The Russian energy conglomerate Inter RAO has asked the Armenian government to allow it to sell Armenia’s debt-ridden power distribution network owned by it to a little-known company registered in Cyprus, it was announced on Thursday.
The development comes less than three months after a fresh rise in electricity prices sparked two-week nonstop demonstrations in Yerevan which forced the government to subsidize power supplies in Armenia. The government also promised a special international audit of the Electric Networks of Armenia (ENA) utility. It is meant to determine whether the ENA has been mismanaged by Inter RAO.
Prime Minister Hovik Abrahamian announced the state-controlled Russian company’s intention to sell the ENA to the Cyprus-registered firm Liormand Holdings Limited at a weekly session of his cabinet. He instructed the Armenian ministries of energy, economy, finance and justice as well as the Public Services Regulatory Commission (PSRC) to look into the proposed deal and conclude whether it should be cleared by the government.
Inter RAO needs such clearance in accordance with an Armenian law enacted in 2001.
“All documents will be examined,” Energy and Natural Resources Minister Yervand Zakharian told reporters after the cabinet meeting. “We will provide more detailed information within one week,” he said.
Both Zakharian and the PSRC chairman, Robert Nazarian, said they know nothing about the owners and activities of Liormand Holdings
According to the Russian business news agency RBK, Liormand is owned by Marcuard Trust, an “international asset management firm” which is registered in Cyprus and has an office in Moscow. Citing an unnamed source close to Inter RAO, RBK also said on Thursday that the Russian giant has not yet agreed terms of the ENA’s sale with Liormand.
It was not immediately clear whether those obscure firms have any connection with Samvel Karapetian, an Armenian-born billionaire based in Russia. Karapetian’s Tashir Group was reportedly close to buying the ENA this spring. That Inter RAO is ready to sell its loss-making Armenian subsidiary was confirmed by Zakharian in May.
Russia’s now defunct Unified Energy Systems (UES) giant, of which Inter RAO is a successor, paid $73 million to acquire the ENA from a British-registered firm in 2006, solidifying Russia’s strong presence in the Armenian energy sector.
The ENA, which was privatized in 2002, absorbed capital investments from its new owner and remained profitable until 2011. However, the network has since been making losses, resulting in an estimated $220 million in outstanding debts to Armenian commercial banks and power plants.
The debts have risen despite a series of sizable increases in the electricity prices for individual and corporate consumers. The most recent price hike approved by the PSRC in June triggered angry street protests in Yerevan. Their mostly young participants believe that the ENA’s massive losses result from widespread corruption within the company management, rather than objective factors such a depreciation of the Armenian dram.
The government placated most protesters by subsidizing the tariffs and announcing the emergency audit of the ENA. But it has since been in no rush to organize the audit, suggesting that it is waiting for another foreign company to take over the ENA. Zakharian insisted on Thursday that the audit will go ahead as planned later this year even if Inter RAO completes the ENA’s sale.