Olvia Sea Port Concession Agreement Concluded

Olvia Sea Port Concession Agreement Concluded

Qatar and Ukraine signed on Thursday a 35-year concession agreement to develop and operate the Ukrainian Port of SC Olvia

On August 20, 2020, representatives of the Ministry of Infrastructure of Ukraine, the Ukrainian Sea Ports Authority, QTERMINALS W.L.L. and QTerminals Olvia LLC signed an online agreement on the transfer of the second sea port in Ukraine – the specialized sea port of Olvia, located in Mykolayiv.

The project engages a leading, highly experienced operator, Qatar-based QTerminals, which operates Qatar’s largest trading port, Hamad, worth more than $ 7 billion. According to the agreement, the concessionaire company invests about UAH 3.4 billion into the development of the port and guarantees the preservation of jobs for the workforce. In addition, at least UAH 80 million will be invested in local infrastructure.

The concession project was prepared by the EBRD and IFC international organizations upon funding from the Global Infrastructure Facility. The successful signing of pilot concessions for the ports of Olvia and Kherson demonstrates the effectiveness of the public-private partnership model for attracting private investments to Ukraine’s infrastructure, improving the country’s competitiveness on international markets and accelerating its economic growth.

According to the agreement, the object of the concession is a single property complex, which includes the property of the State Enterprise “Olvia Stevedoring Company”, the State Enterprise “Ukrainian Sea Ports Authority”, as well as facilities built particularly in accordance with the terms of the concession agreement. The property transferred to the concessionaire as part of the concession object remains in state ownership and after the expiration of the concession agreement is transferred to the state with all objects built or modernized by the investor during its operations period. The concession period is to last for 35 years.

The concessionaire commits to:
– ensure proper functioning and maintenance of the port;
– pay on an annual basis a concession payment in the amount of at least UAH 80 million, taking into account indexation and 0.75% of the net income of the concessionaire. This is 16 times more than the port’s profit last year;
– invest funds into the development of infrastructure of the Mykolayiv city – at least UAH 80 million of the contribution for the solution of infrastructural problems of the city;
– build new real estate on the territory of the enterprise, which includes, but is not limited to: a grain terminal or a universal transshipment complex with a design capacity of 2 million tons of grain cargo per year and infrastructure / industrial real estate in the northern part of the port ;
– within the first 3.5 years from the beginning of the concession make investments into the object of concession in the amount of at least UAH 1 billion 560 million (including VAT), and invest during the first 10 years at least UAH 1 billion 800 million;
– ensure the minimum volume of cargo throughput of at least 2.55 million tons per year from the sixth year from the date of the concession until 2029 and not less than 2.83 million tons per year after 2030;
– ensure maximum use in the concession activities of employees-citizens of Ukraine;
– transfer all employees of the Olvia Insurance Company and part of the USPA employees, preventing their dismissal at the initiative of the concessionaire or its authorized body within 6 years from the moment of hiring by the concessionaire and increase the level of their salary in accordance with the legislation;
– during the first 3 years from the moment of hiring employees by the concessionaire prevent reduction of their salary below the level of the wages, established as of March 1, 2019 with indexation and taking into account the growth of the subsistence level upon the date of the concession agreement;
– enter into a new collective agreement with the primary trade union organization for a period of 5 years and on the terms not worse than those contained in the collective agreement of the Olvia Insurance Company, in force as of March 1, 2019;
– conduct an environmental and social assessment of the project, implement and maintain the functioning of the environmental and social management system, systematically assess the impact of the enterprise on the environment;
– reimburse the costs of preparation of the concession project, in particular, the development of its feasibility study and the draft tender documentation.

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