RUSSIAN OWNED MADNEULI PLANS NEW INVESTMENTS IN GEORGIA
Levan Lomtadze
The FINANCIAL
Sept 1 2008
Georgia
The FINANCIAL — The Russian-Georgian war was a big test for the
companies operating in Georgia. Some of them started thinking about
whether or not it would be profitable to stay in the Georgian market,
but this was not the case for Russian giant – mining company Madneuli,
the winner of the most influential award in Georgia, Golden Brand 2007.
"Madneuli is committed to continue business activities
in Georgia. Additionally, we are planning to open a new pit in
Sakdrisi soon. Recently the company opened the Balichi pit and we are
conducting research in one of our potential pits in Racha, and soon
another research is coming to the Adjara region," Nikoloz Avaliani,
Marketing Department of Madneuli, told The FINANCIAL.
"We have information that foreign investors are going to raise
investments in the country, especially long-term investments,"
said Avaliani.
One of the prior activities of Madneuli is the implementation of social
projects. In 2007-2008 the amount for charity funds and sponsorship
of Madneuli will exceed USD 3 million.
In this difficult situation when there are tens of thousands of
refugees who need help, Madneuli was one of the first companies that
contributed a huge amount in order to help the displaced people from
the conflict zones.
"In the days of war we visited almost all the hospitals in
Georgia. Quartzite with Madneuli bought medicines, food, water and
beds for the refugees and injured people. Also it should be noted
that we are planning to donate much more to the cause in the near
future. I think the total amount contributed will exceed GEL 1
million," Avaliani noted.
Madneuli is going to actively continue operating in Georgia and
further more they are going to put more effort into searching for
new resources.
Despite the war Madneuli didn’t halt its production process. The
working schedule was not changed because of the conflict. Madneuli
uses railway to transport products to the seaport Poti, from where
it goes to different countries.
According to the Marketing Department of the company the war did not
have an effect on sales because it coincided with time intervals when
production is collected and packed for transportation.
"Now as we know the railway is functioning properly and Madneuli is
running continuous production process," claimed Avaliani.
The company also guaranteed the safety of its workers.
"The Madneuli factory is far away from the conflict zone. It should
be mentioned that all workers of Madneuli are insured and well
equipped. During the war special security measures were fulfilled,"
said Avaliani.
It seems as though there were minimal or no losses at Madneuli during
the conflict. "As our production was not interrupted the losses are
minimal or perhaps even zero, but it is still too early for exact
calculations."
According to the company the partners of Madneuli actively paid
attention to statements made by European leaders and US officials. As
these statements were in support of Georgia, foreign partners do not
see reason to worry in the long-term. Furthermore as EBRD and other
financial institutions released their readiness to raise financial
injections in Georgia this was signal to all of the partners that
business conditions in the country are rather good.
In the first quarter of 2008 the company sold a record USD 50 million
worth of production. After this data Madneuli became #1 exporter of
the country. In 2005, 2006 and 2007 the net incomes of the company
were USD 18,063,968 million, USD 47,745,547 million and USD 15,159,565
million respectively.
The company was established in 1975 in the Bolnisi region,
Georgia. Madneuli contributes more than 10% of Georgian
exports. Madneuli is operating in gold and copper markets. Over 65%
of the company revenues come from sales of copper. Madneuli’s primary
focus is on copper because of the experience with and the prospects
for this metal. The company exports to France, the UK, Germany,
and Austria.
The major shareholder of Madneuli is Russian resources holding company
Geopromining. In Georgia Geopromining owns Madneuli and Quartzite.
According to Armenian newspaper Hetq online Madneuli is a sister
affiliate of the Prominvest Corporation whose principal owners are
Sergei Generalov and Siman Poverenkin.
Along with Madneuli Russian capital including the banking sector,
energy, oil, mobile communications, plants, air companies – have all
felt at comfort in Georgia up till now. During the conflict, which
is widely expected to be resolved, VTB , Beeline, Telasi and LUKOIL
worked normally and did not come under attack by the local population.
The only non-functioning body with Russian capital is the Azoti plant,
though the reason has nothing to do with war as the plant is undergoing
renovation works.
Georgian-Russian company Energy Invest acquired Azot in 2005 for USD
20 million.
Energy Invest, which owns fertilizer company Azoti, located in Rustavi,
35 km from Tbilisi , told The FINANCIAL the only reason why the Azoti
plant has stopped now is because of the renovation works being carried
out there.
"Georgia will not attempt to re-nationalize assets owned by Russian
companies such as UES, Vimpelcom or VTB following its conflict with
Russia," the Georgian Deputy Prime Minister Giorgi Baramidze told
mergermarket, according to the Financial Times.
Economic expert Soso Tsiskarishvili said that the Georgian government
should be able to think ahead carefully before making decisions. Today
in Russia there is no big Georgian business capital, but there’s a
huge physical capital which is in danger. The Georgian government
can’t risk the lives of these people.
In order to adequately react to Russia’s actions, every vague
transaction that was made with Russian companies should be
overlooked. There are many questions regarding the legal aspects of
the contracts with which economically strategic units were sold.
Vakhtang Khmaladze, the well known Georgian expert, believes that when
economically strategic units in Georgia were being sold to Russian
companies the legal rights of the Georgian and Russian companies
weren’t equal. "According to Georgian legislation those foreign
companies whose main shareholder is the government of another country,
have the right for acquisition. While in Russia the legislation forbids
acquisitions by these kinds of companies because of political threats."
Today the Georgian government is less likely to start nationalization
of property belonging to Russian corporations, Khmaladze says. "A more
realistic solution would be to use Georgian legislation. There are a
number of Russian corporations whose main shareholder is the Russian
government and own strategically important units in Georgia. The
law should oblige them to sell their property to other non-Russian
companies. The price at which the companies will be sold must be a
competitive price, which will be beneficial for the Russian side too."