Bulgaria’s murky coal empire casts a shadow over the country’s energy transition

Bulgaria’s net-zero transition is at risk of falling victim to the dubious history of the country’s coal industry, dominated by a notorious energy mogul who is hiding behind shell companies registered in the UK – warns Greenpeace Bulgaria’s new report, Circles of a Coal Empire.

The implementation of the European Union’s energy transition plan is facing an exceptional challenge in Bulgaria. The energy sector of the EU’s poorest and most corrupt member state is heavily influenced by a Coal Empire that has been built in the past two decades by the infamous businessman Hristo Kovachki. Now there is a significant risk that the euro billions intended for the energy transformation of Bulgaria might fall through the cracks of this empire’s obscure convolutions.

Kovachki rose to prominence as he grabbed state energy assets at the time of large-scale privatisation in the early 2000s. He is associated with mines and power plants owned by newly established companies, some of which are registered at the same addresses primarily in the United Kingdom. The foreign registration of these businesses in the Coal Empire allows the companies to conceal their synchronised actions as a cartel on the energy market, to transfer money and lower their taxes, participate in joint ventures and reinvest in one another, breaching laws with impunity.

The Coal Empire incorporates a fair number of companies with a broad remit. These include intermediaries that divert funds from the Sofia municipality-owned district heating company, a trader in greenhouse gas emissions and a verifier of certified emissions, a pension fund that reinvests in the Coal Empire itself, a state-favoured insurance company, and a lobbying association for the so-called green future of the brown conglomerate.

The Coal Empire emerged and developed against the backdrop of exceptional regulatory comfort. As a result, 17 companies identified as part of the conglomerate had a total of approximately €170 million (BGN 330 million) of outstanding debt owed to the National Revenue Agency at the end of 2020. A further approx. €5 million (BGN 10 million) have been written off, having gone beyond their expiration date. Four employers’ associations requested cartel reviews from the Commission for the Protection of Competition of Bulgaria, but the authority did not find anything problematic in any of its investigations, the latest report published in 2020. In addition, the Financial Supervision Commission of Bulgaria did not find it illegal that Toplina – Kovachki’s pension fund – is investing in Kovachki’s Coal Empire. Although these are legally separate entities, there is an obvious connection between the foreign ownership of the companies that the authority failed to acknowledge.

“Bulgaria is embarking on a very ambitious challenge to transform a coal-addicted energy system with €5.7 billion earmarked under the Recovery and Sustainability Mechanism and €1.3 billion under the Just Transition Fund. With a traditionally loose state control, complacent state institutions and a Coal Empire emboldened by its feudal grip on entire towns and regions, the challenges of energy transition go far beyond technological issues. In Bulgaria, transitioning to clean and green energy is as much about technology as it is about justice and democracy, so the stakes are high and many eyes are watching,” added Desislаva Mikova, Climate and Energy campaigner at Greenpeace CEE-Bulgaria.

See the full report (in Bulgarian) here: https://www.greenpeace.org/static/planet4-bulgaria...