This rather long article describes the interaction of state authorities in Bulgaria against the publisher of one of the few respected Bulgarian newspapers. The Bulgarian media landscape is dominated by the quasi-monopoly of Delyan Peevski, a shady power broker. The country ranks 109th in terms of media freedom according to Reporters without Borders.
The publisher of Sega newspaper Sasho Dontchev and his business in gas distribution Overgas were subject to an investigation for high treason by the Prosecutor’s Office based on a signal dated 16 January 2017, to the Prosecutor General Sotir Tsatsarov. The signal contains publicly-known information regarding a complaint, filed by Sasho Dontchev in 2011, to the European Commission for abuse of dominant position of Bulgargaz and Bulgartransgaz on the Bulgarian market, as a result of which the European Commission initiated legal actions against Bulgaria.
Notwithstanding that it is a matter of public information on legitimate actions from 2011 (filing a complaint to the EC), in April 2016, on the basis of this signal, the Prosecutor’s Office initiated an investigation against officials and servants of the Energy and Water Regulatory Commission (EWRC).
Before the Prosecutor’s Office announced this investigation in this way, in March Dontchev was invited, by an intermediary, to an off the record meeting with the Prosecutor General Tsatsarov, during which meeting, Dontchev was subject to a number of clearly-distinguishable threats, albeit in the form of “advice” by the Prosecutor General. Dontchev himself recounted the story during a business forum – that the Prosecutor General had expressed discontent with the editorial policy of Sega newspaper which according to Tsatsarov supported the opposition party “Da, Bulgaria!”.
Tsatsarov also criticised the editorial policy of BIT television, which actually is not owned by Dontchev, but according to the Prosecutor General, Donychev has “a say” there. All three cases refer to two media and an opposition party with critical positions vis-à-vis the Prosecutor General, the work of the Prosecutor’s Office as well as the politics of the then ruling party.
Commentators said that the whole scheme was aimed at stealing Dontchev’s business, and wrecking Sega, a critical newspaper, which he also owns. Prime Minsiter Boyko Borissov and Tstasarov are reportedly unhappy with the sardonic way they are depicted by the newspaper’s cartoonist, Cristo Komarnitski.
- The state energy companies: Bulgargaz, Bulgartransgaz and BEH, the Bulgarian Energy Hoding, the latter being their mothership in a Byzantine scheme. BEH was established in 2008 by then-Prime Minister Sergei Stanishev, with the aim of cross-subsidising state companies at loss. The Bulgarian gas grid is owned by Bulgartransgaz, which is part of BEH. Bulgargaz is the only gas public supplier in Bulgarian gas market.
- Gazpromexport, needing no introduction.
- Overgas, the largest private gas company in Bulgaria, is owned 50% by Gazprom and 50% by Bulgarian businessman Sasho Dontchev. The company has 60,000 household clients and 3,000 industrial clients. The daily supplies to those clients amount to 1.5 million cubic metres per day, and represent some 10% of the gas consumption in Bulgaria.
- EWRC, the Energy and water regulatory commission, the specialised body in Bulgaria regulating two sectors: energy and water. Heavily criticised by the independent press and on social media for being independent only in theory.
- Dexia Bulgaria is a gas trader company, member of the Bulgarian Federation of Industrial Energy Consumers (BFIEC) and of the Confederation of the employers and Industrialists in Bulgaria (KRIB). It is unclear why Dexia is part of BFIEC, as they are not gas consumers.
- The Ministry of Energy of Bulgaria.
The goal of some of the participants in an orchestra conducted by the Ministry of Energy and BEH is to punish Overgas for having filed with DG Competition a complaint for violation of the competition rules. Other participants simply seek to eliminate (or at least try to eliminate) their competitor Overgas from the Bulgarian gas market.
The latest developments:
Stage 1. The ‘orchestra’ is buying time until DG Competition announces its decision. Against the backdrop of the negotiations between DG Competition and BEH, Overgas becomes a victim of the dominant position of the BEH companies.
In August 2016, Overgas Mrezhi (Overgas networks) , the biggest gas distribution company in Bulgaria, owned 100% by Overgas, attempted to improve the conditions under its Gas Supply Contract with Bulgargaz. However, Bulgargaz demonstrated a lack of willingness to negotiate. Overgas Mrezhi continued to insist. As a result of Overgas’s insistence, a meeting was held on 1 September 2016 in the office of Bulgargaz.
As the meeting produced no result, Overgas Mrezhi sent a letter with a notice of termination of their contract with Bulgargaz as from 1 January 2017. Overgas Mrezhi did this with the expectation that Gazpromexport would fulfill its promises to restore supplies to Overgas, which was supplier of Overgas Mrezhi in the period 2013-2015. With the same letter, Overgas Mrezhi nevertheless required Bulgargaz to provide it with an offer in its capacity as a trader rather than a public supplier. Bulgargaz responded vaguely , but warned Overgas Mrezhi that gas was not provided for them for the next year despite Bulgargaz’s duty as a public supplier to ensure such supply.
Overgas waited for a clearer position on the part of the public supplier and, after it did not receive such, sent a letter to the Minister of Energy, dated 16 November 2016, flagging an omission in the legislation which was allowing Bulgargaz to abuse its monopoly position.
The Minister remained silent. The further developments could explain his motives.
Meanwhile, in September 2016, negotiations between BEH and DG Competition were in their final phase. The two sides exchanged mutual proposals and it was clear that no one was ready to compromise. It was clear to BEH and Bulgargaz that the probability of a fine in the case was increasing. The Minister had already taken positions in favour of BEH
In an obvious effort to punish a “troublemaker”, the Bulgargaz management decided not to rush with the signing of a contract with Overgas Mrezhi and to remain silent until the EC’s decision becomes clear.
Stage 2: It becomes clear that the Commission will impose a fine to Bulgaria. A plan for revenge has to be drawn. Until this happens, Overgas is kept under pressure and without a supply contract for 2017.
Interesting events unfolded in the negotiation process with DG Competition, which had obviously come to an end. On 19 September 2016, at a working meeting, DG Competition representatives informed BG and BEH that they did not accept the counter-proposals for a conciliation arrangement and would proceed to sanctions over the vicious practices for closing the market.
On 26 September 2016 this position was confirmed in a formal letter from DG Competition.
On 7 October 2016 DG Competition informed BEH about the possibility of a reduced size of the fine in three different scenarios, depending on the willingness of the guilty party to co-operate through the privatization of Bulgargaz and / or Bulgartransgaz.
Shortly after it was confirmed that there would be a fine, the Minister became seriously concerned about the situation.
On 8 November 2016 BFIEC and KRIB seized EWRC with an open letter asking for Overgas to be punished for its attempt to negotiate with Bulgargaz. The formal occasion was the fact that Overgas Mrezhi had not specified its volumes for 2017 by the end of August 2016, although the company doesn’t have such an obligation. According to the authors of the letter, Overgas’ “inaction” would lead to increased costs for Bulgargaz for gas transmission through Romania, and they insisted they did not want to pay for ‘mistakes’ made by others.
It should be noted here that without complaining, the authors of the letter had suffered for years from the fact that Bulgargaz had paid two times and a half more capacity than it actually used. It is a logical question why suddenly they became so concerned. The answer is plain to see in the actions that followed.
On the very day the open letter was published, EWRC reacted, expressing gratitude for the issues raised, while its Chairman stated that he would review the Ordinance for the formation of natural gas price with the purpose of punishing Overgas Mrezhi.
Overgas considered all the positions expressed by BFIEC and EWRC to be absurd and impossible to be realised because they were contrary to basic market principles.
Nevertheless, Overgas responded to both BFIEC and KRIB and sent its official position to EWRC in writing and participated with representatives at the public discussion regarding the amendments to the Ordinance for the formation of natural gas price.
Overgas continued to insist for negotiations with Bulgargaz. On 30 November 2016 Overgas Mrezhi again asked for an offer from Bulgargaz. The latter responded in a vague way and only confirmed its willingness to “offer” a contract without attaching a draft or proposing a date for its signature.
Buying time was part of this strategy, and the further developments will explain the reasons.
On the first working day after receiving that letter, Overgas responded by letter dated 12 December 2016, insisting to receive a specific proposal no later than 16 December2016.
As no response came, Overgas Mrezhi sent a new letter to Bulgargaz also copying the Chairman of EWRC to inform him on a forthcoming dispute between energy undertakings – something that lies within its competence. To this letter Overgas Mrezhi attached binding nominations for 2017 (the amounts of gas oy intends to deliver to its clients).
At the request of Overgas on 20 December 2016 in the office of Bulgargaz a meeting between the two parties took place. In preparation of the meeting, Bulgargaz representatives invited the Overgas representative to come and sign a contract with Bulgargaz on 21 December 2016 at 15:30.
The Overgas representative appeared at the appointed time, but nobody received him in Bulgargaz office, without any explanation.
With two letters dated 21 December 2016, Bulgargaz invited Overgas to sign the supply contract on 30 December 2016, i.e. after the date on which the amendment of the Ordinance for the formation of natural gas prices would enter into force.
Meanwhile, Overgas was strung along by Gazpromexport that it would receive gas after resuming the supplies under the contract between them. The last such promise was given personally by Alexander Medvedev, Deputy Chairman of Gazprom, to Sasho Dontchev on 18 October 2016 in Amsterdam at an International Gas Union (IGU) event.
Overgas Mrezhi did not want to wait as ordered by Bulgargaz until 30 December 2016 and on 28 December sent a letter to Bulgargaz attaching the unilaterally signed contracts with all annexes. On the very next day, Bulgargaz responded, insisting that the signing be on 30 December. The goal was clear: the signing should be done at the earliest on the day of the entry into force of the amended Ordinance for the formation of natural gas prices, which fixed the highest possible prices for Overgas.
Later, in the beginning of 2017, at the insistence of Overgas, the unilaterally signed contracts were returned to Overgas without being signed by Bulgargaz.
On 30 February 2017 Overgas signed a contract with Bulgargaz under pressure.
While Bulgargaz delayed the signing of a contract with Overgas Mrezhi until 30 December 2016, there is evidence that for other Bulgargaz clients during this period contracts were signed in a very short time (up to two days after submitted request). Bulgargaz had a motive – to push Overgas out of the market;
BFIEC and KRIB , in which a competitor of Overgas – Dexia Bulgaria is a member, launched the attack and imitated an initiative of the industry organisation to amend the Ordinance to the detriment of Overgas. EWRC made the amendment valid only and explicitly for Overgas Mrezhi in order not to hurt other players in this battle for revenge against Overgas. The Minister helped the scheme by remaining silent.
Stage 3: The plan for revenge now includes pressure by the Prosecutor’s Office and causing damage to Overgas by creating chaos in the usage of the Bulgartransgaz network.
In the beginning of 2017 it became clear that an unknown person filed a signal to the Prosecutor’s Office with charges against Overgas that the latter threatened the statehood by claiming that state-owned companies in the structure of BEH committed violations.
The signal to the Prosecutor’s Office was leaked to the media. From the text published, it can be concluded that it was written by an official in BEH or Bulgargaz and that the text was written in the period September – December 2016.
In two letters, the Prosecutor’s Office requested documents from Overgas regarding the procedure initiated against BEH. Overgas responded by providing only the information that was not covered by confidentiality.
The prosecutor’s office, with highly publicized statements, including a public action by the investigative bodies, harassed the EWRC with its presence for days in order to search for documents of unclear nature. The presence of the investigative bodies in EWRC was accompanied by vocal media statements, including by the official Prosecutor’s Office spokesman, that Overgas unjustly harmed their clients. None of this was proved. Checks by the Prosecutor’s Office continue to this day with full information blackout.
Taking advantage of amended Ordinance, at the end of March 2017 EWRC approved two prices for Bulgargaz – one for Overgas and one for all other clients of Bulgargaz, the first one being of course higher. Again with a decision on the basis of the amended Ordinance, EWRC forbade Overgas to calculate to its customers the difference between the two prices. Similar decisions were made by EWRC for each quarter of 2017. As a result, in 2017 Overgas suffered damage of BGN 1.2 million.
The punishments for Overgas did not end there. Bulgartransgaz also participated in the plot. Under the pretext of starting a test period for introducing an entry-exit model, Bulgartransgaz changed its contract for using the network. From 1 January 2017, all its network users were in the obligation to declare and respectively pay for entry and exit capacities. Tariffs for imbalance were introduced. Overgas was punished by this deliberately created chaos, “justified” by the test period.
From the beginning of January 2017 until the end of October 2017 Bulgartransgaz was not even for a day in strict execution of its contract. The violations they performed can be grouped into the following categories:
- Starting the entry exit model (EEM) without available information on the balance status of This deprives network users of the opportunity to manage their imbalances and puts them in a situation where they learn about the damage they have suffered after all reasonable deadlines for corrective action have expired;
- Starting EEM without offering products guaranteeing user flexibility – daily capacities. This artificially causes additional costs for users of the BTG network for used but not nominated capacity;
- Introducing on the market of a product daily capacity for entry points without that being accompanied by introducing a product of exit daily This artificially causes an imbalance for network users;
- Implementation of different procedures for nominations and allocations at the entry and exit points, with which the users of the Bulgartransgas network literally steal gas.
The biggest users of the Bulgartransgaz network are Bulgargaz and Overgas. As a result of the above violations by Bulgartransgaz, Overgas suffered considerable financial damage, while the benefit for Bulgargaz is more than obvious.
This information is a faithful, but not exhaustive account of what Overgas has flagged to the EU executive.
The case against Dontchev is part of what appears to be concerted actions against publishers outside the media empire of Delyan Peevski, friendly to Prime Minister Boyko Borissov.
Another publisher targeted is Ivo Prokopiev,co-founder of Dnevnik and Capital.
At a closed session 24 November, the Bulgarian parliament decided not to recognise the European Commission’s positions with regard to a case of abuse of dominant position in the gas market by the Bulgarian Energy Holding (BEH) and its subsidiaries Bulgargaz and Bulgartransgaz.
According to information by the Bulgarian national radio BNR, MPs have approved a position according to which Bulgaria should not recognise alleged infringements in the Overgas case and should not assume responsibility for them, including a possible multi-million euro fine.
All 176 MPs present in the National Assembly reportedly voted in favour of the motion to reject the Commission’s positions, filed by opposition MPs Zhelyu Boychev and Tasko Ermenkov.
By the same decision, the parliament instructed the Minister of Energy Temenuzhka Petkova to take all necessary actions to protect the interests of the country and the companies concerned, including actions for appealing against the Commission’s decisions.
Peevski’s media empire has published many articles depicting Dontchev as a greedy oligarch, who committed an anti-Bulgarian act by seizing the Commission and triggering a huge fine, which will deplete the country’s coffers and leave pensioners without pensions.
I recently met with Dontchev and with his representatives who held meetings in the Commission.
Dontchev told me there wer enough direct and indirect signs that the Bulgarian services are tapping his phones and watching his personal correspondence. Certainly, this is an issue where it difficult to have evidence, but every citizen of the Republic of Bulgaria can officially ask for information on whether he is subject to wiretapping.
Dontchev said he had turned to the parliamentary Commission which oversees this surveillance three times and did not receive any answer, which is a gross violation of the rights of a citizen of an EU member state. It is clear to everyone that once the Commission will announce the fine, Dontchev will also seek his rights in the Energy Charter dispute settlement arbitration, as the Austrian EVN and Czech CEZ and Energopro previously did. The entrepreneur has already sent an invitation to the Bulgarian government for a peaceful settlement of relations, but the Bulgarian government has not even found it necessary to answer, therefore another serious arbitration case is taking shape in Bulgaria.