Tbilisi would have Electricity, for the Time Being…

AES-Telasi and the Georgian Government Locked in Disagreement

On February 10 after the meeting of State Minister Avtandil Jorbenadze and general manager of the US-owned AES-Telasi company, which distributes electricity in capital city Tbilisi, Georgian government agreed to pay for the purchase of the natural gas needed for the power plant owned by AES-Telasi, to secure unrestricted supply of electricity to Tbilisi.

General Manager of the company Ignacio Iribarren said on February 7 AES Telasi does not have 5 million Lari necessary to purchase the natural gas for its generating facility AES-Mtkvari, thus electricity supply to the capital city would be restricted.

On February 10 Georgian government expressed readiness to pay up to 2 million Lari from the budget in order to secure steady supply of electricity. According to the State Minster, USAID would cover the remaining 3 millions, in framework of its assistance to the Georgian energy sector.

The AES-Telasi management also says Tbilisi residents have severely underpaid for the consumed electricity in January.
 
The recent problems for the AES-Telasi started after the Constitutional Court upheld the suit of the Labor Party, canceling as illegal increase of the electricity tariffs to 13.7 Tetri (6.5 cents). In late December the Court obliged the Georgian National Energy Regulation Commission (GNERC) to calculate the reduced rate. In early February GNERC proposed to reduced the tax by 1,8 Tetris.

“This was a compulsory measure. We have to obey the decision of the Constitutional Court and reconsider the tariff. For this purpose we have suggested the minimum attainable price for the electricity [under the current taxation regime]. But if the exemption from the value added tax is granted, the cost of electricity can be as low as 8,8 Tetris,” Paata Vardosanidze, representative of the GNERC, told Civil Georgia.

Ignacio Iribarren said the political decisions are negatively affecting his business. “During the recent months we were unable to mobilize the revenues,” he said presenting the documents, proving that the company was suffering losses.

The AES-Telasi management indicates the Labor Party has caused most of these losses, by agitating the city residents not to pay for electricity until the cheaper tariffs are introduced.

Iribarren did not rule out that the Georgian government might be involved in such worsening of the business environment, since company’s relations with the country’s leadership has been worsening as well.

Last week the Georgian president mentioned the company’s problems again in his weekly government briefing. Eduard Shevardnadze said that due to financial problems at its head offices AES might leave the Georgian market.

The AES-Telasi lobbyists Irakli Melashvili clams several acting and former governmental officials in Georgia are trying to take over AES-Telasi and force the US Company out of the country.

So far, however, the company management says it is not planning to shut down operations or to sell its shares. “This is absolutely not going to happen at this moment. But, of course if in the future any other company will wish to buy our business and offers us favorable conditions, we would definitely consider their proposal,” Iribarren said.

Current decision by GNERC to decrease the tariff would affect AES profits as well. The management thus denied bearing the burden of the loss, arguing the government should reimburse the losses and favor its contractual obligations with AES.

Popular discontent towards AES-Telasi has grown after the company increased electricity rates in Tbilisi by 1,3 Tetris (0,6 cents) to constitute 13,7 Tetris since November 1, 2002. AES justified its demand for increased tariff by reduction of investments from the AES head office.

Despite protest of the population and various non-governmental organizations, the GNERC has satisfied the company’s request and permitted increase of the tariff. This was the second increase of the price since 1999, when the AES rented the electricity distribution system in Tbilisi for 99 years. In 2001 the tariff increased from 9,8 to 12,4 Tetris.

By Tea Gularidze, Civil Georgia