By Shakeh Avoyan and Atom Markarian
After several unsuccessful attempts to sell its loss-making electricity distribution system, the Armenian government has announced another tender for state controlled network. The World Bank and the IMF have demanded from the Armenian government to privatize its energy sector. The World Bank, which covers almost 40 percent of Armenia's budget deficit by its special structural reform assistance credits (SAC), has made the privatization of the state owned energy production and distribution enterprises, a precondition for future credit allocations. The Armenian nuclear power plant Metsamor is excluded from the privatization list. Privatization would substantially cut subsidies from Armenia's budget and reduce the deficit.
US, Spanish and Russian energy firms were competing in the last tender held in December of 2001, which ended in complete failure, with all firms including the Russian energy giant RAO UES dropping out from the contest. The sharp decline in the global utility industry also contributed to the decision by those companies to withdrew from the contest for.
Sources close to the commission on privatization of the power distribution grids said Thursday, that already the main bidder in a new tender is most probably known and it could be a Russian-Ukrainian joint company. According to the new conditions outlined in the official announcement published on Thursday, the bidder should have a least $100 million market capital. In the previous two tenders the companies could have qualified only if they had at least $250 million market capitalization, with specialization in the energy production or distribution industries. According to the new requirements outlined in Thursday's tender announcement, the bidder could be from other industrial sectors. The Armenian finance Minister Vartan Khachatrian told journalists on Friday that the winner could get 80.1 percent shares of the Armenian utility distribution company.
The deputy minister of Energy, Areg Galustian told RFE/RL that the companies which qualified in previous tenders could re-enter the bidding process. However, there was no indication that western utility companies would bid again if another tender is announced. Meanwhile the Armenian power distribution company continues to post heavy losses. Last year alone the company lost almost $65 million and some experts doubt whether the company could be valued as a business with potential profitability or just a loss-making asset.
The commission on the privatization of the power distribution grids voted unanimously on Thursday to lower the requirements for the bidders, hoping that the deal could be very attractive and the bidders would not hesitate this time to take over the company, thus easing Armenia's budgetary burden. A would to buyer is fully aware that the company is in a very bad financial and physical shape and they know the real market value of the company, the commission members told RFE/RL. "We have no pricing power, the company even could be priced at $1 and the only thing that the government could do is just to cancel the deal", a member of privatization commission Harutiunian Pambukian said.
Potential buyers could bid for the ailing energy company until August 7.
After several unsuccessful attempts to sell its loss-making electricity distribution system, the Armenian government has announced another tender for state controlled network. The World Bank and the IMF have demanded from the Armenian government to privatize its energy sector. The World Bank, which covers almost 40 percent of Armenia's budget deficit by its special structural reform assistance credits (SAC), has made the privatization of the state owned energy production and distribution enterprises, a precondition for future credit allocations. The Armenian nuclear power plant Metsamor is excluded from the privatization list. Privatization would substantially cut subsidies from Armenia's budget and reduce the deficit.
US, Spanish and Russian energy firms were competing in the last tender held in December of 2001, which ended in complete failure, with all firms including the Russian energy giant RAO UES dropping out from the contest. The sharp decline in the global utility industry also contributed to the decision by those companies to withdrew from the contest for.
Sources close to the commission on privatization of the power distribution grids said Thursday, that already the main bidder in a new tender is most probably known and it could be a Russian-Ukrainian joint company. According to the new conditions outlined in the official announcement published on Thursday, the bidder should have a least $100 million market capital. In the previous two tenders the companies could have qualified only if they had at least $250 million market capitalization, with specialization in the energy production or distribution industries. According to the new requirements outlined in Thursday's tender announcement, the bidder could be from other industrial sectors. The Armenian finance Minister Vartan Khachatrian told journalists on Friday that the winner could get 80.1 percent shares of the Armenian utility distribution company.
The deputy minister of Energy, Areg Galustian told RFE/RL that the companies which qualified in previous tenders could re-enter the bidding process. However, there was no indication that western utility companies would bid again if another tender is announced. Meanwhile the Armenian power distribution company continues to post heavy losses. Last year alone the company lost almost $65 million and some experts doubt whether the company could be valued as a business with potential profitability or just a loss-making asset.
The commission on the privatization of the power distribution grids voted unanimously on Thursday to lower the requirements for the bidders, hoping that the deal could be very attractive and the bidders would not hesitate this time to take over the company, thus easing Armenia's budgetary burden. A would to buyer is fully aware that the company is in a very bad financial and physical shape and they know the real market value of the company, the commission members told RFE/RL. "We have no pricing power, the company even could be priced at $1 and the only thing that the government could do is just to cancel the deal", a member of privatization commission Harutiunian Pambukian said.
Potential buyers could bid for the ailing energy company until August 7.