Construction of oil terminals in the Kaliningrad Region

Investment case. A privately held Swedish investment fund is handling an investment project in the Kaliningrad Region. The project’s design foresees development of a oil refueling base and a terminal with a yearly capacity of 4.5 mln tons per year. The plan includes construction of a mooring for 2-3 tankers, storage and draining capacities, as well as rail approach roads. We anticipate that the capacities would enable transportation of crude oil and oil refinery products to the Northern countries of the European Union. The project provides for two options, which differ from each other in scope of rail facilities construction.

Finance. We estimate that the project’s total costs should not overrun $65 mln, given realization of the more expensive option. We believe, a considerable part of capital expenditures is accounted for by construction of transportation facilities. In the meanwhile, the project is promising, since the estimated net operating income should exceed $10 mln after the project is fully invested and put into operation. Given divestiture possibility as the project’s NPV increases, the payback period could be bound above by 5-7 years. We leave for a possibility of expanding the capacities beyond the yearly 4.5 mln tons, which would drive up the project’s inherent value by 20-40%.

Project progress. For now, our investment fund has concluded acquisition of land plots in question and hired a project group of architects to mould and structure the construction process. We now wield the project’s draft master plan, and licenses to proceed with the development. We have performed the project’s valuation, prepared the business case and now are turning to search of strategic investors, willing to contribute not less than $5 mln into the business.

Construction of oil terminals in the Kaliningrad Region - safe investments for your funds