Annual Report 2010-2011 - Gammon India

The operative margin for financial year 2010 is comparable to 2009 if the impact of Port Sudan Project is
not considered. Also a substantial reduction of overall risk funds for Euro 4.2 million has been a significant
achievement of Project Management in 2010. The year also started with streamlined global procurement
activity and its full benefit will be in the years to come. The financial year 2010 closed with a negative result of
Euro 15.583K in comparison to a positive result of Euro 176K of 2009.
The implementation of the plan involving activities to improve performance of production is in progress, with
the aim to (i) Reduce costs, (ii) Improve Quality and (iii) Improve the service granted to the Client. Continuous
reduction in costs is being pursued through optimization of the high value activities carried out in the shops,
the continuous analysis of production activities the adoption of a lean manufacturing organization and layout
revision.
SAE Power Lines S.r.L.:
The activities of the Company relating to the fabrication and erection of transmission towers and lines continues
to be steady with adequate and promising prospects as we look ahead. This is despite the pressure on liquidity
in the global markets which would also have an impact in the emerging markets. However the prospects of good
opportunities over the medium to long-term especially in markets in North East and West Africa are encouraging
as also in the emerging markets including India, Brazil and the Middle East. The Company is continuing its focus
on good market opportunities in the United States of America as well as Mexico for the future for all its products
and services.
During the calendar year 2010, the Company recorded a turnover of Euro 32.02 million, an EBITDA of Euro 1.96
million and PAT of Euro 4.60 million.
Further, the year end order book was Euro 56 million. Additionally the company is well positioned on its bids
which are approximately in the range of Euro 55 million.
Oil and Gas - Campo Puma Oriente S.A.:
The Puma Block is located in Ecuador’s Oriente Basin, 50 km south of Puerto Francisco de Orellana approximately
400 Km east of Quito awarded to Pegaso Consortium (Gammon India Limited through Campo Puma Oriente
S.A. has a share of 66.4% in the consortium). The contract was originally established as a Production Sharing
Contract, which entitled the contractor to a share on the incremental production above an established base
production output. After a reform on the Hydrocarbon Law on 2010, all operators in Ecuador had to undergo a
contract renegotiation process to migrate to the newly established Service Contract model. The revised Puma
Block contract was signed and registered on February 1st, 2011 for an 18 year term. The primary objective of the
project is the exploration, development, and production of hydrocarbons in the Puma Block through a Service
Contract signed with the Ecuadorian government. From the beginning of the Block’s development in late 2008,
90% of all production facilities have been built and are currently in operation; 7 wells have been drilled and are
currently producing with a 100% success rate on development well drilling. Puma Block is currently producing an
average of 1,800 barrels of oil per day. 15 km. of 2D seismic were surveyed during late 2010, which will provide
for valuable information regarding the reservoir currently in production. Based on this information, 2 additional
development wells will be drilled between late 2011, and early 2012 to increase production.
The total investment plan for the initial stage of Puma Block’s exploration and development (2008 – 2015) is
USD 100.6 million Out of the total project cost described in the previous section, the Consortium has invested
USD 49.9 million as of December 31st, 2010.
The estimated production output for the Puma Block’s current developed and producing field is 1,800 barrels
per day for the remaining contractual term (2011 – 2028), is a total recovery of 11 million barrels. This implies a
20% recovery factor over a total 50 million barrels estimated Original Oil in Place. This development considers
9 currently drilled wells plus 2 additional development wells. At a Service Fee of $21.1/barrel, as established in
the new Service Contract, the total resource pool created by the project is $232 million.
9. Real Estate Business:
Real estate, a “sunshine industry” in India, is flourishing rapidly, propelled by strong demand drivers and
significant transformations such as deregulation of the sector, increasing transparency and professionalism,
improved product quality and service standards etc.
Further, the housing sector has been growing at an average of 34% annually, while the hospitality industry
witnessed a growth of 10-15% last year. Apart from the huge demand, India also scores on the construction
A NNUAL R EPORT I 2010/11
55