Strategic Development Plan of the state enterprise “Ukrainian Sea Ports Authority” for 2021-2025 (hereinafter – the Strategic plan) was agreed on by the USPA Supervisory Board and approved by the Ministry of Infrastructure of Ukraine in accordance with the Laws of Ukraine “On Managing Objects That Are in the State Ownership” and “On Sea Ports of Ukraine”, National Transport Strategy of Ukraine Until 2030, Ukrainian Sea Ports Development Strategy Until 2038, taking into account modern and prospective trends of the economic development of Ukraine.
The Strategic plan aims at transforming USPA into a modern, efficient and competitive port development company.
4. 4
Ukrainian ports need substantial improvements to become
competitive – our vision 2025 as a driver for modernization
Modern corporation
In order to maintain the competitiveness of
Ukrainian sea ports, USPA will adopt best
global practices in organizational design and
port authority management
Efficient infrastructure provider
To keep up with the rising demand, USPA will
gain more coordinated control over the day-
to-day operations of port infrastructure and
the use of port land
Open and integrated port community
USPA will create a feedback platform that will
promote, facilitate and meet the needs of
port customers and enterprise stakeholders
Global outlook
Our vision 2025
Rising competition amongst ports
Global volumes of international trade will annually increase by ~2.5%
until 2025, driving higher competition between ports
With ever higher requirements to efficiency and reliability of global
supply chains, ports face more pressure to provide seamless
infrastructural service for trade flows
Economic growth in the country
Ukrainian real GDP is growing at ~4%*, driving both import and
export trade flows
Existing and evolving trade activities (~40% estimated national real
export growth in 2016-2020) demand timely completion of key
projects, requiring investments into port infrastructure
Increasing investments by commodity producers and traders
High, stable prices for export goods increased investments in
agriculture, metallurgy and other export oriented sectors
This requires infrastructure projects to engage modern execution
practices with transparent project management
*Without taking into consideration while GDP forecasting global factors, including the deterioration of the epidemiological situation in the world and the introduction of respective
anti-epidemiological measures
5. 5
USPA currently faces several challenges that prevent the
Ukrainian sea port system from functioning effectively
Status Quo at USPA and background for the Strategy designing
Current performance
status*(2019)
Status Quo
USPA is responsible for
Managing state-owned infrastructure at sea ports
Control and maintaining the depth of the ports' water areas and access channels
in order to ensure safety of navigation
Promoting private investments in the port infrastructure development
Comparatively low return on
assets (7.4%, compared to 15-
20% globally)
Relatively low revenue per
employee (UAH 967k / person )
Major challenges
Unpredictable state dividend policy, which affects available CAPEX budget
Limited authority to manage port land, which limits the port development
capabilities
Discrepancy of port due rates in Ukraine with the competitive level
Inefficient throughput per meter
of berth (~2.6k tons / m for
general and dry bulk cargo,
compared to 5-7k tons globally)
Currently no revenue on
hectare of port land
*Refers to external key performance indicators that display port performance as infrastructure service
6. 6
The Strategy aims to transform USPA into a modern, efficient
and competitive organization
High-level Strategy overview – three Thrusts and respective Initiatives
Thrust A:
State-of-the-art
corporations
Thrust B:
Landlord port
model with high-
quality
infrastructure and
services
Thrust C:
Well-functioning
port communities
А.1. Corporatize headquarters and branch offices; streamline processes and functions
A.2. Improve expertise of staff via recruiting and training
A.3. Develop modern and efficient management tools
B.1. Take responsibility for port lands and manage them in a more efficient way
B.2. Improve maintenance of existing and develop new, modern infrastructure
B.3. Improve private-sector involvement
C.1. Improve customer relations and cooperation with stakeholders
C.2. Apply and enforce international standards for safety of navigation, occupational
safety and health and environmental protection, as well as maritime security
C.3. Increase marketing activities
7. 7
The Strategy should raise the competitiveness of Ukrainian
sea ports and foster their investment appeal
Impact of the Strategy
Private sector involvement and modernization of infrastructure will allow USPA to increase cargo-handling efficiency in Ukrainian ports, increasing
throughput per meter of a USPA berth for all cargo types:
for general and dry bulk cargo it will reach ~3,000 tons per meter of a berth under a baseline scenario for 2025. Additional ~10 years and
modernization of terminal facilities will be required to reach the international benchmark level of ~8,000 tons.
the turnover of containers will grow by at least 30% to reach ~460 TEU per meter of berth in 2025. Without additional initiatives, Ukrainian ports
will not be able to achieve the global benchmark of 2 000 TEU under the 2030 optimistic scenario.
for the liquid bulk, throughput will grow by ~10% to 3,500 tons per meter of berth in 2025 and reach 3,800 tons in 2030.
Implementation of the Strategy will contribute to harmonized relationships with local communities, gradually improve ship turnaround times and decrease
the ratio of logistics cost / total GDP, driving up total consumption and business activity in the country.
The sea port infrastructure will see further improvements in utilization of staff potential as well as overall cost efficiency gains.
The Strategy implementation will allow maintaining the passport characteristics of waterside infrastructure facilities (sea port water areas, quay walls, etc.)
and their proper condition of technical operations.
Ukraine as a whole will additionally benefit from increased international volumes of cargo handling and creation of jobs in export-oriented industries.
The withdrawal of non-core assets, the disposal of underutilized assets will enable USPA to achieve the return on assets (RoA) level of ~8% by 2025. In
addition, the increase in the operational efficiency will allow USPA to ensure the EBITDA margin at no lower than 15%.
Despite possible changes in port dues rates, the revenue per employee will increase to reach at least UAH 1,1 million in 2025.
9. Selected external key
performance indicators
improved by the Thrust*
9
Thrust A – USPA will become a joint-stock enterprise
through corporatization and enhanced expertise
A State-of-the-art corporations
1
2
3
Initiative A.1: corporatize headquarters and branch offices;
streamline processes and functions by
Turning USPA into a joint-stock company
Reorganizing the USPA structure, in particular through consolidation (merging) of branches –
sea port authorities
Improving internal procedures and processes, including optimization of expenses of USPA
and increase in the efficiency of the use of financial resources
Initiative A.2: improve expertise of staff via recruiting and
training by
Creating qualified staff recruitment system, based on the needs of the enterprise and
current trends in the labor market
Designing effective system for corporate trainings and education
Streamlining organizational structures, staffing charts and staff number
Initiative A.3: develop modern and efficient management tools, including
More intensive IT application (including introduction of ERP and GIS systems, the functionality
of the “Maritime window”
Providing for the functioning of complex and reliable management systems
Improving KPI-monitoring system at all levels of the enterprise
State-of-
the-art
corporations
Internal key performance indicators will need to be formulated by USPA after the launch of strategy implementation and should help to drive key
strategic initiatives. List of priority KPIs could change year-to-year. Exemplary KPIs could be:
meeting budget targets overhead spending as % of net revenue
personnel job satisfaction
personnel turnover rate
*Monitored on a quarterly, possibly monthly basis
Return on assets
(RoA)
EBITDA margin
Labour
productivity
Introduction of risk
management and
internal control
systems
10. 10
Initiative A.1: Corporatize headquarters and branch offices;
streamline processes and functions
A State-of-the-art corporations
Target picture of USPA in 2025
USPA
today
State-owned
port authority
Limited and slow
decision making
Outdated
governance and
management
system
Support efficient
decision making
on port dues and CAPEX
Updated organizational
structure
Consistent project approach to
selecting future infrastructure
projects
Optimized administrative
costs
Functional changes
11. Day-to-day work
Learning and development
Recruiting
11
Initiative A.2: Improve expertise of staff via recruiting and
training
A State-of-the-art corporations
Key measures to increase workforce efficiency
Efficient
workforce
> Introduce personal accounts for employees with
the full information on their work at the enterprise
(including with the KPI tracking)
> Create a staff reserve bank for the basic service
(profile) professions
> Introduce corporate education roadmaps
> Develop strict and clear recruitment standards
> Introduce effective recruiting system
12. 12
Initiative A.3: Develop modern and efficient
management tools
A State-of-the-art corporations
Strategic instruments for implementation
Modern
Management
Toolbox
… increasing project efficiency and reducing time effort
… ensuring right focus of projects and prioritization in day-to-
day work
… simplifying land management by showing up-to-date land
ownership status
… reducing overhead costs and creating better transparency,
especially in management reports
Project management
systems
KPI monitoring
Geographic information
system
Modern enterprise resource
planning system
Contract monitoring team
collaboration, other tools … making daily operations more efficient, transparent and
convenient
13. 13
Thrust B – Ukraine will adopt a contextualized landlord port
model to increase quality of infrastructure and services
B Landlord port with high-quality infrastructure and services
2
3
Initiative B.1: take responsibility for coordination of port lands and
manage them in a more efficient way, e.g. by
Forming a bank of potentially free territories to be potentially used to develop port facilities
Designing a comprehensive development plan (master plan) of Ukrainian sea ports
Establishing pilot joint ventures with local self-government bodies and/or a local state
administrations
Initiative B.2: improve maintenance of existing and develop
new, modern infrastructure, e.g. by
Introducing the mechanism for constant updating of the investment portfolio of projects
Attracting external financial resources to carry out infrastructure projects
Applying the instruments for the constant infrastructure monitoring
Initiative B.3: improve private-sector involvement, e.g. by
Participating in creation of competitive concession agreements for port infrastructure objects
Introducing the mechanism for compensation of investments by economic entities in strategic
facilities of the USPA port infrastructure
Applying provisions on KPIs and service quality control into the agreements with private
economic entities
1 Selected external key
performance indicators
improved by the Thrust*
*Monitored on a quarterly, possibly monthly basis
Become a
landlord port
with high-
quality
infrastructure
and services
Internal key performance indicators will need to be formulated by USPA after the launch of strategy implementation and should help to drive key
strategic initiatives. List of priority KPIs could change year-to-year. Exemplary KPIs could be:
% of port land under USPA's management
weighted average cost of capital for projects under USPA management
number of new concession agreements
number of leased berths
Throughput per 1
meter of the passport
length of a cargo berth
of USPA
Amount of capital
expenditures
Number of new PPP
agreements involving
the USPA property
per year
Definition of port
boundaries for all sea
ports
14. Targetmodel
Public
control
Private
control
Equipment
Superstructure
Port Labor
Other services
Infrastructure
Description
Service Port Tool Port Landlord Port Private Port1 432
After respective regulatory changes are adopted, USPA will be able to develop a national master plan for the port network based
on rational land/quay walls/access roads use and development, and also assess potentially free territories usable for development
of port capacities together with local authorities.
The regulatory changes will allow USPA to purchase and/or acquire corporate rights to use the identified port land, including
establishment of pilot joint ventures with the participation of the corporatized USPA JSC and local self-government bodies and/or
local state administrations to manage a sea port authority.
Afterwards, USPA will get an opportunity to obtain a share of concession payments in case the USPA assets are determined as such
to be subject to concession and lease berths.
14
Initiative B.1: Take responsibility for coordination of port
lands and manage them in a more efficient way
Port ownership and management models
B Landlord port with high-quality infrastructure and services
PrivatePublic
Currentmodels
15. 15
Initiative B.2: Improve maintenance of existing and develop
new, modern infrastructure
B Landlord port with high-quality infrastructure and services
Initiatives for port infrastructure development
Monitoring
Project portfolio
update
Loans from
international
institutions
USPA will apply constant monitoring tools for port infrastructure (once
USPA gets consolidated authority over port land management)
USPA will constantly update the package of investment infrastructure
projects to implement with external funds, in particular through private
investments (including PPPs)
In order to successfully launch initial infrastructure projects, it will be
essential to involve in a law-established manner financial resources,
including from international financial organizations
16. 16
Initiative B.3: Improve private-sector involvement
B Landlord port with high-quality infrastructure and services
Possible set-up for development and operation under transformation
Activity /
assets in operation
Possible set-up
Capital
investment
Operation and
maintenance
USPA will promote private investments in port infrastructure projects
This will create proper conditions for competitive concession agreements
In order to monitor the quality of infrastructure and services, USPA will introduce performance-based concession and investment
agreements
Land reclamation (for port and water front-industrial development)
Terminals (quay walls, equipment, cranes, operating systems, reefer system, terminal operating building)
Breakwater and shore protection
Port operation infrastructure (underwater structures, revetments, in-port roads, lighthouse)
Hinterland connectivity (onsite cargo depot, in-port rail tracks, terminal yard, connecting roads)
Dredging
Land improvement (paving and surfacing)
Port facilities/sub-infra. (admin. buildings, parking, maintenance shop)
Port utilities (telecom, water supply and sewerage, waste management)
Public PPP
PPP PPP
Public Public
Public Public
PPP PPP
Public
Public
Public PPP
PPP PPP
PPP
PPP
17. 17
Thrust C – USPA will drive better interaction within
the Ukrainian port community
C Well functioning port communities
Initiative C.3: increase marketing activities, e.g. by
Designing the USPA marketing policy projected for domestic and international markets
Introducing surveys among USPA customers on the level of satisfaction with the
quality of services provided by the enterprise’s structural units
Creating electronic accounts of a myPort client (partner) of USPA
Initiative C.2: apply and enforce international standards for safety of
navigation, occupational safety and health and environmental
protection, as well as maritime security, e.g. by
Ensuring the functioning of the ecological management system of USPA in compliance
with international standards
Improving maritime security system within the framework of the ISPS Code
Implementing the occupational safety and health management system in accordance with
international standards
Initiative C.1: improve customer relations and cooperation with
stakeholders, e.g. by
Strengthening Sea port councils
Practicing sustainable reporting on USPA and sea port performance
Designing and approving the USPA policy on the cooperation with stakeholders
2
3
1 Selected external key
performance indicators
improved by the
Thrust*
Well
functioning
port
communities
Internal key performance indicators will need to be formulated by USPA after the launch of strategy implementation and should help to drive key
strategic initiatives. List of priority KPIs could change year-to-year. Exemplary KPIs could be:
number of employee complaints
coverage of the required maritime security measures
reduction of fraud accidents and other misconduct
average reaction speed in case of emergency or HSE violations
*Monitored on a quarterly, possibly monthly basis
Level of customer
satisfaction
Application of
international standards
of port operations
Number of maritime
emergencies per year
Number of
occupational safety
accidents per year
18. 18
Initiative C.1: Improve customer relations and
cooperation with stakeholders
C Well functioning port communities
Target picture for stakeholder collaboration
To enhance stakeholder
collaboration within the port
communities, USPA will…
Strengthen Sea port councils and
enhance interaction with local
authorities
Constantly inform the port community,
e.g. on ongoing transformation and port
development
Introduce annual customer satisfaction
surveys (among port operators and
maritime agents)
Port
Community
Port
Community
Port
Community
RecipientShipping
line
Port
Sea Port
Authority
Sea Port
Authority
Sea Port
Authority
Local
authorities
Banks &
Insurance
Producer/
shipper/ Cargo
owner
Trucking
companies
Service
provider
Port
Port
19. 19
Initiative C.2: Apply and enforce international standards for safety of
navigation, occupational safety and health and environmental
protection, as well as maritime security
C Well functioning port communities
Critical elements to create a healthy, secure and sustainable community
Enhanced
port safety
through…
…norms & requirements …safety infrastructure
Obtaining PERS Certificates from EcoPorts network by
sea port authorities
Educating and training all relevant personnel
Improving marine navigation safety and environmental
protection system
Supporting the process of approving standard staffing of
fire safety units (FSUs)
Improving an integrated security system of ports
Engagement with the activities of the International
Maritime Organization (IMO)
Ensuring the functioning of the ecological management
system
Carrying out the functioning of the occupational safety
and health management system
Supporting the process for improvement of the
emergency rescue operations system
Creating conditions for handling all types of vessel
boeard waste (oil contaminated water and oil
residues, sewage, garbage, operational waste, cargo
residues, separations) in sea ports
…training & certificates…management systems
20. 20
Initiative C.3: Increase marketing activities
C Well functioning port communities
Foundations of sustainable marketing policy
TechnologiesOrganization Tools
Securing communication
through corporate client
(partner) account myPort
on the official portal
Surveying USPA clients on
the level of satisfaction
with the quality of services
Disseminating information
on the investments
attractiveness and
infrastructure potential of
Ukrainian ports
Strengthening marketing
and client relations
departments
Ensuring the participation
of USPA in international
organizations and of sea
ports in international
transport routes
Involving advanced
practices of B2B marketing
from the world’s leading
port authorities
Designing and approving a
marketing policy for both
domestic and international
markets
Conducting market analysis
in terms of attractiveness of
Ukrainian ports, quality of
services, rates of port dues
Ensuring application of the
brand book
21. 21
The Strategy should be implemented until 2025 – full
integration of the landlord model might continue until 2030+
Strategy implementation timeline
2020 2021 2022 2023 2024 2025
Initiative A.3: Develop modern and efficient management tools
Unification
and alignment
of the internal
org. processes
Initiative C.3: Increase marketing activities
Initiative B.2: Improve maintenance of existing and develop
new, modern infrastructure
Initiative B.1: Take responsibility for port lands and
manage them in a more efficient way
Initiative C.1: Improve customer/stakeholders relations
Draft law on
corporatization
registered
Initiative B.3: Improve private-sector involvement
Thrust A: State-of-the-art corporations
Thrust B: Landlord port model with high-quality
infrastructure and services
Activity
First joint venture(s) formed
with local authorities
to manage
port authorities
Initiative A.1: Corporatize USPA;
and streamline processes and functions
Initiative C.2: Apply and enforce international
standards
Thrust C: Well-functioning port communities
State registration
of USPA JSC
Formed proposal
to change regulations,
enabling the adoption
of landlord port model
Initiative A.2: Improve expertise of staff via recruiting and training
Expected timeframe envisaged by USPA action plan Expert opinion on minimum timeframe
Strategy
implementation,
especially
adoption of the
landlord port
model, could
continue through
2030
Selected milestones*
*More detailed description of planned milestones is available in USPA Strategy action plan
23. 23
To assess the impact of the proposed strategy initiatives, we
have considered three macroeconomic scenarios
Scenario considerations to estimate the impact of strategy
Influencing
factors
SCENARIO 3:
Optimistic
SCENARIO 2:
Baseline
SCENARIO 1:
Pessimistic
Real GDP growth 0.5% p.a. in 2020-2030 3.0% p.a. in 2020-2030 4.5% p.a. in 2020-2030
Climate factors Relatively low agricultural harvest in Ukraine with high
agricultural harvests in competing exporter-countries
Normal level of harvest in Ukraine and competing
countries
High level of harvest in Ukraine
Development of new business
sectors
No new prominent businesses
Development of agriculture, mining and other
industries slowing down
Steady development of core (agriculture, mining) and
additional exporting business sectors (wine production,
machinery)
Strong development of core and additional exporting
business sectors as well as strong investment in
previously prominent industries (e.g. automotive)
Geopolitical development Increase of tension with Russia, further protectionist
trends and global trade conflicts
No foreseeable quick solution for conflict with Russia
Further global conflicts do not significantly influence
Ukraine's economy
Improving relationships with Russia, partly recovering
access to territories currently under incursion
Trade wars and protectionism abate
Regional infrastructure
developments
Improvement in quality and competitiveness of port
infrastructure in the region; slow progress in Ukrainian
ports
Steady improvement and investment inflow into the
port infrastructure in Ukraine
Significant improvement and investments in Ukrainian
port infrastructure due to its key role in large regional
projects (e.g. China Belt and Road Initiative)
International trade Stagnation due to protectionist tendencies Steady growth with no further significant global trade
disruptions
Further global trade liberalization
Demand for Ukrainian
agricultural products
Stagnating demand due to improvement in local
agriculture worldwide; lower demand due to global
consumption trends, e.g. decrease of meat
consumption
Moderate growth in demand following the current
global market trend
Rising demand for Ukrainian export goods due to
global climate change
LocalRegionalGlobal
Source: Eurostat, Euromonitor, Expert interviews; USPA
24. Pessimistic scenario Baseline scenario Optimistic scenario
7.4%
7.8%
10.0%
7.4%
7.8%
12.0%
7.4%
7.8%
9.0%
Benchmark:
15-20%
24
Ukrainian ports will also become a more appealing asset –
RoA should rise from 7.4% to ~8%
Return on Assets (RoA, in %)
Current Return on Assets (RoA) is very low compared to global benchmarks.
Decommissioning of outdated infrastructures will help to decrease asset costs; in addition, RoA will be improved by initiatives taken under the corporatization thrust, resulting in
higher efficiency and decreased expenses.
The withdrawal of non-core assets, the disposal of underutilized assets will enable USPA to achieve the RoA level of ~8% by 2025.
Asset value as of 2019 Asset value unknown
*Asset value can not be determined at this point as it is dependent on the implementation status of landlord model and acquisitions of new assets (e.g. port land)
2019 2025 2030 20252019 2030 2019 20302025
Source: Expert interviews; USPA
25. 25
Upon the Strategy implementation, efficiency of staff will
increase with revenue per employee reaching UAH ~1.1m in 2025
2018 2020
1 500
2019 2021 2022 2024 2026
1 400
2025 2029 2030
900
1 000
2028
1 200
1 100
2015 20272016 2023
1 600
1 300
1 700
1 800
1 900
2017
k, UAH
By 2025, revenue per
employee is projected to
grow to UAH ~1.1m in the
baseline scenario
Due to workforce
optimization, the revenue
per employee will likely
increase from 2021 to
2025
The possible optimization
of port dues may reduce
revenue per employee,
but this will be leveled out
over time due to efficiency
increases
Baseline scenario Pessimistic scenarioOptimistic scenario
Source: Expert interviews; USPA
26. 26
Performance of USPA berths is below the global benchmarks –
decommissioning and attraction of new cargo flows should help
to increase efficiency
Overcapacity and low berth
utilization leads to generally
low productivity in the
Ukrainian seaports
In optimistic scenario, USPA
will not reach the global
benchmark if no additional
measures are taken
Decommissioning of
underutilized berths would
raise efficiency and bring
throughput per meter of berth
close to the benchmark level
Further assets management
initiatives or planning should
be considered for overall
improvement in Ukrainian sea
ports' performance
k tons / m
DecomissioningBenchmark Baseline scenario Pessimistic scenarioOptimistic scenario
Source: Expert interviews; USPA
2020 2025 2030 2035 2040
100
60
80
180
280
120
200
140
260
160
220
240
27. 27
Efficiency gains and higher competitiveness lead to a series of
benefits – positive impact on economy and society in Ukraine
Key benefits of the Strategy 2021-2025
Positive impact on Ukrainian trade activities
Due to uptake in their efficiency, Ukrainian ports will attract more international cargo and boost trade flows. Additionally,
involvement of the private sector will result in creation of a significant number of jobs in export-oriented industries
Logistics cost competitiveness for the whole country
Once USPA is corporatized, it aims at taking greater authority over tariffs, adjusting them to market-based level. This will
bring down the logistics costs, increasing the competitiveness of Ukrainian economy as a whole
Improvement in transport infrastructure
Gains in efficiency and modernization, as well as higher share of the private service operators in cargo handling will
improve ship turnaround times, leading to a better logistic flow and optimal port capacity utilization
Higher quality of services through modernization and training
The introduction of modern, efficient management structures and tools, as well as corporate trainings /exchange of
knowledge will increase USPA's internal expertise, leading to an increased efficiency as well as better customer service
Attractiveness of port terminals for private investors
Modern infrastructure will result in more appealing investment profile of port superstructures; better management and
monitoring tools will lead to further reduction in port service cost, benefitting profit margins of private terminal operators
Execution of the Strategy
will enable USPA to
modernize through:
• improved
organizational and
administrative
effectiveness
• increased efficiency of
port infrastructure
• improved stakeholder
integration
28. THANK YOU FOR YOUR ATTENTION!
Official
website http://uspa.gov.ua
Investment
Portal http://investinports.com