FS ENERGY & POWER FUND Creating a partnership with a singular focus on energy to generate income and growth 1
WHY THE CHANGE? ACCESS DEEP EXPAND LOWER MANAGEMENT PREPARE ENERGY EXPERTISE OPPORTUNITIES + + INCENTIVE FEES FOR LISTING OPTIMIZE PORTFOLIO • EIG is a leading global • Lower management fee • Targeting 12–18 months • Ability to co-invest energy investor, managing from 2.00% to 1.75% 4 following entry into the $17B in energy assets 1 alongside EIG’s new advisory agreement 5 • Waive income incentive institutional funds • Access EIG’s 60+ • Proxy solicitation begins fees for 12 months • Enhance portfolio professionals dedicated beginning in Q1 2018 in January + includes diversification by to energy investing provisions for listing leveraging EIG’s robust • Supported by existing • Reset annualized energy credit platform $30 million sponsor distribution amount from • Increase portfolio yield investment from FS $0.71 to $0.50 per share over the long-term 3 employees and affiliates 2 1 As of September 30, 2017. 2 Sponsor investment refers to proceeds from investors affiliated with FS Investments, including members of FSEP’s board of trustees. As of November 16, 2017. 3 There is no guarantee that portfolio yield increases will be achieved. Past performance is no guarantee of future results. 4 Based on gross assets. Waiver of base management fee to 1.75% begins January 1, 2018. 2 5 The timing of any liquidity event is uncertain, cannot be assured and is subject to, among other factors, board approval and market conditions.
A LONG-TERM PARTNERSHIP DEDICATED TO ENERGY INVESTING EIG is a leading institutional manager focused exclusively on the energy industry 60+ FULL ACCESS TO EIG PLATFORM $17B 35 36 • FSEP will gain the ability to co-invest YEARS ENERGY COUNTRIES ASSETS alongside EIG’s institutional funds, subject IN INVESTMENT $85B WITH UNDER PROFESSIONALS to receiving exemptive relief 4 FOUNDED IN 1982 BUSINESS INVESTMENTS 2 MANAGEMENT 1 DIRECT LENDING SPECIALIZED ENGINEERING EXPERTISE Global Project Funds • Singular focus on energy with specialized engineers to complement investment ENERGY FUND SERIES underwriting and management Hybrid debt & structured equity DEEP EXPERIENCE INVESTING ACROSS ENERGY PRIVATE EQUITY CAPITAL STRUCTURE Harbour Energy • 35-year track record investing across the energy industry and sourcing opportunities EIG ENGINEERING up and down the balance sheet ~14 technical professionals to support investment due diligence and management 1 As of September 30, 2017. 2 Since inception in 1982. 3 Global Project Fund launched in 2001. 3 4 There is no guarantee this exemptive relief will be received in part or at all.
EXPAND INVESTMENT OPPORTUNITIES + OPTIMIZE PORTFOLIO Enhance portfolio diversification through accessing EIG’s robust investment platform FSEP HOLDINGS BY SUBSECTOR 1 EIG’S DIRECT LENDING BUSINESS BY SUBSECTOR 2 Upstream 63% Upstream 19% Midstream 11% Midstream 26% Downstream 1% Other infrastructure 10% Power 7% Power 30% Service 18% Renewables 9% Resources 6% SIGNIFICANT REDUCE FOCUS ON UPSTREAM + MIDSTREAM + SERVICES INFRASTRUCTURE EXPOSURE 1 Based on fair value as of September 30, 2017. There is no guarantee that FSEP’s future investment portfolio will approximate EIG’s direct lending business shown above. 2 Portfolio allocations as of December 31, 2016. 4
FOCUS ON GROWING PORTFOLIO YIELD OVER THE LONG-TERM Rotate out of broadly syndicated assets into higher-yielding direct originations 1 BROADLY SYNDICATED DIRECT ORIGINATIONS $1.8B $2.4B 9.8% 43% 10.7% 57% Fair value 2 Fair value 2 Gross portfolio of investment Gross portfolio of investment yield prior portfolio 3 yield prior portfolio 3 to leverage 2 to leverage 2 1 There is no guarantee that gross portfolio yields will be achieved. Past performance is no guarantee of future results. 2 Reflects FSEP’s portfolio as of September 30, 2017 based on amortized cost and excluding non-income producing assets. 3 Based on fair value as of September 30, 2017. 5
RESET DISTRIBUTION TO GROW NAV AND PREPARE FOR A PUBLIC LISTING WE BELIEVE THIS IS Distribution coverage has been challenged post-commodity cycle A NECESSARY STEP TOWARDS A PUBLIC LISTING $100,000 110 • Greater flexibility to generate Net investment Income (LHS) total returns absent the need Net investment income and distributions ($000's) $90,000 Distributions (LHS) to focus on the highest income Bank of America Energy High Yield Index 100 opportunities to meet the $80,000 Bank of America Energy High Yield Index (RHS) distribution $70,000 90 • Reset annualized distribution $60,000 amount from $0.71 to $0.50 per share 2 $50,000 80 • Increased annualized $40,000 distribution amount 11x since 70 inception by approximately $30,000 $0.08 per share $20,000 • Adviser fee reductions: 60 – Management fee: $10,000 lowered from 2.00% to 1.75% 1 $0 50 – Income incentive fee: Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 waived for 12 months 1 ICE BofAML U.S. Energy High Yield Index is designed to track the performance of U.S. dollar-denominated high yield rated corporate debt publicly issued in the U.S. domestic energy market 1 Waiver is effective beginning January 1, 2018. 6 2 The payment of future distributions on FSEP’s common shares is subject to the discretion of FSEP’s board of trustees and applicable legal restrictions and, therefore, there can be no assurance as to the amount or timing of any such future distribution.
CREATING A POTENTIAL PATH TO LIQUIDITY Proxy solicitation timeline for FSEP Transaction Target date for special announcement Seek listing shareholder meeting DEC 2017 JAN 2018 MAR 2018 12–18 MONTHS following entry into the new advisory agreement Proxy solicitation begins The timing of any liquidity event is uncertain, cannot be assured and is subject to, among other factors, board approval and market conditions. 7
RESOURCES Website Webinars FSPROXY.COM WEBINARS FREQUENTLY PRESS COMMUNICATION EMAIL ASKED RELEASES SAMPLES INVITATIONS QUESTIONS TO COME 8
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