BGV Group Management, the investment group founded by Hennadii Butkevych, views the modernisation of water treatment systems and the management of municipal utility infrastructure as one of its priority investment areas in Ukraine.
The company plans to create a full-scale private utility operator — a multi-utility company capable of operating in water supply, wastewater management, district heating and energy modernisation.
Wastewater treatment facilities in Ukrainian cities will be the initial focus. To build an economically sustainable portfolio, BGV is considering investments of approximately €50–60 million.
This material was adapted for InVenture based on an interview with Oleksii Tymofieiev published by Forbes Ukraine.
BGV’s Investment Strategy in Municipal Infrastructure
— Which infrastructure segments are currently a priority for BGV Group?
— The most promising areas are energy modernisation, the upgrade of water treatment systems and integrated management of municipal water utilities.
Our strategic objective is to create a full-scale private utility operator with a sustainable financial model. We do not view these assets as short-term investments that could be sold after the war ends.
The goal is to build a long-term infrastructure business capable of serving cities and investing in the renewal of critical systems.
— What role does energy play in this model?
— Energy is not an end in itself for us. It can serve as an entry point into a significantly larger infrastructure project.
For example, installing gas-fired cogeneration capacity could become the first stage in creating a private district heating operator. Initially, the investor provides the facility with its own power generation and later moves towards integrated infrastructure management.
The pace of investment will depend on how quickly we can identify cities willing to transfer individual facilities or entire systems into private management.
Why Energy-Efficiency Projects Are Difficult to Scale
— What is the main challenge associated with investing in energy efficiency?
— The principal limitation is the difficulty of scaling such projects.
The facilities are located in different cities, and each project requires separate negotiations with the relevant local authorities. As a result, it is difficult to quickly transform energy modernisation into a large, systematic business.
To create a profitable model, an investor needs to build a portfolio covering at least 20–30 cities.
Energy-efficiency projects should form part of a broader infrastructure strategy. They require substantial capital investment in equipment modernisation, while the average payback period is approximately ten years.
Wastewater Treatment Facilities as a Priority Investment Area
— Why is BGV starting with the modernisation of wastewater treatment facilities?
— Wastewater treatment facilities are among the most critical elements of urban infrastructure.
A significant proportion of Ukraine’s treatment facilities do not provide the required capacity or treatment quality. According to available estimates, around 30% of wastewater may be discharged without adequate treatment.
From an investment perspective, this is a market with enormous unmet demand and virtually no competition. At the same time, barriers to entry remain high because of regulation, tariff policy and the need to negotiate with municipalities.
— Which cities are currently in your focus?
— We are primarily considering cities with populations of up to 100,000.
In communities of this size, most issues can be resolved directly at the local government level. We are interested in cities prepared to provide economically acceptable conditions for investors, including a review of tariff policy.
Several dozen communities have already demonstrated potential interest. Approximately ten mayors have expressed readiness to discuss cooperation, potentially including a transition to a public-private partnership model.
However, preparing such a partnership may take around a year. The most difficult issue is usually reaching a compromise on tariffs.
What Tariff Level Is Required to Attract Investment?
— Why do current tariffs not allow municipal water utilities to modernise?
— In most regional capitals, the combined tariff for water supply and wastewater services ranges from UAH 30 to UAH 40 per cubic metre. In Kyiv, it is approximately UAH 35.
By comparison, the cost of an equivalent service in Warsaw may reach around UAH 175 per cubic metre.
According to our estimates, even to maintain the current operating condition of municipal water utilities without comprehensive modernisation, the tariff would need to be approximately UAH 100 per cubic metre.
When the tariff does not cover economically justified costs, a municipal water utility has no funds either to upgrade its equipment or to attract private capital. An investor cannot commit tens of millions of euros to a system that does not generate sufficient cash flow to repay the investment.
The willingness of local authorities to gradually bring tariffs to an economically justified level is therefore one of the principal conditions for cooperation.
Project Budgets and Payback Periods
— How much does it cost to modernise wastewater treatment facilities in one city?
— For a city with a population of approximately 20,000, the required investment may amount to around €3 million.
Creating a full-scale portfolio business would require total investment of approximately €50–60 million.
The average payback period for such infrastructure projects is around ten years. These are long-term investments, which makes tariff predictability, long-term contracts and a clear cooperation model with the municipality particularly important.
— What scale should the business achieve?
— BGV’s ideal model is a portfolio of wastewater treatment facilities in approximately 30 cities with a combined population of around 2 million people.
This scale would make it possible to centralise management, procurement, technical expertise and financing. A single facility may be challenging from an economic perspective, but a portfolio covering dozens of cities creates a more resilient business model.
Investment Programme Timeline
— When are the first projects expected to be launched?
— Implementation of the pilot project will take approximately two years.
By the end of 2026, we plan to sign agreements with at least three cities. In parallel with the construction of the first facilities, we will continue identifying additional communities to expand the portfolio.
Should we be unable to build a sufficient pipeline among cities with populations of up to 100,000, we will consider communities with populations of approximately 50,000–60,000.
From a technical and financial perspective, the wastewater treatment problem across Ukraine could be largely addressed within three to five years through comprehensive modernisation. However, this would require systematic solutions, significant private capital and the willingness of municipalities to cooperate.
Concessions and Private Management of Municipal Water Utilities
— What other investment formats is BGV considering?
— The second priority after wastewater treatment facilities is the management of municipal water utilities.
This could involve a concession, the corporatisation of a municipal enterprise or the long-term lease of an integrated property complex.
Unlike individual wastewater treatment modernisation projects, larger scale is an advantage when managing municipal water utilities. The more cities or consumers an operator serves, the greater the opportunities to optimise costs, attract financing and implement unified management standards.
At the same time, BGV does not plan to create large in-house engineering departments for every segment. Specialised engineering and technology companies will be engaged for specific projects.
How the Projects Will Be Financed
— Does BGV plan to attract other private investors or specialised infrastructure funds?
— There is no such need at the initial stage. BGV is itself an investment company, while the group’s available capital is primarily generated by the income of the ATB corporation.
We intend to finance the pilot phase with our own funds. Once the economics of the projects have been validated and the initial portfolio has been established, we may consider partnerships, bank financing and other sources of capital.
Last year, BGV invested approximately $100 million in other sectors, meaning the group has sufficient resources to finance the first wastewater treatment modernisation projects.
For us, investment in Ukrainian infrastructure is not only a matter of internal rate of return. It is a long-term investment in quality of life, environmental security and the ability of Ukrainian cities to remain suitable for living and business development.
