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Final Report
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)
21129 Hamburg New Delhi – 110019
Germany India
Phone: (+49 40) 7 40 08-137 Tel. +91-11-4139 2310
Fax: (+49 40) 7 40 08-133 Fax +91-11 2628 1898
E-Mail: r.scholl@hpc-hamburg.de E-Mail: sghosh@cesinter.com
Internet: http://www.hpc-hamburg.de Internet: http://www.cesinter.com
Table of Contents
EXECUTIVE SUMMARY xi
1. INTRODUCTION 1-1
iii
HPC – CES Business Plan for Ennore Port Limited: Final Report
iv
HPC – CES Business Plan for Ennore Port Limited: Final Report
8. ANNEXURES 8-74
List of Tables
Table 2.1: Past Traffic 2-6
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
v
HPC – CES Business Plan for Ennore Port Limited: Final Report
List of Figures
Figure 2.1: Present Port Layout 2-5
Figure 2.7: Road Network Within the Port Area and Vicinity 2-22
Figure 3.1: Projects under 7-Year Action Plan and Provision for Long Term Development 3-30
List of Annexures
Annexure 1: Commercial Terms of Concluded BOT Contracts 8-75
vi
HPC – CES Business Plan for Ennore Port Limited: Final Report
List of Abbreviations
ADB Asian Development Bank
CB Carbon Black
CD Chart Datum
vii
HPC – CES Business Plan for Ennore Port Limited: Final Report
IS Indian Standards
MS Motor Sprit
MS Mild Steel
viii
HPC – CES Business Plan for Ennore Port Limited: Final Report
NH National Highway
SK Superior Kerosene
ix
HPC – CES Business Plan for Ennore Port Limited: Final Report
Units:
ha Hectares
Hr Hour
KM Kilometre
KW Kilo Watts
M Meter
MT Metric Tonne
MW Mega Watts
x
HPC – CES Business Plan for Ennore Port Limited: Final Report
xi
HPC – CES Business Plan for Ennore Port Limited: Final Report
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, 1999.
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,
2006. The Inception Report was submitted on 21st July 2006. The Interim Report
was submitted on 3rd November 2006 and presented to the Central Advisor (Port of
Rotterdam) at New Delhi on 9th December 2006. After incorporating the comments
of the Central Advisor, the Interim Report (Final) was submitted to EPL on
16.02.2007. The Draft Final Report was submitted to EPL on 16.02.2007 and
presented to EPL, the Indian Ports Association and the Central Advisor on
10.03.2007. 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.
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
–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).
The Traffic forecast for Ennore Port has been made for the period of 20 years from
2007-08 to 2026-27. 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.
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
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.
• 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.
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.
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.
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.
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.
Develop as a mega port with world class facilities to become the Eastern gateway
Port of India.
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
HPC – CES Business Plan for Ennore Port Limited: Final Report
• 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.
(Table 4.8)
* This includes equity contribution of Rs.1077.5 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 - 500 Million
5. Financial Projections
The Financial Statements comprising of projected Profit and Loss Account, Balance
Sheet and Cash Flow for a period of first 7 years, 10th year, 15th year and 20th year
commencing from the financial year 2007-08 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 2008-09 and 2009-10, 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 2008-09 and 2009-10.
Total operating cost 298 266 269 321 391 416 490 621 940 1,501
Operational net earnings 951 1,101 1,333 3,409 4,287 4,494 4,970 6,863 7,681 8,715
Depreciation 138 185 238 271 271 270 270 268 267 267
Net earnings before interest and tax 813 916 1,095 3,138 4,016 4,224 4,700 6,596 7,414 8,448
Interest 322 480 688 655 490 325 158 101 5 0
Net earnings before tax 491 436 406 2,484 3,526 3,899 4,542 6,495 7,409 8,448
Tax 55 49 46 279 396 437 510 2,166 2,534 2,911
Net earnings 436 387 361 2,205 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 1,033 49 0
Equity 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000
Reserves 460 847 1,208 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 ) 897.40 224.00 191.55 343.70 349.81 1,795.93 3,830.37 14,220.47 26,806.73 45,622.94
Liquid means ( Cl. Bal ) 224.00 191.55 343.70 349.81 1,795.93 3,830.37 6,421.09 15,743.00 30,874.77 48,549.04
Increase (decrease) liquid means (673.40) (32.44) 152.15 6.11 1,446.12 2,034.44 2,590.72 1,522.53 4,068.04 2,926.10
1. Operating Ratio 0.24 0.19 0.17 0.09 0.08 0.08 0.09 0.08 0.11 0.15
(Operating expenses / Operating revenue)
2. Debt Equity Ratio 1.30 1.68 2.37 2.24 1.68 1.11 0.54 0.34 0.02 0.00
(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% 121.12%
(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. 1.45 1.29 1.20 7.35 10.44 11.54 13.44 14.43 16.25 18.46
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
• Second Choice
• Third Choice
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.
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.
1. INTRODUCTION
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.
• the Inception Report providing all details of the existing port and its
operations and
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.
2.1.1 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 1999.
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.
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]
Temporary facilities:
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.
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.
Traffic forecast for Ennore port has been made for the period 2007-08 to 2026-27
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.
2.2.1.1 Coal
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.
• 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.
2.2.1.4 Containers
Ennore port were then estimated according to relevant capacity developments for
each year. For the financial year 2013-14, 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.
5.000 5.000
4.000 4.000
'000 TEU
4.000 4.000
3.000 3.000
3.000 3.000
2.000 2.000
2.000 2.000
1.000 1.000
1.000 1.000
0 0
0 0
7
6
-0
-0
-0
-1
-1
-1
-1
-1
-1
-1
06
07
08
09
10
11
12
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14
15
6
20
20
20
20
20
20
20
20
20
20
-0
-0
-0
-1
-1
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-1
-1
-1
06
07
08
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20
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20
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20
20
20
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 2010-
11 at the earliest.
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 2008-09.
• 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.
In the medium term a potential may arise and EPL is recommended to review the
prospects regularly.
• The summary of traffic forecast by commodity for the period from 2007-08
to 2026-27 is presented in Table 2.2
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.
Considering the present and future vessel trend analysis, vessel traffic forecast has
been made and the summary is shown in Table 2.3.
(in Numbers)
Vessel type 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2020-21 2026-27
Low Cargo Forecast
TNEB Coal 187 187 163 208 299 299 299 344 344
Non TNEB Coal - - 162 164 167 167 167 212 294
Iron Ore 45 69 97 115 121 123 131 144 167
Liquid Bulk 8 59 68 64 67 70 74 103 111
Container - - - 278 325 354 450 1,188 2,711
Total Vessels 240 315 490 829 979 1,013 1,121 1,991 3,627
High Cargo Forecast
TNEB Coal 199 199 174 219 310 310 310 355 355
Non TNEB Coal - - 162 164 214 214 212 258 339
Iron Ore 67 69 143 162 168 169 176 185 209
Liquid Bulk 15 94 105 110 118 127 132 174 186
Container - - 320 383 427 554 1,674 4,187
Total Vessels 281 362 584 975 1,193 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)
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.
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 in-
adequate 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.
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 2.6.
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.
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.
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.
3. 75 ha of land for locating the port side container yard adjoining the
Attipattu/ Nandiampakkam R.S.
containers by the side of it. 5 ha of land for siting another buffer yard by
the side of the existing access road leading to the port main gate. Total
land requirement for these purposes shall be 225ha.
5. Salt Department land of 486 ha for which action has been initiated by
EPL for transfer.
The above locations are marked in the updated land use plan at in Figure 2.3. Total
requirement of additional lands mentioned above works out to 1,046 ha or
approximately 1,050 ha including areas for environmental upgrading and tree
plantation.
2.5.4 Strategy
EPL should take action on priority to acquire about 1,050 ha of land in the
vicinity of Ennore Port before land becomes scarce in the region and to make
sure that Ennore Port’s growth is not affected for want of lands. The 1,050 ha
will however not be sufficient to cater for the long term development and EPL
must initiate further action to identify their requirements and procure the
resulting land.
Ennore Port is connected to the southern railway network at Attipattu and Attipattu-
Pudhunagar railway stations at about 6m from the port on the Chennai-Gudur
section of the Southern railway. A broad gauge railway siding which was developed
during the construction phase and branching off from the NCTPS (TNEB) siding is
now available and presently being used for the movement of about 2 million tonnes
of Iron ore per annum for export through the temporary barge loading jetty.
Ennore Port does not have its own siding at present to connect to southern railway
network. It depends on NCTPS siding. The rail connectivity is shown in Figure 2.4.
This connectivity is not adequate to move the rail-borne cargo of the proposed new
terminals.
100% export of Iron ore about 65% coal despatches to non-TNEB users and about
25% inward / outward movement of containers between Ennore Port and the
hinterland destinations depend on rail connectivity. Hinterland rail routes are shown
in Figure 2.5. The critical rail route to move about 10 million tonnes of Iron ore in
short term and about 15 millions tonnes in long term is between Bellary- Hospet iron
ore mines and Ennore Port passing through the severely congested Avadi- Vysarpadi
sub- urban section (17.5 km sketch). As the coal despatches from Ennore Port are
through the released wagons of iron ore, coal movement will not pose any problem.
• Take up the new 88km chord line from Puttur (on the Renigunta-Arakkonam
section) to Attipattu with a flyover crossing the main line near Minjur station
via Periapalayam to bye-pass the critical section (Estimated cost is Rs.635.65
crores). This will be the long-term solution.
2.6.1.4 Strategy
Ennore Port is envisaged to handle large volumes of bulk commodities and container
traffic. A reasonable 35% share of dry bulk commodity, 75% of liquids and
chemicals and 75% of the container traffic are expected to move by road system. A
good network of roads in appropriate form, adequate in capacity and offering high
level of service is important to enable efficient movement of goods and promote
profitability of the port. A network of access roads exist with ability to connect the
port to the National Highways NH5, NH4 & NH45 and deep hinterland with certain
improvements (widening & strengthening) and construction of bye-pass roads.
Network of the existing and proposed access roads to Ennore Port is shown in the
map at Figure 2.6.
The proposed network of port roads has the following components to connect the
port operational areas with the access roads (NCTPS road and TPP road).
• Roads within the port operational areas (within the port boundary wall)
Map at Figure 2.7 shows the Road Network within the port area and vicinity. The
details of roads constituting the road network are shown in Table 4.7.
Among the new roads proposed in the Business Plan, Northern Port Access Road
will be an important link between Port area and TPP road near Vallur and then on to
NH5 at Thachur thus providing connectivity to Chennai metropolitan area and the
deep hinterland. This road would also serve the proposed SEZ and other
developments north of Ennore Port. This road will have 4-lanes up to TPP road.
2.6.2.3 Strategy
Figure 2.7: Road Network Within the Port Area and Vicinity
The management of Ennore port incorporated under the companies Act, 1956 is
provided through the Board of Directors. The top management body is functioning
in the style of a Central Government Public Sector Undertaking meeting out
Job descriptions for the personnel involved in the planning activities are drawn
according to the managerial position in the planning unit. EPL already initiated for
recruiting the proper professionals and fill up the slots as per the recommended
organisation structure in stages commensurating with the workload.
(Contd..)
Develop as a mega port with World Class facilities to become the Eastern gateway
Port of India.
The goals for the next 7 years are to execute the following projects selected to create
port capacities to handle marine liquids, coal, iron ore and containers and to provide
the supporting infrastructure.
Projects:
• Marine Liquid Terminal to handle POL, LPG, chemicals and other liquid
bulk cargo
• Coal Terminal to handle coal for various users other than Tamil Nadu
Electricity Board (TNEB)
Supporting Infrastructure:
• Dredge the berth areas of marine liquids, coal and iron ore terminals to -15m
depth in Phase-I and land raising for Coal and Iron Ore stackyards.
• Dredge the berth area of Iron ore terminal to –18.0m, port basin to –18.5m
and channel to –20.0m in Phase-II
• Establish rail connectivity to the coal, iron ore and container stack yards.
• Establish road connectivity to the coal, marine liquid and container terminals
3.2 Strategy
Development Strategy:
• Undertake the required capital dredging and essential road and rail
connectivity works.
• Monitor and co-ordinate the activities among the BOT operators, EPL and
interfacing Departments/Agencies to maintain the time frame.
Commercial Strategy:
• Maximise utilisation and revenue earnings of the existing coal berths and
temporary handling facilities for POL and iron ore.
• Review the land use plan and allot lands for port related purposes.
• Review and fix the tariff for vessel related charges other than berth hire for
the berths constructed by the BOT operators on commercial basis.
Financial Strategy:
• Explore the possibilities of forming Joint Venture with the beneficiaries like
TIDCO, National and State Highways, BOT operators, Railways, RVNL and
other stakeholders for investments on road and rail connectivity.
The short term projects included in the Business Plan for EPL allow EPL to increase
capacity from the present level of 12 MTPA to 42 MTPA for bulk cargo, and 18
MTPA containerised cargo aggregating to 60 MTPA. This will be sufficient to cater
for the projected traffic well into the second half of the next decade. To cater for
projected traffic volumes thereafter, two principle options exist for EPL.
a) Further extension of the nascent dock basin created through the container
terminal in a north-south direction.
The latter solution has initially been proposed at the time Ennore Port was first
conceived. The former solution is presently preferred by EPL management and has
the advantage that a continuous quay of several kilometres in length could be
established. Compared thereto, the possible length of one or more dock basins with
an east west orientation would be limited by the stack yard of the new common user
coal and iron ore terminals and the NCTPS ask dykes. There are also concerns that
creating a number of dock basins with an east-west orientation can create
environmental problems, if they require alternations to Buckingham Canal or Ennore
Creek. It is outside the scope of this Business Plan to address the long term
development aspects in any detail. This should be addressed by EPL in the medium
term future, e.g. in conjunction with the next revision of the master plan.
Having said the above Figure 3.1 over leaf shows how the long term development
might be approached, based on the alternative presently preferred by EPL
management. Figure 3.1 shows the expansion with a northern dock arm stretching to
2,250 m quay length in the west and 850 m quay length in the east to accommodate
future berths. This dock arm can be further extended northwards with ship
manoeuvring area as shown in Figure 2.3 (see page 2-16). Such extension can
accommodate more berths in the long run.
A key issue that EPL must thereby address is the availability of additional land to
accommodate the long term development perspective. Provision must be made for
both port facilities and port related infrastructure (such as roads, rail connections,
etc.) as well as auxiliary facilities (container depots, commercial zones, …). It is
outside the scope of this assignment to exactly specify the amount of land required
as it will depend on which development alternative EPL finally prefers. However,
the following points and comments are worthwhile mentioning:
• Land presently under control of EPL will be sufficient to cater for future
traffic development until sometime in the second half of the next decade.
• An extension of the dock basin as shown in Figure 2.3 will require the
minimum additional land of 210 ha as discussed in section 2.5 above. The
extension of the dock basin will however require much of the presently
available land in the north east and will severely limit the possibility to create
additional bulk storage areas should a second container terminal be
established next to the presently planned container terminal.
• The proposed phase II for the SEZ will conflict with any northward
extension of the dock basin. As TIDCO is already understood to be in an
advanced planning stage, it is strongly recommended the EPL quickly
approach TIDCO and agree on a different location, e.g. to the north of the
proposed Northern Port Access Road.
• An initial comparison with other ports with a similar cargo mix would
suggest that the long term land requirement might easily be to the order of
2,500 to 3,000 ha, which is more than fourfold of the present land available.
Figure 3.1: Projects under 7-Year Action Plan and Provision for Long Term
Development
4. OVERVIEW OF INVESTMENTS
This section highlights new terminal investment projects to handle marine liquids
Coal and Iron ore which are designed, tendered and awarded on a BOT basis and
those proposed within the next seven years. EPL has completed the planning of
container terminal (Phase–1) and activated selection of the BOT operator. These
projects have been covered in the National Maritime Development Programme
(NMDP) for Ennore port. Where necessary, reference is made to the existing
facilities.
• Projects already contracted are seen to have passed the acceptability and
financial viability test of operators by virtue of the contract concluded. These
operators have committed substantial investments – likewise has EPL. The
revenue shares offered put EPL in a comfortable financial position.
• For the container terminal project, which is yet to be awarded, the usual
financial analysis at project level has been performed.
The LNG terminal project for the import of LNG is not included in the analysis of
this business plan for the next 7 years for the following reasons:
Even though the LNG project at Ennore Port had been under consideration at least
for the last 10 years, initially by Tamil Nadu Industrial Development Corporation of
Government of Tamil Nadu as part of their Petrochem Park project and later by
EPL, the project did not take of. Two years back EPL accorded ‘in-principle’
approval to IOC to put up the terminal on a JV basis but no concrete action has yet
occurred. It is understood that IOC have not firmed up their gas sourcing so far due
to constraints in the supply situation in the international market. In addition, it is
expected that in the medium term, LNG demands will preferably be met from
domestic sources for the following reasons:
The Ennore Port has set apart the existing two coal berths for handling thermal coal
required by the power plants in which Tamil Nadu Electricity Board (TNEB) is a
stakeholder. The existing terminal has a capacity of 12 million tonnes now, which
can be enhanced to 16 million tonnes by installing shore based grab unloaders at coal
berth No.2. Increasing the number of cranes from the existing two to four (2,000
TPH capacity each) would increase the berth capacity from the existing 4 million
tonnes to 8 million tonnes. Presently the coal requirement for power generation at
the power plants of TNEB having linkage to Ennore port is of the order of 8 to 9
million tonnes per annum. TNEB plans to set up some more power plants with
linkage to Ennore port and it is expected that the full berth capacity of 16 million
tonnes will be utilised by 2013-14. The projected forecast of requirement for 2013-
14 for TNEB is 16.5 million tonnes. EPL should initiate and take up with the
TNEB to install 2 grab unloaders in coal berth No.2 to upgrade its capacity to 8
million tonnes and meet the projected demand of 16.5 million tonnes. The new
grab unloaders to be installed should be capable to unload coal from the large
panamax vessels (80,000 – 100,000 DWT), which have a broader beam.
The investment required from TNEB for augmentation of coal handling capacity
shall be of the order of Rs.200 crores.
EPL has signed a concession agreement for a second terminal for handling coal for
the consumers other than TNEB on a 30 year BOT basis in September 2006 with the
project company Chettinad International Coal Terminal Pvt. Ltd. The promoters of
the project company are M/s. South India Corporation Ltd, Portia Management
Services Ltd and Navayuga Engineering Co. Ltd. The commercial terms are
summarised in Annexure 1. The investment of the licensee on the project is
estimated at Rs.4,000 millions (DPR).
The planned capacity is about 8 million tonnes per annum. This is less than the
traffic demand projection made in section 4 of this study, i.e. 9.3 million tonnes by
2013-14 and 16.3 million tonnes by 2026-27 (low scenario). It thus leaves room for
additional expansion.
• The operator has proposed to provide a capacity of 1,500 TPH for the belt
conveyor to be loaded by the reclaimers. But the wagon loader will be linked
to the coalbunker by a 2,000 TPH capacity conveyor. It is necessary to
match the capacities so that loading operation is not delayed or interrupted.
The bunker capacity of 1,000 tonnes will be critical to complete the wagon
loading operation within the permitted time by railways especially if there is
a breakdown in the reclaiming system. It is felt that a larger bunker of 2,000
tonnes will increase the reliability of the wagon loading system.
• In the ship unloading system, the capacity of the unloader has been worked
out as 1,750 TPH. The capacity of the grab proposed to be used is stated to
be 30 cubic metres and the number cycles per hour of operation as 75. For
purpose of effective average unloading capacity, the achievable average
number of cycles per hour, is only 45. Therefore the effective capacity of
unloader will be
This effective unloading rate per day with two grab unloaders will be only
40,000 tonnes. In our view grab unloader of 2,000 TPH capacity (Rated
Capacity) similar to the one operating in the Existing coal berths will be a
good choice.
Recommendations:
Commercial/Financial Assessment
The BOT operator in his Detailed Project Report has adopted a rate of Rs.235 per
tonne. The comparable rate at Chennai is Rs.180 per tonne. As anticipated services
are better in Ennore than in Chennai (mechanised handling, gearless vessels, higher
productivity, faster turn round etc) a rate of Rs.200 per tonne is adopted in the
revenue projection which is approximately 10% higher than the present Chennai
Port rate of Rs.180 per tonne. Financial implications for EPL during the business
plan period are summarised in Table 4.1.
Table 4.1: Common User Coal Terminal Financial Implications for EPL
Capital expenditure
Dredging Phase I* 500 400
EPL has signed an agreement for an iron ore terminal on a 30 years BOT basis in
September 2006 with the project company SICAL Iron ore Terminal Limited. The
promoters of the project company are M/s. SICAL Logistics Ltd and L&T
Infrastructures Development Project Ltd. The commercial terms are summarised in
Annexure 1. The Investment of the Licensee on the project is estimated at Rs.5,000
million.
The BOT operator has proposed to develop the capacity in two phases. Installed
capacity in the first phase will be 9 MTPA with a guaranteed minimum of 6 MTPA
to be increased to 15 MTPA in the second phase. Expected handling volumes fall in
between the low and high demand forecast of this Business Plan Study.
• In the first phase a berth of 271m in length with two mooring dolphins is
proposed by the operator to be constructed for vessels up to 150,000 DWT and
the contractual obligation of EPL is to dredge the berth area to –18.0m CD &
the corresponding deepening of the turning basin and approach channel. The
berth structure will be suitable for dredging up to -22m, so that during the
second phase vessels up to 250,000 DWT can be serviced, if dredging is
completed.
Analysis of the vessel size development of dry bulk carriers (see Interim Report
for details) reveal the following trends.
− Panamax vessels (60,000 – 80,000 DWT) and super cape size vessels
(Above 1,60,000 DWT) grew most dynamically (Panamax 42.6% &
super cape size 37.5%)
− As per the vessel order book for the next 3 years (2006-09). The number
of vessels under order in the cape size range 100,000 DWT to 159,000
DWT is only one.
It is evident from the above that even if the berth is deepened to –18.0m CD for
cape size vessels (150,000 DWT) by spending Rs.150 crores by EPL the berth
is likely to be visited mostly by Panamax and Panamax (r) size vessels for
which 15m depth is adequate. Capacity of the berth length of 271m (one berth)
with single ship loader can reach only up to a max productivity of about 8
MTPA with the predominant vessel mix of Handymax & Panamax vessels.
Reaching of the first phase planned capacity of 9 million tonnes would be
difficult. Instead extending the berth to 525m in second phase coupled with
installation of second shiploader and second stream of conveyor the capacity
would increase to 16 million tonnes (2 berths) with the alongside depth of 15m.
The utility of the facility and the performance level would increase as two
panamax vessels could be handled at a time. In case, the BOT operator
insist 18m depth quoting the contractual provision EPL should call for a
viability study report from the operator to justify the arrival of sufficient no
of capesize vessels and significant increase in berth capacity on account of
it.
• To achieve a minimum ship-loading rate of 50,000 per day for panamax size
vessels and 75,000 TPD for cape size vessels two ship loaders of 5,000 TPH
capacities would be advisable. This will also facilitate even loading of vessels,
better reliability and efficient ship loading operation.
• When the throughput of ore exceeds 10 million tonnes per annum, wagon-
unloading system with two tipplers of 25 cycles per hour design capacity as
proposed by BOT operator will be overstrained to achieve higher output. A third
tippler is considered essential to handle an annual throughput of 12 million
tonnes. Definitely a 15 million tonnes throughput will be difficult to be achieved
with only two tipplers.
Recommendations:
• Instead of a berth length of 271m with end dolphins in Phase 1, a berth length of
325m without end dolphins is preferable which will provide space for the linear
extension of berth length to 525m (without any obstruction).
• Considering the current trends of dry bulk carriers, a berth length of 525m
(2 berths) with the second stream of conveyor and addition of second ship loader
would able to handle 16 million tonnes with the alongside depth of 15m.
• If the BOT operator insists on 18m alongside depth, EPL will ask for a viability
study to justify the arrival of sufficient Nos. of capesize vessels (150,000 DWT)
as this category is dwindling in the market.
• Provision of a surge bin of not less than 2,000 tonnes capacity will ensure
continuous loading operations without interruptions.
• The stack yard should be furnished with a highly efficient automatic water spray
system.
Commercial/Financial Assessment
The BOT operator in their Detailed Project Report has adopted a rate of Rs.230 per
tonne. However, the comparable rate at Chennai is Rs.110 per tonne. For revenue
projection a rate of Rs.125 per tonne has been adopted which is approximately 10%
higher than the present Chennai Port rate of Rs.110 per tonne. Financial
implications for EPL during the business plan period are summarised in Table 4.2
Capital expenditure
Dredging Phase I* 500 400
Dredging Phase II 600 900
In November 2004 a concession agreement was signed with Ennore Tank Terminals
Private Ltd. (ETTPL) for a 30 year BOT of a marine liquid terminal. After EPL
obtained the environmental clearance from the MoE&F the project construction
started from June 2006. The commercial terms are summarised in Annexure 1.
Investment of the Licensee in berth and pertinent land facilities is estimated at
Rs.1,963 million (as per the DPR).
The operator will develop a terminal capable of servicing vessels from 5,000 DWT
to 125,000 DWT with a cargo handling capacity of approximately 3 MTPA. Cargo
to be handled comprises of POL, LPG, CBFS, chemicals and others.
• a pipeline system to carry the liquid cargo to the tank farm; LPG shall be
directly delivered to the IOC bottling plant outside Ennore port area.
• storage facilities for the various products comprises of six sections with a total
storage capacity of approximately 260,000 KL.
• The berth occupancy of the MLT berth is given as 70 percent to achieve the full
capacity. Given the expected vessel mix, this is ambitious, but achievable under
good operational performance. However, it will inevitably lead to considerable
ship waiting times if vessel traffic is not scheduled and co-ordinated but at
random arrivals.
• The proposal to have two additional mobile unloading arms to be utilised when
two 5,000 DWT vessels are berthed will involve additional risk factors. Mostly
chemicals use small size vessels, operationally they are dangerous cargo.
Recommendations:
Commercial/Financial Assessment
It remains to be seen how clients will react on ship waiting times due to high berth
occupancy when the terminal reaches 3 million capacity. A very good service can
only be guaranteed at an occupancy rate of 35 percent, at random ship arrivals if one
berth is available. The manageable berth occupancy without much waiting of vessels
would be around 50%.
Tonnes of Cargo (million) 0.3 1.2 1.5 1.5 1.5 1.6 1.7
Capital expenditure
Dredging Phase I* 500 400
The traffic demand forecast reveals a considerable potential for a container terminal
at Ennore Port. A Technical and Financial Report developed for the business plan
covering the conceptual layout and operations of the proposed container terminal is
contained in an Addendum to this Report. This analysis concludes that a container
terminal with a capacity of 1.5 million TEU will reach its capacity limit within a few
years of commencement of commercial operations. The typical layout of the
Container Terminal and the Financial Analysis of the Container Terminal are at
Annexure 3 and Annexure 4. As a matter of prudence the low traffic forecast forms
the basis for the financial analysis. This approach takes the asymmetric risk profile of
the forecast into account:
Development of a terminal of 1,000m of quay length and 600m width in two stages
through private sector participation would facilitate a financially viable terminal
operation and provide linear expansion of the second terminal, once the need arises.
The licensee may be given the flexibility to develop the terminal in two stages. In
this case, the initial configuration will not be less than 700m (Stage I). In Stage II,
the operator would have the option to add a further 300m. It is proposed that this
option may be exercised within 5 years of commissioning of the terminal or when
reaching 0.8 million TEU of throughput which ever is earlier (exact conditions to be
determined during the tendering process). The quay length and the number of SSG
that the quay can accommodate limit the capacity of the terminal. Nine cranes can be
employed in stages corresponding with the traffic growth with sufficient clearance in
between the equipment. This results in an annual terminal capacity of 1.5 million
TEU.
A Stage I terminal of 700m quay length and 600m width would handle containers up
to the level of 1.20 million TEU per annum which correspond to the projection for
the year 2014-15 (high scenario) as per Table 2.2. The container traffic is likely to
exceed 2.0 million TEU per annum by 2016-17 (high scenario). Further, there is a
possibility to handle cargo items like cars, granite blocks, project cargo etc. It is
therefore suggested that the container terminal be developed through private
sector participation with a waterfront of 1,000m in line with the maritime policy
of the Government of India.
The private operator can develop topside and backup area facilities on line with the
traffic growth. During the initial years of operation the operator may be permitted to
handle cars, granite blocks, project cargo etc using the spare capacity of the
container terminal. This would benefit the port for entry of new types of cargo and
revenue share thereon. When sufficient volume of container traffic is generated and
on completion of Stage II, the 1,000m x 600m container terminal can be fully
utilised for container handling.
Estimated private investment of Rs.10,878 millions as shown in Table 4.4 has been
taken into account for the purpose of financial viability analysis.
Total (million
Year Rs.)
Infrastructure 3,648.1
Equipment 7,229.8
Grand Total 10,877.9
Expenditure is phased for the 2010-11 to 2019-20 when the terminal will have been
operating at full capacity for some time. It should be noted that this figure also
contains replacement investment according to the expected economic life of the
equipment. Expenditure in a railway terminal are not included in the calculation as
Results of the cash flow analysis of the proposed container terminal at Ennore port
are as follows:
Financial implications for EPL during the business plan period are summarised in
Table 4.5. Capacity and productivity benchmarks are summarised in Annexure 2.
The development strategy of Ennore Port Ltd (EPL) for implementation of the
planned projects is that development of cargo terminals including installation of
equipment will be through private sector participation under private investments and
capital dredging and development of common infra-structure like road and rail
connectivity, will be under EPL investments. EPL will make available the protected
waterfront area and land areas to the respective BOT operator after raising it to the
required levels. As can be seen from the projects already committed by the private
sector this sort of sharing the investments by the port will motivate and attract
private investments in the port projects. This strategy has proved well for EPL,
which is evident from the fact that the selected BOT operators for Marine Liquid
Terminal, Coal Terminal and Iron Ore Terminal have offered high revenue shares
benefiting the port. EPL investments on capital dredging and rail/road infrastructure
will benefit the BOT operators to carry on the operation to the optimal level and
maximise the utilisation of the facility created.
• Capital dredging
• Road connectivity
• Rail connectivity
(1) –15.0m CD in the berth areas of the proposed marine liquids, coal and
container terminals
(2) –18.0m (Ore berth area) –18.5m in port basin and -20.0m in channel.
• To provide dredge materials for raising about 500 acres of low lying port
land west of Ennore creek to about +2.50m level to facilitate development of
stackyards for coal and iron ore and railway holding yard.
• To deposit the dredge materials for shore protection on the northern side of
north breakwater.
The dredging in the berth areas, port basin and channel will benefit the BOT
operators for safe berthing and sailing of vessels for cargo operations. The dredging
is in the sandy seabed and no rock dredging is involved. The dredging is to be
carried out in a phased manner and the timings should match with:
Note:
Deepening of iron ore berth from –15.0m CD to –18m CD and the corresponding
deepening of turning basin from –15.5m CD to –18.5m CD and the approach
channel from –16.0m CD to –20.0m CD (Phase –2 (a)) to cater for cape size vessels
(150,000 DWT and 16.5m draft) is the contractual obligation of EPL under the
Licence Agreement. Investment required by EPL on this score is about Rs.150
crores. EPL would decide on this investment after getting a viability study report
from the BOT operator justifying the arrival of sufficient number of cape size
vessels and substantial increase in the berth capacity. The capital dredging for the
container terminal can be done in stages according to the licensees schedule.
Development of port business and productivity in port depends on good road and rail
connectivity to the hinterland for the effective movement of cargo in and out of the
port. Network of well-laid roads are required to connect the port operational areas to
the main access roads. On EPL investment point of view, the roads can be classified
as:
• Network of internal roads within the port boundary wall
• Network of roads in the vicinity area of the port
Besides the internal roads, the main access roads like TPP road and NCTPS road are
to be widened and strengthened to effectively connect the internal roads to the
National Highway. EPL has to share a proportionate expenditure with the SPV and
other beneficiaries of the road by way of contribution. Development of roads will be
beneficial to the operators of the port and other agencies who have business with the
port like shipping, customs house agents, exporters, importers, traders etc.
Rate/km Cost
Length Prior- (Rs. in (Rs. in
Road
(km) ity millions) millions)
1. Roads within Port Operational Areas.
Widening and strengthening of South Port Road up to
the Container Terminal (from 2 lanes to 4 lanes with 0.6 2 20 12
hard shoulders).
Development of North Port Road (Two-lanes) 1.6 1 15 24
Link road from North Port Road to the gate on the
0.8 1 25 20
northern boundary wall.
Development of North South Link Road (four lane with
2.5 2 45 112.5
hard shoulders)
Development of Security road along the boundary wall.
6.8 1 10 68
(One lane with shoulders)
Strengthening the Road to coal wharf & SBW. 1.0 2 LS 8.5
2. Roads in the Vicinity Areas
Development of Spinal Road on the west of stackyards
(Two lanes with hard shoulders for 3.5 km, extending
3.5 1 25 87.5
westwards up to NCTPS road (ash dyke road) (two
2.0 1 25 50
lanes for 2 km) (including box bushing under the
railway crossing)
Development of Northern Port Access Road from EPL
North gate to meet TPP Road (four lanes) further
20 2 lump sum 990*
extend to Thachur at NH-5 including Construction of a
major bridge across Ennore creek
Development of a road in front of western port
boundary wall. (Village access road) (Two lane with 4.0 1 25 100
hard shoulders)
3. Strengthening of NCTPS road and port access road from 2
lanes to 4 lanes including widening of the road and railway 7.5 lump sum 200
bridges.
4. Widening & upgrading the TPP Road into four lanes (EPL
9.0 Proportionate 87.5**
contribution)
5. Upgrading and strengthening of ash slurry pipeline road
1 lump sum 20
(Immediate requirement)
6. Commissioning of detailed feasibility studies, and preparation
lump sum 20
of DPRs for road network development.
Total 1,800
Rs.1,800 millions
* EPL has taken up with the Central Government to include this road under port
connectivity to be financed by NHAI. In that case EPL investment will be nil. If the
development is on EMRIP pattern through an SPV then EPL has to contribute equity. The
financing model of this road needs to be updated under the annual review of the Business
Plan.
** Total EPL contribution is Rs.175 millions of which Rs.87.5 millions (50%) has already
been paid.
Development of rail connectivity is an essential common user transport mode for the
inward and outward movement of rail-borne cargo items between the port
operational areas and the hinterland destinations.
The EPL investment on rail infrastructure will facilitate quick evacuation of cargo
from port area and benefit the exporters and importers in moving the cargo directly
to the destinations without any intermediate transhipment and multi-handling.
The proposal for creation of a new line connecting Puttur-Attipattu (updated cost
estimate is Rs.635.65 crores in August 2006) is in the planning stage. The Railways
is of the view that routing of the traffic via the shorter project route will be
benefiting not the railways but the consignor/consignee (iron ore exporters).
However railways is willing to consider the proposal with EPL suggesting sharing
the cost of construction of the new line along with the iron ore exporters by floating
SPV for funding the project. Construction of the proposed new line will be
necessary on EPL point of view to motivate the iron ore exporters and promote iron
ore traffic through Ennore port and to reach the throughput level of 16MTPA. This
will also maximise the utilisation level of iron ore terminal. Ennore port would take
a lead to promote the SPV with Railways (RVNL), Exporters of Iron ore etc. EPL
contribution to the SPV in the form of equity shall be of the order of Rs.50 crores.
Besides the above specific project investment, EPL has to make the following
investments to support the private investments on cargo.
Sl.No. Item Rs. in millions
1. Land excavation for container terminal prelude to capital 14.0
dredging
2. Removal of rock boulders from the container park area 5.0
3. Removal of the existing Railway sidings and site clearance 12.0
4. Land developments works 50.0
5. Green belt and environmental measures 69.0
6. Shore protection structures 150.0
7. Land Acquisition (additional lands) 150.0
Total 450.0
EPL investments amount to Rs.748 crores as shown in the Table 4.8. The costs may
be reviewed and updated during the annual review and updating of the Business
Plan.
• This includes equity contribution of Rs.1077.5 million by EPL to the SPV for
the development of Northern Port Access Road and widening of TPP road.
5. FINANCIAL PROJECTIONS
• Contracts on BOT basis have already been awarded for establishing coal,
iron ore and multi liquid cargo handling facilities.
5.1.1 Revenue
• The projection for traffic, number of vessels, nature of vessels, GRT etc.,
are based on the present trend of traffic, expectations and capacity of the
terminals. For reasons of financial prudence, all projections are based on the
low traffic forecast.
• For the existing facilities of handling of coal, iron ore and oil, present tariff
of the EPL is adopted. In the case of coal handling by TNEB a revision is
due on 1st July 2007 based on wholesale price index for all commodities.
Based on the trend of increase in index, 10% revision is taken into account
Section 5 : Financial Projections 5-49
HPC – CES Business Plan for Ennore Port Limited: Final Report
for the financial year 2007-08 and the same percentage once in 3 years
thereafter. Further when once the tonnage handled crosses 10 million tonnes
per annum, the Tariff has to be renegotiated for the tonnage handled in
excess of 10 million tonnes as agreed to between EPL and TNEB. Having
this in mind, a 10% reduction in rate has been assumed for the tonnage
exceeding 10 Millions per annum expected to be handled from 2010-11.
• For liquid products to be handled at the new berth possible tariff based on
DPR of BOT operator has been adopted. For iron ore handling, though the
BOT operator has adopted a rate of Rs.230 per tonne in their DPR, for the
purpose of EPL revenue projections only Rs.125 per tonne has been adopted.
This rate compares favourably with the present rate of handling of about
Rs.110 per tonne at Chennai Port and is approximately 10% higher than the
present rate at Chennai Port. For coal handling at the new coal terminal a
rate of Rs.200 per tonne is adopted, though BOT operator has adopted the
rate of Rs.235 per tonne in their DPR. The rate adopted for EPL revenue
projection is approximately 10% higher than the present rate of Rs.180 per
tonne prevailing in Chennai Port.
• For containers an average of Rs. 3,200 per TEU has been assumed. This is
approximately 10% above the recorded average earning of M/s. CCTPL at
Chennai port in 2005. A revenue share of 30% has been assumed to EPL.
• Revision in rates has been assumed @ 10% once in three years. The revenue
share of EPL is calculated accordingly.
• Land rentals and way leave charges are as per the provision made in the
concession agreements.
• Vessel dues (port dues and pilotage) to be recovered by EPL directly from
the Shipping Agency are based on the present tariff. 5% increase once in 3
years is assumed.
• The increase once in 3 years is broadly based on the existing practice in the
other major ports.
5.1.2 Expenditure
• For time charter contracts for Tugs & Pilot launches provision has been
made as per the existing contracts of EPL up to 2012-13. Thereafter
provision made is based on average for 10 years with yearly increase of 5%
for escalation. For establishment charges for the year 2007-08 one time
increase of Rs.22.50 million has been assumed to meet the cost of quantum
increase in staff and also wage revision. Likewise for the year 2008-09 and
2009-10 one time increase of Rs.11.25 million for each year is assumed. For
all years 15% increase is provided every year to cover normal annual
increments. For running cost like fuel, mooring operation etc., expenses
provided is in proportion to the number of vessels handled.
• The provision for manning contract for fire fighting has been doubled during
2008-09, the year of commissioning Marine Liquid Terminal handling
facilities.
• The provision for interest for long-term loans taken by EPL from Banks and
Chennai Port Trust has been increased by 1% from the year 2008-09 as there
is an agreement for resetting interest rates from that year. For new loans
according to the financing strategy discussed in section 5.2.5, an interest of
10% has been assumed.
The total of EPL investments and the period are shown in Table 5.1.
EPL Contribution
Regarding improvements to TPP road, EPL has already paid Rs.87.5 million during
2005-06 as its share of contribution and the balance Rs.87.5 million is expected to
be paid during 2007-08. Towards development of Northern Port Access road from
EPL north gate to Minjur and then extended to Tachur, the contribution of EPL is
expected to be Rs.490 millions during 2009-10 and Rs.500 millions during 2010-11
and this has been provided for. Further EPL is expected to pay a contribution of
Rs.250 millions each year for the years 2010-11 and 2011-12 towards to the new rail
link Puttur–Attipattu. All these items of contributions totalling to Rs.1,577.50
millions are shown as investments in the Balance sheet towards Equity participation.
5.1.4 Others
5.1.4.1 Depreciation
For the purpose of projection of Profit and Loss account depreciation has been
provided on straight-line method as per the present practice of EPL as provided
under the Companies Act 1956. Depreciation has also been provided for the
expected capital investments on dredging, road connectivity, rail connectivity etc.
For the period after expiry of the tax holiday, depreciation has been worked out as
per income tax law for the purpose of working out income tax.
Tax holiday for 10 years as opted by EPL from the financial year 2006-07 under
Sec.80 IA of the Income Tax Act has been taken into account. During the tax
holiday period of 10 years minimum alternate tax at the rate of 11.22% has been
provided. After the tax holiday period, tax liability has been worked out at the rate
of 33.66%. These provisions are in accordance with the present Tax laws.
5.1.4.3 Dividends
No provision has been made for payment of dividends in the early years of the
forecast horizon as the port is in a growing stage and surplus generated has to be
ploughed back for port development works. Provision has been made for the
payments of dividends from 2014-15. Resulting dividend distribution tax has also
been included.
For working out vessel dues for foreign vessels calling at the port an exchange rate
of US $ 1 = Rs.44.00, prevailing as on 31st January 2007 has been adopted.
• Upfront fee of Rs.40 Million received from MLT operator during 2003-04
and accounted under current liabilities is taken to Profit and loss account
during 2006-07 as the zero date commences during this year.
• Upfront fee of Rs.55 Million received from Iron ore terminal operator is
taken as cash inflow for 2006-07 and shown in Balance sheet under current
liabilities. This will be taken to Profit and Loss account during 2007-08 when
zero date is expected to commence.
• Upfront fee of Rs.40 Million received from Coal terminal operator is taken
as cash inflow during 2006-07 and shown in Balance sheet under current
liabilities. This will be taken to Profit and Loss account during 2007-08 when
zero date is expected to commence.
An analysis of the Profit and Loss account shows that EPL will make moderate
profits of Rs. 436.29 millions after tax during 2007-08 and Rs.174.15 millions
during 2008-09 and profit would considerably increase once the commercial
operations of Coal and Iron ore terminals start from the financial year 2009-10 and
will further increase from the financial year 2010-11 when commercial operations of
Container terminal are expected to commence.
The Balance sheet projections take care of increase in fixed assets, depreciation,
profits and cash flows. Investments include contributions of EPL towards
improvements to TPP road, construction of the new Northern Port Access Road and
the new rail link Puttur- Attipattu. 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. It is
understood that the contingent liability is the result of arbitration proceedings
brought against EPL. It is not known when a final judgement thereon will be
available
The EPL is expected to have an opening cash flow position of Rs.897.40 million as
on 1st April 2007. During the year 2007-08 and 2008-09 the cash inflow on account
of operations is expected to be Rs. 673.79 million and Rs.359.38 million
respectively. This would help to meet the repayment liabilities of loan already taken
and cash flow required for capital investment on dredging, road connectivity and rail
connectivity during 2007-08 and 2008-09. However a short fall of funds to the
extent of Rs.1,399.27 millions is expected by the end of 2008-09 and short fall will
increase and will continue till end of 2010-11 on account of EPL investments on
capital dredging, road connectivity and rail connectivity etc. The cash flow will be
positive from 2011-12 and is comfortable from 2012-13. To accommodate the cash
shortfall, a commercial debt financing of Rs. 3,900 million has been assumed as
discussed further below.
The key figures and accounting ratios as extracted from the Profit & Loss account
and Balance Sheet are shown under Table 5.2 for ready reference.
Total operating cost 298 266 269 321 391 416 490 621 940 1,501
Operational net earnings 951 1,101 1,333 3,409 4,287 4,494 4,970 6,863 7,681 8,715
Depreciation 138 185 238 271 271 270 270 268 267 267
Net earnings before interest and tax 813 916 1,095 3,138 4,016 4,224 4,700 6,596 7,414 8,448
Interest 322 480 688 655 490 325 158 101 5 0
Net earnings before tax 491 436 406 2,484 3,526 3,899 4,542 6,495 7,409 8,448
Tax 55 49 46 279 396 437 510 2,166 2,534 2,911
Net earnings 436 387 361 2,205 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 1,033 49 0
Equity 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000
Reserves 460 847 1,208 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 ) 897.40 224.00 191.55 343.70 349.81 1,795.93 3,830.37 14,220.47 26,806.73 45,622.94
Liquid means ( Cl. Bal ) 224.00 191.55 343.70 349.81 1,795.93 3,830.37 6,421.09 15,743.00 30,874.77 48,549.04
Increase (decrease) liquid means (673.40) (32.44) 152.15 6.11 1,446.12 2,034.44 2,590.72 1,522.53 4,068.04 2,926.10
1. Operating Ratio 0.24 0.19 0.17 0.09 0.08 0.08 0.09 0.08 0.11 0.15
(Operating expenses / Operating revenue)
2. Debt Equity Ratio 1.30 1.68 2.37 2.24 1.68 1.11 0.54 0.34 0.02 0.00
(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% 121.12%
(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. 1.45 1.29 1.20 7.35 10.44 11.54 13.44 14.43 16.25 18.46
Note: The financial implications of recommendations contained in Section 5.2.5 below are reflected in this
Table.
The cash position will be as set out in Table 5.2. In the years 2008-09 and 2009-10,
the cash generated from ordinary operations will not be sufficient to cover all cash
requirements for planned capital expenditure. The cash flow will become positive
from 2011-12. In case of any variation in the traffic realisation or time over run in
the project implementation by the BOT operators, the short-fall may likely to
change.
Financing Strategy
• First Choice
• 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.
• Third Choice
The principle justification for applying for a grant to cover the cost of capital
dredging is that dredging is a long term basic infrastructure investment that benefits
all port users. According to applicable guidelines, dredging in principle qualifies for
government assistance and it is understood that EPL has received positive
preliminary indications in this respect from the relevant central government agency.
The second choice would have the disadvantage it carries the risk of increasing the
influence of Chennai Port Trust. This is presently not considered to be
advantageous. In principle, it would also be possible to take in other shareholders,
e.g. other Port Trusts. However, this requires approval from present shareholders as
Section 5 : Financial Projections 5-55
HPC – CES Business Plan for Ennore Port Limited: Final Report
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 mentioned above, present shareholders will provide requisite
support to EPL to maintain healthy balance sheet ratios. Support could thereby be
either through additional equity, through guarantees or other forms that provide
sufficient comfort to financing institutions. Even before a final arbitration result is
available, this may also be a requirement in obtaining the additional debt financing
proposed by the third choice.
The financial implications of the above recommendations have been taken into
account in the Projected Profit and Loss Account, Balance Sheet and Cash Flow
Statements contained in Annexure 6, Annexure 7 & Annexure 8 and Table 5.2.
6.1 Approach
This section covers detailed Action plan for implementation of the identified projects
during the first seven years of the business plan focusing on schedule of activities
and milestone events. The plan includes the cargo terminals to be developed and
operated through private sector financing and the support core infrastructure projects
like capital dredging, road and rail connectivity etc to be established through the port
financing. The plan specifies the responsibilities of the private operator and EPL in
the development and commissioning of the project facilities and set timings for
accomplishment of inter-dependent items so that construction of project facilities by
the private operator and development of the support facilities by the port can
progress in an integrated and synchronised manner and to achieve the goal.
The timings for the accomplishment of the milestone events, commencement and
completion of project facilities vis-à-vis the date of commissioning of the terminals
under the BOT format and the supporting infrastructure projects to be funded by
EPL are in accordance with the discussions held with EPL officers and their
Development Plan. The plan also lists the action points of EPL in providing the
support facilities to the private investors to meet the obligations of EPL mandated in
the respective agreement.
As regards Container terminal (Phase-I) EPL has prepared the Project Report
defining the project parameters and submitted the proposal to Central Government
for obtaining in – principle clearance of Public-Private-Partnership Appraisal
Committee (PPPAC). The Bidder selection process through competitive tendering
will start on receipt of clearance.
In case of the infrastructure projects under EPL financing, the phasing and timings
of the construction schedule are matched with the construction schedule and
commissioning of the BOT projects.
The activity schedule and mile stone events are shown in the chart at Appendix 1.
• Develop village access road along the western port boundary wall
and make it available to the operator for tanker truck movements
The activity schedule and mile stone events are shown in the chart at Appendix 2.
• Raise the land earmarked for coal stack yard to the designated level and
handover with access road (construction purpose)
• Obtain clearance from the authority concerned for routing the conveyor
support structures across the Ennore back water (creek).
• Acquire/ take over the land from the concerned authority (TIDCO/
TNEB/ Salt Department) for locating the holding yard for railway sidings
and construction of west Spinal road for evacuation of coal.
• Upgrade the ash-slurry pipeline road (taking permission from TNEB) and
develop the Spinal road on the west and extend it westwards to meet
NCTPS road (taking permission from the authority concerned). Provide
road connectivity to facilitate evacuation of coal through road trucks.
Section 7: Financial Model 6-58
HPC – CES Business Plan for Ennore Port Limited: Final Report
The activity schedule and milestone events are shown in the chart at Appendix 3.
Action points of EPL to support the construction and commissioning of Iron Ore
Terminal:
• Raise the land earmarked for Iron ore stackyard to the designated level and
hand over with access road.
• Obtain right of way permission from the owners of the land concerned
outside Ennore port area for routing the conveyor alignment
• Obtain clearance from the authority concerned for routing the conveyor
support structures across the Ennore backwater (Creek)
• Dredge the berth area of Iron ore terminal to –18.0m CD, port basin to
–18.5m and channel to –20m to facilitate berthing of Iron ore carriers
The activity schedule and mile stone events are shown in the chart at Appendix 4.
• Remove the temporary railway sidings and hand over the area for
development of container parking yard
• Widen the south port access road from the existing two lanes to four
lanes and develop part of north south link road (1 km) (4 lanes) and
make them available to the operator to facilitate movement of container
trailers
Dredging the berth areas of MLT, Coal and Iron ore to -15.0m CD.
The activity schedule and milestone events are shown in the chart at Appendix 5.
• Decide and mark the alignment of the pipe line to carry the dredge
materials from the dredger to raise the (Stackyard) land well before
mobilisation of the dredger & equipment
• In case of raising the holding yard area take permission from the
respective land owner
Dredging the berth area of iron ore - 18.0 m CD, port basin to –18.5 m and
channel to –20.0m.
A network of roads within the port operational areas and in the vicinity area has
been developed to establish good connectivity for evacuation of cargo from the
terminal areas and stackyards. The activity schedule and milestone aments for
construction of various roads constituting the system are shown in the chart
Appendix 6.
The schedule for commencement and completion of each road has been so drawn
matching with the completion/commissioning dates of the terminals which require
road support.
The major road to connect Ennore port direct to NH5 has been identified as the
Northern port access road. As it involves major investment and beneficiaries are
many, it is recommended that EPL could take it up with the Central Government to
bring it under the port connectivity projects funded by NHAI.
This activity schedule and milestone events are shown in the chart at Appendix –7.
Master control bar chart combining the construction schedules of the major four
terminals and the associated capital dredging is at Appendix 8.
The development of projects in the next seven years is by various private developers
and the EPL and many activities are inter-linked. It is necessary to co-ordinate and
monitor the activities with reference to the individual action plan. It is
recommended that EPL should set up a monitoring team under a senior level
officer to over see the activities, rectify the deficiencies then and there so that
the overall action plan is kept up.
7. FINANCIAL MODEL
7.1 Structure
The financial model is structured with input fields, calculation fields and output
fields. The input fields comprise of traffic, number of vessel calls, tariff, revenue
share, lease rentals, various elements of operation, repairs and maintenance,
administrative cost, source of funds and application of funds. The calculation fields
comprise of computation of revenue earnings, expenditure, depreciation, debt
servicing and taxation. Output fields comprises of total operating revenue, total
operation cost, net earnings after tax, cash flow, additions to assets, liabilities and
reserves. The fields are shown in different colours to facilitate annual review.
• Input fields - Light green
• Calculation field - Yellow
• Output fields - Blue
7.2 Development
The financial model is developed taking into account the relevant elements of
revenue, expenditure, source and application of funds.
Revenue
1. Wharfage (Composite rate) for TNEB coal
2. Concession fees (Revenue Share) payable by BOT operators.
3. Port dues and Pilotage dues from Shipping Agents
4. Lease rental and way leave charges.
Expenditure
1. Running and operations cost (Fuel, Manning contracts, Time charter, etc)
5. Establishment charges
6. Administrative Overheads
The principal assumptions are listed under Section 5.1 of the report.
The financial model includes Profit & Loss Account, Balance Sheet and Cash Flow
statement. These provide all items of revenue, expenditure, profit, source of funds
such as Equity Capital, Loan Capital, Net Earnings, and Short-term liabilities and
application of funds such as fixed assets, current assets, liquid assets and
investments. Long-term loan schedule and EPL investment schedule are provided.
Depreciation and taxation schedule are also provided.
The financial model gives financial projection year wise consisting of Profit & Loss
account, Balance Sheet & Cash Flow for a period of 20 years commencing from
2007-08. Categories of revenue, Categories of cost, classification of assets, short-
term liabilities, long-term liabilities, Equity and Reserves are specified supported by
working sheets.
Financial evaluation is an ongoing process and requires regular annual review to:
The Annual Review shall be undertaken by the Finance Unit of EPL and the Head of
the Finance Unit will be the nodal officer.
The proposed time frame for the annual review of the financial model will be the
first three months of the financial year (April – June) side by side with finalisation of
the Annual Accounts. The results of the review shall be presented to the Board of
Directors in July.
8. ANNEXURES
Tariff setting Port dues, pilotage fees and shifting charges and any other vessel
EPL: related charges except berth hire for the berth built by Licensee
Tariff setting Rates and user charges for the coal terminal including berth hire
Licensee charges
BOT-Period: 30 years
Completion Period: 30 month
• Capital dredging required
Capital Investment of • Raising of ground level of stackyard
EPL: • Rail connectivity through a siding to the main lines
• Road access up to the boundary limits
Tariff setting EPL: Port dues, pilotage fees and shifting charges and any other
vessel related charges except berth hire for the berth built
by Licensee
Tariff setting Licensee Rates and user charges for the iron ore terminal including
berth hire charges
BOT-Period: 30 years
Completion Period: 24 month
Capital Investment of • Capital dredging required
EPL:
Capital Investment of • Berth and accessories
Licensee: • Mooring dolphins and loading arms
• Pipe trestle and pipe lines
• Fire fighting equipment
• Storage tanks
• Oil containment booms and skimmer
• Utilities
Obligation of Licensee: • Operation, repair and maintenance of the terminal
• Environmental stipulations:
− Comply with the conditions specified by the
Ministry of Environment and Forests in the
Environmental clearance.
− Comply with the directions of the Governmental and
other enforcement authorities as per annual review.
− According to applicable National laws
− According to Industrial standards and practices.
Services and facilities • All marine services
provided by EPL: • Maintenance of the waterways to the required depths.
• Safety of navigation
• Provision and maintenance of general port
infrastructure
Tariff setting EPL: Port dues, pilotage fees and shifting charges and any
other vessel related charges except berth hire for the
berth built by Licensee
Tariff setting Licensee Rates and user charges for the marine liquid terminal
including berth hire charges and tank usage
Payments to EPL • Land Lease and Right of Way
• Revenue Share: 21.678 percent
• Minimum Annual Guaranteed Revenue increasing
from Rs.25 million (1st year) to Rs.103 million (30th
year).
Within the given commercial and financial strategy of EPL is proposed to create also
this terminal as a BOT project with a maximum of private participation. The key
parameters are recommended as follows:
BOT-Period: 30 years
Tariff setting EPL: Port dues, pilotage fees and shifting charges and any
other vessel related charges except berth hire for the
berth built by Licensee
Tariff setting Licensee Rates and user charges for the container terminal
including berth hire charges
Capital Expenditure
Capital expenditure comprises civil works and equipment and machinery. Main
components of civil works are:
A breakdown is given in Table 8.1 below. The table includes expenditures expected
to be borne by EPL according to the proposed commercial modalities of the project.
Expenditure in a railway terminal are not yet included in the calculation as existing
rail connectivity restrictions might discourage investors to invest in such a facility at
least in the initial stage of the terminal. Likewise EPL investments in the pertinent
immediate rail connectivity have not been taken into account.
Customs duty of 30 percent (basic duty, CVD and SAD) has been taken into account
to calculate the cost of imported equipment and other material required for the
development of the terminal.
Price Total
Item Unit (Rs) per Quantity (million
Unit Rs.)
Stage I
Quay (including bollards and fenders) m 2,300,000 700 1,610.0
Crane rails incl. foundation m 4,200 1,400 5.9
Stage II
Quay (including bollards and fenders) m 2,300,000 300 690.0
Crane rails incl. foundation m 4,200 600 2.5
Subtotal 4,496.8
Contingencies/Engineering (10%) 10% 449.7
Total 4,946.5
Thereof EPL 1,298.4
Thereof Licencee 3,648.1
Table 8.2. It should be noted that the table also contains replacement investment
according to the expected economic life of the equipment.
Table 8.2: Equipment Investment for Container Terminal
A sensitivity analysis is being carried out showing the effects on the IRR of a
deviation of revenue (traffic volume), operating costs and capital investment costs by
+/- ten percent from the planned figures.
Financial evaluations are based on the projected investment programme and on the
expected cash flow development. At this stage of the business plan preparation the
financial evaluation will not assess possible financing conditions and their leverage
effects. The analysis has been carried out on basis of a project cash flow, not
distinguishing between internal and external capital. Corporate taxes have also not
been taken into consideration. The calculation methodology is thus a simplified
Discounted Cash Flow approach.
All costs and revenues are at 2006 level with no allowance being made for future
inflation rates. This has an effect on the discounting factor applied as it excludes
general inflationary trends (constant price approach). All figures are in million
Indian Rupees (Rs); foreign exchange expenditures are converted at the exchange
rate as per 31. January 2007, i.e. Rs.44 = 1 US Dollar.
Revenue Projection
Revenues are based on the expected traffic to be handled at the terminal. As the
entire project is being evaluated revenue of both, the BOT Licensee (Operator) and
EPL are to be analysed.
Handling rates of the operator have been assumed at Rs.3,200 per TEU. This is
approximately 10 percent above the Rs. 2,920 per TEU - the recorded average
revenue earnings of M/s CCTPL at Chennai port in 2005. This estimate as rather
conservative. It takes into account inflation experienced since 2005. Furthermore, it
is expected that sufficient container storage space and good road connectivity will
enhance the earning potential of the new terminal at Ennore. The assumed average
revenue is also within the range of the average container handling rate of South East
Asian terminals given at 92 USD by Drewry’s survey of 2002 for the movement
from ship’s hold to stack to truck (or vice versa) only. At the current exchange rate
and prevailing 20ft/40ft container pattern this amounts to approximately Rs.2,920
per TEU (excluding container storage, extra moves and services etc.). It might
further be noted that amongst all surveyed ports worldwide South East Asia had the
lowest average tariff in the survey, with little variation within the region at country
level. Main reasons for this are low regional average wage levels by international
standards and regulated ceilings on tariffs imposed by a number of South East Asian
governments.
Revenue of EPL is estimated as per container vessel forecast and the current tariff of
EPL. Revenue streams between the EPL and the Licensee (land lease, revenue share
etc.) have not been considered as the analysis is done on a project level.
Operating Expenses
A standardised South Asian rate of Rs.500 per TEU is being used. It is based on
international surveys and tallies with rates used in the feasibility studies prepared for
Ennore Port and Chennai Port 2nd Container Terminal.
Operation costs of EPL are based on a tentative analysis and projection of the
present cost composition (financial years 2003-4 and 2004-5) as highlighted in the
Inception Report. It suggests an average cost of Rs.300 per TEU once the four new
terminals (coal, iron ore, MLT and containers) are in operation with subsequent
better utilisation of existing marine facilities.
Capital Investment
Capital investments have been analysed in Table 8.1 and Table 8.2 above.
Investments in civil works have been allocated to the various years according to the
foreseen construction sequence. It is assumed that initially about half of the terminal
area will be paved by the Licensee and the remaining area in 2014-15 when the
additional area is likely to be required. Investment in equipment follows the capacity
requirements. Replacement costs as per economic life is also included. Figure 8.1
shows the expected distribution of expenses until 2026.
3.000
2.500
2.000
million Rs.
1.500
1.000
500
0
2008- 2009- 2010- 2011- 2012- 2013- 2014- 2015- 2016- 2017- 2018- 2019- 2020- 2021- 2022- 2023- 2024- 2025- 2026-
09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
.
Results of the cash flow analysis of the proposed container terminal at Ennore port
are as follows:
Operating Investment
Year Revenue Cash Flow
Expenses Expenses
31,0%
30,0%
29,0%
28,0%
IRR
27,0%
26,0%
25,0%
24,0%
10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% -6% -7% -8% -9% -10%
Variation of ...
EPL - Investments
Abstract of yearwise -Phasing
Phasing of Expenditure(Rs. In millions)
Sl.No. Name of the Project
2007-08 2008-09 2009-10 2010-11 2011-12
1 Capital Dredging Phase I, II & III 500 1000 1500 1100 -
2 Road Connectivity 152+87.5** 138.5 237.5 + 490 * 194.5 + 500 * -
3 Rail Connectivity 150 300 180 250*** 250***
4 Miscallaneous Works 65 225 91 45 15
* Equity contribution to SPV for the new Northern Port Access Road
** Equity contribution to SPV for widening TPP Road
*** Equity contribution to SPV for the new Puthur - Attipattu Railway line
Note: Other operational income in 2007-08 and 2008-09 includes upfront fee received in advance.
The financial implications of recommendations contained in section 5.2.5 of the report are reflected
in the above statement
Note:
1. Current assets, Provisions and Short-term liabilities are assumed to be at 2006-07 figures.
2. The financial implications of recommendations contained in section 5.2.5 of the report are
reflected in this statement.
Note: The financial implications of recommendations contained in section 5.2.5 of the report are
reflected in this statement.
3. Ennore Port Ltd: First Annual Report (11th October 1999 to 31st March, 2001)
12. EPL – Study of Rail Infrastructure at Ennore Port, Final Report (July 2004) by
RITES
14. Strategy Study for Ennore Port Connectivity by Pallavan Transport Consultancy
Services Ltd, Chennai (January 2006)
15. Extracts from BOT Agreement for Marine Liquid Terminal Project ( November
2004) (Part II)
16. Extracts from RFP documents for Iron Ore Terminal Project (Vol.-I & III)
17. Extracts from RFP documents for Coal Terminal Project (March 2004)
20. EPL Development of Iron Ore Terminal at Ennore Port – Final Techno-
Economic Feasibility Report – March 2003 by L&T Ramboll Consulting
Engineers Ltd.
21. DFR for LNG Terminal at Ennore for IOC by Tractebel Engineers and
Constructors Pvt Ltd
22. DFR for Development of a Container Terminal at Ennore Port by IPA (January
2005)
24. Detail Project Report for Marine Liquid Terminal, August 2006
26. Concession Agreement between EPL and ETTPL for MLT – Port I & II
27. RFP document for common-user Iron Ore Terminal – Port I & II
28. RFP document for common-user Coal Terminal – Vol. I & II and Addendum I
32. Response to RFP for Iron Ore Terminal from SICAL consortium. Submitted in
June 2005.
33. Response to RFP for Coal Terminal from SICL consortium (Technical proposal
and General)
34. Detailed Project Report for development of Marine Liquid Terminal at Ennore
Port for which BOT contract is awarded for Ennore Tank Terminals Private
Limited (July, 2006)
35. Ennore Port Expansion Proposal for Environmental clearance volume 1 & 2.
38. Model Concession Agreement for private sector projects in Major ports.
39. Land use plan for Ennore Port – 2003 prepared by CES.