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Sara Petrosyan

World Bank Advises Shut Down of Nairit; Government and Employees Oppose the Idea

The government of Armenia has finally decided to free itself from the constant protests of 2,200 Nairit plant workers demanding back wages.

The bulk of the back wages have been paid. Nairit Ltd. borrowed 16 billion AMD (US$33 million) from Yerevan Thermal Power Plant CJSC to pay the wages and to keep the plant from rusting away.

Nairit Ltd., a Soviet-era chemical giant, has stood idle since 2010. It has only produced a mountain of debt, which Minister of Energy and Natural Resources Yervand Zakharyan has estimated to be 102 billion AMD.

In August 2006, the Armenian government decided to sell 90% of Nairit’s shares to Rhinoville Property Ltd. for $40 million. The government retained the other 10%. In 2010, the company’s shareholder fled, leaving Nairit with a debt of 90 billion AMD ($188 million). This amount included a $108 million debt the company owned CIS Interstate Bank.

Readers will note that Rhinoville Property Ltd. took out a $70 million loan from Interstate Bank in order to buy 90% of the shares of Nairit Plant and to invest in it. As collateral, Rhinoville put up shares in Nairit.

At the request of the Armenian government, the World Banks audited the finances of Nairit and concluded that Nairit’s assets weren’t sufficient to pay off its debt.

Nairit has certain assets but their market value remains unknown. The prime assets are estimated to be around 57 billion AMD ($119 million) – significantly less than its 90 billion AMD ($188 million overall debt). The World Bank report states that a large portion of Nairit’s resources have deteriorated (wear and tear), and that this factor has yet to be reflected in its financial statements since there haven’t been any recent asset appraisals.

Gagik Hakobyan, director of Nairit-2, told Hetq that the back wages would be completely paid from revenues derived from the sale of company assets. We now know that the wages have been paid from the sale of the Vorotan Cascade.

Nairit’s obligations include a state insured loan to CIS Interstate Bank that hasn’t been paid off. World Bank consultants advised the government to enter into negotiations with creditors to resolve the issue of these loans that probably cannot be paid via the sale of company assets. A court decision has obligated Nairit to pay Interstate Bank 51 billion AMD ($108 million), an amount that includes interest and penalties.

On July 2, Minister Zakharyan suggested to Interstate Bank that it concede the demand rights of the loans allocated to Rhinoville Ltd. and to Nairit Plant CJSC.

World Bank analysts claim that if a resolution of the situation cannot be found then Nairit will continue to be a heavy burden for Armenia’s state electricity companies to the tune of $4-6 million per year in terms of wage payments and plant maintenance. The World Bank report states as a result of financial and technical factors the Armenian government must draft a plan to dissolve the plant.

Nevertheless, Nairit cannot dismiss all employees due to safety reasons and that over 500 workers will have to remain.

World Bank analysts say that any plan to dissolve Nairit must include an inventory of its assets and a market value appraisal.  The analysts also call for the drafting of a plan to soften the social impact of further employee dismissals and that the Armenian government must insure that they are paid dismissal compensation.

The World Bank adds that the government must conduct a detailed environmental study regarding taking the chemical plant off-line in order to minimize any deleterious consequences.

However, shutting down Nairit remains unacceptable to the government and to employees.

The government steadfastly maintains that it is looking for new investors to get Nairit up and running. Employees demand the same – that Nairit is re-launched. They claim that experts have estimated that it will only take $50-55 million to do so.

Workers say that those investing in the plant will recoup their outlay in three years and make a profit in the fourth.

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