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Havel Holasek & Partners has advised on Genesis Capital’s sale of its share in JRC Czech to Hamaga. Kocian Solc Balastik advised Hamaga on the deal, which also included the simultaneous acquisition of Genesis Capital’s minority shareholder Slavomir Pavlicek’s share.

JRC Czech runs an e-shop and a network of 30 brick-and-mortar stores in the Czech Republic, most of them situated in prime locations in major shopping malls, including the Novy Smichov shopping arcade. In addition, JRC operates 10 shops in Slovakia. With consolidated turnover of nearly half a billion crowns, JRC is the largest retail vendor of a wide assortment of computer games and gaming consoles in the Czech Republic and Slovakia. 

Genesis Capital is one of the largest providers of private equity in the Czech Republic and Slovakia. It acquired a 100% stake in JRC Czech — the Czech and Slovak leader in video games and video game consoles, which formerly operated under the name Game Czech — in August 2012 from the UK-based Game Group Plc. A minority share in the company was acquired at the time by Slavomir Pavlicek, the original founder of JRC. 

Genesis Capital held its stake in JRC for only three years. Tomas Casa, Genesis Capital’s Investment Manager who was the member of the board of directors responsible for this investment, explained: “a shorter-than-usual holding period for JRC Czech corresponds to our original investment plan.” He added: “Doubling consolidated revenues through the combination of the Slovak acquisition and organic growth during the holding period has helped us achieve satisfactory returns and fulfil our investment plan.”

The Havel Holasek team advising Genesis Capital in the sale consisted of Partner Pavel Kvicala, Managing Associate Tomas Varoscak, and Junior Associates Veronika Filipova and Juraj Petro.

The buyer Hamaga — a company that has until now mainly specialized in the tourism and development segments — was advised by KSB Partner Martin Krejci and Counsel Drahomir Tomasuk.

CMS has successfully advised the Riverside Company — a global private equity firm — on the purchase of a majority interest in Fadata, a leading IT company providing software solutions to the global insurance industry.

Fadata — which is headquartered in Bulgaria — provides global distribution system and supports subsidiaries as well as partners’ networks in more than 30 countries. The agreement to acquire a majority stake in Fadata was made by Riverside collectively with Charles Taylor plc, a public company quoted on the London Stock Exchange. The established joint venture between Charles Taylor, Riverside, and the management of Fadata is aimed at accelerating further growth in the global technology market both of Fadata and all the parties involved.

“Attracting a global investor will allow Fadata to further strengthen its position as a global provider of IT solutions to the insurance sector,” said Warsaw-based CMS Partner Marek Sawicki. “We are happy to see a company from our region succeed in expanding so vastly in so very different markets. It is also an example of how legal advice can cross boundaries between jurisdictions — in this case, a transaction involving global players in the Bulgarian market was handled by a team of Polish lawyers. Knowledge of CEE markets has enabled us to follow the client to other jurisdictions in the region.” 

The CMS team advising Riverside Company included Warsaw-based Partners Marek Sawicki and Jakub Marcinkowski and Associate Tomasz Waligorski, working alongside Sofia-based Partner Atanas Bangachev, and Associates Alexander Rangelov and Zornitsa Georgieva.

Editorial Note: After this article was published, Wolf Theiss announced that it had advised founders of Fadata AD on the sale. The Wolf Theiss team consisted of Budapest-based Partner Richard Clegg, Senior Associate Katerina Novakova, and Associate Nikoleta Nikolova.

Schoenherr advised DPx Fine Chemicals Austria, a subsidiary of DPx Holdings BV, on the sale of its Linz-based Exclusive Synthesis (ES) and Maleic Anhydride Intermediates & Specialties (IM) business divisions to the Ardian France SA investment firm. Wilkie Farr & Gallagher was international transactional counsel for Ardian France, with Binder Groesswang advising Ardian France on due diligence, carve-out of the divisions, SPA, and tax matters (along with Ernst & Young). The transaction was signed on July 21, 2015, and closing is subject to approval by the antitrust authorities. Additional details of the transaction were not disclosed.

ES develops and produces chemical intermediate products for agriculture and other industries. IM produces maleic anhydride, a large number of intermediates, derivatives and esters. The two divisions generated combined sales of around EUR 200 million in the 2014 financial year and have around 390 employees.

According to Binder Groesswang, “with the support of Ardian, the management of ES and IM plans to significantly strengthen its market position. Ardian’s Mid Cap Buyout Team has extensive experience in the chemicals sector from previous and current investments in companies such as CABB, Novacap, Italmatch and Eliokem. This investment will focus on expanding the product portfolio through organic growth – building on the strength of existing and new customer relations – as well as through targeted strategic acquisitions. The company will also seek to realize its international growth potential by further expanding into new markets.”

Schoenherr’s team was led by Partners Christian Herbst and Florian Kusznier, and included Partners Peter Konwitschka, Volker Weiss, Stefan Kuhteubl, and Bernd Rajal, Attorneys Maximilian Lang, Tamara Gaggl, Constantin Benes, and Michael Woller, and Associates Franziska Oczlon, Karolin Andreewitch, and Mark Tuttinger.

Wilkie Farr & Gallagher’s team was led by Mario Schmidt and Maximilian Schwab and Associate Christina Mann.

Binder Groesswang’s team was led by Partners Thomas Schirmer and Andreas Hable, and included Partners Bernd Schneider Bauer, Christian Wimpissinger, John Barbist, Angelika Pallwein-Prettner, and Ivo Rungg, Counsel Hellmut Buchroithner, Lawyers Hermann Schneeweis and Markus Pinggera, Associates Florian Kiefer, Sabine Apfl, and Hanna Oberbichler, and Trainee Lawyer Hao Chu.

The President has signed the Law, which is hoped will stimulate alternative power engineering in Ukraine.

Thus, Ukraine is implementing EU legislation and approaching levels of “green” tariff for electricity generated from alternative energy sources to the world average levels. The adopted law is also aimed in particular at solving the problem of excessive stimulation of the electricity production from solar energy and at the same time insufficient stimulation of bioenergy production, and at stimulating private households to the introduction of energy from renewable sources of power generation. Such new conditions will certainly be attractive for the foreign investors engaged in this sphere.

The law introduces several significant additions and changes to the existing regime, some of the main ones described hereunder:

•the term “biomass” is brought in accordance with the requirements of the Directive of the European Parliament and Council Directive; 

•the obligation of the wholesale electricity market of Ukraine to purchase the electricity produced by the stations subject to the “green” tariff is clarified;

•”green” tariff is fixed in Euro until 2030. Indexation to Euro is made quarterly, but not monthly;

•the coefficients of “green” tariff for electricity generated from different categories of the stations is revised and approved;

•electricity produced by stations from renewable energy sources, except for the volumes used for their own needs, will be paid as per “green” tariff.

•the rule of “local content” is cancelled and surcharge to the “green” tariff is instead introduced as a stimulating factor in cases when using domestic equipment. The amount of surcharge will be 5% (when using 30% of domestic equipment) or 10% (when using 50% of domestic equipment);

•connecting to the network does not require inclusion of the project into the 10-year Plan for Development of the Unified Energy System of Ukraine. Benefits of compensation of costs for new connections are cancelled as ineffective;

•households are allowed to establish not only solar, but also wind power installations up to 30 kW with the right to sell the excess energy.

By Taras Lytovchenko, Associate, Gvozdiy & Oberkovych Law Firm

BSWW Legal & Tax has advised Ideal Idea — a Polish developer of warehouse and office SBUs (small business units) — on the sale of the Ideal Idea Park III office and warehouse center in Warsaw to a subsidiary of BPH TFI, for more than EUR 12.5 million.

The BSWW Legal & Tax team was led by Managing Partner Michael Wielhorski.

Lawyers BSWW Legal & Tax IDEAL IDEA previously advised on the sale of the first phase of the Ideal Idea III complex, sold for over EUR 14 million and the purchase of real estate, and at all stages of previous Ideal Idea development investments, as well as on previous leasing matters.

Image source: pcruciatti / Shutterstock.com

Resume

On 22 July 2015 the Bulgarian Parliament adopted amendments to the Energy Act (“EA”) and the Act on Energy from Renewable Sources (“AERS”), which will have a significant affect across the electricity value chain.

The most critical amendments are the introduction of a mandatory contribution to a new fund “Energy System Security” by all electricity GenCos of 5% of their annual revenues and the possibility for RES GenCos to sale the produced electricity at price for surplus on the balancing market or at free negotiated prices.

Background

In the last couple of years, the Bulgarian energy sector experienced serious financial imbalances, which led to a worsening of the financial status of the incumbent wholesale company public provider NEK EAD. In the course of the discussions on the new electricity prices for the forthcoming price period July 2015- June 2016, it was determined that the so-called “price for obligations toward society” has to be significantly increased for the business clients on the free electricity market. The increase led to immediate negative reaction by the large industrial companies, which triggered an urgent reconsideration of the electricity prices along the electricity value chain by the energy regulator. As a result, members of Parliament have proposed a Bill for amendment and supplementation of the Energy Act (the “Bill”), which was finally adopted on 22 July 2015 by the Bulgarian Parliament. The Bill should be published and enter into force on 24.07.2015. The Bill also proposes changes to the AERS, as described below. 

Proposals

Among others, the Bill proposes the following changes to the Energy Act:

• Establishment of a new fund “Security of the electro energy system” (“Fund”) in the form of a corporate legal entity which aims to compensate the shortage of funds to cover the costs of the public provider – NEK, resulting from its mandatory obligation to purchase generated electricity under long term PPAs and under regulated prices, including for previous regulatory periods. All GenCos of electricity in Bulgaria will be obliged to provide mandatory monthly instalments to the Fund, amounting to 5% of their monthly revenues from sold electricity, VAT exclusive. Electricity traders, which import electricity in Bulgaria, are also required to contribute to the Fund by instalments amounting to 5% of their monthly revenues from imported electricity. The amounts due to the Fund will be considered as public state receivables and may be coercively collected by the National Revenue Agency. The right of NEK to be compensated through the Fund may not be subject to offset or seizing.
• Mandatory obligation for all GenCos of electricity, which provide availability to the public provider NEK (i.e. RES GenCos, lignite coal TPPs, the Kozloduy NPP, the HPPs of NEK etc.), to provide to the Energy and Water Regulatory Commission (“EWRC”) their Power Purchase Agreements within 14 days of their conclusion. On its side, the EWRC shall publish the contracts on its official website. Notwithstanding any confidentiality provisions in the agreements, GenCos may not refuse publication.

The Bill also proposes the following changes to the Act for the Energy from Renewable Sources:

• The electricity generated by the RES GenCos will be purchased under the respective FiT only up to the amount of the newly introduced threshold, determined by the new definition “Net specific generation of electricity”, which is to be determined by the EWRC by 31 July 2015. This new threshold intends to substitute the currently predetermined average annual duration of work in accordance with the EWRC’s decision for setting of the price of the respective type of generation source (e.g. for some wind GenCos 2250 a.h. and for some PV GenCos 1450 a.h.). The generated electricity above the new threshold will not be purchased, as it is currently, at the electricity price of NEK for the end suppliers, but at the price for “surplus” paid at the balancing market. RES GenCos will have the possibility to sell the surplus on the liberalized market (by bilateral agreements or on a power exchange basis).
• RES GenCos, which utilised funds under a national or EU support schemes for construction of the power plants, and were commissioned before the entry into force of the AERS, will have their FiT adapted to the FiT, set out by the EWRC for projects supported by national and/or EU schemes. Furthermore, those GenCos will have to recover to NEK or the respective end suppliers within 6 months from the entry into force of the Bill, taking in mind the difference in the FiT since the commissioning of the power plant.
• The possibility to amend the commercial schedules (TPS files) of balancing groups with RES GenCos will be limited to the emergency situations set out in Art. 73 of the EA (such as prevention of breakdowns where human health or life is endangered, where the integrity of the electric power grid is endangered, in case the system, and respectively the network or the customers, risk sustaining substantial physical damage, in case of impossibility to maintain the balance between generation and consumption in the electric power grid, or in case of any deviation from the intersystem schedules for exchange with neighbouring operators).

Comments

The changes to the legislation, as outlined above, will be yet another adverse measure affecting the majority electricity GenCos and consequentially, the electricity value chain in Bulgaria. As already announced in the media by associations of the wind and PV GenCos, the changes could lead to further financial difficulties following the previously introduced revenue reduction measures, such as the 20 % fee on revenues, the preliminary access to grid prices, the balancing charges, etc.

• The 5% of revenue instalment to the Fund: The introduction of the 5% mandatory instalment for the security of energy system Fund carries features of a hidden tax or a fee, rather than the declared contribution to a fund. The Bill itself specifies that the contribution shall be considered as a public state receivable. Such types of hidden taxes are usually vulnerable from the point of view of compliance with the Constitution of the Republic of Bulgaria. For instance, the very similar 20% fee on RES GenCos introduced in 2013, was declared as unconstitutional by the Bulgarian Constitutional Court. This mandatory instalment could, in practice, be interpreted as a diminution of the FiT, and as such, its compliance with Bulgarian law is questionable.

As to the obligation for electricity traders, importing electricity in Bulgaria to contribute to the Fund, it should be noted that this measure could constitute a breach of EU law and freedom of movement of goods. 

The intended instalments are likely aiming to reduce NEK’s financial burden from the mandatory purchase of energy under long term PPAs, however, as a mechanism, it is incomplete and incoherent with the specific provisions of the EA related to (i) the principal forbidding cross subsidies, (ii) the transfer of all costs related to the obligations towards society to end clients, and (iii) the principles for preferential treatment of the RES generated electricity under the AERS. It also raises questions with respect to breach of international investment protection instruments, i.e. Bilateral Investment Treaties and/or the Energy Charter Treaty. Furthermore, the legislative text does not provide any clarity as to the methodology for the management and control of expenditure of the collected amounts. Last but not least, if the collected amounts are transferred to NEK, this could breach EU and Bulgarian State Aid rules.

• Confidentiality of PPAs: Several political parties and NGOs have appealed for the transparency and publicity in the energy sector that resulted in specific request to publish all the contracts in the energy sector. As the majority of PPAs were already published more than a year ago, the proposal seems more like a populist manoeuvre considering the forthcoming local elections. 
• New thresholds for payment of FiTs: The adopted substitution of the “annual average duration of work” threshold with a new “net specific production of electricity”, represents in practice a modification of the FiT payment conditions and it could potentially  have adverse negative effect on the revenue stream of the RES GenCos. The unclear provisions of the Bill do not shed sufficient light onto the practical application of the new mechanism authorising EWRC to determine the net specific production, including the parameters to be considered by it. It is clear though that the generated electricity above the threshold will be purchased at a much lower price than the currently applied as the price for “surplus” paid at the balancing market (recently ranging between BGN/MWh 0.00 and 30.00, approx. Euro/MWh 15.00), or the free market price (recently ranging between BGN/MWh 72.00 – 76.00, approx. Euro/MWh 36.00- 38.00) are considerably lower than the currently applied NEK’s energy mix regulated price (BGN/MWh 114,10, approx. 58,33 Euro/MWh.). This will put additional pressure on the revenues of the RES GenCos, unless they are able to find clients for the surplus on the liberalized market to mitigate the loss to some extent.
• Limitation of the possibilities for curtailment via balancing: The adopted limitation on modification of generation forecast schedules (TPS files) of the coordinators of balancing groups, including RES GenCos, aims to limit the arbitrary intervention of NEK on those schedules, which incurred significant costs to RES GenCos in the past year. This measure has been requested by RES GenCos for a long period of time now and its implementation should lead to the indented results.

The adopted amendments seem to open door for more disruptions and turmoil across the electricity sector rather than providing pragmatic solutions. The already demonstrated rush in adopting the Bill at first and second reading by the Parliament, and the planned urgent next steps without sufficient time for public discussions and assessment of the effects of the new provisions, is concerning and it raises more questions rather than it provides answers. In any case, it seems that from a legislative point of view the summer will be hectic and hot.

By Radoslav Mikov, Partner, Oleg Temnikov, Associate, Wolf Theiss

Greenberg Traurig has advised Orlen Upstream in connection with its entrance into a Joint Operating Agreement with Polskie Gornictwo Naftowe i Gazownictwo (PGNiG), the Polish state-controlled oil and natural gas company. The companies aim to jointly conduct analytic and research works in eight concession blocks in the Podkarpackie Voivodeship. PGNiG was not represented by outside counsel on the deal.

The aim of the joint venture — referred to as the Bieszczady Project — is “exploration, appraisal, and production of crude oil and natural gas in the Carpathians.” As a result of the agreement, Orlen Upstream acquired 49% of shares in 8 concession blocks grouped under the joint venture.

The Greenberg Traurig Warsaw team consisted of Local Partner Rafal Baranowski, Senior Counsel Malgorzata Bednarek, and Associate Filip Kijowski.

Bondoc & Asociatii has secured a victory for Europharm Holding before the High Court of Cassation and Justice of Romania.

The case concerned the annulment of a notification for payment of a claw-back tax imposed by the National Health Insurance House (NHIH) on Europharm Holding. The value of the claw-back tax within the notification amounted to more than EUR 10 million. 

According to Bondoc & Asociatii, this represents one of a large number of administrative disputes that the firm is appearing on against the NHIH on the claw-back tax, and it expects decisions on these matters to represent “critical precedents for subsequent fiscal revaluations of tax payments by pharmaceutical companies in Romania.”

The Bondoc & Asociatii team representing Europharm on the matter consisted of Managing Partner Lucian Bondoc, Partner Viorel Dinu, and Managing Associate Ioana Katona.

The Competition and Antitrust team of Goltsblat BLP — the Russian practice of Berwin Leighton Paisner — has successfully challenged a fine levied upon the Freight One company, which together with other railway operators, Russian Railways, and the authorities of the Kemerovo Region of Russia, had been accused by the Russian antimonopoly authority (FAS) of signing an anticompetitive agreement to transport coal.

In 2013, the FAS concluded that the parties had colluded in transporting coal from the Kemerovo Region, and imposed fines totalling more than RUB 2 billion. 

Freight One’s challenge of the USD 16 million fine levied upon it in the Moscow Arbitration Court — the court of first instance in the matter — involved findings of multiple economic studies, facts established during previous litigations, and new evidence presented to the court. Eventually, Goltsblat BLP reports, “the court recognised the FAS ruling as invalid and cancelled all resolutions regarding fines imposed on the parties accused of anticompetitive collusion.”

The Goltsblat BLP team was managed “from a strategic perspective” by Partners Nikolay Voznesenskiy and Anton Sitnikov, and the challenge itself was led by Vitaly Dianov, the Head of the firm’s Competition and Antitrust Group, supported by Andrey Neminuschiy and Artiom Ermoshin.  

Editor’s Note: In September, 2015, Goltsblat BLP reported that the ruling by the court of first instance had been upheld by the Russian Ninth Arbitration Court of Appeal.

Image Source: FotograFFF / Shutterstock.com