Bulgaria’s Commission for Protection of Competition (CPC) ruled on July 19 to deny the proposed sale of all the assets owned by Czech energy group CEZ in Bulgaria to local company Inercom.
In its decision, the regulator said that it found some overlap between the companies – although only set up last year, Inercom owns several solar parks, which would benefit from the acquisition of CEZ assets, which include an electricity trading subsidiary.
The main objection to the deal, however, appears to be that the proposed acquisition would lead to “establishing or strengthening the dominant position of the merged group,” CPC said in its statement.
“Given the wide range of activities of the companies being acquired and their importance to the Bulgarian electricity grid, there are grounds to accept that this merger is of strategic importance to the country, as the potential effects would have direct repercussions on national security,” the regulator said.
CEZ, controlled by the Czech government, operates in the country through seven companies and its power distribution arm services western Bulgaria, including the capital city of Sofia. The company, reportedly, has been looking to exit the Bulgarian market for more than a year and has accused Bulgarian authorities of creating an unfavourable regulatory environment, lodging an international arbitration lawsuit in 2016.
But it was its chosen buyer Inercom that raised the loudest objections among Bulgaria’s politicians, given its small scale and questions about how it plans to cover the acquisition price. Inercom owner Ginka Vurbakova previously said it would be financed using loans and the company’s own money, but some opposition MPs have claimed that the company was a stand-in for other, unknown interested parties.
Bulgaria privatised its power distribution grid in 2004 – CEZ paid 281.5 million euro for three regional power distribution companies in western Bulgaria, which it later merged – but this is not the first change of ownership since then.
In 2012, Germany’s E.ON, which acquired the regional power distribution companies in northern and north-eastern Bulgaria in the privatisation tender, exited the country by selling its operations to Czech firm Energo-Pro in a deal that met no opposition from the anti-trust regulator.
This was the second major proposed deal blocked by CPC on July 19, with the regulator also refusing to approve the sale of broadcaster Nova Televizia by Modern Times Group to Czech investment conglomerate PPF Group. Both decisions are subject to appeal within 14 days.