Chernomorsk set for the next PPP in the Ukrainian port sector

Chernomorsk, Ukraine (PortSEurope) October 25, 2021 – After successfully signing concession contracts for the ports of Kherson and Olvia, the Ministry of Infrastructure (MoI) and Ukrainian Sea Ports Authority (USPA) are structuring and tendering a public-private partnership (PPP) to modernise Chernomorsk Port. In June 2020, a concession contract for Kherson was signed with Risoil S.A. and Georgian Industrial Group; this was followed by a concession with Qatar’s QTerminals for the Port of Olvia in August 2020. The Public-Private Infrastructure Advisory Facility, PPIAF, is supported financially by U.S., Germany, Austria, UK, Sweden, the Netherlands and the World Bank. It has also helped the ministry develop a national logistics and seaport strategy. The PPP project for Chernomorsk (Chornomorsk) is supported by the European Bank for Reconstruction and Development (EBRD) and the World Bank's International Finance Corporation (IFC). Chernomorsk The EBRD and IFC will help prepare a comprehensive contractual framework, set bidding criteria and tender rules, and liaise with potential investors, paving the way for a successful tender. Private sector-led investment and modernisation of Chernomorsk, country’s third largest, located on the north-western shore of the Black Sea could increase Ukraine’s import and export capacity, boosting its trade competitiveness and economic growth. Ukraine is the world’s second largest exporter of grain and fifth largest exporter of iron ore. Its imports last year were for almost $60 billion. Yet, even though the country is strategically located on the Black and Azov Seas, several of its shipping ports operate at only a fraction of their potential. More investments are needed to upgrade equipment, install technology that will increase efficiency and construct modern container terminals. Modernizing port infrastructure and speeding up handling times will enable Ukraine to attract more global shipping operators and will help mid-size local companies to grow by offering them easier access to port services. The Chernomorsk container terminal and railway-ferry complex concession will help develop existing assets, improve and optimise its operations and develop additional services for carriers and cargo owners. Improving the port by optimising cargo logistics and providing higher-quality services is expected to boost the attraction of Ukraine to leading international shipping operators. The EBRD’s engagement in Chernomorsk follows two successful tenders in the country’s maritime infrastructure sector. In 2020, the bank – in partnership with the IFC and the Global Infrastructure Facility – supported the ministry in structuring concessions for two midsize ports: Kherson (Herson) The port is located in the mouth of Dnipro (Dnieper) River which flows into the Dnipro Gulf and is directly connected to the Black Sea. Kherson is the main sea terminal on the Dnieper River, flowing through the largest industrial and agrarian regions of Ukraine, supporting key exports for the economy - including cereals, oil meal, building materials, fertilizers, metals and timber. Kherson port has long been a hub for agricultural cargo hauling operations on the Dnipro river, the key water artery in Ukraine. However, in recent decades, the port’s berths have been underutilized due to outdated infrastructure. As such, much of the region’s cargo is transported overland by diesel trucks, contributing to carbon emissions. The 30-year concession was awarded to Risoil, a leading stevedoring and agro-industrial company, and the Georgian Industrial Group (GIG). Risoil will invest and modernise the facility to increase container traffic and reduce rail and road traffic locally. Risoil-Kherson LLC is a consortium consisting of Petro Oil & Chemicals LLC, part of the GIG, and the Ukrainian port operator JSC Risoil SA (Geneva, Switzerland). GIG is one of the largest industrial groups in Georgia with a focus on the energy sector (electricity generation and trade, refuelling and trade in natural gas). GIG is also involved in commercial real estate, building materials and metalworking. The port is to be upgraded through the Ukraine’s first-ever PPPs, which are expected to revitalize the country’s shipping sector. The small port will become a transfer hub, facilitating cleaner transport up and down the river to save time and costs while benefiting the environment. Olvia (Olbia, Olviya) The facility located on the estuary of the Dnieper-Bug River, with easy access to the open sea and the inland waterway system. The subsidiary of state-owned Ukrspecexport, UkrOboronService (export/import of military products and special-purpose services), and the design company of Qatari port operator QTerminals, QTerminals Olvia LLC, signed in December 2020 a memorandum of understanding and cooperation. The companies will work to ensure the implementation of the concession agreement as well as the further efficient and profitable operation of the port. QTerminals Olvia LLC and SOE Ukroboronservice will carry out reconstruction and dredging works, increase the capacity of approach roads and the railway that leads to the port. Ukrainian port PPPs The concessions in Kherson and Olvia ports have resulted in $137 million of private investment commitments. Under the terms of the PPPs, the private investors will upgrade the ports with new infrastructure and technologies, while also introducing climate-smart practices that use renewable energy and greater use of rail and water transport, replacing diesel trucks. In addition to strengthening the country’s trade competitiveness, the PPPs will help boost shipping volumes, increase tax revenues, and provide the government with concession fees over the course of the 30 and 35-year contracts. In Ukraine, container transport has great potential for development, as it currently accounts for only 8.5% of the total cargo volume. After finding an investor for the Chernomorsk Port and modernising the container terminal, it should be possible to almost double its capacity. IFC, in collaboration with the World Bank and the GIF, is also helping the government explore potential PPPs in the road, rail, airport, energy and health-care sectors. More PortSEurope news about Ukraine’s ports Copyright (C) PortSEurope. All Rights Reserved. 2021.

Chernomorsk set for the next PPP in the Ukrainian port sector

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Chernomorsk set for the next PPP in the Ukrainian port sector

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