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Prague, Czech Republic (UPI) Jan 25, 2013
Prague takes a dim view of Albania's decision to revoke the license of Czech utility CEZ to operate its electric grid, Czech Prime Minister Petr Necas says.
Necas issued a statement Wednesday warning the move by Albanian regulators will hurt Tirana's chances of joining the European Union and gave the government's full backing to CEZ's decision to seek financial arbitration over the dispute, which the company says will cost it more than $250 million in lost investments.
"I see the removal of a license from CEZ, the largest Czech investor in the region, by the Albanian authorities as a very negative signal for the traditionally very good and friendly relations between the two countries," the prime minister said.
"The approach of the Albanian authorities to CEZ is a great disappointment."
The Czech company -- the largest utility in Central and Eastern Europe -- saw the license of subsidiary CEZ Shperndarje stripped by the Albanian regulatory agency ERE Monday after months disputes over its performance in the country.
CEZ indicated Monday it would lodge a formal protest against the decision and take the initial steps to seek international arbitration.
Necas said the decision shook Prague's faith that Albania is "a state that respects the law and a healthy investment environment, including protection for foreign investment."
Doubts about the safety of business investments in Albania will damage its hopes of EU accession, he warned.
"For membership in the European Union, Albania must show that it is a state which respects the rule of law and observes the basic rules which govern the standard market environment," Necas said.
CEZ, he added, "has my full support in any claim for damages which it has suffered through the approach of the Albanians," but he also said it's important for the company's leaders to "review their experience from this risky investment, to draw conclusions for the originators of the project and to avoid similar investments in future."
CEZ entered the Albanian market in 2009, buying a 76 percent stake in the state-owned electricity distribution grid for $135 million and followed that with an additional $133 million for upgrades.
The problems started in earnest last year when the state-owned electricity producer from which CEZ Shperndarje was buying power hiked its wholesale prices by 100 percent, but regulators ruled it couldn't pass the hikes along to consumers, thus causing immediate losses, Radio Prague reported.
Another big challenge for the Czech company was convincing Albanian consumers to pay for their consumption of something that many in the country regard as a natural commodity and take for granted, the broadcaster said.
For its part, ERE claimed CEZ didn't measure up to its requirements in running the grid and so was in violation of the conditions of the agreement that had allowed it into the Albanian market.
The regulators cited collective power outages, with the final straw coming when CEZ cut off power to water utilities that had unpaid bills, leaving more than half of the country without water service, the Albanian daily Tema reported.
That move led to a wave of popular indignation and prompted the government to obtain a court order forcing CEZ to restore power while resolving the conflict.
The newspaper said the CEZ license removal represented one of the greatest failures in the privatization of strategic enterprises ever in Albania.
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