FS Specialty Lending Fund 10Q 2020 Q1 Quarterly report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 814-00841

FS Energy and Power Fund

(Exact name of registrant as specified in its charter)

	Delaware			27-6822130
	(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
	201 Rouse Boulevard Philadelphia, Pennsylvania (Address of principal executive office)			19112 (Zip Code)

Registrant’s telephone number, including area code: (215) 495-1150

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☒

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected to not use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒.

Securities registered pursuant to Section 12(b) Act: None

	Title of each class			Trading symbol(s)			Name on each exchange on which registered
	N/A			N/A			N/A

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. The issuer had 436,755,981 common shares of beneficial interest outstanding as of May 13, 2020.

TABLE OF CONTENTS

	Page
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS		1
Consolidated Balance Sheets as of March 31, 2020 (Unaudited) and December 31, 2019		1
Unaudited Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019		2
Unaudited Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2020 and 2019		3
Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019		4
Consolidated Schedules of Investments as of March 31, 2020 (Unaudited) and December 31, 2019		5
Notes to Unaudited Consolidated Financial Statements		18
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		45
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		61
ITEM 4. CONTROLS AND PROCEDURES		62
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS		63
ITEM 1A. RISK FACTORS		63
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		65
ITEM 3. DEFAULTS UPON SENIOR SECURITIES		65
ITEM 4. MINE SAFETY DISCLOSURES		65
ITEM 5. OTHER INFORMATION		65
ITEM 6. EXHIBITS		66
SIGNATURES		73

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PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements.

FS Energy and Power Fund

Consolidated Balance Sheets
(in thousands, except share and per share amounts)

	March 31, 2020 (Unaudited)			December 31, 2019
Assets
Investments, at fair value
Non-controlled/unaffiliated investments (amortized cost—$2,945,272 and $3,399,611, respectively)		$	2,087,605		$	3,108,039
Non-controlled/affiliated investments (amortized cost—$909,778 and $698,631, respectively)			400,835			374,598
Controlled/affiliated investments (amortized cost—$87,728 and $27,464, respectively)			52,581			—
Total investments, at fair value (amortized cost—$3,942,778 and $4,125,706, respectively)			2,541,021			3,482,637
Cash			274,835			149,752
Restricted cash			—			667
Receivable for investments sold and repaid			77,460			729
Swap income receivable			—			395
Unrealized appreciation on swap contracts			—			6,831
Interest receivable			35,340			33,507
Prepaid expenses and other assets			170			266
Total assets		$	2,928,826		$	3,674,784
Liabilities
Payable for investments purchased		$	926		$	28,518
Credit facilities payable (net of deferred financing costs of $5,868 and $6,370, respectively)(1)			835,799			730,297
Secured note payable (net of deferred financing costs of $6,956 and $7,344, respectively)(1)			486,206			485,313
Shareholder distributions payable			5,275			10,240
Management fees payable(2)			16,959			15,582
Administrative services expense payable			658			507
Interest payable			10,421			16,567
Unrealized depreciation on swap contracts			—			280
Trustees’ fees payable			199			192
Other accrued expenses and liabilities			4,259			7,683
Total liabilities			1,360,702			1,295,179
Commitments and contingencies ($12,742 and $28,104, respectively)(3)
Shareholders’ equity
Preferred shares, $0.001 par value, 50,000,000 shares authorized, none issued and outstanding			—			—
Common shares, $0.001 par value, 700,000,000 shares authorized, 436,755,981 and 438,477,007 shares issued and outstanding, respectively			437			438
Capital in excess of par value			3,599,140			3,610,533
Accumulated earnings (deficit)			(2,031,453)			(1,231,366)
Total shareholders’ equity			1,568,124			2,379,605
Total liabilities and shareholders’ equity		$	2,928,826		$	3,674,784
Net asset value per common share at period end		$	3.59		$	5.43

(1)

See Note 9 for a discussion of the Company’s financing arrangements.

(2)

See Note 4 for a discussion of the Company’s management fees.

(3)

See Note 10 for a discussion of the Company’s commitments and contingencies.

See notes to unaudited consolidated financial statements.

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FS Energy and Power Fund

Unaudited Consolidated Statements of Operations
(in thousands, except share and per share amounts)

	Three Months Ended March 31,
	2020			2019
Investment income
From non-controlled/unaffiliated investments:
Interest income		$	59,285		$	77,859
Paid-in-kind interest income			4,167			1,891
Fee income			275			1,513
Dividend income			66			—
From non-controlled/affiliated investments:
Interest income			11,956			6,786
Paid-in-kind interest income			3,032			364
Total investment income			78,781			88,413
Operating expenses
Management fees			15,849			17,048
Administrative services expenses			1,058			793
Share transfer agent fees			650			693
Accounting and administrative fees			251			272
Interest expense(1)			21,056			21,739
Trustees’ fees			199			188
Other general and administrative expenses			1,530			901
Total operating expenses			40,593			41,634
Less: Management fee offset(2)			(450)			(200)
Net expenses			40,143			41,434
Net investment income			38,638			46,979
Realized and unrealized gain/loss
Net realized gain (loss) on investments:
Non-controlled/unaffiliated			(57,503)			(3,312)
Non-controlled/affiliated			—			38
Net realized gain (loss) on swap contracts			20,250			1,531
Net change in unrealized appreciation (depreciation) on investments:
Non-controlled/unaffiliated			(566,095)			59,626
Non-controlled/affiliated			(184,910)			15,298
Controlled/affiliated			(7,683)			—
Net change in unrealized appreciation (depreciation) on swap contracts			(6,551)			(12,306)
Net change in unrealized gain (loss) on foreign currency			(26)			1
Total net realized and unrealized gain (loss)			(802,518)			60,876
Net increase (decrease) in net assets resulting from operations		$	(763,880)		$	107,855
Per share information—basic and diluted
Net increase (decrease) in net assets resulting from operations (Earnings per Share)		$	(1.75)		$	0.25
Weighted average shares outstanding			435,458,944			437,647,716

(1)

See Note 9 for a discussion of the Company’s financing arrangements.

(2)

See Note 4 for a discussion of the offset by FS/EIG Advisor, LLC, the Company’s investment adviser, of certain management fees to which it was otherwise entitled during the applicable period.

See notes to unaudited consolidated financial statements.

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FS Energy and Power Fund

Unaudited Consolidated Statements of Changes in Net Assets
(in thousands)

	Three Months Ended March 31,
	2020			2019
Operations
Net investment income		$	38,638		$	46,979
Net realized gain (loss) on investments, swap contracts and foreign currency			(37,253)			(1,743)
Net change in unrealized appreciation (depreciation) on investments			(758,688)			74,924
Net change in unrealized appreciation (depreciation) on swap contracts			(6,551)			(12,306)
Net change in unrealized gain (loss) on foreign currency			(26)			1
Net increase (decrease) in net assets resulting from operations			(763,880)			107,855
Shareholder distributions(1)
Distributions to shareholders			(36,207)			(54,616)
Net decrease in net assets resulting from shareholder distributions			(36,207)			(54,616)
Capital share transactions(2)
Reinvestment of shareholder distributions			15,429			26,953
Repurchases of common shares			(26,823)			(30,450)
Net increase (decrease) in net assets resulting from capital share transactions			(11,394)			(3,497)
Total increase (decrease) in net assets			(811,481)			49,742
Net assets at beginning of period			2,379,605			2,648,186
Net assets at end of period		$	1,568,124		$	2,697,928

(1)

See Note 5 for a discussion of the sources of distributions paid by the Company.

(2)

See Note 3 for a discussion of the Company’s common share transactions.

See notes to unaudited consolidated financial statements.

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FS Energy and Power Fund

Unaudited Consolidated Statements of Cash Flows
(in thousands)

	Three Months Ended March 31,
	2020			2019
Cash flows from operating activities
Net increase (decrease) in net assets resulting from operations		$	(763,880)		$	107,855
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchases of investments			(208,432)			(264,593)
Paid-in-kind interest			(7,199)			(2,255)
Proceeds from sales and repayments of investments			352,174			351,405
Net realized (gain) loss on investments			57,503			3,274
Net change in unrealized (appreciation) depreciation on investments			758,688			(74,924)
Net change in unrealized (appreciation) depreciation on swap contracts			6,551			12,306
Accretion of discount			(11,118)			(4,904)
Amortization of deferred financing costs and discount			1,532			1,536
(Increase) decrease in receivable for investments sold and repaid			(76,731)			12,339
(Increase) decrease in interest receivable			(1,833)			(8,570)
(Increase) decrease in swap income receivable			395			382
(Increase) decrease in prepaid expenses and other assets			96			2,369
Increase (decrease) in payable for investments purchased			(27,592)			(68,013)
Increase (decrease) in management fees payable			1,377			2,081
Increase (decrease) in administrative services expense payable			151			(85)
Increase (decrease) in swap income payable			—			(141)
Increase (decrease) in interest payable(1)			(6,146)			(9,336)
Increase (decrease) in trustees’ fees payable			7			5
Increase (decrease) in other accrued expenses and liabilities			(3,424)			70
Net cash provided by (used in) operating activities			72,119			60,801
Cash flows from financing activities
Repurchases of common shares			(26,823)			(30,450)
Shareholder distributions paid			(25,743)			(27,393)
Borrowings under credit facilities(1)			160,000			150,000
Repayments of credit facilities(1)			(55,000)			(150,000)
Deferred financing costs paid			(137)			(562)
Net cash provided by (used in) financing activities			52,297			(58,405)
Total increase (decrease) in cash			124,416			2,396
Cash at beginning of period			150,419			98,506
Cash at end of period		$	274,835		$	100,902
Supplemental disclosure
Reinvestment of shareholder distributions		$	15,429		$	26,953
Non-cash purchase of investments		$	—		$	(37)
Non-cash sales of investments		$	—		$	37

(1)

See Note 9 for a discussion of the Company’s financing arrangements. During the three months ended March 31, 2020 and 2019, the Company paid $25,670 and $29,539, respectively, in interest expense on the financing arrangements and Senior Secured Notes.

See notes to unaudited consolidated financial statements.

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FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments
As of March 31, 2020
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Senior Secured Loans—First Lien—47.1%
AIRRO (Mauritius) Holdings II	(k)(p)(w)	Power	L+695		1.5%	7/24/25		$	19,360		$	16,708		$	14,836
AIRRO (Mauritius) Holdings II	(e)(k)(p)(w)	Power	L+695		1.5%	7/24/25			16,039			16,039			12,291
Allied Wireline Services, LLC	(w)	Service & Equipment	L+950		1.5%	6/30/20			102,718			102,669			59,833
ARB Midstream Operating Company, LLC	(w)	Midstream	L+725		1.0%	11/6/21			3,102			3,094			2,852
Bellatrix Exploration Ltd.	(k)(w)	Upstream	10.0%			5/29/20			2,251			2,251			2,251
Bellatrix Exploration Ltd.	(e)(k)(w)	Upstream	10.0%			5/29/20			3,377			3,377			3,377
Bioenergy Infrastructure Holdings Limited	(k)(w)	Power	L+725		1.0%	12/22/22			885			881			872
Bioenergy Infrastructure Holdings Limited	(e)(k)(w)	Power	L+725		1.0%	12/22/22			543			543			535
Bioenergy Infrastructure Holdings Limited	(e)(k)(w)	Power	L+725		1.0%	12/22/22			544			544			536
Birch Permian LLC	(h)(w)	Upstream	L+800		1.5%	4/12/23			49,865			49,531			47,750
BL Sand Hills Unit, L.P.	(m)(o)(w)(x)(y)	Upstream	Prime+650		3.5%	12/17/21			19,200			16,674			288
Brazos Delaware II LLC	(h)	Midstream	L+400			5/21/25			63,494			60,315			33,493
Cimarron Energy Inc.	(w)(x)	Service & Equipment	10.0%			6/30/21			7,500			7,500			6,900
Cox Oil Offshore, LLC, Volumetric Production Payments	(i)(v)(w)(x)	Upstream	0.0%			12/31/23			100,000			55,452			32,285
CPV Shore Holdings LLC		Power	L+375			12/29/25			1,076			1,066			949
Edgewater Generation LLC		Power	L+375			12/13/25			7,117			6,921			5,863
EIF Van Hook Holdings, LLC	(h)	Midstream	L+525			9/5/24			34,295			33,551			24,864
FR BR Holdings LLC	(h)(w)	Midstream	L+650			12/14/23			88,774			84,466			80,518
LMBE-MC Holdco II LLC		Power	L+400		1.0%	12/3/25			1,701			1,682			1,488
Lower Cadence Holdings LLC	(h)	Midstream	L+400			5/22/26			9,937			9,355			6,062
Lucid Energy Group, LLC		Midstream	L+300		1.0%	2/17/25			8,478			7,653			4,910
Lusk Operating LLC	(m)(o)(w)(x)(z)	Upstream	Prime+500 PIK (8.8% Max PIK)		3.3%	4/30/20			29,297			27,464			—
Luxe Drillship Operating, LLC	(w)	Upstream	8.0%			10/30/24			18,571			17,770			14,200
Luxe Drillship Operating, LLC	(e)(w)	Upstream	8.0%			10/30/24			31,429			31,429			24,030
MB Precision Holdings LLC	(f)(w)(x)(y)	Industrials	L+725, 2.3% PIK (2.3% Max PIK)		1.3%	7/23/22			4,610			4,522			4,477
MECO IV LLC	(h)(w)	Upstream	L+725		1.5%	9/14/21			35,000			34,869			32,935
MRP CalPeak Holdings, LLC	(h)(w)	Power	L+525		1.5%	1/27/25			8,333			8,333			8,125
MRP CalPeak Holdings, LLC	(e)(w)	Power	L+525		1.5%	1/27/25			6,667			6,667			6,500
MRP West Power Holdings II, LLC	(h)(w)	Power	L+525		1.5%	1/27/25			8,333			8,333			8,125
MRP West Power Holdings II, LLC	(e)(w)	Power	L+525		1.5%	1/27/25			6,667			6,667			6,500
Navitas Midstream Midland Basin LLC	(h)	Midstream	L+450		1.0%	12/13/24			77,697			76,661			46,521
Navitas Midstream Midland Basin LLC (Mirror Tranche)		Midstream	L+450		1.0%	12/13/24			39,700			38,112			23,770
NNE Holding LLC	(h)(w)	Upstream	L+800			3/2/22			40,000			39,944			37,316
Panda Hummel Station LLC	(h)	Power	L+600		1.0%	10/27/22			18,165			17,863			14,396
Panda Stonewall LLC	(h)	Power	L+550		1.0%	11/13/21			33,346			32,913			24,771
Panda Stonewall LLC	(h)	Power	L+550		1.0%	11/13/21			21,317			20,821			15,835
Permian Production Partners LLC	(m)(o)(w)(x)	Upstream	L+600		1.0%	5/18/24			44,498			43,184			13,897
Plainfield Renewable Energy Holdings LLC	(w)	Power	10.0%			8/22/25			2,855			2,855			1,934
Plainfield Renewable Energy Holdings LLC, Letter of Credit	(e)(w)	Power	10.0%			8/22/23			2,709			2,709			1,508
Plainfield Renewable Energy Holdings LLC	(w)	Power	15.5%			8/22/25			10,397			10,397			10,467
Prairie ECI Acquiror LP		Midstream	L+475			3/11/26			5,242			5,127			2,790
Swift Worldwide Resources US Holdings Corp.	(h)(w)	Service & Equipment	9.5%, L+150 PIK (L+150 Max PIK)		2.5%	7/20/21			60,280			60,280			59,903

See notes to unaudited consolidated financial statements.

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FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of March 31, 2020
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor			Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Traverse Midstream Partners LLC	(h)	Midstream	L+400		1.0%		9/27/24		$	60,121		$	60,129		$	34,479
Ultra Resources, Inc.		Upstream	L+375, 0.25% PIK (0.25% Max PIK)		1.0%		4/12/24			67,235			57,335			32,889
Warren Resources, Inc.	(f)(h)(w)(y)	Upstream	L+1000, 0.0% PIK (1.0% Max PIK)		1.0%		5/22/20			27,577			27,577			25,060
Waterbridge Operating LLC	(f)(h)	Midstream	L+575		1.0%		6/22/26			22,880			22,354			13,270
Total Senior Secured Loans—First Lien													1,144,587			806,451
Unfunded Loan Commitments													(67,975)			(67,975)
Net Senior Secured Loans—First Lien													1,076,612			738,476
Senior Secured Loans—Second Lien—26.1%
Aethon III BR LLC	(w)	Upstream	L+675		1.0%		1/10/25			10,000			9,873			9,669
Aethon United BR LP	(h)(w)	Upstream	L+675		1.0%		9/8/23			148,150			146,669			142,313
Arena Energy, LP	(m)(o)(w)	Upstream	L+900, 4.0% PIK (4.0% Max PIK)		1.0%		1/24/21			117,911			116,730			77,932
Bellatrix Exploration Ltd.	(k)(m)(o)(w)	Upstream	8.5%				9/11/23			22,511			22,511			17,707
Bellatrix Exploration Ltd.	(k)(m)(o)(w)(x)	Upstream	8.5%				9/11/23			54,108			49,379			—
Chisholm Oil and Gas Operating, LLC	(m)(o)(w)	Upstream	L+550, 3.0% PIK (3.0% Max PIK)		1.3%		3/21/24			199,000			196,000			75,108
Chisholm Energy Holdings, LLC	(w)	Upstream	L+625		1.5%		5/15/26			21,429			21,236			20,147
Chisholm Energy Holdings, LLC	(e)(w)	Upstream	L+625		1.5%		5/15/26			8,571			8,571			8,059
Encino Acquisition Partners Holdings LLC		Upstream	L+675		1.0%		10/29/25			41,828			35,488			18,127
Peak Exploration & Production, LLC	(w)	Upstream	L+675		1.5%		11/16/23			13,545			13,487			13,078
Peak Exploration & Production, LLC	(e)(w)	Upstream	L+675		1.5%		11/16/23			1,505			1,505			1,453
Penn Virginia Holdings Corp.	(h)(k)(w)	Upstream	L+700		1.0%		9/29/22			20,000			20,000			16,400
Rosehill Operating Company, LLC	(w)	Upstream	10.0%				1/31/23			1,667			1,655			1,667
SilverBow Resources, Inc.	(h)(k)(w)	Upstream	L+750		1.0%		12/15/24			19,000			18,858			17,712
Titan Energy Operating, LLC	(m)(o)(w)(x)(y)	Upstream	L+900		1.0%		2/23/20			137,233			100,902			—
Total Senior Secured Loans—Second Lien													762,864			419,372
Unfunded Loan Commitments													(10,076)			(10,076)
Net Senior Secured Loans—Second Lien													752,788			409,296
Senior Secured Bonds—26.1%
Black Swan Energy Ltd.	(h)(k)(w)	Upstream	9.0%				1/20/24			90,000			90,000			71,100
Denbury Resources Inc.	(k)	Upstream	7.5%				2/15/24			12,000			11,995			1,742
Denbury Resources Inc.	(k)	Upstream	9.3%				3/31/22			42,341			42,150			10,519
FourPoint Energy, LLC	(h)(w)(y)	Upstream	9.0%			��	12/31/21			235,125			232,276			188,100
Limetree Bay Ventures, LLC	(w)(y)	Midstream	20.0% PIK (20.0% Max PIK)				1/4/21			22,838			22,838			34,394
Velvet Energy Ltd.	(h)(k)(w)	Upstream	9.0%				10/5/23			120,000			120,000			102,743
Total Senior Secured Bonds													519,259			408,598
Unsecured Debt—14.4%
Ferrellgas, L.P.		Midstream	6.8%				1/15/22			5,000			4,372			4,317
Global Jet Capital Holdings, LP	(w)(x)	Industrials	15.0% PIK (15.0% Max PIK)				1/30/25			1,188			1,093			1,016
Global Jet Capital Holdings, LP	(w)(x)	Industrials	15.0% PIK (15.0% Max PIK)				4/30/25			7,551			6,945			6,456
Global Jet Capital Holdings, LP	(w)(x)	Industrials	15.0% PIK (15.0% Max PIK)				9/3/25			1,560			1,435			1,334
Global Jet Capital Holdings, LP	(w)(x)	Industrials	15.0% PIK (15.0% Max PIK)				9/29/25			1,469			1,351			1,256
Global Jet Capital Holdings, LP	(w)(x)	Industrials	15.0% PIK (15.0% Max PIK)				12/2/26			1,292			1,188			1,105
Great Western Petroleum, LLC	(w)	Upstream	8.5%				4/15/25			13,636			13,123			10,901
Great Western Petroleum, LLC		Upstream	9.0%				9/30/21			35,830			35,780			23,243
Hammerhead Resources Inc.	(k)(w)	Upstream	9.0%				7/10/22			100,000			98,430			81,750

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of March 31, 2020
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Limetree Bay Ventures, LLC	(w)(y)	Midstream	15.0% PIK (15.0% Max PIK)			3/3/21		$	34,711		$	34,711		$	35,693
Limetree Bay Ventures, LLC	(w)(y)	Midstream	20.0% PIK (20.0% Max PIK)			2/1/21			8,838			8,838			10,913
Lonestar Resources America Inc.		Upstream	11.3%			1/1/23			32,500			33,246			7,556
Moss Creek Resources, LLC	(x)	Upstream	7.5%			1/15/26			42,693			40,530			12,746
Tenrgys, LLC	(m)(n)(o)(w)(x)	Upstream	L+900		2.5%	12/23/18			75,000			75,000			26,500
Whiting Petroleum Corp.	(k)	Upstream	5.8%			3/15/21			5,395			5,240			399
Total Unsecured Debt												361,282			225,185
							Number of Shares			Amortized Cost			Fair Value(d)
Preferred Equity—40.2%(l)
Abaco Energy Technologies LLC, Preferred Equity	(o)(w)(x)	Service & Equipment							28,942,003			1,447			6,715
Altus Midstream LP, Series A Preferred Units	(h)(j)(w)(x)	Midstream	11.0%			6/28/26			51,946			53,614			48,700
Global Jet Capital Holdings, LP, Preferred Equity	(o)(w)(x)	Industrials							27,856			2,786			—
Great Western Petroleum, LLC, Preferred Equity	(n)(w)(x)	Upstream	15.5%			12/31/27			36,364			43,168			35,924
Limetree Bay Ventures, LLC, Preferred Equity	(m)(o)(w)(x)(y)	Midstream	13.5%			11/27/23			86,739,816			87,027			60,761
Limetree Bay Ventures, LLC, Preferred Equity	(m)(o)(w)(x)(y)	Midstream	13.5%			11/27/23			54,119,947			53,548			—
MB Precision Investment Holdings LLC, Class A Preferred Units	(n)(o)(w)(x)(y)	Industrials							8,952,623			1,880			1,189
NGL Energy Partners, LP, Preferred Equity	(h)(k)(w)(x)	Midstream	14.2%			7/2/27			156,250			159,506			149,048
NuStar, Preferred Equity	(h)(k)(w)(x)	Midstream	12.8%			6/29/28			5,910,165			152,322			165,189
Rosehill Resources, Inc. Preferred Equity	(o)(w)(x)	Upstream							2,536			2,511			761
Segreto Power Holdings, LLC, Preferred Equity	(h)(w)(x)(aa)	Power	13.1%			5/8/25			70,297			85,749			80,476
TE Holdings, LLC, Preferred Equity	(o)(x)	Upstream							1,475,531			14,734			—
USA Compression Partners, LP, Preferred Equity	(h)(k)(w)(x)	Midstream	9.8%			4/3/28			79,336			77,488			81,620
Total Preferred Equity												735,780			630,383
							Principal Amount(c)			Amortized Cost			Fair Value(d)
Sustainable Infrastructure Investments, LLC—3.4%
Sustainable Infrastructure Investments, LLC	(k)(w)(z)	Power	��					$	60,264			60,264			52,581
Total Sustainable Infrastructure Investments, LLC												60,264			52,581

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of March 31, 2020
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Number of Shares		Amortized Cost			Fair Value(d)
Equity/Other—4.9%(l)
Abaco Energy Technologies LLC, Common Equity	(o)(w)(x)	Service & Equipment		6,944,444		$	6,944		$	1,191
AIRRO (Mauritius) Holdings II, Warrants	(k)(o)(p)(w)(x)	Power		35			2,652			2,058
Allied Downhole Technologies, LLC, Common Equity	(n)(o)(w)(x)	Service & Equipment		7,431,113			7,223			—
Allied Downhole Technologies, LLC, Warrants	(n)(o)(w)(x)	Service & Equipment		5,344,680			1,865			—
Ascent Resources Utica Holdings, LLC, Common Equity	(o)(q)(w)(x)	Upstream		148,692,908			44,700			29,962
Bellatrix Exploration Ltd., Warrants	(k)(o)(w)(x)	Upstream		1,533,197			—			—
BL Sand Hills Unit, L.P., Net Profits Interest	(o)(s)(w)(x)(y)	Upstream		N/A			5,180			—
BL Sand Hills Unit, L.P., Overriding Royalty Interest	(o)(s)(w)(x)(y)	Upstream		N/A			740			—
BL Sand Hills Unit, L.P., Series A Units	(g)(o)(w)(x)(y)	Upstream		29,117			24,019			—
Chisholm Oil and Gas, LLC, Series A Units	(g)(o)(w)(x)	Upstream		14,700,000			14,700			—
Cimarron Energy Holdco Inc., Common Equity	(o)(w)(x)	Service & Equipment		4,302,293			3,950			183
Cimarron Energy Holdco Inc., Participation Option	(o)(w)(x)	Service & Equipment		25,000,000			1,289			1,063
FourPoint Energy, LLC, Common Equity, Class C-II-A Units	(n)(o)(w)(x)(y)	Upstream		66,000			66,000			974
FourPoint Energy, LLC, Common Equity, Class D Units	(n)(o)(w)(x)(y)	Upstream		12,374			8,176			184
FourPoint Energy, LLC, Common Equity, Class E-II Units	(g)(o)(w)(x)(y)	Upstream		150,937			37,734			2,226
FourPoint Energy, LLC, Common Equity, Class E-III Units	(g)(n)(o)(w)(x)(y)	Upstream		222,750			55,688			3,286
Harvest Oil & Gas Corp., Common Equity	(o)(x)(y)	Upstream		1,350,620			20,259			4,038
JSS Holdco, LLC, Net Profits Interest	(o)(w)(x)	Industrials		N/A			—			58
Limetree Bay Ventures, LLC, Common Equity	(o)(w)(x)(y)	Midstream		128,645			3,406			—
Lusk Operating LLC, Common Equity	(o)(r)(w)(x)(z)	Upstream		2,000			—			—
Luxe Drillship Operating, LLC, Overriding Royalty Interest	(o)(w)(x)	Upstream		N/A			1,354			657
MB Precision Investment Holdings LLC, Class A-2 Units	(n)(o)(w)(x)(y)	Industrials		1,426,110			490			—
NGL Energy Partners, LP, Warrants (Par)	(h)(k)(o)(w)(x)	Midstream		2,187,500			3,083			25
NGL Energy Partners, LP, Warrants (Premium)	(h)(k)(o)(w)(x)	Midstream		3,125,000			2,623			24
NGL Energy Partners, LP, Warrants (Premium)	(h)(k)(o)(w)(x)	Midstream		781,250			576			7
NGL Energy Partners, LP, Warrants (Par)	(h)(k)(o)(w)(x)	Midstream		546,880			630			7
Ridgeback Resources Inc., Common Equity	(k)(o)(t)(w)(x)(y)	Upstream		9,599,928			58,985			29,235
Swift Worldwide Resources Holdco Limited, Common Equity	(k)(o)(u)(w)(x)	Service & Equipment		3,750,000			6,029			862
TE Holdings, LLC, Common Equity	(g)(o)(x)	Upstream		2,225,950			18,921			178
Titan Energy, LLC, Common Equity	(o)(x)(y)	Upstream		555,496			17,554			17
USA Compression Partners, LP, Warrants (Market)	(h)(k)(o)(w)(x)	Midstream		793,359			555			106
USA Compression Partners, LP, Warrants (Premium)	(h)(k)(o)(w)(x)	Midstream		1,586,719			714			161
Warren Resources, Inc., Common Equity	(o)(w)(x)(y)	Upstream		4,415,749			20,754			—
Total Equity/Other							436,793			76,502
TOTAL INVESTMENTS—162.2%						$	3,942,778			2,541,021
LIABILITIES IN EXCESS OF OTHER ASSETS—(62.2%)										(972,897)
NET ASSETS—100.0%									$	1,568,124

(a)

Security may be an obligation of one or more entities affiliated with the named company.

(b)

Certain variable rate securities in the Company’s portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of March 31, 2020, the three-month London Interbank Offered Rate, or LIBOR, was 1.45% and the U.S. Prime Lending Rate, or Prime, was 3.25%. PIK means paid-in-kind. PIK income accruals may be adjusted based on the fair value of the underlying investment.

(c)

Denominated in U.S. dollars, unless otherwise noted.

(d)

Fair value determined by the Company’s board of trustees (see Note 8).

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of March 31, 2020
(in thousands, except share amounts)

(e)

Security is an unfunded commitment. The stated rate reflects the spread disclosed at the time of commitment and may not indicate the actual rate received upon funding.

(f)

Position or portion thereof unsettled as of March 31, 2020.

(g)

Security held within FS Energy Investments, LLC, a wholly-owned subsidiary of the Company.

(h)

Security or portion thereof held within Gladwyne Funding LLC and is pledged as collateral supporting the obligations outstanding under the term loan facility with Goldman Sachs Bank USA (see Note 9).

(i)

Security held within EP Northern Investments, LLC, a wholly-owned subsidiary of the Company.

(j)

Security held within FS Power Investments, LLC, a wholly-owned subsidiary of the Gladwyne Funding LLC.

(k)

The investment is not a qualifying asset under the Investment Company Act of 1940, as amended, or the 1940 Act. A business development company may not acquire any asset other than a qualifying asset, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the business development company’s total assets. As of March 31, 2020, 72.4% of the Company’s total assets represented qualifying assets.

(l)

Listed investments may be treated as debt for U.S. generally accepted accounting principles, or GAAP, or tax purposes.

(m)

Security was on non-accrual status as of March 31, 2020.

(n)

Security held within FSEP Investments, Inc., a wholly-owned subsidiary of the Company.

(o)

Security is non-income producing.

(p)

Security or portion thereof held within FS Power Investments II, LLC, a wholly-owned subsidiary of the Company.

(q)

Security held within EP American Energy Investments, Inc., a wholly-owned subsidiary of the Company.

(r)

Security held within FSEP-BBH, Inc., a wholly-owned subsidiary of the Company.

(s)

Security held within EP Burnett Investments, Inc., a wholly-owned subsidiary of the Company.

(t)

Investment denominated in Canadian dollars. Amortized cost and fair value are converted into U.S. dollars as of March 31, 2020.

(u)

Investment denominated in British pounds. Amortized cost and fair value are converted into U.S. dollars as of March 31, 2020.

(v)

Investment is a real property interest and is included with Senior Secured Loans — First Lien to facilitate comparison with other investments.

(w)

Security is classified as Level 3 in the Company’s fair value hierarchy (See Note 8).

(x)

Security or portion thereof is pledged as collateral supporting the amounts outstanding under the Senior Secured Notes with JPMorgan Chase Bank, N.A. (see Note 9).

(y)

Under the 1940 Act, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of March 31, 2020, the Company held investments in portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control”. The following table presents certain information with respect to such portfolio companies for the three months ended March 31, 2020:

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of March 31, 2020
(in thousands, except share amounts)

Portfolio Company	Fair Value at December 31, 2019			Purchases, Paid-in-Kind Interest and Transfers In			Sales, Repayments and Transfers Out			Accretion of Discount			Net Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)			Fair Value at March 31, 2020			Interest Income(1)			PIK Income(1)
Senior Secured Loans—First Lien
BL Sand Hills Unit, L.P.		$	288		$	—		$	—		$	—		$	—		$	—		$	288		$	—		$	—
MB Precision Holdings LLC			4,585			26			(18)			22			—			(138)			4,477			152			26
Warren Resources, Inc.			27,507			70			—			—			—			(2,517)			25,060			828			70
Senior Secured Loans—Second Lien
Titan Energy Operating, LLC			—			—			—			—			—			—			—			—			—
Senior Secured Bonds
FourPoint Energy, LLC			223,369			—			—			679			—			(35,948)			188,100			5,986			—
Limetree Bay Ventures, LLC			—			22,838			—			—			—			11,556			34,394			368			—
Unsecured Debt
Limetree Bay Ventures, LLC			—			34,711			—			—			—			982			35,693			419			—
Limetree Bay Ventures, LLC			—			8,838			—			—			—			2,075			10,913			142			—
Preferred Equity
Limetree Bay Ventures, LLC, Preferred Equity			—			86,105			—			922			—			(26,266)			60,761			2,903			1,950
Limetree Bay Ventures, LLC, Preferred Equity			—			53,548			—			—			—			(53,548)			—			1,158			986
MB Precision Investment Holdings LLC, Class A Preferred Units			1,205			—			—			—			—			(16)			1,189			—			—
Equity/Other
BL Sand Hills Unit, L.P., Net Profits Interest			—			—			—			—			—			—			—			—			—
BL Sand Hills Unit, L.P., Overriding Royalty Interest			—			—			—			—			—			—			—			—			—
BL Sand Hills Unit, L.P., Series A Units			—			—			—			—			—			—			—			—			—
FourPoint Energy, LLC, Common Equity, Class C-II-A Units			6,906			—			—			—			—			(5,932)			974			—			—
FourPoint Energy, LLC, Common Equity, Class D Units			1,307			—			—			—			—			(1,123)			184			—	��		—
FourPoint Energy, LLC, Common Equity, Class E-II Units			15,793			—			—			—			—			(13,567)			2,226			—			—
FourPoint Energy, LLC, Common Equity, Class E-III Units			23,306			—			—			—			—			(20,020)			3,286			—			—
Harvest Oil & Gas Corp., Common Equity			8,644			—			—			—			—			(4,606)			4,038			—			—
Limetree Bay Ventures, LLC, Common Equity			—			3,406			—			—			—			(3,406)			—			—			—
MB Precision Investment Holdings LLC, Class A-2 Units			—			—			—			—			—						—			—			—
Ridgeback Resources Inc., Common Equity			50,721			—			—			—			—			(21,486)			29,235			—			—
Titan Energy, LLC, Common Equity			16			—			—			—			—			1			17			—			—
Warren Resources, Inc., Common Equity			10,951			—			—			—			—			(10,951)			—			—			—
		$	374,598		$	209,542		$	(18)		$	1,623		$	—		$	(184,910)		$	400,835		$	11,956		$	3,032

(1)

Interest and PIK income presented for the three months ended March 31, 2020.

(z)

Under the 1940 Act, the Company generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of March 31, 2020, the Company held investments in portfolio companies of which it is deemed to be an “affiliated person” of and deemed to “control.” The following table presents certain information with respect to such portfolio companies for the three months ended March 31, 2020:

Portfolio Company	Fair Value at December 31, 2019			Purchases, Paid-in-Kind Interest and Transfers In			Sales, Repayments and Transfers Out			Accretion of Discount			Net Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)			Fair Value at March 31, 2020
Senior Secured Loans—First Lien
Lusk Operating LLC		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Sustainable Infrastructure Investments, LLC
Sustainable Infrastructure Investments, LLC			—			60,264			—			—			—			(7,683)			52,581
Equity/Other
Lusk Operating LLC, Common Equity			—			—			—			—			—			—			—
		$	—		$	60,264		$	—		$	—		$	—		$	(7,683)		$	52,581

(aa)

Security held within EP Synergy Investments, Inc., a wholly-owned subsidiary of Gladwyne Funding LLC.

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Energy and Power Fund

Consolidated Schedule of Investments
As of December 31, 2019
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Senior Secured Loans—First Lien—47.7%
AIRRO (Mauritius) Holdings II	(k)(p)(w)	Power	L+695		1.5%	7/24/25		$	18,186		$	15,534		$	15,378
AIRRO (Mauritius) Holdings II	(e)(k)(p)(w)	Power	L+695		1.5%	7/24/25			17,055			17,055			14,421
Allied Wireline Services, LLC	(w)(x)	Service & Equipment	L+950		1.5%	6/30/20			102,718			102,657			92,960
ARB Midstream Operating Company, LLC	(w)(x)	Midstream	L+725		1.0%	11/6/21			3,193			3,183			3,186
Bellatrix Exploration Ltd.	(k)(w)	Upstream	10.0%			3/31/20			7,879			7,879			7,879
Bellatrix Exploration Ltd.	(e)(k)(w)	Upstream	10.0%			3/31/20			3,377			3,377			3,377
Bioenergy Infrastructure Holdings Limited	(k)(w)	Power	L+725		1.0%	12/22/22			909			904			912
Bioenergy Infrastructure Holdings Limited	(e)(k)(w)	Power	L+725		1.0%	12/22/22			543			543			545
Bioenergy Infrastructure Holdings Limited	(e)(k)(w)	Power	L+725		1.0%	12/22/22			544			544			546
Birch Permian LLC	(h)(w)	Upstream	L+800		1.5%	4/12/23			41,531			41,176			41,436
Birch Permian LLC	(e)(w)	Upstream	L+800		1.5%	4/12/23			8,333			8,333			8,314
BL Sand Hills Unit, L.P.	(m)(o)(w)(x)(z)	Upstream	Prime+650		3.5%	12/17/21			19,200			16,674			288
Brazos Delaware II LLC	(h)	Midstream	L+400			5/21/25			63,656			60,357			54,744
Cimarron Energy Inc.	(w)(x)	Service & Equipment	10.0%			6/30/21			7,500			7,500			7,472
Cox Oil Offshore, LLC, Volumetric Production Payments	(v)(w)(x)(y)	Upstream	6.6%			12/31/23			100,000			63,884			63,646
CPV Shore Holdings LLC		Power	L+375			12/29/25			1,089			1,080			1,098
Edgewater Generation LLC		Power	L+375			12/13/25			2,885			2,879			2,775
EIF Van Hook Holdings, LLC	(h)	Midstream	L+525			9/5/24			34,521			33,739			32,967
EPIC Crude Services LP	(h)	Midstream	L+500			3/2/26			9,500			9,327			9,183
Felix Investments Holdings II, LLC	(w)	Upstream	L+650		1.0%	8/9/22			5,900			5,878			5,959
FR BR Holdings LLC	(h)(w)	Midstream	L+650			12/14/23			89,233			84,669			86,770
LMBE-MC Holdco II LLC		Power	L+400		1.0%	12/3/25			1,712			1,693			1,703
Lower Cadence Holdings LLC	(f)(h)	Midstream	L+400			5/22/26			18,957			17,827			18,803
Lusk Operating LLC	(m)(o)(w)(aa)	Upstream	Prime+500 PIK (8.8% Max PIK)		3.3%	1/31/20			29,297			27,464			—
Luxe Drillship Operating, LLC	(w)	Upstream	8.0%			10/30/24			17,143			16,115			15,819
Luxe Drillship Operating, LLC	(e)(w)	Upstream	8.0%			10/30/24			32,857			32,857			30,321
MB Precision Holdings LLC	(w)(x)(z)	Industrials	L+725, 2.3% PIK (2.3% Max PIK)		1.3%	1/23/21			4,602			4,492			4,585
MECO IV LLC	(h)(w)	Upstream	L+725		1.5%	9/14/21			35,000			34,849			34,405
Navitas Midstream Midland Basin LLC	(h)	Midstream	L+450		1.0%	12/13/24			77,895			76,815			73,416
Navitas Midstream Midland Basin LLC (Mirror Tranche)		Midstream	L+450		1.0%	12/13/24			39,800			38,141			37,512
NNE Holding LLC	(h)(w)	Upstream	L+800			3/2/22			40,000			39,938			39,492
Panda Hummel Station LLC		Power	L+600		1.0%	10/27/22			19,150			18,668			17,060
Panda Hummel Station LLC	(h)	Power	L+600		1.0%	10/27/22			24,227			23,802			21,582
Panda Stonewall LLC	(f)(h)	Power	L+550		1.0%	11/13/21			53,447			53,070			49,791
Panda Stonewall LLC	(h)	Power	L+550		1.0%	11/13/21			21,372			20,813			19,910
Permian Production Partners LLC	(h)(m)(o)(w)(x)	Upstream	L+600		1.0%	5/18/24			44,498			43,184			28,648
Plainfield Renewable Energy Holdings LLC	(w)	Power	10.0%			8/22/25			2,855			2,855			2,569
Plainfield Renewable Energy Holdings LLC, Letter of Credit	(e)(w)	Power	10.0%			8/22/23			2,709			2,709			2,437
Plainfield Renewable Energy Holdings LLC	(w)	Power	15.5%			8/22/25			10,397			10,397			10,441
Power Distribution, Inc.	(w)(x)	Power	L+725		1.3%	1/25/23			27,891			27,891			25,982
Prairie ECI Acquiror LP	(f)	Midstream	L+475			3/11/26			17,991			17,615			17,901
Sandy Creek Energy Associates, L.P.	(f)	Power	L+400		1.0%	11/9/20			72,666			66,553			62,054
Swift Worldwide Resources US Holdings Corp.	(h)(w)(x)	Service & Equipment	9.5%, L+150 PIK (L+1.5% Max PIK)		2.5%	7/20/21			59,901			59,901			59,901

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Energy and Power Fund

Consolidated Schedule of Investments (Continued)
As of December 31, 2019
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Terra-Gen Finance Co LLC		Power	L+425		1.0%	12/9/21		$	25,185		$	23,922		$	24,429
Traverse Midstream Partners LLC	(h)	Midstream	L+400		1.0%	9/27/24			60,273			60,283			54,728
Ultra Resources, Inc.		Upstream	L+375, 0.25% PIK (0.25% Max PIK)		1.0%	4/12/24			67,405			57,066			40,542
Warren Resources, Inc.	(h)(w)(z)	Upstream	L+1000, 0.0% PIK (1.0% Max PIK)		1.0%	5/22/20			27,507			27,507			27,507
Waterbridge Operating LLC	(h)	Midstream	L+575		1.0%	6/22/26			24,938			24,348			24,595
Total Senior Secured Loans—First Lien												1,317,947			1,199,989
Unfunded Loan Commitments												(65,418)			(65,418)
Net Senior Secured Loans—First Lien												1,252,529			1,134,571
Senior Secured Loans—Second Lien—23.7%
Aethon III BR LLC	(w)	Upstream	L+675		1.0%	1/10/25			10,000			9,868			9,956
Aethon United BR LP	(h)(w)	Upstream	L+675		1.0%	9/8/23			148,150			146,582			146,298
Arena Energy, LP	(h)(w)(x)	Upstream	L+900, 4.0% PIK (4.0% Max PIK)		1.0%	1/24/21			116,730			116,730			113,575
Bellatrix Exploration Ltd.	(k)(w)	Upstream	8.5%			9/11/23			22,511			22,511			22,511
Bellatrix Exploration Ltd.	(k)(m)(o)(w)(x)	Upstream	8.5%			9/11/23			54,108			49,379			17,168
Chisholm Oil and Gas Operating, LLC	(w)(x)	Upstream	L+550, 3.0% PIK (3.0% Max PIK)		1.3%	3/21/24			197,503			196,000			149,201
Chisholm Energy Holdings, LLC	(w)	Upstream	L+625		1.5%	5/15/26			21,429			21,230			21,090
Chisholm Energy Holdings, LLC	(e)(w)	Upstream	L+625		1.5%	5/15/26			8,571			8,571			8,436
Encino Acquisition Partners Holdings LLC		Upstream	L+675		1.0%	10/29/25			41,828			35,334			31,579
Peak Exploration & Production, LLC	(w)	Upstream	L+675		1.5%	11/16/23			13,545			13,484			13,435
Peak Exploration & Production, LLC	(e)(w)	Upstream	L+675		1.5%	11/16/23			1,505			1,505			1,493
Penn Virginia Holdings Corp.	(h)(k)(w)	Upstream	L+700		1.0%	9/29/22			20,000			20,000			19,726
Rosehill Operating Company, LLC	(w)(x)	Upstream	10.0%			1/31/23			1,667			1,655			1,619
SilverBow Resources, Inc.	(h)(k)(w)	Upstream	L+750		1.0%	12/15/24			19,000			18,853			18,802
Titan Energy Operating, LLC	(m)(o)(w)(x)(z)	Upstream	L+1300 PIK (L+1300 Max PIK)		1.0%	2/23/20			137,233			100,902			—
Total Senior Secured Loans—Second Lien												762,604			574,889
Unfunded Loan Commitments												(10,076)			(10,076)
Net Senior Secured Loans—Second Lien												752,528			564,813
Senior Secured Bonds—22.0%
Black Swan Energy Ltd.	(h)(k)(w)(x)	Upstream	9.0%			1/20/24			90,000			90,000			91,692
Denbury Resources Inc.	(k)	Upstream	7.5%			2/15/24			12,000			11,995			10,260
Denbury Resources Inc.	(k)	Upstream	9.3%			3/31/22			42,341			42,139			40,024
FourPoint Energy, LLC	(h)(w)(x)(z)	Upstream	9.0%			12/31/21			235,125			231,597			223,369
Talen Energy Supply LLC	(h)	Power	7.3%			5/15/27			34,319			34,042			36,176
Velvet Energy Ltd.	(h)(k)(w)	Upstream	9.0%			10/5/23			120,000			120,000			122,700
Total Senior Secured Bonds												529,773			524,221
Unsecured Debt—13.6%
Ferrellgas, L.P.		Midstream	6.5%			5/1/21			24,729			22,296			21,462
Ferrellgas, L.P.		Midstream	6.8%			1/15/22			25,020			22,137			21,337
Global Jet Capital Holdings, LP	(w)(x)	Industrials	15.0% PIK (15.0% Max PIK)			1/30/25			1,145			1,067			1,145
Global Jet Capital Holdings, LP	(w)(x)	Industrials	15.0% PIK (15.0% Max PIK)			4/30/25			7,276			6,779			7,276
Global Jet Capital Holdings, LP	(w)(x)	Industrials	15.0% PIK (15.0% Max PIK)			9/3/25			1,503			1,401			1,503
Global Jet Capital Holdings, LP	(w)(x)	Industrials	15.0% PIK (15.0% Max PIK)			9/29/25			1,415			1,319			1,415
Global Jet Capital Holdings, LP	(w)(x)	Industrials	15.0% PIK (15.0% Max PIK)			12/2/26			1,245			1,160			1,245

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Energy and Power Fund

Consolidated Schedule of Investments (Continued)
As of December 31, 2019
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Great Western Petroleum, LLC	(w)(x)	Upstream	8.5%			4/15/25		$	13,636		$	13,101		$	11,966
Great Western Petroleum, LLC	(x)	Upstream	9.0%			9/30/21			35,830			35,764			32,129
Hammerhead Resources Inc.	(k)(w)(x)	Upstream	9.0%			7/10/22			100,000			98,299			96,750
Lonestar Resources America Inc.	(x)	Upstream	11.3%			1/1/23			37,500			38,310			25,781
Martin Midstream Partners L.P.	(k)(x)	Midstream	7.3%			2/15/21			12,723			12,453			11,615
Moss Creek Resources, LLC	(x)	Upstream	7.5%			1/15/26			42,693			40,473			32,566
Oasis Petroleum Inc.	(k)	Upstream	6.9%			3/15/22			2,000			1,946			1,930
Oasis Petroleum Inc.	(k)	Upstream	6.9%			1/15/23			11,850			11,085			11,613
Talen Energy Supply LLC		Power	9.5%			7/15/22			10,365			10,442			10,371
Tenrgys, LLC	(m)(n)(o)(w)(x)	Upstream	L+900		2.5%	12/23/18			75,000			75,000			28,000
Whiting Petroleum Corp.	(k)	Upstream	5.8%			3/15/21			5,395			5,201			5,116
Total Unsecured Debt												398,233			323,220
							Number of Shares			Amortized Cost			Fair Value(d)
Preferred Equity—30.4%(l)
Abaco Energy Technologies LLC, Preferred Equity	(o)(w)(x)	Service & Equipment							28,942,003		$	1,447		$	11,982
Altus Midstream LP, Series A Preferred Units	(j)(w)(x)	Midstream	11.0%			6/28/26			51,053			52,185			53,095
Global Jet Capital Holdings, LP, Preferred Equity	(o)(w)(x)	Industrials							27,856			2,786			348
Great Western Petroleum, LLC, Preferred Equity	(n)(w)(x)	Upstream	15.5%			12/31/27			36,364			42,306			39,332
Limetree Bay Ventures, LLC, Preferred Equity	(w)(x)	Midstream	13.5%			11/27/23			83,877,497			84,155			72,831
Limetree Bay Ventures, LLC, Preferred Equity	(w)(x)	Midstream	13.5%			11/27/23			42,402,611			42,403			35,489
MB Precision Investment Holdings LLC, Class A Preferred Units	(n)(o)(w)(x)(z)	Industrials							8,952,623			1,880			1,205
NGL Energy Partners, LP, Preferred Equity	(k)(w)(x)	Midstream	14.2%			7/2/27			156,250			155,770			159,198
NuStar, Preferred Equity	(h)(k)(w)(x)	Midstream	12.8%			6/29/28			5,910,165			150,836			178,842
Rosehill Resources, Inc. Preferred Equity	(o)(w)(x)	Upstream							2,536			2,511			2,709
Segreto Power Holdings, LLC, Preferred Equity	(g)(w)(x)	Power	13.1%			5/8/25			70,297			83,418			82,311
TE Holdings, LLC, Preferred Equity	(o)(x)	Upstream							1,475,531			14,734			—
USA Compression Partners, LP, Preferred Equity	(h)(k)(w)(x)	Midstream	9.8%			4/3/28			79,336			77,452			84,500
Total Preferred Equity												711,883			721,842

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Energy and Power Fund

Consolidated Schedule of Investments (Continued)
As of December 31, 2019
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Number of Shares		Amortized Cost			Fair Value(d)
Equity/Other—9.0%(l)
Abaco Energy Technologies LLC, Common Equity	(o)(w)(x)	Service & Equipment		6,944,444		$	6,944		$	2,167
AIRRO (Mauritius) Holdings II, Warrants	(k)(o)(p)(w)	Power		35			2,652			1,129
Allied Downhole Technologies, LLC, Common Equity	(n)(o)(w)(x)	Service & Equipment		7,431,113			7,223			372
Allied Downhole Technologies, LLC, Warrants	(n)(o)(w)(x)	Service & Equipment		5,344,680			1,865			267
Ascent Resources Utica Holdings, LLC, Common Equity	(o)(q)(w)(x)	Upstream		148,692,908			44,700			39,404
Bellatrix Exploration Ltd., Warrants	(k)(o)(w)	Upstream		1,533,197			—			—
BL Sand Hills Unit, L.P., Net Profits Interest	(o)(s)(w)(x)(z)	Upstream		N/A			5,180			—
BL Sand Hills Unit, L.P., Overriding Royalty Interest	(o)(s)(w)(x)(z)	Upstream		N/A			740			—
BL Sand Hills Unit, L.P., Series A Units	(g)(o)(w)(x)(z)	Upstream		29,117			24,019			—
Chisholm Oil and Gas, LLC, Series A Units	(g)(o)(w)(x)	Upstream		14,700,000			14,700			—
Cimarron Energy Holdco Inc., Common Equity	(o)(w)(x)	Service & Equipment		4,302,293			3,950			277
Cimarron Energy Holdco Inc., Participation Option	(o)(w)(x)	Service & Equipment		25,000,000			1,289			1,613
FourPoint Energy, LLC, Common Equity, Class C-II-A Units	(n)(o)(w)(x)(z)	Upstream		66,000			66,000			6,906
FourPoint Energy, LLC, Common Equity, Class D Units	(n)(o)(w)(x)(z)	Upstream		12,374			8,176			1,307
FourPoint Energy, LLC, Common Equity, Class E-II Units	(g)(o)(w)(x)(z)	Upstream		150,937			37,734			15,793
FourPoint Energy, LLC, Common Equity, Class E-III Units	(g)(n)(o)(w)(x)(z)	Upstream		222,750			55,688			23,306
Harvest Oil & Gas Corp., Common Equity	(o)(x)(z)	Upstream		1,350,620			20,259			8,644
JSS Holdco, LLC, Net Profits Interest	(o)(w)(x)	Industrials		N/A			—			156
Limetree Bay Ventures, LLC, Common Equity	(o)(w)(x)	Midstream		106,363			3,406			—
Lusk Operating LLC, Common Equity	(o)(r)(w)(aa)	Upstream		2,000			—			—
Luxe Drillship Operating, LLC, Overriding Royalty Interest	(o)(w)	Upstream		N/A			1,354			1,354
MB Precision Investment Holdings LLC, Class A-2 Units	(n)(o)(w)(z)	Industrials		1,426,110			490			—
NGL Energy Partners, LP, Warrants (Par)	(k)(o)(w)	Midstream		2,187,500			3,083			2,142
NGL Energy Partners, LP, Warrants (Premium)	(k)(o)(w)(x)	Midstream		3,125,000			2,623			1,924
NGL Energy Partners, LP, Warrants (Premium)	(k)(o)(w)	Midstream		781,250			576			576
NGL Energy Partners, LP, Warrants (Par)	(k)(o)(w)	Midstream		546,875			630			630
PDI Parent LLC, Common Equity	(o)(w)(x)	Power		1,941,431			1,663			757
Ridgeback Resources Inc., Common Equity	(k)(o)(t)(w)(x)(z)	Upstream		9,599,928			58,985			50,721
Sunnova Energy Corp., Common Equity	(o)(x)	Power		3,392,666			38,167			37,862
Swift Worldwide Resources Holdco Limited, Common Equity	(k)(o)(u)(w)(x)	Service & Equipment		3,750,000			6,029			1,575
TE Holdings, LLC, Common Equity	(g)(o)(x)	Upstream		2,225,950			18,921			178
Titan Energy, LLC, Common Equity	(o)(x)(z)	Upstream		555,496			17,554			16
USA Compression Partners, LP, Warrants (Market)	(k)(o)(w)(x)	Midstream		793,359			555			1,722
USA Compression Partners, LP, Warrants (Premium)	(k)(o)(w)(x)	Midstream		1,586,719			714			2,221
Warren Resources, Inc., Common Equity	(o)(w)(x)(z)	Upstream		4,415,749			20,754			10,951
White Star Petroleum Holdings, LLC, Common Equity	(g)(o)(w)(x)	Upstream		4,867,084			4,137			—
Total Equity/Other							480,760			213,970
TOTAL INVESTMENTS—146.4%						$	4,125,706			3,482,637
LIABILITIES IN EXCESS OF OTHER ASSETS—(46.4%)	(i)									(1,103,032)
NET ASSETS—100.0%									$	2,379,605

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Energy and Power Fund

Consolidated Schedule of Investments (Continued)
As of December 31, 2019
(in thousands, except share amounts)

Derivative Instruments Swap Contracts—Crude Oil(y)
Counterparty	Type	Location	Period	Bbls		Weighted Average Price $(/Bbls)	Unrealized Appreciation(1)			Unrealized Depreciation(1)
BP Energy Company	Fixed	NYMEX WTI	January 1, 2020 – December 31, 2023		993,727	$61.69		$	5,988		$	—
BP Energy Company	Basis	NYMEX WTI/Argus LLS	January 1, 2020 – December 31, 2023		993,702	$2.97			274			280
Total Swap Contracts—Crude Oil									6,262			280

Swap Contracts—Natural Gas(y) Counterparty	Type	Location	Period	MMBtu		Weighted Average Price $(/MMBtu)	Unrealized Appreciation(1)			Unrealized Depreciation(1)
Macquarie Bank Limited	Fixed	NYMEX Henry Hub	February 1, 2020 – December 31, 2023		6,368,951	$2.58		$	569		$	—
Total Swap Contracts—Natural Gas									569			—
TOTAL SWAP CONTRACTS								$	6,831		$	280

(1)

Represents the amounts the Fund would pay and amounts the Fund would receive under each swap contract if they were to settle on December 31, 2019 (see Note 6).

Abbreviations

Bbls — Barrels

MMBtu — One million British thermal units

(a)

Security may be an obligation of one or more entities affiliated with the named company.

(b)

Certain variable rate securities in the Company’s portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of December 31, 2019, the three-month London Interbank Offered Rate, or LIBOR, was 1.91% and the U.S. Prime Lending Rate, or Prime, was 4.75%. PIK means paid-in-kind. PIK income accruals may be adjusted based on the fair value of the underlying investment.

(c)

Denominated in U.S. dollars, unless otherwise noted.

(d)

Fair value determined by the Company’s board of trustees (see Note 8).

(e)

Security is an unfunded commitment. The stated rate reflects the spread disclosed at the time of commitment and may not indicate the actual rate received upon funding.

(f)

Position or portion thereof unsettled as of December 31, 2019.

(g)

Security held within FS Energy Investments, LLC, a wholly-owned subsidiary of the Company.

(h)

Security or portion thereof held within Gladwyne Funding LLC and is pledged as collateral supporting the obligations outstanding under the term loan facility with Goldman Sachs Bank USA (see Note 9).

(i)

Includes the effect of swap contracts.

(j)

Security held within FS Power Investments, LLC, a wholly-owned subsidiary of the Company.

(k)

The investment is not a qualifying asset under the Investment Company Act of 1940, as amended, or the 1940 Act. A business development company may not acquire any asset other than a qualifying asset, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the business development company’s total assets. As of December 31, 2019, 72.8% of the Company’s total assets represented qualifying assets.

(l)

Listed investments may be treated as debt for U.S. generally accepted accounting principles, or GAAP, or tax purposes.

(m)

Security was on non-accrual status as of December 31, 2019.

(n)

Security held within FSEP Investments, Inc., a wholly-owned subsidiary of the Company.

(o)

Security is non-income producing.

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Energy and Power Fund

Consolidated Schedule of Investments (Continued)
As of December 31, 2019
(in thousands, except share amounts)

(p)

Security or portion thereof held within FS Power Investments II, LLC, a wholly-owned subsidiary of the Company.

(q)

Security held within EP American Energy Investments, Inc., a wholly-owned subsidiary of the Company.

(r)

Security held within FSEP-BBH, Inc., a wholly-owned subsidiary of the Company.

(s)

Security held within EP Burnett Investments, Inc., a wholly-owned subsidiary of the Company.

(t)

Investment denominated in Canadian dollars. Amortized cost and fair value are converted into U.S. dollars as of December 31, 2019.

(u)

Investment denominated in British pounds. Amortized cost and fair value are converted into U.S. dollars as of December 31, 2019.

(v)

Investment is a real property interest and is included with Senior Secured Loans — First Lien to facilitate comparison with other investments.

(w)

Security is classified as Level 3 in the Company’s fair value hierarchy (See Note 8).

(x)

Security or portion thereof is pledged as collateral supporting the amounts outstanding under the Senior Secured Notes with JPMorgan Chase Bank, N.A. (see Note 9).

(y)

Security held within EP Northern Investments, LLC, a wholly-owned subsidiary of the Company.

See notes to unaudited consolidated financial statements.

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FS Energy and Power Fund

Consolidated Schedule of Investments (Continued)
As of December 31, 2019
(in thousands, except share amounts)

(z)

Under the 1940 Act, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of December 31, 2019, the Company held investments in portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control”. The following table presents certain information with respect to such portfolio companies for the year ended December 31, 2019:

Portfolio Company	Fair Value at December 31, 2018			Purchases, Paid-in-Kind Interest and Transfers In			Sales, Repayments and Transfers Out			Accretion of Discount			Net Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)			Fair Value at December 31, 2019			Interest Income(1)			PIK Income(1)			Fee Income(1)
Senior Secured Loans—First Lien
Altus Power America, Inc.		$	83,247		$	—		$	(85,939)		$	—		$	—		$	2,692		$	—		$	—		$	—		$	—
BL Sand Hills Unit, L.P.			20,000			—			(800)			—			105			(19,017)			288			782			—			—
MB Precision Holdings LLC			4,573			105			(112)			148			38			(167)			4,585			696			105			—
Warren Resources, Inc.			27,297			210			—			—			—			—			27,507			3,256			210			—
Senior Secured Loans—Second Lien
Titan Energy Operating, LLC			12,411			—			—			—			—			(12,411)			—			—			—			—
Senior Secured Bonds
FourPoint Energy, LLC			231,010			—			—			2,530			—			(10,171)			223,369			24,088			—			—
Sunnova Energy Corp.			17,757			19,637			(37,474)			(67)			36			111			—			1,091			759			4,657
Unsecured Debt
Sunnova Energy Corp.			—			757			(629)			—			(128)			—			—			—			—			—
Preferred Equity
Altus Power America Holdings, LLC, Preferred Equity			28,217			—			(28,646)			—			—			429			—			—			—			—
MB Precision Investment Holdings LLC, Class A Preferred Units			1,248			37			—			—			—			(80)			1,205			—			—			—
Sunnova Energy Corp., Preferred Equity			6,134			—			(5,387)			—			(561)			(186)			—			—			—			—
Equity/Other
Altus Power America Holdings, LLC, Common Equity			2,183			—			(12,474)			—			—			10,291			—			—			—			—
BL Sand Hills Unit, L.P., Net Profits Interest			1,150			—			—			—			—			(1,150)			—			—			—			—
BL Sand Hills Unit, L.P., Overriding Royalty Interest			738			—			—			—			—			(738)			—			—			—			—
BL Sand Hills Unit, L.P., Series A Units			3,239			—			—			—			—			(3,239)			—			—			—			—
FourPoint Energy, LLC, Common Equity, Class C-II-A Units			14,768			—			—			—			—			(7,862)			6,906			—			—			—
FourPoint Energy, LLC, Common Equity, Class D Units			2,800			—			—			—			—			(1,493)			1,307			—			—			—
FourPoint Energy, LLC, Common Equity, Class E-II Units			33,772			—			—			—			—			(17,979)			15,793			—			—			—
FourPoint Energy, LLC, Common Equity, Class E-III Units			49,840			—			—			—			—			(26,534)			23,306			—			—			—
Harvest Oil & Gas Corp., Common Equity			24,284			—			(9,455)			—			—			(6,185)			8,644			—			—			—
MB Precision Investment Holdings LLC, Class A-2 Units			—			—			—			—			—			—			—			—			—			—
Ridgeback Resources Inc., Common Equity			47,488			—			—			—			—			3,233			50,721			—			—			—
Sunnova Energy Corp., Common Equity			—			—			(32,151)			—			7,125			25,026			—			—			—			—
Titan Energy, LLC, Common Equity			167			—			—			—			—			(151)			16			—			—			—
Warren Resources, Inc., Common Equity			10,377			—			—			—			—			574			10,951			—			—			—
		$	622,700		$	20,746		$	(213,067)		$	2,611		$	6,615		$	(65,007)		$	374,598		$	29,913		$	1,074		$	4,657

(1)

Interest, PIK and fee income presented for the year ended December 31, 2019.

(aa)

Under the 1940 Act, the Company generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of December 31, 2019, the Company held investments in Lusk Operating LLC, which it is deemed to be an “affiliated person” of and deemed to “control.” The fair value as of December 31, 2019 was $0 for the Company’s senior secured loan and common equity investments in Lusk Operating, LLC. The company did not purchase, sell, accrue income or realize a gain (loss) for the Company’s senior secured loan and common equity investments in Lusk Operating, LLC for the year ended December 31, 2019.

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements
(in thousands, except share and per share amounts)

Note 1. Principal Business and Organization

FS Energy and Power Fund, or the Company, was formed as a Delaware statutory trust under the Delaware Statutory Trust Act on September 16, 2010 and formally commenced investment operations on July 18, 2011. The Company is an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. In addition, the Company has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a regulated investment company, or RIC, as defined under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code. As of March 31, 2020, the Company had various wholly-owned financing subsidiaries, including special-purpose financing subsidiaries and subsidiaries through which it holds or expects to hold interests in certain portfolio companies. The unaudited consolidated financial statements include both the Company’s accounts and the accounts of its wholly-owned subsidiaries as of March 31, 2020. All significant intercompany transactions have been eliminated in consolidation. Certain of the Company’s consolidated subsidiaries are subject to U.S. federal and state income taxes.

The Company’s investment objective is to generate current income and long-term capital appreciation by investing primarily in privately-held U.S. companies in the energy and power industry. The Company’s investment policy is to invest, under normal circumstances, at least 80% of its total assets in securities of energy and power related, or Energy, companies. The Company considers Energy companies to be those companies that engage in the exploration, development, production, gathering, transportation, processing, storage, refining, distribution, mining, generation or marketing of natural gas, natural gas liquids, crude oil, refined products, coal or power, including those companies that provide equipment or services to companies engaged in any of the foregoing.

The Company is managed by FS/EIG Advisor, LLC, or FS/EIG Advisor, pursuant to an investment advisory and administrative services agreement, dated as of April 9, 2018, or the FS/EIG investment advisory agreement. FS/EIG Advisor oversees the management of the Company’s operations and is responsible for making investment decisions with respect to the Company’s portfolio. GSO Capital Partners LP, or GSO, resigned as the Company’s investment sub-adviser and terminated the investment sub-advisory agreement, dated April 28, 2011 that FS Investment Advisor, LLC, or FS Advisor, had entered into with GSO, effective April 9, 2018. The FS/EIG investment advisory agreement replaced the investment advisory and administrative services agreement, dated April 28, 2011, as amended by the first amendment to the investment advisory and administrative services agreement, dated August 10, 2012, by and between the Company and FS Advisor.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation: The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For a more complete discussion of significant accounting policies and certain other information, the Company’s interim unaudited consolidated financial statements should be read in conjunction with its audited consolidated financial statements as of and for the year ended December 31, 2019 included in the Company’s annual report on Form 10-K. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The December 31, 2019 consolidated balance sheet and consolidated schedule of investments are derived from the Company’s audited consolidated financial statements as of and for the year ended December 31, 2019. The Company is considered an investment company under GAAP and follows the accounting and reporting

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (Continued)

guidance applicable to investment companies under Accounting Standards Codification Topic 946, Financial Services—Investment Companies. The Company has evaluated the impact of subsequent events through the date the unaudited consolidated financial statements were issued and filed with the Securities and Exchange Commission, or the SEC.

Use of Estimates: The preparation of the unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Many of the amounts have been rounded, and all amounts are in thousands, except share and per share amounts.

Capital Gains Incentive Fee: Pursuant to the terms of the FS/EIG investment advisory agreement, the incentive fee on capital gains is determined and payable in arrears as of the end of each calendar year (or upon termination of such agreement). Such fee equals 20.0% of the Company’s “incentive fee capital gains,” which are the Company’s realized capital gains on a cumulative basis from inception, calculated as of the end of the applicable period, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fees on capital gains. The Company will accrue for the incentive fee on capital gains, which, if earned, will be paid annually. The Company will accrue the incentive fee on capital gains based on net realized and unrealized gains; however, the fee payable to FS/EIG Advisor will be based on realized gains and no such fee will be payable with respect to unrealized gains unless and until such gains are actually realized.

Subordinated Income Incentive Fee: Pursuant to the terms of the FS/EIG investment advisory agreement, FS/EIG Advisor may also be entitled to receive a subordinated incentive fee on income. The subordinated incentive fee on income under the FS/EIG investment advisory agreement is calculated and payable quarterly in arrears and equals 20.0% of the Company’s “pre-incentive fee net investment income” for the immediately preceding quarter subject to a hurdle rate, expressed as a rate of return on adjusted capital, equal to 1.625% per quarter, or an annualized hurdle rate of 6.5%. As a result, FS/EIG Advisor will not earn this incentive fee for any quarter until the Company’s pre-incentive fee net investment income for such quarter exceeds the hurdle rate of 1.625%. For purposes of this fee, “adjusted capital” means cumulative gross proceeds generated from sales of the Company’s common shares (including proceeds from its distribution reinvestment plan) reduced for distributions from non-liquidating dispositions of the Company’s investments paid to shareholders and amounts paid for share repurchases pursuant to the Company’s share repurchase program. Once the Company’s pre-incentive fee net investment income in any quarter exceeds the hurdle rate, FS/EIG Advisor will be entitled to a “catch-up” fee equal to the amount of the Company’s pre-incentive fee net investment income in excess of the hurdle rate, until the Company’s pre-incentive fee net investment income for such quarter equals 2.031%, or 8.125% annually, of adjusted capital. This “catch-up” feature will allow FS/EIG Advisor to recoup the fees foregone as a result of the existence of the hurdle rate. Thereafter, FS/EIG Advisor will be entitled to receive 20.0% of the Company’s pre-incentive fee net investment income.

Reclassifications: Certain amounts in the unaudited consolidated financial statements for the three months ended March 31, 2019 may have been reclassified to conform to the classifications used to prepare the unaudited consolidated financial statements for the three months ended March 31, 2020.

Revenue Recognition: Security transactions are accounted for on the trade date. The Company records interest income on an accrual basis to the extent that it expects to collect such amounts. The Company records dividend income on the ex-dividend date. Distributions received from limited liability company, or LLC, and limited partnership, or LP, investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. The Company does not accrue as a receivable interest or dividends

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (Continued)

on loans and securities if it has reason to doubt its ability to collect such income. The Company’s policy is to place investments on non-accrual status when there is reasonable doubt that interest income will be collected. The Company considers many factors relevant to an investment when placing it on or removing it from non-accrual status including, but not limited to, the delinquency status of the investment, economic and business conditions, the overall financial condition of the underlying investment, the value of the underlying collateral, bankruptcy status, if any, and any other facts or circumstances relevant to the investment. If there is reasonable doubt that the Company will receive any previously accrued interest, then the interest income will be written-off. Payments received on non-accrual investments may be recognized as income or applied to principal depending upon the collectability of the remaining principal and interest. Non-accrual investments may be restored to accrual status when principal and interest become current and are likely to remain current based on the Company’s judgment.

Loan origination fees, original issue discount and market discount are capitalized and the Company amortizes such amounts as interest income over the respective term of the loan or security. Upon the prepayment of a loan or security, any unamortized loan origination fees and original issue discount are recorded as interest income. Structuring and other non-recurring upfront fees are recorded as fee income when earned. For the three months ended March 31, 2020 and 2019, the Company recognized $83 and $75, respectively, in structuring or other upfront fee revenue. The Company records prepayment premiums on loans and securities as fee income when it earns such amounts.

Note 3. Share Transactions

Below is a summary of transactions with respect to the Company’s common shares during the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
	2020					2019
	Shares		Amount			Shares		Amount
Reinvestment of Distributions		3,156,043(1)		$	15,429		4,394,767		$	26,953
Share Repurchase Program		(4,877,069)			(26,823)		(4,991,838)			(30,450)
Net Proceeds from Share Transactions		(1,721,026)		$	(11,394)		(597,071)		$	(3,497)

(1)

The Company issued these shares pursuant to its distribution reinvestment plan at $3.70 per share on March 31, 2020. Following the final determination of the Company’s net asset value for the quarter ended March 31, 2020, the Company is currently reprocessing the shares issued pursuant to its distribution reinvestment plan at $3.65 per share, which reflects a price that is within 2.5% of the net asset value per share as of March 31, 2020.

On February 25, 2020, the Company received exemptive relief from the SEC permitting it to offer multiple classes of common shares. While the Company has no present intention to recommence a public offering of its common shares, the Company could do so in the future.

Share Repurchase Program

In light of difficult market conditions and in an effort to preserve liquidity in the Company, the Company’s board of trustees determined to suspend for an indefinite period of time the Company’s share repurchase program and will reassess the Company’s ability to recommence such program in future periods. The Company’s board of trustees determined to terminate the Company’s previously announced quarterly tender offer pursuant to its share repurchase program, or Tender Offer, that it made pursuant to the Tender

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 3. Share Transactions (Continued)

Offer Statement on Schedule TO originally filed with the SEC on February 24, 2020. As a result of this termination, no common shares were purchased in the Tender Offer and all common shares previously tendered and not withdrawn were promptly returned to tendering holders.

Prior to its suspension, the Company intended to conduct quarterly tender offers pursuant to its share repurchase program. The Company’s board of trustees will consider the following factors, among others, in making its determination regarding whether to cause the Company to offer to repurchase common shares and under what terms:

•

the effect of such repurchases on the Company’s qualification as a RIC (including the consequences of any necessary asset sales);

•

the liquidity of the Company’s assets (including fees and costs associated with disposing of assets);

•

the Company’s investment plans and working capital requirements;

•

the relative economies of scale with respect to the Company’s size;

•

the Company’s history in repurchasing common shares or portions thereof; and

•

the condition of the securities markets.

Historically, the Company limited the number of common shares to be repurchased during any calendar year to the lesser of (i) the number of common shares the Company can repurchase with the proceeds it receives from the issuance of common shares under the Company’s distribution reinvestment plan and (ii) 10% of the weighted average number of common shares outstanding in the prior calendar year, or 2.5% in each calendar quarter. On May 5, 2017, the board of trustees of the Company further amended the share repurchase program. As amended, the Company will limit the maximum number of common shares to be repurchased for any repurchase offer to the greater of (A) the number of common shares that the Company can repurchase with the proceeds it has received from the sale of common shares under its distribution reinvestment plan during the twelve-month period ending on the date the applicable repurchase offer expires (less the amount of proceeds used to repurchase common shares on each previous repurchase date for repurchase offers conducted during such twelve-month period) (this limitation is referred to as the twelve-month repurchase limitation) and (B) the number of common shares that the Company can repurchase with the proceeds the Company receives from the sale of common shares under its distribution reinvestment plan during the three-month period ending on the date the applicable repurchase offer expires (this limitation is referred to as the three-month repurchase limitation). In addition to this limitation, the maximum number of common shares to be repurchased for any repurchase offer will also be limited to 10% of the weighted average number of common shares outstanding in the prior calendar year, or 2.5% in each calendar quarter. As a result, the maximum number of common shares to be repurchased for any repurchase offer will not exceed the lesser of (i) 10% of the weighted average number of common shares outstanding in the prior calendar year, or 2.5% in each calendar quarter, and (ii) whichever is greater of the twelve-month repurchase limitation described in clause (A) above and the three-month repurchase limitation described in clause (B) above.

If the Company recommences its share repurchase program, the Company intends to offer to repurchase common shares at a price equal to the price at which common shares are issued pursuant to the Company’s distribution reinvestment plan on the distribution date coinciding with the applicable share repurchase date. The price at which common shares are issued under the Company’s distribution reinvestment plan is determined by the Company’s board of trustees or a committee thereof, in its sole discretion, and will be (i) not less than the net asset value per common share as determined in good faith by the Company’s board of trustees or a committee thereof, in its sole discretion, immediately prior to the payment date of the

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 3. Share Transactions (Continued)

distribution and (ii) not more than 2.5% greater than the net asset value per common share as of such date. The Company’s board of trustees may amend, suspend or terminate the share repurchase program at any time, upon 30 days’ notice.

The following table provides information concerning the Company’s repurchases of common shares pursuant to its share repurchase program during the three months ended March 31, 2020 and 2019:

For the Three Months Ended	Repurchase Date	Shares Repurchased		Percentage of Shares Tendered That Were Repurchased		Percentage of Outstanding Shares Repurchased as of the Repurchase Date		Repurchase Price Per Share			Aggregate Consideration for Repurchased Shares
Fiscal 2019
December 31, 2018	January 2, 2019		4,568,195		16%		1.04%		$	6.10		$	27,866
Fiscal 2020
December 31, 2019	January 8, 2020		4,354,073		9%		0.99%		$	5.50		$	23,947

In order to minimize the expense of supporting small accounts and provide additional liquidity to shareholders of the Company holding small accounts after completion of the regular quarterly share repurchase offer, the Company reserves the right to repurchase the shares of and liquidate any investor’s account if the balance of such account is less than the Company’s $5,000 minimum initial investment, unless the account balance has fallen below the minimum solely as a result of a decline in the Company’s net asset value per share. The Company will provide or will cause to be provided 30 days’ prior written notice to potentially affected investors, which notice may be included in the regular quarterly repurchase offer materials, of any such repurchase. Any such repurchases will be made at the Company’s most recent price at which the Company’s shares were issued pursuant to its distribution reinvestment plan. The Company conducted the first such repurchase and de minimis account liquidation after the Company’s second quarter 2018 share repurchase offer.

The following table summarizes the common shares repurchased by the Company relating to its de minimis account liquidations during the three months ended March 31, 2020 and 2019:

For the Three Months Ended	Repurchase Date	Shares Repurchased		Percentage of Outstanding Shares Repurchased as of the Repurchase Date		Repurchase Price Per Share			Aggregate Consideration for Repurchased Shares
Fiscal 2019
December 31, 2018	January 16, 2019		423,643		0.10%		$	6.10		$	2,584
Fiscal 2020
December 31, 2019	January 17, 2020		522,996		0.12%		$	5.50		$	2,876

Note 4. Related Party Transactions

Compensation of the Investment Adviser

Pursuant to the FS/EIG investment advisory agreement, FS/EIG Advisor is entitled to an annual base management fee based on the average weekly value of the Company’s gross assets (gross assets equals total assets as set forth on the Company’s consolidated balance sheets) during the most recently completed calendar quarter and an incentive fee based on the Company’s performance. The base management fee is payable quarterly in arrears, and is calculated at an annual rate of 1.75% of the average weekly value of the Company’s gross assets. Pursuant to a letter dated May 13, 2020, FS/EIG Advisor has elected to defer the payment of

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 4. Related Party Transactions (Continued)

74.9% of the base management fee to which it is entitled for the investment advisory services provided during the quarterly period ended March 31, 2020 and thereafter until FS/EIG Advisor notifies the Company that it no longer intends to defer payments. FS/EIG Advisor agrees that it will take the deferred payment for any quarter upon the earlier of (1) the date provided by FS/EIG Advisor in a written notice to the Company and (2) the end of the third full calendar quarter following the quarter in which the provision of services to which such deferred payment relates. The deferred payment for any quarter will be deferred without interest and may be taken in such other quarter, in whole or in part, as FS/EIG Advisor shall determine. See Note 2 for a discussion of the capital gains and subordinated income incentive fees that FS/EIG Advisor may be entitled to under the FS/EIG investment advisory agreement.

FS/EIG Advisor may receive structuring or other upfront fees from portfolio companies in which FS/EIG Advisor has caused the Company to invest. FS/EIG Advisor has agreed to offset the amount of any structuring or other upfront fees received by FS/EIG Advisor against the management fees payable by the Company under the FS/EIG investment advisory agreement. During the three months ended March 31, 2020 and 2019, $450 and $200, respectively, of structuring or other upfront fees received by FS/EIG Advisor were offset against management fees.

Pursuant to the FS/EIG investment advisory agreement, FS/EIG Advisor oversees the Company’s day-to-day operations, including the provision of general ledger accounting, fund accounting, legal services, investor relations, certain government and regulatory affairs activities and other administrative services. FS/EIG Advisor also performs, or oversees the performance of, the Company’s corporate operations and required administrative services, which includes being responsible for the financial records that the Company is required to maintain and preparing reports for the Company’s shareholders and reports filed with the Securities and Exchange Commission, or SEC.

The Company reimburses FS/EIG Advisor for expenses necessary to perform services related to the Company’s administration and operations, including FS/EIG Advisor’s allocable portion of the compensation and/or related expenses of certain personnel of FS Investments and EIG providing administrative services to the Company on behalf of FS/EIG Advisor, and for transactional expenses for prospective investments, such as fees and expenses associated with performing due diligence reviews of investments that do not close, often referred to as “broken deal” costs. The Company reimburses FS/EIG Advisor no less than quarterly for expenses necessary to perform services related to the Company’s administration and operations. The amount of this reimbursement is set at the lesser of (1) FS/EIG Advisor’s actual costs incurred in providing such services and (2) the amount that the Company estimates it would be required to pay alternative service providers for comparable services in the same geographic location. FS/EIG Advisor allocates the cost of such services to the Company based on factors such as time allocations and other reasonable metrics. The Company’s board of trustees reviews the methodology employed in determining how the expenses are allocated to the Company and assesses the reasonableness of such reimbursements for expenses allocated to the Company based on the breadth, depth and quality of such services as compared to the estimated cost to the Company of obtaining similar services from third-party providers known to be available. In addition, the Company’s board of trustees considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, the Company’s board of trustees, among other things, compares the total amount paid to FS/EIG Advisor for such services as a percentage of the Company’s net assets to the same ratio as reported by other comparable BDCs. The Company does not reimburse FS/EIG Advisor for any services for which it receives a separate fee, or for rent, depreciation, utilities, capital equipment or other administrative items allocated to a controlling person of FS/EIG Advisor.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 4. Related Party Transactions (Continued)

The following table describes the fees and expenses accrued under the FS/EIG investment advisory agreement during the three months ended March 31, 2020 and 2019:

			Three Months Ended March 31,
Related Party	Source Agreement	Description	2020			2019
FS/EIG Advisor	FS/EIG investment advisory agreement	Base Management Fee(1)		$	15,399		$	16,848
FS/EIG Advisor	FS/EIG investment advisory agreement	Administrative Services Expenses(2)		$	1,058		$	793

(1)

During the three months ended March 31, 2020 and 2019, $14,022 and $14,767, respectively, in base management fees were paid to FS/EIG Advisor. The base management fee amount shown in the table above for the three months ended March 31, 2020 and 2019 is shown net of $450 and $200, respectively, in structuring or other upfront fees received by FS/EIG Advisor and offset against base management fees. As of March 31, 2020, $16,959 in base management fees were payable to FS/EIG Advisor.

(2)

During the three months ended March 31, 2020 and 2019, $650 and $716, respectively, of the accrued administrative services expenses related to the allocation of costs of administrative personnel for services rendered to the Company by FS/EIG Advisor and the remainder related to other reimbursable expenses. The Company paid $554 and $878 in administrative services expenses to FS/EIG Advisor, or its affiliates, during the three months ended March 31, 2020 and 2019, respectively.

Potential Conflicts of Interest

The members of the senior management and investment teams of FS/EIG Advisor serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as the Company does, or of investment vehicles managed by the same personnel. In serving in these multiple and other capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in the Company’s best interests or in the best interest of the Company’s shareholders. The Company’s investment objectives may overlap with the investment objectives of such investment funds, accounts or other investment vehicles. For example, the Company may rely on FS/EIG Advisor to manage the Company’s day-to-day activities and to implement its investment strategy. FS/EIG Advisor, personnel of FS/EIG Advisor, and certain of their respective affiliates are presently, and plan in the future to continue to be, involved with activities which are unrelated to the Company. As a result of these activities, FS/EIG Advisor, its personnel and certain of its affiliates will have conflicts of interest in allocating their time between the Company and other activities in which they are or may become involved, including the management of other entities affiliated with FS Investments or EIG. FS/EIG Advisor and its employees will devote only as much of its or their time to the Company’s business as FS/EIG Advisor and its employees, in their judgment, determine is reasonably required, which may be substantially less than their full time.

Exemptive Relief

As a BDC, the Company is subject to certain regulatory restrictions in making its investments. For example, BDCs generally are not permitted to co-invest with certain affiliated entities in transactions originated by the BDC or its affiliates in the absence of an exemptive order from the SEC. However, BDCs are permitted to, and may, simultaneously co-invest in transactions where price is the only negotiated term. In an order dated June 4, 2013, or the Order, the SEC granted exemptive relief permitting the Company, subject to the satisfaction of certain conditions, to co-invest in certain privately negotiated investment transactions with certain affiliates of FS Advisor, including FS KKR Capital Corp., FS KKR Capital Corp. II, or collectively the Company’s co-investment affiliates. Effective April 9, 2018, or the JV Effective Date, and in connection with the transition of advisory services to a joint advisory relationship with EIG, the Company’s board of trustees authorized and directed that the Company (i) withdraw from the Order,

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 4. Related Party Transactions (Continued)

except with respect to any transaction in which the Company participated in reliance on the Order prior to the JV Effective Date, and (ii) rely on an exemptive relief order dated April 10, 2018, granted to EIG and its affiliates which permits the Company to participate in co-investment transactions with certain other EIG advised funds, or the EIG Order.

Expense Reimbursement

Pursuant to an expense support and conditional reimbursement agreement, amended and restated as of May 16, 2013, or, the expense reimbursement agreement, FS Investments agreed to reimburse the Company for expenses in an amount that is sufficient to ensure that no portion of the Company’s distributions to shareholders will be paid from its offering proceeds or borrowings.

Under the expense reimbursement agreement, FS Investments agreed to reimburse the Company quarterly for expenses in an amount equal to the difference between the Company’s cumulative distributions paid to its shareholders in each quarter, less the sum of the Company’s net investment company taxable income, net capital gains and dividends and other distributions paid to the Company on account of preferred and common equity investments in portfolio companies (to the extent such amounts are not included in net investment company taxable income or net capital gains) in each quarter.

Pursuant to the expense reimbursement agreement, the Company has a conditional obligation to reimburse FS Investments for any amounts funded by FS Investments under such agreement if (and only to the extent that), during any fiscal quarter occurring within three years of the date on which FS Investments funded such amount, the sum of the Company’s net investment company taxable income, net capital gains and the amount of any dividends and other distributions paid to the Company on account of preferred and common equity investments in portfolio companies (to the extent not included in net investment company taxable income or net capital gains) exceeds the distributions paid by the Company to its shareholders; provided, however, that (i) the Company will only reimburse FS Investments for expense support payments made by FS Investments with respect to any calendar quarter beginning on or after July 1, 2013 to the extent that the payment of such reimbursement (together with any other reimbursement paid during such fiscal year) does not cause “other operating expenses” (as defined below) (on an annualized basis and net of any expense support payments received by the Company during such fiscal year) to exceed the lesser of (A) 1.75% of the Company’s average net assets attributable to its common shares for the fiscal year-to-date period after taking such payments into account and (B) the percentage of the Company’s average net assets attributable to its common shares represented by “other operating expenses” during the fiscal year in which such expense support payment from FS Investments was made (provided, however, that this clause (B) shall not apply to any reimbursement payment which relates to an expense support payment from FS Investments made during the same fiscal year) and (ii) the Company will not reimburse FS Investments for expense support payments made by FS Investments if the aggregate amount of distributions per share declared by the Company in such calendar quarter is less than the aggregate amount of distributions per share declared by the Company in the calendar quarter in which FS Investments made the expense support payment to which such reimbursement relates. The Company is not obligated to pay interest on the payments it receives from FS Investments. “Other operating expenses” means the Company’s total “operating expenses” (as defined below), excluding base management fees, incentive fees, organization and offering expenses, financing fees and costs, interest expense, brokerage commissions and extraordinary expenses. “Operating expenses” means all operating costs and expenses incurred, as determined in accordance with GAAP for investment companies. The expense reimbursement agreement was terminated on the JV Effective Date. The Company’s conditional obligation to reimburse FS Investments pursuant to the terms of the expense reimbursement agreement survived the termination of the agreement. As of the JV Effective Date, the Company entered into an expense support and conditional reimbursement agreement with FS/EIG Advisor, or the FS/EIG expense reimbursement agreement, on substantially similar terms. During the

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 4. Related Party Transactions (Continued)

three months ended March 31, 2020, the Company did not pay any amounts in expense recoupments to FS Investments. As of March 31, 2020, $12,742 of reimbursements may become subject to repayment by the Company to FS Investments in the future.

The following table reflects the expense reimbursement payments from FS Investments to the Company as of March 31, 2020 that may become subject to repayment by the Company to FS Investments:

For the Three Months Ended	Amount of Expense Reimbursement Payment			Annualized “Other Operating Expenses” Ratio as of the Date of Expense Reimbursement		Annualized Rate of Distributions Per Share(1)		Reimbursement Eligibility Expiration
September 30, 2017		$	7,095		0.36%		9.91%	September 30, 2020
December 31, 2017			5,647		0.36%		10.57%	December 31, 2020
Total		$	12,742

(1)

The annualized rate of distributions per share is expressed as a percentage equal to the projected annualized distribution amount as of the end of the applicable period (which is calculated by annualizing the regular monthly cash distribution per share as of such date without compounding), divided by the Company’s distribution reinvestment price per share as of such date.

Note 5. Distributions

The following table reflects the cash distributions per share that the Company declared and paid on its common shares during the three months ended March 31, 2020 and 2019:

	Distribution
For the Three Months Ended	Per Share			Amount
Fiscal 2019
March 31, 2019		$	0.12500		$	54,616
Fiscal 2020
March 31, 2020		$	0.08333		$	36,207

The Company’s board of trustees has not declared regular cash distributions to shareholders for any period after March 31, 2020, and FS/EIG Advisor and the Company’s board of trustees expect that future cash distributions to shareholders will be suspended until such time that the Company’s board of trustees and FS/EIG Advisor believe that market conditions and the financial condition of the Company support the resumption of such distributions. There can be no assurance that the Company will be able to pay distributions in the future. The timing and amount of any future distributions to shareholders are subject to applicable legal restrictions and the sole discretion of the Company’s board of trustees.

The Company has adopted an “opt in” distribution reinvestment plan for its shareholders. As a result, if the Company makes a cash distribution, its shareholders will receive distributions in cash unless they specifically “opt in” to the distribution reinvestment plan so as to have their cash distributions reinvested in additional common shares. However, certain state authorities or regulators may impose restrictions from time to time that may prevent or limit a shareholder’s ability to participate in the distribution reinvestment plan.

On October 13, 2016, the Company further amended and restated its distribution reinvestment plan, or the amended distribution reinvestment plan, which first applied to the reinvestment of cash distributions

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 5. Distributions (Continued)

paid on or after November 30, 2016. Under the original plan, cash distributions to participating shareholders were reinvested in additional common shares at a purchase price equal to 90% of the public offering price per share in effect as of the date of issuance. Under the amended distribution reinvestment plan, cash distributions to participating shareholders will be reinvested in additional common shares at a purchase price determined by the Company’s board of trustees, or a committee thereof, in its sole discretion, that is (i) not less than the net asset value per common share as determined in good faith by the Company’s board of trustees or a committee thereof, in its sole discretion, immediately prior to the payment of the distribution and (ii) not more than 2.5% greater than the net asset value per common share as of such date. Any distributions reinvested under the plan will remain taxable to a U.S. shareholder.

The Company may fund its cash distributions to shareholders from any sources of funds legally available to it, including proceeds from the sale of the Company’s common shares, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to the Company on account of preferred and common equity investments in portfolio companies and expense reimbursements from FS Investments. The Company has not established limits on the amount of funds it may use from available sources to make distributions.

No portion of the distributions paid during the three months ended March 31, 2020 and 2019 were funded through the reimbursement of operating expenses by FS Investments, EIG or FS/EIG Advisor, as applicable. Any distributions funded through expense reimbursements or the offset or waiver of advisory fees are not based on the Company’s investment performance, and can only be sustained if the Company achieves positive investment performance in future periods and/or FS/EIG Advisor continues to offset or waive such fees. The Company’s future repayments of amounts reimbursed or offset by FS Investments or its affiliates will reduce the distributions that shareholders would otherwise receive in the future. During the three months ended March 31, 2020 and 2019, the Company did not repay any amounts to FS Investments or its affiliates for expenses previously reimbursed, offset or waived. There can be no assurance that the Company will continue to achieve the performance necessary to sustain its distributions or that the Company will be able to pay distributions at a specific rate or at all. FS Investments and FS/EIG Advisor have no obligation to offset or waive advisory fees or otherwise reimburse expenses in future periods.

The following table reflects the sources of the cash distributions on a tax basis that the Company paid on its common shares during the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
	2020					2019
Source of Distribution	Distribution Amount			Percentage		Distribution Amount			Percentage
Net investment income(1)		$	36,207		100%		$	54,616		100%
Short-term capital gains proceeds from the sale of assets			—		—			—		—
Long-term capital gains proceeds from the sale of assets			—		—			—		—
Return of capital			—		—			—		—
Total		$	36,207		100%		$	54,616		100%

(1)

During the three months ended March 31, 2020 and 2019, 76.8% and 91.9%, respectively, of the Company’s gross investment income was attributable to cash income earned, 9.1% and 2.6%, respectively, was attributable to paid-in-kind, or PIK, interest and 14.1% and 5.5%, respectively, was attributable to non-cash accretion of discount.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 5. Distributions (Continued)

The Company has in the past and may experience additional restructurings or defaults in the future. Any restructuring or default may have an impact on the level of income received by the Company.

The determination of the tax attributes of the Company’s distributions is made annually as of the end of the Company’s fiscal year based upon the Company’s taxable income for the full year and distributions paid for the full year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of the Company’s distributions for a full year. The actual tax characteristics of distributions to shareholders are reported to shareholders annually on Form 1099-DIV.

Net capital losses may be carried forward indefinitely, and their character is retained as short-term or long-term. As of March 31, 2020, the Company had short-term and long-term capital loss carryforwards available to offset future realized capital gains of $14,741 and $569,998, respectively.

As of March 31, 2020 and December 31, 2019, the gross unrealized appreciation on the Company’s investments, swap contracts and unrealized gain on foreign currency was $71,712 and $109,735, respectively, and the gross unrealized depreciation on the Company’s investments, swap contracts and unrealized loss on foreign currency was $1,510,374 and $790,173, respectively.

The aggregate cost of the Company’s investments for federal income tax purposes totaled $3,979,664 and $4,169,633 as of March 31, 2020 and December 31, 2019, respectively. The aggregate net unrealized appreciation (depreciation) on a tax basis was $(1,438,662) and $(680,438) as of March 31, 2020 and December 31, 2019, respectively.

As of March 31, 2020 and December 31, 2019, the Company had deferred tax assets of $152,470 and $135,803, respectively, resulting from net operating losses and capital losses of the Company’s wholly-owned taxable subsidiaries. As of March 31, 2020 and December 31, 2019, certain wholly-owned taxable subsidiaries anticipated that they would be unable to fully utilize their deferred tax assets, therefore the deferred tax assets were offset by valuation allowances of $152,470 and $135,803, respectively. For the three months ended March 31, 2020 and the year ended December 31, 2019, the Company did not record a provision for taxes related to its wholly-owned taxable subsidiaries.

Note 6. Financial Instruments

The Company may trade in financial instruments with off-balance sheet risk in the normal course of its investing activities. During the three months ended March 31, 2020 and 2019, the Company utilized swap contracts to economically hedge certain risks against natural gas and crude oil price exposure related to certain investments in the Company’s portfolio. While the use of these derivative instruments limits the downside risk of adverse price movements, their use also limits future revenues from upward price movements.

The Company’s fixed price swaps were settled monthly based on differences between the fixed price specified in the contract and the referenced settlement price. When the referenced settlement price was less than the price specified in the contract, the Company received an amount from the counterparty based on the price difference multiplied by the volume. Similarly, when the referenced settlement price exceeded the price specified in the contract, the Company paid the counterparty an amount based on the price difference multiplied by the volume. The prices contained in these fixed price swaps are based on the NYMEX Henry Hub for natural gas and the NYMEX West Texas Intermediate, or NYMEX WTI, for oil. Gas volumes are measured in one million British thermal units, or MMBtus, and oil volumes are measured in barrels, or Bbls. As of March 31, 2020, the Company did not have any fixed price swap positions.

In addition, the Company entered into oil basis swap positions, which settled on the pricing index to basis differential of Argus Light Louisiana Sweet Crude Oil, or Argus LLS, to NYMEX WTI. As of March 31, 2020, the Company did not have any oil basis swap positions for Argus LLS.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 6. Financial Instruments (Continued)

The fair value of swap contracts (which are not considered to be hedging instruments for accounting disclosure purposes) as of December 31, 2019 are as follows:

	December 31, 2019
Instrument	Asset(1)			Liability(2)
Swap Contracts – Crude Oil		$	6,262		$	280
Swap Contracts – Natural Gas			569			—
Total		$	6,831		$	280

(1)

Reflected on the Company’s consolidated balance sheets as: Unrealized appreciation on swap contracts.

(2)

Reflected on the Company’s consolidated balance sheets as: Unrealized depreciation on swap contracts.

The effect of swap contracts (which are not considered to be hedging instruments for accounting disclosure purposes) on the Company’s statements of operations for the three months ended March 31, 2020 and 2019 were as follows:

	Three Months Ended March 31,
	2020						2019
Instrument	Realized Gain (Loss) on Derivatives Recognized in Income(1)			Net Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized in Income(2)			Realized Gain (Loss) on Derivatives Recognized in Income(1)			Net Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized in Income(2)
Swap Contracts – Crude Oil		$	19,313		$	(5,982)		$	1,502		$	(12,091)
Swap Contracts – Natural Gas			937			(569)			29			(215)
Total		$	20,250		$	(6,551)		$	1,531		$	(12,306)

(1)

Reflected on the Company’s consolidated statements of operations as: Net realized gain (loss) on swap contracts.

(2)

Reflected on the Company’s consolidated statements of operations as: Net change in unrealized appreciation (depreciation) on swap contracts.

The following tables present the Company’s derivative assets and liabilities by counterparty, net of amounts available for offset under a master netting agreement as of December 31, 2019:

	December 31, 2019
Counterparty	Derivative Assets Subject to Master Netting Agreement			Derivatives Available for Offset			Net Amount of Derivative Assets(1)
BP Energy Co.		$	6,551		$	280		$	6,271
Macquarie Bank Ltd.			675			—			675
Total		$	7,226		$	280		$	6,946

Counterparty	Derivative Liabilities Subject to Master Netting Agreement			Derivatives Available for Offset			Net Amount of Derivative Liabilities(2)
BP Energy Co.		$	280		$	280		$	—
Macquarie Bank Ltd.			—			—			—
Total		$	280		$	280		$	—

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 6. Financial Instruments (Continued)

(1)

Net amount of derivative assets represents the net amount due to the Company from the counterparty in the event of default.

(2)

Net amount of derivative liabilities represents the net amount due from the Company to the counterparty in the event of default.

Note 7. Investment Portfolio

The following table summarizes the composition of the Company’s investment portfolio at cost and fair value as of March 31, 2020 and December 31, 2019:

	March 31, 2020 (Unaudited)								December 31, 2019
	Amortized Cost(1)			Fair Value			Percentage of Portfolio		Amortized Cost(1)			Fair Value			Percentage of Portfolio
Senior Secured Loans – First Lien		$	1,076,612		$	738,476		29%		$	1,252,529		$	1,134,571		33%
Senior Secured Loans – Second Lien			752,788			409,296		16%			752,528			564,813		16%
Senior Secured Bonds			519,259			408,598		16%			529,773			524,221		15%
Unsecured Debt			361,282			225,185		9%			398,233			323,220		9%
Preferred Equity			735,780			630,383		25%			711,883			721,842		21%
Sustainable Infrastructure Investments, LLC			60,264			52,581		2%			—			—		—
Equity/Other			436,793			76,502		3%			480,760			213,970		6%
Total		$	3,942,778		$	2,541,021		100%		$	4,125,706		$	3,482,637		100%

(1)

Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.

In general, under the 1940 Act, the Company would be presumed to “control” a portfolio company if it owned more than 25% of its voting securities or it had the power to exercise control over the management or policies of a portfolio company, and would be an “affiliated person” of a portfolio company if it owned 5% or more of its voting securities.

As of March 31, 2020, the Company held investments in two portfolio companies that it is deemed to “control.” As of March 31, 2020, the Company held investments in eight portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control.” For additional information with respect to such portfolio companies, see footnotes (y) and (z) to the unaudited consolidated schedule of investments as of March 31, 2020 in this quarterly report on Form 10-Q.

As of December 31, 2019, the Company held investments in one portfolio company that it is deemed to “control.” As of December 31, 2019, the Company held investments in seven portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control.” For additional information with respect to such portfolio companies, see footnotes (z) and (aa) to the consolidated schedule of investments as of December 31, 2019 in this quarterly report on Form 10-Q.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 7. Investment Portfolio (Continued)

The Company’s investment portfolio may contain loans or bonds that are in the form of lines of credit or revolving credit facilities, or other investments, pursuant to which the Company may be required to provide funding when requested by portfolio companies in accordance with the terms of the underlying agreements. As of March 31, 2020, the Company had ten senior secured loan investments with aggregate unfunded commitments of $78,051, one preferred equity investment, Rosehill Resources, Inc., with an unfunded commitment of $833 and unfunded commitments of $2,573 of Sustainable Infrastructure Investments, LLC. As of December 31, 2019, the Company had nine senior secured loan investments with aggregate unfunded commitments of $75,494 and two preferred equity investments with aggregate unfunded commitments of $10,927. As of December 31, 2019, these unfunded preferred equity investments were Limetree Bay Ventures, LLC and Rosehill Resources, Inc. The Company maintains sufficient cash on hand, available borrowings and liquid securities to fund such unfunded commitments should the need arise.

The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets in such industries as of March 31, 2020 and December 31, 2019:

	March 31, 2020 (Unaudited)					December 31, 2019
Industry Classification	Fair Value			Percentage of Portfolio		Fair Value			Percentage of Portfolio
Upstream		$	1,285,509		51%		$	1,802,396		52%
Midstream			864,494		34%			1,061,389		30%
Power			184,896		7%			421,388		12%
Service & Equipment			136,650		5%			178,586		5%
Industrials			16,891		1%			18,878		1%
Sustainable Infrastructure Investments, LLC(1)			52,581		2%			—		—
Total		$	2,541,021		100%		$	3,482,637		100%

(1)

Sustainable Infrastructure Investments, LLC is generally comprised of midstream, renewables and power assets.

Sustainable Infrastructure Investments, LLC

On January 2, 2020, Sustainable Infrastructure Investments, LLC, or SIIJV, a joint venture between the Company and Imperial Sustainable Infrastructure Investments, LLC, or Imperial, a subsidiary of Imperial Capital Asset Management, LLC, or ICAM, was entered into pursuant to the terms of an amended and restated limited liability company agreement of SIIJV between the Company and Imperial, or the SIIJV Agreement. The SIIJV Agreement requires the Company and Imperial to provide capital to SIIJV of up to $67,629 in US dollars and $5,430 in Canadian dollars in the aggregate where the Company and Imperial would provide 87.5% and 12.5%, respectively, of the committed capital. Pursuant to the terms of the SIIJV Agreement, the Company and Imperial each have 50% voting control of SIIJV and are required to agree on all investment decisions as well as all other significant actions for SIIJV. SIIJV invests in senior secured loans (both first lien and second lien) to middle market companies, broadly syndicated loans and other midstream, renewables and power assets. As administrative agent of SIIJV, the Company performs certain day-to-day management responsibilities on behalf of SIIJV and is entitled to a fee of 0.25% of SIIJV’s assets under administration, calculated and payable quarterly in arrears. As of March 31, 2020, the Company and Imperial have funded approximately $68,889 to SIIJV, of which $60,264 was from the Company. The Company does not consolidate SIIJV in its consolidated financial statements.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 7. Investment Portfolio (Continued)

On January 2, 2020, Seine Funding, LLC, or Seine Funding, a wholly-owned subsidiary of SIIJV, entered into a revolving credit facility, or the Seine Funding Facility, with certain financial institutions as lender, agent, collateral agent, collateral administrator, and collateral custodian, and SIIJV, as collateral manager. The Seine Funding Facility provides for borrowings in U.S. dollars and certain agreed upon foreign currencies in an aggregate principal amount of up to $634,103 on a committed basis, which may be increased under certain circumstances at the request of Seine Funding and with the consent of the lender and agent. The end of the reinvestment period for the Seine Funding Facility is December 31, 2020. The maturity date for the Seine Funding Facility is the earlier of (i) the latest maturity date among the assets securing the facility and (ii) the first date, after the end of the reinvestment period, on which all assets securing the facility are paid in full. Under the Seine Funding Facility, borrowings bear interest at the rate of three-month LIBOR (or the relevant reference rate for any foreign currency borrowings) (subject to a 0% floor) plus 1.20% per annum. Borrowings under the Seine Funding Facility are secured by a first priority security interest in substantially all of the assets of Seine Funding. As of March 31, 2020, total outstanding borrowings under the Seine Funding Facility were $609,996.

Below is a summary of SIIJV’s portfolio, followed by a listing of the individual loans in SIIJV’s portfolio as of March 31, 2020:

Total investments(1)	$	676,388
Weighted average current interest rate on debt investments(2)		3.27%
Number of portfolio assets in SIIJV		19
Largest investment in a single portfolio company(1)	$	90,000
Unfunded commitments(1)	$	23,396

(1)

At cost.

(2)

Computed as the (a) annual stated interest rate on accruing debt, divided by (b) total debt at par amount.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 7. Investment Portfolio (Continued)

Sustainable Infrastructure Investments, LLC Portfolio
As of March 31, 2020 (in thousands)

Portfolio Company(a)	Footnotes		Industry	Rate(b)		Maturity		Principal Amount(c)			Amortized Cost			Fair Value(d)
Senior Secured Loans – First Lien – 94.7%
AES DE Holdings V, LLC			Renewables		L+175		6/13/26		$	15,899		$	15,899		$	15,271
Alianca Transportadora de Gas Participacoes S.A.			Midstream		L+230		5/23/27			90,000			90,000			84,489
Astoria Energy II LLC			Power		L+150		8/31/24			61,181			61,181			59,947
Blue Heron Intermediate Holdco I, LLC			Midstream		L+175		4/22/24			34,557			34,557			33,733
Blue Heron Intermediate Holdco I, LLC		(e)	Midstream		L+175		4/22/24			204			204			204
Cedar Creek II LLC			Renewables		L+188		11/18/23			11,794			11,794			11,658
Ciclo Combinado Tierra Mojada s.r.l. de CV			Power		L+200		6/19/26			32,258			32,258			30,933
Conejo Solar SPA			Renewables		L+225		6/15/36			44,527			44,527			42,095
Copper Mountain Solar 3, LLC			Renewables		L+175		5/29/25			21,868			21,868			21,465
CPV Maryland, LLC		(f)	Power		L+425		3/31/22			13,177			13,177			13,117
DWBI Class B Member LLC			Renewables		L+175		4/30/25			24,548			24,548			23,651
Flex Intermediate Holdco, LLC			Midstream		L+250		5/15/23			85,000			85,000			83,753
FLNG Liquefaction 2, LLC			Midstream		L+150		12/31/26			32,714			32,714			31,123
FLNG Liquefaction 3, LLC			Midstream		L+175		4/28/22			6,961			6,961			6,594
FLNG Liquefaction 3, LLC		(e)	Midstream		L+175		4/28/22			23,192			23,192			23,192
Fowler Ridge Wind Farm LLC			Renewables		L+183		3/28/25			13,387			13,387			13,105
Meikle Wind Energy, LP		(g)	Renewables		C+150		5/29/24			17,674			13,596			12,216
NES Hercules Class B Member, LLC		(f)	Renewables		L+125		12/15/27			25,045			25,045			23,390
SP Armow Wind Ontario LP		(g)	Renewables		C+150		5/20/23			35,613			27,397			24,705
ST EIP Holdco LLC			Midstream		L+250		11/5/24			60,000			60,000			56,950
Top of the World Wind Energy LLC			Renewables		L+188		12/2/28			27,704			27,704			27,058
Total Senior Secured Loans – First Lien													665,009			638,649
Unfunded Loan Commitments													(23,396)			(23,396)
Net Senior Secured Loans – First Lien													641,613			615,253
Unsecured Debt – 5.3%
Sociedad Minera Cerro Verde S.A.A.			Power		L+190		6/19/22			34,775			34,775			34,572
Total Unsecured Debt													34,775			34,572
TOTAL INVESTMENTS – 100.0%												$	676,388		$	649,825

Percentages are shown as a percentage of total investments.

(a)

Security may be an obligation of one or more entities affiliated with the named company.

(b)

Certain variable rate securities in the Company’s portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of March 31, 2020, LIBOR was 1.45% and Canadian Dollar Offer Rate, or CDOR, was 1.24%. PIK means paid-in-kind. PIK income accruals may be adjusted based on the fair value of the underlying investment.

(c)

Denominated in U.S. dollars unless otherwise noted.

(d)

Security is classified as Level 3.

(e)

Security is an unfunded commitment. The stated rate reflects the spread disclosed at the time of commitment and may not indicate the actual rate received upon funding.

(f)

Position or portion thereof unsettled as of March 31, 2020.

(g)

Investment denominated in Canadian dollars. Amortized cost and fair value are converted into U.S. dollars as of March 31, 2020.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 7. Investment Portfolio (Continued)

Below is selected balance sheet information for SIIJV as of March 31, 2020:

Selected Balance Sheet Information
Total investments, at fair value	$	649,825
Cash and other assets		11,692
Total assets	$	661,517
Debt	$	609,996
Other liabilities		4,957
Total liabilities		614,953
Member’s equity	$	46,564

Below is selected statement of operations information for SIIJV for the three months ended March 31, 2020:

Selected Statement of Operations Information
Total investment income	$	6,985
Expenses
Interest expense		4,748
Custodian and accounting fees		41
Administrative services		14
Professional services		860
Other		10
Total expenses		5,673
Net investment income		1,312
Net realized and unrealized losses		(23,636)
Net increase in net assets resulting from operations	$	(22,324)

Note 8. Fair Value of Financial Instruments

Under existing accounting guidance, fair value is defined as the price that the Company would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment. This accounting guidance emphasizes valuation techniques that maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances. The Company classifies the inputs used to measure these fair values into the following hierarchy as defined by current accounting guidance:

Level 1: Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs that are quoted prices for similar assets or liabilities in active markets.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (Continued)

Level 3: Inputs that are unobservable for an asset or liability.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

As of March 31, 2020 and December 31, 2019, the Company’s investments were categorized as follows in the fair value hierarchy:

Valuation Inputs	March 31, 2020 (Unaudited)			December 31, 2019
Level 1 – Price quotations in active markets		$	4,055		$	46,522
Level 2 – Significant other observable inputs			365,177			856,930
Level 3 – Significant unobservable inputs			2,171,789			2,579,185
Total		$	2,541,021		$	3,482,637

As of December 31, 2019, the Company’s swap contracts were categorized as follows in the table below.

	December 31, 2019
Valuation Inputs	Assets			Liabilities
Level 1 – Price quotations in active markets		$	—		$	—
Level 2 – Significant other observable inputs			6,831			280
Level 3 – Significant unobservable inputs			—			—
Total		$	6,831		$	280

The Company’s investments consist primarily of debt investments that were acquired directly from the issuer. Debt investments, for which broker quotes are not generally available, are valued by independent valuation firms, which determine the fair value of such investments by considering, among other factors, the borrower’s ability to adequately service its debt, prevailing interest rates for like investments, call features, anticipated prepayments and other relevant terms of the investments. Except as described below, the Company’s investment in SIIJV and all of the Company’s preferred equity and equity/other investments are also valued by independent valuation firms, which determine the fair value of such investments by considering, among other factors, contractual rights ascribed to such investments, as well as various income scenarios and multiples of earnings before interest, taxes, depreciation and amortization, or EBITDA, cash flows, net income, revenues or, in limited instances, book value, PV-10 multiples or liquidation value. An investment that is newly issued and purchased near the date of the financial statements is valued at cost if the Company’s board of trustees determines that the cost of such investment is the best indication of its fair value. Such investments described above are typically classified as Level 3 within the fair value hierarchy. Investments that are traded on an active public market are valued at their closing price as of the date of the financial statements and are classified as Level 1 within the fair value hierarchy. In determining the fair values of swap contracts, the Company utilized an industry-standard pricing model that considers various inputs including quoted forward prices for commodities, time value and current market and contractual prices for the underlying instruments. These assumptions are observable in the marketplace or can be corroborated by active markets or broker quotes and are typically classified as Level 2 within the fair value hierarchy. Except as described above, the Company values its other investments by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which are provided by an independent third-party pricing service and screened for validity by such service and are typically classified as Level 2 within the fair value hierarchy.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (Continued)

The Company periodically benchmarks the bid and ask prices it receives from the third-party pricing service and/or dealers and independent valuation firms, as applicable, against the actual prices at which the Company purchases and sells its investments. Based on the results of the benchmark analysis and the experience of the Company’s management in purchasing and selling these investments, the Company believes that these prices are reliable indicators of fair value. The valuation committee of the board of trustees, or the valuation committee, and the board of trustees reviewed and approved the valuation determinations made with respect to these investments in a manner consistent with the Company’s valuation policy.

The following is a reconciliation for the three months ended March 31, 2020 and 2019 of investments for which significant unobservable inputs (Level 3) were used in determining fair value:

	For the Three Months Ended March 31, 2020
	Senior Secured Loans – First Lien			Senior Secured Loans – Second Lien			Senior Secured Bonds			Unsecured Debt			Preferred Equity			Sustainable Infrastructure Investments, LLC			Equity/ Other			Total
Fair value at beginning of period		$	569,778		$	533,234		$	437,761		$	149,300		$	721,842		$	—		$	167,270		$	2,579,185
Accretion of discount (amortization of premium)			565			109			678			153			5,976			—			—			7,481
Net realized gain (loss)			(1,131)			—			—			—			—			—			(4,662)			(5,793)
Net change in unrealized appreciation (depreciation)			(97,871)			(142,174)			(64,940)			(16,363)			(115,357)			(7,683)			(89,201)			(533,589)
Purchases			44,544			—			22,838			43,548			21,884			60,264			—			193,078
Paid-in-kind interest			781			—			—			286			6,132			—			—			7,199
Sales and repayments			(64,540)			—			—			—			(10,094)			—			(1,138)			(75,772)
Net transfers in or out of Level 3(1)			—			—			—			—			—			—			—			—
Fair value at end of period		$	452,126		$	391,169		$	396,337		$	176,924		$	630,383		$	52,581		$	72,269		$	2,171,789
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date		$	(102,588)		$	(142,174)		$	(64,940)		$	(16,363)		$	(115,657)		$	(7,683)		$	(89,201)		$	(538,606)

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (Continued)

	For the Three Months Ended March 31, 2019
	Senior Secured Loans – First Lien			Senior Secured Loans – Second Lien			Senior Secured Bonds			Unsecured Debt			Preferred Equity			Equity/ Other			Total
Fair value at beginning of period		$	761,125		$	539,172		$	456,575		$	55,906		$	498,167		$	238,485		$	2,549,430
Accretion of discount (amortization of premium)			276			279			604			137			2,638			—			3,934
Net realized gain (loss)			154			—			—			—			—			(7,859)			(7,705)
Net change in unrealized appreciation (depreciation)			15,249			(3,814)			2,844			(5,040)			28,607			23,783			61,629
Purchases			121,687			15,869			—			—			37			—			137,593
Paid-in-kind interest			304			1,095			268			244			344			—			2,255
Sales and repayments			(57,284)			—			—			—			—			(4,615)			(61,899)
Net transfers in or out of Level 3(1)			—			—			—			95,000			—			—			95,000
Fair value at end of period		$	841,511		$	552,601		$	460,291		$	146,247		$	529,793		$	249,794		$	2,780,237
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date		$	15,680		$	(3,814)		$	2,844		$	(5,040)		$	28,607		$	13,198		$	51,475

(1)

Transfers in or out of Level 3 were deemed to have occurred at the beginning of the period.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (Continued)

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements as of March 31, 2020 and December 31, 2019 were as follows:

Type of Investment

Fair Value at
March 31, 2020
(Unaudited)

Valuation Technique(1)

Unobservable Input

Range

Weighted
Average

Senior Secured Loans – First
Lien

392,242

Market Comparables

Market Yield (%)

7.0% – 26.5%

13.7%

EBITDA Multiples (x)

2.3x – 4.8x

3.6x

32,285

Discounted Cash Flow

Discount Rate (%)

19.0% – 24.0%

21.5%

27,599

Other(2)

N/A

Senior Secured Loans – Second Lien

373,462

Market Comparables

Market Yield (%)

8.8%- – 20.5%

10.9%

EBITDA Multiples (x)

0.3x – 2.7x

1.4x

17,707

Other(2)

N/A

Senior Secured Bonds

396,337

Market Comparables

Market Yield (%)

9.4% – 23.5%

17.5%

Unsecured Debt

150,424

Market Comparables

Market Yield (%)

13.5% – 19.8%

17.8%

Net Aircraft Book Value
Multiple (x)

0.9x – 1.0x

0.9x

26,500

Other(2)

N/A

Preferred Equity

8,665

Market Comparables

EBITDA Multiples (x)

3.0x – 7.5x

6.7x

621,718

Discounted Cash Flow

Discount Rate (%)

9.0% – 19.5%

15.3%

Sustainable Infrastructure Investments, LLC

52,581

Discounted Cash Flow

Discount Rate (%)

14.0% – 15.0%

14.5%

Equity/Other

69,166

Market Comparables

EBITDA Multiples (x)

2.5x – 7.5x

3.7x

Production Multiples (Mboe/d)

$11,250.0 – $26,250.0

21,544.0

Proved Reserves Multiples (Mmboe)

$2.1 – $8.3

6.5

Production Multiples (MMcfe/d)

$2,400.0 – $2,900.0

2,650.0

Proved Reserves Multiples (Bcfe)

0.6x – 0.7x

0.6x

PV-10 Multiples (x)

0.4x – 1.5x

1.0x

2,715

Discounted Cash Flow

Discount Rate (%)

14.5% – 31.0%

27.0%

388

Option Valuation Model

Volatility (%)

32.5% – 90.0%

63.4%

Total

2,171,789

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (Continued)

Type of Investment

Fair Value at
December 31, 2019

Valuation Technique(1)

Unobservable Input

Range

Weighted
Average

Senior Secured Loans – First Lien

478,337

Market Comparables

Market Yield (%)

7.5% – 27.0%

13.8%

EBITDA Multiples (x)

3.6x – 4.6x

4.1x

63,646

Discounted Cash Flow

Discount Rate (%)

18.5% – 23.5%

21.0%

27,795

Other(2)

N/A

Senior Secured Loans – Second Lien

533,234

Market Comparables

Market Yield (%)

8.5% – 19.1%

13.7%

EBITDA Multiples (x)

3.6x – 4.6x

4.1x

Senior Secured Bonds

437,761

Market Comparables

Market Yield (%)

7.9% – 12.1%

10.1%

Unsecured Debt

121,300

Market Comparables

Market Yield (%)

10.2% – 12.5%

10.6%

Net Aircraft Book Value
Multiple (x)

1.0x – 1.0x

1.0x

28,000

Other(2)

Other

N/A

Preferred Equity

13,187

Market Comparables

EBITDA Multiples (x)

6.8x-8.8x

8.4x

708,307

Discounted Cash Flow

Discount Rate (%)

9.3% – 19.0%

13.8%

348

Other(2)

N/A

Equity/Other

144,465

Market Comparables

EBITDA Multiples (x)

3.5x – 10.3x

4.6x

Production Multiples (Mboe/d)

$20,000.0 – $37,500.0

28,364.1

Proved Reserves Multiples (Mmboe)

$2.8 – $12.0

7.2

Production Multiples (MMcfe/d)

$3,050.0 – $3,550.0

3,300.0

Proved Reserves Multiples (Bcfe)

0.8x – 0.9x

0.9x

PV-10 Multiples (x)

0.5x – 1.2x

0.8x

1,354

Discounted Cash Flow

Discount Rate (%)

14.5% – 20.5%

17.5%

9,371

Option Valuation Model

Volatility (%)

24.0% – 37.5%

30.7%

12,080

Other(2)

N/A

Total

2,579,185

(1)

Investments using a market quotes valuation technique were valued by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which were provided by an independent third-party pricing service and screened for validity by such service. For investments utilizing a market comparables valuation technique, a significant increase (decrease) in the market yield, in isolation, would result in a significantly lower (higher) fair value measurement, and a significant increase (decrease) in any of the valuation multiples, in isolation, would result in a significantly higher (lower) fair value measurement. For investments utilizing a discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, in isolation, would result in a significantly lower (higher) fair value measurement. For investments utilizing an option valuation model valuation technique, a significant increase (decrease) in the volatility, in isolation, would result in a significantly higher (lower) fair value measurement.

(2)

Fair valued based on expected outcome of proposed corporate transactions, the expected value of the liquidation preference of the investment or other factors.

Note 9. Financing Arrangements

The following tables present a summary of information with respect to the Company’s outstanding financing arrangements as of March 31, 2020 and December 31, 2019. For additional information regarding these financing arrangements, see the notes to the Company’s audited consolidated financial statements contained in its annual report on Form 10-K for the year ended December 31, 2019 and the additional disclosure set forth in this Note 9.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 9. Financing Arrangements (Continued)

	As of March 31, 2020 (Unaudited)
Arrangement(1)	Type of Arrangement	Rate(2)	Amount Outstanding			Amount Available			Maturity Date
Goldman Facility(3)	Term	L+3.20%		$	425,000		$	50,000	December 2, 2022
JPMorgan Facility(4)	Revolving/Term	L+2.75%			416,667			278,333	February 16, 2023
Senior Secured Notes(5)	Bond	7.50%			500,000			—	August 15, 2023
Total				$	1,341,667		$	328,333

	As of December 31, 2019
Arrangement(1)	Type of Arrangement	Rate	Amount Outstanding			Amount Available			Maturity Date
Goldman Facility	Term	L+3.20%		$	425,000		$	50,000	December 2, 2022
JPMorgan Facility	Revolving/Term	L+2.75%			311,667			383,333	February 16, 2023
Senior Secured Notes(5)	Bond	7.50%			500,000			—	August 15, 2023
Total				$	1,236,667		$	433,333

(1)

The carrying amount outstanding under the facility approximates its fair value, unless otherwise noted.

(2)

LIBOR is subject to a 0.00% floor.

(3)

On April 1, 2020, the Goldman Facility was amended to, among other things, increase the interest rate to L+7.50% per annum through July 1, 2020, and L+5.20% thereafter. On and after that date, Gladwyne Funding permanently prepaid an aggregate amount of $225,000 of the outstanding loans, reducing the outstanding facility amount to $200,000.

(4)

On April 9, 2020, the JPMorgan Facility was amended to, among other things, reduce the revolving loan commitments to $185,000 (the amount of revolving loans then outstanding), thereby reducing the amount available at that time to $0 and bringing the total outstanding facility amount to $416,667. The amendment also provided that additional prepayments of revolving loans will permanently reduce the revolving loan commitments to $140,000, at which point any further prepayments of revolving loans may be reborrowed.

(5)

As of March 31, 2020 and December 31, 2019, the fair value of the Senior Secured Notes was approximately $450,210 and $507,500, respectively. These valuations are considered Level 2 valuations within the fair value hierarchy.

For the three months ended March 31, 2020 and 2019, the components of total interest expense for the Company’s financing arrangements were as follows:

	Three Months Ended March 31,
	2020									2019
Arrangement(1)	Direct Interest Expense(2)			Amortization of Deferred Financing Costs and Discount			Total Interest Expense			Direct Interest Expense(2)			Amortization of Deferred Financing Costs and Discount			Total Interest Expense
Goldman Facility		$	5,484		$	67		$	5,551		$	6,886		$	159		$	7,045
JPMorgan Facility			4,665			447			5,112			3,942			379			4,321
Senior Secured Notes			9,375			1,018			10,393			9,375			998			10,373
Total		$	19,524		$	1,532		$	21,056		$	20,203		$	1,536		$	21,739

(1)

Borrowings of each of the Company’s wholly-owned special-purpose financing subsidiaries are considered borrowings of the Company for purposes of complying with the asset coverage requirements applicable to BDCs under the 1940 Act.

(2)

Direct interest expense includes the effect of non-usage fees, administration fees and make-whole fees, if any.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 9. Financing Arrangements (Continued)

The Company’s average borrowings and weighted average interest rate, including the effect of non-usage fees, for the three months ended March 31, 2020 were $1,307,766 and 5.91%, respectively. As of March 31, 2020, the Company’s effective interest rate on borrowings was 5.72%.

The Company’s average borrowings and weighted average interest rate, including the effect of non-usage fees, for the three months ended March 31, 2019 were $1,189,333 and 6.79%, respectively. As of March 31, 2019, the Company’s effective interest rate on borrowings was 6.74%.

Recent events such as the rapid spread of the COVID-19 pandemic and the recent failure of Saudi Arabia, Russia and other oil producing countries to reach an agreement around crude oil production that in turn has severely depressed the price of oil and the associated impacts from these events on the U.S. and global economies (including energy markets), have negatively impacted, and are likely to continue to negatively impact, the business operations of some of the Company’s portfolio companies. The Company cannot at this time fully predict the impact of these events on its business or the business of its portfolio companies, their duration or magnitude or the extent to which they will negatively impact the Company’s portfolio companies’ operating results or the Company’s own results of operations or financial condition. The Company expects that certain of its portfolio companies will continue to experience economic distress for the foreseeable future and may become insolvent or otherwise significantly limit business operations if subjected to prolonged economic distress, including as a result of the depressed price of oil or other declines in the energy markets. These developments could result in a further decrease in the value of the Company’s investments.

These events have already had adverse effects on the Company’s investment income and the Company expects that such adverse effects will continue for some time. These adverse effects may require the Company to restructure certain of its investments, which could result in further reductions to the Company’s investment income or in impairments on the Company’s investments. In addition, disruptions in the capital markets have resulted in illiquidity in certain market areas. These market disruptions and illiquidity are likely to have an adverse effect on the Company’s business, financial condition, results of operations and cash flows. Unfavorable economic conditions caused by these events can also be expected to increase the Company’s funding costs and limit its access to the capital markets. These events have limited the Company’s investment originations, which is likely to continue for the immediate future, and have also had a material negative impact on the Company’s operating results. In addition, depressed mark-to-market valuations of many of the Company’s portfolio companies have materially reduced the value of collateral available to secure the Company’s financing arrangements, and consequently have adversely impacted the Company’s liquidity and may continue to do so in the future.

Under its financing arrangements, the Company has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar financing arrangements. As a result of the events described above, the Company has needed to sell certain investments to satisfy certain margin obligations, and if current market conditions persist or worsen, the Company may need to sell additional investments at similarly or even more disadvantageous prices, or enter into other transactions on terms that are disadvantageous to the Company, to satisfy obligations under its financing arrangements. The Company did not comply with covenants under certain of its financing arrangements relating to the Company’s level of shareholder equity as of March 31, 2020. Accordingly, in early April 2020, the Company obtained waivers from the other parties to the applicable financing arrangements to satisfy those covenants. The Company was otherwise in compliance with all covenants required by its financing arrangements as of March 31, 2020.The Company was in compliance with all covenants required by its financing arrangements as of December 31, 2019.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 9. Financing Arrangements (Continued)

Goldman Facility

On April 1, 2020, Gladwyne Funding LLC, or Gladwyne Funding, a wholly-owned special-purpose financing subsidiary of the Company, the Company, Goldman Sachs Bank U.S.A., or Goldman, and Wells Fargo Bank, National Association, or Wells Fargo, entered into a letter agreement, or the Goldman Letter Agreement, in respect of (i) the Gladwyne Funding’s term loan facility with Goldman, or as amended, the Goldman Facility and (ii) that certain Non-Recourse Carveout Guaranty Agreement, dated as of December 2, 2019, or the Limited Guaranty, by the Company and in favor of Goldman and Wells Fargo, as collateral agent. The Goldman Letter Agreement provides that through July 1, 2020, or the Standstill Period, certain provisions of the Goldman Facility, the Limited Guaranty and the related transaction documents shall not be operative and none of Goldman, Wells Fargo or any of the lenders party to the Goldman Facility shall exercise any remedies in connection with such provisions. In addition, the Goldman Letter Agreement provides for certain amendments to the Goldman Facility, including a suspension of all financial covenants during the Standstill Period. Pursuant to the Goldman Letter Agreement, the interest rate under the Goldman Facility has increased to LIBOR plus 750 basis points per annum (from LIBOR plus 320 basis points per annum) during the Standstill Period before decreasing to LIBOR plus 520 basis points per annum when the Standstill Period ends. In connection with the execution of the Goldman Letter Agreement, Gladwyne Funding prepaid $205,000 under the Goldman Facility and agreed to prepay an additional $20,000 after closing using cash proceeds from asset sales, principal proceeds and interest proceeds.

One of the purposes of the Goldman Letter Agreement is to allow the parties thereto to discuss proposals for addressing various credit matters, with a view to possibly entering into further modifications to the Goldman Facility and the Limited Guaranty. The Company is currently engaged in discussions with respect to such credit matters; however, there can be no assurance that the Company will reach any agreement with respect to those matters by the end of the Standstill Period, if at all.

Gladwyne Funding incurred certain customary costs and expenses in connection with the closing of the Goldman Letter Agreement.

JPMorgan Facility

On April 9, 2020, the Company entered into Amendment No. 1 and Waiver, or the JPMorgan Amendment, to the Company’s senior secured revolving credit facility with JPMorgan Chase Bank, N.A., or JPMorgan, as administrative agent and collateral agent, and the other lenders and agents party thereto, or as amended, the JPMorgan Facility. The JPMorgan Amendment reduces revolving loan commitments under the JPMorgan Facility to $185,000, which amount is equal to the amount of currently outstanding revolving loans under the JPMorgan Facility. Upon the occurrence of certain events and subject to certain specified thresholds, the JPMorgan Amendment would require the Company to make certain prepayments of outstanding loans and additional reductions of the revolving commitments. The JPMorgan Amendment also reduces the minimum shareholders’ equity the Company is required to maintain as of the end of each fiscal quarter, to $900,000 for the fiscal quarters ending in March, June and September of 2020 and $1,150,000 for each fiscal quarter thereafter. Additionally, the JPMorgan Amendment restricts the ability of the Company to make most discretionary cash dividends and distributions and other restricted payments.

The Company incurred certain customary fees, costs and expenses in connection with the closing of the JPMorgan Amendment.

Note 10. Commitments and Contingencies

The Company enters into contracts that contain a variety of indemnification provisions. The Company’s maximum exposure under these arrangements is unknown; however, the Company has not had prior claims

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 10. Commitments and Contingencies (Continued)

or losses pursuant to these contracts. FS/EIG Advisor has reviewed the Company’s existing contracts and expects the risk of loss to the Company to be remote.

The Company is not currently subject to any material legal proceedings and, to the Company’s knowledge, no material legal proceedings are threatened against the Company. From time to time, the Company may be party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with its portfolio companies. While the outcome of any legal proceedings cannot be predicted with certainty, the Company does not expect that any such proceedings will have a material effect upon its financial condition or results of operations.

See Note 4 for a discussion of the Company’s commitments to FS Advisor, FS/EIG Advisor and its affiliates (including FS Investments) and Note 7 for a discussion of the Company’s unfunded commitments.

Note 11. Financial Highlights

The following is a schedule of financial highlights of the Company for the three months ended March 31, 2020 and the year ended December 31, 2019:

	Three Months Ended March 31, 2020 (Unaudited)			Year Ended December 31, 2019
Per Share Data:(1)
Net asset value, beginning of period		$	5.43		$	6.01
Results of operations(2)
Net investment income			0.09			0.46
Net realized gain (loss) and unrealized appreciation (depreciation)			(1.85)			(0.54)
Net increase (decrease) in net assets resulting from operations			(1.76)			(0.08)
Shareholder distributions(3)
Distributions from net investment income			(0.08)			(0.50)
Net decrease in net assets resulting from shareholder distributions			(0.08)			(0.50)
Capital share transactions
Issuance of common shares(4)			—			—
Repurchases of common shares(5)			—			—
Net increase (decrease) in net assets resulting from capital share transactions			—			—
Net asset value, end of period		$	3.59		$	5.43
Shares outstanding, end of period			436,755,981			438,477,007
Total return(6)			(33.00)%			(1.83)%
Total return (without assuming reinvestment of distributions)(6)			(32.41)%			(1.33)%
Ratio/Supplemental Data:
Net assets, end of period		$	1,568,124		$	2,379,605
Ratio of net investment income to average net assets(7)			6.67%			7.76%
Ratio of total operating expenses to average net assets(7)			7.07%			6.54%
Portfolio turnover(8)			6.43%			32.88%
Total amount of senior securities outstanding, exclusive of treasury securities		$	1,341,667		$	1,236,667
Asset coverage per unit(9)			2.17			2.92

(1)

Per share data may be rounded in order to recompute the ending net asset value per share.

(2)

The per share data was derived by using the weighted average shares outstanding during the applicable period.

(3)

The per share data for distributions reflects the actual amount of distributions paid per share during the applicable period.

(4)

The issuance of common shares on a per share basis reflects the incremental net asset value changes as a result of the issuance of common shares pursuant to the Company’s distribution reinvestment plan. The issuance of common shares at a price that is greater than the net asset value per share results in an increase in net asset value per share.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 11. Financial Highlights (Continued)

(5)

The per share impact of the Company’s repurchases of common shares was a reduction to net asset value of less than $0.01 per share during each period.

(6)

The total return for each period presented was calculated based on the change in net asset value during the applicable period, including the impact of distributions reinvested in accordance with the Company’s distribution reinvestment plan. The total return (without assuming reinvestment of distributions) for each period presented was calculated by taking the net asset value per share as of the end of the applicable period, adding the cash distributions per share which were declared during the applicable period and dividing the total by the net asset value per share at the beginning of the applicable period. The total returns do not consider the effect of any sales commissions or charges that may be incurred in connection with the sale of the Company’s common shares. The total returns include the effect of the issuance of common shares at a net offering price that is greater than net asset value per share, which causes an increase in net asset value per share. The historical calculations of total returns in the table should not be considered representations of the Company’s future total returns, which may be greater or less than the returns shown in the table due to a number of factors, including the Company’s ability or inability to make investments in companies that meet its investment criteria, the interest rates payable on the debt securities the Company acquires, the level of the Company’s expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which the Company encounters competition in its markets and general economic conditions. As a result of these factors, results for any previous period should not be relied upon as being indicative of performance in future periods. The total return calculations set forth above represent the total returns on the Company’s investment portfolio during the applicable period and do not represent actual returns to shareholders.

(7)

Weighted average net assets during the applicable period are used for this calculation. Ratios for the three months ended March 31, 2020 are annualized. Annualized ratios for the three months ended March 31, 2020 are not necessarily indicative of the ratios that may be expected for the year ending December 31, 2020. The following is a schedule of supplemental ratios for the three months ended March 31, 2020 and year ended December 31, 2019:

			Three Months Ended March 31, 2020 (Unaudited)						Year Ended December 31, 2019
Ratio of interest expense to average net assets					3.67%						3.40%

(8)

Portfolio turnover for the three months ended March 31, 2020 is not annualized.

(9)

Asset coverage per unit is the ratio of the carrying value of the Company’s total consolidated assets, less liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness.

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(in thousands, except share and per share amounts)

The information contained in this section should be read in conjunction with our unaudited consolidated financial statements and related notes thereto included elsewhere in this quarterly report on Form 10-Q. In this report, “we,” “us” and “our” refer to FS Energy and Power Fund and “FS/EIG Advisor” refers to FS/EIG Advisor, LLC.

Forward-Looking Statements

Some of the statements in this quarterly report on Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q may include statements as to:

•

our future operating results;

•

our business prospects and the prospects of the companies in which we may invest, including our and their ability to achieve our respective objectives as a result of the current COVID-19 pandemic;

•

the impact of the investments that we expect to make;

•

the ability of our portfolio companies to achieve their objectives;

•

our current and expected financing arrangements and investments;

•

changes in the general interest rate environment;

•

the adequacy of our cash resources, financing sources and working capital;

•

the timing and amount of cash flows, distributions and dividends, if any, from our portfolio companies;

•

our contractual arrangements and relationships with third parties;

•

actual and potential conflicts of interest with FS/EIG Advisor, FS Investments, EIG, or any of their respective affiliates;

•

the dependence of our future success on the general economy and its effect on the industries in which we may invest;

•

general economic and political trends and other external factors, including the current COVID-19 pandemic and related disruptions caused thereby;

•

our use of financial leverage;

•

the ability of FS/EIG Advisor to locate suitable investments for us and to monitor and administer our investments;

•

the ability of FS/EIG Advisor or its affiliates to attract and retain highly talented professionals;

•

our ability to maintain our qualification as a RIC and as a BDC;

•

the impact on our business of the Dodd-Frank Act, as amended, and the rules and regulations issued thereunder;

•

the effect of changes to tax legislation and our tax position; and

•

the tax status of the enterprises in which we may invest.

In addition, words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason. Factors that could cause actual results to differ materially include:

•

changes in the economy;

•

risks associated with possible disruption in our operations or the economy generally due to terrorism, natural disasters or pandemics; and

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•

future changes in laws or regulations and conditions in our operating areas.

We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. Shareholders are advised to consult any additional disclosures that we may make directly to shareholders or through reports that we may file in the future with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The forward-looking statements and projections contained in this quarterly report on Form 10-Q are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Overview

We were formed as a Delaware statutory trust under the Delaware Statutory Trust Act on September 16, 2010 and formally commenced investment operations on July 18, 2011. We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act and has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a RIC under Subchapter M of the Code. In November 2016, we closed our continuous public offering of common shares to new investors.

Our investment activities are managed by FS/EIG Advisor and supervised by our board of trustees, a majority of whom are independent. Under the FS/EIG investment advisory agreement, we have agreed to pay FS/EIG Advisor an annual base management fee based on the average weekly value of our gross assets and an incentive fee based on our performance.

Our investment policy is to invest, under normal circumstances, at least 80% of our total assets in securities of Energy companies. This investment policy may not be changed without at least 60 days’ prior notice to holders of our common shares of any such change.

Our investment objective is to generate current income and long-term capital appreciation. We pursue our investment objective by focusing on the following seven investment themes: (i) basin-on-basin competition in U.S. shale, (ii) globalization of natural gas, (iii) coal retirements and the evolving energy generation mix, (iv) renewables focused on power grid parity, (v) export infrastructure for emerging U.S. producers, (vi) market liberalization opening new markets and (vii) midstream infrastructure connecting new supplies. However, we may pursue other investment opportunities if we believe it is in our best interests and consistent with our investment objectives.

Within the above investment themes, we intend to focus on the following investment categories, which we believe will allow us to generate an attractive total return with an acceptable level of risk.

Direct Originations: Through FS/EIG Advisor, we intend to directly source investment opportunities across the Energy industry. Such investments are typically originated and structured through a negotiated process in which we directly participate and are not generally available to the broader market. These investments may include both debt and equity components. We believe directly originated investments may offer higher returns and more favorable protections than broadly syndicated transactions.

Broadly Syndicated Loan and Bond Transactions: Although our primary focus is to invest in directly originated transactions, in certain circumstances we will also invest in the broadly syndicated loan and high yield bond markets. Broadly syndicated loans and bonds are generally more liquid than our directly originated investments and provide a complement to our less liquid strategies.

In the case of broadly syndicated investments, we generally intend to capitalize on market inefficiencies by investing in loans, bonds, and other asset classes where the market price of such investment reflects a lower value than we believe is warranted based on our fundamental analysis, providing us with an opportunity to earn an attractive return on our investment.

Our portfolio is comprised primarily of income-oriented securities, which principally refers to debt securities and income-oriented preferred and common equity interests, of privately-held Energy companies

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within the United States. We expect to invest primarily in directly originated investments and primary market transactions, as this will provide us with the ability to tailor investments to best match a project’s or company’s needs with our investment objectives. We intend to weight our portfolio towards senior secured debt and directly originated preferred equity investments, which we believe offer opportunities for superior risk-adjusted returns and income generation. Our debt investments may take the form of corporate or project loans or bonds, may be secured or unsecured and may, in some cases, be accompanied by yield enhancements. These yield enhancements are typically expected to include royalty interests in mineral, oil and gas properties, warrants, options, net profits interests, cash flow participations or other forms of equity participation that can provide additional consideration or “upside” in a transaction. Our preferred equity investments are mostly directly originated and may take the form of perpetual or redeemable securities, typically with a current income component and minimum base returns. In addition, certain income-oriented preferred or common equity interests may include interests in master limited partnerships and a portion of our portfolio may be comprised of derivatives, including the use of total return swaps, credit default swaps and other commodity swap contracts. In connection with certain of our debt investments or any restructuring of these debt investments, we may on occasion receive equity interests, including warrants or options, as additional consideration or otherwise in connection with a restructuring. FS/EIG Advisor will seek to tailor our investment focus as market conditions evolve.

Revenues

The principal measure of our financial performance is net increase or decrease in net assets resulting from operations, which includes net investment income, net realized gain or loss on investments, net realized gain or loss on foreign currency, net realized gain or loss on swap contracts, net change in unrealized appreciation or depreciation on investments, net change in unrealized gain or loss on foreign currency investments and net change in unrealized gain or loss on swap contracts. Net investment income is the difference between our income from interest, dividends, fees and other investment income and our operating and other expenses. Net realized gain or loss on investments is the difference between the proceeds received from dispositions of portfolio investments and their amortized cost, including the respective realized gain or loss on foreign currency for those foreign denominated investment transactions. Net realized gain or loss on foreign currency is the portion of realized gain or loss attributable to foreign currency fluctuations. Net realized gain or loss on swap contracts is the portion of realized gain or loss attributable to the difference between the fixed price specified in the contract and the referenced settlement price. Net change in unrealized appreciation or depreciation on investments is the net change in the fair value of our investment portfolio, including the respective unrealized gain or loss on foreign currency for those foreign denominated investments. Net change in unrealized gain or loss on foreign currency is the net change in the value of receivables or accruals due to the impact of foreign currency fluctuations. Net change in unrealized gain or loss on swap contracts is the net change in the value of receivables or accruals due to the impact of the difference between the fixed price specified in the contract and the referenced settlement price.

We principally generate revenues in the form of interest income on the debt investments we hold. We also generate revenues in the form of dividends and other distributions on the equity or other securities we may hold. In addition, we may generate revenues in the form of non-recurring commitment, closing, origination, structuring or diligence fees, fees for providing managerial assistance, consulting fees, prepayment fees and performance-based fees.

Expenses

Our primary operating expenses include the payment of management and incentive fees and other expenses under the FS/EIG investment advisory agreement, interest expense from financing arrangements and other indebtedness, and other expenses necessary for our operations. The management and incentive fees compensate FS/EIG Advisor for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments.

FS/EIG Advisor oversees our day-to-day operations, including the provision of general ledger accounting, fund accounting, legal services, investor relations, certain government and regulatory affairs activities, and other administrative services. FS/EIG Advisor also performs, or oversees the performance of, our corporate operations and required administrative services, which includes being responsible for the

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financial records that we are required to maintain and preparing reports for our shareholders and reports filed with the SEC. In addition, FS/EIG Advisor assists us in calculating our net asset value, overseeing the preparation and filing of tax returns and the printing and dissemination of reports to our shareholders, and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others.

We reimburse FS/EIG Advisor for expenses necessary to perform services related to our administration and operations, including FS/EIG Advisor’s allocable portion of the compensation and related expenses of certain personnel of FS Investments and EIG providing administrative services to us on behalf of FS/EIG Advisor, and for transactional expenses for prospective investments, such as fees and expenses associated with performing due diligence reviews of investments that do not close, often referred to as “broken deal” costs. We reimburse FS/EIG Advisor no less than quarterly for all costs and expenses incurred by FS/EIG Advisor in performing its obligations and providing personnel under the FS/EIG investment advisory agreement. The amount of this reimbursement is set at the lesser of (1) FS/EIG Advisor’s actual costs incurred in providing such services and (2) the amount that we estimate would be required to pay alternative service providers for comparable services in the same geographic location. FS/EIG Advisor allocates the cost of such services to us based on factors such as time allocations and other reasonable metrics. Our board of trustees reviews the methodology employed in determining how the expenses are allocated to us and assesses the reasonableness of such reimbursements for expenses allocated to us based on the breadth, depth and quality of such services as compared to the estimated cost to us of obtaining similar services from third-party service providers known to be available. In addition, our board of trustees considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, our board of trustees compares the total amount paid to FS/EIG Advisor for such services as a percentage of our net assets to the same ratio as reported by other comparable BDCs. We do not reimburse FS/EIG Advisor for any services for which it receives a separate fee, or for rent, depreciation, utilities, capital equipment or other administrative items allocated to a controlling person of FS/EIG Advisor.

We bear all other expenses of our operations and transactions, including all other expenses incurred by FS/EIG Advisor in performing services for us and administrative personnel paid by FS/EIG Advisor, to the extent they are not controlling persons of FS/EIG Advisor or any of its affiliates, subject to the limitations included in the FS/EIG investment advisory agreement.

In addition, we have contracted with State Street to provide various accounting and administrative services, including, but not limited to, preparing preliminary financial information for review by FS/EIG Advisor, preparing and monitoring expense budgets, maintaining accounting and corporate books and records, processing trade information provided by us and performing testing with respect to RIC compliance.

For information regarding our fee offset and historical expense reimbursement arrangements with FS Investments and FS/EIG Advisor, see Note 4 to our unaudited consolidated financial statements included herein.

COVID-19 and Energy Market Developments

Recent events such as the rapid spread of the COVID-19 pandemic and the recent failure of Saudi Arabia, Russia and other oil producing countries to reach an agreement around crude oil production that in turn has severely depressed the price of oil and the associated impacts from these events on the U.S. and global economies (including energy markets), have negatively impacted, and are likely to continue to negatively impact, the business operations of some of our portfolio companies. We cannot at this time fully predict the impact of these events on our business or the business of our portfolio companies, their duration or magnitude or the extent to which they will negatively impact our portfolio companies’ operating results or our own results of operations or financial condition. We expect that certain of our portfolio companies will continue to experience economic distress for the foreseeable future and may become insolvent or otherwise significantly limit business operations if subjected to prolonged economic distress, including as a result of the depressed price of oil or other declines in the energy markets. These developments could result in a further decrease in the value of our investments.

These events have already had adverse effects on our investment income and we expect that such adverse effects will continue for some time. These adverse effects may require us to restructure certain of

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our investments, which could result in further reductions to our investment income or in impairments on our investments. In addition, disruptions in the capital markets have resulted in illiquidity in certain market areas. These market disruptions and illiquidity are likely to have an adverse effect on our business, financial condition, results of operations and cash flows. Unfavorable economic conditions caused by these events can also be expected to increase our funding costs and limit our access to the capital markets. These events have limited our investment originations, which is likely to continue for the immediate future, and have also had a material negative impact on our operating results. In addition, depressed mark-to-market valuations of many of our portfolio companies have materially reduced the value of collateral available to secure our financing arrangements, and consequently have adversely impacted our liquidity and may continue to do so in the future.

In particular, as a result of these events, we have needed to sell certain investments to satisfy certain margin obligations, and if current market conditions persist or worsen, we may need to sell additional investments at similarly or even more disadvantageous prices, or enter into other transactions on terms that are disadvantageous to us, to satisfy obligations under our financing arrangements.

In light of such difficult market conditions and in an effort to preserve our liquidity, we previously determined to suspend for an indefinite period of time our share repurchase program and will reassess our ability to recommence such program in future periods. Moreover, our board of trustees has not declared regular cash distributions to shareholders for any period after March 31, 2020, and we expect that future cash distributions to shareholders will be suspended until such time that we believe that market conditions and our financial condition support the resumption of such distributions. Accordingly, there can be no assurance that we will be able to pay distributions in the future.

We will continue to carefully monitor the impact of both the COVID-19 pandemic and disruptions in the energy markets on our business and the business of our portfolio companies. Because the full effects of these events are not capable of being known at this time, we cannot estimate the impacts on our financial condition, results of operations or cash flows. We do, however, expect that these events will continue to have a negative impact on our business and the financial condition of our portfolio companies.

Portfolio Investment Activity for the Three Months Ended March 31, 2020 and for the Year Ended
December 31, 2019

Total Portfolio Activity

The following tables present certain selected information regarding our portfolio investment activity for the three months ended March 31, 2020 and the year ended December 31, 2019:

Net Investment Activity	For the Three Months Ended March 31, 2020			For the Year Ended December 31, 2019
Purchases		$	208,432		$	1,240,325
Sales and Repayments			(352,174)			(1,313,072)
Net Portfolio Activity		$	(143,742)		$	(72,747)

	For the Three Months Ended March 31, 2020					For the Year Ended December 31, 2019
New Investment Activity by Asset Class	Purchases			Percentage		Purchases			Percentage
Senior Secured Loans – First Lien		$	59,898		29%		$	677,674		55%
Senior Secured Loans – Second Lien			—		—			175,756		14%
Senior Secured Bonds			22,838		11%			66,393		5%
Unsecured Debt			43,548		21%			63,668		5%
Preferred Equity			21,884		10%			242,227		20%
Sustainable Infrastructure Investments, LLC			60,264		29%			—		—
Equity/Other			—		—			14,607		1%
Total		$	208,432		100%		$	1,240,325		100%

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The following table summarizes the composition of our investment portfolio at cost and fair value as of March 31, 2020 and December 31, 2019:

	March 31, 2020 (Unaudited)								December 31, 2019
	Amortized Cost(1)			Fair Value			Percentage of Portfolio		Amortized Cost(1)			Fair Value			Percentage of Portfolio
Senior Secured Loans – First Lien		$	1,076,612		$	738,476		29%		$	1,252,529		$	1,134,571		33%
Senior Secured Loans – Second Lien			752,788			409,296		16%			752,528			564,813		16%
Senior Secured Bonds			519,259			408,598		16%			529,773			524,221		15%
Unsecured Debt			361,282			225,185		9%			398,233			323,220		9%
Preferred Equity			735,780			630,383		25%			711,883			721,842		21%
Sustainable Infrastructure Investments, LLC			60,264			52,581		2%			—			—		—
Equity/Other			436,793			76,502		3%			480,760			213,970		6%
Total		$	3,942,778		$	2,541,021		100%		$	4,125,706		$	3,482,637		100%

(1)

Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.

The following table presents certain selected information regarding the composition of our investment portfolio as of March 31, 2020 and December 31, 2019:

	March 31, 2020			December 31, 2019
Number of Portfolio Companies			71			77
% Variable Rate (based on fair value)			44.6%			47.4%
% Fixed Rate (based on fair value)			25.5%			25.7%
% Income Producing Preferred Equity and Equity/Other Investments (based on fair value)			26.5%			20.3%
% Non-Income Producing Preferred Equity and Equity/Other Investments (based on fair value)			3.4%			6.6%
Weighted Average Annual EBITDA of Portfolio Companies		$	269,044		$	248,795
Weighted Average Purchase Price of Debt Investments (as a % of par value)			96.4%			96.1%
% of Investments on Non-Accrual (based on fair value)			10.7%			2.1%
Gross Portfolio Yield Prior to Leverage (based on amortized cost)			6.7%			8.1%
Gross Portfolio Yield Prior to Leverage (based on amortized cost) – Excluding Non-Income Producing Assets			9.7%			10.1%

Our board of trustees has not declared regular cash distributions to shareholders for any period after March 31, 2020, and FS/EIG Advisor and our board of trustees expect that future cash distributions to shareholders will be suspended until such time that our board of trustees and FS/EIG Advisor believe that market conditions and our financial conditoin support the resumption of such distributions. There can be no assurance that we will be able to pay distributions in the future and any annualized distribution rate provided in this report may not be representative of the actual distribution rate for any period. Based on our regular monthly cash distribution rate of $0.020833 per share as of March 31, 2020, and the price at which we issued shares pursuant to our distribution reinvestment plan of $3.65 per share, the annualized distribution rate to shareholders as of March 31, 2020 was 6.85%. We originally issued shares pursuant to our distribution reinvestment plan at $3.70 per share on March 31, 2020. Following the final determination of our net asset value for the quarter ended March 31, 2020, we are currently reprocessing the shares

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issued pursuant to our distribution reinvestment plan at $3.65 per share, which reflects a price that is within 2.5% of the net asset value per share as of March 31, 2020. Based on our regular monthly cash distribution rate of $0.041667 per share as of December 31, 2019, and the price at which we issued shares pursuant to our distribution reinvestment plan of $5.50 per share, the annualized distribution rate to shareholders as of December 31, 2019 was 9.09%. For the three months ended March 31, 2020 and year ended December 31, 2019, our total return was (33.00)% and (1.83)%, respectively, and our total return without assuming reinvestment of distributions was (32.41)% and (1.33)%, respectively.

Our estimated gross portfolio yield and annualized distribution rate to shareholders do not represent actual investment returns to shareholders. Our gross annual portfolio yield and distribution rate to shareholders are subject to change and in the future may be greater or less than the rates set forth above. See the sections entitled “Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2019 and in our other periodic reports filed with the SEC for a discussion of the uncertainties, risks and assumptions associated with these statements.

Direct Originations

The following tables present certain selected information regarding our direct originations for the three months ended March 31, 2020 and the year ended December 31, 2019:

New Direct Originations	For the Three Months Ended March 31, 2020			For the Year Ended December 31, 2019
Total Commitments (including unfunded commitments)		$	166,806		$	584,910
Exited Investments (including partial paydowns)			(105,427)			(520,751)
Net Direct Originations		$	61,379		$	64,159

	For the Three Months Ended March 31, 2020					For the Year Ended December 31, 2019
New Direct Originations by Asset Class (including Unfunded Commitments)	Commitment Amount			Percentage		Commitment Amount			Percentage
Senior Secured Loans – First Lien		$	30,000		18%		$	244,624		42%
Senior Secured Loans – Second Lien			—		—			60,250		10%
Senior Secured Bonds			22,838		14%			—		—
Unsecured Debt			43,548		26%			3,409		1%
Preferred Equity			10,156		6%			227,170		39%
Sustainable Infrastructure Investments, LLC			60,264		36%			—		—
Equity/Other			—		—			49,457		8%
Total		$	166,806		100%		$	584,910		100%

	For the Three Months Ended March 31, 2020			For the Year Ended December 31, 2019
Average New Direct Origination Commitment Amount		$	41,702		$	36,557
Weighted Average Maturity for New Direct Originations			5/4/22			4/28/24
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Funded during Period			12.8%			10.2%
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Funded during Period – Excluding Non-Income Producing Assets			12.8%			11.2%
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Exited during Period			5.3%			7.6%

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The following table presents certain selected information regarding our direct originations as of March 31, 2020 and December 31, 2019:

Characteristics of All Direct Originations held in Portfolio	March 31, 2020			December 31, 2019
Number of Portfolio Companies			49			49
Weighted Average Annual EBITDA of Portfolio Companies		$	285,666		$	267,575
Weighted Average Leverage Through Tranche of Portfolio Companies – Excluding Equity/Other Securities			3.9x			4.7x
% of Investments on Non-Accrual (based on fair value)			12.5%			2.8%
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct Originations			6.5%			8.0%
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct Originations – Excluding Non-Income Producing Assets			10.3%			10.4%

Portfolio Composition by Strategy

The table below summarizes the composition of our investment portfolio by strategy and enumerates the percentage, by fair value, of the total portfolio assets in such strategies as of March 31, 2020 and December 31, 2019:

	March 31, 2020					December 31, 2019
Portfolio Composition by Strategy	Fair Value			Percentage of Portfolio		Fair Value			Percentage of Portfolio
Direct Originations		$	2,171,806		85%		$	2,617,063		75%
Broadly Syndicated/Other			369,215		15%			865,574		25%
Total		$	2,541,021		100%		$	3,482,637		100%

See Note 7 to our unaudited consolidated financial statements included herein for additional information regarding our investment portfolio.

Portfolio Asset Quality

In addition to various risk management and monitoring tools, FS/EIG Advisor uses an investment rating system to characterize and monitor the expected level of returns on each investment in our portfolio. FS/EIG Advisor uses an investment rating scale of 1 to 5. The following is a description of the conditions associated with each investment rating:

	Investment Rating			Summary Description
	1			Investment exceeding expectations and/or capital gain expected.
	2			Performing investment generally executing in accordance with the portfolio company’s business plan—full return of principal and interest expected.
	3			Performing investment requiring closer monitoring.
	4			Underperforming investment—some loss of interest or dividend possible, but still expecting a positive return on investment.
	5			Underperforming investment with expected loss of interest and some principal.

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The following table shows the distribution of our investments on the 1 to 5 investment rating scale at fair value as of March 31, 2020 and December 31, 2019:

	March 31, 2020					December 31, 2019
Investment Rating	Fair Value			Percentage of Portfolio		Fair Value			Percentage of Portfolio
1		$	—		—		$	—		—
2			859,198		34%			2,115,875		61%
3			1,060,159		42%			805,934		23%
4			105,178		4%			206,535		6%
5			516,486		20%			354,293		10%
Total		$	2,541,021		100%		$	3,482,637		100%

The amount of the portfolio in each grading category may vary substantially from period to period resulting primarily from changes in the composition of the portfolio as a result of new investment, repayment and exit activities. In addition, changes in the grade of investments may be made to reflect our expectation of performance and changes in investment values.

Results of Operations

Comparison of the Three Months Ended March 31, 2020 and 2019

Revenues

Our investment income for the three months ended March 31, 2020 and 2019 was as follows:

	Three Months Ended March 31,
	2020					2019
	Amount			Percentage of Total Income		Amount			Percentage of Total Income
Interest income		$	71,241		91%		$	84,645		96%
Paid-in-kind interest income			7,199		9%			2,255		2%
Fee income			275		0%			1,513		2%
Dividend income			66		0%			—		—
Total investment income(1)		$	78,781		100%		$	88,413		100%

(1)

Such revenues represent $60,496 and $81,254 of cash income earned as well as $18,285 and $7,159 in non-cash portions relating to accretion of discount and PIK interest for the three months ended March 31, 2020 and 2019, respectively. Cash flows related to such non-cash revenues may not occur for a number of reporting periods or years after such revenues are recognized.

The level of interest income we receive is generally related to the balance of income-producing investments multiplied by the weighted average yield of our investments. We expect the dollar amount of interest income that we earn to increase as both the interest rates attributed to the investments within our investment portfolio and the proportion of directly originated investments in our investment portfolio increases. The decrease in the amount of interest income for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 was primarily due to a combination of factors including an overall decrease in the size of the investment portfolio and certain investments being placed on non-accrual. The increase in the amount of PIK income for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 was primarily due to the increase in the size of our directly originated investments and structured preferred equity investments.

Fee income is transaction based, and typically consists of prepayment fees and structuring fees. As such, future fee income is generally dependent on new direct origination investments and the occurrence of

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events at existing portfolio companies resulting in such fees. The decrease in the amount of fee income for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 was primarily due to the decrease of structuring and prepayment activity during the period.

Expenses

Our operating expenses for the three months ended March 31, 2020 and 2019 were as follows:

	Three Months Ended March 31,
	2020			2019
Management fees		$	15,849		$	17,048
Administrative services expenses			1,058			793
Share transfer agent fees			650			693
Accounting and administrative fees			251			272
Interest expense			21,056			21,739
Trustees’ fees			199			188
Expenses associated with our independent audit and related fees			112			104
Legal fees			460			139
Printing fees			270			294
Other			688			364
Total operating expenses			40,593			41,634
Less: Management fee offset			(450)			(200)
Net operating expenses		$	40,143		$	41,434

The following table reflects selected expense ratios as a percent of average net assets for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
	2020		2019
Ratio of operating expenses to average net assets		1.77%		1.58%
Ratio of management fee offset to average net assets		(0.02)%		(0.01)%
Ratio of net operating expenses to average net assets		1.75%		1.57%
Ratio of interest expense to average net assets		(0.92)%		(0.82)%
Ratio of net operating expenses, excluding interest expense, to average net assets		0.83%		0.75%

Interest expense may increase or decrease our expense ratios relative to comparative periods depending on changes in benchmark interest rates such as LIBOR, among other factors.

Management Fee Offset

During the three months ended March 31, 2020 and 2019, $450 and $200, respectively, of structuring or other upfront fees received by FS/EIG Advisor were offset against management fees due to FS/EIG Advisor from us. See Note 4 to our unaudited consolidated financial statements contained in this quarterly report on Form 10-Q for a discussion of the management fee offset for the three months ended March 31, 2020 and 2019.

Net Investment Income

Our net investment income totaled $38,638 ($0.09 per share) and $46,979 ($0.11 per share) for the three months ended March 31, 2020 and 2019.

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Net Realized Gains or Losses

Our net realized gains (losses) on investments and swap contracts for the three months ended March 31, 2020 and 2019, were as follows:

	Three Months Ended March 31,
	2020			2019
Net realized gain (loss) on investments(1)		$	(57,503)		$	(3,274)
Net realized gain (loss) on swap contracts			20,250			1,531
Total net realized gain (loss)		$	(37,253)		$	(1,743)

(1)

We sold investments and received principal repayments of $293,904 and $58,270, respectively, during the three months ended March 31, 2020 and $300,317 and $51,125, respectively, during the three months ended March 31, 2019.

Net Change in Unrealized Appreciation (Depreciation) on Investments and Swap Contracts and Unrealized Gain (Loss) on Foreign Currency

Our net change in unrealized appreciation (depreciation) on investments, swap contracts and foreign currency for the three months ended March 31, 2020 and 2019 were as follows:

	Three Months Ended March 31,
	2020			2019
Net change in unrealized appreciation (depreciation) on investments		$	(758,688)		$	74,924
Net change in unrealized appreciation (depreciation) on swap contracts			(6,551)			(12,306)
Net change in unrealized appreciation (depreciation) on foreign currency			(26)			1
Total net change in unrealized appreciation (depreciation)		$	(765,265)		$	62,619

During the three months ended March 31, 2020, the net change in unrealized appreciation (depreciation) on our investments was primarily driven by the performance of our investments due to, among other things, the adverse economic effects of the COVID-19 pandemic, the continuing uncertainty surrounding its long-term impact and the recent failure of Saudi Arabia, Russia and other oil producing countries to reach an agreement around crude oil production. The change in unrealized appreciation (depreciation) on our investments during the three��months ended March 31, 2019 was primarily driven by the positive performance of certain of our midstream and power investments.

Net Increase (Decrease) in Net Assets Resulting from Operations

For the three months ended March 31, 2020 and 2019, the net increase (decrease) in net assets resulting from operations was $(763,880) ($(1.75) per share) and $107,855 ($0.25 per share), respectively.

This “Results of Operations” section should be read in conjunction with “COVID-19 and Energy Market Developments” above.

Financial Condition, Liquidity and Capital Resources

Overview

As of March 31, 2020, we had $274,835 in cash, which we or our wholly-owned financing subsidiaries held in custodial accounts, and $328,333 in borrowings available under our financing arrangements, subject to borrowing base and other limitations. As of March 31, 2020, we also had broadly syndicated investments that could be sold to create additional liquidity. As of March 31, 2020, we had ten senior secured loan investments with aggregate unfunded commitments of $78,051, one preferred equity investment with aggregate unfunded commitments of $833 and unfunded commitments of $2,573 of Sustainable

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Infrastructure Investments, LLC. This paragraph should be read in conjunction with “Financing Arrangements” below for information regarding amendments to our financing arrangements following March 31, 2020.

We maintain sufficient cash on hand, available borrowings and/or liquid securities to fund such unfunded commitments should the need arise.

We generate cash primarily from the issuance of shares under our distribution reinvestment plan and from cash flows from fees, interest and dividends earned from our investments as well as principal repayments and proceeds from sales of our investments. To seek to enhance our returns, we also employ leverage as market conditions permit and at the discretion of FS/EIG Advisor, but unless and until we elect otherwise, as permitted by the 1940 Act, in no event will leverage employed exceed 50% of the value of our assets, as required by the 1940 Act. See “—Financing Arrangements.”

Prior to investing in securities of portfolio companies, we invest the net proceeds from the issuance of shares under our distribution reinvestment plan as well as from sales and paydowns of existing investments primarily in cash, cash equivalents, including money market funds, U.S. government securities, repurchase agreements and high-quality debt instruments maturing in one year or less from the time of investment, consistent with our BDC election and our election to be taxed as a RIC.

This “Financial Condition, Liquidity and Capital Resources” section should be read in conjunction with “COVID-19 and Energy Market Developments” above and “—Financing Arrangements” below.

Financing Arrangements

The following table presents a summary of information with respect to our outstanding financing arrangements as of March 31, 2020:

Arrangement(1)	Type of Arrangement	Rate(2)	Amount Outstanding			Amount Available			Maturity Date
Goldman Facility(3)	Term	L+3.20%		$	425,000		$	50,000	December 2, 2022
JPMorgan Facility(4)	Revolving/Term	L+2.75%			416,667			278,333	February 16, 2023
Senior Secured Notes(5)	Bond	7.50%			500,000			—	August 15, 2023
Total				$	1,341,667		$	328,333

(1)

The carrying amount outstanding under the facility approximates its fair value, unless otherwise noted.

(2)

LIBOR is subject to a 0.00% floor.

(3)

(4)

(5)

As of March 31, 2020, the fair value of the Senior Secured Notes was approximately $450,210.

For additional information regarding our financing arrangements, see Note 9 to our unaudited consolidated financial statements included herein.

RIC Tax Treatment and Distributions

We have elected to be treated for U.S. federal income tax purposes, and intend to qualify annually, as a RIC under Subchapter M of the Code. As a RIC, we generally do not have to pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute as dividends to our shareholders. To maintain our qualification as a RIC, we must, among other things, meet certain source-of-income and

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asset diversification requirements. In addition, in order to maintain RIC tax treatment, we must distribute to our shareholders, for each tax year, dividends generally of an amount at least equal to 90% of our “investment company taxable income,” which is generally the sum of our net ordinary income plus the excess, if any, of realized net short-term capital gains over realized net long-term capital losses, determined without regard to any deduction for dividends paid. In addition, we may, in certain cases, satisfy the Annual Distribution Requirement by distributing dividends relating to a tax year after the close of such tax year under the “spillover dividend” provisions of Subchapter M of the Code. If we distribute a spillover dividend, such dividend will be included in a shareholder’s gross income for the tax year in which the spillover distribution is paid. We intend to make sufficient distributions to our shareholders to maintain our RIC tax treatment each tax year. We will also be subject to nondeductible U.S. federal excise taxes on certain undistributed income unless we distribute in a timely manner to our shareholders of an amount at least equal to the sum of (1) 98% of our net ordinary taxable income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gain net income, which is the excess of capital gains over capital losses (adjusted for certain ordinary losses), for the one-year period ending October 31 of that calendar year and (3) any ordinary income and capital gain net income for the preceding years that were not distributed during such years and on which we paid no U.S. federal income tax. Any distribution declared by us during October, November or December of any calendar year, payable to our shareholders of record on a specified date in such a month and actually paid during January of the following calendar year, will be treated as if it had been paid by us, as well as received by our U.S. shareholders, on December 31 of the calendar year in which the distribution was declared.

Prior to the closing of our continuous public offering in November 2016, we declared regular cash distributions on a weekly basis, and paid such distributions on a monthly basis. Effective November 30, 2016, and subject to applicable legal restrictions and the sole discretion of our board of trustees, we intend to declare regular cash distributions on a quarterly basis and pay such distributions on a monthly basis. We will calculate each shareholder’s specific distribution amount for the period using record and declaration dates and each shareholder’s distributions will begin to accrue on the date that common shares are issued to such shareholder. From time to time, we may also pay special interim distributions in the form of cash or common shares at the discretion of our board of trustees. The timing and amount of any future distributions to shareholders are subject to applicable legal restrictions and the sole discretion of our board of trustees.

During certain periods, our distributions may exceed our earnings. As a result, it is possible that a portion of the distributions we make will represent a return of capital. A return of capital generally is a return of an investor’s investment rather than a return of earnings or gains derived from our investment activities and will be made after deducting the fees and expenses payable in connection with our continuous public offering, including any fees payable to FS/EIG Advisor. Moreover, a return of capital will generally not be taxable, but will reduce each shareholder’s cost basis in our common shares, and will result in a higher reported capital gain or lower reported capital loss when the common shares on which such return of capital was received are sold. Each year a statement on Form 1099-DIV identifying the sources of the distributions will be mailed to our shareholders.

Any distributions we make will be in the form of cash, out of assets legally available for distribution, unless shareholders elect to receive their cash distributions in additional common shares under our distribution reinvestment plan. Any distributions reinvested under the plan will nevertheless remain taxable to a U.S. shareholder.

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The following table reflects the cash distributions per share that we have declared and paid on our common shares during the three months ended March 31, 2020 and 2019:

	Distribution
For the Three Months Ended	Per Share			Amount
Fiscal 2019
March 31, 2019		$	0.12500		$	54,616
Fiscal 2020
March 31, 2020		$	0.08333		$	36,207

See Note 5 to our unaudited consolidated financial statements included herein for additional information regarding our distributions, including a reconciliation of our GAAP-basis net investment income to our tax-basis net investment income, the components of accumulated earnings on a tax basis and deferred taxes.

Critical Accounting Policies

Our financial statements are prepared in conformity with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming the estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. Understanding our accounting policies and the extent to which we use management judgment and estimates in applying these policies is integral to understanding our financial statements. We describe our most significant accounting policies in Note 2 to our unaudited consolidated financial statements included herein. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as necessary based on changing conditions. We have identified one of our accounting policies, valuation of portfolio investments, as critical because it involves significant judgments and assumptions about highly complex and inherently uncertain matters, and the use of reasonably different estimates and assumptions could have a material impact on our reported results of operations or financial condition. As we execute our operating plans, we will describe additional critical accounting policies in the notes to our future financial statements in addition to those discussed below.

Valuation of Portfolio Investments

We determine the fair value of our investment portfolio each quarter. Securities are valued at fair value as determined in good faith by our board of trustees. In connection with that determination, FS/EIG Advisor provides our board of trustees with portfolio company valuations which are based on relevant inputs, including, but not limited to, indicative dealer quotes, values of like securities, recent portfolio company financial statements and forecasts, and valuations prepared by independent third-party valuation services.

Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure, or ASC Topic 820, issued by the Financial Accounting Standards Board, or the FASB, clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. ASC Topic 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities where there is little or no activity in the market; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

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With respect to investments for which market quotations are not readily available, we undertake a multi-step valuation process each quarter, as described below:

•

our quarterly fair valuation process begins with FS/EIG Advisor reviewing and documenting preliminary valuations of each portfolio company or investment;

•

such preliminary valuations for each portfolio company or investment are compared to a valuation range that is obtained from an independent third-party valuation service;

•

FS/EIG Advisor then provides the valuation committee of our board of trustees, or the valuation committee, its valuation recommendation for each portfolio company or investment, along with supporting materials;

•

preliminary valuations are then discussed with the valuation committee;

•

the valuation committee reviews the preliminary valuations and FS/EIG Advisor, together with our independent third-party valuation services, if applicable, supplements the preliminary valuations to reflect any comments provided by the valuation committee;

•

following its review, the valuation committee will recommend that our board of trustees approve our fair valuations; and

•

our board of trustees discusses the valuations and determines the fair value of each such investment in our portfolio in good faith based on various statistical and other factors, including the input and recommendation of FS/EIG Advisor, the valuation committee and any independent third-party valuation services, if applicable.

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations and any change in such valuations on our consolidated financial statements. In making its determination of fair value, our board of trustees may use any approved independent third-party pricing or valuation services. However, our board of trustees is not required to determine fair value in accordance with the valuation provided by any single source, and may use any relevant data, including information obtained from FS/EIG Advisor or any approved independent third-party valuation or pricing service that our board of trustees deems to be reliable in determining fair value under the circumstances. Below is a description of factors that FS/EIG Advisor, any approved independent third-party valuation services and our board of trustees may consider when determining the fair value of our investments.

Valuation of fixed income investments, such as loans and debt securities, depends upon a number of factors, including prevailing interest rates for like securities, expected volatility in future interest rates, call features, put features and other relevant terms of the debt. For investments without readily available market prices, we may incorporate these factors into discounted cash flow models to arrive at fair value. Other factors that may be considered include the borrower’s ability to adequately service its debt, the fair market value of the portfolio company in relation to the face amount of its outstanding debt and the quality of collateral securing our debt investments.

For convertible debt securities, fair value generally approximates the fair value of the debt plus the fair value of an option to purchase the underlying security (i.e., the security into which the debt may convert) at the conversion price. To value such an option, a standard option pricing model may be used.

Our equity interests in portfolio companies for which there is no liquid public market are valued at fair value. Our board of trustees, in its determination of fair value, may consider various factors, such as multiples of EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. All of these factors may be subject to adjustments based upon the particular circumstances of a portfolio company or our actual investment position. For example, adjustments to EBITDA may take into account compensation to previous owners or acquisition, recapitalization, restructuring or other related items.

FS/EIG Advisor, any approved independent third-party valuation services and our board of trustees may also consider private merger and acquisition statistics, public trading multiples discounted for illiquidity and other factors, valuations implied by third-party investments in the portfolio companies or industry practices in determining fair value. FS/EIG Advisor, any approved independent third-party valuation services and

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our board of trustees may also consider the size and scope of a portfolio company and its specific strengths and weaknesses, and may apply discounts or premiums, where and as appropriate, due to the higher (or lower) financial risk and/or the smaller size of portfolio companies relative to comparable firms, as well as such other factors as our board of trustees, in consultation with FS/EIG Advisor and any approved independent third-party valuation services, if applicable, may consider relevant in assessing fair value. Generally, the value of our equity interests in public companies for which market quotations are readily available is based upon the most recent closing public market price. Portfolio securities that carry certain restrictions on sale are typically valued at a discount from the public market value of the security.

When we receive warrants or other equity securities at nominal or no additional cost in connection with an investment in a debt security, the cost basis in the investment will be allocated between the debt securities and any such warrants or other equity securities received at the time of origination. Our board of trustees subsequently values these warrants or other equity securities received at their fair value.

Swap contracts typically will be valued at their daily prices obtained from an independent third party. The aggregate settlement values and notional amounts of the swap contracts will not be recorded in the statements of assets and liabilities. Fluctuations in the value of the swap contracts will be recorded in the statements of assets and liabilities as gross assets and gross liabilities and in the statements of operations as unrealized appreciation (depreciation) until closed, when they will be recorded as net realized gain (loss).

The fair values of our investments are determined in good faith by our board of trustees. Our board of trustees is solely responsible for the valuation of our portfolio investments at fair value as determined in good faith pursuant to our valuation policy and consistently applied valuation process. Our board of trustees has delegated day-to-day responsibility for implementing our valuation policy to FS/EIG Advisor, and has authorized FS/EIG Advisor to utilize independent third-party valuation and pricing services that have been approved by our board of trustees. The valuation committee is responsible for overseeing FS/EIG Advisor’s implementation of the valuation process.

See Note 8 to our unaudited consolidated financial statements included herein for additional information regarding the fair value of our financial instruments.

Contractual Obligations

We have entered into an agreement with FS/EIG Advisor to provide us with investment advisory and administrative services. Payments for investment advisory services under the FS/EIG investment advisory agreement are equal to 1.75% of the average weekly value of our gross assets and an incentive fee based on our performance. Base management fees are generally paid on a quarterly basis in arrears. See Note 4 to our unaudited consolidated financial statements included herein for a discussion of this agreement and for the amount of fees and expenses accrued under these agreements during the three months ended March 31, 2020 and 2019.

A summary of our significant contractual payment obligations for the repayment of outstanding indebtedness at March 31, 2020 is as follows:

		Payments Due By Period
	Maturity Date(1)	Total			Less than 1 year		1 – 3 years			3 – 5 years		More than 5 years
Goldman Facility(2)	December 2, 2022		$	425,000		—		$	425,000		—		—
JPMorgan Facility(3)	February 16, 2023		$	421,667		—		$	421,667		—		—
Senior Secured Notes(4)	August 15, 2023		$	500,000		—		$	500,000		—		—

(1)

Amounts outstanding under the financing arrangements will mature, and all accrued and unpaid interest thereunder will be due and payable, on the maturity date.

(2)

At March 31, 2020, $50,000 remained unused under the financing arrangement. In connection with an amendment to the Goldman Facility on April 1, 2020, Gladwyne Funding permanently prepaid an aggregate amount of $225,000 of the outstanding loans, reducing the outstanding facility amount to $200,000.

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(3)

At March 31, 2020, $278,333 remained unused under the financing arrangement. On April 9, 2020, the JPMorgan Facility was amended to, among other things, reduce the revolving loan commitments to $185,000 (the amount of revolving loans then outstanding), thereby reducing the amount available at that time to $0 and bringing the total outstanding facility amount to $416,667. The amendment also provided that additional prepayments of revolving loans will permanently reduce the revolving loan commitments to $140,000, at which point any further prepayments of revolving loans may be reborrowed.

(4)

At March 31, 2020, no amounts remained unused under the financing arrangement.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

We are subject to financial market risks, including changes in interest rates. As of March 31, 2020, 44.6% of our portfolio investments (based on fair value) paid variable interest rates, 25.5% paid fixed interest rates, 26.5% were income producing preferred equity and equity/other investments and the remainder (3.4%) consisted of non-income producing preferred equity and equity/other investments. A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to the variable rate investments we hold and to declines in the value of any fixed rate investments we hold. However, many of our variable rate investments provide for an interest rate floor, which may prevent our interest income from increasing until benchmark interest rates increase beyond a threshold amount. To the extent that a substantial portion of our investments may be in variable rate investments, an increase in interest rates beyond this threshold would make it easier for us to meet or exceed the hurdle rate applicable to the subordinated incentive fee on income and may result in a substantial increase in our net investment income and to the amount of incentive fees payable to FS/EIG Advisor with respect to our increased pre-incentive fee net investment income. In recent weeks, the U.S. Federal Reserve and other central banks have reduced certain interest rates in response to the COVID-19 pandemic and market conditions. A prolonged reduction in interest rates may reduce our net investment income.

Pursuant to the terms of each credit facility and financing arrangement, all credit facilities and financing arrangements, with the exception of the Senior Secured Notes, borrow at a floating rate based on a benchmark interest rate. Under the indenture governing the Senior Secured Notes, we pay interest to the holders of such notes at a fixed rate. To the extent that any present or future credit facilities or other financing arrangements that we or any of our subsidiaries enter into are based on a floating interest rate, we will be subject to risks relating to changes in market interest rates. In periods of rising interest rates when we or our subsidiaries have such debt outstanding or financing arrangements in effect, our interest expense would increase, which could reduce our net investment income, especially to the extent we hold fixed rate investments.

The following table shows the effect over a twelve-month period of changes in interest rates on our interest income, interest expense and net interest income, assuming no changes in the composition of our investment portfolio, including the accrual status of our investments, and our borrowing arrangements in effect as of March 31, 2020 (dollar amounts are presented in thousands):

Basis Point Change in Interest Rates	Increase (Decrease) in Interest Income			Increase (Decrease) in Interest Expense			Increase (Decrease) in Net Interest Income			Percentage Change in Net Interest Income
Down 100 basis points		$	(6,262)		$	(8,456)		$	2,194		1.2%
No change			—			—			—		—
Up 100 basis points		$	11,289		$	8,456		$	2,833		1.5%
Up 300 basis points		$	35,300		$	25,367		$	9,933		5.4%
Up 500 basis points		$	59,342		$	42,278		$	17,064		9.3%

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We expect that our long-term investments will be financed primarily with equity and debt. If deemed prudent, we may use interest rate risk management techniques in an effort to minimize our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations. During the three months ended March 31, 2020 and 2019, we did not engage in interest rate hedging activities.

In addition, we may have risks regarding portfolio valuation and the potential inability of counterparties to meet the terms of their contracts. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Valuation of Portfolio Investments.”

Item 4.

Controls and Procedures.

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2020. Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that we would meet our disclosure obligations.

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) that occurred during the three month period ended March 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1.

Legal Proceedings.

We are not currently subject to any material legal proceedings and, to our knowledge, no material legal proceedings are threatened against us. From time to time, we may be party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of any legal proceedings cannot be predicted with certainty, we do not expect that any such proceedings will have a material effect upon our financial condition or results of operations.

Item 1A.

Risk Factors.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors that appeared under Item 1A. “Risk Factors” in our most recent Annual Report on Form 10-K. There are no material changes from the risk factors included within our most recent Annual Report on Form 10-K other than the risks described below.

Events outside of our control, including public health crises, could negatively affect our portfolio companies and our results of operations.

Periods of market volatility have occurred and could continue to occur in response to pandemics or other events outside of our control. These types of events have adversely affected, and could continue to adversely affect, operating results for us and for our portfolio companies. For example, the COVID-19 pandemic has resulted in the following in many affected jurisdictions, including the United States: (i) restrictions on travel and the temporary closure of many corporate offices, retail stores, and manufacturing facilities and factories, resulting in significant disruption to the business of many companies, (ii) increased defaults by borrowers, (iii) volatility in credit markets and (iv) rapidly evolving action by government officials to address the economic and market problems. In addition to these developments having adverse consequences for us and our portfolio companies, the operations of FS/EIG Advisor have been, and could continue to be, adversely impacted, including through quarantine measures and travel restrictions imposed on its personnel or service providers based or temporarily located in affected countries, or any related health issues of such personnel or service providers.

As the potential impact of COVID-19 is difficult to predict, the extent to which COVID-19 could negatively affect our and our portfolio companies’ operating results or the duration of any potential business or supply-chain disruption is uncertain. Any potential impact to our results of operations will depend to a large extent on future developments and new information that could emerge regarding the duration and severity of the COVID-19 pandemic and the actions taken by authorities and other entities to contain the spread of COVID-19 or treat its impact, all of which are beyond our control. These potential impacts, while uncertain, could adversely affect our and our portfolio companies’ operating results.

We are currently operating in a period of capital markets disruption and economic uncertainty.

The U.S. capital markets have experienced extreme volatility and disruption following the global outbreak of COVID-19 that began in December 2019. Some economists and major investment banks have expressed concern that the continued spread of the virus globally could lead to a world-wide economic downturn. Disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets. These and future market disruptions and/or illiquidity would be expected to have an adverse effect on our business, financial condition, results of operations and cash flows. Unfavorable economic conditions also would be expected to increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events have limited and could continue to limit our investment originations, limit our ability to grow and have a material negative impact on our operating results and the fair values of our debt and equity investments.

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If the current period of capital market disruption and instability continues for an extended period of time, there is a risk that investors in our equity securities may not receive distributions consistent with historical levels or at all or that our distributions may not grow over time and a portion of our distributions may be a return of capital.

As announced, our board of trustees has not declared regular cash distributions to shareholders for any period after March 31, 2020 and FS/EIG Advisor and our board of trustees expect that future cash distributions to shareholders will be suspended until such time that our board of trustees and FS/EIG Advisor believe that market conditions and our financial condition support the resumption of such distributions. Our ability to resume distributions, to pay reduced distributions, to resume paying distributions consistent with our historical range or to continue to pay our distribution fully in cash rather than shares of common stock might be adversely affected by the impact of one or more of the risk factors described in this Quarterly Report on Form 10-Q and in our most recent Annual Report on Form 10-K, including the COVID-19 pandemic described above. If we are unable to satisfy the asset coverage test applicable to us under the 1940 Act as a business development company or if we violate certain covenants under our existing or future credit facilities or other leverage, we may also be limited in our ability to make distributions. If we declare a distribution and if more shareholders opt to receive cash distributions rather than participate in our dividend reinvestment plan, we may be forced to sell some of our investments in order to make cash distribution payments. To the extent we make distributions to shareholders that include a return of capital, such portion of the distribution essentially constitutes a return of the shareholder’s investment. Although such return of capital may not be taxable, such distributions would generally decrease a shareholder’s basis in our common stock and may therefore increase such shareholder’s tax liability for capital gains upon the future sale of such stock. A return of capital distribution may cause a shareholder to recognize a capital gain from the sale of our common stock even if the shareholder sells its shares for less than the original purchase price.

Our business, results of operations and financial condition have been adversely affected by the recent disruption in the global oil and energy markets and resulting substantial price decline of oil, and the ultimate effect of these events on our business will depend on future developments, which are highly uncertain and cannot be predicted.

As a result of both the significant decrease in demand caused by the COVID-19 pandemic and political tensions between several large oil producing countries, there has been a substantial and unprecedented decline in oil and natural gas prices. A prolonged continuation of depressed oil and natural gas prices would adversely affect the credit quality and performance of certain of our investments in Energy companies. A decrease in credit quality and performance would, in turn, negatively affect the fair value of these investments, which would consequently negatively affect our net asset value. Should a prolonged period of depressed oil and natural gas prices or other disruptions in the energy markets occur, it is likely that the ability of our portfolio companies to satisfy financial or operating covenants imposed by us or other lenders will be adversely affected, thereby negatively impacting their financial condition and their ability to satisfy their debt service and other obligations to us. Likewise, should a prolonged period of depressed oil and natural gas prices or other disruptions in the energy markets occur, it is likely that our portfolio companies’ cash flow and profit generating capacities would also be adversely affected thereby negatively impacting their ability to pay us amounts owed or dividends or distributions, as applicable. The full extent to which the decline in oil and natural gas prices and other disruptions in the energy markets will impact our business and that of our portfolio companies remains uncertain; however, there could be a material adverse impact on our or their business, results of operations or financial condition.

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Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

The table below provides information concerning our repurchases of common shares during the three months ended March 31, 2020 pursuant to our share repurchase program and de minimis account liquidation.

Period	Total Number of Shares Purchased		Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 to January 31, 2020		4,877,069		$	5.50		4,877,069		(1)
February 1 to February 29, 2020		—			—		—		—
March 1 to March 31, 2020		—			—		—		—
Total		4,877,069					4,877,069

(1)

The maximum number of common shares available for repurchase pursuant to our share repurchase program on January 6, 2020 was 10,974,088. A description of the maximum number of common shares that may be repurchased under our share repurchase program and a description of the de minimis account liquidation are set forth in Note 3 to our unaudited consolidated financial statements contained in this quarterly report on Form 10-Q.

See Note 3 to our unaudited consolidated financial statements contained in this quarterly report on Form 10-Q for a more detailed discussion of the terms of our share repurchase program and de minimis account liquidation.

Item 3.

Defaults upon Senior Securities.

Not applicable.

Item 4.

Mine Safety Disclosures.

Not applicable.

Item 5.

Other Information.

Effective May 13, 2020, Stephen T. Burdumy resigned from our board of trustees so that he may focus on other endeavors. Mr. Burdumy’s resignation from the board was not as a result of any disagreement on any matter relating to our operations, policies or practices.

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Item 6.

Exhibits.

	3.1			Third Amended and Restated Declaration of Trust of FS Energy and Power Fund. (Incorporated by reference to Exhibit 3.1 to FS Energy and Power Fund’s Quarterly Report on Form 10-Q filed on August 10, 2017.)
	3.2			Amendment No. 1 to the Third Amended and Restated Declaration of Trust of FS Energy and Power Fund. (Incorporated by reference to Exhibit 3.2 to FS Energy and Power Fund’s Quarterly Report on Form 10-Q filed on August 10, 2017.)
	3.3			Second Amended and Restated Bylaws of FS Energy and Power Fund. (Incorporated by reference to Exhibit 3.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on June 1, 2017.)
	4.1			Second Amended and Restated Distribution Reinvestment Plan of FS Energy and Power Fund. (Incorporated by reference to Exhibit 4.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on October 17, 2016.)
	10.1			Investment Advisory and Administrative Services Agreement, dated as of April 9, 2018, by and between FS Energy and Power Fund and FS/EIG Advisor, LLC. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on April 9, 2018.)
	10.2			Investment Advisory and Administrative Services Agreement, dated as of April 28, 2011, by and between FS Energy and Power Fund and FS Investment Advisor, LLC. (Incorporated by reference to Exhibit (g)(1) filed with Amendment No. 3 to FS Energy and Power Fund’s registration statement on Form N-2 (File No. 333-169679) filed on May 6, 2011.)
	10.3			Amendment No. 1 dated as of August 10, 2012, to Investment Advisory and Administrative Services Agreement, dated as of April 28, 2011, by and between FS Energy and Power Fund and FS Investment Advisor, LLC. (Incorporated by reference to Exhibit 10.2 to FS Energy and Power Fund’s Quarterly Report on Form 10-Q filed on August 14, 2012.)
	10.4			Investment Sub-advisory Agreement, dated as of April 28, 2011, by and between FS Investment Advisor, LLC and GSO Capital Partners LP. (Incorporated by reference to Exhibit (g)(2) filed with Amendment No. 3 to FS Energy and Power Fund’s registration statement on Form N-2 (File No. 333-169679) filed on May 6, 2011.)
	10.5			Custodian Agreement, dated as of November 14, 2011, by and between State Street Bank and Trust Company and FS Energy and Power Fund. (Incorporated by reference to Exhibit 10.6 to FS Energy and Power Fund’s Quarterly Report on Form 10-Q filed on November 14, 2011.)
	10.6			Escrow Agreement, dated as of March 29, 2011, by and between FS Energy and Power Fund and UMB Bank, N.A. (Incorporated by reference to Exhibit (k) filed with Amendment No. 3 to FS Energy and Power Fund’s registration statement on Form N-2 (File No. 333-169679) filed on May 6, 2011.)
	10.7			Amended and Restated Credit Agreement, dated as of June 11, 2014, by and among FSEP Term Funding, LLC and Deutsche Bank AG, New York Branch. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on June 17, 2014.)
	10.8			First Amendment to Amended and Restated Credit Agreement, dated as of June 11, 2015, by and among FSEP Term Funding, LLC and Deutsche Bank AG, New York Branch. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on June 15, 2015.)
	10.9			Second Amendment to Amended and Restated Credit Agreement, dated as of June 10, 2016, by and among FSEP Term Funding, LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent and a lender, and the other lenders party thereto. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on June 16, 2016.)

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	10.10			Third Amendment to Amended and Restated Credit Agreement, dated as of June 9, 2017, by and among FSEP Term Funding, LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent and a lender, and the other lenders party thereto. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on June 14, 2017.)
	10.11			Fourth Amendment to Amended and Restated Credit Agreement, dated as of June 11, 2018, by and among FSEP Term Funding, LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent and a lender, and the other lenders party thereto. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on June 15, 2018.)
	10.12			Asset Contribution Agreement, dated as of June 24, 2011, by and between FS Energy and Power Fund and FSEP Term Funding, LLC. (Incorporated by reference to Exhibit 10.8 to FS Energy and Power Fund’s Quarterly Report on Form 10-Q filed on June 27, 2011.)
	10.13			Investment Management Agreement, dated as of June 24, 2011, by and between FS Energy and Power Fund and FSEP Term Funding, LLC. (Incorporated by reference to Exhibit 10.9 to FS Energy and Power Fund’s Quarterly Report on Form 10-Q filed on June 27, 2011.)
	10.14			Security Agreement, dated as of June 24, 2011, by and between FSEP Term Funding, LLC and Deutsche Bank AG, New York Branch. (Incorporated by reference to Exhibit 10.10 to FS Energy and Power Fund’s Quarterly Report on Form 10-Q filed on June 27, 2011.)
	10.15			Termination and Release Acknowledgment, dated as of May 11, 2012, by Citibank N.A. in favor of FS Energy and Power Fund. (Incorporated by reference to Exhibit 10.15 to FS Energy and Power Fund’s Quarterly Report on Form 10-Q filed on May 15, 2012.)
	10.16			Termination Acknowledgment (TRS), dated as of May 24, 2013, by and between EP Investments LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on May 31, 2013.)
	10.17			Loan Agreement, dated as of May 24, 2013, by and among EP Funding LLC, the financial institutions and other lenders from time to time party thereto and Citibank, N.A., as administrative agent. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on May 29, 2013.)
	10.18			Account Control Agreement, dated as of May 24, 2013, by and among EP Funding LLC, Citibank, N.A. and Virtus Group, LP. (Incorporated by reference to Exhibit 10.2 to FS Energy and Power Fund’s Current Report on Form 8-K filed on May 29, 2013.)
	10.19			Security Agreement, dated as of May 24, 2013, by and between EP Funding LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.3 to FS Energy and Power Fund’s Current Report on Form 8-K filed on May 29, 2013.)
	10.20			Investment Management Agreement, dated as of May 24, 2013, by and between FS Energy and Power Fund and EP Funding LLC. (Incorporated by reference to Exhibit 10.4 to FS Energy and Power Fund’s Current Report on Form 8-K filed on May 29, 2013.)
	10.21			Credit Agreement, dated as of July 11, 2013, by and among Energy Funding LLC, Natixis, New York Branch, Wells Fargo Bank, National Association and the other lenders from time to time party thereto. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on July 16, 2013.)
	10.22			Securities Account Control Agreement, dated as of July 11, 2013, by and among Energy Funding LLC and Wells Fargo Bank, National Association. (Incorporated by reference to Exhibit 10.2 to FS Energy and Power Fund’s Current Report on Form 8-K filed on July 16, 2013.)
	10.23			Collateral Management Agreement, dated as of July 11, 2013, by and between FS Energy and Power Fund and Energy Funding LLC. (Incorporated by reference to Exhibit 10.3 to FS Energy and Power Fund’s Current Report on Form 8-K filed on July 16, 2013.)

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	10.24			Amended and Restated Expense Support and Conditional Reimbursement Agreement, dated May 16, 2013, by and between FS Energy and Power Fund and Franklin Square Holdings, L.P. (Incorporated by reference to Exhibit 99.1 to FS Energy and Power Fund’s Current report on Form 8-K filed on May 17, 2013.)
	10.25			Expense Support and Conditional Reimbursement Agreement, dated as of April 9, 2018, by and between FS Energy and Power Fund and FS/EIG Advisor, LLC. (Incorporated by reference to Exhibit 10.24 to FS Energy and Power Fund’s Form 10-Q filed on May 14, 2018.)
	10.26			Committed Facility Agreement, dated as of December 11, 2013, by and between Berwyn Funding LLC and BNP Paribas Prime Brokerage, Inc. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on December 17, 2013.)
	10.27			First Amendment Agreement, dated as of August 18, 2014, between BNP Paribas Prime Brokerage, Inc., on behalf of itself and as agent for the BNPP Entities, and Berwyn Funding LLC. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on August 21, 2014.)
	10.28			Fifth Amendment to the Committed Facility Agreement, dated as of May 4, 2016 by and between Berwyn Funding LLC and BNP Paribas Prime Brokerage, Inc. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on May 10, 2016.)
	10.29			U.S. PB Agreement, dated as of December 11, 2013, by and between Berwyn Funding LLC and BNP Paribas Prime Brokerage, Inc. (Incorporated by reference to Exhibit 10.2 to FS Energy and Power Fund’s Current Report on Form 8-K filed on December 17, 2013.)
	10.30			First Amendment to the U.S. PB Agreement, dated as of May 4, 2016, by and between Berwyn Funding LLC and BNP Paribas Prime Brokerage, Inc. (Incorporated by reference to Exhibit 10.2 to FS Energy and Power Fund’s Current Report on Form 8-K filed on May 10, 2016.)
	10.31			Special Custody and Pledge Agreement, dated as of December 11, 2013, by and among State Street Bank and Trust Company, Berwyn Funding LLC and BNP Paribas Prime Brokerage, Inc. (Incorporated by reference to Exhibit 10.3 to FS Energy and Power Fund’s Current Report on Form 8-K filed on December 17, 2013.)
	10.32			Investment Management Agreement, dated as of December 11, 2013, by and between FS Energy and Power Fund and Berwyn Funding LLC. (Incorporated by reference to Exhibit 10.4 to FS Energy and Power Fund’s Current Report on Form 8-K filed on December 17, 2013.)
	10.33			Loan and Servicing Agreement, dated as of September 9, 2014, among Wayne Funding LLC, as borrower, Wells Fargo Securities, LLC, as administrative agent, Wells Fargo Bank, National Association, as collateral agent, account bank and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on September 15, 2014.)
	10.34			First Amendment to the Loan and Servicing Agreement, dated as of October 13, 2016, among Wayne Funding LLC, as Borrower, Wells Fargo Securities, LLC, as Administrative Agent, Wells Fargo Bank, National Association, as institutional lender, and Wells Fargo Bank, National Association, as collateral agent, account bank and collateral custodian. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on October 14, 2016.)
	10.35			Purchase and Sale Agreement, dated as of September 9, 2014, by and between Wayne Funding LLC, as purchaser, and FS Energy and Power Fund, as seller. (Incorporated by reference to Exhibit 10.2 to FS Energy and Power Fund’s Current Report on Form 8-K filed on September 15, 2014.)

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	10.36			Collateral Management Agreement, dated as of September 9, 2014, by and between Wayne Funding LLC and FS Energy and Power Fund, as collateral manager. (Incorporated by reference to Exhibit 10.3 to FS Energy and Power Fund’s Current Report on Form 8-K filed on September 15, 2014.)
	10.37			Securities Account Control Agreement, dated as of September 9, 2014, by and among Wayne Funding LLC, as pledgor, Wells Fargo Bank, National Association, as collateral agent, and Wells Fargo Bank, National Association, as securities intermediary. (Incorporated by reference to Exhibit 10.4 to FS Energy and Power Fund’s Current Report on Form 8-K filed on September 15, 2014.)
	10.38			Amended and Restated Sale and Contribution Agreement, dated as of September 11, 2014, by and between FS Energy and Power Fund and Gladwyne Funding LLC. (Incorporated by reference to Exhibit 10.5 to FS Energy and Power Fund’s Current Report on Form 8-K filed on September 15, 2014.)
	10.39			Indenture, dated as of September 11, 2014, by and between Gladwyne Funding LLC and Citibank, N.A., as trustee. (Incorporated by reference to Exhibit 10.6 to FS Energy and Power Fund’s Current Report on Form 8-K filed on September 15, 2014.)
	10.40			First Supplemental Indenture, dated as of December 15, 2014, by and between Gladwyne Funding LLC and Citibank, N.A., as trustee. (Incorporated by reference to Exhibit 10.1 of FS Energy and Power Fund’s Current Report on Form 8-K filed on December 19, 2014.)
	10.41			Second Supplemental Indenture, dated as of September 21, 2016, by and between Gladwyne Funding LLC and Citibank, N.A., as trustee. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on September 22, 2016.)
	10.42			Gladwyne Funding LLC Floating Rate Notes due 2024. (Incorporated by reference to Exhibit 10.7 to FS Energy and Power Fund’s Current Report on Form 8-K filed on September 15, 2014.)
	10.43			Amended and Restated September 1996 Version Master Repurchase Agreement between Goldman Sachs Bank USA and Strafford Funding LLC, dated as of September 21, 2016. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on September 22, 2016.)
	10.44			Second Amended and Restated Master Confirmation, dated as of September 21, 2016, by and between Goldman Sachs Bank USA and Strafford Funding LLC. (Incorporated by reference to Exhibit 10.56 of FS Energy and Power Fund’s Quarterly Report on Form 10-Q filed on November 9, 2016.)
	10.45			Amended and Restated Revolving Credit Agreement, dated as of December 15, 2014, by and between FS Energy and Power Fund and Strafford Funding LLC. (Incorporated by reference to Exhibit 10.3 of FS Energy and Power Fund’s Current Report on Form 8-K filed on December 19, 2014.)
	10.46			Amended and Restated Investment Management Agreement, dated as of September 11, 2014, by and between Gladwyne Funding LLC and FS Energy and Power Fund. (Incorporated by reference to Exhibit 10.10 to FS Energy and Power Fund’s Current Report on Form 8-K filed on September 15, 2014.)
	10.47			Collateral Administration Agreement, dated as of September 11, 2014, by and among Gladwyne Funding LLC, FS Energy and Power Fund and Virtus Group, LP. (Incorporated by reference to Exhibit 10.11 to FS Energy and Power Fund’s Current Report on Form 8-K filed on September 15, 2014.)

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	10.48			Term Loan and Security Agreement, dated as of November 6, 2015, by and among Foxfields Funding LLC, Fortress Credit Co LLC, as administrative agent, the lenders from time to time party thereto and the other loan parties from time to time party thereto. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on November 12, 2015.)
	10.49			Contribution Agreement, dated as of November 6, 2015, by and between FS Energy and Power Fund and Foxfields Funding LLC. (Incorporated by reference to Exhibit 10.2 to FS Energy and Power Fund’s Current Report on Form 8-K filed on November 12, 2015.)
	10.50			Investment Management Agreement, dated as of November 6, 2015, by and between FS Energy and Power Fund and Foxfields Funding LLC. (Incorporated by reference to Exhibit 10.3 to FS Energy and Power Fund’s Current Report on Form 8-K filed on November 12, 2015.)
	10.51			Securities Account Control Agreement, dated as of November 6, 2015, by and among Foxfields Funding LLC, Fortress Credit Co LLC, as administrative agent and State Street Bank and Trust Company. (Incorporated by reference to Exhibit 10.4 to FS Energy and Power Fund’s Current Report on Form 8-K filed on November 12, 2015.)
	10.52			Guaranty, dated as of November 6, 2015, by and between FS Energy and Power Fund and Fortress Credit Co LLC. (Incorporated by reference to Exhibit 10.5 to FS Energy and Power Fund’s Current Report on Form 8-K filed on November 12, 2015.)
	10.53			Pledge Agreement, dated as of November 6, 2015, by and between FS Energy and Power Fund and Fortress Credit Co LLC. (Incorporated by reference to Exhibit 10.6 to FS Energy and Power Fund’s Current Report on Form 8-K filed on November 12, 2015.)
	10.54			First Amendment to Term Loan and Security Agreement, dated as of November 25, 2015, by and among Foxfields Funding LLC, Fortress Credit Co LLC, as administrative agent, the lenders signatory thereto. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on December 1, 2015.)
	10.55			Consent and Third Amendment to Term Loan and Security Agreement, dated as of March 16, 2018, among Foxfields Funding LLC, as borrower, Fortress Credit Co LLC, as administrative agent, and the lenders party thereto. (Incorporated by reference to Exhibit 10.2 to FS Energy and Power Fund’s Current Report on Form 8-K filed on March 19, 2018.)
	10.56			Senior Secured Revolving Credit Agreement, dated as of May 18, 2016, by and among Bryn Mawr Funding LLC, Barclays Bank PLC, as administrative agent, and the lenders from time to time party thereto. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on May 24, 2016.)
	10.57			Contribution Agreement, dated as of May 18, 2016, by and between FS Energy and Power Fund and Bryn Mawr Funding LLC. (Incorporated by reference to Exhibit 10.2 to FS Energy and Power Fund’s Current Report on Form 8-K filed on May 24, 2016.)
	10.58			Investment Management Agreement, dated as of May 18, 2016, by and between FS Energy and Power Fund and Bryn Mawr Funding LLC. (Incorporated by reference to Exhibit 10.3 to FS Energy and Power Fund’s Current Report on Form 8-K filed on May 24, 2016.)
	10.59			Control Agreement, dated as of May 18, 2016, by and among Bryn Mawr Funding LLC, Barclays Bank PLC, as collateral agent, and State Street Bank and Trust Company, as custodian. (Incorporated by reference to Exhibit 10.4 to FS Energy and Power Fund’s Current Report on Form 8-K filed on May 24, 2016.)
	10.60			Guaranty, dated as of May 18, 2016, by and between FS Energy and Power Fund and Barclays Bank PLC, as collateral agent. (Incorporated by reference to Exhibit 10.5 to FS Energy and Power Fund’s Current Report on Form 8-K filed on May 24, 2016.)
	10.61			Pledge Agreement, dated as of May 18, 2016, by and between FS Energy and Power Fund and Barclays Bank PLC, as collateral agent. (Incorporated by reference to Exhibit 10.6 to FS Energy and Power Fund’s Current Report on Form 8-K filed on May 24, 2016.)

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	10.62			Guarantee, Pledge and Security Agreement, dated as of May 18, 2016, by and among Bryn Mawr Funding LLC, any subsidiary guarantors from time to time party thereto, Barclays Bank PLC, as revolving administrative agent, and Barclays Bank PLC, as collateral agent. (Incorporated by reference to Exhibit 10.7 to FS Energy and Power Fund’s Current Report on Form 8-K filed on May 24, 2016.)
	10.63			First Amendment to Senior Secured Revolving Credit Agreement, dated as of March 14, 2018, among Bryn Mawr Funding, LLC, the lenders party thereto, Barclays Bank PLC, as administrative agent, and FS Energy and Power Fund. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on March 19, 2018.)
	10.64			Credit Agreement, dated as of April 19, 2017, among Gladwyne Funding LLC, Goldman Sachs Bank USA, as lender, sole lead arranger and administrative agent, Citibank, N.A., as collateral agent, and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on April 25, 2017.)
	10.65			Indenture, dated August 16, 2018, by and between FS Energy and Power Fund, U.S. Bank National Association, as trustee, and the guarantors named therein. (Incorporated by reference to Exhibit 4.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on August 22, 2018.)
	10.66			Senior Secured Credit Agreement, dated August 16, 2018, by and among FS Energy and Power Fund, the Lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent and the other parties signatory thereto. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on August 22, 2018.)
	10.67			Amendment No. 1 and Waiver, dated as of April 9, 2020, among FS Energy and Power Fund, each of the subsidiary guarantors party thereto, each of the lenders and conduit support providers party thereto, and JPMorgan Chase Bank, N.A. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on April 9, 2020.)
	10.68			Guarantee and Security Agreement, dated August 16, 2018, made by FS Energy and Power Fund and certain of FS Energy and Power Fund’s subsidiaries in favor of JPMorgan Chase Bank, N.A. as collateral agent. (Incorporated by reference to Exhibit 10.2 to FS Energy and Power Fund’s Current Report on Form 8-K filed on August 22, 2018.)
	10.69			Collateral Agency and Intercreditor Agreement, dated August 16, 2018, by and among FS Energy and Power Fund, FS Energy and Power Fund’s subsidiaries parties thereto, JPMorgan Chase Bank, N.A., as the initial credit facility representative, U.S. Bank National Association as the initial secured notes representative and JPMorgan Chase Bank, N.A., as collateral agent. (Incorporated by reference to Exhibit 10.3 to FS Energy and Power Fund’s Current Report on Form 8-K filed on August 22, 2018.)
	10.70			First Amendment to Credit Agreement, dated as of September 6, 2019, among Gladwyne Funding LLC, Goldman Sachs Bank USA, as lender, sole lead arranger and administrative agent, Citibank, N.A., as collateral agent, and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on September 10, 2019.)
	10.71			Second Amendment to Credit Agreement, dated as of October 15, 2019, among Gladwyne Funding LLC, Goldman Sachs Bank USA, as lender, sole lead arranger and administrative agent, Citibank, N.A., as collateral agent, and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on October 17, 2019.)
	10.72			Third Amendment to Credit Agreement, dated as of November 14, 2019, among Gladwyne Funding LLC, Goldman Sachs Bank USA, as lender, sole lead arranger and administrative agent, Citibank, N.A., as collateral agent, and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on November 19, 2019.)

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	10.73			Amended and Restated Credit Agreement, dated as of December 2, 2019, among Gladwyne Funding LLC, Goldman Sachs Bank USA, as lender, sole lead arranger and administrative agent, Citibank, N.A., as collateral agent, and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on December 6, 2019.)
	10.74*			Amendment No. 1 to Amended and Restated Credit Agreement, dated as of March 11, 2020, among Gladwyne Funding LLC, as borrower, Goldman Sachs Bank USA, as sole lead arranger, sole lender, and administrative agent, FS Energy and Power Fund, as equity holder and investment manager, and Wells Fargo Bank, National Association as collateral agent and collateral administrator.
	10.75			Letter Agreement, dated as of April 1, 2020, among Gladwyne Funding LLC, FS Energy and Power Fund, Goldman Sachs Bank, USA, and Wells Fargo Bank, National Association. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund’s Current Report on Form 8-K filed on April 7, 2020.)
	31.1*			Certification of Chief Executive Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended.
	31.2*			Certification of Chief Financial Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended.
	32.1*			Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on May 13, 2020.

				FS Energy and Power Fund
				By:			/s/ Michael C. Forman Michael C. Forman Chief Executive Officer (Principal Executive Officer)
				By:			/s/ Edward T. Gallivan, Jr. Edward T. Gallivan, Jr. Chief Financial Officer (Principal Financial and Accounting Officer)

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FS Specialty Lending Fund (FSEN) 10-Q2020 Q1 Quarterly report

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