Event

Albania’s power regulator revoked the distribution license of the privatised Czech energy distribution company CEZ, and placed it under administration with a new state-appointed director. The move follows a long-lasting dispute over issues including power imports, price and debt between CEZ and the state-owned enterprise, which controls all production. CEZ’s margins were under pressure as the regulator raised the prices at which electricity was sold by the generation company but maintained the final consumer tariffs. The dispute is likely to go to international arbitration and could negatively affect the traditionally friendly relation with the Czech Republic.

Impact on country risk

The de facto nationalisation of CEZ would damage the already poor investment reputation of Albania, which is characterised by a weak legal framework and a relatively high level of corruption. Any reform to enhance the investment climate is unlikely to be adopted before the legislative election scheduled in June 2013. The latest legislative elections of 2009 were followed by protests and political deadlock for almost three years. In this context, ONDD is likely to downgrade the risk of expropriation and government action.

Analyst: Pascaline della Faille, p.dellafaille@credendogroup.com