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HMS GroupPresentation for Morgan Stanley EMEA conference                                   April 2011
DisclaimerThis document is confidential and has been prepared by HMS Hydraulic Machines & Systems Group plc (the “Company”...
HMS at a glance     The leading pump manufacturer and provider of flow                                                   ...
History of growth: Industry consolidationFrom pumps to integrated solutions1993–2002             Pump Trading             ...
Strong management team                                                             Key senior managers Artem Molchanov   ...
Key investment highlights                            1   Attractive industry fundamentals                                T...
1          Attractive industry fundamentalsRussian energy and utilities                                Russian oil sector ...
Oil and gas sector                                                         Oil field                                      ...
1           New milestone projects                Oil & gas production and oil transportation                             ...
Nuclear power generation                                      Reactor hall                       Turbine hall             ...
1          New milestone projects                Thermal and nuclear power utilities           TGC-3 (Mosenergo)          ...
Water industry                                                                                                    Water su...
1          New milestone projects              Water utilities                                  Asia-Pacific Economic Coop...
1          Significant upside from aftermarket Key drivers for aftermarket services growth                                ...
2          The leading provider of flow control              solutions in RussiaLeading market share in pumps …           ...
3       Advanced R&D capabilities: Pumps Very strong in-house R&D and significant experience          Pump design and wor...
3       Advanced R&D capabilities: Project design Recently acquired Giprotyumenneftegaz (GTNG),             West Siberia ...
3          Advanced R&D capabilities: Unique           business model Pre-tender preparation/aftermarket support are cruc...
4         Diversified and well-established customer           baseSelected customers by industries in 2007-2010           ...
5        Operational and product quality excellence  Plants are certified in accordance with                   Comparativ...
6             History of resilient financial growth and                 strong backlog Revenue, EBITDA1 (RUR bn) and EBITD...
Current tradingLatest Events   Listing on the London Stock Exchange   Repayment of RUR 3.3 bn bank loansComing Events 2...
Business strategyFocus on integrated     Higher margin than stand-alone products and servicessolutions and other     HMS...
Key investment highlights                            1   Attractive industry fundamentals                                T...
Appendix (i)               25
Production assets Promburvod (PBV)                                    Livnynasos (LN)                               HMS Ho...
Competitive environment in Russia                                              Customized pumps                           ...
Attractive industry fundamentalsHMS core markets in pump manufacturing1 CAGR ’09-’15 %45                                  ...
Sales and marketing   HMS representatives                                        Subject of                               ...
HMS’ integrated solution services overviewIntegrated solutions highlights                                                 ...
Growth strategy: Selective acquisitions in keysegments                                 Core focus for potential acquisitio...
East Siberia – Pacific Ocean pipeline   Total number of pumping stations                                                  ...
HMS Group presentation, Morgan Stanley EMEA Conference (April 2011)
HMS Group presentation, Morgan Stanley EMEA Conference (April 2011)
HMS Group presentation, Morgan Stanley EMEA Conference (April 2011)
HMS Group presentation, Morgan Stanley EMEA Conference (April 2011)
HMS Group presentation, Morgan Stanley EMEA Conference (April 2011)
HMS Group presentation, Morgan Stanley EMEA Conference (April 2011)
HMS Group presentation, Morgan Stanley EMEA Conference (April 2011)
HMS Group presentation, Morgan Stanley EMEA Conference (April 2011)
HMS Group presentation, Morgan Stanley EMEA Conference (April 2011)
HMS Group presentation, Morgan Stanley EMEA Conference (April 2011)
HMS Group presentation, Morgan Stanley EMEA Conference (April 2011)
HMS Group presentation, Morgan Stanley EMEA Conference (April 2011)
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HMS Group presentation, Morgan Stanley EMEA Conference (April 2011)

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This presentation was created to present HMS Group at one-on-one meetings with investors within Morgan Stanley EMEA Conference (12-14 April 2011, London & New-York).

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HMS Group presentation, Morgan Stanley EMEA Conference (April 2011)

  1. 1. HMS GroupPresentation for Morgan Stanley EMEA conference April 2011
  2. 2. DisclaimerThis document is confidential and has been prepared by HMS Hydraulic Machines & Systems Group plc (the “Company”) and it subsidiaries and associates (the "Group") solely for use atthe presentation and may not be reproduced, retransmitted or further distributed to any other person or published, in whole or in part, for any other purpose.This presentation does not constitute or form part of and should not be construed as an advertisement of securities or a securities prospectus, an offer or invitation to sell or issue or thesolicitation of an offer to buy or acquire or subscribe for securities of the Company or the Group or any depositary receipts representing such securities in any jurisdiction or an invitation orinducement to engage in investment activity in relation thereto.No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever.No representation, warranty or undertaking, express or implied, is given by or on behalf of the Company or any of its directors, officers, employees, shareholders, affiliates, advisers,representatives or any other person as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein orany other material discussed at the presentation. The information contained in this presentation does not purport to be comprehensive and has not been independently verified. TheCompany is under no obligation to update or keep current the information contained in this presentation and any opinions expressed herein is subject to material change without notice.Neither the Company nor any of its directors, officers, employees, shareholders, affiliates, advisors, representatives or any other person shall have any liability whatsoever (in negligence orotherwise) for any loss howsoever arising from any use of this presentation or any other material discussed at the presentation or their contents or otherwise arising in connection with thepresentation.This presentation includes statements that are, or may be deemed to be, “forward-looking statements”, with respect to the financial condition, results, operations and businesses of theCompany. These forward-looking statements can be identified by the fact that they do not only relate to historical or current events. Forward-looking statements often use words such as”anticipate”, “target”, “expect”, “estimate”, “intend”, “expected”, “plan”, “goal” believe”, or other words of similar meaning.By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, a number of which are beyond the Companys control. As aresult, the Company‟s actual future results may differ materially from the plans, goals and expectations set out in these forward-looking statements. The Company assumes noresponsibility to update , complete or revise any of the forward looking statements contained in this presentation.This presentation is directed only at (i) persons who are outside the United Kingdom or (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act2000 (Financial Promotion) Order 2005, (the “Order”) or (iii) high net worth entities, and other persons to whom they may lawfully be communicated, falling within Article 49(2) of the Order(all such persons together being referred to as “relevant persons”). Any investment activity to which the materials relate is available only to, and will be engaged in only with relevantpersons. Any person who is not a relevant person should not act or rely on the information contained in this presentation or any of its contents.Neither the Company‟s share nor global depositary receipts representing the same have been, nor will they be, registered under the U.S. Securities Act of 1933 (the "Securities Act”), asamended, or under the applicable securities laws of Australia, Canada or Japan. Any such securities may not be offered or sold in the United States or to, or for the account or benefit of, USpersons except pursuant to an exemption from registration and, subject to certain exceptions, may not be offered or sold within Australia, Canada or Japan.Any failure to comply with these restrictions may constitute a violation of United States, Australian, Canadian or Japanese securities laws. The distribution of this presentation in certainjurisdictions may be restricted by law and persons into whose possession this document or any other document or other information referred to herein comes should inform themselvesabout, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities law of any such jurisdiction.For Russian law purposes, the securities mentioned in this presentation (the "Securities") represent securities of foreign issuers. It is not permitted to place or publicly circulate the Securitieson the territory of the Russian Federation at present or for the benefit of persons who are not "qualified investors" (in the meaning of the Russian securities laws). No prospectus for the issueof the Securities has been or is intended to be registered with the Federal Service for Financial Markets of the Russian Federation. The information provided in this presentation is notintended to advertise or facilitate the offer of the Securities in the territory of the Russian Federation. This presentation does not represent an offer to acquire the Securities or an invitation tomake offers to acquire the Securities.The information and opinions contained in this document are provided as at the date of this presentation and are subject to change without notice. Some of the information is still in draft formand neither the Company nor any other party is under any duty to update or inform recipients of this presentation of any changes to such information or opinions. In particular, it should benoted that some of the financial information relating to the Company and the Group contained in this document has not been audited and in some cases is based on managementinformation and estimates.** NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA,JAPAN OR THE RUSSIAN FEDERATION ** 2
  3. 3. HMS at a glance  The leading pump manufacturer and provider of flow Financial Highlights (RUR bn) control solutions and related services to the oil and  Revenue CAGR 5% 65% 47% gas, nuclear and thermal power and water sectors in Russia and the CIS  Blue-chip customer base 2004 2008 2008 2009 9m 2009 9m 2010  Adjusted EBITDA CAGR / EBITDA margin ² 23.5% 11.7% 11.7% 12.8% 14.5% 13.9% 24% 15% 58%  Advanced R&D and significant experience in pump development 2004 2008 2008 2009 9m 2009 9m 2010  Three complementary business segments before crisis crisis after crisis Market share (core) by Business segment revenues Backlog estimates (*) (RUR bn) Industrial pumps 41% 117% 20.6 9.5 Modular equipment 35% Engineering, procurement 10%1 31 Dec 2009 30 Sep 2010 and construction (EPC)Sources: Audited IFRS financials for 2007-2009, reviewed IFRS financials for 9m 2010, Company data, Frost & Sullivan report1 Research, engineering and design services for the upstream oil industry2 Adjusted EBITDA margin is calculated as adjusted EBITDA divided by revenue(*) Refer to note (*) on page 21 for a discussion of the Group‟s methodology for the calculation of backlog and of the limitations associated with the calculation of backlog 3
  4. 4. History of growth: Industry consolidationFrom pumps to integrated solutions1993–2002 Pump Trading Pump Design and 2003 Pump Trading Manufacturing Modular Equipment Pump Design and2004–2006 Pump Trading Manufacturing Design and Manufacturing Modular Equipment Pump Design and2007–2008 Pump Trading Manufacturing Design Construction and Manufacturing Modular Equipment 2009– Pump Design and Pump Trading Design EPC Today Manufacturing and Manufacturing Oil and gas production Oil transportation Power generation Water utilities 4
  5. 5. Strong management team Key senior managers Artem Molchanov  Kirill Molchanov  Andrey Nasledyshev Nikolay Yamburenko  Anatoliy Nazarov Igor Tverdokhleb CEO First Deputy CEO Deputy CEO Head of Industrial Pumps Head of Modular Head of R&DIndustry experience: Industry experience: Industry experience: Industry experience: Equipment Industry experience: 17 years 17 years 11 years 32 years Industry experience: 24 years Years with HMS: Years with HMS: Years with HMS: Years with HMS: More than 35 years Years with HMS: 17 years 17 years 6 years 7 years Years with HMS: 6 years 4 years Founders / ShareholdersThe management team… HMS Group shareholder structure G. Tsoy 17.33% …is comprised of professionals with significant experience in pump and oil and gas industries Free-float 37.25% …includes founders, who have led HMS since its inception Other managers 21.42% …has a strong commitment to the business V. Lukianenko 24.00% Source: Company data HMS’ founders remain shareholders and continue to be actively involved in managing the business 5
  6. 6. Key investment highlights 1 Attractive industry fundamentals The leading provider of flow 2 control solutions in Russia 3 Advanced R&D capabilities Diversified and well-established 4 customer base Operational and product quality 5 excellence History of resilient financial 6 growth and strong backlog 7 Strong management team 6
  7. 7. 1 Attractive industry fundamentalsRussian energy and utilities Russian oil sector investments Commentsinfrastructure investments (RUR bn) (RUR bn) Water utilities CAGR Oil refining and CAGR  Infrastructure modernization and expansion Thermal power generation ’09-’15 petrochemicals ’09-’15 Nuclear power generation Oil pipelines – Large portion of Russian infrastructure is outdated and at 2,576 or near end of useful life 3,340 Oil exploration – Economic growth driving demand for new infrastructure 1,011 21.7% and extraction 540 15.3% – Very large expected spending by public and private sectors 810 19.0% in energy generation, public utilities and oil and gas 1,131 industries 1,586 21.7% 1,103 230  State development programs 311 285 1,226 12.2% 489 – Large on-going projects in the public utilities and electricity 743 16.1% 616 303 generation with ongoing impact until 2020-30 2009 2015E 2009 2015ESource: Frost & Sullivan report Source: Frost & Sullivan report Russian pumps market history and Russian modular equipment market history and EPC market history and forecast3- forecast1 (RUR bn) forecast2 - HMS core segments (RUR bn) HMS core segments (RUR bn) 224 22 CAGR 14.0% 511 CAGR 18.8% CAGR 14.1% 10 231 79 2009 2015E 2009 2015E 2009 2015E Significant increase in capital spending in core end markets drives growth of all HMS’ businessesSource: Frost & Sullivan report1 Includes pumps for water injection, oil refining and petrochemicals, oil pipelines, energy generation (thermal and nuclear (excluding MCP)), water utilities pumps, household vibrationpumps, as well as integrated solutions and aftermarket2 Includes pump stations, automated group metering units, associated gas processing and transport units3 Includes oil field infrastructure construction, oil and gas transportation, construction and engineering, research and design services for oil and gas industry (upstream) 7
  8. 8. Oil and gas sector Oil field ► ► Main oil pipeline Oil refinery ► ► ► ► ► ► ► ► ► Oil product storage ► ► Filling station Filling station ► ►Source: Company data 8
  9. 9. 1 New milestone projects Oil & gas production and oil transportation Mature oil producing regions Haryaga-Yuzhny Zapolyarnoye-Purpe Underdeveloped oil producing regions Khylchuyu (45 MMt, 536 km) Oil pipeline projects (8 MMt, 160 km) Baltic Pipeline Oil products pipeline projects System-II (50 MMt, 1,000 km) Primorsk Developing oil fields Prirazlomnoye HMS participation confirmed Timano-Pechora Tikhoretsk-Tuapse 2 basin Yuzhny Haryaga Moscow ESPO-II and ESPO-II Komsomolsky NPZ (12 MMt, 295 km) Khylchuyu Zapolyarnoye capacity expansion -De-Kastry Unecha Russia (47 MMt, 2,046 km) (n.d., 300 km) Salymskoye Purpe Russkoye Vankor“Yug” (South) Tikhoretsk Priobskoye Yurubcheno- Syzran Tokhomskoe Talakanskoye(9 MMt, 1,465 km) Samotlor Tyamkinskoye Novorossiysk Nizhnevartovsk Verkhnechonskoye Tuapse Tengiz De-Kastri Skovorodino Taishet Komsomolsky NPZCaspian Pipeline Consortium Purpe-Samotlor (25expansion Komsomolsky NPZ MMt, 430 km)(35 MMt, 1,510 km) -port De-Kastry Yurubcheno- ESPO-I and ESPO-I (9 MMt, 313 km) Tokhomskoe-Taishet capacity expansion (18 MMt, 600 km) (50 MMt, 2,694 km) Kozmino Transneft investment program 2010-2017 Oil production development Export markets > 10,000 km of pipelines to be constructed or > 3 bn tons of oil reserves to be Central Asia replaced developed in the next several  Rapidly growing sales of modular equipment to oil years and gas sector in Kazakhstan > 140 of pump stations to be constructed or Iraq reconstructed Oil refining development  Significant installed base of HMS pumps from Soviet > 550 reservoirs with total capacity of almost  26oil refineries are to be and post Soviet periods 10 mln m3 to be reconstructed reconstructed  Currently undertaking projects for Oil Ministry and BP Source: Frost & Sullivan report, Transneft website (www.transneft.ru) 9
  10. 10. Nuclear power generation Reactor hall Turbine hall Feed pumps Condensate pumps Pumps for security systems Pumps for lubrication systems Pumps for auxiliary systemsSource: Company data 10
  11. 11. 1 New milestone projects Thermal and nuclear power utilities TGC-3 (Mosenergo) TGC-1 TGC-2 TGC-6 Investment 2010-2015: Investment 2010-2015: Investment 2010-2015: Investment 2010-2015: RUR 39 bn RUR 73 bn RUR 28 bn RUR 16 bn Kolskaya Leningradskaya-II TGC-9 TGC-4 Investment 2010-2015: Investment 2010-2015: RUR 28 bn RUR 21 bn TGC-13 (Enisei) Investment 2010-2015: Kalininskaya TGC-11 RUR 10 bn Smolenskaya Kurskaya Investment 2010-2015: Novovoronezhskaya-II RUR 26 bn Rostovskaya Rostovskaya Beloyarskaya TGC-14 TGC-12 (Kuzbas) Investment 2010-2015: TGC-5 Investment 2010-2015: RUR 8 bn Investment 2010-2015: RUR 21 bn RUR 14 bn Selected nuclear power plant projects abroad using Russian TGC-8 TGC-7 (Volga) TGC-10 (Fortum) technology Investment 2010-2015: Investment 2010-2015: Investment 2010-2015: RUR 18 bn RUR 11 bn RUR 47 bn No of power units / Investments Name Country Unit capacity (MW) 2010-2015 (RUR bn) Belene NPP Bulgaria 1 / 1,000 128Summary of total investments in power generating capacity Tianwan NPP China 2 / 1,000 86 Number of power units to be Additional generation Investments constructed or reconstructed capacity, MW 2010-2015 (RUR bn) Kudankulam NPP India 2 / 1,000 65 TGC n/a 13,627 359 Mokhovtse NPP Slovakia 2 / 440 53 Akkuyu NPP Turkey 4 / 1,200 27 OGC n/a 11,962 467 Ukraine 2 / 1,200 Nuclear plants 41 21,500 808 Belarus 2 / 1,200 (Russia) Other projects 1,581 Armenia 1 / 1,200 Nuclear plants 17 17,880 1,940 (Foreign) Vietnam 1 / 1,200Source: Frost & Sullivan Nuclear Power Plants HMS participation confirmed Projects under construction Planned projects 11
  12. 12. Water industry Water supply to industrial enterprises Irrigation ► Urban water supply ► Water treatment Water conditioning ► ► Sewage treatment ► ► Surface water intake ► ► ► Reuse of treated wastewater Borehole water intake ► ► ► Water industry Release of wastewaterSource: Company data 12
  13. 13. 1 New milestone projects Water utilities Asia-Pacific Economic Cooperation Olympic Games in Sochi in 2014 FIFA World Cup 2018 Summit in Vladivostok in 2012 Investment 2010-2014: RUR 930 bn1 Investment 2010-2018: RUR 1.6 trn1 Investment 2010-2012: RUR 660 bn1 Kaliningrad Petrozavodsk St. Petersburg Tver Vladimir Export markets Moscow Yaroslavl Central Asia Kaluga Kirov  Recently undertook turnkey construction of Rostov-on-Don N.Novgorod Perm Kazan pumping stations in Turkmenistan and Uzbekistan Volgograd Ekaterinburg Azov Tyumen  Presence in water markets of Tajikistan and Krasnodar Samara Orenburg Kyrgyzstan Sochi Omsk  Offices in Ashkhabad (Turkmenistan) and Tashkent (Uzbekistan) Barnaul Leading integrated water utilities JSC Rosvodokanal JSC Evraziysky JSC RKS Vladivostok Total Capex 2010- Capex in water projects, RUR bn (2007–2015) Large-scale State Programmes Capex period 2015 (RUR bn) Federal Programme "Zhilische" (public 620 2011-2015 housing) 1,011 Regional programmes "Clean Water“2 520 2011-2017 844 (unconfirmed budget) 724 606 Water Strategy of Russian Federation until 351 2009-2020 471 372 393 2020 (excl. "Clean Water") 295 311 Reconstruction of Grozny utilities 105 2010-2011 St. Petersburg Water Utilities Development 103 2010-2025 Programme 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015ESource: Frost & Sullivan report, media sources Source: Frost & Sullivan report1 Figures have been taken from various media sources; they are not final and may change in the future2 The “Clean Water” program is a nationwide large investment plan aimed at improving drinking water quality. 13
  14. 14. 1 Significant upside from aftermarket Key drivers for aftermarket services growth Installed base Water injection pumps  Very large installed base requires repair and Other 13% maintenance services Exceptional installed base  Large portion of installed base is outdated, HMS supplies creating opportunity for upgrades as well as 87% replacement Total number of pumps: 4,500 Oil trunk pipeline pumps1 Other 2%  Energy represents 80% of operating cost for a typical pump Energy efficiency HMS supplies  Trend for modernization of equipment to increase 98% energy efficiency Total number of pumps: 1,044 Source: Company data, Frost & Sullivan Example of pump servicing  Most repair and maintenance historically largely in-house Outsourcing trend  HMS has contracts with companies including – TNK-BP (full outsourcing of maintenance of water injection pumps at the Samotlor field) – TransneftSource: Frost & Sullivan, Company data Note: In red are highlighted the pump‟s components that1 In Transneft‟s pipeline system suffer the greatest degree of deterioration during operation of the pump and which can be replaced in order to extend the pump‟s operation life 14
  15. 15. 2 The leading provider of flow control solutions in RussiaLeading market share in pumps … … and modular equipment Market size Market size HMS Other HMS Other RUR bn RUR bn To tal HM S co re segments 41% 59% 9.0 To tal HM S co re 35% 65% 10.0 Submersible water well pumps 65% 35% segments 1.0 Water injectio n pumps 59% 41% 1.1 Oil pipeline pumps 54% 46% 1.0 P ump statio ns 56% 44% 4.6 Water utilities pumps 41% 59% 1.0 Thermal po wer generatio n pumps 41% 59% 1.1 A uto mated gro up 2.2 30% 70% metering units Nuclear po wer generatio n pumps 29% 71% 0.8 Oil refining and petro chemical pumps 27% 73% 1.9 A sso ciated gas pro cessing and 7% 93% 3.2 Ho useho ld vibratio n pumps 20% 80% 1.1 transpo rt unitsSource: Frost & Sullivan report (for 2009) Source: Frost & Sullivan report (for 2009)Leading independent player in oil and gas field project design CommentsTotal market size: SurgutNIPIneft, 21%  Leading player in core business segments:RUR 19.1 bn Other, 31% – Almost half of market share in core pump market segments with no close local or international competitors Rosneft-NTC, 12% – Strong position in modular equipment NizhnevartovskNIPIneft, 5% – Leading independent player in oil and gas field project Giprovostokneft, 7% HMS1, 10% design TomskNIPIneft, 7% UfaNIPIneft, 7%Source: Frost & Sullivan report (for 2009)1 HMS‟ subsidiary GTNG – a leading independent Russian oil and gas R&D center Leading market positions in core segments 15
  16. 16. 3 Advanced R&D capabilities: Pumps Very strong in-house R&D and significant experience Pump design and working mode modeling1 in pump development – 5 in-house R&D facilities in Russia and the CIS, centralized research coordination Unique testing facility (one of the largest in the former Soviet Union and globally) for all types of large specialized pumps for nuclear power plants and oil transportation – Current facility allows to test pumps up to 8MW in power; new facility for pumps up to 14MW under construction Deep integration with clients‟ R&D – HMS‟ R&D works closely with clients‟ R&D divisions in developing pre-tender documentation and helps clients adopt new design solutions and technical regulations – Increases the likelihood of the use of HMS 1Using ANSYS CFX, which is a high-performance, general purpose computational fluid dynamics (CFD) and flow modeling software used to solve wide-ranging fluid flow problems equipment in projects Top right picture: Different colors of lines in a stream depict different velocity of parts of the stream. A modeler‟s task is to equalize velocities in the flow to ensure the most optimal operation of a pump Only a few global pump manufacturers have comparable R&D capabilities 16
  17. 17. 3 Advanced R&D capabilities: Project design Recently acquired Giprotyumenneftegaz (GTNG), West Siberia province: Oil & gas field map leading Russian R&D center specializing in design of on-surface (as opposed to sub-surface) facilities for oil and gas fields – Designed over 200 oil and gas condensate fields in Russia including many of the largest (e.g. Samotlor, Mamontovskoye, Priobskoye) Significant R&D resources for design of water utilities projects (RVKP)Selected oil and gas clients3D design and real view of oil preparation facility Tyumen Oil field designed by GTNG Other Project design capabilities a major competitive advantage in provision of integrated solutions 17
  18. 18. 3 Advanced R&D capabilities: Unique business model Pre-tender preparation/aftermarket support are crucial for establishing/maintaining strong relationships with clients HMS‟ ability to participate in pre-tender preparation stage creates unique competitive advantage Tender, pricing Pre-tender project Design and Delivery and and contract After market preparation production installation negotiation services (up to 24 months) (1–24 months) (1 month) (1–3 months) Design of large-scale  Limited competition in  Local engineering  Timely delivery,  Spare parts projects, including customized pumps expertise is one of the installation and testing are  Maintenance pipelines, water utilities most important factors for crucial  Modernization (after 5-15  Key decision factors: and O&G fields clients  Installation services years of operation) Frequent co-operation – Local engineering  Raw materials to start accounts for significant with technical teams of expertise production are generally part of overall revenue potential clients on financed from customers‟ from a contract development of tender – Timely execution prepayments documentation  Competition in standard pumps driven by: – Historical relationship – Quality – Price  Modernization  Reconstruction  Replacement 18
  19. 19. 4 Diversified and well-established customer baseSelected customers by industries in 2007-2010 Sales breakdown (9m 2009-2010) 16,158 3,741 9,975 2,597 997 Oil and gas 580 1,037 537 970 451 736 954 6,456 7,076 9m 2009 9m 2010 Other TNK-BP Gazpromneft OrionStroy Transneft Rosneft Source: Company data, audited 2007-2009 IFRS financials Power Examples of customers for integrated solutions Client Pumps Modular equipment EPC Rosneft    TNK-BP    Transneft    SurgutNG  Infrastructure LUKOIL   and water Gazprom   Gazprom Neft    Turkmenistan Salym Petroleum   Premium customer base, which requires integrated solutionsSource: Company data 19
  20. 20. 5 Operational and product quality excellence  Plants are certified in accordance with Comparative analysis examples ISO:9001:2008 Submersible water well pumps HMS Grundfos Model 3ЭЦВ6-10-110 SP17-11  Products are compliant with API 610 standard 3 Flow rate, m /h 10 10  Modern software systems for R&D and project Head, m 110 110 management Efficiency ratio, % 57.0-59.2 53.9-58.3 Model 3ЭЦВ6-25-100 SP30-12 – SolidWorks, ANSYS CFX, Bentley, 3 Flow rate, m /h 25 25 Primavera Head, m 100 100 Efficiency ratio, % 59.8-62.1 57.4-61.7  Equipment from well-established foreign producers for critical manufacturing processes Water utilities pumps HMS KSB Model 1Д315-75 Omega 100-250A – Skoda, Schiess, Doosan, Demag, Schenk, Flow rate, m3/h 315 315 Sodik, Ibarmia and other Head, m 75 75  HMS‟ products include high-precision, safety- Efficiency ratio, % 83.0 82.6 critical equipment for hazardous facilities (nuclear Weight, kg 190 210 plants, refineries, pipelines) Source: The Russian Association of Pump ManufacturersSchiess Demag Skoda Ibarmia HMS has a strong focus on operational excellence and manufactures top quality products 20
  21. 21. 6 History of resilient financial growth and strong backlog Revenue, EBITDA1 (RUR bn) and EBITDA1 margin (%) Backlog estimates (*) (RUR bn) 25.0% 20.6 23.5% 117% 20.0 20.0% 16.2 14.8 14.0 14.5% 13.9% 15.0% 15.0 12.8% 11.7% 9.5 10.3 9.8 0.4 10.0 1.1 10.0% 1.1 5.0 3.0 5.0% 8.0 9.2 1.9 2.3 0.7 1.6 1.4 0.0 0.0% 2004 2008 2009 9 m 09 9m 10 31 Dec 2009 30 Sep 2010 Revenue EBITDA adj. EBTDA margin Other Nuclear pumps Oil transportation pumps Comments Comments  Revenue growth  Strong backlog (*) – 2004-2008 CAGR 47% – 117% growth in 9m 2010 – Resilient performance during crisis – Accelerated growth post-crisis: 65% in 9m 2009- 2010 – Mostly organic growth in recent yearsSource: Audited IFRS financials for 2007-2009, reviewed HMS and GTNG IFRS financials for 9m 2010, Company data1 Adjusted EBITDA(*) HMS estimates backlog according to its own methodology, which may differ materially from the methodology of other compani es in the industry. The amount of backlog at any reporting date is estimated to be the amount of backlog as atthe preceding backlog reporting date, plus new or additional customer orders booked during the reporting period, less amounts of contract value booked as revenue under Russian GAAP on an unconsolidated basis under the relevantcontracts, plus or minus adjustments made in the judgment of HMS management, including adjustments to reflect amendment, expiry or termination of contracts, cancellation of orders, changes in price terms under contract or ordersfactors affecting the amount of potential revenue which HMS may be recognised under such contracts and other adjustments for certain large contracts based on IFRS revenue recognition principles.Backlog is not an IFRS concept. HMS backlog estimates are not derived from IFRS figures, are subject to certain adjustments based on management‟s judgment and are not comparable to IFRS figures. When preparing its backlogestimates, HMS estimates how much revenue has been accrued under Russian GAAP on an unconsolidated basis, subsidiary by subsidiary, and deducts that amount from the contract value. The amount of this accrued revenue underRussian GAAP on an unconsolidated basis is likely to differ materially from revenue that would be accrued under IFRS on a consolidated basis. HMS does not take into account the potential timing of future performance in calculatingbacklog. Backlog estimates are not an indication of potential revenues under IFRS or otherwise, and may differ materially from revenues actually recognized under the relevant contracts in future periods. Figures shown include contractsobtained through the acquisition of GTNG in 2010; therefore, backlog at 31 December 2009 may not be comparable to backlog at 30 September 2010 21
  22. 22. Current tradingLatest Events Listing on the London Stock Exchange Repayment of RUR 3.3 bn bank loansComing Events 2010 results will be released in the second half of April 2011 11-12 April: Morgan Stanley EMEA Conference in London 13-14 April: Morgan Stanley EMEA Conference in New York 31 May – 2 June: VTB Capital Russia Calling in London 09 June: Credit Suisse Oils & Gas Conference in London 28 June: Renaissance Capital Investor Conference in MoscowContracts – Winner / Spring Traditional flow of usual contracts including oil transportation and nuclear pumps for clients‟ current facilities Transneft contract on a trackM&A Activity Active discussions with several targets including one in a final stage 1 deal in a stage of finalizing In addition to current 40% of DKHM, 11% to be bought at the beginning of 2012 HMS is in line with its growth strategy and continues to deliver on promises to its shareholders and investors 22
  23. 23. Business strategyFocus on integrated  Higher margin than stand-alone products and servicessolutions and other  HMS‟ largest customers increasingly seek to work with manufacturers that can offer integrated and highly-engineered customized solutions products  Creates strong ties to customers, pull-through demand for aftermarket servicesStrengthen position  Take advantage of positive market trends in existing core markets in core markets  Organic expansion into attractive market segments including  Increase of aftermarket services component to generate higher-margin and recurring revenue aftermarket andexport opportunities  Core export opportunities: water projects in FSU, Rosatom nuclear contracts, O&G in Kazakhstan and Iraq Expand research  Leverage leading R&D capabilities in order to develop next-generation customized pumps, technological and development upgrades and integrated pump systems capabilities  Work closely with customers to develop technical policies and standards  Continue to integrate and optimize current production assets and continue to capture synergies betweenImprove operational acquired businesses efficiency  Standardization and continuous improvement of operations and business processes (e.g. financial reporting, R&D, procurement and IT) Pursue selective,  Acquire technology and R&D facilities value-enhancing  Pursue acquisition opportunities in high-growth sectors where HMS has limited presence acquisitions  Seek cost and revenue synergies 23
  24. 24. Key investment highlights 1 Attractive industry fundamentals The leading provider of flow 2 control solutions in Russia 3 Advanced R&D capabilities Diversified and well-established 4 customer base Operational and product quality 5 excellence History of resilient financial 6 growth and strong backlog 7 Strong management team 24
  25. 25. Appendix (i) 25
  26. 26. Production assets Promburvod (PBV) Livnynasos (LN) HMS Household pumps Dimitrovgradhimmash (DGHM)  Products: Water well submersible  Products: Water well submersible  Products: Household vibration pumps  Products: Equipment for oil and chemical pumps pumps industries and pumps for oil refining HMS Neftemash  Products: Modular equipment for oil and gas and water industries HMS Pumps  Products: Industrial pumps for oil and gas, power generation Nizhnevartovskremservice (NRS) Belarus  Services: Maintenance and repair of pump equipment, drilling and other oil and gas Ukraine field equipment Minsk Moscow Nasosenergomash (NEM) Russia Sumy Bavleny  Products: Pumps for thermal and nuclear power generation and oil & gas industry Sibneftavtomatika (SibNA) Livny Dimitrovgrad Nizhnevartovsk  Products: High-precision measuring equipment for oil, gas and water flow rates Rostov Tyumen VNIIAEN Tomsk  Description: R&D center for pumps used in nuclear, thermal power generation, oil and gas industry Tomskgazstroy (TGS) HMS Group  Services: Trunk oil and gas pipeline and auxiliary facilities construction  Headquarters Rostov Vodokanalproekt (RVKP) Giprotyumenneftegaz (GTNG) Sibkomplektmontazhnaladka (SKMN)  Services: Project design for water utilities  Services: Project and construction design  Services: Design, construction and of oil and gas facilities commissioning of oil and gas field projectsSource: Company data Industrial pumps Modular equipment EPC 26
  27. 27. Competitive environment in Russia Customized pumps Standard pumps  Limited R&D Russian players  Small scale of operations  Pump manufacturing is a non-core business for most of  Not well-positioned in terms of operational players  Products are often not in direct competition with HMS efficiency due to limited scale of operations product line  Key names: NPO Frunze, Votkinsk Plant, Uralhydromash Global players  Lack of local engineering expertise  Water pumps: KSB, Grundfos  Not well-positioned in terms of price of products  Oil trunk pumps: Sulzer, Flowserve  Power: Weir, KSB Chinese players  Lack of relevant technologies to produce customized  No brand names pumps  No established relationships with Russian clients Source: Company data 27
  28. 28. Attractive industry fundamentalsHMS core markets in pump manufacturing1 CAGR ’09-’15 %45 Oil Pipelines4035 Water (Clean Water Supply and Dry-pit Sewage) Thermal Power30 Core segments CAGR2: 26.9% Submersible Water25 Pumps for Well Pumps Water (Wet-pit Sewage and Oil Refining and Chemical Submersible Waste Water Treatment Petrochemicals Industry Household Pumps20 Pumps for Drilling Total market CAGR: 18.8% Household Subsurface Oil Vibration Pumps Main Circulation Pumps for Production Nuclear Power Generation15 Surface Oil Nuclear Power Pumps for Metallurgy Other Production (excl. MCP) and Mining10 500 1,500 2,500 3,500 40,000 2009 market size (RUR mm) Oil and gas Power Water and infrastructure Non-coreSource: Frost & Sullivan report1 Including integrated solutions and aftermarket sales2 CAGR calculated using total market size of core segmentsNote: All CAGR figures are based on the Frost & Sullivan report Fast growing core segments 28
  29. 29. Sales and marketing HMS representatives Subject of A typical client’s hierarchy for negotiation discussion  CEO  Deputy CEO  Large-scale project Group CEO Deputy CEO  Heads of divisions (e.g. ESPO, Vankor, Rosatom) Head of Head of Head of Head of Project  Integrated solutions Development Procurement Construction Management  Heads of R&D units  Cross-selling  Technical specialists Head office  Large supplies of  Senior sales managers1 customized pumps and modular equipment Senior management of operating subsidiaries  Large construction  R&D engineers contracts  Cross-selling Operating subsidiaries  Sales managers1 Middle management of local production units  Regular supplies of pumps and equipment and Technical specialists of local production units  R&D engineers services Local production unitsSource: Company data1 Total number of HMS‟ sales force as of 30 September 2010 is approximately 200 Best-in-class sales team reaching clients at all levels, supported by R&D throughout process 29
  30. 30. HMS’ integrated solution services overviewIntegrated solutions highlights Project management Construction Growing demand for single source solutions Load / unload facilities ― Optimize supply chain Metal works ― Reduced complexity and risk of compatibility issues Wall panels Installation and assembly Tanks / Vessels Tanks / Vessels / Storages ― Lower client life-cycle costs Commissioning Commissioning Commissioning Favor larger manufacturers with stronger R&D Supervision Supervision Supervision Automation Automation Automation Forecast to grow to up to 45-50% of the size of the Ventilation Ventilation Ventilation global pump market by 2015 (Frost & Sullivan) Safety system Safety system Safety system Lubrication system Lubrication system Lubrication system (seal, bearing, coupling) (seal, bearing, coupling) (seal, bearing, coupling) Pipework Pipework Pipework Cabling Cabling Cabling Pressure gauge Pressure gauge Pressure gauge Flow meter Flow meter Flow meter Valves Valves Valves Frequency inverter Frequency inverter Frequency inverter Solution / project design Solution / project design Solution / project design Pump System Design Pump System Design Pump System Design Pump System Design Skid (baseplate) Skid Skid Skid Coupling Coupling / Hydraulic coupling Coupling / Hydraulic coupling Coupling / Hydraulic coupling Pump / pump unit Electric motor / Turbine / Electric motor / Turbine / Electric motor / Turbine / Electric motor Diesel motor Diesel motor Diesel motorPump (standard / customized) Pump (standard / customized) Pump (standard / customized) Pump (standard / customized) Pump (standard / customized)Pump design (customized pumps) Pump design (customized pumps) Pump design (customized pumps) Pump design (customized pumps) Pump design (customized pumps) Integrated solutions Integrated solutions Turnkey solution Bare shaft pump Pump based system (non-modular) (modular design) Integrated solutions Low (< 15%) Medium (15-30%) High (> 30%) High (> 30%) High (> 30%)Source: Frost & Sullivan report EBITDA margin level 30
  31. 31. Growth strategy: Selective acquisitions in keysegments Core focus for potential acquisitions Acquisition objectives and rationale Oil and gas  Flow control solutions in oil and gas  Pumps for oil and gas, chemical and petrochemical  Increase of market share applications  Diversification of product offering  Modular equipment, tanks and vessels  Expansion into new segments  Dimitrovgradkhimmash (DGKhM)1  Pumps for nuclear and thermal power generation, marine applications Power  Increase of market share  Pumps for nuclear and thermal power generation, oil refining, chemical and petrochemical applications  Diversification of product offering  Pumps for thermal power generation, water utilities  Pumps for wet-pit sewage applications  Diversification of product offering Water  Pumps for water utilities, nuclear and thermal power  Strengthening positions in water segment generation  Increase of market share  Modular equipment for wastewater treatment  Expansion into wastewater treatment segment  Pumps for oil refining and metals and mining  Pumps for oil refining, oil transportation, water utilities and  Diversification of product offering Other vessels  Expansion into new segments  Pumps for oil transportation, oil refining, metals and mining  Increase of market share  Pumps for chemical applications, nuclear power generation, water utilities Source: Company data 1 The Group has an option to acquire 11.0% of the voting shares of its associate, DGKhM, in 2012 31
  32. 32. East Siberia – Pacific Ocean pipeline Total number of pumping stations 41 Yakutsk Sea of Krasnoyarsk 12 13 14 15 Okhotks 16 region 11 17 10 18 9 19 8 RUSSIA 7 20 6 Khabarovsk Taishet 5 Ust’-Kut region 3 4 Skovorodino 21 22 1 23 2 Buryat 24 25 Irkutsk region 26 34 27 33 region 31 32 35 Chita 28 30 Blagoveschensk 29 Chita 36 region Irkutsk 37 38 39 CHINA 40 41 MONGOLIA Vladivostok Purposes of new pumping stations – increasing Number of contracted pumping stations 21 20 capacity Pumping stations under construction by HMS 12 For Komsomolsk and Khabarovsk refineries 9 Pumping stations constructed by Sulzer and For Primorsk refinery 4 9 Turbonasos Not information the present time. Supposedly – for increasing of capacity after launching new branches from 7Source: Company data, Transneft oilfields 32

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