Hyderabad Aug. 6 Essar Shipping Ports and Logistics Ltd (ESPLL), part of the diversified Essar Group, has achieved financial closure for the purchase of four of the proposed six supra-max dry bulk carriers at a cost of $218 million.

This is part of its $630-million capital expenditure programme in the shipping business.

The six ships, each of 54,000 DWT, are being built at India’s largest
private shipyard, ABG Shipyard, and are expected to join Essar’s fleet
of 25 ships between 2009 and 2011. Its current order book consists of
12 new building orders, which will take its combined capacity from the
current 1.40 million DWT to 2.36 million DWT by 2011.

“The six ships are being funded through a debt of $153 million and
equity of $ 65 million. Large European shipping banks participated in
the lending. Despite the downturn, we are pretty comfortable raising
debt through banks and equity through internal accruals,” Mr V. Ashok,
ESPLL’s Director, told Business Line.

The company is in the process of purchasing another six mini cape dry
bulk carriers at a cost of $ 412 million. The ships, which will be
built at STX Shipyard, will be funded through a debt of $288 million.

“We expect to achieve financial closure for purchasing these ships on or before June 2010,” Mr Ashok said.

ESPLL’s total committed capital expenditure programme involves an
investment of $1.6 billion, which includes setting up a 30 million
tonne all-weather deep draft port at Hazira and an integrated terminal
facility at Salaya for handling coal and pet coke used in power plants.

The company, which owns a fleet of 13 onshore rigs and one
semi-submersible rig, also plans to increase its fleet to 16 rigs by
2011, including two jack-up rigs being built at ABG Shipyard at a cost
of $457 million.

On the current freight market trends, Mr Ashok said: “The dry bulk
markets have revived from their lows. However, the outlook continues to
be volatile over the next one to two years. The market will remain
tight with supplies of new buildings impacting freight rates. On the
wet side, we are witnessing some pressure on the freight rates and the
same is likely to continue.

“There has been a lesser impact on revenues of our sea transportation
business due to drop in freight rates, as our assets are backed by
long-term Contract of Affreightment (COA),” he added.

In the last quarter, the cargo handled by the logistics division of
ESPLL was 5.63 million tonnes, with the division recently commencing
its new business initiative in project cargo handling and
transportation. The company clocked a net profit of Rs 6 crore in the
first quarter of the current fiscal, compared with a loss of Rs 73
crore in the corresponding quarter of the last fiscal.

Its oilfields division contributed significant to its earnings, with net revenue standing at Rs 145 crore.

Source: The Hindu Business Line

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