CEZ nationalized again, Albania pays to the Czech Republic 95 million Euros

CEZ nationalized again, Albania pays to the Czech Republic 95 million Euros

IBNA Special Report

Tirana, June 24, 2014/Independent Balkan News Agency

Power distribution company CEZ, the only one in Albania for the sale of power supply to consumers, businesses and state institutions, has been nationalized again. Albanian authorities appeared before the media today to confirm that a deal was struck with the Czech authorities. The Albanian side will pay to the Czech side 95 million Euros. Based on the deal, the parties withdraw from every further financial or legal claim. The Czech side withdraws from the arbitrage process, started in May 2013 based on the rules of UNCITRAL and on the Energy Treaty Charter.

The Agreement and financial terms

CEZ paid to the Albanian government 103 million Euros in 2009 to purchase 76% of shares at the distribution company, where the state remained an owner of the remaining part. From the start, until the end of its work, CEZ was at the focus of the discontent  of Albanians. Like in many other countries of the East, they too complained about over inflated bills, poor service, lack of power supply, collective penalization, unjustified cut outs, etc. In many cases, there were also destroyed houses and fire victims due to electrical defects, something that put CEZ at the center of accusations from the damaged households. CEZ publicly declared that it didn’t recognize any damage and that it didn’t pay damages. In January 2013, Power Regulatory Authority concluded that the Czech company could no longer hold the distribution company and decided to suspend its license. But earlier, CEZ had announced in important international media the sale of its shares in Albania.

Moreover, CEZ took Albania to the International Court of Arbitrage claiming 200 million Euros.

In December 2013, the new government launched negotiations for a “friendly settlement”, brokered by the Secretariat of the Energy Community.

Minister of Energy, Damian Gjiknuri said today: “The final solution of the dispute with CEZ not only clarifies the legal status of the company, but it also gives way to investments in the sector of distribution left to collapse due to poor management and lack of investments”.

According to him, “the status quo until the ruling of the Arbitrage was a dangerous option, as in the current situation, the company is accumulating losses amounting to 150 million Euros a year and the energy sector would continue to lead the country and state budget to a financial collapse”.

Gjiknuri said that the Czech side withdraws from the amount of 103 million Euros paid for the purchase of the shares in 2009 and from any other financial claim, while adding that the agreement includes “immediate transfer to the Albanian state of the 76% of shares owned by CEZ a.s”.

“The new distribution company, now controlled by the Albanian state, commits to pay to the Czech company an amount of 87.1 million Euros. This amount was agreed to be paid until 2018, with a total value of 7.9 million Euros worth of interest rate”, declared Gjiknuri.

Minister of Finance, Shkelqim Cani said that the total sum amounts to 95 million Euros. He assured that the state budget will not be burdened. “This money will be paid year after year by CEZ company and not the state budget”, said he.

According to the government, the settlement of the dispute with CEZ gives way to the reformation of the sector and investments, which up until now have been blocked due to the lawsuit with the Czech company.

Energy Secretariat: The agreement was successful

The Vienna based Energy Community Secretariat, in the quality of institution that has brokered negotiations between the Czech company and the government, reacted today over the Albanian-Czech deal. The vice director of the Secretariat, Dirk Bushle, has considered the deal as the most rational action possible.

“I’m convinced that the start and the finalization of these negotiations is done to serve the best interests of Albania and its power supply consumers”, says Mr. Bushle.

According to him, the years of negligence have left the Albanian energy sector in a very difficult position, with significant bills still unpaid, state owned companies in serious financial difficulties and a very low trust by investors.

In such situation, said Mr. Bushle, the settlement of the dispute with CEZ is the most rational action, as the expensive procedures of the Arbitrage, with an unclear outcome, would have created a long period of insecurity and instability.

A last minute deal

The deal was made public (photo) a few hours before the news that the EU granted Albania the membership candidate status. The Czech government had warned that it would use its veto if the Albanian side didn’t strike a deal with the Czech side for the future of CEZ distribution.

Officially, the governments of the two countries deny the relevance of the deal with the status.

Meanwhile, the deal has serious implications on the Albanian economy and especially on CEZ Distribution. It must pay CEZ 95 million Euros over a period of four years.  Those who will be damaged will be Albanian citizens, because the government has warned that there will soon be an increase in the price of power supply. /ibna/