Introductory note
We are delighted to share with you the first edition of Kinstellar's Energy and Natural Resources Trends in the CEE and Central Asia for the year 2025. This report brings together an overview of the latest and the up and coming developments in the energy and natural resources sector across our jurisdictions, with a particular focus on the opportunities and advancements in renewable energy, battery energy storage systems, hydrogen, nuclear, or oil & gas—each tailored to the specific energy landscape in: Bulgaria, Croatia, Czech Republic, Hungary, Kazakhstan, Romania, Serbia, Slovakia, Turkey, Ukraine, and Uzbekistan.
Through this report, we aim to provide both new and existing investors in our markets with an overview into the evolving trends and the more significant developments across the energy and natural resources sector in the regions that we cover, drawing on the expertise and insight of our team's professionals and practitioners.
Our markets are highly diverse, each facing its own challenges in the current geo-political climate, but across all our jurisdictions a few common trends emerge (irrespective of geography) such as the need to secure energy supply and independence (especially as regards natural gas), the transition towards an ecologically sustainable economy and renewable generation sources, together with longer term investments planned in the nuclear sector (both new build units and SMRs).
The start of the year proves that 2025 may be a year that brings significant changes in the energy space. Increased protectionism, tariffs and policy uncertainty are expected to drive up costs and supply chain risks. Demand for battery energy storage systems (BESS) is expected to increase considerably. Meanwhile, although investments in the clean energy transition and renewables are expected to continue rising in the short to medium term, they may be called into question in some countries, similar to what is happening in the US.
We hope you find this report insightful and valuable as we navigate together through the dynamic landscape of the energy and natural resources sector. Please do not hesitate to reach out for further discussions or if we can provide any additional information on the topics covered.
Iustinian Captariu
Partner, Firm Wide Head of the Energy and Natural Resources
Sector
+40 21 307 1643
iustinian.captariu@kinstellar.com
Kinstellar at a glance
Kinstellar is a leading independent law firm in Central and Southeastern Europe, and Central Asia.
Operating as a single fully integrated firm, Kinstellar delivers consistently high quality services across all jurisdictions in an integrated and seamless style. We are particularly well suited to servicing complex transactions and advisory requirements spanning several jurisdictions.
Bulgaria
Bulgaria's energy market has a strategic position in Southeast Europe as it acts as an energy hub that interconnects regional markets. The country's energy generation landscape is diverse, comprising nuclear power (37.36%), coal and gas thermal power (19.12%), hydroelectric (1.12%), and increasing inputs from renewable sources such as wind (9.24%) and solar (32.92%) energy. This mix not only ensures a stable supply (Bulgaria has the most energy-intensive economy in Europe) but also opens avenues for various trading opportunities (Bulgaria is a net exporter of electricity). The government intends to reduce its coal power capacity to gradually replace it with renewable power capacity. During this energy shift, the government plans to rely on nuclear power generation and natural gas to meet a significant portion of electricity demand.
Renewable energy
There has been a true revolution in solar energy. In 2019, solar capacity in Bulgaria was one gigawatt; in 2024, it has reached more than four gigawatts. The solar industry in Bulgaria is growing extremely fast, thus contributing to creating green electricity produced locally and partially replacing fossil fuel imported from Russia.
In order to achieve its goal of climate neutrality by 2050, Bulgaria has set as its priorities the acceleration of the process of introducing the production of energy from RES, the promotion of own consumption of energy from RES, the electrification of industry and grid development. Due to the electrification of industry, Bulgaria's gross electricity consumption is expected to reach 41,450 GWh—a 15% increase compared to current consumption. The planned development of RES projects by 2033 according to existing contracts for connection to the distribution networks is as follows: 14,785 MW of new solar power installed capacity, 830 MW of wind power, 1,608 MW of hydroenergy and small quantities of bioenergy. To accommodate this new capacity, the country's transmission system operator, ESO, has invested more than EUR 25 million in digitalisation of the grid. Modernisation and digitalisation of the medium-voltage grid is expected to be completed by end 2024.
Battery energy storage system (BESS)
The framework for the development of BESS was introduced in 2023 to secure the balance and flexibility of the power system. As a result, projects involving energy storage are already under development. Electricity storage facilities can be constructed as part of a new or existing power generation plant or as a standalone facility; their operation is not subject to a licensing regime. An ongoing national funding mechanism for the development of battery electricity storage systems under the National Recovery and Resilience Plan aims to achieve at least 3 GWh of capacity within the transmission electricity network (RESTORE). According to a press release from the Ministry of Energy, 151 bids were submitted, with a total value approaching BGN 5 billion, while the grant allocation amounts to nearly BGN 1.154 billion.
Offshore Wind Energy
Existing wind farms are onshore, as the country has not yet taken steps to tap into its significant offshore potential in the Black Sea. While new offshore wind projects are an integral part of Bulgaria's long-term plans for the development of its energy sector, the necessary regulatory framework for their development is still missing. The most attractive region of the Bulgarian coastal area, near the border with Romania, has a technical potential of 4.3-5 GW, with efficiencies of 45% to 48%.
Hydrogen
Bulgaria is currently producing large-scale grey hydrogen for industrial consumption, mainly through steam reforming. According to Hydrogen Europe, Bulgaria ranks 12th in hydrogen production out of the 32 EEA countries. Lukoil Neftohim Burgas, the largest oil refinery in Southeast Europe, uses around 80,000 t/g of hydrogen produced by steam reforming.
The 2023 National Hydrogen Roadmap sets out pathways for the transition to green hydrogen that could benefit a range of industries. These include regulatory and administrative measures such as initiating pilot projects, decarbonising power generation, modifying electricity trading regulations, and developing hydrogen transport infrastructure. Given the current EU and national funding dynamics, Bulgaria could potentially mobilise EUR 3.2 billion, supplemented by EUR 0.5 billion of own funds, including private investment, over the next decade, according to the National Hydrogen Roadmap.
Bulgartransgaz EAD, the Bulgarian natural gas transmission and storage system operator, and its Greek counterpart, DESFA, are currently conducting a joint assessment of the interest in the hydrogen market to identify the expected hydrogen capacity needs as well as possible production locations and delivery points to end users in both countries. The European Commission's First List of Projects of Common Interest and Projects of Mutual Interest includes a hydrogen project developed by Bulgartransgaz EAD as part of the Southeast European Hydrogen Corridor.
Nuclear
Bulgaria has one operating nuclear power plant, Kozloduy nuclear power plant, which is one of the largest such plants in the region. It provides for more than one-third of the national annual electricity generation. An expansion of the plant is currently underway. The state-owned company Kozloduy NPP – New Builds EAD has signed contracts with Hyundai and Westinghouse for the engineering and building of two new nuclear reactors using Westinghouse's latest, thirdgeneration AP1000® technology. This is a massive project that will involve a large number of (sub)contractors for the various services involved in the development of the new units. The project is expected to be completed by 2034.
Gas
The gross consumption (delivery) of natural gas in Bulgaria in 2023 dropped to 2,552 million cubic meters, which is close to the absolute minimum for the last 23 years. Natural gas distribution in Bulgaria is carried out by private regional and local companies operating under a licensing regime and price regulation for distribution activities.
The natural gas market is fully liberalised. Bulgaria currently has two licensed gas exchanges in operation. Balkan Gas Hub EAD is responsible for the functioning of the organised gas trading market. The platform provides equal access, market prices, increased transparency, and improved competition in the natural gas market in Bulgaria.
In view of geopolitical developments in recent years and the halted supply of natural gas from Russia to Europe, the Ministry of Energy and Bulgargas EAD, the national natural gas distribution company, have taken actions to ensure diversification of natural gas supplies to the country and to fill the Chiren underground storage facility.
The gas interconnector Greece – Bulgaria (IGB) connects the natural gas transmission network of Greece and the Trans Adriatic Pipeline (TAP) with the Bulgarian transmission network. The pipeline provides about half of Bulgaria's domestic consumption needs and enables gas to be transported to other countries in the region. Its technical capacity allows for an increased gas transmission from 3 to 5 bcm/year.
An expansion project of the gas transmission infrastructure is currently underway: a public procedure was launched in early 2024 to increase the gas transmission capacity at the interconnection points from Greece to Bulgaria and from Bulgaria to Romania (the Vertical Corridor). Under the first public procurement procedure, new investments in the design, equipment, construction and commissioning of new facilities of the gas transmission infrastructure of Bulgartransgaz EAD are to be made with an estimated value of EUR 300 million.
Hydropower
In Bulgaria, the National Electric Company (NEK) owns 15 conventional hydro and pumped-storage plants. After delays in the repair projects and regulatory inconsistencies, the repair works of the second hydro unit of the Chaira Pumped Storage Hydro Power Plant were completed in December 2024. In addition, Toshiba Corporation and the ABB-Voith consortium have signed contracts for the repair and rehabilitation of hydro units 1 and 3, expected to be ready by the beginning of 2026, making three-quarters of the hydro power plant operational
Also, some new potential projects are in the pipeline. One of them is advised by the European Investment Bank, which will provide support to NEK regarding the construction of two large pumped-storage hydropower plants in southwestern Bulgaria, with a projected installed capacity of 800 MW per plant. With an estimated total cost of around EUR 900 million each, the plants are projected to become operational by 2032.
Another potential project is related to the construction of the hydrotechnical complex Turnu Magurele – Nikopol, consisting of two run-of-the-river hydropower plants on the Danube, with a projected installed capacity of 420 MW each. The project has been added to the annual list of approved cross-border energy projects for 2024, which enables the opportunity for support through Connecting Facility Europe.
Diana Dimova Managing
Partner (Sofia office)
+359 2 9048 331
diana.dimova@kinstellar.com
Mladen Minev
Counsel
+359 2 9048 381
mladen.minev@kinstellar.com
Croatia
Croatia has significant green energy potential and a diversified energy mix including hydro, natural gas, nuclear, geothermal and renewables. Ranked 6th in BloombergNEF's 2023 Climatescope Index (and 1st in the European region), Croatia is recognised as the most attractive emerging market for energy investment in Europe. With its geostrategic position in the CEE region, abundance of natural resources and the government's positioning of the energy transition process at the forefront of the country's strategic interest, Croatia is on track to become one of the key players in the EU energy market.
Renewable energy
Croatia is strongly focused on increasing the share of renewable energy in its overall energy mix, with approximately 80% of electricity production coming from renewable sources and total investments in clean energy amounting to approximately EUR 240 million to date.
Hydropower plants, historically important in the Croatian energy matrix, are the leading production force in Croatia, accounting for approximately 40% of the total electricity production mix in 2024. The country continues to optimize existing plants and explore small-scale projects in river systems. Wind farms, mainly developed in coastal and mountain areas, have significant potential for scaling up the renewable energy sector. Solar projects are experiencing growth in total investment volume, supported by the government through incentives and subsidies targeting both the residential and commercial sectors, with additional incentives expected by late 2024. Recognizing the challenges posed by climate change, Croatia has introduced a regulatory framework for the development of agro-solar power projects, allowing PV plants on agricultural land. By integrating solar energy production into agriculture, agro-solar projects aim to increase energy independence, address climate change, and support the rural economy. Using agricultural residues and forestry by-products, Croatia is also developing biomass energy solutions, contributing to a circular economy and sustainable rural development.
In 2024, renewable energy production accounted for 22.3% (wind 15%, biogas and biomass 5%, and solar 2%), surpassing fossil fuel production of 19.7%. These trends reflect Croatia's strong commitment to the energy transition, supported by government incentives and subsidies, making Croatia one of the leading EU Member States in terms of RES production rates.
To incentivize investments and facilitate the development of renewable energy projects, Croatia has introduced regulatory changes enabling remuneration models for renewable energy producers, including:
- incentives provided to preferential producers through a market premium model, replacing the previous feed-in tariff and enabling competitive pricing approaches for quota allocation through public auctions conducted by HROTE, the Croatian energy market operator; and
- a regulatory framework for concluding PPAs, either as (i) physical PPAs or (ii) virtual (synthetic) PPAs (i.e., contracts for difference), allowing parties to freely negotiate contractual terms, including tariff and pricing arrangements.
Although demand and interest in renewable energy projects are growing, with around EUR 2 billion of investments pending, the Croatian RES market faces challenges, mainly related to limited grid capacity and the growing need for investments in grid development, complex permitting procedures and lack of regulation for grid connection, as well as a still-developing PPA market. Despite these challenges, new renewable energy projects continue to be deployed and banks continue to provide financing. Some of the key players in the market are: ENNA Group, INA, HEP, E.ON and MET.
Battery energy storage system (BESS)
With increasing balancing costs associated with renewable energy production, Croatia is witnessing growing demand and interest in the development of BESS projects, which are most often pursued alongside the development of PV production facilities. Although the BESS market is still developing, Croatia has a regulatory framework in place to ensure its implementation.
Hydrogen
In preparation for the transposition of the RED III Directive, Croatia has implemented a hydrogen strategy for the period up to 2050, focusing on developing the necessary infrastructure and enabling the use of hydrogen primarily in the transport sector. The country is also facilitating changes to the regulatory framework for hydrogen projects to achieve the European Green Deal and Europe's clean energy transition goals.
Geothermal
With its above-average natural characteristics, Croatia is one of the most attractive locations in Europe for geothermal development, with preliminary assessments indicating an estimated geothermal potential of over 1 GWh. In recent years, 75 areas have been identified, 43 of which are suitable for heating and 32 for electricity production. Seven exploitation fields and 28 exploration fields in the continental region are currently being exploited, with levels of approximately 10 MW each and expected investments of around EUR 400 million.
Gas
The Krk LNG Terminal, which started its operations in early 2021, is a key development for Croatia and one of the country's most profitable strategic projects. It enhances energy security, diversifies energy sources and reduces dependence on individual suppliers. The terminal enables the import of liquefied natural gas (LNG) from various global suppliers, thereby promoting competition in the energy market and improving price stability.
The successful operation of the terminal has resulted in capacity being sold out until 2037, and plans are underway to increase LNG capacity to 6.1 billion cubic metres by October 2025 (from the current 2.9 billion), positioning Croatia as a regional hub for gas supply in Southeast Europe and enhancing energy cooperation with neighbouring countries, including Slovenia, Hungary, as well as Austria and Germany. Some of the key players are: INA, PPD, HEP, MET and MVM.
Nuclear
As part of its long-term energy strategy, Croatia recognises nuclear energy as one of its strategic energy sectors, which provide reliable and low-carbon sources of electricity, ensuring energy independence and self-sufficiency. The Krako Nuclear Power Plant, equally owned by Croatia and Slovenia, accounted for 12.5% of Croatia's total electricity production in 2024 and will continue to operate until 2043. Croatia is interested in the development of small modular reactors (SMRs) and a possible joint venture with Slovenia for the construction of a second unit at the Krako Nuclear Power Plant (Krako 2), which could ensure a long-term strategic energy source for both Slovenia and Croatia, while private investors could be given the opportunity to participate in the project.By investing in sustainable practices and innovative technologies, Croatia is poised to build a resilient energy future, ensuring a cleaner environment and energy security for its citizens. Furthermore, the banking sector in Croatia is increasingly recognising the vital role of investment in energy, particularly in renewables.
Duako }urić
Co-Managing Partner (Zagreb office)
+385 1 5555 630
dusko.zuric@kinstellar.com
Marija Vuchetich
Counsel
+385 1 5555 670
marija.vuchetich@kinstellar.com
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