Bidding for Armenia Power Grid Set for December

YEREVAN (RFE/RL)–Bids for Armenia’s electricity distribution network put up for sale will open on December 7 with the official release of bid specifications–government sources said on Tuesday.

Bidding was initially expected to begin on October 15 but was postponed by the late Prime Minister Vazgen Sargsyan to allow more time for its preparations.

The planned privatization of the country’s four energy distributing enterprises has attracted strong interest from major foreign companies.

Fifteen of them were shortlisted last summer after a "pre-qualification." Among them are the US Cinergy Global Power–Electricite De France–Russia’s RAO United Energy Systems and a subsidiary of the Russian Gazprom giant.

A government official involved in the process told RFE/RL that Yerevan’s strategy will be to sell a controlling 51 percent stake in each of the four enterprises to different "strategic investors" in order to spur future competition among them.

The European Bank for Reconstruction and Development also takes an interest in the network’s privatization and may be given 20 percent of all shares–the official said. The government is likely to grant five percent of the stock to the sector’s employees and retain control over the remaining 25 percent–according to the official. Winners of the international tender are expected to be selected by the end of next February.

Informed sources also say that the government is keen to clear all debts owed to the energy sectors before privatizing the national power grid–in an effort to prevent tariff hikes in the near future.

Last August–the government diverted 17 billion drams ($32 million) in public funds to the partial repayment of electricity debts incurred by state-owned enterprises.

The emergency measure was approved by the International Monetary Fund which had urged Yerevan to "restore the financial viability" of the energy sector.

Experts from the World Bank have estimated that at least $1.5 billion will be needed in the next ten years for upgrading the country’s energy sector.

They view private investmen’s as the only realistic source of money.

The World Bank’s $53 million loan to the Armenian energy sector released last March was conditional on its privatization.

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