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. Last Updated: 07/27/2016

Canada Signs Ukraine Power Plant Deal

KIEV -- A Canadian power firm struck a deal to operate and eventually own a Ukrainian electricity plant Thursday, which would make it the first Western company to break into the former Soviet republic's state-run energy sector.

Northland Power is seeking funding for the $110 million joint-venture deal signed during a visit by Canadian Foreign Minister Lloyd Axworthy.

"This would be one of the largest projects, if not one of the biggest foreign investments, in independent Ukraine," Canadian Ambassador Christopher Westdal said at the signing ceremony to form the Ukr-Can Power company.

Northland spent four years negotiating with the Ukrainian government and energy authorities to run Kiev's gas-powered Darnytsia plant, company president James Temerty said.

The Canadian side would raise the $110 million from lending bodies, export development agencies, Western commercial banks and private sources, he said.

In the five years since it gained independence, Ukraine has maintained tight control over "strategic" enterprises such as energy producers, making it difficult to attract foreign investment.

Ukraine has attracted only about $1.5 billion in investment since the Soviet Union collapsed, and investors complain of an unfriendly and bureaucratic investment climate.

"This breaks the log-jam on energy restructuring," Westdal said.

The deal followed the approval earlier this month of a $317 million World Bank loan to help create a competitive electricity market in Ukraine, where power cuts are common.

Temerty said his Toronto-based power company would operate the plant, and then take over 51 percent of shares when a new on-site facility was completed.

"Once all of this is done, we build the plant and turn it into a commercial operation," Temerty said, adding that it would probably take two years.

The deal was part of a package agreed upon during a visit by Axworthy. Canada has a big Ukrainian diaspora and has formed strong links with Ukraine.

Ukraine is awaiting Western cash to offset costs of shutting down its Chernobyl power plant, which still provides 5 percent of the country's electricity needs despite the 1986 explosion there that destroyed one reactor unit.