Bulgarian regulator thwarts CEZ sale to Inercom

26 July 2018, Week 29, Issue 920

Bulgaria’s antitrust watchdog has blocked the sale of assets belonging to Czech energy giant CEZ to a Sofia-based minnow called Inercom.

CEZ first announced its intention to withdraw from Bulgaria in early 2017. It reportedly entered into talks with numerous investors before striking a deal with Inercom in February this year.

The sale, which CEZ valued at 326 million euros (US$378.3 million), would have seen Inercom take control of various power supply, distribution and trading assets, together with a solar plant in western Bulgaria and a biomass plant in the south. Inercom is the owner of six solar parks in southern Bulgaria with a combined output of 23 MW.

Bulgaria’s Commission for Protection of Competition (CPC) said on July 19 that it had rejected Inercom’s application to buy the CEZ assets, filed last month. The agency said the deal would have created a dominant company that would be likely to impede competition. Inercom now has 14 days to appeal against the decision.

The transaction’s announcement earlier this year prompted ridicule from government officials and industry figures alike. They questioned how Intercom, which controls only 100 million levs (US$63 million) in assets, could finance the takeover of a business with an annual turnover of US$1.2 billion. Amid these concerns, Sofia set up a parliamentary ad hoc committee to investigate the deal.

CEZ’s experience in Bulgaria has been mixed. In 2014, the company acquired a 67% stake in three distribution companies for 281.5 million euros (US$343 million) at a privatisation auction. Since then, it has endured a fractious relationship with the Bulgarian authorities.

In 2013, the creeping cost of electricity in Bulgaria sparked nationwide protests that ended up toppling the government. Sofia deflected some of the blame onto CEZ and other foreign energy providers, claiming they were colluding to keep power prices artificially high. In a knee-jerk decision, Bulgaria’s regulator slashed household energy prices by an average of 7% that year, causing CEZ to rack up heavy losses. The Czech firm launched arbitration proceedings against the Bulgarian government in mid-2016 for failing to protect its investments.

CEZ was able last year to offload one of its assets in Bulgaria, a 1,260-MW coal-fired thermal power plant (TPP) on the Black Sea coast, to a local transport company called Sigda. The plant was shut down in 2015 because of stricter EU emissions rules. During the auction for CEZ’s remaining assets, the second-ranked bidder behind Inercom was India Power Corp.

Joseph Murphy

Edited by

Joseph Murphy


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