Public-Private Partnership Impact Stories Albania: Ashta Hydropower Photo © Angelo DellÁtti/IFC The Ashta hydropower plant is Albania’s first major hydropower plant construction in 30 years and the government’s first large public-private partnership (PPP) in the energy sector. IFC advised the government of Albania on the structuring of the proj- ect and attracting a strong and reliable international investor. In September 2008, the government signed a 35-year concession with Verbund (Aus- tria’s largest electricity company) to build and operate a new hydropower plant. Over a three-year period, the project mobilized $262 million in private investment, increased Albania’s power generation capacity by 53 megawatts, and delivered im- proved services for 170,000 people. Construction of the plant began in January 2010 and became fully operational in March 2013. This series provides an overview of public-private partnership stories in various infrastructure sectors, The project was implemented with the financial support of DevCo, a multi-donor facility affiliated with the where IFC was the lead advisor. Private Infrastructure Development Group. DevCo provides critical financial support for important infra- IFC Advisory Services in structure transactions in the poorest countries, helping boost economic growth and combat poverty. DevCo Public-Private Partnerships is funded by the UK’s Department for International Development (DFID), the Austrian Development 2121 Pennsylvania Ave. NW Agency, the Dutch Ministry of Foreign Affairs, the Swedish International Development Agency, and IFC. Washington D.C. 20433 ifc.org/ppp BACKGROUND and the necessary investment. Albania, once a net exporter of electricity, had been unable to Verbund, Austria’s largest electricity company, won the bid and keep pace with increasing domestic demand. Power outages were now holds the concession rights to operate the Ashta hydropower common. Many parts of the country, including Tirana, the capital, plant for 35 years. The plant’s installed capacity is 53 megawatts. suffered from extended daily outages. Even though hydropower accounted for more than 90 percent of total electricity, the existing hydropower plants dated back to the 1970s, with no additional investment since 1985. Despite good gross domestic product growth and a reformist government, Albania had trouble POST-TENDER RESULTS attracting international investors for large infrastructure projects. • The new concession law is providing a strong base for the development of PPP projects in the country. IFC’S ROLE In 2006, Albania’s Ministry of Economy, Trade, and Energy • The know-how transferred to the government is (METE) hired IFC to support the development of the hydropower allowing it to implement subsequent transactions sector through a PPP. efficiently and independently. IFC drafted a new concession law that was adopted in early • The construction was finalized in less than three 2007 and helped METE establish a PPP unit. IFC identified an unfinished hydropower plant as the potential pilot transaction and years with high construction quality, environmental developed a long-term PPP structure whereby a private company protection, and safety standards. The plant became would design, construct, and operate the new plant. fully operational in March 2013. Specifically, IFC undertook the following key activities: • Electricity produced by the Ashta hydropower plant costs $0.08 per kilowatt-hour, below the average • Identified the site on the Drin River that would take advantage import prices at the time bids were solicited. of existing infrastructure and minimize negative environmental and social impacts. • Over a three-year period, the project mobilized • Involved local communities through a program of public con- $262 million in investment and the realized fiscal sultations to address their concerns and ensure their support of impact of the project was $26.2 million. the project. • The project increased Albania’s power generation • Implemented the bidding process, also setting financial and capacity by 53 megawatts, and has improved servic- technical prequalification criteria in line with international es for 170,000 people (5 percent of the population). best practice and the government’s strategic goals. • Drafted the concession contract and bidding documents. * Unless otherwise stated, monetary values are presented in 2012 US dollars. Results are from a post-completion • Assisted the government with the final negotiations on project evaluation completed April 2013. agreements with the winning bidder. TRANSACTION STRUCTURE IFC structured the transaction as a 15-year concession, under This story was originally published in 2008, and updated on 08/2013 which the concessionaire is responsible for designing, building and operating the plant. This structure responds to both the government’s policy objectives and desire to move toward the European Union framework for the energy sector, and investors’ requirements when investing in emerging markets such as Albania. The Ashta hydropower plant is the most downstream hydropower plant on the Drin River cascade and is therefore affected by plants operating upstream. IFC drafted and negotiated a cascade coordination agreement to assure optimal operation of the entire cascade. BIDDING The transaction attracted numerous international companies, 10 of which were prequalified as capable of bringing strong expertise