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EBRD gives green light to new road development and power sector reconstruction in Albania
The European Bank for Reconstruction and Development (EBRD) today extended EUR 40.0 million in loans to Albania’s overburdened power and transport sectors. The financing consists of two sovereign loans: a EUR 30.0 million loan to Korporata Electroenergjetike Shqiptare (KESH), Albania’s electricity utility; and a loan of EUR 10.0 million to the country road reconstruction. The projects will address critical infrastructure bottlenecks in the Balkan region in the wake of the Kosovo conflict.
Speaking in Tirana, Albania, Charles Frank, the EBRD’s First Vice President said: "Albania’s infrastructure sector is experiencing severe technical and financial difficulties in the aftermath of the Kosovo conflict, and urgent action is required to help them recover." Mr Frank continued: "Revitalization of road and electrical systems will underpin the restoration of economic activity and serve as a basis for a more vibrant private sector. EBRD assistance to Albania’s power sector, which links northern Europe to southern Italy and Greece, and its road transport system will benefit south eastern Europe as a whole."
For the last eight years, the lack of a reliable system of power transmission and distribution has been a major barrier to the development of the private sector in Albania, and the power supply situation has severely deteriorated since the Kosovo crisis. The loan to KESH will allow the company to increase the availability and reliability of the power supply in the region while lower costs will stimulate industrial activity. It will also help to enhance KESH management skills. The project will lead to the introduction of private management for the sector and should result in a more stringently enforced payment system. In the longer term, the management contract should pave the way for full privatisation.
The road reconstruction loan, which will be administered by the Ministry of Transport, together with grant financing from sources to be arranged by the EBRD, will finance emergency improvements to approximately 30.5 km of the national East-West corridor between the port of Durres and the border of the Former Yugoslav Republic of Macedonia. The project will help to upgrade this road corridor to meet the needs of transit traffic on this key route. The project will significantly improve communications in south eastern Europe.
Mr Frank explained: "Without improved road connections, the reconstruction of the south Balkan region would be severely constrained. The East-West road corridor is one of the priority projects in the action plan that the EBRD has formulated in response to the Kosovo conflict."
The road link is expected to play a crucial role in the supply of goods and equipment to the region, since almost all cargo arriving in the Port of Durres is transported by road due to the poor state of Albanian railways.
Power sector reconstruction project - Albania
Background: Korporata Electroenergjetike Shqiptare KESH is responsible for power generation, transmission, distribution and sale of electricity within Albania and trade of electricity with neighbouring countries. In Albania it operates 1,700MW of hydro capacity with a turnover of US$ 60.0 million (EUR 58.0 million).
The Project: The financing will enable KESH to redefine its priorities for the modernisation of the electricity sector, taking account of the Balkan regional situation. It will help to provide sufficient electricity supply for the domestic markets by reducing commercial and technical losses and to upgrade 80 per cent of the Albanian electricity generating capacity. It will also improve its financial and managerial performance. By increasing the availability and reliability of power supply in Albania, the project will directly contribute to the mitigation of instability risks in the region and the recovery and future economic development of the country. The total project cost is EUR 61.6 million.
Terms: 12-year maturity including a grace period of two years.
Amount: EUR 30 million with a guarantee from the Republic of Albania. The loan will replace two existing loans with KESH for the Drin River cascade rehabilitation project (EUR 15.7 million) and the transmission and distribution project (EUR 10 million). These cannot be implemented as envisaged because of the impact of the pyramid scheme crisis and the Kosovo war on the Albanian power sector.
Co-financing: The project includes co-financing of EUR 31.6 million. This will be provided by Japan Bank for International Cooperation (EUR 12.8 million), the Austrian Government (EUR 7.6 million), the Swiss Government (EUR 7.6 million) and KESH (EUR 3.6 million).
Emergency road rehabilitation project - Albania
Background: The financing will be made available to the Republic of Albania and will be administered by the Ministry of Public Works and Transport. Within the Ministry, the General Roads Directorate (GRD) is responsible for the main road network and within the GRD, the Project Implementation Unit is responsible for upgrading the East-West Corridor.
The Project: The EBRD-financed section of the East-West road corridor commences some 4.8 km to the west of Elbasan, including a partially completed 3.4 km by-pass around the town and continues eastwards for 22.3 km to Librazhd. Elbasan is the third-largest city in Albania and is dominated by an extensive steel works. It is also the location of the country’s largest cement plant and the largest chromium smelting plant. Librazhd is a medium-sized agricultural centre. Construction is planned to start in September 2000 and to be completed by 2002. The total project cost is EUR 16.1 million. Grant money will be provided by the Republic of Albania (EUR 0.3 million), the Central European Initiative (EUR 1.7 million) and EU-Phare (EUR 1.8 million). Albania has applied for an additional grant from the Italian Co-operation in the amount of EUR 2.3 million.
Terms: 15-year maturity including a three year grace period.
Amount: EUR 10.0 million to the Republic of Albania.
Co-financing: Co-financiers of other sections of the East-West Corridor are International Development Association (EUR 12.2 million), Republic of Albania (EUR 3.9 million), Kuwait Fund for Arab Economic Development (EUR 7.5 million), EU-Phare (EUR 20.0 million), and European Investment Bank (EUR 23.0 million).
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