Mercantile Ports & Logis... Share Discussion Threads

[mount teide] 04/5/2017 14:33

kramch

In the original port specification with solid quay wall prepared by Royal Haskoning, 4.0m3 of infill material was the figure given to develop the 200 acre site.

Which would give an average depth of material of 5.0m, or 7.12m over a 150 acre land area.

Using 5.7m3 of infill material would give and average depth of 7.12m(22ft) over 200acres, or 9.5m(30ft) over 150 acres.

The infill volume figures for 200 acres are highly implausible and for 150 acres total nonsense.

At London Gateway, 230 acres was recovered from the river Thames with water depth at the proposed quay wall line of more than 21m - yet they only used barely twice the total volume of material now suggested as required at Karanja, where it is mostly foreshore and intertidal zone - makes no sense.

If the intention is to maintain the site at 200 acres - perhaps the management can explain how they propose to do this. Since the site has got a 1,000m sea front development footprint - substituting a solid quay wall for a low cost much shortened jetty will significantly reduce the land footprint in order to allow vessels sufficient room to safely manoeuvre to/from the inner berths. We calculate an absolute minimum of 30 acres will be lost but it could easily be as much as 50 acres or more after taking into consideration other factors that an open jetty necessitates.

As previously mentioned if the jetty is to be 600m long it will need 404 piles not the 260, which will give a maximum jetty length of 354m.

Jay's prediction of 2.0m tonnes of cargo through the port in 2018 is i'm afraid complete nonsense - completely delusional - its about as likely as the forecast in the 31 October 2106 Shareholders Circular to raise another £37m that, 180 acres of land will be reclaimed by the end of Q1/2017 and that four berths will be completed with three available to work cargo. All they delivered was another 40m of piling and just FOUR more acres of land to the situation reported nine and a half months previously in mid June 2016.

While all this hugely reduced activity was going on the Directors fees were still being paid as the bank interest payment clock continued to merrily tick along at a cool £6.4m a year!


The port of Tilbury with over 60 deepwater berths(200m long), and more than 6 times the land area of a fully developed Karanja last year achieved a new record annual throughput of 13.0m tonnes - and it has the third largest(by containers handled) deepwater container terminal in the UK, the largest short sea container terminal, the UK's largest forest products and Grain terminals, and a daily short sea ro-ro service, in addition to 50 odd berths handling various steel, heavy machinery, timber, cars, brick, cement and other dry bulk cargoes.

2.0m tonnes annual throughput is equivalent to the dry bulk cargo carried by around 600 fully loaded 3000 - 4000dwt small coasters. That is nearly 2 fully loaded vessels a day, every day of the year! Which at current old Harbour Mumbai rates would generate at best around £500k of handling revenue per year, less costs of around 50% giving a total profit contribution of £250k or so plus lets say at best £150k for storage and handling to road vehicle, giving a total contribution of £400k - some one sixteenth of the current interest on the bank debt !

I would suggest to Jay, with his previous forecasting record, to suggest Karanja will handle 2.0mt in 2018 and 4.0mt in 2019 is putting himself at extreme risk of being taken away in a straightjacket for his own protection - it is of course complete and utter nonsense.

As for Mr Sutcliffe, any non-shareholding Port Professional who while a non exec cheerfully continued to trouser over £250k in fees while the shareprice plummeted 96% from IPO, and then still could't find a further £37m fundraise at a 96% discount to the IPO price to his taste for risking any of his own investment funds, for what is a physical asset speaks volumes.

Perhaps Mr Sutcliffe is acutely aware of the staggering incompetence of the executive management, the cash burn to date and, the potential market value of such an asset, and at 10p/£40m market cap, it simply still fails to meet his investment risk/reward criteria!


AIOHO/DYOR

[kramch] 04/5/2017 10:01

MT thanks for your comments, I used your previous posts to frame some of my questions to Jay. I have run manufacturing businesses and developed properties but I know nothing about ports.

The biggest project issue that came across to me was the aggregate costs, Jay said JNPT had agreed the higher prices and due to the contract delays and need to press on KT had decided to agree them rather than go into dispute/arbitration.

I have rechecked my notes and was told they need 5.7M M3 infill (was 4.7M M3), so an extra 1M M3 due to settlement. The intention is still to reclaim the 200 acres.

The 600M jetty should ultimately provide c 1000M of berthing, as they can use both sides (apart from the access butt). (The jetty area is dredged to 6M.)

Thanks for your figures on handling revenues, I have no idea but I would have thought Mr Sutcliffe would have looked at these, it would be helpful if he stated his views, he shouldn't be a director if the project is not viable.

PJ1/ MT; the risk of shareholders and their assets being parted company at some stage is a concern to me. I wouldn't have made the visit if Lord Flight, L&G etc had not come on board. It is still a risk, Mr Gandhi can't be happy about being diluted and having to stump up £3M cash.

K.

[mount teide] 03/5/2017 22:55

PJ1 - 'It would be interesting to know which Banking Presidents Mr Gandhi dines with on a regular basis.'

Indeed, it would probably not surprise many if in the future a consortium led by Gandhi subsequently bought the terminal back from some 'well looked after' Indian bank presidents following foreclosure for around £25m - £30m.

Since, at that price real value could be unlocked by developing it as a transhipment, storage and distribution centre serving the deep sea shippers using the nearby fast expanding JNPT terminals.

[phowdo] 03/5/2017 22:54

"doubling of aggregate prices from their contractor"

I smell cooking. book cooking.

[mount teide] 03/5/2017 22:28

diku - building the port to the reduced specification (small jetty and reduced land footprint), effectively means the volume of aggregate material saved from not reclaiming land all the way out to the quay line, would provide more than(possibly many times over), the amount of additional aggregate MPL did't budget for as a result of their claimed 'greater than anticipated' settlement of the land reclaimed to date.

Like most everything else this management claims concerning the cost and specification, resource allocation and progress target timelines - it simply makes no sense and, fails to stand up to even the mildest of critical examination.

As shareholders are very aware most MPL statements to date rarely bear any resemblance to subsequent reality - read the Shareholders Circular to raise £37m and , then compare that to the current situation on the ground and revised design specification.

Frankly, it is fairly safe to say that any objective examination would suggest Karanja bears more than a passing resemblance to a crudely crafted ruse to raise a huge sum of money for a project that is now being developed as a low cost, scaled down alternative, that probably could be built to a high specification for less than a third of the total funds and debt raised.

By way of comparison, a new Royal Haskoning designed high specification deepwater jetty quay with berthing either side for deep sea bulk vessels of up to 13.0m draft and 100,000dwt was recently built at the Port of Caldera for a total cost of just £26m.

Since Royal Haskoning's original Karanja port design(solid quay wall backing directly onto the port storage compound), has effectively been thrown away, and replaced with a small two sided access piled jetty and reduced land footprint - it begs the question, why were shareholders not told early last year about this change since the 'quay wall' piling that commenced last year was clearly for a jetty design NOT a quay wall - something i pointed out to Pavan at the time, only to be told "no, its definitely for a quay wall".

Well, nothing has changed with respect to the system of piling, so the conclusion clearly, is that a change to a much smaller low cost jetty design was decided 18 months to two years ago and is still to be officially notified to shareholders, despite the Directors raising a further £37m of funds to complete the build out to the Directors 'preferred' specification - which shareholders quite rightly expected to be of a considerably higher specification than the original Royal Haskoning design - otherwise why raise the extra funds for a low cost, scaled down alternative?

The problem we have with this port development project is that it continues to make no financial sense for the specification of the infrastructure being built, and much less so now we have been made aware of the specification changes.


Consider this comparison:

JNPT Extension
1000m of deepwater berths capable of handling three of the latest generation 300m long, 18,000teu container ships with 16m drafts at the same time; together with the reclamation and development of 225 acres of land in water up to 21m deep, strengthened to enable storage of heavyweight containers stacked 6 high - cost £226m

Karanja terminal -
350m shallow water piled jetty with an access channel dredged to 3.5m capable of handling barges and small coasters: together with the reclamation and development of around 150 acres of mostly shallow water intertidal zone and foreshore, strengthened for the open storage of general and bulk cargo - cost, up to £170m by the time the scaled down port commences full operations, after including debt interest payments that will have already fallen due.

Makes no financial or commercial sense whatsoever, particularly when you consider that the annual revenue earning potential of the JNPT extension terminal is at least a factor of TEN times that of Karanja.

[diku] 03/5/2017 21:03

kramch....thanks for the feedback....

[diku] 03/5/2017 21:02

MT touched on the issue of aggregate prices as I was thinking the same whilst reading kramch post of 287...surely MPL would have negotiated the aggregate price well in advance due to vast amount required...or is that the extra amount MPL didn't budget for?..

[pj 1] 03/5/2017 20:59

It would be interesting to know which Banking Presidents Mr Gandhi dines with on a regular basis.

[saikat] 03/5/2017 20:27

Kramch - you tried your well meaning best. I am not a holder but probably most holders will and should thank you for your efforts. There are probably very few holders now from PIs on this obvious fraud case. MPL management probably saw you as a potential saviour from a show out of fraudulence.

The message from your meeting is the same story that has been repeated for the last n-number of years. MTs posts point towards that.

My guess is that they will loot the last dollar - even the banker's loan - and send it to bankruptcy. They may buy it out of bankruptcy for peanuts with the looted money and try some other scam.

[mount teide] 03/5/2017 17:38

kramch - thanks for your feedback.


I suggest Jay speaks to people(Indian Met Office) who are professionally qualified to make statements on the intensity of the Indian Monsoon season before giving the benefit of his 'wisdom'. In 2016 the Indian monsoon season was in fact officially recorded as a 'normal monsoon season' with total rainfall at 100% of the long term average year.

Indeed, the conditions were such for outdoor construction work in the H2/2016 monsoon season, that just 5 miles away across the Uran Peninsula ITD Cementation had no trouble driving well over 400 heavy duty quay piles and reclaiming over 50 acres of land in tidal waters up to 21m deep!

While at Karanja - ITD managed ZERO acres of land reclamation and the driving of around a dozen low spec shallow water jetty piles.

Many would question the accuracy of the claimed doubling of aggregate prices - since MPL/SPL told the market three years or more ago they had paid an up front payment of circa £9m of shareholders funds to the quarry company to prepare the quarry to commence the transfer of aggregate material to the port site. Since then, at worse India has seen cumalative price inflation for aggregates of around 25%.

Also bear in mind, the same aggregate material(although many times the volume) is being used in the land reclamation work at JNPT. It is inconceivable that ITD Cementation will not have taken advantage of this situation and, combined the total requirement for the two sites and negotiated pricing accordingly with the quarry operator. (100% pricing uplifts for aggregates after paying £9m up front makes no sense!)

Also bear in mind that since there is no longer going to be a solid quay wall - just a small 350m to 400m long more delicate jetty with berthing access to both sides - this will take a considerable chunk out of the original land reclamation footprint, perhaps reducing it by 50 or more acres. Consequently, it will reduce the total aggregate requirement compared to the original budget for the development of the 200 acre site, by considerably more than a pro-rata 25%, since the 'land' that will no longer be reclaimed due to the physical space requirements to provide access to both sides of the jetty, will be where the tidal water is deepest and, where it would require multiples of the volume of aggregate material per acre compared to the shallow inshore intertidal zone and foreshore.


A piled jetty of 600m long to the specification being built at Karanja would require 404 piles - for 260 piles the jetty will have a maximum length of 354m.

Recently, i posted:
'A Google Earth image update for the end of Feb 2017, reveals just 104 jetty piles laid/ around 120m of progress, against a target of four berths complete by the end of Mar 2017. We calculate, if the progress achieved since Jan 2017 is maintained it would suggest the heavily scaled back 400m of jetty will still not see piling completed before H2/2018 at the earliest and, this assumes work through the next two monsoon seasons is maintained at the same rate of progress as during the current dry season, something that has not remotely been the case since construction eventually got started some three years ago, after four years of delays securing the necessary approvals.'

In common with our other previous forecasts this has proved a much more accurate assessment of the likely rate of progress at best, than the work of total fiction found in all previous company statements and in particular the Shareholders Circular dated 31 October 2016.

Discharging and loading small dry bulk carriers using a mobile jetty crane and grab to/from bulk tipper trucks is positively archaic by modern port standards(which use all weather mechanical elevator systems), and extremely time consuming and costly for cargo (coal, cement, salt, rice), which generates only very low handling rates per tonne. Without an all weather handling system, handling most types of bulk cargo(salt, grain, cement, coal, etc) is virtually impossible during the monsoon season,

The current cargo handling market rates operators in Mumbai Port get for handling dry bulk cargo using a crane and grab is 19.5 rupees(£0.24) per tonne for coastal traffic and 32 rupees(£0.39)per tonne for deep sea traffic.

This would generate the grand sum of £864 of revenue to discharge/load a 4,000dwt small bulker assuming cargo is around 90% of the total vessel deadweight. JNPT get that amount of revenue for loading/discharging 10 containers, which takes them about 15-20 minutes!

Assuming MPL had a small bulker vessel every day of the year( they would be extremely lucky to get half this volume), they would still only generate £315k a year of revenue from the use of around 100m to 150m of jetty berth - average labour and equipment handling costs using mobile cranes and grabs for bulk cargo port operations is around 50% of turnover for efficient ports.

This generates a total 'profit contribution' of just £180k a year from handling 180 small coasters with bulk cargoes. Add in some additional revenue for storage and handling to road vehicle and, with luck MPL might get the revenue up to £250k a year - barely enough to cover Pavan's annual salary and Gandhi's Michelin star restaurant and first class travel expense account.

As i mentioned previously, this type of high cost port operation will only be commercially viable handling containers, ro-ro traffic and high value break bulk cargo like steel coils.

The interest on the bank debt is currently running at £6.4m a year - at a well run efficient port, total operating costs would be around 50% of turnover. After taking overheads into consideration, to pay the interest on the debt they would need to generate at least £15m of annual revenue. And around £25m per annum once the principal payments start kicking in.

This in our opinion is not remotely plausible for a terminal of the revised jetty and land configuration that MPL now intends to build, even if handling all premium paying cargo. Handling the type of business mentioned in the MOU announcements, the situation is hopeless, as the terminal will not get anywhere near to covering even the interest on the debt, never mind any principal repayment.

AIOHO/DYOR

[kramch] 03/5/2017 14:48

I didn't see their city offices, just met Jay at the Taj for coffee. Then a high speed crossing from Gateway of India quay to Karanga village. Didn't see the business park as we went straight back by boat, but Jay said it provides a potential good road link to / from the site. I could see new developments about 1-2 km away. This should be a new fast expanding area for Mumbai. Shame MPL just has it on lease from the ports authority, I reckon the freehold would be quite valuable!
I got the impression Jay and the team are doing a good technically competent job, I think the communication issues are coming from higher up the tree.

K.

[fft] 03/5/2017 14:20

Kramche,

Great write up. Huge feeling of Deja Vu from a couple of years ago when I was out there.

Did they still have the offices about 20 minutes drive from the Taj ? If so did Nikhil still have an office in it ? Was the old Ark Royal moored up just past 'the gateway to india' ? And did they take you for food afterwards in the Lebanese restaurant on the top floor of the Taj ?

Assume the hi-tech business park adjacent to the port is nearly complete - I always thought that would be a huge asset if the port was also being used as a logistic centre.

In retrospect it was pretty much a con job to get me to say/write nice things.

Nice boat ride though.

[mount teide] 03/5/2017 12:50

phowdo - 'Blimey thats a bit of a change from the placing document schedule!
Why haven't they RNSed this?'

Because almost every time they put out a photographic or written update, they expose themselves to the entirely fair and reasonable accusation of being responsible for a sustained level of breathtaking incompetence that simply beggars belief; should this not be the case then a lawyer might suggest the only plausible alternative explanation would be described as 'blatant misrepresentation/attempt to defraud by wilful deception'.

[waterloo01] 03/5/2017 12:16

Cheers MT. Belt and braces then. Thanks for the site update kramche

Re lack of RNS's they have been selectively giving out market sensitive information for weeks (if not longer) without RNS. Can one assume the NOMAD is refusing to sign any off? Can of worms.

[pj 1] 03/5/2017 12:14

kramche- thanks for taking the time to feed back

[phowdo] 03/5/2017 11:48

They intend to get two 100M berths operational by the year end and the rest of the jetty completed in 2018.

Blimey thats a bit of a change from the placing document schedule!
Why haven't they RNSed this?

Not really out of character for this lot though...

[mount teide] 03/5/2017 11:38

waterloo01 - as requested, we have received a confirmation acknowledgement for the safe receipt of our complaint/package of supporting evidence(much of which was provided by the spectacularly clueless management in website photographic updates and written market statements, data and operational reports).

Prior to forwarding the complaint to the AIM Regulation team at the LSE, we sent our proposed submission to a good friend who is a Master Mariner and practising Maritime Lawyer with Norton Rose in the City, for him to cast his legal eye over and offer suggestions for improvement(which he kindly did).

Amusingly, he said as he worked his way through the detail of the documentation/supporting evidence; on three occasions he burst out laughing and shook his head at the "staggering incompetence" of the management and Nomad with respect to compliance with their individual and collective responsibilities.

AIOHO/DYOR

[kramch] 03/5/2017 10:10

As per my post 233 of 13th April, Redleaf arranged for me to meet MPL and visit the site on Friday.
I met Jay Mehta (COO of KTLPL and now a director of MPL) at the Taj Palace in Mumbai and we had ¾ hr open discussion about progress. We then went by speedboat across to Karanja and by 4x4 through a couple of villages to site (I will call it KT).
We passed some 20-30 trucks on the connecting roadway waiting to unload aggregate.
I met the c. 20 KT site personnel and the chief project engineer went through the plans and operations with me in the office. I then visited the piling operations and land reclamation activities.

Jay has an MBA from NY University and qualifications from Rotterdam in port management. He is enthusiastic about the project and has been with the company over a period 13 years, taking a break when the project became stuck in Indian burocracy.

The major issues seem to have been the doubling of aggregate prices by the contractor (ITD, arguing the delays in the contract and agreement to higher prices by the other development (extension to JPD nearby port) and delays due to the very heavy monsoon last year which stopped quarrying and piling from June to October. (JPD are extending their existing large container port on the other side of the promontory, however Jay says their access roads are poor, going through built up areas, whereas KT’s will be much better.)
KT will cater for smaller coastal vessels and barges as draft depth is limited in the creek to c 3.5M.). The other issues being land settlement requiring more aggregate, and compensation demands from the local villagers.

The plans show a jetty c 600M long x c 25M wide off a c 25M connection road from the main site. They intend to get two 100M berths operational by the year end and the rest of the jetty completed in 2018. I saw the piling operations and am told this is proceeding at an ave of 1 pile per day. 160 of 240 piles have been completed. They are casting the jetty deck slabs on site and say they have 150 of the total 720. The berths will initially be serviced by a mobile crane, as they do not know what type of goods they will be handling
The 200 acres is about 50% complete with enough materials on site to extend to 60%. They feel this is enough to support the 2 berths initially. They are trying to accelerate the settlement process by inserting plastic strips to about 14M depth, I didn’t fully understand this process.

Jay said the 2 berths would handle about 2M tonnes pa. They have signed a couple of MoU’s with a cement supplier and an O&G vessel refurbishment firm and “are discussing several others”. Jay envisages capacity rising to 4M tonnes in 2018 and reaching 85% of maximum (8M tonnes) by 2021.

I don’t know what their cash flow would be from handling these tonnages, perhaps someone with port experience could fill in here. I suppose earnings will depend on the type of goods they end up handling, coal, steel & cement bulk being less valuable than containers.

I am grateful to Charlie for arranging the visit and to Jay and his staff for their time. It was approaching 40 deg by the time I left site and I’m sure they didn’t want to be stuck outside answering arcane questions.

AIMHO, E&OE

K.

[diku] 02/5/2017 18:51

Coke & Sprite running low!...

[waterloo01] 02/5/2017 17:33

MT any reply as yet or are they doing their chocolate teapot routine?

[phowdo] 27/4/2017 10:37

unless Regulators such as Cenkos step in. How often does that happen?

Cenkos are not a regulator. They are paid by the company for a service. The longer they turn a blind eye to any shortcomings the more they get paid.

[pj 1] 27/4/2017 08:14

jim-Good point. You would have thought MPL would have responded to the request very quickly.

[jimblack513] 27/4/2017 08:10

Has anyone managed to arrange a site visit yet?