Armenian Finance Ministry: Loan provided to Armenia for modernization of NPP is extremely beneficial

ArmInfo. 270 mln USD loan provided by Russia to Armenia for extension of life cycle of the second unit of the Armenian Nuclear Power Plant is extremely beneficial and fully meet the interests of the two countries, Head of Strategy and Risk Management Unit of Public Debt Management Department of the Armenia's Ministry of Finance Artak Marutyan told ArmInfo's correspondent.  The specialist recalled that the governments of the two countries signed the framework loan agreement on February 5 2015. The cost of activities for extending the life cycle of the Metsamor NPP till 2026 totals 300 mln USD, it is planned to provide 270 mln USD as interstate export loan and 30 mln USD as a grant. 

The specialist told that the loan is provided for a 14.5-year term with 5-year grace period. During the grace period Armenia will make interest payments only. The interest rate on the loan totals 3% annually, which is paid from the received amount of funds. According to the agreement Armenia will start to pay for the principal amount of the loan from January 15, 2020 and will finish it till July 15, 2029. It is planned to pay off the loan by 20 equal payments once in 6 months. The country will pay 27mln USD each year. According to the conditions of the loan agreement if Armenia does not use the whole amount of the loan and there will be funds remaining after the implementation of the project the country may administer the remaining funds by paying 1% from the non-used funds. 

Artak Marutyan noted that in the whole amount of Armenia's debt burden this loan can be classified as a credit at preferential rate. "First, the loan is a long-term one secondly, with a fixed interest rate, which provides opportunity to calculate all the risks beforehand. The loan is very beneficial also because as of today by entering international markets of debt liabilities with sovereign bonds the country attracts funds minimum at 7% annual rate and a loan with 3% is certainly beneficial for Armenia", the financial expert noted. The fact that the loan is provided in dollars is another advantage in terms of management of currency risks. Another benefit is is that due to these funds the country gets Russian technologies, equipment and improves its own experience of work in nuclear energy field. 

Touching upon the implementation of the loan program Marutyan noted that the major part of the loan will be used for purchasing for the Armenian NPP, the authorized organization of the Armenian government, equipment and services from "Rosenergoatom", the authorized organization of the Russian government. The two organizations sign agreements on providing services and goods, within which the NPP presents demand for services and equipment to the Ministry of Finance though the Ministry of Energy and Natural Resources. The Ministry of Finance in turn sends an application for financing to the Ministry of Finance of Russia. After approval the financial agencies of the sides represented by the Armenian Central Bank and Bank for Development and Foreign Economic Affairs open relative letters of credit, with the help of which the payments are regulated and made. According to the expert it is important that each payment is made with 10% of grant component. He also informed that relations inside Armenia between the government, represented by the Finance Ministry, and Armenian NPP are regulated by sub loan agreement and envisage that the repayment of the credit will be made at the expense of the income of NPP. 

To recall, the Armenian NPP, the only NPP in the region, is located near the town of Metsamor (some 30km to the south of Yerevan). The first unit was put into exploitation in 1976, the second in 1980. At the beginning of 1989, the plant was closed down for political ideas, and then the second unit was reactivated because of acute energy crisis at the beginning of 1995. Two power units of Russian model pressurized water reactor- 440, with capacity of 815 megawatt in total were installed at the Armenian NPP. Experts say the Plant will be able to operate till 2016. At present measures are being taken to prolong the lifespan of the Armenian NPP till 2026.  Armenia and Russia signed in Moscow an agreement implying provision of 270 mln USD loan to Armenia for 14.5 years at 3% p.a. In addition, Russia will grant 30 mln USD to Armenia for the same purposes.