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BG prospectsLucrative

Sredets solar power park sales particulars

Sustainable investment within the EU: Time to Due to its location Bulgaria is a „land of sun“, comparable reconsider with Spain. A partnership from inside out –

The sun - an endless supply of energy and income. from Bavaria and Saxony to Bulgaria

The foundations of ABG were laid in Today the ABG Group consists of 1990 by the formation of ABG Allgemeine .. ABG-Partner in the consulting field, Beratungs- und Treuhandgesesellschaft .. ABG-Energy in the renewable energy field. mbH, Steuerberatungsgesellschaft, a trust company and tax consultancy. In ABG Energy has been involved with re- the following years audit and consultancy, newable energy in Bulgaria since 2006. real estate and truck management In the last two years specific solar energy services were added. projects have been developed. ABG-Energy GmbH was founded in 2010 Dresden The Group has been working with as a platform for all companies working partners in the field of renewable together in the field of renewable energy. energy in Germany for some 10 years. They have been involved in planning ABG-Partner has been advising Bulga- Bayreuth various solar, wind park and hydroelectric rian companies operating in Germany power plants as well the commercial and on tax issues for some 11 years. ABG- technical management. Partner’s operations in Germany are focussed primarily on Bavaria and Munich 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 Index of contents Page operations. Audit and legal consultancy The ABG group of companies 3 services are provided by ACTIV OOD in Bulgaria. With this cross-border expertise Bulgaria: the country and key data 4 we are able to provide a specific yet com- Solar energy: the facts 6 prehensive range of services to clients Project participants 7 seeking to set up operations in Bulgaria.

Contractual basis 8 Varna

Tax basis 10

A-B-G Security package 12

Project details – location & site 14

Technical description 15

Sredets solar power park at a glance 16

The ABG-Group . 3 Key information Inflation 2,9 % (2010) Unemployment 9,5 % (2010) at a Glance Key Economic Bulgaria is an agricultural country. Fruit and vegetables in particular are cultivated. The Sectors country’s other key industries are tourism, engineering, metal industry, textiles and The Country software development.

The Republic of Bulgaria lies in the north eastern section of the Balkan peninsular. Its Due to its geographical location Bulgaria is ideally positioned for the generation of neighbouring countries are Romania in the north, Turkey and Greece in the south and renewable energy. In recent years it has focussed on the generation of hydro-electric Serbia and Macedonia in the west. The Black Sea is to the east of the country. power and wind energy. Last year the government began to focus on the building of photovoltaic plants. Key Data: Bulgaria is also involved in the planned „Nabucco“ and „South Stream“ major gas pipeline projects. EU The country has been a member of the European Union since 01.01.2007. Energy Bulgaria is largely dependent on coal (49%) and nuclear (38%) power stations. The Political System The country is governed by parliamentary democracy. The Bulgarian National Assembly majority of its energy is currently imported, mainly from Russia. consists of 240 delegates. They are voted in for 4 years. The last elections took place in 2009. Tax Legislation As of 2008 Bulgarian tax legislation applies a flat rate of 10% on all income, i.e. from natural and legal persons. Area 110.994 km² On 02.06.1987 a double taxation treaty was signed between Bulgaria and Germany Population By the end of 2008 the population consisted of 7.6m inhabitants. to avoid double taxation on income and assets. In a session held on 09.07.2010 the The religious denominations are as follows: German Bundesrat approved the draft for a new Double Taxation Treaty (DTT). The Approx. 85% orthodox Christian new DTT is similar to OECD sample treaties in terms of its structure and content. Approx. 12% Muslim Approx. 10% Turkish Investment Nationals and foreign investors are considered equal. Foreign investors can hold full Approx. 3% Roma Conditions 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 Key Cities The capital city of Bulgaria is Sofia (approx. 1.2m inhabitants). Other key cities include liability company. For a one-man limited company this is known as EOOD, for several (approx. 523,000 inhabitants), Varna (approx. 378,000 inhabitants) and shareholders as OOD. However, depending on the form of participation, the (E)OOD (approx. 300,000 inhabitants). & 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 Currency System The local currency is the Lev. discussed individually with a tax adviser. 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.

Economic Situation 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 Rumania

countries (Hungary, Romania, Greece). General Map of the Black Sea National debt runs at only 18.2% of GDP. Serbia Republic of Bulgaria Varna Sofia Bulgaria Burgas General conditions have improved considerably since the country entered the EU in Sredets solar power park

2007. However there remains a pressing need for reforms to the legal system and to Plovdiv remove the chains of bureaucratisation. Mazedonia

4 . Bulgarien: the Country and Key Data Greece Aegean Sea Turkey Solar Energy: Project Participants the Facts

Climatic conditions The climatic conditions in Bulgaria are suited to building photovoltaic plants due to the ABG-Energy ABG-Energy undertakes projects for renewable energy in the photovoltaic, hydropower geographic location. As can be seen from the solar chart below, the Sredets – Burgas www.abg-energy.eu and wind sectors in conjunction with expert partners. ABG-Energy‘s Bavarian office is region with a global radiation of 1,500 to 1,550 kWh/m² per annum is among the best in Munich and it also has a Saxony office in Dresden. solar locations in Bulgaria. ABG-Partner ABG-Partner is a group of consultancy firms offering tax advice, audit and Legislation According to current energy legislation from June 2011, energy suppliers are obliged www.abg-partner.eu corporate consultancy. to use the energy produced by photovoltaic plants for a period of 20 years. The re- Its German offices are in Munich, Dresden and Bayreuth. The group handles levant legislation includes the EEBG. These regulations govern the obligations of the commercial procedures and advises investors on financial and tax issues for energy suppliers to use the power supplied and pay a fixed power supply rate. Since individual projects. June 2011 the rate is 24.8 cent / kWh. ACTIV ABG In Bulgaria ABG-Partner acts with its Bulgarian partner ACTIV GmbH under the joint www.ACTIVABG.bg company ACTIV ABG GmbH in the Varna and Sofia branches. The collaboration of ABG-Partner and ACTIV ensures cross-border support.

ACTIV The ACTIV Group is an association of medium-sized consultancy firms operating in www.ACTIV.bg the fields of tax advice, audit, corporate and legal consultancy with branches in Varna, Solar map of Jährliche StrahlungAnnual solar [kWh/m²] radiation [kWh/m²] Sofia, Dobritsch and Schumen. Bulgaria 1.350 1.4001.350 1.450 1.400 1.500 1.450 1.550 1.500 1.600 1.550 1.650 1.600 1.700 1.650 1.750+ 1.700 1.750+ Project Development 1.013 1.0501.013 1.088 1.050 1.125 1.088 1.163 1.125 1.200 1.163 1.238 1.200 1.275 1.238 1.313+ 1.275 1.313+ 0 0 50 50 100 km 100 km Jährlich gewonneneAnnual won Elektrizität electricity pro per 1kW 1kWpeakpeak System System mit with Nutzungsgrad efficiency 0,75 0,75 [kWh/kW [kWh/kWpeakpeak] ] Project-ABG Consult Project-ABG Consult GmbH & Co. KG is based in Varna. The company undertakes GmbH & Co. KG turnkey projects in association with Bulgarian and reputable international partners.

ILF Beratende ILF Beratende Ingenieure comprises several international independent engineering Ingenieure 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.

Jährliche Strahlung [kWh/m²] 6 . Solar Energy: The Facts Project Participants . 7 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+ 0 50 100 km Jährlich gewonnene Elektrizität pro 1kWpeak System mit Nutzungsgrad 0,75 [kWh/kWpeak] General Contractor Contractual Obligations

Project-ABG Consult The solar park is being set up in conjunction with a reputable international Contract Contractual partners Key contract terms general contractor. Limited partnership contracts Partnership agreement Energy 1-6 GmbH & Co. KG governs the articles and running of the company

Suppliers Limited partnership share assignment members the members assign their holding in the limited partnership capital to the investor

Modules Large, international premium supplier. Limited company contracts

Sale of Limited partnership holdings to the ABG Consult GmbH According to Bulgarian law the limited administrative company SMA Solar SMA Solar Technology AG has its headquarters in Niestetal near Kassel and is also limited administrative company must have a holding in the assets of the limited partnership (in represented on four continents by thirteen oversees companies. this case 2%). The holding previously owned by ABG Consult Technology AG GmbH must be sold to a limited administrative company, to be (inverters) The group of companies employs over 5,500 staff (including temporary workers) and set up.

has won numerous awards in recent years for outstanding services as an employer. Articles of association private limited company to be formed governs the articles and running of the company The company has been registered on the Frankfurt Stock Exchange Prime Standard Other contracts since 27th June 2008, and since 22nd September 2008 the shares have been listed Site purchase contract ABG Consult GmbH ABG Consult GmbH has sold the sites to the individual operating on the TecDAX. companies.

Plant purchase contract Project-ABG Consult Project-ABG Consult GmbH & co. KG supplies the turnkey play Schletter GmbH Schletter was founded in 1968 and focuses on the production of windows and facade GmbH & Co. KG including modules and inverters (assembly system) parts as well as aluminium processing. In 1983 „Schletter GmbH“ was registered as a Mains connection and energy supply EVN-Bulgaria Contact in accordance with EEBG craftsman‘s establishment. Today the company operates worldwide and has a global contract

network. Schletter is respected throughout the world and is synonymous with high Service and management contract Project-ABG Consult GmbH & Co. KG, ACTIV Service and management to be undertaken for the entire durati- quality products. -technical ABG GmbH on by Project ABG Consult GmbH & Co. KG and ACTIV ABG GmbH. -commercial

Contractual The investor purchases all holdings in the limited partnership from the members as Basis well as the private limited company. Each site is owned by the individual operating companies, i.e. after the production Parent company period according to the Energy Act, it can either be sold or the plant can continue to ABG Consult GmbH Land be operated.

Sale to 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. Energy-ABG Consult Project-ABG Consult GmbH & Co. KG GmbH & Co. KG General contractor Purchase of operating company Commissioning After commissioning Project-ABG Consult GmbH & Co. KG shall perform the plant Technical management Investor technical services (maintenance, monitoring etc.). ACTIV ABG GmbH shall undertake Planning permission the commercial services (accounts, tax declaration, energy supplier invoices etc.). Supply contract Commissioning

This will therefore further ensure comprehensive cross-border support of the photovoltaic plant after the investment. Private limited adminis- ACTIV ABG GmbH Commercial management trative company

8 . Contractual Basis Contractual Basis . 9 Taxation of income from a from the operating company is exempt, Tax Bulgarian partnership but with progressive tax rates applicable. Basis a) in Bulgaria Dividend payments are subject to a 5% The operating company is a partnership withholding tax, corresponding to a net with unlimited tax liability in Bulgaria. taxation of 4.5%. Unlike in Germany, it is considered in We shall now set out the key tax Bulgaria to be a non-transparent company, The following table shows the different principles of investing in the Sredets i.e. it is taxed as a capital company and taxation effects on a German investor. solar power park. It is assumed that the therefore as a legal entity in its own right. investors are natural persons or capi- Profits are taxed in Bulgaria at 10%. In principle it is desirable for a German tal companies based in Germany and investor as a natural person to invest in a not in Bulgaria, with unlimited income b) in Germany Bulgarian partnership. tax liability. From a German perspective the “Koman- ditno drushestwo” (“KD”) can be con- Naturally not all tax related aspects of an The main tax consideration of this sidered a limited partnership. Income of Bulgaria investment can be considered as these investment opportunity is that German a Bulgarian partnership resulting from the Germany Partnership Capital Company will vary depending on the personal investors are investing directly in the generation and sale of power constitutes Excluding dividends circumstances of the individual investor. Bulgarian partnership (operating com- income from a business enterprise, from natural person 10 % 10 % Investors should therefore consult pany limited partnership with a limited a German perspective. Consequently capital company 10 % 10 % with a tax adviser who will advise or liability company). Investors in Bulgaria the Bulgarian partnership is treated Including dividends potential individual tax implications of have the advantage of excellent Bul- as a general commercial partnership natural person 14,5 % 33,5 % the investment. garian tax rates (flat rate of 10%). and persons involved in the Bulgarian capital company 11,3 % 11,3 % Income from the Bulgarian partnership partnership are treated as general is exempt from tax in Germany, as a commercial partners. Taxation comparison by legal forms between Germany and Bulgaria result of the double taxation treaty signedbetween the Federal Republic The generation and sale of power are of Germany and Bulgaria to avoid considered to be an active occupation double taxation on income and assets under the terms of the DTT. It can there- (hereafter referred to as DTT or “Double fore be assumed that income generated Taxation Treaty”. The right of taxation for all income gene- rated from the Bulgarian photovoltaic plant resides therefore with Bulgaria If the investor desires a different type of legal form, according to alone. It is therefore exempt from tax the Bulgarian Conversions Act a Bulgarian partnership can be in Germany. changed into a capital company. If the investor is a natural person, income is taxed respectively at the “progressive tax rates”.

10 . Tax Basis Tax Basis . 11 . . A B G-Security Package 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. Ownership guarantee The sites are the property of the respective operating company. This also applies to Monitoring the individual permissions required to run a photovoltaic plant, i.e. after the production When the plant has been constructed a specially designed monitoring system period the owner can decide whether to continue running the plant or sell. will continually assess its functionality to rectify potential error sources as quickly as possible. Approval guarantee and revenue guarantee According to the Bulgarian Energy Act, energy suppliers are obliged to use the Regular maintenance and service power supply produced by the operating company for a period of 20 years as The contract partners commissioned by Project-ABG Consult GmbH & Co. KG shall well as pay a fixed power supply rate. The energy suppliers in Bulgaria are EON provide regular, professional plant maintenance throughout the 25 year term. (Germany), EVN (Austria) and CEZ (Czech Republic). A supply contract exists with EVN for the Sredets project. Cross-border support – tax and legal advice Project-ABG Consult GmbH & Co. KG and its partners will provide ongoing Secure Energy comprehensive cross-border support between Germany and Bulgaria, including Unlike other renewable energies, the sun is a constant supplier of power. On average after the plant has been commissioned, to ensure continued secure earnings for there are around 1500 sun hours in Bulgaria. the investor.

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. Secure, sustained

Technical, fiscal and legal certificate The project documents are examined by independent technical and legal consultan- investment with ABG cies as part of due diligence procedures. The documents are also accepted by banks.

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

Varna Sofia Bulgaria Burgas Sredets solar power park

Plovdiv

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. Layout of the individual sites of the solar power park

Site Technical Description

The site is 3.5 km north of Sredets near The photovoltaic power plant project area The specially designed monitoring system to route 5399 which leads to the town of of 37.67 ha is divided into 8 separate ensures that all project-related data (such 6 Dyulevo. The site covers an area of plants. These 8 plants with a combined as energy yield) is continually stored and 37.67 ha. output of 12 MW are divided into 4 x 2 transferred to the project homepage. The MW and 4 x 1 MW. The energy is trans- homepage can be accessed at any time Burgas The site has good connections to the ferred to the local energy supplier EVN to view the current data. The ongoing nearby town and is therefore within via a 3 km long, 20 kV medium voltage monitoring of all technical readings also good reaching distance. All necessary cable; the energy for each plant is means that any faults can be diagnosed 539 services (maintenance, repairs, security) metered in a central project substation. and dealt with as swiftly as possible. can therefore be performed easily. The 8 plants are all individually fenced and equipped with high resolution cameras as well as touch-sensitive 79 Black Sea fence monitoring. A 24 hour manned 539 safety office, which continually moni- 99 tors all 8 plants, ensures an optimum level of safety. Dyulevo 79 9 Sredets solar power park

Technical Description . 15 Sredets Sredets solar power park at a glance

Partners Seller Project-ABG Consult GmbH & Co. KG, Varna – an ABG Energy company ABG-Energy Involved in the renewable energy sector for 10 years ABG-Partner Tax consultancy and audit partner in Bavaria and Saxony through to Bulgaria for over 20 years Project Location Sredets (Burgas) Volume 12 MW Product description Energy 1-6 ABG Consult GmbH & Co. KG, operating compa- nies own the sites, the planning permission and the supply con- tracts with EVN. Number of operating companies 4x2 MW and 4x1 MW Building start / end dates August 2011 to December 2011 (planned) Ownership form The investor shall purchase the holdings in the limited partner- ship as well as the private limited company from the members. Purchase price payment After completion and approval of the solar power park Project partners Only reputable premium partners Certificate Technical, fiscal and legal certificate Monitoring/Security 24 hour ongoing plant monitoring/ security on site Service/maintenance Provided on site by Projekt ABG Consult GmbH & Co KG Tax and legal advice ACTIV ABG GmbH and ACTIV GmbH, Varna Location Bulgaria Member of the European Union since 01.01.2007 Sun hours On average 1500 sun hours per annum Income guarantee Through the EEBG (Bulgarian Energy Act) for a period of 20 years Tax Legislation 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 Double taxation treaty A double taxation treaty between Bulgaria and Germany has been in place since 1987 to avoid double taxation. Currency Lev (tied to the Euro) Investor profile Investors with long-term asset interests, above-average returns expectations and income guarantee

Update: June 2011

Project-ABG Consult & Co. KG . Member of ABG-Energy GmbH Secure and sustained Christian Urban Marinka Enikova Waldstraße 6d Dunav 5 investment D-82205 Gilching BG-9000 Varna fon: (+49) 81 05 - 77 99 71 fon: (+3 59 ) 52 - 64 88 11 mobile: (+49) 1 51 - 15 14 47 80 mobile: (+3 59 ) 8 89 - 87 38 81 www.abg-energy.eu email: [email protected] email: [email protected]