Logistics centre KENON Optimal logistical route China – Zabaikalsk – Moscow Октябрь 2013 Москва 2014 February Moscow CHITA ON THE RUSSIAN-CHINESE TRADE ROUTES The value of bilateral trade between Russia and China reached $87.5 billion in 2012 The trade turnover is forecasted to be increasing by circa $7–10 billion per year 18.5 mln tons is shipped through border- crossing point Zabaikalsk - Manzhouli 1 CHINA - RUSSIA DELIVERY ROUTES COMPARISON The delivery route through Chita city is optimal for goods delivery from China to Siberia and the Central part of Russia in terms of prices and delivery time. Moreover the route is one of the most popular: share of goods imported from China through Zabaikalsk reached 16% against 3% through Kazakhstan in 2012 Delivery to Novosibirsk - delivery time comparison Delivery to Novosibirsk - cost of delivery comparison Baltic ports 49 Baltic ports 11,500 Primorye ports 38 Primorye ports 9,100 Chita 21 Chita 8,663 0 10 20 30 40 50 60 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 * Delivery in Novosibirsk using the route via Chita-Zabaikalsk-Manchuria minimizes delivery time by more than 2-times compared to routes through Moscow 2 SHANGHAI – CHITA – MOSCOW IN 22 DAYS DAYS THE ROUTE DETAILS 7 Shanghai – Manzhouli freight 2 Transferring the goods to a Russian motor transport and transit processing 1 Manzhouli – Chita freight 2 Customs processing at the temporary storage warehouse 2 Transferring cargo to railway transport and shipping by theTrans-Siberian railway 8 Chita – Moscow freight 22 Total delivery time 3 LOGISTIC CENTRE KENON INFRASTRUCTURE Customs post 4 CHITA INTERNATIONAL AIRPORT The airport is located 9 km from KENON. In 2013 the airport served more than 300 thousand passengers and 2 598 tons of freight. Chita International Airport reached a top-5 spot among small airports in the pan-European ranking (ACI- Europe) for the dynamics of development. FREIGHT, TONS The airport is able to accommodate: 2,598 . Boeing 767/757-200 2,108 2,079 . Airbus A319/320/321 1,664 1,601 . An-124 Ruslan, SSJ-100, IL-76, Tu-204/214 1,176 Runway capacity is 10 takeoff and landing operations 2008 2009 2010 2011 2012 2013 per hour. 5 LOGISTICS CENTRE KENON PROJECT Main storage capacities . heated and unheated storage facilities, refrigerated chambers Second stage — 52,000 m² . temporary storage warehouse zone with indoor and outdoor space . open yards for storage of containers and out-of- gauge cargoes . a parking lot for cars and custom vehicles Support infrastructure Stepdown substation Logistic complex . modern handling and dock equipment 50,000 kW First stage — 65,000 m² . a ramp for loading and unloading of trains . customs certification centre . veterinary and sanitary checks point, phyto- checks point . service rendering and technical maintenance companies Container yard — 2,700 TEU . office centre Railway 6 CARGO TRAFFIC THROUGH KENON Cargo traffic through KENON, Zabaykalsky Krai and KENON shares in warehouses occupancy rates China-Russia cargo traffic in 2018 3,000 90% , 16% 85% 24% 80% 2,000 75% 75% China – Russia tons Cargo traffic 16,3 million tons Route through Zabaykalsk thousand 1,000 60% 60% KENON Cargo traffic KENON through Warehouses occupancy rate 0 45% 2015 2016 2017 2018 Cargo flow, thousand tons Warehouse occupancy rate . KENON will be launched in December 2014 . KENON will attract 16% of China-Russia cargo traffic by . Project capacity will be reached in 2018 2018 . Cargo traffic through KENON will amount to 1,8 . 900 automotive vehicles will be required for cargo million tons in 2015 and 2,6 million tons in 2018 transportation in 2015. 1 300 vehicles will be required in 2018. 7 LOGISTIC CENTRE SERVICES . The logistic centre will provide storage, custom clearing, loading/unloading and cargo handling services. Price for KENON services will be defined according to the average price level for logistic services in the Siberian Federal District Storing services Loading/unloading, cargo handling services Temporary Temporary Storage type General storage zone storage Service General storage zone storage warehouse warehouse Rubles per pallet position/month Rubles for pallet position/operation Refrigerated 600 3 026 Loading/unloading 216 323 chambers Picking up pallets 17 17 Heated warehouse 300 38 880 Unheated Weighing 355 355 150 47 088 warehouse Packing 83 83 Rubles per automotive vehicle/month Order picking 85 - Outdoor storage 7 119 37 068 Rubles per container/operation area Parking lot 7 119 37 068 20 DC 350 350 Rubles per container/month 40 DC 600 600 20 DC 12 000 12 000 40 DC 15 000 15 000 8 FINANCIAL RESULTS Profit and gross margin dynamics Revenue by service type in 2018 3.0 65% 4% 2% Loading/unloading 54% 7% Storing 52% Order picking 2.0 50% rubles Weighing 45% 8% Packing billion 44% , Picking up pallets 1.0 2.1 35% Revenue in 2018 1.9 Gross margin 31% 1.6 3,94 billion rubles Profit 0.9 - 20% 2015 2016 2017 2018 36% Profit, billion rubles Gross margin . KENON will generate profit starting from the 1st . Proportion of revenue coming from cargo storing and year of operations proceeds from handling services is defined by . The ross margin growth is propelled by increase turnover of cargos in the logistic centre in the logistic centre occupancy . In the base case scenario («E-commerce») cargos turnover is presumed to be in the range of 5–14 days 9 KENON – AREA DEVELOPEMENT ZONE The development of the Far East and Baikal Region is the priority of the Russian Federation Government. Several state programs are now being launched to support business in the region. Area development zone Zabaikalskiy Krai Governor Konstantin Ilkovskiy is workings towards creating an area development zone on the territory of the Chita district. The zone is aimed at attracting new enterprises to the territory by creating favorable environment for business development The benefits of an area development zone include: . Lowered tax burden and land rental fee . Budgetary allocations for investment projects implementation . Providing State guarantees for business development bank loans . Granting subsidies from the federal budget to reimburse a part of interest expense Project of regional significance Head of the Ministry of Economic Development of the Zabaykalskiy Krai, Aleksey Sidorov supports assignment of the status of the project of regional significance to the KENON project. The status will grant the following preferences: . Tax deferment . Support in construction of infrastructure facilities 10 BUSINESS COMMUNITY SUPPORT Oleg Dunayev Head of Logistics Committee, Chamber of Commerce and Industry of the Russian Federation (RF) Member of the Business Council, Shanghai Cooperation Organization (SCO) . Supported participation of Logistic Centre KENON project in the RBC conference “Problems of Modern Logistics 2013” . Recommended the Project for consideration by the RF Chamber of Commerce and Industry and the Zabaykalsky Krai administration . Assisted in presenting the project to the Business Council members of the Russian part of SCO Kirill Tolmachev CEO of Concept Logic Ltd. Member of Logistics Committee, Chamber of Commerce and Industry of RF . Directly participated in developing the Project concept in terms of logistic solutions . Successfully presented the Project at the RBC conference “Problems of Modern Logistics 2013” . Presented the Project to the Chamber of Commerce and Industry . Represents the Project interests at the Business Council of the Russian part of SCO 11 CONTACT INFORMATION Zabaikalsky Krai ADDRESS: 6 Pavlovskaya street, Moscow, 115093, Russia PHONE: +7 (495) 228-18-63 / +7 (499) 653-82-50 E-MAIL: [email protected] www.estuary.ru/kenon www.kenon.su .