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Georgian Co-Investment Fund January 2015
Georgian Co-Investment Fund
January 2015
22Georgian Co-Investment Fund | January 2015
GCF – Background and Main Objectives
Established in September 2013
The Georgia-dedicated private equity fund provides unique opportunity to investors to get an exposure
to the rapidly growing Georgian economy
Fully privately owned, with LP investors including blue-chip international institutions, corporates and
private family offices
Set up according to international best practices, as a limited partnership
Professional management team with years of international investment finance experience
Total commitment target of up to US$ 6B
GCF’s objectives:
- invest in commercially attractive projects
- provide high returns to investors
- attract top class strategic investors as partners (co-investors)
- drive returns through optimal capital structure
33Georgian Co-Investment Fund | January 2015
Investment Criteria
Geography Georgia and Georgia related
Industry Sector Focus
Energy and Infrastructure – up to US$ 3B
Hospitality and Real Estate – up to US$ 1B
Agriculture and Logistics – up to US$ 0.5B
Manufacturing – up to US$ 1.5B
Other – up to US$ 0.5B
Investment Restrictions
Trading, retail, residential real estate development, gambling, transit
Working capital financing
Speculative investments: acquiring commodities, speculative derivative contracts
Investment Type Startups, expansion, turnaround, reorganization, distress, special situations
Financing Type Equity, mezzanine debt, hybrid financial instruments (i.e. convertible debt, etc.)
Minimum Investment Size US$ 5M
Maximum Investment Size >20% of total commitments
Target Equity Stake in Projects 25%-100%. Fund’s preference is to hold non-controlling stakes
Investment Period
Fund Life
Exit Horizon
Exit Terms
First five years (By YE 2018)
7+1+1 years; the Fund will liquidate after term expiry
By YE 2020 (extendable by two additional years)
Fund seeks put/call structures, tag-along and drag along rights
Financial Criteria
Qualitative Criteria
Minimum IRR - 17%
Minimum money multiple - 1.5x
Quality of management; quality of strategic partner; investment scale
44Georgian Co-Investment Fund | January 2015
Investment Horizon & Exit Strategy
First five years comprise the investment period, where the Fund intends to deploy up to US$ 6B
The Fund will expire after seven years, with the option to extend twice by one year
All underlying investments must be exited pre-fund expiration period
The Fund’s exit strategy will be dictated by commercial considerations and market conditions:- Sale to co-owners of the project;
- Sale to third party strategic or financial investors; or
- IPOs on local and international stock exchanges
The Fund seeks put and call structures, as well as tag-along and drag-along rights with co-investors
1 2 3 4 5 6 7 +1 +1
Investo
rs' C
ash F
low
s
Capital calls (investments, fees and expenses)
Distributions
Cumulative Cash Flows
Investment period
Exit period
5 years 2 +1+1 years
55Georgian Co-Investment Fund | January 2015
Knock-on Effects on Georgian Economy
Expanding Export
Base & Import
Substitution
Building Human
Capital
Attracting FDI
Global industry and corporate leaders entering the Georgian market
Boosting capital formation
Recapitalizing local businesses and projects
Introducing high standards of management and finance practice
Increasing liquidity and deal flow
Boosting development of local capital markets
Creating jobs through new projects or expansion of existing companies
Improving local skill-set and quality of human capital
Facilitating technological transfer and expertise from industry leaders entering the market
Development of specialist expertise, skills and knowledge base
Increasing labor productivity
Increase of local production
Improvement of current account balance
Raising competitiveness of local businesses
Creating Jobs
Supporting Healthy
Business
Environment
Attracting Foreign
Direct Investments
Existing Portfolio and Pipeline
7Georgian Co-Investment Fund | January 2015
Existing Portfolio and Transaction Pipeline Summary
# Project name Sector Description Project size
1 Mtkvari HPP EnergyInstalled capacity 53.3 MW
Annual energy generation 255.2 GWhUS$ 98 M
2Tskhenistskali
Cascade HPPsEnergy
Installed capacity 347 MW
Annual energy generation 1,744 GWhUS$ 679 M
3Dairy Farm &
Processing plantAgriculture
1,000 milking cows; production capacity 25t per day,
processing capacity 100t per day
US$ 37 M
4 Greenhouse Agriculture Greenhouse for tomatoes, 4000 ton capacity per year US$ 40 M
5 BitFury IT Crypto currency exchange and mining, chip production US$ 15 M
6 Pending MOU Real EstateMultifunctional Complex: Hotel-252 rooms; Residential -
20,100m²; Office- 6,700 m²; Commercial area- 14,700 m² US$ 80 M
7 Pending MOU Real Estate Shopping Mall: 16,000 m² leasable area US$ 38 M
8Pending
AgreementReal Estate Shopping Mall: 22,000 m² leasable area US$ 75 M
9Panorama Tbilisi
(Concept Design)Real Estate Multifunctional Complexes US$ --- M
Energy and Infrastructure
Mtkvari HPP
9Georgian Co-Investment Fund | January 2015
Mtkvari HPP - Location
Akhlatsikhe District, South Georgia, near Turkish border
On the river Mtkvari
Mtkvari HPP
Powerhouse
Mtkvari HPP
Headwork
1010Georgian Co-Investment Fund | January 2015
Technical Parameters
Type of the plant Run-of-river (with reservoir)
Installed capacity 53.3 MW
Annual energy generation 255.2 GWh
Capacity usage ratio 55%
Reservoir useful capacity 2.67 million m³
Height of the reservoir 32 m
Headrace tunnel length 9,600 m
Headrace tunnel diameter 6 m
Tunneling technology Tunnel Boring Machine (TBM) – already manufactured by Herrenknecht
Gross head 103 m
Rated turbine discharge 70 m³/s
Transmission line 220 kW, 2.7 km long
Project Cost
Total investment amount $ 98 M
Investment per 1 MW installed capacity $ 1.84 M
Existing situation 20% of total construction works have been performed
Required time to complete remaining works 2.5 years
Mtkvari HPP – Key Parameters
Energy and Infrastructure
Tskhenistskali Cascade of HPPs
1212Georgian Co-Investment Fund | January 2015
River: Tskhenistskali
Location: Lentekhi & Tsageri Districts, North-Western Georgia
HPPs: Ludji, Mukhra, Lentekhi and Tsageri
Tskhenistskali Cascade of HPPs – Location
Mukhra HPP
Powerhouse
Lentekhi HPP
Headwork
Lentekhi HPP
Powerhouse
Mukhra HPP
Headwork
Ludji HPP
Powerhouse Ludji HPP
Headwork - Dam
Tsageri HPP
Headwork - Dam
Tsageri HPP
Powerhouse
1313Georgian Co-Investment Fund | January 2015
Technical Parameters
Type of the plants Run-of-river (with 2 reservoirs)
Capacity of Ludji HPP 54 MW
Capacity of Mukhra HPP 61 MW
Capacity of Lentekhi HPP 81 MW
Capacity of Tsageri HPP 151 MW
Total installed capacity 347 MW
Total annual generation 1,744 GWh
Overall capacity usage ratio 57.3%
Ludji reservoir storage capacity (gross) 197 million m³
Ludji reservoir storage capacity (net) 127 million m³
Tsageri reservoir storage capacity (gross) 17 million m³
Tsageri reservoir storage capacity (net) 7 million m³
Ludji reservoir height 149 m
Tsageri reservoir height 55 m
Total gross head 947 m
Please note that the above parameters might change during the Feasibility Study
Tskhenistskali Cascade of HPPs – Key Parameters
1414Georgian Co-Investment Fund | January 2015
Project Cost , US$
Cost of Ludji HPP 245 million
Cost of Mukhra HPP 94 million
Cost of Lentekhi HPP 112 million
Cost of Tsageri HPP 228 million
Total cost of Tskhenistskali Cascade 679 million
Total project cost per MW installed capacity 1.96 million
Total project cost per generated KWh 0.39
Please note that the project cost calculations and construction durations might change during the Feasibility Study
Tskhenistskali Cascade of HPPs – Project costs
Agriculture and Logistics
Dairy Farm and Processing Plant
16Georgian Co-Investment Fund | January 2015
Dairy Farm and Processing Plant
Project Component Location Area (Ha) Note
Fodder Fields (stage I) Abasha District 1,200 Agricultural land
Livestock Farm (stage I) Abasha District 25-30 1,000 milking cows
Dairy Processing Plant (stage II) Abasha District 5 Production capacity: 100 tons per day
17Georgian Co-Investment Fund | January 2015
Dairy farm and fodder field– Leading Dutch company – “The Friesian” is participating
in the project
– 1,000 milking cows
– Production of 25 tons of milk per day
– Creation of milk collection centers;
– 1200 to 1600 ha in west Georgia for feedstock:• Silage
• Haylage
• Corn
• Barley
• Alfalfa hay
• Barley straw
Based on procurement of land and own production
of feedstock company saves up to US$ 2 M per year
Processing Plant
18Georgian Co-Investment Fund | January 2015
Dairy Farm
High-tech milk collection and dairy processing plant– Location: Abasha (west Georgia)
– Capacity of processing 100 tons of milk per day
– Creation and development of dairy farming co-
operatives
– Introduction of international experience, veterinary
support and constant stream of revenue for local
farmers
– Milk transfer from dairy farm with low cost + milk
collection centers
– Production of• Curd Cheese
• Soft cheese
• Milk pasteurized
• Yogurt
• Kefir
• Matsoni
• Sour cream
Creation of up to 400 permanent jobs
Total size of the investment - US$ 36.9 M
Agriculture and Logistics
Tomato Greenhouse Development
20Georgian Co-Investment Fund | January 2015
Tomato Greenhouse Development
Import substitution of tomatoes in Georgia– Our goal is to fill the gap between local production and
consumption of yearly 14,000 Tones
– Phase I – build 4.5 ha greenhouse with production of 1,700
tones per year.
– Phase II – expand to 12 ha greenhouse with production of
4,000 tones per year.
– Potential to expand up to 50 ha greenhouse for full import
substitution and export
Location– Strategic location with potential of using thermo power
plant heat
– Gardabani region with one of the highest sun insolation
results in Georgia
– Ready to use infrastructure including – access to Gas,
Water, Electricity
Partners– Richel Group – with 50 years of history in greenhouse field,
with 250 ha construction per year. Familiar with region –
recently built greenhouse in Azerbaijan, Russia, Turkey
– ICES – Local construction company The main fields:
Design, Construction, Project Management & Equipping
(refrigeration, production, warehouse places). Completed
100 projects with “Turn Key” Condition.
Overview
Potential development area: 50 ha
2014 yr. Phase 1 - 4.5 ha greenhouse and service area
2015 yr. Phase 2 - additional 7.5 ha greenhouse &
nursery
Total - 12 ha
Product
Tomato, potential for cucumber
Location
Gardabani, Kvemo Kartli
Target Markets
Local market - 30 % Import substitution
Production
Phase 1 - 4.5 ha cluster – 1700 tones per year
First harvest time: February 2015th
Phase 2 - 12 ha cluster – 4000 tones per year
First harvest time: September 2015th
21Georgian Co-Investment Fund | January 2015
Richel greenhouse examples:
Russia, Krasnodar: Azerbaijan, Baku:
Turkey, Antalya: Russia, Naltchik:
Tomato Greenhouse Development
Information Technology
BitFury – Bitcoin mining Data Centers
2323Georgian Co-Investment Fund | January 2015
BitFury and Investment opportunity
Investment opportunity
Loan Size US$15 M (principal already returned)
Loan purpose 55nm chip servers and commissioning data center in Georgia
Maturity 6 Months
Interest Rate 25% (absolute return) convertible to equity
Collateral Servers placed in Georgia / Parent Guarantee
Warrants option to convert US$2.5 M interest into equity @ US$250 M pre-money
Legal Counsel Dechert LLP
at Glance
Global leader in ASIC chip production for Bitcoin mining
~40% of worldwide Bitcoinsare mined on BitFury chips
Undisputed best market delivery on time and quality performance
Mining @ data centers in Finland, Iceland & Georgia
Rolling out 55nm chip this month and a new 40nm chip summer 2014
Expected YE2014 Revenues @ US$210 MM; YE2015 Revenues @ US$234 MM
Expected 415,000 Bitcoinsmined during 2014 and 2015
Current Bitcoinsownership balance at over 32,000
IPO targeted for 2015 (London or NY)
2424Georgian Co-Investment Fund | January 2015
Investment highlights
Experienced
Management
Culture
of Innovation
Diversified
Business Model
Favorable
Markets
World’s Leader
in Bitcoin Mining
Undisputed leader in bitcoin mining
~40% of all Bitcoins mined on BitFury chips
Behind largest mining pool GHASH.IO (30% of mining)
Bitcoins are making dent on a 7 trillion US$ financial industry
Over US$120 M allocated to Bitcoin ventures in 2013
Highest performing asset class in 2013
Institutional money moving in
Half of servers sold to third party / the other half used for own mining
Strategy to diversify into Bitcoin ecosystem: exchanges, wallets, applications
Mining centers located in three different locations
Current Bitcoin ownership balance at over 32,000
3 years of successful track record
Most efficient FPGA and ASIC applications
Team of 19 designers and engineers (in-house and contracted) working jointly
“Get Things Done” mentality & attitude. Only company delivering on time & on budget
Extensive experience in computer sciences; chip manufacturing & integration
Strong track record of successful capital raising & IPOs
Considered one of the most professional in the industry
2525Georgian Co-Investment Fund | January 2015
Bitcoin Mining
MININGCENTER
Finland2 MW >12
MW
MININGCENTER
Iceland3 MW > 10
MW
Amsterdam
MININGCENTER
Georgia0.1 MW > 12
MW
San Francisco
BitFury has diversified MiningOperations in Iceland, Finland & Georgia.
Expected Megawatt Capacity by year end @ 34 MW
2626Georgian Co-Investment Fund | January 2015
George Bachiashvili
Chief Executive Officer
Tel: +995 322 470 003
Email: [email protected]
Contacts
Thea Jokhadze
Chief Financial Officer
Tel: +995 322 470 004 ext. 160
Email: [email protected]
Tinatin Odilavadze
Head of Public Relations
Tel: +995 322 470 004 ext. 151
Email: [email protected]
