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STRICTLY PRIVATE & CONFIDENTIAL
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Introduction to Marine
21 October 2014
Mikael Mäkinen, President - Marine
© 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.
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Introduction to Marine
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Aerospace Power Systems
Marine
Nuclear
Rolls-Royce Marine An important member of the family
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“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
Marine industry A strong contributor to the global economy
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Environmental efficiency
Ship sizes growing
Flexibility increases in ship design
Ship intelligence is the new way to sell
Fuel diversity will increase
Markets continue shifting towards Asia
Increasing activities in harsh environments
Towards electric ships and systems
Business models changing towards asset management
Major trends A large business opportunity
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1) Including > 25,000 fishing vessels and > 23,000 tugs & workboats, excluding inland waterway vessels and pleasure craft 2) > 20 metres
Offshore
> 10,000 vessels
Naval
> 11,000 vessels2)
Merchant
> 111,000
vessels1)
Search for and extraction of
natural resources.
Transportation of
cargo and people.
Protection of
state interests.
Purpose Market segments
Co
mm
erc
ial
Market segments Every fifth ship has Rolls-Royce equipment
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Seismic vessels
Drill ships & semi-subs
Shuttle tankers
Exploration &
Production
Supply & Service
Subsea &
Construction
Vessel segments Vessel types
Platform supply vessels
Anchor handling
vessels
Safety standby vessels
Construction vessels
Subsea vessels
Cable layers
Offshore Vessel segments and ship types
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Cyclicality by ship type
Source: Internal, vessel contracting
Offshore Supply / demand balance at a ship type / size level
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Seismic vessel Drill ship Drilling semi-submersible
Construction vessel Platform supply vessel Anchor handling vessel
Offshore Wide range of vessel types
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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
Illustrative
Oil field life-cycle Rolls-Royce equipment used throughout
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Source: International Energy Agency (IEA) - World Energy Outlook
Growing energy demand
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Sources: International Energy Agency (IEA) - World Energy Outlook and Rystad
Oil & gas market Prospects for 2035
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Sources: Barclays E&P Spending Update
Actual Forecast
2009-13
13%
2014-17
11%
$3.9 Trillion
35%
$9.0
Trillion 45%
Global E&P capex spending growth Low-double digits with offshore c. 5 to 10%
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Proven offshore oil reserves beyond 400 ft With new discoveries increasingly in deep water
Source: Based on RS Platou data, water depth > 400 ft
Mexico
400-1,000
1,000-5,000
5,000-7,500
7,500+
Reserve Water Depth
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Vessel segments Vessel types
Others
Cargo vessels
Passenger
vessels
Merchant
Tankers
Bulk carriers
Container vessels
Cruise ships
Ferries
Yachts
Tugs & workboats
Fishing vessels
Dredgers
Vessel segments and ship types
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Cyclicality by ship type
Source: Internal, vessel contracting
Merchant Supply / demand balance at a ship type / size level
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Tanker (medium) Tanker (large) Container vessel
Bulk carrier Ferry Tug
Merchant Wide range of vessel types
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GDP and seaborne trade growth relationship
Sources: IHS World Industry and DnV Shipping 2020
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World fleet
Sources: IHS Fairplay and Internal
1) Including all commercial & naval vessels > 100 gross tonnes, excluding tugs, yachts and inland waterway vessels
Number of vessels contracted and scrapped
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Constabulary
vessels
Navy
vessels
Coast guard
vessels
Vessel segments Vessel types
Combatants
Offshore patrol vessels
Amphibious vessels
Auxiliaries
Patrol vessels
Search & rescue
vessels
Tugs & tenders
Police vessels
Customs vessels
Naval Vessel segments and ship types
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Fast attack craft Coast guard vessel Frigate
Littoral combat ship Aircraft carrier Replenishment vessel
Naval Wide range of vessel types
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Source: IHS Jane’s Defence Budgets
Global military ship market
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Large number of market players
Oil companies
Subsea construction companies
Charterers
Cargo owners
Governments
Ship owners
Ship operators
Ship managers
Navies
Government agencies
Shipyards
Equipment & system suppliers
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MARINE VIDEO
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Key facts
Rolls-Royce Marine - Global footprint
Land & Sea - Revenue 2013 Rolls-Royce Marine - Revenue 2013 Total: £5.5bn Total: £2.0bn
Rolls-Royce Marine
6,500 employees
12%
75%
13%
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Source: Internal, 2008 - 2013, addressable market, vessel contracting, by value
China 29%
South Korea 19%
Singapore 8%
Norway 6%
USA 6%
Brazil 4%
Netherlands 4%
Japan 3%
Malaysia 3%
Indonesia 2%
USA 18%
Norway 13%
Singapore 9%
Malaysia 6%
Brazil 6%
China 5%
France 5%
United Arab Emirates 4%
Bermuda 3%
Netherlands 2%
Shipyard countries - Offshore Ship owner countries - Offshore
Top 10 offshore countries
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Shipyard countries - Merchant Ship owner countries - Merchant
China 34%
South Korea 32%
Japan 18%
Philippines 2%
Netherlands 2%
Taiwan 2%
Malaysia 1%
Indonesia 1%
Vietnam 1%
Italy 1%
Japan 14%
China 11%
Greece 10%
Singapore 6%
Germany 6%
United Kingdom 4%
South Korea 4%
Denmark 4%
Hong Kong 3%
Taiwan 3%
Top 10 merchant countries
Source: Internal, 2008 - 2013, addressable market, vessel contracting, by value
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Major trends
Rolls-Royce
strength
A large business opportunity
Environmental efficiency
Ship sizes growing
Flexibility increases in ship design
Ship intelligence is the new way to sell
Fuel diversity will increase
Markets continue shifting towards Asia
Increasing activities in harsh environments
Towards electric ships and systems
Business models changing towards asset management
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Concentration
Geographical presence
Market and vessel segments Equipment & systems
Choices have been made
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Ship systems Large number of different systems
Steering gear
Stabilisers
Thrusters
Propulsors
Gears and shaft lines
Main engines
Auxiliary engines
Winches
Fuel system
Ramps
Electric drives
Switchboards
Automation & controls
Navigation
Communication
Ventilation
Sewage treatment Ballast water treatment
Ballast systems
Steam system
Exhaust gas treatment
Cargo deck
Elevators
Lightning
Electric distribution
Life saving equipment Food stores
Air Conditioning
Bridge automation
Outdoor deck systems
Generators Fire fighting systems Energy management
Laundry
Rudders
Bearings and seals
Deck equipment
Launch & recovery systems
Replenishment / fuelling systems
Rolls-Royce scope
Adjacent to Rolls-Royce scope
Distant to Rolls-Royce scope
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Our market approach
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Offshore market positioning
propulsion
& engines
operational functionality
electrical, automation
& control
Illustrative
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A sizeable market opportunity
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.
14 18
94108
111
0
50
100
150
200
250
2004 - 2013 2014 - 2023
Services opportunity
Equipment and systems opportunity
Equipment and systems adjacency*
Mar
ket
op
po
rtu
nit
y[ £
bn
]
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Our integrated strategy
Profitable growth
Continuously improve our
operational efficiency
Grow our aftersales support
business
Grow into attractive market
segments and geographies
Innovation
Create a winning offering for
future customer needs
Customer
Fully understand our customers’
requirements to create
compelling offerings
STRICTLY PRIVATE & CONFIDENTIAL
Trusted to deliver excellence
Customer
21 October 2014
John Knudsen, President - Commercial Marine
© 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.
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Customer
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Large number of market players
Oil companies
Subsea construction companies
Charterers
Cargo owners
Governments
Ship owners
Ship operators
Ship managers
Navies
Government agencies
Shipyards
Equipment & system suppliers
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Shipyards - Offshore
Top 10 offshore companies
Ship owners - Offshore
Samsung Heavy Industries Co 9%
Daewoo Shipbuilding & Marine 6%
Zhejiang Shipbuilding Co Ltd 4%
Fujian Southeast Shipyard 4%
Hyundai Heavy Industries Co 3%
Fujian Mawei Shipbuilding Ltd 3%
Damen Shipyards Group 2%
Jurong Shipyard Pte Ltd 2%
IHC Offshore & Marine 1%
Guangzhou Huangpu Shipbuilding 1%
Bourbon SA 4%
Seadrill Ltd 2%
Tidewater Inc 2%
ENSCO International Inc 2%
Edison Chouest Offshore LLC 2%
Pacific Drilling Services Inc 2%
Odfjell JO 2%
China Govt 2%
Nam Cheong Dockyard Sdn Bhd 2%
Atwood Oceanics Inc 1%
Source: Internal, 2008 - 2013, addressable market, vessel contracting, by value
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Shipyards - Merchant
Top 10 merchant companies
Ship owners - Merchant
Hyundai Heavy Industries Co 8%
Daewoo Shipbuilding & Marine 6%
Samsung Heavy Industries Co 5%
Hyundai Samho Heavy Industries 3%
STX Shipbuilding Co Ltd 3%
Hyundai Mipo Dockyard Co Ltd 2%
Imabari Shipbuilding Co Ltd 2%
Sungdong Shipbuilding & Eng 2%
HHIC-Phil Inc 2%
Dalian Shipbuilding Industry 2%
COSCO 5%
Moller-Maersk A/S 3%
Seaspan ULC 2%
Mitsui OSK Lines Ltd 2%
Evergreen Marine Corp 2%
Neptune Orient Lines Ltd 2%
United Arab Shipping Co 1%
NYK Line 1%
Zodiac Maritime Agencies Ltd 1%
Peter Doehle Schiffahrts-KG 1%
Source: Internal, 2008 - 2013, addressable market, vessel contracting, by value
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Customer requirements Diverse, with common themes
Technical performance
Through-life
Matched to mission:
Quality and reliability of
equipment & systems
Quality and responsiveness of
aftersales support
Installation availability:
Capital expenditure
Operational expenditure
Value for money:
Seamless interfaces and
functional integrity
Efficiency-optimised
Systems:
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Value proposition Creating high barriers to entry
System
integration Innovative
products and
technology
Product quality
and reliability
In-service
upgrades
Training, incl.
simulation
Responsive
global aftersales
support
Domain
knowledge
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Value proposition Domain knowledge
System
integration Innovative
products and
technology
Product quality
and reliability
In-service
upgrades
Training, incl.
simulation
Responsive
global aftersales
support
Domain
knowledge
“UT 731 CD has proven to be very efficient in daily operations,
reducing fuel consumption and cutting harmful emissions”
Børge Nakken, VP T&D Farstad Shipping
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Innovative products and technology
System
integration Innovative
products and
technology
Product quality
and reliability
In-service
upgrades
Training, incl.
simulation
Responsive
global aftersales
support
Domain
knowledge “With the number of LNG-fuelled ferries operating in Norway and the
years of experience, the Rolls-Royce Solution was low risk”
Ingvald Fardal, CEO Fjord Line
Value proposition
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Product quality and reliability
System
integration Innovative
products and
technology
Product quality
and reliability
In-service
upgrades
Training, incl.
simulation
Responsive
global aftersales
support
Domain
knowledge
“Far Seeker 5 years of operation with only 9 hours off hire”
Captain Svein-Åge Vadset
Value proposition
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System integration
System
integration Innovative
products and
technology
Product quality
and reliability
In-service
upgrades
Training, incl.
simulation
Responsive
global aftersales
support
Domain
knowledge Long experience in system integration and ship design;
40th anniversary of UT ship design
Value proposition
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Responsive global aftersales support
System
integration Innovative
products and
technology
Product quality
and reliability
In-service
upgrades
Training, incl.
simulation
Responsive
global aftersales
support
Domain
knowledge
Global service network with more than 1,000 well-trained service
engineers in 54 service centres in 32 countries
Value proposition
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Training, incl. simulation
System
integration Innovative
products and
technology
Product quality
and reliability
In-service
upgrades
Training, incl.
simulation
Responsive
global aftersales
support
Domain
knowledge
Latest:
Offshore and marine services company C-MAR Group
has installed our Icon dynamic positioning simulators
at its dynamic positioning training centres in London and Mumbai
Value proposition
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In-service upgrades
System
integration Innovative
products and
technology
Product quality
and reliability
In-service
upgrades
Training, incl.
simulation
Responsive
global aftersales
support
Domain
knowledge Ships have a 25 - 30 year lifecycle
Value proposition
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Trusted to deliver excellence
Two of our latest achievements Based on true domain knowledge and customer intimacy
UT 777 top hole drilling, light well-intervention
and subsea construction vessel Unified bridge
Award winning World class operability
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Trusted to deliver excellence
Examples
UT design anchor handling vessel
1,600 passenger LNG-powered ferry Frigate
Drilling semi-submersible
Offshore Offshore
Naval Merchant
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Trusted to deliver excellence
Example for the offshore market Large anchor handling vessel
Value of vessel (c. £77m)
Maximum R-R value
100%
42%
Engines (6%)
Propulsion equipment (14%)
Deck machinery (16%)
Other equipment (6%)
Engines High- and medium-speed
Automation & Control
Lifetime support:
• 24/7 technical support
• Field service
• Spare parts
• Repair & overhaul
• Upgrades
• Energy monitoring
• Equipment health
monitoring
• Training
Deck Machinery
Propulsion
Electrical System
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Example for the offshore market Drilling semi-submersible
Value of vessel (c. £370m) 100%
7%
Engines (2%) Propulsion equipment (3%) Deck machinery (2%)
Maximum R-R value
Lifetime support:
• 24/7 technical support
• Field service
• Spare parts
• Repair & overhaul
• Upgrades
• Energy monitoring
• Equipment health
monitoring
• Training
Propulsion equipment; 3-6 months drilling campaigns: dynamic positioning
longer drilling campaigns: mooring
Deck machinery
Engines medium-speed
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“Troll A” gravity based production platform The largest structure ever moved on earth
All ten vessels featuring Rolls-Royce deck machinery winches
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Deep water mooring From 200 to 3,000 metres
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Mooring of an FPSO Floating Production Storage & Offloading
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Example for the merchant market 1,500 passenger / 600 car LNG-powered ferry
Value of vessel (c. £80m) 100%
20%
Engines (16%)
Propulsion equipment (4%) Other equipment (0.4%)
Rudder
Propeller
Reduction gear
Gas engine medium-speed
Gas tanks
Maximum R-R value Lifetime support:
• 24/7 technical support
• Field service
• Spare parts
• Repair & overhaul
• Upgrades
• Energy monitoring
• Equipment health
monitoring
• Training
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Example for the naval market Frigate
Propulsion equipment
Handling systems
Value of vessel (c. £300m)
Maximum R-R value
100%
Engines / gas turbines (5%) Propulsion equipment (0.5%)
Handling (1.5%) Power Electrics (3%)
10%
Lifetime support:
• 24/7 technical support
• Field service
• Spare parts
• Repair & overhaul
• Upgrades
• Energy monitoring
• Equipment health
monitoring
• Training
Engines gas turbine and high-speed reciprocating
Power Electrics
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Trusted to deliver excellence
Competition Fragmented and diverse landscape
Global competitors
aiming for systems
capability
Global competitors
aiming for technology
/ product leadership
Regional competitors
aiming for cost
leadership
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Going forward In parallel
Continuous improvement of our
strong value proposition
Relentless focus on cost and
operational efficiency
Raise quality of business:
Grow with addressable market
Grow share in addressable
market
Expand addressable market
Raise quantity of business:
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Trusted to deliver excellence Trusted to deliver excellence
Innovation
21 October 2014
Sauli Eloranta, EVP - Marine Engineering & Technology
© 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.
61 Privileged and confidential - prepared at the request of outside counsel
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Marine trends
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Trusted to deliver excellence Trusted to deliver excellence
Well positioned to meet these challenges
Prize winning ship designs
2008, 2009, 2012, 2013
Automation & Control
& Data Integration
Azimuth
Thrusters Permanent Magnet
Thrusters Power Systems LNG & Hybrids
Special Winches &
Safer deck equipment
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Trusted to deliver excellence Trusted to deliver excellence
Future innovations
Ship Intelligence
BETTER POWER FOR A CHANGING WORLD DISRUPTIVE CHANGE
Efficiency Leader
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Trend from products to technology
Wide product portfolio and integrated systems are key enablers for the next step
Long tradition of collaboration with
leading ship-owners
The best way to predict the future
is to create the future
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Profitable Growth
Mark Alflatt, Finance Director - 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.
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Grow market share + installed fleet
Competitive portfolio – products & services
Focus on Cost & Cash
”Trusted to deliver excellence”
Profitable growth
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Growth and capital allocation Building on our strengths
Building on
opportunities with
Land & Sea Strong positions
on key products
and Sectors
Improving
Competitive
Positioning
Grow Services
Innovation – key
technologies
Rationalise
Product Portfolio
Delivering Growth
and Value
Creation
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Balanced business model
• Barriers to entry: innovation, systems, long service lives
• Fragmented industry – suppliers, customers, regulators
• Modest investment and short time-to-market
• Short cycle for new OE, aftermarket primarily Time & Materials
• Strong return profile
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”Trusted to deliver excellence”
A comparison with Aerospace
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A decade of growth
1.0
2.0
2004 2013
OE Services
Revenue (£bn) – 8% CAGR
78
233
2004 2013
UPBFCT (£m) – 13% CAGR
8.1% 11.4%
2004 2013
RoS (%) – +330bps
6% 32%
2004 2013
ROCE (%)
A track record of success
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Focus on the 4C’s
• Transformation programmes underway
• Product portfolio
• Business processes and systems
• Footprint and supply chain consolidation
• Lower cost sourcing and engineering
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Bedrock that drives profitable growth
Cash Cost Customer Concentration
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”Trusted to deliver excellence”
£1.8bn cost by region: £1.8bn cost by type:
• Over 90% of our cost/supply chain and headcount in High Cost Countries
• Make / Buy similar to Aerospace (80: 20)
• Key programmes addressing footprint, LCC sourcing (material/headcount)
Todays Marine cost base
Europe 79%
Americas 12%
Asia 9%
Material 50%
Indirect spend 10%
Headcount 25%
Other op costs 15%
Significant opportunity to drive competitive positioning
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Transforming footprint and supply chain Dispersed services network
Regional Service LocationProduct Centre Training Centre
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Trusted to deliver excellence
Regional Service LocationProduct Centre Training Centre
12%
75%
13%
Transforming footprint and supply chain 6,500 employees, 70 locations, 30 countries
Percentage of headcount
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Trusted to deliver excellence
Addressable 44%
Partners / Naval /
Services 44%
No LCC options today
12%
Material cost: £0.9bn
• Re-sourcing key commodity groups to LCC
• Addressable spend ~ £0.4bn
• LCC spend doubled in 3 years to 30%
• Target of 40% of addressable by 2016
Engineering resources: Headcount
• 1,600 engineers globally - Nordics, EU, USA
• Increasing capability in India, Croatia,
Poland, Asia
Low cost sourcing and engineering A significant opportunity
Americas 10%
Nordics / Europe
84%
Asia 6%
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Trusted to deliver excellence
• Strong track record of growth – doubled revenue over the last decade
• Strong positions in growth markets
• Opportunities to improve cost and competitive position
• Strong growth potential in the next decade
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”Trusted to deliver excellence”
Summary
STRICTLY PRIVATE & CONFIDENTIAL
Trusted to deliver excellence
Summary
21 October 2014
Mikael Mäkinen, President - Marine
© 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.
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Trusted to deliver excellence
Our integrated strategy
Profitable growth
Continuously improve our
operational efficiency
Grow our aftersales support
business
Grow into attractive market
segments and geographies
Innovation
Create a winning offering for
future customer needs
Customer
Fully understand our customers’
requirements to create
compelling offerings