By Astghik Bedevian
After months of negotiations Russia’s national electricity company completed late Tuesday its controversial purchase of Armenia’s power distribution network that will boost the already strong Russian presence in the Armenian energy sector.
The shares in the Electricity Networks of Armenia (ENA) were formally transferred to an offshore-registered subsidiary of the state-controlled RAO Unified Energy Systems (UES) in the presence of Defense Minister Serzh Sarkisian and other senior Armenian officials.
The high-profile ceremony took place in Yerevan one year after the announcement of the $73 million deal. The Armenian government agreed to ENA’s sale in September 2005 on the condition that the Russians assume the investment commitments and liabilities of the network’s previous owner, the British-registered Midland Resources Holding.
Alexei Rapoport, the UES vice-chairman present at the ceremony, said the Russian giant will invest $20 million in ENA during the first year of its operations. He said the deal was initiated by the Armenian government and emphasized Sarkisian’s personal role in the process.
It is still not clear why the transfer of shares has taken so long. The Russians were reportedly having second thoughts about the takeover after a former Armenian Energy Ministry official implicated the ENA management in large-scale fraud. In a bombshell February interview with two Armenian newspapers, Felix Tadevosian, alleged that an official audit of ENA found that Midland has grossly inflated its capital investments in the network and ran up more debts than was previously thought. ENA strongly denied the allegations.
The Russian takeover of ENA was first made public and presented in June 2005 as a “management contract” signed by UES and Midland. The legality of the deal was seriously questioned by the World Bank and the U.S. Agency for International Development (USAID). But the Western 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, in one way or another, several major power plants that provide 80 percent of Armenia’s electricity, including the nuclear power station at Metsamor.