Bulgaria Regulator Holds Hearing on CEZ License April 16

Bulgaria started a license revocation procedure against CEZ AS, the largest Czech utility and gave it two months to fix violations as the government resigned amid protests over high energy prices.

The State Energy and Water Regulation Commission found 21 violations including evasion of public procurement laws, spokeswoman Ralitsa Stoyanova said by phone today in Sofia. CEZ has seven days to comment on the regulator’s grounds for starting the procedure and set a deadline to repair the breaches, Stoyanova said. The regulator will inspect whether CEZ has fixed the transgressions before its hearing on April 16.

CEZ denies any wrongdoing and said the government’s steps were politically motivated. Czech Prime Minister Petr Necas said in an e-mailed statement he will demand the Bulgarian government explain the “unprecedented step.”

Bulgarian Prime Minister Boyko Borissov, who submitted his resignation to Parliament today amid violent protests, wanted to cancel CEZ’s license to quell protesters’ demands for lower utility bills. The protests since Feb. 9 initially targeted energy utilities and escalated into anti-government marches on Feb. 17.

The company’s local units supply electricity to the capital Sofia and the northern city of Pleven, which together account for 41 percent of Bulgaria’s power consumption. CEZ has invested 1.7 billion lev ($1.2 billion) in the Balkan country in the past eight years to acquire, expand and improve the power- distribution grid.

CEZ Investment

CEZ said the regulator has failed to prove any “substantial mistake, and lacks reasons for the revocation.

‘‘We have received about 20 comments from the Bulgarian regulator, which however do not confirm any substantial mistake by CEZ, and hence cannot be a reason for license revocation,’’ says Tomas Pleskac, head of the company’s power-distribution unit, in a statement today before a Prague press conference on the issue.

The revocation is the second in as many months. The Albanian energy regulator revoked CEZ’s license last month following disputes over tariffs and taxes.

Bulgaria’s State Financial Inspection Agency started a probe into CEZ’s Bulgarian units last year and submitted a report on Feb. 8, saying that CEZ ‘‘evaded requirements of the Law for Public Tenders,” the Energy and Economy Ministry in Sofia said on Feb. 18.

The ministry asked the authority to conduct a similar investigation into the local units of Austria’s EVN AG and Prague-based Energo-Pro, it said.

Bulgaria sold seven power distributors in 2005 to EON SE, CEZ and EVN before joining the European Union. EON sold its Bulgarian companies to Energo-Pro in 2011.

To contact the reporter on this story: Elizabeth Konstantinova in Sofia at ekonstantino@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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