Article by Rositsa Chopeva, Managing Partner at xFigureFinance
xFigureFinance is a financial advisory company that focuses on project financing and M&A in Bulgaria and the SEE region. The renewable energy sector is one of the company’s core areas of expertise. Rositsa Chopeva is managing partner of xFigureFinance.
Mrs. Chopeva, you have been working in the renewable energy sector for more than 10 years. How has the landscape changed in this decade, and what challenges are investors facing today?
Yes, our team has been involved in structuring project financing for solar, wind and biogas assets since 2010. Over this period, we have witnessed significant changes in the sector. The way renewable energy projects are currently developed, operated, and financed is very different than 10 years ago. On one hand, we see major improvement in technology combined with even more substantial reduction of equipment costs. On the other hand, even though the sector remains heavily regulated, projects are no longer dependent on government support and operate on the independent energy exchange market. These trends open up opportunities for securing attractive returns when robust contract and market risk management is in place and also when investors optimize the financing of their RES projects.
Attracting capital is often just a fraction of the process of realising a renewable energy project. What other services do you provide in that regard?
Our focus as financial advisors in on optimization of the capital structure, and this is crucial for infrastructure investments. It is so important that for some renewable energy assets, we have managed to increase the internal rate of return by more than 20%. But in order to secure good financing, the project must be bankable, which means that the risks should be adequately addressed. That is why, we usually get involved much earlier, i.e. during the late stages of development and help our clients translate their intentions into low-risk renewable energy projects. We assist with negotiations on key contracts for engineering, procurement, and construction (EPC) and we also advise on securing power purchase agreements (PPAs) for the produced energy. Essentially, we transform Greenfield projects into bankable, low-risk ones, enabling us to then secure capital on preferential terms.
Apart from investors, renewable projects involve an ecosystem of companies. Do you provide services and advisory support to other companies engaged in the green energy transition?
Yes, our core competence is corporate finance advisory. While in 2023 we put focus on renewable energy projects, we also provide services related to mergers and acquisitions (M&A) or attracting growth capital. What sets us apart is our understanding of the challenges companies in the energy ecosystem face, our knowledge of their growth potential, and our extensive network of partners. We help them raise capital to become regional leaders or develop growth strategies. Frankly, some of our most interesting projects are with companies involved in the energy transition.
Let's wrap up by looking at the Bulgarian energy market in 2023. It has been a year of significant turbulence. What trends do you see emerging in this context?
Let me answer from the perspective of our experience, projects, and active clients. We usually advise international investors looking in Bulgaria or in south-eastern Europe's energy assets. They see acquisitions in our region as an attractive opportunity from a risk-return perspective. We also work with local businesses and investors who know the Bulgarian market well but do not have the required expertise in renewable energy projects. I can share that both investor groups see a buyer's market for solar assets, with a variety of projects, many of which do not bring the expected double-digit returns.
That is why they are selective, choosing the solar assets with right location, terrain characteristics and favorable grid connection. We are glad to see increased interest in wind projects. This type of assets require experienced teams, long-term commitment and understanding of the market.
Going beyond 2023, capital interest in green energy assets and in the energy transition sector is yet to come. SEE region has good renewable energy resources, but our infrastructure is outdated and heavily underinvested. We expect that this untapped potential will bring the focus of investors to the region.