Contents -- Acknowledgments -- Acronyms and Abbreviations -- Executive Summary -- 1. How Did It Happen? A Brief Overview of Power Sector Reform -- Why Reform was Necessary -- Steps Armenia Took Toward Reform -- What Reform Has Achieved -- 2. Was It Worth It? The Economic and Fiscal Outcomes of Armenia's Power Sector Reforms -- Economic Benefits -- Existing Externalities and Other Social Costs or Benefits -- Fiscal and Financial Benefits -- How Costs and Benefits Were Distributed -- 3. Lessons Learned From Armenia's Reform -- Preprivatization -- Privatization -- Postprivatization -- Role of the GoA -- Role of the AERC -- Role of the Donors -- Role of MRH as a Different Kind of Strategic Investor -- Concluding Lessons of Caution -- 4. Generalizing the Lessons Learned -- Postscript -- APPENDIXES -- A Overview of the Armenian Power Sector -- B Chronology of the Reforms -- C World Bank Power Sector Conditionality in Armenia -- D Lessons from Power Sector Privatizations Elsewhere in Europe and Central Asia -- E Estimating the Welfare Benefits of Power Sector Reform in Armenia -- LIST OF TABLES -- 1.1. Installed Capacity and Ownership of Armenia's Power Plants -- 2.1. Fiscal and Quasi-Fiscal Power Sector Debt in Armenia -- 2.2. Purchase Prices of Armenia Power Sector Assets -- 2.3. Top 13 Taxpayers in Armenia -- 3.1. Losses Collections Elsewhere in the CIS -- 3.2. Compared Staging of World Bank Conditionality in CIS Countries -- A.1. Installed Capacity and Ownership of Armenia's Power Plants -- A.2. Armenian Thermal Plant Statistics -- A.3. Characteristics of Armenia's HV Interconnections -- A.4. Peak Load and Available Capacity in Armenia -- A.5. Aggregate Electricity Imports and Exports in Armenia -- LIST OF FIGURES -- 1.1. Changing Generation Mix in Armenia Throughout the Reforms -- 1.2. Electricity Sales and Production in Armenia Compared to GDP.

1.3. Structure of Armenia 's Electricity Industry in 2005 -- 2.1. Effective Electricity Price Increases to End Users -- 2.2. Narrowing Gap Between Electricity Production and Sales -- 2.3. Evidence of Substitution to Natural Gas Throughout Reforms -- 2.4. Improvement in Energy Efficiency (Electricity Only) -- 2.5. Overall Energy Efficiency Improvement in Armenia -- 2.6. Use of Primary Fuels as Proportion of Total Energy Consumption -- 2.7. Fiscal and Quasi-Fiscal Debt Shown as Commercial, Tariff, and Collection Losses -- 2.8. Annual Electricity Expenditure and Use of Household Customers -- 3.1. Primary Success Factors in Armenian Power Sector Reform -- 3.2. Electricity System Losses in Armenia -- 3.3. Path of Tariffs During the Reforms -- 3.4. Collections and Commercial Losses Since Privatization -- A.1. Structure of Armenia's Electricity Industry in 2005 -- A.2. Changing Generation Mix in Armenia -- A.3. Declining Consumption and Demand in Armenia -- A.4. Operation of Armenia's Generators to Serve Load (Winter) -- A.5. Operation of Armenia's Generators to Serve Load (Summer) -- E.1. Economic Welfare Gains of Power Sector Reform -- E.2. Relationship Between Price and Demand During Reform Period -- LIST OF BOXES -- 1.1. Refinements to the Legal Framework -- 1.2. Armenia Launches its Second Tender Amid the Perfect Storm -- 1.3. Profile of Midland Resources Holding -- 2.1. Expansion of the Gas Network and Gas Consumption in Armenia -- 2.2. The End-Product Approach -- 2.3. Public Utilities are "Tax Collectors Par Excellence" -- 3.1. The Results of Armentel's Privatization Have Been Poor -- 3.2. The GoA's Concerns With MRH and the Safeguards Imposed -- 3.3. The Emergence of Financial Companies as Strategic Investors.