Банкеръ Weekly


Prosecutors Fail to Really Scare Wrongdoers in Energy

Everyone knows why the government of Boyko Borissov fell in early-2013: these were the high electricity bills, the protests and the overall chaos in energy sector, which then became quite obvious in Bulgaria. But few remember that after the escalation of the public discontent the Prosecutor General Sotir Tsatsarov still freshly appointed to the position then commanded a large-scale campaign to establish the situation in the industry. Indeed, after two months digging the prosecution managed to raise the curtain to some extent. Contracts signed in detriment to the country, lack of control by the State Energy and Water Regulatory Commission (SEWRC), dividends scandalously unclaimed by the state ... were just some of the offenses that landed on the table of state prosecutors.

Prosecution’s checks began on 12 February and what was first inspected were the activities of the energy regulator. Later the scope was extended and three teams of prosecutors and tax officials entered the offices of the electricity distributors CEZ, EVN and Energo-Pro. Another group examined the activities of the National Electricity Company (NEC), and in the meantime they had to review the actions also of the Ministry of Economy, Energy and Tourism. The end result of all this was the formation of five pre-trial proceedings. For nearly two months they did a tremendous amount of work. The report showed problems unsolved and accumulated over the past 10-15 years, and they were reflected in the accounts paid by the end user, pointed out Mr. Tsatsarov.

The most startling of the five proceedings were some against officials from the Ministry of Economy, who failed to seek dividends from the profit of CEZ. According to prosecutors, on 31 December 2012 the positive financial result of the company was nearly 593.4 million levs and the economy ministry could claim 33% of this amount as the public participation in the enterprise was then. From the statements of Tsatsarov and his deputy Borislav Sarafoff it became evident that the state had to collect 195.8 million levs. But even then it was visible that nobody seemed to be too eager to see the end of this case and nobody specified exact names of the people who are responsible for being too absent-minded. However, the people were quite clear - the Minister of Economy and Energy in March 2012, Traicho Traikov, his successor Delian Dobrev and agents of the Ministry in the Czech company appointed by them. Then indeed proceedings were instituted against CEZ under Article 219 of the Penal Code for deliberate mismanagement.

Far more important for the present mess in the energy sector were the other three industries. The first aimed at establishing the guilt of the energy regulator. A year and a half ago prosecutors strongly emphasized that according to the information available at that time, the regulator has not compiled any official act against EDCs, despite Prosecution’s instructions. Prosecutors are not involved in revoking licenses, it can not even start the procedure. This should be made by the regulatory commission. It was found that the regulator had decreased its control over the distribution companies for years. This means omissions and shows that the regulator is an ineffective supervisory authority. Only that despite these allegations, the regulator was investigated for something completely different - that in September 2012 it approved the applications of the Electricity System Operator (ESO), CEZ Distribution Bulgaria, EVN Bulgaria Electricity Distribution JSC and Energo-Pro Grid for imposing provisional prices for access to the network. Against them appealed manufacturers of green energy and these tariffs were subsequently overturned by the Supreme Court. These documents were submitted on September 13, 2012 and approved the next day by the state commission, without performing the necessary analysis.

Right now, they cannot identify the specific officials of the regulator and the specific amount of damage caused because of the fact that the procedure itself, in which these requests are considered is prepare according to the opinions of specialists and is carried out by multiple employees. Detailed assessment is needed as to who how well they performed their obligations in connection with these applications, said prosecutor Nelly Zlatkova. This assessment is still waiting.

Against an unknown perpetrator was initiated the fourth production, but it sounds very topical today, too. It has targeted officials from NEC. They have entered into agreements with AES 3C to build a new plant on the site of TPP Maritza East 1 and Contour Global for rehabilitation of Maritsa East 3, although in 2000, the former Secretary of the Council of Ministers Dimitar Buchvarov warned in a report that contracts with the two companies are unprofitable and will lead to a jump in the price of electricity. A check on the case was triggered in a moment when just before parting with his ministerial post Delian Dobrev announced that he had documents showing that NEC had agreed to pledge their future receivables from the distribution companies in the country and thus guarantee loans drawn from foreign investors (AES -3C and Contour Global). Consultant for both major energy deals was the company of Krasimir Georgiev, Frontier. Otherwise, now again key players are talking about reducing the cost of acquisition of electricity from both American power plants in the agreements in order to reduce the financial burden on the National Electricity Company.

Realistically, the only a particular proceeding was initiated against the former CEO of Bulgarian Energy Holding (BEH) Mihail Andonov. According to prosecutors, between April 18, 2011 and October 5, 2012, as CEO of NEC, he did not take enough care of the management or maintenance of the property entrusted to him, which caused significant damage to the company amounting to more than 189 million levs. Moreover, in the period from September 15, 2011 to June 5, 2012, as its CEO and later CEO of BEH, Andonov in a continuing crime, knowingly entered into disadvantageous contracts - contracts for litigation and contracts for legal services, which caused significant harm to the represented by him enterprises - which is a crime according to Art. 220, paragraph 1 of the Criminal Code.

The five mentioned proceedings were something as a stone thrown in the direction of the energy sector swamp. However, instead of making a difference, the stone just sank. None of the proceedings was terminated, but nothing was brought to court, the Sofia City Prosecutor’s Office answered concisely to a question by the Banker weekly. At this pace of working, the prosecutors can not frighten anyone in the energy sector. More so, even if they do initiate a trial, this is just the beginning of another long journey.


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