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Bulgarian Prosecutors Start Probe of CEZ, EVN, Energo-Pro

Bulgarian prosecutors and tax authorities started a probe of power distribution companies operated by Czech CEZ AS (CEZ), Austria’s EVN AG (EVN) and Energo-Pro amid protests against high utility bills that toppled the government.

“I have issued an order to carry out a full inspection of the distribution companies to check for possible violations and offenses,” Bulgaria’s Chief Prosecutor Sotir Tsatsarov told reporters in Sofia today. “The purpose of the inspection is to check whether all spending and investments are real.”

The European Union’s poorest state in terms of per-capita output weathered the global crisis without borrowing from international lenders and wants to keep its budget gap at 1.3 percent of gross domestic product this year to help contain the impact from the euro-area crisis. Higher electricity and heating bills caused by cold weather combined with low wages and rising unemployment triggered nationwide protests against energy utilities and the government, leading to Prime Minister Boyko Borissov’s resignation Feb. 20.

The State Energy and Water Regulation Commission started a license revocation procedure against CEZ, the largest Czech utility, after it found 21 violations including evasion of public procurement laws. CEZ was given the option to repair the breaches before the regulator’s next hearing on April 16.

All six members of the regulator resigned, it said Feb. 25.

Checking Contracts

The prosecutor’s probes, ordered by the Energy, Economy and Tourism Ministry, will check the companies’ external services contracts and will end on March 22, after which the conclusions will be prepared, Tsatsarov said.

“We have no reason to be concerned because we have observed the laws,” CEZ Bulgaria said in an e-mailed statement today. “We’ll fully cooperate with the investigating authorities and will fulfill our obligations professionally.”

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.

CEZ supplies electricity to more than 2 million customers in Sofia and the northern city of Pleven, which together account for 41 percent of Bulgaria’s power consumption. EVN has 1.5 million customers in Plovdiv and Stara Zagora in southern Bulgaria. Prague-based Energo-Pro provides electricity to 1.2 million customers in northeastern Bulgaria.

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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