TAV Georgia’s Contract Questioned
11 April, 2013
TAV Georgia’s Contract Questioned
Georgian government is reconsidering the contract terms with TAV Georgia, the Turkish-based operator company of Tbilisi and Batumi International Airports. The new memorandum on investing USD 65 million in the construction of new runway at Tbilisi airport that secured 10 more years of management term to TAV Georgia at both Tbilisi and Batumi airports, is also under renegotiation at the moment.
The torments of verbal criticism flowing from the President of Georgia toward TAV Georgia since 2011 on account of
high tariff policy practiced by TAV Georgia at Georgian airports, very likely will end up in amendments in the contract between the Georgian state and the operator company. New government asked TAV Georgia to suspend the construction works of the new runway at Tbilisi International Airport [carried out in compliance with the memorandum concluded by ex-administration and TAV Georgia in September of 2012] as soon as it came in power in October of 2012. Now Georgian government states the contract concluded between Georgian state and TAV Georgia in 2005 is not based on parity issues for interest of Georgian side is minimized and plans to revise terms.
“We mean reconsideration of the contract that to our mind is not based on parity and do not protect interests of the state,” Kvirikashvili, Minister of Economic and Sustainable Development of Georgia, said. “We’d like to achieve negotiations with TAV and of course interest of the investor must be taken into account.”
The issue is negotiated at the moment with the Turkish side. Director General of TAV Holding that owns 76% of TAV Georgia had already arrived in Georgia and met Prime Minister of Georgia. However neither side discloses details of the negotiation as of yet whether which particular pretentions they have to agree. The only pretention Kvirikashvili accentuated on so far is the service quality provided by TAV Georgia but he did not specify details of the discontent. Actually the contract concluded by ex-power with TAV Georgia has always been a subject of criticism as the sector pundits assured the contract was a real bondage to Georgian side and insuring monopolist position to TAV Georgia but the exact contract terms were not available for public eye as the state held it as a commercial secret. TAV Georgia prefers to keep silence until the negotiations will be through. On the other hand, the suspended memorandum on construction of a new runway is not revoked as of yet. Ministry of Economic and Sustainable Development of Georgia (MOED) that asked TAV Georgia to halt the memorandum as far as MOED plans to attract its own financial sources to construct the said runway, is still perusing the paper. But if the memorandum is dissolved TAV Georgia’s operation period will be cut from 2037 to 2027 as envisaged in the contract signed in 2005. Meantime TAV Georgia has already spent over USD 1.4 million on construction works of the runway as it started works immediately in September of 2012. TAV Georgia promises not to ask compensations immediately if the memorandum will be really called off.
Since September TAV Georgia implemented construction works of around USD 1 450 000. If the state revokes the memorandum we are ready at this phase not to ask for the compensation sum but wait till the new investor comes in that will pay us what we have spent on the works performed,” TAV Georgia informed Georgian Journal. TAV Georgia invested over USD 100 million in both Tbilisi and Batumi airports since 2005 and increased passenger turnover by 74% in Tbilisi airport for the last three years.
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