BISNIS Trades & Tenders, August 22, 1999

 

PLEASE NOTE: A WEB SUPPLEMENT TO TRADES AND TENDERS WILLBE AVAILABLE TUESDAY AT http://www.bisnis.doc.gov/leads/leads.htm

 

InternationalCopyright, U.S. & Foreign Commercial Service and U.S. Department of State,1999.   All rights reservedoutside of the United States.

 

The Business Information Service for the Newly IndependentStates (BISNIS) is the U.S. Department of Commerce's information clearinghouseon trade and investment in the emerging markets of the newly independent statesof the former Soviet Union.  BISNIShas created the "BISNIS Trades & Tenders" electronic newsletterto help U.S. companies find business opportunities in these expanding markets.

 

Theseopportunities are provided solely as an informational service and do notrepresent an endorsement by the U.S. Department of Commerce. Verification ofleads is the responsibility of the reader. BISNIS may consider other privatesector‑generated trade leads and tenders, in electronic form only, and publish ona space‑available basis.  Pleasesend your leads to [email protected]

 

Afull selection of BISNIS leads and other market intelligence are available viaBISNIS OnLine at: www.bisnis.doc.gov

 

Pleasealso find another 2 trade leads in this document.  

 

Tableof Contents for Web Supplement:

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Lead#1: Tender for Georgian Airlines - Georgia

Lead#2: Tender for JSCChaturmanganumi – Magnesium Plant - Georgia

Lead#3: Tender for Elmavalmshenbeli - Georgia

Lead#4: Tender for Elektromekanikosi - Georgia

Lead#5: Tender for Georgian Locomotive Company - Georgia

Lead#6: Tender for Kaspitsementi" Cement Factory - Georgia

Lead#7: Tender for Joint-Stock Company"Kolkhida" (Motorcar production) - Georgia

Lead #8 Tender for JSC Lithopone (production of litophone,micro-barite,

micro-calcite, different paints, copper sulfate (vitriol) andothers) - Georgia

Lead #9:  Tender forChemical Fiber Facility - Georgia

Lead #10: Tender for Sakabreshum – Silk Facility - Georgia

Lead #11: Tender for Tami Metal Casting and Tool works - Georgia

Lead #12:  IndustrialAcids, Oils and Alcohol – Moscow, Russian Federation

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Tableof Contents for this Document: 

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Lead#1: Agricultural Equipment Leasing Firms – Kyrgyzstan

Lead#2: Information About Privatization Of EnergyGeneration And Distribution Companies

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Lead#1 – Agricultural Equipment Leasing Firm Tender - Kyrgyzstan

AGRICULTURAL EQUIPMENT LEASING FIRMS

KYRGYZ REPUBLIC 

 

ACDI/VOCA, a not-for-profit corporationlocated in Washington, D.C., is providing technical assistance and technologytransfer services in the Kyrgyz Republic under an agreement supported by the USDepartment of Agriculture’s Food for Progress program. 

 

ACDI/VOCA is seeking expressions ofinterest and pre-qualification documents from firms with management expertisein leasing a broad range of agricultural equipment and which are prepared toestablish and maintain a professionally managed equipment leasing operation inthe city of Osh in the Kyrgyz Republic.

 

To qualify, a firm must provide afull-time expatriate manager and such support staff experienced in marketingand maintenance of farm equipment as to create and sustain a viable operationcommitted to cooperative efforts to increase agricultural productivity and tomodernize the processing of agricultural products.

 

 

 

**INSTRUCTIONSTO OFFERORS**

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Pre-qualification documents submitted inresponse to this document should clearly indicate the background and experienceof the firm in the area of leasing and maintenance of a broad range ofagricultural equipment including international experience in this area.

 

The firm must clearly demonstrate thatit has the financial capacity to undertake and sustain a viable operation thatrequires the purchase and shipping of a wide range of agricultural equipmentand the shipping of the equipment to the city of Osh in the Kyrgyz Republic.

 

The firm must indicate its willingnessto enter into a joint venture with a local firm of its own choosing in Osh.

 

The pre-qualification documents shallinclude a business plan outlining the firm’s approach to this undertaking,including an estimated budget for the first three years of operation.

 

Respondents shall include in their offerthe information requested on the Corporate Profile sheet included with thisdocument.

 

The firm shall be required to provideand maintain a full-time professional expatriate manager in Osh and suchadditional staff on a long-term or short-term basis as is required to introduceand establish modern accounting systems and controls of operations. The firmshall also provide expertise necessary to maintain and repair equipment. Thisshall include the introduction of preventative maintenance procedures and thetraining of local staff in the proper operation, maintenance and repair ofequipment.

 

The firm shall be required to developand implement marketing plans to reach farm cooperatives, associations andindividual farm enterprises.

 

From local funds generated under theon-going USDA Food for Progress program, ACDI/VOCA-Kyrgyz Republic is preparedto offer funding for local start-up and support expenditures as specifiedfurther herein.

 

Expressions of Interest shall besubmitted in four (4) copies to the following address:

 

ACDI/VOCA

Attn: AmyHolecek

50 F Street, NW,Suite 1100

Washington, D.C.20001

 

 

The deadline for receipt of proposalshall be no later than 4:00 PM local time on September 7, 1999.

 

**TERMSOF REFERENCE**

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A. BACKGROUND

 

 

The ACDI/VOCA Food for Progress team inthe Kyrgyz Republic has identified a need for appropriate modern farm equipmentthat can be leased to farmers and to farmer cooperatives on a short-term,task-oriented basis.

 

The leasing operation would beestablished in or near the city of Osh located in the Osh Oblast. Osh Oblasthas a population in excess of 1.4 million inhabitants (1997) and is located atthe eastern end of the fertile Fergana Valley, bordering Uzbekistan, Tajikistanand China. It is the most important economic center in the southern KyrgyzRepublic, situated at an altitude of 700 to 1,000 meters. The heavily populatedand agriculturally rich areas of Kara-Suu district in the Ak-Buura river valley,Nookat, Aravan and Uzghen surround it. Major industries include textiles,light-machinery manufacturing, garment manufacturing and food processing.  For many years the oblast has been animportant commercial center with one of the largest trading markets in CentralAsia. Osh is surrounded by an area of intense agricultural production and isthe gateway to another agriculturally rich area in the Jalal-Abad Oblast to thenorth.

 

As the regional capital and the secondlargest city in the Kyrgyz Republic, Osh has well-developed public socialservices, including a university and several specialized educationalinstitutions, major regional health-care clinics and hospitals, and is theheadquarters of the oblast**administration.  The city is approximately 3,000 yearsold, and is situated on the former Silk Road with a rich history.

 

The city also benefits from awell-developed transportation infrastructure, a telecommunications system whichis being upgraded, and a relatively low-cost labor force.

 

Osh airport is the largest in thesouthern Kyrgyz Republic and has scheduled local and chartered flights.  The Osh railway station is linkedthrough Kara-Suu, 28 km. north of Osh, to Jalal Abad and the Uzbek railnetwork. In addition to freight services, there are scheduled passengerservices to Jalal-Abad and to Bishkek (via Tashkent).

 

The region isaptly suited for the production of cereals, cotton, tobacco, oilseed, potatoes,vegetables, sub-tropical fruits and nuts. The region has about 28% of the total cattle herds of the KyrgyzRepublic and 20% of the nation’s sheep and goatherds.

 

The former *sovhozes* and *kolkhozes*(state-owned farms and farm collectives respectively) have been privatizedthroughout the country. All of the state-owned lands, with the exception of theNational Fund (see below), have been redistributed. In addition, a recentreferendum on private land ownership was approved by the electorate in 1998making land subject to a mortgage in five years (according to the present landcode, the right to use land can be mortgaged as security on loans). There areapproximately 11,000 individually owned family farms in the Osh Oblast. DjalalAbad accounts for up to 3,000 additional registered farm enterprises. Most ofthese farms average between 3 and 20 hectares. There are twelve farmassociations with areas over 150 ha. Additionally, there are up to 500cooperative farms reported to range in size from 50 ha. to 150 ha. The NationalFund has been allocated 84,849 ha. in the Osh Oblast by the government. This landis rented to farmers to help increase the size of their land holdings.

 

It is estimated that the introduction oftechnology could result in significant increases in wheat yield per ha.However, at present cotton and tobacco are the most profitable crops forfarmers.

 

The primary focus of the leasingoperation would be crop production. However there is some need for equipment inthe animal husbandry and livestock areas. Livestock  production has been in decline due to the lack ofavailability of feed and processing facilities, and the resultant increase incosts.  Uneconomical prices forinputs made fodder unaffordable.

 

 

B.   AGRICULTURAL TECHNICAL SERVICES

 

 

The selected firm will be required todevelop the local enterprise capacity to maintain and service the equipment soas to permit local farmers to maintain cost efficiency in their operations andthus enable them to achieve a reasonable return on their investment.  Therefore, the selected firm must beprepared to invest sufficient resources not only to purchase and transport theequipment to the region but also to commit resources to the maintenance andrepair of the equipment and develop local business capacity to viably operateequipment leasing in collaboration with its firm.

 

To establish and maintain a base ofoperations and to market the services effectively, the selected firm will berequired to enter into a joint venture arrangement with a local firm.

 

 

C. FINANCIAL INTERMEDIARIES  

 

 

There are several institutions which canprovide assistance to farmers and/or potentially, to the joint venture. Theyare the Osh Farm Credit Association (OFCA), Agro-Credit Djalal Abad Association(ACDA), Kyrgyzstan Agricultural Finance Corporation (KAFC), the StateEntrepreneurial Fund (State Fund) and the Central Asian-American EnterpriseFund. 

 

OFCA was legally established by theACDI/VOCA FFP program. It is a locally registered, member-owned, not-for-profitcredit facility providing financial assistance in the form of credits to smallfarmers engaged in crop and livestock production, agro-processing andagricultural service industries.

 

ADCA was legally established by theACDI/VOCA FFP program and the Kyrgyz Swiss Agro-Credit Djalal AbadProject.  It also is a locallyregistered, member-owned, not-for-profit credit facility operating in DjalalAbad Oblast, providing financial assistance in the form of credits to smallfarmers engaged in agricultural production, business and services.

 

KAFC has been established to providefinancial assistance to farmers in the absence of other large lendinginstitutions, which have ceased offering credit to the agriculturalsector.  KAFC is in the process ofprivatization (the Kyrgyz Government is still the principal shareholder).Currently the Kyrgyz Government and the World Bank are the sources of theKAFC’s current resources of about US $8 million.

 

KAFC providescredit for various agricultural operations, primarily to finance inputs.However, they are in a position to make loans to farmers to lease equipmentsuch as the joint venture would make available. In addition, KAFC is able toguarantee payments in hard currency, avoiding the need to deal with in-kindcrop payments or barter trade to convert payments to hard currency. Farmers mayreceive credit from KAFC twice a year, for the production and harvest seasonsrespectively. 

 

The State Fund was established toprovide both investment capital and credit to various 

industries,primarily in the agricultural sector. This includes farms, agroindustrial, including input supply, technologyand food processing. The Fund is in a position to finance leasing operations,both in terms of providing credit to farmers and covering payments in hardcurrency to a leasing company and possible direct equity investment in thejoint venture. The Fund has three lines of currency: Kyrgyz soms, German marksand US dollars. The Fund can allocate as much as US $25,000 for one project.

 

The Central Asian-American EnterpriseFund, established by the US Government, is a privately managed, venture capitalinstitution in the Kyrgyz Republic. The fund provides financing to commerciallyviable small and medium-sized enterprises. The fund welcomes the participationof international partners, especially US companies, who are willing to providerisk capital, management expertise and new technology, and who wish to developa long-term presence in the region to explore new markets for US exports inCentral Asia. 

 

 

D. LEGAL ISSUES

 

 

There are no specific regulations orrestrictions pertaining to leasing operations at this time. There is nospecific code regarding leasing currently in effect. However, one may beenacted in 1999.

 

A charter fund is necessary.   The contribution on behalf of thejoint venture partners is minimal. It is anticipated that the joint venture willinvest all equipment in kind into the charter fund. This will provide the jointventure with significant tax advantages. Investments into the charter fund aredeemed to be non-resident company assets invested into it and are exempt fromall customs duties and value-added tax (VAT).

 

The Kyrgyz Republic has five tax freezones that currently provide tax holidays on corporate profits for five years.

 

 

E. CURRENCY EXCHANGE

 

 

The som is aninternational currency and can be easily repatriated. Several Kyrgyz banks havecommercial banking services. The Kairat Bank and the Demir Kyrgyz InternationalBank, a Turkish bank, can guarantee letters of credit up to US $350,000. TheKairat Bank correspondent banks are the Bank of America, American Express Bank,Ltd., and Deutsche Bank A.G.  

 

Demir Kyrgz International Bank (DKIB) isanother full service commercial bank with its head office in Bishkek and abranch office in Osh. DKIB maintains an extensive network and provides accessto worldwide financial services. It has the capacity to handle international transaction and fundtransfers in major currencies. The DKIB has The Bank of New York and CitibankN.A. as corresponding banks in the US.

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Lead#2: INFORMATION ABOUT PRIVATIZATION OF ENERGYGENERATION AND DISTRIBUTION COMPANIES

 

1. Introduction

As part of a continuing privatisation policy and in an effort toimprove the

reliability of electricity supply, the Government of Georgia (the

"Government"), through the Ministry of State PropertyManagement (the

"Ministry" or "MoSPM"), is privatising theelectricity sector in a

competitive direct sale and tender process open to domestic andforeign

investors. It is envisaged that a strategic privatisation willimprove the

productivity, operating efficiency and financial discipline of the

electricity sector in Georgia.

The Government has retained Merrill Lynch International("Merrill Lynch")

(working together with KANTOR Management Consultants) as itsfinancial

advisor in the privatisation. The Government has already completedthe

initial preparation, including the unbundling of the electricitysector into

generation, transmission and distribution to improve transparency.

The Ministry of State Property Management is announcingprivatisation of

shares of distribution companies and thermal power station througha

competitive direct sale process and a competitive tender forManagement

Contracts for shares of JSCs established through corporatisationof hydro

power stations. The process is open for local and foreigninvestors, which

may include a consortium.

 

2. Transaction Structure

Buyers are invited to participate in the competitive direct saleprocess or

tender process for Management Contracts. Generation Assets andsome of the

Distribution Companies will be offered in three clusters:

Cluster 1

(i) Competitive direct sale of 75% of shares in Relasi JSC(Rustavi

Distribution Company);

(ii) Competitive direct sale of 80% of shares in Tbilsresi JSC(thermal

power station);

(iii) 25 year Management Contract for 100% of shares in Kramhesi IJSC (HPP)

through a Tender;

(iv) 25 year Management Contract for 100% of shares in KhramhesiII JSC

(HPP) through a Tender.

Cluster 2

(i) Competitive direct sale of 75% of shares in Kelasi JSC (Kutaisi

Distribution Company);

(ii) 25 year Management Contract for 100% of shares in LajanurhesiJSC (HPP)

through a Tender;

(iii) 25 year Management Contract for 100% of shares in TkibulhesiJSC (HPP)

through a Tender;

(iv) 25 year Management Contract for 100% of shares in ShaorhesiJSC (HPP)

through a Tender;

(v) 25 year Management Contract for 100% of shares in GumathesiCascade JSC

(HPP) through a Tender;

(vi) 25 year Management Contract for 100% of shares in RionhesiJSC (HPP)

through a Tender

Table illustrating brief information on the above JSCs is attachedto this

announcement (see Annex 1)

Bidders must have prior experience in operating a hydro or thermalplant of

similar size they wish to acquire.

Bidders may bid for one or both Clusters separately. By biddingfor each

Cluster the Bidder is participating in privatisation of each itemin the

Cluster.

Cluster 3

Cluster 3 contains equity stakes of all remaining regionaldistribution

companies outside Cluster 1 and 2 (see the attached list in Annex2).

Privatisation of these companies will be through competitivedirect sale of

75% of equity stakes. Bidders may bid for one or more distributioncompanies

(JSCs). In case there are such Bids the Ministry will considerprivatisation

of 35kV lines and substations being part of the assets of"Electrogadatsema"

(transmission company), treasury enterprise, through direct saleof them

along with the regional distribution companies. 

Land issues will be resolved on the bases of Georgian Law "onManagement and

Dispose of the Non-agricultural Land in State Ownership"pursuant to "macro

location indexes of Georgian cities (districts), area measuringand

methodology for defining normative prices for non-agriculturalland in state

ownership".

 

3. Submission of Binding Bids

Binding bids should be submitted in sealed envelopes marked"Do not open

except in the presence of the Tender Committee", before 5:00P.M. Tbilisi

Time, on August 20, 1999.

The Bids should be accompanied by the following:

*          BankSlip confirming that the Bidder made down payment of US$250,

000 to the bank account of the Ministry of State PropertyManagement

(Georgian National Bank, Foreign Currency Account # 070472, Code220101107;

Georgian Lari Account #141144212, Code#220101107) in case ofclusters 1 and

2 and US$30,000 in case of each distribution company. In case ofsuccess the

down payment will be included in the total purchase price executedby the

successful Bidder. All unsuccessful bidders will be refunded theirdown

payment; 

*          Filledout Application form as established which should reflect the

Bidders consent regarding execution of the tender conditions; 

*          IDcard or Passport details; 

*          Notariallyconfirmed Power of Attorney if the person is acting on

behalf of any other person; 

*          Legalentities are required to submit company registration and

foundation documentation. 

Bids placed in sealed envelopes and also the above documentsshould be sent

to the following address:

 Send to:           With copy to:

 Mr. Mikheil UklebaMinister Ministry of State Property Management 64,

Chavchavadze Avenue 380062 Tbilisi, Georgia; Tel: +995 (32) 294875     Mr.

Jason Schaeffer Merrill Lynch International Ropemaker Place 25Ropemaker

Street, London EC2Y 9LY, United Kingdom, Tel: +44 (171) 867 2320

The copy of the Bid for Cluster 1 and 2 with all attacheddocuments listed

above should reach Merrill lynch office at the above address notearlier

than 1:00 P.M. Greenwich Mean Time (5:00P.M. Tbilisi, GeorgiaTime), August

20, 1999 and not later than 5:00 PM Greenwich Mean Time (9:00P.M.Tbilisi,

Georgia Time), August 21, 1999. 

The Tender Commission will officially open the Binding Bids forthe

Competitive Direct Sale and Management Contracts at 12:00(Tbilisi, Georgia

Time), on Tuesday, August 24, 1999.

 

4. Content of Binding Bids

Binding bids should contain the following information:

*          oCash consideration to be paid at closing (indicating amount in US

Dollars); and indicating in language that states that the cash sumwill be

less Merrill Lynch's success fee; 

*          Amountof debt assumed (indicating amount in US Dollars) ("Financial

Offer"); 

*          Investmentcommitments (indicating amount in US Dollars and year by

year timing including for the first five years);

o Electricity tariff requested by the Bidder; 

*          Letterdetailing financial ability of the Bidder to execute

transaction; 

*          Detailsof the corporate entity used to effect the acquisition; 

*          Futuredevelopment plans of the asset the Bidder is acquiring; 

*          Markup copy of the Agreement/Contract provided by the Government of

Georgia. 

*          Inthe case of Tbilsresi JSC proposals regarding operation of

Tbilsresi JSC in Autumn and Winter months, which shallrespectively be

reflected in the Sale and Purchase Agreement. 

Any binding bids, either for direct sale or Management Contract, thatdo not

meet the following conditions set forth will not be considered:oGuarantee

that given sufficient supply of electricity, the DistributionSystem(s) will

supply electricity at the prevailing tariff to all payingcustomers, in

accordance with existing Georgian Legislation;

*          Atthe time Bidders submit binding bids, such bids must state in

writing that the Bidders are prepared to immediately execute such

Agreement/Contract in the form in which it is submitted; and 

*          Inthe Agreement/contract, a Buyer's obligation to consummate the

acquisition and/or future investment commitments should not becontingent

upon the arrangement of financing. The inclusion of any suchcontingency in

the binding bid will place the Bidder at a severe disadvantage. Inany case,

the binding bid should be accompanied with a letter detailing theBidder's

financial ability to execute the transaction. 

In the case of Lajanurhesi JSC and Khramhesi II JSC the creditsallocated by

OECF should be reflected in the Definitive Management Contract.

 

5. Guidelines for Binding Bids

*          oConsortiums may submit bids for either purchase of Distribution

Companies and Generation Assets or 25 year management Contract; 

*          Biddersshould complete all due diligence prior to submitting a

binding bid. Any bid that is conditional upon satisfactorycompletion of due

diligence will not be considered; 

*          Bindingbids containing provisions that trigger an automatic

increase in the consideration offered depending upon theconsideration

offered by others will not be considered; and 

*          Itis not anticipated that Bidders will be allowed to change their

offer, so bidders are advised that binding bids should reflect theBidders'

best offer. 

 

6. Evaluation of Binding Bids

6.1 Process

The process under the law which will be used for the sale of 75%of equity

stake of Distribution company(s) and 80% of equity stake ofTbilsresi will

be that of a "competitive direct sale" and for 25 yearManagement Contract

for 100% of company shares of hydro power plants will be that of aTender.

The MoSPM, with the assistance of Merrill Lynch, will evaluate thebinding

bids as soon as practicable after the bid deadline. The MoSPMreserves the

right without further notice to discuss with any Bidder the termsof any

binding bid, to negotiate with one or more Bidders with respect tothe sale

or management contract of any of the asset and to amend or tomodify the

rules and procedures. In no event will the MoSPM or Merrill Lynchhave any

obligation to notify any Bidder and/or to reopen their respectivebids as a

result. The MoSPM's interpretation of the rules and proceduresestablished

herein shall be final and binding on all parties submittingbinding bids.

Once the MoSPM selects the successful binding bid (based on theselection

criteria set out below), it will notify the Bidder that submittedsuch bid,

and seek to enter into a definitive Sale and Purchase Agreement/25year

Management Contract and to make a public announcement of thetransaction in

ten working days after the final bids are received. Any delay ineither

signing or closing the transaction may result in the MoSPMchoosing an

alternative binding bid.

Agreement/Management Contract has been executed and delivered tothe MoSPM.

Until such time, the MoSPM shall not have any obligation to theBidder and

following such time the MoSPM's only obligations will be those setforth in

the definitive Sale and Purchase Agreement(s) and/or ManagementContract(s).

 

6.2. Selection Criteria

The successful Bidder will be selected using the bid evaluationcriteria set

out below and on the basis of an objective comparison of the bidsreceived.

Bids for each first three Clusters will be evaluated in complexand the

Tender Commission will make decision based on the following mainselection

criteria (which are expected to carry approximately equalweighting) :

*          oThe Financial Offer made for the purchase/management of the equity

stake. 

*          Theinvestment commitments undertaken by the Bidder; 

*          Amountof Debt the Bidder commits to assume; 

*          Electricitytariff required by the bidder; and 

*          Theextent to which the Sale and Purchase Agreement/Management

Contract has been amended. 

The other bid evaluation criteria, in no particular order ofimportance,

will include:

*          oThe commitment to transform such System(s) and the electricity

sector in the State of Georgia into a world-class operationthrough

technology transfer, human resource training and skillsdevelopment; 

*          Itis recommended that if Bidders choose to form a consortium, such

consortium is implemented as soon as possible in order to assistthe MoSPM

in assessing the working relationship between the consortiummembers; and 

*          Thecommitment to use local skills while implementing rehabilitation

and modernisation of the distribution System(s) 

*          Inevaluating the Bids received priority would be given to the Bid

proposing acquisition of additional distribution companies.