“The arbitration proceedings have been formally initiated by sending a ‘notice of arbitration.’ However, this does not prevent a potential out-of-court settlement between the parties,” says Prague-based CEZ Group
TIRANA, May 20 – In an expected move after having its Albania licence revoked, Czech Republic-based CEZ Group says it has officially initiated arbitration procedures to seek compensation for damage incurred due to its non-protected investment in the CEZ Shperndarje Albanian subsidiary managing the country’s electricity distribution operator.
In a statement published on its website, CEZ does not disclose the amount of damages sought, but Czech media say the energy giant which managed Albania’s distribution operator for more than three years could claim Euro 190 million. The Albanian government had earlier announced it would seek USD 1 billion (Euro 750 million) in compensation if the conflict ends up in arbitration court.
However, CEZ leaves open an out-of-court solution which has also been recently supported even by Economy Minister Flojron Mima.
“The arbitration proceedings have been formally initiated by sending a ‘notice of arbitration.’ However, this does not prevent a potential out-of-court settlement between the parties.”
CEZ says the state administrator appointed by Albania’s energy regulator took control of the company acquiring all rights of the corporate statutory bodies, including all decision-making powers and responsibility for its operations.
CEZ Group, which is 70-percent state-owned, operates in around 10 countries, mainly in eastern and central Europe.
It also faces problems in Bulgaria, where the energy regulating body launched action against it last month, following demonstrations over the energy prices.
Under a unanimous decision taken on January 21, the Energy Regulatory Entity (ERE) Board of Commissioners decided to revoke CEZ’s licence in Albania, arguing that the company had failed to make compulsory electricity imports, reduce grid losses, make investments, provide all consumers with power meters, pay debts to state-owned operators KESH power corporation and OST transmission operator, and stop collective power cuts.
CEZ blames the situation in Albania on tariff disputes with the Energy Regulatory Entity and heavy fines imposed by local authorities.
CEZ Shperndarje possessed a long-term distribution licence due to expire in 2038 and a retail public supplier licence which the company had applied to extend because of expiring on January 25, 2013.
The government-CEZ conflict reached its peak on November 16 after CEZ cut power to debtor water supply companies leaving half of Albania without water and sparking nationwide protests which lasted for only few hours after police intervened arresting several CEZ employees and forcefully reconnected power.
Prague-based CEZ Group had warned it would decide by the end of 2012 over the sale of its subsidiary in Albania, the CEZ Shperndarje distribution operator, following disputes with the Albanian government over tariffs, taxes and investments.
The Czech prime minister warned Albania’s decision to revoke the business license of CEZ could dash its hopes of Czech support for an eventual bid to join the European Union.
“The Czech Republic cannot ignore the [Albanian] approach to a Czech investor in the context of Albania’s aspirations to integrate [into the EU],” said Petr Necas.
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.
CEZ received a 60 million euro guarantee from the World Bank as an incentive to take over Albania’s OSSH power distributor in 2009 but can no longer claim the guarantee after its departure from Albania.
CEZ Shperndarje distribution operator, which since January 2013 is back under state administration, has dismissed as speculations media reports that the company will pardon unpaid bills or late-payment penalties on electricity bills ahead of the electoral campaign. Three months after taking over as state administrator of CEZ Shperndarje distribution operator, Sahit Dollapi says the electricity supply situation in Albania has considerably improved. Reporting to the Energy Regulatory Entity (ERE) on the performance of the electricity system in Albania, Dollapi said the increase in the bill collection rate has enabled the payment of a series of debts to state-owned power corporation KESH and transmission operator OST. Power losses in February 2013 dropped to 48.71 percent, down from 51.12 percent in January, while the bill collection rate rose to 63.1 percent in February 2013, up from 59 percent last January.
“Derains & Gharavi” hired
to defend Albania
French law firm Derains & Gharavi will defend the interests of the Albanian government against the lawsuit filed by CEZ Group in the International Arbitration Tribunal. A government decision published on the Official Gazette on May 16 authorizes the Ministry of Economy and Energy to sign a contract, worth Euro 900,000, with this law firm to provide services to the Albanian side.
CEZ’s contract with the Albanian government envisaged Euro 300 million of investments in four years. However, less than 10 percent of this amount was invested in the Albanian distribution grid forcing the Albanian state supervisory authorities to take measures of revoking its licence and nationalizing the company.
