1. © 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

2. 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.

3. 3 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

4. 4 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

5. 5 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 area existing terminal and reclaimed area Ukrainian Port Reform – Changes faced by a Terminal Operator – © HPC Hamburg Port Consulting GmbH

6. 6 Future Steps to be solved Existing 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

7. 7 Backup Ukrainian Port Reform – Changes faced by a Terminal Operator – © HPC Hamburg Port Consulting GmbH

8. 8 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

9. 9 Key Changes of the new Port Law The 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

10. 10 Limiting the Sphere of State Monopoly The 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

11. 11 Future Adminstration of State Ports Organisation  single state company – not state authority  branch in each port  degree of independence of each branch to be determined by central administration (Ministry) Scope of Work  As per service list  No explicit mandate for cargo handling  Harbour Master separated from the administration Central Administration of Ukrainian State Ports Port of IllichevskPort of OdessaPort of YuzhnyOther Ports Ukrainian Port Reform – Changes faced by a Terminal Operator – © HPC Hamburg Port Consulting GmbH

12. 12 Facing New Status of Port Infrastructure The new Ukrainian port law differs between:  Strategic port infrastructure facilities  Other port infrastructure facilities The strategic facilities include:  Hydraulic structures (e.g., berths)  Rail lines and access roads  Communication and utility lines  Navigation equipment and other facilities of navigation and hydrographic support  Port traffic control systems  Information systems Ukrainian Port Reform – Changes faced by a Terminal Operator – © HPC Hamburg Port Consulting GmbH

13. 13 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 Improved by new Port Law Ukrainian Port Reform – Changes faced by a Terminal Operator – © HPC Hamburg Port Consulting GmbH