The Armenian government gave on Tuesday the strongest indication yet that it could cancel soon the $250 million sale of Armenia’s largest cascade of hydroelectric plants to a U.S. energy firm, which was officially announced in January.
Armen Movsisian, an adviser to President Serzh Sarkisian who served as energy minister until last month, said the government may have made a mistake when it agreed to what would be the first-ever major Western investment in Armenian energy sector dominated by Russian conglomerates.
Under a takeover agreement signed on January 29, the New York-based group ContourGlobal was to pay $180 million for three plants making up the Vorotan Hydro Cascade and invest US$70m in their modernization over the next six years. The deal came after about two years of negotiations between the government and the U.S. company.
The impending takeover was first announced by the U.S. State Department in November. John Heffern, the US ambassador to Armenia, underlined the US government support for the agreement with his presence of at its signing its Yerevan. Heffern said afterwards that it will strengthen the country’s “energy diversity and independence.”
ContourGlobal was expected to formally complete the acquisition by mid-April. However, the Armenian side subsequently demanded unpublicized changes in the terms of Vorotan’s sale, fuelling speculation that it is having second thoughts about the deal. Officials in Yerevan have said in recent weeks that the American firm is still considering those demands.
Citing unnamed government sources, the pro-opposition daily “Haykakan Zhamanak” reported on Tuesday that the Sarkisian administration is now “extremely close” to annulling the deal for geopolitical reasons. It claimed that Yerevan is keen to avoid negative reaction from Russia, whose state-run giants own many of Armenia’s energy facilities.
Armenia - Energy Minister Armen Movsisian attends a parliament session, Yerevan, 5Feb2014.
Movsisian, who had personally negotiated with ContourGlobal, gave more weight to such reports in an interview with the Tert.am news service. He said that the decision to privatize Vorotan was made before a recent cabinet Armenian government reshuffle that saw Prime Minister Tigran Sarkisian and several ministers, including Movsisian, replaced by other officials.
“If we made a mistake on that issue, then of course it’s still not too late,” said Movsisian, who served as energy minister for 13 years. “Nothing irreversible was done and the new government is free to make any changes or even suspend the process.”
The Soviet-built plants are located on the Vorotan river flowing through Armenia’s southeastern Syunik province. With a combined operational capacity of 405 megawatts, they are nearly as powerful as the Metsamor nuclear plant that accounts for roughly 40 percent of Armenian electricity production.
Movsisian spoke to Tert.am in response to former President Robert Kocharian’s strong criticism of the Vorotan deal that was voiced on Monday. Kocharian claimed that the deal is illegal because it was not approved by the Armenian government. He also said that it would primarily benefit the U.S. buyer.
Movsisian dismissed this criticism as disingenuous, saying that parliamentary approval is not mandatory under Armenian law and that several Armenian energy facilities were sold off in a similar fashion during Kocharian’s 1998-2008 presidency.
Those facilities included a smaller hydroelectric cascade on the Hrazdan river and a thermal power plant in central Armenia.