Agreement between CEZ and Albanian government gets international backing, but political opposition accuses the government of giving too much away.
TIRANA, Aug. 14 – The Czech government has signaled it is happy with the amicable out-of-court agreement reached between the Albanian government and CEZ, an international power company with the majority of shares owned by the Czech state.
Several international organizations have also expressed support for the agreement which has now been approved by the Albanian parliament despite strong objections raised by the political opposition, which has accused the government of not being transparent enough about the deal and giving away too much in it.
Albania and CEZ decided to split their claims in half, avoiding a potentially costly and lengthy international arbitration court procedure in relation to the botched privatization of Albania’s power distribution company.
The Embassy of the Czech Republic in Tirana on Monday expressed support to the agreement.
“The Czech Republic welcomes the reaching of a settlement agreement between the parties and its adoption in the Albanian Parliament on July 31, 2014,” the embassy said in a statement. “The Czech Republic considers the settlement agreement as a compromise on legitimate demands of the parties resulting from long negotiations.”
The dispute was settled in June and a deal signed in Vienna, stipulating that CEZ will get a total of 100 million euros ($136 million) in annual installments by 2018 and the arbitration case will be stopped.
The Albanian government in turn gets back all the shares of the national electricity distribution company that CEZ still legally owned after authorities suspended its license, in effect nationalizing the company only a few years after the privatization took place.
CEZ started international arbitration against Albania last year seeking compensation for lost investment after it lost its license to operate Albania’s national grid following a dispute with the government that led to water-supply cuts and daily rolling blackouts.
The Czech company previously estimated its losses at almost 200 million euros, but chief executive Daniel Benes called the deal “a success.”
CEZ also said it was happy with the assistance provided by the Secretariat of Energy Community, which facilitated the negotiations between the parties and continuous encouragement addressed to both parties by other international partners like the European Union, the World Bank or the International Monetary Fund for out-of-court settlement of the dispute.
Despite international backing for the deal, the main opposition Democratic Party has continued to accuse the government of giving too much away in the deal.
The accusations have not ceased since Democratic Party Chairman Lulzim Basha has held a last-minute press conference two weeks urging MPs of the ruling Socialist-led coalition not to vote to ratify the agreement, calling a recent agreement between the Albanian government and CEZ “a criminal offense and mega-scandal of the [Prime Minister Edi] Rama government.
Democratic Party experts maintain that the government is hiding critical facts and that in fact the losses to the Albanian state will be closer to $3 billion dollars, related to loans not used for their intended promises and missed investments.
The Democrats finance critic, MP Florion Mima, said the government had given away at least 500 million euros in unpaid bills that CEZ owed to Albanian state-owned companies, which made up part of the 2.3 billion euros the Democrats say the agreement cost Albanian taxpayers.
The Democrats say the government dismissed the advice of lawyers it had hired on the matter.
“This is perhaps the first and only in the history of such processes, that the lawyer paid by the state to safeguard its interests in the best professional manner, are excluded by the state in the negotiations and the agreement,” Mima said. “It is understandable why. Because he would not agree and would speak against the agreement.”
Mima said the government’s action s on the matter had been “irresponsible and corrupt.”
Czech Ambassador to Tirana Bronislava Tomasova said this week that her country and other international actors involved were happy with the results and that political accusations on the part of the opposition had a negative effect on bilateral relations.
The World Bank has also expressed support for the agreement, and has offered to help Albania improve its energy distribution system, now back under government control. The World Bank had served as a guarantor in the botched privatization deal, but did not allow CEZ to access the funds when it license was removed, asking for an agreement between the two parties instead.
Last week, the bank said it had agreed to provide Albania with a $150-million loan for a Power Reform and Recovery Project. It aims to support Albania’s power sector reforms, particularly efforts to improve the reliability of the electricity supply and the financial viability of the sector.
“Increased reliability and financial sustainability of the energy sector are among the most important reforms needed to stimulate economic growth and restore fiscal balance in Albania,” said Ellen Goldstein, World Bank director for Southeast Europe. “A quick and fair resolution of the commercial dispute over the distribution company allows Albania to move ahead with these crucial reforms and much-needed investments in the system.”
The World Bank said in a statement that the settlement agreement between the Albanian government and the Czech Utility CEZ created a clear ownership structure in the energy sector, which will facilitate further reform and investment.
“The [World] Bank-assisted program is a first necessary step to support Albanian government efforts to improve quality of service to consumers, reduce distribution losses from current levels of 42 percent to around 20 percent by year 2018 and implement priority sector reforms in alignment with EU legislation,” said Salvador Rivera, team leader for the Energy Sector Recovery Program, adding it will also provide short-term support for financing of power imports during periods of dry weather.
Albania’s power production is based almost totally on the hydro power stations located mainly in the north at the Drini River. Lack of rain has often caused power shutdowns or heavy rain has flooded many areas in the north and northwest with the water from these power stations. Besides Albania loses a lot in the lost energy in its old network or from the non-payment of the consumers’ bills, which were major issues that hampered CEZ operations in the country.
