K E Y R E S U LT S O V E R T W O Y E A R S

Agreement with ENTSO-E

July 7, 2017

On June 28, 2017 in Brussels

Agreement on the Conditions for Future Interconnection of Power System of Ukraine with Power System of Continental Europe was signed

Agreement took effect

The agreement contains:1. Catalogue of Measures;2. List of necessary additional researches;3. Road Map

To date, the Agreement has been approved by 28 European system operators of the ENTSO-E “Continental Europe” Regional Group

The deadline for the implementation of all activities of the Catalogue of Measures is 5 years. Another year is needed to work in an isolated mode (physically disconnected from the power systems of the Russian Federation, Belarus and ENTSO-E).

Under the agreement, Ukrenergo undertakes to implement the technical provisions contained in the catalogue of measures, and to check the island mode of operation of the integrated power system.

The implementation of all activities and operation in an island mode should be a condition for a positive decision of ENTSO-E to switch to parallel work with Ukraine and Moldova in 2023.

28європейських

ОСП

Sustainable Development Strategy

«Ukraine 2020»(approved by the

Presidential Decree on January 12, 2015)

Paragraph 3. Road map and priorities of the Strategy

implementation

Association Agreement between the European Union and its Member

States, on the one hand, and Ukraine, on the other

Section V. Economic and sectoral cooperation

Memorandum of Understanding on a

Strategic Energy Partnership

between Ukraine and the EU (signed in

Brussels on 24.11.2016)

Paragraph 7.Implementation and

reporting

Energy Strategy of Ukraine until 2035

(approved by Government Decree

No.605 on August 18, 2017)

Part 2. Goals and priorities of the Energy Strategy

Part 3. Stages and main measures of the

implementation of the Strategy

Strategy «Ukraine 2020»

Association Agreement

Memorandum Energy

Strategy

Integration into ENTSO-E in Ukraine’s strategic documents

Government’s Action Plan

Action Plan for synchronisation of the

Integrated power system of Ukraine with the

association of power systems of the EU

Member States (approved by Cabinet Decree No. 1097-р of

27.12.2018)

Decree of the Cabinet №1097-r

“On approving the plan of action on synchronisation of the integrated power system of Ukraine with the association of the power systems of of the EU member states”

Approved on 27 December 2018

KEY MEASURES OF THE PLAN ENVISAGE

Certification of the transmission system operator MECI/ NEURC/ Ukrenergo 2018

Setting up a joint control unit for Ukraine’s IPS and the PS of Moldova MECI/ Ukrenergo2019

Research of the established operating modes, static and dynamic stability of the IPS of Ukraine, including frequency testing and control systems of active frequency and excitation regulation

MECI/NEURC/ Ukrenergo/ SE NNEGC Energoatom /

PJSC Ukrhydroenergo/generating companies of thermal power plants

2019-2020

Organization of communication channels for technological management of IPS Ukraine

MECI/NEURC/ Ukrenergo2020

Upgrade of software and hardware for dispatch control and data collection

MECI/NEURC/ Ukrenergo2021

Construction of overhead lines and renewal of operation of interstate overhead lines

MECI/NEURC/ Ukrenergo2021-2022

Switch to working in island mode with power systems of countries outside of ENTSO-E

MECI/ Ukrenergo2022

Attracting international technical assistanceМЗС / MECI/Ukrenergo/ Ministry of Economic Development and

Trade

ongoing

C o n t a i n s o p e r a t i o n a l a n d t e c h n i c a l m e a s u r e s ( 1 9 m e a s u r e s )

- done - in progress - planned - not done

For ENTSO-EFor the IPS of Ukraine

Reduction of the active members' primary reserve shares due to the synergy (by± 140-160 MW, ratably)

Easier to control the energy system in peak loads (due to non-coincidence of the Ukrainian and European peak hours)

Improved grid stability (by adding inertia to the ENTSO-E grid)

Strengthened interconnections between the Northern and Southern parts of Continental Europe’s grid

Significant increase of stability and flexibility of Ukraine’s power system

Possibility to receive emergency assistance from the power systems of ENTSO-E member countries

Increase in electricity trade with Europe - from today's 4-5 billion kW*h to 18-20 billion kW*h

Reduced dependence on Russia

Benefits of integration of the IPS of Ukraine into ENTSO-E

• Generation readiness to ensure reserves and automatic voltage control

• Development of communication channels for dispatching operations

• Additional studies on the static and dynamic stability Implementation of the Operation Handbook ENTSO-E

Grid development 130 m EUR

130 m EUR

92 m EUR

5 m EUR

138m EUR

IFI funding

Cost of synchronization

TOTALcost

357m EUR

p r e l i m i n a r y e s t i m a t e s

Main components of the synchronisation process

Available reserves of primary,

secondary and tertiary controls of

frequency and active power, sufficient

for the operation of the IPS of Ukraine

in synchronous mode with the

European power system, and in the

island mode

Ensuring that Ukraine's power system is

operated in accordance with the

standards followed by transmission

system operators within ENTSO-E

(Operation Handbook, Synchronous

Area Framework Agreement)

Harmonisation of the Ukrainian legislation in electricity to comply with

the European law; compliance with market standards and certification of

the national transmission system operator

K e y r e q u i r e m e n t s f o r f u t u r e p a r a l l e l w o r k w i t h t h e E N T S O - E C o n t i n e n t a l E u r o p e P o w e r S y s t e m

|1| |2| |3|

Frequency control reserves|1|

PRIMARYMW As part of ENTSO-E In island mode Currently possiblePotential for export of

reserves

ПЕРВИННИЙ ±160* ±1000** ±320 ±160

SECONDARY+1000 -420

+1000 -420

+1000***-420

-

TERTIARY+1000 -420

+1000 -420

+2000 -420

+1000

* volume reviewed annually by the Forum of European TSOs and is determined on the basis of equity** based on the results of modeling, can be reduced (possibly up to 750-900 MW)*** including connected to SCADA / AGC +600 MW and -350 MW (HPP of the Dnipro cascade)

• To calculate the dynamic and static stability of the power system, it is necessary to create a mathematical model• Mathematical model of the power system is created based on the results of testing the power units• Calculations should be made by the Consortium of ENTSO-E TSOs based on the Service Contract• The ENTSO-E PG Ukraine/Moldova informed Ukrenergo that the Consortium Agreement was signed and entered into force on

April 30, 2019.• Together with the ENTSO-E PG Ukraine/Moldova, the Service Contract has been drafted, incorporating the requirements of

the World Bank• Stakeholders' amendments and comments made at the meetings of the ENTSO-E PG Ukraine/Moldova, have been introduced• Final version of the Service Contract with annexes from the ENTSO-E Consortium was sent to the World Bank for approval

P r o v i d i n g a d d i t i o n a l s t u d i e s :

As part of building a mathematical model of the power system for further calculation of its dynamic stability, power units at TPPs, CHPs and HPPs were tested for automatic control of frequency and excitation.

• PG Ukraine/Moldova agreed on the list of power units to be tested• Framework test programmes developed and agreed upon with Ukraine/Moldova PG• Negotiations with USAID held, funding for tests secured, and test consultant selected -

USEA (United States Energy Association)• All power plants on the list have been visited in order to obtain as much data as possible

to develop procedures and test programmes, the need was identified to involve thedevelopers of equipment and use additional testing equipment

• General and block testing procedures have been developed and agreed upon with PGUkraine/Moldova;

• Test schedule of power units has been developed and agreed upon with all testparticipants

• Tests were conducted on 11 power units of 8 power plants, including 9 tests of automaticexcitation control and 7 tests of frequency and active power

Testing started on January 22, 2019, and was completed on April 26, 2019

NEXT STEPS:

• Systematisation of test results and, after the conclusion of the Service Contract with the Consortium of ENTSO-E TSOs, transfer of data to the Consortium to be used in the calculations

• Together with the PG Ukraine/Moldova, conducting analysis of the possibility of using start-up and pre-commissioning tests of power generation units' excitation systems of NPPs. Testing excitation systems of power units at NPPs, if necessary

Frequency control reserves |1| testing of power units

11power units

16tests

Ensuring that Ukraine's IPS is operated in accordance with the standards followed by

transmission system operators in ENTSO-E |2|

Agreements on emergency supply with neighboring transmission

system operators (Poland, Slovakia) drafted

NEXT STEPS: Agreeing upon and signing of

emergency supply agreements

Involving Ukrenergo in planning and data exchange processes in XML format (year, month, week,

day)

NEXT STEPS: Adapting the system of

operational planning according to ENTSO-E requirements (year,

month, week (daily) in XML format

Compliance with ENTSO-E requirements to carry out 24-hour forecasting

calculations in automated mode (for the power system of "Burshtyn TPP Island" carried out using the updated software

DAKAR)

NEXT STEPS: Compliance with ENTSO-E requirements

to carry out in automated mode the calculations of forecasting regimes for the

IPS of Ukraine in Power Factory format

Regular training of dispatchers is arranged. Amendments to the

programmes of technical training for dispatchers and training programmes for newly-hired managers. Joint training with

the Moldovan TSO

NEXT STEPS: Setting up a training centre for

dispatchers

during 2018

Drafting, approval and signing of the operation agreement establishing a

control unit composed of power systems of Ukraine and the Republic of Moldova,

and annexes thereto

2018 – 2019

In accordance with ENTSO-E requirements, conducting joint training of dispatch personnel SE NPC Ukrenergo and SE Moldelectrica in the

format of joint emergency exercises and presentation of works by operational dispatch of power systems of the Republic of Moldova

and Ukraine

after 2019

Monitoring the implementation of the processes described in the annexes to the operation

agreement

Ensuring that Ukraine's IPS is operated in accordance with the standards followed by

TSOs in ENTSO|2|

On December 10, 2018, Moldelectrica signed an agreement to create a joint Ukraine-Moldova control unit, with annexes

Harmonisation of the Ukrainian electricity law to

comply with the European law; compliance with

market standards and certification of the national

TSO|3|

In the course of aligning with market standards, Ukrenergo undertakes to develop:

Transmission System Code, Commercial Metering Code

Market Rules

Draft Connection Fee Methodology

Rules for limitation management and Procedure for cross-border capacity allocation

Launch of a new model of the electricity market

Ukrenergo’s certification as a transmission system operator

- accomplished - not accomplished

International supportOver the course of two years, Ukrenergo has managed to form a strong international coalition to support the integration of Ukraine's IPS into the ENTSO-E power system.Constructive relations with numerous European TSOs and international partners enable the implementation of joint projects:

Project for Support to the Integration of Ukraine's Power System with the Continental Europe Synchronous Area (CESA)

Goal of the project: identification of the following priority investment projects aimed at promoting synchronisation with the Continental Europe Synchronous Area (CESA) and improving the transmission system efficiency.On 15 August 2018 KfW reported that the Application for Grant Funding was approved by the Council of the EU Neighborhood Investment Facility (NIF).

Cooperation with the US within the framework of the US-Ukraine Strategic Energy Dialogue

In the letter of 13 February 2019 to the Minister of Foreign Affairs of Ukraine PavloKlimkin, US Deputy Secretary of Energy Dan Brouillette supported ongoing and new cooperation, in particular, related to the enhancement of physical and cyber security and support for ENTSO-E integration.Consultations on the first visit of US experts to Ukrenergo on these initiatives are underway.

Testing of power units using USAID grant funding

Goal of the project: Testing of TPPs, CHPPs and HPSs on frequency and excitation control to look into the possibility of synchronous operation of power systems of Ukraine and Moldova with the power system of ENTSO-E Continental Europe.Tests on 11 power units of TPPs, CHPPs and HPPs were started on January 22, 2019 and were completed on April 26, 2019.

International support

Project for RES Integration in Ukraine"

Goal of the project: to develop new approaches to the operation of the power system, mechanisms for determining the necessary strategic reserves and ensuring the flexibility of the power system, determining its optimal configuration, etc.The decision of the Federal Ministry of Economics and Energy of Germany is to be finalised to extend a corresponding grant to the German Energy Agency (DENA)

Project for Consulting Services on ENTSO-E Integration under theSecond Power Transmission Project (PTP-2)

Goal of the project: preparation for signing agreements between TSOs, conducting three training workshops on following the scheduling rules adopted by the ENTSO-E, and helping to develop the Terms of Reference to expand the functionality of existing software for analyzing and modeling the power system for successful synchronisation with the ENTSO -E.On 5 April 2018, Ukrenergo signed a contract for consulting service related to the integration into ENTSO-E with Elia Group, funded by the World Bank.

Project for construction of energy storage capacities

Goal of the project: carrying out the relevant study on the testing of balancing methods of solar and wind power plants, whose share in the IPS of Ukraine is rapidly increasing.At the end of December 2018, the Ministry of Economy and Finance of France approved the decision to provide a grant to RTE to carry out a study within the framework of the Project for the construction of energy storage capacities in the Integrated Power System of Ukraine.

ENTSO-E Cooperation Beyond Membership Programme

On 13 February, in Brussels, an Agreement on the participation ofUkrenergo in the ENTSO-E Cooperation Beyond MembershipProgramme for 2019-2021 was signed during a meeting withENTSO-E Secretary-General Laurent Schmitt

Cooperation Beyond Membership Programme is a unique type ofpartnership between ENTSO-E and Ukrenergo (in accordance with therecommendations for cooperation under Regulation (EC) No. 714/2009between ENTSO-E and the TSOs non-members of the network)

The goal is to create the framework for receiving the expertise and thebest practices on the most pressing issues for the company as regardsthe integration into ENTSO-E

The Programme envisages:

1. Workshops suited to Ukrenergo needs2. 10-day field trip of Ukrenergo employees to the

ENTSO-E Secretariat3. Long-tern internship of Ukrenergo employees in the

ENTSO-E Secretariat

First Introductory Workshop with the participation of ENTSO-E Secretary General, MrLaurent Schmitt, on ENTSO-Е’s key policies, processes, platforms, etc., will take place on 29 May 2019 at Ukrenergo

Key findingsAs never before, Ukraine has a historic opportunity to make within a short period a strategic step to enhance its

own energy security and a full-scale integration into the European energy market.

Ukrenergo plays a major role in the process of integration of the IPS of Ukraine into the ENTSO-E Power System.

However, ENTSO-E integration should be a common goal for all market participants and key stakeholders.

Thus, achieving a common goal will require:

1. Modernisation of the power units at the scale necessary to ensure the frequency and active power control in the isolated mode of operation of Ukraine's IPS. Responsible entities are generating companies2. Creation of a detailed plan to prepare for the power system’s operation in an isolated mode for further approval by the NSDC of UkraineResponsible body is Ukrenergo3. Achieve full compliance of Ukrainian electricity legislation with the European lawResponsible bodies are the Verkhovna Rada, the Cabinet of Ministers of Ukraine, and NEURC4. Introduction of a new model of the electricity marketResponsible bodies are the Verkhovna Rada, the Cabinet of Ministers, NEURC, Ukrenergo, Energorynok, market participants5. Certification of SE NPC Ukrenergo as a transmission system operator as soon as possible to allow to obtain the observer status in the ENTSO-EResponsible bodies are NEURC, the Ministry of Finance, Ukrenergo6. Proper financing of Ukrenergo's activities related to ENTSO-E integrationResponsible body is NEURC7. Consolidation of foreign policy effortss related to ENTSO-E integrationResponsible bodies are the Ministry of Foreign Affairs, the Ministry of Economic Development and Trade