Regnum, Moscow, in Russian
20 Sep 05
RUSSIAN ENERGY COMPANY CHIEF DETAILS PLANS IN ARMENIA
A top official of the Russian energy giant has confirmed the plans to
buy the Armenian power grid. Andrey Rappoport, chairman of the board
of directors of Inter-RAO UES, brushed aside allegations of breaching
the Armenian legislation while taking over the power grid from a
British company. The deal is legally not over yet and the provisions
of the Armenian law on privatization will be fulfilled, Rappoport
said in an interview with the Russian news agency Regnum. Rappoport
also said that the state commission regulating the public service has
the powers to set tariffs, issue licences and endorse contracts,
making the creation of a “vertically-integrated monster” impossible
in Armenia. The following is the text of report by Russian news
agency Regnum; subheadings have been inserted editorially:
Vertically-integrated “monster” impossible in Armenia
[Correspondent] Mr Rappoport, following the explanations of
[Britain’s] Midland Resources Holding Ltd company, the discussions
around the Electricity Networks of Armenia closed-type joint-stock
company have slightly subsided. Statements are being made that RAO
UES plans to create “a vertically integrated monster” in Armenia. It
is alleged that the Russian side intends to establish a monopolistic
system of generating and distributing electricity in Armenia which
would have a negative impact on the development and energy security
of Armenia. Do you agree with this assessment? Please explain your
answer.
[Rappoport] I absolutely disagree. First of all, I would like to note
that RAO UES Russia owns only 10% of electricity generation in
Armenia – the Sevan-Razdan Cascade hydroelectric power plant, which
belongs to a subsidiary, the International Energy Corporation [IEC]
closed-type joint-stock company.
Inter-RAO UES used to manage the Razdan thermal power plant when the
property complex of the Razdan thermal power plant was being handed
over from Armenia to the Russian Federation at the expense of the
interstate debt. The reason was the need for the stable work of the
station while the legal registration took place. Inter-RAO UES dealt
with ensuring the uninterrupted and reliable generation of electric
power in the Razdan thermal power plant, supplying the reserve fuel
to the station and guaranteeing the energy balance in the winter. The
company tackled the task successfully.
We withdrew from the management after the station was handed over to
Russia and a new legal entity was created. However, Inter-RAO UES is
the managing company of Armenia-owned 100% of shares of the Armenian
Nuclear Power Station. The management was established in 2003 at the
request of the Armenian government with the aim to overcome a crisis
at the plant. As a result of our work, the plant generated an
all-time record electricity output already in 2004 and its net profit
rose to 19m dollars.
At the last session of the board of directors of the Armenian Nuclear
Power Station, a report on the work conducted has been heard and the
participants in the session agreed that the station is ready to
operate on its own. We are ready to stop managing the station even
though all these years we have been the financial guarantor of its
nuclear fuel supply. Fuel supplies will be done in 2005 in the same
way as before.
Concerning the creation of a vertically integrated company or, to
borrow your expression, of a “monster”, this is impossible in
Armenia. The fact is that the most important member in this market is
the commission on regulating public services. It regulates the state
policy on setting tariffs for each actor of the market, on issuing
licenses on their activity, confirming and coordinating contracts.
The state dictates the tariff policy, rules of work and fields.
Therefore such accusations are groundless.
No influence on tariffs
[Correspondent] Sometimes the Armenian media carries reports warning
that as the owner of the main generating capacities of Armenia, RAO
UES will have the opportunity to have an unhindered influence on the
domestic tariffs in Armenia after having bought its power grid. Does
RAO UES have such a task?
[Rappoport] The state is regulating the tariffs via the commission
regulating the public services. RAO UES is not the owner of the main
generating capacities but owns only the Sevan-Razdan Cascade, which,
incidentally, we bought at the request of the Armenian side when the
payment for the delivery of nuclear fuel and the repayments of debts
accumulated since 1995 were under discussion. At that time the
Armenian power industry had no money to settle the accounts with us
and we took the cascade as a payment. We cannot influence tariffs.
The commission is independent. Its members are elected for a term of
five years. Even the Armenian government cannot influence it.
Ownership of power grid and regional plans
[Correspondent] According to the information given by Britain’s
Midland Resources Holding LTD, 100% of shares of the Armenian
Electricity Networks were handed over to the Russian Interenergo BV
company for trust management for the duration of 99 years. By what is
behind such a long-term interest of the Russian side in the Armenian
Electricity Networks? The top management of RAO UES has repeatedly
announced that they intend to synchronize the work of the electricity
systems of the South Caucasus countries, as well as of Turkey and
Iran. Is it possible to consider the interest of RAO UES to the
Armenian Electricity Networks in this context?
[Rappoport] Concerning the period of 99 years, first of all, the
Anglo-Saxon law allows to operate with such terms and we used this
opportunity. Second, we are not going to be just a manager for 99
years, but we intend to be the owner of the grid in the near future.
All the necessary documents for owning the grids or giving the
ownership to Interenergo BV, a subsidiary company that is a member of
the RAO UES group of companies, will be sent in the near future.
Now about the synchronization of the energy systems of South
Caucasus, Turkey and Iran. We have signed a memorandum with Iran,
which in particular, talked about the organization of the network
construction and ensuring simultaneous work via Azerbaijan by 2007.
We also put forward an initiative to organize a corridor for the
parallel work via Armenia and Georgia, and have reached a preliminary
agreement to this respect with Iran. A corresponding proposal was
made to the Armenian power engineers and I think that the work in
this direction in Armenia and Georgia will become significantly more
intensive in the nearest future. It must also be taken into
consideration that Armenia’s energy system is already working in the
parallel regime with Iran.
Western criticism
[Correspondent] When the Russian side and the British company made a
deal on the Armenian Electricity Networks, USAID took an unexpected
and harsh stance. What worries the Americans in your view?
[Rappoport] Some Western organizations voiced an opinion that the
deal is not transparent. They are concerned that the owner has
changed in the violation of certain legal provisions. We carried out
a number of consultations with the representatives of the World Bank
and of other Western organizations and made it clear that the
ownership has not changed at present and that there was has not been
any violation of the legislation.
We are already a participant in Armenia’s electricity market, we know
the country’s laws very well and follow them rigidly. I want to
emphasize that the procedure of taking over the shares will also be
implemented in accordance with the law. The statements of the Western
organizations were prompted, apparently, by the fact that although
the procedure has yet to even start, representatives of these
organizations assumed that the deal was over. They assumed that it
was not only completed but also that it was done “non-transparently”.
It is possible that they did not fully understand the legal side of
the deal, but it is also possible that they fell under the influence
of the excessively emotional publications in the local press.
At this point we have already received the declaration on trust, that
is we became the beneficiary in terms of rights but we did not become
the owner. This means that legally speaking, the operation is not
over and it will be completed once the government has endorsed it,
and when the provisions of the law on privatization in Armenia are
fulfilled.
[Correspondent] RAO UES and Gazprom have suggested the Armenian
government that they complete the construction of the fifth unit of
the Razdan thermal power station which will take part in the
“electricity for gas” scheme involving the gas coming through the
Armenia-Iran pipeline. Has Armenia responded to the offer, and if
not, what is the reason for the delay?
[Rappoport] Inter-RAO UES and Gazprom did indeed jointly apply with
an appropriate commercial proposal in accordance with the decision of
the intergovernment commission on economic cooperation between Russia
and Armenia. We hoped to receive a response within a month but,
regrettably, we have still to receive any information. A possible
explanation for the delay is that there is a certain rivalry on this
issue and it is likely that some alternative proposals are being
formed.
From: Emil Lazarian | Ararat NewsPress