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EBRD to take equity stake in privatised Armenian power distributors
The European Bank for Reconstruction and Development (EBRD) is making an equity investment in four regional Armenian electricity companies to support the Government of Armenia’s efforts to privatise the power sector. The Bank plans to purchase up to 19.9 per cent of the capital in each of the distribution companies at the time of their privatisation to strategic investors.
"Despite increases in tariffs and a relatively strong collection record, the high level of losses in the distribution networks cripples the cashflow within the sector," said Hildegard Gacek, the EBRD’s Country Director for the Caucasus, Belarus and Moldova, at the signing in Yerevan. "Privatisation of these distribution companies is vital to improve management of the businesses and provide much needed investment. Ultimately, this should reduce losses and improve the overall financial performance of the sector and quality of supply to consumers."
Ms Gacek added that Armenia has been a pioneer in the region, with the adoption in 1997 of a progressive Energy Law and subsequent establishment of a professional and independent regulatory authority for the sector. A successful privatisation of the Armenian distribution sector will also have a good demonstration effect for other countries in the region, she said.
Dr Karen Galustian, Minister of Energy of Armenia, hailed the project as well. "Privatising the electricity distribution companies (EDCs) is a very important process for the Government," he said, drawing particular attention to the passage of a separate law by the National Assembly of Armenia that regulates the privatisation of the EDCs. "The Government of Armenia believes that the participation of a very reputable bank in the privatisation of EDCs will make the deal more attractive for strategic investors aiming to purchase at least a 51 per cent stake in the affected EDCs."
The price per share paid by the Bank will be the same as that paid by strategic investors to be selected through a tender process currently underway. The tender for a stake of at least 51 per cent in the four distribution companies is scheduled to be completed by 31 March 2001. With its advance commitment to participate in the privatisation, the EBRD hopes to enhance the credibility and transparency of the privatisation process.
To date, the EBRD’s total portfolio for power and energy is €1,210 million and for energy efficiency is €180 million.
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