India Asean Pledge to Conclude Services Agreement Negotiations by December Anand Sharma Tasks Negotiators to Include Product-Specific Rules of Origin in FTA

At the 10th ASEAN-India Economic Ministers Consultations in Siem Reap, Cambodia today, Union Minister for Commerce, Industry & Textiles, Shri Anand Sharma, and the ASEAN Economic Ministers reviewed the impressive growth in total trade since the signing of the ASEAN-India Trade in Goods Agreement. Since 2011, bilateral trade has increased by 43% to reach USD 79.8 billion making India the 6th largest trading partner of ASEAN. The Ministers tasked the Senior Officials to start review of the implementation of ASEAN-India Trade in Goods Agreement including the possibility for a package of Product-Specific Rules of Origin to further facilitate trade between both the regions. The Ministers agreed to intensify negotiations towards conclusion of the ASEAN-India Trade in Services and Investment Agreement. This would facilitate the beginning of ASEAN-India discussions on the Regional Comprehensive Economic Partnership (RCEP) which would bring together a market of more than 50% of the world’s population and 30% of the world’s GDP. India would be hosting a meeting of the Working Group on Services and Investment in the second half of September 2012 so as to conclude negotiation before the ASEAN-India Commemorative Summit in December in New Delhi. The Ministers discussed their participation at the Second ASEAN-India Business Fair (AIBF) from December 18-20. Cambodia, as ASEAN Chair, confirmed its participation and assured that the ASEAN Member States look forward to a successful AIBF back to back with the ASEAN-India Commemorative Summit. The Ministers discussed preparations for the Commemorative Summit and related events such as the ASEAN-India Car Rally and the INS Sudarshini expedition to ASEAN countries. Shri Sharma invited his counterparts to the flag down ceremony of the Car Rally at Guwahati on December 17, 2012. Shri Sharma also had bilateral meeting with his counterpart from Myanmar and discussed various means and ways to boost bilateral trade and economic cooperation. They also discussed expansion of items under border trades. Myanmar welcomed investments from India in the fields of agriculture, mining, oil and gas, infrastructure development, etc. The Ministers to take the discussions further during Shri Sharma’s visit to Myanmar later this year.

Metalloinvest chooses Siemens and Midrex Technology for its new HBI production facility

Siemens Metals Technologies and consortium partner Midrex Technologies, Inc. signed a contract with the Russian Metalloinvest Company to expand the hot briquetted iron (HBI) production at Lebedinsky Mining and Processing Integrated Works (Lebedinsky GOK) in Gubkin (Belgorod Region, Russia). The contract has a total volume of 270 Mio Euro. The new plant with a rated capacity of 1.8 million metric tons of hot briquetted iron per year will be the largest single HBI module in the world.

TMK ANNOUNCES 2Q 2012 AND 1H 2012 IFRS RESULTS

The following contains forward looking statements concerning future events. These statements are based on current information and assumptions of TMK management concerning known and unknown risks and uncertainties.

OAO TMK (“TMK” or “the Company”), one of the world’s leading producers of tubular products for the oil and gas industry, announces today its interim consolidated IFRS financial results for the six months ending June 30, 2012.

2Q 2012 Highlights

• Total pipe sales increased by 10% quarter-on-quarter to 1,101 thousand tonnes, mainly due to an increase in seamless OCTG and large-diameter (LD) pipe sales.
• Revenue for the second quarter was $1,781 million, an increase of 7% over the first quarter of 2012.
• Adjusted EBITDA increased by 5% quarter-on-quarter to $290 million due to higher volumes of mainly seamless OCTG and LD pipe and lower operating expenses. Adjusted EBITDA margin was 16%.
• Net income was $76 million for the second quarter, as compared to $105 million in the first quarter of 2012, being negatively impacted by a $26 million foreign exchange loss versus a $31 million gain in the previous quarter.
• Net debt decreased by $128 million in the second quarter of 2012 and amounted to $3,569 million as of June 30, 2012, while the Net Debt-to-EBITDA ratio^[1] was 3.6x. The share of short-term loans and borrowings was 27% as of June 30, 2012; loans with a fixed interest rate represented 82% of total debt. TMK’s weighted average nominal interest rate decreased from 7.00% as of March 31, 2012 to 6.87% as of June 30, 2012.

1H 2012 Highlights

Sales Volumes

• Total pipe sales decreased by 3% to 2,106 thousand tonnes compared to the first half of 2011, mainly due to a decline in LD pipe volumes partially offset by the growth in both sales of seamless and welded OCTG and welded line pipe.
• Seamless pipe sales increased by 3% compared to the first half of 2011 and amounted to 1,272 thousand tonnes. Seamless OCTG pipe volumes increased by 12% year-on-year on the back of strong drilling activity in Russia.

• Welded pipe sales decreased by 12% year-on-year and amounted to 834 thousand tonnes. Welded OCTG and line pipe sales increased by 19% and 31% respectively, whereas LD pipe sales declined. 

Financials

• Revenue decreased by 3% year-on-year to $3,439 million mainly due to lower welded pipe volumes caused by a drop in LD pipe sales. Sales of seamless pipe, the core business of the Company, generated 62% of total revenue.
• Adjusted EBITDA decreased by 9% year-on-year to $567 million affected by lower welded pipe volumes, the negative effect of currency translation[2] and higher operating expenses. However this negative effect was partially offset by higher volumes and better pricing and product mix of seamless pipe. Adjusted EBITDA margin amounted to 16% for the first six months of 2012.
• Net income was $182 million for the first half of 2012 as compared to $258 million for the first half of 2011, negatively impacted by the operating expenses growth. Net income adjusted for the gain/(loss) on changes in fair value of the derivative instrument, amounted to $184 million; adjusted net income margin equaled 5% for the first half of 2012.

Recent Developments

• In April and May 2012, TMK shipped casing pipe with ULTRA^TM FJ Premium connections to Lukoil and Gazprom. This premium product was patented by the American division and manufactured at the Orsky Plant in Russia.
• In June 2012, the annual shareholders’ meeting approved a final dividend for 2011 in the amount of 2,531 million Russian roubles ($76 million at the exchange rate on the date of approval) or 2.70 Russian roubles ($0.08) per ordinary share.
• In July 2012, TMK and Gazprom signed a technological cooperation agreement for the period of 2012-2015. The Sci-Tech cooperation program stipulates the development of 21 new types of product and focuses on the delivery of import-substitute and high-performance tubular products that will meet the advancing needs of Gazprom.

• In July 2012, TMK’s Orsky Plant completed an audit of its quality management system for compliance with the American Petroleum Institute (API) standard. This certification will enhance the Company's capabilities to promote and supply its products to international customers.

Russia

In the second quarter of 2012, revenue in the Russian division increased by 9% to $1,237 million mainly due to the growth of sales of seamless OCTG, LD and welded line pipes. Adjusted EBITDA increased by 16% to $204 million due to higher volumes, better pricing and product mix of welded pipe and lower operating expenses.

For the first half of 2012, revenue of the Russian division decreased by 8% to $2,370 million mainly due to the decline of welded pipe volumes as a result of the fall in LD pipe sales and the negative effect of currency translation. Adjusted EBITDA decreased by 12% to $380 million following a downward trend in revenue and gross profit.

Americas

Revenue for the American division increased by 2% to $448 million in the second quarter of 2012 primarily driven by increasing volume in the seamless pipe business despite being negatively affected by a drop in welded line pipe sales as a result of plant downtime for a capital project at the Wilder, Kentucky facility. Adjusted EBITDA dropped by 20% to $68 million both as a result of this downtime as well as increases in hot rolled coil prices in the early part of the previous quarter.

For the first half of 2012, revenue for the American division increased by 16% and amounted to $887 million mainly due to higher volumes in welded pipes, as well as better pricing and improved product mix in both the welded and seamless businesses. Adjusted EBITDA declined, however, by 4% to $154 million. Purchase prices for hot rolled coil used in production in the first half of 2012 were higher than prices for coil used in production in the same period of the prior year. Increasing pressure from imports limited the ability of the American division to improve pricing in welded products, and plant downtime also added additional pressure on EBITDA.

Europe

Revenue for the European division increased by 11% to $96 million in the second quarter of 2012 due to higher sales of seamless industrial pipe. Adjusted EBITDA grew by 17% to $17 million.

For the first half of 2012, revenue of the European division decreased by 5% to $182 million. Positive contribution of higher average selling prices and improved product mix was negatively impacted by the effect of currency translation. Adjusted EBITDA declined by 8% to $32 million.

2Q and 1H 2012 Market Conditions

Russia

In the first half of 2012, the Russian pipe market declined by 22% compared to the first half of 2011 mainly as a result of a significant decline in LD pipe demand, as well as weaker consumption of seamless industrial and welded line pipe.

Demand for TMK’s core products, seamless OCTG and line pipe, was relatively strong. In the first half of 2012, the seamless OCTG market in Russia remained flat year-on-year, while the seamless line pipe market grew by 12%. Robust demand for oil and gas grades continued to be supported by a high level of drilling activity which set a 10-year record in 2011. Oil production in Russia increased by 1.6% in the first half of 2012. The pace of production growth has recently been declining which, however, is evidence of a more challenging Russian drilling environment.

In the first half of 2012, the LD pipe market in Russia experienced a substantial decline year-on-year as new pipeline projects have been delayed.

The industrial seamless pipe market in Russia declined by 10% year-on-year for the first six months of 2012, while the welded industrial pipe market grew by 11% in the same period affected by growing construction activity in Russia.

Americas

OCTG demand in the U.S. remained steady throughout the second quarter of 2012.  According to the Baker Hughes rig count, the U.S. finished the quarter at 1,959 active drilling rigs, down 1% from the first quarter. The gas rig count continued to decline, down 19% in the second quarter of 2012 due to low natural gas prices in the U.S. However, strong oil rig count growth continued to increase by 8%.   

In the second quarter of 2012 industry shipments of OCTG in the U.S. increased by 21% as compared to the second quarter of 2011 and were flat compared to the first quarter of 2012, according to Pipe Logix.  Per the OCTG Situation Report, the average OCTG inventory for all products increased to 5 months of supply, historically considered a normal level. Led by Korean producers, import shipments continued to exceed domestic shipments in the second quarter and reached volume levels not experienced since early 2009. 

Europe

In the second quarter of 2012, the European market remained challenging due to macroeconomic concerns and the Eurozone debt crisis. As a result, end-users continued to focus on spot orders anticipating more favorable payment terms. Customers also kept inventories at a minimum level for their ongoing needs creating additional pressure on prices and volumes.

3Q 2012 and 2012 Outlook

The Russian division sees a strong order backlog through the end of 2012 as Russian oil and gas companies continue their drilling plans. The Company therefore expects the demand for OCTG and line pipe in Russia to remain strong in the second half of 2012.

While the Company feels positive about the long-term U.S. market outlook, the second half of 2012 is more uncertain. We expect to see continued adjustments in the drilling behavior of customers as a result of low gas prices. Both distributors and customers are closely managing inventory which will lead to both pressure on volumes and pricing in the third quarter.

The Company confirms its cautiously positive outlook for the remainder of the year and, despite some usual slowdown in the third quarter, expects to maintain the financial performance demonstrated in the first half of 2012 through the year-end.

---

[1]Net-Debt-to-EBITDA ratio is defined as Net Debt at the end of the given reporting date divided by the Adjusted EBITDA for the 12 months immediately preceding the given reporting date.

[2] For the purposes of this press-release, the effect of currency translation on revenue/costs and income/expense illustrates an influence of different rates used for translation of such revenue/costs or incomes/expenses from functional to presentation currency in different reporting periods.

Note: Certain monetary amounts, percentages and other figures included in this press release are subject to rounding adjustments. On occasion, therefore, amounts shown in tables may not be the arithmetic accumulation of the figures that precede them.

[3] One GDR represents four ordinary shares

[4] Adjusted EBITDA is determined as profit/(loss) for the period excluding finance costs and finance income, income tax (benefit)/expense, depreciation and amortization, foreign exchange (gain)/loss, impairment/(reversal of impairment) of non-current assets, movements in allowances and provisions, (gain)/loss on disposal of property, plant and equipment, (gain)/loss on changes in fair value of financial instruments, share of (profit)/loss of associate and other non-cash items.

Development of Tourist Spots with Foreign Assistance

A loan agreement for an amount equivalent to Japanese Yen 7331 million was signed with Japan International Cooperation Agency (JICA) in the year 2003 for Phase II of Ajanta Ellora Conservation and Tourism Development Project.                                 A loan agreement for an amount equivalent to US$ 20 million has been signed by the Asian Development Bank (ADB) in the year 2010 for South Asia Tourism Infrastructure Development Project – India Portion (Sikkim). A disbursement of US$ 0.14 million has been made during financial year 2011-12 and no disbursement has been made during 2012-13 under this project.                         A loan agreement for an amount equivalent to US$ 43.42 million has been signed by the Asian Development Bank in the year 2011 for Infrastructure Development Investment Programme for Tourism (Project I) covering Himachal Pradesh and Punjab.  A disbursement of US$ 1.79 million has been made during financial year 2011-12 and US$ 0.21 million during 2012-13 under this project.                         A loan agreement for an amount equivalent to US$ 43.84 million has been signed by the Asian Development Bank (ADB) in the year 2012 for Infrastructure Development Investment Programme for Tourism (Project 2)covering Tamil Nadu and Uttarakhand. No disbursement has been made under this Project as of 31st July 2012.  This information was given by the Minister of State for Tourism, Shri Subodh Kant Sahai    in a written reply to ShriPralhad Joshi   in Lok Sabha today.

Growth in Tourism Industry

The Working Group on Tourism for 12th Five Year Plan, set up by the Planning Commission, has recommended a target growth in domestic tourism of about 12% per annum during the 12th Plan. The Working Group has also recommended to increase India’s share of International Tourists Arrivals to at least 1% by the end of 12th Plan – requiring an annual growth of about 12%. To increase the foreign tourist arrivals, the Ministry of Tourism, as part of its on-going activities, releases print, electronic, online and outdoor media campaigns in the international and domestic markets, under the Incredible India brand-line, to promote various tourism destinations and products of the country. In addition, a series of promotional activities are undertaken in important and potential tourist generating markets overseas through the Indiatourism Offices abroad with the objective of showcasing India’s tourism potential. These promotional activities include participation in travel fairs and exhibitions; organising road shows, Know India seminars & workshops; organizing and supporting Indian food and cultural festivals; publication of brochures; offering joint advertising and brochure support and inviting media personalities, tour operators and opinion makers to visit the country under the Hospitality Programme of the Ministry. Development and promotion of tourism, including providing facilities to tourists, are primarily the responsibility of the State Governments/Union Territory Administrations. However, Ministry of Tourism provides central financial assistance to the States/UTs for these activities on the basis of proposals received from them as per the Scheme Guidelines, inter-se priority and subject to availability of funds. Efforts made by Ministry of Tourism for improving the facilities for foreign and domestic tourists include, creation/upgradation of tourism infrastructure, wayside amenities, providing last mile connectivity, increasing the availability of budget accommodation and trained manpower, etc. For undertaking various activities relating to the development and promotion of tourism, the Working Group has also recommended total outlay of Rs.22800 Crore for tourism sector during 12th Plan. This information was given by the Minister of State for Tourism, Shri Subodh Kant Sahai in a written reply to Shri Manohar Tirkey in Lok Sabha today.

Foreign Companies in Power Sector

The Union Minister of State for Power, Shri K.C.Venugopal, informed Lok Sabha today in a written reply that as per extant policy, Foreign Direct Investment (FDI) up to 100% is permitted in the power sector, under the automatic route, for: i) Generation and transmission of electric energy produced in hydro electric, coal/lignite based thermal, oil based thermal and gas based thermal power plants; ii) Non-Conventional Energy Generation and Distribution; iii) Distribution of elective energy to households, industrial, commercial and other users; and iv) Power Trading. The Minister further informed that accordingly, any foreign investor can enter power sector through FDI route. Moreover, the Electricity Act creates a conducive environment for investments in all segments of the industry, both for public sector and private sector, by removing barrier to entry in different segments. Section 63 of the Act provides for determination of tariff by competitive bidding process which will encourage private sector investment. He said that several global power plant equipment manufacturing companies from Japan, Europe and USA have formed Joint Ventures with Indian Companies for establishing manufacturing base in India for the manufacture of supercritical boilers/ turbine generators and technology transfer. The companies are Mitsubishi Heavy Industries Ltd., Japan with L&T at Gujarat; Hitachi, Japan with BGR at Tamil Nadu; Toshiba, Japan with JSW at Tamil Nadu; Alstom, France with Bharat Forge at Gujarat; Ansaldo Caldie, Italy with Gammon at Tamil Nadu; Babcock & Wilcox, USA with Thermax at Maharashtra; Hitachi Power Europe GmbH (Germany) with BGR at Tamil Nadu. Doosan, Korea (100% FDI) has come to establish its manufacturing facilities on their own strength in Tamil Nadu. CLP Holdings, Hong Kong has established power plant of 1320 MW at Jhajjhar Haryana and AES Corporation, USA has established Orissa Power Generation Corporation Ltd. for a thermal power plant of 420 MW at Orissa.

Thermal Power Projects

The Union Minister of State for Power, Shri K.C.Venugopal, informed Lok Sabha today in a written reply that feasibility studies for setting up of thermal power projects are conducted by the developers. However, in the case of Ultra Mega Power Projects (UMPPs), identification of the project site is done by Central Electricity Authority (CEA) in consultation with the State Government. Studies/investigation and the tariff based competitive bidding process for selection of the developer are carried out by project specific SPV Company. He further said that one Ultra Mega Power Project (UMPP) at Tilaiya in Jharkhand has been awarded to M/s. Reliance Power Ltd. for which land acquisition is under progress. Government of Jharkhand has proposed a second UMPP in Deogarh district of Jharkhand. Site for the second UMPP in Jharkhand has been identified and approved by the State Government. The developer for the second UMPP in Jharkhand will be selected on the basis of tariff based competitive bidding after completion of studies/investigations.