In the past years, more and more states have decided to sell, either completely or a significant share in their railway companies’ stakes. Reasons are different, yet have something in common, namely the current global economic situation or their profitability. It is obvious that these processes determine the increase of the efficiency and competitiveness of railway transport and contribute to opening the market encouraging the creation of new business opportunities. Therefore, the Georgian authorities have decided to list 25% of the stakes of the State Railway Company to London Stock Exchange, but the measure was postponed because of the global financial problems.
According to the “Global Enabling Trade Report 2012”, published by the World Economic Forum (WEF), Georgian Railways maintains its position of leader in the national transport market, benefiting from an infrastructure with a competitive advantage which influences positively the commercial potential of Georgia, and the infrastructure quality promotes the increase of the freight traffic. For these reasons, WEF has ranked Georgia 38th for its contribution to the commercial increase.
Under the circumstances, from April 2012 the Georgian authorities have decided to make public the privatisation of the Railway Company, the sale of a stake of up to 25% being foreseen at the initial public offer to London Stock Exchange. For listing this stake, Georgia had estimated to obtain up to USD 250 Million, but in May the company postponed the listing.
“We realized that the price would not be high enough due to the current situation in the markets and although the enlistment was cancelled, the company will go ahead with the IPO or Eurobonds sale as soon as the situation will improve”, said Prime Minister, Nika Gilauri, who insisted to mention the fact that “postponing IPO was neither a direct decision of the government, nor of the problems generated by the Facebook listing (in May the company recorded a 15% depreciation of stakes, and as a consequence, over 13 initial public offerings were withdrawn from the Stock Exchange). At the same time, all investors interested in general in the initial public offerings have become sceptical after the Facebook event. They believed that if one of the biggest companies (editor’s note: Facebook) has registered a failure, then the Georgian Railways would not have any real chance”, stated the Prime Minister.
The company, which is involved in deve-loping some important railway projects such as the Baku-Tbilisi-Kars corridor, saw its re-venues rise 18 % to USD 283 Million in 2011. “We are one of the very few companies in the world delivering profitable growth without reliance on government subsidies. The initial public offering will mark another stage in the evolution of the company bringing greater profit and the possibility to extend in the region”, said CEO Irakli Ezugbaia. Likewise, in order to encourage investors, the Railways has announced that it will offer dividends of 60% from the net profit this year and at least 30% in the period 2013-17. Under the circumstances, Armenia sees the purchase of shares in the Georgian company as a vital state security problem, Davit Shahnazarov, former head of the national security service in Armenia, declaring to the central press that “Armenia is bound to purchase all shares of the Georgian Railways listed to London Stock Exchange, the entry in the capital of the Georgian Railways representing a vital problem for the state security. The access to the Georgian Railway network is important in order to guarantee Armenia’s exit to the Black Sea. 70% of Armenian imports are shipped through the Georgian ports of Batumi and Poti to which Armenia already has a railway connection”, he stated.
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