RETROFIT FINANCING BLACK HOLE OR EMERGING PRODUCT Alan McCarthy UK Chamber of Shipping Ballast Water Event – 23rd November 2016

Have Faith Field of Dreams – 1989. Directed by Phil Alden Robinson, Starring Kevin Costner

The Dilemma Regulatory restrictions on international banks has created a near vacuum for financing of small and medium size shipping companies. This will not improve in the near term The IMO Convention on Ballast Water Management is now ratified and will come into effect. 50,000 ships? $60 billion in funding costs? With Sea Transportation accounting for <90% of international trade, it is inconceivable that funding will not be available for necessary retrofitting

Supporting Evidence Thematic Investing: Blue Revolution – Global Water Primer Bank of America Merrill Lynch – April 2014

Supporting Evidence Thematic Investing: Blue Revolution – Global Water Primer Bank of America Merrill Lynch – April 2014

Supporting Evidence Thematic Investing: Blue Revolution – Global Water Primer Bank of America Merrill Lynch – April 2014

Supporting Evidence Thematic Investing: Blue Revolution – Global Water Primer Bank of America Merrill Lynch – April 2014

Sources Owners’ Equity Banks Export Credit Agencies Supplier Credits Quasi-Government

Owners’ Equity Make the Corporate Case for Investment Everybody else will – and there will be no lending or investment if there is no payback. Consolidated corporate structure Best practice Corporate Governance Sound Financial Condition Make the Market Case for Investment Reasonable and realistic revenue and cost projections Modest amortisation profile Maximum up to next survey - 5 years If you cannot justify the investment – should you be in the business? Older ships for recycling Industry consolidation

Banks Make the Corporate & Market Case Don’t hold your breath This is not shipping finance in its traditional form Probably not realistic to offer ship mortgage security Working Capital facilities Short tenors (annually renewable lines of credit) Full corporate support More acceptable demand on bank’s capital under new (Basel II and II Regulations) Don’t hold your breath

Export Credit Agencies SOME GOVERNMENT AGENCIES assisting EXPORT finance JAPAN NEXI: Nippon Export and Investment Insurance JBIC: Japan Bank for International Cooperation KOREA K-sure: Korea Trade Insurance Corp. Korea Exim Bank NORWAY GIEK: Insurance Agency Eksportfinans GERMANY Euler Hermes KfW IPEX-Bank

Export Credit Agencies GERMANY Euler Hermes KfW IPEX-Bank Eurofin Group Eurofin S.A. - Athens Eurofin International Ltd – London Seafin Ltd - Singapore German Equipment Meaningful Deal Size – (Minimum $20 million) means fleet wide project

Supplier Credits “ “

Quasi Government European Investment Bank

EIB Under the umbrellas of the European Fund for Strategic Investments (EFSI): Green Shipping Loan Programme and the Connecting Europe Facility (CEF): a new financial instrument to further support Green Shipping Investments

EIB Make the Corporate & Market Case

EIB

CEF

The Light at the End of the Tunnel

The Light at the End of the Tunnel I M O BWTS