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24 October 2012

Mott MacDonald helps Kosovo’s electric distribution company go private

Mott MacDonald has assisted the International Finance Corporation with the successful privatisation of KEDS, Kosovo’s distribution and supply company. The consultancy provided technical and regulatory transaction advice for the €27 million acquisition by Turkish investors Limak and Calik.

Kosovo is in need of a significant increase in its power generation capacity and rehabilitation of its distribution system after protracted years of under-investment. The Government of Kosovo took the decision to privatise KEDS to generate the major infrastructure investment needed to improve performance and reduce substantial losses in electricity provision.

To prepare for privatisation, Mott MacDonald’s role involved:

● Carrying out due diligence audits of technical and environmental performance

● Developing a model of economic viability of the transaction and performed sensitivity analysis of the various technical & regulatory parameters

● Drafting required modifications to the regulatory framework and developing the regulatory statement underlining the transaction

● Estimating the transaction's impact on tariffs and revenue for power supply and distribution

● Assisting with the preparation of the privatisation brochure, setting-up of the data room for the due diligence by bidders and drafting various market rules and regulations required by the transaction

Nick Frydas, Mott MacDonald’s project director commented: “During the course of this exciting project we had to solve some unique regulatory, economic, environmental and technical problems. These included: separation of assets; commercial losses stemming from tariffs; incentivising private investment post-acquisition and the opening of a new private lignite mine and associated IPP. But by far the most challenging problem was managing and aligning the several and sometimes diverging policies in place regarding the privatisation of existing generation and compliance of Kosovo with EU energy directives, in such a way as to facilitate the KEDS transaction.”

Ends


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