Interview with Chief Investment Advisor of Nefco Yuliia Shevchuk to the Interfax-Ukraine Agency

Text: Oksana Gryshyna

 

Tell us about the Programmes that Nefco are currently launching in Ukraine.

Nefco implements environmental projects in Eastern Europe, including Ukraine. A large number of municipal projects have been implemented regarding energy efficiency, district heating and wastewater modernisation.

Nefco has a Framework Agreement with the Government of Ukraine ratified by the Verkhovna Rada of Ukraine, which gives Nefco the possibility to operate as an International Financial Institution (IFI)in Ukraine.

We have been cooperating with over 100 Ukrainian municipalities for more than 10 years.

Nefco launched the Green Recovery Programme for Ukraine in July 2022, with the aim to provide financial and technical support to municipal projects. The Programme will support the green transition and the development of a green economy while helping to rebuild Ukraine. The purpose is to enhance and finance projects focused on rebuilding infrastructure at the municipal level to ensure that Ukraine is built back greener and better. As during the pre-war time, Nefco’s focus will be on implementation of small and medium sized projects in direct cooperation with Ukrainian municipalities, combined with technical assistance paving the way for medium- and long-term sustainable planning and operations.

The programme is a multi-contributor initiative, with the EU and the Nordic Governments as the initial contributors.

We manage three new actions funded by the European Union (EU), which includes around 30 communities in Ukraine. These actions are aimed at rebuilding critical infrastructure, urgent housing needs and building new housing for internally displaced persons (IDPs). Nefco administers and implements these actions.

One of the actions is about repairing and reconstructing damaged critical infrastructure in the Kyiv region. The included projects will be related to rehabilitation of water supply, wastewater and district heating. This action includes 12 cities and urban villages in the Kyiv region; the Borodyanka, Borschahivka, Dymer, Dmytrivka, Hostomel, Irpin, Ivankiv, Kalynivka, Nemishaieve, Piskivka, Slavutych and Velyka Dymerka territorial communities. The total funding is EUR50 million allocated by the  EU through Nefco.

Another new action, with funding allocated from the EU is the Housing for internally displaced persons (IDPs) and rehabilitation of liberated cities in Ukraine. The action includes so far 6 cities: Chernivtsi, Dubno, Kovel, Lviv, Zhytomyr and Makariv. 

A third action with EU funding applies to the repair of Housing for IDPs. Under this Programme we work in 10 cities located in the western Ukraine.

Two of the actions are at the procurement stage and the Housing for IDPs has started the construction phase.

How were the projects that have already received the support chosen? Did communities actively apply?  

The projects were chosen based on proposals by Ministry for Communities and Territories Development of Ukraine and final approvals were made by the EU.

There were much more applications than what was possible to include under these new actions. Together with the European Union, Nefco began the pre-preparations of the programmes in spring 2022. Cities are very active, we currently get three to five new applications every week from the communities.

The name of one of the Programme is Housing for IDPs and rehabilitation of liberated cities, but according to the notice, the cities of the West of Ukraine were chosen.

Most of the construction projects of the new housing for IDPs are located in Western Ukraine, as there has been a relocation of people from Eastern to Western parts of Ukraine since the war started. In addition, rehabilitation of public buildings will be implemented in two liberated cities.

What type will the new Housing for IDPs be?

The technical assistance of the European Union involves professional international and Ukrainian consulting companies that will assist cities in the development of housing concepts for IDPs, taking into account modern energy efficient and environmentally friendly technologies, as well as requirements for inclusivity, as housing should be built taking into account the needs of the wounded and disabled people.

What are your requirements for these housing projects?

Our requirements relate to implementation of energy efficiency measures, and usage of more environmentally friendly materials according to European building standards. Cities should follow the procedure provided by the Government of Ukraine on the distribution of social housing for Ukrainian citizens. Priority will be given to the most affected groups.  The action has a requirement that housing which have been built with funding provided from the action is not privatised, which  means it is the property of the municipality.

A Project Implementation Unit has been formed in each of the included cities, including all necessary departments to ensure as quick project implementation as possible.

When talking about Project Implementation Unit of the projects, do you focus on further expansion of cooperation?

Yes, we hope to continue working in the chosen cities, because they are known partners for us, they already know our rules, have a team for implementation, so it is more efficient to work with these cities. For example, we have four projects in Chernivtsi, and three of them are now being implemented simultaneously. But we also have new cities in the portfolios of these new actions. 

Have you already analysed the current state of critical infrastructure? What part of the need for rehabilitation does the amount of grant support provided by the European Union through Nefco cover in the chosen communities?

There is no consolidated analysis as projects are under development. Сommunities that were seriously destroyed have been chosen by the EU, together with the Ministry for Communities and Territories Development of Ukraine and Nefco.  For example, in a small town near Kyiv, a project including a substantial number of measures for the rehabilitation of both district heating, water supply and wastewater facilities is planned.

But are small towns able to manage such big projects?

Small communities have limited resources for the implementation of projects funded by international organisations. Therefore, the European Union provides financial support for technical assistance to support the project implementation. Technical assistance includes support for project development, preparation of tender documentation under Nefco’s requirements as well as monitoring and technical supervision of project implementation.

Nefco has extensive experience of implementation of similar projects and we have created a monitoring system that provides several stages of project quality control.

What are the difficulties already revealed?

During the implementation of projects, we see a possibility of shortage of local materials, because many production facilities of building materials have been destroyed as a result of Russia's aggression. In addition, the male part of the population can be mobilised, which applies to both the staff of the contractors and municipalities, so the availability of human resources may be a challenge for our new actions.

We also wish to highlight the difficult financial condition of the included municipalities, as taxes have decreased as a result of decreased activity, and cities have to contribute to the approved projects. For example, there is a condition that the Housing for IDP projects will ensure the connection of the new housing to all necessary infrastructure (water, heat, electricity). In addition, the community is responsible for the bomb shelter equipment, because without bomb shelter the new housing cannot be put into operation.

What are the contributions of municipalities to the rehabilitation of critical infrastructure?

These projects should also have some local funding from the included cities, but we understand that it is very difficult to expect powerful financial contributions from destroyed cities.

Among the risks of the projects you have mentioned the problems with local equipment or building materials. How will it be resolved?

We are planning public tenders, in which any company, not under sanctions, can participate in. Taking into account our previous experience, if we talk about construction, among the contractors who won the tenders, there were mainly Ukrainian companies, because local permits and licenses were required, but at the same time the materials provided were from different countries.

Now, most likely, we will see even more foreign materials, while Ukraine's own production of for example windows and other materials is destroyed. But we will see the new reality after the tendering has been completed.

When will the first results be?

Some of the tenders are already ongoing and some will be announced in the near future. We expect to have first tenders finalised by summer. We are very hopeful that most of the construction works for all three actions will begin during this year.

And what are the chances that works can be completed by the end of the year?

It is challenging to start and finish the construction work during the same season. We have to look at what type of technologies to be chosen for all projects and usually construction or repair takes more than a year. For example, there is a day-care centre among the chosen projects and it is completely destroyed. It must be demolished and a new one must be built, which will take more than a year.

What are the requirements in terms of safety for the cities in which you start the projects? In which regions do you work, which are at the stage of waiting?

Now the issue of safety is our first priority when making the decision whether we can work in a certain region or city and under which circumstances. For example, in the cities in the Kyiv region, where we will repair critical infrastructure, there is a requirement for the demining of objects. We will undergo such a procedure in our implemented projects for the first time in our history. We hope that everyone, including state authorities, will work smoothly to fulfil this condition.

In general, if you look at geography, most of the included projects are in the western part of Ukraine now. This is related first of all to safety, but also due to the fact that IDPs have moved from east to west, and due to this housing is now needed in the western regions.

But also projects in Central Ukraine are included, for example where Nefco funds the supply of mobile boilers for a city’s heating system due to the destruction of heating infrastructure by Russia. The donor of this project is the Danish Government, which provides significant funding through Nefco.

Of course, we do not work in the eastern part of the country, although we had a very large initiative being implemented in Eastern Ukraine before the war, supported by the Government of Norway and the other Nordic Countries. A number of projects were implemented with Nefco’s participation in Bakhmut and Vuhledar and in other cities that are damaged now. We constantly communicate with the municipal authorities, for example with Melitopol, which hopes that when these territories will be liberated, we will be able to continue our cooperation.

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