Scenarios behind the cancellation of contract with CEZ Shperndarje include government taking over the distribution sector’s majority share, or the temporary takeover of the full shares and the contracting of another private company.
TIRANA, Oct. 22 – The Energy Regulatory Entity (ERE) has postponed a meeting to start procedures that would strip CEZ Shperndarje, a subsidiary of Czech-Republic-based CEZ Group of its power distribution licence because of failing to meet contract obligations for the third time in a row. In an announcement, ERE said it has postponed its meeting scheduled for Oct. 22 to an undetermined date ‘in order to complete its data analysis and comply with international institutions in order to minimize costs and find a fair solution that would not infringe power supply and protection of consumers’ interests.’
Finance Minister Ridvan Bode announced last week government is negotiating with the World Bank over a Euro 100 million loan to support cash-strapped power corporation KESH make imports as the country’s hydro-dependent electricity generation is unable to meet the country’s needs due to water levels in the country’s main Drin Cascade reaching their stoppage point.
Speaking of the possible removal CEZ’s licence, Bode said government was working with the World Bank in order to find a solution that would not affect public interests. He blamed the critical situation in the electricity system on CEZ’s failure to reduce debts and lower grid losses.
Meanwhile, Eduard Elezi, ERE’s legal director said the removal of CEZ’s licence remains only an assumption for the moment. “We are not under these conditions yet. There will be a second stage when everything will be made public,” said Elezi.
KESH sources say Albania is importing 2/3 of its electricity needs or around 12 mln kWh which cost the Albanian government Euro 750,000 a day. 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.
ERE’s refusal to allow CEZ put the distribution system’s assets as collateral for a Euro 100 million loan from the EBRD and the IFC has further aggravated its relations with the regulatory watchdog.
Three and a half years after taking over Albania’s distribution system management, CEZ has failed to lower its network losses which according to latest INSTAT data climbed to 50 percent in the first half of 2012, twice higher than planned.
Government’s latest move of cutting 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 is a sign no drastic measures will be taken against CEZ which has faced two huge fines this year. Apart from forcing municipalities and companies to pay debts to CEZ, the normative act also set a Euro 40 million guarantee for state-owned power corporation KESH to compensate lack of imports by CEZ Shperndarje to cover its distribution grid losses.
Facing a reduction in domestic hydropower generation because of lack of rainfall, the Albanian electricity system has plunged into a chain of debts involving KESH, CEZ and local government institutions.
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 notified ERE it could not continue with imports because of its severe financial situation also affected by a huge Euro 30 million fine imposed by the tax inspectors over VAT payments.
Recent disputes with the Albanian government over lack of imports and fines have forced CEZ Shperndarje to hire U.K.-based law firm Schindlers to negotiate its issues. 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 Shp쳮darje has recently confirmed that its position in the Albanian energy market remains unchanged and expressed its commitment to continue operations.
