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UKRAINE PUBLIC PRIVATE PARTNERSHIP DEVELOPMENT PROGRAM (P3DP)

QUARTERLY REPORT– Y3Q3

APRIL 1, 2013 – JUNE 30, 2013 USAID Cooperative Agreement # AID-121-A-00-10-00708

June 30, 2013

This document was prepared by FHI Development 360 LLC through the Public Private Partnership

Development Program in Ukraine

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Table of Contents

Acronyms and Abbreviations ................................................................................................................... 3

Executive Summary .................................................................................................................................. 4

Program Activities and Results ................................................................................................................ 6

Objective 1: Policy and Legal Environment ..................................................................................... 6

Objective 2: PPP Unit and GOU Institutional Support ..................................................................... 9

Objective 3: Awareness and Capacity Development ..................................................................... 13

Objective 4: Pilot PPP Transactions ............................................................................................... 18

Objective 5: Global Climate Change (GCC) and Clean Energy ....................................................... 30

Key Upcoming Events and Activities ...................................................................................................... 32

Program Administration ........................................................................................................................ 34

Annex 1 P3DP Implementation Chronology .................................................................................. 35

Annex 2 P3DP Performance Monitoring Report Y3Q3 (April – June 2013) ................................... 41

Annex 3 P3DP Project Lifeline ........................................................................................................ 59

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Acronyms and Abbreviations

AMDI .................................................................................. Agriculture Marketing and Development Institute AMC ...................................................................................................... Anti-Monopoly Committee of Ukraine AmCham ........................................................................................................American Chamber of Commerce ARC ................................................................................................................ Autonomous Republic of Crimea AUC ................................................................................................................... Association of Ukrainian Cities BPP ....................................................................................................................................Biomass Power Plant CLC............................................................................................................................... Commercial Law Centre CMU ................................................................................................................ Cabinet of Ministers of Ukraine COM .................................................................................................................................. Cabinet of Ministers EEF ..................................................................................................................... Eastern European Foundation FHI360 ............................................................................................................................. FHI Development 360 GIZ ......................................................................... Deutsche Gesellschaft für Internationale Zusammenarbeit GCC ................................................................................................................................. Global Climate Change GOU .............................................................................................................................. Government of Ukraine IBSER ............................................................................ Institute for Budgetary and Socio-Economic Research IFC .............................................................................................................. International Financial Corporation

KCSA ................................................................................................................ Kyiv City State Administration MEP ...................................................................................... Ministry of Environmental Protection of Ukraine MOEDT ..................................................................................... Ministry of Economic Development and Trade MRDCH ............................................................ Ministry of Regional Development, Construction and Housing MLC ................................................................................................................................. Municipal Law Center NCCSR ........................................................................ National Commission of Communal Services Regulation NCMSR ....................................................................... National Commission on Municipal Services Regulation NPA .............................................................................................................................. National Project Agency PPP ........................................................................................................................... Public-Private Partnership P3DP ...................................................................................... Public-Private Partnership Development Project RT ................................................................................................................................................... Round Table SIP....................................................................................... [PPP development] Strategy Implementation Plan SPA ................................................................................................................................. State Property Agency SWM .......................................................................................................................... Solid Waste Management TA ...................................................................................................................................... Technical Assistance USAID .............................................................................United States Agency for International Development VRU ................................................................................................... Verkhovna Rada of Ukraine (Parliament) WG ............................................................................................................................................. Working Group

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Executive Summary

The goal of the Public Private Partnership Development Program (P3DP) in Ukraine is to enable national and municipal leaders to establish long-term, contractual partnerships with private companies in order to improve infrastructure and the quality of public services. The public-private partnership (PPP) mechanism is used around the world to attract much-needed private financing, technology and management to provide services in health, waste management, transport, energy, education and other sectors. In Ukraine, however, inappropriate legislation, poor understanding of PPP contractual transactions, and a poor investment environment impedes national and municipal governments from engaging the private sector effectively. The Government of Ukraine recognizes the positive impact PPPs can have on the country’s development and has been working closely with P3DP to rectify the many obstacles.

During Y3Q3, the Program made significant progress on both national and municipal levels in bringing PPPs closer to realization in Ukraine, including constructive developments in legislation and the first tender for a pilot PPP project. A detailed list of P3DP’s activities during this reporting period can be found in Annex 1.

On the policy and legal fronts, P3DP worked closely with the Ministry of Economic Development and Trade (MOEDT) to create the National PPP Concept, which is now awaiting approval by the Cabinet of Ministers. This document provides the foundation for Ukraine’s PPP Development Strategy which, according to the National Action Plan of the Economic Reforms Program for 2010-2014, should be adopted by the Cabinet of Ministers by December 2013. P3DP also drafted the PPP Strategy and Implementation Plan which is currently under review by the MOEDT. This set of documents, once adopted, will provide additional impetus for PPP development throughout the country. P3DP also made significant progress on improving the legal framework for PPPs during the period, providing analyses, input and recommendations on how to improve the budget code, laws on concessions, and PPP approval procedures.

P3DP assistance to the National PPP Unit within the MOEDT tasked with supporting PPP development resulted in new promotional materials and web based information that increases municipalities’ access to needed information and assistance. Additionally, since members of the PPP Unit have recently been rotating to other government agencies having PPP related responsibilities, P3DP began work to create and institutionalize a sustainable PPP training program that can teach essential knowledge and skills to new staff members assigned to the PPP Unit long after completion of P3DP.

This reporting period also saw many activities that raised awareness about the benefits of PPPs. P3DP played a prominent role in USAID Field Day in Simferopol which was held at Gagarin Park, the site of one of our pilot projects. Coverage in television, print and online media was wide and positive for USAID in general and P3DP specifically. Additionally, P3DP co-sponsored an international PPP conference in Kyiv, and launched a P3DP Program Web site. As a result of this outreach, recognition among citizens and government of the value of well-structured PPPs and the need to implement them in Ukraine continued to expand.

The creation of necessary rules, regulations, institutions and raising awareness of the importance of PPPs is in itself insufficient to accelerate their development. At the core of

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P3DP’s strategy is the creation of 10 PPP pilot projects to demonstrate how they can be done and what benefits can be realized in this challenging environment. It should be noted that the process to improve the PPP environment in Ukraine is not linear, but rather organic, as lessons learned from pursuit of the pilot projects heightens awareness of work that needs to be done in the legislative area and capacity development of institutions and individuals.

PPP pilots currently in the P3DP pipeline are designed to improve services in health, energy, parks and recreation, transport, and solid waste management, as well as other key sectors. Significantly, a first tender was issued in June for a recreational facility PPP in Kyiv, and other tenders are expected during 2013, including a health project in Zaporizhia and a public park in Simferopol. P3DP’s work with many municipalities advanced the preparation of the required feasibility studies, market research, legal reviews, environmental assessments, finance models, and other documents necessary to take the pilot PPPs to tender. The P3DP PPP pilots will also reduce harmful emissions responsible for climate change. As a result of energy efficiency and better use of renewable sources of energy, it has been calculated that the pilot projects will eliminate nearly 1 million metric tons of carbon emissions.

In summary, the groundbreaking work of P3DP is progressing and is, in many ways, accelerating. The Government of Ukraine is committed to using PPPs to address many needs and views P3DP as an essential partner in achieving their goals. The legislative and regulatory environment is improving, and best practices and lessons learned in the process of developing the PPP pilots – both positive and negative – are proving invaluable. P3DP and our partners are confident that the foundation we are laying will result in mainstreaming PPPs as a viable tool for delivery of public services and economic growth.

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Program Activities and Results

The goal of the Public Private Partnership Development Program (P3DP) in Ukraine is to accelerate the use of public-private partnerships to improve the quality of infrastructure and delivery of public services. The Program achieves this goal by facilitating legal and institutional reforms; building the public institutions, processes and capacities necessary for PPP development; enabling local officials to conduct PPP transactions; educating stakeholders to recognize the benefits of PPPs; and implementing pilot PPP transactions in multiple sectors. Mitigating global climate change and supporting the use of clean energy through crosscutting measures are imbedded into all P3DP activities.

Objective 1: Policy and Legal Environment

P3DP supports the Government of Ukraine’s (GOU) objective of creating a legal environment conducive to PPP initiatives in multiple sectors. Priority issues are identified through several processes: first, through monitoring and analysis of legislative activity; second, through working partnerships with public and private stakeholders; and third, through lessons learned through the design and execution of pilot PPP projects (see Objective 4).

1.1 PPP Concept, Development Strategy and Strategy Implementation Plan

During this reporting period, P3DP worked closely with key GOU staff on adoption of national PPP policies and the GOU’s plan for supporting the development of PPPs in Ukraine: the PPP Development Concept and the PPP Development Strategy for 2012-2017, including the Strategy Implementation Plan.

During this quarter, P3DP was focused on the adoption of the PPP Development Concept. P3DP provided support to the development of the PPP Concept through Ministry of Justice and Ministry of Finance, providing necessary comments and recommended amendments to the draft. At MOEDT’s request, P3DP drafted a special justification document entitled Policy Proposal for the PPP Development Concept, to be submitted to the Cabinet of Ministers together with the draft PPP Development Concept. On June 14, the draft PPP Development Concept was submitted by MOEDT to the Cabinet of Ministers for adoption. P3DP is now tracking processing of the draft through the Cabinet of Ministers and will provide expert advice and other support to the MOEDT to facilitate its adoption.

The draft PPP Development Strategy and accompanying Strategy Implementation Plan was developed by P3DP in 2012. According to the National Action Plan of the Economic Reforms Program for 2010-2014, the PPP Development Strategy should be adopted by the Cabinet of Ministers by December 2013. During the reporting period, P3DP updated both PPP Concept and PPP Strategy with revisions through the period 2014-2018, and submitted them to MOEDT. The further discussion of the draft PPP Development Strategy is planned for Q4 meetings within MOEDT and a roundtable on PPP Development in Ukraine.

P3DP and the MOEDT have agreed to coordinate efforts and collaborate closely in improving and adopting both documents by the target dates.

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1.2 Improvements to the Legal Framework

P3DP continually tracks legislative developments, prepares monthly legal assessment reports, and documents experiences gained during implementation of P3DP pilot transactions. These activities help identify and prioritize PPP legal reform issues, focus P3DP resources, and address stakeholder concerns with existing PPP legislation.

During the reporting period, P3DP provided the following support to the draft laws’ development and adoption:

Draft Law #10228, On Amendments to the Law of Ukraine Regarding PPPs, prepared by the Parliamentary Committee on Industrial, Regulatory Policy and Entrepreneurship. At the request of the Committee, P3DP re-drafted the law. To do so, the Program organized consultations with stakeholders so their concerns could be reflected in the new draft. On the basis of best practices, lessons learned and issues raised by stakeholders, P3DP drafted the new draft law, which is expected to be finalized in July 2013.

Draft Law #0857 (formerly #9739), On Amendments to the Laws on Leasing or Concessions of District Water, Heating Supply and Sanitation Communal Facilities, prepared by the Ministry of Regional Development. P3DP continued monitoring progress with the Committee on Communal Services and Housing of the Verkhovna Rada, which is responsible for the draft. In Q4 it is expected that the draft will be prepared for the next hearing in Verkhovna Rada. P3DP agreed to participate in further public hearings and/or meetings, contribute expert opinions and recommendations, track developments and advocate for adoption of the draft law.

During the reporting period, P3DP focused on simplifying approval procedures for PPP tender proposals, as agreed with MOEDT. On the basis of P3DP’s experiences in developing the pilot PPPs and stakeholders concerns, P3DP developed the Concept of Amendments according to Cabinet of Ministers of Ukraine Decrees #384, On Efficiency Analysis Procedure and #232, On Risk Assessment Procedure. P3DP will develop a draft decree on amendments to CMU Decrees #384 and #232 during Q4.

Additionally, P3DP was requested by MOEDT to provide expert analysis and advice on legislation drafted in other PPP-related areas. P3DP provided comments and recommendations to the following legislation and/or amendments:

Decree #639 on Draft law # 2745, On Concessions;

Draft law On Amendments to Some Laws on Solid Waste Management;

CMU Decree #642, On Concession Tendering;

CMU Decree #643 on Model Concession Contracts;

CMU Calculating Concession Fees.

P3DP continued providing support on local legislation development in Pilot regions. Specifically, P3DP provided comments and proposals to the Draft Resolution “On PPP Development Program in Zaporizhia”, which is designed to outline processes and programs to encourage and facilitate the use of PPPs to improve public services and stimulate local economic development.

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1.3 Strengthening Budget Legislation

P3DP recommended introducing the concept of “contingent obligation” and “long term obligation” to budget legislation. This was a key issue identified in P3DP’s report, Most Critical Legislative Issues Relevant to PPP Project Startups in Ukraine (2011), which was based on its diagnostic review of the legal and regulatory framework for PPPs in Ukraine.

During this reporting period P3DP provided support on Budget Legislation development as follows:

The draft law On Amendments to the Budget Code, developed by the Institute of Budgetary and Socio-Economic Research (IBSER): P3DP signed a Memorandum of Understanding with IBSER and provided proposals to the draft. P3DP organized consultations and meetings with IBSER to coordinate mutual efforts on supporting of the draft law. P3DP took active part in discussion of the Draft at the 11th Financial and Economic Forum on the topic of Energy Efficiency of Budget Expenditures, A Road to Economic Prosperity, organized by IBSER. P3DP will continue to provide support to IBSER on adoption of the Draft Law.

Draft law On Amendments to the Budget Code, which enables energy service agreements by introducing long-term budget obligations. P3DP took an active part in discussions of the draft law, which was developed by the National Commission on Communal Services Regulation (NCCSR). P3DP contributed substantially by providing proposals and recommendations to the draft and ensuring that there would be no budget-related constraints for PPP project implementation in the energy efficiency sector. P3DP will continue to track further processing of the draft law and provide necessary support for its finalizing and adoption.

1.4 Improvements of Legal Regulations for Communal Utilities

P3DP actively participates in enhancing public services tariff regulation policy through its close working relationship with the National Commission on Communal Services Regulation. During the reporting period, P3DP agreed to cooperate with the National Commission on development of the new methodology on calculating tariffs in solid waste management. This will become a regulatory document to be approved by the National Commission.

P3DP has selected an international consultant and is in the process of identifying local technical and regulatory specialists for methodology development. P3DP will develop the Draft Methodology in Q4. Clear, consistent and effective tariff regulation and application is essential to enable PPPs in solid waste management. In addition to stimulating private sector participation, effective use of economic instruments and practices can encourage development of pollution control technology and provide sources of revenues to support waste management programs.

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Objective 2: PPP Unit and GOU Institutional Support

P3DP assisted the Ministry of Economic Development and Trade of Ukraine (MOEDT) to

establish a designated regulatory and administrative body, the PPP Unit, to:

Facilitate the use of PPPs in Ukraine;

Establish systems and processes to monitor the use of PPPs in Ukraine;

Develop staff capacity necessary for its PPP work; and

Create and implement a National PPP Strategy.

The PPP Unit is now a functional body within the MOEDT. P3DP has helped define its role and responsibilities, has provided technical assistance as it develops a national strategy and approach for PPPs, and assists staff of the PPP unit increase their knowledge of PPPs and skills needed to provide necessary support to municipalities and other agencies developing PPPs.

2.1. PPP Strategy and Implementation Plan

According to Ukraine’s “National Plan for Implementation of the Economic Reform Program for 2010-2014: Prosperous Society, Competitive Economy, and Efficient State”, approved by Presidential Decree No.128/2013 dated March 12, 2013, the PPP Development Concept must be approved by the Resolution of the Cabinet of Ministers prior to the end of 2013. In this reporting period, MOEDT submitted the draft Concept to all relevant ministries and authorities for their comments. P3DP assisted the PPP Unit in analyzing comments and amending the Concept accordingly. The Concept was submitted to the Cabinet of Ministers (COM) in the beginning of June and is currently under review. Recent changes in COM membership have slowed the approval process.

2.2. MOEDT PPP Unit Web Site

In order to promote, facilitate and accelerate the use of PPPs in Ukraine, it is important to disseminate information about the benefits of PPPs throughout the country and publicize the PPP Unit’s role in supporting the use of them. Potential public as well as private partners must have easy, quick and user-friendly access to PPP-related information. To enable such access, P3DP helped the MOEDT prepare content for the PPP Unit’s Web page answering frequently asked questions of potential web-site visitors, for example:

What are PPPs and how do they work?

What legislation governs PPPs in Ukraine?

How do PPPs get approved?

How should Feasibility Studies be prepared?

What is required to pass the PPP appraisal stage? and

How can the PPP Unit be contacted?

P3DP built in some sections in anticipation of future demand, once the first pilot PPP projects

are launched:

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Status of the PPP project as required by the established PPP monitoring rules;

Examples of Feasibility Studies;

News on PPP projects and PPP-related activities.

MOEDT’s Web page can currently be accessed at: http://goo.gl/RyTH2

2.3. MOEDT PPP Unit Capacity Development

In this reporting period, a large contingent of the MOEDT PPP Unit staff rotated out to other positions and agencies, which highlights the need to create a systematic way to build capacity among new staff within the PPP Unit. P3DP recognizes the critical need for a permanent system that will quickly instill the PPP knowledge and skills needed by new staff in order for them to perform effectively, including training in basic PPP disciplines and on-the-job support. Such a system will prevent a sustainability risk and create an enabling environment that ensures continual support to municipalities and other stakeholders.

In response, P3DP is now reviewing alternative methods to establish a permanent PPP training and support program designed for public servants—a basic course for newcomers and skills development course for working professionals—incorporated into the curricula of specialized training institutions, preferably providing qualification improvement (skills development) training for governmental staff. P3DP will assist the development of training methodology, training materials and conduct initial train-the-trainers activities for a selected institution or institutions.

Such PPP training courses can not only serve MOEDT staff, but also potential public partners from Ukrainian government, other ministries and authorities, and government institutions, municipal enterprises (potential objects of PPP), private entities (potential private partners), financing institutions (potential sources of financing), non-governmental institutions (potential PPP project stakeholders influencing public opinion), and others interested in becoming PPP professionals or to be hired as staff of the PPP unit or other government agencies. At this stage, P3DP has identified key stakeholders of such training process, and a list of training institutions to meet with during the next quarter and to identify and evaluate possible options.

2.4. MOEDT PPP Unit Pamphlet

In this reporting period, P3DP drafted a pamphlet for the MOEDT PPP containing basic information about PPPs:

What is a PPP under Ukrainian law?

What are the key features of a PPP?

Who can be a public partner?

Who can be a private partner?

What are the legal forms of a PPP?

What the core stages of the PPP process?

How do PPPs differ from privatization?

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What legislation governs PPPs?

What is the role of the MOEDT PPP Unit and what are their contacts, including Web site, and link for online feedback?

Subject to final approval, the informational pamphlet will be published and then distributed at public events arranged by the MOEDT or P3DP. The pamphlet’s audience includes representatives of the municipalities and governmental institutions, potential private sector partners, NGOs and other stakeholders.

2.5. Support to the Ministry of Economic Development and Trade of the Autonomous Republic of Crimea

P3DP supports the MOEDT of the Autonomous Republic of Crimea (ARC) in its efforts to create investment opportunities in Crimea, including PPPs. In this reporting period, P3DP participated in organizing a second Donors Forum of International Technical Assistance conducted on May 30-31. P3DP’s role was to highlight the important role of quality

infrastructure and public services in economic development, and how the challenges faced by ARC municipalities to address this need can be met through the use of PPP mechanisms. One objective of this major event was to review ARC’s

economic results and international cooperation during

the past year. There was also discussion of ongoing

projects and new initiatives. P3DP’s presentation and

Q&A session was well received, with good audience

participation and positive feedback. About 200 people

attended, representatives of the leading international

donors: the European Union, UN/ UNDP, U.S. Embassy/USAID, Germany, Turkey, Canada, the

United Kingdom, Switzerland, Poland, and the Netherlands.

2.6. Support to the National Commission of Municipal Services Regulation of Ukraine (NCMSRU)

P3DP provides advisory support to the NCMSRU in its efforts to create an enabling environment for municipal sector development, including PPPs. In this reporting period, P3DP provided advice on amendments to two draft laws on the State Budget Code and the Energy Efficiency Law. As a follow-up on June 20, 2013 P3DP participated in the Open Meeting of the Council on Methodological Support of the Law-Drafting Process under the NCMSRU chaired by the head of the Commission Mr. Saratov. The deputies of the Verkhovna Rada of Ukraine (VRU) who initiated these draft laws at the VRU, and reputable experts attended. P3DP supported the NCMSRU as the authors of these draft laws. Such exercises are a part of law-drafting process, identifying weak points in draft laws and strengthening draft legislation prior to its submission for formal approval in the Ministries. The draft laws are expected to be finalized in July 2013.

P3DP's Director of PPP Professional Service Group, Tatiana Korotka, described PPP methods available in Ukraine.

Mr. Saratov, Head of the National Commission of Municipal Services Regulation shared his vision of effective tariff regulation.

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2.7. Support to Ministry of Regional Development, Construction and Housing (MRDCH)

P3DP provides advice to MRDCH on PPP development in the Housing-Municipal Sector

through participation in technical meetings to provide commentary or input to proposed

legislation. In the reporting period, P3DP participated in the Meeting of the Representatives

of the International Technical Assistance Projects and Programs held on June 7. Membership

of the MRDCH Working Group on Coordination of the International Technical Assistance

Projects and Programs was approved and a work coordination plan was agreed.

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Objective 3: Awareness and Capacity Development

As various pilot PPP projects advance toward tendering, P3DP has increased its Stakeholder Strategic Communication efforts. P3DP also continues to develop capacity of partner municipalities for preparing new PPP project initiatives. Two major capacity development events and two stakeholder communication activities were held during the reporting period, with more planned in the upcoming months.

3.1 Capacity Development

Second International Conference, Speed uPPP Ukraine

P3DP continued its efforts to share with pilot city representatives the latest trends in PPP development. During this quarter, P3DP co-organized the Second International Conference Speed uPPP Ukraine, which took place on April 11-12 in Kyiv. The event brought together 157 delegates from 11 different countries: 87 men (55 percent) and 70 women (45); 64 percent represented the public and 36 percent the private sector.

P3DP sponsored the participation of 10 municipal representatives from pilot PPP projects cities to build their capacity in preparing and implementing PPP projects. Besides learning about the opportunities, challenges and potential benefits of introducing PPPs in Ukraine, they had the opportunity to network with the influential individuals from the public and private sectors working on developing the PPP environment in the country. One highlight was learning about experience of developing PPP projects in countries similar to Ukraine, as well as the role and support of this process from International Financial Institutions.

Public-Private Partnership Seminar at the IX Ukrainian Municipal Forum

On June 13th, P3DP conducted a Public-Private Partnership Seminar within the IX Ukrainian Municipal Forum, organized by the Association of Ukrainian Cities (AUC) in Yalta for representatives of Ukrainian municipalities. The two-hour discussion featured experiences of private companies working in sectors where P3DP is developing its pilot PPP projects. It P3DP Awareness and Capacity Development

Manager Olena Maslyukivska (far left) moderated the discussions at the PPP Seminar of the IX Ukrainian Municipal Forum.

Mick Mullay, P3DP Chief of Party, (center) shared lessons learned during development of pilot PPP projects in Ukraine.

Participants of the Second International Conference Speed uPPP Ukraine represented over 10 countries.

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focused on new opportunities and potential benefits that cities can realize by engaging the private sector to improve public infrastructure and public services by using the PPP mechanism. Sectors discussed included energy efficiency, renewable energy sources, landfill biogas extraction and healthcare. Forty-four leaders of Ukrainian cities attended the seminar: 30 men (68 percent) and 14 women (32 percent).

This activity built on dialogue between the municipalities and potential private sector partners began during the Carpathian Business Summit in April 2012. Understanding the expectations of private partners and the major obstacles to engaging their expertise, access to technology, and finance were cited as key benefits to participating in the event.

Specialized PPP trainings

P3DP began the process to identify a trainer to conduct five advanced PPP trainings on peculiarities of PPPs in the energy efficiency and renewable energy sectors within the framework of the USAID's Global Climate Change and Development Strategy. The trainings are expected to be conducted by the end of Y3Q4 in Dnipropetrovsk, Ivano-Frankivsk, Kyiv, Zhytomyr and Vinnytsia. 3.2 Raising Awareness about PPP Projects in Pilot Municipalities Kyiv Summer Sports and Recreation Facility On May 26th, P3DP launched a strategic communications campaign for the Kyiv Summer Sport and Recreation pilot PPP project. During the beach soccer competition on the Kyiv City Day, flyers were disseminated to inform citizens about the project specifics and the benefits engaging private sector involvement through a PPP. This was the first event in the broader Stakeholder Communication Strategy that P3DP proposed to the Kyiv City State Administration. Upcoming activities include: 1. Placing of an information board at the

entrance to the island to inform citizens about the plan of involving a private partner to the management and operations of the territory of Dolobetsky Island;

2. Organizing a round table to support public consultations and discussion of the project;

3. Raising awareness of the project by conducting a sport tournament at the site and disseminating information to participants and the media during the activities.

Participants of the PPP Seminar at the IX Ukrainian

Municipal Forum asked presenters numerous questions

about the potential PPP benefits for communities.

Information fliers describing the benefits of the PPP Pilot were distributed during the Kyiv City Day on Dolobetsky Island.

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Public Outreach Event in Simferopol

On June 1, P3DP’s Gagarin Park pilot PPP project was highlighted at the USAID Tent City organized during the Simferopol City Day celebration. P3DP informed citizens about the project and raised awareness about the potential benefits of involving the private sector for park reconstruction and management. P3DP distributed information materials and engaged interested members of the public to gain a better understanding of their views and concerns.

The celebration

drew many people to the park, allowing P3DP to reach a broad spectrum of key stakeholders. In addition to the general public, the P3DP tent was visited by City Mayor Mr. Ageev, Municipal staff, the Deputy Minister of Economic Development and Trade of the Autonomous Republic of Crimea, Mr. Reznik, and Ministry staff.

P3DP printed informational flyers on the

Gagarin park pilot PPP project and created an information board to inform the public about the PPP. People also received magnets with the map of proposed reconstruction plans of the park.

In addition, P3DP organized master classes for children to promote environmentally friendly behaviour in the park and in everyday life. Activities included making souvenirs from old newspapers, brooches from plastic bottles, and making bird feeding racks from recycled materials. Many children also made a pledge on the Tree of Environmental Responsibility, stamping their hand prints with paint on a tree “cut-out”.

The event achieved its goal of raising awareness of the benefits that USAID programs are bringing to Ukraine in general and Crimea specifically. The P3DP booth was not only well attended by the public, but also well-covered by the media. P3DP and USAID received special attention due to the importance of the pilot PPP project in Gagarin Park. The effort familiarized key stakeholders with the PPP project in Simferopol, conveyed the benefits to citizens and highlighted USAID’s role in improving the environment, the economy, and the overall quality of life in Ukraine.

Simferopol citizens left their pledges on the Tree of Environmental Responsibility.

USAID Mission Director Jed Barton reviewed the status of the P3DP efforts to implement the Gagarin Park pilot PPP project.

Simferopol Mayor Viktor Ageev stated his support and enthusiasm for USAID and P3DP during the event.

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Coverage at USAID Field Day

USAID and P3DP’s Gagarin Park Pilot PPP project were

given positive media coverage at USAID Field Day in

Simferopol on television and in newspapers and Web sites.

Below is a sample of coverage available online.

Television:

TV program "Focus" (June 04)

Print: (June 1 stories)

USAID Tells Simferopol Citizens about the Main Directions of its Work. Center for Journalistic Investigation.

Americans Developed a Project to Reconstruct a Park in Simferopol. News of Crimea.

Simferopol Celebrates City Day (Photos). New Region.

Fire, Water and International Programs. Crimean News.

Gagarin Park Prepares to Modernize. Simferopol. Web sites:

Photo Journal: USAID to Talk About its Projects in Crimea on Simferopol Day. Site of the City of Simferopol.

Gagarin Park in Simferopol Expects Big Changes. Portal of Crimea.

Simferopol Celebrates its 229th Anniversary. Party of the Regions Crimea.

3.3 Collection of Case Studies

A collection of cases describing experiences of Ukrainian cities engaging the private sector to deliver public services was assembled with the assistance of P3DP implementing partner, the Association of Ukrainian Cities. The cases present alternative approaches that Ukrainian cities have used to work with the private sector, although not specifically through PPP agreements. They will be assembled as a booklet with an introductory article on characteristics of PPPs, the benefits they can bring, and the challenges that must be overcome in implementing successful long-term contracts between the public and private sector. The booklet will be published and distributed to the members of AUC during Y3Q4 in order to stimulate PPP interest and discussions among city leaders throughout Ukraine in how they can better engage the private sector. 3.4 Stakeholder Consultation and Public Outreach

P3DP, with the support of implementing partner KEI and in cooperation with the Simferopol working group, continued implementation of the strategic communication activities for the Gagarin Park PPP. To gain a better understanding of the use of the park, identify public concerns and gauge views on the development plans, a survey was created that will be conducted during the next quarter. Objectives of the research include mitigating or avoiding causes of delays in project implementation, improving the park design to better reflect citizen needs, reducing political risk, and enhancing the credibility of the authorities deciding to move

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ahead with the project. Findings will be included in the final feasibility study and shared during a public hearing. Up to four more surveys and stakeholder analyses related to other PPP pilot projects are planned in the next quarter. 3.5 P3DP Web site

The P3DP Program launched the English-language version of its Web site which can be accessed at http://ppp-ukraine.org. The Ukrainian language version will be launched in the next quarter. The site will contain information about P3DP’s goals, objectives, activities and results; the PPP environment in Ukraine and news about its development, and PPP opportunities and resources. It will connect readers to our implementing partners and complement the MOEDT’s PPP Unit’s Web page.

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Objective 4: Pilot PPP Transactions

Concurrently with assistance directed at improving PPP legislation, institutions and knowledge, P3DP is implementing pilot PPP transactions throughout Ukraine. The Program has analyzed numerous PPP opportunities throughout the country and has been developing the most promising among them in partnership with Ukrainian municipalities. Key sectors P3DP is working include healthcare, parks and recreation, renewable energy and energy efficiency, solid waste management, education and transport.

Ten PPP Pilot projects are in various stages of development, while others are still being evaluated to determine if they merit pursuit. The experience of developing these pilots—from identification through tendering and awarding of the final contract—is providing valuable experience and knowledge about PPPs in Ukraine that is being used to improve P3DP’s menu of assistance, from identifying key legislative issues to developing training.

The diagram above provides an approximate snapshot of where the various pilots stand along the development pipeline. P3DP provides assistance at each stage of the PPP process, such as: project identification, analysis of governing legislation, environmental and market analyses, financial modeling, stakeholder communications, transaction structure advice, contract preparation, marketing, assistance with tendering, bid evaluation, award and issuance of the long-term PPP contract. A more detailed description of the P3DP pilot project lifeline process is included as Annex 3.

Donetsk E-

Government

Malyn Heating

IF Landfill Gas

DP Lighting

Lviv Parking

Kyiv

Kindergarten

Simferopol

Park

Vinnytsia

Landfill Gas

Zaporizhia

Healthcare Kyiv Park &

Recreation

Implementation

Project

Identification

Brief

Concept Contract

Signing

Tender

and Award

PPP Unit

Approval

Feasibility

Study

Analysis Preparation

Pilot PPP Project Process Milestones

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A brief description of the various P3DP pilot PPP projects is contained in the following table:

PPPP Pilot Project Summaries –

PROJECT DESCRIPTION STATUS

HEA

LTH

CA

RE

Zaporizhia Healthcare: First healthcare PPP in Ukraine, opening

the door for greater private sector participation in the public healthcare system. PPP expected to delivery better services to the public at competitive costs.

MOU signed with Mayor;

Feasibility study complete and awaiting approval by the Municipal Executive Committee (expected in July);

Appraisal Opinion expected to be completed and submitted to National PPP Unit in July;

Tender expected in Y3Q4.

PA

RK

S &

REC

REA

TIO

N

Simferopol Urban Park Renewal: Enables private operator to manage

Gagarin Park, which will be divided into commercial and green zones and managed by a private operator under an agreement with the city. PPP expected to improve quality of park without additional cost to the city.

MOU signed with ARC Council of Ministers;

Concept paper completed April 2012;

Environmental Assessment complete; feasibility study to expected in Y3Q4;

Working group resolving land use issues and draft terms of PPP contract;

Tender expected by end of 2013.

Kyiv Summer Sports and Recreation Facility: Establishes a sports and recreation zone

on Dolobetsky Island in the Dnipro River in Kyiv.

P3DP provided input to the feasibility study, project area design, and tender criteria;

Project taken to tender in June 2013;

Tender results expected in July 2013, with an approved contract expected in August.

REN

EWA

BLE

S &

EN

ERG

Y E

FFIC

IEN

CY

Malyn Municipal Heating with Alternative Fuel: Enables several municipal buildings,

mainly schools, to be heated using alternative fuel sources. Expected to reduce heating costs by up to 15%.

Letter of Intent received from Malyn;

PPP structure proposed;

Financial model prepared;

Feasibility study and appraisal expected in July;

Tender expected in Y3Q4.

Dnepropetrovsk Street Lighting: Proposed PPP will introduce energy-efficient lighting in one district of the city.

P3DP submitted a PPP concept outlining an approach, payment mechanism, legal structure, and technical outline.

City to sign MOU with the city.

Environmental review expected to be completed in December.

SOLI

D W

AST

E

MA

NA

GEM

ENT Vinnytsia Landfill Gas Treatment:

The proposed project will generate power from landfill gas at a municipal landfill. The energy produced will reduce the need for power from more polluting sources, reducing carbon emissions.

Legal assessment, financial model and feasibility study expected August 2013;

Environmental assessment will be finalized;

Tender expected in late 2013.

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PROJECT DESCRIPTION STATUS Ivano-Frankivsk Landfill Gas:

Tests indicate that there are sufficient gas emissions at a municipal landfill to generate electricity. Under a PPP, the city will construct the grid to the site and the private partner will build and operate a power generating facility.

Concept paper developed and presented to Mayor;

Financial model drafted;

City seeking financing and permits to extend power grid to site.

EDU

CA

TIO

N

Kyiv Kindergarten Management: The project envisages a private operator building and managing a kindergarten that charges fees. This PPP would help reduce a serious shortage of preschool facilities in the city.

Business and Financial models completed;

Market testing meetings conducted;

Budget models show that fees cannot fully support the project;

Alternative financing models being explored.

TRA

NSP

OR

TATI

ON

Lviv Parking Management: This PPP will reduce traffic congestion and pollution in the city center by building parking facilities.

The project has recently become a greater priority;

MOU signed with City in 2011;

Concept paper completed;

Financial model completed;

P3DP will prepare a market sounding memorandum and plan for technical studies, environmental review, and other documents necessary for tender.

PU

BLI

C A

DM

INIS

TRA

TIO

N

Donetsk Oblast Municipal E-Government: This PPP aims to introduce E-Government to city in Donetsk region. This electronic system makes billing and payments of utilities more efficient and increases collection rates. It has been tested at several municipalities in Ukraine.

P3DP requested to assist in PPP structure, strategic stakeholder communications, and train selected city in PPP management;

Next steps are to visit municipalities to evaluate potential and determine further P3DP assistance, including content of PPP E-Government Seminar.

A clear lesson learned to date is that Ukrainian municipalities still lack the knowledge and

skills needed to develop PPP projects on their own. A second lesson is that external

transaction advice and capacity building support, such as that provided by P3DP, is essential

for municipalities to create bankable and viable PPP projects that build public confidence in

PPPs as instruments capable of bringing significant benefits to communities.

HEALTHCARE

Healthcare in Ukraine is dominated by State institutions (above 99% of all visits). However, State healthcare is considered unsatisfactory by most patients, medical professionals and the government as it provides neither prevention nor satisfactory treatment of diseases, is customer-unfriendly, creates an unacceptable work environment for physicians and nurses, and is a heavy financial burden for the State.

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Private sector funding, expertise and technology mobilized through Public-Private Partnerships can help the GOU and municipalities address these issues and improve the overall quality of medical services. P3DP is working with the municipal government of Zaporizhia to create Ukraine’s first healthcare PPP. Leaders in other cities such as Odessa are closely watching the process as they have expressed interest in introducing healthcare PPPs.

4.1. Zaporizhia Healthcare PPP

This is a high-profile project for many stakeholders because it breaks new ground for the healthcare sector in Ukraine. P3DP’s preliminary work demonstrates what kinds of PPPs are possible in this sector, identifies the needs of private operators and requirements from the public sector, and clarifies the views of patients and the public opinion of private sector involvement in communal healthcare.

P3DP’s key activities and accomplishments on this project during this reporting period include:

Completed the feasibility study, including the legal review, business model, and financial model;

Facilitated attendance by municipal representatives to PPP conferences to build their capacity;

Conducted awareness and training activities for the benefit of municipal, non-profit and healthcare representatives of the city.

The feasibility study was prepared by a professional group of advisors from an NGO experienced in healthcare reform, business projects in medicine and pre-PPP initiatives for communal and state clinical institutions. The study was circulated to members of the working group, which includes city departments, medical institutions, medical NGOs, and city officials for input.

Once the feasibility study is accepted by the Executive Committee of the Municipality, the Committee will prepare the PPP Appraisal Opinion for submission and approval to the PPP Unit. At that point, the city can officially announce the tender. This is expected to take place in Y3Q4. It will be executed in full compliance with the PPP Law and all PPP-related normative acts of the Government of Ukraine and local authorities.

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PARKS & RECREATION

Ukraine is richly endowed with parks and recreation facilities. However, local governments rarely have the resources necessary to maintain them or keep them operating at full efficiency. PPPs can provide the financing and operational expertise needed so that the public can enjoy quality city and national parks, sports facilities, and other recreational areas.

4.2. Simferopol Urban Park Renewal PPP

Throughout Y3Q3, the Simferopol PPP Pilot made solid progress in moving towards the PPP tender stage. However, the project structure and deal preparation remain relatively complicated, reflecting the fact that in Ukrainian cities, parks and recreational areas are communal properties with special status. Technical assistance is necessary for this groundbreaking work to ensure smoother and more practical ways to bring in private operators to build and manage such assets.

For many Ukrainian mayors and officials, it remains unclear how to attract long-term private operators with sufficient legal guarantees. The PPP Pilot in Simferopol will serve as a useful model for such PPPs, and is therefore on the radar of other Ukrainian municipalities. It has already provided preliminary ways to structure public recreation PPPs and shows how to establish clear vertical ownership and management structures in parks and other related city-owned properties. Prior to P3DP’s engagement, objects in Simferopol park, including buildings, were owned and managed by numerous, inter-connected government and municipal agencies, blurring responsibilities and making a PPP impossible to execute. A successful PPP tender will bring persuasive evidence that a traditional public good, such as a park, can be managed effectively at lower cost to the public and with higher satisfaction by citizens.

During the reporting period, P3DP twice participated in the project Working Group sessions, which resulted in the official approvals to begin preparation of land use documents and schematics of the envisaged recreational objects to be constructed in the park. The list of objects has gone through architectural review and preliminary public opinion testing. The city departments of Land, Architecture and Economics are now working to develop the additional documents necessary to move toward the PPP procurement stage. The working group is also identifying key contractual issues that should be included in the PPP agreement. These will be worked through in more detail while preparing the PPP tender.

P3DP has prepared the public consultation activities, including public surveys and interview questionnaires, which will be implemented during the next quarter. Findings will assist preparation of the public hearing planned for August or September and will be included in the feasibility study that will in the next quarter, followed by the PPP Appraisal Opinion from Simferopol Municipality prior to its submission to the PPP Unit for approval.

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4.3. Kyiv Summer Sports and Recreation Facility PPP

This Project went to tender in June, making it the first P3DP project to reach this stage. P3DP started discussions on pilot PPP projects with the Kyiv City State Administration (KCSA) in 2011. By early 2012, Kyiv became one of the P3DP’s pilot cities with the Kyiv Kindergarten project. Staff from the Kyiv municipality participated in a number of activities organized by P3DP, including conferences and seminars. In October 2012, P3DP conducted PPP training for about 30 representatives of the KCSA.

These activities led to P3DP’s involvement in this parks and recreation project. At the end of 2012, KCSA requested P3DP’s assistance in developing a PPP project to create a sports and recreation zone at Dolobetsky Island, located in Kyiv in the middle of the Dnipro River. Kyiv has a well-established but simple mechanism for working with private companies on state-owned facilities; however, in this case it needed a more complex, long-term contract with investors that shares risks and requires capital investments to build and operating faculties. Furthermore, the island is an environmentally sensitive territory and public opinion about its development is strong. P3DP agreed to assist with two components:

Providing advice and recommendations on the bidding documents and to the contract; and

Assisting in designing and conducting a stakeholder communication program.

Following P3DP’s review of the project feasibility study conducted by the KCSA, the Economics and Investments Department (the authorized Department from KCSA) requested P3DP to advise on the PPP tender and PPP contract preparation, as well as conducting public outreach activities to inform stakeholders about the project benefits. P3DP has provided comments and recommendations for the PPP tender documents and drafted the awareness activities plans, which have been sent officially to KCSA. In June P3DP started working on the draft Agreement.

On June 7, KCSA announced a tender for creation of the construction of sports facilities for beach soccer, football and other sports on the territory of Dolobetsky island1. The amount of investment is 14.4 million UAH; the duration of a contract is 15 years. An area of 4.9 hectares will be made available to a private investor to construct several fields for summer sports and maintain existing buildings such as first aid medical facility, trading pavilion, and several administrative buildings.

After the bidder is selected, P3DP will provide further assistance in how to structure negotiations with the potential investor.

1 Available at: http://kievcity.gov.ua/news/?c=254

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ALTERNATIVE ENERGY AND EFFICIENCY

Ukraine has adopted a number of regulations aimed at encouraging the production of electricity from renewable energy sources, setting a target to achieve 10% renewables in total electricity production by 2020. However, Ukrainian Prime Minister, Nikolay Azarov, stated during a cabinet meeting in April 2012 that it is not economically viable for the government to invest in “green” or renewable energy due to high costs of alternative energy sources, particularly renewable sources of electric power. However, public-private partnerships can provide municipalities’ access to needed private finance and technology in order to benefit from alternative and renewable energy and improve efficiency. P3DP is working with progressive leaders to introduce PPPs in this area.

4.4 Malyn Municipal Heating with Renewable Energy

P3DP has begun to work with Malyn municipality to develop an energy-efficiency PPP pilot project following numerous consultations with Zhytomyr regional municipalities, energy efficiency advisors, and potential private operators. The project will enable several municipal buildings, mainly schools, to be heated using renewable fuel sources. The role of the private partner is to construct one of three large boilers in the complex boiler facility and put the two other boilers, which operate on natural gas, into long-term storage for future use. The reconstructed boiler will be capable of consuming bio fuel (for example, straw pellets, wood scraps) instead of natural gas. This will decrease the cost of heating to the municipality, a requirement in the PPP agreement.

Having obtained the Letter of Intent from Malyn municipality, the P3DP Team visited the Mayor, Secretary of City Council, and officials of the City administration to present the proposal of P3DP’s assistance and to obtain political concurrence to move the project to PPP tender. In June 2013, P3DP proposed the PPP structure and discussed technical options with private sector representatives. Following the meetings, the city established the official working group and approved the Action Plan to move the project to PPP tender by the end of 2013 with P3DP support.

The next stage of the project is drafting the feasibility study. P3DP will actively cooperate with city’s advisors and interested private operators, including suppliers of biofuel and equipment operators, to prepare the study in line with the structure required by the MOEDT for PPP projects. The study is expected during the next quarter. PD3P will support the city in obtaining approval of the PPP by the PPP Unit and ensuring compliance with municipal PPP tender procedures.

As a result of the project, the city expects to get the same amount of heat at tariffs 10 to 15 percent lower than the current rate, subject to approval by the local authorities. The private partner will install mobile components of the boiler, which requires fewer approvals and permits from local and state authorities; operate it, ensuring a timely supply of fuel; and provide service and maintenance throughout the life of the PPP contract, expected to be somewhere from 10 to 20 years.

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4.5 Dnipropetrovsk Street Lighting

After reviewing three proposed options for the energy efficiency PPP Pilot Project, P3DP completed initial negotiations with the municipality regarding the basic characteristics of a street lighting PPP project. The city proposed Frunzenskiy District be the site of the pilot project. After consultations with market operators, P3DP confirmed that the proposed district is feasible. P3DP prepared the concept paper and submitted it to the city. It covers the PPP approach, payment mechanism, legal structure, and key technical outline for the private partner’s activity.

P3DP hired a local technical consultant to provide advice on the specific structure of the project and is now reviewing the feasibility of this structure in light of Ukrainian legislation and municipal procedures.

P3DP submitted a Memorandum of Understanding with Dnipropetrovsk Municipality to the mayor and is awaiting signature. P3DP will conduct additional research next quarter and determine the most appropriate business model for the PPP, including the

legal structure, payment mechanism, principle of return of investments, financing sources, and technical features of future changes.

SOLID WASTE MANAGEMENT

P3DP is working with the National Commission for Communal Services Regulation to establish a rational, clear, and consistent tariff methodology. This is essential for successful introduction of public-private partnerships in solid waste collection and disposal. In the interim, P3DP is working with municipalities to engage the private sector on other areas of their SWM strategy.

Solid wastes collected and disposed in landfills of Ukraine are highly organic in nature. Biogas technology can be used as an integral component of a sustainable solid waste management program suitable for both urban and rural areas. As biodegradable wastes are transformed into biogas and slurry, biogas technology can serve as a waste disposal technology that provides energy while helping to disposal and other environmental issues.

4.6. Vinnytsia Biogas Treatment

The Biogas Treatment and Electricity Production PPP Pilot project aims to produce electricity by burning landfill gas emissions. It will require installation of new equipment at the existing municipal landfill to combine the current biogas flaring system with a newly-built electrical generation system. The project will result in significantly reduced gas emissions (methane, being the main component of landfill gas is many times more hazardous than carbon dioxide), better landfill maintenance, and a healthier environment at and near the landfill.

P3DP is now developing the financial model of the project to demonstrate how capital expenditures should be distributed between the public and the private partner, and to what

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extent the proceeds from electricity generation (at the “green” tariff) can cover landfill maintenance and re-cultivation activities at the landfill.

To support project preparation, P3DP hired local technical and legal consultants who will prepare the feasibility study and PPP tendering documents, as well as define key terms of the PPP agreement. Early next quarter, P3DP will meet Vinnitsa authorities to present the transaction team and begin these technical assistance activities.

4.7. Ivano-Frankivsk Biogas Treatment

In April, P3DP and representatives from a private German company visited Ivano-Frankivsk to test the technical viability of a biogas project at a landfill. The tests showed that the landfill has a sufficient amount of landfill gas with suitable composition for generating electricity.

P3DP has political support from the Mayor and Deputy Mayor to develop the project as a PPP. P3DP recommended that the government assume responsibility for constructing the electrical grid to take up electricity produced from landfill biogas. The private partner would be responsible for designing, financing, building and operating an electrical generation facility for a fixed term sufficient for extracting all produced biogas, estimated to be about 15 years after closure of the landfill.

P3DP is now finalizing technical analysis needed to complete the PPP Concept Paper. The city has applied to the Regional Energy Authority to get a technical permit necessary for construction of electricity lines to the landfill, and is seeking the financing needed to achieve this. The next visit to the city is scheduled in July to update the Municipality on P3DP activities and find out where the project stands from the city’s perspective. Commitment by the city to build the grid to the proposed site is a key factor for this project to move ahead.

EDUCATION

Beginning in the late 90s, there has been a steady reduction in Ukraine’s network of kindergartens due to lack of funds in local budgets to maintain kindergartens; a declining birth rate; and extended periods of unemployment among parents. The closure of pre-school institutions has become regular phenomenon along with the transforming of many pre-school institutions into other municipal uses or outright sale to private organizations.

Today, only 56% of children aged one to six years old have the opportunity to attend preschool institutions in Ukraine, the Education and Science Ministry of Ukraine has reported. Over 100,000 children "are waiting for the opportunity to obtain preschool education." Moreover, almost 1,000 preschool institutions are not functioning for various reasons.

Education PPPs can assist governments obtain financial resources necessary for modernizing and reopening kindergartens as well as transfer managerial responsibilities to private sector partners.

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4.8. Kyiv Kindergarten Management

P3DP further developed the Kyiv Kindergarten Management PPP throughout the quarter. Activities included:

Visiting proposed sites and short-listing the two best suitable for the project;

Collecting information for the Concept Paper and financial model;

Drafting the business concept;

Developing a project budget;

Drafting the financial model and presenting it to the Education Department of Kyiv State City Administration;

Holding several working group meetings to approve and proceed with the Action Plan;

Holding initial meetings with private operators to provide information and obtain feedback.

The financial model shows that user fees are not sufficient to build and operate a kindergarten, necessitating alternative financing arrangements. Possibilities include a budget subsidy or assistance with construction costs (in the initial project scope it was planned that the private partner would reconstruct the entire building). Officials from Education Department and policymakers from the Executive Committee have not yet provided clarity on whether the city could subsidize the project or assist with capital expenditures at the reconstruction phase; therefore, P3DP continues to seek options that could make the project financially viable.

During this period, P3DP conducted additional consultations with private operators which demonstrated that the private partners cannot finance reconstruction (cost: $1 – 1.5 million USD) and maintain the building based on proceeds from paid kindergarten services. A major construction company was also approached to explore possible participation as a short-term donor of a recently-built facility, in which the city would not require monetary compensation from the construction company. This would follow the pattern of construction firms making a social contribution when a new multi-apartment building is launched. Such initiatives are now being explored in parallel to discussions with KCSA about political actions to move the project to PPP tender.

TRANSPORTATION

Traffic in Ukraine has increased many times over in the last two decades. Ukrainian cities suffer from too many cars on roads designed for far less traffic. Due to steady increases in the number of cars per capita combined with bad urban planning, finding a parking spot in the city core of any Ukrainian city can be a herculean challenge. Drivers in search of parking spaces add to congestion, hindering the level of retail business activity and worsening the quality of life in the cities. Better parking facilities – for payment – can help ease congestion and raise funds needed to build and maintain facilities. P3DP is now working on Ukraine’s first parking management PPP in Lviv.

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4.9 Lviv Parking Management

The PPP pilot project, which was a priority throughout 2012, was stalled due to political reasons and legislative barriers. However, the project regained momentum and is back on track towards development and tendering. Recent city developments indicate that city leaders, mainly the executive branch headed by the Mayor, is now seriously working to ease road congestion, which is partly caused by a lack of organized parking spaces in the city center.

P3DP is cooperating with the Communal Enterprise Lvivavtodor, which is responsible for municipal road and parking issues, and the city’s Investment Department, to push for an accelerated process to implement an off-street parking facility using a PPP mechanism. The Mayor is tentatively planning to cover certain operator expenses, related to construction and operation of the facility, or guarantee a certain minimum level of demand, essentially providing a subsidy to cover the costs, which may allow the project to become bankable.

During this period, P3DP outlined a new technical assistance plan that is now being reviewed by the city. Planned assistance includes:

Conduct an “express engineering” assessment of the location to construct a multi-storied, underground garage;

Appropriately adjust the financial model previously developed by P3DP;

Create a market sounding information memo and strategy;

Assist in creating and implementing a communication strategy that includes stakeholder consultations, outreach and the media.

Although Ukraine is exploring adoption of more rational legislation now constraining collection of fines related to illegal or unauthorized parking, nothing has yet been adopted. Still, Lviv is piloting innovative methods of controlling off-street parking that include the use of barriers and strict enforcement to stop illegal parking around the location of the planned underground parking facility.

PUBLIC ADMINISTRATION

E-government has been piloted in several municipalities in Donetsk region, enabling citizens to pay for utilities electronically. Besides simplifying a once-complex process, e-government also improves collection rates for utilities. The system has proven effective for improving public administration and has the potential to be expanded beyond utilities. However, the capital investment, technology and other resources required to successfully introduce the technology and processes prevents most Ukrainian cities from using the system. PPPs may prove to be a viable option to overcome these challenges.

4.10 Donetsk Oblast E-Government

E-Government is a method of administering utility billing and payments whereby customers get a single bill and pay all or part of them electronically. It allows for easy payment for heat, water, maintenance of apartment, solid waste collection and utilization, post, telephone, and

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other services. At present, customers receive bills for each service separately and pay them individually, usually through the Post Office or banks.

In May, P3DP representatives visited Donetsk to meet a number of stakeholders involved in a project “Municipal E-Government”. P3DP met the private operator, the Investment Agency of Donetsk oblast, and local institutions facilitating the project. P3DP evaluated how the activity might be structured as a PPP and discussed the private firm’s views on their concerns and how to best structure the contract. The stakeholder communication strategy and PPP contract management have been identified as areas where P3DP might help the viability of the effort

P3DP will conduct stakeholder consultations during the next quarter, visiting cities that have pioneered some form of e-government practices. Key stakeholder groups will be met with to determine their views, identify what obstacles were encountered during introduction of the technology, and assess the overall success of the program. Using the findings of the consultations, a public outreach “seminar” will be conducted for Donetsk oblast cities to discuss the project opportunities and challenges. It will identify ways perspective cities can benefit from E-Government and enable P3DP to design its PPP expertise to best support the project.

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Objective 5: Global Climate Change (GCC) and Clean Energy

Inefficient use of energy wastes resources, increases pollution, and contributes to global climate change. Ukraine, dependent on its agricultural sector, is at risk of increased droughts, flooding, and irregular rainfall.2 Public-private partnerships have a role to play in reducing these risks. In Ukraine, where energy use is highly inefficient, P3DP addresses energy efficiency and climate change in all its programming activities at both national and local levels. This cross-cutting work forms P3DP’s Objective 5, which works within the framework of USAID's Global Climate Change and Development Strategy. P3DP supports both legislative changes to reduce emissions and pilot PPP projects that increase energy efficiency and introduce renewables. 5.1. P3DP Helps Integrate Reduced Emissions and Clean Energy into Ukraine’s PPP Concept

P3DP provided support to the MOEDT as it developed its concept for PPP development in Ukraine for 2013–2018. The Cabinet of Ministers is expected to adopt the strategy in the near future. This document stipulates that energy efficiency in the delivery of communal services is a priority area for the PPPs in Ukraine. Once the concept is adopted, the Ministry will develop an action plan which includes a detailed implementation model. An important part of P3DP’s contribution is ensuring that the strategy and action plan include requirements for reduced emissions and support for clean energy. 5.2 Draft Law on Changes to the Budget Code Supports Energy Efficiency

P3DP made significant contributions to the law On Changes to the Budget Code, which enables energy service agreements. The energy services-based PPP model is crucial for attracting private sector financing and technical expertise necessary to bring energy efficient solutions to as Ukraine’s infrastructure is modernized. This in turn will reduce consumption of heat and electricity, and consequently, greenhouse gases emission. P3DP made substantial contributions to the development of the draft law, particularly in ensuring that its adoption will not be hindered by budget-related constraints when implementing PPP projects in energy efficiency. This work was in support to the National Commission of Communal Services Market Regulation of Ukraine. 5.3. Support Efforts to Reduce Greenhouse Gas Emissions and Improve Energy Efficiency

P3DP engaged Environmental (Green) Investment Fund LLC to calculate anticipated reductions in greenhouse gas emission from P3DP pilot PPP projects in Vinnytsia, Ivano-Frankivsk, Dnipropetrovsk and Malyn. The estimated reductions due to the U.S. Government assistance delivered through the P3DP Program will be equivalent to 998,159 metric tons of CO2. The estimated reduction of electricity consumption generated from non-renewable energy sources, such as oil or coal, is 231,812 MWh. These reductions are due to energy efficiency measures and substitution for renewable sources of energy. The table below provides details on each project’s figures and calculation periods.

2 http://www.zoinet.org/web/sites/default/files/publications/CCEE-English-web.pdf

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Anticipated Reductions in GHG Emissions and Electricity Generated from Non-Renewable Sources

Project name Estimated Reduction in GHG

(Metric tons of CO2 equivalent)

Estimated reduction of electricity consumed, generated from non-renewable sources

(kWh)

Period

Landfill biogas extraction PPP in Vinnytsia

459 016 79 393 973 2019-2029

Landfill biogas extraction PPP in Ivano-Frankivsk

456,705 78,994,325 2015-2025

Renewable energy for district heating in Malyn, Zhytomyr region

11,429 72,601,136 2013-2038

Energy efficient street lighting PPP in Dnipropetrovsk

1,008 822,188 2015-2024

TOTAL 928,158 231,811,622

5.4 Training: PPPs in Energy Efficiency and Renewable Energy

P3DP prepared a Terms of Reference for a trainer to conduct five specialized trainings, primarily for municipal officials, on how to design and implement PPPs in the energy efficiency and renewable energy sectors within the framework of USAID's Global Climate Change and Development Strategy. The trainings are expected to be conducted during Y3Q4 in Dnipropetrovsk, Ivano-Frankivsk, Kyiv, Zhytomyr and Vinnytsia. 5.5 Technical Assistance Provided to Dnipropetrovsk

During this period, P3DP provided technical assistance to the city of Dnipropetrovsk to support its efforts in creating and implementing a PPP pilot project aiming at improving energy efficiency using private sector expertise and funding (see Objective 4).

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Key Upcoming Events and Activities (Y3Q4)

Training and Seminars

P3DP will be delivering a series of seminars on Energy Efficiency and Renewable Energy. The seminars will take place over a five-week period from late August through September in Dnipropetrovsk, Zhytomyr, Kyiv, Vinnytsia, and tentatively Ivano-Frankivsk.

A general PPP Training in Zhytomyr, a Seminar on PPPs in E-Government in Donetsk, and a Media Tour in Vinnytsia will be organized and delivered in cooperation with the East European Foundation in September.

In the area of GOU and Legal support activities of P3DP, an All Ukrainian Forum of Mayors and a Roundtable on PPP Strategy Implementation will be organized in order to share results of cooperative efforts to improve the PPP legal framework and plan future work with representatives of MOEDT and municipalities’ leaders.

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USAID Field Days

P3DP will present and promote its proposed pilot project in Vinnytsia at the USAID Field Day event on September 7. P3DP developed materials to introduce key PPP concepts to stakeholders and affected communities, and successfully presented them in Simferopol in May. P3DP will cooperate with a local NGO in organizing and implementing the public education activities.

In October, P3DP will participate in the USAID Field Day in Zaporizhia. P3DP will highlight its work in Zaporizhia to introduce the first PPP in Ukraine’s health sector. P3DP plans to incorporate health awareness and environmental issues into materials to be distributed and activities to be conducted.

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Program Administration

P3DP Administrative Staff Training - Washington D.C.

During October 1-3, P3DP members – Olga Petrenko, Senior Program Coordinator, and Natalia

Logvinova, Finance Manager - will travel to Washington D.C. to participate in a training

focused on Federal Rules and Regulations: Grants and Cooperative Agreements. P3DP

members will advance their qualification in the area of administration of projects managed

under grants and cooperative agreements and gain additional knowledge in such areas as

sources of legal authority, policy and procedures for sub-awarding funds, cost principles for

nonprofit organizations, etc. P3DP members will also meet with FHI360 headquarter staff

members to review program administration practices. Upon their return to Kyiv, P3DP

members are expected to develop and deliver a short workshop for staff members of MARPs

project, which is co-implemented by FHI360 in Ukraine.

P3DP Compliance Review

During the period August 11-14, P3DP will undergo an annual Internal Compliance Review,

implemented by FHI360 Compliance Officer Yasser El-Said Luxor. The review will evaluate

P3DP compliance with FHI360 and USAID policies and procedures in the areas of

procurement, bank operations, cash management, etc. The final Review Statement will be

submitted to FHI360 Home Office and P3DP for further analysis and recommendations.

Registration (Approval of Procurement Plan)

P3DP initiated the procedure of re-registration due to the change of the official name of the

implementing company - from FHI Development 360 LLC to FHI360. The procedure requires a

completely new registration documents package, which includes a P3DP Procurement Plan

(the document that enlists the amount of supply that is subject to preferential exemption

from VAT), approved by MOEDT. P3DP’s Procurement Plan was submitted to MOEDT on June

13. Upon the approval of the Procurement Plan, P3DP will file its request for new registration

to USAID.

Staff Changes

David Lawrence was recruited on May 1 as Senior Technical Assistance Coordinator, the role

previously filled by Mr. Mullay. Mr. Lawrence also consults with the International Finance

Corporation’s PPP Advisory Services Department and will support P3DP on an as-needed

basis.

The Program’s Financial Assistant, Anastasiia Walsh, left the project on May 20 for family

reasons. She was replaced by Olena Potapova on June 17.

Viktoriia Opryshko joined P3DP on July 1 to fill the role of receptionist/secretary. She will also

assist in translation of documents.

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Annex 1

P3DP Implementation Chronology

Dates Key Program Activities

April 3 P3DP met with MOEDT’s PPP Unit to create a detailed cooperative work plan for the coming

year. Issues included prioritization of legal acts that need drafting, identifying possible training

topics, and holding public events as agreed to during previous meetings with Mr. Maksiuta.

Discussions built on previous agreements regarding further technical support in developing and

approving of the PPP Concept and PPP Strategy and Strategy Implementation Plan mentioned

in the President’s Economic Reforms Action Plan approved two weeks ago by the President of

Ukraine Administration.

April 4 Members of P3DP administrative and financial staff and the COP attended FHI360 project

Finance training on FHI360 policies, procedures and USAID compliance (i.e. sub-awards and

consultant procedures, cash requests and travel policy, allocation and separation of accruals,

procurement policy, budgeting and pipelines).

April 4 Valeriy Dobrovolskiy and Ruslan Kundryk met with the advisor to Zhytomyr oblast cities,

Vadim Glamazdin, who assists municipalities in identification of the scope of activities while

preparing and implementing biofuel heating PPP projects. The meeting was built on prior

discussion of political and technical background of a potential project and identified alternative

methods to move forward with shortlisted Municipalities in Zhytomyr oblast.

April 5 Mick Mullay, Tatiana Korotka and Ruslan Kundryk participated in the 11th Annual Financial

and Economic Forum: A Road to Economic Prosperity, organized by IBSER (the implementer

of USAID’s MFSI-II Project). The forum focused on the issues related to the legal principles

and modern practices of Implementing energy saving projects, the mechanisms of financial

stimulation of energy resources’ effective utilization and alternative funding sources for energy

saving projects. Tatiana Korotka presented the scope of implementing PPP energy efficiency

projects in Ukraine.

April 9 Tatiana Korotka, Ruslan Kundryk and Chris Shugart met with Oleg Kostrykin and Olena

Bondarenko representing Urkaine’s National Commission on Tariff Regulation. Discussions

clarified and prioritized issues related to SWM tariff regulation and created a framework draft

of SWM tariff setting consultancy. P3DP determined the anticipated timeline and staffing for

completing the envisaged STTA assignment.

April 10 P3DP submitted the joint P3DP-MOEDT 2013 Work Plan to MOEDT. The Work plan was

drafted during the working meeting on March 29 with the representatives of MOEDT’s PPP

Division, Viktor Kovalenko, Pavlo Pakholko and Oksana Kordina. Once approved, the

Workplan will serve as the roadmap of joint P3DP-MOEDT activities and planned technical

assistance that will lead to creating a conducive PPP policy and regulatory environment and a

more effective MOEDT PPP Unit.

April 11 P3DP team met with representatives of Dnepropetrovsk municipality to discuss the concept note

on the street lighting PPP pilot project. The key strategic project components, that need to be

approved by city leaders, were identified.

April 12 P3DP submitted the recommended outline for the content of MOEDT’s PPP Division web-page.

The outline is expected to be approved and content uploaded on MOEDT’s web–site by the end

of April.

April 15 The Ukrainian PPP Development Support Center (UPPPDSC), the Institute for Public-Private

Partnerships (IPPP) Warsaw, and P3DP co-organized the 2nd

International Conference “Speed

UPPP Ukraine”. P3DP COP, Mick Mullay, delivered a presentation on the current opportunities

and existing challenges of implementing PPPs in Ukraine and how P3DP assistance is

mitigating barriers and developing pilot PPPs. Over 150 representatives of national and local

36 | P a g e

Dates Key Program Activities

public institutions, private companies, nongovernmental organizations and experts attended,

including representatives of the Ministry of Economic Development and Trade of Ukraine, the

Ministry for Regional Development, Construction, Housing and Communal Services of

Ukraine, and Mayors of major Ukrainian cities.

April 16 Tatiana Korotka, Valeriy Dobrovolskiy, and PPP International Expert, Chris Shugart, and local

SWM Expert, Fedor Luchenko, conducted a business trip to Vinnytsia to meet with Vinnytsia

municipal department of public utilities. The recent Concept Note on Vinnytsia SWM Pilot PPP

project that was prepared and submitted to the city by P3DP framed the discussions on options

for the pilot PPP’s legal structure (DBFO vs. DBO) and solid waste collection as an additional

component to its scope. At the moment Vinnytsia is considering a municipal loan to fund the

project and requested P3DP to focus efforts on the second PPP Pilot, which would include

installation and operation of electricity production (from landfill gas), and closure and post-

closure activities at the landfill. P3DP has started to collect information for the financial model

of the project and will be ready to proceed with preparation of Feasibility Study in May, 2013.

April 17 Tatiana Korotka, Valeriy Dobrovolskiy, Chris Shugart and Fedor Luchenko met with the

Vinnytsia Mayor and Department of Communal Services and City Maintenance to discuss

development of two PPP Pilot Projects - construction of a new landfill; operation of existing

landfill with enhanced landfill gas electricity production.

April 18 P3DP discussed a new PPP Project concept with Kyiv State City Administration representatives,

related to construction and long-term operation of summer sports and recreation facility in

Hydropark zone in Kyiv. City Administration has selected a site for the project and would like

P3DP assistance to conduct a tender to attract the private partner to install a series of temporary

stadiums and fields. P3DP has also with met one of the interested private operators, representing

the association of beach football in Ukraine, which revealed key components of the project

preparation. P3DP is being requested to support awareness activities and provide input to the

tendering procedure of the PPP in April and May 2013.

April 18 To strengthen public outreach of Zaporizhia Healthcare PPP, P3DP prepared a leaflet specifying

the PPP project scope and benefits for the community. Feedback from the City has been

incorporated and it will be printed and disseminated to stakeholders. P3DP has preliminary

agreed to meet with Zaporizhia Council representatives in May-June 2013 to discuss key issues

and outline next steps to ensure the pilot moves toward tendering.

April 18 Mick Mullay met with FHI360’s Paul Bundick and former team members Alan Pieper, Jason

Cycz, and Larry Hearns in Washington, DC to review the status of P3DP pilot PPPs and discuss

strategies to accelerate their process toward tendering.

April 19 P3DP provided legal comments and recommendations on two draft laws per request of the

National Commission of State Regulation of Public Services: “On amendments to certain laws

of Ukraine regarding solid waste management sector” and draft law “On amendments to Budget

Code of Ukraine and other legislative acts regarding energy supply services.”

April 23

Tatiana Korotka, Nataliya Boyko, Valeriy Dobrovolski, and P3DP-comissioned Finance

Modeler, Nadezda Yermolenko, delivered a presentation of project concept and financial model

of the Kyiv Kindergarten Pilot PPP to the representatives of Kyiv Department of Education.

Irina Ostapenk, Head of the Preschool Education Division, expressed interest and enthusiasm

about further project implementation and requested P3DP to deliver a more concise version of

the same presentation to Deputy Head of KMDA, Viktor Korzh, and his staff after the May

holidays.

April 23 Valeriy Dobrovolskiy and Ruslan Kundryk conducted a working meeting with the Investment

Department of KMDA to explore the viability of a Kyiv Sports and Recreation pilot PPP

project. The parties discussed preliminary feasibility studies and what steps are needed to take

the project to tender. P3DP agreed to help design and implement a stakeholder communication

strategy and to contribute to the preparation of required tender documents for the PPP project.

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Dates Key Program Activities

April 24 P3DP approved the reporting form for anticipated CO2 Emissions Reductions assignment.

Consultants started working on Vinnytsia biogas pilot PPP project.

April 25 Valeriy Dobrovolskiy and Ruslan Kundryk traveled to Malyn (Zhytomyrska region) to evaluate

two possible PPP Pilot Projects in the heating sector. The city envisages substituting central and

local municipal heating stations with a private heating provider that would significantly

improve the quality of provision of hot water and heat. The project is aimed at introducing new

technologies that would reduce emissions through burning biomass, instead of natural gas.

Installments are primarily planned in municipal buildings such as secondary schools, and

municipal hospitals.

April 26 Tatiana Korotka and Olena Maslyukivska met with the private vendor selected by P3DP to

support awareness activities during USAID Field Days in Simferopol (City day on June 1). The

private partner will present ideas and cost estimates for the Master classes in Simferopol on

June 1.

April 26 P3DP provided its legal review and recommendations to MOEDT on Resolutions of the Cabinet

of Ministers № 639, 642 and 643 regarding implementation of concession agreements.

April 29 Tatiana Korotka and Ruslan Kundryk traveled to Simferopol to participate in the meeting of the

Urban Park Renewal PPP Working Group and meet with Simferopol Deputy Mayor Mr.

Skutskiy. It was determined that P3DP will request the Municipal Land Department to develop

(with P3DP assistance) and submit the draft Resolution on park land plot allocation to the

Executive committee meeting scheduled on May 17. Upon approval, this will be put into

agenda of City Council for further adoption. The Municipality agreed to finalize the draft

Design of the Park within the next two months. P3DP will now proceed with preparation of the

project’s Feasibility Study needed for preparation of tendering the PPP.

April 29-30 Nellie Makary conducted a business trip to Ivano-Frankivsk. P3DP organized the testing of

methane gas on the municipal landfill of Ivano-Frankivsk. The testing revealed the presence of

landfill gas that exceeds initial average expectations for key indicators (i.e. methane and oxygen

levels) which indicate commercial viability for harnessing the gas and converting to usable

energy. The business trip concluded with the meeting with the city mayor, where it had been

agreed to initiate PPP Biogas Project, to prepare the technical concept by June, and sign the

Memorandum of Cooperation between P3DP and the municipality soon after.

April 30 Ruslan Kundryk participated in the meeting with Olexiy Korchmit, Deputy Head of Strategy

Department of National Commission for Communal Services Regulation to discuss the P3DP

proposals to the Draft Law on implementing energy performance contracts. Most of P3DP

proposals and recommendations had been taken into the account and the draft law was updated

accordingly. If adopted, the draft law can facilitate the creation of ESCO PPPs in communal

services areas.

May 6 P3DP COP Mick Mullay met with Eric Bleich, COP of the USAID funded AgroInvest Project,

for preliminary discussions on ways of collaborating in pursuit of achieving the two projects’

shared goals and objectives. Greatest potential for synergy appears to be in the area of

establishing agricultural produce wholesale markets through PPP mechanisms. Various ways of

cooperation related to agricultural land ownership, use, and sales were also discussed. It was

agreed to research the issues in greater depth to evaluate potentials and identify specific ways of

cooperation. It was also agreed that it may be beneficial to engage an expert experienced in

establishing agricultural PPPs in similar environments. Follow on discussions are tentatively

planned for the week of May 13.

May 21 Mick Mullay and Valeriy Dobrovolskiy traveled to Donetsk to meet with the authorized

representatives of Chelsea Equity, LLP, to discuss the potential for introducing E-government

systems for administration and utility payments management in Ukraine through PPP type

agreements. Chelsea is interested in using PPP approaches with multiple municipalities

interested in improving the efficiency of their operations while increasing revenues collected.

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Dates Key Program Activities

May 23 Olena Maslyukivska and Mick Mullay met with key P3DP implementing partners, AUC, to

review joint cooperation during the past year and discuss future partnership.

May 24 Mick Mullay and Tatiana Korotka participated in a meeting dedicated to a potential PPP project

in healthcare in Odessa, Ukraine, organized by USUBC. The participants included a co-owner

of a U.S. company which exports U.S. medical supplies and equipment to public and private

hospitals in Ukraine, a top manager from Intecracy Group, an IT outsourcing and products

company (a USUBC member) which could assist in project integration.

May 20 Mick Mullay met with Olya Holyda, an IREX fielded consultant, to explore ways in which

P3DP can broaden cooperation with and leverage the skills and resources of the Municipal Law

Center (MLC). It was explained that both P3DP and MLC jointly participate in select

committees and contribute input to amendments to PPP framework law and other relevant

policies and regulations, but that no legal services had been provided to P3DP on a commercial

basis by the MLC. It was agreed that P3DP will ensure that future TORs requiring legal support

are shared with the Center in the hopes they will participate in the tender competition.

May 21 Mick Mullay and Valeriy Dobrovolskiy traveled to Donetsk to meet with the representatives of

SoHaTec Company, the initiators of an e-government systems project in Ukraine. The project

provides administration and electronic utility payments management for increased efficiency

and effectiveness. Apart from its main functions, the introduced technologies enable creating of

a public utilities consumption database of customers. The Project is supported by a group of

advisers (Exim Consulting, Chelsea Equity LLC) and has been piloted in 5 cities of Donetsk

oblast. Over 40 other towns have expressed interest. Parties discussed ways of cooperation, in

particular thorough legal structuring of the e-Government PPP and implementing

communication strategies in municipalities to highlight PPP benefits and identify public

concerns. A follow-up meeting will be scheduled for next week in Kyiv.

May 22 Mick Mullay participated in the Food Safety Conference organized by P3DP’s implementing

partner East European Foundation. Discussions included exploring methods of applying PPPs in

the agriculture sector to improve the quality and quantity of food production, especially produce

of small farm holders. During the event, Kyiv Economic Institute and P3DP agreed to explore

ways of expanding their cooperation to include stakeholder surveys and needed demographic

studies related to PPP pilots being assisted by P3DP.

May 22 Ruslan Kundryk and Valeriy Dobrovolskiy met with Malyn alternative heating Pilot PPP

Project stakeholders (the private operator, land resources consultant, technical consultant) to

discuss ways of structuring the project and its timeline. Issues related to land, technical details

of alternative fuel boilers, current heating system in municipal buildings (mainly, educational

institutions), legal structuring of a PPP project and other topics must be discussed with the

Mayor and City Council representatives. The parties will elaborate and prioritize issues to

prepare for the follow-on meetings in Malyn in June 2013.

May 24, Mick Mullay and Tatiana Korotka participated in a meeting dedicated to a potential PPP project

in healthcare in Odessa, Ukraine, organized by USUBC. The participants included a co-owner

of a U.S. company which exports U.S. medical supplies and equipment to public and private

hospitals in Ukraine, a top manager from Intecracy Group, an IT outsourcing and products

company (a USUBC member) which could assist in project integration. A P3DP team will visit

Odessa in June to prepare a project brief and outline a business concept.

May 27 P3DP met with Serhiy Kharchenko, leader of Kyiv’s Sports and Recreation Facility project, to

discuss the creation and implementation of the project’s stakeholder communication strategy

and additional P3DP technical assistance. P3DP will facilitate and track the project through

tender preparation, bidding, private partner selection and contract implementation.

May 27 P3DP met with Vitalii Gordon, Member of the Board Directors of EIG Engineering

Management Consulting Company, to explore potential areas of cooperation between EIG and

P3DP in environmental protection and offer clean energy solutions. EIG Engineering is

planning to construct a Biomass Power Plant (BPP) with the capacity of 18 MW through a

39 | P a g e

Dates Key Program Activities

parent company, Biogasenergo. in Ivankiv, Kyiv region. Next to Ivankovo BPP, a greenhouse

can possibly be built that utilizes heat generated by the plant. It was agreed to continue

discussions and explore possible application of PPP approaches.

May 28 P3DP met with representatives of Exim Consulting that is advising and assisting the raising of

capital needed to implement the envisaged E-Government project in multiple Municipalities. In

addition to identifying the optimal PPP approaches to apply, P3DP may be able to mitigate

significant risks by providing tailored PPP capacity development workshops for the

municipalities and assisting the design and implementation of stakeholder communication

strategies. Additional discussions are planned for June 3 with the interested private partner.

May 30 Agriculture Marketing and Development Institute (AMDI) provided P3DP with its action plan

regarding the organization of a public event dedicated to PPP opportunities and applications in

the Agribusiness sector. P3DP agreed to support and cooperate through assisting the design of

the program, to possibly field PPP experts to make presentations and conduct seminars during

the event, and produce a paper highlighting best practices and applications in Ukraine. It is

hoped that an event can be conducted in September or October.

May 29 – May

31

P3DP participated in the annual Technical Assistance Donors’ Forum, organized by MOEDT of

ARC. The goal of the forum was to review the results of ARC’s and International Donors’

cooperation during the past year, present ongoing efforts, and introduce new initiatives and

directions. Participants included EU Delegation to Ukraine, UN/ UNDP, U.S.

Embassy/USAID, Germany, Turkey, Canada, the United Kingdom, Switzerland, Poland, and

the Netherlands. A consistent theme in presentations and discussions was that the level of

available financing from the Ukrainian government, ARC and international donors for

improvement of municipal and social services will continue to diminish in future years, and that

cities need to develop the capacity to fill this gap through Public Private Partnerships. Great

interest was expressed in P3DP activities and programs.

May 31 Tatiana Korotka participated in the PPP Working Group Meeting of Simferopol City Council

Executive Committee. Participants discussed the positive outcome of the vote by Simferopol

City Council to approve the set of land management documents needed to proceed with

development of Gagarin Park. This decision clarifies the types of facilities that can be

constructed in the park and their location. The City Council decision is a significant step

towards further development of Simferopol Park Pilot PPP Project. Steps needed to complete

the required Feasibility Study and prepare PPP Tender documentation will be outlined in detail.

June 10 P3DP met with Mr. Volodymyr Selsky and Mr. Stanislav Krugliakov from LNK Company - the

investor and operator of the Boryspil Biogas Energy Power Plant, which was featured at the

Biogas conference. Parties discussed mutual areas of interest, practical approaches to apply PPP

methods of cooperation in Ukraine, and explored possible ways of cooperation.

June 11 P3DP and Chris Shugart met with Pavlo Pakholko, of the PPP Unit of MOEDT, to discuss the

action plan of amending Resolutions of the Cabinet of Ministers #232 (on Risk Assessment of

PPP projects) and #384 (on the Assessment of Feasibility of PPP projects). Significant

amendments of the resolutions are required in order to enable a smooth and less burdensome

review of PPP projects submitted by municipalities to MOEDT for approval. A number of

options were examined, and preliminary deadlines for preparation of necessary procedural

documents set.

June 12 P3DP team members participated in the Annual Municipal Forum conducted in Yalta. P3DP

organized a separate panel session within the program of the Forum dedicated specifically to

identifying opportunities and methods for municipalities to engage the private sector to improve

the quality of public services and infrastructure. Representatives of private sector companies

presented the benefits of engaging them in sectors such as modernization of heating systems in

public buildings (Center for Energy Research), PPP approaches in solid waste landfills gas

treatment (AEU), and PPP in healthcare (LadyMed). The audience was comprised of heads of

over 40 Ukrainian Municipalities.

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Dates Key Program Activities

June 12 Tatiana Korotka and Ruslan Kundryk participated in the meeting of Simferopol City Council

PPP Working Group to agree on the further plan of actions that will determine bringing

Simferopol Pilot PPP project to tender stage. The parties agreed that the project requires

additional social and marketing research to ensure that socio-economic benefits are detailed in

the Feasibility Study. P3DP later met with implementing partners KEI on June 13 to describe

needs in research, stakeholder communications, and necessary data collection.

June 14 Green Investment Fund, P3DP short term technical assistance expert, submitted to P3DP the

Anticipated Carbon Emissions Calculations for two P3DP PPP pilot projects (Vinnytsia biogas

and Malyn biofuel) for review and feedback. It is anticipated that both pilot projects will have a

clear and measurable positive impact on the environment.

June 18 The Malyn Municipal Executive Committee issued a resolution to start development of a PPP

Pilot Project for heating of public buildings. A PPP Working Group was organized to prepare a

feasibility study and move to a PPP tender. Next week, the P3DP Team will meet PPP Project

stakeholders to discuss the draft feasibility study and begin preparation of a presentation in the

City Council.

June 20 Nellie Makary attended a meeting of the Council of Scientific and Methodological Assistance

of the National Commission on Tariff Regulations. The Commission updated participants with

the latest changes and improvements to the draft law On Amendments to the Budget Code on the

Supply of Energy Services in Public Buildings. The follow-up meeting was tentatively

scheduled for the first week of July.

June 20-21 Tatiana Korotka, Ruslan Kundryk, Valeriy Dobrovolskiy, Andriy Huk, the Head of the NGO

Initiative in Community Healthcare, and Mr. Lebedko of Prudence Law, the legal advisor,

presented the Zaporizhia Healthcare Pilot PPP project Feasibility Study to Zaporizhia officials

and discussed next steps for the project’s tender. P3DP also discussed prospective PPP project

ideas on municipal heating, water and waste water treatment, cultural and recreational objects

with Deputy Mayor Mr. Y. Kaptyukh and Secretary of City Council Mr. R. Taran. On June 21,

P3DP and the PPP Working Group, headed by Deputy Mayor of Zaporizhia, approved the

feasibility study and the joint work plan. The project is on track for the tender in the fall of

2013.

June 21 Olena Maslyukivska and Maryna Kulykova participated in a USAID workshop on writing

success stories. The workshop concentrated on practical exercises to improve professional

writing skills of USAID project staff. P3DP presented the Kyiv Sports and Recreation Pilot PPP

project for its story.

June 21 The Resolution of Ministry of Infrastructure #318 dated May 27, 2013 was officially published.

The Resolution approved regulations on tendering commissions for transferring state owned

objects under concessions. The Resolution helps develop PPPs in the sector of

transportation/logistics and seaport PPPs. P3DP will track further developments.

June 26 P3DP participates in Simferopol Park Pilot PPP Project working group meeting. P3DP’s Ruslan

Kundryk participated in a working group meeting on the Simferopol Park PPP. The meeting

was led by Deputy Major Mr. Skutskiy. Participants discussed: (i) financing of the land plot

design for PPP Project Development and (ii) the legal mechanism of land plot usage for park

development under a PPP project. The city is now considering the issues and alternative actions

(June 26).

June 27 USAID Partners’ Meeting. Mick Mullay and Tatiana Korotka participated in the quarterly

USAID Partners Meeting and provided an update on P3DP activities. It was noted that

Ukraine’s new country development strategy 2012 – 2016 includes wider use of public-private

partnerships to improve public services and infrastructure.

June 28 Program Web site registered at ppp-ukraine.org.

41

Annex 2

P3DP Performance Monitoring Report Y3Q3 (April – June, 2013)

The Kyiv Economics Institute prepared this report to assist the PPP project

development team in evaluation of its performance, identification of the

possible delays and risks in the implementation of the Program objectives.

The analysis shows that in the third quarter of the Year 3 of the project, the planned activities are

mostly performed within the respective timelines, although a few of them are delayed for reasons

independent of P3DP (parliamentary crisis, availability of local officials, etc.).

Political and macroeconomic risks remain the highest risks for PPP projects implementation. On the

one hand, the investment climate is very unlikely to improve decreasing willingness of the private

sector to get involved in PPPs. On the other hand, the revenue part of the state raises concerns and as a

result local budgets might lack funds that should be tunneled to them from the State Treasury to engage

in PPPs. Election indeterminacy in Kiev may also jeopardize two pilot PPP projects.

The rest of this report is structured as follows. For each of the four objectives of the Program, activities

foreseen by this objective for the entire Year 3 (Y3) and their implementation are described and then

the relevant performance indicators, their targets and actual values are presented. For the ease of

perception, activities that were fully and timely implemented are marked with green, activities that are

either delayed or implemented partially marked with yellow, and activities that are not implemented

are marked with red. The report ends with some concluding remarks.

List of abbreviations

AMC – Anti-Monopoly Committee of Ukraine

AmCham – American Chamber of Commerce

ARC – Autonomous Republic of Crimea

CLC – Commercial Law Centre

CMU – Cabinet of Ministers of Ukraine

EEF – Eastern European Foundation

GIZ – Deutsche Gesellschaft fur Internationale Zusammenarbeit GmBH

GOU – Government of Ukraine

IBSER – Institute for Budgetary and Socio-Economic Research

IFC – International Financial Corporation

MEP – Ministry of Environmental Protection of Ukraine

MoEDT – Ministry of Economic Development and Trade

MRDCH – Ministry of Regional Development, Construction and Housing

NCCSR – National Commission of Communal Services Regulation

NCMSR – National Commission on Municipal Services Regulation

NPA – National Project Agency

PPP – Public-Private Partnership

P3DP – Public-Private Partnership Development Project

RT – Round Table

SIP – [PPP development] Strategy Implementation Plan

SPA – State Property Agency

SWM – Solid Waste Management

TA – Technical Assistance

VR – Verkhovna Rada (the Parliament) of Ukraine

WG – Working Group

42

List of tables

Table 1. P3DP participation in events during Y3Q2 (Activity 1.3.3) …………………page 5

Table 2. Performance indicators for Objective 1………….…………...………………page 7

Table 3. Events organized by P3DP ……………………………………………..……page 9

Table 4. Performance indicators for Objective 2……………………………..………page 10

Table 5. Performance indicators for Objective 3………………………………….….page 13

Table 6. Projects pursued by P3DP ………………………………………..………....page 14

Table 7. Progress in projects pursued by P3DP……………………………………..page 16

Table 8. Performance indicators for Objective 5……………………..………………page 17

Explanatory note: Activities highlighted in green were conducted according to the Y3 Work Plan,

highlighted in yellow were either fulfilled partially or postponed/delayed and highlighted in red were

not conducted.

43

Objective 1. Legal Framework Enhancement

To achieve this Objective, P3DP works closely with Ukrainian officials, representatives of the private

sector and international investors to make legal environment in Ukraine more favorable for PPP

development.

In Y3Q3, the following activities were planned and performed within this Objective:

Activity 1.1.1. A year-round monitoring of legal environment. During Y3Q3, P3DP continued to issue

Weekly Highlights and monthly Legislation Development Assessment Reports.

Activity 1.1.2. Development of amendments to the PPP law. Earlier this year, the Parliamentary

Committee on Industrial, Regulatory Policy and Entrepreneurship requested P3DP to rewrite the draft

Law #10228 “On Amendments to the Law of Ukraine On PPPs”. P3DP intended to provide the new

draft to the Committee in Y3Q3 but this draft will be finalized in July 2013.

Activity 1.1.3. Development of amendments to the draft law on Concessions. P3DP planned that the

draft Law #0857 “On Amendments to the Laws on Leasing or Concessions of District Water, Heating

Supply and Sanitation Communal Facilities” (Law “On Peculiarities…., Law “On Concessions”)

would be passed by the parliament by the end of April 2013. However, political situation did not allow

the VR to work in a normal regime. Hence, P3DP continued cooperation with the VR Committee on

Communal Services and Housing responsible for the Draft. The Draft is expected to be ready for the

next parliamentary hearings in the Y3Q4. P3DP agreed to participate in the next public hearings and/or

meetings on this law draft with the Committee, contribute expert opinions and recommendations, track

developments and advocate the adoption of the draft Law.

Activity 1.1.5.2. In Y3Q3, P3DP continued to develop two draft laws on long-term budget

commitments.

On 2013-04-30, P3DP held a meeting with IBSER discussing the draft law and the plan of its public

discussion. Besides, P3DP took active part in the draft discussion at the 11th

Financial and Economic

Forum on Energy Efficiency of Budget Expenditures organized by IBSER (see Table 1). P3DP will

continue to provide support to IBSER during the draft law adoption process.

P3DP also participated in the development of another draft law on long-term budget commitments

initiated by the National Commission on Communal Services Regulation. On 2013-04-19, P3DP

provided crucial proposals and recommendations to the draft to eliminate budget related constraints for

the PPP project implementation in the energy efficiency sector. P3DP actively participated in the

discussions of this draft law. On 2013-04-30, P3DP met with NCCSR representatives to discuss the

draft law. P3DP will follow the draft law development process and provide necessary support during

its finalization and adoption.

Under Activity 1.2.3, P3DP planned to provide assistance to the MoEDT in drafting of legislative acts

according to the PPP development Strategy Implementation Plan, starting from January 2013.

Although SIP has not been adopted yet, P3DP continues to work on development of the PPP-related

legislation according to the Draft SIP, P3DP Priorities and Recommendations. Specifically, in Y3Q3,

P3DP prepared the following legal documents:

1) 2013-04-01 – proposals and recommendations to the draft Resolution on PPP Development

Program in Zaporizhzhia;

2) 2013-04-12 – updated draft PPP Development Strategy in line with the new terms for 2014-

2018;

3) 2013-04-19 – Recommendations and proposals to the draft Law “On amendments to the

Budget Code on implementation of long term budget commitments under ESCO contracts

(POI 1.3);

4) 2013-04-19 – Recommendations and proposals to the draft Law “On amendments to some

Laws on SWM” envisaging the new approach to SWM regulations affecting PPPs;

44

5) 2013-04-19 – Recommendations and proposals to the draft Law “On concessions” (the new

version of the Law);

6) 2013-04-26 – the list of recommendations on improvement of CMU concession-related

decrees. The recommendations were provided upon the MOEDT request to outline the main

changes to be implemented to enhance concession development;

7) 2013-05-28 – Draft PPP Development Concept updated in line with suggestions from the

Ministry of Finance and the Ministry of Justice.

8) 2013-06-25 – Draft Policy Proposal on the PPP Development Concept.

9) 2013-06-28 – Concept of Amendments to the CMU Decrees #384 On Efficiency Analysis

Procedure and #232 On Risk Assessment Procedure.

During Y3Q3, P3DP team took part in a number of events listed in Table 1.

45

Table 1. P3DP participation in events during Y3Q3 (Activity 1.3.3)

Date Event Participating organizations Topic

2013-04-05

11th Economic Forum on Energy

Efficiency of the Budget Expenditures:

a Road to Economic Prosperity

IBSER, experts, donors, NGOs Discussion of the Budget Code rules in light of

the energy efficiency developments

2013-04-09 SWM Tariff Calculation Methodology

discussion meeting

National Commission for Communal

Services Regulation

TOR outline for Methodology Development

Consultancy discussed and agreed upon

2013-04-11 Speed uPPP Ukraine conference (Kyiv)

MOEDT, NPA, foreign PPP Units,

municipalities, donors, expert

organizations, NGOs, investors

Status and progress of PPP development in

Ukraine

2013-04-30 Meeting on the PPP facilitating

amendments to the Budget Code IBSER

Discussion of the draft law on amendments to

the Budget Code and of the plan of its public

discussion and submission

2013-04-30

Meeting on discussion of P3DP

proposals to the draft law on long-term

budget commitments

National Commission for Communal

Services Regulation

Discussion of the draft law on amendments to

the Budget Code on ESCO implementation

2013-06-07 ITA Working Group meeting within the

Ministry of Regional Development MRDCH, donors, experts

Participants discussed the ITA support to

MRDCH and agreed on coordination of further

activities

2012-06-12 PPP Seminar (Yalta) AUC, Municipalities, experts

Discussion of PPP projects implementation in

the municipalities, identifying stakeholders

concerns. Report on PPP Seminar

2013-06-20

Meeting of the Council on

methodological support of the law-

drafting process within NCMSR

NCCSR, donors, experts Discussion of the draft Law “On amendments to

the Budget Code” implementing long term

budget commitments under ESCO contracts

46

Performance indicators for Objective 1 are presented in the Table 2.

Table 2. Performance indicators for Objective 1

# Definition Y3Q1

actual

Y3Q2

actual

Y3Q3

actual

Y3

target

% of target

implement

ation

POI

1.1

Draft Concept Paper, Strategy and

Strategy Implementation Plan on PPP

Development developed and

submitted to GOU for approval

YES - - YES +

POI

1.2

# of actions implemented under PPP

Strategy Implementation Plan 0 0 0 TBD -

POI

1.3

# of policy reforms/regulations/

administrative procedures drafted and

presented for public/ stakeholder

consultations to enhance sector

governance and/or facilitate private

sector participation and competitive

markets as a result of USG assistance

(F 4.4.1-13)

1a 0 1

с 4 50

POI

1.4

# of P3DP legal reforms (based in

part on the GIDE review) that are

submitted in final recommendation

form to the relevant GOU (state)

entity

1b 0 1

d 6 33

a Draft Strategy on PPP Development in Ukraine for 2012-2017 and Strategy Implementation Plan

b Draft Decree on Strategy on PPP Development in Ukraine for 2012-2017 and Strategy Implementation Plan

c Draft Law “On amendments to the Budget Code” (on ESCO contracts)

d Implementation of long-term budget commitments under ESCO contracts

Note: POI 1.2 is zero because SIP has not been approved.

Implementation of Objective 1 proceeds according to the Year 3 Work Plan, except for the two

draft laws developed in Year 2 (and rewritten in Y3) that cannot be considered and approved

by the parliament because of the political situation. However, P3DP continues to discuss and

improve these draft laws at the level of Parliamentary Committees. Besides, P3DP is helping

to design two other draft laws on long-term budget commitments.

Objective 2. PPP Unit(s) Establishment.

Within this Objective, P3DP assists the development of a national PPP Unit within the

MoEDT, which could coordinate PPPs on the national level and promote PPP-friendly

policies.

In Y3Q3, the following activities were planned and performed within Objective 2:

Under Activity 2.1, P3DP participated in two meetings:

- on 2013-06-07, P3DP discussed with MRDCH coordination of work and new

membership approval;

47

- on 2013-06-20, P3DP participated in an open meeting of the Council on

Methodological Support of the Law-Drafting Process within the National Commission

on Municipal Services Regulation (see also Table 1 above). P3DP advised NCMSR on

the two draft laws on amendments to the Budget Code of Ukraine and to Energy

Efficiency Law.

Under Activity 2.2.1.1, P3DP planned to conduct consultations with stakeholders and develop

steps for SIP implementation. Within the framework of the “Speed uPPP Ukraine” conference

held in April 2013, P3DP discussed the need for PPP Development Concept and Strategy with

the Speed-uPPP participants.

On 2013-06-11, P3DP had a follow-up meeting with the MoEDT after submission of the PPP

Development Concept to the relevant ministries and units for their comments and approval.

Under Activity 2.2.1.2 P3DP planned to finalize draft an Action Plan guiding PPP Unit

development by the end of April 2013. However, rotation in the MOEDT PPP Unit staff (after

head of the Investment and PPP Division and senior PPP specialist quit) caused delay in work

planning and P3DP-MoEDT joint activities implementation. P3DP continued to fulfill its

obligations where routine interaction was not necessary (drafting of legislation, elaboration of

the leaflet and the web-site content). However, Action Plan has to be developed together with

MoEDT specialists because it integrates visions of the both sides. Hence, it was postponed

until the new staff members are appointed (on 2013-07-11).

A regional round table on PPP Unit functions planned for May 2013 under Activity 2.2.2.1 was

rescheduled to September-October 2013 because of MoEDT staff rotation, as explained under

the previous Activity.

Under the Activity 2.2.3.2, P3DP updates “PPP Unit’s operational policies and guidelines”

during May-July 2013. Currently, P3DP team is working on the substantial changes to the core

legislation governing major part of PPP project preparation process – Resolutions of the

Cabinet of Ministers of Ukraine No. 383 and 232.

On 2013-06-11, P3DP had a meeting with the MoEDT in order to reach an agreement upon

strategic vision of these changes, and upon results of this meeting, a Concept of Amendments

was completed at the end of June 2013.

The training workshop on PPP issues was scheduled for April 2013 (Activity 2.2.4.1).

However, instead of this workshop, P3DP conducted a very effective national level Workshop

on PPP practices within the Annual Municipal Forum in Yalta on 2013-06-12

(M34/18F/U42/R4/N6).

Under Activity 2.2.4.3, P3DP supported participation of executive power representatives in

two international conferences - “Speed uPPP Ukraine” (2013-04-11; M87/F70/U79/R31/N47)

and International Technical Assistance Donors Forum in Crimea (2013-05-30; M125/F53). In

both of these events P3DP acted as a co-organizer; and at the last event P3DP has highlighted

economic challenges that ARC municipalities are facing and advised on how PPP mechanisms

could help to cope with them.

High level investment forum (Activity 2.3.1.1) planned for March-May 2013 was postponed

because NPA showed no interest in it.

48

Activity 2.3.2.1 planned a capacity-building study tour for high-level decision makers

responsible for national PPP projects (so that they could learn international best practices and

experiences) in June-July 2013. However, due to institutional reasons (rotation of MoEDT

staff explained under Activity 2.2.1.2 and appointment of a new head of the Ministry of

Justice) the tour was rescheduled for October 2013.

Under Activity 2.3.2.2, P3DP planned to conduct three training workshops on PPP Feasibility

Study preparation – in December 2012, April and August 2013. However, because of the

formation of the new government in winter 2012-2013 and a recent rotation of MoEDT staff

(see explanations to the Activity 2.2.1.2), the workshops were rescheduled for Y3Q4.

NPA representatives did not receive a direct financial support for participation in an

international conference (Activity 2.3.2.3). However, they were invited to the P3DP-sponsored

conference “Speed uPPP Ukraine”.

Under Activity 2.4.1.1, P3DP held two working group meetings with the Crimean MoEDT:

- on 2013-05-31, P3DP team participated in a PPP Working Group Meeting of

Simferopol City Council Executive Committee. As a result of the meeting, several land

issues were resolved;

- on 2013-06-12 P3DP took part in PPP Working Group Meeting of Simferopol City

Council Executive Committee. At this meeting, the action plan on Gagarin Park PPP

project preparation was approved.

Together with the workshops for the central government (Activity 2.3.2.2), P3DP planned to

conduct workshops for ARC officials on how to effectively use the “Practical Guide for PPP

Appraisal Methodology” (Activity 2.4.2.1). P3DP conducted the first workshop in December

2012, but the remaining two workshops were rescheduled for the fall of 2013 as they will be

conducted by the same trainers as the workshops for the central government.

Under Activity 2.4.2.2, P3DP planned to sponsor participation of the Crimean authorities in

international conferences. In Y3Q3, ARC officials took part in “Speed uPPP Ukraine” and

International Technical Assistance Donors Forum in Crimea mentioned under Activity 2.2.4.3.

Activity 2.5 foresees year-round P3DP consultations with MRDCH. On 2013-06-07, P3DP

participated in the meeting of the Working Group on Coordination of the International

Technical Assistance Projects and Programs. Fifty people (M35/F15/U10/N40) took part in

this meeting.

Besides, in Y3Q3 P3DP elaborated

- the draft leaflet for the MOEDT PPP Unit (Activity 2.2.2.2)

- PPP web-page content covering all major PPP-related questions of potential visitors of

the MOEDT web-site (Activity 2.2.2.3)

Table 3 presents performance indicators for the Objective 2 for Y3Q3.

49

Table 3. Performance indicators for Objective 2.

# Definition Y3Q1

actual

Y3Q2

actual

Y3Q3

actual

Y3

target

% target

implemen

tation

POI

2.1

# of top level participants in familiarization

study tours re: PPP Unit(s) implementation

and operations

0 0 0 30 0

POI

2.2

# of drafted legislative acts/regulations

specifying PPP Unit(s) activities 1* 2

a 0 5 60

POI

2.3

# of analytical documents related to PPP

transaction design, implementation and

monitoring drafted together with the PPP

Unit(s)

5** 0 0 5 100

POI

2.4

# of desired Operational Polices drafted for

the PPP Unit(s) 1

† 0

b 1

c 3 67

POI

2.5

# project ideas submitted by public bodies

(line ministries/municipalities) to the

designated responsible GOU PPP entity

(MoEDT/NPA)

2‡ 0 0 8 25

DC

2.1

# of stakeholders (lawmakers, public

officials) attending consultations,

conferences annually re: regulatory

operations/implementation of the designated

responsible PPP GOU entity and PPP

Strategy Implementation Plan or

modification

12

(5M/1

2F,

12P/0

R)

437

(M281

/

F156)

N/A -

*PPP Strategy Implementation Plan

** see table 4 in the Y3Q1 report for details †PPP Practical Guide

‡ (1) Sea Port, submitted by Port Ochakiv LLC in October 2012; (2) airlines, submitted by the SPA on behalf of the

“Motor Sich” plant in November 2012. a CMU Resolution On Amending the CMU Resolution “On Approval of the List of Documents submitted with the

License Application for certain type of business activity” No. 756 dated 04.07.2001; Draft Law of Ukraine “On

Amending the Budget Code of Ukraine” (related to conditional debt and conditional liabilities”. Both submitted

on 2013-03-29. b On 2013-03-15 and 2013-03-29, meetings with MoEDT management were held at which a lot of amendments to

the legislation impacting PPP Unit operational policies were discussed. If amendments are adopted, operational

policies would be seriously modified. c Concept Paper of amendments to the legislation on PPP efficiency appraisal, bidding process and risk

assessment methodology

The majority of activities planned for Y3Q3 under this Objective are performed as planned.

Several activities were rescheduled for the Y3Q4 because of the staff rotation at the Ministry

of Economy and the Ministry of Justice. Target indicators are likely to be met.

Objective 3. Awareness and Capacity-Development.

P3DP conducts capacity development and awareness events to provide representatives of

selected pilot municipalities with knowledge and skills needed to identify, launch and manage

successful PPP projects, while also inviting representatives of private organizations and NGOs

to join.

50

A year-round Activity 3.1.1 foresees financial and organizational support to local authorities to

attend international conferences on PPP-related issues in order to build capacity of pilot PPP

municipalities for preparation and implementation of PPP projects. In Y3Q3, P3DP sponsored

the participation of 10 representatives of P3DP pilot cities in the Second International

Conference “Speed uPPP Ukraine” on 2013-04-11-2013-04-12.

Activity 3.1.2 – international study tour for municipal officials was planned for April-May

2013. It is rescheduled for the next year.

Under Activity 3.1.3, five specialized PPP trainings were planned throughout the Year 3

starting from December 2012. However, the trainings were rescheduled and all of them will

take place in Y3Q4. Meanwhile, P3DP prepared the Terms of Reference for a trainer to

conduct five advanced PPP trainings on peculiarities of PPPs in the energy efficiency and

renewable energy sectors within the framework of the USAID Global Climate Change and

Development Strategy. The trainings are planned in Dnipropetrovsk, Ivano-Frankivsk, Kyiv,

Zhytomyr, and Vinnytsia.

Activity 3.2.1 foresees conduct of public attitude surveys and focus groups on

“willingness/ability to pay” in the pilot cities. P3DP jointly with KEI has started doing the

survey for Simferopol and plans to perform up to four more surveys. However, the timing of

the surveys is not set as they are carried out on an “as needed” basis.

Within Activity 3.2.2, P3DP planned to provide a year-round support to municipalities in

organization of public events on PPP projects. In Y3Q3, P3DP helped to organize two public

events to support the following pilot projects:

1) Kyiv Summer Sports and Recreation

On 2013-05-26, P3DP launched a communication campaign on the Kyiv Summer Sport and

Recreation pilot PPP project. During the beach soccer competition on the Kyiv City Day,

P3DP disseminated project fliers to inform citizens about the project and the benefits of the

PPP involvement.

2) Simferopol Park project

On 2013-06-01, P3DP held an awareness activity on its Gagarin Park pilot PPP project within

the framework of the USAID Tent City organized during the Simferopol City Day celebration.

P3DP informed citizens about the PPP pilot project in Gagarin Park and raised awareness

about the benefits of involving the private sector into the reconstruction of the park via

distributing project fliers and installing an information board in the park.

A Market Sounding Event was planned for June 2013 under Activity 3.2.3. From the

consultations with business representatives about P3DP pilot projects, P3DP learned that for

some pilot projects Market Sounding individual consultations are suited better than events,

which bring together several potential competitors. During individual consultations, potential

bidders are more open and can share valuable information on the PPP projects development.

Hence, in Y3Q3 intensive market sounding consultations were conducted for the Kyiv

kindergarten PPP pilot project. Three companies were consulted in face-to-face interviews and

another five provided inputs via the phone. Similar but smaller scale consultations were

conducted for the Vinnytsia and Ivano-Frankivsk biogas, Malyn Municipal Heating, and Kyiv

Summer Sports and Recreation projects.

51

Activity 3.2.4. Local media study tour planned for May was rescheduled for Y3Q4.

Activity 3.2.5. (media monitoring). AUC continues media monitoring on PPP developments in P3DP

pilot cities.

EEF has stopped this activity as there was a problem with a subcontractor. P3DP decided to abandon

this activity and re-focus EEF on more proactive media relationships. Relevant contract modification

has been prepared.

Activity 3.2.6 (providing P3DP documents via websites of implementing partners). Starting from

Y3Q4, P3DP will open its own website and therefore will no longer need this service from the

Implementing Partners. However, both EEF and AUC can freely upload P3DP produced public

documents and materials at their own cost. Relevant contract modification has been prepared.

Activity 3.3.2, planned as the Carpathian Business Summit, was conducted on 2013-06-13 in Yalta in

the form of a Public-Private Partnership Seminar for representatives of Ukrainian municipalities – AUC

members. The event embraced the philosophy of the Carpathian Business Summit but was held within

the framework of the 9th Ukrainian Municipal Forum because P3DP and AUC agreed that this format

would better suit the objectives of both organizations.

Under Activity 3.3.3., P3DP co-organized the Second International Conference “Speed uPPP

Ukraine”, which took place on April 11-12, 2013 in Kyiv.

According to the Work Plan, the collection of the best PPP practices in Ukraine had to be published by

the end of January 2013 (Activity 3.4.1). In Y3Q3, the text of cases and the introductory article was

finalized, and the brochure design developed. The collection is ready to be published in Y3Q4.

In Y3Q3 the work on the “PPP Guidelines for Ukrainian Conditions with Examples from Ukraine” was

started (Activity 3.4.2). In coordination with Objective 2 manager, the draft of the PPP Municipal

Guidelines was prepared. However, the publication was postponed until at least two pilot PPP projects

are completed by the P3DP team in order to better document the process which in turn will be

beneficial for Ukrainian municipalities.

Performance indicators for Objective 3 are presented in the Table 5.

Table 5. Performance indicators for Objective 3

# Definition Y3Q1

actual

Y3Q2

actual

Y3Q3

actual

Y3

target

% target

impleme

ntation

POI

3.1

# of individual events

held to promote PPP

understanding

3 5 2 15 60

POI

3.2

# of persons attending

major events held to

promote PPP

understanding

102

M61/F41

U38/R41/

N23

87

M35/F52

U87/R0/

N0

209

M121/F88

U121/R35/

N53

350 114

POI

3.3

# of targeted government

trainees completing PPP

training sessions during

the reporting period

6

M6/F0

69

M27/F42

121

M71/F50 250 78

POI

3.4

# of targeted non-

government trainees

completing PPP training

64

M36/F28

R41/N23

0

88

M50/F38

R35/N53

150 101

52

sessions during the

reporting period

POI

3.5

# of individuals who

received USG-assisted

training, including

management skills and

fiscal management, to

strengthen local

government and/or

decentralization (F -

2.2.3-1)

102

M61/F41

69

M27/F42

121

M71/F50

350

M245/

F105

83

POI

3.6

# of sub-national

government entities

receiving USG assistance

to improve their

performance (F 2.2.3-5)

3 8 12 30 77

DC

3.1

Index of development in

capacity of the public

sector representatives to

prepare and implement

PPP projects. Survey

based data

- - - - -

DC

3.2

Index of raised awareness

about PPPs among key

stakeholders. Survey

based data

- - - - -

The implementation of activities generally proceeds as planned, although some activities were

rescheduled for later due to delays in implementation of other activities. Annual target

indicators are likely to be met.

Objective 4. Pilot Project Transactions

Within this Objective, P3DP helps local officials to implement PPP projects – from idea

selection and evaluation to tendering and contraction.

In the Year 3, P3DP team will concentrate on six to ten PPP Pilot projects, for which the most

progress has been achieved in Year 2, as well as new PPP Pilot Project, which possess

significant chances to be taken to competitive tender in the closest time. Currently 8 PPP Pilot

Project receive P3DP support at different stages from Concept to PPP tender, including one

new project – Kyiv Summer Sports and Recreation Facilities.

The list of projects actively pursued by P3DP (ordered according to the priority) is provided in

Table 6 below.

Table 6. Projects pursued by P3DP

Order in

Y3Q1

Order in

Y3Q2

Order in

Y3Q3 Project name

1 1 1 Zaporizhzhya Healthcare

2 2 2 Simferopol Urban Park Renewal

53

- - 3 Kyiv summer sports and recreation facilities

3 3 - Vinnytsia Solid Waste Management**

4 4 7 Ivano-Frankivsk Solid Waste Management (biogas)

7 5 5 Kyiv kindergartens

8 6 8 Dnipropetrovsk ESCO in street lighting

9 7 4 Malyn (Zhytomyr obl.) municipal heating w. alternative fuel

- 8 6 Vinnytsia landfill management and biogas treatment

5 9 - L’viv City Parking Management*

6 10 - Western Crimea Solid Waste Management* * these projects are being put on hold due to serious political, technical, land allocation or other transaction

constraints (relevant Memos have been made available to P3DP/FHI360 management).

** this project was replaced by the Vinnytsia biogas project

The following activities were conducted within pilot projects:

Zaporizhia Healthcare project

The feasibility study was completed according to the structure recommended by the

Government of Ukraine for PPP Projects. The feasibility study was extensively discussed

during the Working Group meeting at Zaporizhia City Council, proposals and comments were

incorporated into the Study, and it will be sent to Zaporizhia Executive Committee (headed by

Mayor) for formal approval. This study will form the basis of the PPP Effectiveness Report

that will be submitted by Zaporizhia Municipality to the MOEDT of Ukraine.

Simferopol Park Project

- The City Council officially decided to initiate drafting of documents for Park land use

for the PPP project (a necessary precondition for the PPP tender);

- P3DP participated in two working group meetings in Simferopol Administration,

which were aimed at further development of the key terms of the future PPP

agreement;

- A local consultant is currently drafting the feasibility study and PPP Appraisal Opinion

(Effectiveness Report), which will be completed in Y3Q4. KEI will contribute to the

study by providing a survey of the public attitude towards the project.

P3DP has supported the Kyiv Summer Sports and Recreation Facilities construction and

operation PPP Pilot Project. The project was promoted fast by the Kyiv State City

Administration up to the tendering stage. This PPP initiative was approved by USAID in late

May 2013, after the feasibility study was completed in April 2013 by a Kyiv Municipal

Enterprise responsible for managing certain Hydropark areas where the project is planned. PPP

tender took place in May 2013, and the private partner was chosen in June 2013. The parties

are expected to sign the PPP contract in August 2013. P3DP has contributed to the project at

different stages: the PPP procurement, drafting of the PPP agreement and supporting the public

outreach campaign.

Malyn (Zhytomyr oblast) municipal heating with biofuel project:

- 2013-04-25 - P3DP met with the Mayor, the secretary of the City Council and an

interested Ukrainian operator to present P3DP activity and agree on the Pilot Project;

- 2013-07-06 - P3DP presented legal and technical peculiarities of the project to the

representatives of the Executive Committee (City administration departments) and City

Council and held a discussion;

- The City created a formal Working Group and approved the Action Plan, where the

54

project is expected to be brought to PPP tender by the end of 2013;

- Feasibility Study was initiated and is expected to be completed in July 2013. The Study

will adhere to the structure recommended by MoEDT for PPP Projects.

Kyiv Kindergarten Project:

- P3DP visited two newly proposed sites and conducted technical check-up of the

facilities;

- P3DP updated the financial model for these two new sites and presented it to the

Education Department together with the proposed project structure for the

Municipality;

- P3DP representatives met with several private operators to identify market interest in

the project. In order to learn about the potential support of the project P3DP met with

representatives of the Association of Heads of Kyiv Kindergartens;

- P3DP approached a few construction companies to learn about their possible

participation in the project (to provide existing kindergarten facilities to the city).

Vinnytsia LFG (landfill gas) treatment and electricity production project:

- P3DP conducted an official meeting with the Mayor of Vinnytsia to obtain political

support in project preparation;

- The financial model is being drafted (based on figures provided by the City);

- Consultants were hired to prepare the feasibility study, which will be completed in

Y3Q4 and presented to the city;

Ivano-Frankivsk Solid Waste Management Project:

- One of the interested private operators visited Ivano-Frankivsk landfill, and conducted

gas tests that showed the availability of landfill gas for extraction. Then, the joint

meeting with the Mayor was held resulting in an official protocol about the start of the

project development and the mutual action plan (P3DP develops the project, private

operator conducts technical check-up, City ensures construction of electricity line to

the landfill);

- City applied to the Regional Energy Authority to get a permit called "Technical

Conditions" necessary for construction of electricity lines to the landfill.

Dnipropetrovsk ESCO project:

- P3DP held a working meeting with the Deputy Mayor to confirm political will and

proceed with the project development.

- P3DP obtained initial information regarding the project size and location (one of

rayons of the City) and started developing the financial model of the project, which

will be finalized in Y3Q4.

Table 7 below presents the project implementation stages and Objective 4 performance

indicators for Y3Q3.

55

Table 7. Progress with the projects pursued by P3DP

Sector

Healthca

re Sports & Recreation

District

heating Education Biogas treatment

Energy

efficiency

POI Project stage Zapori-

zhzhya

Simfe-

ropol

Park

Kyiv

sports&

recr.

Malyn

(Zhytom.

obl.)

Kyiv

kinder.

Vinny-

tsia

Ivano-

Frank.

Dniprope

trovsk

Y3Q1

act.

Y3Q2

act.

Y3Q3

act.

Y3

plan

%

plan

impl.

Sta

ge

1 4.1 PIB prepared Y2Q1 Y2Q1 Y3Q3 Y3Q1 Y2Q4 Y3Q2 Y2Q2 Y3Q1 2 1 1 3 133

4.2 PPP initiative

approved by

USAID

Y2Q1 Y1 Y3Q3 Y3Q1 Y3Q1

-

Y2Q1 Y3Q1 3 0 1 3 133

Sta

ge

2

4.3 Concept paper

prepared Y2Q4 Y2Q3 Y3Q3

Exp. in

Y3Q4 Y3Q3 Y3Q1 Y3Q3 2 0 3 3 167

4.4 Environmental

review

prepared

Y3Q1 Y2Q3 Exp. in

Y3Q4

Exp. in

Y3Q4

Exp. in

Y3Q4

Exp. in

Y3Q4

Exp. in

Y3Q4

Exp. in

Y4Q1 2 0 0 4 50

4.5 Feasibility

report (FR)

initiated

Y2Q4 Y2Q4 Y3Q2 Y3Q3 Exp. in

Y3Q4

Exp. in

Y3Q4

Exp. in

Y3Q4 0 0 1 3 33

4.6 FR completed Y2Q3

Exp. in

Y3Q4 Y3Q3 Exp. in

Y3Q4

Exp. in

Y4Q1

Exp. in

Y3Q4 0 0 1 3 33

Sta

ge

3

4.7 Effectiveness

report

submitted

0 0 0 2 0

4.8 Tender package

is being drafted

Exp. in

Y3Q4

Exp. in

Y3Q4 Y3Q3

Exp. in

Y3Q4

Exp. in

Y4Q1 0 0 1 2 50

4.9 Tender issued Y3Q3 0 0 1 2 50

4.1

0

PPP contract

executed

Exp. in

Y3Q4 0 0 0 1 0

Sta

ge

4

4.1

1

Project under

P3DP

monitoring

0 0 0 0 0

DC

4.1

# of jobs

created - - N/A -

DC

4.2

Investment, $

equivalent - - N/A -

56

Objective 5: Global Climate Change (GCC) and Clean Energy

Objective 5 is introduced to mitigate the Global Climate Change and support the use of Clean Energy

through crosscutting measures that touch upon all P3DP activities. P3DP integrates climate change

considerations into all its programming activities at the national and local levels, addressing climate

change prevention and mitigating its impact on the broader development of Ukraine. This Objective

foresees only two activities.

Activity 5.1. Include Low Emissions Development and Clean Energy Support into the Strategy

for PPP Development in Ukraine

Under Objective 1, P3DP supported the Ministry of Economic Development and Trade in drafting of

the Concept of PPP development in Ukraine for 2013–2018 to be adopted by the Cabinet of Ministers

of Ukraine. This document stipulates that resource and energy efficiency in the communal services

delivery is one of the priority areas for the PPP development and use in Ukraine. Following the

Concept adoption, the Action Plan with more detailed implementation models will be developed.

P3DP is making sure that it contains Low Emissions Development principles and Clean Energy

Support as a cross cutting theme.

Draft Law of Ukraine “On changes to the Budget Code”

Meanwhile, P3DP provided support to the National Commission of Communal Services Market

Regulation of Ukraine in developing the draft Law of Ukraine “On changes to the Budget Code”,

which enables energy service agreements. The PPP model for energy services is crucial for attracting

private sector financing and technical expertise into the infrastructure modernization with the energy

efficient solutions. This in turn will lead to the reduction of heat and electricity consumption and

eventually to greenhouse gases emission reductions. P3DP made substantial contribution to this draft

law development, making sure that after its adoption there would be no budget-related constraints for

the PPP project implementation in the energy efficiency sector.

5.2. Assist PPP transactions that support efforts to reduce greenhouse gas emissions and improve

the energy efficiency

In Y3Q3, P3DP provided technical assistance to the Dnipropetrovsk municipality to support its efforts

in creating and implementing a PPP pilot project aiming at energy efficiency increase using private

sector expertise and funding (See Objective 4).

P3DP prepared the Terms of Reference for a trainer to conduct five specialized trainings on

peculiarities of PPPs in the energy efficiency and renewable energy sectors within the framework of

the USAID's Global Climate Change and Development Strategy. The trainings are expected to be

conducted by the end of Y3Q4 in Dnipropetrovsk, Ivano-Frankivsk, Kyiv, Zhytomyr and Vinnytsia

(See also Objective 3).

This quarter P3DP finished calculating the anticipated greenhouse gases emission reductions for its 4

pilot projects in Vinnytsia, Ivano-Frankivsk, Dnipropetrovsk and Malyn.

The performance indicators for this Objective are shown in the Table 8.

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Table 8. Performance indicators for Objective 5

# Definition Y3Q2

actual

Y3Q3

actual

Y3

target

%

target

impl.

POI

5.1

Number of laws, policies, strategies, plans,

agreements, or regulations addressing climate

change officially proposed, adopted, implemented

as a result of USG assistance (4.8.2-28a: Clean

Energy).

0* 1a 1 0

POI

5.2

Number of stakeholders with increased capacity

to adapt to the impacts of climate variability and

change as a result of USG assistance (4.8.2-26b:

Using climate information in their decision

making)

0** 0 10 0

POI

5.3

Number of people receiving training in GCC as a

result of USG assistance (4.8.2-6 a: Clean

Energy)

0*** 0 100 0

POI

5.4

Number of institutions with improved capacity to

address climate change issues as a result of USG

assistance (4.8.2-14a: Clean Energy)

0*** 0 20 0

POI

5.5

Number of days of USG funded technical

assistance in GCC provided to counterparts or

stakeholders (4.8.2-27)

3 37 40 7.5

DC

5.1

Anticipated quantity of greenhouse gas

emissions, measured in metric tons of CO2

equivalent, reduced as a result of USG

government assistance (4.8-7).

958 159 t CO2e -

DC

5.2

Anticipated reduction of consumption of

electricity, generated from non-renewable energy

sources (e.g. oil, coal), due to energy efficiency

measures and substitution for renewable sources

of energy, as a result of USG government

assistance.

231 811 622 KWh -

* P3DP is working on the amendments to the Law regulating Energy Service contracts, enabling

the use of PPPs. The result is expected in Y3Q3

**P3DP provides transaction advisory services to assist pilot project municipalities in their pursuit

of implementing PPP projects, which will result in reducing landfill generated methane emissions

into the atmosphere; increasing energy efficiency of street lighting and changing district heating

system from no-renewable to renewable fuel

*** For Y3Q3-Q4 period, five specialized trainings are planned on the peculiarities of PPPs in the

energy efficiency and renewable energy sectors within the framework of the USAID's Global

Climate Change and Development Strategy. a the Draft Law “On amendments to the Budget Code” (on ESCO contracts)

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Concluding remarks

In the third quarter of Year 3 almost all activities foreseen by the Work Plan were implemented on

time, except for the activities stipulating the adoption of the draft laws by the parliament and some

awareness activities rescheduled for a later period. P3DP did not cease work on the drafts actively

discussing them with parliamentary committees.

Overall, the greatest risk for implementation of P3DP activities in the Year 3 lies in the political and

institutional sphere. This could be clearly seen in the third quarter, when staff rotation at the MoEDT

caused delays in implementation of some Activities under Objectives 2 and 3. Economic and political

problems are mounting both at the central and local levels. Continuing world recession keeps

macroeconomic forecast for Ukraine rather gloom; interest rates for sovereign bonds of emerging

markets (and Ukraine) are rising; and in the absence of economic reforms, the implementation of state

budget is at risk. Hence, current government is quickly losing popular support, and its local

representatives are lacking both support and funds for pursuit of long-term projects. This situation may

hamper successful implementation of PPP projects under P3DP guidance.

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Annex 3

P3DP Project Lifeline