The International Finance Corporation (IFC), a member of the World Bank Group, has acquired a 20 percent stake in Armenia’s largest hydroelectric complex that was sold to a U.S. energy company earlier this year.
The company, ContourGlobal, revealed the acquisition in a statement on Wednesday announcing its formal takeover of the Vorotan Hydropower Cascade.
Under a takeover agreement signed in Yerevan on June 8, ContourGlobal paid $180 million for the cascade consisting of three hydroelectric plants on the Vorotan river flowing through Armenia’s southeastern Syunik province. It also pledged to invest around $70 million in modernizing them.
The ContourGlobal statement said the IFC will also buy into in the Vorotan complex in order to “enhance electricity supply reliability and strengthen the country's power sector.”
It quoted Tomasz Telma, the IFC director for Europe and Central Asia, as saying: “Private sector participation can play an important role in addressing key infrastructure challenges in Armenia, and this transaction is an important step in that direction. The planned rehabilitation of the Vorotan Cascade will help improve access to energy and support Armenia's energy self-sufficiency.”
Armenia - Energy Minister Yervand Zakharian (C) and Joseph Brandt (L), the CEO of the U.S company ContourGlobal, sign a deal on the sale of Vorotan Hydro Cascade, Yerevan, 8Jun2015.
There was no word on the cost of the 20 percent share in Vorotan and IFC’s investment commitments. The Washington-based multilateral institution has issued no separate statements on the deal yet.
The acquisition appears to be in tune with IFC’s efforts to help Armenia increase its reliance on renewable energy sources. Through its Armenia Sustainable Energy Finance Project launched in 2010 jointly with the Austrian government, the IFC has been promoting greater use of hydropower with financial and technical assistance provided to local companies.
Over the past decade, hydropower’s share in electricity production in Armenia has risen from 20 percent to around 30 percent thanks to more than 150 small and privately owned hydroelectric plants built on the country’s fast-flowing mountainous rivers. Electricity generated by them is much cheaper than that of thermal-power plants currently accounting for over 40 percent of Armenian electricity output.
The promised investments in Vorotan could make hydropower even more important for the Armenian energy sector. With a design capacity of 405 megawatts, the hydroelectric complex is nearly as powerful as the nuclear power station at Metsamor which currently provides about one-third of Armenia’s electricity.
ContourGlobal is the first Western company to buy a major asset in a sector that has long been dominated by Russian energy giants. The Vorotan deal was initially hammered out in early 2014. It was subsequently renegotiated at the Armenian government’s behest.
President Serzh Sarkisian personally announced the impending sale of Vorotan when he visited Washington in May. The announcement followed the signing of a U.S.-Armenian Trade and Investment Framework Agreement (TIFA).