Power giant ČEZ faces major losses in Albania

Czech state-controlled power major hit by Albanian tax hike and price freeze, ready to appeal to World Bank

Daniel Beneš was Roman’s right-hand man at ČEZ | na serveru Lidovky.cz | aktuální zprávy Daniel Beneš was Roman’s right-hand man at ČEZ | foto: © ČTKČeská pozice
Daniel Beneš was Roman’s right-hand man at ČEZ

Prague-listed power major ČEZ is set to lose up to Kč 10 billion over the next three years from its investment into the Albanian power distribution company as a result of a 91 percent hike in tariffs imposed by the government in Tirana, non-payment of bills, and loses from the network, the Czech daily Lidové noviny (LN) reported Wednesday.

State-controlled ČEZ paid €102 million (approximately Kč 2.8 billion) for a 72 percent stake in the Albanian power distribution monopoly Shpërndarje in 2009. According to LN, the 91 percent tariff hike introduced by the Albanian state power company at the end of last year is set to cost ČEZ around Kč 3.5 billion over the next three years. The projected loss is also based on the fact that Shpërndarje has not been allowed to raise power prices for end consumers.   

ČEZ says it faces further losses of up to Kč 6.5 billion as a result of the Albanian state power company and the country’s government refusing to allow distributor Shpërndarje to pass the cost of loses from the distribution network — caused by technical shortcomings and theft — and unpaid debts, to consumers.

The Czech power major says it is now preparing to appeal to the World Bank which provided a guarantee for its Albanian investment and if successful would receive around €60 million in compensation. ČEZ would then have to launch arbitration proceedings against the Albanian state to recuperate the remainder of the loss on its investment and for compensation on loss of profits.

“In a legal dispute we will demand compensation for damages which could in the coming years potentially arise unless there is a resolution of the situation concerning regulation of electricity prices,” ČEZ spokeswoman Eva Nováková told LN, adding that the firm hopes an amicable resolution will be found out of court.  

CEO of ČEZ Daniel Beneš accompanied Czech Prime Minister Petr Nečas (Civic Democrats, ODS) on a visit to Albania in April where Albanian PM Sali Berisha assured him his government was keen for ČEZ to be successful in Albania but the that a solution suitable for both ČEZ and Albanian consumers must be found.