Investigation 20 Oct 14
BIRN can reveal that the competition authority is probing claims that Albania’s power utility, OSHEE, colluded with two electricity traders – EFT A.G and GSA – to rig the outcome of import tenders.
|Electrcity pyllon in the city of Elbasan | Photo by : Flickr/Sanatacroce|
The Competition Authority of Albania, CAA, has launched a probe against the power utility OSHEE, following complaints filed by another electricity trader.
GEN-I Tirana claims that OSHEE’s uncompetitive and illegal practices cost taxpayers millions of euro.
The complaints centre on nine monthly electricity import tenders held by OSHEE from January to September 2014.
According to two complaints filed with the CAA on July 30 and September 18, of which BIRN has obtained copies, GEN-I claims OSHEE’s uncompetitive practices lost taxpayers 6.87 million euro from January to July and another 457,000 euro in August and September.
In the September 18 complaint, GEN-I maintained that “illegal agreements between OSHEE and EFT A.G and [between] OSHEE and GSA continued [despite their earlier complaint] through the manipulation of the prices and quantity [of electricity] in the bids.”
It said OSHEE has secured illegal profits for the two traders, “by helping the two operators to harmonize their bids… and by exchanging confidential information with these operators on the latest and best offers placed by other operators, among them also GEN-I Tirana,” the complaint adds.
An official from the competition authority who spoke on condition of anonymity told BIRN that despite the authoritative nature of the complaints, “the investigation was still at an early stage to draw conclusions.”
The complaints maintain that the OSHEE tenders were manipulated through two main methods, which alternated in different months.
The first included the placing of bids by EFT and GSA, which were only a few cent lower in price per MWh of electricity than the bid of GEN-I Tirana, making it possible to eliminate the competition.
The second method by GSA and EFT included placing offers that were much higher than the market price in cases where other competitors, such as GEN-I Tirana, were bidding to supply small amounts of electricity, compared with the demand by OSHEE.
Queried by BIRN specifically on these allegations, OSHEE and EFT did not comment.
GSA issued a statement denying wrongdoing. “We have been informed about GEN-I Tirana’s complaint, but we don’t have any detailed information about its content,” GSA’s executive director, Serafin Orgocka, said.
|The Sept. 18 complaint against OSHEE|
Orgocka also said GSA had no partnership or relations with any other companies working in the sector, “including EFT”.
Albania imports tens of millions of euro of electricity every year to meet scarce local supply and cover losses caused by an ageing power grid and rampant theft.
Power is imported through the state-owned electricity producer, KESH, and the electricity system distributor, OSHEE.
From 2009 until 2013, OSHEE was owned by the Czech power giant CEZ and listed by the name CEZ Shperndarje.
In January 2013, Albania’s Energy Regulatory Agency stripped CEZ of its license and took control of the company after a drawn-out dispute over unpaid bills with public institutions in Albania and with the state electricity producer, KESH.
An audit conducted in 2013, at the height of the dispute between Albania and the CEZ Group, found that the now heavily indebted CEZ Shperndarje had no market value.
Facing the threat of prolonged arbitration and political pressure from the Czech Republic, however, Albania agreed to pay the CEZ Group 90 million euro to settle the dispute and regain the majority stake that was sold to CEZ in 2009.
Following the settlement, the electricity distributor was renamed OSHEE in July 2014.
EFT AG, which stands for Electricity Financing Team, is a Swiss-registered electricity trading company controlled by a Serbian businessman, Vuk Hamovic.
GSA is an Albanian electricity trading company controlled by two Albanian businessmen, Agron Shpallo and Serafin Orgocka.
Orgocka said GSA was founded in 1990 and has been involved in energy trading and supply since 2005.
He estimated that GSA had a 15-per-cent market share in the tenders of public energy enterprises.
Sixty per cent of the company’s customers were private companies in the industrial sector, he said.
“We supply the ferrochrome, cement, oil and steel industries and have long-term contracts with some of them,” Orgocka added.
According to the complaint by GEN-I Tirana on July 30th, OSHEE, EFT and GSA colluded with each other illegally concerning the tenders organized between January and July 2014 to supply electricity.
|July 30 complaint against OSHEE|
OSHEE is accused of passing confidential information about bids to EFT and GSA, allowing the two competing traders to harmonize their final bids for the tenders and so manipulate the outcome.
“The presentation of almost identical bids from the two ‘independent’ operators in the tenders organized by OSHEE… cannot be considered an accident but only a coordinated practice, which aimed to manipulate the results,” the complaint read.
In its complaint, GEN-I noted that EFT A.G and GSA had initially submitted high bids, well above market price – but later filed final bids with almost identical prices.
According to the complaint, some of the monthly tenders for electricity held by OSHEE from January to July, the difference in the price per MWh in the bids between EFT AG and GSA was only 4 to 10 euro cents.
In its September 18th complaint, GEN-I claimed that OSHEE had continued manipulation of the tender procedures, forcing other electricity traders in the market to file bids for smaller amounts of electricity or desist completely from bidding.
GEN-I says the bids made by EFT A.G and GSA were structured in such a way as either to secure them profitable contracts with high prices, or secure the biggest share of the electricity import market.
According to GEN-I, OSHEE is guilty of illegal practices that intentionally “eliminated competition from the market”.
GSA’s Orgocka rejected the accusations, telling BIRN that the small size of the differences in GSA’s and EFT’s bids was pure chance.
“The bidding procedure is held every month, so it can happen that one time the differences are narrow, while in other cases the differences between the competitors are not so narrow,” he said.
Orgocka described the accusations that its bids and electricity prices had cost Albanian taxpayers millions of euro as “nonsense”.
This investigation was made possible with the support of the National Endowment for Democracy, NED.