Axpo Bulgaria preparing pilot PPAs

Swiss renewable energy company Axpo’s Bulgarian unit is working on pilot power purchase agreements (PPAs), expected to be officially announced between 2022-2025, Axpo Bulgaria managing director Milena Videnova said.

“We have a promising PPA pipeline in Bulgaria… and are actively preparing the first pilot projects. In order to develop the PPA market we need well-prepared renewable projects with all approvals from regulators,” Videnova said in an interview for the Independent Commodity Intelligence Services (ICIS).

Due to the fact that Bulgaria lacks a renewables support scheme, PPAs are considered crucial for the expansion of the nation’s renewable capacity and the achieving of its decarbonisation goals. However, the PPA market is not yet developed.

“Usually, the project is leveraged, and the lenders would like the project’s cash flow to be very well protected. Due to the lack of liquidity of the Bulgarian [wholesale] market, currently the usual tenor is 3-year stag and roll over and/or 5 years. The challenges in front of the PPA market in Bulgaria are liquidity, debt and credit risk,” Videnova said.

She added that to generate pilot projects, the European Union (EU) via the European Investment Fund or other guarantee lines could cover the construction risk.

Separately, state support might be needed to mitigate counterparty credit risk, considered high in Bulgaria and the whole of Southeast Europe (SEE) amid the current high energy price volatility.

The day-ahead market coupling between Bulgaria and Romania planned to go live on October 27, is also to have a positive impact on PPAs, especially on the country spreads and the PPAs tenor, according to the managing director.

“We could see a renewable corporate PPA in the next six months,” she said.

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