World Bank predicts "divorce" for CEZ and Albania

By bne IntelliNews November 2, 2012

bne -

The World Bank waded into the row between Czech utility CEZ and the Albanian state on November 1, saying that the Czech utility could walk out of the country within the next few months after it failed to turn around its power distribution monopoly.

CEZ said on October 31 that it's considering exiting its Albanian distribution business because it hasn't been able to resolve its dispute with the government over tariffs and extraordinary taxes. The power company's dispute with the country's regulator centres on an order to the Czech utility to pay state-owned power producer KESH higher tariffs, while not allowing CEZ to raise the prices it charges customers.

The dispute only escalated in the summer, when Tirana slapped an extraordinary tax of €23m on CEZ Shperndarje, pushing the subsidiary into a loss.

Jane Armitage, the World Bank's director for Southeast Europe expressed concern that the distribution monopoly and the government no longer trust one another. She reported that both have now engaged lawyers and appear to be "looking at an exit," reports Reuters.

"There have been a lot of effort to try and get an agreement between CEZ and the government, but I think at this point it is a divorce that is on the cards in the next few months," Armitage told reporters.

Reviewing CEZ Shperndarje's three-year experience, Armitage shared out responsibility for the problems. She criticized CEZ for its inability to reduce technical and commercial losses, and the refusal of government agencies and consumers to pay their power bills and accept tariff increases.

The World Bank is involved as guarantor of money used to revamp Albania's sclerotic electricity sector. CEZ board member Tomas Pleskac said CEZ has prepared documentation to activate a €60m guarantee it received from the World Bank when it bought the Albanian OSSH power distributor.

Armitage said the World Bank would support the government in the next few months to finance electricity imports and also to continue reforms to put the sector on a sustainable basis. "That is the top priority for us. We are working on a $100m dollar loan to the country for the energy sector," she added.

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