March 9, 2018 / 1:00 PM / 2 years ago

CEZ, Inercom to study potential Bulgarian state stake in asset sale

PRAGUE/SOFIA (Reuters) - Czech utility CEZ (CEZP.PR) and Inercom agreed to study the possibility of the Bulgarian state taking a stake in assets that CEZ is selling to the small Bulgarian solar energy producer, CEZ said on Friday.

FILE PHOTO: Czech electricity producer CEZ's logo is seen on the company's headquarters in Prague March 17, 2013. REUTERS/David W Cerny

CEZ signed a contract in February to sell a power distributor that provides electricity to over three million Bulgarians, together with other assets in Bulgaria, to Inercom for an estimated 320 million euros ($394 million).

But Bulgaria’s government said last week it wanted a controlling stake in the assets after the deal prompted concerns across the political spectrum in Bulgaria that strategic energy assets were passing into the hands of owners which little was known about.

CEZ said on Friday that Inercom representatives had asked if the Bulgarian state could take a role in the asset sale.

“Although the Bulgarian government did not officially show interest in the sale process which was running last year, CEZ will comply with its business partner’s wishes and will examine this possibility,” it said in a statement.

Both sides agreed to study the impact of the Bulgarian state taking a role in the transaction, CEZ said, adding that negotiations would continue in the coming weeks.

Inercom, with assets of around 100 million levs ($63 million), is set to acquire a business with annual turnover of about 1.8 billion levs.

Last month, Bulgarian Prime Minister Boyko Borissov urged the central bank and intelligence services to look into the deal.


A week ago, Finance Minister Vladislav Goranov said Bulgaria’s government wanted a stake in CEZ’s Bulgarian assets.

However, he, as well as Delyan Dobrev, head of the parliamentary energy commission, said later they did not think the government should get involved, as the state has enough instruments to control energy distribution companies. Goranov said this was his personal view.

Energy prices are politically sensitive in the EU’s poorest member state, and a spike in electricity bills in 2013 toppled Borissov’s first government.

Inercom said on Friday it would be up to CEZ to decide whether to start talks between the companies and the Bulgarian state over a potential government involvement in the sale.

In written responses to Reuters, Milena Stoeva, chair of the board of directors of Inercom Bulgaria, declined to reveal the value of the deal but said the company has made firm commitments to close the transaction and planned to deliver on them.

Addressing concerns about the financing of the deal, Inercom said that it is holding talks with several global banks and that no offshore companies would take any part in the transaction.

The company said it has never discussed the financing of the deal with Russian banks and said it was ready to commit significant equity for the deal, but did not elaborate. Bulgarian Mane Capital is Inercom’s financial adviser.

“Since signing the contract, the negotiations with the banks are progressing well,” she said, declining to name them.

CEZ has taken Bulgaria to arbitration seeking hundreds of millions of euros for failing to protect its energy investments in the country and the ongoing case will complicate any eventual involvement of the state in CEZ’s assets.

Hundreds of protesters, backed by opposition Socialists, rallied in Sofia on Wednesday demanding the centre-right cabinet stop the sale of CEZ’s assets.

Additional reporting by Petra Vodstrcilova in Prague and Angel Krasimirov in Sofia; Editing by Adrian Croft

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