Controversial privatization plan unveiled for Tirana water supply company

Tirana Times
By Tirana Times August 29, 2016 15:06

Controversial privatization plan unveiled for Tirana water supply company

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  • Privatization plans come at a time when the state-run company has sharply increased its profits in the past three years, with a net profit 424 million (Euro 3 mln) in 2014

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TIRANA, Aug. 29 – The announcement of privatization plans for Tirana’s state-run water supply and sewerage company at a time when it consolidating its performance and increasing profits has sparked concerns over the goal of the operation and a possible failure just like the electricity distribution operator which was taken back under state control in 2013 after only three and a half years under private hands.

Mayor Erion Veliaj says the Tirana municipality which has the majority stake of 82.5 percent in the water supply system serving about 1 million residents in the municipalities of Tirana, Kamza and Vora, is seriously considering selling one of its key assets to further improve water supply and sewerage services both for households and businesses.

“We are still in a negotiation process but I would like to guarantee citizens that we will do our best until we are convinced we have received the best bid for Tirana’s water supply and sewerage company,” said Veliaj last week, inspecting sewerage reconstruction works in a Tirana suburban area.

“We have received several offers which is a compliment for the performance of the Tirana water supply and sewerage as the first company out of 61 companies managed by the new municipalities earning such praise and being quoted thanks to its improving performance also because of rising bill collection rates,” said Veliaj.

Tirana has an average of 10 hours of water supply a day which makes water deposits a necessity while poor sewerage infrastructure contributes to frequent flash floods.

The privatization would make the Tirana water supply and sewerage company, the country’s biggest, the first  such company to switch into private hands.

The Socialist Party Mayor, who is strongly backed by Prime Minister Edi Rama, assured the privatization would not affect drinking water prices.

“This does not affect drinking water prices. The price is set by the regulatory entity just like electricity prices,” said Veliaj.

Privatization plans come at a time when the state-run company has sharply increased its profits in the past three years, with a net profit 424 million (Euro 3 mln) in 2014, according to the National Registration Centre. The company’s profit before tax for 2015 are estimated to have increased to Euro 5 million.

Economist Zef Preçi has described the privatization idea as hurried and a dangerous step.
“Studies have unveiled that many cities around the world have taken back water supply under public administration because of the importance this sector has,” says Preçi, who also casts doubts if water prices will escape an apparent hike.

Tirana secured its water supply through individual wells until 1939 just before the WWII when the first water supply system and much of Tirana’s present buildings and central square and boulevard were built under Italian occupation.

Water prices for household consumers in Tirana are currently at 45 lek (€0.32)/m3. State institutions pay 120 lek (€0.85)/m3, while private companies 135 lek/m3.

Albania will have to wait for a long time before it settles its long-standing water supply issue due to the huge investments needed in the dilapidated distribution system where around two-thirds of running water is lost.

Albania’s average water supply in 2015 ranged from 4 to 24 hours a day, with the average supply at 11.5 hours, says the Water Entity in its annual report.

Only three towns in south-eastern Albania, Korça, Pogradec and Librazhd offer uninterrupted water supply thanks to investments by foreign donors.

Albania which has privatized almost all key enterprises in the past two decades had a bad experience with the privatization of its electricity distribution grid in 2009.

In mid-2014, the Albanian government reached an out-of-court deal to pay Czech Republic’s CEZ in annual installments for the next four years a total of Euro 95 million, an amount slightly lower to its initial investment in the Albanian distribution system, but half of the Euro 200 million CEZ had warned it would claim in international arbitration proceedings.

The CEZ Group entered the Albanian market in May 2009 by acquiring a 76 percent stake in the Albanian power distribution company for Euro 102 million but was forced to leave in early 2013 after accumulating huge debts due to poor collection rates and high grid levels.

More than a year after the launch of an aggressive nationwide campaign to curb electricity thefts and collect accumulated unpaid bills, the country’s now state-run power distribution operator is back to profitable after its failed  privatization spell.

Distribution operator, OSHEE, said the company registered profits of about 14.9 billion lek (€106 mln) in 2015 following losses of 4.5 billion lek (€32 mln) in 2014 and a record high of 27 billion lek (€192 mln) in 2013 when the company was taken back under state administration.

Tirana Times
By Tirana Times August 29, 2016 15:06