World Bank guarantees sale of power distribution operator

WASHINGTON, May 5 – The World Bank Board of Directors approved Tuesday a 60 million EUR (78 million USD) Partial Risk Guarantee for the Albania Privatization of the Energy Distribution System Operator (OSSH).
This Guarantee will facilitate the recent privatization of the Operator by enabling the Government of Albania and CEZ of the Czech Republic as the new buyer, to implement the Privatization Agreement for OSSH under the agreed Regulatory Framework.
The Guarantee period is until December 31, 2014 and covers the Regulatory Framework as part of the Privatization Agreement, which was ratified by the Albanian Parliament in April 2009.
The electricity sector in Albania has been problematic for many years. The inadequate performance of the electricity distribution, in particular, has been affecting the whole sector resulting in blackouts for households, firms and state bodies. The power sector also presented fiscal challenges for the government, forcing it to subsidize electricity using funds that could be spent more effectively to provide health, education, and social assistance for Albanians that face hardship. The privatization agreements and the agreed regulatory framework provide an overall balanced approach, where the privatized OSSH undertakes significant and challenging commitments to improve performance, while the Government and the Regulatory Entity agree to provide reasonable returns if that performance is reached.
“We believe that this Guarantee project will help OSSH to invest in the electricity network, reduce system losses and non-payment of bills, improve the overall electricity situation for all Albanians in the medium term, and reduce the fiscal burden imposed on the Albanian economy,” said Demetrios Papathanasiou, Leader of the World Bank team designing the project. “This project will also contribute to the success of the Albanian power market and its further integration into the Energy Community”.
IFC’s Private Enterprise Partnership-Southeast Europe Infrastructure advised the Albanian Government for OSSH’s privatization.
The Guarantee will be made available by the Bank to Albania at no cost, as long as there is no breach of the agreed Regulatory Framework.
The Czech energy group CEZ bought with 102 million EUR (129 million USD) a 76 percent stake in Albania’s OSSH power distributor.
CEZ won an international tender for the privatization last September.
Post-communist Albania has suffered frequent power cuts caused by low water levels at the hydroelectric stations that produce the bulk of its electricity consumption, and an outdated distribution system.
Multi-billion-euro projects have been signed in recent months with Italian companies to build power plants fired by gas and coal.
The Bank has been engaged in the Albanian power sector since 1992 through investment projects, donors’ coordination, and policy dialogue. Since joining the World Bank in 1992, the commitments to Albania total approximately 1,083 billion USD.