1. Container Ports – Key Sector Trends Saurabh Suneja Tel: +91 11 42505163 (D), +91 11 26930117, +91 9910400494(M), +91 11 26842213 (fax) Email: ssuneja@crisil.com 21 st June 2010

2. 2. This presentation Trends: Indian ports, container traffic growth and drivers Capacity outlook: things are looking up Constraints: old; more pressing; and some emerging caution points

3. 3. Traffic Snapshot (2009-10) Port Traffic grew at 10% between 2004-05 and 2009-10 –Traffic at non-major ports grew at by ~7.9% for major ports ~ 14.2% –Commodities: dominant share of POL, followed by IO, containers and Coal –Growth in major and non-major port traffic since 2004-05 driven by Containers (@ 15.8%), PO –Traffic growth for major and non- major @ 13% between FY 09 and FY 10 Capacity utilization levels peaking for major ports: ~95% –Minor ports utilization at 68% Traffic growth POL Iron Ore

4. 4. Container traffic: Recent volatility, but strong growth fundamentals Recent volatility: Low / flat container traffic in 2009, Q1 2010 Growth fundamentals continue to remain robust –Growth in merchandise trade (WB expects merchandise exports to grow @ 20% and 17% for FY 11 & FY 12 respectively) –Growth in containerisation Quarter wise container traffic (MT)

5. 5. Container traffic: strong outlook Expected growth @ 11.2% CAGR to 195 MT by 2014-15 –Although growth not as high as in the past 5 years Commodity drivers: –Imports: capital goods (driven my infrastructure growth) –Exports: Textiles and food grains 11.2% Expected container traffic growth (MT)

6. 6. Recent developments – select projects 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 Jaigarh: Bulk (coal +), Gen, Container

7. 7. Huge capacities planned for non-major, major ports

8. 8. Select upcoming projects - large capacity expansions Paradip: Award of IO and coal terminals Large capacity expansions underway: projected addition ~ 700 MT (*as of July 09) –Expected both for major and minor ports –Key drivers: Container demand, coal imports for power gen –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: 4 th cont. term. Mundra: Coal; SPM Dahej: LNG jetty Ennore: Coal terminal Krishnapatnam: Phase 2 exp Dighi: Coal & cont. Chennai: 2 nd cont. terminal (PSA Sical) CONTAINERS BULK Dhamra: Coal +

9. 9. Select upcoming projects – PPPAC approval Paradip: Multipurpose to handle cargo & containers Container projects in major ports – recent PPPAC approval obtained JNPT: Standalone Cont. Handling New Mangalore: Container terminal Chennai: Mega Container Terminal Tuticorin: North cargo berth II

10. 10. 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 –Projects under process: JNPT 4 under bidding, Chennai mega container terminal, Tuticorin berth No. 8 –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

11. 11. Non-major ports: growth in share to continue Consistent growth in market share : Traffic share grew from around 27% in 2005-06 to ~ 32% for 2009-10; 11.5% share of non-major ports in container traffic Majority of recent capacities in non-major ports Rise in expected share beats past forecasts Expected share in Capacity at 36% as per 11 th Plan Major PortsNon-Major Ports Share in traffic expected to grow to 42.2% for 2013-14

12. 12. Capacity utilizations to ease Overall utilization levels would come down from the present ~85% to ~73% 2008-092013-14 (P) Major ports~95%~74% Non-Major ports ~68%~72% Current and expected capacity utilizations

13. 13. Minor ports to gain share in container traffic Container traffic at non-major ports projected to grow @ 27% against 10.5% at major ports Growth in traffic at non-major ports in line with available free capacity – container capacities coming up at the non-major ports of Pipavav, Hazira, and Dighi will drive higher growth / share Container traffic – expected growth (MT)

14. 14. Issues Container ports efficiency: Many old constraints remain –Issues related to mechanisation have been largely resolved in cases of large privately operated terminals –Congestion issues remain due to very high capacity utilisation (e.g. JNPT) –Lingering constraints of: Shallow draft at major ports, poor hinterland connectivity Delay in development of many announced projects –delays in environmental clearance, problems with financial closure 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

15. 15. Concerns / Caution points (Observations from recent projects) Concerns over traffic –Merchandise trade growth dependent on health of global economy – not out of the woods yet –Key concern for new projects, difficult financial closures for borderline projects 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 –Are recent bids too aggressive?

16. 16. Summary Traffic flow has started to look up after a brief depression –Growth fundamentals remain strong 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 Sector is poised for growth and investments –Healthy pipeline of under development, awarded, and approved projects –Many minor ports are sitting on potential for capacity ramp up and have robust development plans, major ports projects flow will go up –But hinterland connectivity constraints and some other issues will need to be managed

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