Olexandr, tell us please about the results of the past year and whether you met your expectations?
The last year turned out to be rather difficult for our company, but at the same time it was also productive. Given the small adjustments, we have managed to implement virtually all of the planned.
In the context of changing economic priorities and a complex political and economic situation in the country, taking into account the collapse of the mineral fertilizers and coal market, we managed to maintain a fairly good amount of turnover. Last year, we handled 4.2 million tons of cargo. The undertaken steps in recent years to diversify operational risks from possible losses to previously stable cargo traffic showed the results – we managed to replace successfully the temporarily absent cargoes with other nomenclature.
2015 for our company was marked by another event – the entry into the European Business Association (EBA), which is one of the largest business organizations. It is a powerful lobbying tool that allows us to solve painful business problems. At present, the main focus we are doing together with the EBA is a project to develop a method for calculating port fees, which would allow to make the existing rate fair to the business and cost-effective to the state.
Despite the difficult economic situation in the country, we continue paying taxes in a timely manner and in full, to meet our obligations. In 2015, Nika-Tera provided the revenue to the state and local budgets in the amount of over UAH 150 million, which accounted for more than 30% of the total allocations of Korabelniy business district of Mykolaiv city.
Salary hike for Nika-Tera staff, which currently amounts over UAH 6,500 has played an important role in a tax increase in 2015. With the growing salaries and welfare of employees, the amount of taxes to the local budget grows as well. Last year the systematic work on improving social standards was carried out, as well as the improvement of living conditions and the additional social guarantees.
Every day we different people, organizations, foundations come to ask us for help, transfer money, to send something or to buy etc. Last year we our charity aid to the city amounted nearly UAH 3.5 million.
In general, my answer to your question will be following – to my mind, year 2015 gave us hope and confidence in the future both for the company and for its employees and accordingly, their families.
Initially, the company Nika-Tera was conceived as a fertilizer transshipment terminal. Currently, the nitrogen enterprises of Group DF are in downtime for various reasons. Did the absence of their products hit the cargo turnover of Nika-Tera significantly? Did you consider the issue regarding terminal’s suspension due to the loss of this type of goods?
You’re right, initially the terminal was conceived for potassium fertilizer transshipment. Even the name Nika-Tera is derived from the phrase – Nikolayev potassium terminal. However, time does not stand still. Last year, the port celebrated its twentieth anniversary. Much has changed since the beginning of its creation: the working conditions, requirements and development plans. And today it would be incorrect to speak about Nika-Tera as a terminal exclusively for fertilizer handling. Our company can be already considered a highly mechanized modern seaport.
Nika-Tera offers a wide range of services on transshipment, storage, preparation and shipping. Loading and unloading port complex consists of three cargo areas, each specializing in certain types of goods. The company works with mineral fertilizers, bulk, grain and other bulk cargo. Thanks to the our implemented project on the number of berths increase the mooring line has grown to seven, and the total length – up to 1700 linear meters. And this is not the limit, as we continue to develop.
We are increasing the transshipment of grain crops. At present, the company can store simultaneously about 250 K tons of this type of cargo. The capacities for transshipment of grain were increased significantly thanks to the project on building a grain silos elevator. In addition, one of the new warehouses, originally intended for urea storage, was reoriented to store corn. Only for the last grain season 2014-2015, the volume of grain transshipment of Nika-Tera amounted almost a quarter of the total volume of grain transshipment in Nikolayev region.
As for the losses in the coal handling due to the conflict in Eastern Ukraine, they were blocked by the transshipment of refractory clay. Therefore, we did not even think about stopping or about a partial suspension of the port. There are enough volumes, although, of course, we would like to have more. Hopefully it will become so in the future.
The unstable situation in the economy and the sharp fluctuations of exchange rate forced many companies to curtail or freeze their investment projects. How your company responded to these challenges?
Today, the services of cargo transshipment is a very competitive market. There are many players. Therefore we need to respond to the market demands quickly despite the fact that the economic situation in the country makes its own adjustments to our plans. We can not afford to wait for better times for the modernization of production capacity and stop on the achieved, as we aim to be better than our competitors.
In 2015 totally about UAH 236 million were invested into the company’s development. We managed to complete the construction of the gallery, which enables to load two ships on the dock of a terminal at the same time. We implemented a project on the creation of medium-pressure gas pipeline, which allowed to run a grain drying system and urea warehouse dehumidifier. New equipment – trucks, transporters, samplers, mobile conveyors «Telestack» was bought. The modernization of conveyor galleries was conducted, as well as the repair of storage facilities, mooring line was increased, dredging of the water area was carried out etc.
In total, since the new owner came over UAH 1.168 billion was invested into the development of Nika-Tera.
For the current 2016 we have also planned to implement a number of investment projects. Among them is the reconstruction of the former factory of the reinforced concrete structures for making a parking for 200 trucks. It is likely that along with parking we will complete this year the construction of an external laboratory complex for crops to serve four grain trucks at the same time. Also, as part of a program on increase the length of the mooring line the construction of another berth is planned to be completed.
The estimated amount of the investment planned for 2016 will be UAH 225 million.
Despite some difficulties, we continue to develop and set new goals.
The volumes of transportation of goods by road have increased recently. It makes certain difficulties for the residents of the surrounding areas of Nikolayev to the port. Can they expect that in the near future this issue will be resolved?
Given the lack of a bypass railway and highway, in a short period, the infrastructure and enterprises of maritime complex located in the Korabelnyy area of ??the city can be in traffic jams.
On a positive note: the issue regarding the construction of the bypass roads and railways is included in the decision of the Transport Committee of the Verkhovna Rada of Ukraine of 10 October 2015 and in the investment passport of Nikolayev region. Nika-Tera for its part has developed a pre-project documentation for the construction of bypass roads. To further settlement of the issue the concrete solutions of the regional authorities and the Cabinet of Ministers of Ukraine are needed. In addition, the sea terminal is ready to take part in questing an investor for the roads construction on the conditions of public-private partnership.
Such a partnership should be resolved at the legislative level. It is about the creation and implementation of a transparent mechanism to compensate the private partner the investment and guarantees of the legislation parmanence.
But without a clear and transparent rules for return on investment, the project unfortunately can remain on the level of searchlights.
What about the dispute between Nika-Tera and the prosecutor’s office on the lands of water fund?
This issue is currently under consideration at the Supreme Administrative Court of Ukraine.
We believe that the decision of the City Council is legal and we defend our point of view. Especially, there have already been precedents, when the Court supported the position of ‘Nibulon’ for example, which rents the land of water fund on a similar to Nika-Tera conditions.
The final point in this matter has not been set yet, but the business climate in the Nikolayev region, due to the actions the prosecutor’s office, forces us to freeze the number of investment projects. Who might benefit from this? I dont know. But the fact is that this situation does not add to the attractiveness of the Nikolayev ports, I have no doubt.
How do you think should be done to improve the attractiveness of maritime complex of Nikolayev region?
We need to develop Bug-Dniprovks basin channel, to deal with its reconstruction, at the same time to work on tariff policy in the field of port charges and their reduction. In addition, the allocation and use of funds from the port fees for investment into the region’s transport infrastructure needs to be clear and understandable. This will help to increase the turnover of goods and will help to create new jobs.
The maritime community of Nikolayev region over a long period has been trying to prove the necessity of channel’s reconstruction. However, despite the fact that the lack of the needed deepening and broadening Bug-Dniprovks basin channel is one of the main reasons hindering the growth of turnover, unfortunately, perennial talks on its modernization remain at the level of declarations.
The potential of Bug-Dniprovks basin channel is significantly higher than is realized. Today, the channel can only be one-way traffic. The vessels heading for ports or back, are forced to stand idle while waiting for their turn to move. If the vessel is delayed and misses its turn, then it can stay for hours waiting for the next convoy. This increases the cost of the freight. And at night, not every vessel can be derived without the tug, the cost of which is quite high. For ship owners it is easier to leave the ship at anchor or at berth until the morning. The increased downtime of the berth results in a reduction of ship calls. This reduces the competitiveness of the Nikolayev ports compared to Big Odessa.
Now Big Odessa has an advantage in depth. But geographically the ports of Big Odessa have no possibilities to expand more, as they are situated within the city borders. And we have the prospect: we can build the terminals along the Bug-Dniprovks basin channel up to the sea. This practice is successfully used in Turkey, placing terminals along the Bosporus. There is a lot of area free and suitable for this. But if there is no needed depth, then the investor will not come.
What do you expect from 2016?
We have taken a good start, and we will need to continue working hard and developing.
With regard to public policy, I think we should make every effort to improve the investment climate, to create the conditions under which investors’ investments will be protected against corporate raids, unfair decisions of officials.
Business is ready to support the country in these difficult times. The authorities, in turn, should reduce the influence of state bodies on the activities of economic entities and increase the level of investor protection.
I hope that Ukraine will finally find a stable model of the development with a full set of objectives and mechanisms to achieve them.