Legal Proceedings faced by the Company and its Subsidiaries, the Company and it Subsidiaries‟

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IX. BUSINESS ACTIVITIES AND PROSPECTS OF THE COMPANY

1. General

The development of national shipping industry that is fully supported by the Government of Indonesia, has brought a wind of change, as demonstrated by the increase in number of domestic fleets and the continuously growing number of domestic players. The implementation of cabotage principle by the Government of Indonesia through the enactment of Law No. 17 of 2008 is the main pillar of the rise of maritime industry in Indonesia. Since then, efforts and campaigns to pursue beyond cabotage implementation have received warm welcome from the maritime industry players. In principle, beyond cabotage provides more room for competition in Indonesian waters. The Company responded to the above by expanding its business, the last one being the development of the shipyard sector, which the Company believes has a bright prospect. The Company was established in and has started its commercial operation since 2010. Currently, the Company is engaged in shipping and shipyard through subsidiaries also management consultant services. The Company owns subsidiaries that are engaged in two segments, vessel chartering and shipyard. The first Subsidiary engaged in vessel chartering has been operating since 1980, whereas the subsidiary engaged in shipyard has been operating since 2009. All of the Company’s business activities are coordinated through the establishment of ten Subsidiaries, nine of which are engaged in vessel chartering. As of the date of the issuance of this Prospectus, the Company owns and operates 33 thirty three vessels, consisting of oil tankers, chemical tankers, gas carriers, and FSOs Floating, Storage and Offloading. In addition, the Company also owns one tug boats and two barges that are privately used for the purpose of shipyard construction. Most of the vessels owned by the Company service the users from the oil and gas industry, both domestic and multinational companies. As previously stated at the beginning of this Prospectus, approximately 61.4 of the Company’s current revenue is contributed by PT Pertamina Persero, which is one of the Company’s customers with a solid track record. The Company has long-standing relationships with its customers. For Pertamina, the Company has built a good relationship since more than 30 years ago. In the shipyard segment, the Company is currently capable of carrying out new shipbuilding activities in addition to MRO Maintenance, Repair and Overhauling activities and is actively participating in tender processes held by vessel users. 2. Business Activities The main business activities: shipping and shipyard through subsidiaries also management consultant services. 2.1. Shipping In general, the Company provides transportation services to all supply chain lines of oil and gas companies and provides storage for oil production output FSO at the oil fields and caters the distribution to refineries and eventually to the energy users. The following diagram outlines the processes and roles carried out by the Company in oil and gas transportation. 132 127 Upstream Operation 1. The Company provides FSO Floating, Storage and Offloading type vessels to store oil production output from offshore and onshore oil fields. 2. The Company’s vessels transport crude oil from Oil Fields or FSO vessels to the refineries. 3. The outputs from oil refineries are transported by the Company’s vessel to the next refineries to be processed into fuels. Downstream Operation 4. Fuel from the refineries is transported by the Company’s smaller vessels to oil depots which will be distributed to end consumers. 5. The by-products of oil refineries in the form of liquid gases are transported by the Company’s gas carrier vessels to LPG depot. 6. The by-products of oil refineries in the form of chemicals are transported by the Company’s chemical tankers to the customers. 7. The Company’s vessels also transport imported oil from outside Indonesia to refineries located in Indonesia. In conclusion, the shipping operations carried out by the Company play a critical role in maintaining supply and ensuring the availability of oil and gas supply from production operational centres to the more advanced production facilities such as refineries; and connecting the oil and gas distribution network to the end consumers who use the energy sources in daily life.