Uncertain Prospects for Energy Privatization As Parliament Opens Debates

YEREVAN (RFE/RL)–The success of the Armenian government’s efforts to privatize state-run electricity distributing networks did not appear a foregone conclusion on Monday as the country’s parliament began final debates on whether foreign companies should be given a controlling interest in the sector.

With the People’s Party of Armenia–a key member of the ruling coalition–said to be opposed to the sell-off–the government of Prime Minister Andranik Markarian faced serious difficulties trying to win over the majority of deputies.

Energy Minister Karen Galustian presented the main points of a draft law setting "the main principles and conditions" of an international tender for the four electricity companies. The bill has to be approved by the National Assembly in order for the bidding to go ahead.

The cabinet–backed by President Robert Kocharian–is keen to complete the privatization process by the end of next fall to secure among other things more vital loans from the World Bank and International Monetary Fund.

Galustian reiterated the authorities’ main argumen’s–saying that the sell-off is essential for attracting capital investmen’s in the loss-making sector and achieving a 100 percent enforcement of electricity bills. He also said that it is part of a government strategy of turning Armenia into a "major exporter of energy in the region."

The issue again brought to light serious differences inside the country’s ruling elite–with some pro-government lawmakers saying that they will help opposition factions scuttle the bill.

A deputy from the People’s Party–Aramayis Barseghian–told RFE/RL that the center-left party–which together with Markarian’s Republican Party forms the Unity bloc–has decided to vote against the proposed legislation. Unity controls 49 seats in the 131-member assembly. Twenty-three members of its faction represent the People’s Party. Some members of the allied 18-strong Stability group–which is also represented in Markarian’s government–have also threatened to block the initiative.

Also opposed to the sell-off are the Armenian Communists–the nationalist Right and Accord bloc and most members of a parliamentary group uniting members of the Yerkrapah Union of Karabakh war veterans. Other parties represented in the parliament have yet to formulate an official position on the issue. The debates will continue on Tuesday.

Meanwhile–parliament committee on budget–finance and economic issues endorsed the government bill on privatization of four energy distributing companies by 15 votes to 3. The committee members from the Right and Accord alliance and the Communists voted against the bill.

Speaking to Armenpress on last Friday–parliament deputy speaker Tigran Torosian endorsed the bill drafted by the government saying that the process of energy companies’ privatization was unprecedented in the entire history of the privatization process in Armenia.

He swept off concerns of some deputies who claim that the absence of the starting price for the companies is the main shortcoming of the draft law. "It is very well known that some tenders are held without fixing the starting price–and I hope the draft law will be passed by the parliament," he said.

Armenia’s energy minister Karen Galustian said that the privatization of energy grid will allow to supply energy uninterruptedly to consumers–will raise the reliability of electricity distribution networks–minimize the huge losses of electricity–and replenish the budget.

"While calculating the price of the power grid we have to take into account that the strategic investor has to buy 51 percent of shares and will try to bring back the money as soon as possible which may have a negative impact on the energy tariffs and raise the social tension," he said.

He claimed that the higher the price of the energy companies the higher the tariffs will be–"that is why we have to conduct a balanced policy in privatization of energy grid and the government draft law is called to secure that balance from the perspective of deman’s put forward by the Armenian government," he said.

In the meantime–Manuk Gasparian from the People’s Party of Armenia’said that he was authorized by his party to announce that the People’s Party of Armenia would endorse the government’s draft law if several suggestions–proposed by his party–are accepted. The People’s Party of Armenia proposes to sell not the 51 percent of the shares but only 40 percent–and give the management of the companies to the owner for a period of 4 years. If the latter does justify the confidence–the remaining 11 percent of shares should be privatized.

Another Armenian party–Liberal Democratic–not represented in parliament–issued a statement on Friday endorsing the privatization of energy companies. The statement says that the privatization of the energy companies will put an end to corruption in the sector and will create possibilities for an uninterrupted supply of energy to consumers. The privatization will also allow to secure material investmen’s directed towards technical updating of the nets–their expansion and development will also create new jobs.

The government proposes to sell the four electricity companies in two separate packages. None of the shortlisted contenders – the Electricite de France giant–Swiss-Swedish group ABB–Spain’s Union Fenosa and the US operator AES Silk Road – would be allowed to buy more than two companies put up for sale in a single package. The future owners would not have the freedom to decide on electricity fees–with the government’s Energy Commission retaining a final say in setting the tariffs.

The successful completion of the privatization process is essential for the release of some $50 million in fresh World Bank loans that would cover about half of Armenia’s budget deficit for this year. Judy O’Connor–the Bank’s regional director for the South Caucasus told reporters in Yerevan on June 5 that the fresh structural adjustment credits will be disbursed very shortly after the government selects the winners and finalizes takeover negotiations with them.

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