By Emil Danielyan
Spanish power utility Union Fenosa will not participate in the upcoming international bidding for a majority stake in Armenia’s four electricity distribution networks, neither independently nor in conjunction with Russian firms, it emerged on Thursday. A company executive denied Russian officials’ claims that Union Fenosa and the ITERA corporation, an offshore-registered subsidiary of the Gazprom giant, will submit a joint bid.
“We have thoroughly looked into the matter and decided not to participate in the tender,” the official told RFE/RL by telephone. “We are not going to present a bid and can therefore be considered out of the process.”
The Union Fenosa official, who asked not to be identified, spoke ahead of Friday’s deadline for the submission of preliminary proposals by foreign companies willing to take part in the second international tender for the distribution networks. The Armenian government’s first attempt to privatize them ended in failure last April after none of three short-listed Western firms, including the Spanish utility, submitted a bid.
Shortly afterwards the government promised to call and complete another bidding by the end of the year. This is the main condition for the release of the final $20 million tranche of a crucial World Bank loan.
Russian Deputy Prime Minister Ilya Klebanov announced in Yerevan over the weekend that Gazprom and Russia’s main electricity firm, RAO UES, will “certainly” compete for the Armenian utilities. He said ITERA had teamed up with Union Fenosa for that purpose.
“ITERA has already signed such an agreement with Fenosa and we will be participating in that project,” Klebanov told reporters on the sidelines of a Russian-Armenian summit.
But the Spanish executive refuted the information, saying that Union Fenosa has invested heavily in South America this year and has no plans to expand further for the time being. While insisting that this is the main reason for the company’s decision to pull out of the contest, he admitted that repeated delays in the privatization process have also played a role.
The Russian energy firms, which were left off the shortlist of bidders last year despite strong pressure from Moscow, are thought to have better chances of success in the wake of President Vladimir Putin’s official visit to Armenia. Putin and his Armenian counterpart, Robert Kocharian, signed a ten-year of economic cooperation which encompasses the energy sector as well. The two sides are close to agreeing another deal that would give the Russians substantial stakes in state-run Armenian enterprises in payment for Yerevan’s $100 million debt.
In a move that could favor the Russian firms, the Armenian government on Thursday delayed by one month the planned announcement of the results of the energy sector privatization. Under a new timetable approved by ministers, the winners of the tender will be officially announced on December 4.
But officials denied that the delay is aimed at giving the Russians more time for preparation. “The delay has nothing to do with the participation of Russian companies,” said Justice Minister David Harutiunian.
The World Bank and other Western donors have previously argued that none of them has proven resources and skills to turn the loss-making Armenian utilities into successful businesses. Friday will show whether Gazprom and RAO UES will face strong Western competitors this time around.