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Government Clears Energy Debts With Privatization Revenues


By Atom Markarian
The government will use part of $132 million raised from the privatization earlier this month of Armenia’s largest mining enterprise to repay huge debts incurred by individual electricity consumers in the past, officials said on Tuesday.

Energy Minister Armen Movsisian said $27 million of the sum will go to clear most of the consumer debt accumulated before the October 2002 privatization of the country’s power distribution network. “After this decision the distribution networks will stop collecting debts incurred before October 1, 2002,” he told reporters after a meeting of a government commission dealing with the issue.

Movsisian added that the Energy Ministry will in turn give the money to electricity-generating companies that are owed substantial sums by the national power grid. The biggest of them, the Metsamor nuclear power station and the Hrazdan thermal power plant, are controlled by Russia’s Unified Energy Systems utility.

The power distribution network was owed 21 billion drams ($43 million) when it was purchased by Midland Resources Holding. The offshore-registered company was not granted ownership of the outstanding debt as part of the takeover agreement and has therefore done little to collect back payments for electricity supplied to thousands of households across Armenia. The network’s chief executive, Yevgeny Gladunchik, revealed recently that less than 3 percent of them have been collected so far.

The amount of the debt itself has aroused suspicions. The distribution network was hugely corrupt before the privatization, with employees routinely misappropriating cash collected from power consumers.

The sale of the Zangezur Copper and Molybdenum Combine, located near the town of Kajaran in southeastern Armenia, to a private consortium led by Germany’s Cronimet group was formalized on December 14. The government has already decided to add $25 million in proceeds from the sell-off to its budget for next year and transfer $75 million to a special privatization fund managed by the Armenian Central Bank.

The funds used in the energy debt payment scheme will be deducted from the $32 million remainder of the sum that was initially allocated to the Kajaran municipality. The money, astronomical by Armenian standards, would have made the town of less than 12,000 inhabitants the wealthiest in the country.

Kajaran Mayor Vartan Gevorgian, who attended the commission meeting in Yerevan, claimed that the town’s legislative council decided last week to give away the bulk of it "voluntarily" and with “great enthusiasm.”
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