Sunday, 20 April 2014

ČEZ to protest against revoking of its unit's licence in Albania

22 January 2013

Prague, Jan 21 (CTK) - Czech power utility CEZ will file a formal protest and take steps toward international arbitration against Monday's decision of Albania's power regulator to revoke license of CEZ's distribution unit in the country, CEZ Shperndarje, CEZ spokeswoman Barbora Pulpanova told CTK.

According to CEZ, these steps are in violation of the local legislation, Pulpanova said.

The Albanian regulator accused CEZ of failing to secure electricity imports and not investing in Albania's power grid.

Along with its decision to revoke the business license, the Albanian regulator also appointed an administrator who should take over the company’s management.

The existing owner, the CEZ Group, thus loses all shareholder rights, Pulpanova said.

"CEZ in principle opposes this conduct, with decisions on the company’s management and operations to be done solely by the regulating authority, and considers it incompatible with any European standards but also with any Albanian laws. Therefore, the company is going to take legal action immediately and notify the Albanian Government of its intention to initiate an international arbitration," Pulpanova said.

The CEZ Group entered Albania in 2009, buying 76 percent in the local distributor for about EUR102m (about Kc2.6bn at the present exchange rate). It got into problems last year after Albania's regulator nearly doubled the prices CEZ Shperndarje pays to the state-controlled power producer. However, the distributor was not given the possibility to raise prices for end customers at the same time.

In addition, CEZ Spherndarje is grappling with poor payment discipline of Albanian customers. In November, CEZ Shperndarje disconnected electricity supplies to Albania's state-owned water utilities that owed it EUR38m (Kc960m) in total for power supplies. A court in Tirana ordered it to hook the utilities to the grid again.

In December last year, the Albanian government accused CEZ of owing it $1bn (about Kc19bn) for damage it had allegedly caused in the country. CEZ has expressed doubts about the debt saying the Albanian government has not explained what the debt figure was composed of.

According to rating agency Moody's, the marred investment in Albania may cause a loss of up to Kc5bn to the CEZ Group.

CEZ CEO Daniel Benes said in January that the final loss would be probably lower. It would climb to Kc5bn if CEZ did not receive any compensation for damage in arbitration, he said.

In November last year, CEZ also asked for compensation from the guarantee that the World Bank had provided to it, arguing that Albania broke the power distributing rights of CEZ Shperndarje.

CEZ had negotiated this guarantee before entering the Albanian market to protect its investment in the unconsolidated business environment.

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