Thursday, 17 April 2014

Albanian developments won't impact ČEZ strategy

28 January 2013

Prague, Jan 27 (CTK) - Albanian operations will not influence strategy of Czech energy group CEZ and the group will now focus on renewable energy sources in Poland and Germany and on nuclear power in the Czech Republic, CEZ board deputy chairman and CFO Martin Novak told CTK.

CEZ has lost control over its distributing company CEZ Shperndarje in Albania.

Novak said the group did not have any expansion plans regarding distribution networks on the Balkans.

"A year and a half ago, we had made an analysis of the energy market and its development in the light of massive renewable energy development in Germany," said Novak.

"The strategy reckoned with renewable energy development in three primary countries, namely Germany, Poland and Romania," Novak said in the interview with CTK.

CEZ completed the Fantanele and Cogealac wind farm project in Romania last year, the installed capacity at 600 megawatts.

Albanian operations will have no impact on the company's development as CEZ is now eyeing markets in Germany and Poland, that is markets with a quite different geographical and regulatory environment, said Novak.

The Albanian regulator has in the past week withdrawn a power distributing licence from CEZ Shperndarje and also appointed a state administrator for the company.

Business environment in Albania, prices set by local authorities and the fact that CEZ Shperndarje has quickly changed into a loss-making company, all this creates a good position for an arbitration case, said Novak.

In the arbitration, CEZ will be seeking damages for failed investment in the Albanian distribution network. Media have reported that CEZ's total losses amount to around EUR200m (Kc5bn) which includes the initial investment, services to the subsidiary and invoices for electricity supplies from the parent company. This is, however, the maximum amount, Novak said, adding that any sum CEZ gets in compensation will cut its losses.

CEZ is unable to use a guarantee of EUR60m it had negotiated for its unit at the World Bank. Only CEZ Shperndarje, now controlled by the Albanian state, can draw the money.

Novak said CEZ was not considering any personnel changes at the moment in connection with Albanian developments.

CEZ entered the Albanian market in 2009 purchasing 76 percent of the local distributor for around EUR102m. Last year it got into trouble as the state regulator almost doubled prices paid by CEZ Shperndarje to the state-owned energy company. At the same time the local authorities made it impossible for the distributor to reflect the price hikes in the end-price.

CEZ also had problems with payments from Albanian customers. The situation came to a peak last autumn when the distributor cut off state-owned water utilities from power to make them pay for power supplies worth EUR38m. A Tirana court, however, ordered CEZ to resume power supplies.

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