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Industrial Parks in Pavlohrad and Kryvyi Rih
1
Content
Summary of IP “Pavlohrad” 2
Indices of effectiveness for the Management company of IP "Pavlohrad" 3
Summary of IP “Kryvyi Rih” 5
Indices of Effectiveness for the Management company of IP “Kryvyi Rih” 6
Industry analysis 8
IP development strategy in Dnipropetrovsk region 9
Sites for IP location in Dnipropetrovsk region 10
Water supply. Wastewater of IP "Pavlohrad" 11
Electricity supply of IP "Pavlohrad" 12
Gas supply of IP "Pavlohrad" 13
Steps for creation of IP “Pavlohrad” 14
Electricity supply of IP “Kryvyi Rih" 15
Steps for creation of IP “Kryvyi Rih” 16
State mechanisms for attracting investments 17
Annexes: 18
The strategic goal of IP creation
World experience in IP creation
The history of the development of IP in Ukraine
2
About project
Key indicators
of the project
Effect
The essence of the project is the creation of Industrial Park on the territory of the Pavlohrad district
near Pavlohrad city
Product of the project is specifically organized platform for the creation of new industries
Expected date of project launching - 1st quarter of 2015
Project status:
1. Allocation of land plot;
2. Creation of Management company of IP “Pavlohrad”, in the partnership with region, city,
district.
3. formation of a pool of IP participants;
4. Project development of general utilities admission
Project initiator– Dnipropetrovsk Regional Council, Dnipropetrovsk Regional State Administration.
Economic effect:
budget revenues through taxes and fees on business activities by IP residents.
Social effect:
creation of new jobs
improvement of infrastructure of the district
The necessary
resources for
the project
implementation
Land plot
Engineering infrastructure
Creation of 1000 work places
Attracting investments from $ 200 mln.
Summary of IP “Pavlohrad”
3
According to the chosen scenario, the income of Management company is formed from the following components::
basic package of basic package of Management Company services - custodial services of the Park territory and participants' facilities, cleaning, etc.
fee for the maintenance of engineering and transport infrastructure of the Park
Rental payments for leased office, exhibition and storage space in the territory of Park
additional services of the Management Company
The cost of these services is selected from the calculation of 25 000 UAH / month per 1 ha., with subsequent annual increases.
IndicesUnit of
measurementValue
Payback period (PB) month. 77,5
Net Present Value, NPV UAH thous. 144 403
Internal Rate of Return, IRR % 30
Profitability Index, PI 1,7
Budget, including UAH thous. 230 000
Internal funds UAH thous. 230 000
Outside finds UAH thous.
Financial and
economic
indicators
Expenses:
Utility charges
Salary expenses (Staff in the first year will be 30 people., with subsequent increase by up to 100 people within 9 years.)
Tax payments
Administrative costs
Promotion expenses
Operating costs and exploitation of industrial space
Investments:
Service lines admission
Surface infrastructure development
Facility construction
Indices of effectiveness for the Management company of
IP "Pavlohrad“ (1/2)
4
-150,000.0
-100,000.0
-50,000.0
-
50,000.0
100,000.0
150,000.0
200,000.0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
EBITDA Net income FCF DCF (cumulative)
Показатель 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
EBITDA 5 329,0 19 861,0 30 387,0 46 808,0 54 358,0 74 904,0 83 504,0 107 850,0 116 564,0 116 364,0
Net income 4 476,4 19 861,0 30 387,0 43 063,4 50 009,4 68 911,7 76 823,7 99 222,0 97 913,8 97 745,8
FCF -95 523,6 -30 139,0 20 387,0 33 063,4 40 009,4 58 911,7 66 823,7 89 222,0 87 913,8 87 745,8
DCF (cumulative) -95 523,6 -122 922,7 -106 074,0 -81 233,0 -53 906,0 -17 326,5 20 393,7 66 178,7 107 191,1 144 403,9
Indices of effectiveness for the Management company of
IP "Pavlohrad“ (2/2)
5
About project
Key indicators
of the project
Effect
The essence of the project is the creation of Industrial Park on the territory of Kryvyi Rih city
Product of the project is specifically organized platform for the creation of new industries
Expected date of project launching - 1st quarter of 2015
Project status: –
1. Creation of Management company;
2. formation of a pool of IP participants;
3. Project development of general utilities admission
Project initiator – Kryvyi Rih City Council
The necessary
resources for
the project
implementation
Summary of IP “Kryvyi Rih”
Land plot
Engineering infrastructure
Creation of 300 work places
Attracting investments from $ 200 mln.
Economic effect:
budget revenues through taxes and fees on business activities by IP residents.
Social effect:
creation of new jobs
improvement of infrastructure of the district
6
IndicesUnit of
measurementValue
Payback period (PB) month 74,5
Net Present Value, NPV UAH thous. 19 040
Internal Rate of Return, IRR % 30
Profitability Index, PI 1,9
Budget, including UAH thous. 23 000
Internal fundsUAH thous.
23 000
Outside finds UAH thous.
Financial and
economic
indicators
Indices of Effectiveness for the Management company
of IP “Kryvyi Rih” (1/2)
According to the chosen scenario, the income of Management company is formed from the following components::
basic package of basic package of Management Company services - custodial services of the Park territory and participants' facilities, cleaning, etc.
fee for the maintenance of engineering and transport infrastructure of the Park
Rental payments for leased office, exhibition and storage space in the territory of Park
additional services of the Management Company
The cost of these services is selected from the calculation of 25 000 UAH / month per 1 ha., with subsequent annual increases.
Expenses:
Utility charges
Salary expenses (Staff in the first year will be 30 people., with subsequent increase by up to 100 people within 9 years.)
Tax payments
Administrative costs
Promotion expenses
Operating costs and exploitation of industrial space
Investments:
Service lines admission
Surface infrastructure development
Facility construction
7
-20,000.0
-15,000.0
-10,000.0
-5,000.0
-
5,000.0
10,000.0
15,000.0
20,000.0
25,000.0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
EBITDA Net income FCF DCF (cumulative)
Показатель 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
EBITDA 1 133,0 2 550,0 3 635,0 5 435,0 7 485,0 10 735,0 10 735,0 11 985,0 11 985,0 11 985,0
Net income 951,7 2 550,0 3 635,0 5 000,2 6 886,2 9 876,2 9 876,2 11 026,2 10 067,4 10 067,4
FCF -14 048,3 -2 450,0 635,0 5 000,2 6 886,2 9 876,2 9 876,2 11 026,2 10 067,4 10 067,4
DCF (cumulative) -14 048,3 -16 275,6 -15 750,8 -11 994,0 -7 290,7 -1 158,3 4 416,5 10 074,7 14 771,2 19 040,8
Indices of Effectiveness for the Management company
of IP “Kryvyi Rih” (2/2)
8
Problems in the field of industrial parks:
Attracting investments. Investors don't prefer the industrial park project and invest money in a trade or office property. Reasons:
high riskiness of projects
Long payback period
the lack of common standards of business
Administrative barriers. Difficulties that arise in the process of harmonization with the enterprises-monopolists and government
Complex business environment in Ukraine.
Market analysis
Risks
Today in Ukraine there are 7 industrial park, which have been put into state registry, namely:
Lviv Industrial Park “Obilne – 2”
“Dolyna" Ivano-Frankivsk
“Slavuta" Khmelnitsk region
“Korosten” (Korosten, Zhytomyr region)
“Tsenralnyi” (Kremenchuk, Poltava region)
“Kryvyi Rih” – Kryvyi Rih
First Ukrainian Industrial Park (Brovary)
Risks Preventive measures
Incorrect assessment of the resource
requirements for the organization of
production on the Park territory
Determination of the targets on the basis of standards and facilities - analogues in the concept design
stage, including definition of reserve capacity creation - for adjacent areas and for possible future transit -
in the case of adjacent territories.
Preliminary assessment of the volume of consumption by specialists of companies - suppliers of
resources
Detailed additional assessment at the stage of design work on the design of engineering and transport
infrastructure of Industrial Park
The long period of the original
arrangement of engineering and
transport
Infrastructure of Industrial Park
Monitoring of legislation and develop corrective methods to achieve the objectives of the Project and its
individual stages.
Making the decision on the competition for Management Company Selection upon the termination of
basic arrangement of the territory of Industrial park by the Project initiator
The long period of formation of
Participants of IP
Formation of positive image of the Park after the decision making on its establishment.
Systematic work to attract investors for entering the park as a participant of the Park.
Joint work with the Management Company for the Park promotio.
Industry analysis
9
IP development strategy in Dnipropetrovsk region
The plot is 250 hectares in Pavlohrad. In the process of siting
The plot is 26 hectares in Kryvyi Rih. The land plot is being sited.
Pavlohrad - the cost of network admission 215 million.
Kryvyy Rih - the cost of network admission is at the assessment stage
Land plot
Networks
Political will
Preferences
Priority
Region
City
District
Resources
House building factory
Furniture
Bathroom and lavatory equipment
Energy conservation equipment
Thermal insulation
Construction mix
Production of constituent parts for greenhouses
Slide 3
Slide 4,5,6,8
RSA Chairman order
Session decision
RSA order
IP residents
Slide 10 Law “On Industrial Parks”
Law “On stimulation of investment activity”
1
2
3
4
5
Session decision
taken
Construction cluster
10
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)
Intended use: industrial land plot
Disposer: SE PA Yuzhny Machine-Building
Plant named after A.M. Makarov
Kryvyi Rih
Oktyabrskiy district
(Kryvyi Rih)
Total area: 26 га
Intended use: industrial land plot
Disposer: 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.
11
IP
ИТОГО: 5,865 млн.грн
2
Water supply
The length of water pipeline
(construction)
2 km
Pipe material PE-80, D 110 mm
Carrying capacity 68 mᵌ/hour
Reserve margin 417-500 mᵌ/hour
Consumption forecast 60 mᵌ/hour
Cost of works UAH 0,95 mln.
Wastewater
The length of the pumped
sewer (construction)
4,2 km
Pipeline D -200 mm
The reserve of production 90%
Project - 21600 mᵌ/day
Factual – 900 mᵌ/day
Cost of works: UAH 4,915 mln.
Water supply. Wastewater of IP "Pavlohrad"
12
Pavlohrad
substation
350/150/32/6
PJSC CEC
150/10/6
II stage of electric power
transmission 150 kW
1 stage of UTS 6/0,4
1 stage of UTS 6/0,4
II stage of substation 150/10/6
ИТОГО: 4,25 млн.грн
2 Electricity supply of IP "Pavlohrad"
Categoty Source Capacity Voltage Measures Sum of money, UAH mln
І stage
(the usage of reserve
capacity)
Electricity is used for
the IP arrangement
and construction
works of the first IP’s
participants
ІІ - ІІІ category
Substation
150/10/6 PJSC
“CEC"
14 MW 6/10 kV
Construction of electric
power transmission about
500m
0,3
Modernization of
substation 150/10/6 0,15
Adjustment of utilized
transformer substation -
6/0,4
0,3
II stage
(increase of capacity,
provision of the first
category for the IP’s
participants)
Electricity is used for
the IP’s activity and
construction works of
other IP’s
participants
І category
PVL-
330/150/35/6
DMES
30 MW 150 kV
Construction of electric
power transmission about
500m
3,5
Construction of substation
150/6 on the Park’s
territory
Construction is fulfilled at
the expense of IP’s
participants (I category is
provided only by
substation's owners)
estimated costs UAH 14
mln
13TOTAL: UAH 205 mln
New GDS
GDS “Ternivka”
PMP flowmeter
Industrial Park “Pavlohrad”
I Stage
II Stage
Stages
Volume
thous.
m3/hour
Primary input Reserve input Necessary works Company
Sum of
money
UAH mln
І 7
GDS “Pavlohrad" GDS “Ternivka"
Construction of supply
pipeline to the IP’s
territory.
PJSC
“Dnipropetrovskgas”4
Modernization of GDS
“Pavlohrad"
GMPM
“Kharkivtransgas"20
Modernization of GDS
“Ternivka"
GMPM
“Kharkivtransgas"20
Partial modernization
of gas pipeline from
GDS “Ternivka"
PJSC
“Dnipropetrovskgas”6
Total: 50
ІІ24 and
moreGDS “Pavlohrad"
GDS “Ternivka"
"
Construction of new
main gas pipeline to
GDS “Pavlohrad"
Ø426
GMPM
“Kharkivtransgas"35
Modernization of GDS
“Pavlohrad"
GMPM
“Kharkivtransgas"100
Construction of gas
pipeline from GDS
“Pavlohrad" to the
flowmeter of PMP
PJSC
“Dnipropetrovskgas”20
Total: 155
Alternative
choice, (in
parallel with
stage)
8 (+7)
increasing
potential
MSW processing
plant and coal
gasification
GDS “Pavlohrad
GDS “Ternivka"
Construction of
enterprises for coal
gasification and MSW
processing
Investor’s
resources
Gas supply of IP "Pavlohrad"
14
Preparation of land
plot
4 months 2 months 2 months 1 months n/a n/a
October November December January February
1
2014
1
2 3 4 5 6
2
3
4
Steps for creation of IP “Pavlohrad”
YuMZ:
RSA
transfer of the land plot
(250 ha) from the usage
of YuMZ into industry
reserve lands for IP
creation.
Dnipropetrovsk RSA
DTEK:
Development of target
concept of the industrial
park with the participation
and financial support of
DTEK.
Development of the
concept of IP creation
2
Selection of Management
Company and creation of
IP
Inclusion of IP
into State
Register
Arrangement of IP Launch of IP
3 4 5 6
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.
Management Company:
Connection to the
engineering infrastructure.
Management Company:
Concludes a contract
with participants on
carrying on economic
activity within the
industrial park territory.
Executing steps at the moment
Receiving of cadastral parcel number
15
Parameters
Distance
from draw-
off point,
km
Cost of
connection,
UAH thous.
Water
supply Ø 225 mm/ 1
MPa1 512
Water
discharge 50-60 mᵌ/day 2 n/a
Gas supplyØ 530 mm/ 5
500 mᵌ/hour0 n/a
Electricity
supplyn/a 2,5 n/a
Electricity supply of IP “Kryvyi Rih"2
16
September October November December January
1
2014
3
2 3 4 5 6
4
Steps for creation of IP “Kryvyi Rih”
4 months 2 months 4 months 2 months n/a n/a
Kryvyi Rih City
Council:
The cadastral parcel
number has been
received.
Kryvyi Rih City Council:
The concept of Industrial
Park has been developed
and proved
Kryvyi Rih City Council:
The preparation of draft
decision of City Council on
organization and carrying
out of competition to select a
management company*
Carrying out of competition
to select a management
company;
conclusion of the contract
with the winner for the
creation and operation of
industrial park.
Kryvyi Rih City
Council:
Submit documents
package into
Stateinvestproject for
inclusion into the
register of industrial
parks.
Management Company:
Connection to the
engineering infrastructure.
Management Company:
Concludes a contract
with participants on
carrying on economic
activity within the
industrial park territory.
Preparation of land
plot
Development of the
concept of IP creation
Selection of Management
Company and creation of
IP
Inclusion of IP
into State
Register
Arrangement of IP Launch of IP
1 2 3 4 5 6
Executing steps at the moment
- Receiving of cadastral parcel number
17
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.
Exempt from import duty on equipment and components, which are not produced in Ukraine
for IP arrangements (Order of the Cabinet of Ministers of Ukraine as of 19.06.2013)
Customs Code of Ukraine – exemption from import duty and possibility of deferral of VAT
payment in the process of import of equipment and components, which are not produced in
Ukraine. (item 10, p.4, Chapter XXI of Customs Code of Ukraine)
Tax Code of Ukraine – a gradual increase in the income tax rate from 0% to16% within 10
years (p.10, paragraph 4 of Chapter XX of Tax Code of Ukraine).
Law of Ukraine “On Industrial Parks”
Exemption from equity participation in infrastructure development of populated places (up to
10% of the total estimated construction cost, art. 34 Law of Ukraine № 5018-VI as of
21.06.2012).
State mechanisms for attracting investments
Inv
estm
en
t
acti
vit
y
Ind
ustr
ial P
ark
Providing tax incentives for encouragement of creation and operation of industrial parks (p.3 of X
Chapter, Law № 5018-VI as of 21.06.2012 - not developed).
18
Annexes
19
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 plot
for plant location
Transport
infrastructure
Engineering
infrastructure
Management company
The main components of Industrial Park
20
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
Poland
300
Czech Republic
144
Slovakia
38
Hungary
206 Romania
48
Bulgaria
14
Turkey
263
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 large
(total about 300)
Romania 572 49,4 48
Hungary 495 49,9 206
Czech Republic 416 47,1 144
Ukraine 0 0 0
21
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 have been include into State Register 7 Industrial Parks, namely:
Lviv Industrial Park “Obilne-2”
“Dolyna” Ivano-Frankivsk
“Slavuta” Khmelnytsk region
“Korosten” (Korosten city, Zhytomyr region)
“Tsentralnyi” (Kremenchukcity, Poltava region)
“Kryvbass” (Kryvyi Rih city)
First Ukrainian Industrial Park (Brovary)
2006 г.
2012 г.
2013 г.
2014 г.
*Based on the experience of Turkey and Poland
