Czech PM warns Albania over CEZ fight

By bne IntelliNews January 23, 2013

bne -

Albania's move to revoke the distribution licence of Czech utility CEZ's local unit is a "very negative" signal for relations between the countries and raises questions about the Balkan country's commitment to EU entry, Czech Prime Minister Petr Necas insisted on January 22.

"The action taken by Albanian authorities towards CEZ is a big disappointment," Necas said in a statement, in which he also vowed to back the company's efforts to seek damages. Following suggestions by analysts that the move will definitely hit sentiment towards Albania as an investment destination, the Czech PM sought to twist the knife by claiming it also raises questions over Tirana's EU ambitions.

"The Czech Republic cannot ignore the approach toward a Czech investor in the context of Albania's integration aspirations," Necas said. "For membership in the European Union, Albania must prove that it has rule of law, that it meets fundamental rules that shape standard market environment."

CEZ said earlier in the day that it will seek international arbitration, after Albania's power regulator ERE on January 21 followed through on its threat to revoke the licence. The move was the latest twist in a long-running saga that has seen CEZ at loggerheads with Tirana practically ever since it bought the distribution company - with the backing of the World Bank - for €102m in 2009.

Albania claims CEZ failed to invest in order to limit electricity losses in the distribution system, and failed to import the required amount of power needed to meet the percentage of Albania's power deficit agreed in the licence. CEZ counters that it has been forced to run the company at a loss due to a hike in wholesale prices from the state-owned generator, while not being allowed to raise consumer tariffs. Furthermore, many households and businesses, both state and private sector, simply don't pay their electricity bills.

Meanwhile, due to ERE's additional decision to immediately put CEZ Shperndarje into administration, the local media reports that CEZ may struggle to draw the €60m guarantee on its purchase of the company, for which it was reportedly to have applied in December.

CEZ chairman Tomas Pleskac said that the guarantee can only be drawn by the Albanian unit, according to CTK, noting that the Czech company has lost control of the subsidiary. "The powers of CEZ Shperndarje's administrator are so broad that it would have to be him [to] apply for the guarantee," Pleskac told online daily Insider. "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."

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