Ennore Port Limited. Business Plan for Ennore Port Limited. Final Report

Transcription

1 Ennore Port Limited Business Plan for Ennore Port Limited Final Report Ennore Port Business Plan Consultancy HPC-CES March, 2007

2 Business Plan for Ennore Port Limited Final Report This Report has been prepared by the Ennore Port Business Plan Consultancy HPC-CES: HPC Hamburg Port Consulting GmbH CES Consulting Engineers Services (India) Pvt. Ltd. Container Terminal Burchardkai 3 57 Nehru Place (5th Floor) Hamburg New Delhi Germany India Phone: (+49 40) Tel Fax: (+49 40) Fax r.scholl@hpc-hamburg.de sghosh@cesinter.com Internet: Internet: Copyright by Ennore Port Business Plan Consultancy HPC-CES 20/03/07 12:28 D:\23328_Indien_Ennore_BP\Reports\Final Report March 2007\Final Report (FR)- V doc

3 Table of Contents EXECUTIVE SUMMARY xi 1. INTRODUCTION MAJOR RESULTS OF INCEPTION AND INTERIM PHASES Port Description General Existing Facilities Composition and Trends in Cargo Traffic Traffic Forecast by Commodity Considerations and Major Assumptions Coal Iron Ore Liquid Bulk Containers General Cargo Summary of Cargo Traffic Forecast Vessel Traffic Forecast Competitive Position Capacity and Bottleneck Analysis Phased Land Use Plan Land Availability Requirements of Additional Lands Summary of Additional Land Requirement Strategy Hinterland Connectivity Rail Connectivity Local Area Connections Hinterland network Rail connectivity Strategy Road Connectivity Existing and Proposed Access Roads Proposed Network of Port roads Strategy Organisational Issues VISION, GOALS AND STRATEGY Vision and Goals Management Vision for the Next 20 Years Goals to be achieved in the Next 7 Years Strategy 3-26 iii

4 3.3 Long Term Development OVERVIEW OF INVESTMENTS Private Investment Projects Existing Coal Berths (TNEB Coal) Common-User Coal Terminal Common-User Iron Ore Terminal Marine Liquid Terminal Container Terminal Summary of Private Investments Public (EPL) Investment Projects Capital Dredging Road Connectivity Rail Connectivity Miscellaneous Investments Summary of EPL Investments FINANCIAL PROJECTIONS Principal Assumptions Revenue Expenditure Investment Costs Others Depreciation Provision for Income Tax Dividends Foreign Exchange Rate Upfront Fees Main Results Profit and Loss Account Balance Sheet Cash Flow Key Financial Indicators Financing Strategy DETAILED ACTION PLAN Approach Action Plan for Identified Projects Projects Under Private Financing Marine Liquid Terminal (BOT Project) Coal Terminal (BOT Project) Iron Ore Terminal (BOT Project) Container Terminal (Phase-I) (BOT Project) Projects under EPL Financing Capital Dredging (Phase I) 6-60 iv

5 Capital Dredging (Phase II) Capital Dredging (Phase III) Road Connectivity Rail Connectivity Co-ordination & Monitoring FINANCIAL MODEL Structure Development Annual review of the financial model ANNEXURES 8-74 List of Tables Table 2.1: Past Traffic 2-6 Table 2.2: Summary of Traffic Forecast by Commodity 2-10 Table 2.3: Summary of Expected Vessel Calls by Type 2-11 Table 4.1: Common User Coal Terminal Financial Implications for EPL 4-34 Table 4.2: Iron Ore Terminal Financial Implications for EPL 4-38 Table 4.3: Marine Liquid Terminal Financial Implications for EPL 4-39 Table 4.4: Estimated Private Investment of the Terminal 4-41 Table 4.5: Container Terminal Financial Implications for EPL 4-42 Table 4.6:Summary of Private Investments 4-42 Table 4.7: EPL Investment on Development of Roads 4-45 Table 4.8: Summary of EPL Investments 4-47 Table 5.1: Phasing of EPL Investments 5-51 Table 5.2 Key Financial Indicators 5-54 Table 8.1: Civil Works for Container Terminal 8-82 Table 8.2: Equipment Investment for Container Terminal 8-83 Table 8.3: Cash Flow of Container Terminal 8-86 v

6 List of Figures Figure 2.1: Present Port Layout 2-5 Figure 2.2: Demand-Supply Analysis South Indian Ports 2-9 Figure 2.3: Updated Land Use Plan 2-16 Figure 2.4: Rail connectivity to Ennore Port 2-17 Figure 2.5: Sketch of Hinterland Rail Routes 2-19 Figure 2.6: Existing and Proposed Access Roads 2-21 Figure 2.7: Road Network Within the Port Area and Vicinity 2-22 Figure 2.8: Recommended Organisation Structure of EPL 2-24 Figure 3.1: Projects under 7-Year Action Plan and Provision for Long Term Development 3-30 Figure 8.1: Estimated Capital Expenditure of Container Terminal 8-85 Figure 8.2: Sensitivity Analysis of Container Terminal 8-87 List of Annexures Annexure 1: Commercial Terms of Concluded BOT Contracts 8-75 Annexure 2: Productivity Benchmarks 8-78 Annexure 3: Container Terminal Layout 8-79 Annexure 4: Financial Analysis of Container Terminal 8-80 Annexure 5: Year wise phasing of EPL Investments (Position as on ) 8-88 Annexure 6: Projected Profit and Loss Account 8-90 Annexure 7: Projected Balance Sheet 8-91 Annexure 8: Projected Flow of Funds 8-92 Annexure 9: Financial Model (Separate Attachment) 8-93 Annexure 10: Documents and References 8-93 vi

7 List of Abbreviations ADB B/H/T BOT CB CCTL CD CEA CES CFS CISF CMD CMDA CONCOR CPCB CPCL CRZ DPW ECP EIA EMC EMP EPL ESCO ETTPL FRM GAAP Asian Development Bank Bellary /Hospet/ Tumkur Build, Operate and Transfer Carbon Black Chennai Container Terminal Limited Chart Datum Central Electricity Authority Consulting Engineering Services (India) Private Limited Container Freight Station Central Industrial Security Force Chairman Cum Managing Director Chennai Metropolitan Development Authority Container Corporation of India Central Pollution Control Board Chennai Petroleum Corporation Limited Coastal Regulation Zone DP World, successor to Dubai Port International East Coast Ports Environmental Impact Assessment Environmental Management Cell Environmental Management Plan Ennore Port Limited Ennore SEZ Company Limited Ennore Tank Terminals Private Limited Fertilizers and Raw Materials Generally Accepted Accounting Principles vii

8 GOI GOTN GSPC HPC HSD ICD ICTT IMC IOCL IPA IPGL IRR IS ISPS IT/ITES IWT JNPT LNG LPG MEPZ MLT MMTC MOE & F MOSRTH MRTS MS MS Government of India Government of Tamil Nadu Gujarat State Petroleum Corporation Hamburg Port Consulting GmbH High Speed Diesel Inland Container Depot International Container Transhipment Terminal (Vallarpadam) Indian Molasses Co. Indian Oil Corporation Limited Indian Ports Association Indra Prastha Gas Limited Inner Ring Road, Internal Rate of Return Indian Standards International Shipping and Port Security Information Technology/ Information Technology Enabled Services Inland Water Transport Jawaharlal Nehru Port Trust Liquefied Natural Gas Liquefied Petroleum Gas Madras Export Promotion Zone Marine Liquid Terminal Minerals and Metals Trading Corporation Ministry of Environment & Forests Ministry of Shipping, Road Transport and Highways Mass Rapid Transport System Motor Sprit Mild Steel viii

9 MSPL NCTPS NH NHAI NMDP NMPT NSDP PFSA POL PPPAC PPP RFP RFQ RGCT ROW RPL RSO SEZ SSG SGL SICAL SICL SIP SIPCOT SISCOL SK SPCB Mineral Sales Private Limited North Chennai Thermal Power Station National Highway National Highways Authority of India National Maritime Development Programme New Mangalore Port Trust Net State Domestic Product Port Facility Security Assessment Petroleum, Oil and Lubricants Public Private Partnership Appraisal Committee Public Private Partnership Request For Proposal Request For Qualification Rajiv Gandhi Container Terminal Right of Way Reliance Petroleum Limited Recognised Security Organisation Special Economic Zone Ship Shore Container Gantry Crane Sesa Goa Limited South India Corporation (Agencies) Limited South India Corporation Limited South Indian Ports State Industries Promotion Corporation of Tamil Nadu Southern Iron & Steel Company Limited Superior Kerosene State Pollution Control Board ix

10 TAMP TIDCO TLF TNEB TNRDC TPP VHF WCP Tariff Authority for Major Ports Tamil Nadu Industrial Development Corporation Tank Lorry Filling Tamil Nadu Electricity Board Tamil Nadu Road Development Corporation Thiruvottiyur Ponneri - Panchetti Very High Frequency West Coast Ports Units: Cum Cfm DWT GRT ha Hr KM KVA KW M MT MTEUPA MTPA MW TEU TPD TPH Cubic metre Cubic feet per minute Dead Weight Tonnes Gross Registered Tonnes Hectares Hour Kilometre Kilo Volt Ampere Kilo Watts Meter Metric Tonne Million TEU per Annum Million Tonnes per Annum Mega Watts Twenty-feet Equivalent Unit Tonnes per Day Tonnes per Hour x

11 USD United States Dollar xi

12 EXECUTIVE SUMMARY 1. Introduction Ennore Port was developed from a green field situation in the East Coast of India at a distance of about 20km to the north of Chennai port. The Port was declared as a Major Port under the Indian Ports Act, 1908 in March 1999 and incorporated as a company (Ennore Port Limited) under the Companies Act, 1956 in October, The Port was commissioned in June, 2001 with two dedicated coal berths with 15m alongside depth and since then handles about 8.5 to 9 Million Tonnes of thermal coal per annum for the power stations of Tamil Nadu Electricity Board (TNEB). The Port also handles small quantities of Iron ore and POL through temporary facilities. The Port has initiated action for development of terminals through private sector participation to handle liquids, coal, iron ore and containers. The Port Management is functioning as a land lord Port with essential core staff. With a view to facilitate development of world class terminal facilities well suited to meet the present and future needs of the trades, Ennore Port Company has awarded the contract to prepare a Business Plan for Ennore Port to HPC Hamburg Consulting GmbH together with the Consulting Engineering Services (India) Pvt. Ltd. in July, The Inception Report was submitted on 21 st July The Interim Report was submitted on 3 rd November 2006 and presented to the Central Advisor (Port of Rotterdam) at New Delhi on 9 th December After incorporating the comments of the Central Advisor, the Interim Report (Final) was submitted to EPL on The Draft Final Report was submitted to EPL on and presented to EPL, the Indian Ports Association and the Central Advisor on Comments from EPL and the Port of Rotterdam were received during the first week of March and were discussed with both EPL and the Port of Rotterdam on occasion of the presentation of the Draft Final Report. The Final Report (FR) is now presented. The Final Report takes the outcome of the discussions of the presentation of the Draft Final Report and the comments received thereon onto account. The Final Report is complemented by an Addendum that sets out more details of the container terminal project. The terms of the reference were also kept in view while preparing the FR. The objective of the FR is to provide a consistent, integrated and substantiated business plan. 2. Major results and conclusions of inception and interim phases. 2.1 Port description Ennore Port is an artificial deep-sea, harbour comprising of two rubble mound type breakwaters with concrete capping. The South breakwater of 1,070 m in length and North breakwater of 3080 m in length created a protected port basin of 220 ha in area. The approach to the port is through a channel of 3,775 m in length, dredged to Executive Summary xii

13 16.0m level and equipped with night navigational facilities. The permissible draught is 13.5m. Two coal berths each of 280 m length in tandem and with an alongside depth of 15m were constructed by EPL and Tamil Nadu Electricity Board (TNEB) have installed the fully mechanised coal handling system comprising of two gantry type grab unloaders each of 2,000 TPH capacity, hoppers and two streams of conveyors each of 4000 TPH capacity to facilitate direct delivery of coal to the premises of North Chennai Thermal Power Station (NCTPS) (Figure 2.1 shows the present port layout) Traffic forecast by commodity The Traffic forecast for Ennore Port has been made for the period of 20 years from to The principal items of Cargo to be handled at Ennore Port comprise of Coal (for TNEB and non-tneb), Iron ore, POL & bulk liquids and Containers. Summary of Traffic Forecast by Commodity (Table 2.2) (million tonnes) Commodity Low Cargo Forecast Coal TNEB* Coal Non-TNEB Iron Ore Liquid Bulk General Cargo Total(million tonnes) Container (mteupa) High Cargo Forecast Coal TNEB Coal Non-TNEB Iron Ore Liquid Bulk General Cargo Total(million tonnes) Container (mteupa) * Excluding additional potential new requirements by TNEB addressed to EPL in March 2007 following completion of the report. (Empty squares indicate no cargo due to non-availability of facilities) 2.3 Competitive Position With the infrastructure in position, the green field Ennore Port is in a good competitive position to develop deep-drafted dry-bulk, liquid-bulk and container Executive Summary xiii

14 terminals through private sector participation and provide better facilities and services. Strengths of Ennore include superior physical facilities and space for expansion. Threats and weaknesses result mainly from hinterland connections that while being a part of the action plan included in this business plan require upgrading and expansion. The principal competitors of Ennore Port are: Chennai, Tuticorin, Cochin (Vallarpadam) and Vizhinjam for containers Chennai and Cuddalore (as and when developed) for coal (Non-TNEB users) Chennai and Krishnapatnam (as and when developed) for Iron ore. On development and commissioning of Coal & Iron ore terminals at Ennore Port, the coal (Non-TNEB) and iron ore presently being handled at Chennai port are expected to shift to Ennore. 2.4 Capacity and bottleneck analysis Ennore Port has a potential to become a world class port. As per the traffic projections in the Business Plan, Ennore Port should have sufficient land back up to support development and operations of port facilities to handle about 55 Million Tonnes of dry-bulk and liquid-bulk cargo and 3.5 million TEU of containers the second half of the next decade. The land presently available is not adequate to meet the long-term demand. EPL should acquire additional lands to remove this bottleneck so that the growth of Ennore Port in long term is not affected for want of back up lands. 2.5 Phased land use plan Ennore Port presently owns 836 ha of land located inside and outside of the port boundary wall. EPL has a land use plan prepared in 2003 to guide the developments. The consultants have reviewed the land use plan with reference to the long-term demands vis-à-vis the land requirements. As per assessment made by the Consultants in the Business Plan, a minimum requirement of 1,050 ha of additional lands are required to provide space to accommodate future berths and the associated back up storage areas, road corridor, portside container yard, commercial corridor etc. The land use plan is updated incorporating the additional requirements. EPL should take action on priority to acquire additional lands in the vicinity before the land becomes scarce in this region. (Figure 2.3 shows the Updated Land Use Plan). The discussion of long term development possibilities reveals that even with the land additions mentioned above EPL will not have sufficient land to support the long term development. EPL must address this concern in conjunction with the recommended revision of the long term Master Plan. Executive Summary xiv

15 2.6 Hinterland connectivity Rail connectivity is required for 100% inward movement of Iron ore, 65% out ward movement of non-tneb coal and 25% of inward outward movement of containers. Road connectivity is required to move about 75% of container traffic and liquid cargo. After analysis of the connectivity needs for uninterrupted evacuation of cargo, the following recommendations have been made. Construction of an independent railway siding to connect Attipattu / Attipattu Pudunagar railway stations to coal, iron ore and container stack yards. (Ref. Figure 2.4) Construction of a new 88km chord line from Puttur to Attipattu with equity participation of EPL. (Ref. Figure 2.5) Construction of the network of roads suggested inside and outside of the port boundary wall. (Ref. Figure 2.7) Construction of a new Northern Port Access road to directly connect Ennore Port to TPP road and then to Thachur at NH-5. EPL to pursue action either to bring it under the port connectivity or participate through equity contribution. 2.7 Organisational issues The management of Ennore Port incorporated under the companies Act, 1956 is provided through the Board of Directors. As a commercial oriented corporate, the management is following the land-lord concept. With the view to improve the planning capability within the management, a 3-layer organisational structure has been recommended (Senior Management, Middle Management and Junior management). EPL has already initiated action to recruit proper professionals and fill up the slots as per the recommended organisation structure (Ref. Figure 2.8) in stages commensurating with the workload. 3. Vision, Goals and Strategy The Management vision for the next 20 years is that: Develop as a mega port with world class facilities to become the Eastern gateway Port of India. The goal for the next 7 years is: To execute the following projects selected to meet the traffic demands and to provide the supporting infrastructure. Projects Marine Liquid Terminal Coal Terminal Iron Ore Terminal Executive Summary xv

16 Container Terminal Installation of additional equipment in the existing coal berths (TNEB). (Figure 3.1 shows the location of the berths) Supporting Infrastructure Dredge the areas of marine liquids, coal, iron ore and container berths in phases synchronising with the construction schedules of the berths. Establish Road and rail connectivity for evacuation of Cargo. Develop other common infra-structure to improve port s attractiveness. Strategy: Develop Cargo terminals through private sector participation. Undertake support infra-structure works through EPL financing. Acquire additional lands to support the long term developments. Co-ordinate with the concerned State and Central Government Departments to improve connectivity. Maximise utilisation of the existing assets and increase revenue earnings. Obtain Government funds for capital dredging. Develop core manpower. 4. Over view of Investments The private investment projects on development of cargo terminals proposed for implementation within the next 7 years are listed in Table 4.6. Summary of Private investments (Table 4.6) Sl. Project Investment Cost Status Capacity No. (Rs. in million) 1. Marine Liquid Terminal 1,963* Contract awarded 3.0 MTPA 2. Coal Terminal 4,000* Contract awarded 8.0 MTPA 3. Iron Ore Terminal 4,800* Contract awarded 9.0 MTPA (Phase I) 15.0 MTPA (Phase I+II) 4. Container Terminal 13,000** Action initiated to 1.50 Million TEU (Phase 1) select BOT operator PA 5. TNEB coal additional capacity 2,000** 4.0 MTPA Total 25,763 * Source DPR ** Source EPL Estimates The Public (EPL) Investment projects on core infrastructure to support the development and operations of the private investment projects within the next 7 years are listed in Table 4.8. Executive Summary xvi

17 Summary of EPL investments (Table 4.8) Sl.No. Project Investment cost (Rs. in millions) 1. Capital Dredging (Phase 1) Capital Dredging (Phase 2) 1, Capital Dredging (Phase 3) 1, Road Connectivity 1,800 * 5. Rail connectivity to coal, iron ore, and container stackyards Miscellaneous investments 450 Total 6,980 equivalent to Rs.698 crores * This includes equity contribution of Rs million by EPL to the SPV for the development of Northern Port Access Road and widening of TPP road. Equity Contribution to the SPV of Puttur Athipattu new rail line Million Gross Total of EPL Investment - Rs.748 Crores. 5. Financial Projections equivalent to Rs.50 crores The Financial Statements comprising of projected Profit and Loss Account, Balance Sheet and Cash Flow for a period of first 7 years, 10 th year, 15 th year and 20 th year commencing from the financial year are prepared adopting the formats prescribed by the Central Advisor and provided. The key financial indicators are shown in Table 5.2. In the years and , the cash generated from ordinary operations will not be sufficient to cover all cash requirements for planned capital expenditure. The financial forecasts shown in the table overleaf include the results of the preferred financing strategy to mitigate this shortfall through additional debt of Rs.3,900 million drawn down in the years and Executive Summary xvii

18 Key Financial Indicators (Table 5.2) (Rs. in Millions) Total operational revenue 1,249 1,367 1,602 3,730 4,679 4,910 5,461 7,484 8,622 10,215 Total operating cost ,501 Operational net earnings 951 1,101 1,333 3,409 4,287 4,494 4,970 6,863 7,681 8,715 Depreciation Net earnings before interest and tax ,095 3,138 4,016 4,224 4,700 6,596 7,414 8,448 Interest Net earnings before tax ,484 3,526 3,899 4,542 6,495 7,409 8,448 Tax ,166 2,534 2,911 Net earnings ,205 3,131 3,461 4,032 4,329 4,875 5,537 Debt (Long term loan) 3,893 5,051 7,103 6,723 5,033 3,335 1,624 1, Equity 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 Reserves ,208 3,413 6,544 10,005 14,037 25,141 43,920 66,309 Net Worth 3,460 3,847 4,208 6,413 9,544 13,005 17,037 28,141 46,920 69,309 Liquid means ( Op. Bal ) , , , , , Liquid means ( Cl. Bal ) , , , , , , Increase (decrease) liquid means (673.40) (32.44) , , , , , , Operating Ratio (Operating expenses / Operating revenue) 2. Debt Equity Ratio (Debt / Equity) 3. Return on Capital Employed 7.09% 5.19% 3.99% 22.07% 32.07% 36.35% 43.44% 67.33% 89.17% % (Net earning before tax / Fixed Assets) - 4. Net earning before tax / Net worth 14.20% 11.34% 9.66% 38.73% 36.95% 29.98% 26.66% 23.08% 15.79% 12.19% 5. Earning Per Share in Rs Note: The financial implications of the financing strategy discussed below are reflected in this table. It should be noted that according to the most recent annual report, EPL has contingent liabilities of Rs. 2,143 million towards claims against the company not acknowledged as debt. According to applicable Indian GAAP, the contingent liability is not shown in the balance sheet or taken into consideration in the above table. Financing Strategy First Choice Seek Government grant of Rs.3,200 Millions during to cover Phase- 2 and Phase-3 capital dredging and to tide over the critical cash flow position during that year. EPL will be able to meet other investments from internal resources. Second Choice Increase in Equity Capital by up to Rs. 3,000 Millions. This would allow EPL to either fund investment from equity or back additional debt financing to fund investment and/or to meet contingent liabilities should EPL be required to do so. Executive Summary xviii

19 Third Choice Short or medium debt from banks or financial institutions to the extent of Rs.3,900 million. Additional debt financing may require pro-rata additional equity financing to ensure maintenance of prudent capital structure Following discussions with EPL management, the third choice has been adopted in the financial analysis. It is thereby further expected that in case the arbitration procedure ends with an unfavourable result for EPL and EPL is required to honour the contingent liability, present shareholders will provide requisite support to EPL to maintain healthy balance sheet ratios. 6. Detailed Action Plan Detailed Action Plan comprising of Activity schedules for implementation of each of the private and public sector projects have been prepared and provided. The milestone events and the action points of EPL to ensure timely completion/ commissioning of the private sector projects have been indicated in the Action Plan. A Master Control Bar Chart showing the relative start and completion of all projects has also been provided to facilitate monitoring and review. 7. Financial Model The financial model is structured with input fields, calculation fields and output fields with instructions for annual review by EPL. In order to make the model more accessible to EPL, a distinction has been made by using different colours for input fields, calculation fields and output fields. A soft copy of the financial model has also been provided to facilitate annual updating. The financial model is provided as a separate attachment (Annexure 9). Executive Summary xix

20 1. INTRODUCTION To facilitate an efficient development of Indian ports, the Ministry of Shipping, Road Transport and Highways (MOSRTH), has mandated that each of the 12 major ports develop a Business Plan Study to spell out the long term goals for each major port and setting out how these goals are to be reached. The key elements of these Business Plan are Goals to be achieved over the next seven years The strategy to be followed to achieve these goals An action plan to implement the strategy. The sources of funding to implement the action plan. To ensure that the Business Plans prepared by all ports address all elements in the scope of work postulated by MOSRTH, Port of Rotterdam has been appointed as the Central Advisor (CA) by the Indian Ports Association (IPA) to oversee the preparation process. HPC Hamburg Consulting GmbH together with Consulting Engineering Services (India) Private Limited have been awarded the contract to prepare the Business Plan for Ennore Port Limited (EPL). The contract was signed in July An Inception Report was submitted by 21 st July and commented on by both EPL and IPA in August The Interim Report was submitted on 11 th September Comments of EPL have been received following presentation of Report to EPL officers on 29 th September The comments have been taken into account and the Interim Report was revised and submitted to EPL on 3 rd November The Central Advisor has evaluated the Revised Interim Report and his comments have been received on 29 th November 2006.The Revised Interim Report was presented to the Central Advisor on at New Delhi. The comments have been incorporated and the Interim Report (Final) submitted to EPL separately on The Draft Final Report was submitted to EPL on and presented to EPL, the Indian Ports Association and the Central Advisor on Comments from EPL and the Central Advisor were received in the first week of March 2007 and were discussed with both EPL and the Central Advisor on occasion of the presentation of the Draft Final Report. Responses of the Consultant to the comments of the CA and EPL are provided as a separate document. The Final Report presented herewith is a continuation of: the Inception Report providing all details of the existing port and its operations and Section 1: Introduction 1-1

21 the Interim Report (Final) providing all details of planned developments at Ennore Port. The Final Report contains a brief summary of the previous reports mentioned above. For any details the above reports refer, as does an Addendum to the Final Report for the container terminal. The Detailed Project Reports of the Coal Terminal and Iron Ore Terminal are since received from the BOT operators and the latest investment and rate analysis figures have been taken into account in the Final Report. The Final Report further summarises the business strategy of EPL, provides a detailed action plan to implement this strategy and a financial projection of EPL adopting the formats prescribed by the Central Advisor. The Final Report takes the outcome of the discussions of the presentation of the Draft Final Report and the comments received thereon onto account. The objective of the Final Report is to provide a consistent, integrated and substantiated business plan. Section 1: Introduction 1-2

22 2. MAJOR RESULTS OF INCEPTION AND INTERIM PHASES 2.1 Port Description General Ennore Port was developed from a green field situation in the East Coast of India at a distance of about 20km to the north of Chennai port. The Port was declared as a Major Port under the Indian Ports Act, 1908 in March 1999 and incorporated as a company (Ennore Port Limited) under the Companies Act, 1956 in October The Port was commissioned in June 2001 with two dedicated coal berths with 15m alongside depth and since then handles about 8.5 to 9 Million Tonnes of thermal coal per annum for the power stations of Tamil Nadu Electricity Board. The Port also handles small quantities of iron ore and POL through temporary facilities. The port has initiated action for development of terminals through private sector participation to handle liquids, coal, iron ore and containers. The Port Management is functioning as a landlord port with essential core staff. The cargo handling is by private operators and the port provides marine services Existing Facilities The existing marine facilities are as follows: Breakwaters South Breakwater 1,070m North Breakwater 3,080m Type of Breakwater Rubble mound with concrete capping; North Breakwater has been armoured with Accropodes [Special type of concrete armour blocks]. Entrance Channel Length 3,775m Width 250m Depth -16 m Width at entrance 300m Turning Basin Diameter 600m Depth -15.5m Berths No. of berths 2 [Dedicated berths to handle Thermal coal for TNEB] Section 2: Major results of the Inception and Interim Phases 2-3

23 Length 280m [each] Depth [alongside] -15 m Permissible draft 13.5m Size of vessels handled 65,000 / 77,000 DWT Equipment (Installed and operated by TNEB) Gantry type grab cranes 2 Nos. (Each 2,000 TPH capacity) Shore Hopper (Big) 1 No. (to receive coal from self unloading vessel) Shore Hopper (Small) 6 Nos. (to receive coal from handy max ground vessel) Conveyors 2 streams (Each 4,000 TPH capacity) Capacity 12 MTPA (Coal Berth No.1-- 8MTPA, Coal Berth No MTPA In coal berth No.2, geared coal vessels (vessels equipped with onboard grab cranes) discharge coal onto the shore mobile hoppers which feed to the conveyor system. Marine Crafts [initially purchased, then sold and in-chartered] Tugs 3 Nos. [40 T Bollard Pull] Pilot Launches 2 Nos. Mooring Launches 3 Nos. Navigational Aids Transit Light Towers 2 Nos. Channel Buoys 6 Nos. Fairway Buoy 1 No. Signal station For communication and regulation of ship movements Temporary facilities: Mobile unloading arm installed by Reliance Petroleum Limited (RPL) at Coal Berth No.2 to handle High Speed Diesel (HSD), Motor Spirit (MS) and Superior Kerosene Oil (SKO). Capacity 0.50 MTPA. Barge jetty and temporary conveyor system installed by Minerals &Metals Trading Corporation (MMTC) to export Iron Ore through barge system. Capacity 2.0 MTPA. The present port layout is shown in Figure 2.1. Section 2: Major results of the Inception and Interim Phases 2-4

24 Figure 2.1: Present Port Layout Section 2: Major results of the Inception and Interim Phases 2-5

25 2.1.3 Composition and Trends in Cargo Traffic The main cargoes presently being handled at Ennore Port are thermal coal, petroleum products (HSD & MS) and Iron ore. Cargo throughput of Ennore Port is approximately 1.8 percent of all Indian ports traffic. Table 2.1 summarises the trends in Port Traffic. Table 2.1: Past Traffic Year All Ports Ennore Port (mill. Tons) Mill. Tons Coal Iron Ore POL Total Source: IPA and EPL There has been a rise in POL and Iron ore traffic. The fluctuation in coal traffic is due to the variation in actual consumption of coal by the Thermal Power Stations. Over the past three years Ennore Port has handled about 170 vessels per year. 2.2 Traffic Forecast by Commodity Traffic forecast for Ennore port has been made for the period to year wise adopting the following methodology. Interaction with end users Review of available projections from other sources. Macro economic analysis Statistical analysis Analysis of Cargo movement routes Review of Port Master Plan Special emphasis has been made in the projection of container traffic taking the competitive situation among the South Indian Ports into account and the demand supply (capacity) gap. Section 2: Major results of the Inception and Interim Phases 2-6

26 2.2.1 Considerations and Major Assumptions Coal Iron Ore The projection of coal is on the following considerations. Requirement of coal for TNEB (Thermal coal) 9.0 to 9.6 MTPA for the power stations of TNEB at North Chennai (630 MW), Ennore (450 MW) and Mettur (840 MW) depending on the calorific value of the coal and seasonal fluctuations. 5.0 MTPA for the proposed 2 x 500 MW capacity Joint Venture (NTPC- TNEB) power station at Vallur. The first unit is expected to commission by and the second unit by MTPA for the proposed 500 MW unit at NCTPS expected to commission by MTPA for further expansion of 500 MW unit at NCTPS expected to commission by In March 2007, TNEB has addressed the requirement to handle an additional 5 MTPA of thermal coal for a new power station to EPL. This requirement was received after completion of the report and it was not possible to explicitly include the additional volumes in the forecast or the report. Requirement of coal for Non-TNEB users Shifting of 7.0 million tonnes of thermal coal (2.0 MTPA), coking coal (1.0 MTPA) and steam coal (4.0 MTPA) presently being handled at Chennai Port to Ennore. 1.3 MTPA of thermal coal for the additional 210 MW unit of Karnataka Power Corporation Limited (KPCL) Power Station at Raichur. 1.0 MTPA of metallurgical coal for the proposed Coke Owen Plant of Venkatesh Coke and Power Limited near Ennore Port. The Iron ore traffic has been projected for Ennore Port on the following considerations. Bellary / Hospet / Tumkur (B/H/T) will be the only source available to Ennore. For B/H/T, Iron Ore production has been projected up to 51 million tonnes in the short term and 70 million tonnes in the long term. Local demand is assessed to go up to 12.5 MTPA in short term and 18 MTPA in the long term. Section 2: Major results of the Inception and Interim Phases 2-7

27 Liquid Bulk Containers Export volume available for export would be up to 38.5 million tonnes in short term and 52 million tonnes in the long term. The Exportable surplus is likely to be shared by Ennore/Chennai Port and Krishnapatnam port (When developed) on the East coast and New Mangalore and Mormugao on the west coast. Because of the gradient and connectivity problems prevailing at Mormugao and New Mangalore ports, it is unlikely that movement of Iron Ore from Bellary Hospet region to these ports will exceed 6.6 million tonnes and 9.3 million tonnes handled during , when the demand from China is at peek. Ennore port being nearer to China (lesser sea freight) would attract more volumes from Bellary-Hospet. The Export potential through Ennore/Chennai Port would range from 9.8 million tonnes in to 16.5 million tonnes in going up to 20 million tonnes by On commissioning of the new Iron Ore terminal at Ennore Port, the iron ore presently being handled at Chennai Port will shift to Ennore. The demand of POL (HSD, MS and SKO) shall be 0.8 MTPA in short term which would increase to 1.5 MTPA in long term. The import of LPG by Indian Oil Corporation Limited (IOCL) shall be 0.6 MTPA in short term and 0.9 MTPA in long term. The local demand for Base oil, Carbon Black Feed Stock (CBFS) and Chemicals shall be 0.5 MTPA in short term and 0.7 MTPA in long term. LNG and crude oil are long-term perspective cargoes and no traffic prospect over next 7 years. The traffic forecast for containers is based on the following assumptions: The container forecast is by adopting log linear regression model taking GDP as an independent variable. The projection is based on the growth pattern of container traffic at Indian ports during the past 16 years ( to ). GDP at 7% is considered for Low scenario and 8% for high scenario. An analysis of probable supply-demand developments was prepared to assess the likely Ennore Port market share. The analysis took regional developments, likely shifting of cargo and competing port facilities into account. Market shares for Section 2: Major results of the Inception and Interim Phases 2-8

28 Ennore port were then estimated according to relevant capacity developments for each year. For the financial year , the market share of Ennore Port was estimated with 10% should capacity be developed quickly in competing ports. Should capacity develop more moderately, the market share of South Indian ports was estimated to be 18% for Ennore. The forecast South Indian ports share will thereby also depend on the extent to which shipping lines introduce new services with direct calls. The recent introduction of a direct call at Chennai on the new NEMO service by CMA CGM is a first positive example. Figure 2.2: Demand-Supply Analysis South Indian Ports '000 TEU Supply-Demand Balance Moderate Capacity Development Ennore '000 TEU Supply-Demand Balance Aggressive Capacity Development Ennore Figure 2.2 summarises the expected demand and supply developments for these two capacity scenarios. The analysis identifies a containerised cargo volume for Ennore Port to the order of magnitude of approximately 1.5 million TEU within a few years of commissioning of the new terminal, which will occur in the financial year at the earliest General Cargo The market analysis leads to the conclusion that presently, there is an insufficient potential to develop a general cargo facility in competition to Chennai. For strategic reasons, it was recommended not to include a multipurpose terminal in the scope of the Business Plan. In the opinion of the consultants the following strategy will apply: Chennai port would continue to handle break bulk general cargo where adequate facilities exist. Export of cars is a prospective cargo for Ennore Port when Hyundai Motors Limited starts production from of its second plant in Till generation of sufficient volumes of car exports justifying the need for a separate terminal, the proposed container terminal will handle the car exports and other clean unit loads in the initial years. Section 2: Major results of the Inception and Interim Phases 2-9

29 In the medium term a potential may arise and EPL is recommended to review the prospects regularly Summary of Cargo Traffic Forecast The summary of traffic forecast by commodity for the period from to is presented in Table 2.2 Table 2.2: Summary of Traffic Forecast by Commodity (million tonnes) Commodity Low Cargo Forecast Coal TNEB* Coal Non-TNEB Iron Ore Liquid Bulk General Cargo Total(million tonnes) Container (mteupa) High Cargo Forecast Coal TNEB Coal Non-TNEB Iron Ore Liquid Bulk General Cargo Total(million tonnes) Container (mteupa) * Excluding additional potential new requirements by TNEB addressed to EPL in March 2007 following completion of the report. (Empty squares indicate no cargo due to non-availability of facilities) Table 2.2 projects container traffic for Ennore port on the basis of a detailed demand-supply analysis. The forecast includes likely shifts in cargo trade patterns and takes developments in competing ports into account Vessel Traffic Forecast Considering the present and future vessel trend analysis, vessel traffic forecast has been made and the summary is shown in Table 2.3. Section 2: Major results of the Inception and Interim Phases 2-10

30 Table 2.3: Summary of Expected Vessel Calls by Type (in Numbers) Vessel type Low Cargo Forecast TNEB Coal Non TNEB Coal Iron Ore Liquid Bulk Container ,188 2,711 Total Vessels ,013 1,121 1,991 3,627 High Cargo Forecast TNEB Coal Non TNEB Coal Iron Ore Liquid Bulk Container ,674 4,187 Total Vessels ,193 1,247 1,384 2,646 4,989 (Note: Container vessels forecast beyond 2016 would require a review as the container traffic projections are based on the log linear model which trends to over estimate beyond a time span) 2.3 Competitive Position Ennore is a Greenfield major port situated at the vicinity of the well-developed Chennai city, yet away from the populated areas. The strength of Ennore port is the availability of protected waterfront of about 3,000m in length and back up lands of 836 ha for development of deep drafted cargo terminals benchmarking high productivity standards and quality parameters. It has the ability to connect to the national highways NH4, NH5 and NH45 without entering into the populated Chennai city area. All in all Ennore port is in a good competitive position to develop bulk and container terminals and the weakness can be mitigated through better facilities and services. The principal competitors of Ennore port are: Chennai, Tuticorin, Cochin (Vallarpadam) and Vizhinjam for containers. Chennai and Cuddalore (as & when developed) in case of coal (for Non- TNEB users). Chennai & Krishnapatnam (as & when developed) for iron ore. Section 2: Major results of the Inception and Interim Phases 2-11

31 Containers Even though Chennai, Tuticorin and Cochin terminals enjoy certain advantages of the present market network, the ports suffer because of some constraints like space availability for expansion, congestion in access roads, draft limitation, labour problems etc. Vizhinjam will be a new comer and on the one side enjoy similar advantages as Ennore. On the other side, hinterland access may not be quite as favourable. The strategy for Ennore port to remain competitive is to develop the container terminal for 6,000-8,000 TEU vessels on priority with better facilities and commission it ahead of competing facilities, e.g. the proposed second container terminal at Tuticorin. Coal The Chennai port is presently handling about 7 million tonnes of coal per annum in conventional berths for users other than TNEB and the operations are suffering because of multiple handlings, in-adequate stack areas, cargo evacuation and dust pollution. This cargo is to shift to Ennore Port. Development of Cuddalore minor port is in the preliminary stage of planning and may not pose any serious competition to Ennore port. Even if the development materialises in future, it may take away only about 3.40 million tonnes of Thermal coal meant for Mettur Thermal Power Station of TNEB from Ennore Port. This will not affect Ennore port because the potential is more than the available capacity. EPL has already taken action and signed the concession agreement with the BOT operator. Iron Ore Chennai port is presently handling about 7 million tonnes of iron ore per annum through the mechanised iron ore handling terminal. The problems on account of inadequate stack areas, outlived handling equipment serving beyond their service life & pollution problems will make the exporters to shift to Ennore port. The potential competitor of Ennore port will be the Krishnapatnam port as and when developed. The present proposal is to construct a deep-water port there to handle thermal coal for the new super thermal plant being put up by Andhra Pradesh Government nearby. The market analysis and the present status of development reveal that Krishnapatnam will not be a serious competitor for the export of iron ore within the next seven years. Ennore Port has already taken action and signed the concession agreement with the BOT operator. Ennore Port should pursue with the Railways to strengthen the track capacity in the critical Avadi-Vyasarpadi section to remove the bottleneck in the rail movement of iron ore rakes. Ennore port should also take a lead to develop the new chord line between Puttur & Attipattu by forming a SPV with Railways (Rail Vigas Nigam Limited) and other stakeholders. Section 2: Major results of the Inception and Interim Phases 2-12

32 2.4 Capacity and Bottleneck Analysis With the existing infrastructure of two breakwaters and the protected port basin of 220ha water spread and 15.5m depth, Ennore Port has a capacity to become a mega port with world class facilities to handle dry bulk/ liquid bulk/container cargoes. It has a potential to handle cars, LNG, and crude when demands arise in courses of time. Ennore Port should have the land and waterfront resources to meet such demands and build up capacity in stages at least for the next 50 years. The foreseeable major bottlenecks which have a bearing on port capacity are: Shortage of backup lands. The present available lands of 836 ha with EPL may be able to accommodate the developments up to the capacity of 42 million tonnes per annum to handle dry bulk & liquid bulk cargoes (TNEB coal- 16 MTPA, Non-TNEB coal- 8 MTPA, Iron Ore 15 MTPA, Marine Liquids 3 MTPA) and 3.0 million TEUS of containers per annum. Even to handle this capacity, EPL requires additional lands for a westward extension of the coal stack yard, the land corridor for Northern Port Access Road including buffer yards, a portside container yard, port related commercial activities etc. Need for a 8-lane Northern Port Access Road directly connecting Ennore Port with TPP road and then NH 5 for evacuation of containers, coal and other cargo items. Need for a new chord line connecting Puttur and Attipattu to support Iron ore movement from Bellary Hospet mines to Ennore Port. The above bottlenecks and the means to overcome them have been analysed in the subsequent paras 2.5 and Phased Land Use Plan Land Availability Ennore port presently owns 836 ha of land inside and outside the port boundary wall. The lands acquired from TNEB, TIDCO and some private landowners are located in Puzhudivakkam, Ennore and Kattupalli villages of Ponneri Taluk, Thiruvallur District. EPL has taken up with the Salt Department for transfer of 486 ha of Salt lands for port development and port related purposes. EPL has been following the land use plan prepared in 2003 for developmental and operational activities. Section 2: Major results of the Inception and Interim Phases 2-13

33 2.5.2 Requirements of Additional Lands Commensurating with the award of BOT contracts for the development and operation of Marine liquid, Coal and Iron Ore terminals and the container terminal to follow, the lands have been allocated towards these developments. Even to meet these committed developments, additional land is required for the following purposes. Westward expansion of the coal stack yard and to construct the new west spinal road for evacuation of coal. Road corridor for the Northern Port Access Road with buffer yards to effectively serve the container terminal(s) Portside container yard with CFS facilities for the rail-borne ICD containers. Ennore Port has the potential to become a world class port. Judging from the traffic forecast of the Business Plan, Ennore Port should have sufficient land back-up to support development of port facilities to handle about 55 million tonnes of Dry bulk/ Liquid bulk cargo and 3.5 million TEUS of containers (see also section 3.3 below). According to the traffic forecast, this may be sufficient until the second half of the next decade. Thereafter, additional facilities must be developed. The long term development is discussed in more detail in section 3.3 below. One option thereby mentioned the extension of dock basin as shown in Figure 2.3. In that case, the 400m width of dock basin proposed in the Master Plan needs for a review. Good amount of land is required on the northern side for the extension of the Dock basin to accommodate future berths and the backup storage yards. Land is also required to support port related activities and utilities Summary of Additional Land Requirement 1. Land to the extent of 1,500m x 1,400m (210ha) north of the northern Port boundary wall to accommodate the future northward extension of the Dock basin with ship manoeuvring area, storage of containers & liquid cargo, LNG regassification plant and other port related activities. 2. Strip of land to the extent of 2,000m x 250m (50ha) on the western side for expansion of coal stack yard and aligning the West Spinal Road. It is desirable that EPL may acquire the balance available lands also in this region to augment the railway operations in the holding yard ha of land for locating the port side container yard adjoining the Attipattu/ Nandiampakkam R.S. 4. Strip of land to the extent of 200 m x 10 Km (200ha) for aligning the Northern Port Access Road (Road corridor) from Ennore Port Northern gate to TPP road (Phase-I) and about 20 ha. for siting the buffer yard for Section 2: Major results of the Inception and Interim Phases 2-14