By Atom Markarian
Russia’s state-run power utility claims that one of its offshore-registered subsidiaries has purchased Armenia’s energy distribution network after years of efforts thwarted by the Armenian government until recently. In a financial report posted on its website late Thursday, the RAO Unified Energy Systems (UES) said the subsidiary called Interenergo BV paid $73 million to buy the Armenian Electricity Network (AEN) from a Canadian investor who privatized it almost three years ago.
The reported takeover, if true, will lead to Russia’s nearly complete control of the Armenian energy sector that has undergone substantial reform and restructuring over the past decade. Western donors and the World Bank in particular are likely to disapprove of it.
AEN strongly denied the claims on Friday, claiming that the Russians will manage, rather than own, the increasingly profitable network. “We have already demanded that RAO UES refute that information because Midland Resources Holding has not sold its shares to anyone,” its spokeswoman, Margarit Grigorian, told RFE/RL. “We only gave them management rights.”
The Armenian Energy Ministry declined to confirm or deny the UES claims. “We have received no government statements confirming the reports as yet,” the spokesman for the World Bank office in Yerevan, Vigen Sargsian, said for his part.
The AEN was sold to the British-registered company Midland Resources Holding for $37 million in September 2002. Under the terms of the deal, the new owner could not resell it to another investor without the Armenian government’s consent. The Russian giant may have found a loophole to get around this hurdle.
Government sources told RFE/RL that Midland Resources, which is mainly owned by a Russian-born Canadian businessman, was recently split into two companies. They said one of them engages in steel trade, Midland’s core activity, while the other operates only as AEN’s parent company. It is the latter that was apparently bought by UES.
Interenergo’s ownership is even more complex and obscure. According to Russian media, the company was set up and registered in the Netherlands in April 2004 by a group of Russian investors. The largest of them was identified as Inter RAO UES, a joint venture of UES and another state-run energy corporation, Rosenergoatom.
The UES statement said Inter RAO UES owns only 42.3 percent of Interenergo. It is not clear who else holds a stake in AEN’s reported new owner and if there are any Armenians among them.
The Russians have long shown interest in the Armenian power grids and Armenian media has for months speculated that UES is on the verge of getting hold of the network. The issue was reportedly high on the agenda of Russian President Vladimir Putin’s visit to Yerevan last spring.
Energy Minister Armen Movsisian publicly spoke out against AEN’s takeover by UES on March 3, arguing that the latter already controls 80 percent of Armenia’s power generating capacities and should not be allowed to monopolize the energy sector. That would run counter to a key aim of the sector’s ongoing reform, he said.
UES’s deputy chief executive, Andrey Rapoport, arrived in Yerevan earlier this week on a visit shrouded in secrecy. The official purpose of the trip was Rapoport’s participation in the annual meeting of the governing board of the Metsamor nuclear power station.
UES was granted financial control of Metsamor last year in return for repaying its $40 million debts to Russian suppliers of nuclear fuel. It also owns Armenia’s largest thermal power plant and several hydro-electric stations.
(Photolur photo: Anatoly Chubais, the UES chief executive, pictured during a visit to Yerevan in October 2003.)