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Renewable Energy Sector in Bulgaria 20th June 2011

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MKB Unionbank – representing the German bank system in Bulgaria. Part of MKB/Bayern LB • A market leader in corporate banking with total assests of

11.8 billion euro 89.6% owned by the BayernLB. • 67 branches in Hungary, 2500 corresponding banking relations in 80 countries • Baa3 rating from Moody’s,which is the country’s ceiling for Republic of Hungary • Leading bank group in Germany, acting as a central bank

for Bavarian Savings Banks and for the Free State of Bavaria • Jointly owned by the Free State of Bavaria (through BayernLB Holding AG) - 94% of the shares and the Association of Bavarian Saving Banks with 6% • А1 rating from Moody’s, A rating from Standart&Poor’s


Executive Summary •

The national goal of the country is to reach 16 % production of electricity from Renewable Energy Sources (RES) from total energy output by the end 2020. In 2010 the production of electricity for RES reached 10.6 % of all electricity.

The preferential tariff system, in addition to other government incentives and EU programs, provides a more clear financial framework for RES investments with a certain extent of predictable profitability levels.

Overall, the market potential for renewable energy continues to be relatively high, due to the favourable price treatment of RES energy and the fact that total production of electricity from RES has to enlarge its share to reach the targets in the next ten years.

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Hydro-potential •

Renewable energy from Hydro power plants takes major part from the total RES production-around 94%.The sector is well developed, but there is still more place for smaller HPP.

The country has installed capacity for HPPs and PSPPs (Pupmedstorage power plants) of 2 947 MW (26.1%), and the available ones are 1 800 MW (19.9%). Couple of large projects on the Danube river are coming in the next years. Installed capacity reached 2160 MW in 2010.

Financed projects by the bank: • 2.3 MW HPP, initial financing volume EUR 5.500.000 • 1.1 MW HPP, initial financing volume EUR 1.800.000 • 1.0 MW HPP, initial financing volume EUR 1.340.000 • 2.0 MW HPP, initial financing volume EUR 300.000 – already repaid

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Wind potential •

The wind power potential of Bulgaria is not a large one, as zones most appropriate for development of such projects are limited to certain areas within mountain regions and along the northern part of the Black Sea coast.

It is estimated that areas of about 1400 km2 can offer average annual wind velocities of more than 6.5m/s, which is actually the economic viability threshold of wind energy projects. Installed capacity reached 465 MW in 2010.

Financed projects by the bank: • 8.4 MW WPP, initial financing volume EUR 10.470.000. Traditionally financed through LT investment loan.

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Solar potential •

The country has significant potential for solar energy, as the average annual sunshine duration is 2150 h, or 49% of the theoretical maximum. Currently the installed capacity is relatively small - only 21.4 MW since solar energy growth only sped up after 2008 with the introduction of the preferential prices for buying the electricity. The purchasing price for solar energy is the highest among the current preferential prices for RES energy.

Financed projects by the bank: • 4.9 MW solar park, initial financing volume EUR 5.700.000 • 1.058 MW solar park, initial financing volume EUR 1.800.000 • 9 MW in 3 solar parks financed through Euler-Hermes/ BayernLB/ MKB UB recently

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Bio-fuel, Biomass and Geothermal potential •

Bio-fuel market in Bulgaria is also not well developed, but has a potential due to the countries’ obligation to mix mineral fuel with bio component. Currently this obligation is suspended until the end of the year and local producers work mainly for external markets. There is installed capacity for around 300 000 tones per year, but production amounted to 40 000 tones per year.

The rest such as Biomass and Geothermal take a small share from the total renewable energy production, but especially Biomass is expected to growth further due to agricultural potential of the country.

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EU Financing Opportunities •

Rural Development Program – RDP Measure 311 "Diversification into non-agricultural activities" and Measure 312 “Support for the creation and development of micro-enterprises” – Projects to EUR 1.000.000 and up to 1 MW power – Subsidy to 80%, max EUR 200.000 – Submission of projects: 31 October - 9 December 2011

OP Competitiveness – RES and Energy Efficiency schemes - total EUR 200.000.000

OP Regional Development – Schemes for municipalities, remediation for housing, energy efficiency in public buildings

EU Direct Programs, donor programmes for Bulgaria from third parties – Creating partnerships and/or effects for the EU

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Contacts: Gert Hempler Director Large Corporates Division 30-32 Gen. E. I. Totleben Bvd. Sofia 1606/ Bulgaria Tel. 00359 2 9153 234 Fax: 00359 2 9534 067 E-mail: HemplerG@unionbank.bg Vladislava Panayotova Head of EU Desk MKB Unionbank 30-32 Gen. E. I. Totleben Bvd. Sofia 1606/ Bulgaria Tel. 00359 2 9153 218 Fax: 00359 2 9534 183 E-mail: PanayotovaV@unionbank.bg

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Thank you! 10


Renewable Energy Sector in Bulgaria