New European Energy Auction Platform: How can Ukrainian electricity suppliers work with Europe?
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The new auction platform (EAP) enables the allocation of cross-border capacity (electric networks) for import and export of electricity, opening up new opportunities in electricity trading with Europe. This has greatly expanded the business possibilities in the energy supply sector, attracting new entrepreneurs not only from Ukraine but from other countries as well.
The EAP allows for quick and easy entry into the market, providing entrepreneurs with the potential to expand their operations beyond Ukraine and increase profits. The platform is simple and transparent, making it easy for entrepreneurs to get involved and take advantage of the expanding market.
Recently, we were approached by a foreign entrepreneur who was actively involved in the electricity market in Europe and was interested in exploring opportunities in the Ukrainian electricity market. After discussing his options with us, he came to the conclusion that starting a new company from scratch would be both time-consuming and unprofitable. As a result, we suggested that he acquire an established company with an existing license and already completed the first stage of market entry.
Our proposal proved to be highly attractive to him, and after our lawyers conducted a thorough check for any outstanding debts or legal issues, the company was successfully transferred to him in just three days.
He is not alone in seeking to capitalize on the new phase of energy market development in Ukraine. We are here to help guide interested parties through the process of entering and competing in the auction platform.
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The main steps for entering the electricity market in 2022
The standard procedure consists of the following steps:
1. Company registration (3 days)
2. Obtaining a license (2-3 weeks)
3. Market entry (approximately one month):
а. UkrEnergo:
- Register a personal account to obtain an EIS code
- Sign a contract for the transfer and receipt of electricity
- Join the imbalance contract
- Organize payment of the guarantee on the market
b. Market operator (MO)
- Prepare the necessary documents and sign a contract with the MO
c. Ukrainian energy exchange
- Prepare and upload documents to the online platform for accreditation on the exchange
- Monitor the progress of your documents review
However, as previously noted, purchasing an existing company significantly reduces the time and effort required. The company that the client purchased already had an EIC code and had signed a contract for the transmission of electricity with the National Energy Company "Ukrenergo".
Our lawyers immediately notified the National Commission for State Regulation of Energy and Public Utilities (NCREPU) and Ukrenergo about the change of director and began preparing applications to join the imbalance settlement agreement.
Next, contracts were concluded with the MO for participation in the Day-Ahead Market (DAM) and Real-Time Market (RTM).
Finally, a contract was signed with the Ukrainian Energy Exchange and accreditation was obtained. This entire process took less than three weeks.
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What is an auction platform and how does it affect the electricity market?
As the Client entered the market quickly, they had some questions about the New Auction Platform.
Their questions were:
- What is this platform and what options does it provide?
- Who needs it?
- How can our company help?
The New Auction Platform (EAP) enables the distribution of capacity between interstate connections (electricity grids) for the import and export of electricity. Once a contract is signed, clients gain access to a specialized platform where all auctions take place.
The electronic platform is fully compliant with not only domestic but also European legislation, making it an effective step towards future integration of Ukraine's and Europe's electricity markets. It ensures that all market participants have equal opportunities for accessing the capacity of interstate electricity grids and transparent procedures for managing limitations.
Please note! Daily auctions, as well as annual and monthly auctions, are conducted on the platform.
The capacity of interstate sections within Ukraine's Unified Energy System (UES) refers to the technical ability to provide electricity supplies through an interstate section in a specific direction, while also considering planned maintenance and repairs of energy equipment within the UES and neighboring energy systems.
Who might benefit from an auction platform, and what advantages does it offer?
This platform can be useful for electricity suppliers, producers, and traders, regardless of whether they are new to the market or have been in the industry for a while.
One of the advantages of this platform is its user-friendly interface, which allows users to access the system from any device or browser without needing to install additional software.
The electronic platform has been upgraded to be more advanced than its predecessor. It now employs a new proportional reduction principle for physical transmission rights (PTR) in the event that their owners need to transfer them, regardless of where they were acquired in previous auctions. Control is in place to prevent affiliated companies from distributing PTRs in excess of 50% of the offered capacity.
Users of this platform have the option to utilize long-term PTRs on a "use it or sell it" basis by reselling them at daily auctions if they remain unused by their owners. A dedicated message board has been set up to facilitate the transfer (sale or purchase) of PTRs.
In addition, a convenient tool has been developed to check the required financial guarantee for participation in auctions and the user status required for participation.
The electronic platform is also equipped with technical capabilities to exchange data with neighboring automated systems, specifically with the MMS for obtaining market participant status, nominating long-term PTRs to form details for daily auctions, and calculating compensation for non-nominated PTRs.
The automated system of JSC "Oschadbank" allows participants to check the balance of their ESCROW accounts to monitor their financial security and make payments for services provided.
Additionally, an Enterprise Resource Planning System (ERP) is available for the automated generation of invoices for services rendered, nominations and returns, and to ensure the actual payment for services provided.
After weighing the pros and cons, our client determined that this platform was necessary to conduct their operations.
Please note that currently only a limited number of companies are connected to the EAP!
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How can we help you?
Our lawyers have prepared everything necessary to conclude a contract, including the application and forms.
The client was only required to sign the documents and provide certified copies of:
- The LLC charter
- The order on appointment of the director
- The resolution of the LLC member.
After the documents were submitted, we consulted with the auction organization department employees on the distribution of capacity to expedite the process.
After the contract was signed, the agency requested an ESCROW account statement for the distribution auctions. We organized a meeting for the client with a bank representative and provided a complete list of documents required for submission to the bank, while a legal assistant accompanied the client.
We sent a properly certified copy of the ESCROW Account Certificate to the auction organization department of the National Power Company "Ukrenergo".
Everything seemed to be going well, and the procedure was completed. However, this platform requires a certificate with a high level of security. Our lawyers consulted with technical specialists from Ukrenergo and received a series of recommendations. After discussing with the client, we organized the acquisition of the necessary certificate.
After obtaining the appropriate certificate, we organized the archiving of the certificate in the required format and sent it to the auction organization department for the distribution of passage capacity. After that, we sent the login credentials to the client's official email for access to the platform.
Although the procedure appeared to be quick, in practice, it was quite complicated. The entire process, from the contract signing to all subsequent procedures, took approximately 8 business days.
Our team of experienced lawyers not only provides assistance with contract drafting and negotiation, but also ensures access to all necessary platforms for active and profitable business operations. We provide our clients with secure login credentials and offer concise instructions on platform usage to get them up to speed.
As a legal services firm operating in Ukraine for over a decade, we were one of the first to fully understand and navigate the new energy market in Ukraine.
Our primary mission is to make legal problem-solving simple, secure, and effective, so you can trust that your business is in good hands with us.
If you want to learn more about the process of registering as a participant in the electricity market through interstate crossings, or if you're ready to order our services, give us a call and we'll be happy to answer all your questions!
