Privatization of the Power Distribution System Operator (OSSH) Partial Risk Guarantee

closed

The objective of the Privatization of the Electricity Distribution System Operator (OSSH) Partial Risk Guarantee (PRG) Project for Albania is to facilitate the privatization of OSSH in the context of a new regulatory framework. The project will be considered successful if: 1) the transaction is closed and the strategic investor takes over OSSH; and 2) if the new regulatory framework is implemented as agreed for the period of the PRG coverage. The PRG will backstop the Government's debt obligation to a commercial bank that has, on behalf of the Government, paid under a Letter of Credit (L/C) that may be drawn by the privatized OSSH in specified circumstances. This will be the second PRG to be provided in support of a power distribution privatization transaction and this use of the PRG was developed specifically to enhance and facilitate the privatization and concessioning of infrastructure and public service utilities. Access to reliable electricity is a key driver of economic growth and a direct means of reducing poverty because it improves the productivity of households and enhances the delivery of social services. The successful privatization of electricity utilities, a key component of reforming energy markets, is therefore a priority for the governments of many developing countries and transition economies, as they seek to improve efficiency and reliability, and attract private investment in the sector. In the Bank's experience, a satisfactory privatization of power distribution utilities should precede efforts to attract private investment to other parts of the sector; as cash flows arise mostly from distribution.