Eelco Hoekstra, Chairman of the Executive Board of Royal Vopak:

“In 2010, we continued in making good progress in the implementation of our three-pillar strategy. Growth, customer service and operational excellence remain the overall guidance for the way forward for our company. To serve our customers now and in the future our ambition is to further develop our global network of terminals at key locations. We will continue to improve our competitive position. In this process it is considered important that we secure an efficient and agile organization. Based on our growth strategy Vopak is well positioned to realize a Group operating profit before depreciation and amortization (EBITDA) between EUR 725-800 million in 2013.”

Market developments

Oil 

The geographical imbalances between production and consumption have continued to reinforce the need for physical transportation of bulk liquid products, to a large extent independently of crude oil prices and the more speculative trading environment. Bulk liquid storage services fulfill an essential role in the supply chain of Vopak’s customers, including large oil majors and national oil companies, with whom we cooperate in long-term relationships. The increasing geographical imbalances lead to an increasing demand for services at strategically positioned (hub) terminals, such as Rotterdam, Fujairah, Tallinn and Singapore, which are critical to the success of the network strategy for oil products. The increased focus of the major oil companies on upstream activities and related possible closures and divestments of less efficient refineries will further impact the need for physical transportation of oil products.

Chemicals

The demand for storage and handling of chemicals showed further signs of recovery in 2010.

Chemical volumes have recovered to pre-crisis levels, except for some remote locations. We experience a stable business environment in the Americas and an encouraging market in Asia in volumes and new projects, while in Europe we note that the demand for storage of chemicals has improved. Following last year’s lower demand for chemical products due to the economic turbulence, some major chemical producers decreased their output and started to redesign their supply chains. Where chemical volumes have decreased, alternative products such as oil products have been stored at some of Vopak’s chemicals terminals. Besides a structural recovery of the world economy, the investments in the chemical industry in the Middle East and consumption growth in Asia will have a lasting impact on the global logistics flows of chemical products. Vopak’s worldwide tank terminal network is very well positioned to address these new opportunities.

Biofuels 

In 2010 Vopak had mixed experiences in the market for storage of biofuels. Market participants reviewed their position in the biofuels market following uncertainties concerning the various biofuels regulations, especially in Europe and North America. Biofuels are a relatively young product group and the products are typically stored at existing terminals replacing chemicals or vegetable oils.

The challenge for Vopak is to proactively turn these developments into customer-specific solutionsat strategically positioned locations across the world. This is a combination of:

– meeting different customer needs by increasing flexibility, offering fast ship turnaround, settinghigh quality and safety standards, and offering specific services, such as blending;

– offering the highest quality infrastructure and a wide array of tank types and sizes, jetty capacity, truck and rail loading stations and blending capacity; and – offering deep-water access, hinterland connections, land availability, and operating permits for handling a variety of oil products and chemicals. Storage capacity developments

Our expansion program resulted in a growth of the worldwide storage capacity by 0.5 million cbm in 2010. The largest project was the commissioning of Vopak Terminal Jakarta (250,000 cbm), the first independent oil storage terminal in Jakarta (Indonesia).

In 2010, various new projects have been announced. Storage capacity for oil products will be expanded at the existing terminal in Fujairah (UAE), at the terminal already under construction in Amsterdam Westpoort (the Netherlands), and at the new terminal under construction in Algeciras (Spain). One of the larger projects under construction is Gate terminal, the first Dutch LNG terminal, which is well on its way to be completed on time and within budget. All projects currently under construction will add 4.5 million cbm of storage capacity in the period up to and including 2012.

Subsequent events

– As per 1 January 2011 Mr Eelco Hoekstra commenced his activities as the new Chairman of the Executive Board. In carrying out his tasks and responsibilities, Eelco Hoekstra is supported by the current Executive Board members of Vopak: Jack de Kreij (Vice-chairman and CFO) and Frits Eulderink (COO).

– Vopak and its partner NIBC European Infrastructure Fund (NEIF) have established a 50-50 joint venture to build and operate a new storage terminal for oil products in the port of Eemshaven, the Netherlands. The terminal shall provide services to European governments for the storage of their strategic reserves of liquid oil products. Vopak will operate the new terminal that has an initial storage capacity of 660,000 cubic meters. This capacity has already been rented-out for a long-term period and is expected to be commissioned in the third quarter of 2012.

– Vopak successfully closed a new EUR 1.2 billion senior unsecured multicurrency revolving credit facility with a syndicate of 14 international relationship banks. This new facility replaced the revolving credit facility (RCF) of EUR 1.0 billion which was concluded in August 2007. The new RCF is fully available for drawdown and will have an initial maturity of five years with two extension options of one year each. On March 7th Vopak reached agreement with Industrial and Commercial Bank of China (ICBC) to include them as Mandated Lead Arranger.

– Vopak has sold its 20% equity stake in the 3.4 million cbm Bahamas Oil Refining Company International Limited (BORCO, also operating as Vopak Terminal Bahamas) to Buckeye Partners, L.P. (Buckeye). The sale of Vopak’s 20% equity stake in BORCO generated an after-tax profit of over USD 150 million and will be recognized in the first quarter of 2011.

– Vopak announced the nomination of Mr Simon Lam Chun Kai (1947) as member of the Supervisory Board as from 27 April 2011. The nomination of Mr Lam follows the decision to increase the number of Supervisory Board members from five to six. Mr Lam’s extensive knowledge of and senior management experience in the Asian petrochemical industry complement those of the current members of the Supervisory Board.

Outlook

Projects under construction will add 4.5 million cbm of storage capacity in the years 2011 and 2012.

The total investment for Vopak and partners in these projects involves capital expenditure of some EUR 1.9 billion, of which EUR 0.9 billion is related to Gate terminal (the Netherlands). Vopak’s total remaining cash spend will be some EUR 0.4 billion. Following the divestment of Vopak Terminal Bahamas (3.4 million cbm) in 2011, the completion of these expansion projects will result in a worldwide storage capacity of 29.9 million cbm as per end of 2012.

Vopak expects the market for storage and handling of oil products to remain robust and is well positioned to support its customers for storage and handling of chemicals in the next stage of economic recovery and supply chain redesign. The mixed developments in the market for storage and handling of biofuels are expected to continue throughout 2011.

Some significant expansion projects like Amsterdam Westpoort (the Netherlands) and Gate terminal (the Netherlands) will be commissioned in the second half of 2011. Furthermore, we have planned for higher out-of-service levels at some of our terminals. Taking into account these developments and the divestment of our 20% equity stake in Vopak Terminal Bahamas, Vopak expects Group operating profit before depreciation and amortization (EBITDA) to grow by around 5% in 2011, whereby it should be noted that the pre-operating expenses related to the above-mentioned capacity additions will negatively affect the results in the first half of 2011. Based on its growth strategy Vopak is well positioned to realize a Group operating profit before depreciation and amortization (EBITDA) of between EUR 725-800 million in 2013. The 4.5 million cbm of storage capacity coming on stream in the period up to and including 2012 will fully contribute to the 2013 results.

More information: http://www.vopak.com/03-11_Annual_results_2010_ENG.pdf