ARMO: Is Russian Connection Real?

Tirana, 15 April 2008. Back during a January cabinet meeting, Prime Minister Sali Berisha announced his government’s decision to privatise three important state-owned companies in the energy (KESH), oil (ARMO), and insurance (INSIG) by the end of 2008. An optimistic Berisha declared, “This year will be marked by a wave of privatisation, because we see ourselves as a liberal government that believes in free enterprise”.
The Ministry of Trade, Economy, and Energy had already hired Patton Boggs, one of the most prestigious US law companies, as a legal consultant. Patton Boggs delivered its report to the Ministry of Trade, Economy, and Energy in October 2007 and some of the details of that report have now been leaked to the media. It seems that Patton Boggs attempted to assess the value of ARMO based on its performance during the period 2004-2006. The financial year 2007 is not taken into consideration, unfortunately, as 2007 was extremely successful for ARMO. Its net income in 2007 was Lek 1.7 milliard compared to a mere Lek 365 million in 2004, or roughly five times more than in 2004.
Patton Boggs assessed the market value of ARMO at 50-60 million Euro, although its assets in paper are worth over 100 million Euro. The Greek newspaper, Imerisia, assessed the paper value of ARMO as high as 109 million Euro. ARMO runs two refineries, a large one in Ballshi, 40 km from the sea, with an annual processing capacity of two million metric tons, and a smaller one in Fieri, plus a small network of filling stations selling motor oil and products. Albania split ARMO from the tottering, oil-producing arm of Albpetrol before the sale to make the refiner more attractive.
The Ministry of Trade, Economy, and Energy announced on 15 February 2008 the open international tender for privatisation by offering for sale 85 percent of the shares of ARMO. Bids will be reviewed on 21 May 2008 and the contract will be signed in June 2008. The bids for ARMO will be evaluated using a formula of 75 percent on the price offered and 25 percent on the prospective buyer’s business and development plan. Prime Minister Berisha has declared that he is looking for a strategic buyer, an oil and gas sector specialist with at least four years of experience, a share capital of 55 million Euro and certifications of international production standards. “One of the main criteria will require the contractor to make an investment that will help develop this key sector”, said Berisha.
ARMO has generated interest from at least 20 companies. The Minister of Trade, Economy, and Energy, Genc Ruli, told journalists that it was a pleasant surprise that large companies have shown interest in ARMO.