Issue 4, 2019. August-September

   

GEORGIA'S STATE INVESTMENT FUND ATTRACTS OVER $2.5 BILLION IN INVESTMENT

The Georgian Partnership Fund is more than the Georgian government's venture capital arm - it is a critical player on the investment and business development scene of Georgia. Investor.ge spoke to the CEO of the Partnership Fund, David Saganelidze about its investments and future plans.

Lika Jorjoliani

With funds committment worth $330 million and a historical 14.9 percent IRR on its investments, the fund has several purposes and characteristics that make it a unique tool to drive investment and development in the country, David Saganelidze told Investor.ge.

The fund's mission is to "promote investment in Georgia by providing co-financing in projects at their initial stage of development," and largely operates in sectors and regions where the possibility of attracting investments is limited.

First, it offers foreign investors a partnership with the government and the reassurance that comes with official government partners.

Second, the fund helps to 'fill in' missing equity and investment volume, making projects in the country that are trying to get off the ground more attractive to commercial banks and international financing organizations.

Its success in this regard can be seen from just a few numbers: more than $2.5 billion in investments have been attracted to Georgia with just the $330 million input by the Partnership Fund-that is, for every $1 spent, $7 have been brought in, Saganelidze says.

The fund has historically invested in energy, agriculture, high-tech production, real estate, tourism, infrastructure, logistics and export-oriented industries. The fund invests in commercially viable projects, and is oriented to make a profit.

Also, according to its investment mandate, the fund is a short to midterm equity partner and stays in the project for a limited time: private investor always has a call option, meaning they can buyout funds share with preagreed price and conditions.

"The Partnership Fund generally stays in a project for three, five or a maximum of seven years," Saganelidze says.

This restraint can also be seen in the fund's approach to the projects it decides to invest in.

"We have slightly changed our funding priorities, for example, the energy sector is of a great interest to investors and the market is competitive, meaning there is less rationale for the Fund to be involved.

"Of course, we are still proceeding with the projects we have started, but we are no longer considering entering the new ones. This also applies to the tourism industry," noted Saganelidze.

"From 2019, we decided to limit our involvement in this sector as well. Our priority now shifts to more export-oriented and hightech production. The projects in those indsutries are of a bigger scale and require more longterm financing. This is one of the reasons we have been talking about Fund reform to be able to have stable, long term sources of funding," he said.

Current activities

One of the fund's most recent and exciting investments is Aerostructure Technologies Cyclone (ATC)-a factory that produces composite airplane parts.

Partnered with the Israeli company Elbit Systems, ATC has put Georgia on the map as the first country in the South Caucasus to enter the industry of civilian aircraft manufacturing.

In the tourism sector, the fund has invested in hotels located in Georgia's iconic touristic sites, including Tsinandali, Sairme, Kutaisi, Borjomi, Akhaltsikhe and elsewhere.

Among the fund's ventures in agriculture is a greenhouse in Samtredia, a hog farm, a blueberry plantation and others.

The Partnership Fund has also promised a $100 million investment in the country's largest logistics project-Port Anaklia, which seeks to construct a deep water port on Georgia's Black Sea coast. Experts believe the new port is the most important project for the country since the construction of Baku - Tbilisi - Kars railway.

In addition, the Partnership Fund has invested two strategic projects in the energy sector: the Gardabani and Nenskra Hydropower Plants.

Startups and exports

Moving forward, the Partnership Fund hopes to work in several new directions.

Supporting innovative startup ideas is one of them.

Secondly, the fund hopes to spur on the development of companies whose products are export-oriented, which includes much of the agricultural sector. This industry, Saganelidze says, has the advantage of bolstering income and the economy in underdeveloped regions of Georgia and developing production, which in turn stems off migration.

This Issue (pdf format)




Recent Issues






See more in our archive>>>