Power grid sale upsets Bulgarian, Czech governments

Bulgarian Prime Minister Boyko Borisov (R) welcomes Czech Prime Minister Andrej Babiš during their official meeting in Sofia, Bulgaria, 22 January 2018. [Vassil Donev/EPA/EFE]

Bulgarian Prime Mininster Boyko Borissov said yesterday (27 February) he would not resign over an unfolding scandal involving the sale of CEZ Bulgaria to an obscure company, saying the sale was a plot to topple him while he was in Brussels for an EU summit last week.

On 22 February, the Czech state-owned energy giant CEZ officially announced the sale of its Bulgarian assets to a small Bulgarian company, called “Inercom Bulgaria”.

The purchase price was announced at €320 million, against which the buyer will acquire a business with an annual turnover of nearly €1 billion.

“Inercom Bulgaria” was founded last year with a capital of €25,000. The owner is Ginka Varbakova from the town of Pazardzhik, a person who has no prior experience in managing energy companies or projects.

Borissov has already been forced to resign over a scandal linked to electricity prices, in February 2013. In that case, the Czech company CEZ was targeted for what was perceived as an attempt to plunder Bulgarian consumers.

Bulgarian prime minister quits following mass protests over electricity bills

Bulgarian Prime Minister Boyko Borissov resigned today (20 February) following boisterous public protests in the capital and several other cities over the price of electricity.

In terms of grid operators, Bulgaria is divided in three. CEZ has the monopoly of the Western part of the country including the capital Sofia. Another Czech company, Energo-Pro, controls the north-west, and Austria’s EVN the south-west.

Bulgarian consumers have long suspected cartel arrangements between the three companies, which charge similar prices in a market where there is no competition. The national energy regulator, which is supposed to police the sector, enjoys very little trust from the public.

“This time, there will be no resignation”

Unlike in 2013, this time the scandal is also creating a political problem for Czech PM Andrej Babiš. A Czech newspaper reported that Babis was “shocked” by the revelations concerning the deal and has asked CEZ for explanations.

Without naming the culprits, Borissov said the sale of CEZ Bulgaria was a plot to topple him while he was in Brussels for the EU summit last Friday.

“This is the scenario of these scoundrels. […] These people have toppled me from power once, now they try again”, the Prime Minister said on public television yesterday (27 February).

“This time there will be no resignations, I promise those people that I will expose them”, Borrisov added.

On the same day, Bulgaria’s energy minister Temenuzka Petkova resigned. She explained that she had nothing to do with the purchase of CEZ’s assets, but had been a personal friend for 20 years with Ginka Varbakova. Petkova announced she was leaving so there would be no speculation about this relationship.

At the EU summit last week, Borissov faced tough questions by Brussels-based Bulgarian journalists. The questions centered on a surprise visit to Bulgaria by Czech Prime Minister Andrei Babiš, which took place on 22 January. There was speculation at the time that CEZ was the subject of the bilateral talks. But Borrisov denied that CEZ was the topic of this meeting.

This apparently discouraged Borrisov from facing the press again, which is unusual of him.

In his television appearance yesterday, the Bulgarian Prime Minister appeared nervous, saying the takeover of CEZ was a plot to oust him.

Borissov also said there was no mechanism to stop the deal, a statement contradicted by politicians and analysts. Borissov keeps repeating that this is a deal between two private entities, although CEZ is a state-owned Czech company.

Borissov said he had received confidential documents on the deal from Babiš that showed the involvement of Russian-Georgian offshore companies, as well as Russian and Bulgarian banks. He urged the central bank and the country’s intelligence services to look into the deal.

In the meantime, it emerged that the price for the sale of the company was bigger than €320 million, because it also included the debts of CEZ Bulgaria.

On Friday, the opposition Socialist Party demanded the sale be stopped and urged the government to arrange a new bidding process.

Borissov, who has previously dismissed Socialists’ calls for the state to buy back private energy assets, said the government was considering legal changes that would allow the state to have a say in similar deals.

Subscribe to our newsletters