Interview of Yuliia Shevchuk, Chief Investment Advisor at Nefco, with the Interfax-Ukraine news agency

Text – Oksana Gryshyna

 

Which projects were completed when the war was already going on? Did it cause any difficulties? How were the projects adjusted when there was a lack of funding?

In November, we completed the main part of a large-scale project in Chernivtsi, within which 16 schools, 15 daycare centres, and two healthcare facilities underwent major renovation. The modernisation of one more public building will be completed next year.

Currently, we are actively working on the implementation of projects related to the repair of housing for internally displaced persons (IDPs), for example, in the cities of Kivertsi and Khmelnytskyi.

In the case of housing repair projects, there are problems of extended design timelines, the works becoming more complex than planned, and increased costs due to substantial modifications to the buildings. For example, a medical institution, which had not been used by the city before the war, was repurposed as housing for IDPs. Furthermore, the project implementation period may be longer due to the poor condition of dormitories and other buildings that are Soviet-type and old, with shared kitchens and showers. Under our projects, the facilities are rebuilt into modern housing, in most cases into separate apartments.

The completion of some projects has been postponed until the following year due to a shortage of human resources as mobilisation efforts are underway. Some cities are overwhelmed with reconstruction projects and other war-related issues, further contributing to the delay.

In such situations, having experienced consultants and flexible donor rules is crucial for making decisions regarding project changes. Here we are in total agreement with the donor, the European Union, which is focused on results and swift project implementation.

Nefco possesses extensive experience in building projects, so we expect a significant level of unforeseen expenses, up to 15% of the total project cost. Usually, such an amount is sufficient to cover any potential funding gaps.

Among the buildings that were modernised with Nefco’s support in Chernivtsi, there are, for example, architectural monuments. What difficulties arose when working with such facilities? What results in reducing heat consumption were achieved? How was the task of ensuring inclusivity accomplished?

Implementing energy-saving measures in historical buildings is a difficult task at every stage. Obtaining permission for the reconstruction of culturally significant facilities is complex, involving multiple ministries. This challenge must be considered during project planning as it can be time-consuming. Fortunately, we initiated consultations with the relevant ministry, engaging specialists from the city, the designer, the contractor, and Nefco. This collaborative effort resolved some fundamental issues, ensuring the project’s successful implementation.

Due to a significant number of restrictions on possible construction works in these facilities, it is quite difficult to find ways to implement effective energy-saving solutions. But I can confidently say that we used the planned funds as efficiently as possible, having managed to preserve and improve the architectural appearance of the buildings. At the same time, we achieved an average 30% reduction in energy consumption targets. Given our experience working on similar buildings, this is quite a significant result.

In buildings with complex architecture, the list of typically implemented measures includes installing new windows and doors, and restoring building envelopes and facades while preserving  architectural elements. Additionally, reconstructing heating systems involves replacing devices and heating pipes along with installing a heat recovery ventilation system and rebuilding lighting systems. Modernising internal engineering networks, insulating attics, and installing ramps for people with limited mobility can also be carried out.

As for the results, in any case, the city now has renovated and energy-efficient educational facilities, and children, staff, and visitors can enjoy comfortable indoor conditions. However, it is difficult to speak of specific figures at the moment because we still only have estimated savings, as the reconstruction of most buildings was completed during lockdown, and subsequently the war began. These circumstances make it challenging to objectively assess the actual energy consumption, given the significant change in the operation of educational facilities.

We plan to obtain the actual energy consumption figures for these buildings in the spring of 2024, after the end of the heating season. This information will then be compared with the planned figures, taking into account the various factors that affect the buildings’ operational modes. One of the distinguishing features of Nefco projects is that we monitor results for at least five years after works have been completed, allowing us to leverage this experience to improve future projects.

Please tell us about the project status of the two new projects in Ukraine: housing for IDPs and the reconstruction of infrastructure.

Regarding the “Housing for IDPs” action, which involves the construction of new housing in nine communities and the repair of municipal buildings in two communities, we can report that preparatory construction works have already begun in two communities.

In all other cities, design work continues. We have concluded the contractors’ pre-qualification process,  marking the first stage of procurement. To optimise time, we organised the two-stage procurement approach, conducting the first stage concurrently with the development of the project estimates. Currently, the second stage of works’ procurement is in progress across almost all cities.

Regarding the critical infrastructure reconstruction action, we can report that almost all procurements have been completed. The works have begun in Nemishaieve, Irpin, Borodianka, and Dymer communities in the Kyiv region. These works involve the laying of water and heat supply pipelines, installing a dispatching system and heat pump, and repairing the boiler house. New works start every week.

What are the requirements for the projects (in terms of green construction and inclusivity)?

Nefco has introduced the Green Recovery Programme for Ukraine, so all our projects must comply with modern ESG (environmental, social, and governance) principles.

Here are some examples of how our projects are implemented in accordance with ESG principles.

Regarding the environmental principle, each project involves green technologies, such as solar panels, heat pumps, biomass, etc. According to the grant agreement, the use of hazardous materials such as asbestos or others is banned.

Speaking of social impact, communities commit to adhering to a transparent procedure for the distribution of social housing in accordance with Ukrainian legislation as part of their obligation to the donor.

Aligned with the best corporate governance principles, all Nefco projects incorporate transparency and anti-corruption aspects. For example, we have implemented comprehensive procedures for compliance or background checks for communities, consultants, and contractors, which are applied before each important project stage.

During the annual meetings of the World Bank Group and the International Monetary Fund, the Council of Europe Development Bank (CEB), the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), and the World Bank agreed to harmonise procurement procedures for investments in the public/regional sector in Ukraine. Was it necessary? How were your procedures (project selection and procurement) adapted according to this memorandum?

As far as we have checked, this document has not been signed yet.

Is there currently a shortage of companies/human resources/construction materials during project implementation? Are foreign companies interested in reconstruction projects in Ukraine?

The large-scale recovery of Ukraine has not yet begun due to ongoing hostilities. At present, more focused projects are underway to address the housing needs of internally displaced persons (IDPs) and to reconstruct destroyed critical infrastructure. Since the war began, about 300 companies have expressed interest in participating in our tenders. Most of them were Ukrainian companies, but there were also foreign ones. In my opinion, foreign companies have a big desire to participate in the reconstruction of Ukraine and in the insurance and support programmes of their countries of origin, especially the EU countries.

For example, I talked to Finnish companies that specialise in buildings such as hospitals, schools, and other infrastructure. What is noteworthy is that one of the largest delegations of 80 people at ReBuild Ukraine, the conference on the reconstruction of Ukraine, which took place in Warsaw this November, represented Finnish companies. They came to look for partners and projects since there is no longer a great need for such projects in their country. However, unfortunately, they often face problems with finding partners and the bureaucratic system in Ukraine.

Are there plans to expand the programmes?

We are working on several projects within the Green Recovery Programme for Ukraine and have agreements to provide funding from Nordic countries such as Finland, Denmark, Sweden, and Norway in addition to the EU.

The implementation of the projects will involve the repair, reconstruction, rebuilding, and construction from scratch of public buildings—schools, daycare centres, and healthcare facilities—with the introduction of up-to-date energy efficiency solutions (for example, the concept of construction with almost zero energy consumption). In addition, as part of the projects, we will carry out the modernisation of district heating facilities, the transition to renewable energy (biomass, solar, biogas, etc.), and address the recovery of water supply and wastewater treatment infrastructure.

Nefco did not stop its support and activities in Ukraine with the beginning of the full-scale invasion, and we will continue to further work to promote the use of more efficient, energy-saving, and green technologies.

With the participation of CFI, Agence française de développement médias, as part of the Hub Bucharest / Residency Yak Vdoma Project