Last checked at 20 Sep 2013 15:26
Invitation for expression of Interest
Black Sea Project
Georgian Railway JSC (the Company) announces its preliminary intention to enter into new project on ferry transportation service to the Black Sea basin countries. For this purposes the company intends to select a partner, which shall comply with requirements stated in this invitation for expression of intention and is willing to cooperate with the Company in order to successfully initiate and implement the Project.
1. Country Overview
Georgia is located to the east of the Black Sea and has a land area of 69,700 square kilometres. The country is bordered by Russia to the north, Azerbaijan to the east, Armenia and Turkey to the south and the Black Sea to the west. Georgia is a key link in the shortest transit route between Western Europe and Central Asia for transportation of oil and gas as well as dry cargo. Country's oil and gas pipelines, Black Sea ports, well-developed railway system, together with its airports are playing an increasingly important role as part of so called "TRACECA" corridor. At the same time, Georgia functions as the vertical North-South transportation link between Russia and Turkey and Armenia.
As a major regional transport-transit hub, Georgia offers significant distribution opportunities through its newly renovated and expanded transportation infrastructure, which includes: seaports/terminals an extensive national highway system, expanded railway routes, 2 renovated international airports and Black Sea ports.
Number of taxes was reduced drastically from 21 in 2004 to only 6 flat taxes today, accompanied by reduction of almost all tax rates. Above all, Georgia now has a genuine, business friendly environment. As a result of the continuous improvement of the entrepreneurial environment in Georgia, the World Bank's 2012 Doing Business Survey ranks the country 16th out of 183 economies in terms of ease of doing business. According to the Work Bank-IFC Doing Business Report, Georgia is ranked as the top reformer globally for 2005-2011. Georgia's ranking jumped by five positions from 77th to 72nd place (with a 4.15 score), according to the World Economic Forum's Global Competitiveness report 2013-2014.
It is reasonably projected that with the opening of the Russian market for Georgia imported/exported freight volumes will increase in the near future.
2. Company Review
JSC Georgian Railway is, by statute, Georgia's only railway operator. It principally provides freight services, transhipping a variety of cargo, including oil, oil products, ores and grains, originating principally in the east from the Caspian Sea and Central Asia to the Black Sea. The Company also provides passenger services. It has a vertically integrated business model, owning and operating the tracks, stations, other infrastructure and rolling stock comprising Georgia's entire national railway system, as well as the land adjoining the tracks. The Company sets its own tariffs without the need to obtain governmental approval. Maximum freight transit capacity amounts to approximately 30mln tons per year.
The Company's mainline rail network, together with Azerbaijan Railway, forms the Caucasus railway corridor, a key segment of the TRACECA corridor. The Company's mainline rail network is thus a link in the shortest route from the Caspian Sea and Central Asia to the Black Sea and the Mediterranean basin. As a key link in the transportation chain between Europe, and Central Asia, the Company believes that it is uniquely positioned to capitalise on trade between Europe and the Caspian Region and Central Asia. Three of the Company's lines terminate at the Black Sea, at the port cities of Batumi, Kulevi and Poti. Access to these ports allows easy on-shipment of transit cargo to the Mediterranean basin and Europe.
The Company believes that it has a number of key competitive strengths that will enable it to capitalise on its leading position in the Georgian and Caucasus transportation markets in the future. These include: A unique strategic location, highly attractive market fundamentals, favourable regulatory framework and strong Government support, track record of resilient and profitable growth with further upside and high quality customer portfolio.
3. Project Overview
Strategic objective of the Project is:
- To enhance competitiveness of sea freight for exported, imported and transit cargos compared to other means of transportation and attract new types of cargo to the corridor.
- To encourage increase of transit/import freight volume transported via Georgian railways by approximately 80 000 tons per year.
The purpose of the Project is to offer ferry transportation service to the Black Sea basin countries in the following directions:
- Georgia (Poti) - Russia ( Kavkaz)
- Russia (Kavkaz) - Georgia (Poti)
In order to implement the Project the Company intends to establish Special Purpose Vehicle (the SPV) together with the selected partner, with equity participation to be further agreed on the final stage of selection.
Considering growing demand for the ferry transportation services and the market entry barriers for foreign competitors SPV is supposed to obtain advantage in the market with competitive prices as well. This means not only price competition with direct competitors, but also competition with alternative means of transportation mainly with road transportation services and routes.
4. Brief Overview of Regulations
Georgia has ferry transportation service agreement with Ukraine, Russia and Bulgaria; also it's planned to sign similar agreement with Turkey in the current year. At present, Georgian transport operators are not able to use quotas that are dedicated for the country, because they do not have appropriate vessels. The market is untapped from the Georgian side, while the Ukrainian and Russian ferries successfully use their allotted quotas, as Georgian ports serve approximately 5 foreign ferries a week.
5. Selection Criteria
Companies (legal entities) interested in this invitation and wishing to express interest to cooperate with the Company on the general terms provided in this invitation are supposed to comply with following requirements:
- successful candidates shall (i) own or (ii) have right to operate a ferryboat, on the basis of rental agreement or (iii) have preliminary agreement on purchase or rental of a ferryboat complying with following technical features :
Class of a vessel | RO-RO ship |
Capacity | Not less than 35 units of rail wagons (L - 14.73 M, WEIGHT - 70 T OR 84 T) |
Type of rail gouge | - 1,524mm Or - Dual Gauge (mixt gauge) for 1,524mm. And 1,435mm. |
Classification society | Member of International Association of Classification Societies (AIACS) |
Dimensions | Not more than 195x30x10 |
Draft | Not more than 10 m |
- experience in the maritime transportation industry shall be an advantage;
- Should be able to submit preliminary agreement with or letter of intention from freight owners willing to become customer of the SPV in case the Project is initiated and successfully implemented.
6. Requested documents
Candidates wishing to participate in the selection process have to submit following documents:
- Intention to cooperate with the Company for the purposes of initiation and successful implementation of the Project;
- Overview of the candidate's business, corporate structure and financial statements for last three years (if applicable);
- document evidencing candidate's ownership rights on a ferryboat or rental agreement or preliminary agreement on purchase or rental of a ferryboat;
- document evidencing technical specifications of a ferryboat;
- preliminary agreements or letters of intention from the freight owners envisaging their intention to become customers of the SPV.
7. Selection Procedures
The candidates, complying with selection criteria as defined in clause 5 and wishing to express interest in the Project are advised to submit documents requested under clause 7 not later than 10 (ten) working days from the date of this Invitation. Documents should be submitted by sending photocopies to the following e-mail addresses:
- Mamuka Talakhadze - Deputy Director of Freight SBU - Mamuka.Talakhadze@railway.ge
- Vakhtang Mikelaishvili - Consultant of the Freight SBU - V.Mikelaishvili@mta.gov.ge
As a next and final stage of the selection procedure only short listed candidates shall be contacted by duly authorised representative of the Company and provided with additional information regarding the Project. Short listed candidates shall be requested to submit additional documents needed for proper evaluation and selection of the candidates. List of such documents and additional information shall be communicated with short listed candidates within reasonable time frames after completion of the first stage selection procedure.
Final decision on entering into legally binding contract with the selected candidate is subject to corporate authorisations to be obtained after finalisation of the second stage selection procedure.
8. Disclaimer
The information contained herein in no case represents a legally binding document for the Company and in no case obliges the latter to enter into any contractual and/or other legal relationships with the candidate expressing interest. Expression of interest in no case entitles the candidate to claim the Company for not executing legally binding document therewith. The Company preserves the right to any time alter, amend, resubmit the information contained herein and no liability whatsoever can be imposed thereupon. The Company preserves the right to choose the candidate, with which it will carry on relationships at its sole discretion or the right to suspend/terminate negotiations at any stage and no claims of whatsoever nature can be submitted for doing so. The candidates shall bear their own costs, expenses and/or liabilities relating to submission of documents requested on any stage of selection and negotiations related to the project and shall have no right to request full and/or partial compensation of such costs and/or expenses from the Company in case of termination of selection/negotiation procedures.