Albania to privatise three state-owned companies this year

28/03/2008

Albania's government is planning by the end of the year to privatise three of the most important state-owned companies -- the last major publicly-owned assets.

By Jonilda Koci for Southeast European Times in Tirana – 28/01/08

The World Bank plans to help Albania auction the aging distribution lines of its power utility, KESH. [Getty Images]

Prime Minister Sali Berisha announced at a cabinet meeting in January that the government intends to privatise three important state-owned companies in the energy, oil and insurance sectors by the end of 2008.

"This year will be marked by a wave of privatisation, because we see ourselves as a liberal government that believes in free enterprise," Berisha told the ministers. His goal is to privatise KESH, the distribution branch of Albania's power utility; ARMO, the country's sole oil refinery; and INSIG, the only state-owned insurance company.

The Ministry of Trade, Economy and Energy announced on February 15th the open international tender for privatisation of 85% of shares of ARMO. Bids will be assessed on May 21st.

ARMO has generated interest from at least 20 companies in a sale that could raise 84.7m euros. The American company Patton Boggs will act as legal adviser to the Albanian government.

Commenting on the sale, Berisha said, "One of the main criteria will require the contractor to make an investment that will help develop this key sector."

The government has also approved the privatisation of its power industry after two years of energy supply problems. Intermittent power cuts -- including in Tirana -- could take their toll on economic growth, which has averaged 6%, but may slip if the crisis is not resolved.

KESH is the only company furnishing the country with energy, and it has been criticised because of successive power crises. In an effort to ease them, KESH has received government subsidies to ensure it has the necessary financing to import energy.

To facilitate the privatisation, KESH has been divided into three smaller companies -- dealing with the distribution, production and transmitting of energy. The divestment will be overseen by the World Bank, which will help Albania auction KESH's aging distribution lines.

INSIG, meanwhile, has been drastically losing its share of the market during the last decade due to increased competition. In July 2003, the government sold 40% of INSIG shares to the international institutions IFC and EBRD. Currently, the company is being prepared for full privatisation.

The privatisation effort is being structured with the assistance of the International Finance Corporation, the World Bank, and the USAID.