USPA corporatization: Why it is needed?

The Cabinet of Ministers approved the possibility of corporatization of the USPA, respectively, the next year the state enterprise may receive new status and opportunities. Among them — simplification of attraction of loans, transparent management on a collegiate principle, introduction of world practices of property disposal, simplification of procurement procedures.

We asked the Authority of Ukrainian Sea Ports to explain more precisely, why the state enterprise needs corporatization. The USPA gave their explanations.

Implementation of state Ownership Policy

In October 2018, the government approved the Basic Principles for the Implementation of the Ownership Policy for State Companies. According to these principles, an enterprise which value of assets exceeds UAH 2 billion or UAH 1.5 billion in annual net income is considered particularly important for the country's economy. Such enterprises should be transformed from state unitary enterprises into joint stock companies, 100% of whose shares belong to the state. The USPA is particularly important for the economy of Ukraine as an enterprise in terms of both asset value and annual net income.

Implementation of the National Transport Strategy

The current status of USPA limits its economic activities in terms of operating land plots and, in general, does not allow implementing the provisions of the National Transport Strategy of Ukraine until 2030.

According to the Strategy, the further stages of port sector reforming envisage the transfer of the USPA to the Landlord Port model, according to which a port authority has the right to provide investors with land (or other facilities) for building or reconstructing terminals. Meanwhile, investors have the right to operate the terminals built for a certain time, after which it can either extend the contract or return the land together with the terminal to the state ownership.

International experience

More than half of the port authorities of the EU countries are corporatized. Examples of such companies are Port Gdański Eksploatacja S. A. (Poland), The Port of Rotterdam Authority Ltd. (Netherlands), Port of Antwerp Authority (Belgium), Hamburger Hafen Und Logistik AG (Germany), North Sea Port (Belgium, Netherlands), Maritime Ports Administration SA Constanta (Romania), etc. Such companies operate in accordance with the principle of self-financing, have a commercial and entrepreneurial nature, aimed at increasing market share and attracting private investment. They can also share the level of influence of state bodies through participation in the board or supervisory board of the port administration, payment of dividends compared with the classical port administrations — state enterprises.

Corporate Relations Restrictions

The legal capacity of state enterprises is limited in the area of corporate relations. Thus, having the organizational-legal form of a unitary enterprise, the USPA does not have the possibility of creating subsidiaries, buying corporate rights, etc., which is at the disposal of state port corporations — active players in the international market of port terminals, such as DP World (UAE), Port of Antwerp Authority (Belgium), PSA (Singapore), etc.

Restricting work with MFIs, banks and investors

International financial institutions, banks and investors are reluctant to cooperate with an enterprise that does not actually own its assets. First of all, it concerns the provision of loans for the implementation of infrastructure projects. Over the next five years, the USPA, together with investors, intends to implement infrastructure projects that will ensure the creation and modernization of port facilities with an annual transshipment volume of almost 35 million tons. Investment costs are expected to be 30.5 billion UAH, of which 26 billion UAH are private investments. However, the implementation of these projects is possible only with joint work of the USPA (dredging, mooring wall, etc.) and the investor (land part, infrastructure). For these purposes, the USPA requires adequate funding. In the medium term, the required portfolio of investments from the USPA is about 20 billion UAH.

The status of state entity does not allow to act as a party to lease / concession agreements.

In European countries, the practice of transferring property (land) to lease / concession by port authorities for a certain period is widespread. In the income structure of European ports, income from the rental (concession) of property (including land) varies within 30-50% of the total income, which makes it one of the key sources of income. For example, the total income of the port of Hamburg in 2016 amounted to 185 million euros, of which 50.8% is the revenue from the lease of assets. A possible corporatization of the USPA will allow the enterprise to operate independently with property on the ProZorro platform and as a result increase revenues to the state budget in the form of taxes and dividends, while monitoring the fulfillment by the tenant (or concessionaire) of social and investment obligations directly in the port.

To do this, it is necessary to consider the possibility of transferring the berths to the authorized capital of the enterprise, which will significantly expand the capacity of the Administration on the effective use and development of the port infrastructure. Since the state is not the only owner of such a category of facilities, it would be fair to equalize the capabilities of the USPA and private maritime terminals in disposing of their property.



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