Czech power company ČEZ has paid a price for drawing a line under its Albanian episode and is now looking away from the Balkans and to countries closer to home as the target for its future investment targets.
As the proverb goes ‘a bird in the hand is worth two in the bush.’ That’s the basic logic with which almost 70 percent state controlled power company ČEZ has closed its unhappy investment chapter in Albania.
Where some feared to tread, ČEZ bought up a 76 percent stake in Albania’s sole electricity distributor in 2009, albeit with some assurances from the World Bank that it would intervene if things turned sour.
Things did indeed turn sour through 2012 as electricity distributor ČEZ Shperndarje clashed with the country’s main state-owned electricity producer KESH over the price hikes it demanded for its power while the country’s energy regulator turned the screws on the raises that ČEZ could pass onto final consumers. The unhappy result was that ČEZ Shperndarje was making a loss on every kilowatt of power it sold. Bigger losses were of course incurred from the not unsubstantial amounts of electricity that were stolen direct from the grid in one of Europe’s poorest countries.
The energy regulator stepped in dramatically at the start of 2013 by removing ČEZ Shperndarje’s distribution licence and the company was effectively taken over by the state. The World Bank guarantees somehow did not come into play and so the long path of international arbitration proceedings was launched by ČEZ to get its initial investment of around 100 million euros back as well as the sizeable sums invested in the following years.
The dispute threatened to take on an international dimension with Prague making threats to block Albania’s moves to become an official candidate country for entry into the European Union if the ČEZ dispute was not resolved. Albania was officially ushered into the EU waiting room by European foreign ministers on Tuesday. The preliminary settlement announced that same day means that ČEZ will get back its investment though not much more. In fact, instead of the 5 billion crowns that
Czech bosses had at some stages talked about recuperating, the claw back sum will be a much smaller amount of around 3 billion crowns. The main merit of the deal is that the cash will be paid out over the following four years and a long drawn out arbitration is avoided. ČEZ also removes, albeit at some cost, one uncomfortable issue ahead of its general meeting on Friday cleared up. Finance minister Andrej Babiš has been breathing down the necks of bosses of the state-controlled power giant with criticism over past investments, in particular the Balkans episodes.
ČEZ boss Daniel Beneš defended the settlement and initial investment in the columns of the Czech business daily Hospodářské Noviny on Wednesday. Electricity sales were at one stage rising by 5 percent annually in Albania with the country gradually putting in place European corporate and regulatory rules, he said. The economic downturn meant though that that positive script had to be recast.
After similar bad experiences with regulators and governments in Bulgaria and ongoing problems with the return on its massive wind farms in Romania, Beneš says ČEZ is now ready to turn its back new investments in the Balkans. Instead it is looking to Poland and Germany and maybe even Slovakia. There are rumours that Italian power giant ENEL might soon opt to sell its 66 percent stake in dominant Slovak electricity producer Slovenské Elektrárne.
Beneš and other ČEZ bosses have often admitted that the company’s biggest mistake was not to bid for the Slovak company when it came up for sale eight years ago. But the Slovak power company, in which the Slovak state still has a third share, would be an ambitious acquisition even at the best of times.
Doris Grozdanovičová: the girl with the sheep in Terezín
Czech government sends Brussels explanation of why it has not taken in refugees
The rocketing career of SpaceX’s David Pavlík
Czech test finds inconsistent levels of product quality in different states
Czech Karolína Plíšková reaches number one in tennis world rankings