A Banker’s Perspective on Ship Efficiency Efficient Shipping Finance: The Seminar London, June 24th 2015 Jan Weismüller (VP Maritime Industries)

Agenda 1. A Brief Introduction to KfW IPEX-Bank 2. Ship Efficiency – Drivers 3. Promoting Ship Efficiency 4. Financing Options 5. Case Studies: Efficiency Enhancing Retrofittings

Legal / Market Requirements 1. A Brief Introduction to KfW IPEX-Bank “Green Shipping/Smart Operations”: Why a relevant issue for us? Sustainability: KfW is Germany's leading financial institution for climate protection and renewable energy technologies Anticipation of regulatory requirements (e.g. air-/water-emissions) and market demands (e.g. bunker efficiency) Identification / selection of „state of the art“ maritime assets with high marketability Mission Legal / Market Requirements Credit Risk

2. Ship Efficiency – Drivers Emission Control Areas/EEDI/SOX Regulation

2. Ship Efficiency– Drivers Impact of ship design on credit risk State of the art vessel Worldwide Employment / Higher Efficiency Better chartering potential May lead to… Better asset collateralization through higher asset values / lower LTVs May lead to… Higher repayment potential through better marketability +++Risk Profile+++

2. Ship Efficiency – Drivers Energy Efficiency Design Index (EEDI) / CLIA approach 50 45 Reference line - 2015 Phase 1 - 2015 Phase 2 - 2020 Phase 3 - 2025 40 35 30 Vessel of low fuel efficiency Kernsaussage dieser Folie: Es ist keine Aufgabe einer Bank hier eigenen Bewertungsansätze zu entwickeln. Wir orientieren uns hier an den allgemeinen regulatorischen Vorgaben durch die IMO. Die für viele Schifffahrtssegmente verpflichtend die zukünftige Einhaltung von bestimmten EEDI Werten vorschreibt EEDI = Energy Efficiency Design Index Es wurden durch die IMO Referenzlinien (Referenzlinien = Durchschnittswerte der Weltflotte) definiert, die bis 2025 abgesenkt werden. Achtung: Es gibt Segmente, für die bisher keine Referenzlinien festgelegt wurden (z.B. Passagier, RoRo, Car Carrier). Hier hat der GL eigene Referenzlinien entwickelt und sich and der Methodologie der IMO für die anderen Segmente orientiert. Für Kreuzfahrtschiffe wird gerade eine Referenzlinie entwickelt, die die CLIA (Cruise Lines International Association) bei der IMO eingereicht wurde. g CO2 / (t*nm) 25 20 15 10 Vessel of high fuel efficiency 5 50.000 100.000 150.000 200.000 DWT

3. Promoting Ship Efficiency EEDI based asset evaluation EEDI vs. IMO reference line 30% better EEDI value than current IMO reference Kernaussage dieser Folie: Beispiel der Einwertung anhand eines LNG Tankers. Ergebnis: Der Einzelwert des Einzelschiffes (Neuprojekt) ist 12 % besser als die Weltflotte (IMO Referenzlinie). Ergebnis II: Der Einzelwert des Einzelschiffes (Neuprojekt) ist 2,4 % besser als das LNG Schiffssegment der IPEX-Flotte 30% better EEDI value than current KfW-IPEX LNG portfolio average

3. Promoting Ship Efficiency Retrofitting Tool/Evaluation Share of vessels able to achieve x-y% improvement <7.5% 10% 7.5 - 9.9% 14% 10.0 – 12.4% 20% 12.5 – 14.9% 14% 15.0 – 17.4% 32% >17.5% 11% Quick scan of world container fleet based on IHS Fairplay data, assuming all relevant measures are implemented

3. Promoting Ship Efficiency Retrofitting Tool/Evaluation World container fleet based on USD/1,000 TEU Nautical Miles Peer group size of vessels with +/-15% TEU capacity is compared to vessels performance before and after retrofitting Peer group size can be set individually Ranking is based on all vessels sailing at given operating profile +/-15% TEU Ranking before retrofitting (50 of 79) Ranking after retrofitting (14 of 79) 12.0% 12.0% 10.0% 10.0% Vessel before retrofit 8.0% 8.0% Vessel after retrofit 6.0% 6.0% 4.0% 4.0% 2.0% 2.0% 0.0% 0.0% -2.0% TEU capacity -2.0% TEU capacity -4.0% -4.0% Source: DNV GL Chances and Challenges for Retrofitting of Vessels

3. Promoting Ship Efficiency IPEX cooperates with the Industry

4. Financing Options NEW VESSEL Full New Eco Vessels (with ECA cover and on commercial basis) RETROFITS Option I: Retrofit Packages for Fleets for European Owners Option II: KfW Support Programme for Green Investments (particular focus on german registered vessels) Option III: European Component Financing (with ECA backing and commercially)

4. Financing Options Retrofit Option I: Fleet based financing for European Owners Bankable corporate structure Corporate Recourse, risk diversification through fleet financing Financing volume > USD 30 Mio. Credit enhancement through potential collaterization of unmortgaged fleet vessels

4. Financing Options Retrofit Option II: KfW Support Programme for German Registered Vessels Challenge: No collateral, often encumbered assets (existing financing), lending volume Program Name Issuer Purpose Constraints Requirements Terms Environmental Program -240-(Umwelt- programm) KFW Promotion of pollution reducing measures that lay well below the EEDI Promotion of certain components e.g. dry scrubber Vessel must be listed in German Maritime Register German Flag Loan up to 20 years Max. of 10 Mio. EUR Fixed interest rate < 10 yrs Repayment holiday up to 3 yrs Commitment fee 25 bps Energy Efficiency Program -242-(Energieeffizienz- Promotion of efficiency enhancing measures based on the EEDI e.g. >20% efficiency increase of new engine Max. of 25 Mio. EUR Grace period >3 yrs

Post-Delivery (Equipment) finance for up to 12 Years 4. Financing Options Retrofit Option III: European Equipment Financing Equipment Finance (min. USD 25m) + Commercial Post Delivery Financing of the “remaining“ Vessel Post-Delivery Financing (12 Years from Delivery) = Post-Delivery (Equipment) finance for up to 12 Years European Suppliers Owner/Buyer: Access to new Financing Sources Ship Yards

IPEX Loan for the Value of the European Equipment 5. Case Studies: Efficiency Enhancing Retrofittings Chinese built LNG-powered ship with European Suppliers Reductions SOx, NOx, Particels near 100% CO2 25% IPEX Loan for the Value of the European Equipment Vessel Operation Supplies, Vessel Export

5. Case Studies: Efficiency Enhancing Retrofittings Fleet Retrofitting with 145 „High Efficiency Propellers“ for Container Ship Comp. Investment Volume EUR 290 Mio EUR 140 Mio 95% Hermes Cover Industries CO2 Reduktion 891.000 t p.a. SOx Reduktion 20.000 t p.a. NOx Reduktion 12.000 t p.a. Status: in Arranging

5. Case Studies: Efficiency Enhancing Retrofittings Installation of 20 Scrubbers in Feriefleet Investment volumen USD 220 Mio. USD 100 Mio. USD 50 Mio SOx Reduktion 95 %