March 18, 2014 / 3:02 PM / 6 years ago

UPDATE 1-Bulgaria gives ultimatum to power distributors over licences

(Adds detail, EVN and CEZ)

* Energy regulator may revoke distributors’ licences

* EVN, CEZ and Energo-Pro deny any wrongdoing

* Top business body slams pressure on investors

* EVN pays 32 mln levs as goodwill gesture

By Tsvetelia Tsolova and Angel Krasimirov

SOFIA, March 18 (Reuters) - Bulgaria has given three foreign-owned energy distributors until Wednesday to pay back money it says they owe to state power provider NEK or risk losing their licences, escalating a standoff that could hurt the country’s investment climate.

The chairman of Bulgaria’s energy regulator, Boyan Boev, said the companies, controlled by Austrian EVN, Czech CEZ and Energo-Pro, must pay back 318 million levs ($226.4 million) to state utility NEK.

CEZ, EVN and Energo-Pro have denied any wrongdoing, arguing that NEK - which had debts exceeding 2 billion levs last year - failed to repay them the money owed for wind and solar power installations.

“There are grounds to revoke the licences of Energo-Pro, EVN and CEZ - the three companies owe a lot of money,” Boev told reporters, adding that the regulator would decide on Wednesday.

Such a move would be a blow for foreign firms already hit by the Socialist-led government’s decision to slash household electricity bills twice since taking power in May. The cuts have squeezed foreign distributors as well as local power producers and piled up NEK’s debts.

Slashing power prices could help shore up the government’s popularity and avoid a new round of street protests against high utility bills, which had toppled the previous, centre-right government in February last year. Such bills eat up a large part of household incomes in the European Union’s poorest country.

On Sunday, Energy Minister Dragomir Stoynev threatened to strip the three companies of their operating permits.

“Such pressure is in essence unacceptable state interference in the market and overall a bad signal to business and potential investors,” leading Bulgarian industrial chamber BIA said in a statement.

CEZ has said NEK was seeking 10.2 million levs from it. Energo-Pro withheld 46.3 million levs of its dues to NEK in December and January, the Czech firm said in a statement late on Monday, arguing that if it had not done so the company would not have enough money for its operational expenses.

EVN and CEZ said on Tuesday they had fulfilled all of Bulgaria’s regulatory requirements and argued that there was no reason for them to lose their licences.

Jorg Zolfelner, the regional manager of EVN Bulgaria, which supplies 1.5 million customers in the south, said the company would approach the World Bank’s International Centre for Settlement of Investment Disputes if its licence were revoked.

EVN, which owes the most money to NEK, paid the state provider 32 million levs as a goodwill gesture on Tuesday, said Zolfelner, but added that “EVN cannot continue to operate as a credit institution forever”.

CEZ paid NEK 8 million levs as a goodwill gesture, adding it would make another two payments by the end of the month. It said in a statement that “the stability of Bulgaria’s energy system and energy security are of primary importance”.

The energy regulator has fined EVN and Energo-Pro 1 million levs each - the highest penalty it can impose - adding that CEZ would also be fined later this week.

Foreign energy companies have a history of spats with the Bulgarian government.

The previous administration had threatened to strip CEZ of its licence for bypassing public procurement laws by subcontracting operations without holding public tenders.

$1 = 1.4044 Bulgarian levs Editing by Matthias Williams, Louise Heavens and Dale Hudson

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