Bloomberg News

Bulgarian Prosecutor Seeks Criminal Probe of CEZ Utility

April 03, 2013

CEZ AS, (CEZ) the Czech Republic’s largest power producer, may face a criminal investigation in Bulgaria as it fights the energy regulator’s effort to revoke its license.

The probe would establish whether CEZ violated the country’s law in outsourcing contracts, Chief Prosecutor Sotir Tsatsarov told reporters in Sofia today.

The move marks the latest escalation in tensions between Bulgaria and the Prague-based utility. CEZ is suspected of 21 violations including evasion of public procurement laws, the nation’s energy regulator said Feb. 20 as it started procedures to revoke the company’s license.

Bulgaria’s energy regulator has moved to strip CEZ of the right to operate its power-distribution network as prosecutors investigate CEZ, EVN AG (EVN) and another Czech utility, Energo-Pro, after high utility bills triggered protests that brought down the government of Boyko Borissov. President Rosen Plevneliev appointed an interim government led by Premier Marin Raikov March 12 to organize and hold early elections May 12.

CEZ shares fell as much as 2.8 percent today, the most in a week, and were down to 585 koruna at 11:54 a.m. in Prague. The stock lost 13 percent of its value last year and a further 14 percent since the beginning of this year.

Albanian Woes

The trouble in Bulgaria came only weeks after Albanian authorities seized CEZ’s assets and drove it out of the country. Both cases show that Prague-based CEZ, which went on a Balkan buying spree in the last decade under former Chief Executive Officer Martin Roman, underestimated the perils of investing in one of the poorest parts of Europe.

CEZ filed a complaint against Bulgaria at the European Commission on March 29, claiming that the country’s regulator was breaking both national and EU laws. The utility has asked the commission for an independent review.

“We maintain that we haven’t broken any laws in Bulgaria,” CEZ spokeswoman Barbora Pulpanova said when reached by telephone. “At this point we must wait for the results of the investigation before we take any further steps.”

To contact the reporter on this story: Ladka Bauerova in Prague at lbauerova@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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