hms group annual results 2010
TRANSCRIPT
HMS Group FY2010 IFRS Results
April 2011
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Speakers 169.196.203
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Financial and Operational highlights Revenue, 2009 vs 2010 (mln RUB)
Artem Molchanov
Managing Director & CEO
2
Kirill Molchanov
First Deputy General Director & CFO
Alexander Rybin
Head of Capital markets and IR
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The information contained herein has been prepared using information available to HMS Group (“HMS”
or “Group” or “Company”) at the time of preparation of the presentation. External or other factors may
have impacted on the business of HMS Group and the content of this presentation, since its preparation.
In addition all relevant information about HMS Group may not be included in this presentation. No
representation or warranty, expressed or implied, is made as to the accuracy, completeness or reliability
of the information.
Any forward looking information herein has been prepared on the basis of a number of assumptions
which may prove to be incorrect. Forward looking statements, by the nature, involve risk and uncertainty
and HMS Group cautions that actual results may differ materially from those expressed or implied in such
statements. Reference should be made to the most recent Annual Report for a description of the major
risk factors. This presentation should not be relied upon as a recommendation or forecast by HMS
Group, which does not undertake an obligation to release any revision to these statements.
This presentation does not constitute or form part of any advertisement of securities, any offer or
invitation to sell or issue or any solicitation of any offer to purchase or subscribe for, any shares in HMS
Group, nor shall it or any part of it nor the fact of its presentation or distribution form the basis of, or be
relied on in connection with, any contract or investment decision.
3
Disclaimer
Agenda 169.196.203
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HMS At-a-glance 5
HMS Group highlights for the FY 2010 6
Outstanding performance for the FY 2010 7
EBITDA development 8
Revenue and EBITDA contribution by segments 9
Key contracts and backlog 10
Cost of sales optimization 11
CAPEX & working capital 12
Debt & liquidity position 13
1Q update & IR calendar 14
IR contacts 15
Appendix I 16
Appendix II: Calculations 39
Who we are Key investment highlights
Attractive industry fundamentals: impressive end-
markets mix prospects
The leading provider of flow control solutions in Russia
and the CIS
Advanced R&D capabilities: basis for high margin &
sustainable performance and growth
Diversified and well-established customer base
Operational and product quality excellence
History of resilient financial growth and strong backlog
Strong management team: company founders and top
professionals
The leading Russian pump and pump-based integrated
solutions provider
Our core markets: oil and gas, nuclear and thermal power
and water sectors in Russia and the CIS
Produce high capacity pump systems up to 12 Mvt
Blue-chip customer base includes Rosneft, Transneft,
Rosatom, etc and more than 4,000 other clients
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Source: Frost & Sulliv an report 2009, Company data
Industrial pumps
Revenue RUB 10,712 mln
EBITDA adj. RUB 2.367 mln
Modular equipment
Revenue RUB 5,805 mln
EBITDA adj. RUB 599 mln
EPC
Revenue RUB 6,135 mln
EBITDA adj. RUB 550 mln
The leading Russian high capacity pump and pump-based integrated solutions
provider
HMS At-a-glance
5
Revenue RUB 23,070 mln EBITDA adj. RUB 3,519 mln
New photo
Pump station of Baltic pipeline system, Transneft Oilf ield Pump Station 2, Vankor oilf ield, Rosneft Oil Pump Station “Tayezhnaya”, Transneft
HMS Group Highlights for the FY 2010 169.196.203
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Revenue, 2009 vs 2010 (mln RUB)
Business Highlights: Growth through innovations
6
Completed large-scale projects, including the delivery of “superblock” modular equipment to Rosneft for the
1st stage of the development of Vankor oil field and full-cycle project for construction of water-lifting pump
station for the Republic of Turkmenistan
Engaged in number of new significant contracts during 2010, including the delivery of integrated pump-based
systems for 14 pumping stations of East Siberia-Pacific Ocean trunk pipelines and projects for development
and design of new oilfields and pipelines
Acquired a 51% stake in Giprotyumenneftegaz (GTNG) for a total cash consideration of RUB 2,467 mln
Designed new types of pumping equipment for trunk pipelines, nuclear plants, power plants and water works
Enjoyed robust backlog increase reflecting overall market growth
Operations’ efficiency focus through introduction of IT systems and quality management system
Note: Management of the Group assesses the performance of operating segments based on a measure of adjusted EBITDA, which is derived from the consolidated financial statements prepared in accordance with IFRS.
For this purpose, EBITDA is defined as operating profit/loss adjusted for other income/expenses, depreciation and amortisation, provision for obsolete inventory, provision for impairment of accounts receivable, unused
vacation allowance, excess of fair value of net assets acquired over the cost of acquisition. This measurement basis excludes the effects on non-recurring expenditure from the operating segments, such as restructuring costs, legal expenses and goodwill impairments, when the impairment is a result of an isolated, non-recurring event.
Key financial figures change yoy 2010 RUB mln 2009 RUB mln
Revenue 56% 23,070 14,772
EBITDA adj. 86% 3,519 1,890
EBIT 133% 3,027 1,298
Profit for the year 2,156% 1,581 70
Net debt -6% 4,297 4,573
EBITDA adj. margin 246 bps 15.3% 12.8%
ROCE 1,825 bps 36.2% 18.0%
1,298
3,027
2009 2010
18.0%
36.2%
2009 2010
14,772 23,070
1,8903,519
12.8% 15.3%
2009 2010
Revenue, RUB mln EBITDA adj., RUB mln
EBITDA adj. margin
Outstanding Performance for the FY 2010 169.196.203
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Financial and Operational highlights Revenue, 2009 vs 2010 (mln RUB)
+56%
+1,825 bps +133%
Source: Company data Source: Company data
Source: Company data
Total revenue up 56% yoy to RUB 23.1 bn
The growth reflects:
Significant increase in size of orders for
pump-based integrated solutions
Completion of key projects
Consolidation of GTNG
Stable growth of revenue from ordinary
contracts
Organic revenue growth of 47% yoy, excluding
impact from GTNG
+86%
7
Comments Key financials, 2009 vs 2010
ROCE, 2009 vs 2010 EBIT, 2009 vs 2010 (RUB mln)
EBITDA Development 169.196.203
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75.3% 2.5% 9.1%
0.5% 12.6% 1.9% 0.7%
15.3%
Revenue Cost of sales Distribution and transport
expenses
SG&A Other expenses Operating profit EBITDA*
75.6% 3.3% 12.4%
1.5% 7.3% 2.3% 3.1% 12.8%
Revenue Cost of sales Distribution and transport expenses
SG&A Other expenses Operating profit Depreciation & amortisation
Others EBITDA adj.
0
50,000
2009 2010
EBITDA adj. increased by 86% yoy to RUB 3,519 mln
due to:
Strong revenue growth in all business units
Focus on innovative high-margin contracts
Effective cost control
Consolidation of GTNG
EBITDA adj. margin increased to 15.3%
SG&A and commercial expenses grew less than
revenue due to economy of scale and cost
optimization strategy
Source: Company data
Comments EBITDA and EBITDA margin, 2009 vs 2010 (mln RUB)
Source: Company data
8
operating expenses
20.2bn v s 13.7bn in 2009 |+47.2% y oy
rev enue in 2010 +56.2% y oy
Comments Revenue & Operating costs, 2009 vs 2010
Key EBITDA adj. drivers, 2009 vs 2010 (% of revenue)
14,772 23,0701,084
2,915701,581
2009 2010
Revenue Operating profit Profit for the year
16.0%22.1%
18.9%10.3%
0.8% 9.0%
2009 2010
Industrial Pumps Modular equipment EPC
1,012
2,367786
599
33
550
2009 2010
Industrial pumps Modular equipment EPC
6,30810,712
4,166
5,8054,189
6,135
2009 2010
Industrial pumps Modular equipment EPC
Industrial pumps:
– Sales up 70% yoy to RUB 10,712 mln, enjoying strong demand for integrated pumping solutions
primarily in oil transportation and upstream
– EBITDA adj. grew by 134% yoy, and EBITDA adj. margin rose to 22.1%, primarily attributable to
increasing share of contracts for pump-based integration solutions
Modular equipment
– Sales up 39% yoy, driven by demand from the major oil companies to equip new oil fields and
modernize existing installed base of modular equipment
– EBITDA adj. decreased 24% yoy and EBITDA adj.
margin also down to 10.3% due to execution of low-margin contracts concluded in 2009
EPC
– Revenue growth of +46% yoy is primarily
attributable to an impact of GTNG acquisition and
entering the market of projects and design
– Revenue growth, excluding an effect of acquisition,
was c. 14% yoy
– EBITDA adj. increased significantly to RUB 550
mln, and EBITDA adj. margin rose to 9.0%
– Newly acquired GTNG added to EPC’s EBITDA RUB 271 mln
– Such a significant EBITDA is primarily attributable to a low EBITDA base in 2009, caused by
significant price pressure connected to investment
cutbacks by oil companies
Revenue and EBITDA Contribution by Segments 169.196.203
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+70%
+39%
+46%
+1,548%
-24%
+134%
+606 bps
-856 bps
+816 bps
Source: Company data 9
Highlights by core segments, 2009 vs 2010 Comments
Revenue, RUB mln
EBITDA adj., RUB mln
EBITDA adj. margin, %
402
10,078
1,123
1,506
7,975
8,254
2010 2011
Oil transportation pumps Nuclear pumps Other
Key Contracts Execution and Backlog Analysis 169.196.203
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Order backlog doubled yoy to RUB 19.8 bn,
including RUB 1.3 bn backlog from acquired GTNG
Organic backlog growth excluding impact from
GTNG was up 95% yoy
General backlog increase reflecting market growth
Robust backlog growth of high-margin pump-based
integrated solutions for large infrastructure projects
Signed contracts for oil transportation pumps
scheduled:
Recognized revenue of RUB 3.7 bn in 2010:
current backlog RUB 10.1 bn, the most part of
revenue to be recognized in 2011
ESPO contracts execution scheduled,
recognized revenue of RUB 3.5 bn
Signed contract for nuclear pumps scheduled:
Recognized revenue RUB 0.1 bn, current
backlog RUB 1.5 bn, the most part of revenue
recognition in 2011
Signed contracts for project design scheduled:
Significant increase of backlog due to GTNG
acquisition – plus RUB 1.3 bn
Backlog doesn’t include contracts with production
period less than 3 months, e.g. for standard pumps.
These short-term contracts generate revenue of
about RUB 3 bn per year
10
+3%
+34%
+2,418%
9,500
19,837
Source: Company data
Highlights Backlog, 2010 vs 2011 (RUB mln)
Backlog structure for 2011 (RUB bn)
Other0.7
Water injection pumps
0.2
Project & design1.3
Modular equipment
1.4
Nuclear pumps1.5
Other pumps2.1
Construction2.7
Oil transportation
pumps10.1
Source: Company data
Cost of Sales Optimization 169.196.203
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expenses
Operating costs grew 47% yoy in 2010 vs revenue growth
by 56% yoy
Cost of sales increased by 56% yoy in 2010, reflecting the
consolidation of GTNG and also due to the increase in
supplies, raw materials and labor costs.
About 60% of HMS Group’s cost of sales is for raw
materials and supplies, where ferrous metals account for
most of the cost
Dual-supplier policy:
– HMS Group doesn’t have monopolistic or exclusive
suppliers
– HMS Group doesn’t have even one supplier with
share more than 5%
Fixing suppliers’ prices and making advance payments for
long-term contracts and passing on price increases to
clients for short-term contracts helps to hedge commodity
prices and currency risks
Cost of sales breakdown, 2009 vs 2010 (RUB mln)
11,164 17,367
500
550
600
650
700
750
800
Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10
World hot rolled coil price index performance, $/tonne
+22%
Source: Bloomberg
Source: Company data
11
Comments Cost of sales structure, 2009 vs 2010 (%)
World HRC price performance in 2010
55.4% 59.7%
16.1%15.5%
15.4%13.2%
3.9% 3.3%2.3% 2.0%1.5% 1.3%5.4% 5.1%
2009 2010
Materials Labour Cost of goods sold Subcontractors D&A Utilities Other
571 2,918
2009 2010
M&A capital expenditures M&A quantity
CAPEX & Working Capital 169.196.203
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1
Source: Company data
Source: Company data Source: Company data
Source: Company data
12
SIBNA
(248)
GTNG
(2,467)
Capital expenditures, 2009 vs 2010 (RUB mln) M&A expenditures, 2009 vs 2010 (RUB mln)
Working capital position update Working capital ratios, 2007-2010
2010 2009
Working capital, RUB bn 2.4 2.7
chg, % -10% 22%
Working capital/ Total assets, x 0.11 0.23
Working capital/ Revenue, % 10.6% 18.3%
Current ratio, x 1.05 1.20
Quick ratio, x 0.83 0.64
Inventories, days 63 92
Receivables, days 105 73
Payables, days 148 106
192 950344 450
0.6x
2.1x
2009 2010
Organic capex Depreciation Capex/ Depreciation ratio
1,973 2,222 2,702 2,441
0.20 0.20
0.23
0.11
0.150.16
0.18
2007 2008 2009 2010
Working capital, RUB mln Working capital / Total assets, x
Working capital / Revenue, x
Debt & Liquidity Position 169.196.203
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Source: Company data
-13%
-54%
Source: Company data
Source: Company data
2.4x
1.2x
HMS’ internal covenant for
Net debt/ EBITDA is 2.5x
Total debt decreased by 13% yoy from RUB 5,331 mln to
RUB 4,648 mln
Significant operating cash flow growth from RUB -0.2 bn
to RUB 3.6 bln
Free cash flow stood at RUB 283 mln despite GTNG
acquisition
During 2010 interest rates on long-term borrowings were
revised and decreased for 4-7%. As a result effective
interest rate amounted to around 9.9% per annum
13
2010 2009
Net cash flow from operations 3,575 -211
Net cash flow from investing activities -3,292 -509
Net cash flow from financing activities -690 815
Free cash flow 283 -720
Cash 351 758
Total debt 4,648 5,331
Total debt/ Equity ratio 1.04 2.35
Total debt/ EBITDA 1.32 2.82
Comments Debt position, 2009 vs 2010
Highlights, 2009 vs 2010 (RUB mln) Debt & net debt/EBITDA position, 2009 vs 2010
3,438 3,8641,893 784
2009 2010
Long-term debt, RUB mln Short-term debt, RUB mln
5,331
4,648
758
351
15.8%
9.9%
2009 2010
Total debt, RUB mln Cash, RUB mln
Effective interest rate, year-end
HMS Group is in line with its growth strategy and continues to deliver on
promises to its shareholders and investors
1Q2011 Key
Events
Traditional flow of usual contracts including oil transportation and nuclear pumps
for clients’ current facilities
IPO proceeds were used for RUB 3.3 bn debt repayment
Average interest rate for a number of large long-term borrowings was decreased
to c. 8.9%
M&A Activity
Active discussions with several targets
1 deal in a stage of finalizing
In addition to current 40% of DKHM, 11% to be bought at the beginning of 2012
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IR Calendar
Mid-May: Annual results roadshow
31 May –2 June: VTB Capital Russia Calling in London
June-beginning: 1Q results announcement
09 June: Credit Suisse Oil & Gas Conference in London
28 June: Renaissance Capital Investor Conference in Moscow
June: HMS site visit – to be considered
14
1Q Trading Update & IR Calendar
2011E Outlook* HMS Group can expect to report a strong increase in revenues and adjusted
EBITDA
• Actual results and dev elopments may be materially dif f erent from any f orecast, forward-looking statement, opinion or expectation expressed in this presentation.
• We emphasize that we base all our f inancial f orecasts on the researches perf ormed by the independent market analy sts. Theref ore, we indemnif y HMS Group f rom any responsibility in relation
to any inv estor or group of inv estors acting in reliance upon such f orecasts
Alexander Rybin
Head of Capital Markets and IR
Tel: +7 (495) 730-66-12
Vyacheslav Tsoy
Deputy Head of Capital Markets and IR
Tel: +7 (495) 730-66-01
Inna Kelekhsaeva
IR Officer
Tel: +7 (495) 730-66-01
15
IR Contacts
Appendix I
16
Source: Company data 17
Income Statement
RUB‟000 2010 RUB „000 2009 RUB „000
Revenue 23,070,014 14,772,269
Cost of sales (17,367,404) (11,164,202)
Gross profit 5,702,610 3,608,067
Distribution & transportation expenses (573,198) (482,576)
General & administrativ e expenses (2,102,642) (1,827,189)
Other operating expenses (112,149) (97,679)
Impairment of goodwill - (116,998)
Operating profit 2,914,621 1,083,625
Finance income 57,089 46,806
Finance costs (823,391) (865,141)
Share of results of associates 15,108 17,193
Profit before income tax 2,163,427 282,483
Income tax expense (582,299) (212,386)
Profit for the year 1,581,128 70,097
Profit/(loss) attributable to:
Shareholders of the Company 1,469,116 (31,821)
Non-controlling interest 112,012 101,918
Profit for the year 1,581,128 70,097
Currency translation dif f erences (85,899) (70,502)
Currency translation dif f erences of associates 1,540 1,283
Other comprehensive loss for the year (84,359) (69,219)
Total comprehensive income for the year 1,496,769 878
Total comprehensiv e income/(loss) attributable to:
Shareholders of the Company 1,402,382 (76,930)
Non-controlling interest 94,387 77,808
Total comprehensive income for the year 1,496,769 878
Basic and diluted earnings per ordinary share for profit/(loss) attributable to the ordinary shareholders
14.32
(0.03)
Source: Company data 18
Balance Sheet
RUB‟000 31 December 2010 31 December 2009
ASSETS
Non-current assets:
Property , plant and equipment 5,948,674 3,954,807
Other intangible assets 310,156 47,109
Goodwill 1,783,915 306,992
Inv estments in associates 507,141 507,293
Def erred income tax assets 130,779 53,992
Other long-term receiv ables 27,123 61,362
Total non-current assets 8,707,788 4,931,555
Current assets:
Inv entories 2,840,745 3,179,644
Trade and other receiv ables and other f inancial assets 10,399,853 2,778,048
Current income tax receiv able 38,086 58,016
Prepaid expenses 39,361 36,213
Cash and cash equiv alents 351,086 758,127
Restricted cash 4,978 905
13,674,109 6,810,953
Non-current assets held f or sale 96,095 -
Total current assets 13,770,204 6,810,953
TOTAL ASSETS 22,477,992 11,742,508
EQUITY AND LIABILITIES EQUITY
Share capital 42,510 36,154
Share premium 210,862 210,862
Share capital to be issued - 6,356
Currency translation reserv e (234,785) (168,051)
Retained earnings 2,897,296 1,480,712
Other reserv es 38,987 37,035
Equity attributable to the shareholders of the Company 2,954,870 1,603,068
Non-controlling interest 1,508,263 669,631
TOTAL EQUITY 4,463,133 2,272,699
LIABILITIES
Non-current liabilities:
Long-term borrowings 3,864,176 3,429,475
Finance lease liability 9 8,479
Def erred income tax liability 745,762 197,307
Pension liability 262,525 125,407
Prov isions f or liabilities and charges 35,691 11,550
Total non-current liabilities 4,908,163 3,772,218
Source: Company data 19
Balance Sheet (cont’d)
RUB‟000 31 December 2010 31 December 2009
Current liabilities:
Trade and other pay ables 10,799,358 3,255,533
Short-term borrowings 775,242 1,879,914
Prov isions f or liabilities and charges 312,213 209,760
Finance lease liability 8,446 13,094
Pension liability 24,736 20,922
Current income tax pay able 115,340 25,069
Other taxes pay able 1,071,361 293,299
Total current liabilities 13,106,696 5,697,591
TOTAL LIABILITIES 18,014,859 9,469,809
TOTAL EQUITY AND LIABILITIES 22,477,992 11,742,508
Source: Company data 20
Cash Flow Statement
RUB‟000 31 December 2010 31 December 2009
Cash flows from operating activities
Prof it bef ore income tax 2,163,427 282,483
Adjustments f or:
Depreciation and amortisation 449,776 343,987
Loss f rom disposal of property , plant and equipment and intangible assets 938 2,305
Finance income (57,089) (42,790)
Finance costs 818,773 865,141
Pension expenses/(income) 33,808 17,673
Warranty prov ision 51,109 18,150
Write-of f of receivables 23,931 -
Interest expense related to construction contracts 17,408 14,953
Prov ision f or impairment of accounts receiv able (13,023) 69,559
Impairment of taxes receiv able 10,052 -
Inv estments impairment prov ision (1,338) 6,099
Prov ision f or obsolete inv entories (107,634) 95,949
Foreign exchange translation dif f erences 4,618 (4,016)
Prov ision f or VAT receiv able (10,887) 29,918
Prov isions f or legal claims 34,073 13,655
Share of results of associates (15,108) (17,193)
Impairment of goodwill - 116,998
Impairment of property , plant and equipment and intangible assets 19,288 13,848
Loss on disposal of subsidiaries 4,360 -
Other non-cash items (646) (18,861)
Operating cash flows before working capital changes 3,425,836 1,807,858
Decrease/(increase) in inv entories 452,945 (810,442)
(Increase)/decrease in trade and other receiv ables (6,921,060) 34,526
Increase/(decrease) in taxes pay able 674,369 (9,530)
Increase/(decrease) in accounts pay able and accrued liabilities 7,063,530 (71,350)
Restricted cash (4,073) (285)
Cash generated from operations 4,691,547 950,777
Income tax paid (277,738) (286,395)
Interest paid (838,533) (875,750)
Net cash from/(used in) operating activities 3,575,276 (211,368)
Cash flows from investing activities
Repay ment of loans adv anced 3,139 122,476
Loans adv anced (5,498) (108,139)
Proceeds f rom sale of property , plant and equipment and intangible assets 24,585 1,775
Interest receiv ed 56 39,352
Div idends receiv ed 16,800 10,313
Purchase of property , plant and equipment (950,275) (192,365)
Acquisition of associates - (122,756)
Acquisitions of subsidiaries, net of cash acquired (2,339,457) (239,806)
Proceeds f rom disposal of subsidiaries, net of cash disposed 7,475 -
Acquisition of intangible assets (48,681) (19,741)
Net cash used in investing activities (3,291,856) (508,891)
Source: Company data 21
Cash Flow Statement (cont’d)
RUB‟000 31 December 2010 31 December 2009
Cash flows from financing activities
Repay ments of borrowings (9,034,047) (5,571,316)
Proceeds f rom borrowings 8,800,148 6,775,593
Pay ment f or f inance lease (12,663) (19,971)
Acquisition of non-controlling interest in subsidiaries (578,844) (208,799)
Expenses related to share issue (58,049) -
Cash receiv ed f rom capital contribution 85,817 -
Cash receiv ed f rom additional share issue of subsidiary 428,420 -
Div idends paid to non-controlling shareholders of subsidiaries (320,458) (160,009)
Net cash (used in)/from financing activities (689,676) 815,498
Net (decrease)/increase in cash and cash equivalents (406,256) 95,239
Effect of exchange rate changes on cash and cash equivalents (785) (6,594)
Cash and cash equivalents at the beginning of the year 758,127 669,482
Cash and cash equivalents at the end of the year 351,086 758,127
Cash flows from investing activities
Repay ment of loans adv anced 3,139 122,476
Loans adv anced (5,498) (108,139)
Proceeds f rom sale of property , plant and equipment and intangible assets 24,585 1,775
Interest receiv ed 56 39,352
Div idends receiv ed 16,800 10,313
Purchase of property , plant and equipment (950,275) (192,365)
Acquisition of associates - (122,756)
Acquisitions of subsidiaries, net of cash acquired (2,339,457) (239,806)
Proceeds f rom disposal of subsidiaries, net of cash disposed 7,475 -
Acquisition of intangible assets (48,681) (19,741)
Net cash used in investing activities (3,291,856) (508,891)
Cash flows from financing activities
Repay ments of borrowings (9,034,047) (5,571,316)
Proceeds f rom borrowings 8,800,148 6,775,593
Pay ment f or f inance lease (12,663) (19,971)
Acquisition of non-controlling interest in subsidiaries (578,844) (208,799)
Expenses related to share issue (58,049) -
Cash receiv ed f rom capital contribution 85,817 -
Cash receiv ed f rom additional share issue of subsidiary 428,420 -
Div idends paid to non-controlling shareholders of subsidiaries (320,458) (160,009)
Net cash (used in)/from financing activities (689,676) 815,498
Net (decrease)/increase in cash and cash equivalents (406,256) 95,239
Effect of exchange rate changes on cash and cash equivalents (785) (6,594)
Cash and cash equivalents at the beginning of the year 758,127 669,482
Cash and cash equivalents at the end of the year 351,086 758,127
Focus on integrated
solutions and other
highly-engineered
products
Higher margin than stand-alone products and services
HMS Group’s largest customers more often prefer to work with manufacturers that
can offer integrated and customized solutions
Creates strong ties with customers, pull-through demand for aftermarket services
Strengthen position
in core markets
including
aftermarket and
export
Take advantage of positive market trends in existing core markets
Organic expansion into attractive market segments
Increase of aftermarket services component to generate higher-margin and
regular cash flows
Core export opportunities: water projects in FSU, Rosatom nuclear contracts,
O&G in Kazakhstan and Iraq
169.196.203
170.70.67
147.193.150
69.114.167
65.152.175
200.193.188
227.24.52
207.213.225
137.165.78
Expand research
and development
capabilities
Leverage leading R&D capabilities in order to develop next-generation customized
pumps, technological upgrades and integrated pump systems
Work closely with customers to develop technical policies and standards
Improve operational
efficiency
Commitment to integration and optimization of current production assets and
commitment to increase synergies between acquired businesses
Standardization and continuous improvement of operations and business
processes (e.g. ERP, budgeting and reporting methodology and software
development, etc.)
Pursue selective &
value enhancing
acquisitions
Our targets are technology and R&D facilities
Pursue acquisition opportunities in high-growth sectors where HMS has limited
presence
Search for cost and revenue synergies
22
Business Strategy
Target Industries Development 169.196.203
170.70.67
147.193.150
69.114.167
65.152.175
200.193.188
227.24.52
207.213.225
137.165.78
169.196.203
65.152.175
11,164
Source: Company data
23
In February 2011, Russian Ministry of Energy is reported to have submitted new proposal for tax reform to the Ministry of Fin ance
The proposal includes a reduction of crude oil export duty to 60% and equalization of oil products export duties at 66% of the duty for crude oil
The proposed reforms also envisage the promotion of new greenfield development through the elimination of MET and the introducti on of an
excess profit tax for new fields
If enacted, the proposed reforms would significantly benefit the economics of E&P activities in Russia
Source: Publicly av ailable inf ormation
Project Brief description Date of announcement Key metrics
Caspian Pipeline Consortium
pipeline capacity expansion
The project w ill involve construction of 10 new pumping
stations and is scheduled to be completed by 2014 December 2010 Capex: US$ 5.4 bn
Development of the Trebs and Titov
f ields
A JV of Bashneft and Lukoil for joint development of the
f ields April 2011
Total reserves: 140.1 mln
tons
Development of the Russian Arctic
continental shelf
Unprecedented strategic alliance betw een Rosneft and
BP for one of the largest development projects to date January 2011 Area: 125,000 km2
Rosneft / Lukoil alliance A long-term cooperation betw een Rosneft and Lukoil for
joint exploration of the Arctic shelf and Nenets areas April 2011 n/a
Development of oil and gas
resources in the Black Sea
Agreement betw een Rosneft and ExxonMobil for joint
development focusing on the Tuapse Trough January 2011 n/a
Despite ongoing pressure on electricity tariff growth, investment programmes in thermal power generation remain unchanged with the Russian Government providing guaranteed return on
investments to newly-constructed power plants through so-called capacity agreements (DPM)
Moreover, Russian Ministry of Energy is actively discussing the opportunities for tax breaks and holidays for capacity renovation projects, which should significantly intensify efforts in the
modernization field
HMS exposure to thermal power remains robust with power
block modernization programmes emerging as the new market opportunity
Russian State Parliament developed the draft legislation on adoption of rate-of-return regulation (RAB) in water utilities – cornerstone to bringing financial independence to companies of
the sector
RAB regulation will be used as a pre-condition for significantly
stepping up investment efforts in the sector with the average depreciation level of assets of 72%
Over the course of the next 5-7 years we expect investment
programmes in water utilities to grow significantly (similar tariff adoption in electricity grids led to 5-fold growth of capex
plans), allowing HMS to significantly extend its order book in the sector
Increased development of greenfield and brownfield projects
Proposed taxation reform favorable to the oil and gas sector
Thermal power generation sector development Water utilities development
7,443 8,772
7,329
14,298
2009 2010
Others Large clients
170.70.67
147.193.150
69.114.167
200.193.188
227.24.52
207.213.225
137.165.78
Source: Company data
* Large client - a client that brings rev enue more than RUB 200 mln a y ear
Stable growth of revenue generated by Other clients
received from replacement and modernization works
Sharp increase in contracts’ quantity from Transneft,
Rosneft and Gazprom Neft played its role in a
substantial revenue growth
New types of contracts include:
– Integrated pump-based solutions (i.e. pumping
stations for Transneft)
– Full-cycle projects (i.e. pumping stations in
Turkmenia)
– Project and design contracts for design of new
oilfields and pipelines
24
Blue-chip Customer Base
FY2010 Total revenue
RUB 23,070 mln
FY2009 Total revenue
RUB 14,772 mln
Revenue structure by clients, RUB mln
NK Dulisma1%
Salym Petroleum
2%
Surgutneftegaz3%
Lukoil1%
Orion Stroy4%
TNK-BP8%
Gazprom Neft4%
Transneft6%
Rosneft21%
Others50%
NK Dulisma1%
Salym Petroleum
1%Hors
Group1%
Surgutneftegaz1%
Lukoil2%
Orion Stroy5%
TNK-BP5%
Gazprom Neft8%
Transneft16%
Rosneft22%
Others38%
Comments Revenue by Clients*, 2009 vs 2010
Selected clients
Turkmenistan
+95%
+18%
511
231
2009 2015E
1,586
743303
489
1,011
311
1,103
3,340
2009 2015E
Water utilities
Thermal power generation
Nuclear power generation
Russian energy & utilities infrastructure investments (RUB bn)
Significant increase in capital spending in core end markets drives growth of all HMS‟ businesses
Comments
Infrastructure modernization and expansion
– Large portion of Russian infrastructure is outdated
and at or near end of useful life
– Economic growth driving demand for new
infrastructure
– Very large expected spending by public and
private sectors in energy generation, public utilities
and oil and gas industries
State development programs
– Large on-going projects in the public utilities and
electricity generation with ongoing impact until
2020-30
169.196.203
170.70.67
147.193.150
69.114.167
65.152.175
200.193.188
227.24.52
207.213.225
137.165.78
CAGR
’09-’15
21.7%
21.7%
16.1%
810
6161,226
285230
540
2,576
1,131
2009 2015E
Oil refining and
petrochemicals
Oil pipelines
Oil exploration
and extraction
CAGR
’09-’15
15.3%
19.0%
12.2%
Russian oil sector investments (RUB bn)
EPC market history and forecast3- HMS core segments (RUR bn)
79
224
2009 2015E
22
10
2009 2015E
Source: Frost & Sulliv an report 1 Includes pumps f or water injection, oil ref ining and petrochemicals, oil pipelines, energy generation (thermal and nuclear (excluding MCP)), water utilities pumps, household v ibration
pumps, as well as integrated solutions and af termarket 2 Includes pump stations, automated group metering units, associated gas processing and transport units 3 Includes oil f ield inf rastructure construction, oil and gas transportation, construction and engineering, research and design serv ices f or oil and gas industry (upstream)
Industry Fundamentals and Growth Potential
25
Source: Frost & Sulliv an report 2009 Source: Frost & Sulliv an report 2009
Russian pumps market history and forecast1 (RUB bn)
Russian modular equipment market history and forecast2 - HMS core segments (RUB bn)
CAGR 18.8% CAGR 14.0% CAGR 14.1%
26
169.196.203
170.70.67
147.193.150
69.114.167
65.152.175
200.193.188
227.24.52
207.213.225
137.165.78
North
Source: Company data
► ► ► ►
►
► ► ► ►
►
►
► ►
Oil product storage
Oil refinery Main oil pipeline
Oil field
Filling station
► ►
Oil and gas sector
Filling station
Source: Frost & Sulliv an report, Transnef t website (www.transnef t.ru)
Novorossiysk
Moscow
Unecha
Primorsk
Kozmino
Skovorodino
Verkhnechonskoye
Tengiz
Timano-Pechora
basin
Caspian Pipeline Consortium
expansion
(35 MMt, 1,510 km)
Baltic Pipeline
System-II
(50 MMt, 1,000 km)
ESPO-I and ESPO-I
capacity expansion
(50 MMt, 2,694 km)
Russia
ESPO-II and ESPO-II
capacity expansion
(47 MMt, 2,046 km)
Talakanskoye
Purpe-Samotlor (25
MMt, 430 km)
Vankor
Salymskoye
Samotlor
Nizhnevartovsk
Priobskoye
Purpe
Prirazlomnoye
Tyamkinskoye
Russkoye
Taishet
Zapolyarnoye-Purpe
(45 MMt, 536 km)
Syzran
Tikhoretsk-Tuapse 2
(12 MMt, 295 km)
Haryaga Yuzhny
Khylchuyu
Haryaga-Yuzhny
Khylchuyu
(8 MMt, 160 km)
Yurubcheno-
Tokhomskoe
Yurubcheno-
Tokhomskoe-Taishet
(18 MMt, 600 km)
Tuapse
Tikhoretsk
Komsomolsky NPZ
-port De-Kastry
(9 MMt, 313 km)
Oil pipeline projects
Mature oil producing regions
Underdeveloped oil producing regions
Developing oil f ields
HMS participation confirmed
Oil products pipeline projects
Komsomolsky
NPZ
De-Kastri
“Yug” (South)
(9 MMt, 1,465 km)
Komsomolsky NPZ
-De-Kastry
(n.d., 300 km)
169.196.203
170.70.67
147.193.150
69.114.167
65.152.175
200.193.188
227.24.52
207.213.225
137.165.78
New Milestone Projects Oil & Gas Production and Oil Transportation
Zapolyarnoye
27
South
> 3 bn tons of oil reserves to be
developed in the next several
years
Oil production development
> 10,000 km of pipelines to be constructed or
replaced
> 140 of pump stations to be constructed or
reconstructed
> 550 reservoirs with total capacity of almost
10 mln m3 to be reconstructed
Transneft investment program 2010-2017
Central Asia
Rapidly growing sales of modular equipment to oil
and gas sector in Kazakhstan
Iraq
Significant installed base of HMS pumps from Soviet
and post Soviet periods
Currently undertaking projects for Oil Ministry and BP
Export markets
26 oil refineries are to be
reconstructed
Oil refining development
28
169.196.203
170.70.67
147.193.150
69.114.167
65.152.175
200.193.188
227.24.52
207.213.225
137.165.78
North
Source: Company data
Nuclear power generation
Reactor hall
Turbine hall
Feed pumps
Condensate pumps
Pumps for security systems
Pumps for lubrication systems
Pumps for auxiliary systems
TGC-13 (Enisei) Investment 2010-2015:
RUR 10 bn
TGC-9 Investment 2010-2015:
RUR 28 bn
TGC-8 Investment 2010-2015:
RUR 18 bn
TGC-7 (Volga) Investment 2010-2015:
RUR 11 bn
TGC-6 Investment 2010-2015:
RUR 16 bn
TGC-5 Investment 2010-2015:
RUR 14 bn
TGC-3 (Mosenergo) Investment 2010-2015:
RUR 39 bn
TGC-14 Investment 2010-2015:
RUR 8 bn TGC-12 (Kuzbas) Investment 2010-2015:
RUR 21 bn
TGC-11 Investment 2010-2015:
RUR 26 bn
TGC-10 (Fortum) Investment 2010-2015:
RUR 47 bn
TGC-4 Investment 2010-2015:
RUR 21 bn
TGC-2 Investment 2010-2015:
RUR 28 bn
TGC-1 Investment 2010-2015:
RUR 73 bn
Source: Frost & Sulliv an
Nuclear Power Plants HMS participation confirmed Projects under construction Planned projects
Leningradskaya-II
Kalininskaya
Rostovskaya
Novovoronezhskaya-II
Beloyarskaya
Kurskaya Smolenskaya
Kolskaya
169.196.203
170.70.67
147.193.150
69.114.167
65.152.175
200.193.188
227.24.52
207.213.225
137.165.78
New Milestone Projects Thermal and Nuclear Power Utilities
29
South
Rostovskaya
Number of power units to be
constructed or reconstructed
Additional generation
capacity, MW
Investments
2010-2015 (RUR bn)
TGC n/a 13,627 359
OGC n/a 11,962 467
Nuclear plants
(Russia) 41 21,500 808
Nuclear plants
(Foreign) 17 17,880 1,940
Summary of total investments in power generating capacity
Name Country No of power units /
Unit capacity (MW)
Investments
2010-2015 (RUR bn)
Belene NPP Bulgaria 1 / 1,000 128
Tianw an NPP China 2 / 1,000 86
Kudankulam NPP India 2 / 1,000 65
Mokhovtse NPP Slovakia 2 / 440 53
Akkuyu NPP Turkey 4 / 1,200 27
Other projects
Ukraine 2 / 1,200
1,581 Belarus 2 / 1,200
Armenia 1 / 1,200
Vietnam 1 / 1,200
Selected nuclear power plant projects abroad using Russian technology
30
169.196.203
170.70.67
147.193.150
69.114.167
65.152.175
200.193.188
227.24.52
207.213.225
137.165.78
North
Source: Company data
Reuse of treated wastewater
Sewage treatment
Borehole water intake
Surface water intake
Water treatment
Water conditioning
Irrigation
Release of wastewater
►
►
► ► ►
► ► ► ► ►
► Water industry
Water supply to industrial enterprises
Urban water supply
►
Water industry
Kirov
Perm
Barnaul
Petrozavodsk
Vladimir
Rostov-on-Don
Azov
Kaluga
Tver
Orenburg
Omsk
Tyumen Krasnodar
393471
606724
844
1,011
311372295
2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E
Source: Frost & Sulliv an report, media sources 1 Figures hav e been taken f rom v arious media sources; they are not f inal and may change in the
f uture
2 The “Clean Water” program is a nationwide large inv estment plan aimed at improv ing drinking water quality .
Capex in water projects, RUR bn (2007–2015)
Source: Frost & Sulliv an report
Large-scale State Programmes Total Capex 2010-
2015 (RUR bn) Capex period
Federal Programme "Zhilische" (public
housing)
620 2011-2015
Regional programmes "Clean Water“2
(unconf irmed budget)
520 2011-2017
Water Strategy of Russian Federation until
2020 (excl. "Clean Water")
351 2009-2020
Reconstruction of Grozny utilities 105 2010-2011
St. Petersburg Water Utilities Dev elopment
Programme
103 2010-2025
JSC RKS JSC Evraziysky JSC Rosvodokanal
169.196.203
170.70.67
147.193.150
69.114.167
65.152.175
200.193.188
227.24.52
207.213.225
137.165.78
New Milestone Projects Water Utilities
31
Central Asia
Recently undertook turnkey construction of
pumping stations in Turkmenistan and Uzbekistan
Presence in water markets of Tajikistan and
Kyrgyzstan
Offices in Ashkhabad (Turkmenistan) and Tashkent
(Uzbekistan)
South
Moscow
Kaliningrad
St. Petersburg
Volgograd Kazan
N.Novgorod
Yaroslavl
Ekaterinburg
Sochi
Samara
FIFA World Cup 2018 Investment 2010-2018: RUR 1.6 trn1
Olympic Games in Sochi in 2014 Investment 2010-2014: RUR 930 bn1
Asia-Pacific Economic Cooperation
Summit in Vladivostok in 2012 Investment 2010-2012: RUR 660 bn1
Vladivostok
Export markets
Leading integrated water utilities
169.196.203
170.70.67
147.193.150
69.114.167
65.152.175
200.193.188
227.24.52
207.213.225
137.165.78
Significant upside from aftermarket
32
Water injection pumps
HMS supplies 87%
Other 13%
Total number of pumps: 4,500
Oil trunk pipeline pumps1
HMS supplies 98%
Other 2%
Total number of pumps: 1,044
Note: In red are highlighted the pump’s components that
suf f er the greatest degree of deterioration during operation
of the pump and which can be replaced in order to extend
the pump’s operation lif e
Source: Company data, Frost & Sulliv an
Installed base Key drivers for aftermarket services growth
Very large installed base requires repair and maintenance services
Large portion of installed base is outdated,
creating opportunity for upgrades as well as replacement
Energy represents 80% of operating cost for a typical pump
Trend for modernization of equipment to increase
energy efficiency
Most repair and maintenance historically largely in-house
HMS has contracts with companies including
– TNK-BP (full outsourcing of maintenance of
water injection pumps at the Samotlor field)
– Transneft
Exceptional installed
base
Energy efficiency
Outsourcing trend
Example of pump servicing
Source: Frost & Sulliv an, Company data 1 In Transnef t’s pipeline sy stem
The leading provider of flow control solutions in Russia
Comments
Source: Frost & Sulliv an report (f or 2009) Source: Frost & Sulliv an report (f or 2009)
HMS Other
Leading player in core business segments:
– Almost half of market share in core pump market segments
with no close local or international competitors
– Strong position in modular equipment
– Leading independent player in oil and gas field project
design
Leading market positions in core segments
Source: Frost & Sulliv an report (f or 2009) 1 HMS’ subsidiary GTNG – a leading independent Russian oil and gas R&D center
… and modular equipment Leading market share in pumps …
Leading independent player in oil and gas field project design
65%
59%
54%
41%
41%
35%
41%
46%
59%
59%
71%
73%
80%
41%
20%
27%
29%
59%
1.1
1.9
0.8
1.1
1.0
9.0
1.0
1.1
1.0
Total HM S' core segments
Submersible water well pumps
Water injection pumps
Oil pipeline pumps
Water utilities pumps
Thermal power generation pumps
Nuclear power generation pumps
Oil refining and petrochemical pumps
Household vibration pumps
56%
30%
7%
44%
70%
93%
35% 65%
3.2
2.2
4.6
10.0Total HM S' core
segments
Pump stations
Automated group
metering units
Associated gas
processing and
transport units
Market size
RUR bn HMS Other
Total market size:
RUR 19.1 bn
169.196.203
170.70.67
147.193.150
69.114.167
65.152.175
200.193.188
227.24.52
207.213.225
137.165.78
33
Market size
RUR bn
HMS1, 10%
Other, 31%
SurgutNIPIneft, 21%
Rosneft-NTC, 12%
UfaNIPIneft, 7% TomskNIPIneft, 7%
Giprovostokneft, 7%
NizhnevartovskNIPIneft, 5%
Advanced R&D Capabilities
Very strong in-house R&D and significant experience in
pump development
– 5 in-house R&D facilities in Russia and the CIS,
centralized research coordination
Unique testing facility (one of the largest in the former
Soviet Union and globally) for all types of large specialized
pumps for nuclear power plants and oil transportation
– Current facility allows to test pumps up to 8MW in
power; new facility for pumps up to 14MW under
construction
Deep integration with clients’ R&D
– HMS’ R&D works closely with clients’ R&D divisions in
developing pre-tender documentation and helps clients
adopt new design solutions and technical regulations
– Increases the likelihood of the use of HMS equipment
in projects
Recently acquired Giprotyumenneftegaz ( GTNG), leading
Russian R&D centre specializing in design of on-surface
(as opposed to sub-surface) facilities for oil and gas fields
– Designed over 200 oil and gas condensate fields in
Russia including many of the largest (e.g. Samotlor,
Mamontovskoye, Priobskoye)
Significant R&D resources for design of water utilities
projects (RVKP)
34
Pumps Project design
Selected Oil & Gas clients
Pre-tender project preparation
(up to 24 months)
Tender, pricing and contract negotiation
(1–3 months)
Design and production
(1–24 months)
Delivery and installation (1 month)
After market services
Pre-tender preparation/aftermarket support are crucial for establishing/maintaining
strong relationships with clients
HMS’ ability to participate in pre-tender preparation stage creates unique competitive advantage
Operational and Product Quality Excellence
Plants are certified in accordance with
ISO:9001:2008
Products are compliant with API 610 standard
Modern software systems for R&D and project
management
– SolidWorks, ANSYS CFX, Bentley,
Primavera
Equipment from well-established foreign producers
for critical manufacturing processes
– Skoda, Schiess, Doosan, Demag, Schenk,
Sodik, Ibarmia and other
HMS’ products include high-precision, safety-
critical equipment for hazardous facilities (nuclear
plants, refineries, pipelines)
HMS has a strong focus on operational excellence and manufactures top quality products
Submersible water well pumps HMS Grundfos
Model 3ЭЦВ6-10-110 SP17-11
Flow rate, m3/h 10 10
Head, m 110 110
Efficiency ratio, % 57.0-59.2 53.9-58.3
Model 3ЭЦВ6-25-100 SP30-12
Flow rate, m3/h 25 25
Head, m 100 100
Efficiency ratio, % 59.8-62.1 57.4-61.7
Comparative analysis examples
Water utilities pumps HMS KSB
Model 1Д315-75 Omega 100-250A
Flow rate, m3/h 315 315
Head, m 75 75
Efficiency ratio, % 83.0 82.6
Weight, kg 190 210
Source: The Russian Association of Pump Manufacturers
169.196.203
170.70.67
147.193.150
69.114.167
65.152.175
200.193.188
227.24.52
207.213.225
137.165.78
Skoda Ibarmia Schiess Demag
35
Strong Management Team
Key senior managers
HMS’ founders remain shareholders and continue to be actively involved in managing the business
Founders / Shareholders
The management team…
…is comprised of professionals with significant experience in
pump and oil and gas industries
…includes founders, who have led HMS since its inception
…has a strong commitment to the business
Anatoliy Nazarov
Head of Modular
Equipment
Industry experience:
More than 35 y ears
Years with HMS:
4 y ears
Kirill Molchanov
First Deputy CEO
Industry experience:
17 y ears
Years with HMS:
17 y ears
Andrey Nasledy shev
Deputy CEO
Industry experience:
11 y ears
Years with HMS:
6 y ears
Nikolay Yamburenko
Head of Industrial Pumps
Industry experience:
32 y ears
Years with HMS:
7 y ears
Igor Tv erdokhleb
Head of R&D
Industry experience:
24 y ears
Years with HMS:
6 y ears
169.196.203
170.70.67
147.193.150
69.114.167
65.152.175
200.193.188
227.24.52
207.213.225
137.165.78
Artem Molchanov
CEO
Industry experience:
17 y ears
Years with HMS:
17 y ears
HMS Group shareholder structure
Source: Company data
Free-float37.25%
V. Lukianenko24.00%
Other managers
21.42%
G. Tsoy17.33%
36
Number of new pumping stations for increasing capacity 21
To supply Komsomolsk and Khabarovsk refineries 9
To supply Primorsk refinery 4
No information at the present time 8
Number of contracted pumping stations 20
Pumping stations under construction by HMS 12
Pumping stations constructed by Sulzer 7
Pumping stations under construction by Turbonasos 2
East Siberia – Pacific Ocean pipeline
37 Source: Company data, Transneft
169.196.203
170.70.67
147.193.150
69.114.167
65.152.175
200.193.188
227.24.52
207.213.225
137.165.78
North
Krasnoyarsk region
1 2
3 4 5
6 7
8
9
10
11
12 13 14 15
16 17
18
19
20
23 24
25
26 27
28 29 30
31 32 33
34
35
36
37
38
39
40
41
Buryat region
Chita region
RUSSIA
MONGOLIA
Irkutsk Chita
Ust’-Kut
Yakutsk
Skovorodino
Blagoveschensk
Vladivostok
Taishet
Irkutsk region
Khabarovsk region
Sea of Okhotks
CHINA
Total number of pumping stations 41
22 21
A pumping station for ESPO-I pipeline
Case Study: ESPO-I Expansion and ESPO-II Contracts
Segment Products / Services Design and
manufacturing
Pumps Design, production and testing of
pumps
HMS and other
suppliers including
Siemens
EPC
Design of integrated pumping
solution
Overall project management
Procurement for supply of
engines, cooling sleeves, valves
and other equipment
Turn-key commissioning
HMS
Key contract highlights
HMS is supplying pump systems (pumps, motors, cooling
sleeves, valves and etc.) to Transneft for ESPO-I and
ESPO-II pipelines
HMS designed unique type of pumps for the project,
constructed a special pump testing facility
HMS prepared target specification for design of hardware
(engines, cooling sleeves, valves and etc.) for European
producers (Siemens, Voit and etc.) as well as coordinated
full cycle procurement
Key features of the project include:
– New approach for oil pumping: Variable motor
revolution, which saves energy
– Integrated approach for project management: HMS
coordinated procurement from multiple suppliers,
R&D process for supplementary equipment and
performed turnkey commissioning
– Construction of a special testing facility
– New approach to modeling: 3D design in ANSYS
CFX was used to model operation of an entire
pumping system
1. Trunk pump
2. Motor
3. Coupling
4. Oil coolers
9. Friction oil pipelines
10. Air cooling unit
11. Antifreeze feed pipes for oil coolers
12. Antifreeze feed pipes for motor coolers
13. Antifreeze air cooling unit
5. Adsorptive dryers
6. Air collectors
7. Compressors
8. Joints
169.196.203
170.70.67
147.193.150
69.114.167
65.152.175
200.193.188
227.24.52
207.213.225
137.165.78
Source: Company data
38
South
Zapolyarie – Pur-pe pipeline
39 Source: Company data, Transnef t
169.196.203
170.70.67
147.193.150
69.114.167
65.152.175
200.193.188
227.24.52
207.213.225
137.165.78
North
Total length of pipeline to be constructed 488 km
Project figures
Capacity, mln tonnes per annum up to 45
Total length, km 488
Projected cost, RUB bn 120
Total length of inlet pipelines, km 1200
Implementation:
1st stage
2nd stage
3rd stage
Dec 2013
Dec 2014
Dec 2015
3rd stage
2nd stage
1st stage
Zapolyarie – Pur-pe pipeline
Zapolyarie
Pur-pe
Appendix II
40
Calculations 169.196.203
170.70.67
147.193.150
69.114.167
65.152.175
200.193.188
227.24.52
207.213.225
137.165.78
169.196.203
65.152.175
11,164
Source: Company data
41
EBITDA is calculated as Operating profit/loss adjusted for Other income/expenses, Depreciation &
amortization, Provision for obsolete inventory, Provision for impairment of accounts receivable,
Unused vacation allowance, Excess of fair value of net assets acquired over the cost of acquisition
EBIT is calculated as Gross margin minus D&T and SG&A expenses
Total debt is calculated as Long-term borrowings plus Long-term financial lease liabilities plus Short-
term borrowings plus Short-term financial lease liabilities
Net debt is calculated as Long-term borrowings plus Long-term financial lease liabilities plus Short-
term borrowings plus Short-term financial lease liabilities minus Cash & cash equivalents
ROCE is calculated as EBIT divided average Debt plus Equity
Notes to the presentation about formulas used for some figures‟ calculations