Kurum offers Euro 110 million for four hydropower plants

For Kurum, one of the country’s largest electricity consumers, the purchase of the HPPs will considerably reduce power costs in its Elbasan steel plant. Meanwhile, the opposition has threatened to cancel the privatization
By Ervin Lisaku
TIRANA, Dec. 24 – Turkey’s Kurum International, which in Albania already operates the Elbasan steel plant, has offered a total of Euro 109.5 million on the privatization of four small and medium sized hydropower plants, being the highest bidder. In an international tender held on December 21, Kurum International offered Euro 52 million on the purchase of the Bistrica 1 and Bistrica 2 HPPs in southern Albania with a capacity of 27.5 MW and Euro 57.5 million on the Ulez and Shkopet HPPs which have an installed capacity of 49.2 MW. Bosnia and Herzegovina’s Energolinij offered the second highest bid on the four HPPs, worth 76.7 billion, followed by U.S based Georgian American Alloys with Euro 57 million and Turkey’s Calik Enerji with Euro 35 million. Two Albanian owned companies, ERPA Investment and Agna Consortium also participated in the tender bidding Euro 35 million and Euro 37 million, respectively on the purchase of the Bistrica 1 and Bistrica 2 HPPs.
Speaking after the bids opening, deputy Energy Minister Sokol Dervishaj said the bids evaluation committee will continue verifications with its IFC international consultant before making a final decision. In another statement, the Energy Ministry denied as untrue media allegations that the HPPs were being sold below their market value. Earlier this year, the Lanabregas HPP with an installed capacity of only 5 MW was bought by the municipality of Tirana for Euro 15 million under a loan to reduce power costs for its water supply company.
For Kurum, one of the country’s largest electricity consumers, the purchase of the HPPs will considerably lower its power costs as a new law in force since the beginning of 2012 stripped big electricity consumers to have power supply at regulated tariffs from the local distribution operator. In early 2012, Kurum suspended work in the steel plant because of difficulty in finding electricity at affordable prices. The new energy law in force since January 2012 foresees that electricity produced by the current hydropower plants, accounting for more than 100 percent of domestically produced electricity, will be used to supply only household consumers and small and medium-sized enterprises, excluding big consumers.
Kurum International is the only company in Albania that operates iron-steel facilities. Established to conduct Kurum Holding’s operations in Albania, Kurum International completed its first activity by launching the Elbasan Steel Production Facilities in 1999, emerging as one of the biggest employers. It has an annual production capacity of 550,000 tons for hot rolled structural iron and 400,000 tons for liquid steel at its smelter and rolling mill facilities.
Opposition
Speaking of the tender on the sale of the four hydropower plants, opposition leader Edi Rama said this week that the Socialist Party which hopes to come to power after the June 2013 general elections will not recognize the privatization. “We will not recognize the privatization of these four hydropower plants, I am telling the bidders not go further in this process. We will not allow that Albanians’ wealth is robbed because of ill-governance,” said Rama at a press conference.
The opposition Socialist Party has denounced the sale of the hydropower plants as corruptive and damaging state-run power corporation KESH. Ilir Beqja, the Socialist Party’s programme secretary said the four HPPs generate around 500 mln kWh annually. “Currently, this amount of electricity is sold to distribution operator CEZ at 2.2 lek/kWh which secures KESH Euro 7.85 million. After their sale, KESH will not only lose the income but also be obliged to purchase this amount at 7.5 lek/kWh costing it 26.8 million euros. Thus, the negative effect in KESH’s balance sheet will be at 26.8 million euros or at around 32 percent of the highest bid on their sale,” said Beqja.
Opposition Socialist Party MPs had earlier called on government to withdraw from the sale of the four HPPs which account for around 6 percent of the annual power generation and prove profitable. Opposition leader Edi Rama said government was losing USD 20 million annually from the privatization of the four hydropower plants.
Tender saga
The tender on the sale of the four small and medium sized HPPs had been postponed for several times after failing to attract interest from potential buyers or their low intended bids. Under the changes to the new tender scheduled for December 21, the pre-qualification stage was removed and the guarantee bidders had to deposit reduced from Euro 10 million to 10 percent of the bid in an effort to finalize the process.
Speaking after the tender failed last September, deputy Energy Minister Sokol Dervishaj, also the head of the bids evaluation committee, said the companies had demanded more time, concerned over how they will transmit and sell power produced from the four hydropower plants.
Austria’s Verbund had previously evaluated the four hydropower plants at Euro 80 million, almost half the amount the Albanian government intends to collect.
Austria’s EVN and Verbund, France’s CNR & CN’AIR, Turkey’s Limak Enerji, Italy’s Tozi Spa, which had previously expressed interest to submit bids on the privatization of the HPPs did not participate in the tender. The four HPPs are reported to have an installed power of 77 Megawatts, accounting for 5.3 percent of hydro electricity produced by state run Power Corporation KESH.
Government had hoped to collect around Euro 150 million from the sale of the four HPPs. All four HPPs are in good condition especially the southern Bistrica HPPs which have been upgraded under a Euro 30 million investment.