Guy Norton in Yeravan -

The marketing campaign for Armenia's first-ever IPO has been launched despite the country recently having to abandon attempts to support its currency, the dram, which depreciated by 25% in March.

Hydroelectric power generator Artsakh Hek is looking to sell AMD3.45bn ($9.5m) of stock at AMD1,050 per share in a landmark offering which is being lead managed by Armenbroke.

Vazgen Abgaryan, investment adviser at Armenbroke in Yerevan, says the firm is looking to attract as broad a possible audience for the groundbreaking transaction. "As the first-ever IPO in Armenia, it's very important to see as wide a range of participation by investors as possible."

He says there have been investor roadshows held in Artsakh's home region of Nagorno-Karabakh and the Armenian capital Yerevan, which were attended by the senior government officials, as well as executives from the country's biggest banking, fund management and industrial groups. "We're seeing very strong, positive feedback on the issue," says Abgaryan. "Traditionally, the main form of investment in Armenia has been in bank deposits or more recently in government or corporate bonds. With this IPO we are offering investors something totally new."

Agbaryan says that Armenbroke has also conducted an email marketing campaign among the Armenian diaspora in the US and Europe, and has also contacted specialist emerging market investors in the hope of drumming up offshore interest ahead of the April 10 subscription date for the issue.

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Artsakh is currently 100% owned by the regional government of Nagorno-Karabakh, which will retain a 40% stake in the company following the IPO. Agbaryan says that in order to ensure that the deal is a success, the authorities in Nagorno-Karabakh have stipulated that a minimum of 10% of Artsakh's annual revenues will be paid out as a dividend. "The government is trying to show the Armenian public that shares are a good investment opportunity," says Agbaryan.

Artsakh will use the proceeds from the IPO to boost its production capacity with the construction of three new hydroelectric power plants on the Tartar and Trghi rivers in Nagorno-Karabakh. As the leading power generator in the region, Artsakh is viewed as a strong credit with stable predictable cash flows from its off-take agreement with distribution company Artsakhenergo.

On the negative side, control of the Nagorno-Karabakh enclave is disputed; the lanlocked region is de jure part of Azerbaijan, but de facto governed by the internationally unrecognized Nagorno-Karabakh Republic. Since the end of the Nagorno-Karabakh War in 1994, representatives of the governments of Armenia and Azerbaijan have been holding peace talks mediated by the OSCE Minsk Group on the region's disputed status.

The transaction will be a key event for the bourse in Yerevan, which was acquired by leading exchange operator in Nasdaq OMX at the start of 2008. Previously new issue activity on the exchange had been limited to fixed-income issuance, with some 11 corporate bonds launched in 2008. "We have great expectations of this first IPO," says Armen Melikyan, director general of Nasdaq OMX Armenia. "The stock exchange will assist any company, any issuer with this process."

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