While the Energy Regulatory Entity is considering fining CEZ over collective power cuts, the Czech company has responded by announcing an extreme measure of cutting power to all debtor water supply companies
TIRANA, Nov. 13 – Another fine to CEZ Shperndarje is expected to further escalate the conflict between the Czech company managing Albania’s distribution system and the Albanian government. The conflict has escalated to that point that the Albanian government is considering removing CEZ’s licence because of failing to meet contract terms, while the Czech company has officially declared it will decide over leaving Albania by the year’s end due to rising losses. CEZ Shperndarje risks getting a third fine in the course of three months because of collective power cuts. This time the fine Energy Regulatory Entity (ERE) has proposed is estimated at Euro 3.5 million or around 1.11 percent of the company’s 2011 turnover. The fine will be imposed for collective power cuts which the Energy Regulatory Entity considers illegal. The previous two fines imposed last September by the tax administration and ERE, worth Euro 33 million and served to spark the conflict between the state and CEZ. The ERE commissioners said they were against collective power cuts but stressed the need of supporting CEZ to collect money from consumers who don’t pay bills. According to ERE, Shkodra, Peshkopia, Kukes, Lezha and Tirana are the most problematic areas. In a reaction, CEZ said it has not made collective power cuts, but cut power only for power cabins which are 100 percent debtors. CEZ said that it would continue power cuts to debtor customers.
Debtor water supply companies
While the Energy Regulatory Entity is considering fining CEZ, the Czech company has responded by announcing an extreme measure of cutting power to all debtor water supply companies which would leave inhabitants in some 40 local government units without water. CEZ Shperndarje has announced that starting from Friday, Nov. 16, it will cut power to all water supply enterprises who owe debts to the company. CEZ says the amount water supply companies owe to it has reached 5.4 billion lek (Euro 38 million). The distribution operator says it has also offered government the cancellation of debts from water supply companies in exchange for debts CEZ Shperndarje owes to power corporation KESH which has been refused. One month ago, government awarded a Euro 10 million fund to CEZ for debts water supply companies owed, but it seems that it has not been enough. Government has recently cut 2.5 billion Lek (Euro 17.5 mln) in unconditional grants to local government units because of debts water supply companies under their administration owe to CEZ Shperndarje operator.
Relationship with CEZ problematic
The relationship with Czech company CEZ remains problematic, says Energy Minister Edmond Haxhinasto. He said CEZ is being monitored and that the decision on it will be made later. Haxhinasto guaranteed citizens there will be no power cuts leaving open the possibility of the departure of the Czech company. “The relationship with CEZ is a problematic relation. What will not happen is that CEZ s performance deteriorates. Government will take all measures so that the performance in the electricity distribution grid improves. Service to consumers will improve and it is not important whether this service is offered by CEZ or another entity,” said Haxhinasto. He said CEZ had violated the contract with the Albanian state, and has made illegal collective power cuts.
Speaking about the issue of CEZ’s departure in a press conference, Prime Minister Sali Berisha said the management of the distribution company by the state is no problem, because they have managed it better than CEZ. He said that under CEZ’s management losses have considerably increased.
In a televised interview Finance Minister Ridvan Bode said “We are concerned because CEZ’s performance has negatively affected public finances and the budget. CEZ owes KESH Euro 140 million but its net obligation toward us is euro 110 million. The failure is related to the inability to meet the calendar of investments and losses. Currently, losses should have been at 26 percent but they are at 46 percent,” said Bode.
CEZ’s on the verge of departure
At a time when the Albanian government-CEZ divorce over the management of the country’s problematic power distribution network seems inevitable, both parties are preparing for a solution that would come from an international arbitration court. While CEZ has already hired U.K-based Schindlers law firm to negotiate its disputes, the Albanian government has also made its move by announcing a tender to select an international consultant. The move comes few days after the Czech Republic-based group announced it was seriously considering leaving Albania and claiming its Euro 60 mln guarantee by the World Bank three and half years after taking over the majority stake in Albania’s distribution system. While CEZ is seriously considering leaving Albania and getting its Euro 60 mln guarantee, World Bank’s Regional Coordinator for Southeast Europe Jane Armitage has said the Bank is “certainly not ready to execute its guarantee at this point.”
CEZ has invested roughly 120 million euros ($155 million) in its Albanian unit, but due to ongoing regulatory and commercial hurdles the company posted a first-half 2012 loss of USD 119 billion.
Scenarios behind the cancellation of contract with CEZ Shperndarje include government taking over the distribution sector majority share, or the temporary takeover of the full shares and the contracting of another private company. Failure to import electricity for its grid losses, debts to state-owned power companies and lack of investments are the three main reasons the Energy Regulatory Entity (ERE) intends to strip CEZ Shperndarje, a subsidiary of Czech Republic CEZ Group, from its power distribution licence in Albania.
Albania’s Energy Regulatory Entity (ERE) has fined Czech-owned CEZ Shperndarje distribution operator 430 million lek (Euro 3 million) because of failing to cover grid losses with imports. CEZ had previously been fined Euro 30 million by the tax administration over VAT payments. CEZ Shperndarje, a subsidiary of Czech-Republic based CEZ Group has been operating the Albanian distribution network since 2009 when it signed a contract with the Albanian government buying the former OSSH 76 percent majority stake for 102 million Euros.
