Category: Bulgaria

CMS has advised the Czech Skoda Group on winning an order from Bulgaria’s Ministry of Transportation for 20 four-car electric trains, alongside an option for an additional five units.

According to CMS, the deal is valued at over EUR 500 million. “These trains will be fully serviced for 15 years under the terms of the contract. The introduction of these new electric trains is part of a wider initiative to modernize Bulgaria’s railways. The existing fleet, which includes older Skoda locomotives, will be replaced by vehicles that comply with the latest Technical Specifications for Interoperability and European standards.”

“Winning this order confirms that our products can compete internationally and strengthens our position in the modernization of European rail transport,” said CEO and Executive Chairman of Skoda Group Petr Novotny. “Bulgaria joins the list of countries where our trains contribute to the attractiveness and accessibility of rail travel.”

The CMS included Managing Partner Kostadin Sirleshtov, Senior Associate Diyan Georgiev, and Trainee Boris Kirov.

The Bulgarian energy regulator has proposed changes to the Grid Connection Ordinance No. 6, adopted earlier this year, which aim to provide flexibility in the application process, support for wind projects, and further regulation of battery energy storage systems (BESS).

The proposal is open for public discussion and comment until 6 September 2024 via the following link to the website of the Ministry Council: Портал за обществени консултации (strategy.bg).

So far, no comments by third parties have been introduced.

The proposal includes substantial changes to the existing legal framework in four major areas of consideration:

1.      The Bulgarian energy regulator proposes that a grid connection can be initiated by anyone in possession of any of the following:

a)      a preliminary land purchase agreement;

b)     a decision of the municipal council establishing the right to build (without the requirement of a tender);

c)      the approval of the competent authorities for a change in designation of forest land.

These changes, if adopted, will significantly promote the development of wind projects in Bulgaria.

2.      A BESS installation that is part of an existing facility for consumption will require a deposit or bank guarantee in the amount of BGN 50,000 per MW if the connected capacity increases.

3.      A BESS installation that is part of an existing facility for production will require a deposit or bank guarantee in the amount of BGN 50,000 per MW if the connected capacity increases.

4.      A stand-alone BESS will require a deposit or bank guarantee in the amount of BGN 50,000 per MW.

The conditions under items 2 to 4 will be prerequisites for the validity of the grid connection conditions as provided by the Bulgarian transmission system operator (TSO).

These conditions will apply to anyone who has obtained a grid connection statement but has not entered into a grid connection contract as of the date of entry into force of the new ordinance.

By Kostadin Sirleshtov, Managing Partner, Borislava Piperkova, Counsel, Dian Boev, Associate, CMS

Kinstellar has advised Peter Mitev and Big Orange Foundation on the joint venture with Raycho Raychev and Endurosat for the acquisition of a 17,000-square-meter office building in Sofia from Alpha Bank. CMS advised Alpha Bank on the sale of its former headquarters. Yonev Valkov Nenov reportedly advised Raycho Raychev and Endurosat.

Peter Mitev is the co-founder and former CEO of Chaos Group, a computer graphics technology company.

Raycho Raychev is the founder and CEO of Endurosat satellite company.

According to Kinstellar, “the building is strategic for Endurosat’s vision for the development of the space sector and will be used for space research and other key operations. The acquisition of the building, formerly the headquarters of Alpha Bank, is the largest office transaction on the Bulgarian real estate market for the year 2024 to date.”

The Kinstellar team included Managing Partner Diana Dimova, Partner Antonia Mavrova, Counsels Svilen Issaev and Atanas Mihaylov, and Senior Associate Denitsa Kuzeva.

The CMS team included Partner Jenia Dimitrova, Senior Associates Katya Todorova and Yana Antonova, and Associates Emil Karasanov and Reni Yanakieva.

CMS has advised Greenvolt Next Holding on its acquisition of Greenvolt Next Bulgaria JSCo from Greystone Bulgaria. Kambourov and Partners advised the seller.

According to CMS, the Greenvolt Next Bulgaria JSCo “will be focused on the delivery of the concept for energy communities, which is a new concept for Bulgaria. Its focus will be on the B2B customers and the combination of rooftop photovoltaic systems with charging stations.”

Earlier this year, CMS advised on Greenvolt’s acquisition of an 80-megawatt PV project from AES Global Power (as reported by CEE Legal Matters on April 16, 2024).

The CMS team included Managing Partner Kostadin Sirleshtov, Partner Atanas Bangachev, Counsel Borislava Piperkova, Senior Associate Diyan Georgiev, Associate Dian Boev, and Trainee Niya Ivanova.

The Kambourov & Partners team included Managing Partner Stefan Tzakov and Partner Irena Petkova.

On 21 August 2024, the Bulgarian Ministry of Energy opened a tender procedure for National infrastructure for storage of renewable energy (RESTORE) for granting stand-alone battery energy storage system (BESS) tender funded under the EU’s Recovery Resilience Facility (the “Procedure”).

The deadline for submitting applications will be 17:00 on 21 November 2024. Bids must be submitted electronically only.

The Procedure aims to provide funding for the construction and implementation of at leasta 3000 MWh stand-alone battery storage facility. The total amount of the grant that can be provided under the entire procedure is EUR 590 million (approximately BGN 1.154 billion). Each undertaking can bid for up to EUR 76 million (BGN 148.6) in grant support.

The maximum grant intensity obtainable by each bidder is 50% of allowed costs (i.e. capital expenditures) but not more than EUR 190,000 (BGN 371,000) per 1 MWh in capacity.

Only legal entities established within the European economic zone are eligible to bid and their ultimate beneficial owners must be declared within their relevant company registers.

Eligibility is restricted to applicants (or the shareholders of applicants), which prove equity on their balance sheets of more than BGN 6 million for battery storage projects between 20 MWh and 50 MWh and BGN 10 million for projects above 50 MWh.

Each application should secure a 3% bid bond based on the amount of the grant requested.

On the technical side, each application should:

1.   present their investment proposal for a battery storage project with at least 10 MW (AC) capacity.

2.   have guaranteed storage-time capacity of more than two hours and must comply with the parameters for securing reserves for prime regulation of the frequency and/or automatic secondary regulation of the frequency and power;

3.   understand that the maximum capacity an applicant (and its linked enterprises) can request for funding for is 500 MWh;

4.   have a technical advisor with previous experience in either a combined project for production and storage or a standalone storage project with capacity of at least 10 MW for investment proposals between 10 MW and 20 MW and 20 MW for investment proposals above 50 MWh.

For an investment proposal to be eligible for application, the earlier of the procurement of the equipment or the commencement of the construction should have started on or after 25 June 2024.

As of the application date, the entity must secure a valid grid connection statement or agreement with the transmission/distribution grid operator.

The deadline for putting the project into operation is 31 March 2026.

A key requirement is that a conceptual design of the project must be submitted in the application process. The design must be prepared and bear the stamp of a certified Bulgarian designer.

Successful bidders are expected to conclude their grant agreement around January 2025.

Applications will be reviewed and ranked based on the requested grant per MWh (where the lower grant per MWh is ranked higher) and at parity the project with a larger capacity (MWh) will be ranked higher. For bids made at parity, the investment proposal with longer warranty period will be ranked higher. The grants will be released and paid to the successful applicants after the storage systems have bene successfully put into operation.

By Kostadin Sirleshtov, Managing Partner, Borislava Piperkova, Counsel, Vaska Solakova, Senior Associate, and Dian Boev, Associate, CMS

Kinstellar has advised the Mitiska European Real Estate Partners 3 on its entry in Bulgaria via a joint venture with Park Lane Developments. CMS advised Park Lane Developments.

Mitiska European Real Estate Partners 3 is a real estate fund managed by Mitiska REIM, a specialist investor in European convenience real estate.

Park Lane Developments is a commercial property company developing and managing prime office, logistics/light-industrial, and retail park assets in CEE.

According to Kinstellar, Mitiska REIM and Park Lane Developments plan to “develop and open at least five prime retail parks in Bulgaria over the next five years.”

The Kinstelalr team included Partner Antonia Mavrova, Counsel Atanas Mihaylov, Senior Associate Denitsa Kuzeva, and Associate Yasen Toshev.

The CMS team included Partners Atanas Bangachev and Jenia Dimitrova, Senior Associate Katya Todorova, and Junior Associate Nikola Naydenov.

CMS has successfully represented MET’s subsidiary MET Suvorovo Wind Park in its claim against the Republic of Bulgaria, represented by the Minister of Finance, for the return of unconstitutional wind taxes imposed by the Republic of Bulgaria back in 2014.

According to CMS, the case was initiated prior to the takeover of the wind park by MET in 2021, “when the Swiss-based energy company MET Group acquired a 100% stake in a 60-megawatt operational wind park in Bulgaria, after signing a share purchase agreement with Spanish Grupo Enhol. The transaction was an important step in achieving MET’s renewables growth targets in the CEE region of 500 megawatts in operation by 2023 and was the second acquisition of an operational wind park of MET in Bulgaria thus expanding its operating wind portfolio in Bulgaria to 102 megawatts.” 

The CMS team included Managing Partner Kostadin Sirleshtov and Senior Associate Yana Antonova.

Boyanov & Co. has advised Generali CEE Holding in the acquisition of United Health Insurance Fund Doverie. Djingov, Gouginski, Kyutchukov & Velichkov advised the seller.

The deal will be completed subject to the required regulatory and concentration clearance permits.

Doverie is one of Bulgaria’s largest health insurance providers. According to Boyanov & Co, “this strategic acquisition marks a significant milestone in Generali’s expansion within the Bulgarian market…[It] underscores Generali’s commitment to enhancing its presence in the health insurance sector and providing comprehensive healthcare solutions to its clients.”

The Boyanov & Co team was led by Partner Yordan Naydenov and included Partner Peter Petrov and Senior Counsel Svetlina Kortenska.

The DGKV team was led by Partners Georgi Tzvetkov and Valentin Bojilov.

Reporting on the most interesting recent developments in Bulgaria Gugushev & Partners Law Office Senior Partner Dafinka Stoycheva shares her views on continuing political instability in the country, a major investment dispute, and significant legal and regulatory developments.

“Politics in Bulgaria is incredibly complicated at the moment, impacting all spheres of public life,” Stoycheva beings. “We had parliamentary elections in early June, yet there is still no regular government in place. This has been the case for the past two years, as no single party has been able to secure a majority, and coalition efforts have consistently failed – we are likely headed for new elections soon, potentially in September, as the creation of a majority government isn’t forthcoming,” she explains. This political uncertainty affects authorities and their decisions, including ongoing proceedings initiated under previous governments.

Stoycheva reports a significant investment dispute involving Nexo, a crypto lender. “The value of the claim is substantial – around USD 3 billion. Nexo is seeking damages due to what they allege are the state’s wrongful and politically-motivated actions, including unjustified criminal investigations,” she explains. “This has become a high-stakes dispute for Bulgaria. Nexo claims that the negative publicity of the investigations led to the termination of contracts and significant financial losses,” Stoycheva adds.

To respond to the dispute, according to Stoycheva, the Bulgarian government “launched a public procurement procedure to handle the legal defense, which is crucial given the dispute’s magnitude and its potential impact on the state’s reputation. However, as of the end of March, when applications for the legal tender happened, there have been no further developments. Nothing has been announced, and no one has been contacted.” According to her, this delay creates “risks regarding the preparation of an appropriate legal defense and raises concerns about the transparency of the procedure.”

Furthermore, Stoycheva reports an interesting recent ruling by the Supreme Court of Cassation. “The Supreme Court of Cassation recently recognized the right of certain partners to act as ad hoc representatives in cases where mergers are stipulated to be handled jointly by them. This ruling references Article 13 of the European Convention on Human Rights.” As she explains, the decision is “significant because it allows these partners to protect company assets in future cases. This new practice could resolve numerous issues for many companies.”

Additionally, Stoycheva reports that “Bulgaria has updated its AML regulations to align with EU standards – these changes include regular risk checks and new transfer protocols for AML tasks. Companies must now verify the proxies involved and report incorrect ownership information, particularly for those handling virtual assets; moreover, new restrictions have been imposed on individuals in specific AML roles.” These updated regulations were published on July 16, and, “although the implementation is delayed for July 2027, many investors outside of the EU already started to worry about their doing business in the country.”

Finally, Stoycheva shares that the “ongoing political instability and significant legal disputes present challenges but also opportunities for Bulgaria to refine its legal framework and governance. The Nexo case, in particular, underscores the need for transparency and efficiency in legal processes.” Meanwhile, Stoycheva feels that the Supreme Court’s ruling and updated AML regulations “demonstrate progress in aligning with international standards and protecting business interests. Ultimately, these developments could lead to a more robust and fair legal environment in Bulgaria.”

Gugushev & Partners has advised the founders of Flat Manager on the sale of the company to Renters. Hristov & Partners advised Renters.

Flat Manager is a rental property management company in Bulgaria.

Renters operates in the traveler accommodation sector in Poland.

“The merger with Renters enables us to grow even faster and more sustainably,” commented CEO of Flat Manager Kamen Manev. “We will develop our services, raising standards for guests and increasing revenues for apartment owners in Bulgaria.” 

The Gugushev & Partners team included Senior Partner Dimitrinka Metodieva and Senior Associate Mihaela Dimitrova.

The Hristov & Partners team included Partners Pavel Hristov, Dragomir Stefanov, and Biliana Shagova.