The strongest forces shaping the dynamics of legal work in Bulgaria, according to Kinstellar Partner Antonia Mavrova, are the country’s recently approved Recovery and Resilience Plan and the branching consequences of the war in Ukraine.
“The RRP will trigger a new wave of projects in the country. It was recently approved at the EU level, with the terms for starting the projects being quite short,” Mavrova begins. She expects that market activity will “very much be influenced by the plan.” The Bulgarian Government has already identified a couple of priorities – renewable energy and infrastructure – with projects to be launched in the second half of the year, she says.
“On renewable energy, we’ve been seeing a lot of M&A deals, recently,” Mavrova says, “as there is obviously increased demand for renewable energy and the acquisition of such assets. The RRP specifically highlights the need for large development projects for power stations, battery storage facilities, and geothermal energy plants.”
And there are significant updates on infrastructure development as well, according to Mavrova. “Remember the Sofia Airport concession deal from last year? Well, now the port of Varna will also go under concession, as will the Danube port of Ruse, with both concession projects set to be launched this year.” The government is considering bringing in external advisors, like the IFC or EBRD, to provide expertise in structuring those concessions, she adds, “with the involvement of such players setting market expectations for a transparent process and real competition between the participants.”
“We’re now closely monitoring the status of projects to be announced by the government, to be proactive and invite over potential bidders interested in the region,” Mavrova says. She expects there might be some returning investors, different arms or teams of those that also bid for Sofia Airport. She says that some of the investors in Bulgaria have been somewhat more conservative on M&A deals these past few months, due to the war and its implications, “but we expect that dynamic to be fully reversed by the RPP.”
The war in Ukraine is also giving rise to other dynamics in Bulgaria, Mavrova points out. The first is the increased demand for the relocation of businesses, “especially from the IT sector from Ukraine, Belarus, or Russia. Bulgaria could become the center of development for their further operations.” She says that global market pressures compound the phenomenon, with companies from Africa and Asia also seeking to relocate into the region: “Bulgaria and Romania are frequently on the radar, as potential hosts, as are the Czech Republic and Hungary, due to their location.”
The second – more of a slow-burn consequence – is increased demand for quality residential assets despite the increasing costs of construction and materials, experienced heavily across other subsectors of real estate. Mavrova highlights ready-to-build, which are upcoming on the market and which will ensure “high-quality units.” There is significant potential for growth in the coming year, she says: “Residential is already very popular and, especially with people being displaced from Ukraine – even more so in the case of Poland – demand for residential real estate should increase and more of these projects will be popping up.”