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Obscure Foreign Firm Set To Buy Armenian Power Grids


By Atom Markarian and Emil Danielyan

An obscure offshore company registered on the British Channel Islands looks set to become the new owner of Armenia's power distribution network following the Armenian government's unexpected decision to again put it up for sale. Sources privy to the privatization process revealed to RFE/RL on Friday that representatives of the Ukrainian-owned Midland Resources Holding have been carrying out confidential negotiations with officials in Yerevan over the terms of the deal.

The government's decision late last month to call yet another international tender for the state-run power utilities came as a surprise to local analysts and Western donors that have long pushed for their transfer under foreign control. The two previous tenders ended in failure last year with no foreign company submitting a bid.

Faced with a lack of business interest in the sector's privatization, the government decided earlier this year to try to lease the network to a foreign investor capable of ending its huge losses. Preparations, overseen by the World Bank, were underway to hold the contest by the end of this year.

Sources said the new bidding will likely serve as a smokescreen for legitimizing the impending deal with Midland Resources. The company, which has already invested in Armenia's food processing sector, is not known to have any experience with power distribution. However, it is likely to meet the bidding requirements that have been substantially softened by the government. There were publicized last week.

The distribution network's future owner is now only required to have a minimum authorized capital and annual turnover of $100 million. The threshold was previously set at $250 million. Bidders have also been exempted from making specific commitments to invest in the sector.

The deadline for the submission of proposals for the first, "pre-qualification" phase of the bidding is August 9. The government may select its winner and formalize the sell off before the end of this month.

Sources said Midland Resources is ready to pay only $40 million for an 80 percent stake in the four power grids that were merged into a single company, the Armenian Electricity Network, last March. Midland's chances of success received a crucial boost last week when one of its Armenian business partners, Harutiun Pambukian, was included in an inter-ministerial government commission in charge of the energy sector privatization.

Pambukian, who is a wealthy businessman and parliament deputy, on Friday did not deny close links with the little known company.

Incidentally, the contact information contained in the government's call for pre-qualification bids included the private e-mail address of Justice Minister David Harutiunian, a close associate of President Robert Kocharian. Harutiunian has personally negotiated details of several deals with foreign investors on behalf of Kocharian, but has until now avoided any involvement in the efforts to privatize the power grids. His current involvement in the process suggests that their expected takeover by Midland Resources enjoys Kocharian's full blessing.
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