One of the largest investors leaves Georgia

One of the largest investors leaves Georgia. Kazakhstan's gas energy and transportation company KazTransGas (KTG) announced a sale of its subsidiary company KTG-Tbilisi. The Georgian Energy Ministry confirmed that the agreement on its purchase by the Industrial Group of Georgia had been reached finally. The negotiations had been in progress since 2015 when KTG-Tbilisi faced the first problems with the Georgian authorities: Energy Minister Kakha Kaladze accused KTG of not fulfilling the contractual obligations, and the government appointed an external manager in the company Tbilgaz, which belongs to Kazakhstani investors.

The background of the conflict was the authorities' disagreement with the increase of retail prices for natural gas in the run-up to the parliamentary elections. Moreover, the ruling party Georgian Dream came to power with a promise to reduce utility payments. But the opponents of the KTG-Tbilisi had other arguments, in particular, a low level of investment in the development of the dilapidated infrastructure of the gas distribution network and a significant debt to the budget. Moreover, the original agreement became the ground for various interpretations.

Numerous visits of Kakha Kaladze to Astana, his negotiations with the leadership of the energy giant KazMunayGazI (the mother company of KTG), attempts to reach a compromise did not bring results until the third influential player appeared - the Industrial Group of Georgia whose owner is multimillionaire Davida Bezhuashvili. She expressed readiness to buy out the company Tbilgaz from the Georgian "daughter’’ KazMunayGaz and save Georgia from a multimillion-dollar claim. Tbilisi could well lose this trial in the European arbitration. But buying assets for real money will satisfy all more or less.

The compromise involves the rejection of lawsuits on lost profits, damage to reputation and so on. The industrial group of Georgia is close to the Georgian authorities and, for certain, acts in coordination with them. In addition, the Georgian billionaire and the founder of the Georgian Dream, Bidzina Ivanishvili’s crucial role in the major financial transactions in the country is not a secret for anyone. For certain reasons, Ivanishvili is a factual leader of the government. It is hard to imagine that such a significant financial operation affecting the issue of the budget debt and the international reputation of the country could be carried out without his knowledge.

On the other hand, it is unlikely that Davida Bezhuashvili would agree to purchase 100% of the shares of the company under the external government control without firm guarantees of a positive solution to the debt issue, and a promise (documented possibly) of Kazakhstani partners to abandon the idea of a lawsuit in arbitration.

The price of the issue has not yet been made public, as the deal has not yet been legally completed and all formalities have not been carried out. We only note that in 2006 KTG bought Tbilgaz from the state for $ 12.5 million, and for 12 years the value of the assets has increased.

The most sensitive issue remains the investment image of Georgia: the buyer is a local company, while the Azerbaijani SOCAR, which also participated in the negotiations for the purchase of KTG, renounced the deal after studying the details. And Tbilgaz is not the only problem asset of Kazakhstani investors. Similar problems KazMunaiGas had with the Batumi port and elite hotel in Borjomi. And if the issue with the hotel was settled relatively easily, since it was a small investment, the situation around the port is fraught with new complications. However, when the government has such "partners" as a billionaire Ivanishvili and multi-millionaire Bezhuashvili, any complexity can be overcome without significant image damage, according to the classic formula of Ilf and Petrov "with complete non-resistance of the parties."