Hydropower Plant Valued at 12 Billion Drams Sold at Nearly Four Times Lower Price Through Criminal Mechanisms

The process of alienation of the property of "ZoraHPP" LLC has undergone a large-scale and comprehensive examination by the Department for the Protection of State Interests of the Office of the General Prosecutor of Armenia. In this regard, necessary documents and information have been requested and obtained from the Ministry of Defense of Armenia, the Public Services Regulatory Commission, and the State Property Management Department of Armenia.

The results of the examination have been sent to the anti-corruption and economic crime prevention department of the criminal investigation department of the Armenian police, with the instruction to verify the available information and to prepare materials in accordance with the rules of the Armenian criminal procedure.

Based on the examination and the prepared materials, it was established that following a corresponding decision of the Armenian government in May 2001, the management powers of the shares of "ZoraHPP" LLC, established with a statutory capital of 2 billion 1 million 840 thousand drams through the allocation of a plot of property from the property of the Ministry of Energy of "HayEnergo" LLC, were entrusted to the Ministry of Defense of Armenia in January 2002 by another decision of the government.

According to the obtained data, "ZoraHPP" LLC operated profitably between 2006 and 2010, delivering about 251 million kWh of electricity, from which 1 billion 252 million drams was transferred to the Ministry of Defense as a share of profit.

With the apparent intention to create justifications for selling the company at a price lower than its market value, the Public Services Regulatory Commission, on February 27, 2009, revised the electricity unit price set by "ZoraHPP" LLC, establishing an unexpectedly cheap tariff of 2.745 drams per unit instead of 13.92 drams without VAT from April 1, 2009, at a time when the production cost of electricity was 4.383 drams. Thus, the company was effectively deprived of the opportunity to generate profit for nearly a year.

Afterwards, immediately following the alienation of shares of "ZoraHPP" LLC, on January 20, 2011, the regulatory commission set the unit price to 10.5 drams without VAT, and from January 2012 to 19.551 drams.

Subsequently, in violation of the requirements previously established by the Armenian government’s decision of March 27, 1998, mandating an independent appraiser to evaluate real estate, a draft decision was prepared and presented to the government without evaluating the property by officials whose status was not clarified during the proceedings. Based on this, the government, by the decision adopted on December 16, 2010, allowed the Ministry of Defense to alienate the state property of "ZoraHPP" LLC, valued at 3 billion 600 million drams, to "Zoraget Hydro" LLC, which had only been operating for two months.

Meanwhile, the examination revealed that "Zoraget Hydro" LLC delivered about 700 million kWh of electricity from 2011 to 2018, generating total revenues of around 14 billion drams. The quantities of electricity delivered by "ZoraHPP" LLC and "Zoraget Hydro" LLC from 2003 to 2018 were comparable each year and did not undergo significant changes.

According to the information received from the State Property Management Department of Armenia, the market value of "ZoraHPP" LLC's property as of December 2010 was approximately 8 billion drams, and as of December 2018, around 12 billion drams.

Thus, the examination revealed that the property of "ZoraHPP" LLC, a state property valued at around 8 billion drams as of 2010 and about 12 billion drams as of 2018, which generated high income, was alienated for only 3 billion 600 million drams, causing significant harm to the legitimate interests of the state and leading to grave consequences.

Given that the prepared materials contain information indicating criminal acts involving the significant harm to the legitimate interests of the state by a number of senior officials and public servants from Armenian executive bodies, who, based on self-serving, personal, and group interests, utilized their official position against the interests of service and failed to perform duties, a criminal case was opened at the main department for combating organized crime of the Armenian police under part 2 of Article 308 of the Armenian Criminal Code.

The preliminary investigation of the criminal case has been entrusted to the Special Investigation Service of Armenia.