Deloitte & Touche Presents Proposals for Improving Armenia’s Energy System

The Armenian government hired Deloitte & Touche after massive public outcry over the raising of electricity prices, thought to be the result of corruption and mismanagement (Source: Photolure)
The Armenian government hired Deloitte & Touche after massive public outcry over the raising of electricity prices, thought to be the result of corruption and mismanagement (Source: Photolure)

The Armenian government hired Deloitte & Touche after massive public outcry over the raising of electricity prices, thought to be the result of corruption and mismanagement (Source: Photolure)

YEREVAN (ARKA)—Deloitte & Touche, a leading U.S. financial services firm hired by the Armenian government to determine whether the recent rise in electricity prices in Armenia that sparked street protests was economically justified, presented its second report today. Its first report was published on September 30.

According to the new report, the company’s specialists analyzed the dynamics of technical and commercial losses suffered by the ENA, its faulty loans and the collection of payments for electricity consumption.

Deloitte & Touche says in its report that the Public Services Regulatory Commission (PSRC), the government body that approved the raise in electricity prices earlier this year, functioned properly for more than 15 years after is establishment in 1997, creating a system of regulation for several segments of Armenia’s economy and attracting new investors, including Midland Resources Holding, Inter RAO, RusHydro and Contour Global, and retaining prices for consumers.

However in 2012, the energy sector began losing balance due to various factors, including decrease in hydro power plants’ water flow, a two-fold increase in thermal power plants’ fuel expenses, market operators’ errors in projecting hydro power plants’ loading and the long-drawn repair of Armenia’s Metsamor nuclear power plant, which led to a sharp increase in power prices for consumers (+70% between 2013 and 2015). All this undermined consumers’ confidence in the regulator’s steps and sparked massive protests in the country.

Taking into account all the above mentioned factors, Deloitte & Touche recommends that the PSRC increase transparency of its activity and ensure regular independent monitoring of the commission’s decisions, and release the monitoring results to the public.

The company points out optimization of technical and commercial losses as one expense-cutting instrument.

The Electric Networks of Armenia (ENA), Armenia’s national power distribution company, was recently bought by Russia-based Tashir Group from the Russian energy giant Inter RAO.

Tashir Group pledged to introduce international practice standards within five years and to improve the management of the utility. The new owner has also committed also to reducing technological losses of the company by at least by 2%, which it hopes will play a significant role in improving the financial condition of the utility.

Tashir Group consists of about 200 companies, including 30 shopping malls and two dozen office buildings and hotels across Russia. With total assets estimated by Forbes magazine at $4.5 billion, Samvel Karapetyan is one of the world’s richest Armenians.

The ENA is said to have more than $220 million in outstanding debts to Armenian power generating plants and commercial banks. It was sold to Inter RAO in 2006 at $73 million by Midland Resources, a British-registered company.

Authors

Discussion Policy

Comments are welcomed and encouraged. Though you are fully responsible for the content you post, comments that include profanity, personal attacks or other inappropriate material will not be permitted. Asbarez reserves the right to block users who violate any of our posting standards and policies.

*

Top