Karatzas Marine Advisors & Co presentation at the 9th MareForum Energy Conference in Houston, October 2015

1. Karatzas Marine Advisors & Co.
International Maritime Advisory
„The Jones Act Market:
An Always Investor-friendly Market”
9th MARE FORUM USA 2015:
Maritime Transportation of Energy
Houston, TX, October 22nd, 2015

2. ‘Safe Harbor’ Statements
‘And seas but join the regions they divide’
Alexander Pope
‘In Sea affairs, nothing is impossible, and nothing is improbable’
Admiral Lord Nelson, writing from
HMS Victory in 1804
‘If you want to build a ship, don’t drum up the men to gather
wood, divide the work and give orders. Instead, teach them to
yearn for the vast and endless sea’
Antoine de Saint-Exupéry
KARATZAS MARINE ADVISORS & Co. October 2015 Page 2

3. Agenda
Company Introduction
Jones Act Market Overview
Jones Act Current Market Developments
Investing Considerations for the Jones Act Market
Company Contact Information
KARATZAS MARINE ADVISORS & Co. October 2015 Page 3

4. Company Introduction
Karatzas Marine Advisors & Co. is New York-based firm with worldwide
footprint & strong, well-qualified management team
Active in shipping finance advisory, restructurings, maritime strategy, private
placements, vessel valuations, ship brokerage and vessel management
Clients include:
Financial institutions seeking shipping market expertise and advisory on shipping matters
Financial institutions in need of origination of transactions in shipping
Banks seeking to dispose of shipping assets and/or shipping loans
Shipowners seeking advise to access the financial markets
Shipowners seeking advisory and investors with existing ‘legacy’ concerns
Shipowners seeking financial partners to benefit from present market trough
Dry bulk, tankers, containerships and offshore
International flag business primarily, but also Jones Act expertise
Proven track record of market outperformance and delivering value to clients
KARATZAS MARINE ADVISORS & Co. October 2015 Page 4

5. Agenda
Company Introduction
Jones Act Market Overview
Jones Act Current Market Developments
Investing Considerations for the Jones Act Market
Company Contact Information
KARATZAS MARINE ADVISORS & Co. May 2015 Page 5

6. Jones Act Market Definition
Merchant Marine Act, Section 33, 1920
Grants cabotage privileges for vessels trading within the US
Three-pronged requirement:
At very least, 75% of shipowning structure is controlled by US Citizens
Vessels have to be built/repaired (to greatest extent) in the USA and fly the
American Flag
Vessels have to be crewed by US Citizens
‘American Flag’ vessels are NOT Jones Act vessels as typically are built
overseas and are granted temporary / special purpose US-cabotage
privileges
KARATZAS MARINE ADVISORS & Co. October 2015 Page 6

7. Jones Act Market
KARATZAS MARINE ADVISORS & Co. October 2015 Page 7
3452
AMERICAN FLAGGED FLEET
AMERICAN FLAGGED
VESSELS
JONES ACT VESSELS

8. Jones Act Market Definition
KARATZAS MARINE ADVISORS & Co. October 2015 Page 8
1185
1702
73
65
79 271
123
52
AMERICAN-FLAGGED FLEET BREAKDOWN
OFFSHORE
TUG
DRY BULK
TANKERS
CONTAINERSHIPS
FERRIES / ROPAX
GENERAL PURPOSE / MISC
DREDGE

9. MT “American Phoenix”
50,000 dwt, built 2012 at BAE Systems, Alabama
• US Flag
• Sold in 2014 at $155 million
• Owner / Seller: US Private Equity Fund
• Buyer: US Refinery / Pipeline / Energy Logistics
Company
• Presently has been chartered by ExxonMobil at
reportedly $120,000 per diem
• Has three-year charter to Shell commencing next
year at $60,000 pd
• Estimated Vessel Daily Operating Expenses
(VDOE) at $25,000 pd
• Estimated Economic Life at 30+ yrs
MT “Maxwell Bay”
50,000 DWT built in 2012 at GSI, China
• Marshall Islands Flag
• Sold in summer 2015 at $30 million
• Owner / Seller: US Private Equity Fund
• Buyer: Torm, Denmark
• Present spot earnings at $21,000 pd; 3yr
TC at $17,000 pd
• Estimated Vessel Daily Operating
Expenses (VDOE) at $6,500 pd
• Estimated Economic Life at 22 years
Jones Act vs ‘Open Registry’
KARATZAS MARINE ADVISORS & Co. October 2015 Page 9

10. Financial Characteristics of Jones Act
Shipping assets are trading in the USA by definition, where exists a predictable
& familiar legal frame
Predictable & familiar jurisdiction lowers legal / sovereign risks, which attracts
many traditional US-based financiers and banks
Shipping assets with long commercial lives, high maintenance standards under
continuous oversight of the US Coast Guard and the American Bureau of
Shipping (ABS), an IACS member
Subject to Internal Revenue Service (IRS) and taxation on corporate level;
however, this is a clear case of ‘no taxation without representation’ since:
Capital Construction Fund (CCF) which allows for tax deferral opportunities from both
operating income and from shipping sales proceed
Favorable tax treatment for both interest and also principal investments
By association, Section 179 on Qualified Financing, via Equipment Lease Financing via a
Leasing Company
KARATZAS MARINE ADVISORS & Co. October 2015 Page 10

11. Agenda
Company Introduction
Jones Act Market Overview
Jones Act Current Market Developments
Investing Considerations for the Jones Act Market
Company Contact Information
KARATZAS MARINE ADVISORS & Co. October 2015 Page 11

12. Outstanding Orderbook
Ocean-going Vessels
KARATZAS MARINE ADVISORS & Co. October 2015 Page 12

13. Current Considerations
Freight rates for Jones Act tankers have dropped from $120,000 pd to $80,000 pd
(reversion to the mean, ≈ $55,000 pd?)
Outstanding orderbook of sixteen (16) Jones Act tankers is historically very high as
proportion of the existing tanker fleet thirty-one (31) vessels, almost 50% of the
existing fleet
Rig count in the USA has dropped appr. 60% y-o-y to 787 active rigs at present
Energy markets presently at turmoil due to oil price volatility / uncertainty; possibly
negative impact of Jones Act Tanker market, and negative impact on expected IRRs
Lifting the export ban for crude oil from the US likely to have negative impact on the
Jones Act tanker market, as smaller amounts of commodities will have to be moved
domestically
Considerations from MV ‘El Faro’ incident recently?
KARATZAS MARINE ADVISORS & Co. October 2015 Page 13

14. Agenda
Company Introduction
Jones Act Market Overview
Jones Act Current Market Developments
Investing Considerations for the Jones Act Market
Company Contact Information
KARATZAS MARINE ADVISORS & Co. May 2015 Page 14

15. Investing in Jones Act market
Great financial pool (most US-based banks and leasing companies do not have a
mandate to invest in international shipping, can consider Jones Act assets)
Downside: Easy for ‘too much money to be chasing too few deals’
Downside: Bidding wars and strong pricing
Asset with very long economic life (≈2x of international shipping assets)
Less volatility in asset pricing
Upside: Less risk translates to more competitive financial terms
Beneficial tax treatment for depreciation, making leasing an attractive financing option
Recent acquisitions in the Jones Act tanker market indicate a new type of buyer has
been entering the shipping industry, the Logistics Provider, that can have access to oil
storage, pipelines and possibly refineries, thus providing ‘turn-key’ solutions to cargo
interests
Downside: Traditional Jones Act shipowners will be facing tougher competition from better positioned
competitors
KARATZAS MARINE ADVISORS & Co. October 2015 Page 15

16. Agenda
Company Introduction
Jones Act Market Overview
Jones Act Current Market Developments
Investing Considerations for the Jones Act Market
Company Contact Information
KARATZAS MARINE ADVISORS & Co. October 2015 Page 16

17. Thank you for your
Attention!
Karatzas Marine Advisors & Co.
International Maritime Advisory
One World Financial Center, 30th Fl
200 Liberty Street
New York, NY 10821 USA
Switchboard: +1 212 380 3700
Mobile (US): +1 713 545 5990
Email: INFO@BMKaratzas.com
Web: www.BMKaratzas.com
Contact Details
KARATZAS MARINE ADVISORS & Co. October 2015

18. Thank you for your attention!
For more thoughts and commentary on shipping finance,
Please feel free to visit our blog at
www.shippingfinance.wordpress.com
© 2015 Karatzas Marine Advisors & Co. All Rights Reserved. Reproduction of all and any information from this
presentation is permitted only with full attribution and mention of the company.
KARATZAS MARINE ADVISORS & Co. October 2015 Page 18