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George Saroglou-Market Diversification: The Case of Tsakos Group

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  • 1) Tsakos’ fleet addresses all customer’s energy transportation needs 2) These are large, sophisticated vessels to operate (unlike dry-bulk) 3) Our customers like the fact that we can offer them a “one-stop-shop” 4) Also means we are able to adapt to changing trends and needs of the industry
  • 1) Tsakos is one of the largest energy transportation companies in the world with a modern, diversified fleet 2) Preferred partner of critical energy producers around the world 3) Experienced, low-cost operator with extensive public market track record 4) Since listing on the NYSE, we’ve generated net income of over $1 billion and distributed approximately $350 million to shareholders 5) Tsakos foundation is committed and is participating in this transaction 6) Consistent dividend policy presently at 7.7% dividend yield
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    • 1. TEN LtdTEN LtdTsakos Energy NavigationTsakos Energy NavigationEuropean Maritime ConferenceAthens May 23, 2013MARKET DIVERSIFICATION – TEN, Ltd.
    • 2. Fleet Composition2Empire State1,250′VLCC1,100′300,000dwtSuezmax900′160,000dwtAframax850′100,000dwtPanamax750′70,000dwtHandymax615’50,000dwtHandysize570’37,000dwtCrude Product1 10 8 9 6 8Aframax850′100,000dwt3LNGLNG750′85,000dwt22819(1) Includes one LNG carrier under construction. Option not includedSophisticated, multi-purpose fleet addresses all customer needs(1)Suezmax900′160,000dwt220 Years in theCapital Markets20 Years in theCapital Markets
    • 3.  Traditional, client-focused, modern and diversified tanker and energy operator One of the largest energy transportation companies in the world− Carried 355 million barrels of oil in 2012, equivalent to ~4 days of global consumptionor ~48 days of current US imports Pro forma fleet consists of 49 vessels totaling 4.9 mm dwt− 19 crude oil tankers− 28 product tankers (including two DP2 Suezmax shuttle tankers)− 2 Liquefied Natural Gas (“LNG”) vessels (including one under construction). TNP hasalso an option for a second LNG newbuilding− $4 bn invested in 65 newbuild acquisitions since 1997 Cost effective technical management and strong balance sheet− One of the lowest overhead cost tanker and energy operators globally 20 years as a public company− 1993 listing on the Oslo Stock Exchange (delisted in 2005)− NYSE listed since 2002− $1 billion net income and ~$374 in dividend payments Tsakos Foundation is largest shareholder (about 39%) and has never sold shares Consistent dividend policyTEN at a Glance20 Years in theCapital Markets20 Years in theCapital Markets
    • 4.  Expand footprint in other energy sectors – Venture beyond the horizon Attain a “first mover” advantage vis-à-vis the competition Proactive not reactive to expanding LNG / Shuttle tanker markets Enhance / diversify chartering base – BG, GDF Suez, Qatar, Nigeria Create a platform to attract additional investors (public / private) – Provide latitude for futurepublic offerings Learn and excel internally in a new “discipline” – establish operating track record High barriers to entry prevent “competition overflow” Niche Markets – 72 shuttle tankers, 371 LNGs and 4,000 tankers (over 30,000 dwt)Why LNG / Offshore Shuttle Tankers?20 Years in theCapital Markets20 Years in theCapital Markets
    • 5.  Gas is cheap, clean and plentiful Natural gas accounted for 24% of the global energy market in 2011 – North America the largestgas consumer in the world and set to increase presence due to country’s shale gas deposits(rush to utilize them in order to reduce the carbon-intensity of its economy) US DOE conditionally approved Freeport LNG export facility to export up to4.4mpta – Half of gas volumes contracted to go to Japan (Osaka Gas, ChubuElectric) According to the EIA, the US has 2.5 trillion cubic feet of potential natural gasproduction. Shale accounts for 862 billion or 34.5% of that Largest growth in Asia – 5.9% increase in 2011 Japanese imports increased by 12.7% y-o-y in 2011 vs. a y-o-y growth rate of 8.5%in 2010. Imported 32.2% of all LNG traded in 2011 and 50.1% of Asian imports South Korea imported 22.7% of Asian imports and China 5.3% UK overtook Spain as the largest European importer. 27.9% of total Europeanimports vs. 12.1% in Spain LNG expected to be among the world’s fastest growing energy sources in the next 10-20 years(CAGR at about 2.6% vs. Oil at 0.8%)Favorable Market Dynamics20 Years in theCapital Markets20 Years in theCapital Markets
    • 6.  2yr TC rates increased frommid-$20K two years to $90K pd today LNG fleet in the water close to 100% utilized Orderbook in constant decline since peak of2004 but picked up recently Orderbook at 20.5% of fleet (371vessels vs. 76 on order) As pricing differentials continue to widen,the arbitrage opportunities presented bymaritime LNG trade will continue to grow Spot market (contracts < 4yrs) on anincrease. From about 5% of the global LNGtrade in 2002 to about 25.1% today Limited yard capacity before 2016 theearliest Seven yards internationally that can builtLNGs (Samsung, Daewoo, Hyundai,Mitsubishi, Hudong, China, STX andMarket Boom Here to Stay?03060902005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025Existing Fleet (Year End) Renewal DemandNew Deliveries Additional RequirementWorldwide LNG Fleet CapacityWorldwide LNG Fleet CapacityVessel shortfallSource: ClarksonsGlobal LNG trade routesGlobal LNG trade routesHenry Hub: ~4.00Europe: ~12.50Middle East: ~14.00Japan: ~17.0020 Years in theCapital Markets20 Years in theCapital Markets
    • 7. Growing in Offshore Shuttle Tankers Global demand and resulting high oil prices are thebackdrop for growing, diverse exploration and drillingprojects Consequently, global energy companies are investing inDeep Water and Ultra-deepwater projects This gives us an opportunity to leverage our preferredposition with our customers to grow in this profitablesegment Vessel demand exceeds supply over the next few years,driving charter rates higher We see many ways to build in this sector, partnering withour customers Penetrating oligopolistic market Over the next decade, Petrobras is significantly rampingup new offshore production facilities Over the past 20 years, the proven reserves in Brazilhaveincreased by 164%20 Years in theCapital Markets20 Years in theCapital Markets
    • 8. Investment ThesisLNG(173,000m3)DP2 Suezmax Shuttle1 mil barrelsVLCC2 mil barrelsPurchase Price (NB) $200-220 million $95-105 million $90 millionTCE pd: $80-90,000 $45-50,000 $25,000Opex pd: $13,000 $15,000 $9,000Contract Duration: 5-10 years or longer 10-15 years 1-2 yearsROE (basic): Around 15% >15% -2%IRR (based on today’smarket):10-12% 10-15% -1%20 Years in theCapital Markets20 Years in theCapital Markets
    • 9. Tsakos Energy Navigation, Ltd – 367 Syngrou Av. , Athens 175 64, Greece Tel: +30210 940 7710, Fax: +30210 940 7716email: ten@tenn.grCompany Contact:Paul Durham, Chief Financial Officer pdurham@tenn.grGeorge Saroglou, Chief Operating Officer gsaroglou@tenn.grHarrys Kosmatos, Corporate Development Officer hkosmatos@tenn.gr

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