Energy Sector Overview

1
Energy Sector Overview

• ? Positioning of Bulgaria as a reliable base for
  the transit of oil, natural gas and electric
  power and as a regional dispatching cent?r
• ? Biggest exporter of electricity on the Balkans
  6,790 GWh
• ? Available electricity generation
  capacity10,234?W
• ? Trend towards greater energy independence
  through development of local energy resources

2
Investments in the Energy Sector
Project Rehabilitation of U 1-4 construction
of FGDs at units 5 and 6 of Maritsa East 2 TPP

• Rehabilitation of 4x150 MW units installation
  of FGDs Construction of FGDs at units 5 and 6
• EPC Contractor U1-4 Mitsui Co Ltd, JapanEPC
  Contractor FGDs 56 tender May 2004
• Total investment EUR 226 M financed by JBIC
  85 of the project's cost 75 million euro,
  co-financed by ISPA (grant), EBRD (credit) and
  Maritsa East
• Status financial arrangements in process, SP
  assigned 'BB' long-term corporate credit rating
  to Maritsa East II TPP

3
Investments in the Energy Sector
Project Construction of replacing capacity on
the site of Maritsa East 1
New capacity 2x335 MW installation of FGDs
Total expected investment EUR 900 M
Project financed BOO
Status financial arrangements in process,
expected financial closure end 2004

• Expression of interest
• AES
• Mitsui ENEL

4
NABUCCO GAS PIPELINE PROJECT Gas Bridge between
Asia and Europe

• BASIC DATA
• The pipeline length 3.400 km
• Consumption estimated 20-25 billion m3 p.a.
• Status Feasibility Study ongoing New pipeline
  effective operation expected 2012
• Starting at Georgian/Turkish and Iranian/Turkish
  border leading to Central and West European
  markets
• Estimated investments costs 4.4 Billion Euros

5
The Regional Perspective
New natural gas interconnections

• The main destinations
• Increase of Russian natural gas transit through
  Bulgaria to Greece, Turkey and FYROM.
• Opening up of opportunities for Russian natural
  gas transit to Italy by means of a transit gas
  pipeline viewed as part of the development of
  European corridor ? 8.
• Construction of a gas pipeline between Bulgaria
  and Serbia and Montenegro for Russian natural gas
  transit.
• The NABUCCO Project

6
Credit Rating of Bulgaria Bulgaria has proven
higher investment credibility
June 2004 StandardPoors gave an
investment-grade foreign-currency rating

• BB?- (stable outlook) by StandardPoors
• BB?- (stable outlook) by Fitch IBCA
• B?1 (stable outlook) by Moodys
• BB?- (positive outlook) by the Japan Credit
  Rating Agency

7
Tax Reform Budget 2005

• ? Corporate tax 15
• ? Income tax rate min - 10 max - 24
• ? Increasing the amortization norm for new plant
  and equipment 50
• ? Expenditure on research and development of the
  companies are not subjects to taxation
• ? Tax Preferences
• ? establishing new enterprise
• ? expanding of an enterprise
• ? increasing the average number of employees

8
Investment Categories
Third category universal measures (Euro 5 - 25
mln.) ? Submission of information, prepared and
processed in advance ? Certificate, specifying
the investment category and the type of
administrative services, provided by the central
and local executive authorities ? Minimum
deadlines.
Second investment category (Euro 25 - 50 mln.)
? Individual administrative services ?
Individual information services ? Institutional
support.
First investment category (above Euro 50 mln.) ?
Universal measures ? Institutional
support ? State aid for developing the
necessary elements of technical infrastructure.
9
Requirements to investors

• ? Establishing a new enterprise, expanding or
  modernizing an existing one
• ? Term of project implementation up to 3 years
• ? Creating new jobs
• ? Economic efficiency

10
Investment incentives in Bulgaria

• ? 15 corporate income tax in 2005
• ? 0 corporate tax in areas with above average
  unemployment
• ? Depreciation rates 2 years for computers and
  related equipment and 3 1/3 years for
  manufacturing equipment
• ? 2-year VAT exemption for imports of equipment,
  consumables and components related to investment
  projects valued over  5 million
• ? 0 capital gains tax
• ? The highest bracket for personal income tax is
  only 29 for monthly income over  300
• ? The Employment Agencys Programmes and measures
  for employment of young people

11
Innovation Strategy measures for stimulating
innovative and research potential

• Stimuls for research, related to industry and
  the co-operation among RD units, universities
  and business
• ? Improvement of the innovations funding,
  evolving mechanisms for attracting private
  equity/capital
• ? encouraging implementation of new technologies
• ? support for the establishment of clusters in
  sectors, traditional for our country
• ? support for newly established companies and
  firms that develop successfully in view of
  enhancing their innovative potential
• ? creating mechanisms for attracting foreign
  investment in the spheres of science and
  technology.