Exclusive interview of Contour Global’s Executive Vice President for Europe Garry Levesley to Mediamax

- The agreement on buying Vorotan Hydroelectric Power Plant Complex by "Contour Global Hydro Cascade" is the largest investment that U.S. has ever made in the Armenia and the first one in energy field. Your company has power stations in 17 countries. What exactly attracted the company to make such a large-scale investment in Armenia?

- ContourGlobal is a New York based international power-generation company with approximately 3500 MW in operations or under construction in 17 countries and on four continents. Out total assets worldwide are worth more than US$ 3.5bln at present.

This acquisition will add to ContourGlobal’s growing presence in Eastern Europe, where it owns power generation facilities in Bulgaria, Ukraine, Romania, and Poland, and will contribute to ContourGlobal’s renewable energy portfolio, which currently comprises approximately 1000 MW of hydro, wind, solar and biogas production in Latin America, Europe and Africa.

We base our portfolio investments on what makes sense for the client and location. Armenia has a well functioning and reliable electricity generation and distribution system that has been re-organized by the Government of Armenia under the guidance of the World Bank. The Vorotan HPP is one of the major hydro power plants in Armenia contributing with 15% to the total electricity production in country. Its production will always be in demand since the hydro energy is among the lower-cost energy types and, by Armenian law, will be consumed solely in the internal market.

- It was reported earlier that besides your company, 4 more companies including a Russian one were interested in the Vorotan Hydroelectric Complex. The Complex is the first company producing energy in Armenia which was sold not to a Russian but an American company. How did you manage in some sense to “break through the Russian monopoly” in Armenian energy field?

- We were approached by the Armenian Government to consider the purchase and then investing into the modernization of the Vorotan hydro power plant, they may also have  approached other interested companies however we are not aware if they did, and if they did who they approached.

For over a year, we have done an extensive research of the Vorotan facilities, in particular, through technical, financial and legal due diligence performed by some of the leading international companies for us. We have based our decision to acquire the Vorotan on business development, economic benefit and country investment climate factors, including political stability – all of which we assessed as quite positive and encouraging for a private company like ours to engage in the business. We hope our investment will prove to be successful in the years to come and, as I mentioned during the brief meeting with the Prime Minister Tigran Sargsyan, will also encourage more western companies to consider doing business and investing in Armenia.

- Your company obliged to invest around USD70mln in modernization of the Hydroelectric Complex within coming 6 years. Would you speak in more detail exactly what modernization programs will be implemented and in what areas?

- Under the terms of the agreement, the ContourGlobal Hydro Cascade closed joint stock company (CJSC), a direct and wholly owned local subsidiary of the ContourGlobal, will own and operate the three hydroelectric facilities located on the Vorotan river and will supply power to the Armenian grid under a long-term (25 years) power purchase agreement.

ContourGlobal will also invest $ 70 million over the next six years in a refurbishment program to modernize the plants and improve their operational performance, safety, reliability, and efficiency. We expect the modernization to create 150 near-term jobs in addition to more than 150 long-term technicians employed at the plants.

Before we embark on any investment though, in accordance with the signed Assets Purchase Agreement (APA), we have to prepare, present and get the approval of the Public Services Regulatory Commission for the Vorotan refurbishment and modernization program. At present, we think the rehabilitation programme will be primarily focused on the upgrading and replacement of the main Electro-Mechanical equipment, including turbines, generators, electrical switch gear and control systems.  The goal is to improve the reliability, efficiency and longevity of the plants, of course each plant has its own specific needs which we are assessing in detail but this is the general scope.

For example, the work in Spandaryan station is likely to be primarily focused on improving the control, monitoring and communications from the plant. Our initial technical assessment in Shamb revealed that there was a vibration problem with one of the units that would be investigated further prior to the replacement of the main turbine equipment. In Tatev station, we presume the work will be focused on refurbishment or replacement of the main generation equipment.

This does not mean, however, that the $ 70mln program will be the only investment the company does within the time-span of its operation of Vorotan. We are contractually committed to keeping the plant functioning uninterruptedly, in accordance with high international norms and practice, inlcuding from the point of view of health and safety and environmental standards.

- Vorotan Complex provides 15% of the energy produced in Armenia and that's why it's an object of strategic significance for Armenia. Taking into account Armenia's being blockaded and Russia's dominant position in the country's energy sector, how are you going to support the country's energy security?

- This acquisition represents the largest single U.S. private investment in Armenia’s history and the first U.S. investment in Armenia’s energy sector. The Vorotan Hydro Cascade accounts for roughly 15 percent of the installed capacity of Armenia’s electricity system and provides sufficient energy to power 250,000 homes. We are committed to keeping the plant functioning uninterruptedly, in accordance with high international norms and practice.

The company is not just encouraged by the business opportunities but also understands the responsibility that we have taken on our shoulders, and we would do everything to further support the energy security of Armenia. We also understand that there are expansion opportunities on the cascade that the Government has asked us to looking to the economic feasibility of, we will do this in due course and if they prove feasible this could lead to an expansion of the complex in future years.

- Armenia sells energy to neighboring countries including Iran. In this regard, can purchasing Vorotan Complex become some kind of a bridge between U.S.-Iran relations? Do you plan to sell energy to Iran?

- ContourGlobal Hydro Cascade (CJSC) will not be involved in any energy sale or swaps with the Islamic Republic of Iran. In this regard, I should mention that we, as an American based company investing outside of the US, are bound by the laws and regulations of the US Government.

- Do you see any possibilities for cooperation with Turkey?

- As a multinational company that has grown rapidly in the past 8 years  to own and operate 33 different energy-type plants worldwide, including Eastern Europe, we are, of course, interested in further promoting our business in the region, not just Turkey. At present, though, we are focused on finalizing the Vorotan deal and establishing a well-functioning and high standard operation in Armenia. In future, we do not exclude considering attractive investment opportunities in the region, including doing more investments in Armenia and, in fact, further towards the East, too.