Exclusive, inside story: The ČEZ drama in Albania and its implications

, SEE Energy News

ČEZ in Albania earned 32 million Euros in the first six months in 2011, while the first six months of the last year brought 90 million Euros loss.

When Czech National Power Utility became the owner of 76% of Albanian electricity distribution at the beginning of 2009, international experts’ estimations of that ČEZ’s business move were not optimistic at all.

International experts for energy have warned that ČEZ entered very risky job, considering that Albanian consumers weren’t used to pay electricity bills orderly, and that illegal electricity connection was very common practice in the land at the time, as well as nowadays. However, ČEZ was considered as the winner in that transaction, because all indicators were talking about fast development of Albanian industry what certainly includes electricity consumption increase.

ČEZ had very big business challenge at the time because of the fact that 30% of consumers hadn’t electricity meters and that they were getting arbitrary bills.

Prime Minister Salija Beriša’s announcements and promises to the election campaign that energy, the energy sector development and order introduction will be priorities to his government after winning second premier mandate also were promising to ČEZ at that point.

Do not be fooled by empty promises

Business problems had occurred before anyone could expect them.

ČEZ earned 32 million Euros in the first six months 2011, while the first six months of the last year brought 90 million Euros loss.

State regulator doubled electricity price that “ČEZ Šperndarje” had to pay to national electricity manufacturer last year, and price increase to ultimate consumers was not allowed. It was straw that broke the camel’s back, with all of the problems at the time.

ČEZ stopped electricity delivery for several water industry companies in November, because of the 40 million Euros debts. Therefore, Tirana and the bigger part of the land run out of water for several days. Debt of State Water Supply only, amounted 38 million Euros.

Disputation about prices was sharpening and ČEZ announces possibility of selling its participation in electricity distribution and leaving Albania.

Government of Albania took away license from ČEZ with accusation that Czech company didn’t insured electricity distribution and didn’t invest in distribution network and so it damaged Albania for billion dollars.

On the other side, ČEZ thinks that action of Albanian institutions is in contrast with the laws and European orders. According to Czech company’s data, 90 to 100 million Euros have been invested in renewal of electricity network in Albania and its extension so far.

Albanian regulative body determined the administrator that will take over administration of the company at the same time when it took away license from ČEZ. So ČEZ lost all its ownership rights in Albanian Distribution Company.

Albanian Government forbad Czech giant to sell the major part in Distribution Company “ČEZ Šperndarje” asking ČEZ to repay its billion dollars damage to Albania. It is not precisely alleged in Albanian government or Ministry of Resources’ statements whom was damage done to and in which way.

ČEZ believes that regulative body itself cannot decide for functioning of the company and thinks that it is not in accordance with European norms or Albanian laws.

The company states that taking license away cots 200 million Euros and announces that it will ask World Bank to activate guaranty of 60 million Euros which had been promised to company before it entered Albania in order to protect investments because of fear of business in unordered conditions.

ČEZ will take steps forward international arbitrage next to formal opposition to taking license away. Rating Company “Mudis” recommended to Czech Electricity Company to leave Albania and so prevent further loss and protect its future incomes.

ČEZ loses license and Albania loses support for EU accession

Considering current situation, Czech Republic won’t ignore Albanian attitude to Czech investor in terms of Albanian EU accession. Czech Prime Minister Petar Nečas seriously warned Albania that he will block its entrance to EU after the last week decision of Albanian Energy Regulatory Office for taking license away from ČEZ. ČEZ has the support of Czech Government which has two thirds of participation in the company for contribution to all damages caused by behavior of Albanian side.

Czech Government consider the taking license away and Albanian procedure as really bad treatments to foreign investors and as ultimately negative signal in relations between these two countries, Akter finds out. ČEZ lost its license, but Albania lost support for EU accession.

The fact that European Commissioner Štefan File is Czech politician and career diplomat is another way ČEZ can seriously endanger Albanian position in EU integrations process. It is even more interesting fact that ex-cadres from ČEZ were engaged directly from his cabinet in Brussels.

Albania submitted request for EU accession in April 2009. The integration procedure is in progress. All EU members decide about it in each phase of this progress. Czech Republic is the member of EU since 01.05.2004.

Observing all circumstances, the fact that ČEZ is one of the leading companies in South East Europe is very interesting. Secretariat Forum for Energy Association in South East Europe, whose seat is in Vienna, was held in Tirana few months after ČEZ had come to Albania and take over electricity distribution.

Then, EU Ambassador in Albania, Helmut Lohan, asked Albanian Government to stop treat electricity as category for buying social peace. Lohan explained to Prime Minister Salijs Beriša, who opened the gathering, how Albanian government is expected to begin energy market liberalization process, saying that it helps to Balkans countries to accelerate its road to EU accession.

Most Albanian citizens didn’t understand what energy market liberalization means, but those who were more educated understood that it means constant electricity price increase and they were aware of the fact that ČEZ won’t tolerate arbitrary electricity bills, illegal network connection i.e. electricity theft and even less unpaid electricity bills.

One thing is certain. The drama, Czech Company has been surviving in last couple of months, threatens to become serious economic and political problem between two countries.

What did Aleksandar Obradović use to say?

Current Serbian energy company EPS Director Aleksandar Obradović was Director of ČEZ Representation in Serbia. While he was on this function, he was extremely interested for strategic partnership and investments in EPS where he is the Chairman today. He said once during interview that “Serbia didn’t invest in production for 20 years and that’s why it has negative impulse because it spends more than it produces”.

“EPS got into magic circle because it must buy electricity that’s being sold at low prices”

When he was talking about EPS and ČEZ’s current positions, he said that it’s not appropriate to make a comparison, but that ČEZ is willing to transfer its experiences. He realized then one unchangeable fact that EPS needs government’s approval for all important business steps, while ČEZ does its business on market conditions that dictates business moves. He explained that a company can spread over borders of country it does business in but it must manage enough profit to finance the expansion and that EPS should follow ČEZ’s old model.

Source Akter/Serbia Energy Magazine