Projects in new regions
Еvgeny Petrov: Welcome to our regular broadcast. I’m Evgeny Petrov, Deputy General Director for Marketing at Unitsky String Technologies Inc. The uScovery office, represented by Executive Director Oleg Zaretsky, is joining us from Dubai. Also the office of Unitsky String Technologies Inc. from Moscow, represented by Executive Director Arsen Babayan, is with us. We continue to discuss issues related to the development of string transport technologies, their implementation in various regions of the world, and projects using our technological solutions. Today we will talk about geographical expansion and the projects that are emerging in new regions; about the opportunities that open up for us in 2024; and about the work of specialists in structural divisions of the companies that are part of the Unitsky Group of Companies or the UST’s Group of Companies At the end of last year, Anatoli Unitsky, the General Designer of UST Inc. and the author of string transport technology, announced plans to expand the company’s operations to new regions. The company has already taken the first steps towards this goal by adding a new company to its team.
We are confident that this new member will soon become active in the region where we have been working and will help us move towards more specific and substantive work. Oleg, could you please tell us about the region and the type of company? Oleg Zaretsky: We recognise that Indonesia is a huge country with a population of 300 million. Given our experience and expertise, we understand that the country is in urgent need of string transport.
Firstly, this country is geographically fragmented, requiring connectivity not only between islands but also within them. Additionally, the country is composed of various communities, clans, and tribes. The absence of a cohesive logistical system on each island presents a significant challenge. Due to the fact that 15-20 thousand islands include Indonesian archipelago, it is impossible to construct a railway system – a unified one, similar to that of Russia, that connects the entire country.
However, dividing the railway or any other infrastructure into smaller parts would not be economically profitable. No one will construct 20-30 km of railway. Therefore, on most of the islands, especially the main ones like Sulawesi, Sumatra, Java, Bali, Papua, and Timor, transportation is primarily done by road transport. This results in significant congestion and traffic jams on the highways. Any attempt to solve logistical issues, such as launching electric trains in cities or building a metro in Jakarta, results in high costs, the need to rebuild infrastructure, and significant capital expenditures.Therefore, our string transport technology will undoubtedly be in demand and is already popular in Indonesia. By the way, uTrans - a system for transporting bulk cargo over long distances from mining facilities to logistics points, is also included.
Indonesia is one of the largest coal exporters in Asia, with most of the coal being mined on the island of Kalimantan (formerly known as Borneo). Of course, developing these coal deposits requires building roads and having a fleet of lorries and drivers. This task is very challenging to accomplish, firstly, due to the island’s geographical conditions, which include a vast number of rivers and dense jungle.
Secondly, the lack of highly skilled labour force poses a significant obstacle. However, our uTrans solution can aid in the island’s development while also being economically advantageous. The project’s payback period can be relatively short. In addition, our advantage of string transport is evident. We have met with the governor of Jakarta and various provincial governments, all of whom have expressed great interest.
However, there are certain legal considerations, including the requirement for a company to be established in Indonesia. So it’s not an empty shell, but a full-fledged limited liability company (LLC). This is the situation. It is important to have a physical office, employees, and authorised capital so that the company can be taken seriously. We have reached the point where we need to establish a company related to Unitsky’s technology. We have achieved this goal by registering a company with a staff in Jakarta and appointing a director from the Unitsky Group of Companies.
The director will begin his duties after Ramadan and will work towards realizing a commercial project as soon as possible. As many as possible projects should be implemented in different areas, including cargo, passenger, and bulk cargo transportation with the help of the uTrans solution. The current situation involves a licence, a physical office, and a company with significant authorized capital. So it’s not an empty shell, but a full-fledged limited liability company (LLC). This is the situation. Еvgeny Petrov: It may be helpful to clarify that, wherever we start specific substantive work on the construction of uST complexes, virtually everywhere we do not pass over the stage where a company must be present on the site to perform project management functions. This is due to the requirement for on-site operational activities and tax deductions to remain in the local area.
Oleg Zaretsky: One of the things we talk about is responsibility, Evgeny. Some strangers came and said: “We'll give you the technology”. And who is going to be responsible for it if something goes wrong? That means responsibility is also implied. We have our own company, our own staff, our own director. These are the people who will be directly responsible to the authorities for the success of the company. Еvgeny Petrov: We are talking about the fact that we are launching the company in Indonesia. As you rightly pointed out, this is no coincidence. It is due to the fact that this is one of the most promising regions for the implementation of projects using our technologies. Now we are talking about the fact that we have an office in Russia, we have an office in the United Arab Emirates, we have a partner company in India.
Now we have a company in Indonesia. The geographical presence of the Unitsky Group of Companies is growing. In Arsen’s area of responsibility, we are also very actively considering the possibility of opening a representative office, as we are very close to the crucial steps related to the start of construction and the completion of design and certification work. Arsen, could you comment please. Arsen Babayan: We are talking about Kazakhstan and the route on one of the exits from Almaty to the suburbs. There is a huge passenger traffic, constant traffic jams. Daily worker migration remains consistently high. So the track should have a good payback. A large international banking structure has expressed interest in financing it. Еvgeny Petrov: Oleg, could you please expand on my thought: I would like to draw the attention of our viewers to the fact that we first talked about the possibility of implementing uST technology in Kazakhstan at least three years ago, or even more, if I remember correctly.
Since then, in principle, the work has not stopped even for a month, not even for a day. We have reached a stage where no final decision has yet been made. There are still a number of circumstances that have to happen. But now, when we have official letters from the regional administration, we have confirmation of the proposed parameters of the complex, and, as you said, Arsen, we have interest from lending organisations’ side, only at this stage we seriously begin to consider the creation of a legal entity that would be engaged in operational activities. Opening a company is not really a problem. We could open a representative office in any country in the world right now, but only up to a certain point. Let’s talk more about what should happen for us to be convinced and decide to open such an office.
Oleg Zaretsky: There should be a sober-minded analysis of the possibility to develop this market. As they say, the stars have to align for such a decision to be taken. Nevertheless, there is a certain risk involved. Because it is clear that setting up a company involves costs. And there’s the same ”Catch-22” dilemma. On the one hand, there is no project until there is no company. On the other hand, some people say that if there is a project, there will be a company. It is necessary to break this cycle. There is still some risk involved anyway. Nevertheless, I think there should be some objective indicators, preliminary work, as was done in Indonesia and Kazakhstan, where I was involved in some way.
And when we see that such a moment is ripe, it is necessary to open a company. Many potential, let’s say not clients but, businessmen, come to us and say: “You should open a company in some country, invest a lot of money, appoint me as director and then everything will be fine.” Unfortunately, this does not usually happen. It can just end up with unjustified expenses.
So, on the one hand, you have to move forward, but on the other hand, you have to do it very carefully, thoughtfully and in a balanced way. Еvgeny Petrov: An important issue that comes up in the context of our discussion today is how should negotiations take place from our point of view as representatives of an official group of companies? Because it is hard to imagine how many requests we receive from, for example, fans, partners, who say to us: “Let me deal with this issue.” This is written by a person who seems to be, for example, an engineer with 20 years of experience, with ties, for example, to someone from the mayor’s office. He says: “I want to negotiate. Where to go? What to do? What to carry?” How do you, Oleg and Arsen, evaluate such initiatives? Oleg Zaretsky: That is actually a very good question.
Indeed, there are many such people, and we should recognise that the vast majority of them sincerely want to contribute to the development of string technology. Of course we are all interested. We know that the overall cost of investing in string technology will look very different and the more focused projects we have, the more the cost of evaluating string technology will rise. It is clear that many people want to contribute not only financially but also to the development of the project.
As I said, the majority of them do so with the utmost sincerity, and we should be grateful to them for that. I hope these people are watching our program. I would like to address to them concerning some contacts. You’re right, let’s say a person knows someone in the mayor's office. But that doesn't mean anything. I also know a lot of people in town halls in different cities. They don’t know me. I suggest that all these people start thinking beyond who knows who.
What we really lack, and where some help might be helpful, is in identifying potential projects that will be profitable. We have to be aware that it has to be realistic. It should be a short track, for example 3-5 kilometres, with a huge passenger traffic, with problems, let’s say, of access to the airport because of traffic jams or other problems. I am sure there are many such potential projects. The situation where you say I know someone who knows someone who knows someone, that usually leads nowhere. Еvgeny Petrov: Often it can even lead to direct damage to the group of company’s reputation. Oleg Zaretsky: Absolutely. I think Arsen has a lot of moments like that, when people call themselves somebody, climb up to some level of power or something.
They end up doing more harm than good. Еvgeny Petrov: Arsen, what do you think? Arsen Babayan: I would certainly like to support Oleg that it is of course necessary to deal with targeted projects in a professional way. Because if we do it unprofessionally and go to the authorities with it, then we undermine the authority of the technology in that very part, and therefore wrong conclusions can be drawn about who is involved in this technology. Well, since they are people, then the question arises as to whether the technology is reliable if people are not presenting it professionally.
Oleg Zaretsky: Our message is that targeted projects should be handled by professionals. I will give you a very simple example. Someone from Africa comes to me and says: “I have a wonderful project. I want it to be like this: two cities, city A and city B, 20 kilometres between them, and people go back and forth. Why not build a string route line?” The first question is: who will pay for it? Is the country’s budget empty? It is empty.
The second question: will this project be economically viable? It’s very easy to calculate. I ask the person: how many people go there and back every day? Well, a thousand of them, well, 10,000 of them. How much are they prepared to pay for a ticket? Well, a dollar. That’s about the daily revenue, multiply it by the number per year and get the result. So such a line would cost - we know this very well - at least 10 million dollars per kilometre. This is another misconception that needs to be cleared up. Quite simply, when we say that our string transport technology is many times cheaper than others, we do not mean that it costs three pennies.
Every infrastructure project costs a lot of money. I mean: the Dubai metro cost $150 million, and the Santo Domingo metro cost $40 million per kilometre in 2007. So when we say “several times less”, we’re talking about, let’s say, $10-15 million per kilometre. Multiply that by 20 kilometres. That’s $200 million. We will never recapture that kind of money from tickets, even if we sell them for a dollar. A person from Africa looks at the pros and cons and he leaves, he realises that this commercial project will never pay off - (A), and (B) - this country has no money in its budget. And I think that’s the main point to keep in mind.
And if the project has prospects from that point of view, it pays off, then surely, we will build stops 400 metres away and 200 metres away wherenever it is necessary. It is all secondary, it is on the way with everything else. It’s solved technically, with engineering. It’s all solvable. The main question is: does this project pay off or not? It’s very easy to calculate. You don't need a university degree.
All you need is a calculator and an objective estimation of how many people will travel per day and how much they are willing to pay for that ticket. And if not, is the government willing to pay that money or at least give guarantees? Because we had a project in one of the African countries where, of course, the whole government says “let’s build” - and investors are somehow willing to put money into that project. But you need guarantees, and at that moment the government passed a law saying that it’s not the government that gives national guarantees.
And that’s it! Because one more thing that people should understand: the guarantees that are given at the municipal level, at the state level, are the same money. So the first question - is the government willing to pay or guarantee? And again, the answer today is usually no. At least in developing countries in Asia, Africa and India. And the second question - will this project pay off in a reasonable period of time? This is easy to calculate without a need of travelling to Dubai, without coming to Unitsky String Technologies Inc., and without even sending us an e-mail. A person can simply use a calculator and get know whether this project is paid for itself or not.
And then, if the answer is positive, then we are interested in it, then we are willing to consider it, and then we will reach the highest levels in this country. We have also made certain links, certain issues like this. So I still urge: if someone wants to help with a specific project, they should answer two questions. Question A: Is this project funded by the government or the budget? Honestly and objectively.
And question B: will this project pay for itself through ticket sales, advertising and all the rest at a capital cost of, say, $7 million to $20 million per kilometre? That's it! Arsen Babayan: I would like to add. Oleg raised a very interesting question. He says: imagine a project where we take people from city to city, and there is a 50 kilometre passenger route. If it costs $10 million per kilometre and there are 50 kilometres, that’s half a billion dollars. I want to say that it turns out that one project costs, perhaps, several times as much... I do not know how much investment was attracted in order to implement the most unique string technology. But one project costs more than all the investments in the unique string technology, which is capable of solving many transport problems around the world. This is to understand the ratio of numbers. That is, the money spent on creating the technology is many times less than an ordinary project, one targeted project.
Еvgeny Petrov: By the way it brings us to the question of dividends and where they come from. Arsen Babayan: This refers to the question of dividends and whether it is difficult to implement a targeted project. I will tell you that from the point of view of attracting funds, the task of finding an investor can be either more difficult or comparable to the task that was solved together with investors. You see, it is comparable to a single targeted project, an ordinary project - to transport passengers from city A to city B for 50 kilometres. The project costs half a billion dollars. How long do you think it takes people - officials, bankers, approving bodies - to make decisions on the allocation of such funds? At the same time, I would like to say that the financing of technology - and this is really the financing of research and development - can happen in a process: one year, two years, three years, five years, ten years.
That’s the technology development. If we are talking about a specific project, in order to be able to go to the construction site and put a shovel in, you should have that half a billion lying around, reserved. In full, in full amount! There is no flow of money from private investors today, tomorrow or the day after tomorrow. Which amout of money came - that amout of land, materials and so on are prepared. This money has to be lying around, there has to be a deadline for the project, plans, schedules, estimates and everything in between. And somebody who takes that half a billion, puts it down and says, “We’re going to cut the ribbon, we’re going to start construction, and in two years we’re going to have the project up and running” - that is a very difficult task.
Еvgeny Petrov: I just have to say that in Indonesia, at a certain point some time ago, we had some difficulties, mainly due to the incompetent actions of, let’s say, activists, who, simply misestimated the project, the scope of the tasks that needed to be solved. Because assessment is one thing. And there is another thing such as a need to communicate, to integrate many parties interested in the project at the same time, to obtain project financing, to structure project financing. And an engineer, with all due respect, with 20 years of experience in technical design, construction - all doesn’t matter, but whether has he any idea how to build these relationships or not, as every word and every stage of negotiation is important here, because simply any misinterpreted or misrepresented fact can become an insurmountable obstacle on the way to the realisation of the project.
I had a situation where we came to the negotiations and made a presentation and they listened to us and said: “You're telling a great story, it’s all very interesting, but your representative came here (we don’t know who, someone came and introduced themselves as a representative) and he said that your solution is 10 times cheaper than the railway.” Oleg Zaretsky: It happens all over the place. Yes, people come and say some false figures, and then, when you start to change their minds, it becomes a problem, of course. Arsen Babayan: And I also have a story about an interaction with one of our investors who proposed a project that seemed really interesting (it seemed interesting to me too at first), but on closer examination it became clear that there were circumstances that required a certain tactical approach to the realisation of this project.
I will tell you a story: one of the investors, an energetic young man living in St. Petersburg, suggested that I take part in such a project. It is called Ostrov Fortov. It is a military-patriotic project to create a patriotic park on Kotlin Island, where the city of Kronstadt is located, with a museum and places for military-patriotic events. The project is headed by the daughter of the Minister of Defence, Ksenia Shoigu. It is a well-known project. The project includes work on historical monuments, forts on islands in the Gulf of Finland. And to one of the forts an embankment road was built, and to another fort a cableway was built within the framework of the project, connecting this fort with the island, with the Fort Alexander the First, with the museum, which was built, I think, even on the shore of the island of Kotlin. There’s a 900 metre track, a cable car. But since the deterioration of the geopolitical situation, all the ropeway builders have left Russia, so there is a design solution, but no technology supplier.
What is more, given the military-patriotic nature of the project, the issue of using domestic technology was also an important factor. As a result, the investor and we are aware that a project that attracts the increased attention of top government officials is certainly a good, ground-breaking project, and in the case of successful implementation, it is of course an absolute plus for the technology. I supported this initiative. We went to a meeting in St Petersburg, not with the project leaders but with Ksenia Sergeyevna's assistants, and they presented the technology in detail. They told us about its advantages, possibilities and how it could be implemented using their project as an example.
And we learned that the military-patriotic project, like all military-patriotic projects, is financed by donations. As you understand, the implementation of a transport and infrastructure solution based on donations (i.e. we are a provider of technological solutions) is a very specific issue. We have talked about acting as an investor. But we are not an investment company, we are a provider of highly efficient technological solutions, so we need a customer, and we need a customer either with an investor or a customer with budget financing.
But there is none - this is a military-patriotic project and donations. And as for the financing of the Ostrov Fortov project itself, where the Alexander the First is located - there is budget financing, the Ministry of Defence is financing this architectural monument, the fortress, turning it into some kind of hotel, retail or tourist function. In any case, these are budget funds. So the situation is the following: even if we had the opportunity to implement this project as investors, on the one hand there is the Ministry of Defence, on the other hand there is the Patriotic Park, and therefore the flow of passengers that Oleg spoke about in terms of project evaluation is unpredictable here. Everything depends on the schedule of military-patriotic events, and on that depends the number of visitors and, therefore, the demand for this track. In other words, we are going to build a track and we do not know how many people will use it, how often they will use it.
Besides, it’s not right to raise money as part of a military-patriotic project to make a commercial story out of it, it’s just wrong. So in this case I think it is wrong to actively offer ourselves as investors, for the simple reason that we are not an investment company. This project is certainly interesting to us, and we can offer an interesting and effective solution. But it’s definitely not going to be cheap – that’s one thing, and secondly, I repeat, the project is not commercial. Some people simply lack the competence to assess all the possible risks, all the benefits and all the pitfalls. Such an example. Еvgeny Petrov: Let us summarise, colleagues. We started with the fact that we have a new region, in a new region we have an official representative office of the group of companies,
where specially trained people are going to work now under the supervision of you, Oleg, who have tremendous experience in communication, tremendous experience in evaluating targeted projects. Here at Unitsky String Technologies Inc. we always have a shoulder to lean on, we have a very good team of analysts who already calculate all these figures in detail. We have a very good team of logisticians who also calculate the specifics of traffic and other things in more detail. And in this respect, since we are using this format to address all our well-wishers, I would like to ask you not to be too diligent in your good intentions, because unfortunately they often lead to the opposite. This work is really very complex and requires a very comprehensive approach, involving many specialists in the detailed assessment - analysts, economists, marketers, logisticians, engineers and designers.
So when we get to a detailed assessment, all of that has to be involved. And of course, if you rush into it, you can make a mess of things and hinder what we are all working towards. And we are all working to ensure that our company as a whole becomes a big, very significant player in international markets, and that those who were astute enough to see the prospects for the development of these technologies and the group of copmpanies at an early stage are rewarded. The value of the project can reach 500 million dollars and more. I would like to point out that of this $500 million, the cost of a technology licence from a single project can be as much as 10%.
So we can expect, for example, $50 million. Or if it is a billion, it could be $100 million. We can do 4-5 such projects a year in the early stages, and then increase the number. Right now (we announced this figure last year) we are working on 100 projects. In India alone, we have up to 500 projects in the future and more. Therefore, those who follow us, those who want to help, can make their own assessment, take a calculator, as Oleg says, and calculate these figures and estimate the possible prospects, the possible income that they can deprive themselves of with such unjustified, thoughtless, hasty actions and decisions that are harmful to their work. That is why I propose to entrust the work on the implementation of the project to those who are authorised, to those whose competence has been confirmed and verified. And if there is an offer, we are always ready to consider it and work at the highest level. Especially since everyone here - Oleg, I know you are an investor, and Arsen is also an investor, and I am your humble servant - all of us are also interested in the fastest and most efficient and productive implementation, mass implementation of our solutions.
Thank you all for joining us and see you again! And next time we will talk about the progress of the construction and certification of the new facility, the new Karat Transport and Infrastructure Complex at the Sharjah Innovation Park. Thank you for your attention! See you again! Oleg Zaretsky: Thank you, goodbye! Arsen Babayan: Thank you for your attention!
2024-04-12 05:01
