Private & confidential

Private Placement DebtAccess to this market for shipowners

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The Private Placement Debt market in brief:

A USD ~300bn private debt market where the investors are predominantly insurance companies

− Financing of cash-flow, not asset

− Priced as a premium to US Treasury based on i) the end credit of the final off-taker (project bonds) or ii) the issuer’s credit rating

− Can offer leverage of ~90-120% LTV as the structure is sized based on cash flows, not LTV

− Annuity style amortization, tenors of ~20+ years if backed by investment grade charter of same length

− Project bonds: Entirely non-recourse to the sponsor (owner)

− No financial covenants

− No dividend restrictions

− Easy execution and moderate issuance cost

− No public registration, no publicity of private (incl. financial) information

− Private credit rating

− No trading

Case study: LNG vessel with 15 year charter

− USD 220 mill loan

− Rated BBB-

− Priced 4.66% (all-in)

− Non-recourse to owners, no covenants

− Tenor 15 years (matching the underlying charter)

− Zero net balloon

Suitable for :

− Investment grade owners (not many)

− Public or private ship-owners with long-term charters (8+ years) to strong counterparts (or their subsidiaries/affiliates) rated BB+ or higher

Pareto Securities is the largest issuer of maritime backed US Private Placement debt

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Example of a Private Placement Debt financed asset:

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Asset-backed vs. cash flowed-backed financing

Shipping / Offshore Services

Infrastructure RenewablesUtilities

LNG / LPG

Shuttle tankers

FPSO

Jones Act

Etc.

Airports

Ports

Railroads

Pipelines

Socialinfrastructure

Offshore Wind

Onshore Wind

Solar

Hydro

Hydro

Termal

Transmission

Real estate

Real estate on long term leases

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The rise of Project Bonds

Old route

New route

Longer tenor

Lower pricing

Higher leverage

Non-recourseFlexible structures

Limited covenants

Private Placement

Project Bonds

6

5

4

3

2

1

Structural benefits of project bonds

New route

‘Going Directly to the Source’

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The Largest Capital Market in the WorldThe US capital market is key to Pareto’s distribution power

Note: Numbers from 2017Source: Statista

49%USD 37 trillion AuM

29%

USD 22 trillion AuM

US

Europe

Rest of World

Assets Under Management - US Assets Under Management - Europe

About half of the world’s total assets under management are in the US. With USD 37 trillion under management, nearly twice that of Europe, the US will be an increasingly important focus area for Pareto in the coming year. The breath and depth of the investor market is immense, representing opportunities for

both our investment banking division and our brokers.

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Example recent maritime Private Placement Debt issuances Fastest growing niche financing product in shipping

Issuer Segment Tenor Amount

Tanker Co Chemical Tankers 10 USD 80m

LNG Vessels Support Vessels 15 USD 60m

Jones Act Co Support Vessels 15 USD 320m

Tanker Co Chemical Tankers 17 USD 86m

Offshore Drilling Drilling rig 5 USD 410m

Nordic Maritime Co Support Vessels 10 EUR 58m

LNG Tanker Co LNG Tanker 15 USD 220m

Tanker Co Chemical Tankers 15 USD 85m

Offshore Service Co Supply Vessels 10 USD 45m

FSO Co Midstream 10 USD 30m

Bulk Tanker Co Bulk Freight 15 USD 60m

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Debt Private Placements: A hybrid between bond and bank debt

Public bonds Private Placements Debt Corporate Bank Loan

MaturitiesNo benchmark maturities; Appetite across 5-30 year range

No benchmark maturities; Appetite across 5-30 year range; 7-15 year “sweet-spot”

5 years typical

Fixed / FloatingFixed price debt; Spread to gov’t yield

Typically fixed price debt though limited appetite for floating

Floating rate; spread + Libor

Investors InstitutionalInstitutional; Mostly North American and European life insurance and asset mgt companies

Banks

Financial covenantsUSA: no (incurrence test)

Norway: yesInvestors expect to be pari passu with other lenders Yes

RatingsUSA: Two ratings required

Norway: none

Not required; but one rating sometimes recommended for projects

Not required

Listing/trading Yes - and trading No listing; not traded No listing; not traded

Reporting Requirements

Strict regulatory requirementsNo public reporting, and no SEC registration or

10b-5 OpinionNo public reporting

DocumentationStrict prospectus requirement (USA)

Investor presentation (Norway)Private Placement Memorandum Depends

Timing/syndicationSeveral weeks preparation / Sold and closed within days

Generally 8 - 10 weeks to “circle” (coupon

setting); funding in 8 - 12 weeks

4 - 8 weeks, depending on distribution approach

Arrangers per deal2 - 3 bookrunners / Additional co-agents

Generally 1 active agentsVarious roles for lead banks. Many passive positions

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Project Bonds: Product overview

Issuers InvestorsProduct

CurrenciesUSD, Euro or GBP

(other currencies can be provided)

Maturities 5 to 30 years

Ratings

Not required; but one rating sometimes

recommended for projects

Legal Framework1 2 3 4

Investment grade corporates

Investment grade bond structures (project bonds)

Mainly issuers from the US, Western Europe, Australia and Canada

Institutional investors; mostly insurance companies and asset managers in North America and Europe

‘Deepest pockets in the world’

Long-term, fixed rate notes

Wholly private market, no public registration, no reporting, no listing, and very limited to no trading

Flexible documentation

Standard Note Purchase Agreement or bilateral/tailored loan docs

Typically English law or New York law

Issuance Volume by Geography

US50%

Canada5%

UK16%

Australia14%

Europe11%

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A broad fixed income product portfolio

“Norwegian” High Yield Bonds

Ove

rvie

w

US High Yield Bonds and Term Loan Bs

1. Flexible bond structures− Structures include both senior unsecured bonds and secured bonds (1st and 2nd lien)

− Covenant light structures and multiple tenors available

2. Global investor universe− Truly global investor universe with investor subscriptions normally ranging from USD 1

million to USD 75 million (and higher)

− Investor demand will depend on issuer jurisdiction, type and size of deal, yield on offer,etc.

3. Efficient process and documentation− Well tested and proven trustee function through the Nordic Trustee

− Broad investor acceptance for the Nordic bond documentation model

Well known structure and issuance process

Pareto with a sales force of ~90 professionals offering premium access tosecurities both in the primary and secondary markets

Pareto’s global investor base also includes investors who are specializedwithin the energy and maritime sectors, not served by other mainstreaminvestment banks

Pareto raised over USD 10bn in 94 HY transaction in 2014 - 2016

World-wide investor reach and placing power

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1. The product− Long-term, fixed rate notes (floating rate is possible)

− Wholly private market, no public registration, no reporting, no listing, no trading, with a~USD 80 bn annual deal flow

2. The issuers− Investment grade corporates and investment grade bond structures (project bonds)

− Mainly issuers from the US, Western Europe, Australia and Canada

3. Documentation and legal framework− Flexible documentation

− Standard Note Purchase Agreement or bilateral/tailored loan docs

4. The investors− Institutional investors; mostly insurance companies and asset managers in North America

and Europe

− ‘Deepest pockets in the world’

Private Placements Sale leaseback

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Case Study: Knutsen LNG / NYK Line USD 220.0 mill Sr Sec NotesSenior Secured US Private Placement Bond Issue

Transaction summary Background

Issuer: Norspan LNG VIII (SPV)

Sponsor: Knutsen LNG AS and NYK Line (JV)

Amount: USD 220.0 mill

Type: US Private Placement Bond

Status: Sr Secured; Non-recourse

Asset: One 2010-built DFDE LNG carrier

Coupon: 4.66% (all-in fixed)

Tenor: 15.2 yrs; small balloon at maturity

Profile: Annuity; avg life ~10.0 yrs

Financial covenants: Distribution test (DSCR)

Docs: Section 4(2) Note Purchase Agr.

Listing: Unlisted

Pareto role: Joint Arranger

Credit rating BBB-

Pricing/Circle date: 22nd Nov 2016

Sponsor:

o Knutsen LNG is a major European maritime group

involved in seaborne transportation of LNG

o NYK Line of Japan is one of the world’s largest maritime groups with activities in bulk, tankers, car carriers, cruise and LNG

Bond structure and process:

o The transaction was structured as a non-recourse project financing with security in the vessel and the 15 yr charter to a BBB-rated utility company (Gas Natural SDG)

o The net proceeds from the bond issue will be used to refinance bank debt and dividends to the shareholders

o Sold to large US institutional investors

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Contact details and disclaimer

www.paretosec.com | Bloomberg: PASE (go) | Reuters: PARETO

Oslo (Norway)Pareto Securities ASDronning Mauds gate 3PO Box 1411 VikaN-0115 Oslo NORWAY

Tel: +47 22 87 87 00

Stavanger (Norway)Pareto Securities ASHaakon VIIs gate 8PO Box 163N-4001 StavangerNORWAY

Tel: +47 51 83 63 00

Malmö (Sweden)Pareto Securities ABStortorget 13S-211 22 MalmöSWEDEN

Tel: +46 40 750 20

Stockholm (Sweden)Pareto Securities ABBerzelii Park 9PO Box 7415S-103 91 StockholmSWEDEN

Tel: +46 8 402 50 00

Helsinki (Finland)Pareto Securities OyAleksanterinkatu 44 6th floorFI-00100 HelsinkiFINLAND

Tel: +358 9 8866 6000

Copenhagen (Denmark)Pareto Securities ASSankt Annæ Plads 131250 Copenhagen KDENMARK

Tel: +45 78 73 48 00

London (UK)Pareto Securities Ltd11 Berkeley Street3rd floorLondon W1J 8DSUNITED KINGDOM

Tel: +44 20 7786 4370

Paris (France)Pareto Securities ASParis Branch11 BD Jean Mermoz92200 Neuilly Sur Seine FRANCE

Tel: +33 141921234

Disclaimer

These materials have been prepared by Pareto Securities AS and/or its affiliates (together “Pareto”) exclusively for the benefit and internal use of the client named on the cover in order to indicate,on a preliminary basis, the feasibility of one or more potential transactions. The materials may not be used for any other purpose and may not be copied or disclosed, in whole or in part, to anythird party without the prior written consent of Pareto.

The materials contain information which has been sourced from third parties, without independent verification. The information reflects prevailing conditions and Pareto’s views as of the date ofhereof, and may be subject to corrections and change at any time without notice. Pareto does not intend to, and the delivery of these materials shall not create any implication that Pareto assumesany obligation to, update or correct the materials.

Pareto, its directors and employees or clients may have or have had positions in securities or other financial instruments referred to herein, and may at any time make purchases/sales of suchsecurities or other financial instruments without notice. Pareto may have or have had or assume relationship(s) with or engagement(s) for or related to the relevant companies or matters referredto herein.

The materials are not intended to be and should not replace or be construed as legal, tax, accounting or investment advice or a recommendation. No investment, divestment or other financialdecisions or actions should be based solely on the material, and no representations or warranties are made as to the accuracy, correctness, reliability or completeness of the material or itscontents. Neither Pareto, nor any of its affiliates, directors and employees accept any liability relating to or resulting from the reliance upon or the use of all or parts of the materials.

Perth (Australia)Pareto Securities Pty LtdLevel 11216 St Georges TcePerth, Western AustraliaAUSTRALIA, 6000

Tel: +61 8 6141 3366

SingaporePareto Securities Pte Ltd16 Collyer Quay #27-02Income at RafflesSingapore 049318SINGAPORE

Tel: +65 6408 9800

New York (US)Pareto Securities Inc150 East 52nd Street29th floorNew York NY 10022USA

Tel: +1 212 829-4200

Houston (US)Pareto Securities Inc8 Greenway PlazaSuite 818Houston, TX 77046USA

Tel: +1 713 840-6304

Hamburg (Germany)Pareto Securities GmbHCaffamacherreihe 7D-20355 HamburgGERMANY

Tel: +49 (40) 299 969 70

Zürich (Switzerland)Pareto Securities AGRennweg 578001 ZürichSWITZERLAND

Tel: +41 44 551 38 00

Frankfurt (Germany)Pareto Securities ASGraefstraße 97Amtsgericht Frankfurt am MainHR B 109177GERMANY

Tel: +49 (69) 589 97 0