ČEZ settles with Albania

 EU News   
    Published: 24 June 2014
    Written by Czech News Agency


Although Czech energy provider ČEZ has settled its problems with Albania, issues remain elsewhere in the region, as a decrease in local subsidies in Romania has the company considering selling part of its wind farm.
Czech power utility reaches agreement with Balkan nation after row over license

Prague, June 24 (ČTK) — Czech state-run power utility ČEZ and Albania, which revoked ČEZ's distribution license last year, have reached a settlement agreement under which ČEZ will be paid back 100 million euros (about 2.75 billion Kč) in annual installments by 2018, spokeswoman Barbora Půlpánová told the Czech News Agency today.

The sum corresponds roughly to ČEZ's initial investment in the acquisition of Albanian distributor ČEZ Shperndarje.

The agreement also includes terms of ending the dispute between ČEZ and Albania before the international arbitration court, Půlpánová said.

Under the agreement, ČEZ will receive compensation of 95.5 million euros as payment of receivables and transfer of shares in ČEZ Shperndarje, in addition to the 4.5 million euros it has already received.

According to the agreement, several conditions have to be fulfilled on the part of Albania, namely a provision of a bank guarantee, an approval by the Albanian government and ratification by the Albanian parliament.

On the part of ČEZ, the agreement is subject to approval by the firm’s governing bodies.

ČEZ will not pay anything to Albania, Půlpánová said.

The agreement was signed under the supervision of the Secretariat of the Energy Community in Vienna.

"I consider the negotiated agreement a success, because we will receive funds significantly earlier, and we will not need to wait several years for results of the arbitration proceedings. The agreement is designed so that financial compensation will be guaranteed by a renowned European bank," said Daniel Beneš, ČEZ CEO and board chairman.

"ČEZ will lose about 2 billion Kč in the Albanian transaction, but the receipt of 100 million Kč [around 2.75 billion Kč] and a fast ending to the dispute is probably better than international arbitration proceedings, which is usually a long and relatively costly process with an unguaranteed result," Jiří Gavor, an energy expert of the ENA company, said.

"It is clearly positive news. An agreement is better than arbitration. It is not certain whether Albania would abide by the result of the arbitration if it lost the dispute," J&T analyst Bohumil Trampota said.

Cyrrus company analyst Marek Hatlapatka said he viewed the agreement slightly positively. "ČEZ will not have to undergo arbitration proceedings, which might drag for an unpredictably long time with an uncertain result. It is therefore a relatively positive ending to the disputable investment of the company in Albania," Hetlapatka said.

According to BH Securities analyst Petr Hlinomaz, it is a question whether Albania will be able to pay the installments entirely, "The European union may help here. In this context, it would be a success if ČEZ received the first installment this year already," Hlinomaz said.

ČEZ entered Albanian market in 2009, when it bought 76 percent in ČEZ Shperndarje for about 102 million euros (about 2.8 billion Kč).

In January last year, the Albanian regulator revoked ČEZ Shperndarje's license accusing the company of having failed to secure electricity imports and to invest in the distribution network. A state administrator was installed at the helm of the company, as a result of which ČEZ lost control over the distributor and virtually left Albania.

In May last year, ČEZ launched an international arbitration dispute with Albania on the basis of the Energy Charter Treaty, which both the Czech Republic and Albania ratified and which sets the rules of international investments protection in the energy industry.

In the arbitration proceedings, ČEZ demanded damages for Albania's failure to protect its investment in ČEZ Shperndarje.

According to information made public earlier, the Czech Republic was ready to block the granting of the EU candidate country's status to Albania over the dispute between ČEZ and the Albanian state.

Besides Albania, ČEZ also has problems in other countries in the Balkans in which it has invested. In Bulgaria, it faces a fine and a withdrawal of a license. ČEZ nevertheless said in mid-May the shortcomings for which it was criticized by the Bulgarian energy regulator DKEVR were exceptional cases that could be resolved.

In Romania, ČEZ is considering the sale of a part of its wind farm owing to a decrease in local subsidies for renewable sources. Beneš said at the beginning of June that ČEZ does not plan to develop further business in the Balkans.

ČEZ is the biggest Czech energy company. The state holds about 70 percent of its shares via the Finance Ministry.

The company's net profit last year fell 12.3 percent to 35.2 billion Kč.

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