61 0.78 1.08 1.38 1.85 Budgetary 1.25 1.55 1.92 1.69 2.12 2.57 3.11 4.03 Others 1.56 1.90 2.16 0.89 1.03 1.22 1.59 1.91
Annex 31: Waste water tariffs, 2002-2009
Customer Category 2002 2003 2004 2005 2006 2007 2008 2009 UAH/m3 Weighted average 0.60 0.77 1.05 1.33 1.81 Residents 0.40 0.44 0.51 0.36 0.49 0.69 0.90 1.32 Budgetary 0.84 1.11 1.35 1.03 1.43 1.88 2.34 3.09 Others 1.03 1.34 1.59 1.32 1.50 1.96 2.39 3.14
Framework Contract FC474/EBSF-2010-08-124F 143 Annex 32: Distribution matrix of residential building stock energy use Zone I Zone II Zone III Zone IV Apartment blocks construction before 1980 After EE After EE After EE After EE Baseline Baseline Baseline Baseline Delivered energy in kWh/m2 for: measures measures measures measures Space heating (incl vent.) 165,0 72,7 143,0 66,1 104,0 54,2 94,9 46,5 DHW 22,0 22,0 22,0 22,0 22,0 22,0 22,0 22,0 Lighting 10,0 5,1 10,0 5,1 10,0 5,1 10,0 5,1 Various 12,6 12,6 12,5 12,5 12,3 12,3 12,1 12,1 Total delivered energy in kWh/m2 209,6 112,4 187,5 105,7 148,3 93,6 139,0 85,7 Building stock conditioned area m2 262 765 515 262 765 515 85 085 758 85 085 758 51 303 966 51 303 966 15 296 304 15 296 304 Total delivered energy in MWh 55 075 652 29 534 844 15 953 580 8 993 565 7 608 378 4 802 051 2 126 186 1 310 893 Apartment blocks construction after 1980 After EE After EE After EE After EE Baseline Baseline Baseline Baseline Delivered energy in kWh/m2 for: measures measures measures measures Space heating (incl vent.) 172,0 59,7 158,0 60,0 131,0 49,0 111,0 41,9 DHW 22,0 22,0 22,0 22,0 22,0 22,0 22,0 22,0 Lighting 10,0 5,1 10,0 5,1 10,0 5,1 10,0 5,1 Various 12,6 12,6 12,5 12,5 12,4 12,4 12,2 12,2 Total delivered energy in kWh/m2 216,6 99,4 202,5 99,6 175,4 88,5 155,2 81,2 Building stock conditioned area m2 55 042 899 55 042 899 17 819 702 17 819 702 10 744 695 10 744 695 3 204 155 3 204 155 Total delivered energy in MWh 11 922 292 5 471 264 3 608 490 1 774 842 1 884 619 950 905 497 285 260 177 Single family houses After EE After EE After EE After EE Baseline Baseline Baseline Baseline Delivered energy in kWh/m2 for: measures measures measures measures Space heating (incl vent.) 289,9 121,3 258,0 110,0 225,1 98,2 190,2 89,7 DHW 14,0 14,0 14,0 14,0 14,0 14,0 14,0 14,0 Lighting 10,0 5,1 10,0 5,1 10,0 5,1 10,0 5,1 Various 12,6 12,6 12,3 12,3 12,1 12,1 12,1 12,1 Total delivered energy in kWh/m2 326,5 153,0 294,3 141,4 261,2 129,4 226,3 120,9 Building stock conditioned area m2 344 129 750 344 129 750 125 393 988 125 393 988 75 647 460 75 647 460 20 200 303 20 200 303 Total delivered energy in MWh 112 358 363 52 651 852 36 903 451 17 730 710 19 759 117 9 788 781 4 571 328 2 442 217
Framework Contract FC474/EBSF-2010-08-124F 144 Annex 33: Classification of multi-story residential buildings in Kyiv, 2004 Number of Name Series Construction year buildings, Share, % Stories units "Pre-revolutionary" – before 1917 1556 12.9 1…8 "Stalinky" – 1920s – mid 1950s 1898 15.7 2…13 "Khruschevka", "Cheshka", "464" mid 1950s – late 1980s 1695 14.1 3…12 "96", "134", Panel buildings 1970s – 1980s 1041 8.6 9…16 "BPS-б" "T", "KT", "APPS" 1970s – 1980s 861 7.1 9…22 "Khruschevka", "MM-640", "K14", mid 1950s – late 1980s 2878 23.9 2…14 Brick buildings "1-318-35/36" "87", "Departmental houses", "KP" before 1991 809 6.7 4…20 "APPS lux", "KT Uyut", "B-5", Modern panel buildings after 1991 286 2.4 9…26 "ES", "Individual project" Modern brick buildings "Individual project" after 1991 1038 8.6 2…28
Annex 34: Normative maximum heat consumption of multi-story buildings
House assignment/ number of Emax, kW∙hour/m2, [kW∙hour/m3], for the temperature zone stories I II III IV Residential houses and hotels / 1 - 3 According to annex 23 4 - 5 89 [32] 77 [28] 65 [24] 53 [19] 6 - 7 83 [30] 72 [26] 61 [22] 50 [18] 8 - 9 79 [29] 69 [25] 58 [21] 48 [17] 10 - 11 75 [27] 65 [23] 55 [20] 45 [16] 12 and more 73 [26] 63 [23] 54 [19] 44 [16] Public and office buildings / 1 [44] [38] [32] [26] 2 [40] [34] [29] [24] 3 [38] [33] [28] [23] 4 -5 94 [35] 81 [31] 69 [26] 56 [21] 6 -7 89 [33] 77 [29] 65 [24] 53 [20] 8 -9 83 [31] 72 [27] 61 [23] 50 [19] 10 - 11 79 [29] 69 [25] 58 [21] 48 [17] 12 and more 77 [28] 67 [24] 57 [20] 46 [17] Medical and children educational facilities / 1 [35] [31] [26] [21] 2 [34] [30] [25] [21] 3 [33] [29] [24] [20] 4 -5 [32] [28] [24] [19] 6 -7 [31] [27] [23] [[19] 8 -9 [30] [26] [22] [18] 10 - 11 [29] [25] [21] [17] Pre-school facilities / 1 - 3 [43] [37] [31] [26] Shops, department stores, supermarkets / 1 [24] [21] [18] [92] 2 [23] [20] [17] [14] 3 [22] [19] [16] [13] 4 -5 [21] [18] [15] [12] 6 -7 [21] [18] [15] [12]
Framework Contract FC474/EBSF-2010-08-124F 145 Space of Number of stories the building 1 2 3 4 heated, m2 Emax, kW∙hour/(m2∙year), for the temperature zone I II III IV I II III IV I II III IV I II III IV Less than 146 126 107 87 – – – 60 60 - 150 130 113 95 78 141 122 103 84 – – 151 - 250 115 99 84 69 125 108 92 75 135 117 99 81 – 251 - 400 104 90 76 62 109 95 80 66 115 99 84 69 120 104 88 72 401 - 600 – 94 81 69 56 99 86 73 59 104 90 76 62 601 - 1000 – 83 72 61 50 89 77 65 53 94 81 69 56 More than – 73 63 53 44 78 68 57 47 83 72 61 50 1000
Annex 35: Distribution of housing in urban and rural area by temperature zone
Temperature operation zone of Ukraine Total for Indicator Ukraine І ІІ ІІІ ІV
Number of 6186974 2243297 1345849 363008 10139128 buildings, units
Framework Contract FC474/EBSF-2010-08-124F 146 Total floor area of housing 640139919 245315446 131535948 47975339 1064966652 premises, m2
Annex 36: Distribution of housing in urban area by temperature zone
Indicator Temperature operation zone of Ukraine Total for Ukraine І ІІ ІІІ ІV
Number of 2565479 824632 496217 150611 4036939 buildings, units
Total floor area of housing 420853554 152380930 75406040 34751053 683391577 premises, m2
Annex 37: Distribution of housing in rural area by temperature zone
Temperature operation zone of Ukraine Total for Indicator Ukraine І ІІ ІІІ ІV
Number of 3621495 1418665 849632 212397 6102189 buildings, units
Total floor area of housing 219286365 92934516 56129908 13224286 381575075 premises, m2
Framework Contract FC474/EBSF-2010-08-124F 147 Annex 38: Distribution matrix of energy savings by EE measures Apartment blocks up to 7 floors construction* Zone I Zone II Zone II Zone IV Measures/Savings kWh/m2 kWh/m2 kWh/m2 kWh/m2 Additional insulation of walls 32,8 29,0 17,4 17,0 New windows 27,0 19,2 11,6 11,5 Additional insulation of roof 12,8 11,9 8,5 8,2 New automated substation and TRV 19,6 16,9 12,3 11,7 Indoor lighting replacement 4,9 4,9 4,9 4,9 Savings in kWh/m2: 97,2 81,8 54,7 53,3 Apartment blocks more than 7 floors construction** Zone I Zone II Zone II Zone IV Measures/Savings kWh/m2 kWh/m2 kWh/m2 kWh/m2 Additional insulation of walls 42,5 36,7 29,1 24,7 New windows 41,7 35,8 31,0 24,4 Additional insulation of roof 3,6 3,4 2,6 2,4 New automated substation and TRV 18,9 17,1 14,2 12,5 Indoor lighting replacement 4,9 4,9 4,9 4,9 Savings in kWh/m2: 111,6 97,8 81,8 68,9 Single family houses Zone I Zone II Zone II Zone IV Measures/Savings kWh/m2 kWh/m2 kWh/m2 kWh/m2 Additional insulation of walls 59,6 53,9 48,9 41,4 New windows 26,1 21,1 15,6 12,6 Additional insulation of roof 40,4 35,3 30,4 21,3 TRV installing 11,0 10,0 8,9 6,6 Indoor lighting replacement 4,9 4,9 4,9 4,9 Replacement heat generator with high efficient boiler 31,5 27,7 23,1 18,6 Savings in kWh/m2: 173,5 152,9 131,8 105,4 * mostly before 1980 **mostly after 1980
Framework Contract FC474/EBSF-2010-08-124F 148 Annex 39: Distribution matrix of savings in MWh Urban areas Urban apartment blocks up to 7 floors construction* Zone I Zone II Zone II Zone IV Total Measures/Savings MWh MWh MWh MWh MWh Additional insulation of walls 8 246 915 2 335 363 846 014 248 023 11 676 315 New windows 6 796 541 1 546 839 566 370 168 405 9 078 155 Additional insulation of roof 3 227 926 956 536 412 511 120 447 4 717 420 New automated substation and TRV 4 932 727 1 359 913 595 773 171 616 7 060 029 Indoor lighting replacement 1 231 757 395 092 238 217 71 659 1 936 725 Savings in MWh: 24 435 866 6 593 744 2 658 886 780 150 34 468 645 Urban apartment blocks more than 7 floors constructions** Zone I Zone II Zone II Zone IV Total Measures/Savings MWh MWh MWh MWh MWh Additional insulation of walls 2 241 419 619 713 296 767 75 633 3 233 532 New windows 2 200 389 604 527 316 394 74 831 3 196 141 Additional insulation of roof 188 836 56 705 26 110 7 360 279 010 New automated substation and TRV 994 856 289 178 144 672 38 402 1 467 108 Indoor lighting replacement 258 278 82 844 49 950 15 026 406 097 Savings in MWh: 5 883 777 1 652 966 833 893 211 251 8 581 888 Urban single family houses Zone I Zone II Zone II Zone IV Total Measures/Savings MWh MWh MWh MWh MWh Additional insulation of walls 7 809 832 2 265 385 1 239 444 315 929 11 630 589 New windows 3 421 606 887 112 394 558 96 204 4 799 480 Additional insulation of roof 5 303 050 1 484 922 769 860 162 230 7 720 062 TRV installing 1 446 286 422 308 226 570 50 517 2 145 681 Indoor lighting replacement 642 446 206 068 124 247 37 375 1 010 135 Replacement heat generator with high efficient boiler 4 128 003 1 164 565 586 913 141 776 6 021 256 Savings in MWh: 22 751 224 6 430 359 3 341 591 804 029 33 327 203
Rural areas Rural apartment blocks up to 7 floors construction* Zone I Zone II Zone II Zone IV Total
Framework Contract FC474/EBSF-2010-08-124F 149 Measures/Savings MWh MWh MWh MWh MWh Additional insulation of walls 373 554 129 026 46 780 11 398 560 758 New windows 307 858 85 461 31 318 7 739 432 375 Additional insulation of roof 146 213 52 847 22 810 5 535 227 405 New automated substation and TRV 223 434 75 133 32 943 7 887 339 397 Indoor lighting replacement 55 794 21 828 13 172 3 293 94 088 Savings in MWh: 1 106 852 364 296 147 024 35 852 1 654 023 Rural apartment blocks more than 7 floors construction** Zone I Zone II Zone II Zone IV Total Measures/Savings MWh MWh MWh MWh MWh Additional insulation of walls 99 215 33 458 16 036 3 397 152 106 New windows 97 399 32 638 17 096 3 360 150 494 Additional insulation of roof 8 359 3 061 1 411 331 13 162 New automated substation and TRV 44 037 15 613 7 817 1 725 69 191 Indoor lighting replacement 11 432 4 473 2 699 675 19 279 Savings in MWh: 260 441 89 244 45 060 9 487 404 231 Rural single family houses Zone I Zone II Zone II Zone IV Total Measures/Savings MWh MWh MWh MWh MWh Additional insulation of walls 12 688 733 4 489 301 2 458 265 520 756 20 157 055 New windows 5 559 127 1 757 986 782 550 158 576 8 258 239 Additional insulation of roof 8 615 933 2 942 662 1 526 911 267 409 13 352 915 TRV installing 2 349 800 836 885 449 371 83 269 3 719 325 Indoor lighting replacement 1 043 790 408 363 246 426 61 606 1 760 185 Replacement heat generator with high efficient boiler 6 706 818 2 307 812 1 164 061 233 694 10 412 384 Savings in MWh: 36 964 201 12 743 009 6 627 583 1 325 309 57 660 102
Framework Contract FC474/EBSF-2010-08-124F 150 Annex 40: Distribution matrix of savings in MW per apartment and family houses
For the apartment blocks in Ukraine Zone I Zone II Zone II Zone IV Total Measures/Savings MWh MWh MWh MWh MWh Additional insulation of walls 10 961 103 3 117 561 1 205 597 338 450 15 622 711 New windows 9 402 186 2 269 466 931 178 254 335 12 857 165 Additional insulation of roof 3 571 334 1 069 150 462 842 133 672 5 236 997 New automated substation and TRV 6 195 053 1 739 837 781 206 219 629 8 935 726 Indoor lighting replacement 1 557 261 504 237 304 038 90 652 2 456 189 Sum savings in MWh: 31 686 937 8 700 250 3 684 862 1 036 739 45 108 787 For the single family houses in Ukraine Zone I Zone II Zone II Zone IV Total Measures/Savings MWh MWh MWh MWh MWh Additional insulation of walls 20 498 565 6 754 686 3 697 708 836 685 31 787 643 New windows 8 980 734 2 645 098 1 177 108 254 779 13 057 719 Additional insulation of roof 13 918 983 4 427 584 2 296 771 429 638 21 072 977 TRV installing 3 796 086 1 259 193 675 941 133 786 5 865 006 Indoor lighting replacement 1 686 236 614 431 370 673 98 981 2 770 320 Replacement heat generator with high efficient boiler 10 834 820 3 472 376 1 750 974 375 469 16 433 639 Sum savings in MWh: 59 715 424 19 173 368 9 969 174 2 129 338 90 987 305 Total for Ukraine savings in MWh 91 402 361 27 873 618 13 654 036 3 166 078 136 096 092
Framework Contract FC474/EBSF-2010-08-124F 151 Annex 41: Berdichev project costs estimates
Name of the projected Total Cost, thousand UAH.* works cost 20/1 Lenina Str. 14 Lupova Str. 36 Novo-Ivanivska Str. (thousan d UAH) Thousand Thousand Thousa Thousa Thousand Thousand UAH Euro nd UAH nd Euro UAH Euro
Project works during all 84,1 23,2 - 24,7 - 36,2 - period of the renovation External walls heating 3215 1188,0 - 980,0 1047,0 - insulation Installation of the 20 10,0 - - - 10,0 - consumed heating energy check point Installation of the electric 420 140,0 - 140,0 - 140,0 - heater for the all building hot water supply Installation of the 330 110,0 - 110,0 - 110,0 - individual heating distribution point Preparation and 7 7,0 - - - - - renovation of the individual heating distribution point and electric boiler rooms. Internal building water 14 7,0 - 7,0 - - - supply, heating and sewage pipe line systems Installation of the roof gas 980 - - 450,0 - 530,0 - heater for the building hot water and heating supply Building backyard asphalt 21,6 - - 21,6 - - - renovation Internal building basement 60 - - - - 60,0 - water supply, heating and sewage systems renovation Stairwells windows change 60 - - - - 60,0 - for metal-plastic ones, building front doors replacement Total 5211,7 1485,2 1733,3 1993,2 * UAH/EUR exchange rate as of Sep. 01, 2007 is 6,9 UAH for 1 EUR
Annex 42: Berdichiv project financing plan
No. According to the financing sources Sum, UAH % of the Applied to (000) general need 1 ЕSCО own funds - - - 2. City budget funds 84,1 1,6 Payment for design work 3. Ukrainian State budget funds 860,9 16,5 Investments 4. DIGH Loan 4266,7 81,9 Investments Total 5211,7 100,0
Annex 43: Lutsk project cost estimates
Framework Contract FC474/EBSF-2010-08-124F 152 Type of works Cost, UAH
Façade insulation 1 694 793 Roof insulation 209 150 Engineering systems 1 291 904 modernization Replacement of old windows 561 718 Lighting system modernization 15 600 Total project cost 3 773 165
Annex 44: Banks loan and investment portfolio , 2011 (mln UAH) Incl. Reserve for Share Reserve Loans for No BANK LIP** Interbank Loans for loans and (%) for banks' legal entities Securities loans*** individuals clients' arrears *** arrears TOTAL 613285.07 100.00 46866.16 1736.52 476181.35 144121.52 115844.74 63697.31 1 PRIVATBANK 93189.87 15.195 10377.07 312.68 79558.32 19046.33 16352.33 873.16 2 UKREXIMBANK 53630.81 8.745 703.71 66.02 48881.91 1095.03 7392.33 10408.53 3 OSCHADBANK 49234.79 8.028 538.01 3.35 39034.64 4614.52 5574.27 10625.23 4 UKRSOTSBANK* 30799.11 5.022 318.65 16.49 16212.76 17496.90 6574.69 3361.99 5 PROMINVESTBANK* 26872.16 4.382 2590.94 45.28 23948.54 1192.72 2090.82 1276.06 6 VTB BANK 26774.67 4.366 259.45 3.01 25817.96 2715.89 4683.68 2668.07 7 OTP BANK 21093.38 3.439 402.69 54.76 11591.53 9399.54 3354.79 3109.17 8 ALFA BANK 18575.75 3.029 2266.65 59.25 16560.12 4306.14 6027.48 1529.58 9 FINANSY I KREDIT 17158.58 2.798 89.02 8.94 13550.62 3815.62 1529.28 1241.53 10 NADRA 16685.74 2.721 480.41 148.80 8568.87 12547.63 5190.05 427.67 11 PUMB 12672.58 2.066 1062.68 19.49 9763.36 3111.54 3009.58 1764.07 12 BROKBUSINESSBANK 11092.38 1.809 687.65 1.40 8364.82 2382.99 865.18 523.50 13 CREDITPROMBANK* 10784.91 1.759 865.96 4.19 7486.00 2525.59 1603.44 1515.00 14 FORUM 9692.43 1.580 139.47 154.03 8900.71 3889.05 4304.62 1221.85 15 PIVDENNY* 8246.29 1.345 510.92 4.60 7458.22 885.24 621.75 18.26 16 SVEDBANK 7958.36 1.298 1198.04 13.01 8167.25 5427.42 7274.55 453.21 17 SBERBANK ROSSII 7900.08 1.288 582.51 6.67 7397.06 1221.49 2413.28 1118.96 18 DELTA 7607.46 1.240 472.07 0.21 6732.24 3468.59 3224.51 159.29 19 ING BANK UKRAINE 7599.73 1.239 322.54 14.94 6412.82 97.90 148.25 929.67 20 UKRGAZBANK 7579.05 1.236 1721.79 482.79 5881.01 2517.64 4916.34 2857.75 21 UNICREDIT BANK* 6995.23 1.141 0.00 0.00 5674.24 1025.42 767.24 1062.81 22 ERSTE BANK 6303.51 1.028 406.70 1.44 1871.34 3241.49 1399.01 2184.43 23 FINANCIAL INITIATIVE 5791.52 0.944 262.01 49.18 6336.61 1.69 808.24 48.64 24 DONGORBANK 5415.18 0.883 1167.08 12.65 2702.49 1298.10 1109.70 1369.87 25 IMEXBANK 5006.06 0.816 137.48 4.06 4830.51 490.49 448.37 0.01 26 UNIVERSAL BANK 4919.79 0.802 321.70 0.67 1450.62 3340.66 1205.05 1012.53 27 CITIBANK UKRAINE 4801.34 0.783 82.88 0.83 2224.62 52.75 136.64 2578.57 28 KHRESCHATYK 4793.78 0.782 612.57 0.53 3627.05 514.70 386.74 426.74 29 VAB BANK 4179.95 0.682 210.05 1.48 3625.91 1341.44 1185.75 189.79 30 INDEX-BANK 4006.85 0.653 281.20 3.58 2329.39 1928.21 597.96 69.59 31 KYIVSKA RUS* 3992.81 0.651 291.69 0.30 3248.33 488.96 223.43 187.56 32 PRAVEX-BANK* 3883.66 0.633 0.00 0.00 1029.43 3768.25 1062.24 148.23 BANK CREDIT- 33 3715.59 0.606 82.09 1.71 3384.97 600.61 416.49 66.12 DNIPRO 34 CIB Credit Agricole 3176.48 0.518 110.00 4.30 3319.40 21.86 271.72 1.24 35 BANK TAVRIKA 3035.55 0.495 460.57 0.74 2387.32 268.76 100.44 20.07 36 MARFIN BANK 3000.56 0.489 253.62 8.80 1918.90 926.43 582.36 492.78 37 BTA BANK 2932.71 0.478 1033.30 1.03 1614.41 435.00 247.43 98.47 38 CREDOBANK 2790.38 0.455 0.00 1.54 2785.01 983.28 1377.55 401.18
Framework Contract FC474/EBSF-2010-08-124F 153 Incl. Reserve for Share Reserve Loans for No BANK LIP** Interbank Loans for loans and (%) for banks' legal entities Securities loans*** individuals clients' arrears *** arrears 39 MEGABANK 2744.68 0.448 135.94 0.03 2068.09 535.56 131.51 136.65 40 BM BANK 2429.85 0.396 344.71 0.16 1802.16 373.85 121.24 30.52 41 PIREUS BANK MKB 2242.47 0.366 102.71 0.03 1810.48 606.66 639.25 361.89 UKRAINIAN 42 PROFESSIONAL 2206.47 0.360 313.23 6.16 1744.75 134.01 120.89 141.52 BANK 43 ACTIV-BANK 2180.30 0.356 193.70 0.18 1435.62 646.36 100.40 5.20 44 SEB BANK 2155.07 0.351 100.48 10.88 1172.34 1163.53 575.87 305.48 45 INDUSTRIALBANK 2149.43 0.350 105.61 3.39 1933.37 161.60 305.45 257.70 46 CLEARING HOUSE 2116.84 0.345 129.60 0.04 2112.99 248.11 413.21 39.40 47 PIVDENCOMBANK 2091.24 0.341 405.76 6.76 1505.19 81.48 102.35 207.93 48 UKRINBANK 1928.97 0.315 370.74 3.56 1372.62 271.43 130.86 48.60 49 PROCREDIT BANK 1925.03 0.314 35.92 0.56 974.52 1042.94 150.93 23.14 50 VOLKSBANK 1855.01 0.302 70.00 0.73 617.24 1388.17 592.23 372.55 51 ZLATOBANK 1819.73 0.297 342.66 3.19 1554.90 114.99 189.70 0.06 52 UKRBUSINESSBANK 1814.52 0.296 51.74 1.79 921.18 872.37 55.96 26.98 53 DIAMANTBANK* 1745.98 0.285 145.79 0.26 1524.16 80.59 80.04 75.74 NATIONAL 54 1737.76 0.283 354.92 0.44 910.76 464.89 66.92 74.54 INVESTMENTS 55 BANK OF CYPRUS 1606.31 0.262 32.51 0.11 1065.22 509.67 185.02 184.03 56 EUROGAZBANK 1508.56 0.246 1136.76 0.09 273.31 98.97 10.49 10.11 57 RODOVID BANK 1433.01 0.234 4.23 1.09 2346.90 1529.61 3038.74 592.09 58 INTEGRAL 1417.66 0.231 1010.12 11.67 385.83 69.24 80.09 44.23 59 PLATINUM BANK 1414.63 0.231 412.68 32.12 0.00 1206.20 173.21 1.08 60 ASTRA BANK* 1387.96 0.226 100.00 10.52 257.73 419.19 108.43 729.98 INVESTMENTS AND 61 1332.77 0.217 240.30 1.98 1118.13 29.04 52.72 0.00 SAVINGS BANK* 62 FORTUNA-BANK 1296.82 0.211 267.43 1.40 1140.14 27.86 137.27 0.06 63 EXPOBANK* 1249.41 0.204 154.57 0.21 999.21 308.09 300.00 87.74 64 EXPRESS-BANK 1180.08 0.192 0.80 0.04 902.08 404.45 139.19 11.99 65 ENERGOBANK 1162.16 0.189 253.87 0.04 750.45 227.48 99.24 29.65 BUSINESS 66 1141.19 0.186 252.34 0.62 514.98 289.61 105.90 190.79 STANDARD 67 BG BANK 1133.39 0.185 296.60 0.81 695.51 196.02 74.09 20.17 68 DEMARK 1097.15 0.179 177.56 1.35 967.20 89.93 153.93 17.74 69 TERRA BANK* 1095.57 0.179 480.14 2.18 323.58 115.41 38.86 217.49 CREDIT EUROPE 70 1051.59 0.171 45.35 1.31 612.40 224.38 120.32 291.09 BANK* 71 FINBANK 991.87 0.162 263.74 0.57 685.39 51.25 20.43 12.49 72 KAMBIO 976.28 0.159 86.47 0.43 776.09 92.55 40.02 61.62 73 GLOBUS 941.66 0.154 602.24 3.53 325.66 8.56 62.81 71.54 74 MISTO-BANK* 927.61 0.151 114.08 0.10 518.32 275.38 144.00 163.94 75 BASIS 916.31 0.149 11.94 0.08 725.19 191.94 46.60 33.92 76 UKRAINIAN CAPITAL* 840.16 0.137 571.62 1.39 163.92 91.62 22.60 37.00 77 UKRGAZPROMBANK 834.99 0.136 303.96 7.09 484.47 78.51 58.93 34.06 78 MERCURY 796.92 0.130 42.75 0.16 489.55 255.92 16.17 25.02 79 ZOLOTI VOROTA 793.43 0.129 0.00 0.20 496.11 408.50 110.97 0.00 80 DANIEL 782.23 0.128 243.26 0.07 279.68 191.81 38.68 106.22 81 HOME CREDIT BANK* 767.52 0.125 88.11 0.90 83.82 400.58 132.92 328.82 82 POLTAVA-BANK* 766.30 0.125 11.81 0.01 676.22 95.88 47.38 29.79 83 CAPITAL 755.15 0.123 39.96 0.04 524.19 167.21 39.83 63.66 84 ZAHIDINCOMBANK 700.74 0.114 0.00 0.01 867.53 206.00 402.87 30.08 85 AUTOKRAZBANK 699.78 0.114 71.05 0.01 588.62 54.44 54.17 39.84 86 UNEX 688.17 0.112 82.76 0.55 596.68 4.04 38.76 44.00 87 INPROMBANK 666.06 0.109 67.14 0.09 626.35 153.59 223.12 42.19 88 ERDE BANK* 661.64 0.108 240.63 8.00 386.11 15.71 26.12 53.31 UKRAINIAN 89 651.64 0.106 7.67 2.53 611.36 33.59 76.16 77.72 FINANCIAL WORLD 90 BANK 643.77 0.105 115.01 0.12 509.68 83.92 106.69 41.96
Framework Contract FC474/EBSF-2010-08-124F 154 Incl. Reserve for Share Reserve Loans for No BANK LIP** Interbank Loans for loans and (%) for banks' legal entities Securities loans*** individuals clients' arrears *** arrears PETROCOMMERZ- UKRAINE 91 APEX-BANK* 642.75 0.105 380.13 0.87 141.89 122.29 11.19 10.50 92 PLUS BANK 624.81 0.102 63.68 0.07 101.89 514.35 55.11 0.07 FIRST INVESTMENTS 93 590.61 0.096 80.99 7.75 498.71 117.01 124.50 26.16 BANK 94 TK-CREDIT 582.56 0.095 0.00 0.00 560.52 32.09 26.66 16.60 95 КOMINVESTBANK* 582.17 0.095 284.54 0.05 247.97 79.02 29.31 0.00 96 EUROBANK* 581.36 0.095 51.72 0.01 274.13 188.45 8.37 75.44 97 PREMIUM* 577.24 0.094 365.47 0.28 295.24 0.79 83.97 0.00 98 BANK 3/4* 575.16 0.094 548.91 4.73 8.74 18.01 0.14 4.38 99 CONVERSBANK 572.81 0.093 204.48 0.64 317.28 50.47 23.35 24.58 100 LVIV 521.29 0.085 15.38 1.55 407.12 177.17 108.10 31.27 INTERNATIONAL 101 519.29 0.085 66.81 0.05 443.67 14.93 11.83 5.77 INVESTMENTS BANK 102 UNICOMBANK* 516.71 0.084 0.00 0.00 619.12 6.14 108.56 0.00 103 SOTSCOMBANK* 511.16 0.083 0.00 0.00 457.40 151.58 97.82 0.00 104 A-BANK 499.10 0.081 8.46 0.10 118.86 504.38 132.49 0.00 105 PORTO-FRANCO 487.92 0.080 102.06 0.28 306.72 96.47 22.05 5.00 106 NOVY* 484.45 0.079 79.88 0.22 404.90 32.34 60.47 28.01 107 METABANK 451.36 0.074 64.92 0.08 236.81 153.12 35.88 32.46 108 AGROCOMBANK 445.22 0.073 174.23 1.70 169.99 89.76 36.84 49.79 109 ARTEN-BANK 434.22 0.071 232.77 0.81 116.52 60.11 32.88 58.50 110 EUROPROMBANK* 431.86 0.070 70.87 0.19 367.75 3.01 9.58 0.00 111 GRANT 393.48 0.064 3.02 0.00 303.79 91.58 8.60 3.70 Bank Russian 112 371.46 0.061 73.25 0.55 16.00 297.19 14.42 0.00 Standard* 113 FINROSTBANK* 354.71 0.058 88.99 6.30 281.50 21.92 31.39 0.00 RENAISSANCE 114 352.32 0.057 118.42 16.22 0.00 292.27 42.15 0.00 CAPITAL BANK 115 VBR* 349.32 0.057 11.94 0.05 191.29 146.98 0.84 0.00 116 ASVIO BANK 346.10 0.056 17.16 1.52 260.76 76.47 6.77 0.00 117 CLASSIC BANK 339.43 0.055 100.81 13.24 292.07 0.00 62.11 21.89 118 INTERBANK 337.51 0.055 22.26 0.03 226.98 18.06 61.38 131.62 BLACK SEA BANK OF 119 RECONSTRUCTION 320.79 0.052 64.48 0.03 160.46 98.49 7.79 5.17 AND DEVELOPMENT 120 PROMECONOMBANK 302.93 0.049 0.00 0.00 286.47 36.22 30.59 10.84 121 INVESTBANK 295.80 0.048 69.94 7.03 194.18 47.54 18.64 9.81 122 REAL-BANK 284.25 0.046 45.00 0.38 199.62 7.01 0.70 33.71 123 POLICOMBANK 283.12 0.046 46.64 0.13 247.82 12.06 24.84 1.57 124 MORSKY 268.50 0.044 45.57 0.06 187.49 59.40 23.94 0.04 125 KYIV 252.96 0.041 190.49 1.62 3099.75 451.43 4114.66 627.56 126 TRUST-CAPITAL* 252.68 0.041 141.47 15.21 100.30 51.68 30.57 5.00 127 VOLODYMYRSKY 252.04 0.041 0.00 0.00 200.48 135.48 83.92 0.00 128 LEGBANK 248.98 0.041 23.87 0.07 201.43 16.05 15.68 23.38 129 SIGMABANK* 240.14 0.039 3.08 0.03 282.66 0.60 55.03 8.86 130 ACCORDBANK* 237.78 0.039 74.20 0.02 125.58 43.52 7.53 2.01 131 CONTRACT* 225.78 0.037 26.93 0.09 222.72 19.11 42.90 0.00 132 REGION BANK 225.72 0.037 33.44 0.01 147.24 57.33 12.28 0.00 133 CONCORD* 223.26 0.036 20.50 0.20 220.92 1.63 27.33 7.74 134 UKRCOMUNBANK* 213.75 0.035 0.00 0.01 161.25 74.18 22.47 0.80 135 EBRF 202.08 0.033 5.01 0.10 217.96 35.92 56.73 0.02 136 STOLYCHNY 192.18 0.031 0.00 0.00 223.47 3.10 38.72 4.33 137 RADICAL BANK 172.33 0.028 1.99 0.00 152.72 18.63 1.63 0.62 138 UCOOPSPILKA* 171.05 0.028 3.98 0.00 151.72 19.21 3.86 0.00 139 D-M BANK* 164.25 0.027 15.33 0.06 91.47 23.73 2.42 36.20 140 CREDITVEST BANK* 164.08 0.027 119.37 0.05 54.49 7.38 17.10 0.00 141 MOTOR-BANK* 155.69 0.025 94.32 3.40 67.70 0.39 12.33 9.00
Framework Contract FC474/EBSF-2010-08-124F 155 Incl. Reserve for Share Reserve Loans for No BANK LIP** Interbank Loans for loans and (%) for banks' legal entities Securities loans*** individuals clients' arrears *** arrears 142 CREDIT-OPTIMA* 142.65 0.023 54.79 0.00 64.99 30.11 7.24 0.00 INDUSTRIAL 143 137.40 0.022 21.00 0.65 64.20 16.13 10.56 47.28 FINANCIAL BANK* 144 PROFINBANK 114.33 0.019 57.99 0.62 4.78 55.67 28.51 25.03 COMMERSIAL 145 96.89 0.016 60.02 5.71 40.46 3.68 1.62 0.06 INDUSTRIAL 146 FINEXBANK 93.87 0.015 0.00 0.01 85.37 23.36 14.84 0.00 147 BANK VELES 93.27 0.015 0.00 0.00 112.93 2.63 22.28 0.00 SHIDNO- 148 85.02 0.014 19.49 0.20 39.13 21.68 4.99 9.91 PROMYSLOVY BANK* 149 RADABANK 75.06 0.012 20.00 0.90 60.40 1.13 5.56 0.00 150 ZEMELNY CAPITAL 72.72 0.012 0.00 0.00 46.30 18.84 5.75 13.33 151 TMM-BANK* 63.23 0.010 0.00 0.00 50.85 22.72 10.34 0.00 152 STOLYTSYA 55.33 0.009 0.00 0.02 59.06 39.37 43.08 0.00 UKRAINIAN BANK OF 153 RECONSTRUCTION 53.23 0.009 40.00 0.25 9.65 1.02 0.17 2.97 AND DEVELOPMENT* 154 BANK FAMILNY 32.61 0.005 0.00 0.01 0.39 30.59 10.22 11.87
Framework Contract FC474/EBSF-2010-08-124F 156 Annex 45: Interviews with banks
Interview on March 28, 2011 with Sergei Hudiyash, Head of Department for working with the IFIs. Per bank’s representative, the bank does not lend to SME nor to physical entities for residential EE investment. The bank’s primary focus is work with large clients, since this is a general policy of bank’s work. However, the official site of the bank (http://www.eximb.com) provides information on broad spectrum of loans that the bank offers to SME and private clients. The choice of the financial products is quite similar to the ones that are now offered by other banks: 1) for private clients there are mortgages available for purchase of apartment or a house; loans for purchase of transport vehicles and credit lines. 2) for SME the bank offers mortgage loans, loans for business development, for replacement of outdated equipment, and credit lines. I the table below there is a summary of the interest rates offered to SME as of Nov 2, 2010. Interest rates to SME as of Nov 11, 2010 Currency Interest rates, % Lending product "Commercial mortgage" UAH from 16.60 USD from 9.00 EURO from 8.10 Lending product "Transportation vehicle" UAH from 16.60 USD from 9.00 EURO from 8.10 Lending product "Business development" UAH from 15.40 USD from 7.30 EURO from 7.30 Lending product "Equipment and machinery" UAH from 16.60 USD from 9.00 EURO from 8.10 Lending product "Overdraft" UAH from 18.30 USD from 10.20 EURO from 9.20 Source: http://www.eximb.com/ukr/sme/loans/conditions/
Framework Contract FC474/EBSF-2010-08-124F 157 As stated by the bank representative in the interview, the bank has no interest in pursuing its business in residential EE by designing financial products to residents, CAs or SME, since it is not in the policy of the bank. RAIFFEISEN BANK AVAL Meeting on March 23, 2011 The following representatives of the bank took part in the meetings: Evgeniy Director of the Products and Marketing for Private DEMYANOV Clients Department Andrey Head of Micro Business Processes and Products GIDULYAN Department Vitaly Director of the State Sector and Trade Finance KYSLENKO Department Tetyana Head of Public and Municipal Sector Department KORGAN Bank has no products specially designed for investing into EE in general, nor in EE in residential buildings. In 2008, the Bank ceased most of its lending activity in municipal and private sectors. For Micro and Small Business sector the bank offers very limited number of financial products: Standard overdraft - up to one year, at 20% annual interest rate Investment loan for purchase of equipment Investment loan for purchase of transportation vehicle Non collaterized loan for business development – up to 7 years, maximum amount 100 thousand UAH, 30% annual interest rate. Investment loan for purchase of equipment can be used for: Purchase of equipment - new, or the one that is used Modernization or reconstruction of equipment Purchase of special vehicles Business development Standard conditions: 1. Term of lending 6 months – 5 years 2. in UAH 3. Maximum loan amount: EUR 100 000 (in UAH equivalent) 4. One time commission: 0.99% 5. First contribution: from 35% (if lending is above 12 months) 6. Collateral: • Property, which is purchased for loan amount or any other liquid property; • Deposit
Clients with turnover up to EUR Clients with turnover above EUR Currency 1 000 000 1 000 000 UAH from 20% from 18.5%
Framework Contract FC474/EBSF-2010-08-124F 158 Max Up to 1.5 mln euro (equivalent in credit line Up to 100 000 euro(equivalent in uah) uah) amount The Bank has clients in the M&SB sectors, but there are no specific purchases of EE equipment or any other similar to it. Among clients there are housing and maintenance companies which do not borrow for investment. Since April, 2011 the Bank plans to renew its lending to private clients by offering two products: Loan for purchase of housing for living Loan for repairs At the end of the year, the bank’s lending portfolio to private clients was: 2009 - UAH 22.5 billion 2010 - UAH 19.2 billion
Loan for repairs collaterized by the residential mortgage
Standard conditions:
Term of lending up 15 years Maximum loan amount: EUR 100 000 (in UAH equivalent) Annual 16-17% in UAH (fixed rate for the year and adjusted after that) No requirement of the first payment Annuity repayment Collateral: residential premise Private clients’ department in principle does not see a problem of lending to individual homeowners if residential property is used as collateral. No other collateral so far is viewed as acceptable for the bank. The Bank has the following concerns for getting into residential EE market: It is treated as consumer lending since OSBB (CA) is not treated as a viable borrower; CA is not treated as a viable borrower because the law does not give clear procedure on collecting debts by the CA from the individual owners; Simple investment pay back period exceed 5 years, while the bank has no long term capital in hryvna; The payback of the EE project may increase with the cost of lending, which should be affected by inflation that is projected to be 1% per month; Residential EE in multi-storied apartments is perceived to be a social project, which has to be supported by state and developed by state; Since flat owners have very different income in one building, low income residents may be an obstacle for EE investment; pensioners are viewed as the group that does not care about investment at all; so it is expected that this sector may offer very low profit; Development of the market should be supported by state through state banks (referred to Ukrexim, Kyiv, Savingsbank, Ukrgasbank) because the state banks have an opportunity for exchanging debt to securities Tariffs for housing and communal services are unpredictable; The bank has no desire in developing a market that has low profits while there are sector that can bring high returns;
Framework Contract FC474/EBSF-2010-08-124F 159 With respect to working with the CAs Private Client department:
would be interested in developing a product for marketing to the CAs; does not see a problem of having to deal with 100s of individual homeowners in the building; see as possible problem for implementation a situation when CA votes for EE measures, but only certain percentage of owners is eligible for getting a loan backed by the residential mortgage (e.g. families with small children, non proper documentation etc), so it will have to be decided by the CA how to finance the total investment amount; the bank believes that in this situation it is possible to offer up front payment by the owners. would be able to consider CA as a client if the law defined clear mechanisms for repayment of liabilities by the individual homeowners to the CA. The Bank would be interested in: considering penetrating EE market with leasing products, e.g. the bank has Raiffeisen Bank Aval Leasing which is the 3rd larges in Ukraine (as cited by the bank representatives). But currently they finance only those objects which can be easily returned; with the boilers etc it is not clear how to behave. Testing a demo project in public buildings EE.
ALFA BANK Meeting on March 24, 2011 Andrey Repko, Head of SME Products Department took part in the meeting. Bank has no products specially designed for investing into EE in general, nor in EE in residential buildings. EE in general is not spelled out as a priority in the bank’s policy. For SME the bank offers commercial loan (business loan), micro-loan (including non collaterised one), and some products. The purpose of the loans includes purchase of additional equipment, transport etc. Information that provided by A. Repko somewhat varies from the info that is available on the official site of the bank. However, in general, the bank offers to SME loans up to 5 years starting from 150 thousand UAH - to 8 million UAH at 21-22% per annum. If the amount is lower than that – 35% per annum. Key criteria for issuing a loan is creditworthiness of the borrower and adequacy of the collateral. The latter should be liquid. If the loan amount is 2 million UAH, the required collateral should be 2.8 million in order to meet NBUs requirement for reserving. They have a practice of accepting accounts receivable as a form of collateral while it has been so far accepted by the bank when there are receivables of the big companies as METRO, Toyota, Kyivstar (mobile phone operator). The projects which the borrowers finance may include the ones which are aimed at optimization of business costs, including energy efficiency. But the projects are not analysed for engineering viability, common sense is applied for judgment on the project’s viability. Non collaterised loans are available maximum for 50 thousand UAH with interest rate per annum 35- 60%. The bank has no clients who operate under EPC. In general, the idea of repayment with savings is acceptable by the bank for considering funding, but the bank would require at least 50/50 funding of it with the loan and contributed by the borrower money. In principle it is viewed that a variety of possible arrangements exists.
Framework Contract FC474/EBSF-2010-08-124F 160 The Bank has the following concerns for getting into residential EE market: The market is considered to be small – for 12000 of the CAs, it seems to be unreasonable to develop a product; It should be a role of the state to develop a market, while it is easier for the bank to work with commercial companies; The bank is looking for profit and not on developing of the market; The state should develop standard projects for typical buildings (of certain construction types) and offer a whole package of documentation that needs to be agreed upon with various state bodies for implementing such projects; The law should give a clear answer on what to do if individual owners do not pay or how to divert the payments of the CA to bank in case of non payment; The bank has no resources in UAH for 10 years. The bank does not see a problem of lending to the individual borrowers in the multi-flat building if at least 70 owners out of 80 (in a standard multi flat house) were to give their passports to the bank for verification of their. Leasing of EE equipment might be an interesting tool for offering because leasing can be organized in hard currency. UKRSIBBANK Meeting on March 30, 2011 Eugene Burlachenko, Deputy Head of territorial Division of Kyiv. Bank has no products specially designed for investing into EE in general, nor in EE in residential buildings. Lending activity of the bank was practically ceased over 2008-2010. It renewed in January 2010. For physical enteritis the bank offers mortgage lending up to 5 years at 19.9% per annum and from 5 to 15 years at 17.9 % per annum. Lending pre payment conditions depend on the type of housing that is purchased. There is also lending to physical entities with collateral being either individual apartments in the multi-apartment buildings or individual house with adjacent territory. The purpose of lending may be to fund all kinds of consumer needs – for repairs, for education, treatment etc. For SME the bank offers commercial loan (business loan), micro-loan (including non collaterised one), and some products. The borrower should be over 25 and no more than 60 when the loan has to be rapid. The borrower has to have a permanent place of work and legal income. Such borrowers are possible employees of Ukrsibbank, employees of the corporate clients of the bank, or SME clients, who get officially salary; and top managers of the state companies. The term of the loan can be up to 7 years, with the value that is not exceeding 50% of the cost of property. There is a commission for issuing a loan. In principle, this type of lending can be provided for any of the EE measures in the building. There is a financial product which bank offers to its corporate clients that are supplying valuable goods for personal use (bank did not mention his clients of this product). The bank concludes a contract with such client and with the person who buys such goods from the corporate client. A person repays the cost of the valuable good over a specified period of time with the collateral of the good itself. While the corporate client gets the payment from the bank immediately. Such type of lending potentially can be offered by the bank to the producers of EE equipment. Estimated cost of such lending is about 36% in national currency per year. But the terms will be negotiated in each
Framework Contract FC474/EBSF-2010-08-124F 161 individual case. For the producers of materials, it is in principle possible to offer such lending, but again, the terms have to be clarified in each individual situation. The Bank does not offer lending the CAs at the moment because the legal status of the entity is not clear to the bank. CAs have not been at all considered as borrowers.
BANK FORUM Commerzbank Group Meeting on April 7, 2011 with Sergei Boiko, Head of Small and Micro Business Loans to private clients are quite standard and include loans for repairs of housing. According to the site info the terms are as following: http://www.forum.com.ua
Max amount of Up to 50% of the value of lending: real estate
Max term of 5 years lending:
Currency: UAH
% rate: 18.75% per annum (effective of 20.01.2011)
Amount of From UAH 50 000 to UAH loan: 300 000
Commission: From 2% of loan amount
For SME a bank offers also standard set of lending products: overdraft, loan for operating activity (purchase of raw materials, goods, etc.), credit line, investment credit. As a form of guarantee the following collaterals can be accepted: Movable and immovable assets; Property rights; Cash, deposited with BANK Forum by private of legal entities; Pledge, guarantees of physical and legal entities. Investment credit is offered for carrying out construction, reconstruction, modernization and purchase of equipment, real estate, implementing of new technologies and other capital assets, under condition that borrowers’ up front contribution is no less than 30% of the project value. The bank has reorganized recently its corporate clients division into corporate clients, SME and micro businesses. So, there are no internal policies and rules available for responding about lending on EE in residential buildings. The bank is very interested in developing programs with EBRD on energy efficiency. But only in May the bank will be able to answer the question on the internal obstacles they have for lending to co-owners of multi-flat buildings. Currently, as the bank’s representative said, the bank does not know if there are any internal obstacles for such lending.
Framework Contract FC474/EBSF-2010-08-124F 162 Today the bank can lend to individual home owners who reside in individual housing for energy efficiency as lending for repairs.
Framework Contract FC474/EBSF-2010-08-124F 163 Annex 46: Detailed Description of Legal and Regulatory Norms for Provision of Housing and Communal Services
1. Definition of housing and communal services In accordance with the Ukrainian legislation, housing and communal services are the result of economic activity aimed at providing for conditions of persons' residence and stay in residential and non-residential premises, houses and buildings, complexes of houses and buildings, in accordance with norms, regulations, standards, procedures and rules. The law of Ukraine "On Housing and Communal Services" divides all housing and communal services by their functional classification and the procedure of setting prices/tariffs. Thus, depending on the functional classification, housing and communal services are divided into: 5) Communal services, which include centralized cold and hot water supply, sewage, gas- and electric power supply, centralized heating as well as household solid waste disposal, etc.; 6) Services on maintenance of houses and buildings and adjacent territories: cleaning internal house premises and the adjacent territory, sanitary and technical service, maintenance of internal house networks, maintenance of elevators, illumination of common use areas, maintenance repair, household solid waste disposal, etc.; 7) Services on management of the house, building or group of houses: balance sheet holding, conclusion of agreements for performance of services, control over implementation of the agreement's provisions, etc.; 8) Services on repair of premises, houses, buildings, including replacement and fortification of constructions and networks elements, their reconstruction, renewal of the bearing capacity of bearing elements of constructions, etc. Tentative lists of housing and communal services and their composition depending on the functional classification are defined by the central executive body in the housing and communal economy. Thus, for example, the Cabinet of Ministers of Ukraine ratified the tentative list of services on maintenance of houses and buildings. Depending on the procedure of setting prices/tariffs on housing and communal services, they are divided into three groups: 1) The first group includes housing and communal services, prices/tariffs for which are set by specially authorized central executive bodies; 2) The second group includes housing and communal services, price/tariffs for which are set by local self-government bodies for their provision on the respective territory; 3) The third group includes housing and communal services, price/tariffs for which are set exceptionally under the contract (agreement among the parties). Prices/tariffs for communal services and services on maintenance of houses and buildings and adjacent territories are formed and set by executive bodies and local self-government bodies in accordance with their authority stipulated by the law. Provision of housing and communal services is subject to normative regulation on the part of central and local executive bodies and local self-government bodies within the limits of their authority pursuant to the legislation. The latter develop and approve standards, regulations, norms, procedures and rules in the field of housing and communal services. The respective standards, regulations, norms and rules must create a complex of qualitative and quantitative indicators and requirements regulating production and performance of housing
Framework Contract FC474/EBSF-2010-08-124F 164 and communal services taking into account social, economic, natural climatic and other conditions of regions and settlements. The legislation also sets minimal norms of housing and communal services. It is done for the purpose of ensuring sanitary and hygienic requirements for residence of people and their stay in premises, providing for technical requirements to house (building) operation, support of the bearing capacity of constructions and operating characteristics of internal house networks and systems. Minimal norms of housing and communal services define the minimal list, minimal requirements to the amount and quality of housing and communal services are to be adopted by the Cabinet of Ministers of Ukraine. Thus, the list of minimally required housing and communal services cannot include the services prices/tariffs for which are defined exceptionally based on the contract (the agreement among the parties). Until now there is no list of minimally required housing and communal services in Ukraine. The Cabinet of Ministers of Ukraine approved only the Typical list of services on maintenance of houses and buildings and adjacent territories and delegates to local executive authorities and local self-government bodies the opportunity to set temporary norms of consumption of housing and communal services of the II group (cold and hot water, centralized heating, household waste transportation), norms of services' quality and modes of their provision taking into account economic capacities of housing and communal economy enterprises, climate and other local conditions. But in any case, in accordance with the law, the procedure of providing housing and communal services, their qualitative and quantitative indicators must meet conditions of the agreement on providing for housing and communal services and requirements of the legislation. User has to obtain communal services in an uninterrupted way, except for the time of interruptions for: Realization of repair and prophylactic work by the provider/producer under the schedule coordinated with executive bodies of local councils or local state administrations pursuant to operating construction norms and rules, rules of technical operation and use, regulations on realization of maintenance and major repairs and other regulatory documents; Period between heating periods for heating systems, the decision on the beginning and ending of which is made by executive bodies of respective local councils or local state administrations based on climatic conditions, pursuant to operating construction norms and rules, technical operation rules and other regulatory documents; Liquidation of consequences connected with force-major situations. In the case of application of an interruption in services provision, the provider/producer is obliged to notify the user via mass media about such interruption no later than 10 days before (except for the interruption arising as a result of a failure or force-major situations). In the notification, it is necessary to indicate the reasons and term of the interruption in provision of the respective services. In the case of exceeding the normatively set terms, except for force-major circumstances, the provider/producer will be liable pursuant to the law. Local executive authorities or local self-government bodies according to the procedure set by the Cabinet of Ministers of Ukraine are authorized to temporally determine other norms of consumption, quality and modes of providing housing and communal services taking into account economic capacities of enterprises, climatic and other local conditions. The action term of the decision on limitation of other parameters and norms, modes of housing and communal services provision cannot exceed one year.
Framework Contract FC474/EBSF-2010-08-124F 165 Who and how provides housing and communal services All subjects of economic activity that work in the field of housing and communal services provision in the Ukrainian legislation are divided into producers and providers of such services. The producer is the subject of economic activity that produces or creates housing and communal services. The provider is the subject of economic activity whose activity is provision of housing and communal services to the user in accordance with an agreement provisions. Thus, the producer of services can be simultaneously their provider. All relations regarding provision of housing and communal services in accordance with the legislation must be formed exceptionally on contractual bases. Accordingly, participants of such relations in the field of housing and communal services are their user and provider. Each of these subjects has respective rights and duties in the field of housing and communal services provision. The Law of Ukraine “On Housing and Communal Services”, the ensures user the right to: Receive in good time and in the proper quality housing and communal services pursuant to the legislation and provisions of the agreement for provision of housing and communal services; Receive according to the procedure set by the legislation necessary information about the list of housing and communal services, their cost, the total amount of monthly fee, structure of the price/tariff, consumption norms, procedure of provision of housing and communal services, their customer properties, etc.; Compensation of damages inflicted to his/her property and/or premises, harm caused to his/her life or health as a result of improper provision or non-provision of housing and communal services; Removal during the term set by the agreement or legislation of revealed failures in provision of housing and communal services; Reduction of the amount of fee for services provided in the case of their non-provision or provision not in full, reduction of their quality in accordance with the procedure set by the agreement or legislation; Non-payment of the cost of housing and communal services for the period of temporary absence of the user or/and his/her family members at the proper documentary registration, as well as for the period of actual absence of housing and communal services set in the agreement according to the procedure set by the Cabinet of Ministers of Ukraine; Receive from the provider compensation at the rate set in the agreement, by a court ruling or legislation for exceeding normative terms of conducting failure and repair work; Check the amount and quality of housing and communal services according to the procedure set by the Cabinet of Ministers of Ukraine, etc. At the same time, the user is obliged to: Conclude an agreement for provision of housing and communal services drafted by the provider on the basis of the typical agreement; Timely apply measures for removal of revealed defects related to receipt of housing and communal services that arose up because of his/her own fault; Provide for integrity of communal services measuring devices and not to interfere in their work; Repair and change sanitary and technical devices and devices, equipment that broke down due to his/her fault at his/her own expense; Pay for housing and communal services within the terms set by the agreement or law;
Framework Contract FC474/EBSF-2010-08-124F 166 Follow fire safety and gas safety rules, sanitary norms; Admit to premises, houses and buildings representatives of the provider/producer according to the procedure set by the law and the agreement for liquidation of failures, removal of defects of sanitary technical and engineering equipment, its installation and replacement, realization of technical and prophylactic inspections and verification of measuring devices' indications; Adhere to requirements of the housing and town-planning legislation regarding realization of repair or reconstruction of premises or their parts, not to allow violation of legal right and interests of other participants of relations in the field of housing and communal services; Timely conduct preparation of the residential house, apartment (in which he/she lives or which belongs to him/her under the property right) and its technical equipping for operation in the fall/winter period; Pay the fine in the amount set by the law or the agreement in the case of untimely payments for housing and communal services to. Rights and duties of the provider and producer of services are also defined by the Law of Ukraine "On Housing and Communal Services" and spelled out in the Exhibit A: Exhibit A: Rights and duties of providers and producers of communal services
Provider Producer
The provider has the right to: The producer has the right to:
- develop and submit for approval calculations - develop and submit for approval calculations regarding the level of prices/tariffs on housing and regarding the level of prices/tariffs on housing communal services of the first and second groups and communal services of the first and second according to the procedure set by the legislation; groups; - offer at conclusion of the agreement prices/tariffs on - offer at conclusion of the agreement housing and communal services of the third group; prices/tariffs on housing and communal services of the third group; - take part in competitions for acquisition of the right to perform housing and communal services in a certain - sign agreements with local self-government territory; bodies for production and creation of housing and communal services; - require from the user observance of operation rules requirements for residential premises and the adjacent - request timely and full payment of services territory, sanitary and hygienic and fire-prevention provided from providers; rules and other regulatory and legal acts in the field of - take part in competitions for acquisition of the housing and communal services; right to perform housing and communal services - require from the user timely realization of works in in a certain territory; relation to removal of defects discovered related to - issue permits and technical terms for receipt of housing and communal services that arose connecting users to respective centralized due to a fault of the user, or compensation of the cost engineering networks according to the procedure of this work; set by the legislation; - receive compensation for privileges provided in - receive information about local programs of the accordance with the law to separate categories of housing and communal economy development citizens and charged subsidies for payment of housing and other sector programs for respective and communal services and to repay them in the case territories; of non-provision of such services or privileges; - compensation of losses in the case of adoption
Framework Contract FC474/EBSF-2010-08-124F 167 Provider Producer
- compensation of losses in the case of adoption by by the respective local self-government body of the respective local self-government body of prices/tariffs lower than the amount of prices/tariffs lower than the amount of economically economically substantiated costs of their substantiated costs of their production; production.
- access to apartments, houses and buildings for liquidation of failures, removal of defects of sanitary technical and engineering equipment, its installation and replacement, realization of technical and prophylactic inspection and verification of measuring devices' indications in accordance with the procedure stipulated by the law and the agreement.
The provider is obliged to: The producer is obliged to: - provide for timeliness and proper quality of housing - sign an agreement with the provider (the user) and communal services pursuant to the legislation and on the terms of housing and communal services provisions of the agreement, including by creation of provision; quality control systems in accordance with national or - produce housing and communal services in international standards; accordance with provisions of the agreement, - carry out control over the technical condition of standards, norms, regulations and rules; engineering equipment of houses, apartments, - conduct in accordance with the procedure set premises; by the Cabinet of Ministers of Ukraine respective - draft and sign with the user the agreement for recalculation of the amount of the fee for housing and communal services provision with housing and communal services in the case of definition of liability for observance of its provisions' their non-provision or provision not in full, implementation pursuant to the typical agreement; deterioration of their quality; - provide according to the procedure set by the - implement energy-efficiency and innovatory legislation necessary information about the list of technologies of housing and communal services housing and communal services, their cost, total production; amount of the monthly fee, the structure of - carry out technological accounting of material prices/tariffs, consumption norms, mode of housing and power resources; and communal services provision, their customer properties, etc.; - provide according to the procedure set by the legislation necessary information about the list - timely conduct preparation of the residential house of housing and communal services, their cost, and its technical equipment for operation in the total amount of the monthly fee, the structure of fall/winter period; tariffs, consumption norms, mode of housing - consider within the term set by the legislation users' and communal services provision, their claims and complaints and to conduct respective re- customer properties, etc. calculation of the amount of fee for housing and communal services in the case of their non-provision or provision not in full, deterioration of their quality; - keep in proper technical condition, to carry out technical maintenance and repair of internal house networks, to apply measures for liquidation of emergency situations, removal of services quality
Framework Contract FC474/EBSF-2010-08-124F 168 Provider Producer violations within the terms set by the agreement and/or the legislation - pay to the user compensation for exceeding the set terms of realization of emergency and repair work in the amount set by the agreement or legislation; - register requirements (claims) of users in connection with violation of the procedure of housing and communal services provision, change of their customer properties and exceeding of the terms of emergency and repair work;
- timely and in good time at its own expense conduct work for removal of revealed defects related to receipt of housing and communal services arising due to its fault.
2 Agreements in housing and communal sphere Relations in the housing and communal sphere are built exceptionally on contractual relations. At the same time, the legislation regulates such relations by setting requirements regarding development and approval of tariffs, quality of services, as well as approval of typical agreements for provision of the respective services. Agreement between the provider/producer and the user of housing and communal services Substantial provisions of the agreement regarding provision of housing and communal services are data on parties to the agreement, services to be provided and their respective costs, payment terms and procedures, rights and duties of each party and all other general and special conditions Except for the substantial provisions, the agreement may also contain other terms based on agreement of the parties. An agreement for provision of housing and communal services comes into effect from the moment of its signing. In the case the provider is not the same as a producer, relations between these parties are regulated by a separate agreement issued in accordance with the above-mentioned provisions. The procedure of coordinating the agreement takes place during one month from the day of draft agreement submission by one of the parties. The above-mentioned requirements regarding substantial provisions of the agreement for provision of housing and communal services are applied to all types of agreements in the field of housing and communal services. Agreement for provision of the services of maintenance of houses and buildings and adjacent territories The Procedure for Tariff Setting on services on maintenance of houses and buildings and adjacent territories and the Typical Agreement for provision of services on maintenance of houses and buildings and adjacent territories is approved by the Decree of the Cabinet of
Framework Contract FC474/EBSF-2010-08-124F 169 Ministers of Ukraine of 20.05.209 No. 529, which define the mechanism of forming tariffs on services on maintenance of houses and buildings and adjacent territories. This Procedure is extended to all economic entities providing services, economic entities providing separate services subject to subcontract agreements with providers, local self-government bodies, owners of residential houses, owners (tenants) of apartments, owners of non-residential premises in residential houses. Tariffs are calculated separately for every house depending on the planned quantitative indicators of actual provision of services taking into account proper sanitary and hygienic, fire- prevention, technical status of houses and buildings and adjacent territories in view of the typical list of services regarding maintenance of houses and buildings and adjacent territories. The services are provided in accordance with the tariff approved by the local self-government body, its structure, frequency and terms of services provision. It should be noted that a copy of such decision is an inalienable part of the agreement for services provision. In accordance with the abovementioned Procedure, when setting the tariff for services it is necessary to provide for transparency of defining the cost of all services calculated per 1 sq. meter of the total floor space of the apartment, residential premises in a dormitory and non- residential premises in residential house. The Typical Agreement for provision of services regarding maintenance of houses and buildings and adjacent territories is adopted with the same Procedure, the terms of which must be followed by participants of housing and communal relations. The typical agreement for provision of the services of maintenance of houses and buildings and adjacent territories must include subject of the agreement, payment for services used, rights and duties of the parties, liability of the parties, the procedure of disputes resolution, force-majeure circumstances, validity term of the agreement and other general and special terms and conditions, as required. Determination of the provider of housing and communal services in houses of state and communal property takes place based on competitive principles. The procedure of preparation and realization of such competition is regulated by the Procedure of realization of the competition for housing and communal services provision ratified with Resolution of the Cabinet of Ministers of Ukraine of 21.07.2005 No. 631. During realization of activity related to housing and communal services provision, it is necessary to take into consideration the Exemplary List of services regarding maintenance of houses and buildings and adjacent territories and services regarding repair of apartments, houses, buildings ratified with the Order of the State Committee of Ukraine for the housing and communal economy of 10.08.2004 No. 150. The agreement on provision of services of district heating, cold and hot water supply, and wastewater collection Relations between the subject of economic activity the activity of which is housing and communal services provision and the individual or the legal entity that receives the centralized heating, cold and hot water-supply and sewage services are regulated by the Rules of centralized heating, cold and hot water-supply and sewage services provision and the typical agreement on provision of centralized heating, cold and hot water-supply and sewage services adopted with Resolution of the Cabinet of Ministers of Ukraine of 21.07.2005 No. 630. Pursuant to the Rules, the services must meet: Centralized cold and hot water-supply – requirements regarding the quality and pressure of water, temperature of hot water, as well as calculations norms of water use in the analysis point;
Framework Contract FC474/EBSF-2010-08-124F 170 Centralized heating – the normative air temperature of in premises of the apartment (a farmstead house) under the condition of their insulation by users and use by the owner (balance holder) of the house and/or provider of insulation measures actions for warming joint use places in the house; Centralized sewage – norms of sewage of flow water under the condition of maintaining the proper condition of premises of the house and the adjacent territory. Local executive authorities and local self-government bodies are authorized to temporally determine other consumption norms, quantitative and qualitative indicators and modes of services provision in accordance with the procedure defined by the Cabinet of Ministers of Ukraine. In accordance with the abovementioned Rules, the list of services provided for the user depends on the level of equipping of the respective house. Centralized heating, cold and hot water-supply, and sewage services are provided to the user pursuant to the agreement, which is issued based on the typical agreement for provision of centralized heating, cold and hot water-supply and sewage services. Based on the agreement for provision of centralized heating, cold and hot water-supply and sewage services, the provider is obliged to timely provide the user with centralized heating, cold and hot water-supply and sewage services of the proper quality, and the user is obliged to timely pay for the services provided under the tariffs set in terms and subject to provisions of the agreement. The typical (standard) agreement for provision of centralized heating, cold and hot water-supply and sewage services is similar to the previous contracts and must contain all required information, such as parties to the agreement, service to be provided, payment type and schedule, and other general and special conditions. Energy supply contract Requirements to the energy supply contract are stipulated in the Economic Code of Ukraine (hereinafter – the ECU). In accordance with article 275, under the energy supply contract the power-supply enterprise (power supplier) provides electric power, steam, hot and heated water (hereinafter – the power) to the user (subscriber), which is obliged to pay for the power received and to adhere to the regime of its use envisaged by the agreement, as well as to provide for safe operation of power equipment used by him/her. Provision of power without issuance of the energy supply contract is prohibited. The subject of the energy supply contract is specific types of power with description stipulated in state standards or technical terms. The producers and suppliers of power which have monopolistic position, in particular natural monopolies, are obliged to sign the energy supply contract upon the request of the users who have the technical means for receiving power. Power-supply enterprises of forms of ownership other than state and communal one can take part in providing power for any users, including through the state (communal) power network subject to conditions stipulated in respective agreements. According to article 276 of the ECU, the total amount of power supplied is defined based on consensus of the parties. If the power is provided on account of the order for priority state needs (the limit), the power-supplier does not have the right to reduce this limit for the subscriber without the latter's consent. Suggestions of the subscriber regarding the amount and types of power, terms of its provision are priority ones, provided the power-supplier has the production capacity.
Framework Contract FC474/EBSF-2010-08-124F 171 Power quality indicators are coordinated by the parties on the basis of state standards or technical terms by approved of the list (amount) of indicators, observance of which is a duty of parties under the agreement. The terms of power-supply are set by the parties in the agreement, as a rule, based on the necessity of providing for its in-time and trouble-free supply to the subscriber. The ten-day period is the basic registration period for power-supply, with volumes correction during the day. The parties can coordinate power-supply during the day by hours, as well as the time and duration of maximum and minimum loads. The amount of power that is not received in the previous periods due to a fault of the power- supplier is to be replenished upon the subscriber's request. If the power was not used by the subscriber or not received in the proper amount for heating in connection with favorable weather conditions, replenishment of power not received in the proper amount is carried out upon consensus of the parties. Settlements under energy supply contracts are carried out on the basis of prices (tariffs) set in accordance with provisions of the law. Payment for power provided is carried out, as a rule, in the form of prepayment. Based on consensus of the parties, planned payments with further revision, or payment for actually supplied power can be used. In the case a subscriber has his/her own power-source and supplies power into the power- supplier's network, settlements based on the balance of mutually obtained power are allowed. The subscriber is authorized to supply energy to the secondary users connected to his/her networks (sub-subscribers). In this case, sub-subscribers sign a energy supply contract with the subscriber and have the rights and duties of a subscriber, while the subscriber has rights and duties of the power-supplier. In this case, the subscriber is obliged to report on the list of sub-subscribers to the power- supplier, which has the right to control power-networks and devices of sub-subscribers and the right to control sub-subscribers' observance of rules of using power. The mechanism of forming tariffs on production, transporting, supply of thermal energy by enterprises of the heating sphere and centralized heating, cold and hot water-supply services provision are defined by the Procedure of setting tariffs on production, transporting, supply of thermal energy and centralized heating, cold and hot water-supply services ratified with Resolution of the Cabinet of Ministers of Ukraine of 10.07.2006 No. 955. In accordance with the Procedure, tariffs setting by enterprises carrying out production, transporting and supply of thermal energy is carried out in accordance with the annual plans of production, transporting and supply of thermal power, economically substantiated planned costs defined on the basis of state norms of use of resources, feasibility calculations and estimates, rates of taxes and fees (mandatory payments) and prices in the planned period defined on the basis of forecasted indicators of prices of industrial products manufacturers. Agreement on providing gas-supply services for population Relations among gas-supplying enterprises, gas-distributing enterprises and individuals (the population) - gas users are regulated by the Rules approved by the Decree of the Cabinet of Ministers of Ukraine "On Approval of the Rules of Providing Population with Gas-Supply Services" of 09.12.1999 No. 2246. In accordance with the Rules, the provider is the enterprise that executes gas-supply work and/or provides gas-supply services.
Framework Contract FC474/EBSF-2010-08-124F 172 Gas-supplying is the service that envisages realization of natural or liquefied gas by transporting it to the user. Gas-supply to the user is carried out by a gas-supply enterprise that has the respective license. Gas-supplying is carried out on the basis of an agreement between the user and the gas-supplying enterprise. Transporting of gas of a gas-supplying enterprise to the user and proving him/her with technical maintenance and gas pipelines and house gas-supplying systems repair services on the basis of the respective license are carried out by a gas-distributing enterprise – an enterprise operating gas-supply systems buildings and gas pipelines The user is an individual (population) to whom gas-supply services for household needs (cooking meal, warming water and heating premises) are provided in accordance with the agreement. Gas-supply services are provided for the user on the basis of the agreement signed by him/her in accordance with the typical agreement approved with Resolution of the Cabinet of Ministers of Ukraine "On Approval of the Typical Agreement for Provision of Population with Gas-Supply Services and Amending Resolution of the Cabinet of Ministers of Ukraine of December, 9, 1999 No. 2246" of July, 5, 2006 No. 938. Under the agreement for providing population with gas-supply services, the provider is obliged to continuously provide the user, his/her family members and other persons registered in the apartment, private house the services of supplying natural or liquefied gas from group reservoirs for household needs with a guaranteed reliability, safety, quality levels and pressure rate, while the user is obliged to timely pay for the services provided under the set tariffs (prices) within the terms and subject to provisions stipulated in this agreement. The provider offers the services of supplying natural or liquefied gas and maintenance and repair of house gas-supply systems and court gas pipelines. In addition, in the agreement for providing population with gas-supply services, it is necessary to indicate volumes, regime and quantity of services provided and their costs. It should be noted that the retail price on natural gas is set by the NERC. The price on liquefied gas supplied from group reservoirs is regulated (set) by the Council of Ministers of the Autonomous Republic Crimea, regional, Kyiv and Sevastopol city state administrations). Agreement for provision of household waste transportation services The procedure of signing the Agreement for provision of household waste transportation services is regulated by Resolution of the Cabinet of Ministers of Ukraine "On Approval of the Rules of Household Waste Transportation Services" of December, 10, 2008 No.1070. The Rules determine the mechanism of provision by subjects of economic activity regardless of their form of ownership of household waste transportation services in cities, settlements and villages. Besides, this Resolution sets requirements to the Typical Agreement for provision of household waste transportation services. The agreement for provision of household waste transportation services is signed between the owner of the apartment, the tenant or lodger and the balance-holder or a person authorized by him/her. If the balance-holder is not the services provider, the services provision agreement is signed between the balance-holder and the services provider. The services provider is determined: For objects in public and communal domain – based on the result of the competition that is conducted in accordance with the Procedure approved with Resolution of the Cabinet of Ministers of Ukraine of July, 21, 2005 No. 631;
Framework Contract FC474/EBSF-2010-08-124F 173 For residential houses in private property – by the local self-government body, except for the cases when owners of the houses expressed their desire to determine the services provider independently. The volume of services provided is calculated on the basis of norms ratified by the local self- government body. Under the agreement for provision of household waste transportation services, the provider is obligated pursuant to the schedule to provide household waste transportation services, and the user is obliged to timely pay for the services under the set tariffs in terms and subject to the conditions stipulated in this agreement The provider provides the user with solid, large, repairs and liquid waste transportation services. Resolution of the Cabinet of Ministers of Ukraine "On Approval of the Procedure of Setting Tariffs on Household Waste Transportation Services" of 26.07.2006 No. 1010 sets the mechanism of forming of tariffs on household waste transportation services. The services of transporting household waste include household waste handling operations (collection, storage, transportation, processing, utilization, making harmless and burial), which are carried out in a settlement pursuant to the amenities rules ratified by the local self- government body. Formation of tariffs on such services by the enterprise is carried out in accordance with annual plans of services provision and economically substantiated planned costs defined on the basis of state norms of use of resources, feasibility calculations and estimates, rates of taxes and fees (mandatory payments) and prices in the planned period defined on the basis of forecasted indicators of the enterprise's prices. In the cases stipulated by legislation, subjects of economic activity intending to produce (provide) housing and communal services must obtain respective permits, licenses. Energy supply contract (or contract for supplying energy resources and other resources via connected network) Under this type of contract, the provider supplies the consumer with electricity, steam, hot and superheated water (hereinafter – energy) to consumers (subscribers)72, or other resources73, which, following the definition in the CCU, include water, and the provider's responsibility stops at the entrance to the building. Therefore, only investments that are allocated for purchase and installation of in-building heat, cold and hot water meters can be recovered via the tariff on the respective energy or other resource. These provisions are stipulated in the procedures of tariffs setting on thermal energy, water and wastewater collection . Regarding electricity and gas supply for population in an apartment house, in fact, purchase of meters should be compensated by the consumer, and the power and gas supplier shall free- of-charge (as defined in paragraph 40 of the Rules of Electricity Supply for Population74 and paragraph 1.16 of the Rules of Gas Supply for Population75) exercise routine verification, maintenance and repair of meters (electricity), periodic verification of gas meters, their maintenance and repair associated with such verification (including removal, transportation and installation) shall be carried out at the expense of the gas supplying company; offer
72 See art. 275 of the ECU. 73 See art. 54 of the CCU. 74 CM of Ukraine Decree No.1357 of 26.07.1999 75 CM of Ukraine Decree No.2246 of 09.12.1999
Framework Contract FC474/EBSF-2010-08-124F 174 recommendations on the possibility and feasibility of using electric power for heating, as well as on energy conservation and power consumption modes. We should pay particular attention to specific features of use of electric power tariffs for population residing in apartment buildings and individual ones, as well as in the buildings where condominium associations (or HCC) have been created, and in the buildings where co- owners have not organized the association. NERC Resolution of 10.03.99 No.309 "On Tariffs of Electric Power Provided for Population and Settlements" (with further amendments and extensions), and NERC Resolution of 31.07.96 No. 28 "On Approving the Rules of Using of Electric Power (with further amendments and extensions), allocate such category of consumer as "a settlement". In practice, NERC and energy supplies include to the category "settlement", among other things, associations of consumers (population) – condominium associations, HCCs, etc. – thus artificially separating these associations, which according to the law represent consumers, from consumers as they are. Given the difference between the tariffs approved by NERC for population and "settlements", consumers united in condominium associations or HCCs find themselves in a less advantageous position than consumers who do not create such associations. At the same time, the indicated division of consumers and their category "settlement" are not stipulated either in the Law of Ukraine "On Housing and Communal Services", nor in the Law of Ukraine "On Electric Power". I.e., the abovementioned NERC regulations in this part do not meet the higher priority legislative acts. According to the Resolution of the Cabinet of Ministers of Ukraine "On Approving the Rules of Using of Electric Power for Population" of 26.07.1999 No.1357, in an apartment house the energy supply shall execute agreements with each tenant (owner) of apartments. That is, the energy supplier's costs related to sale of electric power are a part of the tariff. However, as seen from the table with the list of tariffs set by NERC for households and for settlements, the tariff on electric power for settlements is higher than the "retail" tariff for the end user in an apartment house, there has no economic justification. In this regard and given the need to support establishment and operation of condominium associations, providing for equal access to electric power services for consumers and energy efficiency development in buildings, we find it necessary to harmonize regulations of NERC with current legislation, and when setting tariffs on electric power to include associations of consumers in housing stock (condominium associations, HCCs) to the "population" category or to ensure economic feasibility of determining the difference between the tariffs for the abovementioned groups of consumers. The second group of contracts described in following text are the contracts with payment for services paid in addition to the cost of housing and communal services. Sub contract for capital construction76 Subcontracting relations in capital construction are regulated by chapter 33 of the Economic Code of Ukraine. It should be noted that legislation does not impose restrictions on definition
76 This section is partly based on materials of the report on the research project "Development of Methodological Guidance for Organizing the First Capital Repair of an Apartment Building by Its Owners, Co-Owners and the State through the Co-Financing Mechanism (final), 2010" prepared by LLC "MDI" under the contract with the Ministry of Housing and Communal Economy of Ukraine. .
Framework Contract FC474/EBSF-2010-08-124F 175 by the parties of settlement conditions under the capital construction subcontract. Thus, the parties themselves on the contractual basis determine the mode of payment for the respective services. However, when executing agreements in the sphere of capital construction, it is necessary to take into account requirements of other regulations. Thus, the foundational rules of determining the cost of new construction, expansion, reconstruction and technical re-equipment of enterprises, buildings, repair of housing, social and communal facilities and landscaping, as well as restoration of architecture monuments are set with the Order of the State Construction Committee of Ukraine "On Approval of the Construction Costing Rules (DBN D.1.1-1-2000)" No.174 of 27.08.2000 and are binding when determining the cost of buildings (objects) construction of which is carried out using budgetary funds or funds of state-owned enterprises, facilities and organizations. According to DBN D.1.1-1-2000 and the Order of the Ministry of Finance "On Approval of Accounting Provisions (Standard) 18 "Construction Contracts"" No.205 of 04/28/2001, capital repair is attributed to the construction works defined as "constructing of a new object, renovation, expansion, completion, restoration and repair of objects, installation works". According to DBN D.1.1-1-2000, the construction object is any separate building (commercial building or workshop, warehouse, residential house, etc.) or structure (bridge, tunnel, platform, etc.) with all arrangement (walkways, platforms, etc.), equipment, furniture, inventory, utility and axillary devices belonging to it and, if necessary, with engineering networks adjacent to it. For object construction, it is necessary to create a separate design and estimate or estimated budget calculation (object estimate or object estimated budget calculation). At construction of enterprises, industrial or residential civil complexes, separate objects in composition of the building are external network with service and auxiliary facilities on them (water supply, wastewater collection , district heating, gas supply, power supply, etc.), access roads, in-factory or in-district roads, other general site works. If at the construction site, under the design, only one main purpose object is constructed without construction of subsidiary or auxiliary facilities (e.g., in industry – the main workshop building; in transport – the building of a railway station, in housing and civil construction – a residential building, theatre, school building, etc.), the notion of the construction object coincides with the notion of the structure. According to clarification by the Ministry of Regional Development and Construction of Ukraine77, use of standard forms of the source accounting records in construction "Acceptance Act for Construction Works (standard form No.KB-2v) and "Certificate of the Cost of Construction Works Performed and Costs Items" (standard form No.KB-3) approved with Order of the Ministry of Regional Development and Construction of December 4, 2009 No.55478, these model forms are subject for use in the course of settlements for work performed between customers and performers of construction (the contractor) performed at the expense of budget funds and funds of state-owned enterprises, institutions and organizations. Frequency of the subcontractor's submission of the model forms is stipulated in the subcontract (paragraphs 98, 99 and 102 of the Framework Conditions of Execution and Performance of Subcontracts in Capital Construction" approved by the Cabinet of Ministers of
77Letter of the Ministry of Regional Development and Construction of Ukraine "On Application of Model Forms of Source Accounting Records in Construction" of 06.05.2010 No.2/12-20/4993.
78 Order of the Ministry of Regional Development and Construction of Ukraine "On Approval of Model Forms of Source Accounting Records in Construction " of 04.12.2009 No.554.
Framework Contract FC474/EBSF-2010-08-124F 176 Ukraine "On Approval of the Framework Conditions of Execution and Performance of Subcontracts in Capital Construction" of 01.08.2005 No.668 (hereinafter – the Framework Conditions), subparagraph 3.3.8 of the Rules for Determining Cost of Construction DBN D.1.1- 1-2000). The practice of settlements for construction work performed is, usually, monthly execution of such documents. Framework Conditions, under the Civil Code of Ukraine, determine the procedure of signing and executing subcontract for carrying out new construction, reconstruction of buildings and structures, as well as technical modernization of operating enterprises (hereinafter – capital construction of objects), as well as complexes and types of work related to capital construction of objects. Provisions of Framework Conditions also apply to execution and performance of subcontract for restoration and capital repair of buildings and structures. Financing of the work (building of the object) is carried out according to the plan drafted by the customer, coordinated with the investor (the main manager of budgetary funds) and the contractor and being an integral part of the subcontract. The construction funding plan is drafted on the basis of the building (object) title, the construction organization design taking into account calendar work implementation schedules and the procedure of settlement for work performed. The parties agree on the construction funding plan according to the procedure stipulated by the contract. The construction funding plan is drafted for the entire construction period by years, and for the current year – by months indicating sources and directions of funding (types of costs). Monthly distribution of funds for transitional construction projects is annually agreed by the parties within the terms set in the contract. According to the subcontract, the customer has the right to amend within set terms the schedule of construction funding for the current year in view of available funds, volumes of actually performed work, etc. If the customer fails within the terms set in the contract to pass to the contractor for approval the construction funding schedule for the current year, the contractor has the right not to start work, and at transitional constructions – to halt its execution, and, if the customer fails to apply the necessary measures, to request termination of the subcontract. Should the customer make the decision on acceleration or slowdown of work implementation, at the same time it is necessary to amend the construction funding plan with making respective amendments in the subcontract. Allocations for work performance (object construction) at the expense of public funds are made in accordance with the procedure stipulated by the law. In the case of performing work using budgetary funds, funds of public and communal enterprises, the issues of settlements for work performed (advance payment, interim payments, payment terms, etc.) are defined by the subcontract in compliance with requirements of the legislation governing these issues. In particular, in 2009 the Ministry of Housing and Communal Economy of Ukraine approved with its order79 the form of the agreement for allocation in 2009 of budget funds from the Stabilization Fund for implementation of investment and innovation projects for energy efficiency in the housing and communal economy. The agreement set the form under which
79Order of the Ministry of Housing and Communal Economy of Ukraine "On Approval of the Form of the Agreement for Granting in 2009 of Budget Funds from the Stabilization Fund for Implementation of Investment and Innovation Projects for Energy Efficiency in the Housing and Communal Economy" of 13.08.2009 No.252.
Framework Contract FC474/EBSF-2010-08-124F 177 the Ministry provides budgetary funds for the recipient of funds under the conditions of co- funding at the expense of own and / or raised funds by transferring them to the recipient's account for the project's implementation (or without co-funding by transferring the funds to the recipient's account for the project's implementation). According to the Framework Conditions of conclusion and execution of subcontracts for capital construction, the Ministry of Construction, Architecture and Housing and Communal Economy of Ukraine approved the Model Subcontract in capital construction (hereinafter – the Model Subcontract)80. The Model Subcontract is applied by customers and subcontractors during construction as guidelines when executing the subcontract for object construction work performance. In the Model Subcontract, several options for presentation of certain conditions are offered, which enables the parties to the contract to choose the most appropriate option for them. Under provisions of part IV of Article 179 of the Economic Code of Ukraine on the status of model contracts, the parties to the subcontract have the right by mutual agreement and based on specific conditions to modify specific provisions stipulated by the Model Contract or complement its content. The parties, however, must comply with provisions of the legislation and the Framework Conditions of executing and performing subcontracts in capital construction approved with Resolution of the Cabinet of Ministers of Ukraine of August 1, 2005 No.66881. According to provisions of Resolution of 01.08.2005 No.668 "On Approval of the Framework Conditions of executing and performing subcontracts at capital repair", the essential terms of the subcontract to perform residential house capital repair work at the expense of budgetary funds are fully prescribed, and include names, contracted works description and values, and all general and special conditions of the contract. The definition of capital repair is set by Order of the State Committee of Ukraine for Housing and Communal Economy "On Approval of the Rules of Maintenance of Residential Buildings and Adjacent Territories" of May, 17 2005, No. 76 (hereinafter – Order No.76 of 17.05.2005). According to this order, "Capital repair of a building is a complex of repair and construction work related to restoration or enhancement of the building's operational qualities, with restoration or replacement of bearings or frame constructions, engineering equipment and fire protection equipment without change of construction dimensions of the building or its technical and economic indicators". Capital repair envisages replacement, restoring and modernizing the building's constructions and equipment in connection with their physical wearing out and destruction, improvement of operational qualities, and improvement of the building's planning and improving the territory without changing construction dimensions of the object. The procedure of drafting, the scope and nature of design estimates for major repairs of residential buildings, as well as the terms of their issue for the contractor, the procedure of realization and funding of major repairs in residential buildings must be set in accordance with requirements of legislative and regulatory technical documents.
80 Order of the Ministry of Construction, Architecture and Housing and Communal Economy of Ukraine "On Approving the Model Subcontract in Capital Construction" of October, 27 2005 No.3.
81 Decree of Cabinet of Ministers of Ukraine "On Approving the Framework Conditions of Executing and Performing Subcontracts in Capital Construction" of 01.08.2005 No.668.
Framework Contract FC474/EBSF-2010-08-124F 178 Thus, in view of requirement of the abovementioned regulations, when signing a subcontract for capital construction, contracting parties may agree on deferred payment of the relevant work. Application of such form of payment is a real basis and opportunity for owners (co- owners) of an apartment building to independently, in the form of direct investment, finance capital repair of their apartment building. Organization of owners' (co-owners') payment under such contract is similar to the procedure described in the section "Direct Investments of Owners (Co-Owners)". Specific features of organizing co-financing for capital construction at the expense of budgetary funds is strictly regulated and, therefore, take a long time and require professional training both for the customer and the contractor. Energy performance contract Ukraine's legislation does not establish specific features of legislative regulation of the energy service subcontract (see the text inset "Fact Sheet") as a separate type of economic contracts, thus such contract form may be selected by the parties themselves. Today, Ukraine has the practice of executing agreements between co-owners of apartment buildings and energy service companies (Nizhyn - condominium "Zorya" – LLC "SEC "ESCO-Centre", Lutsk – condominium "BINOM" – LLC "Energy Servicing Company "Lutsk Utility Systems"). To regulate their relations, the parties chose the contract for provision of centralized heating and centralized hot water supply services. In Nizhyn, elements of the energy service subcontract in the services contract were implemented by setting own algorithm for calculation of the ceiling rate of the tariff on services. This rate should be 97% of the tariff for heat supply set for thermal power provider in the city multiplied by the rate of heat power consumption per square meter of heated space in the house that has been observed during the several recent years and is calculated on the basis of house heat power meters' indications. LLC "SEC "ESCO-Centre" entered into agreements82 with each apartment owner for provision of centralized heating and hot water supply services, in which the annex to provisions of the model contract includes the algorithm of calculation for determining the ceiling rate. Apartment houses co-owners-project participants will gradually repay to ESCO for work performed by paying monthly fees for services during ten years. In Lutsk, the condominium association "BINOM" – LLC "Energy Servicing Company "Lutsk Utility Systems", similarly to the contract concluded between the parties in Nizhyn, envisaged that consumers would pay for services at the tariff that makes up 93% of the one set in the city during 10 years. Thus, when tariffs in the city change, the new size of the tariff for consumers of the house cannot exceed the rate that includes the actual average monthly consumption of heat power in this house calculated per one square meter of heated space defined by calculation. But, unlike the contract signed in Nizhyn, this average consumption rate is not determined. As stated in the contract, improvements that are not parts of energy conservation measures (roof repair, lobby improvement, sewer repair) will be performed by the ESCO under a separate contract and paid by the customer during 10 years at the expense of funds collected from the condominium as the fee for maintenance of buildings, structures and adjoining territories. Despite ESCOs' attempts to introduce separate elements of energy service subcontracting in services contracts, there are now a number of limitations to extensive application of performance contracts in Ukraine. Among them:
82 Similar to the Model Contract on provision of centralized heating, hot and cold water supply and wastewater collection services approved with Decree of the Cabinet of Ministers of Ukraine of July, 21 2005 No.630
Framework Contract FC474/EBSF-2010-08-124F 179 Due to the nature of social welfare programs (housing subsidies, privileges regarding paying housing and utilities fees), which determine the size of social allowances depending on tariffs on services, ESCO companies have to be centralized heating and hot water supply services performers. Otherwise, the payment for energy service contracting services, which would not be linked with the tariff on services, will not be taken into account when determining the amount of social allowances for low income consumers and those who have privileges regarding payment for services. Any work (services) associated with implementation of energy efficiency measures in an apartment house, except for measures in the sphere of district heating or hot water supply, must be funded by residents as a separate fee. This is due to peculiarities of tariffs setting on centralized water supply, wastewater collection, maintenance of buildings, structures and adjacent territories and electric power supply for population (or "settlements", see below). Without setting a clear benchmark understandable for consumers (which is the tariff on heat consumption per square meter), ensuring of energy saving achieved by the ESCO required preparation of the procedure of verification and monitoring of energy consumption indicators before and after implementation of the energy efficiency measures, as well as understanding of these aspects by co-owners for negotiating with the ESCO. Since there is no such experience in Ukraine, the demand for ESCO services in their pure form has not yet formed.
Framework Contract FC474/EBSF-2010-08-124F 180 Annex 47 – Contractual details of concluding loan agreements with condominiums; legal background for lease agreements 1. Loan Agreements Part two of Article 66 of the Economic Code of Ukraine provides for the general right of enterprises to attract bank loans. The legislation contains no direct restrictions on this right either on the basis of the legal and organizational form, or on the basis of the enterprise's form of ownership. The term "loan" is used in several legislative acts, and in different acts different meanings are attributed to these concepts. Types of loans are also defined in different ways. For the purposes of article 1054 of the Civil Code of Ukraine, the loan is interpreted as the monetary funds that a bank or another financial institution (lender) provides for the borrower provided the borrower agrees to repay the money and pay interest on using the funds. Along with this, Article 1057 of the Civil Code of Ukraine contains a reference to the "commercial loan" in the form of advance payment, prepayment, deferred or installed payment for goods, work or services. Article 1 of the Law of Ukraine "On Financial Services and State Regulation of Financial Services" contains the definition of the "financial loan", which corresponds to the understanding of the loan under Article 1054 of the CCU. According to Article 4 of the Law of Ukraine "On Financial Services and State Regulation of Financial Services", loan disbursement under financial credit conditions is attributed to financial services. According to Article 5 of this law, the right of providing financial services belongs to financial institutions, while the right to extend financial loans due to borrowed funds only belongs to lending institutions on the basis of the respective license. Financial institutions, according to the law, include banks, credit unions, pawnshops, leasing companies, trust companies, insurance companies, pension savings institutions, investment funds and companies, as well as other legal entities the sole business of which is provision of financial services. Credit institutions, pursuant to the applicable law, include banks and credit unions, however, among the financial institutions from which companies may receive loans there are only banks (the range of the entities to whom credit unions can extend loans is limited by the Law of Ukraine "On Credit Unions"). According to Article 347 of the Economic Code of Ukraine, bank loans can have the following forms: bank, commercial, lease, mortgage, other. Types of loans vary in: terms of use (short, medium and long-term), security means; risk rate, extension methods, maturity, other terms of extension, use or repayment. The law does not prohibit taking loans from non-residents (including foreign banks). According to the "Regulation on the Procedure of Receiving Loans, Loans in Foreign Currency by Residents from Non-residents and Extension by Residents Loans in Foreign Currency for Non-residents", approved by Resolution of the NBU of 17.06.2004 No. 270, such attraction of loans shall be made through authorized banks of Ukraine ("servicing bank.). The contract under which the loan is extended shall be subject to registration with the NBU. Condominium associations as legal persons have the right to obtain loans. Article 4 of the Law of Ukraine "On Condominium Association" provides for that the association's property is composed of: Property transferred to it by association members as property; Income obtained; Other property acquired on grounds not prohibited by law.
Framework Contract FC474/EBSF-2010-08-124F 181 Not a single legislative act contains prohibition for condominiums to receive funds as loans. At the same time, the legislation sets some conditions for attracting and using loan resources by condominiums. Thus, Article 21 of the Law of Ukraine "On Condominium Associations" and paragraph 6.2. of the Model Statute of the Condominium approved with Order of the State Committee for Housing No. 141 of 08.27.2003, it is envisaged that use and disposal of funds shall be carried out "in compliance with the statute and the approved estimate". Consequently, attraction of loan funds and their use and repayment should be stipulated in the association's estimate. Under article 10 of the abovementioned Law, adoption of the estimate is assigned to exclusive competence of the general meeting of the association. Therefore, the decision on the condominiums' taking a loan must be made at a general meeting of the association, and simultaneously with the adoption of such decision the meeting should decide on the appropriate amendments to the estimate (or adoption of a new one). Besides, depending on the mechanism of loan funds' repayment, it may be necessary to implement relevant targeted contributions from co-owners. Collateral under loans for condominium associations Since obtaining a loan is always related to provision of a collateral by the borrower for the lender (pledge, etc.), it is necessary to pay attention to the fact that a condominium as a legal entity does not own either the apartment building as a whole, or joint property (elevators, attics, basements, etc.) of such house. The so-called joint property of an apartment building in accordance with Article 382 of the CCU and the Law of Ukraine "On Condominium Associations" is jointly owned by owners of apartments and non-residential premises in the building. So, in most cases the only property owned by a condominium association as a legal entity is the funds on its bank accounts and obligations / debts of co-owners to the condominium. Another "asset" of a condominium association might be the fees that the condominium will receive in the future but the maturity of which has not yet come. Ukrainian legislation allows pledging titles to property, including those that the mortgagor will obtain in the future (Articles 4 and 49 of the Law of Ukraine "On Pledge", art. 576 of the CCU) – that is, in our case, claim rights under obligations, including those maturity of which has not yet come, can be pledged. It should be noted that among the abovementioned joint property in an apartment house there are also auxiliary premises that condominiums can now lease. Such premises are not separated from the general bulk of a building's joint property, there are no title documents for them, they remain joint property of all co-owners of the apartment house. Association can only lease them because such right is directly given to condominium associations in the Law of Ukraine "On Condominium Associations". And despite the fact that condominiums sign lease agreements for such premises on their behalf, they are not owners of such premises. Therefore, in our opinion, condominiums cannot pledge auxiliary premises. Besides, to be pledged an auxiliary premise should be separated from the joint property of the house. Since the premises are separated from joint property of the apartment building's co-owners, it is the co- owners (not the condominium association) that will be co-owners of the premises83. Theoretically, co-owners of the premises can pledge them under loan commitments undertaken by the condominium, but this will require reaching 100% consent on this issue, which in practice is not always possible. Separate condominiums own apartments or non-residential premises and title documents issued for them.
83 Since premises are real estate objects and the title on them is subject to state registration, all co-owners must be mentioned in the title certificate for such premises. Among other things, this also creates purely practical inconveniences.
Framework Contract FC474/EBSF-2010-08-124F 182 So, a condominium association as a legal entity usually has no assets that potential lenders would be willing to accept as collateral. For the exception of the few condominiums that own apartments, the only asset of the associations is the "cash flow" of contributions and mandatory fees of co-owners. Organizational aspects of loans by condominium associations It should be taken into account that most condominiums lack knowledge, experience and expertise to negotiate a loan and sign the necessary agreements. Getting a loan, apart from actually finding a potential lender who offers optimum loan conditions is also associated with the need to develop a business plan and prepare a set of documents for obtaining the loan, which may be required by the lender. Moreover, in the case of extending a loan the condominium association would need qualified legal assistance when signing the loan agreement and the collateral agreement. As experience proves, in Ukraine there are very few chairs and members of condominium boards who have the necessary education or training for this. And even among condominium members it is not always possible to find appropriate experts who could provide such assistance. While involvement of outside experts would incur additional costs for condominiums – while the quality of such specialists' services is not always guaranteed. Since in Ukraine loans secured with pledging of the claim right for financial liabilities are too expensive (due to peculiarities of regulation of the banking market in Ukraine), in practice it is not profitable for condominiums to take a loan from a Ukrainian bank. Accordingly, the most profitable option for condominiums is receiving from the contractor company a commercial loan (art.1057 of the CCU) as installment payment for work performed. This helps condominiums avoid the need to independently negotiate and sign agreements with lenders (because condominiums far not always have the opportunity to request the assistance from experts in law, finance, etc.). The main limitation for use of loan as a source of funding for investment projects by condominiums is lack of knowledge, experience and expertise to negotiate the loan and sign the necessary agreements, as well as the fact that the condominium as a legal entity lack property that potential lenders would be willing to accept as collateral; plus the status of a condominium as a non-profit organization, which for some banks is not acceptable for extending loans in accordance with internal regulations. Co-owners of the multi apartment building in which there is no HOA established can apply to the bank for borrowing for the purpose of capital repairs in their building. In order to make a decision on borrowing, it is necessary to obtain 100% agreement of all the co-owners. In this case co- owners will have to apply for borrowing as individuals and have their own property as collateral. This may be a big barrier for borrowing. Since there is no special provision in the law which prescribes a mechanism of decision making on the issue of borrowing by the co-owners in the multi-apartment building in which there is no established HOA, getting an agreement of 100% of co-owners on the issue of borrowing seems to be technically unrealistic. Lease Agreement84 In the housing sector for energy conservation it is possible to apply leasing relations. Legal and economic principles of financial leasing are stipulated by the Law of Ukraine "On Financial Leasing" No.723/97-VR of 12.16.1997 (hereinafter in this section – the Law).
84 When preparing this section, we used materials of the report "Review of Funding Sources for Investment Projects in the sector of District Heating and the Options of Their Application within the Municipal Heating Reform Project". The Study Results Report. Part I. Prepared by the Municipal Development Institute within the USAID "Municipal Heating Reform" project. Task 6.1. Kyiv, 2009"
Framework Contract FC474/EBSF-2010-08-124F 183 According to Article 1 of the Law, financial leasing (hereinafter – leasing) is a type of civil legal relations arising from the lease agreement. Under the financial lease agreement (hereinafter – the lease agreement), the lessor undertakes to acquire an object as property from the seller (supplier) in accordance with specifications and conditions set by the lessee and to pass it for the lessee's use for a specified period not less than one year at a fixed fee (lease payments). According to Article 4 of the Law, lease subjects can be any legal entities, namely: Lessor – the legal entity who transfers the right to owning and using the leasing object to the lessee; Lessee – the individual or legal entity who receives the right to owning and using the leasing object from the lessor; Seller (supplier) – the individual or legal entity from whom the lessor acquires the object that later will be transferred as a lease subject to the lessee; Other individuals or legal entities who are parties to a multilateral lease agreement. Article 6 of the Law stipulates that essential provisions of the lease agreement are: Lease subject; Period for which the lessee is entitled to use the lease subject (lease term); Amount of lease payments; Other conditions on which upon the request of at least one of the parties agreement must be reached. The law sets general rules and restrictions on definition of essential provisions of the financial lease agreement. The lease subject. Article 3 of the Law provides for certain restrictions on the subject of the lease agreement. The subject of the lease agreement (hereinafter – the lease subject) may be an inconsumable thing (intended for repeated use) defined by individual features and classified according to legislation as fixed assets. Land plots or other natural objects, integral property complexes of enterprises and their separate structural subdivisions (branches, workshops, divisions) cannot be leased. Property in state or communal property to which no prohibition on transfer for use and / or possession applies, can be leased according to the procedure prescribed by this Law. The lease term. Article 6 of the Law specifies that the lease term is determined by the parties to the lease agreement in accordance with provisions of the law and, therefore, cannot be less than one year. Lease payments. According to Article 16 of the Law, payment of lease payments shall be made according to the procedure prescribed by the agreement. Lease payments may include: The amount that partially compensates the value of the leased asset; Payment as remuneration to the lessor for property obtained on lease; Reimbursement of the interest under the loan; Other costs of the lessor directly related to execution of the lease agreement. Thus, the legislation of Ukraine does not contain restrictions on the range of legal entities who may provide financial leasing services or use financial leasing services. The company (lessor) not necessarily must be a financial institution in order to provide property for another enterprise as financial leasing. Under financial leasing, there are no additional requirements to the collateral or security, as the property leased is a form of collateral under the agreement. However, leasing is not extensively applied in the housing sector, primarily due to lack of demand from co-owners. According to expert assessments, the cost of financial leasing may be
Framework Contract FC474/EBSF-2010-08-124F 184 higher compared with a loan, as it includes not only the interest, but also other costs of the lessor that are directly related to execution of the lease agreement (remuneration and other lessor's costs, etc.), the cost of leased property insurance, etc. Today in Ukraine leasing companies offer executing agreements for the term of up to 5 years. Moreover, financial leasing actually limits the company that needs to purchase equipment to the choice for equipment of those suppliers who can offer sale under financial leasing conditions, or to involving leasing companies, which increases the cost of the agreement. Realization by co-owners of lease payments can be considered both as a part of the tariffs on district heating and hot water supply (as required in accordance with the Tariffs Setting Procedure of RCMU No. 955), and as a separate payment when it comes to equipment that cannot be attributed to the heating sphere (elevators , potable water booster pumps, etc.). Thus, for the purpose of funding investment needs of a residential building, co-owners of the building may enter into a financial lease agreement. However, considering the specific features of financial leasing, the owners' (co-owners') choice in favour of this method of funding may be unnecessarily expensive and economically unsound.
Framework Contract FC474/EBSF-2010-08-124F 185 TECHNICAL ASSISTANCE FOR IMPROVING THE ENERGY PERFORMANCE OF RESIDENTIAL BUILDINGS
ANNEX 48
Gap Analysis of Law of Ukraine “On Association of Co-Owners of Residential Buildings” (Bulletin of Verkhovna Rada of Ukraine, 2002, N10, p. 78)
Prepared For:
Ministry of Housing and Municipal Economy of Ukraine
Prepared by:
Jaroslava Zapletalova Housing Institute, c. a. Bratislava, Slovakia
Under the subcontract with:
2675 Morgantown Road Reading, Pennsylvania 19607-9676 United States
CONTRACT: FC474/EBSF-2010-08-124F Table of Content
Synopsis ...... 3 1. Summary of Ukrainian Law...... 4 1.1 Summary of Current Law...... 4 1.2 Suggested Approach...... 5 2. Summary of Slovak Housing Policies...... 6 3. Gaps between the Slovak and Ukrainian legislative ...... 8 4. Conclusion and Recommendations:...... 12
2 Synopsis
This paper provides Gap Analysis of the “Law of Ukraine on associations of co-owners of multi-apartment residential buildings”1 from 2002 and as amended in2005 and 2006 with „relatively well functioning“ legislative of Slovakia relevant to the residential building sector. It is apparent that the two legislatives on apartment ownership are substantially different. The differences are most likely a result of differences in perception of the responsibilities of the apartment owners for their domicile and the differences in the up- to-date state housing policies influenced by the socio-economic environment of the two countries.
1 (“ Про об'єднання співвласників багатоквартирного будинку ( Відомості Верховної Ради (ВВР), 2002, N 10, ст.78 ) ( Із змінами, внесеними згідно із Законом N 3053-IV( 3053-15 ) від 03.11.2005, ВВР, 2006, N 4, ст.60 )
3 1. Summary of Ukrainian Law
1.1 Summary of Current Law
“Law on associations of co-owners of multi-apartment residential buildings” defines legal and organizational principles of establishment, functioning, reorganization and liquidation of associations of owners of residential premises and premises used for non-residential purposes, protection of their rights and performance of duties regarding joint maintenance of apartment house.
Law provides definition of used terminology, recognizing two terms describing the way the homeowners can be organized:
Association of apartments owners and co-owners of common area - legal entity established for the purpose of utilization common property (article 3,4)
Association of apartment owners – also a legal entity established for the purpose of protecting common interest of the union (article 3,8)
Law sets the process of establishing, registration, activity and liquidation of these legal entities, their interrelations and relations between them government and local governments as well as their relations to commercial entities.
Law correctly defines the association of apartment owners (Homeowners Association), form of establishing, rights and responsibilities of the members – owners of rooms, apartments and other-non living spaces, and the association representatives (articles 2-11). However, the problematic issue is the definition of its establishment within the apartment complex. It can consist of single building or from multiple buildings, and may include buildings owned by others based on contractual agreement. In such case, the decision making process applied by the owners of rooms, apartments and non-living are it is not clear. In such arrangement, the owners may not have direct control utilization of funds in their own building (their property), the funds they have the responsibility to collect in the bank for the purpose of repairs and maintenance (article 21), together with other buildings of the apartment complex. Such ”common” funds are not registered and appropriated for the specific buildings, which in turn is the reason for lack of interest of the apartment owners in proper repair and maintenance. This system does not allow transparent management of funds. Law does not permit establishing multiple associations within one building (article 4) and it allows building management based on contract with building management organization (article 13)
Association is defined by the law as legal entity with non-profit organization status (article 4), but in article 10, it allows establishing or participation in for profit entity with limited liability (Ltd) (article 17) which is contradictory to law on non-profit organizations.
4 The membership in the association is voluntary (article 9), the member can be accepted of expelled (article 7), which makes the association the same as association base on common interest. Association of owners is a form of common asset management and therefore the membership and associated decision making responsibility mandatory for all owners of the apartment in the building.
The rights and responsibilities of association members (articles 14, 15, 16) are defined correctly.
The payments are divided to creation of necessary accounts and for payments for services (article 21, 22). Payments for services are to be made monthly according to agreement. The type of agreements, necessary billing documents containing service type and volume of services, definition of suppliers and recipients of services are not defined. (need s to be determined by other laws)
In case of non payment, the association can refer the case to the court after 60 days after payments ceased and can demand the payments (article 13). Law does not include establishment of legal claim (Lien) against the property in favor of the other owners. Establishing Lien is important for ensuring payments and also had significant role in obtaining loan for reconstruction and its repayment
Law maintains the participation of former owner of the assets on repair and maintenance of building common spaces (article 24). By transferring the ownership to the property, all responsibilities for its repair and maintenance should be transferred on new owner. Responsibility of former owner of the assets to participate in repair and maintenance should only apply in case when not all apartments are sold or transferred. In such case the former owner should have the same rights and responsibilities as the other owners.
One of the main problem of the law is its definition of two levels of legal entities – Association and union, on which the responsibility for maintenance of common spaces can be delegated. (article 12 and 16). In this case, the owners are excluded from decision making process. The second level of the legal entity should be eliminated.
1.2 Suggested Approach
The law should be based on principle of transferring responsibility for the real estate assets of multi- apartment buildings from former owner (state, or other) on individual owners of apartments and non-living spaces and to define their rights and responsibilities. The law has to establish the fact that with the ownership of apartment carries also common ownership of the common spaces and rights to it and responsibilities for it.
Main content of such law in any country must include:
Record in registry of real estate property ownership for individual owners acquired by purchase, inheritance or by other acts, and all associated 5 issues such as financial responsibility for payments for repairs and maintenance.
Ensuring management of the common area and common equipment of the building by establishing Home owners Association (HOA), establish selection and rights of its management, process of selecting executive representative(s). Second form of management can be agreement (contract) with specialized, licensed building management organization or private person.
Responsibility to collect financial resources for repairs and maintenance of common property and means of payment for services that are associated with utilization of apartments (utilities)
Establish decision making process of the owners regarding use of financial resources for repair and maintenance by voting process, and in case of insufficient own resources allowing use of other means such as loans.
Provide means of enforcing payments by the apartment owners to the fond for repair and maintenance and for services obtained
Establish rules for common management and maintenance of the building, in compliance with other laws, such as energy law, safety standards, etc.
Mentioned principles are currently not included in the Ukrainian Law from 2002. 2. Summary of Slovak Housing Policies In 1990, the Government of Slovakia adopted basis principle that the citizen has the solo responsibility for his/her domicile, for acquiring it on housing market and for its maintenance. On this basis, in 1992 all previously applied system of rent and other housing related subsidies were permanently abolished. At the same time, payments for rent and services were separated and “rent control” was gradually reduced and finally eliminated. Currently, Slovakia has no rent control.
The principle of citizen’s responsibility for its own domicile is in Slovakia currently applied to the entire housing sector, including apartments in private ownership of the residents. So called „social blindness“ in the residential sector required introducing provisions for introducing a safety net - assistance to economically and socially disadvantaged citizens who are for one or the other reason (mostly economical reasons) not capable of securing their own domicile.
State assumed the responsibility for protection of socially and economically vulnerable part of the society through a set of legislative acts, directives and through other available means and effectively protects the socially and economically disadvantaged groups, such as young families, retires, large families, single parent families, disabled, minorities, etc). Gradual introduction of the social protection tools since 1992 and effective combinations of such tools substantially influences not only availability, but
6 also affordability of the housing, its maintenance and recently also it improvements.
In 2006, European Council adopted the proposal of team of expert and issued Directive on housing, financing and subsidies with intention to formulate the provisions for securing adequate means of housing for disadvantaged part of population and prevent exclusion of part of the society due to poverty, racism, or xenophobia. This document contains definitions and description of fiscal means that can be applied, including a specific housing subsidy. Most of the proposed means in this document is being applied in Slovakia with very positive, encouraging results. Results include new construction of public sector rent based housing, support of low interest loan for single family and multi-apartment housing construction, soft loan schemes for housing reconstruction, program of loan guarantees, etc. The legislative and all directives are periodically reviewed for their effectiveness and impact and as necessary, amended. Results are used to formulate state housing policy, within a 5-year cycle.
As a result of the privatization of apartment houses (1993), the former owners of the housing stock were released from any responsibility for the housing. In 1991-1992, some experts estimated that the cumulative cost of neglected maintenance and repair in apartment houses (especially the concrete panel construction) reached approximately EUR 13 bill; which is about two annual state budgets of the country. Thus, the state revoked any further commitments concerning privatized housing stock, since such amount of money could not be accumulated neither by the state, nor by the municipalities which gradually became owners of those apartments. That is also a reason why prices for apartments were downgraded, since the owners started to accept their responsibility for the status of privatized housing stock. The degree of neglect required quick action. Instead of direct support, incentives were introduced for the owners – subsidies for building retrofits through state grants. The apartment owners engaged themselves in long- term saving plan to accumulate money for refurbishment, obtained mortgage loans subsidies through reimbursement of the part of interest rate, guarantee program sponsored by the Slovak Guarantee and Development Bank, etc. In 1994, the State Housing Development Fund (SHDF) was established based on revolving principle. In 1996, it started to provide support to both legal entities and natural persons in form of a loan and unrecoverable contribution. State Housing Development Fund /hereinafter only referred to as "SHDF"/ is a fund established to cover state support for housing stock refurbishment and expansion typically in form of advantageous long-term loans. The state makes regular annual contributions to this fund. The total government subsidies of the housing sector in Slovakia is lower then in many West European countries, Since the very start, Slovakia supports the approach that every house (residents of the single house) should be responsible for their own economic management and handling of their resources based on joint decision-making of apartment owners. A large number of houses provide evidence of correctness of this approach, since with a little support from the state and many available financing sources the apartment owners carried out the refurbishment of their properties by themselves. Estimates show that about 20% + of residential buildings were completely renovated. Often, improved
7 technical status of the house is not the only objective, since many owners are also trying to reduce their energy consumption in the house in line with the Act on Higher Energy Efficiency of the houses. A large part of the loans is then paid back by saved energy – especially reduced heating demands. 3. Gaps between the Slovak and Ukrainian legislative
Definition of Assets The Ukrainian and Slovak laws define terms differently. The Slovak law defines and works only with term “apartment building” and is not considering “apartment complex” consisting of multiple apartment buildings. Ukrainian law does not define the size of the apartment complex. This affects the decision making related to financial resources and movement of resources between the complex units. This may lead to lack of transparency and loss of interest in care of the property.
Land Ukrainian law is addressing transfer of ownership also of the land, In Slovakia, this issue was complicated by the restitutions process and the land transfer is complicated and is not completed yet. Both laws are based on the fundament of the definition of condominium, where residential or non- residential premises form subject of direct ownership and a share of common premises forms part of joint ownership and apartment owners are obliged to take shared care of them.
Apartment transfer The Ukrainian law also deals with the issue of housing cooperatives’ transfer, which is an issue still unresolved in Slovakia. It is much related to unpaid loans for cooperative apartments that have to be returned to the state. The Slovak law only considers apartment transfer once the loan has been paid back, which happens gradually
Type of Legal Entity The Ukrainian law differentiates between two levels of legal entities – an association and a union. The definition of both is different from Slovak law in terms of apartment building maintenance in ownership of the residents. In case of association, the objective of the establishment is unclear, since the law fails to define the objectives, e.g. if it is a housing management or association based on common interests. This is a form, which is unknown to the Slovak law. Slovak legislation, allows only one legal level of housing management called home-owners’ association or a contract signed with the housing manager. A joint ownership of infrastructural networks’ outside of the building is not allowed in Slovakia, since there are other laws on service suppliers serving this purpose. The service suppliers are owners of networks, which is much related to the duty of introducing meters in houses, for which service suppliers are liable (water, heat and hot water).
National Association of HOA The National Association of Home-Owners’ Associations established in Slovakia is a legal entity operating on voluntary basis with member associations from all around Slovakia. It provides training for HOA officials, regularly publishes a magazine for its members, represents the interests of 8 associations vis-à-vis the government, Parliament and other organizations. As a matter of principle, it will not carry out housing management and it works via regional organizations. Since its establishment in 1996 the NAHOA becomes a very important partner of all government organization, provides expert opinion on legislative and all related sub-laws and directives and represents interest of apartment owners as well as users of services and energy consumers. Slovak law on apartment ownership does not define the NAHOA, this organization is established based on civil codex and it is registered as non-profit organization
In Slovakia, home-owners’ association (HOA) – owners of apartment and common building area- is the only legal form which can be established by home-owners in order to manage their common premises and equipment in the houses. HOA is registered as non-for-profit organization which may not own immovable property or conduct business activities via other persons. The only form of HOA income comes from the rent of common premises or equipment that is taxed in line with regulations (initially, they were deductible items prior to taxation).
Process of Establishing HOA Similarly to the Ukrainian legislation, the Slovak law also precisely defines the procedure concerning HOA establishment via memorandum of association and registration with respective registration place of public administration. Establishment of associations in Slovakia is possible only in houses with more than four apartments. Based on registration, HOA will acquire an identification number and enlists itself with the tax authority as a tax payer. Registration authority puts down the name and address of HOA, identification number, bodies of home-owners’ association as well as statutory, i.e. HOA chairman. The contract must contain information on HOA (title and address, HOA bodies, management style, framework covering rights and responsibilities of home-owners – the basic duties of home- owners are established directly in the law – participation to the meeting, voting, etc.), ways and authorizations for persons handling with money in the fund (general meeting, chairman, board, or another party agreed upon). Appointment of statutory is important when dealing with other legal entities and statutory bodies (responsibility, right to sign).
HOA Management Similarly to the Slovak law, the Ukrainian legislation also appoints association’s managing body. In fact, their composition differs, but the role of general assembly remains similar (meetings of home-owners). Law does not define the issues to be decided only by the general meeting of owners. Law does not define the obligation of owners to create and contribute to fund for maintenance and repairs through periodic monthly payments. Lack of this responsibility likely causes the consequent lack of understanding by the owners of their responsibility to maintain their property. In addition, Ukrainian law allows possibility to establish business entity by the association. In Slovakia this is in contrary with the non-profit status of HOA.
According to the Slovak law, bodies of HOA consist of: chairman, board, general assembly (meeting of home-owners) and other bodies approved by home-owners in their agreement. Since its adoption in 1993, this law had
9 been amended 10 times and original option of having collective statutory body has now been replaced by the only position of the chairman as person bearing legal liability and acting in line with decisions of the general assembly and according to the provisions in law.
Chairman as an executive body (statutory) coordinates activities of HOA and acts on its behalf, the general assembly elects him/her for three years. The board is HOA’s supervisory body with at least three members. Its role is to control economic management in the house and submit a report on economic management to the home-owners’ annual general assembly. General assembly is a supreme HOA’s body formed by all home-owners in the house. The board convenes general assembly at least once a year. It also contains other ways of convening an assembly. Apart from these basic provisions, the law also defines other details on rights and duties, voting, approval of documents, elections, etc. Furthermore, the law also defines way in which HOA can be liquidated.
Housing management contract In SR, it is obligatory for home-owners to facilitate housing management directly via HOA establishment or by means of contract signed with natural person or legal entity – house administrator. There is only one form of housing management acceptable by law. In case that house administrator is in charge, a written contract must be signed with home-owners which define mutual rights and duties of both parties. The law is quite specific about duties of the administrator towards home-owners. The house administrator must keep finances of home-owners on specific bank account. HOA or administrator must conduct book-keeping in line with regulations for non-for- profit organizations. Finances are deposited on bank accounts and mutual balancing with service providers is based on reimbursements of received invoices for rendered services. Social subsidies are targeted and are received directly by owners.
Number of buildings Typically, HOA would be established in one house only, while joint associations occurred very rarely in cases of joint technical equipment (e.g. boiler for 3 houses, etc.). A principal reason for having individual HOAs was economic management of financial resources which had to be paid by home- owners and were, therefore subject to their joint decision-making. State does not play role in establishing the HOA. Very positive role in support of the process was played by the media by making available information
Operation and Maintenance Fond Home-owners have to pay regular monthly payments based on advance- payment note laid out by the HOA or housing administrator. These are composed of monthly advance payments for services which are accounted for on annual basis according to the actual consumption and on payment to the fund of repair approved by home-owners (depending on their co-owned share). Fund of maintenance, repair and operation is indivisible and typically, it is used to pay for repairs of joint parts and common equipment. To provide for recovery of receivables, the law defines a pledge pro bono HOA or other home-owners. The pledge is registered in the cadastre (register of immovable property) and based on this provision, a legal procedure may be
10 applied to claim and recover receivables from owner- debtor, which results in execution (in line with law on execution) or even auction of apartment (law on auction).
It is a duty of a chairman or administrator to submit activity plan at the beginning of the year and to account for advance payments for the services rendered in the previous year. Division of payments for services takes place according to the measurements or rules agreed upon by home-owners (e.g. waste disposal or cleaning of premises per number of persons, hot water consumption according to the meters, etc.). According to the Ukrainian law, plans for refurbishment require complex technical inspection which forms basis for home-owners’ decision on one-off repair or gradual step-by-step reconstruction. These decisions take into consideration financial resources owned by home-owners in maintenance fund, bank loan availability, and state’s incentive grant programs. The general meeting of apartment owners makes decision on selecting the service supplier, contractors for construction or maintenance. Ukrainian law lacks of definition of this process. Text “application according to status and agreement” is not sufficient to determine the decision parties.
Rights and Responsibilities of owners Rights and obligations of home-owners are defined in both types of legislation in a very similar way. One of the fundamental rights is to take part in the meeting, to be elected and to make decisions about proposed measures. Some of the crucial duties are: a duty to pay fees for services and to contribute to the fund for repairs of common premises based on one’s co- owned share. Gradually, a system supporting planning of repairs and accumulation of funds, including loans and other support mechanisms were developed in Slovakia. Such mechanisms include state subsidies such as subsidy for removal of systemic breakdowns in panel houses which were precisely mapped and defined as a result of insufficiencies in original plans). Individual associations generate one fund of maintenance and repairs which may be divided into various sub-groups of funds (fund of reserves, etc.). Neither the State or the municipality has nothing to do with creation of funds. Information on generation of fund per m is an important indicator for banks and for the State Housing Development Fund granting loans and proving one’s solvency.
In one of its most recent amendments, the law introduced an option for apartment owners to sell apartment of home-owner who keeps violating the rights of others. This provision is considered to be „Damoclean sword“ for those who are not able to keep the conditions of co-existence (alcoholics, drug addicts, etc.).
Sales Price of the Unit Apart from above-mentioned provisions, the Slovak law also contains an independent part on stipulation of sale price for apartments, studios and garages, which were sold from the state or municipalities for the price which would be lower than the market one with regard to the technical status of the housing stock. Forthcoming amendment plans to get rid of this part.
Building modifications/additions
11 Another separate part of the law covers housing construction – it tackles new housing construction, additions or in-built parts. This part was frequently used when dealing with additions, in which, home-owners allowed apartment construction (note: in attic) to take place, which resolved an issue of leaking roofs on expense of others.
Decision making process In conclusion, it has to be emphasized that the crucial part of the Slovak law is the one covering direct decision-making on resources in individual houses accumulated by home-owners themselves. This way, home-owners gradually developed a sense of responsibility for the house condition which is something home-owners need to develop in contrast to tenants attitude of indifference towards the property. This process is quite lengthy and requires cooperation between public and private sector as well as involvement of media (TV, daily print, training institutions, schools, etc.) which played an important part in refurbishment process of housing sector in Slovakia. As the experience clearly show, the basis of positive development in housing sector was well written law on housing ownership which eliminated possibility to combine the process with all “ways of working”
4. Conclusion and Recommendations: Comparison of existing Ukrainian law and its amendment dated 2009 with existing Slovak law, and with the experience with Slovak law development and application, offers the following major issues:
1. The Ukrainian law and its amendment introduce unclear definitions at two levels (association and union) which introduce confusion. Recommendation: Law should allow only one form of Home Owners Association (HOA) as the entity responsible for management of the assets. 2. Ukrainian approach to housing policies does not in general, consider the apartment owner to have ultimate responsibility for his/her property. The amendment expects the former owner to invest in property which is now owned by others (apartment owners), regardless of the lack of financial resources. Recommendation: By transferring the ownership of the apartment, law must transfer full responsibility for its future repairs and maintenance to the now owner(s). The responsibility of the former owner (state) should be terminated by transfer of ownership. 3. Ukrainian law does not provide specific guidance for decision-making within the HOA Recommendation: Law should include establishing voting process for individual issues based on their importance
12 4. Ukrainian law allows association to create for-profit entity, which is in contrary with Slovak functioning non-profit status of HOAs Recommendation: Eliminate from the law the possibility of establishing HOA as an organization for protection of HOA interest. Law should allow establishing possibility to establish HOA as “common interest” organization based on Civil Code 5. Ukrainian law assumes common management of multiple buildings and in it section no 20 (likely copying the Russian law) establishes that: „The former manager (owner, asset holder) of the residential building organizes and funds the first complete overhaul of the building after the union’s establishment according to the legislation.” By this requirement, it practically eliminates responsibility of current owners to start taking care of their property. This is a major problem with the law, as it is counterproductive in housing stock improvement and also puts extreme burden on state budget. It is therefore asserted that the amendment if not changed, will influence the future progress inversely. Recommendation: It is necessary to establish whether Ukraine has sufficient financial resources to include in the Law this condition, or whether solution to this problem should be by another form – for instance establishing revolving fond, or providing owners with soft loans etc.
13 TECHNICAL ASSISTANCE FOR IMPROVING THE ENERGY PERFORMANCE OF RESIDENTIAL BUILDINGS
ANNEX 49
Review and Comments on Amendment of Draft Law of Ukraine “On Association of Co-Owners of Residential Buildings”
Prepared For:
Ministry of Housing and Municipal Economy of Ukraine
Prepared by:
Jaroslava Zapletalova Housing Institute, c. a. Bratislava, Slovakia
4th April 2011
Under the subcontract with:
2675 Morgantown Road Reading, Pennsylvania 19607-9676 United States
CONTRACT: FC474/EBSF-2010-08-124F TECHNICAL ASSISTANCE FOR IMPROVING THE ENERGY PERFORMANCE OF RESIDENTIAL BUILDINGS
Synopsis
This paper provides review and comments on the latest amendments to the “Law of Ukraine on associations of co-owners of multi-apartment residential buildings”1 from 2002 and as amended in2005 and 2006 with „relatively well functioning“ legislative of Slovakia relevant to the residential building sector. This document refers only to the introduced amendments; the overall gap analysis were subject of earlier review.
1 (“ Про об'єднання співвласників багатоквартирного будинку ( Відомості Верховної Ради (ВВР), 2002, N 10, ст.78 ) ( Із змінами, внесеними згідно із Законом N 3053-IV( 3053-15 ) від 03.11.2005, ВВР, 2006, N 4, ст.60 )
CONTRACT: FC474/EBSF-2010-08-124F TECHNICAL ASSISTANCE FOR IMPROVING THE ENERGY PERFORMANCE OF RESIDENTIAL BUILDINGS
Draft amendment introduces significant changes into legal framework for co-ownership relationships in apartment houses which need to respect its typical integration of exclusive and joint ownership of real estate. It includes direct apartment ownership and joint ownership of common premises and facilities in the house. This legal framework for ownership was incorporated from Anglo-Saxon legal system into many European and Asian regulations in modern era, while it is predominantly enforced in USA, Canada and Germany as of 1951. With greater or smaller success depending on individual legal formulations, it was adopted in almost all Eastern European countries.
Legal framework for ownership of multi-apartment houses is important not only for relationships between individual owners of residential and non-residential premises in these houses, but also for housing management, operation and safety of these buildings. That is related to legal contacts with other entities, such as natural persons or legal entities – e.g. housing managers, suppliers of services, construction companies or banks etc. which provide various types of services for these buildings based on contractual relations. Privatization of apartment houses in Eastern European countries significantly changes the status of apartment users – from tenants to owners. This fact implies new circumstances – new rights and duties. This is a reality which must be clear to apartment house owners as well as other stakeholders including state and local administration bodies which will still be able to intervene with affairs of apartment houses based on various types of legislation (e.g. building law, technical and safety standards, etc.) or by means of contractual relationships. In majority of Eastern European countries, the housing stock suffers by greatly neglected maintenance and ineffective energy consumption of all types, thus it is inevitable to enshrine owners’ obligation to take care of it in the law. Meeting these requirements will demand a lot of resources related to ownership rights of new owners (the same way owners of family houses take care of their houses). State and local support must be limited to inevitable motivational level and must be strictly defined. The most inadequate form of support is any across-the-board subsidy. The role of this law is to settle relationships in houses with apartments owned by citizens, so that the wording of the law itself makes it obligatory to collect finances for repairs and thus facilitate energy saving. At the same time, the law must also clearly define the way in which default payments may be claimed from defaulters and what can be settled by lawful registration of pledge to apartment of all owners in the registry of real estate ownership. The tasks related to refurbishment and energy saving can be facilitated by owners themselves once they combine their own resources and bank loans, which is a model that can be observed in some countries and which proved to work in several Ukrainian projects. However, banks will not grant loans without clear specification of partners, majority consent of apartment owners and sufficient loan guarantee along with possibility for claiming receivables. Thus, such mechanism must be in line with several related laws and other necessary tools, such as guarantee fund establishment to help with guarantee provision. The state should only retain money to finance repairs resulting from original planning errors of panel construction – should such cases appear in Ukraine. Current draft of amendment fails to incorporate this overall mechanism to necessary extent.
CONTRACT: FC474/EBSF-2010-08-124F TECHNICAL ASSISTANCE FOR IMPROVING THE ENERGY PERFORMANCE OF RESIDENTIAL BUILDINGS
On the other hand, draft amendment adequately omits residential complex as one of the options for establishing owners’ association (Art. 1). This way, it creates conditions for association to be formed within individual houses, which helps to make economic management of funds generated jointly by apartment owners and saved on a house account much more transparent. As a result, individual owners will be more interested in financial flow in the house. Unless apartment owners start to feel like real stakeholders in the house demanding information on financing of house operation, maintenance and repair, no real improvement of their property can be expected. Such mental and physical change should be of key interest to everybody who takes part in transformation changes of state economy.
Definitions in the Article 1 should be complemented by a definition of apartment house (in order to distinguish it from a family house); furthermore a definition of apartment and possibly also a room for permanent residence should be included too, since they form a direct subject of ownership constituting co-owned share in jointly owned premises and facilities in the house and respective land. Co-owned share forms prerequisite for payments into the fund of maintenance and repair.
Art. 1 including definitions stipulates that federation of associations is a legal entity established to advocate common interests of associations. On the other hand, Art. 8 defines federation as an entity gathering associations with joint ownership of internal infrastructural networks. Neither basic definition, nor Art. 8 define legal form of such entity – profit or non- profit. Art. 16 states that general assembly may delegate some rights of their managing bodies to the federation and it may be a founder of it. However, transfer of any rights shall result in loss of owner’s direct stake in management of his/her apartment house. Thus, we recommend elapsing from the law the level of federation as higher degree of an organization.
Association of co-owners is defined (Art. 4) as registered legal entity of non-profit character (co-owners contribute to the operation and maintenance from their taxed income), which is not meant to generate profit or distribute it among co-owners. Art. 17 implies that associations may establish further legal entities – it is not clear what type; probable business form could be deduced from Art. 21 on income of association and companies established by the association. This wording is mutually irreconcilable. Abovementioned article allows for establishment of fund of repair, however, its formulation does not make it clear whether its formation can be understood as legal duty to establish a fund.
In its original version, the law had already tackled transformation of apartment cooperatives to associations – Art. 5, which is a phenomenon not present in many countries and there are still many organizational and property-related issues connected to this matter. That is why this solution should be appreciated as one of the best.
Art. 24 covers relationship between former owner and jointly owned property. Participation of a former owner should take the same form as in case of direct owners of apartments and non-residential premises, but only in case of unsold residential and non-residential premises. Once the last apartment or non-residential space was sold, mutual relationships should cease to exist completely.
Article 25 deals with subsidies for apartment owners. This article very much depends on overall state subsidy policy. In most countries, social assistance takes form of direct housing allowance for those who need it due to low income to secure a decent housing. Thus, in the future, this article may be amended as a result of price liberalization and related social support adjustment on the level of state or region.
Author of the commentary: Jaroslava Zapletalová, Housing Institute, 4th April 2011
CONTRACT: FC474/EBSF-2010-08-124F