Interview of the administrator of KESH sh.a., Mr.Agron Hetoja for the “Monitor” magazine.

QUESTION: KESH is ranked among the largest local companies for the annual turnover of the year 2015.
What are some of the reasons that enhanced financial performance?

ANSWER: Referring to the modalities of the organization and functioning of the electricity market before the entry into force of the Law No. 43, dated 30/04/2015 “On the power sector”, wherefrom until the first semi-annual term of 2016, KESH sh.a has exerted the function of wholesale producer and public supplier, we admit that the increase of financial performance has been an indicator of the proper administration of this company.

From the perspective of energy generation activity, we acknowledge that the company KESH sh.a started the activity of year 2015 with Fierzë reservoir at the quota of 286 meters, which is an optimal level to ensure the fulfilment of obligations by the company KESH sh.a.
Hydric conditions were proven to be favourable for the first semi-annual term, where there was an increase of energy generation, while for the second semi-annual term, the flows were significantly below the multi-year average level.

Although for the period between January and May 2015, the average flows for 2015 have been nearly equal to the average flows for the same period 2001-2015, the company KESH sh.a:

–    was able to generate 2,490 GWh or 20% more than the average generation of 2,078 GWh realized for the same period during the years 2001-2015
–    was able to minimize the discharges of waters with 40% less than the average annual discharges of 1,42 billion m3of water for the same period during the years  2001-2015           
–    realized the effective cascade use, wherefrom on 1 June 2015 the level at the reservoir of Fierzë HPP was proven to be 5 meters higher than the average level of the period 2001-2015 for that date. 

During 2015, we generated over 4.49 TWh or about 600,000 MWh more than the multi-year average generation.
In addition to the above aspects, the approval and implementation of financial recovery plan in 2015 favoured trade relations of KESH with partner institutions  (OSHEE, OST, Small Producers, General Tax Directorate, suppliers of goods and services) to proceed normally and far from the problems of the past.

Revenues generated from KESHsh.a for the year 2015 amount to approximately 19,2 billion ALL.

This year, which may be considered equally challenging and significant in relation to the period corresponding to the initial profound reform of the energy system, it records data that could hardly be conceived previously. For the year 2015, KESH realized :
–    100 % receivables from OSHEE for invoicing of the year
–    0 new debts and 0 expenses of penalties for late payments,
–    10% less operational expenses and 15% less expenses for short-term loan interests.
–    the coverage at own income of expenses for the energy import to tariff consumers

Further, during 2015 KESH sh.a succeeded to:
–        fully repay all current bills of small HPPs for the year 2015 at an amount of  9.3 billion ALL (without creating new obligations towards them)  
–        finalize the process of full repayment of the obligations of over 5 billion ALL accrued over years to small HPPs as a result of the ineligibility of tariff structure of the regulatory period 2012-2014
–        repay, in addition to the current obligations, the amount of 765 million ALL to fiscal and customs administration, as well as the outstanding obligations accrued over years in the amount of 327 million ALL.
–        reduce the level of short-term OD loans with 950 million ALL or approx. 7 million Euro.

QUESTION 2: What is the prospective of further development and how is it envisaged the income and profit performance?
ANSWER: The future development prospective of the Company KESH sh.a is the commercialization of its activity based on the provisions of the Law No. 43/2015 “On the power sector”.

Although after the adoption of the Law No. 43 dated 30/04/2016 “On the Power Sector” KESH sh.a. is required to operate in the electricity market in its natural function of production and trading of electricity, due to the delay in the adoption of the regulatory acts, KESH operated in the electricity market until July 1, 2016 KESH, based on the provisions of the Law No. 9072, dated 22/05/2003 “On the power sector” (repealed).

As above, for the second semi-annual term of 2016, KESH sh.a will operate in the energy market based on the previsions of the Interim Model of the Energy Market, but inheriting the costs incurred due to the exercise of the function of wholesale public supplier for the first semi-annual term of 2016, probably due to the applicable fee of energy generation and trading of KESH sh.a for that period. The tariff upheld by the regulator for the second semi-annual term of 2016 reflects only the genuine cost of energy generation, which renders difficult the timely repayment of interests of the inherited ODs and execution of investments by KESH sh.a.

As of 2017 the company KESH sh.a envisages to start a new phase of its operation in the electricity market, oriented to its natural functions (energy generation and trade).
Referring to the above, revenues generated from the company KESH sh.a in exercising the function of energy producer and trader will enable the company to cover all expenses, make investments and repay the debts incurred.

QUESTION 3: How will the new model of energy market impact KESH financial position?
ANSWER: The adoption of the Law No. 43 dated 30/04/2015 “On the Power Sector” came as a need for approximation of the Albanian legislative and regulatory framework with the European legislative and regulatory framework in the field of electricity, this referring to the obligations that Albania has as a member of the Energy Community Treaty.

This law makes a comprehensive approach to the Directive 2009/72 / EC “On the common rules for the internal market of electricity” and is intended to guarantee the stable and reliable supply of electricity to customers through the creation of a functioning and competitive market of electricity, taking into account the interests of customers, the security and quality of supply of electricity, aiming inter alia, the Albanian market integration in the regional and European market of electricity.

All the initiatives so far and the projects that are being discussed at the national as well as European level are intended to unify the energy markets (market coupling), aiming at enhancing competition through clear division of the wholesale and the retail trading segments and of the liberalized and regulated part of the energy market.

Profound reformation of the power sector and the approximation of the Albanian legislation on the power sector with that of the European Union (the Third Energy Package of the European Union) goes through a phase transition, which refers to the period from the moment of the adoption of the Law No. 43/2015 and up to the moment of finalization of the establishment of the Albanian Energy Stock Exchange.

The adoption of DCM No. 244, dated 30/03/2016 “On approval of the conditions for the establishment of the public service obligation, which will apply to licensees in the electricity sector, who operate generation, transmission, distribution and power supply “which serves as an interim model of the market, is another step forward in the implementation of the provisions of the Law no. 43, dated 04/30/2015 “On the Power Sector”.

Referring to the previsions made in the Interim Model of the Energy Market, the company KESH sh.a has the obligation to provide to the Universal Service Provider (OSHEE Sh.a) the amount of electricity, which is determined based on the multi-year rational regime of generation capacities’ utilization, which goes for meeting the demand for electricity to end customers who benefit from the Universal Service Supply. Also this Interim Market Model enables the Company KESH sh.a to operate in the electricity market and create revenues through sales at market prices of the amount of electricity deriving after the fulfillment of the public service obligation.

Under these conditions, KESH sh.a, apart from operating in the electricity market as a production company to which it is imposed the public service obligation, an obligation which must be justified as necessary, non-discriminatory and proportional to all electricity market participants, will also be able to perform its natural function of production and trading of electricity in the deregulated (liberalized) market.
This new way of organization and functioning of the Albanian electricity market will create opportunities for the KESH sh.a Company to make a more efficient use of existing water resources, by looking into the possibility of building new generation capacities through the implementation of new technologies guaranteeing efficiency, safety and competitive prices.

QUESTION 4: What are some of the challenges that prevent you from a faster growth?

  ANSWER: Although the Law No. 43/2015 “On the Power Sector” provides for the implementation of development policies of the Albanian Government for the structural, financial and commercial reformation of the sector which simultaneously with the achievement of financial sustainability and independence from the state budget must ensure the safety of electricity supply to customers with acceptable prices set in a gradually liberalized, competitive and transparent market, the delays created in the approval of regulatory acts in its implementation, extend the transitional period until full liberalization of the electricity market.

  Such a situation does not allow for the exercise by the company KESH sh.a of its natural function of production and trading of electricity in an organized market based on the principles of competition, transparency and equality.

The company KESH sh.a follows up the developments in the Albanian electricity market and is ready to exercise its functions, being responsible and demanding to itself so that as the largest producer of electricity in Albania, give the first example of access to the best practices of European countries that have experienced an early experience with the transition from a fully regulated market (monopoly) to a liberalized market of electricity.