Round table discussion on creation of Industrial Parks on the territory of Dnipropetrovsk region

2

Content

The participants of round table discussion 2

Strategic aim on creation of IP 3

International experience in creation of IP 4

History development of IP in Ukraine 5

State mechanisms for attracting investments 6

Site for the IP location in the Dnipropetrovsk region 7

Energy infrastructure of IP “Pavlohrad” 8

Steps for creation of IP “Pavlohrad” 9

Energy infrastructure of IP “Kryvbas” 10

Steps for creation of IP “Kryvbas” 11

The participants of round table discussion

3

The Chairman of Dnipropetrovsk Regional Council – Udod YevhenDeputy Chairman of the Regional Council for the executive staff– Peregudov Volodymyr

RSA – Deputy Chairman of Dnipropetrovsk Regional State Administration – Molokov Stanislav

Deputy Mayor of Kryvyi Rih City Council – Svitlychnyi Oleksandr

Deputy Mayor of Pavlohrad City Council – Tykhonov Volodymyr

DIA – Director Gerasimenko Ivan

ORTEKSAN Consultancy LLC – Managing Partner– Berksan Buyukyıldız

DTEK – Head of Department of Sustainable Development - Hryb Viktoria

Dnipropetrovsk Regional Center for Investment and Development – Director Molodan Alim

SE Production Association Yuzhny Machine-Building Plant named after A.M. Makarov – Head of R&D Department – Dovhopol Oksana

SE Pavlohrad Mechanical Plant – Director Kyrychenko Volodymyr

BDO – Director of Development– Trykoz Oleh

PwC – Head of Dnipropetrovsk office – Volkova Olena PwC – Head of Consulting Department – Tymkiv Oleh

EBA – Head of Dnipropetrovsk office Uschchapovska Kateryna

DCCI – President Zhmurenko Vitalii

Glass Trösch – Head of Glass Trösch in Ukraine and Moldova , director of LLC Ukrglas – Orlov SerhiyGlass Trösch – Head of LLC Glass Trösch Dnipropetrovsk and Glass Trösch Kryvyi Rih – Yemets YaroslavGlass Trösch – Commercial Director of Glass Trösch in Ukraine and Moldova – Sorokun Serhiy

City Development Institution of Kryvyi Rih – Director Nahornyi Andrii

4

Strategic aim on creation of IP is regional economy diversification

industrial land Land is leased from Residents

with a subsequent right to purchase

not less than 15 hectares

Availability of roads for cargo transport and small remoteness from roads of national significance

Availability of railroads on the IP territory and small remoteness from freight train station

Proximity to the airport Proximity to the river port

Electricity Gas supply Water supply

Potable water Non-potable water

Water discharge

A specialized company managing the operation of the Industrial park and providing services to the IP residents

Industrial park is a specially organized territory for location of new facilities with provision of state preferences, as well as the provision of infrastructure and managed

by a specialized company

Proper plotfor plant location

Transport infrastructure

Engineering infrastructure

Management company

The main components of Industrial Park

5

International experience in creation of IP

World practice shows that at 1 hectare of industrial park area has accounted for :

from $1,0 to 5,0 mln. of investment.

From 20 to 50 jobs.

Russia 207

Operating 51Belarus

1

Black Sea

Poland300

Czech Republic 144

Slovakia38

Hungary206 Romania

48

Bulgaria 14

Turkey263

Operating 148

0

The Industrial Parks have been created and successfully operated in most countries.

Ukraine

Country

Number of

established

enterprises

Number of created

jobs, (thsd.)Number of IP

Russia 740 55,8 207/51

Poland 719 85,066 больших

(всего около 300)

Romania 572 49,4 48

Hungary 495 49,9 206

Czech Republic 416 47,1 144

Ukraine 0 0 0 

6

• History development of IP in Ukraine

The state support is provided for 10 pilot IP projects, which come into State Register.

Implementation of these projects can attract about $2,5 investment over 5 years and create 40 ths. jobs.

The first government initiative on creation of IP.

Adoption of law, which regulates the operation of IP in Ukraine.

In some regions the local authorities have initiated the process of IP creation.

The Ministry for Economic Development is forming the list for IP inclusion into the State Register.2006 г.

2012 г.

2013 г.

2014 г.

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Law of Ukraine “On stimulation of

investment activity”

Investor can perform investment activities for getting public benefits in the frameworks of law "On the industrial parks" and "On stimulation of investment activity".

In the course of investment activity on the territory of IP, it is possible to use benefits, which provide both laws.

Land Code of Ukraine – exempt from land auctions in the process land plot allocations of state or municipal ownership for creation of IP and for IP’s participants as well as setting a minimum term of the lease of land for 30 years.

Customs Code of Ukraine – exemption from duty on equipment and components, materials for IP arrangements that are not produced in Ukraine

Tax Code of Ukraine – a gradual increase in the income tax rate from 0% to16% within 10 years.

Arrangement of IP at the expense of state and local budgets (up to 25% of the arrangement’s costs)

Law of Ukraine “On Industrial Parks”

Exemption from equity participation in infrastructure development of populated places (up 10 % of the total estimated construction cost).

State mechanisms for attracting investments

Inve

stm

ent

acti

vity

Ind

ust

rial

Par

k

Providing tax incentives for encouragement of creation and operation of industrial parks (not developed).

8

Sites for the IP location in the Dnipropetrovsk region

Dnipropetrovsk

Pavlohrad

Former landfill of YuMP (Pavlohrad district)

Total area: 250 ha (with the possibility of expandability)Disposer: SE PA Yuzhny Machine-Building Plant named after A.M. Makarov (Act of permanent use)

Kryvyi Rih

Oktyabrskiy district(Kryvyi Rih)

Total area: 34 га Intended use: open land without vegetation cover or with a slight vegetal coverDisposer: Kryvyi Rih City Council

370 sites were analyzed, 3 priority investment sites were identified for a pilot IP placement. Key criteria for sites selection:

area – more than 30 ha; industrial land; public / state property.

9

Energy infrastructure of IP “Pavlohrad”

Gas

Existing Glas Trösch (I stage) Industrial Park (outlook)

Volume, m3/hour 13 000 7 000 21 000

The length of the gas pipeline

L=1 km L=1 kmL=10,6 km

(from GDS “Ternivka”)

Costs, mln. UAH.*(Design and construction)

1,912 1,912. 20,268

Electricity

Capacity, MW 50 MW 9 MW to 50 MW

Water supply

It is necessary to build wells on the territory of IP

Connection to the gas supply

Electrical substation PS 150/6/6 kV “PZTO”

GDS “Ternivka”

10,6 km

1 km

Pavlohrad

GDS

As you organize IP it is need to develop a feasibility study for IP energy infrastructure on the territory of IP. According to our calculation, the existing volume of gas is provided by GDS in Pavlograd. In the winter period it is gathering of gas from GDS “Ternivka”. In the prospects for further development of Glas Trösch, and also IP and for sustainable provision the territory with gas, it is needed to carry out modernization of gas main line

section from GDS “Ternivka” with initial costs of UAH 20 mln.

Railway line

* Approximate data of PJSC “Dnipropetrovskgas”

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Inclusion of IP into State Register

Launch of IP

Dnipropetrovsk RSA DTEK:

Development of target concept of the industrial park with the participation and financial support of DTEK.

Selection of Management Company

and creation of IP

Dnipropetrovsk RSA: Carrying out of competition

to select a management company;

conclusion of the contract with the winner for the creation and operation of industrial park.

Specialized departments of RSA:

Submit documents package into Stateinvestproject for inclusion into the register of industrial parks.

Arrangement of IP

Management Company: Concludes a contract

with participants on carrying on economic activity within the industrial park territory.

Management Company: Connection to the

engineering infrastructure.

Development of the concept of IP creation

YuMZ: RSA

transfer of the land plot (250 ha) from the usage of YuMZ into industry reserve lands for IP creation.

Preparation of land plot

Executing steps at the moment

Steps for creation of IP “Pavlohrad”

4 months 2 months 2 months 1 months n/a n/a

April May June July August

1

2014

1

2 3 4 5 6

23

4

Signature of memorandum with anchor participant of IP - Glass Trösch on 4.06.2014

Receiving of cadastral parcel number

ü

ü

11

Energy infrastructure of IP “Kryvbas”

Electrical substation

Water supply system

Gas

Canalization

Energy supply

Types of resourcesUnit of

measure

Un.of measure/ 1 ha of territory hour

Hours per day

Days per year

Requirement for territory

Per hour Per day Per year

Water supply system and water discharge m3 3,1 8 260 105,6 844,8 219 648

Gas supply m3 2,1 8 260 71,5 572 148 720

Energy consumptionkW/per

hourMaintenance of necessary capacity is possible after its determination and development of project design documentation.

Characteristics of the land plot

The total land area 34,07 ha

Category of land Lands of industrial purpose

Communications There are no network engineering - power lines, main gas lines, waterlines and other communications. The figure shows the predefined connection point to the existing utility networks.

Transport infrastructure close location to the acting railroad track.

Distance from the land plot to: - Kryvyi Rih international airport – 35 km; - Roads of national significance Н11 (Dnipropetrovsk – Mykolaiv (via Kryvyi Rih) - 5,5 km;

- Roads of national significance H23 (Kirovohrad –Kryvyi Rih-Zaporizhzhya) - 11,5 km.

Information about the presence of especially valuable ;ands on a land plot

None. Ground investigation for compliance verification with article 150 of the Land Code of Ukraine was not conducted.

Inclusion of IP into State Register

Launch of IPSelection of Management Company

and creation of IP

Kryvyi Rih City Council: 1.1. Preparation of the draft

decision of the city council to organize and hold a tender for selection of the management company *

1.2. Carrying out of competition to select a management company;

1.3. conclusion of the contract with the winner for the creation and operation of industrial park

Kryvyi Rih City Council :

Submits documents package for inclusion into the register of industrial parks.

Arrangement of IP

Management Company: Concludes a contract

with participants on carrying on economic activity within the industrial park territory.

Management Company: Connection to the

engineering infrastructure.

* Выполняемые на данный момент этапы

Steps for creation of IP “Kryvbas”

6 months 2 months n/a n/a

March April June2014

1

1 2 3 4

2

May July August

April May

1.1 1.2 1.3

Project financing

Offer of project financing for creation of Industrial park in the Dnipropetrovsk region from Eximbank of Turkey

• State guarantee or warranty of one of Ukrainian banks

• loan amount to $ 300 mln.

• no more than 85% of project cost

• Bearing the date of 10 years

• % loan depending on the amount and submitted guarantees

• contractor for the project should be Turkish company

Commercial Banks of Ukraine, which can act as guarantor:• PrivatBank • UkrExim Bank• Raiffeisen Bank Aval • UkrSotsBank• ProminvestBank• VTB• ОТР Bank• Delta-Bank

Credit terms: