TIRANA, June 20 – Small private and concession hydropower producers say some new legal changes the government is undertaking have increased insecurity among foreign and Albanian investors and warned of initiating arbitration proceedings over what they call “unilateral violation of contracts” no longer guaranteeing the sale of their total production.
Lorenc Gordani, the head of the Albanian Renewable Energy Association (AREA), says the proposed transfer of the HPP contracts from state-run power utility KESH to the other state OSHEE distribution operator does not guarantee the sale of the electricity they produce and is a high-risk move that could take investors to bankruptcy.
The AREA association represents some 60 small and medium-sized hydropower producers, including Italian, French, Austrian and Turkish ones, mainly with a capacity of up to 15 MW who have invested more than Euro 650 million in the country’s wholly hydro-dependent electricity production.
Unlike the initial concession contracts with KESH power corporations, producers claim the new contracts with OSHEE distribution operator guarantee them only the partial sale of their electricity production.
“The decision creates conditions of insecurity and even poses the risk of bankruptcy for domestic and foreign investors who have invested hundreds of millions of euros in Albania,” said the association in a statement.
“The unilateral cancellation of rights previously legally recognized through concession contracts has not only created insecurity among Albanian and foreign investors, but also risks taking the Albanian government to arbitration proceedings for unilateral violation of contracts,” says the Association.
The energy ministry has not officially reacted to the association’s claims but recently said in a meeting with interest groups, the changes to the renewable energy resources law have been drafted in compliance with European Commission directives and set national targets to achieve by 2020.
The new contracts with OSHEE operator could spark a new legal battle between the government and HPP investors who are already challenging in court the government’s revise downward in electricity prices during the past three years.
A revise downward in electricity prices for concession and private hydropower plants led to a decline in investors’ 2015 income despite increased production due to some new HPPs and favourable hydro situation, according to an annual report by energy regulator, ERE.
A government decision in 2015 which adopted a new formula to calculate electricity prices for private-run HPPs, taking into consideration average prices at the Hungarian stock exchange, a 1.24 coefficient and the average annual euro/lek exchange rate. The government argued the decision with retroactive effects for 2013-2014 with the huge losses state-run power utility was suffering under the previous rates.
State-run power utility KESH spent some 8 billion lek (€58 million) on electricity purchase from private and concession hydropower plants in 2015, down 2.4 percent compared to 2014 despite production increasing by 12 percent and accounting for 24 percent of total domestic wholly hydro-dependent electricity generation.
Some 101 private and concession hydropower plants had electricity sale contracts with KESH power corporation in 2015, excluding four small and medium-sized HPPs run by Turkey’s Kurum, currently under bankruptcy proceedings and another new medium-sized plant, the Peshqesh HPP run by Turkey’s Ayen As Energji which became operational in mid-2015.
The Ashta HPP, a €200 million by Austria’s Verbund and EVN, operational since early 2013, increased its production to 200 GWh in 2015 accounting for one-fifth of total production by private and concession-run HPPs. Its 2015 income was at about 2 billion lek (€14 million), according to energy regulator ERE.
State-run KESH is the country’s largest electricity producer, mainly coming from the northern Albania Drin Cascade where the country’s three largest HPPs are situated.
Since 2007, the Albanian government has awarded more than 400 concession contracts to private companies, of which only 100 have already been made operational, accounting for 20 percent of domestic hydro-dependent electricity.
The Devoll HPP by Norway’s Statkraft is the biggest hydropower plant under construction in Albania with a potential installed capacity of 243 MW and production estimated at 729 GWh a year.
Recent hydropower plant concession projects have been met with protests by environmentalists and local communities worried about the future of tourism and ecosystems in the Vjosa and Valbona rivers.
