CEZ Boss: TPP Varna Cannot Provide Cold Reserve

Atanas Tchobanov

Tomáš Pleskač, Vice Chairman of the Board of Directors of Czech power utility CEZ, declared during an official meeting with Czech politicians that the Thermal Power Plant in Bulgaria’s Black Sea city of Varna (TPP-Varna) had not been upgraded to operate on gas, therefore it cannot be used as a “cold reserve”. In particular, he voiced doubts that the plant can be put into operation within eight hours. Pleskač further revealed that the candidate for CEZ’s assets in Bulgaria, “Eurohold”, had also been behind Gincka Varbakova’s “Inercom” offer. The Czechs asked whether the deal involves Russian money or the participation of Czech billionaire Radovan Vítek, accused of fraud in the United States. Bivol was able to establish that the latter that he had been a partner in “Eurohold” years ago. It also transpires that CEZ’s arbitration case against Bulgaria has not been dropped and the claims are for hundreds of millions of euros.

The above information is from a meeting between CEZ bosses and a team of the Czech Pirate Party, which filed a lawsuit against an unknown perpetrator on June 21, as reported by Euro.cz and initiated in the Czech Parliament a probe into the deal for the sale of CEZ’s assets in Bulgaria and in particular of TPP Varna. The Pirates claim that CEZ sold the TPP for pocket change to the detriment of the Czech treasury and talk of political corruption. Senator Lukáš Wagenknecht quotes a claim to the Bulgarian Prosecutor’s Office from the “Anti-Corruption Fund” and points out that the “pro-Russian” Bulgarian politician Ahmed Dogan (Honorary Lifetime Chairman of the Movement for Right and Freedoms, DPS, the party largely representing the Bulgarian Muslim minority) has earned tens of millions from the “cold reserve” contract.

The Pirates’ activity seems to have disturbed CEZ, as the initiative for the meeting has come from the highest levels in the Czech power utility. The meeting was held on June 27, 2019, in the office of Lukáš Wagenknecht. Those in attendance include Daniel Beneš, CEO of the CEZ Group, Pavel Cyrani, Member of the Board of Directors, Tomáš Pleskač (on the headline photo), Jakub Michálek, Member of the Chamber of Deputies of the Parliament of the Czech Republic from the Pirate Party and Janusz Konieczny, member of the Pirates analytical team. The latter took the minutes of the meeting.

CEZ hopes to recover losses via arbitration

When asked why the TPP-Varna had been sold at a loss, Tomáš Pleskač blames the Bulgarian government. It becomes clear that CEZ has invested EUR 100 million in the Varna plant so it can operate, but the Bulgarian authorities have not allowed the plant to sell electricity on the free market, to export electricity and has imposed quotas. Eventually, the TPP was closed in 2015 because of harmful emissions.

A year later, in 2016, CEZ filed an arbitration claim for hundreds of millions of euros against the Bulgarian State, hoping to recover the losses. Albania is given as an example, as there the government nationalized the distribution network bought earlier by CEZ, but the Czechs managed to sentence the State and recover the losses via arbitration.

The specific amount of the arbitration claim to Bulgaria is not quoted, but it is in the vicinity of hundreds of millions of euros. According to a publication by the Bulgarian Capital weekly, the claim is about EUR 600 million. The other power utilities in Bulgaria also filed arbitration cases against the State, EVN’s claim was EUR 500 million (the case ended with a settlement), while Energo-Pro’s claim was for the modest EUR 54 million.
It is clear from the minutes that CEZ has had no intention to drop the arbitration case as it was speculated earlier because of a ruling by the European Court in Strasbourg and a declaration signed in January by 22 countries, including Bulgaria, to terminate all arbitration cases filed by European Union (EU) investors against EU Member States.

Can “TPP-Dogan” serve as a “cold reserve”?

The TPP in Varna can work only with coal from Donbas, Australia and Vietnam, Tomáš Pleskač explains. CEZ representatives say they had doubts whether the TPP-Varna can currently operate. The Bulgarian side claims that the plant is partially converted to gas, but, according to Pleskač, this was not true. The TPP receives money from the State for the so-called “cold reserve”, but it is unclear whether it can be put in operation within eight hours.
CEZ sold the TPP-Varna to the “Sigda” company of the children of the former Bulgarian Minister of Transport Danail Papazov, because it had offered the most money, say the CEZ bosses in attendance, while the issue of the transfer of the assets to Ahmed Dogan is not relevant to the business deal.

In a recent TV statement, Danail Papazov specified that the deal had been for EUR 48,500,000, which had been financed by a bank loan for EUR 28,000,000 and the rest of the money had come from CEZ’s liabilities to the plant.

Eurohold has been behind Ginka and has negotiated with Slavcho Varbakov

The participants in the meeting also discuss the failed deal for CEZ’s assets in Bulgaria of the company “Inercom” of Ginka Varbakova. Pleskač explains that due diligence had been carried out with a positive outcome.

After the Bulgarian Commission for Protection of Competition (CPC) blocked the deal with “Inercom”, CEZ had turned to “Eurohold” because it had supported “Inercom”, Pleskač says. This information is new to the public. “Eurohold” was not on the list of financial institutions and businesspersons that leaked by the Czech government in February 2018, after news about the deal made headlines. This list, also published by Capital weekly, includes UniCredit Bulbank, First Investment Bank (FIBank), the Bulgarian Development Bank (BDB), the Russian Sberbank and offshores of Georgian billionaire Paata Gamgoneishvili.

Approached for comment on these statements, Assen Hristov from “Eurohold” confirmed that he has had meetings with a representative of “Intercom” to discuss the holding’s participation in the deal with CEZ. Negotiations had taken place in May-June 2018, but Ginka Varbakova, who is the sole owner of “Inercom”, had not been present and her husband Slavcho Varbakov had represented the company.

Slavcho Varbakov has no formal relation to the company “Inercom”, and, according to Hristov, he had not been the decision maker in this deal. In a series of investigations, Bivol revealed that Slavcho Varbakov has a connection with the business of emblematic SIC figures, while, both, Ginka and Slavcho Varbakovi, are closely connected with Prime Minister Boyko Borisov’s friendly circle of card players.

Hristov says that in the end, the negotiations for “Eurohold’s” entry into the deal of “Inercom” with CEZ have failed for two reasons – uncertainty as to who and with what money is behind “Inercom” and the insistence of “Inercom” to have a 51% stake in the future company. However, “Eurohold’s” intentions to support “Inercom” had been obviously specific because CEZ had been aware of them as well.

CEZ bosses also officially reveal the names of the banks that have funded “Eurohold” in the deal for power utility’s Bulgarian assets. These are Deutsche Bank and Nomura Bank. Asked if this is the case, Assen Hristov avoided answering the question by referring to a confidentiality clause but specified that Tomáš Pleskač had no such confidentiality restrictions and most probably talked about the bank guarantee letters received by CEZ.

Russian money or Czech oligarch behind Eurohold?

The issue that perturbs the Czech Pirates the most is whether the funding of “Eurohold” might come from Russia or Czech oligarch Radovan Vítek. The Pirate Party has expressed these concerns in ten questions to the Czech Finance Minister and Prime Minister Babis, but they have refused to answer.

At the end of May, in an interview with Lidové noviny, quoted by the Bulgarian National Radio (BNR), Assen Hristov categorically denied that the deal involved Russian money. The Russian “Renaissance Capital” will be a consultant on the deal, but Hristov stressed that it will not participate in the financing.

The CEZ executives also say they have no information about Russian money behind “Eurohold” or about participation in the deal by Radovan Vítek, one of the wealthiest people in the Czech Republic.

In April 2019, Radovan Vítek, whose state is estimated at USD 3.5 billion, was accused of racketeering and swindling, after US investors claimed he carried out an elaborate fraud to strip valuable assets from companies he secretly controlled. The lawsuit was filed in New York and the US claims are for USD 3 billion, the Financial Times writes.

Vítek had been a partner in “Eurohold” at the end of the 1990s, according to a reference in the State Gazette. He was the sole owner of the company “Alpha EuroActiv”, which was a shareholder in “Eurohold”. As its representative, Vítek briefly became a member of “Eurohold’s” Board of Directors before selling “Alfa EuroActiv” to the current majority shareholder Assen Hristov. There is currently no data about Vítek’s participation in any of the holding’s companies.


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