NEW DISCOVERIES: PAZARDZHIK MUNICIPALITY AND THE UNREALIZED PROJECT FOR A PHOTOVOLTAIC POWER STATION
PAZARDZHIK MUNICIPALITY DOES NOT INVOKE PENALTY CLAUSE FOR DAMAGES IN THE AMOUNT OF 1 MILLION LEVS
REFERRED TO THE SPECIALIZED PROSECUTOR’S OFFICE
New Findings Regarding the Unrealized Project for the Largest Solar Photovoltaic Plant in Southeastern Europe
The Anti-corruption Fund (ACF) has published the contract for the unrealized largest photovoltaic solar plant in Southeastern Europe, which was supposed to be built in the region of Pazardzhik.
At the end of 2018, ACF filed a complaint with the Specialized Prosecutor’s Office regarding the agreement between Pazardzhik Municipality and Real States EOOD (single-member limited liability company) – a company linked to Ginka Varbakova, a candidate to acquire Bulgarian assets of the Czech electricity company ČEZ. ACF’s complaint exposed an omission on the part of Pazardzhik Municipality to claim due damages worth EUR 1 million from Real States EOOD.
As a result of proceedings under the Access to Public Information Act, ACF obtained the said contract on 4 January 2019. The contract a transaction in which Pazardzhik Municipality sold municipal land to Real States. Besides the contract, ACF also obtained three annexes to the contract, dated 20 May 2011, 31 May 2011, and 23 July 2012 respectively.
Following a comprehensive analysis of the documents related to the land sale, ACF has established that:
- the alleged problems, outlined in ACF’s complaint to the Prosecutor’s Office, have been confirmed;
- the new obtained raises suspicions as to whether the relevant legal provisions have been complied with.
According to the contract, Real States EOOD were sold municipal property near the villages of Apriltsi, Elshitsa, and Sbor (all within the region of Pazardzhik) provided that they build a photovoltaic plant with 50MW power generation capacity within a period of 32 months following the issuance of the construction permit. To date, Real States has built 2,45MW of the required 50MW, yet the municipality has not invoked the penalty clause in the contract, obliging the company to pay damages in the amount of EUR 1 million.
The deadline for the execution of the investment project, valued at BGN 400 million, has been extended twice by means of annexes to the original contract. The first annex extended the deadline for the construction of the solar park by two years without any justification.
Annex No 3, dated 23 July 2012, refers to the amendments to the Energy from Renewable Sources Act of 2011 and to a judgment of SEWRC, stating that the parties agree on substantial changes to the “economic rationale” and the “business plan” of the project. The buyer company “has declared that it will not drop the project” and that “it undertakes all sensible actions that will lead to the successful completion of the project in accordance with the contract and the law”. It remains unclear from the text whether the buyer company has provided evidence in support of its statements.
Annex No 3 in fact makes the construction of the solar park – one of the most considerable investments in the region – contingent on a very uncertain eventuality, namely the abolition of the so-called “moratorium”, as the parties label it, in the judgment by SEWRC (now EWRC).
According to ACF’s legal team, the clauses of the three annexes to the contract support solely the interests of the buyer. Real States EOOD has not provided any additional guarantees protecting the interests of Pazardzhik Municipality.
The grounds for signing the three annexes remain unclear. To ACF’s knowledge, there are no decisions of the Pazardzhik Municipal Council that would justify the renegotiation of the contract. ACF explicitly requested such decisions from the Pazardzhik Municipal Council, but none have been presented.
At the beginning of 2018, Real States sold two land plots, obtained via the above-mentioned deal, in violation of obligations not to transfer possession of any land until the solar park has been fully constructed. The transaction for the sale of the two plots, at a cost of BGN 1 million, provokes serious doubt as to whether the interests of the municipality have been protected.
The above-mentioned information raises suspicions of violations of the legal provisions related to the expenditure of public funds and the management of municipal property.
ACF has found additional information that poses further questions.
- According to information from the Pazardzhik Municipality’s Register of Disposition Transactions, the tax assessment of the land acquired by Real States is more than BGN 1 600 000. However, the property was sold for BGN 500 000. The decision of the Pazardzhik Municipal Council to sell the land was taken shortly before amendments to the Municipal Property Act of 13 June 2008. Following these amendments, municipal land can no longer be sold at a price lower than the tax assessment.
- The person who signed the contract between Pazardzhik Municipality and Real States EOOD on behalf of the latter is Stoyan Fiodorov Belitchev. At present, Mr Belitchev is Chief Executive Officer of Avtomagistrali EAD (single-shareholder joint stock company), a company that received BGN 1.35 billion from the government budget surplus at the end of 2018.
The Anti-corruption Fund will continue to monitor the case closely and will inform you about any developments.
 State Energy and Water Regulatory Commission.