What were the risks posed by Georgia and what mechanisms did AES use to mitigate these risks?
The financial losses of the electricity sector of Georgia totaled between a quarter of a billion and $400 million. The government believed that a private investor could help mitigate the risks and losses for Georgia. One profound problem that needed attention was the delayed maintenance and repairs that the government lacked the capital to undertake. This, in effect, allowed for only 42% available capacity. Another problem was the egregiously low collection rates, which ranged from 20 to 40 percent because most of the population stole electricity using illegal lines. A third problem Georgia had was the rampant corruption in the energy sector. The rate of theft of domestic funds was very high, which as a result left less money for the ...view middle of the document...
The employees loved Scholey and his new strategies. The other half included combatting corruption.
Who were the allies and opponents in making AES-Telasi a viable company? Why do they support or oppose AES’s interests?
One clear ally of AES- Telasi was the Georgian government, who was severely overwhelmed by its inability to provide electricity to its people. It facilitated the creation of AES- Telasi, hoping that a private investor would help solve their problems. Scholey’s efforts to generate returns from AES-Telasi were repeatedly slowed down by a variety of opponents stretching from local corruption networks benefiting from free electricity supplies for their industrial firms to the export of stolen electricity to to Moscow where the Russian government increasingly used its state-owned enterprises selling gas or electricity to exploit Georgian corruption networks in the interests of Russian foreign policy (Wharton 15) . Scholey was fighting corruption on multiple fronts and time and time again switched off power for prominent users who did not want to pay. His logic was simple and fair.
Evaluate Scholey’s strategy for managing the risks in Georgia. Is this strategy likely to work?
Scholey’s strategy for managing the risks in Georgia is pretty evident from the case. He invested in new plant and equipment to deal with the soaring demand for electricity, he shut down customers that weren’t paying, including some high profile industrial offices, and he empowered workers. This seems like a solid strategy but it might not be so sustainable in the long term. Its very difficult for one company to take on an entire country of customers who aren’t paying, while at the same time dealing with all the bureaucratic corruption. It might be wise for AES- Telasi to team up with other firms or organizations in the long term, in order to retain its strong foothold in the energy sector.