THE INVESTMENT STRATEGY TO DEVELOP NIBULON BY INCREASING TRANSPORTATION VOLUMES BY RIVERS AND THE WAY TO REDUCE TRANSPORTATION COSTS FOR AGRICULTURAL

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2 THE INVESTMENT STRATEGY TO DEVELOP NIBULON BY INCREASING TRANSPORTATION VOLUMES BY RIVERS AND THE WAY TO REDUCE TRANSPORTATION COSTS FOR AGRICULTURAL PRODUCTS DELIVERY 2

3 NIBULON HAS STUDIED THE BEST EXPERIENCE OF THE USA, THE EU COUNTRIES, BELARUS AND EXPERIENCE OF OTHER COUNTRIES IN USING INLAND WATER TRANSPORT 3

4 The tug of 6,000 hp pushes 54 non-self propelled vessels on the Mississippi River The transshipment complex on the Mississippi River Barge fleet on the Mississippi River 4

5 The Magdeburg Water Bridge on the Rhine River The Gambsheim Lock on the Rhine River Poland plans to invest EUR 15 billion to revive its part of international waterways E-30 (the Danube River, Bratislava the Baltic Sea, Szczecin), E-40 (the Baltic Sea, Gdansk the Black Sea, Odesa), and E-70 (the Atlantic Ocean, Antwerp the Baltic Sea, Klaipeda). Crossing Poland, Belarus and Ukraine, the E-40 waterway connects the ports of Gdansk and Kherson through the Vistula River, the Western Buh River, the Prypiat River, and the Dnipro River. Revival of active water trade will enable the EU countries to exchange 4 million tons of goods per year and to develop logistic centers to supply cargoes to any country in Europe and Asia. 5

6 CARGO TRANSPORTATION ALONG THE PRYPIAT RIVER (BELARUS) 6

7 7 THE DNIPRO S RIVER UNUSED POTENTIAL

8 EFFICIENCY OF WATER RESOURCES USAGE IN UKRAINE IN COMPARISON TO OTHER COUNTRIES (basin area, km 2 )

9 EFFICIENCY OF WATER RESOURCES USAGE IN UKRAINE IN COMPARISON TO OTHER COUNTRIES (length of navigable area, km)

10 10 EFFICIENCY OF WATER RESOURCES USAGE IN UKRAINE IN COMPARISON TO OTHER COUNTRIES (navigable drafts in the Dnipro River and the Mississippi River systems)

11 EFFICIENCY OF WATER RESOURCES USAGE IN UKRAINE IN COMPARISON TO OTHER COUNTRIES (volumes of transportation by inland waterways, million tons) the Dnipro 2,8 1,5 Other cargoes Grains the Mississippi 490,7 69,

12 LENGTH OF NAVIGABLE PART OF THE MAIN UKRAINIAN WATERWAYS (WITHIN UKRAINE, KM) The Dnipro River The Southern Buh River 106 (from Varvarivka bridge in Mykolaiv) The Desna River 6 TOTAL LENGTH

13 ACCORDING TO INFORMATION PROVIDED BY THE MINISTRY OF INFRASTRUCTURE OF UKRAINE, EACH MILLION TONS OF CARGOES TRANSPORTED BY RIVER RESULT IN A REDUCTION OF ABOUT UAH 790 MILLION IN ROAD REPAIR COSTS 13

14 NIBULON S CONTRIBUTION TO THE DEVELOPMENT OF THE DNIPRO RIVER AND THE SOUTHERN BUH RIVER AS THE MAIN TRANSPORT ARTERIES OF UKRAINE 14

15 THE CARGO FLEET NUMBERS 53 UNITS WITH TOTAL DEADWEIGHT OF MORE THAN156 THOUSAND TONS. IT IS THE SECOND LARGEST FLEET IN UKRAINE (MOREOVER, IT WAS BUILT AT NIBULON SHIPBUILDING AND REPAIR YARD) 15

16 COOPERATION WITH THE EUROPEAN INVESTMENT BANK AND EBRD WILL ENABLE NIBULON TO: BUILD UP TO 15 UNITS OF CARGO FLEET PER YEAR; INVOLVE OTHER STATE SHIPBUILDING YARDS IN THE PROJECT (SE SHIPYARD NAMED AFTER 61 COMMUNARDS, KHERSON STATE PLANT PALLADA AND OTHERS). 16

17 NIBULON DREDGED 134 KM OF THE SOUTHERN BUH RIVER AT ITS OWN EXPENSE, USING ITS MACHINERY AND WITHOUT GOVERNMENT SUPPORT. NIBULON SPENT 5 YEARS TO OBTAIN 47 PERMITS 17

18 DEPTHS OF THE SOUTHERN BUH RIVER: DURING THE USSR 2.9 M; BEFORE DREDGING 1.6 M; UPON DREDGING COMPLETION 2.4 M. 18

19 DUE TO NIBULON, THE NAVIGATION ALONG THE SOUTHERN BUH RIVER IS REVIVED FOR THE FIRST TIME IN 25 YEARS 19

20 NIBULON BROKE THE RECORD OF CARGO TRANSPORTATION ALONG THE SOUTHERN BUH RIVER THAT WAS SET DURING THE SOVIET PERIOD: DURING THE USSR 50 THOUSAND TONS OF GRAIN CARGOES PER YEAR; IN 2016 NIBULON TRANSPORTED 300 THOUSAND TONS OF GRAIN (12.5 THOUSAND TRUCKS WERE REMOVED FROM THE HIGHWAYS); PLANS 2 MILLION TONS PER YEAR (1 MILLION TONS OF GRAIN CARGOES, 1 MILLION TONS OF BUILDING MATERIALS). 20

21 21 NIBULON DESIGNED, BUILT AND INSTALLED 11 MOORING BUOYS ON THE DNIPRO RIVER AND ON THE SOUTHERN BUH RIVER WORTH UAH 2 MILLION

22 22 NIBULON BUILT 2 TRANSSHIPMENT TERMINALS ALONG THE SOUTHERN BUH RIVER, HAVING PROVIDED 1.5 THOUSAND BUILDERS WITH WORK

23 RECONSTRUCTION OF NIBULON SHIPBUILDING AND REPAIR YARD IS IN PROGRESS 23

24 24 NIBULON SHIPBUILDING AND REPAIR YARD IN MAY 2017

25 25 NIBULON SHIPBUILDING AND REPAIR YARD. STORAGE SYSTEM FOR METAL, AREA FOR METAL CLEANING AND PRIMING, AND METALWORK WORKSHOP ON FEBRUARY 1, 2017

26 NIBULON SHIPBUILDING AND REPAIR YARD. THE EQUIPMENT THAT WILL BE INSTALLED AT THE STORAGE SYSTEM FOR METAL, AREA FOR METAL CLEANING AND PRIMING, AND AT METALWORK WORKSHOP SUPRAREX HD portal plasma cutting machine (ESAB AB, Sweden) Shipbuilding press SBP 275 (Nieland B.V., the Netherlands) ROSLER roller conveyor machine for rolled plates and frames RRB 27/6 (Rosler Oberflachentechnik GmbH, Germany) Frame bending machine SBK 275 (Nieland B.V., the Netherlands) 26

27 THE COMPANY CREATED 600 WORKPLACES FOR SHIPBUILDERS AND 350 WORKPLACES AT SHIPPING COMPANY EMPLOYEES ARE NEXT IN TURN TO GET A JOB 27

28 NIBULON S EXPENSES TO IMPLEMENT THE SHIPBUILDING PROGRAM ( ): TOTAL SUM OF INVESTMENT FUNDS USD MILLION, IN PARTICULAR: INVESTMENTS IN SHIPBUILDING CAPACITIES USD MILLION, INVESTMENTS IN NAVIGATION USD MILLION, IN PARTICULAR: WAGES USD MILLION; MANDATORY PAYMENTS TO THE STATE FUNDS USD MILLION; VAT USD MILLION; DUTIES AND CUSTOMS DUTIES USD 1.8 MILLION; EXCISE TAX USD MILLION. 28

29 29 NIBULON S SHIPBUILDERS DESIGNED AND CONSTRUCTED NIBULONIVETS FLOATING CRANE FOR OPERATION ON THE DNIPRO RIVER

30 POTENTIAL: TRANSPORTATION OF 10 MILLION TONS OF GRAIN CARGOES BY RIVER TRANSPORT PER YEAR; REVIVAL OF E-40 NAVIGATION PASS AND RIVER TRANSPORTATION BY THE ROUTE THE BALTIC SEA GDANSK THE DNIPRO RIVER THE BLACK SEA ; INTRODUCTION OF CONTAINER CARRIAGE (INCLUDING REEFER CONTAINERS) UP THE DNIPRO RIVER TO BELARUS. 30

31 POTENTIAL: POSSIBILITY TO TRANSPORT ORE, METAL, WOOD, COAL, FERTILIZERS, VEGETABLES, FRUIT ALONG THE RIVERS. 31

32 FREIGHT TRAFFIC POTENTIAL ALONG THE DNIPRO RIVER COMPRISES 60 MILLION TONS OF CARGOES PER YEAR 32

33 PRIORITIES: TO REVIVE DECLARED DEPTHS OF THE DNIPRO RIVER AND TO GUARANTEE A TRANSIT DEPTH OF 3.65 M TO ALL MARINERS. AT PRESENT GUARANTEED DRAUGHT OF VESSELS ALONG THE DNIPRO RIVER COMPRISES M. UPON COMPLETION OF THE DREDGING ON THE DNIPRO RIVER, THE GUARANTEED DRAUGHT WILL COMPRISE 3.2 M. 33

34 34 A series of accidents confirms complexity of the site conditions. For example, the Dnieper Princess motor vessel with 250 foreign tourists on board ran aground on leaving the lock on August 20, All passengers were evacuated to the river bank by tugs of Dnipropetrovsk river port. The motor vessel was damaged near the first compartment of the dry hold. During the Soviet period, one tried to dredge this area through blasting. However, it turned out that the rocks are continuation of the platform where the Dniprovskyi Integrated Iron and Steel Works named after Dzerzhynskyi and storage of radioactive waste are located. We refused from blasting. At present, there are new technologies and special mechanisms to crush rocks, in particular, high capacity excavators. These innovations can be used to remove the above mentioned obstacles.

35 PRIORITIES: 1. TO PERFORM DREDGING ON THE LIMITING PARTS IN THE DNIPRO RESERVOIR AND THE DNIPRODZERZHYNSK RESERVOIR 35

36 36 LIMITING AREAS OF THE DNIPRO S NAVIGATION PASS (Е-40 INTERNATIONAL WATERWAY)

37 37 LIMITING AREAS OF THE DNIPRO S NAVIGATION PASS (Е-40 INTERNATIONAL WATERWAY)

38 WATER LEVEL MARKS AND DEPTHS AT THE LIMITING PARTS OF THE DNIPRODZERZHYNSK LOCK WHICH IS IN NEED OF URGENT RECONSTRUCTION (TAIL BAY) THE INFORMATION PROVIDED BY SE UKRVODSHLIAKH 38

39 NIBULON HAS ALREADY MADE APPROPRIATE RESEARCHES AND DEVELOPED A WORKING DRAFT AT ITS OWN EXPENSE. IN ACCORDANCE WITH THE WORKING DRAFT ONE MUST REMOVE: 1 247,50 M 3 OF ROCKS AND М 3 OF SAND FROM THE DNIPRODZERZHYNSK RESERVOIR; ,94 М 3 OF ROCKS FROM THE DNIPRO RESERVOIR. THE COST OF DREDGING COMPRISES ABOUT USD 2 MILLION. 39

40 NIBULON CONSTRUCTS A SELF-PROPELLED DREDGING VESSEL TO DREDGE THE DNIPRO RIVER TO 15 METERS. IF THE COUNTRY IS NOT ABLE TO DREDGE THE LIMITING PARTS IN THE DNIPRO RESERVOIR AND THE DNIPRODZERZHYNSK RESERVOIR, NIBULON WILL DO THIS THE DESIGN IDEA WAS DEVELOPED BY NIBULON 40

41 2. TO INSTALL NECESSARY NAVIGATION EQUIPMENT ON THE DNIPRO RIVER 41

42 CURRENT SITUATION WITH NAVIGATION EQUIPMENT ON THE DNIPRO RIVER (as of November 1, 2016) No. Reservoir Lighting of navigation circumstances Bridges lighting Lack of radio communication coverage 1 Kaniv 20 % 60 % 2 Kremenchuk 0 % 50 % 96 km 3 Dniprodzerzhynsk 0 % 90 % 45 km 4 Dnipro 70 % 10 % 50 km 5 Kakhovka 70 % 0 % 145 km 6 From Kakhovka hydroelectric power station to the lower Dnipro 100 % 75 % NIBULON ANNUALLY LOOSES 100 THOUSAND TONS (15 %) OF FREIGHT BECAUSE OF LACK OF NAVIGATION EQUIPMENT LIGHTING. 42

43 43

44 44 3. TO DREDGE THE DNIPRO RIVER

45 45 PROBLEMS OF TARIFF REGULATION

46 PRIME COST OF GRAIN TRANSPORTATION KREMENCHUK MYKOLAIV (as of April 01, 2016, before increase in tariffs for railway services) UAH per ton UAH per ton UAH per ton 46

47 PRIME COST OF GRAIN TRANSPORTATION KREMENCHUK MYKOLAIV (since May 01, 2016, after increase in tariffs for railway services) UAH per ton UAH per ton UAH per ton The Ministry of Infrastructure of Ukraine plans to increase tariffs by 15 %. It is unacceptable. The Ministry of Infrastructure of Ukraine should develop tariff policy to concentrate transport logistics of Ukraine on transportation by waterways. 47

48 PRIME COST OF GRAIN TRANSPORTATION KREMENCHUK MYKOLAIV (according to the draft law No. 2475a on inland water transport) UAH per ton UAH per ton Given the river due of UAH per ton/km and abolishment of certain payments UAH per ton 48

49 THE RIVER DUE IMPLEMENTATION COASTAL SHIPPING BY VESSELS FLYING THE FOREIGN FLAGS IMPORT OF VESSELS FREE OF CUSTOMS DUTY 49

50 The draft laws No. 2475a, 2476a, 2713 and 2712 are unjustified and baseless. They lead to: 1) Enhancement of fiscal burden on inland water transport flying the Ukrainian flag, loss of competitiveness in comparison to the transport flying flags of other countries. 2) workplaces in sphere of navigation are not created workplaces in the shipbuilding sector. 3) Shortfall in revenues to the state budget: in particular as regards the excise tax about EUR 9.6 million per year, payments from wages about UAH 320 million per year. 4) Shortfall in customs duties (duties and VAT) during temporary import of foreign vessels to the territory of Ukraine comprises USD 390 thousand per one vessel worth USD 1.5 million. The suggested draft laws contradict the practice of the EU and the USA in inland waterways maintenance. 50

51 Draft law No a The draft law of Ukraine On inland water transport Draft law No. 2476а The draft law of Ukraine On amendments to the Tax Code of Ukraine on peculiarities of rental payment for special water use and taxation of land of inland water transport Draft law No The draft law of Ukraine On amendments to the Customs Code of Ukraine aimed at promoting the development of navigation in Ukraine The draft law No The draft law of Ukraine On amendments to The Maritime Code of Ukraine (aimed at promoting the development of navigation in Ukraine) 51

52 PORTS OF ODESA ARE NOT INTERESTED IN DEVELOPMENT OF INLAND WATERWAYS 52

53 53

54 NO COUNTRY IN THE WORLD GIVES UNLIMITED ACCESS TO ITS INLAND WATERWAYS TO THE VESSELS FLYING THE FOREIGN FLAG, THEREBY PROTECTING INTERESTS OF A NATIONAL FLAG 54

55 CALL OF PANAMAX VESSELS WITH DEADWEIGHT OF 60 THOUSAND TONS GHENT ANTWERP ROTTERDAM HAMBURG MYKOLAIV EUR 1.45 PER TON EUR 1.25 PER TON EUR 1.29 PER TON EUR 1.01 PER TON USD 4.25 PER TON 55

56 COMPARATIVE ANALYSIS OF DUES Types of dues The Danube River The Rhine River The Mississippi River The Prypiat River, The Dnipro River (Belarus) The Dnipro River Oil product excise tax Locking services Port dues River due * Canal dues Rental payment for special water use for water transport needs * IS PLANNED ACCORDING TO THE DRAFT LAW NO. 2475A DATED

57 ALMOST USD 3 MILLION OF DUES ARE PAID ANNUALLY ON INLAND WATERWAYS (FREIGHT TRAFFIC OF 5.5 MILLION TONS PER YEAR). ABOUT USD 5.47 BILLION MUST BE PAID ANNUALLY ON INLAND WATERWAYS (FREIGHT TRAFFIC OF 10 MILLION TONS PER YEAR). UPON IMPLEMENTATION OF THE RIVER DUE, ABOUT USD 5.48 MILLION MUST BE PAID PER YEAR (FREIGHT TRAFFIC OF 10 MILLION TONS PER YEAR). THUS, IMPLEMENTATION OF THE RIVER DUE IS INEFFECTIVE. 57

58 ROAD MAP OF FUNDING AND MAINTENANCE OF INLAND WATERWAYS AND PORT INDUSTRY VARIANT 1 FUEL EXCISE TAX FOR WATER TRANSPORT To reduce by 50 % and direct to develop inland waterways (USD 1.13 million per year, USD 12.3 million per year after revival of waterways) If the excise tax is unchanged, then one should direct the amount of tax paid to develop inland waterways (USD 2.26 million per year, USD 24.6 million per year after revival of the waterways) Fuel excise tax for water transport isn t paid in Europe. The excise tax in the USA comprises 67.9 % of the excise tax in Ukraine. 58

59 ROAD MAP OF FUNDING AND MAINTENANCE OF INLAND WATERWAYS AND PORT INDUSTRY VARIANT 2 PORT DUES: To reduce canal due by USD 1 per ton for Mykolaiv and Kherson sea ports + PORT DUES: To direct USD 0.5 per ton to develop infrastructure of port cities (USD 10million per year) To direct USD 0.5 per ton to develop inland waterways (USD 10 million per year) 59

60 THANK YOU FOR YOUR ATTENTION! 60