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Golden Fleece Capital For Business Development in Georgia
Business development opportunities in GeorgiaKiev, March 29, 2012
www.gf-capital.com I Kiev, March 29, 2012 1
Golden Fleece Capital For Business Development in Georgia
Page 2
Agenda
Georgia – Untapping Great Development Potential
Georgian Economy at a glance Economy competitiveness Growth Perspectives in:
Agriculture Energy Manufacturing Transport & Logistics Tourism,
Specific Opportunities
AgendaGrowth Perspectives
Agriculture
Energy
Manufacturing
Transport & Logistics
Tourism
Specific Opportunities
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
Page 3
Economy at a Glance
www.gf-capital.com I Kiev, March 29, 2012
2010 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/BMoody's rating: Ba3
Golden Fleece Capital For Business Development in Georgia
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61 57 89 27 5 63 4 71 98 25 Competitiveness Rank
Competitiveness & Trade
Georgia has significant negative trade balance with higher ranked trade partners
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
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2020 Target competitiveness rank countries and neighbours 2020 Target competitiveness rank countries and neighbours
Countries 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
Source: World Economic Forum, Globalcompetitiveness Report 2010-2011
Competitiveness Index
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
Page 6
Georgian Economy 2020
www.gf-capital.com I Kiev, March 29, 2012
Georgian Economy, 2010 - 2020
Agriculture, % of GDP
Manufacturing Industry, % of GDP
Non-Manufacturing Industry, % of GDP
Services, % of GDP
GDP per capita (PPP), 2010
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%
Golden Fleece Capital For Business Development in Georgia
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Agriculture
• Wide-range of climatic zones
• Rich and pesticide-free soils - Ideal place for production of organic food
• Rich tradition of winery, growing citrus, grape, sunflower, tea, etc
• Legal provisions to own (i.a. for foreigners) agricultural land
• 0% VAT on primary production of agricultural products
• 0% export duty + 100% VAT refund
• 0% of import duty on agricultural and other equipment
• 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 Source: Government of Georgia’s Sector Presentation
Objectives
GFC
Agriculture
Tourism
Real Estate
Wood Processing
Manufacturing
Our Proposal
www.gf-capital.com I Kiev, March 29, 2012
AgendaGrowth Perspectives
Agriculture
Energy
Manufacturing
Transport & Logistics
Tourism
Specific Opportunities
Golden Fleece Capital For Business Development in Georgia
Page 8
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.
Source: Government of Georgia’s Sector Presentation Source: Government of Georgia’s Sector Presentation www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
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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
Live sheep and goats 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
Potatoes 127,7 1 238,1
Tea 2 112,3 1 186,3
Source: Government of Georgia’, Economic Sector Presentation Source: Government of Georgia’, Economic Sector Presentation
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
Page 10
4 Reasons for Underdeveloped Agricultural Sector
Source: Government of Georgia’, Economic Sector Presentation Source: Government of Georgia’, Economic Sector Presentation
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
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Important Snap-Shots
Main challenges are monocultures and low production per ha.•With technology and knowhow average harvest could be tripled
•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)
* Data for 1988 is exaggerated to some extent due to reporting interests in the centralised system of planning
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
Agro product Average harvest per ha. Good precedents per ha.
Wheat 1.8 tn. 4 tn.Tomato 10 tn. 65 tn.Potato 10 tn. 45 tn.
Source: Government of Georgia’, Economic Sector Presentation Source: Government of Georgia’, Economic Sector Presentation
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
Page 12
Regional Energy Hub – Net Exporter
Source: Government of Georgia’, Economic Sector Presentation Source: Government of Georgia’, Economic Sector Presentation
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
Page 13
Electricity Balance
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Golden Fleece Capital For Business Development in Georgia
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Georgia’s Energy Dynamics
Source: Government of Georgia’, Economic Sector Presentation Source: Government of Georgia’, Economic Sector Presentation
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
Page 15
Transmission Capacity
Source: Government of Georgia’, Economic Sector Presentation Source: Government of Georgia’, Economic Sector Presentation
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
Page 16
Large-Scale Hydro Power Projects
Source: Government of Georgia’, Economic Sector Presentation Source: Government of Georgia’, Economic Sector Presentation
www.gf-capital.com I Kiev, March 29, 2012
WWW.TRACECA.ORGWWW.TRACECA.ORG
traseka
18www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
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Transport and Logistics
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, 2016-2020, 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
141 300 150 800 250
Travel agencies , tour operators; tourist assistance
187 300 50 600 150
Total 776 2,700 1,800 9,400 7,900
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.
Source: GFC AnalysisSource: GFC Analysis
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
Page 20
Marine Transport Development Potential
Marine Transport
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 20,000250,000
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
Total 400 490
Source: GFC AnalysisSource: GFC Analysis
Growth potential is huge when starting from zero Georgia still has experienced and qualified Marine personnel, hystory of shipbuilding and operating
significant fleets
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
Page 21May 27, 2011
.
Source: USAID, EPI Value Chain AssessmentSource: 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)
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)
Objectives
GFC
Agriculture
Tourism
Real Estate
Wood Processing
Manufacturing
Our Proposal
www.gf-capital.com I Kiev, March 29, 2012
AgendaGrowth Perspectives
Agriculture
Energy
Manufacturing
Transport & Logistics
Tourism
Specific Opportunities
Golden Fleece Capital For Business Development in Georgia
Page 22
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
AgendaGrowth Perspectives
Agriculture
Energy
Manufacturing
Transport & Logistics
Tourism
Specific Opportunities
Golden Fleece Capital For Business Development in Georgia
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Real Estate Industry Drivers
Privatization 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
Objectives
GFC
Agriculture
Tourism
Real Estate
Wood Processing
Manufacturing
Our Proposal
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
Page 24
Entertainment and Retail Center
www.gf-capital.com I Kiev, March 29, 2012
Objectives
GFC
Agriculture
Tourism
Real Estate
Wood Processing
Manufacturing
Our Proposal
Project Overview
Aim of the project is to attract USD 7 Mil financing for the swimming pool, gim and retail ceneterLocated 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 projectsRetail space occupancyis assured by preliminary contracts with the future tanantsDesign and site preparation works are completed
Golden Fleece Capital For Business Development in Georgia
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Project Example in Real Estate
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.
VillaPark – Project Overview 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.
Objectives
GFC
Agriculture
Tourism
Real Estate
Wood Processing
Manufacturing
Our Proposal
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
Page 26
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
May 27, 2011
Objectives
GFC
Agriculture
Tourism
Real Estate
Wood Processing
Manufacturing
Our Proposal
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
Page 27
Cold Storage in GeorgiaGreenfield Investment Opportunity
Project Overview
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
Objectives
GFC
Agriculture
Tourism
Real Estate
Wood Processing
Manufacturing
Our Proposal
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
Page 28
Cold Storage in GeorgiaGreenfield Investment Opportunity
Project Overview
Objectives
GFC
Agriculture
Tourism
Real Estate
Wood Processing
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.
Estimated Start-up Costs (USD mil.)
Equipment 3.4
Land 0.3
Buildings 2.2
Other 0.6
Working Capital 0.5
Total 7.0
Projected annual performance at optimal capacity (USD mil.)
Revenue 3.4
Gross Profit 1.9
Operating Profit 0.8
Net Profit 0.4
Net Profit Margin % 10.3%
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
Page 29
Christmas Tree FarmingGreenfield Investment Opportunity
Project Overview
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
Objectives
GFC
Agriculture
Tourism
Real Estate
Wood Processing
Manufacturing
Our Proposal
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
Page 30
Christmas Tree FarmingGreenfield Investment Opportunity
Project Overview
Objectives
GFC
Agriculture
Tourism
Real Estate
Wood Processing
Manufacturing
Our Proposal
Estimated Start-up Costs (USD mil.)
Machinery 0.18
Land 0.10
Buildings 0.08
Other 0.40
Working Capital 7.10
Total 7.86
Projected annual performance at full capacity (USD mil.)
Revenue 4.0
COGS 1.5
General & Admin 0.3
Depr. Interest & Tax 0.5
Net Profit 1.7
EBITDA Margin % 55%
Estimated Investment Return Indicators (USD mil.) Project NPV 1.0
Project IRR 16%
Equity Holder IRR 17%
Payback Period 9 Yrs.
Disc. Payback Period 11 Yrs.
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
Page 31
Project example in Wood Processing
Project OverviewThe 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 7MAdditional business development option: production of various type wood boards to substitute imports.
Objectives
GFC
Agriculture
Tourism
Real Estate
Wood Processing
Manufacturing
Our Proposal
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
Page 32
Consulting
Marketing analysis and business plans from the industry and country’s best experts will eliminate high-price 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.
Objectives
GFC
Agriculture
Tourism
Real Estate
Wood Processing
Manufacturing
Our Proposal
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
Page 33
Project Management
We will reduce business development risks and costs by:
Identifying, analyzing, planning and implementing best risk response measures;
Your development will be international, while costs will be local;
We will provide you with all the needed control instruments to assure project objectives performance
You will achieve better project performance because we will:
Provide best available industry experts and managers;
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
Objectives
GFC
Agriculture
Tourism
Real Estate
Wood Processing
Manufacturing
Our Proposal
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
Page 34
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;
Attracting Financing
Objectives
GFC
Agriculture
Tourism
Real Estate
Wood Processing
Manufacturing
Our Proposal
www.gf-capital.com I Kiev, March 29, 2012
Golden Fleece Capital For Business Development in Georgia
Page 35
Contact Us
Objectives
GFC
Agriculture
Tourism
Real Estate
Wood Processing
Manufacturing
Our Proposal