Danaos Corporation Environmental Report 2014

D A N A O S

DANAOS CORPORATION

C O R P O R A T I O N

ANNUAL ENVIRONMENTAL REPORT 2014

2 0 1 4

World-Class Shipping, Leading-Edge Expertise

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

REMDesign

R E P O R T

DANAOS CORPORATION R&D Dept.

14, Akti Kondyli, 185 45, Piraeus, Greece

Email : Telephone : Fax : Website :

RnD@danaos.com +30 210 41 96 500 +30 210 42 20 855 http://www.danaos.com

World-Class Shipping, Leading-Edge Expertise

www.danaos.com

ANNUAL ENVIRONMENTAL REPORT 2014

Contents 1 2 3 4 5

6 7

CONTENTS 4

DANAOS CORPORATION 6

OUR R&D DEPARTMENT 8

SHIPPING GLOBAL IMPACT 10

OUR PROJECTS 12 On-line Data Acquisition & Process System 14 DMC DASWAVES 16 Danaos Advanced algorithms 17 Bulbous Bow Optimization 18 HYPERCUBE 19 Ballast Water Treatment Systems 20 LNG 21 ECA 2015 22 Panama Canal expansion 22 New Lashing Rules 23 Inventory of Hazardous Materials 23

Our BCG Bunker Consumption results 26

Our Environmental Performance 27 Our Emissions 28 Our Emission KPIs Summary 31 Our Bunkers 32 Energy Efficiency Operational Index (EEOI) 36 Our Operational Profile (2014 vs 2013) 43 Environmental Ship Index (ESI) 44 Energy Efficiency Design Index (EEDI) 47

DANAOS CORPORATION

Dear Fellow Shareholders, Research and development (R&D) is one of the means through which shipping companies can experience future growth. R&D is used to develop new systems and processes which may improve and expand the operations of a shipping company. It has to be stressed that the rate of new regulations and the industry’s awareness on environmental issues has increased significantly over the last decade. In such a competitive market, shipping companies have to invest in the implementation of new technology, qualified personnel and advanced monitoring systems.

When we think of the term R&D images of high tech firms on the cutting edge of new technology come to mind. The time has come to emboss these images on the shipping sector as well.

On average, most companies spend only a small percentage of their revenue on R&D. However, further investment on research and development is required in order to preserve competitiveness and to be able to meet environmental protection mandates and strict regulations.

The R&D department of Danaos was established after the financial crisis outbreak of 2009. The department has operated successfully over the last years, analyzing existing and forthcoming regulations, energy efficiency optimization systems and potential investments on relative modifications

onboard. A number of studies, tests and joint research projects have been carried out which have set up the necessary framework for effective ship operation.

More specifically: • The thorough study of more than 35 Energy Efficiency Improvement Methods (EEIM), and a subsequent operations optimization study, • The development of performance analysis algorithms resulting from 30 years of operational experience, • The preparation of an advanced SEEMP and the issuance and follow up of a thorough Environmental report, • The design and implementation of both on-line data acquisition and analysis software routines.

The above are some of the major areas, amongst a number of activities, which have enabled Danaos to form a new and successful operational model. The results produced over the last years are illustrated in the Environmental Reports published by Danaos on an annual level.

OUR GOAL This year (as well as last year) are enhancement periods for our new systems.

The R&D department will complete all the related evaluation algorithms and procedures, and work on being prepared to meet new challenges such as NOx Tier III, dual gas engines, further emission reductions through innovative systems and processes, targeting the lowest possible harmful emissions and the safe operation of vessels.

Respectfully

Mr. Dimitris Vastarouchas Deputy Chief Operating Officer and Technical Director

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ANNUAL ENVIRONMENTAL REPORT 2014

56

CONTAINERships

93,4%

fLEET gROWTH IN 2014

Danaos Corporation 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 CMA-CGM, Yang Ming, China Shipping, Hanjin, ZIM, MSC, Niledutch and Hyundai Merchant Marine Co. 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 56 containerships aggregating 334,239 twenty-foot equivalent units (TEU), placing us amongst the largest

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containership charter owners in the world and one of the largest US listed containership companies based on fleet size.

Our fleet utilization increased to 97.5% in 2014 compared to 93.4% in 2013. This is mainly due to the sale of nine of our older vessels, some of which were off-charter and laid-up in the twelve months ending December 31, 2013. During 2014 the effective fleet utilization for the fleet under employment was 98.5% (excluding the vessels on lay-up).

During 2014 we sold five of our older vessels, the Marathonas, the Commodore, the Mytilini, the Duka and the Messologi, for an aggregate amount of $55.2 million (representing the gross sale proceeds less commissions).

Additionally, we acquired two 6,402 TEU second hand containerships built in 2002, the MOL Performance and the MOL Priority.

DANAOS CORPORATION

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

OUR STRATEGY The primary objective of Danaos Corporation is to expand the business whilst increasing earnings and maximizing the returns for our shareholders by pursuing the following strategies: Provide

a high level of customer service.

Maintain a diverse portfolio of charterers.

Acquire newly built and secondhand vessels.

Continue to invest in larger containerships and deploy them under long-term charters.

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ANNUAL ENVIRONMENTAL REPORT 2014

Our R&D Department OUR GOAL Our R&D Department falls under the Technical Deptartment of DAS and was officially established in 2011, although its early stages date back to 2006.

Our goal is to be in the forefront of innovation, brainstorming ideas and developing them to address our clients’ needs, in the changing market environment. We apply the company’s know-how and technical expertise in order to improve our fleet’s fuel efficiency and our environmental performance thus, maintaining our competitive advantage.

OUR STRATEGY The main pillar of our strategy, when it comes to the planning of projects and their execution, is defined by company needs, market trends, future demands and regulatory frameworks.

R&D DEPT. 2014 REVIEW There is an increasing focus on fuel efficiency and a growing interest in environmental performance. This is due to the increase in fuel

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cost but also due to the fact that benchmarking is nowadays driven by traditional factors, such as price and transit time, but also by environmental and social responsibility in the whole supply chain.

An emphasis on research and development and technological innovation aimed at developing tools to monitor and optimize fuel efficiency, emissions control, energy management and bunkers control are the key elements to tackling the two key problems of the shipping industry: high fuel bunker prices and GHG emissions.

The focus has therefore been placed on the “On-line data acquisition and process system” which has been fully implemented and stabilized onboard twenty-four Danaos vessels. The project initiated in 2013 with the installation on seven pilot vessels and given the successful results, the implementation was expanded to cover in total, twenty-four vessels of Danaos fleet. Tools for close monitoring, on-time fault diagnosis and rectification have been developed resulting in the significant improvement of the systems stability and reliability.

DANAOS CORPORATION

The development of an “On line data acquisition system” with associated algorithms and the introduction of an advanced software smart platform, which provides the owner with accurate and close real-time control of all performance parameters, is Danaos way to move forward.

DasWaves is an advanced operational platform which utilizes data from various sources and incorporates Danaos expertise and know-how in order to produce smart KPIs, control forms and alerting systems. DasWaves is currently under development in cooperation with Danaos Management Consultants.

Emphasis has also been placed on projects relating to upcoming regulations and on our preparation for compliance (ECA phase II, Panama Canal, BWTS phase I).

Bulbous bow optimization study as a part of fuel efficiency improvement methods has been investigated for Danaos 10,100 TEU and 13,100 TEU vessels.

In the context of innovation and Danaos consistent effort to keep up with new technologies, a preliminary study on LNG

propulsion has been carried out and the scenario of a 18,000 TEU container vessel considering two engine alternatives (Man ME-GI HP engine and Wartsila DF-LP engine) has been investigated in cooperation with Wartsila.

Hypercube thermodynamic models for three main engine types have been installed in our fleet (one conventional MC-C engine and two electronic engines – Man Diesel and Wartsila) and finalized within 2014 in cooperation with NTUA (National Technical University of Athens). By using engine models we are in a position to assess engine performance by comparing the actual operation data with the calculated expected ones produced by a simulation “run” of the thermodynamic model.

Last but not least, a number of pre-purchase surveys have been carried out within 2014 in the frame of the fleet modernization program, which the company has executed by scanning the market for accretive acquisition opportunities of younger tonnage.

ANNUAL ENVIRONMENTAL REPORT 2014

Shipping Global Impact

SHIPPING INDUSTRY & ENVIRONMENT According to the World Economic Forum (WEF), if every country improved two key supply chain barriers, border administration and transport and communications infrastructure, then global GDP could increase by US$ 2.6 trillion (4.7%). Seaborne transport should act as a guarantor so that potential growth can be obtained in the most cost and energy – efficient way.

The maritime transport system can be viewed as a complex stochastic system based on the interaction and management of its subsystems - ships, ports and cargoes, ships being the key element in this chain. The global challenge is to achieve and effectively respond to this growth potential, in the most cost-effective and environmentally sound manner. In line with an increasing awareness of the environmental impact, the requirements for efficiency, quality, safety and training have become ever more stringent.

We recognize that for our clients sustainability partially consists of their service expectations. We share the necessity for optimal global transport supply chains and energy and cost-efficient trade.

Our objective as high quality & cost effective providers of ships & vessel services is inherent in our customers’ sustainability strategy. We develop and customize our tools to effectively address their needs.

Besides contributing to the minimization of the GHG emissions, inherent in the fleet service by promoting its energy efficiency, we also sustain our competitive advantage by introducing attractive cost-saving options to our clients.

This report is intended to provide our stakeholders with an overview of Danaos’ environmental performance and initiatives/actions taken towards improving our fleet’s performance from a purely technical point of view. The data has been carefully integrated into this report in a transparent, accurate, and reliable manner.

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DANAOS Corporation shares the commitment for a clean, healthy and sustainable environment for the community, through preventive as well as remedial actions. Our fleet systematically complies with, or exceeds, environmental laws and regulations.

We focus on our social and environmental performance, something that is reflected in our ethical and transparent management practices.

DANAOS CORPORATION

SHIPPING EMISSIONS Based on the IMO 3rd GHG Study, CO2 emissions are projected to increase significantly in the coming decades. Depending on future economic and energy developments, the study’s BAU scenarios suggests an increase by 50% to 250% in the period leading to 2050. Emission projections demonstrate that improvements in efficiency are important in mitigating an increase of emissions. Danaos, being a responsible owner, works in improving its vessels energy efficiency in an effort to reduce the environmental impact of its fleet thus, contributing to the sustainability development of the whole supply chain.

Our efforts are mainly concentrated on improving vessels energy efficiency through a great series of operational measures and design enhancements as well as through optimizing our monitoring tools.

Thanks to slow steaming and the implementation of our energy efficiency management policy, Danaos CO2 efficiency has increased by 19 % since 2012.

We have developed an emissions calculator tool, through which we monitor our emissions’ production on a quarterly basis.

Fuel cost reduction, improved margins of profitability and competitiveness are all important drivers in the reduction of emissions.

Strict emission regulatory regimes increase the social environmental awareness. The desire to shrink our emissions footprint underlines the necessity for adopting and promoting an energy - saving culture.

The Danaos membership of the Hellenic Marine Environment Protection Association (HELMEPA) coupled with our Manager’s ISO 14001/2004 certification are a testimony of the culture of environmental Best Practices prevailing throughout our organization.

Sustainable development and eco-efficiency should be the journey and not the destination

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ANNUAL ENVIRONMENTAL REPORT 2014

Our projects

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DANAOS CORPORATION

Danaos Corporation’s primary objective is to retain its competitive advantage and, simultaneously, to maintain a steadfast commitment to Shareholders’ returns, Quality, Safety and Environmental protection using innovation and technology.

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ANNUAL ENVIRONMENTAL REPORT 2014

On-line Data Acquisition & Process System CURRENT STATUS Danaos has enrolled in the “LAROS” project a total number of 7 ships within 2013 from our Fleet of 56 container vessels. The expansion of the investment on another 17 vessels has been approved by the management for 2014. The total cost for the implementation on all 24 vessels came to approximately USD 800,000.

LAROS CONCEPT The on-line data acquisition and process system can be summarized by the following:

Continuous power and consumptions measurement onboard

Uninterrupted weather, navigation and operation data collection Interpretation and analysis of data from welltrained statistics and performance monitoring team Effective bunkers control

Advanced superintendence with remote monitoring of basic operational parameters, alarms and functions.

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SYSTEM’S STABILITY Within 2014 our efforts have been concentrated on the successful implementation of the “On – line system” onboard 16 vessels of Danaos fleet and the system’s fault-free operation. The below monitoring and root-cause analysis tools have been developed to ensure the system’s close control, on-time fault detection and diagnosis and problems rectification: System flow diagram System gateway check System validation map Fault – tree analysis diagram (parameters and alarms) Weekly status report Monthly statistics log With the use of the above diagnosis tools, certain system’s weaknesses have been identified and efforts have been coordinated accordingly in order to address them effectively.

The main problems encountered are related to communication issues, reliability of certain equipment measurements (eg. draft gauges, speed log) and alarms transmission. Solutions have been found for all problems and the system is currently under the stabilization phase since countermeasures are tested and validated for their effectiveness.

DANAOS CORPORATION

On-line Data Acquisition & Process System VESSELS ENROLLED DURING 2014 During 2014, the “On-line” system has been installed onboard 17 vessels. Currently, data is received from all 24 vessels of the Danaos fleet, as listed below.

Zim Luanda

4,253 TEU

CMA CGM 6500s

5 x 6,500 TEU

CSCL 8500s

2 x 8,468 TEU

CMA CGM 8500s

5 x 8,530 TEU

CSCL 9200s

2 x 9,580 TEU

Hanjin 10100s

3 x 10,100 TEU

Hyundai 13100s

5 x 13,100 TEU

MSC Zebra

2,500 TEU

A mobile – tablet application, which provides basic information such as the vessel’s position, basic parameters monitoring (for example speed-draft-power profile) and alarms, is currently functional.

An upgrade of the application is expected to be finalized soon.

ANNUAL ENVIRONMENTAL REPORT 2014

DMC DASWAVES

Danaos underlines the necessity of improving its well-established procedures through the upgrade of the existing performance monitoring and energy efficiency assessment tools in order to keep being in the forefront of innovation by capturing all developments in the field and effectively adapting to the evolving market needs and demands. In this context, Danaos has invested on the development of the new ERP platform in cooperation with DMC (Danaos Management Consultants).

The new web-based application combines data collected from the on-line system with new telegram manual entries and processes them in the built-in algorithms which incorporate Danaos technical expertise and know how, in order to produce performance and efficiency KPIs, automated control forms, reports, graphs, alarms and warnings.

The DASWAVES application consists of an advanced tool of monitoring and assessing energy efficiency onboard through its specifically designed routines (such as power management, steam management, emissions control). Based on its algorithms (PLEGMA, BCS, P-MATRIX), DASWAVES provides the possibility of advanced performance monitoring while at the same time it can be used for diagnosis and problem-identification purposes. Some of the enhanced features of the new web application which is under development includes Tracking/Polling, voyage parameters monitoring and plotting through voyage duration and speed control through voyage execution.

DASWAVES structure Trade statistics Stowage analysis Operation profiles Off hires routine Port statistics

Operation profiles & statistics

EEOI Weather assesment General info Positions list Trade zones

Voyage Voyage info

Data input

Charterers reporting Control form Graphs Bunkers management Water production Lubricants management Power management Steam management Ship’s performance BCS KPIs USS evaluation Emissions control DDA

Reports DASWAVES structure

Daily messages

Ship’s management Advanced Poling Performance monitoring

2. Programming

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Constants Templates Graphs Forms Direct functions Telegrams

1. algorithm’s set up

Noon Arrival Departure

Maps Restricted areas Crew data OPEX Emissions Parameters monitoring

DANAOS CORPORATION

Danaos Advanced algorithms

We have worked on the development of advanced algorithms which condense Danaos technical know-how and experience. The incorporation of these algorithms in a common platform supports the development of an enhanced performance assessment tool with inborn diagnosis functions. These empirical models, which form the reference line for our evaluation, are subject to continuous editing in order to incorporate actual operational data into the model.

The whole concept provides for the need of a closer and more effective monitoring of fuel efficiency, emissions, energy management and bunkers control.

Below is an indication of some of the graphs and KPIs designed by Danaos R&D, which form part of the energy efficiency evaluation process, BCS (Bunker Control System) daily deviation trend (actual versus theoretical consumption), P-matrix (Performance-matrix) profile distribution graphs (normal, heavy, very heavy), diesel generators efficiency and utilization index and burner operation graph.

Screenshots from P-matrix and power management routines

PP Normal

PP 50%

PP 100%

8.2% 14.3%

77.5%

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ANNUAL ENVIRONMENTAL REPORT 2014

Bulbous Bow Optimization

CONCEPT It is established that redesigning a container ship’s bulbous bow for slow-steaming leads to an 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 power needed.

However, the modified bulbous bow is optimized for a design speed range – draft combination and subsequently sailing on a different profile might result in a negative effect, compared to the original design.

The optimization of the bulbous bow is carried out using the existing bow design as a reference. The optimization process is performed in several steps (on average six) and with regard to 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 then identified.

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STEPS The following steps take place during the BB Optimization study: Development of several new bow designs (six – seven), 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.

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

DANAOS STUDIES During 2013, DAC conducted studies with Hamburg Ship Model Basin HSVA, for the following five container vessel sizes of: 4,650 TEU, 6,500 TEU, 8,100 TEU, 8,500 TEU, 9,200 TEU. In 2014 two more studies were performed on the same ship model basin for the following Danaos vessel sizes: 10,100 TEU and 13,100 TEU 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.

DANAOS CORPORATION

HYPERCUBE

HYPERCUBE methodology involves the comparison of data measured from the “service report” of the ship with the “expected values” of the various parameters, obtained via simulations, using a thermodynamic model adapted and calibrated for the specific shipboard engine.

The engine model is fed with ambient conditions and operation settings from the service report therefore producing reference data for the specific engine at the specific conditions (i.e. how it is expected to operate). Service actual data (observed) is then compared with the expected performance data.

If the variance does not exceed 3% for all the parameters the condition of the engine is considered to be satisfactory. Apart from the diagnostic mode, described above, the model can be used in a prognostic manner in order to predict how the engine would behave in hypothetical (“what-if”) scenarios. This usage pattern proves very useful in cases where the vessel’s main engine is operating in conditions outside the “standard” operating envelop, e.g., slow steaming.

The Hypercube model has been developed in cooperation with NTUA (National Technical University of Athens) for 3 engines/vessels of the Danaos fleet: a. 12K98MC-C (normal and cut-out mode) of CSCL Europe, b. 12RTflex-96c (normal and cut-out mode) of Hanjin Greece and c. 12K98ME-C (normal and cut-out mode) of Hyundai Speed.

HYPERCUBE DATA “EXPECTED”

COMPARE

SERVICE REPORT MEASURED DATA

PERFORMANCE EVALUATION

“OBSERVED”

Through the “Hypercube” model one may: Create reliable reference values for the engine’s exact operating conditions Check and verify the engine’s good operation Detect faulty operation and make diagnosis Check service reports (such as accuracy recording, instrumentation problems, human error) Examine “what-if” scenarios and predict the performance at off-design conditions Compute difficult to measure parameters (fuel consumption, CO2 emissions, etc.)

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ANNUAL ENVIRONMENTAL REPORT 2014

Ballast Water Treatment Systems In view of the anticipated enforcement of the IMO BWTS convention, which is expected to be ratified soon, the USCG final rule on the implementation of ballast water management systems and discharge standards based on the IMO Best Achievable Technology schedule, which will be effective for Danaos vessels after 1/1/2016 on their first scheduled drydocking, Danaos R&D department has carried out a thorough study in connection to BWTS technological and regulatory framework.

The study includes the following:

Regulatory developments (IMO, USCG, California, etc.)

Review of more than 20 IMO & AMS approved BWTS available in the market Review of BWTS Technologies applied (for example: electrolysis, electro chlorination, electro catalysis, ozonation, UV, deoxygenation, principle, characteristics, advantages and disadvantages of the systems as viewed from both technical and regulatory aspects, items for further consideration for each type of technology reviewed) Preliminary comparison of systems reviewed in terms of the various criteria set (capital

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cost, power requirements, pressure drop, footprint, opex etc.)

Factors of decisive importance when it comes to BWTS selection from a regulatory, technical and financial aspect Within the scope of the project, detailed technical questionnaires have been dispatched to involved BWTS makers and extended correspondence has been exchanged with all makers, classification societies and USCG authorities.

Phase I of the study has been completed as above. Phase II is under way.

BWTS is a project that requires continuous and close monitoring.

This is due to the fact that the progress in this field is ongoing both from a technological as well as a regulatory aspect.

DANAOS CORPORATION

LNG Using liquefied natural gas (LNG) as ship fuel for propulsion has gained attention. The reduction in sulphur oxide emissions, the lower carbon content of LNG compared with traditional fuels and the currently low price of LNG compared with MGO are three main drivers that make LNG as ship fuel to be considered as a promising new technology for shipping. As per LR “Global Marine Fuel Trends 2030� report, the space left by the declining share of HFO will be filled by low sulphur alternatives (MDO/MGO or LSHFO) and by LNG and this will happen differently for each ship type and scenario examined. According to the study, LNG will reach a maximum 11% share by 2030 in status quo.

As a part of our Innovation and Research program we have investigated the use of LNG in propulsion.

Within the scope of this study the following have been reviewed: Key LNG properties/characteristics Wartsila DF LP engine overview Man Diesel ME-GI HP engine overview Energy efficiency (LP vs HP) Emissions Methane slip Boil off gas handling LNG tanks alternatives Lubrication Comparative study & cost-benefit analysis for a 18,000 TEU container vessel LNG infrastructure prospects The comparative study for the 18,000 TEU container vessels has been conducted in cooperation with Wartsila.

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ANNUAL ENVIRONMENTAL REPORT 2014

ECA 2015 As of 1/1/2015, the permitted sulphur content of fuel in emission control areas was set to 0,1%. To assess the modifications that each vessel would be required to apply a thorough technical investigation was carried out in two phases. Phase 1 was completed in 2013 whilst phase 2 in 2014. During 2014 all necessary measures, including modifications in piping, tanks arrangement, transfer line, bunkering line for vessels to have sufficient capacity of “MGO ready” tanks in order to avoid frequent bunkerings and be able to satisfy their consumption needs inside ECAs, were undertaken. Modifications were made to all vessels calling ECAs as per project decision map.

Panama Canal expansion The Panama Canal Expansion is the largest project at the Canal since its original construction.

The project will create a new lane of traffic along the Canal through the construction of a new set of locks, doubling capacity and allowing more traffic.

The existing locks allow the passage of vessels that can carry up to 5,000 TEUs. After the expansion the Post-Panamax vessels will be able to transit through the Canal, with up to 13,000 TEUs. The Expansion will double the Canal’s capacity, having a direct impact on economies of scale and international maritime trade.

Compliance with the New vessel Requirements “OP Notice to Shipping No. N-1-2014 Revision 1” has been investigated for all Danaos vessels with carrying capacity over 6,500 TEU. Danaos has been engaged in discussions with the Panama Canal Authorities in order to identify potential modifications required so that PostPanamax vessels will be able to transit through the Canal after its expansion. With regard to the

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above, recording of the compliance status for each vessel and a calculation of the investment cost required for the modifications to take place is based on two scenarios being carried out (with and without bridge console shifting).

Following the study, a meeting between Danaos and the Panama Canal Authorities took place in Panama in order to further discuss and analyze the project results.

DANAOS CORPORATION

New Lashing Rules Classification societies, following in-depth studies on sailing conditions in various ocean regions, have adopted a new approach to container stowage rules in order to enable container lines to gain business flexibility and cost advantages through enhanced onboard stowage flexibility. The new rules consider lower acceleration values along all routes thus, providing higher loading flexibility to the operators.

Moreover, they have developed standard routes to be applied with vessel-specific calculations considering even lower acceleration values and therefore providing even higher loading flexibility.

Fifteen Danaos vessels have adopted all the required updates in CSM and the loading software and have been granted LC and RSCS notation by DNV-GL. Whereas for another seven vessels the updating process is in progress.

Inventory of Hazardous Materials Once the ship recycling convention enters into force, any ship that is greater than 500 gt will be required to maintain an Inventory of Hazardous Materials (IHM). This inventory identifies, locates and lists out all hazardous and potentially hazardous materials onboard a vessel.

Once the IHM has been reviewed by class, a Statement of Compliance (Green Passport) will be issued under the Hong Kong Convention. Danaos, as a part of its commitment to improve its environmental standards, has proceeded to the approval and verification of an Inventory of Hazardous Materials for 18 of its vessels. Relevant SoC (Statement of Compliance) have been issued by the corresponding Administrations.

ANNUAL ENVIRONMENTAL REPORT 2014

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DANAOS CORPORATION

A great challenge

arises for the whole shipping sector, as it is not only a matter of pursuing environmental sustainability by minimizing the environmental load, but also a whole new strategy, which takes into account many social and economic factors.

Businesses are attracted by opportunities to increase their profits and nowadays are obliged to combine them with sustainability policies.

We address our clients’ needs by being actively involved in their energy consumption optimization and eco-vessels operation campaigns / initiatives.

We share our clients’ sustainability targets and we strive to improve the level of our services by meeting their expectations and addressing the key issues of concern.

To this respect we are engaged in a continuous effort to improve our performance. This is verified through the investment in projects aimed at optimizing our energy efficiency and our control and monitoring tools. Examples of this are the rigorous systems of internal audits and inspections that we have established, the energy saving policy that we have adopted through the energy efficiency awareness training and SEEMP implementation onboard, the advanced internal reporting system, the consistent emissions monitoring process and our active and effective participation in our client’s energy audit schemes.

Danaos vessels have participated in several energy audits as per our charterers’ request with very satisfactory results.

We consider our clients major partners to this effort, with mutual beneficial results in mind, we work towards a sustainable future.

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ANNUAL ENVIRONMENTAL REPORT 2014

BCG Bunker Consumption Benchmarking Our improved performance is testified by our good results in BCG benchmarking, where Danaos scores the best performance in bunker consumption module from 9 participants, for two consecutive years (2012, 2013).

Results for 2013

Better performance1 %difference to overall average 2013

Non-operating owners

+20%

Liners

14%

Route and Size

+10%

6% 3%

0%

0%

0%

-1%

-2%

+15%

-4%

Danaos

-10%

-8%

13%

+10%

Only Size

+5%

2%

1%

1%

0%

0% -1%

-1%

-5%

-2%

-3%

Danaos

Results for 2012

Participant comparison of bunker consumption All segments Average consumption (tons/kTEU/kNm)-over ground

80 60 40

15.9 49.7

16.7

17.0

16.9

15.7

16.9

Avg. Speed (Nm/h)

16.9

17.2

16.6

-18% 44.5

41.3

39.7

39.5

37.9

33.7

32.6

-12%

39.9

36.9

20 0

Danaos Average Avg. steaming consumption

Avg. speed

Top quartile

Aveg. vessel size (TEU)1 <4.5k <4.5k 4.5k-5.5k <4.5k 4.5k-5.5k 5.5k-6.5k 5.5k-6.5k 4.875

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DANAOS CORPORATION

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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ANNUAL ENVIRONMENTAL REPORT 2014

Our Emissions Every year we calculate the emissions of our entire Fleet, aspiring to be fully 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 the 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.

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 is produced as per the below formula:

∑ ∑∑ FC ×C v

i

j

ijv

Fj

Where: 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:

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

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

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DANAOS CORPORATION

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

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:

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

Where: 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=

∑nj=1 (Ax,jxBx,j) ∑ni=1(Ax,j)

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

29

ANNUAL ENVIRONMENTAL REPORT 2014

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=

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

Where: 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.

30

DANAOS CORPORATION

Our Emission KPIs Summary The below emissions figures and efficiency factors correspond to the total of our operating Fleet during 2014 (these include those that were sold but exclude our two bareboat vessels).

As it can be seen from the above figures, Danaos environmental performance has been significantly improved within 2014.

31

ANNUAL ENVIRONMENTAL REPORT 2014

Our Bunkers

The below bar graph shows our bunkered quantities and quality data for the years 2012, 2013 and 2014 with regard to our operable fleet: The fuel quantity delivered in 2014, based on our bunker delivery notes, presents a negative trend compared with 2013. The above can be mainly attributed to the sale of 5 vessels by the end of the year and the further increased tendency for SSS, as the load-speed profile graphs below clearly indicate. Two new acquisitions were added to the fleet within the last quarter of 2014. The weighted average sulphur content remains at the same level as in 2013.

2,58%

1.250.000

2,56%

1.200.000

2,54%

1.150.000

2,52% 1.100.000 2,50% 1.050.000 2,48% 1.000.000

2,46%

950.000

2,44%

900.000

2,42% 2012

2013 Bunkers(MT)

2014

Weighted average Sulphur %

2011

2012 Engine Powe

2013

60

2779.91 MW

68

2936.81 MW

65

2864.77 MW

65

3000 MW 2950 MW 2900 MW 2850 MW 2800 MW 2750 MW 2700 MW 2650 MW 2600 MW 2550 MW 2500 MW

2864.77 MW

Engine Power (MW)

Fleet size & Total Engine Power (within year)

2014

80 70 60 50 40 30 20 10 0

Fleet size

Fleet size and engine power within each year (including vessels that were sold and the two Danaos Bareboats).

32

DANAOS CORPORATION

Danaos fleet size and engine power at the end of each year (excluding vessels that were sold), including the 2 Danaos Bareboats.

2011

2012 Engine Powe

2645.70 MW

56

59 2701.57 MW

2847.83 MW

64

65

2900 MW 2850 MW 2800 MW 2750 MW 2700 MW 2650 MW 2600 MW 2550 MW 2500 MW

2864.77 MW

Engine Power (MW)

Fleet size & Total Engine Power (end of year)

2013

2014

70 60 50 40 30 20 10 0

Fleet size

A break-down of the bunker quantities and the corresponding weighted average sulphur content for each grade is provided below.

HFO Bunkers Quantity

HFO Bunkers Sulphur Content

1,200,000

0

HFO -HS [tons] HFO -LS [tons]

2014 927,761 72,030

0,00%

HFO -HS [tons] HFO -LS [tons]

2,63%

2,59%

2012 2,70% 0,93%

2013 2,59% 0,92%

0,94%

0,50%

0,92%

1,00%

0,93%

2013 1,021,273 94,643

1,50% 72,030

2012 1,125,100 77,021

2,00%

2,70%

927,761 94,643

200,000

77,021

600,000 400,000

2,50%

1,021,273

800,000

1,125,100

1,000,000

3,00%

2014 2,63% 0,94%

High Sulphur HFO bunkered quantities, present a decreasing trend in the last three years, whilst Low Sulphur HFO quantities have decreased compared to 2013. The latter can be attributed to the increase in SSS tendency in 2014 as well as to the fact that vesselsâ&#x20AC;&#x2122; calls at North American ECAs have decreased during 2014.

ANNUAL ENVIRONMENTAL REPORT 2014

Regarding Diesel Oils used onboard, the figures show that EUDO bunkered quantity increased from 2013 to 2014.

The reason for the increase of EUDO bunkered quantity can be mainly attributed to the fact that since 1/1/2014, the MDO sulphur limit for operating in California waters was set at 0.10% for both DMA and DMB grades (as per CARB Marine Notice 2011-01). Given the above CARB MDO and EU MDO can be considered as the same type of MDO considering their sulphur content. In addition more than 5,000 MT of EU MDO were bunkered within November and December in order for the vessels to be ready to comply with the new SOx emission limit of 0.1% that was enforced on 1/1/2015 for operation within ECAs.

252

0

158 2013 9,372 4,124 158

17,567

4,124

2012 13,506 1,451 400

DO - Î&#x2022;U [tons] DO - CARB [tons] DO - HS [tons]

9,372

400

13,506

20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0

1,451

DO Bunkers Quantity

2014 17,567 0 252

DO - Î&#x2022;U [tons] DO - CARB [tons] DO - HS [tons]

34

2012 0,07% 0,47% 1,18%

2013 0,07% 0,31% 0,53%

0,46% 0,08% 0,00%

0,07% 0,31% 0,53%

0,47% 0,07%

1,40% 1,20% 1,00% 0,80% 0,60% 0,40% 0,20% 0,00%

1,18%

DO Bunkers Sulphur Content

2014 0,08% 0,00% 0,46%

DANAOS CORPORATION

UTILIZATION FROM 93.4% WITHIN 2013 TO 97.5% IN 2014

EEOI efficiency IMPROVEMENT OF TRANSPORT EFFICIENCY BY 6.3% COMPARED TO 2013

NOx efficiency

11.3 % IMPROVEMENT WITHIN 2014

SOx efficiency 6 % IMPROVEMENT

35

ANNUAL ENVIRONMENTAL REPORT 2014

Energy Efficiency Operational Index (EEOI)

19% CO2 efficiency improvement since 2012 Developed by the IMO as per MEPC.1 Circ.684, EEOI index calculates the amount of CO 2 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.

In advance of the United Nations Climate Conference in Lima (1-12 December), the global trade association for ship operators – the International Chamber of Shipping (ICS) – declared that the industry is on track to reduce its emissions by more than 20% by 2020 (compared to 2005) with further reductions going forward.

Danaos has achieved an improvement of on about 19% since 2012 in CO2 efficiency, mainly due to the consistent efforts in improving vessels energy efficiency and reducing fuel costs.

The above improvements have been driven by the results of a thorough technical research initiated in 2008, and have been realized within a controlled and structured framework without compromising vessels’ safety and utilization.

From the above figure it is evident that there is a decreasing tendency in EEOI average for 2014 compared to 2013. The above is mainly owed to the increase of transport work (ton-miles index) and the lower speeds adopted giving improved consumptions.

The below figures show that in some cases there are some deviations observed between sister 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).

36

DANAOS CORPORATION

31.36

DIMITRIS C

NILEDUTCH ZEBRA

19.14

25.30

30.51

FLEET 1

AMALIA C

DANAE C 2014

SNL COLOMBO

YMSINGAPORE 2012

2013

22.37 22.59 23.51

24.49 20.78 17.84

23.65 19.97 20.71

13.10

19.53

22.14

FLEET 3

YMSEATTLE 2014

YMVANCOYVER

CSCLPUSAN 2012

15.18

16.38 11.43

CSCLAMERICA

17.72 18.22

19.34 18.61 14.91

CSCLEUROPE

16.18 15.28 12.02

19.21 19.93 16.52

FLEET 4

2013

CSCLHAVRE 2014

PRIORITY

PERFORMANCE

2012

HANJIN HANJIN ALGEORAS VERSAILLES 2013 2014

24.04 26.10 26.15

HANJIN SANTOS

20.20 23.51 23.69

HANJIN BUENOS AIRES

24.64 20.41 25.20

22.81 21.59 23.44

HYUNDAI FEDERAL

23.19 23.08 23.26

20.40 19.51 20.78

FLEET 5

HANJIN COSTANTZA

37

ANNUAL ENVIRONMENTAL REPORT 2014

HYUNDAI FUTURE 2013

HYUNDAI HIGHWAY

2014

19.99 17.85 15.72

26.30

OOCL ISTANBUL 2012

OOCL NOVOROSSIYSK

ZIM LUANDA

17.67 16.49

20.21 16.71 15.57

25.12 ZIM SAO PAOLO

20.68 14.69 15.90

ZIM RIO GRANDE

15.58 14.61

20.53 17.18 15.28

FLEET 7

ZIM MONACO 2013

2014

13.15 10.47 11.62

12.91 10.98 11.61

CMACGMRABELAIS 2014

CMACGMRACINE

13.42 13.51 14.07

11.54 10.33 10.85

CMACGMMUSSET CMACGMNERVAL 2012 2013

14.18 13.28 14.00

CMACGMMOLIERE

12.92 11.65 12.07

18.19 13.64 13.68

FLEET 8

38

13.34 13.94 13.82

14.61 12.35 14.70

13.28 14.30 14.29

FLEET 9

CMACGMATTILA

CMACGMTANCREDI 2012

CMACGMBIANCA 2013

CMACGMSAMSON CMACGMMELISANDE 2014

32.01

HYUNDAI PROGRESS

22.32 18.25

25.81 20.03 19.09

HYUNDAI SPRINTER 2012

26.28 20.69 18.53

31.38

HYUNDAI STRIDE

20.39 19.16

HYUNDAI ADVANCE

28.67 22.77 22.51

23.38 22.33 19.93

HYUNDAI VLADIVOSTOK

27.21 23.08 23.82

33.03 26.09 19.18

FLEET 6

HYUNDAI BRIDGE

DANAOS CORPORATION

24.67 23.18 19.30

DEVA

DERBY D

11.24 14.10 12.23

25.05 24.83 22.11

HANJIN GERMANY

11.78 10.87 9.70

13.42 17.39 13.97

FLEET 10

HANJIN ITALY 2012

HANJIN GREECE 2013

2012

2014

11.73 10.99 11.99

12.39 10.41 9.91

12.28 10.36 10.09

HYUNDAI TOGETHER

HYUNDAI TENACITY

HYUNDAI SMART 2013

HYUNDAI SPEED 2014

12.10 10.31 10.00

11.27 10.06 10.08

FLEET 11

HYUNDAI AMBITION

DUKA

13.14

24.25 24.40 22.26

31.12 19.75

0.00

0.00

23.88

24.67 20.07 23.92

SCRAPPED 3

MARATHONAS 2012

MESSOLOGI 2013

MYTILINI

HYUNDAI COMMODORE

2014

EEOI for Danaos fleet (2012-2014) Evidently, in the majority of vessels the tendency for EEOI is decreasing.

The above is due to the increased SSS activity within 2014 for the majority of vessels and also the increase of transport work.

With regard to the CSCL vessels the speed reduction (average weighted more than 1.5 knot) enabled by the T/C cut-out, adopted on all four vessels within 2014, as well as the increase in ton-miles index resulted in the significant improvement of the transport efficiency of the vessels in question.

In the case of SNL Colombo, the rate of decrease in ton-miles index is much higher compared with the rate of decrease in the consumption index resulting in an increase of EEOI for 2014.

39

ANNUAL ENVIRONMENTAL REPORT 2014

Regarding HMM chartered 2,200 TEU vessels, the greatest improvement in EEOI is observed in the case of Hyundai Vladivostok, where the improvement in transport work (ton-miles increase by nearly 40% compared with 2013) is much more dominant compared with the rate of increase in consumption. In addition, the increase of SSS activity within 2014 for HMM chartered 2200 TEU vessels has resulted in significant improvement of their transport efficiency. An exception can be seen with Hyundai Stride and Hyundai Sprinter whose EEOI is almost at the same level with 2013 due to the significant decrease in ton-miles index (these two vessels have changed their route during 2014). The slight decrease in the ton-miles index for 2014 explains why Hyundai Tenacity presents a 2013

2014

Commodore

1

YM Vancouver

CSCL Europe

2

CSCL Europe

CSCL America

3

CSCL America

Federal

4

Federal

Deva

5

Deva

Derby D

6

Derby D

YM Vancouver

7

Hyundai Together

Hyundai Advance

8

Hyundai Tenacity

Hyundai Vla divostok

9

Hyundai Smart

10

Hyundai Speed

11

Hyundai Ambition

12

Hyundai Progress

13

Hyundai Advance

14

Hyundai Bridge

15

Hyundai Future

16

Hyundai Vladivostok

17

Hyundai Highway

18

Hyundai Stride

19

Hyundai Sprinter

The list of vessels enrolled in CO2 index project for 2013-2014

40

slightly increased CO2 index for 2014 compared with her sister vessels. Concerning the13100 teu vessels, despite the weighted average increase in their speed and draft profile, resulting in higher consumption, they present improved transport efficiency compared with 2013 due to the increase in their ton-miles index.

The increased percentage of operation of Hanjin Versailles and Hanjin Santos within critical draft areas in combination with the decrease in the ton-miles index resulted in an increase in EEOI for 2014. For the rest of the 3400 TEU vessels chartered to Hanjin, the EEOI for 2014 is at the same levels as in 2013.

In the case of 10100 TEU vessels, their transport efficiency has significantly improved within 2014.

For Hanjin Germany the reduced operation within critical draft areas for 2014 in combination with the slight increase in ton-miles index has resulted in improved transport efficiency.

In case of Hanjin Italy, reduction of the sailing time compared with the previous year combined with reduced weighted average speed resulted in a remarkable reduction in fuel consumption. The big reduction in ton*miles index was compensated by the big improvement in fuel consumption leading to an improved EEOI. Although consumption for Hanjin Greece was increased within 2014 due to vesselâ&#x20AC;&#x2122;s spending more time at sea compared with 2013 at a weighted average increased draft, the significant increase in ton-miles index resulted in a considerable improvement in vesselâ&#x20AC;&#x2122;s operational efficiency.

As far as Danaos 6500 TEU series and 8500 TEU series vessels are concerned, the increase in weighted average speed of all vessels (on average higher than 1 knot) in combination with the small increase in ton-miles index (which was not sufficient to compromise the increase in consumption) resulted in an almost steady or slightly increased EEOI. In the cases where a slight decrease in the ton-miles index is observed when compared with 2013 (CMA CGM Rabelais, CMACGM Racine and CMACGM Tancredi) the increase in CO2 index is somewhat higher.

DANAOS CORPORATION

We incorporated a calculation tool to measure EEOI through the vessels’ daily telegrams in our Danaos Enterprise software. This allows us to regularly monitor the fuel efficiency of all our ships. Since 2008, we have voluntarily enrolled 9 of our vessels in the DNV-GL “CO2 Index” project, monitoring their performance and CO2 emissions.

Within 2014, we have registered another 10 vessels of Danaos fleet in the project.

These vessels receive an annual certification of their participation from DNV-GL., through DNV-GL Auditors, who come to the Danaos Head Office to verify the validity of the data utilized to produce the CO2 index.

Danaos certified CO2 index by DNV-GL for years 2008-2014

ANNUAL ENVIRONMENTAL REPORT 2014

It is our mission to maximize the return to our Shareholders by providing a service of excellence to our customers by utilizing a safe, fuel efficient and environmentally friendly ocean going fleet.

DANAOS CORPORATION

Our Operational Profile (2014 vs 2013) Weighted average Engine Load Profile for Danaos fleet for 2013-2014

When viewing the above figures, one can clearly see a trend being set by the Danaos Fleet. Main Engine weighted average load and vesselsâ&#x20AC;&#x2122; weighted average speed were reduced even more within 2014. T/C cut-out has been applied in seven more vessels within 2014 (CSCL Europe, CSCL America, CSCL Pusan, CSCL Le Havre, YM Vancouver, Dimitris C and Niledutch Palanca), increasing the percentage of Danaos vessels equipped with T/C cut-out to 89% excluding the bareboats.

Engine Load Profile 2013

Weighted average Engine Load Profile

Engine Load Profile 2014

50% 45,9%

45% 40%

38,8%

35%

31,9%

30%

30,1% 25,2%

25%

20,8%

20% 15% 10% 5% 0%

3,8%

2,8% 0,3% 0,4%

0-25% USS

25%-35% SS

35%-55% Mid

55%-75% Normal

55%-100% High

Weighted average Speed Profile for Danaos fleet for 2013-2014 Speed Profile 2013

Weighted average Speed Profile

Speed Profile 2014

50% 45% 42,2% 41,3%

40% 35% 30%

29,0%

25%

26,0%

24,9% 29,1%

20% 15% 10% 5%

2,5% 1,8%

1,4% 1,7%

0%

0-8 Kn

8-13 Kn

13-17 Kn

17-21 Kn

>21 Kn

43

ANNUAL ENVIRONMENTAL REPORT 2014

Environmental Ship Index (ESI) Danaos Corporation has been enrolled on a voluntary basis in the Environmental Ship Index (ESI) system, which is developed by World Port Climate Initiative (WPCI) (http://www.wpci.nl).

So far, 26 of our vessels have been officially enrolled in WPCI ESI database, either by our charterers or directly by us. However, we have calculated ESI for all our Fleet vessels built after 2000 (having NOx technical file) as it an extra tool for evaluating our vesselâ&#x20AC;&#x2122;s environmental performance and an instrument for contributing to our clientsâ&#x20AC;&#x2122; sustainability policy. Below you can find the relevant graph:

Danaos fleet ESI score basis WPCI web site and Danaos calculations for years 2013-2014

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 with regard to 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.

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 granted as a reward a discount in port dues in more than 20 major ports worldwide. Vessels calling at EU ports and California are and therefore burning MGO are

44

highly rewarded, gaining high scores. Contrary to the above, the vessels calling at non-ECA areas, for example Asia which is not likely to have vessels calling at non-ECA areas, are not likely to achieve a high score.

The differences observed in some cases between Danaos calculated ESI values and the ones in the WPCI web site are due to the different period in which the calculations took place. The yellow marked ESI refer to the 26 vessels subscribed in the WPCI and their score in accordance with the WPCI web site and depending on the vessel are valid for the period mentioned in the below table.

The ESI scores calculated for a total of 44 vessels (equipped with a NOx technical file) have been calculated by the Danaos R&D department

DANAOS CORPORATION

for both 2013 and 2014 based on the data available for the corresponding years (from 1/1-31/12) and are depicted in the graph above.

Hyundai Tenacity has the highest ESI score amongst the Danaos registered vessels as per WPCI website: 44.1.

Vesselâ&#x20AC;&#x2122;s enrolled in ESI program 2012 YM Vancouver CSCL Europe Deva Derby D Hanjin Germany Hanjin Italy Hanjin Greece Hyundai Together Hyundai Tenacity Hyundai Smart Hyundai Speed Hyundai Ambition

2013 YM Vancouver CSCL Europe Deva Derby D Hanjin Germany Hanjin Italy Hanjin Greece Hyundai Together Hyundai Tenacity Hyundai Smart Hyundai Speed Hyundai Ambition Hanjin Buenos Aires Hanjin Santos Hanjin Versailles Hanjin Constantza Hanjin Algeciras Zim Rion Grande Zim Monaco Zim Luanda CMA CGM Attila CMA CGM Tancredi CMA CGM Bianca CMA CGM Samson CMA CGM Melisande

2014 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38

YM Vancouver CSCL Europe Deva Derby D Hanjin Germany Hanjin Italy Hanjin Greece Hyundai Together Hyundai Tenacity Hyundai Smart Hyundai Speed Hyundai Ambition Hanjin Buenos Aires Hanjin Santos Hanjin Versailles Hanjin Constantza Hanjin Algeciras Zim Rion Grande Zim Monaco Zim Luanda CMA CGM Attila CMA CGM Tancredi CMA CGM Bianca CMA CGM Samson CMA CGM Melisande Hyundai Progress Hyundai Advance Hyundai Bridge Hyundai Future Hyundai Vladivostok Hyundai Highway Hyundai Stride Hyundai Sprinter CMA CGM Moliere CMA CGM Musset CMA CGM Nerval CMA CGM Rabelais CMA CGM Racine

Score Validity 01/10/2014 - 31/03/2015 01/01/2015 - 30/06/2015 01/10/2014 - 31/03/2015 01/01/2015 - 30/06/2015 01/01/2015 - 30/06/2015 01/01/2015 - 30/06/2015 01/01/2015 - 30/06/2015 01/01/2015 - 30/06/2015 01/01/2015 - 30/06/2015 01/01/2015 - 30/06/2015 01/01/2015 - 30/06/2015 01/01/2015 - 30/06/2015 01/01/2015 - 30/06/2015 01/01/2015 - 30/06/2015 01/01/2015 - 30/06/2015 01/01/2015 - 30/06/2015 01/01/2015 - 30/06/2015 01/10/2014 - 31/03/2015 01/10/2014 - 31/03/2015 01/10/2014 - 31/03/2015 01/01/2015 - 30/06/2015 01/01/2015 - 30/06/2015 01/01/2015 - 30/06/2015 01/01/2015 - 30/06/2015 01/01/2015 - 30/06/2015 01/10/2014 - 31/03/2015 01/10/2014 - 31/03/2015 01/10/2014 - 31/03/2015 01/10/2014 - 31/03/2015 01/10/2014 - 31/03/2015 01/10/2014 - 31/03/2015 01/10/2014 - 31/03/2015 01/10/2014 - 31/03/2015 01/10/2014 - 31/03/2015 01/10/2014 - 31/03/2015 01/10/2014 - 31/03/2015 01/10/2014 - 31/03/2015 01/10/2014 - 31/03/2015

ANNUAL ENVIRONMENTAL REPORT 2014

HYUNDAI TENACITY

HUNDAI TENACITY

ESI Score NOx: 23.30 SOx: 45.06 CO2: 10 OPS: 35 Total: 44.1

46

DANAOS CORPORATION

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.

Although the EEDI refers only to the new buildings, the EEDI has been calculated for all our existing vessels as a tool to estimate their

design efficiency and marketing value. Only 1 series of vessels (which are built in the 90â&#x20AC;&#x2122;s) are above phase 0 limit (using HFO as fuel for the calculations).

EEDI values for all Danaos vessels and relevant limits for the different phases are shown in the below diagram including the new acquired vessels Performance/Priority.

Some general remarks based on the above figures: 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)

Attained EEDI vs Phases

PASS NOT PASS

60

1 50

30

40

30

47

55

55 20

26

10

9 0

1

Phase 0

Phase 1

Phase 2

Phase 3

1/1/2013 - 31/12/2014

1/1/2015 - 31/12/2019

1/1/2020 - 31/12/2024

1/1/2025 - end of time

47

ANNUAL ENVIRONMENTAL REPORT 2014

DANAOS CORPORATION

D A N A O S

DANAOS CORPORATION

C O R P O R A T I O N

ANNUAL ENVIRONMENTAL REPORT 2014

2 0 1 4

World-Class Shipping, Leading-Edge Expertise

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

REMDesign

R E P O R T

DANAOS CORPORATION R&D Dept.

14, Akti Kondyli, 185 45, Piraeus, Greece

Email : Telephone : Fax : Website :

RnD@danaos.com +30 210 41 96 500 +30 210 42 20 855 http://www.danaos.com

World-Class Shipping, Leading-Edge Expertise