HMS Group Annual Results 2010

HMS Group FY2010 IFRS Results

Roadshow Presentation

May 2011

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2

The information contained herein has been prepared using information available to HMS Group (‚HMS‛

or ‚Group‛ or ‚Company‛) at the time of preparation of the presentation. External or other factors

may have impacted on the business of HMS Group and the content of this presentation, since its

preparation. In addition all relevant information about HMS Group may not be included in this

presentation. No representation or warranty, expressed or implied, is made as to the accuracy,

completeness or reliability of the information.

Any forward looking information herein has been prepared on the basis of a number of assumptions

which may prove to be incorrect. Forward looking statements, by the nature, involve risk and

uncertainty and HMS Group cautions that actual results may differ materially from those expressed or

implied in such statements. Reference should be made to the most recent Annual Report for a

description of the major risk factors. This presentation should not be relied upon as a recommendation

or forecast by HMS Group, which does not undertake an obligation to release any revision to these

statements.

This presentation does not constitute or form part of any advertisement of securities, any offer or

invitation to sell or issue or any solicitation of any offer to purchase or subscribe for, any shares in HMS

Group, nor shall it or any part of it nor the fact of its presentation or distribution form the basis of, or

be relied on in connection with, any contract or investment decision.

2

Disclaimer

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Calculations 169.196.203

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11,164

Source: Company data

3

All numbers in millions of Russian RUBles, unless otherwise stated

Management of the Group assesses the performance of operating segments based on a measure of adjusted EBITDA, which

is derived from the consolidated financial statements prepared in accordance with IFRS

EBITDA is defined as Operating profit/loss adjusted for Other income/expenses, Depreciation and Amortization, Provision for

obsolete inventory, Provision for impairment of accounts receivable, Unused vacation allowance, Excess of fair value of net

assets acquired over the cost of acquisition. This measurement basis excludes the effects on non-recurring expenditure from

the operating segments, such as restructuring costs, legal expenses and goodwill impairments, when the impairment is a result

of an isolated, non-recurring event

EBIT is calculated as Gross margin minus D&T and SG&A expenses

Total debt is calculated as Long-term borrowings plus Long-term financial lease liabilities plus Short-term borrowings plus

Short-term financial lease liabilities

Net debt is calculated as Long-term borrowings plus Long-term financial lease liabilities plus Short-term borrowings plus Short-

term financial lease liabilities minus Cash & cash equivalents

ROCE is calculated as EBIT divided average Debt plus Equity

Backlog is calculated as the preceding backlog 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 relevant

contracts, plus or minus adjustments made in the judgment of the Group’s management. The Group may also make certain

adjustments to bookings to reflect amendment, expiry or termination of contracts, cancellation of orders, changes in price

terms under contracts or orders, or other factors affecting the amount of potential revenue which the Group believes may be

recognised under such contracts. The Group’s backlog estimates are not an indication of potential revenues. Actual revenues

and other measures of financial performance under IFRS may differ materially from any estimate of backlog, and changes in

backlog between periods may have limited or no correlation to changes in revenue or any other measure of financial

performance under IFRS

Notes to the presentation and formulas used for some figures’ calculations

Agenda

4

HMS GROUP AT A GLANCE 5

HMS At a Glance 6

Story of Growth & Profitability 7

BUSINESS STRATEGY & INVESTMENT HIGHLIGHTS 8

Industry Fundamentals and Growth Potential 9

New Milestone Projects 10

Significant Upside from Aftermarket 13

Advanced R&D Capabilities 14

Operational and Product Quality Excellence 15

Strong Management Team 16

Business Strategy 17

Sources of Best-in-class Margins & Growth 18

2010 BUSINESS UPDATE 19

2010 Business Update 20

Leader in Flow Control Solutions 21

FINANCIAL PERFORMANCE 22

Outstanding Performance for the FY 2010 23

EBITDA Development 24

Revenue & EBITDA Contribution by Segments 25

CAPEX & Working Capital 26

MID-TERM PROSPECTS 27

Key Contracts Execution and Backlog Analysis 28

Selected End-market Projects from Mid-term 29

CONTACTS 30

APPENDIX 31

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HMS GROUP AT A GLANCE

5

Who we are Key investment highlights

Attractive industry fundamentals: impressive end-markets mix prospects

The leading provider of flow control solutions in Russia and the CIS

Advanced R&D capabilities: basis for high margin & sustainable performance and growth

Diversified and well-established customer base

Operational and product quality excellence

History of resilient financial growth and strong backlog

Strong management team: company founders and top professionals

The leading provider of pumps and pump-based

integrated solutions in Russia

The core markets: oil and gas, nuclear and thermal power

and water sectors in Russia and the CIS

Production of high capacity pump systems up to 12 Mwt

Blue-chip customer base includes Rosneft, Transneft,

Rosatom, etc and more than 4,000 other clients

Source: Company data Notes: Hereinafter ‚EBITDA‛ read as ‚EBITDA adjusted‛, ‚EBITDA margin‛ read as ‚EBITDA adjusted margin‛ and ‚Net Income‛ read as ‚Profit for the year‛

Industrial pumps

Revenue RUB 10,712 mln

EBITDA adj. RUB 2.367 mln

Modular equipment


EBITDA adj. RUB 599 mln

EPC


EBITDA adj. RUB 550 mln

The leading provider of high capacity pumps and pump-based integrated solutions in Russia

HMS At a Glance

6

Revenue RUB 23,070 mln EBITDA adj. RUB 3,519 mln

New photo

Pump station of Baltic pipeline system, Transneft Oilfield Pump Station 2, Vankor oilfield, Rosneft Oil Pump Station ‚Tayezhnaya‛, Transneft

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Profit for the year RUB 1,581 mln

Story of Growth and Profitability

Revenue, 2009 vs 2010 (mln RUB)

7


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4,498

6,724

13,399 14,046

14,772

23,070

744 830 1,423 1,644 1,890

3,519

16.5%

12.3%

10.6%

11.7%

12.8%

15.3%

2005 2006 2007 2008 2009 2010

Revenue, RUB mln EBITDA, RUB mln EBITDA margin, %

Revenue CAGR 39%

EBITDA CAGR 36%

Revenue & EBITDA performance, 2005-2010

5 Years – 5 Times Growth of Revenue & EBITDA Despite Crisis

BUSINESS STRATEGY & INVESTMENT HIGHLIGHTS

8

511

231

2009 2015E

1,586

743303

489

1,011

311

1,103

3,340

2009 2015E

Water utilities

Thermal power generation

Nuclear power generation

Russian energy & utilities infrastructure investments (RUB bn)

Significant increase in capital spending in core end markets drives growth of all HMS’ businesses

Comments

Infrastructure modernization and expansion

– Large portion of Russian infrastructure is outdated and at or near end of useful life

– Economic growth driving demand for new infrastructure

– Very large expected spending by public and private sectors in energy generation, public utilities and oil and gas industries

State development programs

– Large on-going projects in the public utilities and electricity generation with ongoing impact until 2020-30

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CAGR

’09-’15

21.7%

21.7%

16.1%

810

6161,226

285230

540

2,576

1,131

2009 2015E

Oil refining and

petrochemicals

Oil pipelines

Oil exploration

and extraction

CAGR

’09-’15

15.3%

19.0%

12.2%

Russian oil sector investments (RUB bn)

EPC market history and forecast3- HMS core segments (RUR bn)

79

224

2009 2015E

22

10

2009 2015E

Source: Frost & Sullivan report 2009 1 Includes pumps for water injection, oil refining and petrochemicals, oil pipelines, energy generation (thermal and nuclear (excluding MCP)), water utilities pumps, household vibration pumps, as well as integrated solutions and aftermarket 2 Includes pump stations, automated group metering units, associated gas processing and transport units 3 Includes oil field infrastructure construction, oil and gas transportation, construction and engineering, research and design services for oil and gas industry (upstream)

Industry Fundamentals and Growth Potential

9

Source: Frost & Sullivan report 2009 Source: Frost & Sullivan report 2009

Russian pumps market history and forecast1 (RUB bn)

Russian modular equipment market history and forecast2 - HMS core segments (RUB bn)

CAGR 18.8% CAGR 14.0% CAGR 14.1%

Source: Frost & Sullivan report 2009, Transneft website (www.transneft.ru)

Novorossiysk

Moscow

Unecha

Primorsk

Kozmino

Skovorodino

Verkhnechonskoye

Tengiz

Timano-Pechora basin

Caspian Pipeline Consortium expansion (35 MMt, 1,510 km)

Baltic Pipeline System-II (50 MMt, 1,000 km)

ESPO-I and ESPO-I capacity expansion (50 MMt, 2,694 km)

Russia

ESPO-II and ESPO-II capacity expansion (47 MMt, 2,046 km)

Talakanskoye

Purpe-Samotlor (25 MMt, 430 km)

Vankor Salymskoye

Samotlor

Nizhnevartovsk

Priobskoye

Purpe

Prirazlomnoye

Tyamkinskoye

Russkoye

Taishet

Zapolyarnoye-Purpe (45 MMt, 536 km)

Syzran

Tikhoretsk-Tuapse 2 (12 MMt, 295 km)

Haryaga Yuzhny

Khylchuyu

Haryaga-Yuzhny Khylchuyu (8 MMt, 160 km)

Yurubcheno-Tokhomskoe

Yurubcheno-Tokhomskoe-Taishet (18 MMt, 600 km)

Tuapse

Tikhoretsk

Komsomolsky NPZ -port De-Kastry (9 MMt, 313 km)

Oil pipeline projects

Mature oil producing regions

Underdeveloped oil producing regions

Developing oil fields

HMS participation confirmed

Oil products pipeline projects

Komsomolsky NPZ

De-Kastri

‚Yug‛ (South) (9 MMt, 1,465 km)

Komsomolsky NPZ -De-Kastry (n.d., 300 km)

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New Milestone Projects Oil & Gas Production and Oil Transportation

Zapolyarnoye

10

South

> 3 bn tons of oil reserves to

be developed in the next

several years

Oil production development

> 10,000 km of pipelines to be constructed or

replaced

> 140 of pump stations to be constructed or

reconstructed

> 550 reservoirs with total capacity of almost

10 mln m3 to be reconstructed

Transneft investment program 2010-2017

Central Asia

Rapidly growing sales of modular equipment to oil and gas sector in Kazakhstan

Iraq

Significant installed base of HMS pumps from Soviet and post Soviet periods

Currently undertaking projects for Oil Ministry and BP

Export markets

26 oil refineries are to be

reconstructed

Oil refining development

http://www.transneft.ru/

TGC-13 (Enisei) Investments 2010-2015: RUB 10 bn

TGC-9 Investments 2010-2015: RUB 28 bn


TGC-7 (Volga) Investments 2010-2015: RUB 11 bn



TGC-3 (Mosenergo) Investments 2010-2015: RUB 39 bn


TGC-12 (Kuzbas) Investments 2010-2015: RUB 21 bn


TGC-10 (Fortum) Investments 2010-2015: RUB 47 bn




Source: Frost & Sullivan report 2009

Nuclear Power Plants HMS participation confirmed Projects under construction Planned projects

Leningradskaya-II

Kalininskaya

Rostovskaya

Novovoronezhskaya-II

Beloyarskaya

Kurskaya Smolenskaya

Kolskaya

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New Milestone Projects Thermal and Nuclear Power Utilities

11

South

Rostovskaya

Summary of total investments in power generating capacity

Selected nuclear power plant projects abroad using Russian technology

Number of power units to be constructed or reconstructed

Additional generation capacity, MW

Investments 2010-2015 (RUB bn)

TGC n/a 13,627 359

OGC n/a 11,962 467

Nuclear plants (Russia)

41 21,500 808

Nuclear plants (Foreign)

17 17,880 1,940

Name Country No of power units / Unit capacity (MW)

Investments 2010-2015 (RUB bn)

Belene NPP Bulgaria 1 / 1,000 128

Tianwan NPP China 2 / 1,000 86

Kudankulam NPP India 2 / 1,000 65

Mokhovtse NPP Slovakia 2 / 440 53

Akkuyu NPP Turkey 4 / 1,200 27

Other projects

Ukraine 2 / 1,200

1,581 Belarus 2 / 1,200

Armenia 1 / 1,200

Vietnam 1 / 1,200

Kirov

Perm

Barnaul

Petrozavodsk

Vladimir

Rostov-on-Don

Azov

Kaluga

Tver

Orenburg

Omsk

Tyumen Krasnodar

393471

606724

844

1,011

311372295

2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E

Source: Frost & Sullivan report 2009, Media sources 1 Figures have been taken from various media sources; they are not final and may change in the

future

2 The ‚Clean Water‛ program is a nationwide large investment plan aimed at improving drinking water quality.

Capex in water projects, RUB bn (2007–2015)


Large-scale State Programs Total Capex 2010-

2015 (RUB bn) Capex period

Federal Program "Zhilische" (public housing)

620 2011-2015

Regional programs "Clean Water‚2 (unconfirmed budget)

520 2011-2017

Water Strategy of Russian Federation until 2020 (excl. "Clean Water")

351 2009-2020

Reconstruction of Grozny utilities 105 2010-2011

St. Petersburg Water Utilities Development Program

103 2010-2025

JSC RKS JSC Evraziysky JSC Rosvodokanal

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New Milestone Projects Water Utilities

12

Central Asia

Recently undertook turnkey construction of pumping stations in Turkmenistan and Uzbekistan

Presence in water markets of Tajikistan and Kyrgyzstan

Offices in Ashkhabad (Turkmenistan) and Tashkent (Uzbekistan)

South

Moscow

Kaliningrad

St. Petersburg

Volgograd Kazan

N.Novgorod

Yaroslavl

Ekaterinburg

Sochi

Samara

FIFA World Cup 2018 Investment 2010-2018: RUB 1.6 trn1

Olympic Games in Sochi in 2014 Investment 2010-2014: RUB 930 bn1

Asia-Pacific Economic Cooperation Summit in Vladivostok in 2012 Investment 2010-2012: RUB 660 bn1

Vladivostok

Export markets

Leading integrated water utilities

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Significant Upside from Aftermarket

13

Water injection pumps

HMS supplies 87%

Other 13%

Total number of pumps: 4,500

Oil trunk pipeline pumps1

HMS supplies 98%

Other 2%

Total number of pumps: 1,044

Note: In red are highlighted the pump’s components that 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

Source: Company data, Frost & Sullivan report 2009

Very large installed base requires repair and maintenance services

Large portion of installed base is outdated, creating opportunity for upgrades as well as replacement

Energy represents 80% of operating cost for a typical pump

Trend for modernization of equipment to increase energy efficiency

Most repair and maintenance historically largely in-house

HMS has contracts with companies including

– TNK-BP (full outsourcing of maintenance of water injection pumps at the Samotlor field)

Exceptional

installed base

Energy efficiency

Outsourcing trend

Source: Frost & Sullivan report 2009, Company data 1 In Transneft’s pipeline system

Key drivers for aftermarket services growth Installed base

Example of pump servicing

Advanced R&D Capabilities

Very strong in-house R&D and significant experience 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 equipment

in projects

Giprotyumenneftegaz (GTNG) is the leading Russian R&D

centre specializing in design of on-surface (as opposed to

sub-surface) facilities for oil and gas fields, e.g. it

designed over 200 fields in Russia including many of the

largest (e.g. Samotlor, Mamontovskoye, Priobskoye)

Significant R&D resources for design of water utilities

projects (RVKP)

14

Pumps Project design

Pre-tender project preparation

(up to 24 months)

Tender, pricing and contract negotiation

(1–3 months)

Design and production

(1–24 months)

Delivery and installation (1 month)

After-market services

Pre-tender preparation/aftermarket support is crucial for establishing/maintaining strong relationships with clients HMS ability to participate in pre-tender preparation stage creates unique competitive advantage

Oilfields, projected by GTNG

Oilfields, projected by others

Oilfields, projected by GTNG vs others

Operational and Product Quality Excellence

Plants are certified in accordance with ISO:9001:2008

Products are compliant with API 610 standard

Modern software systems for R&D and project management

– SolidWorks, ANSYS CFX, Bentley, Primavera

Equipment from well-established foreign producers for critical manufacturing processes

– Skoda, Schiess, Doosan, Demag, Schenk, Sodik, Ibarmia and other

HMS’ products include high-precision, safety-critical equipment for hazardous facilities (nuclear plants, refineries, pipelines)

HMS has a strong focus on operational excellence and manufactures top quality products

Submersible water well pumps

HMS Grundfos

Model 3ЭЦВ6-10-110 SP17-11

Flow rate, m3/h 10 10

Head, m 110 110

Efficiency ratio, % 57.0-59.2 53.9-58.3

Model 3ЭЦВ6-25-100 SP30-12


Head, m 100 100

Efficiency ratio, % 59.8-62.1 57.4-61.7

Comparative analysis examples

Water utilities pumps HMS KSB

Model 1Д315-75 Omega 100-250A


Head, m 75 75

Efficiency ratio, % 83.0 82.6

Weight, kg 190 210

Source: The Russian Association of Pump Manufacturers

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Skoda Ibarmia Schiess Demag

15

Comments

Strong Management Team

HMS’ founders remain shareholders and continue to be actively involved in managing the business

Founders / Shareholders

… is comprised of professionals with significant experience

in pump and oil and gas industries

… includes founders, who have led HMS since its inception

… has a strong commitment to the business

Anatoliy Nazarov Head of Modular

Equipment Industry experience: More than 35 years

Years with HMS: 4 years

Kirill Molchanov First Deputy CEO

Industry experience: 17 years


Andrey Nasledyshev Deputy CEO



Nikolay Yamburenko Head of Industrial Pumps



Igor Tverdokhleb Head of R&D



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Artem Molchanov CEO



16

Key Senior Management

The management team… Shareholders Structure

Free-float37.25%

Vladimir Lukyanenko

24.00%

Other managers21.42%

German Tsoy

17.33%

Focus on integrated solutions and other highly-engineered products

Higher margin than stand-alone products and services HMS Group’s largest customers more often prefer to work with manufacturers

that can offer integrated and customized solutions Creates strong ties with customers, pull-through demand for aftermarket services

Strengthen position in core markets including aftermarket and export

Take advantage of positive market trends in existing core markets Organic expansion into attractive market segments Increase of aftermarket services component to generate higher-margin and

regular cash flows Core export opportunities: water projects in FSU, Rosatom nuclear contracts,

O&G in Kazakhstan and Iraq

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Expand research and development capabilities

Leverage leading R&D capabilities in order to develop next-generation customized pumps, technological upgrades and integrated pump systems

Work closely with customers to develop technical policies and standards

Improve operational efficiency

Commitment to integration and optimization of current production assets and commitment to increase synergies between acquired businesses

Standardization and continuous improvement of operations and business processes (e.g. ERP, budgeting and reporting methodology and software development, etc.)

Pursue selective & value enhancing acquisitions

Our targets are technology and R&D facilities Pursue acquisition opportunities in high-growth sectors where HMS has limited

presence Search for cost and revenue synergies

17

Business Strategy

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Financial and Operational highlights

18

Sources of Best-in-class Margins & Growth

HMS Group high and sustainable margins are the result of a number of cumulative factors

Mix of growing markets Unfolding innovative projects

Shift in structure of demand

First class customer base

Strong negotiation force over customers

Unique pump R&D Exceptional project design capabilities

End-to-end solutions capabilities: from design to implementation and after-market

Growth through integrated solutions: ahead of market with lower capex

Further bolt-on acquisition growth strategy based on successful track record of integrated acquisitions

United team of founders and high professionals

High market share Technical entry barriers for international majors

Multidecade track record with customers

Installed base

Focus on operations excellence and project execution

REVENUES &

MARGINS

POTENTIAL

2010 BUSINESS UPDATE

19

Innovations bring success

2010 Business Update

1 Successful completion of two milestone projects:

Vankor oilfield development Stage 1

Turkmenistan pilot station

20

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5 Operations efficiency focus through introduction of IT systems and quality management systems

4 Research & Development:

R&D of new types of pumping equipment for trunk pipelines, nuclear plants, power plants and water works

14 MWT testing facilities construction

3 Acquisition of controlling stake in GTNG:

Entrance into lucrative oilfield infrastructure project design,

That pave the way for major oil project for core HMS business

Oilfields, projected by GTNG

Others

2 Contract for supplying pump-based integrated systems for ESPO

Associate gas processing and transport units

7.5 12.6

97.5

113.8

2009 2010

20%

68% 86.099.2

67.0

73.4

2009 2010

Pump stations

Leading market share in pumps…

21

… and modular equipment


In 2010, HMS Group expanded its presence in the most key segments

The company’s share grew mainly faster than its core segments

Russian government introduced new fuel specifications, and hence, oil companies undertake refinery’s upgrade mainly in ‚hot cycle‛. The market share decrease in refinery & petrochemicals is attributable to HMS Group’s presence only in standard ‚cold cycle‛ pumps

Deferred demand is being created for standard ‚cold cycle‛ pumps

Decrease in nuclear non-MPC pumps is attributable to the industry’s specifics expressed in long-term only contracts

Revenue from signed in 2009 contracts will be recognized in 2011

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22.325.2

15.7

16.0

2009 2010

Oil industry - Water injection

pumps

17.6 16.9

46.959.6

2009 2010

Oil industry - Refining &

petrochemical pumps

18.0

64.9

15.3

19.0

2009 2010

Oil industry - Oil transportation

pumps

21.8

28.0

11.8

13.9

2009 2010

Water utilities - Submersible water

well pumps

13.5

22.7

19.3

24.0

2009 2010

Water utilities - Clean water supply and dry-pit sewage

7.6 9.1

30.3

35.9

2009 2010

Water utilities - Household vibration

pumps

The Leading Provider of Flow Control Solutions

7.3 6.4

18.2

26.8

2009 2010

Power generation - Nuclear non-MPC

pumps

21.325.2

14.7

22.2

2009 2010

Power generation - Thermal pumps

38.0 41.2

76.5 83.9 41.9 46.7 45.0

33.2 47.3

64.5

33.2

33.6 32.8

37.9 25.5 36.0

13%

8% 19% 152% 25% 42% 19% 30% 31%

-4%

261% 28%

68%

20% -13%

51%

Comments

.153.0 172.6

13%

15%

Automated group metering units

21.7 25.1

50.350.0

2009 2010

4%

16%

75.1 72.0

105.0

126.4

2009 2010

HMS Group revenue, US$ mln Others

2009 2010

HMS Group revenue, US$ mln Others

FINANCIAL PERFORMANCE

22

1,890

3,519

12.8%

15.3%

2009 2010

EBITDA margin

1,298

3,027

2009 2010

14,772

23,070

2009 2010

18.0%

36.2%

2009 2010

Revenue, 2009 vs 2010 Comments

Outstanding Performance for the FY 2010

Source: Company data Source: Company data


Total revenue up 56% yoy to RUB 23,070 mln

The growth reflects:

Significant increase in size of orders for pump-based integrated solutions

Completion of key projects

Consolidation of GTNG

Stable growth of revenue from ordinary contracts

Organic revenue growth of 47% yoy, excluding impact from GTNG

23

ROCE, 2009 vs 2010 EBIT, 2009 vs 2010

227.24.5

2 EBITDA, 2009 vs 2010

Net income, 2009 vs 2010

133% 1,825bps

56% 86%


70

1,581

2009 2010

2,156%


75.3% 2.5% 9.1%

0.5% 12.6% 1.9% 0.7% 15.3%

Revenue Cost of sales Distribution andtransportexpenses

SG&A Other expenses Operating profit Depreciation &amortisation

Others EBITDA*

Key EBITDA drivers, 2009 vs 2010 (% of revenue)

Comments World HRC price performance in 2010

EBITDA Development

expenses

EBITDA increased by 86% yoy to RUB 3,519 mln due to:

Strong revenue growth in all business units

Focus on innovative high-margin contracts

Effective cost control

Consolidation of GTNG

EBITDA organic growth of 72% yoy

EBITDA margin increased to 15.3%

SG&A grew less than revenue due to economy of scale

and cost optimization strategy

Source: Company data 24

operating expenses

20.2bn vs 13.7bn in 2009 |+47.2% yoy revenue in 2010 +56.2% yoy

227.24.5

2

0

50,000

2009 2010

75.6% 3.3% 12.4%

1.5% 7.3% 2.3% 3.1% 12.8%

Revenue Cost of sales Distribution and transport expenses

General & Administrative

expenses

Other expenses Operating profit Depreciation & amortisation

Others EBITDA

Source: Bloomberg

22%

500

550

600

650

700

750

800

Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10

World hot rolled coil price index performance, $/tonne

Modular equipment:

Sales up 39% yoy, driven by demand from the major oil

companies to equip new oil fields and modernize existing

installed base of modular equipment

EBITDA decreased 24% yoy and EBITDA margin also down to

10.3% due to execution of low-margin contracts concluded in

2009

Highlights by core segments, 2009 vs 2010 Comments

Industrial pumps:

Sales up 70% yoy to RUB 10,712 mln, enjoying strong demand

for integrated pumping solutions primarily in oil transportation

and upstream

EBITDA grew by 134% yoy, and EBITDA margin rose to 22.1%,

primarily attributable to increasing share of contracts for pump-

based integration solutions

Revenue & EBITDA Contribution by Segments


Industrial pumps

Modular equipment

EPC

227.24.5

2

EPC:

Revenue growth of 46% yoy is primarily attributable to an impact of GTNG acquisition and entering the market of projects and design. Revenue growth, excluding an effect of acquisition, was c. 14% yoy

EBITDA increased significantly to RUB 550 mln, and EBITDA margin rose to 9.0%. Newly acquired GTNG added to EPC’s EBITDA RUB 271 mln

Such a significant EBITDA growth is primarily attributable to a low EBITDA base in 2009, caused by significant price pressure connected to investment cutbacks by oil companies

1,548%

46%

-24%

39%

134%

70%

6,308

10,712

1,012

2,367

16.0%

22.1%

2009 2010


4,166

5,805

786 599

18.9%

10.3%

2009 2010


4,189

6,135

33 550 0.8%

9.0%

2009 2010


571

2,918

248

2467

2009 2010

Total M&A capex, RUB mln Controlling interest acquisition, RUB mln

Working capital position update, 2009 vs 2010 Working capital performance, 2009 vs 2010

Capital expenditures, 2009 vs 2010 M&A expenditures, 2009 vs 2010

CAPEX & Working Capital


Source: Company data Source: Company data


26

SIBNA

GTNG

2010 2009

Working capital, RUB bn 2.4 2.7

chg, % -10% 22%

Working capital/ Total assets, x 0.11 0.23

Working capital/ Revenue, % 10.6% 18.3%

Current ratio, x 1.05 1.20

Quick ratio, x 0.83 0.64

Inventories, days 63 92

Receivables, days 105 73

Payables, days 148 106

227.24.52

2,7022,441

0.18x

0.11x

2009 2010

Working capital, RUB mln Working capital / Revenue, x

192

950

344

4500.6x

2.1x

2009 2010

Organic capex, RUB mln Depreciation, RUB mln Capex/ Depreciation ratio, x

MID-TERM PROSPECTS

27

7,975 8,254

402

10,078

1,123

1,506

31 Dec 2009 31 Dec 2010

Other Oil transportation pumps Nuclear pumps

Backlog structure as of 31 Dec 2010, RUB mln

Highlights Backlog 2010 vs 2011, RUB mln

Key Contracts Execution and Backlog Analysis

Order backlog doubled yoy to RUB 19.8 bn,

including RUB 1.3 bn backlog from acquired GTNG

Organic backlog growth, excluding impact from

GTNG, was up 95% yoy

General backlog increase reflects market growth

Robust backlog growth of high-margin pump-based

integrated solutions for large infrastructure projects

Signed contracts for oil transportation pumps:

Recognized revenue of RUB 3.7 bn (incl. ESPO

RUB 3.5 bn) in 2010, current backlog RUB 10.1

bn, the most part of revenue to be recognized

in 2011

Signed contract for nuclear pumps:

Recognized revenue RUB 0.1 bn, current

backlog RUB 1.5 bn, the most part of revenue

recognition in 2011

Signed contracts for project design:

Significant increase of backlog due to GTNG

acquisition – plus RUB 1.3 bn

Standard equipment and other products, sold from

the company’s warehouses, bring up to RUB 2.5 bn

of revenue. Usually these products are not

considered in backlog calculation

28

3%

34%

2,418%

9,500

19,837



227.24.5

2

Other0.7

Water injection pumps

0.2

Project & design1.3

Modular equipment

1.4

Nuclear pumps1.5

Other pumps2.1

Construction2.7

Oil transportation

pumps10.1

Financial and Operational highlights

29

Selected End-market Projects from Mid-term

Source: Public information, Media resources, Company data

Increased number of HMS end-market projects

227.24.5

2 Project Brief description Completion Key metrics Comments

Lukoil & Bashneft JV

Trebs and Titov fields Joint development of the fields, in stage of project development. Reserves 141 mt

by 2013 Capex US$5-6 bn HMS has good references for previous

projects

Rosneft

Vankor 2 stage Further development. Capex for 2011 US$ 2.6 bn next stage by 2014 Min capex RUB 480 bn

Planned production 25 mtpa HMS participated in previous stages

Yurubcheno-Tokhomsk oilfield Development

Associated gas utilization program (Komsomolskoe, Priobskoe oilfields)

Achievement of 95% level of associated gas utilization HMS participated in previous stages

Moskovtsev oilfield Development of a new field in KHMAO is planned to begin in 2012 Reserves ~33mln

Transneft

ESPO expansion 9 oil-pumping stations to be constructed to deliver oil to Khabarovsk and Komsomolsk refineries by 2015

9 OPS by 2015 HMS participated in previous stages

Zapolyarye – Pur-pe pipeline Oil transportation from YANAO and Northen Krasnoyarsk region oilfields 4 OPS by 2015 Capex RUB 120 bn HMS participates in a project design

ESPO expansion 4 OPSs to be constructed to deliver oil to t Primorsk refinery by 2017 4 OPS by 2017 HMS participated in previous stages

Pur-pe – Samotlor expansion Construction of 2 OPS Total capex in 2011 RUB 77 bn 2 OPS by 2017 HMS participated in previous stages

TNK-BP

Russkoe oilfield Giant oilfield in YANAO with specific oil. Project production 20 mtpa Capex US$ 4.5 bn HMS participates in a project design

Samotlor Further development of an active oilfield in Nizhnevartovsk. by 2014 Capex US$ 4.6 bn HMS participated in previous stages

Uvat 21 oilfields in Tyumen region HMS participated in previous stages

East- and Novo- Urengoy gas and condensate fields

Planned production for 2011 is 3.2bcm, up 17% on 2010 HMS participates in project design

Verkhnechonsk oilfield Oilfield located in the Eastern Siberia, Irkutsk region. Development was stimulated by close proximity of ESPO pipeline.

Peak production by 2014

Additional US$3-4 bn HMS participated in previous stages

Gazprom

Shtokman gas and condensate field The field will become a resource base for Russian pipeline gas and liquefied natural gas (LNG) exports to the Atlantic Basin markets

HMS produces units for complex gas preparation

Gazprom Neft

Strategy 2020 Doubling oil equivalent production rate to 100 mtpa through development of new projects in YANAO, KHMAO, Eastern Siberia and offshore

by 2020

Priobskoe oilfield Western Siberia. Recoverable reserves ~600 mt HMS participates in a project design

Urmanskoe and Shinginskoe oifields Eastern Siberia

Sberbank Capital

Dulisma oilfield Irkutsk region. Further development. 3rd resource base for ESPO Total reserves 15 mt HMS participated in previous stages

Taas-yuriah oilfield Sakha region. Further development. Total reserves ~130 mt Capex RUB 15-30 bn

Iraq

Rumaila brownfield Consortium headed by BP Capex US$ 15 bn HMS already submitted technical survey

Az Zubair Consortium headed by Eni Capex US$ 20 bn HMS participates in a tender

Rosatom

Rostov NPP Reactor 4 by 2015 Min capex RUB 100 bn HMS participated in previous stages

Belene (Bulgaria) Reactor 1 by 2017-18 Capex € 5-6.3 bn

Municipal water

Grozvodokanal Modernization and reconstruction of water utilities in Chechnya Capex about RUB 100 bn HMS participated in previous stages

General Inquiries [email protected] Alexander Rybin Head of Capital Markets Tel: +7 (495) 730-66-01 [email protected] www.grouphms.com 7 Chayanova Str. Moscow 125047 Russia

Inna Kelekhsaeva IR Officer Tel: +7 (495) 730-66-01 [email protected]

30

Сontacts 227.24.5

2

mailto:[email protected]


http://www.grouphms.com/


APPENDIX

31


Income Statement

RUB ‘000 2010 2009

Revenue 23,070,014 14,772,269

Cost of sales (17,367,404) (11,164,202)

Gross profit 5,702,610 3,608,067

Distribution & transportation expenses (573,198) (482,576)

General & administrative expenses (2,102,642) (1,827,189)

Other operating expenses (112,149) (97,679)

Impairment of goodwill - (116,998)

Operating profit 2,914,621 1,083,625

Finance income 57,089 46,806

Finance costs (823,391) (865,141)

Share of results of associates 15,108 17,193

Profit before income tax 2,163,427 282,483

Income tax expense (582,299) (212,386)

Profit for the year 1,581,128 70,097

Profit/(loss) attributable to:

Shareholders of the Company 1,469,116 (31,821)

Non-controlling interest 112,012 101,918

Profit for the year 1,581,128 70,097

Currency translation differences (85,899) (70,502)

Currency translation differences of associates 1,540 1,283

Other comprehensive loss for the year (84,359) (69,219)

Total comprehensive income for the year 1,496,769 878

Total comprehensive income/(loss) attributable to:

Shareholders of the Company 1,402,382 (76,930)

Non-controlling interest 94,387 77,808

Total comprehensive income for the year 1,496,769 878

Basic and diluted earnings per ordinary share for profit/(loss) attributable to the ordinary shareholders

14.32

(0.03)


Balance Sheet

RUB’000 31 December 2010 31 December 2009

ASSETS

Non-current assets:

Property, plant and equipment 5,948,674 3,954,807

Other intangible assets 310,156 47,109

Goodwill 1,783,915 306,992

Investments in associates 507,141 507,293

Deferred income tax assets 130,779 53,992

Other long-term receivables 27,123 61,362

Total non-current assets 8,707,788 4,931,555

Current assets:

Inventories 2,840,745 3,179,644

Trade and other receivables and other financial assets 10,399,853 2,778,048

Current income tax receivable 38,086 58,016

Prepaid expenses 39,361 36,213

Cash and cash equivalents 351,086 758,127

Restricted cash 4,978 905

13,674,109 6,810,953

Non-current assets held for sale 96,095 -

Total current assets 13,770,204 6,810,953

TOTAL ASSETS 22,477,992 11,742,508

EQUITY AND LIABILITIES EQUITY

Share capital 42,510 36,154

Share premium 210,862 210,862

Share capital to be issued - 6,356

Currency translation reserve (234,785) (168,051)

Retained earnings 2,897,296 1,480,712

Other reserves 38,987 37,035

Equity attributable to the shareholders of the Company 2,954,870 1,603,068

Non-controlling interest 1,508,263 669,631

TOTAL EQUITY 4,463,133 2,272,699

LIABILITIES

Non-current liabilities:

Long-term borrowings 3,864,176 3,429,475

Finance lease liability 9 8,479

Deferred income tax liability 745,762 197,307

Pension liability 262,525 125,407

Provisions for liabilities and charges 35,691 11,550

Total non-current liabilities 4,908,163 3,772,218


Balance Sheet (cont’d)


Current liabilities:

Trade and other payables 10,799,358 3,255,533

Short-term borrowings 775,242 1,879,914

Provisions for liabilities and charges 312,213 209,760

Finance lease liability 8,446 13,094

Pension liability 24,736 20,922

Current income tax payable 115,340 25,069

Other taxes payable 1,071,361 293,299

Total current liabilities 13,106,696 5,697,591

TOTAL LIABILITIES 18,014,859 9,469,809

TOTAL EQUITY AND LIABILITIES 22,477,992 11,742,508


Cash Flow Statement


Cash flows from operating activities

Profit before income tax 2,163,427 282,483

Adjustments for:

Depreciation and amortisation 449,776 343,987

Loss from disposal of property, plant and equipment and intangible assets 938 2,305

Finance income (57,089) (42,790)

Finance costs 818,773 865,141

Pension expenses/(income) 33,808 17,673

Warranty provision 51,109 18,150

Write-off of receivables 23,931 -

Interest expense related to construction contracts 17,408 14,953

Provision for impairment of accounts receivable (13,023) 69,559

Impairment of taxes receivable 10,052 -

Investments impairment provision (1,338) 6,099

Provision for obsolete inventories (107,634) 95,949

Foreign exchange translation differences 4,618 (4,016)

Provision for VAT receivable (10,887) 29,918

Provisions for legal claims 34,073 13,655

Share of results of associates (15,108) (17,193)

Impairment of goodwill - 116,998

Impairment of property, plant and equipment and intangible assets 19,288 13,848

Loss on disposal of subsidiaries 4,360 -

Other non-cash items (646) (18,861)

Operating cash flows before working capital changes 3,425,836 1,807,858

Decrease/(increase) in inventories 452,945 (810,442)

(Increase)/decrease in trade and other receivables (6,921,060) 34,526

Increase/(decrease) in taxes payable 674,369 (9,530)

Increase/(decrease) in accounts payable and accrued liabilities 7,063,530 (71,350)

Restricted cash (4,073) (285)

Cash generated from operations 4,691,547 950,777

Income tax paid (277,738) (286,395)

Interest paid (838,533) (875,750)

Net cash from/(used in) operating activities 3,575,276 (211,368)

Cash flows from investing activities

Repayment of loans advanced 3,139 122,476

Loans advanced (5,498) (108,139)

Proceeds from sale of property, plant and equipment and intangible assets 24,585 1,775

Interest received 56 39,352

Dividends received 16,800 10,313

Purchase of property, plant and equipment (950,275) (192,365)

Acquisition of associates - (122,756)

Acquisitions of subsidiaries, net of cash acquired (2,339,457) (239,806)

Proceeds from disposal of subsidiaries, net of cash disposed 7,475 -

Acquisition of intangible assets (48,681) (19,741)

Net cash used in investing activities (3,291,856) (508,891)


Cash Flow Statement (cont’d)


Cash flows from financing activities

Repayments of borrowings (9,034,047) (5,571,316)

Proceeds from borrowings 8,800,148 6,775,593

Payment for finance lease (12,663) (19,971)

Acquisition of non-controlling interest in subsidiaries (578,844) (208,799)

Expenses related to share issue (58,049) -

Cash received from capital contribution 85,817 -

Cash received from additional share issue of subsidiary 428,420 -

Dividends paid to non-controlling shareholders of subsidiaries (320,458) (160,009)

Net cash (used in)/from financing activities (689,676) 815,498

Net (decrease)/increase in cash and cash equivalents (406,256) 95,239

Effect of exchange rate changes on cash and cash equivalents (785) (6,594)

Cash and cash equivalents at the beginning of the year 758,127 669,482

Cash and cash equivalents at the end of the year 351,086 758,127

Cash flows from investing activities

Repayment of loans advanced 3,139 122,476

Loans advanced (5,498) (108,139)

Proceeds from sale of property, plant and equipment and intangible assets 24,585 1,775

Interest received 56 39,352

Dividends received 16,800 10,313

Purchase of property, plant and equipment (950,275) (192,365)

Acquisition of associates - (122,756)

Acquisitions of subsidiaries, net of cash acquired (2,339,457) (239,806)

Proceeds from disposal of subsidiaries, net of cash disposed 7,475 -

Acquisition of intangible assets (48,681) (19,741)

Net cash used in investing activities (3,291,856) (508,891)

Cash flows from financing activities

Repayments of borrowings (9,034,047) (5,571,316)

Proceeds from borrowings 8,800,148 6,775,593

Payment for finance lease (12,663) (19,971)

Acquisition of non-controlling interest in subsidiaries (578,844) (208,799)

Expenses related to share issue (58,049) -

Cash received from capital contribution 85,817 -

Cash received from additional share issue of subsidiary 428,420 -

Dividends paid to non-controlling shareholders of subsidiaries (320,458) (160,009)

Net cash (used in)/from financing activities (689,676) 815,498

Net (decrease)/increase in cash and cash equivalents (406,256) 95,239

Effect of exchange rate changes on cash and cash equivalents (785) (6,594)

Cash and cash equivalents at the beginning of the year 758,127 669,482

Cash and cash equivalents at the end of the year 351,086 758,127

55.4% 59.7%

16.1%15.5%

15.4%13.2%

3.9% 3.3%2.3% 2.0%1.5% 1.3%5.4% 5.1%

2009 2010

Materials Labour Cost of goods sold Subcontractors D&A Utilities Other

Cost of Sales Optimization 169.196.203

170.70.67

147.193.150

69.114.167

65.152.175

200.193.188

227.24.52

207.213.225

137.165.78

expenses

Operating costs grew 47% yoy in 2010 vs revenue

growth by 56% yoy

Cost of sales increased by 56% yoy in 2010, reflecting

the consolidation of GTNG and also due to the increase

in supplies, raw materials and labor costs.

About 60% of HMS Group’s cost of sales is for raw

materials and supplies, where ferrous metals account for

most of the cost

Dual-supplier policy:

– HMS Group doesn’t have monopolistic or exclusive

suppliers

– HMS Group doesn’t have even one supplier with

share more than 5%

Fixing suppliers’ prices and making advance payments for

long-term contracts and passing on price increases to

clients for short-term contracts helps to hedge

commodity prices and currency risks

Cost of sales breakdown, 2009 vs 2010 (RUB mln)

11,164 17,367

22%

Source: Bloomberg


37

Comments Cost of sales structure 2009 vs 2010, %

World HRC price performance in 2010

500

550

600

650

700

750

800

Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10

World hot rolled coil price index performance, $/tonne

170.70.67

147.193.150

69.114.167

200.193.188

227.24.52

207.213.225

137.165.78

Source: Company data * Large client - a client that brings revenue more than RUB 200 mln a year

Stable growth of revenue generated by Other

clients received from replacement and

modernization works

Sharp increase in contracts’ quantity from

Transneft, Rosneft and Gazprom Neft played its

role in a substantial revenue growth

New types of contracts include:

– Integrated pump-based solutions (i.e. pumping

stations for Transneft)

– Full-cycle projects (i.e. pumping stations in

Turkmenia)

– Project and design contracts for design of new

oilfields and pipelines

38

Blue-chip Customer Base

FY2010 Total revenue

RUB 23,070 mln

FY2009 Total revenue

RUB 14,772 mln

7,443 8,772

7,329

14,298

2009 2010

Others Large clients

Revenue structure by clients, RUB mln

NK Dulisma1%

Salym Petroleum

2%

Surgutneftegaz3%

Lukoil1%

Orion Stroy4%

TNK-BP8%

Gazprom Neft4%

Transneft6%

Rosneft21%

Others50%

NK Dulisma1%

Salym Petroleum

1%Hors

Group1%

Surgutneftegaz1%

Lukoil2%

Orion Stroy5%

TNK-BP5%

Gazprom Neft8%

Transneft16%

Rosneft22%

Others38%

Comments Revenue by Clients*, 2009 vs 2010

Selected clients

Turkmenistan

http://www.lukoil.com/

Number of new pumping stations for increasing capacity 21

To supply Komsomolsk and Khabarovsk refineries 9

To supply Primorsk refinery 4

No information at the present time 8

Number of contracted pumping stations 20

Pumping stations under construction by HMS 12

Pumping stations constructed by Sulzer 7

Pumping stations under construction by Turbonasos 2

East Siberia – Pacific Ocean pipeline

39 Source: Company data, Transneft

169.196.203

170.70.67

147.193.150

69.114.167

65.152.175

200.193.188

227.24.52

207.213.225

137.165.78

North

Krasnoyarsk region

1 2

3 4 5

6 7

8

9

10

11

12 13 14 15

16 17

18

19

20

23 24

25

26 27

28 29 30

31 32 33

34

35

36

37

38

39

40

41

Buryat region

Chita region

RUSSIA

MONGOLIA

Irkutsk Chita

Ust’-Kut

Yakutsk

Skovorodino

Blagoveschensk

Vladivostok

Taishet

Irkutsk region

Khabarovsk region

Sea of Okhotks

CHINA

Total number of pumping stations 41

22 21

169.196.203

170.70.67

147.193.150

69.114.167

65.152.175

200.193.188

227.24.52

207.213.225

137.165.78

40

Zapolyarnoe-Pur-pe pipeline

Projected Zapolyarnoe–Pur-pe pipeline

Inlet pipelines from main perspective oilfields (with production level over 2mln tons in 2020)

New OPS

Maximum level of pumping capacity by 2020, mtpa

Main OPS – main oil-pumping station of the future Zapolyarnoe-Pur-per pipeline

OPS – oil-pumping station

Legend

Inlet pipelines

Inlet point Oilfield License holder Max capacity

in 2020, mt

Main OPS 1 Vostochno-Messoyakhinskoe Slavneft * 10.9

Main OPS 1 Zapadno-Messoyakhinskoe Slvaneft 2.4

Total Main OPS 1 13.3

OPS 2 Russkoe TNK-BP 6.8

OPS 2 Zapolyarnoe Gazprom 2.3

OPS 2 Tazovskoe Gazprom 1.0

OPS 2 Northern Urengoyskoe Gazprom n/a

OPS 2 Salekaptskoe Lukoil 0.3

Total OPS 2 10.9

OPS 3 Urengoyskoe Gazprom 7.4

OPS 3 Pestsovoe Gazprom n/a

OPS 3 En-Yakhinskoe Gazprom n/a

OPS 3 Samburgskoe SeverEnergiya ** 0.2

OPS 3 Yaro-Yakhinskoe SeverEnergiya 0.5

OPS 3 License plot of Western Urengoyskoe TNK-BP 1.1

Total OPS 3 9.7

Total capacity to Pur-pe 34.0-45.0

* TNK-BP and Gazprom Neft have per 50% share ** Gazprom holds 51%; this shareholding should be sold to Novatek

Source: Public sources, Transneft site

Capacity, mtpa up to 45

Total length, km 488

Projected cost, RUB bn 120

Total length of inlet pipelines, km 1,200

Project figures Construction period 2011-2015

1st stage Dec 2013

2nd stage Dec 2014

3rd stage Dec 2015

Implementation

1st stage

2nd stage

3rd stage

A pumping station for ESPO-I pipeline

Case Study: ESPO-I Expansion and ESPO-II Contracts

Segment Products / Services Design and

manufacturing

Pumps Design, production and testing of

pumps

HMS and other

suppliers including

Siemens

EPC

Design of integrated pumping

solution

Overall project management

Procurement for supply of

engines, cooling sleeves, valves

and other equipment

Turn-key commissioning

HMS

Key contract highlights

HMS is supplying pump systems (pumps, motors, cooling sleeves, valves and etc.) to Transneft for ESPO-I and ESPO-II pipelines

HMS designed unique type of pumps for the project, constructed a special pump testing facility

HMS prepared target specification for design of hardware (engines, cooling sleeves, valves and etc.) for European producers (Siemens, Voit and etc.) as well as coordinated full cycle procurement

Key features of the project include:

– New approach for oil pumping: Variable motor revolution, which saves energy

– Integrated approach for project management: HMS coordinated procurement from multiple suppliers, R&D process for supplementary equipment and performed turnkey commissioning

– Construction of a special testing facility

– New approach to modeling: 3D design in ANSYS CFX was used to model operation of an entire pumping system

1. Trunk pump 2. Motor 3. Coupling 4. Oil coolers

9. Friction oil pipelines 10. Air cooling unit 11. Antifreeze feed pipes for oil coolers 12. Antifreeze feed pipes for motor coolers 13. Antifreeze air cooling unit

5. Adsorptive dryers 6. Air collectors 7. Compressors 8. Joints

169.196.203

170.70.67

147.193.150

69.114.167

65.152.175

200.193.188

227.24.52

207.213.225

137.165.78


41

South

Production assets

Livny

Russia

Ukraine

Tomsk

Nizhnevartovsk

Tyumen

Dimitrovgrad

Nizhnevartovskremservice (NRS)

Services: Maintenance and repair of pump

equipment, drilling and other oil and gas

field equipment

HMS Neftemash

Products: Modular equipment for oil and gas

and water industries

Sibneftavtomatika (SibNA)

Products: High-precision measuring

equipment for oil, gas and water flow rates

Tomskgazstroy (TGS)

Services: Trunk oil and gas pipeline and

auxiliary facilities construction

Sibkomplektmontazhnaladka (SKMN)

Services: Design, construction and

commissioning of oil and gas field projects

Rostov Vodokanalproekt (RVKP)

Services: Project design for water utilities

Rostov

Sumy

42

HMS Household pumps

Products: Household vibration pumps

HMS Group

Headquarters

Sales team1: 118

Promburvod (PBV)

Products: Water well submersible

pumps

Livnynasos (LN)

Products: Water well submersible

pumps

Nasosenergomash (NEM)

Products: Pumps for thermal and nuclear

power generation and oil & gas industry

VNIIAEN

Description: R&D center for pumps used in

nuclear, thermal power generation, oil and

gas industry

Dimitrovgradhimmash (DGHM)

Products: Equipment for oil and chemical

industries and pumps for oil refining

HMS Pumps

Products: Industrial pumps for oil and gas,

power generation

Giprotyumenneftegaz (GTNG)

Services: Project and construction design of

oil and gas facilities

Belarus

Minsk Moscow

Bavleny

Industrial pumps Modular equipment EPC


Note: Number of employees as of 9M 2010 1 Total number of HMS’ sales people for 9m 2010 is 192

169.196.203

170.70.67

147.193.150

69.114.167

65.152.175

200.193.188

227.24.52

207.213.225

137.165.78

Competitive Environment in Russia 169.196.203

170.70.67

147.193.150

69.114.167

65.152.175

200.193.188

227.24.52

207.213.225

137.165.78

43 Source: Company data

Limited R&D

Small scale of operations

Pump manufacturing is a non-core business for most of players

Products are often not in direct competition with HMS product line

Key names: NPO Frunze, Votkinsk Plant, Uralhydromash

Not well-positioned in terms of operational efficiency due to limited scale of operations

Global players

Lack of local engineering expertise

Water pumps: KSB, Grundfos

Oil trunk pumps: Sulzer, Flowserve

Power: Weir, KSB

Not well-positioned in terms of price of products

Chinese players

Lack of relevant technologies to produce customized pumps

No brand names

No established relationships with Russian clients

Customized Pumps Standard Pumps

Russian players

Growth Strategy: Selective Acquisitions in Key Segments

169.196.203

170.70.67

147.193.150

69.114.167

65.152.175

200.193.188

227.24.52

207.213.225

137.165.78

44

Source: Company data 1 The Group has an option to acquire 11.0% of the voting shares of its associate, DGKhM, in 2012

Flow control solutions in oil and gas

Pumps for oil and gas, chemical and petrochemical applications

Modular equipment, tanks and vessels

Dimitrovgradkhimmash (DGKhM)1

Increase of market share

Diversification of product offering

Expansion into new segments

Water Pumps for wet-pit sewage applications

Pumps for water utilities, nuclear and thermal power generation

Modular equipment for wastewater treatment


Strengthening positions in water segment


Expansion into wastewater treatment segment

Power Pumps for nuclear and thermal power generation, marine applications

Pumps for nuclear and thermal power generation, oil refining, chemical and petrochemical applications

Pumps for thermal power generation, water utilities



Other Pumps for oil refining and metals and mining

Pumps for oil refining, oil transportation, water utilities and vessels

Pumps for oil transportation, oil refining, metals and mining

Pumps for chemical applications, nuclear power generation, water utilities


Expansion into new segments


Core Focus for Potential Acquisitions Acquisition Objectives and Rationale

Oil & Gas

Documents

HMS Group Annual Results 2010