Transcript Business development opportunities in Georgia

Golden Fleece Capital
For Business Development in Georgia
Business development opportunities in Georgia
Kiev, March 29, 2012
www.gf-capital.com I Kiev, March 29, 2012
1
Golden Fleece Capital
For Business Development in Georgia
Georgian Economy
Agenda
Growth Perspectives
Agriculture
Energy
Manufacturing
Transport & Logistics
Tourism
Specific Opportunities
Agenda
 Georgia – Untapping Great Development
Potential
 Georgian Economy at a glance
 Economy competitiveness
 Growth Perspectives in:
 Agriculture
 Energy
 Manufacturing
 Transport & Logistics
 Tourism,
 Specific Opportunities
www.gf-capital.com I Kiev, March 29, 2012
Page 2
Golden Fleece Capital
Economy at a Glance
For Business Development in Georgia
2010
Other Agriculture
Production
10%
5%
Education,
Health & Social
16%
Manufacturing
10%
Construction
6%
Public
Administration
12%
Retail &
Wholesale
17%
Real Estate
9%
Services
7%
Transport
8%
2011
GDP
US$ 11.7 bln. 14.35 bln.
GDP - Real Growth Rate 2010
+6.4%
+6.8%
GDP - Per Capita (PPP), USD
5,035
5,430
Inflation rate (average annual)
7.1%
12.6%
Unemployment rate
16.8%
16.7%
Total exports (Mil. USD)
1,583
2,189
Total imports (Mil. USD)
5,095
7,058
Trade surplus/deficit (Mil. USD)
-3,512.
-4,869
Public Debt
39.1%
41.7%
Public Deficit
-5.4%
-3.9%
Government bond ratings
Standard & Poor's:
B+/Stable/B
Moody's rating: Ba3
www.gf-capital.com I Kiev, March 29, 2012
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Golden Fleece Capital
Competitiveness & Trade
For Business Development in Georgia
 Georgia has significant negative trade balance with higher
ranked trade partners
61
57
89
27
5
63
Competitiveness Rank
4
71
98
25
www.gf-capital.com I Kiev, March 29, 2012
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Golden Fleece Capital
Competitiveness Index
For Business Development in Georgia
2020 Target competitiveness rank countries and neighbours
Competitiveness
Rank
Agriculture,
% of GDP
Manufacturing
Industry, % of
GDP
Non-Manufacturing
Industry, % of GDP
Services, %
of GDP
GDP per capita
(PPP), 2010
Tunisia
32
10
18
15
58
9,600
Estonia
33
3
17
12
68
20,600
Czech Republic
36
3
25
13
60
25,300
Slovenia
45
2
23
11
63
27,100
Azerbaijan
57
6
4
65
24
9,900
Albania
88
21
12
8
59
8,800
Ukraine
89
8
23
14
55
6,658
Georgia
93
10
12
9
69
5,035
Moldova
94
11
14
1
74
3,100
Armenia
98
18
15
30
37
5,500
Countries
Source: World Economic Forum, Globalcompetitiveness Report 2010-2011
www.gf-capital.com I Kiev, March 29, 2012
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Golden Fleece Capital
For Business Development in Georgia
Georgian Economy 2020
Agriculture, %
of GDP
Manufacturin
g Industry, %
of GDP
NonManufacturin
g Industry, %
of GDP
Services, % of
GDP
2010
10
12
9
69
5,100*
2020
10
22
12
56
17,480*
GDP 2020, at fixed prices, USD
4,141
9,110
4,969
23,190
9,220
GDP 2010 at fixed Prices, USD
1,200
1,400
1,100
8,300
2,690
Compaund Annual Growth Rate, %
13%
21%
16%
11%
13%
Georgian Economy, 2010 - 2020
GDP per
capita (PPP),
2010
www.gf-capital.com I Kiev, March 29, 2012
Page 6
Golden Fleece Capital
For Business Development in Georgia
Agriculture
• Wide-range of climatic zones
Objectives
Georgian Economy
Agenda
• Rich and pesticide-free soils - Ideal place for production of organic
food
GFC
Growth
Perspectives
• Rich tradition of winery, growing citrus, grape, sunflower, tea, etc
Agriculture
Agriculture
• Legal provisions to own (i.a. for foreigners) agricultural land
Tourism
Energy
• 0% VAT on primary production of agricultural products
Real Estate
Manufacturing
• 0% export duty + 100% VAT refund
Wood Processing
Transport
& Logistics
• 0% of import duty on agricultural and other equipment
Manufacturing
Tourism
Our Proposal
Specific
Opportunities
• 100% depreciation allowance on investment
• Low-cost and skilled human resource base
• Liberal labor regulations
• Strategic link from East to high value Western markets
• Well developed transport sector including railway and sea ports
essential for effective exports of agricultural goods
• Available 80,000 Ha agricultural land through privatization
Source: Government of Georgia’s Sector Presentation
www.gf-capital.com I Kiev, March 29, 2012
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Golden Fleece Capital
For Business Development in Georgia


Agriculture Export-Import, 2010
According to the 2010 data, the export and import of agro food products were US$314 million and US$939
million.
In 2010, main export commodities were: nuts, citruses, natural grape wines, spirits, soda, mineral & spring
waters, sheep, cattle, etc.
Export (US mln)
• Mostly seasonal disbalance
• Opportunity in import substitution
• Opportunity in storage investment
1000
900
800
700
913
Exports declined due to the
embargo imposed by Russia on
Georgian exports in October 2006
600
400
200
762
739
594
500
300
Import (US mln)
434
340
225
100
274
228
286
0
2005
2006
Source: Government of Georgia’s Sector Presentation
2007
2008
2009
www.gf-capital.com I Kiev, March 29, 2012
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Golden Fleece Capital
For Business Development in Georgia
Major Export Products
Export Items, in USD 000’s
2009
2010
Other nuts, fresh or dried
69 955,8
64 035,9
Undenatured ethyl alcohol, spirits, liqueurs and other spirituous beverages
54 019,4
54 573,3
Wine of fresh grapes
31 997,0
39 269,0
Waters, natural or artificial mineral and aerated waters, not containing added sugar
24 674,7
30 155,1
Live bovine animals
16 902,5
15 932,4
Waters, mineral and aerated waters, containing added sugar
10 683,5
13 420,3
Citrus fruit, fresh or dried
15 702,7
12 142,9
Other food preparations
7 996,0
8 112,5
17 054,0
7 842,9
Wheat and meslin
3 248,3
7 256,9
Fruit and vegetable juices
2 883,0
6 047,1
127,7
1 238,1
2 112,3
1 186,3
www.gf-capital.com I Kiev, March 29, 2012
Page 9
Live sheep and goats
Potatoes
Tea
Source: Government of Georgia’, Economic Sector Presentation
Golden Fleece Capital
For Business Development in Georgia
4 Reasons for Underdeveloped
Agricultural Sector
Fragmented Agro Lands
• New law adapted in 2005 on Privatization of State Agro Land
• On sale - 40 000 ha agro-land in sizable lots
• Land registry simplified, new cadastre introduced by NAPR
Outdated Technology
• Presidential Program – Machinery for Rural Economy
• Agro sector is still craving for new technology
Absence of Storage Facilities
Not Diversified Market
• Concessional Credit Program for building storage
facilities in numerous regions
• Dependence on Russian market has been overcome
• FTAs and GSP+ with important markets
Source: Government of Georgia’, Economic Sector Presentation
www.gf-capital.com I Kiev, March 29, 2012
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Golden Fleece Capital
For Business Development in Georgia
Important Snap-Shots
Main challenges are monocultures and low production per ha.
•
•
With technology and knowhow average harvest could be tripled
Agro product
Average harvest per ha.
Good precedents per ha.
Wheat
Tomato
Potato
1.8 tn.
10 tn.
10 tn.
4 tn.
65 tn.
45 tn.
During the Soviet Era, Georgia used to be main supplier of the Union’s market
with selected agro products, which pushed the country into monocultural agro
production (ex. grape, citrus, tea etc)
Product
1988 (thousand tons)*
2008 (thousand tons)
Vegetables
685.5
165.0
Fruit & berry
653.0
158.5
Grape
619.7
175.8
Citrus
436.9
55.2
Tea
458.7
5.4
* Data for 1988 is exaggerated to some extent due to reporting interests in the centralised system of planning
Source: Government of Georgia’, Economic Sector Presentation
www.gf-capital.com I Kiev, March 29, 2012
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Golden Fleece Capital
For Business Development in Georgia
Regional Energy Hub – Net Exporter
Source: Government of Georgia’, Economic Sector Presentation
www.gf-capital.com I Kiev, March 29, 2012
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Golden Fleece Capital
For Business Development in Georgia
Electricity Balance
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Golden Fleece Capital
For Business Development in Georgia
Georgia’s Energy Dynamics
Source: Government of Georgia’, Economic Sector Presentation
www.gf-capital.com I Kiev, March 29, 2012
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Golden Fleece Capital
For Business Development in Georgia
Transmission Capacity
Source: Government of Georgia’, Economic Sector Presentation
www.gf-capital.com I Kiev, March 29, 2012
Page 15
Golden Fleece Capital
For Business Development in Georgia
Large-Scale Hydro Power Projects
15 Projects under
Design/Construction
Source: Government of Georgia’, Economic Sector Presentation
www.gf-capital.com I Kiev, March 29, 2012
Page 16
traseka
WWW.TRACECA.ORG
www.gf-capital.com I Kiev, March 29, 2012
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Golden Fleece Capital
For Business Development in Georgia

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

There is a huge untapped potential in Marine, cargo storage and handling and air cargo logistics.
Georgia-Turkey railway expeced completion in 2013 will open another efficient transportation
possibilities
Marine and railway development will stimulate road transport and logistics centers development.
Transport system development will signicantly improve Georgia’s products cost competitivenes.
Current
contribution to
GDP, USD Mil
Target
contribution to
GDP in 2015,
USD Mil
Financing
estimate, 2012
- 2015, USD
Mil
Target
contribution to
GDP in 2020,
USD Mil
Financing
estimate, 20162020, USD Mil
Marine
0
400
330
2,000
1,500
Road
223
500
550
2,000
2,000
Railway
42
200
100
400
500
Air
34
500
400
1,600
1,000
Cargo handling and storage
148
500
620
2,000
2,500
Other supporting transport
activities
Travel agencies , tour
operators; tourist assistance
141
300
150
800
250
187
300
50
600
150
776
2,700
1,800
9,400
7,900
Transport and Logistics
Total
Source: GFC Analysis
www.gf-capital.com I Kiev, March 29, 2012
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Golden Fleece Capital
For Business Development in Georgia


Marine Transport Development Potential
Growth potential is huge when starting from zero
Georgia still has experienced and qualified Marine personnel, hystory of shipbuilding and operating
significant fleets
Current
Fleet,
Quantity
Fleet in
2015
Fleet
Capacity in
2015 and
transport
volumes
Investment
estimates,
USD Mil
Estimate Annual
revenues, USD
Mil
Estimated
paybeck
period, Years
Container Ships, TEU
0
8
20,000
250,000
200
250
4–5
Tanker, DW
0
2
70,000
70
100
4–5
Dry Bulk Cargo Ships,
DW
0
2
50,000
60
40
5–10
Fishing Vessals, t.
40 (120t.)
60
70
100
1–3
400
490
Marine
Transport
Total
Source: GFC Analysis
www.gf-capital.com I Kiev, March 29, 2012
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Cross Industry
Linkage
Industry
Leadership
Impact Potential
Competitiveness
Potential
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Adventure tourism
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Wine tourism
Agriculture
Tourism
Energy
.
.
GFC
Growth
Perspectives
MICE tourism
.
Objectives
Georgian Economy
Agenda
.
For Business Development in Georgia
.
Golden Fleece Capital
Real Estate
Manufacturing
Wood Processing
Transport
& Logistics
Manufacturing
Tourism
Tourism
Our Proposal
Specific
Opportunities
May 27, 2011
Source: USAID, EPI Value Chain Assessment

Number of tourist arrivals in 2011 – almost 3 Million

Hotel and restaurant revenues in 2010 – USD 200 M

Kobuleti and Anaklia Free Tourism Zone (plot of land for
symbolic GEL 1 price, customized profit and property tax
exemptions)
www.gf-capital.com I Kiev, March 29, 2012
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Golden Fleece Capital
For Business Development in Georgia
Agenda
Growth Perspectives
Agriculture
Energy
Manufacturing
Transport & Logistics
Tourism
Specific Opportunities
WHY TO INVEST IN GEORGIA
/Investment Incentives /
 Liberal Tax Code
 Tax-Free Regimes (FIZ, FTZ)
 Preferred Trade Regimes with Major
Trading Partners
 Tax Incentives for Agricultural Investments
 Cheap & Skilled Workforce
 Liberal Labor Code
 Investor Protection Regulations
 Investment Guarantees
 Choice of Law for Contracts
 International Dispute Resolution
Mechanism
www.gf-capital.com I Kiev, March 29, 2012
Page 22
Golden Fleece Capital
For Business Development in Georgia
Real Estate Industry Drivers
Average monthly nominal salary, USD
Specific
ObjectivesOpportunities
GFC
Agriculture
Tourism
Real
RealEstate
Estate
400
350
300
250
200
150
100
50
0
2007
Wood Processing
2008
2009
2010
Average monthly nominal salary, USD
Manufacturing

Privatization
Our Proposal

Liberal land ownership law

Road infrastructure development/improvement

Urban and regional development

Simplified permitting & free competition

Old Tbilisi New Life – Tbilisi municipality initiative

Free Touristic zones in Kobuleti and Anaklia
www.gf-capital.com I Kiev, March 29, 2012
Page 23
Golden Fleece Capital
Entertainment and Retail Center
For Business Development in Georgia
Specific
ObjectivesOpportunities
GFC
Agriculture
Tourism
Real
RealEstate
Estate
Wood Processing
Manufacturing
Project Overview
Our Proposal




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Aim of the project is to attract USD 7 Mil financing for the swimming
pool, gim and retail ceneter
Located on the newly built main road in the center of Tbilisi’ most
affluent area;
Land is the property of the interested investor/developer with the
best in the market experience in the simmilar projects
Retail space occupancyis assured by preliminary contracts with the
future tanants
Design and site preparation works are completed
www.gf-capital.com I Kiev, March 29, 2012
Page 24
Golden Fleece Capital
For Business Development in Georgia
Project Example in Real Estate
VillaPark – Project Overview
ObjectivesOpportunities
Specific
GFC
Agriculture
Aim of the project is to attract USD 16M
financing for the elite village project in Tbilisi
with 57% IRR and 4.5M NPV investment
returns.
Tourism
Real Estate
Real
Estate
Wood Processing
Manufacturing


Our Proposal

Only three competing projects with similar concept and target
market segment. Total number of houses of ALL competing projects
is less than 500 during the next 2-3 years.
Possibility to adjust project scale and phases to sales development to
reduce sales risks. This provides more flexibility in the project
development compared to multistory residential building
development, which in current market conditions requires entire
building completion before starting sales, thus increasing sales risks.
1 sq.m. prices of the multistory residential buildings are similar to the
project proposed prices of USD 800-1000. We expect to sell to
potential medium market apartment buyers by proposing very
competitive and much more attractive lifestyle alternative.
www.gf-capital.com I Kiev, March 29, 2012
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Golden Fleece Capital
For Business Development in Georgia
Specific
ObjectivesOpportunities
GFC
Agriculture
Tourism
Real
RealEstate
Estate
Wood Processing
Other Real Estate Development
Opportunities



Inexpensive shopping centers in Tbilisi
as well as in the regional cities;
Modern bus stations with shopping,
food courts and entertainment;
GF Capital can assure renting
agreements with tenants prior to the
construction as well as manage project
from concept to turn key to the
operator
Manufacturing
Our Proposal
May 27, 2011
www.gf-capital.com I Kiev, March 29, 2012
Page 26
Golden Fleece Capital
For Business Development in Georgia
Cold Storage in Georgia
Greenfield Investment Opportunity
Project Overview
Specific
ObjectivesOpportunities
GFC
Agriculture
Tourism
Real Estate
Wood Processing
Logistics
and Wholesale
Manufacturing
Our Proposal
Partnership Fund, an investment fund of the Government of
Georgia, is inviting strategic investors to co-invest in a USD 7
mil. Greenfield project aiming at development of 4,700t
Capacity Fruit and Vegetables Cold Storage serving 1.2 mil.
population of Tbilisi and Rustavi with quality fresh fruits and
vegetables year round. Co-investment and support for
setting up the project will be facilitated by Partnership Fund.
Financing
• The needed financing, estimated at USD 7 mil., is
envisaged to be formed from:
• The Investor’s contribution in the amount of 25% of
financing needed in common equity
• Fund’s matching contribution through sub-debt or
common equity
• Debt financing in the amount of 50% of total financing
need, that can be acquired in Georgian market with
assistance of Partnership fund
www.gf-capital.com I Kiev, March 29, 2012
Page 27
Golden Fleece Capital
For Business Development in Georgia
Cold Storage in Georgia
Greenfield Investment Opportunity
Project Overview
Projected annual
performance at optimal
capacity (USD mil.)
Specific
ObjectivesOpportunities
Estimated Start-up
Costs (USD mil.)
GFC
Equipment
3.4
Agriculture
Land
0.3
Revenue
3.4
Buildings
2.2
Gross Profit
1.9
Other
0.6
Operating Profit
0.8
Working Capital
0.5
Net Profit
0.4
Total
7.0
Net Profit Margin %
Tourism
Real Estate
Wood Processing
Logistics
and Wholesale
10.3%
Manufacturing
Our Proposal
Estimated Investment Return Indicators (USD mil.)
Project NPV
1.5
Project IRR
16%
Equity Holder’s IRR
21%
Payback Period
6 Yrs.
Disc. Payback Period
10+ Yrs.
www.gf-capital.com I Kiev, March 29, 2012
Page 28
Golden Fleece Capital
For Business Development in Georgia
Christmas Tree Farming
Greenfield Investment Opportunity
Project Overview
Specific
ObjectivesOpportunities
GFC
Agriculture
Tourism
Real Estate
WoodFarming
Processing
Tree
Manufacturing
Partnership Fund, an investment fund of the Government of Georgia,
is inviting strategic investors to co-invest in a USD 7.9 mil. Greenfield
project aiming at Christmas tree growing and exporting from Georgia
to Europe
Financing
•
•
•
•
The needed capital, estimated at USD 7.9 mil., is envisaged to be
formed from:
The Investor’s contribution in the amount of 25% of capital
needed in common equity
Fund’s matching contribution through sub-debt or common
equity
Debt financing in the amount of 50% of capital needed, that can
be acquired in Georgian market with assistance of Partnership
fund
Our Proposal
www.gf-capital.com I Kiev, March 29, 2012
Page 29
Golden Fleece Capital
For Business Development in Georgia
Christmas Tree Farming
Greenfield Investment Opportunity
Project Overview
Estimated Start-up
Costs (USD mil.)
Projected annual performance at
full capacity (USD mil.)
Machinery
0.18
Revenue
4.0
Agriculture
Land
0.10
COGS
1.5
Tourism
Buildings
0.08
General & Admin
0.3
Real Estate
Other
0.40
Depr. Interest & Tax
0.5
Working Capital
7.10
Net Profit
1.7
Total
7.86
EBITDA Margin %
55%
ObjectivesOpportunities
Specific
GFC
WoodFarming
Processing
Tree
Manufacturing
Our Proposal
Estimated Investment Return Indicators (USD mil.)
Project NPV
1.0
Project IRR
Equity Holder IRR
Payback Period
Disc. Payback Period
16%
17%
9 Yrs.
11 Yrs.
www.gf-capital.com I Kiev, March 29, 2012
Page 30
Golden Fleece Capital
For Business Development in Georgia
Project example in Wood
Processing
ObjectivesOpportunities
Specific
Project Overview
GFC

Agriculture
Tourism
Real Estate
Wood Processing
Wood
Processing

Manufacturing
Our Proposal

The client proposes to sell all rights and obligations related
to the registered forest management license free of due
and/or accrued tax and lending obligations to the potential
operator. The proposed price for the license is USD 10M.
Investment NPV – USD 7,4 M (@15% discount rate) and
IRR – 57%
The deal sub-option includes current operator continuing
operations and own 30% of the company and selling the
remaining 70% at USD 7M
Additional business development option: production of
various type wood boards to substitute imports.
www.gf-capital.com I Kiev, March 29, 2012
Page 31
Golden Fleece Capital
For Business Development in Georgia
ObjectivesOpportunities
Specific
GFC
Consulting

Marketing analysis and business plans from the
industry and country’s best experts will eliminate highprice mistake risks and provide better choice of
alternative options in business development in Georgia

Knowing value chain current settings and wider choice
of cooperation and competition options will help in
defining most effective and efficient market entry and
development strategies

We will provide our advice on tax and regulatory
matters

Our reporting system will be tailored to required scope
and schedule beyond on traditional financial reporting,
including key performance indicators for the industry,
market and value chain components.
Agriculture
Tourism
Real Estate
Wood Processing
Manufacturing
Our Proposal
Cooperation
www.gf-capital.com I Kiev, March 29, 2012
Page 32
Golden Fleece Capital
For Business Development in Georgia
ObjectivesOpportunities
Specific
Project Management
We will reduce business development risks and costs by:

Identifying, analyzing, planning and implementing best risk
response measures;
Agriculture

Your development will be international, while costs will be local;
Tourism

We will provide you with all the needed control instruments to
assure project objectives performance
GFC
Real Estate
Wood Processing
You will achieve better project performance because we will:
Manufacturing

Provide best available industry experts and managers;
Our Proposal
Cooperation

Assure plan performance by consistently measuring project targets
and milestones performance;

Provide better alternatives to choose for each and every project
component as well as for the entire project;

Explore possibilities of donor assistance, cost savings and
preferential regulatory options
www.gf-capital.com I Kiev, March 29, 2012
Page 33
Golden Fleece Capital
For Business Development in Georgia
ObjectivesOpportunities
Specific
GFC
Agriculture
Tourism
Real Estate
Attracting Financing
 If looking for investing in Georgia, we will
provide wide range of pre-screened
investment opportunities and options;
 Joint projects for finding strategic and financial
investors and financiers;
Wood Processing
Manufacturing
Our Proposal
Cooperation
www.gf-capital.com I Kiev, March 29, 2012
Page 34
Golden Fleece Capital
For Business Development in Georgia
Contact Us
ObjectivesOpportunities
Specific
GFC
Agriculture
Tourism
Real Estate
Wood Processing
Manufacturing
Our Proposal
Cooperation
Page 35