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UKRAINE INVESTMENT OUTLOOK

UKRAINE INVESTMENT OUTLOOK

Mikhail Titarchuk

May 11, 2017
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  1. Ukraine in world ratings The rating “Doing Business 2017” of

    the World Bank Group Ukraine has risen from 152 to 80 place since 2012 The Global Competitiveness Index of the World Economic Forum 2016-2017 took 85th spot among 138 countries of the world The Global Innovation Index 2016 of Cornell University, INSEAD, and the World Intellectual Property Organization of the United Nations, placed 56 rank among 128 countries of the world Index of Economic Freedom 2017 of the Wall Street Journal & Heritage Foundation is ranked 166th out of 180 countries of the world
  2. Attracted Foreign Direct Investment 5.6 5.9 6.0 5.3 5.5 2.5

    3.8 4.4 2009 2010 2011 2012 2013 2014 2015 2016 Years 2009 2010 2011 2012 2013 2014 2015 2016 FDI inflows at the beginning of the period mln. US $ 35 616,4 38 992,9 45 370,0 48 197,6 51 705,3 53 704,0 40 725,4 37 655,5
  3. 31,3 26,3 12,4 9,1 9,4 5,2 2,6 2,6 1,2 25,4

    27,4 14,6 9,7 11,6 5,8 2,3 2,3 1,0 Industry Financial and insurance activities Trade Real estate business Other Professional, scientific and technical activities Construction Transport Agriculture, foresty, fishery 01.01.2017 01.01.2016 Attracted Foreign Direct Investment 28,32 17,1 4,42 8,39 5,7 4,95 4,0 25,73 15,28 4,27 11,55 5,8 5,3 4,69 01.01.2017 01.01.2016 MAJOR COUNTRIES INVESTORS in % of total investment amount FOREIGN DIRECT INVESTMENT AT TYPES OF ECONOMIC ACTIVITY in % of total investment amount
  4. Development of investment climate Сreation of Ukraine Investment Promotion Office

    – Decree of the Cabinet of Ministers of Ukraine from 19.10.2016 National Investment Council - Decree of the President of Ukraine from 29.08. 2016 National Anti-Corruption Bureau of Ukraine On March 15th, 2017 Agreement was signed between Ukraine and the Organization for Economic Cooperation and Development to join the Declaration on International Investment and Multinational Enterprises Business Ombudsman Council 1 2 3 4 5
  5. Support for Industrial parks in Ukraine State Regional Development Strategy

    2020 defined a regional network of industrial parks (IP) and providing state support to entities that create such parks as one of the priorities of regional development State support shall be provided to the Initiators, Management companies and Participants of IP included into the Register of Industrial Parks State support for creation and function of IP includes: • financing from State Regional Development Fund of projects of building of IP infrastructure on condition of at least 10% co-financing from local budgets • exceptions for initiators (business entities) of the IP creation and\or its management companies to pay for development of the settlement infrastructure when they construct objects within IP • exemption from import duties when importing equipment and materials that are not produced in Ukraine and imported with the purpose of IP creation and function within IP
  6. Industrial parks infrastructure in Ukraine Data as of 26.04.2017 IP

    included into the Registry: 1. Dolyna 2. Slavuta 3. Ryasne-2 4. Korosten 5. Tsentralnyi 6. Svema 7. Solomonovo 8. PUIP 9. BIONIC Hill 10. iPark 11. Kryvbas 12. Trostianets 13. Mirotske 14. VIP 15. ZHYTOMYR-EAST 16. Novodnistrovsk 17. Fastindustry 18. Pavlograd 19. Yavoriv IP not included into the Registry of IP Industrial park initiated to be included into the Registry of IP Industrial park included into the Registry of IP (with the managing company) Industrial park included into the Registry of IP (without the managing company) 7 1 10 19 IP of Rivne Oblast 3 2 Novii Rozdil Burshtyn 14 15 4 13 8 9 17 IPCE “BVAC” 5 11 18 6 12 Patriot Cheksil Malynivka IP of ZAPOROZhKRAN KhersonIndustrialPark AzovAquaInvest Kamianka-Buzka
  7. KEY DEVELOPMENTS IN PPP LEGISLATION The work on elaboration of

    a unified approach to the private sector participation in modernization of infrastructure and the provision of public services on PPP basis is underway: The Interagency Work Group on Concession Legislation Reforming established by the Ministry of economic development and trade approved the Concept for Concessions Legal Framework The Ministry of Economic Development and Trade with support from EBRD is drafting a new law "On Concession" The Ministry of Infrastructure is drafting an order of the Cabinet of Ministers of Ukraine regarding the pilot concession projects in infrastructure (sea ports) Ministry of economic development and trade is working on the methodical recommendations on the implementation of PPP projects
  8. CONCESSION OF COMMERCIAL SEA PORT KHERSON 600 Quay Length (m)

    47 Area (ha) 30 CAPEX Required ($mln) 7.6 Max Depth (m) 7.9 Revenue ($mln, 2016) 14% EBITDA Margin (2016) 4 Berths Key investment highlights: o Favorable location: o On the mouth of the Dnieper river, the biggest river going through the key industrial and agricultural regions o Railway, road and river access to the port makes it an excellent multimodal cargo hub o Significant opportunities for operating performance growth: o New logistics planning system could significantly increase efficiency of existing storage facilities o Port area could be utilized more efficiently to accommodate cargo flow growth potential o Equipment modernization could substantially improve handling efficiency o Cargo turnover growth opportunities: o Grain is the most promising cargo in the port with considerable export growth potential o Further inland waterways development will provide additional cargo volumes for transshipment in the port o Sustainable financial position: o Revenue ranged from $8 to $10 mln in the last 3 years o EBITDA margin averaged at 18% in the last 3 years o $30 mln CAPEX required according to the estimations of international consultants o Well-structured transaction: o The World Bank provided technical assistance in preparation of pre-feasibility study for the project o IFIs will be deeply involved in transaction structuring Russia EU EU Russia Black Sea Kherson SCP Kyiv Kherson city Left bank facilities
  9. CONCESSION OF STEVEDORING COMPANY “OLVIA” Key investment highlights: o Favorable

    location: o In the northern part of Dnieper-Bug estuary, close to the Black Sea and Dnieper river o In one of the key agricultural regions of Ukraine with high grain export potential o Outside of the Mykolaiv city with extensive free territory o Extensive free area for further development: o Section A is a “greenfield” project ($250 mln CAPEX est.) o Sections B, C, D, E are the “brownfield” project(s) ($45 mln CAPEX est.) o Additional free state-owned land available for further extension, portside production, etc. o Diversified cargo handling operations: o 2.2 million tones of cargo handled in 2016 divided approximately by 1/3 for 3 main cargoes: metals, building materials and cereals o Sustainable financial position: o Revenue ranged from $15 to $21 mln in the last 3 years o EBITDA margin averaged at 45% in the last 3 years o Well-structured transaction: o EBRD provided technical assistance in preparation of pre-feasibility study for the project o IFIs will be deeply involved in transaction structuring 1.53 Quay Length (km) 179 Area (ha) 5% Market Share 10.3 Max Depth (m) 15.4 Revenue ($mln, 2016) 47% EBITDA Margin (2016) 7 Berths Russia EU EU Russia Black Sea B A C D E Mykol aiv
  10. CONCESSION OF THE FERRY TERMINAL IN CHORNOMORSK Berths #26 and

    #27 Berth #28 2 lift bridges Warehouses #25 and #26 Area – 12 ha. EU Black Sea Ukraine Russia Turkey Georgia Key investment highlights: o Unique facility: o Serves both railway ferries and Ro-Ro vessels o Is the only railway ferry terminal in Ukraine and one of the biggest terminals of such kind in Black Sea region o Favorable location: o In the Sea Commercial Port of Chornomorsk, one of the biggest ports in Ukraine located in Sukhoy estuary, 12 miles to the South-West from Odesa o At the intersection of major transport corridors between Europe and Asia, industrialized areas and key sea routes o It is the center of two basic rail ferry lines on the Black Sea o Niche market position: o Domestic market share in handling trucks is 71%, vehicles – 95% and full market of handling wagons o Unspecialized on particular cargoes, diversified cargo flow mostly represented by perishable food products, wood, building materials and other cargo in small batches o Stable operating business: o Does not require significant CAPEX and has spare capacity for cargo flow growth o Has significant operating efficiency growth potential and opportunities to develop new services o Highly marginal financial position: o Revenue ranged from $3.3 to $5.6 mln in the last 3 years o EBITDA margin averaged at 44% in the last 3 years 690 Quay Length (m) 1.8 Cargo Turnover (mln tones, 2016) 9.6 Max Depth (m) 3.7 Revenue ($mln, 2016) 41% EBITDA Margin (2016) 3 Berths 4.5 mln tones of cargo in railway wagons 35 000 heavy duty trucks 250 000 units of vehicles Annual Capacity