Energy crisis is cause of skepticism over Italian energy projects

TIRANA, Dec 8 – Following the recent ‘boom’ in investment prospects for Albania when Italian companies pledged to spend than 2.4 billion Euros on energy, cement and other infrastructure projects, there now appears to be increased skepticism from some experts and media columnists.
During last week’s visit by Italian Prime Minister Silvio Berlusconi in Albania, an agreement was signed for building a regasification plant worth one billion Euros. Also, Italian investments in a wind farm and an interconnection line also worth 1 billion euro, a cement factory worth 250 million and funding of a road segment with 35 million Euros were approved.
Many people found it quite a surprise for Albania, still struggling while in a transition period from the communist past, believe these agreements were more a political spectacle than a possible reality.
Local analysts in Albania called such plans “grandiose promises” during Berlusconi’s visit, recalling a project agreed upon six years ago when he visited Albania to sign an agreement to establish an undersea potable water pipeline from Albania to Italy.
They also said it was unrealistic to build a 500 MW wind farm, noting that the Italian company signed up for the project seems to be a small company to make such a large investment.
However, people have become used to announcements about grandiose projects in Albania before general elections when the two main political groups, the governing Democratic Party and the main opposition Socialist party, for all practical purposes begin their election campaigns well ahead of time.
Meanwhile, the country continues to suffer from regular power cuts and continues hoping for rain for the Drini River, which produces the bulk of the country’s electricity.
As temperatures drop in Albania, electricity consumption in the country grows. However, the system cannot cope with the additional strain, resulting in frequent power cuts.
Albania’s energy crisis began in the late 1990s due to a lack of infrastructure investment and fast-growing consumption.
The country is now dependent upon foreign energy imports though it lacks the funds to purchase them. Consequently, the country has deepened its debt and regular power consumers pay higher rates.
Albania is part of the Balkan region, almost identically engulfed in a power crisis, with much depending on electricity produced in Bulgaria and Romania. Experts estimate that the Balkan countries need to invest more than 15 billion Euros in new power sources and inter-connection lines to avoid ever-worsening electricity shortages.
In the midst of this situation, Albanian Prime Minister Sali Berisha pledged to convert the country into a small superpower in the region. Is that realistic?
In 2007, Albania’s state-owned power corporation, KESH, ran at a loss of over 200 million Euros, roughly 2.5 per cent of Albania’s GDP, mostly due to imports.
Experts blame the lack of major investments in the energy sector over the last two decades on the artificially low price structure. In other words, the money required to invest in new power sources cannot be raised with the current low price of electricity for consumers.
Moreover in Albania, collecting electric bills owed by consumers has been a consistent problem.
Gjergj Bojaxhi, head of the Albanian Electro-Energy Corporation, or KESH, says private investors are willing to invest in the region but are put off by the actions of Albanian governments to keep down consumer electricity prices.
Albania’s government insists it is committed to the liberalization of energy and also the privatization of the energy distribution sector. However, the tender for privatization was twice postponed in first three quarters of 2008.
In 2001, a World Bank-sponsored study concluded that proper maintenance and management of a national utility company in Albania would require an income of 4 cents for every kW sold. But the Albanian Energy Regulatory Agency set a maximum quota for distributors of only 1.5 cents per kW.
Experts long-doubted the power company would find a private buyer under such disadvantageous terms, and it was only on September 29, 2008 that the Albanian Distribution Company, OSSH, was finally sold to Czech CEZ for 102 million Euros. Significantly, a condition for the sale was that CEZ would not raise consumer prices in 2009 during the run-up to 2010 general elections.
During Italian Prime Minister Berlusconi’s recent visits there was also protests staged by Mjaft! (Enough!) Movement that accused the government of allowing the colonization of Albania.
In parliament, Opposition MPs have also questioned the government decisions, arguing that the energy deal is not transparent and does not benefit Albania.
The project has also been contested by various environmental groups and intellectuals.
On Monday, writing in an op-ed column, Albania’s former President, Rexhep Meidani, slammed the agreements between Albania and Italy to build one of Europe’s biggest wind farms.
“Every simple analysis could not but be negative about this project,” Meidani wrote in the daily Shekulli, adding that the deal was not transparent.