Conventional vs. LNG Fuelled RoPax - Case Study -

Conventional vs. LNG Fuelled RoPax - Case Study - 42nd ANNUAL INTERFERRY CONFERENCE 7th 11th October 2017 Split, Croatia Sokrates Tolgos < 1 >

Agenda 1 Emission Compliance and Fuel Concepts Basic Considerations 2 RoPax Case Study Main Vessel Data and Operation Profile 3 Life Cycle Costs of Conventional vs. LNG Fuelled Vessel Design 4 The Fuel Concept Selection Diagramme 5 Conclusions < 2 >

Diesel Engine Emissions Typical Emission Profile Exhaust gas composition of HFO burning 4-stroke Diesel engines (fuel sulphur content 3%) N 2 74.3% pollutants O 2 11.25% H 2 O 8.1% CO 2 6% pollutants 0,35% soot/ash 0.003% SO2 0.15% CO 0.007% HC 0.02% NOx 0.17% < 3 >

Legislation Legally Effective IMO Limits Sulphur / % 5 4 3 2 1 0 S-ECA All vessels (old and new) S-Global NOx / [g/kwh] Tier I Tier II Tier III Only new buildings N-Global N-ECA North America / Caribbean Baltic & North Sea < 4 >

Dominant Emission Solution Trends Overview Countermeasures for NO x SO x SCR (MGO, HFO) Scrubber (HFO) MGO Dual Fuel Technology < 5 >

Comparison of NOx Trends Automotive versus Shipping 18 16 Euro 0 14 12 IMO Tier I NOx in g/kwh 10 8 Euro 1 Euro 2 IMO Tier II IMO Tier III global 6 Euro 3 4 Euro 4 IMO Tier III ECA 2 Euro 5 Euro 6 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 < 6 >

Selective Catalytic Reduction (SCR) Chemical Principle of NOx Reduction Vaporization of Urea* (NH 2 ) 2 CO in exhaust gas leads Catalytic to formation Reduction of ammonia (NH 3 ) * widely used in agriculture as a nitrogen containing fertilizer; for exact urea specification, please, address to MDT Catalyst < 7 >

Selective Catalytic Reduction (SCR) Main Considerations for CAPEX and OPEX NOx CATALYST CAPEX (for Case Study): MAN SCR Depending on engine type, typically 10% - 15% of engine price OPEX: Backpressure increase by 15mbar to 20mbar ( impact SFOC) UREA consumption for Tier III compliance typically 5% - 7% of fuel consumption, depending on engine load point Price for UREA: 250 USD/t in the past ~ 40% to ~ 80% of HFO price, does not follow oil market < 8 >

SO x Reduction Technology Wet Scrubber Open Loop, Closed Loop, Hybrid System Open loop + Closed loop = HYBRID Type < 9 >

SO x Reduction Technology Main Considerations for CAPEX and OPEX SOx SCRUBBER CAPEX (for Case Study): Hybrid Type 2 systems one per engine room OPEX - Closed Loop: During operation in harbour and manoeuvering SFOC increase by 1.5% (pumps etc.) Backpressure increase by 15mbar Price for Caustic Soda* (50%) : 250 USD/t in the past typically below HFO price Costs for removal of sludge not considered OPEX - Open Loop: During operation at sea SFOC increase by 2.0% (pumps etc.) Backpressure increase by 15mbar * 50% solution in water < 10 >

Emissions with LNG Fuelled Engine 4-Stroke Dual-Fuel Engine (Diesel vs. Gas Mode) CO2 NOx SOx PM - 25% - 85% > 99% > 99% 0 25 50 75 100 Emission value [%] Diesel operation Gas operation 4-Stroke DF engine in Gas mode offers IMO Tier III compliant operation without the need for any further exhaust gas after treatment < 11 >

Greenhouse Gas Emissions Diesel Engine 48/60CR vs. Dual-Fuel Engine 51/60DF GHG Emissions [g/kwh] 140% 120% 100% 80% 60% 40% 20% Methane Number MN80 GHG = CO 2 + 28*CH 4 according to IPCC 2014 (100 years time horizon) 25 50 75 85 100 Engine Load [%] 51/60DF (Gas), Gas, CO2 DE 48/60CR (HFO), HFO, GHG CO2 DE 48/60CR (MGO), MGO, CO2 GHG DF (Gas), GHG 51/60DF CO2 equivalent acc IPCC 2014 * Reference: Diesel Engine (HFO) @ Full Load Reference* Based on GWP = 28 consideration, a gas burning dual-fuel engine performs still better than a diesel engine in the medium and upper load ranges < 12 >

Emissions with LNG Fuelled Engine Main Considerations for CAPEX and OPEX LNG CONCEPT CAPEX: No after treatment LNG tanks + Gas Supply System Safety Concept & Components Dual-Fuel Engines (Main, Auxiliary) OPEX: LNG Fuel (small scale price FOB) MGO (pilot fuel, back-up fuel) < 13 >

Agenda 1 Emission Compliance and Fuel Concepts Basic Considerations 2 RoPax Case Study - Main Vessel Data & Operation Profile 3 Life Cycle Costs of Conventional vs. LNG Fuelled Vessel Design 4 The Fuel Concept Selection Diagramme 5 Conclusions < 14 >

RoPax Case Study Main Vessel Data and Route Profile Main Vessel Data Displacement Length Capacity Installed Power Propulsion system ~ 25,000 tons ~ 210 m ~ 3,500 lane meters ~ 1,500 passengers 38.8 MW (4 Main Engines) 6.4 MW (4 Auxiliary Gensets) Diesel-Mechanic Route Profile Length of Round Trip Duration of Round trip LNG Refueling LNG tank capacity 1,370 n.m. 76 hours (thereof at ports: 12 hours) Once per round trip 2 x 450 m3 (C-type) < 15 >

RoPax Case Study Resulting Annual Operation Profile < 16 >

Agenda 1 Emission Compliance and Fuel Concepts Basic Considerations 2 RoPax Case Study Main Vessel Data and Operation Profile 3 Life Cycle Costs of Conventional vs. LNG Fuelled Vessel Design 4 The Fuel Concept Selection Diagramme 5 Conclusions < 17 >

RoPax Case Study Scenario 1 SOx-ECA + IMO Tier III Comparison of HFO vs. LNG Fuelled Concepts 1 48/60CR 51/60DF IMO Tier III + S-ECA (0,1%S) Baltic and North Sea North American ECA 1. 4x8L 48/60CR 100% MGO SCR 2. 4x8L 48/60CR 100% HFO Scrubber + SCR 3. 2x8L + 2x9L 51/60DF 100% LNG MGO as pilot oil only (no after treatment) 2 IMO Tier II + Global Sulphur Cap (0,5%S) Rest of the World 48/60CR 1. 4x8L 48/60CR 100% BFO no after treatment 2. 4x8L 48/60CR 100% HFO Scrubber 51/60DF 3. 2x8L + 2x9L 51/60DF 100% LNG MGO as pilot oil only (no after treatment) < 18 >

CAPEX - Scenario 1 RoPax Case Study (Displacement 25,000 tons) CAPEX 175% 150% 125% 100% 75% CAPEX: SOX-ECA 100%, IMO Tier III CAPEX from Tank to Stack SCR Hybrid Scrubber LNG FGSS HFO / MGO Fuel System Aux Engines Main Engines 50% 25% 0% 4x8L48/60CR 100% MGO SCR 4x8L48/60CR 100% HFO Scrubber + SCR 2x8L + 2x9L 51/60DF 100% LNG Highest CAPEX for LNG fuelled vessel due to extra expenses for fuel gas storage and supply system (FGSS) as well as higher engine first costs. Size of the LNG tank is main driver for the FGSS cost, which is mainly depending on voyage time (respectively intervals between refuelling) < 19 >

OPEX Scenario 1 RoPax Case Study (Displacement 25,000 tons) OPEX [Mio. ] 25 20 15 10 5 Average Annual OPEX* (Scenario: 100% SECA, 100% IMO Tier III) Maintenance Costs Urea Caustic Soda Lube Oil Pilot Oil LNG Liquid Fuel * Time Period: 10 years FUEL PRICES [USD/t]: HFO (3.5%S): 340 1 MGO (0.1%S): 510 1 LNG: 490² (= 10.5 $/mmbtu) Urea: 250 USD/t Caustic Soda (50%) : 250 USD/t 0 4x8L48/60CR 100% MGO SCR 4x8L48/60CR 100% HFO Scrubber + SCR 2x8L + 2x9L 51/60DF 100% LNG Lube Oil: 3,200 USD/t Fuel bill is the biggest part of OPEX by far. Hence, fuel prices will have the decisive impact on the OPEX ranking. For the reflected price situation (01/2017), the HFO solution yields lowest OPEX (approximately 2 Mio. EUR lower annual OPEX compared to the LNG solution) 1 Source: Bunkerworld (25.01.2017) 2 Source: see separate slide attached in Backup < 20 >

Life Cycle Costs Scenario 1 RoPax Case Study (Displacement 25,000 tons) NPV Calculation (Scenario: 100% SECA, 100% IMO Tier III) FUEL PRICES [USD/t]: Net Present Value (NPV) 1400% 1200% 1000% 800% 600% 400% 200% Assumptions Time Period: 10 years Net Interest Rate: 7% +31% +14% 985% 4x8L48/60CR 100% MGO SCR 4x8L48/60CR 100% HFO Scrubber + SCR 2x8L + 2x9L 51/60DF 100% LNG HFO (3.5%S): 340 1 MGO (0.1%S): 510 1 LNG: 490² (= 10.5 $/mmbtu) Urea: 250 USD/t Caustic Soda (50%) : 250 USD/t 0% 0 1 2 3 4 5 6 7 8 9 10 100% = CAPEX MGO solution Lube Oil: 3,200 USD/t Years With today s fuel price scenario, after 10 years, the HFO solution provides an accumulated LCC benefit of 14% against the LNG and 31% against the MGO solution Amortization time of SCR System + Hybrid Scrubber compared to the MGO solution is about 1 year (Price Differential MGO vs. HFO = 170 USD/t) 1 Source: Bunkerworld (25.01.2017) 2 Source: see separate slide attached in Backup < 21 >

RoPax Case Study Scenario 2 IMO Tier II + Global Sulphur Cap Comparison of HFO vs. LNG fueled concepts 1 48/60CR 51/60DF IMO Tier III + S-ECA (0,1%S) Baltic and North Sea North American ECA 1. 4x8L 48/60CR 100% MGO SCR 2. 4x8L 48/60CR 100% HFO Scrubber + SCR 3. 2x8L + 2x9L 51/60DF 100% LNG MGO as pilot oil only (no after treatment) 2 IMO Tier II + Global Sulphur Cap (0,5%S) Rest of the World 48/60CR 1. 4x8L 48/60CR 100% BFO no after treatment 2. 4x8L 48/60CR 100% HFO Scrubber 51/60DF 3. 2x8L + 2x9L 51/60DF 100% LNG MGO as pilot oil only (no after treatment) < 22 >

CAPEX - Scenario 2 RoPax Case Study (Displacement 25,000 tons) CAPEX: SOx-ECA 0%, IMO Tier II CAPEX 175% 150% 125% 100% 75% Hybrid Scrubber LNG FGSS HFO / MGO Fuel System Aux Engines Main Engines 50% 25% 0% 4x8L48/60CR 100% BFO 4x8L48/60CR 100% HFO Scrubber 2x8L + 2x9L 51/60DF 100% LNG The CAPEX of the BFO variant are lowest: ~ 37% below the HFO solution (mainly due to Scrubber costs) ~ 65% below the LNG solution (due to LNG FGSS and higher engine costs) < 23 >

OPEX Scenario 2 RoPax Case Study (Displacement 25,000 tons) OPEX [Mio. ] 20 18 16 14 12 10 8 6 4 2 Average Annual OPEX* (Scenario: 0% SECA, 100% IMO Tier II) Maintenance Costs Caustic Soda Lube Oil Pilot Oil LNG Liquid Fuel * Time Period: 10 years FUEL PRICES [USD/t]: HFO (3.5%S): 340 1 BFO (0.5%S): 450 2 MGO (0.1%S): 510 1 LNG: 490 3 (= 10.5 $/mmbtu) Urea: 250 USD/t Caustic Soda (50%) : 250 USD/t 0 4x8L48/60CR 100% BFO 4x8L48/60CR 100% HFO Scrubber 2x8L + 2x9L 51/60DF 100% LNG Lube Oil: 3,200 USD/t With today s fuel price scenario, the annual OPEX of the BFO variant are the highest: ~ 4.0 Mio. above the HFO solution ~ 0.5 Mio. above the LNG solution 1 Source: Bunkerworld (25.01.2017) 2: Price BFO = Price MGO 1/3 (Price MGO Price HFO) 3 Source: see separate slide attached in Backup < 24 >

OPEX Scenario 2 RoPax Case Study (Displacement 25,000 tons) NPV Calculation (Scenario: 0% SECA, 100% IMO Tier II) FUEL PRICES [USD/t]: 1400% 1200% Assumptions Time Period: 10 years +24% 1185% +22% 4x8L48/60CR 100% BFO HFO (3.5%S): 340 1 BFO (0.5%S): 450 2 MGO (0.1%S): 510 1 Net Present Value (NPV) 1000% 800% 600% 400% 200% Net Interest Rate: 7% 977% 4x8L48/60CR 100% HFO Scrubber 2x8L + 2x9L 51/60DF 100% LNG LNG: 490 3 (= 10.5 $/mmbtu) Urea: 250 USD/t Caustic Soda (50%) : 250 USD/t 0% 0 1 2 3 4 5 6 7 8 9 10 100% = CAPEX BFO Solution Lube Oil: 3,200 USD/t Years With today s fuel price scenario, after 10 years, the HFO solution provides an accumulated LCC benefit of 24% against the LNG and 22% against the BFO solution Amortization time of Hybrid Scrubber compared to the BFO solution is < 1.5 years (Price Differential BFO vs. HFO = 110 USD/t) 1 Source: Bunkerworld (25.01.2017) 2: Price BFO = Price MGO 1/3 (Price MGO Price HFO) 3 Source: see separate slide attached in Backup < 25 >

Agenda 1 Emission Compliance and Fuel Concepts Basic Considerations 2 RoPax Case Study Main Vessel Data and Operation Profile 3 Life Cycle Costs of Conventional vs. LNG Fuelled Vessel Design 4 The Fuel Concept Selection Diagramme 5 Conclusions < 26 >

Fuel Concept Selection Diagramme Mathematical Derivation & Practical Meaning Owner s Life Cycle Costs = CAPEX + OPEX A... HFO fuelled RoPax design B... Gas fuelled RoPax design (MGO pilot fuel only) Pure Mathematics A B LCC < LCC if B B B A B B mlng mmgo mlo murea msoda PHFO < PLNG + PMGO + PLO PUrea PSoda + Const. A A A A A m m m m m HFO HFO HFO HFO HFO ~ 0.85 ~ 0.01 ~ 0 ~ 0.1 ~ 0.01 Resulting order of magnitude of coefficients for considered RoPax design & operation profile (LCC consideration over 10 years period) < 27 >

Fuel Concept Selection Diagramme RoPax Design 25,000 t (~ 40 MW Installed Power) NPV Calculation of Life Cycle Costs OPERATION SCENARIO 1: 100% SECA, 100% IMO Tier III P HFO [USD/t] 600 550 500 450 400 Lower LCC for LNG Fuelled RoPax Design P HFO = 0,845 * P LNG 4 $/t Urea Price: 125 USD/t 250 USD/t 375 USD/t Caustic Soda (50%) : 250 USD/t 350 300 250 Lower LCC for HFO Fuelled RoPax Design 200 200 250 300 350 400 450 500 550 600 P LNG [USD/t] Lube Oil: 3,200 USD/t MGO* Price: 510 USD/t (* for Pilot Fuel in DF-Engine) Assumptions Time Period: 10 years Net Interest Rate: 7% HFO / LNG Price Situation in 01-2017 (used for case study LCC calculation) < 28 >

Fuel Concept Selection Diagramme RoPax Design 25,000 t (~ 40 MW Installed Power) NPV Calculation of Life Cycle Costs OPERATION SCENARIO 2: 0% SECA, 100% IMO Tier II P HFO P BFO [USD/t] 600 550 500 450 400 350 Lower LCC for LNG Fuelled RoPax Design P BFO = 0,847 * P LNG + 38 $/t P HFO = 0,847 * P LNG + 24 $/t Limiting Line: BFO (0.5% S) HFO (3.5% S) Caustic Soda (50%) : 250 USD/t Lube Oil: 3,200 USD/t 300 250 Lower LCC for HFO or BFO Fuelled RoPax Design 200 200 250 300 350 400 450 500 550 600 P LNG [USD/t] MGO* Price: 510 USD/t (* for Pilot Fuel in DF-Engine) Assumptions 0.5% Global Sulphur Cap Only Time Period: 10 years Net Interest Rate: 7% BFO Price: 0,88 * MGO Price (used for case study LCC calculation) HFO / LNG Price Situation 01-2017 (used for case study LCC calculation) < 29 >

Agenda 1 Emission Compliance and Fuel Concepts Basic Considerations 2 RoPax Case Study Main Vessel Data and Operation Profile 3 Life Cycle Costs of Conventional vs. LNG Fuelled Vessel Design 3 The Fuel Concept Selection Diagramme 4 Conclusions < 30 >

CONCLUSIONS Expected Trends and Major Aspects for Fuel Type Solution Main Marine Market: SCR + HYBRID SCRUBBER versus DUAL-FUEL (especially after 2020 with 0.5%S limit on global level) MAIN FACTORS - Initial Costs (CAPEX) - Small Scale LNG Price vs. HFO Price (OPEX) LCC Key Driver! - Impact of Equipment Size & Weight on Revenue * (Loss of Cargo, Loss of Cabins / Public Spaces) * not considered in previous RoPax case study OTHER - Fuel Availability & Safe Bunkering Procedure - Reliability of Technology in the Field - Potential Scenario of Emission Legislation on Particulate Matters! < 31 >

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Contact Sokrates Tolgos Head of Sales Cruise & Ferry sokrates.tolgos@man.eu +49 821 322 3733 < 33 >