February 23, 2018 / 5:44 PM / 25 days ago

CEZ signs deal to sell Bulgarian energy assets as minister quits

SOFIA (Reuters) - Czech power utility CEZ (CEZP.PR) signed a contract on Friday to sell its Bulgarian assets to Bulgarian company Inercom, hours after the Bulgarian energy minister resigned over her links to Inercom.

FILE PHOTO: Czech electricity producer CEZ's logo is seen next to an electricity pylon in front of the Ledvice coal-fired power plant near the village of Ledvice, Czech Republic, February 9, 2016. REUTERS/David W Cerny

Under the deal, Inercom Bulgaria will take over an energy distributor that provides electricity to over 3 million people in the north west of the country, an energy trader and several renewable energy assets.

The sale, estimated at about 320 million euros ($394 million), raised concerns among lawmakers across political parties in Bulgaria about the ability of the little-known company to finance and operate strategic power assets.

Electricity costs are politically sensitive in the Balkan country of 7.1 million people, which also ranks as the most corrupt European Union member state, according to Transparency International.

Energy Minister Temenuzhka Petkova resigned after confirming she had known the owners of Inercom for over 20 years, but she denied any wrongdoing.

Speaking to reporters in Brussels, Prime Minister Boyko Borissov said he would accept Petkova’s resignation to assuage any doubts that his government had any say in the deal.

“I want to confirm ... (the government) had not influenced that deal in any way,” he said.

Borisov said the country’s energy, financial and anti-trust regulators, as well as the intelligence services, would look closely into the deal, including the origin of the funds for the transaction.

Inercom, part of a group that has activities in construction and solar energy, said it was aware of the social importance of the business it will acquire and pledged to work transparently and responsibly.

“We have proved that we have the experience and capacity to acquire and manage companies in Bulgaria,” it said.

    Inercom also said it planned to make a tender offer to the minority shareholders in CEZ Electro 1CZ.BB and CEZ Razpredelenie 3CZ.BB, once it gets a green light from the Bulgarian anti-trust regulator.

    The head of the parliament energy commission Delyan Dobrev however questioned the ability of Inercom to manage an energy business with an annual revenue of about 1.8 billion levs ($1.13 billion).

    “Initially it sounded like fake news to me,” Dobrev told NOVA television. “How a company that I have not heard of until yesterday will take over one third of the power distribution network in Bulgaria?” he said.

    The opposition Socialists criticized the deal, urging the government and the president to take a stand.

    Volen Siderov, one of the leaders of the government’s junior coalition partner, urged the prosecutors and anti-corruption authorities to scrutinize the deal.

    Reporting by Tsvetelia Tsolova, editing by David Evans and Jane Merriman

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