The European Bank for Reconstruction and Development (EBRD) has opened two credit lines for JSC "Ukrzaliznytsia" (UZ) - EUR 180 million for the purchase of gas piston installations and EUR 300 million for the acquisition of electric locomotives.
"The EBRD is providing UZ with a EUR 180 million loan for the installation of small generators across the country to address the issue of shortages and large-scale power outages expected this winter in Ukraine due to Russian shelling of its energy generating capacities... The EBRD is also granting UZ a EUR 300 million loan for the purchase of electric locomotives," - reported the bank's press service on Wednesday.
The credit funds amounting to EUR 180 million are allocated for the procurement and installation of equipment for decentralized small gas generation with a total capacity of up to 270 MW. The facilities will be located at UZ sites throughout Ukraine. The total project cost is EUR 248 million, according to the announcement.
The EBRD loan is accompanied by an investment grant from the United Kingdom of up to GBP 10 million (EUR 12 million) and an investment grant of up to EUR 56 million from a multilateral or bilateral international donor.
The project's aim is to enhance the resilience of the national energy system and create an alternative to traditional electricity sources for UZ during outages.
"In the current emergency conditions, the EBRD is pleased to finance new players in the energy generation market, such as Ukrzaliznytsia, and plans to allocate additional loans in this direction," - quoted the bank's press service the words of Arved Turkner, Managing Director of the EBRD in Ukraine and Moldova.
One component of the program is aimed at supporting the human capital of UZ – a company that employs around 200,000 staff, as reported by Sue Barrett, who leads EBRD's infrastructure activities in Europe, the Middle East, and Africa.
"The war has only amplified the significance of Ukrzaliznytsia, a long-standing EBRD client. We are pleased to support the company's new initiative aimed at improving the resilience of the country. UZ is also one of Ukraine's largest employers - the company currently has around 200,000 staff. Considering this, the project will include a human capital support component as part of the EBRD's 'Grant Incentive for Human Capital Investment' program," - said Barrett.
It has been reported that the EBRD, as a leading provider of climate financing, supports Ukraine's long-term transition to more active use of energy from renewable sources (RES). The process will continue when conditions allow, but the small gas generators being installed now may serve as balancing capacities for RES in the future, clarified the EBRD.
As is known, UZ, which ranks among the top five largest distribution companies in Ukraine by network length and electricity flow volumes, is a vital component of Ukraine's integrated energy system, providing electricity to several households and enterprises in Ukraine. UZ has created a separate legal entity - LLC "UZ Energo," which will be responsible for constructing gas power plants in the regions.
The EUR 300 million loan for the purchase of electric locomotives is provided to UZ under state guarantee and is accompanied by an investment grant of up to $190 million from the United States of America, administered by the World Bank, as clarified by the bank's press service, noting that the funding will help UZ renew its locomotive fleet to ensure stable freight transport, particularly for agricultural exports and critical imports, as well as passenger transport.
The loan will help reduce greenhouse gas emissions, improve energy efficiency, and support demobilized workers through the implementation of a new veteran reintegration program, the bank's press service reported.
The EBRD reminded that the bank has already provided UZ with EUR 200 million in 2023 to improve rail communication with the European Union and EUR 150 million in 2022 to support liquidity.
In total, since February 2022, the EBRD has allocated over EUR 5.4 billion to Ukraine, including over EUR 1.6 billion in 2024. The bank's loans are aimed at strengthening energy security, critical infrastructure, food security, supporting trade, the private sector, and key reforms.
In 2023, the EBRD Board of Governors approved a capital increase of EUR 4 billion to maintain current investment levels amid the war, with subsequent increases during the post-war recovery phase.
It was previously reported that the EBRD plans to provide UZ with a state-guaranteed loan of EUR 300 million for the renewal of electric locomotives. The loan may be divided into tranches: the first confirmed tranche is up to EUR 120 million, and the second is up to EUR 180 million, depending on the project's implementation timelines. The loan term will be up to 18 years, including a grace period of up to 4 years for the repayment of the principal amount.
It was also reported that the project for updating UZ's locomotives is planned to be supported by a parallel grant from the U.S. government of up to $195 million, administered by the World Bank through the Target Fund for Supporting, Recovering, Reconstructing, and Reforming Ukraine (URTF) as part of the "Restoration of Critical Logistics Infrastructure and Network Communication (RELINC)" project.
As is known, a significant number of UZ's electric locomotives are approaching the end of their extended service life and will be decommissioned in the near future due to wear and corrosion, which reduces the company's ability to meet market demand for rail transport services.