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Sale of the Bulgarian largest energy operator caused political turmoil in the country

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Bulgaria is shaken by political turmoil after small local company acquired the largest energy operator in the country. A few days ago the Czech utility company CEZ signed a contract to sell its Bulgarian assets to small local company Inercom. The amount of the sale is assessed at 370 million USD and affects almost half of the country’s population.
The companies subject to the transaction are: CEZ Bulgaria EAD, CEZ Electro Bulgaria AD, CEZ Distribution Bulgaria AD, CEZ Trade Bulgaria EAD, CEZ Information and Communication Technologies Bulgaria EAD, Free Energy Project Oreshetz solar power and Bara Group EOOD.
CEZ’s press statement added that Inercom’s offer is significantly above the fair market value of the assets sold, as determined in an independent appraisal, and brings a positive return on the investments in the Bulgarian assets.
The deal raised a lot of concerns among the opposition in the country, as the company Inercom is relatively small energy firm with total turnover of around 25 million EUR, being relatively unknown to publicity. The company operates four solar plants in the country and has assets for 100 million EUR.
The owners of the company Inercom explained that deal will be financed with bank loan. The name of the bank was not released, but it was described and well-known international creditor. However, according to unofficial information part of the creditors of the deal are related to the international Paradise Papers tax evasion. One of the offshore companies in question is “Score Trade”, which has a stake of 67 million EUR. Its co-owner is the Russian-Georgian businessman Paata Gamgoneishvili. He is chairman of the board of directors of the Moscow-based Slavyanskii Kredit bank.
The company Inercom Group and its executive director Ginka Varbakova are connected with the Czech magnate Zdenek Zemek. He provided most of the loans to the Bulgarian company for construction of solar plants, holding a share in the them and even signed as manager. The name Zemek has reappeared around Innercom again in 2017. For a short-term, he acquired 50% of the Innercom Group and appointed representatives who resembled previous operations and initiated talks about a possible new joint project. A few months later, however, the shares were returned to the Ginka Varbakova and her husband.
The uncertainties around the deal and the question “How a company with turnover of 25 million EUR can manage a business with turnover of 1 billion EUR?” raised fire on the Bulgarian political scene. The Bulgarian Minister of Energy Temenuzhka Petkova resigned because of friendship with the executive director of Inercom Group Ginka Varbakova. The opposition attacked the ruling coalition and the Prime Minister Boyko Borissov to answer MPs questions about the deal.
On other side the local authorities initiated investigation around the deal, inspecting the capital of Inercom Group and who is staying behind the company. According to rumors in the country, the Russian and Czech magnates will become the owners in shadow.
The Czech Prime Minister has expressed concern over the way in which the sale of CEZ’s business in Bulgaria. Andrej Babis considers that unlike Bulgaria in the Czech Republic, the sale of the energy company was perceived as a purely commercial deal.
It is not yet clear how many this political turmoil will develop, but the public interest is pretty big and uncertainty may cause more serious problem in Bulgaria.