Privatization in Progress

Recent Privatization Bids
 
The Georgian government is expecting more than USD 200 million next year from the privatization of several state-run enterprises, including the Georgian Ocean Shipping Company, manganese mining factory in Tchiatura and the Vartsikhe hydro power plant.

The Government recently signed its largest-ever privatization deal with the Greenoak Group, regarding the selling of a shipping company for USD 107 million; however, the agreement is preliminary.  Prime Minister Zurab Zhvania said, on December 23, that the shipping company will be sold to any company that is willing to offer more than USD 107 million before December 27.
 
Another large-scale privatization package includes Chiaturmanganumi, a manganese mining enterprises in the western Georgian town of Tchiatura, and the Vartsikhe hydro power plan. These two enterprises will be sold in one package, as the Chiaturmanganumi mine receives its electricity directly from the the Vartsikhe hydro power plant.
 
Prime Minister Zurab Zhvania said that three companies – Ukrainian Interpipe Corp.; Austrian DCM and a Kazakh company – have expressed interest in purchasing the Chiaturmanganumi/Vartsikhe package.  On December 24, however, the Economy Ministry reported that the Kazakh company will not participate in the privatization.
 
The deadline for applying to privatize these facilities is January 10.  “On January 11 we will publicly open the envelopes with the applicants’ proposals and get acquainted with what they are offering us,” Zurab Zhvania said at a news briefing on December 23.
 
He also said that an Austrian company has offered USD 100 million for the Chiaturmanganumi mine and the Vartsikhe hydro power plant.
 
“The Austrian company has even made a USD 10 million downpayment [which cannot be accessed by Georgian officials until completion of the deal] in an attempt to demonstrate its serious intentions over this deal,” Zhvania said.
 
In 2003, DCM purchased a controlling stake in the Ferro-Alloy Plant in Zestaponi, which is also located in western Georgia.  The Zestaponi Ferro-Alloy Plant represents the biggest customer of Chiaturmanganumi’s products.
 
Another bidder for the Chiaturmanganumi/Vartsikhe package is the Ukrainian giant Interpipe Corp., which is owned by the influential tycoon Viktor Pinchuk, son-in-law of outgoing Ukranian President Vladimir Kuchma.   
 
“We have created real conditions for competition, which works in favor of Georgia,” the Georgian Prime Minister said.
 
He said a final decision will be made in favor of the company which pays the highest price and presents the best investment plan and development concept. 
 
$15 Million for Governmental Residence 
 
The Georgian government expects an additional USD 15 million from another privatization deal, involving the sale of the Governmental Residence located in the Krtsanisi district of the capital city, Tbilisi.
 
Georgian Prime Minister Zurab Zhvania announced on December 23 that a group of New York-based businessmen are interested in purchasing the huge Krtsanisi Residence, which includes several apartments, conference halls and a total of 44 hectares of land.
 
The site was used for official meetings and also served as a residence for Eduard Shevardnadze during his presidency. The ex-President still lives in one of the apartments of the Krtsanisi Governmental Residence.  However, the apartment currently occupied by Shevardnadze will not be included in the privatization deal.
 
“If there is somebody who will offer us more than USD 15 million, they may do so over the next three days [the deadline of applying for privatization bid is December 26] and they can purchase it,” Zurab Zhvania said on at a news briefing on December 23.
 
Priorities
 
Georgia Prime Minister Zurab Zhvania also announced on December 23 that the USD 200 million expected from this privatization process will mainly be distributed among the armed forces, energy sector and road construction projects.
 
“We should receive at least USD 200 million [from privatization] next year and, as the President has already announced, part of this money will be spent on the army,” Zurab Zhvania said.
 
He also stated that the rehabilitation of the energy sector will also be a priority. “We need tens of millions of [U.S.] dollars to secure an electricity supply by autumn, 2005,” Zhvania said.
 
“By the end of next year, Georgia itself should produce 1,800 megawatts of electricity.  This is the amount of electricity that Georgia consumes on New Year’s eve,” added the Prime Minister, alluding to the one day out of the year wherein the most electricity is consumed in the country.
 
Zhvania also said that part of the income from this privatization process will be directed towards the rehabilitation of roads.
 
Exact distribution figures from the proposed privatization iniatives, however, have not been made public.