© HPC Hamburg Port Consulting GmbH

Ukrainian Port Reform - Changes faced by a Terminal Operator -

Klaus Schmöcker, President HPC Ukraine

Maritime Days in Odessa, May 23th – 25th, 2013

2Ukrainian Port Reform – Changes faced by a Terminal Operator – © HPC Hamburg Port Consulting GmbH

Expected Uncertainties during Transition Period Due to smaller scope of work the port administrations will have to reduce personnel.

Reduction of personnel not solved yet. possibility of strikes?

The financing (budget) of the state companies still unclear. possibility of lack of services?

Status of already initiated port investments unclear.

Due to centralised administration, lack of knowledge for the needs of local operators and users.

resulting in less-than-ideal and slow decisions.

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Privatisation and Renting of Port Infrastructure

Some strategic port infrastructure facilities can be rented: Berths Rail lines and access roads used by one party only

Alternatively to renting, a concession up to 49 years can be granted to private companies for the use of strategic port infrastructure.

Ukrainian Port Reform – Changes faced by a Terminal Operator – © HPC Hamburg Port Consulting GmbH

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Deregulation of Tariffs (Prices)The new port law differs between:Specialised services provided by natural monopolies;Other services.

Specialised services: Will still be regulated by the State Company for the ports of Ukraine (i.e., the

Government). A list of services that belong to this class is to be enacted by the government.

Other services: Comprise the majority of port services. Will be deregulated – allow for free market-based tariffs and prices.

Ukrainian Port Reform – Changes faced by a Terminal Operator – © HPC Hamburg Port Consulting GmbH

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Port of Odessa:

Breakwater and quay wall (650m)

Dredging (-16 m)

HPC Ukraina:

Access dam to berths

Pavement of quay and access roads

Reclamation of 19ha terminal area

+ 3 STS cranes for QM

Status Quo of Quarantine Mole Project

reclaimed areaexisting terminal and

reclaimed area

Ukrainian Port Reform – Changes faced by a Terminal Operator – © HPC Hamburg Port Consulting GmbH

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Future Steps to be solvedExisting Terminal

no concessions granted

established in other sectors

never before used for port infrastructure

political priority for the ministry

ministry has to define future procedure

Reclaimed Area

currently classified as fixed assets of ports

operators with unclear status

under the new law will be classified as land

can only be owned by the state but

can be leased to private entities

government to introduce legislation governing the status of reclaimed land

Ukrainian Port Reform – Changes faced by a Terminal Operator – © HPC Hamburg Port Consulting GmbH

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Backup

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Factors Determining Private Port Investments

Private Port Investments

Capital

Manpower

Land Area

Market Environment

Resource Availability & Cost

Demand for Services

Competition

Political Stability

Laws and Regulations

Planning Certainty

Revenues

Regulation of Tariffs

Development of Prices

Ukrainian Port Reform – Changes faced by a Terminal Operator – © HPC Hamburg Port Consulting GmbH

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Key Changes of the new Port LawThe new Ukrainian port law…

…forms central National Company to manage all maritime ports of Ukraine.

…changes the port concept from „state company“ to „territory and water area“.

…allows ownership of port land assets in different sectors: State Municipal Private

…provides no grounds for the termination of existing contracts under which infrastructure is used.

Ukrainian Port Reform – Changes faced by a Terminal Operator – © HPC Hamburg Port Consulting GmbH

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Limiting the Sphere of State MonopolyThe new Ukrainian port law provides a list of services which still can only be provided by the port-based branches of the state company:

regulation of ship traffic rescue operations navigational and hydrographic services mapping and cartography services detection, supervision and removal of oil spills

All other services – particularly all kinds of cargo handling operations – can be provided by private companies.

Ukrainian Port Reform – Changes faced by a Terminal Operator – © HPC Hamburg Port Consulting GmbH

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Future Adminstration of State PortsOrganisation

single state company – not state authoritybranch in each port degree of independence of each branch to be determined by central administration (Ministry)

Scope of Work

As per service listNo explicit mandate for cargo handlingHarbour Master separated from the administration

Central Administration of

Ukrainian State Ports

Port of Illichevsk Port of Odessa Port of Yuzhny Other Ports

Ukrainian Port Reform – Changes faced by a Terminal Operator – © HPC Hamburg Port Consulting GmbH

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Facing New Status of Port InfrastructureThe new Ukrainian port law differs between:Strategic port infrastructure facilitiesOther port infrastructure facilities

The strategic facilities include:Hydraulic structures (e.g., berths)Rail lines and access roadsCommunication and utility linesNavigation equipment and other facilities of navigation and hydrographic supportPort traffic control systemsInformation systems

Ukrainian Port Reform – Changes faced by a Terminal Operator – © HPC Hamburg Port Consulting GmbH

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Factors Determining Private Port Investments

Private Port Investments

Capital

Manpower

Land Area

Market Environment

Resource Availability & Cost

Demand for Services

Competition

Political Stability

Laws and Regulations

Planning Certainty

Revenues

Regulation of Tariffs

Development of PricesImproved by new Port

Law

Ukrainian Port Reform – Changes faced by a Terminal Operator – © HPC Hamburg Port Consulting GmbH