Ukraine secures US funding for storage facility

15 February 2018

The Overseas Private Investment Corporation (OPIC) has overseen a "political risk insurance contract" for the Central Spent Fuel Storage Facility (CSFSF) at the site of the Chernobyl nuclear power plant in Ukraine. OPIC, the US government's development finance institution, is providing insurance to support the project trust's $250 million fixed-rate bond securities issuance in US capital markets.

Financing agreement for used fuel store - 460 (Energoatom)
The signing of the funding agreement (Image: Energoatom)

The proceeds will fund a 20-year loan to Ukraine's nuclear power plant operator Energoatom. The facility, which Energoatom and the USA's Holtec International started building last November, will store used fuel from three of Ukraine's four nuclear power plants.

With OPIC's political risk insurance credit enhancement, Moody's rated the notes Aa2, a "significant uplift" from the government of Ukraine's Caa2 rating, OPIC said.

OPIC President and CEO Ray Washburne, Energoatom President Yury Nedashkovsky and Ambassador of Ukraine to the USA Valeriy Chaly participated in the contract signing ceremony in Washington yesterday.

According to the agreement, Bank of America/Merrill Lynch has arranged in the US capital markets the sale of OPIC's $250 million risk insurance commitment in the form of fixed-rate bond securities.

The contract represents Ukraine's first access to US capital markets and will bolster the country's energy independence by providing an alternative to sending its used nuclear fuel to Russia, OPIC said.

"In addition to advancing a major energy security project in a region critical to American foreign policy, this project marks a milestone in an innovative use of political risk insurance to help developing countries access the capital markets to finance major infrastructure projects," OPIC said.

Washburne added in the same statement: "This project will help transform the energy landscape in Ukraine and reflects OPIC's ongoing commitment to innovating its products to address the needs of our clients. By helping Ukraine raise money in the capital markets, OPIC is addressing one of the major hurdles that often prevents developing countries from raising sufficient financing for critical infrastructure projects."

In addition to bolstering energy infrastructure in Ukraine, the project will generate about $225 million of procurement of American-made goods and services. Holtec International of Camden, New Jersey, will supply storage casks, along with other equipment and training to the project over a five-year period, OPIC noted.

Ukraine is supporting the OPIC-insured loan with an "irrevocable and unconditional guarantee of Energoatom's payment obligations", OPIC said. Bank of America/Merrill Lynch, as the lead underwriter, was instrumental in the success of this financing, it added.

In an Energoatom statement, Nedashkovsky said the contract enables a reduced rate of borrowing for Ukraine. US stock market investors will not only recover their money over a long 20-year period, but will also make a steady profit, he added.

The CSFSF will avoid the "hundreds of millions of dollars" Ukraine spends every year on the shipment and storage of its used nuclear fuel in Russia, Energoatom said.

In a Ukrainian Embassy statement, Chaly said the CSFSF is another important step towards strengthening Ukraine's energy security that the country is undertaking together with its American partners.

"The project not only increases our energy security, but also has a profoundly positive social and economic impact by creating more well-paid jobs in Ukraine," Chaly said. "We are confident that our joint efforts with the US government and leading American companies will bring an additional impulse for our fruitful and mutually beneficial cooperation, which we see as a true sign of our strategic partnership with the United States," he added. 

Researched and written
by World Nuclear News