KESH’s electricity local import to cost 46 million Euros

TIRANA, Sep 1 – Purchasing energy from private hydropower plants will cost the Albanian Electro-energetic Corporation (KESH) some 46 millions euro per year.
Last April, the government approved a new price plan in which KESH would buy energy at the average import price paid in the previous year.
Based on that, the government will subsidize private energy producers by 7-8 cents per kilowatt/hour in an effort to avoid creating additional layers of management.
In the past, the power price was sometimes established in an arbitrary fashion by taking into consideration the production costs and the “fair profit” concept.
Hydropower plants produce low cost energy, measured at 1.2- 1.8 cent kilowatt/hour cheaper than nuclear plants and 2-2.3 cents kilowatt/hour less expensive than coal.
Further, more companies are trying to be issued concessions to produce energy in Albania.
Last week, an Italian company offered to build some 23 small hydropower stations in Albania.
Last year, the private sector produced some 55,000 kilowatt/hour of electricity, which cost KESH about 3 million Euros, according to the Institute of Statistics.
New, smaller hydropower plants will have an estimated cost of 46 million euros per year for KESH and will provide barely 1 per cent of the total need.
However, during the past two years, the Ministry of Economy, Trade and Energy has awarded 27 concessions for hydropower, planning to produce some 602 million kilowatt-hours per year.
Building new, small hydropower plants has turned into a good business investment in Albania. It is estimated that the expected investment would be about 131 million euros and be paid back in approximately 3 years.
Problems with the privatization
Spending 46 million euros to buy energy from the small hydropower plants will not make things easier for KESH at a time when it is facing serious difficulties with the privatization process.
Its technical losses are still at high levels and the same could be said of its inability to collect consumer payments.
That difficult financial situation makes it hard for KESH to pay for domestic and foreign imports.
Recently, KESH received a 40 million euro loan from Raiffeisen Bank and the government guaranteed repayment.
KESH owes private banks some 40 million Euros in loans and some 110 million Euros to public companies.
Raising the price of energy did not improve the situation, since consumers cannot afford to pay for it and KESH continues to import energy at a high price.
Consequently, the privatization process of the Distribution Division, expected to be completed this month, remains a very difficult transition.
The Energy Ministry reported that energy imports in the first seven months of this year dropped 13 per cent, technical losses dropped 3.3 per cent and there was a subtle growth in revenues.
Those figures still remain low and will negatively affect the privatization process.
Lastly, during the last two years Albania has been hit by an acute energy crisis, with regular power cuts throughout the country, including in the capital, Tirana.