Private Capital Markets - The Republic of Georgia
Georgia is widely considered to be one of the fastest-growing economies in the Caucasus, with private investments representing a particularly important opportunity in the country's economy. Recent years have shown that the Georgian energy industry is particularly ripe for investment, with hundreds of millions of private dollars pouring into the construction of hydroelectric power plants. Additionally, the establishment of the Georgian Co-Investment Fund has resulted in billions of private investments being funneled into Georgian industries such as tourism, hospitality, real estate, manufacturing, and agriculture.
EBRD And Investment In Georgia's Energy Sector
- Georgia's energy sector has been recognized as a priority area for private investors in the country, with significant industry-wide development potential, especially in the hydroelectric subsector.
- Many new hydroelectric power plants have been developed in Georgia over the past several years thanks to private investors taking advantage of low regional wholesale prices and the "wealth of Georgia's hydropower resources".
- The European Bank for Reconstruction and Development (EBRD) has co-financed a number of these power plant projects, establishing itself as the "largest renewable energy investor" in the country.
- The first hydroelectric plant to go live in Georgia was the 87 MW Paravani HPP, developed in 2014 by the Anadolu Group from Turkey using US$ 68,500,000 in financing from the EBRD.
- The 108 MW Dariali HPP, another plant manufactured with the help of a US$ 80,000,000 syndicated loan from the EBRD, was Georgia's first example of an infrastructure project completed by a private-public investment partnership.
- In 2015, EBRD partnered with the International Finance Corporation (IFC) and the Asian Development Bank (ADB) to lend US$ 250,000,000 to a project for the 187 MW Shuakhevi HPP. The funding represents "the largest ever private hydro investment in Georgia".
- As of 2020, the EBRD is still considered a "leading institutional investor" within Georgia, having invested more than €3.7 billion across 249 projects throughout the country, 87% of which were confined to the private sector.
The Georgian Co-Investment Fund
- In 2013, Georgia's prime minister, Bidzina Ivanishvili, launched the Georgian Co-Investment Fund (GCF) in order to encourage private investment in the Georgian economy from both foreign and domestic sources. The fund is meant to focus on private investment projects of over US$ 5,000,000.
- At the time of launch, the GCF boasted US$ 6 billion in private equity funds, equal to approximately 40% of the country's GDP, and included a mandate designed to offer investors priority access to the highest-growth sectors of Georgia's economy.
- Approximately 80% of the GCF was intended for private investment within Georgia, while the remaining funds were earmarked for international projects. Investment priorities of the fund include US$ 3 billion in the energy sector, US$ 1 billion in the hospitality and real estate sectors, US$ 500,000,000 for agriculture and logistics, and US$ 1.5 billion for manufacturing.
- Shorty after launch, the GCF attracted a significant number of "heavyweight investors", such as the Abu Dhabi Group of the UAE, Calik Holdings of Turkey, and Milestone International Holding of China.
- In 2016, the GCF created the Georgian Tourism Development Fund (GTDF) to boost investment in the company's tourism and hospitality sectors. The GTDF's focus is the development of hotels and entertainment facilities in Georgia, such as the US$ 100,000,000 Galleria Tbilisi project and the US$ 101,000,000 Axis Towers in the nation's capital.
- Private investments enabled by the GCF have also focused on agricultural development, such as a US$ 34,000,000 investment in developing Georgian greenhouses and US$ 9,000,000 lent to GeoAgro, one of the largest agricultural producers in the region.
To begin, your research team conducted a thorough press scan of news and financial journal articles published in or about the Republic of Georgia in hopes of locating recent publications describing the nature of Georgia's private sector investment. The majority of information located referenced Georgia in terms of an emerging economy, with private investment discussions largely focused on current pain points and future opportunities. Older articles referenced the 2013 development of the Georgian Co-Investment Fund (GCF), which had the effect of spurring private investment in the country despite being a government-led initiative.
Next, we attempted to locate press releases, blog posts, financial reports, and other white papers from private firms who have previously conducted or intend to conduct business with Georgia. Documents of this nature were found among publications from the European Bank for Reconstruction and Development (EBRD) and PricewaterhouseCoopers (PWC), a UK-based consulting firm, both of which indicated the attractiveness of Georgia's electricity sector for private investors.
Finally, your research team scoured official documents released by the government of the Republic of Georgia, hoping to find official reports reviewing the country's private sector investment environment or growth opportunities. Unfortunately, very little could be found aside from information surrounding the GCF and related projects. In an attempt to provide a range of useful information, our research brief focused primarily on trends related to the potential of private investment in the Georgian energy sector, as well as investment trends spurred by the creation of the GCF.