Introductory presentation · Introductory presentation 7 September 2011 . 2 This presentation (the “Presentation”)has been produced by SinOceanic Shipping ASA (the...

SinOceanic Shipping ASA

Introductory presentation

7 September 2011

2

This presentation (the “Presentation”) has been produced by SinOceanic Shipping ASA (the “Company”, “SinOceanic” or “SINO”) solely for use by the attending thepresentation of the Company on the day hereof. This presentation is strictly confidential and may not be reproduced or redistributed, in whole or in part, to any otherperson. To the best of the knowledge of the Company, the information contained in this Presentation is in all material respect in accordance with the facts as of the datehereof and contains no material omissions likely to affect its import. This Presentation contains information obtained from third parties. Such information has beenaccurately reproduced and, as far as the Company is aware and able to ascertain from the information published by that third party, no facts have been omitted that wouldrender the reproduced information to be inaccurate or misleading.

This Presentation contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which itoperates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words“believes”, expects”, “predicts”, “intends”, “projects”, “plans”, “estimates”, “aims”, “foresees”, “anticipates”, “targets”, and similar expressions. The forward-lookingstatements contained in this Presentation, including assumptions, opinions and views of the Company or cited from third party sources are solely opinions and forecastswhich are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. None of the Company or anyof its officers or employees provides any assurance that the assumptions underlying such forward-looking statements are free from errors nor does any of them accept anyresponsibility for the future accuracy of the opinions expressed in this Presentation or the actual occurrence of the forecasted developments. The Company assumes noobligation, except as required by law, to update any forward-looking statements or to conform these forward-looking statements to our actual results.

An investment in the company involves risk, and several factors could cause the actual results, performance or achievements of the company to be materially different fromany future results, performance or achievements that may be expressed or implied by statements and information in this presentation, including, among others, risks oruncertainties associated with the company’s business, segments, development, growth management, financing, market acceptance and relations with customers, and, moregenerally, general economic and business conditions, changes in domestic and foreign laws and regulations, taxes, changes in competition and pricing environments,fluctuations in currency exchange rates and interest rates and other factors.

Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described inthis presentation. The company does not intend, and does not assume any obligation, to update or correct the information included in this presentation.

No representation or warranty (express or implied) is made as to, and no reliance should be placed on, any information, including projections, estimates, targets andopinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein, and, accordingly, none of the Company orany of its officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this document.

Securities in the Company are not and will not be registered under the United States Securities Act of 1933, and no solicitations are being made or will be made, directly orindirectly, in the United States.

By attending or receiving this Presentation you acknowledge that you will be solely responsible for your own assessment of the market and the market position of theCompany and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of the Company’s business.This Presentation speaks as of 7 September 2011. Neither the delivery of this Presentation nor any further discussions of the Company with any of the recipients shall, underany circumstances, create any implication that there has been no change in the affairs of the Company since such date.

Disclaimer

3

SinOceanic’s objective is to become a high growth ship finance company

– Ambition to reach a container fleet of 100,000-120,000 TEU lifting capacity within 12 months

Already acquired 4 new and modern container vessels with lifting capacity of 44,000 TEU, 3 of them at ~20% discount to original project cost

– Acquisition includes CP’s to first rate charterers entered into prior to financial crisis at rates reflecting pre-financial crisis asset values

Main shareholder HNA financing SinOceanic until delivery through a USD 62m pre-delivery unsecured loan at attractive terms

Aggressive dividend payout model – targeting 10% yield from FY 2012

Lean and cost efficient organization

Executive summary

4

A ship finance company with key differentiators

Extensive management experience and contact network in the shipping sphere

Strong market view discipline – stayed away from other segments such as tankers and bulk

Proprietary deal flow – access to private accretive deals

High transparency – easy to analyze, transparent business and cost model

Deals solely done to the benefit of SinOceanic

5

Investment highlights

Creating a ship financing company geared for growth

and dividends

1

Current focus on container segment

due to favorable industry dynamics

Ability to generate proprietary and accretive deals

Strong supportive shareholder

facilitating growth

2

4

Yield play targeting aggressive dividend

policy

3

5

6

Business Strategy

Acquire modern and standard vessels with charters attached and with appreciation potential

Scalable set-up enabling aggressive growth strategy without noticeable increase in SG&A

Targeting optimal debt structure and aggressive dividend policy

Flexible investment approach towards segments, however initial focus will be on the container segment as it still is considered the most attractive in terms of asset prices and employment

Constantly monitor all shipping markets to identify the segments which at any given time provide the best risk reward ratio. Watch out for and exploit turning points in all markets

Creating a sizeable ship owning company

Company sole focus is to take advantage of current market opportunities investing in attractively priced tonnage with firm cash flow

1

7

SinOceanic fleet of modern container vessels

Built:

Yard:

Delivery:

Length:

Capacity:

Beam:

Purchase price:

Technical manager:

YM Portland

2003

Stocznia Gdynia, Poland

Nov 2010

286m

32m

4,414 TEU

USD 50.5 million

Peter Doehle Shiffart

MSC Vega

Under construction

Hyundai Heavy Ind., Korea

Jan 2012

366m

48m

13,100 TEU

USD 154.4 million

E.R. Schiffahrt GmbH & Cie.

MSC Altair

Under construction

Hyundai Heavy Ind., Korea

Feb 2012

366m

48m

13,100 TEU

USD 154.4 million

E.R. Schiffahrt GmbH & Cie.

MSC Regulus

Under construction

Hyundai Heavy Ind., Korea

Apr 2012

366m

48m

13,100 TEU

USD 156 million

MSC

2

8

YM Portland (TEU 4,414)

Built in 2003, acquired 17 November 2010

Purchase price USD 50.5 mill

Time charter until 2019 to Yang Ming Lines

MSC Vega, MSC Altair and MSC Regulus (TEU 13,100)

Under construction, delivery Jan, Feb and Apr 2012

Combined purchase price USD 466 mill

Attractive 15 year charter parties to MSC

SinOceanic with no risk until delivery of vessels

(*) Assuming that the purchase options are not exercised

SinOceanic already completed 4 attractive deals

2

Secured freight income of USD 1 bn

EBITDA first full year of operation (excl. G&A)

Acquired vessels fit well into SinOceanic’s business model and illustrates its ability to access high

profile transaction

85330

330

255

1 000

0200400600800

1 0001 200

YM Portland MSC Vega* MSC Altair* MSC Regulus*

Secured freight income

USDm

6

18

18

17

60

0

10

20

30

40

50

60

70

YM Portland MSC Vega MSC Altair MSC Regulus

Total EBITDA

USDm

9

88

101

113

135

0

20

40

60

80

100

120

140

40 000 45 000 50 000 58 500

Alternative 15 year TC rate (USD/day)

Implied newbuilding parity (USDm)

175

18

193

38

154

0

50

100

150

200

250

Newbuild priceCosts during const. (10%)Total project cost Discount Acquisition cost

USDm

The three VLCS’ secured at USD 154-156m per vessel including attractive 15 year CPs to MSC at above present market rates

– Vessels acquired at ~20% discount to original project cost

Long term TCs for 13,000 TEU vessels are presently not available unless at very low rates

– Anticipated to be in the USD 40’s /day vs. USD 60’/day for Vega and Altair

– The graph above illustrates the implied newbuilding parity in different rate scenarios

Favourable delivery dates – immediate CF

– SinOceanic vessels due in Jan/Feb/Apr 2012 vs. newbuild delivery in 2013 at the earliest

Vessels secured at favorable market terms

2

20% discount to original project costImplied newbuilding parity in alternative rate scenarios*

-20%

(*) Implied newbuilding parity = (acquisition cost – PV10 of TC rate premium for 15 years) less 10% costs during costruction phase

Current new-building cost

(Delivery 2013)

10

Mediterranean Shipping Company S.A. (MSC) is a privately owned shipping line founded in 1970

– Rapidely grown to become one of the leading global shipping lines

Worlds 2nd largest carrier in respect of container slot capacity and of number of container vessels operated

– High growth achieved through organic growth

As per August 2011 MSC was operating 472 container vessels, of which 213 fully owned, with an intake capacity of 2 million TEU

MSC – the worlds 2nd largest container carrier

Top carriers by operated capacity (2010)

Number of operated vessels

Source: MSC

2

0,0

0,5

1,0

1,5

2,0

2,5

AP

M-

Mae

rsk

MSC

CM

AC

GM

Ever

gree

n

H-L

AP

L

CSA

V

CO

SCO

Han

jin

CSC

L

Total capacity in million TEU, owned and chartered

472

0

100

200

300

400

500

70

85

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

Au

g-1

1

11

Management team with extensive network

Experienced management team with extensive experience from the shipping and offshore industry

Track record for building and operating successful companies

Cost efficient organization, primarily consisting of transaction and commercial expertise and some high level support staff

Cost driving operations outsourced

Technical management outsourced to highly regarded and well reputable management companies, but tightly controlled

Jan Håkon Pettersen – CEO40 years experience from the shipping industryFormer CEO of BW Gas ASA, Bergesen dy ASA,

Arcade Shipping AS, Arcade Drilling AS, Custodiaand RS Platou AS

Garup Meidell – Deputy CEO / CFO14 years experience from the shipping industry

Held positions as Deputy CEO/CFO of BW Gas ASA and Bergesen dy ASA, and exec. positions at KPMG, Norex Offshore, Oslobanken and Midland Montagu

Morten Steen Martinsen - COO30 years experience from the shipping industry

Previously held executive positions at BW Group, BW Gas, Eletson (Greece), Jo Tankers and Kvaerner

Oil & Gas

2

12

Secured first 4 deals despite being a new establishment and without cash balance

– Deals concluded off the market

Other accretive deals could have been completed with a larger cash position

Currently evaluating numerous other deals, including;

1. 2 modern panamaxes on 8 year TC to prime charterer

2. Possible acquisition of a fleet with 100,000 TEU capacity, all with CPs to 1st rate charterers

3. Evaluating new container vessel concept in cooperation with Ulsteindesign and Jinhai Heavy Industry

Ability to generate accretive deals

2

13

Secured vessels generating solid results

Illustrative financials (first full year of operations of current fleet)

3

Total fleetRegulusAltairVega Portland

Note: *Opex also including ship management costs. Financing costs based on current working assumptions in related to bank discussions and negotiations. Effective tax rate assumed to 0%

28

39

56

701

10

4

 0

 10

 20

 30

 40

 50

 60

 70

 80

USDm

Net resultNet financial costs

EBITeD&A

18

EBITDAeG&ANet revenueCommissionsGross revenue

70 9

Opex*

14

10.2%

9.2%

11.7%

10.7%

Increasing yields through high scalability

Top performing among peers.. … and increasing dividend yield with new vessels

3

Current fleet to return a dividend yield of ~10% from 2012– Among the industry leaders

Adding new vessels will increase yield potential through economies of scale

– Potential to increase fleet substantially with limited increase in overhead costs

– Graph illustrates the impact of reducing average annual G&A per vessel from current USD 1.05m per vessel towards USD 0

+15%

+16%

Earnings yieldCash flow yield

Current fleet without G&A

Current fleet G&A

10,9%

5,4%

8,6%

7,5%

6,1%

6,4%

9,8%

10,2%

Knightsbridge Tankers

Costamare

Ship Finance

SinOceanic

Seaspan

Golar LNG Partners

Teekay LNG Partners

Average

Expected dividend yield 2012:

Note: Share prices and analyst estimates as of Sep-11 (1) Weighted by charter revenue(2) Simple average

Avg. charter term (years)

14.01

1.92

11.11

4.12

11.02

8.42

14.12

8.3

15

Main Chinese shareholder with substantial resources and long term strategy to build a sizeable shipping company within the maritime cluster

USD 35 billion in assets YE 2010

Strong supportive shareholder facilitating growth

Financing:HNA provides loans to bridge-finance

acquisition opportunities. Objective to maintain ownership position through

new equity issues.

Newbuildings:HNA owns the 3rd largest

yard in China (Jinhai Heavy Industry)

Access to Chinese charterers:

Objective from the Central Government to control

50% of all transportation to and from China

4

HNA Group is the company’s largest shareholder controlling 33%

Acquisition of the three 13,100 TEU vessels made possible through HNA financing of pre-delivery payments

HNA committed to grow the company further

HNA actively pursuing acquisitions in the West supported by the central and regional government Purchased GE container lease business (GE SeaCo) for USD 1bn

(closing year end)

Purchased Spanish hotel chain for USD +600m

Presently bidding ~USD 1bn for Hochtief AG, which owns airports in Germany, Hungary, Greece and Austria

16

Container fleet consisting of > 5,000 vessels

– Shipping lines owning ~50% of fleet and chartering the remaing 50%

German tonnage providers top the rankings in terms of the container shipping fleet

– ~35% of the available lot capacity belonged to German ship owners in 2009

– Important in the operational charter business, commanding ~2/3 of the charter market

The German KG market has been the main financing source for international container lines

– This market is still down

This presents two great opportunities for SinOceanic as tonnage provider in the container sphere:

1. Provide new tonnage to support growth in the container line industry

2. German KGs need to improve balance sheet by selling vessels

SinOceanic is viewed as a positive new entrant by liner companies due to meltdown by traditional sources of tonnage

Strategic opportunity to invest in container market

5

German tonnage providers lead the container segment

German investors are currently the largest sellers

DE35 %

JP9 %

DK8 %

CN7 %

GR5 %

Other37 %

Container fleet by nationality of owner (%)

44 %

17 %

2 %

37 %

0 %

10 %

20 %

30 %

40 %

50 %

German Lines Greek Other

Sellers of container vessels

5 %

17 %

37 %41 %

0 %

10 %

20 %

30 %

40 %

50 %

German Lines Greek Other

Buyers of container vessels

Source: VDR, Howe Robinson Time period: 2009-Feb11

17

Container market set for upturn

Seaborne trade growth rates: 2000-10Global container demand on the rise

Asia/Europe demandPositive Chinese export trends

Strong increased demand in container shipping last 10 years – From 2000-10 port

movements of loaded containers more than doubled from 200m to 540m TEU

– Higher growth rates compared to Dry Cargo and Liquids

Demand up almost 15% in 2010 recovering from recession– Throughput above

pre-crisis levels

Global trade, sourcing and manufacturing key drivers for market growth– China export also

driving market

CAGR

Source: Drewry, ViaMar

5

Asia/Europe WB

42 %

Transpacific EB30 %

Intra Asia12 %

Intra Europe

3 %

Transatlantic WB

3 %

Others10 %

Transportation demand by region (2010)

18

Demand absorbing supply

New orders and net fleet growthSchedules deliveries 2000-2015

Demand approaching supply Slow steaming absorbing capacity

The orderbook in containter shipping is declining

– Orderbook at 3.5 million TEU per Feb-11 equal to 24% of the total fleet

– Down from more than 50% in 2008

Sceduled deliveries to be further reduced due to delays and cancellations

– Slow steaming also absorbing capacity

– Scrapping reducing fleet

Source: Howe Robinson, ViaMar

5

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

105%

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1

TE

U 1

00

0s

Supply vs. DemandTotal Productivity Adjusted Container Carrying Fleet vs. Container Trade

UTILISATION SUPPLY DEMAND 2011q1 Base

FORECAST

15.0

16.0

17.0

18.0

19.0

20.0

21.0

22.0

23.0

2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1

Kn

Average Speed in Knots

2011Q1 Base Case

2011Q2 Base Case

50

8 0

00

61

5 0

00

65

0 0

00

60

0 0

00

65

0 0

00

90

0 0

00 1

32

0 0

00

1 2

30

00

0

1 5

77

00

0

1 0

80

00

0

1 3

18

47

2

1 3

53

62

6

1 1

54

34

0

74

4 1

50

50

00

0

0

0

300 000

600 000

900 000

1 200 000

1 500 000

1 800 000

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

TEU

19

With the recovery in demand in 2010 charter rates across most sizes have improved from the lows of 2009

– Upward trend expected to continue

Current TC rates for 4,400 TEU vessels at USD 20,000 per day

– Still well below historical average

Rates set to increase

5

Source: Maersk Broker, ViaMar, Clarksons

Container newbuilding prices (8,000 TEU+) Charter rates

70

90

110

130

150

170

190

Ja

n-0

4

Ju

l-0

4

Ja

n-0

5

Ju

l-0

5

Ja

n-0

6

Ju

l-0

6

Ja

n-0

7

Ju

l-0

7

Ja

n-0

8

Ju

l-0

8

Ja

n-0

9

Ju

l-0

9

Ja

n-1

0

Ju

l-1

0

Ja

n-1

1

Ju

l-1

1

Mil

l. U

SD

8,200 TEU 9,200 TEU 10,000 TEU 13,000 TEU

Newbuild prices have increased somewhat since 2010

– Newbuild prices for 13,000 TEU vessels currently at USD 135m

Still more than 25% upside to historical values

20

Why SinOceanic has not invested in Dry Bulk or Tank

5

Source: ViaMar

Large tanker market balance Average earnings modern VLCC

Dry bulk market balance Capesize dayrate forecasts

60%

65%

70%

75%

80%

85%

90%

95%

100%

150

175

200

225

250

275

300

325

350

00Q1 02Q1 04Q1 06Q1 08Q1 10Q1 12Q1 14Q1

Mil

l D

wt

ViaMar Large Tanker Market Balance

Utilization Supply (dwt) Demand (dwt)

FORECAST

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

01Q1 03Q1 05Q1 07Q1 09Q1 11Q1 13Q1

US

D/d

ay

VLCC Ras Tanura - Chiba (TD5) Average Earnings Modern

2011Q1 Base Case 2011Q2 Base Case History

FORECAST

70 %

75 %

80 %

85 %

90 %

95 %

100 %

250

300

350

400

450

500

550

600

650

700

2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1

ViaMar Dry Bulk Market Balance - Supply vs Demand2.qtr. Base Case

Utilization Supply Demand

FORECAST

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1

us

d/d

ay

Capesize CS4TC - 2. qtr. Base

2011q1 Base Case 2011q2 Base Case IMAREX CS4TC

FORECAST

21

SinOceanic Shipping ASARådhusgaten 23,

N-0158 Oslo, Norway

Tel: +47 22 81 40 00Fax: +47 22 81 40 01

Contact details