Response to discussions in the Internet regarding the Rustavi Metallurgical Plant

I want to respond to the discussions held on the Internet forums Forum.ge and Conference.ge. First of all I would like to thank people for their interest in our situation and at the same time address some questions and criticisms which have been raised in these forum discussions:

1) As regards comments about employees of the plant not being paid, I must unfortunately agree with you, because we are receiving similar information from other sources also, and I have to admit that this is indeed a huge problem.

2) According to Georgian legislation if you are the majority shareholder, there should be no problem at all in dismissing the Director of a Georgian company. For this very purpose a partners meeting of Energy and Industry Complex LLC was held, which is the 100% shareholder of JSC Georgian Steel. The first obstacle we faced was the absence of Mr. Shio Rekhviashvili (the present Director of Energy and Industry Complex LLC) because he left Tbilisi for a “vacation” and could not be contacted for several months. Nevertheless the partners meeting was finally held and voted for Mr. Rekhviashvili’s dismissal. Immediately thereafter, Vili Eligulashvili, Director of JSC Georgian Steel, applied for an injunction to stop Thames Steel from adopting a decision at the partners meeting of Energy and Industry Complex LLC on changing the director or amending the charter.

We are to this day astonished that the Rustavi court satisfied Mr. Eligulashvili’s application. The Rustavi Tax Inspection accordingly suspended proceedings to register me as the new Director of Energy and Industry Complex LLC until “final resolution of the case”. So my question is this: What should be resolved here? That the majority shareholder has the right to change a director? This is all well defined and enshrined in the legislation. Moreover we could be waiting months or years for a final decision of the court. Surely a better use of the court’s time and resources would be action against the current management to stop the dismantling of the plant for sale as scrap in order to avoid the complete devastation of one of Georgia’s strategic enterprises.

It should be re-iterated here that I am a Director of a British company which has 100% beneficial ownership of JSC Georgian Steel through its direct shareholding in Energy and Industry Complex LLC, but we have no “right” to visit the plant itself or access the company records. All we can do is observe this critical situation from the sidelines and express our deep concern that our rights are not being protected here. This could not happen in the UK or other developed economies.

We are not trying to avoid our responsibility towards the employees of the plant. On the contrary, we are sure that the ignorant and irresponsible behaviour of the incumbent management could seriously damage our own reputation and could lead to significant problems once we finally gain control of our assets in Georgia.

I would like to appeal to Georgian society and professional NGOs to articulate their views on protecting rights of investors and encouraging foreign investment. This is even more crucial now, at a time when the Georgian Government’s hard work is showing results and Georgia has advanced to 11th place in the Doing Business 2010 report. It would be a shame to lose this momentum because of the misguided decisions of a few minor government officials.

Finally, on behalf of our company, I want to say that Georgia is still a priority for us and we intend to re-animate the metallurgical industry in your country. However if the problems we are facing are not resolved soon, there will surely be negative effects on Georgia’s investment ratings and future investment into the country.

I can be contacted by e-mail at: trb_georgia@yahoo.com



With respect,

Thomas R. Blake

Director
Thames Steel UK Limited