October 16, 2019 / 3:10 PM / a month ago

Georgia gives port consortium year-end deadline to secure financing

TBILISI (Reuters) - A consortium planning to build a major port on Georgia’s Black Sea coast has until the end of the year to secure financing for the project, a minister said on Wednesday, extending a deadline originally set for earlier this week.

Anaklia Development Consortium (ADC), which signed a deal in 2016 to build the $2.5 billion port in Anaklia over nine phases, has accused the government of sabotaging its plans by rejecting investors it had presented before the initial Oct. 15 deadline.

Plans for the project, which critics say envisages building a port that will be far bigger than the ex-Soviet nation’s needs, has been beset by problems.

The government has refused to give state financing guarantees, a major U.S. consortium partner has quit and ADC’s founder and former head of Georgia’s TBC Group, Mamuka Khazaradze, has been put under investigation for alleged fraud.

Khazaradze has denied the charges.

“The consortium was not able to fulfil the obligations defined by the deadline,” Regional Development and Infrastructure Minister Maia Tskitishvili said, referring to Tuesday’s cut off.

“Despite this, a decision was made not to use our right to terminate the agreement and give the consortium time until the end of the year to fulfil the obligations determined by the investment agreement,” she told reporters.

She did not give figures but earlier plans envisaged the consortium investing about $100 million and raising a further $400 million in financing.

ADC earlier secured $400 million in loan pledges from the European Bank for Reconstruction and Development, the U.S. Overseas Private Investment Corporation, the Asian Development Bank and the Asian Infrastructure Investment Bank.

But the lenders demanded state guarantees, in case the project ran into trouble or essential roads and railways were not built on time. However, the government refused, saying the port with its 52-year concession was a private venture.

The government had given ADC until Oct. 15 to replace its partner Conti International, the U.S. firm that withdrew in August. But ADC said on Tuesday the government had rejected proposals for two new foreign investors.

“It is necessary that both sides sit down at the negotiating table now and resolve all issues for the successful implementation of this project,” ADC General Director Levan Akhvlediani said after the financing deadline was extended.

“The consortium cannot solve these problems alone without the support of the government,” he added.

Critics question the commercial viability of the project, saying the new port envisages handling 100 million tonnes of cargo a year after five decades while Georgia’s existing four ports handled less than one million tonnes in 2018.

ADC’s partners include Georgia’s TBC Holding, U.S. firm SSA Marine and Britain’s Wondernet Express.

Writing by Margarita Antidze; Editing by Edmund Blair

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