UPF-2019: Competitiveness of Ukraine's MMC complexes depends on increasing depths and modernization of specialized terminals in ports

Cargoes of the mining and metallurgical complex remain one of the main nomenclatures in the sea ports of Ukraine. Now they are confidently second only to agrarian ones. Last year more than 52 million tons of MMC products were handled. In the framework of the Ukrainian Ports Forum-2019, international experts have emphasized that Ukrainian cargo owners and ports should be prepared to increase the number of ship calls of large vessels of Newcastlemax type. This will increase the vessel’s batch, reduce the cost of logistics and make Ukrainian exports less vulnerable to fluctuations in world prices. Among the main problems in the field of handling of industrial cargoes in Ukraine, representatives of leading companies from the USA, Germany, Italy, UAE, Bulgaria, Ukraine, Croatia and other countries noted the need for deep-sea ports, the development of specialized terminals equipped with modern equipment for the processing of mining and metallurgical cargoes, as well as ensuring the stable operation of Ukrainian ports in the Azov Sea. President of the global logistics company Clarksons Platou (Italy) Massimo Dentice at the Forum in Odessa noted the worldwide trend of increasing the fleet of Newcastlemax class vessels, which is over 41% of the total number of new vessels that are now ordered by ship-owners in the world. «The transition to modern large vessels will significantly improve the economic situation for both ship-owners and port operators. Therefore, it is now necessary to bring the depths of Ukrainian ports to the level appropriate for such vessels in order to remain competitive in world markets» – the expert noted. In Ukraine, there is only one port, which is close to have the required depths. This port is Pivdennyi. Ukrainian Sea Ports Authority is completing the next stage of dredging. «The USPA has already practically ensured bringing the depths of the approach channel, maneuver zones and operational aquatoria of the individual berths of the Pivdennyi port up to 20 m. In this project more than half a billion UAH were invested, and the volume of dredging works was 2.7 million m3» the head of the USPA, Raivis Veckagans commented on the implementation of a large-scale project in the port. Another issue, which was discussed at the Forum in Odessa, is the need to provide freedom of navigation in the Azov Sea. Due to problems encountered at the end of last year with the passage of vessels through the Kerch-Yenikalsky Canal, cargo owners were forced to reorient some of the cargoes to the Ukrainian ports in the Black Sea. But the technical equipment of the terminals did not always allow to process the corresponding volumes in the necessary time. Now the situation in the Kerch Strait has somewhat stabilized, besides, the USPA managed to attract a contractor to restore passport depths in the ports of Mariupol and Berdyansk and on the approach channels to them. The volume of investments of USPA in these projects is almost 725 million UAH. In addition, it was recently announced that JSC Ukrzaliznytsya intends to provide a 20% discount on the delivery of goods to Ukrainian ports in the Azov Sea. All this allows us to hope for an increase of competitiveness of cargo handling through the ports of Mariupol and Berdyansk. However, the state and businesses should intensify their interaction in order to develop specialized terminal facilities in Ukrainian ports. The optimal format for this is public-private partnership projects, in particular concessions, which, for example, allowed Bulgaria, over 4 years to attract more than 127 million euros for the development of the port of Burgas and increase the volume of in it by almost 5 times. Currently, pilot concession projects of state stevedores in Olvia and Kherson ports are being implemented in Ukraine, prepared by the Ministry of Infrastructure, a team of international consultants and specialists from USPA. Tender contests are to be announced in June-July 2019. For more details, see the link below. As previously reported, the next possible concessions in the Ukrainian port sector are projects for the development of specialized terminals in the ports of Pivdennyi and Chornomorsk.

UPF 2019: The winners of the pilot tenders for the concession of state stevedores in the ports of Olvia and Kherson will register individual companies in Ukraine for the implementation of projects

In the framework of the Ukrainian Ports Forum 2019, a round table on public-private partnership projects in Ukrainian seaports was held on May 31, 2019. Consultants from the International Finance Corporation (IFC), the European Bank for Reconstruction and Development (EBRD) informed investors about the latest changes that have been made to concession projects during preparation for the tenders, as a result of consultations with business and government representatives. As the Minister of Infrastructure of Ukraine Volodymyr Omelyan noted, the main task of the pilot projects is to attract the best international practices and technologies to the Ukrainian ports. Therefore, a team of the Ministry and international experts is making every effort to ensure that pilot projects for the concession of state stevedores in the ports of Olvia and Kherson to be implemented soon. It is planned that concession competitions will be announced in June-July 2019. The tender documentation has already been developed and sent for approval to the Cabinet of Ministers of Ukraine. The current legislation gives a little more than three months to conduct the tender and determine the winner. Contracts will be signed with the winners, the parties to which will be: the Ministry of Infrastructure of Ukraine, the Ukrainian Sea Ports Authority, the company winner of the tender, as well as the company, which will be established and registered in Ukraine by the winner of the tender for the project. Oleg Kudashov, IFC Senior Investment Advisor, recommended that investors who are planning to take part in the tender begin preparing applications now. “Many investors noted that 60 days for submitting applications is too short period, but since the new law on the concession has not yet been adopted, we have such a framework. Therefore, preparation should start now, the representative of the IFC said. Also, the developers of the pilot projects informed investors that while preparing for the tender, the recommendations of business representatives and the USPA should be taken into account. “A concession project should be beneficial for all participants and a team of international consultants ensures ongoing dialogue with all parties. The Ukrainian Sea Ports Authority will transfer berths and other infrastructure to the concessionaire. For us, it is important that the future investor fulfills obligations for current and capital repairs throughout the entire project implementation period, as well as plans to increase cargo traffic through these ports.” said Raivis Veckagans, head of Ukraine Sea Ports Authority. In accordance with the views of potential participants in the framework of the IFC so-called market sounding to increase the number of potential bidders, the need for experience in cargo handling in the port industry has been expanded to include the entire range of cargoes into acceptable experience. Also, as part of the implementation of the concession project, a transition period of up to two years is expected during which the concessionaire will be able to prepare and approve an investment project directly, obtain licenses and other necessary permits, and take an inventory of the property transferred to the concession. The main conditions of the pilot concession projects remained unchanged: mandatory investments in the development of both ports in the amount of about $ 60 million for the project in Olvia and $ 8 million for the project in Kherson, allocation of funds in the amount of not less than 5% of the volume of capital investments (CapEx) for the development of transport infrastructure of cities where ports are located and, of course, compliance with social obligations to employees of enterprises that are transferred to the concession. In addition to that, a significant increase in cargo traffic and increases in payments to local budgets are expected.

In the framework of the Ukrainian Ports Forum 2019 events will be held for investors on pilot projects for concessions of state stevedores in seaports of Ukraine

A round table will be held in Odessa on May 31, during which investors and business representatives interested in participating in pilot concessions of government stevedores in the ports of Olvia and Kherson will have the opportunity to receive up-to-date information and answers to their questions from consultants and involved parties in projects. Also in the forum a series of individual meetings and consultations with representatives of investors will be held. Representatives of USPA, IFC, EBRD, PPP SPILNO, World Bank and European Investment Bank will discuss important issues of concession tenders and conditions for participation of interested investors in the framework of the round table «Pilot projects of public-private partnership in the seaports of Ukraine». Providing investors with timely information on concession projects directly from project developers will help ensure maximum transparency in the conduct of tenders and attract the maximum number of participants to their implementation. «I am convinced that, on the eve of the announcement of the first concession tenders, it is important to discuss in detail with potential investors and industry representatives the pilot projects and future concession plans at the seaports of Ukraine,» said Oleg Kudashov, Senior Investment Specialist at the International Finance Corporation (IFC). It is important to analyze the regulatory framework for PPP regulation, as well as focus on the practical issues of concession tenders that may arise from stakeholders." «On our part, we see the readiness of the Government of Ukraine, in particular, the Ministry of Infrastructure, and the Ukraine Sea Ports Authority for a constructive dialogue with businesses regarding finding the optimal concession model based on the balance of interests of all stakeholders, therefore we invite interested investors to an open discussion» — adds Mark Magaletsky, Head of the Infrastructure Sector in Ukraine, European Bank for Reconstruction and Development (EBRD). The round table will be held on May 31, 2019 at Bristol Hotel, Odessa in the framework of one of the most significant events of the Ukrainian maritime industry — Ukrainian Ports Forum 2019, which will take place in Odessa. The organizers of the forum are the State Enterprise «Ukraine Sea Ports Authority» and the Center of Transport Strategies.

USPA and Brooklyn-Kyiv, with the participation of Louis Dreyfus Company Ukraine, defined the terms of completion of the project at the Berth no. 1-z in Odesa Sea Port and agreed on plans for its further development

The Ukrainian Sea Ports Authority, Louis Dreyfus Company Ukraine LLC and Brooklyn-Kyiv LLC signed a memorandum of understanding within the Ukrainian Ports Forum 2019. This document defines the terms for completion of the construction of the berth no. 1-z in Odesa Sea Port and the new grain complex. Investment projects with a total value of over $ 250 million must be completed by the end of 2019. “We are very pleased that at the final stage USPA and private investors managed to synchronize the work and finish the projects on the berth no. 1-z and the grain terminal this year almost simultaneously. This is what the memorandum is implying” The Head of USPA Raivis Veckagans noted. According to him, the further development of the project involves the definition of: economic feasibility of dredging up to 13.5 m, the availability of additional cargo flows and terms of implementation. Now it is planned that after the completion of the works in 2019, the new terminal should reach a volume of at least 3 million tons per year.   The signatures of the memorandum were placed by: On behalf of UPSA — Ihor Tkachuk, Head of Odesa Sea Port Authority, and on behalf of Brooklyn-Kyiv – Yurii Gubankov, President of Brooklyn-Kyiv company. Private investors — Brooklyn-Kyiv with the participation and support of the European Bank for Reconstruction and Development and Louis Dreyfus Company Ukraine — started the implementation of an investment project for the construction of a modern transshipment grain complex at the back of the berth No. 1-z in the Androsivskyi mole of Odesa Seaport in 2012. During this time, three of the five queues of the project (1, 3 and 4) were completed. The second and fifth will be complete this year. Ukrainian Sea Ports Authority joined the project in 2013 and provided for the construction of a new berth No. 1-z with a berth length of 254.02 m; the width of the berth is 35.4 m and the depth at the berth border is 12 m.

Infrastructure Reform

The transport sector is among Ukraine's basic sectors of economy. The transport infrastructure has an extensive railway network, a well-developed highway network, sea and river ports (terminals), airports and a wide network of air destinations, freight and customs terminals. The future of the Ukrainian state and the well-being of its people depend on the operational performance and development of these services. More

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