Essar Shipping Limited. · NSE:ESSARSHPNG
Essar Shipping — Essar Oil — Investor Presentation (June 2009)
34 slides from Essar Shipping's investor presentation, June 2009
Slide 1: Essar Oil, June 2009
mi ee faa Vales | Ll Pes PRN oy ESSAR June 2009
Slide 2: Disclaimer
Disclaimer This presentation is strictly confidential and may not be copied, published, distributed or transmitted. The information in this presentation is being provided by the Essar Oil Limited (the “Company”). This presentation has been prepared for information purposes only and is not an offer o
Slide 3: 1. Business Overview
1. Business Overview
Slide 4: Essar Oil: An Integrated Oil and Gas Player
Essar Oil: An Integrated Oil and Gas Player Refining Marketing Exploration y Base capacity of 10.5 MMTPA y Presently 1,276 retail outlets y Ratna International (1) – Presently operating at 133% capacity y 29 supply points spread across India with 12 y Mehsana y Madagascar y Proposed expansion to 34.
Slide 5: Vision: High Growth with predominant India focus
Vision: High Growth with predominant India focus Target refining capacity – 1 million bpd with state of the art technology Significant Presence Throughout Hydrocarbon Value-chain Crude Oil – 30% of refining capacity Setup Indian retail Gas – 100% of group feed network of 5,000 outlets stock requirem
Slide 6: Strong Operating Performance
Strong Operating Performance 3 High Capacity Utilization: Currently operating at 14 MMTPA (133% capacity utilization) 3 Optimization of Crude Mix: Efficient reduction in average crude cost 3 Improved Product Slate: Maximization of middle distillates – High margin segment 3 Marketing Tie Up: Signific
Slide 7: Expansion Imminent with High Return on Investment
Expansion Imminent with High Return on Investment 3 100% basic engineering completed Phase I 3 69% detailed engineering completed 3 Project cost of $ 1,560 mn; Financing tied up y Expansion to 16 MMTPA 3 Complexity enhancement from 6.1 to 11.8 y Completion targeted by 3 Ready domestic market Dec ‘10
Slide 8: 2. Refining Operations
2. Refining Operations
Slide 9: Strategically Located World Class Refinery
Strategically Located World Class Refinery ● Location advantage at Vadinar, Gujarat ● Commercial production commenced since 1 May 2008 ● Currently capable of producing Euro II / III Products, Designed as a cracking refinery ● Internationally acclaimed technology from process licensors (ABB, Axens, S
Slide 10: 2nd Largest Refinery in India with High Capacity Utilization
2nd Largest Refinery in India(1) with High Capacity Utilization Currently Operating at 14 MMTPA capacity (utilisation of 133%) Refinery Utilization (FY09) MMTPA MRPL 130% 12.6 EOL 123% 12.9 HPCL Vizag 122% 9.0 IOC – Panipat 109% 13.1 IOC – Mathura 108% 8.6 CPCL 103% 9.7 BPCL – Mumbai 102% 12.2 IOC –
Slide 11: Crude Optimization: 70% Sour and Tough Crude Resulting in Higher GRM
Crude Optimization: 70% Sour and Tough Crude Resulting in Higher GRM Light and 40% 36% 31% 30% Sweet Crude Sour and Tough 64% 69% 70% 60% Crude Q1 FY09 Q2 Q3 Q4 ● Essar processed wide range of crudes from ultra heavy to light ● Processed more than 20 types of crudes during the year ● Avg. API (Densi
Slide 12: Product Slate Flexibility: 67% of Light/Middle Distillates
Product Slate Flexibility: 67% of Light/Middle Distillates Light 23.7% 20.4% 19.6% 21.7% Distillates High Margin Middle 44.9% 46.4% 45.7% Segments 42.9% Distillates Heavy 33.3% 34.7% 34.0% 32.6% Distillates Q1 FY09 Q2 Q3 Q4 ● Optimised production of middle distillates – High margin segment ● Naphtha
Slide 13: Maximum conversion of Naphtha to value added Products
Maximum conversion of Naphtha to value added Products Naphtha Gasoline Refinery Naphtha in Crude Sales Sales EOL 15.0% 0.4% 18.2% MRPL 14.7% 7.0% 10.0% CPCL 12.9% 7.8% 8.3% BPCL-M 15.2% 8.6% 10.5% IOC – Mathura 12.9% 6.3% 11.6% IOC – Panipat 12.7% 6.3% 7.6% IOC – Koyali 13.0% 7.0% 9.3% RIL 20.2% 10.
Slide 14: Premium Margins to Singapore Crack
Premium Margins to Singapore Crack 14.0 12.54 12.0 10.92 10.0 8.0 8.17 6.59 6.0 5.81 5.48 3.78 4.0 2.0 2.26 0.0 1Q FY09 2Q 3Q 4Q Source: Platts Singapore Cracking EOL's GRM 14
Slide 15: GRM next only to Reliance despite much lower Complexity
GRM next only to Reliance despite much lower Complexity Company GRM ($/BBL) Configuration RIL 12.2 FCC & Coker EOL 8.89 FCC & Visbreaker BPCL-Kochi 6.27 FCC & Hydrocracker Reuters Cracking (Sing Dubai) 5.81 FCC MRPL 5.33 Hydrocracker & VB BPCL-Mumbai 4.48 Hydrocracker & FCC HPCL 3.97 FCC IOC 3.69 HC
Slide 16: Financial Performance
Financial Performance (US$ in Millions) (Jan–Mar 09) May’ 08–March’ 09 Q4 11 Months Gross Sales/Income from Operation 1,592 8,898 Net Sales 1,353 8,014 Cost of Goods Sold 1,083 7,271 Operational Expenditure 66 220 Forex Loss (19 ) 268 Operational EBIDTA 223 256 Interest and Financial Charges 63 232
Slide 17: Fiscal Advantage: Sales tax deferral, Income tax benefits
Fiscal Advantage: Sales tax deferral, Income tax benefits Income Tax Benefit ● 100% income-tax exemption on refinery profits for seven years under section 80-IB until (1) Sales Tax/VAT Deferral Benefit ● Sales Tax Deferment benefit of approx. US$1,800 million ● Huge benefits in terms of NPV and Cash
Slide 18: 3. Expansion Project
3. Expansion Project
Slide 19: Ramping Up Capacity to 34 MMTPA with Complexity 12.8
Ramping Up Capacity to 34 MMTPA with Complexity 12.8 Period Planned Today December 2010 December 2011 Particular Base Refinery Operational Refinery Phase – I Phase – II 12.8 Complexity 34.0 MMTPA 11.8 Complexity 16.0 MMTPA Refinery Details 6.1 Complexity 14.0 MMTPA 6.1 Complexity 10.5 MMTPA API (Den
Slide 20: Expansion to Provide Increased Crude and Product Flexibility
Expansion to Provide Increased Crude and Product Flexibility ● Conversion of entire negative margin FO into high value added products and Pet Coke ● Enhancing ability to process Tough and Sour Crude ● Build higher flexibility between light and middle distillates ● Flexibility to produce petrochemica
Slide 21: Favourable Domestic Demand Supply Dynamics
Favourable Domestic Demand Supply Dynamics Units in MBPSD 2010 2012 2015 Total Refinery Capacity 4.5 4.9 5.1 Total Refinery Product Demand 3.5 3.8 4.4 Surplus: With SEZ Refinery 1.0 1.1 0.7 Without SEZ Refinery 0.4 0.6 0.1 Source: 11th and 12th five year plan and company estimates 21
Slide 22: Competitive Project Cost
Competitive Project Cost Essar has the 2nd most Cost Competitive Refinery Project in the region US$ / complexity bbl 2,190 1,886 1,323 1,110 949 665 HPCL Bhatinda BPCL Bina IOC Paradeep RPL EOL 16.0 EOL - 34 Source: Company Filings, street research 22
Slide 23: Well defined financing plan with Marginal Project Capex
Well defined financing plan with Marginal Project Capex Project Cost US$mn Phase I 1,560 Phase II 4,440 Total Cost 6,000 Phase I (Dec ‘10) US$mn Phase II (Dec ‘11) US$mn Equity / Internal Accruals 640 Total Cost 4,440 Debt (financial closure achieved) 920 Target Net Gearing 1.5x-1.7x Total Cost 1,56
Slide 24: 16MMTPA Expansion on Track: Overall 33% completed
16MMTPA Expansion on Track: Overall 33% completed Basic Detailed Procurement Construction Engineering Engineering 100% 69% 48% 14% y All Basic Engineering Completed y Detail engineering is in advanced y All long lead items ordered y All major pipe rack work commenced stage y Balance items to be orde
Slide 25: Phase II - 18 MMTPA Expansion status
Phase II - 18 MMTPA Expansion status Basic Detailed Procurement Construction Engineering Engineering 100% 44% y All Basic Engineering y Detail engineering in progress y All critical Long Lead items y Pipe rack work commenced for Completed y Overall Detailed Engineering ordered FCC unit y Major items
Slide 26: 4. Marketing Business
4. Marketing Business
Slide 27: Over 70% Sales in Domestic Market
Over 70% Sales in Domestic Market ● Strong foothold 78% 78% 80% 70% 71% in domestic market: 60% – Firm Arrangement with 40% 30% 29% HPCL, BPCL & IOC for 22% 22% 20% offtake of 7 million tonnes 0% – 12% domestic market 1Q 2Q 3Q 4Q share in Bitumen in Gujarat Source: As % of total Sales value (FY 09,
Slide 28: Pan India Presence with Flexible business model
Pan India Presence with Flexible business model y First private company in India to enter petro retailing 46 sector (2003) through a franchisee model ( capex 8 8 investment by Dealers) 53 1 22 191 3 4 4 101 31 y All 1,276 Retail Outlets are operational 1 1 29 106 199 25 2 1 34 y Positive Gross Margi
Slide 29: 5. Exploration and Production
5. Exploration and Production
Slide 30: Strong Domestic E&P Assets with International Upside
Strong Domestic E&P Assets with International Upside Gujarat (Mehsana) Assam (2) y 70% operatorship interest y 10% interest in two in Mehsana block CB-ON/3 exploration blocks Ratna / R Series West Bengal (Raniganj) y 50% joint operators interest in Nigeria (1) Ratna & R series blocks y 100% interest
Slide 31: Raniganj CBM: A Significant Opportunity
Raniganj CBM: A Significant Opportunity to tap high growth and gas deficient market 3 Location Advantage – Proximity to industrialized regions of West Bengal and gas supply deficit region – Reduced transportation / delivery costs 3 Prospects – Estimated resources of 42 bcm (as per DGH) – Located clo
Slide 32: Experienced Management Team
Experienced Management Team Naresh K Nayyar P Sampath S. R. Agrawal Managing Director and CEO Director – Finance Director and CEO of E&P Division y Chartered Accountant and IIM, y Cost Accountant Secretary and Company y Chartered Accountant with over 31 years experience Ahmedabad Alumnus y Over 30 y
Slide 33: Essar Oil: Set to Deliver Strong Value
Essar Oil: Set to Deliver Strong Value Strong Operations with Premium GRMs Ability to Leverage Group Expansion to 34 MMTPA at Resources marginal capex High Complexity; Crude and Upside from E&P Product Flexibility 75% Sales in Domestic Market 33
Slide 34: Thank You
Thank You 34 ENERGY