Links to Bulgarian criminal firm exacerbate ČEZ’s East European headache
Energy giant ČEZ is trying to distance itself from the mysterious criminal group TIM, after the mafia-style organization bought a significant stake of the Czech company’s operations in Bulgaria. TIM is widely considered to be the most powerful organized-crime empire in Bulgaria, boasting 30,000 employees and properties valued between 1 billion and 2 billion euros.
It is believed the group was founded in Varna in 1993 as a security and debt collection company by three former elite Bulgarian Navy “Seals”: Tihomir Ivanov Mitev, Ivo Kamenov Georgiev and Marin Velikov Mitev. The notorious organization, whose title is supposedly derived from the first letters of its founders’ first names, owns the national carrier Bulgaria Air, the chemical holding Himimport, several media brands and many other businesses.
According to leaked U.S. Embassy correspondence, TIM is involved “in a wide range of criminal activities, including extortion and racketeering, intimidation, prostitution, gambling, narcotics trafficking, car theft and trafficking in stolen automobiles.”
Revelations of ČEZ’s links to Bulgaria’s shadowy underworld are another blow for the 70 percent Czech government-owned utility, which is already battling significant problems in the Balkan state. Following a string of violent nationwide protests over spiraling power prices, the Bulgarian government announced its intention last month to revoke ČEZ’s electricity distribution license.
Public anger prompted Prime Minister Boyko Borisov to resign the following day, but authorities are continuing to investigate power distribution companies including ČEZ to determine if they have committed any violations or offenses. Bulgaria’s chief prosecutor says the purpose of the probe is to check whether all spending and investments are real.
The inspection is expected to end March 22, with conclusions to be prepared after and a public hearing of the energy regulator scheduled for April 16. The Bulgarian regulator has already announced that fellow Czech company Energo-Pro abused its dominant position last year by cutting off electricity to the water utility in the city of Dobrich.
As the examination of ČEZ continues, a group of investigative Bulgarian journalists has revealed that in November last year the secretive TIM group bought shares in the company’s Balkan subsidiaries ČEZ Electro and ČEZ distribution. Central Cooperative Bank, which is linked to TIM, served as the intermediary in the privatization of the Bulgarian government’s 33 percent minority share in ČEZ through the Bulgarian Stock Exchange.
Citing ČEZ Bulgaria’s financial records, the reporters say TIM now controls 25 percent of ČEZ Electro and 5 percent of ČEZ Distribution. Today, TIM has widened its business interests and now concentrates on white-collar crime, said Atanas Chobanov, the editor of the Bulgarian investigative journalism website Bivol.bg.
“They pay for the media’s silence. They don’t want their activities to be known,” Chobanov told The Prague Post. “This is what I call ‘the duplicity of the West.’ They do business with the bandits and at the same time, Bulgaria is too corrupted by organized crime and we don’t have the right to be in Schengen. [Foreign companies] feed this corruption and organized crime by legitimizing it.”
ČEZ, however, has distanced itself from the Bulgarian criminal syndicate, saying it cannot control who buys shares in its stock abroad. “ČEZ can in no way influence who owns the shares of the company – the sale of the state shares was fully in the hands of the Bulgarian privatization agency,” ČEZ spokeswoman Barbora Půlpánová said.
While ČEZ waits to see whether Bulgaria revokes its license, the utility has suffered another setback after the country’s energy regulator announced it must lower electricity prices. Central and Eastern Europe’s largest energy company says it respects the regulator’s decision, which will force it to cut prices 7.2 percent.
However, ČEZ’s ongoing problems in Bulgaria have sparked concerns within the Czech government. In a letter sent to European Union President José Manuel Barroso March 4, Czech Ambassador Martin Povejšil expressed concern that “the Bulgarian energy-sector licensing and revocations system as well as certain administrative proceedings may be in breach of both Bulgarian national and EU laws in force.”
Povejšil further argues that the regulator’s conditions for a possible license revocation “may be incompatible with EU law” and its decisions “seem unlawful.” Other analysts point to ČEZ’s recent departure from Albania, where ČEZ Shpërndarje has been nationalized amid scorn from lawmakers and regulators alike over its failure to stem losses from the national grid. They suggested the company had simply made risky investments in countries whose energy policy was prone to instability.
There, “companies have to cope with totally different challenges than in Western Europe,” Jan Osička, an energy policy researcher at the International Institute of Political Science of Masaryk University, told The Prague Post during the demonstrations in Bulgaria last month. “In Eastern Europe, you have to pay so much more attention to what the government thinks and who is waiting in opposition to become government people. In Western Europe, you follow the elections only to see what the taxes will be.”
Chobanov says that, despite its current woes in Bulgaria, ČEZ can still have a future there if it cleans itself up. He says this should include removing Dimitar Nikolov Stefanov, a mafia-linked business associate of former Prime Minister Borisov, from its management board. “This state of affairs can’t continue like this with TIM as a shareholder. … There must be some radical change in the management,” he said. “The problem is that in Bulgaria, they don’t have confidence. What people want is to buy electricity from a company that gives a better price.”
In 2011, Bulgaria accounted for almost 10 percent of ČEZ’s revenues, with the company supplying electricity to more than 2 million customers in Sofia and the northern city of Pleven, which together account for 41 percent of the country’s power consumption.
Owners: Tihomir Ivanov Mitev (Bulgarian citizen, born Oct. 10, 1958), Ivo Kamenov Georgiev (Bulgarian citizen, born Sept. 22, 1969), and Marin Velikov Mitev (Bulgarian citizen, born Oct. 5, 1957)
Properties: 1 billion to 2 billion euros