YUZHNY SEA TRADE PORT CONCESSION INVESTMENT OPPORTUNITIES 7

YUZHNY SEA TRADE PORT: CONCESSION INVESTMENT OPPORTUNITIES

7 berths The deepest export of Ukraine 11. 46 mln tons cargo in 2017

CURRENT TERMINAL ORGANISATION

FINANCIAL RESULTS OF SE YUZHNY AND CARGO STRUCTURE Cargo structure, mln tons Container traffic structure Inner circle – Container (TEU) Outer circle – Container (items) Forecasted cargo structure, mln tons Financial results of SE Port “Yuzhny”, USD EBITDA margin

FINANCIAL ISSUES - SENCITIVITY ANALYSIS – CHANGES IN CAPEX Items A B C D 40 000 72 000 134 300 0 26 500 37 400 31 000 63 000 0 22 700 44 300 0 5 000 5 500 Other investments 47 200 49 100 Diesel locomotive replacement 8 000 Other items 21 313 32 325 37 750 45 538 Contingencies 38 363 58 185 67 950 81 968 The projects B and D are very sensitive to CAPEX changes. VAT 46 035 69 822 81 540 98 361 Project A and C are less sensitive to CAPEX changes. Total, excl. VAT 000’ USD 230 175 349 110 407 700 491 805 Total, incl. VAT 000’ USD 276 210 418 932 489 240 590 166 Berths works Ship-to-shore equipment Stack-yards Coal conveyor belt and train loading station Renewal of equipment for iron ore export Equipment for break-bulk

Current Staff STAFF DOWNSIZING ü With natural outflow of personal, incentives for retirement and increase of cargo volumes, acceptable staff levels may be reached without forced layoffs ü Today SOE Yuzhny is less effective in terms of cargo turnover and staffing in comparison with private ukrainian and international seaports ü In addition, with the increase of cargo volumes the need of staff will also increase 2018 WORKFORCE downsizing target (Medium case) option 1 2025 Administration - 322 Administration - 22 Operational - 1315 Operational - 484 Other - 1143 Other - 120

ZOOM ON EXISTING QUAYSIDE ORGANISATION

IRON ORE EXPORTS

CURRENT SITUATION OF SE SCPY Objectives: ü Flexible strategy to adapt to difficult market ü Investments ü Strong competition internationally and inside the port ü Efficiency - Profitability ü Maintained market share despite condition of facility ü Employment ü Requires major investment in old and damaged assets ü Sustainable operation ü Overstaffing and increasing cost of labor ü Drop in traffic ü Unprofitable and Unsustainable Items Material costs Wages & salaries Items 1 H 2018 1 H 2017 Changes Cargo flow, thous. t 6 132 6 613 (7, 3%) Revenue, 000’UAH Net profit, 000’UAH 862 311 57 434 825 824 186 538 4, 4% (69, 2%) Social payments Depreciation Other OPEX Total(000’UAH) 1 H 2018 1 H 2017 Changes 244 335 176 490 38% 334 643 269 040 72 469 57 475 77 898 81 088 59 088 53 128 788 433 637 221 24% 26% (4%) 11% 24%

TERMINAL SCENARIOS Scenario Ukraine Market Share Port Share Capital Investment Depth Yuzhny bulk terminal 2025 2035 2040 A Conservative Low Maintain Current 54% 54% B Conservative Low Improve 20 m 56% 57% 58% C Optimistic High Modernize 20 m 60% 62% 64% D Optimistic High Modernize 20 m (TIS 20 m) 56% 56%

BULK TERMINAL FORECASTS INVESTMENTS SCENARIOS Alternative investment strategies ü Current Approach – Flexibility: respond to uncertain demand ü Alternative –Specialization: emphasize quality of service Basic investment – Wharf ü Strengthening - essential ü Deepening - preferred ü Straightening - optional Additional investment – Equipment ü Replacement - older equipment ü Introduction – modern technology Public sector investment** ü Rail Access ü Access Channel ** detailed assessment to be conducted in Feasibility study

üPre-feasibility funded by EU & designing by Egis üNext step – feasibility study preparation with EBRD and IFC

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