WB, gov’t sign power system deal

TIRANA, Nov. 3 – Albania and the World Bank signed an agreement Monday for a $150 million loan in an effort to give an end to the crisis engulfing the electricity system and bring it back on its feet in five years.
Ellen Goldstein of the World Bank praised the Albanian government for preventing a crisis in the energy sector, which she said would have severe economic, fiscal and social consequences in 2014 and beyond.
“I can assure you that by early 2013, the power sector was nearing collapse, with demand far outstripping domestic supply, years of negligible investment, staggering technical and non-technical losses, low collection rates and insolvent institutions, including a potentially lengthy and costly dispute between the privatized distribution agency and government,” she said.
Albanian Prime Minister Edi Rama said his cabinet and the authorities are set to give an end to the chaotic management of the system and would take to the court all power thieves.
Rama and Energy Minister Damian Gjiknuri also reminded that without giving an end to the dispute with the Czech power corporation CEZ, it would have been impossible to continue the reform and also secure investment from international institutions.
The World Bank loan will be mostly spent for the electricity distribution network, with $95 million going to that end, but also for the management and other infrastructure personnel in the power corporation.
The corporation will install power meters for some 300,000 consumers that do not have them. They will install some 2,600 kilometers of cables of low power tension, more than 500 boxes and 10,000 pillars covering the most problematic residences.
Gjiknuri said that the sector produced $270 million losses per year. He added the losses reached 50 percent when the Socialists came to power in September last year, from 34 percent when the distribution corporation had been sold to the Czech company, CEZ, in 2008.
Now the losses are at 40 percent and they will be aimed at being lowered to 17 percent in 2019 while the consumers’ money collection will move from 84 percent now to 93 percent in 2019, according to the government’s plans.
“The road toward the reform asks for sacrifices, often with a political cost, but that is the only path toward success for a more secure future,” Gjiknuri said.
Prime Minister Rama added that those who steal electricty — a major problem in post-communist Albania — will be held accountable by law enforcement authorities. He said they will first target businesses that often pay as much as a family.
Authorities have embarked in a national campaign, already cutting power supply to more than 600,000 consumers. Many people have been taken to the court and if convicted they may be imprisoned up to five years.
Assuring accountability is the key to reforming the country’s bankrupt and inefficient energy sector, said the World Bank.
Goldstein added that “fixing the power sector is one of the most important foundations for increased investment, growth and job creation in Albania.”
Unreliable power supply is seen as a top constraint to doing business here. Today, cumulative losses in the energy sector — which are financed by the government — stand at a total of 55 billion leks.
“That amount would be expected to rise above 80 billion leks by 2018 if serious reform is not undertaken now,” she added.
The bank is expected to give another $125 million loan to the Albanian power corporation before 2020.
The reform will get World Bank support for the next 4-5 years.
Gjiknuri also said that by 2018 they aim to have already liberalized 40 percent of the consuming market.
Goldstein said at the signing ceremony that “confidence in the financial sustainability of the sector is the key to unlocking billions of dollars of investment in Albania’s hydropower potential. Increasing generation capacity will gradually reduce reliance on imports and lower the cost of providing electricity to consumers.”
Rama also said that the government is set only to cancel the 300 kWs with a lower price for the consumers and keep a uniformed one that is expected to be a medium figure between the prices of the 300 kWs at 7.7 leks to the higher amount of 13.8 leks.
The government has also said it will support financially all the pensioners and other socially-assisted population for the higher price.
The premier said openly they are ready to cope with the political consequences for such major reforms.
“If there is a choice of staying long in power, lengthening the chain of problems, or stay shorter in power, cutting the chain of problems, there is no dilemma for us as we belong wholeheartedly to the second,” he said.