Czech company buys Albania’s power distributor utility

TIRANA, Sep 29 – The Czech power utility CEZ CEZsp.PR was the winner of the international tender for the sale of 76 percent of the Albanian Distribution System Operator (DSO) and offered 102 million Euros.
The Economy, Trade and Energy Ministry opened the bids Monday for the sale of 76 percent of the power distributor utility aiming to alleviate a power crisis that has recently caused regular power cuts, according to a statement.
Italian Enel S.p.A was eliminated after it did not meet the technical performance criteria.
Austria’s EVN and Energie Steirmark withdrew.
DSO (OSSH in Albanian) has been separated from the KESH power corporation in an effort to improve management.
Electricity shortages have become almost regular in the last three years in Albania, one of Europe’s poorest countries, with an overall negative impact on the economy.
Tens of millions of Euros (dollars) are spent every year to buy electricity from other countries.
Post-communist Albania has had chronic electricity problems, which have been blamed on poor management, an outdated distribution system and lack of money.
The ministry would announce the winning bid in a month time.
“That privatization will bring about more security and quality of the operational network, attract foreign capital in the necessary investment in the network and also eliminate the negative effects of the power sector in the state budget,” said the statement.
The Czech power utility CEZ CEZsp.PR has also agreed to spend more than 420 million Euros that will be used not only to buy the controlling stake but also upgrade its grid and pay its debts.
Angelo Dell’Atti, the World Bank’s International Finance Corporation (IFC) representative, said the IFC saw the sale as a success because CEZ was a “very good company that had paid a very high value” for the Distribution System Operator (DSO).
“We do consider this as a success. This is a very good company, who will bring improvements for the public and who is paying a high level of value for what is the audited value of the assets,” Dell’Atti said in a news conference.
CEZ would pay 102 million Euros to Albania for a 76 percent stake in DSO, invest 200 million Euros during the five years of operation and repay DSO’s old debt of 15 billion lek (around 122 million Euros).
“When we put everything together…the total commitment that the new company will have to take on is over 52 billion lek. This is over 420 million Euros,” Dell’Atti said.
The final award of the contract will happen after a commission consisting of government officials and IFC advisers asks the government to approve the sale.
“I can say the tender was transparent. When there is less corruption, there is more power,” Prime Minister Sali Berisha said.
Deputy Energy Minister Neritan Alibali, who chairs the government commission, said the sale followed the successful sale of the ARMO refiner to a U.S-Swiss group for 125 million Euros. “After the earlier successful sales, success is now normal for us.”
Dell’Atti said the sale price could have been higher if the government had not asked the potential buyers to take over the debt and make big investments, but Albanian consumers would not have benefited as much they were to gain now with CEZ.
DSO auditors had valued its net assets at 8.05 billion lek, adding CEZ’s price of 102 million Euros for 76 percent of DSO’s shares was the equivalent of 134 million Euros for 100 percent of its shares.
“This is equivalent to 16.5 billion lek. When you compare it to the net value of the company’s assets, which as I said is 8.05 billion lek, the company CEZ is actually paying more than twice the audited value of the assets of OSSH (DSO).”
Albania hopes the sale of the distributing arm of state-owned power utility KESH will gradually reduce its chronic power shortages.
Before 1990 Albania even exported hydropower to its Balkan neighbors, but its has suffered chronic power problems since then due to soaring domestic consumption, non-payment of bills, ageing system and poor maintenance.
Albania depends heavily on hydropower, with 90 percent of its electricity produced in the north from hydroelectric plants which suffer from low rainfall and outdated technology in recent years.
There has been little investment in the grid since but not in new power sources.