The completion of planned privatizations would not only bring much-needed revenue to the government, but would also signal its commitment to market-oriented reforms, says the EBRD
TIRANA, Jan. 25 – State-owned oil company Albpetrol, five small and medium-sized hydro power plants and remaining minority stakes in fixed line operator Albtelecom and Armo oil refiner are the key remaining assets government plans to privatize this year. The announcement was made by Economy Minister Nasip Naco during a recent press conference unveiling the 2011 performance of the ministry also responsible for trade and energy and the priorities for 2012. Revealing the key assets set for privatization, Naco did not put Insig insurer on the list. Along the Albpetrol whose tendering procedures are already being compiled, Insig is also a 100 percent state owned asset whose privatization has failed in two previous tenders.
The Economy Ministry says that in 2011 it completed privatization documentation for 440 state owned assets worth 5.6 billion lek, double the amount compared to 2010.
Back in early 2011, government identified 1,280 public assets including strategic enterprises it intended to privatize as soon as possible. The privatization list includes remaining state owned shares in strategic oil, and phone companies, small hydropower plants, military facilities and small and medium-sized enterprises, except for big hydropower plants and dams, schools, hospitals and public buildings and offices which will remain under state ownership.
According to latest Finance ministry data, government used 387 million lek from privatization revenues, 87 million more than planned, to cover a 38 billion lek budget deficit during the first 11 months of 2011. While privatization revenues cover only 1 percent of the deficit, almost 58 percent of the deficit was covered by domestic borrowing and the remaining part through external borrowing.
Prime Minister Sali Berisha has reiterated his Democratic Party-led ruling coalition remains set to complete the full privatization process by this year in an effort to fight corruption and end inefficiency in the state-run enterprises. Meanwhile, opposition Socialist Party leader Edi Rama has warned the opposition Socialist Party would launch a transparency process on every privatized asset as soon as it comes to power and annul every corrupt privatization.
However, the Economy Ministry has assured potential domestic and foreign investors interested in buying state-owned assets that the privatization process will be fully legal and transparent and that the opposition’s threats of not recognizing them are legally baseless.
London-based EBRD has underlined the completion of the privatization process as a key priority for the Albanian government.
“Sales of state-owned assets should be concluded, suggest the EBRD. The completion of planned privatizations would not only bring much-needed revenue to the government, but would also signal its commitment to market-oriented reforms. This could trigger substantial foreign direct investment (FDI) inflows in the coming years,” says the EBRD.
Energy
Describing energy as top priority sector, minister Naco said that recent legal changes in the electricity market and newly compiled draft laws on renewable energy and energy efficiency will save government Euro 50 million a year, which will be used on public investments. The cut in expenditure comes from a new law in force since Jan. 2011, foreseeing that electricity produced by the current hydropower plants, accounting for more than 90 percent of domestically produced electricity, will be used to supply only household consumers and small and medium-sized enterprises, excluding big consumers. Big energy consumers will be supplied with electricity by qualified suppliers other than CEZ Shperndarje at prices not regulated by the energy watchdog ERE to minimize rising costs for state-owned power utility KESH. Government says it used to spend 50 million Euros a year in reimbursement to private distribution operator CEZ Shperndarje for giant consumers of more than 50 million kWh annually.
For 2012, government expects to make operational the Elbasan-Podgorica interconnection line linking Albania to Macedonia, and put to use the Vlora thermal power plant.
While need for electricity is on the rise, awarding concession contracts to build new hydropower plants, mainly small and medium sized ones has been one of the government priorities to increase the country’s hydro-dependant domestic electricity production which since 2011 has suffered from low rainfall, making electricity imports a burden for the state budget.
During the past few years government has awarded 110 concession contracts for 300 small, medium-sized and big HPPs to domestic and foreign companies, with an installed capacity of 1,400 Megawat. The ministry says that is also in the final stage of completing procedures for an international tender on HPPS in the Vjosa and Osum river cascades in southern Albania.
Meanwhile, five existing state-owned small and medium sized HPPs, the Ulez, Shkopet, Lanabregas and Bistrica 1 and Bistrica 2 whose privatization bill was approved last year will be sold 100 percent.
Oil, Mining, TAP
Albanian and foreign companies will invest USD 40 million in the mining sector this year after participating in 143 tenders in 2011 under new legal changes– making the award of mining permits under procurement procedures rise by 32 percent to 8.2 million tonnes while mining rent rose by 2.5 times to around USD 10 million.
Meanwhile, crude oil production in Albania in 2011 rose to 892,000 tonnes, up 20 percent compared to 2010 and double compared to 2005 as more and more companies engage in exploration and production operations “There has been obvious progress in the implementation of hydrocarbon deals in exploration blocks for the new oil and liquid gas resources and 43 million USD of investments are expected this year,” said Naco.
Speaking of the much expected Trans Adriatic Pipeline approval, the only project including Albania in its itinerary, Naco said the implementation of the project would benefit Albania USD 1 billion of investment, securing alternative energy resources at affordable prices. Waiting for Azerbaijan’s decision on building the infrastructure to carry gas to Europe from the major Shah Deniz gas field, the Albanian government remains hopeful the Trans Adriatic Pipeline (TAP), the only project including Albania in its route, will be announced the winner.
Nabucco and the Interconnector Turkey-Greece-Italy (ITGI) are two other projects competing to bring gas from the Caspian region to Europe but do not include Albania in their projected route.
