Portfolio Overview & Capital Allocation
Private large
portfolio companies
EXTERNALLY VALUED
WATER UTILITY BUSINESS OVERVIEW
INVESTMENT RATIONALE
Regulated monopoly in Tbilisi and surrounding districts with high entry barriers.
■ Stable regulatory environment with attractive return on investment.
■Full asset ownership of water and wastewater network and self-sufficient in terms of
electricity usage.
■ Diversified cash flow streams from water and electricity sales, the latter being USD
denominated and creating natural FX hedge.
■ Stable cash collection rates.
■ Growing electricity market as supply lags behind the increasing demand, creating
opportunities.
Ownership of the second largest hydro with the reservoir in Georgia, facilitating full-year
deals with the direct customers on electricity market.
VALUE CREATION POTENTIAL
■ EU harmonization reforms in progress in utilities sector, expected to drive water tariffs up,
as demonstrated in the current regulatory period.
■ Bullet repayment structure, coupled with decreased capital expenditures, leading to
strong cash-flow generation and strengthened liquidity position.
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Ongoing reforms in electricity market positively affecting electricity sales price.
■ Stable dividend distribution capacity.
OWNERSHIP
■ Water Utility is 100% owned by Georgia Capital.
MEDIUM TERM STRATEGIC PRIORITIES
Robust profitability with 60%-65% EBITDA margin
ROIC enhancement to 13%-15% in GEL
Strong cash flow generation and managed leverage - operating cash flow over debt
service c.4.0x
REGULATORY ENIVORNMENT
TARIFF DERIVATION FORMULA
Existing
assets
+
New CAPEX
Net book value
WACC
Return on assets
Depreciation
GEORGIA
CAPITAL
Total operating expenses
Time value correction¹
AVERAGE WATER TARIFF GROWTH IN 3-YEAR REGULATORY PERIODS
GEL per m3 of water sold
-0.4%
+ 47.8%
Georgia Capital PLC 1. The COVID-19 related unearned revenue from water sales during 2020 was reimbursed
through time value correction in the tariff calculation methodology for 2021-2023 regulatory period.
4.42
2017
0.27
4.40
+23.9%
Allowed revenue
6.50
+ 52.0%
0.33
0.50
2018-2020
2021-2023
■Legal entities Residential customers
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