EnVen COD - Presentation

8/6/2019 EnVen COD - Presentation

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Security AnalystBriefing

June 24, 2011


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COMMERCIAL OPERATION DATE OF WORLDS

LARGEST SINGLE TRAIN UREA PLANT HAS

BEEN DECLARED TODAY

Expansion Plant Operations


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Production HistoryPlant has successfully demonstrated over 40 days ofcumulative production during periods of gasavailability.

On-spec production was achieved within hours of firstever start-up on 29th Dec 2010.

So far, over 118 thousand tons of Urea has beenproduced from the new plant.

First plant in Pakistan to employ highly advancedec no o y or ar on ox e recovery rom ue as.

Results in urea production increase of upto 350 tonsper day.

Hydrogen recovery unit of Ammonia plant in theprocess of getting commissioned. Will add upto 200tons of urea production.

At full capacity, plant can produce over 3800 tons ofurea in a single day

Adjusted for service and capacity factors, annualproduction expected from the plant is around 1.3million tonsen en 1.3en en 1.3


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Energy Consumption

Pakistans most energy efficient and State of the ArtAmmonia / Urea Complex incorporating severalunique features.

First Fertilizer plant of Pakistan to utilize waste gasfrom Ammonia plant for power generation usingState of the Art control system in Gas Turbine drivenpower plant.

Plant is experiencing efficiency debit due to operationat lower load, however is still better than the designefficiency of most efficient competitor as well asEngros existing plant

en en 1.3en en 1.3


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Performance EvaluationsUrea plant has been operated upto 87% of designcapacity (owing to gas limitation)

Adjusted for gas curtailment, the plant has alsodemonstrated upto 100% of the design capacity andefficiency for few days.

Analysis of plant data has been carried out to ascertainexpected plant performance at full load conditions.

Detail plant evaluations have been carried out by, -

by Engros technical team. Clean bill of health has beenissued.

Lenders' appointed independent engineer has carriedout a thorough scrutiny of plant data and is satisfiedwith current plant operation and anticipated operationat full load conditions

If more gas is available, the plant has potential to few %point above design capacity WITHOUT ANYADDITIONAL INVESTMENT

en en 1.3en en 1.3


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Engro FertilizersCommercial & Financial


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Project CostOverall project cost - Rs. 84 Billion (USD 1.14 Billion)

Increase in project cost due to delay and loss of revenue has beencovered through subordinate debt of Rs. 1.5 billion, IPO proceeds of Rs.2 billion (to come in 3rd Q, 2011) and IFC loan of USD 30m

Out of USD 30m IFC loan USD 20m has already been drawn down and10m s n p pe ne


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Gas SituationOn country wide basis there is a shortfall of 20-25% however Sindh and Khyber Pakhtunkhwa invoked article 158 resulting in shortfall of 40% of total demand on SNGPLnetwork

Efforts are being made by GOP and industry to resolve the issue

Short Term Solutions:Import of HSFO - Possibility of importing HSFO instead of Urea

Mari deep - diversion of identified non-pipeline gas to the fertilizer industry will reducecurtailment

-LNG Efforts are being made to fast track LNG imports to reduce reliance onindigenous gas

Gas Finds Fast track implementation of known gas fields - Sui network to bringadditional gas of 400-450 MMSCFD in next 2 yrs chiefly from KP-TYA, Sinjhoro and Uch

- Incentives are being given to encourage further gas exploration

Alternate Fuels companies are also evaluating alternatives to reduce reliance onnetwork gas


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Gas Situation - Cost of Importing Urea vs. HSFO

Import HSFO Import Urea

Lost Production

on Enven

Lost Production on

other Sui-plantsA Import Cost (USD/T) 710 545 545

B Energy Content *(MMBTU/Ton) 40 20 24

Importing Urea is much expensive vs. import of HSFO

A / B

($ / MMBTU)18 28 23

C Weighted-average Cost of Energy ($ / MMBTU)

18 25

Incremental cost to economy of importingurea shortfall Rs. 14 Billion

* Incremental Energy Content


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Pricing PowerIncrease of Rs. 190/bag in December, 2010 to offset marginimpact of 20% curtailment at expansion plant, along with 45days winter outage, and 12% of curtailment at base plant.

Further increase of Rs. 60/bag in April, 2011 to offset the

impact of additional days of plant shutdown betweenFebruary 2011 and April 2011.

Current Urea price Rs. 1,050/bag (Exl. GST) vs. Imported Urearice ~Rs. 2 600 ba Exl. GST i.e. based on Intl rice of CFR-

1,050

2,600

KHI: USD 545/Ton(TCP tender opened in June, 2011)

The company has the option and plans to raise prices further to offset the impact of gas outages

Current price accounts for 90 days shutdown, 20% curtailmenton expansion plant and 12% curtailment at base plant further increase in July will incorporate incremental shutdown days(all numbers are on annualized basis)

Local Urea Price (Exl. GST) - Rs./Bag

Intl. Urea Price (Exl. GST) - Rs./Bag


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Engro Fertilizers Cash Flows and Profitability2011:At current prices, base plant EBITDA alone is sufficient to serve interest cost (~Rs. 9.5

Billion) during 2011

Principal repayment of Rs. 6 billion is due in 2011 50% of which has already been servicedand remaining can easily be serviced through cash generation during 2 nd half

In addition to above there are bridge loans of Rs. 2.6 billion to be paid off during 2011 willbe paid off through IPO proceeds of Rs. 2 Billion and subordinate loan from Engro Corp.

First half 2011 profitability appears to be on track

2012 and beyond:Rs. 18 Billion of Debt servicing is due in 2012 based on current situation this appears to beserviceable

Even without any margin increase deleveraging will result in strong profit growth

Fuel gas price increase or removal of subsidy on feed stock (as being discussed currently byGOP) will have a significantly positive impact on profitability

Debt to Equity beginning of 2012 - 66:34 (including revaluation of the base plant)

Debt to EBITDA for 2012 - 3 to 3.5


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Legal StatusCompany is of the view that it is on a strong legal footing because:

100 MMSCFD gas was allocated through international competitive bidding processconducted by GoP, and upon payment of license fee

Water-tight GSA with SNGPL guarantees uninterrupted supply, with right to first 100

MMSCFD gas production of the Qadirpur field

Both Qadirpur gas field and expansion project are located in Sindh

MMSCFD gasCompany has obtained specific orders from Sindh high court, directing SNGPL tosupply 80-100 MMSCFD to expansion plant no gas outage since the specific courtorders except forced majeure due to issues at Zamzama/Sui gas field


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Engro Fertilizers IPOAfter declaration of commercial operations, we are now planning theIPO of Engro Fertilizers

Major risk of gas supply can be mitigated to a great extent, as demonstrated,through legal/commercial actions

Issue worth Rs. 2 billion

Having confidence in future performance of Engro - IFC has agreed, in

principle, to convert new loan of USD 30m to equity. This is subject tofinal agreement and regulatory approvals


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enabling growth.enabling excellence.

thank you.

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EnVen COD - Presentation