Russian electricity monopoly buys control of Armenian grid

The Associated Press
07/20/05 13:54 EDT

MOSCOW (AP) – Russia’s electricity monopoly Unified Energy Systems
has received the right to run Electricity Networks of Armenia, the
Armenian national grid company said Wednesday.

The US$73 million (euro61 million) deal was signed between UES and
Britain’s Midland Resources Holding Ltd., which bought the debt-ridden
grid in 2002.

Due to a translation error, UES had erroneously reported in its 2004
financial statements at the end of June that it had paid the US$73
million to buy the company, rather than the right to manage it and
receive its profits, UES said.

State-controlled UES, hungry to cement influence in the former
Soviet republics, has brokered several high-profile electricity
deals with Russia’s smaller neighbors. In Georgia it controls a
chunk of generation and power distribution, and has negotiated
generator-building deals in Tajikistan, which supplies neighbors
Afghanistan and Kyrgyzstan.

Lauri Sillantaka, an electricity analyst at the Troika Dialog
investment bank, said the opacity of the Electricity Networks deal
was typical of UES dealings in former Soviet republics. “These kinds
of transactions … are very intransparent,” he said.

While Sillantaka said that the price paid by UES sounded high, the
deal could give the company a valuable head start in an underdeveloped
and competition-free market. “It could be clever to buy now,” he said.

Midland Resources Holding had paid US$37 million (euro31 million)
for Electricity Networks of Armenia, of which US$25 million (euro21
million) was to go toward paying the company’s budget debts and
overdue wages.

Electricity Networks said its owners had notified the commission
that regulates utilities about the deal on Monday. An official
from Inter RAO UES, which manages UES operations outside Russia,
met with the commission chairman, the minister of energy and the
World Bank’s representative in Armenia this week to explain UES’
plans for the company.