Albania and CEZ resolve electricity distribution licence dispute

24 June 2014 12:03 Source:ICIS
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The Albanian government has reached a settlement agreement with Czech state-owned utility CEZ over a power distribution licence dispute, the two counterparties announced in separate statements on Tuesday.

The move is a step towards restoring investor confidence in the Balkan country’s energy sector.

“The settlement agreement resolves all claims between the CEZ Group on the one hand and the Republic of Albania on the other hand relating to CEZ’s investment in CEZ Shperndarje and the Albanian energy sector,” the statements said.

In another statement CEZ disclosed that it will receive almost €100m by 2018 from Albania - an amount similar to the initial investment CEZ made when purchasing the Albanian distribution company.

Dispute background

CEZ Shperndarje’s licence to operate in Albania was revoked at the beginning of 2013, after a dispute that dates back to early 2012 when a drought, which depleted hydroelectric stocks and output, forced Albanian state-owned power producer KESH to import power at much higher prices, with the costs of these imports then passed on to CEZ Shperndarje ( see EDEM 21 January 2013 ).

CEZ acquired 76% of the Albanian distribution network in 2009. The minority share is held by the Albanian government.

In May last year the Czech utility initiated arbitration proceedings against Albania, seeking compensation for losses incurred by CEZ Shperndarje ( see EDEM 16 May 2013 ).

The Albanian government managed to avoid prolonged and costly international arbitration with the help of the EU’s Energy Community, which has been a mediator during the negotiation process.

“Years of neglecting left the Albanian energy sector in a very bad shape, with an unsustainably high share of electricity not paid for, the state-owned companies in serious financial difficulties, and investor confidence alarmingly low,” said Dirk Buschle, deputy director of the Energy Community in a separate statement on Tuesday.

“In this situation, settling the dispute with CEZ was the only sensible move….Stability and the good reputation of Albania’s energy sector needed to be restored as an indispensable first step to turn the sector around,” he added.

Delays to the liberalisation of the Albanian electricity market were previously cited as harmful to investment in new generation capacity in the country ( see EDEM 4 April 2014 ). Irina Peltegova

By Irina Peltegova