Fotolur photo: The package of takeover proposals by the new owner of Armenia's power grids.
By Shakeh Avoyan
An obscure private company registered on the British Channel Islands was on Saturday declared the winner of an international tender for Armenia’s low-voltage power grids after offering to pay $37.15 million for a commanding 80.1 percent share in them.
As was widely anticipated, Midland Resources Holding was the only foreign firm to have submitted a bid before the expiry of the August 24 deadline at 6 p.m. local time.
“The contest has taken place and the winner is the Midland Resources Holding company,” Prime Minister Andranik Markarian, who heads a commission overseeing the energy sector privatization, declared minutes after the disclosure of its proposals sealed in an envelop.
The commission’s decision will almost certainly be rubber-stumped by Markarian’s cabinet next week. Justice Minister David Harutiunian said the government will then start final takeover negotiations with the offshore firm within the next 24 hours. “We will sign the deal in another 24 hours,” he said.
The loss-making energy distribution networks, incorporated into a single company late last year, were unexpectedly put up for sale a month ago, apparently after the Armenian government was approached by Midland Resources executives. Sources privy to the privatization process told RFE/RL shortly afterwards that the outcome of the tender is a forgone conclusion.
Two similar energy biddings ended in failure last year with no foreign company submitting a bid. This time government promptly softened its bidding requirements to pave the way for the sell-off.
The price offered by the British-registered firm includes the power grids’ $25 million debt to electricity producers, meaning that it will pay only $12.15 million for the 80 percent stake. The Armenian energy ministry had originally estimated the distribution network’s value at $250 million.
Officials argued on Saturday that demanding a higher takeover price from foreign investors would not be realistic given the current state of the Armenian energy sector. They also said that the lower-than-expected price would also enable the government to block any increase in electricity fees in the next three years. The existing tariffs are already seen as disproportionately high by most Armenians.
It is expected that the European Bank for Reconstruction and Development will buy the remaining 19.9 percent of the Armenian Electricity Network’s stock.
No representative of Midland Resources was present at the official opening of its package of proposals, a fact that kept up uncertainty surrounding its ownership. According to the offshore company’s main Armenian business partner, parliament deputy Harutiun Pambukian, it is owned by Alex Schneider, a Canadian national. Pambukian told RFE/RL earlier this month that Midland Resources holds a majority share in the Zaporozhstal steel factory in Ukraine and recently bought a 50 percent stake in the Armenian agricultural company Max Fruit. The other 50 percent belongs to Pambukian.
Midland Resources’ biggest challenge will be to tackle the power grids’ $50 million annual losses resulting from corruption and mismanagement. Harutiunian said it will likely hire a new team of energy sector managers from the United States to run the troubled network.