By Atom Markarian
A South Korean engineering firm will take over the management of Armenia’s recently privatized and struggling power distribution network on January 1, officials said on Tuesday.
A long-term management contract for the Armenian Electricity Network (AEN) was signed last month by the Daewoo Engineering group and AEN’s new owner, the British-registered Midland Resources Holding. The company, which has little experience with energy business, promised to hire an experienced operator after its $40 million purchase of the loss-making utility last August.
An AEN spokeswoman, Margarit Grigorian, told RFE/RL that Daewoo executives have not yet arrived in Armenia to prepare for the transfer of management.
The new network operator will face a daunting task of restructuring AEN and tackling widespread theft of electricity practiced by its various-level officials. The fraud and inefficiency cost Armenia an estimated $50 million each year.
Under the terms of AEN’s sell-off, Midland Resources must pay in full for electricity supplied by the country’s state-owned power plants. Its total debt to the latter amounted to more than $100 million before the privatization. The power grid is itself owed comparable sums by various government agencies and corporate consumers. The vast majority of ordinary Armenians pay their electricity bills on time.
Midland Resources officials have already warned that they will not hesitate to cut off power supplies to delinquent payers. They say that a tough enforcement of bills is also essential for their plans to modernize the network’s aging Soviet-era equipment which has suffered a series of breakdowns since the onset of winter.
Midland Resources’ decision to find an experienced energy operator has also paved the way for the release of a $20 million World Bank to the Armenian government. World Bank officials said the money, which will partly finance the government’s 2002 budget deficit, will be made available later this month.
Negotiations were underway on Tuesday between Armenian officials and a visiting World Bank officials on the release of more such loans next year.