i vendimeve të Qeverisë së Kosovës

Problems of privatization of the energy network in Kosovo

30-09-2011 14:31:37

The process of privatization of social enterprises is entering its final phase. The process of privatization of public enterprises, however, is in the initial phase. 500 social enterprises have been privatized and I cannot mention a single case as a success story of privatization process. The initial preparations for privatization of public enterprises leave no room for hope that the process will be managed in a better manner than the privatization of social enterprises. While the privatization of social enterprises was managed and lead by the Kosovo Privatization Agency (and its successor AKM), characterized by mixture of competences between the local and international representatives, the privatization of public enterprises is an exclusive competence of the Kosovo Government, which is a single shareholder of these enterprises. Altogether 32 enterprises are listed in the list of public enterprises. Eight of them are central enterprises and the rest are regional and local enterprises. Three of public enterprises are in the process of privatization. The Prishtina International Airport is already given for private management for a period of 20 years. PTK is in the final phase of privatization. So is the privatization of KEK, through two separated projects: privatization of generation and privatization of distribution and supplying.

Of all the public enterprises which are in the process of privatization, one of the most sensitive processes is the privatization of the Kosovar Electricity Distribution and Supply Company (KEDS). In most countries the network of electricity power is unique, and is almost impossible to create parallel networks, like you can create, for example, mobile telephone networks. For this reason, many countries, including countries that support the notion of free economy and the privatization of public properties, prefer to keep under state property the energy network, in order to avoid a private monopoly, which may later on lead towards an increase of energy price.

The process of privatization of energy distribution and supplying began with a government decision in October 2008. Soon the Privatization Committee was formed, consisting of five ministers, in charge of leading the process. In order to make the process easier and acquire better expertise, the Government hired the International Financial Corporation (IFC) as a consultancy. According to Government’s plan entitled “Economic Development Vision 2011-2014”, adopted in April 2011, Government foresees the selection of the winner to be by the end of September and by December 2011 all financial agreements should be set. 

However, since the Government’s decision in October 2008 for initiating the privatization process until the adoption of “Economic Development Vision”, the whole process was managed in a non-transparent manner and the public was not provided even with basic information about this project.

All countries in the region have privatized the distribution and supplying network. Neighboring countries have successfully managed to attract credible western investors, like the Czech company CEZ (Albania), Austrian company EVN (Macedonia) or the Italian company A2A SpA (Montenegro). None of these companies has expressed any interest in the privatization of energy distribution and supplying in Kosovo. All four prequalified companies for privatization of energy distribution and supplying in Kosovo are non-European companies: “Limak” (Turkey), “Ç alik” (Turkey), TAIB (Turkey&Bahrain) and “Elsewedy” (Egypt)). All these potential investors, have acquired their whole experience in countries which according to EU reports are classified as “semi-free countries” or as countries which do not rank very high in the index of economic freedom. “Limak” which has invested in the Prishtina International Airport, in its expertise profile, lists energy after construction, tourism and cement factories. While another potential investor “Çalik”, in its profile lists energy after textile, and its main engagement in energy projects is in oil refinery and natural gas. The so far investments of “Çalik”” in the energy sector are in Turkmenistan, Uzbekistan, Iraq, etc., countries rich with oil and natural gas. There are no information provided on its experience on management of power networks. “TAIB” is a company whose headquarter is in Bahrain and has its branches in Turkey, India, Kazakhstan, etc., whose business priority is in banking sector and real estate. The last company “Elsewedy” is an Egyptian company specializing in production of energy equipments. How can these companies, interested in investing in Kosovo energy network, harmonize their experience in eastern countries with European directives which Kosovo must apply?

The common answer given by the officials of privatization project is “we should trust them”! As I said, so far no document has been made public that explains how this project was managed so far and how this sector will look after privatization.  In the official website of this project, the only documents available are Government’s decisions on privatization and Kosovo laws on energy. How does the plan on elimination of losses in the network look like? How will the energy prices be affected? Which are the rules against monopoly?

Answering these questions is also a request from the Kosovo Assembly. In Assembly’s decision, that in essence approved the privatization of energy distribution and supplying, is stated that “the privatization procedures may begin, the Government should undertake a feasibility study and present a busniness model and make sure that the privatization of a particular sector, is in country’s economic priority and advantage”. Therefore, before Government rushes to finalize the process as soon as possible, the Government should make public the Business Model of the Kosovar Electricity Distribution and Supply Company, as it is required by Assembly’s decision nr. 03-V-074, on 12 December 2008.

Apart from the Kosovo Government which should be transparent, accountable and should respect the common directives of EU, the IFC too has its obligations in cases when it is engaged in energy projects, such as the privatization of energy distribution and supplying in Kosovo. According to IFC’s standards of performance, IFC’s advisors should push the government to take measures in order to ensure accountability, transparency, economic, environmental and social impact assessments, informing the workers about their future after privatization, etc. In Kosovo’s case, IFC didn’t do enough to persuade the Government to make this process more open to the public. On the other hand, KEK employees, 2500 workers of the KEDS in particular , have no idea what will happen to them after their privatization.    

Therefore, the Government should make public all documents that regulate the energy distribution and supplying sector, especially the operating model. A debate should follow in the Kosovo Assembly about the model and the percentage of shares that are expected to be sold, as it is required with article 9 of Law on Public Enterprises and with the preliminary decision of the Assembly; and, the Assembly to make the final decision on privatization of distribution and supplying.

Failure to make this process more transparent risks of repeating the not so good examples of privatization so far. But, the consequences of this non-transparent privatization will be even bigger compare to the so far privatization cases, because the network of energy distribution and supplying is the only network in Kosovo. Therefore, we should not allow that this process to end just like the rest of privatization processes so far. 


(Published in Prishtina Insight)

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