EBRD helps Ecoprod generate power from biogas

By Anton Usov

Ukraine’s Donbass mining region, which started developing in the late 19th century and became the industrial heart of the Soviet Union, is famous for its ruthless managers running gigantic plants and more recently the entire country.

So it is something of a shock to discover someone such as Ivan Melnik there, a manager not involved in the mining or steel-rolling business and one who presents a human face in this otherwise merciless part of the world.

Mr Melnik, the owner of CJSC Ecoprod, has never been too keen on heavy industry or mining and has instead been trying to develop agribusiness operations. His successful farming projects were eventually spotted by the private equity fund Western NIS Enterprise Fund (WNISEF) and in 2006 they set up a business, which now employs around 800 staff.

Ecoprod is a well-established operation and the largest agribusiness player in Donbass. It has around 5,000 heads of cattle and about 25,000 hectares of agricultural land.

Its reputation and reliability have earned it an impressive customer base, which includes the likes of Cargill, Danone and Wimm-Bill-Dann.

Unlike many “red directors” so typical of the Donbass region, Mr Melnik recently became very concerned about the efficiency of his agribusiness operations and their constantly growing electricity bills.

Ukraine is, of course, famous for the profligacy of its electricity and gas consumption and poor energy efficiency. The country still relies heavily on imported fuel and its own energy-generating capacities are ageing and highly polluting.

After giving the problem a lot of thought, Mr Melnik approached the EBRD with a project to help Ecoprod utilise its cattle manure, silage and other agricultural waste. The project preparation was not an easy ride in any respect: three years of diligent efforts by EBRD consultants transformed the initial project concept completely.

Based on their advice, Ecoprod agreed to implement IFRS accounting methods and accepted a very demanding Environmental and Social Action Plan (ESAP).

Now the company is planning to develop, construct and operate a 1.5MW biogas plant, which will produce 5.8 million cubic metres of biogas a year to be used for the generation of 9,900 MW of electricity.

It will be one of the first biogas plants in the country to sell generated electricity to the grid.

The financing package to Melnik’s company arranged by the Bank includes a seven-year EBRD loan of €3.1 million and a 15-year loan of €1.1 million from the Clean Technology Fund (CTF).

The ESAP developed for the project was warmly welcomed by the business’s environmentally-conscious owner. It should bring significant environmental benefits through utilising manure and waste biomass and serve as an important benchmark for the entire Donbass region.

Another important feature of the project is closely linked with the EBRD’s sector policy dialogue in Ukraine.

The project case was widely used by the Bank’s consultants for Ukrainian policy-makers to clarify and define the feed-in tariff for biogas, which was originally lacking in the country. Our efforts finally paid off when necessary amendments to the law were approved in November 2012.