No solution yet on dispute with CEZ

TIRANA, March 18 – More than one year after CEZ Group had its Albania licence revoked, the Albanian government says it still negotiating with Czech Republic CEZ Group over an out of court solution that would not have severe financial consequences for Albania after the Czechs have initiated Arbitration procedures. In an interview for Vizion Plus TV this week, Energy Minister Damian Gjiknuri said negotiations with Czechs continue but the situation remains critical because the CEZ energy giant, whose majority 70 percent stake is owned by the Czech government was not expropriated by the previous government when its licence was revoked in January 2013.
Minister Gjiknuri said Albania’s position remains unfavourable and that the Albanian government is interested in finding a solution that would overcome the deadlock and pave the way to investments in the energy distribution system.
“We want to find a solution that is supported by international institutions which would also pave the way to investments in this sector. Nobody would lend to CEZ in its current situation under which it is neither private not state-owned and you cannot invest or make reforms or other unilateral actions without the previous consent of Czechs who are the formal owners,” said Gjiknuri.
Asked if the Czechs claim Euro 200 million in damages, Gjiknuri declined to comment saying that the amount is under negotiations.
“There will be huge financial consequences. Unfortunately, the previous government did nothing on this issue in the past eight to nine months, no expropriation procedures were carried out and no negotiations were made to find a solution with the Czechs, deteriorating Albania’s position in this conflict. The settlement of the Arbitration dispute which can take years, prevents investments in the system and all these issues will be reflected on the electricity system and the financial crisis it faces,” Gjiknuri has earlier said.
Prague-based power utility CEZ AS said it’s open to talks with Albania about possibly dropping an international arbitration suit it filed after the Albanian government revoked its license and seized its assets this year. CEZ is willing to consider avoiding arbitration if the two sides agree on fair compensation, spokeswoman for CEZ has earlier said.
CEZ is seeking compensation for damage to its investment in power distributor CEZ Shperndarje, which it purchased in 2009 for 102 million euros ($139 million). It has invested 100 million euros in repairs and expansion and says the Albanian regulator ordered it to pay state-owned power producers higher tariffs without allowing the Czech utility to raise prices for customers, Bllomberg reports.
CEZ says it will claim Euro 200 million in international arbitration while the previous Albanian government claimed that CEZ’s failure to fulfill its contract obligations over imports, investments and reducing grid losses caused the state USD 1 billion in damage.
CEZ Group, which is 70-percent state-owned, operates in around 10 countries, mainly in eastern and central Europe.
Under a unanimous decision taken on January 21, the Energy Regulatory Entity (ERE) Board of Commissioners decided to revoke CEZ’s licence in Albania, arguing that the company had failed to make compulsory electricity imports, reduce grid losses, make investments, provide all consumers with power meters, pay debts to state-owned operators KESH power corporation and OST transmission operator, and stop collective power cuts.
CEZ blames the situation in Albania on tariff disputes with the Energy Regulatory Entity and heavy fines imposed by local authorities