Report No. 18636-UA Republic of Ukraine Transport Sector Review (In Three Volumes) Volume III: Annexes and Statistical Appendix November 30, 1998 Infrastructure Unit Expertise Services Europe and Central Asia DGI Worlcl Bank European Comnmission Document of the World Bank CURRENCY UNITS and EQUIVALENTS US$1 = Hrv 2.0 lHrv = 100 Kopeck US$1 = USc 100 WEIGHTS, MEASURES and OTHER UNITS Bln Billion Inh Inhabitant Kg Kilogram Km Kilometer Mln Million Pass Passenger pkm passenger kilometer sq kIn, km2 Square kilometer T Ton (meteric, 1,000 kg) Th Thousand tkm ton kilometer Toe Ton oil equivalent Vpd Vehicles per day CONVERSION FACTORS 1 mile = 1.609 meters 1 kg= 2.205 lbs 1 US gallon = 3.785 liters 1 sq km = 0.386 square miles CHEMICAL COMPOUNDS C.Hy, HC Hydrocarbons CO Carbon Monoxide CO2 Carbon Dioxide NO. Nitrogen Oxides SO2 Sulfur Dioxide FISCAL YEAR January 1 - December 31 Vice President: Johannes Linn, ECAVP Country Director: Paul Siegelbaum, ECC 1I Infrastructure Director Ricardo Halperin, ECS1N Sector Leader Eva Molnar, ECSIN Task Team Leader: Pedro Taborga, ECSIN GLOSSARY OF ACRONYMS AND ABBREVIATIONS ADW Ave. Dead Weight ATC Air Traffic Control CAA Civil Aviation Administration CIF Cost-Insurance-Freight CIS Commonwealth of Independent States CMEA Council for Mutual Economic Assistance COTIF Bern Convention of May 9, 1980 EBRD European Bank for Reconstruction and Development ECAC European Civil Aviation Conference EDI Electronic Data Interchanges EIA Environmental Impact Assessment EU European Union FIATA Federation Internationale des Associations des Transitaires et Assimiles FOB Free-On-Board FSU Former Soviet Union GATT General Agreement on Tariffs and Trade GDI Gross Domestic Investment GDP Gross Domestic Product GNP Gross National Product IATA International Air Transport Association ICAO International Civil Aviation Organization IMF International Monetary Fund IRI International Roughness Index MOT Ministry of Transport OECD Organization for Economic Cooperation and Development PA Per Annum PIP Public Investment Plan SAC Structural Adjustment Credit SMGS USSR Rail Waybill SOE State Organizations and Enterprises TACIS Technical Assistance for Commonwealth of Independent States TIR International Road Transport UZ Ukrzaliznytsia (Railway Administration) VAT Value Added Tax WTO World Trade Organization U ACKNOWLEDGEMENTS The Review is based on findings of a World Bank mission, which visited Ukraine in May/June 1998, and a Transport Policy Workshop which followed it on June 29 - July 3, 1998. The members of the mission were P. N. Taborga (mission leader); Robert Bonney (Highway Specialist); Jean-Paul Desgranges (Aviation Specialist); Jan-Coen van Elbuwg (Environment Specialist); Parbo Juchnewitsch (Railway Reform Specialist); Rene Meeuws (Containerization Specialist); Philippe de Naurois (Senior Financial Analyst); Gerald Ollivier (Financial Analyst); Ovadia Salama (Transport and Trade Facilitation); Olev Schults (Railway Specialist); Carlos Silva anstitutional Reform Expert); and Eugene Vemnigora (Maritime and River Specialist). The Ministry of Transport and the Ukrainian National Agency for Development and Investment were the main counterparts of the mission on the Ukrainian side. The study has relied heavily on official sources of information and statistics as well as interviews and meetings with Government ministries and agencies. It also draws on on-going World Bank and IMF work on the macro-economic conditions of the country, other sector work, studies supported by EU, EU- TACIS and EBRD, cross country comparisons and other sectors benchmarks. The mission gratefully acknowledges the suggestions received from Ms. Jann Masterson and Mr. Mark Davis, and the final updating of the report by Ms. Shobha Subramanian. Major sources of qualitative information were also obtained from the commercial services of France, the United Kingdom and the United States (Business Information Services for the NIS), located in Ukraine. The mission wishes to thank the EU - Expertise Service for its support, which financed consultant time, travel and subsistence, and some of the administrative costs of this work Without this support, the work presented in this report would have not been possible. UKRAINE TRANSPORT SECTOR REVIEW Table of Contents 3 TRANSPORT SECTOR: ISSUES AND STRATEGY 3 1 Accounting and Financial Management Information Systems 4 TRANSPORT DEMAND AND FUTURE SCENARIOS 4 1 Container Growth Potential 4 2 Detailed Scenarii by Sub-sector 5 THE NEW ROLE OF THE GOVERNMENT 5 1 Advisory Unit Functions 6 TRANSPORT AND TRADE FACLUTATION 6 1 Customs, Border Crossing and Documentation 6 2 Infrastructure and Service Quality Barriers 6 3 Multimodal Transport Measures 6 4 Corrective Measures and Related Costs for Modal Inefficiencies 6 5 Security and Insurance Issues 7 ROAD INFRASTRUCTURE SECTOR 7 1 Road Infrastructure-Cost Recovery Analysis 7 2 1 Forecasted Statistics 7 2 2 Proforma Sources & Uses of Funds 7 2 3 Main Financial Indicators (Graph) 7 2 1 Forecasted Statistics 7 2 2 Proforma Sources & Uses of Funds 7 2 3 Main Financial Indicators (Graph) 8 RAILWAYS 8 1 UZ Organization Chart 8 2 UZ Assets 8 3 UZ Traffic Levels and Importance in the Economy 8 4 Regional Railways' Description 8 5 Financial Performances and Issues 8 1 1 Railway System-Map 8 1 2 Railway Corridor Map 8 1 3 Traffic Analysis (Railways Historical Data) 8 1 4 Graph: Indexed Traffic (Trends Base 100=1990) 8 1 6 Regional Railways Traffic and Financial Highlights 1996 8 1 7 Financial Highlights 8 1 8 1997- Balance Sheet -Railways 8 2 1 Traffic Estimates 8 2 2 Forecasted Statistics 8 2 3 ProForma Income Statements 8 2 4 Proforma Sources & Uses of Funds 8 2 5 ProForma Balance Sheets 8 2 6 ProForma Ratio Analysis 8 2 7 Main Financial Indicators (Graph) 8 2 1 Traffic Estimtes 8 2 2 Forecasted Statistics 8 2 3 ProForma Income Statements 8 2 4 Proforma Sources & Uses of Funds 8 2 5 ProForma Balance Sheets 8 2 6 ProForma Ratio Analysis 8 2 7 Main Financial Indicators (Graph) 8 2 8 Gross Operating Result (Graph) 8 2 9 Investment Financing Capacity (Graph) 9 SEA PORTS 9 1 The Main Seaports of Ukraine 9 2 Maritime Environment under FSU 9 1 1 Historical traffic per port- Export 9 1 2 Historical traffic per port- Import 9 1 3 Historical traffic per port- Transit 9 1 4 Historical traffic per port- Total 9 1 5 Traffic Analysis 9 1 6 Indexed Traffic (Trends Base 100=1990) 9 1 7 Total Sea Ports Traffic 1997 (Graph) 9 1 8 Financial Analysis Odessa-Ilyichevsk 1997 9 2 1 Traffic Statistics 9 2 2 Forecasted Statistics 9 2 3 ProForna Income Statements 9 2 4 Proforma Sources & Uses of Funds 9 2 5 ProForma Balance Sheets 9 2 6 ProForma Ratio Analysis 9 2 7 Main Financial Indicators (Graph) 9 21 Traffic Estimates 9 2 2 Forecasted Statistics 9 2 3 ProForma Income Statements 9 2 4 Proforma Sources & Uses of Funds 9 2 5 ProForma Balance Sheets 9 2 6 ProForma Ratio Analysis 9 2 7 Main Financial Indicators (Graph) 9 2 8 Gross Operating Result (Graph) 9 2 9 Investment Financing Capacity (Graph) 10 CIVIL AVIATION 10 1 Air Ukraine 10 2 Condition of Main Airports 10 3 Technical Assistance Program 10 11 Main Ukrainian Airlines 10 1 2 Main Ukrainian Airlines-Freight Traffic 10 1 3 Main Ukrainian Airlines-Passenger Traffic 10 1 4 Ukrainian Airports-Passenger Traffic 10 1 5 Ukrainian Airports-Traffic Analysis and Graphs 10 1 6 Airports-Financial Comparisons- 1995 10 1 7 Borispol International Airport- Financial Highlights: 1996-1997 10 1 8 Borispol International Airport- Income Statements and Cash Flow: 1996-1997 10 2 2 Forecasted Statistics 10 2 3 ProForma Income Statements 10 2 4 ProFomna Sources & Uses of Funds 10 2 5 ProForma Balance Sheets 10 2 6 ProForma Ration Analysis 10 2 7 Main Financial Indicators (Graph) 10 2 2 Forecasted Statistics 10 2 3 ProForma Income Statements 10 2 4 ProForma Sources & Uses of Funds 10 2 5 ProForma Balance Sheets 10 2 6 ProForma Ratio Analysis 10 2 7 'Main Financial Indicators (Graph) 10 2 8 Gross Operating Result (Graph) 10 2 9 Investment Financing Capacity (Graph) 12 TRANSPORT SECTOR 12 1 1 Traffic Estimates-All Scenarios 12 1 2 Public Surplus in Transport Sector-All Scenarios 12 1 3 Trade Facilitation Expected Gross Economic Benefits- All Scenarios 1r t a 12 2 21 Traffic Estimates all Modes 1 2 2 2 Traffic Estimates all Modes- Graphs 12 2 3 Gross operating Results 12 2 1 Traffic Estimates all Modes 12 2 2 Traffic Estimates all Modes-Graphs 12 2 3 Gross operating Results 1 2 Tf EsImateallMod 12 2 1 Traffic Estimates all Modes 12 2 2 Traffic Estimates all Modes- Graphs 12 2 3 Gross Operating Results Annex 3.1 Annex 3.1. Accounting and Financial Management Information Systems 1. An adequate accounting and financial management framework for the transport sector has become an essential factor. It will support the sector to: (i) achieve good management performance; (ii) deliver efficient and financially sustainable transport services; (iii) mobilize resources and sustain operations in a market economy; and (iv) introduce private investment resources in the sector. Key aspects of an acceptable accounting and financial management framework for the sector, should be, as a minimum, the following: 2. Generalize Generally Accepted Accounting Principles (GAAP) or equivalent in the Sector. In 1997, Ukraine adopted the accrual basis principle. The transport sector should take the lead in generalizing professionally at least the other main principles such as continuity of operation (going concern assumption) or permanence of accounting methodologies (consistency principle). 3. Improve Accounting Systems and Standards. Sound and reliable accounting and reporting methodologies and systems in accordance with International Accounting Standards (IAS) taking into account national business practices will have to be introduced. 4. Introduce Audit Requirements and Improve Auditing Standards. Yearly financial audit should be generalized among the transport entities. Ukrainian auditing procedures and guidelines, when existing are currently oriented towards compliance with a statutory based system. It will need to be revised for compliance with the IAS. These auditing requirements and standards will become a priority in the transport sector with the introduction of private investment resources in the sector. 5. Adopt Financial Disclosure Requirements in Compliance with IAS. The inevitable privatization of transport operations will impose adoption of financial disclosure requirements in compliance with IAS to ensure transparency and availability of financial information. 6. Define and Introduce the Adequate Incentive for Decision-Makers and Managers in the Sector via Training and Accountability Policy. Once the institutional framework has been put in place and responsibilities clarified, it is a fundamental principle of law and administration that decision-makers should exercise their independent judgment. At the same time, those decision-makers and their organizations should be held strictly accountable for their decisions and general performance in the management of the matters, finances, manpower and assets entrusted to them. Continuous assessment of this performance, together with the right incentive measure will have to be organized and implemented. 7. Introduce Professional Valuation of Infrastructure Assets and Equipment and Define Adequate Amortization Policy. Although several revaluation of assets in the sector were implemented in 1995, 1996 and recently in 1997, it appears that a professional inventory, valuation of infrastructure assets, equipment and inventories and clear title establishment, will have to be performed, particularly, since privatization of productive operations would have to be envisaged. On another hand, government will have to ensure that periodic adjustments and appropriate depreciation and provisions policies are clearly defined and implemented to take into account economic and financial realities facing the sector. Annex 4. 1. Annex 4.1. Container Growth Potential 1. More and more cargo will be transported in containers in the future as experienced worldwide. Table 1 shows the ratios of intermodal cargo potential for some selected commodity group. These ratios have been elaborated in different studies concerning the containerization potential for European harbors. Table I : Percentage of Intermodal Cargo Potential by Commodity Groups List of commodity groups Ratio of Intermodal Cargo Potential' 1 non ferrous ore, scrap 29% 2 iron, steel 22% 3 non ferrous metal 17% 4 food and beverages 81% 5 fresh fruit and vegetables 80% 6 chemicals 55% 7 vehicles and parts 50% 8 machines, electronic/electric goods 86% 9 leather and textile goods 92% 10 other manufactured goods 80% 11 pulp and waste paper 40% 12 wood 32% 13 grain and animal feed 4% 14 coal 0% 15 crude oil and oil products 2% 16 iron ore 0% 17 copper ore and bauxite 2% 18 building material 20% 19 fertilizer 4% ' Up to this percentage of the commodities could be transported in containers if container transport was taking place in normal conditions. Annex 4.2 UKRAINE- TRANSPORT SECTOR REVIEW- RAIL SUBSECTOR SCENARIO I Exchange rate US$M/rv 2.00 FREIGHT 1999-01 2002-OS FREIGHT 1999-01 2002-05 Operating Expenditures 1999-01 2002-05 Traffic growth (tkn) Annual tariff increase Pension & Benefits for Staff -10% 18% Ores 1% 1% Ores 7.5% 5% Average salary 25% 10% Coal & Coke -10% 2% Coal & Coke 7.5% 5% Staff right sizing -15% -5% Black Metals 1% 1% Black Metals 7.5% 5% Assets rationalization 0% 0% Construction Maerials 2% 3% Construction Maerials 7.5% 5% Productivity gaintMaterial -5% -3% Oil & Oil Products 1% 1% Oil & Oil Products 7.5% 5% Productivity gain on Op. Exp. -5% -3% Other 2% 3% Other 7.5% 5% Provision for Bad Debts 5% 3% PASSENGERS 1999-01 2002-05 PASSENGERS 1999-01 2002-05 Barter ratio decrease -10% -5% Traffic growth (pkm) Annual fare increase Macro conditions 1999-01 2002-05 International -5% -3% International 10% 5% Economy growth 3% 5% National -5% -5% National 7.5% 5% Severance payments 24.00 36.00 Suburban -20% -15% Suburban 50% 15% Proflt Taxes 30% 30% SCENARIO 2 Exchange rate USS/Hrv 2.00 FREIGHT 199941 2002-4 FREIGHT 1999-01 2002-05 Operating Expenditures 1999-01 2002-05 Traffic growth (tkm) Annual tariff increase Pension & Benefits for Staff -5% 21% Ores 1% 1% Ores 5% 3% Average salary 15% 7% Coal & Coke -8% 2% Coal & Coke 5% 3% Staff right sizing -10% -5% Black Metals 1% 1% Black Metals 5% 3% Assets rationalization 0% 0% Construction Maerials 2% 3% Construction Maerials 5% 3% Productivity gain/Material -3% -2% Oil & Oil Products 1% 1% Oil & Oil Products 5% 3% Productivity gain on Op. Exp. -3% -2% Other 2% 3% Other 5% 3% Provision for Bad Debts 7% 4% PASSENGERS 1999-01 2002-05 PASSENGERS 1999-01 2002-05 Barter ratio decrease -5% -5% Traffic growth (pkm) Annual fare increase Macro conditions 1999-01 2002-05 International -5% -3% International 8% 3% Economy growth 1% 2% National -5% -5% National 5% 3% Severance payments 12.00 18.00 Suburban -20% -15% Suburban 30% 10% Profit Taxes 30% 30% Annex 42 UKRAINE- TRANSPORT SECTOR REVIEW- RAIL SUBSECTOR SCENARIO 3 Exchange rate US$/Hrv 2.00 FREIGHT 1999-01 2002-05 FREIGHT 1999-01 2002-05 Operating Expenditures 1999-01 2002-05 Traffic growth (tkm) Annual tariff increase Pension & Benefits for Staff 5% 43% Ores -5% 0% Ores 1% 2% Average salary 5% 5% Coal & Coke -2% -5% Coal & Coke 1% 2% Staff right sizing -1% -2% Black Metals 1% 1% Black Metals 1% 2% Assets rationalization 0% 0% Construction Maerials 1% 1% Construction Macrials 1% 2% Productivity gain/Material 0% 0% Oil & Oil Products 1% 1% Oil & Oil Products 1% 2% Productivity gain on Op. Exp. 0% 0% Other 1% 1% Other 1% 2% Provision for Bad Debts 10% 10% PASSENGERS 1999-01 2002-05 PASSENGERS 1999-01 2002-05 Barter ratio decrease 0% -5% Traffic growth (pkm) Annual fare increase Macro conditions 1999-01 22002-05 International -5% -5% Internationsl 0% 1% Economy growth 0% 1% National -5% -5% National 0% 1% Severance payments 0.00 0.00 Suburban -5% -5% Suburban 0% 1% Profit Taxes 30% 30% Annex 4.2 UKRAINE- TRANSPORT SECTOR REVIEW- ROAD SUBSECTOR _ SCENARIO I Exchange rate US$/Hrv 2.00 INFRASTRUCTURE 1999-01 2002-05 USER CHARGES 1999-01 2002-05 INVESTMENT UNIT COST 1999-01 2002-05 1998 Road Network Length Routine Maintenance Highways 1% 1% Fuel Levy 4.50 6.00 Highways -7% 3% 2,400 Local roads 1% 1.5% Vehicle ownership charge 70.00 75.00 Local Roads -7% 2% 1,229 Turn over Tax -30.0% Periodic Maintenance Highways -7% 3% 8,570 Local Roads -7% 2% 3,960 Rehabilitation PASSENGERS 1999-01 2002-05 1999-01 2002-05 Highways 3% 2% 300,000 Traffic growth (pkm) Local Roads 3% 2% 150,000 Vehicles 1.0% 8% Road Administration 1% 2% 80.00 Fuel consumption 1.5% 10% Economy Growth 3% 5% SCENARIO 2 Exchange rate US5/Hrv 2.00 INFRASTRUCTURE 1999-01 2002-05 USER CHARGES 1999-01 2002-05 INVESTMENT UNIT COST 1999-01 2002-05 1998 Road Network Length 0 Routine Maintenance Highways 1% 1% Fuel Levy 4.00 4.50 Highways -5% 2% 2,400 Local roads 1% 1% Vehicle ownership charge 70.00 70.00 Local Roads -5% 2% 1,229 Turn over Tax -30% 0% Periodic Maintenance Highways -5% 4% 8,570 Local Roads -5% 3% 3,960 Rehabilitation PASSENGERS 1999-01 2002-05 0 1999-01 2002-05 Highways 3% 2% 300,000 Traffic growth (pkm) Local Roads 3% 2% 150,000 Vehicles 1% 5% Road Administration 1% 2% so Fuel consumption 2% 7% Economy Growth 3% 5% SCENARIO 3 Exchange rate USS/Hrv 2.00 INFRASTRUCTURE 1999-01 2002-05 USER CHARGES 1999-01 2002-05 INVESTMENT UNIT COST 1999-01 2002-05 1998 Road Network Length 0 Routine Maintenance Highways 0% 0% Fuel Levy Highways 1% 2% 2,400 Local roads 0% 0% Vehicle ownership charge Local Roads 0% 1% 1,229 Turn over Tax -10% -15% Periodic Maintenance Highways 1% 2% 8,570 Local Roads 0% 1% 3,960 Rehabilitation PASSENGERS 1999-01 2002-05 1999-01 2002-05 Highways 3% 2% 300,000 Traffic growth (pklo) Local Roads 3% 2% 150,000 Vehicles 1% 3% Road Administration 0% 1% 80 Fuel consumption 1% 5% Economy Growth 3%/ 5% Annex 4.2 UKRAINE- TRANSPORT SECTOR REVIEW- AIRPORT SUBSECTOR SCENARIO 1 Exchange rate US$/Hrv 2.00 FREIGHT 1999-01 2002-05 FREIGHT 1999-01 2002-05 Operating Expenditures 1999-01 2002-05 Traffic growth (ton) Annual tariff increase Pension & Benefits for Staff 35% 25% International 10% 5% International 7.5% 5% Average salary 20% 10% Domestic 10% 5% Domestic 7.5% 5% Staff right sizing -25% -5% PASSENGERS 1999401 2002-05 PASSENGERS 1999-01 2002-05 Assets rationalization 0% 0% Traffic growth (pas.) Annual fare increase Productivity gain/Material 3% 5% International-Borispol 10% 5% International-Borispol 10% 5% Productivity gain on Op. Exp. 3% 5% International 7% 5% International 10% 5% Provision for Bad Debts 5% 3% Domestic 10% 5% Domestic 7.5% 5% Barter ratio decrease input data input data Macro conditions 1999-01 2002-05 Economy growth 3% 5% Severance payments 24.00 36.00 Profit Taxes 30% 30% SCENARIO 2 Exchange rate US$/Hrv 2.00 FREIGHT 1999-01 2002-05 FREIGHT 1999-01 2002-05 Operating Expenditures 1999-01 2002-05 Traffic growth (ton) Annual tariff increase Pension & Benefits for Staff 35% 30% International 6% 4% International 7.5% 5% Average salary 10% 7% Domestic 6% 4% Domestic 7.5% 5% Staff right sizing -15% -5% PASSENGERS 1999-01 2002-05 PASSENGERS 1999-01 2002-05 Assets rafionalization 0% 0% Traffic growth (pas.) Annual fare increase Productivity gaintMaterial 2% 3% International-Borispol 8% 3% International-Borispol 8.0% 3% Productivity gain on Op. Exp. 2% 3% International 5% 3% International 6.00% 3% Provision for Bad Debts 5% 5% Domestic 4% 3% Domestic 4.00% 3% Barter ratio decrease input data input data Macro conditions 1999-01 2002-05 Economy growth 1% 2% Severance payments 12.00 18.00 Profit Taxes 30% 30% Annex 4.2 UKRAINE- TRANSPORT SECTOR REVIEW- AIRPORT SUBSECTOR SCENARIO 3 Exchange rate US$/Hrv 2.00 F REIGHT 1999-01 2002-05 FREIGHT 1999-01 2002-05 Operating Expenditures 1999-01 2002-05 Traffic growth (ton) Annual tariff increase Pension & Benefits for Staff 35% 35% Internaffonal 5% 3% International 7.5% 5% Average salary 5% 5% Domestic 5% 3% Domestic 7.5%. 5% Staff right sizing -1% -2% PASSENGERS 1999-01 2002-05 PASSENGERS 1999-01 2002-05 Assets rationalization 0% 0% Trafflc growth (pas.) Annual fare increase Productivity gain/Material 2% 3% International-Borispol 5% 2% International-Borispol 5% 2% Productivity gain on Op. Exp. 2% 3% International 3% 2% International 3% 2% Provision for Bad Debts 7% 7% Domestic 3% 2% Domestic 2% 2% Barter ratio decrease input data input data Macro conditfons 1999-01 2002-05 Economy growth 0% 1% Severance payments 0.00 0.00 Profit Taxes 30% 30% Annex 4.2 UKRAINE- TRANSPORT SECTOR REVIEW- PORT SUBSECTOR SCENARIO I Exchange rate USS/Hrv 2.00 FREIGHT 1999-01 2002-05 FREIGHIT 1999-01 2002-05 Operating Expenditures 1999-01 2002-05 TraMc growth Annual tariff increase Pension &*Benefits/Staff 35% 25% Liquid 10% 5% Port Dues (vessels) -10% 2% Average salary 20% 10% Bulk 3% 2% Port Dues (Goods) -5% 2% Staff right sizing -25% -5% General cargo 10% 10% Cargo handling -5% 2% Non permanent Staff % TRAFFIC STRUCTURE 1999-01 2002-05 VESSELS 1999-01 2002-05 Assets rationalization Export 3% 3% Traffic increase (%) Material 3% 5% Import 2% 2% Cat 1 10% 10% Op. Exp. 3% 5% Transit 10% 5% Cat 2 10% 110% Provision for bad debts 1% 1% TRAFFIC STRUCTURE 1999-01 2002-05 Cat 3 10% 10% Barter ratio decrease -25% -5% Annual tariff increase Macro conditions 1999-01 2002-05 Black Sea 4% 1% Cat 1 10% 10% Economy growth 3% SX% Azov sea -2% -1% Cat 2 10% 10% Severance payments 24 36 Danub Region -2% -1% Cat3 10% 10% Profit Taxes 30% 30% SCENARIO 2 Exchange rate USSMlrv 2.00 FREIGHT 1999-01 2002-05 FREIGHT 1999-01 2002-05 Operating Expenditures 1999-01 2002-05 Traffic growth Annual tariff increase Pensinn & BenefitalStaff 40% 30% Liquid 5% 3% Port Dues (vessels) -5% 2% Average salary 15% 5% Bulk 2% 1% Port Dues (Goods) -3% 2% Staff right sizing -10% -5% General cargo n.d n.d Cargo handling -3% 2% Non permanent Satff % TRAFFIC STRUCTURE 1999-01 2002-05 VESSELS 1999-01 2002-05 Assets rationalization Export 2% 1% Traffic increase (%) Material 1% 2% Import 2% 1% CatI 2% 1% Op. Exp. 1% 2% Transit 8% 5% Cat 2 8% 5% Provision for bad debts 2% 2% TRAFFIC STRUCTURE 1999-01 2002-05 Cat 3 S% 5% Barter ratio decrease n.d n.d Annual tariff increase Macro conditions 1999-01 2002-05 Black Sea 2% 1% Cat 1 2% 1% Economy growth 1% 2% Azov sea -1% -1% Cat2 -1% -1% Severance payments 24 36 Danub Region -1% -1% Cat 3 -1% -1% Profit Taxes 30% 30% Annex 4.2 UKRAINE- TRANSPORT SECTOR REVIEW- PORT SUBSECTOR UKRAINE - TRANSPORT SECTOR REVIEW - PORT SUBSECTOR SCENARIO 3 Exchange rate US$/Hlrv 2.00 FREIGHT 1999-01 2002-05 FREIGHT 1999-01 2002-05 Operating-Expenditures 1999-01 2002-05 Traffic growth Annual tariff increase Pension & Benefits/Staff 40% 40% Liquid n.d3 n.d3 Port Dues (vessels) -1% -1% Average salary 1% 2% Bulk n.d3 n.d3 Port Dues (Goods) -1% -1% Staff right sizing -1% -1% General cargo n.d3 n.d3 Cargo handling -1% -1% Non permanent Satff % TRAFFIC STRUCTURE 1999-01 2002-05 VESSELS 1999-01 2002-05 Assets rationalization Export 1% 1% Traffic increase ('/) Material 1% 2% Import 2% 2% Cat 1 n.d3 n.d3 Op. Exp. 1% 2% Transit 5% 2% Cat2 n.d3 n.d3 Provision for bad debts 3% 3% TRAFFIC STRUCTURE 1999-01 2002-05 Cat 3 n.d3 n.d3 Barter ratio decrease n.d n.d Annual tariff increase Macro conditions 1999-01 2002-05 Black Sea 0% 0% Cat 1 n.d3 n.d3 Economy growth 1% 2% Azov sea 0% 0% Cat 2 n.d3 n.d3 Severance payments 0 0 Danub Region 0% 0% Cat 3 n.3 n.d3 Profit Taxes 30% 30% Annex 5.1 Annex 5.1. Advisory Unit Functions 1. Three Advisory Units. Three advisory units would support the Minister's office in its daily activities: the Economic Unit, the Legal Unit and the International Unit. Each of these would have well defimed responsibilities as described below. The Economic Unit would notably assess and monitor the economic impact of policies or investments, define infrastructure needs, formulate the budget of the Ministry accordingly. The Legal Unit would prepare the legal framework for the transport sector and monitor its implementation. The International Unit would facilitate the international integration of Ukraine and its regional cooperation. 2. Economic Unit. The economic unit would have the following functions: (i) Participate in the formulation of policies, plans and strategies of the Government for the sector; (ii) Follow up on the implementation of these and report to the Minister; (iii) Carry out studies to evaluate the implementation of sector policies or play counterpart role in studies contracted with extemal companies; (iv) Evaluate the subsidy requests, if any, presented by the sub-sector Departments; (v) Support the monitoring by the Ministry of state transportation companies; (vi) Execute programs that exceed the exclusive scope of the sub-sector Departments of the Ministry; (vii) Identify and evaluate feasible projects in the sector and prepare the necessary documentation to obtain credits or contributions from intemational organizations, and regular reporting to the Minister; (viii) Administrate or delegate the administration of funds or credits granted by international organizations to the benefit of the Ministry and the sector; (ix) Assist in the formulation of the Ministry's budget, and represent the sector in the budgets analysis of state transportation companies with the Ministry of Finance; (x) Compile, process and publish sector statistics in coordination with sub-sector Departments; (xi) Define the transport infrastructure needs, according to sub-sector department requirements and (vii) above. Annex 5.1 3. Legal Unit. The legal unit would perfonn the following functions: (i) Provide legal advice to the Minister and sub-sector Departments; (ii) Review legality of draft laws, draft international agreements, supreme decrees and ministerial resolutions; (iii) Maintain and publish legislation related to transport; (iv) Monitor compliance with international agreements and national laws in coordination with the sub-sector Departments (v) Examine the legality of applicable sanctions, suspension, application of fines and service cancellations. (vi) Advise the Minister in the relationships with the Parliament related to the presentation and examination of draft legislation; (vii) Elaborate the legal framework of the transport sector. 4. International Unit. The international unit would perform the following functions: (i) Advise the Minister and the sub-sector Departments of transportation, on international matters especially in European Union; (ii) Prepare texts, with the help of staff from the Legal Unit and Ministry of Foreign Affairs, related to international transport agreements; (iii) Organize international transportation meetings, and advise the official representations of the Ministry on their interactions with International Transport Organizations. Annex 6.1 Annex 6.1. Customs, Border Crossing and Documentation Corrective Actions 1. The type of actions required to reduce the difficulties at border crossing have been increasingly applied worldwide with some successful example of countries and group of countries where procedure and documentation streamlining now allows real time clearance of shipments or free circulation of goods through the borders (EU). In the case of Ukraine, a number of measures could be taken to streamline and reform import and export procedures and documentation to conform to regional and international standards. It would remove a substantial part of the excess cost linked to trade for a rather modest cost. The measures' are presented below in three categories: (i) Customs and cargo inspection procedures; (ii) documentation, freight forwarding and transport conventions; and (iii) border crossing improvements. Customs and Cargo Inspection Procedures (a) Streamline and harmonize Customs and other Ministries clearance procedures to international standards; Instruct Customs authorities to focus and limit their activity to their basic duties and areas of expertise, and remove from their responsibility additional tasks, such as collecting road taxes. (b) Standardize nationwide the application of customs regulations; organize information channels about existing rules and forthcoming changes. (c) Stimulate intensive national and regional co-operation in border crossing and customs procedures. (d) Replace procedures involving 100% examination of imports and exports by more cost- effective methods, involving risk analysis, according to the EU Rationalized Examination Procedures. Use new computer systems to effectively target potential vehicles for inspection. Extensive checks on high-risk trucks should be substituted to superficial checks on all vehicles. (e) Create simplified border crossing procedures for reliable companies (respecting TIR Camet convention) and adopt pre-entry clearance and pre-shipment inspection procedures. (f) Establish a computerized information system at the border-crossing checkpoints and inland customs enabling an electronic transfer of trade related data. This effort should be conducted in close regional partnership so as to integrate the different computer systems used by neighbouring countries and define a regional IT strategy (CEK Siemens in Poland, Sofix in Czech Republic, Asycuda 3+- in Hungary, Asycuda in Slovakia and in Ukraine, and Bespoke in Slovenia). Annex 6.1 (g) Inform, instruct and control customs officers about the application of changed regulations and new conventions. (h) Develop Memoranda of Understanding between customs and trade organizations to ensure the introduction of control measures common to all neighboring countries and the European Union. (i) Facilitate fast processing for transit traffic by reducing transit traffic inspection requirement and by introducing the EU Community Transit (CT) system in order to improve the present transit guarantee system. (j) Provide Customs clearance facilities at approved inland container terminals and at established enterprises. Containers to and from these places should allowed to be moved by both road and rail with a minimum of restrictions in the form of guarantees andlor deposits. Customs have to lay down clear instructions for the inland movement, handling, stuffing /de-stuffing of containers. The private sector should be allowed and stimulated to set-up and operate container terminals as common user facilities. (k) Introduce measures to address poor morale of under-trained and underpaid officers and set their salaries at market rate (as applied in forwarding agencies): establish regular training programs to support a professional Customs service. (1) Provide Customs with commercial information for checking guarantors at the time of final clearance of goods, away from the borders and in advance of consignments. Documentation, Freight Forwarding and Transport Conventions Tfhe international legal and regulatory framework for Trade and Transport existing in Ukraine should be supplemented to accommodate the following features: (a) Introduce in cooperation with main commercial partners and neighboring states one single multimodal transport document in line with intemational standards. (b) Replace the TIR Carnet, by an alternative type of transit system namely the Community Transit (CT) system (used in the EU), which consists of a five part Cargo Declaration, plus a Transit Advice Notice, which can be used as the control document without modification. (c) Generalize the use of UN aligned commercial documentation and have them adopted by all Trade Associations. (d) Ratify and implement the following conventions: -CMR Convention (which imposes substantial liabilities on road hauliers which cannot be avoided or reduced by private contract), -FIATA Convention (covering combined transport shipments), -COTIF Convention (covering goods shipped internationally by rail); Annex 6.1 -Customs Convention on Containers (1972); -Customs Convention on the International Transport of Goods under cover of TIR Carnets (TIR Convention) (1975); -International Convention on the Harmonization of the Frontier Control of Goods (1982); -Convention on the Liability of International Terminal Operators (1991); and -Convention on customs treatment of pool containers used in international transport of 1994 (e) Generalize the following documents for Transport and Trade: -Negotiable FIATA Combined Transport Bill of Lading (specifically used when more than one mode of transport is used), -Dangerous Goods Note (usually required to be produced both by Customs and Police during international transits), -Aligned Export Cargo Shipping Instructions (which provides the freight forwarder with all information needed to effect a shipment), -FIATA Forwarders Certificate of Receipt (signifying that the forwarders obligations and responsibilities apply from this point on until fulfilment of the contract in terms of the movement of the goods), and -Standard Shipping Note (containing information about the shipment). (f) Generalize the following banking and insurance documents: -Aligned Bank Collection Form (instructing the buyer's bank on how to process a documentary collection), -Bill of Exchange (instructions from the purchaser to a third party to pay the seller an agreed amount at a specific time), and -Certificate of Insurance (providing evidence that an export shipment has been insured and the- goods covered during transit). AU key international documentation should be in both Russian and English. (g) Establish better relationships between Customs Officers, Customs clearance Agents, freight forwarders and the private sector. Closer working relationships should focus on common data collection, the use of intelligence, and the introduction of Memoranda of understanding between customs and trade organisations to apply common control measures in a climate of mutual trust. Border Crossing Physical Improvements 2. A high priority is to improve border-crossing points by providing the most critical ones reviewed with infrastructure equipment, access roads and personnel. The Korczowa project of new border crossing facility seems justified but small-scale improvements of the Dorohursk crossing Annex 6.1 should also be introduced. The major bottlenecks at the Vysne Nemecke and Zahony border crossing could be easily overcome with small investment. A TACIS study of border posts will give a more detailed set of recommendations and cost estimate on this topic. Annex 6.2 Annex 6.2. Infrastructure and Service Quality Barriers Infrastructure 1. Poor Road Condition. Ukrainian roads are in disrepair, with unmarked potholes and a lack of systematic lane delimitation. Separated highways are scarce. The best stretches are those linking Lviv to Kiev and Kiev to Odessa, but smaller roads are not within European norms. FSU- made vehicles, which for the most part do not fulfill the norms required for being driven in Europe, are more robust and adapted to these roads than European made trucks, which are more technologically sensitive and wear out more quickly on bad roads. 2. Inefficient Gauge Transfer. Much of the excess railway infrastructure capacity is obsolete. Particular shortfalls are noted in connection with border crossings and the shortage of specialized wagons. The different gauge system used in Europe (1.43 m) and the CIS (1.51 m) results in labor intensive activity and delays while simple mechanical technology for adjusting bogie gauges exists. Traffic capacity and facilities on the busy railways routes of Chop-Kiev-Moscow and Ilychevsk-Bryansk-Moscow need upgrading, along with railway outlets from the Chop and Mostiska border stations and approaches to Far Eastern seaports. 3. Poor Condition of Waterways. Obsolete infrastructure, handling, storage and pickup/delivery facilities constitute serious handicaps for taking advantage of waterway transport potential. Little maintenance has been carried out in recent years. Dredging is not up to requirements. Lock gates do not always properly operate. Service Quality 4. Cost of Services. Overall the cost of international transport services via Ukraine is high, especially in the port and railway sector when considering the transfer from one mode to another and hidden costs. This applies specially to container transport and high value goods for which substantial non-transport transit costs are charged to shippers 5. Road Transport Services. Truck drivers and mechanics in Ukraine have a poor image (alcoholism, theft, and personal commerce). Service quality is poor, with delays and delivery errors detrimental to the customer. Small clients have even more difficulty obtaining the service quality they expect. Some drivers are reported as conducting parallel and non-transparent activities. Competition by European carriers is substantial. Foreign companies find it difficult to obtain from local manpower to give priority to the company's interest over their own. Growth ancd profit are not perceived as valid objectives. Low skilled employees prefer to take advantage of short-term gain opportunities and disregard long term future consequences. Simultaneously foreign companies attempt to link remuneration to results, by paying higher wages and prohibiting activity external to that of the company. Ukrainian companies encounter more difficulty in managing their personnel and having it focus on company operations. 6. Trucking Documentation. Since Ukraine has not fully adhered to the CMR convention, CMR documents routinely used by carriers often do not conform to international law. As a result, the carrier rarely reimburses the shipper in case of damage or loss as required by the Convention under international law. The increasing difficulties of the International Road Union (IRU), the Annex 6.2 national guaranteeing association and the international insurance pool, as well as national customs authorities has prompted the Council of the European Union to seek radical changes in the system, still under review. At present, the system is causing serious difficulties at the borders. 7. Railway Transport Services. The organizational set up of the railway result in political and non-commercially sound decisions in terms of tariffs leading to cross subsidies between services. Ukrainian Railways - UKRZALISNITSA - fall under the authority of the Ministry of Transport and the Deputy Minister for Railways. The state has so far refused to let tariffs evolve in a market economy, on the ground that Ukrainian manufacturers would not be in position to absorb the resulting transport cost increases. Yet, shipping tariffs for containers are set too high at the level of truck services despite the much slower service offered. Several maritime operators (CMN, CMA, MAERSK and SEALAND) protested officially against high rates quoted for carrying transit containers by train. Transit containers appear as subsidizing lower tariffs applied to ores, coal and steel products. None of these tariffs reflects market conditions, and they rather represent a subsidy for low productivity producers, particularly penalizing the development of the waterway mode. 21 days on average of delay for rail traffic 8. Air Transport Services. Kiev-Borispil is the only airport set to international standards, both in terms of infrastructure and services. Delays and inefficiencies are observed in the other airports. Overall transport chain dependability can only be guaranteed by international messenger companies, such as UPS or DHL. Transfers from terminals to town present the risk of partial or total shipment theft. Only the use of large and well-known companies prevents this risk but it comes at a high premium. 9. Current Intermodal Operations. Customers in Ukraine still have to rely mainly on their own transport to transport their freight from the port or railway terminal to the destination point, using their own trucks or those of a trucking company they selected and paid. Unloading of containers is mostly based on transshipment via the storage area. Container terminal operations are time consuming. International intermodal rail transport to and from Ukraine is in the present circumstances not competitive with road transport, timewise and qualitywise. The railways are still using the single-wagon railway transport system; no block trains, no train shuttles, although efforts are made in that direction. 1O. Staff Issues. Management and administrative staff in larger Ukrainian transport companies, was found lacking training and familiarity with international conditions and practices, particularly in matters of international law, modern technology and even geography. Due to the lack of personnel trained abroad to apply modern western approaches to international freight hauling, the emergence of private or quasi-private companies did not result in replacing upper management and administrative staff. This staff is admittedly familiar with its client network, but unable to run the company in a market open to competition. Small companies are better adapted but client follow-up leaves to be desired. Low-paid labor lacks training, motivation and dependability. Truck drivers constitute a strong and cohesive group. They are reported to pay an "entry fee" in order to be recruited in international transport enterprises, as travel offers them additional personal business and income opportunities. Although most of them have mechanical knowledge, they cannot be expected to use their ability in this domain. A few foreign companies have recently provided training to improve their staffs performance, particularly for staff operating in ports. Such training needs to be expanded and generalized. Annex 6.2 11. Overall Service Quality Shortfalls. Logistics in Ukraine is still considered exogenous to transport activities and given little attention, although its impact on transport demand is significant, notably in the agricultural sector. Communications between carriers and shippers is minimal so that it is difficult to get information on the implementation status of the transport contract. Ukrainian companies logistic facilities are substandard: telephone and fax lines, computers and software (email), handling equipment, Global Positioning System for vehicle tracking, storage organization are generally under used and under performing. Often, the carrier will misinform the client rather than admit negligence, error or incompetence. Small shippers receive little attention. Training lacks in the areas of inventory management, quick location and delivery of the goods, and overall logistic activities are considered exogenous to the hauling activity. Satisfactory service can only be found in reputable foreign enterprises. As a result, considerable delays can be observed if goods must be forwarded or re-expedited. Packaging andL handling methods (loading, unloading and reloading) are obsolete and inadequate except, to some extent, in major ports where loading and transshipment are mechanized. Annex 6.3 Annex 6.3. Multimodal Transport Measures 1. The development of multimodal transport comes from the optimal integration of various mode within a policy framework fostering competition. A series of measures pertaining to the legal framework and physical handling capacity would enable the successful development of multimodal transport: Formulate policy fostering the regional and international integration of Ukraine: -Harmonize fundamental transport legislation with EU; -Develop block trains and shuttle services along major corridors; -Develop a uniformn policy to integrate Ukrainian infrastructure in Trans-European Transport Network; -Build European standard gauge lines for connection to the Transport European Networks; -Participate actively in the Black Sea Economic Cooperation (BSEC) -Adhere, ratify and implement the following conventions: (a) International Convention on the Contract for the International Carriage of Goods by Road (CMR) (b) Customs Convention on Containers (1972) (c) Customs Convention on the International Transport of Goods under cover of TIR Carnets (TIR Convention) of 1975 (d) International Convention on the Harmonization of the Frontier Control of Goods (1982) (e) Convention on the Liability of International Terminal Operators 1991 (f) Convention on customs treatment of pool containers used in international transport of 1994 Formulate policy fostering multimodal development (door to door transport chain): -Develop framework for the optimal integration of different mode including for their infrastructure development plans; -Stimulate cooperation between public and private parties involved in distribution; -Provide Customs clearance facilities at approved inland container terminals and at established enterprises. Containers to and from these places should allowed to be moved by both road and rail with a minimum of restrictions in the form of guarantees and/or deposits. -Prepare clear instructions for customs to act on the inland movement, handling, stuffing/de-stuffing of containers. -Create a suitable transport insurance system for containerized cargo (identifying clearly liabilities in accordance with international standards) using the draft handbook for Multimodal Transport for Officials and Practitioners (UNCTAD, Geneva, 1995) -Simplify Border Crossing (Annex 6.1) Annex 6.3 Improve container handling capacity -Modernize existing terninal and plan new terminals -Develop container handling facilities in sea and river ports and inland terminals Stimulate private participation in infrastructure -Stimulate set up and operation of container terminals as multi-user facilities by the private sector. Annex 6.4 Annex 6.4 Corrective Measures and Related Cost for Modal Inefficiencies 1. Road. Driver and transportation personnel training activities are estimated at US$1 million (short term, for 50 professionals to be trained as trainers and managers) and US$2 million (medium term, for 200 professionals, over 3 years, to be trained as international class truckers- mechanics with basic trade documentation knowledge), on the all inclusive basis of US$ 10,000 per month of training abroad. 2. RaiL At present, the magnitude of the improvements is such that US$ 10 million (short term) is estimated to be a minimum required amount. Restructuring and adapting the rolling stock for container transport is estimated to cost US$ 2 million, on the short term. Assisting in moving toward creating a competitive environment between transport modes and within the terminal operations of the rail sector itself requires technical assistance estitmated at US$ 300,000. 3. Air. The improvement of air transport competitive position for small volumes of high value freight, with respect to other modes, would be achievable by reducing tariffs and taxes. Such a measure can be achieved following a technical assistance expertise by a management consultant firn, for an estimated amount of US$ 200,000 (short term), inclusive of expatriate manpower cost. Its implementation would result in increased revenues from increased freight throughput. 4. Maritime Transport. These measures developed in Chapter 9 will require substantial technical assistance in addition to equipment costs. Technical assistance covering all the ports is estimated at 60 man-months or US$ 1 million (short term). It consists of management review, staff training, and policy analysis assistance to the MOT. This figure excludes the cost of equipment requirements for which use of leasing could be more appropriate. 5. River Transport. These measures developed in Chapter 9 would require technical assistance in the form of policy advice and program development, estimated at 30 man-months or US$ 500,000. In-depth studies should indeed be conducted to analyze competition between and within modes, and to remove preferential tariffs and other subsidies and distortions in investments, all of which prevent this particular mode to become viable and to yield benefits to users. 6. Logistic and Management. Corrective training activities are similar to those discussed under general trucking, but do not duplicate them. They are estimated to US$ 1 million in the short term, and US$ 2 million in the medium term. Other corrective measures pertain to government general economic policy making. Their scope and complexity nevertheless require technical assistance, which in this case is estimated at US$ 2 million (short term). Total funding required thus amounts to US$ 3 million in the short term and US$ 2 million in the medium term. Annex 6.5 Annex 6.5 Security and Insurance Issues 1. Quality and quantity export certification procedures conducted by SGS and Veritas are costly and require advance notice. These procedures are not always followed by shippers of small consignments, leading to complications and delays at borders. Large foreign shippers use their services more systematically, as their expertise is usually a deciding factor in cases of litigation. It is estimated that 10 percent of their activity is devoted to quantity certification, while 90 percent is devoted to quality control, particularly as far as oils, cereals, sugar and dairy products are concerned. During import expertise, it is not unusual to observe losses and thefts amounting to 15 percent of the shipment. 2. Goods' Security. Theft and pilferage constitute a reality, and this problem must be accounted for. It is seldom possible to sue the Ukrainian carrier in case of bad faith. Risk of cargo theft cannot be excluded, although gunpoint attacks, as those occurring in other countries, have not recently been reported. For sensitive goods liable to excise taxes, such as alcohol, tobacco and automotive vehicles, armed escort is recommended. This service is costly and amounts to about one US$ per km, that is, US$ 500 from Kiev to the border. Conversely, insurance rates are reduced for such escorted convoys. 3. Insurance. Fragmented insurance transaction with mandatory use of local insurer increase substantially insurance cost. There are about 230 licensed insurance companies. The quality of service and the financial health of most of these companies are reportedly poor, except for a handful of them, with which reputable foreign companies are willing to work with. International insurance of both hull and shipment is costly, due to the mandatory use of Ukrainian insurance companies intermediary, which given their under-capitalization, can only retain part of the transaction, while re-insuring abroad its largest fraction. This two tier system, besides being expensive in itself, leaves the door open to fixing insurance premiums in a fashion that is arbitrary and variable from insurer to insurer and from a transaction to another. Indeed, there is no way to know beforehand how many intermediaries will be involved and how much commission they will ask for. Foreign companies are also submitted to this process, as the transaction must be fragmented. It often is decided that the foreign company will insure for the full amount so that the "fraction" conceded to the local company represents a necessary excess-cost not likely to be associated with an actual service. Total carm Cnbus l Truck 2 azks Trck 3 aks Tracek + Traile Articulated Truck Annual Annua Annua Annua Aen'ua mul Ann ual Annea Annual Ananal An ual Annua l Anna -nual Annual Annual Annual Avsege Avera 2001 Average 1998- Av-e Average Avege Average Average Ave Averag Avenge Averge Average Average Aveage Average 1998-2000 2005 2000 2001-2005 1998-2000 2001-2005 1990 2000 2001-2005 1998.2000 2001-2005 1990-2000 2001-2005 199S-2000 2001-2005 1998-2000 2001-2005 ESAL.kmn(millionl) 6,655 7,947 _ A _ i. ¾ Alq b <~:A Vehicle-kmn (million) 43,019 54,719 9O i '' ' >'$3a Reudsteed Vehicles COOO) 9,442 11,773 p2 S U Automotive Fuel Consumption (million litres) 7,701 10,103 1 VARIABLE COSTS OF ROAD USE a VehicleRelated(MUSS/Year) 93 100 63 69 3 3 3 3 15 15 5 6 2 2 3 2 Loading Related (MUSS/Year) 207.9 276.7 0.1 0.1 0.1 0.1 44.8 60.5 37.2 50.3 38.5 51.9 25.2 34.1 62.1 79.7 Total Variable Cost to Cover (US$/year) 301 376 63 69 3 3 47 63 52 66 44 57 27 36 65 02 8. VehicleRelated (Usc/Vehakm) 0.22 0.18 0.22 0.18 0,22 0.18 0.22 0.18 0.22 0.18 0.22 0.18 0.22 0.18 0.22 0.18 LoadingRelated((Usc/Veh.km) 0.40 0.51 0.00 0.00 0.00 0.01 3.63 4.04 0.54 0.60 1.51 1.69 2,55 2.85 5.29 5.91 Total Variable Cost to Cover (UdVeh.ka) 0.70 0.69 0.22 0.18 0.22 0.19 3.84 4.22 0.76 0.79 1.73 1.87 2.77 3.03 5.51 6.09 Fuel Levy to Cover Variable Coats IU - Proposed Fuel Levy (UscAiter) ID AW N 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 2 C Annual Fuel Charge Revenues (MUSS) 308 404 88 124 9 11 22 28 80 103 47 60 20 36 34 41 p1 Exceeding/(Insufident) Coverage of Variable Costs 7 28 26 56 6 9 (25) (35) 28 38 3 2 1 (0) (31) (41) - a Charges to Cover Fixed and Remaining Variable Coats Proposed Amnual Vehicle OwnershipCharge (USS/vehicle) 69 66 TI:M> M .1 1S0 t '~ , iQ 0 ; ) 4 Annual VehicleOOwnershipRevenues(MUSS) 648 777 94 120 7 9 26 36 152 183 93 iII 121 145 155 173 R ContributiontoFixedCosts(MUSS) 656 005 120 176 13 17 1 1 181 220 96 114 122 145 124 132 EipectedTotal RoadUserRevenues(MWSS) 957 1,181 182 245 16 20 48 64 233 286 140 171 149 181 188 214 T g Adddrdonal DiredtCostsduetoCbarges(USaCkm) 2 2 0.6 0.6 1.3 14 4 4 3 3 5 6 15 15 16 16 6 i Current Costs (Uscdkm) 12 12 23 23 58 58 33 33 42 42 54 54 56 56 e Road Network Maintenance and RehabilitatIonK. e Normalized Needs Total State Roads Eighways Local Roads Expected Total Road User Revenues (MUSS) C Annual Annual 3 Annual Annual Annual Average Average Annual il 8 Average Average Average 2001- 1998- Average 1998-2000 2001-2005 1998-2000 2005 2000 2001-2005 n U ft Nunber of km 173670 181698 30926 32198 142744 149500 - 1 Average Width to Maintain (with partial Shouldera) 6.7 6.7 9,1 9.1 6.2 6.2 Routine Repair and Maintenance (Ian) 173670 181698 30926 32198 142744 149500 Articulated Truck Cars Sr Routine Maintenance Unit Cost (USS/krn) 2000 2082 1024 1031 ). Routine Maintenance Annual Cost (MUSS) 208 221 62 67 146 154 aMnibus ofWhichFixedCosts(MUSS) 195 206 53 57 143 150 Bus of Which Variable Costs (MUSS) 13 15 9 10 3 5 Average Cost of Periodic Maintenance (/man) 7142 7464 3300 3626 Tnuck + Trailer _5 Periodic Maintenance (MUSS) 692 782 221 240 471 542 ofWhichFixedCosts(MUSS) 484 506 184 192 300 314 2 axies ofWhich Variable Costs (MUSS) 208 277 37 49 171 228 Truck 3 andes Cs Annual Maintenance Needs (MUSS) 900 1004 283 307 617 696 Administrative Costs (MUSS) 80 85 25 26 55 59 Fixed Costs (MUSS) 679 712 237 249 443 463 Load Reated Variable Cosb (MUSS) 208 277 37 49 171 228 Vehicle Rated Variable Cots (MUSS) 93 100 34 36 58 64 1 Table 7.2.1 TRANSPORT SECTOR REVIEW ROAD INFRASTRUCTURE SECTOR Forecasted Statistics for the years ended december 31 st projections AeT1iAbHHH nporHo3 nepcnerroaBHo : : . _ = ,' . , ,, : :,, ,' : ' .................... '. '.'.'. ': :::" ''' _~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. . . . . . . . . Operation Statistics Road Network Number of 000'km 17Z0 173.7 175.5 177.2 179.7 18Z2 184.8 187.4 Highways 31.0 31.3 31.6 31.9 32.3 32.6 32.9 33.2 Local roads 141.0 142.4 143.8 145.3 147.5 149.7 151.9 154.2 Registered Vehicles ('000) 9,300.4 9,393.4 9,487.3 9,582.2 10,348.8 11,176.7 12,070.8 13,036.5 Automotive Fuel Consumption (million litres) 7,585.5 7,699.3 7,814.8 7,932.0 8,725.2 9,597.7 10,557.5 11,613.2 --~~~~~~~~ _ > w~~~~ 'IolWs^t#fd 9O aE ... .. . .......X --':'-------................................................................................. '..::...s:.:.....::............:..r{.r2:;*.e- I vG~~~~~~~~~~raph 7.2.3: Main Financial Iniao 1,200 128,0020000120220320420 fooo~~~~~~ - C odFnd1,50 aneaneNes eN0ehce Table 7.2.1 TRANSPORT SECTOR REVIEW ROAD INFRASTRUCTURE SECTOR Forecasted Statistics for the years ended december 31st projections AeTAbISHHf ri,OrHoa3 nepcneWMB{HO Opertion Statistics Road Network Number of OW0km 172.0 1720 1720 1720 172.0 172.0 17Z0 1720 Highways 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0 Local roads 141.0 141.0 141.0 141.0 141.0 141.0 141.0 141.0 Registered Vehicles ?000) 9,300.4 9,393.4 9,487.3 9,5822 9,869.6 10,165.7 10,470.7 10,784.8 Automotive Fuel Consumption (million litres) 7,585.5 7,661.3 7,738.0 7,815.3 8,206.1 8,616.4 9,047.2 9,499.6 Tuble 7.2.2 TRANSPORT SECTOR REVIEW ROAD INFRASTRUCTBURE SECTOR ProForan,, Source & Uses of Funds for the yars ended d-ember 3lst (In t'SS nin) Sources of Fumds Budget Allocrtio. Divestiture frost As5ets Taxes on Tnstove. 488 439 395 356 302 257 218 186 Road User Chates 31 0 0 0 0 0 0 0 PFeI Levy 31 O 0 0 | 0 0 Vehicle Ownaership Chasge 0 0 | O Other 25 iotIwInHwAlSQItXt8O 544 439 395 356 302 257 218 186 Highway Project Loan Additional Lost, Borroving IoiaW,t1llSmaI0Mces 0 0 0 0 0 0 0 0 TotalSoume "54 439 3" 356 302 257 218 186 Applisction of Futnds Road Administratlon Direct Operctional Expenses 80.0 80.0 80.0 80.0 30.3 31.6 82.4 83.2 Road Maintenance and Rehabilitation Plan Routie Repait & Maintenance 248 248 249 250 253 256 260 263 Hwary 74 75 76 77 78 80 81 83 Local roads 173 173 173 173 175 177 179 180 Periodic Maintenance 824 827 829 832 843 854 866 877 Higways 266 268 271 274 279 285 290 296 Local roads 558 558 558 558 564 570 575 581 Road Maintnastnce Program 1071.7 1.075.1 1,078.5 1,082.0 1,096.3 1,110.9 1,125.6 1,140.6 Road Rebhbiliatroo 0 Highway 0 0 0 0 0 0 0 Local road, 0 0 0 0 0 0 0 Road Rehabillaticon PrqOant 0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Bridges, Tunncls Total Road Maintenance and Rehabilitaion 1071.7 1075.1 1078.5 1082.0 10S6.3 1110.9 1125.6 1140.6 Debt Scrvices Iterest Primcipal TRn1ikDht.$yiQt 0 0 0 0 0 0 0 0 IQIiJ..~ppI&1A1s - c1,152 1,155 1,159 1,162 1,177 1,192 1,208 1,224 Surpina Fssnds (608) (716) (763) (806) (875) (935) (990) (1,038) yer Cas Ba ce Cosiog Cah Balance I _ __ rap --7 2.3: Main- Financial Indicator 1840 13,500 1 1 2 ,0 5E M g l l i | 1l 11000~~~~~~~~~~~~~~~~~~1300 .9800 9 1981,520020020220320420 600~~~~~ _. odFn -1odaitnncNes 0NVeie _ _ . . ~ ~ ~ ~ 1050 Annex 8.I Annex 8.1. UZ Organization Chart 1. The State Administration for Railway Transport in Ukraine (Ukrzaliznytsia (UZ)) is responsible for the administration of all railway functions in the country, including safety, construction arLd design standards, operating practices and finances. UZ is a 100% state owned entity. As in most socialist and former Soviet Union (FSU) countries with planned economies, UZ is far from being just a railway. Ancillary activities include urban metropolitan-subway services in Kiev, Kharkov, and Dnepropetrovsk, railway design bureaus, material manufacturing, food production, and a large variety of social services such as school, hospitals, restaurants and other activities for railwaLy employees. UZ activities perform 80% of total cargo carriage and 60% of passenger carriage in LUkraine thus representing major contribution to national economy. Ukrzaliznytsia (UZ) Computer rinting Kiev Catering Hops T &Administration Center Newspapers RoHingsofkr &Tadna&MdianEuato Donetsk l L'viv G Odessa GDneiper uthwest _ Southem ggRailway Railway Railway m Railway |l Railway m Railway InterTrans Lisky Special _ Refrigerated | Passenger _ Frih || Freightd Intermodal Wagon Unit Wagon Unit |l Customer Cutmr g m Forwarder ,,r- (tanks) l Center _ Cne City Metro Idsra Railway Shops | Manufacturing | |Mtral g |Egneering| |Services | |Riwy& | |(21 factories |||& Sleepers | toe | Design l |(3-1/2) 6 |Srie | |6bureaus) |||(9 factories) | itiuin||Bureaus (4)| |Computer | |Pitn l l Kev | |Catering |Hospitals | |Training & | | Center t t Newsapers | Rollinstock & Trading | |& Medical | |Education | l } } & Gazette } | Bureau | | ~~Group | |Supply (15, 5,1) | Annex 8.2 Annex 8.2. UZ Assets 1. Railway Assets. UZ includes 6 geographically subordinated (not organized by corridors) regional railways, about 1,800 stations, over 430 depots, 68 freight car depots, 235 technical maintenance shops, about 70 main and 45 auxiliary depots for locomotive facilities. Freight facilities include more than 200 freight yards and 250 container terminals. Tracks and track facilities represent about 22,700 km (in majority 61,4 kg/m) of main track (gauge 1,520 mm) and 555 km track with European gauge 1,435 mm, 63,700 km of switches, more than 13,800 km off seamless tracks. In 1995, about 800 machines for freight transport constituted the operational pool of main-line locomotives, 900 for passenger services, over 10,000 inter-city passenger cars, over 10.000 freight cars. 8,400 km (35%) of track is electrified. 730 km has been electrified during last three years. UZ operates 801 locomotives for freight and 933 in passenger services. Freight wagons are owned by a common wagon park, which is used by all FSU countries. All FSU countries, including the Baltic States, have signed treaties between their respective countries according to which the railway companies are centrally charged against each other for using wagons of other countries. UZ currently owns approximately 200,000 freight wagons, out of which 90% is located in Ukraine, and 10,000 passenger wagons. 24-hour freight operational stock was 109,000 freight wagons in 1997. Passenger services include 123 main stations. Every year more than 250 passenger trains are formed. Average passenger distance served is 250 km performed with average speed of 50 - 60 km/h. In freight operations - average distance 470 km and average technical speed 40 km/h. 2. Network Facilities. UZ telecommunication network is a part of Ukrainian Single National Communication System. Total network - 22,600 km, with 1.9 million channel-km of phone and 1.2 million channel-km of telegraph lines; 800 stations support 220,000 phone numbers. The network is old fashioned (95% analog lines) and obsolete. Automated control system includes: automated blocking system (13,600 km), central dispatch (3,355 km), automated signaling system (15,113 km), dispatch control (8,495 km), electrical signaling (in 1,642 stations), 21 stations, 15 shunting centers, terminals etc. Existing automated control system has rather low capacity, yet does not enjoy support of modem hard- and software. High-efficiency technologies and equipment has not been available due to limited investment resources. UZ is insufficiently computerized and is no different from the most of FSU railways. EDP and availability of EDI instruments are only represented in centralized in-house statistical production. Although UZ operates with obsolete equipment and primitive software, recognition of the need to retire from FSU methodology in economic analyses and data processing experience would have to be immanent before any new large investment was made in the field. 3. Good Technical Capacity. General quality of technical capacity of UZ remains good and clearly above average compared to the most of other FSU railways. Average and high end speeds for both passenger and freight services are satisfactory for FSU railway standards despite shortage in investment resources and budgetary funding during last five years. UZ has remarkable hidden reserves available and idle technical capacity, which could allow the State and management of the company to economize and rationalize UZ activities without a risk to jeopardize current performance levels. It is evideni tthat UZ can, from technical perspective point of view, self- sustain another 7 - 10 years without major investment carried out in infrastructure and rolling stock. The latter would provide a solid ground for successful launch of radical restructuring and Annex 8.2 commercialization activities for UZ. On the other hand, relatively good technical conditions of UZ' may serve a reason for management to delay changes because traditionally railway organizations, especially in FSU, have been and still are driven by engineers and not by managers with economic and financial background. Annex 8.3 Annex 8.3. Traffic Levels and Importance in the Economy 1. Traffic Drop. Although a significant amount of liquid traffic has been shifted from rail to pipeline following the growth of oil production in Russia, rail still carried almost 90% of the land tkm in 1989. The breakup of the FSU and the recent years economic and political problems (both internally and externally) have considerably affected the traffic levels. Rail traffic in Ukraine and throughout the CIS has fallen precipitously from its pick. Since then, freight volumes are about 65% lower (freight traffic has been divided by a factor of 3 between 1990 and 1997), and passenger traffic has declined by 25%. Freight importance in Ukrainian total traffic has decreased from 87% in 1989 - 1990 to around 75% in 1993 - 1997. These declines reflect the drop in overall activity in Ukraine, but also presage a changing economic role. Figure 1 S i i :. E ; B:~~~~~ ~ 2. Experience in other countries passing through similar periods of transition and restructunng has shown that socialist economies used too much transport, and much of the excess was in the rail mode. The FSU breakup has had a number of adverse effects on the rail operations. Traffic levels and patterns have been disrupted and will never return to the levels of the past. New borders and deficient international regulation, which creates bureaucracy and corruption, are delaying, sometimes extensively, transit times and involve numerous inter-railway exchange preventing fluid rail traffic flows. 3. Freight Traffic. In 1990, more than 500 billion ton-km were moved by rail in Ukraine. By 1997, total ton-km had dropped to 160 billion, about 30% of 1989 levels. Railway freight traffic has probably now lost its past predominant role in relation to road transport and is not going to gain the same position vis-a-vis other modes of transportation in the foreseeable future, if ever. However, according to UZ estimation, freight traffic importance compared to passenger traffic on Annex 8.3 rail should increase up to 82% mainly due to the expected decrease of suburban and long-distance passengers during next 4 years. Management of UZ is in the opinion that during next 15 years current level of ton-km in freight services would remain in the level of 1997 year. Figure 2 ' 1?9>*' ' 199 .. 9 :..','199A0 19,. ?. . --, 7' ''''°'^''''' I i w. -.t-'' 4. The most important traffic components in recent years remain coal, iron ore, black metals and construction materials, mostly on high travel distance. The average travel distance did not vary in the recent years and is about the same as in 1990 - 470 km. Table 1. Distribution of Freight by Commodity and Region COMMODITY LOAD UNLOAD NET BALANCE MAIN LOAD MAIN UNLOAD min tons min tons load - unload REGION REGION COAL 80.1 91.9 -11.8 Donetsk Donetsk ORE 51.7 56.3 -4.6 Dnieper Donetsk CONSTRUCTION MATERIALS 51.4 52.4 -1.0 Donetsk Dnieper FERROUS METAL 24.2 29.0 - 4.8 Dnieper Odessa OIL 15.9 23.0 - 7.1 South Odessa GRAIN PRODUCTS 12.5 13.1 -0.6 Odessa South West COKE 7.5 7.7 - 0.2 Donetsk Donetsk CHEMICALS & AINERALS 5.0 10.3 - 5.3 Donetsk Odessa OTHER 47.7 61.8 -14.1 Donetsk Lvov TOTAL 296.0 345.5 - 49.5 Donetsk Donetsk 5. Transit Role. UZ role in servicing and creating transit flows has significantly decreased within growing competition among FSU railways targeting Russia and Asia (both FSU and further). UZ does predict small growth in their transit activities in the next 5 - 10 years, which represents rather modest progress considering other players' performance in the industry. Annex 8.3 However, it seems that UZ, which has probably the highest operating and recovery cost compared to other players in the throughput (incl. ports, road, forwarders, etc.) has the smallest income. Therefore an indepth cross-industry study should be initiated in order to understand break-down of the trnsit corridor(s) and respective cost structure discounted to players in the corridor. Ukraine' s aspirations in the Crete corridor concept have not come to reality so far. Both European direction and the "Silk Road" constitute high importance for the Ukrainian government but progress is modest. 6. The freight traffic patterns have remained about the same during the very recent years with about 60% of international traffic and 40% of domestic traffic. Figure 3 7. Inter- and multi-modal standards and respective development has not been favorable so far for railways and UZ has been often considered as the least reliable player in the chain. Inflexibility and inertia in handling lead time, safety, insurance, handling, etc. is making UZ not competitive in addressing market and customer needs. 8. Turnover of containers has declined enormously. Statistics from the past report up to 10 million tons carried a year while only about 60,000 containers were carried by UZ in 1997. There is no challenge and/or cheap instruments available in UZ to attract containers, not speaking about re-gaining lost container tonnage in transit to Russia. Lead-time, costs on throughput on rail and handling problems make containers on rail expensive and inefficient product. Although formal tariff for container shipments is reasonably modest, the actual throughput costs are rather high. Industry barrier will likely remain (very) high for containers on rail in Ukraine for many years because: 1) containerized shipments represent relatively sophisticated discipline for FSU transport industry and standards; 2) lack of supporting logistical services and facilities (no dedicated container port among others), 3) lack of Ukraine's domestic consumer (forwarders) capacity, which all leads to a lack of competitiveness vis-a-vis road transport services. In the same time, UZ Annex 8.3 is investigating possibility to reintroduce platform carriage, which was widely used in FSU. In some cases combining platforms with lighters on river. The concept is dubious due to industry andL trading world going towards standardized containers. 9. Passenger Traffic. Passenger traffic was also affected by the harsh economic situation in Ukraine, which has resulted in significant depression in quality and price of public services. The total number of passengers transported by rail in 1997 was slightly below 500 million, while they were about 670 million in 1990. In terms of passenger-kilometers, the decline is even bigger: the railways transported 54 billion pkm in 1997, down from 81 billion in 1990, although a rebound was recorded in 1994. Passenger traffic further steadily decreased during 1995, 1996, and 1997. 1998 estimates now put the number of passengers transported at the 1997 level. Nevertheless, management of UZ expects further decline in passenger figures with the trend stabilizing in 2001 at 35 billion pk1m a year. Figure 4 PA. -E*351S - n m ,. ... 190 ...... V...- .94 -1995 - ,19 Figure 5 PASSENGER TRAFFIC PATrERN (bin passngeI-m-- ~~~190 1997' '' q" '"" a INTE=RNATiONA DOMESTILONG-DISTANCE .- SUBURBA Annex 8.4 Annex 8.4. Regional Railway Description 1. Regional railways, which are organized geographically, contribute a little to each other in terms of industrial and operational synergy. All regional railways are consolidated economically. Regional railways have rather significant differences and performance results although in general the economic wealth of the subordinated regional railways remains difficult. Summary analyses for 1996: SouthWest - largest traffic. Biggest freight and passenger traffic in kms as well as largest number in passengers. Relatively high passenger orientation - 33% of its traffic. Main transit corridor - 63% of its freight volume is coming from transit (in financial terms transit importance is even bigger as average distance of transit is longer than it is in export, import and domestic haulage). Main export category: construction materials - 53% of total freight volume in tons. Relatively well maintained infrastructure, highest average technical speed. Highest employee productivity. Longest average freight travel distance - 387 km. Revenue per FTK is one of the lowest (partly because of long average travel distance). Good EBITDA2 margin - 17%. Best EBIT3 per passenger-km. Big depreciation expense. South - highest revenue per km. Smallest traffic in kms. Relatively high passenger orientation - 33% of its' traffic. Second largest transit region - 60% of its freight volume. Relatively well-maintained infrastructure, average technical speed has not almost decreased during recent years. Extremely high revenue per FTK (1.6 times higher than Ukrainian average in 1996, at the same time average travel distance is second shortest after Donetsk). Sharp increase took place in 1996. Also revenue per PK is highest. Best EBITDA margin -19%. Best EBIT per FTK - more than 2 times higher than in other regions. Big depreciation expense. Best fixed assets utilization - revenue per fixed assets is highest. Donetsk - coal transport. Biggest freight volume in tons. Relatively high freight orientation - 82% of its traffic. Smallest passenger traffic in kms. Incomparably biggest domestic and second biggest export region. Export and domestic haulage are giving almost 70% of its total freight volume. Main freight item coal (81% of Ukrainian all coal). Also biggest import region in volume, although for the region itself import is making up only 20% of its freight. Smallest transit contribution. Lowest average technical speed. Shortest average freight travel distance - 155 km. Second shortest average passenger travel distance - 80 km. Second largest operating revenue. Biggest loss maker in passenger traffic (worst EBIT margin). Largest amount of fixed assets (book value $US 5.0 bln and net book value $US 2.5 bln). Dnieper - ore transport. Second largest freight and passenger traffic in kms as well as second largest freight volume in tons. Ore 48% from its freight (84% of Ukrainian all ore). Biggest export region - 36% of its freight volume. Highest revenue per employee. 2 Earnings before depreciation. 3 Earnings before interests and taxes. Annex 8.4 Biggest operating revenue. Lowest EBITDA margin - 8%. Low depreciation expense. Highest state of wear (oldest fixed assets) - 56%. Lvov - overstaffed financial wizard. Second smallest freight and passenger traffic in kms. Smallest freight volume, mainly orientated to transit (57% of its total freight volume). Ore - main largest import item. Smallest investments to infrastructure (technical speed has decreased sharply). Shortest average passenger travel distance - 78 kan. Second highest revenues per FTK and PK (PK because of shortest passenger travel distance). Lowest employee productivity. Lowest revenue per employee. Second smallest operating revenue. Lowest EBITDA margin - 8%. Lowest depreciation expense. Best EBIT margin - -2%. Extremely high EBIT form other activities. Odessa - long travel distances; decreasing unit revenues. Smallest number of passengers. Transit (50%) and import (32%) are giving 82% of its freight volume. Ferrous metal and coal - biggest import items. Smallest investments to infrastructure (technical speed has decreased sharply), despite of that fixed assets state of wear is only 35%. Second longest average freight travel distance - 354 km. Longest average passenger travel distance - 188 km. Lowest revenues per FTK and PK (because of shortest travel distances). Highest employee productivity. Smallest operating revenue. Considerably low EBIT per FTK. Spread in revenues per km (both freight and passenger) with Ukrainian average has increased year-by-year. Figure 7 : L :- . .. -:L--;-- '.'.''X E H~~~~~~~~~~~... .. .. ...... Ho~~~~~~~~~~~~.- MLN PASS84GIS Annex 8.5 Annex 8.5. Financial Performances and Issues 1. Considerable declines in traffic levels and increasing costs, combined with non-realistic cost recovery mechanisms, have rapidly cut into the UZ's financial performance. Despite its virtual monopoly on internal surface traffic, UZ has been caught in structural inflationary spiral well known in the railways elsewhere. This decrease in rail operation volume (only 30 - 40% of installed capacity) has caused productivity to drop, high level of immobilization on equipment and rolling stock and a bad absorption of fixed costs, which are traditionally high in the railway. Costs go up rapidly but government pressures the regulatory interventions and market forces have constrained tariffs increases. 2. In 1996, UZ financial results as a group (figures aggregated not consolidated) and the contribution of main entities to the financial results, as per UZ itself, are estimated and presented in the table below: Table 1. UZ Financial Indicators (in million Hrv's): UZ GROUP Operating Revenue*Gross Operating Result** Assets 1996 1996 31.12.96 Transport Enterprises 4 882 9 -175.8 27 867.7 Urban Metro Systems 112.7 9.9 1 947.1 Manufacturing 327.5 48.7 992.5 Railway Shops 38.9 7.6 138.4 Construction Enterprises (repairs) 101.6 7.9 155.8 Design Bureaus 3.7 0.7 5.2 Construction (major works) 0.0 0.0 375.3 Materials. Stores & Distribution 5.9 3.2 64.4 Research Institutes 3.4 0.6 6.7 Catering & Trading 69.1 -7.6 179.0 Agricultural Enterprises 6.3 -0.5 86.2 Publishing 0.06 0 0.82 Medical Supply 3.7 0.2 7.6 * Operating revenue (including subsidies, VAT excluded) 3. The rapid global analysis of this table shows clearly that UZ transport enterprises constitute the core activities (about 90% of operating revenues and assets involved in UZ activities). The level of subsidies for this fiscal year, is about 24 million Hrv's (US$ 12 million) mainly allocated to the urban metro systems (about 18 million Hrv's). UZ is not anymore compensated for the losses in the passenger traffic, even if tariffs are apparently still regulated by the government and is not compensated for the numerous social services provided to its staff. 4. The analysis of the financial results for the Transport Activities, for fiscal years 1996 and 1997, as per UZ accounts, for the transport enterprises which is summarized in the tables below calls for the following comments. Annex 8.5 Table 2. Financial Highlights, Transport Enterprises of UZ for the year ended December 31st 1996 1997 1996 1997 mln Hrv's mln Hrv's mln USD min USD Operating revenue 4 882.9 5 052.3 2 669.0 2 713.8 Earnings before depreciation (EBITDA) 1 427.9 1 241.3 780.5 666.8 EBITDA margin 29% 25% 29% 25% Earnings before interest and tax (EBIT) - 513.1 - 1 771.7 - 280.5 - 951.7 Earnings before tax (EBT) - 175.8 - 1 415.4 - 96.1 - 760.2 EBT margin - 11% - 35% - 11% -35% Net profit - 374.0 - 1 434.4 - 204.4 - 770.4 Freightton-km (mln) 163 384 160 432 163 384 160 432 Passenger-km (mln) 59 080 54 540 59 080 54 540 Revenue per freight ton-km (kopecks and USc) 1.86 2.10 1.02 1.13 Revenue per freight ton-km (kopecks and USc) 1.04 1.20 0.57 0.64 EBT on freight traffic 451.3 - 172.7 246.7 - 94.4 EBT margin on freight traffic 15% -5% 15% - 5% EBT on passenger traffic - 795.7 - 1 380.4 - 434.9 - 754.5 EBT margin on passenger traffic - 130% -216% - 130% -216% EBT on other activities 168.6 137.7 92.3 88.6 EBT margin on other activities 14% 16% 14% 16% Assets (end of year) 27867.7 24 873.9 14752.6 13 160.8 Net fixed assets 25 311.3 21 982.7 13 399.3 11 631.1 State of wear 48% 53% 48% 53% (accumulated depreciation I book value of fixed assets) 5. On a global level, at more or less the same level of traffic, financial situation has worseneid between 1996 -and 1997, showing increasing important losses (estimated to be more than US$ 900 million in 1997). This financial situation is mainly caused by an exceptionally high yearly depreciation in 1997 (about US$ 1.56 billion). 6. EBITDA margin decreased from 29% to 25%, showing the deterioration of the operating conditions and an increasing alarming situation: the working expenses have increased by about Hrv 300 million. The operating result is considerably deteriorated moving from a loss of about Hrv 500 million in 1996 to a loss of about Hrv 1.7 billion in 1997. Consequently, the EBT margin dropped from -11% in 1996 to -35% in 1997, emphasizing the role of depreciation in the cost structure of UZ transport activities and demonstrating that in this particular case, the cash flow is a more adapted performance indicator than profit. The ratio operating cash flow (generated exclusively by transport activities) and net cash flow stayed at about the same level between 1996 and 1997: Hrv 1.2 billion. The ratio (net cash flow on turn over) is estimated to be around 30%X). Considering the amount of funds involved one of the main issues remains the adequate use of this cash flow, which, if not adequately used, would generate an important de-capitalization. ][t appears that an increasingly large part of these funds are used to finance important losses in the Annex 8.5 passenger activities, increasing receivables and inventories and social activities and investments for the railway staff. 7. The freight activities are more or less in financial equilibrium. Financial sustainability of the freight tariffs will highly depend on the level of the appropriate yearly depreciation allocation and the appreciation of their economical and financial reality in the context of the actual situation of the railway. It is estimated that in 1996, the average cost per tkm was 1.6 Kopeck for average revenue generated of 2.1 Kopeck. In 1997, these figures moved to 2.1 and 2.2 (around US$ 1 cent per tkm) respectively. 8. The total amount of loss estimated for the passenger activities moved from about Hrv 800 million in 1996 to about Hrv 1.4 billion in 1997 (US$ 700 million), representing about 2 times the passenger traffic turnover. For the passenger traffic, it is estimated that in 1996, the average cost per pkm was 2.4 Kopeck for average revenue generated of 1 Kopeck. In 1997, these figures moved to 3.7 and 1.2 (around US$ half a cent per plam) respectively, showing a loss of 2.5 Kopeck per unit. 9. As the railway is not anymore compensated for these considerable losses, the freight operation and the profit on the other activities directly subsidize the passenger activities. This extreme situation, if to be durable, would generate a rapid and irreversible de-capitalization of the freight segment business of the railway, whatever amortization policy is implemented. Table 3. Financial Highlights, Regional Railways of UZ for the year ended December 3 15 1996, in million Hrv's Donetsk Dnieper Lvov Odessa SouthWest South Operating revenue 886.9 926.6 727.5 713.8 871.7 644.9 Op. Result before Depreciation 109.4 78.1 103.3 97.1 147.2 122.1 Working margin 12% 8% 14% 14% 17% 19% Net Operating Result (NOR) - 51.6 - 48.2 - 14.4 - 41.8 - 48.8 -22.3 Operating margin -6% -5% - 2% -6% -6% -3% NOR on freight traffic 90.6 110.4 67.6 73.2 95.5 104.8 NOR on passenger traffic - 134.1 - 181.4 - 155.2 - 137.5 - 167.8 - 153.7 NOR on other activities - 8.1 22.8 73.2 22.6 23.5 26.7 Assets (end of period) 4 992.8 4 357.6 4 554.7 4 727.8 5 223.1 2 879.2 Net fixed assets 4 725.7 4 077.0 4 327.6 4 538.4 4 743.4 2 647.5 State of wear 50% 56% 42% 35% 44% 43% 10. The analysis of the financial performance of each of the six railways, performned for 1996, confirms that the main characteristics of the situation described are more or less the same in each of the railways. The situation in the Dnieper railway is probably more deteriorated than for the other railways. Annex 8.5 Figure 8 AS.S * STATEOF W V u it vale) 58%: 1 .1. The financial structure of the balance sheet of the Transport Activities, as a group, ha beeni extensively modified between 1995 and 1997. The total of the balance sheet has been multiplied by more or less 5. UZ went through several governmentally driven assets reevaluation, (1995, 1996 and 1997) and applies now the new depreciation rate. An in-depth analysis should be done to ensure that the actual reevaluated values and yearly depreciation amount represent fairly and adequately the economical and financial realities of the group and its transport enterprises and ensure proper modernization of the railway network. 12. The short-term financial structure of the Transport Activities, as a group, is fragile. The amount of receivables moved from about Hrv 1 billion at the end of 1996 to Hrv 1.9 billion at the end of 1997. This now represents about 180 days of the actual freight turnover. These amounts are largely constituted by overdue payments or arrears on state enterprises in the mining and industry sectors, which are also going through a stabilization process. t is notable that ministries instead of companies are in charge for handling settlement of overdue receivables and indebtedness between large state companies. Delay in salary payments has reached 6 month. In addition, UZ has a growing debt to budget and Pension Fund, thus contributing to a growing fiscal problem. If not urgently and properly addressed, the settlement of this situation will generate additional implications. 13. Financial situation of UZ is further damaged by the fact that freight services to the large extent are bartered rather than sold against cash. In addition, parts of revenues are coming from inter-company non-cash transactions. According to UZ only 40% of total sales in freight tonnage is paid in cash. Despite extensive internal operational and technical resource available, UZ may face liquidity crises already in the near future. ,d, > B E a ~~A P Y C l -P §~~~a" v #~' o"%ovn ~~~4 m- N*_teX_.t vow - t V 4 _W ¢-en ° t71mm" o r ~~~tatlg M*N_"¢ 0 E ,v+/Ot _~~~r*A _ *MO SOW P M E f) CEB3EPHOECTKo1M 4 MOPE ~~~ ~..* * ~ ~ ~ ~. :~~:i''? AI MOP£UMEE EB - ~~~crflcer ronidors _m r Nr.l Tahn -Rp-Ks-Wanaw -6 Nr. tA Rbas - KaNningrad - Gdanskc -i ! Nr. 11 BerHin - Wesaw - M-sk - Moscow _i3 Nr.C BeRVln- Kaowe -"LvovI-Khv _ g Nr. V Tussle - 4ubtana - Zagreb - Budapest - Chop - Lvov; BraHislava - Chop - Lvov _i Nr. IX Plovdlv - Blucharest - Kishhnev - Razdebhaya - Kbev - Vltebsk - Sl. Petersburg - Fhesinki _ ~~Nr.~ IXA Odessa - Razdelnaye _i_ ~~Nr. IXB Kbev-Mhnsk - VIlnus -Kaunas -Klalpeda _ ~~~Nr. IXC Kiev - Moscowv - Sl. Petersburg - Additinal coiridors, suggested by Llkrahne _ > Baltic Sea (Gdenslc) - Blackc Sea (Odessa) _3 EuroAsb . Ilychovsk - lerry passage - Potl - TblHlsi - Baku - ferry passage - Turkrnenbashi - Ashkhabad - Mashhad _j Europe -Asia. Fastov- Zoamenca -Dnapopalovs k-Volgograd -Maka - Chardzhou _ _ CorrIdor od the Rb*t~ S~ee- onomke...P. - !..e!!.~ - -des- e nnka - Dr-Cwk - * sinmvaiys - iXvasnino _ ~~~Other corrndors. Moscowv - Orenburg -. Tashkenl Table 8.13: UKANiAN RAILWAYS - HiSTORICAL DATA Main Operatal Statistics 1990 1993 1994 1996 1997 Freight tons (million) 974.0 532.2 408.0 343.2 333.3 Freight tkm (billion) 474.0 246.4 200.4 163.4 160.4 FreightTraffic Indice (100=1990) 100 52 42 34 34 Ave. length of haul (km) 486.7 463.0 491.2 476.0 481.3 Pasenger journeys (million) 669.0 502.0 736.0 538.6 505.8 Passenger kIn (billion)* 81.9 76.0 70.9 59.1 54.6 Passenger Traffic Indice (100=1990) 100 75 110 81 76 Locornotive/DMU/EMU km (million) 180.9 172.3 Train Ian (million) 131.2 125.0 Wagon km (million) 5.3 5.2 Employment ('000) 531.7 495.7 Productivity* C000 tO nJemployee) 384.1 404.5 Graph 8.1.4: Ukrainian Railways- Indexed Traffic Trends 100 80 60 40 1990 1993 1994 1996 1997 - *-~Ton ""'4-Ton-km 0 Pass -0 Pass-km Table 2L1.6; TRANSPORT SECTOR REVIEW RAILWAYS, 0 : I lKosme Staiteienls and Caslt Flow 0 - for the year: ended Decemher 31st, 1996 in millioin mi Hrv's in million Hrv's Source bt~s Oei~fngrivenues : .. 886.9 727.5 713.8 926.6 71.7 44.9 4,771.5 Opin ...gE.peases ........ .-.n 917.8 736.2 746.7 960.5 908.5 689.9 4,959.5 e.R.. ..............; s. . . 109.4 103.3 97.1 78.1 147.2 122.1 657.2 ^btt000 0t: 0ii ;;:~~~~............. Net~~~pettlt~~~ai'tsti......(51.6) (14.4) (41.8) (48.2) (48.8) (22.3) (227.1) NetPtLoaee*> . .Tax 185.2 85.2 20.4 99.9 19.3 30.3 440.2 NetiP*.m(L*$)*iet~Tn i 0 ;i- - - .. 146.6 59.7 (4.1) 40.7 (8.6) 12.3 246.7 .- . . ... . ... WOS*b...... 883% 86% 86% 92% 83% 81% 86% . :e jj tinX; ::j;.- -..;:thtlo 103% 101% 105% 104% 104% 107% 104% NetOperutba-gV.hPl0' t;;; 088.7 97.6 88.2 63.8 135.2 144.7 618.2 N .e - c d - lo w 286.8 171.7 125.9 152.7 175.4 179.3 1,092.0 Ndtc~whflow/OUwtgRdwames 32% 18% 16% 20% 28% 23% Operating Result on Frdeght Traffic 90.6 67.6 73.2 110.4 '5S5 104.81 iTj Operating Resut on Passenger Trnffic (134.1) (ISS.2) (137.S)1 (814) (167.8)31 (3.7)1 | (929.8)1 Operatg Result on other aciviles (8&I) 73.2 22.6 22.8 U.S 26.7 1 I: :. :.:.:.. .. :::: :;t;S lt : ;:~~~~~~~~~~~~~~~~~~9 :4 -3 sg S fi& sE gu ; h3 ~<-- I w X r 5> * i i Fu u 0| | Mw3 X | bsh 8 S Table 8.1.7 TRANSPORT SECTOR REVIEW RAILWAYS Income Statements and Cash Flow for the year ended December 3 Ist (in rnillion s) (in million US$'s) TRANSPORT TRANSPORT TRANSPORT TRANSPORT Source: 1996 1997 1996 1997 Operating revenues 4,882.9 5,0523 2,653.8 2,687.4 Freight 3,039.9 3,374.5 1,652.1 1,794.9 Passengers 611.5 651.8 332.4 346.7 Other 1,231.5 1,026.0 669.3 545.7 Operating Expenses Materials 657.0 971.0 357.1 516.5 Fuel 313.0 313.0 170.1 166.5 Energy 525.0 420.0 285.3 223.4 Salaries & benefits 1,040.0 1,019.0 565.2 542.0 Other expenses 920.0 1,088.0 500.0 578.7 Working expenses 3,455.0 3,811.0 1,877.7 2,027.1 Depreciation 1,941.0 3,013.0 1,054.9 1,602.7 Operating Expenses 5,396.0 6,824.0 2,932.6 3,629.8 Operating Income (513.1) (1,771.7) (278.8) (942.4) Other non Operating Income 349.7 405.1 190.0 215.5 Other Expenses 12.4 48.7 6.7 25.9 Profit before Tax (175.8) (1,415.4) (95.5) (752.9) Tax 198.2 19.0 107.7 10.1 Profit after tax (374.0) (434.4 (2032 (763.0) Net Operating Cash Flow 1,229.7 1222.3 6683 6502 Net Cash Flow 1,567.0 6 ......... .... .. . .. . T...,.,..8'.".88... .... 00TI ~ ~ ~ TINgX Source: I9~~~~~~~~~~~~~~ 19~~~~~~...... Ileault a Frdgixt T1~~~~~~~~*8e 43L3 (~~~~~,........ kesult on Passenger Tisdfl ... ...(.. .. ............ ............. ......v 1 Tabe 8.1.8 TRANSPORT SECTOR REVIEW RAILWAYS Balace Sheets per year, as of December 31 (in million Hrv's) Source: 1995 1996 1997 ASSETS Cash 20 40 99 Accounts Receivables 662 992 1,956 Inventories 441 644 836 CutTent assets 1,123 1,676 2,891 Fixed assets 6,358 46,592 46,836 Accumulated depreciation 2,541 21,534 24,878 Net Fixed assets 3,817 25,058 21,958 Other assds 46 33 25 LIABILITIES Current Liabilities 758 1,011 1,383 Long Term Liabilities 4 3 3 Paid in Capital 3,960 24,637 22,338 Other Funds 263 762 3,406 Retained eamig & Curre income 0 1,064 (2,255) Total Equity 4,223 26,462 23,488 M... __ _ Table 8.2.1 UKRAINIAN RAILWAYS ACTUAL PROJECTED 'Fraffic estimates AITHIH4O 3AHAAHOBAHO and Average tarnf per product 1997 1998 199 2000 2001 2002 2003 2004 2005 TRAFFIC DATA Product 1: Ores Freight (mlin t) 59 60 61 62 62 63 64 64 65 Freight (mlin t.km) 34,750 34,750 35,098 35,448 35,803 36,161 36,523 36,888 37,257 Average trip (kbn) 590 575 575 575 575 575 575 575 575 Average freight tariff (Hrv / t.km) 0.014 0.014 0.015 0.016 0.018 0.019 0.020 0.020 0.022 Product 2: Coal & Coke Freight (t) 99 92 83 75 67 69 70 71 73 Freight (mlin t.km) 32,000 30,000 27,000 24,300 21,870 22,307 22,754 23,209 23,673 Average trip (km) 322 325 325 325 325 325 325 325 325 Average freight tariff (Hrv / t.km) 0.022 0.022 0.024 0.025 0.027 0.029 0.030 0.031 0.033 Product 3: Black Metals Freight (t) 31 31 31 31 31 32 32 32 33 Freight (mln t.km) 17,100 17,100 17,271 17,444 17,618 17,794 17,972 18,152 18,334 Average trip (lkn) 560 560 560 560 560 560 560 560 560 Average freight tariff (Hrv / t.hn) 0.023 0.023 0.025 0.027 0.029 0.029 0.029 0.029 0.029 Product 4: Construction Materials Freigt (t) 49 49 50 51 52 53 55 56 58 Freight (mlt tktm) 17,500 17,000 17,340 17,687 18,041 18,582 19,139 19,713 20,305 Aveage trip (kmn) 355 350 350 350 350 350 350 350 350 Average freight tariff (Hrv / tkm) 0.019 0.019 0.021 0.022 0.024 0.025 0.026 0.028 0.029 Product 5: Oil & Oi products F-eght (t) 24 24 25 25 25 25 26 26 26 Freight (mln tkm) 13,600 13,600 13,736 13,873 14,012 14,152 14,294 14,437 14,581 Average tp (km) 565 560 560 560 560 560 560 560 560 Average freight tariff (Hrv / tri) 0.025 0.025 0.027 0.029 0.031 0.032 0.034 0.036 0.037 Other Products Freit (t) 72 75 77 78 80 82 84 87 90 Freight (-In Lkn) 45,500 45,000 45,900 46,818 47,754 49,187 50,663 52,182 53,748 Average trip (kl) 635.0 600 600 600 600 600 600 600 600 Aversge freight tariff (Hrv / t.l) 0.024 0.024 0.026 0.028 0.030 0.032 0.033 0.03 0.037 Total Freight . Freight (t): : .:$.3..: F.eight (min t.m) * . . . . * *I . Average trip (kln) S z I 11 Table 8.2.2 TRANSPORT SECTOR REVIEW UKRAINIAN RAILWAYS Forecasted Statisties for the years ended december 31st (rAICTIqHO 3ArIAAHOBAHO ACTUAL PROJECTED Source 1997 0_ i i _ _ O Freight: Total Freight (min tons) 334 331 326 321 317 324 330 337 344 Total Freight (bln tkm) 160.5 157.5 156.3 155.6 155.1 158.2 161.3 164.6 167.90 Passengers: Total Passengers (min pas.) 506 469 384 315 260 227 198 173 152 Total Pasenger(bln p.km) 54.6 51.5 45.6 40.6 36.4 33.6 31.1 28.8 26.8 Other Total TU (bin) 215.0 209.0 201.9 196.1 191.5 191.8 192.4 193.4 194.7 Number Emplovees 300,000 300,000 255,000 216,750 184,238 175,026 166,274 157,961 150,063 Productivitv Employee 717 697 792 905 1039 1096 1157 1224 1298 Turnover "Employee 6,879 6,738 8,427 10,563 13,269 14,808 16,472 18,339 20,434 Salary/Employee (Hrv/month) 84 100 125 156 195 215 236 260 286 Table 8.2.3 TRANSPORT SECTOR REVIEW UKRAINIAN RAILWAYS ProFonma Income Statements for the years ended december 31st US$ million) 'DAKIHLlHO 3AIIAAHOBAHO ACTUAL PROJECTED Source: 1997 l . . Revenue: Freight 1,687 1,655 1,765 1,887 2,022 2,154 2,296 2,448 2,612 Passengers 326 317 331 346 362 362 362 363 363 Other 51 so 53 57 61 75 80 86 91 Operating Revenues 2,064 2,021 2,149 2,290 2,445 2,592 2,739 2,897 3,066 Expense: Salaries & Benefits 445 475 518 528 541 532 556 581 608 Materials 489 475 436 424 414 423 424 427 430 Other operating expenses 557 541 496 482 471 481 483 486 489 Other overhead expenses 100 100 88 88 88 75 75 75 75 Working Expenses 1,591 1,591 1,538 1,522 1,513 1,512 1,539 1,569 1,601 Operating Result 473 430 611 768 931 1,080 1,200 1,328 1,465 Depreciation 1,475 848 859 870 881 933 944 956 967 Provision for bad debts 169 83 88 94 101 65 69 73 78 Gross Operating Result (1,170) (500) (336) (196) (51) 83 187 299 420 Non operating items 0 0 0 0 0 0 0 0 0 Extraodissarv items (net) (770) (5,000) 0 0 0 0 0 0 0 Provision for Social Program 108 92 78 33 32 30 28 Net Income ( Loss) (400) 4,500 (444) (288) (129) 49 155 269 391 before taxes Taxes 0 0 0 15 47 81 117 Current Income (400) 4,500 (444_ (288) (129) 35 109 1I8 274 Operating Expenditures 3,066 2,522 2,485 2,486 2,495 2,509 2,552 2,598 2,646 Table 8.2.4 TRANSPORT SECTOR REVIEW UKRAINIAN RAILWAYS ProForma Sources & Uses of Funds per year, as of December 31 USS million) GSAKTHMHO 3A1IAAHOBAHO ACTUAL PROJECTED Source l - . .........-. 0 ... ....t. . SOURCES OF FUNDS Net Income afiter Taxes (400) 4,500 (444) (288) (129) 35 109 188 274 Depreciation & Provisions 1,475 931 1,055 1,056 1,060 1,030 1,044 1,059 1,074 Other (770) (5,000) 0 0 0 0 0 0 0 Funds from Operations 305 430 611 768 931 1,065 1,153 1,247 1,348 Writeoff&Saleofassets 0 0 0 0 0 0 0 0 0 Borrowings 0 0 0 0 0 0 0 0 0 Equit Capital 0 0 0 0 0 0 0 0 0 Change in working capital (14) 189 163 140 9 (40) (44) (47) Financing 0 (14) 189 163 140 9 (40) (44) (47) Total Sources 305 416 800 931 1,071 1,074 1,113 1,203 .1,300 USES OF FUNDS Repayment ofLT Debt 0 0 0 0 0 0 0 0 0 Re-evaluation of assets 0 0 0 0 0 0 0 0 0 Net Plant & Equipment 0 100 500 500 500 500 500 500 500 Change in Working Capital needs 92 90 77 65 42 (1) (2) (2) Bad debts 169 83 88 94 101 65 69 73 78 Staff rightsizing program 0 0 108 92 78 33 32 30 28 Total Uses 169 274 786 763 744 640 599 602 605 Total Sources & Uae 136 142 14 168 327 434 513 602 696 =====- I I ======---- -- ==== ====== ====== ====== Th.lnv. FinancingCapacity 136 242 514 668 827 934 1,013 1,102 1,196 Aatnl.lInv. Fiancing Capackty (539) (420) (16) 290 625 826 1,013 1,102 1,196 - I---- - Table 8.2.5 TRANSPORT SECTOR REVIEW UIKINIAN RAILWAYS ProForma Balance Sheets per year, as of December 31 US$ million) (DAKTH'qHO 3AIAAHOBAHO ACTUAL PROJECTED Source: 197 . .... , , w. a, ., - ASSETS Cash 42 184 198 366 693 1,127 1,640 2,242 2,938 Accounts Receivables 968 975 829 704 599 598 638 680 725 Inventories 418 425 383 344 310 301 303 304 306 Current assets 1,428 1,584 1,409 1,414 1,602 2,027 2,581 3,226 3,969 Fixed assets 23,418 38,548 39,048 39,548 40,048 40,548 41,048 41,548 42,048 Accumulated depreciation 12,439 23,287 24,146 25,016 25,897 26,830 27,774 28,730 29,697 Net Fixed assets 10,979 15,261 14,902 14,532 14,151 13,718 13,274 12,818 12,351 Deffered Charges 0 0 0 0 0 0 0 0 0 Other assets 30 0 0 0 0 0 0 0 0 Total Assets 12,437 16,845 16,311 15,946 15,752 15,745 15,855 16,045 16,321 LIABILITIES Current Liabilities 692 600 510 434 368 326 328 329 331 Long Term Debt 1 0 0 0 0 0 0 0 0 Provisions 0 0 0 0 0 0 0 0 0 Paid in Capital Authorized Capital 12,921 12,922 12,922 12,922 12,922 12,922 12,922 12,922 12,922 Retained Earning (Loss) (852) (1,177) 3,323 2,879 2,590 2,461 2,496 2,605 2,793 Current income (325) 4,500 (444 (288) (129) 35 109 188 274 Total Equity 11,744 16,245 15,801 15,513 15,384 15,418 15,527 15,715 15,990 liabilities and Equity 12,437 16,845 16,311 15,946 15,752 15,745 15,855 16,045 16,321 Table 8.2.6 TRANSPORT SECTOR REVIEW UKRAINIAN RAILWAYS _ _ ProForma Ratio Analysis (DAIClHHETIHO 3ArIAAHOBAHO ACIUAL PROJECTED Source: 1997 -. ... .... 2. .. . Efficiency: Revenue turnover 18.8%/ 13.2%/a 14.4% 15.8% 17.3% 18.9% 20.6% 226% 24.8% Receivables tumover* 169 174 139 Ill 88 83 84 85 85 Inventory tumover * 73 76 64 54 46 42 40 38 36 Number Employees 300,000 300,000 255,000 216,750 184,238 175,026 166,274 157,961 150,063 Traffic Units !Employee 717 697 792 905 1,039 1,096 1,157 1,224 1,298 Pricing: Net ton *km (million) @ USti per Tkm 0.011 0.011 0.011 0.012 0.013 0.014 0.014 0.015 0.016 Million Passenger/km @ US5 per Pas-km 0.006 0.006 0.007 0.009 0.010 0.011 0.012 0.013 0.)14 Profitability: Working Ratio 77% 79% 72% 66% 62% 58% 56% 54% 5'2% Operating Ratio 149% 125% 116% 109% 102%0 97% 93% 900/0 6% Retum on FLxed Assets -10.7% -3.3% -23% -1.4% -0.4% 0.6% 1.4% 2.3% 3.4% Lquidity: Working Capital needs 695 800 701 615 540 573 613 655 700 Current Ratio 2.07 2.64 276 3.26 4.35 6.21 7.88 9.80 11.99 Quick Ratio ZOO Z33 238 242 Z47 Z76 Z87 299 3.12 Capitalization: Asset Leverag 5.6% 36% 3.1% 2.7% Z3% Zl% 21% 21% 200/0 gGah8.2.7: Main FinancialIdctr 1,~~~~~ GosOeaigReut--Fnsfo prtosToa U(ilo)N mlye 000)28 | . , , , _ _ _~~~~~~~~~~~-g - - - - - ---- .. . --a_ ............. _ _~~~~~~26 Table 8.2.1 UKRAINIAN RAILWAYS .j._.~ ACTUAL PROJECTED raffic estimates A______HO 3AflAAHOBAHO and Average tarrif per product _ 1997 1998 1999 2000 2001 2002 2003 2004 2005 TRAFFIC DATA Product 1: Ores Freight (mln t) 59 60 57 55 52 52 52 52 52 Freight (mln t.km) 34,750 34,750 33,013 31,362 29,794 29,794 29,794 29,794 29,794 Average trip (kmn) 590 575 575 575 575 575 575 575 575 Avera freight tariff (Hrv / t.kmn) 0.014 0.014 0.014 0.015 0.015 0.015 0.015 0.016 0.016 Product 2: Coal & Coke Freight (t) 99 92 90 89 87 83 78 74 71 Freight (min t.km) 32,000 30,000 29,400 28,812 28,236 26,824 25,483 24,209 22,998 Average trip (kin) 322 325 325 325 325 325 325 325 325 Average freight tariff (Hrv / t.km) 0.022 0.022 0.022 0.022 0.023 0.023 0.023 0.024 0.024 Product 3: Black Metals Freight (t) 31 31 31 31 31 31 31 31 32 Freight (mlni t.kn) 17,100 17,100 17,186 17,271 17,358 17,445 17,532 17,619 17,708 Average trip (kmn) 560 560 560 560 560 560 560 560 560 Average freight tariff (Hrv / t.ktn) 0.023 0.023 0.024 0.024 0.024 0.024 0.024 0.024 0.024 Product 4: Construction Materials Freight (t) 49 49 49 50 50 51 51 52 52 Freight (mlin t.kn) 17,500 17,000 17,170 17,342 17,515 17,690 17,867 18,046 18,226 Average trip (km) 355 350 350 350 350 350 350 350 350 Average freight tariff (Hrv / t.kn) 0.019 0.019 0.019 0.020 0.020 0.020 0.021 0.021 0.021 Product S: Oil & Oil products Freight (t) 24 24 24 25 25 25 25 25 25 Freight (mlrn tkin) 13,600 13,600 13,668 13,736 13,805 13,874 13,943 14,013 14,083 Average ttip (kn) 565 560 560 560 560 560 560 560 560 Average freight tariff (Hrv / t.kn) 0.025 0.025 0.025 0.025 0.025 0.026 0.026 0.027 0.028 Other Products Freight (t) 72 75 75 76 76 77 77 77 78 Freight (mlrn thin) 45,500 45,000 45,225 45,451 45,678 45,907 46,136 46,367 46,599 Averge trip (km) 635.0 600 600 600 600 600 600 600 600 Average freight tariff (Hrv / tnkm) 0.024 0.024 0.025 0.025 0.025 0.026 0.026 0.027 0.027 Total Freight Freigt (t).::. :$ . : ........ :::g ::i:;:: .::::: Freight (mln t.km) t ttao . i,$,i,:.i8 m : Averge ttip (km) .. Average freight tariff (Hrv / t.km) . . . ... Table 8.2.2 TRANSPORT SECTOR REVIEW UKRAINIAN RAILWAYS Forecasted Statistics for the years ended december 31st DAKTWIIHO 3AIAA-HOBAHO ACTUAL PROJECTED Source: 19'7 1 ... . Freight: Total Freight (mln tons) 334 331 327 324 321 317 314 312 309 Total Freight (bin tkm) 160.5 157.5 155.7 154.0 1524 151.5 150.8 150.0 149.41 Passengers: Total Passengers (mlin pas.) 506 469 445 423 402 382 363 344 327 Total Pasenger(bln p.km) 54.6 51.5 48.9 46.5 44.2 41.9 39.8 37.9 36.0 Other Total TU (bin) 215.0 209.0 204.6 200.5 196.5 193.5 190.6 187.9 185.4 Number Employees 300,000 300,000 297,000 294,030 291,090 285,268 279,563 273,971 268,492 Productiviry Employee 717 697 689 682 675 678 682 686 690 Turnover;Employee 6,879 6,738 6,765 6,798 6,835 7,036 7,218 7,410 7,613 Salary/Employee (Hrv/month) 84 100 105 110 116 122 128 134 141 Table 8.2.3 TRANSPORT SECTOR REVIEW UKRAINIAN RAILWAYS ProForma Income Statements for the years ended december 31st USS million) 4DAKTqHO 3AIIAAHOBAHO ACTUAL PROJECTED Source: 1997 09 O .0_1 Revenue: Freight 1,687 1,655 1,658 1,663 1,668 1,687 1,708 1,729 1,752 Passengers 326 317 301 286 272 261 250 240 231 Other 51 50 50 50 50 59 60 61 61 Operating Revenues 2,064 2,021 2,009 1,999 1,990 2,007 2,018 2,030 2,044 Expense: Salarnes & Benefits 445 475 532 554 578 593 610 628 646 Materials 489 475 465 456 447 440 434 427 422 Other operating expenses 557 541 530 519 509 501 493 486 480 Other overhead expenses 100 100 88 88 88 75 75 75 75 Working Expenses 1,591 1,591 1,614 1,617 1,621 1,609 1,612 1,617 1,622 Operating Result 473 430 395 382 368 398 406 414 422 Depreciation 1,475 738 744 749 755 795 800 806 812 Provision forbad debts 169 165 166 166 167 169 171 173 175 Gross Operating Result (1,170) (473) (514) (533) (553) (56) (565) (565) (566) Non operating items 0 0 0 0 0 0 0 0 0 Extraodinary items (net) (770) 0 0 0 0 0 0 0 0 Provision for Social Program 0 0 0 0 0 0 0 Net Income (Loss) (400) (473) (514) (533) (553) (565) () (565) (566) before taxes Taxes X 0 0 0 _ 0 0 0 0 Curnt Income (400) (473) (514) (565) (565) Operating Expenditures 3,066 2,495 2,523 2,532 2,543 2,572 2,583 2,596 2,610 Table 8.2.4 TRANSPORT SECTOR REVIEW UKRAINIAN RAILWAYS ProForma Sources & Uses of Funds per year, as of December 31 US5 million) 4'AKTH14HO 3AIIAAHOBAHO ACTUAL PROJECTED Source: 1997 1,,. SOURCES OF FUNDS Net Income after Taxes (400) (473) (514) (533) (553) (565) (565) (565) (566) Depreciationi & Provisions 1,475 904 909 915 921 963 971 979 987 Other (770) 0 0 0 0 0 0 0 0 Funds from Operations 305 430 395 382 368 398 406 414 422 Write off& Sale of assets 0 0 0 0 0 0 0 0 0 Borrowings 0 0 0 0 0 0 0 0 0 Equity Capital 0 0 0 0 0 0 0 0 0 Change in working capital (14) 0 0 0 86 (3) (4) (5) Financing 0 (14) 0 0 0 86 (3) (4) (5) Total Sources 305 416 395 382 368 484 403 409 416 USES OF FUNDS Repavment ofLT Debt 0 0 0 0 0 0 0 0 0 Re-evaluation of assets 0 0 0 0 0 0 0 0 0 Net Plant & Equipment 0 100 250 250 250 250 250 250 250 Change in Working Capital needs 92 0 0 0 92 7 7 6 Bad debts 169 165 166 166 167 169 171 173 175 Staff nghtsizing program 0 0 0 0 0 0 0 0 0 Total Uses 169 357 416 416 417 511 428 430 431 Total Sources & Uses 136 59 (21) (34) (48) (26) (25) (20) (15) ll.Inv. Financing Capacity 136 159 229 216 202 224 225 230 235 Actual-Inv. Financing Capacity (539) (502) (434) (449) (465)1 (367) (287)1 (202) (115) Table 8.2.5 TRANSPORT SECTOR REVIEW UERAINIAN RAILWAYS ProForma Balance Sheets per year, as of December 31 USS tmillion) *DAKlTMLHO 3AHAAHOBAHO ACTUAL PROJECTED Source: 1997 .| . ...S. ASSETS Cash 42 .101 81 47 (2) (28) (53) (73) (88) Accounts Receivables 968 975 975 975 975 844 854 865 876 Inventories 418 425 425 425 425 470 463 457 451 Current assets 1,428 1,501 1,481 1,447 1,398 1,286 1,264 1,249 1,239 Fixed assets 23,418 33,548 33,798 34,048 34,298 34,548 34,798 35,048 35,298 Accumulated depreciation 12,439 23,177 23,921 24,670 25,424 26,219 27,019 27,825 28,637 Net Fixed assets 10,979 10,371 9,877 9,378 8,874 8,329 7,779 7,223 6,661 Deffered Charges 0 0 0 0 0 0 0 0 0 Other assets 30 0 0 0 0 0 0 0 0 Total Assets 12,437 11,872 11,358 10,825 10,272 9,615 9,043 8,471 7,899 LIABILITIES Current Liabilities 692 600 600 600 600 508 501 494 488 Long Term Debt 1 0 0 0 0 0 0 0 0 Provisions 0 0 0 0 0 0 0 0 0 Paid in Capital Authorized Capital 12,921 12,922 12,922 12,922 12,922 12,922 12,922 12,922 12,922 Retained Eaming (Loss) (852) (1,177) (1,650) (2,164) (2,697) (3,250) (3,815) (4,380) (4,946) Current income (325) (473) (514) (533) (553) (565) (565 (565) (566) Total Equity 11,744 11,272 10,758 10,225 9,672 9,107 8,542 7,977 7,411 Liabilities and Equity 12,437 11,872 11,358 10,825 10,272 9,615 9,043 8,471 7,899 Table 8.2.6 TRANSPORT SECTOR REVIEW UKRAINIAN RAILWAYS ProForma Ratio Analysis GDAKTIH14HO 3ArIAAHOBAHO ACTUAL PROJECTED Source: 1997 . . 2W0 8._1 Efficiency: Revenue tumover 18.80/0 19.5% 20.3%/ 21.3% 224%o 24.1% 25.9% 28.1% 30.7% Receivables turnover " 169 174 175 176 176 151 152 153 154 Inventory tumover' 73 76 76 77 77 84 83 81 79 Number Employees 300,000 300,000 297,000 294,030 291,090 285,268 279,563 273,971 268,492 Traffic Units "Employee 717 697 689 682 675 678 682 686 690 Pricing: Net ton "krn (million) Ca USS per Tkm 0.011 0.011 0.011 0.011 0.011 0.011 0.011 0.012 0.012 Million Passenger/km @ US$ per Pas-km 0.006 0.006 0.006 0.006 0.006 0.006 0.006 0.006 0.006 Profitabilit;: Working Ratio 77% 79% 80/ 81% 81%/0 80%/0 80% 80%/ 79 Operating Ratio 149% 123% 126% 127% 128% 128/ 128% 128% 128% Return on Fixed Assets -10.7% -4.6% -5.29/s -5.7% -6.2%/o -6.8% -7.3% -7.8% -8.5% liquidity: Working Capital needs 695 800 800 800 800 806 816 827 839 Current Ratio 207 250 Z47 241 Z33 253 Z52 253 254 Quick Ratio 200 233 233 Z33 Z33 259 263 Z67 272 Capitalization: Asset Leverage 5.6% 5.1% 5.3% 5.5% 5.8% 5.3%1 5.5%/s 5.8% 6. 2o , , ^ ~~~~In US$ win X i o X F o s s 48 o I~~~~~I' in bin for TU and 000'for staff ^ ~~~ _~In US$SmIn^ ;!Xo o ° ° ° O o o o I _ So 1,400 ~Graph 8.2.9: Investment Financgapaci 1,000 800 600 400 200 0 (200) (400) . (600) (800) 3 - cenaio Comlet Refrm 4- Senaro 2 GraualReform 0 Scenario 3: Status Quo ~Scen no 1 Comlete efor Sceario : GrdualReform -0Scenario 3: Status Quo Annex 9.1 Annex 9.1. The Main Seaports of Ukraine This section describes in more details the ports in the following locations: Odessa, llyichevsk; Mariupol, Izmail, Reni, Nikolayev, Kherson, Sevastopol, Theodosia, and Kerch. Main Ports 1. Odessa Port. Odessa port was founded in 1794. It has an old layout consisting of finger piers, has a total of 40 berths with a total length of 7 km and water depths varying from 10.5 m to 12.5 m. In spite of its obsolete layout, typical of old port design with narrow finger piers, and being cramped by the city, not being able to expand its land side area, it handles the largest tonnage of cargo among the rest of the ports in Ukraine. In 1997 it amounted to about 21 million tons, of which 70% (14.4 million tons) consisted of transit (export mostly of Russian oil), and 21% of steel products, containers represented only 2% of the total cargo handled. In 1990 total tonnage handled in Odessa port was 28 million tons, of which 64% (18 million tons) was export of Russian oil. Annual capacity of the port is about 35 million tons. The port of Odessa, represents alone about 50% of the export and transit traffics with the oil transshipment (about 14 million tons). Despite its good results and constant traffic increase, has lost important tonnage of dry cargo and containers (1997 containers traffic level is 51.500 TEU, down form 64.500 T.E.U in 1996). 2. Port operations are divided into six zones specializing in: a) chemicals, steel products, general cargo, and containers; b) cereals in bulk, paper, and general cargo; c) general cargo consisting mainly of steel products, paper rolls, pipes, timber, and chemicals; d) import cargo; e) refrigerated cargo; and f) grain. The oil handling facilities are located to the north of the ports. Each of the six zones are managed by a stevedoring company with which the port has "a joint agreement". The stevedoring companies absorbed a total of 2,000 workers of the ports. These joint agreement operations were initially not accepted either by the MOT or the Fund of the State Property. It took three years for the Odessa port to convince the Government of the benefits in such operations and to obtain an official permission for the "joint arrangement" operations with the stevedoring companies. This is not an ideal arrangement, however, under the existing legal system, it is the only one which is workable, as neither "joint ventures" nor "leasing" of the port property is allowed under the Ukrainian law. 3. The Oil Terminal in Odessa port has recently been rehabilitated. It has four berths, admitting ships of maximum of 70,000 DWT. All berths can load or unload crude oil and products, and can handle up to 30 million tons annually. The port has storage facilities for crude oil in the amount of 150,000 tons, and for light products of 120,000 tons. The oil port is equipped with marine environmental protection equipment to take care of any problem related to oil spills. Given the spare capacity of about 15 million tons for crude oil and products, it is not clear why a new facility is being built in Yuzhni port for handling the same amount of oil and products in the first stage of its developments. Annex 9.1 4. One of the main problems of the Odessa port is the land access. All trucks have to go through the city creating traffic jams. The Odessa port has found a solution to this problem by initiating construction of a 4.5 km long elevated road out of the port with a capacity of 200 trucks per hour. Already 800 m of the access road has been built, the rest is planned to be completed in two years. The estimated cost of construction is US$ 50 million. 5. Odessa Port is operating at just about its capacity. However, its existing capacity can be increased if the area occupied by the navy is ceded to the port. This would provide additional storage areas, as well as additional berthing space. It is understood that the navy might be willing to give up its territory and move to Sevastopol. The port has also the option of reclaiming additional land on the south, which has already been initiated and is continuing with the financial support of the stevedoring companies. 6. Ilyichevsk Port. Ilyichevsk port was built in 1958. The port has 28 berths with a total length of about of 5.5 1cm, and with water depths varying from 9 m to 12 m. Theoretical annual capacity of the port is about 13.0 million tons. In 1997, it handled about 9.0 million tons, and was second after Odessa. Of the total tonnage handled, 65% accounted for export, 24% for transit, and 1% for imports. The port is divided into seven terminals, specializing in: a) steel products, b) containers, c) grain, d) vegetable oil, e) fertilizers, and f) a pier for RO/RO ships and railway ferries operating to Vama port in Bulgaria and Poti port in Georgia. Unlike Odessa, all terminals are operated by the port. The port also has a container repair facility, which is not very active at this time. 7. The port is carrying out the following investments: a) rehabilitating and equipping berths #1 and #2 mainly for handling steel products at a total estimated cost of US$120.0 million, of which 40% has already been invested; b) a new grain terminal by Cyrus American at US$ 12 million, mostly completed, the port is considering to double the capacity of the grain terminal and invest an additional US$12.0 million; c) a new potash fertilizer terminal at the existing berth #12 at US$4.0 million, invested by Russia, d) a cement terminal at the back of berth #22 by Driktron Europe at US$8.0 million, e) terminal for wine and alcohol at US$4.0 million by French company Naval, f) terminal for handling chemical products and storage tanks at US$6.0 million by Ukrainian/American company, to be built on the eastern shore of the bay, g) multimodal container terminal for chemical and hazardous cargo at the ferry terminal, at ECU 7.0 million by European Community for further development of Corridor #9. The port is also planning to set up its ownI shipping line, and is trying to obtain financing for two or three river/sea type (Volga/Balt) of 5,500 DWT capacity each. In addition, the port is also planning to replenish its stock of equipment ranging from 16 tons to 32 tons forklifts, cranes, front-end loaders, etc. at a total cost of US$8.0 million 8. The Ilyichevsk port has fairly good road and railway accesses, however, the road networlk inside the port requires improvements. The general layout of the port is better suited for handling cargo than Odessa ports. It has a strip of land behind the berths of 400 m. to 500 m. wide, the quays are almost in a straight line which enables making best use of the facilities. The port is over equipped with portal cranes, which is the case with most of the FSU country ports, utilization of these cranes on the average is only about 50%. These cranes in the future need to be reduced in number and replaced by more efficient types of equipment to improve cargo handling rates, andl reduce ship service time, which is excessive. Mean productivity level in Ilyichevsk port is low at 6.6 tons per hour for loading and 4.8 tons per hour for unloading per docker and is about half of Annex 9.1 those achieved in European ports. Container handling rates of 10 units per hour needs also to be improved. These improvements could be achieved with the help of private sector involvement in port operations, where the stevedoring companies would bring along their know how and appropriate equipment to increase the productivity in cargo handling operations and cut down the costs: 9. Yuzhni Port. Yuzhni port was built in 1978, to initially serve a chemical plant, built in its vicinity. The port has good land and rail accesses. The port has a total of six berths with a total length of 1,500 m. Depths of water at berths vary from 12.5 m. to 14.0 m. The berths have been built to accommodate deepening in the future up to 19 m. of water depth. The theoretical capacity of the port is about 16.0 million tons per year, could be increased up to 40.0 million tons per year. In 1997 it handled about 9.0 mil tons, of which 61% was export, and 38% was transit. Port operations are divided into five areas specializing in: a) loading of carbonide in bulk and in bags (lately loading in bags has been discontinued); b) loading of liquid gasses e.g. ammonia, super phosphoric acid, methanol, and nitrile-acrylic acid; c) reclamation of sand; d) handling coal and various ores as well as steel products; e) unloading of phosphate. All of the berths, except for the coal terminal, and sand reclamation terminal, are operated by the manufacturers of the specific cargo. The coal complex, consists of: two berths 750 m long with 14 m water depth, open storage areas, coal car dumper, stackers and conveyor belt lines, with quay side portal cranes. Due to increases in cost of rail transport in Russia, coal practically stopped coming from Russia to Yuzhni ports. At this time the port is handling mainly steel products and some ores, the equipment for handling coal is idle. The phosphate terminal built in 1983, in the first phase of development was to handle 2.5 million tons per year (total development was conceived for 10 million tons per year). It was not operated until last year, when a 4,000 DWT ship was unloaded into railway wagons. The reason for this delay was due to the opposition from the environmentalists. Last year the Regional Environmental Authority reviewed the phosphate terminal together with foreign experts and on the basis of favorable conclusions reached, lifted the environmental ban. Now the terminal may unload phosphates without any further restrictions. 10. For import of crude oil, an oil terminal with an offshore single mooring buoy is being built at Yuzhni. In the first phase of development it is planned to handle 12.0 million tons per year, and at its full development 40.0 million tons. The first phase of development is scheduled to be completed by the year 2,000. Oil pipes to connect to the storage tanks are already at the site. The storage tanks for the first stage of development will be of 80,000 tons capacity and for the second stage of development will be 250,000 tons. The construction of the terminal has been slowed down due to some problems encountered in financing of the project. It is not clear why this project is going ahead when Odessa port has spare capacity in import of crude oil and products equivalent to the first stage development of the oil terminal in Yuzhni. 11. In comparison with Odessa and Ilyichevsk ports, Yuzhni port does not have a long berthing line. This creates a problem, as investments for construction of new berths are significant while conversion of existing berths for adaptation to new types of cargo to be handled, is significantly less expensive. This feature slows down expansion possibilities of the ports. 12. Yuzhni port is carrying out the following investments: a) at berth #17, the site of phosphate complex, two warehouses of 70,000 cu. m. each are being built for perishable cargo and bagged cargo e.g. sugar, flour etc.; b) berth #4, used for loading super phosphoric acid, is idle; the port is planning to start a passenger service from there; c) Cargill of USA is interested in investing in Annex 9.1 Yuzbni port in a grain handling facility. However ownership or lease of land by foreign company is not clearly defined in legal terms which creates concerns on behalf of the investor. The newly elected Parliament of Ukraine will look into this problem sometime this year and take a decision to resolve it. Also in this connection, the President of Ukraine created " A Special Quick Reaction Unit" to facilitate settlement of problems arising from the implementation of the investment by the American companies, which is expected also to help to settle the investment problem in Yuzhni ports. Remaining Important Sea Ports of Ukraine 13. Of the remaining important Ukrainian seaports, according to the tonnage handled in the descending order are: Mariupol, Izmail, Reni, Nikolayev and Kherson ports. 14. Mariupol Port. Mariupol port is located on the Azov Sea. The port has 16 berths, with a total length of about 3,000 m, with depth of water of about 8.5 m. In 1997 the port handled about 6.4 million tons Of the total tonnage handled, about 50% accounted for transit cargo, 49 % for export, and about 1% for imports. Maximum annual throughput capacity of the port is 14.0 million tons Coal was the major cargo handled by the port, but with the dwindling down of this cargo, steel products and fertilizer will most probably account for the major part of traffic. Container traffic may increase to some extent. The port has rail and road accesses, with an unusual feature of road overpassing the railways. Mariupol port is well placed with respect to the economic and industrial centers of Ukraine, in particular to the Donbass Region. It is also well placed to Russia's industrial areas, and its access to the Volga-Don basin from where 9 months of the year barges arrive carrying mostly fertilizer. In spite of all these benefits, the restricted nautical access, limits the development of the port to cargo destinations not further than the Mediterranean Sea. 15. Izmail Port. Port facilities are located in three different sites along the Danube River: a) at the site #1, there are 7 river berths with total length of 650 m., with water depth ranging from 1.0 m. to 4.0 m., and one berth for sea ships 150.0 m. long with water depth of 7.5 m.; b) at the site #2, there are 7 berths with a total length of 1,000.0 m., and water depth of 7.5 m.; and c) at site #3, there is a small dock mainly for handling sand and building materials. In 1997 the port handled about 4.0 million tons. Of the total tonnage handled, about 85% accounted for exports, and 12% for transit. Steel products and various ores in bulk accounted for most of the cargo handled. The port also handles containers. Maximum annual throughput capacity of the port is about 9.0 million tons. Izinail port due to its location on the Danube river can play a major role in multimodal transport serving Danube and CIS countries. However, with the political instability in the Balkans traffic through the port may actually further decrease. A major disadvantage of the port is its being far from the industrial areas of Ukraine. Izinail port was conceived mainly for direct loading from train wagons to barges or vice versa. The port has limited open and covered storage, which is a disadvantage taking into account the cargo handling operations in the future that will require extensive storage areas. 16. Reni Port. Reni port is located at three sites on the Danube river: a) at the site #1 there are 9 berths with a total length of 900.0 m., of which seven are for river transport with water depths of 3.5 m. and the remaining two with water depths of 7.5 m.; b) at the site #2 there is an old oil terminal and two RO/RO piers; c) at site #3 there are 12 berths, with water depth of about 7.5 m. In 1997 the port handled about 2.5 mi. tons. Of the total tonnage handled, transit and export Annex 9.1 cargoes are split half way. Most of the cargo consists of metal and various bulk commodities. The port has a maximum annual throughput capacity of 10.0 million tons. RO/RO operations started in 1993 between Reni and Russe on the Danube in Bulgaria appear to be doing well. Political instability in the Balkans resulted in significant reduction in traffic of the ports. There is also a problem of the railway line to the port which goes across Moldova for an appreciable length, which causes increases in transport costs on account of high rail tariffs in Moldova and time lost in border crossing. 17. Nikolayev Port. Nikolayev port is located on the estuary of the Bug river, it has 14 berths, of about 3.0 km long, with water depths ranging from 8.3 m. to 10.5 m. In 1997 the port handled about 1.9 million tons. Of the total tonnage handled, about 55% accounted for transit cargo, and 38% for exports. The maximum annual throughput of the port is 9.0 million tons. Around half of the port capacity was dedicated to handling of iron ore and coal, both of these cargoes have stopped coming to Nikolayev ports. At present the main cargo consists of steel products. Nikolayev port is located at the crossing of the railroads going east, west and north toward Russia. The port is also located on the main road linking Odessa with Mariupol. The port is surrounded by the city and cannot be expanded. It has draught limitations; maintenance dredging of a long approach channel to the sea is very costly. The cost of dredging was previously borne by the users e.g. Navy as in Nikolayev was a large naval ship building yard. The maintenance costs of the channel could not be absorbed by Nikolayev port alone, this may hamper the future operation and development of the ports. 18. Kherson Port. Kherson port is located on the Dniepr river, 85 km. from the Black sea. The entrance channel to the port is 5.5 m. deep, and in some places even shallower due to arrears in dredging. The port facilities are divided into three sites: a) at site #1 there are five berths of a total length of about 550m. with depth of water varying from 7.3 m. to 8.3 m.; b) at site #2 there are 4 berths managed by Ministry of Agriculture; at site #3 there exist three basins mainly used for handling sand. In 1997 the port handled about 1.5 mi. tons, of which 61% was transit cargo, and 38% was export cargo. The port mainly handles chemical products, and sand. Maximum annual throughput capacity of the port is 4.0 million tons. The port has railway connections, but no road access. It is well placed with respect to industries and economic centers, however, due to restricted draughts, its cargo handling possibilities are limited. Also with river-sea ships offering direct shipping from ports on Dniepr such as Zaparojie to the final destinations in foreign countries, there is likelihood of cargo by- passing the port of Kherson. Crimean Ports 19. The Crimean ports in-spite of being ice-free, are at a disadvantage in comparison with other Ukrainian ports, especially with those of Azov Sea and Odessa region ports, due to being further away from industrial center of Ukraine and Russia. Only the ports of Sevastopol, Theodosia, and Kerch have railway links, all other ports are connected by road only. Due to additional ton kilometers required to transport cargo by road or rail to the ports, makes the ports of Crimea non competitive with other ports of Ukraine. Most of the ports of Crimea were at one time heavily involved in transport of passengers, and extraction of construction materials from the sea, e.g. sand and gravel, however, these activities over the last few years have dwindled down. Regarding the marine ecology, unfortunately most of the Crimean littoral is contaminated by garbage, with plastics predominating, disposed from ships sailing in the BLACK Sea. Of the Crimean ports, in view of their unique situation, only Sevastopol, Theodosia, and Kerch are described hereunder. Annex 9.1 20. Sevastopol Port. Sevastopol was the main navel base of the USSR in the Black Sea, and continues to accommodate naval installations and naval ships of Ukraine and Russia. Due to its strategic importance, until recently it was closed to foreigners. From July 1996 the Sevastopol port was opened to foreign flag merchant ships. Sevastopol is a harbor well protected against wind and waves. It consists of two bays, the Sevastopol and Southern. The Sevastopol bay is 6.3 km. Long, 900 m. wide and 16 m. to 20 m. deep. The Southern bay is 2.3 km. Long, 500 ni. wide and 12 m. to 15 m. deep. Commercial seaport in Sevastopol is located at the eastern end cf the Sevastopol bay. It consists of a berth 112 m. long, with 8.5 m. depth of water. The berth has limited storage capacity, it is equipped with 3 portal cranes with capacities varying from 6 t. to 20 t. Annual cargo handling capacity of the port is estimated to be about 0.7 million tons. The port handled 0.5 million tons of general cargo in 1992, gradually annual throughput decreased to 0.16 million tons in 1997, and in 1998 the port expects to handle about 0.25 million tons. Sevastopol port is planning to expand its facilities by building additional berths with a total throughput capacity of about 2.0 million tons. Construction is planned to be completed by 2001. In the Sevastopol area along the littoral there are about 20 berths for handling passengers. In Sevastopol area, at the port of Kamishov, it is reported that 3.0 million tons of oil is exported annually. 21. The bay of Sevastopol is used by about 150 naval ships, which is the main source of pollution. The bed of the bay is heavily contaminated by oil and is covered with steel cables dropped from the ships. A Japanese bank is considering to assist in financing cleaning of the bay. However, at this time the port needs first of all to establish its ownership of land and water areas in the bay to sign relevant agreements with the navy, before proceeding with the cleaning of the bay. 22. The uniqueness of the Sevastopol port is that from 1992 to 1997 it was the only port in lUkraine that was under the municipal authority, thereafter it reverted to the Ministry of Transport. The Sevastopol Municipality was mainly involved in the port for financing passenger transport, it did not take an active part in the management of the port. At that time the port was oriented to operate as a semi autonomous commercial enterprise, which it is trying to continue in spirit at this time. On the basis of the past experience, it would be an interesting pilot experiment to revert back to municipal ownership under well structured legal and financially independent organization. 23. Theodosia Port. The Theodosia port consists of a pier and a basin. The basin is occupied by the navy, and commercial activities take place on the seaside of the pier. The pier consists of two parts: one is 445 m. long with depth of water varying from 5.8 m. to 7.3 m., and the second one is 275 m. long with water depth of 6.5 m. There are a total of 5 berths engaged in commercial cargo handling activities, these berths are not protected against wave disturbance, and for this reason cannot operate for about 60 to 80 days annually. At the port site there are 13 portal cranes with capacities varying from 6 t. to 20 t. Total annual throughput capacity of these berths is estimated to be about 1.5 million tons of general cargo, mainly consisting of kaolin, steel products, mineral fertilizer, sawn timber, cellulose, and non ferous metal products. Cargo handling operations have been steadily increasing , and the port in 1996 handled about 0.50 tons, which decreased in 1997 to 0.40 tons. At a site to the north of the commercial port, is an offshore oil export facility which has an annual capacity of about 4.0 million tons. The tonnage handled there dropped to its' lowest in 1996 to 0.50 tons, in 1997 it increased to 0.70 tons. The port management is sensitive to environmental protection, in this connection it devised a system for loading of fertilizer into ships' hold. It consists of containers full of fertilizer which are lowered Annex 9.1 into ships' hold and emptied with minimal dust being generated. For this operation the port acquired 6,000 special containers which were built at Illichevsk port. The port management is well aware of efficient port operations, however, at this stage they do not seem to be motivated in improving operations through modifications to the existing infrastructure and procurement of modem cargo handling equipment. 24. The uniqueness of the port is that in spite of being further away from other ports to the industrial region of Ukraine, it still manages to receive cargo for export. It appears that one of the reasons for this is the frustration created at the Kerch straight, through collection of significant unofficial charges over and above official charges, from the ships. In this connection it is too bad that the Theodosia port has a rather limited capacity, as otherwise it could have been an effective regulator agaist the charges collected at the Kerch straight. 25. Kerch Port. The Kerch port is 'U' shaped, with a pier on either end. There are a total of 7 berths, with the following characteristics: berths #1 and #3 are each 230 m. long, and berth #2 is 130 m. long. All three berths have a water depth of 8.75 m. and are equipped with 13 portal cranes of various capacities. Berths #4 and #5 are each 191 m. long with water depth of 8.5 m., and are equipped with 10 cranes of various capacities. Berths #6 and #7 are each 206 m. long, with water depth of 9.75 m., and are equipped with 12 cranes with maximum capacity of 40 tones. Berths #1,#4, and #5 are used mainly for general cargo, berth #2 is used for parking of port fleet, berth #3 is used mainly for metal products and sand, and berths #6 and #7 are mainly used for handling of containers, RO/RO ships, and general cargo. Total annual throughput capacity of the port is estimated at about 3 million tons. Since Independence of Ukraine, the port handled under a million tons annually. To the north of Kerch is the port of Crimea, from which during the USSR a ferry was operating to Port-Caucasus (only four miles away), thus providing a railway link from Crimea to the Caucasus. Now, only a car ferry operates between these two ports and the link has been discontinued. Thus Kerch happens to be at the end of the railway. With the disruption of the railway service to Caucasus, the Kerch port lost a significant amount of cargo. 26. The uniqueness of the Kerch port is that it also manages the straight of Kerch, and thus, in addition to the normal port activities receives additional income from the ships sailing through the straight of Kerch. It may be an interesting thought to discontinue collecting these charges and help the ports in Azov sea to increase their volume of cargo handled. Annex 9.2 Annex 9.2. Maritime Shipping Before Independence 1. Before independence of Ukraine, in the FSU, the merchant marine fleet was responsible for meeting the needs of each port rather than the country's overall needs in international trade. Each shipping company was given a number of ports to serve, and there was no competition among them. The country's major seaports were subordinated to the regionally based national carriers. Smaller ports came under the jurisdiction as subdivisions of the carriers, and were fully integratecd in the carrier's organization. The central authorities used to decide on what role a particular port should play, and directed specific types of ships and cargo there. Thus a number of ports became specialized, and each liner was responsible for carrying most of the cargo to its home base. There was no consideration given to diversification, and the centrally assigned carriers created a situation in which competitive strategy and improvement in service was of no concern. 2. With the existing monopoly of the Government in maritime shipping, the Government obliged all national forwarders to transport cargo on national shipping lines. Schedules were prepared by the Government, and accordingly the national fleet was used 100%. In some cases there were even shortages in capacity of national shipping. Also, to maximize the use of the national ships, domestic exporters were forced to arrange international cargo transactions on CIF terms, and importers were to execute freight contracts on FOB terms. Such practices were designed to ensure that national carriers carried most of the national cargo contracted for sea transport, thus minimizing foreign exchange outlays for ocean freight. An exception applied to countries with which FSU had preferential trade agreements that provided for a 50-50 split for carriers from each of the trading company. TABLE 9.1.1- UKRAINIAN PORTS - HISTORICAL TRAFFIC PER PORT IEXPORT in 000'tons 1 1990 1993 1994 1995 1996 1997 PORT OF: Belgorod-Dnestrovskdy 233.4 151.1 332.6 195.2 221.4 Berdyansk 1,067.9 1,111.3 701.8 467.5 649.8 llyichevsk 5,645.2 6,924.6 6,520.8 6,733.4 5,741.1 Iznail 2,323.5 2,784.7 2,947.4 3,203.0 3,527.3 ........................................................................................................................ ................................ Kerch 347.6 257.0 454.8 415.0 462.5 Kherson 612.3 423.6 247.2 429.0 591.0 Mariupol 2,928.3 2,887.7 1,919.1 1,577.8 3,122.3 Nicholayev 1,044.4 982.9 584.9 220.4 711.7 Odessa 2,312.4 3,855.4 3,426.9 3,235.2 4,654.1 Oktyabrsk 319.0 177.2 153.0 65.6 348.0 Reni 1,089.0 388.6 406.0 1,049.9 1,186.3 Sevastopol 17.8 3.8 64.8 40.6 45.6 ......................................................................................................................................................... Skadovsk 6.3 25.5 7.7 4.2 19.1 Theodosia 151.2 332.5 718.9 524.7 577.0 Ust-Dunajak 69.5 128.0 157.0 164.0 Yalta 6.3 Yevpatoria 3.0 24.3 10.4 0.1 14.0 Yuzhny 11,012.4 4,789.7 3,291.5 3,231.6 5,543.2 TOTAL - 29,120.0 25,189.4 21,915.8 21,550.2 27,578.4 ............................. ............................. .............................................. TABLE 9.1.2- UKRAINIAN PORTS - HISTORICAL TRAFFIC PER PORT JIMPORT In 000s 1 1990 1993 1994 1995 1996 1997 PORT OF: Belgorod-Dnestrovskly 2.2 3.0 3.2 3.0 3.0 Berdyansk 248 2.7 22.2 15.4 2.0 Ilyichevsk 1,926.6 1,169.5 1,415.5 1,494.1 1,027.3 IznaHi 222.4 26.2 18.0 26.0 33.1 Kerch 106.5 1.7 1.1 38.3 82.4 Kherson 0.7 1.8 2.9 9.8 10.0 MarlUpO 98.4 81.2 80.3 184.7 195.9 Nicholayev 96.8 6.5 140.7 80.2 137.5 Odessa 2,521.0 955.8 1,245.5 1,018.2 808.9 Oktyabrsk 5.4 4.0 18.0 32.6 6.2 Reni 25.0 40.8 243.5 93.1 95.0 Sevastopol ....... ................................................................................ Skadovsk 0.4 Theodosha 33.3 455.3 735.8 4.4 392.7 Ust-Dunask 621.9 333.0 268.0 89.0 Ya,ta 1.0 1.0 Yevpatoria 0.2 1.0 9.0 18.7 27.1 Yuzhny 8.3 9.1 57.9 TOTAL - 5,072.0 3,381.5 4,269.7 3,286.5 2,983.0 ....................................................... .......:..................................... TABLE 9.13- UKRAINIAN PORTS - HISTORICAL TRAFFIC PER PORT ITRANSIT In 000tin ] 1990 193 1994 1995 1996 1997 PORT OF: Belgorod-Dnestrovsldy 56.7 72.1 47.9 15.9 Berdyansk 105.9 183.3 224.1 219.6 fBichevsk 2,094.9 lanail. 50.2 623.0 545.5 485.2 Kerch 582.2 636.2 418.5 411.6 Kherson 1,242.9 1,478.8 1,018.6 944.0 Marlupol 2,330.1 4,302.1 2,985.2 3,098.3 Nicholayev 292.4 386.4 904.5 1,034.0 Odessa 11,301.3 13,053.5 14,052.8 15,338.8 Oktyabrsk 35.8 225.0 260.6 115.1 Reni 1,797.0 1,808.6 1,673.7 1,213.0 Sevastopol ......................................................................................... Skadovsk 23.3 Theodosla 788.8 31.5 11.9 187.9 Ust-Dunaisk 198.7 218.4 466.0 298.0 Yalta Yevpatoria 15.0 39.4 Vuzihy 4,120.0 1,442.4 920.0 3,451.2 TOTAL - 21,098.2 22,917.0 24,461.3 23,5293 28,970.2 ................................. TABLE 9.1.4- UKRAINIAN PORTS - HISTORICAL TRAFFIC PER PORT TOTAL in 000'tons 1990 1993 1994 1995 1996 1997 PORT OF: Belgorod-Dnestrovsidy - 235.6 210.8 407.9 246.1 240.3 Berdyansk - 1,092.7 1,219.9 907.3 707.0 871.4 nlyiehevsk - 7,571.8 8,094.1 7,936.3 8,227.5 8,863.3 Izmail - 2,545.9 2,861.1 3,588.4 3,774.5 4,045.6 Kerch - 454.1 840.9 1,092.1 871.8 956.5 Khersn - 613.0 1,668.3 1,728.9 1,457.4 1,545.0 Marlupol - 3,026.7 5,299.0 6,301.5 4,747.7 6,416.5 Nlholayev - 1,141.2 1,281.8 1,112.0 1,205.1 1,883.2 Odessa - 4,833.4 16,112.5 17,725.9 18,306.2 20,801.8 Oktyabrsk 324.4 217.0 396.0 358.8 469.3 Reni .1,114.0 2,226.4 2,458.1 2,816.7 2,494.3 Sevastopol - 17.8 3.8 64.8 40.6 45.6 Skadovsk - 6.7 25.5 7.7 4.2 57.4 Theodosia 184.5 1,576.6 1,486.2 541.0 1,157.6 Ust-Dunask - - 890.1 679.4 891.0 551.0 Yalta - 6.3 1.0 1.0 - - Yevpatoria 3.2 40.3 19.4 18.8 80.5 Yuzhny - 11,020.7 8,918.8 4,733.9 4,151.6 9,052.3 TOTAL - 55,290.2 51,487.9 S0,646.8 48,366.0 59,531.6 ...................................................................... ..................................................................... _...._. Table 9.1.5: UKRAINIAN PORTS - HISTORICAL TRAFFIC BREAKDOWN PER PORT 1993-1997 (in million tons) 1993 1997 PORT OF: Export Import Transit Total Export Import Transit Cabotage Total AB main Ports 65.5 27.6 3.0 27.0 2.0 59.5 Including 46% 5% 45% 3% Odessa 2.3 2.5 10.7 15.6 4.7 0.8 15.2 0.1 20.8 Yuzhny 6.1 - 4.9 113 5.5 0.1 3.4 0.1 9.1 llylchevsk 3.3 1.3 3.8 &7 5.7 1.0 1.8 0.3 8.9 Total snks Black Sea ports 11.7 3.8 19.4 35.5 IS.9 1.9 20.4 0.5 38.7 33% 11% 55% 100%. I 41 5% 53% 1% 100% Table 9.1.5: UKRAINIAN PORTS - HISTORICAL TRAFFIC PER PORT 1990-1997 (in million tons) PORT OF: 1990 1993 1994 1995 1996 1997 Total _nks Ports Theoretical capacity (estnabtes 120 120 120 135 135 A_ug traffic 120 55.3 51.5 50.6 48.4 59.5 Including Odessa 37.9 15.6 16.1 17.7 18.3 20.8 Yuzhny 10.2 11.0 8.9 4.7 4.2 9.1 llylchevsk 12.9 8.7 8.1 7.9 8.2 8.9 Total main Black Sea Ports 61.0 35.3 33.1 304 307 38.7 Total other Ports 59.0 20.0 18.4 20.2 17.7 20.8 110 80 70 1990 1993 1994 1995 1996 1997 S TotalUkrainianPorts -4+-Odessa --- Yuzhny ---Ilyichevsk - Total otherPorts Graph 9.1.7: 1997 Total Sea Ports Traffic in- 25.0- 15.0- 10.0 5.0- 0.0- Odessa Yuzhny Ilyichevsk Other Ports ECaotage U Import C] Transit MExpr 11|1~~~~~~~ ::p :o t |111 Table 9.1.8: TRANSPORT SECrOR REVIEW BLACK SEA PORTS Finanial Highlights for the year ended December 3 1st (in million Hrvws) (in million US$'s) Source: 3 _ Operating revenes.' 104.4 136.6 55.5 72.7 Worddg Expe 42.8 62.4 22.8 33.2 Operatng Reslit befbre depreci 39.5 Net operating result. 53.7 64.9 28.6 34.5 Net Profit sobe,fore:Tn . 94.2 68.2 50.1 36.3 Net Profit (Loas) terT. 73.3 52.6 39.0 28.0 Trafl(inWn tons) 20.802 8.863 20.802 8.863 WorkigR Ratio 41% 46% 41% 46% Operating Ratio. 49% 52% 49% 52% Prl*ing Ratio(In MU/ton)* 5.02 15.41 2.67 8.20 Net O.perating Cash Flow 45.8 56.6 24.4 30.1 Net Operating Cash Flow/Operag ReYt 44% 41% 44% 41% Net Cash Flow 81.2 -61.9 43.2 32.9 Net-Cash' lowlOperatingRevenues 78% 45% 78% 45% 'For Odessa, without cargo handling which represents about 13 Hrvfton. Table 9.1.8: TRANSPORT SECfOR REVIEW BLACK SEA PORTS Income Statements and Cash Flow for the year ended December 31st (in million HrVs) (in million US$s) ODESSA ILYICHEVSK ODESSA ILYICHEVSK Source: 1997 1997 1997 1997 Operating reventues 104.4 1366 55.5 72.7 Materials 11.6 22.6 6.2 12.0 Labor 19.2 35.7 10.2 19.0 Other 12.0 4.1 .6.4 2.2 Woridng expenses 42.8 62A 22.8 33.2 Depreciation 7.9 9.3 4.2 4.9 Operating Expenses 50.7 71.7 27.0 38.1 Other Income 41.6 9.5 22.1 5.1 Other Expenses 1.1 6.2 0.6 3.3 Profit before Tax 94.2 68.2 50.1 36.3 Tax 20.9 15.6 11.1 8.3 Profit after tax 73.3 52.6 39.0 28.0 Net Operating Cash Flow 45.8 Net Cash Flow 81.21 432 32.91 Table 9.2.1 TRANSPORT SECTOR REVIEW UKRAINIAN SF-A POOTS P011"I'm T.ffi. swi.dc. '00 T ... fe-h. y.- ACTUAL PROJECTED PROJECTED PROJECTED PROJECrED PROJECrED PROJECTED PROJECTED 1"s 1999 2000 2001 2002 2003 2004 2005 Black Se mv Se Daaub T.W Black UJAo Se I Dumb Total Black 9.1 zo Sal D..b Toud_ Sal zov Sal nftb ToW Sal WV Sal D..b ToWl Black S.1 zo S. I [)..b Total Sel WV Se I Dab Total Se Azov Se Dmub Totat LIQUID BULK E.p..t 0.3 0.3 1.4 1.0 0.3 0.3 i.5 1.0 0.3 0.3 1.5 1.1 0.3 1.6 1.1 0.3 0.3 1.7 1.2 0.3 0.3 1.7 1.2 0.3 0.3 1.8 1.2 13 0.3 1.8 1.p.,t 0.3 0.1 1.0 0.6 0.2 0.1 1.0 0.7 0.2 0,1 1.0 M, '2 0.1 1.1 0.7 0.3 0.1 1.1 0.7 0.3 0.1 1.1 0.8 0.3 0.1 1.2 0.8 0, 0.1 1.2 T- t 17.3 0.8 0.4 18.5 19.7 0.9 0.4 21.0 22.6 0.9 0.5 24.0 25.8 1.0 0.5 27.3 27.1 1.1 0.5 28.7 28.5 1.1 0.6 30.1 29.9 1.2 0.6 31.6 31.4 1.2 0.6 33.2 TOTAL (.1. w-) 18.8 1.3 0.8 20.8 21.3 1.4 0.8 23.5 24.3 1.4 0.8 26.6 27.6 1.5 0.9 30.0 29.0 1.6 0,9 31.5 30.4 1.6 1.0 33.0 31.9 1.7 1.0 34.6 33.4 1.8 1.0 36.2 ........ ..... .. .......... ....... I. ........ .......... ........ .......I .......... ........ ........ .......... . ....... ...... ..... I.... ......... ...... ......... ........ ...... .......... ........ ...... .......... SOUD BULK S.P.A 14.4 3 3.0 212 10142 3,8 3.0 22.2 16.25 38 3:21 23 17.,7 3.9 3.1 24.6 18.2 4.0 3.2 25.4 18.9 4.1 3.3 26.1 19.3 4.2 3.4 26.9 19.9 4.3 3.5 27.7 11 06 0 1:4 I.P.It 0.2 O7 0.3 0.6 0.2 1.1 0. I 0. 0.6 0.2 1.1 0.2 0.7 0.3 1.2 0.2 0.7 0.3 1.2 0.3 0.7 0.3 1.2 0.3 0.7 0.3 1.2 T- t 3.5 1.6 0.9 6.0 3.9 1.7 1.0 6.6 4.5 7.4 5.2 2.0 1.1 8.3 5.4 2.1 1.2 8.7 5.7 2.2 1.2 9.1 6.0 2.3 1.3 9.6 6.3 2.4 1.4 10.1 1.0 .[..1.9 TOTAL (.1. t...) 18.1 6.0 4.2 28.2 19.6 6.2 4.2 30.0 21: 31.9 23.1 6.5 4.5 34.1 i-: ..23.9. 6.7 4.6 35.3 24.7 7.0 4.8 36.5 25.6 7.2 4.9 37.7 26.5 7.5 5.1 39.1 ....... ...I.... .......... .......... ...... ......... ..... ........ ........ .......... . ....... ......... .......... ...... ......... .......... ......... .......... .......... ........ ......... .......... GENERALCARGO E.p,.t 1:7 1.0 I 10 1.8 5.7 3.1 1.0 1.8 5.9 3.3 1.8 6.1 3.4 1.1 1.9 6.3 3.5 1.1 1.9 6.5 3.6 1 2.0 6.7 3.7 1.2 2.0 6.9 imp..t 2 0.1 0:'l 1:'4 :93 0.1 0.1 1.5 1.4 0.1 0.1 1.6 1. 4 ol 0.1 1.7 1.5 0.1 0.1 1.7 1.5 0.1 0.1 1.7 1.5 0 0.1 1.8 1.6 0.1 0.1 1.8 T-it 2.3 1.6 0.7 4.6 2.6 1.7 0.8 5.1 3.0 1.9 0.8 5.7 3.4 2.0 0.9 6.3 3.6 2.1 0.9 6.6 3.8 2.2 1.0 7.0 4.0 2.3 1.0 7.3 4.2 2.4 1.1 7.7 TCYrAL (.1. t.-) 6.2 2.7 2.6 1 1.5 6. .... 12.3 7.5 3.0 2.7 13.2 8.2 14.1 8.5 3.3 2.9 14.7 8.8 3.4 3.0 15.2 9.1 3.6 3.1 15.8 9.5 3.7 3.2 16.4 :. 2.6 2..L. ........ ..... .......... ...... ....... ......... ........ .......... ...... .. ......... ......... .......... ......... ......... ......... ......... ......... .. ....... ......... ......... .......... TarAL FREIGHT F.P.d 18.0 5.0 5O 231:0 19 5.0 5.0 29.4 20.37 5.1 5.1 30.8 22.41 51 1l 332:4 22.8 5.3 5.3 33.4 23.5 5.5 5.5 34.4 24.2 .6 5.6 35.4 24.9 5:1 151 346,5 I.P.rt 2.0 1.0 0 1.0 0.5 3.6 2. 10 0.5 3.7 2. 1:0 0 9 2.4 1.0 0.5 4.0 2.5 1.0 0.5 4.0 2.5 1.1 0.5 4.1 2.6 1 Tc-t 23.0 4.0 2.0 29.0 26.3 4.3 2.2 32.8 4.6 2.3 37.1 34.4 5.0 2.5 42.0 36.2 5.3 2.6 44.0 38.0 5.5 2.8 46.3 39.9 5.8 2.9 48.6 41.9 6.1 3.0 51.0 85 66.6 1 3 9.4 92 3.0 10.0 7.5 61 47 10.4 7.7 66 53.0 10.7 7 11.2 8.1 78 81 63,9 12.0 8.7'. 12.5 9.0 88 69.3 30.1 ........ ........ ......... ...... .......... ........... ......... ..... . ......... .......... ......... ......... ........ ......... ..... I... .......... ... I.... ...... .......... 7'able 9.2.2 TRANSPORT SECTOR REVIEW UKRAINIAN SEA PORTS Statistics for the years ended december 31 st ACTUAL PROJECTED (DAKTIII1HO 3A InPOrHO30M Source: 1997 2M 2 0 : . - .1 Preight: Liquid Bulk 20.825 23.508 26.562 30.041 31.478 32.985 34.566 36.224 Solid Bulk 28 .200 29 .992 31 .946 34.077 35.254 36.474 37.739 39.052 General cargo 11.475 12.277 13.158 14.129 14.663 15.219 15.797 16.400 SubTotal Dry 39.675 42.269 45.104 48.206 49.917 51.693 53.537 55.452 Vessels: ADW 7,000 7,500 7,875 8,269 8,682 9,116 9,572 10,051 10,553 Pasengers/vessel 1,500 1,500 1,575 1,654 1,736 1,823 1,914 2,010 2,111 f,- .::s.:.~ese.:S:SSSSS;Su "., ....~..,.*, ~ ..........,., .......ee..::ees:ees grss:s:sss:us:.e.ss" Freght vessels 8,067 8,353 8,667 9,012 8,928 8,846 8,766 8,687 Pasenger vessels 3,333 3,238 3,146 3,056 2,998 .2,940 2,884 2,829 _ g _s .:.s....... ...... .s+e _ M" IsS.1 s Productivity/Employee 2,017 2,923 4,247 6,182 6,770 7,413 8,119 8,893 Turnover/Employee 9,286 12,580 17,029 23,104 25,676 28,540 31,728 35,279 >>.>> .s ~ sugs. , v<>s sP>is>'S>SS- * S1 4 M. ~~~~~~~~~~ _u~ } '..,'5W. . V- Eyb'su.s..ye5:x.e:SSA Table 9.2.3 TRANSPORT SECTOR REVIEW UKRAINIAN SEA PORTS Pro-Fonna Income Statements for the years ended december 31st (US$ million) ACTUAL PROJECTED Source: Repoits 1997 20 Revenue Port Dues (Vessel) 0.0 17.5 15.6 14.4 13.2 13.3 13.4 13.5 13.6 Port Dues (Goods) 0.0 90.0 93.7 97.0 100.6 106.8 113.3 120.2 127.6 Cargo Handling 0.0 217.5 220.9 223.9 227.3 240.1 253.6 267.9 283.0 Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Expense: Salaries & Wages 0.0 62.5 54.3 46.9 40.4 40.3 40.2 40.1 40.0 Pension & Benefits 0.0 25.0 19.0 16.4 14.1 10.1 10.1 10.0 10.0 SubTotal Salaries & Benefits 77.3 87.5 73.4 63.3 54.6 50.4 50.3 50.1 50.0 Materials 48.3 67.5 74.5 83.6 94.1 102.7 112.2 122.6 133.9 Other 21.1 22.5 23.8 26.7 30.1 32.8 35.9 39.2 42.8 Depreciation & Provisions 24.2 30.0 31.7 33.9 36.2 45.7 49.2 52.7 56.2 Provision for bad debts 0.0 0.0 3.3 3.4 3.4 3.6 3.8 4.0 4.2 Interest expenses 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Extraodinary items (net) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Provision for Social Progra 0.0 0.0 36.2 31.2 26.9 6.4 6.4 6.3 6.3 N Nii|| ' >sf W^g$ftsss§f g.>.gN 9 S>.:$'Sf S _ >,2X.X gm El Taxes 46.2 35.3 26.2 27.9 28.8 35.6 36.8 38.0 39.2 Operatiug Expen&dItres 171 208 207 211 218 235 251 269 287| ; Table 9.2.4 TRANSPORT SECTOR REVIEW UKRAINIAN SEA PORTS Pro-Forma Sources & Uses of Funds per year, as of December 31 -ACTUAL (JS$ million) OAKTH4HO PROJECTE 3A HPOFHO30M Source: Reports 1997 19 00 _____ SOURCES OF FUNDS Net Income 107.7 82.3 61.1 65.2 672 83.0 85.8 88.7 91.5 Depreciation & Provisions 24.2 . 30.0 71.2 68.5 66.5 55.6 59.3 63.0 66.7 Other 0.0 ' 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Funds from Operations 132 112 132 134 134 139 145 152 158 Borrowings 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Equity Capital 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Change in working capital 0.0 0.0 (4.8) (3.5) (4.0) 19.3 (4.4) (4.7) (5.0) Financing 0 0 (5) (3) (4) 19 (4) (5) (5) Total Sources 132 112 128 130 130 158 141 147 153 USES OF FUNDS Repayment of LT Debt Net Plant & Equipment 0.0 100.0 75.0 75.0 75.0 100.0 100.0 100.0 100.0 Change in WorkingCapital 0.0 0.0 13.8 (4.0) (4.6) 7.5 (3.1) (3.4) (3.7) Bad debts 0.0 0.0 3.3 3.4 3.4 3.6 3.8 4.0 4.2 Staff rightsizing program 0.0 0.0 36.2 31.2 26.9 6.4 6.4 6.3 6.3 Total Uses 0 100 128 106 101 117 107 107 107 Total Sources & Uses 132 . 12 (1) 25 29 40 34 40 46 Finaning capacity 131.9 112.3 74.2 99.6 103.9 140.4 133.8 140.1 146.4 Table 9.2.5 TRANSPORT SECTOR REVIEW UKRAINIAN SEA PORTS Pro-Forma Balance Sheets per year, as of December 31 ACTUAL (USS million) (DAKTIWI HO PROJECTE 3A nPOrHO30M Source: Reports 1997 IM f1 "" _ ASSETS Cash 8 21 20 45 74 114 148 188 235 Accounts Receivables 55 55 55 56 57 45 48 50 53 Inventories 17 17 22 24 27 20 22 24 26 Current assets 79 93 97 125 158 179 217 262 314 Fixed assets 818 980 1,055 1,130 1,205 1,305 1,405 1,505 1,605 Accumulated depreciation 346 376 408 442 478 523 573 625 681 Net Fixed assets 472 604 648 689 727 782 833 880 924 Work in Progress 62 Other assets I LIABIUTIES Current Liabilities 47 47 33 37 41 34 37 40 44 Long Term Debt Provisions Paid in Capitlg Authorized C4pital 454 454 454 454 454 454 454 454 454 Reserves 115 115 115 115 115 115 115 115 115 Retained Earning (Loss) 0 0 82 143 209 276 359 445 533 Current income 0 82 61 65 67 83 86 89 92 Total Equity 568 651 712 777 844 927 1,013 1,102 1,193 - - - - -- -- - - - - - - -- - - -- - - - - _ - - - 'Iable 9.2.6 TRANSPORT SECTOR REVIEW UKRAINIAN SEA PORTS ACrUAL ProFonna Ratio Analysis 4'AKl4lHO PROJECTE 3A nPorHO30M Source: Reports 1997 : - 2i0- . 2001. Efficiency: Revenue turnover 68.8% 53.8% 51.0% 48.7% 46.9% 46.01% 45.7% 45.6% 45.9% Receivables turnover * 61 61 60 60 60 45 45 45 45 Inventory tumover *19 19 24 26 29 20 21 21 Payables turnover 52 52 36 40 44 34 35 36 37 Number Employees 30,000 30,000 22,500 16,875 12,656 12,023 11,422 10,851 10,309 Traffic Units/Employee 0 2,017 2,923 4,247 6,182 6,770 7,413 8,119 8,893 Prcinsg: Net ton (million) @ USSper ton 5.6 5.4 5.0 4.7 4.4 4.4 4.5 4.6 4.6 Profitability: Working Ratio 45% 55% 52°/e 52D/a 52%/s 52% 52%/e 53% 53% Operating Ratio 53% 64% 63% 63% 64% 65% 66% 67% 68% Return on Fixed Assets 22.80%. 13.6% 15.5% 14.5% 13.4% 11.9% 11.5% 11.3% 11.1% Uquidity: WorkingCapital*** 25 25 44 43 43 31 32 33 35 Current Ratio 1.71 2.00 Z96 3.40 3.82 5,29 5.87 6.48 7.10 Quick Ratio 1.54 1.54 Z34 2.18 Z03 1.91 1.87 1.83 1.79 l G~~~~~~~~~~raph 9.2.7: Main FinancilIdctr 160 90 |*7 1480 l 4 120 l l M1 2 | @ S a I ! E I llM- 60 197 19 99 00 201 20 03 04 20 . - --: ,~~~~~~~~~~~~~~~~~~~5 80 ~ ~ ~ rs prtn eu °hvsmn ikninCpayT tlFegt(ltn) N mlye 00 .~~~~~~~~~~~~~~~~~~~~~~~~~~~~4 Tahle 9.2.1 TRANSPORT SECTOR REVIEW UJKRAINIAN SEA PORTS T.offie Staido.- '0T T.~. for ch. y... ACTUAL PRO ECrED PROJECTED PRO ECrED PROJECTED PROJECTED PROJECTED PROJECTED 1998 1999 ~~~~2000 2001 22002 2003 I2004 I2005 mack S. o~~~~~ s. Danub Total B~~~~~~~~~~J~abT~~~ ~~ Black ~~~~c zov Se Duoub Total DiootalBlacuba TVoolalubBolackk eSzo SeOV uSTotlDankub Toldnu LIQUID BULK FoPo±t 0. 0.3 0.3 1.4 0.9 0.3 0.3 1.4 0.9 0.3 0.3 1.4 0.9 0. 0.3 1.4 0.9 0.3 0.3 1.5 0.9 0.3 0.3 1.5 1. 0.3 0.3 1.5 1.0j 0.3 0.3 1.5 lroPo. 0.6 0.3 0.1 1.0 6 , 0 01 10 06 030.6 0.3 0.1 1.0 0.6 . 0.3 0.1 1.0 0.3 0. . 6 0 . .1 07 03 01 11 0.7 0.3 0.1 1. 07 03j01 11 T-oot 17.3 0.8 0.4 18.5 18.1 0.8 0.4 19.4 19.0 0.9 0.4 20.3 20.0 0.9 0.5 21.4 20.4 0.9 0.5 21.8 20.8 1.0 0.5 22.2 21.2 1.0 0.5 22.7 21.6 1.0 0.5 23.1 TOTAL (rnbt torn) 18.8 I1.3 0.8 20.8 19.6 1.3 0.8 21.8 20.6. 1.41 0.8 22.8 21.5 1.4 0. 38 20 15 0.9 24.3 22.4 L 1:.5 . 24.8 .22.8 ..1.5 0.9 25.2 23.31.. 1.61 0.9 25.7 SOIID BULK ExPort 14.~4 3.8 3.0 21.2 14.5 3.8 :3.0 21. 1.4.7 3.8 3.1 21.6 14.8 j3. 3.1 21.8 15.0 3.9 3.1 22.0 15.1 3.9 3.2 22.2 15.3 4.0 3.2 22.5 15.4 4.0 3.2 22.7 larport 0.2 0.7 0.3 1.1 0.2 0. 03 11 .2 0.7 0.3 1.1 0,2 07 0.3 1.2 0.2 0.7 0.3 1.2 0.2 0.7 0.3 1.2 0.2 0.7 0.3 1.2 0.2 0.7. 0.3 1.3 T-it ~3.5 j1.6 J0.9 6.0 3.6 1.7 0.9 6.2 3.8 1.8 1.0 6.6 4.0 j1.9 1.0 6.9 4.1 J1.9 1.1 7.0 4.2 1.9 1.1 7.2 4.2 2.0 1.1 7.3 4.3 2.0 1.1 7.5 TOTAL (ol. t-n) 1. 60I42282 18.4 6.1 4.2. 28.7 18.7 6.3 I4.3 29.3 19.0 I. 6.4.14.4. 29.8 19 5 . 02 19.5 I6.6 4.5 30.6 19.7 6,7 4.6 31.0 20.01 6.81 4.6 31.4 GENERAL CARGO Expor-.1.1... 2.7 1.0 1.8 5.5 2.8 1.0 1.8 5.6 2.8 1.0 . . 8 0 1.8 5.7 2.8w 1.1 1.8 5.7 2.9 1.1 1.9 5.8 2.9w 1.1 1.9 5.8 lorpot 1.2 0,1 0,1 1.4 1.2 0. 01 .5 .2 (:0.1 0.1 1.5 1.3 0.1 0.1 1.5 1.3 0.1 0.1 1.5 1.3 0.1 0.1 1.6 1.4 0.1 0.1 1.6 1.4 0.1 0.1 1.6 T-enit 2.3 1.6 I0.7 4.6 2.4 1.7 0.7 4.8 2.5 1.8 0.8 5.1 2.7 1.9 0.8 5.3 2.7 1.9 0.8 5.4 2.8 1.9 0.8 5.5 2.8 2.0 0.9 5.7 2.9 2.0 J0.9 5.8 TOYrAL (.I,, t-) 6.2 2.7 2.6 11.5 6. 2.8. 2.6 1 1.8 6.5 2.9 2.7 12.1 6.7 3.0 2.7 12.5 6.8 3.0 2.8 12.6 6.9j 3.1 2.8 12.8 7.0 3.1j 2.9.I 13.0 7.21 3.21 .2.9. 13.2 TOTAL FREIGHT 9poT- 1 8. 5.0 5.0 28.0 182 5.1 5.1 28.3 18.4 5.1 5.1 28.6 18.5 5.2 5.2 28.8 187 5.2 5.2 29.1 18.9 5.3 5.3 29.4 19.1 5.3 5.3 29.7 19.3 5.4 5.64 30, Irapor 2.00 1.0 0.5 3.5 2.:0 1.0 0.5 3.6 2.1 1.0 0.5 3.6 2.1 1.1 0.5 3.7 22 li 0.5 3.8 2.2 1.1 0.6 3.9 2.3 1.1 0.6 3.9 2.3 11 06 40 Vocoit 23.0 4.0 j2.0 29.0 24.2 4.2 2.1 30.5 25.4 4.4 2.2 32.0 26.6 4.6 2.3 33.6 27.2 4.7 J2.4 34.2 27.7 4.8 2.4 34.9 28.3 4.9 2.5 35.6 28.8 5.0 2.5 36.3 TOTAL (ealntons) 43.0 I10.0 I7.5 61 44.4 10.3 7.7 62 45.8 10.6 I7.8 64 47.3 10.8 I8.0 66 48.111101 8.1 67 48.8111.2 82 6 496 11. . 9 5. 11.184 7 - ... .... ..... .... ... ..... .... .... ..... .... .... ..... .... .... .......... ...............4 ... .... .... ..... ..... Table 9.2.2 TRANSPORT SECTOR REVIEW UKRAINIAN SEA PORTS _-i_i-m~~~~~~~~~~~-17 Statistics for the years ended december 31st ACTUAL PROJECTED (DAKflIqHO 3AHPOrHO3OM Source: 1997 I.19 :: 20:_ Freight: Liquid Bulk 20.825 21.781 22784 23.835 24.298 24.769 25.250 25.740 Solid Bulk 28.200 28.731 29.279 29.846 30.225 30.609 30.999 31.395 General cargo. 11.475 11.788 12.114 12.452 12645 12842 13.041 13.244 SubTotal Dry 39.675 40.519 41.393 42.299 42870 43.451 44.040 44.639 VWX ~ ~ ~ ~ ~. ...RZ4t 'es. 4.&S':m .. _ T W~~~ W ii W .~~4:4:..*e.4.'e ~ 4X4$4 ::.1 ...... Vessels:.**. ...*. ' . ADW 7,000 7,500 7,875 8,269 8,682 9,116 9,572 10,051 10,553 Pasengers/vessel 1,500 1,500 1,575 1,654 1,736 1,823 1,914 2,010 2,111 ggg w~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ; Wws E_ R s l l _ . S . 2stseg.s>SSWX.20 .XfSS:>Y:SS.S!YS> 4TEE S§.X Freght vessels 8,067 7,911 7,761 7,617 7,368 7,127 6,894 6,669 Pasenger vessels 3,333 3,238 3,146 3,056 2,998 2,940 2,884 2,829 V Fr;1 " :M.m..,.,.. m _ .~~~~~~~~~~~~~~~~~~~~M Productivity/Employee 2,017 2,098 2,183 2,272 2,331 2,391 2,453 2,517 Tumover/Employee 9,286 9,515 9,722 9,939 10,364 10,810 11,275 11,762 ..4:.:45% 4. .4, 4' .4444WIN4,moo _ fgii S . > i F S s ...........................*..................... ...j.... f' s Y 2 4'.i Ss S'M>$;>.."' MIN, g .I.%f MI'MI, Y $'S3* .$s S.".4' _74i 3 111111 Ones em-on"o-son."~~~~~ . Table 9.2.3 TRANSPORT SECTOR REVIEW UKRAINIAN SEA PORTS Pro-Forma Income Statements for the years ended december 31st (LISS million) ACTUAL PROlECTED Source: Reports 1997 _. Revenue: Port Dues (Vessel) 0.0 17.5 16.6 16.0 15.5 15.4 15.2 15.1 15.0 Port Dues (Goods) 0.0 90.0 92.5 94.3 96.3 99.7 103.3 107.0 110.9 Cargo Handling 0.0 217.5 220.6 223.1 225.7 233.4 241.3 249.4 257.9 Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Expenses Salaries & Wages 0.0 62.5 71.7 81.7 93.0 96.6 100.5 104.4 108.6 Pension & Benefits 0.0 25.0 28.7 32.7 37.2 38.7 40.2 41.8 43.4 SubTotal Salaries & Benefits 77.3 87.5 100.4 114.3 130.2 135.3 140.6 146.2 152.0 Materials 48.3 67.5 69.2 72.0 75.0 77.6 80.4 83.3 86.3 Other 21.1 22.5 22.1 23.0 24.0 24.8 25.7 26.6 27.6 Depreciation & Provisions 24.2 30.0 31.7 33.9 36.2 45.7 49.2 52.7 56.2 Provision for bad debts 0.0. 0.0 9.9 10.0 10.1 10.5 10.8 11.1 11.5 Interest expenses 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Extraodinary items (net) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Provision for Social Progra 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Taxes 46.2 35.3 28.9 24.1 18.7 16.4 15.9 15.5 15.0 Operartng Expenditus 171 208 233 253 275 294 307 320 334 Table 9.2.4 TRANSPORT SECTOR REVIEW UKRAINIAN SEA PORTS Pro-Forina Sources & Uses of Funds per year, as of December 31 ACTUAL (115 million) 4>AK-THqHO PROJECTE 3A nPOrHO3OM Source: Reports 1997 1 __ __0_ SOURCES OF FUNDS Net Income . 107.7 82.3 67.5 56.2 43.5 38.2 37.1 36.1 35.1 Depreciation & Provisions 24.2 30.0 41.5 43.9 46.3 56.1 60.0 63.8 67.7 Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Funds from Operations 132 112 109 100 90 94 97 100 103 Borrowings 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Equity Capital 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Change in working capital 0.0 0.0 (3.2) (1.4) (1.5) 19.4 (2.0) (2.0) (2.1) Financing 0 0 (3) (1) (2) 19 (2) (2) (2) Total Sources 132 112 106 99 88 114 95 98 101 USES OF FUNDS Repayment of LT Debt Net Plant & Equipment 0.0 100.0 75.0 75.0 75.0 100.0 100.0 100.0 100.0 Change in WorkingCapital 0.0 0.0 16.2 (1.2) (1.3) 7.4 (0.9) (1.0) (1.0) Baddebts 0.0 0.0 9.9 10.0 10.1 10.5 10.8 11.1 11.5 Staff rightsizingprogrem 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Uses 0 100 101 84 84 118 110 110 111 Total Sources & Uses 132 12 5 15 4 (4) (15) (12) (10) Financing capacity 131.9 112.3 79.8 89.9 79.4 95.9 85.3 87.7 90.1 Table 9.2.5 TRANSPORT SECTOR REVIEW UKRAINIAN SEA PORTS Pro-Forma Balance Sheets per year, as of December 31 ACTUAL (USS million) (DAKTrIlHO PROIECTE 3A nPOFHO30M Source: Reports 1997 s999 2:-- 2.- __ ASSETS Cash 8 21 26 41 45 41 27 14 4 Accounts Receivables 55 55 55 56 56 44 45 46 48 Inventories 17 17 20 21 22 15 16 16 17 Current assets 79 93 101 117 123 100 87 77 69 Fixed assets 818 980 1,055 1,130 1,205 1,305 1,405 1,505 1,605 Accumulated depreciation 346 376 408 442 478 523 573 625 681 Net Fixed assets 472 604 648 689 727 782 833 880 924 Work in Progress 62 Other assets I LIABIIITIES Current Liabilities 47 47 30 32 33 26 27 27 28 Long Tefm Debt Provisions Paid in Capital Authorized Capital 454 454 454 454 454 454 454 454 454 Reserves 115 115 115 115 115 115 115 115 115 Retained Earning (Loss) 0 0 82 150 206 249 288 325 361 Current income 0 82 67 56 44 38 37 36 35 Total Equity 568 651 718 774 818 856 893 929 964 Isble 9.2.6 TRANSPORT SECTOR REVIEW UKRAINIAN SEA PORTS ACTUAL ProForma Ratio Analysis I)AKT1l4HO1-11-_ PROJECTE 3A IIPOFHO30M Source: Reports 1997 _ _ _ 2 _ Efficiency: Revenue turnover 68.8% 53.8% 50.9% 48.4% 46.4% 44.6% 43.2% 42.2% 41.5% Receivables turnover * 61 61 60 60 60 45 45 45 45 Inventory turnover *19 19 22 23 23 1 16 16 16 Pnyables turnover 52 52 33 34 35 26 27 27 27 Number Employees 30,000 30,000 29,700 29,403 29,109 28,818 28,530 28,244 27,962 Traffic Units/Employee 0 2,017 2,098 2,183 2,272 2,331 2,391 2,453 2,517 Pricing: Net ton (million) @ US$per ton 5.6 5.4 5.3 5.2 5.1 5.2 5.3 5.4 5.5 Profitability: Working Ratio 45% 55% 58% 63% 68% 68% 69% 69% 69% Opernting Ratio 53% 64% 71% 76% 82D/D 84% 85% 86% 87% Retum on Fixed Astets 22.8% 13.6% 11.9% 9.6% 7.4% 6.20/s 5.8% 5.4% 5.0% Liquidity: Working Capital **** 25 25 45 45 45 33 34 35 36 Current Ratio 1.71 2.00 3.32 3.70 3.74 3.90 3.28 2.79 2.42 Quick Ratio 1.54 1.54 246 2.41 2.37 2.29 2.28 2.28 2.27 Grap 9..7:Main Financial Indicatorg' 180EsiS 0 160 l90 s 1 40 8 60 30~~~~~~~~~~~~~~~~~~~~~~~~~7 120-D O- e~~~~~~~~~~~~~~~~~~~~~~~~6 197 19 99 00 201 20 03 0420 , .~~~~~~~~~~~~~~~~~~~~~~5 so ~ GosOeaigRsl *~netetFnnigCpct I Tntal Freight (min tanR) Nh empinyees (()Q°)4I IGraph 9,2.8: Gross Operating lResuiti 140- 11 l 1 C 120- il 'C | S ' l i 1997 1998 1999 2000 2001 2002 2003 2004 2005 | cenario 1: Complete Reform ~ inScenario 2: Gradual Reform : ~Scenanio 3: Status Quo| .,.:: :-: :. :::::: ': :o,............... . .,,,,,,,--: : .sts,. .,r.r. ,,, Gah9.2.9: Investment Financing Capacit 160-- 0 i 140 -I l 3 1 10 120 11> 1 60- log1 40-l 1 20 1l 1997 1998 1999 2000 2001 2002 2003 2004 2005 | Sceario : Comlete efoTm ~ e~Scnax l 2: GadualRefonn - :,~Scenario 3: Status Quo Annex 10.1 Annex 10.1. Air Ukraine 1. Air Ukraine Financial Status. Air Ukraine's accounts showed apparent profits up $6M for a revenue of $100M in 1995. Air Ukraine financial performance is difficult to estimate since it includes several regional airlines, which include themselves their airport base, and most aircraft are already fully depreciated. Moreover, the inappropriate taxation artificially increase profits. Such taxation rules will prevent airlines from making sufficient fleet renewal provisions which, on the long term, will endanger, the Ukrainian sector (public and private). Air Ukraine's 1996 and 1997 accounts show aggravated deficits. Revenue decline far exceeded cost reductions. Low level of revenue can be mainly explained by the relatively low level of tariffs, although the airline has already applied several important increases since 1990. The rate of UScent6,0/RPK (Revenue Passenger/ Kilometer) is still almost 25% below world average. It is understandable that, due to the low average purchasing power of the Ukrainian (and other CIS) passengers (Table 10.2), the airline may wish to keep some reduced fares for the lower end of its market, but it should also be able to charge higher fares to those customers (mainly business men) whose purchasing power is often comparable to those in western countries. 2. Air Ukraine Future. Unlike its successful sister company, Air Ukraine faces considerable challenges. It remains fully government-owned and operates on low profitability routes (CIS and long-haul). Its current fragmentation plans go against international trend towards concentration. Moreover, its management seems not ready to compete actively in its new target market (Western Europe). Technical assistance that would ensure the development of a sound business plan and institutional building is required to prevent Air Ukraine from becoming a burden for the national budget. In order to remain on the international scene, Air Ukraine's priority is to acquire sufficient financing capacity to purchase or lease new generation aircraft. Its monopoly on its long haul market may evolve with the growth of this market. Possibility of foreign new entrants is not excluded. Besides, although there is no direct competitor today on these routes, Air Ukraine is facing a fierce competition from Westem Europe carriers which propose long haul routes through their respective hubs (Amsterdam, Frankfurt, London, Paris, Vienna...). Air Ukraine has already tried to acquire one 767s (260 seats) under a lease agreement, but this attempt remained apparently unsuccessful because of the lack of financing guarantees. Such an aircraft is needed, if the airline is intending to compete on the high yield contribution with a large business class, while offering increased capacity for belly cargo. 3. Air Ukraine Investment Needs. Air Ukraine must dispose of its unproductive assets (Tablel O.1). A fleet of 40 aircraft should be sufficient to serve its current network, including the re-opening of some former routes if needed. Acquisition of new generation 150 to 200-seater, and maybe one long-range aircraft in replacement of the I162M is necessary by the beginning of next century. New generation aircraft could be availability of second-hand/Chapter 3 aircraft, with a significantly lower acquisition or leasing price. The selection of aircraft type should be also based on the cargo capabilities in the light of the cargo market needs so specific to the international trade nature of Ukraine economy. Technical assistance in the commercial field, the development of management information system, including cost accounting, would also be needed. This would represent an investment of about US$300 million by the end of next decade, not including acquisition of a long-range aircraft, an estimate which would have to be sharpened in the light of Annex 10.1 the elaboration of the business plan. Without a deep structural adjustment, such an investment program is out of reach. Table 10.1.: Ukrainian Main Airlines Fleets __ _ _ _ _ _ _ __ _ _ _ _ Number Capacity Average in fleet ordered Seats age Type of aircraft (min/max) Air Ukraine Antonov An-12 3 freighter 33,5 Antonov An-140 (1) 40 40/52 Antonov An 24 54 48 29,5 Antonov An-26 9 freighter 20,7 Antonov An-30 3 freighter 22,7 Antonov An-32 5 freighter 7,8 Ilyushin Il-62M 8 144 16,4 Ilyushin Il-76M 6 freighter 12,5 L-410 Turbolet 20 15 16,0 Tupolev Tu-134A/A 15 76 20,7 Tupolev Tu-154B 26 164 18,3 Tupolev Tu-154M 3 164 7,0 Yakovlev Yak-40/40k 15 27/36 23,9 Yakovlev Yak-42 21 120 17,8 Dornier 328 3 30/33 Falcon 20/200 1 exec (10/16) n.a. Boeing 767 (2) 254/290 S/Total: 189 43 Average age: 21,4 Ukraine International Airlines B737-200 Adv. (3) 3 108 13,7 B737-300 (4) 2 1 135 n.a. B737-700 1 128/149 S/Total: 5 2 Average age: 137 Aerosweet Antonov An-24 1 48 32,0 B737-200 Adv. (3) 2 2 120 18,0 S/Total: 3 2 Average age: 2Z,7 Total 197 Average age 21,3 Source: JP Airline Pleet, Airclaims, IT, Databank, World Bankc mlssion (1) New Antonov Product expected off production line by 1998/99 to replace An 24s (2) Being contemplated in view of network extension to long-haul flights (Chicago, New-York, Toronto...) (3) 737-200s acquired in 1994, 1995, 1997, will be forbidden to operate to Europe as from 2002 (4) Leased since Febl998 Annex 10.1 Table 10.2. - Air Ukraine Fares for Services to/from Kiev (Summer 1998) Country/City Weeki Aircraf Fares Distance Fares flights type IATA CIS citizen i (km) (US Cent/km) (US$) (US$) IATA CIS citizen i __ __ __ __ _(1) (1) Domestic Donietsk 18 An-24 n.d 80 557 n.d. 14,4 Lvov 11 An-24 n.d 65 501 n.d 13,0 Luganzk 9 An-24 n.d. 68 671 n.d 10,1 Mariupol 3 An-24 n.d. 78 636 n.d. 12,3 Simferopol 3 An-24 n.d. 60 641 n.d. 9,4 Uzhgorod 10 An-24 n.d 64 623 n.d. 10,2 CIS countries Baku 1 TU-15 n.d 150 1 844 n.d. 8,1 Batumi 1 TU-13 n.d. 145 1 249 n.d. 11,6 Erevan 1 TU-13 n.d. 150 1 546 n.d 9,7 Kazan 1 TU-13 n.d. 160 1 347 n.d. 11,9 Kutaicy 1 TU-13 n.d. 135 1 301 n.d. 10,4 Moscow 14 TU-13 391 107 721 54,2 14,8 Murnansk 2 TU-13 n.d 112 2 077 n.d. 5,4 Nizhnevartovsk 1 TU-13 n.d. 260 3 035 n.d 8,6 Surgut 1 TU-13 n.d 300 2 868 n.d 10,5 Tashkent I TU-15 n.d. 189 3 110 n.d. 6,1 Tbilisi 1 TU-13 n.d. 160 1 431 n.d. 11,2 Tumen 1 TU-13 n.d. 149 2 371 n.d. 6,3 Ufa 1 TU-13 n.d 150 1 000 n.d 15,0 Central and Western Eurlope Bratislava 3 An-24 n.d. 190 1 023 n.d 18,6 Bucharest 2 An-24 308 164 745 41,3 22,0 Budapest 3 TU-13 357 216 913 39,1 23,7 Istambul 3 TU-154 790 300 1 057 74,7 28,4 Praha 3 TU-134 447 274 1 172 38,1 23,4 Sofia 2 TU-134 375 245 1 027 36,5 23,9 Warsaw 2 TU-134 292 206 721 40,5 28,6 Others Beijing 3 TU-154 2 401 749 6 440 37,3 11,6 Beyrouth 1 TU-154 n.d. 405 1 886 n.d. 21,5 Cairo I TU-134 1 195 320 2 260 52,9 14,2 Sharja I TU-154 1 301 450 3 485 37,3 12,9 Damascus 1 TU-134 1 226 368 1 927 63,6 19,1 Delhi 1 Il-62 1 379 660 4 552 30,3 14,5 Dubai 1 TU-154 1 301 450 3 511 37,1 12,8 New-York 3 11-62 n.d 480 7 544 n.d 6,4 Toronto 1 11-62 1 914 721 7 552 25,3 9,5 Tunis 1 TU-134 1 063 400 2 231 47,6 17,9 Total flights (perwee : 99 Average flight length: 1 554 Annex 10.2 Annex 10.2. Condition of Main Airports 1. Infrastructure. During its mission in 1996, the TACIS/TTC performed a visit to 18 airports, which covers all airports suggested to remain open to commercial traffic, and some ten more to be classified as (>. 2. Runways lengths are generally far sufficient to serve most aircraft since they were built for former soviet aircraft which need more take-off length than their western counterparts. Yet,, because these aircraft were equipped with more boogies, they did not need as much resistant; pavement as needed by more modern aircraft. This is the major constraint today, if Ukraine wishes to open its regional airports to international traffic. These remarks remain valid for most airports in Ukraine. The following part focuses on major issues relevant to major airports. For al]l other fields, reference can be made directly to the TACIS/TTC study. 3. Borispol. No major capital investment is required for the coming decade. Its terminal was; recently refurbished for a relatively low cost (US$15million) extending its capacity to 2.5 millionL passenger per year, a level of traffic which should not be reached before 2010. Its new runway is under completion, and it should be open to traffic by the coming autumn, although the airport is still searching financing for the building or corresponding taxiways and aprons. Borispol development is guided by a sound master plan (the only one in the country). 4. Simferopol. No specific need was identified. Refurbishment is completed, and the airport, which has been separated from its airline, has been able to finance these minor investments on its; own resources. 5. Odessa. This airport represents a major issue. Its pavement requires urgent rehabilitation but works have been postponed because a former Soviet law which remains valid until supplemented by a new Ukrainian law, still plans its relocation. Indeed, this airport is very close to; the city, and the levels of traffic of more than 3 million passengers in FSU times could justify its relocation. Today, the significant drop of its activity (below 300,000 passengers) along with the expected gradual replacement of older noisy and polluting aircraft by new generation ones does, not justify such a costly investment anymore. Subsequently, the adoption of a law, even prior to, the achievement of a Airport Development Strategy is needed to define long term objectives, and,, in particular, to proceed with the launching of a runway rehabilitation program. 6. Its terminal building, which was designed in FSU times when traffic was almost exclusively intra-Soviet Union, also needs refurbishment because it is not suited to new needs for intemationall traffic treatment. 7. Kiev-Zhulyany. This airport used to be Kiev domestic airport. It is indeed located almost in the center of the city, which makes it very convenient for commuter flights and business Annex 10.2 aviation. Former plans to relocate it further from the city has fortunately been dropped at the light of current traffic (300,000 passengers in 1997). 8. Its aeronautical infrastructures are very poor and do not meet requirements to serve new generation aircraft. Its current terminal is also in poor condition although a VIP lounge has just been completed. Yet, passenger treatment has not changed since FSU times: no modem check-in, no baggage treatment with passengers having to carry their luggage to and from the aircraft. The construction of a new terminal worth US$19 million was started in 1993/94, but it has been interrupted due to cash shortage, which is not surprising with its low traffic level: today, its revenues do not exceed US$2 million per year. Its transfer to the Municipality in 1994 may be welcome as an effort to separate airports from airlines. Y et, because it has introduced a lack of coordination with Kiev-Borispol, which, cumulated with the lack of Airport Development Strategy defining the roles and objectives for the elements of an airport system, may lead to costly duplicate investments than Ukrainian public resources are not able to support today. Moreover, because most domestic flights from the regions land at Zhulyany, this situation prevents international Ukrainian airlines from proposing good connections with their international routes since driving time between both airports may exceed 2 hours. This is contradictory with the claimed objective to inake Borispol the hub of Ukraine, and even represents an incentive for regional markets to use foreign airlines on direct routes from regional airports. 9. This issue needs further investigation to be held during the elaboration of the Airport Development Strategy. Special attention should be paid in particular on the cost/advantages at the national level to consider the re-classification of this airport which could be limited to general (business) aviation, and the possible merging of its management with Borispol's one. Annex 10.3, Annex 10.3. Technical Assistance Program 1. Many studies have already been done in the aviation sector and the Ukrainian administration is well aware of the overall objectives to achieve. The many issue lies in the implementation strategies needed to set up the adequate policy and institutional framework. Therefore, technical assistance is highly needed, with special focus on implementation processes. It could include the following projects: a) Administration: Training for CAA executive managers for transition to a market driven economy (i) Reform of the tax system for the aviation/airport sector (ii) English training course Expected cost: US$0.5 million b) Airports (i) Airport Development Strategy (ii) Legal framework for airport concessions; (iii) Airport(s) privatization strategy formulation. Expected cost: US$2 million c) Airlines (i) Business Plan for Air Ukraine, including technical assistance for its implementation (ii) Training in English for middle and top management Expected cost: US$2 million World Bank User \\StreetTalk\Projects@Fies@ECA\LUKRA]NE\NRA\TRANSPOR\ILENP\YELLOWC\ANNEXES.DOC 10/01/98 2:41 PM Tabk 10.1.1 TRANSPORT SECTOR REVIEW Main Ukrainian airlines (as registed onO0l/OI1998), excluding Ministry ofDerense, airlines without aircraft, aviation schools and academies, and agricuture aerial work, and sport act vies. Fleet 1997 TraiMc Airline Base Nbe Main types Capacity Passenger Freight Staff of aircraft Max/Min (x1000) (Tons) _ Passenger only airlines Aerosweet (1) Kiev 2 737-200 120 156.6 4471 Columbus Kiev 2 Yak40 32 0.7 D.M. International Donetsk 5 Yak40;Le410 14127 Donbass Airlines Donetsk 3 Yak4o;An24;Tul54 12 / 164 18.1 Omega Simferopol 2 An24 48 Tavna-Mak Joint Stock Cy Simnferopol 3 An24 48 19.2 Transago Borispol Kiev 5 Let410,Yak40,Tu134 15 / 68 0.1 Passenger and Cargo airlines Crimea Air Simferopol 10 An24 36 48 173.2 2,457t 2,000 Air Ukraine (1) Kiev 189 An2;Yak40;Tu34;Tul54;1l62;1176 12 144 910.7 7,312t 9,500 Air Urga Kirovograd 15 An-24;An26 16/ 48 40.0 1,991t 145 Aviaton Kiev 4 Yak4O;An26 28 BSL Airline Kiev 8 Tu154,1176 144 0.7 4,537t Dniproavia Dnepropetrovsk 17 Yak42;Yak4O, An26 32 144.1 2,890t 1,300 ICAR Airlines Kiev 5 Let4l0;An24;An26;An74, Anl2 36 1.7 1,170t 145 Kharkov Aviation Product A Kharkov 8 Let410,An24;An26;Anl2;An74 36 Khortitsa-Air Zaporozhye 3 Yak4O;An32 32 Kyi4a Lvov 2 D1S1 96 1.3 76t Motor Sich Aviakompania Zaporozhye 14 Yak40;An24,An26,An12 30 2.2 1,032t Odessa Airlines Odessa 11 Yak40,Tul54 27n164 92.0 1,150t Tavria Aviakompania Odessa 1 Tu154 164 28.4 370t Ukraine International Airlines Kiev 5 737-200,737-300 10S 135 177.6 1,532t 215 Cargo Ailines Air Service Ukraine Kiev 11 11-76 MD - 769t 150 Antonov Airtrack Kiev 4 An26;An32;Anl24 - 3,559t Antonov Design Bureau Kiev 20 All Antonov Artem-Avia Kiev 4 An26 . 204t ATI Air company Kiev 8 1176 .Aviacompama Trarsavia Kiev 2 An26/32 Aviant Kiev 20 An24/321124 Avilond Feodosia 2 176 Avirciti Odessa I Anl2 Azov-Avia Melitopol 3 1176 Busol Kiev 7 An12;1176 - 17t 50 Khors Aircompany Kiev 13 An24;176 - 0.2 I0963t Kroonk Air Agency Kiev 2 An26 25 Polissyaaviatrans Zhitomyr 5 1176 Ukraine Air AUiance Kiev 8 An26,An2,An74,A12 - 1,945t Veteran Airlines Dzhankoi 15 Anl2,1176 - 2,062t Vitair Kiev 3 An24 Volare Kiev 6 Anl2/U76 - 500t Yuzhmashavia Dnepropetrovsk 6 Yak40/1176 - 7.0 3,746t Others (V.LP.) Aerocharter Kiev 1 Yak 40 Executive Aeroleasing Kiev 2 Falcon Executive AVIS-Avia Sewce Iternmatio Donetak I Falcon Executive Cabi Donetsk 3 Falcon Executive Chaika Kiev 5 Yak;An2;An2S Executive UES Avia Dnepropetrovsk 4 Yak40,1176 Executive 6.2 2,216t Ukraina Aviapredpriatie Kiev 7 Yak40,Tu134,Tu154,1162 Executive UNA Southern Independant Odessa 2 Yak4O Executive 4.5 UniversalAvia Kiev 9 Let410 12/ 15 TOTAL 488 1,788.0 65,64t ## including, Chemovtsy, Donetsk, Ki-ovoga Lupgansk, Lvov, Vinnitsa, and Zaporozyc aation enterpri es which are former Aeroflot geographical divisions and operates from airports of the ame name, with operations in Air Ukraine colors, although aircraft are marked under their own nam. Source: ITA database, Airclaims, Ukrainian CAA Tnble 10.1.2 TRANSPORT SECTOR REVIEYS Passenger traffic of tUkrainian airlines (in thousands) International traffic Domestic traffic Total traffic 1996 1997 % 1996 1997 % 16 1997 % Private sector I Crimea 181.1 117.9 -35% 51.2 55.3 + 8% 232.3 173.2 -25% 2 Air Ukraine 852.5 698.3 - 18% 208.2 212.4 + 2% 1,060.7 910.7 - 14% of which Vinnitsa a/I 6.6 62 - 6% 0.2 0.0 -100% 6.8 6.2 - 9% Donetsk a/l 123.1 105.4 - 14% 47.3 44.7 - 5% 170.4 150.1 - 12% Zaporizhzha all 17.8 10.0 - 44% 17.5 14.1 - 19% 35.3 24.1 - 32% Kiev a/ 67.8 43.4 -36% 79.9 86.9 + 9/o 1477 130.3 -12% Borispol all 440.1 334.9 - 24% 0.0 0.5 440.1 335.4 - 24% Kirovograd a/l 2.9 39.4 n.s. 0.0 0.9 2.9 40.3 n.s Lugansk all 40.4 21.8 - 46% 24.3 21.3 - 12% 64.7 43.1 - 33% Lvov a/i 88.3 74.5 - 16% 3&4 38.6 + 1% 126.7 113.1 - 11% Kharkov a/l 45.5 41.9 - 8% 0.3 3.1 n.s. 45.8 45.0 - 2% Khmelnitsk a/l 4.2 9.2 + 119% 0.1 1.6 n.s. 4.3 10.8 + 151% Chernovisy al/ 15.8 11.6 -27% 0.2 0.7 n.s. 16.0 12.3 -23% 3 Dniproavia 124.5 111.8 -10% 29.7 32.3 + 90 . 154.2 144.1 - 7% 4 Universalavia 0.0 0.0 2.8 0.7 - 75% 2.8 0.7 - 75% of which Uzhgorod all 1.2 0.3 - 75% 1.2 0.3 -75% Poltava a/l 0.8 0.0 - 100% 0.8 - 100% Chernigov all 0.0 0.0 Sunmy a/l 0.8 0.4 - 50% 0.8 0.4 - 50% 5 Odessa airlines 95.6 71.8 - 25% 17.6 20.2 + 15% 113.2 92.0 -19% 6 Ukrainian International 178.6 177.6 - 1% 0.0 0.0 178.6 177.6 - 1% Total public sector 1,432.3 1,177.4 - 18% 309.5 320.9 + 4% 1,741.8 1,498.3 -14% Private sector 7 Acrosweet 116.6 156.6 + 34% 0.0 0.0 116.6 156.6 + 34% 8 Others 126.4 118.6 - 6% 12.8 14.5 + 13% 139.2 133.1 - 4% Total private sector 243.0 275.2 + 13% 12.8 14.5 + 13% 255.8 289.7 + 13% TOTAL 1,675.3 1,452.6 - 13% 322.3 335.4 + 4% 1,997.6 1,788.0 - 10% Table 10.13 TRANSPORT SECTOR REVIEW Freight traffic of Ukrainian airlines (in tons) International traffic Domestic traffic Total traffic 1996 1997 % 1996 1997 % 1996 1997 % Private sector I Cnimea 145.6 119.8 - 18% 5,921.8 2.337.2 -61% 6.067.4 2,457.0 - 60% 2 AirUkraine 11,767.5 7.168.2 -39% 130.8 144.1 + 10% 11,898.3 7,312.3 -39% of which Vinnitsa a/l 3.0 12.0 + 300% 3.0 12.0 + 300% Donetsk all 637.1 458.5 - 28% 23.4 22.7 - 3% 660.5 481.2 - 27% Zaporizhzha a/l 110.5 13.8 - 88% 6.0 4.8 -20% 116.5 18.6 - 84% Kiev a/l 152.7 109.9 -28% 69.9 70.7 + 1% 222.6 180.6 -*19/o Borispol a/l 3,419.7 1,804.0 -47% 0.0 1.2 3,419.7 1,805.2 - 47% Kirovograd a/i 349.0 0,0 0.0 349.0 Lugansk a/l 1,289.7 266.6 - 79/ 10.0 10.5 + 5% 1,299.7 2771 - 79% Lvov a/l 5,517.4 3,680.1 -33% 21.5 265 +23% 5,538.9 3,706.6 -33% Kharkov a/l 291.8 383.5 + 31% 0.0 5.8 291.8 389.3 + 33% Khmeinitska/I 279.6 89.3 - 68% 0.0 1.8 279.6 91.1 - 67% Chemovtsy a/i 66.0 1.5 - 98% 0.0 0.1 66.0 1.6 - 98% 3 Dniproavia 924.1 2,874.5 + 211% 13.5 15.9 + 18% 937.6 2,890.4 + 208% 4 Universalavia of which Uzhgorod a// Poltava a/i Chemigov all Summvy a/i 5 Odessa airlines 2,346.2 1,143.3 - 51% 7.9 6.6 - 16% 2,354.1 1,149.9 - 51% 6 Ukrainian Intemational 1,387.0 1,531.9 + 10% 0.0 0.0 1,387.0 1,531.9 + 10% Total public sector 16,570.4 12,837.7 - 23% 6,074.0 2,503.8 - 59% 22,644.4 15,341.5 - 32% Private sector 7 Aerosweet 360.8 447.3 + 24% 360.8 447.3 + 24% 8 Others 34,114.8 47,344.4 + 39/ 1,814.5 2,515.4 + 39% 35,929.3 49,859.8 + 39% Total private sector 34,475.6 47,791.7 + 39% 1,814.5 2,515.4 + 39% 36,290.1 50,307.1 + 39% TOTAL 51,046.0 60,629.4 + 19% 7,888.5 5,019.2 - 36% 58,934.5 65,648.6 + 11% Table 10.1.4 TRANSPOR 'SECTOR REVIESf t'krainian airports passenger traffic (in thousands) and proposed commercial classification 1990 1995 1996 1997 Proposed Airport Total Dom. nt. (1) Total Dom. Int. (1) Total Dom. itn (1) Total Category Kiev Borispol 5,640 61 1,271 1,332 44 1.258 1,302 70 1,324 1,394 A Simferopol 4,887 69 508 577 68 434 502 94 310 404 A Odessa 3,019 28 352 380 30 334 364 32 264 296 A Donetsk 1,771 84 197 281 74 174 248 84 112 196 A Kiev Zhulyany 2,104 259 51 310 286 52 338 274 44 318 A Lvov 2,531 39 91 130 34 100 134 38 84 122 A Kharkov 1,792 24 55 79 16 54 70 18 46 64 A Dnepropetrovsk 1,085 22 130 152 40 140 180 40 138 173 A Poltava 270 5 23 28 2 2 4 2 1 3 C Ivano-Frankovsk 532 18 29 47 13 19 31 14 12 26 .B Nikolaev 437 2 42 U 5 29 34 2 20 22 B Lugan-k 1,022 23 39 62 29 40 69 26 22 48 B Uzhgorod 280 29 21 50 23 11 34 19 7 26 B Zaporozhe 839 29 53 82 21 42 63 19 34 53 B Chernovitsy 341 18 16 34 4 17 21 3 11 IS C Kherson 347 1 6 7 3 5 7 1 6 7 C Kerch 93 5 5 10 I 1 I 1 C Kirovograd 320 4 4 0 3 3 2 19 21 B Severodonetsk 122 5 6 11 C Maiupol 199 9 9 12 7 19 14 8 22 B KhmeWtsy 220 5 5 1 3 4 0 4 5 B KrivoyRog 255 2 9 11 1 12 13 1 8 10 C Cherkassy 277 5 5 0 0 1 I C Vinnilsa 254 2 2 4 2 3 5 2 1 3 C SuMy 104 2 2 3 3 2 2 C Berdyansk 150 4 4 2 2 2 2 C Chernigov 42 1 1 c Ternopol 123 1 1 1 1 1 1 C Lutsk 90 1 1 0 0 0 0 C Rovny 285 3 24 27 2 8 11 3 2 5 B Zhltomir 49 C Total: 29,480 737 2,953 3,690 717 2,746 3,463 765 2,478 3,243 (1) international including CIS Source: 3TC Report; CAA. MO-AIRPORT Page I Table 10.1.5 TRANSPORT SECTOR REVIEW Histork Traffic Analys (in thousand passengers) 1990 1995 1996 1997 % 1990 l.Total Ukraina Airports 29,480 3,690 3,463 3,243 11% Including Kiev-Borispol 5,640 1,332 1,302 1,394 25% Kiev Zhulyany 2,104 310 338 318 15% 2. Sub Total-Kiev 7,744 1,642 1,640 1,712 22% 3. Sub Total Kiev (% of Total 1.) 26% 44% 47% 53% Sinfferopol 4,887 577 502 404 8% Odessa 3,019 380 364 296 10% Donetsk 1,771 281 248 196 11% Lvov 2,531 130 134 122 5% Kharkov 1,792 79 70 64 4% Dnepropetrovsk 1,085 152 180 178 16% 4. Sub Toal Main Airports 22,829 3,241 3,138 2,972 13% 5. Totd 8 Main Airports ( o/f Total 1.) 77% 88% 91% 92% Other airports 6,651 449 325 271 40%o 6. Total other Airports (% of Total 1.) 23% 12% 9% 8% 1995 1996 1997 Airport Doni bi. (1) Total Don Int. (1) Total Dom. Lt. (1) Total KievBorispol&Zhulyany 320 1,322 1,332 330 1,310 1,302 344 1,368 1,394 Simferopol 69 508 577 68 434 502 94 310 404 Odessa 28 352 380 30 334 364 32 264 296 Donetsk 84 197 281 74 174 248 84 112 196 Dnepropetrovsk 22 130 152 40 140 180 40 138 178 Sub Total 523 2,509 2,722 542 2,392 2,596 594 2,192 2,468 Other airports 214 444 968 175 354 867 171 286 775 Total: 7 37 2,953 3,690 717 Z,746 3,463 765 2,478 3,243 Graph 10.1.5: Ukrainian Airports- Indexed Traffic Trends (Base 100=1990) 90 80 70 60 50 40 30 20 g g1 10 .. .,.'s~ .. 0 1990 1994 1995 1996 1997 |_Total Airports WMain Airports -nfriKiev-Borispol ---Other airports Table 10.1.6 TRANSPORT SECTOR REVIEW AIRPORT SECTOR Finandal Highlights for the year ended Decenber 31st (m million US$s) Source: TTC___ Operatingairporeve 20.678 1.57% 3.022 0.861 WCeaingRExpersatingexpensealtl ) 91.1S9 1.000 1.911 0.472 Operatiag R*suFltbefbe r ewe citaz q; - t -; -t t :0 : - . -: . -: - 9.489 0.578 1.111 0.389 Fstimated depredaimon*-. ;S .t:.0 ;: . :.: 2.000 0.500 0.500 0.250 Net operatiogDl | i? D D t? DD0?kD t?fffabl 7.489 0.071 0.611 0.139 Trfldrllon pax)5S ; : . ..... . ..;.0 j tgt-. 2 j...0........... 1.332 0.310 0.577 0.0SI Worldng Ratio . .- ;--:;;.0.: :-; --540% 63% 63% 55% Ratio~~~~~~~oipo nerainl ipr OperatngRati i t:t t-t : t: |lE: tt: 0 .tt-:; : 0-;640% 95% S0% 84% Operating ~ ~ ~ ~ Fnada H g Pricing Rtio (ni p es) . ..... 15.52 5.09 5.24 10.63 Costing Ratio (work et es in UoSpaz) i 8.40 3.23 3.31 5.53 Coating Ratio (operating pensasin.SSipx)-_ 9.90 4.34 4.18 8.91 Operating CashF k.wbdui s 9.489 0.578 1.111 0.389 tto be updated Table 10.1.7 UKRANE TRANSPORT SECTOR REVIEW AIRPORT SECTOR Borispol Intenutoh Airport for the year ended Decerber 3 Ids (in million MSs) Source: TITC and Coopers & Lybrand-Kiev .......... Opetsthlg airport ;. - - .t - .0 40 ~~20.678 20.901 21.782 24.000 WkigExpesest; ;;0-............. -.-... .- - :-........ :0: 11.189 14.285 18.444 15.750 OeCg Res"I: de^ 9.489 6.616 3.338 8.250 EsAimated dphn - - E-. -SiS .................--2.000 4.431 5.973 5.500 Net opetig reit 0- 00- ; 7.489 . 2.185 (2.635) 2.750 traffic (_mn pao);t:.- :..-0- .:-:0............... :-i.. 1.332 1.302 1.394 1.500 wommg Ratio t - 00- : :: : 540% 68% 85% 66% peaigRto t ,i : 0. - - - . :: .. .- . 640/ 90% 1 12% 89% Pricng Ratio(Mn t}30ps - Y - .. ..-tt;- -... 15.52 16.05 15.63 16.00 Cotig Rati:(orkht* g In .S$ r-- - 8.40 10.97 13.23 10.50 Costing Ratio (operat0*000 e Wpiei lsOZtW 9.90 14.37 17.52 14.17 ,Operating Cash Flow belbi*i.-tx. : . --. : .;.--. 9.489 _ 6.61i6 _ 3.338 _ 8.250 Table 10.1.7 TRANSPORT SECTOR REVIEW AIRPORT SECTOR Borispol International Airport Fincial Hihight for the year ended December 31st (in million US$'s) Source: Coopers & Lybrand-Kiev _ Operating airport reven-', - -.-'.- -.' ,' ,-- - ........e. -, ' , 20.9 21.8 Wortdng Expenses 14.3 18.4 Operating Result befire dele,aioin.. 6.6 3.3 Nt operating result 2.2 (2.6) Net Profit (Loss) before Tax 7.4 4.5 Net Proflt (Loss) aJterTax; 5.1 3.4 Traffic (milionpassm) 1.302 1.394 Woriang Ratio .:.-.'. 68% 85% Operag Ratio 90% 112% PrlcIngRasio(ilnUS$/pss,): 16.05 15.63 Airport Opag Cash Fhw 6.6 3.3 Net Cash Flow 9.5 9.3 Net Cash FlowtOp,ertingRe .................venii e,s . .. ,. ,45% 43% Table 10.1.8 TRANSPORT SECTOR REVIEW AIRPORT SECTOR Borispol hiterntional Airport Income Statements and Cash Flow forthe year ended December 31st (in mifion US$!s) (inUS Source: Coopers & Lybrand-Kiev i Revenues 26355 28.48 20.2 2.4 AirporttActivities, 20.901 21.782 16.1 1. Other Activities 5.454 6.676 4.2 4.8 -Expenes Labor 7.884 10.342 6.1 7.4 Maintenance 4.519 5.214 3.5 3.7 Other 1 .882 2.888 1.4 2.1 Worldng expenses 14.285 18.444 11.0 13.2 Depreciation 4.519 5.214 3.5 3.7 Provision *0.088 0.759 -0.1 0.5 Operating Expenses 18.716 24.417 14.4 17.5 Operating Profit (Loss) 7.639 4.041 5.9 2.9 Other Income 1.830 3.207 1.4 2.3 Other Expenses 2.040 2.765 1.6 2.0 Profit before Tax 7.429 4.483 5.7 3.2 Tax 2.370 1.130 1.8 0.8 Profit after tax 5.059 3353 3.9 2. Airport ativities Operating Cash Flow 6.6161 333 2AI |Net Cash Flow 9490i| 93261 F 73 67 Table 10.2.2 TRANSPORT SECTOR REVIEW UKRAINIAN AIRPORTS Statistics for the years ended december 31st 'Dawin-luo FlanH PROJECTED Source: 1997 )99S :3 2110 2001 International Take off& Landig Freight (Fons): 0.030 0.033 0.036 0.040 0.042 0.044 0.046 0.049 Passenger-Borispol 1.368 1.400 1.540 1.694 1.863 1.957 2.054 2.157 2.265 Passenger-Other 1.110 1.100 1.177 1.259 1.348 1.415 1.486 1.560 1.638 Total Domestic Take off& Landig Freight (Tons): 0.030 0.033 0.036 0.040 0.042 0.044 0.046 0.049 Passengers 0.765 0.750 0.825 0.908 0.998 1.048 1.101 1.156 1.213 Total Take off & Landing 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 Total Freight (mln Tons) 0.000 0.060 0.066 0.073 0.080 0.084 0.088 0.092 0.097 Total Passengers (mln) 3.243 3.250 3.542 3.861 4.209 4.420 4.641 4.873 5.116 Other Estimated Number Employe 10,000 10,000 l_ .. . ... Productivity/Employee Turnover/Employee Salary/Employee 125 125 *i:l's . . Table 10.2.3 TRANSPORT SECTOR REVIEW tJKRAINIAN AIRPORTS Pro-Forma Income Statements tor the years enided december 31st (US$ n8in) 4DAKTHI1HO [AAH PROJECTED Source: Reports 1997 .. .199 ........ 20 Revenue: Freight International 0.060 0.071 0.084 0.099 0.109 0.121 0.133 0.147 Domestic 0.030 0.035 0.042 0.050 0.055 0.060 0.066 0.073 Passenger: International-Borispol 21.4 21.9 26.5 32.0 38.8 42.7 47.1 51.9 57.3 International-Other 13.0 12.9 15.2 17.9 21.0 23.2 25.5 28.2 31.1 Domestic 4.8 4.7 5.5 6.6 7.8 8.5 9.4 10.4 11.5 Other 6.6 6.7 8.1 9.8 11.9 13.1 14.4 15.9 17.5 Operating Revenues 45.7 46.2 55.4 66.4 79.6 87.7 96.7 106.6 117.5 Expense: Salaries 19.2 15.0 13.5 12.2 10.9 11.4 11.9 12.5 13.0 Pension & Benefits 7.5 4.7 4.3 3.8 29 3.0 3.1 3.3 SubTotal Salaries & Benefits 22.5 18.2 16.4 14.8 14.3 14.9 15.6 16.3 Miantenance 9.7 9.7 10.9 11.9 13.0 13.9 14.6 15.3 16.1 Other operating expenses 5.4 5.4 6.0 6.6 7.2 7.7 8.1 8.5 8.9 Overhead 1.0 1.0 1.2 1.3 1.4 1.5 1.5 1.6 1.7 Working Expenses 35 39 36 36 36 37 39 41 43 Operating Result 10 8 19 30 43 50 58 66 75 Depreciation 20 21 22 23 23 28 29 30 31 Provision for bad debts 2 2 2 4 5 5 6 Net Operating Result (10) (14) (5) 6 18 18 24 30 37 Interest expenses Extraodinary items (net) Provision for Social Program 9 8 7 2 2 2 2 Net Income ( Loss) (10) (14) (14) (2) 10 16 22 28 35 Taxes 0 0 0 0 3 5 7 8 11 Net Income (Loss) after Tax (10) (14) (14) (2) 7 11 15 20 25 Operating Expenditures 55 60 60 61 62 701 73| 77 | 8 Table 10.2.4 TRANSPORT SECTOR REVIEW UKRAINIAN AIRPORTS Pro-Forma Sources & Uses of Funds per year, as of December31 (llS$ min) rIAaU PROJECTED Source: Reports No 1997 _ _ 19 _ 20_ SOURCES OF FUNDS Net Income (10) (14) (14) (2) 7 tt t5 20 25 Depreciation & Provisions 20 21 33 33 33 34 36 38 39 Other Funds from Operations 10 8 19 30 40 46 51 57 64 Borrowings Equity Capital Change in working capital 0 0 6 5 4 (4) (3) (3) (3) Financing 0 0 6 5 4 (4) (3) (3) (3) Total Sources 10 8 25 35 44 42 49 54 61 USES OF FUNDS Repayment of LT Debt 1 1 1 1 1 1 1 Net Plant & Equipment 10 8 20 20 30 30 30 30 Change in Working Capital nee 0 0 3 3 2 7 (0) (0) (0) Bad debts 0 0 2 2 2 4 5 5 6 Staff rightsizing program 9 B 7 2 2 2 2 Total Uses 10 8 15 34 33 44 37 38 39 Total Sources & Uses 0 (0) 10 1 1t (2) 11 16 22 Estimated financing capaci 10 8 10 21 31 28 41 46 52 Table 10.2.5 'l'RANSPORT SECI'OR REVIEW UKRAINIAN AIRPORTS .IC- Pro-Forma Balance Sheets per year, as of December 31 (IUSS mln) aKnfquo HASUT PROJECTED Source: Reports No 1997 I: __3__ 02 ASSETS Cash 2 2 12 13 24 22 34 50 72 Accounts Receivables 35 35 30 25 21 22 24 27 29 Inventories 3 3 3 2 2 5 6 6 6 Current assets 40 40 44 41 48 50 .... 63 83 108 Fixed assets 675 708 733 753 773 803 833 863 893 Accumulated depreciation 400 421 443 466 489 517 546 576 608 Net Fixed assets 275 287 290 287 284 286 287 287 285 Work in progress 25 25 Other assets 25 Total Assets 365 351 334 328 332 336 350 369 393 LIABILITIES Current Liabilities 20 20 17 14 12 6 6 6 7 Long Term Debt 10 10 9 8 7 6 5 4 3 Provisions 0 Paid in Capital 335 335 335 335 335 335 335 335 335 Retained Eaming (Loss) (14) (27) (30) (22) (11) 4 24 Current income (14) (14) (2) 7 11 15 20 25 Total Equity 335 321 308 305 313 324 339 359 383 Total liabilities 365 351 334 328 332 336 350 369 393 Table 10.2.6 TRANSPORT SECTOR REVIEW UKRAINIAN AIRPORTS ProForma Ratio Analysis 4aWqNiO nIs PROIECTED Source: Reports No 1997 _ 29_1 Efficiencr. Revenue tumover 16.6% 16.1% 19.1% 23.1% 28.0l/o 30.70/ 33.7% 37.20/o 41.20/o Receivables turnover* 276 272 193 137 97 90 90 90 90 Inventory tumover* 24 23 Number Employees 10,000 10,000 7,500 5,625 4,219 4,008 3,807 3,617 3,436 Traffic Units/Employee 324 325 472 686 998 1,103 1,219 1,347 1,489 Pricing: Passengers (number departing) @ US$ per Unit 14.1 14.2 15.6 17.2 1B.9 19.8. 20.8 21.9 23.0 Profitability: Working Ratio 77% 84% 66% 54% 46% 43% 40%/ 38% 37% Operating Ratio 121% 129% 108%/o 91% 78% 80°/ 76%/ 72% 68% Graph 10.2.7: Main Financial Indicatorsj 60 - we ;l12.00 .g" KM . ....~. . ~ so I 11s11S 11011 !W1 !1E | g 011 01 zaffi ~~~~~~~~~~10.00' 40 ~ 30. 's . 2 0 6.00 0.00 ~Gras pertin Reult eEsimaed inacin caaciy * Total Passeger (nn) N -Nb employee (0001) Table 10.2.2 TRANSPORT SECTOR RFVIFW UKRAINIAN AIRPORTS Statistics for the years ended december 31st (?awrsno flAan PROJECTED Soturce: 1997 *.. 999 2000 2001 International Take off& Landig Freight (tons): 0.030 0.032 0.033 0.035 0.036 0.037 0.038 0.039 Passenger-Borispol 1.368 1.400 1.470 1.544 1.621 1.653 1.686 1.720 1.754 Passenger-Other 1.110 1.100 1.133 1.167 1.202 1.226 1.251 1.276 1.301 Total Domestic Take off& Landig Freight (Cons): 0.030 0.032 0.033 0.035 0.036 0.037 0.038 0.039 Passengers 0.765 0.750 0.773 0.796 0.820 0.836 0.853 0.870 0.887 Total Take off & Landing 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 Total Freight (min Tons) 0.000 0.060 0.063 0.066 0.069 0.072 0.074 0.076 0.078 Total Passengers (mln) 3.243 3.250 3.376 3.506 3.642 3.715 3.789 3.865 3.942 Other Estimated Number Employe 10,000 10,000 . Productivity/Employee Turnover/Employee Salary/Employee .25 12 ..... Table 10.2.3 TRANSPORT SECTOR REVIEW UKRAINIAN AIRPORTS Pro-Forma Income Statements for the years ended december 31st (US$ mnlII) 4AKTH4HO nAAH PROJECTE Source: Reports M1997 l : 20 2001 Revenue: Freight International 0.060 0.068 0.076 0.086 0.093 0.101 0.109 0.118 Domestic 0.030 0.034 0.038 0.043 0.047 0.050 0.055 0.059 Passenger: International-Borispol 21.4 21.9 24.1 26.6 29.3 30.5 31.7 33.0 34.3 International-Other 13.0 12.9 13.7 14.5 15.4 16.0 16.7 17.3 18.0 Domestic 4.8 4.7 4.9 5.2 5.4 5.7 5.9 6.1 6.4 Other 6.6 6.7 7.4 8.1 9.0 9.3 9.7 10.1 10.5 Operating Revenues 45.7 46.2 50.2 54.5 59.3 61.7 64.2 66.8 69.5 Expense: Salaries 19.2 15.0 15.6 16.2 16.8 17.3 17.8 18.4 18.9 Pension & Benefits 7.5 5.5 5.7 5.9 6.1 6.2 6.4 6.6 SubTotal Salaries & Benefits 22.5 21.0 21.9 22.7 23.4 24.1 24.8 25.5 Miantenance 9.7 9.7 10.3 10.7 11.I 11.4 11.7 11.9 12.2 Other operating expenses 5.4 5.4 5.7 5.9 6.2 6.3 6.5 6.6 6.7 Overhead 1.0 1.0 1.1 1.1 1.2 1.2 1.2 1.3 1.3 Working Expenses 35 39 38 40 41 42 43 45 46 Operating Result 10 8 12 15 18 19 21 22 24 Depreciation 20 21 22 23 23 28 29 30 31 Provision for bad debts 0 0 0 1 .1 1 1 Net Operating Result (10) (14) (10) (8) (5) (9) (9) (9) (8) Interest expenses Extraodinary items (net) Provision for Social Program 0 0 0 0 0 0 0 Net Income ( Loss) (10) (14) (10) (8) (5) (9) (9) (9) (8) Taxes 0 0 0 0 0 0 0 0 0 Net Income (Loss) after Tax (10) (14) (10) (8) (5) (9) (9) (9) (8) Operating Expendltlue 55 [ 0 60 62 64 71 73 75 78 Table 10.2.4 TRANSPORT SECTOR REVIEW UIKRAINIAN AIRPORTS Pro-Forma Sources & Uses of Funds per year, as of December331 (USS min) nAaH PROJECTE _ Source: Reports N 97#9 99~0 SOURCES OF FUNDS Net Income (10) (14) (10) (8) (5) (9) (9) (9) (8) Depreciation & Provisions 20 21 22 23 23 29 30 31 32 Other Funds from Operations 10 8 12 is 18 19 21 22 24 Borrowings Equity Capital Change in working capital 0 0 6 5 4 4 (1) (1) (1) Financing 0 0 6 5 4 4 (1) (1) (1) Total Sourc 10 8 18 20 22 23 20 21 23 USES OF FUNDS Repayment of LT Debt 1 1 1 I 1 I 1 Net Plant & Equipment 10 8 20 20 30 30 30 30 Change in Working Capital nee 0 0 3 3 2 8 (0) (0) (0) Bad debts 0 0 0 0 0 1 1 1 1 Staff rightsizing program 0 0 0 0 0 0 0 Total Us"s 10 8 4 24 23 39 32 32 32 Total Sources & Uses 0 (0) 14 (4) (1) (16) (12) (10) (9) Estimated financng capacit 101 8 14 16 19 14 18 20 21 =__====== ======I ====== ======I ====== L ======I ====== ======l ====== Table 10.2.5 TRANSPORT SECTOR RE-VIEW URRAINIAN AIRPORTS Pro-Forma Balance Sheets per year, as of December 31 (USS mln) 'sUbO DAaH PROJECTED) Source: Reports No| 1997 | ; , . ... ASSETS Cash 2 2 15 11 10 (6) (17) (28) (36) Accounts Receivables 35 35 30 25 21 15 16 17 17 Inventories 3 3 3 2 2 4 5 5 5 Current assets 40 40 48 39 34 14 3 (6) (14) Fixed assets 675 708 733 753 773 803 833 863 893 Accumulated depreciation 400 421 443 466 489 517 546 576 608 Net Fixed assets 275 287 290 287 284 286 287 287 285 Work in progress 25 25 Othet assets 25 Total Aseas 365 351 337 326 318 300 290 280 271 UABILITIES Current Liabilities 20 20 17 14 12 5 5 5 5 LongTerrn Debt 10 10 9 8 7 6 5 4 3 Provisions 0 Paid in Capital 335 335 335 335 335 335 335 335 335 Retained Earning (Loss) (14' (24) (31) (36) (46) (55) (64) Current incorne (14) (10) (8) (5) (9) (9) (9) (8) Total Equity 335 321 311 304 299 289 280 271 263 Total liabilities 365 351 337 326 318 300 290 280 271 ==~ ~~~~~~........... ==== ===J=== === === === === -=.= === Table 10.2.6 TRANSPORT SECTOR REVIEW UKRAINIAN AIRPORTS ProForma Ratio Analysis 4)ascns.no nnAa PROIECTED Source: Reports No 1°97 19 1 ____ _ 2 Efficicey:. Revenue turnover 16.6% 16.1% 17.3% 19.0%0 20.9% 21.6% 22.4%/ 23.3% 24.3% Receivables tumover* 276 272 213 167 131 90 90 90 90 Inventory tumover * 24 23 Number Employees 10,000 10,000 9,900 9,801 9,703 9,509 9,319 9,132 8,950 Traffic Units/Employee 324 325 341 358 375 391 407 423 441 Pricing: Passengers (number departing) @ USS per Unit 14.1 14.2 14.9 15.6 16.3 16.6 16.9 17.3 17.6 Profitability Working Ratio 77%/( 84% 76% 73% 70% 69% 68% 67% 66% OperatingRatio 121% 129% 120% 114%/a 109% 115% 114%/9 113% 112°/s In US$ min EA _ _ o uk o en o m o en o en f~~"0 °oroA o o ~ ~ ~ ~ ~ ~ ~ ~~o" o g Gnh10.2.8: Gross OperatingRsl- w~~ ~ ~ ~ ~ I | 00Scenario 3: Comnpleto Refoffm ~ *IScenario 2: Gradual Reform dw'.IScenario 3: Status Quo Graph .2.9: estmeFinancing Capacity * 30 10 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 | Scenario 1: Complete Reform ~ *~Scenaro 2: Gradual Reformr - Scenano 3: Status Quo Graph 12.1.1: Traffic Forecasts, Freight Graph 12.1.1: Traffic Forecasts, Passenger . . ' ......... 1, 0 1 5 109 20A0 200 1 20a 2003 7004 2005 , . ,nn, ,v 0, , 0.,,n I *Air ~~~~~~Sea Potts RivetPotts I i ePK River Ports t Railways ~Road Pipeline | abvs_ o d- U rban Totnport 0 .Scena.i..3Complete Ref ne '|Scna0o 3 StatusQuno| ICooplete Refomm _Seenano 3 SautQuo Eg~~~~~~~~~~~~~~~~~~~~~~ rA .Graph 12.1.3: Expected Economic Benefits from Trade Facilitation measures 2,5000 .0 2 2 00 In USS mln ' ~~~~~~~omplete Reor > Gada refom m Stau Quo, _~~~~~~~~~~~~~~~" . ........ ... .. .... .. Table 12.2.1 TRANSPORT SECTOR REVIEW (Actual 199UW1997 and Projected 1998-2005) 1990 1993 I994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 200 FREIGHT (mnin tons) Air 0.2 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Sea Ports 121.5 55.3 51.5 50.6 48.4 57.5 60.5 65.8 71.7 78.2 81.4 84.7 88.1 91.7 River Ports 66.0 25.0 20.0 13.0 8.0 2.0 2.0 2.1 2.1 2.2 2.3 2.4 2.5 2.7 Railways 974.0 532.0 408.0 360.2 343.2 333.8 331.1 325.5 320.9 317.2 323.6 330.3 337.1 344.0 Road 4,897.0 2,811:0 1,869.0 1,816.0 1,254.0 1,300.0 1,300.01 1,339.0 1,379.2 1,420.5 1,491.6 1,566.2 1,644.5 1,726.7 Pipeline 296.0 251.0 244.0 246.0 246.0 250.0 250.0 257.5 265.2 273.2 286.8 301.2 316.2 332.1 TOTAL FREIGHT 6,3547 3,674.3 2,592.5 2,485.8 1,899.6 1,943.3 1,943.7 1,989.9 2,039.2 2,091.4 2,185.8 2,284.8 2,388.5 2,497.2 _______ ______3 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 PASSENGER (mlln passen rs) Air 29.5 15.0 10.0 3.7 3.5 3.2 3.3 3.5 3.9 4.2 4.4 4.6 4.9 5.1 Sea Ports 26.0 11.0 10.0 8.0 5.0 5.0 5.0 5.1 5.2 5.3 5.5 5.6 5.8 6.0 River Ports 19.0 8.0 7.0 4.0 3.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Railways 669.0 502.0 736.0 577.0 538.0 506.5 468.5 383.7 315.5 260.4 226.7 197.8 173.0 151.8 Road 8,331.0 4,795.0 4,040.0 3,483.0 3,305.0 3,300.0 .3,300.0 3,399.0 3,501.0 3,606.0 3,786.3 3,975.6 4,1744 4,383.1 Urban Transport 5,917.0 3,405.6 2,869.4 2,742.0 2,914.0 3,000.0 3,000.0 3,090.0 3,182.7 3,278.2 3,442.1 3,614.2 3,794.9 3,984.6 TOTAL PASSENGER 14,991.5 8,736.6 7,672.4 6,817.7 6,768.5 6,814.7 6,776.8 6,81 ,08 7,154.2 7,465.0 7,798.0 8,1531 8,530.7 Source: Statistical documen alsources, ransport departent, Rlway, Sea and River Ports aMission E-timates -~~~~~~mi tons i ~~~~mln passengers oI I 5~~~~~~~~~~., g E X S ~~~~~~~~~~~~~5's. Table 12.2.3 TRANSPORT SECTOR REVIEW (in US$ win) __1997 199 I 1999 2000 2001 2002 2003 2004 2005 OPERATING REVENUES Air 45.7 46.2- 55.4 66.4 , 79.6 87.7 96.7 106.6 117.5 Sea Ports 324.8 325.0 330.2 335.3 341.1 360.2 380.3 401.7 424.3 River Ports 6.0 6.0 6.2 6.4 6.6 8.0 8.4 8.9 9.3 Railways 2,063.8 2,021.4 2,148.9 2,289.5 2,444.6 2,591.7 2,738.8 2,896.8 3,066.4 Road 405.0 544.0 1,345.6 1,254.9 1,195.1 1,299.7 1,414.1 1,538.8 1,674.5 Pipeline Urban Transpor 109.5 116.0 142.0 173.8 212.7 234.4 258.4 284.8 313.8 Metro 55.0 55.0 64.5 75.7 88.8 96.0 103.8 112.3 121.4 TOTAL REVENUES 3,009.9 3,113.6 4,092.8 4,201.9 4368.4 4,677.7 5,000.6 5,349.7 5,727.. 197 __ WX8 - - 20,00- 2001 2002 2003 2004 2005 OPERATING EXPENDITURES Air 55.4 59.9 60.0 60.7 61.9 69.8 73.1 76.5 80.1 Sea Ports 170.9 207.5 206.7 210.9 218.3 235.3 251.3 268.6 287.2 River Ports 6.4 6.4 6.6 6.8 7.0 7.6 8.0 8.3 8.8 Railways 3,065.5 2,521.9 2,485.0 2,485.9 2,495.4 2,509.2 2,551.9 2,597.8 2,646.5 Road 1,200.0 1,151.7 1,401.1 1,353.4 1,310.0 1,476.1 1,527.8 1,571.5 1,616.7 Pipeline Urban Transport 218.3 222.5 230.3 238.4 247.0 255.6 264.6 273.8 283.5 Metro 69.8 80.7 82.7 84.6 86.7 95.0 98.1 101.2 104.5 TOTAL EXPENDITURE 14,786.2 _4,250.6 4,472.3 4,440.8 4,426.11 4,648.5 4,774.8 _4,97.9 5,027.2 197 998 I 9 2000 200 2002 2-003- 2004 -2005 1"7 1"9 000 20200012 GROSS OPERATING RESULT Air (10) (14) (5) 6 18 18 24 30 37 Sea Ports 154 118 124 124 123 125 129 133 137 River Ports (0) (0) (0) (0) (0) 0 0 1 1 Railways (1,002) (500) (336) (196) (51) 83 187 299 420 Road (795) (608) (55) (99) (115) (176) (114) (33) 58 Pipeline 0 0 0 0 0 0 0 0 0 Urban Transport (109) (107) (88) (65) (34) (21) (6) 11 30 Metro (15) (26) (18) (9) 2 1 6 1 1 17 TUrAL RESULT (1,776) (1,131) (379) (239) eSs 29 226 452 700 Table 122.1 TRAUNSPORT SECTOR REVIEW (Actual 1990-1997 and Projected 19982005) 1990 1993 1994 1995 1996 1997 1998 1999 2000 2001_ 2002 2003 2004 2005 FREIGHT (min tons) Air 0.2 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 SeaPorts 121.5 55.3 51.5 50.6 484 57.5 60.5 64.0 67.8 71.9 74.1 76.5 78.9 81.4 River Ports 66.0 25.0 20.0 13.0 8.0 2.0 2.0 2.0 2.0 2.1 2.1 2.1 2.2 2.2 Railways 974.0 532.0 408.0 360.2 343.2 333.8 331.1 326.6 322.7 319.3 324.2 329.2 334.3 339.5 Road 4,897.0 2,811.0 1,869.0 1,816.0 1,254.0 1,300.0 1,300.0 1,313.0 1,326.1 1,339.4 1,366.2 1,393.5 1,421.4 1,449.8 Pipeline 296.0 251.0 244.0 246.0 246.0 250.0 250.0 252.5 255.0 257.6 262.7 268.0 273.3 278.8 TOTAL FREIGHT 6,354.7 3,674.3 2,592.5 2,485.8 1,899.6 1,943.3 1,943.7 1,958.3 1,973.8 1,990.3 2,029.4 2,069.4 2,110.2 2,151.9 1990 1993 1994 1995 1996 1997 1998 1999 -2"000 2001 2002 2003 2004 2005 PASSENGER (miss pass engers) Air 29.5 15.0 10.0 3.7 3.5 3.2 3.3 3.4 3.7 3.9 4.0 4.1 4.2 4.4 Sea Ports 26.0 11.0 10.0 8.0 5.0 5.0 5.0 5.1 5.2 5.3 5.5 5.6 5.8 6.0 River Ports 19.0 8.0 7.0 4.0 3.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Railways 669.0 502.0 736.0 577.0 538.0 506.5 468.5 383.7 .315.5 260.4 226.7 197.8 173.0 151.8 Road 8,331.0 4,795.0 4,040.0 3,483.0 3,305.0 3,300.0 3,300.0 3,333.0 3,366.3 3,400.0 3,468.0 3,537.4 3,608.1 3,680.3 Urban Transport 5,917.0 3,405.6 2,869.4 2,742.0 2,914.0 3,000.0 3,000.0 3,030.0 3,060.3 3,090.9 3,152.7 3,215.8 3,280.1 3,345.7 TOTAL PASSENGER 14,99L5 8,736.6 7,672.4 _,8 6,768.5 6,814.7 6,776.8 6,755.3 6,751.0 6,760.6 6,869 6,960.7 7,0713 7,188.1 Source: Statistical documn ts all sources, Transport department, Railwy, Sea and iver Ports and Mission Egtinnates - 900 99 3l ars (01 ~T1 002 A t O 880 3 l, 04 r3 §t990 -!wq 101993 - 994 il0 .0052 S g XI 003 M;. S Table 12.2.3 TRANSPORT SECTOR REVIEW (in USS mmn) (U n-n - ---- 1 1997 1998 1999 2000 2001 2002 2003 2004 2005 OPERATING REVENUES Air 45.7 46.2 52.9 60.5 69.2 73.4 77.9 82.6 87.7 Sea Ports 324.8 325.0 330.2 334.7 339.6 354.3 369.8 386.1 403.2 RiverPorts 4.0 4.0 4.0 4.1 4.1 5.3 5.4 5.5 5.6 Railways 2,063.8 2,021.4 2,088.7 2,160.8 2,237.8 2,320.9 2,398.9 2,481.4 2,568.4 Road 405.0 544.0 1,307.1 1,215.8 1,155.4 1,086.2 1,148.2 1,213.7 1,283.2 Pipeline UrbanTransport 109.5 116.0 134.7 156.5 181.S 198.4 216.5 236.3 257.9 Metro 55.0 55.0 61.1 67.9 75.4 80.8 86.5 92.7 99.2 TOTAL REVENUES 2,843.4 2,940.6 3,782.9 3,775. 3,806.2 3,840.1 4,000.1 4,169.3 4,348.1 - -~~ ~ ~ ~ -999--0020- -0- - 1997 1998 9 2000 2001 2002 2003 2004 2005 OPERATING EXPENDITURES Air 55 70 60 61 63 69 72 74 77 Sea Ports 170.9 207.5 223.4 235.5 248.3 256.4 265.9 275.7 285.9 River Ports 6.4 6.4 6.5 6.5 6.6 6.9 7.1 7.2 7.4 Railways 3,065.5 2,554.9 2,531.1 2,521.7 2,518.1 2,470.3 2,488.7 2,508.8 2,530.6 Road 1,200.0 1,151.7 1,260.8 1,220.8 1,183.2 1,344.9 1,392.8 1,436.4 1,481.6 Pipeline Urban Tansport 218.3 222.5 213.9 218.6 223.5 229.5 235.7 242.1 248.8 Metro 69.8 80.7 82.2 83.6 85.1 87.1 89.2 91.4 93.6 EOTAL EXPENDffU 4,716.4 4,213.0 4,295.5 4,264.7 4,242.7 4,377.5 4,462.0 4,544.6 4,631. 199q70 1" 9=99 2000 2001 2002 2003 2004 2005 GROSS OPERATING ESULT Air (10) (24) (7) (1) 6 4 6 8 11 SeaPorts 154 118 107 99 91 98 104 110 117 River Ports (2) (2) (2) (2) (2) (2) (2) (2) (2) Railways (1,002) (534) (442) (361) (280) (149) (90) (27) 38 Road (795) (608) 46 (5) (28) (259) (245) (223) (198) Pipeline 0 0 0 0 0 0 0 0 0 UrbanTranport (109) (107) (79) (62) (42) (31) (19) (6) 9 Metro (15) (26) (21) (16) (10) (6) (3) 1 6 TOTAL RESULT (1,764) (1,156) (378) (332) (2 (339)- (245) (39j (2t 5 TOTL- --UL- - - - ) -2 Table 12.2.1 TRANSPORT SECTOR REVIEW iciual 19 9 1i97and 'rojected 1998-2005) 1990 13 1994 -_5_ I96 1997 1998 1999 2000 2001 2002 2003 2004 2005 FREIGHT (mnd tons) Air 0.2 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Sea Ports 121.5 55.3 51.5 50.6 48.4 57.5 60.5 62.3 64.2 66.1 67.2 68.2 69.3 70.4 River Ports 66.0 25.0 20. 0 13.0 8.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.1 2.1 Railways 974.0 532.0 408 .0 360.2 343.2 333.8 331.1 327.4 323.9 320.5 317.3 314.4 311.6 309.1 Road 4,897.0 2,811.0 1,869.0 I,816.0 1,254.0 1,300.0 1,300.0 1,300.0 1,300.0 1,300.0 1,313.0 1,326.1 1,339.4 1,352.8 Pipeline 296.0 251.0 244.0 246.0 246.0 250.0 250.0 250.0 250.0 250.0 252.5 255.0 257.6 260.2 TOTAL FREIGHT 6,354.7 3,674.3 2,592.5 2,485.8 1,899.6 1,943.3 1,943.7 1,941.8 1,940.1 1,938.7 1,952.1 1,965.9 1,980.0 1,994.6 19T 193 1994 S 1996 1997 1998 2000 20 2 2003 2004 2005 PASSENGER (mli passen rs) Air 29.5 15.0 10.0 3.7 3.5 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.9 SeaPorts 26.0 11.0 10.0 8.0 5.0 5.0 5.0 5.1 5.2 5.3 5.5 5.6 5.8 6.0 RiverPorts 19.0 8.0 7.0 4.0 3.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0. 1 0.1 Railways 669.0 502.0 736.0 577.0 538.0 506.5 468.5 445.1 422.9 401.7 381.6 362.5 344.4 327.2 Road 8,331.0 4,795.0 4,040.0 3,483.0 3,305.0 3,300.0 3,300.0 3,300.0 3,300.0 3,300.0 3,333.0 3,366.3 3,400.0 3,434.0 Urban Transport 5,917.0 3,405.6 2,869.4 2,742.0 2,914.0 3,000.0 3,000.0 3,000.0 3,000.0 3,000.0 3,030.0 3,060.3 3,090.9 3,121.8 TOTAL PASSENGER 14,991.5 8,736.61 7,672.4 6,817.71 6,768.5 6,814,7 6,776.8 6,753.61 6,731.6 6,710.7 6,753.1 6,798.6 6,845.0 6,893.0 Source: Statistical documents all sources, Transpot department, Railway, Sea and River Ports and Mission Estimnates Graph 12.2.2: Traffic Actual and Forecasts, Freight Graph 12.2.2: Traffic Actual and Forecasts, Passenger 6,000 '~.:~'..:.~'~ "14,000 ~ 5 000*>tii43 .Q ~~.~,12 000 X~~~ ~ ~ i4$.~ ..,.. g&.~W it i f i i it i g fi g g | f 'C,.. ~~~~~~~~~~~~ ~ 10,000 . *4x$."t . 13.000 6,O D0$D " ~ ' 0 Air SeaPofla rts RivePrt Pay s o Ports RaverPorts § § Road S Pipeine -1 997T1h9ffic _Road Uban T pt _ 0 1997 Tra__ Table 12.2.3 TRANSPORT SECTOR REVIEW (In US$ nibi) 1997 9 1999 200 2001 T 2002 2003 2004 2005 OPERATING REVENUES Air 45.7 46.2 50.2 54.5 59.3 61.7 64.2 66.8 69.5 Sea Ports 324.8 325.0 329.7 333.5 337.5 348.5 359.8 371.5 383.7 River Ports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Railways 2,063.8 2,021.4 2,009.3 1,998.8 1,989.7 2,007.3 2,018.0 2,030.2 2,044.0 Road 405.0 544.0 439.2 395.3 355.8 302.4 257.0 218.5 185.7 Pipeline Urban Transport 109.5 116.0 114.8 113.6 112.5 110.2 108.0 105.8 103.6 Metro 55.0 55.0 56.1 57.2 58.4 59.5 60.7 62.0 63.2 TOTAL REVENUES 2,839.4 2,936.6 2,828.4 2,782.1 2,742.3 2,719.8 2,699.t 2,687. 2,682.1 1__7 1998 199 2000 2001 - 2002 2eo3 0024 2005 OPERATING EXPENDIT URES Air 55.4 59.9 60.1 62.2 64.4 71.1 73.3 75.4 77.6 Sea Ports 170.9 207.5 233.3 253.3 275.4 293.9 306.8 320.0 333.6 River Ports 6.4 6.4 6.4 6.4 6.4 6.7 6.7 6.8 6.9 Railways 3,065.5 2,494.6 2,523.4 2,531.9 2,542.6 2,572.1 2,583.1 2,595.6 2,609.5 Road 1,200.0 1,151.7 1,155.1 1,158.5 1,162.0 1,177.1 1,192.5 1,208.0 1,223.8 Pipeline Urban Transport 218.3 222.5 209.2 209.2 209.5 207.9 206.5 205.4 204.6 Metro 69.8 75.6 76.3 76.9 77.6 78.8 80.0 81.2 82.5 TOTAL EXPENDITURE 4,716.4 4,142.6 4,187.6 4,221.6 4,260.3 4,328.9 4,368. 4,411.3 4,456.0 1997 W1998 t99 2000 2001 2002 2Tff 2004 2005 GROSS OPERATING RESULT Air (10) (14) (10) (8) (5) (9) (9) (9) (8) Sea Ports 154 118 96 80 62 55 53 52 50 River Ports (6) (6) (6) (6) (6) (7) (7) (7) (7) Railways (1,002) (473) (514) (533) (553) (565) (565) (565) (566) Road (795) (608) (716) (763) (806) (875) (935) (990) (1,038) Pipeline 0 0 0 0 0 0 0 0 0 Urban Transport (109) (107) (94) (96) (97) (98) (99) (100) (101) Metro (15) (21) (20) (20) (19) (19) (19) (19) (19) TOTAL RESULTS (¶76lj (,090) (1,244) (1326) (1,46) 1,499) (1,562) (1,619) (1,670)