Dkg management presentation usd 2008 update

DK Group Management Presentation

March 2008

Legal notice

Confidentiality All information and documentation provided during the current presentation is subject to the Confidentiality Agreement signed with DK Group (the “Company”), and is to be considered confidential Company information as defined in the Confidentiality Agreement.

Disclaimer This presentation contains forward-looking statements as of the date of such statements. Such forward looking statements involved known and unknown risks, uncertainties and other fars which may cause the actual results, financial conditions, performance or achievements of the company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, any person to whom the current presentation is addressed is cautioned not to place any undue reliance on such forward-looking statements and to review and analyse the same with its legal, financial and economic advisors.

Such forward-looking statement therefore do not constitute in any manner an undertaking and/or commitment or guarantee as to the future business of the Company.

1 Introduction and key investment features

2 Business profile

3 Technology and product characteristics

4 Market and customers

5 Strategy

6 Financials

7 Q&A

Agenda

1. Introduction and key investment features

• Established in 2000 DK Group develops and markets fuel saving technologies and vessel designs to the global shipping and shipbuilding industries

− DK Group has developed a unique and patented technology/design for the commercial ship building industry, the air cavity system (ACS)

• Numerous tank tests on DK Group-vessel models support bunker consumption reduction of 5% to 15% from applying the ACS technology on different vessel classes

─ Tests are carried out together with leading market participants and potential customers

• Savings translate directly into financial benefits as well as a cleaner environment from reduced CO2 emission and reduced emission of other greenhouse gasses

Introduction to DK Group

Vessel orders

Financial projections

Units

USDm

Market share

DK Group’s addressable market Sizable market value from few units

Source: Delivery dates, Maersk Broker, DK Group

Market size

Units USDbn

Tanker vessels

Containerships

Bulk carriers

LNG/LPG vessels

Target vessel classes and types

925

1,140

1,314

54

79

89

83

122

83

122

137

Key milestones 2007/08

DK Group secured the first order from a European shipowner for 4xVLBC of USD 100m each

– The order is a significant step towards proof of concept and confirms that the shipping market is ready and willing to order new ships with the ACS technology

– Project pipeline established leading to new orders in 2008

DK Group received an important classification of the ACS technology (Germanischer Lloyd)

The ACS demonstrator vessel was acquired and reconstructed

– The project is supported by key industry players

Shipowners have shown willingness to compensate for development cost, reducing CAPEX per project

DK Group received significant political and industrial interest

DK Group raised first round venture capital in a private placement process

DK Group appointed a professional non-executive board of directors

2008 projects

Maersk Broker and DK Group tour Asian shipyards and European shipowners

- Tank project already initiated with international, Nordic-based shipowner

- Container project already initiated with international, German-based shipowner

Opportunity to win additional orders during 2008 in accordance with the business plan

DK Group commences tank testing of large container vessels for European shipowner

M/V ACS Demonstrator retrofits to be completed

– It is expected that it will deliver final proof of concept in 2008

– In Q2/Q3 2008 the ACS demonstrator vessel will undertake a large-scale ocean-going demonstration

– ACS Demonstrator

- Shipowners, shipyards, shipping industry, government and environmental organisations participate in the ACS Demonstrator

DK Group vessel design is to be approved for Carbon/CO2 emission in project run together with shipowner

Development phases and funding requirements

Establishment of DK Group

Conceptualising

Core technology development

Initial proof of concept

Final proof of concept

Company mature

Seed capital Final funding round & listing

Target exit time for existing

shareholders

2000

• Tank testing

• Initial design

• Design phase

• Tank testing

• Industry partners

• 1st orders

• Demonstrator

• Classification

• Corp. governance

• Industry acceptance

• Market standard

Venture funding round

2002 2004 2006 2008 2010 2012 Time

Maturity/value

Private funds

Key investment considerations

In order to reach the target customers comprising about 25 shipyards and 30 shipowners within short time, DK Group has signed a global sales channel/distribution agreement with one of the largest ship brokers worldwide, Maersk Broker

Partnership with world-leading ship

broker

One of the leading classification companies, Germanischer Lloyd has already classified the M/V ACS Demonstrator and is working with DK Group on its progressed projects

Recognised technology in the marine industry

Calculations show that if DK Group’s ACS technology was applied to the current global fleet of target vessel classes, an annual CO2 reduction of approximately 64million tons would be achieved. This would equate to potential emission tax savings of around USD 1,200m at USD 20 per ton (Kyoto protocol)

Fuel usage and CO2 emission reducing

technology

The analysis highlights that an investment in DK Group’s ACS delivers an IRR of 30% and a payback period of around 3 years for an Aframax tanker. Similar calculations for an 8,000 TEU container ship are IRR of 58% and a payback period of around 1½ years. Including the abovementioned estimated CO2 emission taxes, the IRRs would increase to 35% for the Aframax tanker and to 68% for the 8,000 TEU containership. Given an economical life of 20-30 years for vessels these returns are significant

Unique value proposition to ship

owners

The royalty fee-driven revenue model is highly scalable, given that the target vessel unit price range is USD 30-220m. This forms the basis for a high-margin business model. Additionally the business plan operates with an asset-light company structure with limited requirements for capital expenditure, R&D and number of employees

Scalable, high-margin business

model

The target market for DK Group’s current ACS technology includes the ocean-going commercial fleet of vessels with a minimum length of 200 metres. This includes tanker vessels, containerships, bulk carriers, general cargo ships and LNG/LPG vessels. The expected 2007 new build activity comprises around 925 vessels with a total value of approx. USD 84bn

Large and well-defined target market

Updated business plan Forecast capital requirements

• The updated Q1 2008 business plan confirms the funding requirements and positive cash flow from operations to 2010

– The cumulative cash requirement is USD 36.5m in 2009

– Free cash flow will be positive in 2010 by USD 18.7m

• In order to push the projects DK Group expects that they will carry the initial development cost

– CAPEX has therefore been moved from phase II to phase I increasing the initial CAPEX to USD 32.0m in 2007-2010 cumulatively

– This increases capital requirements

• The implementation plan remains highly adaptable to market conditions and funding

Funding requirements USDm

2. Business profile

Mission statement

To be the world-leading supplier of fuel-efficient and

environmentally friendly ACS vessel designs

to the marine industry

DK Group business model Scalable and high-margin model

• 1% royalty fee of total vessel costs – Total new-build market size of approx. USD 139bn (2009) – Pricing strategy developed in close co-operation with Maersk

Broker – The first order and discussion with shipowners show that the

market is ready to accept the pricing model

Royalty-based income model

Unique customer value propositions

Scaleable model • Completion of only 18 vessel type designs by 2011 – One vessel design can be sold multiple times – One vessel design can be sold to shipyards and shipowners

• DK Group’s ground-breaking design offers a 5%-15% reduction in the bunker cost for the shipowner – Bunker represents 70%-90% of the OPEX and up to 50 % of total

cost to the shipowner • Possible extra income to the shipowner from carbon credits

– Green profile

Patented vessel design company

• DK Group markets and sells the patented ACS vessel – Most fuel-efficient design – Strong environmentally friendly profile

Orders and projects in the pipeline

Project funnel

40 identified customers

3 contacted shipowners and shipyards

1 signed contract

Construction

Completion

• DK Group has identified the 10 largest shipowners in each class, covering 80% of the new-build market

• DK Group is currently in contact with 3 shipowners working on projects including – 1 container

– 1 bulk

– 1 tank

• The yard contract for the bulk project is being secured with Maersk Broker

• The first vessels with ACS are expected to be delivered in 2009/10

Organisational and operational set-up

European locations of DK Group • DK Group operates with a highly

experienced executive group with CEO, COO and Founder

• A non-executive supervisory board was established in 2008 with high profile international members

• The technical development team consists of technical advisers and project management, assisted by naval architect consultants

• The whole group is based on locations around Europe and the US

Supervisory Board

• Frederik baron Wedell-Wedellsborg, Chairman of the board – Long international career with Danish trading and shipping company EAC – CFO of Rockwool, CEO of Meisner & Jensen, MD and Director of Group 4 Securitas and various other board positions. – Born in Denmark and now based in Copenhagen

• John Richards, board member – Financial services entrepreneur, Founder & former Managing Director Societé Generale Fund Management, London – Born in England and now based in Monaco

• David Wheeler, board member – Chairman of Credit Suisse European Technology Group – Experienced international investment banker having worked in the US and 25 years in London – Born in the US and now based in London

Management team

• Jørn Winkler, Founder – Founder of DK Group and the drive behind the company’s unique approach to ACS technology, through in-depth understanding of

aerodynamics from his years in the aviation industry is applied to hydrodynamics – Jørn drives the international dialogue on greenhouse gas emission reduction from shipping, most recently at BunkerWorld 15-17

November 2006 in NYC

• Jørgen Clausen, COO – Over 30 years in global shipping at leading shipping companies

• Scandinavia at French CMA CGM (JV with Norwegian Wilhelmsen), MD • British Inchcape Shipping Services, MD for Denmark • Chr. Jensen, liner traffic for the Far East, the Middle East, Central and South America, South and East Africa and Australia

– Manager for the logistics department • Lehmann Junior, import and export to/from the Far East/Japan with Nippon Yusen Kaisha (NYK Line)

• Christian Eyde Møller, CEO – 20 years of international executive experience at telecoms, trading and shipping industries with strong connections in shipping – Successful entrepreneurial track-record − growing and exiting ventures at Ebone (GTS) and Equinix – Commenced his career in shipping at The East Asiatic Company (EAC) in 1985

• Build-up a highly profitable shipping route in Vietnam for EAC – the initial investment was paid back within 12months – Blue chip experiences at EAC, TDC and Sprint – Non-executive: Chairman Vopium (current), Contactel, Vice-chairman at HTCC (ASE listed), board member ECTA and Song Networks – Graduated in business and economics from LSFT in 1985 and in maritime law from Copenhagen Business School in 1987

Technical team

• Konstantin Matveev, Technical Adviser – Over 15 years of naval engineering experience – Assistant Professor in Mechanical Engineering, Washington State University 2006-current – Senior Hydrodynamicist, Art Anderson Associates, 2004-2006 – Technical Staff Member, Los Alamos National Laboratory, 2003-2004 – Graduate Research Assistant, California Institute of Technology, 1998-2003 – PhD in Mechanical Engineering: California Institute of Technology – MSc in Applied Physics: Moscow Institute of Physics and Technology

• Johannes Johanneson, Technical Adviser – Over 25 years naval engineering experience – Leader of the project department at Scandlines Danmark A/S: 2003-current – Technical director at Knud E. Hansen A/S - a consulting company of naval architects and marine engineers, 1999-2003 – Head of the design office for 6 years for a Danish shipyard – Naval architect for 9 years – Surveyor for Det Norske Veritas - head office in Oslo: 4 years – Naval Architect: Technical University in Denmark in 1980

• Henrik Meyer Rasmussen, Project Management – Over 10 years of business experience including business analysis, market analysis, business administration, project management and

quality assurance – MSc in Economics: Copenhagen University 1995 – Commercial diver

3. Technology and product characteristics

Introduction to ACS Air Cavity System from below

Compressor

Air deflection before propeller

Air Cavity

Introduction to ACS Air Cavity System from the front

Compressor

Air Cavity

Overall layout of ACS Schematic design – Aframax tanker

Overall layout of ACS Principal Section – Aframax tanker

Weight Estimate: Aframax Marginal to a traditional vessel

Additional Shell Plating

Additional Floor Plating Area equivalent to basis vessel

Aframax example:

Weight of ACS sides 95 t

Weight of keels 260 t

ACS weight increase 355 t

Wider beam weight 411 t

Total weight increase 781 t

Failure of Air Cavity Loss of air results in increased draft

VC

VB

DT

DT y n DVC + DVB

0.8 L B

Aframax example:

DT y (1600 m3 + 800 m3)/0.8 x 234.0 m x 44.9 m = 0.30m

Design draught: 11.85 m, Air loss draught: 12.15 m

Extra draught

Tank testing of ACS Stable air cushion below the bottom

Ballast draught

11 knots, calm water

Design Draught

15 knots, 4.2 m waves

Resistance reduction from ACS Distribution for different vessel classes

RT = RF + RR + RA, RR and RA are kept constant -> RF = CF ½ r (S – SACS) V2

The equation shows the maximum theoretical resistance savings with ACS

In addition to the gain in resistance, there is a potential to increase the propeller efficiency 1-3% due to the reduced load

Saving ~12 % R

R ~30 %

RR ~30 %

RF ~70 %

RF ~58 %

Tanker vessel

Tanker with ACS

Saving potential: RF / RT 70 % SFlat Bottom / STOT 40 % ACS area of FB 65 % ACS efficiency (HSVA) 77 % Saving 12 %

Saving ~7 %

RR ~35 % R

F ~55 % RA ~10%

RR ~35 % R

F ~48 % RA ~10%

Container ship

Container vessel with ACS

Saving potential: RF / RT 55 % SFlat Bottom / STOT 30 % ACS area of FB 65 % ACS efficiency (HSVA) 77 % Saving 7 %

Aframax c. 7 t/day

12,670 TEU c. 27 t/day

Case Study: 115,000 DWT Aframax Modified for ACS

Principal Dimensions Consumables Length over all 250.00 m Heavy fuel oil 2800 m3

Length between pp 240.00 m Marine diesel oil 185 m3

Breadth, moulded 44.20 m Lubricating oil 130 m3

Depth, moulded 21.70 m Fresh water 410 m3

Design draught 14.90 m Ballast water 44,200 m3

Speed, service, 15 % s.m. 15.0 kn Cargo capacity

Installed power: 15,230 BHP Cargo tanks 1 to 5, P+S 130,200 m3

Fuel consumption: 1.56 t/h Slop tanks P+S 2,200 m3

Deadweight Displacement at design draught: 134,600 t

Est. lightweight 18,900 t

ACS area

3,650 m2

Case Study: 115,000 DWT Aframax Air supply system

• Treble air compressors – 3 x 4,240 m3/h @ 1.75 bar FAD • Common air feed pipe / redundant distribution system • Air supply rate to cavity, normal operational conditions: 2000 m3/h • Power consumption at normal operational conditions: 110 kW • Fuel consumption at normal operational conditions: 0.3 - 0.5 t/day

ACS area: 3,650 m2

Case Study: 115,000 DWT Aframax Speed and Power

Principal Dimensions Consumables Length over all 333.30 m Heavy fuel oil 8600 m3

Length between pp 318.00 m Marine diesel oil 375 m3

Breadth, moulded 59.90 m Lubricating oil 300 m3

Depth, moulded 32.10 m Fresh water 500 m3

Design draught 21.06 m Ballast water 99,000 m3

Speed, service, 15 % s.m. 15.9 kn Cargo capacity Propulsion power, 85 % MCR: ~21.000 kW Cargo tanks 1 to 5, P+S 340,000 m3

Fuel consumption: 90 t/day Slop tanks P+S 10,100 m3

Deadweight Deadweight at design draught with air in cavity: 283,125 t

ACS area

4,300 m2

Case Study: 280,000 DWT VLCC Modified for ACS

• Double air compressors – 2 x 5000 m3/h @ 2.2 bar delivery • Common air feed pipe / redundant distribution system • Air supply rate to cavity, normal operational conditions: 5000 m3/h • Power consumption at normal operational conditions: 500 kW

ACS area: 4,300 m2

Case Study: 280,000 DWT VLCC Air Supply System

• M10 is the simulated VLCC

• M20 is the simulated VLCC with ACS

• Values given are calm water results in model scale

Case Study: 280,000 DWT VLCC Model Testing of Aframax as Simulated VLCC

• Speed and power curve for reference vessel (A) vs. ACS vessel (B)

• No sea margin included

Case Study: 280,000 DWT VLCC Speed and Power

Loa.: 400.0 m Lpp.: 378.0 m B: 54.2 m Depth: 30.5 m Draft: 14.5 m Speed: 26.0 kn Power: 2 x 57 MW

ACS area

6,700 m2

Case Study: 12,670 TEU containership Modified for ACS

• Double air compressors – 2 x 5000 m3/h @ 1.5 bar delivery • Common air feed pipe / redundant distribution system • Air supply rate to cavity, normal operational conditions: 5000 m3/h • Power consumption, normal operational conditions: 300 kW

Case Study: 12,670 TEU containership Air Supply System

• ACS Fuel saving – ~ 7.6% – ~ 28 t/day

• or speed increase – ~ 0.6 knots

• or speed increase – ~ 0.3 knots + 700

TEU

Case Study: 12,670 TEU containership Speed and Power

By installing an Air Cavity System it is possible stretch the limit for a single-engine, single-propeller ship and design a ship with a considerably larger capacity.

Case Study: Ultra Large containerships Conclusion

The ACS Demonstrator in 2007 received certification by Germanisher Lloyd

Contra Rotating Propellers

Advantages Short main engine and reasonable

propeller size Very high propulsion efficiency

(10 % improvement vs. twin screw depending on relation between main engine and thruster) less installed power lower fuel costs

Propulsion redundancy Very good manoeuvrability Very high flexibility – propulsion and

electrical power Reduced size of engine room

Disadvantages Probably higher installation costs

than twin-propeller solution No steering redundancy Needs careful

considerations to avoid cavitation

Propeller Boss Cap Fin (PBCF)

Fuel saving up to approximately 4%

High-efficiency propellers (e.g. Kappel blades)

Fuel saving up to approximately 4%

Increasing the propeller efficiency

Heat recovery system Recovering the waste gas heat

Fuel saving 7 - 12 % depending on sophistication of heat recovery plant

2,550 DWT, 83 m LOA

ACS Demonstrator

ACS Demonstrator Technical layout of ACS

• AIR System test for ACS Demonstrator • Two air compressors: 1x55kw 997m3/h FAD=370m3 @ 1.7 bar 1x30kw 565m3/hFAD =210m3 @ 1.7 bar • Test of air supply rate to cavity ─ normal operational conditions • Power consumption at normal operational conditions

450 m2

Resistance of a Ship . .

The resistance of the bare hull (RT) is given by :

Water density

Ship speed Wetted surface

Ship resistance coefficient

Resistance Coefficients . .

The resistance of a ship hull originates from the wave-making resistance, the hull friction and the wind resistance of the superstructure:

Wave resistance coefficient

Viscous resistance coefficient

Wind, rudder etc.

The wave resistance is normally a fraction of the total resistance as follows: Large and slow tankers : 10-20% General cargo ships : 30-50% Small and fast ships : >50%

Viscous Resistance

The viscous resistance is primarily determined by the drag on the steel hull. The resistance is calculated based on extensive series of resistance tests with flat plates.

The viscous resistance is mainly determined by the condition of the hull, i.e. the surface roughness including the type of anti-fouling system.

The wave-making resistance is the energy loss due to wave-making of the ship. The resistance is determined by the

1. Speed of the vessel 2. Wave-interaction of the hull-generated waves 3. Fullness of the ship 4. Shape of the bow and the bulbous bow 5. Loading condition and trim 6. Submergence of the bulbous bow 7. Etc.

Wave-making Resistance

• Demonstration of the concept • Confidence of scaling method of model tests

ACS Demonstrator 83m Demonstrator – main purposes

• Sea trials to be conducted with and without ACS • FORCE and Germanischer Lloyd to perform sea trials in accordance

with standard procedures

ACS Demonstrator Sea trial

ACS Demonstrator sea trials

ACS demonstrator tests to include:

• Speed trials in calm water • Speed tests in waves • Maneuvering tests

Comparable tests will be made with and without ACS

Environmental conditions of waves and ocean documented by wave buoys both at the surface and underwater.

Based on the sea trial data with ACS, the scaling procedure for ACS will be made and reliable results for large ocean-going ships will be made.

4. Market and customers

Industry development Why is the development starting now?

• The shipping industry has experienced a significant increase in fuel costs over the last 6 years

• As shipping is a very fuel-efficient transport mode compared to other ways of transport, the focus on fuel savings has only begun in recent years

• On top of this development, the long investment cycles of shipping makes the response time long compared to other industries

• In addition the true environmental aspect of shipping has only recently been revealed to the public

Nominal bunker prices 1991-2007 (USD per ton)

Primary benefits from ACS Shipowner economy and environment

• Fuel savings of up to 15% – High oil prices – Bunker costs comprise 78-90%

of total OPEX • Significant reduction of

greenhouse gas emission – CO2

– SOx

– Other greenhouse gasses

Nominal bunker prices FY1991A-FY2010E (USD per ton)

CO2 emission prices in USD per ton (US carbon market)

Average, USD 12

Direct financial impact from adopting ACS

Annual saving from ACS:

Payback time of ACS investment:

Internal rate of return on ACS investment:

Overall investment returns from ACS

• Analyses show that ACS vessels will generate significantly better returns by increasing IRR by up to 4% points from average shipping equity returns of 8-10%

• For ship owners / investors combining cleaner ships with higher returns is an attractive offering that will drive change in the shipping industry

• Separately, the vessels may become eligible for CO2 emission credits and thereby generate additional revenues, increasing returns even further

Example of investment returns (8000 TEU container vessel)

• The ACS provides means of reducing greenhouse gas emission – Major global challenges and focus area – Ever growing problem for shipowners

• Kyoto Protocol for shipping industry • Expensive low sulphur fuel

• Had DK Group’s ACS technology been applied to the current global commercial fleets, this would reduce ongoing greenhouse gas emission

CO2 and SOx emission reduction ACS for a better environment

8% CO2

emission

reduction

C02 emission from current global fleet

– Total commercial vessel fleets annual CO2 emission of approx. 1,200,000,000 tons

– E.g. CO2 emission reduction by 8% – A CO2 emission tax of USD 31 per ton total fleet

CO2 emission would cost the shipping industry approx. USD 15,5bn

Carbon emissions from merchant shipping are nearly 3 times as high as previously estimated according to a draft United Nations study leaked to The Guardian (newspaper in the UK)

Significant public and political attention on shipping

(BRUSSELS) - EU Secretaries of State for the Environment agreed on Monday that European action is needed to tackle toxic shipping emissions as international maritime authorities had failed to do enough, a spokeswoman said

Scientists and MEPs have jumped on the ship emissions bandwagon after the industry again found itself on front page news in the UK.

Secretary of State for the Environment Connie Hedegaard said that if the industry has not solved the emissions problem by the Copenhagen Conference in 2009 then emissions from ships will be first on the agenda at the Copenhagen conference

DK Group vessels may enjoy carbon credits as it reduce CO2 emission

• As DK Group vessels will have a lower fuel consumption and CO2 emission, the vessels may become eligible for CO2 emission credits

• A project with leading industry consultants and a shipowner has been commenced to test the feasibility for obtaining project recognition from voluntary carbon standard agencies

Market size and outlook 4 target vessel classes

Market drivers • World trade growth (China and India) • General retirement of old vessels • Environmental (SECAS, CO2, SOx etc.)

• Legislation (double hull, Kyoto etc.) • More efficient technologies

Assumptions • Forecast based on order book until FY09A • Conservative unit growth FY10E-FY15E • Price growth at 2.5% p.a. FY07A-FY15E

Sources: Order dates, Maersk Broker, DK Group

Order book FY06A-FY15E (units)

Order book FY06A-FY15E (USDbn)

Standard vessel types High unit prices

Tanker vessels Containerships

Gas vessels

VLCC

VLBC

10,000 TEU+

LNG

Suezmax

Aframax

Panamax

Handymax

Panamax

Handymax Capesize LPG

8,000 TEU

7,000 TEU

5,500 TEU

3,500 TEU

1,700 TEU USD 120m

USD 95m USD 215m

USD 150m+

USD 60m+ USD 110m+

USD 60m USD 90m+

USD 30m+

USD 45m+ USD 40m+

Bulk carriers

Few shipowners dominate globally Focused target customers list

• Together with Maersk Broker DK Group has identified the largest shipowners for each vessel class

• The 10 largest shipowners in each class cover more than 80% of the new-build market

• They traditionally order in series of 2-8 vessels at a time

• Ongoing dialogues with leading shipowners

Source: Maersk Broker, October 2006

Few shipyards dominate globally Focused target customers list

• Together with Maersk Broker DK Group has identified the largest shipyards for each vessel class

• The 23 largest shipyards cover more than 80% of the new-build market

• Traditionally these shipyards have multiple docks for the mass production of standard vessel types

• Ongoing dialogues with leading shipyards

Source: Maersk Broker, Oct-06

Industry feedback From DK Group’s customer dialogues

“I will insist that we put a commercial representative into the technical group working with DK Group in order to speed-up the implementation of ACS” CEO of tanker division, Top 5 largest global shipping company

“ACS would be easy to implement into our basic design and construction process” Technical Vice President, Top 5 largest shipyard

“Our number one priority in the upcoming year is fuel efficiency” CEO, Global shipping company

“During our due diligence on DK Group’s ACS we have not found anything to suggest that ACS will not work” Technical director, leading Northern European container shipyard

“We have not seen any other fuel savings technologies that can provide savings comparable to DK Group’s ACS” Technical fleet director, leading global energy company

Validation of ACS technology Industry-wide acknowledgements

Partners

Tank testing facilities

$• Unique tank test facilities in Denmark and Germany

First orders $• First orders and close working relationships with selective owner within bulk, tank and container segments

Classification society $

• 10 classification societies globally • Germanischer Lloyd is the leading

classification society • First fully classified ACS design

approved by Germanischer Lloyd

Comments

Ship broker • MB has signed a global channel

distribution and marketing agreement with DK Group

$

5. Strategy

• 83 metres “ACS Demonstrator” to be used as real time proof of concept. The ACS Demonstrator has received classification

• Based on shipowner dialogues, initial focus is on – VLCC tanker vessel – 6,500 - 8,000 TEU containership – Securing yard contract for VLBC project

• Continue focus on industry-wide fuel saving initiatives • Co-operate with other critical suppliers (e.g. MAN B&W, Atlas Copco

etc.) • Team up with investors and ship financing institutions to lead ship

building programs driving competitive advantages through technology adoption

• Take advantage of EU funding opportunities in support of environmentally friendly technology

• Direct and extensive dialogues with leading shipowners and progressive shipyards

• Maersk Broker markets to all relevant shipowners and shipyards

Market penetration strategy How to ensure the first order …

Demonstrator

Customer relationships

Industry cooperation

shipowner projects shipyard projects

IPR Strategy Patent portfolio

• DK Group has filed for 3 different patent families – Valid for 20 years from filing

• Patent strategy is focused on maintaining a strong IPR portfolio – Ongoing filings to support current families – Ongoing filings to expand reach of the patent protection

IPR protection strategy Aggressive approach

• DK Group will apply an aggressive strategy to protect its Intellectual Property Rights

• Patent infringement can be confronted and stopped through a range of means

• Ship arrest is expensive as highlighted by below Aframax example:

• Aframax royalty fee to DK Group of USD 650k

• Equals 20 days of ship arrest at current charter of USD 33k

– Once a violator has been identified, arrest is likely to happen more than once in the 30-year vessel life time

– Only payment of bond can release the vessel

• Tarnished name in the industry Operation phase

Construction phase

• Sue shipyard at domicile • Sue shipowner at domicile • Inform relevant industry bodies

– Ship financiers – P&I – Classification societies

• Arrest the ship where it is physically located

– Select the easiest/cheapest place for ship arrest

• Sue shipowner at domicile

Issues for violating shipowner

6. Financials

Legal structure

• Developed by Nauta Dutilh, Rotterdam, in 2001 • Support a total corporate tax rate of approx. 7-9%

100%

DK Group NA NV Netherlands Antilles corporation

Owner of IPR

DK Group Netherlands BV Dutch corporation

Sub-licensor of IPR

Unit sale projections 2 phase market penetration model

• Phase I sales forecast driven by – 2007: # 4 orders – 2008: # 6 orders – 2009: # 33 orders

• In Phase II from 2010 onwards when the market has accepted the ultimate proof of concept

– ACS will be an indispensable investment for shipowners and shipyards alike

– The forecast will be driven by market share assumptions for the individual vessel types

Unit sales FY07E-FY15E

Sales projections

Sales forecast FY07E-FY15E (USDm) • DK Group expects to reach a steady state

sales level of USD 585m from current identified target markets

• Tanker and container markets are expected to remain the most important vessel segments to DK Group measured by total value

• The gas vessel market has higher vessel unit revenue, while the bulker market has the lowest vessel unit revenue

• DK Group’s market share is expected to be the highest for larger ships as the advantage here is largest

Forecast operating expenses (“OPEX”)

Cost forecast FY07E-FY15E (USDm) • The realised SG&A of 2007 was slightly lower

than budgeted. USD 2.7m realised vs. USD 2.9m – Most R&D is capitalised, not expensed

• In phase I, DK Group works with both shipowners and shipyards on designated projects

• The cost structure is driven by a limited number of employees and outsourcing of non-core work streams

– Total average work force in 2007 of 5 persons growing to 19 in 2009

• In phase II the scalability of DK Group’s business model kicks in and SG&A decreases significantly in % of sales

• Cost of sales comprise in-house inspectors hired to ensure the highest quality at the various shipyards

– The number of inspectors increases from 8 in 2010 to 98 in 2015 to support the order flow

– Long-term level of approx. 4% of sales

Workforce projections FY07E-FY15E

Capital expenditure (1/2) Development of the full product suite

Capital expenditure plan by vessel class • DK Groups expects that projects can be

promoted if funds are provided in the development phase

• In 2008 DK Group expects to invest in 5 projects with shipowners in addition to the investment in the Demonstrator

– Total CAPEX of USD 11.5m

– In 2009 6 projects are expected to be initiated with shipyards

– Total CAPEX of USD 8.4m

– The plan is highly adaptable to market and business conditions

• From 2013-2015 CAPEX is expected to grow by 10% annually with a total CAPEX of USD 46.1m for the 3 years

Capital expenditure (2/2) Development of the full product suite

Capital expenditure plan by vessel class • DK Group has a detailed budget for the capex

related to the basic designs in phase II • In 2010 the ships which have already been

developed are entering phase II – From 2010-2012 design packages for the

additional vessel are being designed • The forecast has an explicit development

programme until 2012 after which an amount of approx. USD 14m is allocated in 2013 and growing by 10% annually

Summary financial projections Highly cash generative business plan

Thank you for your attention!

Q&A

Appendix A

Additional information Current voluntary carbon emissions credits

Carbon markets

Carbon regimes

Carbon market pricing hierarchies

Dkg management presentation usd 2008 update

Leadership & Management

Transcript of Dkg management presentation usd 2008 update