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Bulgaria May Revoke CEZ Distribution License After Probe

Bulgaria will consider canceling CEZ AS’s power-distribution license after a financial investigation into the local units of the largest Czech utility.

The government will decide whether to start the revocation procedure in several days, the Energy, Economy and Tourism Ministry said on its website yesterday. Thousands of Bulgarians marched in a dozen cities demanding lower electricity bills and higher wages in the run-up to a general election in July.

The 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,” according to the ministry. 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.

CEZ’s operations comply with Bulgarian law and the company will cooperate with the regulator, CEZ Electro Bulgaria said in an e-mailed statement today. 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. It earns 9 percent on every electricity bill, while the rest is paid to power producers, National Electricity Co. and the state grid operator, according to the statement.

‘Categorically Denies’

“CEZ categorically denies any wrongdoing that could theoretically trigger a procedure of revoking the license,” Barbora Pulpanova, a spokeswoman, said in an e-mail to Bloomberg News. “CEZ rejects the politicizing of this matter in light of the approaching parliamentary elections.”

CEZ shares declined 0.4 percent at 616.2 koruna on the Prague Stock Exchange, falling for a fourth day and valuing the company at 331.5 billion koruna ($17.4 billion). 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.

The Albanian energy regulator revoked CEZ’s license last month following disputes over tariffs and taxes. The Czech utility said on Jan. 21 that it will start international arbitration against Albania.

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.

Bulgarian Protests

The EU’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 in the past 10 days.

The State Energy and Water Regulation Commission will assess whether the financial inspection report gives grounds to start license-revocation procedures, the Energy Ministry said.

Protesters threw stones and broke the windows of the office building of Energo-Pro in the Black Sea city of Varna yesterday, police said. Four people were arrested after police clashed with protesters in Sofia yesterday, according to the police. A protest rally is scheduled in the capital today.

Probes in the energy industry should be extended to the energy regulator, the Bulgarian Energy Holding, which groups the country’s biggest utilities, and the National Electricity Company, the country’s President Rossen Plevneliev said today.

The investigations should help “eliminate inefficient spending and corruption,” Plevneliev said in a statement. “The industry has serious structural problems accumulated over the past 23 years, it doesn’t function efficiently and its control is insufficient.”

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