Sale of ČEZ Bulgaria to Inercom raises red flags; requires greater scrutiny

The proposed sale of the Bulgarian assets of ČEZ Group, an energy conglomerate of which the government of the Czech Republic is the majority stakeholder, raises red flags for corruption and should undergo further investigation.

ČEZ Group controls a reported 67 per cent share of the electricity market in Bulgaria. The sale of these assets to Inercom, a much smaller Bulgarian company, raises concerns over the source of funds for the deal. The identity of any external investors in Inercom has not been disclosed.

On 23 February, Bulgarian Energy Minister Temenuzkha Petkova offered to resign after admitting that the owner of Inercom had been her friend for 20 years. The National Assembly should accept her resignation, Transparency International said.

“The investigation into the deal by the Bulgarian institutions responsible for national security, money laundering and electricity supply supervision must proceed in a thorough and transparent manner,” said Kalin Slavov, executive director of Transparency International Bulgaria. “It appears that the ultimate owner buying the company has concealed their identity. If the purchase goes ahead, unknown capital coming from offshore companies will be used to buy a major company functioning in a key sector of the European market. This represents a very serious danger to the security of the country. If the electricity sector enters unknown hands, the consequences for Bulgaria could be extremely dangerous,” continued Slavov.

“As a state-owned enterprise, ČEZ must not do business with groups with an unclear beneficial ownership structure, a controversial reputation or who are evidently part of shady patronage networks,” said David Ondráčka, director of Transparency International Czech Republic and board member of Transparency International. “There is serious risk ČEZ might serve as a vehicle for potentially dirty money. The public should receive details and background on the sale.”

“Governments must ensure that state-owned enterprises and companies providing essential public services are held to the highest standards of transparency and accountability,” said Patricia Moreira, managing director of Transparency International. “The governments of both Bulgaria and the Czech Republic should ensure that any hint of suspicious activity surrounding the deal between ČEZ Group and Inercom is removed. The identities of all parties involved must be disclosed to the public if the deal is to go ahead.”

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