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Suciu Popa has announced that it advised Petrofac Solutions and Facilities Support on its acquisition by Expert Petroleum SPV. Leroy & Asociatii advised Expert Petroleum on the deal.

Expert Petroleum provides services related to extraction of crude petroleum and natural gas, and is a member of GMS Holdings which is present in Romania through Expert Petroleum SRL. 

Petrofac Solutions & Facilities Support SRL is a member of the Petrofac Group, which provides worldwide oil services to customers in the oil and natural gas industry. 

The Suciu Popa team consisted of Managing Partner Miruna Suciu, Partner Cleopatra Leahu, and Managing Associate Andrei Georgescu.

Leroy & Asociatii did not reply to our inquiries.

On 16 June 2016, Mateusz Morawiecki, Poland’s Deputy Prime Minister and Minister of Development, announced a new initiative – “Start in Poland” – the new government programme for the development and support of start-up companies.

The intention of the government is to introduce CEE’s biggest incentives package for entrepreneurs, engineers, IT developers and designers, specialised in new high technologies, and who are able to compete in international technology markets.

From an economic perspective, the programme is intended to provide a total amount of 3bln zlotys (z?), approximately 680m Euros financing for start-up companies. The financing will be available in all phases of start-ups – from “incubation” (on a pre-seed and seed stage), “acceleration” through to further development. The Ministry intends to involve state-owned companies as prospective customers of services and products provided by start-up companies in the programme. The target of the programme is to develop 1500 start-up companies within the next seven years. What is important is that the programme will be available to both Polish and foreign entrepreneurs, in particular for those of CEE origin, and it will be handled by the Polish Development Fund (http://www.pfr.pl) and the Polish Agency for Enterprise Development (http://www.parp.gov.pl/).

From a legal perspective, the programme envisages the introduction of the new simplified joint stock company (“SJSC”) in order to enable development and investments in start-ups. The concept of the SJSC is based on the French société par actions simplifiée company (“SAS”). The new SJSC is supposed to combine the advantages of a limited liability company and a joint stock company. The following principles are envisaged for the SJCS:

• online incorporation and registration via the online registry court, within 24 hours (online procedures are already available for incorporation and registration of partnerships and limited liability companies, with articles of association based on statutory templates);
• a minimum share capital of 1 z? – the concept of 1 z? companies has been criticised in Polish legal doctrine, but 100.000 z? is the minimum share capital for a joint stock company, unachievable for small start-up companies;
• a simplified know-how contribution procedure based on less stringent requirements as to the valuation of contributed know-how;
• simplified dematerialisation of shares without the necessity to apply provisions governing listed companies;
• different types of shares and classes of shares with different privileges and rights for different shareholders (currently different types of shares and classes of shares can be established in joint stock companies, but not in limited liability companies);
• more detailed regulation of investment agreements on a statutory level (currently, due to the lack of detailed statutory provisions, investment agreements are governed by the principle of freedom of contract);
• flexibility in respect of composition and powers of corporate bodies, and replacement of a mandatory supervisory board with an administrative body composed of managers and independent supervisors;
• a simplified voluntary winding-up procedure in the event of failure.

No further details or deadlines regarding legislative works have been announced so far. The Ministry has only indicated that the introduction of the SJSC is subject to further discussion and consultation with experts and representatives of entrepreneurs. It remains to be seen how this idea will be received by the market and how much time it will take to introduce it in practice.

By Katarzyna Terlecka, Partner, and Grzegorz Barszcz, Attorney at Law, Schoenherr

The long-awaited package of secondary legislation regarding renewables (“Secondary Legislation”) was finally adopted by the Government of Serbia on 13 June 2016.

The Secondary Legislation consists of the following decrees:

• The Decree on the Conditions and Procedure of the Acquisition, Duration and Termination of the Status of a Privileged Power Producer (“PPP”), Temporary Privileged Power Producer (“TPPP”) and Power Producer from Renewable Energy Sources (“Decree on PPP Status”); 
• The Decree on Incentive Measures for Electricity Generation from Renewable Energy Sources and from High-Efficiency Cogeneration of Heat and Power (“Incentives Decree”); and 
• The Decree on Power Purchase with a Standard Model Agreement (“PPA”) and Appendix to a Model Agreement. 

The Secondary Legislation was adopted with an almost six-month delay from the statutory deadline set under the Serbian Energy Act. Drafts of the Secondary Legislation, however, were published by the Serbian Ministry of Mining and Energy (“Ministry”) in September 2015 and were followed by the discussion period during which the Ministry received feedback on the drafts from interested parties.

The intent behind the new Secondary Legislation is to create more favourable investment conditions in RES, to improve bankability of local RES projects and, thus, to bring the Serbian legal framework in line with the EU Third Energy Package.

With the improvements introduced, the Secondary Legislation definitely presents a step in the right direction for creating a more favourable climate for developing/financing RES projects.

Decree on PPP status

Key provisions of the Decree on Privileged Producer Status include:

• Capped capacities for wind and solar power plants: maximum capacities for TPPP and PPP statuses for wind and solar power plants remain capped at: 
  • 500 MW for wind; 
  • 2 MW for rooftop solar up to 30 kW; 
  • 2 MW for rooftop solar between 30 kW-500 kW; 
  • 6 MW for ground-mounted solar up to 500 kW; and 

• Duration of TPPP status: 
  • the TPPP status (status acquired upon obtaining the construction permit after which the PPA may be concluded) is valid for the period of three years (for solar – one year) during which the project must be completed. The TPPP status may be extended under specific conditions such as force majeure. 

Incentives Decree

One of the key introductions to the Incentives Decree is the inclusion of the ‘maximum annual effective operation time’ for all types of plants, which is capped and included in the calculation of the incentive purchase price.

Other key provisions of the Incentives Decree include:

• The incentive period: 
  • the incentive period remains 12 years, and starts from the acquisition of the PPP status; 

• FiT:  
  • feed in tariffs (“FiT”) are indexed according to Eurozone inflation; 
  • excess electricity produced from a wind power plant over the ‘maximum produced electricity’ (which corresponds to the established ‘maximum annual effective operation time’) will be purchased at 35 % of the corresponding FiT;  
  • electricity produced during TPPP status (commissioning phase) will be purchased at 50 % of the corresponding FiT; and 

• Subsequent changes in law:  
  • changes in legislation which ultimately lead to an increase in producer’s expenses, shall result in the corresponding increase of FiT. The increase of FiT is conditional upon the Ministry’s/Government’s consent obtainable upon demonstrating the negative effect of such change to the producer’s financial position.

PPA

As anticipated, the new draft PPA Model is primarily directed at overcoming bankability issues.

Some of the new key features of the PPA Model are:

• No preliminary PPA: 
  • the possibility to conclude the PPA immediately upon obtaining TPPP status (no more controversial preliminary PPA); 

• Transfer of PPA: 
  • a new template for the step-in agreement between the lenders, producer and the off-taker has been envisaged. However, the possibility to execute such agreement is reserved only for projects exceeding 30MW; 

• International arbitration: 
  • a dispute resolution mechanism introduces two possibilities for international arbitration: 1) under International Chamber of Commerce rules – seat in Paris, and 2) under the rules of Vienna International Arbitral Centre – seat in Vienna;  
  • international arbitration may be invoked if the producer is in direct or indirect ownership of a foreign entity, or if the project is financed by a foreign financial institution; and 

• Change in law:
  • an off-taker is obliged to change the price of electricity based on new FiT pursuant to the abovementioned change-in-law rules. 

Key deviations from drafts of Secondary Legislation

The Secondary Legislation contains improvements when compared to the drafts published in September 2016.

These include:

• Decree on PPP status 
  • in the case of the termination of TPPP or PPP status of the producer, lenders or their agents may introduce a new privileged producer within three months as of the termination of such status. This right is reserved only for projects over 30MW; 

• Incentives Decree 
  • 35 % of the FiT for the excess electricity produced paid only for wind power projects; 
  • removal of the limitation that the increase of FiT (due to changes in law) will not be recognised if unjustifiable and if this will jeopardise the interests of the public; 
  • ‘change in law’ now excludes non-discriminatory, across-the-board, legislation that applies to all legal entities in Serbia (for instance a universal increase in corporate income tax); 

• PPA 
  • direct transfer of the PPA from a defaulting borrower/producer to a new entity is regulated more effectively through a separate step-in agreement concluded between the producer, off-taker and the lenders (reserved only for projects over 30MW); 
  • international arbitration may be invoked if the producer is financed by a foreign financial institution (not only if (ultimate) shareholders are foreign entities); and 
  • a producer may now terminate the PPA if the off-taker is in delay of settling any payments due, instead of being in delay with three consecutive payments.

By Milos Lakovic, Partner, and Aleksandra Petrovic, Associate, Schoenherr

Redcliffe Partners has acts as Ukrainian law adviser to the Astarta Group in connection with its obtaining export financing from AKA Bank.

According to a Redcliffe Partners press release, “the financing was extended to the Astarta Group for purchasing German agricultural equipment; accordingly, it has been supported by a guarantee from Euler Hermes, a German export credit agency.”

Redcliffe’s team included Managing Partner Olexiy Soshenko, Counsel Dmytro Orendarets, and Junior Associate Olesia Mykhailenko.

Eversheds Ots & Co has advised both buyer Tornator Eesti OU and seller Mestnik on the acquisition by the former of 7,500 hectares of forestland in Estonia from the latter, in what the firm calls “one of the largest forest sale transactions in Estonia, involving a transfer of forest and other land in mainland Estonia and on Saare and Hiiu Islands.”

Tornator Eesti is the Estonian subsidiary of the Finnish forestry company Tornator Oyj. With nearly 50,000 hectares of agricultural and forestry land in Estonia, Tornator is the country’s largest private landowner. The company grows forests and sells harvesting rights to local buyers, mainly harvesting companies. In 2014, the Estonian operations generated some EUR 1.8 million in sales. 

The Everheds Ots & Co advisory team was lead by Real Estate Partner Randu Riiberg.

The Vilnius and Tallinn law offices of Glimstedt have advised distribution and logistics provider Sanitex on the acquisition of 100% of shares in Agora DC from Landcom, a company engaged in warehousing, transportation, and other logistics services. Raidla Ellex advised Landcom on the deal, which closed on June 9, 2016.

Glimstedt’s team was led in Lithuania by Partner Kestutis Jaskutelis and Associate Partner Ausra Maliauskaite-Embrekte. The firm’s Estonian team was led by Partner Leho Pihkva.

The Raidla Ellex team was led by Senior Partner Juri Raidla, Counsel Martin Kaerdi, Senior Associate Martin Maesalu, and Lawyer Triin Tiru.

With the recent Hague Tribunal judgment, Bosnia and Herzegovina (B&H) can at last draw a line under its turbulent past and look to the future. Political, social, economic, and legal stability are imperative for the country to seek and secure international investment, especially in relation to real estate.

The country’s great potential for real estate investment is there for all to see. It enjoys a stable macroeconomic climate, a favorable tax regime, a competitive labor force, and clear prospects for entry into the European Union. There is reform momentum across the region, and B&H has started implementing the reform Agenda prepared with the help of the European Commission and international financial institutions (IFIs).

The real estate market in B&H is very similar to that of other Western Balkan countries: acquisitions and developments occur between multinational companies or foreign individuals who have access to external financing. Properties are, in general, a much better value for money than in other countries of the region. The cost of living is also much cheaper, and yet access to beautiful cities such as Dubrovnik and Split is very easy.

The most important point to note is that foreign investors have the same rights of ownership in B&H as B&H citizens. However, permission from the government is required if there is no reciprocity between B&H and the investor’s country of origin. The reciprocity exists, for example, with the UK, France, Germany, Spain, Russia, Australia, Italy, Norway, and Denmark – which means that investors from these countries, including companies registered in them, can buy property in B&H with no restrictions.

With this in mind, acquiring real estate in Bosnia can be much easier (and therefore less expensive!) than in some other Western Balkan countries.

Purchasing Freehold in B&H Directly

A brief summary of the steps involved is as follows: (1) The vendor and purchaser enter into a sales contract (this contract can be signed for the purchaser by a representative who is resident in B&H). The contract confirms the agreed price and that both parties are legally obliged to complete and register the transfer; (2) No permission to purchase is required for foreign investors; (3) The purchaser pays a deposit of 3-5% of the agreed selling price to the vendor; (4) The property is registered with the local court and recorded with the local municipality cadaster (unification of both is now also required, according to a law that has only just been implemented); and (5) The property title registration is split into three: the proprietor; the description of the property; and details of any charges/encumbrances such as mortgages. 

As is the case with the whole of the Western Balkans region, ensuring clean title is essential, and working closely with local lawyers is necessary for this to happen.

Purchasing Real Estate Through a SPV

It is also possible to acquire real estate in B&H via the incorporation of a company. The average cost of acquiring real estate this way is approximately EUR 3000 – which includes public notary fees, certified court interpreter translations, taxes, and all other relevant disbursements (including an initial capital contribution of EUR 1000 which can be withdrawn the day after incorporation). An investor would then have similar duties to those that exist in other countries around the world, such as maintenance of accounts, etc. The incorporation process is relatively quick in B&H and can be done within a three-week time frame.

As one would expect, the property transfer has to be registered with the appropriate local authority and each party to the contract must fulfill the conditions set out in the contract and, most importantly, the purchaser must pay the outstanding balance. There is also a property transfer tax of 5% that is payable on completion. The obligation to pay this tax is generally with the purchaser but can be passed on to the vendor if stipulated and agreed under the contract of sale.

Whether an investor purchases real estate directly or via an SPV, ensuring clean title is paramount, and working closely with local lawyers is essential for this to happen.

Looking Ahead

The fact that all of the region’s economies – including B&H’s – grew last year is encouraging, and commentators expect further growth in most Western Balkans countries in 2016, albeit still at levels below their potential.

The backing of global investors such as the EBRD, which is one of the largest institutional investors in the country, shows that confidence and stability are slowly returning to B&H, which can only help the country to realize its potential.

B&H can attract much more real estate investment. To ensure it does, it is imperative that structural and legal reforms carry on and the country continues to have economic and political stability. Let’s hope now that we are able to showcase B&H’s many strengths, and let’s invite real estate investors the world over to join us in realizing its potential!

By Petar Orlic, Partner, and Josip Stajfer, Associate, Faegre Baker Daniels LLP

This Article was originally published in Issue 3.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Looking at the legal aspects of the real estate practice in Serbia, one would be hard-pressed to find a more significant occurrence than the recent introduction of the new General Urban Plan (GUP) for Belgrade.

Thirteen years had passed since the last plan of that kind was adopted, giving room for a wealth of updates this time around. Belgrade’s mayor has declared the new plan to be a strategic document of great importance and a basis for the city’s overall modernization, new investments, and new job positions, all of which are included in the government’s short and long-term goals. 

The Republic of Serbia also adopted a general pyramidal structure of plans. The plans can, as a consequence, be divided into “zoning plans” (providing the general concept for the development of an area) and “urban plans” (general or detailed plans providing more construction/urban parameters). The GUP, in terms of its subject matter, is a strategic plan providing guidance for the development of the City of Belgrade. This means that its implementation would (for most areas) require preparation of detailed urban plans to provide specific construction/urban parameters to be applied when constructing a facility.

In order to provide a more in-depth look at the GUP itself, as well as its related implications, we should start with what exactly the plan entails. To start with, the GUP defines specific boundaries (including the scope of the construction area), the borders of the general regulation plans for the entire construction area, the general purpose areas that are predominantly planned in the construction area at the level of urban zones, and the general directions and corridors for traffic, energy, water management, utilities, and other key infrastructural elements. Furthermore, the entire scope of the GUP can best be perceived when taking into consideration that the total territory of the City of Belgrade is around 322,000 hectares, with the territory covered by the GUP totaling 77,851 hectares – 57,000 of which are taken up by designated construction areas. City officials claim that the main tangible focus points of the GUP are the relocation of commercial and industrial facilities from the central city zone into suburban areas, the preservation of agricultural land in the peripheral zone, and the retrofitting of transport and utilities infrastructures. In addition, certain areas have been labeled as being of “special interest” in the GUP and are defined as future large city projects. Examples of these projects include the Sava amphitheater and shipyard, the Belgrade Waterfront project, Ada Huja island, commercial zones along the Batajnica-Dobanovci road, and the military complex in Surcin.

The adoption of the GUP also provides the conditions needed for the realization of a large number of residential, commercial, and industrial complexes. The newly formulated urbanization process in new urban zones is meant to forestall the possibility of illegal construction, while the old factories remaining in the central city area are intended to be transformed into commercial and other kinds of similar facilities. The GUP also presents the introduction of the “mixed-use” concept, a regulatory innovation that allows for the combination of housing with commercial contents, and thus represents a more flexible utilization of urban land properties. Calling upon the concrete nature of these plans, Belgrade city officials have professed their expectation that the GUP will be a big boost to industry in general, as well as a fundamental aspect of anticipated future investments. 

As is the case with any other regulatory change or update, there are a variety of viewpoints one can take – especially depending on one’s area of expertise. However, the biggest legislative benefit of the GUP is the much clearer definition of infrastructural elements, meant to make the process of issuing building permits run significantly faster. Still, a word of caution should perhaps be given to the introduction of the aforementioned “mixed-use” concept, wherein the combination of commercial and housing purposes in a single property has, in some cases, turned out to hinder the overall rentability of such objects.

By Dragan Karanovic, Senior Partner, and Ana Lukovic, Senior Associate, Karanovic & Nikolic

This Article was originally published in Issue 3.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Having reached its financial crisis-instigated bottoms in 2009 and 2013, the Slovenian real estate market started showing first signs of recovery in mid-2015 and has since gathered steady momentum, slowly bringing itself towards its pre-crisis levels.

A Brief Statistical Outline

According to the Surveying and Mapping Authority of the Republic of Slovenia, the first half of 2015 saw the completion of over 13,300 real estate-related transactions in a total amount topping EUR 720 million, with the residential and the commercial real estate markets seeing an increase in the number of transactions by 29% and 38%, respectively, compared to the same period in bottom-hitting 2013. According to the Statistical Office of the Republic of Slovenia, the number of transactions in the residential market peaked at 9,314, nearly reaching the all-time high of 10,119 in 2007. Trends regarding the sales of construction land have been less encouraging, with the number of transactions approaching its lowest point since 2009.

The positive trend in the residential market, however, which to a large extent is due to the repeated lowering of interest rates for mortgage loans, kept its impetus in the second half of 2015, contributing to a price increase of 5.2% for newly-built apartments. On the other hand, an aging population and decreased migration into the country has led to a significant increase in the supply of family houses available for sale, resulting in a price decrease of 4.3% compared to the previous year. The overall average price of residential real estate rose by 0.8% in 2015, representing the first increase of the kind in three years.

BAMC’s Impact on the Market

Considering the magnitude of its portfolio, further developments in the Slovenian real estate market depend to a notable extent on the future policy of the Bank Assets Management Company (“BAMC”). BAMC is a State-owned company established to facilitate the restructuring of systemic Slovenian banks, which – to stabilize them – entailed the transfer of their non-performing assets to BAMC. Consequently, BAMC holds in its portfolio real estate assets worth over EUR 80 million, along with real estate-related claims exceeding EUR 1 billion in value.

BAMC’s real estate portfolio consists of over a thousand real estate units. Since its establishment in 2013, BAMC has only managed to sell 29 real estate units for a cumulative amount of EUR 3.8 million, meaning that the largest portion of its real estate assets remains to be sold. Among these remaining assets are two large residential complexes in Ljubljana and Koper, with 227 and 215 individual residential units respectively. Both complexes are expected to be renovated prior to their sale, and once they are put on the market along with the other units, the significant increase of supply which is expected to result should put pressure on the prices of residential units across the country.

Anticipated Legislative Changes

Rigid, over-detailed, and impractical legislation in the field of new construction has often been singled out as a primary hindrance for real estate-related investment. Seeking to remedy the problem, on November 20, 2015, the Ministry for Environment and Spatial Planning of the Republic of Slovenia launched a public debate on drafts of three new legislative acts: the Spatial Management Act, the Building Code, and the Chartered Architects and Engineers Act. The drafts of these legislative acts are aimed at providing an increased flexibility to the process of spatial planning, reducing the risks usually incurred by investors, and providing a more suitable regulation of the professions pertaining to the field of real estate development (i.e., authorized architect, landscape architect, spatial planner, land surveyor, and engineer).

Furthermore, by focusing on optimizing the structure of tax burdens and hence improving economic growth, and having seen its previous attempt fail in 2014, the Ministry of Finance of the Republic of Slovenia plans to introduce a new system of real property taxation by 2017. The resulting income would fall entirely within the domain of the budgets of local municipalities and thus allow for more flexible and efficient spatial planning on the local level.

The proposed legislative amendments are expected to have a positive effect on the currently negative trend of sales of construction land and related real estate development. As to future price movements, especially in the residential market, much is thought to depend on further steps taken by BAMC and its newly appointed non-executive member of the board of directors, who has extensive experience in the real estate sector.

By Branko Ilic, Partner, and Tine Misic, Associate, ODI Law

This Article was originally published in Issue 3.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Could Real Estate Investments in Dire Financial Times Turn From High-Risk Ideas to No-Brainers?

Over the last seven years, Greece has been under an austerity restructuring program, receiving extended aid from European financial institutions and international creditors in an attempt to tackle its overly high deficits and incessant market stagnation. This year did not get off to a flying start for financial markets, and in particular the Greek real estate market, which – following a long period of significant contraction – remains subdued and of uncertain outlook.

The question that pops up is when is the right time to invest. All investors – both seasoned and novice – wish for the ability to master the market’s intricacies and perfectly predict market swings when formulating their strategies. Sadly, however, most of the markets are governed by random action, making it practically impossible for investors to build and develop investment projects on the basis of current market yields. Things seem to be even more complicated when investors are called to invest in times of financial meltdowns and inevitable crashes.

Let’s zoom in on the Greek commercial real estate market. In a nutshell, a slowing economy, tight credit standards, and liquidity shortages have curtailed real estate activity, leading to business bankruptcy, higher vacancies, and investment reluctance. In addition, business activities and investment interest appear to have been further severely affected by the adverse and volatile legal framework regulating real property tax. Real estate taxation has been a thorny issue for Greek government, lenders, and investors alike, with the government insisting on higher taxes across the board and planning to increase the rates of ENFIA – the tax levied annually on property located in Greece on the basis of specific coefficients (e.g., size, location, zone price, surface, age, and use).

On the good news side, the Greek real estate sector has not ceased to offer a wide range of property investment opportunities, including prime commercial properties, real estate development projects, vacant units, and unused commercial premises, along with secondary retail, warehouses, and non-prime office buildings, frequently featuring investor-friendly assets such as soundness of location, current and future infrastructure initiatives, optimal urban planning, and migration patterns. Unfortunately, while investors would theoretically want to get their hands on such real properties, Greece’s current overextension and inability to make good on its debts hold them back – or at least this seems to apply to the conservative investing approach.

However, aggressive investors generally agree that when times are bleak, that is the time to invest. Accepting a relatively high degree of risk and always being prone to whipsaw actions, they aspire to draw trend lines allowing low entry points in hopes that they will come out on top in the mid-term. From a Greek market point of view, safety-sensitive strategies usually turn in favor of the investors when they are built as time-tested techniques – i.e., investing a set amount of money on a certain asset for a specific time frame. Thanks to the current depressed prices, the Greek real estate market appears to be open to such techniques, favoring investments that – despite the high risk involved – may easily turn out to be safe bets. The number of international investors already testing an aggressive approach in the Greek territory, such as Fairfax Holdings and – most recently – Landis+Gyr, would appear to confirm this analysis.

An attempt at a reality check would confirm that prime real estate prices are currently relatively low, indicating only a slight chance of minimization in the immediate future and, therefore, any ups and downs in the market will cause little harm in overall investments. However, a potential risk that needs to be assessed prior to any investment decision involves the real estate taxation developments. The upcoming few months will indicate whether the government is planning to stick with the current property taxation system or whether everything will change again for property owners and potential investors. Until then, investors will have enough time to determine whether the current dire economic straits call for strong intuition or solid risk assessment strategies.

By Panagiotis Drakopoulos, Senior Partner, and Mariliza Kyparissi, Senior Asssociate, Drakopoulos Law Firm

This Article was originally published in Issue 3.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.