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05YEREVAN2217 2005-12-23 08:28:00 UNCLASSIFIED Embassy Yerevan
Cable title:  

ARMENIA COMMERCIAL NEWS SUMMARY:

Tags:   ECON ETRD KTDB BBSR BEXP BTIO AM 
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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.



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JAPANESE BANK EXTENDS LOAN TO MODERNIZE SUBSTATIONS


--------------------------



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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.



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ARMENAL FOIL MILL REOPENS AFTER COMPLETE MODERNIZATION


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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.



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ARMENIA LAUNCHES FIRST WIND POWER PLANT


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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


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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.



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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