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Germany’s Siemens May Run Armenian Power Grids


By Atom Markarian

The German engineering group Siemens may soon be granted management of Armenia’s recently privatized power distribution network, a source close to the privatization process told RFE/RL on Tuesday.

The source said the Armenian government has told Western donor agencies that the network’s new owner, the British-registered Midland Resources Holding, is likely to sign a management contract with Siemens by December 1.

Midland Resources was declared last August the winner of an international tender for a commanding 80.1 percent share in the Armenian Electricity Network (AEN) after offering to pay $37 million. The World Bank and other Western donors criticized the government’s choice of a new AEN owner, arguing that the known company has little experience with power distribution and lacks the expertise to end the network’s huge losses.

But Midland Resources dismissed the criticism and pledged to hire an experienced energy operator to run and restructure AEN. The head of its Moscow office, Andrey Zavrazhnov, assured reporters in Yerevan on September 6 that it will be a “famous foreign energy company with huge experience.” “It is not yet clear which company as we are now conducting negotiations,” he said.

A deal with Siemens would almost certainly dispel donor concerns which have already resulted in yet another freezing of crucial World Bank loans promised to the Armenian government. The German giant, which has a division specializing in power distribution, was last year close to securing a 25-year management of the electricity network of the Azerbaijani capital Baku. However, disagreements between Siemens and the Azerbaijani government over electricity fees derailed the planned agreement.

Two separate World Bank missions are currently in Yerevan, negotiating with Armenian officials the fate of the two frozen loans worth more than $40 million. They were meant to cover a large part of the country’s 2002 budget deficit. One of the loans, a $20 million installment of the bank’s 2001 Structural Adjustment Credit (SAC), was specifically pegged to a successful privatization of Armenia’s power grids.

The World Bank spokesman in Yerevan, Vigen Sargsian, told RFE/RL that no agreement has been reached on the release of the funds.
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