Kenneth Lefkowitz Managing PartnerNew Europe Corporate Advisory Ltd.www.necadvisory.com

05 November 2009

RENEWABLE ENERGY SOURCES AND REDUCING CO2 EMISSIONS

Bulgaria’s 20/20/2020 Targets: What do they Mean for the Renewables Industry?05 November 2009

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Bulgaria’s 20/20/2020 Targets: What do they Mean for the Renewables Industry?

Indicative trajectory of renewables as fraction of Final Energy Consumption (FEC) until 2020

9,40%

10,72%11,38%

12,37%

13,69%

16% (binding)

8,00%

9,00%

10,00%

11,00%

12,00%

13,00%

14,00%

15,00%

16,00%

17,00%

Source: Directive 2009/28/EC 2

Source: Eurostat

Bulgaria’s 20/20/2020 Targets: What do they Mean for the Renewables Industry?

Renewables consumption scenarios (TWh)

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ScenariosHistoric

10,29

11,79

13,49

15,45

17,69

20,25

23,19

1,33 1,362,07

2,72

5,086,28

7,938,67

8,99 9,9110,93

12,0513,28

14,65

16,15

17,80

0

5

10

15

20

25

Scenario 1: 7% annual growth (based on projection of the Ministry of Economy, Energy and Tourism)

Scenario 2: 5% annual growth (2003-2006 average, Eurostat)

9,61%

38,44%

11,68%

23,04%

7,71%

9,52%

Derived heat and Industrial waste

Source: Eurostat

Bulgaria’s 20/20/2020 Targets: What do they Mean for the Renewables Industry?

Final Energy Consumption by fuel/product 2006

4,71%

42,23%

22,83%

5,10%

20,67%

Solid fuels

Oil

Gas

Renewables

ElectricityRenewables

Gas

Electricity

Solid fuels

Oil

Bulgaria EU-27

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Historic Scenarios

Bulgaria’s 20/20/2020 Targets: What do they Mean for the Renewables Industry?

Scenarios for Final Energy Consumption until 2020 (TWh)

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127 133

141 149

157 165

174 182

194 204

214 225

236

119 124 129

134 140

146 153

159 166

173 181

189

120 123 125 128 130 132 135 137 140 142 145

-

50

100

150

200

250

Scenario 1: Minisrty of Economy, Energy and Tourism's projection, according to the long-term program for development of RenewablesScenario 2: Based on Eurostat data; convergence with EU-27 FEC/capita average; 4,3% annual growth

Scenario 3: Based on NSI data; 2% annual growth (2002-2006 average)

45,80%

48,60% 48,70% 48,97%50,77%

52,63%54,56%

56,55%

58,63%

60,78%

64,10% 64,31% 64,40% 64% 64%

40,00%

45,00%

50,00%

55,00%

60,00%

65,00%

70,00%

BulgariaEU-27

75% convergence with EU-27 until 2020

Source: Eurostat

Bulgaria’s 20/20/2020 Targets: What do they Mean for the Renewables Industry?

Energy Efficiency 2002-2007 and NECA projectionFinal Energy Consumption/Gross Inland Consumption

6

Historic

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Bulgaria’s 20/20/2020 Targets: What do they Mean for the Renewables Industry?

Final Energy Consumption, Gross Inland Consumption and renewables (NECA projection, TWh)

101 107116 114

124 134

146 159

173 189 221 221

239 233 244

255 268

282 296

311

7,44 8,25 8,99 10,29 11,79 13,49 15,45 17,69 20,25 23,19

0

50

100

150

200

250

300

350

Final energy consumption (Scenario 2)

Gross inland consumption

Renewables consumption (Scenario 1)

Bulgaria’s 20/20/2020 Targets: What do they Mean for the Renewables Industry?

Renewables as percentage of FECWorst-case and best-case scenarios

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0,07% 0,50% 0,73% 0,77%

-0,01%

-3,04%-3,75%

-4,82%-6,14%

-8,46%

10,72%11,38%

12,37%13,69%

16%

7,68% 7,63% 7,55% 7,55% 7,54%

10,79%11,88%

13,10%

14,46%

15,99%

9,23% 9,76%10,33%

11,01%11,77%

-10,00%

-5,00%

0,00%

5,00%

10,00%

15,00%

20,00%Best-case scenario

Worst-case scenario

Indicative trajectory

Worst-case scenario (Scenario 1 for Final Energy Consumption, scenario 2 for consumption of renewables)

Best-case scenario (Scenario 3 for Final Energy Consumption and scenario 1 for consumption of renewables)

Base case scenario

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Bulgaria’s 20/20/2020 Targets: What do they Mean for the Renewables Industry?

Capacity needed to meet 20/20/2020NECA estimations

TypeBase case (Installed

capacity, MW)

Assumed average

efficiency

Incremental capacity to fill

gap (MW)

Estimated averagemarginal cost

(million Euros per MW installed

capacity)

Estimated total cost for incremental

capacity to fill gap (billion Euros)

Wind 1,419 30% 3,040 € 1,2 – 1,5 € 4,1

Small hydro 450 50% 1,824 € 2,5 € 4,6

Large hydro 80 75% 1,216 € 3 € 3,6

Solar 200 12% 7,601 € 2- 2,5 € 17,1

Biomass 1,762 95% 960 € 2 - 4 € 2,9

Geothermal 159 80% 1,140 € 2- 5 € 4,0

* The expected indirect sanctions for every GWh unproduced energy from renewables are around € 1,2 million, or a total of € 42,5 billion until 2020 for the base-case scenario and € 113,6 billion for the worst-case scenario

• Introduce long-term contracts at a pre-agreed price to stimulate renewables growth

• The government should get more actively involved with grid development

• The government should increase its financial and supervisory functions

• Most importantly, the government should seek constant dialogue with the parties involved

Source: AmCham Bulgaria

Bulgaria’s 20/20/2020 Targets: What do they Mean for the Renewables Industry?

Government actions

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Kenneth LefkowitzManaging partnerNew Europe Corporate Advisory Ltd.www.necadvisory.com

99 Evlogi Georgiev Blvd.Bulgaria, 1142, Sofiatel.: +359 (2) 988-7390cell: +359 (88) 631 5375fax: +359 (2) 981-6206e-mail: neca@necadvisory.com

Bulgaria’s 20/20/2020 Targets: What do they Mean for the Renewables Industry?05 November 2009

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