January 21, 2013 / 2:45 PM / 6 years ago

UPDATE 2-Albania revokes Czech CEZ's distribution licence

* Power board to seek damages from CEZ

* Places unit in temporary administration

* CEZ to seek international arbitration (adds details, regulator comment)

By Benet Koleka

TIRANA, Jan 21 (Reuters) - Albania’s power regulator has revoked the distribution licence of Czech utility CEZ, holding it liable for damages for importing insufficient electricity and not investing in the Balkan country’s power grid.

The ERE board’s 5-0 vote to revoke the licence of CEZ’s loss-making local unit, CEZ Shperndarje, is the latest twist in a long-running battle between central Europe’s biggest utility and Albania over issues including power imports, prices, ownership and debts.

ERE Chairman Sokol Ramadani said that CEZ had breached its licence mainly by failing to limit electricity losses in the distribution system, which led to the company’s failure to import the required amount of power under Albanian law.

The regulator did not specify the amount it would seek in damages from CEZ, but the Albanian government has estimated the cost of the company’s failures at $1 billion.

“The main thing is they could not control the power losses and that’s the main problem ... That means they could not control debt and they could not control problems in the industry,” Ramadani told Reuters after the hearing.

In November CEZ trimmed its 2012 profit outlook because of the Albanian operation’s losses and said that an exit from the Balkan state was the most likely solution to its problems.

The utility put its 76 percent stake in the loss-making Albanian distribution unit up for sale a month ago, but the government has vowed to block the deal and hinted that it wanted to buy the business for one euro ($1.33).

CEZ criticized the ERE’s decision and said that it would seek international arbitration.

“Such a move is in violation of local laws and CEZ will file a formal protest. At the same time, the company will take initial steps toward international arbitration,” it said.

The regulator also used Albania’s energy law to put the CEZ unit in temporary administration and appointed a new manager to oversee the business during the dispute with the company.

CEZ Shperndarje is under contract to import enough energy to make up for network losses above 24 percent last year in the hydro-dependant Balkan nation.

It failed to import power at times during the dispute last year, and in November the Czech company cut off power supply to a number of utilities to collect debts worth 38 million euros. ($1 = 0.7524 euros) (Additional reporting by Jason Hovet; Writing by Michael Kahn; Editing by Mark Potter and David Goodman)

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