Danaos Environmental Report 2013

R E P O R T

enforce rigorous operational standards

environmental protection commitment to safety premier

choice of global seaborne container transportation

D A N A O S

C O R P O R A T I O N

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2 0 1 3

R&D Dept.

14, Akti Kondyli, 185 45, Piraeus, Greece

Email : rnd@danaos.com Telephone : +30 210 41 96 500 Fax : +30 210 42 20 855 Website : http://www.danaos.com

E N V I R O N M E N T A L

DANAOS CORPORATION

outstanding customer service

REMDesign

World-Class Shipping, Leading-Edge Expertise

ANNUAL environmental REPORT 2013

DAC LISTED NYSE

annual environmental report 2013

annual environmental report 2013

DANAOS

ENVIRONMENTAL REPORT 2013

Contents 1

CONTENTS 4

2

DANAOS CORPORATION

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3

OUR R&D DEPARTMENT

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4

SHIPPING GLOBAL IMPACT

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5

OUR PROJECTS

12

On-line Data Acquisition & Process System

13

Bulbous Bow Optimization

15

Energy Efficiency Improvement Methods

16

Super Slow Steaming

18

Hull Roughness

19

Welding Seams

20

Container Stowage Optimization

21

Performance Monitoring

22

DMC “Waves Info Analyzer”

23

Operation on Low Sulphur Fuels

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SOX Scrubbing Units and NOX SCRs

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25

Our Emissions

26

Our Emission KPIs Summary

29

Our Bunkers

30

4

OUR ENVIRONMENTAL PERFORMANCE

Energy Efficiency Operational Index (EEOI)

34

Our Operational Profile (2013 vs 2012)

38

Environmental Ship Index (ESI)

39

Energy Efficiency Design Index (EEDI)

42

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Established in 1972, Danaos Corporation is an international owner of container ships, chartering vessels to many of the world’s most eminent liner companies. Domiciled in the Republic of Marshall Islands the Company trades in NYSE under the symbol DAC. Its fleet consists of 58 Panamax and Post Panamax containerships with a capacity of 340,365 TEU.

DANAOS

ENVIRONMENTAL REPORT 2013

GENERAL Danaos Corporation (DAC) is a leading international owner of container ships, chartering vessels to many of the world’s largest liner companies, such as Maersk, China Shipping, CMA-CGM, Hyundai Merchant Marine Co., Hanjin, MSC, Yang Ming, and ZIM. OFFICES Our principal executive offices are located in Piraeus care of our Manager, Danaos Shipping Co. Ltd (DAS). DAS has Branch Offices in Odessa, Mariupol, St. Petersburg, Zanzibar (Crewing) and Pusan (Technical Support).

FLEET DEVELOPMENT We currently have a fleet of 58 container ships, aggregating to 340,365 twenty-foot equivalent units (TEU), placingus amongst the largest container ship charter owners of the world and making us one of the largest US listed containership companies based on fleet size.

During 2013, we sold our 9 older vessels (the Henry, the Pride, the Independence, the MV Honour, the Hope, the Elbe, the Lotus, the Kalamata and the Komodo) and on February 26, 2014, we sold the Marathonas.

Furthermore, we acquired a 2,452 TEU geared containership the Amalia C, built in 1998, a 2,602 TEU geared containership the Niledutch Zebra, built in 2001, a 2,524 TEU geared containership the Danae C, built in 2001 and a 3,430 TEU geared containership the Dimitris C, built also in 2001.

OUR MISSION We here at Danaos are committed to our prime strategic objective, which is to provide top class service to our customers by ensuring maximum fleet utilization time, at a minimum fuel cost per TEU, always within a safe and environmentally friendly context.

OUR STRATEGY The primary objectives of Danaos Corporation are to grow the business, increase earnings and maximize value for our shareholders by pursuing the following strategies: Provide a high level of customer service Maintain a diverse portfolio of charterers Actively acquire newly built and secondhand vessels Continue to invest in larger containerships and deploy them under long-term charters

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Danaos Corporation

DANAOS

ENVIRONMENTAL REPORT 2013

“We are very proud to receive this recognition. This vessel is a typical example of the Danaos Corporate Mentality”

Mr. Iraklis Prokopakis (left), Senior Vice President and COO of Danaos Corporation upon receiving the award commented: “We are very proud to receive this recognition. This vessel is a typical example of the Danaos Corporate Mentality. She reflects the very early views of John Coustas that the future of the Container Industry will be in the ultra large container vessels.

Additionally, the Hyundai Ambition and her sister vessels are the result of the joint effort of all of us at Danaos but primarily of an excellent team of young people, who participated in the design of the ship, supervised her construction and now look after her operational and technical management.

The Hyundai Ambition and her sister vessels are manned with highly trained and qualified crews, specially selected from our long term pools on whom we have relied upon for the growth of our company.”

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The vessel is fitted with an electronically controlled main engine in compliance with Tier II IMO NOx emissions standards and the phase II IMO EEDI INDEX, equipped with turbocharger cut-out measures, and is capable to super slow steam down to 10% of maximum engine load. It is equipped with an advanced performance monitoring system, with online analysis for power measurement and multi-stations alarm monitoring controls. The vessel has undergone extensive trim optimization tests to enhance her performance and is coated with the latest silyl SPC coatings.

The Hyundai Ambition also has state of the art IT, Communication and Entertainment Systems on board, a wired and wireless network offering Internet and Entertainment Systems to all Crew Cabins and mess rooms, a centralized video and music center offering a private selection of movies and music onboard, as well as satellite TV in all communal rooms.

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HYUNDAI AMBITION

ONE OF OUR FIVE 13,100 TEU VESSELS BUILT IN 2012

DANAOS

ENVIRONMENTAL REPORT 2013

OUR GOAL

R&D DEPT. PERSPECTIVE 2013 REVIEW

Our R&D department falls under the Technical 2013 was a very productive year. Our focus was Dept. of DAS and was officially established in placed on advanced vessels’ monitoring systems 2011, although its early stages date back to 2006. and energy efficiency improvement methods, Our goal is to be at the forefront of innovation, in the context of the needs imposed by current brainstorming ideas and developing them to ad- market trends, economic and environmental redress our clients’ needs, in the changing market alities. Efficiency enhancement should involve an environment and applying our company’s know- integrated solution, combining operational meashow and technical expertise in order to improve ures and design improvements, together with adour fleet’s fuel efficiency and environmental per- vanced performance monitoring and assessment formance thus sustaining our competitive advan- tools. Emphasis was given to the energy efficiency improvement methods, whilst among the meastage. ures that seemed to be the most promising “fuel efficiency” wise, wasbulbous bow optimization OUR STRATEGY The main pillars of our strategy, when it comes which was studied separately with HSVA for CSCL, to project planning and execution is defined by CMA CGM and HMM chartered vessels. company needs, market trends, future demands The On Line Data Acquisition and Process System is a fundamental project that leads the way to and regulatory framework.

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Our R&D Department substantial changes towards a more sophisticated way of monitoring avessel’s performance and its efficient operation.

PLATFORMA is the next stepcombining input received from the “On-Line Data Acquisition and Process System” in the form of auto-feed cells in the telegrams interface, where information is manually entered and then processed to produceprocess performance and efficiency KPIs, automatically controlled forms and evaluation reports, laying the foundation for a more advanced vessels’ monitoring system.

Last but not least, a number of pre-purchase surveys were carried out within the year, in the scope of the company’s “fleet modernization program”, scanning the market for accretive acquisition opportunities of younger tonnage.

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DANAOS

ENVIRONMENTAL REPORT 2013

DANAOS Corporation seeks to remain the premier choice of global seaborne container transportation for our clients by utilizing our solid operational, technical and financial infrastructure.

Danaos will continue to provide outstanding customer service, enforce rigorous operational standards, maintain a steadfast commitment to safety and environmental protection, and reward its shareholders.

SHIPPING INDUSTRY & ENVIRONMENT

mental goals in order to establish a competitive In general, liner companies would like to see ship- advantage relative to their peers. ping companies be more competitive on their en- Being part of our customers’ sustainability stratvironmental performance. egy, contributes to our objective of being a high It is quite evident that there is an increasing em- quality & cost effective provider of ships & vessel phasis on sustainability and a growing interest in services. environmental performance, not only from our clients but also from other stakeholders. Sustainabil- Besides contributing to the minimization of the ity is defined as the quality of not being harmful to GHG emissions, inherent in the fleet service by the environment or depleting natural resources, promoting its energy efficiency, we also sustain thereby supporting a long-term ecological bal- our competitive advantage by introducing attractive cost-saving options to our clients. ance.

This report is intended to provide our stakeholders with an overview on Danaos’ environmental performance and initiatives/actions taken towards improving our fleet’s performance from a purely technical point of view. This data has been careAs part of this chain, owners of chartered vessels fully integrated into this report in a transparent, should preferably try to meet their clients environ- accurate, and reliable manner.

To strive for this, our clients are trying to make it possible for their customers to benchmark shipping lines – not only on traditional issues such as price and transit time but also on environmental and socially responsible performance.

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Shipping Global Impact

CO

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SHIPPING EMISSIONS

coupled with our Manager’s ISO 14001/2004 cerContainer shipping is the most energy efficient tification are a testimony of the culture of environmeans to move high volumes of goods across mental “Best Practices” prevailing throughout our long distances. Vessels use fuel oil and thereafter organization. inevitably emit carbon dioxide, which is the main contributor to global warming, as well as NOx, In line with an increasing awareness of environSOx, soot and other emissions. Therefore, in absomental impact, the requirements for efficiency, lute terms, shipping emissions are significant and Danaos being a responsible owner works on im- quality, safety and training have become even proving its vessels energy efficiency in an effort to more stringent. Danaos Corporation shares the reduce the environmental impact of its fleet and commitment of a clean, healthy and sustainable thus contribute to the sustainable development environment for the community, through prevenof the whole supply chain. tive, as well as remedial action. Indeed, our fleet Our efforts are mainly concentrated on improving systematically complies with or exceeds environour vessels’ energy efficiency through a great series of operational measures and design enhance- mental laws and regulations. We are closely monitoring our social and environmental performance, ments and by optimizing our monitoring tools.

The Danaos membership of the Hellenic Marine something which is reflected in our ethical and Environment Protection Association (HELMEPA) transparent management practices.

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DANAOS

ENVIRONMENTAL REPORT 2013

Our Projects

We at Danaos are committed to our prime strategic objective in providing top class service to our customers by ensuring maximum fleet utilization time at a minimum fuel cost per TEU, always within a safe and environmentally friendly context.

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Project “LAROS”

On-line Data Acquisition & Process System

LOOKING INTO THE FUTURE

ly designed by our R&D, comprise the main elements of the on-line data acquisition and process Danaos beingsensitive to thecurrent needs of the market for fuel efficient operation, was aimed to- system, for the further processing and evaluation effectively improvie its already well-established of raw data collected by the vessels: performance evaluation tools, through its R&D BCS (Bunkers Control System) Dept. by developing an “On-line Data Acquisition DDA (Danaos Distribution Analysis) & Process” System in cooperation with PRISMA S.A. MAG.VE. OUR TARGETS

OUR LAROS SOFTWARE

Cover the needs of closer and more effective The on-line data acquisition and process system performance monitoring concept summarizes: Achieve closer and more accurate control of Continuous power & consumptions measurefuel consumption ment onboard Be a pioneer and lay the foundation for the Uninterrupted weather, navigation and operanext phase of advanced performance monitortion data collection ing through real-time data acquisition, followInterpretation and analysis of data from welling the rapid development of the global comtrained statistics and permunication system network formance monitoring team.

HOW IT WORKS Effective bunkers control Data output from various sensors installed onAdvanced superintendenboard, is being wirelessly transferred periodically cy with remote monitoring to a server onboard and then to Danaos HQ daof basic operation paramtabase server, for further processing / evaluation. eters, alarms and functions Signals are received from the following equipment: Navigational equipment Fuel Indicators Power meters Various measuring devices Advanced algorithms and analysis methods which have been internal-

Sat Link Onboard Server HQ Server

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DANAOS

ENVIRONMENTAL REPORT 2013

On-line system concept Chart Operation profiles Advanced superintendency Advanced performance monitoring Operation Parameters Distribution Analysis

On-Line data acquisition & process system

CBM Bunker Control System II Sea routing planning optimization Ship’s behavioral analysis - MAGVE

VESSELS ENROLLED DURING 2013

In 2013 Danaos enrolled 7 ships from our Fleet of 58 container vessels in the Laros project. The following vessels were selected, covering all ship sizes:

Zim Luanda 4,253 TEU

CMA CGM Nerval 6,500 TEU

CSCL Le Havre 9,580 TEU

CSCL Europe 6,500 TEU

Hanjin Greece 10,100 TEU

CMA CGM Samson 8,530 TEU

Hyundai Speed 13,100 TEU

Our Management has approved to extend this investment in 2014 by enrolling 16 more vessels. The total cost of enrolling 23 vessels will amount to approximately USD 800,000.

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proJeCt “BB”

BulBous BoW optimization

CONCEPT

Redesigning a container ship’s bulbous bow (“BB”) for slow-steaming, is a proven improvement in fuel efficiency.

By changing the bulbous bow, we can neutralize the bow generated split waves, which hit the front shoulder of the ship, thus reducing the total needed power.

CFD analysis compared with the initial hull lines for lower speeds and draft combinations compared with design condition DANAOS STUDIES

DAC has conducted studies with Hamburg Ship Model Basin HSVA, for However, the modified bulbous bow is optimized the following five for a design speed range – draft combination and container vessel subsequently sailing on a different profile might sizes : result in a negative effect, compared to the origi4,650 TEU nal design.

6,500 TEU The optimization of the bulbous bow is carried out using theexisting bow design as a reference.

The optimization process is performed in several steps (on average six) and given the restrictions imposed by a. the limits provided for the modification and b. the smooth fairing with the rest of the hull. The optimum version giving the highest savings is thenidentified.

8,100 TEU 8,500 TEU 9,200 TEU

STEPS

The following steps take place during the BB Optimization study: Development of several new bow designs, modification of the hull lines forward of the collision bulkhead and up to on/about 2nd stringer height Application of potential flow tools for the optimization of the bow design

SAVINGS

Weighted average power savings identified by the study are at a maximum in the range of 4-6% whereas a 1-2% improvement is feasible on hulls that are deemed already highly “optimized” in limited form variations.

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Danaos

environmental report 2013

proJeCt “eeims”

enerGY eFFiCienCY improvement metHoDs

37 eeims The increasing market needs for fuel efficient and environmentally sound operation, led Danaos’ R&D department to embark on a research project of 37 different energy efficiency improvement methods.

Our study aims to provide guidance on the 37 EEIMs which were examined, but most importantly to validate their actual savings and the feasibility of their implementation on containerships.

For that reason, we have been engaged in a number of joint studies with various makers and classification societies (Man B&W, Wartsila, Aalborg, Stone Marine, DNV, etc.), and have invested on model tests, CFD analysis and the Danaos “on-line data acquisition & process system”.

57% OF EEIMS ALREADY IMPLEMENTED S

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i s

nai n

a g

≤ ‐ ‐

Savings

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proJeCt “BB�

BulBous BoW optimization

37 energy efficiency improvement methods (eeims) SSS down to 30% MCR USS down to 10% MCR TC Cut-out Low load tuning Engine Performance ICC Wartsila LNG retrofit JIP Variable exhaust valve timing (Man B&W)

Side shell butt welds Roughness analysis Hull cleaning Advanced paintings Air Layer

Advanced propeller retrofit Derating & propeller retrofit Propeller cleaning Appendages

Bulbous bow optimization

Additives Homogenizers Induction coil fuel improver Fuel analysis Sludge Monitoring FAST fuel injection nozzles

Trim optimization Sea routing PLEGMA MAG.VE. Containers stowage Stack load increase Bumkers control (BCS)

Power managment Inverters Steam managment CW managment system

AMP Waste Heat recovery systems (WHRs)

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environmental report 2013

proJeCt “tC Cut-out”

super sloW steaminG

Since 2009, we have begun investigating how our vessels should be retrofitted, in order to improve their fuel efficiency and environmental footprint. A thorough technical investigation has been carried out in order to identify the modifications required for each vessel, so as to be able to operate at very low engine loads based on her engine, Turbocharger and boiler specification.

T/C cut out by blind flange After the T/C cut-out, the turbochargers’ efficiency increases, resulting in increased scavenge pressure, compressor pressure & max pressure in the cylinder (for the same load condition) giving better SFOC. Combustion is improved and engine performance is optimized at low loads.

The maximum load that can As the fuel consumption curve is be obtained when the vesexponential, a reduction in speed sel is in cut-out mode, is on/ gives significant fuel savings. For about 35% if a vessel has 2 instance, for a speed reduction T/Cs, 60% if a vessel has 3 T/ from 23 to 17 knots (26%) the Cs and 70% if it has 4 T/Cs. corresponding fuel consumption The fuel savings realized, as reduction is 47% for a 13,100 TEU per the M/E maker are in the vessel. All our vessels responding range of 2-4%. Below you can to market needs are operating at find the current T/C cut-out low speeds corresponding to 10status for the whole Danaos 40% engine loads. The following feet. From the charts one views that T/C cut-out has TC Cut-out options have been investigated and apbeen applied to 82% of Danaos’ vessels. The correplied to the majority of Danaos vessels: sponding percentage last year was 56%. It is evident Flexible T/C cut-out that Danaos adopts ultra-slow steaming as a viable Manual-flexible cut-out (hybrid solution) strategy, being responsive to the industry’s needs.

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proJeCt “Hr” Hull rouGHness

Biological Roughness

A vessel’s s hull surface has a slow and steady degradation over time, which leads to an increase in underwater hull roughness (“HR”). Any increase in HR can cause a significant rise in fuel consumption resulting in a significant rise in the vessel’s operating costs.

There are two main types of hull roughness: physical and biological (fouling), each with its own macro (large scale) and micro (small scale) characteristics.

macro animal Fouling

micro Weed Fouling

slime Fouling

Physical Roughness macro Welds Corrosion

micro plate Waviness plate laps

minorCorrosion

steel profile

Coatings Condition

mechanical Damage

Macro physical roughness can be attributable fication of the hull surface regions which contribute mostly to the frictional resistance. To to plate waviness, plate laps, welds and weldidentify the regions which contribute the most ing quality, mechanical damage and corrosion. to frictional resistance, the relation between Macro biological roughness is typically attribthe friction force and the area was calculated. utable to animal and weed fouling Regions with high shear stress such as the bulMicro physical roughness can be attributable bous bow the fore shoulder and the lower part to steel profile, minor corrosion and coatings of the rudder have a large contribution to the condition friction force Micro biological roughness is typically attribResults of the study have been incorporated in uted to slime fouling In order to assess the effect of surface roughness each vessel’s updated e-tool “PLEGMA II”, in order to calculate, among others, the extra power deon predicted vessel’s resistance, the flow around mand due to the effect of hull roughness increase. the underbody of our 8,500 TEU container ship Depending on the was simulated at HSVA at various degrees of level of fouling condiroughness, by using CFD analysis. The motive of tion (from light slime the hull roughness study was twofold: to heavy fouling) and Theoretical assessment of the influence of paint/hull condition the overall mean hull roughness on the power the study revealed that consumption (speed-power calculations for corresponding power several hull roughness values) penalties can be found Theoretical assessment of the flow and identi- in the range of 5-70%.

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environmental report 2013

proJeCt “Ws”

WelDinG seams

To assess the effect of the welding seams profile on predicted vessel’s resistance, the flow around the underbody of our 8,500 TEU container ship was simulated at Hamburg Ship Model Basin HSVA at various heights of transversal welding seams. The following assumptions were made: Seam’s standard width of 20mm Reference height is 3mm Average length of shell plates 9000mm which results in about 37 butts Higher seams (7mm height) at the construction stage can give a vessel a power penalty of up to 3.5%.

The target of this study is to try to identify the effect that bad welding quality could have on the vessel’s resistance during the construction stage. Of course the latter is supposed to be taken into consideration during model tests via the correlation allowance factor, however, this is a factor freely selected by the various ship model basins, based on their empirical data library. This factor therefore could produce different results in practice depending on the model basin selection.

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proJeCt “lasHinG 13�

Container stoWaGe optimization

In times when the market is especially tight, added flexibility in container stowage can help operators stay competitive and run vessels more economically.

Traditionally, rules and layouts for vessel lashing systems have been based on the stormy North Atlantic routes. This ignores the potential of tailoring plans to reflect the reduced wave and wind loads of other routes, increasing the stowage potential of a vessel.

2 Class sW with new rules (Gl, Kr) 1 more expected in 2014 (Dnv)

Classification societies have adopted a new approach to container stowage rules. They have taken into account the latest market developments and by using long-term statistical data on wave conditions, they developed new rules and lashing softwareconsidering lower acceleration values along all routes, thus providinghigher loading flexibility to the operators. Furthermore and within the same context, they have developed standard routes to be applied with vessel-specific calculations, considering even lower acceleration values and as suchproviding even higher loading flexibility.

2 Gms 2 Deck scenarios 1 C/H scenario

10 Danaos vessels have already adopted the GLRSCS notation.

The R&D dept. has initiated a comparison study among the different software, incorporating the new rules released by the various classification societies; taking specific loading scenarios for certain sized vessels.

4,253 teu 8,530 teu 13,100 teu

The study is expected to be finalized within the first semester of 2014.

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environmental report 2013

proJeCt“pleGma ii”

perFormanCe monitorinG

Danaos underlines the necessity for correct vessel performance monitoring. Hull and M/E performance are monitored through an advanced well established system, which our intention is to take to the next step through our “On-line data acquisition and process system” and “PLATFORMA” projects when those are fully implemented.

Aertseen Townsin & Kwon Baree NMRI NSMB

R&D has created an e-tool called “PLEGMA” in order to be used for proper performance monitoring, where the results from the following studies have been incorporated: The target is through the full implementation of our “On-line data” project and “PLATFORMA” project to try to utilize data received from vessels In the meantime, a number of semi-empirical & through the use of intelligent algorithms in order theoretical methods available in literature have to enhance and further improve our performance been studied in depth, in an effort to theoreticalevaluation tools. ly assess the effect of weather conditions (wind, waves) on power demand. The relevant tool incorporating 5 of them has been introduced: Trim optimization model tests Roughness effect

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proJeCt “platForma” pro DmC “Waves inFo analYzer”

PLATFORMA is an advanced version of the existing “Operations” application of Danaos ERP. An improved vessels’ monitoring system, including a combination of on-line data auto-feed by remote sensors and manual entries that are processed to resultant performance and efficiency KPIs, automatic controlled forms, evaluation reports aiming to achieve effective vessel’s monitoring and performance control.

The project’s basic set-up and the algorithms package was finalized during the validation process is expected to be completed fourth quarter of 2013. The substantial phase of within 2014. the project that includes the implementation and

proJeCt “eCa 2015”

operation on loW sulpHur Fuels After2015, the fuel sulphur limit cap will drop from for each vessel, so as to continue safely operat1 to 0.1% in the ECA areas. To assess the modifica- ing within ECA areas in the near future when the tions each vessel will be required to make, in or- stricter limits for sulphur content shall apply. der to operate within those ECA areas after 2015, each vessel’s current operation profile within ECAs, their tank capacities & arrangements, M/E & D/Gs cylinder oil consumption, their current loading profile, pump type, piping diagram and main engine and D/G makers’ service letters and instructions concerning operation on low sulphur fuel oil were thoroughly studied.

Those studies led to specific results and decisions concerning the policy that will be followed

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environmental report 2013

proJeCt “sCruBBers�

soX sCruBBinG units anD noX sCrs

SOx Scrubbers

NOx SCR (Selective Catalyst Reduction)

as part of our innovation and research program and in view of the forthcoming strict emission regulations, we attempted a first approach at investigating the potential of sox scrubber installations in the future. Given the above, we tried to study the operation of wet sox scrubbers and identify their main pros and cons, whilst also attempting a preliminary cost analysis. some of the many factors reviewed were:

We also investigated the nox selective Catalyst reduction (sCr) installations.

1. regulatory framework 2. sox scrubbers classification (ex. Wet (open/ closed/hybrid loop) and Dry scrubbers) and their working principle 3. technical considerations in relation to wet sox scrubber operation 4. Cost evaluation of an open-loop system

the nox sCr installations will be an option for the new Building vessels, when nox tier iii limits come into effect. (after 2016).

We had various meetings with nox sCr maker, Hitachi, in order to obtain further information and were in a position to issue a technical assessment, touching on points such as: 1. regulatory framework 2. nox sCr working principle 3. Cost evaluation 4. Comparison with other nox Control technologies (ex. eGr)

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DANAOS

ENVIRONMENTAL REPORT 2013

Our Environmental Performance

We developed our environmental indexes as monitoring tools of our fleet environmental performance and as a means to evaluate the effectiveness of our energy efficiency improvement measures.

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our emissions Every year we calculate the emissions of our entire Fleet, aspiring to befully transparent, on the parameters that can influence our efforts, towards a more energy efficient management. We use those calculations, as indicators of our environmental performance and share them with our clients, upon their request, in order for them to evaluate their fleet’s environmental footprint.

All the formulae used for the calculation of our emission KPIs are in line with the ones used by the KPI platform: https://www.shipping-kpi.org/.

We adopted the above approach, in order to use the same reference tool as that of our charterers, so as to be fully aligned with them, regarding emissions calculations.

CO2 EMISSIONS References: IMO MEPC/Circ.471: Interim Guidelines for voluntary ship CO2 emission indexing for use in trials CO2 emissions in tons are calculated for each voyage, of each vessel and then summed up for all voyages of each vessel, they are then summed up for all vessels accordingly. The total CO2 emissions for the Danaos fleet are produced as per the below formula:

∑ ∑∑ FC ×C where:

v

i

j

ijv

Fj

FCij is the mass of consumed fuel j at voyage i (metric tons) for the vessel v, CFj is a non-dimensional conversion factor between fuel j consumption, measured in grams and CO2 emission also measured in grams based on carbon content (as per the update of the IMO 2000 study (Buhaug et al,2008)) EEOI (in gr/tons*miles) for each vessel is defined as the ratio of mass of CO2 emitted per unit of transport work:

where:

∑ni=1 ∑ki=1 (FCij×CFj) 6 EEOI= ∑ni=1(mcargo,i×Di) x10

j is the fuel type i is the voyage number FCi,j, is the mass of consumed fuel j during voyage i (metric tons)

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environmental report 2013

our emissions CFj, is a non-dimensional conversion factor between fuel j consumption, measured in grams and CO2 emission also measured in grams based on carbon content (as per the update of the IMO 2000 study (Buhaug et al,2008)): Diesel/Gasoil: 3.20600

Light Fuel Oil: 3.15104

Heavy Fuel Oil: 3.11440

mcargo,i, is the carried cargo mass during the voyage i Di, is the distance in nautical miles corresponding to the voyage i The average EEOI of all vessels produces fleet average EEOI. SO2 EMISSIONS

References: “An Online Ship Emissions Calculator as a Decision-Making Aid and Policy Evaluation Tool”, C.A Kontovas & H.N Psaraftis, Laboratory for Maritime Transport, National Technical University of Athens SO2 emissions depend on the type of fuel and more specifically on the sulphur content of the fuel. One has to multiply total bunker consumption (in tonnes per day) by the percentage of sulphur present in the fuel (for instance, 4%, 1.5%, 0.5%, or other) and subsequently by a factor of 0.02 to compute SO2 emissions (in tonnes per day). The 0.02 SO2 factor is exact and comes from the chemical reaction of sulphur and oxygen to produce SO2.

As far as the SO2 index is concerned, the following expression found in the literature that gives the equivalent sulphur content per ton-nautical mile has been used for calculating SO2I for each vessel and the average has been produced giving the SO2I (in gr/tons*miles)for the whole fleet:

where:

∑ni=1 ∑kx=1 (20xFCi,x×Six) SO2I= ∑ni=1(mcargo,i×Di) x103

FCi,x, is the mass of consumed fuel x during voyage i (metric tons) mcargo,i, is the carried cargo mass during the voyage i Di, is the distance in nautical miles corresponding to the voyage i and Si,x, is the weighted average of % sulphur content of fuel type x calculated by the formula:

Sx= 30

∑nj=1 (Ax,jxBx,j) ∑ni=1(Ax,j)

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our emissions where: x, is the fuel type (e.g. HFO, LSFO, MDO etc.) received by the vessel n, is the number of bunkering operations in the reporting period Sx, is the weighted average of % sulphur content of fuel type x Ax,j, is the quantity of fuel of type x received during bunkering operation Bx,j, is the sulphur content of fuel type x received during bunkering operation NOx EMISSIONS

References: The Norwegian Toll and Avgiftsdirektoratet (The Norwegian Customs and Tax department).

Document (only available in Norwegian) NOx emissions based on the NOx emission factor, equal to 0.100 (ton of NOx/ton of fuel) for slow speed diesel engines and 0.07 (ton of NOx/ton of fuel) for medium speed diesel engines.

The NOxI emissions index (in gr/tons*miles) for a voyage, is calculated based on the below formula:

NOxI= where:

∑ni=1(FCi,ME×CFME+FCi,DGxCFDG) x106 ∑ni=1(mcargo,i×Di)

i is the voyage number, FCi,me, is the mass of fuel consumed in Main Engine during voyage i (metric tons) FCi,DG, is the mass of fuel consumed in auxiliary engine during voyage i (metric tons) CF, is a conversion factor between fuel consumption, measured in metric tons and NOX emission also measured in metric tons: Slow speed engines:

0.1 mt per metric ton of fuel used

Medium speed engines:

0.07 mt per metric ton of fuel used

mcargo,i, is the carried cargo mass during the voyage i and Di, is the distance in nautical miles corresponding to the voyage i

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DANAOS

ENVIRONMENTAL REPORT 2013

Our Emission KPIs Summary The below emissions figures and efficiency factors correspond to the total of our operating Fleet during the 2013 year, (these include those that were sold but exclude our two bareboat vessels).

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Our Bunkers The below bar graph shows our bunker quantity and quality data for 2011, 2012 and 2013 concerning our operable fleet: The fuel quantity delivered in 2012, based on our bunker delivery notes, was marginally higher compared to2011, due to the fact that six newbuildingvessels were added to the fleet in 2012. However it should be noted that the delivered fuel quantity, would have been higher if it wasn’t for the increase in the number of laid vessels the anodic trend of Super Slow Steaming (SSS) and the increased number of dry-dockings (9) that took place within 2012. In 2013, the corresponding figure presents a negative trend due to the sale of 9 vessels by the end of the year and the further increased tendency for SSS as the load-speed profile graphs below clearly indicate.

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DANAOS

ENVIRONMENTAL REPORT 2013

High Sulphur HFO bunkered quantities, present a decreasing trend the last three years, whilst Low Sulphur HFO quantities have increased.

To some extent, the latter can mainly be attributed to the fact that vessels calls to North American ECAs have significantly increased during the last three years i.e.233 in 2011, 248 in 2012 and 300 calls during 2013, (where the new stricter sulphur cap of 1% was enforced in 2012)and also to the policy adopted by most liner companies, to participate in voluntary low burning schemes at various ports worldwide, in that way improving the emissions footprint of the cargo transferred.

These port initiative schemes reward such activities, providing motivation for even higher performances.

*Fleet size and total engine power as of January 1st of the current year

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Regarding the Diesel Oil used onboard, the figures show that EUDO was reduced in 2013, whilst CARB DO was almost tripled.

The reason for the reduction of EUDO bunkered quantity can be mainly attributed to the fact that scrapped vessels received a high quantity of EUDO within 2012, whereas a number of other vessels changed route and did not call EU ports within 2013. To the contrary the calls to California ports increased significantly.

As seen in the HFO graph, the Sulphur content for Diesel Oil seems to have been reduced (for CARB DO), possibly due to the new lower limits for CARB MDO that have been in placesince 1/8/2012.

The peakof High sulphur DO during 2012, can mainly be attributed to the initial DO supply of newbuildings vessels.

*Fleet size and total engine power as of January 1st of the current year.

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DANAOS

ENVIRONMENTAL REPORT 2013

Cargo Transferred

INCREASED BY 4.8% WITHIN YEAR 2013

UTILIZATION FROM 93.0% WITHIN 2012 TO 93.4% IN 2013

CO2

REDUCTION BY 13.5% COMPARED TO 2012

NOx

9.1% REDUCTION WITHIN 2013

SOx

18.3% EMISSIONS REDUCTION IN 2013

*Scrapped vessels in 2013 are included in above figures

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Energy Efficiency Operational Index (EEOI) International maritime shipping, accounts for approximately 2.7% of annual global greenhouse gas emissions. Container ships account for approximately 25% of that amount1, while moving roughly 52% of marine commerce by value2.

Developed by the IMO as per MEPC.1 Circ.684, EEOI index calculates the amount of CO2 emitted per ton/unit/TEU of cargo transported per nautical mile. CO2 output per cargo can be used as an indicator of a vessel’s fuel efficiency. This only reports CO2 emission as a result of fuel combustion.

Industry standardization and verification of CO2 data is a prerequisite in order to enable fair, reliable measurements of CO2 performance and to enable CO2 benchmarking with competition.

From the above figure it is evident that there is a decreasing tendency in EEOI average for 2013 compared to 2012. The above is mainly owed to the increase of cargo weight transferred within 2013 and the lower speeds adopted.

The below figures show that in some cases there are some deviations observed between sister’s vessels in the EEOI index. The above differences can be attributed to differences in cargo transferred, speed profile and of course change in vessels’ calls (miles sailed).

1. Second International Maritime Organization Green House Gases Study 2009 2. http://www.imsf.info/papers/NewOrleans2009/Wally_Mandryk_LMIU_IMSF09.pdf

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DANAOS

ENVIRONMENTAL REPORT 2013

All three vessels are newly acquired second hand vessels. Bought during the Q4 of 2013.

The CSCL Pusan had less EEOI in 2013 than the CSCL Le Havre, since she carried more cargo (in MT).

The SNL Colombo had less EEOI in 2013 than the YM Singapore, due to the fact that she called AUS (bigger sailing distance) and also transferred more cargo (40% more in total) The Marathonas is currently in cold lay-up condition since Q4 of 2011.

The Messologi was in hot lay-up in Q1 of 2013.

The Mytilini carried less cargo compared to the Messologi (about 50%) resulting in significantly higher EEOI 2013.

The Duka has been under cold lay-up since 2012. The high EEOI is due to a few port calls before her lay-up.

All our 3,400 TEU vessels had a similar EEOI with small deviations due to the differences in ton-miles and consumption. The Hanjin Constantza and Hanjin Algeciras encountered, on average, the worst weather conditions, whilst the average weight of the cargo transferred, was lower, compared with to their sister vessels.

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All 2,200 TEU vessels presented an almost similar CO2 index.

The Hyundai Vladivostok had a higher EEOI in 2013, since she carried less TEU at shorter total sailing distance. Therefore her tons*miles index is lower compared toher sister vessels.

All vessels presented a similar performance when it come to their CO2 footprint.

The Deva had a slightly higher EEOI value in 2013, compared to that of the Derby D, as shecarried less cargo. The tones*miles index was lower compared with to hersister vessel.

The CMA CGM Moliere also had a slightly higher EEOI value compared to sister vessels, as she carried less cargo and the total distance sailed was also less (different round trip) The CMA CGM Attila and CMA CGM Bianca had a slightly higher EEOI, due to less cargo weight being transferred at al shorter total distance.

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DANAOS

ENVIRONMENTAL REPORT 2013

The Hanjin Germany and Hanjin Greece had a higher EEOI due to less cargo weight being transferred (avg. 36,200 and 47,200 tons respectively compared to the Hanjin Italy (avg. 72,000 tons). The vessels were operating on a different route.

The Niledutch Zebra was acquired second hand in Q4 of 2013.

The EEOI of the Hyundai Tenacity was significantly high in Q1 of 2012. The vessel was delivered on 08/03/2012, and did not have much cargo onboard till the end of the month, which resulted in the soaring of her EEOI. The Hyundai Tenacity also had a slightly higher EEOI compared to that of her sister vessels, since she transferred less cargo onboard at a shorter distance, her tones*miles index therefore was lower compared to the remaining 13,100 TEU vessels, resulting in a slight increase of her CO2 index.

We incorporated’, a calculation tool, to their performance and CO2 emissions. measure EEOI through the vessels’ daily These vessels receive an annual certitelegrams in our Danaos Enterprise softfication of their participation from GL., ware. This will allow us to regularly monithrough GL Auditors, who come to the tor the fuel efficiency of all our ships.

Danaos Head Office to verify the validSince 2008, we have voluntarily enrolled 9 of our vessels in the Germanischer Lloyds “CO2 Index” project, monitoring

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ity of the data utilized to produce the CO2 index.

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Our Operational Profile

(2013 vs 2012)

When viewing the above figures, one can clearly see the trend being set by the Danaos Fleet. The Main Engine Weighted Average Load and Vessels’ Weighted Average speed, were significantly re-

duced in2013. Danaos’ vessels were prepared, well in advance, to effectively respond to the super slow steaming challenge and as such immediately adapted to the new modus operandi.

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Danaos

environmental report 2013

environmental sHip inDeX (esi) Danaos Corporation has voluntarily entered in the Environmental Ship Index (ESI) system which is developed by World Port Climate Initiative (WPCI) (http://www.wpci.nl).

So far, 25 of our vessels have officially been enrolled in the WPCI ESI data base, some through our charterers and some through us. Regardless of that though, we have calculated the ESI for all our Fleet vessels built after 2000 (having a NOx technical file) as it is an extra tool for evaluating our vessels’ environmental performance and an instrument contributing to our clients’ sustainability policy. Below you can find the relevant graph:

This project is a voluntary system designed to improve the environmental performance of sea going vessels and an instrument to visualize the environmental performance of ships regarding air pollutants and CO2. It takes the NOx and SOx emissions directly into account and rewards documentation and management of energy efficiency, like EEOI and AMP installations.

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PM is indirectly included because of its strong relationship to SOx. Vessels with ESI indexes above a certain score (varying from port to port) are eligible to be rewarded with a discount for the port dues of more than 20 major ports worldwide. Vessels calling at EU ports, thus burning MGO,gain high scores and as such are rewarded. Contrary to the above, the vessels calling non-ECA areas, e.g. Asia are not

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likely to achieve a high score.

formula utilized in 2012 is applied, the vessel’s ESI One views that there is generally a descending score increases to 64.1.) trend of the ESI index for 2013, despite the fact that A list of vessels enrolled in the ESI program: the sulphur content which is the main factor defin2012 2013 ing the final score improved (meaning decreased).

This occurred due to a revision of the calculation formula for the SOx ESI, that considers the weighted average sulphur content for LS HFO (less that 1%) and MDO (less than 1% but greater than 0.5%) in the same category, whilst last year LS HFO sulphur was weighted with the HFO sulphur content, resulting in the HFO weighted sulphur content to be more optimum. Additionally, the previous standard was rewarding the vessels burning HFO and LS HFO and LS gasoil (<0.5% sulphur content) but not MDO (of sulphur content >0.5% and <1%) with an extra 35 points which is something that has changed due to the application of the new new formulae. The green marked ESI refer to the 25 vessels subscribed in the WPCI and their score is according to the WPCI web site and are valid for the period from 01 October 2013 until 31 March 2014. The ESI scores calculated for a total of 42 vessels (equipped with a NOx technical file) have been calculated by the Danaos R&D department for both 2012 and 2013 based on the data available for the corresponding years (from 1/1-31/12) and are depicted in the graph.

The Hyundai Smart has the highest ESI score amongst the Danaos registered vessels as per the WPCI website: 41.73.

Although the score is lower compared to last year, Hyundai Together’s score of 53.9 is not due to the vessel’s inferior performance, but to the above described changes in the ESI formula. (if the previous

YM Vancouver

1

YM Vancouver

CSCL Europe

2

CSCL Europe

Deva

3

Hanjin Buenos Aires

Derby D

4

Hanjin Santos

Hanjin Germany

5

Hanjin Versailles

Hanjin Italy

6

Hanjin Algeciras

Hanjin Greece

7

Hanjin Constantza

Hyundai Together

8

Zim Rio Grande

Hyundai Tenacity

9

Zim Monaco

Hyundai Smart

10

Zim Luanda

Hyundai Speed

11

Deva

Hyundai Ambition

12

Derby D

13

CMA CGM Attila

14

CMA CGM Tancredi

15

CMA CGM Bianca

16

CMA CGM Samson

17

CMA CGM Melisande

18

Hanjin Germany

19

Hanjin Italy

20

Hanjin Greece

21

Hyundai Together

22

Hyundai Tenacity

23

Hyundai Smart

24

Hyundai Speed

25

Hyundai Ambition

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DANAOS

ENVIRONMENTAL REPORT 2013

HYUNDAI SMART

ESI Score NOx: 23.30 SOx: 37.75 CO2: 10 OPS: 35 Total 41.7

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Energy Efficiency Design Index (EEDI) Developed by the IMO as per MEPC.1 Circ.681, the EEDI is a tool for rating new building ships in order to stimulate innovation and technical development of all elements influencing the energy efficiency of a ship from its design phase.

ings, the EEDI has been calculated for all our existing vessels as a tool to estimate their design efficiency and marketing value. As per the below graph, only twoseries of vessels (which are built in the 90â&#x20AC;&#x2122;s) are above the current phase limit.

The rest of our Fleet already satisfies the Phase 0 Although the EEDI refers only to the new build- limit, which is effective until 31/12/2014.

Some general remarks based on the above figures are as follows: Larger vessels with waste heat recovery systems and smaller power installed for the same service speed (meaning lower hull resistance and/or higher propeller efficiency) have better EEDI values Vessels with similar DWT & container intake, may appear

to have a significant EEDI deviation mainly due to: different M/E installed power variations in SFOC (for M/E & DGs) Waste Heat Recovery System (WHRS)

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annual environmental report 2013

R E P O R T

enforce rigorous operational standards

environmental protection commitment to safety premier

choice of global seaborne container transportation

D A N A O S

C O R P O R A T I O N

-

2 0 1 3

R&D Dept.

14, Akti Kondyli, 185 45, Piraeus, Greece

Email : rnd@danaos.com Telephone : +30 210 41 96 500 Fax : +30 210 42 20 855 Website : http://www.danaos.com

E N V I R O N M E N T A L

DANAOS CORPORATION

outstanding customer service

REMDesign

World-Class Shipping, Leading-Edge Expertise

ANNUAL environmental REPORT 2013

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