Joint Venture Iraq

It would require office and warehouse to incorporate a stocking, refurbishment, test

facility with manufacturing capabilities. The facility will be based in Basra. We
anticipate that we would require something in the region of 25,000 square feet. We
need to set up a joint venture company with the physical presence in Basra. The
company registered in Dubai as part of the Harlow International Group.

To achieve the API approval as a manufacturer we need to have a physical site to be

audited. The majority of the details below will depend on how quickly we get started
with Iraq. I know you were already looking at real estate.

Manufacturing
To have a set up with manufacturing capability we need to be approved by all the
recognised international standards. The company needs to have ISO 9001 accreditation,
we need to be able to design and produce valves to API 6D, API 602, API 600, API 594,
API 609. The product needs to be fire safe certified. We have the capability to supply
this as an established manufacturer of Ball, Gate, Globe, Check and plug valves, This
would be done through stages, ISO 9001 being the first step to approve the systems. The
first step to get the accreditation would be to have the valve designs and procedures
approved and in place. We can get API approved for both UK and Iraq by having valves
made to our design and procedure and having them assembled and tested in the UK and
this mirrored in Iraq. This would give us the manufacturing arm to the company that we
can develop further advances on the manufacturing front with other styles of valve. Ball
valves would require the fire safe test certificates to cover the range, this would be part
of the approval process.

We need to ensure with everything in place we can approach the market place as an
acceptable Iraq local content manufacturer.

We have the market and international knowledge of the required products and
standards required but would require assistance with the direct requirement of the
IRAQ market to fine tune where we start the overall process.

The manufacturing of Gaskets is also an area we are can develop as part of the overall
package we are going to produce.
Valve refurbishment
Within the facility we need to be able to offer a valve refurbishment service . This will
require various equipment for machining of parts, assembly and testing of completed
valves.

In the early stages a strong supplier relationship needs to be established because the
refurbished valves will be various manufacturers already on site. We need spares across
the board, going forward we would be refurbishing our own valves. This is going to take
experienced staff as well as trainee apprentices. This would be able to be set up much
quicker than the manufacturing side and could have an impact within 3-4 months. The
overall goal would be take over site maintenance and plant management, with
framework agreements and the supply of contracted staff.

Valve modification.
Standard valves can require various modification work, fitting and testing of gear boxes
and actuators with a number of additional items for control applications. There is often,
locking devices, position indicators, welding of pipe pups, extended bonnet /stem
assemblies, cryogenic extentions, machining of threaded ends, flange finishes. All of the
above can be done as direct work by ourselves or as a contracted service to others. This
all fits within the valve refurbishment area as far as capital spends and also the
expertise.

Non Destructive testing

This follows through the path of manufacturing and also refurbishment as an additional
tool that other companies would not have in house. Also this can be sold as a service on
its own merits. Again this would have a capital outlay for the required equipment and
initially trained and approved registered staff, once again with a view to training staff in
Iraq. This would include, Dye pen, magnetic particle inspection, positive material
indentification, fugitive emission testing and going forward maybe cryogenic testing.
Training facilities
As part of the ongoing development of the company the workforce training will be a big
basis for improvement. We will supply in house training on valve refurbishment,
hydrostatic testing, non destructive testing and valve modification. Inspection services
and QA procedures.

We will be able to offer this as development of our staff and also as a service both in Iraq
and the UK for end users and the oil companies as required. Internationally approved
standards certified as applicable.

The operation already established in the UK for testing , and repair has the facilities to
provide on-site training and the local college and universities along with the British
Valve Manufacturers Association can supply modules to suit various engineering
practises .

Stocking facility
It was identified that there is a need for stock on the ground in Basra. We can supply a
range of valves and ancillary equipment to support the oil, gas and petrochemical
industries. The range should cover, Gate, Globe, Check, Ball and maybe Plug valves.
Ancillary items such as strainers, sight glasses, relief/safety valves. We have already
relationships with major companies that are prepared to work with us on actuation.

With regard to the package material then we would need pipe, fittings butt weld and
screwed/socket weld, flanges, gaskets and bolts. The range is very expansive but with
more detailed information on the frame work agreements we can tailor to suit. As
previously stated one of the easiest opportunities to manufacturer with Iraq local
content would be with gaskets. Spare parts to support the repair and refurbishment
activities.

A stocking facility would require again staff training and a capital out lay.
Sales of products and services
The sales team will have the responsibility for selling through all aspects of the
company. This will be dealt with from the UK to start and moved across to the Iraq base
as training determines it is ok.

1/ Stock material and bought in items to end users through tender and
framework agreements

2/ Projects through end users and contractors

3/ Shut down maintenance through , valve refurbishment and testing facilities.

4/ Inspection and non-destructive testing as add on to both maintenance and

contract requirement

5/ Training for all aspects of the proposal and the supply of engineers,
inspectors and maintenance staff .

Staffing levels

Managing Director Craig, Sales Director Bryan

Outside Sales Manager covering Iraq Mostafa

Works Manager - Manufacture, testing and valve refurbishment

Office requirement for sales to accommodate initially internal sales team of general
manager, 2 sales people supported from the UK. 1 administration staff, accounts clerk,

Office/warehouse requirement for valve repair , modification ,department manager, QA

inspector/auditor, two engineers, two apprentices,

Office/warehouse required for valve manufacture/assembly, supervisor, two fitters,

two apprentices, experienced pressure test operative

Warehouse stocked material , driver/general warehouseman, fork lift

driver/warehouseman.

Warehouse - approved non-destructive testing operative,

Manufacture of gaskets, machine operator, general warehouse assistant

Capital Outlay
Warehouse facility based in Basra, initially based on around 25,000 sq feet. This needs
to have the flexibility to increase dependant on how far we want to go with the
manufacturing. This is based on a start up basis of manufacturing gaskets and
butterfly/check valves to gain us the approvals that we need;

Premises- Rent or Buy

Overhead Crane (initially 1 )

Fork lift truck/ Pallet truck (initially 1)

Pick up truck for delivery and collection

Manufacturing / Assembly Plant

4 Pressure test benches to cover assembly and testing; as well as valve refurbishment
and testing. Vertical and horizontal and to cover various sizes and pressure

Non destructive testing equipment

Pallet racking, storage, work benches, assembly benches, general engineering

equipment

Office equipment

IT equipment

Paint booth with shot blast facility

Estimated total investment in capital plant- without premises. 1.2 million Pounds

Support from the UK

Sales and Managing Director based in UK- Regular visits to site.

Overseeing all required approvals and registrations are completed

Design , manufacture and oversee all required plant and equipment from source to
installation

Dedicated sales team to support the enquiries and orders from Iraq

Training programme established for both UK accreditation and on site requirement.

Sales management of internal and external sales people in the UK and Iraq

Overall responsibility for integration and eventual hand over to trained and motivated
management team.
Timescale of development- Some based on Available Iraq base.
Confirmation of the agreement in principal to the outlined plan. 1 week

Contracts in place and accepted by legal teams 2 weeks

Joint venture set up and company in place in Iraq 2-3 weeks?

Once funding is in place we can start the approvals 2 3 weeks

Recruitment of management staff process immediate 4 weeks to start

External salesman generating enquiries with visits immediate

Ready to take and expedite orders immediate

Recruitment for Iraq office process immediate on premises

Training of staff either in Iraq or UK process immediate dependant on premises

Procurement of machinery/plant 12 weeks delivery transit time?

Warehouse fitted with racking, fork lift and other requirements 6 weeks dependant on
local availability , if we have to bring in equipment and contractors, again premises

Office fitted with IT and ready to work 4 weeks dependant on local availability

To have stock available as buy in material until we have approvals for our own range, 8
weeks to start and continuing until we have the full stock range we require plus transit.

To have a fitted valve refurbishment facility with test benches- 12- 16 weeks plus
transit

To manufacturer gaskets in Iraq 12- 16 weeks plus transit

To have non destructive testing capability in 12 weeks- plus transit-

To be ready to manufacture on site 16/20 weeks plus transit dependant on approvals

To have ISO 9001 3-4 months and the required API approval to show us as a
manufacturer 6/7 months requires premises and audit in Iraq

To have a fire safe certified Lloyds approved ball valve 6 months due to the number of
separate fire tests to be undertaken. Valve design from this point we can move forward
into other areas of manufacturing as the business dictates, to obtain full approvals and
registrations to meet international standards 400,000 investment

Training facility, staff, courses, travel, hotels to cover potentially 22 staff both in Iraq
and UK. Estimated cost 250,000

Staffing costs for both Iraq based and UK. First Year anticipated at 920,000

Cost associated with travel other than training, 65,000 annually

I do not have the knowledge of the standard running costs of the Iraq base but if we
estimated at 10,000 per month, not including salaries, dependant on rent?
This would mean an investment in the first year of 2.89 million pounds, of which 1.2
million would be capital investment and would show on the balance sheet, stock would
be an additional cost but again this would be an asset to the company and would also
show on the balance sheet

I would expect we would pick orders up very quickly once we have a presence in Basra.
Also we would hope to get framework agreements in place.

We are looking at various profit centres within one company and if we can gain access
to the various oil and gas companies through direct end user business and also taking
contracts we should achieve the goals we are setting.

A figure of 100 million pounds turnover from this operation has been mentioned and
when we can hit the market with a quality product, service and a total package we will
be successful.

I would imagine a margin in the region of 25% based on our previous dealings in Iraq,
Kuwait and Bahrain over many years. Business is tight at present but I still believe this
is achievable. If we based the figures on 10% of where we want to, once established i.e.

A/ 10,000,000 @20% we would recover the investment in the second year.

B/ 8,000,000 @ 25% we would achieve the same results

In truth I would have expected to take 3 years to have the investment showing a profit
but with all the contacts, the backing and the knowledge within all aspects of the
business I would expect a great success.

The funding will be split across the year and as soon as the sales start, it will start to
fund itself.

Yours Faithfully

Bryan Broadbent Craig Sandham