1

2

THE INVESTMENT STRATEGY TO DEVELOP NIBULON BY INCREASING TRANSPORTATION VOLUMES BY RIVERS AND THE WAY TO REDUCE TRANSPORTATION COSTS FOR

AGRICULTURAL PRODUCTS DELIVERY

3

NIBULON HAS STUDIED THE

BEST EXPERIENCE OF THE USA,

THE EU COUNTRIES, BELARUS

AND EXPERIENCE OF OTHER

COUNTRIES IN USING INLAND

WATER TRANSPORT

4

The tug of 6,000 hp pushes 54 non-self propelled vessels

on the Mississippi River

The transshipment complexon the Mississippi River

Barge fleeton the Mississippi River

5

The Magdeburg Water Bridgeon the Rhine River

The Gambsheim Lockon the Rhine River

Poland plans to invest EUR 15 billion to revive its part of international waterways – E-30 (the Danube River, Bratislava – the Baltic Sea, Szczecin), E-40 (the Baltic Sea, Gdansk – the Black Sea, Odesa), and E-70 (the Atlantic Ocean, Antwerp – the Baltic Sea, Klaipeda).

Crossing Poland, Belarus and Ukraine, the E-40 waterway connects the ports of Gdansk and Kherson through the Vistula River, the Western Buh River, the Prypiat River, and the Dnipro River. Revival of active water trade will enable the EU countries to exchange 4 million tons of goods per year and to develop logistic centers to supply cargoes to any country in Europe and Asia.

6

CARGO TRANSPORTATION ALONG THE PRYPIAT RIVER (BELARUS)

7

THE DNIPRO’S RIVER UNUSED POTENTIAL

8

EFFICIENCY OF WATER RESOURCES USAGE IN UKRAINE IN COMPARISON TO OTHER COUNTRIES (basin area, km2)

3 400 000

2 981 076

2 582 672

1 808 500 1 805 200

1 380 000

1 080 000817 000

504 000 425 600220 000

170 000 78 650 36 000 12 9350

500 000

1 000 000

1 500 000

2 000 000

2 500 000

3 000 000

3 500 000

4 000 000

9

EFFICIENCY OF WATER RESOURCES USAGE IN UKRAINE IN COMPARISON TO OTHER COUNTRIES (length of navigable area, km)

5800

34423200

24142200

1590 14501230 1035

952680

365 311 272 258

0

1000

2000

3000

4000

5000

6000

7000

10

EFFICIENCY OF WATER RESOURCES USAGE IN UKRAINE IN COMPARISON TO OTHER COUNTRIES (navigable drafts in the Dnipro

River and the Mississippi River systems)

11

EFFICIENCY OF WATER RESOURCES USAGE IN UKRAINE IN COMPARISON TO OTHER COUNTRIES (volumes of transportation by inland waterways,

million tons)

0 100 200 300 400 500 600

the Mississippi

the Dnipro

490,7

2,8

69,3

1,5

Other cargoes

Grains

12

LENGTH OF NAVIGABLE PART OF THE MAIN UKRAINIAN WATERWAYS (WITHIN UKRAINE, KM)

The Dnipro River 1 035

The Southern Buh River 106(from Varvarivka bridge in Mykolaiv)

The Desna River 6

TOTAL LENGTH 1 147

13

ACCORDING TO INFORMATION PROVIDED

BY THE MINISTRY OF INFRASTRUCTURE

OF UKRAINE, EACH MILLION TONS OF

CARGOES TRANSPORTED BY RIVER RESULT

IN A REDUCTION OF ABOUT

UAH 790 MILLION IN ROAD REPAIR COSTS

14

NIBULON’S CONTRIBUTION TO THE DEVELOPMENT OF

THE DNIPRO RIVER AND THE SOUTHERN BUH RIVER

AS THE MAIN TRANSPORT ARTERIES OF UKRAINE

15

THE CARGO FLEET NUMBERS

53 UNITS WITH TOTAL DEADWEIGHT

OF MORE THAN156 THOUSAND TONS.

IT IS THE SECOND LARGEST FLEET IN

UKRAINE (MOREOVER, IT WAS BUILT

AT NIBULON SHIPBUILDING AND

REPAIR YARD)

16

COOPERATION WITH THE EUROPEAN INVESTMENT BANK AND EBRD

WILL ENABLE NIBULON TO:

● BUILD UP TO 15 UNITS OF CARGO FLEET PER

YEAR;

● INVOLVE OTHER STATE SHIPBUILDING YARDS

IN THE PROJECT (SE “SHIPYARD NAMED AFTER

61 COMMUNARDS”, KHERSON STATE PLANT

“PALLADA” AND OTHERS).

17

NIBULON DREDGED 134 KM OF THE

SOUTHERN BUH RIVER AT ITS OWN

EXPENSE, USING ITS MACHINERY AND

WITHOUT GOVERNMENT SUPPORT.

NIBULON SPENT 5 YEARS

TO OBTAIN 47 PERMITS

18

DEPTHS OF THE SOUTHERN BUH RIVER:

● DURING THE USSR — 2.9 M;

● BEFORE DREDGING — 1.6 M;

● UPON DREDGING COMPLETION — 2.4 M.

19

DUE TO NIBULON, THE NAVIGATION

ALONG THE SOUTHERN BUH RIVER

IS REVIVED FOR THE FIRST TIME

IN 25 YEARS

20

NIBULON BROKE THE RECORD OF CARGO

TRANSPORTATION ALONG THE SOUTHERN BUH RIVER

THAT WAS SET DURING THE SOVIET PERIOD:

● DURING THE USSR — 50 THOUSAND TONS OF GRAIN

CARGOES PER YEAR;

● IN 2016 NIBULON TRANSPORTED 300 THOUSAND TONS OF

GRAIN (12.5 THOUSAND TRUCKS WERE REMOVED FROM THE

HIGHWAYS);

● PLANS — 2 MILLION TONS PER YEAR (1 MILLION TONS OF

GRAIN CARGOES, 1 MILLION TONS OF BUILDING MATERIALS).

21

NIBULON DESIGNED, BUILT AND INSTALLED 11 MOORING BUOYS ON THE DNIPRO RIVER AND ON THE SOUTHERN BUH RIVER WORTH UAH 2 MILLION

22

NIBULON BUILT 2 TRANSSHIPMENT TERMINALS ALONG THE SOUTHERN BUH RIVER, HAVING PROVIDED 1.5 THOUSAND

BUILDERS WITH WORK

23

RECONSTRUCTION OF NIBULON

SHIPBUILDING AND REPAIR YARD

IS IN PROGRESS

24

NIBULON SHIPBUILDING AND REPAIR YARD IN MAY 2017

25

NIBULON SHIPBUILDING AND REPAIR YARD. STORAGE SYSTEM FOR METAL, AREA FOR METAL CLEANING AND PRIMING, AND METALWORK

WORKSHOP ON FEBRUARY 1, 2017

26

NIBULON SHIPBUILDING AND REPAIR YARD. THE EQUIPMENT THAT WILL BE INSTALLED AT THE STORAGE SYSTEM FOR METAL, AREA FOR

METAL CLEANING AND PRIMING, AND AT METALWORK WORKSHOP

SUPRAREX HD portal plasma cutting machine (ESAB AB, Sweden)

Shipbuilding press SBP 275

(Nieland B.V., the Netherlands)

ROSLER roller conveyor machine for rolled plates and frames RRB 27/6 (Rosler Oberflachentechnik GmbH, Germany)

Frame bending machine SBK 275 (Nieland B.V., the

Netherlands)

27

THE COMPANY CREATED 600 WORKPLACES

FOR SHIPBUILDERS AND 350 WORKPLACES

AT SHIPPING COMPANY

9 000 EMPLOYEES ARE NEXT

IN TURN TO GET A JOB

28

NIBULON’S EXPENSES TO IMPLEMENT THE SHIPBUILDING PROGRAM (2010-2016):

TOTAL SUM OF INVESTMENT FUNDS – USD 158.855 MILLION, IN

PARTICULAR:

INVESTMENTS IN SHIPBUILDING CAPACITIES – USD 11.801 MILLION,

INVESTMENTS IN NAVIGATION – USD 147.054 MILLION, IN PARTICULAR:

WAGES – USD 16.456 MILLION;

MANDATORY PAYMENTS TO THE STATE FUNDS – USD 5.461 MILLION;

VAT – USD 22.618 MILLION;

DUTIES AND CUSTOMS DUTIES – USD 1.8 MILLION;

EXCISE TAX – USD 2.413 MILLION.

29

NIBULON’S SHIPBUILDERS DESIGNED AND CONSTRUCTED “NIBULONIVETS” FLOATING CRANE FOR OPERATION ON THE DNIPRO RIVER

30

POTENTIAL:

● TRANSPORTATION OF 10 MILLION TONS OF GRAIN CARGOES BY RIVER TRANSPORT PER YEAR;

● REVIVAL OF E-40 NAVIGATION PASS AND RIVER TRANSPORTATION BY THE ROUTE “THE BALTIC SEA – GDANSK – THE DNIPRO RIVER – THE BLACK SEA”;

● INTRODUCTION OF CONTAINER CARRIAGE (INCLUDING REEFER CONTAINERS) UP THE DNIPRO RIVER TO BELARUS.

31

POTENTIAL:

● POSSIBILITY TO TRANSPORT ORE, METAL, WOOD, COAL, FERTILIZERS, VEGETABLES, FRUIT ALONG THE RIVERS.

32

FREIGHT TRAFFIC POTENTIAL

ALONG THE DNIPRO RIVER COMPRISES

60 MILLION TONS OF CARGOES PER YEAR

33

PRIORITIES:

TO REVIVE DECLARED DEPTHS OF THE DNIPRO RIVER AND TO GUARANTEE A TRANSIT DEPTH OF 3.65 M TO ALL MARINERS.

AT PRESENT GUARANTEED DRAUGHT OF VESSELS ALONG THE DNIPRO RIVER COMPRISES 2.7–2.9 M.

UPON COMPLETION OF THE DREDGING ON THE DNIPRO RIVER, THE GUARANTEED DRAUGHT WILL COMPRISE 3.2 M.

34

A series of accidents confirms complexity of the site conditions. For example, the “Dnieper Princess” motor vessel with 250 foreign tourists on board ran aground on leaving the lock on August 20, 2007.

All passengers were evacuated to the river bank by tugs of Dnipropetrovsk river port.

The motor vessel was damaged near the first compartment of the dry hold. During the Soviet period, one tried to dredge this area through blasting. However, it turned out that the rocks are continuation of the platform where the Dniprovskyi Integrated Iron and Steel Works named after Dzerzhynskyi and storage of radioactive waste are located. We refused from blasting.

At present, there are new technologies and special mechanisms to crush rocks, in particular, high capacity excavators. These innovations can be used to remove the above mentioned obstacles.

35

PRIORITIES:

1. TO PERFORM DREDGING ON THE LIMITING

PARTS IN THE DNIPRO RESERVOIR AND THE

DNIPRODZERZHYNSK RESERVOIR

36

LIMITING AREAS OF THE DNIPRO’S NAVIGATION PASS (Е-40 INTERNATIONAL WATERWAY)

37

LIMITING AREAS OF THE DNIPRO’S NAVIGATION PASS (Е-40 INTERNATIONAL WATERWAY)

38

WATER LEVEL MARKS AND DEPTHS AT THE LIMITING PARTS OF THE DNIPRODZERZHYNSK LOCK WHICH IS IN NEED

OF URGENT RECONSTRUCTION (TAIL BAY)

THE INFORMATION PROVIDED BY SE “UKRVODSHLIAKH”

39

NIBULON HAS ALREADY MADE APPROPRIATE RESEARCHES AND DEVELOPED A WORKING DRAFT AT

ITS OWN EXPENSE. IN ACCORDANCE WITH THE WORKING DRAFT ONE MUST REMOVE:

1 247,50 M3 OF ROCKS AND15 748 М3 OF SAND FROM

THE DNIPRODZERZHYNSK RESERVOIR;

23 584,94 М3 OF ROCKSFROM THE DNIPRO RESERVOIR.

THE COST OF DREDGING COMPRISESABOUT USD 2 MILLION.

40

NIBULON CONSTRUCTS A SELF-PROPELLED DREDGING VESSEL TO DREDGE THE DNIPRO RIVER TO 15 METERS. IF THE COUNTRY IS NOT

ABLE TO DREDGE THE LIMITING PARTS IN THE DNIPRO RESERVOIR AND THE DNIPRODZERZHYNSK RESERVOIR, NIBULON WILL DO THIS

THE DESIGN IDEA WAS DEVELOPED BY NIBULON

41

2. TO INSTALL NECESSARY NAVIGATION

EQUIPMENT ON THE DNIPRO RIVER

42

CURRENT SITUATION WITH NAVIGATION EQUIPMENT ON THE DNIPRO RIVER (as of November 1, 2016)

NIBULON ANNUALLY LOOSES 100 THOUSAND TONS (15 %) OF FREIGHT BECAUSE OF LACK OF NAVIGATION EQUIPMENT LIGHTING.

No. ReservoirLighting of navigation

circumstancesBridges lighting

Lack of radio communication

coverage

1 Kaniv 20 % 60 % —

2 Kremenchuk 0 % 50 % 96 km

3 Dniprodzerzhynsk 0 % 90 % 45 km

4 Dnipro 70 % 10 % 50 km

5 Kakhovka 70 % 0 % 145 km

6

From Kakhovkahydroelectric power station to the lower

Dnipro

100 % 75 % —

43

44

3. TO DREDGE THE DNIPRO RIVER

45

PROBLEMS OF TARIFF REGULATION

46

PRIME COST OF GRAIN TRANSPORTATION KREMENCHUK – MYKOLAIV (as of April 01, 2016, before increase in tariffs for railway services)

UAH 197.34 per ton

UAH 249.82 per ton

UAH 342.72 per ton

47

PRIME COST OF GRAIN TRANSPORTATION KREMENCHUK – MYKOLAIV(since May 01, 2016, after increase in tariffs for railway services)

The Ministry of Infrastructure of Ukraine plans to increase tariffs by 15 %. It is unacceptable. The Ministry of Infrastructure of Ukraine should develop tariff policy to concentrate transport logistics of Ukraine on transportation by waterways.

UAH 226.94 per ton

UAH 249.82 per ton

UAH 342.72 per ton

48

PRIME COST OF GRAIN TRANSPORTATION KREMENCHUK – MYKOLAIV(according to the draft law No. 2475a on inland water transport)

Given the river dueof UAH 0.005 perton/km and abolishment of certain payments

UAH 226.94 per ton

UAH 246.40 per ton

UAH 342.72 per ton

49

THE RIVER DUE IMPLEMENTATION

COASTAL SHIPPING BY VESSELS FLYING

THE FOREIGN FLAGS

IMPORT OF VESSELS FREE OF

CUSTOMS DUTY

50

The draft laws No. 2475a, 2476a, 2713 and 2712are unjustified and baseless. They lead to:

1) Enhancement of fiscal burden on inland water transport flying the Ukrainian flag, loss of competitiveness in comparison to the transport flying flags of other countries.

2) 1 750 workplaces in sphere of navigation are not created. 5 650 workplaces — in the shipbuilding sector.

3) Shortfall in revenues to the state budget: in particular as regards the excise tax — about EUR 9.6 million per year, payments from wages — about UAH 320 million per year.

4) Shortfall in customs duties (duties and VAT) during temporary import of foreign vessels to the territory of Ukraine comprises USD 390 thousand per one vessel worth USD 1.5 million.

The suggested draft laws contradict the practice of the EU and the USA in inland waterways maintenance.

51

Draft law No. 2475 a The draft law of Ukraine

“On inland water transport”

Draft law No. 2476аThe draft law of Ukraine “On

amendments to the Tax Code of Ukraine on peculiarities of rental

payment for special water use and taxation of land of inland water

transport”

Draft law No. 2713The draft law of Ukraine “On

amendments to the Customs Code of Ukraine aimed at promoting

the development of navigation in Ukraine”

The draft law No. 2712The draft law of Ukraine “On

amendments to “The Maritime Code of Ukraine” (aimed at

promoting the development of navigation in Ukraine)”

52

PORTS OF ODESA ARE NOT INTERESTED

IN DEVELOPMENT OF INLAND WATERWAYS

53

54

NO COUNTRY IN THE WORLD GIVES

UNLIMITED ACCESS TO ITS INLAND

WATERWAYS TO THE VESSELS FLYING

THE FOREIGN FLAG, THEREBY

PROTECTING INTERESTS

OF A NATIONAL FLAG

55

CALL OF PANAMAX VESSELSWITH DEADWEIGHT

OF 60 THOUSAND TONS

GHENT

ANTWERP

ROTTERDAM

HAMBURG

MYKOLAIV

EUR 1.45 PER TON

EUR 1.25 PER TON

EUR 1.29 PER TON

EUR 1.01 PER TON

USD 4.25 PER TON

56

COMPARATIVE ANALYSIS OF DUES

Types of duesThe

Danube River

The Rhine River

The Mississippi River

The Prypiat River, The Dnipro River (Belarus)

The DniproRiver

Oil product excise tax - - + - +

Locking services - - - - +

Port dues + - - - +

River due - - - - +*

Canal dues + - - - +

Rental payment for special water use for water transport needs

- - - - +

* IS PLANNED ACCORDING TO THE DRAFT LAW NO. 2475A DATED 04.08.15.

57

ALMOST USD 3 MILLION OF DUES ARE PAID ANNUALLY ON INLAND WATERWAYS (FREIGHT TRAFFIC OF 5.5 MILLION TONS PER YEAR).

ABOUT USD 5.47 BILLION MUST BE PAID ANNUALLY ON INLAND WATERWAYS (FREIGHT TRAFFIC OF 10 MILLION TONS PER YEAR).

UPON IMPLEMENTATION OF THE RIVER DUE, ABOUT USD 5.48 MILLION MUST BE PAID PER YEAR (FREIGHT TRAFFIC OF10 MILLION TONS PER YEAR).

THUS, IMPLEMENTATION OF THE RIVER DUE IS INEFFECTIVE.

58

ROAD MAP OF FUNDING AND MAINTENANCE OF INLAND WATERWAYS AND PORT INDUSTRY

FUEL EXCISE TAXFOR WATER TRANSPORT

Fuel excise tax for water transport isn’t paid in Europe.The excise tax in the USA comprises 67.9 % of the excise tax in Ukraine.

To reduce by 50 % and direct to develop inland waterways (USD 1.13 million per year,

USD 12.3 million per year after revival of waterways)

If the excise tax is unchanged, then one should direct the

amount of tax paid to develop inland waterways (USD 2.26

million per year, USD 24.6 million per year after revival of the

waterways)

VARIANT 1

59

PORT DUES:

To reduce canal due

by USD 1 per ton

for Mykolaiv and

Kherson sea ports

PORT DUES:

To direct USD 0.5 per ton to develop infrastructure of port

cities (USD 10millionper year)

To direct USD 0.5 per ton to develop inland waterways (USD 10 million per year)

+

ROAD MAP OF FUNDING AND MAINTENANCE OF INLAND WATERWAYS AND PORT INDUSTRY

VARIANT 2

60

THANK YOUFOR YOUR

ATTENTION!