Mr. Sirleshtov, which are, in your opinion, the most perspective opportunities for investment in the Bulgarian energy sector at this moment and in the mid-term?

The Bulgarian energy sector, and the Bulgarian electricity sector in particular, are in quite a poor condition at the moment and this requires a number of measures in the short mid and long term. The best investment opportunities are those where all stakeholders get undisputed benefits.

Let’s start with nuclear energy. Can we even dream of a new block or a new plant? The answer is absolutely no, at least at this stage. Therefore, all public efforts should be aimed at extending the life and increasing the capacity of blocks 5 and 6 of Kozloduy Nuclear Power Plant. These are two separate projects and their realisation would allow for Bulgarian nuclear energy to be saved and the return on investment for the state is immensely high. At the same time, these projects guarantee keeping our competitive advantage in the electricity sector for the next 30 years. 

On the other hand, there are great opportunities in the gas sector as well and they are ignored at the moment. A typical example for the best short-term project is the transformation of Galata into gas storage.  This project does not require any public investment, it will create gas storage that is three times bigger than Chiren and most importantly, it will reduce the costs and investments of the Bulgaria Energy Holding.  If we look at the mid-term, the electricity sector will be focused on the low-carbon part of the generation (renewable energy sources), and in the gas sphere particular attention should be paid to our own sources, including onshore.


In which of the abovementioned spheres can your law firm be a partner to investors and what services can you offer to them?

Our law firm is the largest one in Europe and the sixth largest in the world. We have around 500 energy lawyers globally. In Bulgaria we have over 30 lawyers, 8 of which are energy experts.  Our team in Bulgaria is proud of its successes both in large projects as well as its work with smaller local investors. We have helped to realize the largest project in Bulgaria’s thermal power sector. In fact, we have worked on all concessions for prospecting and exploration of natural gas and we work on the largest projects in the sector. We advise the investors in more than 50% of the installed renewables power in Bulgaria. We work at competitive rates.


How does the deficit in our electricity sector influence the readiness for new investment? What are the changes in the market model and the management of the sector that investors want to see?

Investors want stability. They want the state to take responsibility when it has made a mistake – for example, in relation to renewable sources. Investors come where they are welcome, and we need investment. The accumulated deficit is due to the numerous systematic mistakes in the electricity sector, which are primarily due to regulatory and political mistakes – the decrease of the prices for end consumers without any reasonable economic grounds, thoughtless investment by the National Electricity Company, significant legislative and regulatory mechanisms to support the renewable energy sources.

In the first place, investors want to see the fire is not quenched by gasoline. This is part of the Government’s program in the sector. The unnecessary and expensive investment should stop. The incentives for renewable energy are already removed. Energy efficiency becomes a priority. Liberalisation of the electricity market is about to be realised. The new investments in the sector should be re-directed to energy efficiency, balancing, reduction of losses, achieving maximum effect of liberalisation.


You have extensive experience in projects for the production of renewable energy. What should be their place in the future electricity market in Bulgaria? Could it be reformed according to the model "contracts for difference" and what are the attitudes of investors to this?

Most importantly, the role of renewable energy in Bulgaria so far needs to be clarified. Prices are only a part of the picture. Through the transfer of accession facilities these projects indirectly contributed to the largest modernisation in the networks for the past 25 years. The opportunities created in some companies for the design and construction of such facilities led to the fact that currently dozens of companies build abroad. On the other hand, I hope that the Government will accept the idea of some investors about a model as a result of which over the next 5 – 15 years the large renewable energy projects or a part of them will be transferred to the Bulgarian Energy Holding and will lead to further benefits for the state. As regards the future – there is no alternative to carbon-free energy industry of which renewable energy sources are an important part, along with nuclear energy.

At the moment Bulgaria has about 2 – 3 years to decide which model to adopt in the future in terms of new generation capacity. The English model of "contracts for difference" is extremely interesting for both parties and provides stability with a normal return for investors. The investors, especially those in nuclear energy, definitely have a positive attitude towards the English model.


The political power has great expectations from the local oil and gas yield, mainly from the Black Sea. What are your current observations on this sector and what can be expected from its development?

I deeply and sincerely applaud the current Government for launching the tenders for blocks "Teres" and "Silistar". In a global context there is hardly a less suitable time for this because of the objective fall of oil and gas prices internationally but Bulgaria has no time to waste. If the process continues in this transparent way, I sincerely hope that there will be investors for these two blocks despite the objective international situation. I would like to remind that these are not the only blocks that have been announced at a tender. Currently there are three blocks onshore and at least one in the Black Sea, about which there should not only be public procurement but it is a duty of the Government that it prefers not to comply with for the time being. The most important thing to realise is that the yield is preceded by an exploration.

There is currently one company that drills in the Black Sea, and the Government should concentrate on providing the best conditions for the continuation of the activities of the company in Bulgaria, which does not happen rhythmically so far.

The activities of Total/ OMV/ Repsol in "Khan Asparuh" are unparalleled and extremely positive for the country. If the exploration develops positively, the yield may be expected before the middle of the next decade. The state and everyone, however, should focus on the exploration and the removal of any possible obstacles, as well as on the support of the process. Basically, a probability of 30% for commercial discovery in this business is considered very high and therefore the Government should fulfill its obligation under the Underground Resources Act and announce public procurement for the other blocks as soon as possible.

In short, this is the sector that could entirely change the outlook of the Bulgarian energy sector in a positive direction during the next 10 – 15 years.


In March this year you moderated the Oil & gas panel at the event of the UKTI: "Great Mega Mission 2015". What are your impressions of the interests of British business in this sector in Bulgaria and can we expect any British investments in energy soon?

The British business in Bulgaria in the energy sector has so far been focused on exploration and production of gas, as well as on nuclear energy. The biggest British investment in the country is that of Petroceltic (previous name – Melrose) and the future of other investment in our country depends to a great extent on the development of this particular investment. The UK has great experience in the field of natural gas, nuclear energy, waste to energy projects and energy efficiency. The British business is extremely well prepared in the areas related to consulting and financial activities in energy and the biggest benefits for our country can come exactly from there. Initiatives such as the UKTI’s Great Mega Mission 2015 are very useful to our country and that is why we gladly participate in their organisation and holding.
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Kostadin Sirleshtov is a Partner and Head of the Energy, Projects and Construction practice of CMS Sofia – the largest international law firm on the Bulgarian market. As of 1 May 2015 Kostadin became Head of Energy at CMS for the CEE region. He is an expert with almost 20 years of professional experience in all areas of energy: conventional power, oil & gas, nuclear energy, renewables, public procurement in the energy sector, project finance etc.