High-Tech Shipbuilding October 2017 - Macrosource Media · HIGH-TECH SHIPBUILDING MARKET REPORT...

Executive Summary

Industry Overview pg 1Introduction Market Size Market Share

Market Trends pg 6The Importance of Natural Gas as a Global Energy Source Tightening Environmental Regulations Renewables as a Global Energy Source Arctic Resource Exploitation Picks Up The Focus on Operational and Energy Efficiency, Safety, Performance

Applications pg 10Deep Sea Mining Polar Transit Offshore Wind Farms

Market Opportunities And Challenges pg 12

Company Overviews - Public pg 14Daewoo Shipbuilding & Marine Engineering Co., Ltd. (DSME) (KRX: 042660) Fincantieri S.p.A. (Borsa Italiana: IT0001415246) General Dynamics Corporation (NYSE: GD) Havyard Group ASA (OSE: HYARD) Hyundai Heavy Industries Co., Ltd. (HHI) (KRX: A009540) Mitsubishi Heavy Industries, Ltd. (MHI) (TYO: 7011) Samsung Heavy Industries Co., Ltd. (SHI) (KRX: 010140)

Company Overviews – Private pg 43Ulstein Group ASA Brødrene Aa AS Fjellstrand AS Fr. Lürssen Werft GmbH & Co. KG (Lürssen) German Naval Yards Holdings GmbH Gobbler Boats Ltd Incat Tasmania Pty Ltd. Meyer Werft GmbH & Co. KG Royal Huisman Shipyard B.V. Selfa Arctic AS Umoe Mandal AS

Key References pg 65

TABLE OF CONTENTS October 2017

EXECUTIVE SUMMARY

This report highlights and discusses the shipbuilders that have developed high-tech ships, notably within the last few years. It provides an up-to-date overview of the builders and their ships that stand at the forefront of technological development in the global shipbuilding industry. Based on research considering technical aspects of recent new builds, this report conducts a qualitative analysis of the companies and ships truly at the technological cutting-edge.

Focusing on builders of commercial and private vessels, 18 leading companies and many more high-tech products are examined in detail. There are no arbitrary criteria for a company’s inclusion; from small, highly-specialized private Norwegian shipbuilders to multinational Japanese and South Korean listed conglomerates with highly diversified product portfolios, the only benchmark is whether these companies produce high-tech ships.

Identifying those companies that are truly at the technological cutting-edge, this report also considers key trends and includes forecasts for the global high-tech shipbuilding market. Established players such as Germany, up-and-coming players such as China, the growing importance of natural gas (including LNG) as a global energy source, tightening global ship emissions regulations, the emergence of deep sea mining, and numerous other factors are identified and discussed as central characteristics and drivers of the market.

Senior Analyst Garvit Bhandari

Contact Details [email protected]

Published by Macrosource Media Pty Ltd

©Macrosource Media 2017

www.macrosourcemedia.com

ISSN: 2206-4052

HIGH-TECHSHIPBUILDINGMARKET REPORT

HIGH-TECH SHIPBUILDING MARKET REPORT

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INDUSTRY OVERVIEW

Introduction High-tech ships represent all possible ship types and have a theoretically unlimited range of applications. From cutting-edge battery-powered fishing boats to exceptionally efficient offshore windfarm support vessels and ground-breaking, almost half-kilometer long floating offshore LNG production and storage facilities, any type of ship serving any function(s) can, so long as it is cutting-edge, qualify as a high-tech ship. Bulk carriers, tankers, container ships, gas carriers, motorized or sail-powered superyachts, offshore platform supply vessels, pipe-laying vessels, cruise ships, car and passenger or pure passenger ferries, oil spill response vessels, dive support vessels, floating LNG storage and regasification units (LNG-FSRU), drillships, and hybrid combinations of these are just some of the ship types currently plying the world’s waterways, and for which a truly high-tech example or set of examples might exist. The transport of bulk goods such as grain or coal, of manufactured goods such as electronic devices, of people and their automobiles, the exploration and exploitation of offshore energy resources, the erection of offshore windmills, the laying of deep sea telecommunication cables, and the simple entertainment of owners and guests are some of the many possible applications of high-tech ships. Of the 18 leading shipbuilders examined in this report that produce high-tech ships, all of them are based in OECD countries. Four are based in Asia, including three in South Korea and one in Japan, one in the US, one in Australia, and the remainder in Europe. In Europe, six are in Norway, three in Germany, one each in Italy, the Netherlands, and the United Kingdom. The weight accorded to the developed world is of course unsurprising, given the general concentration of advanced industries and technologies in these countries. It also aligns with figures on the value of new order contracts concluded by shipyards worldwide. According to Clarkson Research Services, the shipbuilding industry is witnessing significant orderbook consolidation. There has been significant and well-reported consolidation in the shipbuilding industry over the last decade, with orderbooks having peaked in 2008. The total number of active yards has fallen from 860 in 2007 to 357 as of the start of September 2017, reflecting a lack of orders at many shipyards as well as significant restructuring and M&A activity. The largest drop has been seen in the bulker sector, which now stands at 97 yards compared to 293 yards in 2009. In the tanker sector (10,000+ dwt), the number of active yards on order has decreased by 55% since 2009 to currently stand at 89 shipyards. On a regional basis, the largest drop has been in China, with the number of Chinese yards with a bulker on order declining by 73% to stand at 50 at the start of July. As of September 2017, ~50% of the worldwide orderbook was secured by 24 yards (compared to 32 yards ten years earlier). The share of the Chinese orderbook in CGT terms accounted for by the top ten yards in China increased from 34% in 2007 to 43% in September 2017. Similarly, in Japan and Europe the top ten yards have seen their orderbook shares grow, from 49% and 30% respectively to 60% and 76% over the same period, with many European yards ceasing operations. Meanwhile, in South Korea, the top three shipbuilders, Daewoo Shipbuilding and Marine Engineering (DSME), Hyundai Heavy Industries (HHI), and Samsung Heavy Industries (SHI), have seen their share of the Korean orderbook grow to 92%, up from 70% ten years earlier. Global new orders shrunk dramatically in 2016 by more than 75% compared to 2015. China remains the main contractor with 215 vessels accounting 3.3 million CGT. In CGT terms, 28 states of the European Union plus Norway were the second main contractor with 2.7 million CGT. However, in number of vessels contracted, Europe stood at just 155 suggesting vessels ordered in Europe are of a higher complexity and value. Demand for tankers,


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containerships and bulkers has plunged due to the existing oversupply of vessels at sea. On the other hand, demand for passenger ships and mainly cruise ships has almost doubled YOY in 2016. Cruise ships and passenger ships comprise the largest percentage of new orders received by EU28 plus Norway during 2016. Compared to China, which saw high percentage from bulk carriers and tankers. The value of new orders contracted by European Union plus Norway stood at ~$18 billion in 2016, representing ~52% of the global share. While China received just $7.4 billion in terms of value, representing ~21% of the overall market. The orderbook data from Clarkson Research Services shows a still-overwhelming reliance of China on producing simpler ship types such as bulk carriers and tankers. German Companies Among the Leaders; Chinese Companies Lag Behind Since the global financial crisis of 2008, the German shipbuilding industry has undergone a radical transformation from one primarily focused on building cargo/freight ships to one in which passenger ships, and in particular cruise ships and yachts, have taken precedence. According to the German Shipbuilding and Ocean Industries Association (Verband für Schiffbau und Meerestechnik), in 2007 cargo ships represented about 70% of all CGT produced in Germany. In 2014, this figure was 0%. As of September 2015, the value of the vessels ordered at German shipyards amounted to €12.5 billion. Of which, 64% were passenger ships, 27% yachts, 0.2% ferries and 1% RoRo ships. The vessels also include technologically sophisticated ships such as marine research ships and servicing ship for the offshore wind industry. With the Asian giants producing the world’s supply of bulkers, tankers, containerships, and gas carriers, Germany, like most other western nations in recent years, had a very small order backlog of these ships as of September 2015. The Chinese shipbuilding industry, on the other hand, is still geared towards the production of relatively less sophisticated vessels, such as bulk carriers and tankers. In the first half of 2016, according to Clarkson Research data, China accounted for 24% of the worldwide tanker orders, 50% bulkers, about 40% container ships and about 45% of general cargo ships. The order book for high value and complex vessels remains much lower compared to Europe. According to orderbook data from Clarkson Research Services, bulk carriers accounted for about 35%-36% of Chinese shipyards’ orderbook value as of 1 December 2015. Tankers were in second place with about 15%-16%, and Containerships in third with about 13%. Gas carriers mustered 5%-6% of the total value. However, China is targeting a 40% share of the global high-end vessel market and 35% of the global offshore market for its shipbuilders by 2020, through an acceleration of overseas expansion. The Chinese cruise market is set to reach 5.6 million domestic cruise passengers by 2024, according to 2017-2018 Cruise Industry News Annual Report. Domestically, China State Shipbuilding Corporation has targeted its first new build launch for 2022, followed by another ship in 2023. German shipyards have traditionally invested a high proportion of their available capital into research and development (R&D). According to the OECD Council Working Party on Shipbuilding, between 1995 and 2007 the German shipbuilding industry consistently had the highest R&D intensity out of the advanced shipbuilding nations South Korea, Germany, Japan, and Norway. The German Federal Government also fosters R&D in the domestic shipbuilding industry via various programs; for instance, through the program “Innovativer Schiffbau sichert wettbewerbsfӓhige Arbeitsplӓtze” (Innovative shipbuilding secures competitive jobs). The programme had a federal budget of EUR 25 million for 2016. The federal government also oversees another R&D programme namely “Next-Generation Maritime Technologies”. Although the programme was originally designed for a period from 2011-2015, but now has been extended till 2017. The programme is aimed at helping German shipbuilding companies to develop next-gen technology to improve their competitiveness in the global market. Research areas covered under the programme include ship technology, production of maritime systems, shipping and ocean engineering. According to the German Shipbuilding and Ocean


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Industries Association, as of 2014/2015 this support had enabled innovations with a total value of around €775 million. Chinese shipyards have been much less active in R&D investment. In December 2015, Jin Peng, Secretary General of the China Association of the National Shipbuilding Industry (CANSI) identified a systemic lack of R&D investment and a subsequent dearth of in-house proprietary designs compared to shipyards in South Korea, Japan, and in particular in Europe as a key shortcoming of the Chinese industry. Nonetheless, it must be noted that China does have programmes and regulations in place to encourage R&D. For instance, as part of the modernization requirements set out in the Issue 55 directive issued by the Chinese Ministry of Industry and Information Technology (MIIT), Chinese shipyards are required to maintain a R&D department and to invest at least 2% of revenues in R&D. One measure of the success of the greater emphasis on industry innovation in China ¾ the annual number of shipbuilding industry-related patent applications at the Chinese State Intellectual Property Office (SIPO) ¾ has shown rapid growth in recent years. German shipbuilders also benefit from the strongest maritime supplier industry in the world. German maritime supplier firms (“Zulieferer”), numbering over 2,800 companies strewn across the length and breadth of Germany, command a worldwide market share in terms of sales of over 20% (2014-15). They are thereby the worldwide leaders ahead of second-placed Japanese suppliers. Furthermore, around 40% of the turnover of German maritime supplier firms is earned domestically ¾ indicating their strong ties with domestic shipyards. According to the German Shipbuilding and Ocean Industries Association, only around 30% of German shipyards’ purchases take place outside of Germany. Companies such as Bosch Rexroth, MAN Diesel & Turbo, Wӓrtsilӓ SAM Electronics, and Siemens are all global leaders within their respective domains, while together covering the spectrum of shipyards’ needs (propulsion systems, electrical systems, cargo handling equipment, etc.) Furthermore, these German suppliers are complemented by global leaders based in other European countries (e.g. Rolls-Royce Marine, UK; Kongsberg Maritime, Norway). According to BALance Technology Consulting in a report funded by the European Commission, a total of 125 European supplier companies in 2014 held about 40% of the global supplier market. A strong supplier industry provides the conditions for the construction of high-tech ships; high-tech ships are after all to a large extent complex, well-executed agglomerations of advanced components. The German Shipbuilding and Ocean Industries Association estimates that about 70-80% of the value-added of a new vessel today is contributed by supplier components. This more or less concurs with an EU Commission-funded report by ECORYS Research and Consulting from 2009, which put the figure at 50-70% for ships in general and 70-80% for “more complex ships”. The Chinese maritime supplier industry is comparatively underdeveloped. According to the China Association of the National Shipbuilding Industry (CANSI), Chinese shipyards source about 70% of their manufactured equipment needs from domestic suppliers, compared to about 80% and 90% for South Korean and Japanese yards, respectively. This figure may also be overly-optimistic; a report on R&D investment in the Chinese maritime industry by the Danish Ministry of Foreign Affairs and the Ministry of Higher Education and Science from August 2014 put the domestically-produced installed equipment figure at less than 40%. Significant for the future of the Chinese supplier industry, however, is that many leading supplier companies from outside China ¾ including German/European suppliers ¾ have established production facilities in China to adapt to the continuing shift in global ship production towards China (and Asia in general). Examples include Schottel of Germany (manufacture of propulsion components in Suzhou) and Rolls-Royce of the UK (manufacture of rudders, azimuth thrusters, etc. at facility in Nanhui). The growing number of product type-approvals issued to Chinese supplier companies (including to companies headquartered elsewhere but with operations in China) is also of note. The German Shipbuilding and Ocean Industries Association identifies technological competence, high quality standards, and continual efforts in innovation as the hallmarks of German shipbuilders, and those which have helped them to neutralize the cost disadvantages in comparison to Asian competitors. The current emphasis on specialized shipbuilding ¾ for instance cruise ships, mega yachts ¾ clearly demonstrates the industry’s


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receptiveness to the changing market environment. Energy efficient and environmentally-friendly ships are focal points within the German industry. Germany is a specialized, high-tech-oriented shipbuilding nation. The Chinese shipbuilding industry cannot be summarized in the same way. It is at a comparatively less developed stage. In the Chinese State Council’s “Implementation Plans on Accelerating Structural Adjustment and Promoting Transformation and Upgrading of the Shipbuilding Industry (2013-2015)” of 31 July 2013 the State Council noted that though the Chinese shipbuilding industry had displayed rapid growth in recent years, there was a “low innovation capability in China’s shipbuilding industry” and “weak high-end products”. Nonetheless, this state of affairs is beginning to change; the future prospects of China as a high-tech shipbuilding nation are considered in the market forecasts section. The Maritime Supply Sector’s Central Role in High-Tech Shipbuilding The high-tech shipbuilding industry is heavily reliant on advanced supplier industries for the systems and components that form the building blocks of cutting-edge vessels. Companies such as Corvus Energy of Canada and Siemens of Germany are amongst the key suppliers of some of the most advanced ships of today. Corvus Energy and Siemens are very active in the area of fully-electric vessels; Corvus Energy supplied the battery modules and Siemens developed the propulsion systems for two ground-breaking vessels featured in this report: Ampere (Fjellstrand) and Karoline (Selfa Arctic). Corvus Energy provides purpose-engineered energy storage solutions (ESSs) ¾ industrial lithion-ion battery systems ¾ for marine, oil and gas, and port applications. The company claims that more than 90% of large commercial hybrid vessels use a Corvus ESS. Siemens was a key industry partner for both Fjellstrand and Selfa Arctic in the development of their vessels. As well as working with Fjellstrand on the development of the propulsion system for Ampere, for instance, Siemens developed and installed a portside recharging solution for the vessel. The number of companies active along the supply chain of high-tech shipbuilders is very large, with Siemens and Corvus Energy being merely two that have played key roles in the development and realization of high-tech vessels. Companies such as GTT of France (membrane containment systems for LNG) and Wӓrtsilӓ of Finland (LNG regasification units, main engines, waterjets; among other products) are two other very prominent names within a complex network of global supplier companies. In attempting to identify distinguishing characteristics among the multitude of actors, perhaps one unifying feature stands out: as per the high-tech end products themselves, the advanced components and systems that go into cutting-edge vessels hail to a decisive extent from companies based in OECD countries. It should be noted that high-tech shipbuilders do also source advanced technologies from other shipbuilders. Isla Bella, the first LNG-powered containership in the world, built by General Dynamics NASSCO of the United States, employs South Korean shipbuilder DSME’s patented LNG fuel supply system. DSME was also in charge of the overall design of the vessel (with input from NASSCO and other actors). Isla Bella is featured in this report.

Market Size The number of high-tech shipbuilders worldwide represents a very small percentage of the total number of shipbuilders globally. In each shipbuilding nation, only an elite group of companies can claim to produce high-tech ships, or there are no high-tech shipbuilders at all. Only a handful of companies globally have produced truly cutting-edge ships. Taking Germany as an example, three German shipbuilders can be characterized as builders of high-tech commercial and private vessels. According to the German Shipbuilding and Ocean Industries Association, however, there were around 60 ship and boat builders in Germany in 2015 (with at least 50 employees). In South Korea, the OECD Council Working Party on Shipbuilding recorded 80 shipbuilders as of 2013. The nation’s big three shipyards, Samsung Heavy Industries, Daewoo Shipbuilding & Marine Engineering and Hyundai Heavy Industries, suffered a combined loss of over eight trillion won in 2015.


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While Korean shipyards are struggling as a result of falling orders, expected increase in global oil prices to over $50 per barrel in 2017 and 2018 (according to EIA) should come as a relief for the beleaguered shipbuilders. In October 2016, South Korea’s finance minister stated that the government planned to support orders of 250 or more vessels by 2020 to help local shipbuilders. The number of South Korean high-tech shipbuilders represented in this report stands at three. Norway has a comparatively large number of shipbuilders producing high-tech ships, with six Norwegian shipbuilders listed in this report. The Norwegian Labour and Welfare Administration counts 75 yards overall operating in new builds and repair as of 2015 (with 25 pure new build yards). For China, the world’s largest shipbuilder, this report lists no high-tech shipbuilding companies. The regional distribution of high-tech shipbuilders is weighted heavily in favor of Europe. Twelve of the 18 companies in this report are European shipbuilders. This figure is even more significant considering the aforementioned fact that the 28 states of the European Union plus Norway received about ~27% of worldwide new shipbuilding orders measured by CGT in 2017, below that of China at ~33%. Also to note that Cruise ships and passenger ships comprise the largest percentage of new orders received by EU28 plus Norway during 2016. Asia, as the next most significant high-tech shipbuilder, with four yards identified in this report, produces, however, a much greater share of worldwide tonnage. Japan and South Korea alone consistently receive about 40-50% of worldwide shipbuilding orders measured by CGT on an annual basis. However, in 2016, the countries a drop in the new orders which stood at ~35% of the worldwide shipbuilding orders. Europe is a true outperformer in cutting-edge shipbuilding.

Market Share There is no direct correlation between the size of a high-tech shipbuilding company and how successful it is in developing new high-tech ship models. Norway’s Ulstein Group, for example, is a specialized shipbuilder with under 1,000 employees focused on constructing ships for the offshore industry, yet despite its limited size Ulstein produces three different high-tech ship models. Italy’s Fincantieri, which has over 20,000 employees and produces everything from ocean-going cruise ships to luxury mega-yachts and naval vessels, is represented with one high-tech ship (from its VARD subsidiary). By focusing on their niche, small players can be just as, if not more successful, than larger players in developing new cutting-edge products. The resource advantage of larger companies, however, means that the best among them are able to produce cutting-edge ships across a broad range of ship types, which is simply not possible for smaller builders. South Korea’s Daewoo Shipbuilding and Marine Engineering (DSME), one of the world’s three largest shipbuilders, has ships as varied as a platform installation/removal and pipe-laying vessel, arctic LNG carriers, and (DSME-designed) LNG-powered container ships. Although they may be able to develop new high-tech ships within a broader vessel category, none of the smaller builders mentioned in this report are able to match the breadth of vessel categories with which companies like DSME are able to produce.

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MARKET TRENDS The Importance of Natural Gas as a Global Energy Source A central driving force in high-tech shipbuilding is the growing importance of natural gas as a global energy source. According to the BP Energy Outlook 2035, the percentage contribution of gas to the total worldwide supply of energy has steadily increased since 1965, from around 16-17% in 1965 to around 23-24% in 2013. The contributions of the other two largest fuel sources meanwhile, oil and coal, have decreased, from around 40% each in 1965 to around 30-32% each in 2013. The BP Energy Outlook 2035 forecasts that by 2035 the three major fossil fuels will each contribute about 26-28% to the worldwide energy mix, with no single dominant fuel. Gas will be the fastest growing fuel (at 1.7% per annum) overtaking coal to become the second largest fuel source by 2035. As a further important development, BP forecasts that global LNG supply and LNG demand will grow significantly by 2035, with the current predominance of gas imports supplied via pipeline (at about 20% of total gas consumed, compared to about 10% for LNG) to be overtaken by gas imported in LNG form (each at about 16% of total gas consumed, however). The growing importance of natural gas as a global energy source has a number of implications for shipbuilding, and in particular for the development of ships within the high-tech category. One is the need for new ships capable of exploiting large gas deposits located (far) offshore. Drillships with new and improved capabilities and ships capable of producing, storing, and offloading gas at remote offshore locations are some of the new types of ship in demand. Shell’s FLNG (liquefied natural gas-floating production storage offloading) vessel Prelude, currently being completed at Samsung Heavy Industries shipyard in South Korea and likely to start production in 2018, is an example of a high-tech response to the current requirements of the gas industry. An enormously complex and ground-breaking vessel, the contract value is listed by Samsung Heavy at US$6 billion. Meanwhile, Petronas FLNG facility built by DSME is already operations and the company is looking to build second FLNG facility by 2020. The increasing trade in natural gas, in particular in LNG form, means that new types of ships designed to facilitate this trade are also required. Though LNG carriers have been around for some time, the recent rapid growth in LNG trade, and the prediction that it will only continue to grow, means that innovative solutions in the transport of LNG are presently sought after. One such solution is Daewoo Shipbuilding and Marine Engineering’s series of Arctic LNG carriers. Featured in this report, these 300m-long, US$300 million+ vessels are designed to service the Yamal LNG project in Russia. They are the first LNG carriers in the world built for year-round operation in the Arctic. The first of such vessels was delivered in March 2017 and completed its maiden voyage in August 2017. The re-gasification of LNG is another important aspect of the LNG trade entailing new shipbuilding opportunities. Hyundai Heavy Industries’ series of LNG-FSRU (liquefied natural gas-floating storage regasification unit) vessels seek to plug demand in this area by offering an economically-efficient means of re-gasifying LNG delivered via an LNG carrier. The first of these vessels, Independence, is featured in this report; at delivery in February 2014, it was the first purpose-built LNG-FSRU in the world. A further implication of natural gas’ growth as an energy source is that the idea of powering ships with LNG ¾ as an alternative to the traditional fuel sources of heavy fuel oil or marine diesel ¾ is gaining significant traction. According to classification society DNV GL, as of September 2015 about 70 vessels of all sizes worldwide were powered by LNG; the figure was 42 two years previously, and may pass 1,000 by 2020. With increased LNG production and a predicted slackness in demand, prices for LNG are forecast to remain relatively stable, which contrasts with volatile oil prices. Although problems such as a lack of LNG bunkering infrastructure and higher total ship prices remain, fuel price advantages and the prospect of more developed bunkering infrastructure in the future are important factors encouraging the use of LNG. Perhaps the most important driving factor for LNG as ship’s fuel, however, is increasingly strict worldwide environmental regulations. The International Convention for the Prevention of Pollution from Ships (MARPOL), Annex VI, first adopted in 1997 and amended since, limits, among other things, the main pollutants contained in ships’ exhaust gas, including


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sulphur oxides (SOx) and nitrous oxides (NOx). Chapter 4 of Annex VI also introduces two mandatory energy efficiency mechanisms ¾ the Energy Efficiency Design Index (EEDI) for new ships and the Ship Energy Efficiency Management Plan (SEEMP) for all ships. With Annex VI having been adopted by countries representing the vast majority of the world’s tonnage, it is now up to shippers to find ways of complying with the emissions and efficiency standards, which are expected to continue to strengthen up until 2020. In geographic areas where MARPOL sets particularly strict standards, such as in the North American Emission Control Area (ECA), the use of LNG as ship’s fuel appears to be one of the only ways of meeting the regulatory requirements. While higher grade marine diesel and technology such as exhaust scrubbing offer alternatives, the potential shortcomings of these options in regards to price and other factors means that LNG ¾ which almost eliminates SOx and NOx emissions ¾ remains a strong option. Thus, in anticipation of tightening NOx standards in the North American ECA for 2016, the North America-based shipper TOTE Inc took delivery in 2015 from General Dynamics NASSCO of the world’s first LNG-powered containership, Isla Bella (featured in this report). As of March, the number of LNG powered ships in-service and on-order combined touched 200. Recently, Sovcomflot, Russian ship operator, confirmed orders for four ice-class Aframax tankers of 114,000 dwt powered by LNG at Hyundai Samho Heavy Industries. High-tech LNG-powered ships such as LNG-ready container ship Barzan, high-speed ferry Francisco (built by Incat, Australia), and the first LNG-powered ocean-going cruise vessels in the world, to be built by Meyer Werft, are all featured in this report. Tightening Environmental Regulations Increasingly strict environmental regulations are of course a more general driving force within the high-tech shipbuilding sector ¾ not only for the development of cutting-edge LNG-powered vessels. While the use of LNG as a fuel may be one of the only viable options for ocean-going and long-distance vessels dependent upon an independent fuel supply, it is also becoming increasingly accepted that hybrid or even fully-electric, battery-powered vessels offer a means of meeting strict environmental standards over more limited distances. According to DSME, the number of LNG fuelled vessels from 2020 to 2025 is expected to reach about 3,200 units. Around 25% of vessels could be LNG fuelled vessels by 2025. Norway’s maritime engineering firm, Kongsberg, along with Yara International, a chemical company, is planning to launch all-electric and autonomous cargo ship by 2018. Further, vessels such as the 80m long roll-on/roll-off ferry Ampere ¾ the world’s first large fully-electric vessel ¾ and the 11m long coastal fishing vessel Karoline ¾ the world’s first battery-driven fishing vessel, delivered in 2015 ¾ are prime examples of highly innovative, battery-based responses to more stringent environmental regulations and increasing environmental consciousness. It should be noted that both vessels have been built by Norwegian shipbuilding companies ¾ Fjellstrand and Selfa Arctic, respectively. That Norwegian companies are leaders in the battery-powered arena is partially explained by the fact that The North Sea and Baltic Sea are both ECAs. Havyard is another important Norwegian company incorporating (hybrid) battery technology into its vessels. Renewables as a Global Energy Source Renewable energy sources, and in particular offshore wind power, are also driving cutting-edge shipbuilding innovation. According to the BP Energy Outlook 2017, in 2015 about 3% of total energy consumed worldwide was provided by renewable sources. The BP Energy Outlook 2017 forecasts that by 2035 the renewable share of the world energy mix will grow to about 10%, thereby overtaking nuclear and hydroelectricity which are expected at 5% and 7% respectively. Although still far behind the three dominant fuels oil, coal, and gas, the prospects for renewables are therefore very strong. Furthermore, wind power represents an important part of the overall renewable energy mix, with leading energy industry research company Douglas Westwood expecting capital expenditure in the offshore wind energy market of about €24 billion per annum between 2015 and 2024.


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With this growth comes demand for new and improved vessels to perform functions such as wind turbine installation, personnel transfer, and cable-laying. Leading shipbuilders are already seeking high-tech solutions to these demands. Norway’s Umoe Mandal launched a 27.4-meter-long personnel transfer vessel in February 2015 which brings cutting-edge improvements in wind farm accessibility. Also from Norway, Ulstein’s design for the Siem Moxie, built by compatriot Norwegian yard Fjellstrand and delivered in 2014, also brings significant improvements in accessibility, while prioritizing crew safety. Arctic Resource Exploitation Picks Up The opening up of the Arctic in recent years as an area for resource exploitation, including of natural gas, has also driven some important innovations in the shipbuilding industry. Two shipbuilding firms particularly active in Arctic-related business are South Korea’s Samsung Heavy Industries (SHI) and Daewoo Shipbuilding and Marine Engineering (DSME). DSME is currently constructing a series of 15 300m-long, ice-breaking LNG carriers to service the Yamal LNG project in the Russian Arctic. The first of which named Christophe de Margerie arrived at the Yamal export terminal in March 2017. Operated by Russian shipping company Sovcomflot, the vessel undertook its maiden voyage in August 2017 carrying gas from Hammerfest in Norway to Boryeong in South Korea. SHI, meanwhile, has been active in constructing cutting-edge Arctic Ocean drillships and ice-breaking oil tankers. The Focus on Operational and Energy Efficiency, Safety, Performance The perennial demands of increased operational and energy efficiency, safety, and performance remain key driving forces for high-tech shipbuilding, alongside the current trends of the growing importance of natural gas and renewables in the global energy mix, stricter environmental regulation, and the opening up of the Arctic to resource exploitation. Kongsberg Maritime has introduced a new “Integrated Vessel Concepts”, which leverages the power of integration between different systems of the vessel to produce gains in operational efficiency and reduced life-cycle costs. The German shipbuilder, Fassmer, is using the concept to build a LNG powered research vessel named Atair II for the German Federal Maritime and Hydrographic Agency (BSH). It is scheduled for delivery in 2020. Vessels such as the 382m-long, 124m-wide oil platform installation/removal and pipe-laying vessel Pioneering Spirit (formerly Pieter Schelte) and the 8.85m-long Gobbler Offshore 290 OSRV, though vastly different in function, are both leading examples of shipbuilders’ responses to demands for increased operational efficiency. Pioneering Spirit, built by DSME and delivered in October 2014, was conceived in response to oil company Shell’s need to remove the 24,000-ton topside of its Delta oil platform in the Brent oil field. It is the first ever ship designed to install and remove large topsides of oil platforms in a single lift. Asides from the operational gains achieved via single-lift capacity – time-consuming methods of traditional platform removal, such as reverse installation, are for instance avoided – the vessel brings further gains via other innovations, such as the capacity to install pipelines of previously unmanageable weight. Worker safety is also served by this vessel ¾ single-lift operation means less exposure of workers to complex (de-)construction procedures. The Gobbler Offshore 290 OSRV, developed and built by niche shipbuilding company Gobbler Boats Ltd of England, is a vessel which brings new and intricate solutions to the problem of oil spills. With radical oil-skimming technology and flexible deployment options, this vessel promises massive potential gains in the efficiency of oil spill cleanup operations. Crew safety and energy efficiency also benefit. Improvements in a vessel’s energy efficiency are of course in constant demand, with shippers wanting to keep fuel costs as low as possible. Shipbuilders vaunt the efficiency gains of their new products achieved via methods such as improved hull design with decreased wave resistance, more efficient propeller designs, and aerodynamically-optimized superstructures. Within the maze of PR material extolling the percentage-gains in efficiency of new ships of all types, some vessels stand out ¾ bringing truly cutting-edge innovations to the area of ship efficiency. The bulk carrier Harvest Frost, delivered by Japan’s Mitsubishi Heavy Industries in 2014, and two offshore wind farm


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support vessels built by Norway’s Ulstein to its SX175 design (one delivered in 2016 and other in 1Q17), are two such vessels. Performance, in the sense of previously unattained levels of speed, comfort, luxury, and sheer size, is a particularly relevant criterion for ships built for private use. Demands for increased performance have led to some cutting-edge developments in mega-yacht and other ship type designs. Included are leisure vessels built by established, globally-renowned companies, such as Nobiskrug and Larsson of Germany, but also those constructed by potentially less well-known ¾ though equally innovative ¾ companies, such as Norway’s Brødrene Aa.


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APPLICATIONS Deep Sea Mining Deep sea mining is an emerging sector that is likely to have significant implications for high-tech shipbuilding. While shallow water mining for gold, tin, diamond, and other valuable deposits is a decades-old practice, Canada’s Nautilus Minerals plans to launch the world’s first commercial deep sea mining project, “Solwara 1”, off the coast of Papua New Guinea in 1Q 2019. Construction of the deep sea mining machines was completed in late 2015, and the company has acquired the necessary licenses for the venture. The significance of this project as a pilot for an entire potential industry cannot be understated. Both companies and nations hold exploration licenses in national and international waters, and have a keen interest in exploiting these very rich deep sea resources. China and Korea, for instance, hold exploration licenses in the international waters of the Indian Ocean, Russia and France on the Mid-Atlantic Range, and Germany in the Pacific and Indian Oceans. The Maritime Coordinator of the German Federal Government wrote in a position paper from October 2015 in reference to deep sea mining that “minerals from the ocean can contribute to securing Germany’s supply of important raw materials”. Also in October 2015, Germany signed a Memorandum on Deep Sea Mining Cooperation with France, with pilot mining tests part of the agreed course of action (subject to the results of a feasibility study). Most significantly for high-tech shipbuilding, construction of the world’s first bespoke deep sea mining vessel ¾ as the axis of the Nautilus Minerals project ¾ has been underway at China’s Fujian Mawei Shipbuilding Ltd since September 2015. The vessel is scheduled to be delivered in 2018. Designed by SeaTech Solutions International of Singapore and due for delivery late 2017, this 227-meter-long vessel should set new benchmarks in terms of deploying massive and novel mining machinery to the sea floor, in receiving and processing minerals, and in offloading them. The vessel will no doubt serve as a cutting-edge reference point for deep sea mining vessels of the future, whether designed and built by existing high-tech shipbuilders or by yards in China and elsewhere. Polar Transit Asides from resource exploitation, the steady reduction in polar sea ice is also opening up possibilities for high-tech shipbuilders in the areas of polar shipping and tourism. Ever-shrinking levels of average sea ice coverage, particularly in the summer months, means that shippers are showing more interest in the potential savings offered by Arctic shipping routes. The American Bureau of Shipping (ABS) identifies distance savings of up to 35% compared with traditional trading routes utilizing the Suez and Panama Canals. Factors such as large fees charged by Russia for transiting waters along the Northeast Passage/Northern Sea Route, the unpredictability of yearly sea ice coverage, and the necessity of ice-breaker escort continue however to act as significant impediments to the more regularized use by shippers of the still underdeveloped Arctic routes. Nonetheless, shipowners, classification societies, international regulatory bodies, and other actors are all working on the assumption that traffic will continue to increase in the region. In 2014 and 2015, the International Maritime Organization (IMO) adopted the safety and environmental parts of the new International Code for Ships Operating in Polar Waters (IMO Polar Code) which came into force at the beginning of 2017. The safety provisions of the code will apply to ships constructed after January 1, 2017. For ships constructed before January 1, 2017, the safety provisions of the code will come into effect beginning 2018. The environmental provisions of the Polar Code apply both to existing ships and new ships. The binding regulations of the new Code cover areas such as polar-specific ship design, construction, and onboard equipment and machinery.


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These new regulations ¾ and the challenges of Arctic shipping in general ¾ offer to high-tech shipbuilders the opportunity to design and manufacture new, cutting-edge products to meet shippers’ needs. In February 2016, the ABS announced it had signed a Cooperation Agreement on Trans-Arctic Shipping Development with China’s COSCO shipping group, including the provision of jointly developing ice-classed vessels for trans-Arctic shipping. The COSCO group includes shipbuilding subsidiaries, and thus it will be interesting to see whether COSCO in cooperation with ABS, emerges as a leading player in the design and construction of new Arctic shipping vessels. Cruise operators have in recent years significantly increased their Arctic (and Antarctic)-region offerings, with continued likely growth in this area also presenting opportunities to those shipbuilders looking at providing passengers with an increasingly immersive polar experience. Offshore Wind Farms The global offshore wind industry is growing at a significant pace and the total market is projected to reach ~$453 billion by 2026, according to the association Subsea UK. High-tech ships are being used for setting up wind farms as the world pushes towards sources of clean and renewable energy. A recent example is the installation of Block Island wind farm off the coast of Rhode Island in the US. Fred Olsen shipping company’s Brave Tern was used for the task. In December 2016, the projected started spinning out electricity. The project is being looked at as the beginning of a boom in offshore wind along the northeast coast of the U.S. In the US, 23 offshore wind projects with a total capacity of producing 16 gigawatts (GW) (equivalent to 16 nuclear power plants), are currently anticipated to be launched. Over the past year, Denmark’s oil and gas giant Dong Energy, Norway’s Statoil and Shell have shown interest in leasing areas off the coast for developing wind farms. According to the US Department of Energy, offshore wind farms will produce 86 GW of power by 2050, about 7% of country’s current electricity demand.


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MARKET OPPORTUNITIES AND CHALLENGES Asia offers tremendous opportunities for the high-tech shipbuilding industry. China which is already the world’s largest shipbuilder is expected to become a leader in cutting-edge ships as well. Factors such as government support, presence of considerable number of shipbuilders, skilled labour force and technical know-how will help drive growth in the country. Asia Presents Significant Opportunity for High-Tech Shipbuilders The future may well see companies from other countries, especially from China, break into the high-tech scene. Factors such as the requirement of advanced supplier industries, heavy investment in research and development, a solid foundation in advanced shipbuilding know-how, and a (highly) skilled labor force means that the barriers to entry remain high however. China’s chances are perhaps the best of any developing nation. As the world’s largest shipbuilder, and with an already developed capacity to independently design and build more advanced ship types ¾ including within the demanding offshore industry (FPSOs, drillships, etc.) ¾ leading Chinese companies are close to independently producing some cutting-edge products. China’s substantial government support is a driving force behind China’s potential as a high-tech shipbuilding nation. Among government initiatives are extensive government programs, such as the Chinese State Council’s Made in China 2025 industry upgrade initiative, shipbuilding modernization requirements mandated by Issue 55 of the Chinese Ministry of Industry and Information Technology (MIIT) and the ministry’s “white list” and “enterprise list” of shipyards singled out for preferential governmental treatment on the basis of conformity with government standards. These efforts are all aimed at advancing the domestic shipbuilding and offshore industries and open up financing options for compliant domestic shipbuilders and for shipowners looking to buy from Chinese yards. There are already some promising signs within the design and (future) product portfolios of a number of Chinese shipbuilders. Dalian Shipbuilding Industry Company Ltd (DSIC), for instance, was granted the world’s first Approval in Principle (AiP) for an LNG-fueled very large crude carrier (VLCC) design in late 2015. Although classification society DNV GL developed the initial concept, DSIC progressed the concept to a market-ready stage. DSIC is in general a very strong candidate for the first Chinese company to break into high-tech shipbuilding. In April 2017, China’s first homegrown aircraft carrier constructed by DSIC was launched. DSIC describes itself as “the flagship of China’s shipbuilding industry” and “the only domestic shipbuilding enterprise group that boasts the ability to provide ship life cycle services, including product R&D, product design, construction, ship repair, conversion, and ship scrapping.” Boom in Chinese cruise ship construction – A big opportunity area Another promising area of opportunity, certainly for the longer term, is cruise ship construction. According to International Association of Cruise Lines (CLIA), China could be the largest cruise ship market by 2030. In 2015, about ONE million Chinese boarded a ship, a number which is expected to rise to 4.5 million by 2024. The number will still be far below the 11 million Americans who cruise every year. China’s government has earmarked cruise shipbuilding as a major objective in its “Made in China 2025” program to upgrade its domestic manufacturing and support jobs at its shipyards, as domestic demand for cruise trips increases 30% a year China’s own ship builders and operators are entering the cruise market. Shanghai Waigaoqiao Shipbuilding Co., a subsidiary of China State Shipbuilding Corp., is working with Italian cruise shipbuilder Fincantieri SpA to build two vessels, worth $1.5 billion, with an option to order four more. The ships will be delivered to the JV announced in October 2015 between China State Shipbuilding Corporation (CSSC), China Investment Corp (CIC) and the world’s largest cruise ship operator, Carnival Corporation. The first ship with a capacity to carry 4,000 passengers will be delivered by 2023.


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Although the deal has immense potential to advance the domestic shipbuilding/maritime industry, including the supplier industry, it is foreseen that, for these ships at least, Italy’s Fincantieri will oversee design, while Lloyd’s Register of Britain will handle classification/quality control. Nonetheless, the lessons learned and advances made during construction of these first ships may put China in a leading position in cruise ship construction in the future, and could potentially have implications outside of cruise ship construction such that the chances of breaking into the high-tech shipbuilding market in general rise. Other Chinese yards are following suit as well. In March 2017, China Merchants Industry Holdings won a deal to build up to ten vessels for Miami-based SunStone Ships, and Xiamen Shipbuilding Industry Co won a $222 million order from Finland’s Viking Line in April 2017 for a 2,800-passenger cruise ferry. In addition, there has been rising interest from international giants such as Royal Caribbean Cruise Line, Norwegian Cruise Line to tap into the fastest growing cruise market. The Growth of “Smart Ships” – Another key area of growth Smart Ships is another rising area of opportunity for high-tech shipbuilders. China is already developing a digitized “smart” ship, due to begin construction this year. In December 2015, CSSC announced details of the country’s first so-called “smart” ship. A ship focused on providing operational feedback and planning via digital systems, such as sea route planning based on hydrological conditions and engine room status, the degree to which the ship will be digitized could take the “smart” ship concept to a new level. Co-developed with classification society Lloyd’s Register, construction is expected to be completed by 2017. Hyundai Heavy Industries (HHI) of South Korea, for instance, has announced collaboration with global consulting giant Accenture on designing a so-called “connected smart ship”. Due for initial deployment in 2020, it will be interesting to see how smart ships from established high-technology players such as HHI compare to those being developed in China. Challenges For industry as a whole, mounting debt problem remains a challenge. Profitability levels are low and debt remains at unsustainable levels for some companies. The industry has also witnesses a series of bankruptcies in recent times. Further, complicated construction processes, strict safety regulations, and stringent environmental standards all represent significant challenges for the players.


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COMPANY OVERVIEWS - PUBLIC

Daewoo Shipbuilding & Marine Engineering Co., Ltd. (DSME) (KRX: 042660) Investor information: http://www.dsme.co.kr/epub/iv/sr/investment0101Q.do Headquarters: Seoul, South Korea Address: 3370, Geoje-daero, Geoje-si, Gyeongsangnam-do, South Korea Phone: 82-5-5735-2114 Established: October 11, 1973 (South Korea) Key Executives: Sung Leep Jung (President and CEO) Youljung Kim (Finance Director) Number of Employees: 10,220 direct, 19,337 subcontracted production employees, 29,557 total employees (as of 31 July, 2017). Number of Shareholders: N/A (as of 31 July, 2017, DSME’s largest shareholders with over 5% were: Korea Development Bank 78.6%, KEB Hana Bank 10.6%). Market Capitalization (mil.): Currently delisted Reporting Period: Fiscal Year Ended December 31st Email Notification for Company Results: N/A Company Overview Daewoo Shipbuilding & Marine Engineering (DSME) is a publicly-listed South Korean company (suspended from trading until September 22, 2017) founded in 1973, engaged primarily in the shipbuilding (commercial and naval), offshore plant, and power plant businesses. In addition, it majority-owns businesses operating in the shipping, wind power, construction, food, hotel, leisure, education, and real estate areas. Founded as a shipbuilding company, DSME has since diversified into the abovementioned business divisions. For the year 2016, as of 31 March 2017, the company’s sales split between its (commercial) shipbuilding and offshore plants divisions ¾ its primary sources of revenue ¾ was dominated absolutely by commercial ships, these accounting for 72.1% of sales value, with 9 units ordered at a total of US$1.11 billion. However, the backlog as of July 31, 2017, was thus weighed in favor of commercial vessels at 65 units valued at US$13.1 billion, while offshore vessels backlog stood at eight units valued at $6.7 billion. In addition the company had an order backlog of 17 special vessels valued at $4.7 billion. In terms of product mix in the commercial shipbuilding segment ¾ as of July 31, 2017 ¾ tankers led the new order unit count, with 5 vessels ordered. LNG carriers (and FSRU) were next with two units. However, LNG carriers accounted for 50% of DSME’s order book (in terms of units) as of July 31, 2017. In the offshore plant segment, DSME handles projects on an EPCI basis (Engineering, Procurement, Construction, Installation). It is a major global provider of offshore plants, having delivered for instance the giant Pazflor FPSO and having received a commission from Petronas in 2012 to build its LNG-FPSO for the Kanowit gas field. As of September 2016, it has commissioned the 336m-long LNG-FPSO for INPEX’s Ichthys LNG project. Since founding, DSME has completed 96 offshore products (including drillships and OSVs).


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DSME’s locations are as follows: Domestic: - Head Office 3370, Geoje-daero, Geoje-si, Gyeongsangnam-do, South Korea Shipyard 3370, Geoje (Geoje-daero, Gyeongsangnam, South Korea) Other sites (e.g. engineering centres, hotels)

• Busan • Gyeonggi-do • Gwangyang • Geoje • Seoul • Jeonranam-do • Jeollanam-do • Yongjin • Ulsan

International: - Fifteen overseas branches in Asia, the Americas, Europe, the Middle East, Australasia, and Africa. Seven overseas subsidiaries in Europe, the Americas, Asia, and the Middle East (e.g. DeWind Corporation, Irvine, California, USA). Key Products In the shipbuilding sector, DSME’s key products are tankers (including ULCC), container ships (including ULCV), LNG carriers, LNG-RV, LPG carriers, Ro/Ro ships, ferries, and car carriers. Bulk carriers have traditionally been a strong component of sales, but not in recent times. In the offshore and engineering division, DSME produces mainly fixed platforms, semi-rigs, drillships and – to a numerically lesser extent - FPSOs, OSVs, TLPs, FPUs. High-Tech In terms of cutting-edge, high-tech vessels, a recent product of particular interest is DSME’s 299m long, 50m wide platform LNG icebreaking carrier which is capable of sailing through 2.1-meter-thick ice. It was successfully delivered in March 2017. It is the first ever ship designed for ambient temperature of minus 50 degree Celsius and can navigate in ice more than 2.1 meters thick. DSME is also scheduled to deliver further 14 ice breaking LNG carriers by 2020. The carrier was built for Russian shipping company, Sovocomflot and will be used in developing a gas field on the Yamal Penisula, in the western part of Siberia. Another vessel of particular interest is DSME’s 382m long, 124m wide platform installation/removal and pipelaying vessel Pioneering Spirit (formerly Pieter Schelte). The largest such vessel in the world at time of delivery in October 2014, it is the first ever ship designed to install and remove large topsides of oil platforms in a single lift. Conceived as a solution to Shell’s need to remove the 24,000 tonne topside of its Delta oil platform in the Brent oil field region of the North Sea, the vessel’s capacity for single-lift installation and removal of topsides of this scale is both exceptionally novel and remarkably efficient, in the sense that it reduces time, costs, and environmental and worker safety hazard associated with other means of installing and removing large topsides (such as reverse installation). Work on such topsides can now largely take place on-shore. Risks such as oil leakage from cut pipes, which arise in the case of a reverse install, are eliminated. A further cutting-edge increase in efficiency is brought about by the vessel’s size – this, along with active motion compensation systems on its lift systems, allows it to operate in higher wave environments as compared to semi-submersible crane vessels typically tasked with the job. Also, novel on this ship is its capacity to install pipelines of


October 2017 16

previously unmanageable weight – its tensioner capacity of 2,000 tonnes is double that of the world’s largest (single-purpose) pipelaying vessel, Solitaire. An extremely complex vessel encompassing a plethora of design novelties, Pioneering Spirit’s supply chain also exhibits pronounced sophistication; for instance, exhaust gas scrubbing equipment supplied by Gӧteborgs Energy Systems (GESAB), four-stroke diesel main engines from MAN Diesel & Turbo, Rolls-Royce Azimuth thrusters, Kongsberg Maritime radars and bridge control system, and a ballast control system from Shinko. Other cutting-edge vessels include:

- Marlin-class containerships: The first LNG-powered containerships in the world. Although not actually produced by DSME, DSME was in charge of overall design, while the ships utilize various DSME technologies. [See the General Dynamics company overview]

Most Recent Annual Reports 2013 Annual Report: http://www.dsme.co.kr/cm/ma/downloadFile.do?dnID=793&dnType=ivsr 2012 Annual Report: http://www.dsme.co.kr/cm/ma/downloadFile.do?dnID=623&dnType=ivsr IR Presentations August 2017: https://www.dsme.co.kr/cm/ma/downloadFile.do?dnID=1271&dnType=ivsr July 2017: https://www.dsme.co.kr/cm/ma/downloadFile.do?dnID=1267&dnType=ivsr Other Key Financial Data Table 1: Key Financial Data

Key Financial Data Year Ending December 31,

2016

Year Ending December 31,

2015


2014


2013 Revenue (KRW in billions) 12,819.2 15,443.6 15,561.5 14,584.8 Net Income (KRW in billions) -2,789.5 -2,209.2 -852.7 -920.4 Operating Income (KRW in billions) -1,530.8 -2,124.4 -565 -1,010 Assets (KRW in billions) 15,064.8 18,880.3 17,735.8 16,776.4 Equity (KRW in billions) 659.3 618.8 2,026.8 2,928.7 Backlog (USD in billions) 34.03 42.72 52.35 45.43

Key Customers Petronas, Maersk, BW Group, Transocean, KOGAS, Angelicoussis Group, Vantage, Songa Offshore, Dorian LPG, Chandris, K Line, Teekay, Hyundai LNG Shipping, Korea Line, Mitsui OSK Lines, CLNG, MOL, CSLNG, BP, Sovcomflot, MSC, Scorpio Tankers, Seadrill, Abu Dhabi National Oil Company, Dynagas, South Korean Navy, British Navy, Norwegian Navy, Indonesian Navy, Royal Malaysian Navy. Recent Orders 7 September 2017: HMM Signs Formal Contract with Daewoo Shipbuilding & Marine Engineering (DSME) to Construct Five 300,000 Dwt Very Large Crude Carriers 5 April 2017: Maran Tankers orders three VLCC from DSME, to be delivered by 2018. Price $250 million. 3 March 2017: John Fredriksen orders two 173,400 cubic meter LNG carriers from DSME, to be delivered by 2H19, Price WON 414.4 billion. 2 March 2017: A European Operator ordered for two 175,000 cubic meters LNG carriers from DSME, to be delivered by 2H19. Price $180 million apiece 18 December 2016: Maran Tankers orders a FSRU from DSME. Total price US$590 million.


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21 November 2016: Malaysian Navy orders 6 Patrol combat corvettes from DSME, for delivery between mid-2017 and mid-2018. Contract valued undisclosed. Research and Development Table 2: Research and Development Spending

Period 2015 2016 Amount (KRW billions) 69.460 52.401

Merger, Acquisition and Alliance Activity 7 April 2017: Samsun Logix Corporation and Korea Line Corporation agreed to acquire 35.29% stake in Korea Marine Finance Corporation from Daewoo Shipbuilding & Marine Engineering Co., Ltd. for KRW 4 billion. 23 December 2016: DSME sells its designing subsidiary DSEC’s stake for KRW 70 billion. 17 January 2017: KDB Private Equity acquired 2.34% stake in Daehan Shipbuilding Co Ltd from Daewoo Shipbuilding & Marine Engineering Co Ltd for KRW 1.5 billion.


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Fincantieri S.p.A. (Borsa Italiana: IT0001415246) Investor information: https://www.fincantieri.it/cms/data/pages/000228.aspx Headquarters: Trieste, Italy Address: 34121 Trieste, Via Genova Phone: +39 040 3193111 Established: December 1959 (Italy) Key Executives: Giampiero Massolo(Chairman) Giuseppe Bono (CEO) Alberto Maestrini (General Manager) Number of Employees: 19,428 (as of 30 June, 2017) Number of Shareholders: N/A (as of 31 December, 2016, Fincantieri’s largest shareholder was Italian state lender Cassa Depositi e Prestiti via holding company Fintecna S.p.A., with 71.6% ownership). Market Capitalization: EUR 1.83 billion (as of September 22, 2017) Reporting Period: Fiscal Year Ended December 31st Email Notification for Company Results: N/A Company Overview Fincantieri S.p.A. (Fincantieri) is a publicly-listed Italian company founded in 1959, engaged primarily in shipbuilding (commercial and naval) and ship repair/conversions. In addition, it is active in the offshore segment (e.g. semi-submersible drilling rig products), in the equipment, systems, and services segment (for instance, in the construction of steam turbines for both marine and industrial applications) and in some other miscellaneous business. Subsidiaries of the parent company Fincantieri S.p.A. ¾ through which some of these business segments are represented ¾ include, inter alia, Vard Holdings Ltd., ACE Marine LLC, and Isotta Fraschini Motori S.p.A. Reflecting its core strength in shipbuilding, 91% of the order backlog as of June 30, 2017 was represented by the shipbuilding segment. A total of 5 vessels were delivered in 1H17, 11 new orders acquired during the same period taking the total order backlog to 102 ships as of June 30, 2017. Of the total 102 vessels, 22 are cruise vessels, 36 are naval vessels and 44 are offshore vessels. In terms of revenue, for the period 1H17, shipbuilding represented ~77% of all income (with the majority of this derived from cruise ship construction). The company won orders for 5 cruise ships in 2Q17. Of which, four cruise ships will be built for Norwegian Cruise Line slated to be delivered between 2022-2025. While, the remaining one cruise ship is for Carnival Corporation to be delivered by 2021. In the shipbuilding segment, Fincantieri is engaged in the design and construction of cruise ships, ferries, naval vessels, and mega-yachts. Ship repair and conversion are also included in this segment. A total of 5 ships were delivered in 1H17, with the product mix being led by cruise ships (three vessels) and naval vessels over 40m in length (2). No mega yachts and naval vessels less than 40m in length were delivered during the period. In the offshore segment, Fincantieri is active primarily in the design and construction of support vessels for the oil and gas exploration and production market. For the year ended 2016, for instance, it delivered 3 PSVs, 2 AHTS, 3 OSCV and 5 other vessels. Fincantieri and its subsidiaries VARD and Fincantieri Oil&Gas S.p.A. are the active players in the offshore segment.


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Fincantieri’s locations are as follows: Domestic: - Head Office 34121 Trieste, Via Genova 1, Italia Shipyard

• Monfalcone Shipyard • Marghera Shipyard • Ancona Shipyard • Sestri Ponente Shipyard • Integrated Naval Shipyard • Riva Trigoso-Muggiano Castellammare Di Stabia Shipyard • Palermo Shipyard

Other sites (e.g. docks, subsidiaries)

• Trieste • Muggiano • Genova • Bari • Palermo

International: - Shipyards, business units, representative offices, subsidiaries, joint ventures in Europe, the Americas, and Asia (e.g. VARD Brevik shipyard in Norway, Etihad Shipbuilding LLC in the UAE). Key Products In the shipbuilding sector, Fincantieri’s key products are cruise ships, ferries, naval vessels, and mega-yachts. In the offshore sector, Fincantieri’s main products are support vessels for offshore oil and gas exploration and production. High-Tech In terms of cutting-edge, high-tech commercial vessels, a product worth mentioning is the submarine Romeo Romei which has a surface displacement of 1,509 tonnes, an overall length of 55.9 meters and a maximum diameter of 7 meters. The submarine can exceed a speed of 16 knots underwater and can accommodate a capacity of 27-person crew. The submarine is built in the shipyard of Muggiano since 1907 and the Romeo Romie is 102nd submarine built in this Romie series. The Romie series is equipped with a silent propulsion system based on fuel cell technology, producing energy through an oxygen-hydrogen reaction from external oxygen. It features an electro-acoustic system which is fully integrated into the command and control system, as well as a modern automation system of the control platform. Another cutting edge, high-tech vessel, a recent product worth mentioning is Fincantieri VARD’s platform supply and stand-by vessel Stril Barents, delivered in 2015. Built at VARD’s Aukra shipyard in Norway, the combination of platform supply, emergency, and oil spill response capacities make this a unique vessel. The complex range of tasks that the ship is able to handle also lends it an outstanding degree of efficiency, in the sense that it eliminates the need for an additional, designated standby vessel. With the capacity for both platform supply and emergency/oil spill response, separate vessels for these tasks are not required. The vessel also ensures a high degree of compliancy with potential future IMO Arctic-region environmental regulations, via the capacity to operate on both LNG and Marine Gas Oil. In addition, it meets all requirements for


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operation in the Arctic Barents Sea region, and is designed to fulfil oil spill contingency regulations for the Goliat oil field. Stock Price Performance Exhibit 1: LTM Price Performance V/S FTSE MIB Index

Source: marketwatch.com Most Recent Annual Reports 2016 Annual Report: https://www.fincantieri.com/globalassets/investor-relations/investor-kit-eng/4.-fincantieri-annual-report-2016.pdf 2015 Annual Report: https://www.fincantieri.com/globalassets/documents/fincantieri_annual_report_2015.pdf Other Key Financial Data Table 3: Key Financial Data

Key Financial Data Year Ending December 31, 2016


2015


2014


2013 Revenue (€ in millions) 4,429 4,183 4,399 3,811 Net Income (€ in millions) 14 -289 55 85 Net Profit Margin 0.3% -6.9% 1.3% 2.2% Operating Margin 3.5% -3.3% 4.5% 5.5% Return On Assets 2.6% -3.2% 3.6% 1.8% Return On Equity 1.1% -20.7% 4% 7% Shareholders’ Equity (€ in millions) 1,241 1,266 1,530 1,210 Backlog (€ in billions) 18.23 15.72 9.81 8.07

Key Customers Carnival Cruise Lines, Compagnie du Ponant, Costa Crociere, Holland America Line, P&O Cruises, Princess Cruises, Virgin Cruises, Finnlines, Grimaldi Napoli, Italian Navy, United Arab Emirates Navy, SAIPEM, Hartmann Logistik. Recent Orders 19 April 2017: Fincantieri signed a memorandum of agreement with Viking Ocean Cruises for the construction of two additional cruise ships, with an option for another two. The two units and the six already ordered will enter Viking fleet in 2021 and 2022.


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10 April 2017: Vard and Fjordlaks Aqua sign agreement for the design and construction of one new fish transportation vessel. 22 February 2017: Fincantieri, China State Shipbuilding Corporation (CSSC) and Carnival Corporation & plc signed a binding Memorandum of Agreement for the construction of two cruise ships, with an option for additional four. The contract is worth about $1.5 billion. 16 February 2017: Fincantieri was awarded an order from Norwegian Cruise Line Holdings Ltd. for the construction of 4 new generation cruise ships with an option for additional 2. The value of each ship is approximately 800 million euros, with one delivery per year from 2022 to 2025, stretching to 2027 in case of confirmation of the option. 19 January 2017: Fincantieri has signed a memorandum of agreement with Carnival Corporation & plc for the construction of two new cruise ships of an overall value exceeding one billion euros. The ship will be of 145,000 tons carrying 3,660 passengers, with deliveries due in 2019 and 2020. 13 January 2017: Fincantieri was awarded the contract by the Armed Forces of Malta for the upgrading of P61, an Offshore Patrol Vessel, built by it over ten years ago. The works, which are estimated at 7 million Euro, are scheduled to begin in the second quarter of 2017 in Italy, in the Fincantieri shipyard of Muggiano (La Spezia), and will last about 6 months. Research and Development Table 4: Research and Development Spending

Period 2016 2015 Amount (€ millions) 96 90

Merger, Acquisition and Alliance Activity 13 November 2016: Fincantieri announces its subsidiary Fincantieria Oil & Gas has launched a voluntary general offer in Singapore for acquiring 44.37% of Vard share capital not already held by it. 4 July 2016: Fincantieri and China Shipbuilding Corporation have signed an agreement for the constitution of a joint venture aimed at developing and supporting the growth of the Chinese cruise industry. 21 December 2015: Fincantieri signs contract with India’s state-controlled naval and offshore-focused Mazagon Dock Limited (MDL) for the provision of technical advice on Project 17A. Envisaged in Project 17A is the construction of 7 stealth frigates ordered in February this year by the Indian Navy from the shipyards MDL and Garden Reach Shipbuilders & Engineers (GRSE). 23 October 2015: Chinese media reports that Fincantieri will be responsible for the design of the first luxury cruise liners to be built in China, by a joint venture consisting of China State Shipbuilding Corporation (CSSC), China Investment Corp., and Carnival Corporation. The first ship is planned for delivery in 2020. 6 August 2015: Fincantieri Marine Group LLC (US subsidiary of Fincantieri) and Gibbs & Cox, Inc., announce a joint strategic research and development initiative in ship and vessel design. The focus is on improving efficiency in ship production and ship affordability.


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General Dynamics Corporation (NYSE: GD) Investor information: http://investorrelations.gd.com/phoenix.zhtml?c=85778&p=irol-irhome Headquarters: Falls Church, Virginia, USA. Address: 2941 Fairview Park Drive, Suite 100, ZIP code 22042-4513 Phone: (703) 876-3000 Established: February 21, 1952 (Delaware, USA.) Key Executives: Phebe N. Novakovic (Chairman and CEO) John P. Casey (Executive VP, Marine Systems) S. Daniel Johnson (Vice President; President, Information Technology) Mark C. Roualet (Executive VP, Combat Systems) Jason W. Aiken CPA (Senior Vice President, Chief Financial Officer) Jeffrey S. Geiger (Vice President; President of Electric Boat) Number of Employees: 98,800 (as of 31 December, 2016) Number of Shareholders: N/A Market Capitalization: US$61.35 billion (as of September 22, 2017) Reporting Period: Fiscal Year Ended December 31st Email Notification for Company Results: YES (http://investorrelations.gd.com/investor-information/email-alerts) Company Overview General Dynamics Corporation (General Dynamics) is a publicly-listed United States company incorporated in 1952, operating in the four business divisions of Aerospace, Combat Systems, Information Systems, and Technology and Marine Systems. It describes itself as a global aerospace and defense company. Having grown organically since its incorporation, the company sold off nearly all of its divisions in the early 1990s, retaining only Electric Boat and Land Systems. Beginning in the mid-1990s, however, the company once again began expanding, acquiring combat vehicle-related businesses, information technology product and service companies, additional shipyards, and the Gulfstream Aerospace Corporation. In both 2015 and 2016 (December 31), the Marine Systems division accounted for the most valuable (total – funded and unfunded) backlog company-wide, beating the Aerospace, Combat Systems, and Information Systems and Technology divisions. The same trend held true for 1H17 as well with Marine Systems backlog higher than other divisions. In terms of revenue throughout 2016 and the first half of 2017; however, it was generally behind the Aerospace and Information Systems and Technology divisions. The Marine Systems division designs, builds, and supports submarines and surface ships for the US Navy, having for instance delivered 15 of the Navy’s 19 classes of nuclear submarines. Marine Systems also designs, constructs and supports ships for commercial applications, although more than 90% of the division’s revenue derives from the naval segment. Marine Systems shipyards are located on both coasts of the US, with the division being subdivided into three business units: Bath Iron Works, Electric Boat, and NASSCO. NASSCO is the business unit active in commercial shipbuilding (as well as being active in naval shipbuilding). Responsible for the design and construction of over 50 commercial ships since its founding in 1960, NASSCO today specialises in oil tankers and dry cargo carriers ¾ in particular, in developing next-generation LNG-powered and LNG-ready tankers and carriers. NASSCO’s shipyards are located in San Diego, California (the traditional base, established 1960), in Mayport, Florida, and in Norfolk, Virginia. Its San Diego shipyard has the capacity to build ships up to 1,000 feet in length. It benefits from the Jones Act of 1920, requiring, inter alia, that ships engaged in US coastal trade be built in the US.


October 2017 23

General Dynamic’s locations are as follows: Domestic: - Head Office 2941 Fairview Park Drive, Suite 100, ZIP code 22042-4513, Falls Church, Virginia, USA. Shipyards

• San Diego (NASSCO) • Mayport (NASSCO) • Norfolk (NASSCO) • Bath Iron Works (Bath Iron Works) • Groton Facility (Electric Boat) • Quonset Point Facility (Electric Boat) • Other sites (e.g. engineering centers) • Washington, D.C. • New London, Connecticut • Middletown, Rhode Island • Honolulu, Hawaii • Quincy, Massachusetts • Jacksonville, Florida

International: - Mexicali, Mexico. Key Products In the Marine Systems division, General Dynamics’s key products are oil tankers, dry cargo carriers, nuclear-powered submarines, surface combat ships (e.g. Arleigh Burke-class guided missile destroyer), auxiliary (e.g. Mobile Landing Platform) and combat-logistics ships. High-Tech In terms of cutting-edge, high-tech commercial vessels, the latest product worth mentioning is General Dynamic NASSCO’s 764-foot long, 3,100 TFEU Marlin Class containership. The first of these ships, the Isla Bella, was delivered to TOTE Maritime in October 2015, and is the first LNG-powered containership in the world. The company delivered its second LNG-powered containership in December 2015 two months ahead of its schedule. The status of LNG as the cleanest burning of the three primary fossil fuels (oil, coal, gas) makes Isla Bella a significant achievement in the development of more fuel-efficient, emission restrictions (ECA)-compliant container ships. Indeed, NASSCO claims that, in comparison to a conventionally-powered (heavy fuel oil) ship of the same type, the reduction in emissions equates to removing 16,000 automobiles from the road. Emissions of certain harmful gases are reduced by up to 98%. The outstanding novelty of this ship required a sophisticated arrangement of industry and regulatory partners in order ensure the ship’s compliancy with appropriate safety and efficiency standards. For instance, NASSCO worked particularly closely with the classification society American Bureau of Shipping (ABS) and with the US Coast Guard at the design, construction, and commissioning phases to ensure Isla Bella would safely and effectively operate on natural gas. An additional complexity of the ship is represented by the strong involvement of South Korea’s Daewoo Shipbuilding & Marine Engineering Co., Ltd in design and in supply of components. For example, DSME supplied its patented LNG fuel supply (vaporization) system, as well being in charge of the overall design of the vessel (through its subsidiary Daewoo Ship Engineering Company). The partnership with DSME/DSEC on the Isla Bella


October 2017 24

reflects a larger partnership between the companies in the production of some of NASSCO’s key ‘green’ ships - its SEACOR ‘ECO’ tankers, for instance, are designed by DSEC. As a final point, Isla Bella is also the world’s first commercial ship to have installed MAN Diesel and Turbo’s new ME-GI dual-fuel engine (manufactured by Doosan of South Korea), which can operate on both heavy fuel oil and natural gas. Another product worth mentioning is the next generation navy fuel ship tankers. The contract was awarded by US Navy in June 2016 and is approximated to be worth $10 billion. The Next Generation fuel ship tanker TAO (X) will replace the fleet of ageing T-AOE, T-AO and T-AKE. The ship will be capable of hauling 156,000 barrels of oil in its tanks along with a significant dry cargo capacity and even aviation capacity. The new ship will be capable of reaching a speed of 20 knots which would be as fast as the existing fleet of T-AO and T-AKE dry goods and ammunition supply ships. Stock Price Performance Exhibit 2: LTM Price Performance vs. S&P 500

Source: Nasdaq Most Recent Annual Reports 2016 Annual Report: http://investorrelations.gd.com/~/media/Files/G/General-Dynamics-IR/documents/annual-reports/2016-GD-Annual-Report-a.pdf 2015 Annual Report: http://investorrelations.gd.com/~/media/Files/G/General-Dynamics-IR/documents/annual-reports/2015-GD-Annual-Report.pdf Quarterly Results http://investorrelations.gd.com/financial-reports/quarterly-results/2017


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2017 First Quarter: http://otp.investis.com/clients/us/general_dynamics/SEC/sec-show.aspx?FilingId=12013772&Cik=0000040533&Type=PDF&hasPdf=1 Second Quarter: http://otp.investis.com/clients/us/general_dynamics/SEC/sec-show.aspx?FilingId=12189182&Cik=0000040533&Type=PDF&hasPdf=1 Annual Financial Highlights – 2016 http://investorrelations.gd.com/~/media/Files/G/General-Dynamics-IR/documents/annual-highlights/2016-annual-financial-highlights.pdf Other Key Financial Data Table 5: Key Financial Data


2016


2015


2014


2013 Revenue ($ in millions) 31,353 31,469 30,852 30,930 Net Income ($ in millions) 2,955 2,965 2,533 2,357 Net Profit Margin 9.4% 9.4% 8.2% 7.6% Operating Margin 13.7% 13.4% 12.7% 11.9% Return On Assets 8.3% 7.8% 6.9% 6.6% Return On Equity 28.2% 26.3% 20.3% 16.25% Shareholders’ Equity ($ in millions) 10,976 10,738 11,829 14,501 Backlog ($ in billions) 59.80 66.12 72.41 45.88

Note: Some figures may not sum to total due to rounding Key Customers In 2016, 60% of General Dynamic’s revenues derived from the US government, 15% from US commercial customers, 13% from non-US commercial customers, and the remaining 12% from non-US government customers. Primary customer is the US Department of Defence. The Department of Homeland Security, intelligence community, first-response community and the Department of Health and Human Services are also key. Government customers globally include Australia, Canada, Germany, Mexico, Spain, Switzerland and the United Kingdom. Commercial customers include American Petroleum Tankers and TOTE Maritime. Recent Orders August 18, 2017: General Dynamics Wins $115.3 Million Contract Option from US Navy for Virginia-Class Submarine Work. 4 May 2017: General Dynamics Information Technology unit was awarded a contract to support the Defense Logistics Agency J6 Enterprise Technology Services program with a ceiling limit of $6 billion for a five-year base period with three option years. 5 April 2017: The UK Ministry of Defense awarded a £330 million contract to General Dynamics United Kingdom Limited to design and develop the next-generation tactical communication and information system as the initial phase of the MORPHEUS programme. 21 February 2017: General Dynamics Information Technology unit was awarded US$155 million contract from the Defense Intelligence Agency to manage enterprise communications for the Combatant Commands and its subordinate units. 16 February 2017: General Dynamics was awarded a US$170 million contract option from the Defense Intelligence Agency to provide a wide range of cyber security services required to defend intelligence networks and systems for the Agency, Combatant Commands and various Military Services. 16 February 2017: General Dynamics Electric Boat unit awarded a contract of US$126.5 million by the U.S. Navy for long lead time material for the first two Block V Virginia-class submarines, SSN-802 and SSN-803.


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9 December 2016: General Dynamics Bath Iron Works unit awarded a $59 million contract for the continuation of Arleigh Burke-class (DDG 51) Lead Yard Services and Flight III Upgrade design efforts from the US Navy. Research and Development Table 6: Total Research and Development Spending

Period 2016 2015 2014 US$418 million US$395 million US$358 million

Merger, Acquisition and Alliance Activity 3 May 2017: General Dynamics announced purchase of cyber products division of Phoenix based Advatech Pacific Inc. Through the acquisition General Dynamics will add Advatech’s TACDS and CenturionCDS products.


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Havyard Group ASA (OSE: HYARD) Investor information: http://www.havyard.com/investor-relations/ir-contacts/ Headquarters: Fosnavåg, Norway Visiting Address Havyard House, Holmefjordvegen 1, 6090 Fosnavåg, Norway Postal Address: P.O. Box 215, 6099 Fosnavåg, Norway Phone: +47 70 08 45 50 Email: [email protected] Established: 2 June 1999 Key Executives: Geir Johan Bakke (President and CEO) Pål Aurvåg (CFO) Kenneth Pettersen (COO) Lasse Stokkeland (Executive Vice President - Havyard Ship Technology AS) Stig Magne Espeseth (Executive Vice President - Havyard Design & Solutions AS) Leif Gjelseth (Executive Vice President - Havyard MMC AS) Number of Employees: 609 (as of 31 December 2016) Number of Shareholders: N/A (as of 31 December 2016) (as of 31 December 2016, Havyard Group ASA’s largest shareholder was Havila Holding AS, with 57.70% of total shares. The next largest shareholder was MP Pensjon PK, with 7.60% of total shares). Market Capitalization: NOK 409.8 million (as at September 25, 2017) Reporting Period: Fiscal Year Ended December 31st Email Notification for Company Results: N/A Company Overview Havyard Group ASA (Havyard) is a publicly-listed Norwegian company established in 1999. In 2000, the shipyard in Leirvik in Sogn, Norway was purchased from the Kværner Group. This yard traces its roots back to 1928, having become known over the years for fishing and (ice-breaking) offshore vessels. Havyard initially operated as a small-scale shipbuilder without in-house design capabilities out of the Leirvik shipyard. Since then, Havyard has become the parent company of a group of international and domestic subsidiaries operating in four business areas: Havyard Design and Solutions (design and system packages, both for in-house and external construction), Havyard Ship Technology (construction, conversion and repair of vessels), Havyard MMC (fish handling equipment and systems), and NES Power & Systems (diesel electric and hybrid propulsion systems). In 2014, Havyard was listed on the Oslo Stock Exchange. In the Ship Technology area, Havyard’s active subsidiaries are Havyard Ship Technology AS, dep. Leirvik, Havyard Ship Technology AS, dep. Fosnavåg, Havyard Ship Technology AS, dep. Turkey, and Havyard Production & Service Sp. z o.o. These companies are specialized in constructing, converting, and repairing offshore support vessels, offshore windfarm support vessels, and vessels with applications in fisheries and aquaculture. Hulls are built under supervision at the Turkish and Polish subsidiaries, with outfitting, completion, startup, testing, and delivery taking place at the Leirvik yard in Norway. Ship Technology is with quite some margin the most important of the four business domains in terms of revenue. In the year ended 2016, for instance, operating revenue was NOK 1,337 million, compared to NOK 198 million in Design and Solutions, 159 million in NES Power & Systems, and 272 million in MMC Fish Handling & Refrigeration. For 1H17, the ship technology division was the largest accounting for ~39% of the overall revenues.


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As of 2Q17, the order backlog in Ship Technology stood at NOK 2,510 million, comprising one live fish carrier, one workboat, eight ferries and one pelagic trawler. In Design and Solutions, the order backlog for the same period was NOK 212 million, with approximately NOK 70 million of this amount attributable to internal deliveries. Havyard’s locations (including subsidiaries) are as follows: Domestic: - Head Office Havilahuset, Mjølstadnesvegen, 6092 Fosnavåg, Norway Shipyards

• Leirvik Other sites (e.g. design centers, fish handling equipment production centers)

• Fosnavåg • Ålesund • Vigra • Tromsø • Haugesund

International: - Poland (hull construction, design, electrical installations, etc.), Turkey (hull manufacture, etc.), Croatia (design), Brazil (design), China (design), Singapore (design). Key Products Offshore support vessels, offshore windfarm support vessels, live-fish carriers, fishing vessels, other specialty vessels. High-Tech In terms of high-tech vessels, a significant Havyard product will be the world largest live fish carrier. The carrier is expected to be 116 meters long with a breadth of 23 meters and will be named Ronja Storm with fish tank capacity of 7,450 cubic meters of water, more than twice the normal sized live fish carriers. The carrier in addition has the capacity to carry 5,000 cubic meters of fresh water. The vessel has been ordered by Sølvtrans for a total cost about NOK 500 million. After the delivery the ship will enter into a ten year contract with the fish farming company Huon in Tasmania and aims to solve the water shortage by providing 17 million liters of freshwater per day. Stock Price Performance Exhibit 3: LTM Price Performance vs. STOXX 600 Index

Source: marketwatch.com


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Most Recent Annual Reports 2016 Annual Report: http://issuu.com/cannas/docs/hgr_2016_web?e=2274360/48073149 2015 Annual Report: http://issuu.com/cannas/docs/hgr_aarsrapport_2015_web?e=2274360/35287427 Quarterly Reports 2017 Report Q2: http://issuu.com/cannas/docs/hgr_2017_q2?e=2274360/52414458 Report Q1: http://issuu.com/cannas/docs/hgr_q1_17?e=2274360/49510531 2016 Report Q4: http://issuu.com/cannas/docs/hgr_q4_16?e=2274360/45041912 Report Q3: http://issuu.com/cannas/docs/hgr_q3_2016?e=2274360/40877650 Report Q2: http://issuu.com/cannas/docs/q2_2016_hgr?e=2274360/38315324 Report Q1: http://issuu.com/cannas/docs/q1_2016_hgr?e=2274360/35905488 Other Key Financial Data Table 7: Key Financial Data


2016


2015


2014


2013 Revenue (NOK in millions) 2,003 1,767 2,411 1,987 Net Income (NOK in millions) -39 -108 39 164 Net Profit Margin -1.9% -6.1% 1.2% 8.2% Operating Margin 5.2% -3.4% 1.9% 9.1% Return On Assets -2.9% -8.0% 1.7% 12.4% Return On Equity -8.0% -21.2% 2.4% 28.4% Shareholders’ Equity (NOK in millions)

486 508 600 668

Backlog (NOK in billions) 1.17 2.53 2.77 3.3 Key Customers Global Offshore, FEMCO, ESVAGT, Havila Shipping, China Oilfield Services Limited (COSL), Fafnir Offshore, Sinopec, Forland Shipping, Atlantic Offshore, Skansi Offshore, Norsk Fisketransport. Recent Orders 15 June 2017: Havyard Ship Technology Enters into Letter of Intent with Baffin Fisheries for the Construction of a Trawler 9 June 2017: Havyard Group Wins Five-Ferry Contract 2 May 2017: Solvtrans ordered the world’s largest live fish carrier from Havyard for about NOK 500 million. 11 April 2017: Havyard and Pelagique signed an agreement to build an innovative pelagic trawler of 80 meter. The vessel is expected to be delivered in December 2018 and the contract includes an option for one additional vessel. Merger, Acquisition and Alliance Activity 1 March 2017: Hayvard and First Process have signed an agreement with an intention of merger. Havyard Group receives 75% of shares in the new company, while First Process Holding AS receives the remaining 25%. The combined entity will be known as MMC First Process AS. The merger is expected to be completed by spring 2017.


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Hyundai Heavy Industries Co., Ltd. (HHI) (KRX: A009540) Investor information: http://www.hhiir.com/EN/index.asp Headquarters: Ulsan, South Korea Address: 1000, Bangeojinsunhwandoro, Dong-gu, Ulsan, South Korea, 682-792 Phone: +82 52 202 2114 Established: 28 December 1973 (South Korea) Key Executives: Kwon Oh-gap (Vice-Chairman and CEO) Kang Hwan-goo (President and CEO) Kim Jee-Won (SEVP and CFO) Number of Employees: 23,077 (as on 31 December 2016) Number of Shareholders: N/A (as of 31 December 2016, HHI’s largest shareholders – with over 5% - were: HHI through treasury shares 13.37%, Chung Moon-joon 10.2%, Hyundai Mipo Dockyard Co., Ltd. 7.98%, KCC 7.01%). Market Capitalization: KRW 5,872.7 billion (as of September 25, 2017) Reporting Period: Fiscal Year Ended December 31st Email Notification for Company Results: N/A Company Overview Hyundai Heavy Industries (HHI) is a publicly-listed South Korean company founded in 1973, engaged in the shipbuilding, offshore and engineering, industrial plant and engineering, engine and machinery, electro electric systems, construction equipment, green energy, refinery, and financial services businesses (9 business divisions in total). Founded as a shipbuilding company, HHI has since diversified into the abovementioned business divisions, growing into a global integrated heavy industries company. As of 31 December 2016, HHI along with its affiliates delivered ~167 vessels in 2016, making it the largest shipbuilding company in the world with a global market share of 16.9%. Since the 1980s, HHI has consistently ranked as the biggest shipbuilding company in the world by output in CGT (compensated gross tonnes). In terms of product mix, containerships, crude oil tankers, and bulk carriers have – in that order - been with some margin the leading products of HHI in terms of number of vessels produced since the company’s founding. However, gas carriers began emerging from HHI’s shipyard in the mid-1980s (LPG) and mid-1990s (LNG), and though the total number of produced vessels remains noticeably lower than that for the abovementioned ship types, the value of these ships means that they presently constitute the most important source of sales revenue for HHI’s shipbuilding division. As of 1H17, LNG and LPG containers accounted for ~43% of the total revenue. The next most important ship type was tankers with a share of 26%, followed by containers with 23% share. The company (excluding associates) is expecting new orders of ~$4.3 billion by the end of 2017 (a total of 20 vessels). Gas carriers will comprise ~51% of those new orders while tankers will represent 48%. The company including its associates is expecting to deliver 154 vessels in 2017 and 198 vessels in 2018). In the offshore and engineering division, HHI handles projects on a turnkey basis – engineering, procurement, construction, installation, commissioning. HHI’s first offshore project was the Jubail Industrial Harbor Project in Saudi Arabia of the late 1970s. Since then, the company has constructed 3.2 million metric tons of offshore facilities and around 5,500 kilometers of subsea pipelines across over 170 projects and for more than 30 clients worldwide (stand: 2015).


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Though fixed platforms have been by far its most significant area of business, HHI has also completed 12 FPSO projects (e.g. the Gollat FPSO for Eni Norge in 2015) and 5 FPU projects as of December 2016. FLNGs will form a core part of its future development focus, with the goal of producing independent technologies and construction competencies. HHI’s locations are as follows: Domestic: - Head Office 1000, Bangeojinsunhwandoro, Dong-gu, Ulsan, South Korea, 682-792 Shipyards

• Ulsan (Ulsan) • Gunsan (Gunsan) • Samho (Samho)

Other sites (e.g. factories, offshore pipe fabrication shops)

• Ulsan • Gyeongju • Gunsan • Eumseong • Seoul

International: - Eighteen overseas offices in Asia, the Americas, Europe, the Middle East, and Africa. Twenty-six overseas corporations in Europe, China, the Americas, Asia, the Middle East, and Africa (e.g. Hyundai West Africa Ltd, Lagos, Nigeria). Key Products In the shipbuilding sector, HHI’s main products are VLCCs, Tankers, Product Carriers, Chemical Tankers, Containerships, Bulk Carriers, OBO carriers, Ro-Pax Ships, Ro-Ro ships, Pure Car and Truck Carriers, LPG Carriers, LNG Carriers, Drillships, Submarines, Destroyers, and Frigates. In the offshore and engineering division, HHI produces mainly FPSOs, FLNGs, FPUs, TLPs, Semi-submersible Units, Topsides Jacket and Pile, Jack-up, Modules and Quarters, Pipelines and Subsea Facilities, Land-based Modules, Offshore Installations. High-Tech In terms of cutting-edge, high-tech vessels, the latest product worth mentioning is HHI’s series of new-build LNG-FSRUs. The first of these vessels, Independence, was delivered in February 2014 to Hӧegh LNG at an estimated cost of US$330 million and is the first purpose-built LNG-FSRU in the world (LNG-FSRUs have traditionally been converted LNG carriers). These 294m-long vessels, classified by DNV-GL, allow operators to avoid the costs of building facilities on land to re-gasify imported LNG. As such, they for instance become high-tech propositions for small energy-poor countries needing to minimize import costs. The current charterer of Independence is Lithuanian state energy terminal operator Klaipedos Nafta, Lithuania having made the decision for the FSRU with the aim of simultaneously cutting its reliance on pipeline imports from Russia while ensuring that alternative import channels would not be more expensive. These vessels are complex devices ¾ in terms of supply chain complexity, Independence’s re-gasification unit was for instance supplied by Wӓrtsilӓ of Finland, with GTT of France supplying the membrane containment systems for storage of the LNG. HHI integrates these various parts into the hull at its yard in South Korea before launch.


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Other cutting-edge vessels produced by HHI include:

Gas Ready Containerships ¾ In May 2015, Hyundai Samho Heavy Industries delivered the first vessel in the world to carry classification society DNV GL’s GAS READY notation; a ULCS to United Arab Shipping Company. The first in a planned fleet of 17 ships, Barzan’s certification implies a capacity to quickly and cost-effectively convert the vessel to run on LNG once the necessary bunker infrastructure is built at ports worldwide. According to DNV GL, preliminary calculations point to an EEDI (Energy Efficiency Design Index) nearing 50% less than the limit set by the IMO for 2025. Future projects:

Hyundai Heavy Industries and National Shipping Company of Saudi Arabia (Bahri) have signed an MOU on establishing a partnership in the smart ship sector. Under the MOU both the companies will jointly develop smart ship solutions and apply the same to the ships operated by Bahri which currently operates 37 VLCC. LNG-fueled Aframax Tankers ¾ On 3 March 2017, HHI announced that it had received a $240 million order to construct the world’s first LNG fueled Aframax Tanker from Sovcomflot, Russia. The order was to build four 114,000 DWT Ice-class IA aframax tankers measuring 250 meters in length, 44 meters in width and 21 meters in height and are schedule for delivery in third quarter 2018. The LNG ice tankers will emit 90% less SOx, 80% less NOx, 15% less CO2 along with 50% less engine noise. LNGreen ¾ On 20 July 2015, it was announced that classification society DNV GL, LNG carrier operator GasLog, LNG containment system developer GTT, and HHI had jointly completed a design concept for a next-generation LNG carrier. According to DNV GL, the ship is about 8% more energy efficient and holds about 5% more cargo than ships of similar size and type. The ship demonstrates compliance with the latest regulatory developments such as the new IGC code of the IMO. According to DNV GL, the ship design is production-ready. Connected Smart Ship ¾ On 16 July 2015, HHI and global management consulting, technology services and outsourcing company Accenture announced collaboration on designing a so-called “connected smart ship”. The aim is to equip selected HHI-built vessels with a system of sensors that will convey vital ship voyage information (such as weather conditions, ocean current data) and ship status data (such as cargo status) to ship operators, enabling them to make efficiency-increasing adjustments to their ship’s voyage. A real-time service utilizing HHI’s on-ship platform Hyundai Intelligent Vessel Service and Accenture’s land-based Connected Platforms as a Service (CPaaS), HHI would hereby be expanding into the domain of ship-management/service provider, alongside its traditional role as shipbuilder. The two companies aim to connect their respective services to satellites by 2020. Gas turbine-powered LNG carrier ¾ On 7 July 2015, it was announced that HHI and GE Aviation and Marine had received Approval in Principle (AIP) on the world’s first gas turbine-powered LNG carrier from Lloyd’s Register. The carrier utilizes GE’s gas turbine system COGES 2.0. The ship is expected to produce savings in the order of millions of dollars (over the operating life of the carrier) compared to conventional LNG carriers. It is also IMO Tier-III compliant. World’s first ice-class FSRU: to be delivered November 2017, classed by RS, 287m long, 174,000 cbm, for deployment at Kaliningrad, Russia.


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Stock Price Performance Exhibit 4: LTM Price Performance vs. KOSPI Composite Index

Source: marketwatch.com Most Recent Annual Reports 2015 Integrated Report: http://www.hhiir.com/Class/download.asp?filename=HHI%20Integrated%20Report%202015(En).pdf&filepath=Quick/EN Audit Report 1H2016 http://www.hhiir.com/Upload/IR/Board/%E2%97%8FConsolidated%20FS(ENG)_HHI_FY2016%202Q_FS%EC%84%9C%EB%AA%85%EB%B3%B8_FIN.pdf Quarterly Reports 2017 Report Q2: http://www.hhi.co.kr/uploadFiles/upload/newsdata/Upload/presentation/2Q%202017_HHI%20Consolidated%20Earning%20Release.pdf Report Q1: http://www.hhi.co.kr/uploadFiles/upload/newsdata/Upload/presentation/1Q%202017_HHI%20Consolidated%20Earning%20Release.pdf IR Presentation September 2017: http://www.hhi.co.kr/uploadFiles/upload/newsdata/Upload/IRNews/EN/IR%EB%89%B4%EC%8A%A4%209%EC%9B%94_%EC%A4%91%EA%B3%B5%EC%97%85_%EC%98%81%EB%AC%B8_3.pdf Other Key Financial Data Table 8: Key Financial Data


2016


2015


2014


2013 Revenue (KRW in billions) 39,317 46,232 52,582 54,188 Net Income (KRW in billions) 656 -1,363 -2,206 146 Net Profit Margin 1.7% -2.9% -4.2% 0.3% Operating Margin 4.2% -3.3% -6.2% 1.5% Return On Assets 2.1% -1.9% -3.8% 0.3% Return On Equity 3.9% -8.5% -12.4% 0.8%


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Shareholders’ Equity (KRW in billions)

17,890 15,499 16,639 19,030

Backlog (KRW in billions) 36.13 53.32 55.69 54.61 Key Customers Hapag-Lloyd, C.P. Offen, CMA CGM, A.P. Moller, Seaspan, Enesel S.A., BP, Exxon Mobil, Chevron, Shell, Total, ENI Norge, SEC, Daewoo Shipbuilding & Marine Engineering, Samsung Heavy Industries, Hyundai Mipo Dockyard, Saudi Aramco, Daelim, KEOCI, MEW, Wagner & Co. Solartechnik, Albatech. Recent Orders 3 May 2017: HHI and POSCO DAWOO secured a $44 million transformer order from British National Grid plc. 11 December 2016: Islamic Republic of Iran Shipping Lines (IRISL) ordered twelve ships from HHI for $700 million. Research and Development Table 9: Research and Development Spending

Period 2015 2016 Amount (KRW billions) 189 219


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Mitsubishi Heavy Industries, Ltd. (MHI) (TYO: 7011) Investor information: https://www.mhi-global.com/finance/index.html Headquarters: Tokyo, Japan Address: 16-5 Konan 2-chome, Minato-ku, Tokyo 108-8215, Japan Phone: + 81- 3 - 6716 – 3111 Fax: +81-3-6716-5800 Established: January 11, 1950 Key Executives: Shunichi Miyanaga (President and CEO) Kenji Ando (SEVP, President and CEO, Power Systems, President of Mitsubishi Hitachi Power Systems, Ltd) Kazuaki Kimura (SEVP, President and CEO, Industry & Infrastructure, Head of Marketing & Innovation Headquarters) Masanori Koguchi (EVP, CFO, Head of Business Strategy Office) Number of Employees: 83,932 (consolidated – as of 31 March 2016) Number of Shareholders: 281,648 persons (as of 31 March 2017, MHI’s largest shareholder was Japan Trustee Services Bank, Ltd., with 5.04% ownership). Market Capitalization: ¥ 1,501,421.7 million (as of September 26, 2017) Reporting Period: Fiscal Year Ended March 31st Email Notification for Company Results: YES (https://www.mhi-global.com/cgi-bin/mailmagazine/register.cgi) Company Overview Mitsubishi Heavy Industries, Ltd. (MHI) is a publicly-listed Japanese company established 11 January 1950, though with roots in the 1884-founded Nagasaki Shipyard & Machinery Works. Beginning with shipbuilding, the Nagasaki-based company followed with automobile, aircraft, turbine, and internal combustion engine production, and later with production of ships and aircraft for use during WWII. Today, after several restructurings, MHI is a highly diversified business operating in four business domains: Commercial Aviation & Transportation Systems; Energy and Environment; Machinery, Equipment & Infrastructure; Integrated Defense & Space Systems. Shipbuilding is split across the two business domains of Commercial Aviation & Transportation Systems (Shipbuilding & Ocean Development Division - commercial ships) and Integrated Defense & Transportation Systems (Naval Ship Division – naval ships). In addition, as of 1st October 2015 all operations in the construction of large-scale commercial ships in the Nagasaki district were transferred to one of MHI’s wholly-owned group companies, MHI Ship and Ocean Engineering Co., Ltd. (MSK). The company from this point onwards became known as Mitsubishi Heavy Industries Shipbuilding Co., Ltd., and is focused on the construction of gas (LNG and LPG) carriers. Also on this date, a company dedicated to the construction of hull blocks, MHI Hull Production Co., Ltd., took over all operations in hull blocks. The business area of Industry & Infrastructure, of which commercial shipbuilding (through the Shipbuilding & Ocean Development Division) is a part, was the most important division in terms of the sales in 1Q17, with a ~46% share of MHI’s total sales. In the Shipbuilding and Ocean Development Division of the Industry & Infrastructure domain, MHI is engaged in the design and construction of cruise ships, ferries, gas (LNG and LPG) carriers, tankers, containerships, Ro/Ro ships, pure car carriers, special purpose ships (e.g. scientific drill ship, oil recovery ships, marine resources survey ships), marine machinery including low- and high-speed engines, marine structures (including an FPSO), marine development equipment (e.g. deep submergence research vessel), and various automated systems. It is also active in ship repair and conversion. Further, it develops engineering solutions for use also by other shipbuilding companies and/or shipowners, such as hull designs and the Mitsubishi Air Lubrication System (MALS).


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MHI’s locations are as follows: Domestic: - Head Office 16-5 Konan 2-chome, Minato-ku, Tokyo 108-8215, Japan Shipyards

• Nagasaki Shipyard & Machinery Works • Shimonoseki Shipyard & Machinery Works • Kobe Shipyard & Machinery Works • Yokohama Dockyard & Machinery Works

Other sites (e.g. machinery works, aerospace systems works) • Hiroshima • Mihara • Nagoya • Iwatsuka • Sagamihara • Takasago

International: - Over 400 locations globally including 207 in Japan, 55 in North and Central America, ten in South America, 39 in China, 12 in India, 41 in the rest of Asia, and 78 in Europe, the Middle East, and Africa. Outside of Japan, the locations encompass overseas offices (e.g. Dubai, Moscow, Kuala Lumpur) and group companies (Mitsubishi Heavy Industries Mexicana, S.A. de C.V.) Key Products In the shipbuilding sector, MHI’s key products are gas carriers, special-purpose ships (e.g. research vessels, training ships), cruise ships, ferries, submarines, and destroyers. High-Tech In terms of cutting-edge, high-tech commercial vessels, a recent product worth mentioning is the AIDAperla the second generation cruise ship, delivered in April 2017 to AIDA cruises. This follows the delivery on March 14, 2016 of AIDAprima, the sister ship of AIDAperla. AIDAperla has 18 decks, is 300 meters in overall length and is equipped with 12 restaurants and 18 bars including an on-board brewery. It also consists of Theatrium, a 3-story multi-purpose theater in the center of the ship’s atrium, as well as saunas, a discotheque, a casino and a fitness gym. The uppermost deck has swimming pools under large foil domes. There is also a sports deck which can be converted into an ice skating ring during winters. The ship with 1,634 staterooms offers the greatest variety in the AIDA cruises fleet. The cruise gross tonnage is of 125,000 tons. Depending on the conditions AIDAperla can be operated with eco-friendly LNG while docked in ports. In terms of cutting-edge, high-tech commercial vessels, a product worth mentioning is the 95,000 DWT bulk carrier Harvest Frost, delivered in October 2014 to Archer Daniels Midland USA. Although built by Oshima Shipbuilding of Japan, the bulker was designed by MHI, and many of the technologies that make the ship cutting-edge are proprietary MHI products. The significance of the ship indeed lies not in any one particular feature or characteristic, but in its novel combination of a number of advanced technologies and designs. One such technology is MHI’s Mitsubishi Air Lubrication System (MALS) ¾ allegedly gifting Harvest Frost with a 27% reduction in CO2 emissions as compared to conventional bulk carriers of the same capacity.


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Another is the innovative propulsion system, which positions fins forward of the propellers and includes special grooving in the propeller boss cap. A third advanced feature is the bespoke bow design, intended to reduce wave-related resistance. A fourth feature relates to compliancy – it was designed to be able to transit the new Panama Canal locks. As a result of its novel combination of advanced technologies and design features, the Harvest Frost was honored on 2 June 2015 by a panel consisting of representatives from organizations such as the International Maritime Organization (IMO) and DNV GL with the Energy Efficiency Award at the Nor-Shipping Awards 2015 ¾ bestowed upon the ship that makes the greatest contribution towards energy efficiency in relation to its function or operation. Stock Price Performance Exhibit 5: LTM Price Performance vs. NIKKEI Index

Source: marketwatch.com Most Recent Annual Reports 2017 Annual Report (for year ended March 31, 2017): https://www.mhi.com/finance/library/annual/pdf/report_2017_financial.pdf 2016 Annual Report (for year ended March 31, 2016): https://www.mhi.com/finance/library/annual/pdf/report_2016.pdf Other Key Financial Data Table 10: Key Financial Data

Key Financial Data Year Ending March 31, 2017

Year Ending March 31, 2016

Year Ending March 31, 2015

Year Ending March31, 2014

Revenue (Yen in billions) 3,914 4,047 3,992 3,350 Net Income (Yen in billions) 87.7 63.8 110.4 160.4 Net Profit Margin 2.2% 1.6% 2.8% 4.8% Operating Margin 3.8% 7.6% 7.4% 6.2% Return On Assets 1.7% 3.5% 3.6% 2.9% Return On Equity 5.1% 3.7% 6.8% 9.9% Shareholders’ Equity (Yen in billions)

1,637 1,679 1,639 1,613

Backlog (Yen in billions) 4,275.6 4,485.5 4,699.1 3,420.0 Key Customers In the shipbuilding sector, key customers include Astomos Energy Corporation, Mitsui O.S.K. Lines Ltd. (MOL), Nippon Yusen Kabushiki Kaisha (NYK Line), Carnival Corporation plc, Chubu Electric Power Co. Inc., Archer Daniels Midland, the Japanese Navy, Gas Spirits Shipping S.A., Wallenius Wilhelmsen, Evergreen Marine Corp.,


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NTT WE Marine, Japan Agency for Marine-Earth Science and Technology (JAMSTEC), Royal Dutch Shell, Japanese Coast Guard, Japanese Fisheries Agency, PGS, Japan Oil, Gas and Metals National Corporation, Osaka Gas Co., Ltd, Oshima Shipbuilding Company, Shin Nihonkai Ferry. Recent Orders

- 19 January 2016: Mitsubishi Hitachi Power Systems (MHPS), a joint venture company between MHI and Hitachi for the integration of thermal power generation systems and other related businesses, receives order for natural-gas-fired gas turbine combined cycle (GTCC) power generation system equipment for Lamma Power Station Extension ¾ Unit 10 (output: 350 megawatts [MW]) to be built in Hong Kong by The Hongkong Electric Co., Ltd. (HK Electric). Under the prime contractor on the project, Mitsubishi Corporation (MC), MHPS will supply the main components of the power plant. Unit 10 is scheduled to commence operation in January 2020.

- 7 January 2016: Mitsubishi Hitachi Power Systems, Ltd. (MHPS), together with Mitsubishi Corporation and PT. Wasa Mitra Engineering (WASA), a local construction and engineering firm, receive turnkey order for a 880 megawatts (MW) natural-gas-fired gas turbine combined cycle (GTCC) power plant from PT. PLN (Persero), Indonesia’s state-owned electricity company. Operation to commence 2018.

- 2 November 2015: MHI Shipbuilding Co., Ltd. receives its first order: a 230m-long, 83,000 cbm very large LPG carrier from Astomos Energy. MHI Shipbuilding Co. Ltd. was launched on October 1 2015 as an MHI group company (consolidating MHI shipyards in the Nagasaki region). Delivery scheduled Q4 2018.

Research and Development Table 11: Research and Development Expenses

Period 2015 2016 Amount (yen in millions) 89,030 106,729


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Samsung Heavy Industries Co., Ltd. (SHI) (KRX: 010140) Investor information: http://www.samsungshi.com/Eng/Invest/fin_highlight.aspx Headquarters: Gyeonggi-do, South Korea Address: 23, Pangyo-ro 227 Beon-gil Bundang-gu, Seongnam, Gyeonggi-do, Korea 134-86 Phone: 82-2-3458-7000 Established: August 5, 1974 Key Executives: Dae Young Park (President, Chief Executive Officer) Tae Hung Chun (Vice President) Hyo Seoup Kim (Executive Director) Number of Employees: 11,897 Number of Shareholders: N/A (as of 31 December 2015, SHI’s largest shareholder was Samsung Electronics, with 40,675,641 shares ¾ equating to 17.6% ownership. Samsung Life Insurance (3.4%), National Pension Service (3.0%), Samsung Electro-Mechanics (2.4%) were the next biggest shareholders. Market Capitalization (mil.): KRW 3,713,162.8 (as on September 25, 2017) Reporting Period: Fiscal Year Ended December 31st Email Notification for Company Results: N/A Company Overview Samsung Heavy Industries (SHI) is a publicly-listed South Korean company founded in 1974, engaged in the shipbuilding, offshore, and electrical and mechanical equipment businesses. In shipbuilding, for the first eight months of 2017, SHI successfully delivered 37 ships valued at $11.6 billion. During the same period, the company also won new orders worth $5.5 billion for 18 vessels. SHI occupies the first position in the market in terms of market share in the technologically advanced LNG carrier market. The company has also built the world’s first Arctic Shuttle-Tanker, and developed other innovative products such as LNG-FSRU, and ships for polar use, such as Arctic Ice-Breaker Container Ships. SHI also builds more conventional ships such as tankers and container ships (up to very large scales, such as 20,150 TEU). In the electrical and mechanical equipment sector, SHI uses the know-how acquired through its shipbuilding and offshore businesses to produce products for a wide range of industrial applications; for instance, automated navigation systems and telecom SI solutions. SHI’s locations are as follows: Domestic: - Head Office 23, Pangyo-ro 227 Beon-gil Bundang-gu, Seongnam, Gyeonggi-do, Korea 134-86 Geoje Shipyard 80, jangpyeong 3-ro Geoje-si, Gyeongsangnam-Do (656-710) Pangyo R&D Center 23, Pangyo-ro 227beon-gil, Bundang-gu, Seongnam-si, Gyeonggi-do (463-400) Daeduk R&D Center 217, Munji-ro Yuseong-gu, Daejeon (305-380)


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Hwaseong Plant 1339, Hyohaeng-ro, Hwaseong-si, Gyeonggi-do (445-330) International: - Two overseas subsidiaries in China, 12 overseas offices in Asia, America, Europe, the Middle East, and Africa. Key Products SHI’s key products derive from its shipbuilding and offshore businesses. It is the world leader in the technologically-sophisticated production of LNG carriers, drillships, and FPSOs. It is also a major supplier of tankers, containerships (including of the latest category of 20,000+ TEU), LNG-SRVs, LNG-FSRUs, LNG-FPSOs, crude oil production and storage facilities, fixed platforms, floating offshore structures, floating production units, offshore development ships, jack-up rigs, and wind turbine installation vessels. High-Tech In terms of cutting-edge, high-tech vessels, the latest product worth mentioning is SHI’s ultra large containerships which was recorded as the world’s largest ship surpassing 20,000 TEU. This 400-meter long vessel, MOL Triumph, is a containership that can transport containers. The eco-friendly ship is accompanied by a range of energy saving equipment designed by SHI including propeller, rubber valve and stator. SHI is expected to deliver ten such 20,000 TEU containership in 2017. Another product worth mentioning is SHI’s next-generation ultra-deepwater 20K BOP drillship. These 228-meter long vessels, classified by the American Bureau of Shipping, are able to operate at depths of up to 3,650 meters, can drill wells of more than 12,200 meters, and are automated to the extent that they can maintain a fixed position in waves of up to 11 meters. Other cutting-edge vessels produced by SHI include: - Arctic Shuttle Tankers — SHI delivered the world’s first ice-breaking oil tanker, Vasily Dinkov, in 2007.

Combining the characteristics of an oil tanker and an ice-breaker, these ships are designed for navigating the icy oceans of the Arctic, with bi-directional ice-breaking technology.

- Arctic Ocean Drillships — In 2007, SHI received the first-ever order for an ice-class +1A1 dual-mast ultra-deepwater drillship designed to exploit deposits in the Arctic Ocean.

- LNG-FPSO — SHI developed its concept of the Liquefied Natural Gas-Floating Production Storage Offloading vessel in 2008. The mammoth Prelude vessel (with the world’s largest hull, at 488m long, 74m wide, 100m high) will be SHI’s first LNG-FPSO, and have the highest production capacity of any LNG-FPSO.

- FPSO — SHI has built the world’s largest number of Floating Production Storage Offloading vessels. These ships are extremely complex; SHI received an order for an FPSO in 2013 for a total construction cost of about US$3 billion.

- LNG carriers — SHI has a particular competency in constructing the complex cargo holds required for transporting high-pressure LNG.


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Stock Price Performance Exhibit 6: LTM Price Performance vs.

Source: marketwatch.com Most Recent Annual Reports 2016 Annual Report: http://www.samsungshi.com/Eng/Common/Downfile/Sustainabilityreport_2016.zip 2015 Annual Report: http://www.samsungshi.com/Eng/Common/Downfile/Sustainabilityreport_2015.zip IR Presentations September 2017: http://www.samsungshi.com/Eng/Handler/RequestFileHandler.ashx?fileName=Ir/SHI_IR_201709_eng(1).pdf August 2017: http://www.samsungshi.com/Eng/Handler/RequestFileHandler.ashx?fileName=Ir/SHI_IR_201708_eng.pdf July 2017: http://www.samsungshi.com/Eng/Handler/RequestFileHandler.ashx?fileName=Ir/SHI_IR_201707_eng.pdf Other Key Financial Data Table 12: Key Financial Data


2016


2015


2014


2013 Revenue (KRW in millions) 10,414,189 9,714,441 12,879,062 14,834,501 Net Income (KRW in millions) -138,777 -1,212,110 147,320 632,205 Net Profit Margin -1.33% -12.48% 1.14% 4.26% Operating Margin -1.41% -15.46% 1.42% 6.16% Return On Assets -0.81% -7.01% 0.86% 3.63% Return On Equity -2.54% -28.41% 2.64% 10.81% Shareholders’ Equity (KRW in millions)

5,470,146 4,265,745 5,573,161 5,845,796

Backlog ($ in billions) 26.7 35.4 34.8 37.5 Key Customers Royal Dutch Shell, Hӧegh LNG, Golar LNG, Maersk, INPEX, Statoil, OOCL, MOL, Gaslog, Ensco, CSAV, Swire Pacific Offshore, Seadrill, Evergreen, Petrobras, CMA CGM, Mitsui O.S.K Lines, Ocean Rig UDW, Nordic American Tanker, Teekay, NYK LNG, Chevron, Stena.


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Recent Orders 18 January 2017: Norway’s Hoegh signs contract with SHI for a 170,000m3 FSRU with a capacity of 70,000 ton LNG storage, the contract comes with three more optional vessels. Price unspecified. 5 January 2017: SHI reports order for semi-submersible production platform valued at US$1.27 billion for GoM Mad Dog Field. 12 October 2016: SHI reports order for four tankers new buildings valued at KRW 240 billion from Norways Viken Shipping. 30 September 2016: SHI reports an order for 180,000 m3 valued at KRW 200 billion. The order comes with validity to build one more carrier.


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COMPANY OVERVIEWS – PRIVATE

Ulstein Group ASA Headquarters: Ulsteinvik, Norway Address: Ulstein Group ASA, 6065 Ulsteinvik, NORWAY Phone: +47 7000 8000 Established: 4 May 1999 Key Executives: Gunvor Ulstein (CEO, Managing Director Ulstein Shipping AS) Tore Ulstein (Chair of the Board, Deputy CEO, COO Design & Solutions) Cathrine Kristiseter Marti (CFO) Kristian Sætre (COO Shipbuilding, Managing Director Ulstein Verft AS) Number of Employees: approx. 600 Company Overview Ulstein Group ASA specializes in ship design and maritime solutions, shipbuilding, power and control, and shipping. Though established in 1999, the company has its roots in the Ulstein Mekaniske Verkstad - a workshop for modification of local fishing boats established in Ulsteinvik by Martin Ulstein in 1917. Ulstein’s business is divided into three domains; Design & Solutions, Power &Control, and Shipbuilding and Shipping. Ulstein focuses on building ships on a turn-key basis for the offshore service segment. Primary types of vessel include offshore support, offshore construction, and seismic and research vessels. Asides from construction at the company’s yard in Norway (with co-operation of the Crist shipyard in Poland), Ulstein also offers shipbuilding and related options at partner yards abroad. Retrofitting, conversion, service and maintenance, repairs, and upgrades are also offered by Ulstein. Ulstein’s locations are as follows: Domestic: - Head Office P.O. Box 158, NO-6067, Ulsteinvik, Norway Shipyards

• Ulsteinvik Other locations (e.g. design centers, marine equipment)

• Ulsteinvik • Ålesund

International: - The Netherlands, Brazil, China, Singapore, Poland, Croatia (e.g. Ulstein Design & Solutions B.V., Vlaardingen, the Netherlands). Key Products Offshore vessels (e.g. subsea, PSV, AHTS), vessel power packages (e.g. propulsion systems), marine mission equipment (e.g. transport and installation of offshore wind turbines, moon poll doors), vessel command and control systems (e.g. complete bridge systems – navigational equipment, radio, etc.)


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High-Tech In terms of cutting-edge, high-tech products, a recent product of note is the largest hybrid vessel of the world namely “Color Hybrid”. A letter of Intent has been signed between Color Line and Ulstein Verft to build this hybrid vessel which is planned to service from summer 2019. The vessel is a plug in hybrid, where the batteries are recharged from their own shore facility via a cable with green electricity or on board by the ships generators. The vessel will be 160 meters long with a capacity of 2,000 passengers and 500 cars. This ship will provide its service in the Sandefjord-Strömstad route. Another cutting-edge, high-tech product is a wind farm construction vessel being built for Netherland based Acta Marine. The vessel named ‘Wind Farm CSV’ will measure 93.4 meters in length, 18 meters in breadth and can accommodate up to 120 people in 80 cabins. The vessel will primarily operate in the offshore wind market and feature Ulstein’s patented X-Stern design, motion compensated gangway system and 3D-motion crane. The vessel is scheduled for delivery in 2018. Other cutting-edge Ulstein products include: Seven Viking — designed and built by Ulstein and delivered in 2013 to co-owners Eidesvik Seven and Subsea 7, this subsea-type vessel incorporates a number of features such as an Ulstein X-Bow hull shape, a specially-designed hangar area, a customized module handling system, diesel electric propulsion, and electrical winches. Siem Moxie — completed by Fjellstrand to an Ulstein design, this offshore wind vessel was delivered to Siem Offshore in 2014. A combination of features such as motion-compensated personnel transfer gangway and roll stabilization for work in unfavorable seas makes it a cutting-edge vessel. Key Customers Seatankers Group, Bourbon Offshore Norway, Nordic American Offshore, Esvagt, Polarcus DMCC, CBO, Neptune Offshore, Bernhard Schulte Offshore, WINDEA.


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Brødrene Aa AS Headquarters: Hyen, Norway Address: 6829 Hyen, Norway Phone: +47 57 86 87 00 Established: 1947 Key Executives: Tor Øyvin Aa (Managing Director) Ole Matias Aa (Financial Director) Number of Employees: approx. 186 Company Overview Brødrene Aa AS (Brødrene Aa) is a private company founded in 1947 in Hyen on the west coast of Norway. It is active primarily in the shipbuilding sector, though it also produces a range of products in reinforced plastic (e.g. subsea covers, train ploughs). It lists its prime focus as the production of fast ferries made of carbon-fiber composites. The company was founded by the brothers Olav Aa and Bertel Aa, with the current directors also being Aas. Brødrene Aa pioneered the use of composite materials for fast ferry applications in the 1970s (with fiberglass composites), and built the world’s first carbon-fiber commercial passenger vessel in the early 2000s ¾ a high-speed ferry. On 16th December 2015, Brødrene Aa signed an agreement with Hong Kong-based Chu Kong Shipping Enterprises (Holdings) Co. Ltd. (CKSE) whereby CKSE was to purchase 40% of the shares in Brødrene Aa. Brødrene Aa’s locations are as follows: Domestic: - Head Office 6829 Hyen, Norway Shipyards

• Hyen Key Products High-speed carbon-fiber ferries, carbon-fiber sight-seeing catamaran. High-Tech In terms of cutting-edge, high-tech vessels, one of Brødrene Aa’s most notable products is not, in fact, a high-speed ferry. Designed by American luxury yacht builder Palmer Johnson for its SuperSport series of cruisers, the hull and superstructure of the 48m PJ265, launched in 2014, was constructed at Brødrene Aa as a special commission. As of August 2015, it was the world’s largest carbon composites superyacht. As carbon composite vessels involve a highly complex and specialized construction method not present at yards even as sophisticated as Palmer Johnson, Brødrene Aa was enlisted for the task. Asides from the novel size of the vessel and the complexity of its construction, it distinguishes itself from other vessels of similar type most notably through the performance gains which carbon composite construction entail. Brødrene Aa claims that the vessel has a structural weight of only one-third that of a comparative structure made of traditional material. Increased speed,


October 2017 46

fuel efficiency, and stability are the result. By nature, carbon composites are also non-corrosive, in contrast to metals. This drives down maintenance costs. The ship is classed by DNV. The company is also building all electric and emission free vessel which is expected to be launched in April 2018. Key Customers Fjord1, Norled, Guangzhou Panyu Lianhuashan Port Passenger Transport Co., Ltd, Torghatten, Veolia Transportation, Boreal Transport, U.T.O. Kapetan Luka, Rodne Fjord Cruise, Kystekspressen, FosenNamsos Sjo, Floro Skyssbat, RS, Hurtigruten, Palmer Johnson. Recent Orders 8 December 2015: Boreal Transport Nord places order for three new carbon-fiber passenger catamarans, two with a length of 24m, the third of 30m length. Delivery during late 2016-early 2017. 30 September 2015: Brødrene Aa wins international tender issued by Guangzhou Panyu Lianhuashan Port Passenger Transport Co., Ltd (subsidiary of Chu Kong Shipping Enterprises Holdings Co. Ltd) of China for the design and build of two identical high-speed carbon-fiber composite coastal catamarans. Length 40.8 m, beam 10.8 m, passenger capacity 270. Delivery scheduled for November 2016 and January 2017. Biggest export-order to-date; entry into Chinese market. 26 June 2015: Brødrene Aa signs contract with Norwegian operator The Fjords AS for a 42m carbon-fiber sight-seeing catamaran. Delivery scheduled for May 2016. First ship in new “Seasight” design series. Merger, Acquisition and Alliance Activity 16 December 2015: Hong Kong-based Chu Kong Shipping Enterprises (Holdings) Co. Ltd. (CKSE) signs agreement with Brødrene Aa for the purchase of 40% of the shares in Brødrene Aa AS. Awaiting final approval by respective companies’ Board of Directors. As a result of the purchase, CKSE is to establish a new shipyard in mainland China for construction and outfitting of vessels based on Brødrene Aa design/technology. Brødrene Aa, for its part, will establish a company in Hong Kong to assist the setting-up and running of the new CKSE yard, as well as handling engineering, sales, and marketing tasks. 19 October 2015: United States shipyard Front Street Shipyard announces partnership with Brødrene Aa to design, construct, market, and sell carbon-fiber ferries throughout the United States under the company name Arcadia Alliance. Envisaged customers are state and federal agencies seeking to replace ageing, inefficient, and aluminium or fiberglass passenger vessels. The aim is to build the ships at Front Street Shipyard’s US facilities, starting in 2016.


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Fjellstrand AS Headquarters: Omastrand, Norway Address: Omavegen 225, 5632 Omastrand, Norway Phone: +47 56 55 76 00 Established: 1928 Key Executives: Hans Martin Gravdal (Managing Director) Dag Skår (Finance Manager) Number of Employees: approx. 100, plus subcontractors Company Overview Fjellstrand AS (Fjellstrand) is a private company founded in 1928 in Omastrand on the west coast of Norway. It is active in the shipbuilding and offshore sectors, and related areas (such as ship repair). It lists a prime focus as the development, construction, and marketing of high-performance aluminum vessels. Fjellstrand is owned by Cinus AS of Norway. Fjellstrand’s locations are as follows: Domestic: - Head Office

• Omavegen 225, Omastrand, 5632, Norway Shipyards

• Omavagen Key Products Ferries, offshore survey vessels, PSV, ROV/Construction, windmill support vessels. High-Tech In terms of cutting-edge, high-tech vessels, a recent product that the company is working on is the construction of a fully automatic and unmanned offshore vessel. The project is being undertaken in collaboration with UK’s Automated Ships Ltd and Norway’s Kongsberg Maritime. The vessel is expected for delivery in 2018. The company’s other high-tech vessels include offshore special vessels such as platform supply vessels, survey vessels, multipurpose subsea construction vessels and seismic vessels. Notable products include 1) Havyard 832CD, a 78.5 m long platform supply vessel, 2) MT 6022 XL, 115.4 m subsea construction vessel, 3) Wartsila VS, a 85 m platform supply vessel. Another particularly notable product is Fjellstrand’s 80m long, 20.8 m wide ZeroCat, a fully electric battery driven ferry. Designed by Fjellstrund and built in conjunction with Aluship Technology of Poland, the first ship of this class, Ampere, was delivered in January 2015 to Norled. It is the first large fully electric vessel in the world. According to DNV GL, the electric propulsion system of the ship (including electric motors from Siemens and modules from Corvus Energy) prevents 2,640 tonnes of carbon dioxide from entering the atmosphere each year, as well as eliminating emissions of particulate matter.


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The superlative novelty and environmental compliancy of this vessel, whose efficiency is increased via a weight-saving aluminium hull and superstructure (which also requires less maintenance), earned it the Seatrade Clean Shipping Award for 2015, as well as The Environmental Technology Award 2015 (hosted by Lloyd’s Register). Able to carry 120 cars and 360 passengers, to recharge from grid-connected stations (supported by battery buffers) at either ferry pier in approximately ten minutes, and with a current (2015) operating run of about 34 trips per day, the ship is furthermore operationally viable, representing a genuine alternative to conventionally-powered ferries. Indeed, the classification society responsible for classing the ship, DNV GL, has claimed that this ship represents the first in what will likely become a majority of medium- to large-sized ferries incorporating battery technology in operation by 2020. Fjord 1 has signed a contract with Fjellstrand for the designing and building of a fully electric, battery powered ferry of the ZeroCat type. This is a larger and further developed version of the MF Ampere. The new vessel will be equipped for both higher speed and longer range. The vessel can carry 120 cars, 12 trucks and 296 passengers. The delivery is anticipated in 4Q 2018. Key Customers Norled, World Marine Offshore, Norside. Recent Orders November 1, 2016: The UK’s Automated Ships Ltd and Norway’s Kongsberg Maritime plan to build an unmanned and fully automated vessel for offshore operations. The vessel to be named Hronn will be constructed by Fjellstrand AS. The vessel is scheduled for delivery in 2018. 2 October 2015: Fjellstrand signs contract with Norside AS for conversion of its ship Vestland Cygnus. Delivery scheduled for June 2016. Contract value approximately NOK 150 million.


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Fr. Lürssen Werft GmbH & Co. KG (Lürssen) Headquarters: Bremen-Vegesack, Germany Address: Zum Alten Speicher 11,28759 Bremen-Vegesack, Germany Phone: +49 (0)421 6604 166 Fax: +49 (0)421 6604 170 Established: 27 June, 1875 Key Executives: Timm Grotheer (Managing Director) Peter Lürßen (Managing Director) Tim Wagner (Managing Director) Frithjof Schmidt (Managing Director) Dr. Klaus Borgschulte (Managing Director) Dirk Malgowski (Managing Director) Company Overview Fr. Lürssen Werft GmbH & Co. KG (Lürrsen) is a private, family-owned company founded in 1875 by Friedrich Lürssen in Aumund, near Bremen, Germany. Its primary business is building and maintaining naval vessels, and luxury yachts for private use. The company has 8 locations in Germany – Vegesack, Lemwerder, Aumund, Rendsburg, Wilhelmshaven, Berne, Hamburg, Wolgast. In 2013, Lürssen delivered the longest private yacht in the world, Azzam, at 180 meters. In terms of naval vessels, the company builds vessels for defense forces around the world, with products including fast patrol boats, OPVs, corvettes, frigates, minesweepers and minehunters, and fleet support vessels. It also licenses construction of vessels to third parties. Over the past fifty years, the naval segment has delivered 170 ships for Germany, 158 for export, and licensed out the construction of 85 further ships. In 2016, Lürssen delivered the biggest motor yacht in the world in gross tonnage, Dilbar, at 156 meters. Lürrsen’s locations are as follows: Domestic: - Head Office Zum Alten Speicher 11, 28759 Bremen-Vegesack, Germany Shipyards

• Lemwerder • Aumund • Rendsburg • Wilhelmshaven • Berne • Hamburg • Wolgast • Vegesack

Key Products Mega yachts and naval vessels.


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High-Tech In terms of cutting-edge, high-tech non-naval vessels, a recent product worth mentioning is the 85 m superyacht ‘Areti’. The company delivered the vessel on July 19, 2017. The vessel boasts of steel hull and aluminium superstructure built to Lloyd’s Registry standards and is PYC compliant, meaning up to 18 guests can be accommodated in nine cabins. Another product worth mentioning is the 156-meter-long yacht Dilbar. It is the world’s largest yatch by volume. Aside from record-breaking weight, the yacht can cruise to a speed of 22.5 knots thanks to its diesel electric power plant installed on board. The Dilbar was built for Russian Businessman, Alisher Usmanov as a replacement for his previous yacht. The yatch contains two helipads, one on the bow and another on the sundeck. The total construction was completed just over 52 months. Another product worth mentioning is the 180-meter-long superyacht Azzam. At the time of delivery in 2013, it was the longest private motor yacht in the world. Aside from record-breaking length, the yacht’s advanced design allows it to reach speeds of 30+ knots, which is truly novel for a yacht of this size. World-leading efficiency was evident during the construction process, which was engineered in one year and built in only three. In comparison, the total construction process for the (as of Azzam’s launch date) second-longest yacht in the world, Eclipse, took about five years. Key Customers Royal family of Abu Dhabi, Royal family of Dubai, the Sultan of Oman, Royal family of Saudi Arabia, Royal family of Qatar, Larry Ellison, German Navy, Saudi Coast Guard, Tunisian Navy, Thai Navy.


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German Naval Yards Holdings GmbH Headquarters: Kiel, Germany Address: Werftstraße 110, 24143 Kiel, Germany Phone: +49 431 239 32 0 Fax: +49 4331 207 788 Established: 2014 Key Executives: Susanne Wiegand (Managing Director) Holger Kahl (Managing Director) Number of Employees: approx. 1000 Company Overview German Naval Yards Holdings GmbH (German Naval Yards) is a private, wholly-owned subsidiary of Beirut, Lebanon-based worldwide shipbuilding group Privinvest Holding sal. German Naval Yards owns and jointly manages three German shipyards – Nobiskrug GmbH (Rendsburg), German Naval Yards Kiel GmbH (Kiel-Gaarden), and Lindenau Werft GmbH (Kiel-Friedrichsort). Resources are transferred between the yards as necessary. Nobiskrug GmbH (Nobiskrug) is primarily focused on superyacht design and construction, in particular on yachts of over 60 meters in length. It also constructs, modifies, and repairs naval and commercial vessels, as well as building steel structures such as lock gates and products for the offshore industry. The yard was founded in 1905, and as of October 2015 had built over 750 ships. German Naval Yards Kiel GmbH (GNY Kiel) is specialized in the design and construction of large naval vessels such as frigates, corvettes, and offshore patrol vessels, both for the German and for overseas navies (e.g. Israeli Navy). Lindenau Werft GmbH (Lindenau) has been active for a number of decades in the construction and repair of ships of all types. Today it is active in the repair, refit, and conversion of commercial, government, and naval vessels. German Naval Yards’s locations are as follows: Domestic: - Head Office Werftstraße 110, 24143 Kiel, Germany Shipyards

• Rendsburg • Kiel-Gaarden • Kiel-Friedrichsort

Key Products Mega yachts and naval vessels. High-Tech In terms of cutting-edge, high-tech non-naval vessels, a recent product of particular note is the 142.8-meter-long sailing yacht Sailing Yacht A (also known as White Pearl). One of the world’s largest superyacht has been delivered


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in February 2017. The Twin 4,827 hp MTU diesel engines will give a top speed of 21 knots, while a cruising speed of 16 knots should return a transatlantic range of 5,320 nautical miles. Asides from its length, a further world-leading novelty of the yacht is its three masts; according to Nobiskrug, at 100 meters, the tallest freestanding composite masts ever built for a sailing yacht. Highly complex structures given the novel dimensions of the vessel, the masts’ development time amounted to three years and required the input of 70 specialists, according to constructor Magma Structures (England). Key Customers Andrej Melnitschenko, German Navy, Israeli Navy, Algerian Navy, Vattenfall.


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Gobbler Boats Ltd Headquarters: Wingrave, United Kingdom Address: 68 Winslow Road, Wingrave, Aylesbury, Buckinghamshire, HP22 4QB, United Kingdom Phone: +44 (0) 2080 040992 Fax: +44 (0) 1296 682779 Email: [email protected] Established: 2009 Key Executives: Paul Jauncey (Managing Director) Jose Suarez (USA Director) Company Overview Gobbler Boats Ltd. (Gobbler Boats) is a private company established in 2009 in England, UK. The company was founded with the aim of responding to what its founders (Paul Jauncey and Jose Suarez) deemed a pressing worldwide need for a new oil spill recovery solution. The company has various products like patented Gobbler Offshore 290 OSRV, as well as associated products (e.g. OilSep™ for separating water from recovered oil). Key customers which the company focuses on are oil companies, commercial shipping companies, governments, militaries, agencies, contractors, marinas, and individual oil spill recovery operators worldwide. Gobbler Boats states that it is committed to ongoing research and product development in the area of environmental protection. Gobbler Boats’s locations: Domestic: - Head Office 68 Winslow Road, Wingrave, Aylesbury, Buckinghamshire, HP22 4QB, United Kingdom Shipyards/factory facilities

• Portsmouth (planned - as of 2015) International: - Arizona, USA. (shipyard/factory facility – planned, as of 2015), San Diego, California (USA. representative office), Porvoo, Finland (representative office for Nordic/Baltic countries). Key Products Gobbler Offshore 290 OSRV. High-Tech Gobbler Boats’s 8.85m-long Gobbler Offshore 290 OSRV is a cutting-edge, high-tech vessel within the oil spill recovery vessel category. The radical oil-skimming technology and the flexible deployment options are what position this vessel at the forefront of oil spill recovery. The oil-skimming technology is radical in that recovered oil (which Gobbler Boats claims is 98-100% water free) is not actually stored aboard the vessel. Rather, it is pumped into detachable bladders which the boat trails behind it during the clean-up operation. Instead of having to make constant trips back to shore to offload recovered oil ¾ as per conventional OSRVs ¾ the Gobbler OSRV simply detaches full bladders for later recovery and begins afresh with a new bladder.


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This radical technology allows round-the-clock operation (with mothership support for refueling and crew changes) in that an in-theory endless set of bladders can be continually attached and released. Aiding the OSRVs operations are Gobbler Boats’s “bladder collection points”. These are floating pods/buoys which store both empty, yet-to-be-used bladders, and full bladders (detached from the OSRV). These pods also have an internal pump so that the oil from full bladders can be pumped to a mothership, thus freeing up bladders for re-use. There is also a Gobbler OSRV refueling facility aboard each pod. The efficiency gains from this unique, disruptive technology consists in for instance time saved in not having to transport recovered oil back to shore, and associated fuel savings. Gobbler Boats claims that its OSRV can recover nearly 2,700 barrels of oil per day, with a 600%+ improvement in efficiency compared to similar OSRVs. The bladder system also brings cutting-edge improvements in safety; in the event of fire, a bladder can be detached and the crew can accelerate away into safety ¾ the dangers of onboard oil storage are eliminated. The flexible deployment options of the Gobbler OSRV are a further feature of the vessel bringing efficiency gains. Characteristics such as its comparatively low weight (fiberglass construction, 3.5 tonnes), short length, and detachable wheelhouse allow it to be transported easily by trailer, ship, and aeroplane. In terms of ships, the Gobbler can be launched from a special cradle. It can also be launched from oil platforms. The Gobbler Offshore 290 OSRV is structurally certified by Lloyd’s Register and by the US Coast Guard for use up to 150 n.m. offshore. It won the Spirit of Innovation and Vessel Design & Construction Awards at the Sea Work 2015 International awards ceremony. It is also a Royal Institution of Naval Architects Significant Small Ship of 2015.


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Incat Tasmania Pty Ltd. Headquarters: Hobart, Australia Address: 18 Bender Drive, Derwent Park, Hobart, Tasmania 7009, Australia Phone: +61 3 6271 1333 Email: [email protected] Established: 1977 Key Executives: Robert Clifford (Founder and Chairman) Craig Clifford (Managing Director) Kim Clifford (Managing Director) Company Overview Incat Tasmania Pty Ltd. (Incat) is a private Australian company founded in 1977, with roots in local boatbuilding companies around the city of Hobart, Tasmania – including in the Sullivans Cove Ferry Company (founded 1972) and International Catamarans Pty Ltd. It is part of a group of privately-held companies including Incat Holdings Ltd., Incat Australia Pty Ltd., Incat Chartering Pty Ltd., and Incat Marketing Pty Ltd. Group shareholders comprise founder of Incat and chairman of Incat Holdings Ltd. Robert Clifford, the Clifford family, company directors, and employees. Incat’s predecessor companies were active in small ferry operation, the construction of conventional steel mono-hull vessels, and, afterwards, in the construction of fast ferries – in particular, those built from aluminium and with International Catamaran’s Wave Piercing hull design. Today, Incat specializes in the construction of high-speed light-weight aluminium catamarans - for civil (ferry, special purpose e.g. oil and gas industry) and military use (e.g. high-speed military support vessels for the US Army and Navy). Incat describes itself as the world’s leading fast passenger/car ferry builder, and as the world’s largest fast ferry builder by both quantity of ferries (ordered and delivered) and revenue. Since 1990, Incat has held the Hales Trophy for the fastest transatlantic crossing by a passenger ship. Incat’s locations are as follows: Domestic: - Head Office 18 Bender Drive, Derwent Park, Hobart, Tasmania 7009, Australia Shipyards

• Hobart Other sites (e.g. design centers, plate shop)

• Hobart Key Products High-speed catamarans for commercial and military use.


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High-Tech In terms of cutting-edge, high-tech vessels, the most recent is the new 109 meter high speed passenger ferry being built for the company, Naviera Armas. The vessel is expected for delivery in 2019. The ferry will be able to clock speed up to 35 knots and carry 1200 passengers and 390 cars. Another high-tech significant vessel is the 99-meter-long dual-fuel high-speed Ro-Ro ferry Francisco. Operating on the Rio de la Plata between Argentina and Uruguay for the Argentinian company Buquebus, Francisco is the world’s first large high-speed ferry to use LNG as the primary fuel. It has been delivered to Buquebus in December 2016. The status of LNG as the cleanest burning of the three primary fossil fuels (oil, coal, gas) makes Francisco a significant achievement in the development of more fuel-efficient, emission restrictions-compliant large passenger ships. In addition to its novel employment of LNG, Francisco is exceptionally fast. This makes it exceptionally efficient in the sense of the number of trips it is able to make. Incat claims that she was able to achieve a lightship speed of 58.1 knots at 100% MCR while operating fully on LNG – for a ship of this size and utility, a world-leading achievement. Normal operating speed of the ferry is still a very fast 50+ knots. Incat attributes the ship’s speed to a combination of its wave piercing catamaran design (by Incat), the use of lightweight marine-grade aluminium, the gas turbines, and its waterjets. The supply chain for Incat’s ship included local and domestic suppliers, and international companies such as Wӓrtsilӓ of Finland (waterjets) and General Electric (gas turbines). Francisco was awarded a 2014 Shippax Award for “being the first large high-speed ferry powered by LNG.” It was also a Royal Institution of Naval Architects Significant Small Ship of 2013. The company plan to build a new high-speed ferry to carry passengers and freight between King Island, Victoria and mainland Tasmania. It will be a 112m, high-speed vessel which will boost the freight and tourism industries on King Island and is expected to be delivered by 2019/2020. Other cutting-edge Incat vessels: Muslim Magomayev — delivered to Caspian Maritime Services in 2014 for the purpose of transporting workers to offshore platforms in two of Azerbaijan’s oil fields, Muslim Magomayev is Incat’s first vessel custom-built for the oil and gas sector, and is described by the company as the world’s largest fast crew transfer and offshore support vessel. The aim is to provide a more cost-effective means of crew transfer/platform support than that provided by helicopters. A Royal Institutional of Naval Architects Significant Small Ship of 2014. Key Customers Caspian Maritime Services, Buquebus, US Army and Navy, Mols Linien, Manly Ferries, Harbour City Ferries (Sydney), MBNA Thames Clipper Line Limited.


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Meyer Werft GmbH & Co. KG Headquarters: Papenburg, Germany Address: Industriegebiet Süd, 26871 Papenburg, Germany Phone: 04961 81-5665 Fax: +49 49 61 / 81-43 00 E-Mail: [email protected] Established: 1795 Key Executives: Bernard Meyer (Managing Director) Lambert Kruse (Managing Director) Tim Meyer (Managing Director) Dr. Jan Mayer (Managing Director) Number of Employees: Approximately 3300 Company Overview Meyer Werft GmbH & Co. KG (Meyer Werft) is a private shipbuilding company. Beginning in the late 18th Century with the construction of wooden ships, the company has over the years constructed steam ships, fishing boats, pilot boats, gas tankers, and Ro/Ro ferries ¾ among other vessel types. Today, the company has a global reputation in the field of large cruise ship construction, while continuing to build car and passenger ferries, Ro/Ros, gas tankers, and research ships. Meyer Werft is part of a larger German and European network of companies belonging to the Luxembourg-registered, Meyer family-controlled holding company Meyer Neptune GmbH. Meyer Werft’s sister companies, Neptun Werft GmbH & Co. KG (Neptun Werft) (with headquarters in Rostock, Germany) and Meyer Turku Oy (Meyer Turku) (located in Turku, Finland) are the other constituents of this company. Neptun Werft, founded in 1850 and acquired by the Meyer family in 1997, is today specialized in the construction of river cruise vessels, though it also builds ferries, gas tankers, and key parts for LPG tankers. Meyer Turku was founded in 1737 and acquired by the Meyer family in 2014, specializing today in building cruise ships, car-passenger ferries, and special vessels. Meyer Werft’s locations are as follows: Domestic: - Head Office Industriegebiet Süd, 26871 Papenburg, Germany Shipyards:

• Papenburg • Rostock (Neptun Werft)

International : - Turku, Finland (Meyer Turku). Key Products Large cruise ships


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High-Tech In terms of cutting-edge, high-tech products, a recent vessel is a new LNG powered cruise liner being built for Carnival Corporation. The cruise liner is expected to weigh about 189,000 gross tonnages and will have 2500 cabins. It will be delivered by end of 2018. Similarly, Royal Cruise Caribbean Cruise has also ordered two LNG powered cruise vessels. They will be delivered by 2020 and 2024 respectively. Another vessel of note is the Meyer Turku (formerly STX Finland)-built 2800-passenger ferry Viking Grace, delivered to Viking Line in 2013. Intended for regular service between Finland and Sweden, this is the world’s first LNG-fueled large passenger ship. The status of LNG as the cleanest burning of the three primary fossil fuels (oil, coal, gas) makes Viking Grace a significant achievement in the development of more fuel-efficient, emission restrictions (ECA)-compliant large passenger ships. It already meets all known future emission regulations. In recognition of its first-in-world environmental contribution, the ship was for instance nominated for the Energy Efficiency Award at the Nor Shipping Awards 2013. It was also a Royal Institution of Naval Architects Significant Ship of 2013, and won a 2013 Shippax Award. A ship of such novelty naturally required an advanced supply chain network; as one example, ABB of Switzerland supplied the entire electrical power plant and propulsion system, as well as its energy management system EMMA. Key Customers Carnival Corporation plc, Norwegian Cruise Line Holdings Ltd., Royal Caribbean Cruises Ltd., Viking Line, AS Tallink Group, Saga Group, German government, Viking River Cruises, Harpain Reederei, AIDA Cruise. Recent Orders 22 Sep 2017: Saga Cruises firmed the option for a second new build named ‘Spirit of Adventure’. It is due for delivery in 2020. 7 May 2017: Royal Caribbean Cruise confirms a contract with Meyer Turku (subsidiary of Meyer Werft) for the construction of a two LNG-powered cruise ships. The vessels are schedule for delivery in 2020 and 2024. 21 February 2017: AIDA Cruise confirms a contract with Meyer Werft for the construction of LNG powered cruise liner. The cruise liner is expected to weigh about 189,000 gross tonnages and have a space of 250 cabins. It will be delivered by end of 2018.


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Royal Huisman Shipyard B.V. Headquarters: Vollenhove, Netherlands Address: Flevoweg 1, PO Box 23, 8325 ZG, Vollenhove, Netherlands Phone: + 31 527 24 3131 Fax: +31 527 24 3800 Email: [email protected] Established: 1884 Key Executives: Roemer Boogaard (Managing Director) Harmen Peters (Finance Director) Jaap Gelling (Technical Director) Number of Employees: approx. 330 Company Overview Royal Huisman Shipyard B.V. (Royal Huisman) is a private, family-owned Dutch company established in 1884. The current executive director, Alice Huisman, represents the fifth generation of the Huisman shipyard-owning family. On 1April 2017, Alice Huisman has step down from all responsibility and the planned succession is completed with the final transfer of the family shareholding to Royal Doeksen. Royal Huisman was originally founded by Jan Jans Huisman at Ronduite, Netherlands, with the purposes of building small wooden fishing vessels and workboats. Wooden sailboats were also built by the company. Today, the company builds and refits custom superyachts, sail or motor, with lengths of 30-90m. Royal Huisman’s locations are as follows: Domestic: - Head Office Flevoweg 1, PO Box 23, 8325 ZG, Vollenhove, Netherlands Shipyards

• Vollenhove International: - Emeden Dockyard, Germany, HJB, Amsterdam, Royal Huisman USA, Ogunquit, Maine, USA (representative office). Key Products Custom superyachts. High-Tech In February 2017, Royal Huisman completed the delivery of a high-tech yacht named ‘Ngoni’. Ngoni better known as The Beast boasts of a 58-meter sloop and powerful 71-meter rig which demands high forestay. It is also the last design project of Late Ed Dubois. Ngoni is a perfect example of innovative design, efficiency in tandem with simplicity, performance without compromising accommodation, clever engineering and bold styling. Royal Huisman’s two hybrid sailing vessels, the 58m Ethereal, delivered in 2009, and the 46m Elfje, delivered in 2014, represent a groundbreaking entry by the company into the hybrid superyacht realm. Ethereal was at launch the world’s first hybrid superyacht.


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Ethereal’s world-first hybrid propulsion system, including for instance the use of propellers to generate power under sail and the integration of 400 kWh lithium-iron-phosphate batteries, entailed the use of non-standard equipment and solutions, with a production time stretched over a number of years resulting from a trial-and-error application of these new technologies at the Royal Huisman shipyard. Preceding this, a three-day design charrette had been held where Royal Huisman engineers, alongside outside experts, academics, and suppliers developed design solutions. The vessel is capable of raising anchor, departing its mooring, and setting sail completely without the use of its engines or generators. On top of its hybrid propulsion system, Ethereal’s focus on energy-saving meant that additional design novelties are featured ¾ for instance, shipyard engineers developed new insulating materials for the hull. Ethereal won the Design & Technology Award at the ShowBoats Design Awards 2011. Elfje represents a further development of the hybrid superyacht concept first explored with Ethereal. The hybrid power system was developed by Royal Huisman’s in-house team alongside Whisper Power. A light-weight Li-ion “peak shaving” battery pack is incorporated. Key Customers Bill Joy, Jim Clark, etc. Recent Orders Royal Huisman has recently announced the signing of a new 81 meters sailing yacht to an Asian client. The new yacht is known as “The Outside World” is expected to be delivered by 2020. Strategic Alliances 26 July 2017: Royal Huisman has entered into a partnership with Palma based P&G Yachting, renowned for their bespoke support services to the yachting industry, to expand their activities and portfolio in Palma.


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Selfa Arctic AS Headquarters: Harstad, Norway Address: Rødskjærveien, 9430 Sandtorg, Harstad, Norway Phone: +47 46 97 33 00 Fax: +47 77 04 14 81 Email: [email protected] Established : 1987 Key Executives: Erik Lanssen (President and CEO) Company Overview Selfa Arctic AS (Selfa) is a private Norwegian company established in 1987. It constructs coastal fishing vessels under 15 meters in length, with a specialization in vessels between 9.5m-12m. In 1997, the company purchased Viksund in Harstad, and with this began the international export of its fishing vessels. The company, based in Harstad in the north of Norway, has two additional branches in Trondheim, Norway. Selfa’s locations are as follows: Domestic: - Head Office Rødskjærveien, 9430 Sandtorg, Harstad, Norway Shipyards

• Trondheim • Harstad

Other sites (office)

• Trondheim Key Products Coastal fishing vessels under 15m in length. High-Tech In terms of cutting-edge, high-tech vessels, a significant Selfa product is the 11-meter long coastal fishing vessel Karoline – delivered in 2015 to Norwegian fishing company Øra AS. Designed and built by Selfa, Karoline is the world’s first battery-driven fishing vessel. The vessel represents the first electrically-powered alternative to conventional diesel-powered fishing boats. It is designed to operate for a full working day of ten hours, and to be charged overnight. The novelty of Karoline’s power system required an exceptionally long design phase, Selfa having spent seven years working on a hybrid fishing boat concept. Industry partners were also required, with marine and heavy industry battery system experts Corvus Energy (Canada) providing the battery system and Siemens (Germany) providing the BlueDrive PlusC hybrid propulsion system. Asides from its novelty and complexity, the ship is also obviously exceptionally compliant ¾ meeting all emissions requirements ¾ and efficient, due to significantly reduced fuel costs for electricity in comparison to diesel.


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Though designed to operate for a full fishing day, it must be noted that battery technology is still developing and as such the boat carries a diesel generator in case variables such as rough weather or a heavy load of fish come into play. According to Erik Lanssen, CEO of Selfa, the boat’s proportion of total power generation assigned to its batteries might therefore be reduced to (a minimum of) 70%. Karoline is a Royal Institution of Naval Architects Significant Small Ship of 2015. Key Customers Øra AS, Stig Tore Soldtad.


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Umoe Mandal AS Headquarters: Mandal, Norway Address: Gismerøyveien 205, N-4515 Mandal, Norway Phone: + 47 3827 9200 Fax: +47 3826 0388 Email: [email protected] Established : 1989 Key Executives: Tom Harald Svennevig (CEO) Petter Andreas Pedersen (Finance) Svein Rune Stiland (Vice President Composite Production) Peter Reed-Larsen (Vice President Services) Company Overview Umoe Mandal AS (Umoe Mandal) is a privately-held Norwegian company established in 1989. Part of the shipbuilding and engineering cluster in the southern city of Mandal, Umoe Mandal was upon founding named Kværner Båtservice, focused on composite ship and component production. The privately-owned Norwegian industrial investment company Umoe AS acquired the company in the year 2000; Umoe Mandal is a 100% owned-subsidiary of Umoe AS. Umoe Mandal develops and produces advanced composite products for the maritime, oil & gas, and naval sectors. It specializes in lightweight ship design and in the development and production of various composite structures, components, and equipment packages (e.g. composite naval gun copulas). The company also constructs, maintains, and modifies vessels for the Royal Norwegian Navy; for instance, the ultra-high-speed Skjold-class coastal corvettes. One of the latest and for the company most important projects is its development of the WaveCraft concept for the offshore wind farm industry, including construction of vessels incorporating this design. Umoe Mandal is 100% owner of subsidiary companies Umoe Advanced Composites AS, Umoe Mandal real estate AS, and Umoe Mandal Inc. Umoe Mandal’s locations are as follows: Domestic: - Head Office Gismerøyveien 205, N-4515 Mandal, Norway Shipyards

• Mandal Other sites (e.g. design facility)

• Mandal International: - Washington, USA (Umoe Mandal Inc.) (marketing office) Key Products Offshore wind farm support vessels, lift fans for surface-effect vessels, composite components for naval and offshore industry applications (e.g. composite air pressure vessels for use in heave compensation systems).


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High-Tech In terms of cutting-edge, high-tech commercial vessels, a central product of note is Umoe Mandal’s series of WaveCraft offshore wind farm support vessels. In April 2017, Umoe Mandal launched WaveCraft Voyager 32 - the seaborne helicopter. It is a high speed, all composite service vessel for a fast crew transport and offers offshore operators an economical and safe alternative to helicopters. The high-speed Voyager 32 is capable for a speed of 50 knots. The first of the Wavecraft series vessels, a 27.4-meter long Umoe Ventus, was launched in February 2015, and is the first to incorporate Umoe Mandal’s WaveCraft design. With WaveCraft’s roots in a design used by the Royal Norwegian Navy, these surface effect ships (SES) utilize an air cushion to lift 80% of the vessel out of the water during transit, significantly reducing wave-induced motions and greatly increasing the operational window for workers to access offshore wind turbines ¾ wind farm accessibility is said to be increased by at least 20% compared to conventional vessels. The company also claims novel capabilities such as significantly higher speed than competing designs (40+ knots), and the ability to operate at a draught of only 1m. The WaveCraft air cushion system was developed by Umoe Mandal engineers alongside researchers from The Norwegian University of Science and Technology (NTNU) and Queensland University of Technology (QUT). Results of the design have been published in the journal Control Engineering Practice (December 2015). Key Customers Royal Norwegian Navy, DONG Energy, US Navy


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KEY REFERENCES

Clarksons Research Services Ltd Clarksons Research is respected worldwide as the most authoritative provider of intelligence for global shipping. http://www.clarksons.com IHS Fairplay http://fairplay.ihs.com/ IHS Fairplay is a weekly magazine and is the world’s trusted source of maritime information. Verband für Schiffbau und Meerestechnik (VSM) VSM is an association of companies and other stakeholders in the German maritime industry. http://www.vsm.de/ Innovation Center Denmark (ICDK) ICDK helps Danish businesses, startups as well as knowledge and research institutions with access to international knowledge and innovation environments. http://www.icdk.um.dk/ European Ships and Maritime Equipment Association (SEA) SEA Europe, the European Ships and Maritime Equipment Association is the voice of the European maritime technology industry. http://www.seaeurope.eu/ Institute of Shipping Economics and Logistics (ISL) ISL, a non-profit entity, is one of the leading maritime research and consulting institutes in Europe. https://www.isl.org/

High-Tech Shipbuilding October 2017 - Macrosource Media · HIGH-TECH SHIPBUILDING MARKET REPORT...

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