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Parliament prepares to privatise medium-capacity hydropower plants - International Law Office

International Law Office

Energy & Natural Resources - Albania

Parliament prepares to privatise medium-capacity hydropower plants

August 01 2011

Introduction
Hydropower Plants Privatisation Law
Public auction procedure for privatisation of state-owned shares


Introduction

In Albania, the privatisation of hydropower plants is not a new challenge. During 2001 and 2002, Albania began to privatise a number of small, low-capacity hydropower plants which were constructed during the communist era to furnish small communities with electricity. Since most of the plants were out of production and required immediate renovation, their privatisation (some were entirely sold and some awarded through concessions) did not cause too much concern and was seen as a relief. However, this was not the case for the five medium-capacity hydropower plants which Parliament recently decided to privatise.

At the beginning of 2011 Parliament raised the idea of privatising state assets, including some medium-capacity hydropower plants. This sparked a heated public debate among the media and political players. Those in favour of privatisation based their support on the fact that these plants are old and need renovation, which would impose a financial burden on the state; private ownership would remove this financial burden, accelerate their development and increase their production. Opponents argued that hydropower plants are a national asset which belong to the Albanian people; they should not be sold, but rather let to the state as a permanent property to be inherited from generation to generation, as a constant means of producing public service and income. They proposed a national referendum on the issue. However, with the passage of the Hydropower Plants Privatisation Law (Law 10 430) on June 9 2011, Parliament has voted for the plants' privatisation, but also opened the door for a concession.

Hydropower Plants Privatisation Law

Through the Hydropower Plants Privatisation Law, Parliament approved the creation of three new state-owned companies, which will have as their main assets five hydropower plants in the Albanian territory (joint stock company HEC Ulëz-Shkopet for the Ulëz and Shkopet hydropower plants; joint stock company HEC Tirana Lanbregas for the Tirana (Lanabregas) hydropower plant; and joint stock company HEC Bistrica 1 and 2 for the Bistrica 1 and 2 hydropower plants). These three companies have been created with a view to their future privatisation. At the beginning of the process, all three companies will be 100% state owned by the Ministry of Economy, Trade and Energy.

According to the new law, the privatisation does not include the water basins for these hydropower plants, which will remain state public property. The companies will have the right to use only respective water resources, as regulated by the law. The law opens up two different possibilities for the plants:

  • transfer of the share ownership rights to third parties; or
  • development of the plants through a concession agreement.

A concession agreement would partially satisfy the opponents to privatisation, since - even if privately used - the plants would remain national property.

An international well-known evaluator will be appointed and contracted as part of an international contract for assistance in the privatisation, and the final form of privatisation will be based on his or her recommendations. In case of a transfer of ownership rights, the privatisation structure for the capital shares of these companies shall be such that 100% of the capital shares will be offered to strategic investors through an open international auction. The Council of Ministers will decide how the income received through the privatisation process will be used and how employees who become unemployed as a result of the privatisation process will be treated.

Public auction procedure for privatisation of state-owned shares

Public auctions in Albania are regulated by the Public Auction Law (9874/2008) and the Public Auction Regulation (Council of Ministers Decision 1719/2008). According to Article 3(1) of the Public Auction Law, a public auction is a sale procedure for public goods in the form of a public offering on the basis of the highest price offered. The law also regulates the transfer of state-owned participations in joint stock companies. Traditionally, the Ministry of Economy, Trade and Energy is the competent authority in charge of implementing and administering the sale of state-owned shares in a company.

According to Article 17 of the law, the possible auction procedures for the sale of state-owned shares are as follows:

  • the open procedure;
  • the restricted procedure; and
  • the negotiated procedure.

All three procedures must include prior publication of an auction notice and must be governed by the following principles:

  • non-discrimination and equality of treatment between and among bidders;
  • transparency; and
  • confidentiality.

The chosen procedure under the Hydropower Plants Privatisation Law is the open procedure, which is the main one-phase auction procedure applied in Albania (see Article 18 of the Public Auction Law). Pursuant to the open procedure, following publication of the auction notice in the Public Procurement Bulletin and an EU newspaper and on the Public Procurement Agency's website, all interested bidders may submit their offers to the contracting authority, which will evaluate and compare the offers in order to select the winner.

Determination of sale's target
The contracting authority will identify the target. Following this, the competent authority will immediately issue an auction order, which must indicate, among other things, the initial value of the auction. According to Paragraph 2 of the Public Auction Regulation, the initial value of a public auction consists of the actual monetary value of the target. A special evaluation commission assisted by duly appointed external advisers will officially assess the initial target value (Paragraph 2 of the regulation).

The contract will be awarded to the bidder that offers the highest price during the public auction procedure and, for example, the most appropriate infrastructure, depending on the specificities of the auction. The contracting authority will evaluate and compare the submitted offers in order to select the successful bidder. On the basis of the offers, the contracting authority will draft a final classification, which will be communicated at a due time to the bidders.

For further information on this topic please contact Ajola Xoxa or Enklid Milaj at Tonucci & Partners by telephone (+355 4 2250711), fax (+355 4 2250713) or email (axoxa@tonucci.it or emilaj@tonucci.com).


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