26.Apr .2019 19:28

Government Will Not Meet Anaklia Port Investors in April, Negotiations Postponed until May

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Government of Georgia says that the meeting with the investors of Anaklia Port project won’t be held in April.

BMG was told by the Ministry of Infrastructure that they are comunicating with investors and the meeting will most probably be held in May, however the exact date is still unknown.

“The meeting will most probably take place in May, I cannot tell you the details about why it will not be held in May, because as far as we know the permanent process of negotiations is taking place between the Ministry, donors and consortium. So far it seems like the meeting will be held in May “, says the Ministry to BMG.

On April 12, the Vice PM, Maia Tskitishvili stated that the government is ready for compromises during the negotiations with investors.

“The meeting should be held in order to find out the details of demands from investors, as well as to conclude positions. Thus, we have expressed full readiness for this meeting and we hope that it will be held in May. After these meetings we will be able to agree on the acceptable positions. The main purpose of the meeting is to conclude positions and find possible areas for compromises, which we are willing to do”, stated the Vice PM and Minister of Infrastructure, Maia Tskitishvili.

Asian Development Bank is among one of the investors and it contributes 100 million USD to the project. BMG asked ADB about specific date of the meeting, however they did not provide specific answer about it. ADB did comment however about potential benefits Georgia will gain from this project.

“We believe that the port will transform regional connections and trade. It will also help Georgia to become the hub for international logistics and business”, says ADB.

The government of Georgia hired legal company, “White & Case” for the negotiations with investors and paid for 195 000 USD for their service. The company was asked to prepare the renewed version of the investment agreement. Moreover, company was asked by the government to put so called “optional article” in the agreement, which would talk about potential consequences of single-sided termination [from the side of the government of Georgia] of the agreement with “Anaklia Consortium Group”.

Ministry of Infrastructure claims that they have not received the legal assessment about the termination of the agreement.

The negotiations renewed between the government of Georgia and donor organizations after IFIs presented an 8-point package of demands to the government. As far as it is known, 8th point is the most problematic for the government, because it obliges Georgia to cover the loan in case of the termination of agreement.
However, 8th point also emphasizes that in such situation the government of Georgia will gain the ownership of all the shares of the port, the price of which amounts to several hundreds of millions of dollars.

8-point demands for the government of Georgia from crediting financial institutions:

1. The deadlines for different stages of the development of the port should not be set until the bank loans for the first stage are covered. Before that the development of next stages should only happen in case it is needed, however such decision should be substantiated with relevant research. The investor should not be obliged to construct the second stage in case there is no turnover;

2. The government should provide the insurance for the risks of turnover. The government should provide insurance for the difference, which consortium would lack so that it pay the loan to the banks with according schedule. The government should lend this money to the consortium and the consortium on their side should pay this money to the banks. After meeting all the requirements of the banks, consortium should fully pay its loan, as well as the subordinated loan and only after this the investors from consortium will be able to gain profit from the port;

3. The government should issue compensation in case the construction of the road and railway is postponed. If the construction of the road and railway starts late then the port won’t be able to start its operations, which would cause specific damages for the investors. Thus, in case the construction of the road and railway is postponed or hindered, relevant financial damages should be compensated by the government;

4. The issuance procedure of loan for the consortium should become more flexible. This article suggests to give the right to investors to sell this loan to third parties, which would mean that the investor can be replaced;

5. “Golden share” of the government should have restrictions. The government owns so called “golden share” in the project with which it can have a significant influence on the commercial decisions. According to this article, the right to “golden share” should be restricted;

6. Government should issue compensation in case of any political force majeure situation;

7. Compensation or agreement for legislative changes. The list of legislative changes, which would require the government of Georgia to compensate the consortium, is too narrow. According to the assessments from banks, this list should widen in order to avoid any negative influences in case of legislative changes;

8. In case of the termination of BOT contract the government of Georgia should cover the loan of 400 million USD. In such case the government of Georgia has the right to cover the loan and gain full ownership over the shares of the port. In this case, the investors of the consortium are losing their investments.