company presentation - scorpio bulkerscompany presentation 2 scorpio bulkers inc. (“scorpio” or...

1

February 2017

Company Presentation

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Scorpio Bulkers Inc. (“Scorpio” or the “Company”) is a NYSE-listed Marshall Islands

corporation, founded in March 2013 by the senior management team of the Scorpio

Group

Company currently owns 48 dry bulk ‘Eco’ vessels

• 28 Ultramax and 19 Kamsarmax delivered to date

• 1 Kamsarmax delivering in 2Q-2017

Scorpio’s strategy is to:

• Own and operate the latest generation of fuel efficient drybulk vessels

purchased from quality shipyards

• Operate vessels in the spot market through the Scorpio Ultramax and Scorpio

Kamsarmax pools under short term or long term time charters

• Maintain a strong balance sheet in the current difficult operating environment

Scorpio has access to Scorpio Group’s customer and supplier relationships as well as

technical, commercial and managerial expertise

About Scorpio Bulkers

3

Experienced Management Team

Years in industry Prior experience

Emanuele A. LauroFounder, Chairman, Director

& Chief Executive Officer

Robert BugbeeFounder, President and

Director

Cameron MackeyChief Operating Officer

Hugh BakerChief Financial Officer

13 years

30 years

22 years

6 years

Member of the Lolli-Ghetti family, involved in shipping since the 1950s

Joined Scorpio Group in 2003, part of senior management since 2004

Founder of several tanker pools including: Scorpio Aframax Tanker Pool, Panamax Tanker Pool and Handymax tanker pool

Degree in International Business from the European Business School in London

Mr. Bugbee, Co-Founder of Scorpio Bulkers, has served as President since July 2013, he also serves as President and Director of Scorpio Tankers since its IPO in April 2010

Joined Scorpio Group in February 2009. Prior to joining Scorpio Group, Mr. Bugbee was a partner at Ospraie Management LLP, and held President, Executive Vice President, Chief Operating Officer positions in OMI Corporation

Holds an MBA from the Norwegian School of Economics (NHH)

Mr. Mackey has served as Chief Operating Officer of Scorpio Bulkers since July 2013, also serves as Chief Operating Officer of Scorpio Tankers since its IPO in April 2010

Previous experience includes equity and commodity analyst at Ospraie Management LLC, Senior Vice President and in Business Development at OMI Corporation

M.B.A. from the Sloan School of Management at MIT, a B.S. from the Massachusetts Maritime Academy, B.A. from Princeton University and Master Mariner

Filippo A. LauroVice President

24 years

Joined Scorpio in July 2012, initially focusing on business development in Scorpio Tankers before taking on role as CFO in Scorpio Bulkers in July 2013

Previous experience as Managing Director of Evercore Partners in New York, Head of Shipping at HSH Nordbank in New York and Managing Director of ING Bank in London

Mr. Baker has a BA from the London School of Economics and a MSc in Shipping, Trade & Finance from Cass Business School

Mr. Baker is a Fellow of the Institute of Chartered Shipbrokers

Member of the Lolli-Ghetti family, involved in shipping since the 1950s

Joined Scorpio Group in 2010 as part of senior management

Founder of and held senior executive roles in several private companies both in his native Italy and abroad

4

Higher Revenues as a result of Scorpio Pools Outperformance

• 95% of the Clarksons Average of the 6/TC Routes for Baltic Supramax Index & 4/T/C Routes for Baltic Panamax Index

• Q1-17 earnings for Ultramax pool represent 73% of the days • Q1-17 earnings for Kamsarmax pool represent 75% of the days

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17

Scorpio Kamsarmax Pool Performance Baltic Panamax Index*

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17

Scorpio Ultramax Pool Performance Baltic Supramax Index*

5

Dec-2014Sold 1

Kamsarmax NB for ~ $31m

2H 14

Nov-2014$150m equity

private placement

offering

Dec-2014

Modified 6 Capesize NBs for LR2 NBs.

Agreed to sell 4 LR2 to Scorpio Tankers

Inc for $204m

Feb-2015Modified 3 existing

Capesize NB contracts for

construction of 3 LR1 product tankers

Apr-2015Sold 1 Kamsarmax

and 3 Capesize NBs as well as 3

LR1 NBs for ~$290m

Apr-2015Sold 2 Capesize NBs and 1 Ultramax NB

for ~ $111m

Sep-2014Raised $65m 7.5%

Sr. Unsecured Notes due 2019

Oct-2014

UW option exercised, raised

add. $8.6m 7.5% Sr. Unsecured Notes

Jun-2015Sold 3 Capesize NBs and 2 LR2 product

tankers for ~ $236m

Jun-2015$200m public offering of common shares +

$30m greenshoe exercise a week later

Capital raises OtherVessel sales

Company Timeline: Raise and Preserve Liquidity (1/2)

Sep-2015/Oct-2015Interest Coverage

Ratio covenant waived/amended through 4Q 2017

Nov-2015Sold 2 Capesize and 4 Capesize

NBs for ~$227m

1H 15 2H 15

Dec-2015Sold 5 Capesize

for ~$167m

Dec-2015Executed a one-for-twelve reverse stock

split to facilitate further equity issuance and

ensure NYSE compliance

6

Company Timeline: Raise and Preserve Liquidity (2/2)

Capital raises OtherVessel sales

2H 16

Feb-2016Agreement

reached to defer delivery of 8

newbuildings by ca. 6 months per

vessel

Feb-2016Termination of 4 TC-In

contracts for $10 million

Mar-2016

$63m public offering of

common shares

Apr-2016Agreement to cancel a

Kamsarmax newbuilding

1H 16

Feb-2016Reached agreement with

lenders to: (i) prepay $41.2m in exchange for deferment of principal

payments of $67.9m and (ii) reduce minimum

liquidity clause to >$25m and $700k per vessel

May-2016Reached agreement with lenders to: (i) amend the "interest coverage ratio"

covenant under the relevant credit facilities, and (ii)

reduce the "value-to-loan ratio" covenant under all of

its credit facilities

Jun-2016

$70m public offering of

common shares

Sep-Dec 2016Reached agreements to: (i) receive a reduction in delivery price on 8 vessels by $18m in aggregate, (ii)

defer delivery of 6 newbuildings by ca. 2-3 months per vessel, and (iii)

eliminate management fees payable upon any future vessel purchases/disposals and reduce

notice period upon vessel disposal

Oct-2016Reached agreement with

lenders to: (i) prepay $24.4m in exchange for deferment of principal payments of $48.8m and (ii) amend the "interest

coverage ratio" covenant under the relevant credit

facilities

7

Recent Charter Employment During 2H-16 and Q1-17

Vessel TypeDuration (Months)

Daily Rate

SBI Bravo Ultramax 4 – 7 $7,500

SBI Zeus Ultramax 7 – 9 $7,300

MV Geneva Queen Kamsarmax 7 – 10 $6,500

SBI Bolero Kamsarmax 5 – 8 $8,000

SBI Electra Kamsarmax 5 – 8 $8,000

SBI Lyra Ultramax 5 – 8 $9,500

SBI Poseidon Ultramax 5 – 7 $8,750

SBI Antares Ultramax 5 – 7 $8,900

SBI Cronos Ultramax 5 $9,000

SBI Capoeira Kamsarmax 5 – 7 $9,350

SBI Thalia Ultramax 5 – 8 $7,350

SBI Reggae Kamsarmax 5 – 8 $9,500

SBI Athena Ultramax 4 – 6 $10,000

SBI Echo Ultramax 4 – 6 $10,000

SBI Zumba Kamsarmax 5 – 7 $10,500

SBI Leo Ultramax 5 – 7 $9,000

SBI Cakewalk Kamsarmax 5 – 8 $9,000

SBI Achilles Ultramax 6 – 8 $11,000

SBI Pegasus Ultramax 5 – 7 $10,250

SBI Hermes Ultramax 6 – 8 $8,500

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Owned Fleet List

Vessel size 60,200-64,000 DWT Vessel size 82,000-84,000 DWT

Delivered Vessels Vessels to be delivered

Ultramax Newbuildings

# Name Year Yard

1 SBI Athena Q1-15 Chengxi

2 SBI Bravo Q1-15 Nacks

3 SBI Antares Q1-15 Nacks

4 SBI Leo Q1-15 Dacks

5 SBI Echo Q3-15 Imabari

6 SBI Lyra Q3-15 Dacks

7 SBI Subaru Q3-15 Dacks

8 SBI Tango Q3-15 Imabari

9 SBI Maia Q3-15 Nacks

10 SBI Hydra Q3-15 Nacks

11 SBI Pegasus Q3-15 Chengxi

12 SBI Ursa Q4-15 Dacks

13 SBI Thalia Q4-15 Chengxi

14 SBI Cronos Q4-15 Imabari

15 SBI Orion Q4-15 Chengxi

16 SBI Achilles Q1-16 Imabari

17 SBI Hercules Q1-16 Chengxi

18 SBI Perseus Q1-16 Chengxi

19 SBI Hermes Q1-16 Imabari

20 SBI Zeus Q2-16 Mitsui

21 SBI Hera Q2-16 Mitsui

22 SBI Hyperion Q2-16 Nacks

23 SBI Tethys Q3-16 Nacks

24 SBI Phoebe Q3-16 Chengxi

25 SBI Poseidon Q3-16 Mitsui

26 SBI Apollo Q4-16 Mitsui

27 SBI Samson Q1-17 Chengxi

28 SBI Phoenix Q1-17 Chengxi

Kamsarmax Newbuildings

# Name Year Yard

1 SBI Cakewalk Q3-14 SWS

2 SBI Charleston Q3-14 SWS

3 SBI Samba Q1-15 Imabari

4 SBI Rumba Q3-15 Imabari

5 SBI Capoeira Q3-15 Hudong

6 SBI Electra Q3-15 Yangzijiang

7 SBI Carioca Q4-15 Hudong

8 SBI Conga Q4-15 Hudong

9 SBI Flamenco Q4-15 Hudong

10 SBI Bolero Q4-15 Hudong

11 SBI Sousta Q1-16 Yangzijiang

12 SBI Rock Q1-16 Yangzijiang

13 SBI Lambada Q1-16 Hudong

14 SBI Reggae Q1-16 Hudong

15 SBI Zumba Q4-16 Hudong

16 SBI Macarena Q4-16 Hudong

17 SBI Parapara Q1-17 Hudong

18 SBI Mazurka Q1-17 Hudong

19 SBI Swing Q1-17 Hudong

20 SBI Jive Q2-17 Hudong

(1) As of January 31, 2017

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Overview of Lenders

Financial InstitutionCommitment (1)

($ in millions)

CEXIM $158.5

SEB $117.8

Nordea $89.7

Deutsche Bank $60.1

Credit Suisse $40.5

Credit Agricole $38.4

BNPP $28.0

NIBC $20.1

ABN AMRO $19.4

Total Committed $572.5

SALT Current Lenders

• Our debt is held by the original lenders and remains priced between L+2.925% and L+3.00%

(1) As of February 3, 2017

10

Remaining Capex & Delivery Obligations

• Agreed with the shipyard to reduce the price by approximately $2.5 million in Q4 2016

Dollars in millions

Vessel Type Country Built Delivery Date Q1-17 Q2-17Total

InstallmentsExtra

Costs*

Total Remaining

Capex

SBI Jive Kamsarmax China Q2-17 1.4 17.2 18.6 0.1 18.7

* Equipment and other technicalupgrades

Installments 1.4 17.2 18.6

Extra Costs* 0.0 0.1 0.1

Total CapEx $1.4 $17.3 $18.7

11

Projected Quarterly Principal Repayment Schedule 2017 – 2019

($ in

mill

ions

)

$1.0

$2.7

$6.1 $6.1 $6.1 $6.1 $6.1 $6.3 $6.3 $6.3 $6.3 $6.3

$-

$5.0

$10.0

$15.0

$20.0

Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19

Year Principal Repayments

2017 $16.0m

2018 $24.7m

2019 $25.3m

Total $66.0m

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In compliance with all Value-to-Loan covenants

Secured Credit Facilities # of delivered

vesselsVTL Compliance (1)

VTL Ratio VTL Test Compliance

20 165% 140% PASS

15 182% 140% PASS

4 205% 115% PASS

3 182% 140% PASS

2 237% 140% PASS

2 191% 140% PASS

1 212% 140% PASS

Total 47

(1) Includes the recent drawdowns for 3 vessels in January 2017 (with average vessel values from two brokers as of January 2017), and based on loans outstanding for the other 44 vessels as of December 31, 2016 (with average vessel values from two brokers as of December 31, 2016)

13

Coal/iron ore

Iron ore/coal

Iron ore/coal

Handysize 10,000 – 40,000

40,000 – 60,000

60,000 – 80,000

Steel/fertilizers/forest/grains/soybeans/alumina/coal/other minor bulks

Steel/fertilizers/forest/grains/soybeans/alumina/coal/other minor bulks

Coal/grains/soybeans/bauxite

Vessel type DWT Cargo carried

Handymax/Supramax

Panamax/Kamsarmax

Post-Panamax

Capesize

VLOC

80,000 – 110,000

110,000 – 200,000

Over 200,000

Overview of Dry Bulk Segments

14

Overview of Dry Bulk Commodity Cargoes

• Iron ore: primary ingredient in the

production of steel, along with limestone &

coking coal and is the largest single

commodity shipped on dry bulk vessels.

• Coal: seaborne coal trade is comprised of

two different types of coal; steam coal

(which is used for electricity generation

and industrial uses), and coking coal (which

is the key ingredient for steel making).

• Grains: consists primarily of wheat, coarse

grains (such as corn, barley, oats, and rye)

and soya bean/meal.

• Minor bulks: include several other dry bulk

goods such as phosphate rock, fertilizers,

bauxite, steel products, forest products,

nickel, ore, sugar, salt, and others.

Breakdown of Major Bulks

Breakdown of Minor Bulks

Breakdown of Major Bulks

Minor Bulks38%

Iron ore29%

Grains10%

Coal23%

Total Sugar3% Total Agribulks

9%

Fertiliser8%

Metals and Minerals

40%

Manufactures40%

15

One Year Time Charter Rates

Source: Clarksons Research Services, February 2017

Time charter rates and BDI have recovered from record low in February 2016

Historical Data 2002-2017

Class/Index Current Avg Max Min Feb 16 to Jan 17

Ultramax $7,563 $18,865 $66,300 $4,875 36%

Panamax/Kamsarmax $8,781 $21,318 $79,375 $5,363 39%

Baltic Dry Index 907 2,657 10,844 307 66%

0

2,000

4,000

6,000

8,000

10,000

12,000

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

Bal

ticx

Dry

Ind

ex

($/D

ay)

Ultramax Panamax/Kamsarmax BDI

16

Dry Bulk Asset Values

Q1-2002Ultramax: $18.3Kamsarmax: $20.5

Q3-2008Ultramax: $48.0Kamsarmax: $53.7

Jan-2017Ultramax: $22.25Kamsarmax: $24.5

Avg 2002-2017Ultramax: $28.8Kamsarmax: $32.4


$0

$10

$20

$30

$40

$50

$60

$70

Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

($ M

illio

ns)

Panamax/Kamsarmax Ultramax

17

Dry Bulk Seaborne Demand


2009-2017

Iron Ore Coal Grains Minor Bulks Total Dry Bulk

CAGR 6.4% 4.3% 5.3% 3.8% 4.8%

3,428

3,854

4,101

4,340

4,584

4,819 4,820 4,884 4,979

0

1,000

2,000

3,000

4,000

5,000

2009 2010 2011 2012 2013 2014 2015 2016 2017(f)

Mill

ion

To

nn

es

Iron Ore Coal Grain Minor Bulks

18

Ton Mile Demand

Iron Ore

Grain Total Dry Bulk

Ton

Mile

s (B

illio

ns)

Coal

Ton

Mile

s (B

illio

ns)

To

n M

iles

(Bill

ion

s)


Ton

Mile

s (B

illio

ns)

5,365 5,852

6,336 6,718 6,931

7,531 7,576 8,035

8,359

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 (f)

3,440

4,047 4,315

4,833 5,033

5,223 4,934 4,903 4,910

0

1,000

2,000

3,000

4,000

5,000

6,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 (f)

2,221 2,460 2,404

2,594 2,794

3,002

3,301 3,376 3,512

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 (f)

18,611

21,098 22,435

23,768 24,933

26,314 26,557 27,133 27,735

0

5,000

10,000

15,000

20,000

25,000

30,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 (f)

19

Dry Bulk Fleet Growth Before Scrapping

.Assumes no slippage, cancellation or scrappingIncludes VLOC Newbuildings on orderSource: Clarksons Research Services, February 2017

111.2 123.2 135.6 141.9

205.4 211.3 211.9 211.9

198.3208.5 211.1 211.4

191.0204.7

207.0 207.5

94.7

101.2103.0 103.7800.5

849.0868.6 876.3

0

200

400

600

800

1000

Current 2017 2018 2019

DW

T (M

illio

ns)

VLOC Capesize Panamax Handymax Handysize

20

Bulker Fleet Age Profile


36%39% 38%

30%

41%

27%33%

36%

12%

15%

13%

10%

5%

13% 9%

10%

6% 6% 7%15%

0%

20%

40%

60%

80%

100%

Capesize Panamax Handymax Handysize

0-4 yrs 5-9 yrs 10-14 yrs 15-19 yrs 20+ yrs

21

Scrapping Increasing, Average Age Scrapped Decreasing


8.2

6.1

4.2

0.4 1.01.8

0.5

5.6

10.6

6.5

23.3

33.4

23.2

16.3

30.529.1

2.2

0.0

10.0

20.0

30.0

40.0

0.0

10.0

20.0

30.0

40.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD

(Avg

Scr

ap A

ge)

DW

T (M

illio

ns)

Capesize Panamax Handymax Handysize Avg Scrap Age

Scrapped (mDWT) Avg Age

2014 16.3 27.3

2015 30.5 25.2

2016 28.9 23.3

22

Ballast Water Treatment Systems

• The IMO’s Ballast Water Convention is due to enter force on September 8, 2017.

• After September 2017, ship operators will need to install type-approved ballast water treatment systems by the time the International Oil Pollution Prevention (IOPP) certificate falls due for renewal, typically at Special Survey.

• Ballast water is used to stabilize vessels and ensure structural integrity. It is typically pumped in while cargo is being unloaded, and discharged while cargo is being loaded.

• Water taken on in one ecological zone and released into another can result in the introduction and spread of aquatic invasive species, many of which can have serious ecological, economic and public health effects if transferred to regions where they are not native

• Ballast water treatment systems actively remove, kill and/or inactivate organisms in the ballast water prior to discharge.

• Ballast water treatment systems are expected to cost $500,000 to $1.5 million and depends on the type and size of vessel.

• Retrofits on older, existing ships, can be more challenging and expensive as they were designed without the space in the engine room.

BWTS Filtering Unit

BWTS Piping in Engine Room

23

New Sulfur Emission Regulations

Source: Ocean Connect, February 2017

MARPOL Annex VI SOx Emission Timeline

Historical FO & MGO Prices ($/MT)1

• On October 27, 2016 the International Maritime Organization's (IMO) announced the results from a vote to ratify and formalize regulations mandating a reduction in sulfur emissions from 3.5% currently to 0.5% as of the beginning of 2020.

• Ship owners will have to decide between:

1. Installing a scrubber so the vessel can continue to burn HFSO; or

2. Paying the premium to consume MGO with a sulfur content < 0.5%

• The cost of the scrubber depends on the size and type of ship but is estimated to cost $4-$10 million.

• Refineries that currently produce traditional fuel oil in areas such as Russia, Mexico, Venezuela, Iraq, and Iran are unlikely to have enough capital to upgrade refineries, resulting in the need to more blended fuel.

• Increase in scrap rate as the cost to equip older tonnage with scrubbers can exceed the scrap value of the vessel.

• Modern fuel efficient ships have a competitive advantage over older tonnage through lower fuel consumption.

$0

$200

$400

$600

$800

$1,000

$1,200

Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

Rotterdam Singapore Houston

24

Recent Growth in Industrial Production

Source: Commodore Research & Consultancy: January 2017

record electricity production; steel production strength

manufacturing surge, steel production strength

manufacturing surge, electricity production rebound

steel production rebound

steel production rebound

25

January’s Estimated Change in Chartering Demand


26

Short Term Negative Global Headwinds


27

Seaborne Coal Trade through 2018

1190mt

1120mt1110mt

1000mt

950mt

1190mt

1170mt

* Projection (high and low scenarios shown)


28

Seaborne Grain Trade through 2018

510mt

535mt545mt

535mt

520mt

575mt

595mt

* Projection (high and low scenarios shown)


29

Chinese Coal Market Analysis

• Domestic coal output fell in 2016 by 8%; there still has yet to be a month since Dec 2014 that has

seen y-o-y growth in coal output

• Domestic coal is of inferior quality with lower energy content and creates more air pollution for less

benefit

• Accidents continue to limit mining due to stoppages / inspections

Recent Coal Mining FatalitiesQitaihe mine

(Nov 29, 2016)

Baoma mine

(Dec 3, 2016)

Shuozhou mine

(Jan 17, 2017)

Xingyu mine

(Jan 4, 2017)

Xinja mine

(Dec 5, 2016)


30

Chinese Electricity Production & Thermal Coal Demand

• The rebound in China’s electricity production is being driven by thermal coal-derived

electricity generation

Chinese Electricity Production 16’ Chinese Coal Derived Electricity Generation 16’

(Yr/

Yr G

row

th)

(Yr/

Yr G

row

th)


31

South American Grain Cargoes

• South American spot grain cargo volume last month jumped by 120% from December’s

volume

• Compared to January 2016, last month’s volume rose by 100%

Weekly South American Spot Grain Cargoes


32

South American Grain Exports

2016/2017 ProjectionsSource: Commodore Research & Consultancy: January 2017

• Brazilian soybean exports are expected to be particularly robust going forward

• 2016/17 exports are expected to total a record 72.5 million tons

Brazil Soybean Exports (Incl Soybean meal)

company presentation - scorpio bulkerscompany presentation 2 scorpio bulkers inc. (“scorpio” or...

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