MEMORANDUM OF UNDERSTANDING BETWEEN THE GOVERNMENTS OF THE G-7 COUNTRIES AND THE COMMISSION OF THE EUROPEAN COMMUNITIES AND THE GOVERNMENT OF UKRAINE ON THE CLOSURE OF THE CHERNOBYL NUCLEAR POWER PLANT

THE RESPECTIVE GOVERNMENTS OF THE G-7 COUNTRIES AND THE COMMISSION OF THE EUROPEAN COMMUNITIES, hereinafter referred to as "the G-7" and THE GOVERNMENT OF UKRAINE, hereinafter referred to as "Ukraine," have developed a cooperative approach on the elaboration and implementation of a Comprehensive Program to support the decision of Ukraine to close the Chernobyl Nuclear Power Plant by the year 2000, as formulated by President Kuchma in his statement of April 13, 1995, and in his letter of August 8, 1995, to G-7 Leaders. The Program will thus implement the commitments of the leaders of the G-7, made in Naples, Italy, in 1994 and Halifax, Canada, in 1995.

The program is guided by the following principles:

- The friendly relationships among Ukraine and members of the G-7;

- The critical linkages between energy sector reform and the achievement of Ukraine's economic and social reform objectives;

- The complementarity between measures summarized herein to support the closure of the Chernobyl Nuclear Power Plant and the development of a long term energy sector strategy in Ukraine, taking into account sound economic, financial and environmental criteria, and leading to an efficient sustainable, market-oriented energy sector well-suited to Ukraine's needs;

- The necessity of the continuous promotion of a high level of nuclear safety around the world taking into account the principles specified in the International Convention on Nuclear Safety and the recognition of the essential rule played in this regard by a strong and independent national nuclear safety regulator;

- The need to mobilize financial resources from the international community and domestic sources to support the decision of Ukraine to close the Chernobyl Nuclear Power Plant.

- The need to ensure full co-operation from the Ukrainian entities associated with all elements of the comprehensive program.

- The recognition that the early closure of the Chernobyl Nuclear Power Plant will have adverse economic and social implications for Ukraine while also facilitating the flow of international financial resources and improving the national standards of nuclear safety.

- The recognition of the fact that the responsibility for nuclear safety lies exclusively with the operating state, including an effective regime for liability for nuclear damage corresponding to accepted international norms.

- The desirability of increasing energy efficiency.

- The importance of our joint commitment to take all necessary measures for the decommissioning of the Chernobyl Nuclear Power Plant in the shortest, practically achievable time.

Ukraine and the G-7 have decided upon the following Comprehensive Program of cooperation in order to support the closure of the Chernobyl Nuclear Power Plant by the year 2000:

I. Power Sector Restructuring

1. Ukraine and the G-7 will continue to cooperate in the development of a financially-sound electric power market with market-based pricing that will encourage energy efficiency and conservation and will work cooperatively in generating and attracting the domestic and international resources needed both for safety measures and for new capital investment in power generation, transmission and distribution.

II. Energy Investment Program

2. Ukraine and the G-7 will work with the international financial institutions as well as foreign and domestic investors to prepare loan-financed projects based upon least-cost planning principles for completion of Khmeinitsky II and Rovno IV nuclear reactors, for thermal and hydro plant rehabilitation and pumped storage projects, and for energy efficiency projects in accordance with Ukraine's energy sector strategy. In order to support the closure of the Chernobyl Nuclear Power Plant; the investment program will identify least-cost power supply investments to meet Ukraine's future national power requirements in the context of competitive market-based power sector.

III. Nuclear Safety

3. Ukraine and the G-7 will work with the relevant international organizations as well as multilateral and bilateral donors on an expedited basis to prepare and implement projects for short term safety upgrades as Chernobyl III and for decommissioning of the Chernobyl Nuclear Power Plant.

4. Ukraine and the G-7 will continue to cooperate in the development of a cost effective and environmentally sound approach to the shelter for Chernobyl IV, including the definition, as soon as possible, of technical and cost options as the basis for reviewing financial requirements.

IV. Social Impact Plan

5. Ukraine and the G-7 recognize the implications of the closure of the Chernobyl plant for the workers and their families. The European Commission and the Government of the United States will assist the Government of Ukraine to develop an Action Plan for addressing the social impacts of the closure of Chernobyl.

V. Financial Resources

6. To provide for the implementation of the program outlined in paragraphs 1-5, Ukraine and the G-7 will cooperated in the identification of international and domestic Ukrainian funding sources and the mobilization of international finance in support of appropriate program activities.

7. Attachment 1 presents a summary of the current financial resources either available or under consideration from the G-7 and international financial institutions. Some elements are subject to the completion of project specific feasibility studies. Attachment 2 provides the list of priority projects of the Comprehensive Program.

8. As a guiding principle, revenue generating projects would be considered for international loan financing and Ukrainian domestic resources. Non-revenue generating projects, directly related to the closure of the Chernobyl Nuclear Power Plant, would be considered for international grant financing and, taking into account the financial and economic situation in Ukraine, Ukrainian domestic resources.

VI. Implementation Review

9. Representatives of Ukraine, the G-7, and the international financial institutions will meet at least annually to monitor implementation of the comprehensive program for the closure of the Chernobyl Nuclear Power Plant and consider any technical or financial issues that represent potential obstacles to realizing its objectives.

Done in Ottawa, this 20th day of December 1995, in duplicate, in the English and Ukrainian languages, each text being equally valid.

FOR THE GOVERNMENTS OF THE G-7 COUNTRIES AND THE COMMISSION OF THE EUROPEAN COMMUNITIES

FOR THE GOVERNMENT OF UKRAINE

ATTACHMENT 1

G-7/UKRAINE COMPREHENSIVE PROGRAM FOR THE CLOSURE OF CHERNOBYL

SUMMARY OF CURRENT FINANCIAL RESOURCES FROM THE INTERNATIONAL COMMUNITY

(US $ MILLIONS)

GRANTS(1) IPI AND TOTALS(3)

EUROTOM

LOAN

FINANCING(2)

POWER SECTOR 43 43

RESTRUCTURING

ENERGY INVESTMENT 102 1,809 1,911

PROGRAM

NUCLEAR SAFETY 349 349

AND

DECOMMISSIONING

SOCIAL IMPACT 4 4

PLANNING

TOTALS 498 1,809 2,307

(1) Committed.

(2) Some loans are pending subject to approval based on necessary feasibility studies

(3) Ukrainian in-kind and financial contributions will be defined as projects are developed.

ATTACHMENT 2

COMPREHENSIVE PROGRAM OF THE G-7 AND UKRAINE TO SUPPORT THE CLOSURE OF THE CHERNOBYL NUCLEAR POWER PLANT

PRIORITY PROJECTS

I. LIST OF NON-REVENUE GENERATING PROJECTS

PROJECT AND CORRESPONDING MOU PARAGRAPH

1.* DECOMMISSIONING OF THE CNPP

PARAGRAPH 3

1.1 STAGE 0 (5 YEARS)

PREPARATORY WORK PRIOR TO DECOMMISSIONING OF CNPP

1.2 STAGE 1. (10 YEARS AFTER COMPLETION OF STAGE 0)

FUEL AND WASTE MANAGEMENT

1.3. STAGE 2 (9 YEARS AFTER COMPLETION OF STAGE 0)

DECOMMISSIONING OF CNPP

2. PLAN TO DEAL WITH SOCIAL IMPACT RELATED TO CLOSURE OF CNPP

PARAGRAPH 5

3. SHORT TERM NUCLEAR SAFETY IMPROVEMENTS FOR CNPP UNIT #3

PARAGRAPH 3

4.** TRANSFORMATION OF "SHELTER" INTO AN ENVIRONMENTALLY SAFE SYSTEM

PARAGRAPH 4

5. POWER SECTOR RESTRUCTURING

PARAGRAPH 1

II. REVENUE GENERATING PROJECTS

6. COMPLETION OF ROVNO #4 AND KHMELNITSKY #2

PARAGRAPH 2

6.1 SAFETY IMPROVEMENTS AND COMPLETION OF KHMELNITSKY #2 AND ROVNO #4

6.2 CONSTRUCTION OF HV TRANSMISSION LINES TO KHMELNITSKY AND ROVNO UNITS

7. REHABILITATION OF THERMAL POWER PLANTS

PARAGRAPH 2

8. INTRODUCTION OF PEAK CAPACITIES

PARAGRAPH 2

CONSTRUCTION OF DNIESTER PUMPED STORAGE

9. ENERGY EFFICIENCY AND DEMAND SIDE MANAGEMENT

PARAGRAPH 2

PROJECTS REQUIRING CLARIFICATION BEFORE BEING INCLUDED

10.*** RELOCATION AND CONSTRUCTION OF 750KV SWITCHYARD OUTSIDE CONTAMINATED AREA AT CHERNOBYL NPP

* ESTIMATED COSTS WILL BE DEFINED, TAKING INTO ACCOUNT THE AEA TECHNOLOGY STUDY.

** ESTIMATED COSTS WILL BE DEFINED ACCORDING TO STUDIES OF ALLIANCE CONSORTIUM AND THE PROTOCOL BETWEEN THE EUROPEAN COMMISSION AND UKRAINE, SIGNED IN BRUSSELS, 11 SEPTEMBER 1995.

*** TO BE CLARIFIED BY UKRAINIAN AND G-7 EXPERTS.