BP Innore Port

Ennore Port Business Plan Consultancy HPC-CES March, 2007

Ennore Port Limited

Business Plan for Ennore Port Limited

Final Report

20/03/07 12:28 D:\23328_Indien_Ennore_BP\Reports\Final Report March 2007\Final Report (FR)- V1-14032007.doc

Business Plan for Ennore Port Limited

Final Report

This Report has been prepared by the Ennore Port Business Plan Consultancy HPC-CES: HPC Hamburg Port Consulting GmbH CES Consulting Engineers Services (India)

Pvt. Ltd. Container Terminal Burchardkai 3 57 Nehru Place (5th Floor) 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: [email protected] E-Mail: [email protected] Internet: http://www.hpc-hamburg.de Internet: http://www.cesinter.com

Copyright by Ennore Port Business Plan Consultancy HPC-CES

HPC CES Business Plan for Ennore Port Limited: Final Report

iii

Table of Contents

EXECUTIVE SUMMARY xi

1. INTRODUCTION 1-1

2. MAJOR RESULTS OF INCEPTION AND INTERIM PHASES 2-3

2.1 Port Description 2-3 2.1.1 General 2-3 2.1.2 Existing Facilities 2-3 2.1.3 Composition and Trends in Cargo Traffic 2-6

2.2 Traffic Forecast by Commodity 2-6 2.2.1 Considerations and Major Assumptions 2-7 2.2.1.1 Coal 2-7 2.2.1.2 Iron Ore 2-7 2.2.1.3 Liquid Bulk 2-8 2.2.1.4 Containers 2-8 2.2.1.5 General Cargo 2-9 2.2.1.6 Summary of Cargo Traffic Forecast 2-10 2.2.1.7 Vessel Traffic Forecast 2-10

2.3 Competitive Position 2-11

2.4 Capacity and Bottleneck Analysis 2-13

2.5 Phased Land Use Plan 2-13 2.5.1 Land Availability 2-13 2.5.2 Requirements of Additional Lands 2-14 2.5.3 Summary of Additional Land Requirement 2-14 2.5.4 Strategy 2-15

2.6 Hinterland Connectivity 2-15 2.6.1 Rail Connectivity 2-15 2.6.1.1 Local Area Connections 2-15 2.6.1.2 Hinterland network 2-18 2.6.1.3 Rail connectivity 2-18 2.6.1.4 Strategy 2-18 2.6.2 Road Connectivity 2-20 2.6.2.1 Existing and Proposed Access Roads 2-20 2.6.2.2 Proposed Network of Port roads 2-20 2.6.2.3 Strategy 2-20

2.7 Organisational Issues 2-22

3. VISION, GOALS AND STRATEGY 3-25

3.1 Vision and Goals 3-25 3.1.1 Management Vision for the Next 20 Years 3-25 3.1.2 Goals to be achieved in the Next 7 Years 3-25

3.2 Strategy 3-26


iv

3.3 Long Term Development 3-27

4. OVERVIEW OF INVESTMENTS 4-31

4.1 Private Investment Projects 4-31 4.1.1 Existing Coal Berths (TNEB Coal) 4-32 4.1.2 Common-User Coal Terminal 4-32 4.1.3 Common-User Iron Ore Terminal 4-35 4.1.4 Marine Liquid Terminal 4-38 4.1.5 Container Terminal 4-40 4.1.6 Summary of Private Investments 4-42

4.2 Public (EPL) Investment Projects 4-43 4.2.1 Capital Dredging 4-43 4.2.2 Road Connectivity 4-44 4.2.3 Rail Connectivity 4-46 4.2.4 Miscellaneous Investments 4-47

4.3 Summary of EPL Investments 4-47

5. FINANCIAL PROJECTIONS 5-49

5.1 Principal Assumptions 5-49 5.1.1 Revenue 5-49 5.1.2 Expenditure 5-50 5.1.3 Investment Costs 5-51 5.1.4 Others 5-52 5.1.4.1 Depreciation 5-52 5.1.4.2 Provision for Income Tax 5-52 5.1.4.3 Dividends 5-52 5.1.4.4 Foreign Exchange Rate 5-52 5.1.4.5 Upfront Fees 5-53

5.2 Main Results 5-53 5.2.1 Profit and Loss Account 5-53 5.2.2 Balance Sheet 5-53 5.2.3 Cash Flow 5-54 5.2.4 Key Financial Indicators 5-54 5.2.5 Financing Strategy 5-55

6. DETAILED ACTION PLAN 6-57

6.1 Approach 6-57

6.2 Action Plan for Identified Projects 6-57 6.2.1 Projects Under Private Financing 6-57 6.2.1.1 Marine Liquid Terminal (BOT Project) 6-57 6.2.1.2 Coal Terminal (BOT Project) 6-58 6.2.1.3 Iron Ore Terminal (BOT Project) 6-59 6.2.1.4 Container Terminal (Phase-I) (BOT Project) 6-59 6.2.2 Projects under EPL Financing 6-60 6.2.2.1 Capital Dredging (Phase I) 6-60


v

6.2.2.2 Capital Dredging (Phase II) 6-61 6.2.2.3 Capital Dredging (Phase III) 6-61 6.2.2.4 Road Connectivity 6-61 6.2.2.5 Rail Connectivity 6-61 6.2.3 Co-ordination & Monitoring 6-62

7. FINANCIAL MODEL 7-71

7.1 Structure 7-71

7.2 Development 7-71

7.3 Annual review of the financial model 7-72

8. ANNEXURES 8-74

List of Tables

Table 2.1: Past Traffic 2-6

Table 2.2: Summary of Traffic Forecast by Commodity 2-10

Table 2.3: Summary of Expected Vessel Calls by Type 2-11

Table 4.1: Common User Coal Terminal Financial Implications for EPL 4-34

Table 4.2: Iron Ore Terminal Financial Implications for EPL 4-38

Table 4.3: Marine Liquid Terminal Financial Implications for EPL 4-39

Table 4.4: Estimated Private Investment of the Terminal 4-41

Table 4.5: Container Terminal Financial Implications for EPL 4-42

Table 4.6:Summary of Private Investments 4-42

Table 4.7: EPL Investment on Development of Roads 4-45

Table 4.8: Summary of EPL Investments 4-47

Table 5.1: Phasing of EPL Investments 5-51

Table 5.2 Key Financial Indicators 5-54

Table 8.1: Civil Works for Container Terminal 8-82

Table 8.2: Equipment Investment for Container Terminal 8-83

Table 8.3: Cash Flow of Container Terminal 8-86


vi

List of Figures

Figure 2.1: Present Port Layout 2-5

Figure 2.2: Demand-Supply Analysis South Indian Ports 2-9

Figure 2.3: Updated Land Use Plan 2-16

Figure 2.4: Rail connectivity to Ennore Port 2-17

Figure 2.5: Sketch of Hinterland Rail Routes 2-19

Figure 2.6: Existing and Proposed Access Roads 2-21

Figure 2.7: Road Network Within the Port Area and Vicinity 2-22

Figure 2.8: Recommended Organisation Structure of EPL 2-24

Figure 3.1: Projects under 7-Year Action Plan and Provision for Long Term Development 3-30

Figure 8.1: Estimated Capital Expenditure of Container Terminal 8-85

Figure 8.2: Sensitivity Analysis of Container Terminal 8-87

List of Annexures

Annexure 1: Commercial Terms of Concluded BOT Contracts 8-75

Annexure 2: Productivity Benchmarks 8-78

Annexure 3: Container Terminal Layout 8-79

Annexure 4: Financial Analysis of Container Terminal 8-80

Annexure 5: Year wise phasing of EPL Investments (Position as on 31.01.2007) 8-88

Annexure 6: Projected Profit and Loss Account 8-90

Annexure 7: Projected Balance Sheet 8-91

Annexure 8: Projected Flow of Funds 8-92

Annexure 9: Financial Model (Separate Attachment) 8-93

Annexure 10: Documents and References 8-93


vii

List of Abbreviations

ADB Asian Development Bank

B/H/T Bellary /Hospet/ Tumkur

BOT Build, Operate and Transfer

CB Carbon Black

CCTL Chennai Container Terminal Limited

CD Chart Datum

CEA Central Electricity Authority

CES Consulting Engineering Services (India) Private Limited

CFS Container Freight Station

CISF Central Industrial Security Force

CMD Chairman Cum Managing Director

CMDA Chennai Metropolitan Development Authority

CONCOR Container Corporation of India

CPCB Central Pollution Control Board

CPCL Chennai Petroleum Corporation Limited

CRZ Coastal Regulation Zone

DPW DP World, successor to Dubai Port International

ECP East Coast Ports

EIA Environmental Impact Assessment

EMC Environmental Management Cell

EMP Environmental Management Plan

EPL Ennore Port Limited

ESCO Ennore SEZ Company Limited

ETTPL Ennore Tank Terminals Private Limited

FRM Fertilizers and Raw Materials

GAAP Generally Accepted Accounting Principles


viii

GOI Government of India

GOTN Government of Tamil Nadu

GSPC Gujarat State Petroleum Corporation

HPC Hamburg Port Consulting GmbH

HSD High Speed Diesel

ICD Inland Container Depot

ICTT International Container Transhipment Terminal (Vallarpadam)

IMC Indian Molasses Co.

IOCL Indian Oil Corporation Limited

IPA Indian Ports Association

IPGL Indra Prastha Gas Limited

IRR Inner Ring Road, Internal Rate of Return

IS Indian Standards

ISPS International Shipping and Port Security

IT/ITES Information Technology/ Information Technology Enabled Services

IWT Inland Water Transport

JNPT Jawaharlal Nehru Port Trust

LNG Liquefied Natural Gas

LPG Liquefied Petroleum Gas

MEPZ Madras Export Promotion Zone

MLT Marine Liquid Terminal

MMTC Minerals and Metals Trading Corporation

MOE & F Ministry of Environment & Forests

MOSRTH Ministry of Shipping, Road Transport and Highways

MRTS Mass Rapid Transport System

MS Motor Sprit

MS Mild Steel


ix

MSPL Mineral Sales Private Limited

NCTPS North Chennai Thermal Power Station

NH National Highway

NHAI National Highways Authority of India

NMDP National Maritime Development Programme

NMPT New Mangalore Port Trust

NSDP Net State Domestic Product

PFSA Port Facility Security Assessment

POL Petroleum, Oil and Lubricants

PPPAC Public Private Partnership Appraisal Committee

PPP Public Private Partnership

RFP Request For Proposal

RFQ Request For Qualification

RGCT Rajiv Gandhi Container Terminal

ROW Right of Way

RPL Reliance Petroleum Limited

RSO Recognised Security Organisation

SEZ Special Economic Zone

SSG Ship Shore Container Gantry Crane

SGL Sesa Goa Limited

SICAL South India Corporation (Agencies) Limited

SICL South India Corporation Limited

SIP South Indian Ports

SIPCOT State Industries Promotion Corporation of Tamil Nadu

SISCOL Southern Iron & Steel Company Limited

SK Superior Kerosene

SPCB State Pollution Control Board


x

TAMP Tariff Authority for Major Ports

TIDCO Tamil Nadu Industrial Development Corporation

TLF Tank Lorry Filling

TNEB Tamil Nadu Electricity Board

TNRDC Tamil Nadu Road Development Corporation

TPP Thiruvottiyur Ponneri - Panchetti

VHF Very High Frequency

WCP West Coast Ports

Units:

Cum Cubic metre

Cfm Cubic feet per minute

DWT Dead Weight Tonnes

GRT Gross Registered Tonnes

ha Hectares

Hr Hour

KM Kilometre

KVA Kilo Volt Ampere

KW Kilo Watts

M Meter

MT Metric Tonne

MTEUPA Million TEU per Annum

MTPA Million Tonnes per Annum

MW Mega Watts

TEU Twenty-feet Equivalent Unit

TPD Tonnes per Day

TPH Tonnes per Hour


xi

USD United States Dollar


Executive Summary xii

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.

2. Major results and conclusions of inception and interim phases.

2.1 Port description

Ennore Port is an artificial deep-sea, harbour comprising of two rubble mound type breakwaters with concrete capping. The South breakwater of 1,070 m in length and North breakwater of 3080 m in length created a protected port basin of 220 ha in area. The approach to the port is through a channel of 3,775 m in length, dredged to


Executive Summary xiii

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).

2.2. Traffic forecast by commodity

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.

Summary of Traffic Forecast by Commodity

(Table 2.2) (million tonnes)

Commodity 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2016-17 2021-22 2026-27

Low Cargo Forecast

Coal TNEB* 9.0 9.0 9.0 11.5 16.5 16.5 16.5 16.5 19.0 19.0

Coal Non-TNEB 9.0 9.1 9.3 9.3 9.3 9.3 12.3 16.3

Iron Ore 2.00 2.0 6.30 7.50 7.90 8.00 8.50 9.25 10.57 12.00

Liquid Bulk 0.3 1.22 1.46 1.48 1.54 1.62 1.70 2.0 2.3 2.34

General Cargo - - - - - - - - - -

Total(million tonnes) 11.30 12.22 25.76 29.58 35.24 35.42 36.00 37.05 44.17 49.64

Container (mTEUpa) 0.39 0.45 0.50 0.63 1.66 3.64 7.23

High Cargo Forecast

Coal TNEB 9.6 9.6 9.6 12.1 17.1 17.1 17.1 17.1 19.6 19.6

Coal Non-TNEB 9.0 9.1 11.8 11.8 11.8 12.0 14.88 18.8

Iron Ore 2.00 2.00 9.30 10.50 10.90 11.00 11.50 12.25 13.57 15.00

Liquid Bulk 0.3 2.09 2.38 2.51 2.69 2.91 3.04 3.4 4.0 4.07

General Cargo - - - - - - - - - -

Total(million tonnes) 11.90 13.69 30.28 34.21 42.49 42.81 43.44 44.75 52.05 57.47

Container (mTEUpa) 0.45 0.54 0.60 0.76 2.17 5.22 11.17 * Excluding additional potential new requirements by TNEB addressed to EPL in March 2007 following completion of the report. (Empty squares indicate no cargo due to non-availability of facilities)

2.3 Competitive Position

With the infrastructure in position, the green field Ennore Port is in a good competitive position to develop deep-drafted dry-bulk, liquid-bulk and container


Executive Summary xiv

terminals through private sector participation and provide better facilities and services. Strengths of Ennore include superior physical facilities and space for expansion. Threats and weaknesses result mainly from hinterland connections that while being a part of the action plan included in this business plan require upgrading and expansion.

The principal competitors of Ennore Port are:

Chennai, Tuticorin, Cochin (Vallarpadam) and Vizhinjam for containers Chennai and Cuddalore (as and when developed) for coal (Non-TNEB users) Chennai and Krishnapatnam (as and when developed) for Iron ore.

On development and commissioning of Coal & Iron ore terminals at Ennore Port, the coal (Non-TNEB) and iron ore presently being handled at Chennai port are expected to shift to Ennore.

2.4 Capacity and bottleneck analysis

Ennore Port has a potential to become a world class port. As per the traffic projections in the Business Plan, Ennore Port should have sufficient land back up to support development and operations of port facilities to handle about 55 Million Tonnes of dry-bulk and liquid-bulk cargo and 3.5 million TEU of containers the second half of the next decade. The land presently available is not adequate to meet the long-term demand. EPL should acquire additional lands to remove this bottleneck so that the growth of Ennore Port in long term is not affected for want of back up lands.

2.5 Phased land use plan

Ennore Port presently owns 836 ha of land located inside and outside of the port boundary wall. EPL has a land use plan prepared in 2003 to guide the developments. The consultants have reviewed the land use plan with reference to the long-term demands vis--vis the land requirements. As per assessment made by the Consultants in the Business Plan, a minimum requirement of 1,050 ha of additional lands are required to provide space to accommodate future berths and the associated back up storage areas, road corridor, portside container yard, commercial corridor etc. The land use plan is updated incorporating the additional requirements. EPL should take action on priority to acquire additional lands in the vicinity before the land becomes scarce in this region. (Figure 2.3 shows the Updated Land Use Plan). The discussion of long term development possibilities reveals that even with the land additions mentioned above EPL will not have sufficient land to support the long term development. EPL must address this concern in conjunction with the recommended revision of the long term Master Plan.


Executive Summary xv

2.6 Hinterland connectivity

Rail connectivity is required for 100% inward movement of Iron ore, 65% out ward movement of non-TNEB coal and 25% of inwardoutward movement of containers. Road connectivity is required to move about 75% of container traffic and liquid cargo. After analysis of the connectivity needs for uninterrupted evacuation of cargo, the following recommendations have been made.

Construction of an independent railway siding to connect Attipattu / Attipattu Pudunagar railway stations to coal, iron ore and container stack yards. (Ref. Figure 2.4)

Construction of a new 88km chord line from Puttur to Attipattu with equity participation of EPL. (Ref. Figure 2.5)

Construction of the network of roads suggested inside and outside of the port boundary wall. (Ref. Figure 2.7)

Construction of a new Northern Port Access road to directly connect Ennore Port to TPP road and then to Thachur at NH-5. EPL to pursue action either to bring it under the port connectivity or participate through equity contribution.

2.7 Organisational issues

The management of Ennore Port incorporated under the companies Act, 1956 is provided through the Board of Directors. As a commercial oriented corporate, the management is following the land-lord concept. With the view to improve the planning capability within the management, a 3-layer organisational structure has been recommended (Senior Management, Middle Management and Junior management). EPL has already initiated action to recruit proper professionals and fill up the slots as per the recommended organisation structure (Ref. Figure 2.8) in stages commensurating with the workload.

3. Vision, Goals and Strategy

The Management vision for the next 20 years is that:

Develop as a mega port with world class facilities to become the Eastern gateway Port of India.

The goal for the next 7 years is:

To execute the following projects selected to meet the traffic demands and to provide the supporting infrastructure.

Projects

Marine Liquid Terminal Coal Terminal Iron Ore Terminal


Executive Summary xvi

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 ports attractiveness.

Strategy: Develop Cargo terminals through private sector participation. Undertake support infra-structure works through EPL financing. Acquire additional lands to support the long term developments. Co-ordinate with the concerned State and Central Government Departments

to improve connectivity. Maximise utilisation of the existing assets and increase revenue earnings. Obtain Government funds for capital dredging. Develop core manpower.

4. Over view of Investments

The private investment projects on development of cargo terminals proposed for implementation within the next 7 years are listed in Table 4.6.

Summary of Private investments

(Table 4.6)

Sl. No.

Project Investment Cost (Rs. in million)

Status Capacity

1. Marine Liquid Terminal 1,963* Contract awarded 3.0 MTPA 2. Coal Terminal 4,000* Contract awarded 8.0 MTPA 3. Iron Ore Terminal 4,800* Contract awarded 9.0 MTPA

(PhaseI) 15.0 MTPA (PhaseI+II)

4. Container Terminal (Phase 1)

13,000** Action initiated to select BOT operator

1.50 Million TEU PA

5. TNEB coal additional capacity 2,000** 4.0 MTPA Total 25,763

* Source DPR ** SourceEPL Estimates

The Public (EPL) Investment projects on core infrastructure to support the development and operations of the private investment projects within the next 7 years are listed in Table 4.8.


Executive Summary xvii

Summary of EPL investments

(Table 4.8)

Sl.No. Project Investment cost (Rs. in millions)

1. Capital Dredging (Phase 1) 900

2. Capital Dredging (Phase 2) 1,500

3. Capital Dredging (Phase 3) 1,700

4. Road Connectivity 1,800*

5. Rail connectivity to coal, iron ore, and container stackyards

630

6. Miscellaneous investments 450

Total 6,980 equivalent to Rs.698 crores

* 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

equivalent to Rs.50 crores

Gross Total of EPL Investment - Rs.748 Crores.

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.


Executive Summary xviii

Key Financial Indicators (Table 5.2)

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2016-17 2021-22 2026-27-

Total operational revenue 1,249 1,367 1,602 3,730 4,679 4,910 5,461 7,484 8,622 10,215

Total operating cost 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

(Rs. in Millions)

Note: The financial implications of the financing strategy discussed below are reflected in this table.

It should be noted that according to the most recent annual report, EPL has contingent liabilities of Rs. 2,143 million towards claims against the company not acknowledged as debt. According to applicable Indian GAAP, the contingent liability is not shown in the balance sheet or taken into consideration in the above table.

Financing Strategy

First Choice Seek Government grant of Rs.3,200 Millions during 2008-09 to cover Phase-2 and Phase-3 capital dredging and to tide over the critical cash flow position during that year. EPL will be able to meet other investments from internal resources.

Second Choice Increase in Equity Capital by up to Rs. 3,000 Millions. This would allow EPL to either fund investment from equity or back additional debt financing to fund investment and/or to meet contingent liabilities should EPL be required to do so.


Executive Summary xix

Third Choice Short or medium debt from banks or financial institutions to the extent of Rs.3,900 million. Additional debt financing may require pro-rata additional equity financing to ensure maintenance of prudent capital structure

Following discussions with EPL management, the third choice has been adopted in the financial analysis. It is thereby further expected that in case the arbitration procedure ends with an unfavourable result for EPL and EPL is required to honour the contingent liability, present shareholders will provide requisite support to EPL to maintain healthy balance sheet ratios.

6. Detailed Action Plan

Detailed Action Plan comprising of Activity schedules for implementation of each of the private and public sector projects have been prepared and provided. The mile- stone events and the action points of EPL to ensure timely completion/ commissioning of the private sector projects have been indicated in the Action Plan. A Master Control Bar Chart showing the relative start and completion of all projects has also been provided to facilitate monitoring and review.

7. Financial Model

The financial model is structured with input fields, calculation fields and output fields with instructions for annual review by EPL. In order to make the model more accessible to EPL, a distinction has been made by using different colours for input fields, calculation fields and output fields. A soft copy of the financial model has also been provided to facilitate annual updating.

The financial model is provided as a separate attachment (Annexure 9).


Section 1: Introduction 1-1

1. INTRODUCTION

To facilitate an efficient development of Indian ports, the Ministry of Shipping, Road Transport and Highways (MOSRTH), has mandated that each of the 12 major ports develop a Business Plan Study to spell out the long term goals for each major port and setting out how these goals are to be reached. The key elements of these Business Plan are

Goals to be achieved over the next seven years The strategy to be followed to achieve these goals An action plan to implement the strategy. The sources of funding to implement the action plan.

To ensure that the Business Plans prepared by all ports address all elements in the scope of work postulated by MOSRTH, Port of Rotterdam has been appointed as the Central Advisor (CA) by the Indian Ports Association (IPA) to oversee the preparation process.

HPC Hamburg Consulting GmbH together with Consulting Engineering Services (India) Private Limited have been awarded the contract to prepare the Business Plan for Ennore Port Limited (EPL). The contract was signed in July 2006. An Inception Report was submitted by 21st July and commented on by both EPL and IPA in August 2006. The Interim Report was submitted on 11th September 2006. Comments of EPL have been received following presentation of Report to EPL officers on 29th September 2006. The comments have been taken into account and the Interim Report was revised and submitted to EPL on 3rd November 2006. The Central Advisor has evaluated the Revised Interim Report and his comments have been received on 29th November 2006.The Revised Interim Report was presented to the Central Advisor on 09.12.2006 at New Delhi. The comments have been incorporated and the Interim Report (Final) submitted to EPL separately 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 Central Advisor were received in the first week of March 2007 and were discussed with both EPL and the Central Advisor on occasion of the presentation of the Draft Final Report. Responses of the Consultant to the comments of the CA and EPL are provided as a separate document.

The Final Report presented herewith is a continuation of:

the Inception Report providing all details of the existing port and its operations and


Section 1: Introduction 1-2

the Interim Report (Final) providing all details of planned developments at Ennore Port.

The Final Report contains a brief summary of the previous reports mentioned above. For any details the above reports refer, as does an Addendum to the Final Report for the container terminal. The Detailed Project Reports of the Coal Terminal and Iron Ore Terminal are since received from the BOT operators and the latest investment and rate analysis figures have been taken into account in the Final Report. The Final Report further summarises the business strategy of EPL, provides a detailed action plan to implement this strategy and a financial projection of EPL adopting the formats prescribed by the Central Advisor.

The Final Report takes the outcome of the discussions of the presentation of the Draft Final Report and the comments received thereon onto account. The objective of the Final Report is to provide a consistent, integrated and substantiated business plan.


Section 2: Major results of the Inception and Interim Phases 2-3

2. MAJOR RESULTS OF INCEPTION AND INTERIM PHASES

2.1 Port Description

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.

2.1.2 Existing Facilities

The existing marine facilities are as follows:

Breakwaters

South Breakwater 1,070m

North Breakwater 3,080m

Type of Breakwater

Rubble mound with concrete capping; North Breakwater has been armoured with Accropodes [Special type of concrete armour blocks].

Entrance Channel

Length 3,775m

Width 250m

Depth -16 m

Width at entrance 300m

Turning Basin

Diameter 600m

Depth -15.5m

Berths

No. of berths 2 [Dedicated berths to handle Thermal coal for TNEB]



Length 280m [each]

Depth [alongside] -15 m

Permissible draft 13.5m

Size of vessels handled 65,000 / 77,000 DWT

Equipment

(Installed and operated by TNEB)

Gantry type grab cranes 2 Nos. (Each 2,000 TPH capacity)

Shore Hopper (Big) 1 No. (to receive coal from self unloading vessel)

Shore Hopper (Small) 6 Nos. (to receive coal from handy max ground vessel)

Conveyors 2 streams (Each 4,000 TPH capacity)

Capacity 12 MTPA (Coal Berth No.1-- 8MTPA, Coal Berth No.2 -- 4MTPA

In coal berth No.2, geared coal vessels (vessels equipped with onboard grab cranes) discharge coal onto the shore mobile hoppers which feed to the conveyor system.

Marine Crafts [initially purchased, then sold and in-chartered]

Tugs 3 Nos. [40 T Bollard Pull]

Pilot Launches 2 Nos.

Mooring Launches 3 Nos.

Navigational Aids

Transit Light Towers 2 Nos.

Channel Buoys 6 Nos.

Fairway Buoy 1 No.

Signal station For communication and regulation of ship movements

Temporary facilities:

Mobile unloading arm installed by Reliance Petroleum Limited (RPL) at Coal Berth No.2 to handle High Speed Diesel (HSD), Motor Spirit (MS) and Superior Kerosene Oil (SKO). Capacity 0.50 MTPA.

Barge jetty and temporary conveyor system installed by Minerals &Metals Trading Corporation (MMTC) to export Iron Ore through barge system. Capacity 2.0 MTPA.

The present port layout is shown in Figure 2.1.



Figure 2.1: Present Port Layout



2.1.3 Composition and Trends in Cargo Traffic

The main cargoes presently being handled at Ennore Port are thermal coal, petroleum products (HSD & MS) and Iron ore.

Cargo throughput of Ennore Port is approximately 1.8 percent of all Indian ports traffic. Table 2.1 summarises the trends in Port Traffic.

Table 2.1: Past Traffic

Year All Ports Ennore Port (mill. Tons)

Mill. Tons Coal Iron Ore POL Total

2001-02 383 3.4 3.4

2002-03 419 8.4 8.4

2003-04 465 9.3 9.3

2004-05 522 8.9 0.5 0.1 9.5

2005-06 573 8.4 0.6 0.2 9.2

Source: IPA and EPL

There has been a rise in POL and Iron ore traffic. The fluctuation in coal traffic is due to the variation in actual consumption of coal by the Thermal Power Stations. Over the past three years Ennore Port has handled about 170 vessels per year.

2.2 Traffic Forecast by Commodity

Traffic forecast for Ennore port has been made for the period 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 Considerations and Major Assumptions

2.2.1.1 Coal

The projection of coal is on the following considerations.

Requirement of coal for TNEB (Thermal coal)

9.0 to 9.6 MTPA for the power stations of TNEB at North Chennai (630 MW), Ennore (450 MW) and Mettur (840 MW) depending on the calorific value of the coal and seasonal fluctuations.

5.0 MTPA for the proposed 2 x 500 MW capacity Joint Venture (NTPC-TNEB) power station at Vallur. The first unit is expected to commission by 2010-11 and the second unit by 2011-12.

2.5 MTPA for the proposed 500 MW unit at NCTPS expected to commission by 2010-11.

2.5 MTPA for further expansion of 500 MW unit at NCTPS expected to commission by 2016-17.

In March 2007, TNEB has addressed the requirement to handle an additional 5 MTPA of thermal coal for a new power station to EPL. This requirement was received after completion of the report and it was not possible to explicitly include the additional volumes in the forecast or the report.

Requirement of coal for Non-TNEB users

Shifting of 7.0 million tonnes of thermal coal (2.0 MTPA), coking coal (1.0 MTPA) and steam coal (4.0 MTPA) presently being handled at Chennai Port to Ennore.

1.3 MTPA of thermal coal for the additional 210 MW unit of Karnataka Power Corporation Limited (KPCL) Power Station at Raichur.

1.0 MTPA of metallurgical coal for the proposed Coke Owen Plant of Venkatesh Coke and Power Limited near Ennore Port.

2.2.1.2 Iron Ore

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.



Export volume available for export would be up to 38.5 million tonnes in short term and 52 million tonnes in the long term.

The Exportable surplus is likely to be shared by Ennore/Chennai Port and Krishnapatnam port (When developed) on the East coast and New Mangalore and Mormugao on the west coast.

Because of the gradient and connectivity problems prevailing at Mormugao and New Mangalore ports, it is unlikely that movement of Iron Ore from Bellary Hospet region to these ports will exceed 6.6 million tonnes and 9.3 million tonnes handled during 200506, when the demand from China is at peek.

Ennore port being nearer to China (lesser sea freight) would attract more volumes from Bellary-Hospet.

The Export potential through Ennore/Chennai Port would range from 9.8 million tonnes in 2006-07 to 16.5 million tonnes in 2013-14 going up to 20 million tonnes by 2024-25.

On commissioning of the new Iron Ore terminal at Ennore Port, the iron ore presently being handled at Chennai Port will shift to Ennore.

2.2.1.3 Liquid Bulk

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

The traffic forecast for containers is based on the following assumptions:

The container forecast is by adopting log linear regression model taking GDP as an independent variable.

The projection is based on the growth pattern of container traffic at Indian ports during the past 16 years (1990-91 to 2005-06).

GDP at 7% is considered for Low scenario and 8% for high scenario. An analysis of probable supply-demand developments was prepared to assess the likely Ennore Port market share. The analysis took regional developments, likely shifting of cargo and competing port facilities into account. Market shares for



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.

Figure 2.2: Demand-Supply Analysis South Indian Ports

Supply-Demand Balance Moderate Capacity Development

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

'000

TE

U

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

Ennore

Supply-Demand Balance Aggressive Capacity Development

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

'000

TE

U

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

Ennore

Figure 2.2 summarises the expected demand and supply developments for these two capacity scenarios. The analysis identifies a containerised cargo volume for Ennore Port to the order of magnitude of approximately 1.5 million TEU within a few years of commissioning of the new terminal, which will occur in the financial year 2010-11 at the earliest.

2.2.1.5 General Cargo

The market analysis leads to the conclusion that presently, there is an insufficient potential to develop a general cargo facility in competition to Chennai. For strategic reasons, it was recommended not to include a multipurpose terminal in the scope of the Business Plan. In the opinion of the consultants the following strategy will apply:

Chennai port would continue to handle break bulk general cargo where adequate facilities exist.

Export of cars is a prospective cargo for Ennore Port when Hyundai Motors Limited starts production from of its second plant in 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.

2.2.1.6 Summary of Cargo Traffic Forecast

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: Summary of Traffic Forecast by Commodity (million tonnes)

Commodity 2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

2016-17

2021-22

2026-27

Low Cargo Forecast Coal TNEB* 9.0 9.0 9.0 11.5 16.5 16.5 16.5 16.5 19.0 19.0 Coal Non-TNEB 9.0 9.1 9.3 9.3 9.3 9.3 12.3 16.3 Iron Ore 2.00 2.0 6.30 7.50 7.90 8.00 8.50 9.25 10.57 12.00 Liquid Bulk 0.3 1.22 1.46 1.48 1.54 1.62 1.70 2.0 2.3 2.34 General Cargo - - - - - - - - - - Total(million tonnes) 11.30 12.22 25.76 29.58 35.24 35.42 36.00 37.05 44.17 49.64 Container (mTEUpa) 0.39 0.45 0.50 0.63 1.66 3.64 7.23 High Cargo Forecast Coal TNEB 9.6 9.6 9.6 12.1 17.1 17.1 17.1 17.1 19.6 19.6 Coal Non-TNEB 9.0 9.1 11.8 11.8 11.8 12.0 14.88 18.8 Iron Ore 2.00 2.00 9.30 10.50 10.90 11.00 11.50 12.25 13.57 15.00 Liquid Bulk 0.3 2.09 2.38 2.51 2.69 2.91 3.04 3.4 4.0 4.07 General Cargo - - - - - - - - - - Total(million tonnes) 11.90 13.69 30.28 34.21 42.49 42.81 43.44 44.75 52.05 57.47 Container (mTEUpa) 0.45 0.54 0.60 0.76 2.17 5.22 11.17 * Excluding additional potential new requirements by TNEB addressed to EPL in March 2007 following completion of the report. (Empty squares indicate no cargo due to non-availability of facilities)

Table 2.2 projects container traffic for Ennore port on the basis of a detailed demand-supply analysis. The forecast includes likely shifts in cargo trade patterns and takes developments in competing ports into account.

2.2.1.7 Vessel Traffic Forecast

Considering the present and future vessel trend analysis, vessel traffic forecast has been made and the summary is shown in Table 2.3.



Table 2.3: Summary of Expected Vessel Calls by Type

(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)

2.3 Competitive Position

Ennore is a Greenfield major port situated at the vicinity of the well-developed Chennai city, yet away from the populated areas. The strength of Ennore port is the availability of protected waterfront of about 3,000m in length and back up lands of 836 ha for development of deep drafted cargo terminals benchmarking high productivity standards and quality parameters. It has the ability to connect to the national highways NH4, NH5 and NH45 without entering into the populated Chennai city area.

All in all Ennore port is in a good competitive position to develop bulk and container terminals and the weakness can be mitigated through better facilities and services.

The principal competitors of Ennore port are:

Chennai, Tuticorin, Cochin (Vallarpadam) and Vizhinjam for containers. Chennai and Cuddalore (as & when developed) in case of coal (for Non-

TNEB users).

Chennai & Krishnapatnam (as & when developed) for iron ore.



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.



2.4 Capacity and Bottleneck Analysis

With the existing infrastructure of two breakwaters and the protected port basin of 220ha water spread and 15.5m depth, Ennore Port has a capacity to become a mega port with world class facilities to handle dry bulk/ liquid bulk/container cargoes. It has a potential to handle cars, LNG, and crude when demands arise in courses of time. Ennore Port should have the land and waterfront resources to meet such demands and build up capacity in stages at least for the next 50 years.

The foreseeable major bottlenecks which have a bearing on port capacity are:

Shortage of backup lands. The present available lands of 836 ha with EPL may be able to accommodate the developments up to the capacity of 42 million tonnes per annum to handle dry bulk & liquid bulk cargoes (TNEB coal- 16 MTPA, Non-TNEB coal- 8 MTPA, Iron Ore 15 MTPA, Marine Liquids 3 MTPA) and 3.0 million TEUS of containers per annum. Even to handle this capacity, EPL requires additional lands for a westward extension of the coal stack yard, the land corridor for Northern Port Access Road including buffer yards, a portside container yard, port related commercial activities etc.

Need for a 8-lane Northern Port Access Road directly connecting Ennore Port with TPP road and then NH 5 for evacuation of containers, coal and other cargo items.

Need for a new chord line connecting Puttur and Attipattu to support Iron ore movement from Bellary Hospet mines to Ennore Port.

The above bottlenecks and the means to overcome them have been analysed in the subsequent paras 2.5 and 2.6.

2.5 Phased Land Use Plan

2.5.1 Land Availability

Ennore port presently owns 836 ha of land inside and outside the port boundary wall. The lands acquired from TNEB, TIDCO and some private landowners are located in Puzhudivakkam, Ennore and Kattupalli villages of Ponneri Taluk, Thiruvallur District. EPL has taken up with the Salt Department for transfer of 486 ha of Salt lands for port development and port related purposes. EPL has been following the land use plan prepared in 2003 for developmental and operational activities.



2.5.2 Requirements of Additional Lands

Commensurating with the award of BOT contracts for the development and operation of Marine liquid, Coal and Iron Ore terminals and the container terminal to follow, the lands have been allocated towards these developments. Even to meet these committed developments, additional land is required for the following purposes.

Westward expansion of the coal stack yard and to construct the new west spinal road for evacuation of coal.

Road corridor for the Northern Port Access Road with buffer yards to effectively serve the container terminal(s)

Portside container yard with CFS facilities for the rail-borne ICD containers. Ennore Port has the potential to become a world class port. Judging from the traffic forecast of the Business Plan, Ennore Port should have sufficient land back-up to support development of port facilities to handle about 55 million tonnes of Dry bulk/ Liquid bulk cargo and 3.5 million TEUS of containers (see also section 3.3 below). According to the traffic forecast, this may be sufficient until the second half of the next decade. Thereafter, additional facilities must be developed. The long term development is discussed in more detail in section 3.3 below. One option thereby mentioned the extension of dock basin as shown in Figure 2.3. In that case, the 400m width of dock basin proposed in the Master Plan needs for a review. Good amount of land is required on the northern side for the extension of the Dock basin to accommodate future berths and the backup storage yards. Land is also required to support port related activities and utilities.

2.5.3 Summary of Additional Land Requirement

1. Land to the extent of 1,500m x 1,400m (210ha) north of the northern Port boundary wall to accommodate the future northward extension of the Dock basin with ship manoeuvring area, storage of containers & liquid cargo, LNG regassification plant and other port related activities.

2. Strip of land to the extent of 2,000m x 250m (50ha) on the western side for expansion of coal stack yard and aligning the West Spinal Road. It is desirable that EPL may acquire the balance available lands also in this region to augment the railway operations in the holding yard.

3. 75 ha of land for locating the port side container yard adjoining the Attipattu/ Nandiampakkam R.S.

4. Strip of land to the extent of 200 m x 10 Km (200ha) for aligning the Northern Port Access Road (Road corridor) from Ennore Port Northern gate to TPP road (Phase-I) and about 20 ha. for siting the buffer yard for



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 Ports 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.

2.6 Hinterland Connectivity

2.6.1 Rail Connectivity

2.6.1.1 Local Area Connections

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.



Figure 2.3: Updated Land Use Plan



Figure 2.4: Rail connectivity to Ennore Port



2.6.1.2 Hinterland network

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.

2.6.1.3 Rail connectivity

Rail connectivity to establish un-interrupted evacuation of rail-borne cargo is vital for Ennore Port operations: Ennore Port and southern railway through various studies and interactions have identified the projects to be undertaken to remove the bottleneck.

Strengthening of the critical Avadi-Vysarpadi section on the Arakkonam-Chennai line. This can only be a short-term solution as far as iron ore is concerned.

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.

Construction of an independent siding to connect Attipattu /Attipattu Pudunagar to Coal, Iron Ore and Container Stackyards. (Estimate cost is Rs.63 crores) EPL has initiated action on this.

2.6.1.4 Strategy

Implementation of Puttur-Attipattu new chord line is vital for Ennore Port development and operations more specifically for Iron ore traffic. The interest of Ennore Port and Ennore Port users is a single line from Puttur-Attipattu with a fly over at Minjur and not in the Tiruvallur-Periapalayam link. Railways may be asked to segregate the costing accordingly. EPL should commit its willingness to support the construction financially through equity participation along with other beneficiaries. MOSRTH & EPL to take up with the Ministry of Railways to give highest priority for this construction.

EPL to initiate planning of a port side container yard at a strategical location by the side of Attipattu Minjur stretch of the Trunk railway line in interaction with CONCOR to attract ICD containers.



Figure 2.5: Sketch of Hinterland Rail Routes



2.6.2 Road Connectivity

2.6.2.1 Existing and Proposed Access Roads

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.

2.6.2.2 Proposed Network of Port roads

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) Roads outside 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

Persuade MOSRTH, GOI/NHAI to develop the Northern Port Access Road under their port connectivity plan. NHAI may develop this road under BOT route or forming a SPV with equity contributions from the beneficiaries like EPL, TIDCO (SEZ), CPCL, Container terminal operators etc.

Play an advocacy role to persuade NHAI, GOTN, CMDA and others to expedite the widening of TPP road, construction of Chennai Bye-pass roads and improvement of the network of other access roads.



Figure 2.6: Existing and Proposed Access Roads



Figure 2.7: Road Network Within the Port Area and Vicinity

2.7 Organisational Issues

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



government objectives and policies. As a commercial oriented corporate, the management is following the landlord concept. The Directors and Heads of Departments are responsible for the corporate planning keeping in view the strategy of the port company.

As the development of new projects is gaining momentum with the award of concessions for three terminals and the fourth one is on the pipeline EPL is taking action to strengthen the organisation. With a view to improve the planning capability within the organisation, a 3-layer organisational structure is recommended (Senior management, Middle management & Junior management). The recommended organisation structure in shown in Figure 2.8.

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.

The financial implication on account of the organisational improvements is Rs.6.0 crores / annum which is Rs.4.5 crores more than the present establishment cost.

(Contd..)



Figure 2.8: Recommended Organisation Structure of EPL


Section 3: Vision, Goals and Strategy 3-25

3. VISION, GOALS AND STRATEGY

3.1 Vision and Goals

3.1.1 Management Vision for the Next 20 Years

Develop as a mega port with World Class facilities to become the Eastern gateway Port of India.

3.1.2 Goals to be achieved in the Next 7 Years

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)

Iron Ore Terminal to facilitate export of iron ore by various users Container Terminal (Phase 1) to promote export/import of containers Organise installation of additional shore based unloaders in the existing coal

berths when required for TNEB / TNEB NTPC JV power plants. The plan at Figure 3.1 shows the location of the berths.

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

Dredge the berth area of container terminal to -15m in Phase III. Establish rail connectivity to the coal, iron ore and container stack yards. Establish road connectivity to the coal, marine liquid and container terminals



Develop other common infrastructure to improve ports attractiveness. This includes organising development of buffer yards and portside (rail) container yards.

Develop Green belt.

3.2 Strategy

The strategy has to address the following issues:

Development Strategy:

Develop cargo terminals through private sector participation. Undertake the required capital dredging and essential road and rail

connectivity works.

Acquire additional lands to support the long term development of port facilities. This refers to both the immediate requirements mentioned in section 2.5 as well as additional long term requirements discussed in section 3.3 below.

Develop core manpower to achieve an optimum and effective core strength. Outsource specialised expertise as and when required. Monitor and co-ordinate the activities among the BOT operators, EPL and

interfacing Departments/Agencies to maintain the time frame.

Continuous market studies and updates future development and operations. Commission feasibility study for construction of a multipurpose berth to

handle cars, granite blocks, project cargo and other clean unit loads.

Co-ordinate with State and Central Government Departments to improve access roads and rail connectivity.

Act as a business facilitator. Commercial Strategy:

Maximise utilisation and revenue earnings of the existing coal berths and temporary handling facilities for POL and iron ore.

Encourage temporary (improvised) cargo handling facilities ahead of regular terminals in line with market demand to be set up under private investments.

Expedite transfer of 486 ha (1,200 acres) of Salt Department Lands at Attipattu south block, as it is needed for port related commercial uses.

Review the land use plan and allot lands for port related purposes.



Introduce a cost centre system to ensure timely and accurate monitoring of forthcoming BOT agreements.

Review and fix the tariff for vessel related charges other than berth hire for the berths constructed by the BOT operators on commercial basis.

Draw up suitable tender conditions to avoid excessive market exploitation by BOT operators.

Form joint ventures with stakeholders to increase port throughput. Financial Strategy:

Mobilise private sector funding for developing cargo terminals. To the extent possible, obtain Government funds for basic infrastructure

investments like capital dredging.

Mobilise additional funds through equity or loan for funding common infrastructure works.

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.

3.3 Long Term Development

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.

b) Creation of one or more harbour basins in an east-west orientation. The first basin could be established north of the first container terminal.

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:

The present land available would suffice to add either: o A further container terminal with a maximum capacity of around 2

million TEU and perhaps 3 bulk berths. However, there would not be sufficient land for bulk storage yards; or

o One or two additional bulk berths including related storage yards. One additional bulk berth will most probably be thereby required to address additional needs for coal handling to the order of 5 MTPA that TNEB has addressed to EPL in March 2007. This may be located adjacent to the present TNEB power station in close proximity to the berth.

Furthermore, it is a present planning principle of EPL to clearly segregate dirty bulk cargo and clean cargo (hence the location of the coal and iron ore stack yards west of Ennore Creek). Therefore, additional land outside the present boundaries will be required to develop further bulk berths.

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.

The undeveloped nature of surrounding land is a substantial advantage for Ennore Port as there is still potential to create the reserves required to secure the long term development and it is necessary that EPL address this problem now with high priority mitigate any future possible constraints.



Figure 3.1: Projects under 7-Year Action Plan and Provision for Long Term Development


Section 4: Overview of Investments 4-31

4. OVERVIEW OF INVESTMENTS

4.1 Private Investment Projects

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 (Phase1) 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.

Financial viability has been established in two alternative ways:

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:

1. Improved domestic supply following major off-shore natural gas finds in Krishna Godavari basin.

2. Price structure favours domestic out put so that more national consumers would favour Krishna Godavari basin out-put than the relatively more expensive LNG imports.

3. Consumer prices for LNG are presently heavily subsidised and it may be expected that domestic sources will be preferred compared to foreign sources as same would impact government finances through a large subsidy burden in addition to the additional foreign exchange requirement.



4.1.1 Existing Coal Berths (TNEB Coal)

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.

4.1.2 Common-User Coal Terminal

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 configuration comprises of:

Berth of 325m in length (Alongside depth 15m) Two grab unloaders and conveyor belt to link the stack yard Stackers and reclaimers at the stackyard Railway yard lines and wagon loader



Comments on the configuration for consideration of EPL during DPR stage:

Capacity of 325m berth with the configuration of the equipment proposed by the BOT operator can go up to 8 MTPA with the vessel mix of Handymax and Panamax size vessels. There is a potential to increase the capacity to 16 MTPA by extending the berth length by another 200m to 525m (as of the adjoining iron ore berth) and installing additional two grab unloaders and installing the second conveyor. Correspondingly stackyard space would be required for westward extension.

The operator has proposed to develop a stackyard of 0.50 million tonnes capacity. With the projected throughput of 8 million tonnes by 2013-14 and 10 million tonnes by 2025-26 the stockyard capacity works out to 6.25% and 5% of the annual throughput. The projected traffic is in three different categories of thermal, coking and steam coal. Also a large number of importers/consignees are involved and segregated stacking plots will be required according to grades and consignees. Space will be lost in such segregated storing of cargo and so the proposal to have stock yards in blocks of 400 M x 40 M will not be practicable. Therefore only if a stackyard of capacity of 0.80 million tonnes is developed it will be possible to service the requirements of consignees in full. Such an increased capacity stackyard will also help in better servicing of the coal ships by avoiding congestion in the stackyard.

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

30 x 0.9 x 0.8 x 45 = 972 tonnes say 1,000 TPH.

0.9: density of coal 0.8: effective average capacity of grab 45: effective cycles per hour.



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:

Feasibility for increasing the capacity of the terminal by further 8 MTPA by linear extension of the coal berth by another 200m eastwards with space for installation of second conveyor and augmenting the capacity of the stackyard and the Railway system may be examined. The navigational aspects should also be considered.

Capacities of various system components should be matched for optimal utilisation.

Larger bunkers will increase reliability of wagon loading system. Capacity and productivity benchmarks are summarised in Annexure 2. Commercial/

BP Innore Port

Documents

port description

rail connectivity

final report fr

proposed network of

bpreportsfinal report

hinterland connectivity

road connectivity

summary of private investments