Ukraine’s state controlled oil and gas company, JSC Naftogaz of Ukraine, has signed an English law governed US$ 3.656 billion credit agreement with state owned China Development Bank Corporation to finance various individual projects involving the substitution of natural gas with locally produced coal. The investment programme is intended to help Ukraine increase its energy capacity through the introduction of modern technology, construction of new plants and the upgrading of existing infrastructure.
Naftogaz was represented by lawyers from Lawrence Graham’s London office (corporate partner Richard Elphick and senior finance associate Akhil Sharma) and lawyers from its Moscow office (corporate partner Mikhail Stoliarenko and associate Dmitry Papyrin). China Development Bank Corporation was represented by lawyers from Clifford Chance’s offices in Beijing (Paul Wee (Counsel) and Emma Zang (Senior Associate), London and Kiev.
The proposed projects involve the transition of Ukrainian thermal-energy production facilities to the use of coal-water slurry as fuel and also the construction of plants for the gasification of brown and bituminous coal in Luhansk, Donetsk, and Odessa regions using Chinese approved technology. These new methods are intended to replace around 4 billion cubic meters of natural gas with Ukraine’s own coal, to provide a stable market for the sale of around 10 million tonnes of domestic coal per year, to create over 2,000 new jobs and help Ukraine make possible savings of up to $1.5 billion per year.
Richard Elphick of Lawrence Graham said: “We are very pleased to have taken the lead role in this high profile financing agreement for Naftogaz, a longstanding client of the firm. The agreement is a full credit facility on commercial terms, implementing the protocol of cooperation signed in July 2012 between the Energy and Coal Industry of Ukraine and China Development Bank Corporation.”
