MINISTRY OF INFRASTRUCTURE OF UKRAINE
Current concession projects in sea port sector of Ukraine
October 2017 Kyiv, Ukraine WORK ALREADY PERFORMED
1. The Ministry of Infrastructure has selected pilot concession projects in port sector
2. PPP Project Management Office “SP3ILNO” has been established by the Ministry and supported by Western NIS Enterprise Fund
3. EBRD and World Bank agreed to help the Ministry with the preparation of pre-feasibility studies
4. EBRD, World Bank with an institutional support of the “SP3ILNO” PPP PMO lead selection of the consultants and preparation of the pre-feasibility studies
5. “SP3ILNO” PPP PMO has developed Concept Notes of the projects, which were approved by the Ministry of Infrastructure, Ministry of Economy and Ministry of Finance
2 NEXT STEPS
1. Selecting the consultants for Full Feasibility Study preparation and Transaction advisory in cooperation with EBRD and IFC
2. Supporting the consultants team in preparation of Full Feasibility Study
3. Efficiency Analysis and approvals from the Ministry of Economy and Ministry of Finance
4. Preparation of tender documents
5. Establishing tender committee and launching the tender
3 1
SC “Olvia” concession project
4 1 STEVEDORING COMPANY OLVIA STEVEDORING COMPANY “OLVIA” AT GLANCE
179 7 1.53 10.3 Area (ha) Berths Quay Length Max Depth (m) (km) 5% 15.4 47% Market Share Revenue EBITDA Margin ($mln, 2016) (2016)
Cargo turnover million tons 2.4 2.5 2.4 2.2 2.2 1.8
2012 2013 2014 2015 2016 2017E
5 1 STEVEDORING COMPANY OLVIA CURRENT CARGO MIX IN THE PORT
Other 7%
Ferrous metal 1.82 32% 1.47 0.39 Cereals 0.17 33% Cargo turnover Mlntons in 2016: 0.29 0.56
0.19 2.2 0.65 mln tons 0.68 0.36
9M 2016 9M 2017 Construction materials 28% 6 1 STEVEDORING COMPANY OLVIA KEY CARGO MARKET FORECASTS
Ukraine Grain Exports Ukraine Iron & Steel 40 40 Exports 35 35 30 30 25 25
20 20 Mln tons Mln
Mln tons Mln 15 15 10 10 5 5 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Cereals & Cereal Preparations Fixed Vegetable Oils Animal Feedingstuffs Oilseeds & Nuts Port Olvia Traffic forecasts 2016-2040 - GRAIN Port Olvia Traffic forecasts 2016-2040 - STEEL 6.0 2.5 5.0 2.0 4.0 New terminal 1.5 3.0 operational 2020
Mln tons Mln 1.0
2.0 tons Mln 1.0 0.5 0.0 0.0
Olvia - actual Olvia - "as is" forecast Olvia - MDST forecast Olvia - actual Olvia - MDST/EY forecast 7 1 STEVEDORING COMPANY OLVIA RAIL ACCESS
o Port accessed by 15 km single line branch o Branch has major level crossing congestion issues o At the moment Port station “Zvhotneva” can handle 15.3 mtpa (all terminals) o 13.6 mtpa of rail capacity is reserved by other terminals o For the last 3 years only 5.5-6.5 mtpa of rail capacity 20.0 was used by all terminals 4.7 o Capacity could be increased to 20 mtpa with upgrade works 1.7 Potential for upgrade o Free Railway can supply Olvia with up to 1.7 mtpa with
Mln tons Mln limited upgrades and additional 4.7 mtpa with station 13.6 Reserved reconstruction
Rail capacity 8 1 STEVEDORING COMPANY OLVIA ROAD ACCESS
o The port has sufficient road access
o All trunk roads to Olvia run via urban city routes
o Level crossings on existing access routes create congestion
o Additional grain traffic will generate significant increases in lorry volumes
9 1 STEVEDORING COMPANY OLVIA ROAD ACCESS POSSIBLE SOLUTIONS
CAPEX – $3.2 mln
CAPEX – $3.75 mln
10 1 STEVEDORING COMPANY OLVIA POWER SUPPLY
o The source of port power supply is Transformer Station “Oktyabrska” o 14 transformer substations with a total capacity of 9570 kW are located on the port territory o The contracted allowable power is 5193 kW, including: ▪ 4500 kW for Olvia ▪ 693 kW for USPA ▪ Total reserve – 3000 kW
o Total TS reserve in the port region is 20 MW
11 1 STEVEDORING COMPANY OLVIA OLVIA PROJECT SELECTED Greenfield Specialized Grain Terminal North
Cargo mix expected Project area 5% 6%
Grain Vegetable oil Vegetable meal
89%
CAPEX estimated
25.7 3 67 Grain terminal 60 Area (ha) New berths Oil extracting plant $250 3 new berths 4 0.5 mln Communications New Grain New Oil plant Ddredging terminal capacity capacity (mtpa) (mtpa) 114 12 1 STEVEDORING COMPANY OLVIA RAIL & ROAD DEVELOPMENT
o Existing modal split for cereals - 40% by road and 60% by rail
o The rail share of traffic arriving at the new Project terminal would be 2.2 mtpa
o New rail connection to “Zhovtneva” station with at least two unloading sidings capable of unloading 500 metre trains
o New road infrastructure and unloading facilities for lorry traffic
13 1 STEVEDORING COMPANY OLVIA POWER SUPPLY DEVELOPMENT
o Project requires additional 8 MW power supply, which will require the following: o Reconstruction of 35 kV open switchgear in TS “Oktyabrskaya” o Laying of 35 kV double circuit overhead line from TS “Oktyabrskaya” to the Port Olvia (approx. 4.5 km) o Construction of a new 35/6 kV transformer substation o Laying of 6 kV underground cable lines from a new 35/6 kV transformer substation to existing Port’s 6 kV Central Distribution Point o Port’s 6 kV Central Distribution Point Reconstruction CAPEX – $3.4 mln 14 1 STEVEDORING COMPANY OLVIA ECONOMIC EVALUATION
Benefits: Costs: o New independent grain terminal o Investments in the project o Oil extracting plant with high value o Investments in access road and added rail tracks outside perimeter o Sharing costs with USPA o Investments in power supply (dredging, berths) o Investment in overbridge (optional)
Preliminary conclusions: o OLVIA Project is a viable investment opportunity o Project with sufficient NPV and IRR
15 2
Kherson SCP concession project
16 2 KHERSON SEA COMMERCIAL PORT PORT HAS FAVORABLE LOCATION
Kherson Sea Commercial Port is located on the both banks of the Dnieper river, key inland waterway in Ukraine going Kyiv through main agricultural and Cherkasy industrial regions of the Kremenchuk country Kamyanske Dnipro Zaporizhya
Mykolaiv Nova Kakhovka Kherson Kherson Port Chornomorsk
28 km away from the Dnieper-Bug estuary and 90 km from the Black Sea. (46°38’ N; 32°37‘ E)
17 2 KHERSON SEA COMMERCIAL PORT PORT KEY FACILITIES
Kherson 4 600 Berths Quay Length (m)
Left Bank 47 7.6 Total area (ha) Max Depth (m)
KSCP utilities and vehicle workshops o Right bank has 15 ha area o Warehouses provide ~16500 m2 of covered Administrative offices storage and ~20000 m2 open storage areas Security office & gate USPA workshops o Silos of ~12000 tons static capacity are available o The port is equipped with 14 gantry cranes (5- Dnipro Cargo 20 tons) and 6 floating cranes (15-150 tons) o KSCP operates a fleet of 13 barges, 11 of which Dnipro Cargo are 1078 DWT, but there is one unit of each of 3000 DWT and 2500 DWT o Fleet of forklifts, trucks and bulldozers is used for horizontal transport 18 2 KHERSON SEA COMMERCIAL PORT HANDLED CARGO MIX AND FORECASTS
o KSCP handles a mix of cargoes: grain, metals, break bulk, etc. o Cargo flows can increase for all commodities up to 3-5 mln tons per year o Grain is a very promising commodity o KSCP has a typical regional cargo flow structure
Other 16% Cereals 30% Metals 4% Cargo turnover in 2016: Fertilizers 13% 1.2 mln tons
Building materials Oil meal 15% 22%
19 2 KHERSON SEA COMMERCIAL PORT HUMAN RESOURCES
732 KSCP is Present staff overstaffed number
Project staff numbers will be rationalized in a negotiation process with the Labor Unions taking into account their preliminary requirements: o Collective Employment Agreement unchanged for next 5 years o No forced staff reduction for 5 years (natural reduction & re-training acceptable) o Level of wages unchanged for next 3 years Possible solutions: o Severance payments o Early retirement payments o Training/outplacement costs 20 2 KHERSON SEA COMMERCIAL PORT MULTIMODAL PORT ACCESS
Rail: Rail o Rail operations are hampered due to single rail track to KSCP o By-passes needed outside the port Possible alternative marshalling yard o $5 mln CAPEX estimated for rail upgrade
Road: KSCP o Road access to the port run via urban city routes o No dedicated truck route to/from port Road o $3 mln CAPEX estimated to upgrade 6 km of existing road River: o River traffic underdeveloped but very promising Possible truck road to/from the port o EIB is ready to finance modernization of Dnieper river locks to increase river cargo flow KSCP
21 2 KHERSON SEA COMMERCIAL PORT LEFT BANK
Characteristics: o Depth is 3.5 to 5.5 m o No existing road or rail connection o Weak subsoil conditions o Surrounded by environmentally protected area o Capital dredging needed to increase water depth o Can be used for parking barges / floating storage o Opportunity for further port transshipment development Possible future asset in concession
22 2 KHERSON SEA COMMERCIAL PORT STORAGE FACILITIES AND TERMINAL EQUIPMENT
Current storage capacity hampers port throughput: o Limited and outdated storage capacity (i.e. grain) o Warehouses often filled with long-stay shipments o Low storage tariffs do not motivate short dwell times
Condition of current terminal equipment: o Old and outdated o Capacity not used efficiently o Modern cargo handling equipment lacking o Poor communications / coordination strongly affects KSCP productivity
23 2 KHERSON SEA COMMERCIAL PORT EXISTING JOINT VENTURE
o “Dnipro Cargo” is an existing cargo handling operating company inside the KSCP area o Joint Activity Agreement with KSCP and USPA is signed until 2028 o “Dnipro Cargo” handled almost 400 000 tons of cargo – mainly sunflower seeds – through its KSCP terminal last year o “Dnipro Cargo” employs 60 staff at the terminal and occupies 3 warehouses close to berths #5 and #6 o Assets operated by “Dnipro Cargo” according to JV agreement are not the concession object
24 2 KHERSON SEA COMMERCIAL PORT PORT DEVELOPMENT SCENARIO A: Mixed cargo port with grain high + other cargo medium forecast
Cargo turnover forecast
3.8 3.4 3.1
2.6 mln tonsmln 1.7
2015 2020F 2025F 2030F 2035F
CAPEX estimated Cargo mix expected
18% 20% Cereals 30% Warehouses 1% 38% Building materials Terminal equipment 9% Fertilizers $30.85 Silos 6% Metals Operation facilities & systems 6% mln Timber Other 19% Other dry bulk 24% 29%
25 2 KHERSON SEA COMMERCIAL PORT PORT DEVELOPMENT SCENARIO B: Mixed cargo port with grain high + metal high + other cargo low forecast
Cargo turnover forecast
2.9 2.6 2.4 2.0
mln tonsmln 1.7
2015 2020F 2025F 2030F 2035F
CAPEX estimated Cargo mix expected
4% 22% 15% Cereals 29% Terminal equipment 2% Building materials $24.85 Silos Fertilizers Warehouses 11% 51% Metals mln Operation facilities & systems Timber 28% Other Other 14% 24%
26 2 KHERSON SEA COMMERCIAL PORT PORT DEVELOPMENT SCENARIO C: Specialized port with grain only
Cargo turnover forecast
2.9 2.5 2.2 1.9 mln tonsmln 1.7
2015 2020F 2025F 2030F 2035F
CAPEX estimated Cargo mix expected
13% Cereals 28% Terminal equipment 6% Building materials Silos $44.15 Fertilizers Warehouses Metals mln Operation facilities & systems Timber 32% 21% Other Other 100%
27 2 KHERSON SEA COMMERCIAL PORT ECONOMIC EVALUATION
Benefits: Costs: o Reduced operating expenses o Investments in KSCP o Labor savings costs o Investments in access road and o Reduced pilferage/damage of cargoes rail tracks outside perimeter o Reduced handling times vessels o Severance payments / training costs labor o Reduced waiting times vessels
Preliminary conclusions: o All scenarios are a viable proposition o No scenario stands out o Slight preference for Scenario A (mixed cargo port) based on NPV.
28 3
Ferry Terminal concession project
29 3 FERRY TERMINAL TERMINAL IS LOCATED ON THE INTERSECTION OF INTERNATIONAL TRANSPORT CORRIDORS
o Favorable location at the intersection of transport corridors between Asia and Ukraine Europe Chornomorsk o Terminal connects the main industrial European Union regions of Ukraine and the Black Sea region o It is the center of two basic rail ferry lines Constanta on the Black Sea Varna Poti Georgia Batumi Haydarpasha Derince Samsun
Turkey
30 3 FERRY TERMINAL TERMINAL HAS A DEVELOPED OFF-SIDE INFRASTRUCTURE
EU Russia o Sea Commercial Port of Chornomorsk is located on the both banks of Sukhyi estuary, 12 miles South-West of Odessa
Russia o It is one of the largest ports in Ukraine EU Chornomorsk o The port is specialized on handling grain, iron ore and Black Sea ro-ro vehicles Cargo turnover Million tons 14.5 Ferry 11.9 10.1 10.5 terminal 6.6
2012 2013 2014 2015 2016
Revenue EBITDA margin 2016 2016 $44 mln 24%
31 3 FERRY TERMINAL UNIQUE FACILITIES WITH SUFFICIENT CAPACITY
Annual capacity
4.5 mln tons cargo in railway wagons
150 000 heavy duty trucks Warehouses #25 and #26 250 000 Area – 12 ha. units of vehicles Main facilities 2 lift bridges Berth Length, m Depth, m Cargo type railway wagons, trucks, #26 210 9.6 general, containers railway wagons, trucks, Berths #26 and #27 #27 210 9.6 Berth #28 general, containers #28 270 9.6 vehicles
32 3 FERRY TERMINAL DIVERSIFIED & FLEXIBLE CARGO FLOW
Cargo handling dynamics Cargo structure in 2016 Million tons Million tons 2.2 Other 20% 1.8 Vehicles 1.6 0.45 1.4 2% 0.15 0.64 Metal 3% Food 0.50 0.36 Construction 1.8 products 1.65 materials mln tons 56% 1.07 4% 0.86 0.94 Equipment 4% Wood 2013 2014 2015 2016 11%
Vehicles General cargo & Containers Wagons Trucks
33 3 FERRY TERMINAL SUSTAINABLE FINANCIAL POSITION
Financial indicators Handling revenue structure Millions USD Million tons Wagons 52% 54% 23% 41% 5.6 5.6 38% 1.0 General 1.3 3.7 0.8 3.3 cargo 0.7 $2.9 15% 0.6 3.9 3.8 mln 2.9 2.4 Trucks 48% 2013 2014 2015 2016 Vehicles 12% Handling Port services Containers Storage EBITDA margin 2%
34 3 FERRY TERMINAL TRUCKS SEGMENT
Terminal operations by direction Market structure Million tons + 19% 1.52 1.5 1.28 Chornomorsk 14% Sea Fishing Port 29% 1.1 0.9 53% 0.9 Sea Port of 52% 25% 18% Yevpatoria 0.6 20% 23% Chornomorsk 71% 21% 38% 55% SCP Chornomorsk 47% 58% 34% 53% 44% SCP 21% 25% 2012 2013 2014 2015 2016 2012 2016 Export Transit Import
35 3 FERRY TERMINAL VEHICLES SEGMENT
Terminal operations by direction Market structure Million tons
259 185 Odesa Reduction Kerch 146 Berdyansk - 87% caused by Olvia political crisis 98
95 Chornomorsk 57 71% 84 29 32 34 35 Olvia 47 18 24 Chornomorsk 95% 2012 2013 2014 2015 2016 2012 2016 Export Transit Import
36 3 FERRY TERMINAL RAILWAY WAGONS & GENERAL CARGO SEGMENTS
Terminal operations by directions Perishable goods handling in Ukraine Million tons Million tons
643 301 274 514 112 503 233 455 42 160 141 363 143 78 100 101 63 489 96 67 72 253 283 248 42 29 36 196 8 21
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Export Transit Import Ukrainian ports Chornomorsk SCP
37 3 FERRY TERMINAL PROMISING SEGMENTS: CONTAINERS & PASSENGERS
Containers operations in Ukrainian ports Tourists flows from Ukraine Millions of TEU Thousand of people
3 million TEU 289 270
Container capacities of 214 Ukrainian ports are 195 1.25 significantly underutilized 0.77 0.74 0.79 0.67 0.52 0.66 0.52 0.58 25 37
2008 2009 2010 2011 2012 2013 2014 2015 2016 Istanbul Bulgaria Batumi 2015 2016
38 3 FERRY TERMINAL INVESTMENT OPTIONS
Investment projects Trucks parking area Terminal for passengers and drivers Passengers
Vehicle Parking for trucks processing Trucks area
Vehicle processing station New for the preparation of the passengers Cars cars for sale terminal
39 : PROJECT TIMELINE
DURATIONПроблема MEASURE
2 months o Consultants selection process
5 months o Full Feasibility Study
3 months o Tender documents preparation
5 months o Tender approval
4 months o Bidding process and negotiations
MINISTRY OF INFRASTRUCTURE OF UKRAINE
40 WWW.SPILNO.IN.UA TRANSACTION SCHEME
Public Authorities (CMU, MIU)
Awarding concession rights, Management, Regulation, Services Control Control
Coordination Financing USPA Concessioner
Services Financial Handling of cargo Services, (channel pass, Institutions berth usage, etc.) supplies
Contractor/ Ship owner Cargo owner Supplier Financing
42