Granting rights and A&M approach to HPPs

Annalise by Dr Lorenc Gordani

Legal Adviser in Albania Energy Market

Today, Albanian total installed capacity in hydropower hasreached at 2100 MW.

Further, projects granted, but yet not developed, at 1785MW, and the hydropower
potential studied, still unexploited, at around 615 MW.Therefore, in a synthesis,
considering the theoretical potential by 4500 MW,today only 46% are exploited. As it
is worth noting that the country can offerone of the lower cost of production (LCOE)
of hydropower in the region.

Therefore, taking into consideration the large number of awarded projects but still not
developed, in this analyse, firstly, based in my daily empirical experience, it will
concentrated in a briefly analysis of the legal framework on procedures to obtain a
HPP, for the better understanding of the complexity of an A&M and the approach
needed to address it by interested developers.

Then, starting with the explorer of the framework in which base the granting rights of
hydropower investments, in summary, there are basically two procedures, and a third
one is emerging, on the rights of granting of hydroelectric sources. Firstly, the
authorization procedure is followed for the project up to 2 MW, considered as small
investments and fundamentally of interest to local investors. A framework based on
the principle that leaves the great load (or major risk) of the work to be followed by
the investor. However, on the other hand its approval within the ministry is perceived
as a fast procedure.

Then, for the most relevant projects, considering the level of difficulty and depending
on the nature of the hydroelectric risk, are based on the regime of public-private
partnership (PPP). What is necessary, from the already existing framework, is a
qualified wise reflection of all the rights recognized by the law to the contract between
the parties, based on the fact that the legal provisions governing the project contract
provide clear guidance on the key issues that will be dealt, allowing the parties to
freely negotiate the flexible terms of the concession contracts.

Based on the contractual conditions for plants up to 15 MW, the sale of energy
generated by the operator is guaranteed through a long-term contract (PPA) for 15

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years, signed with the operator charged of the public service obligation, with
regulated tariffs, through a “feed-in”scheme, determine by an independent authority.
The construction of power plant that is subject from 15 to 20 permits and complex
licenses of various bodies, but it is secured and facilitated by the assumption and
provisions as a co-responsibility of the public authorities.

Regard the third procedure, recently, the Ministry of Energyopened the tender for the
selection of the bidder for the construction of thePV plant above 50 MW in the
southern Albania. A first project based on pure principle of the capacity tender, which
has been partially applied in many HPP projects at least over the last 2-3 years. Thus,
it represents a large-scale of innovation, where everything is prepared in the package
by the publicauthority, giving the maximum support to investors interested. A
practicethought to act as a model for further hydroelectric concessions.

As perceived by above procedures, consider the multi-importance for the economy

and the complex challenges in their deployment in practice, the current legal
framework has seen a continuous revision with the goal of improvement. Despite that,
the importance of legal framework is in some way limited to the taken period of the
sign of contract, and the core of investments in long term based on accurate technical
studies. In addition, their preparation from the earliest stages is also crucial for gaining
access to the financial system with a convenient interest rate.

Therefore, the development of sound technical studies, well above the minimum
required by law, becomes fundamental. Normally their width and depth vary
according to the relevance of the project. In any case, regardless of the technology
used, or even the form of investment as an unsolicited proposal or capacity offer, the
studies should provide sufficient technical, economic and financial reliability, as well
as guarantees in its environmental and social impact.

In final of the above analysis, considering the high number of projects awarded but
not yet realized, despite the continuous interest in the acquisition and transfer (A&M),
the current situation shows all the complexity in this direction. The factors are
different, where the legal procedure in the transfer rights first requires the consent of
the public authorities, in the same form given for their approval. Furthermore, a
problem is the reliability of the projects, if considers that a good one is sold by itself.
In addition, it cost more in financial terms, as well as time and energy, because it
necessitate the redo the evaluation along the entire chain. Then, finally, the general
problem lies in the developers’ approach, as far they are way to what is request form
whom is offered to manage renewable resources.
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For more on above please find the related slides on Albania hydroelectric sector towards large
and sustainable developments, kept by Dr Lorenc Gordani, at 2th Edition Summit
“Hydropower Balkans 2018” organised by Vostock Capital, among 6-8 November 2018, at the
Splendid Conference & SPA Resort, Budva, Montenegro.

Shënim: Mendimet dhe opinionet e këtu me sipër shprehur i përkasin autorit të tyre. Ndërsa të
gjitha përpjekjet janë bërë për të siguruar saktësinë e tyre, sa këtu nuk ka për qëllim të ofrojë
këshilla ligjore, pasi që situatat individuale mund të ndryshojnë dhe duhet të diskutohen me
një ekspert. Për çdo këshillë specifike teknike ose ligjore, mbi informacionin e ofruar dhe tema
të ngjashme, mund të kontaktoni përmes “lorenc_gordani@albaniaenergy.org”.

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