Caucasian Business Week #11 by Caucasian Business Week

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BUSINESS WEEK July 01, 2013 #11

caucasian business week

July 01, 2013, Issue 11

BE INFORMED, DO BUSINESS

GEORGIA

VTB HEAD MEETS WITH PRIME MINISTER ON BUSINESS EXPANSION ISSUES

ndrei Kostik, head of second largest state bank of Russia met with Bidzina Ivanishvili, Georgian Prime Minister, - reports Ria Novosti, based on Bank’s press service.

IRI: 41% OF RESPONDENTS WOULD VOTE FOR GIORGI MARGVELASHVILI IN THE PRESIDENTIAL ELECTIONS

Pg. 2

RATIO OF NONPERFORMING LOANS IN TOTAL LOAN PORTFOLIO REMAINS UNCHANGED

caucasian1

n the cumulative portfolio of banking system, share of problem loans was defined by 9,5% by June 1, 2013 (first quarter 2013 - 9,5%). Pg. 8

MILLENIUM CHALLENGE CORPORATION APPROVED SECOND COMPACT TO GEORGIA WORTH OF $140M

eorgian Ministry of Education and Science reported that board of the US governmental Millenium Challenge Corporation has approved on June 19 a 5-year Compact for Georgia. Pg. 9

GROSS EXTERNAL DEBT OF GEORGIA

ross External Debt Statistics is harmonized with BOP statistics. Besides of public sector debt, it includes private sector’s (Banking and Other sector) external debt. Pg. 9

56% of respondents think the country is developing in the right direction

he International Republican Institute [IRI] reveals new data of the survey evaluating mood of the Georgian population. “Rustavi 2” TV company reports that the organization conducted a survey in the second half of May and 4 thousand adults were surveyed. According to the study, if presidential election were held next week, 41% would vote for “Georgian Dream” candidate Giorgi Margvelashvili. The second place is occupied by the “United National Movement” candidate [11%] which is not yet named, 7% of respondents support Nino Burjanadze, while

5-5% percent of the respondents would vote for Shalva Natelashvili and Salome Zurabishvili. As for the current processes in Georgia, when asked “in what direction is the country developing,” 56% of respondents believe that “in right”, “in wrong” 22%, and 22% - have no answer. 47% of respondents name unemployment the most important problem in Georgia, followed by occupied territories - 18%, and the economic situation - 13%. 29% of respondents believe that most of all the population expects from the government solution of unemployment problem, 14% -improvement of the economic situation and 6% are waiting for the fulfillment of promises. In addition, 37% of respondents believe that the Parliament should work primarily on employment problem, on health care - 16%, on the economic issues - 14%. When asked “whether the ruling party and the opposition should continue a dialogue?” - 73% of respondents believe that “yes”, 13% “no,” while 14% - don’t have an answer. When asked “What are you most afraid of?”- most of the research participants named the threat of war - 21%, followed by the threat of internal conflict- 14% and the problem of the occupied territories - 5%. 41% of respondents consider the U.S. the most important partner while Russia as the greatest political - economic threat - 57%. Along with that, 82% of respondents support the continuation of the dialoguewith Russia, partially - 11%. 61% of respondents are in favor of NATO membership, partially agree - 19%.

INFORMATION ON ASSECO GROUP’S ENTRANCE IN GEORGIA

sseco Group, one of the leading IT companies in Easter Europe plans to launch operation in Georgia and set up and develop major IT companies in the country. Pg. 4

AZERBAIJAN FITCH RATINGS AFFIRMS AZERBAIJAN RAILWAYS AT ‘BBB-’ WITH STABLE OUTLOOK

itch Ratings has affirmed Azerbaijan Railways Closed Joint Stock Company’s (ADY) Long-term Issuer Default Rating (IDR) at ‘BBB-’ with a Stable Outlook, Fitch Ratings said on June 25. Pg. 10

ARMENIA BLOOMBERG RATES ARMENIA FOURTH MOST IMMORAL COUNTRY

rmenia was ranked fourth in the list of most immoral countries in the world by Bloomberg analysts. The analysts studied indicators of 57 countries. Pg. 11

CIS GAZPROM GIVES UKRAINE USD 1 BLN PREPAYMENT FOR NATURAL GAS TRANSIT

nalyst sees payment as “yet another driver of devaluation pressure for hryvnia in the near future.” Pg. 12

WORLD NEWS GOLD MINERS TRADE LIKE JUNK AS BULLION SINKS BELOW $1,200

TI: ADVERTISING BUSINESS COMES TO STANDSTILL

ransparency International Georgia has published a new advertising market research . According to the report, Georgia’s advertising market has come to standstill, but its competitive capacity has increased and the field has been depoliticized. The research named as Georgia’s Advertising Market - Now in Competitive Environment?” says the private sector’s costs on AD campaigns have not increased, because investors are afraid of instable political situation in Georgia. Total expenditures on advertising plans in 2012 made up 52 million USD

and a major part of the costs was registered in the television sector, including 95% were recorded in Tbilisi-based television stations, the report reads. 11% of the expenditures were recorded for outdoor campaigns, 10% have gone to the radio AD campaigns, 5% went to printing media and only 2% were registered in the internet media. “The first three months of 2013 registered contraction in advertising expenditures and economic growth and a major part of the market experts note total expenditures on AD campaigns will further decline in 2013”, the report reads. Pg. 3

Rasmussen gia’s on Georgia’s NATO Integration ion Pg. 2

Foreign Citizens will not be able to Participate in the Agricultural Cooperatives Minister of Agriculture Shalva Pipia Pg. 7

David Sergeenko: Private Insurance Business Will Still Have Quite Room for Development Pg. 7

Bijan Mougouee: If Georgians Perceive Fly Georgia as a National Carrier and are Proud of it, that Day will be the Day of our Success Pg. 4 Nino Kobakhidze: Corporate Health Insurance Market will Lose a Certain Number of Clients Pg. 6 “Coca-Cola” Founder Speaks about Sales Growth after Acquisition of “Castel- Georgia” Pg. 6

Rompetrol Georgia introduces new premium quality fuel Efix S Pg. 5

TOP NEWS caucasian business week

ISRAEL SHOWS INTEREST IN GEORGIA’S AGRICULTURE SECTOR

eorgia’s Minister of Agriculture Shalva Pipia declared that Israel is interested in investments in Georgia, especially in agriculture sector. Pipia made this statement after meetings with Israeli businessmen, which he held during visit of Georgian delegation to Israel on June 24-25. According to Georgian Ministry of Agriculture, interest towards joint projects was expressed by Poly-Ag Corporation and Erben Investments.

July 01, 2013 #11

RASMUSSEN ON GEORGIA’S NATO INTEGRATION

ILIAUNI BUSINESS REVIEW: TBILISI CUSTOMERS PREFER SNO, BAKURIANI AND NABEGLAVI

ased on research, conducted in Tbilisi, IliaUni Business Review said that Sno and Bakuriani are market leaders among spring water brands, holding per 43%, while Nabeglavi leads among mineral waters with 56%. Regarding other brands, IliaUni Business Review said that Bakhmaro and Sairme hold per 7% among spring water brands, while Likani has 21%, Borjomi – 14% and Sairme – 9% in mineral waters’ category. The research was conducted on June 1-15 among staff of 75 trade outlets (Goodwill, Populi, 2 Steps, Ioli, Nikora, Smart and Furshet), located in 17 different areas of Tbilisi.

PARLIAMENT ADOPTS BILL ON INVESTMENT FUNDS BY FIRST HEARING

he Parliament approved in first reading a draft bill “On Investment Funds” yesterday. The draft allows existence of several types of investment funds. In particular, the matter concerns unit investment trust, investment fund of experienced investors (with staring capital no less than 500,000 lari), stock fund (including venture capital and private investments), etc.

VTB HEAD MEETS WITH PRIME MINISTER ON BUSINESS EXPANSION ISSUES

ndrei Kostik, head of second largest state bank of Russia met with Bidzina Ivanishvili, Georgian Prime Minister, - reports Ria Novosti, based on Bank’s press service.

Russian Agency informs that the sides discussed further enlargement of VTB Group business in Georgia. Kostin characterized meeting as very constructive. “I saw sincere interest of Georgian side I enlargement of VTB activities in Georgia. Considering this, we’re going to invest additional $7,5 million of the bank and to open 5 new branches of VTB bank Georgia by the end of the year”, - State Bank’s press service, citing Kostin’s words. “Georgian side considers that existing positive changes in Russian-Georgian trade-economic relations will enable VTB to maximally use its potential for bilateral economic relations development”, - Ria Novosti writes.

GEORGIAN DELEGATION TAKES PART IN EURASIAN MINISTERIAL OF OECD

eorgian delegation takes part in Eurasian ministerial of OECD (Organization for Economic Cooperation Development), which is held on June 27-28 in Poland. As Georgian Ministry of Regional Development and Infrastructure reported, the delegation consists of the Minister David Narmania, Energy Minister Kakha Kaladze, Deputy Minister of Economy and Sustainable Development Mikheil

Janelidze and chairman of Georgian Industry and Commerce Chamber Kakha Baindurashvili. The ministerial aims sharing of experience and deepening of cooperation between countries of Eastern Europe and South Caucasus, the Ministry said.

BUSINESS WEEK

caucasian The Editorial Board Follows Press Freedom Principles Publisher: LLC Caucasian Business Week - CBW Director: Levan Beglarishvili DISTRIBUTED FREE OF CHARGE Editor-in-chief: Evgeni Mikeladze Mobile phone: 555 472234 Commercial Department: Irakli Lekvinadze Email: caucasianbusiness@gmail.com

• Georgia is ‘on the right path and making real progress’; • ‘With consistent efforts Georgia will walk through NATO’s open door’; • ‘October presidential elections are next important test’; • ‘Saakashvili, his successor and PM will all be remembered as builders of democracy;’ • ‘Allies have some concerns over judicial processes against ex-govt officials’; • ‘Georgia cannot afford even the perception of selective justice’; • ‘I trust the Georgian authorities to uphold the rule of law’;

ATO Secretary General, Anders Fogh Rasmussen, said on June 27 in Tbilisi that Georgia “is on the right path”, which moved “a lot closer to NATO”, but “the burden may still be on you now to continue to deliver the necessary reforms.” “But once you have delivered, the burden will be on us to live up to our pledge that Georgia will be a member of NATO,” he said in a speech before a group of students in the National Library on the second day of the visit to Georgia by NATO’s main political decision-making body North Atlantic Council (NAC). Earlier on June 27, the NATO Secretary General and ambassadors from the NATO-member states from the North Atlantic Council met Parliamentary Chairman Davit Usupashvili and senior lawmakers from both the parliamentary minority and majority groups. At that meeting the NATO Secretary General said that the presidential elections in October, 2013 would be the “next important test” for Georgia’s NATO aspirations. Parliament speaker Usupashvili said: “Georgia is moving with firm steps and getting closer to NATO membership, which is the choice of the Georgian people and the goal which the current government serves and the goal which the previous government was serving.” “The Georgian people and we the parliamentarians and politicians expect that there will be reciprocal steps made by NATO and its member states to demonstrate next year that integration process has deepened,” Davit Bakradze, the UNM parliamentary minority leader, said at the same meeting that the major political groups in the country were unanimous in respect of the Euro-Atlantic integration. “It’s difficult to find an issue which so many politicians will agree on, but NATO membership is an issue which all we agree on,” Bakradze said. In a speech before students in the National Library, the NATO Secretary General laid out the priority areas Georgia should pay attention and said that the country should “continue to work to ensure the highest democratic standards.” “You are on the right path, because it is the path to NATO’s open door. You are making real progress. With consistent and determined efforts, you will reach your destination. And you will walk through that open door,” Rasmussen said. He said that a resolution on foreign policy and constitutional amendments, which were unanimously passed by the Parliament, was demonstrating political compromise and dialogue in the country. “But the Allies do have some concerns, particularly regarding the judicial processes against former government officials,” Rasmussen continued. “Georgia cannot afford even the perception of selective justice.”

“Let me stress, corrupt or criminal officials must be prosecuted. But prosecution must never become, or be seen to be, an exercise in political revenge,” he said. “The Georgian government is committed to promoting due process, a politically independent and strong judiciary, and public confidence in the courts. And during my meeting with members of the government they all reaffirmed these basic values. So I trust the Georgian authorities to uphold the rule of law in each and every case. And I trust the Georgian people to stay actively engaged in holding your institutions of government to the highest standards,” the NATO Secretary General said. He also stressed on the need for “greater tolerance” and said that the violence that took place in Tbilisi on May 17 against anti-homophobia rally had no place in democracy. Rasmussen, who met PM Bidzina Ivanishvili on June 26 and met President Saakashvili on June 27, said that in last October’s parliamentary elections Georgia experienced the peaceful transfer of power and for this the Prime Minister “deserves congratulations” and the President “deserves credit.” “Later this year, President Saakashvili will step down. And when he does, he, his successor, and the Prime Minister will all be remembered as builders of democracy,” the NATO Secretary General said. Rasmussen again mentioned the previous and current governments when speaking about Georgia’s relations with Russia and said: “Your new government has stepped up the efforts of the previous government to improve relations with Russia.” “NATO welcomes these efforts. They show political courage and a realistic understanding of what is achievable. But it takes two to tango. And Russia has to help in this regard,” he said and called on Russia to reciprocate on Georgia’s non-use of force commitment. He also expressed concern over installation of fences along the South Ossetian administrative boundary line by the Russian troops and said that “such moves are contrary to international law and they are contrary to the ceasefire agreement.” “Fence-building impedes freedom of movement. It can further inflame tensions. It is not acceptable, and should be reversed,” Rasmussen said. In his speech the NATO Secretary General reiterated that Georgia’s contribution to ISAF mission was not a mean of buying entry into NATO. “I know that many Georgians are asking how many more of their brave soldiers will be lost in order to gain NATO membership. Let me stress. Your soldiers are not in Afghanistan as a means of buying entry into NATO. They are there, first and foremost, because it is in Georgia’s security interests for them to be there,” he said. Civil.ge

MEDIA MARKET July 01, 2013 #11

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TI: ADVERTISING MARKET REACHED STAGNATION PERIOD In the past three years, the Georgian advertising sector has seen a high degree of market concentration and was highly politicized. A first TI Georgia report that looked at advertising in 2011 highlighted that a network of people with links to former Defense Minister Davit Kezerashivli had established control over large parts of the sector. It also found that many companies self-censored their activities and allocated much, if not all, of their spending to media outlets that were not seen as critical of the government.Much has changed in the media and advertising sector after the October 2012 elections and the transition of power from the United National Movement to the Georgian Dream coalition. This report seeks again to take stock of the sector and to highlight the challenges that remain. A free, competitive and growing advertising sector is a precondition to a free and sustainable media sector, as well as to healthy business environment. Media outlets can only be editorially independent if they are not contingent on political sponsors or other interest groups for continuing subsidies and manage to operate in a financially sustainable way with diversified sources of income. This report is based on public records, available public and commercial data, as well as interviews with more than 30 professionals from the advertising and media sectors as well as marketing executives of leading Georgian companies. Many of the interviewees asked to remain unnamed.

The distribution of advertising flows Television – the primary source of news and information for nine out of ten Georgians – continues to attract the largest share of money spent on advertising in Georgia. In 2012, an estimated 72 percent of spending went to TV, according to estimates by Publicis Hepta. Rustavi 2 and Imedi TV, the two private channels with national coverage, continue to have a combined audience market share of around 60 percent and receive more than two thirds of all TV advertising spending.Outdoor accounts for an estimated 11 percent of advertising spending – money that does not benefit the development of the media sector. Radio accounts for ten percent, print media for only five percent of spending. Despite the fact that for around 12 percent of the population the Internet has become their main or second source of information about current affairs5, advertisers only spend a meager two percent of their marketing budgets online. For outdoor, print, and online advertising spending, no detailed and reliable data is available. Publicis Hepta estimates that net outdoor advertising expenditure in 2012 was USD 6 million, net online advertising spending reached approximately USD 1.2 million while print advertising constituted approximately USD 2.8 million. Based on these estimates, net advertising in 2012 accounted for roughly USD 54 million, of which at least USD million came from political parties. TI Georgia’s 2011 report suggested that in 2010 (which had local elections with low campaign spending), net spending was between USD 43 and 46.5 million. There are thus strong indications that in the past three years – possibly since 2008 – private sector advertising spending has been stagnating in Georgia, despite an economic growth of between six and seven percent per year between 2010 and 2012.

Television Television stations reported GEL 82,707,855 (around USD 50 million) of income in 2012 to the Georgian National Communication Commission (in several cases, sizeable contributions from owners and political backers were not accounted for). Advertising (including sponsorship, product placement and teleshopping) accounted for GEL 63,405,061 (USD 38.5 million) of revenues. 10 2012 shows a fall of around GEL 2 million (USD 1.21 million) in ad revenues compared to 2011. TV spending was significantly lower than in the previous year in every month after June. August and September were an exception since political advertising ahead of the October parliamentary elections compensated for a drop in private sector spending.

The impact of the October 2012 elections After the change in government, prosecutors brought charges against Cesar Chocheli, the former governor of Mtskheta-Mtianeti, who was arrested over alleged illegal business activities and money laundering. He and his family have either been shareholders, or else in the management of several major companies. These include Berta, a manufacturer of household and personal care products that ceased operations in late 2012, Barambo, a chocolate manufacturer, and the brewery Zedazeni. All three companies were among the top 40 TV advertisers in 2012.As a result of the investigations, advertising spending of these enterprises is likely to decline in 2013.

Print Advertising in press remains one of the weakest spots of the advertising market. The circulation of Georgian newspapers remains unmeasured but is commonly perceived to be low. Kviris Palitra, the largest newspaper in Georgia reports a circulation of 63 thousands weekly. Reportedly, the circulation of most well known political daily newspapers such as Rezonansi and 24 Hours does not exceed significantly 5,000 copies. Kviris Palitra reported a 7 percent increase in ad revenues in 2012 and expects another 15 percent growth in 2013, according to Irina Sharvashidze, the head of advertising at Palitra Media. Many daily and weekly publications reporting on current affairs provide a mix of rumors, opinions and factual reporting. Because of the inconsistent quality of the reporting, newspapers rarely manage to shape public debates or influence opinion leaders. Some papers are prone to publish hate speech, xenophobic, and harshly nationalistic statements – something that major advertisers generally do not want to be associated with. Those who advertise in newspapers are often small and medium size firms that are reluctant to shift their marketing activities online. Many publications struggle to communicate to advertisers which readers they are able to reach. Tamar Chergoleishvili, the editor-in-chief of Tabula magazine, says that being able to offer advertisers a clearly defined target audience was the main reason behind Tabula’s successful marketing.59 In 2012, Tabula, a general interest magazine with strong element of libertarian-leaning commentary, partnered with the Internet and IPTV provider Silknet and distributed the magazine for free to SilkTV subscribers. The circulation increased to 20,000, 16,000 of which were distributed for free. As the number of readers went up, so did its advertising revenue. Last year the magazine generated an income of more than GEL 350,000 from advertising. However, it was not enough to make the magazine fully financially sustainable. Tabula is in the process of launching a TV station, while the magazine has moved from weekly to monthly publication.

Online Many advertising and media professionals TI Georgia interviewed see online advertising as the fastest growing advertising segment in Georgia. However, little data is available to substantiate these perceptions. Online spending continues to rank behind all other media vehicles; it accounted for an estimated two percent of all ad-spending in 2012 generating approximately USD 1.2 million revenues for websites. Previously, TI Georgia estimated Internet advertising accounted for one percent of spending and remained below USD 1 million in 2010. Earlier this year, a TI Georgia report on the state of the Internet found that there is now little growth in the number of Internet users. About a quarter (24 percent) of Georgia’s adult population is online every day; another eight percent of the population is online at least once a week, according to the CRRC Caucasus Barometer survey, conducted in late 2012.

Radio

Facebook

Private radio stations reported total revenues of GEL 9,613,189 (around USD 5.8 million) in 2012, a slight decline from GEL 9,949,837 (around USD 6 million) in 2011. Advertising revenues grew from GEL 8,756,070 (around USD 5.3 million) in 2011 to GEL 9,182,361 (around USD 5.5 million) in 2012.

Facebook is a huge competitor for Georgian news websites and appears to attract a large chunk of online advertising spending. The high reach of the social network in Georgia, its cheap prices for ads targeting a local audience, and the fact that its tools and statistics allow advertisers to easily launch and manage ad campaigns provide Facebook with a competitive advantage. According to Facebook’s data, it has now more

than 1 million users in Georgia. In 2012, Facebook generated between USD 250,000 and 300,000 of revenue in Georgia, according to data provided by Publicis Hepta.71 This would mean that roughly 20 to 25 percent of all online ad spending flows to Facebook and thus does not benefit Georgian news and entertainment websites. Facebook advertising is charged either by 1,000 impressions (CPM) or by every click on the ad (CPC). For Georgia, average cost of CPC is USD 0.04; the cost of CPM is as low as USD 0.01. For comparison: in the United States, average CPC is USD 0.74 and CPM is USD 2.38.

Outdoor advertising In 2012, outdoor advertising accounted for an estimated USD 6 million of revenue, making it the second largest advertising vehicle after television.78 Tobacco and gambling companies are the largest outdoor clients. Kote Chavchanidze, the director of Outdoor.ge, the leading owner and manager of billboards and displays in Tbilisi, says that restrictions on alcohol and tobacco advertising in print and broadcasting media drive these advertisers to promote their products with billboards. Chavchanidze told TI Georgia that many outdoor advertisers have cut their budgets for 2013 by 10 to 15 percent compared to last year, and that he was expecting an overall decline of advertising expenditure for 2013.

Main findings • The October 2012 parliamentary elections and the change of government had a major impact on the advertising market. Shortly after the transition of power from the United National Movement to the Georgian Dream, the structure of the advertising sector was significantly altered. General Media, the company that previously held a monopoly on selling advertising on national TV, no longer exists. TV stations now compete against each other using different sales teams. • Politics no longer plays a significant role in the allocation of advertising budgets. Today it would appear that companies have abandoned the practice of self-censorship when allocating marketing budgets, as had previously been the case, and now decide freely about their spending. In the regions, local newspapers report that businesses and individuals are no longer afraid of being associated with independent media outlets. As a result, the advertising market and thus the media market have becomesignificantly more competitive. • Several advertising companies that were previously controlled by former Defense Minister Davit Kezerashivli (through offshore shell companies) have been acquired by the Georgian-Russian businessman David Iakobashvili, a business partner of Kezerashivli in several energy companies since 2011. • Despite relatively strong economic growth, the Georgian advertising market has not grown in recent years, which is bad news for the independence and sustainability of the Georgian media. TI Georgia estimates that total advertising spending in 2012 was around USD 54 million, including at least USD 8 million of spending by political parties. • Investors remain cautious and concerned about perceived political instability. The poor performance of advertising spending in the first three months of 2013 combined with a slowing down of economic growth to 1.7 percent in the first quarter, has led most market observers to expect another decline of overall advertising spending this year. Numerous advertisers postponed their media buys in the beginning of this year by several weeks, waiting for the dust in the broadcasting and advertising sector to settle after ownership, teams, strategies and price lists had changed. Only in 2014 might advertising spending grow –providing that local and foreign businesses regain their confidence and start investing. • TV channels’ total net advertising revenue declined by approximately USD 1.5 million in 2012, largely because of perceived political uncertainty which led to more cautious advertising spending, and because of changes in the ownership of several TV stations, most importantly Imedi, in the last quarter.Advertising revenues of radio stations saw a slight increase compared to 2011. • While both Rustavi 2 and Imedi saw a decline in advertising revenues, Maestro, Kavkasia and TV9 saw a strong increase in revenues in 2012, with strong growth ahead and shortly after the elections. After December, their monthly revenues took a sharp decline. Market stakeholders interviewed by TI Georgia believe that such growth in ad revenues was at least partly an emotional response to political developments, rather than a decision based on marketing assessments, broadcasters’ content, and ratings. • Television continues to receive approximately 72 percent of all advertising spending, with approximately 95 percent of this money going to Tbilisi-based stations. While Internet advertising is growing, it only accounts for two percent of Georgian advertising spending – less than USD 1.5 million in absolute terms; • Many media outlets continue to lack professional advertising sales representatives that would be able to attract advertisers. This is especially true for media outlets based outside Tbilisi, which often focus all their available resources on reporting and content creation.

Transparency International Georgia

INTERVIEW 4 “IF GEORGIANS PERCEIVE FLY GEORGIA AS A NATIONAL CARRIER AND ARE PROUD OF IT, THAT DAY WILL BE THE DAY OF OUR SUCCESS” July 01, 2013 #11

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“Fly Georgia is a full service airline with low fare and high quality services. It is a company for Georgian people” BIJAN MOUGOUEE EXPERIENCE

1974 - 2000 IranAir From Senior Management Analyst to Director of Benelux and Cargo Director for Europe September 1998 – August 2000 Board Member – BARIN (Board of Airlines Representative In the Netherlands) November 2000 – March 2001 AirCP Amsterdam, The Netherlands Business Development Manager for Europe AirCP stand for Airlines Commercial Partner belongs to KLM HOLDING. April 2001 – March 2002 Rutges Air Cargo Amsterdam, The Netherlands one of the leading Trucking Company in Europe. Business Development Manager for Europe April 2002 – March 2003 Avia Trading Amsterdam, The Netherlands one of the 3rd Handling Company in the Schiphol Airport. Business Development Manager for Europe April 2003- November 2003 Delsy Airlines Brussels Commercial Director. December 2003 – April 2004 VLM Airlines Brussels Commercial Director May 2004 – September 2012 BlueNet B.V Holding B.V. Amsterdam, The Netherlands Managing Director

Developing Georgian market as a HUB and offering high quality service with low fair, is what Fly Georgia stands for – says Fly Georgia’s Chief Executive Officer BijanMougouee in an interview with Caucasus Business Week. - What does the Company appellation FlyGeorgia mean? - FlyGeorgia is the first airline in the Georgian market, which comply with EASA (the European safety standard). Fly Georgia is a full service airline with affordable fares and high quality services. It is a Company for Georgian people. If Georgians recognize Fly Georgia as a national carrier and are proud of it, that Day will be the Day of Our Success. - How would you evaluate the situation on the Georgian aviation market? How competitive the Georgian market is? - The aviation market is very limited for a country

with 5 million people, of which 1,5 million live in Tbilisi. At the moment, we have two national airlines, Fly Georgia and Georgian Airways that are quite active on this market. We have decided to join and develop Georgian market and should compete with the third parties, which come into our market. Those companies have bigger networks, the Georgian aviation should join effortsand create very strong national carrier for the country. That is basically what we plan to do and we are doing. - What would you offer to compete with the airlines on the Georgian market? - We offer Georgian Airways to create alliance

and series of joint venture … Moreover, we would like to cooperate with airlines that are dominant on the Georgian market. In the aviation industry everything depends on cooperation, future joint ventures, future integration. - Are you satisfied with the results that the Company has achieved since starting operationin the Georgian market? - The main goal of Fly Georgia is not only to develop Georgian market, but to develop it as a HUB to connect south to north and east to west via Tbilisi. The past two months we are quite active inthis direction. The hub needs full interline agreement with many companies. Before having interlineagreement we need to get IOSA (the IATA Operational Safety Audit) certificate. Fly Georgia management has started the process and will get

it by the end of the year. - How many destinations do you serve at the moment? - The Company for now has 2 Airbus aircrafts and we serve 7 destinations per week with 15 flights. Frankfurt, Stockholm, London, Barcelona, Delhi and Jeddah will come this summer as well. By the end of 2013 the Company will have 15 destinations and this is quite ambitious as well. Frankfurt, London and Stockholm are the most immediate destinations, which we will serve this summer. Last but not least, we know where we are standing and where we are going to be in next two years. I think the future is very clear for us and the roadmap to the future is very clear as well. Every month we are getting better and better. By Keti Sikharulidze

INFORMATION ON ASSECO GROUP’S ENTRANCE IN GEORGIA

sseco Group, one of the leading IT companies in Easter Europe plans to launch operation in Georgia and set up and develop major IT companies in the country. Asseco Group is one of the major IT companies that is represented in over 30 countries and employs over 20 000 individuals. It is worth noting in 2011 the group’s net profits were over 96 million EUR. The company’s business model is the so-called Federation and this means Asseco Group is managed not from the center, but it represents a unity of independent and successful companies all over the world. These companies are independent in managing their businesses. Asseco has got huge experience in management of various projects in different sectors. Asseco experience has been concentrated in such fields as finance sector, including bank, insurance and investment funds, education, healthcare, energy,

telecommunications, security and so on. The company is implementing projects in both private and state sectors and the company has taken part in implementation of state services automatization projects and introduction of electronic services in several countries of Eastern Europe. Asseco’s special experience is proved by the fact the company started developing and establishing bank sector software from the very beginning and after the success in this field the company took a decision to expand operation in this field. As to the Asseco steps in Georgia, a strong team will be created of several IT companies so as Asseco offer high quality and competitive services and products on the regional level in the IT field. It is worth noting the company plans to expand activities in the Caucasus Region from Georgia. Onyx Consulting will be the first Georgian company Asseco will tightly cooperate with. Onyx Consulting was founded in 2008 and today it is

one of the leaders in supply of bank solutions and consulting services in the bank sector. It is also important that Asseco Georgia will not be a branch of Asseco Group, but the company will be founded in line with the Georgian legislation and staffed by Georgian citizens completely and Asseco will act as only a consluting company. A major part of the company profits will be accumulated in Georgia and the company will pay taxes in Georgia too. In March 2013 members of the board of directors of the company visited Georgia to hold meetings with representatives of the state structures and business sector. The parties outlined future cooperation plans and determined concrete steps to be taken by Asseco in Georgia. The entrance of the company to Georgia and official registration was

completed on June 26 to June 27 after Asseco founder and director general Adam Goral arrived in Georgia. The delegation members met with the Georgian Prime Minister and representatives of the business sector. Asseco website: http://www.asseco.com/ Onyx Consulting website: http://www.onyx.ge/

BUSINESS July 01, 2013 #11

caucasian business week

ROMPETROL GEORGIA INTRODUCES NEW PREMIUM QUALITY FUEL EFIX S

ompetrol Georgia has introduced new premium type of fuel on the market Efix S, which is specially designed for the drivers who seek maximum performance and optimal functioning of their vehicles. Regarding the launch of new product on the market Management of Rompetrol Georgia together with the specially invited guest representative from TRG (The Rompetrol Group) Dumitru Mihaela will hold a press conference in the Tbilisi Courtyard Marriot Hotel on 25th of June at 14:00. The new premium quality fuel Efix S represents an optimal mix of additives for power and active protection compounds, that fosters vehicle performance. Efix S increases effectiveness and power of the engine. , EfixS 98 offers an easy starting of the vehicle, and idle and smooth running without vibration in high speed mode and a fast engine response under demanding conditions. “There is no similar product on the Georgian market as Efix S; it is good news for the owners of sports cars and those who seek for more power and performance of their cars. Efix fuel is very popular among our customers and I am sure that Efix S will gain the same popularity” – says the General Manager of the Rompetrol Georgia Mr. Nurken Murzagaliyev. Both premium quality fuels Efix and Efix S Clean injectors and improve their functioning, removes valves deposits and keep them clean. The distinction between these two premium fuels is that While Efix reduces fuel consumption; Efix S ensures more power and performance of

the engine. “Regarding the price for the new Efix S, at this stage it will remain the same as the Euro Super fuel we had on our stations before” – says the commercial director of Rompetrol Georgia Tengiz Chichinadze. * The results were obtained during a series of test, that took into account a range of variables including the type of vehicle, operating temperature, type of lubricants and driving style. The tests were conducted both in the laboratory conditions, and also under real life traffic conditions, using different brands of cars. Rompetrol currently sells 5 types of products at the Georgian market: Three types of gasoline (Euro Regular, Efix Euro premium, Efix S) and

two types of diesel (Efix Euro Diesel and Euro Diesel). For already five years Efix has been the respectful product of the company. During these years customers have become well aware that the latter premium quality fuel reduces consumption, cleans valves and injectors of the engine and keeps them clean and protected from corrosion. New Efix S has already been implemented in several European countries and now Rompetrol offers it to the Georgian customers. In addition, due to the launch of the new Efix S on the Georgian market, Rompetrol will hold a special drift racing event. Best drifter will compete among each other. Attendance at the show is free of charge.

FLYDUBAI LAUNCHES BUSINESS CLASS

ubai-based flydubai today announced the launch of business class services,based on feedback from its passengers, across its network of 60 destinations. Commenting on the launch of the airline’s Business Class services, Ghaith Al Ghaith, CEO of flydubai, stated, “We are very pleased to announce the evolution of our passenger offering as we continue to meet the travel needs of ourcustomers. The introduction of Business Class will provide greater choice for our passengers, who will have access to faster check-in services, comfortable and spacious seatingandcan enjoy a variety of internationally -inspired menus during their journey.” “Both our business and leisure travellers can now benefit from a more personal flying experience. flydubai is ready for business and we look forward to continuing to offer our passengers reliable and accessible travel services, whether in Economy or Business Class.” In the air flydubai’sBusiness Class cabin is configured with12 seats finished in soft Italian leather with lumbar support and a seat pitch of 42 inches.The in-flight entertainment system will offer a high definition touchscreen of 12.1 inches with over 900 hours of movies, music and games. In addition,Business Class passengers will benefit from having their own dedicated cabin crew. Travellerswillbe offered a selection of coldlight food and accompaniments on short flightsand the choice of athree-course meal from aspecially designed Halal menu on flights of 90 minutes and above.

On the ground

Business Class passengers will be able to take advantage of flydubai’s priority check-in, conveniently located just 120 paces from the car park, as well as the new facilities at the recently upgraded and expanded Terminal 2 at Dubai International Airport. Later this year, passengers will be able to relax in flydubai’s Business Class lounge ahead of their

flight and will have access to priority baggage collection upon arrival at their destination. A dedicated business team will also be available 24 hours a day to attend to queries and assist in ticket booking, meal selection and telephone check-in. The airline will receive delivery of the first aircraft with a business class cabin in August 2013. All new aircraft subsequently delivered will include business and economy classes. Business class tickets will be available for purchase on selected flights from August 2013, and the inaugural flight is scheduled to take offin October 2013. “flydubai’s agility and flexibility has been an integral part of our young airline’s journey since its launchfour years ago. We are committed to innovation and expanding the range of services on offer for both our business and leisure travellers. We have provided easier access for our passengers to 44 previously underserved markets, creating free flows of trade and tourism, to support Dubai’s economic development.Passengers will now be able to enjoy these services on destinations across our network including some

that have never offered business class air travel before,” Al Ghaith continued. flydubaioffers passengers reliable high quality travel services and strives to listen to its passengersto meet theirtravel requirements. Not only is the airline the launch customer for this newly developed reclining seat but it was the first to introduce high definition films on its flights as well as introduce Boeing’s Sky interior, designed to increase passenger comfort and reduce jetlag. The airline will launch a new catering option for Economy Class customers, in the near future. Passengers can pre-select their meal and order online up to 48 hours before departure. flydubai’s Business Class offering includes: • Business class fareincludes a comfortable spacious seat, a generous checked baggage allowance, its award winning in-flight entertainment system and a choice of internationally-inspired menus and refreshments • An exception customer experience • 12 soft Italian leather seats with lumbar support • Seat pitch of 42 inches

• In-flight entertainment system with a high definition 12.1 inch touchscreen • A dedicated and highly-trained cabin crew member • Premium catering services including cold food and accompaniments on short flights, and the option of a three-course meal on flights of 90 minutes and above • Priority check-in located one minute or just 120 pacesfrom the car park at Terminal 2, Dubai International Airport • Priority baggage collection upon arrival at destination • Dedicated customer service team to attend to enquiries and assist with bookings • Access to flydubai’s Business Class lounge later this year flydubaiaims to make travel more convenient for its passengers through services such as visa facilitation for select destinations, a mobile website, car hire and insurance services. Most recently, the airline has made holiday packagesavailable to its passengers.

INTERVIEW caucasian business week

July 01, 2013 #11

NINO KOBAKHIDZE: CORPORATE HEALTH INSURANCE MARKET WILL LOSE A CERTAIN NUMBER OF CLIENTS An interview with Managing Director of the insurance broker “Grass Savoye Georgia” NINO KOBAKHIDZE

- The second phase of the universal health care program begins on July 1. It is known that this does not apply to the corporate segment. Does it still leave the prospect for the development of an insurance market? Is the area left for insurance companies (before the third stage) to change the situation in their favor? - From July 1, those people who have not enjoyed this insurance during a year will be insured within the state program. This applies to organizations as well. In terms of health insurance, some insurance companies will be deprived of the volume of customers, I can truly say this. I should mention that a good product is offered, which almost covers a planned hospitalization and illnesses that are painful for the citizens of Georgia. There is also an expectation of how the state

health program will justify. Based on this, organizations will decide to rely only on the state insurance or to buy expanded risks from insurance companies. We plan to develop the agricultural sector. Players of the insurance market must claim the property and insurance risks. Motor vehicle insurance segment should become more active as well as the third party liability risks which become mandatory in almost all developed countries. We somehow have to move in this culture. - You mentioned a waiting mode, is it started on February28 or when the first stage was launched, is it connected with July 1? - February 28 was a bit vague, the population lacked the information. We’ll see how fast the state will fund these services, how acceptable agreements it has with the providers and so on. I wonder how the state will manage to do it because there may be a problem of the same rows. The advantage of private insurance companies in this situation was the lack of queues. To say a little pessimistically, perhaps corporate health market will lose a part of its customers. - What did the recent period show? Have those who were insured corporately refused from the corporate insurance in anticipation of the state insurance? - We serve today more than 100 corporate clients.

On the contrary, they tell us that they will not terminate the agreement until we say that the state will cover 100 percent of costs. - Whether such a wide coverage in the frames of the state program will affect the price reduction in the corporate segment? - I am not in favor of a price reduction. I would prefer the insurance company to improve services and thereby purchase additional services than to cut prices. Today insurance is definitely cheap in Georgia. Our foreign clients mention this as well. We also have international insurance, but people do not buy because it is too expensive for them. As for the drop in prices, they will not drop in the current corporate market until the state makes certain offers. - In your opinion, what is the Georgian insurance industry ready, how strong is it from financial point of view? Insurance Supervision Department will examine the activities of each company,how do you think what information will be discovered? - As you know, 15 insurance companies are registered and we work with five. Imagine how instable this business is. We have selected a company that represents a high-ranking reinsurers, has financialstability, and so on. – I can tell you publicly that only several com-

pany complies with the standards. As for the object of the study, I really do not know who spent more or less. If they spent incorrectly, it certainly should be controlled. I am sure that they did not spend this amount for pleasure, and did everything the clinics to be completed ahead of time. - At what stage is the western, foreign companies’ interest in the Georgian market? Youmentioned earlier the American and French companies. - Insurance companies from the Eastern European countries are also interested. We are actively workingwith American reinsurance organizations. We want to actively introduce the reinsurance of critical illness into the corporate market. For example, the treatment of oncological diseases within 100 000 Euro and so on. We are actively working on this issue. I’m sure Insurance Supervision Service will be involved in it and will help us in this regard. They will definitely come, but that does not mean they open a branch here. The fact that big companies reinsure the Georgian corporate business through our group and place their risks, on the one hand, means that they are very interested in Georgia. A usual work and monitoring is underway. After that it will be necessary to bring in new products. People will begin to understand that insurance is not an expensive pleasure. But, on the contrary, it is mandatory and necessary.

LASHA NIKOLADZE: THE THIRD STAGE OF THE “UNIVERSAL HEALTHCARE” WILL COVER ALL CITIZENS AND BECOME TRULY UNIVERSAL An interview with the Head of Insurance SupervisionService LASHA NIKOLADZE - What should be the second phase of the universalhealth care, what did the state reimburse and whatnot? Who will be insured from July 1, in what quantity and what kind of costs will be covered by the state? - On July 1 the universal health insurance will not apply to the people with insurance packages. Universalhealth care will cover the persons (2 million people) whowere uninsured as of February 28. From July 1 services will be significantly increased. Primary health care, as well as regular operations, oncology and childbirth will be expanded. Plus consultations of 8 specialists at the outpatient level; the liver, thyroid gland, the abdominal cavityultrasound, X-ray. Laboratory studies have been significantly expanded. However, in the number of cases the reimbursement will be 100 percent and in some cases 70 percent. The original promise to significantly increase access to services has been totally fulfilled. Now I’ll mention the stationary services expansion which will take effect from July 1. It is co-financing of the planned surgical operations (the 70 percent coverage, other expenses should be covered by the patient or private insurance). An annual limit for such interference is 15 000 GEL. In addition, in nonsurgical cases the chemistry andradiation therapy is included with the annual limit of 12 000 GEL. The state will pay 80 percent of the patient’s treatment. In addition, two significant prices are announced, delivery and caesarean section,the basic principle of treatment is maintained. The patient chooses a clinic where he will benefit from these services. The state will pay amounts in full compliance with these conditions. In urgent cases, the state will cover 100 percent of the expenses everywhere. Access to healthservices is significantly enhanced. 70,80, or 100 percent of medical costs are covered. - It’s important for those citizens who did not have insurance, especially considering so muchcoverage. But will it fully cover the entire population? - When the first phase was launched we made a

statement that the second phase would be carried out on the same principle as the first. It will cover only the uninsured citizens. The third phase will be followed that will cover all citizens and will become truly universal. Vertical services will not be added, it will spread horizontally, ie, on all citizens of Georgia by different types of coverage. The target groups (refugees, helpless, teachers, and so on) will have other types of coverage, the rest of the population for which we launched the first and the second phases, will have other types of coverage. - As for medicines, what do we have in this part? - There are two important moments. The first is that our economy will not be able to fund drugs at home, but we will fund the drugs, which are included in services provided at the hospital during surgical interventions and treatment of cancer. So, the money that was allocated for the state health care program will be used only for the treatment. Accordingly, the space for development of corporate, private health insurance is quite large not only in cofounding but in the drug, high-tech research and in a part that is not covered by the state health care program. - So, talk that after the enactment of the universal health insurance program, the space for corporate insurance activity will not be left will not really justify? - I think that there will be a certain category of people who will decide that universal health care is enough for him, but I do not suppose that the whole population of Georgia will have such a sense. - What will be the role of insurance companies? Have you familiarized them with this program,do you know their position in this regard? - Insurance companies were invited to the presentation, which was held on June 22. They serve the insured by their companies and the socially insured. - According to the data that is now available, is the Georgian insurance market ready to compete with the state even in offers, prices and other services? - Universal health care is a basic product re-

flected in prices and services. There are a lot of issues which may be funded and expanded by a private insurance. VIP - services and so on. Believe me, a very big space remains for universal health care, as well as beyond basic product for private insurance companies. The insurance companies have enough time. At least 1-2 months is a sufficient period for them to make the appropriate calculations and implement a marketing research. Accordingly, to release a new product to the market. - Is the purchasing power of Georgia’s population sufficient to request VIP and a variety of advanced services? - When basic health care covers the whole population of Georgia, the cost of corporate insurance should fall. The part that will be covered by the state will be a reason to cheapen the product. However, for the same price they can offer more services. The universal health care will have a positive impact on the purchasing power of our population. - Will the program cover all the citizens this year? - This issue is still being finalized and is dependent on the task of the Insurance Supervision Service. In particular, its first task will be to examine the condition of insurance companies that participate in social insurance and to develop recommendations for these companies to withdraw from the program aspainlessly as possible. After this, it will be possible to discuss the date. - Over the years it was heard that insurance companies worked for a high profit margin that they were actually “bound” with the state medical programs and so on, that they did not develop other services. How do you think, as a result of the study, will these expectations and notions of society, justify? What conclusions casn you make based on the information you have? - The fact is that more than 90 percent of the business of a number of insurance companies comes to the social insurance. So, they failed to develop corporate insurance during their existence. We are going to study social services of insurance companies to see the real picture. - In one of your comments you said that , as a

result of this study, someone (I mean the insurance company) will have to change the price of insurance premiums and postpone investment commitments if it turns out that the amount of insurance premiums for the insured person was very low. In such a case, who will build hospitals? - It is still too early to talk about these things because the insurance supervision department should develop recommendations. In the end, the government will have to decide which of these recommendations to use and which not. It will be possible in 1.5-2 months. - About in 1.5 months you will have information on how conscientiously insurance companiesoperated within the state programs, won’t you? - Yes, how financially stable they are after the rendered services and how they carried out theseservices. - Will we get an answer to the question whether these financial resources were spent for salaries of these companies’ top management? - Just do not talk like that, we’ll have a full and true picture on how a particular insurance company actually served the project. - Will this information be public? - Of course.

BUSINESS & ECONOMY July 01, 2013 #11

caucasian business week

FOREIGN CITIZENS WILL NOT BE ABLE TO PARTICIPATE IN THE AGRICULTURAL COOPERATIVES Changes are planned in agricultural vouchers program An interview with the Minister of Agriculture SHALVA PIPIA

- Small Farmer Support (SFS) project will be completed on August 1. Will the distribution of agricultural vouchers continue next year? - Of course, it will continue, no statistics have been available so far in this regard. A certain number of peasants and farmers were not included in lists, in some cases even the villages. In the future we will have much better starting conditions, as we have the information on these people, the beneficiaries. Maybe next year the format will be changed, but the project is still in force. - What changes will be included? - I think it’s still too early to talk about specific changes, but we have absolutely correct information and this project will be more effective in the future. - Until now, “CARTU” fund was named the only investor in one billion agriculture fund. During this time, if there were other investors and if someone is interested in it from commercial point of view? - So far, not one, but two contributors were known. They are not investors, but funders, because investment envisages to get the invested amount, but they had no such intentions. As for the second funder, as far as I know, it was agricultural charity fund. - Don’t you have any other funders?

- No, today there are only two funders, but it does not mean that no one will join this list. - Over the last few years the vintage is being actively subsidized. Will the vintage be subsidized by the government in the current year? - We have certain plans in this direction, we have already had a meeting with winemakers, they familiarized us with the detailed information regarding the amount of the grapes they want to purchase. I want to tell you that the demand and interest has increased compared with last year by a number of reasons. We have a great hope and desire that everything will be fine. As for subsidies, we want to select the correct and proper methods. It’s too early to discuss the exact scheme, but we are workingintensively on this issue. It’s still too early to speak about a volume of expected harvest as well. On the first -second decade of July we will know the crop forecast. - As for the announced law on cooperatives. Today there are people who are against thecooperatives and the reason for that is the refusal of some members of cooperative to fulfill their commitments. Will cooperative members have certain obligations under the law or not? - One important point: the cooperation will be voluntary. Each person will decide whether to become a member of this cooperative. The cooperative law will not be equipped with the obligations,responsibilities and rights of each cooperative member will be regulated by the cooperative rules. - If a foreigner will be able to become a member of a cooperative? - Only Georgian citizens will be able to become cooperative members and a foreigner will not have a right of the cooperative’s membership in spite of the fact that it was envisaged in one of the versions. - Have you worked out a project on tea and cereal crops development? - We are already working on tea and grain direction. For next year, we will start some projects, including pilot. A specific information about these projects will be made public in the near future.

HEALTHCARE MINISTER: PRIVATE INSURANCE BUSINESS WILL STILL HAVE QUITE ROOM FOR DEVELOPMENT

inister of Labor, Healthcare and Social Protection David Sergeenko declared that universal healthcare program does not mean expel of private companies from insurance market. “After multiple expert assessments, it was decided that the sum, being spent by the state for Georgian citizens’ health, should be controlled by the state itself and form the basic pack”, the Minister declared at the press conference today. However, “There remain quite room beyond the basic pack, suitable for successful development of private insurance business”, Sergeenko said and expressed hope that companies will show sufficient flexibility. The Minister also pointed that within the mentioned program, patients are allowed to apply for service to both, public and private, hospitals. He stressed that private hospitals account for more than 90% among those, complying with established license terms. Minister of Labor, Healthcare and Social Protection David Sergeenko declared that the Ministry has no “legal possibility to exert influence over salaries of medical staff”. As a reason, he referred to “total alienation of medical infrastructure”, implemented by the previous government. The same time, the Minister pointed at the press conference today that expanded state program, including its urgent part, means new funds’ inflow to medical institutions. Sergeenko expressed hope that the issue will fall into legal frames and “the employee will be helpless no more”.

TBILISI INTERNATIONAL FESTIVAL OF THEATRE September 19 - October 8 International Program presents ‘a really astonishing piece of work (The Guardian )

The Animals and Children Took to the Streets COMPANY “1927” , UK

OCTOBER 5 and October 6 , 2013 Duration: 70 minutes , without intermission Venue: Nodar Dumbadze Children and Youth Theatre Ticket Prices: 20,30 GEL

RUSSIA TO FACILITATE VISA REGIME TO GEORGIA IN NEAR FUTURE

urab Abashidze, a special representative of Georgia’s Prime Minister for relations with Russia, declared at the joint session of the foreign relations and interim committee on restoration of territorial integrity, that Russia would facilitate visa regime with Georgia in the near future. He said that this would concern travel for business and relatives. According to Abashidze, Lars customs check-

point would work around the clock before September. In his words, it is aimed at the simplification of movement of Georgian freights to the Russian market. “The meeting is planned between the Road Agency and Russia’s Transport Ministry representatives to lift restrictions on Georgian companies regarding visas. Lifting the conventional ban on Russian railway took much time. It’s already possible to send our cargo via railway through Azerbaijan”,- Abashidze said.

“COCA-COLA” FOUNDER SPEAKS ABOUT SALES GROWTH AFTER ACQUISITION OF “CASTELGEORGIA”

astel - Georgia” owner Temur Chkonia talks about 5-fold sales increase. Chkonia bought “Castel - Georgia” brewery a few months ago. As the businessman told “Commersant”, after the appearance of the updated beer “Germanuli” on the market, in June demand for “Castel” products 5-fold increased compared with the same period of last year. He says that “Germanuli” is a beer prepared according to the German recipe which sale price is 1 GEL. In addition, as we reported, Chkonia plans to replace “Zedazeni” and “Natakhtari” in restaurants and cafes by a new brand as well as to introduce new standards.

‘Think Alexander Rodchenko meets Tim Burton, Charles Dickens meets Fritz Lang, and the early 20thcenturysilent movie meets the 21st-century graphic novel, and you have something of the flavour of this jawdroppingly clever and gloriously subversive parable of social mobility, revolution and its suppression… 1927 conjure a world so complete it feels as if you’ve fallen down a rabbit hole’ (The Guardian)

About Company:

“1927” is a London based performance company that specialise in combining performance and live music with animation and film to create magical filmic theatre.

About performance:

Welcome to the Bayou, a part of the city feared and loathed wherein lies the infamous Bayou Mansions; a sprawling stinking tenement block, where curtain-twitchers and peeping-toms live side by side, and the wolf... is always at the door. When Agnes Eaves and her daughter arrive late one night, does it signal hope in this hopeless place, or has the real horror only just begun? Seamlessly synchronising live music, performance and storytelling with stunning films and animation this is the wickedly twisted international hit tale from the multiple award-winning company ! Like a giant novel burst into life, 1927 invite you on a theatrical journey of startling originality. www.tbilisisinternational.com facebook: Tickets available from July 5 in Marjanishvili State Drama Theatre Box Office. Marjanishvili 8, from 12 till 20:00 You also can get tickets ONLINE : BILETEBI.GE (from July 10) Starting with this issue, we will present each performance of Festival International Program and Georgian ShowCase ON EVERY MONDAY. The readers will get full information about Festival, performances, companies. But not only information. You will get all the information on ticket prices, availability of tickets, special discounts and all other important information on Festival.

BANKING NEWS

Bank of Georgia: AMEX GOLD CARD BECOMES AVAILABLE FOR WIDER RANGE OF CUSTOMERS

ank of Georgia announced that American Express Gold Card became available for wider range of customers. Such decision is conditioned by high demand, the bank noted. Bank of Georgia said that if this card was available until now only for clients of service SOLO (personal banking), while this restriction is voided now. No other terms were changed, the bank told Sarke. In particular, eligible holder should be aged between 22 and 65, while have monthly income of 2,000 lari at least. In case of getting the card until September 1, the holder will get doubled bonuses of Membership Reward program. Besides, if holder will spent 7,500 lari or more during 3 months, service fee for the first year will be returned to him/her. Bank of Georgia is exclusive issuer of American Express cards in Georgia, providing also exclusive procession of these cards in POSes in trade outlets. According to latest data (as of April), number of issued AmEx cards exceeded 100,000.

BANK OF GEORGIA COMPLETED JANUARYMAY WITH 51.06 MILLION GEL PROFIT

SC Bank of Georgia completed January-may 2013 with 51,06 million GEL profit (first quarter 2013 - 24,014 million GEL). May profit was defined as 16 million GEL (04/13 -12,4 million GEL). Bank actives are 5,186 billion GEL, market share - 35,4% (01/03/12 - 4,421 billion GEL, 34,9%). The bank is a market leader according to all data. The only exception is individual deposits portfolio, which amounts to more than 1 billion GEL.

BANK REPUBLIC GOT 9.4 MILLION GEL PROFITS IN JANUARYMAY

ank Republic completed January-May 2013 with 9,4 million GEL profit (first quarter 2013 - 5,5 million GEL, 2012 - 15,2 million GEL). Non-banking deposit portfolios equals to 434 million GEL by June 1 (01/01/13 - 427,4 million GEL), credit portfolio - 612 million GEL (01/01/13-572,5 million GEL). Overall actives are 810 million GEL, market share - 5,5% (first quarter 2013 - 810 837 753 million, 5,7%). Bank operates since 1991. 93,6% of the bank stocks belong to French banking group SOCIETE GENERALE, 6,36% - to European Bank of Reconstruction and Development (EBRD). Recently One of the founders - Lasha Papashvili gave his last 5,6% share to the main stockholder, but he still remains as chairman of supervisory board. Total stock capital equals to 130,1 million GEL (first quarter 2013 - 126,2 million GEL).

July 01, 2013 #11

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BANK SECTOR ASSETS GROW TO 14.654 BILLION GEL AS OF JUNE 1 VTB BANK GEORGIA AND VTB FACTORING TO COOPERATE WITH KINDZMARAULI WINE CELLAR

inemaking company Kindzmarauli Wine Cellar signed a cooperation agreement with VTB Bank Georgia and VTB Factoring. As the bank reported, the document envisages implementation of pilot factoring deal. Within a deal, VTB Bank Georgia will provide payment to Kindzmarauli Wine Cellar, while VTB Factoring undertakes risks, related to the companyâ&#x20AC;&#x2122;s debitors in Russia. Upper limit of funding makes up $2 million.

CARTU BANK COMPLETED JANUARYMAY WITH 27 MILLION GEL PROFIT

SC Cartu Bank completed January-May 2013 with 27 million GEL profit (first quarter 2013 - 1,938 million GEL). The bank completed 2012 with 75,3 million GEL loss. By June 1, deposit portfolio is 83,5 million GEL (first quarter 2013 - 119,4 million GEL, 2012 - 67,6 million GEL), loans - 313,7 million GEL (first quarter 2013 - 282,05 million GEL). For the reporting period, bank actives are defined at 387 million GEL (first quarter 2013 - 397,6 million GEL), market share - 2,6%. Bank operates since 1998. JSC Cartu Group is a stockholder. Group represents Krista Investments Limiter, Sargans Limited and Tarpan Management Limited. 2 local companies are among Cartu Group owners: Inter Invest and Argo Service. Beneficiary Owner of 100% of the bank is Prime Ministerâ&#x20AC;&#x2122;s son Uta Ivanishvili, By June 1, stock capital of the bank equals to 160,6 million GEL (first quarter 2013 - 135,3 million GEL).

LIBERTY GOT 2 MILLION GEL PROFIT IN JANUARY-MAY

SC Liberty bank completed January-May 2013 with 2 million GEL profit (first quarter - 319 000 GEL). By June 1, Non-banking deposit portfolio is 892 million GEL (first quarter - 825,5 million GEL), loans - 477,6 million GEL (first quarter - 403,3 million GEL), overall obligations - 937,8 million GEL (first quarter - 875,8 million GEL). Actives are defined at 1,05 billion GEL, market share - 7,2% (first quarter - 991 million GEL, 7%). According to first quarter situation, direct and indirect beneficiaries of Liberty Bank stocks are: Dan Cortache Patriciu (70,7%), Lado Gurgenidze (7,48%) and BNY (NOMINEES) LIMITED (11,27%). Stock capital of the bank equals to 116,6 million GEL (01/04/13 -115,5 million GEL).

TBC SHARE ON THE RETAIL LENDING MARKET IS 23.1%

hare of TBC bank on the retail lending market is 23,1% by June 1, 2013 (01/01/13 - 25%). Loan portfolio of individuals increased by 41,8 million GEL (5%), to 901,3 million GEL from the beginning of the year (01/01/13 - 859,5 million GEL). Overall loan portfolio of the bank is 2,283 billion GEL (01/01/13 - 2,249 million GEL). Lending investments of the commercial banks (including loans on non-residents) exceeds to 9 billion GEL. Among them, credit portfolio for individuals is 3,9 billion GEL.

verall actives of commercial banks equaled to 14,654 billion GEL by June 1, 2013 (01/05/13 14,569 billion GEL). Growth has slowdown; annual growth is 13,2% (01/05/13 -16,5%, 01/06/12 -20,2%). National Bank of Georgia (NBG) informs that actives (in the current prices) are increased by 85,6 million GEL (0,6%) compared to previous month. Own funds of the banking sector were defined at 2,608 billion GEL, which is 17,8% of the total actives of commercial banks (01/05/13 -2,559 billion GEL, 17,6%). capital is increased by 10% in comparison with analogic period 2012. By then there was 31% growth. By June 1, contribution of the foreign capital in the gross paid-in share capital equaled to 74,9% (01/05/13 - 74,3%, 01/06/12 -77,4%). Net profit equaled to 30,9 million GEL in May (04/13 - 36,4 million GEL). Share of 5 banks with the largest actives in the total actives of banking sector was defined at 79,9% (01/05/13 - 79,9%, 01/06/12 -81,2%) By June 1, 2013 Georgian banking sector is represented by 20 commercial banks, among them 16 - with contribution of the foreign capital in their authorized capital and 2 branches of the foreign banks.

RATIO OF NONPERFORMING LOANS IN TOTAL LOAN PORTFOLIO REMAINS UNCHANGED

n the cumulative portfolio of banking system, share of problem loans was defined by 9,5% by June 1, 2013 (first quarter 2013 - 9,5%). According to NBG statistics, inactive loans portfolio (nonstandard, dubious, hopeless) equals to 858,2 million GEL by June 1 (01/05/13 -868,3 million GEL, 01/06/12 -640 million GEL). Amount of overall credit investments exceeded to 9 billion GEL. Annual growth of the portfolio is 13,6% (01/05/13 -14%, 01/06/12 -21,7%).

NON-BANKING DEPOSITS EQUALED TO 8.3 BILLION GEL BY THE END-MAY

onbanking deposits in the banking sectors equaled to 8,3 billion GEL by June 1, 2013. (01/05/13 - 8,2 billion GEL), which is 1,8% more compared with data of analogic period, last year (150,6 million GEL). National Bank of Georgia (NBG) informs that in comparison with last month, general request deposits reduced by 5,2% (184,3 million GEL) and fixed-term deposits - by 0,7% (33,7 million GEL). Dollarization coefficient of the deposits is 62,2% (01/05/12 63,03%). Average weighted annual interest rate on the fixed-term deposits equaled to 7,6% (01/05/13 - 8,1%), among them - on the deposits in national currency - 10,3% (01/05/13 - 11,1%), denominated in the foreign currency - 6.9% (01/05/13 -7,2%). Share of USD in the Deposits in the foreign currency equaled to 80,5%, Euro - 17,1% (01/04/13 - 79,9%, 17,9%).

STATISTICS July 01, 2013 #11

caucasian business week

BALANCE OF PAYMENTS OF GEORGIA (I Quarter Of 2013)

rom the second half of 2012, unlike the previous years, current account deficit exhibited decreasing trend. Current account deficit amounted to 198.4 million US dollars (328.9 million GEL) in the first quarter of 2013, decreasing by 50 percent annually. Exports of goods increased by 31.5 million US dollars, while imports decreased by 109.4 million US dollars, as compared to the same quarter of the previous year. As a result trade deficit decreased, totaling 741.6 million US dollars (1.2 billion GEL). That is 16.0 percent lower compared to the same quarter of 2012. Balance of services account was positive equaling 256.1 million US dollars (424.7 million GEL). The export of services amounted to 581.5 million US dollars (964.2 million GEL), 16.9 percent more than the figure of the same quarter of 2012. Import of services increased by 10.3 percent annually totaling 325.4 million US dollars (539.5 million GEL). From services account travel had the largest positive balance (244.8 million US dollars or 405.9 million GEL) increasing by 30.7 annually. Balance of income was negative equaling -67.2 million US dollars (-111.3 million GEL). Income credit amounted to 181.1 million US dollars (300.2 million GEL), 14.7 percent lower than the figure for the same quarter of 2012. Income debit totaling 248.2 million US dollars (411.6 million GEL) was 7.3 percent lower than the figure of the same quarter of 2012. Current transfers, the largest positive component of the current account amounted to 354.2 million US dollars (587.3 million GEL). The annual growth of this component was 4.6 percent. Inflow of current transfers equaled 379.7 million US dollars (629.5 million GEL), while outflow made up 25.4 million US dollars (42.2 million GEL).

Annual decrease of the net current transfers of public sector was 2.0 percent while other sectors current transfer increased by 5.2 percent. Net capital transfers inflow equaled 20.8 million US dollars (34.5 million GEL). Net foreign direct investments amounted to 210.9 million US dollars (349.6 million GEL) in the first quarter of 2013. Foreign direct investment to Georgia made up 226.2 million US dollars (375.1 million GEL), that is 15.91 percent lower as compared to the same quarter of 2012. Out of total foreign direct investments to Georgia, 27.1 percent was invested in equity capital; 34.7 - reinvested earnings and 38.2 - other capital. Balance of portfolio investments amounted to -31.3 million US dollars (-51.9 million GEL). Portfolio investments assets decreased by 2.8 million US dollars (4.6 million GEL) and liabilities by 34.1 million US dollars (56.5 million GEL). Portfolio investments liabilities decreased due to repayment of debt securities by one commercial bank. Positive balance of other investments amounted to 79.9 million US dollars (132.5 million GEL). Out of that assets decreased by 45.8 million USD (75.9 million GEL) due to decrease ofloans and deposits. At the same time, liabilities grew up by 34.1 million USD (56.5 million GEL). Out of total liabilities in other investments trade credits and deposits increased by 45.7 million USD (75.8 million GEL) and 50.9 million USD (84.4 million GEL) respectively. At the same time loans decreased by 59.6 million USD (98.8 million GEL) due to repayment of IMF loan by National Bank of Georgia. During the first quarter of 2013 official reserve assets increased by 92.5 million US dollars (153.4 million GEL) due to transactional changes and amounted to 2.9 billion US dollars (4.9 billion GEL), that covers 4.6 months of imports.

INTERNATIONAL INVESTMENT POSITION OF GEORGIA

et international investment position (IIP) of Georgia amounted to -16.0 billion of USD (-26.5 billion GEL) by the end of 31st of March 2013, that is 100.3 percent of Georgian GDP. This number is decreased by 1.7 billion USD (2.9 billion GEL) compared to the first quarter of 2012 figure and by 241.9 million USD (401.1 million GEL) compared to the previous period data. Transactions, exchange rate changes, price changes and other changes all were negative during the quarter. Total international assets amounted to 5.6 billion of USD (9.3 billion GEL) as for 31st of March 2013. 52.4 percent out of total international assets consists of reserve assets; 27.4 percent - of other investments; 19.6 percent - of direct investment abroad; and 0.6 percent of portfolio investment and financial derivatives. 19.0 percent of total international assets consists of currency and deposits; 6.4 percent - of trade credits; 1.7 percent - of loans. Reserve assets increased by 124.6 million of USD (205.6 million GEL) compared to the record of 31st of March 2012. By the end of first quarter of 2013 Reserve assets amounted to 2.9 billion of USD (4.9 billion GEL). 157.6 million of USD (260.1 million of GEL) out of net annual changes of reserve assets was due to transactions and -31.1 millions of USD (-51.3 million of GEL) - due to exchange rate changes. As for liabilities, by the end of same period, total liabilities amounted to 21.6 billions of USD (35.8 billion of GEL), that is 2.4 billion of USD (3.9 billion of GEL) increase on annual base. The liabilities to direct investors has increased by 12.1 percent and amounted to 11.0 billions of USD (18.2 billion GEL). Portfolio investment liabilities grew by 36.0 percent annually, and amounted

to 2.1 billions of USD (3.4 billion of GEL). Out of total portfolio investment liabilities 664.0 million USD (1.1 billion of GEL) are Georgian government’s Eurobonds, 613.2 millions of USD (1.0 billion GEL) - Eurobonds of Georgian railway and 271.7 millions of USD (450.4 million of GEL) - Georgian Oil and Gas Corporation bonds. Treasury bills and treasury notes bought by nonresidents, total 123.1 millions of USD (204.1 million GEL) is included in this component. By the end of the first quarter of 2013 other investments liabilities increased by 7.8 percent compared to the same period record of preceding year, and amounted to 8.5 billion of USD (14.1 billion of GEL). Out of that amount 6.6 billion of USD (11.0 billion GEL) is comprised by loans. Monetary authorities’ loans decreased by 49.4 percent as compared to the same period record of the previous year and amounted to 283.2 million of USD (469.4 million GEL). External liabilities of general government grew by 9.8 percent annually due to increase of long term liabilities. Liabilities of other sectors increased by 24.5 percent annually and amounted to 1.7 billion of USD (2.8 billion of GEL) by the end of 31st of March 2013. On the contrary, banking sector loans decreased by 8.1 percent totaled to 1.3 billion USD (2.1 billion GEL). This fall was mainly conditioned by the decrease of short-term liabilities in banking sector. Currency and deposits liabilities increased by 36.5 percent compared to the previous year record and reached 814.1 million USD (1.3 billion GEL). By the end of March 2013, the other long term liabilities of the National Bank of Georgia amounted 215.9 millions of USD (357.8 million GEL), which is the allocation of Special Drawing Rights (SDR).

MILLENIUM CHALLENGE CORPORATION APPROVED SECOND COMPACT TO GEORGIA WORTH OF $140M

eorgian Ministry of Education and Science reported that board of the US governmental Millenium Challenge Corporation has approved on June 19 a 5-year Compact for Georgia, which total cost amounts to $140 million. Priorities of the Compact were presented in Tbilisi today. The program includes 3 projects: improvement

of general education quality, development of production sills and labor force and STEM (Science, Technology, Engineering and Mathematics) higher education. Goal of this latter project is partnership with one or several American universities in modernization of STEM education and offer of highquality educational programs. First 5-year Compact for Georgia was completed in April 2011. Its total cost amounted to $395.3 million.

GROSS EXTERNAL DEBT OF GEORGIA

ross External Debt Statistics is harmonized with BOP statistics. Besides of public sector debt, it includes private sector’s (Banking and Other sector) external debt. Gross External Debt of Georgia by March 31 of 2013 amounted to 13.4 billion of USD (22.2 billion of GEL), 83.9 percent of GDP. Out of that 4.2 billion of USD (7.0 billion of GEL) (26.5 percent of GDP) is public sector debt, 500.2 million of USD (829.2 million of GEL, 3.1 percent of GDP) - National Bank’s debt; 2.4 billion of USD (3.9 billion of GEL, 14.8 percent of GDP) - Banking sector’s debt; 3.4 billion of USD (5.6 billion of GEL, 21.1 percent of GDP) - other sector’s debt and 2.9 billion of USD (4.8 billion of GEL, 18.3 percent of GDP) is intercompany lending. 93.3 percent of the Gross External Debt of Georgia is denominated in foreign currency. During the first quarter of 2013, Gross External Debt of Georgia decreased by 15.5 million of USD (25.7 million of GEL), of which, transactions led to increase in gross external debt of Georgia by 71.4 million of USD (118.4 million of GEL), price changes - by 16.7 million of USD (27.7 million of GEL), other changes - by 9.1 million of USD (15.1 million of GEL), while exchange rate changes led to decrease by 112.7 million of USD (186.9 million of GEL). Public sector debt decreased by 18.8 million of USD (31.3 million of GEL) during the reporting period, of which, transactions resulted in growth by 56.9 million of USD (94.3 million of GEL), while price and exchange rate changes changes decreased the public sector external liabilities by 1.4 million of USD (2.3 million of GEL) and 74.3 million of USD (123.2 million of GEL) respectively. External liabilities of the National Bank of Georgia decreased by 82.1 million of USD (136.1 million of GEL), of which 68.1 million of USD (112.9 million of GEL) decline was due to trans-

actions and 14.0 million of USD (23.3 million of GEL) due to exchange rate changes. External liabilities of banking sector, decreased by 112.3 million of USD (186.3 million of GEL); of which 113.5 million of USD (188.2 million of GEL) decline due to transactions and 8.9 million of USD (14.8 million of GEL) due to exchange rate changes; while 10.1 million of USD (16.7 million of GEL) growth was due to price changes. During the reporting period banking sector’s short-term liabilities decreased by 112.7 million of USD (186.9 million of GEL), and long-term liabilities increased by 0.4 million of USD (0.7 million of GEL). Other sectors’ external liabilities increased by 134.8 million of USD (223.5 million of GEL), of which 121.7 million of USD (201.8 million of GEL) was the growth of nonfinancial corporations’ external liabilities. Other sectors’ liabilities increased by 124.7 million of USD (206.7 million of GEL) due to transactions, by 8.0 million of USD (13.3 million of GEL) due to price changes and by 12.8 million of USD (21.3 million of GEL) due to other changes, while decreased by 10.8 million of USD (17.9 million of GEL) due to exchange rate changes. Intercompany lending increased by 63.0 million of USD (104.5 million of GEL) during the first quarter of 2013. Transactions led to growth by 71.4 million of USD (118.4 million of GEL) while exchange rate and other changes led to decline by 4.7 million USD and 3.7 million USD (7.7 million GEL and 6.2 million GEL) respectively. Liabilities denominated in foreign currency decreased by 98.1 million of USD (162.6 million of GEL), and amounted to 12.5 billions of USD (20.7 billion of GEL). On the contrary liabilities denominated in national currency increased by 82.6 million of USD (136.9 million of GEL) and totaled 867.3 million of USD (1.4 billion of GEL).

AZERBAIJAN July 01, 2013 #11

caucasian business week

MOODY`S REPS VISITS AZERBAIJAN`S LEADING INSURANCE FIRM

FITCH RATINGS AFFIRMS AZERBAIJAN RAILWAYS AT ‘BBB-’ WITH STABLE OUTLOOK

delegation of international rating agency Moody’s Investors Service has visited the International Insurance Company (ICC), one of the leading insurance companies of

Azerbaijan. The meeting focused on ICC rating, and its financial stability. They also stressed the need for continuing cooperation between the Azerbaijani company and the agency.

AZERBAIJAN’S ONLINE MARKET QUADRUPLES OVER FIVE YEARS

zerbaijan’s online market has quadrupled, with IT production tripling over the past five years, the Ministry of Communication and Information Technologies said. According to the ministry, compared to 2008, the share of mobile sector dropped to 59.5% from 67.5%, while the share of the internet rose to 6.6% from 1.4% and the production share of information technologies increased to 2.7% from 1.4%.

SPANISH BUSINESSMEN LOOK FOR PARTNERS IN AZERBAIJAN

n Azerbaijani- Spanish joint meeting supported by the Azerbaijan Ministry of Economic Development and organized by AZPROMO brought together over 60 businessmen in Baku. Speaking at the event, AZPROMO head Rufat Mammadov highlighted Azerbaijan`s economic achievements, particularly business and investment opportunities in the country. At the meeting of investors and potential beneficiaries ICEX director general for internationalization of Spanish companies Isaak Martin said that the well-known crisis is not always well understood in terms of cooperation with the Spanish business. “The crisis is a good opportunity to regroup forces and it’s a great opportunity for companies to become better than before. In this regard, Spain and its business is considering the possibility to diversify markets and expand business practices outside of the traditional markets,” Martin said. For this reason, the Spanish business is actively looking for partners among the best of Azerbaijani companies, Martin added.

itch Ratings has affirmed Azerbaijan Railways Closed Joint Stock Company’s (ADY) Long-term Issuer Default Rating (IDR) at ‘BBB-’ with a Stable Outlook, Fitch Ratings said on June 25. ADY is the wholly state-owned operator of the national railway system in Azerbaijan (BBB-/Stable) and its rating is aligned with that of the sovereign. The rating alignment primarily reflects Fitch’s assessment of ADY’s links with its parent as relatively strong, in accordance with Fitch’s Parent and Subsidiary Rating Linkage criteria. Fitch’s assessment considers ADY’s high strategic importance to the national economy, including its position in transport of export-bound oil and oil products as well as freight transit, which are significantly contributing to Azerbaijan’s economy. The agency also views the operational links as strong due to the government’s involvement in tariff setting, capex planning and funding, financial and business strategy and policy setting. Fitch anticipates that ADY will re-

main 100% state owned in the foreseeable future, but notes that ADY’s debt is not guaranteed by the government. Debt was relatively modest at AZN284m at end-Q113, including a new loan drawn in February 2013. Currently, ADY does not plan to raise new external debt. Any significant external debt increase, if it was not guaranteed by the government may result in ADY’s rating being notched down from the sovereign rating. Additionally, an increased level of secured debt may, in Fitch’s view, be detrimental to ADY’s senior unsecured creditors (53% of total debt at end-2012) relative to ADY’s senior secured creditors (47%). The agency views the governmentapproved tangible support in the form of significant committed state funds (both directly from the state budget - USD1.3bn equivalent and borrowed by the state without recourse to ADY - USD450m and EUR215m) for ADY’s extensive capex programme over 2010-2017 (USD3bn) as a key factor for the rating alignment. Fitch expects these funds to be contributed to ADY as permanent equity, with the remaining 15%

of the capex (and additional maintenance capex that Fitch assumes of around AZN30m p.a.) to be funded from the company’s operating cash flows. A change in the proposed funding terms may result in ADY’s rating being notched down from the sovereign rating. In 2012, ADY reported revenue of AZN505m, up 5% yoy. Its EBITDA reached AZN210m, resulting in about 41% EBITDA margin compared with 38% in 2011. Freight revenue accounted for about 66% of total revenue and amounted to AZN335m, with export/import and transit operations accounting for about half each. Flat volumes in 2012 were affected by flat crude oil and natural gas liquids production and certain traffic restrictions imposed due to track rehabilitation works. Average freight tariff increased by 7% in 2012 reflecting the reduction of discounts to SOCAR and strong demand from central Asia producers. Railway traffic is expected to increase significantly upon commissioning of the BakuTbilisi-Kars rail link by end-2014, enabling deliveries from Baku to Istanbul and further to Europe.

At end-2012, ADY had gross debt of AZN185m, with 2013 maturities of AZN42m. The debt is made up of an unsecured term loan (funded by loan participation notes) that accounted for AZN98m or 53% of debt and loans of AZN87m secured on export revenues (47% of debt). At end-Q113,gross debt increased to AZN284m, including a new loan drawn in February 2013. Fitch does not currently anticipate funds flow from operations adjusted leverage increasing above 1.5x over the medium term. At end-2012 cash stood at AZN16m. Fitch forecasts that ADY will report large negative free cash flow (FCF) over 2013-2017 due to its intensive capex programme. ADY is responsible for about 15% of total capex, plus additional maintenance capex that Fitch assumes of around AZN30m annually to be funded from its operating cash flows. Fitch notes that ADY’s expansionary capex is only committed to the extent that the earmarked government funds are available. ADY’s liquidity excluding this capex is adequate, due to healthy operating cash flow and the amortising structure of about half of its debt.

AZERBAIJAN AMONG TOP FOREIGN INVESTORS IN TURKEY

zerbaijan ranks third for the number of companies established with foreign investment in Turkey in May 2013, the Union of Chambers and Commodity Exchanges of Turkey said last week. As for Azerbaijani capital placed in the neighboring country, 27 companies with Azerbaijani investment were established in Turkey last month, according to the report. It said 399 companies were established in Turkey in this period. Syria with 61 companies tops the list, followed by Germany with 37 companies. As of the end of 2012, the number of companies with Azerbaijani capital in Turkey reached 1,100. Mutual investments between Azerbaijan and Turkey exceed $10 billion. The amount of Azerbaijani investments in Turkey in the coming years is projected at $21 billion. According to the 2012 results, trade turnover between the two countries amounted to $2.12 billion. Turkey ranked first among the foreign trade partners of Azerbaijan for the volume of imports ($1.520 billion) with a share of 15.75 percent in Azerbaijani imports. Earlier Azerbaijani state energy company SOCAR’s Vice President Suleyman Gasimov said that SOCAR will proceed in making major investment in the projects in Turkey next spring. “Work with export-import banks is in the final stage. We plan to start attracting funds of the banks in March next year. Prior to that, we will use both internal funds and funds of the State Oil Fund of Azerbaijan. Currently, a large amount of money is required. We plan to spend up to $1 billion by the end of 2013,” Gasimov said.

SOCAR is one of the world’s most well-established oil companies, active in Turkey since May 30, 2008. The volume of investments that SOCAR will invest in the projects in Turkey is estimated at $17 billion. SOCAR is involved in a number of major investment projects in Turkey, including the construction of the Trans Anatolian gas pipeline (TANAP), Star refinery and others. TANAP will bring gas from Azerbaijan to the European edge of Turkey, and could be connected with either Nabucco or TAP pipeline. The TANAP project envisages construction of a pipeline from the eastern border of Turkey to the country’s western border to supply gas from Azerbaijan’s giant Shah Deniz gas condensate field in the Caspian Sea. Initial capacity of the pipeline is expected to be 16 billion cubic meters

per year. Around 6 billion cubic meters will be delivered to Turkey, while the rest will be transported to European markets. The Star refinery’s processing capacity is expected to be 10 million tons of oil and it will be capable of refining such oil grades as Azeri Light, Kirkuk and Urals. Annual production at the refinery will equal 1.6 million tons of naphtha. STAR Refinery is scheduled for commissioning in 2015 and it will contribute significantly to the economy of the region and country by creating employment and increasing competitiveness.

ARMENIA July 01, 2013 #11

caucasian business week

ARMENIA IS 5 AT GLOBE SPOT’S TOP 10 COUNTRIES TO TRAVEL TO IN 2013 TH

rmenia comes in at # 5 among Top 10 countries to travel to in 2013, according to Globe Sports portal. “Despite its rather well developed tourism infrastructure, Arme-

nia still flies under the radar of most travellers. Boasting having been the first to embrace Christianity, the country provides ample proof of that assertion, and following the guidebooks’ suggestions will most likely leave anyone churched (or

monasteried) out,” according to the portal. According to Globe Spot, fortunately, those willing to dig a little deeper will discover a truly amazing country with a beautiful landscape, but will also encounter genuinely nice people always ready to offer them a shot of aragh (voda in Armenian language), introduced by never-ending toasts, or welcome them at their khorovats picnic (Armenian barbeque), or both. “And with visa requirements being lifted for EU citizens, starting in January, there’s even less reason to pass on this one.” For compiling this rating, a group of professional travelers have captured what’s happening on the travel scene focusing on destinations they think will be “hot - or at least should be.” Armenia was rated within a category of “adventurous places for those who are going above and beyond, seeking out the best travel.” Globe Spot rated Portugal as top country to visit in 2013. It is followed by Mozambique, Kyrgyzstan, Panama, Armenia, Rwanda, Cuba, Ukraine, Malawi and Canada. ARKA

BLOOMBERG RATES ARMENIA FOURTH MOST IMMORAL COUNTRY

rmenia was ranked fourth in the list of most immoral countries in the world by Bloomberg analysts. The analysts studied indicators of 57 countries. To determine the degree of immorality, Bloomberg picked the following averages: the amount of alcohol for every adult citizen of the country, the number of smoked cigarettes, the prevalence of

drug use (percentage of residents using drugs aged 15 to 64 years), and the total losses from gambling as a percentage of GDP. Bloomberg analysts found that an average Armenian drinks 13.6 liters of alcohol a year, smokes 1,620 cigarettes and squanders 1.65% of GDP on gambling. Some 3.5 percent of the population smokes cannabis, 0.3 percent uses opioids, 0.5% uses amphetamines and ecstasy and 0.1% cocaine.

The Czech Republic has been announced the most immoral country while impoverished Zambiahas been announced the most innocent. The Czech Republic was followed by Slovenia, Australia, Armenia, Bulgaria, Spain, Bosnia and Herzegovina, Belarus and Greece. According to the study, the residents of Colombia, Mexicoand Venezuela consume relatively little drugs. ARKA

ARGENTINA THIRD LARGEST INVESTOR IN ARMENIAN ECONOMY AT $55 MLN IN 2012

rgentina is the third country to make biggest direct investments in Armenia, at $55 million, in 2012, Ambassador to Armenia Diego Alvarez Rivera said Friday. “Compared to 2011, the figures rose by 5%,” he

said at the seminar devoted to commercial and economic ties between Armenia and Argentina. Araik Vardanyan, executive director of Armenia’s Chamber of Commerce and Industry, has said the largest investment project Argentina implemented in Armenia was a construction of a new passenger terminal of Zvartnots airport: total investments valued at $160 million. New York-based holding company owns Armenian-International Airports company, which, in turn, has been managing Zvartnots airport since 2001. The 100% stock of the holding is held by Argentinean businessman of Armenian origin

Eduardo Eurnekian. The report of the Argentinean Embassy stated the top investor in Armenia economy in 2012 was France (41% - $230 million), Russia came in second (16%-$123 million). According to the National Statistical Service of Armenia, the total foreign investments in Armenian economy, received via banking system and without state management, dropped by 8.6% from 2011 to $ 1 587 million. Direct foreign investments hit $ 656.7 million against $ 906.3 million (27.5-percent fall). ARKA

CZECH AIRLINES FLEW 300,000 PASSENGERS BETWEEN YEREVAN AND PRAGUE IN TEN YEARS

ver the last 10 years the Czech Airlines made around 2,000 flights between Yerevan and Prague flying over 300,000 passengers, the company said in a press release. On June 22 it will be celebrating the 10 years of its operation at the Armenian market. The first flight was made on June 11, 2003 when the company flew the Boeing 737-400 (OK-FGR) to the Armenian capital city. Half of the 300,000 passengers transported in the last ten years between Yerevan and Prague, were flown in the last three years. “This is evidence of the growing importance and attractiveness of this flight for Armenians who fly to Prague and from there to other European cit-

ies,” the press release says. To date, the airline transported also more than 3.3 million kg of cargo and more than half a million kg of mail. Overall, the company’s aircraft flew to Yerevan and back 3,700 times, which makes more than 9 million kilometers. This summer the airline will be making daily flights between the two cites by Airbus A319 and A320 aircraft. The airline said also the flights are very convenient for Armenian passengers heading for Amsterdam, Berlin, Brussels, Budapest, Frankfurt, Hamburg, Copenhagen, Milan, Nice, Paris, Warsaw and other cities across the Europe . The Czech Airlines, as the flagship carrier of the Czech Republic, provides air service from

Prague, as well as through Prague to major destinations in Europe, Central Asia, the Caucasus and the Middle East. Since 2001, the Czech Airlines has been a member “SkyTeam alliance of air carriers. The members of the Alliance - Aeroflot, Aerolíneas Argentinas, Aeroméxico, Air Europa, Air France, Alitalia, China Airlines, China Eastern, China Southern, Czech Airlines, Delta Airlines, Kenya Airways, KLM Royal Dutch Airlines, Korean Air, Middle East Airlines, Saudia, TAROM , Vietnam Airlines and Xiamen Airlines transported annually 552 million a year, making more than 15,000 flights to 1000 destinations in 187 countries worldwide. ARKA

PRIVATELY-OWNED HOMES PRICES UP 0.1 PERCENT IN MAY

verage market prices of privatelyowned houses in the regions of Armenia in May increased by 0.1% fr om April, the State Committee of Real Estate Cadastre said. It said 322 real estate transactions were made in May, of which 83 in Yerevan. According to the Committee, the lowest price of homes in May were reported in Dastakert village in southern Syunik region wh ere one square meter of living space cost 11,600 drams. The highest price was recorded in Tsakhkadzor in central Kotayk region – 305,000 drams per square meter. ($ 1 409, 90 drams).

ARMENIA’S GROSS INTERNATIONAL RESERVES TOTALED $ 1,669.7MLN IN MAY

rmenia’s gross international reserves totaled $ 1,669.7 million in May, an increase of 1.9% compared to May, says the website of Armenia’s Central Bank. Most part of assets is kept in hard currency ($1,635.1mln). According to the report, SDR in IMF amounted to $34.4 million as of the end of the reporting period, as compared to $13.7 million ($1=409.60drams).

PETROL IN ARMENIAN BECOMES 1.5% CHEAPER IN JUNE THAN IN MAY

etrol and diesel in Armenian became 1.5% and 1.1% cheaper in June than in May, the National Statistical Service of Armenia reports. Petrol prices went 1.5% down in June 2013, compared with the same month a year earlier, while diesel prices rose 2.7%. Prices for petrol have slipped 2% since December 2012, and diesel prices have climbed 2.7%. Nonfood prices in Armenia went 4.8% up in June 2013, compared with June 2012, but slid 0.1%, compared with May 2013.

ONE SQUARE METER IN APARTMENT BLOCKS IN YEREVAN COSTS AMD 271,900 IN MAY 2013

ne square meter in apartment blocks in Yerevan cost AMD 271,900 in May 2013 against AMD 255,300 in May 2012, according to Armenia’s State Real Estate Cadastre. The average price for one square meter in apartment blocks in Yerevan rose 0.2% in Apr 2013, compared with April 2013. According to the report, the highest price was recorded in Yerevan’s administrative district Kentron – AMD 428,000 per one square meter, and the lowest price in Nubarashen – AMD 151,500. One square meter in separate resident houses in Yerevan cost AMD 286,600 in May 2013 against AMD 274,100 in May 2012 – the price has not changed since April 2013. One square meter in apartment blocks in provinces rose 0.6% in May, compared with April. Prices rose slightly in Abovyan, Yeghegnadzor, Dilijan and Noyemberyan. Tsakhkadzor accounted for the highest prices in May 2013 – (AMD 292,500), and Dastakert and Shamlug for the lowest prices (AMD 8,000). ($1 – 409.90). ARKA

12 GAZPROM GIVES UKRAINE USD 1 BLN PREPAYMENT FOR NATURAL GAS TRANSIT

CIS July 01, 2013 #11

caucasian business week

AZERBAIJAN’S INVESTMENT IN RUSSIA TOPS $560 MLN OVER 10 YEARS

nalyst sees payment as “yet another driver of devaluation pressure for hryvnia in the near future.” MOSCOW, July 27, 2013 (UBO) - Russian state natural gas monopoly Gazprom (GAZP RM) decided to make one more advanced payment (USD 1 bln) to Naftogaz of Ukraine (NAFTO), the state gas production and distribution monopoly, to cover transit costs, according to a Gazprom press release on June 26, Concorde Capital told its clients in an online communication today. Since 2012, Gazprom has wired to Naftogaz USD 5.15 bln, which covers the cost of gas transit till early 2015, according to Gazprom estimates. Concorde analyst Alexander Paraschiy added: “Ukrainian authorities are in a hasty search for alternatives to cover the state’s currency deficit. Talks about QE tapering have made it difficult for the Cabinet to raise money from abroad. In this respect, we see the deal with Gazprom on prepayment as an effort to reduce a minute-by-minute currency problem. As Gazprom has already prepaid for gas transit for 1.5 years in advance, this source of currency inflow looks exhausted for the future. Thus the prepayment creates a one-time cash inflow that will be translated into a larger currency deficit over the next year and a half – yet another driver of devaluation pressure for hryvnia in the near future.”

Turkmenistan

DB to generate $7.5b for financing TAPI gas pipeline. Turkmenistan, Afghanistan, Pakistan and India are likely to sign a transaction advisory deal with the Asian Development Bank (ADB) in the first week of July in an effort to generate over $7.5 billion from leading investors for financing a US-backed gas pipeline to meet growing energy needs. According to sources, this development is expected to take place in meetings of the steering committee and the working group on the gas pipeline project in Ashgabat, Turkmenistan on July 2-3. Earlier, the deliberations were scheduled to be held on June 17-19, but were put off in the wake of transition of power to a new government in Pakistan. In 2008, the ADB had warned that the cost of TAPI gas pipeline could escalate to $9 billion following delay in finalising necessary issues compared to initial cost estimate of $7.6 billion based on a pre-feasibility study. Under the original project plan, Pakistan will get 1.365 billion cubic feet of gas per day (bcfd) from Turkmenistan, India will also receive the same 1.365 bcfd and Afghanistan will get 0.5 bcfd. Turkmenistan will export up to 33 billion cubic metres of natural gas per year through a 1,800km pipeline that will start from Turkmenistan and reach India after passing through Afghanistan and Pakistan. Pakistan and India have already signed gas sale-purchase agreements and efforts are under way to attract potential investors for financing the project.

Uzbekistan

UKOIL and Uz-Daewoo start production of motor oil under UzautoOil brand. Asaka-based plant produces nine models of cars, including three – Nexia, Matiz and Gentra – realised in Russian market. Launch of new motor oil is logical move, taking into account production volume and network of dealers of the plant. According to Avtostat, some 680,000 cars, produced in Uzbekistan, are maintained in Russia now. UzautoOil has improved low-temperature properties, which will ensure reliable protection to engine during harsh winter and prevent formation of deposits.

zerbaijan’s investment in neighboring Russia’s economy has exceeded $560 million over the past ten years, Vice President of Azerbaijan Export and Investment Promotion Foundation (AZPROMO) Vidadi Guliyev said at the presentation of the Russian-Azerbaijani Business Economic Club in Baku last week. According to him, 479 companies with Russian investment were registered in Azerbaijan in 2004-2012. “The Russian companies act as contractors in five projects worth a total of 10 million manats (over $12.7 million), which are carried out at the

expense of Azerbaijani state investment,” Guliyev said. He said Azerbaijan-Russia trade turnover amounted to over $2.3 billion in 2012. Azerbaijan’s imports made up $1.39 billion while exports stood at $960 million. In JanuaryApril 2013, the trade turnover increased by 38 percent compared to the same period of last year. “There is great potential for the development of business relations between companies of the two countries,” Guliyev said. Speaking at the event, consultant of Russia’s Trade Representation in Azerbaijan Victor Glushenko said the growth of the export potential of both countries, measures taken

for the improvement of the taxation system as well as support for entrepreneurship in Azerbaijan and Russia play a significant role in the development of trade and economic relations. The Russian-Azerbaijani Business Economic Club is a new structure established in Baku on Friday to contribute to the development of bilateral trade - economic ties. The Russian-Azerbaijani Business Economic Club, established under the auspices and with direct participation of Russia’s Trade Representation and the Russian Embassy in Azerbaijan, should become grounds for strengthening the economic relations between the two countries.

The goals and tasks of the Club are to advance and lobby Russian companies’ interests in the government agencies of Azerbaijan, to support Russian companies which are operating in Azerbaijan or are preparing to access Azerbaijani markets, to support Azerbaijani companies in searching for partners in Russia and in entering Russian markets, to become a ground for exchange of experience and information on business management in Azerbaijan, and to form a positive image of the Russian business in Azerbaijan and Azerbaijani business in Russia. The Club will also provide the companies with marketing, advertisement, legal and other support.

ALSTOM SIGNS AN AGREEMENT FOR THE PRODUCTION OF TRAMS IN UKRAINE The objectives of this partnership are to organise manufacturing, operation and maintenance of modern tramways by City Transport Group in Ukraine under licence from TramRus

lstom and its Russian joint-venture, TramRus, have concluded an agreement with City Transport Group, a filial of the LAZ Group and the main bus manufacturer in Ukraine, to produce modern high speed tramways for the Ukrainian market. The agreement was signed in presence of Ukrainian Prime-Minister, Nikolay Azarov on June 25. 80% of the trams currently in operation in Ukraine (2,500 15-metre long trams) are obsolete. The replacement of the fleet will enable urban rail transport efficiency and passenger comfort to be increased. The objectives of this partnership are to organise manufacturing, operation and maintenance of modern tramways by City Transport Group in Ukraine under licence from TramRus. Based on Alstom’s flagship model Citadis, this tramway was specially designed for the CIS market. Suited to the 1524 mm gauge of the region, the Citadis CIS is winterised to withstand temperatures as low as -40°C. It is equipped with new innovative pivoting bogies to fit the existing rail networks, thus reducing implementation time and infrastructure related costs. This new tramway model features state-of-the-art engineering solutions such as composite materials reducing energy consumption by 10%. Modular sections ensure easier repair and lower maintenance costs. The lifetime of the Citadis CIS is 30 years, compared with 18 years for the present Ukrainian trams. Designed for maximum speed of 75 km/h, it can run at an average speed of 25 km/h depending on existing infrastructure and signalling systems, compared to 11 km/h for the existing fleet. Ukraine’s tramway is a full low-floor 25 to 35metre long vehicle. It can transport up to 255 pas-

sengers and provide easy access to people with reduced mobility. It can be equipped with Wi-Fi internet connections and its interior and exterior designs can be fully customised according to the needs of each city. With more than 1,650 Citadis trams sold in 41 cities worldwide around the world, Alstom is a leader in the manufacturing of tramways. To date, Citadis trams have covered 450 million kilometres across the globe and transported more than five billion passengers. UBO

WARSAW-BOUND HELICOPTER INVADES BELARUS` AIRSPACE

helicopter bound for Warsaw intruded into Belarus` airspace after departing from Vilnius on the morning of June 26. The aircraft was spotted by a border control unit, which immediately alerted the Air and Air Defense Force, said the defense ministry`s press office. The press office said that the Eurocopter 120 had been up to three kilometers deep into Belarus` territory before leaving the country`s airspace. The Air and Air Defense Force`s officers identified the helicopter and learned its route after receiving information from Lithuania`s colleagues. Its commanders decided not to use “means” of air defense, taking into account the information and difficult weather conditions and also acting out of humanitarian considerations, said the press office. Information about the incident has been sent to the foreign ministry for “taking adequate measures of response.” BelaPAN

WORLD NEWS July 01, 2013 #11

caucasian business week

GOLD MINERS TRADE LIKE JUNK AS BULLION SINKS BELOW $1,200

arrick Gold Corp. (ABX) and Kinross Gold Corp. (K) are trading as if they’ve lost their investment-grade ratings after the price of the metal plunged 28 percent this year to the lowest since August 2010. Barrick’s implied bond rating has deteriorated to Ba1, the highest junk rating, according to Moody’s Corp. Moody’s Investors Service’s actual rating for Toronto-based Barrick, the world’s biggest gold miner, is an investment grade Baa2. Kinross, Canada’s third-largest producer, also has an implied rating of Ba1, versus an actual rating of Baa3. Barrick Chief Executive Officer Jamie Sokalsky is reducing spending and selling assets as gold heads for its first annual drop since 2000. Barrick, which had $12.5 billion of net debt as of March 31 and sold $3 billion of bonds in April to bolster liquidity, also faces higher costs at its delayed and over-budget billion-dollar Pascua-Lama gold project in the Andes. “All the gold names have been pretty much getting hammered both on the credit side and the equity side for quite some time with gold prices coming down,” Wen Li, an analyst at CreditSights Inc., said in a phone interview yesterday. Pascua-Lama is also a “really big overhang” for Barrick, he said. Barrick’s bonds have declined 12 percent since May 1, the fourth-biggest drop among issuers in Bank of America Merrill Lynch’s U.S. Metals, Mining and Steel Index. Goldcorp Inc. (G)’s notes have slid 9.4 percent and Kinross’s by 7 percent. The largest 50 issuers in the index have lost an average 9 percent.

‘Inevitable Pressure’

“If all currently planned projects go forward, and current metals prices and financial policies continue, the simple math results in inevitable pressure on credit metrics and ratings” in the industry, said Kevin McSweeney, money manager at CI Investments Inc., which oversees about $74 billion of assets. Gold futures in New York yesterday dropped below $1,200 for the first time since August 2010, as signs of improving U.S. economic growth

boosted speculation the Federal Reserve will wind down its asset-purchase program. After rising to a record $1,923.70 an ounce in September 2011, gold futures for August delivery fell 1.6 percent to $1,192.20 at 8:47 a.m. today on the Comex in New York. “Our investment grade rating was recently reconfirmed by all three rating agencies, with Moody’s re-confirming a Baa3 rating just earlier this month,” Steve Mitchell, a spokesman for Toronto-based Kinross, said yesterday by e-mail.

Debt Obligations

Barrick has the lowest operating costs of the senior producers and almost 60 percent of its production in the first quarter came from five mines at a cost of $591 per ounce, said Andy Lloyd, a company spokesman. “Our debt repayment obligations in the next few years are modest, with the majority maturing beyond 2023,” Lloyd said in an e-mail yesterday. Jeff Wilhoit, a spokesman for Vancouver-based Goldcorp, didn’t respond to telephone calls or an e-mail yesterday seeking comment on the bonds’ performance. High-yield, or junk bonds, are rated below Baa3 by Moody’s Investors Service and lower than BBB- at Standard & Poor’s. Elsewhere in credit markets, Valeant Pharmaceuticals International Inc. (VRX) issued $3.23 billion yesterday of junk bonds to finance its buyout of eye-care provider Bausch & Lomb Holdings Inc. last month.

Valeant Bonds

The Laval, Quebec-based company also is planning $4.05 billion in loans to help fund the purchase. Valeant issued $1.63 billion of eight-year securities yielding 7.5 percent and $1.6 billion of five-year notes with a yield of 6.75 percent. The extra yield investors demand to own the debt of Canadian investment-grade corporations rather than the federal government was unchanged at 124 basis points, or 1.24 percentage points yesterday, according to data compiled by Bank of America. Yields fell to 3.18 percent from 3.22

percent. In the provincial bond market, relative yields were unchanged at 72 basis points yesterday, according to another Bank of America Merrill Lynch index. Yields dropped to 2.91 percent, from 2.96 percent. Corporate debt has lost 0.4 percent this year, Bank of America Merrill Lynch index data show. Provincial securities have slid 2.6 percent, and federal-government bonds have dropped 2.1 percent.

Default Swaps

The relative yield investors demand to hold Barrick’s bonds have surged to an average 332 basis points from 224 basis points on May 1, according to Bank of America. Its credit-default swaps have implied a speculative grade rating of Ba1, the highest junk rating, since mid-April and over the last two days dropped to as low as Ba3, according to Moody’s data. Barrick could face a ratings downgrade of “another notch or so” if gold prices decline further and stay lower for a prolonged period, although it will probably remain investment grade, said Li. “They will get hit pretty hard in terms of earnings and margins and free cash flow” at lower prices, he said. Barrick has forecast it will cost $950 to $1,050 to produce an ounce of gold on average from all its mines this year. Goldcorp forecast a cost of $1,000 to $1,100. Barrick’s net debt would probably increase to a peak of $15.8 billion in 2014 if it decides to cancel its Pascua-Lama project, assuming a gold price of $1,300, Anita Soni, a Toronto-based analyst at Credit Suisse Group AG, said in a note dated June 25. Net debt could rise to $17 billion in 2015 if the project on the Chile-Argentina border goes ahead.

Gross debt

Repayment becomes a concern with gold under $1,300, though only in the longer term because the company has good access to the debt market and $14 billion of its $17.7 billion gross debt is due in 2018 or later, she said. Barrick had $2.34 billion in cash and equivalents as of March 31, according to data compiled by Bloomberg, and said May 2 it completed the sale of $3 billion of 5-, 10- and 30-year notes. The company also had undrawn credit of $2 billion, Chief Financial Officer Ammar Al-Joundi said on an April 24 conference call. The company’s debt repayment obligations through 2017 were less than its operating cash flow last year, he said. Barrick, which last year raised the cost estimate for Pascua-Lama to as much as $8.5 billion, said June 3 that production won’t start in the second half of 2014 as planned, because of demands from Chile’s environmental agency, and that the delay would probably lead to highercapital costs. Barrick will probably re-evaluate its capital spending plans in light of the current gold price, which may help reduce its financing burden, Joel Levington, managing director of corporate credit research at Brookfield Investment Management Inc. in New York, said in an e-mail. “Barrick will be able to maintain investmentgrade ratings, but a downgrade to low-BBB would not be surprising,” he said.

NO SIGN OF BLACKBERRY TURNAROUND IN RESULTS, SHARES DROP

lackBerry shares tumbled about 28 percent in both U.S. and Toronto trading. The Canadian smartphone maker, which has struggled to compete against Apple Inc’s iPhone, Samsung’s Galaxy phones and other devices powered by Google’s Android operating system, said smartphone sales were up 13 percent from the previous quarter, a period when buyers waited for the BB10 phones to hit the market.

BlackBerry offered few signs of a long-promised turnaround on Friday, with an unexpected quarterly operating loss, a dearth of details on sales of its make-or-break new line of devices and no return to profit expected in the current quarter. But deliveries are down from a year ago as sales of its older line of BlackBerry devices taper off. “We haven’t received the BlackBerry 10 unit numbers yet, but certainly it doesn’t bode well for the initial BlackBerry 10 launch, particularly the Z10. But even the outlook for a Q2 loss doesn’t bode well for the Q10 either,” said Brian Colello, an analyst with Morningstar. BlackBerry launched two all-new smartphones this year, the touch screen Z10 device, followed by the Q10, which includes the mini keyboard

many BlackBerry users still covet. It has also launched the Q5, a lower-end keyboard device targeted at emerging markets, and plans to unveil one more cheaper phone running on its old BlackBerry 7 platform later this year, hoping to stave off market share losses in pricesensitive emerging markets flooded with cheap Android devices. BlackBerry invented the concept of on-the-go email with clunky little devices with a mini keyboard. It offered levels of security that made the devices attractive to the business, government and legal clients, but they are now moving to other devices and leaving BlackBerry chasing both a high-end and a low-end market. “They’re not the high-end provider anymore, they’re not Apple, they’re not the low-end provider, they’re not Nokia, so they are in the middle and they do relatively low volumes,” said Daniel Ernst, of Hudson Square Research in New York. “It’s difficult to make great margins on that kind of volume, so I would say the outlook is quite negative then.” Excluding one-time items such as the cost of job cuts, BlackBerry reported a loss from continuing operations of $67 million, or 13 cents a share, on revenue of $3.1 billion. Analysts, on average, expected a profit of 6 cents a share, on revenue of $3.36 billion, according to Thomson Reuters I/B/E/S Estimates. Earnings were also reduced about 10 cents a share due to Venezuelan currency restrictions.

FORECAST OF CURRENTQUARTER LOSS The company forecast an operating loss in the current quarter. Chief Executive Thorsten Heins cited the need for increased investment in a competitive environment. The company has been consumed over the last year with developing the new phones and making sure they work, and the devices were not ready for the all-important holiday season at the end of last year. The Z10 only hit store shelves in the crucial U.S. market in late March, while the Q10 device only reached the United States after the end of BlackBerry’s fiscal first quarter. The Waterloo, Ontario-based company said it shipped 6.8 million smartphones in the quarter. On a conference call it said 40 percent of them, or 2.72 million devices, were BlackBerry 10 devices. Analysts looked for shipments of about 3 million of the new phones. It reported a net loss of $84 million, or 16 cents a share, in the fiscal first quarter ended June 1. That compared with a year-earlier loss of $518 million, or 99 cents a share. BlackBerry did not provide a detailed outlook for the rest of the year, saying the smartphone market remained highly competitive, making it difficult to estimate units, revenue and levels of profitability. It also said it would not supply subscriber numbers due to changes in its revenue model.

EXHABITION caucasian business week

July 01, 2013 #11

TBILISI GUIDE July 01, 2013 #11

Embassy United States of America Embassy 11 Balanchivadze St., Dighomi Dstr., Tbilisi Tel: 27-70-00, 53-23-34 E-mail: tbilisivisa@state.gov; askconsultbilisi@state.gov United Kingdom of Great Britain and Northern Ireland Embassy 51 Krtsanisi Str., Tbilisi, Tel: 227-47-47 E-mail: british.embassy.tbilisi@fco.gov.uk Republic of France Embassy 49, Krtsanisi Str. Tbilisi, Tel: 272 14 90 E-mail: ambafrance@access.sanet.ge Web-site: www.ambafrance-ge.org Federal Republic of Germany Embassy 20 Telavi St. Tbilisi Tel: 44 73 00, Fax: 44 73 64 Italian RepublicEmbassy 3a Chitadze St, Tbilisi, Tel: 299-64-18, 292-14-62, 292-18-54 E-mail: embassy.tbilisi@esteri.it Republic of Estonia Embassy 4 Likhauri St., Tbilisi, Tel: 236-51-40 E-mail: tbilisisaatkond@mfa.ee Republic of Lithuania Embassy 25 Tengiz Abuladze St, Tbilisi Tel: 291-29-33 E-mail: amb.ge@urm.lt Republic of Latvia Embassy 4 Odessa St., Tbilisi Tel: 224-48-58 E-mail: embassy.georgia@mfa.gov.lv Greece Republic Embassy 37. Tabidze St. Tbilisi Tel: 91 49 70, 91 49 71, 91 49 72 Czech RepublicEmbassy 37 Chavchavadze St. Tbilisi Tel: 291-67-40/41/42 E-mail: czechembassy@gol.ge Web-sait: www.mzv.cz Japan Embassy 7 Krtsanisi St. Tbilisi Tel: 75 21 11, Fax: 75 21 20 Kingdom of Sweden Embassy 15 Kipshidze St. Tbilisi Tel: +995 32 2 55 03 20 , Fax: +995 32 2 22 48 90 Kingdom of the Netherlands Embassy 20 Telavi St. Tbilisi Tel: 27 62 00, Fax: 27 62 32 People’s Republic of China Embassy 52 Barnov St. Tbilisi Tel: 225-22-86, 225-21-75, 225-26-70 E-mail: zhangling@access.sanet.ge Republic of Bulgaria Embassy 61 Agmashenebeli Ave. Tbilisi Tel: 91 01 94, 91 01 95, Republic of Hungary Embassy 83 Lvovi Street, Tbilisi Tel: 39 90 08 E-mail: hunembtbs@gmail.com State of Israel Embassy 61 Agmashenebeli Ave. Tbilisi Tel: 95 17 09, 94 27 05 Embassy of Swiss Confederation’s Russian Federation Interests Section Embassy 51 Chavchavadze Av., Tbilisi Tel: 291-26-45, 291-24-06, 225-28-03 E-mail: RussianEmbassy@Caucasus.net Ukraine Embassy 75, Oniashvili St., Tbilisi Tel: 231-11-61, 231-12-02, 231-14-54 E-mail: ukraina_pu@wanex.net; emb_ge@mfa.gov.ua Consular Agency: 71, Melikishvili St., Batumi Tel: (8-88-222) 3-16-00/ 3-14-78 Republic of Turkey Embassy 35 Chavchavadze Av., Tbilisi Tel: 225-20-72/73/74/76 E-mail: turkemb.tbilisi@mfa.gov.tr Address: 8, M. Abashidze str. Batumi, Georgia tel: (8-88-222) 7 47 90 Republic of Azerbaijan Embassy Kipshidze II-bl . N1., Tbilisi Tel: 225-26-39, 225-35-26/27/28 E-mail: tbilisi@mission.mfa.gov.az Address: Dumbadze str. 14, Batumi Tel: 222-7-67-00 Fax: 222-7-34-43 Republic of Armenia Embassy 4 Tetelashvili St. Tbilisi Tel: 95-94-43, 95-17-23, 95-44-08 E-mail: armemb@caucasus.net Web: www.armenianembassy.ge Consulate General, Batumi Address: Batumi, Gogebashvili str. 32, Apt. 16

caucasian business week Kingdom of Spain Embassy Rustaveli Ave. 24, I floor, Tbilisi Tel: 230-54-64 E-mail: emb.tiflis@maec.es Romania Embassy 7 Kushitashvili St., Tbilisi Tel: 38-53-10; 25-00-98/97 E-mail: ambasada@caucasus.net Republic of Poland Embassy 19 Brothers Zubalashvili St., Tbilisi Tel: 292-03-98 Email:tbilisi.amb.sekretariat@msz.gov.pl Web-site: www.tbilisi.polemb.net Republic of Iraq Embassy Kobuleti str. 16, Tbilisi Tel: 291 35 96; 229 07 93 E-mail: iraqiageoemb@yahoo.com Federative Republic of Brazil Embassy Chanturia street 6/2, Tbilisi Tel.: +995-32-293-2419 Fax.: +995-32-293-2416 Islamic Republic of Iran Embassy 80, I.Chavchavadze St. Tbilisi, Tel: 291-36-56, 291-36-58, 291-36-59, 291-36-60; Fax: 291-36-28 E-mail: iranemb@geo.net.ge United Nations Office Address: 9 Eristavi St. Tbilisi Tel: 225-11-26/28, 225-11-29/31 Fax: 225-02-71/72 E-mail: registry.geo@undp.org Web-site: www.undp.org International Monetary Fund Office Address : 4 Freedom Sq., GMT Plaza, Tbilisi Tel: 292-04-32/33/34 E-mail: kdanelia@imf.org Web-site: www.imf.ge Resident Mission of the Asian Development Bank (ADB) Address: 1, G. Tabidze Street. Tbilisi Tel: +995 32 225 06 19, EXT:101 Cell: +995 577 900 128 e-mail: qtvalavadze.contractor@adb.org World Bank Office Address : 5a Chavchavadze Av., lane-I, Tbilisi, Georgia Tel: 291-30-96, 291-26-89/59 Web-site: www.worldbank.org.ge Regional Office of European Bank for Reconstruction and Development Address: 6 Marjanishvili St. Tbilisi Tel: 244 74 00, 292 05 13, 292 05 14 Web-site: www.ebrd.com Representation of the Council of Europe in Georgia Address : 26 Br. Kakabadze, Tbilisi Tel: 995 32 291 38 70/71/72/73 Fax: 995 32 291 38 74 Web-site: www.coe.ge

Hotels in Georgia TBILISI MARRIOTT Tbilisi , 13 Rustaveli Ave. Tel: 77 92 00, www.marriott.com COURTYARD MARRIOTT Tbilisi , 4 Freedom Sq. Tel: 77 91 00 www.marriott.com RADISSON BLU HOTEL, TBILISI Rose Revolution Square 1 0108, Tbilisi Tel: +995 32 402200 radissonblu.com/hotel-tbilisi RADISSON BLU HOTEL, BATUMI Ninoshvili Str. 1, 6000 Bat’umi, Georgia Tel: 8 422255555 http://radissonblu.com/hotel-batumi SHERATON METECHI PALACE Tbilisi , 20 Telavi St. Tel: 77 20 20, www.starwoodhotels.com SHERATON BATUMI 28 Rustaveli Street • Batumi Tel: (995)(422) 229000 www.sheratonbatumi.com HOLIDAY INN TBILISI Business hotel Addr: 1, 26 May Square Tel: +995 32 230 00 99 E-mail: info@hi-tbilisi.com Website: http://www.hi-tbilisi.com BETSY’S HOTEL With Marvellous Tbilisi Views Addr: 32/34 Makashvili St. Tbilisi Tel: +995 32 293 14 04; +995 32 292 39 96 Fax: +995 32 99 93 11 E-mail: info@betsyshotel.com Website: http://www.betsyshotel.com

Restaurants CHARDIN 12 Tbilisi , 12 Chardin St. , Tel: 92 32 38 CHINA TOWN Tbilisi , 44 Leselidze St. (ent. from Chardin St.) Tel: 43 93 08, 43 93 80, Fax: 43 93 08 BREAD HOUSE Tbilisi , 7 Gorgasali St. , Tel: 30 30 30 BUFETTI - ITALIAN RESTAURANT Tbilisi , 31 I. Abashidze St. , Tel: 22 49 61 DZVELI SAKHLI Tbilisi , 3 Right embankment , Tel: 92 34 97, 36 53 65, Fax: 98 27 81 IN THE SHADOW OF METEKHI Tbilisi , 29a Tsamebuli Ave. , Tel: 77 93 83, Fax: 77 93 83 PICASSO Tbilisi , 4 Miminoshvili St. , Tel: 98 90 86 SAKURA - JAPANESE RESTAURANT Tbilisi , 29 I. Abashidze St. , Tel: 29 31 08, Fax: 29 31 08 SIANGAN - CHINESE RESTAURANT Tbilisi , 41 Peking St , Tel: 37 96 88 VERA STEAK HOUSE Tbilisi , 37a Kostava St , Tel: 98 37 67 BELLE DE JOUR 29 I. Abashidze str, Tbilisi Tel: (+995 32) 230 30 30 VONG 31 I. Abashidze str, Tbilisi Tel: (+995 32) 230 30 30 BRASSERIE L’EXPRESS 14 Chardin str, Tbilisi Tel: (+995 32) 230 30 30 TWO SIDE PARTY CLUB 7 Bambis Rigi, Tbilisi Tel: (+995 32) 230 30 30 LOFT 11. I. Mosashvili str, Tbilisi Tel: (+995 32) 230 30 30 RESTAURANT NERO 21 Abano Street, Tbilisi Tel: (+995 32) 292 10 15

SH. RUSTAVELI STATE THEATRE Tbilisi. 17 Rustaveli Ave. Tel: 93 65 83, Fax: 99 63 73 TBILISI STATE MARIONETTE THEATRE Tbilisi. 26 Shavteli St. Tel: 98 65 89, Fax: 98 65 89 THEATRE OF PANTOMIME Tbilisi. 37 Rustaveli Ave. Tel: 99 63 14, (77) 41 41 50 Z. PALIASHVILI TBILISI STATE THEATRE OF OPERA AND BALLET Tbilisi. 25 Rustaveli Ave. Tel: 98 32 49, Fax: 98 32 50

Galleries ART GALLERY LINE Tbilisi. 44 Leselidze St. BAIA GALLERY Tbilisi. 10 Chardin St. Tel: 75 45 10 GALLERY Tbilisi. 12 Erekle II St. Tel: 93 12 89 GEORGIAN NATIONAL MUSEUM - PICTURE GALLERY Tbilisi. 11 Rustaveli Ave. Tel: 98 48 14 KARVASLA’S EXHIBITION HALL Tbilisi. 8 Sioni St. Tel: 92 32 27, KOPALA Tbilisi. 7 Zubalashvilebi St. Tel: 99 99 02, Fax: 99 99 02 MODERN ART GALLERY Tbilisi. 3 Rustaveli Ave. Tel: 98 21 33, Fax: 98 21 33 M GALLERY Tbilisi. 11 Taktakishvili St. Tel: 25 23 34 ORNAMENT - ENAMEL GALLERY Tbilisi. 7 Erekle II St. Tel: 93 64 12, Fax: 98 90 13

Akhvledianis Khevi N13, Tbilisi, GE. +995322958377; +995599265432

Cinemas AKHMETELI Tbilisi. “Akhmeteli” Subway Station Tel: 58 66 69 AMIRANI Tbilisi. 36 Kostava St. Tel: 99 99 55, RUSTAVELI Tbilisi. 5 Rustaveli Ave. Tel: 92 03 57, 92 02 85, SAKARTVELO Tbilisi. 2/9 Guramishvili Ave. Tel: 8 322308080,

Theatres A. GRIBOEDOV RUSSIAN STATE DRAMA THEATRE Tbilisi. 2 Rustaveli Ave. Tel: 93 58 11, Fax: 93 31 15 INDEPENDENT THEATRE Tbilisi. 2 Rustaveli Ave. Tel: 98 58 21, Fax: 93 31 15 K. MARJANISHVILI STATE ACADEMIC THEATRE Tbilisi. 8 Marjanishvili St. Tel: 95 35 82, Fax: 95 40 01 M. TUMANISHVILI CINEMA ACTORS THEATRE Tbilisi. 164 Agmashenebeli Ave. Tel: 35 31 52, 34 28 99, Fax: 35 01 94 METEKHI – THEATRE OF GEORGIAN NATIONAL BALLET Tbilisi. 69 Balanchivadze St. Tel: (99) 20 22 10 MUSIC AND DRAMATIC STATE THEATRE Tbilisi. 182 Agmashenebeli Ave. Tel: 34 80 90, Fax: 34 80 90 NABADI - GEORGIAN FOLKLORE THEATRE Tbilisi. 19 Rustaveli Ave. Tel: 98 99 91 S. AKHMETELI STATE DRAMATIC THEATRE Tbilisi. 8 I. Vekua St. Tel: 62 59 73

THE BEST GEORGIAN HONEY OF CHESTNUTS,ACACIA AND LIME FLOWERS FROM THE VERY HART OF ADJARA MATCHAKHELA GORGE IN THE NETWORK OF GOODWILL

PUBLICITY caucasian business week

July 01, 2013 #11