Russian Banks Likely To Seize Heavily Indebted Crimean Solar Projects

April 17, 20159 years ago James Ayre 3 Comments

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With the ongoing political turmoil in the region as a partial cause, a total of 200 megawatts (MW) worth of solar energy projects in Crimea are looking likely to be seized by Russian banks thanks to outstanding loan payments and looming foreclosure, according to recent reports.

Solar projects in the region are currently said to be saddled with as much as ~$870 million in debt thanks to large cuts in feed-in-tariff rates (FiT) following the political changes there (not surprising considering that the Ukrainian government isn’t likely to support a region that it no longer has control of, if it even had the monetary means to do so) — serving as a good example of a very real potential pitfall to the success of large projects in unstable regions. Large projects (and the monetary systems accompanying them) are of course more fragile than simpler (distributed) ones. Those who have supported the Desertec project in North Africa in the past, take note.

According to the Russian Ministry of Energy, these heavily indebted projects don’t possess the ability to repay their debts — making their seizure by state-owned lending banks an inevitability. The banks in question here are: Sberbank, VEB, VTB, and also the Ukrainian bank Oschadbank.

To provide some specifics here, under the previous arrangements, FiT rates for the projects were set at €0.446 per kilowatt-hour via the Ukrainian government. With the annexation of the peninsula, the projects have been effectively suspended through the reduction of this tariff (to €0.057 per kilowatt-hour).

With the seizure of the projects, they will effectively become Russian — it’ll be interesting to see what path the government there takes once that happens. Will the projects begin receiving notable support again? Just with a new “master” this time?

The Ukrainian bank Oschadbank is of course owed money for these projects as well (it’s not just the Russian banks), complicating things some. According to the Ukrainian bank, it’s currently owed around RUB 25 billion (€427 million) by Crimean solar projects. It’s unclear if the methodology used by the Ukrainian bank to calculate the estimated debt is the same as that used by the Russian banks (unlikely).

Reportedly, the Russian banks (and the government there) are currently mulling potential support options, including: firm supply contracts; the substantial increase of FiT rates; state subsidies; and/or the assignment of debt to third parties.

The Russian government is currently planning to develop more solar photovoltaic projects in the region — partly owing to the potential profitability/effectiveness of such projects, and partly as a means of stimulating the economy/employment there. This will follow on the relatively recent decision by the government to force solar projects in the country to source locally to a substantial degree.