The Company‟s Revenue in the Past 3 Years

142 137

b. Obtain new contracts for MRO and new building for the Company‟s shipyard.

The Company will improve its capabilities to obtain new shipbuilding and docking contracts for its shipyard, which has become fully operational in early 2014. Proven track record in both MRO and shipbuilding of the Company’s shipyard will be considered as relevant factor as key advantage in order to get better positioning in market competition.

c. Operational cost efficiency

Company has introduced several business initiatives that serve as a basis to improve cost efficiency include the synergy between shipping and shipyard, therefore the Company can set a target to reduce the waiting time prior to docking and utilize the advantages from its close proximity to Singapore as well as from the tax and custom exemption.

d. Integration of shipping industry operational support information system

Improve operational efficiency through expertise in shipping, financial synergy and development of proper standardized systems in all areas. The Company is developing an integrated system that will facilitate better internal control and process flow, which will result in lower operational cost.

e. Development of human capital

Continuously improve and develop human resources through training in order to improve the quality of the Company’s office staff and ship crew, with the final objective of providing high quality and reliable service to customers.

6. Business Prospects

Shipping The demand for Indonesia’s domestic marine transportation will continue to grow in line with the growth of society’s energy demand, new refinery constructions and discoveries of new oil and gas production fields. In addition to its large population, the growth of middle class in Indonesia ensures that future energy demand will continue to grow. Pertamina itself projected that the demand for fuel will increase by 7 per year. The growing demand for energy will certainly be accompanied by the increase in demand for marine transportation, especially considering Indonesia is an archipelago. In addition to the demand for energy, the demand for marine transportation will also increase as a result of the new discoveries of oil and gas fields in Indonesia, which will soon enter the production stage, as described below: 1. Exxon Mobile in Cepu Block, which will soon produce 165.000 barrel of crude oil in early 2015. Up to the date this Prospectus is prepared, Exxon is constructing a giant Floating Storage Offloading facility, with the size of a VLCC, in Singapore. The giant FSO is currently close to completion. Once the facility arrives at the location, Exxon plans to start production in Cepu Block. The additional crude oil will require several aframax and MR types vessels for transportation from FSO to domestic refineries, and eventually vessels to transport refinery products. 2. Chevron IDD Project 3. Santos Ande Ande Lumut Bloc in Natuna 4. Husky Madura Block, which will produce gas and condensate. 5. BP Tangguh Train 3, which is an expansion of the currently existing LNG field. 6. Donggi Senoro LNG 7. And others. In the refinery sector, in order to lower the national balance of payment reduce the fuel import amount, the Government is planning to develop new domestic refineries, in cooperation with foreign oil companies such as Saudi Aramco, Kuwait Petroleum and others. Additional refineries will also result in additional demand for marine transportation. Demand for marine transportation will also increase as a result of the state electricity company’s, PLN’s Perusahaan Listrik Negara, plan to use a new type of energy, that is Liquified Natural Gas LNG for its power generators. Currently PLN has procured 2 units of LNG FSRU regasification facilities in West Java and Lampung, and is planning to procure additional units. This condition will increase demand for LNG carrier vessel from production fields such as Bontang and BP Tanggung to FSRU location, and in the future there will be high demand for small LNG feeders to cater direct distribution to the small power generators in the regions. 143 137 138

7. Competition in Shipping Industry

Indonesian-Flagged Vessels DWT Soechi DWT Soechi „s Market Share Oil tankers 5,805,740 992,015 17 Chemical and oil product tankers 753,640 58,895 8 FSO 178,397 144,197 81 Liquid Gas 617,715 4,199 1 Total 7,355,492 1,199,306 16 Source: Fleetmon, Company data, RHB Shipyard In line with the implementation of cabotage principle, the need for shipyards for new shipbuilding and vessel repair and docking will rapidly increase. Based on Indonesian National Shipping Association’s INSA data, the major cabotage principle implementation in the years 2005 – 2012 has doubled the number of vessels, from 6,000 units to 11,628 units. These additional vessels tend to be large in size, therefore, in terms of tonnage the number tripled from 5.6 million to 16 million gross tons. Whereas the number of domestic shipyards does not increase significantly. The existing shipyards are designed to facilitate small sized vessels. Based on the regulations from international classification agency IACS, all vessels are required to conduct an inspection survey of the ship bottom bottom survey every 2.5 years intermediate survey and every 5 years special survey. Therefore, the constant capacity of domestic shipyard will result in the following impact: 1. For small vessels: long queue of ships waiting for domestic dock space 2. For large vessels: difficulty in obtaining domestic shipyard space, therefore they will look for alternative shipyards overseas. For example, large vessels owned by the Company and Pertamina prefer to carry out docking in China. The sharp increase in demand for docking is clearly reflected in the ability of domestic shipyards to obtain high profit by charging fees that are far higher compared to similar shipyards in China. However, customers are still waiting in line in those shipyards. The Company believes that by the time the Company’s floating dock facility is completed in early 2015, vessels that previously preferred to travel to China will choose to carry out docking in the Company’s shipyard considering the vessel mobilization and demobilization cost to China is very high. In addition to the travel time to China that takes 5-7 days, fuel costs are to be incurred to travel to and back from China. As for the new shipbuilding market, the Government of Indonesia has started implementing similar policies as the United States, i.e., Indonesian-flagged vessels are encouraged to be built by domestic shipyard. For example, Pertamina carried out tender for the new building of tanker with a capacity of 17,500 tons, provided that such vessel is built locally. The Company has seized this opportunity and managed to win the order for 3 17,500 tons vessels from Pertamina, with a total project value of more than USD 70 million. The same applies for government contractors for oil and gas under SKK Migas, which have implemented all tenders for new shipbuilding to require the vessel to be built in domestic shipyards. For example, Total EP Mahakam Block recently issued tender for the new shipbuilding of 5 AHTS vessels, which are required to be built locally. The Company believes that in the future, demands for new ships to be built locally will continue to grow. The Company’s shipyard, which has just recently started operating, has managed to obtain orders for 5 vessels with a total value of USD 92 million. 8. Compliance with Environmental Regulations Based on the State Minister Environmental Regulation No 11. Year 2006 concerning the type of business plan andor activities for which environmental impact assessment reports are mandatory, the Company is not under the category of a company which business plans andor business activities renders it mandatory to prepare environmental impact assessment reports Analisis Mengenai Dampak Lingkungan, ―AMDAL‖ . In addition, based on the Decree of the Governor of Special Capital Region of Jakarta No. 1892002 dated 5 February 2002, the Company is also not categorized as a company which business plans andor business activities renders it mandatory to prepare Environment Management Efforts Upaya Pengelolaan Lingkungan, ―UKL‖ and Environment Monitoring Efforts Upaya Pemantauan Lingkungan Hidup, ―UPL‖ in the Special Capital Region of Jakarta. Accordingly, it is not mandatory for the Company to prepare AMDAL or UKL and UPL documents.