The cancellation of the tender for auditing capital investments in KEDS, at the request of the Energy Regulatory Office (ERO), has raised suspicions of interference in the process, as several companies with long experience in auditing capital investments were competing for the contract.
By Agon Sinanaj
Among the four companies that participated in the tender for auditing capital investments in KEDS was Audit&Conto, a firm with extensive experience and specialization in auditing capital investment projects.
Initially, this company was considered the frontrunner for winning the tender—largely because it had submitted the lowest bid—but everything changed after a request made by the Energy Regulatory Office (ERO) in December 2022 to the Anti-Corruption Agency and the Central Procurement Agency (CPA).
Following that request, the tender was canceled under “suspicious circumstances,” with justifications that were later contested by some of the competing companies, which claimed that there had been “interference in the process.”
In 2022, the Government of Kosovo, specifically the Ministry of Finance, had allocated €200,000 to the ERO for the audit of KEDS’s capital investments. However, the funds were never used because the tender was canceled.
Under the privatization contract, the Kosovo Electricity Distribution Company (KEDS) had committed to investing €300 million in the Distribution Network with the goal of reducing electricity losses. At the time of privatization, network losses exceeded 30 percent—one of the main arguments used to justify privatization.
Fifteen years later, KEDS claims to have invested over €200 million, yet no independent audit of these investments has ever been conducted. The ERO approves expenditures related to capital investments based on the assessments of external auditors selected and contracted directly by KEDS.
The first serious attempt to conduct such an independent audit in 2022 ended with ERO deciding to cancel the tender—raising doubts among competing companies about potential interference in the process.
Although the procurement procedures were managed by the Central Procurement Agency, according to documents obtained by Buletini Ekonomik, the cancellation was made at the request of the ERO.
In its announcement dated 21 July 2022, the ERO stated: “The Energy Regulatory Office informs all interested parties that through the Central Procurement Agency it has announced the tender for ‘Audit and verification services of capital investments realized in the distribution network for the needs of the ERO.’”
The Experienced Audit Company “Removed” from the Tender
According to the documents, Audit&Conto submitted the lowest bid—€164,483.44.Other participants included:Etika Co Sh.p.k, Consortium Grant Thornton & Grant Thornton Tax & Business Advisory Solutions and Consortium Nexia KS Sh.p.k, Nexia Sh.p.k & Zaharinova Nexia
The consortium led by Grant Thornton was disqualified for failing to submit a financial offer, while the remaining three were disqualified for “potential conflict of interest.”
Audit&Conto, which had the highest chances of winning the tender due to its lowest price, is a company with a long track record in auditing, particularly in auditing capital investments for large corporations.
The company’s director, Ymer Shatri, stated that in the past they had audited capital investments in major enterprises such as SharrCem, after being contracted by the Kosovo Trust Agency (KTA).
Regarding the KEDS audit tender, Shatri said that his company had met all the requirements and had even discussed details with ERO officials. “When we expected to be announced as the winner, we suddenly received the cancellation notice,” he said, expressing suspicions of “interference by someone.”
Shatri explained that ERO had sent a request to the Anti-Corruption Agency seeking an opinion on possible conflicts of interest concerning several experts proposed by the competing companies.
Among those mentioned was an expert from Audit&Conto—for whom the Anti-Corruption Agency issued a decision noting a “potential conflict of interest.” This decision became the basis for the CPA to cancel the tender entirely a few days later.
However, Shatri suspects that this was a deliberate move by the regulator to derail the process. According to him, ERO used the “expert card” strategically—since experts in energy regulation are scarce in Kosovo.
The “Expert Card”
One of the tender’s key requirements was that companies demonstrate they had engaged experts with at least five years of experience in tariff regulation and capital investment in electricity distribution networks.
Research shows that such experts are rare in Kosovo. Most of those with relevant experience are employed in public energy companies such as KEK, KOSTT, or in private operators like KEDS or KESCO.
In Audit&Conto’s case, one of the many proposed experts had previously worked at the Kosovo Energy Corporation (KEK)—specifically in the area of capital investments in the electricity distribution network.
“The expert we engaged for this position had previously worked at KEK. I don’t understand how the tender could be canceled because of that. He worked for KEK—we’re talking about auditing KEDS—and I don’t see where the conflict lies,” Shatri said.
Buletini Ekonomik contacted ERO to understand the reasons behind the cancellation and why the tender was not re-announced in subsequent years. “The tender was canceled because during the evaluation phase it was found that two of the qualified companies had conflicts of interest, while the other two did not meet the documentation requirements as defined by procurement procedures,” ERO said in its written response.
As for why the tender was not re-announced in the following years, ERO blamed the Ministry of Finance, which it said had not approved the budget for this activity. “During 2023 and 2024, ERO again planned this activity, but the Ministry of Finance did not approve the requested budget within the Law on the Budget of the Republic of Kosovo. Consequently, the procedures for re-launching the tender could not continue during these years. This year, the Regulator will make the necessary efforts to carry out this activity,” the ERO stated.
The Ministry of Finance did not respond to questions about whether ERO’s claims were accurate and, if so, why the budget for this activity was not approved in subsequent years.
A possible explanation is found in ERO’s 2022 Annual Report, which states that on November 9, 2022, the Government of Kosovo decided to cut ERO’s budget by €200,000. The reason given was that “since the CPA failed to select an economic operator for the project ‘audit/verification services of capital investments realized in the Distribution Network’ due to the lack of responsive bids, the allocated budget was withdrawn.”
KEDS Investments Not Subject to Public Procurement
An independent audit of this process has long been demanded by civil society, especially given that KEDS’s capital investments have circumvented Kosovo’s Law on Public Procurement—a fact repeatedly highlighted in civil society reports.
A report by the GAP Institute states: “The ERO should engage a company to audit capital investments made by KEDS, which according to ERO, has so far failed to comply with the Kosovo Law on Public Procurement as required by its license.”
GAP further recommends conducting a performance audit of these investments, as there is no clear data on how they have contributed to reducing technical and commercial losses—costs that are ultimately covered by consumers.
According to ERO’s recent reports, energy losses in the distribution network have dropped from above 20% to around 15%, largely due to the introduction of billing in the northern municipalities. However, these losses still amount to around €100 million, costs that continue to be passed on to consumers.
Despite this, ERO has so far been satisfied with audits conducted directly by KEDS itself.
Meanwhile, the Chairman of ERO’s Board, Ymer Fejzullahu, previously stated to the media that ERO “accepts the reports of KEDS’s external auditors as credible.” “Usually, they report through external audits, which ERO accepts as reliable. Based on those audit reports, the investment values are also considered. Approximately, investments in the Distribution System Operator (DSO) during the first regulatory period were around €103 million, while in the second period, over €100 million,” said Fejzullahu.
