Czech energy group CEZ became the third electricity distribution firm to file an arbitration claim against Bulgaria with the World Bank’s arbitration institution Icsid, saying that the actions of Bulgarian authorities were damaging the operations of CEZ subsidiaries and “causing the long-term critical situation on the local energy market that is not improving”.
In a statement, CEZ said that its damages claim “amounts to hundreds of millions of euro”, but gave no further details. The company had filed a notice of dispute in November 2015, asking for an amicable settlement of the dispute, but Bulgaria made no efforts in that direction, CEZ said.
“We are prepared to protect our investments by all possible means and arbitration is therefore the next logical step,” CEZ chief external relations and regulation officer Ivo Hlaváč said in the statement.
CEZ entered the Bulgarian electricity distribution market in 2004, when the country’s government privatised the entire distribution grid. CEZ bought the distribution network in western Bulgaria, which includes the capital city of Sofia.
“The situation in the Bulgarian energy sector is critical and especially the pricing decisions of the local regulator have not been, on a long-term basis, in line with the expectations at the time of the privatisation process. Therefore, businesses operating in the energy sector have in recent years faced declining profitability or losses and low liquidity,” the company said.
The other two electricity distribution firms in Bulgaria have already filed similar lawsuits in recent years, with Austria’s EVN filing for arbitration in July 2013 and Czech Energo-Pro doing the same in May 2015. Both claims were filed with Icsid.