Russian power grid to manage Armenian electricity network

Arminfo
22 Jul 05

Yerevan, 22 July: British Midland Resources Holding Ltd, the owner
of Electric Networks of Armenia [ENA], transferred 100 per cent of
the company’s shares for 99 years to the Interenergo B.V. company
which is the “grandchild” of the Russian joint-stock company UES
[Unified Energy System] of Russia, the deputy chairman of the board
of the Interenergo RAO [Russian joint-stock company] UES of Russia,
Mikhail Mantrov, told a news conference on Friday.

He said the agreement on trust management between Interenergo and
Midland Resources was signed on 23 June 2005. Taking into account the
strategic importance of the Armenian electricity network, the UES of
Russia took it under trust management, but the holding also intends
to reserve the primary right to purchase it.

The Armenian electricity network requires a strategic investor because
their main assets are both morally and physically obsolete and require
considerable financial resources for modernization, he added.

The strategic investor intends to fulfil the 2005 investment program
approved by a public service commission. The losses are expected to
reduce to 15 per cent. The investor intends to form an optimal system
of management in the company in market conditions.

As Mantrov pointed out, Midland Resources lost interest in power
engineering, declaring last autumn that it intended to sell its shares
of Armenia’s electricity network. The UES of Russia has this interest.

Speaking about personnel policy, he said that it was being implemented
by the Board of Directors established by the owner. But on the basis
of the management agreement, the opinion of the managing company will
be taken into account. A copy of the agreement has not been given
to the Armenian government because no such requirement had been put
forward earlier, Mantrov said and added that according to Armenian
laws, an agreement with the executive authorities must be signed only
if the facility is alienated.

He said the UES of Russia group of companies was seriously interested
in energy assets not only in Armenia but also in Moldova, Georgia
and a number of other countries. The holding also intends to take
part in the privatization of Turkish electricity networks.

We recall that the net profit of the Electric Networks of Armenia
CJSC totalled 3.7bn drams [about 8m dollars] in 2004.