Essar Shipping to invest $1 billion in fleet expansion
Essar Shipping Ports and Logistics Ltd (ESPLL) is in the process of investing $1.1 billion to acquire 12 new vessels and two jack-up rigs in the next two years, despite projections of another year of choppy freight market in 2011-12.
“There will be over supply of ships next fiscal, which will dampen the freight market. But our medium to long term projections of the freight market are positive and we feel this is the right time to acquire assets,” Mr Rajiv Agarwal, Chief Executive Officer and Managing Director, told Business Line.
This fiscal, the company is acquiring two cape size vessels at a cost of $20 million each, one of which has already been received and the second expected to join Essar's fleet next month.
ESPLL is in the process of demerging its ports and shipping businesses into two separate entities. While the existing company will be renamed Essar Ports, the new entity, Essar Shipping, which will handle its shipping, oilfield services and logistics businesses, is expected to get listed a month after the demerger process is completed by February.
“We have on order six new mini-cape size vessels and six supramax dry bulk carriers, which will be delivered from next fiscal. The six supramax ships are already contracted on time charter at $19,000 a day to import coal for Essar Power and the six mini-cape sizes will be deployed to import iron ore for Essar Steel,” Mr Agarwal said.
The company, which operates a fleet of 26 vessels, including two tankers, with a total tonnage of 1.4 million DWT, is expecting revenues of about Rs 2,700 crore from its shipping business this fiscal, an increase of about 30 per cent from last fiscal. Its shipping business derives about 38 per cent of its revenues from Essar group companies and the remaining from third party charters. With the acquisitions, the share of revenue from group companies is expected to nudge up to 59 per cent next fiscal.
“We do not have exposure to the spot market, focussing entirely on long term charger to cushion our fleet from the cyclical movement of the freight market,” Mr Agarwal said.
Oilfield services
In the oilfield services division, the company owns a fleet of 13 drilling rigs, including one semi-submersible rig. Two jack-up rigs worth about $480 million are on order with ABG Shipyard, the country's largest private shipbuilding yard.
“There will be over supply of ships next fiscal, which will dampen the freight market. But our medium to long term projections of the freight market are positive and we feel this is the right time to acquire assets,” Mr Rajiv Agarwal, Chief Executive Officer and Managing Director, told Business Line.
This fiscal, the company is acquiring two cape size vessels at a cost of $20 million each, one of which has already been received and the second expected to join Essar's fleet next month.
ESPLL is in the process of demerging its ports and shipping businesses into two separate entities. While the existing company will be renamed Essar Ports, the new entity, Essar Shipping, which will handle its shipping, oilfield services and logistics businesses, is expected to get listed a month after the demerger process is completed by February.
“We have on order six new mini-cape size vessels and six supramax dry bulk carriers, which will be delivered from next fiscal. The six supramax ships are already contracted on time charter at $19,000 a day to import coal for Essar Power and the six mini-cape sizes will be deployed to import iron ore for Essar Steel,” Mr Agarwal said.
The company, which operates a fleet of 26 vessels, including two tankers, with a total tonnage of 1.4 million DWT, is expecting revenues of about Rs 2,700 crore from its shipping business this fiscal, an increase of about 30 per cent from last fiscal. Its shipping business derives about 38 per cent of its revenues from Essar group companies and the remaining from third party charters. With the acquisitions, the share of revenue from group companies is expected to nudge up to 59 per cent next fiscal.
“We do not have exposure to the spot market, focussing entirely on long term charger to cushion our fleet from the cyclical movement of the freight market,” Mr Agarwal said.
Oilfield services
In the oilfield services division, the company owns a fleet of 13 drilling rigs, including one semi-submersible rig. Two jack-up rigs worth about $480 million are on order with ABG Shipyard, the country's largest private shipbuilding yard.