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Case Studies in Port FinancingAndrii TsokolPrincipal Banker, Transport Team
14 April 2023
14 April 2023 2
What is a good project?
14 April 2023 3
Reciprocal framesConcept
“ A reciprocal frame is a class of self-supporting structure made of three or more beams and which requires no center support to create roofs, bridges or similar structures...
The failure of a single element may lead to the failure of the whole structure. ”
Wikipedia
14 April 2023 4
Reciprocal framesUsed in architecture since long
Leonardo Da Vinci’s self-supporting arc bridge (1485-1487)
Chinese Rainbow Bridge – Qingming scroll (12th century)
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Reciprocal framesModern times
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Project structureBuilding blocks
Macro environmentCountry rating
Economic growthRegulatory environment
Business caseMarket test
Project structureStrong sponsor(s)
Offtake commitmentsRisk allocation
Financing structureCash flow generation
Security package
Successful project
14 April 2023 7
Overview of Global Transport Financing
Global transport financing overviewInstruments and their specifics
Characteristics of transport assets Long payback period
Big ticket projects ($100M+)
Regulation
Fluidity of traffic flows
Financing requirements Long tenors
Key role of debt / Syndication
Risk allocation
Offtake agreements
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2008 2009 2010 2011 2012 2013 20140
20
40
60
80
100
120
140
Financing by instrument
Equity LoansBonds IFI Government Support
USD
bn
Global transport financing overviewGlobal trends
1%
99%
Bonds
4%
96%
Loans
Non IG IG
15%
85%
IFI / Gov
Source: IJ Global, Fitch, S&P, author’s calculations
• Bank loans are the main source of debt financing for transport projects
• Bank lending is adapting to the constraints posed by regulation (Basel III):o shorter tenors (5
years)o local banks replacing
international banks in emerging markets
• Growing share of bonds
• Investment grade sovereign rating (BBB- and above) is critical for bonds
14 April 2023 10
Global transport financing overviewGlobal trends
2008 2009 2010 2011 2012 2013 20140
20
40
60
80
100
120
140
Financing by purpose
Primary Financing Refinancing
US
D b
n
35%
53%
12%
Bonds
51%
36%
13%
Loans
95%
3% 2%
IFI / Gov
Source: IJ Global
• Primary financing in decline until 2014
• Bond investors are most averse to construction risk, IFIs more willing to take it
14 April 2023 11
Case Study: Odessa grain terminal (Ukraine)
Case Study: Odessa Grain Terminal (Ukraine)Overview
Client: Brooklyn-Kiev LLC
Total project cost:
$104M
EBRD finance:
Senior loan $60M
Signed: 2014
Construction of a new grain terminal in the Port of Odessa with a maximum design throughput capacity of 4.5 million tons
Sponsors:
14 April 2023 13
Case Study: Odessa Grain Terminal (Ukraine)Business case
• Growing grain production and exports from Ukraine (record 32M tons in MY 2013/14)
• Biggest sales growth potential in distant markets (China #4 importer already)
• Large vessels generate up to 20 $/ton cost savings on long-distance transportation
• Shortage of deep water port capacity in Ukraine => high stevedoring charges
• Modern deep water terminal with advantageous location and good hinterland connections
Yuzhnyi
Nikolaev
Odessa
Illichevsk
Berdyansk
Kherson
Mariupol
Sevastopol
Kerch
Others
0.0 2.0 4.0 6.0 8.0 10.0
Ukraine grain turnover
2014
2013million tons
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Case Study: Odessa Grain Terminal (Ukraine)Project structure
• Strong partnership between a leading private port operator (BK) and a major international commodities trader and top-3 grain exporter from Ukraine (LDC)
• BK’s existing business generating stable cash flows
• New Terminal developed in stages => cash flows during construction
• Berth developed by the Administration of Sea Ports => third party risk (?)
14 April 2023 15
Case Study: DCT Gdansk (Poland)
Case Study: DCT Gdansk (Poland)Overview
Client: DCT Gdansk S.A.
Total project cost:
€361M
EBRD finance:
Senior loan €31M
Co-financing:
€259M syndicated loan financed by six banks
• Construction of a second deep-water container terminal at the Port of Gdansk to enable extension of capacity from current 1.35 million TEU to 2.55 million TEU
• Refinancing of existing loan facilities3 Australian pension funds
Sponsors:
14 April 2023 17
Case Study: DCT Gdansk (Poland)Business case
• Gdansk is the gateway terminal for Poland and a major transshipment hub for the SE Baltic and CEE regions
• Direct deep-sea call of the largest ULCS ships (up to 18,000 TEUs)
• Transportation cost savings of 20% on deliveries from Shanghai to Warsaw and 12% on deliveries to CEE compared to W European ports
• Market tested business case – 92% capacity utilization at Terminal 1
14 April 2023 18
Case Study: DCT Gdansk (Poland)Project structure
• Terminal 1 fully operational with an existing offtake from Maersk
• Cash flows from Terminal 1 alone are sufficient to cover debt service
• Strong sponsor and management team with a successful track record
• Fixed price turnkey EPC contract with a top tier construction company + direct lenders’ agreement with the contractor
14 April 2023 19
Case Study: Mersin Port (Turkey)
Industry Recognition 2013Port Deal of the Year (MEA)
Case Study: Mersin International Port (Turkey)Overview
Client: Mersin International Port
Total project costFinancing:
$857M
$450M Eurobond
EBRD stake:
$79.5M
Signed: 2013
• Refinancing of the company’s loan portfolio to restructure and strengthen balance sheet
• Capacity expansion including construction of a new deep-water berth (17.5 m)
Sponsors:
14 April 2023 21
Case Study: Mersin International Port (Turkey)Business case
• Established business with stable cash flows and growth prospects capitalizing on the development of the Turkish economy
• Diversified client and cargo base
• Strong competitive position (2nd largest container port in Turkey with a market share of 19%) and a dominant position in its catchment area (82% market share in SE Turkey)
• Limited construction risk – key facilities are operational, expansion limited in scope and not affecting existing business
Ambarli
Mersin
Kocaeli
Gemlik
Izmir
Aliaga
Antalya
Iskenderun
Others
Turkey container traf-fic, 2014
million TEU
14 April 2023 22
Case Study: Mersin International Port (Turkey)Project structure
• Favorable macroeconomic conditions (BB+/BBB- sovereign credit rating at the time of placement)
• Established business with predictable cash flows
• Strong partnership between a leading Turkish infrastructure investment group (Akfen) and a major international port operator (PSA)
• Stable regulatory framework: 36 year concession with clear terms & conditions and a good reputation on the market
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Summary and conclusions
Project structure building blocks
Odessa Gdansk Mersin
Macro environment
Sovereign rating
Economic growth
Regulatory environment
Business case
Market test
Project structure
Strong sponsor(s)
Offtake
Risk allocation
Financing structure
Cash generation
Security package
• Key challenges in Ukraine:o Macro environment
(outside of our control)
o Legal and regulatory issues (land and property titles, stable regulation, etc.)
o Timely delivery of commitments by the state
• Which projects are still successful despite the challenges?o Strong sponsorso Tested business caseo Offtake commitments o Balanced risk
allocationo IFI financing
14 April 2023 24
Thank you!
Contacts
© European Bank for Reconstruction and Development 2015
25
Andrii TsokolPrincipal Banker – Transportemail: tsokola@ebrd.com
European Bank for Reconstruction and DevelopmentKyiv Resident Office16 Nemyrovycha-Danchenka StreetKyiv 01133Tel: (044) 277 1100
For further enquiries, please contact :
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