GEO

Water from offshores: who owns Georgian Water and Power?

22 May, 2014

 

 

The state owned water distribution company Tbilisis Tskali (now Georgian Water and Power - GWP), that delivers water to up to 400 000 subscribers in Tbilisi and its neighbourhood, was privatized back in 2008. This deal has quickly raised several questions over the transparency issues. Six years on identity of the beneficiary owner is still a mystery because GWP’s current owner - Georgian Global Utilities - remains hidden behind offshore entities (which is certainly not a violation of the law).

In order to shed a light on management of limited water resources in Tbilisi, TI Georgia conducted a small scale research revealing direct and indirect business links to shell companies behind the Georgian Water and Power.   

Georgian Water and Power, a company that delivers water to Tbilisi is owned by Georgian Global Utilities (former Multiplex Energy Limited), an offshore entity registered on British Virgin Islands. Georgian Global Utilities itself has two shareholders - Sirius Private Equity Fund and US Utilities - both appear to be shell companies. Beneficial owners of GWP are not traceable in Georgian public documents, though we were able to link the company to several Georgian and Russian businessmen.

Is Russian company behind GWP?

The most recent Georgian public registry records mention three directors of Georgian Global Utilities - Gocha Megrelidze, Mikhail Tuzov and Vladimir Kozin. The later’s business interests are not traceable through public records, while the other two of these individuals (Gocha Megrelidze and Mikhail Tuzov) have in different times worked for daughter companies of Inter Rao, a Russian energy company that owns Telasi and three power plants in Georgia (Mtkvari, Khrami 1 and Khrami 2).

At the time of privatization, Inter Rao was managed by Andrey Rapopport, a businessman of Ukrainian origin. He is now deputy chairman of the executive board of Rusnano, a Russian state-owned company, managed by Anatoliy Chubais. Andrey Rappoport has never confirmed his involvement with GWP, though the former Prime Minister Bidzina Ivanishvili mentioned him as the owner of GWP in an interview.

  • Mikhail Tuzov is a longtime associate of Andrey Rapopport.  A Mikhail Tuzov’s profile on the Russian Sailing Team website says he’s been employed with ОАО РАО ЕЭС России. (After the reform Inter Rao was separated from this state company) Tuzov and Rapopport were in board of directors of FSK-EES, a company created by the Russian state to manage national electricity resources.

  • Gocha Megrelidze served as the head of the fiscal policy and foreign economic relations unit of the State Chancellery in 2000-2003 and in 2004 was the Deputy Minister of Economy. In a 2007 Prospect of Financial Assets of Inter Rao, Gocha Megrelidze is named as a board member of TGR Energy, one of the daughter companies of Inter Rao operating in Turkey.

In his last asset declaration filed in 2004, Megrelidze declared that he holds shares at JSC Children World, a shopping center near the Tbilisi Railway Station. His other assets include: LTD Uniqueservice, LTD MG (40%), LTD Chardin 11 (20%), LTD Geoservice (66.7%), LTD G.G.M. (50%), LTD Cross Invest (50%), LTD Megapolis (33.4%) - cafe Segafredo on Chavchavadze street.

Links with the Georgian Businessmen

Giorgi Gachechiladze, former Minister of Economy and Gocha Megrelidze’s former boss, was appointed as the director of Georgian Water and Power in April 2014. Megrelidze and Gachechiladze jointly own LTD Chardin 11. Older reports on GWP ownership suggest that Giorgi Gachechiladze and his business partner Levan Kacharava, were also linked to privatization:

  • Green Alternative’s 2010 report describes that the government announced Multiplex Solutions, a Swiss-registered entity, as the winner of the privatization process. The company had taken on an obligation to invest USD 350 million in rehabilitation of water distribution network . The Tbilisi City Court at the time ruled that the contract would not be made public. Green Alternative highlighted that Multiplex Solutions had a Georgian-registered subsidiary, which, in different times was managed by Giorgi Gachechiladze and Levan Kacharava. Between July-december 2009, Shalva Pipia, the Minister of Agriculture acted as the director of the company, while in his biography on the website of the Ministry of Agriculture it is indicated that he served as the financial director of ‘Multiplex Holding Group’ between 2008-2009. Interestingly, the privatization contract available in the Public Registry database shows that GWP was sold not to Multiplex Solutions from Switzerland but to Multiplex Energy Limited from the British Virgin Islands. This suggests that Multiplex Solutions was used as a distraction by the government to obscure involvement of the British Virgin Islands entity in the privatization process.

Georgian media reports have alleged that Levan Kacharava – nickname Tilika – was a friend of Giorgi Ramishvili, the main shareholder behind SilkRoad Group. Indeed, Kacharava and Ramishvili are business partners in several companies, namely All Seasons Resorts and k.l.g ltds. They are also board members of JSC Hotel Iveria (Radisson).

In fact, the address of Multiplex Solutions’ in Switzerland was Place de la Fusterie 9 - 11 in Geneva (initially the Swiss business registry identified this location as Multiplex Solutions’ address, however recent search doesn’t show any record on this company). The website of the SilkRoad Group states that the company also has an office in Switzerland, where Silk Road Group (Suisse) SA is registered – it is the same address that Multiplex Solutions used – Place de la Fusterie 9 - 11 in Geneva. Furthermore, both Multiplex Solutions and Silk Road Group (Suisse) SA had the same director - Juerg (Jürg) Johner.

Although owning a company through offshore entity is not violation of the Georgian legislation, we consider it as a matter of utmost importance that the public is aware about the ownership of such strategic assets across the country.


[1]

We addressed Georgian Water and Power with a letter asking to disclose their beneficial owners or confirm whether individuals and companies mentioned herein are linked with the ownership of GWP. GWP’s director Aleksey Kuznetsov responded to our letter saying the company does not have such information.

[2]

Although the contract between the Ministry of Economy and Multiplex Energy Limited is declared confidential, the contract is accessible on the website of National Agency of Public Registry. This document is available both in English and Georgian, however, in the course of a research TI Georgia found that several clauses regarding obligations of the company mentioned in Georgian version were missing from the English copy. After addressing the company, the legal representative stated that hard copies of the report on both language were identical and it was due to a mistake that one page was completely omitted from the English version of the contract. According to GWP they reported this case to NAPR and the process is underway.    

Author: Ana Dabrundashvili