CEZ unit hires law firm to negotiate in dispute with Albania

Tue Oct 2, 2012 3:24pm EDT

Related Topics

* Albania angry with CEZ unit for not importing power

* Compensating for imports to hurt Albanian finances

TIRANA Oct 2 (Reuters) - The Albanian unit of the Czech utility CEZ said it would hire U.K.-based law firm Schindlers to negotiate with the Albanian government in a dispute over CEZ's failure to import power last month.

CEZ Shperndarje Sh.a. angered the government and the regulator ERE when it failed to import power in September, forcing the state-owned KESH power producer monopoly to use up its water reserves to supply CEZ Shperndarje.

CEZ Shperndarje holds a monopoly on power distribution to 1.1 million homes in Albania and is bound by law to use imports to make up for any power losses - from technical faults or theft - in its grid in the hydro-dependant Balkan nation.

"The company is seeking through (the hiring of Schindlers) to help defuse tension in the manner of communication and take the necessary steps to resolve the situation in Albania," CEZ Shperndarje said in a statement late on Tuesday.

CEZ Shperndarje described Schindlers as experienced strategic negotiators who would help end the dispute, which it said was of a legal rather than a business nature.

Compensating for the company's imports brought the level of water in KESH's hydro power stations just five metres above the stoppage point and could force the government to earmark a subsidy of up to $50 million to help KESH buy power this year, according to Albanian officials.

Three weeks ago, ERE slapped a fine of 430 million leks ($3.98 million) on CEZ Shperndarje, equal to 1 percent of the company's 2011 revenues.

Without providing a reason, ERE also ruled against a request by CEZ Shperndarje to mortgage its assets in order to receive a loan of 100 million euros ($129.35 million) from the European Bank for Reconstruction and Development and the World Bank's International Finance Corp.

In a warning shot earlier on Tuesday, Finance Minister Ridvan Bode said his ruling Democratic Party could call on parliament to press the ERE to make clear to CEZ Shperndarje that "meeting mutual obligations is indispensable."

Bode worries that subsidies for KESH will put a strain on the public debt, which is nearly 60 percent of gross domestic product. The IMF called on Albania earlier on Tuesday to keep public debt in check because of the risk to the country's macroeconomic stability.

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