Michal Štefl and Daniel Mahovský: Georgia has become our second home

Czech engineers have been building hydro power plants all over the world for decades. Now, however, an opportunity to participate in the famous tradition of the Czech energy construction industry has opened up also for Czech investors. An experienced team of building engineers and investment specialists have established an investment fund that will help grow eco-friendly hydro power plants on the wild rivers in Georgia’s Caucasus mountains. This is what we have discussed with Michal Štefl, vice president of the Czech Chamber of Commerce and a prominent Czech property developer, and Daniel Mahovský, experienced entrepreneur in the field of renewable energy sources.

Many Czech tourists have been travelling to Georgia recently, perhaps also thanks to the many TV documentaries about this beautiful country. How did you become interested in Georgia?

Štefl: I was the CEO of a large construction company for over twenty years. We were looking for opportunities for further development in the Eastern markets. When we were building a motorway in Azerbaijan, we also explored the neighbouring Georgia, which is of course an attractive tourist destination, but also an enormously interesting business and investment target.

Mahovský: I was looking for investment opportunities in the field of renewable energy sources for a Czech company, mostly abroad. I have found Georgia attractive in many ways, and the country has in fact become my second home. I basically see no reason to seek investment opportunities anywhere else than here.

Why is that so? What makes Georgia different from other countries east of the Czech Republic?

Mahovský: Historically, Georgia has very similar values to ours. The country has an association agreement with the European Union and there are more EU flags in the streets of Georgian cities than in most member countries. According to the latest World Bank Doing Business ranking, Georgia is the seventh best country in the world in terms of ease of doing business. To compare, the Czech Republic is forty-first. It is not just about simplifying and digitising all necessary processes, but also about a very pro-client approach of Georgian officials. Other benefits include simple and low taxes, tariff-free regime with a third of the world's markets and cheap labour.

Štefl: I should also mention that Georgians are perhaps the most hospitable nation of all. They put their guests above anything else. And this also translates into friendly business cooperation with foreign investors and entrepreneurs.

Does Georgia also offer any support programmes for foreign investors?

Štefl: Like CzechInvest in our country, there is a similar service provided here by Enterprise Georgia with the Produce in Georgia programme. It offers free use of state-owned land or payment of interest on the loan.

Mahovský: We should also mention the Partnership Fund. This is a state-owned investment fund that gives investors the opportunity to finance joint projects. The fund’s priority areas for financing include energy, agriculture, engineering, real estate, tourism, logistics and infrastructure.

In what industries do you see the biggest potential for Czech investors in Georgia?

Štefl: First of all, the Czech Republic is already one of the five biggest investors in Georgia, with energy having the largest share. For example, the Czech company Energo-Pro owns about 85% of the energy distribution network, while it also acquired 15 hydroelectric power plants in privatisation. Moravské naftové doly are also very active these days. Several Czech development projects are also being built in Georgia, be it hotel-type or apartment complexes.

Mahovský: With the high education level of the population, there is an opportunity to use the country's human potential in many different areas, such as shared services, customer support centres or IT. According to analyses by KPMG and Deloitte, about 60% of young people and 40% of the total population in Georgia speak English fluently, while some 10% speak German.

Georgians put their guests above anything else. And this also translates into friendly business cooperation.

Gentlemen, you have jointly founded the Georgia Energy SICAV qualified investor fund, which allows Czech investors to participate in the construction and operation of hydroelectric power plants in Georgia. When and how did this idea begin?

Mahovský: In 2019, I founded a company that was involved in the development of hydro power plants up to the construction permit stage with the aim of subsequent sales to investors, primarily foreign investment funds. When I got to know Michal and his colleagues, we found out that together we have enough experience to implement and run these projects ourselves.

Štefl: The investment fund provides us with sufficient resources so that we can finance, together with banks, the entire construction process of our projects. In addition, we are the only Czech fund that offers the option of investing in hydro power plants.

Why hydroelectric power plants in Georgia? And how does it go together with wild nature?

Štefl: There are more than 300 rivers in Georgia with ideal conditions for hydroelectric power plants. They rise in the Greater Caucasus mountains and have a fast flow and large drop, thanks to the elevation. The rivers are fed by glaciers and high precipitation due to the westerly winds from the Black Sea. Hydro power plants produce 80% of electricity in Georgia. However, the country is also still dependent on the import of electricity from neighbouring countries and production of electricity from natural gas. Building hydroelectric power plants is therefore a priority for the local government.

Mahovský: We only supply run-of-river hydro power plants. We don't build any storage dams. With the help of a weir, we take away part of the river flow, which we lead through an underground pressure pipe along the river all the way to the turbines, and then return it back again. At the same time, we design our constructions so that they blend in with the environment as much as possible.

Both of you have experience with the construction of other renewable energy sources, be it in the Czech Republic or abroad. Are you looking to expand your latest venture beyond hydro power and Georgia?

Mahovský: As I mentioned, Georgia is now number one for me. Being active in this market, we also receive offers to build photovoltaic and wind power plants here. Although hydroelectric power plants are a priority for us, we are involved in these projects as well.

Štefl: It definitely makes sense to focus on other projects as well. On the other hand, you need to realise that in any new country, you need several years before you get to know it enough to be able to do successful business there over the long term. We know Georgia really well, and we have many great business partners and friends there.

Mr. Mahovský and Mr. Štefl were interviewed by Jana Jenšíková

Photo credits: D. Mahovský and M. Štefl