By Atom MarkarianRussia’s national electricity company appears to be having second thoughts about its controversial purchase of Armenia’s power grids amid allegations implicating their management in large-scale fraud.
The transfer of shares in the Electricity Networks of Armenia (ENA) to an obscure subsidiary of Unified Energy Systems (UES) has yet to take place almost five months after the takeover worth at least $73 million was sanctioned by the Armenian government. The state-controlled Russian giant and ENA’s current British-registered owner have declined to provide an explanation for the increasingly suspicious delay.
According a former Armenian Energy Ministry official who claims to have audited ENA last summer, the deal may well fall through because the company was found to have been mismanaged ever since it was privatized by Midland Resources Holding in 2002. In a bombshell interview with two Armenian newspapers late last week, Felix Tadevosian alleged that Midland grossly inflated its capital investments in ENA and ran up more debts than was previously thought.
The Armenian government agreed to ENA’s sale last September on the condition that the Russians assume Midland’s investment commitments and liabilities officially totaling $9 million. The process was due to be completed in two months.
ENA on Monday denied the fraud allegations and the very fact of being audited by a firm hired by UES. Its spokeswoman, Margarit Grigorian, insisted that the company only underwent a minor “financial inspection." “Let Tadevosian produce a single document showing that he was paid for carrying out an official audit of our company,” she told RFE/RL.
Grigorian also dismissed Tadevosian’s allegations that ENA illegally cut off electricity to his Yerevan house in retaliation for his allegations. She claimed the auditor was simply stealing electricity. “The utility network catches a million thieves like him every day,” she said.
Tadevosian also claimed to have received death threats and appealed to Armenia’s Office of the Prosecutor-General for protection. Incidentally, the law-enforcement agency reportedly launched a criminal inquiry and even raided ENA’s offices in Yerevan last month on suspicion of fraud committed by some of its senior employees.
Tadevosian, meanwhile, appeared to have sharply softened his rhetoric on Monday, declining to comment on the affair. “You had better look into their books. I can’t say anything on that,” he told RFE/RL.
UES caused a stir last June when it revealed the signing of a $73 million “management contract” with Midland, making it the de facto owner of the Armenian power utility. The legality of the deal was seriously questioned by the World Bank and the U.S. Agency for International Development (USAID). But the donors acquiesced when Midland and UES decided two months later to formalize the sale of ENA and seek the Armenian authorities’ formal approval of the deal.
UES already controls several major power plants that provide 80 percent of Armenia’s electricity. Its takeover of ENA would thus make the Armenian energy sector even more dependent on Russia.
(Photolur photo: Yevgeny Gladunchik, the Russian CEO of ENA.)