Will we have gas in winter?

Eka Gabadadze

The privatization process of Joint Stock Company “Tbilgas” has gone on for years. A number of tenders have ended in a crash.

The Government obstinately continues to look for investor. The population anticipates the future winter with fear and awaits for the final verdict. One of the priority branches of economy is still energetic on which depends the development of heavy and light industry, the improvement of life standard. The strategic object of energetic has been made a point of ideology.
Brief history of the past: since 1995 gas was not supplied to the population, which deteriorated the exploitation process of “Tbilgas”. In 1996 gas supply was renewed and, after this, corrosive defects in the Underground gas pipeline were detected. The general length of gas pipeline of “Tbilgas” makes up 2000 km of which only 402 km. network is in order. The amortized and defected pipeline poses a serious problem for the gas economy. In view of the fact that “Tbilgas”was in a difficult situation and that it was a heavy burden for the city budget, it was entered in a privatization list by the decision of Tbilisi Municipality (26, 1998). State estate Ministry announced commercial competition for 75% of Tbilgas shares that belong to the property of the State. The first competition was announced in 12 May 1998, the second one in 22 November 1999, the third in spring 2000 and the forth (and we hope the last) in June 2001. The potential investors who showed an interest in the object, took an informational memorandum that described a company, its consumer base and investment climate of Georgia. At first, this process was headed by the Estate Ministry, but afterward, by the decision of the President, the Government became involved in the process, too. Last year, in the beginning of November, the specialist of Tbilisi Municipality and US Aid’s contractor firm “PA Consulting” signed an agreement that envisaged for the attraction of strategic investor. Despite the fact, that “PA Consulting” made quite good work, the future prognoses for “Tbilgas” is not reassuring. According to the opinion of specialists, the inner business organization of “Tbilgas” was changed with the assistance of US Aid’s contractor firm. Reorganization was performed. The procedure of staff employment and redundabcy was developed. A correct staff policy is the best way of attracting an investor.
According to the experts, these procedures will help them to save time, which will make it possible to prepare for winter. Of course, all this will be dependent on finances. In short, the privatization of “Tbilgas” is viewed as “panacea”. Though, the question of whether it is real or not is a different subject.
Incidentally, many famous companies wished to purchase “Tbilgas”: “Sakgas”, “Itera”, “Garden France”,etc. For the present, there is only one group left in the Marathon ? Israeli company “TAHAL” It is noteworthy that “TAHAL” has won a great number of projects that were financed by such international organizations as “The World Bank”, “American United Bank”, “United Nations”, etc. The cost of projects implemented by them made up averagely 600 million US dollars per year. Many public and private companies used services of the company. Georgian fathers of energetic and high-ranked officials lay great hopes for “TAHAL”. However, we should point out that this company expressed a wish to take part in the tender of “Tbilwaterchanal”, but it failed the exam and dropped out of the process. There are important materials about the situation in gas pipeline network. These materials are accessible to any investors. As far as we know, “TAHAL” is familiar with the content of these materials.
What do we sell?
On the basis of privatization memorandum, the Government intends to sell an investor a major interest of “Tbilgas” (85%). Privatization The privatization process of Joint Stock Company “Tbilgas” has gone on for years. A number of tenders have ended in a crash. The Government obstinately continues to look for investor. The population anticipates the future winter with fear and awaits for the final verdict. One of the priority branches of economy is still energetic on which depends the development of heavy and light industry, the improvement of life standard. The strategic object of energetic has been made a point of ideology. of “Tbilgas” pursues important aims: commercialization of “Tbilgas” will be performed, which will improve its financial index; operative rehabilitation works will be performed, gas supply and the quality of technical safety system will be improved, gas network will be expanded, the number of gas consumers will rise, the problem of “Tbilgas” indebtedness will be settled. In short, everything will be all right. The strategic investor will start work in years 2001-2002 till winter. For your information, the assets of “Tbilgas” make up 3960 788 shares, the nominal value of which amounts to 3960 788 GEL.
The potential investor must meet the following requirements: the investor shall submit to the commission an investment plan aimed at commercializing the system rehabilitation and at increasing the number of consumers (who presently make up 120 thousands) to minimum 300 000 for the first five years. The investor is responsible for supplying gas to “solvent” consumers. The annual income of the company must exceed 50 million US dollars. Thus, a winner shall have the right to purchase “Tbilgas” and shall invest 75 million US dollars for five years. It also undertakes to pay off last and present debts of “Sakgas” and “Itera”.
According to our informational source, the documents sent by “TAHAL” to the Georgian party were not, unfortunately, translated. Specialists spent much time on translation of the documents. Though, the fact that “Tbilgas” is going to be sold is not worth arguing about.
The former estate minister, Levan Dzneladze, had the honour of opening “TEHAL’s” block of shares. In his opinion, privatization is by no means idee fixe. However, “Tbilgas” requires big investments and guarantees that will serve the purpose of providing service to the population. To his mind, “Tbilgas” will not be able to solve this problem in the existing situation. The survival of “Tbilgas” is called in question nowadays.
Levan Dzneladze, a former estate minister, says that the Government has three principle requirements as far as the tender of “Tbilgas” is concerned. system restructuring ? rehabilitation and expansion of communication networks; second ? financial matter ? the question of indebtedness. Third ? conclusion of stable and long-term contract with gas supply companies. Note, that it is an infrastructural branch for each enterprise, it is a part of cost price: continuity of this part is of great importance. These were the main requirements. At the first stage of tender, application was made only by the Israeli company “TEHAL”. Documentation was made in English language. Note, that tender was announced for direct purchase of “Tbilgas”. Direct purchasing requires indication of a starting price. “TEHAL” did not indicate the price in its application, though it was specified that this requirement was obligatory.
– Do you think that terms of “TEHAL” are acceptable?
– To tell you the truth, I expected to receive more optimistic, real offers, but, in this case, I refrain from making any conclusions. Tender commission has postponed its work in this stage. These documentations must reach a particular condition. Representatives of “TEHAL” will make further comments after the decision will be taken. The process of “Tbilgas” privatization was postponed for a number of times. The situation is desperate, winter is approaching, and the indebtedness of “Sakgas” is growing. Do not you think that in this state of affairs it would be better to sell “Tbilgas” to the company that takes part in the tender.
– Representatives of US AID and PA Consulting helped us to organize this process in accordance with high standards. The most important thing for us is the functioning of “Tbilgas” system gas supply to the consumer; this gas and system must be “acceptable” (as far as the price is concerned).
– Mr. Levan, there are not representatives of “Tbilgas” in the tender commission.
– For one thing, the membership of tender commission is determined on the basis of the
President’s decision. It is a structure of executive power. Leaders of Parliament Committee and even a premier of Tbilisi who represents interests of capital city, are involved in it. Decision is taken by the members of Commission and drawn up by the Chairman of tender Commission. As soon as a winner is selected, contract will be drawn up. In this stage, the opinion of community representatives will be more important.
In spite of the fact that Community Representatives are not invited to the tender Commission, a reform group of the commission working on the study of energetic problems, scrupulously reviews the privatization process of “Tbilgas”. They say they will intervene in this in case “Tbilgas” is sold in this way and in this form. Their principle requirement is 24 hour gas supply to the consumer.
In conclusion, we can presuppose that privatization process will be once again postponed. According to our informational sources, “TEHAL” asks for 5 years’ delay of “Sakgas” indebtedness and 15 years’ delay of budget indebtedness. Besides, it can not fix the investment plan. Apart from this, “TEHAL” requires preferences and tax exemption for the first years. In addition, it asks for the assistance of “Semex”, International Gas Corporation, and ministry of energetic, etc. in the conclusion of long-term contract.