ARMENIA COMMERCIAL NEWS SUMMARY:

UNCLAS SECTION 01 OF 02 YEREVAN 002217 SIPDIS EMBASSIES - PLEASE PASS FCS DEPT FOR EUR/CACEN, EB/CBA PASS TDA, OPIC, EXIM E.O. 12958: N/A TAGS: ECON ETRD KTDB BBSR BEXP BTIO AM SUBJECT: ARMENIA COMMERCIAL NEWS SUMMARY: DECEMBER 2005 -------------- SUMMARY -------------- ¶1. This cable summarizes press reporting on commercial developments in Armenia for December 2005. Major headlines include: -- Japanese Bank for International Cooperation approves extension of loan for electrical transmission station upgrade; -- Russian Prime Minister Fradkov inaugurates the newly modernized aluminum foil mill; -- Armenia launches first wind power plant; -- Armeconombank issues corporate bonds; -- November 2005 Economic Data. END SUMMARY. -------------- -------------- JAPANESE BANK EXTENDS LOAN TO MODERNIZE SUBSTATIONS -------------- -------------- ¶2. The Japanese Bank for International Cooperation (JBIC) has granted an extension to the USD 4.5 million loan aimed at modernizing 33 electrical distribution and transmission 110-volt stations. The program includes purchase and installation of modern equipment for 33 110-volt electrical substations, design and installation of SCADA communication system, acquisition of multi-tariff electrical meters for socially disadvantaged population, and provision for consulting services. The project tender will be announced in early 2006 and the project implementation deadline is set for 2010. JBIC approved the original loan in 1999, which expired on October 20, 2004, but work had never started due to the lengthy process of privatization of the Armenian Electrical Network. The project was deemed unprofitable due to the USD inflation and increase in prices for construction materials. The Armenian Government requested that JBIC grant a no-cost extension of the loan in the beginning of October 2005. -------------- -------------- ARMENAL FOIL MILL REOPENS AFTER COMPLETE MODERNIZATION -------------- -------------- ¶3. On December 3, Premier Fradkov and the Armenian President inaugurated the Armenian Aluminum foil mill (ARMENAL),a Yerevan subsidiary of the Russian giant RUSAL, which represents a USD 70 million Russian investment and is expected to employ about 1000 local staff. Fradkov called the newly refurbished aluminum foil mill an excellent example of Russian-Armenian investment cooperation. The plant was purchased by 
RUSAL in 2003 and shut down in October 2004 for complete modernization. German Achenbach rolling mill manufacturer, who won RUSAL's international tender, completely refurbished and upgraded the plant, bringing it in line with international standards. -------------- ARMENIA LAUNCHES FIRST WIND POWER PLANT -------------- ¶4. On December 6, Ministers of Energy of Armenia and neighboring Iran inaugurated Armenia's first-ever wind power plant, part of the country's efforts to explore alternate energy sources. The plant is a 2.6 MW capacity facility consisting of four wind turbines perched at the altitude of 2,038 meters in the mountain pass in Lori, one of country's northern provinces. The power station, the first of its kind in the South Caucasus, is expected to satisfy the electrical demand of the neighboring town of Stepanavan as well as villages in the surrounding area. The USD 3.5 million grant was allocated by the Iranian Government to cover the entire expenses of the project, including purchase and installation of German-made equipment. The Iranian Sanir company won the tender and became the general contractor implementing the project. As stated by the Armenian Deputy Minister of Energy, the Armenian Government is looking at expanding the capacity of the plant to 20 MW as well as promoting wind power generation in other mountainous areas of the country. -------------- ARMECONOM BANK ISSUES FIRST CORPORATE BONDS -------------- ¶5. On December 14 Armeconombank, one of Armenia's leading commercial banks, issued its first corporate bonds with the assistance of the USAID Securities Market Strengthening Activity. It issued AMD 200 million in corporate discount bonds with an average yield of 6 percent and a maturity date of December 15, ¶2006. This is the first time that corporate bonds are being issued for public secondary exchange trading in Armenia. The underwriter of the bonds is the "Ton Ton" brokerage Company. According to the director of the Armenian Stock Exchange (ArmEx) Armen Melikyan, the bonds will be listed and circulated by ArmEx. As stated by the executive Director of the bank, the first issuance of the bonds is a pilot project aimed at assessing the current market situation as well as checking the possibility for the future issuance of mortgage bonds. The second tranche of bonds will be issued in February-March 2006 with a possibility of further issuance on a quarterly or bi-annual basis. -------------- NOVEMBER 2005 ECONOMIC DATA -------------- ¶7. According to the preliminary data from the National Statistical Service, Armenia's real GDP from January to November 2005 grew by 13.5 percent year-on-year to USD 4.2 billion. Industrial production totaled USD 1,275 million, showing an increase of 6.8 percent compared to the same period of last year. Gross agricultural output for the first eleven months of 2005 grew by 10.9 percent compared to 2004, and reached USD 892.1 million. Construction increased by 32.7 percent to USD 788.8 million. From January to November 2005, exports were worth USD 867.4 million, and imports USD 1.6 billion, with a foreign trade deficit of USD 714 million. GODFREY