STRICTLY PRIVATE & CONFIDENTIAL
Introduction to Marine
Mikael Mäkinen, President - Marine
21 October 2014
© 2014 Rolls-Royce plc The information in this document is the property of Rolls-Royce plc and may not be copied or communicated to a third party, or used for any purpose other than that for which it is supplied without the express written consent of Rolls-Royce plc. This information is given in good faith based upon the latest information available to Rolls-Royce plc, no warranty or representation is given concerning such information, which must not be taken as establishing any contractual or other commitment binding upon Rolls-Royce plc or any of its subsidiary or associated companies.
Trusted to deliver excellence Introduction to Marine
Trusted to deliver excellence 2 Privileged and confidential - prepared at the request of outside counsel Rolls-Royce Marine An important member of the family
Aerospace Power Systems
Marine
Nuclear
Trusted to deliver excellence 3 Privileged and confidential - prepared at the request of outside counsel Marine industry A strong contributor to the global economy
“Offshore exploration & production is expected to grow to 45% (from 35%) of exploration & production
over the next decade.”
Barclays
“Over 90% of the world’s goods by weight and volume
are transported by sea.”
International Maritime Organization (IMO)
“Over 50% of countries worldwide have an ocean-going naval fleet.”
IHS Jane’s
Trusted to deliver excellence 4 Privileged and confidential - prepared at the request of outside counsel Major trends A large business opportunity
Environmental efficiency
Ship intelligence is the new way to sell
Fuel diversity will increase
Towards electric ships and systems
Markets continue shifting towards Asia
Increasing activities in harsh environments
Business models changing towards asset management
Flexibility increases in ship design
Ship sizes growing
Trusted to deliver excellence 5 Privileged and confidential - prepared at the request of outside counsel Market segments Every fifth ship has Rolls-Royce equipment
Purpose Market segments
Offshore Search for and extraction of
natural resources. > 10,000 vessels
Merchant Commercial Transportation of
cargo and people. > 111,000 vessels1)
Protection of Naval state interests. 2) > 11,000 vessels
1) Including > 25,000 fishing vessels and > 23,000 tugs & workboats, excluding inland waterway vessels and pleasure craft 2) > 20 metres
Trusted to deliver excellence 6 Privileged and confidential - prepared at the request of outside counsel Offshore Vessel segments and ship types
Vessel segments Vessel types
Seismic vessels Exploration & Drill ships & semi-subs Production Shuttle tankers
Construction vessels Subsea & Subsea vessels Construction Cable layers
Platform supply vessels
Anchor handling Supply & Service vessels
Safety standby vessels
Trusted to deliver excellence 7 Privileged and confidential - prepared at the request of outside counsel Offshore Supply / demand balance at a ship type / size level
Cyclicality by ship type
Source: Internal, vessel contracting
Trusted to deliver excellence 8 Privileged and confidential - prepared at the request of outside counsel Offshore Wide range of vessel types
Seismic vessel Drill ship Drilling semi-submersible
Construction vessel Platform supply vessel Anchor handling vessel
Trusted to deliver excellence 9 Privileged and confidential - prepared at the request of outside counsel Oil field life-cycle Rolls-Royce equipment used throughout
Illustrative
Seismic vessel
Platform supply vessel
Anchor handling vessel
Drill ship / semi-sub
Subsea construction vessel
Pipe layer
Production & storage vessel Shuttle tanker
Well intervention vessel
Inspection / maintenance vessel
Decommissioning vessel
Trusted to deliver excellence 10 Privileged and confidential - prepared at the request of outside counsel Growing energy demand
Source: International Energy Agency (IEA) - World Energy Outlook
Trusted to deliver excellence 11 Privileged and confidential - prepared at the request of outside counsel Oil & gas market Prospects for 2035
Sources: International Energy Agency (IEA) - World Energy Outlook and Rystad
Trusted to deliver excellence 12 Privileged and confidential - prepared at the request of outside counsel Global E&P capex spending growth Low-double digits with offshore c. 5 to 10%
Actual Forecast
2014-17 $9.0 11% 45% Trillion 2009-13 13% 35%
$3.9 Trillion
Sources: Barclays E&P Spending Update
Trusted to deliver excellence 13 Privileged and confidential - prepared at the request of outside counsel Proven offshore oil reserves beyond 400 ft With new discoveries increasingly in deep water
Reserve Water Depth
400-1,000 1,000-5,000
5,000-7,500 7,500+
Source: Based on RS Platou data, water depth > 400 ft
Trusted to deliver excellence 14 Privileged and confidential - prepared at the request of outside counsel Merchant Vessel segments and ship types
Vessel segments Vessel types
Tankers
Cargo vessels Bulk carriers Container vessels
Cruise ships Passenger Ferries vessels Yachts
Tugs & workboats
Others Fishing vessels
Dredgers
Trusted to deliver excellence 15 Privileged and confidential - prepared at the request of outside counsel Merchant Supply / demand balance at a ship type / size level
Cyclicality by ship type
Source: Internal, vessel contracting
Trusted to deliver excellence 16 Privileged and confidential - prepared at the request of outside counsel Merchant Wide range of vessel types
Tanker (medium) Tanker (large) Container vessel
Bulk carrier Ferry Tug
Trusted to deliver excellence 17 Privileged and confidential - prepared at the request of outside counsel GDP and seaborne trade growth relationship
Sources: IHS World Industry and DnV Shipping 2020
Trusted to deliver excellence 18 Privileged and confidential - prepared at the request of outside counsel World fleet Number of vessels contracted and scrapped
Sources: IHS Fairplay and Internal 1) Including all commercial & naval vessels > 100 gross tonnes, excluding tugs, yachts and inland waterway vessels
Trusted to deliver excellence 19 Privileged and confidential - prepared at the request of outside counsel Naval Vessel segments and ship types
Vessel segments Vessel types
Combatants
Navy Offshore patrol vessels Amphibious vessels vessels Auxiliaries
Patrol vessels
Coast guard Search & rescue vessels vessels Tugs & tenders
Constabulary Police vessels
vessels Customs vessels
Trusted to deliver excellence 20 Privileged and confidential - prepared at the request of outside counsel Naval Wide range of vessel types
Fast attack craft Coast guard vessel Frigate
Littoral combat ship Aircraft carrier Replenishment vessel
Trusted to deliver excellence 21 Privileged and confidential - prepared at the request of outside counsel Global military ship market
Source: IHS Jane’s Defence Budgets
Trusted to deliver excellence 22 Privileged and confidential - prepared at the request of outside counsel Large number of market players
Ship owners Oil companies Ship operators Subsea construction companies Shipyards Ship managers Charterers Navies Cargo owners Government agencies Governments
Equipment & system suppliers
Trusted to deliver excellence 23 Privileged and confidential - prepared at the request of outside counsel
MARINE VIDEO
Trusted to deliver excellence 24 Privileged and confidential - prepared at the request of outside counsel Rolls-Royce Marine Key facts
Land & Sea - Revenue 2013 Rolls-Royce Marine - Revenue 2013 Total: £5.5bn Total: £2.0bn
Rolls-Royce Marine - Global footprint
75%
12% 13%
̴ 6,500 employees Trusted to deliver excellence 25 Privileged and confidential - prepared at the request of outside counsel Top 10 offshore countries
Shipyard countries - Offshore Ship owner countries - Offshore
China 29% USA 18% South Korea 19% Norway 13%
Singapore 8% Singapore 9% Norway 6% Malaysia 6%
USA 6% Brazil 6% Brazil 4% China 5%
Netherlands 4% France 5% Japan 3% United Arab Emirates 4% Malaysia 3% Bermuda 3% Indonesia 2% Netherlands 2%
Source: Internal, 2008 - 2013, addressable market, vessel contracting, by value
Trusted to deliver excellence 26 Privileged and confidential - prepared at the request of outside counsel Top 10 merchant countries
Shipyard countries - Merchant Ship owner countries - Merchant
China 34% Japan 14% South Korea 32% China 11%
Japan 18% Greece 10% Philippines 2% Singapore 6%
Netherlands 2% Germany 6% Taiwan 2% United Kingdom 4% Malaysia 1% South Korea 4% Indonesia 1% Denmark 4% Vietnam 1% Hong Kong 3% Italy 1% Taiwan 3%
Source: Internal, 2008 - 2013, addressable market, vessel contracting, by value
Trusted to deliver excellence 27 Privileged and confidential - prepared at the request of outside counsel Major trends A large business opportunity
Rolls-Royce strength
Environmental efficiency
Ship intelligence is the new way to sell
Fuel diversity will increase
Towards electric ships and systems
Markets continue shifting towards Asia
Increasing activities in harsh environments
Business models changing towards asset management
Flexibility increases in ship design
Ship sizes growing
Trusted to deliver excellence 28 Privileged and confidential - prepared at the request of outside counsel Concentration Choices have been made
Market and vessel segments Equipment & systems
Geographical presence
Trusted to deliver excellence 29 Privileged and confidential - prepared at the request of outside counsel Ship systems Large number of different systems
Ventilation Air Conditioning Elevators
Food stores Lightning Laundry Life saving equipment Outdoor deck systems Exhaust gas treatment Electric distribution Ramps Communication Navigation Cargo deck Bridge automation Propulsors Deck equipment
Steering gear Rudders Winches Gears and shaft lines Stabilisers Fuel system Main engines Steam system Switchboards Energy management Thrusters Fire fighting systems Automation & controls Generators Launch & recovery systems Bearings and seals Auxiliary engines Replenishment / fuelling systems Ballast systems Electric drives Ballast water treatment Sewage treatment Rolls-Royce scope Adjacent to Rolls-Royce scope
Distant to Rolls-Royce scope
Trusted to deliver excellence 30 Privileged and confidential - prepared at the request of outside counsel Our market approach
Trusted to deliver excellence 31 Privileged and confidential - prepared at the request of outside counsel Offshore market positioning Illustrative
operational functionality
electrical, automation & control
propulsion
& engines
Trusted to deliver excellence 32 Privileged and confidential - prepared at the request of outside counsel A sizeable market opportunity
250 ]
bn Services opportunity [ £
200 Equipment and systems opportunity
111 Equipment and systems adjacency*
150
Market opportunity
100
108 94 50
18 14 0 2004 - 2013 2014 - 2023
Source: Internal data based on 2014 market pricing with no adjustment for inflation, vessel contracting * For power, transmission, propulsion, automation & control, ship design, motion control and work systems.
Trusted to deliver excellence 33 Privileged and confidential - prepared at the request of outside counsel Our integrated strategy
Customer Innovation
Fully understand our customers’ Create a winning offering for requirements to create future customer needs compelling offerings
Profitable growth
Continuously improve our operational efficiency
Grow our aftersales support business
Grow into attractive market
segments and geographies
Trusted to deliver excellence 34 Privileged and confidential - prepared at the request of outside counsel