Essar Seeks to Develop Port in Mozambique

Essar Ports Ltd, a unit of the $20 billion (̀̀̀̀̀̀̀̀98,400 crore) Essar Group, is seeking to develop a port in Mozambique as the conduit for the exports of iron ore from an affiliate’s mining assets in Zimbabwe.

“Mozambique is a mineral rich country. We are working towards signing a concession agreement for building a port in that country,” said Rajiv Agarwal, chief executive officer and managing director of Essar Ports. He did not disclose details of the investment that would go into the port.

Essar Africa Holdings Ltd (EAHL) signed an agreement with the Zimbabwe government in August 2011 to buy the steel and mining assets of the state-owned Zimbabwe Iron and Steel Co. and also invest $750 million in the project.

The company’s plans to enter Mozambique make commercial sense considering the investments made by Essar Group in Africa and potential investments by other groups in the continent for sourcing iron ore, said a senior analyst with a domestic brokerage that tracks Essar Ports.

At present, 98% of Essar Ports’ revenue comes from Essar Group companies. The company plans to scale up its third party business as well.

“They have assured business from parent companies. New challenges will come up when it opens up more to third-party business,” added the analyst who did not want to be identified.

“By fiscal 2015, 25% of our estimated revenues will be coming from third party business,” Agarwal said.

An August report by international brokerage J.P. Morgan India Pvt. Ltd said the promise by group companies to take or pay—Essar Ports is paid by group companies even if they don’t use its facilities—had worked well for Essar Ports.

Essar Ports has two operational ports at Hazira and Vadinar in Gujarat with a combined capacity of 88 metric tonnes per annum (mtpa). The company plans to expand capacity to 158 mtpa over the next few years and is in the process of building five more ports: an iron ore berth at Paradip in Orissa (16 million tonnes per annum, or mtpa capacity); a dry bulk terminal at Salaya in Gujarat (20 mtpa); a general cargo terminal at Hazira in Gujarat (20 mtpa); a coal terminal at Paradip (14 mtpa); and a liquid storage terminal at Vadinar in Gujarat.

“We have also bid for developing Gujarat Maritime Board’s (GMB) proposed green field port off Nargol village in South Gujarat. The outlook for port sector is good. The economic slowdown is a temporary phenomenon for India,” Agarwal said.

Essar Ports was created by separating the ports business from the erstwhile publicly traded Essar Shipping Ports and Logistics Ltd in May. The demerger also led to the formation of Essar Shipping Ltd.

Essar Ports was subsequently listed on the Bombay Stock Exchange, becoming the third port company to go public after Mundra Port and Special Economic Zone Ltd and Gujarat Pipavav Port Ltd.

The company declared its results for the quarter ended 30 September on Wednesday, posting a net profit of ̀̀̀̀̀̀̀̀40.84 crore, up from the ̀̀̀̀̀̀̀̀5.30 crore profit of the erstwhile Essar Shipping Ports and Logistics in (in the port segment) in the year-ago period. It reported revenue of ̀̀̀̀̀̀̀̀279.14 crore against ̀̀̀̀̀̀̀̀178.96 crore in the comparable quarter last year.

Shares of Essar Ports rose 1.8% to close at ̀̀̀̀̀̀̀̀56.5 each on Wednesday on the Bombay Stock Exchange, on a day when the benchmark index, Sensex, gained 2.01% to close at 17085.34 points. The results were announced during market hours.

(PortNews)