Indian Ports – Key Sector Trends 21 st January 2010.

Indian Ports – Key Sector Trends21st January 2010

2.

This presentation

• Trends: major and minor ports, commodities driving

growth, view on capacities

• Outlook: things are looking up

• Constraints: old; more pressing; and some emerging

caution points

3.

Traffic Snapshot (2008-09)

383463

530

136

171

231

0

100

200

300

400

500

600

700

800

2004-05 2006-07 2008-09

Traffic at Major Ports Traffic at Minor Ports

• Port Traffic grew at 10% between

2004-05 and 2008-09

– Traffic at minor ports grew at

~14.2%, ~8.5% for major ports

– Commodities: dominant share of POL,

followed by IO, containers and Coal

– Growth in Major port traffic since

2004-05 driven by Containers (CAGR

14.6%), POL (CAGR 8.6%)

• Traffic growth for Major ports for

Apr-Dec 09 vs. Apr-Dec 08: 5.4%

• Capacity utilization levels peaking

for major ports: ~95%

– Minor ports utilization at 68%

Traffic growth

Composition for 2008-09

POLOthers

Cont.

Coal Iron Ore

4.

Recent developments – select projects

Dhamra: IO & Coal, 2009

Gangavaram: Coal +, 2008

Krishnapatnam: Coal, IO, 2008

Karaikal: Coal +, 2008

Select recent projects

and expected

dominant

commodities

• Recent capacities added to minor ports

•Dominated by bulk capacities on the east

coast

5.

Select upcoming projects

Paradip: Award of IO and coal terminals

• Large capacity expansions underway: projected addition ~ 700 MT– Expected both for major and minor ports (18 and 20 planned projects resp.)

– Key drivers: Coal imports for power gen, container demand

– LNG capacities expected in western ports on the back of improved gas grid

• Confidence wrt. projects coming up

– Projects at major ports are at advanced stages of development

– Many minor ports projects at existing ports and capable developers

Valarpadam: Cont. - dev. by DP World

M’goa: Coal & IO

Mum: Offshore cont. (Gammon +)JNPT: 4th cont. term.

Mundra: Coal; SPM

Dahej: LNG jetty

Ennore: Coal terminal

Krishnapatnam: Phase 2 expDighi: Coal & cont.

Chennai: 2nd cont. terminal (PSA Sical)

CONTAINERSBULK

6.

Outlook: Project flow expected to look up

• Investments have been already happening on minor ports

– Strong minor ports capacities in Gujarat; AP and Orissa are catching up

• Projects flow for major ports has been subdued for various

administrative reasons

– Delay in finalization of new MCA

– Time taken for clearing tariffs for new projects as per 2008 TAMP guidelines

• But projects flow is looking up

– Recent awards at Paradip, JNPT 4 under bidding

– The PPPAC approved 8 projects during Oct 08 – Nov 09 with expected

project costs of INR ~ 11 thousand crores

– 4 projects for INR 4,179 crores under consideration

7.

Outlook: Ports to continue to witness strong growth

• From 2008-09 to 2013-14 CRISIL expects traffic to grow at CAGR of 8.9%

to 1167 million tonnes

– Major ports expected to grow at CAGR of 4.9% while minor ports at 16.3%

– Traffic growth likely to be driven by coal (CAGR:14%), followed by containers

Current and expected commodity shares

8.

Minor ports: growth in share to continue

• Consistent growth in market share: Traffic share grew from around

25% in 2005-06 to ~ 31% for 2008-09

• Majority of recent capacities in minor ports

• Rise in expected share beats past forecasts

64%

36%

Expected share in Capacity at 36% as per 11th Plan

0

200

400

600

800

1000

1200

2008-09 2013-14Major Ports Minor Ports

Share in traffic expected to grow to 42.2% for 2013-14

9.

Capacity utilizations to ease

• Overall utilization levels would come down from the present

~85% to ~73%

2008-09 2013-14 (P)

Major ports ~95% ~74%

Minor ports ~68% ~72%

Current and expected capacity utilizations

10.

Issues

• Many old constraints remain

– Draft constraints at major ports, below par efficiency levels, poor hinterland

connectivity, delays in environmental clearance

• Bringing bankable projects to market still the biggest hurdle

– Reliance on private investment for capacity ports dev. is huge: ~USD 14 Bn

– Poor project preparation, unattractive packaging lead to delays at

procurement and post award stages

– Some minor port projects have highlighted systematic gaps in site selection:

environmental issues, unfavorable soil conditions etc.

– Administrative, policy change issues

11.

Concerns / Caution points (Observations from recent projects)

• Qualification criteria for bidding in major ports favoring a few large

players

– Selection of only top 5 technical bids may lead to adequately qualified firms

being out of competition - same firms being selected for different projects

– Large intl. players that bring qualification points are not necessarily investors

– The top 5 selection criteria has been done away with for the roads sector

• Differential royalty structure in minor ports adversely impacts the

economics of new port developments

– Operational ports already have a first mover advantage

– May delay investments / reduce competitive position of newer developments

• Fast paced reform of domestic coal mining may multiply the coal

production in India

– Thermal coal is the backbone of investment thesis for bulk ports

– Domestic coal may simply replace the imported coal for power generation

12.

Summary

• Traffic flow has started to look up after a brief depression

– Growth will be lead by coal and containers

• Trends from traffic and capacity addition expectations

– Trend towards minor ports gaining market share will continue

– Capacity utilisations shall ease, balance in favour of minor ports

– Investments and traffic flows for the eastern cost to be driven by bulk

(esp. coal); mixed for western coast

• Sector is poised for growth and investments

– Many minor ports are sitting on potential for capacity ramp up and have

robust development plans, major ports projects flow will go up

– Hinterland connectivity constraints and other issues however will need

to be managed

13.

CRISIL Risk and Infrastructure Solutions Limited

A Subsidiary of CRISIL Limited, a Standard & Poor’s company

www.crisil.com

14.

Opportunities exist for Brownfield expansions at Major Ports and Greenfield Minor Port Ventures

• The 11th Five year plan aims to more than double the existing port capacity to 1575

MTPA

• Major Opportunities exist in

– BOT expansions at Major Ports (ROCE in the range of 14%-16%)

JNPT-IV Container Terminal

– High Degree of Certainty on Port Traffic: serves industrial western region and landlocked North India

– Presence of entire logistics chain

Ennore & Chennai Container Terminals

– Shall play a leading role in Intra-Asia trade

– Ennore preferable to Chennai as Chennai has land constraints and may face congestion issues

Tuticorin Container Terminal

– Shall serve the Central Tamilnadu Industrial Cluster

– Presently facing some tariff fixation issues

– Greenfield Private Service Ports (ROCE in the range of 14%-20%)

A large number of Concessions have been awarded on East as well as West Coast

However, locational studies would yield 3-4 strategically located ports, alternatively secondary

acquisitions can be looked at.

– ICDs/ CFS

Relatively smaller investment and serve as a traffic aggregator for owned ports

• The 11th Five year plan aims to more than double the existing port capacity to 1575

MTPA

• Major Opportunities exist in

– BOT expansions at Major Ports (ROCE in the range of 14%-16%)

JNPT-IV Container Terminal

– High Degree of Certainty on Port Traffic: serves industrial western region and landlocked North India

– Presence of entire logistics chain

Ennore & Chennai Container Terminals

– Shall play a leading role in Intra-Asia trade

– Ennore preferable to Chennai as Chennai has land constraints and may face congestion issues

Tuticorin Container Terminal

– Shall serve the Central Tamilnadu Industrial Cluster

– Presently facing some tariff fixation issues

– Greenfield Private Service Ports (ROCE in the range of 14%-20%)

A large number of Concessions have been awarded on East as well as West Coast

However, locational studies would yield 3-4 strategically located ports, alternatively secondary

acquisitions can be looked at.

– ICDs/ CFS

Relatively smaller investment and serve as a traffic aggregator for owned ports

15.

Short term GDP forecasts looking up

3

3.5

4

4.5

5

5.5

6

6.5

7

7.5

Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09

CRISIL IMF ADB

16.

PPPAC - Proposals Granted Approval

1 Construction of Deep draught iron ore berth on BOT basis by Paradip Port Trust

Port (Department of Shipping)

Orissa 591.35 Proposal approved on 23.10.2008

-127.34

2 Construction of Deep draught coal berth on BOT basis by Paradip Port Trust


Orissa 497.01 Proposal approved on 23.10.2008

-103.15

3 Development of Eighth Berth as Container Terminal on Build Operate & Transfer (BOT) basis at Tuticorin Port


Tamil Nadu 312.23 Proposal approved on 13.01.2009

-67.23

4 Construction of Container Terminal at Ennore Port in Tamil Nadu on BOT basis


Tamil Nadu 1407 Proposal approved on 13.01.2009

-302.97

5 Development of a Coal Terminal at Port of Mormugao, Goa on Design, Build, Finance, Operate and Transfer (DBFOT) Basis


Goa 334 Proposal approved on 13.01.2009.

-71.92

Sub-Total

3683.25 3141.59

-793.12

S. Name of the project Sector State Project cost Remarks

No. (Sponsoring Authority)

in Rs. Crore

(in US$, Million*)

1 Development of Standalone container handling facility with a quay length of 300m towards North at Jahawar Lal Nehru Port Trust

Ports (Ministry of Shipping)

Maharashtra 600.08 Proposal approved on 11.11.2009

-129.22

2 Mechanism of Coal Handling facilities and upgradation of General Cargo Berth at Outer Harbour of Visakhapatnam Port to cater 200,000 DWT vessels on DBFOT basis


Andhra Pradesh

438.36 Proposal approved on 11.11.2009

-94.39

3 Development of Fourth Container Terminal at Jawahar Lal Nehru Port Trust


Maharashtra 6700 Proposal approved on 11.11.2009

-1,442.72

Sub-Total

7738.44

-1,666.33

17.

PPPAC - Proposals Under Consideration

S. Name of the project

Sector State Project cost

No. (Sponsoring Authority)

in Rs. Crore

1 Development of Container Terminal at New Mangalore Port on BOT basis


Karnataka 275.82

2 Development of Multipurpose Berth to handle clean cargo including containers on BOT basis at Paradip Port


Orissa 445.51

3 Development of North Cargo Berth II for handling bulk cargo at Tuticorin Port on DBFOT basis


Tamil Nadu 332.16

4 Development of Mega Container at Chennai Port


Tamil Nadu 3125

Sub-Total 4178.49

18.

Distribution of traffic – Major Ports

Source: CRISIL Research

Indian Ports – Key Sector Trends 21 st January 2010.

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