Armenia’s government on Thursday allowed the national power distribution network to borrow $160 million from foreign banks for further cutting its losses and modernizing its aging facilities.
The private owner of the Electric Networks of Armenia (ENA) utility needed government permission to offer 70 percent of its stock as a collateral for the two equal loans to be provided by the European Bank for Reconstruction and Development (EBRD) and the Asian Development Bank (ABA).
Prime Minister Karen Karapetian’s cabinet authorized the transaction on the condition that should the ENA default on the loan repayments the banks will not be able to sell the ENA shares to other investors without the Armenian authorities’ consent.
The Manila-based ABA announced the impeding disbursement of its $80 million credit to the ENA early this month. It said the money will help the company cut electricity distribution losses from around 10 percent in 2016 to around 8 percent by 2021. This will be achieved by “rehabilitating, reinforcing, and augmenting the distribution network, connecting new customers and introducing international standards of management and automated control system,” the ABA said in a statement.
The ENA had incurred mounting losses since 2010, despite repeated increases in electricity prices approved by Armenian state regulators. The company had $220 million in outstanding debts to Armenian power plants and commercial banks when it was acquired by the Tashir Group of the Russian-Armenian billionaire Samvel Karapetian from Inter RAO, a state-run Russian energy giant, in October 2015. Karapetian pledged to make the troubled utility “much better under our management.”
The most recent electricity price hike announced by Armenia’s Public Services Regulatory Commission (PSRC) in June 2015 sparked two-week demonstrations in Yerevan. While defending the tariff rise, the government officials acknowledged that the power grids have been mismanaged by the Russians.
Artak Manukian, a Yerevan-based economist, was skeptical about the rationale for the new loans sought by the ENA. He said that the loans could be misused because the company has been notorious for a lack of transparency.
“But formally we have no grounds to prove that and have to accept for now the explanations presented by the company,” Manukian told RFE/RL’s Armenian service (Azatutyun.am).