Arbitration Court rules penalty on CEZ for Romania privatization contract breaches

The Paris Arbitration Court has ruled energy company CEZ should pay EUR 5.7 million in damages to the Romanian state for failing to respect two clauses in the privatization contract of electricity distributor Electrica Oltenia, according to the Romanian state. Its statement came after CEZ announced on its website that the court rejected most of the state's claims. According to the state, CEZ failed to show how it used EUR 103.6 million to finance the company’s modernization, as it pledged in the privatization contract. Romanian authorities say the court found CEZ also breached the contract when it did not achieve the indicators it had mentioned in the initial business plan, which was instrumental in selecting CEZ as winner. CEZ had planned to fulfill the business plan in five years after privatization, but later said it was not mandatory to respect it, according to Romania’s Energy Participation Society (SAPE). Apart from the damages, CEZ will also have to pay an interest on the EUR 5.7 million, amounting to 3.116% a year, and calculated from October 2012 until the damage payment date. It will also have to cover 50% of the arbitration costs – USD 217,500. CEZ won the privatization contract for Electrica Oltenia in 2005, for EUR 62.8 million, for a stake of 24.6%. It later increase its share capital by EUR 103.6 million, to reach a 51% ownership. The state also went to the International Court of Arbitration against Enel and E.ON, the other two companies which won privatization contracts for the country's electricity distribution companies. Paris Arbitrage Court admits Romanian state’s EUR 521 mln case against Italy’s Enel editor@romania-insider.com