Foreign Investors Line Up for Armenian Power Grid

YEREVAN (RFE/RL)–The planned privatization of Armenia’s electricity distributing network has aroused unprecedented interest among big foreign companies–with 15 of them already short-listed for the second stage of the international tender announced by Yerevan in June–a World Bank official said on Thursday.

Other reliable sources told RFE/RL that the preliminary choice has been made out of over one hundred firms from the US–Europe and Russia that showed interest in buying a 51 percent stake in Armenia’s power grid. Among those on the short-list are the US Cinergy Global Power–France’s Electricite De France–Russia’s RAO United Energy Systems and a subsidiary of the Russian Gazprom giant–the sources said.

Also bidding are power companies from Britain–Austria–Spain–India and the Caribbean island tate of Barbados.

The Armenian grid currently consists of four state enterprises–encompassing the capital Yerevan and the country’s central–northern and southern parts. The Yerevan enterprise is believed to be the most profitable.

Armenia experienced severe energy shortages in 1992-95 but has since progressed to a surplus production of electricity–some of which it currently exports to Georgia. A reopened border with Turkey would open a substantially bigger energy market for Armenia.

But experts say at least $1.5 billion will be needed in the next ten years for upgrading the country’s energy sector. Private investmen’s are seen as the only realistic source of money.

Salman Zaheer–a World Bank specialist on energy sector reforms–told reporters in Yerevan that the Armenian government will work out all details of the second and final phase of the tender by the middle of this month. It will then be clear whether the four energy enterprises are to be sold separately or otherwise.

Zaheer said Yerevan has pledged to ensure an adequate transparency of the process–mindful of previous privatization scandals.

He said the tender’s terms will be put on debate in the parliament–which will be invited to send representatives to a government commission handling the sell-off.

Opposition factions in the previous parliament caused a public uproar over the sell-off to foreign investors of Armenia’s telecommunications monopoly and famous cognac factory.

The opposition accused senior government officials of making huge personal profits on the deals.

The energy sector privatization may be challenged by those politicians who are opposed to any further increase in electricity charges. Many Armenia’s already find it difficult to pay their utility bills.

The cabinet of Prime Minister Vazgen Sargsyan has turned down Western lenders’ recent offer to raise the energy tariffs as a way of balancing the budget. The World Bank’s Zaheer said Yerevan should not charge a high bidding price if wants the future owners of the power grid to avoid tariff hikes.


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