Sevastopol seaport in annexed Crimea became unprofitable

Author : News organization EurasiaNet

Source : EurasiaNet

Although the port of Sevastopol was one of the most profitable city’s state-owned enterprises until 2014, in 2014-2016, it was operating at a loss of 420 thousand USD to 2 million USD annually
14:40, 2 April 2018

Read the original text at EurasiaNet

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Until 2014, Crimea has been under the control of Kyiv, and Sevastopol seaport was considered one of the most profitable state-owned enterprises of the city. Today, it is going through hard times, actually, like all the Crimean ports.

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Being the second in terms of transshipment volumes on the peninsula (after the port of Kerch), in 2014-2016 the port worked at a loss that fluctuated from 420 thousand USD to 2 million USD annually. Following the results of 2017, the port's management expects a loss of 1,1 million USD (the results have not yet been summed up), for 9 months it amounted to 1,4 million.

As the general director of the Sevastopol port Sergey Yemelyanov stated, the reasons for the losses are the reduction in turnover, unprofitability of some areas of work, and a large number of unusable ships occupying berths that could be used more efficiently (for example, could be used by the carriers). "In some cases, the repair of such vessels is comparable with the purchase of a new vessel," Yemelyanov claimed.

There are two cargo areas in the port of Sevastopol, two berths in Inkerman (near Sevastopol) and five berths in Kamiesch Bay in the western part of the city. The main cargo is sand, crushed stone and aerated concrete blocks that come to Sevastopol from the mainland of Russia and diverge over various construction projects, including the Tavrida road, which is laid between Kerch and Simferopol.

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In 2017, throughput fell by 35% (to 304 thousand tons). The fact is that at the end of 2015, Crimea was powered down due to the undermining of power lines in the territory of the Kherson region of Ukraine, and during 2016 the port of Sevastopol received fuel oil, which was used by local power plants to generate the energy (126.6 thousand tons of fuel oil in the 2016 year). In 2017, the transfer of fuel oil was stopped.

About 10-15% of cargo turnover is export-import cargo. The port accepts imported cement and exports scrap metal, but the port authorities do not disclose the names of the countries. In 2018-2019, the port expects the growth of cargo turnover due to the construction of the Tavrida road, the growth of grain transshipment and the start of the receipt of construction materials for the reconstruction of a major military facility in Crimea.

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To reduce losses, in 2018, the port has radically revised its work. First, the company is preparing to sell a total of 18 old ships, which will eliminate the need to spend money on their maintenance and make way for mooring other vessels.

It is also assumed that since May 2018 the first high-speed vessel "Kometa 120M" with the capacity of 120 people will ply between Sevastopol and Yalta (in the future its route will extend to the Krasnodar Territory of Russia). This route was introduced by the United Shipbuilding Corporation, which received 21 million USD from the government for the construction of passenger ships to resume the Azov-Black Sea high-speed lines. 

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According to Boris Kabakov, Director of the Department of the Shipbuilding Industry and Marine Equipment of Russia’s Ministry of Industry and Trade, it is planned to produce six "Comets" to link Crimea and Krasnodar (Russia). In addition, the "Prince Vladimir" ferry began to moor in Sevastopol since 2017 (since 2018 it plies between Crimea and Sochi).

In addition to receiving third-party vessels, the port lets seven launches of the Molodizhny project (for 200-250 people) and two ferries during each navigation. The ships carry locals and tourists from the city center to the northern side of Sevastopol (the city is divided into two parts by a huge bay). At the same time, almost a third of passengers (26%) are local residents who have the status of preferential categories of citizens and use the ferry for free. The passenger traffic in 2015 – 2017 was 6.2 – 7 million people per year.

To replenish the fleet of ships, the port sent proposals to the Ministry of Transport of the Russian Federation for the purchase of 5-6 new boats worth 23 million USD. If the agency approves them, the vessels will be purchased under the program of non-commercial leasing of passenger transport in Crimea. For example, in 2015, buses and trolley buses were bought for the enterprises of Krymavtotrans (140 buses for 24 million USD) and Krymtrolleybus (111 trolleybuses for 28 million) at the expense of the State transport leasing company.

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In the spring of 2018, the port authorities will present a development plan, in which several investment projects will be announced on the basis of public-private partnership. The details of the port's management are not yet available. For example, Yemelyanov explains, the building of the sea terminal in Nakhimov Square is occupied by the port staff, while it could be used as a business center.

"If everything goes well, we will probably transfer our main office to the Kamiesch Bay, because the area in the city center is used inefficiently," Yemelyanov noted.

In addition, they are considering to increase the length of cargo berth number 210 (the depth near which is relatively large – 10-12 m) and the purchase of equipment for transshipment of the container cargo.

Related: Ukraine's Border Guard release summary of work on border with Crimea

The port needs money to develop the existing crane facilities and reload the equipment. In 2017, the company tried to attract about 50 million on the security of working capital (the monthly volume of which is 52-60 thousand USD), but these plans were unsuccessful.

"Despite the loans nesessaty, which is a big advantage in the eyes of banks, there were no undertakers. In 2018, we will try to attract money already on the security of property. Leasing options are also considered," said the head of the enterprise.

If all these plans are successful, the port of Sevastopol hopes to get rid of losses in 2018 or 2019, Yemelyanov added.

Alexander Alikin

This column does not necessarily reflect the opinion of the editorial board or 112.International and its owners.

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