BUSINESS
TAV GEORGIA IS EXPECTED TO REVISE CONTRACT
04 July, 2013
TAV Georgia, a Turkish-based operator company of Tbilisi and Batumi International Airports, is expected to revise its contract with Georgian administration so as to make it mutually beneficial.
Details of the revised version are not disclosed at the moment until TAV Georgia draws out its decision but very likely obligations to the investor company will be enhanced significantly, for the new draft, comprising 220 pages is almost trice voluminous compared to the 78-page previous contract, concluded by the ex-power with
TAV in 2005 when Tbilisi and Batumi airports were handed to the Turkish investor under BOT [build-operate-transfer] contract, expiring by 2027.
“The currently valid BOT contract we concluded in 2005 with government and on which we base our activity comprises 78 pages. On June 12 of this year ministry of economy sent a new 220-page amended contract that needs to be perused on our side. TAV Georgia is scrutinizing the contract terms at the moment,” Mete Erkal, General Manager of TAV Georgia, commented. Georgian side waits patiently cherishing a hope to get a mutually beneficial contract at last.
“This is a very difficult contract and when authorities prompted [on decision] and made a hasty contract previously Georgia fell in a pretty difficult situation as a contractor,” Dimitri Kumsishvili, Deputy Minister of Economy and Sustainable Development of Georgia, elaborated to Georgian Journal. “What we are trying today is to make contract mutually beneficial for both Georgian and Turkish side, this is principally important, believe me that the result can be much bigger and pleasant. TAV can construct the new runway project but all contracts that were agreed before and now should be mutually beneficial,” Kumsishvili said.
He could not name exact timelines when the new contract will be signed but the paper is expected to be through in this July tentatively, another deputy economy minister Natia Mikeladze said to radio Commersant on June 25, 2013.
The contract was highly criticized from the very first days of its conclusion and authorities were hailed in overlooking the state interests. Nonetheless, in September of 2012 TAV secured a new memorandum on 10-year prolongation of its management term at Georgian airports under an obligation to invest USD 65 million in construction of a new runway at Tbilisi airport. However new authorities found the said memorandum as well as currently valid contract between Georgian state and TAV Georgia based not on parity issues infringing Georgia’s interests. And although construction works have already been implemented by TAV Georgia since past September and, in April of 2013 authorities asked the investor to suspend works and halt the memorandum as far as the state decided to attract its own financial sources to construct the said runway. All papers were put under perusal and negotiations were expected to be completed early in this past May however the issue got protracted to mid-June.
Finally, Georgian side attached the memorandum issue to the basic contract and worked out a new draft contract envisaging amendments to both memorandum and old contract within one framework. Georgian side did not specify its pretentious except that the service quality provided by TAV was below the par, the state interest were overlooked and now the new contract should be based on mutually beneficially terms. Only in this case TAV can remain as a partner and construct the new runway too.
According to Mikeladze, Georgian side has already assessed the new runway project value and is ready to pay due compensation to the investor [if the memorandum is dissolved] but did not specify the project value while accentuated that negotiations with other investors taking an interest in Tbilisi airport are also on.
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