Bulgarian prosecutors initiated criminal proceedings against local and international power utilities, including the energy regulator, after protests against high energy bills toppled the Cabinet of Boyko Borissov.
Criminal proceedings have started against the National Electricity Co., the country’s biggest power utility, for signing unprofitable purchase contracts with AES Galabovo ran by U.S. power producer AES Corp. and ContourGlobal LP, which operates the Maritsa East Three lignite-fired plant, Chief Prosecutor Sotir Tsatsarov said in Sofia today. CEZ AS, the Czech power producer, faces similar actions, he said.
Bulgarian demonstrations over past five weeks, which toppled Borissov’s government on Feb. 20., focused citizens’ ire on high energy bills and poverty. President Rosen Plevneliev appointed an interim government led by Marin Raikov on March 12 to organize and hold early elections on May 12.
“National Electricity has accumulated great losses after signing 15-year contracts to buy electricity from these producers in 2009 and 2011 at prices much higher than the current market rate,” Tsatsarov told reporters. “This has pushed up power prices. It’s criminal mismanagement and the investigation will help find more details.”
AES built a 670-megawatt coal-fired plant in the Maritsa East mining and power generation complex for 1.2 billion euros ($1.5 billion), which was put into operation in 2011. Enel SpA completed a 700 million-euro expansion and raised the plant’s capacity to 908 megawatts in 2009 before selling it to ContourGlobal.
CEZ, central Europe’s largest power producer, also faces a criminal investigation as it fights the energy regulator’s effort to revoke its license. The probe would establish whether CEZ violated the country’s law in outsourcing contracts, Tsatsarov said.
CEZ is suspected of 21 violations including evasion of public procurement laws, the nation’s energy regulator said Feb. 20 as it started procedures to revoke the company’s license. CEZ, which denies any wrongdoing, has the option to fix breaches until the regulator’s next hearing on April 16.
CEZ’s trouble in Bulgaria comes weeks after Albanian authorities seized the company’s assets there and drove it out of the country. Both cases show that CEZ, which went on a Balkan buying spree in the last decade under former Chief Executive Officer Martin Roman, underestimated the perils of investing in one of the poorest parts of Europe.
Bulgaria’s energy regulator, the State Energy and Water Regulation Commission is under criminal investigation for “inefficient control over the operations” of the power distributors, Tsatsarov said.
Another investigation is being initiated against the Ministry of Energy and Economy for “criminal negligence,” which didn’t claim the state’s dividend from CEZ’s 593 million-lev ($389 million) profit in 2012, when the government still controlled a third of the company before selling it on the Bulgarian Stock Exchange in November, Tsatsarov said.
Mihail Andonov, chairman of the Bulgarian Energy Holding, which groups the country’s biggest energy utilities, is being investigated for mismanagement of public assets, Tsatsarov said.
“The criminal investigations do not constitute an indictment,” Tsatsarov said.
The energy regulator cut power prices on March 5 by an average of 7 percent, which reduced CEZ’s earnings on every household electricity bill to about 4 percent from 9 percent, while the rest is paid to power producers.
EVN and Energo-Pro face a similar issue. EVN will enter arbitration proceedings with Bulgaria to safeguard its Bulgarian investment, the Austrian utility said March 19.
CEZ filed a complaint against Bulgaria at the European Commission on March 29, claiming that the country’s regulator was breaking both national and EU laws. The utility has asked the commission for an independent review.
The EU is “very attentive” to CEZ case in Bulgaria, European Commission President Jose Barroso told reporters in Prague today. “We will make an assessment to be sure that all the rules of the internal market are respected,” he said.
CEZ shares fell as much as 2.8 percent today, the most in a week, and were down to 581 koruna at 2:41 p.m. in Prague. The stock lost 13 percent of its value last year and a further 14 percent since the beginning of this year.
“We maintain that we haven’t broken any laws in Bulgaria,” CEZ spokeswoman Barbora Pulpanova said when reached by telephone. “At this point we must wait for the results of the investigation before we take any further steps.”
Bulgaria’s power exports dropped 22 percent in 2012 on lower demand in southeastern Europe to 8,358 billion kilowatt-hours, according to the Electricity System Operator.