By Shakeh Avoyan
The Armenian government on Friday formally merged four state-run power utilities into a single enterprise as part of preparations for their possible lease to a foreign operator.
The decision to restructure the loss-making electricity distribution networks was taken last December following the failure of two government attempts to privatize them. The energy ministry announced that the new consolidated company, named the Unified Electrical Distribution Network, will have a three-tier management structure designed to boost its efficiency. Its board of directors will be headed by Energy Minister Armen Movsisian.
“Our goal is to find a powerful and experienced company which would get a management contract for the network in the course of this year,” said Deputy Energy Minister Areg Galstian. “This time we will not fall into a euphoria and will definitely succeed.”
Galstian referred to last year’s collapse of two international tenders for a majority stake in the four utilities. No foreign company took an interest in the bidding, something which Armenian officials and the World Bank have largely blamed on external factors. The sell-off of the power grids was the main condition for the release of a $20 million World Bank loan to Armenia. The bank has since backed the government plans to lease them to a foreign company.
The energy ministry has yet to set a date for the official call for proposals from interested investors. The main requirement to the future network operator is the elimination of the energy distributors’ huge financial losses. They total a staggering $50 million, according to some expert estimates.
Foreign investment will be crucial for the realization of the government’s long-term energy strategy unveiled by Galstian at a seminar on Friday. According to that program, at least $1.5 billion worth of capital investments will be needed to ensure the development of the Armenian energy sector in the next two decades. “The lion’s share of the money is to come from the private sector,” Galstian said.
The program envisages to increase electricity production in Armenia by about two and a half times by the year 2020.