PRESS RELEASE

November 3, 1998

U.S. Government Assists Rustavi in Providing More Electricity to Customers

Tbilisi-- U.S. government contractors and Rustavi municipal authorities are preparing to expand a pilot project in metering electrical use and customer billing to cover a total of more than 9,000 residential customers in Rustavi.

Begun in July, with funding from the U.S. government's Agency for International Development (USAID), the pilot project has been run by the U.S. firm of Hagler Bailly and the Rustavi Municipal Distribution Company. The project's primary objective has been to improve electrical distribution company revenue collection from customers in the cheapest way possible to increase power supplies to consumers.

After three months of implementation of the project's new computerized metering, billing, and collections system, customer cash collection rates increased from below 10 percent to 100 percent of electricity billed, and power supplies have increased from less than six hours per day to nearly 24 hours per day. Commercial and technical losses together amounted to less than 5 percent of collected revenues. These results have been sustained throughout the summer.

Using additional funds from USAID, the planned expansion will add another 5,000 customers to the 4,100 residential customers in Rustavi block apartments now covered by the pilot project. The expansion is expected to be completed by early 1999.

In preparation for winter, the Rustavi Municipal Distribution Company will soon enter into a direct contract with Sakenergo for the 24-hour supply of electricity to pilot project feeders. All money collected from customers in the pilot project area will be deposited in a new, separate bank account, and payments to Sakenergo for 24-hour power supplies will be made directly from this account. This will ensure full payment to Sakenergo for power supplied to pilot feeders and is required to ensure full power supplies to pilot project electricity customers during the upcoming winter period.

The results of the Rustavi pilot project in power distribution and commercialization support the Georgian government's privatization strategy of attracting the capital and commercial know-how from international investors that is necessary to solve problems in the electrical distribution sector.