From State Electrosystem to multi-million Tenders - Sulkhan Zumburidze’s Business Interests - საერთაშორისო გამჭვირვალობა - საქართველო

From State Electrosystem to multi-million Tenders - Sulkhan Zumburidze’s Business Interests

31 October, 2023

Between January 2010 and October 2018, Sulkhan Zumburidze served as Director/Chairman of the Board of Directors for JSC "Georgian State Electrosystem", one of the most lucrative companies in Georgia. Mamuka Papuashvili was a member of the board of directors of the same state company. After leaving their positions, these individuals and their associated businesses were granted over 28 million GEL and acquired 15 hectares of land through state procurement, with a 49-year lease allowing them to construct buildings on the property.

High-profile audit report without response

The State Audit Office revealed substantial irregularities in the State Electrosystem during Sulkhan Zumburidze's leadership. Auditors identified a loss of 76 Million GEL between 2014 and 2017, an improperly issued 12 Million GEL bonus, and various misused expenditures.

At the heart of media scrutiny, alongside Sulkhan Zumburidze's substantial salary of nearly 1.5 million GEL over five years, were his notably large roaming expenses totaling 29 thousand GEL in five days, as well as other budget disbursements.

While the documents were submitted to the prosecutor's office, there has been no public information regarding the commencement of the inquiry or investigation so far.

From State Electrosystem to Privileged Business

Since 2019, Sulkhan Zumburidze has held the position of director and possesses a 50% ownership stake in “Parvu Group” LLC, while Mamuka Papuashvili owns the remaining 50% of shares. This company specializes in the construction of small and medium-sized hydroelectric power plants and, since its inception, has secured a total of 27,984,905 GEL from state procurement contracts, with a remarkable 89% of these acquisitions secured through simplified procurement and disqualification of competitors.

Just two months after its founding, the company co-owned by Zumburidze and Papuashvili won in a tender announced by the Georgian Energy Development Fund JSC. Their success was attributed to submitting a bid price that was only 1 GEL lower than the nearest competitor.

As a result of disqualification, the competitor of 'Parvu Group' was disqualified from the procurement process initiated by Dusheti Municipality. The municipality subsequently declared Zumburidze and Papuashvili's company as the winner. Later, 'Parvu Consulting,' another company linked to them, prepared design and cost accounting documentation. Consequently, the scope of contractual work expanded, and the corresponding cost increased by 148,000 GEL.

Within a year of its establishment, 'Parvus Group' secured its most substantial contract, valued at up to 10 million GEL, from 'Open Net,' NNLE founded by Georgia's Innovation and Technology Agency. The contract was awarded based on the rationale of their proven ability to execute work efficiently within tight time constraints. (SMP200002889; CMR200092744) - The company owned by the former high-ranking officials took on the responsibility of establishing the infrastructure for optical fiber Internet services in Ozurgeti. Notably, within two months of contract signing, Zumburidze and Papuashvili's company received over half of the contract value as an advance payment from 'Open Net.' However, 'Parvu Group' requested extensions for their obligations twice, and the project was ultimately completed in April 2021, missing the original deadline set for December 2020. This delay incurred a substantial penalty of 77 thousand GEL.

Yet another company owned by Zumburidze, 'Parvus Construction' LLC, in which 'Parvus Group' LLC holds a 100% stake, has, since its inception to the current day, received a total of 366,684 GEL from Dusheti Municipality. These allocations were made under the arguments of an urgent necessity and the event's significance to the state and the public, utilizing a simplified procurement method, and without any competitive bidding.

Parvus Consulting’ LLC, a company with 100% ownership by 'Parvus Group' LLC, was awarded 60,000 GEL by Dusheti Municipality through a simplified procurement process, without any competitive bids. The justification provided for this allocation was the need to promptly organize an event of state/public significance.

Sulkhan Zumburidze serves as the Chairman of the Supervisory Board of 'Black Sea Energy' LLC, a former board member of the 'State Electrosystem’, Mamuka Papuashvili is also a board member in the same company. The 'Black Sea Group' company holds a 50% ownership stake in this LLC, which has accumulated a total income of 530,923,480 GEL from state procurement since its inception. Notably, 51% of this income was derived from non-competitive tenders and simplified procurement processes. One of the shareholders of 'Black Sea Group,' Giorgi Kalandadze, shares a business partnership of Old Capital’ LLC with Beka Odisharia, a member of the 'Georgian Dream' party and a member of the Parliament of Georgia.

Since its establishment, ‘Parvus Group' LLC has acquired 81 parcels of land in Dusheti, Ozurgeti and Kobuleti municipalities, collectively measuring 140,600 square meters, and 6 buildings with a combined area of 613 square meters, with the right to use and construction.  Among these, 44 land plots covering a total area of 62,801 square meters and all 6 buildings are secured under a lease period of 49 years. The company's primary objective on these properties is the construction of hydroelectric power stations. 

'Parvus' LLC, with Sulkhan Zumburidze as its director and wholly owned by 'Parvus Group' LLC, has been allocated 30 land parcels encompassing a combined area of 13,302 square meters in Aspindza and Dusheti municipalities with the rights of use and construction. The company is constructing hydroelectric power plants on these plots of land.

Furthermore, it is noteworthy that on June 5, 2023, 'Parvus Group' LLC acquired a 49.99% ownership stake in 'Parvus' LLC from JSC 'Georgian Energy Development Fund' for the sum of 6,152,499 GEL, and this transaction was executed without undergoing an auction process.

Since 2005, Sulkhan Zumburidze has been a business partner of Davit Songhulashvili, a Member of the Parliament of Georgia who also serves as the Chairman of the Committee on Sectoral Economy and Economic Policy. They are associated with 'TH Georgia' LLC, where 49% of Davit Songhulashvili's ownership interest is overseen by his brother, Ioseb Songhulashvili. Ioseb Songhulashvili has made a total donation of 160,000 GEL to the Georgian Dream party.

In 2013, Davit Tvalabeishvili, who was a partner of Sulkhan Zumburidze in JSC 'Georgian Energy Development Promotion Fund’, donated 35,000 GEL to the 'Georgian Dream'. Davit Tvalabeishvili has held various significant positions at different times, including serving as the General Director of JSC 'Georgian Oil and Gas Corporation’, the Chairman of the Board of Directors of JSC 'Georgian State Electrosystem’, and the Deputy Minister of Economy and Sustainable Development of Georgia. Currently, he holds the position of General Director at JSC 'Commercial Operator of Electric Energy System’.

Allegations of Cryptocurrency Mining Operations at Recently Constructed Hydroelectric Power Plants

'Mountain News' (Mtis Ambebi) revealed that Zumburidze-Papuashvili's 'Parvu Group' was engaged in Cryptocurrency Mining at three Khevsureti Hydroelectric Power Plants built after 2021. The investigative report uncovers the installation of robust cryptocurrency mining facilities within the compact hydroelectric power stations situated in the Roshki valley. Despite the local population's initial agreement to permit the construction of these small hydroelectric power stations in exchange for electricity provision, the report by 'Mountain News' alleges that local residents have yet to receive the promised electricity supply.

The favorable positioning of companies owned by former high-ranking officials of the 'Georgia State Electrosystem,' Sulkhan Zumburidze and Mamuka Papuashvili, in state procurement, their development of hydroelectric power plants on state-owned land, as well as their connections with prominent government officials and political donations, strongly indicate the presence of alleged large-scale corrupt practices. The significant findings of the State Audit Office report did not lead to a thorough investigation. Zumburidze transitioned to the business sector and continues to leverage state resources consistently and without interruption, raising clear and legitimate concerns about potential high-level corruption.

We call on the Anti-Corruption Agency of the State Security Service to launch an investigation aimed at uncovering potential manipulations in the terms of state procurement for firms associated with Sulkhan Zumburidze, as well as to examine the alleged existence of cryptocurrency mining operations within the hydroelectric power plants owned by the 'Parvu Group’.