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22:34 27 Oct 2020

Six Ukrainian highways become private: what does it mean

Ukraine plans to launch the first pilot projects of public-private partnerships in the highway sector, conceding six roads.

Ekonomichna Pravda reports.

Which Ukrainian highways can become private?

The first they offer to implement by the DPP:

section of the M-03 highway from Boryspil to Poltava;

section of the M-06 highway from Kyiv to Rivne;

route from Dnipro to Kryvyi Rih and Mykolaiv (M-04, H-11);

route Yahodyn – Kovel – Lutsk (M-07, M-19);

route Kharkiv – Dnipro – Zaporizhia (M-29, M-04, M-18);

a section of the M-14 highway from Kherson to Mykolaiv.

What does it change?

The private investor will undertake to upgrade and develop the existing road, and the Road Fund will allocate funds to support the investor, provided that he complies with all obligations for the road maintenance quality.

Instead of charging a fare, they plan that the investor will earn by developing roadside infrastructure: gas stations, catering establishments, advertising space, etc.

The Ministry of Infrastructure estimates that implementing the entire program will attract more than $9 billion in private investment in the reconstruction and maintenance of over 4,500 kilometers of state roads within the medium term. 

The first program of public-private partnership in the road sector is planned to be presented in Kyiv on October 29, 2020.

What is a concession?

A concession is a kind of public-private partnership that involves transferring state-owned objects (such as roads, airports, businesses) to private enterprises for temporary use.

For the state, the concession is interesting because it attracts funds from a private company, but the state retains control over the concession object. Also, thanks to the concession company, the object can increase its competitiveness and improve service quality.

The concessionaire receives state guarantees for returning a significant part of the funds it has invested and risk-sharing.

Are there precedents in Ukraine?

In 2020, they've already begun to concede large facilities in Ukraine. The first was the Kherson seaport. Risoil-Kherson received it, which invests about UAH 300 million in the port's development.

Over 18 million hryvnias will be invested in local infrastructure, the government says. Later, the "Olvia" port in Mykolaiv was also conceded.

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