ČEZ Group Maintains Positive Balance Abroad, Observes Fluctuating Results in Albania Only

Due to the excellent performance of its foreign acquisitions, ČEZ has already recouped 71% of its investment. Despite the impacts of the financing crisis in the countries where ČEZ has established presence, ČEZ has been successful at fulfilling its target financial indicators and implementing key changes in line with its plans. Albania poses the only exception; due to its unstable business environment, it is the only country that has not reached the planned return on investment.
“Our foreign companies have significantly contributed to the good results of the ČEZ Group. We have distributed CZK 8.8 billion in dividends, and we plan to distribute another CZK1.3 billion by the end of the year,” says Tomáš Pleskač, Distribution and Foreign Assets Division Director. The highlights of 2012 certainly include the launch of additional hydroelectric power stations in Turkey (with their installed capacity totaling 366 MW already). In the same country we also continue to build a combined cycle power plant in Egemer. We have launched the photovoltaic power plant in Oresec, Bulgaria, and developed the Ecowind wind park projects in Poland. Since October, ČEZ has been operating the largest continental wind park in Europe in Romania, with its full installed capacity of 600 MW to be connected to the grid by the end of the year. It is worth mentioning that, in terms of its foreign assets, the ČEZ Group wants to focus in particular on investing in renewable energy sources, which is consistent with its strategy. As for distribution, ČEZ primarily focuses on improving its productivity, which means optimizing headcounts and reducing grid losses. In Bulgaria and Romania, these efforts have brought positive results. “Albania is the only exception; there we have tried to use all our prior experience in the Balkans but, unfortunately, due to unforeseeable interventions by the local authorities, this approach proved to be ineffective,” Pleskač explains.
“We are facing a truly non-standard business environment in Albania. Our team has been trying hard to resolve all issues in an utmost constructive manner. Nevertheless, the primary limit of our activities will always be our aim to protect our shareholders’ interests,” says Tomáš Pleskač and adds: ”At our yesterday’s meeting with Albanian Prime Minister Salim Berisha, we agreed to initiate discussions on a method how to resolve the situation at hand, including our potential withdrawal from the country.“
The Albanian acquisition represents less than one percent of all the investments of the ČEZ Group made between 2005 and 2011. All foreign acquisitions account for about one fifth of the total asset value. ČEZ owns significant energy assets in seven foreign countries, and except for Albania, all of them have been successful at meeting or even exceeding the planned return on investment.
History of ČEZ Group’s Expansion Abroad
The foreign expansion of the ČEZ Group started in January 2005 when, following a successful privatization tender, it acquired majority stakes in three Bulgarian distribution companies. In the autumn of the same year, ČEZ won a privatization tender in Romania and acquired a majority stake in the biggest Romanian distribution company, Electrica Oltenia. In 2006, the ČEZ Group enlarged its foreign asset portfolio with three power generation assets, the Elcho and the Skawina power plants in Poland, and the Varna power plant in Bulgaria. A year later, the company’s most significant acquisition of the year was its partnership with MOL, a Hungarian oil and gas corporation, aimed at building gas power plants. In 2008, ČEZ acquired a project for the construction of the largest European continental wind park in Romania. At the end of that year, ČEZ was chosen by the Slovak government as a partner for building a nuclear power plant in Jaslovské Bohunice. In 2008, ČEZ also successfully entered the Turkish market, and won a privatization tender for a distribution company in Albania.
History of ČEZ Group’s Presence in Albania
The situation in Albania got more complicated early this year when, due to the drastic drought of last year, the Albanian state-owned company of KESH had to import power from abroad for much higher prices, which brought it on the verge of bankruptcy; the company would not have survived without receiving help from the Albanian Government. The local Government tried to resolve the situation early this year with a decision unprecedented in Europe: All costs were placed on the shoulders of the foreign investor, ČEZ Shperndarje. Therefore, as of January 1, 2012, the local regulator ordered that the price charged to the foreign investor for power taken from KESH should be 91% higher. Following intensive negotiations, this negative impact could be partially alleviated by the regulator’s new decision to reduce the price of input power supplied by the KESH state-owned power plants from 2,830 to 2,200 ALL/MWh, which lowered the year-on-year price growth from 91% to 49%. Furthermore, a study was approved that determined the initial value of bad debt. However, the Albanian tax authority’s order imposing a penalty of ALL 4 billion (approx. EUR 28 million) for outstanding taxes and penalties and another ALL 430 million (approx EUR 3 million) for failing to meet the agreed electricity import levels has brought yet another turn in the matter. In early October, the ČEZ Group changed the staffing of the Supervisory Board and the Board of Directors of ČEZ Shperndarje, replacing the original personnel with independent experts in order to calm down the heightened style of negotiations.

energjia.al, 01.11.2012