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More Western Investors ‘Interested’ In Armenian Energy Sector


Armenia -- A newly rebuilt thermal power plant in Yerevan, 21Apr2010

Armenia -- A newly rebuilt thermal power plant in Yerevan, 21Apr2010

Two Europe-based companies have expressed readiness to invest hundreds of millions of dollars in the construction of new thermal power plants in Armenia, according to the Armenian government.

Prime Minister Hovik Abrahamian’s cabinet approved on Thursday a memorandum of understanding with one of them, the Italian group Renco. The latter is to conduct a four-month feasibility study on a 234-megawatt plant which it is considering building in Yerevan.

Should Renco decide to go ahead with the $215 million project the government will provide it with a plot of land adjacent to an existing Yerevan power plant. The 242-megawatt gas-fired facility was completely reconstructed in 2010 with a $247 million loan provided by Japan’s government.

According to a government statement, Abrahamian stressed the importance of the would-be project for Armenia’s energy security. He argued that the country would boost its power generating capacity without increasing its foreign debt.

Renco has done business in Armenia for more than a decade. It has not been involved in the local energy sector, however, investing instead in luxury housing and hotels. But the company has built, installed or operated power generation and distribution facilities in other parts of the world.

The government gave the green light to the possible deal with Renco less than a week after Abrahamian met with the visiting chief executive of Grange Holdings, a little-known company based in Britain. Abrahamian’s press office cited Assad Sheikh as saying that the company is “prepared to invest some $400 million in Armenia’s energy sector and thermal energy in particular.”

The Armenian premier assured Sheikh that his government would welcome such a project. There was no word on possible dates for its implementation.

Earlier this year, energy experts from the World Bank warned in a report that Armenia could face a shortage of electricity unless it builds a new and large power plant by 2026, the anticipated date of the decommissioning of the nuclear station at Metsamor.

With a capacity of 400 megawatts, Metsamor’s sole functioning reactor accounts for around 40 percent of electricity generated in the country annually. Its 30-year design life span ends in 2016. The government plans to modernize the Soviet-era plant and keep it operational for at least 10 more years.

The two possible investments revealed by the government would also further diversify foreign ownership of Armenian energy enterprises. The sector is currently is dominated by the Russian energy giants Gazprom and Inter RAO.

In May this year, the U.S. company ContourGlobal completed a $180 million acquisition ofArmenia’s largest hydroelectric complex. It thus became the first Western firm to gain major assets in the Armenian energy sector. The three plants making up the Vorotan Hydropower Cascade have a combined capacity of over 400 megawatts.

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