Twinseleven Navigation Ltd.

Project plans to acquire and operate 5 sea-river class dry-cargo vessels with cargo carrying capacity of about 6000 tons. Market for such vessels is low competitive due to their shortage.
Management company planned to be founded in Malta or similar jurisdiction is recipient and debtor of investments.
Each vessel to be purchased, registered and owned by separate shipowner company established by management company in Malta or similar jurisdiction.
Management company transfers full management of all vessels to ship management company in Ukraine which will operate ships for and on its behalf.

The project is calculated, but investments are required for implementation.

Company clients are traders, sellers and buyers of bulk grains, agricultural products and raw materials in Azov-Black Seas region. These are companies of various sizes, from small grain traders of Turkey, Egypt, Russia, Ukraine, Europe and steel and power plants of Bulgaria, Romania, Turkey, Egypt and Italy till big commodity market operators such as Cargill, Bunge, Glencore, Sibanthracite, Mechel, Mirtrade and big Turkish industrial corporations such as ICDAS, Isdemir, Erdemir.
Average annual cargo turnover of only Azov Sea shallow ports is over 40 million tons of dry cargoes, including over 20 million tons of export cargoes of bulk grains, agricultural products and raw materials. Such ports develop their cargo storage and transhipment facilities to ensure handling of growing flows of export dry cargoes.
As of the end of December 2019, there were 223 units of dry cargo vessels in operation, similar to those considered in this project and built before the end of 1999. Average age of these vessels was 36,8 years. According to forecasts, 170 of these vessels will remain in service by 2025, and 93 vessels by 2030. Besides, there were 71 new dry-cargo vessels of such type built and put into operation during the period 2000-2019. Another 55 vessels of this type were contracted for building until 2025. The requirement for vessels of this class is about 300 units.

Company clients are traders, sellers and buyers of grains, agricultural products and raw materials in bulk who charter vessels to carry such cargoes by lots of 5-6000 metric tons from shallow ports of Azov and Black Seas at ports of Black Sea and Mediterranean Sea basins. There is shortage of such type vessels in this region, especially during export seasons of grains and agricultural products, which will not be fully replenished during project implementation period.

Company will propose to customers classed and insured by first-class societies modern vessels in proper technical condition, well equipped and professionally manned, able to carry even volumetric cargoes in lots of 5-6000 metric tons from shallow ports, which meets highest requirements of most clients.

Competitors are number of Ukrainian, Russian and Turkish shipping companies owing and/or operating shallow draft vessels of sea-river classes in quantity from several to dozens of ships in Azov-Black Seas and Mediterranean Sea region. Most of such vessels are over 25 years old.
Market is low competitive due to shortage of such type vessels in this region, especially during export seasons of grains and agricultural products, which will not be fully replenished during project implementation period.
Moreover, market of considered in this project modern vessels with cargo carrying capacity of 5-6000 metric tons, cargo volume capacity of about 9-10000 cubic meters and draft of up to 5 meters is represented in Azov-Black Sea region by limited number of vessels of several shipowners.

Differentiators over most competitors:
1. Vessels’ young age: significant number of Customers do not accept vessels over 25 years age for carriage of their cargoes.
2. Vessels’ classification society and insurance company of first-class: significant number of Customers accept only vessels classed by IACS members and insured by first-class insurers.
3. Vessels’ proper technical condition: significant number of vessels are restricted by their owners to call for EU ports due to treatment of ship’s detention by port authorities because of her improper technical condition.
4. Vessels’ flag recognised by international communities: advantage for significant number of Customers.
5. Vessels’ large cargo carrying capacity: ability to load more quantity of volumetric cargoes, such as sunflower seeds, sunflower seed meal, coke, coke breeze, etc.
6. Agreement with trade union that is ITF member: advantage in employment of proper vessels’ crew.
7. Proper updating Customers in respect of vessels’ current operations and positions.

Source of project revenue is freight payments received from Charterers (Customers) for carriage of cargoes by vessels acquired in ownership.
Financial indicator of ship's operation is time-charter equivalent - income received by vessel per day during voyage, deducted with voyage costs (port/canal dues and charges, additional expenses, cost of fuel consumed, brokerage commissions on freight).
This income is used to pay for:
- return of raised funds for vessel acquisition and respective interest;
- administrative expenses;
- vessel’s running cost.
Administrative expenses are expenses for maintenance of management company, shipowner companies, including costs of registering and maintaining vessels’ jurisdiction, and fee of ship management company for management of ships.
Ship maintenance costs are divided into following categories:
- regular or running cost (crew wage and victuals, crew change, fresh water, supplies, consumables, spare parts, services and maintenance, regulated class surveys, lubricating oils, communications, classification society, insurance, etc.) i.e., expenses that exist continuously, regardless of vessel operation condition. Amount of running cost is determined for one classification period (5 years) and is distributed on average for each year/month/day of such a period;
- variable or voyage cost (fuel bunkering, port dues and charges for the passage of canals/straits (disbursement accounts), brokerage commissions on freight). Voyage cost is taken into account for each voyage of each vessel.
Estimated time-charter equivalent for vessel type considered in this project is over USD 4500 per day based on average freight rates over last 5 years (2016-2020) for cargo transportation in Azov-Black Sea and Mediterranean Sea regions.
Estimated time-charter equivalent considered in this project for calculations is USD 4200 per day.
Estimated average annual revenue of 5 vessels is USD 7 455 000.
Estimated annual administrative expenses of 5 vessels is USD 765 000.
Estimated annual running costs of five vessels is USD 3 345 000.
Raised investments are estimated to be returned in full within 4,5 years by equal monthly or quarter payments, beginning from second year of project implementation.

To implement project, management company is established in Malta or jurisdiction that meets conditions of investments. Founders of management company are individuals/legal entities who are the project participants or are associated with them.
Management company is recipient and debtor of the financial resources required to implement project. For acquisition of each vessel management company establishes shipowner company in Malta or similar tax jurisdiction. Each new shipowner company founded in this way is registered owner of purchased vessel.
Vessels purchased are registered under Maltese flag or flag of a suitable tax jurisdiction recognized by international communities.
On basis of BIMCO Standard Ship Management Agreement management company transfers full management of acquired vessels to ship management company registered and located in Ukraine, which will operate vessels for and on its behalf for fixed management fee. Thus, all cash flows related to project implementation will pass through bank account of management company.
Ship management company will have necessary experienced staff, licenses and certificates to carry out activities related to operation of dry cargo ships.
Search for and acquisition of vessels will be carried out in two ways:
1. Through reputable specialised broker companies that have significant successful experience in sale and purchase of vessels and a wide communication network with actual owners of vessels of type considered in project.
2. Through our own communication network in the industry.
Vessels will be employed for carriage cargoes in Azov-Black Seas and Mediterranean Sea market via own network of charterers and ship’s brokers.

Investments are required for purchasing 5 vessels at secondary market and taking them in operation.
Estimated average cost of one vessel: USD 3 500 000.
Estimated cost of one vessel taking in: USD 150 000.
Cost of vessel’s taking in operation includes:
- changing the ship’s registration jurisdiction;
- her equipping and supply;
- port dues (disbursement account) in the first loading port.

Offer to Investor:
- full return on investment;
- share in the ownership of vessels acquired on investment, the size of which should be discussed and agreed.

Following list of risks that can significantly affect course of project implementation are taken into consideration:
1. Failure to comply with cargo loading/discharging rates in ports.
2. Growth of prices of fuel and energy resources.
3. Unfavorable trends in the transport industry.
4. Reaction of competitors.
5. Actual costs of project implementation overdraw the estimated ones.
6. Delay in payments for services rendered.
7. Risks of loss (destruction) of the vessel.

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