prospects Sredets solar power park sales particulars Sustainable - - PDF document

BG D Sredets solar power park sales particulars Sustainable investment within the EU: Bulgaria

Lucrative

prospects

The foundations of ABG were laid in 1990 by the formation of ABG Allgemeine Beratungs- und Treuhandgesesellschaft mbH, Steuerberatungsgesellschaft, a trust company and tax consultancy. In the following years audit and consultancy, real estate and truck management services were added. The Group has been working with partners in the field of renewable energy in Germany for some 10 years. They have been involved in planning various solar, wind park and hydroelectric power plants as well the commercial and technical management.

Due to its location Bulgaria is a „land of sun“, comparable with Spain. The sun - an endless supply of energy and income.

Time to

reconsider

Index of contents

The ABG group of companies Bulgaria: the country and key data Solar energy: the facts Project participants Contractual basis Tax basis A-B-G Security package Project details – location & site Technical description Sredets solar power park at a glance

Page

3 4 6 7 8 10 12 14 15 16

Today the ABG Group consists of . ABG-Partner in the consulting field, . ABG-Energy in the renewable energy field. ABG Energy has been involved with re- newable energy in Bulgaria since 2006. In the last two years specific solar energy projects have been developed. ABG-Energy GmbH was founded in 2010 as a platform for all companies working together in the field of renewable energy. ABG-Partner has been advising Bulga- rian companies operating in Germany

• n tax issues for some 11 years. ABG-

Partner’s operations in Germany are focussed primarily on Bavaria and

• Saxony. In conjunction with the Bulgari-

an partner ACTIV, in 2008 the company founded ACTIV ABG OOD, a tax and accounting consultancy supporting clients in Varna with their international

• perations. Audit and legal consultancy

services are provided by ACTIV OOD in

• Bulgaria. With this cross-border expertise

we are able to provide a specific yet com- prehensive range of services to clients seeking to set up operations in Bulgaria.

A partnership from inside out – from Bavaria and Saxony to Bulgaria

Dresden Bayreuth Munich Varna Sofia

The ABG-Group . 3

The Country

The Republic of Bulgaria lies in the north eastern section of the Balkan peninsular. Its neighbouring countries are Romania in the north, Turkey and Greece in the south and Serbia and Macedonia in the west. The Black Sea is to the east of the country.

Key Data:

The country has been a member of the European Union since 01.01.2007. The country is governed by parliamentary democracy. The Bulgarian National Assembly consists of 240 delegates. They are voted in for 4 years. The last elections took place in 2009. 110.994 km² By the end of 2008 the population consisted of 7.6m inhabitants. The religious denominations are as follows:

• Approx. 85% orthodox Christian
• Approx. 12% Muslim
• Approx. 10% Turkish
• Approx. 3% Roma

The capital city of Bulgaria is Sofia (approx. 1.2m inhabitants). Other key cities include Plovdiv (approx. 523,000 inhabitants), Varna (approx. 378,000 inhabitants) and Burgas (approx. 300,000 inhabitants). The local currency is the Lev. Based on the Currency Board determined by law, the Lev has been tied to the Euro (previously Deutschmark) since 1997. There is therefore no currency risk. Money transfers between Bulgaria and other states are freely convertible; occasionally notification with the National Bank may be required. Due to its relatively stable state finances Bulgaria has not yet sought funding from the International Monetary Fund, as has been the case with many other eastern European countries (Hungary, Romania, Greece). National debt runs at only 18.2% of GDP . General conditions have improved considerably since the country entered the EU in

• 2007. However there remains a pressing need for reforms to the legal system and to

remove the chains of bureaucratisation. 2,9% (2010) 9,5% (2010) Bulgaria is an agricultural country. Fruit and vegetables in particular are cultivated. The country’s other key industries are tourism, engineering, metal industry, textiles and software development. Due to its geographical location Bulgaria is ideally positioned for the generation of renewable energy. In recent years it has focussed on the generation of hydro-electric power and wind energy. Last year the government began to focus on the building of photovoltaic plants. Bulgaria is also involved in the planned „Nabucco“ and „South Stream“ major gas pipeline projects. Bulgaria is largely dependent on coal (49%) and nuclear (38%) power stations. The majority of its energy is currently imported, mainly from Russia. As of 2008 Bulgarian tax legislation applies a flat rate of 10% on all income, i.e. from natural and legal persons. On 02.06.1987 a double taxation treaty was signed between Bulgaria and Germany to avoid double taxation on income and assets. In a session held on 09.07.2010 the German Bundesrat approved the draft for a new Double Taxation Treaty (DTT). The new DTT is similar to OECD sample treaties in terms of its structure and content. Nationals and foreign investors are considered equal. Foreign investors can hold full shareholdings in companies. The legal forms of Bulgarian companies are comparable with those in Germany. The most common type of company in Bulgaria is the limited liability company. For a one-man limited company this is known as EOOD, for several shareholders as OOD. However, depending on the form of participation, the (E)OOD & Co. KD form (comparable with a limited partnership with a limited liability company) it can be more advantageous for foreign investors. The potential benefits should be discussed individually with a tax adviser. EU Political System Area Population Key Cities Currency System Economic Situation Inflation Unemployment Key Economic Sectors Energy Tax Legislation Investment Conditions

Key information

at a Glance

Sofia Plovdiv Varna Burgas Sredets solar power park Rumania Black Sea Turkey Greece Mazedonia Serbia Aegean Sea Bulgaria

General Map of the Republic of Bulgaria

4 . Bulgarien: the Country and Key Data

The climatic conditions in Bulgaria are suited to building photovoltaic plants due to the geographic location. As can be seen from the solar chart below, the Sredets – Burgas region with a global radiation of 1,500 to 1,550 kWh/m² per annum is among the best solar locations in Bulgaria. According to current energy legislation from June 2011, energy suppliers are obliged to use the energy produced by photovoltaic plants for a period of 20 years. The re- levant legislation includes the EEBG. These regulations govern the obligations of the energy suppliers to use the power supplied and pay a fixed power supply rate. Since June 2011 the rate is 24.8 cent / kWh. Climatic conditions Legislation Solar map of Bulgaria

the Facts

Solar Energy:

Jährliche Strahlung [kWh/m²] Jährlich gewonnene Elektrizität pro 1kWpeak System mit Nutzungsgrad 0,75 [kWh/kWpeak] 1.350 1.400 1.450 1.500 1.550 1.600 1.650 1.700 1.750+ 1.013 1.050 1.088 1.125 1.163 1.200 1.238 1.275 1.313+ 50 100 km

Annual solar radiation [kWh/m²] Annual won electricity per 1kWpeak System with efficiency 0,75 [kWh/kWpeak] 1.350 1.400 1.450 1.500 1.550 1.600 1.650 1.700 1.750+ 1.013 1.050 1.088 1.125 1.163 1.200 1.238 1.275 1.313+ 50 100 km Jährliche Strahlung [kWh/m²] Jährlich gewonnene Elektrizität pro 1kWpeak System mit Nutzungsgrad 0,75 [kWh/kWpeak] 1.350 1.400 1.450 1.500 1.550 1.600 1.650 1.700 1.750+ 1.013 1.050 1.088 1.125 1.163 1.200 1.238 1.275 1.313+ 50 100 km

ABG-Energy undertakes projects for renewable energy in the photovoltaic, hydropower and wind sectors in conjunction with expert partners. ABG-Energy‘s Bavarian office is in Munich and it also has a Saxony office in Dresden. ABG-Partner is a group of consultancy firms offering tax advice, audit and corporate consultancy. Its German offices are in Munich, Dresden and Bayreuth. The group handles commercial procedures and advises investors on financial and tax issues for individual projects. In Bulgaria ABG-Partner acts with its Bulgarian partner ACTIV GmbH under the joint company ACTIV ABG GmbH in the Varna and Sofia branches. The collaboration of ABG-Partner and ACTIV ensures cross-border support. The ACTIV Group is an association of medium-sized consultancy firms operating in the fields of tax advice, audit, corporate and legal consultancy with branches in Varna, Sofia, Dobritsch and Schumen. Project Development Project-ABG Consult GmbH & Co. KG is based in Varna. The company undertakes turnkey projects in association with Bulgarian and reputable international partners. ILF Beratende Ingenieure comprises several international independent engineering and consultancy firms. ILF helps customers with complex needs to carry out sophisticated industrial and infrastructure projects. The ILF companies are among the leading engineering firms in the world today. At their main locations in Innsbruck and Munich and over 30 branches and subsidiaries worldwide, more than 1600 staff design and implement successful project solutions for international customers. The ILF companies are certified to ISO 9001. ABG-Energy www.abg-energy.eu ABG-Partner www.abg-partner.eu ACTIV ABG www.ACTIVABG.bg ACTIV www.ACTIV.bg Project-ABG Consult GmbH & Co. KG ILF Beratende Ingenieure

Project Participants

Project Participants . 7 6 . Solar Energy: The Facts

General Contractor The solar park is being set up in conjunction with a reputable international general contractor. Suppliers Large, international premium supplier. SMA Solar Technology AG has its headquarters in Niestetal near Kassel and is also represented on four continents by thirteen oversees companies. The group of companies employs over 5,500 staff (including temporary workers) and has won numerous awards in recent years for outstanding services as an employer. The company has been registered on the Frankfurt Stock Exchange Prime Standard since 27th June 2008, and since 22nd September 2008 the shares have been listed

• n the TecDAX.

Schletter was founded in 1968 and focuses on the production of windows and facade parts as well as aluminium processing. In 1983 „Schletter GmbH“ was registered as a craftsman‘s establishment. Today the company operates worldwide and has a global

• network. Schletter is respected throughout the world and is synonymous with high

quality products. Project-ABG Consult Modules SMA Solar Technology AG (inverters) Schletter GmbH (assembly system) The investor purchases all holdings in the limited partnership from the members as well as the private limited company. Each site is owned by the individual operating companies, i.e. after the production period according to the Energy Act, it can either be sold or the plant can continue to be operated. All forms of permission for the operation of the photovoltaic plant are owned by the individual operating companies. Project-ABG Consult GmbH & Co. KG shall run the project until completion and approval. After commissioning Project-ABG Consult GmbH & Co. KG shall perform the plant technical services (maintenance, monitoring etc.). ACTIV ABG GmbH shall undertake the commercial services (accounts, tax declaration, energy supplier invoices etc.). This will therefore further ensure comprehensive cross-border support of the photovoltaic plant after the investment. Energy-ABG Consult GmbH & Co. KG

• perating company

Planning permission Supply contract

Project-ABG Consult GmbH & Co. KG

General contractor Technical management

ACTIV ABG GmbH

Commercial management Parent company

ABG Consult GmbH

Land Purchase of Commissioning Commissioning Sale to

Private limited adminis- trative company Investor

Contractual Obligations

Contract Contractual partners Key contract terms Limited partnership contracts Partnership agreement Energy 1-6 GmbH & Co. KG governs the articles and running of the company Limited partnership share assignment members the members assign their holding in the limited partnership capital to the investor Limited company contracts Sale of Limited partnership holdings to the limited administrative company ABG Consult GmbH According to Bulgarian law the limited administrative company must have a holding in the assets of the limited partnership (in this case 2%). The holding previously owned by ABG Consult GmbH must be sold to a limited administrative company, to be set up. Articles of association private limited company to be formed governs the articles and running of the company Other contracts Site purchase contract ABG Consult GmbH ABG Consult GmbH has sold the sites to the individual operating companies. Plant purchase contract Project-ABG Consult GmbH & Co. KG Project-ABG Consult GmbH & co. KG supplies the turnkey play including modules and inverters Mains connection and energy supply contract EVN-Bulgaria Contact in accordance with EEBG Service and management contract

• technical
• commercial

Project-ABG Consult GmbH & Co. KG, ACTIV ABG GmbH Service and management to be undertaken for the entire durati-

• n by Project ABG Consult GmbH & Co. KG and ACTIV ABG GmbH.

Basis

Contractual

Contractual Basis . 9 8 . Contractual Basis

We shall now set out the key tax principles of investing in the Sredets solar power park. It is assumed that the investors are natural persons or capi- tal companies based in Germany and not in Bulgaria, with unlimited income tax liability. Naturally not all tax related aspects of an investment can be considered as these will vary depending on the personal circumstances of the individual investor. Investors should therefore consult with a tax adviser who will advise or potential individual tax implications of the investment. The main tax consideration of this investment opportunity is that German investors are investing directly in the Bulgarian partnership (operating com- pany limited partnership with a limited liability company). Investors in Bulgaria have the advantage of excellent Bul- garian tax rates (flat rate of 10%). Income from the Bulgarian partnership is exempt from tax in Germany, as a result of the double taxation treaty signedbetween the Federal Republic

• f Germany and Bulgaria to avoid

double taxation on income and assets (hereafter referred to as DTT or “Double Taxation Treaty”. The right of taxation for all income gene- rated from the Bulgarian photovoltaic plant resides therefore with Bulgaria

• alone. It is therefore exempt from tax

in Germany. If the investor is a natural person, income is taxed respectively at the “progressive tax rates”. Taxation of income from a Bulgarian partnership a) in Bulgaria The operating company is a partnership with unlimited tax liability in Bulgaria. Unlike in Germany, it is considered in Bulgaria to be a non-transparent company, i.e. it is taxed as a capital company and therefore as a legal entity in its own right. Profits are taxed in Bulgaria at 10%. b) in Germany From a German perspective the “Koman- ditno drushestwo” (“KD”) can be con- sidered a limited partnership. Income of a Bulgarian partnership resulting from the generation and sale of power constitutes income from a business enterprise, from a German perspective. Consequently the Bulgarian partnership is treated as a general commercial partnership and persons involved in the Bulgarian partnership are treated as general commercial partners. The generation and sale of power are considered to be an active occupation under the terms of the DTT. It can there- fore be assumed that income generated from the operating company is exempt, but with progressive tax rates applicable. Dividend payments are subject to a 5% withholding tax, corresponding to a net taxation of 4.5%. The following table shows the different taxation effects on a German investor. In principle it is desirable for a German investor as a natural person to invest in a Bulgarian partnership. Taxation comparison by legal forms between Germany and Bulgaria If the investor desires a different type of legal form, according to the Bulgarian Conversions Act a Bulgarian partnership can be changed into a capital company.

Germany Bulgaria Partnership Capital Company Excluding dividends natural person 10 % 10 % capital company 10 % 10 % Including dividends natural person 14,5% 33,5% capital company 11,3% 11,3%

Basis

Tax

Tax Basis . 11 10 . Tax Basis

Ownership guarantee The sites are the property of the respective operating company. This also applies to the individual permissions required to run a photovoltaic plant, i.e. after the production period the owner can decide whether to continue running the plant or sell. Approval guarantee and revenue guarantee According to the Bulgarian Energy Act, energy suppliers are obliged to use the power supply produced by the operating company for a period of 20 years as well as pay a fixed power supply rate. The energy suppliers in Bulgaria are EON (Germany), EVN (Austria) and CEZ (Czech Republic). A supply contract exists with EVN for the Sredets project. Secure Energy Unlike other renewable energies, the sun is a constant supplier of power. On average there are around 1500 sun hours in Bulgaria. Payment The investor only pays the purchase price once the solar power park has been completed and approved. Insurances The insurances are held with a first-class European premium insurer. They cover all damage to the electronics and business interruption. Long-term warranties – exclusively premium partners The premium solar modules are purchased from one of the world‘s largest solar

• manufacturers. The manufacturer offers a 25 year performance warranty on the
• modules. A performance rate of 90% is guaranteed for the first 10 years on all

modules, followed by a rate of 80% for the next 15 years. The other moving parts generally come with a 5 year warranty. Project planning and site monitoring by ILF ILF, an international engineering consultancy, will support the project, both in the project planning phase and the building phase, to ensure optimum planning and building work. Technical, fiscal and legal certificate The project documents are examined by independent technical and legal consultan- cies as part of due diligence procedures. The documents are also accepted by banks. Security When the plant has been constructed a security company will protect the plant 24 hours a day. A contract will be awarded by Project-ABG Consult GmbH & Co. KG. Monitoring When the plant has been constructed a specially designed monitoring system will continually assess its functionality to rectify potential error sources as quickly as possible. Regular maintenance and service The contract partners commissioned by Project-ABG Consult GmbH & Co. KG shall provide regular, professional plant maintenance throughout the 25 year term. Cross-border support – tax and legal advice Project-ABG Consult GmbH & Co. KG and its partners will provide ongoing comprehensive cross-border support between Germany and Bulgaria, including after the plant has been commissioned, to ensure continued secure earnings for the investor.

A.B.G-Security Package

Secure, sustained investment with ABG

A.B.G-Security Package . 13 12 . A.B.G-Security Package

Location

The photovoltaic plant is close to Sredets, a district approximately 40 km from

• Burgas. The district covers an area of

1146 km². In addition to the town of Sredets there are 32 villages.

Site

The site is 3.5 km north of Sredets near to route 539 which leads to the town of

• Dyulevo. The site covers an area of

37.67 ha. The site has good connections to the nearby town and is therefore within good reaching distance. All necessary services (maintenance, repairs, security) can therefore be performed easily.

Project Details

Sofia Plovdiv Varna Burgas Sredets solar power park Bulgaria

Technical Description

The photovoltaic power plant project area

• f 37.67 ha is divided into 8 separate
• plants. These 8 plants with a combined
• utput of 12 MW are divided into 4 x 2

MW and 4 x 1 MW. The energy is trans- ferred to the local energy supplier EVN via a 3 km long, 20 kV medium voltage cable; the energy for each plant is metered in a central project substation. The specially designed monitoring system ensures that all project-related data (such as energy yield) is continually stored and transferred to the project homepage. The homepage can be accessed at any time to view the current data. The ongoing monitoring of all technical readings also means that any faults can be diagnosed and dealt with as swiftly as possible. The 8 plants are all individually fenced and equipped with high resolution cameras as well as touch-sensitive fence monitoring. A 24 hour manned safety office, which continually moni- tors all 8 plants, ensures an optimum level of safety. Layout of the individual sites of the solar power park Burgas Kameno Sredets Dyulevo 6 9 79 79 539 539

Sredets solar power park Black Sea

Technical Description . 15

Partners Seller ABG-Energy ABG-Partner Project Location Volume Product description Number of operating companies Building start / end dates Ownership form Purchase price payment Project partners Certificate Monitoring/Security Service/maintenance Tax and legal advice Location Bulgaria Sun hours Income guarantee Tax Legislation Double taxation treaty Currency Investor profile

Update: June 2011

Project-ABG Consult & Co. KG . Member of ABG-Energy GmbH Christian Urban Marinka Enikova Waldstraße 6d Dunav 5 D-82205 Gilching BG-9000 Varna fon: (+49) 8105- 779971 fon: (+3 59) 52- 648811 mobile: (+49) 151- 15144780 mobile: (+3 59) 889- 873881 email: urban@abg-energy.eu email: enikova@projekt-abg.eu

www.abg-energy.eu

Sredets solar power park

Project-ABG Consult GmbH & Co. KG, Varna – an ABG Energy company Involved in the renewable energy sector for 10 years Tax consultancy and audit partner in Bavaria and Saxony through to Bulgaria for over 20 years Sredets (Burgas) 12 MW Energy 1-6 ABG Consult GmbH & Co. KG, operating compa- nies own the sites, the planning permission and the supply con- tracts with EVN. 4x2 MW and 4x1 MW August 2011 to December 2011 (planned) The investor shall purchase the holdings in the limited partner- ship as well as the private limited company from the members. After completion and approval of the solar power park Only reputable premium partners Technical, fiscal and legal certificate 24 hour ongoing plant monitoring/ security on site Provided on site by Projekt ABG Consult GmbH & Co KG ACTIV ABG GmbH and ACTIV GmbH, Varna Member of the European Union since 01.01.2007 On average 1500 sun hours per annum Through the EEBG (Bulgarian Energy Act) for a period of 20 years Since 2008 a flat rate of 10% has been applied to all income plus 4.5% net withholding tax for dividends; income tax exempt in Germany with progressive rate A double taxation treaty between Bulgaria and Germany has been in place since 1987 to avoid double taxation. Lev (tied to the Euro) Investors with long-term asset interests, above-average returns expectations and income guarantee

at a glance

Secure and sustained

investment