RUSSIANS COMPLETE TAKEOVER OF ARMENIAN POWER GRID
By Astghik Bedevian

Radio Liberty, Czech Rep.
Sept 26 2006

After months of negotiations Russia’s national electricity company
completed late Tuesday its controversial purchase of Armenia’s power
distribution network that will boost the already strong Russian
presence in the Armenian energy sector.

The shares in the Electricity Networks of Armenia (ENA) were
formally transferred to an offshore-registered subsidiary of the
state-controlled RAO Unified Energy Systems (UES) in the presence of
Defense Minister Serzh Sarkisian and other senior Armenian officials.

The high-profile ceremony took place in Yerevan one year after the
announcement of the $73 million deal. The Armenian government agreed
to ENA’s sale in September 2005 on the condition that the Russians
assume the investment commitments and liabilities of the network’s
previous owner, the British-registered Midland Resources Holding.

Alexei Rapoport, the UES vice-chairman present at the ceremony, said
the Russian giant will invest $20 million in ENA during the first
year of its operations. He said the deal was initiated by the Armenian
government and emphasized Sarkisian’s personal role in the process.

It is still not clear why the transfer of shares has taken so long.

The Russians were reportedly having second thoughts about the takeover
after a former Armenian Energy Ministry official implicated the ENA
management in large-scale fraud. In a bombshell February interview
with two Armenian newspapers, Felix Tadevosian, alleged that an
official audit of ENA found that Midland has grossly inflated its
capital investments in the network and ran up more debts than was
previously thought. ENA strongly denied the allegations.

The Russian takeover of ENA was first made public and presented in
June 2005 as a "management contract" signed by UES and Midland. The
legality of the deal was seriously questioned by the World Bank
and the U.S. Agency for International Development (USAID). But the
Western donors acquiesced when Midland and UES decided two months
later to formalize the sale of ENA and seek the Armenian authorities’
formal approval of the deal.

UES already controls, in one way or another, several major power
plants that provide 80 percent of Armenia’s electricity, including
the nuclear power station at Metsamor.

From: Emil Lazarian | Ararat NewsPress