Energy Traders


The Power Brokers


Regional Agreement
Forms Blueprint



Anatomy of a Blackout


Albanians Take Power



New System and Old Politics


Living without Electricity



Bulgaria Losing Power


A Revolt Against Rising Prices



The World Behind the Plug


Romanian Prosecutors Open Inquiry in ALRO case


Lawsuit Gives Insight Into Power Industry


A Town Without Light



STORY No.1 | ALBANIAprint preview

Anatomy of a Blackout

Politics and controversial trading contracts complicate the country's electricity situation

In October of 2005, with a cold winter approaching, Albanians witnessed a terrible series of blackouts that left the country with only 10 hours of electricity a day. The country had the money for much of the power, but problems between government, an antiquated network and energy buyers proved that parts of southeast Europe lack a reliable energy industry.

Albania relies almost exclusively on dams to generate electricity and as the fall approached, Albania's rivers were low. The state electrical company Korporata Elektroenergjetike Shqiptare (KESh) predicted it would face a serious power shortfall of 600 GWh for the last two months of the year – the energy needed to run 400,000 of Albania's 700,000 households.

It issued a tender asking to buy the electricity but only one bidder responded: London based Energy Financing Team (EFT). Albanian law requires getting bids from at least two companies to ensure competition. The tenders were reissued asking for less total energy but again only EFT responded. Three more tenders ended in the same result.

A sixth tender asked for 400GWh and Energy Holding of Romania entered a bid along with EFT making it legal but neither company could provide the total energy needed. By this time, even if they had gotten a bidder offering the full 400 GWh, the country would need to use rolling blackouts to make up the difference.

The prices being offered were also higher than anticipated.

“Either the price was higher than what they were ready to pay, or they had only one bidder,” said Gjergj Bojaxhi, deputy energy minister since last September. “The rivers had drained.”

EFT offered 73.2 GWh at €43 per MWh, a high price and less than a quarter of the electricity needed. The London-based trader, operated by Serbian electricity specialists, had sold energy to Albania since 2000 and has accounted for four-fifths of the energy the country imported in those early years, according to Leonard Mone, the former procurement director at KESh.

Energy Holding, a broker from Romania, offered double the amount EFT did for a slightly lower price, but the total was still only half the 395 GWh that KESh had asked for.

Politics were worsening the situation. The power company was not acting decisively because prolonged elections had led to delays in appointing a new director at the power company. The failure to secure energy purchases in advance put the country on the brink. Meanwhile, KESh held off power purchases in an effort to get lower prices.

“The procurement law had its problems,” said Fatmir Hoxha, who had been interim general manager of KESh at the time. “It was a law made to buy carrots and tomatoes, not electricity.” It required the utility to announce the tender two months ahead, which didn't work with the fluctuations in the market.

Albanian Prime Minister Sali Berisha tried to use his friendship with President Viktor Yushchenko to buy energy in Ukraine. That failed. Another 100 MWh from Bulgaria and Romania could not be routed to Albania because the high-voltage lines connecting Albania with those countries had already been booked by other energy traders and countries for their electricity, Bojaxhi said. A very small amount of electricity got through from Italy through Greece.

Eventually, KESh bought €4 million of electricity for the last six weeks of the year from Montmontaza of Croatia; Ezpada, the Czech broker active in the northern Balkans; the Bulgarian state-run generator Natsionalna Elektricheska Kompania (NEK); Complexul Energetic Rovinari, the producer in south-central Romania; and GSA, a local broker.

Andi Beli, KESh's general manager, said it was hard to bring some of this supply into Albania because the high voltage lines, the highways of electricity, were busy elsewhere. This is a recurring problem and has made Albania susceptible to shortages of electricity.

Each country has a certain number of tranmission lines that connect them to the world. Albania has two 200 kV lines connecting it to Montenegro and on 400 kV line connecting it to Greece. All imported energy must come through these lines.

These lines that once were used only by state companies selling electricity to each other are now being used by private traders moving energy around the region in search of the highest profit. Energy traders buying and selling electricity between countries reserve capacity on these lines. The lines between Albania and Montenegro are chronically busy. Between 50 and 90 percent of the capacity is taken by private traders, according to a report by SEETEC, the Southeast Europe System Technical Support Project.

“For the volume of power that is currently going through Montenegro, the transmission capacities should be three times bigger,” said Zoran Đukanović, a manager of transmission department of the Montenegrin power company Elektropriveda Crna Gora (EPCG). Đukanović said the transmission bottleneck that leads to blackouts is not rare and that the Montenegro Utility Company is having the same problem with its imports from Serbia.

That bottleneck may be self imposed by power companies worried about stability in their power grids and that's part of the problem says Peter Sayles of the European Federation of Energy Traders (EFET). Transmission operators sometime auction of as little as one-tenth of the total capacity of their transmission lines for import and export, an amount that is too conservative Sayles says.

The results for Albania by the end of 2005 were catastrophic: Power cuts went from four to 10 hours a day in Tirana, and the rest of the country spent even more time in the dark.

“We were in a situation when we had a narrow highway (from which to buy power abroad) that was jammed by 18-wheelers, and the ambulance could not come to save us,” said Bujar Nepravishta, who leads the country's energy regulatory committee, ERE.

After two months of constant blackouts, KESh finally moved on a larger purchase. It awarded a tender to Interfin, a company owned by businessman Behgjet Pacolli, a Kosovo Albanian businessman with Swiss citizenship. Pacolli's relationship with former Russian President Boris Yeltsin led to investigations into his Swiss companies in 1999.

However, Interfin's tender was cancelled because KESh suspected Interfin did not have the electricity it was offering at the lowest price: €36 per MWh. The manager of Pacolli's interests in Albania said that InterFin would purchase energy from a power station in the border between Bulgaria and Romania . Andi Beli, KESh's general manager, said he “did not see where they would get it.”

By January of this year, KESh had pledged to purchase €57 million from six companies—EFT, EGL, Ezpada, the Czech trader, and GSA—to ensure energy for the rest of the year. At that time, it had been six weeks since rain had fallen in the northern mountains.

This was not the first time politics shut off electricity in the country. Energy shortages and energy contracts are both often very controversial and often lead to accusations of theft in the belligerent world of Albanian politics.

Another crisis occurred in late 2000 when the country had only five days of electricity remaining, said the KESh manager of that time.

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