kelemenis & co., 5 tsakalof street, 106 73 athens, t: +30 210 3612800, f: +30 210 3612820, e:...

Kelemenis & Co., 5 Tsakalof Street, 106 73 Athens, T: +30 210 3612800, F: +30 210 3612820, E: [email protected], W: www.kelemenis.com

Greece: Legal and economic framework for photovoltaics

Dr. Yannis Kelemenis and Tom Kyriakopoulos


O u t l i n e

Profile of Kelemenis & Co.

Size and dynamics of the Greek PV market

Incentives and feed-in tariffs

Licensing and grid access

Connection to the grid and Operator Agreements

Corporate Environment

Tax Environment


Kelemenis & Co. is an Athens-based law firm providing quality legal services in the key corporate and commercial areas. The firm advises a varied client base that includes

corporations, governments, large institutions and high-net-worth individuals. The firm draws on a team of lawyers with excellent academic qualifications from world-class

universities (e.g. Oxford, Harvard, Heidelberg).

Kelemenis & Co. has built a reputation for acting on complex, high volume cross-border transactions and disputes for a range of corporate and financial institution clients. The

firm's track record spreads across an array of sectors including energy, infrastructure, hotels, leisure, real estate, retail and technology. Although Greece has been the focal

point of the firm's activities, the firm has been active in Southeast and Eastern Europe where it advises local governments on legal approximation with the EU acquis

communautaire and international investors on their cross-border ventures.

Kelemenis & Co. enjoys excellent rankings in all leading international legal directories and is a recommended law firm in all key practice areas. The firm is regularly invited to

contribute the Greece chapter to commercial law handbooks published by highly regarded international publishers. Kelemenis & Co. is a member of several professional

associations and chambers. It is a sustaining member of both the British Hellenic and the Greek American Chambers of Commerce. The firm is the Greece member of

Multilaw, a leading global law network consisting of more than 65 law firms worldwide and over 6,000 lawyers in over 150 commercial centres. Being part of the Multilaw

network ensures an instant global reach for clients who require multi-jurisdictional legal advice.

Indicative Energy Clients: Endesa, Veolia, General Electric, Statkraft, Energy Community Secretariat (Vienna), World Bank, Greek Regulatory Authority for Energy (RAE),

Greek Centre for Renewable Energy Sources (CRES)

Well-regarded ... able to advise on complex issues ... received high plaudits due to the outstanding cross-border practice..."

PLC Which Lawyer 2007

"A practice which has shown promise since its inception... The practice impressed the market..."

IFLR1000 2008

"...advised on some of the biggest deals in the Greek market of the past year"

World Tax 2008

"Clients ... praise the firm's 'deep knowledge and expertise within different industries and jurisdictions', and Anglo-American style of service."

Legal 500 2007

Firm Profile


The Practice

The firm has built a strong reputation for its energy practice not only in Greece but in the wider region of southeast Europe. The practice, which is headed by

name partner Dr. Kelemenis, is well-versed into both transactional and regulatory work. It has advised, inter alia, the regulators of Greece (RAE) and FYR

Macedonia (ERC) and the governments of Romania, Moldova, FYR Macedonia and Albania. The firm has also been advising several energy undertakings in

Greece and in southeast Europe and provides a one-stop shop service in any of the countries that make part of the Regional Energy Market of Southeast Europe.

Scope of Work Energy Regulation Energy Infrastructure/PFI/PPP Projects Energy Acquisitions and Disposals Energy Finance Energy Disputes

The Team

The practice is supported by a team of lawyers with excellent academic qualifications from world-class universities and often draws upon a pool of economists,

analysts, engineers and senior consultants to ensure the comprehensive management of its assignments. The firm is regularly invited to contribute chapters to

leading international publications on energy. It is the author, inter alia, of the Greece chapter for the loose-leaf "Energy Law and Regulation in the EU" (Sweet &

Maxwell), the leading energy law publication in Europe; and of the chapters on Oil and Electricity Regulation in the “Getting the Deal Through Series” published

by the International Bar Association and the Global Competition Review.

The Key People

Dr. Yannis Kelemenis

Tom Kyriakopoulos

Manya Tsoumita, LL.M. (Humboldt)

Iro Stamataki, LL.M (Heidelberg)

The Energy Practice


1. Introduction of Statute 3468/2006 on the production of electricity from renewable energy sources

2. By 31.12.2008 the total licensed capacity was envisaged to come up to 350 MW for the interconnected system

and to 140 MW for the non-interconnected islands

3. By 31.12.2009 the total licensed capacity was envisaged to come up to 450 MW for the interconnected system

and to 180 MW for the non-interconnected islands

RegionsTotal power

(MWp)<20 KWp

(MWp)

>20 and < 150kWp (MWp)

>150 and <2 MWp (MWp)

>2 MWp (MWp)

East Macedonia's and Thrace 45 4,5 15 13 12,5

Central Macedonia 60 6 24 15 15

West Macedonia 10 1 3 3 3

Epirus 18 1,8 5,4 5,4 5,4

Thessaly 55 5,5 16,5 16,5 16,5

Ionian islands 15 1,5 4,5 4,5 4,5

West Greece 60 6 18 18 18

Central Greece 60 6 18 18 18

Peloponnese 122 12,2 36,6 36,6 36,6

Attica 40 4 12 12 12

Thessaloniki's Prefecture 15 1,5 4,5 4,5 4,5

Total 500 50 157,5 146,5 146

Greek PV Market : What was envisaged in 2006


PVs

APPLICATIONS FOR GENERATION LICENSES

Amount Power (MW) Total power to be granted permission till 2010 >150KW and

<2MW

Area

1004 1217,039 147,980

East Macedonia and Thrace 83 106,779 12,500

Attiki 41 51,722 10,920

Northern Aegean Sea 1 1,609 *

Western Greece 120 158,694 18,000

Western Macedonia 36 47,000 12,000

Ipiros 50 58,230 5,400

Thessaly 177 245,984 16,020

Ionian Islands 3 4,046 *

Central Macedonia 127 124,263 15,000

Crete 26 15,281 * South Thessaloniki 20 20,306 4,500

Southern Aegean Sea 1 0,200 *

Peloponnesus 203 244,290 36,590

Sterea Ellada 116 138,634 17,060

296 1824,900 147,480 East Macedonia and Thrace 26 99,938 12,000

Attiki 10 43,952 10,920

Western Greece 30 131,357 18,000

Western Macedonia 17 99,744 12,000

Ipiros 7 37,000 5,400

Thessaly 44 256,851 16,020

Ionian Islands 1 4,000 *

Central Macedonia 38 197,943 15,000

Crete 4 22,996 *

South Thessaloniki 7 34,395 4,500

Peloponnesus 62 685,655 86,590

≥2MW

Sterea Ellada 50 211,070 17,060

Total 1300 3041,939 345,460

The Greek PV Market : Investors’ interest for production license


THE 3-STEP LICENSING PROCEDURE

· Production License / Exemption from obligation to obtain a production license · Connection terms / · Environmental terms approval· Installation license (for power stations over 150 Kwp· Contracts for Connection and Purchase· Operation License (for power stations over 150 Kwp

Application for granting Electricity Production License (RAE)

Preliminary Environmental Assessment and EvaluationRAE forwards the Preliminary Report on Environmental Impact to the Authority

that is responsible for environmental licensing

Electricity Production License RAE / Ministry of Development

Determination of the connectionterms to the System or the Grid (The offer)

(DESMIE / DEI)

Intervention or Concession Approval(Secretary General of the Region /

Local Forest Authority)

Power Purchase Agreement(DESMIE / DEI)

Contract for the connection with the System and the Grid

(DESMIE / DEI)

Operation License(Secretary General of the Region / Dept. of Planning & Development)

Installation License(Secretary General of the Region / Dept. of Planning & Development)

Environmental Terms Approval


The current feed-in tariffs

Year / MonthMAINLAND ISLANDS

>100ΚW <=100ΚW >100ΚW <=100ΚW

2009 February 400,00 450,00 450,00 500,00

2009 August 400,00 450,00 450,00 500,00

2010 February 400,00 450,00 450,00 500,00

2010 August 392,04 441,05 441,05 490,05

2011 February 372,83 419,43 419,43 466,03

2011 August 351,01 394,88 394,88 438,76

2012 February 333,81 375,53 375,53 417,25

2012 August 314,27 353,56 353,56 392,84

2013 February 298,57 336,23 336,23 373,59

2013 August 281,38 316,55 316,55 351,72

2014 February 268,94 302,56 302,56 336,18

2014 August 260,97 293,59 293,59 326,22

For every year “n” as of 2015

1,3 x aMSPn-1* 1,4 AMSPN-1 1,4 Χ AMSPN-1 1,5 x aMSPn-1

•aMSPn-1 = Average Marginal System Price during the previous year, i.e. n-1

NB. Feed-in tariffs are readjusted every year by a percentage of 25% of the consumer price index of the preceding year, as this index is defined by the Bank of Greece. If the price (after having been readjusted according to the above) is lower than the average Marginal System Price, as determined in the preceding year and increased by 40%, it will be the latter pricing that will be applied, i.e. the average Marginal System Price as determined in the preceding year increased by 40%.


Greenfield ventures vs acquisition of existing projects

Regulatory impediments Licensing stumbling blocks

Planning and construction difficulties and timelines

Terms and cost of connection

Standard Terms of Operator Agreements (e.g. duration, risk allocation etc) What has been learnt since the inception of the market in 2007

Key Regulatory Issues for Investors


1.Preferred Entry and Tax Free Exit Strategy

2.Financing with limited direct and indirect tax implications in Greece

3.New Thin Capitalization Rules that may affect financing

4.Issues related to deductibility of costs and depreciation

5.Tax Losses and generating steady upstream revenue flows

6.VAT refund on the acquisition of equipment

7.Incentives for energy companies

Key Tax Issues for Investors (1)


1. Preferred Entry and Tax Free Exit Strategy Green field venture vs Acquisition

Foreign non Greek Company used as Holding Company of the Project

2. Financing with limited direct and indirect tax implications in Greece

Stamp Duty on shareholder loans and ways around it

Withholding Tax on Interest payments and ways around it

The use of Corporate Bonds as a tax efficient tool

The use of Bank Loans



3. New Thin Capitalization Rules that may affect financing

3:1 Thin capitalization Rules

Debt : Equity Ratio limitations

Possible solutions to the debt : equity ratio limitations

4. Issues related to deductibility of costs and depreciation

Principles applicable to deductibility of expenses

New Transfer Pricing Rules

Depreciation and amortization

Management Fees paid abroad



5. Tax Losses and generating steady upstream revenue flows

Tax losses carried forward

How to generate upstream revenue flows to satisfy shareholder returns

6. VAT Refund on the acquisition of equipment

VAT on leasing of equipment

VAT on acquisition of equipment



7. Incentives for energy companies (Category 1 Investment)

Investments for the production of electricity from soft energies, in particular wind power, hydroelectric power, geothermal power and biomass qualify as aided investments under Greek incentive legislation 3299/2004, irrespective of the installed power for the joint production of electricity and heat.

Investments for the production of electricity from solar power, with the exception of investments in photovolatic systems investments with a capacity exceeding 2 MW, also qualify as aided investments under Greek incentive legislation 3299/2004.

Tax incentive in the form of income tax exemption is granted according to the following table:

The incentive percentages are increased for small and medium sized companies as follows: For medium size enterprises an additional 10% up to €15m. For small size enterprises an additional 20% up to €10m.


Investment Zone A Zone B Zone C

Category 1 20%20% 40% 30%30% 50% 40%40% 60%

Category 2 15%15% 35% 25%25% 45% 35%35% 55%


7. Incentives for energy companies (Zones)



7. Incentives for energy companies - The tax exemption works as follows:

The incentive involves exemption from payment of income tax on non distributed gains for the first 10 years following completion of the investment, through the creation of a tax free reserve.

The amount recorded in the tax free reserve is calculated based on the net profits declared in the income tax return after deducting (i) profit exempt from income tax, (ii) statutory reserve and (iii) actually distributed profits.

When the investment is acquired through leasing, the tax free reserve is calculated on the basis of the lease payments on the condition that the ownership of the equipment will be transferred to the company

The tax free reserve of the tax relief must appear in separate accounts in the accounting books of the company

According to a recent amendment to the Incentive Law, the amount of tax relief must be equal to the amount the company would have received in the event of a cash grant.



Dr. Kelemenis is the managing partner of Kelemenis & Co. He obtained his LL.B from the University of Athens and his M.Phil and D.Phil degrees from Oxford

University. He went up to Oxford on a Rhodes Scholarship awarded by the John Cecil Rhodes Trust of Oxford University. Dr. Kelemenis' expertise lies primarily

in corporate and commercial matters, corporate fraud, and litigation. In terms of sectoral expertise, he has been heavily involved in energy and natural

resources. He has been repeatedly selected by the EU Commission and the World Bank to advise on the legal approximation of Eastern European transition

economies with the EU acquis communautaire. In so doing, he has advisednearly all governements of Southeast Europe.

Dr. Kelemenis is a recommended lawyer for M&A, corporate & commercial work, energy, and litigation in all leading international legal directories (e.g. PLC

Handbooks, European Legal Experts, Legal 500, Chambers & Partners, IFLR). PLC Which Lawyer 2008 describes him as a “prolific and respected deal-

focused corporate advisor with acknowledged advisory experience in deals involving the energy industry”, whereas Legal 500 2008 as “a versatile business

lawyer who can inspire colleagues and clients alike”. Dr. Kelemenis is authorized to appear before the Supreme Court of Greece.

Dr. Kelemenis has authored several articles and chapters in edited volumes including the Greece chapter for Sweet & Maxwell’s leading loose-leaf publication

“Energy Law and Regulation in the EU”, as well as the Greece chapter on both Electricity and Oil Regulation for the “Getting the Deal Through Series”; on

renewable energy for the "Renewable Energy Finance Yearbook 2007/2008" published by Euromoney; on M&A for the "European M&A 2007/2008” published

by the Global Competition Review; and on dispute resolution for ICGL’s "Litigation & Dispute Resolution 2008" and PLC’s “Dispute Resolution Handbook

2008/09”. He was recently commissioned by Oxford University Press to write the Greece chapter for the Digest of Commercial Laws of the World.

Dr. Yannis Kelemenis


Being both an experienced lawyer and a management consultant (he also holds an MBA) with a post graduate degree in tax, Mr. Kyriakopoulos combines the

qualities required for investors looking for legal consultants with comprehensive legal, regulatory and tax knowledge with a business acumen.

Head of the firm’s tax practice. He provides a comprehensive range of tax consulting work with respect to almost all forms of direct and indirect taxation,

including the application and interpretation of double tax treaties. He is widely experienced in advising international clients on formulating tax efficient

structures and cross border transactions in connection with all forms of commercial agreements and enterprises. He has long standing experience in assisting

in all facets of share purchase agreements and business transfer deals and side agreements and supporting documentation, reviewing the tax structure of such

deals, consulting on the tax issues related to the acquisition of a business and undertaking full and limited scope tax and legal due diligence work. In the

energy sector, he has contributed and carried out a number of energy projects. To name a few, he was involved in an energy EU funded project in former

Yugoslav Republic of Macedonia, with respect to the development of the Energy Regulatory Commission. In Greece, he concluded a project for the Greek

Centre for Renewable Energy Sources in mapping the legal and tax problems to be addressed for the introduction of legislation regarding Energy Services

Companies, Energy Service Contracting and Third Party Financing. He has undertaken on behalf of the Energy Community Secretariat a multi-jurisdictional

legal, regulatory and tax study in 13 legal orders for the establishment and operation of the South East Europe Coordinated Auction Office.

His recent publications include the Greece chapter on Project Finance in the “Getting the Deal Through” series published by the IBA and the Global

Competition Review, the chapter “Greece: The Current State of the Law” in the Euromoney Project Finance Yearbook 2007/2008, the Greece chapter on

“Mergers and Acquisitions 2008/2009” published by ICLG and the Greece chapter on “Corporate Taxation” in the PLC’s “Corporate Tax Handbook 2008/2009”.

Tom Kyriakopoulos


THANK YOU

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