Insider: ČEZ might not be able to draw World Bank's guarantee

Prague, Jan 22 (CTK) - Czech power utility CEZ might not be able to draw EUR60m (Kc1.5bn) from the guarantee the World Bank had granted to it for its enterprise in Albania, online daily Insider said Tuesday.

The guarantee can only be drawn by CEZ's distribution unit in Albania, CEZ Shperndarje, but CEZ has lost control over the distributor on Monday when Albanian authorities appointed an administrator over the company, Insider said.

"The powers of CEZ Shperndarje's administrator are so broad that it would have to be him who can apply for the guarantee," Insider quoted CEZ board chairman Tomas Pleskac as saying.

"We are analysing the situation from the legal point of view but we cannot rule out that we will not be able to draw the guarantee due to the lightning appointment of the administrator," Pleskac said.

According to Pleskac, Albanian authorities acted "surprisingly quickly" when appointing the administrator and entering his name in the Albanian register of companies.

In November last year, CEZ 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. A two-month period then started to run during which both parties should negotiate a solution to their dispute.

However, on Monday this week Albania's power regulator revoked CEZ Spherndarje's licence for power distribution in the country and appointed an administrator to take over the company’s management.

The regulator said CEZ had failed to secure electricity imports and had not invested in Albania's power grid.

CEZ reacted to the decision saying it would file a formal protest and take steps toward international arbitration.

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.

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 has been 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.

According to rating agency Moody's, the marred investment in Albania may cause a loss of about EUR200m to the CEZ Group.

Pleskac said Tuesday the loss should amount to EUR205m (about Kc5.2bn) at maximum.

CEZ wants to get part of the money back in arbitration proceedings.