This document discusses plans to revise and expand the Vizhinjam Deep Water Port Project in India. Key points include: 1) The current market study underestimates the project's potential and does not factor in benefits like its strategic location and ability to handle large ships. 2) A revised study will consider additional traffic drivers like cost savings from large ships and positioning Vizhinjam as India's primary port for large vessels. 3) Vizhinjam has advantages as a world-class port due to its strategic location, ability to handle large ships, competitive operating costs, and access to a large hinterland in South India. 4) Modifications to the master plan and expanded

1. Vizhinjam
Deep
water
Port
Project
A
New
Vision
and
Way
Forward
1

2. Agenda
• Revisi>ng
the
Market
• Core
ABrac>ons
of
the
Project
• Modifica>ons
to
the
Master
Plan
• Development
Structure
• Expanded
Government
Support
2

3. Market
Study
-­‐
1
• Current
study
by
Drewry/IFC
under-­‐es>mates
the
poten>al
of
the
port
• Very
conserva>ve
projec>on
of
container
transshipment
volumes
even
aPer
assuming
deep
rate
discounts
• Benefits
of
deep
draP
and
strategic
loca>on
to
act
as
single
stop
for
India
for
10,000+
TEU
class
ships
not
factored
in
• Vizhinjam
has
been
posi>oned
as
“just
another
container
port”
and
not
a
regional
transshipment
hub
• Lessons
of
successful
“transshipment-­‐only”
hubs,
such
as
Salalah
(99.5%
transshipment)
or
Tanjung
Pelapas
(95.8%),
not
incorporated
into
market
forecasts
• Poten>al
for
cargo
such
as
LNG
and
coal
ignored,
ci>ng
the
need
to
be
a
“green
port”
• Poten>al
for
deep
water
shipyard
not
factored
in
despite
clear
proposal
from
CSL
3

4. Market
Study
-­‐
2
• Further
traffic
drivers
need
to
be
taken
into
account:
• Study
cost-­‐savings
of
using
10,000+
TEU
vessels
and
use
as
a
strategic
driver
for
transshipment
traffic;
18
m
depth
to
be
used
as
USP
• Posi>on
Vizhinjam
as
“the
one
stop
in
India”
for
6th
and
7th
genera3on
ships”
–
aBract
a
line
such
as
APM
or
MSC
that
typically
call
at
one
transshipment
hub
per
country
with
minimum
devia>on
from
the
shipping
lanes
• Kerala
has
a
significant
power
deficit
–
poten>al
for
LNG
terminal
and
LNG
power
plant
• Shipyard
and
bunkering
facility
to
be
included
in
market
study
4

5. Market
Study
-­‐
3
• Govt.
of
India
has
proposed
revision
of
SEZ
rules
• Single-­‐sector/Port
based
SEZs
will
need
only
40
hectares/100
acres
as
opposed
to
100
hectares/250
acres
• Mul>product
SEZs
will
need
only
250
hectares/625
acres
as
opposed
to
1000
hectares/2500
acres
• Significant
dis-­‐con>guity
may
be
allowed
for
large
SEZs
as
long
as
clear
connec>ons
can
be
established
• The
Vizhinjam
market
study
should
now
factor
in
at
least
a
Port-­‐based
SEZ;
necessary
for
exemp>on
from
Customs
for
transshipment
cargo;
precedent
established
at
Vallarpadam
• Poten>al
for
Mul>-­‐product
SEZ
to
be
studied
–
land
available
in
the
Southern
(Poovar)
and
Eastern
parts
of
district
5

6. Vizhinjam
Has
to
be
Developed
as
a
World-­‐class
port
because
it….
• Is
Strategically
Located
• Has
Global
Scale
• Has
the
Lowest
Opera>ng
Costs
• Can
be
the
Gateway
to
South
India
6

7. Strategic
Loca>on
• Vizhinjam
is
less
than
10
nau>cal
miles
from
the
Suez/Gulf-­‐Malacca
shipping
lane
• Closest
Indian
port
to
30%
of
world
sea
traffic
• Best
located
port-­‐of-­‐call
in
India
for
container
ships,
cruise
vessels
and
tankers
• Access
to
large
hinterland
area
in
South
India
• Also
ideal
for
ship
repair
and
bunkering
facili>es
7
Actual
photo
of
a
supertanker
sailing
close
off
the
Vizhinjam
shore,
sans
dredging

8. Global
Scale
• Site
has
a
natural
draP
of
18-­‐23
m
• With
minimal
capital
dredging,
the
project
will
be
the
only
container
terminal
in
India
capable
of
handling
container
ships
of
>
12,000
TEUs
• Rapid
increase
in
container
ship
size
–
latest
genera>on
will
carry
up
to
18,000
TEUs
• Economies
of
scale
will
allow
for
the
lowest
logis>cs
costs
• Ideal
loca>on
for
container
transhipment
terminal
16
8

9. Compe>>ve
Opera>ng
Costs
• Vizhinjam
needs
next
to
nil
maintenance
dredging
to
maintain
18-­‐20
m
draP
• Compe>ng
ports
spend
hundreds
of
Millions
of
dollars
a
year
to
maintain
even
14
m
of
draP
• Vizhinjam
has
full
flexibility
to
set
tariffs
to
aBract
business;
major
Indian
ports
are
constrained
by
regulators
• New
workforce;
no
legacy
unioniza>on
9

10. Gateway
to
South
India
• Within
18-­‐24
hours
road/
rail
transit
from
Vizhinjam:
• 120
million
consumers
• $
180
Bn
of
GSDP
• Bangalore,
Chennai,
Coimbatore,
Tu>corin
and
Tirunelveli
• Within
36-­‐48
hours
road/
rail
distance
from
Vizhinjam:
• 220
Million
consumers
• $
300
Bn
of
GSDP
• Hyderabad,
Vizag
and
Goa
10

11. Capturing
the
Hinterland
• To
assume
that
the
hinterland
for
Vizhinjam
is
constrained
between
those
of
Tu>corin
and
Ernakulam
is
to
incorrectly
concede
that
Vizhinjam
cannot
import/export
cargo
at
lower
seaborne
costs
because
it
can
handle
bigger
ships;
• Total
transport
costs
=
sea
transit
+
land
transit
costs
• Vizhinjam
can
move
cargo
at
rates
30-­‐50%
cheaper
than
compe>ng
ports
because
it
can
handle
much
bigger
ships
–
a
12,000
TEU
vessel
Vs
a
6000
TEU
vessel
• Logis>cs
firms
will
quickly
shiP
to
the
lowest
total
cost
op>on
as
long
as
land
transit
can
be
made
cost-­‐efficient
and
fast
• Vizhinjam
can
also
match,
if
not
beat,
exis>ng
ports’
handling
>mes
by
minimizing
conges>on
and
turn-­‐around
>me
for
ships
• Such
shiPs
in
hinterland
cargo
are
already
being
seen
in
the
case
of
efficient,
deep
water
ports
such
as
Mundra,
Gangavaram
and
Ennore
• However
world-­‐class
road-­‐rail
connec>vity
is
absolutely
cri>cal
11

12. Further
Development
Prospects
• Vizhinjam
has
significant
poten>al
to
develop
into
a
premier
cruise
port
• 300
cruise
ships
transit
on
the
nearby
shipping
lanes
annually
• Trivandrum
is
already
a
top
tourist
des>na>on
• Cochin
Shipyard
Ltd.
has
already
announced
plans
to
set
up
a
VLCC-­‐class
ship
repair
and
building
yard
at
Vizhinjam
• Poten>al
for
LNG
terminal
and
power
plant;
significant
energy
demand
in
South
India
12

13. LNG
as
a
Key
Energy
Source
-­‐
1
• Kerala
is
currently
facing
an
acute
power
shortage
• Current
genera>on
of
about
2500
MW
is
unable
to
meet
demand
of
about
3300
MW
• Current
genera>on
is
mostly
hydel
and
is
at
the
mercy
of
the
weather
• Opposi>on
to
coal
and
nuclear
plants;
shortage
of
land
• Demand
is
expected
to
hit
6000-­‐7500
MW
by
2020
Supply
shortall
• Minimal
addi>on
expected;
MW
for
KKNPP
and
gas
sta>ons
8000
associated
with
Petronet
6000
LNG
terminal
4000
• Supply
gap
of
at
least
2000
2000
MW
by
2020
0
Current
State
Current
Demand
Supply
Demand
Es>mate
-­‐2020
Source:
18th
EPS
–
CERC;
WB;
KSEB
13

14. LNG
as
a
Key
Energy
Source
• Liquefied
Natural
Gas
is
gaining
prominence
world-­‐wide
as
the
fossil-­‐
fuel
of
choice
• LNG
is
cleaner
as
a
fuel
than
coal
• Cost
of
power
produced
is
comparable
to
coal,
with
a
global
drop
in
LNG
prices
due
to
new
supply
in
Australia,
Africa
and
the
US
• LNG
power
plants
are
much
more
compact
than
coal-­‐fired
power
sta>ons
–
40-­‐50
acres
of
a
1000
MW
gas
power
plant
Vs
400
acres
for
a
coal-­‐fired
plant
• LNG
is
also
much
easier
to
handle
as
a
fuel
–
lower
volumes/MW
and
it
can
be
moved
via
pipelines
• Natural
gas
can
also
power
vehicles
• LNG
power
plants
are
cheaper
(per
MW)
and
faster
to
permit
and
build
• In
short,
LNG
is
the
ideal
op>on
to
solve
Kerala’s
power
crisis
14

15. Gas-fired Power Generation
CCGT (Combined Cycle Gas Turbine)
Very efficient generation technology
“
Modern
combined
cycle
1000
MW
power
“
Diagram
CCGT,
a
combina>on
of
a
gas
plant
(CCGT)
-­‐
needs
~
50
acres
of
land
turbine
and
a
steam
turbine.
Efficiency
~
59
%.
16
15

16. LNG-fired power generation
Lowest capital costs per MW installed
Capital costs of options may vary considerably in absolute
terms, but very little in relative terms
Indicative, cost levels
million $/MW
5
4
3
2
1
Source: MMD, June 2010 16

17. Lowest All-in Unit Costs per Kwh produced
Competitive for meeting Base-load Demand
$/MWh
Prices (at plant inlet) Based on: 7000 hrs operation for gas and coal per year
Gas : 8 $/MMBtu 2500 hrs for onshore wind per year
Coal: 80 $/t 3600 hrs for offshore wind per year
7800 hrs for nuclear per year
Source: MMD, June 2010 17

18. Smaller plant size reduces risk of
Overcapacity
Minimum size to capture economies of scale (in MW)
1000 -1600
600
-1000
450
Gas CCGT Coal Nuclear
supercritical
Source: MMD, June 2010 18

19. Short
construc>on
>me
reduces
risks
of
demand
uncertainty
years 8
7
6
5
4
3
2
1
0
CCGT Coal Nuclear
Plus shortest time for LA, permitting and construction
Source: Energy Technology Perspectives, IEA 2010 19

20. LNG
import
via
Vizhinjam
• The
bulk
of
India’s
LNG
demand
will
be
met
via
imports
–
the
country’s
only
major
NG
source
–
the
KG
basin
–
has
been
underperforming
• Major
suppliers
will
be
Qatar,
Australia,
Africa
(Mozambique)
and,
possibly
at
a
later
stage,
the
US
• Vizhinjam
is
the
closest
port
for
imports
from
Australia,
Africa
and
North
America
(via
Malacca/Cape)
• LNG
import
has
economies
of
scale
like
in
the
case
of
any
sea-­‐borne
trade
–
such
as
containers:
the
bigger
the
ship,
the
cheaper
it
is!
• The
largest
LNG
carriers
–
such
as
the
260,000
Cu.m
Q-­‐MAX
–
can
be
30-­‐50%
more
cost-­‐efficient
to
import
gas
than
smaller
ships
• Vizhinjam
can
handle
the
biggest
LNG
tankers
with
its
18
m
draP
• Ideal
loca>on
for
a
2.5
MT/year
LNG
import
terminal
and
a
1000
MW
power
plant
(expandable
to
5
MT/year
and
2000
MW)
• Can
supply
domes>c
gas
and
vehicle
fuel
to
Trivandrum,
Kollam,
Tirunelveli,
Tu>corin
and
Madurai
and
industrial
gas
to
Tu>corin
&
Tirunelveli
20

21. Cruise
Terminal
• Hundreds
of
cruise
ships
cross
the
Indian
Ocean
and
transit
very
close
to
Indian
ports
• Over
100
cruise
calls
were
made
at
ports
like
Mumbai,
Mangalore,
Goa
and
Kochi
• Close
to
50
made
calls
at
Kochi
because
of
its
proximity
to
the
shipping
lane
and
the
aBrac>veness
of
Kerala
as
a
tourist
des>na>on
• Vizhinjam
is
the
closest
Indian
port
to
the
interna>onal
shipping
lane
–
a
cruise
ship
will
have
to
divert
only
an
hour
to
call
at
Vizhinjam
Vs
about
10
hours
to
call
at
Kochi
and
24+
hours
at
Goa
• Vizhinjam
is
located
right
inside
Kerala’s
top
foreign
tourist
aBrac>on
–
the
Trivandrum
–
Kovalam
–
Kollam
tourist
belt
• As
a
greenfield
port,
cruise
ships
will
not
encounter
conges>on
• India’s
first
world-­‐class
Cruise
Terminal
at
Vizhinjam
could
aBract
over
100
ships
and
up
to
100,000
premium
tourists
every
year!
21

22. Deep
Water
Shipyard
• Significant
market
for
ship
repair
and
construc>on
• About
1/3rd
of
global
shipping
passes
close
to
Vizhinjam,
necessita>ng
periodic
maintenance
and
repair
of
tens
of
thousands
of
ships
each
year
• India
and
Asia
are
seeing
rapid
addi>on
in
shipping
capacity
–
especially
for
container
ships
and
LNG
tankers
• No
deep
water
shipyard
between
Dubai
and
Singapore
• Indian
workers
form
a
major
part
of
the
workforce
at
Dubai
&
Singapore;
India
is
well
known
for
low
cost,
high
quality
engineering
• Vizhinjam
has
a
draP
of
18
m
and
can
build
any
size
ship
• Cochin
Shipyard
Limited
has
already
expresses
strong
interest
in
a
deep
water
ship
repair
and
construc>on
yard
at
Vizhinjam;
needs
larger
yard
to
complete
its
order
book
including
India’s
second
new
aircraP
carrier
• The
shipyard
will
aBract
more
traffic
to
the
port
and
create
thousands
of
Crores
of
economic
ac>vity
including
for
small
manufacturers
22

23. Master
Plan
–
Basic
Concepts
-­‐
1
• Deep
water
port
with
a
focus
on
container
transshipment;
close
to
the
int’l
shipping
lanes
• Design
emphasis
should
be
on
creaGng
a
world-­‐class
port,
NOT
on
cuMng
costs
to
build
a
mediocre
port
–
ALL-­‐IN
STRATEGY!
• Design
draP
in
Phase
I
itself
should
be
the
best
in
India
–
18
m
at
least
–
sufficient
for
6th
genera>on
ships
• Turning
circle/breakwater
length
to
be
sufficient
to
handle
6th
genera>on
ships
(10,000
TEUs)
• Future-­‐proof
by
Maximizing
berth
length
within
loca>onal
constraints
–
have
berths
along
main
breakwater
and
allowance
of
two
way
vessel
traffic
in
port
channel
23

24. Master
Plan
–
Basic
Concepts
-­‐
2
• Container
berths
need
to
be
located
on
the
land
side
of
the
basin
since
they
need
adjacent
stacking
areas
for
maximum
opera>onal
efficiency
• Since
there
are
constraints
on
the
total
length
of
coast
that
the
project
can
occupy,
it’ll
be
ideal
to
create
another
line
of
berths
along
the
main
breakwater
• Cruise,
LNG
and
liquid
cargo
terminals
can
be
located
along
the
breakwater
• Vizhinjam
Port
area
development
including
logis>cs
hubs,
Container
Freight
Sta>ons
(CFS)
etc
to
be
planned
• Addi>on
of
bunkering
facility
• Mul>purpose/general
cargo
handling
to
be
provisioned
for
• Strategic
Choice:
Longer
berth
length,
greater
basin
depth
and
capacity
Vs
increased
construc>on
cost
16
24

25. Master
Plan
Modifica>ons
Phase
I
capacity
to
be
at
least
Phase
II
capacity
1.5
Mn
TEUs
to
be
at
least
=
Phase
I
Phase
I
Design
Depth
to
be
18
m
Move
Cruise
Terminal
to
Breakwater
Turning
circle
to
accommodate
6th
Move
Main
Gen
ships
Breakwater
further
out
to
sea
to
allow
berths
for
non-­‐
16
25
container
uses

26. Master
Plan
on
Site

27. ABrac>ve
Deal
Structure
• The
State
Government
of
Kerala
PORT
acts
as
the
‘Landlord’;
it
pays
for
basic
facili>es
such
as
the
breakwater,
berths
and
road/rail
connec>vity
• Landlord
invests
75%
of
capital
Landlord
Invests
BASIC
cost
75%
of
project
INFRSTRUCTURE
• Operator/Investor
develops
cost
terminal
infrastructure;
invests
SoP
Revenue
25%
of
capital
cost
Debt
Share
• Landlord
can
provide
‘soP
debt’
Operator
TERMINAL
Opera>ng
support;
at
low
interest
and
with
invests
25%
SUPERSTRUCTURE
Revenue
a
10
yr
repayment
moratorium
• Operator/Investor
receives
all
opera>ng
revenue
for
30
years;
op>on
to
share
with
Landlord
27

28. Modifying
the
Business
Model
• Offer
the
private
investor
the
op>on
to
set
the
business
plan
for
the
en>re
port
as
opposed
to
just
the
container
terminal
• A
Swiss-­‐Challenge
op>on
to
develop
further
container
and
non-­‐
container
terminals
• Rather
than
the
Government
ge{ng
involved
in
marine
services
as
is
envisaged
in
the
current
Landlord
model,
all
opera>ons
would
be
leP
to
the
operator
• As
opposed
to
an
op>onal
revenue
share,
the
Government
could
mandate
a
share
of
the
overall
net
income(cargo
handing
+
marine
charges)
above
a
Preferred
Return
earned
by
the
private
investor
• The
Investor/Operator
makes
an
offer
based
on
the
share
of
revenue
that
it
will
offer
to
GoK
above
the
Preferred
Return
• This
could
be
modified
for
later
phases
based
on
the
rela>ve
investment
by
the
public
and
private
sectors
28

29. Increased
Government
Support
-­‐
1
• Establishment
of
Port-­‐based
and
Mul>-­‐Product
SEZs;
along
with
road/rail
connec>vity
between
the
port
and
SEZs
• Improve
hinterland
connec>vity
for
Vizhinjam;
to
rest
of
Kerala,
South
TN,
Coimbatore
and
Bangalore
• New
mixed
use
rail
corridor
from
Vizhinjam
to
Coimbatore
and
Mangalore;
high
speed
rail
and
passenger
services
• Road
connec>vity
to
Southern
TN
via
KoBur-­‐
Ambasamudram
• Coastal
passenger
&
freight
shipping
services
• Immediate
decision
to
establish
CSL’s
new
deep
draP
shipyard
at
Vizhinjam
29

30. Road
Connec>vity
• The
exis>ng
road
infrastructure
in
Kerala
is
severely
congested
• 4/6-­‐laning
of
NH-­‐66
from
TN
Border
to
Mangalore
to
be
taken
up
urgently
• Four
Lane
road
to
T i r u n e l v e l i
v i a
Ambasamudram
to
be
re-­‐developed
• GoK
to
apply
for
GoI
funding
under
port
Stretch to be upgraded to 4/6 lane
connec>vity
scheme
Existing 4 lane
New 4 lane road
30

31. Rail
Connec>vity
• Upgrade
key
rail
routes
to
p r o v i d e
h i g h
s p e e d
connec>vity
to
key
ci>es
like
M a n g a l o r e ,
C o i m b a t o r e ,
C h e n n a i ,
B a n g a l o r e ,
Tirunelveli,
Tu>corin
and
Kochi
• Electrifica>on
of
en>re
route
to
Chennai
via
Nagercoil
• New
North-­‐South
rail
corridor
needed
from
Trivandrum
to
Mangalore
as
current
routes
are
at
over
100%
capacity
31

32. Increased
Government
Support
-­‐
2
• Parity
with
Vallarpadam
on
incen>ves
and
policies
–
Cabotage,
Customs
clearance,
tax
incen>ves
etc
• Preferen>al
power
purchase
policy
for
an
LNG
power
plant
that
sources
fuel
via
Vizhinjam
since
the
port
is
a
State
Government
project
• Expedite
construc>on
of
Outer
Ring
Road
in
Trivandrum
to
provide
more
land
for
port-­‐based
industrial
uses
• Expedite
4/6
laning
of
NH-­‐66
and
connec>on
to
the
Na>onal
Highway
network
• PPP
mode
development
of
logis>cs
and
industrial
areas
including
warehouses,
CFS
etc
32

33. Logis>cs
Zone
-­‐
1
• World-­‐class
Industrial
facili>es
including
logis>cs
and
light
manufacturing
space
is
a
cri>cal
success
factor
for
a
major
port
like
Vizhinjam
• World-­‐wide,
the
concentra>on
of
industrial
real
estate
is
closely
correlated
with
hub
ports
• Focus
areas
for
value
addi>on
in
the
supply
chain,
such
as
just-­‐in-­‐
>me
inventory
management,
re-­‐packaging
of
cargo
for
regional
distribu>on
and
loading/unloading
of
containers,
require
world-­‐class
logis>cs
spaces
• These
ac>vi>es
will
be
a
differen>ator
for
Vizhinjam
Vs
current
ports
which
generally
only
have
rudimentary
warehouses
• World-­‐class
logis>cs
spaces
will
aBract
global
logis>cs
and
retail
players
who
are
currently
entering
India
• Generate
addi>onal
employment
and
economic
ac>vity
33

34. Logis>cs
Networks
and
Hubs
• Logis>cs
space
is
co-­‐located
with
major
ports
and
airports;
increases
importance
of
hubs
in
the
supply
chain
• In
the
US,
there
is
an
average
of
36
SF
of
space/TEU
handled
34

35. Logis>cs
Zone
-­‐
2
• Considering
an
ini>al
container
terminal
capacity
of
1,500,000
TEUs
and
80%
transshipment,
Vizhinjam
will
need
up
to
8,000,000
SF
of
logis>cs
space
• GoK
should
set
up
a
Free
Trade
Warehouse
Zone
(FTWZ)
on
100
acres
of
land
close
to
the
port
and
engage
private
developers
to
build
and
operate
world-­‐class
logis>cs
facili>es
• Build
a
combina>on
of
storage
warehouses,
cross-­‐docking
facili>es
for
re-­‐distribu>on
opera>ons
and
regional
distribu>on
facili>es
• Anchor
tenants
could
include
major
retail
players
such
as
IKEA,
Wal-­‐
Mart,
Future
Group,
Carrefour,
METRO,
Amazon,
E-­‐Bay
etc
and
logis>cs
players
such
as
global
shipping
lines
and
cargo
operators
like
DHL,
FedEx
and
UPS
• On-­‐site
access
to
road
and
rail
transport
and
ancillary
facili>es
like
truck
maintenance,
Customs
&
Security
etc
35

36. Key
Next
Steps
• Appoint
consultants
to
update
market
study
and
to
re-­‐
visit
development
and
business
plans
• AECOM
to
prepare
master
plan
according
to
updated
market
study
and
business
plan
• Govt.
of
Kerala
&
VISL
to
explore
G2G
op>ons
to
iden>fy
a
capable
operator
• Under
the
leadership
of
the
Hon.
MP
of
Trivandrum
• Focused
discussions
with
Governments
that
have
na>onal/
regional
port
operators
such
as
Barcelona,
Singapore,
Hamburg
and
Malaysia
• Pro-­‐ac>ve
discussion
with
Liner
based
Operators
who
would
be
direct
beneficiaries
in
transshipment
terminals
such
as
APM
Terminals
(Maersk),
APL
Terminals
(APL/NOL),
Terminal
Link
(CMA
CGM),
Ceres
Global
(NYK
Liners),
Hapag
Lloyd
etc
36

37. THANK
YOU
©
Benny,
Gopinathan
and
Prasad,
MMXII
37