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2019 June 14

Crimean ports break the loss record

Crimean Sea Ports have broken the loss record from 2014. The revenues have decreased due to launching of the Crimea Bridge, lack of cargo at the ports and leasing out of Kerch ferry service which could ensure additional RUB 300-400 million of revenues per year if used by the company. The Ministry of Transport of Crimea has developed a plan on ‘financial recovery’ of seaports revealing no details though. 

Financial bottom

The loss of Crimean Sea Ports (CSP) in 2018 increased to RUB 411.7 million (from RUB 97 million in 2017), say the company’s official statistics. It is the largest loss after 2013. The lowest financing result was shown by the ports of Yalta (– RUB 195.8 million), Feodosia (– RUB 190.4 million) and Kerch Fishing Port (– RUB 91.5).

Among the most profitable branches was Commercial Port of Kerch, Gosgidrografia (dealing with installation of navigation equipment) and CSP Administration. Occasionally, shorter periods like months and quarters saw profit of Feodosia ports (due to transshipment of grain, which was not handled earlier), Yevpatoria (due to transshipment of sand excavated at the Donuzlav lake), Kerch ports including Kerch Fishing Port, a source at Crimean Sea Ports told IAA PortNews.

Neither the Ministry of Transport of Crimea, nor CSP comment on the causes of the loss growth. Sergey Kvasov appointed General Director of CSP in February 2019 (former Deputy Director of Rosmorport’s Tuapse Branch) only said that the reduction of revenues should be attributed to launching of the Crimea Bridge. It decreased from RUB 2.2 billion in 2017 to RUB 1.9 billion in 2018. Before the bridge was put into operation, Marine Directorate LLC, operator of the ferry service used to pay CSP 1.1% to 3% of ticket sales.

Since the bridge was opened for passenger vehicles in May 2019 part of goods traditionally carried via the ports has been carried by small lorries that has lead to reduction of cargo turnover of CSP’s Kerch branch.

Aleksey Volkov, former head of CSP (between May 2018 and February 2019) earlier told IAA PortNews that revenues dropped by 30–35% because of that. According to his forecast, opening of the bridge for trucks was to finally decrease the revenues by 55–65%. The trucks were allowed to use the bridge on 1 October 2018 and the main impact on the revenues and profit of CSP is likely to be seen in 2019. In 2019, the company expects the reduction of revenues to RUB 1.7 billion and the growth of the loss to RUB 919.6 million.

Apart from the bridge opening, the loss in 2018 was caused by the lack of cargo, said Aleksey Volkov. CSP published no statistics and did not answer the request of IAA PortNews concerning it yet. CSP is going to increase cargo turnover in 2020 with the launching of the railway part of the bridge (scheduled for December 2019). That will let the ports of Crimea attract transit cargo that are currently handled by other port of the Azov-Black Sea Basin, says Sergey Kvasov.

Financial problems of CSP in 2018 included the loss of SUE Lotsman-Krym which joined CSP in October 2018. The loss of the newly established branch was as high as RUB 44.6 million. Before joining, in 2016 and in 2017, the loss of SUE Lotsman Krym totaled RUB 70 million and RUB 28.9 million accordingly, says Kartoteka.ru.

“The Ministry of Transport of Crimea initially planned to initiate bankruptcy of Lotsman-Krym but then decided to affiliate it due to its certain assets. We took over some of their debts and undertook downsizing. The virtually have no fleet to provide pilotage services. Therefore, they cannot compete in this segment with Rosmorport and private pilotage companies”, told a CSP source.

According to the source, the increase of recent years’ loss should be also attributed to signing of an agreement between the Ministry of Land and Property Regulations of Crimea and TIS-Krym LLC, operator of a railway ferry service between Crimea and the Krasnodar Territory.

According to the agreement, CSP extended leasing out of the company’s property till 2024 on the condition that TIS-Krym LLC invests in construction of one more trailer-high ramp under the federal targeted programme on the development of Crimea and Sevastopol.

In case of independent operation of the railway service CSP could get additional RUB 300-400 million per year. According to Kartoteka.ru, that is the revenue of TIS-Krym in 2015–2017. The ferry service is used by TIS-Krym to carry a large number of tank cars with petrol and diesel fuel that are consequently distributed between fuel stations of Crimea.

CSP loss does hinders timely payments to Rosmorport, the largest creditor of Crimean Sea Ports. From the beginning of 2017 up to 3 June 2019, Rosmorport filed nine claims for RUB 399.2 million including two recent claims for RUB 279.4 million.

Sergey Kvasov explains that the claims of Rosmorport relate to operation of vessel tracking management system. CSP source explains that VTMS is used for collection of navigation dues. “It is collected in case of transit via the canal and in case of entry to the port of Kerch. The equipment is among the assets of Rosmorport but legally we can collect it alone. Therefore, we collect it. Instead of sending it to Rosmorport we “eat it through” and Rosmorport then invoices us”, he said.

Finally, the CSP source tells about occasional delay of wage payment. “They can be up to three months”. This information is confirmed by official data.

Crimean Sea Ports has developed a plan on “financial recovery” and “crisis bailout”, said Sergey Kvasov. The document has been signed by Crimea Transport Minister Sergey Karpov appointed to this position in October 2018.

No details on financial recovery have been revealed.

The seaport of Sevastopol has not yet published its financial results for 2018. Neither the port management nor Sevastopol Government have responded to IAA PortNews inquiry. The result of the port for nine months of 2018 - RUB 107 million loss. 

Aleksandr Alikin