Attracting Green ShipsMay 2012

About RightShip The Current EnvironmentThe Existing Vessel Design Index Accuracy of dataFactoring in relative CO2 performance in todays decision making processPractical application examples

Agenda

Independent company formed in Oct 2001Melbourne, London & Houston200+ Customers globallyShip Vetting & Risk ManagementPetroleum & Dry Cargo Vetting Service Environmental Rating & CO2 BenchmarkingWorldwide dedicated vetting specialistsFormer serving Masters and Chief EngineersAward winning proven systemISO9001 and ISO27001 Certified

About Rightship

The Current EnvironmentPart Two

Green award Benefits

Singapore Green Ship Program - Incentives

Environmental Ship Index (ESI) PromoteCommitment to SustainabilityEnvironmentally Friendly Initiatives

Reduction in port feesReduced rates on waste reception facilitiesReduced marine services chargesReduced fees for training courses, seminars and eventsReduced charges for marine productsPreferential queue treatment

Current Incentives Available Include

Environmentally Friendly Ports

The Existing Vessel Design IndexPart Three

Framing the Opportunity

EEDI What is it?Energy Efficiency Design Index (EEDI)A formula produced by the IMO to calculate the amount of CO2 emitted (in grams) by a vessel for every tonne of cargo carried a nautical mile based on:Total engine powerFuel type & specific fuel consumptionCargo carrying capacitySpeedAgreed at MEPC 62 in July 2011 and comes in to force for new deliveries from January 2013

EVDI What is it?Existing Vessel Design Index (EVDI)This formula produces the amount of CO2 emitted (in grams) by a vessel for every tonne of cargo carried a nautical mile based on:Total engine powerFuel type & specific fuel consumptionCargo carrying capacitySpeedDeveloped by RightShip based on the same assumption as the EEDI, this formula can be validly applied to existing vessels right now

EVDI What it is not?Not a replacement for the EEDI Not a mechanism to drive retrospective legislationNot a measure of the vessels operational performance Not going to tell you if a vessel has been designed efficiently

The Relative Efficiency of the Existing Fleet

Basis of Comparison

Lets Compare

Lets Compare

How accurate is the data?Part Four

First Best Source of Data

Consider the ImplicationsPart Four

Bulk Carriers: Brazil to China11,023 nautical miles

CO2 DifferentialBulk Carriers Calculated using 170,000 to 175,000 dwt Vessels

Price of Fuel DifferentialBulk Carriers Assumes a price of fuel USD650 per tonne (IFO 380)

Practical ApplicationsPart Five

For the Terminal

For the Ship Owner

Charterers Owners TerminalsFinance companiesIndustry

Results so far

ConclusionsPart Six

CO2 EmissionsEmissions (Gigatons CO2)Data Source: Second IMO GHG Study (2009)

Chart1

0.7

0.75

0.9

1.1

1.3

1.45

1.8

5.95

6.05

Emissions (Gigatons CO2)

Global Shipping Activity -Among the largest carbon dioxide emitters

Sheet1

CountryEmissions (Gigatons CO2)

United Kingdom0.7

Canada0.75

Germany0.9

Global Fleet1.1

Japan1.3

India1.45

Russia1.8

USA5.95

China6.05

Sheet1

Emissions (Gigatons CO2)

Global Shipping Activity -Among the largest carbon dioxide emitters

Sheet2

Sheet3

Emissions of the existing fleet already form part of the decision making processRightShip A - G Greenhouse Gas Emissions is a statistically valid means of determining relative efficiency of existing tonnagePromote market based solutions through the logistics chainWelcome your feedback and input www.shippingefficiency.orgConclusions

Thank YouEmail: environment@rightship.com

***Very QuicklyBut enough about us.

**The shipping industry is demonstrating a commitment to sustainability and efficiency through programs that benefit and encourage environmentally friendly ships but more needs to be done

3 examples of this:

Green AwardGreen Award certifies ships that are extra clean and extra safe. Ships with a Green Award certificate reap various financial and non-financial benefits.

By rewarding high safety and environmental standards in shipping, Green Award makes above standard ship operation economically more attractive. The Green Award certification scheme is open to oil tankers and dry bulk carriers from 20.000 DWT and upwards, LNG carriers and inland navigation vessels.

Examples of benefits:Port of Ghent: 6% premium on the port fees for Crude oil/Product Tankers and 10% for Cargo Bulk Carriers.Port of Montreal: All Green Award certified vessels are granted 10% fee reduction on port duesPort Taranaki: 5% premium on the port fees for any Green Award shipPort Metro Vancouver: 21% savings over the basic harbour dues rate for ships calling Burrard Inlet and Roberts Bank.

Maritime and Port Authority of Singapore (MPA) - Green InitiativeUnder the Green Ship Programme targeted at Singapore-flagged ships, MPA will provide incentives to ship owners who adopt energy efficient ship designs that reduce fuel consumption and carbon dioxide emissions. Singapore-flagged ships which go beyond the requirements of IMOs Energy Efficiency Design Index will enjoy a 50% reduction of Initial Registration Fees (IRF) and a 20% rebate on Annual Tonnage Tax (ATT) payable. Ship owners will also be recognised through certificates and a new SRS Green Ship of the Year award starting from the next Singapore International Maritime Awards.Ships that use type-approved abatement/scrubber technology or burn clean fuels with low sulphur content beyond MARPOL requirements within the port can enjoy a 15% reduction on port dues payable.

Environmental Ship Index ESIOne of the projects within World Ports Climate Initiative (WPCI) is the development of an Environmental Ship Index (ESI). The ESI identifies ships that perform better in reducing air emissions than required by the current emission standards of the International Maritime Organization, the Environmental Ship Index. The ESI assists in identifying cleaner ships in a general way.The index is used by ports to reward ships when they participate in the ESI and will promote clean ships, but can also be used by shippers and ship owners as their own promotional instrumentParticipating incentive providersPort of Amsterdam Port of Rotterdam Port of OsloHamburg Port Authority Ports of Bremen/Bremerhaven Port of Antwerp Seehafen Kiel GmbH & Co. KG Kiel Autorit Portuale di Civitavecchia

*The port itself also has some options: COLD Ironing facilitiesVirtual arrival programsECA RegionsTransparency on standards and expectations

In Australia emissions in scope for carbon tax on harbour side so sustainability and measurement are very much at the forefront of discussions.

*Some participating incentive providersPort of GhentPort Metro VancouverPort of MontrealFreeport of Riga AuthorityKlaipeda State Seaport AuthorityPort Taranaki CentrePort WellingtonPort NelsonSohar Industrial Port CompanyAdministrao do Porto de Sines SAAdministrao dos Portos do Douro e LeixesAdministrao do Porto de LisboaAdministrao do Porto de SetbalNational Ports Authority of South AfricaPort of AmsterdamPort of RotterdamPort of DordrechtMoerdijk Port AuthorityZeeland Seaports Vlissingen, Terneuzen

*. *To contextualise my presentation today I want to start by drawing a parallel between shipping and the purchase considerations in say buying an appliance.Factoring in efficiency is standard and as you can see in this slide most things have an energy efficiency rating which tells you based on some assumptions how environmentally friendly the device has been designed.It is an average based on assumptions so for exampleIf I buy the most efficient fridge, but I always leave the door open, it is not going to operate as the most efficient fridge

Efficiency considerations in the shipping industry is no exceptionLink to fridge analogy efficient fridge but leave door open - both equally important considerations

Emissions at the terminal represent the tip of the iceberg considering the time at sea laden and in ballast - and the distances between major mining hubs & manufacturing facilities and the cargoes final destinations.

As the terminal represents a focal point for most marine transactions properly co-ordinated incentives and robust measurement techniques can be used to deliver substantial efficiency gains and significant environmental outcomes. Difficulty with shipping is compounding by the significant investments in what after a few years will be sunk technology and complications and ambiguities in measurement.

For starters we need to consider:GHG Emissions (NOx, SOx PM & CO2)ECA ZonesNoiseFouling Lifecycle of vessel and what changes in legislation means to incumbent ships

The IMO has defined efficiency in shipping as grams of CO2 emitted per tonne nautical mile and calculates this through theEnergy Efficiency Design Index or EEDI

It looks complicated, but if we break it down in to its elements the numerator looks at engine power, fuel type and Specific fuel consumption.

The denominator looks at cargo carrying capacity speed

In July 2011 at MEPC 62, the IMO introduced the EEDI as a mandatory measure to reduce CO2 emissions from shipping on a global scale and comes into force for NEW DELIVERIES from January 2013

*Next we have the EVDI THE EXISTING VESSEL DESIGN INDEX.

Developed by RightShip, it is based on the same assumption as the EEDI, this formula was can be validly applied to the EXISTING fleet right now.

The EVDI calculates efficiency is a consistent and systematic basis and so bypasses one of the major limitations of the SHIP ENERGY EFFICIIENCY MANAGEMENT PLAN OR S E M - P

In essence it provides industry with a tool for the 60,000 vessels not picked up by the EEDI which will be in service for the next 25 years

*VERY IMPORTANT FROM THE OUTSET THAT I BE CLEAR THE EVDI IS NOTTHE EVDI IS NOT EASIER TO PRONOUNCE THE EEDI

Replacement for the EEDI We support the ICS and Intercargo position that the EEDI can only apply from 2013

Trying to drive retrospective legislation we need to separate the debate between what can be measured and what should be legislated

A measure of the vessels operational performance this is the EEOI

Tell you if a vessel has been designed efficiently may sound odd, but next few slides illustrate the point

**THE IMO AND INDUSTRY IS TO BE CONGRATUALTED ON AGREEING THE FIRST MODAL SPECIFIC GLOBAL FRAMEWORKTO ADRESS EMISSIONS

On the screen is a familiar graphic from MEPC 62 showing the reference line for bulk carriers. X AXIS is DWTY AXIS is EEDIBLUE BLOBS ships delivered between 1999 and 2009 tidied up to remove outliersBLACK LINE power regression line of best fit specifying minimum efficiency for new deliveries from 2013The ref lines at as a legislative tool makes a lot of sense it is an average and in the case of the 2,512 bulk carriers on screen it is representative of almost 93% of delivered vessels during the 10 year baseline period.As a selection tool though does not quite work as mechanism to improve efficiency.MAKE SLIDE In SHIP PICS.SAY I WANTED TO SHIP 300,000 tonnes of coal the relative performance of 300 x 1,000 dwt ships has very little impact on my decision. THIS IS THE PROBLEM WITH relying on the reference line in isolation to drive efficiency. AS MY DAD WOULD SAY DONT COME TO ME WITH PROBLEMSBut just what is a fair group of peers to benchmark against? Dont care how oven compares with a dishwasher for example.

This table has been developed based on the distribution of the underlying data and provides a good statistical measure of like for like comparison. USING LARGELY SAME SHIP TYPES AS IMO MEPC

Groupings are as per the table on this slide Bulk Carriers DWTContainer vessels TEU- GAS carriers on CBM

200 bulkers. for any given ship we look at 100 immediately bigger and 100 immediately smaller based on dwt. This 200 is a rolling collective meaning that no 2 ships will have an identical group for comparison.

If a ship is on the end of the spectrum, this group is adjusted - so the second largest bulk carrier is compared to 199 vessels immediately smaller and the 1 bulk carrier which is bigger to produce the best relative group for performance. It is from this peer group we then determine relative and absolute performance of the subject vessel

*SO this is still QUITE COMPLICATED and this is an extract from our system which shows how we have simplified its application.

AS I MENTIONED EARLIER EVDI IN ISOLATION IS NOT GOING TO TELL YOU if a vessel has been designed efficiently it is just a number not good or bad

YOU CAN SEE THIS NUMBER WITH THE BLUE ARROW WHICH IN THIS CASE 4.925

The A-G SCALE however WILL tell you if a ship has ben designed efficiently WE CALL THIS THE GHG EMISSIONS RATING AND IS the practical application on the table on the previous slide. A is the most efficient, G is least efficient

AS SHOWN BY THE PINK ARROW, THIS VESSEL IS A C, WHICH MEANS THE SHIP IS SOMEWHERE BETWEEN AVERAGE and half a standard deviation more efficient than average.

The GREY ARROW shows the top rated peers. So we known 4.925 grams of CO2 is a C rating but how much better is a B? In this case there are no As in the peer group of comparison and quick click on the hyperlink will tell you the performance differential.

*SO WHAT DOES LOOK LIKE AT THE COLLECTIVE LEVEL?

SAME DATA SET AS USED IN THE IMO REFERNCE LINE CALCULATION WITH SOME BIG BLUE CIRCLES TO ILLUSTGRATE THE SUB-SET USED FOR PEER GROUPS OF COMPARISONBIGGER IS NOT ALWAYS BETTER AND IMPORTANTLY, NEWER IS NOT ALWAYS MORE EFFICIENTHAPPY TO TALK OFFLINE TO ANYONE ABOUT THIS IN MORE DETAIL

WHITE PAPER EXPLAINING OUR METHODOLOGY ON OUR WEBSITEALL VESSELS ARE AVAILABLE FREE OF CHARGE THROUGH www.shippingefficiency.org COME AND SEE ME OUTSIDE***Central to this initiative is the accuracy of the data used in the calculations..Our principle source of data is same IHS Fairplay data set used by IMO in calculation in ref line

Having said that there is a hierarchy of dataFIRST BEST is When verified by third part such as class and this is displayed by the BLUE ARROW/RED CIRCLESecond BEST is where the information is attested to by the beneficial owner from their technical fileADVANCE SLIDEWe then opened it up to industry through CWR & SE.ORG to provide 100% transparency in our calculation and when I looked at the stats last Friday we have 49,391 vessel views since going live just over 12 months ago, ---FULL TRANSPARENCY PER GRAB

We welcome feedback on our system and information display and since going live we have had 1146 enhancements, upgrades and corrections Encouragingly website views continue to growNumber of corrections is slowing significantly and this gives me renewed confidence in our data.

*TODAY WE HAVE ALREADY SPOKEN ABOUT THE CORRELATION BETWEEN FUEL CONSUMPTION AND CO2 EMISSIONS AND WITH BUNKER REPRESENTING UP TO 75% of OPCOSTS THIS IS ABIG CONSIDERATION,

RightShip are advocates of a consistent measurement framework AND Market Based Solutions WHAT DOES THIS MEAN?SPEED, CONSUMPTION AND EFFICIENCY HAVE LONG BEEN FACTORED INTO CHARTER PARTY NEGOTIATIONS THIS IS MUCH SIMPLER THAN A CAP AND TRADE SCHEME OR A BUNKER LEVY WE SUGGEST THAT MARKET FORCES ARE ALREADY SELF REGULATING ALL WE WANT TO DO IS PROMOTE A CONSISTENT AND FAIR MEASUREMENT STICK

Comparatives between ship types is a lot more complex then and oven and a microwave so lets run through an example

*Using a common voyage from tubarao to Ching-dow using bulk carriers on the iron ore trade.JOURNEY OF 11,023 nautical miles

*Using vessels between170,000 to 175,000 dwtAnd a size grouping of 200 ships as per the size rating range explained earlier and focusing on the majority of vessels so 1 std deviation from the mean up and down.

You can see the potential variation in EVDI values.The B Vessel 2.63The F Vessel 3.42This is a difference of 1,400 Tonnes of CO2 and a 25% variance from the mean!YES THIS DIFFERENCE IS THEORETICAL, But conceptually the application is significant and enables comparison on fair and like for like basis

*USING THE SAME VESSLS AND ASSUMING A BUNKER COST OF USD650 PER TONNE of HFOYOU CAN SEE A PERCENTAGE% spread between Best and Worst performer representing around a USD300,000 differential IT IS ABOUT AN INFORMED SELECTION THROUGH A CONSISTENT FRAMEWORK USED TO EMPOWER NEGOTATIONS

*Enough Theoretical

How well do market forces current address pick this up?Here we can see the profile for a medium side bulk terminal overlayed by peer group on A-G continuum.

Black Line is a count of vessels by letter

Good distribution of vessels some are better, some are worse but most vessels are average scoring C, D or E and fall within one standard deviation of the mean.

Through this process some low hanging fruit presents itself:

What is the average of the terminal in the last 6 months and how has this metric changed over time.Do a certain segment of vessels represent the quantum of poor performers and they can be identified in advanceHow would such a policy reconcile with HSE reporting obligations ?

*Same Approach Applied to a Ship Owners Fleet

How can a Ship owner who has an efficient fleet be recognized and rewarded for having an efficient fleet? NO G SHIPS,.In part through freight rates but this could be better.NOT A NEW IDEA NEGOTIATIONS ALREADY FACTOR IN A CHARTER SPEED AND BUNKER COST JUST FORMALISED

**OUR EXEPIENCE SO FARFor Charterers3 customers who collectively just over 2,000 vessels per annum and around 123m tonnes of commodity largely petroleum mgmt override before they can use a G vessel

Owners & Terminals we spoke about a little bit alreadyon previous slides and are assisting several other customers with aspects of their annual reports, sustainability reports and calculating baselines for future comparisonFinance Companies are one of the largest users if this information. Arbitrage opportuinity much longer lifecycle approach ARBITRAGE LINKAGE?IndustryWOKRING WITH OTHER SCHEMES TO SEEK CONTINUITY OF APPROACH AND WHERE WE CAN CONTRIBUTE>>>>>FULLY SUPPORT INCENTIVE STRUCTURES SUCH AS THE MPA WHO PROVIDE DISCOUNTS FOR SINGAPOREAN FLAGGED VESSELS. HERE YOU CAN SEE ANOTHER EXAMPLE OF SEPATING THE DEBATE BETWEEN WHAT CAN BE MEASURED and what ahs been LEGISTLATEDAnecdotal support from class performing VERIFICATIONS PRIOR TO THE IEEC coming in to effect for new deliveries from 2013

*4 things to take away from todays presentationA different scale taking all those little bits and adding them together If shipping were a country, it would be the 6th largest emitter of Co2..

From the graph b/w Japan and Germany

3.3% of global emisssions in 2009 1b+ tonnes2.7% relate to international shipping

According to the IMOs GHG Study, if unabated, shippings contribution to GHG emissions could reach 18% by 2050. Something clearly needs to be done

**Emissions of the existing fleet already form part of the decision making process it is simple, the more fuel you use, the more emissions you produce

RightShip A - G Greenhouse Gas Emissions is a statistically valid means of determining relative efficiency of existing tonnage - WE ARE PROMOTING A FAIR AND CONSISTENT BASIS OF COMPARISON

Promote market based solutions through the logistics chain standard basis of comparison and SEPARATE THE DEBATE BETWEEN MEASUREMENT and legislation.

Welcome your feedback and input www.shippingefficiency.org*