The law firm SOG, in collaboration with Kinstellar, an associate member of the Association RES Serbia, has been involved in key projects in the renewable energy sector. They provide legal support from the acquisition and financing phases, through regulatory issues, to contractual arrangements. Through their engagement in projects involving wind farms, solar power plants, and energy storage systems, the firm has actively cooperated with major international investors and financial institutions. One of the most notable cases was advising the Chinese company Power China during the acquisition process of the Vetrozelena wind farm. This endeavor was particularly challenging due to differences in legal and business cultures, which was one of the topics discussed with Sara Ostojić, a lawyer and Senior Associate at SOG in collaboration with Kinstellar.
What are some of the things that your law firm has been working on or is still working on?
– Our office has been engaged in some of the most important projects in the renewable energy sector in Serbia and the region. Our team is engaged in projects involving wind farms, solar power plants, biomass power plants, covering a wide range of legal aspects – from the moment of entering the project and acquisition, financing, through regulatory issues, to contractual arrangements with EPC contractors and analysis of electricity purchase agreements. Through these projects, we have cooperated with various investors, most often large international companies, funds, but also financial institutions that have recognized the potential of the Serbian renewable energy market.
In addition, we actively participate in advising investors on challenges related to grid connection, the auction system and regulatory changes that can significantly affect the development of the renewable energy sector. Recently, we have also focused on legal issues related to electricity trading, energy storage and the introduction of battery systems into the grid, which is an area that will play a key role in the stability of the power system in the future.
One of the most important references is the advice of Power China on the purchase of the Vetrozelena wind farm. What experiences do you take from that job?
– The project, which had as its subject the entry of a new investor into the Vetrozelena wind farm project, was one of the most complex M&A developments in the renewable energy sector in Serbia, having in mind the planned installed capacity of the project and the percentage share of such a project in the renewable energy market. Power China, a global player in the energy industry, has faced challenges specific to the local market. Our role was instrumental in ensuring that the transaction complied with Serbian legislation, identified and resolved regulatory barriers, and closed the transaction in accordance with the negotiations of all parties and partners in the development of the project.
A special experience in this project is reflected in working with a Chinese investor, where we tried and succeeded in reconciling different legal and business cultures, by trying to ensure a precise interpretation of local regulations and enable the acquisition process to run smoothly. Working on this project has shown us how complex transactions in the energy sector are and how important it is to have a team that understands both local regulations and market challenges, but at the same time is ready to react and work quickly and efficiently.
What are the specifics of RES projects compared to other projects?
– Renewable energy projects differ significantly from other infrastructure projects, primarily due to their long-term nature and specific regulatory frameworks. Unlike investments in traditional industrial or any other sector, renewable energy projects require deep integration with the electricity system, and their sustainability depends on regulatory policies, local system capabilities and market prices of electricity.
A great challenge is access to the network, which is often limited by the capacities of the electricity infrastructure, but also by the fact that in many cases a large number of investors in large projects cannot count on long-term state guarantees through feed-in tariffs, but the realization for a smaller number of projects is reflected in market incentives such as market premiums. Also, licensing procedures are complex and subject to change, which means that investors must be prepared for a long-term strategy and flexibility in business.
What is your assessment of the legislation in Serbia in the field of energy and renewable sources? Is there room for improvement?
– In recent years, Serbia has made significant steps towards the modernization of energy legislation, especially through the adoption of the Law on the Use of Renewable Energy Sources and the introduction of a system of auctions for the allocation of incentives. Nevertheless, the legislative framework is still in the adjustment phase, and some key issues remain open, such as long-term market stability, the obligation to do so, and clearer regulation of the content and rules for power purchase agreements.
In this context, the recent amendments to the Energy Law are particularly important, which can be said to contribute to the stabilization of action plans in the field of energy and further improve the investment climate. The key changes to the law relate to the regulation of battery energy storage systems, the improvement of the rules on balancing the electricity system and further harmonization with EU regulations regarding market-based energy trading mechanisms. Although everything that we list as significant changes is positive steps, I believe that simplification of administrative procedures and acceleration of the adoption of bylaws that accompany legal changes is always welcome.
What are the key regulatory challenges in Serbia’s energy sector that foreign investors should be aware of when entering the market? Are these challenges specific to the Serbian market, or are they noticeable in the region as well?
– The renewable energy market in Serbia is developing at an accelerated pace, and in the coming years we can expect further expansion of solar and wind power plants. The conclusion of new contracts on the purchase of electricity on the market of the Republic of Serbia is an additional security for investors, given that many companies are looking for ways to ensure a long-term supply of green energy.
One of the key challenges remains the integration of new capacities into the grid and ensuring the stability of the power system. In this sense, the development of battery systems and flexible energy solutions will become an inevitable part of the market – although it is evident that key operators and institutions recognize the challenges and are actively working to solve them. Also, Serbia is facing the obligation to further harmonize with EU policies and implement mechanisms that will enable a more transparent market.
The European Commission has proposed four models for the taxation of carbon dioxide emissions. How will this affect the economy in Serbia?
– In connection with the proposed models of taxation of carbon dioxide emissions, this approach will have a significant impact on the economy and the way companies do business in the Republic of Serbia, especially on industries that rely on fossil fuels for their work. While the introduction of such taxation models is positive from the point of view of climate goals, it can create additional challenges for businesses, including within the renewable energy sector. The recommended models for taxing carbon dioxide emissions imply that industries face new costs that can increase overall operating costs. This could put pressure on traditional industrial sectors that are already struggling to switch to green technologies and reduce emissions.
For investors in the renewable energy sector, increasing the competitiveness of the green technology market and strengthening the demand for sustainable solutions are benefits, but investors still face the challenges of an incomplete regulatory framework and potential divergent actions of institutions in the implementation of the law. Investments in green energy will be subject to further risk analysis, as the electricity market faces dynamic changes in terms of carbon prices and taxation.
The challenge for the Republic of Serbia will be to adapt to the new obligations within the Energy Community, which includes harmonization with EU legislation and the introduction of new market mechanisms that may be necessary to reduce carbon dioxide emissions. Given the current phase of regulatory change, it is crucial that Serbia develops mechanisms that will support investments in cleaner energy, while minimizing the negative economic impact on industries that rely on fossil fuels.
What trends do you see in the energy sector in the region? In what direction will the energy and renewable energy market develop?
– The energy sector in the region is increasingly oriented towards decarbonization and sustainable energy, but also the diversification of energy sources in order to reduce dependence on fossil fuels. In this context, significant efforts have been made towards the integration of the electricity market through the interconnection of networks and the harmonization of regulations within the Energy Community.
In parallel with the development of wind and solar capacities, the return of nuclear energy to energy development strategies is increasingly mentioned – also in the Republic of Serbia. Although some countries in the region, such as Hungary and Bulgaria, are already deep in the process of expanding their nuclear capacities, in Serbia and certain countries of the Western Balkans region, this type of energy is not yet in the phase of concrete projects. Nuclear energy can play a role in the long-term stability of the power system, but it is realistic that no concrete projects can be expected before 2040, given the unfinished impact studies, insufficiently developed laws and regulations, construction costs and the social consensus that would be required for such an endeavor.
You have worked on some of the largest mergers and acquisitions (M&A) transactions in the region. What challenges did you have in that process?
– When it comes to mergers and acquisitions (M&A) in Serbia, as an M&A attorney, I face numerous challenges related to regulatory compliance of target companies, risk assessment and the complexity of the legislative framework. One of the biggest challenges is dealing with insufficiently harmonized legislation, where there are certain legal gaps that can cause uncertainty, especially for foreign investors. In addition, the due diligence process in Serbia is often complex for investors – and therefore the cost at the very beginning of entering the project, given that it is necessary to analyze not only the legal and financial aspects of the transaction, but also the specific local conditions and potential controls of state institutions that may affect the further development of the project or the target company.
Through my work in this area, I have come to the conclusion that it is very important to pay attention to administrative procedures that can extend or change the expectations of investors, which is an additional challenge for the successful implementation and realization of the transaction. Also, it is not uncommon for one of the parties in the transaction to need to anticipate certain legal institutes that are not regulated by the domestic legal framework, so the task of the lawyer is to devote himself to the implementation of such provisions in the contract and transaction documentation to the greatest extent possible so that it is applicable in the event of a need for interpretation or dispute before one of the institutions in the Republic of Serbia.
In the M&A energy market, transactions often depend on the political climate, stimulus measures and the stability of electricity prices. Every transaction, not only in this sector, but also beyond, requires an in-depth analysis in addition to financial and legal aspects, and an analysis of long-term market potential.
What advice would you give to young people who want to specialize in the field of energy?
– I would advise young lawyers who want to specialize in the field of energy to prepare for frequent regulatory changes and harmonization of regulations, because this is one of the most dynamic areas of law. Also, it is very important to understand the broader economic and political picture, because energy is not an isolated area – it is intertwined with finance, international agreements and infrastructure investments. Working on projects within this sector also requires a multidisciplinary approach, as a lawyer often has to work closely with engineers and government institutions.
However, in addition to requiring dedication and discipline, working in the energy sector provides young lawyers with the opportunity to specialize, take on bold challenges, and step out of their comfort zone. It is this readiness to step forward that opens the door to exceptional professional growth and development.