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ELECTRIC NETWORK OF ARMENIA CJSC HAS NOT BEEN MUCH AFFECTED BY CONSEQUENCES OF THE GLOBAL FINANCIAL CRISIS
Alexander Avanesov
ArmInfo
November 17, 2009
Interview of Director General of Electric Network of Armenia CJSC
Yevgeniy Gladunchik with ArmInfo News Agency
Mr. Gladunchik, the consequences of the global financial crisis are
the problem number one for the Armenian companies over the last two
years. How did the crisis affect the Company?
Electric Network of Armenia CJSC suffered 10% fall of electric power
sales in 2009 because of two reasons: first, the man-caused accident
at Nairit Chemical Plant, which is the biggest consumer of electric
power in Armenia, and the second, reduction of purchase of electric
power by water supply companies. The unusually cool summer and rainy
weather in Armenia led to reduction of electric power consumption by
water consumer companies that halved electricity purchase volumes. But
for these two factors, reduction of electric power consumption in
the system of Armenian electric network will total nearly 5%. It is
another matter that the company expected growth like during several
last years. The situation with low power consumption at nights has
begun improving as well, which we explain by better living conditions
of the people who have begun actively using air conditioning and other
equipment. It took just a month the mining enterprises to resume
production. For our part, we supported them and did not cut their
electric power supply as we understand the delicacy of the situation.
What is the situation with payments by the population? Did you observe
a tendency of non-payments?
The situation here is normal. This question is out of discussion. The
bill collection level meets the requirements of the company's license.
What is the course of fulfillment of the upgrading programme of 17
sub-stations being financed by Japan Bank for International Cooperation
in an amount $35 mln?
I want to say that I am very content with the work of our contractors
represented by the Chinese company, but discontent with myself.
Unfortunately, we did not declare ourselves well enough, however, there
are serious reasons for that. At present 4 out of 17 sub-stations have
been already put into operation. We had to conform to the Chinese and
their methods of work. I must say that they work really well. They did
and are still doing everything well, however, we have currently quite
another problem and try to solve it. The modern substations include a
"mouse" and computer, while the specialists, able to work with them,
are no more than one or two. A training programme is required for
this to be trained. Next week 2 specialists of the company are leaving
for France to take the training programmes.
In this context, we are assisted by company, which differs from other
big companies by its engagement in municipal services, in particular,
in substations with capacity of 35 kV and lower. This company uses the
training programmes in Russia as well, and its specialists visited our
company several times. In general, we should train about 500 people.
The task is not so much easy as it seems at first sight. It is easier
for us to set new equipment than to deal with training of the staff.
Anyway, by the end of 2010 the rest 13 out of 17 sub-stations will
be built and put into operation. Within the frames of the credit
programme it was envisaged to restore 17 electrical sub-stations in
Yerevan and 5 in different regions of Armenia. All 110kV and 35kV
circuit-breakers, separators, current and voltage transformers,
over-voltage suppressors and cells of 10(6) kV are replaced at
substations. Connections of 110,35 kV and cells of 10(6) kV of the
relay protection equipment will be also replaced. A computer will be
installed at each substation to control and operate the cells of 10(6)
kV. As a result of fulfillment of the programme technical losses and
exploitation expenses will be reduced at these sun-stations and the
management level will grow. Over fulfillment of the programme the
sub-stations are not fully made dead for the consumers not to suffer.
For this reason we restore them gradually, though it would be easier
to make them fully dead and then restore. At present it is difficult
to account for how much technical losses and exploitation expenses
will reduce after restoration of the sub-stations. The works being
implemented resolve the problems of reliability raising.
In 2009, your Company signed the so-called "Tripartite Union" with
WEB and European Bank for Reconstruction and Development. How this
programme is implemented?
We have become the first company in Armenia to receive credit at 64,5
mln Euro from such serious financial institutions. It is also important
that the company has been received without any state guarantees,
that indicates high level of the company's creditability.
The credit has been provided at EURIBOR + 7%, that makes up about 11%
per annum. 'These are just perfect conditions for us. The agreement
has been signed with the Russian Vnesheconombank, European Bank for
Reconstruction and Development and Electric Networks of Armenia CJSC
in June 2009. The credit has been provided for 10 years.
Recently, it has been much spoken about removal of electric substations
from residential houses. The issue was even discussed at the meeting
of the Public Services Commission ...
The point is that we intend to completely upgrade all the electric
substations of Yerevan with capacity of 6-10 kV. Ten substations
have already been upgraded: new buildings have been built for them
and the whole equipment has been fully repaired or replaced. Now,
it is necessary to create our own control center, that will make it
possible to control energy flows more efficiently. About 2, 000 people
are currently engaged in this work, however, their number will be
considerably reduced with creation of our own control center. Today,
we have substations, which have not been attended for about a year. We
have switched to quite another equipment category. In particular,
it is prohibited to install oil circuit breakers, and we actively use
fire protection systems. We did not even have a reliable protection
system. Currently, it takes several days to find the place where a
cable has been damaged. The problem is to completely replace the whole
automatics. The whole complex, related to substations, will be renewed
by late, 2010. The equipment at the sum of $40 mln is currently in
Armenia's warehouses. The Company schedules to build and put into
operation a big electric substation of 110 kV, that will allow to
reduce loading on the substations that supply the center of Yerevan.
Moreover, the capacities of this substation will be used to supply
the third mobile operator Orange-Armenia. Orange-Armenia will turn
out to be in a difficult situation if we do not manage to put this
substation into operation by October 2010. Moreover, this substation
has nothing in common with 17 substations being reconstructed by the
funds of the Japan Bank for International Cooperation. A new electric
substation with capacity of 35 kV, where it is scheduled to install
gas-insulated and vacuum circuit breakers, is under construction.
How many substations are there on the Company's balance in general?
Currently, there are over 8,000 electric substations on the Company's
balance, 222 of which are 35 kV, 101 - 110 kV and 7,9 thsd - 6-10 kV.
Their upgrading requires attraction of considerable financial and
material resources. We are not going to be limited to repair, but
intend to completely replace the old equipment by the up-to-date one.
Today, we even pay money for the old equipment to be taken from us,
as its delivery as a scrap metal requires more serious financial
investments. Yerevan, Gyumri and Dilijan, where offshore zones start
to be formed, will become our primary activity. We shall start from
Yerevan first, where the situation is the hardest. We hope very much
on Yerevan mayor's assistance, especially during allocation of lands
for construction. We have already started to carry out 4 old electric
substations from the buildings in Vanadzor. These buildings number
130, and currently we have to carry out electric substations from
another 100 buildings.
An agreement was signed with HSBC bank in due time for extension of
credit to $5 million. What is being done in this direction?
This credit allowed us to finance the significant measures for
improvement of the power supply quality. We do not intend to attract
other serious credits as the funds of the European Bank and WEB will
be enough to resolve the problem set. The company does not intend to
gather credit funds, as currently the matter concerns not the money
but the people's readiness to work with new equipment.
If I am not mistaken, you were singled out for a Diploma of Merit by
the Armenian Parliament speaker for the vigorous charitable activity.
Meanwhile, the company's funds have been arrested for some reasons.
How will the company continue its charitable activity in this
situation?
The accounts of Electric Networks of Armenia are currently under arrest
by the Tax Inspection only in one bank. The remaining accounts work
in a usual mode. However, we do not consider the arrest of one account
illegal and unreasonable. In view of this, we have already appealed to
the corresponding instances. We intend to solve the problem without
any emotions and abrupt movements. I think this is the most correct
way out of the created situation. We have won all the risks and I am
sure we shall win this one as well.
Properly speaking, what is the problem?
A whole lodgment of 86 people, employees of the Tax Inspection,
was launched in the Company in February, 2009. However, they found
no serious violations, as one would expect. Nevertheless, we were
required, though orally, to pay 8,6 bln drams to the state budget.
When we asked to show an act for production before the court, this
amount was strangely reduced to 1,7 bln drams. Now, by the decision of
the tax agencies, our accounts have been frozen in one of the banks,
so, a risk appears that we shall not be able to either square accounts
with the generation objects or accept the consumers' accounts. The
tax agencies offer the Company to take 600,000 electric meters,
currently belonging to consumers, onto its books, and require to pay
taxes from the as if the Company earns from receipt of these meters -
these taxes make up over two third of unfortunate 1,7 bln drams. The
meters belong to consumers, and the Company's employees are engaged in
their serving, as they have to do that irrespective of belonging. It
is interesting that the tax employees did not think over the opinion
of real owners of the notorious meters. Moreover, the company did
not have these meters on the balance when it was purchased. If the
meters were available, we would have them free-of- charge. However,
the law does not require tax payment even in this case. The problem
is just incorrectly raised and we cannot agree to such statement of
the question, as this may become a precedent. Undoubtedly, we shall
achieve justice in the court, and I am confident of our rightness.
Well, I wish you success and thank you for the interview.
Alexander Avanesov
ArmInfo
November 17, 2009
Interview of Director General of Electric Network of Armenia CJSC
Yevgeniy Gladunchik with ArmInfo News Agency
Mr. Gladunchik, the consequences of the global financial crisis are
the problem number one for the Armenian companies over the last two
years. How did the crisis affect the Company?
Electric Network of Armenia CJSC suffered 10% fall of electric power
sales in 2009 because of two reasons: first, the man-caused accident
at Nairit Chemical Plant, which is the biggest consumer of electric
power in Armenia, and the second, reduction of purchase of electric
power by water supply companies. The unusually cool summer and rainy
weather in Armenia led to reduction of electric power consumption by
water consumer companies that halved electricity purchase volumes. But
for these two factors, reduction of electric power consumption in
the system of Armenian electric network will total nearly 5%. It is
another matter that the company expected growth like during several
last years. The situation with low power consumption at nights has
begun improving as well, which we explain by better living conditions
of the people who have begun actively using air conditioning and other
equipment. It took just a month the mining enterprises to resume
production. For our part, we supported them and did not cut their
electric power supply as we understand the delicacy of the situation.
What is the situation with payments by the population? Did you observe
a tendency of non-payments?
The situation here is normal. This question is out of discussion. The
bill collection level meets the requirements of the company's license.
What is the course of fulfillment of the upgrading programme of 17
sub-stations being financed by Japan Bank for International Cooperation
in an amount $35 mln?
I want to say that I am very content with the work of our contractors
represented by the Chinese company, but discontent with myself.
Unfortunately, we did not declare ourselves well enough, however, there
are serious reasons for that. At present 4 out of 17 sub-stations have
been already put into operation. We had to conform to the Chinese and
their methods of work. I must say that they work really well. They did
and are still doing everything well, however, we have currently quite
another problem and try to solve it. The modern substations include a
"mouse" and computer, while the specialists, able to work with them,
are no more than one or two. A training programme is required for
this to be trained. Next week 2 specialists of the company are leaving
for France to take the training programmes.
In this context, we are assisted by company, which differs from other
big companies by its engagement in municipal services, in particular,
in substations with capacity of 35 kV and lower. This company uses the
training programmes in Russia as well, and its specialists visited our
company several times. In general, we should train about 500 people.
The task is not so much easy as it seems at first sight. It is easier
for us to set new equipment than to deal with training of the staff.
Anyway, by the end of 2010 the rest 13 out of 17 sub-stations will
be built and put into operation. Within the frames of the credit
programme it was envisaged to restore 17 electrical sub-stations in
Yerevan and 5 in different regions of Armenia. All 110kV and 35kV
circuit-breakers, separators, current and voltage transformers,
over-voltage suppressors and cells of 10(6) kV are replaced at
substations. Connections of 110,35 kV and cells of 10(6) kV of the
relay protection equipment will be also replaced. A computer will be
installed at each substation to control and operate the cells of 10(6)
kV. As a result of fulfillment of the programme technical losses and
exploitation expenses will be reduced at these sun-stations and the
management level will grow. Over fulfillment of the programme the
sub-stations are not fully made dead for the consumers not to suffer.
For this reason we restore them gradually, though it would be easier
to make them fully dead and then restore. At present it is difficult
to account for how much technical losses and exploitation expenses
will reduce after restoration of the sub-stations. The works being
implemented resolve the problems of reliability raising.
In 2009, your Company signed the so-called "Tripartite Union" with
WEB and European Bank for Reconstruction and Development. How this
programme is implemented?
We have become the first company in Armenia to receive credit at 64,5
mln Euro from such serious financial institutions. It is also important
that the company has been received without any state guarantees,
that indicates high level of the company's creditability.
The credit has been provided at EURIBOR + 7%, that makes up about 11%
per annum. 'These are just perfect conditions for us. The agreement
has been signed with the Russian Vnesheconombank, European Bank for
Reconstruction and Development and Electric Networks of Armenia CJSC
in June 2009. The credit has been provided for 10 years.
Recently, it has been much spoken about removal of electric substations
from residential houses. The issue was even discussed at the meeting
of the Public Services Commission ...
The point is that we intend to completely upgrade all the electric
substations of Yerevan with capacity of 6-10 kV. Ten substations
have already been upgraded: new buildings have been built for them
and the whole equipment has been fully repaired or replaced. Now,
it is necessary to create our own control center, that will make it
possible to control energy flows more efficiently. About 2, 000 people
are currently engaged in this work, however, their number will be
considerably reduced with creation of our own control center. Today,
we have substations, which have not been attended for about a year. We
have switched to quite another equipment category. In particular,
it is prohibited to install oil circuit breakers, and we actively use
fire protection systems. We did not even have a reliable protection
system. Currently, it takes several days to find the place where a
cable has been damaged. The problem is to completely replace the whole
automatics. The whole complex, related to substations, will be renewed
by late, 2010. The equipment at the sum of $40 mln is currently in
Armenia's warehouses. The Company schedules to build and put into
operation a big electric substation of 110 kV, that will allow to
reduce loading on the substations that supply the center of Yerevan.
Moreover, the capacities of this substation will be used to supply
the third mobile operator Orange-Armenia. Orange-Armenia will turn
out to be in a difficult situation if we do not manage to put this
substation into operation by October 2010. Moreover, this substation
has nothing in common with 17 substations being reconstructed by the
funds of the Japan Bank for International Cooperation. A new electric
substation with capacity of 35 kV, where it is scheduled to install
gas-insulated and vacuum circuit breakers, is under construction.
How many substations are there on the Company's balance in general?
Currently, there are over 8,000 electric substations on the Company's
balance, 222 of which are 35 kV, 101 - 110 kV and 7,9 thsd - 6-10 kV.
Their upgrading requires attraction of considerable financial and
material resources. We are not going to be limited to repair, but
intend to completely replace the old equipment by the up-to-date one.
Today, we even pay money for the old equipment to be taken from us,
as its delivery as a scrap metal requires more serious financial
investments. Yerevan, Gyumri and Dilijan, where offshore zones start
to be formed, will become our primary activity. We shall start from
Yerevan first, where the situation is the hardest. We hope very much
on Yerevan mayor's assistance, especially during allocation of lands
for construction. We have already started to carry out 4 old electric
substations from the buildings in Vanadzor. These buildings number
130, and currently we have to carry out electric substations from
another 100 buildings.
An agreement was signed with HSBC bank in due time for extension of
credit to $5 million. What is being done in this direction?
This credit allowed us to finance the significant measures for
improvement of the power supply quality. We do not intend to attract
other serious credits as the funds of the European Bank and WEB will
be enough to resolve the problem set. The company does not intend to
gather credit funds, as currently the matter concerns not the money
but the people's readiness to work with new equipment.
If I am not mistaken, you were singled out for a Diploma of Merit by
the Armenian Parliament speaker for the vigorous charitable activity.
Meanwhile, the company's funds have been arrested for some reasons.
How will the company continue its charitable activity in this
situation?
The accounts of Electric Networks of Armenia are currently under arrest
by the Tax Inspection only in one bank. The remaining accounts work
in a usual mode. However, we do not consider the arrest of one account
illegal and unreasonable. In view of this, we have already appealed to
the corresponding instances. We intend to solve the problem without
any emotions and abrupt movements. I think this is the most correct
way out of the created situation. We have won all the risks and I am
sure we shall win this one as well.
Properly speaking, what is the problem?
A whole lodgment of 86 people, employees of the Tax Inspection,
was launched in the Company in February, 2009. However, they found
no serious violations, as one would expect. Nevertheless, we were
required, though orally, to pay 8,6 bln drams to the state budget.
When we asked to show an act for production before the court, this
amount was strangely reduced to 1,7 bln drams. Now, by the decision of
the tax agencies, our accounts have been frozen in one of the banks,
so, a risk appears that we shall not be able to either square accounts
with the generation objects or accept the consumers' accounts. The
tax agencies offer the Company to take 600,000 electric meters,
currently belonging to consumers, onto its books, and require to pay
taxes from the as if the Company earns from receipt of these meters -
these taxes make up over two third of unfortunate 1,7 bln drams. The
meters belong to consumers, and the Company's employees are engaged in
their serving, as they have to do that irrespective of belonging. It
is interesting that the tax employees did not think over the opinion
of real owners of the notorious meters. Moreover, the company did
not have these meters on the balance when it was purchased. If the
meters were available, we would have them free-of- charge. However,
the law does not require tax payment even in this case. The problem
is just incorrectly raised and we cannot agree to such statement of
the question, as this may become a precedent. Undoubtedly, we shall
achieve justice in the court, and I am confident of our rightness.
Well, I wish you success and thank you for the interview.