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We hosted senior management of Essar Ports at the J.P. Morgan India SMID
Corporate Access Day. Besides discussion on a broadly positive consensus view on
long term growth in the India Port sector, investor questions were focused on the two
operating assets- Hazira multipurpose cargo terminal and Vadinar Oil terminal. The
take or pay agreements with Essar Group companies, comparison of realizations and
competitiveness across ports, time-line on clearances for expansion plans, capex, cost
of funding and potential for 3rd part cargo featured in most discussions.
Key takeaways
Expansion projects delayed but management confident about new timelines.
Hazira Phase-II (20MMT) is awaiting environmental clearances; revised CoD
timeline is Mar-14 vs. Dec-12 at the beginning of the year. Similarly the 14MTPA
coal terminal at Paradip is grappling with delayed forest approval. According to
management dated land records of Paradip still list the major port land parcels at
Paradip as forest areas though there are none on the site. In Salaya, the timeline for
CoD is still Mar-2014 as earlier forest clearances are awaited.
Take-or-pay contracts: Management affirmed that the take-or-pay contracts
signed with Essar Steel and Essar Oil were long term (15 years and renewable on
mutual consent) and build in nominal escalation (~3%). These would not be
modified for existing facilities and expansion plans covered in the contracts.
Bid for Nargol Port in South Gujarat: Besides Essar Port, Sterlite-Vedanta,
Gammon India and a consortium of Israeli port companies, Cargo Motors remains
in the race. The initial estimate investment in the port as per Economic Times is
Rs7.5B. According to management, Nargol Port is highly scalable (up to
100MTPA) and the development could take capex up to US$1.5B.
Valuations, price target and key risks: We remain OW with Mar-12 SOP based
PT of Rs135. We value individual ports using DCF over the concession period
with WACC ranging from 11.5%-13.00%. Key risks include dilution of T/P terms,
slow scale up of Essar traffic, delay of under construction projects.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We hosted senior management of Essar Ports at the J.P. Morgan India SMID
Corporate Access Day. Besides discussion on a broadly positive consensus view on
long term growth in the India Port sector, investor questions were focused on the two
operating assets- Hazira multipurpose cargo terminal and Vadinar Oil terminal. The
take or pay agreements with Essar Group companies, comparison of realizations and
competitiveness across ports, time-line on clearances for expansion plans, capex, cost
of funding and potential for 3rd part cargo featured in most discussions.
Key takeaways
Expansion projects delayed but management confident about new timelines.
Hazira Phase-II (20MMT) is awaiting environmental clearances; revised CoD
timeline is Mar-14 vs. Dec-12 at the beginning of the year. Similarly the 14MTPA
coal terminal at Paradip is grappling with delayed forest approval. According to
management dated land records of Paradip still list the major port land parcels at
Paradip as forest areas though there are none on the site. In Salaya, the timeline for
CoD is still Mar-2014 as earlier forest clearances are awaited.
Take-or-pay contracts: Management affirmed that the take-or-pay contracts
signed with Essar Steel and Essar Oil were long term (15 years and renewable on
mutual consent) and build in nominal escalation (~3%). These would not be
modified for existing facilities and expansion plans covered in the contracts.
Bid for Nargol Port in South Gujarat: Besides Essar Port, Sterlite-Vedanta,
Gammon India and a consortium of Israeli port companies, Cargo Motors remains
in the race. The initial estimate investment in the port as per Economic Times is
Rs7.5B. According to management, Nargol Port is highly scalable (up to
100MTPA) and the development could take capex up to US$1.5B.
Valuations, price target and key risks: We remain OW with Mar-12 SOP based
PT of Rs135. We value individual ports using DCF over the concession period
with WACC ranging from 11.5%-13.00%. Key risks include dilution of T/P terms,
slow scale up of Essar traffic, delay of under construction projects.
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