Klaveness Combination Carriers

Investor Presentation • Aug 26, 2019

Klaveness Combination Carriers ASA

Q2 2019 Presentation Oslo, 26 August 2019

Disclaimer

This presentation has been prepared by Klaveness Combination Carriers ASA (the "Company") and is furnished to you for information purposes only and may not be reproduced or redistributed, in whole or in part, to any other person. The presentation does not constitute or form part of any offering of securities, and the contents of this presentation have not been reviewed by any regulatory authority.

The presentation should not form the basis for any investments nor be deemed to constitute investment advice by the Company including its affiliates or any of their directors, officers, agents, employees or advisers. An investment in the Company's securities involves risk, and several factors could cause the actual results, performance or achievements that may be expressed or implied by statements and information in this presentation and by attending or reading the presentation you acknowledge that you will be solely responsible for your own assessment of the market and the market position of the Company and that you must make your own independent assessment of the information contained in the presentation after making such investigations and taking such advice as may be deemed necessary. In particular, any estimates, projections, opinions or other forward-looking statements contained herein necessarily involve significant elements of subjective judgment, analysis and assumptions and each recipient should make its own verifications in relation to such matters.

This presentation contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates. Forward-looking statements concern future circumstances, not historical facts, and are sometimes identified by the words "believes", expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", and similar expressions. The forward-looking statements contained in this presentation (including assumptions, opinions and views of the Company or opinions cited from third party sources) are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. None of the Company, any of its parent or subsidiary undertakings, or any such person's officers, directors, or employees provides any assurance that the assumptions underlying such forward-looking statements are free from errors, nor does any of them accept any responsibility for the future accuracy of the opinions expressed in this Presentation or the actual occurrence of the forecasted developments described herein.

No representation or warranty (expressed or implied) is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information contained herein. Accordingly neither the Company nor any of its affiliates accept any liability whatsoever arising directly or indirectly from the use of this presentation, including any reproduction or redistribution.

The information and opinions contained in this document are provided as at the date of this presentation and may be subject to change without notice. Except as required by law, neither the Company nor any of its affiliates undertake any obligation to update any forward-looking statements or other information herein for any reason after the date of this presentation to conform these statements to actual results or to changes in our expectations or publicly release or inform of the result of any revisions to these forward-looking statements which the Company or any of its affiliates may make to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events.

This presentation speaks as of August 2019. Neither the delivery of this presentation nor any further discussions by the Company with any of the recipients shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since such date. The Company does not intend to, or will assume any obligation to, update this presentation or any of the information included herein.

This presentation shall be governed by Norwegian law. Any dispute arising in respect of this presentation is subject to the exclusive jurisdiction of the Norwegian courts with the Oslo City Court as exclusive legal venue.

Table of contents

I. Highlights

• II. Business & market update
• III. Q2 2019 Result
• IV. Summary and Q&A

Company highlights Klaveness Combination Carriers ASA

• World leader in combination carriers
• The most energy efficient and environmentally friendly tanker and dry bulk shipping solution
• Consistent superior earnings, 1.5-2 times standard tanker and dry bulk vessels
• Fleet of 11 vessels (9 x CABU + 2 x CLEANBU) on water and 6 x CLEANBU newbuilds for delivery until Q1-2021
• Quarterly dividend payments representing 80% of adjusted cash flow to equity
• Strong balance sheet with 49% equity ratio and \$128 million cash balance as of end Q2-2019

Highlights 2nd quarter and year to date 2019

Continued superior CABU earnings and proving of CLEANBU earnings capacity – positive outlook for 2nd half 2019 and 2020

"One-off" costs pulled down results for Q2-2019	CABUs continue delivering earnings above standard markets	CLEANBU-intro progressing / proving of earnings capacity	Continue quarterly dividend payments
• Q2 2019 EBITDA of USDm 4.2 (Q2 2018 of USDm 8.5) • Substantial "one-off" costs linked to CLEANBUs start up and KCC listing	• Strong operational performance • Earnings 1.3 x MR tankers, but below 2019 average • Lower than normal share of the fleet in main combi-trades (86%) – more dry bulk trading	• First combination voyage ― First successful wet-dry switch ― Earnings of ~\$20,000/ day = 1.5 x standard market earnings • Cutting "lead time" to combi trading by 2/3 – ― 2nd CLEANBU starts combi- trading in September	• Announcing USDm 0.5 (USD 0.01 per share) dividends for Q2 2019. Bringing total dividend for 2019 to USDm 3.4.

Table of contents

• I. Highlights
• II. Business & market update
• III. Q2 2019 Result
• IV. Summary and Q&A

Business and market update | CABU Earnings

Continued outperforming standard tonnage, but premium impacted by temporary lower CSS shipments and a weak dry bulk market

CABU TCE Earnings USD '000 per day¹

• Lower CSS shipment volume caused by timing/temporary effects and the now-resolved Alunorte situation
• Low share of days in main combi pattern (86%)
• More than normal trading as standard dry vessels in a difficult dry bulk market

1) CABU Carrier: Average monthly earnings per on-hire day for the period 2015 to YTD 2019, Gross of commissions and commercial management fees. Bulk carrier spot earnings: Average of the 4 Spot Routes for Baltic Panamax Index (P4TC). Gross rate. MR Tanker spot earnings: Average MR Clean Earnings, Gross rate. Spot earnings benchmark source: Clarksons SIN

Business and market update | CABU Caustic soda COA bookings

Substantially higher caustic soda bookings in 2nd half of 2019

Growing CSS COA portfolio in the Pacific, but Atlantic CSS volumes impacted by Alunorte F/M situation

2019 CSS Pacific COA volumes skewed towards second half – increased CSS volumes to Brazil in Q3 - Alunorte ramps up to full production

# of CSS Cargoes per year # of CSS Cargoes per quarter 2019

Atlantic Expected Atlantic Pacific

1) Alunorte COA expires end of Q3 2019

Business and market update | CLEANBU

CLEANBU introduction progressing well - cutting lead time to high value combi-trading by 2/3

# of days phase-in time from delivery to first combination voyage

• Technical and operational experience transfers from 1st vessel to the 2nd and subsequent vessels
• Cutting phase-in time by 2/3 on the 2nd vessel – MV Barracuda ready for combitrading in mid-September
• MV Baru scheduled for guarantee docking in October 2019

Business and market update | CLEANBU

Successful first wet/dry combi voyage proves superior earnings capacity of the CLEANBU concept…

USD/day BARU Combi RV estimated TCE of 20 000/day or ~1.5x earnings premium to standard tonnage¹

TCE for same round voyage estimated to ~USD 30 000 per day with current market conditions² USD/day

1) Source: Baltic Exchange and Clarksons

2) For illustration purposes only. Estimated based on spot dry bulk and tanker market, and bunker prices 23 August 2019, Source: Baltic Exchange and Clarksons

…and reduces CO2 emissions compared to standard vessels equal to the annual emissions from ~1 000 cars¹

1) CO2 emission reduction is compared to that of a standard tanker and a standard dry bulk vessel performing the same cargoes as MV Baru, with the weighted average ballast leg connected for the standard vessels. AIS data and Baltic Exchange vessel description has been used to estimate this effect. Ballast leg for the dry bulk vessel is basis the weighted average inbound ballast leg prior loading, and the ballast contribution from the LR1 tanker is basis the repositioning leg after CPP discharge. Source: EIA.gov, AXSmarine.com, Baltic Exchange and company data.

Business and market update | OPEX

OPEX improvement for the CABUs CLEANBU OPEX still impacted by start-up costs

CABU OPEX USD per day

CLEANBU OPEX USD per day¹

Business and market update | Contract coverage

Low financial financial coverage for 2020– will increase through the "contract season" over the next months

Volume coverage

Share of estimated total fleet carrying capacity (i.e. volume) booked for rest of 2019 and 20201, 2,

Financial coverage

Share of estimated rate (i.e. price) exposure that has been fixed for rest of 2019¹and 2020

50%

26.08.2019

2) Wet capacity is based on minimum volume on CPP COA.

13

1) Balance 2019 as of end of July

Business and market update

Strong product tanker and fuel market outlook bodes well for KCC's 2020 earnings¹

Continued strong product tanker outlook based on low orderbook and positive IMO 2020 effects

Product tanker markets

Solid line shows MR (orange) and TC5 triangle trade (dark blue) earnings. Dotted lines forward curves.

Strong recovery in dry bulk markets - weak forward markets due to fear of trade wars and recession

Panamax Dry Bulk market¹

0 2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 18 000 jan.17 apr.17 jul.17 okt.17 jan.18 apr.18 jul.18 okt.18 jan.19 apr.19 jul.19 okt.19 jan.20 apr.20 jul.20 okt.20 \$/day Solid line is the P4TC historical settled values. Dotted lines forward curve

Increasing fuel prices (and freight rates) following implementation of IMO 2020 sulphur cap

1) Source: Shipping Intelligence Network, NOS, ICE, FIS & company data. Product tanker markets: Triangle trade TC5 PG-Japan+TC5 Korea/Australia. Bunker is basis Sing380 cst with an estimated USD190 pmt premium for the compliant IMO 2020 0.5% sulphur fuel. MR TCE basis TC7 as per Baltic Exchange.

Table of contents

• I. Highlights
• II. Business & market update
• III. Q2 2019 Result
• IV. Summary and Q&A

Consolidated financial statements Q2 2019 (unaudited)

Income Statement	Q2 2019	Q2 2018	1H 2019	1H 2018
Net revenues	12 607	14 415	25 933	27 764
Operating expenses, vessels	(6 913)	(5 096)	(13 911)	(10 086)
SG&A	(1 467)	(868)	(3 059)	(1 853)
EBITDA	4 227	8 450	8 963	15 824
Depreciation	(3 142)	(4 102)	(5 920)	(8 273)
EBIT	1 085	4 348	3 043	7 551
Net financial items	(2 961)	(1 176)	(5 723)	(925)
Profit before tax	(1 876)	3 172	(2 680)	6 626
Tax	-	-	-	-
Profit after tax	(1 876)	3 172	(2 680)	6 626
EPS	(0.04)	0.10	(0.06)	0.22

• Loss of USD 1.9 million for the quarter
• CABU earnings of USD 15,038/day
• CLEANBU earnings of USD 12,905/day
• Increase in operating expenses explained by "One-off costs" linked to introduction of the CLEANBUs
• Administration costs is up for the period due to transaction costs related to listing process (-0.4)
• Negative unrealised effects from changes in fair value of derivatives (-1.1)

Positive EBT adjusted for year-of-introduction effects and unrealized financial derivatives

Balance sheet

• mainly due to equity raise of USD 38.8 million and drawdown of USD 31 million on the DNB/SEB loan facility for Barracuda.
• Payment of dividends of in total 2.9 million in Q2.
• Equity ratio is 49 % in line with previous quarter, but down from 53 % YE-18.

Positive cash flow and liquidity development from equity raise and draw down loan financing

Table of contents

• I. Highlights
• II. Business & market update
• III. Q1 2019 Result
• IV. Summary
• V. Q&A

Summary Business Update

• Full year 2019 CABU TC-earnings expected in line with 2018 figures of \$17,400/day. CABU earnings to significantly improve in 2nd half of 2019 based on higher actual CSS contract cargo bookings and the ramp-up of Alunorte production to full capacity in Q4-2019
• CLEANBU earnings to improve in 2nd half 2019 with more vessels in combi-trading and expected reduction in "one-off introduction costs"
• Positive 2020 outlook based on strong product tanker market outlook and higher fuel costs following implementation of IMO 2020

Enclosures

Enclosures

Torvald Klaveness & Klaveness Combination Carriers (KCC)

Torvald Klaveness' business segments

Note: Simplified orginazational chart, for illustration purposes only

Enclosures

CLEANBU Estimated deliveries

CLEANBU delivery schedule¹

				2019			2020			2021				2022
Name	Contract price		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Baru – 1222	USD 48.5m	Delivered		January 2019
Barracuda – 1223	USD 48.5m	Delivered		July 2019
Barramundi – 1224	USD 48.2m					September 2019
Baleen – 1226	USD 46.5m				February 2020
Bangus – 1227	USD 46.5m					Q3 2020
Baiaco – 1228	USD 46.5m					Q4 2020
1229	USD 46.5m						Q1 2021
1247	USD 46.5m						Q1 2021

Strong bank support and balanced interest rate hedging Enclosures

Limited refinancing risk

Maturity profile for debt as per 31.12.2018 and committed debt (5XCLEANBU with 2019 and 2020 delivery) ¹

• Instalments Balloons Bond Limited refinancing risk with no maturities (excluding overdraft facility) prior to the bond due date in May 2021. The current bank debt matures in March 2022 and December 2023 and August 2025
  • Bank loans have been secured for six newbuilds with delivery in 2019 and 2020
  • Average margin for bank debt is 2.3% as of 30 June 2019 and the NOK bond loan is swapped to a USD fixed interest rate 6.98%
  • Interest hedge ratio is ~60% as of 30 June 2019 which will fall to ~55% 31 December 2019. Average swap interest rate on LIBOR swaps (excl. margin) is 2.4% as of 30 June 2019

1) In January 2019 the USD 36 million unsecured loan from KSH was cancelled while simultaneously the KCC assumed the obligations of the KCC03 bond loan

Consolidated financial statements Q2-2019 (unaudited) Enclosures

		Quarter ended		YO D		Year ended
		Unaudited	Unaudited	Unaudited	Unaudited	Audited
USD'000	Notes	30 Jun 2019	30 Jun 2018	30 Jun 2019	30 Jun 2018	31 Dec 2018
Freight revenue	3	31 774	26 748	60 081	26 748	84 284
Charter hire revenue	3	349	2 796	581	16 145	17540
Total revenues, vessels	3	32 122	29 544	60 663	42 893	101 824
Voyage expenses		(19515)	(15 130)	(34 730)	(15 130)	(45 431)
Net revenues from operations of vessels		12 607	14 415	25 933	27 764	56393
Operating expenses, vessels		(6 875)	(5 064)	(13 837)	(10 010)	(21 599)
Group commercial and administrative services	10	(1 067)	(776)	(2 328)	(1 747)	(3 618)
Tonnage tax	11	(38)	(32)	(74)	(76)	(119)
Other operating and administrative expenses		(401)	(92)	(731)	(107)	(300)
Operating profit before depreciation		4 227	8 450	8 963	15 824	30 757
Ordinary depreciation	4	(3 142)	(4 102)	(5 920)	(8 273)	(16 840)
Operating profit after depreciation		1 085	4 348	3 043	7 551	13917
Finance income	8	815	631	1 545	2 300	2 234
Finance costs	8	(3 776)	(1 807)	(7 268)	(3 225)	(7 374)
Profit before tax		(1 876)	3 172	(2 680)	6626	8777
Income tax expenses	11					ਦਰੇ
Profit after tax		(1 876)	3 172	(2 680)	6626	8 836
Attributable to:
Equity holders of the parent company		(1 876)	2 487	(2 680)	5 768	7 978
Non-controlling interests			685		858	858
Total		(1 876)	3172	(2 680)	6626	8 836

		Quarter ended	YTD	Year ended
	Unaudited	Unaudited	Unaudited	Unaudited	Audited
USD '000				30 Jun 2019 30 Jun 2018 30 Jun 2019 30 Jun 2018 31 Dec 2018
Profit/ (loss) of the period	(1 876)	3172	(2 680)	6626	8 836
Other comprehensive income to be reclassified to profit or loss
Net movement fair value on cross-currency interest rate swaps (CCIRS)	(14)		105
Reclassification to profit and loss (CCIRS)	(72)		211
Net movement fair value on interest rate swaps	(423)	161	(692)	651	368
Net movement fair value FX hedge	30		(14)		(35)
Net movement fair value bunker hedge	(323)	-	647		(918)
Net movement fair value FFA hedge	(774)		212		970
Income tax effect
Net other comprehensive income to be reclassified to profit or loss	(1 575)	161	470	651	385
Other comprehensive income/(loss) for the period, net of tax	(1 575)	161	470	651	385
Total comprehensive income/(loss) for the period, net of tax	(3 452)	333	(2 210)	7 278	9 221
Attributable to:
Equity holders of the parent company	(3 452)	2560	(2 210)	6 086	8 029
Non-controlling interests		774		1 192	1 192
Total	(3 452)	333	(2 210)	7 278	9 221

Consolidated financial statements Q2-2019 (unaudited) Enclosures

	Unaudited	Audited
ASSETS Notes	30 Jun 2019	31 Dec 2018
Non-current assets
Deferred tax asset 11	15	15
Vessels 4	213 844	167 037
5 Newbuilding contracts	64342	59 877
4 Right of-use assets	1613
Long-term receivables from related parties
б Long-term financial assets	1075	1 855
Total non-current assets	280 889	228 786
Current assets
Short-term financial assets 6	1073	464
Inventories	5112	5 883
Trade receivables and other current assets	15 729	9870
Short-term receivables from related parties	49	594
7 Cash and cash equivalents	127 996	88 263
Total current assets	149 958	105 074
TOTAL ASSETS	430 847	333 859

		Audited
EQUITY AND LIABILITIES	30 Jun 2019	31 Dec 2018
Equity
9 Share capital	5725	4 863
Share premium	130 232	92 271
Other reserves	521	51
Retained earnings	75 367	80 901
Total equity	211 845	178 086
Non-current liabilities
	147 471	95 746
б Mortgage debt
6 Long-term liabilities to related parties		36 000
б Long-term financial liabilities	2541	450
Long-term lease liabilities	1297
Bond loan 6.10	34 994
Total non-current liabilities	186 303	132 196
Current liabilities
6 Short-term mortgage debt	15 902	12 200
Other interest bearing liabilities	7 851	2 172
6 Short-term financial liabilities	271	918
ნ
Short-term lease liabilities	332
Trade and other payables	7 656	7601
Short-term debt to related parties	570	563
Tax liabilities 11	115	123
Total current liabilities	32 698	23 577
TOTAL EQUITY AND LIABILITIES	430 847	333 859

Consolidated financial statements Q2-2019 (unaudited) Enclosures

		Quarter ended		YTD		Year ended
		Unaudited	Unaudited	Unaudited	Unaudited	Audited
	Notes	30 Jun 2019	30 Jun 2018	30 Jun 2019	30 Jun 2018	31 Dec 2018
Profit before tax		(1 876)	3 313	(2 680)	6 600	8777
Tonnage tax expensed	10	38	32	74	76	119
Ordinary depreciation	4	3 142	4 102	5 920	8 273	16 840
Amortization of upfront fees bank loans		77	58	154	109	228
Financial derivatives unrealised loss / gain (-)	6	660	(୧୧୮)	1119	(2 517)	(1 163)
Gain/loss on foreign exchange		473		473
Interest income	1	(554)	(152)	(1 095)	(445)	(1 071)
Interest expenses	7	2 272	1717	4 566	3 043	6 972
Taxes paid for the period	10			(45)
Change in current assets		(4 937)	5 732	(4 525)	2 369	(2 070)
Change in current liabilities		583	(6816)	(537)	(3 814)	(1 782)
Interest received	1	554	152	1 095	445	1 071
A: Net cash flow from operating activities		432	7 482	4 520	14 139	27 920
Acquisition of tangible assets	4	(466)	(2 093)	(986)	(2 386)	(2 817)
Installments and other cost on newbuilding contracts	5	(9 971)	(10 280)	(56 026)	(15 752)	(22 126)
Acquisition of subsidiaries, net of cash					863	863
B: Net cash flow from investment activities		(10 437)	(12 373)	(57 013)	(17 275)	(24 080)

Proceeds from mortgage debt 6	31 000		62 000		3 000
Net proceeds from bond loan and settlement shareholder 6 loan			(630)
б Transaction costs on issuance of loans			(454)
б Repayment of mortgage debt	(3 481)	(4 303)	(6 531)	(5 774)	(10 528)
Interest paid 7	(2 147)	(1674)	(3 865)	(3 000)	(7 103)
Repayment of financial lease liabilities	(90)		(179)
Capital increase April 30, 2018		12 000		12 000	12 000
Capital increase October 10, 2018					45 000
Capital increase	40 096		40 096
Transaction costs on capital increase	(1 035)		(1 035)		(581)
Acquisition of non-controlling interests					(622)
Group contribution/dividend	(2 854)		(2 854)	(9 958)	(a ac8)
Dividends to non-controlling interests				(495)	(495)
C: Net cash flow from financing activities	61 490	6 022	86 248	(7 227)	30 713
Net change in liquidity in the period (A + B + C)	51 485	1 131	34 055	(10 364)	34 552
Cash and cash equivalents at beginning of period*	68 660	41 175	86090	51 538	51 538
Cash and cash equivalents at end of period*	120 145	42 306	120 145	41 175	86 090
Net change in cash and cash equivalents in the period	51 485	1131	34 055	(10 364)	34 552