September 2019 — Ukraine’s Ministry of Infrastructure has announced pilot tenders for the Kherson and Olvia seaports on the Black Sea. The first tender notification was published in the Uriadovyi Kurier newspaper on 12 September 2019 and opens the opportunity for potential investors to review the tender documentation. Both foreign and Ukrainian entities are invited to participate in the tender.

The authority that grants the concession based on the results of the concession tender (the grantor) is the Ministry of Infrastructure of Ukraine.

The assets to be transferred as part of the concessions include:

  • The assets of the State Enterprise “Kherson Sea Commercial Port” (“Kherson Port”) and certain assets of the State Enterprise “Ukrainian Sea Ports Authority” (“USPA”) according to the list approved by the grantor, as well as objects to be created (constructed) under the terms and conditions of the concession agreement. The list of assets and tender documentation in Ukrainian and English languages (with the indication of titles and other details) are available at the grantor’s website at https://mtu.gov.ua/content/proekt-koncesii-u-portu-herson.html;
  • The assets of the Specialized Sea Port “Olvia” located in Mykolayiv (“Olvia Port”) and certain assets of the USPA according to the list approved by the grantor, as well as objects to be created (constructed) under the terms and conditions of the concession agreement. The list of assets to be transferred as part of the concession and the tender documentation in Ukrainian and English languages (with the indication of titles and other details) are available at the grantor’s website at https://mtu.gov.ua/content/proekt-koncesii-u-portu-olviya.html.

Ukraine’s Ministry of Infrastructure is arranging a road show in Odessa on 1 October 2019 to present both concessions.

The second tender notification will launch the official start for the tender procedure and is expected to be published in the newspaper Holos Ukrainy:

  • In relation to the Kherson Port Concession — in early October 2019, shortly after the road show takes place; and
  • In relation to the Olvia Port Concession — several weeks after the second tender notification for the Kherson Port concession is published. 

The bidding process is divided into two stages to be completed within 60 days from the publication of the second tender notification, i.e. (i) prequalification of candidates and (ii) preparation and submission of the bids by the shortlisted candidates. 

The key concession terms are summarised below:

 

Kherson Port

Olvia Port

Concession term

30 years or a shorter term suggested by the bidder, but not less than 10 years

35 years or a shorter term suggested by the bidder, but not less than 10 years

Minimum investments

UAH 215,735,000 (approximately USD 8,750,000) within 3.5 years from the commencement date

UAH 1.56 billion (approx. USD 63,270,000) within 3.5 years from the commencement date

Investment requirements

Reconstruction and modernisation of the port’s existing infrastructure; co-investment into construction of new grounds for cargo transport outside Kherson; increasing the capacity of transhipment facilities

Construction of:

  • a new grain terminal or universal transhipment terminal with capacity of 2 million tonnes per year
  • industrial facilities or real estate which may be used for production / processing (including, but not limited to, LNG terminals, buildings or structures for palletizing meal or chemical fertilizers)

Investment into development of the local social and engineering infrastructure

5% of the total investments under the concession agreement

5% of the total investments under the concession agreement

Social obligations
  • a new collective agreement with the local trade union;
  • no salary decreases during the three-year period following the transfer of personnel; and
  • no redundancies during the five-year period (or a longer period offered by the bidder) following the transfer of personnel.

The tender in general should be completed within 120 days from the date of publication of the second tender notification. The concession agreement shall be negotiated and signed within three months from the date of the announcement of the results of the tender.

Although the announced tenders will be arranged according to existing Ukrainian concession law, it is expected that a new, more progressive law on concessions will be adopted by Ukrainian Parliament this October. Should this happen, the winners of the concession tenders should be able to enjoy all benefits envisaged by the new concession law when negotiating and executing the concession agreements.

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For information on the pilot concession tenders and for any assistance, please contact:

Kostiantyn Likarchuk, Managing Partner, at kostiantyn.likarchuk@kinstellar.com, or​
Oleg Matiusha, Counsel, at oleg.matiusha@kinstellar.com, or
visit our KINSTELLAR website.