Georgia Global Utilities (GGU), a fully owned subsidiary of Georgia Capital (GCAP), owns and operates the water cycle infrastructures of Tbilisi, Miskheta and Rustavi, including: Zhinvali dam and reservoir, with a capacity of 520 Hm3, 7 Drinking Water Treatment Plants (DWTP), 1 large Wastewater Treatment Plant (WWTP), 58 pumping stations, 118 reservoirs and 4,300 km of distribution networks and 1,700 km of sewerage. It also owns and operates important renewable energy generation assets with an installed capacity of 240 MW in 9 mainly hydroelectric plants, some of them associated with the water cycle assets (150 MW) and others independent (90 MW).
Aqualia and GCAP have reached an agreement whereby the process will be implemented in two phases during 2022: In the first phase, which is expected to be completed by the end of January, Aqualia will acquire 65% of the existing GGU, which will include the water and renewable energy assets, for a price of USD 180 million. GGU has currently issued a USD 250 million green bond, which is expected to be redeemed soon.
In a second phase, GGU will spin off the independent renewable assets, leaving only the water assets (and 4 hydroelectric plants associated with the water cycle infrastructures) in the perimeter of GGU, bringing Aqualia's shareholding to 80% of GGU. After the spin-off, GGU plans to issue a bond adjusted to the new perimeter of the company.
In the first phase, which is expected to be completed by the end of January, Aqualia will acquire 65% of the existing GGU
In addition, Aqualia has granted GCAP a put option, exercisable in 2025 or 2026, and GCAP has granted Aqualia a call option, exercisable on the expiry date of the put option period, for the remaining 20%.
The amount of the transaction, USD 180 million for 80% of the company, will represent a business valuation (BV) of 8.9 times EBITDA at the end of the current financial year 2021.
Georgia is a country with a thriving economy, transparent and open to foreign investment, a preferential partner of the EU, with an Association Agreement in force since 2016.
With a population of 3.7 million inhabitants, it receives 8 million tourists per year and ranks among the countries with the best business climate (World Bank. Ease of Doing Business Rank) and in transparency (Transparency International IPC Rank) at similar or better levels than several EU member countries.
Water management, like energy and gas, are regulated sectors in Georgia by the Georgian National Energy and Water Supply Regulatory Commission (GNERC). The regulatory system, of the Regulatory Asset Base (RAB) type, aims to attract investment in the utilities sector, ensuring that investors recover their capital and the costs of the operation with adequate returns. It is a familiar system for Aqualia as it is very similar to the one in place for Smvak (a fully owned subsidiary of Aqualia) in the Czech Republic.
The independence and professionalism of the GNERC have been two of the factors that have determined the decision to carry out the operation.
The amount of the transaction, USD 180 million for 80% of the company, will represent a business valuation (BV) of 8.9 times EBITDA at the end of the current financial year 2021
Georgia Capital is Georgia's largest investment group, listed on the London Stock Exchange, with a highly diversified portfolio in sectors such as banking, insurance, healthcare, retail pharmacy, food, and real estate, among others.
Commenting on the deal, Irakli Gilauri, Chairman and CEO of GCAP said: "This is an important milestone for Georgia Capital and marks the achievement of a key strategic priority with the successful completion of the full investment cycle of our strategy: invest, grow and monetise through a cash exit".
"I am delighted to have agreed the sale of the water services business to such a high-quality strategic acquirer as Aqualia. Aqualia's strong management team can add substantial value to the water services business in this new scenario, and it has our full support as a minority shareholder".
Felix Parra, CEO of Aqualia, said: "Aqualia's interest in Georgia and the Tbilisi water system goes back a long way, as we participated in the first privatisation process of the water supply and sanitation system in 2008, and we have followed closely and with interest the evolution of the asset to date".
"Aqualia and GCAP teams have been working for months on an agreement that creates value for both parties. In the case of Aqualia, this operation represents another milestone in the company's significant growth in recent years in the management of the end-to-end water cycle, whether in the award of long-term concessions or through the acquisition of regulated assets, in property, as in the case of GGU".
"GCAP will maintain a 20% stake in GGU in the coming years. In this way, the combination of its in-depth knowledge of the country's regulatory framework and the professionalism of its team, together with Aqualia's technology and experience in the water sector, guarantees the company's continued success and high standards of performance and quality of services".
Aqualia is the water management company owned by the citizen services group FCC (51%) and the Australian ethical fund IFM Investors (49%). The company is the fourth largest water company in Europe by population served and the ninth largest in the world, according to the latest Global Water Intelligence ranking (March 2021).
It currently serves 30 million users in 17 countries: Algeria, Saudi Arabia, Colombia, Chile, Ecuador, Egypt, United Arab Emirates, Spain, France, Italy, Mexico, Oman, Portugal, Qatar, Czech Republic, Romania, and Tunisia. In FY2020, it reported revenue of €1,188 million and EBITDA of €283 million, which was not down on FY2019 despite the pandemic. On 30 September 2021, EBITDA reached €217.1 million, an increase of 4.1% compared to the result at that date of the previous year.