Armenia Power Networks

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In August 2002, the British Midland Resources Holding won a competitive tender for 80% share in the Electric Networks of Armenia (AEN). AEN was created on December 13, 2001, when the Armenian energy ministry consolidated the Yerevan, Central, Northern and Southern Electricity Networks into a single company. The company distributed electric energy via 36 thousand km of electric grid and had an exclusive license for distribution of electric energy in Armenia. The company provided service to about 935,000 customers and had over 8,300 employees. The divestiture was based on the law of privatization of the country’s electricity network, signed by the Armenian president on August 17, 2001. The divestiture took place in two stages. On August 26, 2002 the Armenian government sold an 80.1% package of AEN to Midland Resources Holding, which was the winner of a competitive open tender with six bidders. The following companies participated in the tender for the 80.1% share in AEN: the British Midland Resources company; the Russia's Universal Power Networks; the American AES Silk Road; the French Electricite de France, the Swedish-Swiss ABB concern and the Spanish Union Fenoza company. Midland Resources Holding was formed in 1997 by private individuals, citizens of Canada and Great Britain. Midland Resources owned large share packages of metallurgic enterprises of Europe and CIS countries. In 2001, the company produced 3.5-4 million tons of ferrous metals, and reached $600 million in sales. According to the 2001 privatization law, the European Bank for Reconstruction and Development (EBRD) was going to act as a strategic partner in AEN and buy the remaining 19.9% package in the second stage of the privatization. However, by October 2002 the EBRD had decided it would not participate in the process, after declaring that Midland Resources Holding did not meet the requirements of the bank. This led to Midland Holding purchasing the remaining shares in AEN by itself, in November of 2002, bringing its total share to 100%. The British Midland Resources Holding paid the Armenian government US$37.0 million for the 80.1% stake and US$12.0 million for the ramaining 19.9% share. In November 2002, the Armenian Government finalized the sale of 100% of its shares in the AEN to the British Midland Resources Holding. Under the terms of the deal, Midland Resources Holding was to pay off $28.0 million of AEN 's debts including 5-6 months wage arrears to the employee, accounts payables, debts to the state budget. The company was also to reduce number of staff, increase collection rate and reduce technical losses. On November 21, 2002, Midland singed a two-year management contract with the South Korea's Daewoo Engineering to manage the power distribution network. In September 2006, Inter RAO UES purchased 100% shares in AEN. RAO UES owned 60% of stock in Inter RAO UES and the Federal Agency for Nuclear Power held 40%. Inter RAO UES handled imports and exports of electric power, and ran energy assets in and outside Russia. Inter RAO UES declared it would invest $20 million in Armenia's electric power grid by the end of the 2006. In June 2009, EBRD signed a EUR42 million (US$58 million) loan agreement with AEN toward the completion of the company's investment program. Vnesheconombank was providing an additional EUR22.5 million in co-financing. In 2010,VTB Bank and AEN signed an agreement for VTB bank to provide AEN with a US$1.4m bank guarantee for purchase of electricity. The agreement was approved by the Public Services Regulatory Commission of Armenia in October 2010. The guarantee was effective from September 2010 until march 2011. 2010 capex from factiva news article (see filling system) 2009 capex from company's AR