“UkrCEPRO”: as subsidies to the private owners shut down the market heat for the population

Group “UkrCEPRO” engaged in the production of pellets in Ukraine in 2008, when gas for the population and heating utilities were cheap, and the local authorities happily subsidized the utility of the heating system.

By the time gas rose significantly, and the Ukrainian officials and businessmen thinking about switching to heating on wood pellets, “UkrCEPRO” has sold pellet business and owned a chain of boiler rooms. Now the band announced a new direction — development of green energy and construction of power plants on renewable energy.

The founder of the group Ivan Nadein and Director of a joint venture with Kara Energy Systems novel, the Swede told Delo.UA what projects the group plans to develop what was closed and what changes in the tariffs of hope.

Today in Ukraine are actively constructing boilers for biomass and produce pellets for substitution of expensive gas. Although you from its pellet business long abandoned, but still — as competed with traditional heat suppliers and why?

Nadein: Alternative energy we started after the 2008 crisis — with the production of pellets for export. Domestic pellet market was not because of gas prices: it cost an average of $50-70, and a reason to use alternative fuels (in Ukraine — ed.) was not. We sell pellets in Poland, Hungary, Denmark, Italy, tried. In Hungary we created a retail company, which went to the domestic European markets.

When in August 2011, the price within Ukraine for natural gas increased by 50%, we have conceived and implemented their first project is the biomass boiler in Belgorod-Dniester district of Odessa region. Through the district office of education has built boilers in schools — first five, then 16. But we substituted coal and gas in 2011, it was still difficult to replace. Gas, we started to replace with 2012 and immediately implemented the project in 5 regions.

The rates for biomass were not competitive with an efficient gas boiler?

Swede: there was a global problem — the population and the public sector subsidize low gas prices. Then the price aligned to the commercial and budgetary institutions had gone from Central to individual heating, in the alternative.

But to supply heat to the population, we could not — no one can compete with subsidized gas (which supported low tariffs for heat from the district heating utility — ed.). Now prices for the population were raised to market levels, and it makes sense to replace the Central boilers are more optimal.

You see this as an opportunity for yourself?

Nadein: This is an opportunity for the market. The “budget” level of gas consumption of 800 million cubic meters, and the production of thermal energy for the population consumes 6-7 billion cubic meters of This market is 10 times more.

But the market is still closed.

Nadein: Closed subsidies because they can obtain while only Teplokommunenergo (CTV) gas. Monetization you want to get CTV, does not solve our issue — we need direct monetization (at the population level, when the consumer receives the subsidy on your personal account and independently pays for provider services — ed.). Now we do, Biotec in Slavutych, other objects with population and dependent on the utility companies because they get money (for services — ed), and they have debts for gas.

The Slavutych the debt for gas, and 130 million UAH, if we proschety will submit them to the court, still the primary lender will “Naftogaz” (“Naftogaz of Ukraine” — state supplier of natural gas — ed.).

Often, utility companies will be liquidated due to the fact that the individual boiler goes past clients — budget of the building. What are the terms for the budget market used to come in your group?

Ivan: We actually took everything. They were not able to heat consumers, we came and said that they would give savings from 10-15% to 30-40%.

At some sites Dusi (Derzhavne management of the Ref — ed.) we are saving 38% on one object, on another 30%, another 15%, and was always uncertainty and trade (specify them). While the rate is not settled law, there was some prenociste business and uncomfortable to work in such formats. But until 2016, we have developed a network of more than 100 boilers.

The price of gas for manufacturers is determined by the market and quite high. You offered this method of heating for industrial enterprises?

Nadein: When we come to the business with such a scheme work, he sees our profitability. He can take the credit and the build, it is more flexible than “budget,” and believes his money.

Budget enterprises do not consider their money, they have to be the biggest problem to take responsibility. The head of the district easier to do nothing — it will encourage, and if he starts to do something and suddenly will burn and he will be off work.

But when in the Dnipropetrovsk region was looking for an investor for the construction of Autonomous boiler-houses, I didn’t see you among the participants.

Nadein: 2015-2016 year we go to a new region with small boiler houses. The market is too competitive, a lot of players. We now have virtually 200 MW of capacity. When compared with retail, the sooner we as a young company, built “stalls” — boilers with a low entry threshold and we now build the “supermarkets” — biomass CHP plants.

What is the threshold entering the investment was here at that time and which now, at the time of “shopping”?

Nadein: We are a company started with $100 thousand in the pocket. To build a bio-CHP, need $10 million minimum. If we plan to build 40 MW of power capacity on biomass, we need about 50 million euros.

To attract credit funds, own funds?

Nadein: Creditwest own. The “UGB” we are in very close cooperation (“Ukrgasbank” together with IFC develops crediting in Ukraine “green” projects — the construction of solar, wind, hydro — ed.). Today dropped the cost of money in Ukraine is a good signal. We credited in the “Taskombank” under 27% annual, now — in the “Ukrgasbank” under 7% in foreign currency, but it’s under “green” tariff only give where there is a currency gain.

I have the impression that lending to the “Ukrgasbank” projects on “green” tariffs, in fact for the first 5 years eats this rate. The right impression?

Swede: Close to it, but for the model this is normal. Most of the money goes to pay, the loan period is small, the interest rate is non-European. But it’s much better than it was.

You plan to sell boilers?

Swede: Continually optimized structure: to sell the far, buy close, to build large. This General motion for enlargement of, I think, is typical of all companies.

We did several projects under the green tariff: small hydroelectric power plant, landfill, “landfill” gas (degasification and power production) to Exactly. Level our plans — four thermal power plants with a total capacity of 40 MW in Zhytomyr, Zaporizhya, Kyiv and Odessa regions. We have a super resource, because we use/used equipment — 10-year-old CHP with Germany. There was very good feed-in tariff and much more expensive chips. And Ukraine is a country with a huge potential of biomass that is hardly used.

If in Ukraine a lot of biomass, why did You decide to grow your own resource and energy willow?

Swede: half the cost of the raw material is the road. For chips, any biomass transport arm — 50 km up to 100 km. delivery of these goods very expensive, they are light but bulky.

Nadein: it Must be so — there was built, there were planted. If we say that the replaced gas, the landing as annually renewable “gas well”.

The Swede: Second — straw a lot of chlorine and the low temperature of ash melting. There are companies that have boilers suitable for straw, but in the Ukrainian market of straw not completely developed: we need to invest not just in the boiler and entire infrastructure.

Nadein: Willow with 300 hectares will be enough to provide free fuel a small village, two schools and a small medical dispensaries. We saw the land of cheap consumer perspective, but the project implementation period for willow is very large — at least three years. The first commercial plantation will collect by 2018.

We have seedlings: in season may to the side to plant about 300 ha. In Slavutych (where the group launched the CHP biofuel — ed.) for spring plan to make the first landing, then 3 years to harvest. And collect for free every year or two for over 30 years.

How did you choose the regions that will build a CHP?

The Swede: For CHP there are a number of factors. The first and most important raw materials. Select priority regions for raw materials and allocated to the areas where they want to stay. In these areas looking for cheap point of connection (to the grid — ed.). Ideally, if it’s an old industrial site, they have the infrastructure, connectivity, roads.

There is a reason the Fund of state property of the local to ask where, what area for sale?

Swede: Different regions in different ways: in one head said, “I can not have my bike there,” another runs right quickly.

Nadein: still, the procedures according to the state property Fund is too long.

Your plans for the future?

Nadein: Horizontally integrate in alternative energy to build 40 MW of “green” biotac, to build solar power plants to build windmills. To finish the projects for the “green” tariff for 2020 to build the plant and prospects of the bioethanol to fuel their cars with ethanol alternative in Europe

In General, you are ready to compete with gasoline?

Nadein: today in Parliament the law, which must impose ethanol in Europe — obligatory content up to 7% (Council Directive 2003/30/EC allows the maintenance of up to 10% of bioethylene in automotive fuels — ed.). While this project from an innovative and idealistic, but 3-7 years ethanol will be able to capture a large percentage of the market.

Still have very good laws in Parliament on garbage (the bill on incineration of waste for electricity generation and the sale of “green” tariff — ed), but all the noise that is scary will hit the pocket.

You know, millions of tons of debris — potential for the economy. Extend for five years the “green” tariff” or give its “debris” — the money coming in investments, will replace the outdated electricity generation capacity and the country will win.

Swede: No CHP is the decentralization of the network. If you have a large consumer and a large TES, all right. But for small dispersed consumers much better when there are small producers nearby.

Interviewed By Victoria Ilchenko