On 23 March 2017 the Parliament of Ukraine adopted the Law “On Amendments to the Law of Ukraine 'On the Introduction of New Investment Opportunities and on Safeguarding the Rights and the Legitimate Interests of Businesses in Conducting Large-Scale Energy Modernisation'" (Draft Law No. 4549 dated  29 April 2016) – a long-awaited piece of legislation which should result in a more active use of energy efficient technologies and, consequently, the decrease of the overall energy consumption in the public sector.

The Law further elaborates the legislative framework related to the activities of energy services companies (ESCOs), sets forth specific rules and procedure for energy service procurement and is expected to result in further attracting International Financial Institutions and private investments to ESCO projects. It is estimated that at least USD 4.2 billion need to be invested in the modernisation of public sector housing with regards energy efficiency.

Additionally, the Law ensures that energy service procurement functions effectively, namely in compliance with the Law of Ukraine “On Public Procurement”, as well as with Directive 2012/27/EU as of 15 October 2012 on energy efficiency.

The novelties of the Law concern, inter alia, the following key aspects:

  • introducing the possibility of procuring energy services for more than one building at a time;
  • the possibility of concluding energy service contracts for a term of up to 15 years, which roughly corresponds to the average payback period for energy service projects;
  • the maximum amount of annual payments to the ESCO provider is eliminated;
  • the term for negotiating essential conditions of an energy service contract is extended;
  • it is mandatory for the tender bid announcements to also be published in the English language; and
  • changes in procedural matters of energy service procurement.

The expected economic effect of the Law (through implementing ESCO projects) should be (1) lower consumption of energy resources by consumers in the public and private sector, and (2) the efficient use of energy resources, especially in the housing and communal services sector.

The Law shall come into force from the day following its promulgation, with some parts to be effective from 1 January 2022.