Bulgaria’s competition watchdog bans sale of CEZ’ assets to Eurohold

Bulgaria’s Competition Protection Committee (CPC) banned the sale of Czech power company CEZ' local assets to the financial and insurance group Eurohold Bulgaria on October 24, ruling that it would significantly affect competition in the sector.

Earlier in October, CPC launched an in-depth investigation, claiming that the deal would significantly impact market positions. Eurohold was asked to provide additional documents to prove the deal would not affect the market.

“The economic strength and the market positions of the merging companies create conditions for establishment or an increase of a dominant market position of the new group, as well as to significant deterioration of the efficient competition on the relevant markets,” CPC said in a statement.

Eurohold commented that it was accepting CPC’s decision as a positive assessment of its financial power.

However, as CPC’s decision can be appealed in court, Eurohold also said that its supervisory board would decide whether to do that.

CEZ decided to leave the country over long-standing disputes with the Bulgarian authorities, and the deal with Eurohold came after an earlier deal struck by the Czech utility to exit its investment in the country was blocked by regulators.

At the beginning of October, CEZ said it would give up selling its Bulgarian assets if its second attempt to strike a deal was blocked by the local authorities.

In February 2018, CEZ announced it had selected local family-owned firm Inercom as the buyer of its Bulgarian assets, which raised serious concerns about the Bulgarian company’s ability to fund and run the assets. Adding to the controversy, Inercom was also found to be owned by a close friend of Bulgaria's energy minister.

The CPC ruled that the highly controversial deal could not be completed as Inercom would gain excessive power on the photovoltaic electricity market. At the time, local analysts suggested that the decision of the antitrust body had no serious grounds, and aimed to put an end to the major political dispute around the sale of CEZ's assets to an unknown and politically connected company. Appeals by CEZ and Inercom were rejected.

In Bulgaria, CEZ operates an electricity distribution business with 2mn customers, a retail electricity supplier, and a wholesale trader. The Varna coal-fired power plant also owned by the firm has an installed capacity of 1,265 MW, and was recently acquired by Ahmed Dogan, the chairman of honour of Bulgaria’s ethnic-Turk Movement for Rights and Freedoms (DPS). In addition, CEZ owns two renewable plants.