Russian gas producers in line to buy Armenian chemicals plant

By bne IntelliNews May 8, 2013

bne -

Russian energy companies Rosneft and Itera are reportedly in talks with the Armenian government over a possible acquisition of the country's largest chemicals plant, Nairit.

The largest producer of chloroprene rubber in the Commonwealth of Independent States, Nairit has been operating at minimal capacity since a gas price hike in 2010 made production unprofitable. Without either a strategic investor or a bailout, the company faces bankruptcy due to a debt burden of around $130m.

According to reports, the Russian oil and gas producers are set to decide on an acquisition by the end of May. The UK's Rhinoville Property Limited has held a 90% stake in Nairit since 2006, while the Armenian government, which owns the remaining 10%, has been trying to find a way to revive production. Russian business daily Vedemosti, citing an unnamed company source, writes that Itera is considering "different variants of participating in the project".

The privately-owned gas producer offered a deal to Yerevan to take on Nairit in 2011. However, that was turned down in favour of an alternative investment plan drawn up by Armenian officials and submitted to state-controlled giant Rosneft instead. Under that proposed programme, investment of around $512m is needed to modernise the plant. The government has already applied to the Eurasian Development Bank (EDB) for $100m.

The talks on finally structuring a deal come as tension builds around Nairit. On April 29, employees gathered outside both the Armenian government building and the presidential residence to appeal for salaries to be paid and production to resume. "We have come to demand a year's salaries and to let Nairit start operating. For three years we have been going to Nairit with no certainty over whether the plant will keep operating or not," the company's press officer Anush Harutyunyan told Armenia Now.

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