High political tension in Bulgaria as future of CEZ sale remains unclear

Written by on March 1, 2018 in Bulgaria - Comments Off on High political tension in Bulgaria as future of CEZ sale remains unclear

One week after Czech utility CEZ announced its intention to sell all its assets in Bulgaria, during which every politician of note in Sofia has weighed in on the deal at least once, the uncertainty surrounding the proposed deal is yet to abate.

The latest notable development was a meeting on March 1 between Prime Minister Boiko Borissov, who has repeatedly said in recent days that he had his doubts about the deal, but also that the Bulgarian state could not interfere in a private transaction, and Ginka Varbakova, the owner of Inercom, the Bulgarian firm picked by CEZ to buy its Bulgarian business.

After the morning meeting, Varbakova spoke to the assembled media, flanked by Deputy Prime Minister Tomislav Donchev, whose oversight area includes the energy sector, and Finance Minister Vladislav Goranov.

“The Prime Minister wants to have full control over the deal we are making and the company we are acquiring,” Varbakova said, before Goranov quickly added “at least a controlling stake.”

“If that calms consumers, yes, I am inclined to have the state participate in the deal, I am inclined to transfer the contract that I have, provided that the seller agrees to it,” Varbakova said. She said she would travel to the Czech Republic to meet with the seller and discuss the changed circumstances.

Varbakova also denied that any Bulgarian lenders were involved in financing the proposed acquisition, as media reports in Bulgaria have claimed. The deal was being financed using “international banks” and Inercom’s own participation.

Asked how the Bulgarian government could buy back into the electricity distribution company – CEZ bought three regional distribution firms that service western Bulgaria in 2004, later merging them into one – Goranov said that it could be done either directly using state budget funds or using one of the state-owned energy companies.

Although CEZ’s supervisory board did not disclose financial details when it announced its intention to sell the company’s Bulgarian assets, reports in Bulgarian media have pegged the price at 8.5 billion Czech koruna, which at current exchange rates amounted to about 344 million euro.

“We are joining at a stage where there is a signed sale contract and are in the delicate situation of depending on the will of two private entities outside the state’s influence. But we see the goodwill of the Bulgarian company to allow the state into the deal in one form or another. The state will seek to have a controlling stake,” Goranov said.

Later in the day, Varbakova appeared in front of the National Assembly’s energy policy and special services oversight committees, which held a joint hearing on the proposed CEZ sale.

She said that Inercom was the target of an “unprecedented campaign” against it. “We are witnessing political and economic blackmail, meant to block a legal deal. Various political forces and institutions saw this deal as an opportunity to raise their political ratings,” Varbakova said.

The barb appeared aimed at Kornelia Ninova, leader of the opposition socialist party, and Bulgarian President Roumen Radev. Both have criticised the government for allowing the deal in the first place, with Ninova suggesting the nationalisation of CEZ assets in Bulgaria, while Radev said that the transaction appeared to be a “covert acquisition”, with Inercom acting as a front for other interests.

On March 1, Radev heaped more pressure on the government, saying that the cabinet’s “chaotic actions contradicted its own declarations.” He went on to say that security services “failed in this case and the natural question arises whether they serve the country or the government’s comfort.”

(Left to right: Deputy Prime Minister Tomislav Donchev, Ginka Varbakova, Finance Minister Vladislav Goranov. Screengrab from Bulgarian National Television.)

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