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Parliament Approves Softer Terms For Energy Privatization


By Ruzanna Khachatrian

The Armenian parliament voted to approve on Wednesday a government proposal to soften terms of the upcoming privatization of state-run power utilities in a bid to make them more attractive to foreign investors.

The changes in privatization legislation will allow a single bidder to buy a controlling stake in all four energy distribution companies. Until now it could acquire only two such companies put up for sale in a single “package.” The parliament also abolished a clause in the Law on Energy stipulating that the owner of a distribution network can not own more than 25 percent of equity in a power generating company.

The changes, which took the form of a new law on the privatization of the national power grid and amendments in the existing energy law, also ease restrictions on the owner’s ability to set electricity fees. “We must be ready for the eventual rise in the tariffs,” Energy Minister Karen Galustian told the deputies on Tuesday.

The government suggested the measure shortly after the collapse last April of the first international tender for the four electricity companies when none of the Western contenders submitted a bid. Stringent requirements to potential buyers were seen as one of the reasons for the fiasco.

The government hopes that its second attempt to privatize the loss-making sector will end in success before the end of November. It is expected to call a new bidding soon. However, the latest legislative changes allow the government to sell the networks to a foreign company without a contest.

The authorities argue that the purpose of the privatization is to end corruption and substantial losses in the energy sector and to attract capital investments in the utilities. Galustian estimates that some $1.5 billion needs to be invested in the sector in the next 15 years to avert another energy crisis in Armenia.
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