NEDO —IC-00ER01

Feasibility Study of

Pridneprovskaya Thermal Power Plant

Reconstruction Project

IVIarch, 2001

New Energy and Industrial Technology Development Organization (NEDO) usted by: Chubu Electric Power Co., Inc.

020005064 -9 Feasibility Study of Pridneprovskaya Thermal Power Plant Reconstruction Project

Entrusted by : Chubu Electric Power Co., Inc.

Prepared on : March, 2001

Study purpose

This project has been framed to apply Scrap & Build project of 300MW Electric power plan, to the Pridneprovskaya Thermal Power Plant owned by the JST Dneproenergo in the UKRAINE,. This project is aimed at improving the efficiency of aged facilities of the plant; enhancing its environment-friendliness; and reducing the emission of greenhouse gases. NEDO-IC —00ER01

Feasibility Study of

Pridneprovskaya Thermal Power Plant

Reconstruction Project

March, 2001

New Energy and Industrial Technology Development Organization (NEDO) Entrusted by: Chubu Electric Power Co., Inc. Preface This Report is a result of the survey of the Feasibility Study of Pridneprovskaya Thermal Power Plant Reconstruction Project, which Chubu Electric Power Co., Inc. received consignment of New Energy Development and Industrial Technology Organization (NEDO) to conduct this study.

In December 1997, the Third Conference of the Parties to the United Nations Framework Convention on Climate Change (COP3) was held in Kyoto. At the conference, the "Kyoto Protocol" was adopted in order to prevent global warming caused by greenhouse gases including carbon dioxide. It commits developed countries to reduce their average emissions of greenhouse gases by at least 5% "in the period 2008 - 15" from the 1990 level. Japan set its target of reduction at 6%. The Kyoto Protocol also provides measures to give flexibility in attaining the goals: "Joint Implementation (JI)" and "Clean Development Mechanism (CDM)." In JI, greenhouse gas reductions are shared among developed countries through implementation of specific international projects. CDM is implemented through cooperation between developed and developing countries. Japan intends to utilize these programs positively to achieve its goal.

This feasibility study is a basic study for leading the "Reconstruction Project of Pridneprovskaya TPP" to joint implementation. "Reconstruction Project of Pridneprovskaya TPP" is the project that realize the renewal of a superannuated unit, environmental protection, energy conservation, and reduction of greenhouse gas by scrapping and building a 300MW unit in the Pridneprovskaya Thermal Power Plant owned by J ST Dneproenergo.

Chubu Electric Power Co., Inc. conducted site surveys of the Pridneprovskaya Thermal Power Plant, had meetings at the Ministry of Fuel and Energy, and considered the results. These results were compiled in this report of Feasibility Study of Pridneprovskaya Thermal Power Plant Reconstruction Project. March 2001 Chubu Electric Power Co., Inc. List of the Participants in the Survey

Corporate Planning International Affair Group Akihisa Mizuno Department Keiichi Yoneyama

Hideo Iwata

Hirotaka Watanabe

Hisashi Kishi

Power System Planning Group Junichi Takahasi Operations Department

Thermal Power Department Planning Group Tetsuya Watabe

Construction Group Takashi Sato

Shunichiro Ide

Katsuo Sakurai

Tadashi Kawamoto

Yoshitaka Okuno

Eisuke Adachi

Civil Engineering And Thermal Power Youichi Momose Architectural Department Civil Engineering and Architectural Group Hiroshi Kouyama

Hironori Kamiya

Kenji Kikuchi

Tomoyuki Amano

Osamu Inada

Minoru Ishida

Junji Nakajima Contents

Summary

Chapter. 1 Basic Subjects of Project 1. Circumstances in Ukraine ...... 1-1 1.1 Political, economic, and social conditions ...... 1-1 1.1.1 Nature ...... 1-1 1.1.2 Population, ethnic groups, religions ...... 1-3 1.1.3 Administrative sections ...... 1-5 1.1.4 Politics...... 1-5 1.1.5 Economy ...... 1-14 1.2 Energy circumstances ...... 1-28 1.2.1 Energy resources ...... 1-28 1.2.2 Energy demand/supply ...... *...... 1-30 1.2.3 Present electric power industry situation * * ...... 1-31 1.2.4 Electric power demand/supply trends ...... 1-33 1.2.5 Present conditions of power generation facilities...... * ...... * ...... 1-36 1.2.6 Electricity rates system...... 1-41 1.2.7 Electricity rates collection system...... 1-43 1.2.8 Environmental problems ...... 1-44 1.3 Need for joint execution of project ...... 1-45 2. Need for introduction of energy-saving technology to the subject industry ...... 1-47 3. Significance, needs, and effects of concerned project, and propagation of results in same type of industry ...... 1-49

Contents 1 Chapter. 2 Implementation of the Project Scheme 1. Project scheme ...... * ...... 2-1 1.1 Overview of the object region for implementing the project ...... 2-1 1.1.1 Economic/social situation ...... 2-1 1.1.2 Environmental issues **••*•• ...... * ...... 2-4 1.2 Details of the project ...... * ...... * ...... 2-4 1.2.1 Objective of this project ...... 2-4 1.2.2 Selection of the unit to be abolished ...... 2-5 1.2.3 Location of the newly installed unit ...... * ...... 2-5 1.3 Targeted greenhouse gas...... * ...... * ...... 2-5 2. Outline of the implementation site...... 2-6 2.1 Degree of interest at the implementation site...... * ...... 2-6 2.2 Situation with respect to the relevant equipment at the implementation site 2-8 2.2.1 Outline of Pridneprovskaya TPP...... 2-8 2.2.2 Equipment specifications of Pridneprovskaya TPP...... * ...... 2-8 2.2.3 Operating situation of Pridneprovskaya TPP * * * ...... 2-10 2.3 Project implementation capability of the implementation site...... 2-12 2.3.1 Technological capability ...... 2-12 2.3.2 Management support ...... * ...... - 2-15 2.3.3 Business management, management policy ...... 2-16 2.3.4 Finance defrayal capability * ...... 2-17 2.3.5 Capability to acquiring human resources ...... 2-18 2.3.6 Implementation framework...... * ...... * * * * 2-18 2.4 Details of the project at the implementation site and specifications after modification to relevant equipment * ...... 2-19 2.4.1 Outline of newly combined cycle power generating plant ...... 2-19 2.4.2 Environmental measures ...... 2-32 2.4.3 Main equipment of the plant and equipment specifications ...... 2-33 2.4.4 Layout scheme ...... * • 2-44 2.4.5 Building scheme * ...... 2-58

2.4.6 Utility supply conditions for the newly installed plant ...... 2-62 2.4.7 Details of modification of existing equipment ...... * ...... 2-63

Contents 2 2.4.8 Procurement of labor and materials / equipment and transportation route

•...... • • • 2-66 2.4.9 Construction method and process *...... 2-67 2.4.10 Operation of newly installed plant ...... * ...... 2-75 2.5 Division of responsibilities for provision of funds, facility/equipment, and service in implementing the proposed project * * ...... * ...... * ...... 2-81 2.5.1 Decision of project implementation ...... 2-81 2.5.2 Financing ...... 2-82 2.6 Preconditions and problems related to implementation of the proposed project 2-83 2.7 Project implementation schedule ...... 2-84 3. Concrete financial planning ...... 2-86 3.1 Financial plan for project implementation * * ...... * * * 2-86 3.1.1 Expenses required...... * ...... * ...... 2-86 3.1.2 Financing method ...... 2-87 3.2 Prospect of financing ...... * ...... * ...... 2-87 3.2.1 The Japanese side action plan * * ...... * ...... * * * * 2-87 3.2.2 The Ukrainian side action plan ...... *...... * ...... * ...... * * 2-88 4. Matters related to Joint Implementation and other conditions ...... * ...... 2-88 4.1 Matters to be coordinated with the Ukrainian side for project implementation: Establishment of project implementation condition and division of duties, taking into consideration the actual situation of the site where the project will be implemented ...... * ...... * ...... 2-88 4.2 Possibility of accepting this project as a Joint Implementation scheme ...... 2-89

Contents 3 Chapter. 3 The Project Effect 1. Energy conservation effect ...... 3-1 1.1 Technical basis for producing energy conservation effect...... 3-1 1.2 Base line for calculating energy conservation effect * * ...... 3-2 1.2.1 Setting the base line ...... * ...... 3-2 1.2.2 Specifications of the base line and calculation results ...... 3-4 1.3 Concrete values, period and cumulative values of energy conservation effect 3-6 1.3.1 Considering the project case...... 3-6 1.3.2 Specifications of the project case and calculation results...... 3-7 1.3.3 Calculation results of energy conservation effect...... 3-11 1.4 Confirming energy consumption effect...... 3-13 2. Effects of reducing greenhouse effect gases...... * ...... 3-13 2.1 Technical basis for reducing greenhouse effect gases-----*...... 3-13 2.2 Base line for calculating reduction in greenhouse effect gases...... 3-14 2.2.1 Setting base line ...... * ...... 3-14 2.2.2 Specifications of the base line and calculation results ...... 3-15 2.3 Concrete and cumulative values and period of reduction in greenhouse effect gases...... 3-18 2.3.1 Considering the project case...... 3-18 2.3.2 Specifications of the project case and calculation results...... 3-19 2.3.3 Calculation results of reduction in greenhouse effect gases ...... 3-22 2.4 Confirming reduction in greenhouse effect gases ...... 3-23 3. Influence on productivity ...... 3-24

Contents 4 Chapter .4 Profitability 1. Financial investment recovery effect ...... * ...... * ...... 4-1 1.1 Assessment method ...... * ...... * ...... * ...... 4-2 1.2 Calculation conditions ...... * ...... * ...... * ...... 4-2 1.3 Financial investment recovery effect (Case 1)-----* ...... 4-7 1.3.1 Revenue ...... 4-7 1.3.2 Expenses ****...... 4-7 1.3.3 Assessment of profitability ...... 4-7 1.4 Financial investment recovery effect (Case 2)...... 4-10 1.4.1 Revenue ...... 4-10 1.4.2 Expenses ...... 4-11 1.4.3 Assessment of profitability ...... * ...... * ...... 4-11 1.5 Examination ...... * * * ...... * ...... * * * 4-13 2. Project effect against cost • * ...... *...... 4-14 2.1 Energy-saving effect against cost ...... * ...... * 4-14 2.2 Greenhouse gas reduction effect against cost...... * ...... * ...... 4-14

Chapter. 5 Diffusion Effect 1. Potential diffusion of the technology to be applied in the project in the recipient country ...... 5-1 1.1 Application conditions ...... 5-1 1.2 Potential plants subject to a similar project ...... 5-1 2. Consequences of diffusion ...... 5-3 2.1 Data and specifications used for assessment ...... 5-3 2.2 Diffusion effect-----*...... * ...... * ...... * ...... * ...... * * 5-3 2.2.1 Energy saving effect ...... *...... **5-3 2.2.2 Greenhouse gas reduction effect...... * ...... 5.4

Contents 5 Chapter .6 Other Effects 1. Effects of the implementation of the project from the viewpoints of environment, economy, and society, in addition to energy saving (alternative energy) and greenhouse gas emission reduction effects...... * ...... 6-1 1.1 Environmental Impact ...... 6-1 1.1.1 Atmospheric Impact ...... 6-1 1.1.2 Water quality...... 6-3 1.1.3 Noise and vibration ...... 6-3 1.1.4 Thermal discharge water...... 6-3 1.1.5 Coal ash ...... 6-4 1.2 Economic and societal influences ...... 6-4 1.2.1 Economic influences ...... * ...... * ...... 6-4 1.2.2 Societal influences ...... 6-5

Conclusion

Attached Document 1 Plant Design Conditions 2 Profitability Statement 3 Calculation of Reductions Other Than Greenhouse Gases

Reference Document

Site Investigation Report

Contents 6 Summary Summary

1. Project Overview

The Pridneprovskaya thermal power station owned by JST Dneproenergo is located in an industrial area situated 400 km to the southeast of Kiev, capital of Ukraine. It is fueled principally by coal, with gross generation of 1,800 MW. In this project, we plan to abolish a 300MW unit (No.12) out of 8 coal-fired existing power generating units (Support fuel; heavy oil and natural gas) and newly to construct new 100MW X 3 blocks gas-fired combined cycle plant. New gas turbines will use natural gas as fuel, which is supplied to the power station by a pipeline.

2. Electric Power Conditions in Ukraine

(1) The system of the electric power industry The electric power industry in Ukraine is currently operated under the following system. The whole electric power industry is under the authority of the Ministry of Fuel and Energy. The power generation sector consists of two hydroelectric power companies, four thermal power companies, nuclear power company Energoatom, 27 power distribution companies, and power transmission company Ukrenergo. When initially founded, these companies were state-owned corporations; however, all but the state-owned Ukrenergo have been partially privatized. Ukrenergo buys all power from generating companies and sells it to power distribution companies. The immediate partner of this project, JST Dneproenergo, has the highest power generating capacity among the four thermal power generation companies.

(2) Power demand and supply conditions Electric energy consumption in Ukraine has seen a constant decrease since 1990 after reaching a peak in 1989. In 1999, its total domestic electric energy consumption recorded 123.1 billion kWh, or 4.1% down from 1998. Gross domestic generation has also decreased year by year after reaching a peak of 298.9 billion kWh in 1990. In 1999, gross generation was 169.4 billion kWh, or 1.5% down from 1998, and about 43% down compared with 1990.

- Summary 1 - According to prediction of Ukraine Ministry of Fuel and Energy, the total generated energy will be changed to an increase in 2000 and afterwards, and is expected to increase slightly by 1 - 2% compared with the former year.

No large-scale development of power resources was conducted in the 1990s. Total installed generating capacity has also decreased year by year. Generating facilities in Ukraine have become considerably outdated due to shortage in funds necessary for modernization. Eighty percent of thermal power stations are regarded as in need of rehabilitation or rebuilding. The capacity ratios of thermal power stations have also decreased, as funds for purchasing fuel have also become short. Total installed generating capacity in Ukraine was 53.9 million kWh, as of 1999, which had not changed since 1997. However, actual available generating capacity is deemed to be about 60% of the aforementioned capacity. Although at present there is no restrictive condition regarding the supply and demand of power, it is highly probable that serious power shortages will occur in the near future as the aged generating facilities are expected to fail eventually, albeit gradually.

(3) Ranking of the power station The Pridneprovskaya power station is smaller than Dneproenergo's other two power stations, its gross demonstrated capacity being 1,800 MW. Located near Dnepropetrovsk, one of the major heavy-industry cities in Ukraine, the Pridneprovskaya power station is ranked high. It supplies power to nearby industrial areas and also provides district heat energy. Shown the equipment specifications for Pridneprovskaya TPP is below. Units Nos. 1 - 6 Units Nos. 7-10 Units Nos. 11-14 Output 100MW 150MW 300MW Main steam pressure — 13.6MPa 24.9MPa Main steam — 560%: temperature 565%: Reheating steam — 565%: 565%: temperature Commencement year of commercial 1954 —1957 1959 —1962 1963 — 1966 operation Fuel Coal/gas/heavy oil Coal/gas/heavy oil Abolished in 1985 Drum boiler Supercritical Remarks Turbines/generators Cogeneration pressure constant have already been plant pressure once-

- Summary 2 - removed through boiler The boilers are in the process of being removed. (5 out of 12 units have been removed.)

3. Details of the Project

3.1 The Unit to Be Decommissioned

The unit to be decommissioned is Unit No.12 (300MW), generation of which has long been suspended. Below is general information on Unit No.12. • Output 300MW • Fuel Coal, Natural gas, Heavy oil • Commencement of operation 1964 • Operating time 221,579 hours

Because the operation time has exceeded the administration value, the unit cannot be operated unless the remaining life assessment is performed. However, the diagnosis itself cannot be implemented due to lack of finance.

3.2 Outline of the New Unit

The new unit features natural gas-fired combined-cycle generating facilities incorporating the latest technology. It consists of three blocks of 100-MW combined- cycle generating facilities. This unit configuration offers the following advantages. 0 In Ukraine where the basic electric energy source is from nuclear plants, thermal power plants should be capable of performing demand and supply adjustments. Whereas combined-cycle generating facilities can be started and stopped with ease in a short time, the drawback is a substantial decrease in thermal efficiency when partially loaded. The multi-shaft configuration is intended to cover this shortcoming. By changing the number of operating blocks according to changes in demand, it becomes possible to maintain the output of operating blocks and ensure constant high-efficiency operation.

- Summary 3 - (2) This unit configuration is suitable for step-by-step development accommodating changes in power demand and supply, and keeping pace with the progress of fund procurement.

Shown below are the specifications for the unit after scrap-and-build renovation. Heat Recovery Type Single Shaft Combined Model Cycle Gross 100.8MWX3 (Total 302.4MW) Output Net 97.0MWX 3 (Total 292.0MW) Thermal Gross 52.5% (LHV) efficiency Net 50.5% (LHV) Auxiliary power 3.8% Fuel Natural gas All the data given above are the values at the design temperature of 8.4°C.

3.3 New Plant Facilities

(1) Mechanical facilities Mechanical facilities include gas turbines, steam turbines, HRSG, and auxiliary equipment. Gas turbines adopted in this project are of a state-of-the-art 1,400°C class. The total thermal efficiency of the combined-cycle generating facilities is planned to be 52.5%. The whole plant makes up redundant configuration comprising three blocks. On the other hand, auxiliary equipment system configuration is not redundant in each block. However, spare units are provided for the equipment whose failure may cause serious damage to the plant (e.g. auxiliary cooling water equipment). Existing facilities such as circulating water pipes for 100MW units, which are being decommissioned and removed, will be diverted to the new plant as much as possible.

(2) Electrical facilities Air-cooled synchronous generators (119MVA) will be installed. Output voltages from these generators are elevated by the main transformer installed in each block and then connected to the existing 154kV bus via gas circuit breakers. Power to auxiliary equipment is supplied from a part of the outputs of the generators after stepping down through the house transformer installed in each block. A starting transformer shared by three blocks will be installed to supply power for starting the blocks.

- Summary 4 - 3.4 Modification of Existing Facilities

(1) Removal of the existing building for abolished 100MW units The existing building for abolished 100MW units will be removed to provide a space for installing the new plant. The 100MW units (Nos.l - 6) were abolished in 1985. Turbines and generators have already been removed. Existing facilities will be removed only within the area required for the construction of the new plant. About two-thirds (corresponding to 4 units) in the longitudinal direction of the building and two smokestacks will be removed.

(2) Relocation of utility-related facilities Utility facilities and pipes being used now will be relocated along with the aforementioned removal.

3.5 Civil Engineering Facilities

Three turbine/HRSG buildings will be built to hold three blocks of the new 100MW generating facilities. Each block will be installed in a turbine/HRSG building. A building holding the central control room will be built between the office building and the new 100-MW buildings. In addition, a utility pump building will be built to hold the aforementioned relocated utility facilities.

3.6 Operation of the New Plant

(1) Operation characteristics (A) Required time for starting (for one block) Time required from the beginning of a starting sequence to the completion depends on the unit status. Hot start 90 minutes Warm start 150 minutes Cold start 210 minutes

(B) Sequential starting of three blocks The system and auxiliary machinery in each block are independent, and each of these can be operated individually. However, at the time of their startup, auxiliary power is supplied from the startup transformer, so, due to restrictions of transformer capacity, multiple blocks cannot be started up simultaneously.

- Summary 5 - After the first gas turbine has been started up, the startup of the next gas turbine can be done after an interval of about 20 minutes, which is after the synchronization and the switchover of auxiliary power of the first block has been completed. Therefore, the time needed to start up all blocks will be the previously-mentioned time needed for startup of 1 block, plus approximately an additional 40 minutes.

(C) Minimum operating load- 60% (60 MW/block)

(D) Load change ratio- 5%/min (5 MW/min • block)

3.7 Environmental Protection Measures

(l) Air pollution O Smoke and dust / sulfur oxides The new unit generates no smoke or dust, as it uses clean natural gas as fuel. Moreover, the amount of sulfur contained in the fuel is very low, meaning that sulfur oxide discharge can be considered insignificant, requiring no specific measures.

O Nitrogen oxides Use of low-NOx combustors is planned for new gas turbines. The concentration of emitted NOx is controlled to a low value of 38.5 ppm (wet gas). Based on this value, we assessed the concentration on the ground in the surrounding area with three blocks in operation, assuming that the smokestack is 45 m high. The result was below the maximum permissible concentration established by the Ukrainian ministry of welfare at 0.085 mg/m3 (0.043 ppm). In order to meet the Ukrainian standard, "a smokestack height shall be made 15m and over higher than the top of a neighboring building", the smokestack height is finally changed to 75m (the height of the existing 300MW boiler, 60m, plus 15m). However, there is no problem because the landing concentration becomes lower.

O Carbon monoxide The new unit bums natural gas in combustors with extremely high combustion efficiency. It generates little CO, and therefore no specific measures against

- Summary 6 - (2) Water pollution <0> Thermal discharge water In a combined cycle, the output ratio of steam turbines that require cooling water is one-third of the overall output. Accordingly, the amount of cooling water will be less than that required under current conditions. The temperature difference occurring at the condenser of the existing unit is 8°C under normal conditions (the limit is 12°C). In contrast, it is planned to be 7°C in the new unit. Therefore, neither the amount nor the temperature of hot wastewater will increase from the current conditions.

<0 Wastewater The new unit, which incorporates combined-cycle generating facilities and uses natural gas as fuel, generates little wastewater under normal conditions. The amount of wastewater discharge is considered to be less than that discharged from the existing generating facilities that mainly burn coal. Incidentally, wastewater is planned to be directed to the existing wastewater treatment equipment.

(3) Noise and Vibration In the new unit, main units of gas turbines will be contained in an enclosure to suppress noise to 90 dB (A) at locations 1 m away from the unit. Furthermore, the whole generating facilities, including HRSG, are housed in the building. Environmental impacts at the boundaries of the premises are considered to be minimum.

- Summary 7 - 3.8 Cost of the Project

The required cost for the project is: ¥ 30,107 million

Of this amount, ¥ 27,132 million is the construction cost required for new generating facilities and civil engineering work. Since the installed generating capacity is 302.4 MW, the construction cost will be ¥90,000/kW. The scope of the quoted cost covers relocation of utility facilities carried out as part of the construction of the new plant, removal of the existing buildings, and construction of new buildings.

4. Effects of the Project

4.1 Base Lines of Fuel Consumption and CO2 Emissions

We setting the base line for calculating energy conservation effect and the reduction in greenhouse gases, it is not realistic to assess only Unit No.12, which we plan to abolish. Four 150MW units (Nos. 7 to 10) are used preferentially as district heating power plants, and after completion of the project, they will continue to play the same role as the present. Accordingly, it is not necessary to assess these 150MW units. As a result, operation performance of the four 300MW units (Nos. 11 to 14) of generating facilities recorded in 1999 is used to set the base line.

4.2 Project Case

It is assumed that the three blocks of the new 100MW generating facilities plus the existing three 300MW units of generating facilities would generate the same level of power as the base line. The utilization factor planned for the new plant is 70% assuming that priority is given to continuous operation during the heavy-duty seasons of winter and summer and that DSS operation is carried out in spring and fall to accommodate peaks. However, generating output shortages on the base line occur only by the new plant. To supply the shortages, the three coal-fired units (Nos.l 1, 13, and 14) remaining after the project are operated. The calculation period is assumed to be 40 years, which is generally applicable to new generating facilities.

- Summary 8 - 4.3 Calculations of Energy-Saving Effects and Greenhouse Gas Reduction Effects

Effects of the project are summarized below from calculation results of base lines and the project case.

(1) Energy-saving effects Project Unit Base line Reduction case Annual energy Energy (TJ) 26,142 18,284 7,858 consumption On oil basis (ktoe) 624 437 187 The above amounts to 7,480 ktoe of reduction during the calculation period of 40 years.

(2) Effects of CO2 emission reduction Unit Base line Project case Reduction Annual CO2 kt-C02 2,121 1,155 966 emission The above amounts to 38,640 kt-CO] of reduction during the calculation period of 40 years.

5. Evaluation as a Joint Implementation Project

As shown in the results of assessment in the previous section, it becomes possible to reduce CO2 emission by implementing this project. This project for Ukraine is an attractive scheme enabling it to solve two major problems that exist for the nation, that is, modernization of generating facilities in the country and reduction of fuel consumption through highly efficient generation. JST Dneproenergo and Ministry of Fuel and Energy have the same understanding as mentioned above, and they are eager in implementing this project.

- Summary 9 - 6. Profitability

6.1 Description of Evaluation

Case 1: [Revenues = Sales of electricity] Case 1 is the most realistic. In the evaluation of profitability, all revenues from the sales of electricity generated by the new plant are regarded as the revenues brought about by the project. As it is intended to evaluate the profitability of the new plant alone, tradable polluting rights on greenhouse gas (CO2) are not considered.

Case 2: [Revenues = Revenues from trading 1/2 of reduced CO2 emission + Revenues from sales of electricity] Case 2 assumes joint implementation and that Ukraine draws revenues from trading polluting rights for reduced CO2 emission. Profitability is evaluated assuming that revenues of the project comprise this revenue plus revenue from sales of electricity generated by the new plant.

- Summary 10 - 6.2 Figures of Profitability Evaluation

The following figures were used for profitability evaluation Exchange Rate 1 US$ = 4.0 UAH = 115 yen Project cost: ¥30,107 million Capacity factor: 70% Price of electricity: 0.11 UAH/kWh = 2.8 US 0 /kWh Fuel costs: Natural gas: 51.2 US$/1000 m3 Coal: 121.19 UAH/t Oil: 47.0 US$/t Plant operation cost: 3.5 USS/MWh Polluting fine Soot and Ash: 4.5 UAH/t SOx: 119.25 UAH/t NOx: 119.25 UAH/t CO: 4.5 UAH/t CO2 emission trading price: 5.0 US$/t-C02 Depreciation: Annual depreciation is calculated by the fixed- percentage method in which the remaining value at the beginning of a period is multiplied by a depreciation factor of 15%.

Tax: Only corporation tax is levied; value-added tax is not taken into account. Corporation tax rate is 30% of ordinary profit (after interest payment, pretax profit). Carryover of losses is up to 5 years.

Financing: 75% of total project cost: environmental yen loan (0.75%/year of interest rate, 40 years redemption period including 10 years' grace)

25% of total project cost: 10.00%/year of interest rate, 10 years of payment term Surplus funds from revenues from sales of electricity generated by completed block(s) are appropriated for the payment of remaining block(s).

Project life: 40 years Discount rate (capital cost): 10% Price increase rate: 0%

- Summary 11 - 6.3 Results of Profitability Evaluation

(1) Case 1: Revenues = Sales of electricity Net present value (NPV) = ¥-6,029 million (discount rate: 10%) Internal rate of return (IRR) = 7.32 % Payback period = 16 years Cumulative cash flow = ¥46,681 million

The net present value is negative although this case assumes a low-interest environmental yen loan. The internal rate of return underperforms substantially below the discount rate of 10.0%. Therefore, use of private funds for the implementation of the project is not realistic. However, the payback period of 16 years and internal rate of return of 7.35% shown in the results indicate no problem as a project on a yen loan.

(2) Case 2: Revenues = Revenues from trading 1/2 of reduced CO2 emission + Revenues from electricity sales Net present value (NPV) = ¥-3,973 million (discount rate: 10%) Internal rate of return (IRR) = 8.24% Payout time = 15 years Cumulative cash flow = ¥55,089 million

As with case 1, it is not realistic to implement the project by raising private funds; however, case 2 can be implemented as a project on a yen loan.

As shown above, case 1 or 2 can be implemented as a project. Present Ukraine is in a different situation such as depression of the Ukraine Hryvnia, imbalance of the cheap electricity price and high fuel gas price, and etc. Consequently, profitability will absolutely become low. Because the scheme of joint implementation is not yet clear and the trend of CO2 emission trading price is unknown now, we cannot judge case 2 can be exist. Therefore, we think that case 1 is most realistic because CO2 emission trading is not incorporated into it.

A sensitivity analysis of exchange rates shows some interesting results. In 1997,

- Summary 12 - the exchange rate was 2.0 UAH/US$ before depreciation of the hryvna. At this level, the internal rate of return is 21.47%, payback period being 6 years. Accordingly, this project would be an attractive project for private investment. At the current exchange rate of 5.5 UAH/US$, investment on the project would be unrecoverable. If, however, the exchange rate turns in favor of the hryvna to 5.0 UAH/US$, it becomes possible to recover the investment. As shown by the evaluation above, which assumed the exchange rate to be 4.0 UAH/US$ with internal rate of return and payback period being 7.35% and 16 years, respectively, this project will be a promising yen loan project if the value of the hryvnia increases slightly against the US dollar. On the other hand, if a unit price of selling electric energy is raised 60% from the present condition in present exchange rate, IRR will become above 10%, this project will be an attractive project for private investment.

- Summary 13 - 7. Project Schedule

Mar. 2001: Feasibility Study completed • Ukrainian side studies F/S content, and carries out environmental impact assessment. • Obtaining of approval from Ukrainian Government, related to project enforcement (Dneproenergo Co. -» Ministry of Fuel and Energy —» Ministry of Economy)

0 Month Request by Ukrainian Government for yen (Starting point): loan from Japanese Government • Study and confirmation by Japanese side regarding granting of yen loan • Agreement between both countries ’ governments concerning enforcement of the project, which will be jointly enforced

14 Months: Exchange of official documents, and conclusion of Loan Agreement

• Selection of consultants)

20 Months: Consultant contracts) • Preparation of detailed design, and of documents for bidding

28 Months: Official announcement of bidding

47 Months: Conclusion of contractor agreements)

48 Months: Start of project construction work

83 Months: Start of commercial operation of No. 1 Block

95 Months: Start of commercial operation of No. 2 Block

107 Months: Start of commercial operation of No. 3 Block, and completion of project construction work

- Summary 14 - 8. Conclusion

This project is intended to improve generating efficiency through maximum use of the existing facilities and premises of the power station, thereby reducing CO2 emissions. The result of the feasibility study shows that CO2 reduction achieved by the project would be 966 kt/year, the total amount of reduction reaching approximately 39 million tons during the 40 years of calculation period. Moreover, it will be possible to reduce other air pollutants, coal ash, and the like by several tens of percent.

At present, it is the most realistic that evaluation of profitability, first of all, estimates the profitability of a project simple substance, without taking into consideration an economic repercussion effect and C02 emission rights trading. Consequently, the capital introduction by the finance of the low interest which cannot necessarily say that it is high but secures enterprise nature is required for the rate of return of this project. Therefore, introduction of private sector capital is not expectable. However, when a yen loan is assumed as a finance of low interest, since it is certain to be realized as an enterprise satisfactory in payment of a debt, this project contributed to discharge curtailment of greenhouse gas and an air pollution substance is expected application of an environmental special yen loan. The result of our feasibility study on the facility plan shows that infrastructure such as installation space and supply of fuel are in proper condition. Moreover, there are no technical difficulties involved in the feasibility of facility building. However, as the exhaust heat recovery combined-cycle system incorporates the latest technology and no other such system exists in Ukraine, it appears necessary to include a scheme for giving O & M technical guidance to Ukrainian engineers when the project is implemented. A possible way to realize this scheme is to provide on-the-job training in a similar plant in Japan or to send engineers from Japan to give guidance on-site. As we have experience in operating many combined-cycle systems, we are able to provide technical assistance in a scheme like this.

Both Dneproenergo, our direct partner in this project, and those on the site concerned with this project are willing to realize this project, as their power facilities have become old with decreasing efficiency and capacity factor and they are worried about shortage of supply capability in the near future. Also, through the feasibility study, we feel that positive assistance can be gained from the Ministry of Fuel and Energy (MOFE), which is the supervisory agency for Dneproenergo.

- Summary 15 - We intend to promote this project continuously, working with Ukrainian government agencies concerned and aiming to develop concrete actions, such as making a request for a yen loan, to raise funds for the project. With profitability taken into consideration, a special yen loan at a low rate of interest is necessary for this project. This necessitates activities aimed at obtaining the understanding of Japanese government agencies concerned.

In promoting this project in the future, several things will need to be kept in mind. The project should not transfer Japanese techniques and experience in a unilateral manner. Requests and actual conditions on the Ukrainian side and changes in future circumstances shall be thoroughly taken into account. Furthermore, achievement of maximum and continued effects from the project should be borne in mind.

- Summary 16 - Chapter ! Basic Subjects of Project [Summary] This chapter introduces the state of energy affairs, general circumstances such as geography, climate, politics and the economy, and explains the electric power situation in Ukraine. In addition, the need for introduction of energy-saving technology and the significance of this project will be elucidated. 1.1.2 Population, ethnic groups, religions The population of Ukraine is 49.81 million (as of July 1999): Ukrainians, 73% (the same Slavic ethnic group as Russians); Russians, 22%; Jews, 0.9%; Belorussians, 0.9%; Moldavians, 0.6%. Small numbers of people from adjacent East European countries, such as Bulgarians (0.5%), Poles (0.4%), Hungarians(0.3%), Romanians (0.3%) and Greeks (0.2%) also live there. Ukrainians are in the majority in almost all oblasts, although, Russians are the majority (64%) of the population in “the Self-Governing Republic of Crimea.” Percentages of Russians are also high in eastern and southern oblasts, while in contrast, the percentages of Ukrainians are higher in western oblasts. About 2,620,000 people live in Kiev, the capital of Ukraine. The populations of other major cities are: Kharkiv, 1,520,000; Dnepropetrovsk, 1,120,000; Donetsk, 1,070,000; Odessa, 1,030,000 and LViv, 790,000. Male population is smaller than female population; the male/female ratio is 47:53. Ukrainian, which, like Russian, is an Eastern Slavic language, is stipulated by the Ukrainian constitution as the official language, but Russian, which was the official language in the USSR era, is still in wide general use. Ukraine became a Christian nation (Ukrainian Orthodox Church) after the Kiev dukedom adopted the Eastern Orthodox Church form of Christianity (Greek Orthodox) in the middle of the 10th Century. However, because Ukraine was under the control of Poland in medieval times, Roman Catholicism also spread throughout the country. The Uniate sect (also called “Eastern Uniate, ” “Ukrainian Catholic, ” or “Greek Catholic ”) was formed in the 16th Century, by a union of the Eastern and Western Churches. In the Imperial Russian era, this sect was not authorized and was suppressed, but in 1889 there was a movement demanding that the ban be lifted, and the Uniate was legalized in December 1889.

- 1-3 - Outline of history The country ’s name, Ukraine, originates from a word combining “U” which means “the surrounding area” and “Krai” which means “frontier ” and “national boundary. ” Russians believe that the Kiev Dukedom, formed around the 9th Century, is the origin of Russian history, and feel strongly that Ukraine is truly the core of Russia. 9th - 12th In the latter half of the 8th Century, a group of merchants Century: called “Rus” set up a base in Kiev, in the mid-stream area of the Dnepr river, and the “Kiev Russie” (Kiev Dukedom) was formed. After 988, when the Greek Orthodox Church was introduced, Kiev became a flourishing political, economic and cultural center. Mid-13th Kiev was destroyed by the Mongol invasion (in 1240), and the Century: center of Russie was moved to Moscow. Most of Ukraine became controlled by the “Great Dukedom of 14th Century: Lithuania. ” 1569: Ukraine became Polish territory by the union of the “Lithuanian Great Dukedom” with Poland. 17th Century: Kiev was rebuilt by Ukrainian Cossacks. 1648: All-out war between Ukraine Cossacks and Poland 1654: Ukraine asked the czar of Moscovy to protect Ukraine from Poland. Ukraine eventually became part of the Russian Empire. Second half of As a result of the Russia-Poland War, the area on the “right ” 18th Century: bank of the Dneiper river became Polish territory, and the area along its “left” bank, and Kiev, became Russian territory. Later, Ukraine became completely absorbed into Russia under Ekaterina II, and Ukrainian Cossack society became extinct. 1919: Ukraine became a Soviet republic. Ukraine became one of the founding members of the United December 1922: Soviet Socialist Republic. World War II: At one time, while the greater part of the nation was occupied by German forces, there was a movement for independence, but USSR forces eventually “liberated ” Ukraine again, and Ukraine did not achieve independence. Following World War II, the USSR seized the “Gartia” region (including LViv) from Poland, the North Bukovia region (Chernovtsy, etc.), the South Bessarabia region (Western Odessa) from Romania, and the Ruthenia region (Uzhgorod, Mukachevo, etc.) from Czechoslovakia, and incorporated these regions into Ukrainian territory. Although a constituent republic of the USSR, Ukraine 1945: participated in the United Nations as one of its original founding member nations. July 1990: Sovereignty of the republic was declared. Ukraine declared independence, and “Ukraine ” was August, 1991: determined as the name of the country.

- 1-4 - 1.1.3 Administrative sections Ukraine has 27 administrative sections (Crimean autonomous republic, 24 oblasts, and 2 municipalities, Kiev and Svastopol ’, with oblast status). Following shows major oblast and its capital.

Oblast Oblast capital Population of capital Kyyivs'ka Kiev 2,620,000 Kharkivs'ka Kharkiv 1,520,000 Dnipropetrovs'ka Dnipropetrovs'k 1,120,000 Donets'ka Donets'k 1,070,000 Odes'ka Odesa 1,030,000 Zaporiz'ka Zaporizhzhya 860,000 L'vivs'ka L'viv 790,000

Appointment and dismissal of the Governor of the administrative agency of each administration section is stipulated to be done by the President, based on nomination by the Premier. The Chairman of each local assembly is directly elected by local residents. The new Ukrainian Constitution states that the content of autonomy concerning the municipalities with oblast status, Kiev and Svastopol ’, will be separately stipulated by law.

1.1.4 Politics [Circumstances of home administration] Ukraine has adopted the republican system, and the authority of the president is generally strong. In December 1991, Mr. Leonid Kravchuk, former chairman of the Supreme Council of the republic, whose aim was to achieve independence of Ukraine from the USSR, took office as the first President of Ukraine. During President Kravchuk ’s administration, an economic reform program was prepared, but this was not actually followed through, and the program was changed repeatedly. In March 1994, the election of the Supreme Council was carried out in the first national administration election after independence, and pro-Russian parties such as the Communist party, Farmers’ party, and Socialist party gained a total of over 1/4 share among council members. A presidential election was held in June 1994. The two candidates were President Kravchuk who was in

- 1-5 - favor of cordial relations with Europe and America, who strongly favored “Ukraine for the Ukrainians, ” and whose constituency was in the western regions, and Mr. Leonid Kuchma, the former Premier, who called for closer economic integration with Russia, and was supported by the military and industrial complex in the eastern regions where there were deep economic ties with Russia. In the final vote, Kuchma obtained 52% of total votes and became the second President. Since Kuchma was inaugurated as President, there have been continuous confrontations between the President, who wants increased presidential authority in order to carry out economic reformation efficiently, and the Parliament ’s mainly conservative forces. President Kuchma issued a presidential order for a national referendum to authorize the President and Parliament to deliberate the draft plan for the new Constitution, and tension between the President and the Parliament increased. But demand for a compromise between the President and the Parliament grew, and President and the Chairman of the supreme council signed a “Constitution agreement ” that includes stipulations such as “the new constitution must be enacted within 1 year” and “the President can appoint or dismiss Cabinet Ministers without consent of Parliament. ” Heated arguments developed in the deliberation of the new Ukrainian Constitution, concerning partition of the authorities of the President, the Parliament, and the government, selection of a bicameral or monocameral system for Parliament, and the position of Crimea, etc. A considerable amount of time was spent on determining procedures and deciding such questions as whether the new Constitution should be adopted by Parliament or by a national vote. The new Constitution was finally adopted by the Supreme Council on June 28, 1996, and enforced as of that date. Separation of the three powers, administrative, legislative and judiciary, is clearly stated in the newly-adopted Constitution. The next election for the Supreme Council was scheduled for March 1998, and the next presidential election was scheduled for October 1999. After President Kuchma took office, he determined economic reform to be his first task, and started to develop a full-scale market economy with IMF guidance, implementing radical price liberation and curtailing subsidies, etc. However, economic reform was delayed due to strong opposition by Communist and Socialist forces in Parliament, and many tasks still remain to be carried out.

- 1 -6 - Recently, slight progress has been evident in some aspects, such as the passage of a law concerning the transfer of state-owned enterprises to private enterprises, and passage of a part of the bill for reformation of the taxation system, but the gap between the President and the Communist and Socialist forces in Parliament is still great. The Communist party won 123 seats, 27% of total seats in the Parliament (450) in the parliamentary election in March in the 1998 fiscal year. The total number of seats won by the 3 left-wing parties (Communist party, Socialist farmers’party, progressive Socialists ’ party) was 171, 38% of the total. As a result, resistance by the Parliament against the President, who was attempting to achieve economic reformation, was intensified. In the presidential election held in October 1999, the incumbent, President Kuchma, was in the lead with 36% of the votes but did not have a majority; however, after the final runoff vote between Kuchma and Mr. Simonenko, the Communist party leader, who was in second place with 22% of the votes, President Kuchma was reelected. President Kuchma submitted a presidential order concerning reformation of government organization. The purpose of this order was to drastically re-arrange and unite the original 89 ministries and agencies, reducing them to only 35; in other words, this reformation cut central government offices by about 40%. Table 1.1-1 shows current members of the Ukrainian Cabinet as of January 2001.

- 1-7 - Table 1.1-1 Ukrainian Cabinet Members

President Mr. Leonid Kuchma

Prime Minister Mr. Viktor Yushchenko

First Vice Prime Minister Mr.Yury Yekhanurov

Vice Prime Minister Mr; Oleg Dubina Mr. Mykhaylo Gladly Mr Mykola Zhulynsky

Ministry of Economy Ministry of Finance (Mr .Vasil Rogovyi) (Mr. Igor Mityukov)

Ministry of Fuel and Energy Ministry of Agrarian I (Mr. Sergiy Yermilov) (Mr. Ivan Kyrylenko)

Ministry of Foreign Affairs Ministry of Internal Affairs (Mr. Anatoly Zlenko) (Mr. Yuny Kravchenko)

Ministry of Defense Ministry of Justice (Mr, Oleksander Kuzmuk) (Mr. Syuzanna Stanik)

Ministry of Emergency Situations Ministry of Transport (Mr. Vasyl Durdynets) (Mr. Leonid Kostyuchenko)

Ministry of Labor and Social Ministry of Education and Science (Mr. Ivan Sakhan) (Mr. Vasyl Kremen)

Ministry of Health Care Ministry of Culture and Art (Mr, Vitaly Moskalenko) (Mr. Bohdan Stupka)

Ministry of Environment and Natural Resources (Mr. Ivan Zayets)

- 1-8 - [President] The President of Ukraine represents the nation as the head of state, as stipulated in the Constitution, and is obliged to protect sovereignty and the Constitution. The president is elected by national election, for a 5-year term of office. The president can be re-elected and can serve a maximum of 2 terms. The President appoints the Premier and other cabinet members, although approval by the Supreme Council is needed for appointment of the premier. The President also appoints other cabinet members, based on the advice of the Premier. However, approval by Parliament is not needed for dismissal of the Cabinet members including the Premier, which can be done by presidential decision alone. The President ’s authority extends mainly to the appointment and dismissal of cabinet members; from the constitutional viewpoint, the Cabinet council holds the actual authority for administrative execution.

[Cabinet council (Cabinet)] The Cabinet council is considered the highest execution organ in Ukraine. The President appoints the Premier, who heads the Cabinet council, after obtaining the approval of parliament. The Cabinet council is constituted of the Premier, 1 First Deputy Premier, 3 Deputy Premiers, and the head minister of each ministry. When the President is replaced by a new President, the Cabinet council resigns en masse.

[Ukrainian supreme council] The legislative organ is the Verkhovna Rada (Ukrainian Supreme Council) set up as a monocameral system, with 450 seats. The term of service for each member is 4 years. According to the Ukrainian Constitution, Ukrainians aged 18 or older have the right to vote, and Ukrainians aged 25 or older are eligible for election. Council members are elected by equal, direct, ordinary, and secret election. The system adopted in the present Election Law jointly uses a single-member constituency system and a proportional representation system, and with members occupying half of the 450 seats elected from single-member electoral districts, and the other half elected from proportional representation districts (nationwide constituency).

- 1-9 - [Crimean (Krymskii) problem] The Crimean (Krymskii) peninsula was “presented ” by Russia to Ukraine in 1954, and even now, Russians comprise over 60% of the population of the Crimean peninsula. After the collapse of the USSR, the Crimea adopted a constitution asserting its independence from Ukraine, and elected its own President, becoming more oriented toward autonomy and independence, but the Ukrainian government revoked the Crimean constitution and abolished its presidency in March 1995. Crimea could not obtain support from Russia which was then occupied with the Chechen (Chechnya) problem, and it was also unable to gain the support of international society for its territorial integrity, so its separation and independence movement was greatly deflated. The Crimean problem also had aspects of a problem involving Russia, and in May 1993, the Ukrainian government protested against Russian Lower House passage of a bill making reversion of the Crimean peninsula to Ukraine illegal, and Ukraine presented this case to the United Nations Security Council. However, the Russian government now considers the Crimean problem to be a Ukrainian domestic problem, and both nations are carrying out moderate measures. The autonomy of the autonomous republic of Crimea is expressly stipulated in the new Ukrainian Constitution. At present, a Crimean Constitution which stipulates that Crimea is an autonomous republic within Ukraine is being deliberated, although approval from Ukraine ’s Verkhovna Rada is needed for the enactment of the Crimean Constitution.

[Diplomacy] Former President Krachuk, who had maintained some distance from Russia, was replaced as president of Ukraine by President Kuchma who is pro-Russian, but contrary to initial expectations, Ukraine did not move rapidly toward Russia, making efforts instead to strengthen its relationships with various nations in Europe, with America, and with international organs such as IMF, World Bank, FBRD, etc.; the Ukrainian government adopted a pro-Europe & pro-America line. Improvement of the relationship between Ukraine and Russia has, however, been progressing since the bilateral friendship treaty was concluded in May 1997; for example, the principle of abolishing discriminatory handling tariffs on both countries ’ products was hammered out in unofficial talks between the presidents of the two nations.

- 1-10 - [Relationships between Ukraine and Russia and other CIS nations] In May 1997 Ukraine and Russia signed the “Treaty concerning friendship, cooperation and partnership. ” Through the conclusion of this treaty, a legal foundation for the relationship between the two nations, which had not existed since the collapse of the USSR, was created, and the principle of strengthening the relationship between the two nations in political and economic aspects, by respecting existing national boundaries, was clarified. Ratification of the treaty by the parliaments of both nations is still expected to take quite a long time, but, through this treaty, the two countries have finally agreed concerning the questions of the reversion of the Crimean peninsula and the division of the Black Sea fleet, which had been pending between Russia and Ukraine for a long time. Previously, the two nations had been struggling to find ways to improve their relationship. In particular, they agreed in a top-level conference in January 1996 to strengthen their relationship by concluding a bilateral treaty without waiting for final approval of the question of the Black Sea fleet. Later, however, the Russian side which considered that final settlement of the problems of the right to possession of the Crimean peninsula and division of the Black Sea fleet, both long-pending matters, had top priority, stated that the bilateral friendship treaty could not be ratified until these problems were officially settled, and Russia retreated by postponing President Yeltsin ’s visit to Ukraine. Eventually, in view of NATO’s eastward expansion, Russia was in a pressing situation and felt it must improve its relationship with Ukraine, so the Russian side made drastic concessions and signed the treaty in May 1997. Through this treaty, consent was reached concerning the question of possession of the Crimean peninsula, one of the focal points of the treaty, confirming the Crimean peninsula as Ukrainian territory and, concerning the question of division of the Black Sea fleet, agreeing that Russia would “lease to use” the Sevastopol ’ base. The Ukrainian side succeeded in obtaining advantageous conditions from Russia in this agreement. Ukraine will receive a payment of about US$100 million every year for 20 years from Russia for leasing the Sevastopol ’ base, and will receive compensation of about US$520 million in exchange for Russia’s ownership of 80% of the fleet. Concerning the problems of division of credit and obligations remaining from

-1-11- the time of the USSR, in December 1994 Ukraine accepted the so-called “Zero option ” by which Russia took over Ukraine ’s entire amount of foreign obligations and assets under the condition of deferment of Ukraine ’s obligation to Russia to make payments for energy. The IMF actually acted as an intermediary, and in March 1995 the deferment of Ukraine ’s energy obligation to Russia was carried out with the condition that the Ukrainian obligation to pay US$2.5 billion (US$1.1 billion to the Russian government, and US$ 1.4 billion to “Gas Prom”) will be deferred for 12 years. However, after the deferral of these obligations, Ukraine again fell behind in the payment of its obligations concerning petroleum and gas imported from Russia, and new unpaid obligations began to accumulate. There was also the problem of unpaid obligations for gas imported from Turkmenistan, so energy obligations become another Ukrainian problem. In addition, Russia was actually feeling uncomfortable about the sudden approach of the USA to Ukraine around that time, and there was a high possibility that this could develop into a political problem. Ukraine has been concerned about CIS becoming a supranational organization, and so is carrying out bilateral military cooperation and economic cooperation individually with each of the CIS nations including Russia.

[Relationships with nations in Europe and America] By signing the START I Lisbon Protocol in May 1992, Ukraine agreed to become a non-nuclear power by transferring strategic nuclear weapons out of its own country. Later, in January 1994, Ukraine signed a triangular joint declaration with the USA and Russia. Through this, Ukraine maintained its financial and technological aid from the USA, and received free granting of nuclear fuel for nuclear power generation for 5 years. Also, in December 1994, Ukraine joined the Nuclear Nonproliferation Treaty (NRT). Concerning the abolition of nuclear warheads based on START I, nuclear warheads in the Ukraine were transferred to Russia and disposed of under the above-mentioned triangular joint declaration. Based on this, President Kuchma declared the complete removal of nuclear warheads from Ukraine in June 1996.

- 1-12 - In its relationship with the North Atlantic Treaty Organization (NATO), Ukraine agreed to the “Partnership For Peace” (PFP) document framework in February 1994. Following this, in July 1997, Ukraine signed the “NATO/Ukraine Charter ” which stipulates mutually cooperative relationships including the establishment of a joint committee and carrying out of mutual visits, achieving a strengthening of its relationship regarding military cooperation. Leading opinions at present, however, say that there will be no demand for Ukraine to join NATO, because of apprehension about the worsening of its relationship with Russia, and because strong opposition by Russian residents can be expected. Ukraine signed a “Friendship treaty” with the European Union in July 1994, and in November 1995, it joined the Council of Europe (CE). Ukraine is also continuing its efforts to join WTO in order to expand its foreign trade with EU nations. There are about 1 million Ukrainian immigrants in the USA, which has strengthened its diplomatic relations with Ukraine. Actually, among the USA’s foreign aid, aid for Ukraine is the third largest amount, exceeded only by aid for Israel and Egypt. (Of the total US$3 billion amount of foreign investment in Ukraine since it became independent, the USA has provided the largest portion, US$570 million.) The most important problem for Ukraine, which has foreign exchange reserves of only about US$1.25 billion, is its external debt of about US$3.1 billion, which needs to be repaid during the fiscal year of 2000. In particular, repayments for approximately US$ 1 billion are concentrated in the first quarter term of the fiscal year of 2000; this includes about US$780 million related to Eurobonds, due to be repaid in March 2000. But IMF must avoid economic breakdown of Ukraine, and is expected to use every possible measure to prevent any defaults. The following are the Ukraine ’s major external debts. Table 1.1-2 External Debts of Ukraine (2000 - 2001) Amount Repayment term Eurobond Ecu. 500 mil March, 2000 Bond US$ 74 mil October, 2000 DM Bond DM 1,500 mil February, 2001 Zero Coupon Bond US$ 2,000 mil September, 2000 Min. Fin. Bond us$ 300 mil 2000-2001

- 1-13 - [Others] Ukraine has already concluded “friendship and good neighbor ” treaties with Hungary, Poland and Slovakia, and has good relationships with them. Ukraine had been in dispute with Romania about a territorial problem, but made a “friendship and good neighbor ” treaty with Romania, and settled their national border. Ukraine hopes to join the WTO while also strengthening its relationships with nations in Central and Eastern Europe.

1.1.5 Economy (1) Domestic economic trends When the USSR broke up at the end of 1991, Ukraine was considered to have the highest feasibility for future development of all the republic nations that had constituted the former USSR. The rehabilitation of Ukraine ’s economy began with organization into the form of the national economy of an independent nation, first by the improvement of its central bank and banking system, then the issuing and management of currency, the establishment of financial affairs, and establishment of systems for taxes, tariffs and foreign trade. But the Ukrainian economy has lagged behind expectations, for the following reasons. • Except for coal, Ukraine is dependent on imports of energy resources from Russia and other CIS nations, and energy export prices increased when Ukraine became independent. • The production system in Ukraine was deeply integrated with the system for division of work formerly used in the USSR; therefore, there are shortages of know-how in every area of government and private industry. Also, agriculture has become sluggish due to sharp rises of prices for agricultural equipment and machines. • Drastic delay of conversion from military-controlled industry to private industry

- 1-14 - Table 1.1-3 Ukrainian Domestic Economic Indices Year 1992 1993 1994 1995 1996 1997 1998 Real economic growth rate -16.8 -14.2 -23.0 -12.2 -10.0 -3.0 -1.7 (over the year, %) Mining and manufacturing -6.4 -8.0 -27.3 -12.0 -5.1 -1.8 -1.5 production (over the year, %) Agricultural production -8.3 1.5 -16.0 -10.0 -8.0 -2.0 -8.3 (over the year, %) Fixed capital investment -36.9 -10.3 -23.0 -35.0 -20.0 -7.0 — (over the year, %) Retail sales -35.0 -13.6 -13.2 -11.4 4.0 — (over the year, %) 818.0 CPI increase rate 1,210 4,735 891 182 39.7 10.1 20.0 (%, annual average) (Data source) IMF, CIS National Statistics Committee, Ministry of Statistics, etc. As mentioned above, the real GDP growth rate has continued to fall every year since 1991, and the real GDP growth rate recorded for 1996 showed a still- large drop of -10.0% over the year. The extent of the drop of the real GDP growth rate decreased in the 1997 fiscal year, but the real GDP growth rate still recorded a drop of -3.0%. In 1998, the growth rates of some industries including the steel industry and non-ferrous metal industry, turned upward, the GDP growth rate from January to June increased by 0.2% over that in the same period of the previous year, and positive growth was recorded for the first time since independence (collapse of USSR). But in and after August, the Ukrainian steel industry suffered damage due to decreased steel exports because of the impact of the Russian financial crisis so the GDP again moved to negative growth, and the GDP growth rate for 1998 was -1.7%. From the beginning of autumn 1999 the GDP began to show a basic growth tone and improved to -0.4%.

Reformation of the economic system including the establishment of a taxation system appropriate for the market economy, and improvement of the legal system, have been delayed; therefore, we cannot feel any force in the direction of growth, and can say that Ukraine is not completely capable of making any great use of its potential for growth.

- 1-15 - According to the EBRD estimation, 49% of the Ukrainian economy is considered a “shadow economy, ” and its real GDP is far greater than that shown by statistics; also, in the past 2 years, the GDP is considered to have been almost stable. Generally speaking, the registration rate for small and medium industries is low in Ukraine, and some foreign trade is not reported. There are many cases of the accounts for such foreign trade being settled between bank accounts in countries outside Ukraine; therefore, in many cases, business results are undervalued.

(2) Commodity prices & employment (A) Commodity prices CPI increase rates compared with the previous year’s were 1,210% in 1992, and 4,735% in 1993. When the 1990 CPI is considered as the standard, that of 1993 exceeds it by 120,000 times, indicating hyperinflation. However, since October 1994, Ukraine has been carrying out austerity measures according to IMF guidelines; as a result, the CPI increase rate over the year was 891% in 1994, 182% in 1995, 39.7% in 1996, and 10.1% in 1997, becoming quite settled. This is the result of the development of a full-scale market economy, including liberalization of prices and the curtailing of subsidies, which Ukraine has started with IMF guidance. But the subsidence of inflation was the result of total demand being severely suppressed, and fund shortages occurred throughout the Ukrainian economy, causing problems such as various unpaid debts to become more serious. Price freeze measures were taken when the new currency, the “UAH,” was introduced in September 1996, but basically, price liberalization has been encouraged, and the majority of price controls were abolished in October 1994. Due to the impact of the financial breakdown in Russia in August 1998, the value of the UAH fell, and the inflation rate in 1998 increased to 20%. It was 19.2% in 1999. (B) Employment According to official statistics, the number of unemployed persons as of the end of September 1997 was 577,703, and the unemployment rate was only 2.1%. But this is considered to be a reflection of the low level of unemployment allowances, and of delays in their payment, so there is little incentive for the registration of unemployed persons. Actually, there are

- 1-16 - many “hidden unemployed persons ” who have been laid off for long periods of time, or who have shortened their work hours, in order to avoid official dismissal, so the actual unemployment rate after including them is assumed to be quite different from the official statistics figure. According to an announcement by the Ministry of Labor, the number of unemployed persons as of the end of 1996 had increased to 3,500,000, and the unemployment rate was estimated to be about 12%. However, the unemployment rate at the beginning of the 1999 fiscal year was 4.3%, so the unemployment rate trend has improved.

(3) Industrial structure (A) Distinctive features of industrial structure Ukraine “has been fortunate in its possession of fertile national land since the time of USSR”(sic), and has long been called the “granary of Europe. ” Typical large-scale mechanized agriculture is carried out, and winter wheat, corn, and rye, etc., are produced. Ukraine was the top grain-producing nation in the former USSR. Industry was developed in the Dnepr region in eastern Ukraine, utilizing the abundant local coal, and after World War II, chemical industries and heavy industry, mainly the steel industry, were developed utilizing local underground resources. As mentioned above, Ukraine can be roughly divided into a western agricultural area and an eastern industrial area. The Ukrainian government has now hammered out a drastic plan to admit the participation of foreign capital to the private operation of large enterprises including the electric power industry, the communication industry, and the agricultural infrastructure. But restructuring of enterprises is not being carried out, and many enterprises still have huge numbers of excess personnel; therefore, foreign capital is not approaching Ukrainian enterprises, and the development of private industry has not yet advanced.

(B) Mining and manufacturing industry 30% of the exports from Ukraine are iron and steel products, and since the time of Imperial Russia, Dombasle in eastern Ukraine has been the site of a munitions industry with high technical power, as well as other industries,

- 1-17 - making great use of the Donetsk coal mine and iron ore from Krivoi Rog. This complex was extensively developed with the assumption of a supply of cheap energy from the USSR, therefore, because Ukraine has not been able to obtain sufficiently cheap energy from Russia since independence, the operation rates of heavy industries such as the metals industry, machine industry, petroleum refining industry and munitions industry have declined to an extreme degree, and at present industrial production has fallen to less than 50% of its 1990 level. Concerning its energy supply, Ukraine is almost self-sufficient in coal, but its self-supply rates of petroleum and natural gas are very low, and it has been depending on imports of petroleum from Russia and natural gas from Russia and Turkmenistan. Considering Ukraine ’s future energy supply, its self­ supply rate for coal is high, but restructuring of the industry has not advanced, so coal production is extremely inefficient and coal cannot become an important energy supply source. Ukraine is highly dependent on imports of both petroleum and natural gas from Russia, but on the other hand it has such problems as differing opinions concerning the subject of pipeline fees. For the purpose of ensuring stable procurement, Ukraine has made an import contract with Azerbaijan concerning petroleum imports, and one with Uzbekistan concerning natural gas imports. Ukraine is also attempting to organize imports of petroleum from Middle Eastern and Near Eastern nations such as Iran. It is also drilling for natural gas in the Sea of Azov off the Crimean peninsula; this is expected to contribute to the gas supply for the Crimean region. (C) Agriculture In keeping with its history as “the granary of Europe, ” agriculture in Ukraine, which has a such large fertile loam region, accounts for a large share of the economy (13.4% of the GDP composition ratio in 1996). Also, 22% of all workers in Ukraine are agricultural workers. But unfavorable conditions for agricultural production have been continuing recently. Agricultural production in 1994 recorded a drastic negative growth rate, 16% less than that in the previous year; in 1995, it showed a negative growth rate of -10%; and in 1996 growth was still negative at -8%. The rate of negative growth decelerated slightly in 1997 but was still recorded at -2%. The amount of minus growth worsened in the 1998 fiscal year, to -8.3%.

- 1-18 - EIU estimation was that the amount of negative growth in 1999 would be -

1.0%. As the above shows, agriculture, originally supposed to be one of the pillars supporting the Ukrainian economy, has been continuously inactive. In the days of the USSR, Ukraine imported agricultural machinery, fuel, and chemical fertilizers at cheap prices from other CIS nations, mainly Russia, but since the USSR collapsed, import prices for these items have been sharply increasing at rates greater than the increase rate for the prices of agricultural products. This can be mentioned as one reason for agricultural inactivity. Also, as of the middle of 1997, about 95% of all farm land still belonged to collective farms (kolkhoz) and state-operated farms, so that development of private operation of agriculture has been delayed; the maintenance of this inefficient system is another cause of agricultural inactivity.

(4) Financial affairs When it was part of the USSR, Ukraine ’s financial affairs had a structure in which any financial deficit was compensated for by transferring the deficit to the USSR government. Therefore, after the USSR collapsed and the transfer of deficits to the USSR government was abolished, the budget deficit structure was exposed. Since 1992, Ukrainian government introduced a new taxation system including VAT and commodity taxes, etc., and has been simultaneously making efforts to curtail annual expenditures including those for subsidies and social services, but no remarkable improvement has yet been seen. The budget deficit in 1996 was 4.6% of GDP, apparently showing the effectiveness of the retrenchment budget, but actually, under conditions in which the government is unable to collect sufficient tax revenues and there are annual revenue shortages, the financial situation has recovered from its worst situation only through the suppression of annual expenditures by lowering the level of social services. Due to this, the problem of unpaid (delayed payment of) pensions and wages has become more serious. Essential problems such as reformation of the taxation system, restructuring of state-operated enterprises, and reduction of the scale of administrative organs, have still not been solved, and the deficit rate (GDP ratio 6.7%) again worsened in 1997. As a result, wage and pension obligations have accumulated, becoming a serious problem obstructing economic reformation in

- 1-19 - Ukraine. The deficit rate relative to GDP was expected to be 2.1% in 1998, and 1.0% in 1999. Table 1.1-4 Ukrainian Fiscal Revenue and Expenditure Trends (Unit: million UAH) Year 1992 1993 1994 1995 1996 1997 Annual revenue 17.0 568.3 5,313.8 20,425.4 31,142.1 36,889.6 Annual 23.3 661.0 6,453.5 24,443.0 33,759.0 43,086.0 expenditure Fiscal revenue -6.3 -92.8 -1,139.7 -4,017.6 -3,617.0 -6,196.4 and expenditure Ratio compared to -12.2 -6.5 -10.5 -7.9 -4.6 -6.7 GDP (%)

(5) Financing (A) Trend of financial policy The Ukrainian National Bank (Central Bank) is subordinate to the Government and Parliament, and is readily subject to political intervention, although the Central Bank Law is being amended in order to maintain the independence of the Central Bank. The Central Bank ’s major monetary adjustment means are the official discount rate and its operation of the reserve ratio against deposits. In future, accompanying development of the government bond market, open market operation is expected to be an important means of monetary adjustment. In Ukraine, the Central Bank provided easygoing credit accommodation in 1993 - 1994, causing intensification of inflation and currency depreciation, and the phenomenon of a negative real interest rate continued. The real interest rate moved to the plus side at the beginning of 1995, due to the monetary restraint policy which started in the second half of 1994, and the inflation rate started to decline. Based on the lowering of the inflation rate, the Central Bank lowered its official discount rate 5 times in 1996, and by August 1997 the official discount rate had been reduced 6 more times. The Central Bank also lowered the reserve ratio against deposits from 15% to 11% in January, showing a positive attitude toward monetary relaxation. However, due to the foreign exchange market confusion which will be mentioned later, the Central Bank increased its official discount rate 3 times

- 1-20 - in November alone, and simultaneously increased its reserve ratio against deposits from 11% to 15%, and the Ukrainian government was obliged to change its financial policy to one of monetary restraint.

(B) Foreign exchange trends In January 1992 Ukraine introduced a “coupon ” system to compensate for the shortage of rubles. The coupons were replaced by the legal currency called “karbovanet ” as a provisional measure until introduction of the official currency in November 1992, when Ukraine officially broke away from the Russian ruble zone. The value of the “karbovanet ” against the US dollar fell continuously from the time of its introduction. In 1993, in order to stabilize foreign exchange rates, the Central Bank carried out the policy of forcibly exchanging 50% of enterprises ’ foreign currency income for “karbovanets, ” Further, in August 1995, circulation of foreign currency in Ukraine was prohibited, and payment using the nation ’s own currency became obligatory for domestic business transactions. Also, in October, 1994, multiple foreign exchange rates had been unified in the market foreign exchange rates to be determined in the inter-Ukrainian bank foreign exchange market. Introduction of the official currency, the “hryvnia (UAH)” a goal set since economic reformation started, was earlier postponed due to economic confusion, but after inflation was suppressed, introduction of the UAH was finally achieved in September 1996. When the UAH was introduced, the UAH: US funds exchange rate was fixed at US$1.00 = 1.76 UAH, but a floating exchange system went into effect on October 7, 1996. Ukraine officially introduced a currency fluctuation margin in order to stabilize foreign exchange rates. (The fluctuation margin until the end of 1997 was set at US$ = 1.7 - 1.9 UAH, and in the first half term of 1998 it was set at US$ = 1.75 - 1.95 UAH.) However, because the IMF postponed the execution of standby credit, and because there was also worldwide confusion in newly-risen markets, selling of short-term government bonds by non-residents accelerated in October 1997, and UAH-selling pressure increased. The Central Bank was obliged to change its policy to one of monetary restraint, and in November it reduced the official discount rate 3 times in order to slow currency depreciation. The influence of de facto downward devaluation of the Russian currency, the

- 1-21 - ruble, was one of the factors precipitating the Russian financial crisis in August 1998; this was followed by a severe decline of currency value which spread to Ukraine, and on August 18, 1998 the Ukrainian Central Bank reduced the currency exchange rate for the UAH and US dollar, from 1 US dollar = 2.14356 UAH, to 1 US dollar = 2.1805 UAH. Devaluation of the UAH continued after this, and at the end of 1998 the exchange rate was 1 US dollar = 3.4270 UAH. The exchange rate at the end of 1999 was 1 US dollar = 5.50 UAH, and as of the end of February, 2000 it is 1 US dollar = 5.59 UAH.

(6) International balance of payments (A) Trade balance trend Ukrainian foreign trade was increasing nicely from 1995, but the trade balance in 1997 showed only sluggish growth; the amount of exports was US$15.4 billion and the amount of imports was US$19.6 billion, so the balance showed a deficit of US$4.2 billion. This was because the majority of Ukrainian exports previously went to Russia, but exports (sugar and vodka, etc.) for Russia had decreased drastically, due to Russia’s discriminatory handling of Ukrainian products, to which it applied tariffs and added-value taxes. On the other hand, due to the strong tendency of producers and consumers to favor high-quality imported products from Western nations, imports basically continued to increase, so the trade deficit is expected to become even larger. The total amount of exports and imports in the 1998 fiscal year was US$30 billion (14.3% less than in the previous year). Exports were US$13.7 billion (an 11.0% decrease from the previous year) and imports were US$16.3 billion (a 17% decrease from the previous year) so the trade balance showed a surplus of US$2.6 billion. It is also noteworthy that foreign trade with Russia dropped to 23% of total exports and 48.1% of total imports. Major export products are iron, steel, machinery, transport vehicles, mineral resources, chemical products, farm products and other agricultural products. Major imports are energy resources including petroleum and natural gas, and products related to agriculture, etc.

- 1-22 - (B) Current balance trend, and problems remaining for Ukraine The IMF has been advising Ukraine to procure the funds it needs to compensate for the current balance deficit, by direct investment and the flotation of bonds in international markets, but the possibility of any drastic increase of direct investment is low, and this has resulted in an increase of external debt. Table 1.1-5 Ukrainian International Balances (Unit: US$ million) Year 1994 1995 1996 1997 1998 Trade balance -2,575 -2,702 -4,296 -4,205 -4,659 Export 13,894 14,244 15,547 15,418 13,699 (over the year %) (2.5) (9.1) (-0.8) Import 16,469 16,946 19,843 19,623 16,282 (over the year %) (2.9) (17.1) (-1.1) Service balance 1,209 1,512 3,714 2,669 — Income balance -344 -434 -571 -644 — Current transfer balance 547 472 509 845 — Current balance -1,163 -1,152 -1,184 -1,335 — Foreign reserves 664 1,069 1,972 2,359 (including gold) — (Import cover rate, (0.5) (0.8) (1.2) (1.4) month(s)) (Data source) IMF, government data

(7) External debts According to the World Bank, Ukraine ’s external debts were US$3.71 billion at the end of 1993, US$5.44 billion at the end of 1994, US$8.22 billion at the end of 1995, and US$9.34 billion at the end of 1996. The IMF has been supporting Ukraine ’s economic reformation program through structure transfer financing (STF) and by providing standby credit on several occasions. Recent noteworthy movements were the economic reformation plan and its supportive financing, to which Ukraine and IMF agreed in July 1998. After that, the financial crisis occurred in Russia, and a restudy was done with consideration of the impact of the crisis; therefore the final decision on financing was delayed, but financing of US$2.2 billion, with a repayment term of 3 years (expansive granting of credit) was determined in September 1998. The financing of about US$257 million was executed immediately and the

- 1-23 - financing of another US$78 million was executed in November 1998. Financing was stopped due to the delayed execution of economic reformation, but was re-started in May 1999, with about US$180 million in financing provided in May, and another approximately US$115 million provided in June. Additional financing of about US$180 million was also provided in November. On the other hand, the repayment term for the official external debt of US$780 million is the March/2000 term, with repayments totaling about US$1 billion concentrated in the first quarter of 2000, so the movements of the Ukrainian government and IMF in future bear watching. Debt disclosed by the Ukrainian government on January 24, 2000 is as shown in following table, 1.1-6 “Circumstances of Debts of Ukraine. ”

Table 1.1-6 Circumstances of Debts of Ukraine Date: Jan. 24, 2000

1999 2000 Debt item 2001 (Actual result) (Expected) (Estimated) Internal debt Mil. UAH Total 13,442.6 20,260.9 25,710.5 1. Corporations (internal loans) 11,097.1 17,222.9 22,393.6

2. Banks (NBU) 2,344.5 3,037.3 3,316.0

3. Other internal debts 955.0 955.0 955.0

Oreign currency debt Mil. US$ Total 11,481.4 12,060.8 12,361.7 1. Economic development 4,831.4 5,668.5 6,707.6 organizations

- World Bank 1,598.9 2,150.1 2,839.8

-EU 332.5 443.3 602.1

-EBRD 110.3 115.3 259.4

-IMF 2,789.7 2,959.8 3,006.2 2. Foreign government 3,530.2 3,404.5 2,953.5 organizations

-Russia 1,896.2 2,072.0 1,974.2 -Turkmenistan 457.8 316.9 176.1 -Germany 176.2 201.2 221.3

- 1-24 - 1999 2000 2001 Debt item (Actual result) (Expected) (Estimated) -USA 492.3 384.2 262.5 -Japan 395.8 314.9 234.4 -Italy 37.4 36.5 27.5 -France 65.5 51.4 36.6 -Spain 4.9 15.1 11.6 -Czech 4.2 3.4 2.6 -Switzerland - 8.8 6.6

3. Foreign commercial banks 1,964.7 1,970.9 1,825.6

-Chase Manhattan Bank 679.5 960.6 886.9 Luxembourg S.A. -Bankers Trust Luxembourg S.A. 583.4 583.4 - -E.M. Sovereign Investment B.V. 503.7 258.4 - -Bavarian Union Bank 129.3 112.2 95.2 -Westdeutche Landesbank 68.9 56.2 43.6 (Europe) AG -State Bond to be Issued in 2000 - - 800.0 4. Other foreign currency debts 1,155.0 1,017.0 875.0

-External State Loan Bonds 1,115.0 1,015.0 875.0 Issued in 1999 (Gazprom Bonds) -Nissho Iwai Loan (Yuzhmash) - 2.0 -

(8) Development of private industry Development of private industry is considered one of the most severely delayed areas in the Ukraine economic reformation. The delay is due to extremely strong resistance by Parliament which previously passed a bill concerning a list of large enterprises, including the munitions industry, that were not to be changed to private enterprises. Introduction of a “voucher ” method was stipulated by Presidential order in November 1994, and speeding-up of the development of private industry has been achieved, but the greater portion of the enterprises that have been become privately-operated enterprises to date are small ones, and the change-over of large and important enterprises is still not progressing.

- 1-25 - According to the EBRD report, the speed of development of private industry in Ukraine is quite slow compared to that in other nations in Eastern Europe and in former USSR nations, in which state-operated enterprises are being transformed into private enterprises; as of mid-1996 the share of annual production provided by private enterprises in the Ukrainian GDP was only 40%. In May 1997, President Kuchma issued a new Presidential Order in order to accelerate the development of private industry and clarified the principles for development of private industry in the strategic fields (energy, transportation, and communication) not previously included in the subject of the development of private industry, so future advances in the development of private industry are expected. Development of private operation in the agricultural field is one important pillar of economic reformation in Ukraine, although there is great resistance, mainly by the agricultural lobby, and opinions about this do not coincide even within the government; therefore private operation is even more delayed in agriculture than in the development of other private enterprises.

(9) Direct investment trend Overseas direct investment in Ukraine is tending to increase annually, although it showed only a sluggish rise in 1997. The amount of investment to Ukraine in 1997 was about US$759,200,000, and the cumulative amount of investment accepted was about US$2.3 billion. However, overseas direct investment rose by US$420 million (an increase of 103% over the same period in the previous year) in the first half term of the 1998 fiscal year, and the amount of direct investment reached US$2.5 billion as of July 1, 1998. The leading investing nation is the USA, and over 200 US enterprises including Cargill (sunflower oil refining), John Deere (assembling of combines), Coca-Cola, Philip Morris, and McDonald ’s, etc., have advanced into Ukraine. One large investment determined in 1997, the project for establishment of joint venture company between the Daewoo group of Korea and AvtoZAZ Co., the state-operated automobile manufacturer in Ukraine, is worth mentioning. The total investment by the Daewoo group is said to be US$1.3 billion (plan basis).

- 1-26 - Investors are strongly dissatisfied, making the following complaints. The taxation system changes too easily, and tax rates are high. Enterprise registration procedures are rough and unsatisfactory. Government officials demand bribes. There are many other things that need to be improved.

(10) Relationship with Japan The Government of Japan recognized the independence of Ukraine in December 1991. After that, Japan established diplomatic relations with Ukraine in January 1992, and opened a Japanese embassy in Ukraine in January 1993. In March 1995, when President Kuchma visited Japan, Japan agreed to provide financial support, and The Export-Import Bank of Japan provided US$200 million in financing to support economic reform in Ukraine. Exports from Ukraine to Japan in the 1998 fiscal year totaled ¥9.49 billion and were mainly steel, non-ferrous metals, and foodstuffs, while on the other hand, imports into Ukraine from Japan, mainly machinery and automobiles, totaled ¥9.6 billion. Total direct investment by Japan in Ukraine until March 1997 was about ¥ 187 million.

- 1-27 - 1.2 Energy circumstances

1.2.1 Energy resources (1) Coal Ukraine is blessed with abundant coal resources, and its coal production in 1990 was 25% of total coal production in the USSR. A large percentage of coal is used as the raw material for coke for iron foundries. The Dnetsk coal mine in the eastern Ukraine is the largest coal production site in Ukraine, and even now, about 68% of all Ukrainian coal production comes from this mine. Annual coal production in 1997 was 71 million tons, which was below the production goal of 90 million tons a year, and only 76 coal mines out of 270 sites could expect a profit. Modernization of production facilities is essential in order to increase coal production.

(2) Petroleum Petroleum production in Ukraine peaked at 15,500,000 tons in 1972, after which oil production continuously dropped; at present, almost all oil fields are completely depleted, and Ukraine is dependent on oil imported from Russia. Another oil shortage cause is that surveying and boring activities have not been done in Ukraine due to financial difficulties.

(3) Natural gas It will be started in the 1950s, after greeting a peak by 69 billion m3 in 1975, decrease in production continues, and it depends for production of natural gas from Russia (75% of the amount of import), Turkmenistan (15%), and Uzbekistan (10%) on import now, and it provides the need of a thermal-power- station plant Every country was previously supplying gas to Ukraine at cheap rates, but they have gradually raised their gas prices to higher than the international market price. Therefore, payment of the gas charge have become difficult. Ukraine's debt as of 2000 to be paid to Russia is about US$3 billion and that to be paid to Turkmenistan is about US$300 million.

- 1-28 - Ukraine haters toll payment for the pipeline that passes Ukraine from Russia for gas charge with Russia, however, there is a problem with the excessive quantity of gas drawn out by Ukraine as a toll payment for pipeline. Therefore plans to change the route of the pipeline for Europe often come up. At present, political agreement is got from both countries to a debt problem, and supply is received succeedingly. This problem is an economical problem purely, the management of a power generation firm improves by improvement in the electricity-rate recovery mentioned later etc., and if a gas charge can be paid, it will be solved.

(4) Nuclear power generation fuel At present there are nuclear power generation plants in 4 places in Ukraine, with 13 reactors being operated. These plants generate 12,000 MW of electrical energy, which is 48% of total power generation facility capacity, but the entire power generation fuel cycle is dependent on imports from Russia, and imported nuclear fuel plays a major role in compensating for the shortage of energy resources in Ukraine. Furthermore, in future, Ukraine will be obliged to promote power generation using nuclear fuel because this is cheaper than fossil fuel. Ukraine has uranium mines in 2 areas, and the ores obtained from these mines are processed in refining plants in Ukraine. The fuel cycle is presently dependent on Russia, and in particular, the negotiations with Russia concerning the processing of spent fuel are not going smoothly, and have become a problem; therefore Ukraine has been negotiating with the USA about a plan to construct a spent fuel storage facility in Ukraine, and the USA is considering providing the research expenses.

- 1-29 - 1.2.2 Energy demand/supply (1) Energy policy The national ‘Petroleum and gas in Ukraine until 2010” plan, prepared in 1994 as the country ’s energy policy, stated that increased production of 7,500,000 tons per year of petroleum and 35.5 billion m3 per year of gas, would be possible, although increasing the production of oil and gas is difficult under present circumstances, in which the nation ’s finances are close to a breakdown. In the rehabilitation plan, Ukraine expects aid from Western bloc nations, but circumstances from the viewpoint of the laws and policies of Ukraine itself are not appropriate for these nations to provide financing to Ukraine. In order to solve the energy problem in Ukraine, it is urgently important to start fuel resource surveying and development using financial aid received from other countries in order to increase the energy self-supply rate, which is 50 - 60% at present. Two major tasks are to improve the production structure, which currently uses antiquated industrial facilities and power generation facilities with poor efficiency, in use since the time of the USSR, and to improve the industrial structure which wastes huge amounts of energy due to heat loss from superannuated heat-supply facilities. Efficiency is considered to be 4 - 5 times worse than that of advanced nations, and according to trial calculations by a research institute in Ukraine, saving 970 kWh a year of electric power is said to be possible.

- 1-30 - 1.2.3 Present electric power industry situation In 1992, after Ukraine became independent, Mineenergo (Ministry of Electric Power and Electrification of Ukraine) formerly a subordinate organization of the Ministry of electric power and electrification of the USSR, became the organization with general control of electric business and heat supply in Ukraine. Under the supervision of Mineenergo, 8 corporate bodies called Energo (electric power and electrification production unions) were organized for individual areas in Ukraine, and each Energo has taken charge of the processes from power generation to supply of electric power in each district of jurisdiction. In order to rebuild the electricity business in the aspects of technology and economy, the Ukrainian government decided to start to reorganize the electric business according to the English model. The principles for unbundling of the electricity business and the establishment of a competition-based wholesale electric power market were stipulated by Presidential order in 1994. Based on these principles, a concrete movement started in 1995 - 1996, after technological support was received from specialists from the Western bloc. At present, electricity business is operated according to the following system. In the power generation category, 2 hydroelectric power generation companies and 4 thermal power generation companies were established. Table 1.1-7 shows the scale of each thermal power generation company.

Table 1.1-7 List of Thermal Power Generation Companies Actual power Fuel Power Power generation composition generation Average age generation results Employees ratio capacity of facility company (1999) MW Coal:Gas:Oil mil. kWh Dnieproenergo 8,160 18,591 10,000 28 65:30:05 Donbassenergo 7,710 20,513 15,000 30 80:15:05 Centrenergo 7,550 17 872 6,500 27 81:10:10 Zahidenergo 4,700 10,966 8,000 31 80:10:10

Each hydraulic and thermal power generation company was designated as a state-owned corporation. (Some of these have now become private corporations.) Nuclear power generation plants are owned and operated by Energoatom, the nuclear power generation company newly established at the end of 1996.

-1-31- In the category of distribution of electrical energy, a total of 27 Oblenergi (electric energy distribution companies) were established, one for each administrative section, and all of these companies were designated as state- owned corporations. (Some of these have now become private corporations.) Each distribution company owns and operates the distribution network in its area, as well as relatively small-scale power generation facilities. Many of these are steam supply and power generation plants. Each distribution company is obligated to supply electric power at regulated charges to all users who wish to receive electricity supply. In the category of power transmission, the state-owned company, Ukrenergo, owns and operates a power transmission system and central electric power supply command station. Ukrenergo does system operations including electric power supply control and the providing of supplementary services, and also carries out the business of settlement of accounts accompanying electric power transactions between market participants. Ukrenergo purchases all electric power from power generation business operators and sells electric power to each distribution company based on the market regulations stipulated in the electric power market participants ’ agreement. The price of electric power purchased from thermal power generation plants is determined on the basis of bidding for each hour in the electric power market. On the other hand, hydroelectric power and nuclear power are purchased on a contract basis. The independent regulatory organ for supervision of such electric power transactions, the National Electric Regulation Committee (NERC), was established in 1995. This committee issues licenses to electric power business operators, and supervises them. These licenses regulate the methods for calculating the rental fees for transmission cables and the retail charges for distribution companies. At present, however, payment arrears and barter transactions with users are constantly occurring throughout the entire economy in Ukraine, so the above- mentioned electric power transaction system does not actually function without problems. In spite of the establishment of the independent organ, NERC, there has been very little change in the Ukrainian government ’s/Mineenergo ’s strong influence on electric power business operation; therefore, the government can easily carry out political intervention in the market, and transactions do not actually conform to market regulations.

- 1-32 - Ukraine made a bold start at the end of 1997 by beginning to sell shares in electric power companies, with the recognition that the transformation to private enterprises of each individual main constituent participating in the market, and of electric power companies, is essential in order to establish an electric power transaction system conforming to market regulations, by eliminating political interventions that distort the market. But the development of private enterprises has not advanced satisfactorily, mainly due to the following reasons. First, at the present stage, many enterprises have sold only 20 - 30% of their shares, and the national government still continues to hold the majority of shares. Also, strict requirements such as additional investment for facilities, payment of accumulated debts, and maintenance of the labor force, are imposed on investors. In addition, the electric power companies being developed as private enterprises still have many problems such as the outstanding amounts of electricity rates unpaid by users, which have worsened their financial conditions. Consequently, investors could not see any positive advantage in the acquisition of shares in those enterprises, and therefore, the private enterprise development movement is being delayed.

1.2.4 Electric power demand/supply trends (1) Energy generated Total domestically-generated energy has been declining annually from the peak of 298.9 billion kWh in 1990. As shown in Table 1.1-8, total energy generated in 1999 was 169.4 billion kWh, a 1.5% decrease from the previous year, and compared with the actual result for 1990, total generated energy in 1999 had decreased by about 43% from the 1990 total. According to prediction of Ukraine Ministry of Fuel and Energy, the total generated energy will be changed to an increase in 2000 and afterwards, and is expected that compared with last year 1 - 2% of a loose increase is shown.

- 1-33 - Table 1.1-8 Transition of Energy generated by Each Power Source (Unit: billion kWh) Year 1990 1992 1993 1994 1995 1996 1997 1998 1999

Nuclear 76.2 73.8 75.2 68.9 70.5 79.6 79.4 75.2 72.9

Hydroelectric 10.7 8.1 11.2 12.3 10.1 8.5 9.7 15.9 13.6

Thermal 212 170.6 143.5 121.8 111.9 90 83.1 80.8 82.9

Total 298.9 252.5 229.9 203 192.5 178.1 172.2 171.9 169.4

Year 2000 2001 2002 2003 2004 2005

Nuclear 76.4 72.9 72.9 72.9 75.4 77.5

Hydroelectric 10.5 10.5 10.5 10.6 12 14.4

Thermal 85.9 91.9 94.7 97.5 97.6 96

Total 172.8 175.3 178.1 181.0 185.0 187.9

The itemized actual results in 1999 for each electric power source facility show that 48.9% of total facilities were thermal power generation facilities, 43.0% were nuclear power generation facilities, and 8.0% were hydroelectric power generation facilities. The inactivity of thermal power generation due to fuel shortages is compensated for by nuclear power generation, so there is a tendency for the percentage of total generated energy produced by nuclear power generation to increase.

Fig. 1.1-3 Transition of Energy Generated by Each Power Source

>> 300 ...... Nuclear — - — - — H ydro ------Thermal ______Total

.2 100

* 1992 1993 1994 1995 1996 1997 1998 1999 o H

- 1-34 - Table 1.1-9 shows fuel composition ratios for thermal power generation. At the beginning of the 1990s, gas comprised the largest percentage of individual fuels used, followed by coal, with heavy oil showing the lowest fuel use rate. However, the ratios of gas and coal used have been reversed in recent years, and the ratio of coal used has shown an overwhelming increase to about 68%. As mentioned above, the import of the energy resources, such as natural gas, has decreased and consumption of the domestic coal has increased because of the deterioration of heating-value. Consequently, consumption rate of coal has increased.

Table 1.1-9 Fuel Composition Ratios for Thermal Power Generation (U n it: %) Year 1995 1996 1997 1998 1999 Coal 70.2 66.2 68.0 67.7 67.3 Heavy oil 4.3 3.6 3.0 3.5 1.4 Gas 25.5 30.2 x29.1 28.8 31.3

(2) Electric energy consumption Electric energy consumption peaked in 1989, then declined continuously in the 1990s. In 1999, total domestic consumption of electric energy decreased by 4.1% from the previous year, to 123.1 billion kWh. The share of total consumption of electric energy for industrial use is extremely high in Ukraine, which developed its industries using cheap imported energy and domestic coal, when it was part of the USSR. After independence, the sluggishness of industrial activity was greatly affected by decreased consumption of electric energy, but even so, the electric energy consumed by industry and transportation is 60.4% of total electric energy consumption. On the other hand, the electric energy consumed for public use and home use is about 30%, not a very large percentage, but this is remaining relatively steady. The specifications for home-use electric power are 220 V, 50 Hz.

- 1-35 - Table 1.1-10 Transition of Electric Energy Consumed in Each Category (Unit: billion kWh) Year 1995 1996 1997 1998 1999 Industrial and 92.7 84.8 83.4 78.7 74.4 Transportation use Agricultural use 13.6 11.9 10.0 8.2 7.6 Public use 18.0 17.7 17.0 2.1 1.9 Home use 27.0 25.4 24.0 39.4 39.2 Total 151.3 139.8 134.4 128.4 123.1 Note: For 1998 and after, most electric energy for public use has been totaled with the electric energy for home use.

1.2.5 Present conditions of power generation facilities The first power generation plant was constructed in Kiev, the capital of Ukraine, at the end of the 19th century. After that, the first rapid electric power source development took place during the 1930s, in the USSR era, when thermal power generation plants were constructed at 5 locations in Ukraine, and a hydroelectric power generation plant, the largest in Europe at the time, was also constructed. From 1950 - 1975, many electric power sources were developed in order to satisfy the increasing demand for electric power accompanying the development of domestic heavy industry. In the second half of the 1970s, the first nuclear power generation plant (Chernobyl) was built, and many nuclear power generation plants were constructed after that, on into the 1980s. However, no large-scale electric power source development was carried out in the 1990s, and total power generation facility capacity has been declining year by year. Since the collapse of the USSR, electric power business operators have been short of funds not only for the development of new electric power sources but also for the modernization of existing facilities. Superannuation of power generation facilities in Ukraine has advanced, and 80% of thermal power generation plants are considered to need rehabilitation and reconstruction. The fuel consumption rate per power generation unit has also worsened. In 1980, the fuel consumption ratio (converted to standard coal) for thermal power plants was 345 g/kWh, but the same ratio was 365 g/kWh in 1996. In addition, there has been a shortage of funds for procuring coal for thermal power plants; therefore,

- 1-36 - the coal utilization rate has decreased. According to official statistics, as of 1999, total power generation facility capacity in Ukraine was 53,900,000 kW, unchanged since 1997, although actually-usable facility capacity is considered to be about 60% of this amount. Table 1.1-11 Transition of Total Power Generation Facility Capacity (Unit: million kW) Year 1995 1996 1997 1998 1999 Thermal power 36.6 36.5 36.4 36.4 36.4 Hydroelectric power 4.7 4.7 4.7 4.7 4.7 Nuclear power 13.8 12.8 12.8 12.8 12.8 Total 55.1 54.0 53.9 53.9 53.9

In 1999 67.5% of total power generation facility capacity was provided by thermal power generation, 8.8% by hydroelectric power generation, and 23.7% by nuclear power generation. 65% of thermal power facilities are operated by mixed combustion of coal and gas, 25% are operated by mixed combustion of oil and gas, and 5% are operated by mixed combustion of coal and oil. Table 1.1-12 shows major thermal power generation facilities in Ukraine. There are thermal power plants at over 40 locations in the country, and their total facility capacity is 36,400,000 kW. More than 31,000,000 kW of this is produced by large-capacity power generation facilities. Table 1.1-13 shows major hydroelectric power generation facilities in Ukraine. Of the hydroelectric power plants in 7 locations, 6 are concentrated along the Dnepr river system which runs north-south in the central area of Ukraine, and one hydroelectric power plant is located on the Dnestr river system. At one point there was a plan to construct a pumped- storage power plant on the Dnestr river system, but its development has been delayed due to the shortage of funds. In 1992, Ukraine started to develop wind power generation with the support of a US enterprise. In the summer of 1997, commercial operation of wind power stations started in the Crimea region facing the Black Sea, and in western Ukraine, but the number of wind power stations is still small, and their total output is still under 100,000 kW.

- 1-37 - Table 1.1-12 List of Major Thermal Power Plants (Unit: MW) Number X Power Facility Year Name of power plant single-unit generation capacity manufactured capacity company Kripoliskaya 2,820 10X282 1965-73 Dnieproenergo 3x800 1975-77 Zaporozhye 3,600 4x300 1972- 4x150 1960-62 Pridneprovskaya 1,800 4x300 1963-66 Zuivskaya 1,200 4x300 1982-88 Donbassenergo 2x100 1957 Lugansk 1,600 8x175 1961-68 1x80 1955 1x100 1957 Slavyansk 1,700 1x720 1967 1x800 1971 1x200 1972 Krakovskaya 1,460 6x210 1972-75 Starobezheskaya 1,750 10x175 1952-67 Uglegorskaya 3,600 4x300 1972-73 Centrenergo 6x200 1960-65 Zemivskaya 2,150 4x300 1967-69 Tripoliaskaya 1,800 6x300 1969-72 Brsitinskaya 2,300 12x195 1965-69 Zahidenergo Radzyniskaya 1,800 6x300 1970-71 3x100 1959-61 Dobrotobilskaya 600 2x150 1963-64 [Source] Ministry for Fuel and Power, World Bank

- 1-38 - Table 1.1-13 List of Major Hydroelectric Power Plants (Unit: MW) F acility Number X single ­ Name of power plant capacity unit capacity Kiev (a) 235.5 3X41.5, 3X37.0 Kiev 361.2 16X18.5, 4X16.3 Kaniev 444.0 24X18.5 Kremenchug 625.0 12X52.0 Dneprozerzhinsk 352.0 8X44.0 Dneprovsk 6X113.1, 2 X 1,538.2 104.5, 9X72.0, 1 X2.6 Kakhovkoe 351.0 6X58.5 Dnestr 702.0 6X117.0 [Source] Minenergo : Ukraine Power Industry, 1998. (Note) (a) Pumped-storage power station

Excluding Chernobyl, there are nuclear power plants in 4 places in Ukraine: Zaporozhye, Rovno, Yuzhno-Ukraina, and Khmel ’nitskii, and as previously mentioned, Energoatom, the nuclear power generation company newly established at the end of 1996, owns and operates these plants. Nuclear power generation facility capacity in 1999 was 12,800,000 kW, 72.9 billion kWh, and nuclear power generation facility capacity as a share of total power generation facility capacity in Ukraine is 23.7%, although energy generated by nuclear power plants has reached 43.0% of total energy generated in Ukraine. The importance of nuclear power generation has increased due to the recent sluggishness of thermal power generation. Chernobyl nuclear power plant, which had the worst nuclear accident in history in its No. 4 reactor in 1986, is located in northern Ukraine near the border with Belorussia (White Russia). Because of this accident, the anti-nuclear-power movement intensified, so the Ukrainian government froze construction of new nuclear power plants in 1990, and decided to close down the Chernobyl power plant by 1995. But the importance of nuclear power generation, which has a low power generation unit price, was again recognized in Ukraine, which suffered extreme

- 1-39 - energy shortages after independence. Due to this, the freeze on new nuclear power plant construction was lifted in 1993, and it was decided to postpone the closing of the Chernobyl plant. At present, 5 nuclear reactor units are being constructed, but, due to the worsening of Ukraine ’s financial situation, this construction work is not progressing well. In December 1995, Ukraine and the G7 nations agreed to the closing of the Chernobyl plant, and both sides signed a memorandum incorporating shutdown of the Chernobyl plant by 2000, alienation of US$498 million by the Western Bloc, and financial support of US$1.89 billion. The main constituent of this financing is applied to the plan (K2R4 plan) to complete the Fumerinitsky No. 2 reactor and Rovno No. 4 reactor, now under construction. The Fumerinitsky and Rovno nuclear power plants are both in the western Ukraine. The Ukrainian government had suspended their construction in 1990 at the stage in which 70 - 80% of construction processes were already completed.

In 1997, however, opinions doubting the economy and safety of the K2R4 plan arose not only from the Western Bloc, but also in Ukraine and from NGOs in eastern European nations. Based on this, the EBRD (European Bank for Rehabilitation and Development) was obliged to re-investigate the appropriateness of the K2R4 plan, and financing for the plan was drastically delayed. As a result of the Ukrainian government ’s repeated demands that EBRD and the Western Bloc finance the K2R4 plan, and its statement that shutdown of the Chernobyl No. 3 reactor by 2000 would not be possible if financing for the K2R4 plan could not be obtained, America decided, as a result of the Kuchma-Clinton talks in June 2000, to provide US$80 million as support funds for closing the Chernobyl nuclear plant. After the talks, Ukraine announced the deadline of December 15, 2000, for permanent closure of Chernobyl. In September, at a top-level conference with EU, Ukraine succeeded in obtaining the promise of financing for the K2R4 plan through EBRD and EU’s Utram fund. Through these movements, the No. 3 reactor of Chernobyl nuclear power plant, the only one still operating, was shut down on December 15, 2000, and the plant was completely closed, in the 15th year since the accident.

- 1-40 - Table 1.1-14 List of Nuclear Power Plants (Unit: MW) Facility Number X single Name of power plant Remarks capacity unit capacity Zaporozh ’e 6,000 6X1,000 Rovno 1 X402, 1 X416, 1 X 1,000 1,818 1 XI,000, (under construction) Yuzhno-Ukraina 1 X 1,000 3,000 3X1,000 (under construction) Fumerinitsky 3 X 1,000 1,000 1 X 1,000 (under construction)

1.2.6 Electricity rates system Concerning electricity rates in Ukraine, before January 1, 1996, the Ministry of Economy regulated retail electricity rates for home-use electricity, and the Ministry of Electric Power and Electrification regulated retail electricity rates for other than home-use users. Electricity rates were formerly suppressed by government subsidies, to levels lower than their costs. The electricity rates system did not reflect costs; for example, the electricity rates for home-use users were set lower than those for high-voltage users. After independence, in Ukraine ’s movement to change to a market economy, the ideal system for electricity rates was reviewed. The government subsidies were discontinued, mutual assistance between user classifications was abolished, and electricity rates were increased several times, in order to revise the policy-controlled setting of electricity rates and introduce an electricity rates system that reflected the actual cost of electricity. In the electric power business reorganization plan of 1995 it was stipulated that the national electric power regulatory committee (NERC) would take charge of electricity rates regulation starting in 1996, and the goal of the plan was set as a shift from the existing system to a system in which in future NERC would approve the electricity rates presented by each distribution company. At that time, the principle of setting electricity rates by a rate base method based on the cost method, was settled. As of September 1997, electricity rates were divided into the 7 user categories shown in Table 1.1-15.

- 1-41 - Table 1.1-15 User Classification Table Classification Category Category I For industrial use (750 kV or higher) Category II For industrial use (lower than 750 kV) Category III For agriculture Category IV Electrified transportation Category V Non-electrified transportation Category VI For home use Category VII Others

Time-specific electricity rates in which the cost differs depending on time of day, such as nighttime and peak time, was introduced for user categories other than “home use.” Electricity rates for home use were divided into those for houses in which electric hot plates for cooking are installed, and houses other than these. Electricity rates also differ for farm village areas and urban areas. Electricity rates are discounted for the residents of areas surrounding nuclear power plants. In addition, an electricity rates discount of 50% is applied to those suffering from the Chernobyl nuclear power plant accident, and to war victims (about 3% of population). The users of industrial-use electric power generally make contracts with distribution companies for the electric energy to be used. If the electric energy used exceeds this contracted electric energy, the user pays for the excess electric energy at double the usual charge. Table 1.1-16 shows wholesale electricity rates in Ukraine in the first half term of2000.

Table 1.1-16 Wholesale Electricity Rates in First Half Term of 2000 Units: Kopecks/kW ______(1 Kopeck=l/100 hryvnia) Month Dnieprenergo Donbassenergo Zapadenergo Centrenergo January 11.08 11.11 11.32 11.10 February 10.91 10.94 11.30 10.93 March 10.81 11.15 11.20 10.83 April 10.69 10.75 11.08 10.72 May 10.74 10.77 11.18 10.77 June 10.79 10.79 11.19 10.77 July 10.86 10.86 11.09 10.86 August 10.86 10.72 10.66 10.69

- 1-42 - Related to this, according to an interview survey in Ukraine, the wholesale electricity rate for ordinary housing was 15.6 kopecks/kW, that for industrial use was 17.85 kopecks/kW, and that for ordinary housing in the area surrounding a nuclear power plant (within a 30 km zone) was 10.4 kopecks/kW.

1.2.7 Electricity rates collection system In Ukraine, electric power users make their electricity rate payments to the bank(s) designated by NERD, according to the electricity rates regulated by National Electric Power Regulatory Committee (NERD). The amount paid in is divided between power generation companies, transmission companies, and distribution companies in accordance with the division rates stipulated by NERD. During 1999, collection of electricity rate payments was not adequately carried out, and normal distribution of dividends was not done; therefore, a vicious circle began in which each company raised its electricity rates repeatedly, and, due to this, users had more difficulty and could not pay their electricity bills. However, the electricity rates collection percentage has rapidly recovered due to NERD’s strengthening of electricity rates payment rules starting in 2000. Table 1.1-17 shows the electricity rates collection percentages in the first half term of

2000. Table 1.1-17 Electricity Rates Collection Levels (%) level of payment(%) month total found payments included January 6% 6% February 25% 18% March 38% 16% April 35% 14% May 66% 12% June 90% 41% July 80% 54% August 89% 79% Average 49% 29%

- 1-43 - 1.2.8 Environmental problems (1) Environmental policies and standards The following shows the laws and standards in Ukraine related to environmental protection 1. Environmental Protection Law 2. Water Quality Standards 3. Air Pollution Control Law 4. Standards for procedures for approval for special utilization of natural resources 5. Standards for procedures for approval for special utilization of precious natural resources 6. Environmental Surveillance Standards 7. Environmental Inspection Law 8 . National Environmental Inspection Standards 9. Air Pollution Control Method Standards 10. Standards for setting of physically and biologically toxic air pollution impact levels 11. Standards for methods of monitoring the impact of air pollution from power generation plants and boiler facilities 12. Public water area protection standards 13. Law concerning waste 14. Standards for environmental pollutant disposal charges and transactions concerning disposal funds The “Ministry of Environment and Natural Resources” is the organ concerned with environmental protection, and the State Ecological Inspection Agency is the environmental inspection organ.

(2) Air pollution control Ukraine has abundant coal deposits, and has been encouraging the use of this coal in thermal power plants. The impact on the surrounding areas of dust from fly ash and clinkers accompanying the combustion of coal has been reduced by installing electrostatic precipitators. But facilities for NOx and SOx control measures have not yet been installed, and those pollutants have been treated by expanding their diffusion range by increasing chimney heights and increasing emission rate speed, etc. (But) strict standards are applied for (most) toxic substances measured in the air. Table 1.1-18 shows the allowable values for toxic substances in air.

- 1-44 - Table 1.1-18 Maximum Allowable Concentrations

One-point maximum Daily average maximum Substance allowable value (mg/m3) allowable value (mg/m3) Nitrogen dioxide 0.085 0.085 Vanadium — 0.002 pentoxide

Arsenic - 0.003 Dust 0.5 0.15 Ash 0.15 0.05 Sulfuric acid 0.3 0.1 Sulfur 0.5 0.05 Hydrogen sulfide 0.008 0.008 Carbon monoxide 3.0 1.0 Formaldehyde 0.035 0.012 Fluorine compounds 0.02 0.005 Chlorine 0.1 0.03 Benzopyrene — 0.000001

These are roughly similar to environmental standards in Japan; therefore, environmental consciousness in Ukraine is considered quite high. Regulatory values for SOx (sulfur oxides) have not been set in Ukraine. Power plants do not measure SOx emission concentrations and quantities of SOx emitted.

1.3 Need for joint execution of project

Ukraine ’s major industries are typical large-scale mechanized agriculture and heavy and chemical industries centered around the steel industry; these industries have many greenhouse gas emission sources. However, the greenhouse gas reduction quantity compared with fiscal year 1990 levels stipulated for Ukraine by the Kyoto Protocol, is 0%. In addition, since the Ukrainian economy remains sluggish, and the possibility of any remarkable future increase of greenhouse gas emissions in Ukraine is low, there is no need to make efforts to reduce the emission of greenhouse gases. On the other hand, the improvement of efficiency by improvement and repairing of superannuated facilities in all industries is desirable. In the electric power

- 1-45 - industry in particular, domestic and international condemnation of nuclear power generation has been intense since the Chernobyl No. 4 reactor accident, future prospects for the previously-mentioned K2R4 plan are unclear, and construction of new nuclear power plants is completely stagnant. Also, both the construction of new thermal power plants and the rehabilitation of existing facilities are difficult to achieve due to financial problems, and power generation is inevitably continuing with the use of low-efficiency power generation facilities; the resulting increased fuel expenditure and decline of energy generated, cause further worsening of financial conditions and a vicious circle of problems for the management of power generation companies. Ukraine is blessed with abundant coal resources, but for most of the oil and natural gas it uses, it depends on imports; its self-supply rate for crude oil is 33.6%, and for natural gas, 22.3%. These oil and natural gas imports have created enormous debts, causing great difficulty for Ukrainian finances; reducing the quantity of fuel imported from outside Ukraine is essential to improve the country ’s financial condition. In other words, Ukraine needs to reduce fuel consumption while maintaining its present power generation capacity; this is directly related to reduction of greenhouse gas emissions. In addition, there is a possibility of serious electric power shortages due to operation shutdowns of superannuated thermal power plants, which could occur one after another in the near future. Repair and improvement of superannuated power generation facilities are urgent tasks for Ukraine which has a pressing need to avoid such a state of emergency in any way possible. Under such circumstances, the Ukrainian government has great hopes for the modernization and improvement of its power generation facilities by joint implementation of a CO2 reduction project, and is strongly motivated to carry out such a project.

- 1-46 - 2. . Need for introduction of energy-saving technology to the subject industry The electric power sector in Ukraine is suffering from such problems as the delay of new electric power source development, declining total power generation facility capacity due to superannuation of facilities, worsening of fuel consumption rates, and declining utilization rates due to the shortage of funds for procurement of fuel. These have caused a decline of energy generated and an increase of fuel consumption, creating a vicious circle for electric power sector management. Under such circumstances, introduction of energy-saving technology to the electric power sector is essential. The improvement of efficiency by introduction of energy-saving technology to the electric power sector actually involves various tasks involving both software and hardware. The following are examples.

(A) Reduction of transmission and distribution losses The actual transmission and distribution loss total in Ukraine was 7.3% in 1990; this increased to 17.6% in 1999. We can assume transmission and distribution losses in major Western countries to be at the 8% level but in Ukraine these figures are higher. (The average transmission loss rate for Chubu Electric Power Co., Inc. was 4.89% in the fiscal year 1999.) Reduction of transmission and distribution losses is one area in which energy-saving technology can be introduced. Technical loss due to superannuation of facilities causes transmission and distribution losses in Ukraine, but non-technical losses, such as theft of electric power from the trolleys used for public transportation, are also large and cannot be resolved simply by the introduction of technology.

- 1-47 - (B) Improvement of power generation efficiency The thermal efficiency of thermal power generation in Ukraine is generally around 20 - 30%, very low values compared to the thermal efficiency level of approximately 40% for electric power companies in Japan. The following factors can be considered to be the causes of low thermal efficiency in Ukraine. • Superannuation of facilities due to shortage of rehabilitation funds • Worsened properties of fuel • Ukraine has selected nuclear power generation as its electric power source base, and uses thermal power plants to cope with peak load.

The vicious circle of shortage of funds, shortage of electric power, and shortage of technical power, is the generally the background in such cases. For improvement, the introduction of a wide range of technology is needed, not only to increase efficiency, but also to save energy at the daily business level. Introduction of such energy-saving technology is expected to have not just a simple energy-saving effect, but also to result in reduction of fuel costs through improved thermal efficiency, and in increases of energy generated by improving the reliability of facilities; in other words, improving profitability as well as the ability to supply power. When a positive loop such as this has been created, it can be expected to connect to the improvement of performance for the entire electric power sector. As stated in “1.1.2, Energy Conditions, ” Ukraine is blessed with abundant coal resources, but depends on imports for most of the oil and natural gas it uses; in 1997 its self-supply rate for crude oil was 33,6%, and that for natural gas was 22.3%. These imports of oil and natural gas have created enormous debts which have handicapped Ukrainian finances; therefore, reduction of the quantity of fuel imported is essential for improvement of Ukraine ’s financial condition. Under such circumstances, Ukraine is carrying out programs to increase its own production of gas and petroleum, and the National “Petroleum and gas in Ukraine until 2010” Program has set as its goal the meeting of at least 50% of the demand for oil and gas in Ukraine by domestic production, within approximately 10 years. The Ministry of Fuel and Energy of Ukraine basically encourages the use of domestic coal in newly-built or rebuilt power plants, while the previously-mentioned National Program is aimed at meeting 50% of oil and gas demand by domestic production. Development of the gas-combined cycle is permitted in the case of this

- 1-48 - project, however, because power generation plants are presently obliged to use low- grade coal, and this power plant is located in a suburb of a large city, Dnipropetrovs ’k, where stable supplies of gas and heavy oil can be expected.

At present, power generation facilities in Ukraine are operating at very low thermal efficiency due to superannuation of facilities and the delay of technological development by the economic problems that have prevailed since the USSR broke up; however, the development of the combined cycle in the execution of this project can drastically decrease fuel consumption by increasing power generation thermal efficiency (30.43% -+ 52.5%), by the installation of 3 new 100MW combined-cycle gas turbine units, as replacements for the existing 300 MW steam power generator to be removed and disposed of, simultaneously achieving drastic reduction of carbon dioxide emission quantity by changing the fuel used from coal to natural gas. Also, since the Chernobyl nuclear power plant accident, the electric power industry in Ukraine has been in circumstances in which they cannot construct any new nuclear power plants, so the Ukrainian electric power industry must construct high-efficiency combined-cycle power plants in order to make efficient use of its limited domestic resources.

3. Significance, needs, and effects of concerned project, and propagation of results in same type of industry (1) Significance of project execution The Pridniprovslcaya power plant is located in Dnipropetrovsk city in southeastern Ukraine, where the steel industry, one of the country ’s key industries, is concentrated, as the key power plant supplying electric power and heat to local residents and to manufacturing plants. The Ukrainian government strongly desires execution of the concerned project not only from the viewpoint of its environmental improvement effects, but also to achieve a stable supply of energy, and J ST Dniproenergo is preparing its acceptance system under the guidance of the Ministry of Fuel and Energy of Ukraine. The efficacy of execution of the project is considered to be like the administration of nutrients (for healthy growth), different from fund aid to Ukraine which is more like an (emergency) intravenous drip infusion treatment for the worsened economy. The execution of this project will involve many

- 1-49 - technologies and the exchange of many human resources, and the project is highly significant from the viewpoint of friendly relations between Japan and Ukraine. Also, the execution of this project, which is the goal of this feasibility study survey, has great significance as a basis for obtaining cooperation from the Ukrainian side when carrying out future adjustments, contracts, joint implementation of future projects, and CO2 emission rights transactions.

(2) Need for and effects of project execution Execution of the concerned project will play an important role as a measure for providing a stable supply of electric power and contributing to industrial reformation and to the development of the local economy. Electric power source development has been sluggish in Ukraine, and its electric power industry has continued to use superannuated facilities with performance that is remarkably degraded due to the continuous operation of these facilities for many years, worsening the efficiency of power plant operation. Such circumstances not only cause increased fuel consumption, but are also connected to worsening of the financial condition of power generation companies. The existing power generation facilities in Ukraine today were mostly constructed in the 1960s and 1970s, as was the Pridniprovskaya power plant, and many facilities have low thermal efficiency and poor operation efficiency. Under the circumstances in which Ukraine is shifting to a free economy accompanying its economic reformation, power generation companies urgently need to improve their power generation efficiency, and to upgrade their power generation facilities to those with good operation efficiency using the newest technology. Also, because Ukraine has many neighboring nations, the achievement of environmental control and safety using the newest facilities, is not only expected within the Ukraine, but is also urgently anticipated by these many adjacent nations. The Pridniprovskaya power plant was constructed in the 1960s, and 34 years have already passed since its 300 MW facility, the subject of this project, was built; its efficiency and its utilization rate have both declined. Except for electric power shortages in some localities, Ukraine ’s overall electric power supply has had no major problems to date, but if the problem of superannuated

- 1-50 - facilities is ignored, power supply shortages will occur in future as power demand increases. In this situation, this project ’s plan to install a combined-cycle power generation facility utilizing an idle location on the same power plant site, and to remove an existing power generation facility, can maintain output in a drastically short period of time compared with the development of a new electric power source; therefore, the need for this project is great. (A) The fuel consumption reduction effect of executing this project, and its impact on the Ukrainian economy, will be very large. (B) Ukraine is presently carrying out economic reformation to shift to a free economy, and by execution of the concerned project the power generation company can expect the effect of increased management efficiency, enabling it to maintain profit from the operation of the power plant by improvement of plant efficiency through use of the newest facilities. (C) Since this is the key power plant in southeastern Ukraine, stable supplies of electric power and heat from the concerned power plant are most important for social and economic development; therefore, early actualization of the concerned project is considered necessary. (D) Execution of this project will increase the efficiency of existing power generation facilities, which had dropped due to their superannuation, and very great energy-saving can be expected from it.

- 1-51 - Chapter.2 Implementation of the Project Scheme [Summary] This chapter provides a description of the specific details of the project. This is a scrap-and-build project to abolish Pridneprovskaya TPP Unit No. 12 (output: 300 MW) and newly build a combined cycle power plant (output: 100 MW X 3). We looked into the current state of equipment, and examined system configuration/equipment specifications/layout scheme/construction process while taking into consideration the needs of Ukraine. As a result, we see a bright outlook for materialization of this project without a technical hitch. The total amount of finance needed for this project (including modification of existing equipment/new construction of power generating facilities) is estimated at 30,107 million yen. Although in this project, the implementation site has attracted a high public interest, we believe it is necessary to reinforce the capacity to carry out the project in terms of operating techniques. 1. Project scheme

1.1 Overview of the object region for implementing the project

1.1.1 Economic/social situation (1) Overview of the object area for implementing the project The object area for implementing the project is a catchment area along the Dnieper River in the southeastern part of Ukraine. This is Dnepropetrovsk Province with the total area of 31,900 km2 (5.3% of the whole land of Ukraine). The population of the province is 3.70 million (7.5% of Ukraine as a whole). Apart from the urban area, the terrain is flat, consisting of steppe and woodland. Dnepropetrovsk Province is located at almost the center of eastern Ukraine. Heavy industries have developed from old times based on the water transportation utilizing the Dnieper River. Today, mining/steel/chemical/mechanical industries are thriving. There are 15 types of industry/587 corporate entities, accounting for 15.6% of industrial output of Ukraine as a whole. The land is fertile and suitable for agriculture. Farmland accounts for 73.4% of the total area of the province (2,299.3 ha). Wheat/sunflower seeds/beets/vegetables are produced, and the revenue from agriculture accounts for as much as 14% of the total production of the province. In addition to water transportation, other transportation infrastructure is also in place. Included are three airports including two international airports. The total extension of the railway track and that of the motorway is 49.5 km per 1,000 km2 (national average: 37.0 km) and 283 km per 1,000 km2 (national average: 269 km), respectively, both of which surpass the national average of Ukraine. The City of Dnepropetrovsk, the capital of the province, has a population of 1.12 million, and is located about 400 km southeast of the national capital of Kiev. It is a city of heavy industries located almost at the center of the province. Although detailed information is not available, it seems that armament-related factories also exist. In addition, it was the center of aerospace-related industries in the era of the former Soviet Union. For these reasons, access by foreigners was restricted up until several years ago.

- 2-1 - Table 2.1-1 JST Dneproenergo Power Generating Units Unit quantity X Capacity of power station unit capacity Kruvorizka 2,820 MW 10X282 MW Pridneprovskaya 1,740 MW 4X285 MW, 4X150 MW Zaporizhia 3,600 MW 3 X800 MW, 4X300 MW Source: UKRAINE POWER INDUSTRY The total power generating installed capacity is the largest among the four power companies in Ukraine.

(3) Overview of Pridneprovskaya TPP Pridneprovskaya TPP is located on the east bank of the Dnipro River in the suburbs of the City of Dnepropetrovsk. It is the oldest power plant and has the lowest power generation capacity among the power plants owned by JST Dneproenergo. It not only supplies electricity in the neighboring heavily industrialized area but also provides heat for district heating. Pridneprovskaya TPP uses domestically produced coal for its fuel, which is transported by freight train from the Donetsk coalfield located about 200 km in the east. In recent years, the heating value/quality of Donetsk coal has deteriorated, which forces the power plant to burn the coal mixed with natural gas. The natural gas is imported from Russia through a pipeline. However, the power plant has gotten into constant trouble with Russia due to unpaid charges. Pridneprovskaya TPP uses the water of the Dnipro River for its condenser cooling water, because plentiful river water is available throughout the year.

-2-3 - 1.1.2 Environmental issues Ukraine used to be rich and abundant in high-quality coal resources. On the other hand, it was not endowed with gas and petroleum resources, most of which were imported from other countries. For this reason, a number of coal-fired thermal power plants were established against a backdrop of abundant coal resources. In recent years, however, most of the coal resources are not adequate in quality, though rich in reserves. As a result, the coal produces excessive NOx and SOx when combusted. Pridneprovskaya TPP, which is the subject of modification this time, is equipped with an electric precipitator, but not with equipment for removing NOx and SOx. The northwester blowing at an annual occurrence rate of 95% or more forces most of these substances emitted from the power plant to come down on the central part of Dnepropetrovsk city street. In addition, internationally active environmental protection groups reside in the vicinity of the power plant, keeping a watch on the exhaust gas from the power plant all the time. Due to the tight domestic economy, it is necessary to give priority to utilizing domestic resources as much as possible. It is more desirable, however, to add equipment for environmental measures or utilize natural gas, which is a clean fuel, in an effort to reduce adverse effects on the surrounding area caused by use of low quality coal.

1.2 Details of the project

1.2.1 Objective of this project The objective of this project is to abolish one of the four 300 MW units that have become deteriorated with lowered efficiency and utilization factors at Pridneprovskaya TPP, owned by JST Dneproenergo, and newly install a highly efficient and highly reliable combined cycle power generating unit of the same size. This project is aimed at ensuring power resources over the years to come by renovating equipment, and at the same time, at attaining energy saving and reduction in CO2 (a global warming gas) emissions by improving thermal efficiency and converting fuel from coal to natural gas.

- 2-4 - 1.2.2 Selection of the unit to be abolished As a result of examination of their needs, of the four 300 MW units, we will demolish Unit No.12, which is shut down at present.

1.2.3 Location of the newly installed unit The already abolished 100 MW unit area will be utilized as the location for the newly installed unit, not the area of Unit No.12 to be demolished. Because a structure still exists in the abolished 100 MW area, the structure will be removed, and the site of a demolished building will be utilized. Thus, Unit No.12 will be simply abolished, and we will not take into consideration the removal of the unit in this project.

1.3 Targeted greenhouse gas

This project aims at abolishing one of the existing four coal/gas/heavy oil-fueled 300 MW units of Pridneprovskaya TPP that have become superannuated and whose efficiency and utilization factor have declined, and at providing a highly efficient and highly reliable combined cycle power generating unit of the same size. Thus, fuel consumption will be cut by the improvement in thermal efficiency, and carbon dioxide emissions will be cut in proportion to the fuel consumption. At the same time, this project also makes it possible to cut the carbon dioxide emissions further by converting fuel use from coal to natural gas. Accordingly, the greenhouse gas targeted in this project is carbon dioxide.

-2-5 - 2. Outline of the implementation site

2.1 Degree of interest at the implementation site

The Ukrainian side is very much interested in this project. Through this study, we were able to obtain full support from JST Dneproenergo as well as Pridneprovskaya TPP. At present, Ukraine has the following problems: (1) Since independence from the former Soviet Union, stagnation of the Ukrainian economy has resulted in domestic industry becoming sluggish. Owing to uncollected electricity bills, operation finance for the power generating plant is running short. At the present time, there is no tightening of supply and demand of electric power. However, under the current situation, it is difficult to determine maintenance costs, not to mention costs for development of a new power source or modernization/modification of the existing plant. For these reasons, shortage of power generation capability is a matter of concern in the near future. (2) The energy situation in Ukraine is severe. Ukraine is suffering from a decline in the heating value of domestically produced coal and suspension of supply of natural gas produced in Russia due to default in the payment of charges. (3) In recent years, there has been growing interest in environmental protection in Ukraine. It is also required to take measures against air pollution in the City of Dnepropetrovsk.

Under these circumstances, this project is considered to be the means to save valuable natural gas and achieve maximum power generation. Expectation on the Ukrainian side is higher than expected. Pridneprovskaya TPP being under the control of JST Dneproenergo is required not only to supply electric power and heat in a stable manner. In the midst of economic reform, Pridneprovskaya TPP is also, due to necessity, under pressure to modify power plant equipment and to improve efficiency, which appears to be peculiar to power companies. Thus, the degree of interest in the power generation plant modification project scheme is very high, though from a different

- 2-6 - viewpoint from the objective of greenhouse gas reduction that Japan tries to achieve. JST Dneproenergo is fully aware of the needs to modify Pridneprovskaya TPP. However, under the current economic situation in Ukraine, there are problems in financing the modification. We feel their interest and need for finance to be granted in implementing this project. The power generation of Ukraine is based on the nuclear power generation plant. The thermal power generation plant requires response to the peak load. On the other hand, Pridneprovskaya TPP Units Nos. 11-14 are 300 MW once- through units, and time required for start-up/shutdown is excessive. Thus, they are not capable of coping with the peak load. A combined cycle power generating unit whose time for start-up/shutdown is particularly short is exactly what JST Dneproenergo needs. We felt a high degree of interest in this project plan and high expectation for its implementation. We felt this not only in carrying out this F/S study but also through the cooperation process, including the study of the local power plant, which occurred at the power company and the power plant. In addition it included their response at the meetings, materials on the existing power plant, and the submission of operation data. Thanks to this, we were given almost free access to the facilities in the power plant. We were also able to proceed with collection of internal documents (e.g. necessary drawings/data) and study hearings without a hitch. In addition, lively Q & A sessions were held at the project plan presentation and an exchange of views conducted on the site with the executives of JST Dneproenergo. Thus, we were able to make this study a productive one. Generally speaking, the Ukrainian side (including executives of JST Dneproenergo) is very positive about this project. We thus believe that we will be able to get positive support. We also feel that we will be able to get positive support from the Ministry of Fuel and Energy (MOFE) (the upper organization).

-2-7 - Following are the equipment specifications for Pridneprovskaya TPP: Pridneprovskaya TPP used to have 14 units in total (2,400 MW) comprising 100 MWX6 units (Units Nos. 1 - 6), 150 MWX4 units (Units Nos.7 - 10), 300 MW X4 units (Units Nos.l 1 - 14). However, Units Nos.l - 6 were abolished in 1985. At present, 8 units (Units Nos.7 - 14) in total (1,800 MW) are in operation. The 150 MW units are drum boilers. They not only generate power but also supply heat to the surrounding areas. The 300 MW units employ supercritical and constant pressure once-through boilers. Both types of unit are those originally planned for the single fuel firing plant to use domestic Donetsk coal. However, because the heating value/quality of Donetsk coal has deteriorated, combustion aid (heavy oil or gas) is now needed.

Table 2.2-1 shows the equipment specifications for Pridneprovskaya TPP.

Table 2.2-1 Pridneprovskaya TPP Equipment Specifications Units Nos. 1 - 6 Units Nos. 7-10 Units Nos. 11-14 Output 100MW 150MW 300MW Main steam — 13.6Mpa 24.9Mpa pressure Main steam — 565%: 560°C temperature Reheating steam — 565°C 565%: temperature Commencement year of 1954 —1957 1959 —1962 1963 ~1966 commercial operation Fuel Coal/gas/heavy oil Coal/gas/heavy oil Abolished in 1985 Drum boiler Supercritical and Turbines/generators Cogeneration plant constant pressure have already been once-through boiler removed. Remarks The boilers are in the process of being removed. (5 out of 12 units have been removed.)

- 2-9 - 2.2.3 Operating situation of Pridneprovskaya TPP (1) Operating situation Generally, 150 MW X 2 units are operated in the summertime, and 150 MW X 4 units are operated in the wintertime. When the electric power generated is insufficient, 300 MW units are operated. Because the 300 MW units are once-through units, it takes time for start­ up/shutdown, which is not suitable for peak load operation. The 150 MW units are drum boilers, and start-up/shutdown is easy. The 150 MW units also supply heat to the city of Dnepropetrovsk. For these reasons, 150 MW units are used preferentially. This affects the operating situation described above. Because the 150 MW units also supply heat, their thermal efficiency (track record) is superior to that of the 300 MW units. Table 2.2-2 gives a description of the operating situation of each unit.

Table 2.2-2 Pridneprovskaya TPP Operating Situation Thermal Utilization Unit Output Mode of operation efficiency factor For load regulation Nos. 7 - 11 150MW 31.75% 53.5% DSS operation scheduled

Nos. 11-14 300MW 30.43% 22.8% For base load

(2) Situation with respect to environmental measures With respect to equipment for environmental measures, the 150 MW units are equipped with cyclone scrubbers, while the 300 MW units are equipped with electrostatic precipitators. However, for single fuel firing of coal, smoke and soot can be observed visually from the smokestack. Regarding NOx and S02, remedial equipment is not installed. Table 2.2-3 gives a summary of the situation with respect to smoke and soot emissions from the 300 MW unit. The data was obtained from Ukraine.

-2-10 - Table 2.2-3 Situation with respect to Smoke and Soot Emissions at Pridneprovskaya TPP (300 MW X 1 unit) Concentration of Item Emissions (t/year) emissions (mg/m3N) Soot and dust 950 5,842 S02 1,025 10,050 NOx 480 4,750 CO 50 850 Note: The values above were calculated from the normal fuel composition/fuel consumption rate. The values are applicable when 300 MW X 1 unit is operated at a utilization factor of 100%.

(3) Maintenance situation Basically, the plant is maintained in a 5 year “large —>small —» medium —» small —> medium —> large” cycle, performing one of three types of maintenance (large scale: from 50 days to 2 months; medium scale: 24 days; small scale: 12 days) each year. They also have a remaining life assessment technique based on the operation time. At the point when the operation time exceeds the administration value, they assess the remaining life. Based on the results, they plan and implement the large-scale maintenance process. At present, most of the units at Pridneprovskaya TPP have exceeded the administration operation time. Some units have undergone large scale maintenance, but others have not. Table 2.2-4 shows the maintenance situation of the units as of December, 2000.

-2-11 - Table 2.2-4 Pridneprovskaya TPP Maintenance Situation 150 MW unit No. 7 Large-scale repair has already been implemented based on the remaining life assessment results. All four units No. 8 can be operated. No. 9 No. 10 300 MW unit No. 11 Large-scale repair has been performed based on the remaining life assessment results. However, the work was suspended due to lack of finance when the repairs were 60% complete. No. 12 Because the operation time has exceeded the administration value, the units cannot be operated unless the remaining life assessment is performed. However, the diagnosis itself cannot be implemented due to lack of finance. No. 13 Because the operation time has not exceeded the No. 14 administration value, operable condition has been maintained by normal maintenance procedures.

As the table above shows, two of the 300 MW units cannot be operated as of now. Of these inoperable units, Unit No. 12 has been selected as the unit to be abolished in this project because there is no prospect of resumption of operation.

2.3 Project implementation capability of the implementation site

2.3.1 Technological capability The educational standard of Ukraine is generally high, and the standard of human resources at the site is also considerably high. And the transfer between the power plants is rare. For these reasons, we imagine that specialized expertise for the power plant is readily available. On the other hand, there are few performances of the gas-turbine-power- generation facility in Ukraine country, and it is only Cogeneration-plant (250MW five sets, 100 MW three sets) of Kiev and Kharkiv which used the gas turbine made from Ukraine. Thus, under the current situation, there are no human resources with the necessary knowledge and expertise in gas turbine equipment at the implementation site of JST Dneproenergo and Pridneprovskaya TPP.

-2-12 - (1) Plant planning/design Due to the lack of human resources with a full knowledge of combined cycle plants, we believe it is difficult for the implementation site alone to plan/design the project. However, it is common in Ukraine to employ consultants such as the Donbasenergo Thermoelectricity Design Research Institute in planning/design, even for power generation plant modification. It is also possible in this project to proceed with planning/design of the plant without problems, by selecting consultants with extensive knowledge/expertise of combined cycle plants. (2) Construction administration In the 1990 ’s, new power sources were not developed in Ukraine. In 1994, JST Dneproenergo was established in a reform of the electric power sector. However, there is no track record of construction administration by J ST Dneproenergo as the main constituent. In the track record of modification for life extension of the existing plant, consultants have played the central part in overall administration, while the Reconstruction Section of the power plant has been responsible for quality/process and safety management at the site. For this reason, we believe that the site can play the central part in promoting the work with no problems, by selecting appropriate consultants for this project with the cooperation of contractors/plant manufacturers. (3) Operating technology Unlike electric power companies in Japan, a companywide training scheme (including simulator training) has not been implemented. However, a moderate training scheme has been put in place, such as having training equipment for the operating personnel at the power plant. Thus, the proficiency of the operating personnel has been adequately maintained. When we studied the central control room, the leader of the operation team answered our questions explicitly. While we were in the room, operating personnel quickly responded to the transmitted alarms. We got the impression that they are prompt and efficient. We thus believe that the current operating technology is adequate. However, because they do not have knowledge of the combined cycle power generating plant, it is necessary to provide operation training together with the

-2-13 - implementation of this project. (4) Maintenance technology They have well-developed comprehensive maintenance procedures ranging from maintenance techniques to cope with daily problems, to periodical inspection, analyzing the equipment status, remaining life assessment, deterioration renovation, preventive maintenance, and historical data management. This is evidenced by the fact that they operate the approximately 40 year old Unit No. 7 (150 MW), even though it started commercial operation in 1959. The executives of the power plant who received us answered most of our questions on the spot in the local study. This also testifies to the high standard of human assets. They also have their own repair plant in the power plant, and can manage some equipment repair on-site. Thus, their specialized technology is excellent. As described above, they do not have knowledge of combined cycle power generating plant, in particular of gas turbines. However, if we provide knowledge necessary for maintenance of combined cycle power generating plant by giving training to the maintenance personnel together with the implementation of this project, we expect that they will be able to operate the plant for a long period of time.

-2-14 - 2.3.2 Management system The top organ of the electric power sector in Ukraine is the Ministry of Fuel and Energy (MOPE). The subordinate independent regulatory organ that monitors electric power transactions is the National Electric Power Regulations Committee (NERC). Under the NERC are the power companies, power distribution companies, and power transmission companies. JST Dneproenergo is one of the six private power companies. The outline organization chart of J ST Dneproenergo is as follows: JST Dneproenergo (total number of employees: 8,338)

Repair maintenance department Kruvorizka TPP (890) Special repair department Management (536) Inspection Zaporizhia TPP Administration department Monitoring (119) (242) Supply department Prydniprovska (68) TPP Transportation department (463) Security department (not disclosed)

As long as we see administrative/maintenance management system of Pridneprovskaya TPP, we do not believe that there are problems in the management support and management capability to execute the project. However, JST Dneproenergo has not experienced construction scheme/implementation of a new power generation plant for the past 10 years. We thus believe that support will be needed with respect to consultants in project management, for example. There has been no experience in Ukraine of installing a combined cycle plant of the type that is proposed in this project. For this reason, we believe that technical assistance/training has to be provided by dispatching professional

-2-15 - engineers for the planning, design, and site administration, and experienced personnel for the test run.

2.3.3 Business management, management policy At present, default in payment by customers and barter transactions are commonplace in the Ukrainian economy as a whole. Thus, the framework of electric power transactions is marred by problems. Although the National Electric Power Regulations Committee (NERC) was established in 1995 as an independent regulatory organ, the government/Ministry of Fuel and Energy have strong influence over management of electric utilities. This allows easy political intervention in the market by the government. Thus, under the current situation, transactions are not conducted in accordance with the market regulations. Privatization is indispensable to the elimination of political intervention that distorts the market, and to establishing a framework for electric power transactions in accordance with the market regulations. Based on this understanding, Ukraine launched the sale of stocks of electric power companies at the end of 1997. As of now, most of the companies have sold only 20% - 30% of their stocks. Most of the stocks are still owned by the national government. The same is true of J ST Dneproenergo. 75% of the stocks are owned by the national government, while the remaining 25% are owned by the employees of the power company (union). Thus, under the present situation, we cannot say that the company is virtually privatized. Privatization is not progressing because severe conditions are imposed on these companies (e.g. additional equipment investment, payment of cumulative debts to the investors, maintenance of labor force). In addition, electric power companies that were subject to privatization have many problems such as default in payments by customers. Thus, under the current situation, these problems aggravate the financial position. However, from January, 2000, rules to collect electricity bills have been enforced against customers. While recovery of charges was 6% as of January 2000, it rose to 89% as of August. The GNP growth rate recorded the 5% mark at the end of 2000, far exceeding the original projection of 2%. For these reasons, it is expected that the Ukrainian economy will recover and the management conditions of JST Dneproenergo will improve in the future. We believe that

- 2-16 - these developments will be favorable for implementation of this project.

2.3.4 Finance defrayal capability Although JST Dneproenergo is a private enterprise, most of the stocks are owned by the Ukrainian government. In addition, charges for electricity and heat supply are determined by the Ukrainian government. Thus, the right of management is virtually held by the Ukrainian government. For this reason, it is believed that the Ukrainian government will defray the actual project costs. However, the Ukrainian government, dependent on Russia for most of its industrial activities, is in serious economic difficulties after its independence from the Soviet Union. Later, due to cooperative recovery with Russia and cooperation with Europe, the domestic economy showed signs of recovery. However, strongly affected by Russia’s financial crisis in 1998, the economic situation is still in serious condition because of concerns over the recurrence of inflation caused by sharp declines in its currency, the Hyrvna. This has also caused delays in the loan repayment schedule from other governments/organs. Thus, at present, the granting of additional finance from other countries has been shut down. However, in January, 2001, the IMF announced its approval to grant additional finance. Thus, we expect that granting of additional finance will be resumed from other countries in the future. We believe that a low-interest soft loan with a long payback period is desirable as an appropriate source of finance for this project under the circumstances. When this project is implemented, emissions of carbon dioxide are expected to be reduced. Thus, we believe that application of Japan ’s special yen loan for the environment is optimal. However, the special yen loan for the environment is granted only for 75% of the total cost of the project. For this reason, we need to examine the financing method for the remaining 25% of the finance. We believe it is difficult for the Ukrainian government, which is not in good economic condition, to cover 25% of the project finance by itself. We thus need to think about financial assistance from overseas for the remaining 25% of the finance. At present, the shutdown of the Chernobyl nuclear power plant has triggered a growing demand for shutdown of the Soviet Union type nuclear power plants in European countries and around the world. We believe that finance assistance can be elicited under the pretext of ensuring a power source to augment the

-2-17 - domestic electric power generation capacity, which is strained due to the shutdown of the nuclear power plant. In any event, we believe that the practical source of finance and defrayal of finance will be left to the negotiations that will be held when this project is implemented.

2.3.5 Capability to acquiring human resources Because JST Dneproenergo and Pridneprovskaya TPP have a number of engineers, we believe that there are no problems in acquiring the personnel needed for this project. However, there has not been any experience in Ukraine of installing the kind of combined cycle generator proposed in this project. For this reason, we believe that the professional engineers have to be dispatched in planning, design, and site administration, and technical assistance/training have to be provided by experienced personnel during the test run.

2.3.6 Implementation framework The possible basic framework will be that JST Dneproenergo is mainly responsible for implementation, and consultants are arranged under JST Dneproenergo to undertake substantial duties. There has been no experience in Ukraine, not to mention in JST Dneproenergo, of installing and operating a combined cycle power generating plant. For this reason, we believe it necessary to select consultants with extensive experience/knowledge.

-2-18 - 2.4 Details of the project at the implementation site and specifications after modification to relevant equipment

2.4.1 Outline of newly combined cycle power generating plant Here, we will give a description of the “newly installed combined cycle power generating plant ” system to be employed in this project as a system scheme. (1) Mechanism of the cycle When fuel gas (natural gas) is combusted in the air, it produces enormous heat (thermal energy). At the same time, the gas causes rapid volume expansion (mechanical energy). In the combined cycle power generation, this force of expansion first rotates the gas turbine. Then, high-temperature exhaust gas discharged from the gas turbine produces high-temperature, high-pressure steam, which rotates the steam turbine. Combining the driving force thus produced by the gas turbine and the steam turbine rotates the generator. In this way, highly efficient power generation is attained in this method by effectively extracting the energy that the fuel carries (thermal energy and mechanical energy).

(2) Equipment configuration In this project, one existing 300 MW unit will be abolished, and combined power generating unit of the same size will be newly established. However, regarding the equipment configuration of the newly installed unit, we will develop a scheme with 100 MW X 3 blocks as a result of the coordination with the Ukrainian side. There are the following reasons: (A) Highly efficient operation is possible in accordance with the supply and demand of the electric power. Ukraine, which depends on nuclear power plants for its base power source, is required to be capable of regulating demand and supply in terms of thermal power source. To the contrary, the combined cycle power generating plant has the advantage of short time and easy start-up/shutdown. It also has the disadvantage, however, of incurring significant reduction in efficiency in the partial load zones.

-2-19 - Figure 2.2-2 shows a graphic representation of efficiency difference in partial load zones between a scheme with one 300 MW unit and a scheme with three 100 MW blocks. As you can see from this figure, it becomes possible to always maintain high efficiency by increasing/decreasing the number of operating blocks in accordance with the increase/decrease in demand, and by keeping the output of the operating block(s) high.

OMW 100MW 200MW 300MW Output Fig. 2.2-2 Differences in Partial Load Efficiency due to Equipment Configuration

(B) It becomes possible to cope with step-by-step development in a flexible manner in accordance with supply and demand situation of electric power and financing.

(3) Outline of the newly installed unit Table 2.1-2 shows the outline of the newly installed unit. The details will be given one by one from the next paragraph.

Table 2.2-5 Outline of the Newly Installed Unit Heat Recovery Type Single Shaft Model Combined Cycle Gross 100.8MWX3 (unit total: 302.4MW) Output Net 96.7MWX3 (unit total: 290. 1MW) Thermal Gross 52.5% (LHV) efficiency Net 50.5% (LHV) Auxiliary power 3.8% Fuel Natural gas The figures above are the values at the design temperature of 8.4°C.

- 2-20 - (4) Temperature-output properties The gas turbine draws in/compresses the outside air and utilizes it as air for combustion. For this reason, when the ambient temperature gets high, the air density gets small, resulting in reduction of the air volume flowing into the gas turbine. The gas turbine controls the fuel volume so that the combustion temperature is kept constant. Thus, when the inflow air volume decreases, the fuel input is restrained, which leads to reduction in output. On the other hand, when the temperature goes down, the output increases. However, 107 MW becomes the upper limit due to mechanical restriction. This relationship is shown in Figure 2.2-3.

107.0 100.8

Condenser pressure : Constant (0.0035 MPa)

-38.2 -10 ~7-3 0 &4 10 38.1 40 Atmospheric Temperature [°C]

Power Output(Gross) of Combined Cycle Power Station [GUD1S.V64.3A] PRIDNEPROVSKAYA FS

Fig. 2.2-3 Atmospheric Temperature-Output Diagram

-2-21 - (5) Working fuel In this project, natural gas supplied through a pipeline will be used as fuel. The scheme will be based upon the composition given in Table 2.2-6.

Table 2.2-6 Natural Gas Composition Item Unit Value Kcal/m3(20°C) 7,876 Lower heating value Kcal/m3N 8,453 (LHV) kJ/kg 46,562 Kcal/kg 11,121 kcal/m3(20°C) 8,732 Higher heating value Kcal/m3N (HHV) 9,371 kJ/kg 51,620 kg/m3(20°C) 0.708 Density kg/m3N 0.760 Composition CH4 vol.% 94.505 C2H6 vol.% 0.699 C3H8 vol.% 0.200 n-C4H 10 vol.% 0.795 N2 vol.% 3.461 CQ2 vol.% 0.340 Mercaptane S g/103m3(20°C) 5.175

The figures in the table above are our estimated values based on the heating values and analytical values on composition given in the “Fax MESSAGE” data from J ST Dneproenergo dated December 20, 1999.

- 2-22 - (6) Main system The following is a description of the main system of combined cycle power generating plant that will be employed in this project. (A)Main piping system Fig. 2.2-4 shows the main pipe system diagram. The description will be given below according to the system diagram. (a) Gas turbine and HRSG The air drawn into/compressed by the compressor is mixed with the fuel gas and fed into the gas turbine where combustion takes place and rotational energy is produced. The heat of the exhaust gas from the gas turbine is recovered as effective thermal energy at HRSG. The exhaust gas is then released from the smokestack. HRSG has two systems: high pressure and low pressure. The steam generated in each drum goes through the superheater, is fed into the steam turbine, and then converted into rotational energy. Both of these systems are also equipped with a bypass pipe that allows each system to bypass the turbine and connect to the condenser in start-up/shutdown. The system that will be employed in this project does not have a reheating system. For this reason, the exhaust steam from the high pressure turbine simply flows into the low pressure turbine, and mixes with the low pressure steam. (b) Feed water system The condensate water condensed in the condenser is fed into HRSG again by the condensate pump. In this process, the condensate water is pre-heated by the “gland steam condenser ” and “condensate pre-heater. ” The condensate water is pressurized by the high pressure feed water pump before being fed into the high pressure line. The system used in start-up is given on the far left side in the figure. In the combined cycle, vacuum deaeration with the condenser is enough during the normal operation. However, dissolved oxygen concentration is high during start-up. For this reason, thermal deaeration is performed before the feed to HRSG.

- 2-23 - (B) Condenser and auxiliary cooling water system Fig. 2.2-5 shows the condenser and auxiliary cooling water system diagram. The description will be given below according to the system diagram. (a) Condenser cooling water system The cooling water is taken in from the existing main pipe using the intake for the former 100 MW unit located near the newly installed unit. In this scheme, the waste water is also returned to the existing culvert. Like the existing unit, the condenser will be equipped with a ball ­ cleaning unit.

(b) Auxiliary cooling water system This system is used for the auxiliary cooling water cooler branching off from the feed piping of the condenser cooling water. This system consists of a booster pump and a cooler, and cools the auxiliary cooling water that circulates between the auxiliary cooling water pump and auxiliary equipment. The booster pump has a spare unit, achieving the configuration of 100% X 2 units. This is because the bearing of the main engine may be damaged by the time when the rotation of the main engine stops completely, even if the plant is shut down immediately due to failure of this pump. The cooler is also configured with 100% X 2 units by taking into consideration the cleaning of clogging and dirt during the operation of the plant.

(C) Fuel feed system Fig. 2.2-6 shows the fuel system diagram. This figure gives the system diagram for all the three blocks. The system branching off from the existing gas main pipe to each block consists of a compressor for pressurization up to the pressure needed for the gas turbine (2.6 MPa); a control valve for controlling the flow rate and pressure; and a gate valve and filters associated with these units.

- 2-24 - Fig. 2.2-4 Main Pipe System Diagram

2-25 Fig. 2.2-5 Condenser and Auxiliary Cooling Water System Diagram

- 2-26 - Fig. 2.2-6 Fuel System Diagram

- 2-27 - (D) Auxiliary power source system During synchronization of the plant, the in-house power is supplied from the House transformer that is installed near the plant building for each block. During de-synchronization, the power source is supplied from the start-up transformer (common for three blocks). One 6.6 kV high-voltage bus is provided for each block, and one common bus for three blocks is provided. The auxiliary power source equipment is configured with the switchboard containers. Standard switchboard containers for gas turbine/steam turbine and HRSG are used in combination. The switchboard container houses not only a 6.6 kV and 400 V switchboard but also a control unit/power source unit for control and emergency storage battery. The switchboard container will be installed in the plant building near the auxiliary equipment. (a) Generator Installed indoors, the horizontal shaft rotating excitation field three- phase alternating current synchronous generator is connected to the steam turbine via the gas turbine and clutch. The cooling system is the open air-cooling type that allows easy maintenance. The excitation is the thyristor direct excitation type and is always controlled by the automatic voltage regulator (AVR). (b) Gas turbine starter To ignite the gas turbine, it is necessary to operate the compressor for compressing the combustion air with external power. In the newly installed plant, the generator will be used as the starter. Electric power is supplied to the main circuit of the generator from the receiving side via the frequency converter. Excitation is performed at the same time. The generator is thus used as the electric motor for controlling the rotating speed. After the gas turbine is ignited, the circuit is opened when self-sustaining operation commences.

- 2-28 - ATo 154 kV switchyard Generator circuit breaker 11/6.9 kV 154/11 kV House transfer 6 kV bus main transformer

Start-up circuit

Rotate as From Starting transformer an electric motor Frequency converter

Excitation circuit

Fig. 2.2-7 Start-up Circuit Conceptual Diagram

(E) Power transmission system The electric power generated by the gas turbine generator is boosted to the extra high voltage of 154 kV, and connected to the 154 kV bus in the existing switchyard. The circuit breaker will be installed near the newly installed plant, while the disconnecting switch will be installed in the feeder site for abolished Units Nos. 1 - 3 that remains intact in the existing switchyard. Having the capacity equivalent to 900 MW, the existing switchyard bus and 154 kV power transmission system are designed to connect former 100 MW Units Nos. 1 - 6 and 150 MW Units Nos. 7 and 8. After Units Nos. 1 - 6 were abolished, 150 MW Units Nos. 9 and 10 were connected to the 154 kV bus. At present, 600 MW (150 MW X 4 units) is connected. For this reason, it is not necessary to reinforce the capacity for connection of 300 MW (output of the newly installed plant). Designed capacity 900MW 100MWX6 150MWx2(Nos. 7 and 8) Current capacity 600MW 150MWX4 (Nos. 7 to 10)

After project implementation 900MW 100MWX3 (3 new blocks) 150MWX4 (Nos. 7 to 10)

- 2-29 - l54kV Bus n ---- D> Fig. —<}-o

2.2-8

-2-30 Switchyard — CD

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00 Povztr Supply Untl 2.4.2 Environmental measures (1) Related to atmosphere (A) Soot and dust/S02 The new unit generates no smoke or dust, as it uses clean natural gas as fuel. Moreover, the amount of sulfur contained in the fuel is very low, meaning that sulfur oxide discharge can be considered insignificant, requiring no specific measures. (B) NOx This project is designed to employ combined cycle power generating unit equipped with a low NOx burner. The NOx emissions after implementation of the project are cut by about 61% from the current level. We assessed the concentration on the ground in the surrounding area, assuming that the smokestack is 45m high. The result was below the maximum permissible concentration established by the Ukrainian Ministry of Welfare. In this evaluation result, the result exceeding a present ground concentration a little is brought. However, it is below a permission ground concentration and NOx discharge is cut down 50% or more. And in order to meet the Ukrainian standard, "smokestack height shall be 15m and over higher than the top of a neighboring building," the smokestack height is changed to 75m (the height of the existing 300MW boiler, 60m, plus 15m.) So, there is no problem. (C) CO In this project, clean natural gas will be used as the fuel. At the same time, a burner is employed whose combustion efficiency is extremely high. For these reasons, generation of CO is extremely low. Thus, there is no need to take special measures.

(2) Related to thermal effluent Pridneprovskaya TPP is located on the bank of the Dnieper River. The cooling water for power generation (condenser cooling water) is taken in from the Dnieper River, and discharged into the Dnieper River as thermal effluent. In this project, one conventional unit (existing 300 MW) will be abolished. In its place, a combined cycle power generating unit will be employed with high efficiency and less workload on the steam turbine per the generated electric power amount. For these reasons, the volume of cooling water for

-2-32 - power generation is less than the amount currently required. In the existing unit, the temperature difference at the condenser is 8°C (limiting value: 12°C) under normal conditions. In this case, the difference is planned to be 7°C for the newly installed unit. Thus, neither the thermal effluent volume nor the temperature will ever increase from the current level. In this way, environmental measures are not needed for the thermal effluent.

(3) Waste water from the plant The objective of this project is to abolish one existing coal-fired 300 MW unit and set up a combined cycle power generating unit of the same capacity fueled by natural gas. For this reason, the volume of the waste water will be decreased. Thus, environmental measures are not needed.

(4) Noise/vibration Regarding the combined cycle power generating installation that is to be newly installed under this project, the main unit of the gas turbine will be packed in an enclosure, which makes it possible to control the noise at 90 dB(A) 1 m on the equipment side. The impact on the border of the lot is also small because the entire power generating facilities is housed in a building.

2.4.3 Main equipment of the plant and equipment specifications (1) Outline of the plant Plant model Heat Recovery Type, Single Shaft Combined Cycle Gross output 100.8 MW/block Net output 97.0 MW/block Auxiliary power ratio 3.8 % Designed ambient temperature 8.4 °C Maximum ambient temperature 38.1 °C Minimum ambient temperature -38.2 T Designed atmospheric humidity RH 74 % Working fuel Natural gas (See 1.2.1 (3) for details) Lower Heat Value(LHV): 7,876 kcal/m3(46,562 kJ/kg) Gross efficiency 52.5 % (LH V Base) Net efficiency 50.5% (LH V Base) Exhaust gas parameters See Table 2.2-7

-2-33 - Table. 2.2-7 Exhaust Gas Parameters Unit Wet gas Dry gas Exhaust gas volume m3N/h 545,970 503,472 Exhaust gas temperature °C 103 — Exhaust gas velocity m/s 21.7 — Concentration ofSOx ppm 0.16 0.17 oc Emissions of SOx m3N/h 0.09 o cx Concentration of NOx ppm 38.5 41.8 ! Emissions of NOx m3N/h 21.1 Concentration of mg/ cd 0 bO soot and dust m3N C/5 3 Emissions of cd m3N/h 0 *5 soot and dust X Oxygen concentration vol% 13.0 14.1

The output changes depending on the ambient temperature and output. Fig. 2.2-3 above shows these properties. Fig. 2.2-10 shows the Heat Balance Diagram at the designed ambient temperature.

-2-34 -

(DESIGN

CONDENSER FEASIBILITY

TPP

DIAGRAM

STUDY TURBINE BALANCE

HEAT STEAM PRIDNEPROVSKAYA

(X) FLOW

t KJ/KG MASS

...

M KG/S KG/S TOR

8.4 GENERA

TURBINE

MW

GAS 100.8 STEAM

:

POINT

PUT

DEGREE TEMPERATURE

OUT

DESIGN RECOVERY •OMPRESSOR

T

A

GROSS HE AMBIENT TOR

GENERA

Fig. 2.2-10 H eat Balance (D esigned A m bient Temperature) (2) Specifications of mechanical equipment The following are the specifications of the main mechanical equipment. The specifications are the same for three blocks. Basically, equipment will not be shared among the blocks. On the other hand, the whole unit is redundant configuration comprising three blocks. Thus, equipment configuration is not redundant for each block. In other words, auxiliary equipment will not be provided with spare units, and 100% X 1 unit will be the basic configuration. However, spare units are provided for the equipment whose failure may cause serious damage to the plant (e.g. auxiliary cooling water equipment).

(A) Gas turbine Quantity 1 unit/block Single output (Gross) 68.5MW Turbine inlet temperature 1,190°C (ISO) Fuel consumption 4.12kg/s Rated speed 5,400 rpm (decelerated down to 3,000 rpm by the decelerator) Combuster Dry Low NOx Type (Pre-mix Combustion) Start-up method Static Frequency Converter (SFC) method Accessory equipment Fuel gas compressor (100% X 1), fuel gas feed unit, safety device, control unit, lubricating oil equipment (shared with ST), turning unit, intake/exhaust equipment, compressor vane cleaning unit

- 2-36 - (B) Steam turbine Model 1 Casing dual pressure axial- flow exhaust reaction Quantity 1 unit/block Single output (Gross) 32.3MW Steam condition HP:7.0MPa/538°C LP:0.52MPa/198°C Exhaust vacuum 3.5kPa Rated speed 3,000 rpm (connected to the generator via the clutch) Accessory equipment Safety device, control unit, Grand Steam Condenser, turbine bypass valve (HP and LP))

(C)HRSG (Heat Recovery Steam Generator) Model Dual pressure horizontal natural circulation type Quantity 1 unit/block Volume of generated steam HP:96.8t/h LP:13.3t/h Steam condition HP:7.3MPa/540°C LP:0.6MPa/200°C Gas temperature Inlet (GT outlet) 578°C / Outlet 103°C Accessory equipment Feed water pump (100% X 1), condensate circulating pump (100% X 1), feed water booster pump (for starting), Starting Deaerator, sampling unit

(D) Condenser Quantity 1 unit/block Designed cooling water temperature 12°C Designed cooling water volume 8900m3/h Degree of vacuum 3.5kPa Cooling water temperature increase 7°C or less Accessory equipment Ball cleaning unit, condenser vacuum pump (100% X 1), condensate pump (100% X 1)

- 2-37 - (E) Auxiliary cooling water unit Designed cooling water temperature 12 °C (branched off from the condenser cooling water) Equipment configuration Cooling water cooler (100% X 2), cooling water booster pump (100% X 2)

(3) Specifications of the electric equipment (A)Generator equipment Model Air cooling type synchronous generator Quantity 1 unit/block Capacity 119MVA Voltage ll.OkV Current 6,246A Power factor 0.9 pf (lag) Frequency 50Hz Excitation mode Thyristor direct excitation

(B)Main transformer Model Outdoor three-phase no-voltage tap changing oil feed air-cooled type Quantity I unit/block Capacity 119 MVA Voltage II kV/154kV

(C) House transformer Model Outdoor three-phase no-voltage tap changing oil-filled self-cooled type Quantity I unit/block Capacity 6 MVA Voltage II kV/6.6 kV

- 2-3 8 - (D)Gas insulation switch-gear (for main transformer) Voltage 168 kV Current 800 A Short-time current 31.5 kA Circuit breaker Quantity 1 unit/block Current 800 A Breaking current 31.5 kA Short-time current 31.5 kA

(E)Disconnecter (for main transformer) Model Stand type single contact air-break Voltage 168 kV Quantity 2 units/block Current 800 A Short-time current 31.5 kV

(F) Auxiliary electric equipment (container type electric equipment) Indoor self-sustaining type enclosed switchboard 6 kV high-voltage switchboard 400 V low-voltage switchboard, motor control center AC, DC distribution panel DC power source equipment Lead storage battery Uninterruptible power source unit

(G) Measurement control unit (container type measurement control unit) Governor control unit Thyristor starter Exciter Protective relay panel Automatic synchronous closing unit

- 2-39 - (H) Central monitoring unit System configuration Digital control unit Scope of automation Stand type single contact air-break During unit start-up from completion of start-up preparation to the target load

During normal operation load control and change in the number of operated auxiliary equipment, etc.

During unit shutdown from the current load to the shutdown of the final auxiliary equipment

Centralized monitoring control method (3 blocks centralized)

(I) Starting transformer Model Outdoor three-phase no-voltage tap changing oil-filled self-cooled type Quantity 1 unit / 3 blocks Capacity 6 MVA Voltage 154 kV/6.6kV

(J) Gas circuit breaker (for start-up transformer) Quantity 1 unit / 3 blocks Voltage 168 kV Current 800 A Breaking current 31.5 kA Short-time current 31.5 kA

(K) Disconnecting switch (for start-up transformer) Model Voltage 168 kV Quantity 2 units / 3 Block Current 800 A Short-time current 31.5 kA

- 2-40 - (L)Control system (a) Scope of automation Start-up/shutdown operation of the equipment (establishment of the fuel system/ignition of the gas turbine) requires complicated operation and precise timing. Thus, stable operation/safe operation of the equipment is ensured through full automation. (b) Automation items Automation will be attained by the CRT operation desk installed in the central control room so that start-up / shutdown can be performed with the scope below. During start-up Gas turbine start-up preparation - Target load During shutdown Load drop - Shutdown of gas turbine/steam turbine and final auxiliary equipment (c) Overall concept of the control system Fig. 2.2-11 shows the control system that is designed based on the scope of automation and automation items above and suitable for operation of the combined cycle power generating plant. (d) Operation/monitoring system The operation/monitoring system is configured based on the control units for the gas turbine / steam turbine / HRSG / related auxiliary equipment. The control units comprise the CRT operation & monitoring panel installed in the central control room and the control system cabinet installed in the control panel container. They are equipped with functions needed for automatic start-up/shutdown of the power generating plant and control during the operation. The digital control unit is also installed. The control units receive signals (e.g. “rotating speed, ” “temperature, ” “pressure ”) from the equipment side. After necessary control calculation is performed, control signals are output for controlling the opening of the fuel control valve. To monitor the operating status, data is collected to be displayed or printed out. As a safety device, if the operation falls into abnormal state, emergency stop will be performed automatically. Each auxiliary equipment is operated/stopped by the sequence logic incorporated into the control unit.

-2-41 - £ i jr

Fig. 2.2-11 Control System Configuration

- 2-42 - (M)Central control room The central control room will be provided in the NO. 1 block area for the three blocks as a whole. As has been described above, the room will be equipped with CRT operation monitoring panels and printers for three blocks. Fig. 2.2-12 shows the panel layout of the central control room.

Fig. 2.2-12 Layout of the Central Control Room

- 2-43 - (2) Overall layout of the power plant Fig. 2.2-14 and Fig. 2.2-15 show the overall floor plan of the power plant. In the following description, the longitudinal direction of the existing turbine building is considered as the north-south direction. In Fig. 2.2-14, for example, the left side is considered as the north. However, these directions differ slightly from the actual compass direction.

Fig. 2.2-14 General Layout of Pridneprovskaya TPP

(A) Layout of the current equipment (a) Locations and features of the buildings The turbine buildings and boiler buildings are laid out in the order of Units Nos.l - 6 (100MW), Units Nos.7 - 10 (150MW), and Units Nos.l 1 - 14 (300MW) from south to north in parallel with the Dnieper River. The railroad for delivering materials needed in the case of inspection and maintenance enters the Unit No.7 (150MW) turbine building through the north flank of the Unit No. 14 (300MW) turbine building. The office building is located in the south side of the Unit No.l (100MW) building across the road. The office building houses the rooms for the manager, office, and conference. It is connected with the existing 100 MW building via the connecting corridor (upper side of the road).

- 2-45 - Fig. 2.2-15 General Floor Plan of the Power Plant

- 2-46 - Case 1: Existing Nos.l - 6 units area Case 2: On the west side of Unit No.14 (constructed in series with the Unit No.14 building) Case 3: Outdoor switchyard(secure the space changing the existing switching facilities to GIS.) Case 4: Vacant lot around Intake No. 1 Case 5: Vacant lot around Intake No. 3

In selecting the construction site, we considered the following items comprehensively. We adopted the proposed location (Case 1) on this occasion. (a) The existing equipment can be utilized, and the construction cost can be held down. Existing water-intake and discharge equipment for the Units Nos.l - 6 can be utilized, and the supply of utilities (e.g. fuel) is easy at this location. (b) Convenience/operability for the power plant staff is high at this location. (c) The balance is maintained in terms of effective utilization of the land. This location (layout) can easily cope with extension/modification plans in the future. (d) This location allows relatively easy delivery of materials at the time of construction. (e) During the construction period, this location does not interfere with the inspection and maintenance work of the operation equipment.

- 2-49 - Fig. 2.2-19 Pridneprovskaya TPP Proposed Site for the Newly Installed Unit

- 2-50 - -2-52 - Fig. 2.2-22 Case of Utilizing the Existing Building (Floor Plan)

-2-53 - Fig. 2.2-23 Case of Removing the Existing Building (General Layout)

- 2-54 - Fig. 2.2-24 Case of Removing the Existing Building (Floor Plan)

-2-55 - Fig. 2.2-26 Case of Housing the Three Blocks in One Buildings

-2-57 - 2.4.5 Building scheme Fig. 2.2-27 shows a cross section of the turbine/boiler building.

L

iv #1

e-

'

Fig. 2.2-27 Turbine/Boiler Building Cross-section

- 2-58 - (1) Basic policy We devised the building scheme based on the results of the survey on natural conditions in the outskirts of the City of Dnepropetrovsk, technical conditions such as building materials/methods of construction, and Pridneprovskaya TPP. (2) Structural design The mathematical expectation of an earthquake occurring in the City of Dnepropetrovsk is extremely low. The city is not included in the subject areas that require aseismatic design stipulated in SNIPII-7-81 “Construction of Seismic Area.” For this reason, we will not take into consideration any seismic force in structural design. (SNIP is the construction standard used in the former Soviet Union.) We will take into account the wind load of 0.038 tf/m2 and the snow load of 0.05 tf/m2 as stipulated in SNIP2.01.07-85 “Loads and Effects.” When the shape factor of the building is taken into consideration, the designed load will be 0.046 tf/m2 for the wind load and 0.050 tf/m2 for the snow load. Spread foundation will be employed for the foundations of structures. The soil freezing depth is GL-1.5 m. For this reason, we will employ GL-2 m as the standard value for the bottom end level. The structural type of the shed is steel-frame construction only. Reinforced concrete construction is not advantageous in terms of the cost, because the mold forms are expensive. In addition, construction work takes time. For these reasons, reinforced concrete construction will not be employed except for the foundations of the buildings. (3) Equipment scheme The central control room building will be equipped with the heating equipment that utilizes warm water from the existing plant in an effort to improve the operability/convenience for the operating personnel during winter. In the summer, a separate air conditioner dedicated for cooling will be provided. At the turbine/HRSG building, ventilation because of buoyancy will be via the ventilator installed on the rooftop. However, the amount of ventilation will be restricted in the winter season. For this reason, the ventilator will be equipped with a manual switching device. Regarding freeze proofing, heat insulation will be provided to the piping.

-2-59 - (4) Specifications of the newly installed building (A) Turbine/HRSG building Structure: One-storied steel-frame construction Building area: 2,460 m2 Maximum height: 28 m External wall: Weatherproof folded plate F oundations: Independent footing foundations (Bottom end GL-3 m) Floor: Earth floor. Other notes: Natural lighting through the side multiple windows. Ventilator provided on the rooftop. Crane: Turbine building 70 t hanging Boiler building 15 t hanging. Large shutter: Delivery of materials and equipment in the case of inspection/maintenance Annexed building: GIS housing building (one-storied steel-frame construction). Power control center (Intense cold specifications container house)

(B) Central control room building Structure: One-storied steel-frame construction Building area: 232 m2 Maximum height: 4.5 m External wall: Weatherproof folded plate (with heat insulating material) Foundations: Continuous footing (bottom end GL-2 m) Floor: Concrete slab placed on the heat insulating material. The load will be transmitted to the continuous footing. Living space: Control room, rest room for operators, bathroom, and shower room. Double sash and pair-glass will be used for weather protection.

- 2-60 - (C) Utility pump building Structure: One-storied steel-frame construction Building area: 220 m2 Maximum height: 4.5 m External wall: Weatherproof folded plate (with heat insulating material) Foundations: Continuous footing (bottom end GL-2 m) Floor: Earth floor. The load will be transmitted to the continuous footing.

(D) Passageway Structure: One-storied steel-frame construction Maximum height: 3.0 m External wall: Weatherproof folded plate (with heat insulating material) F oundations: Independent footing foundation (bottom end GL-2 m) Floor: Earth floor.

(E)F oundations Structure: Reinforced concrete construction Form: mat foundation (bottom end GL-2 m)

-2-61 - 2.4.6 Utility supply conditions for the newly installed plant Table 2.2-8 shows the supply conditions for utilities such as fuel gas/condenser cooling water/makeup water that are needed in the newly installed plants.

Table 2.2-8 Utility Supply Conditions for the Newly Installed Plants

Quantity No. Item Unit consume Remarks d

Fuel kg/s 4.47 Ambient temperature -38.2°C 1 (natural gas) Nm3/h 21,200 Density: 0.76008 kg/Nm3

Makeup water t/h 2 2 Demineralized water (during normal operation) ton 100 For water filling For condenser (temperature increase 7 °C or less) 8,900 River water Required differential pressure 3 t/h (the Dnieper River) for tie-in point outlet/inlet 10 mAq

1,300 For auxiliary cooling water

Maximum supply conditions 4 Auxiliary steam t/h 5 during start-up: 7 kgf/cm2, 200°C

5 Auxiliary power kW 4,000

Maximum supply conditions Nm3/min 6 Air for instrument 10 during start-up: 7 kgf/cm2, room temperature

7 Nitrogen for storage m3 50 Filling capacity

The figures in the table above show the values for one block.

We asked them about the tie-in conditions shown in the table above, and confirmed that each item is receivable with all the conditions satisfied.

- 2-62 - 2.4.7 Details of modification of existing equipment This section gives a detailed explanation on the removal, relocation, and modification of existing equipment necessitated by this project. (1) Scope of removal for existing equipment The removal scope of existing equipment for Units Nos.l - 6 will be limited to the minimum area necessary for construction of a new plant. In this plan, the existing equipment installed up to the 28th Street will be removed. Since a part of the existing 100 MW units building is supposed to be preserved even after project completion, it is necessary to build a new wall in a cross section (flank side) of the building. (a) Turbine and boiler buildings: between the present flank side and a location 175 m away from the flank side (a scope covering Units Nos.l - 3) (b) Smokestack: 2 stacks (2) Relocation of existing equipment Since utility piping necessary for operation of the existing power plant is installed within the removal scope for existing equipment, it is necessary to relocate, prior to removal of the existing equipment, such piping to a location where it will not hinder the construction of a new unit. Fig. 2.2-28 shows the general locations of piping and the route of relocated piping.

Heat supply piping

Fire-fighting water /drinking water piping

Relocation of pump station

Fuel gas piping /Coal ash Piping route after relocation transport pipe

Fig. 2.2-28 Layout of Piping to Be Relocated

-2-63 - Details of equipment that should be relocated are given below. (a) Fuel gas piping Fuel gas piping starts from a fuel gas flow meter room, goes through the west side of the office building and the vicinity of the smokestacks for Units Nos.l - 6, and to Units Nos.7 - 14. Prior to the removal of the existing buildings, a new piping rack will be installed to create a detour to avoid the construction area. The piping will then be relocated. Since fuel gas piping consists of two systems, construction works can be carried out without affecting the operation of the existing unit by relocating one system at one time. (b) Coal ash transport pipe Coal ash transport pipe is installed in the same piping rack as the fuel gas piping. Therefore, it is necessary to relocate coal ash pipe prior to the removal of the existing buildings, as in the case for fuel gas piping. Similarly, since coal ash piping also consists of two systems, construction works can be carried out without affecting the operation of the existing unit. (c) Fire-fighting water pump/drinking water pump station A pump station is installed in the south end inside the existing 100 MW unit building. Prior to the removal of the existing building, a utility pump building is installed in the western side of an office building, and the pump station is relocated in this room. (d) Fire-fighting water/drinking water piping Fire-fighting water and drinking water piping for the buildings of the entire existing power plant is laid along the inner side of the external walls of the 100 MW unit building, as if encompassing it. Prior to the removal of the existing building, the piping will be relocated onto the same piping rack as fuel gas piping. (e) Heat supply piping Heat supply piping for the office building and surrounding buildings, which is from Unit No.7, is laid along the outer and inner sides of the east-side external walls of Units Nos.l - 6 building.

- 2-64 - 2.4.8 Procurement of labor and materials / equipment and transportation route (1) Procurement of labor For implementation of construction works, an organization consisting of an engineer from the owner side, a consultant from Japan or other foreign country, and a local construction company may be established. If the owner-side engineer is selected from the employees working in Pridneprovskaya TPP, a chief engineer or sub-chief engineer will be suitable for the job. Since such a position is supposed to be assigned to a worker who has engaged in all types of jobs, including mechanical, electrical, and civil engineering and construction works, a chief engineer or sub-chief engineer is considered to have sufficient competence to administer and manage the entire construction work. In Dnepropetrovsk City, there are a number of construction companies, some of which engaged in construction of existing power plants. A construction company in Kiev has recently constructed a thermal power plant. An interview survey of construction companies in Dnepropetrovsk City found that it is possible to procure most of the necessary mechanics, electricians, and civil engineering and construction workers from the city or the area adjacent to the power plant. (2) Procurement of materials and machinery As a center of steel and other manufacturing industries in Ukraine, Dnepropetrovsk Province is conveniently located for the procurement of materials and machinery. According to the results of the interview survey of local construction companies, it is possible to procure most of the materials subject to local procurement for mechanical and electric equipment works—namely, piping and electric cables. Since only ordinary materials will be used for civil engineering and construction works, all such materials can be procured within Ukraine. As for construction machinery, although some construction companies have limited types of such machinery, basic heavy machines are available partly through a leasing company. Regarding special heavy machines, however, further investigation is required. (3) Procurement of equipment / facilities The purpose of the project is to construct a power plant with high power

- 2-66 - generating efficiency. In light of this, it is necessary to adopt high-quality equipment produced under strict quality control for the main power generating equipment that will significantly affect power generating efficiency, such as a gas turbine and generator. Such equipment should ideally be procured from foreign manufacturers who have extensive experience of undertaking construction works in regions with low winter temperatures.

(4) Transportation route Large equipment (such as gas turbine and generator) will be shipped by water from a manufacturing country to the coast of the Black Sea, and after unloading, transported by rail to the power plant. Water-borne transport from the Black Sea to Dnepropetrovsk City is not feasible, since there is a dam on the way and there is no large-scale unloading facility in the city. At the time of construction of the existing Pridneprovskaya TPP, the materials, including those procured locally , were transported 50% by rail, 30% by truck, and 20% by water or air.

transportation limitation> Truck transportation : Height limit: 4.5 m (50 t maximum) It is necessary to obtain permission to use respective roads. Permission is not required for vehicles of 36 t or less.

Rail transportation : Height limit: 4.8 to 5 m above rail surface Load limit for a general freight car: 60 t Transportation of heavier loads is allowed, if a special freight car is used.

2.4.9 Construction method and process (1) Construction method (A) Removal of existing 100 MW unit Prior to the construction of new units, the structures (including the foundation) of the existing 100 MW unit will be removed. Under this project, the removal scope covers up to the 28th Street (around the former Unit No. 4), as an area where three new units can be constructed. The structures outside the scope will remain as they are, and walls will be built for them.

- 2-67 - The removal scope of existing foundations will be limited to an area where such structures would not hinder the construction of new units. The remaining foundations will remain as they are. Prior to the removal of the existing unit, utility equipment for the entire power plant (fuel gas piping, fire-fighting water piping, general service water piping, drinking water piping, heat supply piping, etc.) will be relocated. (B) Construction of three 100 MW unit blocks After removal of the existing 100 MW unit, three blocks of new 100 MW units will be constructed. The construction period of each block is assumed to be one year, taking into consideration the arrangement of construction machinery and the availability of construction workers. Details of the construction process and the conceptual diagram of the construction method are provided later. (C) Delivery road Heavy equipment will be transported by rail on to the premises of the power plant. After transferring to a trailer, the freight will be transported to the construction area. As a transportation route on the premises, the main road between the power plant turbine building and outdoor switchyard will be used. Gas turbine, steam turbine, and accessory equipment will be installed through the hatch of a newly constructed building using the overhead traveling crane of the building. Heavy equipment related to HRSG will be transported on the delivery road to the HRSG area, and installed using a mobile crane. A generator stator, which cannot be lifted using a overhead traveling crane, will be installed using rollers. The largest equipment both in size and weight in this project is the generator stator, which has a height of approximately 4 m (when the generator stator is loaded on a low body trailer) and weighs approximately 90 tons. At such a height, there will be no clearance against overhead lines running between Units Nos.7 - 10 and the outdoor switchyard. To cope with the weight, protective measures will be required for condenser cooling water pipes, discharge culvert, and other underground facilities. These matters will be studied further in the stage of detailed design after finalization of the proposed project.

-2-68 - Meanwhile, general cargo that can be transported by road, will be unloaded at a nearby port and transported by truck into the premises of the power plant. The figure below shows the outline of equipment delivery route.

Outdoor switchyard

Railway Gate; [Office Transshipping [building of machinery □ □ □ □ and equipment to trailers at No. 14 Unit Existing 300MW unit ['Existing 150MW unit New 100MWX3 blocks

Fig. 2.2-30 Conceptual Diagram of Heavy Equipment Delivery Route

(2) Construction process Table 2.2-9 shows a construction process chart. Matters to be considered are as follows: (A) Removal of existing 100 MW unit structures (0 month) It will take about 12 months to complete the removal work of existing 100 MW unit structures, including relocation of utility piping and other preparation works. Fig. 2.2-31 shows a conceptual diagram of the removal work. In the figure, the hatched area indicates the removal scope of the existing structures, and the thick lines indicate utility piping and other equipment to be relocated. ------,

"N------\r~s\ Fig. 2.2-31 Conceptual Diagram of Removal Work

- 2-69 - To ensure continuous operation of existing equipment, it is necessary to relocate the utility piping prior to the removal work. As shown in the figure below, a piping rack and utility supply station will be constructed, and all utility piping connected to the existing units will be installed on this utility rack. In this plan, the piping rack will be laid up to the A Street side at the southern end of Unit No. 7 (150 MW).

Utility supply station

Piping rack

Fig. 2.2-32 Situation after Removal of Existing Structures

(B) Construction process of Block No. 1 In this plan, it will take 25 months from the start of construction work to the start of commercial operation of new Block No. 1. Matters to be considered regarding the construction method are as follows: The foundation work will start first for smokestacks and the HRSG area. Immediately after completion of the foundations of the smokestacks and the HRSG area, the ground structures will be constructed, since HRSG cannot be installed after a building is constructed. After installation of HRSG, construction of a building for the HRSG area and finishing work will be carried out. During installation of HRSG, the foundation of the power train area will be constructed. After completion of the foundations, a building will be constructed (including installation of a overhead traveling crane). Using the overhead traveling crane, gas turbine, steam turbine, and other equipment (except for a generator stator) will be installed.

- 2-70 - After equipment installation is completed, sequence test, blowing out, and other preparations for a test run will be conducted. After a six-month comprehensive test run, commercial operation will begin.

Construction area in order of foundation -> building —» machinery

Construction area in order of foundation -> machinery -> building

Fig. 2.2-33 Situation of Construction of Block No. 1

(C) Construction process of Block No. 2 The construction method and period are the same as for Block No. 1. However, since the construction period overlaps the period of installation of the ground structures of Block No. 1, the following should be taken into consideration. The construction period of Block No. 2 is scheduled to start one year after Block No. 1. (a) Construction situation of Block No. 1 at the time of commencement of foundation work of Block No. 2 At the time of commencement of the foundation work of Block No. 2, the installation of HRSG and construction of a building for the power train area will be at the final stage. Accordingly, there will be no heavy machines in the construction area, which means that the foundation

-2-71 - work of Block No. 2 can be carried out. However, the foundation work of a power control center room (container house) might be affected by the installation work of a building in the HRSG area, it is therefore necessary to adjust the construction time of the foundation. This matter will be studied further in the detailed design after finalization of the proposed project.

(b) Construction situation of Block No. 1 at the time of the construction of ground structures of Block No. 2 Regarding the ground structure of Block No. 2, smokestacks will be the first to be installed. At that time, with most of the equipment already installed, Block No. 1 will be in the preparation stage for a test run, such as implementation of sequence test and blowing out. Accordingly, there will be no heavy machines for installation in the construction area, which means that the equipment of Block No. 2 can be installed.

- 2-72 - (D) Construction process of Block No. 3 Since Block No. 3 will be constructed one year after Block No. 2, there will be no problem in the construction of Block No. 3, as in the case of Block No. 2.

Fig. 2.2-35 Situation at the Time of Commencement of Work of Block No. 3

- 2-73 - Table 2.2-9 Construction Process Table - m 37 re — 36 7 pie >ica 1 35 mr 34 ion 33 ig n ilat nst 32 ivi tio 31 :ce 1 30 ma ing Vlj g. 29 hei rer unj 'esi T L 28 'ov

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Block Block Block

3 2 STACK BUILDINGS HRSG ELECTRICAL- RELATED COMMISSIONING FOUNDATIONS POWER 100-MW Removal NO.l NO. NO. ------

- 2-74 - 2.4.10 . Operation of newly installed plant (1) Start-up/shutdown methods (A)Start-up procedure The outline of the plant start-up procedure is as follows: ® Before plant start-up Establish lubricating oil system. Receive electricity for auxiliary power source from a starting transformer. The turbine is in turning operation. (D Start-up preparation Establish control oil system. Start-up fuel gas compressor, and keep it idling on stand-by. (3) HRSG purging Start up gas turbine using an electric motor (generator) for start-up, and conduct HRSG purging for 10 minutes at a gas turbine velocity of approximately 1,000 r.p.m. (D Gas turbine ignition/speed up After purging, ignite the gas turbine and increase the speed to a rated speed. When the designated speed is achieved, shut off electric power supply and excitation to the electric motor (generator) for start up. (5) Generator parallel-in When the operation condition of the gas turbine becomes stable, resume excitation to the generator to establish generator voltage. After the rated voltage is achieved, synchronize and parallel in the system. After paralleling in, switch over the power source of the auxiliary power system from the starting transformer to the house transformer. (6) Steam turbine speed up At the initial stage of start-up, steam generated in HRSG is sent into a condenser, bypassing the steam turbine, by a turbine bypass valve. When steam conditions are satisfactory, start up and speed up the steam turbine. During this period, the steam turbine is disconnected from the gas turbine and generator by a clutch. (7) Clutch engagement When the steam turbine speed reaches the rated speed, let in the steam turbine clutch. (8) Completion of start-up Start-up is complete, when the output of gas and steam turbines

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Fig. 2.2-38 Start-up Pattern (at the time of cold start) (C) Continuous start-up of three blocks Three blocks are independent from each other in terms of both system and auxiliary equipment, and can be operated individually. At the time of start­ up, however, more than one block cannot be started at one time, due to the limited capacity of the start-up transformer, from which electricity is supplied for auxiliary power. It is only after completion of parallel-in and switching over of the auxiliary power system in one block that the gas turbine of another block can be started. It takes about 20 minutes from the start-up of the first gas turbine to that of the second gas turbine. The time required for start-up of all blocks is calculated by adding approximately 40 minutes to the time required for start-up of one block as described above. It should be noted, however, that the volumes of auxiliary steam and control air that should be supplied from existing equipment will increase in this case. It is necessary to check for any problems at the stage of detailed design.

- 2-77 - (D) Shutdown procedure The outline of plant shutdown procedure is as follows: 0 Decrease of load 0 Disconnection of steam turbine At 60% gas turbine output and 70% steam turbine output, decrease the output of steam turbine first, while maintaining the gas turbine output. Surplus steam will be sent into a condenser by a turbine bypass valve. At 30% steam turbine output, disengage the clutch to start no load operation. (3) Parallel-off Stop the steam turbine by shutting off the steam. At the same time, decrease the gas turbine output. At 10% output, parallel off the generator. After the turbine speed decreases, the steam turbine is in turning operation. 0 Completion of shutdown Stop the gas turbine by shutting off the gas. After the turbine speed decreases, the gas turbine is also in turning operation. (E) Shutdown pattern The shutdown pattern of the new plant is shown in Fig. 2.2-39.

nGT GT speed nST ST speed \ n GT PGT GT power output t3 70 - PST ST power output ts 50 - 0ST clutch open ©ST speed down P GT ©Bypass valve full close *-i 30 - P ST ®De-synchronization o 20 ■ ©GT speed down

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Fig. 2.2-39 Shutdown Pattern (2) Personnel scheme (A) Operation personnel Since a newly installed plant is primarily free from site operation, and adopts one-man operation through digital control unit/CRT operation, the minimum operation personnel required consists of one shift leader, one operator, and one patroller. By adding one worker as a standby, four personnel comprise one shift. In total, 16 workers are necessary for three shifts. (B) Maintenance personnel Maintenance work is divided into four sections: gas turbine, HRSG, electrical equipment, and instrumentation equipment. One worker will take charge of the maintenance of each section per one block. Four maintenance heads will be assigned for supervision of their respective sections. In addition, a worker responsible for civil engineering and construction for three blocks will be necessary. (C) Planning personnel Since the new plant will be a power generating plant with properties significantly different from those of the existing Unit No. 12, it is necessary to introduce planning personnel for performance control and other jobs.

Therefore, the number of personnel required for a new plant can be summarized as follows: Operation Maintenance Planning Total personnel personnel personnel At commencement of commercial operation of 16 9 2 27 Block No. 1 At commencement of commercial operation of 16 13 2 31 Block No. 2 At commencement of commercial operation of 16 17 2 35 Block No. 3

(3) Operation pattern Since a new plant will consist of three 100 MW blocks, the most efficient operation of the plant can be achieved by coordinating the shutdown and restart of each block depending on output.

- 2-79 - (4) NO the other more case of generating is and continuous Therm al Efficiency (LHV)

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2.5 Division of responsibilities for provision of funds, facility/equipment, and

service in implementing the proposed project

This project will be carried out by using low interest international development finance such as special yen loan. Table 2.2-10 shows the division of responsibilities regarding provision of support, and the procedures of some the activities will be described in the following sections. Table 2.2-10 Division of Responsibilities for Provision of Funds, Facility/Equipment, and Service in Implementing the Project Japan or other country based Activity manufacturers/power Ukraine utilities, etc. with extensive experience © Feasibility study (The present feasibility O study) Decision of project © implementation O Financing © Selection of consultant © Equipment scheme O © Equipment The Ukrainian side will decide by competitive design/manufacturing/co bidding nstruction works O & M training O © Operation/maintenance o © Implementation O' Support, advice, etc.

2.5.1 Decision of project implementation First of all, the Ukrainian side needs to decide project implementation. The procedure is given below. (1) Preparation of implementation plan, and consultations among parties concerned JST Dneproenergo, as an implementing body on the Ukrainian side, will carry out a feasibility study of the proposed project, and prepare a project implementation plan (Project Proforma). The results of this feasibility study may be used for the study.

-2-81 - For our part, we will contact the parties related to project implementation on the Ukrainian side toward implementation of this project. (2) Approval by the Cabinet, the Ukrainian government The Project Proforma prepared by JST Dneproenergo will be examined at the Ukrainian Cabinet council meetings. If the plan is approved, the Ukrainian government will officially decide the implementation of the project.

2.5.2 Financing This project is not only to energy saving and C02 curtailment, but that it can contribute to preparation of the power infrastructure of Ukraine country, and Ukraine offers it about project capital. However, if an example is taken in economic conditions etc., its own country capital cannot be expected but it is thought that a project can be promoted by the ability using extraordinarily low interest yen loan international development finance. We want to perform the following support so that this project will realize by the application of a yen loan. (1) We intend to obtain the understanding of the Ukrainian side, such as JST Dneproenergo, Ukraine government, especially the organization concerned about planning the power-source development of this project, and raise its priority among power-source development. (2) We intend to appeal to the Ukrainian side related organization to understand the scheme, the superiority, the significance, and its effectiveness of joint implementation, and to lead to positive actions. (3) After being made a request for a yen loan for this project, we intend to appeal and support to the Japanese side related organization to understand and accept the request.

Japan Bank for International Cooperation (JBIC)'s opinion about a yen loan donation to Ukraine is as follows. Although there is no experience in allocating a yen loan to Ukraine, JBIC want to expand the yen loan to Ukraine after allocating about 10 billion yen loan for the most important project at first and judging the payment state. The yen loan to Ukraine will be allocated once a few years.

- 2-82 - Considering the circumstances mentioned above, this project is thought to be difficult to become the first yen loan project in Ukraine. However, this project is certainly important subject in Ukraine and meets one of the requirements for realizing a yen loan.

2.6 Preconditions and problems related to implementation of the proposed project

According to the equipment scheme assumed in this feasibility study, installation space, fuel supply, and other conditions in terms of infrastructure are secured satisfactorily. There will be no problem in the feasibility of equipment development. The following preconditions should be met before determining elements other than technical requirements, such as funds, contract method, standards and other detailed equipment specifications for implementation of the project. (1) In light of the present economic condition, it is difficult for Ukraine to finance the project on its own. Therefore, financing by a special environmental yen loan or equivalent is a precondition for project implementation. (2) Concrete trading scheme of reduced greenhouse effect gas emissions, such as Joint Implementation, are established and agreed on by the Conference of the Parties to the United Nations Framework Convention on Climate Change. (3) The importance of this project heightens in Ukraine, and an approval is obtained from the related ministries and agencies of the Ukrainian government.

Given that a combined cycle system is a state-of-the-art technology that is unprecedented in Ukraine, it is necessary to introduce an O & M technical assistance scheme for Ukrainian engineers in implementing the project. The scheme may include real machine training in a similar plant in Japan as well as on-site training by engineers sent from Japan. With extensive experience and proven track record of this system in our power plants, we will be pleased to offer technical cooperation in such schemes. Ukraine has a relatively loosely-binding environmental assessment system: After completion of a feasibility study on installation of a new power source,

- 2-83 - necessary data is submitted to the local government and related organizations, and the data is reviewed one month before commencement of construction work for the submission of revised data. However, in light of the situation that a new power source has not been developed since the 1990s, and that environmental issues are rapidly attracting attention in Ukraine, it is highly likely that the present environmental assessment system will be replaced by a more strict and time-consuming assessment system as in Western industrialized countries.

2.7 Project implementation schedule

The power generating plant of Pridneprovskaya TPP are superannuated due to over 30 years of operation. It has been an urgent task to construct a new plant. Taking into consideration that modification of existing equipment would require too long a construction period, and that existing equipment is extensively deteriorated due to aging, we designed a project in which a new combined cycle power generating plant will be installed and existing power generating plant will be removed (actually, abolished). Assuming the project is to be implemented, a schedule for the shortest possible time span (as concerned at present) is given below.

- 2-84 - March 2001: Completion of basic research for promotion of NEDO Joint Implementation, etc. - Review by the Ukrainian side on the results of the feasibility study - Implementation of environmental impact assessment (3-6 months) - Obtain approval for project implementation from the Ukrainian government (JST Dneproenergo —» Ministry of Fuel and Energy —» Ministry of Economy) March 2002: Request for yen loan to the Japanese government by the Ukrainian government - Examination and review on granting the yen loan by the Japanese government - Agreement by the Ukrainian and Japanese governments on implementing the project in a Joint Implementation framework May 2003: Conclusion of exchange note and loan agreement - Selection of a consultant November 2003: Consultant contract - Detailed design, preparation of bid document July 2004: Announcement of bid

February 2006: Conclusion of contractor contract

March 2006: Commencement of construction work for the project

February 2009: Completion of construction, and commencement of commercial operation of a NO.l Block.

February 2010: Completion of construction, and commencement of commercial operation of a NO.2 Block.

February 2011: Completion of construction, and commencement of commercial operation of a NO.3 Block, and completion of project.

- 2-85 - 3. Concrete financial planning

3.1 Financial plan for project implementation

3.1.1 Expenses required With the total expense of 30,107 million yen, the project will require the following expenses. Table 2.3-1 Expenses Required for the Project Unit: million yen Total Expense development Item amount Block No. 1 Block No. 2 Block No. 3 Rem oval/relocation/m edification 1 817 817 0 0 of existing equipment (1) Removal of existing 100 MW 607 607 0 0 building (2) Relocation of equipment to 210 210 0 0 be used for new plant 2 Power generating installation 26,334 8,846 8,744 8,744 (1) Gas turbine equipment 8,640 2,880 2,880 2,880 (2) HRSG equipment 4,065 1,355 1,355 1,355 (3) Steam turbine equipment 1,440 480 480 480 (4) Generator equipment 810 270 270 270 (5) Measurement control 1,110 370 370 370 equipment (6) Electrical equipment 1,130 430 350 350 (7) Mechanical equipment 1,320 440 440 440 (8 ) Coordination of works/test 7,819 2,621 2,599 2,599 run Civil engineering/construction 3 798 332 233 233 works (1) Power generating 594 198 198 198 installation building (2) Central control room 33 33 0 0 (3) Foundations and other 171 101 35 35 works 4 Engineering expenses 560 200 180 180 5 Reserve fund 1,398 500 449 449 6 Spare parts 200 200 0 0 Total 30,107 10,895 9,606 9,606

- 2-86 - Of the above total expense, 27,132 million yen will be used for construction of a new power generating facility and civil engineering/construction works. For an installed generating capacity of 302.4 MW, the construction cost per kW amounts to 90 thousand yen/kW. The above values were calculated based on an exchange rate of 1 US$ = 4.0 UAH = 115 yen.

In addition, value added tax (VAT) and import duty are not included, since special exemption can be expected for the project as a national project.

3.1.2 Financing method Under the leadership of President Kuchma, the Ukrainian government has held a series of meetings with the IMF and is carrying out administrative and financial reforms for reconstruction of the economy. As a financial reform, the government decided to keep expenditure at less than revenue in the budget for this fiscal year and onward. In addition, to ensure stable tax revenue, efforts are being made to simplify the present tax system, which is unrealistic and complicated. Under such circumstances, it is considered impossible for Ukraine to finance the project on its own terms. Given that this project is aimed at greenhouse effect gas reduction, and that the Ukrainian economy is in the stage of reconstruction, and that it will be in a few years time when the implementation of this project is scheduled, the most realistic financing method is an environmental special yen loan. Project cost (1) 75%: Environmental special yen loan

(2) 25%: The Ukrainian side’s own funds Depending on the results of COP-7, greenhouse effect gas emissions trading can be one source of finance, as the primary goal of this feasibility study is reduction of such emissions.

3.2 Prospect of financing

3.2.1 The Japanese side action plan Upon completion of the present basic research, we will report the results to the Ukrainian side, and reconfirm their needs and conditions. If it is confirmed that an environmental special yen loan will satisfy such needs and conditions, we will

- 2-87 - recommend the Ukrainian side to request for an environmental special yen loan as a financing method. We will give advice on the system, conditions, and request procedure of an environmental special yen loan to the Ukrainian side to help smooth implementation of the request procedure.

3.2.2 The Ukrainian side action plan Since this feasibility study is conducted on the assumption that the proposed project is aimed at reduction of greenhouse effect gas emissions, the Ukrainian side is primarily relying on financing to be a low-interest environmental special yen loan granted by Japan. If the Ukrainian side reaches the conclusion that the project is feasible after reviewing the content of a report on the basic research, J ST Dneproenergo will prepare a request for an environmental special yen loan and submit it to the Ministry of Fuel and Energy, an authority supervising the company. If the Ministry of Fuel and Energy approves the content of the request for an environmental special yen loan for this project, the request will be submitted to the Japanese Embassy in Ukraine via the Ministry of Economy, which is responsible for foreign economic cooperation.

4. Matters related to Joint Implementation and other conditions

4.1 Matters to be coordinated with the Ukrainian side for project implementation:

Establishment of project implementation condition and division of duties, taking

into consideration the actual situation of the site where the project will be

implemented

To promote this project as a Joint Implementation project, the conditions and matters to be coordinated with the Ukrainian side are given below. However, a scheme for Joint Implementation has yet to be established within the international community. In light of the present situation, we have to admit that such conditions and matters will be largely affected by the results of COP-7.

- 2-88 - (1) Arrangement for an organization coordinating the project and a project implementation system, to facilitate Joint Implementation by Ukraine and J apan (2) Arrangement of allocation between the Ukrainian and Japanese sides of reduced CO2 emissions (CO2 credit) to be achieved by the project implementation

4.2 Possibility of accepting this project as a Joint Implementation scheme

As mentioned previously regarding the power plant ’s interest in this project, J ST Dneproenergo and Pridneprovskaya TPP are not just required to supply electric power and heat to the Dnepropetrovsk area in a stable manner. In the midst of economic reform, they are also, out of necessity, under pressure to modify the power plant equipment and to improve efficiency partly due to the power company ’s pursuit of its own economic efficiency. Under the present business condition of J ST Dneproenergo, however, it is difficult to modify the superannuated power plant with its own funds. The electric utility strongly wishes to implement the project under a Joint Implementation scheme. If such a scheme is adopted, it is highly likely that the Ukrainian side will accept trading of all or part of greenhouse effect gas emission reductions achieved by the implementation of the proposed project.

- 2-89 - Chapter.3 The Project Effect [Summary] In this chapter we will estimate how much this project will contribute to energy conservation and to reductions in greenhouse effect gases and air pollutants. The base line for calculating the project effect is the present operating condition of the four existing coal-fired generation units of 300 MW. After completion of the project, we will use a new combined cycle generation unit of 300 MW and the three remaining generation units to generate power equivalent to the base line. As a result, within 40 years of calculation period, energy conservation effect is expected to amount to approx. 310,000 TJ (approx. 7,500,000 t in crude oil) and reduction in CO2 emissions to approx. 39,000,000 t, respectively. 1. Energy conservation effect

1.1 Technical basis for producing energy conservation effect

In this project, we will scrap one of the existing coal-fired units of 300 MW in the Pridneprovskaya Thermal Power Plant, and newly construct a combined cycle unit using gas (100 MW X 3 blocks). The combined cycle unit is a highly efficient system, combining the gas turbine generation unit and the boiler/steam turbine generation unit. Adoption of this system enables substantial improvement in thermal efficiency and energy conservation.

In the gas turbine generation unit, combustion gas energy directly drives the turbine generator to generate power. The advantage of the system is that its simple and small-scale system configuration provides large output and that start/stop operations are possible in a short time; the disadvantage is that high thermal efficiency is not expected in a single system. As temperature of the gas exhausted from the gas turbine is generally high (400 to 600°G), thermal energy of the gas is exhausted as surplus heat quantity. In the boiler/steam turbine generation unit, on the other hand, the boiler heats water to generate steam. Steam energy thus generated drives the turbine generator to generate power. This is the most widespread type of thermal power generation system. The combined cycle generation (cogeneration) unit uses gas exhausted from the gas turbine as heat source for the boiler. By appropriately combining the gas turbine and the steam turbine, thermal energy of the gas exhausted from the gas turbine is reduced to approx. 100°C for efficient use and steam is generated in the boiler without fuel. Since 1980 such combined cycle units have been rapidly proliferating with the progress of turbine technology, that is, high temperature and large scale of the turbines. As a result, internationally, the technology thus progressed is the main current of thermal power generation using gas. While thermal efficiency of the conventional boiler/steam turbine system even in the most up-to-date plant is 45% at best, that of the combined cycle system has already exceeded 50%; 60% is expected in future.

-3-1 - Thermal efficiency of the old coal-fired unit to be scrapped is 35% at best. On the other hand, in this project adopting the combined cycle generation unit with the newest 1,400°C class gas turbine, thermal efficiency of 52.5% is expected at rated output. Such improvement of thermal efficiency enables reduction in fuel consumption, that is, energy conservation.

1.2 Base line for calculating energy conservation effect

1.2.1 Setting the base line (1) Units to be assessed At present, the system of the Pridneprovskaya Thermal Power Plant consists of four coal-fired units of 150 MW and heat supply (Units Nos.7 - 10) and four coal-fired units of 300 MW (Units Nos.11 - 14) exclusively for power generation. With respect to the present operation condition, 1999 ’s actual results show that the average utilization factor of the 150 MW units Nos.7 - 10 is comparatively high, 53.5%, and that of the 300 MW units Nos.11 - 14, as low as 22.9%. The reason the utilization factor of the 150 MW units is high is; that they have functions to supply heat or energy as important as electric power; that they can be started/stopped in a shorter time than 300 MW units; and that one cycle of rehabilitation has been completed to maintain the system in comparatively favorable conditions. On the contrary, the 300 MW units exclusively for power generation are inferior in utilization. Since unit No. 9 of them is under rehabilitation, utilization factor is low. Unit No. 12 has not been operated for a long time.

In this project, we plan to scrap one unit (No. 12) under long-term stoppage out of 300 MW units and newly to construct a combined cycle generation unit with the equal output. When setting the baseline for calculating energy conservation effect, it is not realistic to assess only this unit under long-term stoppage. After completion of the project, the 150 MW units that are playing roles of supplying heat locally as mentioned above will be continuously used,

-3-2 - separately from the unit to be newly-constructed exclusively for power generation. Accordingly, it is not appropriate to assess these 150 MW units. As a result, when calculating energy conservation effect, all of the already- constructed 300 MW units NO.l 1 ~14 are to be assessed.

(2) Utilizing units to be assessed on the base line About 40 years have passed since the 150 MW units Nos.7 - 10 in the Pridneprovskaya Thermal Power Plant started operation. During these years, comparatively large-scale rehabilitation such as replacement of turbine generators was carried out to prolong their working lives for consecutive operation. The 300 MW units Nos.l 1 - 14 to be assessed have become old as they have been operating for about 35 years. Unit No. 11, which started operation first, is under rehabilitation. Unit No. 12, under long-term stoppage is waiting for funds required for rehabilitation.

Decrease in electric power demand in Ukraine that was caused by economic disorder after the ruin of the USSR has come to the end of the first stage. According to a long-range supply-demand outlook by the fuel energy department, after 2000, demand is expected to increase slightly by 1 to 2% compared with the former year. The ratio of thermal power generation to entire power generation is expected to maintain the present 40%. By using the closed Chernobyl nuclear power plant as security to raise money, construction of a new nuclear power plant is being planned. It is not clear, however, that any thermal power plant will be newly constructed on a large scale. As a result, it is considered that the present thermal power plants in Ukraine will hold the same positions in the middle- and long-term periods. Accordingly, it is considered that the thermal power plants will be rehabilitated to prolong the lives for continued operation without such scrap and build as in this project.

In conclusion, as the base line for calculating energy conservation effect in this project, the 300MW units Nos.l 1 - 14 for assessment are to be operated while maintaining the present utilization factor.

- 3-3 - 1.2.2 Specifications of the base line and calculation results As specifications of the base line, we use the 1999 actual operation results of the units for assessment that were obtained from Dneproenergo Power Company. The data are shown in Table 3.1-1 below.

Table 3.1-1 1999 Actual Operation Results of the Units for Assessment Item Unit Actual results Unit — Nos. 11, 12, 13, 14 Annual gross generating MWh 2,406,107 output Total ton as CF(X) 891,986 Coal ton as CF 608,752 Annual fuel consumption Petroleum ton as CF 5,609 Natural ton as CF 277,625 gas CF: Abbreviation of ‘Conditional Fuel,’ virtual fuel of 7,000 kcal/kg used as the control base in Ukraine

By using the specifications in Table 3.1-1, the operation results of these units are calculated as follows: • Utilization factor 22.9 % • Average gross thermal efficiency 33.1 % • Average gross heat rate 10,865 kJ/kWh The fuel consumption is given as the value already converted to the virtual fuel of 7,000 kcal/kg. Therefore, the annual energy consumption of the units for assessment can be simply obtained as shown below. The annual energy consumption = Total annual energy consumption (ton as CF) X 103 X 7000(kcal/kg) X 4.1868(kJ/kcal)XlO-9 = 26,142 TJ/Year

In comparing the base line and the project case, generating output is assumed to be constant before and after the project. It is not the gross generating output but the net generating output that should be constant. Although actual results of the net generating output are not shown, they can be obtained as follows by using the auxiliary power ratio of the 300 MW units, 7.0%

- 3-4 - Annual net generating output = Annual gross generating output X( 1 -0.07) = 2,237,680 MWh/Year

As a result, the base line for calculating energy conservation effect in this project is shown in Table 3.1-2 below. Table 3.1-2 Specifications of Base Line Item Unit Specifications Unit — Nos. 9, 10, 11, 12 Rated output MW 300 X 4 Annual net generating MWh 2,237,680 output Annual energy TJ 26,142 consumption

The actual fuel consumption can be obtained from the calorific value of each fuel as shown in the following equation, which is not used for calculating the energy conservation effect.

Actual fuel consumption = Fuel consumption (ton as CF)X 7000 (kcal/kg)/Actual calorific value

From the above equation and the 1999 calorific value data of Dneproenergo Power Company, Table 3.1-3 is obtained.

Table 3.1-3 Fuel Consumption on Base Line Consumption Fuel Calorific value Actual consumption (as CF) Coal 608,752 ton 4,689 kcal/kg 908,779 ton Petroleum 5,609 ton 9,238 kcal/kg 4,250 ton Natural gas 277,625 ton 7,876 kcal/m3(X) 246,746 X 10A3 m3(X) Total 891,986 ton — —

- 3-5 - 1.3 Concrete values, period and cumulative values of energy conservation effect

1.3.1 Considering the project case (1) Handling the new unit In this project we plan to scrap Unit No. 12 (under long-term stoppage) out of the four 300 MW coal-fired units and instead to newly construct a combined cycle generation unit using natural gas (100 MW X 3) with equal output. This new unit will form a highly efficient plant with the newest technology. As a matter of course, it is assumed that operation of this unit shall be prior to that of the existing units. Nuclear power generation in Ukraine, which occupies a little more than 40% of the total generating output, is the base power source. Thermal and hydroelectric power generation is regarded as middle and peak power source to meet power demand increase or decrease. On the other hand, the superannuated coal-fired plants, which are inferior in utilization, cannot fully meet the demand. This is a problem to be solved, and one of the causes of low utilization factor in 300 MW units.

The combined cycle generation unit to be newly constructed is superior in utilization because of its high efficiency and a short time and easy start/stop operation. We expect that this unit will be operated, taking priority over existing thermal generation units, and that this will be often started and stopped according to decreased demand on holidays and at nights. Such operation is the same as that of combined cycle generation units in Chubu Electric Power Co., Ltd., n which nuclear power and coal-fired power are used as base load. Such utilization is also seen in Chubu Electric Power Co., Ltd. Therefore, based on the actual results in this company, utilization factors of the new combined cycle generation unit are set as follows.

Annual generating output (MWh) • Calendar day utilization factor Generating capacity (MW)x24hours x365days = 70 %

Annual generating output (MWh) • Generating time utilization factor Generating capacity (MW)X Annual generating time (hours) = 90 %

- 3-6 - (2) Handling the existing 300MW units In calculating the base line as mentioned in Section 1.2, the four existing 300 MW coal-fired units are to be assessed. The average utilization factor is

22.9%. In the case of the project, utilization factor of the main new combined cycle generation unit (100 MW X 3 blocks) is set at 70% as mentioned above. On the base line, however, generating output shortages occur. To supply the shortages, the three coal-fired units (Nos. 11, 13, and 14) remaining after the project are operated, by setting their thermal efficiency and fuel consumption equal to the base line.

As mentioned in Section 1.2 above, not gross generating output but net generating output shall be set constant before and after the project.

1.3.2 Specifications of the project case and calculation results (1) The combined cycle generation units newly to be constructed Performance specifications of the new combined cycle unit are shown in Table 3.1-4. Table 3.1-4 Performance Specifications of New Combined Cycle Unit Specifications Item Unit Gross Net output output Number of blocks Block 3 Block output MW 100.8 97.0 Total output MW 302.4 291.0 100% % 52.5 50.5 output Thermal efficiency 90% % 51.4 output Heart rate ioo %mt) kJ/kWh 6858 7129 (LHV base) 90 kJ/kWh 7005 Auxiliary power ratio % 3.8 Fuel used — Natural gas

-3-7- By using net output in Table 3.1-4 and calendar time utilization factor, 70%, set in Section 1.3.1 above, annual gross generating output of the new combined cycle unit is obtained as follows:

Annual gross generating output of the new combined cycle unit = 302.4(MW) x24houres X 365days X70% = 1,854,317 MWh/Year

By multiplying the annual gross generating output by the annual gross heat rate, the annual energy consumption of the new combined cycle unit is obtained. As specified in Section 1.3.1 above, generating time utilization factor, or the average output during operation is 90%. Therefore, for the average thermal efficiency/heat rate, specifications at 90% output are used, as follows.

Annual energy consumption of the new combined cycle unit =Annual gross generating output X Gross heat rate (at 90% output) = 1,854,317 (MWh)X 103 x 7005 (kJ/kWh)X 10-9 = 12,989 TJ/Year

Fuel (all natural gas) consumption in the new combined cycle unit is obtained as follows: Annual natural gas consumption = Annual energy con sum pt ion/Nat ural gas calorific value

_ 12,989(11/Year) 9 7,876(kcal/m3) x 4.1868(kJ/kcal)

— 393,902 X 10A3 m3/Year (at latm,20°C) ( = 443,196 ton as CF/Year )

Annual net generating output is obtained as follows: Annual net generating output of the new unit = 291.0 (MW)X 24 hours X 365 days X 0.7 = 1,784,412 MWh/Year

-3-8 - (2) Existing coal-fired 300 MW units The three coal-fired units (Nos. 11, 13, and 14), which will remain after the project, supply the shortage of output generated by the new combined cycle unit, compared with the net generating output of the base line. Their annual generating output is obtained by using (1) and Table 3.1-2 above as follows:

Annual net generating output of the existing 300MW units = Net generating output of base line - Net generating output of new unit = 2,237,680 (MWh/Year) - 1,784,412 (MWh/Year) = 453,268 MWh/Year

As the auxiliary power ratio of the existing 300MW units is 7.0%, the annual gross generating output is obtained as follows: Annual gross generating output of the existing 300MW units =Annual net generating output/ ( 1 — 0.07 ) = 487,384 MWh/Year

This is equivalent to the calendar day utilization factor, 6.2%. Thermal efficiency/heat rate of the existing 300MW units is the same as that of the base line. By using the present heat rate obtained in 1.2.2 above, the annual energy consumption of the existing units after the project is also obtained as follows:

Annual energy consumption of the existing 300MW units = Annual gross generating output X Gross heat rate = 487,384 (MWh/Year) X 10A3 X 10865 (kJ/kWh) X 10A-9 = 5,295 TJ/Year

-3-9 - On the assumption that the ratio of energy consumptions according to types of fuel to energy consumption is the same as that of the base line, they are obtained as follows, by using 1999 actual results of Table 3.1-1.

• Coal Energy consumption by using coal = 5,295 (TJ/Year)X( 608,752/891,986 ) = 3,614 TJ/Year

Coal consumption

3,614(TJ/Y ear) X 106 4,689(kcal/kg) x 4.1868(kJ/kcal)

— 184,088 ton/Year (= 123,313 ton as CF/Year )

• Petroleum Energy consumption by using petroleum = 5,295 (TJ/Year)X( 5,609/891,986 ) = 33 TJ/Year

Petroleum consumption

= 3 3 (TJ/Year) 1q6 9,238(kcal/kg) x 4.1868(kJ/kcal)

= 853 ton/Year ( = 1,126 ton as CF/Year )

• Natural gas Energy consumption by using natural gas = 5,295 (TJ/Year)X( 277,625/891,986 ) = 1,648 TJ/Year

Natural gas consumption

______1,648(TJ/Year)______xl()9 7,876(kcal/m3) x 4.1868(kJ/kcal)

= 49,977 X 103 m3/Year (at latm,20°C) ( = 56,231 ton as CF/Year)

- 3-10 - (3) Summary of the project case Calculation results of the project case are summarized as shown in Table 3.1-5.

Table 3.1-5 Summary of Project Case Existing Item Unit New unit Total unit Rated output MW 100.8 X 3 300 X 3 1,202.4 Calendar day utilization % 70 6.2 22.2 factor Annual Gross 1,854,317 487,384 2,341,701 generating MWh output Net 1,784,412 453,268 2,237,680 Total 12,989 5,295 18,284 Coal 0 3,614 3,614 Annual energy TJ consumption Petroleum 0 33 33 Natural 12,989 1,648 14,637 gas Annual fuel Coal 0 184,088 184,088 ton consumption Petroleum 0 853 853 (Actual Natural consumption) 1000m3 393,902 49,977 443,879 gas Total 443,196 180,670 623,866 Annual fuel Coal 0 123,313 123,313 ton consumption Petroleum as CF 0 1,126 1,126 (as CF ) Natural 443,196 56,231 499,427 gas

1.3.3 Calculation results of energy conservation effect Considering the summary mentioned above, the period for calculating the concrete energy conservation effect is determined to be 40 years, the average life of the new generating unit. By using the base line in Table 3.1-2 and the project case in Table 3.1-5, reduction in annual and 40 years’cumulative energy consumptions are obtained as shown in Table 3.1-6 below.

-3-11 - Table 3.1-6 Concrete and Cumulative Values of Energy Conservation Effect Conversion rate Item Energy (TJ) in crude oil (ktoe) Base line 26,142 624 Annual energy Project case 18,284 437 consumption Annual reduction 7,858 187 rate Cumulative reduction rate 314,320 7,480

Consumptions according to types of fuel are shown in Tables 3.1-7 and 3.1-8 below. Natural gas consumption increases, while coal and petroleum consumptions decrease sharply.

Table 3.1-7 Comparison of Fuel Consumptions before and after the Project (Actual consumption) Petroleum Natural gas Item Coal (ton) (ton) (1000m3) Annual Base line 908,779 4,250 246,746 fuel Project case 184,088 853 443,879 consum Annual reduction ptions 724,691 3,397 -197,133 rate Cumulative reduction rate 28,987,640 135,880 -7,885,320 Note: “—’’shows increase.

Table 3.1-8 Comparison of Fuel Consumptions before and after the Project

(CF conversion) Coal Petroleum Natural gas Total Item (ton as CF) (ton as CF) (ton as CF) (ton of CF) Base line 608,752 5,609 277,625 891,986 Annual fuel Project case 123,313 1,126 499,427 623,866 consum Annual ptions reduction 485,439 4,483 -221,802 268,120 rate Cumulative reduction 19,417,560 179,320 -8,872,080 10,724,800 rate Note: “—’’shows increase.

-3-12 - 1.4 Confirming energy consumption effect

In this project, we plan to scrap the existing 300 MW generating unit and newly to construct the combined cycle generating unit (100 MW X 3 blocks). The project enables improvement in thermal efficiency of the thermal power plant. By comparing thermal efficiencies of the plant before and after the project, energy conservation effect can be confirmed concretely. Accordingly, for obtaining thermal efficiency of the thermal power plant, it is indispensable to measure fuel gas consumption and gross/net generating output of the new combined cycle generating unit. Therefore the new combined cycle unit shall be equipped with a fuel meter and a wattmeter.

In the project case for assessing energy conservation effect, it is assumed that the new generating units with high thermal efficiency will be operated at utilization factor of 70% prior to the existing 300MW units. Owing to the shortage of generating output before improvement, the three existing coal-fired generating units (Nos. 11, 13, and 14) remaining after the project will be operated to supply the shortage. By comparing the ratio of fuel consumption to the equal generating output of these three existing coal-fired units and the new combined cycle generating unit, energy conservation effect can be appropriately assessed.

2. Effects of reducing greenhouse effect gases

2.1 Technical basis for reducing greenhouse effect gases

In this project, we will scrap one of the existing coal-fired units of 300 MW in Pridneprovskaya Thermal Power Plant , and newly to construct a combined cycle generation unit using gas (100 MW X 3 blocks). The combined cycle unit is the highly efficient generating system combining the gas turbine generating unit and the boiler/steam turbine generating unit. Adoption of the system enables thermal efficiency and energy conservation to greatly improve compared with the existing units, thus reducing fuel consumption. This system enables reduction of CO2 to be generated and emitted by fuel combustion.

-3-13 - Here we will omit features of each generating system and the principle of combined cycle generation, since we mentioned them in “1.1 Technical basis for producing energy conservation effect” in this chapter. Thermal efficiency of the superannuated coal-fired generating unit to be scrapped is 35% at best. On the other hand, that of the new combined cycle unit using l,400°C-class gas turbine is

expected to be 52.5% at rated output. Thus improvement of thermal efficiency enables reduction in fuel consumption or CO2 emissions.

The main fuel for the generating unit to be scrapped is coal. In this project, however, we will use only natural gas for the combined cycle unit to be newly constructed. While the present utilization factor of the unit to be scrapped is as low as 20%, the new unit with high efficiency and favorable utilization is expected to have high operation rate of approx. 70%. After carrying out the project, such high operation rate will be effective in controlling operations of the existing coal- fired units (Nos. 11,13 and 14) other than that to be scrapped. If natural gas mainly consisting of methane (CH4) including hydrogen is used, CO2 emissions original unit per energy unit is approx. 3/5 compared with the case using coal mainly consisting of carbon. As explained above, if fuel for the units is changed from coal to natural gas, and coal consumption is reduced by using existing thermal power with the help of high performance of the new natural gas fueled unit, CO2 emissions will be reduced.

This project will bring both reduction in fuel consumption owing to improvement in thermal efficiency and fuel conversion from coal into natural gas. Such multiplier effect enables drastic reduction in CO2 emissions.

2.2 Base line for calculating reduction in greenhouse effect gases

2.2.1 Setting base line (1) Units to be assessed At present, Pridneprovskaya Thermal Power Plant consists of four coal-fired units Nos.7 - 10 (150 MW and heat supply) and other four coal-fired units Nos.11 - 14 (300 MW) exclusively for power generation. In this project, we plan to scrap the No.12 out of the four 300 MW units, which has been under long-term stoppage, and newly to construct a combined cycle unit with equal

-3-14- output. When setting the base line for calculating reduction in greenhouse effect gases, the four existing 300 MW coal-fired units(N0.1 1 ~14) are to be assessed, based on the same viewpoint mentioned in “1.2 Base line for calculating energy conservation effect” in this chapter. This viewpoint fully explained in Section 1.2.1 (1) is omitted here.

(2) Utilizing the units to be assessed for the base line On the base line for calculating reduction in greenhouse effect gases, the four already-constructed 300 MW units are to be operated continuously, maintaining the present utilization factor. This viewpoint, fully explained in Section 1.2.1 (2), is omitted here.

2.2.2 Specifications of the base line and calculation results As specifications of the base line, we use the 1999 actual operation results of the units for assessment that were obtained from Dneproenergo Power Company. The data basically the same as those mentioned in 1.2.2 are shown again in Table 3.2-1 below.

Table 3.2-1 1999 Actual Operation Results of the Units for Assessment Item Unit Actual results Unit — Nos. 11, 12, 13, 14 Annual gross generating MWh 2,406,107 output Total ton as CF(X) 891,986 Coal ton as CF 608,752 Annual fuel consumption Petroleum ton as CF 5,609 Natural ton as CF 277,625 gas CF: Abbreviation of ‘Conditional Fuel,’ virtual fuel of 7,000 kcal/kg used as the control base in Ukraine

-3-15 - By using the specifications in Table 3.2-1, the operation results of these units are calculated as follows as in the case of calculating energy conservation effect: • Utilization factor 22.9 % • Average gross thermal efficiency 33.1 % • Average gross heat rate 10,865 kJ/kWh • Average net generating output: 2,237,680 MWh/Year • Annual energy consumption: 26,142 TJ/Year

Annual energy consumption according to types of fuel is shown as follows: Energy consumption by using coal = Annual coal consumption (ton as CF) X 103 X 7000(kcal/kg) X 4.1868(kJ/kcal)X 10-9 = 17,841 TJ/Year

Energy consumption by using petroleum = Annual petroleum consumption (ton as CF) X 103 X 7000(kcal/kg) X 4.1868(kJ/kcal) Xl(M = 164 TJ/Year

Energy consumption by using natural gas Annual natural gas consumption (ton as CF) X 103 X 7000(kcal/kg) X 4.1868(kJ/kcal) XlO-9 = 8,137 TJ/Year

As a result, the base line specifications for calculating reduction in greenhouse effect gases are shown in Table 3.2-2 below.

-3-16 - Table 3.2-2 Specifications of Base Line Item Unit Specifications Unit — Nos. 9, 10, 11, 12 Rated output MW 300 X 4 Annual net generating MWh 2,237,680 output Total 26,142 Coal 17,841 Annual energy TJ consumption Petroleum 164 Natural 8,137 gas

Then in accordance with the IPCC guideline, CO2 emissions are calculated in the following procedures: a. Energy unit Annual energy consumption according to types of fuel shown in Table 3.2-2 is used. b. Conversion into carbon emission basic unit Carbon emission basic unit (t-C) = Energy unit X Conversion factor of carbon emission basic unit

c. Correction of incomplete combustion Correction of incomplete combustion = Conversion value of carbon emission basic unit X Oxidized carbon ratio

d. Conversion into CO2 unit (ratio of C: 12 —» CO2: 44) CO2 unit = Incomplete combustion correction value X CO2/C molar ratio CO2/C molar ratio = 44/12

Conversion factors of b and c above are fixed according to types of fuel as shown in Table 3.2-3.

Table 3.2-3 Conversion Factor for Calculating C02 Emission Natural Coal Petroleum gas Conversion factor of carbon 25.8 21.1 15.3 emission basic unit (t-C/TJ) Oxidized carbon ratio 0.98 0.99 0.995

-3-17 - From the specifications in Table 3.3-2 and the above calculation procedures, CO2 emissions on base line are obtained as follows: CO2 emissions by coal combustion = 17,841 X 25.8 X 0.98 X 44/12 X 10-3 = 1,654 kt-C02/Year

CO2 emissions by petroleum combustion = 164 X 21.1 X 0.99 X 44/12 X 10-3 = 13 kt-CCh/Year

CO2 emissions by natural gas combustion

= 8,137 X 15.3 X 0.995 X 44/12 X 10-3 = 454 kt-CC>2/Year

Totals 1,654 + 13 + 454 = 2,121 kt-CQ2/Year

2.3 Concrete and cumulative values and period of reduction in greenhouse effect gases

2.3.1 Considering the project case In this project, we plan to scrap one (No. 12) of the four existing 300 MW coal- fired units, which has been under long-term stoppage, and instead to newly construct a combined cycle unit (100 MW X 3) using natural gas with equal output. The new combined cycle unit and the existing coal-fired units shall be handled in the same condition as in the case of calculating energy conservation effect.

Operation condition of the new combined cycle unit shall be in accordance with the actual results of Chubu Electric Power Co., Ltd. • Calendar day utilization factor 70 % • Generating time utilization factor 90 %

The existing coal-fired 300MW units are operated to supply the shortage of

- 3-18 - output generated by the new combined cycle unit, compared with the base line generating output. Their thermal efficiency and fuel consumption ratio shall be equal to the base line.

It is not gross generating output but net generating output that shall be constant before and after the project, as in the case of calculating energy conservation effect.

2.3.2 Specifications of the project case and calculation results (1) Combined cycle unit newly to be constructed Again Table 3.2-4 shows performance specifications of the new combined cycle unit, which are the same as in the case of calculating energy conservation effect

Table 3.2-4 Performance Specifications of New Combined Cycle Specifications Item Unit Gross Net output output Number of blocks Block 3 Block output MW 100.8 97.0 Total output MW 302.4 291.0 100% % 52.5 50.5 Thermal efficiency output (LHV base) 90% % 51.4 output 100% kJ/kWh 6858 7129 output Heat rate 90% kJ/kWh 7005 output Auxiliary power ratio % 3.8 Fuel used — Natural gas

By using these specifications and use conditions specified in Section 2.3.1, annual generating output and energy consumption of the new combined cycle unit are obtained as follows:

Annual gross generating output of the new combined cycle unit = 302.4 (MW)X 24 hours X 365 days X 0.7 = 1,854,317 MWh/Year

-3-19- Annual energy consumption of the new unit = Annual gross generating output X Gross heat rate (at 90% output) = 1,854,317 (MWh)X 103 X 7005 (kJ/kWh)X 10-9 = 12,989 TJ/Year

Energy consumed is all natural gas.

Annual net generating output is as follows:

Annual net generating output of the new combined cycle unit = 291.0 (MW)X 24 hours X 365 days X 0.7 = 1,784,412 MWh/Year

(2) Existing coal-fired unit Under the use conditions specified in Section 2.3.2, operation values of the three existing coal-fired 300MW units (Nos. 11, 13 and 14) remaining after the project are obtained as follows. Calculation procedures and results, which are the same as in the case of calculating energy conservation effect, are omitted. Annual net generating output of already-constructed units = Net generating output of base line - Net generating output of new unit = 2,237,680 (MWh/Year) - 1,784,412 (MWh/Year) = 453,268 MWh/Year

As the auxiliary power ratio of the existing units is 7.0%, the annual gross generating output is obtained as follows: Annual gross generating output of the existing 300MW units = Annual net generating output/(l - 0.07) = 487,384 MWh/Year

(Calendar day utilization factor: 6.2%)

- 3-20 - Annual energy consumption of the existing 300MW units = Annual gross generating output X Gross heat rate = 487,384 (MWh/Year) x 10A3 X 10865 (kJ/kWh) X 10A-9 = 5,295 TJ/Year

On the assumption that ratio of energy consumption according to fuel types to the above energy consumption is as same as base line, the following equations are obtained.

Energy consumption by using coal = 5,295 (TJ/Year)X( 608,752/891,986 ) = 3,614 TJ/Year

Energy consumption by using petroleum = 5,295 (TJ/Year)X( 5,609/891,986 ) = 33 TJ/Year

Energy consumption by using natural gas = 5,295 (TJ/Year)X( 277,625/891,986 ) = 1,648 TJ/Year

(3) Summary of the project case Specifications of the project case are summarized as shown in the Table3.2-5.

Table 3.2-5 Summary of Project Case Existing Item Unit New unit Total unit Rated output MW 100.8 X 3 300 X 3 1,202.4 Calendar day utilization % 70 6.2 22.2 factor Annual Gross 1,854,317 487,384 2,341,701 generating MWh output Net 1,784,412 453,268 2,237,680 Total 12,989 5,295 18,284 Annual Coal 0 3,614 3,614 energy Petroleum TJ 0 33 33 consumption Natural 12,989 1,648 14,637 gas

-3-21 - By using the total of annual energy consumption of new and existing units, CO2 emissions in the project case are calculated as follows. Calculation method is in accordance with the same IPCC guideline as mentioned in “2.2.2 Specifications of the base line and calculation results.” The results are as follows:

CO2 emissions by coal combustion

= 3,614 X 25.8 X 0.98 X 44/12 X 10-3 = 335 kt-CCh/Year

CO2 emissions by petroleum combustion

= 33 X 21.1 X 0.99 X 44/12 X 10-3 = 3 kt-CCh/Year

CO2 emissions by natural gas combustion

= 14,637 X 15.3 X 0.995 X 44/12 X 10-3 = 817 kt-CG2/Year

Total = 335 + 3 + 817 = 1,155 kt-CQ2/Year

2.3.3 Calculation results of reduction in greenhouse effect gases When calculating reduction in greenhouse effect gases in this project, the calculation period is determined to be 40 years as in the case of calculating energy conservation effect. As a result, annual and 40 years’cumulative reduction rates in CO2 emissions are shown in Table 3.2-6 below.

Table 3.2-6 Reduction in CO2 Emissions and Cumulative Reduction Rate Item CO2 emissions Base line 2,121 Annual CO2 Project case 1,155 emissions Annual reduction 966 rate Cumulative reduction rate 38,640

-3-22 - 2.4 Confirming reduction in greenhouse effect gases

In this project, we plan to scrap the existing 300 MW generating unit and newly to construct a combined cycle generating unit (100 MW X 3 blocks). The project enables improvement in thermal efficiency of the thermal power plant. By comparing thermal efficiencies of the plant before and after the project, energy conservation effectiveness can be confirmed concretely. Greenhouse effect gas emissions are in proportion to fuel consumption; by comparing fuel consumptions before and after the project, we can confirm reduction in emissions of greenhouse effect gases, or CO2. Consequently, it is necessary to measure fuel consumption of the new combined cycle generating unit. This new unit shall be equipped with a fuel meter. The already-constructed boilers were equipped the fuel meters from the first to enable regular monitoring of fuel consumption and data sampling. In the case of the project for assessing reduction in greenhouse effect gas emissions, it is assumed that the new generating unit with high thermal efficiency will be operated with a utilization factor of 70% prior to the existing 300MW units. Owing to the shortage of generating output before improvement, however, the three coal-fired units (Nos. 11, 13, and 14) remaining after the project shall be operated to supply the shortage. By comparing the ratios of CO2 emissions calculated from fuel consumption to the equal generating output of these three coal-fired units and the new combined cycle unit, reduction in greenhouse effect gas emissions can be appropriately assessed.

- 3-23 - 3. Influence on productivity

In this project, we plan to scrap the existing 300 MW generating units and newly to construct a combined cycle generating unit (100 MW X 3 blocks). Interpreting productivity as heat rate, we will mention the influence of the project on the heat rate. Heat rates before and after the project are shown in Table 3.3-1 below.

Table 3.3-1 Comparison of Heat Rates before and after the Project Gross heat rate Net heat rate Before project 10,865 kJ/kWh 11,683 kJ/kWh After project 7,599 kJ/kWh 8,171 kJ/kWh

Comparison of heat rates before and after the project shows that approx. 30% is improved; improvement of productivity is approx. 30%.

- 3-24 - Chapter.4 Profitability [Summary] This chapter deals with the profitability of this project. Analyses were conducted based on two assumptions- a case considered to be the most down-to-earth in light of the present electric power conditions of Ukraine (Case l)l and a case where

future implementation of greenhouse gas (CO2) emission trading is taken into consideration in assessment of the profitability (Case 2). These cases assume that the project is funded by an environmental yen loan (with a repayment period of 40 years including 10 years' grace, and with an interest rate of 0.75%). As a result, in the [Case 1], internal rate of return (IRR) becomes 7.32% and payback period becomes 16 years. Therefore, introduction of private sector capital is not expectable. However, from the viewpoint of a yen loan project, payment of a debt is no problem and there is no doubt about feasibility of this project as a business.

Moreover, in the [Case 2] in which revenue from CO2 emission trading is taken into consideration, IRR becomes 8.24% and payback period becomes 15 years. 1. Financial investment recovery effect

In this section, the calculation/assessment of financial investment recovery effect as a business is conducted on the following two cases, based on the plans of the project described in the previous chapters* [Case 1 (Revenue = Revenue from sales of electricity) In this case, an assessment is made on the profitability of a new plant alone. So, all the revenue from the sales of electricity generated at a newly constructed plant is considered to be the project revenue. And the economic ripple effects of the new plant on other factors are not taken into consideration. Accordingly, the case does

not assume greenhouse gas (CO2) emission trading.

[Case 2 (Revenue = Revenue from trading of 1/2 of reduced CO2 emission + Revenue from sales of electricity)] In this case, under a joint implementation scheme, the Ukraine side gains

revenue from emissions trading for 1/2 of reduced CO2 emission. This revenue plus revenue from sales of electricity are considered as the project revenue in assessment of the profitability.

41- 1.1 Assessment method After preparation of an income statement and cash flow chart, the net present value (NPV), the internal rate of return (IRR), and the payback period are calculated, and used as the indicators in the assessment of the profitability of the investment project.

[Net present value (NPV)] R: Free cash flow Rt NPV = -/ i- Discount rate (Capital cost) M (1 + 0' t' Term (cash flow of the investment occurring in “n ” years) I- Amount of investment

[Internal rate of return (IRR)] R: Free cash flow Rt '=1E'O + r)' r* Internal rate of return t- Term (cash flow of the investment occurring in “n ” years) I- Amount of investment The internal rate of return (IRR) is the "r" that meets the above equation, which means the discount rate that makes the NPV equal to zero. In other words, the IRR is the value that what percent interest the return yielded by the investment to the project is equivalent to.

[Payback period] Payback period is the period in which the accumulation of the initial investment amount and subsequent cash flow in and out becomes equal to zero.

1.2 Calculation conditions For assessment, the following calculation conditions were adopted. [Assessment currency] Due to its moderate fluctuations, the US dollar was adopted. Fig. 4.11 shows changes in the exchange rate between Ukraine Hryvnia (UAH) and US dollar (US$). Since the rate fluctuated sharply between 1997 and 2001,

-4-2- this report uses the median value, 4.0 UAH/US$. Using this value as a base, sensitivity analyses are conducted to assess the influence of exchange rate fluctuations. (Base) 1 US$ = 4.0 UAH = 115 yen

Daily Exchange Rates: Ukrainian Hryvna per U.S. Dollar 6.0

6.5

5.0

4.5

40

3.5

30

2.5

2.0

1.5 j AsWkid j Fwawj j aso Wd j fwa Wj j as Wmd j fma Wj j aso 'n Wj 1997 1998 1999 2000

Fig. 4.1-1 Changes in Exchange Rate between Ukraine Hryvnia and US Dollar

[Project cost] Based on 1 US$ =115 yen, the values presented in Section 3.1.1, Chapter 2, are converted to US dollars as follows: (Unit : X 1000US$) Total project Expenditure development expense Block No. 1 Block No. 2 Block No. 3 261,796 94,738 83,529 83,529

[Operating conditions] The operating conditions of a block of a new plant are as follows: Output (Gross) 100.8 MW (* 1) Output (Net) 97.0 MW Capacity factor Capacity factor (M) 70 % Annual generated output Fuel gas Installed generating capacity x 24h x 365day 131,301 X 1000m3 consumption^) Soot and dust 0 t/ year emission SOx emission 1.45 t/ year (* 2) 393,902-r3 blocks= 131,301 (X 1000m0 NOx emission 264.7 t/ year CO emission 45.5 t/ year

-43- [Price of electricity] The actual value of the wholesale price paid to Dneproenergo by transmission companies in 2000 is used- 0.11 UAH/kWh(-r- 4.0 UAH/US$ = 2.8 US < /kWh)

[Fuel cost] The latest prices of fuels purchased by Pridneprovskaya Power Plant are used. Fuel Fuel cost (281.69 UAH/1000m3)/(5.5UAH/US$) Natural gas 51.2 US$/1000m3 Coal 121.19 UAH/t Petroleum 47.0 US$/t (258.70 UAH/t)/(5.5UAH/US$)

[Plant operation cost] The table below shows plant operation costs calculated based on the average labor cost in Ukraine, the actual costs of combined cycle power generation plants of Chubu Electric Power Co., Ltd., and replacement intervals of high-temperature components of a gas turbine. Daily Periodic Total Labor cost maintenan inspection (million ce cost cost (million (1000US$/ yen/year) (million (million yen/year) year) yen/year) yen/year) After commencement 2,226 of operation of 10 18 228 256 No.l Block After commencement 11 35 456 502 4,365 of operation of No.2 Block After commencement 12 53 684 749 6,513 of operation of No.3 Block

The operation cost per MWh is as follows- 6,513,000 US$/ year 4- (100.8MW X 24h X 365day X 0.7 X 3 Block) = 3.5 US$/MWh

-4-4- [Emission fine] Based on the results of confirmation with the Environmental Protection Department, the following values are used: Emission substance Fine Dust and soot 4.5 UAH/t SOx 119.25 UAH/t NOx 119.25 UAH/t CO 4.5 UAH/t

[CO2 emission trading price] The trading rate of the World Bank ’s Prototype Carbon Fund, 5.0 USS/t-CO], is used. In the present condition, since the rate is indefinite, it performs the sensitivity analysis at the time of fluctuating a dealings rate.

[Depreciation] The annual depreciation expense is calculated by multiplying the balance at the beginning of the term by a fixed depreciation rate of 15%, in accordance with the Corporation Tax Law.

[Tax] Only corporation tax is applied, and value-added tax (VAT) is not taken into consideration. The rate of corporation tax is 30% of ordinary profit (pretax profit after interest payment), and carryover of losses is up to five years.

-4-5- [Financing] 75% of the total project expense is covered by an environmental yen loan provided by Japan, and the Ukraine side raises the funds for the remaining 25%. Since it is difficult to specify the sources of the funds to be raised by the Ukraine side, a typical soft loan is assumed. To minimize the amount of loans, surplus funds generated from revenue from the sales of electricity after completion of construction of a preceding block will be allocated for the expenses for following blocks. The terms and conditions of loans are shown in the table below. Loan amount Interest Repayment period Yen 75% of the total project 0.75%/ year 40 years loan cost (including a grace period of 10 years) Others (25% of the total project 10.00%/ year 10 years cost) - (Surplus funds (equal payment of principal generated from sales of and interest) electricity)

[Project life] The project life assumed for the assessment of the profitability of this project is 40 years, taking into consideration the repayment period of the yen loan and a typical plant life.

[Discount rate (Capital cost)] A discount rate is the minimum profitability that a private corporation wishes to secure in an investment. It is used for the criterion for the assessment of the profitability, that is, the investment is profitable if IRR > discount rate. In this case, the discount rate is 10%.

[Price increase rate] The increases in electricity charge, fuel cost, plant operation cost, and other expenses are not reflected in calculations. In other words, the price increase rate is 0%.

-4-6- 1.3 Financial investment recovery effect (Case 1)

As for Case 1 (Revenue = Revenue from sales of electricity), an assessment was made on the financial investment recovery effect.

1.3.1 Revenue

Project revenue = Annual gross generation (net) X Electricity price

= (97.0 MW X 24 h X 365 days X 0.7 X 3 blocks X 28 US$/MWh

= 49,964 X 1,000 US$/year (5,746 million yen/year)

1.3.2 Expenses 0 Fuel cost = Annual fuel gas consumption X Fuel unit price = (131,301 X 1,000 mVblock X 3 blocks) X 51.2 USS/1,000 m3 = 20,168 X 1,000 US$/year (2,319 million yen/year) (2) Plant operation cost =6,513 X 1,000 USS/year (749 million yen/year)

Emission fine = 0 Dust and soot 119.25UAH/t + 1.45t/year/block x 3blocks x SOx 4.0UAH/USS 119.25UAH/t + 264.7t/year/block x 3blocks x NOx 4.0UAH/US$ 4.5UAH/t + 44.5t/year/block x 3blocks x CO 4.0UAH/USS = 24 x 1,000US$ / ^(3 million yen / year)

1.3.3 Assessment of profitability Based on the above calculations, the profitability is assessed as follows: - Net present value (NPV) = —52,428 X 1000US$ (—6,029 million yen) - Internal rate of return (IRR) = 7.32% - Investment recovery period = 16 years - Cumulative cash flow = 405,918 X 1,000US$ (46,681 million yen)

Since NPV and IRR are below 0 and 10% (discount rate), respectively, in the case above, the project is not feasible as a private investment project. As a yen loan project, however, the project is feasible as a business, since there is no problem in the loan repayment and the cumulative cash flow comes out as a positive quantity.

-4-7- 500

Fig. 4.1-2 Cumulative Cash Flow (Case 1) Based on the above results, a sensitivity analysis was conducted regarding fluctuations in exchange rate, electricity unit price, natural gas unit price, and utilization factor. The results of the analysis are shown in Table 4.1-1. The table indicates that the investment funds cannot be recovered at the present exchange rate of 5.5 UAH/US$, but will be able to be recovered if the Ukraine Hryvnia becomes stronger, reaching 5.0 UAH/US$. In a case where the Ukrainian currency appreciates to 3.0 UAH/US$, or the electricity unit price rises 20%, NPV and IRR will become above 0 and 10%, respectively, and the investment recovery period will be 10 years or so. Then the project may be feasible as a private investment project.

And a sensitivity analysis was conducted regarding fluctuations in electricity unit price, at present exchange rate of 5.5 UAH/US$. The results of the analysis are shown in Table 4.1-2. If a unit price of selling electric energy is raised 60% from the present condition, since NPV>0 and IRR>10% are securable according to this, the possibility as a private investment project also comes out.

-4-8- Table 4.1-1 Sensitivity Analysis (Case 1) Recovery NPV IRR period (million US$) (%) (year) Unrecove 5.5 UAH/US$ 161 0.94 rable 5.0 UAH/US$ 133 2.82 32 4.5 UAH/US$ -106 4.43 24 Exchange (Base) 4.0 UAH/US$ — 52 7.32 16 rate 3.5 UAH/US$ — 15 9.26 13 3.0 UAH/US$ 53 12.59 10 2.5 UAH/US$ 128 16.11 8 2.0 UAH/US$ 247 21.40 6 +20% 0.132 UAH/kWh 11 10.57 12 + 10% 0.121 UAH/kWh - 26 8.68 14 Electricity (Base) 0.110 UAH/kWh — 52 7.32 16 unit price -10% 0.099 UAH/kWh — 93 5.15 22 -20% 0.088 UAH/kWh 135 2.72 33 +20% 61.44 US$/1000m3 — 83 5.71 20 + 10% 56.32 US$/1000m3 — 68 6.53 18 Natural gas (Base) 51.20 US$/1000m3 — 52 7.32 16 unit price -10% 46.08 US$/1000m3 - 37 8.10 15 -20% 40.96 US$/1000m3 — 23 8.85 14 80 % — 21 8.93 14 Operating (Base) 70 % - 52 7.32 16 ratio 60 % — 85 5.62 20

-4-9- Table 4.1-2 Sensitivity Analysis (Regarding fluctuations in electricity unit price at

present exchange rate of 5.5UAH/USS) NPV IRR Payback period (million US$) (%) (year) +100% 0.220 UAH/kWh 92 14.52 9 +90% 0.209 UAH/kWh 70 13.46 9 +80% 0.198 UAH/kWh 47 12.34 10 +70% 0.187 UAH/kWh 25 11.27 11 +60% 0.176 UAH/kWh 2 10.11 12 Electricity +50% 0.165 UAH/kWh - 23 8.81 14 unit price +40% 0.154 UAH/kWh - 50 7.45 16 +30% 0.143 UAH/kWh - 76 6.03 19 +20% 0.132 UAH/kWh -104 4.51 24 + 10% 0.121 UAH/kWh -132 2.85 32 (Base) 0.110 UAH/kWh -161 0.94 Unrecoverable

1.4 Financial investment recovery effect (Case 2)

As for Case 2 (Revenue = Revenue from trading of 1/2 of reduced CO2 emission + revenue from sales of electricity), an assessment was made on the financial investment recovery effect.

1.4.1 Revenue 0 Revenue from CO2 emission trading As discussed in Chapter 3, the amount of CO2 reduction is 966 kt-CC>2 per year. Therefore,

Amount of tradable CO2 emission = Reduced CO2 emission X 1/2

= 966 kt-CC>2/year X 1/2 = 483 kt-CC>2/year

Revenue from CO2 emission trading = 483 kt-CC>2/year X 5.0 US$/t-CC>2 = 2,415 X 1,000 US$/year (278 million yen/year) 0 Revenue from sales of electricity = 49,964 x 1,000 US$ (5,746 million yen/year) (The same as in Case 1)

-4-10- 1.4.2 Expenses (D Fuel cost = 20,168 X 1,000 US$/year (2,319 million yen/year) (The same as in Case l) (2) Plant operation cost = 6,513 X 1,000 US$/year (749 million yen/year) (The same as in Case l) (3) Emission fine = 24 X 1,000 US$/year (3 million yen/year) (The same as Case l)

1.4.3 Assessment of profitability Based on the above calculations, the profitability is assessed as follows- - Net present value (NPV) = —34,552 X 1,000US$ ( — 3,973 million yen) (Discount rate- 10%)

- Internal rate of return (IRR) = 8.24 %

- Investment recovery period = 15 years - Cumulative cash flow = 479,031 X 1,000 US$ (55,089 million yen)

Since NPV and IRR are below 0 and 10%, respectively, in the case above, the project is not feasible as a private investment project. As a yen loan project, however, the project is feasible as a business, since there is no problem in the loan repayment and the cumulative cash flow comes out as a positive quantity.

600 500 ,

400 flow

300 cash million

GO 479 c 200 Recovery period- 15 years | 100 US$

Cumulative _i 0 ^

-100 time axis [year] -200 -300

Fig. 4.1-3 Cumulative Cash Flow (Case 2)

-411- Based on the above results, a sensitivity analysis was conducted regarding fluctuations in exchange rate, electricity unit price, natural gas unit price, and

CO2 emission trading rate. The results of the analysis are shown in Table 4.1 3. The table indicates that if the Ukraine Hryvnia appreciates to 3.5 UAH/US$, or the electricity unit price rises 20%, NPV and IRR will become above 0 and 10%, respectively. Table 4.1*3 Sensitivity Analysis (Case 2) NPV IRR Recovery (million US$) (%) period (year) 5.5 UAH/US$ -141 2.27 36 5.0 UAH/US$ -114 3.96 26 4.5 UAH/US $ - 87 5.47 21 Exchange (Base) 4.0 UAH/US$ - 35 8.24 15 rate 3.5 UAH/US$ 2 10.12 12 3.0 UAH/US$ 68 13.34 9 2.5 UAH/US $ 143 16.80 8 2.0 UAH/US $ 262 22.07 6 +20% 0.132 UAH/kWh 27 11.33 11 + 10% 0.121 UAH/kWh - 9 9.57 13 Electricity (Base) 0.110 UAH/kWh - 35 8.24 15 unit price -10% 0.099 UAH/kWh - 75 6.15 19 -20% 0.088 UAH/kWh -116 3.86 27 +20% 61.44 US$/1000m3 - 65 6.69 18 +10% 56.32 US$/1000m3 - 49 7.47 16 Natural gas (Base) 51.20 US$/1000m3 - 35 8.24 15 unit price -10% 46.08 US$/1000m3 - 20 9.00 14 -20% 40.96 US$/1000m3 - 5 9.73 13 +20% 6.0 us$/t-co 2 - 31 8.43 14 +10% 5.5 us$/t-co 2 - 33 8.33 14 Emission (Base) 5.0 2 - 35 8.24 15 trading rate us$/t-co -10% 4.5 us$/t-co 2 - 36 8.15 15 -20% 4.0 us$/t-co 2 - 38 8.06 15

-4-12- 1.5 Examination Present Ukraine is in a difficult situation such as depreciation of Ukraine Hryvnia, imbalance of cheap electricity price and high fuel gas price, and etc. Consequently, profitability will absolutely become low. The results of each case are shown again below. Case 1 Case 2 Net present value (NPV) - 52,428 - 34,552 Internal rate of return (IRR) 7.32 % 8.24 % Payback period 16 years 15 years cumulative cash flow 405,918 479,031

Meanwhile the scheme of joint implementation does not yet become clear, and

the trend of CO2 emission trading price is also unknown. So, we cannot judge whether the [Case 2] can stand up or not.

Therefore, we consider the [Case l] to be the most down-to-earth because CO2 emission trading is not taken into consideration in the assessment of the profitability. From the exchange rate sensitivity - analysis result of [Case l], if the exchange rate is 2.0UAH/US$ of the 1997 level before Hryvnia fall, IRR becomes 21.40% and payback period becomes six years. So, this project hides possibility of becoming an attractive private investment project. However, in present exchange-rate 5.5UAH/US$, investment recovery is impossible. However, it turns out that Hryvnia is recovered from the present condition also a little, investment recovery will be attained if it becomes 5.0UAH/US$, and it becomes a promising yen loan project issue also from it having been 7.32% of internal rates of return, and investment pay back-period 16 years by some Hryvnia recovery in 4.0UAH/US$ used as the base this time. Moreover, if a unit price of selling electric energy is raised 40% from the present condition in present exchange rate 5.5UAHZUS$, IRR becomes 7.45%, and payback period becomes 16 years, and it will have profitability of the same grade as the case of 4.0 UAH/US$ used as the base of an exchange rate this time. Furthermore, if a unit price of selling electric energy is raised 60% from the present condition, NPV>0 and IRR>10% are securable.

-413- 2. Project effect against cost

In this section, an assessment is made from a perspective different from that in the previous section, where investment recovery effect is assessed. This section deals with energy-saving effect and greenhouse gas reduction effect against the initial investment amount (total project expense) for a single fiscal year.

2.1 Energy-saving effect against cost As described in Section 1.3.3, Chapter 3, the reduced fuel consumption due to this project is 187 ktoe a year. The total project expense is 30,107 million yen. Therefore, the energy-saving effect against the total project cost for a single fiscal year is*

187,000foe = 6.2\toe - y / million yen 30,107million yen

2.2 Greenhouse gas reduction effect against cost

As described in Section 2.3.3, Chapter 3, the reduced CO2 emission due to this project is 966 kt-CCh per year. The total project expense is 30,107 million yen. Therefore, the greenhouse gas reduction effect against the initial investment amount for a single fiscal year is* 966,000/ - CQ2 = 32.1/ -C02 -y!million yen 30,107millionyen

-4-14 Chapter.5 Diffusion Effect [Summary] This chapter deals with the effect of diffusion of the technology used in the proposed project. A scrap-and-build remodeling project, the same type as this project, could be implemented for 17 units of four power stations in Ukraine. The total installed capacity of these units amounts to approximately 3,000 MW. If each of these units is remodeled into a combined cycle power generating unit, as in Pridneprovskaya Thermal Power Plant, the annual amount of reduced fuel consumption will be approximately 3.4 million tons of oil equivalent (energy-saving effect), and the annual amount of reduced CO2 emissions will be approximately 7.8 million tons (CO2 reduction effect), assuming the capacity factor is 70% uniformly. 1. Potential diffusion of the technology to be applied in the project in the recipient country

1.1 Application conditions

The technology proposed in this project is a scrap-and-build project changing power generating units from coal-fired to gas-fired combined cycle type. This technology could be applied to units satisfying the following conditions: (1) The unit is a coal-fired power generating unit with low efficiency and capacity factor. (2) As fuel for gas turbines, natural gas can be secured. (3) Sufficient space for construction of a combined cycle power generating unit can be secured. (4) The unit is not a steam supply and power generating plant.

This requirement is designed to avoid any reduction or discontinuance of district heating in the wake of remodeling of such a plant into a combined cycle power generating plant.

1.2 Potential plants subject to a similar project

The table below shows the specifications of power generating units in Ukraine, and which units could be the subjects of a scrap-and-build project. It should be noted, however, that the analysis is partly based on assumptions, due to the lack of materials providing detailed information on these units. The criteria for selection of potential plants subject to a similar project are as follows: (1) The unit is an aged plant that was constructed in or before the 1960s. (2) Units with a large capacity, such as 720 MW and 800 MW, will be excluded, since those units are presumed to be base load facilities. (3) It is presumed that almost half of the power generating units in each power station are district heating units. Since the steam supply and power generating function is usually required at the time of the construction of a new power station, older units in the same station are considered to be steam supply and power generating plants, and accordingly will be excluded. (4) As for a power station that has a number of units with the same generating capacity that were constructed over a period of several years, half of these

-5-1- units are considered to be steam supply and power generating plants, and accordingly will be excluded.

Facility specification Capacity Name of power No. X Capacity Construction subject station per unit (MW) year (MW) Kruvorizka 10X282 1965-73 — Excluded as *1 3x800 1975-77 — Excluded as *2 Zaporizhia 4x300 1972- — Excluded as *1 4x150 1960-62 — Prednieprovskaya 4x285 1963-66 — Zuivskaya 4x300 1982-88 — Excluded as *1 2x100 1957 — Excluded as *3 Lugansk 8x175 1961-68 700 Subject to 4 units. 1x80 1955 — Excluded as *3 1x100 1957 — Excluded as *3 Sloviansk 1x720 1967 — Excluded as *2 1x800 1971 — Excluded as *2 1x200 1972 — Excluded as *1 Kurakhove 6x210 1972-75 — Excluded as *1 Starobesheve 10x175 1952-67 875 subject to 5 units. Vuglegirska 4x300 1972-73 — Excluded as *1 6x200 1960-65 — Excluded as *3 Zmiiv 4x300 1967-69 — Excluded as *1 Trypilia 6x300 1969-72 — Excluded as *1 Burshtyn 12x195 1965-69 1,170 Subject to 6 units. Ladyzhyn 6x300 1970-71 — Excluded as *1 3x100 1959-61 — Excluded as *3 Dobrotovor 2x150 1963-64 300 Subject to 2 units. Total 3,045 Note: *1 Relatively new *2 Large capacity *3 Heat and Electric power supply plant (assumption) Name of power station's spelling as by UKRAINE POWER INDUSTRY (MOPE)

-5-2- Based on the table above, it is assumed that units with the total installed capacity of 3,045 MW across Ukraine can be remodeled into combined cycle plants with the same capacity by the scrap and build method.

2. Consequences of diffusion

2.1 Data and specifications used for assessment

As for the units that could be remodeled into a combined cycle plant, we have not yet obtained sufficient materials. For assessment, therefore, it is assumed that the thermal efficiency, auxiliary power ratio, and other conditions of these units are the same as those of Pridneprovskaya Power Plant. Also, the data necessary for calculation of energy saving and CO2 reduction effects is assumed to be the same as that for this project.

2.2 Diffusion effect

2.2.1 Energy saving effect (1) Based on Section 1.1.3 “Calculation results of energy saving effect” of Chapter 3, the energy saving effect as a consequence of diffusion will be calculated. (2) The annual amount of energy to be reduced by a scrap-and-build project of a 300-MW plant is 7,858 TJ, or 187 ktoe/year in terms of oil. (3) In Ukraine, the total capacity of power generating plants for which a similar project could be is 3,045 MW. Therefore, the energy saving effect will be:

3,045(MW) x l %1{ktoe / Year) = 1,898 (ktoe / Year) 300(MW)

-5-3 - 2.2.2 Greenhouse gas reduction effect (1) As in the above case of calculation of energy saving effect, based on Section 2.3.3 “Calculation results of reduction in greenhouse gases” of Chapter 3, the greenhouse gas reduction effect as a consequence of diffusion will be calculated. (2) The annual amount of greenhouse gases to be reduced by a scrap-and-build project of a 300-MW plant is 966 kt-COi/year. (3) In Ukraine, the total capacity of power generating facilities for which a similar project could be implemented is 3,045 MW. Therefore, the greenhouse gas reduction effect will be:

3,045{MW) x g kt _ CQ2 ! y = 9 805(fe _ CQ21 Year} 300(W)

-5-4- Chapter.6 Other Effects [Summary] This chapter deals with other effects of the proposed project. The implementation of the project is expected to have insignificant impact on the environment, posing no problems. In terms of economy, this project will bring such benefits as the creation of employment for construction projects, and the revitalization of domestic industries and improvement of the people ’s quality of life, since the project will help mitigate electricity shortages. From the social aspect, the project is expected to facilitate a structural reform of the power sector through related exchanges and collaborations with overseas organizations. 1. Effects of the implementation of the project from the viewpoints of environment, economy, and society, in addition to energy saving (alternative energy) and greenhouse gas emission reduction effects

1.1 Environmental Impact

1.1.1 Atmospheric Impact This is a project to construct a power plant where natural gas is combusted in a gas turbine. Natural gas is a clean fuel source with few impurities and a light load on the environment. Table 6.1-1 shows air-related environmental data for this project. Table 6.1-1 Air-related Environmental Data Existing unit New unit Unit (300MW) (100MWX3) Exhaust gas volume m3N/h — 545,970(wet)x3 Exhaust gas temperature °C — 103 Exhaust gas velocity m/s — 21.7 Concentration ofSOx m g/m 3 N 480 0.16ppm(wet) Emission volume ofSOx m3N/h — 0.09X3 Bg Concentration ofNOx mg/m3N 1025 38.5ppm(wet) 3| Emission volume ofNOx m3N/h — 21.1 X 3 Dust concentration mg/ m3N 950 0 II Dust emission volume m3N/h — 0 Oxygen concentration vol% — 13.0(wet) Stack height m 180 45

Table 6.1-2 shows a comparison of annual emission volumes before and after the project. Table 6.1-2 Comparison before and after the Project (Air-related Data) Reduced Substance Unit Present After project volume Dust t/year 5,351 1,084 4,267 802 t/year 9,206 1,869 7,337 NOx t/year 4,351 1,675 2,676 CO t/year 779 292 487

The present volumes were calculated by adjusting the data in Table 2.2-3 based on the actual capacity factor of an existing 300-MW unit, which is 22.9%.

- 6-1 - As shown in Table 6.1-2, the implementation of the project will reduce dust emissions by 80%, 802 by 80%, NOx by 61%, and CO by 62%, leading to significant environmental improvement. In Ukraine, the stack height is determined based on the results ofNOx landing concentration assessment. Since such assessments are carried out by a technical organization, the assessment of landing concentration for this project was entrusted to the organization. We assessed two cases: 45m-high stack case as original proposed project; and 100m-high stack case for reference. And we compared them with the value when Unit No.12 is in operation. Table 6.1-3 shows the general results of the assessment.

Table 6.1-3 General Results of Landing Concentration Assessment Maximum Maximum Acceptable allowed Unit landing landing concentration concentration concentration fraction Present status 0.043 0.507 (Unit No. 12) After project mg/m 3 0.056 0.085 0.662 (Stack height: 45 m) After project 0.022 0.264 (Stack height: 100 m)

As shown in the above table, it was confirmed that with a stack height of 45 m, the landing concentration falls within the acceptable level.

After that, according to the demand of JST Dneproenergo, the chimney stack was changed into 75m high, which is 15m higher than the existing building. Although quantitative evaluation of a landing concentration in the case of a chimneystack height of 75m is omitted, since the ground concentration falls further by making the chimneystack higher, it does not become a problem.

- 6-2 - 1.1.2 Water quality In this project, we plan to scrap one of the existing 300MW coal-fired units and instead to newly construct a combined cycle unit with equal capacity, so wastewater decreases. Therefore, additional environmental protection measures for wastewater are not necessary. The details of water quality will be examined at the implementation stage of the proposed project.

1.1.3 Noise and vibration In the combined cycle power generating facility which will be constructed in this project, the main body of the gas turbine will be housed in the enclosure. As a result, the noise level will be below 90 dB(A) within 1 m of the facility. In addition, the impact beyond the border line of the site will be minimized, by containing the entire power generating facility in a building. At the implementation stage of the proposed project, additional assessment of noise and vibration will be conducted as necessary by taking existing equipment into consideration.

1.1.4 Thermal discharge water Being located at the side of the Dnieper River, Pridneprovskaya Power Station takes in cooling water for power generation (circulating water) from the river, and discharges hot thermal discharge water into the river. In this project, an existing 300 MW conventional unit will be replaced with a highly efficient combined cycle power generating facility. Since the new unit has a smaller steam turbine workload per unit of generated output power, it will require less cooling water for power generation compared to the existing unit. While the temperature difference for a condenser of the existing unit is 8°C in normal operation (limit value: 12°C), that of the new unit will be 7°C- In short, neither the volume nor temperature of thermal discharge water will increase after construction. Therefore, no environmental measures will be required regarding thermal discharge water.

- 6-3 - 1.1.5 Coal ash The volume of coal ash generated by operation of the existing coal-fired unit will be reduced as shown in the table below.

Table 6.1-4 Comparison of Coal Ash Volumes before and after the Project Reduced Item Unit Present After project volume Coal ash t/year 135,568 27,461 108,107 Clinker t/year 23,816 4,824 18,992

As shown in the above table, the volume of coal ash will be reduced by 100,000 tons yearly, leading to a longer lifetime for the ash disposal site.

1.2 Economic and societal influences

1.2.1 Economic influences The implementation of this project may bring the following economic benefits: (1) The 300-MW combined cycle power generating facility, which has excellent ability for supply and demand adjustment, will contribute to stabilization of the electric power system, since it will no longer be necessary to constrainedly operate an aged power generating unit with low load capacity. (2) The highly efficient power generating facility will require less fuel to produce the same electric energy output as before. As a result, natural gas, a valuable resource, can be saved. (3) Shorter maintenance periods and less problems than the existing facility will lead to improvement of the annual rate of operation. (4) Replacement of the aged central control/measuring systems with a state-of- the-art digital control system will enable reduction of the number of personnel required for operation/management, monitoring, data recording, etc. (5) In the construction stage, employment will be created for logistics/site construction, as well as incidental projects, including food and accommodation for foreign engineers. After remodeling, there will be employment created related to maintenance of the main facility as well as logistics related to the maintenance work.

-6-4 - The proposed project will not only bring benefits to Pridneprovskaya Power Station and JST Dneproenergo, but contribute to the revitalization of Ukrainian industry and improvement of citizens ’ lives. As a result, there will be extensive economic effects.

1.2.2 Societal influences Since this project deals with the remodeling of an existing power generating plant, instead of establishment of a new power plant, the construction work will not cause significant societal influences. However, the following positive influences are expected in the social aspect: (1) Through quality/process control practices at the construction stage and O&M training after remodeling, not only the Power Station but also other parties related to the Ukrainian power industry will learn how to manage a power station efficiently from technical and financial perspectives. This will help promote the structural reform of the electric power sector, which is called for by the World Bank and other international assistance organizations. (2) In the area to be covered by the project, air pollution has recently become a serious problem, and there is a growing interest in environmental conservation. However, appropriate measures are not being taken for financial reasons. Under these circumstances, the implementation of this project, which will contribute to improvement of the environment, may help promote citizens ’ understanding of such overseas assistance programs, leading to the creation of a social environment that will enable smoother implementation of similar projects in the future. (3) Unstable electricity supply always causes both the society and economy uneasiness and other adverse effects. Such adverse effects will be eliminated by the implementation of the project, which will achieve stabilization of electric power supply. (4) After this project is completed, the power generating aspect of Pridneprovskaya Power Station ’s function as a steam supply and power generating plant will become less important. As a result, the plant will be able to focus on district heating, leading to improvement of electricity and steam supply —a matter of vital importance in the Dnepropetrovsk area in wintertime.

- 6-5 - Conclusion Conclusion

We have conducted a feasibility study on a renovation project to scrap-and-build 300MW coal-fired generating unit of the Pridneprovskaya thermal power station to provide gas-fired exhaust heat recovery combined-cycle power unit of the same capacity.

This project is intended to improve generating efficiency through maximum use of the existing facilities and premises of the power station, thereby reducing CO2 emissions. The result of the feasibility study shows that CO2 reduction achieved by the project would be 966 kt/year, the total amount of reduction reaching approximately 39 million tons during the 40 years of calculation period. Moreover, it will be possible to reduce other air pollutants, coal ash, and the like by several tens of percent.

In the assessment of the profitability, it is the most realistic now to assess the profitability of the project alone, without taking into consideration an economic ripple effect and CO2 emission rights trading. The result of the assessment was as follows; the rate of return of this project is not necessarily high, and low interest financing is necessary to secure business. Therefore, introduction of private sector capital is not expectable. However, when a yen loan is assumed as a finance of low interest, because it is certain that payment of a debt is no problem and there is no doubt about feasibility of this project as a business and this project will contribute to emission curtailment of greenhouse gas and an air pollution substance, application of an environmental special yen loan is expected.

The result of our feasibility study on the facility plan shows that infrastructure such as installation space and fuel supply is in proper condition. Moreover, there are no technical difficulties involved in the feasibility of facility building. However, as the exhaust heat recovery combined-cycle system incorporates the latest technology and no other such system exists in Ukraine, it appears necessary to include a scheme for giving O&M technical guidance to Ukrainian engineers when the project is implemented. A possible way to realize this scheme is to provide on-the-job training in a similar plant in Japan or to send engineers from Japan to give guidance on-site. As we have experience in operating many combined-cycle systems, we are able to provide technical assistance in a scheme like this. Both Dneproenergo, our direct partner in this project, and those on the site concerned with this project are willing to realize this project, as their power facilities have become old with decreasing efficiency and capacity factor and they are worried about shortage of supply capability in the near future. Also, through the feasibility study, we feel that positive assistance can be gained from the Ministry of Fuel and Energy (MOPE), which is the supervisory agency for Dneproenergo.

We intend to promote this project continuously, working with Ukrainian government agencies concerned and aiming to develop concrete actions, such as making a request for a yen loan, to raise funds for the project. With profitability taken into consideration, a special yen loan at a low rate of interest is necessary for this project. This necessitates activities aimed at obtaining the understanding of Japanese government agencies concerned.

In promoting this project in the future, several things will need to be kept in mind. The project should not transfer Japanese techniques and experience in a unilateral manner. Requests and actual conditions on the Ukrainian side and changes in future circumstances shall be thoroughly taken into account. Furthermore, achievement of maximum and continued effects from the project should be borne in mind.

In conclusion, we would like to express our gratitude to all the persons concerned at the Ministry of Fuel and Energy of Ukraine, Dneproenergo, and the Pridneprovskaya thermal power station for their invaluable cooperation in the feasibility study.

March 2001 Chubu Electric Power Company, Incorporated Attached Document

1 Plant Design Conditions

2 Profitability Statement

3 Calculation of Reductions Other Than Greenhouse Gases Attached Document -1 Plant Design Conditions Attached Document -1

Attached Document -1: Plant Design Conditions This document describes plant design conditions for the Pridneprovskaya power station renovation project. 1. Design Standards Ukraine does not have its own design standards for civil engineering and construction. Currently, the nation is preparing its original design standards based on the former Soviet Union's SNIP (National Codes & Standards of Russia). In this report, therefore, design of civil engineering and construction complies with the former Soviet Union's SNIP.

2. Weather 2.1 Temperatures Mean monthly temperatures in areas surrounding the Pridneprovskaya power station over the 1997 to 1999 period are shown in Table 1.

Table 1 Mean Monthly Temperatures Unit: °C Month Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sept. Oct. Nov. Dec 1997 -6.5 -2.6 1.9 7.2 17.6 20.8 21.1 19.6 12.9 8.5 3.9 -2.7 1998 -2.4 -0.9 2.4 11.4 16.4 22.5 22.8 20.6 16.6 9.7 -0.2 -3.9 1999 -2.6 -0.8 5.0 12.2 13.3 22.3 25.2 21.0 15.9 10.1 0.4 1.4 Source: J ST Dneproenergo In the design conditions used for the existing plants of the Pridneprovskaya power station, the base, highest, and lowest temperatures were 8.4°C, 38.1°C, and -38.2°C, respectively. Identical conditions as these are used as design conditions for the new plant.

2.2 Humidity Humidity in the area surrounding the Pridneprovskaya power station is approximately 80% in winter and 45% in summer. In the design conditions used for the existing plants of the Pridneprovskaya power station, humidity was 74%. The identical condition as this is used as a design condition for the new plant.

1 Attached Document -1

2.3 Water Temperature Mean monthly water temperatures and highest and lowest water temperatures, mean flow velocity, and highest and lowest water levels of Dnepr River at the Pridneprovskaya power station over the 1997 to 1999 period are shown in Tables 2, 3, and 4.

Table 2 Mean Water Temperatures of Dnepr River Unit: °C Month Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sept. Oct. Nov. Dec 1999 2 2 3 4 10 20 27 26 19 19 7 5 1998 3 3 6 9 22 22 24 25 21 15 5 3 1997 5 6 7 8 17 27 26 23 20 14 9 7 Source: J ST Dneproenergo

Table 3 Maximum and Minimum Water Temperatures of Dnepr River Unit: °C Maximum Minimum Temperature Recorded in Temperature Recorded in 1999 28 August 2 February 1998 30 August 1 February 1997 28 August 1 February Source: JST Dneproenergo

Table 4 Mean Flow Velocity and Highest and Lowest Water Levels of Dnepr River Item Record Remarks Mean flow velocity 0.082 m/sec. Maximum water level EL.51.5m Bottom of intake of Pridneprovskaya Minimum water level EL.49.8m TPP: EL 39.80 m Source: JST Dneproenergo

In the design conditions used for the existing plants of the Pridneprovskaya power station, water temperature was 12°C. This condition is also used as a design condition for the new plant.

2 Attached Document -1

2.4 Precipitation/Amount of Snowfall Precipitation in the area surrounding the Pridneprovskaya power station differs to some extent from year to year within the range of 450 to 550 mm. The area has snowfall in winter. The maximum amount of snowfall in the past was 250 mm. The mean amount of snowfall is 100 to 150 mm.

Snow Loads The standards for snow loads specified in the former Soviet Union's SNIP (National Codes & Standards of Russia) are still used. A load per unit area is specified for each area as a snow load condition. Area classification by snow load specified in SNIP is shown in Fig. 1. In SNIP, snow loads are classified into 6 classes. Higher classification numbers indicate harsher loading conditions. Snow load classification of Dnepropetrovsk in Ukraine is I. A load per unit area of 50 kg/m2 is assigned to the city.

BtmamopuM\_ umi

\ 1 cw«* Fig. 1 Area Classification by Snow Load

3 Attached Document -1

2.5 Earthquake General Information on Earthquakes Ukraine is not an earthquake-classed country, but is not entirely free from the possibility of an earthquake. Interviews with local people showed that the last earthquake occurred about 40 years ago. As such, the Pridneprovskaya power station does not have recording equipment for earthquakes.

Earthquake Loads The standards for earthquake loads specified in the former Soviet Union's SNIP (National Codes & Standards of Russia) are still in use. Highly detailed definitions of locational constant, ground condition, importance of structure, structural type, size of structure, and the like are given with regard to earthquake loads. Area classification by earthquake load specified in SNIP is shown in Fig. 2. Ukraine is classified as being earthquake zone 5 or 6. In SNIP, earthquake loads shall be taken into account in construction design in zone 7 and higher but not in zone 6 and lower. Therefore, earthquake loads are not taken into consideration in this report.

■'^panonowbe-^Ty ”'

Fig. 2 Area Classification by Earthquake Load

4 Attached Document -1

2.6 Winds General Information on Winds Average monthly wind directions and speeds in the area surrounding the Pridneprovskaya power station are shown in Table 5.

Table 5 Average Monthly Wind Directions and Speeds Unit: m/Sec Month Jan. Feb. Mar. Apr. May Jun. Average wind direction E NW E SSW E NW Mean wind speed 4.2 4.4 4.2 3.9 3.3 3.2 Month Jul. Aug. Sept. Oct. Nov. Dec Annual average Average wind direction NW NW SW SW SSW SW SW Mean wind speed 3.0 2.9 3.0 3.5 3.6 3.8 3.6

The mean wind speed tends to be slightly higher in October to April than in May to September in and around Dnepropetrovsk. With regard to wind directions, easterly winds blow in January, March, and May, while northwesterly and southwesterly winds prevail in other months.

Wind Loads The standards for wind loads specified in the former Soviet Union's SNIP (National Codes & Standards of Russia) are still in use. Area classification by wind load specified in SNIP is shown in Fig. 3. Wind load per unit area are specified according to locational constants based on the area classification, mean wind speed, height and shape of structure, and the like. In SNIP, areas are classified by wind load into 8 classes. Higher classes indicate harsher loading conditions. As shown in the figure, wind load classification of Dnepropetrovsk in Ukraine is m. A load per unit area of 40 kg/m2 is assigned to this area class.

5 Attached Document -1

Kj P*

Fig. 3 Area Classification by Wind Load

3. Geographic and Geological Features 3.1 Geographic Features (Source: World Encyclopedia, Heibonsha) Most areas of Ukraine are flat with low hills. Mean elevation is 170 m. The only uplands are the Carpathian Mountains along the western border and the Crimean Mountains in the Crimea. The principal rivers, mostly all running in to the Sea of Azov or the Black Sea, are the Dnepr (2,200 km in length of which 1,200 km is in Ukraine, the third longest river in Europe), the Bug, the Dnestr, and the Donets.

Ukraine is divided into the following three areas in terms of soil and vegetation. 0 Poles'e : Acid soils unfit for agriculture, called podzol, spreads in this forested and fen region. Poles'e is situated to the north of Kiev and accounts for 19% of Ukraine. (2) Forest steppe : This region is covered with fertile chernozem soils forming layers about 180 cm thick. Forest steppe extends broadly in the central part of Ukraine on both sides of the Dnepr. It covers 33% of the country. (3) Steppe : This is the grassland in the southern part of Ukraine and is also covered with black earth. This region covers 48% of Ukraine.

6 Attached Document -1

The Dnepropetrovsk oblast, which is the target district of this project, is situated in the forest steppe region ((2)).

3.2 Geological Features The ground in the area surrounding the Pridneprovskaya power station was surveyed in 1951 to 1953, before the construction of Units 1 to 6, by drilling 155 holes in the vicinity of the power station. According to the survey result, strata at depths from 1.25 to 15.0 m around the power station are irregular sand layers. The surfaces are covered with sand and clay of weathered alluvial granite. Beneath this extend alluvial sand layers 0.2 to 15.0 m thick. Alluvial clay in lenticular forms 2 to 4 m thick is distributed in the middle of the alluvial sand layers.

3.3 Ground Properties Properties of the ground around the power station obtained from the geological survey are as shown in the table below. Table 6 Ground Properties Item Value Remarks Allowable bearing capacity 2.4kgf/cm2 Xsafety factor (0.8) 1.92kgf7cm2 (bearing capacity (Description given in Reference No. 23) of soil) Allowable bearing capacity above 2.0kgf/cm2 groundwater level Measured bearing Result of measurement at 2.0 m below land capacity of soil 1.5kgf/cm2 surface around power station (description given in Reference No. 32) Angle 33° —37° 30 Dry soil of internal friction 25° 30—32° Saturated soil Moisture content 3.52%—4.75% Specific gravity 2.62-2.65 Unit volume weight 1.62t/m 3 Porosity 40.43%—41.61% Density 0.37-0.41 Measured value taken at 2.0 to 2.5 m below Coefficient 3.3—3.5X10-5m/s ground of permeability Reference No. 32 GENERAL DESCRIPTION OF POWER STATION AND VILLAGE CONSTRUCTION SITES, JST Dneproenergo Reference No. 23 TURBINE GENERATOR FOUNDATION Main Sheet, J ST Dneproenergo

7 Attached Document -1

3.4 Thickness of Frozen Soil Design standards assume that the thickness of frozen soil is 1.5 m from the surface (the result of a field survey). A measurement record shows that soil is frozen down to 0.9 m below ground around the power station in winter (described in Reference No. 32).

3.5 Groundwater Levels It has been confirmed by the result of a drilling survey conducted around the power station in 1951 to 1953 when the power station was constructed, that groundwater levels are distributed in the range from 1.8 to 8.0 m below the surface of the ground.

8 Attached Document -2 Profitability Statement

1 Main Case

2 Case of Trading Emission Rights [Case 1] Assumption

Specifications of 100IIW Combined Cycle Plant (per 1 Block) Capacity (Gross) 100.8 MW (Net) 97.0 MW Capacity Factor 70 % (Output Factor 90%) Annual Generation (Gross) 618,106 MWh - Capacity (Gross) x24hx365days x Capacity Factor (Net) 594,804 MWh - Capacity (Net) x24hx 365daysx Capacity Factor Heat Rate (at 90% load) 7,005 kJ/kWh Annual Gas Consumption 4,329. 8 TJ/year - Annual Generation(Gross) xHeat Rateat(90% load) 131,305 10Q0m3at20°C/year /(A. 1868k J/kca I) / (7876kca I /m3at20°C) Emissions Dust SOx NOx CO 0 t/year 1.45 t/year 264.7 t/year 44. 5 t/year

Fuel Cost Gas Price 51.2 US$/1000m3 (281. 69UAH/1000m 3) / (5.5UAH/US$)

Electricity Tariff o.ii m/m (= 2.8 US C /kWh ) (x10O0US$) Project Cost Allocation of Construction Cost Item Total No.1 Block No.2 Block No.3 Block Scrap of existing facilities 7,104 7,104 0 0 Plant Equipment 228,989 76,921 76,034 76,034 Civil 6, 939 2, 887 2, 026 2, 026 Engineering Fee 4, 869 1,739 1,565 1, 565 Contingency 12,156 4, 348 3, 904 3, 904 Spare Parts 1,739 1,739 0 0 Total 261,796 94,738 83.529 83,529

0&M Cost 1 Block 2 Blocks 3 Blocks (x1000US$/year) 2,226 4, 365 6,513

Profit Tax 30 %

Depreciation Dec I ining-baIance 15 %

Exchange Rate 1 US$ = 115 Yen 4.0 UAH 1.15 Euro (1 Euro = 100 Yen) Discount Rate 10 %

Loan Condition Yen Loan Interest p. a. 0.75 % Maturity 30 years (Grace for first 10 years) Principal 75% of Project Cost Phase 1 Phase 2 Phase 3 (x1000US$) 71,054 62,647 62.647 Other Loan Interest p. a. 10.00 % Maturity 10 years Annuity Payment

Price Escalation Electricity Tariff Fuel Cost 0&M Cost 0 %/year 0 %/year 0 %/year

Dust SOx NOx CO 4.5 UAH/t 119.25 UAH/t 119.25 UAH/t 4.5 UAH/t

Result

NPV= -52,428 x1000US$ IRR= 7.32% Payback Period (years) 16 [Case 1]100MW x 3 Combined Cycle Plant (1/3) (Moneytary Unit : 1000US$) Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 T7L (D Revenue (Elec. Power Sold) 0 16, 655 33,309 49, 964 49, 964 49,964 49, 964 49,964 49, 964 49,964 49,964 49, 964 49,964 49, 964 49, 964 49,964 (D Cost (Fuel Cost) 0 6, 723 13,446 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 ® (O&M Cost) 0 2,226 4, 365 6,513 6,513 6,513 6,513 6,513 6,513 6,513 6,513 6,513 6,513 6,513 6,513 6,513 ® (Emission Fee) 0 8 16 24 24 24 24 24 24 24 24 24 24 24 24 24 (D EBITDA GH2HD-® 0 7,698 15,482 23.259 23,259 23,259 23,259 23,259 23, 259 23,259 23,259 23, 259 23,259 23,259 23,259 23,259 (D Depreciation 0 14,211 24, 608 33,447 28,430 24,165 20, 540 17,459 14, 840 12, 614 10,722 9,114 7,747 6, 585 5, 597 4, 757 (2) EBIT dHD 0 -6,513 -9,126 -10,188 -5,171 -906 2,719 5, 800 8,419 10,645 12, 537 14,145 15,512 16,674 17, 662 18,502 (D Interest ®+© 0 2, 901 4, 980 6, 488 6,104 5, 682 5,219 4, 708 4,147 3,529 2, 850 2,103 1,649 1,421 1,372 1,323 (D EBT (2HD 0 -9,414 -14,106 -16, 675 -11,275 -6,589 -2, 500 1,091 4, 272 7,115 9, 687 12,042 13,863 15,253 16,290 17,178 ® Tax d)x30% 0 0 0 0 0 0 0 0 0 0 179 3, 613 4,159 4. 576 4, 887 5,153 ® Net P/L (D~® 0 -9,414 -14,106 -16, 675 -11,275 -6, 589 -2, 500 1,091 4, 272 7,115 9, 507 8,429 9, 704 10, 677 11,403 12, 025

® Free Cash Flow (SHOD-© -94, 738 -75,831 -68,047 23,259 23,259 23,259 23,259 23, 259 23, 259 23,259 23,080 19, 646 19,100 18,683 18, 372 18,106 ® Net Cash Flow ®H##-®- © 0 0 0 12, 937 12, 937 12,937 12,937 12, 937 12, 937 12,937 12,758 10,811 11,054 10,717 10,455 10, 237 ® Cumu lative C/F I (®HD) -94, 738 -173,470 -246,497 -229, 726 -212,571 -194, 994 -176,954 -158,403 -139, 291 -119,562 -99,332 -81,789 -64, 338 -47,076 -30,076 -13, 294 Debt Yen Loan ® Loan 71,054 62, 647 62, 647 0 0 0 0 0 0 0 0 0 0 0 0 0 ® Principal 0 71,054 133,700 196, 347 196, 347 196,347 196, 347 196, 347 196,347 196, 347 196, 347 196, 347 193,979 189,522 182,977 176,432 ® Principal Payment 0 0 0 0 0 0 0 0 0 0 0 2, 368 4, 457 6, 545 6, 545 6, 545 ® Interest ® x0. 75% 0 533 1,003 1,473 1,473 1,473 1,473 1,473 1,473 1,473 1,473 1,473 1,455 1,421 1,372 1,323 ® Annual Payment ®+® 0 533 1,003 1,473 1,473 1,473 1,473 1,473 1,473 1,473 1,473 3, 841 5,912 7, 966 7,917 7,868 Others ® Loan 23,685 17,572 13,117 0 0 0 0 0 0 0 0 0 0 0 0 0 ©Principal 0 23,685 39,770 50,150 46,316 42,099 37,460 32, 356 26, 743 20, 568 13,776 6, 305 1,941 0 0 0 ©Principal Payment 0 1,486 2. 737 3,834 4,217 4, 639 5,103 5,613 6,175 6, 792 7,471 4, 364 1,941 0 0 0 © Interest ©x 10% 0 2, 368 3,977 5,015 4, 632 4,210 3, 746 3, 236 2, 674 2, 057 1,378 630 194 0 0 0 ©Annual Payment © © 0 3, 855 6,714 8, 849 8, 849 8, 849 8, 849 8, 849 8, 849 8, 849 8, 849 4, 994 2,135 0 0 0 © Capital Expenditure 94,738 83,529 83,529 0 0 0 0 0 0 0 0 0 0 0 0 0 Depreciation Depreciation 0 14,211 24, 608 33,447 28,430 24,165 20,540 17,459 14,840 12,614 10, 722 9,114 7,747 6,585 5,597 4,757 Residue Value 94, 738 164,056 222,977 189,530 161,101 136,936 116,395 98,936 84,096 71,481 60.759 51,645 43,898 37,314 31,717 26,959 Cumulative Cash Flow from ® 405,918 xiooousi; i NPV from ® | -52,428 x1000US$ 1 CTSti | ROi AVERAGE (®)/Investment 1Irr from ® | 7.32% | Payback Period (year) from ® | 16 1 [Case 1]______100MW x 3 Combined Cycle Plant (2/3) (Moneytary Unit : 1000US$) Year 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 P/L (D Revenue (Elec. Power Sold) 49,964 49, 964 49, 964 49, 964 49, 964 49, 964 49,964 49, 964 49, 964 49,964 49,964 49, 964 49,964 49, 964 49,964 49,964 (D Cost (Fuel Cost) 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 (D (O&M Cost) 6,513 6,513 6, 513 6,513 6,513 6,513 6,513 6,513 6,513 6,513 6,513 6,513 6,513 6,513 6,513 6,513 @ (Emission Fee) 24 24 24 24 24 24 24 24 24 24 24 24 24 24 24 24 © EBITDA OXD-^HD 23,259 23,259 23, 259 23, 259 23, 259 23, 259 23, 259 23,259 23,259 23,259 23,259 23,259 23, 259 23, 259 23, 259 23,259 © Depreciation 4,044 3,437 2, 922 2, 483 2,111 1,794 1,525 1,296 1,102 937 796 677 575 489 416 353 ® EBIT ©-© 19,215 19,822 20, 337 20, 776 21,148 21,465 21,734 21,963 22,157 22,322 22,463 22, 582 22, 684 22,770 22, 843 22, 906 © Interest ®+© 1,274 1,225 1,176 1,127 1,078 1,029 980 931 881 832 783 734 685 636 587 538 © EBT (ZH© 17, 941 18,597 19,161 19, 649 20,070 20,436 20, 754 21,032 21,276 21,490 21,680 21,848 21,999 22,134 22, 256 22,368 ® Tax ©x30% 5, 382 5,579 5, 748 5, 895 6,021 6,131 6, 226 6,310 6, 383 6,447 6, 504 6, 554 6, 600 6,640 6,677 6,710 © Net P/L ©-# 12, 559 13,018 13,413 13, 754 14,049 14, 305 14,528 14, 722 14, 893 15,043 15,176 15,294 15,399 15,494 15, 580 15, 658

® Free Cash Flow (D-®-© 17,877 17,680 17,511 17, 364 17,238 17,128 17,033 16, 949 16, 876 16, 812 16, 755 16, 705 16,659 16,619 16,582 16, 549 ® Net Cash Flow ©+##-®- © 10,058 9,910 9,790 9,693 9,615 9, 555 9, 508 9,474 9,450 9,435 9,427 9, 425 9,429 9,438 9,450 9,466 ® Cumulative C/F I (©-©) 3, 309 19,764 36,098 52, 336 68, 496 84, 595 100, 648 116,667 132, 662 148, 642 164, 613 180, 584 196, 558 212, 541 228,536 244, 547 Debt Yen Loan ® Loan 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ® Principal 169, 887 163, 342 156, 797 150, 252 143, 708 137,163 130,618 124,073 117,528 110, 983 104, 438 97,893 91,348 84,803 78,259 71,714 © Principal Payment 6, 545 6, 545 6, 545 6, 545 6, 545 6, 545 6,545 6, 545 6, 545 6, 545 6,545 6, 545 6, 545 6, 545 6, 545 6, 545 ® Interest ® x0. 75% 1,274 1,225 1,176 1,127 1,078 1,029 980 931 881 832 783 734 685 636 587 538 ® Annual Payment ©+© 7,819 7,770 7,721 7, 672 7,623 7,574 7,525 7,475 7,426 7,377 7,328 7,279 7,230 7,181 7,132 7,083 Others ® Loan 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (2) Principal 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ©Principal Payment 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 © Interest ® x10% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ©Annual Payment © © 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ©Capital Expenditure 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Depreciation Depreciation 4,044 3,437 2, 922 2, 483 2,111 1,794 1,525 1,296 1,102 937 796 677 575 489 416 353 Residue Value 22, 915 19,478 16,556 14,073 11,962 10,168 8, 642 7,346 6, 244 5, 308 4,511 3, 835 3, 260 2, 771 2, 355 2,002 EBITDA : Earning Before Interest, Tax, Depreciation and Amortization EBT : Earning Before Tax EBIT : Earning Before Interest and Tax [Case 1]______100MW x 3 Combined Cycle Plant (3/3) (Moneytary Unit : 1000US$) Year 32 33 34 35 36 37 38 39 40 41 42 p7l (3) Revenue (Elec. Power Sold) 49, 964 49, 964 49,964 49, 964 49, 964 49, 964 49, 964 49,964 49,964 33, 309 16, 655 (D Cost (Fuel Cost) 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 13,446 6, 723 (D (O&M Cost) 6,513 6,513 6,513 6,513 6,513 6,513 6,513 6,513 6,513 4, 365 2, 226 @ (Emission Fee) 24 24 24 24 24 24 24 24 24 16 8 © EBITDA g>(D-(3>-(D 23,259 23,259 23, 259 23,259 23, 259 23,259 23,259 23, 259 23, 259 15,482 7,698 © Depreciation 300 255 217 184 157 133 113 96 82 70 59 ® EBIT dHD 22,959 23,004 23,042 23,075 23,102 23,126 23,146 23,163 23,177 15,412 7,639 © Interest ®+© 489 440 391 342 292 243 194 145 96 47 16 © EBT CZMD 22,470 22,564 22, 651 22, 733 22,810 22,882 22,952 23,018 23,081 15,365 7,623 © Tax ©x30% 6, 741 6, 769 6, 795 6, 820 6, 843 6, 865 6, 885 6, 905 6, 924 4,610 2, 287 © Net P/L ©-© 15, 729 15, 795 15,856 15,913 15, 967 16,018 16,066 16,112 16,157 10,756 5, 336

© Free Cash Flow ©-©-© 16,518 16,490 16,464 16, 439 16, 416 16, 394 16, 374 16, 354 16, 335 10, 872 5,411 © Net Cash Flow ©+©+#-©-© 9,484 9, 505 9, 528 9, 553 9, 579 9, 606 9, 634 9, 664 9, 694 6, 649 3, 307 © Cumulative C/F I (©-©) 260,576 276,626 292, 699 308, 797 324,920 341,071 357, 251 373,459 389,698 400,523 405,918 Debt Yen Loan ® Loan 0 0 0 0 0 0 0 0 0 0 0 ® Principal 65,169 58,624 52, 079 45, 534 38, 989 32, 444 25,899 19,354 12,810 6, 265 2,088 © Principal Payment 6, 545 6, 545 6, 545 6, 545 6, 545 6,545 6, 545 6, 545 6, 545 4,176 2,088 © Interest ©xO. 75% 489 440 391 342 292 243 194 145 96 47 16 © Annual Payment ©+© 7, 034 6, 985 6, 935 6, 886 6, 837 6,788 6, 739 6, 690 6, 641 4, 223 2,104 Others © Loan 0 0 0 0 0 0 0 0 0 0 0 ©Principal 0 0 0 0 0 0 0 0 0 0 0 ©Principal Payment 0 0 0 0 0 0 0 0 0 0 0 © Interest © x 10% 0 0 0 0 0 0 0 0 0 0 0 ©Annual Payment © © 0 0 0 0 0 0 0 0 0 0 0 ©Capital Expenditure 0 0 0 0 0 0 0 0 0 0 0 Depreciation Depreciation 300 255 217 184 157 133 113 96 82 70 59 Residue Value 1,701 1,446 1,229 1,045 888 755 642 545 464 394 335 [Case 2] Assumption

Specifications of 100MW Combined Cycle Plant (per 1 Block) Capacity (Gross) 100.8 MW (Net) 97.0 MW Capacity Factor 70 % (Output Factor 90%) Annual Generation (Gross) 618,106 MWh - Capacity(Gross) x24hx365daysxCapacity Factor (Net) 594, 804 MWh - Capacity(Net) x24hx365days xCapacity Factor Heat Rate (at 90% load) 7,005 kJ/kWh Annual Gas Consumption 4, 329. 8 TJ/year - Annual Generation(Gross) xHeat Rate(at90%Ioad)

Emissions Dust SOx NOx CO 0 t/year 1.45 t/year 264.7 t/year 44.5 t/year

Fuel Cost Gas Price 51.2 US$/1000m3 «- (281. 69UAH/1000m 3)/(5.5UAH/US$)

Electricity Tar iff 0.11 UAH/kWh (= 2.8 USt/kWh ) (xIOOQUSS) Allocation of Construction Cost Project Cost Total Item No.1 Block No.2 Block No.3 Block Scrap of existing facilities 7,104 7,104 0 0 Plant Equipment 228, 989 76, 921 76, 034 76, 034 Civil 6, 939 2,887 2,026 2,026 Engineering Fee 4, 869 1.739 1,565 1,565 Contingency 12,156 4, 348 3, 904 3,904 Spare Parts 1,739 1,739 0 0 Total 261,796 94, 738 83,529 83,529

0&M Cost 1 Block 2 Blocks 3 Blocks (x1000US$/year) 2,226 4, 365 6,513

Profit Tax 30 %

Depreciation Dec 1 ining-ba 1ance 15 %

Exchange Rate 1 US$ = 115 Yen = 4.0 UAH 1.15 Euro (1 Euro = 100 Yen) Discount Rate 10 %

Loan Condition Yen Loan Interest p . a. 0. 75 % Maturity 30 years (Grace for first 10 years) Principal 75% of Project Cost Phase 1 Phase 2 Phase 3 (x1000US$) 71,054 62,647 62,647 Other Loan Interest p . a. 10.00 % Maturity 10 years Annuity Payment

Price Escalation Electricity Tariff Fuel Cost 0&M Cost 0 %/year 0 %/year 0 %/year

Emission Fee Dust SOx NOx CO 4.5 t/year 119. 25 t/year 119.25 t/year 4.5 t/year

C02 Emission Right Sold Price 5.0 US$/t-C02

C02 Emission Right Sold 483 kt-C02/year/3BIocks «- 966 (kt-C02/year/3Blocks) x 1/2

Result

NPV= -34,552 x 1000US$ IRR= 8.24% Payback Period (years) 15 [Case 2]1001# x 3 Combined Cycle Plant (1/3) (Moneytary Unit : 1000US$) Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 P/L (D Revenue (Elec. Power Sold) 0 16, 655 33,309 49, 964 49, 964 49, 964 49, 964 49, 964 49,964 49, 964 49, 964 49, 964 49, 964 49, 964 49, 964 49, 964 CD’ (CO2 Emission Right Sold) 0 805 1,610 2,415 2,415 2,415 2,415 2,415 2,415 2,415 2,415 2,415 2,415 2,415 2,415 2,415 (D Cost (Fuel Cost) 0 6, 723 13,446 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 ®'-dMSH® 0 8, 503 17,092 25,674 25,674 25,674 25,674 25, 674 25,674 25, 674 25. 674 25,674 25,674 25,674 25,674 25,674 (D Depreciation 0 14,211 24, 608 33, 447 28,430 24,165 20, 540 17, 459 14, 840 12,614 10, 722 9,114 7, 747 6, 585 5, 597 4, 757 ® EBIT dMD 0 -5, 708 -7,516 -7, 773 -2, 756 1,509 5,134 8, 215 10, 834 13,060 14, 952 16, 560 17,927 19,089 20, 077 20,917 (D Interest ©+© 0 2, 901 4,899 6,238 5, 871 5,468 5,024 4,535 3,998 3,407 2, 757 2,042 1,623 1,421 1,372 1,323 (D ebt SHE) 0 -8,609 -12,416 -14,011 -8,627 -3,959 110 3, 680 6,836 9, 653 12,195 14,518 16, 304 17,668 18,705 19,593 ® Tax ®X30% 0 0 0 0 0 0 0 0 0 0 2,779 4, 355 4,891 5, 300 5,611 5, 878 © Net P/L ©-© 0 -8,609 -12,416 -14,011 -8,627 -3,959 110 3, 680 6, 836 9, 653 9,416 10,163 11,413 12, 367 13,093 13,715

© Free Cash Flow <©-©-© -94, 738 -75,026 -66,437 25,674 25,674 25,674 25,674 25,674 25,674 25, 674 22, 895 21,319 20, 783 20,374 20,063 19, 796 © Net Cash Flow ©+##-©- © 0 0 0 15,767 15,767 15.767 15, 767 15, 767 15, 767 15,767 12, 988 12,897 13, 020 12,407 12,145 11,928 © Cumu lative C/F I (®-(D) -94,738 -172, 665 -244,002 -224, 566 -204, 763 -184,556 -163, 906 -142, 767 -121,091 -98,824 -78, 686 -59,409 -40, 250 -21,297 -2, 607 15, 866 Debt Yen Loan ® Loan 71,054 62, 647 62, 647 0 0 0 0 0 0 0 0 0 0 0 0 0 ® Principal 0 71,054 133, 700 196,347 196,347 196,347 196, 347 196, 347 196, 347 196, 347 196, 347 196, 347 193,979 189, 522 182, 977 176,432 © Principal Payment 0 0 0 0 0 0 0 0 0 0 0 2, 368 4,457 6, 545 6, 545 6, 545 © Interest ® x0. 75% 0 533 1,003 1,473 1,473 1,473 1,473 1,473 1,473 1,473 1,473 1,473 1.455 1,421 1,372 1,323 © Annual Payment ©+® 0 533 1,003 1,473 1,473 1,473 1,473 1,473 1,473 1,473 1,473 3, 841 5,912 7,966 7,917 7,868 Others © Loan 23,685 16, 767 11,376 0 0 0 0 0 0 0 0 0 0 0 0 0 (2) Principal 0 23, 685 38, 965 47, 655 43,985 39,949 35,510 30,626 25,254 19,344 12, 844 5, 694 1,683 0 0 0 ©Principal Payment 0 1,486 2, 687 3,669 4,036 4,440 4, 884 5, 372 5, 909 6, 500 7,150 4,011 1,683 0 0 0 © Interest ®x10% 0 2, 368 3,897 4,765 4, 399 3, 995 3, 551 3,063 2, 525 1,934 1,284 569 168 0 0 0 © Annua 1 Payment © © 0 3, 855 6, 583 8,435 8,435 8,435 8, 435 8,435 8,435 8,435 8,435 4, 580 1,851 0 0 0 ©Capital Expenditure 94, 738 83,529 83, 529 0 0 0 0 0 0 0 0 0 0 0 0 0 Depreciation Depreciation 0 14,211 24, 608 33,447 28,430 24,165 20,540 17,459 14, 840 12,614 10, 722 9,114 7,747 6, 585 5, 597 4, 757 Residue Value 94, 738 164,056 222,977 189,530 161,101 136,936 116, 395 98,936 84,096 71,481 60, 759 51,645 43,898 37,314 31,717 26, 959 Cumulative Cash Flow from ® 479,031 xiooousj; i NPV from © | -34, 552 xiooous:; i I ROi AVERAGE (®) /Investment OBH | Urr from © | 8TZW I Payback Period (year) from ® | 1b [Case 2]______1001# x 3 Combined Cycle Plant (2/3) (Moneytary Unit : 1000US$) Year 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 P/L (D Revenue (Elec. Power Sold) 49, 964 49, 964 49, 964 49, 964 49, 964 49, 964 49,964 49, 964 49, 964 49, 964 49,964 49, 964 49, 964 49,964 49,964 49, 964 ©' (CO2 Emission Right Sold) 2,415 2,415 2, 415 2,415 2,415 2, 415 2,415 2,415 2, 415 2, 415 2, 415 2, 415 2, 415 2,415 2, 415 2, 415 (D Cost (Fuel Cost) 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168

® Free Cash Flow dM®-© 19, 567 19, 371 19,201 19,055 18,928 18,819 18,723 18, 640 18,567 18,503 18,446 18, 395 18,350 18,309 18,273 18,239 ® Net Cash Flow ®+®+#-®- © 11,748 11,601 11,480 11,383 11,306 11,245 11,199 11,164 11,140 11,125 11,117 11,116 11,120 11,128 11,141 11,156 ® Cumulative C/F I (©-(§)) 34,159 52,304 70, 329 88,257 106,108 123, 898 141,642 159,351 177,036 194, 706 212,369 230, 030 247, 694 265,368 283, 053 300, 755 Debt Yen Loan ® Loan 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ® Principal 169, 887 163, 342 156, 797 150,252 143,708 137,163 130,618 124,073 117, 528 110, 983 104,438 97, 893 91,348 84, 803 78, 259 71,714 ® Principal Payment 6, 545 6, 545 6, 545 6, 545 6, 545 6, 545 6, 545 6, 545 6, 545 6, 545 6, 545 6, 545 6,545 6, 545 6, 545 6, 545 ® Interest ® x0. 75% 1,274 1,225 1,176 1,127 1,078 1,029 980 931 881 832 783 734 685 636 587 538 ® Annual Payment ®+® 7,819 7,770 7", 721 7,672 7,623 7,574 7,525 7,475 7,426 7,377 7,328 7,279 7,230 7,181 7,132 7,083 Others ® Loan 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Principal 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ©Principal Payment 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 © Interest ® x10% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 © Annual Payment © © 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 © Capital Expenditure 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Depreciation Depreciation 4,044 3,437 2, 922 2,483 2,111 1,794 1,525 1,296 1,102 937 796 677 575 489 416 353 Residue Value 22, 915 19,478 16, 556 14,073 11,962 10,168 8, 642 7,346 6, 244 5, 308 4,511 3, 835 3, 260 2, 771 2, 355 2,002 EBITDA : Earning Before Interest, Tax, Depreciation and Amortization EBT •' Earning Before Tax EBIT : Earning Before Interest and Tax [Case 2]______100MW x 3 Combined Cycle Plant (3/3) (Moneytary Unit : 1000US$) Year 32 33 34 35 36 37 38 39 40 41 42 p7l (D Revenue (Elec. Power Sold) 49,964 49,964 49, 964 49,964 49, 964 49,964 49,964 49, 964 49, 964 33, 309 16, 655 CD’ (CO2 Emission Right Sold) 2,415 2, 415 2,415 2,415 2,415 2,415 2,415 2,415 2, 415 1,610 805 (D Cost (Fuel Cost) 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 20,168 13,446 6, 723 (D (O&M Cost) 6,513 6,513 6,513 6,513 6,513 6,513 6,513 6,513 6,513 4, 365 2,226 @ (Emission Fee) 24 24 24 24 24 24 24 24 24 16 8 (D EBI IDA (D+d)' -dHlMD 25, 674 25, 674 25, 674 25,674 25,674 25, 674 25,674 25, 674 25, 674 17,092 8,503 (D Depreciation 300 255 217 184 157 133 113 96 82 70 59 Q) EBIT 25,374 25,419 25. 457 25, 490 25,517 25, 541 25, 561 25, 578 25,592 17,022 8,444 (D Interest (QME) 489 440 391 342 292 243 194 145 96 47 16 ® EBT (7HD 24,885 24, 979 25,066 25,148 25,225 25, 297 25,367 25, 433 25,496 16, 975 8, 428 ® Tax d)x30% 7,465 7,494 7,520 7,544 7,567 7,589 7,610 7,630 7,649 5, 093 2, 528 ® Net P/L dH® 17, 419 17, 485 17,547 17,604 17,657 17,708 17,757 17, 803 17,847 11,883 5,900

® Free Cash Flow dH®-© 18, 209 18,180 18,154 18,130 18,107 18,085 18, 064 18,044 18,025 11,999 5, 975 ® Net Cash Flow ®+®+®-®- ® 11,175 11,196 11,219 11,243 11,269 11,297 11,325 11,354 11,384 7,776 3,871 ® Cumulative C/F I (©-(§)) 318,474 336,215 353,978 371,766 389, 581 407, 422 425,292 443,191 461,120 473, 072 479, 031 Debt Yen Loan ® Loan 0 0 0 0 0 0 0 0 0 0 0 ® Principal 65,169 58,624 52,079 45,534 38,989 32,444 25.899 19, 354 12, 810 6.265 2,088 ® Principal Payment 6, 545 6, 545 6, 545 6,545 6, 545 6, 545 6, 545 6, 545 6, 545 4,176 2,088 ® Interest ®x0. 75% 489 440 391 342 292 243 194 145 96 47 16 ® Annual Payment ®H® 7,034 6, 985 6, 935 6,886 6, 837 6, 788 6, 739 6, 690 6, 641 4, 223 2,104 Others ® Loan 0 0 0 0 0 0 0 0 0 0 0 ©Principal 0 0 0 0 0 0 0 0 0 0 0 ©Principal Payment 0 0 0 0 0 0 0 0 0 0 0 © Interest © x10% 0 0 0 0 0 0 0 0 0 0 0 ©Annual Payment © © 0 0 0 0 0 0 0 0 0 0 0 ©Capital Expenditure 0 0 0 0 0 0 0 0 0 0 0 Depreciation Depreciation 300 255 217 184 157 133 113 96 82 70 59 Residue Value 1,701 1,446 1,229 1,045 888 755 642 545 464 394 335 Attached Document -3 Calculation of Reductions Other Than Greenhouse Gases Attached Document-3

Attached Document -3: Calculation of Reductions Other Than Greenhouse Gases

1. Emissions from the Current 300-MW Unit (1999)

1.1 Emissions Other Than Greenhouse Gases

Data Provided by the Ukraine Item Unit Annual emission Dust t/year 5,842 802 t/year 10,050 NOx t/year 4,750 CO t/year 850

The above data indicate annual emissions of a 300-MW unit calculated from ordinary fuel composition and are probably not recorded emissions of 1999. Therefore, we assume that these are calculated values of emissions of a 300- MW unit operating at a capacity factor of 100% and actual emissions of 1999 are as shown in the following table.

Actual Emissions of 1999 (Assumption) Item Unit Annual emission Ground for calculation Dust t/year 5,351 This correction assumes that four 300-MW units operated at 802 t/year 9,206 the recorded capacity factor of NOx t/year 4,351 22.9% in 1999. CO t/year 779

1 Attached Document-3

1.2 Amount of Ash Disposed of

Data Provided by the Ukraine Item Unit Annual emission This includes emission from Coal ash t/year 148,000 smokestack of 5,842 t/year. Clinker t/year 26,000

* Values shown in table above are data provided by Dneproenergo. * As the same value is indicated as the amount of emission from smokestack, the above data are considered to be calculated through the same procedure as in 1.1. The actual amount of ash disposed of in 1999 is assumed to be as shown below after the same correction as in 1.1.

Actual Amount of Ash Disposed of in 1999 (Assumption) Item Unit Annual emission Coal ash t/year 135,568 Clinker t/year 23,816

1.3 Electric Energy Output in 1999

Section 3 of the text indicates the following data. Item Unit Gross Net Electric energy output MWh 2,406,107 2,237,680 Capacity factor % 22.9 22.9 Thermal efficiency % 33.14 30.82 Auxiliary power ratio % 7 7

2 Attached Document-3

2. Emissions after Project Implementation

2.1 Electric Energy Output after Project Implementation

Section 3 of the text indicates the following data. Unit : MWh Baseline Annual electric energy output (Net) 2,237,680 Annual electric energy output of new unit (Net) 1,784,412 Project case Annual electric energy output of existing unit (Net) 453,268 Annual electric energy output of existing unit (Gross) 487,384

2.2 Emission after Project Implementation

(1) Emission of dust The new plant would generate no smoke or dust as it uses clean natural gas as fuel. The emission of dust has been calculated according to the proportions of electric energy output shown above, assuming that fuel ratios of existing units remain constant both prior to and subsequent to project implementation. Item Unit Annual emission Reduction rate Reduced volume Dust t/year 1,084 80% 4,267

(2) Emissions of sulfur oxides Although the natural gas used by the new unit is clean itself, Mercaptane used as an odorant contains sulfur and generates a slight amount of SO2.

(A)Emissions from the new unit Emissions from the new unit are as shown below, according to properties of emission gases of the new unit. Item Unit Emission S02 emission (8.4°C) mg/s 65.9 Per unit 0SO2emission (8.4°C) mg/s 197.7 Sum of 3 units (2)S02emission (8.4°C) t/year 4 0X36OOx24hx365x7O%xlO-9

The annual capacity factor is assumed to be 70% as in Section 3 of the text.

3 Attached Document-3

(B) Emission from Existing Units Emission shown below has been calculated according to the aforementioned proportions of electric energy output, assuming that fuel ratios of existing units remain constant both prior to and subsequent to project implementation. Item Unit Annual emission ©S02 emission t/year 1,865

(C) SO2 emission after project implementation Annual Reduction Reduced Item Unit emission rate volume S02 emission t/year 1,869 © + © 80% 7,337

(3) Emissions of nitrogen oxides (A) Emissions from the new unit Emissions from the new unit are as shown below, according to properties of emission gases of the new unit. Item Unit Emission NOx emission (8.4°C) mg/s 11,990 Per unit ©NOx emission (8.4°C) mg/s 35,970 Sum of 3 units ©NOx emission (8.4°C) t/year 794 @X3600x24hx365x70%xl0-9

The annual capacity factor is assumed to be 70% as in Section 3 of the text.

(B) Emissions from existing units Emission shown below has been calculated according to the aforementioned proportions of electric energy output, assuming, as with calculations of dust and SO2, that fuel ratios of existing units remain constant both prior to and subsequent to project implementation.

Item Unit Annual emission ©NOx emission t/year 881

4 Attached Document-3

(C) NOx emission after project implementation Annual Reduction Reduced Item Unit emission rate volume NOx emission t/year 1,675 61% 2,676

(4) Emissions of carbon monoxide (A) New unit Emissions from the new unit are as shown below, according to properties of emission gases of new units. Item Unit Emission ©Density of CO (8.4°C) ppm 10.0 15% 02 base Density of CO (8.4°C) ppm 11.6 Actual 02 base Amount of gas (m3N/h): CO emission (8.4°C) m3N/h 5.8 503,472 ©CO emission (8.4°C) m3N/h 17.5 Sum of 3 units

Molecular weights of C and O are 12.0110 and 15.9994, respectively. Hence, the molecular weight of CO is 28.0104. Therefore, the mass of CO of unit volume is 1.250 kg/m3N (0).

Weight emissions are as shown in the following table based on the calculation above. Item Unit Emission ©CO emission (8.4°C) kg/h 21.9 ©X® ©CO emission (8.4°C) t/year 134 ©X24hx365x70%xl0-3

The annual capacity factor is assumed to be 70% as in Section 3 of the text.

(B) Emission from existing units Emission shown below has been calculated according to the aforementioned proportions of electric energy output, assuming, as with calculations of dust and SO2, that fuel ratios of existing units remain constant both prior to and subsequent to project implementation. Item Unit Annual emission ©CO emission (8.4°C) t/year 158

5 Attached Document-3

(C) CO emission after project implementation Annual Reduction Item Unit Reduction emission rate CO emission t/year 292 62% 487 (8.4%:)

(5) Amount of ash disposed of The new unit would generate no smoke or dust as it uses clean natural gas as fuel. Therefore, ash has been calculated according to the proportions of electric energy output shown above, assuming that fuel ratios of existing units remain constant both prior to and subsequent to project implementation. Item Unit Annual emission Reduction rate Reduced volume Coal ash t/year 27,461 80% 108,107 Clinker t/year 4,824 80% 18,992

As shown in the table above, the amount of ash disposed of would be reduced by 100,000 tons a year. Therefore, the new unit is expected to extend the period of usability of the ash disposal facility.

The amount of ash disposed of annually from the power station is approximately 200,000 tons according to the overview of the power station obtained at an initial phase of this project. It is assumed that this amount would be reduced by half after implementation of the project.

6 Reference Document

Reference Document Reference Document

1. OVERSEAS ELECTRIC POWER INDUSTRY, part H, 2000 ( Japan Electric Power Information Center, INC.) 2. OVERSEAS ELECTRIC POWER INDUSTRY STATISTICS (JEPIC) 3. World Encyclopedia (Heibonsha Limited,) 4. UKRAINE Power Industry (MOPE) 5. USSR Council of Minister ’s State Committee on Construction [PoccTpoH] 6. National Codes & Standards of RUSSIA [SNIP] 7. Basic Data on The Power Station (J ST Dneproenergo) 8. Description of existing power station (J ST Dneproenergo) 9. Main characteristics of construction site for the power station and residential area (J ST Dneproenergo) 10. Monthly average air tempureture output PRI.TPP (JST Dneproenergo) 11. Electrical Generation & Fuel Consumption Data for 1999 (J ST Dneproenergo) 12. Balance sheet as of June 31, 2000 (J ST Dneproenergo) 13. European Bank for Reconstruction and Development UKRAINE Information on Electric Power Sector Generation and Consumption of Electric Power in Ukraine in 1980-1999 (MOPE) 14. Information on Electric Power Sector (MOPE) 15. Comparison calculation for pollution of environment by nitrogen oxides depending on composition of main equipment of Pridnieprovskaya TPS (J ST Dneproenergo) 16. Current State of Power Sector of Ukraine (MOPE) 17. Generation and Consumption of Electric Energy by Entities of Minenergo of Ukraine(l 997-2010) (MOPE) 18. Development of organic fuel fired thermal power stations Current state of coal fired thermal power stations of the Ministry for Fuel and Power (MOPE) 19. Dnipropetrovs'k Region Guide (Dnipropetrovs'k Regional State Administration) Site Investigation Report Site Investigation Report (the outline version)

October, 2000 Chubu Electric Power Co.

Regarding the results of the 1st site investigation concerning the Feasibility Study on "Reconstruction project for Prednieprovskaya power plants in Ukraine” (Business trip report)

1. The outline (1) The purpose This business trip was carried out for the following purpose as the 1st fact finding of Feasibility Study. 0 Data collection which is needed for Feasibility Study enforcement - Present Condition and Future Plan of Electric Power Supply and Demand - Site Conditions, Geographical, Weather, Fuel Supply, Etc. - Related Statute and Basis - Present Condition of Exciting Equipment, Layout, System, Detailed Specification. - Erection-Work Information, Such as Machinery and Materials Supply and Transportation - Thermal-Power-Plant Information, Such as Operation Situation, Organization, O&M Cost, Etc. (2) Each following organs-concemed visit and presentation are passed, and it is the consensus reservation and relevant-information collection for this Feasibility Study promotion. Ukraine Ministry of Fuel and Energy (MOFE) JST Dneproenergo head office Embassy of Japan

2. Investigation Period September 24 (Sun.), 2000 to October 3 (Tue.), 10 days Site Investigation Report (the outline version)

3. Investigation member: 9 persons in total Chubu Electric Power Co. (CEPCO) Thermal Power Dept., Director Sato, Plant Engineering & Construction Group Vice-director Ide, Vice-directors Sakurai, Chief Adachi

Civil & Architectural Engineering Dept. Vice-director Nakajima, Chief Kikuchi

Corporate Planning Dept., Director Yoneyama International Affair Group

Sumitomo Corporation (SC) Power Project Dept.NO.2, Team NO.4 Chief Fusin

Fuji Electric Co. (FE) Energy & Electric System Company Senior Engineer Takeda Fuji-Siemens Energy System Promotion Group, Plant Engineering Dept. Site Investigation Report (the outline version)

4. Detailed Itinerary Content Accommodation Sept. 24 Sun. Travel day (Japan —> Frankfurt) Frankfurt CEPCO: From Nagoya FE: From Narita SC: Precedence getting in Kiev 25 Mon. Travel (Frankfurt— »Kiev) Kiev Join with FE and SC The kickoff meeting in Feasibility Study team (Schedule, Investigation plan, Local information, etc.) 26 Tue. A B Zaporozhe Visit the Embassy of Japan (Greeting, Presentation, Information gathering) Drawing arrangement and Visit MOFE Technical-meeting at SC's office (Greeting, Presentation, Information gathering) Travel (Kiev—»Zaporozhe) 27 Wed. Visit JST Dneproenergo Dnepropetrovsk (Greeting, Presentation, Information gathering) Travel (Zaporozhe —^Dnepropetrovsk) Visit Prednieprovskaya TPP (Greeting) 28 Thu. Prednieprovskaya TPP investigation Dnepropetrovsk AM: Meeting. Q&A session about an outline of existing facilities with TPP staffs. PM: On-site investigation. 29 Fri. On-site investigation Dnepropetrovsk It protocol-creates about how to advance future. The friendship dinner party with Dneproenergo and TPP executives. 30 Sat. Travel (Dnepropetrovsk —»Kiev) Kiev Results-of-an-investigation generalization Oct. 1 Sun. Travel day (Kiev—» Frankfurt) Frankfurt FE, SC: Departure for Narita 2 Mon. Travel day (from Frankfurt) Overnight Fright SC, FE: arrive in Narita. 3 Tue. Travel day arrive in Nagoya. The composition of Sept. 26 of Team A and B is as follows. [Team A] CEPCO Director Sato, Director Yoneyama, Vice-director Ide SC Chief Fusin

[Team B] CEPCO Vice-directors Sakurai, Vice-director Nakajima, Chief Kikuchi, Chief Adachi FE Senior Engineer Takeda Site Investigation Report (the outline version)

January, 2001 Chubu Electric Power Co.

Regarding the results of the 2nd site investigation concerning the Feasibility Study on "Reconstruction project for Prednieprovskaya power plants in Ukraine” (Business trip report)

1. The outline of a business trip (1) The purpose This business trip was carried out for the following purpose as the 2nd investigation of Feasibility Study. (D Explanation by the part of Ukraine of the contents of a proposal created based on the result of the 1st investigation, and the 1st protocol (D The evaluation check by the part of Ukraine to the above-mentioned proposal (3) Additional collection of the data which are needed for detailed examination - Present Condition and Future Plan of Electric Power Supply and Demand - Various Items for Profitability Calculation - Investigation and Check of Presentation and boundary point of Supply Conditions of Exciting Utility Facility - Erection-Work Information, Such as Labor cost, Machinery and materials supply, and Transportation (2) A visit and presentation of Ukraine fuel Department of Energy are passed, and it is the consensus reservation and relevant-information collection for this Feasibility Study promotion. (3) The works investigation and the technical arrangement of Germany Siemens AG which are using the item for technical data origination and which are the manufacturer of a V64.3A Gas Turbine

2. Enforcement term December 6(Sun.), 2000 to December 18(Tue.), 12 days Site Investigation Report (the outline version)

3. Investigation member Chubu Electric Power Co. (CEPCO) Thermal Power Dept., Director Sato, Plant Engineering & Construction Group Vice-director Ide, Vice-directors Kawamoto, Chief Adachi

Civil & Architectural Engineering Dept. Vice-director Nakajima, Chief Kikuchi

Corporate Planning Dept., Vice-director Iwata International Affair Group

Sumitomo Corporation (SC) Power Project Dept.NO.2, Team NO.4 Chief Fusin

Fuji Electric Co. (FE) Energy & Electric System Company Kadowaki Fuji-Siemens Energy System Promotion Group, Plant Engineering Dept.

Thermal Power Div., Construction Dept. Manager Horie Site Investigation Report (the outline version)

4. Detailed Itinerary Content Accommodation Dec. 6 Wed. Travel day: Japan —» Berlin Berlin CEPCO: From Nagoya FE: From Narita 7 Thu. The technical meeting with Siemens AG Berlin 8 Fri. Travel day: Berlin —» Vienna Vienna 9 Sat. CEPCO and FE: Holiday Vienna

SC: Travel day: Narita—> Vienna 10 Sun. Joins with SC. Dnepropetrovsk Travel day: Vienna —» Dnepropetrovsk 11 Mon. The visit to Prednieprovskaya TPP Dnepropetrovsk Presentation about the contents of a proposal to JST Dneproenergo and TPP. 12 Tue. Prednieprovskaya TPP investigation Dnepropetrovsk 13 Wed. Prednieprovskaya TPP investigation Dnepropetrovsk Meeting with Local contractor (Information gathering) 14 Thu. Meeting with JST Dneproenergo and TPP Kiev The 2nd protocol conclusion Travel: Dnepropetrovsk —» Kiev 15 Fri. A B Kiev Visit MOFE Drawing arrangement and Presentation about the contents Technical-meeting at SC's of a proposal office Meeting with Local contractor (Information gathering) 16 Sat. Travel day: Kiev—►Frankfurt —» Overnight Fright 17 Sun. Travel day: —► Japan CEPCO: arrive in Nagoya. FE, SC: arrive in Narita The composition of Dec. 26 of Team A and B is as follows. [Team A] CEPCO Director Sato, Vice-director Ide, Vice-director Iwata SC Chief Fusin

[Team B] CEPCO Vice-directors Kawamoto, Vice-director Nakajima, Chief Kikuchi, Chief Adachi FE Manager Horie, Kadowaki Site Investigation Report (the outline version)

March, 2001 Chubu Electric Power Co.

Regarding the results of the 3rd site investigation concerning the Feasibility Study on “Reconstruction project for Prednieprovskaya power plants in Ukraine” (Business trip report)

1. Business Trip Purpose For this Feasibility Study, our company is the trust from NEDO. " The 2000th Promotion basic investigations, such as common implementation " scrap & build reconstruction project which about existing coal-fired 300MW power plant to gas turbine combined-cycle power plant of 100 MW x 3 block composition. This fact finding is the 3rd time which follows the 2nd, 1st in September 2000, and December 2000, and carried out the report by the side of Ukraine of old investigation / examination result, and the consensus reservation and the last comment collection to this as a main purpose.

2. Investigation Period March 10 (Sat.), 2001 to March 16 (Fri.) , 7 days

3. Visit Place Ukraine Ministry of Fuel and Energy (MOFE) JST Dneproenergo The head office and Pridneprovsk TPP Embassy of Japan

4. Investigation Member Chubu Electric Power Co. (CEPCO) Thermal Power Dept., Director Sato, Plant Engineering & Construction Group Vice-director Ide, Sumitomo Corporation (SC) Power Project Dept.NO.2, Team NO.4 Chief Fusin Site Investigation Report (the outline version)

5. Detailed Itinerary Content Accommodation March 10 (Sat.)Travel day: Japan —> Vienna Vienna CEPCO: From Nagoya via Frankfurt SC: From Narita Direct communication 11 (Sun.) Travel day: Vienna —» Dnepropetrovsk Dnepropetrovsk 12 (Mon.) The visit to a Pridneprovsk TPP Dnepropetrovsk The visit to the JST Dneproenergo head office 13 (Tue.) Dnepropetrovsk (Zaporozhe) 14 (Wed.)Travel: Dnepropetrovsk —> Kiev Kiev The visit to a Japanese embassy Fuel Department-of-Energy visit 15 (Thu.) Travel day: Kiev —> (via Frankfurt) —> Overnight Fright 16 (Fri.)Travel day: —► Japa CEPCO: arrive in Nagoya. FE, SC: arrive in Narita Site Investigation Report Site Investigation Report (the outline version)

October, 2000 Chubu Electric Power Co.

Regarding the results of the 1st site investigation concerning the Feasibility Study on "Reconstruction project for Prednieprovskaya power plants in Ukraine”

(Business trip report)

1. The outline (1) The purpose This business trip was carried out for the following purpose as the 1st fact finding of Feasibility Study. (D Data collection which is needed for Feasibility Study enforcement - Present Condition and Future Plan of Electric Power Supply and Demand - Site Conditions, Geographical, Weather, Fuel Supply, Etc. - Related Statute and Basis - Present Condition of Exciting Equipment, Layout, System, Detailed Specification. - Erection-Work Information, Such as Machinery and Materials Supply and Transportation - Thermal-Power-Plant Information, Such as Operation Situation, Organization, O&M Cost, Etc. (2) Each following organs-concemed visit and presentation are passed, and it is the consensus reservation and relevant-information collection for this Feasibility Study promotion. Ukraine Ministry of Fuel and Energy (MOFE) JST Dneproenergo head office Embassy of Japan

2. Investigation Period September 24 (Sun.), 2000 to October 3 (Tue.), 10 days Site Investigation Report (the outline version)

3. Investigation member: 9 persons in total Chubu Electric Power Co. (CEPCO) Thermal Power Dept., Director Sato, Plant Engineering & Construction Group Vice-director Ide, Vice-directors Sakurai, Chief Adachi

Civil & Architectural Engineering Dept. Vice-director Nakajima, Chief Kikuchi

Corporate Planning Dept., Director Yoneyama International Affair Group

Sumitomo Corporation (SC) Power Project Dept.NO.2, Team NO.4 Chief Fusin

Fuji Electric Co. (FE) Energy & Electric System Company Senior Engineer Takeda Fuji-Siemens Energy System Promotion Group, Plant Engineering Dept. Site Investigation Report (the outline version)

4. Detailed Itinerary Content Accommodation Sept. 24 Sun. Travel day (Japan —> Frankfurt) Frankfurt CEPCO: From Nagoya FE: From Narita SC: Precedence getting in Kiev 25 Mon. Travel (Frankfurt —» Kiev) Kiev Join with FE and SC The kickoff meeting in Feasibility Study team (Schedule, Investigation plan, Local information, etc.) 26 Tue. A B Zaporozhe Visit the Embassy of Japan (Greeting, Presentation, Information gathering) Drawing arrangement and Visit MOFE Technical-meeting at SC's office (Greeting, Presentation, Information gathering) Travel (Kiev-—* Zaporozhe) 27 Wed. Visit JST Dneproenergo Dnepropetrovsk (Greeting, Presentation, Information gathering) Travel (Zaporozhe —^Dnepropetrovsk) Visit Prednieprovskaya TPP (Greeting) 28 Thu. Prednieprovskaya TPP investigation Dnepropetrovsk AM: Meeting. Q&A session about an outline of existing facilities with TPP staffs. PM: On-site investigation. 29 Fri. On-site investigation Dnepropetrovsk It protocol-creates about how to advance future. The friendship dinner party with Dneproenergo and TPP executives. 30 Sat. Travel (Dnepropetrovsk —* Kiev) Kiev Results-of-an-investigation generalization Oct. 1 Sun. Travel day (Kiev—> Frankfurt) Frankfurt FE, SC: Departure for Narita 2 Mon. Travel day (from Frankfurt) Overnight Fright SC, FE: arrive in Narita. 3 Tue. Travel day arrive in Nagoya. The composition of Sept. 26 of Team A and B is as follows. [Team A] CEPCO Director Sato, Director Yoneyama, Vice-director Ide SC Chief Fusin

[Team B] CEPCO Vice-directors Sakurai, Vice-director Nakajima, Chief Kikuchi, Chief Adachi FE Senior Engineer Takeda Site Investigation Report (the outline version)

January, 2001 Chubu Electric Power Co.

Regarding the results of the 2nd site investigation concerning the Feasibility Study on "Reconstruction project for Prednieprovskaya power plants in Ukraine”

(Business trip report)

1. The outline of a business trip (1) The purpose This business trip was carried out for the following purpose as the 2nd investigation of Feasibility Study. (D Explanation by the part of Ukraine of the contents of a proposal created based on the result of the 1st investigation, and the 1st protocol (2) The evaluation check by the part of Ukraine to the above-mentioned proposal (3) Additional collection of the data which are needed for detailed examination - Present Condition and Future Plan of Electric Power Supply and Demand - Various Items for Profitability Calculation - Investigation and Check of Presentation and boundary point of Supply Conditions of Exciting Utility Facility - Erection-Work Information, Such as Labor cost, Machinery and materials supply, and Transportation (2) A visit and presentation of Ukraine fuel Department of Energy are passed, and it is the consensus reservation and relevant-information collection for this Feasibility Study promotion. (3) The works investigation and the technical arrangement of Germany Siemens AG which are using the item for technical data origination and which are the manufacturer of a V64.3A Gas Turbine

2. Enforcement term December 6(Sun.), 2000 to December 18(Tue.), 12 days Site Investigation Report (the outline version)

3. Investigation member Chubu Electric Power Co. (CEPCO) Thermal Power Dept., Director Sato, Plant Engineering & Construction Group Vice-director Ide, Vice-directors Kawamoto, Chief Adachi

Civil & Architectural Engineering Dept. Vice-director Nakajima, Chief Kikuchi

Corporate Planning Dept., Vice-director Iwata International Affair Group

Sumitomo Corporation (SC) Power Project Dept.NO.2, Team NO.4 Chief Fusin

Fuji Electric Co. (FE) Energy & Electric System Company Kadowaki Fuji-Siemens Energy System Promotion Group, Plant Engineering Dept.

Thermal Power Div., Construction Dept. Manager Horie Site Investigation Report (the outline version)

4. Detailed Itinerary Content Accommodation Dec. 6 Wed. Travel day: Japan —► Berlin Berlin CEPCO: From Nagoya FE: From Narita 7 Thu. The technical meeting with Siemens AG Berlin 8 Fri. Travel day: Berlin— ► Vienna Vienna 9 Sat. CEPCO and FE: Holiday Vienna SC: Travel day: Narita—► Vienna 10 Sun. Joins with SC. Dnepropetrovsk Travel day: Vienna —► Dnepropetrovsk 11 Mon. The visit to Prednieprovskaya TPP Dnepropetrovsk Presentation about the contents of a proposal to JST Dneproenergo and TPP. 12 Tue. Prednieprovskaya TPP investigation Dnepropetrovsk 13 Wed. Prednieprovskaya TPP investigation Dnepropetrovsk Meeting with Local contractor (Information gathering) 14 Thu. Meeting with JST Dneproenergo and TPP Kiev The 2nd protocol conclusion Travel: Dnepropetrovsk —► Kiev 15 Fri. A B Kiev Visit MOFE Drawing arrangement and Presentation about the contents Technical-meeting at SC's of a proposal office Meeting with Local contractor (Information gathering) 16 Sat. Travel day: Kiev—►Frankfurt —► Overnight Fright 17 Sun. Travel day: —► Japan CEPCO: arrive in Nagoya. FE, SC: arrive in Narita The composition of Dec. 26 of Team A and B is as follows. [Team A] CEPCO Director Sato, Vice-director Ide, Vice-director Iwata SC Chief Fusin

[Team B] CEPCO Vice-directors Kawamoto, Vice-director Nakajima, Chief Kikuchi, Chief Adachi FE Manager Horie, Kadowaki Site Investigation Report (the outline version)

March, 2001 Chubu Electric Power Co.

Regarding the results of the 3rd site investigation concerning the Feasibility Study on "Reconstruction project for Prednieprovskaya power plants in Ukraine”

(Business trip report)

1. Business Trip Purpose For this Feasibility Study, our company is the trust from NEDO. " The 2000th Promotion basic investigations, such as common implementation " scrap & build reconstruction project which about existing coal-fired 300MW power plant to gas turbine combined-cycle power plant of 100 MW x 3 block composition. This fact finding is the 3rd time which follows the 2nd, 1st in September 2000, and December 2000, and carried out the report by the side of Ukraine of old investigation / examination result, and the consensus reservation and the last comment collection to this as a main purpose.

2. Investigation Period March 10 (Sat.), 2001 to March 16 (Fri.) , 7 days

3. Visit Place Ukraine Ministry of Fuel and Energy (MOFE) JST Dneproenergo The head office and Pridneprovsk TPP Embassy of Japan

4. Investigation Member Chubu Electric Power Co. (CEPCO) Thermal Power Dept., Director Sato, Plant Engineering & Construction Group Vice-director Ide, Sumitomo Corporation (SC) Power Project Dept.NO.2, Team NO.4 Chief Fusin Site Investigation Report (the outline version)

5. Detailed Itinerary Content Accommodation March 10 (Sat.)Travel day: Japan —» Vienna Vienna CEPCO: From Nagoya via Frankfurt SC: From Narita Direct communication 11 (Sun.) Travel day: Vienna —» Dnepropetrovsk Dnepropetrovsk 12 (Mon.) The visit to a Pridneprovsk TPP Dnepropetrovsk The visit to the JST Dneproenergo head office 13 (Tue.) Dnepropetrovsk (Zaporozhe) 14 (Wed.) Travel: Dnepropetrovsk —» Kiev Kiev The visit to a Japanese embassy Fuel Department-of-Energy visit 15 (Thu.) Travel day: Kiev —> (via Frankfurt) —» Overnight Fright 16 (Fri.) Travel day: —> Japa CEPCO: arrive in Nagoya. FE, SC: arrive in Narita Any part or a whole of the report shall not be disclosed without prior consent of International Cooperation Center, NEDO.

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