By Emil Danielyan
A Japanese government agency financing the reconstruction of a big thermal power plant in Yerevan has added its voice to Western concerns about the controversial takeover of Armenia’s electricity distribution network by a state-owned Russian company, it emerged on Tuesday.
Levon Vartanian, head of the Armenian Energy Ministry’s external relations department, told the Arminfo news agency that representatives of the Japan Bank for International Cooperation (JBIC) visited Yerevan recently to demand explanations regarding ownership of the Electricity Network of Armenia (ENA). Vartanian said they voiced their “dissatisfaction” with ENA’s de facto sale to Russia’s Unified Energy Systems (UES) giant.
An obscure UES subsidiary called Interenergo BV paid last June $73 to buy the right to manage ENA and use its earnings, in a legally questionable deal that has provoked strong criticism from the United States and the World Bank. Although Midland Resources Holding, a British-registered firm that privatized ENA three years ago, insists that the deal did not amount to an acquisition, its ownership of the Armenian utility now seems largely symbolic.
Under the terms of ENA’s 2002 privatization, Midland Resources can not resell it to another investor without the Armenian government’s consent. The government was clearly reluctant to demand explanations from Midland Resources until the World Bank and the U.S. Agency for International Development warned last month that its handling of the matter could adversely affect their further assistance to Armenia.
Armenia’s Public Service Regulatory Commission has demanded that the ENA owner submit written clarifications of its deal with UES by August 17 or face the possibility of losing its operating license. “The owner of the Electricity Networks of Armenia has not yet answered to the inquiry about the deal on the transfer of the company's shares to the Russian company,” Vartanian said.
The JBIC became closely involved in the decade-long reform of Armenia’s energy sector last March when it disbursed a $150 million loan for the complete reconstruction and modernization of the Yerevan power plant which will allow the country to save almost $20 million worth of imported natural gas every year.
Officials said electricity produced at the modernized plant will cost between 7-8 drams (about 2 U.S. cents) per kilowatt/hour. Power generated at Armenia’s largest thermal plant located in the central town of Hrazdan is more than twice as expensive. Incidentally, the Hrazdan plant is owned by the Russian government and managed by UES. The latter already controls 80 percent of Armenia’s power generating capacities.
The Japanese bank is apparently worried that an energy distribution network controlled by UES could be disinterested in buying electricity from other suppliers and thereby render the multimillion-dollar project meaningless.