Government, Developer, Investors Meet on Anaklia Port Project Financing    

The Government of Georgia, the Anaklia Development Consortium and four international financial institutions convened a meeting on May 21 to negotiate the funding agreement for the Anaklia deep sea port project, a USD 2.5 billion investment project on the Black Sea coast in western Georgia.

Regional Development and Infrastructure Minister Maia Tskitishvili and Finance Minister Ivane Machavariani attended the meeting on behalf of the Government, together with representatives of the ministries of economy and justice. Four potential investors – Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB), European Bank for Reconstruction and Development (EBRD) and Overseas Private Investment Corporation (OPIC) were also present at the negotiations.

Speaking after the meeting, Levan Akhvlediani of the Anaklia Development Consortium, said seven out of eight investor requirements have been agreed. Akhvlediani added that the sides will continue talks on the last point – on the issue of cargo transportation insurance, which would require the authorities to cover the debt accumulated by the port operator in case of insufficient freight turnover.

Badri Japaridze of the TBC Holding hailed the negotiation results, saying the meeting demonstrated that the project “will not be hampered.” “All sides are ready to implement the project,” he noted.

Government officials commented on the matter as well, with Infrastructure Minister Maia Tskitishvili saying the Anaklia port project is of “strategic importance” for the country, and that both sides – the banks and the government – have a “positive attitude” concerning the role and the participation of the Anaklia Development Consortium in the project.

Tskitishvili also confirmed that the sides reached preliminary agreement on seven points, but failed to agree on the issue of cargo transportation insurance. “Regrettably, we cannot take part with respect to commercial risks, because the state has never taken part in commercial risks – in none of the projects that have been implemented in Georgia,” the Minister said.

Finance Minister Ivane Machavariani echoed the message, saying the authorities are ready to support the project, but cannot “compromise” on the issue of cargo transportation insurance, citing “loss of the commercial component” in the project. “We are as much constructive as possible when it comes to political risks, force majeure situations, environmental or legislative risks, but we consider that it is not right for the government to undertake commercial risks,” he noted.

What do international financial institutions request?

According to the Anaklia Development Consortium, the following requirements have been presented by OPIC, AIIB, EBRD and ADB to the Government of Georgia as a precondition for funding the project:

• No timeframes for port construction phases and no requirement to carry on the construction in case of cargo shortage;
• Cargo transportation insurance/covering the debt (in the form of a loan) accumulated by the Consortium in case of insufficient freight turnover;
• Compensations in case of delays in railway and road construction;
• Easing lending procedures for the Consortium;
• Restrictions on the Government’s golden shares;
• Compensation in case of political force majeure situations;
• Compensation for/coordination of legislative amendments with creditor institutions;
• Compensation of USD 400 million in case of contract termination by the government.