BISNIS Trades & Tenders, August 22, 1999

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

The Business Information Service for the Newly Independent States (BISNIS) is the U.S. Department of Commerce's information clearinghouse on trade and investment in the emerging markets of the newly independent states of the former Soviet Union. BISNIS has created the "BISNIS Trades & Tenders" electronic newsletter to help U.S. companies find business opportunities in these expanding markets.

These opportunities are provided solely as an informational service and do not represent an endorsement by the U.S. Department of Commerce. Verification of leads is the responsibility of the reader. BISNIS may consider other private sector‑generated trade leads and tenders, in electronic form only, and publish on a space‑available basis. Please send your leads to BISNIS@ITA.DOC.GOV

A full selection of BISNIS leads and other market intelligence are available via BISNIS OnLine at: www.bisnis.doc.gov

Please also find another 2 trade leads in this document.

Table of 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) and others) - Georgia

Lead #9: Tender for Chemical Fiber Facility - Georgia

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

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

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

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Table of Contents for this Document:

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Lead #1: Agricultural Equipment Leasing Firms – Kyrgyzstan

Lead #2: Information About Privatization Of Energy Generation 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 corporation located in Washington, D.C., is providing technical assistance and technology transfer services in the Kyrgyz Republic under an agreement supported by the US Department of Agriculture’s Food for Progress program.

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

To qualify, a firm must provide a full-time expatriate manager and such support staff experienced in marketing and maintenance of farm equipment as to create and sustain a viable operation committed to cooperative efforts to increase agricultural productivity and to modernize the processing of agricultural products.

INSTRUCTIONS TO OFFERORS

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

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

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

The pre-qualification documents shall include 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 offer the information requested on the Corporate Profile sheet included with this document.

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

The firm shall be required to develop and implement marketing plans to reach farm cooperatives, associations and individual farm enterprises.

From local funds generated under the on-going USDA Food for Progress program, ACDI/VOCA-Kyrgyz Republic is prepared to offer funding for local start-up and support expenditures as specified further herein.

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

ACDI/VOCA

Attn: Amy Holecek

50 F Street, NW, Suite 1100

Washington, D.C. 20001

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

TERMS OF REFERENCE

A. BACKGROUND

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

The leasing operation would be established in or near the city of Osh located in the Osh Oblast. Osh Oblast has a population in excess of 1.4 million inhabitants (1997) and is located at the eastern end of the fertile Fergana Valley, bordering Uzbekistan, Tajikistan and China. It is the most important economic center in the southern Kyrgyz Republic, situated at an altitude of 700 to 1,000 meters. The heavily populated and 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 an important commercial center with one of the largest trading markets in Central Asia. Osh is surrounded by an area of intense agricultural production and is the gateway to another agriculturally rich area in the Jalal-Abad Oblast to the north.

As the regional capital and the second largest city in the Kyrgyz Republic, Osh has well-developed public social services, including a university and several specialized educational institutions, major regional health-care clinics and hospitals, and is the headquarters of the oblast administration. The city is approximately 3,000 years old, and is situated on the former Silk Road with a rich history.

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

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

The region is aptly 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 Kyrgyz Republic and 20% of the nation’s sheep and goatherds.

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

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

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

B. AGRICULTURAL TECHNICAL SERVICES

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

To establish and maintain a base of operations and to market the services effectively, the selected firm will be required to enter into a joint venture arrangement with a local firm.

C. FINANCIAL INTERMEDIARIES

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

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

ADCA was legally established by the ACDI/VOCA FFP program and the Kyrgyz Swiss Agro-Credit Djalal Abad Project. It also is a locally registered, member-owned, not-for-profit credit facility operating in Djalal Abad Oblast, providing financial assistance in the form of credits to small farmers engaged in agricultural production, business and services.

KAFC has been established to provide financial assistance to farmers in the absence of other large lending institutions, which have ceased offering credit to the agricultural sector. KAFC is in the process of privatization (the Kyrgyz Government is still the principal shareholder). Currently the Kyrgyz Government and the World Bank are the sources of the KAFC’s current resources of about US $8 million.

KAFC provides credit for various agricultural operations, primarily to finance inputs. However, they are in a position to make loans to farmers to lease equipment such as the joint venture would make available. In addition, KAFC is able to guarantee payments in hard currency, avoiding the need to deal with in-kind crop payments or barter trade to convert payments to hard currency. Farmers may receive credit from KAFC twice a year, for the production and harvest seasons respectively.

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

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

The Central Asian-American Enterprise Fund, established by the US Government, is a privately managed, venture capital institution in the Kyrgyz Republic. The fund provides financing to commercially viable small and medium-sized enterprises. The fund welcomes the participation of international partners, especially US companies, who are willing to provide risk capital, management expertise and new technology, and who wish to develop a long-term presence in the region to explore new markets for US exports in Central Asia.

D. LEGAL ISSUES

There are no specific regulations or restrictions pertaining to leasing operations at this time. There is no specific code regarding leasing currently in effect. However, one may be enacted in 1999.

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

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

E. CURRENCY EXCHANGE

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

Demir Kyrgz International Bank (DKIB) is another full service commercial bank with its head office in Bishkek and a branch office in Osh. DKIB maintains an extensive network and provides access to worldwide financial services. It has the capacity to handle international transaction and fund transfers in major currencies. The DKIB has The Bank of New York and Citibank N.A. as corresponding banks in the US.

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Lead #2: INFORMATION ABOUT PRIVATIZATION OF ENERGY GENERATION AND DISTRIBUTION COMPANIES

1. Introduction

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

reliability of electricity supply, the Government of Georgia (the

"Government"), through the Ministry of State Property Management (the

"Ministry" or "MoSPM"), is privatising the electricity sector in a

competitive direct sale and tender process open to domestic and foreign

investors. It is envisaged that a strategic privatisation will improve 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 its financial

advisor in the privatisation. The Government has already completed the

initial preparation, including the unbundling of the electricity sector into

generation, transmission and distribution to improve transparency.

The Ministry of State Property Management is announcing privatisation of

shares of distribution companies and thermal power station through a

competitive direct sale process and a competitive tender for Management

Contracts for shares of JSCs established through corporatisation of hydro

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

may include a consortium.

2. Transaction Structure

Buyers are invited to participate in the competitive direct sale process or

tender process for Management Contracts. Generation Assets and some 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 I JSC (HPP)

through a Tender;

(iv) 25 year Management Contract for 100% of shares in Khramhesi II 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 Lajanurhesi JSC (HPP)

through a Tender;

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

through a Tender;

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

through a Tender;

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

(HPP) through a Tender;

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

through a Tender

Table illustrating brief information on the above JSCs is attached to this

announcement (see Annex 1)

Bidders must have prior experience in operating a hydro or thermal plant of

similar size they wish to acquire.

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

Cluster the Bidder is participating in privatisation of each item in the

Cluster.

Cluster 3

Cluster 3 contains equity stakes of all remaining regional distribution

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

Privatisation of these companies will be through competitive direct sale of

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

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

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

(transmission company), treasury enterprise, through direct sale of them

along with the regional distribution companies.

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

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

location indexes of Georgian cities (districts), area measuring and

methodology for defining normative prices for non-agricultural land 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 5:00 P.M. Tbilisi

Time, on August 20, 1999.

The Bids should be accompanied by the following:

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

000 to the bank account of the Ministry of State Property Management

(Georgian National Bank, Foreign Currency Account # 070472, Code 220101107;

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

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

down payment will be included in the total purchase price executed by the

successful Bidder. All unsuccessful bidders will be refunded their down

payment;

* Filled out Application form as established which should reflect the

Bidders consent regarding execution of the tender conditions;

* ID card or Passport details;

* Notarially confirmed Power of Attorney if the person is acting on

behalf of any other person;

* Legal entities are required to submit company registration and

foundation documentation.

Bids placed in sealed envelopes and also the above documents should be sent

to the following address:

Send to: With copy to:

Mr. Mikheil Ukleba Minister Ministry of State Property Management 64,

Chavchavadze Avenue 380062 Tbilisi, Georgia; Tel: +995 (32) 294 875 Mr.

Jason Schaeffer Merrill Lynch International Ropemaker Place 25 Ropemaker

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

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

above should reach Merrill lynch office at the above address not earlier

than 1:00 P.M. Greenwich Mean Time (5:00P.M. Tbilisi, Georgia Time), 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 for the

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:

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

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

less Merrill Lynch's success fee;

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

Offer");

* Investment commitments (indicating amount in US Dollars and year by

year timing including for the first five years);

o Electricity tariff requested by the Bidder;

* Letter detailing financial ability of the Bidder to execute

transaction;

* Details of the corporate entity used to effect the acquisition;

* Future development plans of the asset the Bidder is acquiring;

* Mark up copy of the Agreement/Contract provided by the Government of

Georgia.

* In the case of Tbilsresi JSC proposals regarding operation of

Tbilsresi JSC in Autumn and Winter months, which shall respectively be

reflected in the Sale and Purchase Agreement.

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

meet the following conditions set forth will not be considered:o Guarantee

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

supply electricity at the prevailing tariff to all paying customers, in

accordance with existing Georgian Legislation;

* At the 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

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

acquisition and/or future investment commitments should not be contingent

upon the arrangement of financing. The inclusion of any such contingency in

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

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

financial ability to execute the transaction.

In the case of Lajanurhesi JSC and Khramhesi II JSC the credits allocated by

OECF should be reflected in the Definitive Management Contract.

5. Guidelines for Binding Bids

* o Consortiums may submit bids for either purchase of Distribution

Companies and Generation Assets or 25 year management Contract;

* Bidders should complete all due diligence prior to submitting a

binding bid. Any bid that is conditional upon satisfactory completion of due

diligence will not be considered;

* Binding bids containing provisions that trigger an automatic

increase in the consideration offered depending upon the consideration

offered by others will not be considered; and

* It is not anticipated that Bidders will be allowed to change their

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

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 of Tbilsresi will

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

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

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

bids as soon as practicable after the bid deadline. The MoSPM reserves the

right without further notice to discuss with any Bidder the terms of any

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

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

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

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

result. The MoSPM's interpretation of the rules and procedures established

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

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

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

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

Management Contract and to make a public announcement of the transaction in

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

signing or closing the transaction may result in the MoSPM choosing an

alternative binding bid.

Agreement/Management Contract has been executed and delivered to the MoSPM.

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

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

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

6.2. Selection Criteria

The successful Bidder will be selected using the bid evaluation criteria set

out below and on the basis of an objective comparison of the bids received.

Bids for each first three Clusters will be evaluated in complex and the

Tender Commission will make decision based on the following main selection

criteria (which are expected to carry approximately equal weighting) :

* o The Financial Offer made for the purchase/management of the equity

stake.

* The investment commitments undertaken by the Bidder;

* Amount of Debt the Bidder commits to assume;

* Electricity tariff required by the bidder; and

* The extent to which the Sale and Purchase Agreement/Management

Contract has been amended.

The other bid evaluation criteria, in no particular order of importance,

will include:

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

sector in the State of Georgia into a world-class operation through

technology transfer, human resource training and skills development;

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

consortium is implemented as soon as possible in order to assist the MoSPM

in assessing the working relationship between the consortium members; and

* The commitment to use local skills while implementing rehabilitation

and modernisation of the distribution System(s)

* In evaluating the Bids received priority would be given to the Bid

proposing acquisition of additional distribution companies.