The Ministry of Economy has yet to officially confirm the reports, but sources familiar with the matter say a final decision on who will manage the rail network will be made within the next three months. Parkfield Investment refused to comment on the issue on October 24.

According to a decree signed by Prime Minister Zurab Nogaideli on August 16, management rights of the Georgian Railway was handed over to UK-based Parkfield Investment for the following 99 years.

Both the company and the Georgian authorities were tight-lipped about who were behind Parkfield Investment. The lack of information created a vacuum that was filled by speculation that several Moscow-based businessmen of Georgian origin and business and media tycoon Badri Patarkatsishvili were behind the deal. Patarkatsishvili, so the speculation went, allegedly agreed to swap his media outlets for the rail network.

Patarkatsishvili has since strongly refuted such suggestions. In October, when Patarkatsishvili became involved in a political standoff with the authorities, he did, however, say that previously the government had offered him “numerous lucrative proposals” in exchange for Imedi TV and radio stations. But he declined to elaborate further on these “lucrative proposals.”

See also:

At Least USD 2 bln Needed for Georgian Railway, Investors Say

Civil Georgia: 2007-08-20
Giorgi Sepashvili, Tea Gularidze

Parkfield Investment Ltd., the company which took control of Georgian Railways, was set up specifically for this particular investment project by a group of individual investors, whose identities will be revealed at a later stage, an official from the company said.

On August 20, Sarah Kendall, speaking on behalf of investors from London by phone, told Civil.Ge that Parkfield Investment was a UK-registered company. “Formalizing the process needs to be complete first,” she said, “and then when all the formalities are done we will be revealing the investors.”

Parkfield Investment recently received the management rights of the railway company for the next 99 years. Earlier reports had suggested the time period would be 89 years. In a decree signed by Prime Minister Zurab Nogaideli on August 16 and posted on the government web-site on August 20, Parkfield Investment is committed to invest USD 1 billion in the rehabilitation and development of railway infrastructure within the next 10 years.

Sarah Kendall, however, said the railway network would probably need two or three billion US dollars in investment in the next 10 to 15 years.

The investment company has also pledged to maintain existing passenger tariffs until December 31, 2008. Increased tariffs, according to the decree, have to be agreed with the Ministry of Economy. “No prior agreement [with the Ministry of Economy] will be needed if the increase is in line with annual inflation,” the decree reads. Giorgi Arveladze, the economy minister, has been tasked to oversee the deal.

Parkfield Investment, according to its representative, is in the process of looking for a company to operate the railway on behalf of the investors.

“We will have a tender process to select an operator company,” she said. “We expect the operator will likely be either from the UK or another western European company with experience of managing this type of railway operation.”

She pointed out that the investment will help to develop the railway network and “will also be a key contributor to the Georgian economy.”

Kendall’s comments to Civil.Ge, although far from explaining everything, are the investment company’s first public pronouncement. Lack of information about the company, has fuelled speculation as to the identity of the secretive investors.

News about the government’s decision to hand over the railway management to Parkfield Investment broke on August 16, with an announcement by the economy minister, Giorgi Arveladze.

The announcement even caught top management of the Railway Company by surprise, indicating that the decision had been made within a very narrow circle of individuals in the government.

Most commentators in Georgia have welcomed the decision to hand over management of the railway to a private company, but the murkiness surrounding the deal has triggered concerns.

Rezo Sakevarishvili, a journalist and an economics analyst, points out that at this stage no clear conclusions can be made.

“I really do not know who might be behind this company,” Sakevarishvili told Civil.Ge. “There are various and numerous rumors. Some of them say it might be Badri Patarkatsishvili, others suggest it might be Bidzina Ivanishvili or some business people close to Arveladze. But these are rumors and more information is needed.”

Several sources familiar with the matter say Patarkatsishvili is probably behind the deal. However, some commentators have challenged this assumption, citing the fact that Patarkatsishvili has fallen out of favor with the authorities.

“I doubt Patarkatsishvili is behind this deal,” Gia Khukhashvili, an economics analyst, told Civil.Ge. “I do not see any logic in this because of the tense relations between Patarkatsishvili and the authorities; if it is true, then a question rises: what was exchanged to make this deal possible?”

Patarkatsishvili is at odds with the current authorities since last March 2006, when he publicly accused the authorities of an attempt to put pressure on his media holding and on other business interests in Georgia.

Patarkatsishvili has moved from Tbilisi and spends most of his time in London. He has also sold some of his businesses in Georgia, including an oil terminal in Kulevi on the Black Sea coast. The State Oil Company of Azerbaijan (SOCAR) has bought it.

The only major business in Georgia he still holds is Imedi media holding – a radio station and a television station. The company is co-owned by News Corporation. This is an important asset, not from a commercial, but from the political point of view. Even Patarkatsishvili himself described his Imedi assets as “a charitable project.”

Guga Kvitaishvili, a spokesperson for Patarkatsishvili in Tbilisi, has declined to comment on the speculation about Patarkatsishvili being behind the railway deal. “I can not comment on rumors,” he told Civil.Ge.

Whoever the investors are, Tbilisi is most likely to see a major facelift as a result of this project. Kakha Bendukidze, the state minister in charge of reforms, said the plan was to relocate the railway network, which currently crosses the city and divides it two, to the outskirts of the city.

“At least 100 hectares of land will become available as a result of this relocation in the capital city and this land will then be engaged in the city’s economic processes,” he said.

See also:

Patarkatsishvili Denies Swapping Imedi TV for Railway

Civil Georgia: 2007-09-10

Tbilisi -- The business tycoon and co-owner of Tbilisi-based Imedi media holding, Badri Patarkatsishvili, rejected on September 10 suggestions that he had taken control of the Georgian Railways in exchange for his media holding.

Last month the Georgian government said it was handing over management rights for 99 years to Parkfield Investment Ltd. – a company set up just for this particular investment project by a group of individual investors, whose identities are still unknown.

The lack of information about the company has fuelled speculation that Badri Patarkatsishvili was probably behind it. Patarkatsishvili, so the rumours go, had made a deal with the government and agreed to give up his shares in Imedi media holding, involving a TV and radio station, in exchange for the management rights to the country’s railway infrastructure. Imedi is also co-owned by News Corporation.

“There is no asset in Georgia worth being swapped for Imedi,” Patarkatsishvili told reporters in Tbilisi. “Imedi is not something that will be traded off for something else.”

He said that he currently planned to create an even larger, as he put it, “regional telecommunications holding”, which would unite Imedi and his recently purchased businesses.

Patarkatsishvili’s Salford Georgia and a partner, Compound Capital Ltd., purchased the U.S.-based Metromedia International Group Inc., including its businesses in Georgia, for USD 154.5 million in August.

Metromedia International Group Inc. has a 34.5% share in MagtiCom, a mobile operator; 85% in Ayety LLC (“Ayety”), a cable television provider in Tbilisi; and 30% in Telecom Georgia, a long-distance transit operator.