ENKA Formally Terminates Contract with Government and Writes off Namakhvani’s $40 Million Assets
By Natalia Kochiashvili
Friday, March 25, 2022
The recently published 2021 financial report of ENKA Insaat shows that the investment agreement between the state and ENKA Renewables for the construction of Namakhvani HPP has been officially terminated. In addition, the financial report states that the company wrote off $40.4 million in investment and construction equipment for the Namakhvani hydropower plant.
ENKA planned to invest a total of $ 800 million in Georgia.
In September 2021, the company announced that it would terminate the investment agreement under Force Major, which was followed by the government explaining that it would continue to negotiate with the company to maintain the agreement. According to the ENKA financial report, the Georgian government failed to persuade the company to keep the contract.
ENKA Renewables Ltd, which is 90% owned by the group, terminated the contract signed on April 25, 2019, for the construction, ownership, and operation of the Namakhvani hydropower plant, which was signed with the Georgian Energy Development Fund, ESCO, and the Georgian State Electricity System.
The contract was terminated due to violation of the terms by the Government of Georgia and force majeure. "Because the plant and equipment can no longer be used like other property, the company wrote it off with a book value of $ 40,389,000,” the ENKA INSAAT financial report said.
Recall that in the spring of 2021, Prime Minister Irakli Gharibashvili noted that the project would not be implemented as it is. The government also announced a ‘moratorium’ and banned the company from starting construction of the dam for some time. A few months later, ENKA reported a force majeure and breach of contract and began preparations to terminate the contract.
The Georgian government last commented on the project on February 21, when then-Economy Minister Levan Davitashvili said the talks were being held at the lawyer level.
According to the Center for Social Justice, the Ministry of Economy did not meet the request of the Center for Social Justice to revoke the construction permit for Namakhvani HPP. The organization will appeal this decision of the Ministry in court.
According to the organization, the construction permit was illegally issued by the Technical and Construction Supervision Agency in April 2020, without mandatory documentation and justification. Examination of the permit issued at Namakhvani HPP reveals that the company has not followed the procedure set out in the substantiation and documentation law.
According to the Center, despite the termination of the contract, this does not mean the invalidity of the construction permit.
At the same time, the current, vague state of the project does not absolve the agencies that are issuing illegal permits from responsibility. The Center for Social Justice, therefore, considers it important to continue the ongoing legal dispute, including avoiding similar cases in the future.
“The study of the issuance of the permit reveals the loyal attitude of the representatives of the agency towards the company. Moreover, in issuing a conditional construction permit, the agency exceeded its authority and offered the permit seeker a way to obtain a construction permit in a simplified manner, with specific conditions and for the submission of mandatory documentation in the future,” the statement said.
