Ukraine's biggest banks sign memorandum on soft loans to rebuild energy infrastructure

Seventeen of Ukraine's largest banks signed a memorandum at the Ekonomichna Pravda Banking Forum on preferential lending for energy infrastructure rebuilding projects.

The memorandum states that the banks are committed to making efforts to provide affordable lending to entrepreneurs implementing projects aimed at increasing Ukraine's energy independence.

The joint memorandum was signed by 17 of Ukraine's largest banks, whose net assets as of 1 May 2024 accounted for more than 83% of the total assets of Ukraine’s entire banking system. The signatories are Raiffeisen Bank, A-Bank, UKRSIBBANK, OTP Bank, MTB Bank, Credit Dnipro Bank, Kredobank, PUMB, SENSE Bank, Oschadbank, Ukreximbank, Ukrgasbank, Crédit Agricole, Piraeus Bank ICB, Pravex Bank, PrivatBank, and Globus Bank.

Applications for preferential loans in the energy sector can be submitted at any branch of the signatory banks or through other channels, and will be considered on a priority basis.

Depending on the segment, loans can range from €500,000 to €25 million. 

The client's own contribution should be between 10% and 50%, depending on the size of the project. Loans to small and micro businesses will be denominated in UAH. The same goes for medium-sized and corporate clients, as long as there are exports and sufficient foreign currency earnings to cover the principal and interest payments.

Eligible projects include the construction of solar, wind, biogas, biomass, gas turbine and gas reciprocating power plants, industrial batteries, and highly manoeuvrable, storage and cogeneration power facilities. Individual entrepreneurs and small businesses will be able to obtain loans to manufacture energy-efficient doors or windows, solar panels, etc.

Loans can be granted for up to 5-7 years. Preferential lending will be available throughout Ukraine, except for areas where military operations were or are ongoing and territories occupied by the Russian Federation. Loans will be priced based on the National Bank of Ukraine's discount rate.

In addition, unsecured lending for small micro and macro business projects is available on a surety basis. The following can be used as collateral for a soft loan: the asset being financed (property rights to the facility or equipment) or an alternative pledge of other assets; property rights to cash flows from an existing business (at least for the duration of the project and in the absence of other sufficient collateral); surety from the owner or another business; or a corporate guarantee, a guarantee from an international financial institution, or war risk insurance (if possible).

Sources of repayment would be cash flows from the project and/or existing business, and potential cost savings from the introduction of energy-efficient equipment or own energy supply.

It is also possible to defer repayment of the principal for up to 6-12 months or until the facility becomes operational. Subordination of funds by the project initiator on a repayable basis is also an option. DSCR, DSRA, CAPEX/Maintenance reserve account and Cash Sweep may apply if necessary.

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