Bulgarian PM asks Prague for documents as probes ordered into sale of CEZ’s local business

Bulgarian PM asks Prague for documents as probes ordered into sale of CEZ’s local business
Bulgarian Prime Minister Boyko Borissov has asked his Czech counterpart to provide all documents related to the sale of CEZ’s business in Bulgaria.
By Denitsa Koseva in Sofia February 27, 2018

Bulgarian Prime Minister Boyko Borissov has asked his Czech counterpart Andrej Babis to provide all documents related to the sale of Czech majority state-owned power company CEZ’s business in Bulgaria, the government in Sofia said in a statement on its website.

The deal, signed earlier in February, provoked a significant confusion in Bulgaria as the buyer – small family-owned firm Inercom Group – was set up in autumn last year and many suspect that it is not the real buyer. 

In a phone call to Babis, Borissov expressed concerns over the deal, stressing that CEZ has elected to sell its business to a company that has not proven itself on the market.

“Borissov pointed out that CEZ Bulgaria is part of the country’s system for national [energy] security and the deal, completed without the necessary transparency, is raising reasonable concerns,” the government said in the statement.

However, Babis responded that the deal was completely legal and does not threaten any of the concerned parties. He also said that CEZ had checked Inercom in terms of management capacity and payment options, the statement noted.

According to information obtained by Capital weekly, Inercom offered €320mn for CEZ’s Bulgarian business, while the total turnover of the three solar stations it currently owns is only around €25mn annually, raising questions about where the rest of the money will come from. 

Czech media revealed on February 27 that the deal is being co-funded by Russian-Georgian businessman Paata Gamgoneishvili. Gamgoneishvili, who previous invested into Bulgaria’s Paradise Centre shopping mall, is reportedly putting up nearly half of the sum that Inercom has offered to pay for the CEZ assets.

The growing furore over the deal has already claimed the job of Bulgaria’s Energy Minister Temenuzhka Petkova, who resigned as it was revealed she is a close friend of Inercom’s owner Ginka Varbakova.

Borrisov has ordered several state institutions to probe the deal, even though he acknowledged it was a deal between two companies, where the government cannot intervene. 

The revenue agency has already begun its check, while the state agency for national security also will investigate the agreement. According to publications in the Bulgarian media, the state energy regulator has also been ordered to probe the deal, although it is still unclear on what grounds.

Tidal wave of criticism 

Other politicians are piling on to criticise the deal. Bulgaria’s President Rumen Radev expressed serious concerns that the deal is not transparent and that Inercom seems to cover up another possible interested party. According to daily Dnevnik, Radev also said that the deal is allegedly a scheme for the hidden acquisition of CEZ’s assets, suggesting possible political protection over the buyer though he did not elaborate further. 

The leader of the opposition right-wing Democrats for Strong Bulgaria (DSB) Atanas Atanasov, who is former head of the state national security body, told bTV that the Varbakova’s husband has been investigated for alleged involvement in a scheme to drain money from the largest telecoms operator in the country, BTC, back in 1999. According to Atanasov, Slavcho Varbakov formally stood down from all his family-owned companies following this investigation.

The main opposition Bulgarian Socialist Party (BSP) said that Borissov is personally responsible for the deal as it concerns state security, while the ethnic-Turk Movement for Rights and Freedom (DPS) said that it will discuss it at a meeting of its leadership.

The deal also raised the question of why CEZ has not found another buyer, and indeed why it decided to exit Bulgaria, where it posts profits. According to Petr Baran, former operations director of CEZ, the company decided to exit Bulgaria due to the bad business environment and the conflicts with Bulgaria’s government. Baran claimed that no serious company has shown interest in the deal and CEZ finally decided to sell it to an unknown company.