CZECH REPUBLIC/FILE: Czech power group CEZ denies any wrongdoings in Bulgaria and shows itself convinced about retaining its distribution license

Record ID: 644427

  • Title: CZECH REPUBLIC/FILE: Czech power group CEZ denies any wrongdoings in Bulgaria and shows itself convinced about retaining its distribution license
  • Date: 20th February 2013
  • Summary: TEMELIN, CZECH REPUBLIC (FILE, 2012) (REUTERS FILE) VARIOUS OF CEZ TEMELIN NUCELAR POWER PLANT WITH SMOKE BILLOWING FROM CHIMNEYS
  • Embargoed: 7th March 2013 12:00
  • Keywords:
  • Location: Czech Republic
  • Country: Czech Republic
  • Topics: Business,International Relations,Economy,Politics,Energy
  • Reuters ID: LVA69D8T54QYZOM9VLRC7RZSL0IF
  • Story Text: Bulgarian regulators on Wednesday (February 20) pledged to press on with the cancellation of Czech power group CEZ's distribution license announced by Prime Minister Boiko Borisov but also suggested there could be room for compromise.
    CEZ, central Europe's largest listed company with a market capitalisation of $17.4 billion, has been caught in the middle of nationwide protests against high electricity bills that on Wednesday prompted the resignation of Borisov's government.
    Borisov, who now faces a tough task to prop up eroding support ahead of a probable early election, tried to stem the protests on Tuesday by promising to revoke CEZ's license and fine other foreign power firms.
    Czech finance minister Miroslav Kalousek pointed out on Wednesday that there was no reason for any changes within the board of CEZ. "We are absolutely sure that all the three CEZ companies operating in Bulgaria are fulfilling national as well as EU legislation and that none of them caused anything which could be seen as a breach of license conditions. Bulgaria is an EU member state and that's why we trust that the hearing which started there will be done in a fair way and within EU rules," Kalousek said.
    CEZ denies breaking any Bulgarian laws and said at a news conference on Wednesday that none of the some 20 comments it had received from regulators proved serious wrongdoing. "Since the beginning of the activities in Bulgaria in 2005 we have been strictly observing all Bulgarian laws. We are being monitored and all these controls found out only very slight mistakes and we always succeeded in eliminating them," said CEZ board member Tomas Pleskac.
    Earlier in the day, Bulgaria's State Energy and Water Regulatory Commission said that CEZ had evaded public procurement laws by subcontracting many operations without holding public tenders. But it left the door open to being persuaded not to revoke the license.
    CEZ said the situation has been politicized. It blamed higher electricity bills on a colder winter and higher consumption this year, and said prices were last changed in July under the order of regulators. "We are convinced that the problem of higher bills in December has been politicized. This issue was being misused by small opposition political parties and then it became a big political issue. During the last days the Bulgarian government tried to use foreign investors as a replacement target to redirect (public) attention to foreign investors," said Pleskac.
    The row in Bulgaria comes at a difficult time for CEZ, which is 70 percent owned by the state, as it deals with the loss of its license in Albania, faces police investigations at home over past deals and is negotiating to end an EU probe in Brussels.
    CEZ shares dropped 0.9 percent down to 605.70 crowns, just off a three-week low on Tuesday and close to four-year lows at the height of the global financial crisis.
    Pleskac said he was convinced CEZ would retain its license in Bulgaria, unlike in Albania, where it lost its license in January as part of a running dispute over power imports and prices. CEZ has started arbitration proceedings in the Balkan country, which if it loses could mean up to 200 million euros in losses.
    "In Albania it was different. During all of 2012 we were pushed by various Albanian authorities, we were charged nonsense penalties, they were taking our ready money and it escalated into problems like switching of the waterworks and in the end the license revocation. This is absolutely another case than today in Bulgaria. We are convinced that in the EU there are the same rules for everyone and these rules are on our side," said Pleskac.
    CEZ has invested 72 billion crowns ($3.79 billion) in its international operations since 2005, including 15.6 billion crowns in two distributors and a coal-fired power plant in Bulgaria.
    After posting a record profit of 51.9 billion crowns in 2009, CEZ's annual profits have dropped by about a fifth and the company has re-concentrated on its home market, where it is running the largest energy tender in the country's history: an expansion of its Temelin nuclear power plant worth around $10 billion.
    CEZ is also running into questions over past deals. The company said on Monday Czech police were investigating four deals, including the sale of a German coal mine and its investment in Albania.
    CEZ has also offered to sell a power plant to meet European Commission demands after an investigation into suspected anti-competitive behaviour.
    CEZ has a week to comment on the process in Bulgaria before an open hearing is held on April 16. ($1 = 18.9844 Czech crowns)
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