U.S Acquisition of Armenian Hydro Plant in Doubt

One of the three hydroelectric power stations on the Vorotan River, sold to U.S.-based ContourGlobal (Photo: Photolur)l


YEREVAN (RFE/RL)—The Armenian government gave on Tuesday the strongest indication yet that it could soon cancel the $250 million sale of Armenia’s largest cascade of hydroelectric plants to a U.S. energy firm, which was officially announced in January.

Armen Movsisian, an adviser to President Serzh Sarkisian who served as energy minister until last month, said the government may have made a mistake when it agreed to what would be the first-ever major Western investment in Armenian energy sector dominated by Russian conglomerates.

Under a takeover agreement signed on January 29, the New York-based group ContourGlobal was to pay $180 million for three plants making up the Vorotan Hydro Cascade and invest US$70m in their modernization over the next six years. The deal came after about two years of negotiations between the government and the U.S. company.

The impending takeover was first announced by the U.S. State Department in November. John Heffern, the US ambassador to Armenia, underlined the US government support for the agreement with his presence at its signing in Yerevan. Heffern said afterwards that it will strengthen the country’s “energy diversity and independence.”

ContourGlobal was expected to formally complete the acquisition by mid-April. However, the Armenian side subsequently demanded unpublicized changes in the terms of Vorotan’s sale, fuelling speculation that it is having second thoughts about the deal. Officials in Yerevan have said in recent weeks that the American firm is still considering those demands.

Citing unnamed government sources, the pro-opposition daily “Haykakan Zhamanak” reported on Tuesday that the Sarkisian administration is now “extremely close” to annulling the deal for geopolitical reasons. It claimed that Yerevan is keen to avoid negative reaction from Russia, whose state-run giants own many of Armenia’s energy facilities.

Movsisian, who had personally negotiated with ContourGlobal, gave more weight to such reports in an interview with the Tert.am news service. He said that the decision to privatize Vorotan was made before a recent government reshuffle that saw Prime Minister Tigran Sarkisian and several ministers, including Movsisian, replaced by other officials.

“If we made a mistake on that issue, then of course it’s still not too late,” said Movsisian, who served as energy minister for 13 years. “Nothing irreversible was done and the new government is free to make any changes or even suspend the process.”

The Soviet-built plants are located on the Vorotan river flowing through Armenia’s southeastern Syunik province. With a combined operational capacity of 405 megawatts, they are nearly as powerful as the Metsamor nuclear plant that accounts for roughly 40 percent of Armenian electricity production.

Movsisian spoke to Tert.am in response to former President Robert Kocharian’s strong criticism of the Vorotan deal that was voiced on Monday. Kocharian claimed that the deal is illegal because it was not approved by the Armenian government. He also said that it would primarily benefit the U.S. buyer.

Movsisian dismissed this criticism as disingenuous, saying that parliamentary approval is not mandatory under Armenian law and that several Armenian energy facilities were sold off in a similar fashion during Kocharian’s 1998-2008 presidency.

Those facilities included a smaller hydroelectric cascade on the Hrazdan river and a thermal power plant in central Armenia.

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8 Comments

  1. Armenian said:

    Now cancel all of the other contracts with Russia and we’ll be off to the right start.

  2. Art said:

    Mother Russia quelling yet another deal between the Armenian oblast and the U.S. Oooops, did I say oblast, I meant the so-called Republic of Armenia.

  3. Armenian said:

    Watch this power plant end up in the hands of a Russian company…

  4. Hratch said:

    “geopolitical reasons”…. it sounds much like the sudden about-face concerning the negotiations with the EU. President Sarkisian made the surprise announcement after talks with his Russian counterpart, Vladimir Putin, in Moscow on September 3.

    It seems like Mother Russia is really twisting arms now. It’s “what we say goes or Karabagh goes, you decide!”

  5. zohrab said:

    dont sell it to usa establish a company offer it as shares to armenian diasphorans at least still will stay in armenian hands do not rely on us

  6. Norin Radd said:

    Those that whined about Russian acquisition regarding other energy assets should also be whining about this potential acquisition, where are you?

  7. Lus said:

    Good news! What a stupid move was that in the first place to make such a deal with the Vultures…

  8. Sokimag said:

    While I agree that it’s not good for Armenia to sell it’s infrastructure to foreign countries, I am disgusted by the motive of the deal cancellation. The only reason is to not upset Russia? Really? How much this criminal and corrupt armenian government will abuse of Armenia before they get kicked out of office?

    It is good to keep all armenian infrascruture for us. That means we should get back all the infrastructure we sold to Russia as well.

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