essar projects india ltd Management discussions

ESSAR CONSTRUCTION (INDIA) LIMITED ANNUAL REPORT 2007-2008 MANAGEMENT DISCUSSION AND ANALYSIS ESSAR CONSTRUCTIONS: Building for tomorrow: Essar Constructions (India) Limited (ECIL) is a part of the Essar Group, a diversified business conglomerate with a balanced portfolio of assets straddling the manufacturing and services sectors: Steel, Energy, Power, Communication, Shipping Ports & Logistics, and Construction. The group, through its holding companies, employs 50,000 people worldwide. ECIL has a rich and varied experience in executing projects involving industrial plants, civil and irrigation projects, laying of pipelines (both offshore and onshore), marine construction and highways and expressways. From pipelines to ports, from industrial projects to intelligent buildings, and on to canals, townships, highways, bridges and breakwaters, ECIL has a rich and varied track record as a premier construction company. A global scale turnkey EPC company with skill sets encompassing construction, project management consultancy and procurement, ECIL has successfully executed many mega projects in different Industry verticals including Oil and Gas, Power, Iron and Steel, Marine and Offshore, Cross Country pipelines and Civil & Infrastructure on an EPC basis. What sets ECIL apart from the competition is not only our rich history but also the extensive in-house capability which includes heavy engineering facilities for fabricating critical equipment for steel, power and refinery projects and one of the largest banks of sophisticated construction equipment in India, with equipment ranging from 1000T cranes to offshore barges and to full pipe laying spreads. This ability to call on our own resources gives us a competitive edge and enables us to provide low cost, high quality and fast track execution of all of our projects. BUSINESS SEGMENTS: Industrial Plants: The Company has executed as an EPC Contractor some of the largest industrial projects in India in the highly challenging areas of Steel, Petrochemicals and the Power Sectors. As with every project that rolls out of EC(I)L, stringent quality controls norms are maintained and followed during design, engineering, procurement and construction as to enable trouble free and smooth operations. Power Plants: Indias first independent combined cycle power plant of 515 MW was constructed by the Company at Hazira followed by the LPG jetty, receiving and storage facilities. The Company has also constructed 350 MW Combined cycle power plant in Hazira, Gujarat, 120 MW Power Plant in Vadinar, Gujarat and 32 MW Power Plant at Visakhapatnam, Andhra Pradesh. In addition, EC(I)L has secured the following contracts for setting up mega power plants during the year. * Various contracts for setting up 1200 MW Thermal Power Project in Mahan, district Sidhi, Madhya Pradesh for Essar Power M.P. Limited. * Various contracts for setting up 1200 MW Thermal Power Project in Salaya, district Jamnagar, Gujarat for Essar Power Gujarat Limited. * Various contracts for setting up 220 MW Co-generation Power Plant in Vadinar, Gujarat for Vadinar Power Company Limited. Petrochemicals and Refinery Projects: The Company has recently commissioned the 10.5 million tonnes per annum refinery for Essar Oil Limited at Vadinar, Gujarat. The refinery processes various types of crude-sour, heavy etc. and produces fuels confirming to Euro IV, Euro V, CARB and Bharat III Standards. In addition to this, the Company also commissioned the 120 MW co-generation power plant and the entire port facilities including a jetty, single point mooring system, crude and product intermediate tankages and infrastructure for dispatch by rail, road and sea. Going by the experience, the Company has further been engaged by Essar Oil for its project for expansion of its crude oil refining capacity to 34 MTPA in Vadinar, Gujarat. Post its expansion to 34 MTPA, the refinery will run at a Nalson Complexity of 12.8. This means it will be able to refine all varieties of crude, producing Euro 5 grade fuels. It will also be among the largest single location refineries in the world thus leveraging on economies of scale. Simultaneously, the Company is also augumenting the Port & Terminal Expansion Facilities. In order to meet the requirement of upto 34 MTPA refining capacity for handling commensurate quantities of crude and products for Vadinar Oil Terminal Limited. Pipelines: Our Pipeline Division is a specialist in on-shore and off-shore and cross country pipelines. The Company has laid over 215 Kms of over two meter dia. mild steel water pipeline spread over various states. It has completed over 2000 KM of gas, product and other pipelines of various diameters. Pipelines - Onshore: The Company has created for itself a niche market in the pipeline business and is the only Company in India with rich and varied experience in cross country, onshore and offshore pipelines - from construction and commissioning. These pipelines transport oil, gas, water and iron ore slurry. The 267 km pipeline that carries iron ore slurry from Bailadilla to the pellet plant at Visakhapatnam is the second longest in the world and traverses through some of the most difficult terrain across three states in the country. Each application has to be customized and here is where the Company has a tremendous amount of diverse experience in different application and ground conditions. Transporting requires large diameter pipes and special techniques for and corrosion and pilfer-proof requirements. During the year, the main projects handled and successfully completed by the company included: * EPC Contracts awarded by Gujarat Water Resources Development Corporation Limited for providing and laying 2350 mm dia M. S. Pipe line from Narmada Main Canal Channel 218.10 (Adundra) to Sujlam Sufalam Spreading Canal including civil, mechanical, electrical and instrumentation of pumping station at Adundra. * EPC Contract awarded to the Consortium formed between JSC Stroytransgaz, Russia and the Company for Anand - Rajkot Section - B Pipeline Project i.e. from IPS-1 at Chuda to Rajkot, Gujarat (24 X100 KM approx.) including Morbi Spur line (18 X 68 KM approx.) awarded by Gujarat State Petronet Limited. * Sub-Contract Agreement with JSC Stroytransgaz, Russia for laying of Pipeline and Associated Facilities (Part I & Part II) for Mundra- Delhi Pipeline Project of Hindustan Petroleum Corporation Limited. * EPC Contract awarded to the Consortium formed between DQE International, Peoples Republic of China and the Company for laying of pipeline and associated facilities of Spread II between Jalalpur (SV7) to Bhoirpada (IP Station 3) covering distance of 147 KM and overall commissioning of the total pipeline system for Dehaj - Uran Pipeline Project of GAIL (India) Limited Pipelines - Offshore: The Company is one of the pioneers in laying offshore gas and oil pipelines and deep water pipelines, both of which require different technologies. These are laid using its own shallow water Barge Scanlay I. The Companys expertise in pipeline laying has been recognized by some of Indias leading companies like Indian Oil Corporation Limited, Gujarat State Petronet Limited, Hindustan Petroleum Corporation Limited, GAIL (India) Limited, GWSSB, Essar Oil Limited, GSDWICL etc. Looking ahead in pipelines: With the current base of successful projects that we have handled, it is but imperative that we have in hand some of the most challenging projects. These include: * Contract for Bharat Oman Refinery Limited lay a 504 KM crude oil line of 24 inch diameter from Vadinar, Gujarat to the Madhya Pradesh Border. This is the first major crude oil pipeline project that ECIL has bagged without a consortium partner. The total contract value of this prestigious project is Rs. 186 crores. With this project and the ISO 9001:2000 certification that Pipeline SBU of ECIL possess, ECIL is now qualified to bid for oil & gas pipeline projects of 1,000 km length and pipe diameter of 30 inches. * EPC (Engineering, Procurement and Construction) contract for laying a gas pipeline pipeline of 30 diameter and with the length of 110 km, inclusive of all terminals, stations, etc. from Bhadbhut to Jamnagar in Gujarat from Gujarat State Petronet Ltd. (GSPL) for a total contract value of Rs. 339 Crores. * Recently also on 21st April 2008, ECIL has been awarded a lumpsum Engineering, Procurement and Construction Contract for Bhadbhut - Jamnagar Pipeline Project (Package I) - Spread 2 - Gana to Hadala Section. The gross contract value for the entire scope of work as per the tender is approx Rs.221.28 Crores. In the last 3-4 years, apart from various water pipeline projects, ECIL has built 2,000 km of hydrocarbon pipelines. Currently, ECIL has 900 km of oil and gas pipeline orders In hand and under execution. Civil & Infrastructure Projects: ECIL undertakes complex high value and high technology civil projects and has already executed a wide range of projects covering construction of canals, bridges, townships, intelligent buildings, heavy concrete work amongst others. Currently, the Company is executing a Construction Contract for providing infrastructure facilities for setting up a Special Economic Zone being developed in Hazira by Essar SEZ Hazira Limited. Heavy Engineering Services: Heavy Engineering Services is a technology driven manufacturing Strategic Business Unit of the Company. Beginning with the manufacturing of equipments for Steel Plants, it rapidly took on manufacturing of refinery and heavy material handling equipments. It manufactures world class, custom made engineering equipment capable of meeting tight delivery schedules. The Heavy Engineering Services Division has modern facilities for manufacturing pressure vessels, reactors, vacuum vessels, cranes etc. This is strategically located on the waterfront at Hazira on the west coast of India. The complex has a covered fabrication shop, machining and assembly sections and an open fabrication yard. It is equipped with the latest machinery required for precision fabrication. Our Technology: The Company also provides complete, economical and timely procurement services through our procurement division and fast track quality construction with emphasis on safety and environment protection. For many technology suppliers like Midrex, SMS Demag, VAI etc., ECIL is the preferred contractor. With in-house skills of design, engineering, procurement and construction and commissioning, ECIL offers concept to commissioning services fora wide variety of Industries. Among its assets, ECIL has various state of the art construction machineries and equipments in order to cater to the growing construction needs. ECIL assets bases comprises of Terex Demag 500 MT Crawler Crane, MAIT HR 240/800 with Hammer, FUSHUN 80 MT Crawler Crane, Pipe layers 60/70 MT, Pipe layers 40 MT, CAT 320 Excavators, Diesel Welding Machine, Pipe Bending Machine, Auger Boring Machine, High Capacity Cranes, Piling Rigs, 100 Ton Liebherr Cranes, 350 Ton Maintowic Cranes, Tug Barger, CAT 572 R Pipe Layer, CAT 320 CL Hydraulic Excavators. The Company has invested substantially in IT to bring its system on a par with global counterparts. The Company is certified at ISO 27001 by RINA, Italy, which is considered a benchmark accreditation for information security. The Companys major operating centers in India are connected 24 X 7 to ensure speedy transmission of information and data. The Company uses the latest software for Electrical, Mechanical, Civil & Structural Design and Analysis (Auto CAD, StruCAD & STADD Pro for PVEIite), Vessels and Column Design, Heat Exchangers Design (HTRI), Electrical Design & Analysis and Pipe Stress Analysis. We also use the most modern Intergraph product suites for design and modeling. The Company is one of the first companies to use SAP for its Supplier Relationship Management (SRM). People - Our Strength: The company values its employees as its most valuable resource in the growth, prosperity and development of the organization. We are committed to creating a congenial and healthy working environment for our people to facilitate identification, development and utilization of their full potential. We have initiated various talent management initiatives to provide a platform for our employees which would enable growth and development. Various employee assistance programmes have been undertaken to promote a stress free environment to enable employees to enhance their efficiency and productivity. With a talent strength of more than 2800, it is but imperative that we nurture the vast talent with us to help us achieve milestones as we grow. Awards & Recognitions: In recognition of the various milestones which we have achieved as well as our impeccable quality systems, we have been on a regular basis getting accolades from various organizations. Some of our notable awards are as follows: * Primavera Excellence Award 2006 * ISO 9001:2000 Certifications * 3rd fastest growing construction company awarded by Construction World - NICMAR 2007.