hms group investor presentation, october 2011

HMS Group Midyear results 2011

Investor Presentation

October 2011

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.

Disclaimer

2

Agenda

3

WHO WE ARE 4

HMS at a Glance 5

HMS Group Core Industries 6

Development of Business Model 7

INVESTMENT HIGHLIGHTS 8

Attractive Industry Fundamentals 9

The Leading Provider of Flow Control Solutions 10

Advanced R&D Capabilities 11

Main Shareholders Run the Business 12

Healthy Debt Position 13

Hedging & Risk Management 14

FINANCIAL PERFORMANCE 15

Financial Highlights for 1H 2011 16

EBITDA Development in 1H 2011 17

Revenue & EBITDA Contribution by Segments 18

Capex & Working Capital as of 30 June 2011 19

2011 & 2012 BUSINESS UPDATE & OUTLOOK 20

HMS Group Recent Acquisitions 21

Significant Upside from Aftermarket 22

Backlog 23

Order Intake 24

HMS Group Recent Selected Contracts 25

Selected End-market Prospects for Mid-term 26

CONTACTS 27

APPENDIX 28

WHO WE ARE

4

4,498

6,724

13,39914,046

14,772

23,070

13,857

744 8301,423 1,644 1,890

3,519 3,133

16.5%

12.3%

10.6%11.7%

12.8% 15.3%

22.6%

2005 2006 2007 2008 2009 2010 1H2011

Revenue, Rub mn EBITDA, Rub mn EBITDA margin, %

1H’11 key financials contribution by business segments

Key investment highlights Key financial indicators for 2005-1H’11

Growing markets in Russia and the CIS:

oil & gas

power generation

water

Leader in flow control solutions on these markets

Best team in Russia:

management

sales

research & development

Resilient financial growth and healthy debt position

HMS at a Glance

Notes: Hereinafter “EBITDA” read as “EBITDA adjusted”, “EBITDA margin” read as “EBITDA adjusted margin” and “Net Income” read as “Profit for the period/year” Pumps read as Industrial pumps

Source: Company data

Pumps*

Revenue Rub 8,518 mn

EBITDA adj. Rub 2,574 mn

Oil & gas equipment


EBITDA adj. Rub 127 mn

EPC


EBITDA adj. Rub 356 mn

New photo

Pump station of Baltic pipeline system, Transneft Oilfield Pump Station 2, Vankor oilfield, Rosneft Oil Pump Station “Tayezhnaya”, Transneft

5

1H’11 total revenue Rub 13,857 mn EBITDA adj. Rub 3,133 mn profit for the period Rub 2,082 mn

Oil upstream ~50%

HMS Group Core Industries

6

Revenue contribution by industries

Oil transportation ~18%

Water utilities ~12%

Nuclear power generation ~1%

Metallurgy & Mining ~1%

Others ~8%

Note: “Others” include general industry pumps and other axillary equipment

Oil refining ~2%

Thermal power generation ~8%

Oil ~70%

Power generation ~9%

Source: Management accounts

http://rosneft.ru/news/photogallery/Upstream/Overview/2/

5% 6% 25% 40%

95% 94% 75% 60%

2008 2009 2010 1H 2011

Revenue from integrated solutions Revenue from standard equpment


Development of Business Model

Why integrated solutions ESPO-I pipeline is an example of integrated solutions

Producers Products / Services

HMS and other suppliers including Siemens

Design, production and testing of pumps

HMS

Design of integrated pumping solution

Overall project management

Procurement for supply of engines, cooling sleeves, valves and other equipment

Turn-key commissioning

1. Trunk pump 2. Motor 3. Coupling 4. Oil coolers 5. Adsorptive dryers 6. Air collectors 7. Compressors

8. Joints 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

7

Type of project / Service

Standard pumps Integrated solutions & customized pumps

Source Array of small-size contracts

Large-scale projects

Research & development Normal Critical

Technical entry-barriers Average High

Capex requirements High Average

Competition type Price R&D and references

Competition High Limited

Revenue growth potential Limited Unlimited

EBITDA margin 10-15% 25-30%

Revenue downside potential

Limited Limited, nearest 1.5y

Frequency High n/a

Aftermarket demand Average High

Integrated solutions’ revenue contribution

INVESTMENT HIGHLIGHTS

8

2.4

8.0

17.9

4.2

12.2

30.4

1.1

5.2

9.8

2002 2010 2015E

Power generation

Municipal water

Oil & Gas, surface

712

1,226

337

810

271

540

2010 2015E

Oil refining & petrochemicals

Oil pipelines

Oil exploration & extraction

357

743

610

1,586

392

1,011

2010 2015E

Municipal water

Thermal power

Nuclear power

Attractive Industry Fundamentals

9

21.4% 13.5%

14.3% 20.0%

CAGR 2002-10

58.1

25.4

Russian selected pumps market revenues, Rub bn

Russian energy & utilities infrastructure investments, Rub bn

Source: Frost & Sullivan 2010

Mix of growing markets

7.7

‘10-15E

16.2% 17.5%

17.1%

17.3%

CAGR 2010-15E

13.0%

3,340

1,359

12.2%

15.7%

9.5%

CAGR 2010-15E

2,576

1,320

Russian oil sector investments, Rub bn

CAGR 11.8% CAGR 16.2% CAGR 18.0%

CAGR 16.1%

Power generation

Municipal water

Oil & Gas, surface

Municipal water

Thermal power

Nuclear power

Oil refining & petrochemicals

Oil pipelines

Oil exploration & extraction

31.6

48.9

28.6

32.9

2009 2010

HMS Group revenue, US$ mln

Other

59.8 73.8

42.9

61.4

2009 2010

HMS Group revenue, US$ mlnOther

10

Leading market share on key markets…

292.6 331.8

173.1

243.9

2009 2010

HMS Group revenue, US$ mln

Other

Oil industry1 Water utilities2 Power generation3

HMS Group has leading positions in all key markets of presence with ~ 40% share on pumps market.

HMS Group managed to expand its market share in the most key segments of business

In the oil industry and water utilities the company’s share outperformed overall market growth

Decrease in power generation pumps is attributable to the nuclear industry’s specifics expressed in long-term only

contracts. Revenue from signed in 2009 contracts will be recognized during 2011/2012

Key conclusions

465,7

575,7

102,7

135,2

60,2

81,8

+41% +43%

+15%

1 includes pumps and oil and gas equipment 2,3 includes pumps

The Leading Provider of Flow Control Solutions

Notes:

Market growth +24% Market growth +32% Market growth +36%

Advanced R&D Capabilities

Very strong in-house R&D and significant experience in pump

development

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

Deep integration with clients’ R&D

Giprotyumenneftegaz (GTNG) is the leading Russian R&D

centre specializing in design of on-surface (as opposed to

sub-surface) facilities for oil and gas fields, e.g. it

designed over 200 fields in Russia including many of the

largest (e.g. Samotlor, Mamontovskoye, Priobskoye)

Significant R&D resources for design of water utilities

projects (RVKP)

Pumps Project design

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 is crucial for establishing/maintaining strong

relationships with clients

HMS ability to participate in pre-tender preparation stage creates unique competitive advantage

11

Free-float37%

Vladimir Lukyanenko

24%

Managers22%

German Tsoy17%

Vladimir Lukyanenko Non-executive Director

Shareholder In company since 2005

Artem Molchanov Managing Director (CEO)


Main Shareholders Run the Business

The Board is comprised of professionals with

significant experience in pump and oil and gas

industries

It includes founders, who have led HMS since its

inception

HMS is the core business of the largest

shareholders

Long-term commitment to the business from

shareholders

Source: Company data as of October 6, 2011

Board of Directors Comments

Shareholders Structure

Kirill Molchanov First Deputy CEO (CFO)


German Tsoy Chairman of the Board


Yury Skrynnik Director for Strategic Marketing


Nikolay Yamburenko Head of Industrial Pumps


Philippe Delpal Independent

Chairman Audit Committee

Andreas Petrou Non-executive

Gary Yamamoto Independent

Chairman Remuneration Committee

Founders

12

98.6% 1.4%

Fixed rate Floating rate

77.0% 23.0%

Long-term debt Short-term debtS&P corporate credit rating: BB- Outlook: Stable

13

Moderate leverage… …with comfortable repayment schedule…

…and low currency and maturity risks Comments

Source: Company data as of 01 July, 2011

Healthy Debt Position

Low leveraged business profile with Net Debt to EBITDA LTM ratio of only 0.7

Easy access to additional liquidity with more than Rub 2.97 bn of undrawn credit facilities (as of 01 September, 2011)

Steady debt repayment schedule with negligible currency risk and prudent maturity structure

More than 98% of Rub-nominated debt with fixed interest rate

Weighted average interest rate of 8.7%, down from 11% a year ago, while interest coverage ratio grew to 14.5

3,455

4,539 4,297

4,105

2.0

2.4

1.2

0.7

2008 2009 2010 1H 2011

Net Debt, Rub mn Net Debt to EBITDA LTM

490

1,255 1,218

2,090

488

2,965

2011E 2012E 2013E 2014E 2015E

Repayments, Rub mn Undrawn credit line, Rub mn

Source: Company data Source: Company data as of 01 September, 2011

98.4% 1.5% 0.1%

Rub Euro Others

14

Risk type Coverage

Raw materials price fluctuations Sale price adjustments for standard products in line with raw materials costs changes

Advances received under the long-term projects are transferred to the suppliers in order to fix raw materials price for the whole project life-cycle

Delay of projects execution

Currency risks

Interest risk

Short-term oil price drop

Day-to-day monitoring and control over of projects implementation

99% of debt with fixed interest rate

Revenue, expenses and debt are nominated in Rubles

Limited impact on business based on standard products and solutions

High opportunity costs for customers with complicated long-term projects: - HMS solutions are mission critical for the infrastructure projects - Only 1-2% of total project’s CAPEX relates to pumps - HMS solutions are usually implemented on the final stages of project execution

– Long-term oil price decline – fallen revenues

Low risk due to limited competition and large market share, and also because of commodities price correlation (steel and oil)

Long-term oil price decline – influence on margin

Not covered

Hedging & Risk Management

FINANCIAL PERFORMANCE

15

431 709 1,111 1,268 1,588 1,545

11.2%

13.4%

15.8%

18.4%

22.5% 22.7%

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

EBITDA, Rub mn EBITDA margin

Rub, mn 1H 2011 1H 2010 chg, yoy

Revenue 13,857 9,149 +51.5%

Gross profit 4,292 2,182 +96.7%

EBITDA 3,133 1,140 +174.8%

Operating profit 2,743 1,035 +164.9%

Net income (loss) 2,082 388 +436.8%

Total debt 4,599 6,361 (27.7%)

Net debt 4,105 4,489 (8.6%)

Net debt to EBITDA LTM ratio 0.7 2.1

Gross margin 31.0% 23.8% +713bps

EBITDA margin 22.6% 12.5% +1,015bps

Operating margin 19.8% 11.3% +847bps

Net income margin 15.0% 4.2% +1,079bps

Significant growth of revenues

Financial Highlights for 1H 2011


16

Revenue performance

EBITDA and EBITDA margin performance



3,835 5,314 7,009 6,912 7,051 6,806

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

Revenue, Rub mn Linear ( Revenue, Rub mn)

1,035

30

(497)

(14)(167)

388

2,743

8

(207)

37

(499)

2,082

Operatingprofit

Financeincome

Financecosts

Share ofresults ofassociates

Income taxexpense

Net income

1H 2010 1H 2011

56.5%

15.1% 16.6%11.8%

58.5%

20.6%

11.9%9.0%

Materials Labour Cost of goods sold Other costs

1H 2010 1H 2011

69%

11%

20%

3%

23%

Revenue Cost of sales SG&A expenses & others Operating profit Depreciation & amortisation with other deductions

EBITDA

76%

13%

11%

2%

12%


operating expenses 11.1bn vs 8.1bn in 1H’11 | +37% yoy revenue in 1H’11 | +51% yoy ebitda in 1H’11 | +175% yoy

Net income components, Rub mn

EBITDA Development in 1H 2011

EBITDA key drivers, % of revenue

Cost of sales components, Rub mn

Source: Company data 17


0

20,000

1H 2010 1H 2011

Oil & gas equipment:

Revenue contracted by 12% yoy

EBITDA margin decreased to 5.5%

Absence of orders for integrated solutions in 1H affected margin performance

Standard equipment margin declined after crisis as a result of the competition growth in this segment

Situation is expected to brighten in 2H owing to the contracts for integrated solutions to be signed in 2H 2011 and entrance into new market segments, e.g. associate gas processing

Highlights by core business segments, Rub mn Comments

Pumps:

Revenue increased by 133% yoy and amounted to Rub 8,518 mn

EBITDA margin grew to 30.2%

Execution of the project in the oil transportation segment as well as stable order intake in other market segments resulted in healthy EBITDA and EBITDA margin growth

Revenue from pumps excluding integrated solutions grew by 8% with EBITDA margin of 20% due to growth of demand and effective cost control

Revenue & EBITDA Contribution by Segments


Pumps

Oil & gas equipment

EPC EPC:

Revenue down 2% to Rub 2,798 mn

Construction revenue declined to Rub 1,637 mn due to intentional rejection of low-margin contracts

Project & design revenue up to Rub 1,170 mn, mainly due to GTNG acquisition

Healthy margin in construction sub-segment and superior margin in project & design (5.3% and 23.1% respectively) resulted in 12.7% of EBITDA margin in EPC segment

Despite recent signature of several large contracts, the Group sticks to conservative projections on construction development

ebitda +265%

revenue +133%

ebitda -56%

revenue -12%

ebitda +171%

revenue -2%

18

3,656

8,518

706

2,574

19.3%

30.2%

1H 2010 1H 2011


2,6232,320

285127

10.9%

5.5%

1H 2010 1H 2011


2,857 2,798

131

356

4.6%

12.7%

1H 2010 1H 2011


351

2,932

(3,848)

(507)

(1,423)

(1,726)

3,303

494

Cash as ofJan 1, 2011

Operatingcash flowbefore WCchanges

WCchanges&others

Income tax& interest

paid

Net cashused in

operatingactivities

Net cashused ininvestingactivities

Net cashfrom

financingactivities

Cash as ofJul 1, 2011

-2,263

93

( 1,178 ) 5,220

6,398

Working capital1H 2010

Inventorieschange

Receivableschange

Payableschange

Working capital1H 2011

HMS Group generated Rub 2,932 bn of operating cash flow before changes in working capital

Substantial working capital increase in 1H 2011 led to the negative operating cash-flow due to ongoing execution of the large infrastructure oil transportation contract with significant advance payments received last year

Working capital is expected to fit target range of 10-15% of revenue with positive operating cash flow in 1H 2012 as a result of:

Next payment of about Rub 2 bn under the contract

Prepayments on contracts signed in 2H’11, and contracts in process of signing

Investing cash flow consisted of:

Organic capex of Rub 438 mn, in line with target level of 1.5-2.5 times depreciation

Acquisition of Sibneftemash – Rub 1,280 mn

Financing cash flow was supported by IPO proceeds of Rub 3,373 mn

Comments Working capital as of 30 June 2011, Rub mn

Cash flow performance in 1H 2011, Rub mn Capital expenditures in 1H 2011 vs 1H 2010

CAPEX & Working Capital as of 30 June 2011


Source: Company data Source: Company data

19

Sibneftemash acquisition (1,280) Rub mn

IPO proceeds 3,373 Rub mn

WC changes (3,650) Rub mn

300

438

146

226

2.1x1.9x

1H 2010 1H 2011

Organic capex, Rub mn Depreciation, Rub mn Capex to Deprecation ratio, x

+ +

+ =

13%

23%

1H 2010 1H 2011

WC to Revenue LTM

13%

23%

1H 2010 1H 2011

WC to Revenue LTM

13%

23%

1H 2010 1H 2011

WC to Revenue LTM

2011 & 2012 BUSINESS UPDATE & OUTLOOK

20

Products portfolio Pumps for oil refining and metallurgy & mining

applications

Deal details: US$ 9.7 mn for 57% of the company (primary stock)

Key financials, BAS 1H’11 Revenue Rub 222 mn 1H’11 EBITDA Rub 30 mn 1H’11 EBITDA margin 13%

Bobruisk Machine Building Plant acquisition

Acquisition rationale Broadening of HMS Group product portfolio with complementary

equipment Potential growth of revenue and EBITDA margin:

Sales power and R&D capability of HMS Group Well-known brands and/ or technical equipment base of

acquired companies Attractive multiples

21

HMS Group Recent Acquisitions

Source: Bloomberg FX rate

Sibneftemash acquisition

Key financials, RAS 1H’11 Revenue Rub 485 mn 1H’11 EBITDA Rub 79 mn 1H’11 EBITDA margin 16%

Products portfolio Tanks and vessels for oil and oilfield services

companies

Deal details: Rub 1,292 mn for 98.6% of the company

596

61

484

1H 2011

HMS has two contracts signed:

– TNK-BP 1-year contract worth Rub 117 mn*, which implicates full maintenance of water injection pumps at the Samotlor field

– 1-year contract worth Rub 484 mn* for maintenance and overhaul services on an Eastern-Siberian oilfield with a very high level of probability for 2-more-year prolongation, that can generate about Rub 1 bn additionally

Contracts’ details:

– HMS Group employs the contractors’ personnel, takes a lease of the contractors’ repair facilities and processing equipment, reducing capex and staff recruitment costs

5% 41% 43%

HMS Group Flowserve Sulzer

Aftermarket Original equipment

Spare parts & services

Comments HMS Group has a very large installed base

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

In red are highlighted the pump’s components which can be replaced in order to extend the pump’s operation life

22

Case study: Pump modernization at the Samotlor oilfield

Aftermarket input in total revenue vs peers

Source: Companies’ websites, latest published data used

Water injection pumps

HMS supplies 87%

Other 13%

Oil trunk pipeline pumps, Transneft

HMS supplies 98%

Other 2%

Aftermarket trend in HMS Revenue, Rub mn


New aftermarket contract, Sept 2011

Samotlor

Note: * excluding VAT

657

Source: Frost & Sullivan 2010

Revenue recognition depends on production period for various type of equipment and the nature of the project

Backlog structure performance

Backlog

Source: Company data, Management accounts

23

1

2 As of June 30, 2011 backlog became more diversified with approximate ESPO contribution of 1/3 versus 2/3 last year, that resulted in higher backlog turnover

Rub mn 1H 2011 1H 2010 chg, YoY Production period /Annual revenue

Products & services on demand, short production cycle - - - Rub 4-5 bn

Oil transportation pumps 4,914 11,506 (57%) 12-36 months

Construction component of EPC 1,492 2,796 (47%) 6-18 months

Other equipment 7,323 5,093 +44% 2-8 months

Total backlog 13,728 19,396 (29%)

6,236 10,678 7,870

12,404

1H 2010 2H 2010 1H 2011

ESPO project, Rub mn

Total order intake excluding ESPO, Rub mn

5,260 8,023 7,216

777

1H 2010 2H 2010 1H 2011


Order intake for other equipment, Rub mn

994 134 11,627

1H 2010 2H 2010 1H 2011


Order intake for oil transportation pumps, Rubmn

Comments

Order Intake

24

Total order intake

Other equipment Oil transportation pumps

Order intake growth in 1H was driven by regular orders (Rub 5-300 mn) across all business segments except construction and oil transportation

Order intake in oil transportation contracted due to the fact, that potential contracts are in a pre-tender stage

Order intake in construction segment contracted as the company intentionally rejected low-margin contracts

Seasonally, 2H is stronger than 1H in terms of new orders

Growing number of Rub 1-3 bn orders (ESPO and Vankor expansion, new oilfields and nuclear plants) are expected to become the core driver of HMS Group’s revenue going forward


Construction segment of EPC

Source: Company data, Management accounts Source: Company data, Management accounts


976 1,661 520

1H 2010 2H 2010 1H 2011

Order intake for construction, Rub mn

18,640

6,037 11,627

HMS Group passed the pre-qualification audit by ENI (07 July, 2011)

Rub 500 mn : HMS Group to produce modular equipment to an oilfield in Eastern Siberia (08 July, 2011)

Rub 300 mn : HMS Group to carry out design works for a Western Siberia gas condensate field (11 July, 2011)

Rub 1 bn : HMS Group signed a new contract on construction for a gas field in Western Siberia (01 September, 2011)

Rub 484 mn : HMS Group signed a new aftermarket contract for an oilfield in Eastern Siberia (29 September, 2011)

HMS Group successfully works on its order book and future growth

HMS Group Recent Selected Contracts

25

Project Brief description Completion Key metrics Comments

Rosneft

Vankor 2 stage Further development. Capex for 2011 US$ 2.6 bn next stage by 2014 Min capex Rub 480 bn HMS won a number of tenders

Yurubcheno-Tokhomsk oilfield Feasibility study under preparation, depends on tax concessions by 2014 Planned production 20mt

Associated gas utilization program (Komsomolskoe, Priobskoe oilfields)

Achievement of 95% level of associated gas utilization HMS participated in previous stages

Lukoil & Bashneft JV

Trebs and Titov fields Joint development of the fields, in stage of project development. Reserves 141 mt

by 2013 Capex US$5-6 bn HMS has good references for previous

projects

Transneft

ESPO expansion 9 oil-pumping stations to be constructed to deliver oil to Khabarovsk and Komsomolsk refineries by 2015

9 OPS by 2015 HMS participated in previous stages

Zapolyarye – Pur-pe pipeline Oil transportation from YANAO and Northern Krasnoyarsk region oilfields

4 OPS by 2015 Capex Rub 120 bn HMS participates in a project design

ESPO expansion 4 OPSs to be constructed to deliver oil to Primorsk refinery by 2017

4 OPS by 2017 HMS participated in previous stages

Pur-pe – Samotlor expansion Construction of 2 OPS. Total capex in 2011 Rub 77 bn 2 OPS by 2017 HMS participated in previous stages

TNK-BP

Russkoe oilfield Giant oilfield in YANAO with specific oil. Project production 20 mtpa

Capex US$ 4.5 bn HMS participates in a project design

Samotlor Further development of an active oilfield in Nizhnevartovsk. by 2014 Capex US$ 4.6 bn HMS participated in previous stages

Uvat 21 oilfields in Tyumen region HMS participated in previous stages

East- and Novo- Urengoy gas & condensate fields

Planned production for 2011 is 3.2bcm, up 17% on 2010 HMS participates in a project design

Verkhnechonsk oilfield Oilfield located in the Eastern Siberia, Irkutsk region. Development was stimulated by close proximity of ESPO pipeline.

Peak production by 2014

Additional US$3-4 bn HMS participated in previous stages

Gazprom

Shtokman gas and condensate field The field will become a resource base for Russian pipeline gas and liquefied natural gas (LNG) exports to the Atlantic Basin markets

HMS produces units for complex gas preparation

Gazprom Neft

Priobskoe oilfield Western Siberia. Recoverable reserves ~600 mt HMS participates in a project design

Urmanskoe and Shinginskoe oilfields Eastern Siberia

Sberbank Capital

Dulisma oilfield Irkutsk region. Further development. 3rd resource base for ESPO Total reserves 15 mt HMS participated in previous stages

Taas-yuriah oilfield Sakha region. Further development. Total reserves ~130 mt Capex Rub 15-30 bn

Iraq

Rumaila brownfield Consortium headed by BP Capex US$ 15 bn HMS already submitted technical

survey

Az Zubair Consortium headed by Eni Capex US$ 20 bn HMS participates in a tender

Municipal water

Central Asia Irrigation stations for Uzbekistan and Turkmenia HMS has good references from

previous projects

Financial and Operational highlights

Selected End-market Projects for Mid-term

Source: Public information, Company data

Increased number of HMS end-market projects

26

Contracts signed

Contacts and HMS Group Key Details

27

Company address: 7 Chayanova Str. Moscow 125047 Russia

Investor Relations Phone +7 (495) 730-66-01 [email protected] http://grouphms.com/shareholders_and_investors/ Twitter HMSGroup and HSMGroup_Rus Sergey Klinkov, Head of Investor Relations [email protected] Inna Kelekhsaeva, Deputy Head of Investor Relations [email protected]

HMS Hydraulic Machines & Systems Group Plc is listed on the London Stock Exchange Identifier Number Number of shares outstanding ISIN US40425X2099 117,163,427 Ticker HMSG Bloomberg HMSG LI Reuters HMSGq.L Credit Rating Standard & Poor’s BB- (Outlook stable) as of 16 June, 2011

mailto:[email protected]



http://grouphms.com/shareholders_and_investors/












APPENDIX

28

Calculations

All figures in millions of Russian Rubles, unless otherwise stated

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

EBITDA is defined as operating profit/loss adjusted for other operating income/expenses, depreciation and amortization,

impairment of assets, provision for obsolete inventory, provision for impairment of accounts receivable, unused vacation

allowance, defined benefits scheme expense, warranty provision, provision for legal claims, provision for VAT and other taxes

receivable, other provisions, excess of fair value of net assets acquired over the cost of acquisition. This measurement basis

excludes the effects of non-recurring income and expenses on the results of the operating segments

EBIT is calculated as Gross margin minus Distribution & transportation expenses minus General & administrative 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 Total debt minus Cash & cash equivalents at the end of the period

Working capital is calculated as Inventories plus Trade and other receivables minus Trade and other payables

Backlog is calculated as the preceding backlog plus new or additional customer orders booked during the reporting period, less

amounts of contract value booked as revenue under ‘‘Russian GAAP’’ on an unconsolidated basis under the relevant

contracts, plus or minus adjustments made in the judgment of the Group’s management. The Group may also make certain

adjustments to bookings to reflect amendment, expiry or termination of contracts, cancellation of orders, changes in price

terms under contracts or orders, or other factors affecting the amount of potential revenue which the Group believes may be

recognized under such contracts. The Group’s backlog estimates are not an indication of potential revenues. Actual revenues

and other measures of financial performance under IFRS may differ materially from any estimate of backlog, and changes in

backlog between periods may have limited or no correlation to changes in revenue or any other measure of financial

performance under IFRS

Notes to the presentation and formulas used for some figures’ calculations

29

RUB,’000 30 June 2011 31 December 2010

ASSETS Non-current assets: Property, plant and equipment 6,486,500 5,948,674 Other intangible assets 380,488 310,156 Goodwill 2,348,255 1,783,915 Investments in associates 523,324 507,141 Deferred income tax assets 98,618 130,779 Other long-term receivables 50,536 27,123

Total non-current assets 9,887,721 8,707,788

Current assets: Inventories 3,623,361 2,840,745 Trade and other receivables and other financial assets 8,681,888 10,399,853 Current income tax receivable 51,856 38,086 Prepaid expenses 32,448 39,361 Cash and cash equivalents 493,999 351,086 Restricted cash 5,197 4,978

12,888,749 13,674,109

Non-current assets held for sale 53,850 96,095

Total current assets 12,942,599 13,770,204

TOTAL ASSETS 22,830,320 22,477,992

EQUITY AND LIABILITIES EQUITY Share capital 48,329 42,510 Share premium 3,523,535 210,862 Currency translation reserve (417,946) (234,785) Retained earnings 4,887,224 2,897,296 Other reserves 122,852 38,987

Equity attributable to the shareholders of the Company 8,163,994 2,954,870 Non-controlling interest 1,532,288 1,508,263

TOTAL EQUITY 9,696,282 4,463,133

LIABILITIES Non-current liabilities: Long-term borrowings 3,528,388 3,864,176 Finance lease liability - 9 Deferred income tax liability 1,082,918 745,762 Pension liability 256,996 262,525 Provisions for liabilities and charges 45,607 35,691

Total non-current liabilities 4,913,909 4,908,163

Current liabilities: Trade and other payables 5,907,622 10,799,358 Short-term borrowings 1,068,698 775,242 Provisions for liabilities and charges 327,839 312,213 Finance lease liability 2,288 8,446 Pension liability 14,485 24,736 Current income tax payable 18,654 115,340 Other taxes payable 880,543 1,071,361

Total current liabilities 8,220,129 13,106,696

TOTAL LIABILITIES 13,134,038 18,014,859

TOTAL EQUITY AND LIABILITIES 22,830,320 22,477,992


Statement of Financial Position

30


Statement of Comprehensive Income RUB,’000

Six months ended 30 June 2011

Six months ended 30 June 2010

Revenue 13,857,464 9,149,003 Cost of sales (9,564,991) (6,967,040)

Gross profit 4,292,473 2,181,963

Distribution and transportation expenses (387,385) (260,016) General and administrative expenses (1,019,510) (845,719) Other operating expenses, net (143,071) (40,923)

Operating profit 2,742,507 1,035,305

Finance income 7,981 30,077 Finance costs (206,740) (496,684) Share of results of associates 36,976 (13,914)

Profit before income tax 2,580,724 554,784

Income tax expense (498,760) (166,971)

Profit for the period 2,081,964 387,813

Profit attributable to:

Shareholders of the Company 1,989,928 371,001 Non-controlling interest 92,036 16,812 Profit for the period 2,081,964 387,813

Currency translation differences (238,951) 43,060 Currency translation differences of associates (6,791) 4,839

Other comprehensive (loss)/income for the period (245,742) 47,899

Total comprehensive income for the period 1,836,222 435,712

Total comprehensive income attributable to:

Shareholders of the Company 1,806,767 412,211 Non-controlling interest 29,455 23,501 Total comprehensive income for the period 1,836,222 435,712

Basic and diluted earnings per ordinary share for profit/(loss) attributable to the ordinary shareholders (expressed in Rub per share) 17.44 3.62

31

RUB,’000 Six months ended

30 June 2011 Six months ended

30 June 2010

Cash flows from operating activities

Profit before income tax 2,580,724 554,784

Adjustments for: Depreciation and amortisation 302,546 154,840 Loss/(gain) from disposal of property, plant and equipment and intangible assets 6,364 (9,322) Finance income (7,981) (29,236) Finance costs 198,756 496,684 Pension expenses 1,102 33,207 Warranty provision (35,738) 9,216 Interest expense related to construction contracts 2,594 3,815 Provision for impairment of accounts receivable (83,795) (16,681) Investments impairment provision 341 (143) Provision for obsolete inventories 26,183 (115,093) Foreign exchange translation differences 7,984 (841) Provision for VAT receivable (11,327) 5,321 Provisions for legal claims (18,313) (12,492) Share of results of associates (36,976) 13,914 Loss from disposal of subsidiary - 4,369 Other non-cash items (468) (1,456)

Operating cash flows before working capital changes 2,931,996 1,090,886

Increase in inventories (769,019) (184,578) Decrease/(increase) in trade and other receivables 1,640,600 (5,983,497) (Decrease)/increase in other taxes payable (197,670) 803,368 (Decrease)/increase in accounts payable and accrued liabilities (4,521,724) 7,264,719 Restricted cash 219 360

Cash (used in)/generated from operations (915,598) 2,991,258

Income tax paid (311,625) (127,252) Interest paid (195,798) (511,611)

Net cash (used in)/from operating activities (1,423,021) 2,352,395

Cash flows from investing activities Repayment of loans advanced - 3,033 Loans advanced - (2,401) Proceeds from sale of property, plant and equipment and intangible assets 7,683 6,220 Interest received - 4,275 Dividends received 14,002 15,288 Purchase of property, plant and equipment (438,160) (300,496)

Cash received from disposal of subsidiary - 7,475

Acquisition of intangible assets (29,888) (8,400) Acquisitions of subsidiaries, net of cash acquired (1,280,000) (2,339,457) Net cash used in investing activities (1,726,363) (2,614,463) Cash flows from financing activities Repayments of borrowings (6,262,415) (5,257,621) Proceeds from borrowings 6,214,859 6,301,637 Payment for finance lease (6,157) (6,918)

Acquisition of non-controlling interest in subsidiaries - (33,945)

Cash received from additional share issue of subsidiary - 428,420

Proceeds from share issue, net of issue costs 3,372,516 -

Dividends paid to non-controlling shareholders of subsidiaries (15,863) (145,937)

Cash received from capital contribution - 85,817

Net cash from financing activities 3,302,940 1,371,453

Net increase in cash and cash equivalents 153,556 1,109,385

Effect of exchange rate changes on cash and cash equivalents (10,643) 3,555

Cash and cash equivalents at the beginning of the period 351,086 758,127

Cash and cash equivalents at the end of the period 493,999 1,871,067


Cash Flow Statement

32

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

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

HMS Group Business Strategy

33

2009–Today Integrated Solutions Modular Equipment Design and Manufacturing

Pump Design and Manufacturing Pump Trading

2007–2008 Construction Modular Equipment Design and Manufacturing


2004–2006 Modular Equipment Design and Manufacturing


2003 Pump Design and Manufacturing Pump Trading

1993–2002 Pump Trading

HMS Group Positioning

The sole domestic engineering company in Russia

34

From pumps to integrated solutions based on excellent R&D base

Above ground

Under ground

Note: * Modular Equipment (Oil & gas equipment)

Industry HMS IntegraEurasia

DrillingWeir Flowserve

Dresser

RandTechnip Schlumberger

Baker

Hughes

Power generation √ √ √

Oil and Gas √ √ √

Water √ √ √

Oil and gas equipment √ √ √ √

Repair √ √ √

Oil and Gas √ √ √ √

Power generation √

Water √

Seismic research √ √ √ √

Well service √ √ √ √

Drilling √ √ √ √

Oil production increase √ √ √ √

Pum

ps

ME*

EPC

Serv

ice

Russian Foreign

1,890

3,519

12.8%

15.3%

2009 2010

EBITDA margin

1,298

3,027

2009 2010

14,772

23,070

2009 2010

18.0%

36.2%

2009 2010

Revenue, 2009 vs 2010 Comments

Financial Performance for 2010

Source: Company data Source: Company data


Total revenue up 56% yoy to Rub 23,070 mn

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

ROCE, 2009 vs 2010 EBIT, 2009 vs 2010

EBITDA, 2009 vs 2010

Net income, 2009 vs 2010

+133% +1,825bps

+56% +86%


70

1,581

2009 2010

+2,156%


35

55%

16% 15%

4% 2% 2%5%

60%

16% 13%

3% 2% 1%5%

Materials Labour Cost ofgoods sold

Constructionworks by

sub-contractors

D&A Utilities Others

2009 2010

75.3% 2.5% 9.1%

0.5% 12.6% 1.9% 0.7% 15.3%

Revenue Cost of sales Distribution andtransportexpenses

SG&A Other expenses Operating profit Depreciation &amortisation

Others EBITDA*

EBITDA key drivers, 2009 vs 2010 (% of revenue)

Comments Cost of sales components comparison, 2009 vs 2010

EBITDA Development in 2010

expenses

EBITDA increased by 86% yoy to Rub 3,519 mn due to:

Strong revenue growth in all business units

Focus on innovative high-margin contracts

Effective cost control

Consolidation of GTNG

EBITDA organic growth of 72% yoy

EBITDA margin increased to 15.3%

SG&A grew less than revenue due to economy of scale

and cost optimization strategy


operating expenses

20.2bn vs 13.7bn in 2009 |+47.2% yoy revenue in 2010 +56.2% yoy

0

50,000

2009 2010

75.6% 3.3% 12.4%

1.5% 7.3% 2.3% 3.1% 12.8%

Revenue Cost of sales Distribution and transport expenses

General & Administrative

expenses

Other expenses Operating profit Depreciation & amortisation

Others EBITDA


36

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 decreased 24% yoy and EBITDA margin also down to

10.3% due to execution of low-margin contracts concluded in

2009

Highlights by core segments, 2009 vs 2010 Comments

Pumps:

Sales up 70% yoy to Rub 10,712 mln, enjoying strong demand

for integrated pumping solutions primarily in oil transportation

and upstream

EBITDA grew by 134% yoy, and EBITDA margin rose to 22.1%,

primarily attributable to increasing share of contracts for pump-

based integration solutions

Revenue & EBITDA Contribution by Segments


Pumps

Modular equipment

EPC 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 increased significantly to Rub 550 mln, and EBITDA margin rose to 9.0%. Newly acquired GTNG added to EPC’s EBITDA Rub 271 mln

Such a significant EBITDA growth is primarily attributable to a low EBITDA base in 2009, caused by significant price pressure connected to investment cutbacks by oil companies

ebitda +1,548%

revenue +46%

ebitda -24%

revenue +39%

ebitda +134%

revenue +70%

6,308

10,712

1,012

2,367

16.0%

22.1%

2009 2010

Revenue, Rub mln EBITDA, Rub mln EBITDA margin, %

4,166

5,805

786 599

18.9%

10.3%

2009 2010


4,189

6,135

33 550 0.8%

9.0%

2009 2010


37

Source: Frost & Sullivan report 2009, Transneft website (www.transneft.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

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 fields

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

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

38

Trebs & Titov (140 MMt, 2,151 km)

Prirazlomnoye

http://www.transneft.ru/

TGC-13 (Enisei) Investments 2010-2015: RUB 10 bn

TGC-9 Investments 2010-2015: RUB 28 bn


TGC-7 (Volga) Investments 2010-2015: RUB 11 bn



TGC-3 (Mosenergo) Investments 2010-2015: RUB 39 bn


TGC-12 (Kuzbas) Investments 2010-2015: RUB 21 bn


TGC-10 (Fortum) Investments 2010-2015: RUB 47 bn




Source: Frost & Sullivan report 2009

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

South

Rostovskaya

Summary of total investments in power generating capacity

Selected nuclear power plant projects abroad using Russian technology

Number of power units to be constructed or reconstructed

Additional generation capacity, MW

Investments 2010-2015 (RUB 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

Name Country No of power units / Unit capacity (MW)

Investments 2010-2015 (RUB bn)

Belene NPP Bulgaria 1 / 1,000 128

Tianwan 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

39

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 & Sullivan report 2009, Media sources 1 Figures have been taken from various media sources; they are not final and may change in the

future

2 The “Clean Water” program is a nationwide large investment plan aimed at improving drinking water quality.

Capex in water projects, RUB bn (2007–2015)

Source: Frost & Sullivan report 2009

Large-scale State Programs Total Capex 2010-

2015 (RUB bn) Capex period

Federal Program "Zhilische" (public housing)

620 2011-2015

Regional programs "Clean Water“2 (unconfirmed 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 Development Program

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

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: RUB 1.6 trn1

Olympic Games in Sochi in 2014 Investment 2010-2014: RUB 930 bn1

Asia-Pacific Economic Cooperation Summit in Vladivostok in 2012 Investment 2010-2012: RUB 660 bn1

Vladivostok

Export markets

Leading integrated water utilities

40

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

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

41

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

Zapolyarnoe-Pur-pe pipeline

Projected Zapolyarnoe–Pur-pe pipeline

Inlet pipelines from main perspective oilfields (with production level over 2mln tons in 2020)

New OPS

Maximum level of pumping capacity by 2020, mtpa

Main OPS – main oil-pumping station of the future Zapolyarnoe-Pur-per pipeline

OPS – oil-pumping station

Legend

Inlet pipelines

Inlet point Oilfield License holder Max capacity

in 2020, mt

Main OPS 1 Vostochno-Messoyakhinskoe Slavneft * 10.9

Main OPS 1 Zapadno-Messoyakhinskoe Slvaneft 2.4

Total Main OPS 1 13.3

OPS 2 Russkoe TNK-BP 6.8

OPS 2 Zapolyarnoe Gazprom 2.3

OPS 2 Tazovskoe Gazprom 1.0

OPS 2 Northern Urengoyskoe Gazprom n/a

OPS 2 Salekaptskoe Lukoil 0.3

Total OPS 2 10.9

OPS 3 Urengoyskoe Gazprom 7.4

OPS 3 Pestsovoe Gazprom n/a

OPS 3 En-Yakhinskoe Gazprom n/a

OPS 3 Samburgskoe SeverEnergiya ** 0.2

OPS 3 Yaro-Yakhinskoe SeverEnergiya 0.5

OPS 3 License plot of Western Urengoyskoe TNK-BP 1.1

Total OPS 3 9.7

Total capacity to Pur-pe 34.0-45.0

* TNK-BP and Gazprom Neft have per 50% share ** Gazprom holds 51%; this shareholding should be sold to Novatek

Source: Public sources, Transneft site

Capacity, mtpa up to 45

Total length, km 488

Projected cost, RUB bn 120

Total length of inlet pipelines, km 1,200

Project figures Construction period 2011-2015

1st stage Dec 2013

2nd stage Dec 2014

3rd stage Dec 2015

Implementation

1st stage

2nd stage

3rd stage

42

Gazprom Neft5%

Transneft34%

Rosneft10%

Gazprom Neft7%

TNK-BP5%

Hors Group3%

NK Dulisma3%

Gazprom2%

Lukoil2%

Stroygazconsulting2%

Surgutneftegaz1%

Others31%

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

Rosneft26%

Orion Stroy11%

TNK-BP7%

Transneft6%

Gazprom Neft5%

Surgutneftegaz2%

Salym Petroleum2%

Lukoil1%

Others40%

Source: Company data * Large client - a client that brings revenue more than Rub 100 mn per period

43

Diversified and Well-established Customer Base

Revenue by Clients*, 1H 2011 vs 1H 2010 Comments

Case study: Gazprom Neft’s revenue breakdown

1H 2010 Total revenue

Rub 9,149 mn

1H 2011 Total revenue

Rub 13,857 mn

Revenue structure by clients

Rub mn

5,5139,498

3,636

4,360

1H 2010 1H 2011

Large clients, Rub mn Others, Rub mn

1H 2011

Gazpromneft-Vostok30.09%

Gazpromneft-Hantos27.51%

Gazpromneft-NNG22.73%

Gazpromneft-Noyabrskneftegas

19.62%

Other 6 subsidiaries0.05%


Competitive Environment in Russia


Limited R&D

Small scale of operations

Pump manufacturing is a non-core business for most of players

Products are often not in direct competition with HMS product line

Key names: NPO Frunze, Votkinsk Plant, Uralhydromash

Not well-positioned in terms of operational efficiency due to limited scale of operations

Global players

Lack of local engineering expertise

Water pumps: KSB, Grundfos

Oil trunk pumps: Sulzer, Flowserve

Power: Weir, KSB

Not well-positioned in terms of price of products

Chinese players

Lack of relevant technologies to produce customized pumps

No brand names

No established relationships with Russian clients

Customized Pumps Standard Pumps

Russian players

44

45

Russia

China

Kazakhstan

Belarus

Ukraine

India

UAE

Uzbekistan

Turkmenistan

Iraq

Vietnam

Kyrgyzstan

Tajikistan

Export Markets

Central Asia

Recently undertook turnkey construction of pumping station on Amu Darya river in Turkmenistan and construction of pumping station on water-storage basin Arnasai in Uzbekistan

Rapidly growing sales of modular equipment to oil and gas sector in Kazakhstan

Presence in water markets of Tajikistan and Kyrgyzstan

Offices in Ashkhabad (Turkmenistan) and Tashkent (Uzbekistan)

Europe

Office in Milan *

Iraq

Significant installed base of HMS pumps, particularly in oil and gas, from Soviet and post Soviet periods

Office in Baghdad diversifies customer base, currently undertakes projects for Oil Ministry and BP

The UAE

Office in Dubai *

Nuclear Exports

Long history of HMS involvement in Rosatom’s foreign as well as domestic projects

International agreements in place for the construction of 19 reactors in China, India, Belarus, Turkey, Ukraine, Armenia, Slovakia, Bulgaria and Vietnam using Russian technology

― Current tenders for development of 16 other reactors worldwide

Source: Company data, media sources Note: * To be opened at 2011-end

HMS office

Italy Bulgaria

Turkey

Livny

Russia

Ukraine

Tomsk

Nizhnevartovsk

Tyumen

Dimitrovgrad

Nizhnevartovskremservice (NRS)

Services: Maintenance and repair of pump equipment, drilling and other oil and gas field equipment

HMS Neftemash

Products: Modular equipment for oil and gas and water industries

Sibneftavtomatika (SibNA)

Products: High-precision measuring equipment for oil, gas and water flow rates

Tomskgazstroy (TGS)

Services: Trunk oil and gas pipeline and auxiliary facilities construction

Sibkomplektmontazhnaladka (SKMN)

Services: Design, construction and commissioning of oil and gas field projects

Rostov Vodokanalproekt (RVKP)

Services: Project design for water utilities

Rostov

Sumy

46

HMS Household pumps

Products: Household vibration pumps

HMS Group

Headquarters

Promburvod (PBV)

Products: Water well submersible pumps

Livnynasos (LN)

Products: Water well submersible pumps

Nasosenergomash (NEM)

Products: Pumps for thermal and nuclear power generation and oil & gas industry

VNIIAEN, associate 47%

Description: R&D center for pumps used in nuclear, thermal power generation, oil and gas industry

Dimitrovgradhimmash (DGHM), associate 40%

Products: Equipment for oil and chemical industries and pumps for oil refining

HMS Pumps

Products: Industrial pumps for oil and gas, power generation

Giprotyumenneftegaz (GTNG)

Services: Project and construction design of oil and gas facilities

Belarus

Minsk

Moscow

Bavleny

Industrial pumps Modular equipment EPC


Production Assets

Bobruisk Machine Building Plant (BMBP)

Products: Pumps for oil refining and metals & mining

Bobruisk

Sibneftemash

Products: Tanks and vessels for oil and oilfield service companies

Growth Strategy: Selective Acquisitions in Key Segments

Source: Company data 1 The Group has an option to acquire 11.0% of the voting shares’ current quantity of its associate, DGKhM, in 2012, as a result HMS Group will own 51.0% of the voting shares of DGKhM

Flow control solutions in oil and gas

Pumps for oil and gas, chemical and petrochemical applications

Modular equipment, tanks and vessels

Dimitrovgradkhimmash (DGKhM)1

Increase of market share

Diversification of product offering

Expansion into new segments

Water Pumps for wet-pit sewage applications

Pumps for water utilities, nuclear and thermal power generation

Modular equipment for wastewater treatment


Strengthening positions in water segment


Expansion into wastewater treatment segment

Power Pumps for nuclear and thermal power generation, marine applications

Pumps for nuclear and thermal power generation, oil refining, chemical and petrochemical applications

Pumps for thermal power generation, water utilities



Other Pumps for oil refining and metals and mining

Pumps for oil refining, oil transportation, water utilities and vessels

Pumps for oil transportation, oil refining, metals and mining

Pumps for chemical applications, nuclear power generation, water utilities


Expansion into new segments


Core Focus for Potential Acquisitions Acquisition Objectives and Rationale

Oil & Gas

47

hms group investor presentation, october 2011

Investor Relations

business of hms group

hms group hmsor group

ebitda development

revenue ebitda contribution

oil coolers

mn ebitda margin

oil gas23

hms groupmidyear results