Exclusive: Czech CEZ Group in conflict with Albania and Bulgaria

23. June 2014. / SEE Energy News

In March 2009, having paid 102 million euros, the Czech energy company ČEZ became the owner of 76% of shares of the Albanian electric power distribution, which had been a part of the electric power industry corporation KEŠ. However, the Albanian Energy Regulatory Office (ERE) withdrew the licence from the Czechs at the end of January 2013, as they stated, for failing to fulfil the obligations from the contracts on electricity import and investments in the improvement of more than half of a century old electricity network. The Albanian authorities accused ČEZ that the damage incurred by their business operations amounted to as much as one billion dollars. In this way, the electric power distribution has returned to the state administration, whereas KEŠ, the public company managing production, is under bankruptcy and it survives owing to the subsidies or loans from the Government.

It has been stated in the media that, in 2011, ČEZ performed business operations with the profit of 32 million euros and the earnings of the Czech company in Albania reached 35 million euros. Already in the first half of 2012, the business operations brought a loss of 90 million euros to the company. Even at the beginning of cooperation, the prognoses of the experts from the field of energy had not been at all optimistic when it came to the business move of ČEZ.

In May 2013, the Czech energy company ČEZ also filed an official complaint against Albania to the International Court of Arbitration, demanding compensation for the damage caused by the ”unprotected investment“ in the Albanian company. As it has been stated in the media, ČEZ had a lot of problems concerning the payment of bills for consumed electricity, and the company also faced great damage from stolen substations and transmission lines.

Apparently, the Albanian consumers did not have a developed habit of paying their electricity bills regularly, and illegal connection to the electrical grid had already been a common practice in this country. ČEZ demands over 122 million euros from the Albanian state institutions and households for unpaid electricity debts. For comparison purposes, ČEZ became the owner of 76 percent of the Albanian electric power distribution having paid 102 million euros. In 2012, 300 million dollars worth of electricity was stolen in Albania.

The latest events concerning the commercial dispute refer to the recommendation of the European Commission to grant Albania the status of a candidate country for the EU which shall be decided upon by the EU summit at the end of June. The Czech Republic is prepared to block Albania’s path to the EU. Although ČEZ was aware of entering into investment in a politically and legally unstable country, for the potential risk, the company had obtained guarantees from the World Bank amounting to 60 million euros. However, after the licence revocation, it is questionable whether they will obtain the money from the World Bank because, according to the Contract, the Albanian daughter company is actually entitled to it and not the parent company ČEZ.

The privatization of the Electric Power Distribution was considered the most successful privatization in Albania and ČEZ was supposed to be the saviour of the Albanian electric power distribution sector, which had been a part of the Albanian electric power industry corporation (KEŠ). This job has obviously failed.

In addition to Albania, ČEZ also has unsolved issues with Bulgaria. ČEZ entered the Bulgarian energy market in 2005 when they bought three distributors of electricity for 360 million euros, merging them into one company afterwards. Moreover, ČEZ bought the thermal power plant “Varna“ and the solar power plant “Orešec“, and the investments in Bulgaria had been deemed successful until 2013. However, in February 2013, the Czech company was threatened by the revocation of licence once again. The citizens protested against the enormous electricity bills that had arrived at their home addresses in January 2013.

The same year in March, ČEZ filed a complaint with the European Commission against the Bulgarian institutions, which had been trying to withdraw their licence for working in the country. The regulatory authority within the field of energy in Bulgaria accused the company of placing orders to sub-suppliers without public tenders, thereby breaking the laws within the field of public procurements. ČEZ denied this, as the Czech media reported.

The Czech company has recently asked for permission to increase the price of electricity by 14 percent as from 1st July this year. ČEZ supplies the electricity for Sofia and the entire Western Bulgaria. Bulgaria is one of the EU countries with the lowest price of electricity.

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