RUGE CAPITAL – A NEW PLAYER IN CEMENT PRODUCTION
The FINANCIAL
14/10/2008 00:46
Georgia
The FINANCIAL — A new player RUGE Capital has appeared in the
cement production market in Georgia. From USD 200 to 300 million
will be invested by the partnership of Georgian-American Company
RUGE Capital and Firebird Fund in building a new cement factory,
equipped with special modern filtration systems. ADVERTISEMENT
"We’ve been investing in Georgia since 2004. We’re one of the largest
shareholders of the Bank of Georgia and we’ve been familiar with
Georgia for a long time. Our main competitor on the market will
be Heidelberg Cement who has the largest share on the market. We
assume that the Georgian market can handle more than two companies
and we will take our chances. The market will show us whether we’ll
be leaders or just followers of the market," Ian Hague, Lead Manager
of Firebird Fund, told The FINANCIAL.
"There will be modern filtration systems and so air pollution will
be decreased to a minimum. American investments guarantee that the
quality standards will be in the highest mode, in accordance with
ISO Certificates," Lasha Shanidze, the founder of RUGE Capital,
told The FINANCIAL.
The license period for using the limestone quarry is 20 years. The
factory will employ from about 300 to 500 people. The object brought
at the auction was the Babakiari cement limestone mine in the Marneuli
region. The total volume of the cement limestone to be obtained is
169,261,500 tonnes. The starting selling price was USD 3,000,000. The
RUGE Capital LLC was declared as the winner. The company won the
auction by offering USD 6,800,000. The factory will start operating
in two to three years.
The auction was held in the Ministry of Economic Development of
Georgia with the purpose of issuing the license for obtaining ore
resources. Pioneer Cement Industries Georgia LLC, a group founded
by Rakeen Development, and RUGE Capital were competing. The auction
was won by American-Georgian company RUGE Capital and its partner
Firebird Fund.
Firebird manages four private funds dedicated to investment in publicly
traded equities of companies operating in the former Soviet Union
and early-stage Eastern European countries, as well as two global
portfolio equity funds. Firebird also co-manages two private equity
funds focusing on the Baltic States.
"The competition on the Georgian cement market is high. There are many
small cement producers and also Armenian cement importer companies
in Georgia. The market share of HeidelbergCement Georgia today is
from 50-60%," Akaki Chkhaidze, Head of Marketing and Communication
Department of HeidelbergCement Georgia, told The FINANCIAL.
Today German HeidelbergCement is the number one cement producer on
the market. In May 2006, Heidelberg Cement purchased a stake of 51%
in the Georgian cement grinding plant Kartuli Cementi. This was
Heidelberg Cement’s first investment in the Caucasus region. The
plant is located in Rustavi, 50 km from the Georgian capital Tbilisi
. In the meantime the plant has been extended and transformed into
an integrated cement plant. The new plant with a cement capacity of
400,000 tonnes was commissioned in early 2008.
Heidelberg Cement has the production capacity of 2,000,000 tonnes
annually. From 2006 the company has invested more than USD 248,544,236
in Georgia.
EUR 12,000,000 investments were made in the recent period with the aim
of renewing the filtration systems in Rustavi and Kaspi factories. Due
to the war the suppliers had problems with providing materials and
Heidelberg had to postpone the process. The new filtration system
will start working at the end of 2008 in Kaspi and at the beginning
of 2009 in Rustavi.
At the end of 2006 Heidelberg Cement acquired a stake of 75%
in Saqcementi, the largest cement producer in the Caucasus
region. Saqcementi operates two cement plants (Kaspi and Rustavi)
near the capital Tbilisi with a total capacity of 1.6 million tonnes
of cement.
RUGE Capital and Firebird Fund are going to build a strong brand
"Kavkaz Cement". "This cement will be produced with dry method. Old
technologies are based on using the wet method of cement production and
largely pollute the air. Factory related pollution is the number one
source of pollution in the United States. Factory pollution accounts
for more than half the volume of all water pollution, as well as
for the most deadly of pollutants. More than 365,000 manufacturing
factories consume vast quantities of fresh water to carry away wastes
of several different types", company said.
Nowadays typical industrial factories have been fitted with various
types of pollution control devices that are designed to minimize the
amount of contaminants that are released into the air or water.
Construction related factory discharge includes gypsum, metals,
cement, abrasives and poisonous solvents. According to Lasha Shanidze
the new factory will be equipped with the newest filtration systems
which will guarantee safe operations and perseverance of nature.
"We’ve been working on this project for months now and the war didn’t
stop us. We with our American partners are committed to this project
and thus committed to Georgia. The government did a fantastic job of
promoting competition on the tender. The investment attractiveness
is a combination of two things, the opportunity itself and the risk
that you experience in the course of investing. Georgia continues to
represent a substantial opportunity for investments even after the
war assuming all the risks."
Heidelberg Georgia uses both wet and dry methods for cement
production. It has two wet methods using factories in Kaspi and
Rustavi. The one factory using the dry method is in Rustavi.
Lasha Shanidze worked as a Chief Executive Officer of the Millennium
Challenge Georgia Fund which was created in 2004. It was created by
the Government of the United States of America in partnership with
the Georgian Government to reduce poverty through economic growth in
Georgia. In that program Mr. Shanidze managed to negotiate on behalf
of Georgia around USD 300 million in grant and established team and
organization to run it smoothly.
In September 2007 Shanidze, after 3 years serving as CEO of MCG
resigned to apply his experience and start working in private business
of attracting large investors in other fields of Georgian economy.
"We’ve analyzed the market and found that there’s serious demand for
quality building materials for building Georgian infrastructure,
this including cement. High quality calls for the high price for
the company and we’ll try to guarantee the highest quality on the
market. These kinds of factories equipped with modern technologies will
help Georgia into further European integration," said Mr. Shanidze.
From: Baghdasarian