ČEZ starts international arbitration proceedings against Bulgaria

Czech power group ČEZ has officially filed a Request for Arbitration against Bulgaria with the International Centre for Settlement of Investment Disputes (ICSID), claiming hundreds of millions of euros in compensation for pricing decisions of the energy regulator damaging its operations in the country.



ČEZ entered the Bulgarian market in late 2004, when it acquired a majority (67%) stake in the electricity distribution companies of Stolichno, Sofia region and Pleven (western Bulgaria); it acquired another 33% in 2012 and now fully controls these companies, which distributed 9.3 TWh and sold 9.7 TWh of electricity to about 3 million customers in 2015. The group also owns the 1,260 MW Varna coal-fired power plant that was put in cold reserve in 2012 and 2013 and stopped operations in December 2014 due to non-compliance with environmental standards.



Since 2013, tensions have escalated between the Bulgarian authorities and the three distribution companies (including ČEZ ), which are seeking tariff increases, while massive demonstrations over high electricity bills prompted the government to resign (in early 2013) and to revoke ČEZ's distribution licence. In May 2014, the energy regulator found violations of the distribution licences and threatened to revoke them (or to fine them at least €25m). Moreover, distribution companies are required to pay about BGN 318m (€159m) to NEK. In turn, the companies are still waiting for NEK to repay the feed-in tariffs they had to pay to renewable producers and are contesting successive end-consumer tariff decreases (three tariff cuts in 2013). EVN and Energo-Pro filed lawsuits with the International Centre for Settlement of Investment Disputes in 2013 and 2014. Tensions continue in 2015 and in May 2015 the three distributors were fined for abusing their dominant market position (new fines in May 2016).