By Atom Markarian
The Public Service Regulatory Commission clarified on Monday that it believes the controversial takeover of Armenia’s electricity distribution network by Russia’s Unified Energy Systems (UEF) did not violate the law despite serious concerns voiced by Western donors. In a statement last week, the commission avoided a direct answer to lingering questions about the legality of an agreement signed by Midland Resources Holding, a British-registered formal owner of the Electricity Networks of Armenia (ENA), and UES in June. The latter paid $73 million for the right to manage ENA and receive its profits, becoming its de facto owner.
Under the terms of its 2002 purchase of ENA, Midland Resources can not resell the utility to any other company without the Armenian government’s approval. UES initially announced in late June that it paid the money to buy ENA. But it later clarified that the deal with Midland Resource was a management contract rather than a formal acquisition.
The regulatory commission, according to its chairman Robert Nazarian, found explanations provided by Midland “convincing.” “Midland Resources Holding remains the owner of the 100 percent of the network’s shares,” Nazarian told RFE/RL.
Nazarian argued that there have been no changes ENA’s board of directors, top management and bank accounts. The state regulator therefore has no grounds to revoke ENA’s operating license, he said.
The World Bank and other Western donors that have heavily invested in the decade-long reform of the Armenian energy sector have expressed serious concern about the deal, threatening to reconsider their further assistance to Yerevan. The warnings prompted the Armenian authorities to demand explanations from ENA. The donors say their further actions will depend on the government’s response to their concerns.