Bloomberg News

Bulgaria May Revoke CEZ Distribution License After Probe

February 18, 2013

Bulgaria will consider revoking CEZ AS’s power distribution license after the State Financial Inspection Agency’s probe into the largest Czech utility.

The government will decide whether to start the procedure in several days, the Energy, Economy and Tourism Ministry in the capital Sofia said on its website yesterday, after thousands of Bulgarians marched in 10 cities and blocked main roads demanding lower electricity bills and higher wages.

The inspection agency started a probe into CEZ’s Bulgarian units last year and submitted a report on Feb. 8, saying that CEZ “evaded requirements of the Law for Public Tenders,” the ministry said. The ministry requested the inspection authority to do a similar probe into the local units of Austria’s EVN AG and Prague-based Energo-Pro, it said.

“The State Energy and Water Regulation Commission will assess whether the conclusions of the financial inspection report give grounds to start a procedure to revoke the company’s license,” the ministry said.

Barbora Pulpanova, a CEZ spokeswoman in Prague, had no immediate comment on the situation in Bulgaria when contacted by phone today.

Shares Drop

CEZ Electro Bulgaria said in a statement on Feb. 15 that it earns 9 percent on every electricity bill, while the rest is paid to power producers, the National Electricity Company and the state grid operator.

CEZ shares declined 0.5 percent to 616 koruna at 12:05 p.m. in Prague, falling for a fourth day and valuing the company at 331.4 billion koruna ($17.4 billion). The company controls companies that supply electricity to Sofia and the northern city of Pleven, which together account for 41 percent of Bulgaria’s power consumption.

The Albanian energy regulator revoked CEZ’s license last month following disputes over tariffs and taxes. The Czech utility said on Jan. 21 that it will start an international arbitration against Albania.

Bulgaria sold seven power distributors in 2005 to EON SE, CEZ and EVN before joining the European Union. EON sold its Bulgarian companies to Energo-Pro in 2011.

Bulgarian Protests

The EU’s poorest state in terms of per-capita output weathered the global crisis without borrowing from international lenders and wants to keep its budget gap at 1.3 percent of gross domestic product this year, to help contain the impact from the euro-area crisis.

Higher electricity and heating bills caused by the cold weather combined with low wages and rising unemployment triggered nationwide protests against energy utilities and the government in the past 10 days.

Protesters threw stones and broke the windows of the office building of Energo-Pro in the Black Sea city of Varna yesterday, police said. Four people were arrested after police clashed with protesters in Sofia yesterday, according to the police. A protest rally is scheduled in the capital today.

To contact the reporter on this story: Elizabeth Konstantinova in Sofia at ekonstantino@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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