The Government is Looking for Private Investors for Lending for Investment Projects in Sea Ports
Mykola Siutkin
You do business, we mitigate risks | Business Investment Risk Advisor | Co-founder of S&P Agency | Attorney | Co-publisher LDaily | Ironman
The Need for Investment in Port Infrastructure
The Government is turning to private investors to help fund the modernization of seaports. A draft resolution submitted to the Cabinet of Ministers addresses the repayment mechanisms for investments initiated by business entities into state-owned strategic port infrastructure. In addition to replacing a weak fiscal policy and insufficient maritime industry funding caused by military aggression from the Russian Federation against Ukraine, the initiative aims to compensate for lack of funds at the state enterprise "Administration of Sea Ports of Ukraine" (AMPU).
Even before the military aggression, the state enterprise AMPU needed a UAH 12 billion over four years to finance the repair of over 48 piers. Although the administration signed contracts for numerous construction projects, the lack of resources prevented the projects' completion. The AMPU has an obligation to maintain the port infrastructure. As of Feb 24, 2022, there are 265 berths in 13 Ukrainian seaports, of which:
Investment Compensation, Concession, and Leasing
According to the Cabinet's draft, it will not be necessary to have an approved financial plan to invest in port modernization. Investment compensation will not exceed the amount paid by the investor, who can be an individual entrepreneur or a legal entity. There may be multiple investors for one object.
Notably, the new order will not apply to contracts for public-private partnerships, including concession contracts and state property lease contracts.
Conclusion
To meet the urgent need of maintaining the port infrastructure, it is essential to create an effective mechanism for attracting private investment. This includes financing repair, modernization, reconstruction, and construction of strategic port infrastructure facilities that are state-owned.
The draft act marks a significant step in achieving this objective by defining the mechanism for an agreement between the AMPU and investors regarding the compensation of investments made in the strategic objects of the port infrastructure, which are state-owned.
However, careful adherence to Ukraine's legal obligations, equilibrium between public and private interests, and routine anti-corruption examinations will be critical to the project's successful implementation.
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