Atom Markarian
A British-based company that recently privatized Armenia's troubled power grids announced on Tuesday that it has chosen a new, Western operator for them and will make public its name later this week. Officials from Midland Resources Holding claimed that their choice has been approved by the World Bank which had earlier criticized the $37 million sale of the Armenian Electricity Network (AEN) on the grounds that the offshore registered firm has little experience with power distribution. They said a management contract with the new AEN operator will be signed "in two or three days time."
"At this point I can not give the name of that company," the head of Midland Resources' Moscow office, Andrey Zavrazhnov, told a news conference in Yerevan. "But I can say that it's fairly good and famous energy company and that its selection has been endorsed by the World Bank."
Sources told RFE/RL late last month that the German engineering group Siemens is among those Western companies that could be granted management of AEN. But the information has not been officially confirmed.
The World Bank, in the meantime, has reconsidered its initially negative attitude toward the AEN sell-off and now seems satisfied with the efforts to find a competent operator for the inefficient and corruption-ridden power utilities. The bank's chief representative in Yerevan, Roger Robinson, said earlier this month that the Armenian government has addressed its misgivings and will likely obtain a $20 million World Bank loan pegged to energy sector reform.
It also emerged on Tuesday that Midland Resources, which last August purchased an 80.1 percent share in AEN, now owns its entire stock. Zavrazhnov confirmed the news, but would not say how much his company paid for the remaining 19.9 percent share, which had been reserved for the European Bank for Reconstruction and Development. Despite a 2000 agreement with the Armenian government, the EBRD has refused to buy it, in a move reflecting Western donors' mistrust of the electricity network's new owner.
Zavrazhnov pledged that Midland Resources will soon launch a sweeping shake-up of AEN in an effort to end its huge losses, which last year alone exceeded $50 million. According to the network's new Russian chief executive, Yevgeny Gladunchik, as much as 36 percent of electricity supplied to AEN is still being lost during its distribution to consumers. Most of it is embezzled by various-level energy officials.
"Every day we discover new methods of theft," Zavrazhnov complained, adding that the new network owner has already fired about 700 employees. AEN still employs some 9,800 people. Many of them are expected to be laid off as part of the restructuring push.