EcoPolitic invited Olesia Mishchenko, the Chairman of the Board of the Ukrainian Decarbonization Fund, for an interview. We asked in detail about the details of the Fund's work, which applicants it lends to and for which projects, whether it is easy for companies to get financing, and what changes are planned for the Company in 2025. We also learned the difference between the Joint Stock Company “Decarbonization Fund of Ukraine” and the Fund for Decarbonization and Energy Efficiency Transformation.
- Business representatives proposed the idea of creating a Fund for Decarbonization in Ukraine to the authorities for a long time, but they created it only in 2023. Why do you think it took so long to implement this concept?
Indeed, we started working on the creation of the Fund in 2016. Unfortunately, I cannot talk about the period when I was not involved in the development of this instrument and this concept, so I cannot now name the obstacles that arose in the past period.
However, practice and life show that many issues are resolved when the visionaries responsible for the area are actively involved in this issue. In this case, the Foundation was approved when the State Agency on Energy Efficiency and Energy Saving was headed by Anna Zamazeyeva. She started working on the creation of the Fund from her first days in office.
The current head of the State Agency on Energy Efficiency and Energy Saving held a lot of talks with the ministries and business representatives involved, studied all the achievements of the Agency's employees who started working on the creation of the Fund. As a result, the Verkhovna Rada amended the Tax Code, and the Decarbonization and Energy Efficiency Transformation Fund was established.
- Is it possible to say that the Decarbonization and Energy Effective Transformation Fund, as well as JSC “Decarbonization Fund of Ukraine” have been fully operational?
Yes, we can talk about the full-fledged operation of both the budget program “Decarbonization and Energy Efficiency Transformation Fund” and the joint-stock company. All regulatory and legal documentation for the Decarbonization and Energy Efficiency Transformation Fund has already been developed and approved, work is underway, and funds from the eco-tax are being transferred by the Ministry of Finance. All these aspects are already set up and working.
Both monthly and quarterly reports are being prepared. Interaction between all participants in the process has been established, including the Cabinet of Ministers, the Treasury, the Ministry of Finance, the Ministry of Development (Ministry of Infrastructure) and the State Agency on Energy Efficiency and Energy Saving.
But, of course, there are processes that need to be improved. The Procedure for the Use of the State Fund for Decarbonization and Energy Efficient Transformation, approved by the Cabinet of Ministers of Ukraine by Resolution No. 761 of June 21, 2024, still allows, in addition to providing soft loans, to involve banks with more than 50% of shares owned by the state in this program. But I can note that we use the funds that are allocated to us, so we do not have any leftover funding to expand the program. Therefore, in my opinion, we have started quite effectively. Today, we have more projects under consideration than the balance of funds. But we expect the next tranche from the Ministry of Finance to be received for further continuous work on project financing.
- What is the frequency of tranches from the Ministry of Finance?
According to the budget passport of this program, we expect quarterly receipts. The first inflow of funds took place in the third quarter of 2024. Funds for the fourth quarter of last year should arrive in the first quarter of this year.
- When do you expect the refund of funds from projects previously credited?
JSC “Decarbonization Fund of Ukraine” is a financial institution. We provide state support in the form of preferential loans. According to the procedure for use of funds, we are able to provide our clients with a deferral of payment on the body of a loan for 6 months, just for the period of realization of the project. During this period, the borrower should pay interest on the balance on a monthly basis, if he has credit debt and return the loan debt itself after the expiration of the delay.
We expect the first return on the body in March this year. The funds received will be directed to new projects.
- In a recent interview, you mentioned that you should not confuse the Fund for Decarbonization and Transformation with JSC "Fund for Decarbonization of Ukraine". Did we understand correctly that the creation of the Decarbonization and Transformation Fund was foreseen as a line in the budget in order to be able to redirect funds from the eco-tax there, and JSC "Decarbonization Fund" is the administrator of these funds? Please explain this legal aspect for our readers.
The Decarbonization and Transformation Fund is really a specialized fund, a line in the budget. It is accumulative, it has a budget program, and there is a Procedure for the use of funds, which I mentioned earlier. By the way, we are expecting changes to the resolution approving this Procedure [changes took place on January 18, 2025 – ed.]
The program funds are managed by the Ministry of Infrastructure [now called the Ministry of Community and Territorial Development – ed. But the JSC “Decarbonization Fund of Ukraine” is a financial instrument, i.e., we receive funds for issuing soft loans to business entities, local governments and other business entities.
- When should you expect changes in the order of using the funds you announced and what will they be directed?
These changes will be aimed at expanding activities and increasing the number of tools. I would not really like to talk directly about the changes now. From previous experience, we understand that sometimes they transform at the decision-making stage. However, I can say that the planned changes to the resolution expand the number of tools for energy-efficient measures, increase the amount of financing, and extend the deferment of payment for the body of the loan. All these innovations will be positive for potential candidates for receiving this state support.
- According to your data, the Decarbonization Fund has already issued 7 loans for 21 million UAH. Please tell us more in detail what subjects have received them. Are there any business representatives?
As of December 18, we have already issued 16 loans for UAH 178 million. Now all loans are issued to legal entities of private ownership. They can be divided into two parts. The first is the companies that introduce energy service. That is, we have committed an energy service mechanism where energy service companies have concluded contracts with customers of energy service through a tender procedure for replacement of lighting in the city [it is about Voznesensk, Mykolaiv region. – Ed.], Signed contracts with utilities for the installation of solar stations on water utilities, for the installation of ITP and additional thermo -modernization in kindergartens. We also have an energy service contract that provides for energy efficient measures in hospitals.
The second part is directly manufacturers who installed solar stations or boiler rooms for their own production needs.
- And what is the geography of these projects?
To date, projects have been made in Mykolaiv, Odessa, Kyiv, Dnipropetrovsk and Lviv regions. We try to reach all Ukraine.
- According to the Head of the State Agency for Energy Efficiency and Energy Saving of Anna Zasazieva, the Fund has accumulated UAH 1.4 billion as of November. You voiced the figure of 379 million UAH of eco -tax, which is accumulated for projects. What is due to such a difference in numbers ?
The difference in the figures is due to the difference in concepts – the budget program “Decarbonization and Energy Efficiency Transformation Fund” and the “Decarbonization Fund of Ukraine” as a joint-stock company and financial instrument. According to the budget program for 2024, the eco-tax was planned to be paid to the Decarbonization and Energy Efficiency Transformation Fund in the amount of UAH 749 million. Accordingly, 50% is allocated for preferential lending through our instrument, which is UAH 379 million. These funds have already been transferred to our authorized capital, which we are using to provide loans. The other 50% were to be used under other conditions in the Procedure for the use of funds to reimburse interest on loans from commercial banks. Since banks are still working on developing their products, they did not use these funds in 2024.
As of mid-December, we have a certificate from the Treasury that the Decarbonization and Energy Efficiency Transformation Fund received UAH 1.9 billion for the entire year. These funds will now be redistributed and used to finance projects.
- What are the sources of funding currently except for eco -tax?
The Decarbonization and Energy Efficient Transformation Fund has the ability to attract other international funds: grants, loans, international technical assistance. To date, we have already signed one contract with one partner – between the State Energy Efficiency Agency and the United Nations Development Program (UNDP). The funds for it were credited to this Fund. The procedure for their use is approved by Cabinet Resolution No. 1040 of September 6, 2024.
There the amount is small – 10 million 780 hryvnias. Roughly, it can cover 3 contracts. But this is only the initial step. We are working on the development of a new project with our partners in order to increase funding and develop our energy service market and beyond.
- Is the modest number of currently issued loans not related to the complexity of the procedure for submitting documents?
Of course, we have requirements that commercial banks don't have, because we are connected with the State Agency on Energy Efficiency and Energy Saving and with the assessment of the technical side of the project. But in fact, many banks engage experts or create their own technical offices, and they also have this procedure for assessing the quality of technical documentation, in addition to financial documentation.
In fact, for a candidate who wants to receive funding, I think the application process is simple and transparent. Our procedure does not require the applicant to submit any difficult documents. Therefore, if an applicant is responsible for collecting a package of documents, he or she will pass this stage quite easily. We will be happy to hear constructive criticism from those who have already received loans from us in order to optimize our business process and not create unnecessary bureaucratic obstacles.
Now I'll answer the question about the number of projects we have financed. In fact, we received a license from the National Bank on August 26. From that moment on, we were able to accept applications, evaluate them, and issue loans. The first one was issued on September 20. Roughly speaking, the figures announced earlier are the result of two months of active work.
Together with the Head of the State Agency on Energy Efficiency and Energy Saving, Hanna Zamazeyeva, we spoke about the concept of the Fund's work at public events before obtaining the license to set up future clients for project preparation.
“If we take into account the dynamics of application submission today, it is very active. I think that we will fully utilize all the funds that have been allocated and will turn to our international donors for funding assistance.
Energy efficiency is now mainstream. Many businesses have already thought that they need to form their own ecosystem to keep their businesses running smoothly. This need exists and must be met.
Therefore, we cannot talk about a small number. In my opinion, this is a good result for 2-3 months of active work.
- How often do you have to refuse proseclares to receive preferential loans? For example, because they are poorly prepared.
We still do not have very representative statistics due to the small number of loans issued. I can only say that out of 20 considered projects, only 4 were rejected, and 16 were approved. A lot of projects are currently under consideration, but not all of them will be able to pass the commission, even if the documents are well prepared, if they do not meet the requirements set for the projects. For example, there may be insufficient own financing or insufficient savings ratios.
- How much time, on average, passes from the moment of submission of documents to the decision to grant or reject a loan?
If we count from the moment of submission of a complete package of documents, then it is 3-4 weeks. But there are cases when we suspend consideration of the project so that the borrower can bring his documentation in line with the requirements. A lot depends on the quality of the documents prepared by the borrower.
Sometimes the preparation of documentation is delayed due to the fact that customers are waiting for a formed commercial offer from high-quality performers, who have a certain "queue" in the current period of high demand. After all, the description of the project must contain clear information about its cost.
- How do you predict, will the Decarbonization Fund be able to give loans to the eco -modernization of large enterprises, which are the main payers of eco -tax, not just for local projects?
Large taxpayers for CO2 emissions have the opportunity to contact us for loans for energy efficient measures. And this would probably be the perfect story, because we understand that they need to introduce projects that will reduce energy consumption, greenhouse gas emissions.
- According to your information, the fund is working to increase funding to 90 million UAH. Will Ukrainian enterprises have time to use the Fund's loans to prepare for the full implementation of CBAM in 2026?
The increase to UAH 90 million will be one of the points to be included in the amendments to the resolution. Accordingly, big business will be more interested. But I would like to note that if large manufacturers implement any measures, these may be different projects. We have restrictions on financing one project, but there are no restrictions on the number of loans for an enterprise. That is, an enterprise can install a solar power plant as one project, install an alternative fuel boiler house as a second project, and carry out thermal modernization of a building as a third project. Therefore, I believe that large enterprises also have the opportunity to take advantage of the Decarbonization Fund Program.
Large enterprises may have time to apply. For example, we are currently developing, we have not yet submitted documents – we have only been negotiating – a concrete products plant, which clearly falls under the CBAM, as they are engaged in exporting products. This company has already installed the first stage of a solar station for its own consumption. And they want to apply to install the second stage of the solar power plant. I understand that this is necessary to fulfill these conditions and to prepare for this additional tax.
- It is rather difficult to find information on the performance of the Decarbonization Fund on the Internet. On the official website, the corresponding pages are still at the stage of filling, that is, there is no data. When will it be possible to expect free access to the volume of income to the Fund and information on projects that have already received funding?
There is indeed an imperfection, we are working on it. I think that in the near future, we will publish a monthly report on the use of funds. We are now preparing information on the Ministry of Finance, according to the procedure of use of funds, where we have to report on use, respectively, we will immediately present information on the site. It will be replenished on a monthly basis.
As for the projections themselves, we need a little more to work out our internal documents so that we can already break it on the projects and tell about the areas we finance, who received, what funding, what implementation and turn this report into success history, which have already been implemented. Further monitor, add information about quarterly economy, all the data they will report to the State Energy Efficiency.
We present all the information that we need to teach in accordance with our requirements, and all the decisions of the owners, and all our financial documentation, and everything we need in accordance with our internal rules and order.
As for the results. I think that in January we will see them exactly, and in the future they will be replenished on a monthly basis. Do you have international funds and institutions, except for the UN development program that can help with the Fund's filling?In fact, together with the head of the State Energy Efficiency Agency, we have been working since the beginning of 2024 on advertising such a tool as the Fund. And they have already submitted proposals to our international bodies for future cooperation. If I can say on behalf of UNDP that the contract has already been signed and fulfilled, and we are already at the stage of reporting on the implementation of this program, then with others it is still in the period of negotiations.
I can name the international organizations with which we work, specifically by country. We work with Denmark, Germany, Turkey, and Japan. But for now, this is all at the stage of negotiations, since we are not the only ones conducting negotiations directly. The State Energy Efficiency Agency is still working in this direction. And I would like to report and talk about specific results. Because the negotiation stage still leads to some changes. There are ideas, there is work, but I would like to talk about it when there are concrete results.
- Recently, information has emerged that the Decarbonization Fund of Ukraine will enter the factoring and leasing market. Please explain for our readers how these mechanisms will work.
Indeed, on December 2, the National Bank issued us a license for financial leasing and factoring. According to the NBU's requirements, we have to conduct at least one transaction within 6 months of the loan disbursement, but we hope that after the amendments to the resolution and our internal improvements, these mechanisms will be operational in the first quarter of 2025.
How do we see it? Of course, we see that only energy-efficient equipment will be provided for financial leasing, and there will be requirements for this equipment that can be provided for financial leasing. This will, of course, include commercial electric vehicles, public electric vehicles, and equipment that is involved in production with its own specifications.
The financial leasing procedure will appear a little later. It will be described in detail on our website, and our clients should know it. As for the factoring market, it will not be trade factoring, it will be financial factoring. First and foremost, we are currently looking at financing the energy service mechanism. That is, we have many contracts that have already been implemented, which were concluded for 10, 12, 15 years. Accordingly, they are already bringing savings, they are already effective. But for these companies to be able to implement new energy service contracts, they need financing, which we will provide through factoring.
