NEW GEORGIANS GOT INTERESTED IN “AZOT”

IRACLI TSINAMDZRISHVILI

Passions around the JSC “Azot” ran high. It is not yet clear who will, finally, become an owner of this gigantic enterprise.

Though, one can see interesting contours on the horizon – “New Georgians” might manage to take control of “Azot” in the background of Parliament members’ interests or lobbying. In the first stage or in the first round of application for the ownership of Azot, some speak about the possible participation of Bidzina Ivanishvili, Gogi Topadze, Mamuka Khazaradze and Gia Jokhtaberidze. Who of them wins, depends on the financial difficulties.
While Parliament members think about Georgian financial groups, non-government organisations and opposition advise the authorities to keep away from “Itera”. The joint stock company “Azot” works in the rehabilitation regime worrying about its survival.
“Azot” has not been the only enterprise to encounter difficulties since the Post-Soviet epoch. Presently, Georgia has up to 1500 limited liabilities and up to 240 joint stock companies in which the government has a major interest. Though, more than thousand enterprises are loss-making. The main reason of it is accumulation of credit and debit indebtedness followed by assignment of assets. The scheme is a simple enough – purchase of production and raw materials at high prices and realisation of output at low prices. Added to these, are increased losses in the course of production process. Thus, an organisation’s assets is not entered in the privatisation list, but transferred to the property of creditors by means of preliminary agreement with creditors, artificially boosted debt and judicial award. The above-mentioned more than thousand enterprises face a danger of being disposed by creditors without being entered in a privatisation list. As a result of it, Georgia will lose significant budget revenues.
It is difficult to say whether this mechanism was used in “Azot”, though 1 million profit for a gigantic enterprise is rather a small amount. The joint stock company “Azot” was established in 1994 by the property management ministry. The statute capital is 30 million 262 GEL. In 2001 a German firm “Vekerley” brought a suit against JSC “Azot” on the ground of bankruptcy case disclosure. The court satisfied the claim. A temporary bankruptcy manager was appointed.
The year 2001 was a really difficult one for Azot. The production fell twice, which resulted in 3 million 410 thousand loss. In this very period a partner was found. It provided the enterprise with gas and electricity. A rehabilitation programme was developed. The court approved of it and discontinued the bankruptcy action: a rehabilitation manager was appointed in the enterprise. Some months later an appropriate agreement was concluded with JS “Sakgas”. Under the agreement, “Sakgas” was obliged to provide the enterprise with gas and electricity, wrapping-paper as well as pay for the production processing… This agreement has been valid from 15 December to the present.
Under the rehabilitation programme, 20% of indebtedness or 16936,65 thousand GEL was to be covered in the first calendar year. 16117,7 thousand GEL has already been repaid. As a result of it, the number of creditors has reduced from 143 to 61 GEL . Thus, “Azot” “got rid” of 82 creditors. We will now speak in detail on the subject of “Azot’s” indebtedness. From 1 January 2001 to 1 July 2002 “Azot” has repaid credit indebtedness to 70 creditors. This sum amounts to 11341559 GEL including 11229987 GEL that was repaid to 24 large creditors such as “Sakgas”, “Rustavgas”, “Elektrowagonrepair”, “Quartzite”, etc. “Azot” has partly repaid the 6 511 710 laris indebtedness to 25 creditors. Yet, a new indebtedness was added to the old one – from 1 June 2001 to 1 July of this year the new credit indebtedness amounts to 912 391 GEL. Indebtedness accrued through interests for defaults and other reasons made up approximately 15 million GEL.
Under the provision of 1 June 2002, credit indebtedness of “Azot” totalled 105 198 583! Large creditors are national budget, Ministry of Finance, energy wholesale market, “Georgian railways”, “Saktransgasmsheni”, customs, etc. We can make a simple conclusion on the basis of these data: under the provision of 1 June 2001, this indebtedness made up 82 603 151 GEL and 105 198 583 GEL under the provision of 1 July 2002. Thus, the indebtedness grew to 22 595 432 GEL. The debit indebtedness of the joint stock company was 12 972 000 exceeding credit indebtedness by 92 226 583 GEL. Thus, the state of production is quite difficult, the level of enterprise liquidity is low, too.
Our government’s opinion might have been the same when it considered the issue of direct sale of “Azot” to “Itera”. The Itera-related story became more strained by the end of summer when non-government organisations, political dividends-thirsty parties and persons threaten with mass demonstrations and strikes. Added to this was strained relations with Russia. This came to it that “Itera” was refused to make a joint enterprise with “Tbilgas” and almost each week summits were organised to consider all details and nuances of “Azot” case.
No one is surprised to hear that Georgia is a country of paradoxes. Nor anyone was surprised to hear that Georgian financial groups have also got the sum of 6 million dollars necessary for the salvage of “Azot”. Incidentally, Demur Georkhelidze, chairman of branch economy committee made an offer of “interests of “Magti”, “TBC”, “Kazbegi” and others. Georkhiladze said the enterprise will start functioning, but the annual turnover of “Azot” will reach 150 million dollars… Good management and not so great sum is necessary for the functioning of “Azot”. Georkheladze also said that there are already strong financial groups in Georgia, for example, TBC group, Magti group, Gogi Topadze’s group and others that can invest money in “Azot” and turn it into a profitable enterprise. Georkheladze’s statement is one thing, but another thing is reality. The representative of above-mentioned groups have not made any such offer. Nor any of them have made an application in the Property Management Ministry. There is only “Itera’s” application there. As far as we know, “Itera” wishes to purchase 90% of “Azot’s” shares and as some say, it aims at taking control over the indebted gigantic enterprise. As for “Azot’s” indebtedness, it is under question, too. Deputies in the session of branch economic committee of the Parliament have argued much and have, finally, come to a sensational conclusion – “Itera” itself owes debt to “Azot”. In short, while “Azot” problems give a headache to officials, “Azot” proceeds with production – in October the enterprise has produced 835 thousand laris’ worth industrial production. Collaterally, the Property Management Ministry speculates on its fate.
We have already mentioned that “Itera” was the only one to send an application to the Ministry. However, it seemed to have forgotten to send a business-plan and documents of financial provision. Softly speaking, direct sale of “Azot” to “Itera” is unimaginable without it. Besides, as high-rank officials of the Property Management Ministry say, they are against the disposal of the object in the form of direct sale. Along with “Itera’s” application, representatives of Property Management Ministry discuss the privatisation of “Azot” through international tender.
Almost all deputies spoke against “Itera” in the committee session. However, Leval Pirveli managed to defend interests of “Itera” and said that “Itera” was the only way out. George Gogoladze, general director of “Azot” tried to take up the same attitude, but Levan Pirveli’s and his speech have failed to suppress deputies’ ventures (azart): “If the enterprise does not have so much money and if it requires millions for restoration, we are here, ladies and gentlemen, to buy shares of gigantic enterprise”.
In short, deputies and new Georgians will do their best to prevent “Itera” from swallowing the titbit of “Azot”. Only one thing is of interest – where have they been before?