Georgian Wines

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The project consists of a US$ 5 million (EUR 4.8 million) loan to one of the leading Georgian wine producers, Georgian Wines & Spirits Ltd (GWS), to support the financing of its development programme. A commercial guarantee, subject to a carve-out for specified political events, is provided by the sponsor of the project and the main shareholder in the company, PR Europe S.A., a subsidiary of Pernod Ricard S.A. The proceeds of the loan will complement the company’s internally generated cash flows and will enable GWS to: (i) upgrade its equipment and facilities and raise quality standards; (ii) selectively increase its production capacity; (iii) improve its raw material procurement through investments in vineyards; and (iv) purchase minority interests in its Achinebuli winery subsidiary. The transition impact and demonstration effect of the project are expected to be high, given: (i) its support for a private sector company, strengthening market-oriented behaviour in Georgia; (ii) its strong economic linkages with the upstream wine-growing sector, which is badly in need of investment; and (iii) its support for the restructuring of a post-privatised company and the establishment of this company as a key market player. Client: GWS is one of the leading Georgian wine producers and the country’s leading wine exporter. It is majority owned by the sponsor, PR Europe S.A. GWS is the majority owner of the Achinebuli winery in the Kakheti region of Georgia. The company sold 1.6 million litres of wines and spirits in 1998. Sponsor: PR Europe S.A., the majority owner of GWS, is a fully owned subsidiary of Pernod Ricard S.A., the leading European alcoholic beverages producer and the fifth-largest wor dwide. Pernod Ricard S.A. had a consolidated net income of EUR 202 million on EUR 3.1 billion net sales in 1998. The Pernod Ricard Group has a strong track record in developing and implementing wine projects around the world, as shown by the success of its Australian Jacob’s Creek brand. US$ 5 million (EUR 4.8 million) medium-term loan with a commercial guarantee from the sponsor, subject to a carve-out for specified political events. The project was screened B/1, requiring an environmental analysis and audit. These were conducted by independent environmental consultants in May/June 1999. The analysis and audit revealed no major environmental problems associated with the facilities. The main issues identified during the audit are: (i) the need for the company to conclude new contracts with the relevant municipal services for water extraction, waste-water discharge and solid waste disposal, and to obtain authorisation for air emissions from power generators and boilers; and (ii) the need to improve environmental management and housekeeping, in particular through the introduction of regular monitoring of water quality and waste-water effluent and physical protection of the two water wells at the Achinebuli site from misuse and damage. New developments, such as the planned introduction of a new bottling line, will require an Environmental Impact Assessment in accordance with Georgian regulations. The Environmental Action Plan (EAP), which has been agreed with the company on the basis of the results of the analysis and audit, includes appropriate measures to address these issues. The implementation of some actions that are due immediately, in particular the submission of the application for outstanding contracts and authorisations, will be a condition to first disbursement. The company will be required to comply with Georgian and applicable EU environmental standards. According to the audit, the company has not been subject to fines or penalties for non-compliance with health, safety and environmental regulations in the past.. The company will report annually to the Bank on environmental matters, such as compliance status and progress with implementation of the EAP. None