Problems over Rustavi Iron and Steel Works

A British Company, Thames Steel, is desperately trying to regain control of its asset in Georgia but faces some obstacles “which are both dangerous and discouraging, not only for us as an investor but for the whole country as well,” says Mr. Thomas Blake, the Director of Thames Steel who was sent to Georgia in mid-July to resolve the situation.

The Messenger has interviewed Mr. Blake and also contacted Vitali Eligulashvili, the General Manager of the party he is in dispute with, Joint Stock Company Georgian Steel, who kindly re-addressed our questions to the company’s PR Department. This later submitted to us the letter to the right if this interview, which we received in Georgian and translated ourselves. We publish both materials with the utmost concern and hope that the appropriate Georgian bodies, specifically the Ministry of Economic Development of Georgia and Parliament, will take an interest in the issue and try to resolve it, as we appreciate and support the striving of the Georgian State to establish its image as an attractive destination for foreign investment for the benefit and welfare of the people of Georgia.



Here is an interview with Mr. Thomas Blake



Please tell us about your company
Thames Steel UK Limited is a British company, based in London. It acquired the Rustavi Iron and Steel Works in late 2007 and the total investment to date is over $70M.

Why did you come to Georgia?
I came to take up my appointment as the new Director of our holding company in Georgia, Energy & Industry Complex LLC, which owns the Rustavi Iron and Steel Works. We wanted to make a detailed assessment of the state of the plant and its immediate and long term prospects. We also wanted to assess the performance of the management team here since Thames Steel became the shareholder. If necessary, we were ready to make management changes. This has proved problematic.

What problem are you facing?
Well, the first problem we are facing is a total lack of co-operation by the current management team here. In fact the director of the plant is refusing to meet with me, and won’t even let me into the plant or our office. I have been unable to access company information and records since I arrived in Georgia in mid July. I’m not sure how they think we can increase our investment, and the plant needs more investment, if they refuse to share any information with us. They are pretty determined and seem to be willing to go to extraordinary lengths to stop us. For example, after I was appointed as Director of Energy & Industry Complex they managed to obtain an injunction from the local court retroactively blocking my appointment. That is an incredible decision which we are now forced to appeal in a lengthy and costly process of litigation, resources we would rather be spending on securing a future for the plant and our investment in it.
Most worryingly, we have information that the situation at the plant is rapidly deteriorating. We hear that employees have not been paid for several months, the plant is itself idle, and management are cutting up equipment to sell as scrap. The sale of scrap is a particular concern, because as we know it also includes equipment which still has a useful life. We believe the actions of the current management are threatening the very future of steel making and processing at Rustavi.

What are you going to do to protect your interests in Georgia?
We are pursuing all available options open to a company in our situation. We are taking legal action in the Georgian courts, and we will be requesting help directly from the Georgian government. We are also asking for assistance from the UK government. Our embassy has already written to the Minister of Economic Development expressing concern and I hope they will be able to visit the plant. Once we regain control of our assets, we intend to undertake a very thorough investigation of the management’s past activities and if there is any evidence of wrongdoing we reserve the right to take appropriate legal action against them.

How can the UK government help you?
We had a meeting with the UK Foreign Office in London and they were very concerned after hearing about our problems in Georgia. We hope that with their help the appropriate departments in the Georgian Government can be briefed and encouraged to support us. We are very confident that when the Georgian Government fully understands our situation it will take all proper and fair actions open to it.

What can you say about your situation in Georgia?
It’s a bit of a shock to me after the efforts made by the government in recent years to improve the investment climate in Georgia. They were doing a lot of positive things and taking many of the right steps but our situation is a big step backwards which will certainly discourage investors from coming to Georgia. In that respect, this is hugely damaging to your country. We hope though, that our problem is limited to unauthorized actions by a small group of managers and that there is no hidden political agenda here.



Information on Thames Steel
Thames Steel UK Limited is a British company and owns 99% of Energy and Industry Complex LLC, which in turn owns 100% of Joint Stock Company Georgian Steel and 83.7% of Joint Stock Company Tuji XXI. The other 1% of Energy and Industry Complex LLC is owned by Joint Stock Company Georgian Steel.
The Rustavi Iron and Steel Works was founded in 1944 and became the centre of an industrial complex supporting a town of 150,000 people. The town of Rustavi is located 30km from Tbilisi. At its peak, the plant was producing over 1.0M tonnes of steel and steel products annually.



The response of JSC Georgian Steel
Joint Stock Company Georgian steel is a company registered according to Georgian legislation. Proceeding from this, the General Director and management of this enterprise, as honest entrepreneurs, are obliged to act according to this legislation and the interests of the company. We categorically state that JSC Georgian Steel’s management has never violated these principles and will remain devoted to them.
In response to the question asked by you, we can say only one thing: the doors of our enterprise are open for everyone, but nobody will be allowed in without appropriate documentation or without clearly stating their purpose. Anyone who has been even once to a big enterprise will well understand that the entry of non-personnel and the holding of excursions to premises being renovated is limited.
Concerning the future plans of the enterprise, we will soon unveil a lot of pleasant novelties and hope that your newspaper’s staff will also be among the multiple guests who will visit us.

with respect
Public Relations Service of JSC Georgian Steel.