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#Enterprises of the State Property Fund. "Privatization, despite the war, provides a unique opportunity for business," Oleksandr Popov, Director of the Ust-Dunaisk Seaport

In the beginning of 2023, the State Property Fund sold a state-owned port at an open auction for the first time. In times of war, when it would seem quite risky to invest the money needed to start a new business, the Fund managed to attract a credible investor for the Ust-Dunaisk Seaport, willing to modernize Ukraine's port infrastructure. 

Oleksandr Popov was appointed by the Fund as acting director of the Ust-Dunaisk Seaport in January 2023. Mr. Popov, who has extensive professional background - specialized education and experience of leading positions in Mykolaiv Port (Head of the Port Authority), Ukraine Sea Ports Authority, Chornomorsk Port (Director), along with the project implementation related to public-private partnering and investing in port infrastructure, preparing and organizing state property lease and concession tenders - accepted the Fund's offer to lead the port enthusiastically. In his opinion, port sale is a good example of how privatization, even in times of war, offers a unique perspective for Ukrainian business.

Oleksandr Popov, acting director of the Ust-Dunaisk Seaport:

"The port of Ust-Dunaisk is quite young compared to the neighboring seaports on the Danube (Reni and Izmail) and was established in 1977 as a barge service base. Offloading barges of the Danube shipping with a large draught at the roadstead was unique at that time. However, the construction and further operation of barges on the economically unattractive but politically expedient Danube-Vietnam route at the time was hopeless. Very soon, the barge fleet was replaced in almost all ports by cheaper feeder (container) shipping, which was followed by the active construction of marine container terminals in 90-2000 around the world as well as the development of door-to-door container delivery, so barge transportation practically disappeared in maritime transport.

In the 2000s, cargo processing at the port of Ust-Dunaisk was concentrated in the cargo area at the port point of Kilia on a single pier No. 1, which is 150 meters long. In recent years, after the port was divided into the Ukrainian Sea Ports Authority and state stevedoring companies (port operators) in 2013, the Ust-Dunaisk Seaport was consistently unprofitable. 

Since the start of the full-scale invasion, things have changed dramatically. Most seaports have been blocked. Therefore, the Danube ports received an opportunity to declare their importance for all transportation players. In 2022, cargo turnover on the lower Danube increased 10 times. The number of ship calls, including at the port of Ust-Dunaisk, increased from the planned 34 to more than 400. 

We had to respond quickly to the challenges of wartime. Our main tasks were to improve transshipment efficiency and thereby increase the volume and speed of cargo processing, as well as to launch towing services. As a result, in January-March 2023, the transshipment of the state stevedore of the State Enterprise "Ust-Dunaisk Seaport" increased to 92.9 thousand tons of cargo (3.8 thousand tons in the same period in 2022).

Another challenge was to expand the range of cargoes. It has shifted towards exports of agricultural products and processed products (grist), loaded with regard to the port's draught on ships with a deadweight up to 6,000 tons. The port handles metal and general cargo in big bags (fertilizers, building materials, cement, salt). In 4 months of 2023, the enterprise paid UAH 12.5 million of taxes to the budget, including UAH 1.7 million of income tax and UAH 6.1 million of dividends.

Recent improvements in the port's operations have made it attractive for investment. On January 17, 2023, Vinnytsia-based company Elixir Ukraine won the auction for the sale of the Ust-Dunaisk property complex on Prozorro.Sale. The price of the port increased 3.3 times from the initial to UAH 201 million at the auction. Elixir Ukraine has already paid the winning bid plus UAH 40 million in VAT. The new owner of the port is ready to modernize warehouses and purchase loading equipment, as well as contribute to the creation of connecting roads and transportation, as the port has no railway connection. In the long term, Elixir Ukraine plans to build a 50,000-ton grain elevator in the port.

The process of transferring the Ust-Dunaisk property complex from the state to the new owner is still going on. The new owner is currently waiting the approval of the Antimonopoly Committee. In the near future, it should also resolve the issue of restoring the port's share of state property (6%), which was illegally obtained by local shadowy authorities.

Certainly, private business has an advantage and the ability to invest and develop terminals more efficiently in accordance with its own vision and strategy. In the pre-war period, state-owned stevedoring companies were constantly losing market share, and in some ports, state-owned stevedores no longer exist (they do not process cargo). Today, more than 90 private stevedoring companies operate in the market.

In recent years, the structure of cargo processing by the form of company ownership has been as follows: 

  • private stevedoring companies at their own piers - 40%;
  • private stevedoring companies at the piers of State Enterprise "Ukrainian Sea Ports Authority" - 38%;
  • state-owned stevedoring companies - 22%.

I believe that it is prudent for the state to develop the Yuzhnyi Seaport among the ports of big Odesa and the Izmail Seaport on the Danube, while the other state-owned stevedoring companies should be transferred to national and foreign investors by involving investments and public-private partnerships. Agroholdings and steelmakers have their own advantage - the availability of a cargo base including adjustments for post-war recovery. The state stevedoring companies have competence in port logistics. Such synergy will undoubtedly have a positive impact on all stakeholders."

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