Czech energy group CEZ a.s. to gain EUR 7.5 mln from won arbitration over a project in Bosnia and Herzegovina

Czech energy group CEZ a.s. is to gain EUR 7.5 mln from an arbitration decision on the grounds of breached contractual conditions over the reconstruction of the existing thermal power plant in Gacko in Bosnia and Herzegovina, the Czech newswire, Prague Post, reported Sept. 2.

 “The arbitration panel imposed an obligation on the state-owned company Elektroprivreda Republike Srpske to purchase from CEZ its equity stake in their joint holding company of Nove Elektrane Republike Srpske (NERS) for a purchase price of EUR 2 mln plus contractually defined interest,” CEZ spokeswoman Barbora Pulpanova said, as cited by the newswire.

 “Moreover, CEZ is also to receive the same amount (EUR 2 mln) plus late-payment interest as liquidated damages. Together with already collected damages of EUR 2.2. mln, CEZ will in total receive compensation of approximately EUR 7.5 mln.”

 The Bosnian project questioned by CEZ concerned an upgrade of the existing thermal power plant in the town of Gacko in Bosnia and Herzegovina. Based on an investment agreement signed by CEZ and the Republika Srpska (a part of the federation of Bosnia and Herzegovina), CEZ and Elektroprivreda Republike Srpske formed a joint holding, Nove Elektrane Republike Srpske (NERS), in which CEZ held a 51 percent stake, leaving Elektroprivreda Republike Srpske with remaining 49 percent.

 Under the agreement signed by the two parties back in 2007, CEZ had the possibility to sell its stake in the investment back to Elektroprivreda Republike Srpske, which, however, refused to buy it. In May 2009, before any major capital expenditures, CEZ pulled out of the deal due to “repeated breach of the implementation contract by its partners in Bosna and Hercegovina” and filed for arbitration.

 This is the second arbitration win for CEZ. In January 2009 the energy group won an arbitration fight against Bulgaria.

 “This is our second arbitration success out of the two we initiated, which proves we are able to successfully defend our rights, even when investing outside the European Union,” Tomas Pleskac, a head of international division at CEZ, said, as cited by the newswire. “I am glad that an independent panel of arbitrators has upheld our position.”

Photo courtesy of Petr Adamek/Wikimedia Commons.