Electricity Distribution Company of Albania (OSSH)

cancelled

On March 11, 2009, the Ministry of Economy, Trade and Energy signed the privatization contract with CEZ Group [Czech Republic] for the divestiture of a 76% stake in Electricity Distribution Company of Albania (OSSH). OSSH is the sole electricity distribution company in Albania, providing electricity to approximately 1 million customers, or one-third of the Albanian population. Prior to the sale, the state-owned, vertically-integrated national power corporation (KESH) was unbundled into three separate legal entities: a generation company, a transmission system operator and a distribution system operator (DSO). OSSH was established as the DSO in June 2007 and was granted a single distribution license with a term of 30 years, as well as a single Retail Public Supplier (RPS) license with a term of 30 years, for the entire country. The IFC advised on the unbundling of KESH, as well as on the structuring of the OSSH divestiture and on the bidding process. The divestiture followed a competitive bidding process. In June 2008, the Albanian government prequalified four companies - Enel [Italy], EVN [Austria], CEZ [Czech Republic] and Energy Steiermark [Austria] - to take part in the tender to purchase a 76% stake in OSSH. In September 2008, the deadline for final bids was extended from September 15 to September 30. CEZ and Enel submitted final bids, while EVN and Energy Steiermark did not. However, Enel’s offer was not considered because the government stated it did not meet the technical requirements of the tender. On October 1, 2008, CEZ Group was confirmed as the winner of the tender, offering to pay EUR102 million (US$141.78 million) for a 76% stake in OSSH, to invest a further EUR425 million in OSSH, and to pay OSSH's outstanding debt of 15.6 billion leks (US$153.4 million). Following the announcement of CEZ’s winning bid, the government and CEZ entered into negotiations to finalize the privatization contract. Under the privatization contract, CEZ was to invest EUR 200 million (US$278 million) over five years in OSSH. The contract was ratified by the Albanian parliament in April 2009. The World Bank Board of Directors approved on May 5, 2009, a EUR60 million (US$78 million) Partial Risk Guarantee (PRG) for the divestiture. The PRG backstops the obligation of the government to compensate OSSH in the event that the energy regulator or government fail to implement the regulatory framework agreed as part of the privatization contract. The availability of the PRG was a precondition to the effectiveness of the OSSH privatization. The IBRD guarantee expires in January 2016. CEZ AS, the Czech Republic’s largest power producer, agreed with the Albanian government to settle a dispute over the revocation of its distribution license in the country in 2013. Albania will pay CEZ 100 million euros ($136 million) by 2018 in yearly installments, an amount roughly equal to CEZ’s initial investment, the Prague-based company said today in an e-mailed statement. Capex 2011 from CEZ AR http://www.cez.cz/edee/content/file/investors/2011-annual-report/VZ2011aj.pdf