Yuri Pognayev: management changes are not to influence the strategy of Ust-Luga port development

Ust-Luga Company operating the project for construction of Russia’s largest port complex is headed by a new Director General today. Yuri Pognayev, earlier Technical Manager of Ust-Luga Company JSC is currently the company’s acting Director General. Mr. Pogrnayev has been interviewed by PortNews IAA.

- Mr. Pogrnayev, will management changes influence the port development strategy?

- Of course, management changes will not influence the strategy of Ust-Luga development. The changes only touched the executive branch of the company, which is the port’s customer -developer. The ideology isdetermined by the Board of Directors. It has not changed – we continue to build modern port through application of technologies corresponding to world requirements. Besides, we carry out integrated development of the near-to-port territory. All the plans and decisions adopted by former Director General within the framework of general strategy are under implementation. Currently we coordinate the adjusted master plan for the port development. The document was initially executed in 2000 though adjustment was later needed to bring it into compliance with up-to-date requirements of transport services market and with investors’ revision of their increased possibilities. First adjustments were made in 2003-2004. Today we encounter it again. I thinthe document will be approved before November 1.

The company also discharges its obligations to state on construction of the port’s general utilities and infrastructure. We continue development of our own investment project – Multi-profile Transshipment Complex “Yug-2”.

- Earlier you held a post of the company’s Technical Manager hence you know all the projects in detail. Could you, please, tell about the state of the port’s terminals.

- According to our prognoses, by 2010 the port’s throughput will exceed the master plan’s figure totaling some 36 million tonnes of different cargo. New master plan, considering actually performed works and investor’s plans as regards yet-to-be-launched projects, forecasts the port’s throughput to reach 120 million tonnes by 2015-2020.

In 2007, throughput of the port’s Coal Terminal will be similar to that of the previous year – some 4.5 – 5 million tonnes per year. In 2008, it is planned to raise the throughput of the coal transshipment complex to 8 million tones. In 2009, the complex is said to reach its design capacity (12 million tones). The terminal’s territory has already been prepared for handling such volumes.

The Multipurpose Transshipment Complex with design capacity of 3 million tonnes per year has been put into operation in June 2007. It is to handle mainly export cargo: iron ore pellets, pig iron, scrap metal, oversized and heavy cargo. It is planned to build large covered warehouse enabling us to carry out transshipment of almost all types of metal requiring storage in covered warehouses.

In late 2007, we plan to put into operation the first phase of the terminal for transshipment of technological sulfur. Initially its capacity is to total 2 million tonnes per year, then it was to be increased to 5 million tones, however the investor raised it to 9.5 million tones. The equipment is to be delivered considering the terminal’s maximal capacity.

This year Ust-Luga-Baltijsk ferry started its regular operation. The line is used for transportation of cargo, railway cars and trailers. Besides operation the lines continues to develop.

In the forth quarter of the next year it is scheduled to start operation of the first phase of the complex for transshipment of liquid bulk cargo with the capacity of 10.5 million tonnes.

Besides, in late 2008 we plan to launch specialized complex for transshipment of pellets (ecologically clean woodfuel). This type of cargo flow is absolutely new for Russia. Berthing facilities are under construction today, the territory is being developed, while in the nearest future we’ll start construction of the complex’s technological facilities: warehouses, conveyor lines and other equipment.

In late 2008, the first phase of the 500,000 TEU container terminal is to be put into operation. Construction of the berthing facilities is to be finalized in 2007. Then construction of coast facilities will immediately start. Investor makes all necessary efforts for project implementation and construction is carried out according to the schedule.

The complex for transshipment of liquefied gas is one of our latest projects. It is currently under planning according to finalized feasibility study. The investor plans to put the terminal into operation in 2010.

The first phase of the Multi-profile Transshipment Complex “Yug-2” for 100,000 motor cars will be put into operation in the forth quarter of 2007. This project is being implemented by Ust-Luga Company itself.

As of today, there are no terminals in Russia specializing in transshipment of imported cars and meeting the world requirements. Our country extremely lacks such facilities. In the first half of 2007, sales of motor cars at Russian market totaled 1,165,000 vehicles. 500,000 vehicles had been manufactured in Russia, while the rest of the figure falls on cars delivered from abroad. In 2006, over 0.5 million of cars were delivered to RussiaFinland. Design capacity of “Yug-2” is 360,000 new cars per year. Having put the new terminal into operation we will be able to reorient this dynamically growing cargo flow to the Russian port. from

Design capacity of the complete Multi-profile Transshipment Complex is 5.3 million tonnes of cargo per year.

- What is your opinion about implementation of the MTC “Yug-2” project?

- Construction of MTC “Yug-2” is our first priority. The works go on according to the schedule. The berths of the first phase will be ready in September, the rest facilities of the first start-up complex will be prepared for operation within two or three months. All design, construction and installation works scheduled for 2007 will be fulfilled. I’d like to repeat that we create a unique motor car terminal indeed. It is to meet world standards in terms of technologies, vast territory and modern infrastructure. The territory bordering “Yug-2”, container terminal and motor car zone of the road-and-railway ferry complex will be used for construction of a storage logistics center. This complex is designed for auxiliary operations. It will comprise a logistics warehouse of the motor car terminal and a ground for storage, filling and unfilling of containers. We will also build service centers there as we plan presales servicing of cars.

I have told only about those terminals which are under designing or construction, while the master plan provisions construction of new complexes the decision on which is to be taken together with investors after approval of the new master plan.

- MTC “Yug-2” development project has been supported by the RF Investment Fund. It makes Ust-Luga Company obliged to attract additional private investments into the project. Could you, please, tell about borrowings and attraction of credits. What are the borrowed funds to be spent for?

- All design, construction and installation works scheduled for the current year are carried out for our company’s own and borrowed funds. Simultaneously, the work on financing program for 2008 is being carried out. The list of MTC’s facilities to be financed by the RF Investment Fund has been already determined. It includes three berthing facilities, which are to be owned by the state and taken by Ust-Luga Company under lease agreement for operation of the transshipment complex. It is part of the complex’s territory and transport infrastructure. Total volume of state financing is RUR 2.11 billion. The rest funds (exceeding RUR 6 billion) will be attracted by the company according to the draft investment agreement. In particular, we have attracted a credit for RUR 700 million from Bank St. Petersburg OJSC. The borrowed funds will be spent for construction of storage infrastructure, utilities, purchase of handling equipment. Further we are going use bank credits for implementation of MTC “Yug-2”. As of January 1, 2008, investments attracted by Ust-Luga Company for MTC “Yug-2” will make RUR 1.2 billion.

- Has the shaping of the Ust-Luga port’s water area been finalized?

- All the sea terminals, either finished or being constructed, are up to 14 meters deep. Next year, the port’s approach channel will deepened to 16 meters. On the basis of the master plan and considering the forecasted throughput we develop a three-year program for development of the port’s water area, approach channels and depths.

The work is being carried out according to the schedule related development of both water area and railway. Development of the Luzhskaya station is carried out in close cooperation with Russian Railways: each transshipment complex will have railway approaches before it is put into operation.

- How does the project on port fleet formation go on?

- Some years ago Ust-Luga Company determined this project to be one of priorities. One of main directions is tugging, so last year St. Petersburg shipbuilding plant Pella built two azimuth-type tug boats Beluga and Navaga to the company’s order. Recently, Ust-Luga Company signed a new contract for construction of two more tug boats (3,000 hp and 4,000 hp). Pella shipyard is to deliver the vessels in June 2009 or it may speed up the construction if necessary. The towing fleet is to grow according to the number of ship calls. Initially the tug boats are to be based at our berths, however according to master plan for development of the port of Ust-Luga, RosMorPort FSUE is to build its own port fleet base. It will be used not only for tug boats but for other specialized vessels of port class: ecology fleet, oil garbage disposal vessel, bunkering vessels, supply vessels, bilge water collecting vessels.

- What about the company’s town-planning project?

- There were some significant changes here. Initially we planned construction of a residential area for some 21,000 residents. Today about 2,500 persons work in the port including the staff of construction organizations. The figure is likely to grow. By 2010, when the port is to reach its design capacity of 36 million tones, the number of port’s workers will make 6,000 people. By 2015, when near-to-port companies start operation, the number of work places will grow to 10,000. Thus new master plan provisions construction of a residential area for 35,000 people. The project developed jointly with the Leningrad region’s Architecture Committee was supported at the presidium of the region’s town-planning council. Public hearings were also a success.

The developers managed to find solutions on preservation of the site’s reserved areas. The city is to have a large park area with natural ponds. There will be schools, kindergartens, a shopping center and a recreational center, health clinics for children and grown-ups, a hospital, public service establishments, modern berths at the shore of the Luga-river. Existing residential buildings will be preserved excluding slum buildings. When building a new town it is planned to combine different types of construction: high-density residential areas are to consist of 4-5-storeyed buildings; medium-density areas - 2-storeyed buildings. Besides, there will be a zone of low-size cottages with land plots from 0.12 to 0.15 hectares. The construction is to be arranged inthree stages. First of all the swampland will be built up with finalization of its first phase (12,500 residents) in 2010. The second phase (24,000 residents) will be ready by 2015, the third one (34,500 residents) – by 2025. Total area of the town is to cover 1035,000 square meters. By 2010 it is planned to commission 250,000 residential square meters.

For implementation of this project, Ust-Luga Company has incorporated its subsidiary Portzhilstroi, the competence of which is designing, construction and documentation needed to start construction of the new town. The project has been supported at the federal level. Comprehensive development of the territory is carried out jointly with Rosstroi and the Ministry of Regional Development. We have set ourselves a task to ensure modern and comfortable conditions for those engaged in construction of the port.