At Essar Projects we understand the importance of good project management practices to stay competitive and effectively offer high quality customized engineering solutions to our clients. Shailesh Sawa, Director-Business Development & Strategy, Essar Projects
In 2014 ESSAR Projects secured $54 million contract from Saudi Aramco. What is the status of the project?
The project is under execution and nearing completion. We are also actively tracking further opportunities with Saudi Aramco, which is one our key clients.
The Middle East seems to be your new playground; ESSAR’s entry into the Kuwait project market with the biggest EPC contract by an external client is a valid testimony to the fact. Are you aggressively focusing on the Middle East, what are the other regions you are bullish about?
We have been executing projects in the Middle East for prestigious clients like TAKREER, GASCO, BOROUGE and Saudi Aramco for the past few years. Bagging the KNPC contract in Kuwait is yet another feather in the cap. Even with the current slowdown in the region due to falling oil prices, there is still a significant amount of work to be done in infrastructure area, which will generate ample business opportunities in the Middle East in the medium to long run.
Further, having executed projects in varying environment – from highly structured working conditions of Singapore and Middle East to the tough terrains of Myanmar, Madagascar and Papau New Guinea, we are confident of taking up assignments in new areas and targeting project specific opportunities in CIS, Africa, Indian Sub-continent and South-East Asia.
Time and again ESSAR projects have been appreciated for their efforts towards safety in project execution, what are the procedures in place to ensure the safety parameters are met?
In Essar Projects, we have successfully established HSE Management System (HSEMS) which follow international best standard and practices. We are an OHSAS 18001 certified company and follow the basic eight elements of HSEMS, as listed below: (1)Leadership & Commitment (2) Policy & Strategic Objectives (3) Organization Resources, Competence, Standards & documentation (4) HSE Risk Management (5) Planning & Procedures (6) Compliance & Regulations (7) Implementation & Monitoring (8) Auditing & Review.
During Project execution, we apply stringent HSE controls with zero tolerance. This includes HSE endorsement of RFC drawing, HSE competency Certification, robust Permit to work system followed by Method statement and Risk Assessment for each critical activities, prior client approval of Construction equipment, ban on Hydras and mandatory safety clearance sticker on all equipment. There are mandatory Induction and Tool Box Talks to workforce, as well as constant HSE training in other vital subjects, periodic HSE Audits & Inspection with client’s representative to monitor and control any HSEMS deficiencies. Defensive driving trainings are mandatory for all the drivers. Sometimes we also deploy GPRS system for vehicle tracking and monitoring drivers’ behaviour. Register of requirements (ROR) comprising national & international HSE pertaining laws & standards and client’s HSEMS requirements is maintained to facilitate compliance.
India has an impending need to build infrastructure to nurture its economic growth, what are your views on this?
Infrastructure deficit in India has prevailed in all the critical areas such as roads, railways, ports, airport, power, water; mainly attributable to decades of underinvestment, drive and policy deficiency in core areas. High interest rates, dearth of reforms, inconsistent policies and delayed decisions all contributed to increasing time and cost making projects unviable.
With a target to attain a double-digit growth by 2020, India needs over INR 30 trillion of investment in infrastructure development in the next five years. Of this, nearly 70% is needed for power, roads and urban infrastructure. The Union Budget for 2016-17 has renewed thrust on infrastructure, which demonstrates keenness to remove the bottlenecks and impediments to infrastructure growth. There have been significant efforts by the Government to boost infrastructure development through public investment and international funding. This is accompanied by pragmatic reforms.
Increased allocation of tax revenues towards the States and a ‘One Team’ model acknowledging the role of State in infrastructure development, will help clear a number of regional and local bottlenecks, thereby increasing the confidence of private players. With NHAI changing its model to include EPC mode, there will be a boost to highway projects. Development of over 65,000 km of roads has been planned under different programmes and with a target to build 30 km a day from 2016. Further, nearly 50,000 km State Highways are planned to be upgraded to National Highways. Besides, to bridge the gap in transport infrastructure and to improve connectivity, the Government is pushing for a number of Bridges, flyovers, coastal road, as well as Metro Rail projects and Dedicated freight corridors.
Apart from transport infrastructure, given the drought situation in many states and the need for water conservation, a number of lift irrigation, river inter-linking, water treatment plants and Water pipeline projects are being announced in various states.
In the Power sector, while there has been an emphasis on increasing power generation capacity, it will take some time for the projects market in power sector to pick up – especially since a number of policy issues are yet to be resolved and incomplete projects need to be commissioned and operational so that private investment in these begins to yield returns. Further, in response to the green energy initiatives, there will a gradual shift towards clean and renewable energy projects – many at localised, captive levels.
Pragmatic and consistent approach to policy reforms will go a long way in boosting and nurturing infrastructure in India.
What kind of prospect do you see in order inflows from domestic market in this fiscal?
In 2016-17, the total Government outlay on roads and railways is estimated at over INR 2, 00,000 crores. This spells quantum opportunities for Construction players. As such, we are looking at significant orders from sectors like Roads & Highways, Metros and also Lift Irrigation projects – in addition to leveraging our core expertise in Refineries, Steel Plants, Oil & Gas Pipelines, Water Pipelines and Marine Works. As compared to previous year, with an array of opportunities emerging in the domestic market, we definitely are more optimistic about order inflows.
Do project management solutions add to the efficiency in execution of projects, what kind of project management technologies has ESSAR put to use in its projects and to what effect?
We at Essar Projects understand the importance of good project management practices to stay competitive and effectively offer high quality customized engineering solutions to our clients. Over the years, the experience earned from executing mega projects are inculcated into the project execution philosophy for new projects.
Every aspect of project management is given due importance at every stage of the project. While efficient Project Planning is important right from the beginning, rigorous Project Monitoring and Control is taken up as a critical activity to ensure time and cost efficiency and customer satisfaction.
We consider Project Management capabilities as key to success and have been providing training to employees in the field of project management, which provides a holistic approach. Time Management, Human Resource Management, Quality Management, Risk Management, Procurement Management techniques are adopted and implemented, which helps to execute large size and complex projects – with their own quota of challenges, risks and uncertainties – using innovative execution methodologies and attaining customer satisfaction.
What are the green initiatives adopted by ESSAR to improve its efficiency and reduce environmental footprint?
Essar Projects is an ISO 14001 – Environment Management System certified EPC Company. Apart from being committed to comply with environment protection guidelines &specifications of the clients, our management is highly sensitive towards various aspects of environmental impact and its minimization throughout our project cycle.
For collection and segregation of waste there are different Colour Waste Bins at Site Locations and all types of construction waste is sent for further disposal as per legal requirements. Segregation and Safe Disposal of Hazardous & Non Hazardous Waste in Solid or Liquid state are strictly monitored. Periodic monitoring of Air, Noise, Water is mandatory and anything excess of norms, is addressed on priority. Stocks of hazardous chemicals such as paints, thinner and cleaners – if required – are held at a minimum levels. Rubbish, debris and waste materials that constitute fire and accident hazards are removed from work area as and when they accumulate. Usage of oil spill trays is encouraged. It is the policy of Essar Projects to take responsibility for any spill that is directly attributable to our actions or negligence and any oil spills are immediately cleared up so as to avoid a safety or fire hazard. Good housekeeping is maintained during the day-to-day operations. All environmental incidents (e.g. accidental spillages or discharges) are properly managed and documented.
There is monthly monitoring of water consumption and disposal which has helped reduce Water foot prints. Rain water harvesting has been initiated even at some of our remote project sites like Mizoram. We provide for drainage systems for wastewater from site office, canteen or toilet facilities into soak pit or the approved sewerage system. All detergents used are to be environmental friendly. There are checks to ensure that earth, bentonite, chemicals and concrete agitator washings etc. are not deposited in the watercourses, but are suitably collected and residue disposed in a manner approved by Local Authorities. Wastewater drainage systems and appropriate toilet facilities are provided at sites in adherence to the approved guidelines
Use of Energy efficient pumps with at least 80% efficiency and motors with 95% efficiency or more is promoted. Diesel Generating sets used have specific fuel consumption of at least 3.5 units per litre of diesel, and a rigorous maintenance schedule. Energy efficient luminaries are used to ensure optimum illumination levels and save energy
To enhance the quality of air, 5% area of living accommodation at site is mandatorily reserved for tree plantation. PUC of all equipment and vehicles used at site is mandatory.
There are periodic training programmes for enhancing Environment Awareness. Recycling and reuse of items like Batteries, Printer Cartridge etc. is encouraged. Increased use of Audio / Video Conference meetings has drastically reduced Carbon Foot prints.
Recently we bagged Greentech Environment Silver Award, in the Construction sector for our Coke Drum Structure Project (CDSP) project of BPCL Refinery in Kochi. Essar Projects is committed to comply with all applicable legal requirements for environment protection during entire project duration.
What are the efforts taken by ESSAR Projects to infuse positive cash flow, what are the assets you plan to trade for bringing in long term stability to your balance sheet?
Prior to the current global economic slowdown, Essar Projects was functioning at full steam, executing projects – both in India and Overseas – across diverse sectors like Refineries, Petrochemicals, Tankages & Terminals, Offshore & Subsea, Pipelines (Oil & Gas, Water and Slurry), Water Treatment Plants, Ports, Power Plants, Steel Plants. To cater to such dynamic nature of orders, we had different Specialised Business Units, each with core sector expertise that helped us Make Mega Projects Possible, to the satisfaction of our clients.
As the slowdown set in Oil & Gas, Power and Steel sectors, most EPC players began to face shrinkage (even cancellation) in orders, delayed payments for work executed and resultant shortening of working capital cycle. Recognizing the need of the hour, Essar Projects began the process of consolidation. We initiated measures towards reducing overheads through resource optimization, and reduction in debt burden through sale of non-core assets; and this strategy is beginning to yield positive impact on our balance sheet.
Besides, now, there is increased focus on timely invoicing and regular follow-up for payments for completed works. Due attention is also given to invoicing and aggressive follow-up for variations, additional works and Change Orders – some of which had been long pending. This has helped to ease the pressure on working capital and begun to improve our cash flows.
Legacy project overruns and delays in projects lead to rise in cost and pile up debt, to what extent has this affected your financial health, what are the possible solutions to address such problems?
As far as possible, Essar Projects strives to complete projects within schedule. Delays in some cases have happened due to circumstances beyond our control, e.g., delays in granting ROW, clearances, delivery of critical items, change in scope/design, etc. As such, timely execution, raising of invoice – for completed works (including variations and change orders) and follow-up for payment has become the key to managing working capital constraints. Further, as mentioned above, with slowdown in the market, we have adapted ourselves through consolidation, reduction in overheads, resource optimization and sale of non-core assets to reduce debt-burden – which is beginning to show positive impact on our balance sheet and cash flows.
