Page 56 - GEORptNov19

exchange for the lack of regulation.
“All these problems are familiar to the authorities, but they are not moving forward. Such inaction is the result of lobbying, which is done at a higher level than that of members of parliament and is directed at the entourage of [Bidzina] Ivanishvili [the billionaire oligarch and ex-PM who heads Georgian Dream]. One of the main lobbyists of the gambling business is Ucha Mamatsashvili. That [lobbying] is what gives this business a guarantee [to remain unregulated,” said Levan Gogichaishvili MP, the initiator of a draft law on gambling.
At such a magnitude, the gambling industry in Georgia poses multiple threats ranging from money laundering and other financial crimes to exchange rate volatility.
The gambling sector is undoubtedly always at risk of money laundering, as noted in a US State Department report on Georgia.
The International Monetary Fund has also taken an interest in Georgia's gambling industry turnover. It did so lately with a​ ​technical assistance report​.
9.2 ​Major corporate news 9.2.1 ​Oil & gas corporate news
First-half net profit at Georgian Oil and Gas Corporation (GOGC) plummeted by 68.5% y/y to $11.9mn, despite robust Ebitda, dragged down by foreign exchange effects, according to unaudited results. Revenue was up 17.8% y/y to $160.4mn in the period, mostly due to a 19.8% y/y ($106.7mn) increase in the sale of gas. Revenue from electricity generation, the second largest revenue category for the company, was up 21.6% y/y, while Georgian lari (GEL) denominated gas pipeline rental revenue was down 7.1% y/y.
Meanwhile, operating expenses increased 14.9% y/y to $130.9mn in the first half of the year. The cost of gas, the largest expense category, which combines gas purchased for resale (85% of cost of gas) and gas used by Gardabani I power plant, grew 19.6% y/y to $114.5mn.
GOGC’s adjusted Ebitda grew by 21.7% y/y to $36.6mn, supported by strong H1 revenues. This translated into an adjusted Ebitda margin of 22.8% in the half, slightly above last year’s level (22.1% in H1 2018).
But the local currency depreciated by 7% y/y against the dollar during the six months, generating a non-cash FX loss of $16.7mn in 1H19, compared to a $11.2mn gain in 1H18.
After upgrading Georgia’s sovereign rating from BB- to BB in October 2019, S&P Ratings lifted GOGC’s rating from B+ to BB-. The decision was backed by GOGC’s strong financial position (sizeable cash balance, stable earnings and steady cash flows from the electricity segment). In addition, S&P Ratings expected the commissioning of Gardabani II in late 2019 to improve the company’s financial position, after a temporary deterioration of credit metrics (high capex, lower cash balance).
Notably, S&P Ratings has not changed Georgian Railway’s credit rating, leaving it at B+, two notches below that of the government.
56​ GEORGIA Country Report​ November 2019 ​ ​www.intellinews.com