Essar Shipping Investor Presentation January 2011
Essar Group Global Outreach Algoma Steel, Canada Essar Power Gujarat Gujarat Aegis BPO, Vadinar Gurgaon Power Essar Power MP Vadinar Mahan Raniganj Essar Steel Oil & Gas blocks, Essar Energy Refinery, Essar Energy Minnesota Steel Project, US Trinity Coal Mine Niger ria Global Supplies FZE (UAE) Kenya Petroleum Essar Telecom East Africa, Kenya Madagascar Mozambique Coal Mine Vietnam Vadinar Oil Terminal EBTL Hazira EBTL Salaya Mumbai Aries Coal Mine Indonesia PT Essar Indonesia Australia Chakla Ashok Karkata Jharkhand Essar Power Jharkhand Hazira Steel Complex, Gujarat Essar Communications Essar Power Essar Projects Essar Shipping & Logistics Sales office Coal block 20 Countries, 5 continents, 60,000 people, US$14bn revenues (FY08 09) 1
Essar Group one of India s large est industrial houses Essar Group Essar Energy Plc* Oil & Gas Power Steel Ports & Shipping Projects Communi- -cations Services 2,132 MMBOE reserves 18MMTPA capacity at Jamnagar Being enhanced to 11,470 MW by 2014 Under Construction: 8450MW 1,300 retail outlets Under Development: 1800MW Integrated company spanning the oil & gas value chain 450 MT coal reserves Over a decade s experience in the Indian power industry 14 MMTPA capacity 1.4 billion tonnes of iron ore reserves 7 MTPA Pellet plant 188.6MT coal reserves in West Virginia Integrated, global steel producer 76 MTPA of port capacity going upto 158 by 2013 Fleet of 26 vessels 13 rigs including one semisubmersible 12 ships and 2 Jack Up rigs on order International logistics provider to steel, oil refining and power sect tors Fully geared to execute turnkey EPC projects in India and overseas 2 nd largest equipment bank in India Leading EPC contractor with 40 years track record Vodafone Essar 109 mn subscribers GSM services in Kenya, Uganda & Congo 14% stake in Indus Towers The Mobile Store 1,225 retail outlets Significant player in the Indian telecom sector 40,000+ employees globally 32,000+ seats 42 global locations Provider of multi-channel CRM solutions to blue-chip clients Source: Company information * Listed on London Stock Exchange Capacities stated represent gross capacity 2
ESPLL Demerger Pre Demerger Post Demerger Promoters Public Promoters 83.7% 16.3% 83.7% Public 83.7% Essar Shipping Ports & Logistics Limited Essar Ports 16.3% Essar Shipping (Shipping, Oilfields Services, Logistics) 3
Demerger Update emerger Sche eme D ESPLL to be renamed as Essar Ports, w hile resulting company to be called Essar Shippingi Share Capital to be split in the ratio 2:1. For every three shares of ESPLL held, the shareholders to get two shares of Essar Ports and one share of Essar Shipping Process Upd date NSE and BSE approval obtained Shareholder s meeting held on 30 th November 2010 and Shareholder approval report filed with the High Court Way Forwa ard High Court hearing scheduled for 27 th January 2011 for approval of demerger scheme Company to announce record date to determine entitlement of members for receiving shares of both the companies 4
Essar Shipping 5
Essar Shipping VLCC MT Smiti Semi-submersible Essar Wildcat Land Logistics Floating Crane for lighterage operations 6
Essar Shipping Overview Sea Transportation Logistics Oilfields Services Fleet of 26 vessels, DWT of 1.40 mn 2 modern Double Hull VLCCs 4 Capesize ships 2 Supramax bulk carriers 2 13,000 dwt General Cargo ships 12 new ships on order 1 Capesize Bulk Carrier being added by end of January 2011 Transhipment Assets: 2 Floating Cranes 10 Articulated Barges 6 tugs Land Logistics Operates fleet of 5,000 chartered trucks Fleet of intercarting assets 1 Semi Submersible offshore rig 12 Land Rigs 2 new Jack Ups under construction All ships on long term contracts Strong client base consisting of Baosteel, SAIL, Indian Oil Corporation, Essar Steel, Provides lighterage support services and onshore & offshore logistics services Inland transportation of finished steel and Essar Oil, etc., all with long term petroleum prod ucts through trucking contracts, ensuring steady cash flows in a volatile market facilities Experienced and credible operator with more than 220 ship years of experience High operating margins Diversified mix of assets and clients across geographies Long term contracts with strong client base consisting of Schlumberger, Vietsovpetro, Prest (Petrobras), Essar Oil, etc. Experienced and credible operator with strong HSE track record Poised to cater to the growing logistics markets 7
Essar Shipping Strong demand drivers in place 1 India s cargo growth expected to continue rising with a CAGR of 10%+ in line with GDP growth rate 2 Essar Group s cargo requirement expected to be around 75 million tons by FY 2013 3 Increased requirement for tonnage to cater to this demand 4 Associated logistics requirements will have to be scaled up accordingly 5 Increased E&P activity in India seen through the various NELP rounds 6 Requirement for mid water Semi-submersibles and high spec Jack-Up rigs expected to be strong 8
Sea & Surface Logistics 9
Sea Transportation MT Smiti (Very Large Crude Carrier) MT Ashna (Very Large Crude Carrier) MV Kiran (Cape-size ship) MV Malavika (Supramax ship) 10
Industry Outlook: Sea Transportati ion Source: Clarkson s Dry bulk markets have been improving marginally with Cape spot rates crossing USD 40,000 per day Tanker markets continue to be choppy with spot rate es not picking up despite approaching winters 11
Sea Transportation Strong growth trajectory Key highlights Capacity (Million DWT) 1.9 2.37 0.47 1 One of India s leading ship owner/operator with an excellent track record 1.40 05 0.5 1.4 1.4 1.9 2 30 year track record of carrying cargo for the most demanding customers including oil majors FY 11 FY 12E FY 13E 3 26 ships in operation, including 2 VLCCs, 4 Capes, 2 Supramax bulk carriers and 2 Handysize carriers Cargo split b) FY 2011E FY 2012E FY 2013E Third Party 62% 57% 41% Essar Group 38% 43% 59% 4 All ships on long term contracts, hedging against the industry cyclicality 5 12 new ships on order consisting of 6 Mini-capes and 6 Supramax bulk carriers Capacities stated represent gross capacity (a) Cargo split as a % of DWT Source: Company information 6 MOA signed for acquisition of one Capesize dry bulk carrier with deliveries in January 2011 Incremental capacity addition 12
Tonnage utilization Vessel DWT Vessel Type Year Built Charter Type Charterer Cargo Comm. Date Term Tankers MT Smiti 281,396 VLCC 2005 MT Ashna 301,428 VLCC 1999 Time Third Party Crude Oil May-09 2 yrs Time Third Party Crude Oil Jan-11 6+6 m Bulk Carrie ers MV Kiran 175,048 Capesize 1993 MV Chandi Prasad 131,987 Capesize 1981 MV Mahavir Prasad 136,608 Capesize 1983 Capesize TBA 150,000 Capesize 1990 MV Govind Prasad 129,329 Capesize 1983 MV Malathi 55,707 Supramax 2004 MV Malavika 53,169 Supramax 2005 MV Tvisha 13,000 Handysize 1998 MV Tuhina 13,000 Handysize 1999 COA Third party Iron Ore Apr-07 5 yrs COA Essar Steel Iron Ore Apr-09 10 yrs Iron Ore Apr-09 10 yrs COA Essar Steel COA Essar Steel Iron Ore Apr-09 10 yrs COA Essar Steel Iron Ore Apr-09 10 yrs COA Third Party Coal Aug-09 5 yrs COA Third Party Coal Aug-08 5 yrs Time Essar Steel Steel Jul-10 8 yrs Time Essar Steel Steel Jul-10 8 yrs New wbuilding Vessels Hull No 291 54,000 Supramax Hull No 292 54,000 Supramax Hull No 293 54,000 Supramax Hull No 294 54,000 Supramax Jul-11 Sep-11 Dec-11 Mar-12 Hull No 295 54,000 Supramax Dec-12 Hull No 297 54,000 Supramax Mar-13 Hull No 2038 105,000 Minicape Jul-11 Hull No 2040 105,000000 Minicape Aug-11 Hull No 2042 105,000 Minicape Oct-11 Hull No 2045 105,000 Minicape Nov-11 Hull No 2046 105,000 Minicape Dec-11 Hull No 2048 105,000 Minicape Jan-12 Time Essar Power Coal Jul-11 10 yrs Time Essar Power Coal Sep-11 10 yrs Time Essar Power Coal Dec-11 10 yrs Time Essar Power Coal Mar-12 10 yrs Dec-12 Mar-13 COA Essar Steel Iron Ore Jul-11 15 yrs COA Essar Steel Iron Ore Aug-11 15 yrs COA Essar Steel Iron Ore Oct-11 15 yrs COA Essar Steel Iron Ore Nov-11 15 yrs COA Essar Steel Iron Ore Dec-11 15 yrs COA Essar Steel Iron Ore Jan-12 15 yrs All ships on long term contracts (a) Capacities represent DWT (Dead Weight Tonnage) Source: Company information 13
Diversification by cargo and customers Operational FY 2012E FY 2013E 1,135 Today MW 6,015 MW 2012E 10,000+ MW 2013E rgo Coal 8% Coal Crude 11% Oil 42% Crude Oil 41% Coal 17% Crude Oil 25% Ca Iron Ore 50% Iron Ore 48% Iron Ore 58% Today 2012E 10,000+ MW 2013E rs Custome Essar Group 38% Third Third Party Party 62% 57% Essar Group 43% Third Party 41% Essar Group 59% Note: Cargo and customer split as a percentage of DWT Source: Company information Healthy split of cargo and Group and third party long term contracts 14
Logistics Services Key highlights 1 Onshore & Offshore logistics services, Lighterage support services and Project cargo services 2 Inland transportation of finished steel and petroleum products 3 Operating a fleet of 5,000 chartered trucks 4 Long Term Contracts with Group companies 5 Pursuing forays into Third Party businesses Source: Company information 15
Oilfields Services 16
Oilfields Services Jack Up Rigs (a) Notes: (a) 2 new-build Jack-Up rigs on order Essar Wildcat Semi-Submersible Rig LR5 Land Rig 17
Industry Outlook: Oilfields Services Source: Pareto Markets have been improving for both, floaters and Jack Ups Recent projections of USD 150,000 have been made in the Jack Up markets, suggesting strong recovery for high quality assets 3G Semi-submersible markets expected to recover further 18
Oilfields Services Asset Deliveries to Drive Growth Key highlights 16 12 8 4 Fleet 2 1 1 1 12 12 12 1 2 The most diversified Indian Oilfields Services company Strong Group track record of having executed drilling contracts of INR 3000 Crore (US 650 Million) 0 Current FY12E FY13E 3 High quality asset base and proven in-house O&M capabilities Jack-ups Semi-subs Land drigs Total cumulative Current FY 12E FY 13E capex (INR Crore) 4175 4675 5145 4 High operating margins and robust cash-flows from operating assets Total incremental capex (INR Crore) 659 500 470 5 Poised to benefit from the strong growth in the Indian E&P markets Customer split Third Party 94% 93% 94% Essar Group 6% 7% 6% 6 Strong relationships with global Oil & Gas Majors Notes: (a) Capex includes only fleet expansion Source: Company information 19
Financials 20
Essar Shipping Financial Performance Total Income (INR Crores) H1 FY11 H1FY10 FY2010 1353.63 1141.67 2622.21 Total Expenses 978.47 781.78 1842.39 EBITDA 375.17 359.89 779.82 Interest and Finance Expenses 161.96 131.20 272.66 Profit Before Depreciation and Tax 213.21 228.69 507.16 Depreciation 150.32 154.77 309.43 Profit Before Tax Tax 62.89 73.92 197.73 21.22 17.73 31.92 Profit After Tax 41.67 56.19 165.81 Operating Cash Profit (PAT + Depreciation ) 191.99 210.96 475.24 Debt as on Sept'10 (INR Crores) Operating 2,780 Projects 1,858 TOTAL 4,638 21
Essar Shipping Key Investment Highlights g 1 Over three decades of experience in the shipping industry 2 Majority of fleet on long term contracts minimal exposure to spot markets 3 Significant investments made in oilfields servicess 4 Essar Wildcat has now completed 750 days of LTI free operations 5 New-buildings on order: twelve ships and two Jack Up rigs 22
Analyst Contacts Mr. Vikram Gupta CFO Essar Shipping Tel: + 91 22 6733 5134 / + 91 98197 30120 Email: vikram.gupta@essar.com Mr. Anshumali Dwivedi Head Investor Relations Essar Shipping Ports & Logistics Limited Tel: + 91 22 6629 3778 / + 91 98339 45648 Email: anshumali.dwivedi@essar.com Mr. Yash Parekh Investor Relations Essar Group Tel: + 91 22 6629 3768 / + 91 9930135775 Email: yash.parekh@essar.com 23
Legal Disclaimer This presentation is for information purposes only and does not constitute an offer, solicitation or advertisement with respect to the purchase or sale of any security of Essar Shippingi Ports & Logistics Limited it (the Company or ESPLL or Essar Shipping Ports & Logistics Limited ) and no part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. This presentation is not a complete description of the Company. Certain statements in this presentation contain words or phrases that are forward looking statem ments. All forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those contemplated by the relevant forward looking statement. Any opinion, estimate or projection herein constitutes a judgment as of the date of this presentation, and there can be no assurance that future results or events will be consistent with any such opinion, estimate or projection. The information in this presentation is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the Company. We do not have any obligation to, and do not intend to, update or otherwise revise any statements reflecting circumstances arising after the date of this presentation or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. All information contained in this presentation has been prepared solely by the Company. No information contained herein has been independently verified by anyone else. No representation or warranty (express or implied) of any nature is made nor is any responsibility or liability of any kind accepted with respect to the truthfulness, completeness or accuracy of any information, projection, representation or warranty (expressed or implied) or omissions in this presentation. Neither the Company nor anyone else accepts any liability whatsoever for any loss, howsoever, arising from any use or reliance on this presentation or its contents or otherwise arising in connection therewith. This presentation may not be used, reproduced, copied, distributed, shared or disseminated in any other manner. The distribution of this document in certain jurisdictions may be restricted by law and persons into whose possession this presentation comes should inform them about, and observe, any such restrictions. 24