By Atom Markarian
The Armenian government and the British-based owner of Armenia’s low-voltage power grids appear to have dropped plans to hire an experienced foreign company to manage the loss-making network despite earlier assurances given to Western donors.
The British-registered company Midland Resources Holding, which last year purchased the Armenian Electricity Network (AEN), indicated this week that it will not sign a management contract with South Korea’s Daewoo Engineering giant. It announced last December that the Koreans will take over the power distribution network in January.
But senior AEN executives now say that they have succeeded in cutting the network’s huge losses in the last four months and see no need to call in a foreign operator with substantial experience in the energy sector. Energy Minister Armen Movsisian echoed their statements, saying in a newspaper interview that AEN’s financial position has “improved considerably.” He said the Armenian government is encouraged by the fact that Midland Resources pays for electricity supplied by local power stations in full.
Midland Resources, which specializes in trade of ferrous metals, got hold of the Armenian power grids last August despite a lack of energy-related experience -- the main reason why the World Bank and other Western donors criticized the $40 million deal. In a bid to allay their concerns, the offshore-registered company promised that AEN will be run by a more experienced foreign operator. The pledge led the World Bank to unblock the release of a major $20 million loan to the Armenian government in December.
The bank is now seeking explanations from the government, according to the spokesman for its Yerevan office, Vigen Sargsian. “Our main concern during the privatization process was that Midland Resources lacks the relevant experience to run the network,” he told RFE/RL. “It is not clear whether Midland Resources has acquired such experience over the past four months.”
Sargsian at the same time stressed that the World Bank is primarily concerned with the financial health of the power distribution network and the Armenian energy sector in general. Endemic corruption and inefficiency there cost are estimated to cost Armenia $50 million each year.