In 2014, IFC provided investment to support the construction and operation of a hydropower scheme that included three cascading hydropower projects on the Adjaristsqali River in Georgia to be developed by Adjaristsqali Georgia LLC (AGL). IFC’s support included a US $70 million loan, $34 million in equity, and an advisory services project to AGL. MIGA provided a $63 million guarantee to Tata Power International Pte. Limited to cover its equity investment in AGL. The Shuakhevi hydropower plant, a 185 megawatt facility, was the only plant of the three to begin operations in March 2020.

In February 2018, CAO received a complaint from twenty-two neighboring households in Rabati alleging that the construction activities related to the Shuakhevi power plant negatively impacted their lives, citing an increased risk of rockfalls and landslides; a decrease in groundwater levels; and harm to the biodiversity of the Adjaristsqali River and its tributaries, resulting in the disappearance of local and vulnerable fish species. They also claimed that AGL failed to address geological and social risks associated with the project and did not honor a 2014 agreement with the Government of Adjara and village residents to provide compensation for damages caused by the construction of the plant. In addition to submitting a complaint to CAO, the complainants filed complaints with the independent accountability mechanisms of the European Bank for Reconstruction and Development (EBRD) and the Asian Development Bank (ADB) as EBRD and ADB are co-financing the Shuakhevi hydropower project.

In April 2018, CAO found the complaint eligible and initiated an assessment during which the parties agreed to engage in a CAO-facilitated dispute resolution process to resolve the issues in the complaint. However, after two years of mediation, the process concluded in August 2020, as the parties were unable to reach a final agreement to address the concerns raised. 

In November 2020, in accordance with CAO’s Operational Guidelines, which were applicable at the time the complaint was filed, the complaint was referred to CAO’s Compliance function to review IFC’s and MIGA’s compliance with their environmental and social (E&S) policies. During compliance appraisal, CAO found that the issue raised regarding the project’s impacts on groundwater and biodiversity were potentially significant and concluded that an investigation was warranted related to these issues specifically. CAO’s Compliance Appraisal Report is available in English and Georgian. 

During its investigation, CAO found that, with respect to concerns related to groundwater, IFC’s due diligence did not identify or address the client’s performance gap with Performance Standard 1, resulting in a lack of baseline information on groundwater and local springs that communities depended on. Additionally, during supervision of the project, CAO found that IFC did not ensure its client incorporated measures to address risk and impacts related to water availability, again failing to ensure client compliance with Performance Standard 1. Despite the recognized importance of tunnel grouting and lining to limit impacts on local groundwater and springs, CAO’s investigation found that IFC did not require its client to grout tunnels until three years after construction of the hydropower plant began. Furthermore, IFC did not analyze spring water monitoring data to understand the impact of tunneling on local springs. CAO found that shortcomings in implementation and supervision of mitigation measures recommended to address potential impacts to groundwater use led to unreliable access to clean water, constituting harm to the complainants. 

CAO also found during its investigation that IFC’s due diligence did not properly ensure the client identified and assessed potential impacts to biodiversity commensurate with the scope and scale of the project to achieve a no net loss (NNL) on vulnerable and endangered fish species, as required in Performance Standards 1 and 6. This resulted in an inadequate biodiversity baseline and the establishment of an environmental flow of 10% of the annual average without an analysis to support it. Despite mitigation measures—such as fish monitoring and restocking—data available to CAO showed a decline in fish diversity and abundance during project construction. CAO concluded that there is a significant likelihood of harm to the aquatic habitat that should be assessed to ensure NNL. 

CAO’s Compliance Investigation Report, finalized in March 2025, is available in English and Georgian. In July 2025, in response to CAO’s investigation, IFC’s Board approved IFC’s Management Action Plan, which addresses areas for improvement in relation to the community water supply and biodiversity impact assessment and mitigation, including: 

• AGL’s support to the Shuakhevi Municipality in the provision of a long-term water supply of sufficient quality and quantity, with a particular focus on the Rabati neighborhood, while maintaining the current water supply system in the short term.
• AGL’s development of a statistical trend analysis and e-flow suitability analysis reports by international experts, with the intention of achieving no net loss of biodiversity where feasible, and by updating the Operational Biodiversity Action Plan, if needed. 

IFC’s Management Action Plan is available in English and Georgian.