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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549



FORM 10-Q





ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2018o

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(State or other jurisdiction of
incorporation or organization)

27-6822130(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 ý    No o.

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 o    No o.

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 o

Accelerated filer o

Non-accelerated filer ý (Do not check if a
smaller reporting company)

Smaller reporting company o Emerging growth company o


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. o

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

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 438,487,393 common shares of beneficial interest outstanding as of May 14, 2018.





---





Table of Contents



TABLE OF CONTENTS





PagePART IFINANCIAL INFORMATIONITEM 1.

FINANCIAL STATEMENTSConsolidated Balance Sheets as of March 31, 2018 (Unaudited) and December 31, 2017


1Unaudited Consolidated Statements of Operations for the three months ended March 31, 2018 and 2017


2Unaudited Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2018 and 2017


3Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017


4Consolidated Schedules of Investments as of March 31, 2018 (Unaudited) and December 31, 2017


5Notes to Unaudited Consolidated Financial Statements


19ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


46ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


61ITEM 4.

CONTROLS AND PROCEDURES


62PART IIOTHER INFORMATIONITEM 1.

LEGAL PROCEEDINGS


63ITEM 1A.

RISK FACTORS


63ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


63ITEM 3.

DEFAULTS UPON SENIOR SECURITIES


64ITEM 4.

MINE SAFETY DISCLOSURES


64ITEM 5.

OTHER INFORMATION


64ITEM 6.

EXHIBITS


65SIGNATURES


71


---





Table of Contents

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, 2018
(Unaudited)

December 31,
2017AssetsInvestments, at fair valueNon-controlled/unaffiliated investments (amortized cost$3,134,868 and $3,490,683, respectively)

$
2,966,788

$
3,281,536Non-controlled/affiliated investments (amortized cost$843,517 and $839,619, respectively)


652,284


715,169Controlled/affiliated investments (amortized cost$27,464 and $27,464, respectively)





​
​
​
​
​
​
​
​Total investments, at fair value (amortized cost$4,005,849 and $4,357,766, respectively)


3,619,072


3,996,705Cash


383,536


195,376Receivable for investments sold and repaid


1,231


66,337Income receivable


50,172


51,293Deferred financing costs


410


720Reimbursement due from sponsor(1)





5,945Prepaid expenses and other assets


8


55​
​
​
​
​
​
​
​Total assets

$
4,054,429

$
4,316,431​
​
​
​
​
​
​
​LiabilitiesPayable for investments purchased

$
106,573

$
88,033Credit facilities payable (net of deferred financing costs of $1,662 and $1,883, respectively)(2)


1,068,338


1,218,117Shareholder distributions payable


7,954


10,938Management fees payable


18,298


21,834Administrative services expense payable


580


361Interest payable


5,432


6,033Trustees' fees payable


450


252Other accrued expenses and liabilities


3,837


4,821​
​
​
​
​
​
​
​Total liabilities


1,211,462


1,350,389​
​
​
​
​
​
​
​Commitments and contingencies ($28,104 and $28,104, respectively)(3)Shareholders' equityPreferred 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, 441,740,665 and 446,045,135 shares issued and outstanding, respectively


442


446Capital in excess of par value(4)


3,785,262


3,814,303Accumulated undistributed net realized gains (losses) on investments and gain/loss on foreign currency(4)


(555,259
)

(487,379
)Accumulated undistributed (distributions in excess of) net investment income(4)


(682
)

(247
)Net unrealized appreciation (depreciation) on investments and unrealized gain/loss on foreign currency


(386,796
)

(361,081
)​
​
​
​
​
​
​
​Total shareholders' equity


2,842,967


2,966,042​
​
​
​
​
​
​
​Total liabilities and shareholders' equity

$
4,054,429

$
4,316,431​
​
​
​
​
​
​
​Net asset value per common share at period end

$
6.44

$
6.65


(1)See
Note 4 for a discussion of expense reimbursements paid to the Company by its former investment adviser and affiliates.(2)See
Note 8 for a discussion of the Company's financing arrangements.(3)See
Note 9 for a discussion of the Company's commitments and contingencies.(4)See
Note 5 for a discussion of the sources of distributions paid by the Company.




See notes to unaudited consolidated financial statements.

1

---





Table of Contents



FS Energy and Power Fund        Unaudited Consolidated Statements of Operations  (in thousands, except share and per share amounts)



Three Months Ended
March 31,2018

2017Investment incomeFrom non-controlled/unaffiliated investments:Interest income

$
66,380

$
69,178Paid-in-kind interest income


2,390


5,363Fee income


6,965


23,822From non-controlled/affiliated investments:Interest income


11,518


15,023Paid-in-kind interest income


629


2,860Fee income


2,091


​
​
​
​
​
​
​
​Total investment income


89,973


116,246​
​
​
​
​
​
​
​Operating expensesManagement fees


18,298


22,385Subordinated income incentive fees(1)





10,499Administrative services expenses


793


808Share transfer agent fees


643


734Accounting and administrative fees


361


422Interest expense(2)


14,107


10,235Trustees' fees


450


250Other general and administrative expenses


933


1,125​
​
​
​
​
​
​
​Total operating expenses


35,585


46,458Less: Expense reimbursement from sponsor(3)





(18,220
)​
​
​
​
​
​
​
​Net expenses


35,585


28,238​
​
​
​
​
​
​
​Net investment income


54,388


88,008​
​
​
​
​
​
​
​Realized and unrealized gain/lossNet realized gain (loss) on investments:Non-controlled/unaffiliated


(67,880
)

(30,861
)Non-controlled/affiliated





208Net realized gain (loss) on foreign currency





3Net change in unrealized appreciation (depreciation) on investments:Non-controlled/unaffiliated


41,067


27,235Non-controlled/affiliated


(66,783
)

(21,595
)Controlled/affiliated





(1,531
)Net change in unrealized gain (loss) on foreign currency


1


52​
​
​
​
​
​
​
​Total net realized and unrealized gain (loss)


(93,595
)

(26,489
)​
​
​
​
​
​
​
​Net increase (decrease) in net assets resulting from operations

$
(39,207
)
$
61,519​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Per share informationbasic and dilutedNet increase (decrease) in net assets resulting from operations (Earnings per Share)

$
(0.09
)
$
0.14​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Weighted average shares outstanding


439,924,494


440,957,676​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


(1)See
Note 2 and Note 4 for a discussion of the methodology employed by the Company in calculating the subordinated income incentive fees.(2)See
Note 8 for a discussion of the Company's financing arrangements.(3)See
Note 4 for a discussion of expense reimbursements payable to the Company by its former investment adviser and affiliates.




See notes to unaudited consolidated financial statements.

2

---





Table of Contents



FS Energy and Power Fund        Unaudited Consolidated Statements of Changes in Net Assets        (in thousands)



Three Months Ended
March 31,2018

2017OperationsNet investment income

$
54,388

$
88,008Net realized gain (loss) on investments and foreign currency


(67,880
)

(30,650
)Net change in unrealized appreciation (depreciation) on investments


(25,716
)

4,109Net change in unrealized gain (loss) on foreign currency


1


52​
​
​
​
​
​
​
​Net increase (decrease) in net assets resulting from operations


(39,207
)

61,519​
​
​
​
​
​
​
​Shareholder distributions(1)Distributions from net investment income


(54,823
)

(77,984
)​
​
​
​
​
​
​
​Net decrease in net assets resulting from shareholder distributions


(54,823
)

(77,984
)​
​
​
​
​
​
​
​Capital share transactions(2)Reinvestment of shareholder distributions


31,380


46,964Repurchases of common shares


(60,425
)

(17,244
)​
​
​
​
​
​
​
​Net increase (decrease) in net assets resulting from capital share transactions


(29,045
)

29,720​
​
​
​
​
​
​
​Total increase (decrease) in net assets


(123,075
)

13,255Net assets at beginning of period


2,966,042


3,348,894​
​
​
​
​
​
​
​Net assets at end of period

$
2,842,967

$
3,362,149​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Accumulated undistributed (distributions in excess of) net investment income(1)

$
(682
)
$
(3,714
)​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


(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.

3

---





Table of Contents



FS Energy and Power Fund        Unaudited Consolidated Statements of Cash Flows        (in thousands)



Three Months Ended
March 31,2018

2017Cash flows from operating activitiesNet increase (decrease) in net assets resulting from operations

$
(39,207
)
$
61,519Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating
activities:Purchases of investments


(260,693
)

(766,544
)Paid-in-kind interest


(3,019
)

(8,223
)Proceeds from sales and repayments of investments


551,229


442,033Net realized (gain) loss on investments


67,880


30,653Net change in unrealized (appreciation) depreciation on investments


25,716


(4,109
)Accretion of discount


(3,480
)

(5,246
)Amortization of deferred financing costs


531


838(Increase) decrease in receivable for investments sold and repaid


65,106


(306,492
)(Increase) decrease in income receivable


1,121


(21,148
)(Increase) decrease in expense reimbursement due from sponsor(1)


5,945


(18,220
)(Increase) decrease in prepaid expenses and other assets


47


(197
)Increase (decrease) in payable for investments purchased


18,540


273,064Increase (decrease) in management fees payable


(3,536
)

1,530Increase (decrease) in subordinated income incentive fees payable





10,499Increase (decrease) in administrative services expense payable


219


(122
)Increase (decrease) in interest payable(2)


(601
)

320Increase (decrease) in trustees' fees payable


198


Increase (decrease) in other accrued expenses and liabilities


(984
)

149​
​
​
​
​
​
​
​Net cash provided by (used in) operating activities


425,012


(309,696
)​
​
​
​
​
​
​
​Cash flows from financing activitiesReinvestment of shareholder distributions


31,380


46,964Repurchases of common shares


(60,425
)

(17,244
)Shareholder distributions


(57,807
)

(76,873
)Borrowings under credit facilities(2)





140,000Repayments of credit facilities(2)


(150,000
)

(4,273
)​
​
​
​
​
​
​
​Net cash provided by (used in) financing activities


(236,852
)

88,574​
​
​
​
​
​
​
​Total increase (decrease) in cash


188,160


(221,122
)Cash at beginning of period


195,376


317,520​
​
​
​
​
​
​
​Cash at end of period

$
383,536

$
96,398​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Supplemental disclosureNon-cash purchase of investments

$
(7,140
)
$
(16,062
)​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Non-cash sales of investments

$
7,140

$
16,062​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


(1)See
Note 4 for a discussion of expense reimbursements payable to the Company by its former investment adviser and affiliates.(2)See
Note 8 for a discussion of the Company's credit facilities. During the three months ended March 31, 2018 and 2017, the Company paid $14,177 and
$5,548, respectively, in interest expense on the credit facilities and $0 and $3,529, respectively, in interest expense pursuant to the repurchase agreement.




See notes to unaudited consolidated financial statements.

4

---



Table of Contents

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments
As of March 31, 2018
(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31.4%Abaco Energy Technologies LLC

(j)

Service & Equipment

L+950


1.0
%
11/20/20

$
85,565

$
82,357

$
84,565Allied Wireline Services, LLC

(k)(l)

Service & Equipment

L+400, 5.5% PIK (5.5% Max PIK)


1.5
%
6/30/20


115,104


114,714


113,090Altus Power America, Inc.

(j)(aa)

Power

L+750


1.5
%
9/30/21


77,378


77,378


75,830Altus Power America, Inc.

(e)(aa)

Power

L+750


1.5
%
9/30/21


23,872


23,872


23,395ARB Midstream Operating Company, LLC

(g)

Midstream

L+725


1.0
%
11/3/21


3,182


3,150


3,150ARB Midstream Operating Company, LLC

(e)

Midstream

L+725


1.0
%
11/3/21


1,819


1,791


1,800Bioenergy Infrastructure Holdings Ltd.

(g)(m)

Power

L+725


1.0
%
11/1/22


734


727


727Bioenergy Infrastructure Holdings Ltd.

(e)(m)

Power

L+725


1.0
%
11/1/22


796


796


788BL Sand Hills Unit, L.P.

(l)(aa)

Upstream

Prime+650


3.5
%
12/17/21


20,000


17,369


20,000Cimarron Energy Inc.



Service & Equipment

L+1150 PIK (L+1150 Max PIK)


1.0
%
12/15/19


25,854


25,646


12,055Compass Power Generation LLC

(g)

Power

L+375


1.0
%
12/20/24


3,000


3,056


3,045Eagle Midstream Canada Finance Inc.

(l)(m)

Midstream

8.5%




9/27/20


175,000


175,000


173,031Felix Investments Holdings II, LLC

(g)

Upstream

L+650


1.0
%
8/9/22


1,933


1,914


1,914Felix Investments Holdings II, LLC

(e)

Upstream

L+650


1.0
%
2/16/25


967


957


957Fortis Minerals Intermediate Holdings, LLC

(g)

Upstream

L+625


1.0
%
2/16/25


11,725


11,609


11,608Fortis Minerals Intermediate Holdings, LLC

(e)

Upstream

L+625


1.0
%
2/16/25


35,175


34,823


34,823Gulf Finance, LLC

(f)

Midstream

L+525


1.0
%
8/25/23


18,439


18,004


17,091Industrial Group Intermediate Holdings, LLC



Service & Equipment

L+800


1.3
%
5/31/20


23,015


23,015


23,360JSS Holdings, Inc.

(l)

Service & Equipment

L+800, 0.0% PIK (2.5% Max PIK)


1.0
%
3/31/23


14,924


14,799


15,243JSS Holdings, Inc.

(e)

Service & Equipment

L+800, 0.0% PIK (2.5% Max PIK)


1.0
%
3/31/23


2,727


2,727


2,786Kraken Oil & Gas LLC



Upstream

L+750


1.0
%
5/7/21


35,000


34,682


35,044Kraken Oil & Gas LLC

(e)

Upstream

L+750


1.0
%
5/7/21


25,000


25,000


25,031Lucid Energy Group, LLC

(f)(g)

Midstream

L+300


1.0
%
2/18/25


16,500


16,488


16,443Lusk Operating LLC

(p)(r)(bb)

Upstream

Prime+500 PIK (8.8% Max PIK)


3.3
%
4/30/18


29,297


27,464


MB Precision Holdings LLC



Service & Equipment

L+725, 2.3% PIK (2.3% Max PIK)


1.3
%
1/23/21


13,226


13,226


10,813Medallion Midland Acquisition, LLC

(g)

Upstream

L+325


1.0
%
10/30/24


5,000


5,013


5,000New Age (African Global Energy) Ltd.

(g)(m)

Upstream

15.0%




6/28/20


1,617


1,601


1,601NNE Holding LLC

(g)

Upstream

L+800




3/2/22


2,650


2,624


2,624NNE Holding LLC

(e)

Upstream

L+800




3/2/22


350


347


347ORYX Southern Delaware Holdings LLC

(f)(g)

Upstream

L+325


1.0
%
2/28/25


25,000


25,125


25,063Power Distribution, Inc.



Power

L+725


1.3
%
1/25/23


29,853


29,853


30,375Strike, LLC

(j)

Midstream

L+800


1.0
%
5/30/19


3,207


3,170


3,223Strike, LLC

(j)

Midstream

L+800


1.0
%
11/30/22


23,438


22,884


23,789Swift Worldwide Resources US Holdings Corp.

(j)

Service & Equipment

L+1000, 1.0% PIK (1.0% Max PIK)


1.0
%
7/20/21


58,473


58,473


58,911Traverse Midstream Partners LLC

(f)(g)

Midstream

L+400


1.0
%
9/27/24


74,672


75,105


75,197UTEX Industries, Inc.

(f)

Service & Equipment

L+400


1.0
%
5/21/21


24,147


22,083


23,745Warren Resources, Inc.

(j)(l)(aa)

Upstream

L+900, 1.0% PIK (1.0% Max PIK)


1.0
%
5/22/20


27,092


27,092


27,092​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Senior Secured LoansFirst Lien
















1,023,934


983,556Unfunded Loan Commitments
















(90,313
)

(90,313
)​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Net Senior Secured LoansFirst Lien
















933,621


893,243​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


See notes to unaudited consolidated financial statements.

5

---



Table of Contents

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of March 31, 2018
(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Second Lien26.5%Aethon United BR LP

(g)

Upstream

L+675


1.0
%
9/8/23

$
87,931

$
86,715

$
88,375Aethon United BR LP

(e)

Upstream

L+675


1.0
%
9/8/23


39,969


39,955


40,171Arena Energy, LP

(j)(k)

Upstream

L+900, 4.0% PIK (4.0% Max PIK)


1.0
%
1/24/21


108,654


108,654


104,851Chief Exploration & Development LLC

(f)

Upstream

L+650


1.0
%
5/16/21


16,156


15,713


16,069Chisholm Oil and Gas Operating, LLC

(j)(k)(l)

Upstream

L+800


1.0
%
3/21/24


196,000


196,000


195,931Granite Acquisition, Inc.

(f)(g)

Power

L+725


1.0
%
12/19/22


22,331


22,036


22,645Gruden Acquisition, Inc.

(j)

Service & Equipment

L+850


1.0
%
8/18/23


15,000


14,486


15,113Horn Intermediate Holdings, Inc.

(j)

Service & Equipment

L+775


1.3
%
10/2/18


50,250


50,250


50,376P2 Upstream Acquisition Co.

(f)(j)

Service & Equipment

L+800


1.0
%
4/30/21


42,399


42,066


39,819Panda Temple Power, LLC

(k)

Power

L+800 (L+800 Max PIK)


1.0
%
2/7/23


3,497


3,430


3,572Penn Virginia Holding Corp.

(m)

Upstream

L+700


1.0
%
9/29/22


50,000


50,000


50,500Rosehill Operating Company, LLC

(g)

Upstream

10.0%




1/31/23


1,667


1,650


1,650SilverBow Resources, Inc.

(g)(m)

Upstream

L+750


1.0
%
12/15/24


19,000


18,814


19,560Talos Production LLC

(k)(l)

Upstream

11.0%




4/3/22


43,250


40,627


43,250Titan Energy Operating, LLC

(k)(aa)

Upstream

2.0%, L+1100 PIK (L+1100 Max PIK)


1.0
%
2/23/20


120,686


100,902


19,225UTEX Industries, Inc.

(f)(j)

Service & Equipment

L+725


1.0
%
5/20/22


85,192


79,513


82,743​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Senior Secured LoansSecond Lien
















870,811


793,850Unfunded Loan Commitment
















(39,955
)

(39,955
)​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Net Senior Secured LoansSecond Lien
















830,856


753,895​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Senior Secured Bonds21.3%Black Swan Energy Ltd.

(j)(m)

Upstream

9.0%




1/20/24


90,000


90,000


87,975CITGO Holding, Inc.

(f)

Downstream

10.8%




2/15/20


31,380


32,930


33,322CSVC Acquisition Corp.

(h)

Service & Equipment

7.8%




6/15/25


30,608


30,608


26,438EP Energy LLC

(f)(h)(m)(o)

Upstream

8.0%




2/15/25


49,880


47,886


33,357EP Energy LLC

(h)(m)

Upstream

9.4%




5/1/24


5,000


4,842


3,563FourPoint Energy, LLC

(j)(k)(l)(aa)

Upstream

9.0%




12/31/21


235,125


227,376


239,240Mirant Mid-Atlantic Trust

(f)(h)(o)

Power

10.1%




12/30/28


31,752


33,690


31,911Ridgeback Resources Inc.

(k)(m)(aa)

Upstream

12.0%




12/29/20


3,887


3,825


3,887Sunnova Energy Corp.

(j)(aa)

Power

6.0%, 6.0% PIK (6.0% Max PIK)




10/24/18


25,504


25,504


25,472Velvet Energy Ltd.

(j)(l)(m)

Upstream

9.0%




10/5/23


120,000


120,000


119,520​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Senior Secured Bonds
















616,661


604,685​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


See notes to unaudited consolidated financial statements.

6

---



Table of Contents

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of March 31, 2018
(in thousands, except share amounts)



Portfolio Company(a)

Footnotes

Industry

Rate(b)

Floor

Maturity

Principal
Amount(c)

Amortized
Cost

Fair
Value(d)Subordinated Debt34.2%Alta Mesa Holdings, LP

(f)(h)(o)

Upstream

7.9%




12/15/24

$
20,425

$
20,425

$
21,361Ascent Resources Utica Holdings, LLC

(f)(h)(j)(o)

Upstream

10.0%




4/1/22


200,000


200,000


216,750Bellatrix Exploration Ltd.

(f)(h)(m)(o)

Upstream

8.5%




5/15/20


60,120


59,323


49,106Brand Energy & Infrastructure Services, Inc.

(f)(h)

Service & Equipment

8.5%




7/15/25


44,759


44,759


46,829Canbriam Energy Inc.

(f)(h)(j)(m)(o)

Upstream

9.8%




11/15/19


110,965


109,324


113,323Compressco Partners, LP

(f)(h)(o)

Service & Equipment

7.3%




8/15/22


20,050


19,934


18,797Covey Park Energy LLC



Upstream

7.5%




5/15/25


9,482


9,426


9,446Eclipse Resources Corp.

(f)(h)(m)(o)

Upstream

8.9%




7/15/23


62,745


57,558


59,372Endeavor Energy Resources, L.P.



Upstream

5.5%




1/30/26


2,000


1,975


1,993EV Energy Partners, L.P.

(f)(h)(o)(p)(r)

Upstream

8.0%




4/15/19


48,814


39,678


23,736Genesis Energy, L.P.

(h)(m)

Midstream

6.8%




8/1/22


23,540


23,032


24,249Genesis Energy, L.P.

(h)(m)

Midstream

6.0%




5/15/23


15,280


14,303


15,139Global Jet Capital Inc.



Service & Equipment

15.0% PIK (15.0% Max PIK)




1/30/25


881


881


889Global Jet Capital Inc.



Service & Equipment

15.0% PIK (15.0% Max PIK)




4/30/25


5,600


5,600


5,649Global Jet Capital Inc.



Service & Equipment

15.0% PIK (15.0% Max PIK)




9/3/25


1,157


1,157


1,167Global Jet Capital Inc.



Service & Equipment

15.0% PIK (15.0% Max PIK)




9/29/25


1,089


1,089


1,099Global Jet Capital Inc.



Service & Equipment

15.0% PIK (15.0% Max PIK)




12/2/26


958


958


966Global Partners L.P.

(f)(m)

Midstream

6.3%




7/15/22


30,835


30,835


30,792Global Partners L.P.

(f)(m)

Midstream

7.0%




6/15/23


2,824


2,478


2,852Great Western Petroleum, LLC

(f)(h)(o)

Upstream

9.0%




9/30/21


35,830


35,723


36,860Hammerhead Resources Inc.

(j)(m)

Upstream

9.0%




7/10/22


100,000


97,334


99,000Hilcorp Energy I LP

(h)

Upstream

5.0%




12/1/24


35,000


35,166


34,475Lonestar Resources America Inc.

(h)

Upstream

11.3%




1/1/23


25,000


25,000


25,031Martin Midstream Partners L.P.

(f)(h)(m)(o)

Midstream

7.3%




2/15/21


24,660


24,100


24,796Moss Creek Resources, LLC

(h)

Upstream

7.5%




1/15/26


30,000


30,000


30,329ONEOK, Inc.

(f)(m)

Midstream

7.5%




9/1/23


12,600


11,818


14,775Tenrgys, LLC

(k)(p)(r)

Upstream

L+900


2.5
%
12/23/18


75,000


75,000


38,625Zachry Holdings, Inc.

(f)

Service & Equipment

7.5%




2/1/20


23,925


23,928


24,269​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Subordinated Debt
















1,000,804


971,675​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


See notes to unaudited consolidated financial statements.

7

---



Table of Contents

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of March 31, 2018
(in thousands, except share amounts)



Portfolio Company(a)

Footnotes

Industry

Rate(b)





Number of
Shares

Amortized
Cost

Fair
Value(d)Equity/Other13.9%(n)Abaco Energy Technologies LLC, Common Equity

(r)

Service & Equipment









6,944,444

$
6,944

$
1,736Abaco Energy Technologies LLC, Preferred Equity

(r)

Service & Equipment









28,942,003


1,447


8,683Allied Downhole Technologies, LLC, Common Equity

(k)(q)(r)

Service & Equipment









7,431,113


7,223


1,858Allied Downhole Technologies, LLC, Warrants, 2/28/2019

(k)(q)(r)

Service & Equipment









5,344,680


1,865


1,336Altus Power America Holdings, LLC, Common Equity

(k)(r)(aa)

Power









12,474,205


12,474


Altus Power America Holdings, LLC, Preferred Equity

(k)(s)(aa)

Power

9.0%, 5.0% PIK (5.0% Max PIK)







25,792,683


25,793


25,664Ascent Resources Utica Holdings, LLC, Common Equity

(r)(t)

Upstream









148,692,909


44,700


37,173BL Sand Hills Unit, L.P., Net Profits Interest

(r)(v)(aa)

Upstream









N/A


5,180


1,031BL Sand Hills Unit, L.P., Overriding Royalty Interest

(v)(aa)

Upstream









N/A


740


736BL Sand Hills Unit, L.P., Series A Units

(i)(r)(aa)

Upstream









29,117


24,019


6,931Chisholm Oil and Gas, LLC, Series A Units

(i)(r)

Upstream









13,905,565


13,906


13,892Cimarron Energy Holdco Inc., Common Equity

(r)

Service & Equipment









3,675,487


3,323


Cimarron Energy Holdco Inc., Preferred Equity

(r)

Service & Equipment









626,806


627


Extraction Oil & Gas, Inc., Common Equity

(k)(r)(z)

Upstream









1,140,637


11,250


13,072FourPoint Energy, LLC, Common Equity, Class C-II-A Units

(k)(q)(r)(aa)

Upstream









66,000


66,000


18,645FourPoint Energy, LLC, Common Equity, Class D Units

(k)(q)(r)(aa)

Upstream









12,374


8,176


3,527FourPoint Energy, LLC, Common Equity, Class E-II Units

(i)(r)(aa)

Upstream









150,937


37,734


42,640FourPoint Energy, LLC, Common Equity, Class E-III Units

(i)(k)(q)(r)(aa)

Upstream









222,750


55,688


62,927Global Jet Capital Holdings, LP, Preferred Equity

(r)

Service & Equipment









2,785,562


2,786


2,507Industrial Group Intermediate Holdings, LLC, Common Equity

(k)(q)(r)

Service & Equipment









472,755


473


591JSS Holdco, LLC, Net Profits Interest

(r)

Service & Equipment









N/A





68Lusk Operating LLC, Common Equity

(r)(u)(bb)

Upstream









2,000





MB Precision Investment Holdings LLC, Class A-2 Units

(k)(q)(r)

Service & Equipment









490,213


490


New Age (African Global Energy) Limited

(g)(m)(r)

Upstream









19


19


19PDI Parent LLC, Common Equity

(r)

Power









1,384,615


1,385


1,385Ridgeback Resources Inc., Common Equity

(k)(l)(m)(r)(w)(aa)

Upstream









9,599,928


58,985


54,693Rosehill Resources, Inc.

(g)(r)

Upstream









2,511


2,486


2,486Sunnova Energy Corp., Common Equity

(r)(aa)

Power









6,667,368


25,026


333Sunnova Energy Corp., Preferred Equity

(r)(aa)

Power









1,117,214


5,948


6,614Swift Worldwide Resources Holdco Limited, Common Equity

(m)(r)(x)

Service & Equipment









3,750,000


6,029


1,687Synergy Offshore LLC, Preferred Equity

(k)(p)(r)(y)

Upstream









71,131


93,009


26,318T1 Power Holdings LLC, Common Equity

(k)(q)(r)

Power









3,758


3,758


4,297TE Holdings, LLC, Common Equity

(i)(r)

Upstream









2,225,950


18,921


2,782TE Holdings, LLC, Preferred Equity

(l)(r)

Upstream









1,475,531


14,734


11,066The Brock Group, Inc., Common Equity

(l)(r)

Service & Equipment









786,094


15,617


15,290Titan Energy, LLC, Common Equity

(k)(r)(z)(aa)

Upstream









555,496


17,554


611Total Safety Holdings, LLC, Common Equity

(l)(r)

Service & Equipment









12,897


4,707


4,514Warren Resources, Inc., Common Equity

(l)(r)(aa)

Upstream









4,415,749


20,754


17,663White Star Petroleum Holdings, LLC, Common Equity

(i)(r)

Upstream









4,867,084


4,137


2,799​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Equity/Other
















623,907


395,574​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​TOTAL INVESTMENTS127.3%















$
4,005,849


3,619,072​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​LIABILITIES IN EXCESS OF OTHER ASSETS(27.3%)



















(776,105
)​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​NET ASSETS100.0%


















$
2,842,967​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


See notes to unaudited consolidated financial statements.

8

---



Table of Contents

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)

As of March 31, 2018
(in thousands, except share amounts)






(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, 2018, the three-month London Interbank Offered Rate, or LIBOR or "L," was 2.31% 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)Investments
classified as Level 3 in the Company's fair value hierarchy whereby fair value was determined by the Company's board of trustees, unless otherwise
noted (see Note 7).(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)Security
or portion thereof held within FSEP Term Funding, LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit
facility with Deutsche Bank AG, New York Branch (see Note 8).(g)Position
or portion thereof unsettled as of March 31, 2018.(h)Security
or portion thereof held within Berwyn Funding LLC and is pledged as collateral supporting the amounts outstanding under the prime brokerage facility
with BNP Paribas Prime Brokerage, Inc., or BNP. Securities held within Berwyn Funding LLC may be rehypothecated from time to time as permitted under Rule 15c-1(a)(1) of the
Securities Exchange Act of 1934, as amended, or the Exchange Act, subject to the terms and conditions governing the prime brokerage facility with BNP (see Note 8).(i)Security
held within FS Energy Investments, LLC, a wholly-owned subsidiary of the Company.(j)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 8).(k)Security
or portion thereof held within Foxfields Funding LLC and is pledged as collateral supporting the obligations outstanding under the term loan facility
with Fortress Credit Co LLC (see Note 8).(l)Security
or portion thereof held within Bryn Mawr Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit
facility with Barclays Bank PLC (see Note 8).(m)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,
2018, 75.4% of the Company's total assets represented qualifying assets.(n)Listed
investments may be treated as debt for U.S. generally accepted accounting principles, or GAAP, or tax purposes.(o)Security
or portion thereof held within Berwyn Funding LLC has been rehypothecated under Rule 15c-1(a)(1) of the Exchange Act, subject to the terms and
conditions governing the prime brokerage facility with BNP (see Note 8). As of March 31, 2018, the fair value of securities rehypothecated by BNP was $191,186.(p)Security
was on non-accrual status as of March 31, 2018.(q)Security
held within FSEP Investments, Inc., a wholly-owned subsidiary of Foxfields Funding LLC.(r)Security
is non-income producing.(s)Security
is held within EP Altus Investments, LLC, a wholly-owned subsidiary of Foxfields Funding LLC.(t)Security
held within EP American Energy Investments, Inc., a wholly-owned subsidiary of the Company.(u)Security
held within FSEP-BBH, Inc., a wholly-owned subsidiary of the Company.(v)Security
held within EP Burnett Investments, Inc., a wholly-owned subsidiary of the Company.(w)Investment
denominated in Canadian dollars. Amortized cost and fair value are converted into U.S. dollars as of March 31, 2018.(x)Investment
denominated in British pounds. Amortized cost and fair value are converted into U.S. dollars as of March 31, 2018.(y)Security
held within EP Synergy Investments, Inc., a wholly-owned subsidiary of Foxfields Funding LLC.(z)Security
is classified as Level 1 in the Company's fair value hierarchy (See Note 7).


See notes to unaudited consolidated financial statements.

9

---



Table of Contents

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of March 31, 2018
(in thousands, except share amounts)






(aa)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, 2018, 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, 2018:


Portfolio Company

Fair Value at
December 31,
2017

Purchases,
Paid-in-Kind
Interest and
Transfers In

Sales,
Repayments and
Transfers Out

Accretion
of
Discount

Net Change
in Unrealized
Appreciation
(Depreciation)

Fair Value at
March 31,
2018

Interest
Income(2)

PIK
Income(2)

Fee
Income(2)Senior Secured LoansFirst LienAltus Power America, Inc.(1)

$
75,353

$


$


$


$


$
75,353

$
1,795

$


$
BL Sand Hills Unit, L.P.


20,000














20,000


544





Warren Resources, Inc.


81,214


124


(52,265
)




(1,981
)

27,092


1,254


124


2,091Senior Secured LoansSecond LienTitan Energy Operating, LLC


62,026











(42,801
)

19,225


592





Senior Secured BondsFourPoint Energy, LLC


238,946





(1,485
)

1,046


733


239,240


5,290





Ridgeback Resources Inc.


3,887














3,887


117





Sunnova Energy Corp.





34,176


(8,672
)




(32
)

25,472


1,023


505


Equity/Other





Altus Power America Holdings, LLC, Common Equity


1,871











(1,871
)










Altus Power America Holdings, LLC, Preferred Equity


25,793











(129
)

25,664


903





BL Sand Hills Unit, L.P., Net Profits Interest


966











65


1,031








BL Sand Hills Unit, L.P., Overriding Royalty Interest


726











10


736








BL Sand Hills Unit, L.P., Series A Units


7,000











(69
)

6,931








FourPoint Energy, LLC, Common Equity, Class C-II-A Units


19,140











(495
)

18,645








FourPoint Energy, LLC, Common Equity, Class D Units


3,619











(92
)

3,527








FourPoint Energy, LLC, Common Equity, Class E-II Units


43,395











(755
)

42,640








FourPoint Energy, LLC, Common Equity, Class E-III Units


64,598











(1,671
)

62,927








Ridgeback Resources Inc., Common Equity


58,284











(3,591
)

54,693








Sunnova Energy Corp., Common Equity





25,026








(24,693
)

333








Sunnova Energy Corp., Preferred Equity





5,948








666


6,614








Titan Energy, LLC, Common Equity


844











(233
)

611








Warren Resources, Inc., Common Equity


7,507











10,156


17,663








​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
715,169

$
65,274

$
(62,422
)
$
1,046

$
(66,783
)
$
652,284

$
11,518

$
629

$
2,091​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)Security
includes a partially unfunded commitment with an amortized cost of $23,872 and a fair value of $23,395.(2)Interest,
PIK and fee income presented for the full three months ended March 31, 2018.




See notes to unaudited consolidated financial statements.

10

---



Table of Contents

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of March 31, 2018
(in thousands, except share amounts)






(bb)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, 2018, the Company held investments in one portfolio company of which it is deemed to be
an "affiliated person" of and deemed to "control". The following table presents certain information with respect to investments in portfolio companies of which the Company was deemed to be an
"affiliated person" of and deemed to "control" for the three months ended March 31, 2018:


Portfolio Company

Fair Value at
December 31,
2017

Purchases,
Paid-in-Kind
Interest and
Other

Sales,
Repayments
and Other

Accretion of
Discount

Net
Realized
Gain (Loss)

Net Change
in Unrealized
Appreciation
(Depreciation)

Fair Value at
March 31,
2018Senior Secured LoansFirst LienLusk Operating LLC

$


$


$


$


$


$


$
Equity/OtherLusk Operating LLC, Common Equity




















​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$


$


$


$


$


$


$
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​




See notes to unaudited consolidated financial statements.

11

---



Table of Contents

FS Energy and Power Fund

Consolidated Schedule of Investments
As of December 31, 2017
(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31.2%Abaco Energy Technologies LLC

(g)(j)

Service & Equipment

L+700, 2.5% PIK (2.5% Max PIK)


1.0
%
11/20/20

$
86,207

$
82,722

$
84,697Allied Wireline Services, LLC

(k)(l)

Service & Equipment

L+400, 5.5% PIK (5.5% Max PIK)


1.5
%
2/28/19


115,104


114,625


113,377Altus Power America, Inc.

(j)(aa)

Power

L+750


1.5
%
9/30/21


77,378


77,378


75,830Altus Power America, Inc.

(e)(aa)

Power

L+750


1.5
%
9/30/21


23,872


23,872


23,395BL Sand Hills Unit, L.P.

(l)(aa)

Upstream

Prime+650


3.5
%
12/17/21


20,000


17,369


20,000Cactus Wellhead, LLC

(f)(j)

Service & Equipment

L+600


1.0
%
7/31/20


41,225


39,865


41,293Cimarron Energy Inc.



Service & Equipment

L+1150 PIK (L+1150 Max PIK)


1.0
%
12/15/19


25,470


25,470


10,379CITGO Holding, Inc.

(f)

Downstream

L+850


1.0
%
5/12/18


26,014


26,149


26,340Crestwood Holdings LLC

(f)

Midstream

L+800


1.0
%
6/19/19


29,151


29,210


29,297Eagle Midstream Canada Finance Inc.

(l)(m)

Midstream

8.5%




9/27/20


175,000


175,000


175,000Gulf Finance, LLC

(f)

Midstream

L+525


1.0
%
8/25/23


18,485


18,030


16,687Industrial Group Intermediate Holdings, LLC



Service & Equipment

L+800


1.3
%
5/31/20


23,027


23,027


23,373JSS Holdings, Inc.

(l)

Service & Equipment

L+800, 0.0% PIK (2.5% Max PIK)


1.0
%
3/31/23


14,941


14,809


15,173JSS Holdings, Inc.

(e)

Service & Equipment

L+800, 0.0% PIK (2.5% Max PIK)


1.0
%
3/31/23


2,727


2,727


2,770Kraken Oil & Gas LLC



Upstream

L+750


1.0
%
5/7/21


35,000


34,660


34,913Kraken Oil & Gas LLC

(e)

Upstream

L+750


1.0
%
5/7/21


25,000


25,000


24,938Lusk Operating LLC

(p)(r)(bb)

Upstream

Prime+500 PIK (8.8% Max PIK)


3.3
%
1/31/18


29,297


27,464


MB Precision Holdings LLC



Service & Equipment

L+725, 2.25% PIK (2.25% Max PIK)


1.3
%
1/23/21


13,793


13,793


12,638Panda Temple Power, LLC

(j)(p)(r)

Power

L+625


1.0
%
3/6/22


9,923


9,782


7,219Panda Temple Power, LLC



Power

L+900


1.0
%
4/28/18


377


377


378Power Distribution, Inc.



Power

L+725


1.3
%
1/25/23


29,928


29,928


30,377Strike, LLC

(j)

Midstream

L+800


1.0
%
5/30/19


19,600


19,358


19,698Strike, LLC

(j)

Midstream

L+800


1.0
%
11/30/22


23,750


23,160


24,106Swift Worldwide Resources US Holdings Corp.

(j)

Service & Equipment

L+1000, 1.0% PIK (1.0% Max PIK)


1.0
%
7/20/21


58,468


58,468


59,637UTEX Industries, Inc.

(f)

Service & Equipment

L+400


1.0
%
5/21/21


24,210


22,006


23,796Warren Resources, Inc.

(j)(l)(aa)

Upstream

L+900, 1.0% PIK (1.0% Max PIK)


1.0
%
5/22/20


79,233


79,233


81,214​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Senior Secured LoansFirst Lien
















1,013,482


976,525Unfunded Loan Commitments
















(51,599
)

(51,599
)​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Net Senior Secured LoansFirst Lien
















961,883


924,926​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


See notes to unaudited consolidated financial statements.

12

---



Table of Contents

FS Energy and Power Fund

Consolidated Schedule of Investments (Continued)
As of December 31, 2017
(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Second Lien26.8%Aethon United BR LP



Upstream

L+675


1.0
%
9/8/23

$
85,938

$
84,698

$
85,052Aethon United BR LP

(e)

Upstream

L+675


1.0
%
9/8/23


39,063


39,063


38,660Arena Energy, LP

(j)(k)

Upstream

L+900, 4.0% PIK (4.0% Max PIK)


1.0
%
1/24/21


107,656


107,656


102,360Chief Exploration & Development LLC

(f)

Upstream

L+650


1.0
%
5/16/21


16,156


15,685


15,928Chisholm Oil and Gas Operating, LLC

(j)(k)(l)

Upstream

L+800


1.0
%
3/21/24


196,000


196,000


195,971Emerald Performance Materials, LLC

(f)

Downstream

L+775


1.0
%
8/1/22


11,819


11,764


11,838Fieldwood Energy LLC

(f)(p)(r)

Upstream

L+713


1.3
%
9/30/20


33,591


34,068


11,252Granite Acquisition, Inc.

(f)

Power

L+725


1.0
%
12/19/22


18,694


18,330


18,825Gruden Acquisition, Inc.

(j)

Service & Equipment

L+850


1.0
%
8/18/23


15,000


14,463


14,981Horn Intermediate Holdings, Inc.

(j)

Service & Equipment

L+775


1.3
%
10/2/18


50,250


50,250


50,501P2 Upstream Acquisition Co.

(f)(j)

Service & Equipment

L+800


1.0
%
4/30/21


42,399


42,046


39,218Penn Virginia Holding Corp.

(m)

Upstream

L+700


1.0
%
9/29/22


50,000


50,000


50,053SilverBow Resources, Inc.

(m)

Upstream

L+750


1.0
%
12/15/24


15,000


14,850


14,850Talos Production LLC

(k)(l)

Upstream

11.0%




4/3/22


43,250


40,495


42,926Titan Energy Operating, LLC

(k)(aa)

Upstream

2.0%, L+1100 PIK (L+1100 Max PIK)


1.0
%
2/23/20


116,964


100,902


62,026UTEX Industries, Inc.

(f)(j)

Service & Equipment

L+725


1.0
%
5/20/22


85,192


79,263


81,146​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Senior Secured LoansSecond Lien
















899,533


835,587Unfunded Loan Commitment
















(39,063
)

(39,063
)​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Net Senior Secured LoansSecond Lien
















860,470


796,524​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Senior Secured Bonds22.3%Black Swan Energy Ltd.

(j)(m)

Upstream

9.0%




1/20/24


90,000


90,000


90,675CITGO Holding, Inc.

(f)

Downstream

10.8%




2/15/20


9,000


9,045


9,653CSVC Acquisition Corp.

(f)

Service & Equipment

7.8%




6/15/25


30,608


30,608


29,460EP Energy LLC

(f)(h)(m)(o)

Upstream

8.0%




2/15/25


54,880


52,838


40,131EP Energy LLC

(g)(h)(m)

Upstream

9.4%




5/1/24


68,614


63,012


60,134FourPoint Energy, LLC

(j)(k)(l)(aa)

Upstream

9.0%




12/31/21


235,125


227,815


238,946Mirant Mid-Atlantic Trust

(f)(h)(o)

Power

10.1%




12/30/28


31,752


33,728


32,052Ridgeback Resources Inc.

(k)(m)(aa)

Upstream

12.0%




12/29/20


3,887


3,825


3,887Sunnova Energy Corp.

(j)

Power

6.0%, 6.0% PIK (6.0% Max PIK)




10/24/18


33,671


33,671


33,671Velvet Energy Ltd.

(j)(l)(m)

Upstream

9.0%




10/5/23


120,000


120,000


121,542​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Senior Secured Bonds
















664,542


660,151​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


See notes to unaudited consolidated financial statements.

13

---



Table of Contents

FS Energy and Power Fund

Consolidated Schedule of Investments (Continued)
As of December 31, 2017
(in thousands, except share amounts)



Portfolio Company(a)

Footnotes

Industry

Rate(b)

Floor

Maturity

Principal
Amount(c)

Amortized
Cost

Fair
Value(d)Subordinated Debt40.6%Alta Mesa Holdings, LP

(f)(h)

Upstream

7.9%




12/15/24

$
20,425

$
20,425

$
22,459Archrock Partners, L.P.

(h)(m)(o)

Midstream

6.0%




4/1/21


8,555


7,714


8,587Archrock Partners, L.P.

(h)(m)

Midstream

6.0%




10/1/22


14,283


12,661


14,337Ascent Resources Utica Holdings, LLC

(f)(h)(j)(o)

Upstream

10.0%




4/1/22


200,000


200,000


216,132Bellatrix Exploration Ltd.

(f)(h)(m)(o)

Upstream

8.5%




5/15/20


60,120


59,240


57,415Brand Energy & Infrastructure Services, Inc.

(f)(h)

Service & Equipment

8.5%




7/15/25


44,759


44,759


47,165Canbriam Energy Inc.

(f)(h)(j)(m)(o)

Upstream

9.8%




11/15/19


115,200


113,222


117,648Compressco Partners, LP

(f)(h)(o)

Service & Equipment

7.3%




8/15/22


20,050


19,929


18,972Covey Park Energy LLC

(h)(o)

Upstream

7.5%




5/15/25


8,333


8,333


8,705Eclipse Resources Corp.

(f)(h)(m)(o)

Upstream

8.9%




7/15/23


62,745


57,444


64,549EV Energy Partners, L.P.

(f)(h)(o)(p)

Upstream

8.0%




4/15/19


48,814


39,678


24,895Extraction Oil & Gas Holdings, LLC

(h)(o)

Upstream

7.9%




7/15/21


37,500


37,500


39,777Genesis Energy, L.P.

(f)(m)

Midstream

6.8%




8/1/22


23,540


23,036


24,477Genesis Energy, L.P.

(f)(m)

Midstream

6.0%




5/15/23


15,280


14,264


15,519Global Jet Capital Inc.



Service & Equipment

15.0% PIK (15.0% Max PIK)




1/30/25


849


849


864Global Jet Capital Inc.



Service & Equipment

15.0% PIK (15.0% Max PIK)




4/30/25


5,398


5,398


5,492Global Jet Capital Inc.



Service & Equipment

15.0% PIK (15.0% Max PIK)




9/3/25


1,115


1,115


1,135Global Jet Capital Inc.



Service & Equipment

15.0% PIK (15.0% Max PIK)




9/29/25


1,050


1,050


1,068Global Jet Capital Inc.



Service & Equipment

15.0% PIK (15.0% Max PIK)




12/2/26


923


923


940Global Partners L.P.

(f)(h)(m)(o)

Midstream

6.3%




7/15/22


68,335


68,188


70,385Global Partners L.P.

(f)(m)

Midstream

7.0%




6/15/23


2,824


2,466


2,909Great Western Petroleum, LLC

(f)(h)(o)

Upstream

9.0%




9/30/21


35,830


35,708


37,398Gulfport Energy Corp.

(h)(m)(o)

Upstream

6.0%




10/15/24


10,000


10,000


10,010Hammerhead Resources Inc.

(j)(m)

Upstream

9.0%




7/10/22


100,000


97,229


100,000Jupiter Resources Inc.

(h)(m)

Upstream

8.5%




10/1/22


76,125


72,383


47,007Lonestar Resources America Inc.

(f)(h)

Upstream

8.8%




4/15/19


24,200


24,055


25,289Lonestar Resources America Inc.

(g)

Upstream

11.3%




1/1/23


25,000


25,000


25,563Martin Midstream Partners L.P.

(f)(h)(m)(o)

Midstream

7.3%




2/15/21


24,660


24,059


25,073Moss Creek Resources, LLC

(l)

Upstream

L+800


1.5
%
4/7/22


65,000


65,000


66,443ONEOK, Inc.

(f)(m)

Midstream

7.5%




9/1/23


12,600


11,789


15,114Tenrgys, LLC

(k)(p)(r)

Upstream

L+900


2.5
%
12/23/18


75,000


75,000


34,313Whiting Petroleum Corp.

(h)(m)(o)

Upstream

5.0%




3/15/19


11,685


11,034


11,990Whiting Petroleum Corp.

(f)(m)

Upstream

5.8%




3/15/21


7,000


6,479


7,219WildHorse Resource Development Corp.

(h)(m)

Upstream

6.9%




2/1/25


10,000


9,930


10,242Zachry Holdings, Inc.

(f)

Service & Equipment

7.5%




2/1/20


23,925


23,930


24,433​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Subordinated Debt
















1,229,790


1,203,524​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


See notes to unaudited consolidated financial statements.

14

---



Table of Contents

FS Energy and Power Fund

Consolidated Schedule of Investments (Continued)
As of December 31, 2017
(in thousands, except share amounts)



Portfolio Company(a)

Footnotes

Industry

Rate(b)





Number of
Shares

Amortized
Cost

Fair
Value(d)Equity/Other13.9%(n)Abaco Energy Technologies LLC, Common Equity

(r)

Service & Equipment









6,944,444

$
6,944

$
1,042Abaco Energy Technologies LLC, Preferred Equity

(r)

Service & Equipment









28,942,003


1,447


5,065Allied Downhole Technologies, LLC, Common Equity

(k)(q)(r)

Service & Equipment









7,431,113


7,223


1,858Allied Downhole Technologies, LLC, Warrants, 2/28/2019

(k)(q)(r)

Service & Equipment









5,344,680


1,865


1,336Altus Power America Holdings, LLC, Common Equity

(k)(r)(aa)

Power









12,474,205


12,474


1,871Altus Power America Holdings, LLC, Preferred Equity

(k)(s)(aa)

Power

9.0%, 5.0% PIK (5.0% Max PIK)







25,792,683


25,793


25,793AP Exhaust Holdings, LLC, Class A1 Common Units

(k)(q)(r)

Service & Equipment









8





AP Exhaust Holdings, LLC, Class A1 Preferred Units

(k)(q)(r)

Service & Equipment









803


895


811Ascent Resources Utica Holdings, LLC, Common Equity

(r)(t)

Upstream









148,692,909


44,700


37,173BL Sand Hills Unit, L.P., Net Profits Interest

(r)(v)(aa)

Upstream









N/A


5,180


966BL Sand Hills Unit, L.P., Overriding Royalty Interest

(v)(aa)

Upstream









N/A


740


726BL Sand Hills Unit, L.P., Series A Units

(i)(r)(aa)

Upstream









29,117


24,019


7,000Chisholm Oil and Gas, LLC, Series A Units

(i)(r)

Upstream









13,905,565


13,906


13,815Cimarron Energy Holdco Inc., Common Equity

(r)

Service & Equipment









3,675,487


3,323


Cimarron Energy Holdco Inc., Preferred Equity

(r)

Service & Equipment









626,806


627


Extraction Oil & Gas, Inc., Common Equity

(k)(r)(z)

Upstream









1,140,637


11,250


16,323FourPoint Energy, LLC, Common Equity, Class C-II-A Units

(k)(q)(r)(aa)

Upstream









66,000


66,000


19,140FourPoint Energy, LLC, Common Equity, Class D Units

(k)(q)(r)(aa)

Upstream









12,374


8,176


3,619FourPoint Energy, LLC, Common Equity, Class E-II Units

(i)(r)(aa)

Upstream









150,937


37,734


43,395FourPoint Energy, LLC, Common Equity, Class E-III Units

(i)(k)(q)(r)(aa)

Upstream









222,750


55,688


64,598Global Jet Capital Holdings, LP, Preferred Equity

(r)

Service & Equipment









2,785,562


2,786


2,507Industrial Group Intermediate Holdings, LLC, Common Equity

(k)(q)(r)

Service & Equipment









472,755


473


709JSS Holdco, LLC, Net Profits Interest

(r)

Service & Equipment









N/A





103Lusk Operating LLC, Common Equity

(r)(u)(bb)

Upstream









2,000





MB Precision Investment Holdings LLC, Class A-2 Units

(k)(q)(r)

Service & Equipment









490,213


490


PDI Parent LLC, Common Equity

(r)

Power









1,384,615


1,385


1,454Ridgeback Resources Inc., Common Equity

(k)(l)(m)(r)(w)(aa)

Upstream









9,599,928


58,985


58,284SandRidge Energy, Inc., Common Equity

(h)(l)(m)(o)(r)(z)

Upstream









1,009,878


22,542


21,278Sunnova Energy Corp., Common Equity

(r)

Power









6,667,368


25,026


Sunnova Energy Corp., Preferred Equity

(r)

Power









1,117,214


5,948


4,502Swift Worldwide Resources Holdco Limited, Common Equity

(m)(r)(x)

Service & Equipment









3,750,000


6,029


2,062Synergy Offshore LLC, Preferred Equity

(k)(p)(r)(y)

Upstream









71,131


93,009


25,465TE Holdings, LLC, Common Equity

(i)(r)

Upstream









2,225,950


18,921


3,617TE Holdings, LLC, Preferred Equity

(l)(r)

Upstream









1,475,531


14,734


14,018The Brock Group, Inc., Common Equity

(j)(r)

Service & Equipment









786,094


15,617


16,390Titan Energy, LLC, Common Equity

(k)(r)(z)(aa)

Upstream









555,496


17,554


844Total Safety Holdings, LLC, Common Equity

(j)(r)

Service & Equipment









12,897


4,707


4,659Warren Resources, Inc., Common Equity

(l)(r)(aa)

Upstream









4,415,749


20,754


7,507White Star Petroleum Holdings, LLC, Common Equity

(i)(r)

Upstream









4,867,084


4,137


3,650​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Equity/Other
















641,081


411,580​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​TOTAL INVESTMENTS134.8%















$
4,357,766


3,996,705​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​LIABILITIES IN EXCESS OF OTHER ASSETS(34.8%)



















(1,030,663
)​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​NET ASSETS100.0%


















$
2,966,042​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


See notes to unaudited consolidated financial statements.

15

---



Table of Contents

FS Energy and Power Fund

Consolidated Schedule of Investments (Continued)
As of December 31, 2017
(in thousands, except share amounts)






(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, 2017, the three-month London Interbank Offered Rate, or LIBOR or 'L,' was 1.69% and the U.S. Prime Lending Rate, or Prime, was 4.50%. PIK means paid-in-kind.(c)Denominated
in U.S. dollars, unless otherwise noted.(d)Investments
classified as Level 3 in the Company's fair value hierarchy whereby fair value was determined by the Company's board of trustees, unless otherwise
noted (see Note 7).(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)Security
or portion thereof held within FSEP Term Funding, LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit
facility with Deutsche Bank AG, New York Branch (see Note 8).(g)Position
or portion thereof unsettled as of December 31, 2017.(h)Security
or portion thereof held within Berwyn Funding LLC and is pledged as collateral supporting the amounts outstanding under the prime brokerage facility
with BNP Paribas Prime Brokerage, Inc., or BNP. Securities held within Berwyn Funding LLC may be rehypothecated from time to time as permitted under Rule 15c-1(a)(1) of the
Securities Exchange Act of 1934, as amended, or the Exchange Act, subject to the terms and conditions governing the prime brokerage facility with BNP (see Note 8).(i)Security
held within FS Energy Investments, LLC, a wholly-owned subsidiary of the Company.(j)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 8).(k)Security
or portion thereof held within Foxfields Funding LLC and is pledged as collateral supporting the obligations outstanding under the term loan facility
with Fortress Credit Co LLC (see Note 8).(l)Security
or portion thereof held within Bryn Mawr Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit
facility with Barclays Bank PLC (see Note 8).(m)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,
2017, 71.2% of the Company's total assets represented qualifying assets.(n)Listed
investments may be treated as debt for U.S. generally accepted accounting principles, or GAAP, or tax purposes.(o)Security
or portion thereof held within Berwyn Funding LLC has been rehypothecated under Rule 15c-1(a)(1) of the Exchange Act, subject to the terms and
conditions governing the prime brokerage facility with BNP (see Note 8). As of December 31, 2017, the fair value of securities rehypothecated by BNP was $279,961.(p)Security
was on non-accrual status as of December 31, 2017.(q)Security
held within FSEP Investments, Inc., a wholly-owned subsidiary of Foxfields Funding LLC.(r)Security
is non-income producing.(s)Security
is held within EP Altus Investments, LLC, a wholly-owned subsidiary of Foxfields Funding LLC.(t)Security
held within EP American Energy Investments, Inc., a wholly-owned subsidiary of the Company.(u)Security
held within FSEP-BBH, Inc., a wholly-owned subsidiary of the Company.(v)Security
held within EP Burnett Investments, Inc., a wholly-owned subsidiary of the Company.(w)Investment
denominated in Canadian dollars. Amortized cost and fair value are converted into U.S. dollars as of December 31, 2017.(x)Investment
denominated in British pounds. Amortized cost and fair value are converted into U.S. dollars as of December 31, 2017.(y)Security
held within EP Synergy Investments, Inc., a wholly-owned subsidiary of Foxfields Funding LLC.(z)Security
is classified as Level 1 in the Company's fair value hierarchy (See Note 7).


See notes to unaudited consolidated financial statements.

16

---



Table of Contents

FS Energy and Power Fund

Consolidated Schedule of Investments (Continued)
As of December 31, 2017
(in thousands, except share amounts)






(aa)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, 2017, 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 December 31, 2017:




Portfolio Company

Fair Value at
December 31,
2016

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,
2017

Interest
Income(2)

PIK
Income(2)

Fee
Income(2)Senior Secured LoansFirst LienAltus Power America, Inc.(1)

$
73,294

$
5,433

$


$


$


$
(3,374
)
$
75,353

$
7,152

$


$
BL Sand Hills Unit, L.P.





64,187


(44,460
)




(2,358
)

2,631


20,000


3,857





Sunnova Asset Portfolio 5 Holdings, LLC


151,148





(149,652
)

2,217





(3,713
)




6,992





Warren Resources, Inc.


78,437


796











1,981


81,214


7,818


796


Senior Secured LoansSecond LienTitan Energy Operating, LLC


85,427


9,863


(332
)

4,237





(37,169
)

62,026


16,269


9,863


Senior Secured BondsFourPoint Energy, LLC


240,709





(2,227
)

2,183





(1,719
)

238,946


22,834





Ridgeback Resources Inc.


3,887








16





(16
)

3,887


473





Sunnova Energy Corp(3)





33,671


(33,671
)













2,738


859


656Equity/OtherAltus Power America Holdings, LLC, Common Equity


12,474














(10,603
)

1,871








Altus Power America Holdings, LLC, Preferred Equity


23,982


1,811














25,793


3,586





BL Sand Hills Unit, L.P., Net Profits Interest





5,180











(4,214
)

966








BL Sand Hills Unit, L.P., Overriding Royalty Interest





740











(14
)

726








BL Sand Hills Unit, L.P., Series A Units





24,019











(17,019
)

7,000








FourPoint Energy, LLC, Common Equity, Class C-II-A Units


31,845














(12,705
)

19,140








FourPoint Energy, LLC, Common Equity, Class D Units


6,032














(2,413
)

3,619








FourPoint Energy, LLC, Common Equity, Class E-II Units


125,670





(30,938
)







(51,337
)

43,395








FourPoint Energy, LLC, Common Equity, Class E-III Units


107,477














(42,879
)

64,598








Ridgeback Resources Inc., Common Equity


58,985














(701
)

58,284








Sunnova Energy Corp., Common Equity(3)


36,204





(25,026
)







(11,178
)










Sunnova Energy Corp., Preferred Equity(3)


3,141


2,868


(5,948
)







(61
)










Titan Energy, LLC, Common Equity


13,332














(12,488
)

844








Warren Resources, Inc., Common Equity


18,988














(11,481
)

7,507








​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
1,071,032

$
148,568

$
(292,254
)
$
8,653

$
(2,358
)
$
(218,472
)
$
715,169

$
71,719

$
11,518

$
656​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


---



See notes to unaudited consolidated financial statements.

17

---



Table of Contents

FS Energy and Power Fund

Consolidated Schedule of Investments (Continued)
As of December 31, 2017
(in thousands, except share amounts)






(bb)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, 2017, the Company held investments in a portfolio company of which it is deemed to be
an "affiliated person" of and deemed to "control". The following table presents certain information with respect to investments in portfolio companies of which the Company was deemed to be an
"affiliated person" of and deemed to "control" for the year ended December 31, 2017:




Portfolio Company

Fair Value at
December 31,
2016

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,
2017Senior Secured LoansFirst LienLusk Operating LLC

$
1,031

$
1,800

$


$


$


$
(2,831
)
$
Equity/OtherLusk Operating LLC, Common Equity








(1,000
)







1,000


​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
1,031

$
1,800

$
(1,000
)
$


$


$
(1,831
)
$
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


See notes to unaudited consolidated financial statements.

18

---





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 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. The Company is an externally managed, non-diversified, closed-end management investment company that 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, 2018, the Company had five wholly-owned financing subsidiaries, seven wholly-owned subsidiaries through which it holds interests in certain
portfolio companies and two wholly-owned subsidiaries through which it 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, 2018. 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.

As
the Company previously announced on April 9, 2018, 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, or the investment sub-advisory agreement, that FS Investment Advisor, LLC, or FS Advisor, had entered into with GSO, effective
April 9, 2018. In connection with GSO's resignation as investment sub-adviser to the Company, on April 9, 2018, the Company entered into a new investment advisory and administrative
services agreement, or the FS/EIG investment advisory agreement, with FS/EIG Advisor, LLC, or FS/EIG Advisor, a newly-formed entity that is jointly operated by an affiliate of Franklin Square
Holdings, L.P., (which does business as FS Investments) and EIG Asset Management, LLC, or EIG, pursuant to which the FS/EIG Advisor acts as investment adviser to the Company. 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, or the FS Advisor investment advisory agreement, by and between the Company and FS Advisor. See Note 11 for additional
information.

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 U.S.
generally accepted accounting principles, 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, 2017 included in the

19

---



Table of Contents

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)

Company's
annual report on Form 10-K. Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending
December 31, 2018. The December 31, 2017 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, 2017. The Company is considered an investment company under GAAP and follows the accounting and reporting 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 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 Advisor 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 (i.e., 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 capital gains incentive fees. On a quarterly basis, the Company accrues for the capital gains incentive fee by calculating such fee
as if it were due and payable as of the end of such period. The Company includes unrealized gains in the calculation of the capital gains incentive fee expense and related accrued capital gains
incentive fee. This accrual reflects the incentive fees that would be payable to FS Advisor as if the Company's entire portfolio was liquidated at its fair value as of the balance sheet date even
though FS Advisor is not entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized. See Note 11 for information relating to the incentive
fee on capital gains under the FS/EIG investment advisory agreement.

Subordinated Income Incentive Fee:Pursuant to the FS Advisor investment advisory agreement, FS Advisor may also be entitled to receive
a
subordinated incentive fee on income. The subordinated incentive fee on income, which is calculated and payable quarterly in arrears, equals 20.0% of the Company's "pre-incentive fee net investment
income" for the immediately preceding quarter and is 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 Advisor does 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 Advisor is entitled to a "catch-up" fee equal to the amount of the 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. Thereafter, FS Advisor is entitled to receive
20.0% of pre-incentive fee net investment income. See Note 11 for information relating to the subordinated incentive fee on income under the FS/EIG investment advisory agreement.

20

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Table of Contents

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)

Reclassifications:Certain amounts in the unaudited consolidated financial statements for the three months ended March 31, 2017
may have been
reclassified to conform to the classifications used to prepare the unaudited consolidated financial statements for the three months ended March 31, 2018.
These reclassifications had no material impact on the Company's consolidated financial position, results of operations or cash flows as previously reported.

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. The Company does not accrue as a receivable interest or dividends 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. The Company records prepayment premiums on loans
and securities as fee income when it receives such amounts.

Effective
January 1, 2018, the Company adopted Accounting Standards Codification Topic 606,Revenue from Contracts with Customers,using the cumulative effect method applied to in-scope contracts with customers that have not been completed as of the date of adoption. The Company did not identify any in-scope contracts that had
not been completed as of the date of adoption and, as a result, the Company did not recognize a cumulative effect on shareholders' equity in connection with the adoption of the new revenue recognition
guidance.

The
new revenue recognition guidance applies to all entities and all contracts with customers to provide goods or services in the ordinary course of business, excluding, among other
things, financial instruments as well as certain other contractual rights and obligations. Under the new revenue recognition guidance, which the Company has applied to all new in-scope contracts as of
the date of adoption, structuring and other upfront fees are recognized as revenue based on the transaction price as the performance obligation is fulfilled. The related performance obligation
consists of structuring activities and is satisfied over time as such activities are performed. Consideration is variable and is constrained from being included in the transaction price until the
uncertainty associated with the variable consideration is resolved, typically as of the trade date of the related transaction. Payment is typically due on the settlement date of the related
transaction.

For
the three months ended March 31, 2018, the Company did not recognize any structuring fee revenue under the new revenue recognition guidance. If the Company had recognized
structuring fee revenue under the new revenue recognition guidance, the Company would have included such revenue in the fee income line item on its consolidated statements of operations. Comparative
periods are presented in accordance with revenue recognition guidance effective prior to January 1, 2018, under

21

---



Table of Contents

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)

which
the Company recorded structuring and other non-recurring upfront fees as income when earned. The Company has determined that the adoption of the new revenue recognition guidance did not have a
material impact on the amount of revenue recognized for the three months ended March 31, 2018.

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, 2018 and 2017:



Three Months Ended March 31,2018

2017Shares

Amount

Shares

AmountReinvestment of Distributions


4,714,195

$
31,380


6,059,668

$
46,964Share Repurchase Program


(9,018,665
)

(60,425
)

(2,239,480
)

(17,244
)​
​
​
​
​
​
​
​
​
​
​
​
​
​Net Proceeds from Share Transactions


(4,304,470
)
$
(29,045
)

3,820,188

$
29,720​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​


During
the period from April 1, 2018 to May 14, 2018, the Company issued 1,532,743 common shares pursuant to its distribution reinvestment plan for gross proceeds of $9,953
at an average price per share of $6.49.

Share Repurchase Program

The Company intends 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:



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

22

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Table of Contents

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)

(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.

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 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.

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 intends to conduct the first such
repurchase and de minimis account liquidation after the Company's second quarter 2018 share repurchase offer.

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,
2018 and 2017:



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
SharesFiscal 2016December 31, 2016

January 3, 2017


2,239,480


100
%

0.51
%
$
7.70

$
17,244Fiscal 2017December 31, 2017

January 12, 2018


9,018,665


64
%

2.02
%
$
6.70

$
60,425


On
April 2, 2018, the Company repurchased 4,786,015 common shares (representing 24% of common shares tendered for repurchase and 1.08% of the shares outstanding as of such date)
at $6.55 per share for aggregate consideration totaling $31,348.

23

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Table of Contents

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

Compensation of the Investment Adviser

Effective January 1, 2018, FS Advisor is entitled to an annual base management fee of 1.75% of the average value of the Company's gross
assets (gross assets equals total assets as set forth on the Company's consolidated balance sheets) and an incentive fee based on the Company's performance. The Company commenced accruing fees under
the FS Advisor investment advisory agreement on July 18, 2011, upon commencement of the Company's investment operations. Base management fees are paid on a quarterly basis in arrears. Effective
January 1, 2018, FS Advisor agreed to waive incentive fees on income for a period of twelve months ending December 31, 2018. See Note 2 for a discussion of the capital gains and
subordinated income incentive fees that FS Advisor may be entitled to under the FS Advisor investment advisory agreement.

Pursuant
to the investment sub-advisory agreement, GSO is entitled to receive 50% of all management and incentive fees payable to FS Advisor under the FS Advisor investment advisory
agreement with respect to each year.

The
Company reimburses FS Advisor for expenses necessary to perform services related to the Company's administration and operations, including FS Advisor's allocable portion of the
compensation and related expenses of certain personnel of Franklin Square Holdings, L.P., or FS Investments, the Company's sponsor and an affiliate of FS Advisor, providing administrative
services to the Company on behalf of FS Advisor. The amount of the reimbursement payable to FS Advisor is the lesser of (1) FS 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 Advisor is required to allocate
the cost of such services to the Company based on factors such as assets, revenues, time allocations and/or other reasonable metrics. The Company's board of trustees reviews the methodology employed
in determining how the expenses are allocated to the Company and the proposed allocation of the administrative expenses among the Company and certain affiliates of FS Advisor. The Company's board of
trustees then 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 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 will not reimburse FS 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 Advisor.

The
following table describes the fees and expenses accrued under the FS Advisor investment advisory agreement during the three months ended March 31, 2018 and 2017:



Three Months Ended
March 31,Related Party

Source Agreement

Description

2018

2017FS Advisor

FS Advisor Investment Advisory Agreement

Base Management Fee(1)

$
18,298

$
22,385FS Advisor

FS Advisor Investment Advisory Agreement

Subordinated Incentive Fee on Income(2)




$
10,499FS Advisor

FS Advisor Investment Advisory Agreement

Administrative Services Expenses(3)

$
793

$
808


(1)During
the three months ended March 31, 2018, and 2017, $15,889 and $20,855, respectively, in base management fees were paid to FS Advisor and $5,945 and $0,
respectively, in base management fees were applied to offset the liability of FS Investments under the expense reimbursement agreement (see "Expense


24

---



Table of Contents

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)

Reimbursement"
below). As of March 31, 2018, $18,298 in base management fees were payable to FS Advisor. (2)During
the three months ended March 31, 2018, and 2017, the Company did not pay any amounts in subordinated incentive fees on income to FS Advisor. As of
March 31, 2018, the Company did not have any subordinated incentive fee on income payable to FS Advisor.(3)During
the three months ended March 31, 2018 and 2017, $586 and $785, respectively, of the accrued administrative services expenses related to the allocation
of costs of administrative personnel for services rendered to the Company by FS Advisor and the remainder related to other reimbursable expenses. The Company paid $574 and $930 in administrative
services expenses to FS Advisor during the three months ended March 31, 2018 and 2017, respectively.


See
Note 11 for information relating to the compensation of FS/EIG Advisor under the FS/EIG investment advisory agreement.

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 and certain of its 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 employees 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 our 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 Investment Corporation, FS
Investment Corporation II, FS Investment Corporation III, FS Investment Corporation IV, and any future BDCs that are advised by FS Advisor or its affiliated investment advisers, or collectively the
Company's co-investment affiliates. However, 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 has authorized and directed that the Company (i) withdraw from the Order, 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 certain other funds and accounts managed or previously
managed by EIG or its affiliates which would permit the Company to participate in co-investment transactions with

25

---



Table of Contents

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)

certain
other EIG advised funds or accounts, or the EIG Order. The Company believes the Order and the EIG Order have and may continue to enhance its ability to further its investment objectives and
strategy.

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 has 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. However, because certain investments the Company may make, including preferred and common equity investments, may generate dividends and other
distributions to the Company that are treated for tax purposes as a return of capital, a portion of the Company's distributions to shareholders may also be deemed to constitute a return of capital for
tax purposes to the extent that the Company may use such dividends or other distribution proceeds to fund its distributions to shareholders. Under those circumstances, FS Investments will not
reimburse the Company for the portion of such distributions to shareholders that represent a return of capital for tax purposes, as the purpose of the expense reimbursement arrangement is not to
prevent tax-advantaged distributions to shareholders.

Under
the expense reimbursement agreement, FS Investments will 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

26

---



Table of Contents

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)

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.

During
the three months ended March 31, 2018, the Company did not accrue any expense reimbursements from FS Investments. During the three months ended March 31, 2017, the
Company accrued $18,220 for expense reimbursements that FS Investments agreed to offset against management fees and subordinated income incentive fees payable by the Company to FS Advisor. As of
March 31, 2018, the Company had no reimbursements due from FS Investments.

As
discussed above, under the expense reimbursement agreement, amounts reimbursed to the Company by FS Investments may become subject to repayment by the Company in the future. During
the three months ended March 31, 2018, the Company did not pay any amounts in expense recoupments to FS
Investments. As of March 31, 2018, $28,104 of reimbursements may become subject to repayment by the Company to FS Investments in the future.

The
following table reflects the expense reimbursement payments due from FS Investments to the Company as of March 31, 2018 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
ExpirationMarch 31, 2017

$
15,362
(2)

0.40
%

9.14
%
March 31, 2020June 30, 2017





N/A


N/A

N/ASeptember 30, 2017


7,095


0.36
%

9.91
%
September 30, 2020December 31, 2017


5,647


0.36
%

10.57
%
December 31, 2020​
​
​
​
​
​
​
​
​
​
​
​Total

$
28,104​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​


(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.(2)Amount
has been reduced by $2,858, which was paid during the year ended December 31, 2017 for expense recoupments payable to FS Investments.


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 has entered into a new expense support and conditional reimbursement agreement with FS/EIG
Advisor, or the FS/EIG expense reimbursement agreement, on substantially similar terms. There can be no assurance that the FS/EIG expense reimbursement agreement will remain in effect or FS/EIG
Advisor will reimburse any portion of the Company's expenses in future quarters.

27

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Table of Contents

FS Energy and Power Fund

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



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, 2018 and 2017:



DistributionFor the Three Months Ended

Per Share

AmountFiscal 2017March 31, 2017

$
0.17713

$
77,984Fiscal 2018March 31, 2018

$
0.12500

$
54,823


Subject
to applicable legal restrictions and the sole discretion of the Company's board of trustees, the Company intends to declare regular cash distributions on a quarterly basis and
pay such distributions on a monthly basis. On March 6, 2018 and May 7, 2018, the Company's board of trustees declared regular monthly cash distributions for April 2018 through June 2018
and July 2018 through September 2018, respectively, each in the amount of $0.041667 per share. These distributions have been or will be paid monthly to shareholders of record as of monthly record
dates previously determined by the Company's board of trustees. 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 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, 2018 was funded through the reimbursement of operating expenses by FS Investments. During the three
months ended March 31,
2017, certain portions of the Company's distributions were funded through the reimbursement of certain expenses by FS Investments and its affiliates, including through the offset of

28

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Table of Contents

FS Energy and Power Fund

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



Note 5. Distributions (Continued)

certain
investment advisory fees by FS Advisor, that are, if certain conditions are met, subject to repayment by the Company within three years. Any such distributions funded through expense
reimbursements or the offset 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 Investments and its affiliates continues to make such reimbursements or offset 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, 2018 and 2017, the Company did not repay any amounts to FS
Investments for expenses previously reimbursed 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 its affiliates have no obligation to offset or waive advisory fees or otherwise reimburse expenses in future periods.
If FS Investments had not reimbursed certain of the Company's expenses, 23% of the aggregate amount of distributions paid during the three months ended March 31, 2017 would have been funded
from offering proceeds or borrowings.

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, 2018 and 2017:



Three Months Ended March 31,2018

2017Source of Distribution

Distribution
Amount

Percentage

Distribution
Amount

PercentageOffering proceeds

$





$



Borrowings











Net investment income (prior to expense reimbursement)(1)


54,823


100
%

58,396


75
%Short-term capital gains proceeds from the sale of assets











Long-term capital gains proceeds from the sale of assets











Non-capital gains proceeds from the sale of assets











Distributions on account of investments in portfolio companies








1,368


2
%Expense reimbursement from sponsor








18,220


23
%​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
54,823


100
%
$
77,984


100
%​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)During
the three months ended March 31, 2018 and 2017, 84.3% and 85.0%, respectively, of the Company's gross investment income on a tax basis was attributable
to cash income earned and 0.0% and 0.9%, respectively, was attributable to non-cash income earned. In addition, 12.0% and 11.6%, respectively, was attributed to paid-in-kind, or PIK, interest and 3.7%
and 2.5%, respectively, was attributed to accretion of discount during the three months ended March 31, 2018 and 2017.


The
Company's net investment income on a tax basis for the three months ended March 31, 2018 and 2017 was $60,214 and $76,616, respectively. As of March 31, 2018 and
December 31, 2017, the Company had $5,390 and $0, respectively, of undistributed ordinary income on a tax basis.

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
difference between the Company's GAAP-basis net investment income and its tax-basis net investment income was primarily due to the reclassification of unamortized original issue
discount, certain amendment fees and prepayment fees recognized upon prepayment of loans from income for

29

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Table of Contents

FS Energy and Power Fund

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



Note 5. Distributions (Continued)

GAAP
purposes to realized gains for tax purposes, the impact of certain subsidiaries that are consolidated for purposes of computing GAAP-basis net investment income but are not consolidated for
purposes of computing tax-basis net investment income and income recognized for tax purposes on certain transactions but not recognized for GAAP purposes.

The
following table sets forth a reconciliation between GAAP-basis net investment income and tax-basis net investment income during the three months ended March 31, 2018 and 2017:



Three Months Ended
March 31,2018

2017GAAP-basis net investment income

$
54,388

$
88,008Reclassification of unamortized original issue discount, amendment fees and prepayment fees


(9,459
)

(17,436
)GAAP versus tax-basis impact of consolidation of certain subsidiaries


6,549


6,418Income subject to tax not recorded for GAAP


8,742


(371
)Other miscellaneous differences


(6
)

(3
)​
​
​
​
​
​
​
​Tax-basis net investment income

$
60,214

$
76,616​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


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.

As
of March 31, 2018 and December 31, 2017, the components of accumulated earnings (deficit) on a tax basis were as follows:



March 31, 2018
(Unaudited)

December 31, 2017Distributable ordinary income

$
5,390

$
Accumulated capital losses(1)


(510,557
)

(430,039
)Other temporary differences


(193
)

(198
)Net unrealized appreciation (depreciation) on investments and unrealized gain/loss on foreign currency(2)


(427,986
)

(498,322
)​
​
​
​
​
​
​
​Total

$
(933,346
)
$
(928,559
)​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


(1)Net
capital losses may be carried forward indefinitely, and their character is retained as short-term or long-term. As of March 31, 2018, the Company had
short-term and long-term capital loss carryforwards available to offset future realized capital gains of $19,235 and $491,322, respectively.(2)As
of March 31, 2018 and December 31, 2017, the gross unrealized appreciation on the Company's investments and unrealized gain on foreign currency was
$120,532 and $104,844, respectively, and the gross unrealized depreciation on the Company's investments and unrealized loss on foreign currency was $548,518 and $603,166, respectively.


The
aggregate cost of the Company's investments for federal income tax purposes totaled $4,047,058 and $4,557,977 as of March 31, 2018 and December 31, 2017, respectively.
The aggregate net unrealized appreciation (depreciation) on a tax basis was $(427,986) and $(498,322) as of March 31, 2018 and December 31, 2017, respectively.

30

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Table of Contents

FS Energy and Power Fund

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



Note 5. Distributions (Continued)

As
of March 31, 2018 and December 31, 2017, the Company had deferred tax assets of $76,910 and $73,103, respectively, resulting from net operating losses and capital losses
of the Company's wholly-owned taxable subsidiaries. As of March 31, 2018 and December 31, 2017, certain wholly-owned taxable subsidiaries anticipated that they would be unable to fully
utilize their generated net operating and capital losses, therefore the deferred tax assets were offset by valuation allowances of $76,910 and $73,103, respectively. For the three months ended
March 31, 2018 and the year ended December 31, 2017, the Company did not record a provision for taxes related to its wholly-owned taxable subsidiaries.

Note 6. Investment Portfolio

The following table summarizes the composition of the Company's investment portfolio at cost and fair value as of March 31, 2018 and December 31, 2017:



March 31, 2018
(Unaudited)

December 31, 2017Amortized
Cost(1)

Fair Value

Percentage
of Portfolio

Amortized
Cost(1)

Fair Value

Percentage
of PortfolioSenior Secured LoansFirst Lien

$
933,621

$
893,243


25
%
$
961,883

$
924,926


23
%Senior Secured LoansSecond Lien


830,856


753,895


21
%

860,470


796,524


20
%Senior Secured Bonds


616,661


604,685


17
%

664,542


660,151


17
%Subordinated Debt


1,000,804


971,675


26
%

1,229,790


1,203,524


30
%Equity/Other


623,907


395,574


11
%

641,081


411,580


10
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
4,005,849

$
3,619,072


100
%
$
4,357,766

$
3,996,705


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, 2018, the Company held investments in one portfolio company of which it is deemed to "control." As of March 31, 2018, 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 (aa) and (bb)
to the unaudited consolidated schedule of investments as of March 31, 2018 in this quarterly report on Form 10-Q.

As
of December 31, 2017, the Company held investments in one portfolio company of which it is deemed to "control." As of December 31, 2017, the Company held investments in
six 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 (aa) and
(bb) to the consolidated schedule of investments as of December 31, 2017 in this quarterly report on Form 10-Q.

31

---



Table of Contents

FS Energy and Power Fund

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



Note 6. 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, 2018, the Company had nine senior secured loan investments with aggregate unfunded commitments of $130,268 and three equity/other investments with
aggregate unfunded commitments of $9,584. As of March 31, 2018, these unfunded equity/other investments were Altus Power America Holdings, LLC, preferred equity, Chisholm Oil and
Gas, LLC and Rosehill Resources, Inc. As of December 31, 2017, the Company had four senior secured loan investments with aggregate unfunded commitments of $90,662 and two
equity/other investments with aggregate unfunded commitments of $8,751. As of December 31, 2017, these unfunded equity/other investments were Altus Power America Holdings, LLC, preferred
equity and Chisholm Oil and Gas, LLC. 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,
2018 and December 31, 2017:



March 31, 2018
(Unaudited)

December 31, 2017Industry Classification

Fair Value

Percentage
of Portfolio

Fair Value

Percentage
of PortfolioUpstream

$
2,235,564


62
%
$
2,539,867


64
%Midstream


424,536


12
%

441,189


11
%Downstream


33,322


1
%

47,831


1
%Power


231,385


6
%

231,495


6
%Service & Equipment


694,265


19
%

736,323


18
%​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
3,619,072


100
%
$
3,996,705


100
%​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​


Note 7. 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.

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

32

---



Table of Contents

FS Energy and Power Fund

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



Note 7. Fair Value of Financial Instruments (Continued)

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, 2018 and December 31, 2017, the Company's investments were categorized as follows in the fair value hierarchy:



Valuation Inputs

March 31, 2018
(Unaudited)

December 31, 2017Level 1Price quotations in active markets

$
13,683

$
38,445Level 2Significant other observable inputs





Level 3Significant unobservable inputs


3,605,389


3,958,260​
​
​
​
​
​
​
​Total

$
3,619,072

$
3,996,705​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


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, all of the Company's 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 or liquidation value.
Investments that are traded on an active public market are valued at their closing price as of the date of the financial statements. 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. 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.

The
Company periodically benchmarks the bid and ask prices it receives from the third-party pricing service and/or dealers, 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. However, because of the private nature of this marketplace (meaning actual transactions are not publicly reported), the Company believes that
these valuation inputs are classified as Level 3 within the fair value hierarchy. The Company may also use other methods, including the use of independent valuation firms, to determine fair
value for securities for which it cannot obtain prevailing bid and ask prices through third-party pricing services or independent dealers or where the Company's board of trustees otherwise determines
that the use of such other method is appropriate. The Company periodically benchmarks the valuations provided by the independent valuation firms against the actual prices at which it purchases and
sells its investments. 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.

33

---



Table of Contents

FS Energy and Power Fund

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



Note 7. Fair Value of Financial Instruments (Continued)

The
following is a reconciliation for the three months ended March 31, 2018 and 2017 of investments for which significant unobservable inputs (Level 3) were used in
determining fair value:



For the Three Months Ended March 31, 2018Senior
Secured
Loans
First Lien

Senior
Secured
Loans
Second Lien

Senior
Secured
Bonds

Subordinated
Debt

Equity/
Other

TotalFair value at beginning of period

$
924,926

$
796,524

$
660,151

$
1,203,524

$
373,135

$
3,958,260Accretion of discount (amortization of premium)


1,070


519


1,042


849





3,480Net realized gain (loss)


(1,926
)

(29,312
)

(4,226
)

(28,785
)

(84
)

(64,333
)Net change in unrealized appreciation (depreciation)


(3,421
)

(13,015
)

(7,585
)

(2,863
)

3,388


(23,496
)Purchases


146,200


14,403


24,371


76,596


6,263


267,833Paid-in-kind interest


1,328


1,298


68


325





3,019Sales and repayments


(174,934
)

(16,522
)

(69,136
)

(277,971
)

(811
)

(539,374
)Net transfers in or out of Level 3

















​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Fair value at end of period

$
893,243

$
753,895

$
604,685

$
971,675

$
381,891

$
3,605,389​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​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

$
(2,481
)
$
(34,532
)
$
(9,272
)
$
(18,319
)
$
1,569

$
(63,035
)​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​






For the Three Months Ended March 31, 2017Senior
Secured
Loans
First Lien

Senior
Secured
Loans
Second Lien

Senior
Secured
Bonds

Subordinated
Debt

Equity/
Other

TotalFair value at beginning of period

$
912,491

$
873,869

$
397,614

$
1,043,167

$
636,571

$
3,863,712Accretion of discount (amortization of premium)


820


2,102


299


2,025





5,246Net realized gain (loss)


(350
)

(10,711
)

466


(5,016
)

(15,042
)

(30,653
)Net change in unrealized appreciation (depreciation)


1,515


9,834


(7,005
)

5,579


2,327


12,250Purchases


98,622


198,327


148,977


305,961


19,364


771,251Paid-in-kind interest


2,236


3,820





301


1,866


8,223Sales and repayments


(56,197
)

(314,489
)

(16,594
)

(43,382
)

(27,433
)

(458,095
)Net transfers in or out of Level 3

















​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Fair value at end of period

$
959,137

$
762,752

$
523,757

$
1,308,635

$
617,653

$
4,171,934​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​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

$
(10,204
)
$
17,127

$
(18,887
)
$
(665
)
$
(1,390
)
$
(14,019
)​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


34

---



Table of Contents

FS Energy and Power Fund

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



Note 7. 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, 2018 and December 31, 2017 were as
follows:



Type of Investment

Fair Value at
March 31, 2018
(Unaudited)

Valuation Technique(1)

Unobservable Input

Range

Weighted
AverageSenior Secured LoansFirst Lien

$
566,918

Market Comparables

Market Yield (%)

8.3% - 13.0%

10.5
%EBITDA Multiples (x)

5.3x - 10.5x

7.2xProved Reserves Multiples (Mmboe)

$5.8 - $6.3

$6.0PV-10 Multiples (x)

0.4x - 0.5x

0.4x10,017

Cost

Cost

99.0% - 99.0%

99.0
%39,147

Other(2)

Other(2)

N/A

N/A277,161

Market Quotes

Indicative Dealer Quotes

91.9% - 102.0%

99.4
%Senior Secured LoansSecond Lien


553,059

Market Comparables

Market Yield (%)

8.6% - 18.5%

12.0
%1,650

Cost

Cost

99.0% - 99.0%

99.0
%19,225

Other(2)

Other(2)

N/A

N/A179,961

Market Quotes

Indicative Dealer Quotes

93.2% - 102.7%

97.6
%Senior Secured Bonds


476,094

Market Comparables

Market Yield (%)

8.3% - 12.5%

9.2
%Production Multiples (Mboe/d)

$41,000.0 - $43,500.0

$42,250.0Proved Reserves Multiples (Mmboe)

$13.5 - $14.5

$14.0PV-10 Multiples (x)

1.0x - 1.0x

1.0xEBITDA Multiples (x)

4.5x - 5.0x

4.8x128,591

Market Quotes

Indicative Dealer Quotes

66.8% - 106.5%

89.5
%Subordinated Debt


48,395

Market Comparables

Market Yield (%)

14.5% - 15.0%

14.8
%PV-10 Multiples (x)

1.1x - 1.1x

1.1x923,280

Market Quotes

Indicative Dealer Quotes

47.5% - 117.4%

100.2
%Equity/Other


330,282

Market Comparables

EBITDA Multiples (x)

4.5x - 27.8x

8.1xProduction Multiples (Mboe/d)

$32,500.0 - $43,500.0

$36,335.3Proved Reserves Multiples (Mmboe)

$4.3 - $14.5

$7.4Production Multiples (MMcfe/d)

$4,000.0 - $4,500.0

$4,250.0Proved Reserves Multiples (Bcfe)

$1.0 - $1.1

$1.0PV-10 Multiples (x)

0.4x - 2.0x

1.2xCapacity Multiple ($/kW)

$1,875.0 - $2,125.0

$2,000.0Market Yield (%)

16.0% - 16.5%

16.3
%1,767

Discounted Cash Flow

Discount Rate (%)

10.5% - 30.5%

11.6
%68

Option Valuation Model

Volatility (%)

30.0% - 30.0%

30.0
%2,505

Cost

Cost

$0.59 - $0.99

$0.9924,610

Other(2)

Other(2)

N/A

N/A22,659

Market Quotes

Indicative Dealer Quotes

$1.0 - $360.0

$76.8​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
3,605,389​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​


35

---



Table of Contents

FS Energy and Power Fund

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



Note 7. Fair Value of Financial Instruments (Continued)





Type of Investment

Fair Value at
December 31, 2017

Valuation Technique(1)

Unobservable Input

Range

Weighted
AverageSenior Secured LoansFirst Lien

$
560,200

Market Comparables

Market Yield (%)

8.0% - 13.0%

10.4
%EBITDA Multiples (x)

5.3x - 8.0x

6.4xProved Reserves Multiples (Mmboe)

$5.8 - $6.3

$6.0PV-10 Multiples (x)

0.4x - 0.5x

0.4x273,133

Market Quotes

Indicative Dealer Quotes

71.3% - 102.0%

98.4
%91,593

Other(2)

Other(2)

N/A

N/ASenior Secured LoansSecond Lien


588,486

Market Comparables

Market Yield (%)

8.5% - 20.7%

11.9
%EBITDA Multiples (x)

6.0x - 6.5x

6.3x14,850

Cost

Cost

100.0% - 100.0%

100.0
%193,188

Market Quotes

Indicative Dealer Quotes

31.0% - 101.3%

92.6
%Senior Secured Bonds


488,721

Market Comparables

Market Yield (%)

7.7% - 12.3%

8.9
%Production Multiples (Mboe/d)

$42,250.0 - $44,750.0

$43,500.0Proved Reserves Multiples (Mmboe)

$10.3 - $11.3

$10.8PV-10 Multiples (x)

0.8x - 0.8x

0.8xEBITDA Multiples (x)

4.8x - 5.3x

5.0x171,430

Market Quotes

Indicative Dealer Quotes

73.0% - 107.8%

89.1
%Subordinated Debt


110,255

Market Comparables

Market Yield (%)

11.0% - 14.8%

11.4
%PV-10 Multiples (x)

1.2x - 1.2x

1.2x1,093,269

Market Quotes

Indicative Dealer Quotes

50.0% - 120.2%

100.7
%Equity/Other


329,226

Market Comparables

EBITDA Multiples (x)

5.5x - 23.5x

8.1xProduction Multiples (Mboe/d)

$32,500.0 - $51,250.0

$37,007.0Proved Reserves Multiples (Mmboe)

$8.3 - $11.3

$9.1Production Multiples (MMcfe/d)

$5,000.0 - $5,500.0

$5,250.0Proved Reserves Multiples (Bcfe)

$1.8 - $2.0

$1.9PV-10 Multiples (x)

0.8x - 2.6x

1.9xCapacity Multiple ($/kW)

$2,000.0 - $2,250.0

$2,125.0Market Yield (%)

15.3% - 15.8%

15.5
%1,692

Discounted Cash Flow

Discount Rate (%)

11.0% - 30.5%

12.2
%103

Option Valuation Model

Volatility (%)

30.0% - 30.0%

30.0
%19,820

Other(2)

Other(2)

N/A

N/A22,294

Market Quotes

Indicative Dealer Quotes

$1.5 - $372.5

$81.7​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
3,958,260​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​


(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 and/or other factors.


36

---



Table of Contents

FS Energy and Power Fund

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



Note 8. Financing Arrangements

The following tables present a summary of information with respect to the Company's outstanding
financing arrangements as of March 31, 2018 and December 31, 2017. 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, 2017 and the additional disclosure set forth in this Note 8.



As of March 31, 2018 (Unaudited)Arrangement(1)

Type of
Arrangement

Rate

Amount
Outstanding

Amount
Available

Maturity DateBarclays Credit Facility

Revolving

L+3.25%

$


$
100,000

March 29, 2019BNP Facility

Prime Brokerage

L+1.35%


200,000


100,000

December 26, 2018(2)Deutsche Bank Credit Facility

Revolving

L+2.05%


290,000


50,000

June 11, 2018Fortress Facility

Term

L+5.00%(3)


155,000




November 6, 2020Goldman Facility

Term

L+3.72%


425,000




September 15, 2019​
​
​
​
​
​
​
​
​
​
​
​
​Total





$
1,070,000

$
250,000​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​






As of December 31, 2017Arrangement(1)

Type of
Arrangement

Rate

Amount
Outstanding

Amount
Available

Maturity DateBarclays Credit Facility

Revolving

L+3.25%

$


$
100,000

May 18, 2021BNP Facility

Prime Brokerage

L+1.35%


300,000




September 27, 2018(2)Deutsche Bank Credit Facility

Revolving

L+2.05%


340,000




June 11, 2018Fortress Facility

Term

L+5.00%(3)


155,000




November 6, 2020Goldman Facility

Term

L+3.72%


425,000




September 15, 2019​
​
​
​
​
​
​
​
​
​
​
​
​Total





$
1,220,000

$
100,000​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​


(1)The
carrying amount outstanding under the facility approximates its fair value.(2)As
described below, this facility generally is terminable upon 270 days' notice by either party. As of March 31, 2018 and December 31, 2017,
neither party had provided notice of its intent to terminate the facility.(3)As
described below, borrowings under the Fortress facility accrue interest at a rate equal to LIBOR plus 5.00%, subject to a floor of 0.75%.


37

---



Table of Contents

FS Energy and Power Fund

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



Note 8. Financing Arrangements (Continued)

For
the three months ended March 31, 2018 and 2017, the components of total interest expense for the Company's financing arrangements were as follows:



Three Months Ended March 31,2018

2017Arrangement(1)

Direct
Interest
Expense(2)

Amortization
of Deferred
Financing
Costs

Total
Interest
Expense

Direct
Interest
Expense(2)

Amortization
of Deferred
Financing
Costs

Total
Interest
ExpenseBarclays Credit Facility

$
94

$
19

$
113

$
94

$
14

$
108BNP Facility


2,121





2,121


1,140





1,140Deutsche Bank Credit Facility


3,243


291


3,534


1,775


271


2,046Fortress Facility


2,486


77


2,563


2,176


67


2,243Goldman Facility


5,632


144


5,776








Goldman Repurchase Financing











3,546


32


3,578Natixis Credit Facility











423


256


679Wells Fargo Credit Facility











243


198


441​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
13,576

$
531

$
14,107

$
9,397

$
838

$
10,235​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


(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)Interest
expense includes the effect of non-usage fees, administration fees and make-whole fees, if any.


For
the three months ended March 31, 2018 and 2017, the cash paid for interest expense, average borrowings, effective interest rate and weighted average interest rate for the
Company's financing arrangements were as follows:



Three Months Ended March 31,2018

2017Arrangement

Cash Paid
for Interest
Expense

Average
Borrowings

Effective
Interest
Rate(1)

Weighted
Average
Interest
Rate(1)

Cash Paid
for Interest
Expense

Average
Borrowings

Effective
Interest
Rate(1)

Weighted
Average
Interest
Rate(1)Barclays Credit Facility

$
94

$








$
96

$






BNP Facility(2)


2,842


247,778


3.65
%

3.42
%

989


127,071


2.50
%

3.59
%Deutsche Bank Credit Facility(3)


3,109


329,444


4.11
%

3.94
%

1,741


205,333


3.03
%

3.46
%Fortress Facility(3)


2,492


155,000


6.38
%

6.42
%

2,041


155,000


5.79
%

5.62
%Goldman Facility(3)


5,640


425,000


5.31
%

5.30
%










Goldman Repurchase Financing(3)














3,529


325,000


4.34
%

4.36
%Natixis Credit Facility(3)














433


49,466


3.48
%

3.42
%Wells Fargo Credit Facility(3)














248


26,861


3.71
%

3.62
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total/Average

$
14,177

$
1,157,222


4.83
%

4.69
%
$
9,077

$
888,731


3.80
%

4.23
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)Effective
interest rate and weighted average interest rate include the effect of non-usage fees, administration fees and make-whole fees, if any. If applicable, the
weighted average interest rate presented for periods of less than one year is annualized(2)Interest
paid monthly in arrears.(3)Interest
paid quarterly in arrears.


38

---



Table of Contents

FS Energy and Power Fund

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



Note 8. Financing Arrangements (Continued)

Barclays Credit Facility

On May 18, 2016, Bryn Mawr Funding LLC, or Bryn Mawr Funding, a wholly-owned subsidiary, entered into a revolving credit facility,
or the Barclays credit facility, with Barclays Bank PLC, or Barclays, as administrative agent, and the lenders from time to time party thereto. As amended to date, the Barclays credit facility
provides for borrowings in U.S. dollars and certain agreed upon foreign currencies in an aggregate amount of up to $100,000, including a subfacility for the issuance of letters of credit for Bryn Mawr
Funding's account in an aggregate face amount of up to $10,000. Bryn Mawr Funding's obligations to Barclays under the Barclays credit facility are secured by a first priority security interest in
substantially all of the assets of Bryn Mawr Funding, including its portfolio of assets and the assets of its subsidiaries, subject to customary exceptions. In
addition, the Company has agreed to guaranty the obligations of Barclays and grant a first priority lien in favor of Barclays, for the benefit of the lenders, on the membership interests in Bryn Mawr
Funding.

Interest
under the Barclays credit facility for (i) loans for which the Company elects the eurocurrency option is payable at a rate equal to LIBOR plus 325 basis points per annum;
and (ii) loans for which the Company elects the base rate option is payable at a rate equal to 225 basis points per annum plus the greatest of (a) the U.S. Prime Rate, (b) the
federal funds effective rate for such day plus 50 basis points, (c) three-month LIBOR plus 100 basis points per annum and (d) zero. Bryn Mawr Funding will pay a commitment fee of 37.5
basis points per annum on the unused portion of the commitments under the Barclays credit facility during the revolving period and letter of credit participation fees and a fronting fee on the average
daily amount of any letters of credit issued under the Barclays credit facility.

On
September 30, 2018 and December 31, 2018, the amount available for borrowing under the Barclays credit facility will be reduced to $75,000 and $50,000, respectively, and
Bryn Mawr Funding will be required to repay any outstanding borrowings in excess of these amounts. The Barclays credit facility will mature on March 29, 2019.

The
Company incurred costs in connection with obtaining the Barclays credit facility, which the Company recorded as deferred financing costs on its consolidated balance sheets and
amortizes to interest expense over the life of the Barclays credit facility. As of March 31, 2018, $177 of such deferred financing costs had yet to be amortized to interest expense.

BNP Facility

On December 11, 2013, Berwyn Funding LLC, or Berwyn Funding, the Company's wholly-owned, special-purpose financing subsidiary,
entered into a committed facility arrangement, or the BNP facility, with BNP Paribas Prime Brokerage International, Ltd (as assignee of BNP Paribas Prime Brokerage, Inc.), or BNP. As
amended to date, Berwyn Funding can borrow, from time to time, up to $325,000 from BNP. The BNP facility was effected through a committed facility agreement by and between Berwyn Funding and BNP, or
the committed facility agreement, a U.S. PB Agreement by and between Berwyn Funding and BNP, and related transaction documents each dated as of December 11, 2013, as amended to date, which are
collectively referred to herein as the BNP financing agreements. Under the terms of the BNP facility, as amended, the maximum committed amount available to Berwyn Funding is $300,000, the interest
rate payable on borrowings under the committed facility agreement is three-month LIBOR plus 135 basis points and the commitment fee payable under the committed facility agreement is (a) 65
basis points on unused amounts so long as 75% or more of the facility amount under the committed facility agreement is utilized or (b) 85 basis points on unused amounts if less than 75% of the
facility amount under the committed facility agreement is utilized.

39

---



Table of Contents

FS Energy and Power Fund

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



Note 8. Financing Arrangements (Continued)

Berwyn
Funding will pledge certain of its securities as collateral to secure borrowings under the BNP facility. The value of securities required to be pledged by Berwyn Funding is
determined in accordance with the margin requirements described in the BNP financing agreements. Berwyn Funding's obligations to BNP under the BNP facility are secured by a first priority security
interest in substantially all of the assets of Berwyn Funding, including its portfolio of securities. The obligations of Berwyn Funding under the BNP facility are non-recourse to the Company and the
Company's exposure under the BNP facility is limited to the value of the Company's investment in Berwyn Funding.

Berwyn
Funding may terminate the committed facility agreement upon 270 days' notice. Subject to certain cancellation rights, and absent a default or facility termination event,
BNP is required to provide Berwyn Funding with 270 days' notice prior to terminating or amending the committed facility agreement.

Deutsche Bank Credit Facility

On June 24, 2011, FSEP Term Funding, LLC, or FSEP Funding, the Company's wholly-owned, special-purpose financing subsidiary,
entered into a revolving credit facility, or the Deutsche Bank credit facility, with Deutsche Bank AG, New York Branch, or Deutsche Bank, as administrative agent and the lender party thereto. Under
the terms of the Deutsche Bank credit facility, as amended, the maximum committed amount available to FSEP Funding is $340,000, the interest rate payable on borrowings is three-month LIBOR plus 205
basis points and FSEP Funding is subject to a non-usage fee of 75 basis points per annum. Any amounts borrowed under the Deutsche Bank credit facility will mature, and all accrued and unpaid interest
thereunder will be due and payable, on June 11, 2018.

FSEP
Funding's obligations to the lenders under the Deutsche Bank credit facility are secured by a first priority security interest in substantially all of the assets of FSEP Funding,
including its portfolio of securities. The obligations of FSEP Funding under the Deutsche Bank credit facility are non-recourse to the Company and the Company's exposure under the Deutsche Bank credit
facility is limited to the value of the Company's investment in FSEP Funding.

The
Company incurred costs in connection with obtaining and amending the Deutsche Bank credit facility, which the Company recorded as deferred financing costs on its consolidated balance
sheets and amortizes to interest expense over the life of the Deutsche Bank credit facility. As of March 31, 2018, $233 of such deferred financing costs had yet to be amortized to interest
expense.

Fortress Facility

On November 6, 2015, Foxfields Funding LLC, or Foxfields Funding, a wholly-owned financing subsidiary of the Company, entered into
a senior secured multiple draw term loan facility, or the Fortress facility, with Fortress as administrative agent, the lenders from time to time party thereto and the other loan parties from time to
time party thereto. Pursuant to the Fortress facility, as amended, Foxfields Funding has borrowed term loans in the amount of $155,000. Interest under the Fortress facility for (i) loans
bearing interest by reference to LIBOR accrues at a rate equal to LIBOR (subject to a floor of 75 basis points) plus 500 basis points per annum, and (ii) loans bearing interest by reference to
the base rate accrues at 400 basis points per annum plus the greater of: (x) the per annum rate of interest announced, from time to time, within Wells Fargo Bank, National Association at its
principal office in San Francisco as its "prime rate," and (y) 175 basis points per annum.

The
Company incurred costs in connection with obtaining and amending the Fortress facility, which the Company recorded as deferred financing costs on its consolidated balance sheets and
amortizes to interest expense over the life of the Fortress facility. As of March 31, 2018, $807 of such deferred financing costs had yet to be amortized to interest expense.

40

---



Table of Contents

FS Energy and Power Fund

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



Note 8. Financing Arrangements (Continued)

Goldman Repurchase Financing

On September 11, 2014, through its two wholly-owned, special-purpose financing subsidiaries, Gladwyne Funding LLC, or Gladwyne
Funding, and Strafford Funding LLC, or Strafford Funding, the Company entered into a debt financing arrangement with Goldman, which was subsequently twice amended, or the Goldman repurchase
financing. Prior to its termination on April 19, 2017, the amount borrowed under the Goldman repurchase financing was $325,000. On April 19, 2017, in connection with the closing of the
Goldman repurchase financing, (i) all of the Floating Rate Notes, or Notes, issued by Gladwyne Funding to Strafford Funding were canceled and the indenture under which the Notes were issued was
discharged, (ii) the master repurchase agreement between Strafford Funding and Goldman and each transaction thereunder was terminated and (iii) accordingly, the Goldman repurchase
financing was prepaid in full and terminated.

Goldman Facility

On April 19, 2017, Gladwyne Funding entered into a Credit Agreement with Goldman, as lender, sole lead arranger and administrative agent,
Citibank, N.A., as collateral agent, and Virtus Group, LP, as collateral administrator, or the Goldman term facility. Under the terms of the Goldman term facility, as amended, Gladwyne Funding
has borrowed term loans in the amount of $425,000. The interest payable on borrowings under the Goldman term facility is three-month LIBOR plus 372 basis points per annum. The Goldman term
facility will mature, and all outstanding principal and accrued and unpaid interest thereunder, will be due and payable, on September 15, 2019.

If
the Goldman term facility is accelerated prior to its stated maturity date due to an event of default or all or a portion of the borrowings are prepaid, then Gladwyne Funding must pay
to Goldman a fee equal to the present value of the aggregate amount of the spread over LIBOR (372 basis points per annum) that would have been payable to Goldman on the subject borrowings
through the facility's maturity date had the acceleration or prepayment not occurred.

The
Company incurred costs in connection with obtaining the Goldman term facility, which the Company recorded as deferred financing costs on its consolidated balance sheets and amortizes
to interest expense over the life of the Goldman term facility. As of March 31, 2018, $855 of such deferred financing costs had yet to be amortized to interest expense.

Natixis Credit Facility

On August 2, 2017, Energy Funding LLC, or Energy Funding, the Company's wholly-owned, special-purpose financing subsidiary, repaid
and terminated the revolving credit facility, or the Natixis credit facility, which Energy Funding originally entered into on July 11, 2015 with Natixis, New York Branch, or Natixis, as
administrative agent and lender, Wells Fargo Bank, National Association, as collateral agent and custodian, and the other lenders from time to time party thereto. The Natixis credit facility provided
for revolving borrowings through January 11, 2015 in an aggregate principal amount up to $150,000 on a committed basis. Prior to the termination of the Natixis credit facility, borrowings under
the Natixis credit facility accrued interest at a rate equal to the applicable commercial paper rate plus 225 basis points per annum.

Wells Fargo Credit Facility

On July 27, 2017 and July 28, 2017, Wayne Funding LLC, or Wayne Funding, the Company's wholly-owned, special purpose
financing subsidiary, repaid and terminated, respectively, the
revolving credit facility, or the Wells Fargo credit facility, which Wayne Funding originally entered into on September 9, 2014 with Wells Fargo Securities, LLC, as administrative agent,
each of the conduit

41

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Table of Contents

FS Energy and Power Fund

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



Note 8. Financing Arrangements (Continued)

lenders
and institutional lenders from time to time party thereto and Wells Fargo Bank, National Association, collectively referred to herein as Wells Fargo, as the collateral agent, account bank and
collateral custodian under the Wells Fargo credit facility. The Wells Fargo credit facility provided for borrowings in an aggregate principal amount up to $60,000 on a committed basis. Prior to the
termination of the Wells Fargo credit facility, borrowings accrued interest at a rate equal to three-month LIBOR plus a spread ranging between 250 and 275 basis points per annum, depending on the
composition of the portfolio of assets for the relevant period.

Note 9. 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 or losses pursuant to these contracts. Management of FS 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 and its affiliates (including FS Investments) and Note 6 for a discussion of the Company's unfunded
commitments.

42

---



Table of Contents

FS Energy and Power Fund

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



Note 10. Financial Highlights

The following is a schedule of financial highlights of the Company for the three months ended March 31, 2018 and the year ended December 31, 2017:



Three Months Ended
March 31, 2018
(Unaudited)

Year Ended
December 31, 2017Per Share Data:(1)Net asset value, beginning of period

$
6.65

$
7.61Results of operations(2)Net investment income


0.13


0.65Net realized gain (loss) and unrealized appreciation (depreciation)


(0.21
)

(0.90
)​
​
​
​
​
​
​
​Net increase (decrease) in net assets resulting from operations


(0.08
)

(0.25
)​
​
​
​
​
​
​
​Shareholder distributions(3)Distributions from net investment income


(0.13
)

(0.71
)Distributions representing tax return of capital





(0.00
)​
​
​
​
​
​
​
​Net decrease in net assets resulting from shareholder distributions


(0.13
)

(0.71
)​
​
​
​
​
​
​
​Capital share transactionsIssuance 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

$
6.44

$
6.65​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Shares outstanding, end of period


441,740,665


446,045,135​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Total return(6)


(1.33
)%

(3.65
)%​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Total return (without assuming reinvestment of distributions)(6)


(1.20
)%

(3.29
)%​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Ratio/Supplemental Data:Net assets, end of period

$
2,842,967

$
2,966,042Ratio of net investment income to average net assets(7)


7.37
%

8.82
%Ratio of total operating expenses to average net assets(7)


4.82
%

4.94
%Portfolio turnover(8)


7.06
%

34.08
%Total amount of senior securities outstanding, exclusive of treasury securities

$
1,070,000

$
1,220,000Asset coverage per unit(9)


3.66


3.43


(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. The per share
impact of the Company's issuance of common shares was an increase in net asset value of less than $0.01 per share during the three months ended March 31, 2018.(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.


43

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Table of Contents

FS Energy and Power Fund

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



Note 10. Financial Highlights (Continued)

(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, 2018 are annualized.
Annualized ratios for the three months ended March 31, 2018 are not necessarily indicative of the ratios that may be expected for the year ending December 31, 2018. The following is a
schedule of supplemental ratios for the three months ended March 31, 2018 and year ended December 31, 2017:


Three Months Ended
March 31, 2018
(Unaudited)

Year Ended
December 31, 2017Ratio of subordinated income incentive fees to average net assets





0.32
%Ratio of interest expense to average net assets


1.91
%

1.52
%


(8)Portfolio
turnover for the three months ended March 31, 2018 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.


Note 11. Subsequent Events

On April 9, 2018, the Company entered into the FS/EIG investment advisory agreement which replaced the FS Advisor investment advisory agreement.

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 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.

The
incentive fee consists of two parts. The first part of the incentive fee, which is referred to as the subordinated incentive fee on income, is calculated and payable quarterly in
arrears, equals 20.0% of the Company's "pre-incentive fee net investment income" for the immediately preceding quarter and is subject to a hurdle rate, expressed as a rate of return on the Company's
net assets, 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%. 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

44

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Table of Contents

FS Energy and Power Fund

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



Note 11. Subsequent Events (Continued)

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 the value of the Company's net assets. 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.

The
second part of the incentive fee, which is referred to as the incentive fee on capital gains, is determined and payable in arrears as of the end of each calendar year (or upon
termination of the FS/EIG investment advisory agreement). This fee equals 20.0% of the Company's "incentive fee capital
gains." "Incentive fee capital gains" 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.

Pursuant
to the FS/EIG investment advisory agreement, 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 financial records that we are required to maintain and preparing reports for our shareholders and reports
filed with the SEC.

Pursuant
to the FS/EIG investment advisory agreement, the Company reimburses FS/EIG Advisor no less than monthly 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.

45

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Table of Contents

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.

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:



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:



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

46

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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 activities were managed by FS Advisor until April 9, 2018 and thereafter have been managed by FS/EIG Advisor. FS Advisor previously engaged GSO
to act as our investment sub-adviser. GSO resigned as our investment sub-adviser and terminated the investment sub-advisory agreement on April 9, 2018.

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 have identified and 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:We intend to directly source investment opportunities. Such investments are
originated or structured for us or made by us and are not generally available to the broader market. These investments may include both debt and equity components, although we do not generally make
equity investments independent of having an existing credit relationship. We believe directly originated investments may offer higher returns and more favorable protections than broadly syndicated
transactions.

Opportunistic:We intend to seek to capitalize on market price inefficiencies by investing in loans, bonds and other securities where
the market
price of such investment reflects a lower value than deemed warranted by our fundamental analysis. We believe that market price inefficiencies may occur due to, among other things, general
dislocations in the markets, a misunderstanding by the market of a particular company or an Energy industry sub-sector being out of favor with the broader investment community. We seek to allocate
capital to these securities that have been misunderstood or mispriced by the market and where we believe there is an opportunity to earn an attractive return on our investment. Such opportunities may
include event driven investments, anchor orders (i.e., opportunities that are originated and then syndicated by a commercial or investment bank but where we provide a capital commitment
significantly above the average syndicate participant) and CLOs.

In
the case of event driven investments, we intend to take advantage of dislocations that arise in the markets due to an impending event and where the market's apparent expectation of
value differs substantially from our fundamental analysis. Such events may include a looming debt maturity or default, a merger, spin-off or other corporate reorganization, an adverse regulatory or
legal ruling, or a material contract expiration, any of which may significantly improve or impair a company's financial position. Compared to other investment strategies, event driven investing
depends more heavily on our ability to successfully predict the outcome of an individual event rather than on underlying

47

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macroeconomic
fundamentals. As a result, successful event driven strategies may offer both substantial diversification benefits and the ability to generate performance in uncertain market
environments.

We
may also invest in anchor orders. In these types of investments, we may receive fees, preferential pricing or other benefits not available to other lenders in return for our
significant capital commitment. Our decision to provide an anchor order to a syndicated transaction is predicated on a rigorous credit analysis, our familiarity with a particular company, industry or
financial sponsor, and the broader investment experiences of our investment adviser.

Broadly Syndicated/Other:Although our primary focus is to invest in directly originated transactions and opportunistic investments, in
certain
circumstances we will also invest in the broadly syndicated loan and high yield 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 addition, and because we typically receive more attractive financing terms on these positions than we do on our less liquid
assets, we are able to leverage the broadly syndicated portion of our portfolio in such a way that maximizes the levered return potential of our portfolio.

Our
portfolio is comprised primarily of income-oriented securities, which refers to debt securities and income-oriented preferred and common equity interests, of privately-held Energy
companies within the United States. We intend to weight our portfolio towards senior and subordinated debt. In addition to investments purchased from dealers or other investors in the secondary
market, we expect to invest in primary market transactions and directly originated investments 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. Our portfolio may also be comprised of select income-oriented preferred or common equity interests, which refers to equity interests that pay consistent,
high-yielding dividends, that we believe will produce both current income and long-term capital appreciation. These income-oriented preferred or common equity interests may include interests in master
limited partnerships. 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.

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 change in unrealized appreciation or depreciation on investments and net change in
unrealized gain or loss on foreign currency. 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 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.

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 facilities and other indebtedness, and other expenses necessary for our operations. The management and

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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 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.

Pursuant
to the FS/EIG investment advisory agreement, 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. 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 and
facilities under the FS/EIG investment advisory agreement. 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
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 Investments and EIG.

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 expense reimbursement arrangement with FS Investments, see Note 4 to our unaudited consolidated financial statements included herein.

Portfolio Investment Activity for the Three Months Ended March 31, 2018 and for the Year Ended
December 31, 2017

Total Portfolio Activity

The following tables present certain selected information regarding our portfolio investment activity for the three months ended
March 31, 2018 and year ended December 31,2017:



Net Investment Activity

For the
Three Months Ended
March 31, 2018

For the
Year Ended
December 31, 2017Purchases

$
267,833

$
1,861,618Sales and Repayments


(558,369
)

(1,431,648
)​
​
​
​
​
​
​
​Net Portfolio Activity

$
(290,536
)
$
429,970​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


49

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For the
Three Months Ended
March 31, 2018

For the
Year Ended
December 31, 2017New Investment Activity by Asset Class

Purchases

Percentage

Purchases

PercentageSenior Secured LoansFirst Lien

$
146,200


55
%
$
397,162


21
%Senior Secured LoansSecond Lien


14,403


5
%

428,871


23
%Senior Secured Bonds


24,371


9
%

347,091


19
%Subordinated Debt


76,596


29
%

621,372


33
%Equity/Other


6,263


2
%

67,122


4
%​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
267,833


100
%
$
1,861,618


100
%​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​


The
following table summarizes the composition of our investment portfolio at cost and fair value as of March 31, 2018 and December 31, 2017:



March 31, 2018
(Unaudited)

December 31, 2017Amortized
Cost(1)

Fair Value

Percentage
of Portfolio

Amortized
Cost(1)

Fair Value

Percentage
of PortfolioSenior Secured LoansFirst Lien

$
933,621

$
893,243


25
%
$
961,883

$
924,926


23
%Senior Secured LoansSecond Lien


830,856


753,895


21
%

860,470


796,524


20
%Senior Secured Bonds


616,661


604,685


17
%

664,542


660,151


17
%Subordinated Debt


1,000,804


971,675


26
%

1,229,790


1,203,524


30
%Equity/Other


623,907


395,574


11
%

641,081


411,580


10
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
4,005,849

$
3,619,072


100
%
$
4,357,766

$
3,996,705


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, 2018 and December 31, 2017:



March 31, 2018

December 31, 2017Number of Portfolio Companies


79


76% Variable Rate (based on fair value)


40.5
%

40.1
%% Fixed Rate (based on fair value)


48.6
%

49.6
%% Income Producing Equity/Other Investments (based on fair value)


0.7
%

0.7
%% Non-Income Producing Equity/Other Investments (based on fair value)


10.2
%

9.6
%Average Annual EBITDA of Portfolio Companies

$
142,857

$
188,168Weighted Average Purchase Price of Debt Investments (as a % of par value)


97.2
%

97.0
%% of Investments on Non-Accrual (based on fair value)


2.5
%

2.6
%Gross Portfolio Yield Prior to Leverage (based on amortized cost)


8.0
%

8.0
%Gross Portfolio Yield Prior to Leverage (based on amortized cost)Excluding Non-Income Producing Assets


9.6
%

9.8
%


Based
on our regular monthly cash distribution rate of $0.041667 per share as of March 31, 2018, and the price at which we issued shares pursuant to our distribution reinvestment
plan of $6.55 per share, the annualized distribution rate to shareholders as of March 31, 2018 was 7.63%. Based on our regular monthly cash distribution rate of $0.059042 per share as of
December 31, 2017, and the price at which we issued shares pursuant to our distribution reinvestment plan of $6.70 per share, the annualized distribution rate to shareholders as of
December 31, 2017 was 10.57%. For the three months ended March 31, 2018 and year ended December 31, 2017, our total return was (1.33)% and (3.65)%, respectively, and our total
return without assuming reinvestment of distributions was (1.20)% and (3.29)%, respectively

50

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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, 2017 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, 2018 and
year ended December 31, 2017:



New Direct Originations

For the
Three Months Ended
March 31, 2018

For the
Year Ended
December 31, 2017Total Commitments (including unfunded commitments)

$
72,878

$
1,045,373Exited Investments (including partial paydowns)


(127,697
)

(590,931
)​
​
​
​
​
​
​
​Net Direct Originations

$
(54,819
)
$
454,442​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​






For the
Three Months Ended
March 31, 2018

For the
Year Ended
December 31, 2017New Direct Originations by Asset Class
    (including Unfunded Commitments)

Commitment
Amount

Percentage

Commitment
Amount

PercentageSenior Secured LoansFirst Lien

$
60,948


83
%
$
285,688


27
%Senior Secured LoansSecond Lien


8,567


12
%

386,000


37
%Senior Secured Bonds








162,812


16
%Subordinated Debt








165,000


16
%Equity/Other


3,363


5
%

45,873


4
%​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
72,878


100
%
$
1,045,373


100
%​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​






For the
Three Months Ended
March 31, 2018

For the
Year Ended
December 31, 2017Average New Direct Origination Commitment Amount

$
6,625

$
47,517Weighted Average Maturity for New Direct Originations


5/19/24


9/27/22Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Funded during Period


9.0
%

8.6
%Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Funded during PeriodExcluding Non-Income Producing
Assets


9.8
%

9.0
%Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Exited during Period


10.8
%

10.2
%


The
following table presents certain selected information regarding our direct originations as of March 31, 2018 and December 31, 2017:



Characteristics of All Direct Originations held in Portfolio

March 31, 2018

December 31, 2017Number of Portfolio Companies


41


36Average Annual EBITDA of Portfolio Companies

$
79,501

$
77,664Average Leverage Through Tranche of Portfolio CompaniesExcluding Equity/Other Securities


5.5x


5.7x% of Investments on Non-Accrual (based on fair value)


3.0
%

2.6
%Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct Originations


7.5
%

7.4
%Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct OriginationsExcluding Non-Income Producing Assets


10.1
%

9.8
%


51

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Table of Contents

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, 2018 and December 31, 2017:



March 31, 2018

December 31, 2017Portfolio Composition by Strategy

Fair Value

Percentage
of Portfolio

Fair Value

Percentage
of PortfolioDirect Originations

$
2,142,991


59
%
$
2,277,397


57
%Opportunistic


818,049


23
%

1,037,413


26
%Broadly Syndicated/Other


658,032


18
%

681,895


17
%​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
3,619,072


100
%
$
3,996,705


100
%​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​


See
Note 6 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, and FS Advisor historically used, an investment rating system
to characterize and monitor the expected level of returns on each investment in our portfolio. FS/EIG Advisor uses, and FS Advisor historically used, an investment rating scale of 1 to 5. The
following is a description of the conditions associated with each investment rating:



Investment Rating

Summary Description1

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.


The
following table shows the distribution of our investments on the 1 to 5 investment rating scale at fair value as of March 31, 2018 and December 31, 2017:



March 31, 2018

December 31, 2017Investment Rating

Fair Value

Percentage
of Portfolio

Fair Value

Percentage
of Portfolio1

$
27,847


1
%
$
99,205


2
%2


3,028,873


84
%

3,125,386


78
%3


340,253


9
%

546,153


14
%4


10,813


0
%




5


211,286


6
%

225,961


6
%​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
3,619,072


100
%
$
3,996,705


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.

52

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Table of Contents

Results of Operations

Comparison of the Three Months Ended March 31, 2018 and 2017

Revenues

Our investment income for the three months ended March 31, 2018 and 2017 was as follows:



Three Months Ended March 31,2018

2017Amount

Percentage of
Total Income

Amount

Percentage of
Total IncomeInterest income

$
77,898


87
%
$
84,201


72
%Paid-in-kind interest income


3,019


3
%

8,223


7
%Fee income


9,056


10
%

23,822


21
%​
​
​
​
​
​
​
​
​
​
​
​
​
​Total investment income(1)

$
89,973


100
%
$
116,246


100
%​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)Such
revenues represent $83,987 and $103,768 of cash income earned as well as $5,986 and $12,478 in non-cash portions relating to accretion of discount and PIK
interest for the three months ended March 31, 2018 and 2017, 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 investment income we receive is directly related to the balance of income-producing investments multiplied by the weighted average yield of our investments. We expect the
dollar amount of interest and any dividend income that we earn to increase if the size of our investment portfolio increases and the proportion of directly originated investments in our portfolio
increases.

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 events at existing portfolio companies resulting in such fees.

Expenses

Our operating expenses for the three months ended March 31, 2018 and 2017 were as follows:



Three Months Ended
March 31,2018

2017Management fees

$
18,298

$
22,385Subordinated income incentive fees





10,499Administrative services expenses


793


808Share transfer agent fees


643


734Accounting and administrative fees


361


422Interest expense


14,107


10,235Trustees' fees


450


250Expenses associated with our independent audit and related fees


79


122Legal fees


99


67Printing fees


244


507Other


511


429​
​
​
​
​
​
​
​Total operating expenses


35,585


46,458Less: Expense reimbursement from sponsor





(18,220
)​
​
​
​
​
​
​
​Net operating expenses

$
35,585

$
28,238​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


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The following table reflects selected expense ratios as a percent of average net assets for the three months ended March 31, 2018 and 2017:



Three Months Ended
March 31,2018

2017Ratio of operating expenses to average net assets


1.21
%

1.38
%Ratio of expense reimbursement from sponsor to average net assets





(0.54
)%​
​
​
​
​
​
​
​Ratio of net operating expenses to average net assets


1.21
%

0.84
%Ratio of income incentive fees and interest expense to average net assets(1)


(0.48
)%

(0.62
)%​
​
​
​
​
​
​
​Ratio of net operating expenses to average net assets, excluding certain expenses


0.73
%

0.22
%​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


(1)Ratio
may be rounded in order to recompute the ending ratio of net operating expenses, excluding certain expenses, to average net assets.


Incentive
fees and interest expense, among other things, may increase or decrease our expense ratios relative to comparative periods depending on portfolio performance and changes in
benchmark interest rates such as LIBOR, among other factors.

Expense Reimbursement

During the three months ended March 31, 2018, we did not accrue any expense reimbursements. During the three months ended
March 31, 2017, we accrued $18,220 for expense reimbursements that FS Investments agreed to pay and were funded through the offset of management fees payable by us to FS Advisor. Under
the expense reimbursement agreement, amounts reimbursed to us by FS Investments may become subject to repayment by us in the future. During the three months ended March 31, 2018 and 2017
we did not accrue any expense recoupments payable to FS Advisor or its affiliates. See "OverviewExpense Reimbursement" for a discussion of the expense reimbursement
agreement.

Net Investment Income

Our net investment income totaled $54,388 ($0.12 per share) and $88,008 ($0.20 per share) for the three months ended March 31, 2018 and
2017, respectively.

Net Realized Gains or Losses

Our net realized gains (losses) on investments and foreign currency for the three months ended March 31, 2018 and 2017, were as follows:



Three Months Ended
March 31,2018

2017Net realized gain (loss) on investments(1)

$
(67,880
)
$
(30,653
)Net realized gain (loss) on foreign currency





3​
​
​
​
​
​
​
​Total net realized gain (loss)

$
(67,880
)
$
(30,650
)​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


(1)We
sold investments and received principal repayments of $301,194 and $257,175, respectively, during the three months ended March 31, 2018 and $97,055 and
$361,040, respectively, during the three months ended March 31, 2017.


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

Our net change in unrealized appreciation (depreciation) on investments and foreign currency for the three months ended March 31, 2018
and 2017 were as follows:



Three Months Ended
March 31,2018

2017Net change in unrealized appreciation (depreciation) on investments

$
(25,716
)
$
4,109Net change in unrealized appreciation (depreciation) on foreign currency


1


52​
​
​
​
​
​
​
​Total net change in unrealized appreciation (depreciation)

$
(25,715
)
$
4,161​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


During
the three months ended March 31, 2018, the net change in unrealized appreciation (depreciation) on our investments was primarily driven by the performance of our broadly
syndicated and directly originated investments. The change in unrealized appreciation (depreciation) on our investments during the three months ended March 31, 2017 was primarily driven by a
continuation of the recovery in the energy markets and by the conversion of unrealized depreciation to realized losses.

Net Increase (Decrease) in Net Assets Resulting from Operations

For the three months ended March 31, 2018 and 2017, the net increase (decrease) in net assets resulting from operations was $(39,207)
($(0.09) per share) and $61,519 ($0.14 per share), respectively.

Financial Condition, Liquidity and Capital Resources

Overview

As of March 31, 2018, we had $383,536 in cash, which we or our wholly-owned subsidiaries held in custodial accounts, and $250,000 in
borrowings available under our financing arrangements, subject to borrowing base and other limitations. To seek to enhance our returns, we employ leverage as market conditions permit and at the
discretion of FS Advisor, but in no event may leverage employed exceed 50% of the value of our assets, as required by the 1940 Act. See "Financing Arrangements." As of March 31,
2018, we also had broadly syndicated investments and opportunistic investments that could be sold to create additional liquidity. As of March 31, 2018, we had nine senior secured loan
investments with aggregate unfunded commitments of $130,268 and three equity/other investments with aggregate unfunded commitments of $9,584. We maintain sufficient cash on hand, available borrowings
and 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 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.

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Financing Arrangements

The following table presents a summary of information with respect to our outstanding financing arrangements as of March 31, 2018:



Arrangement(1)

Type of
Arrangement

Rate

Amount
Outstanding

Amount
Available

Maturity DateBarclays Credit Facility

Revolving

L+3.25%

$


$
100,000

March 29, 2019BNP Facility

Prime Brokerage

L+1.35%


200,000


100,000

December 26, 2018(2)Deutsche Bank Credit Facility

Revolving

L+2.05%


290,000


50,000

June 11, 2018Fortress Facility

Term

L+5.00%(3)


155,000




November 6, 2020Goldman Facility

Term

L+3.72%


425,000




September 15, 2019​
​
​
​
​
​
​
​
​
​
​
​
​Total





$
1,070,000

$
250,000​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​


(1)The
carrying amount outstanding under the facility approximates its fair value.(2)The
BNP facility generally is terminable upon 270 days' notice by either party. As of March 31, 2018, neither Berwyn Funding nor BNP had provided
notice of its intent to terminate the facility.(3)As
described in Note 8 to our unaudited consolidated financial statements included herein, borrowings under the Fortress facility accrue interest at a rate
equal to LIBOR plus 5.00%, subject to a floor of 0.75%.


For
additional information regarding our outstanding financing arrangements, see Note 8 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 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

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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.

We
intend to continue to make our regular distributions in the form of cash, out of assets legally available for distribution, unless shareholders elect to receive their 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.

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, 2018 and 2017:



DistributionFor the Three Months Ended

Per Share

AmountFiscal 2017March 31, 2017

$
0.17713

$
77,984Fiscal 2018March 31, 2018

$
0.12500

$
54,823


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. 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. In preparing the financial statements, management has made 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. In preparing the financial statements, management has utilized available information, including our
past history, industry standards and the current economic environment, among other factors, in forming its 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. 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 net asset 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.

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Accounting Standards Codification Topic 820,Fair Value Measurements and Disclosure, or
ASC Topic 820, issued by 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.

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



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's management team, 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.

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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's management team, 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's management team, any approved independent third-party valuation services and 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's management team 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.

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's management team, and has authorized FS/EIG Advisor's management team 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 7 to our unaudited consolidated financial statements included herein for additional information regarding the fair value of our financial instruments.

Revenue Recognition

Security transactions are accounted for on the trade date. We record interest income on an accrual basis to the extent that we expect to collect
such amounts. We record dividend income on the ex-dividend date. We do not accrue as a receivable interest or dividends on loans and securities if we have reason to doubt our ability to collect such
income. Our policy is to place investments on non-accrual status when there is reasonable doubt that interest income will be collected. We consider 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 we will
receive any previously accrued interest, then the interest income will be written-off. Payments received on nonaccrual 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 our judgment.

Loan
origination fees, original issue discount and market discount are capitalized and we amortize such amounts as interest income over the respective term of the loan or security. Upon
the prepayment

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of
a loan or security, any unamortized loan origination fees and original issue discount are recorded as interest income. We record prepayment premiums on loans and securities as fee income when we
receive such amounts.

Effective
January 1, 2018, we adopted Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, using the cumulative effect method applied to in-scope
contracts with customers that have not been completed as of the date of adoption. We did not identify any in-scope
contracts that had not been completed as of the date of adoption and, as a result, we did not recognize a cumulative effect on shareholders' equity in connection with the adoption of the new revenue
recognition guidance.

The
new revenue recognition guidance applies to all entities and all contracts with customers to provide goods or services in the ordinary course of business, excluding, among other
things, financial instruments as well as certain other contractual rights and obligations. Under the new revenue recognition guidance, which we have applied to all new in-scope contracts as of the
date of adoption, structuring and other upfront fees are recognized as revenue based on the transaction price as the performance obligation is fulfilled. The related performance obligation consists of
structuring activities and is satisfied over time as such activities are performed. Consideration is variable and is constrained from being included in the transaction price until the uncertainty
associated with the variable consideration is resolved, typically as of the trade date of the related transaction. Payment is typically due on the settlement date of the related transaction.

Net Realized Gains or Losses, Net Change in Unrealized Appreciation or Depreciation and Net Change in
Unrealized Gains or Losses on Foreign Currency

Gains or losses on the sale of investments are calculated by using the specific identification method. We measure realized gains or losses by
the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but
considering unamortized fees. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously
recorded unrealized gains or losses when gains or losses are realized and the respective unrealized gain or loss on foreign currency for any foreign denominated investments we may hold. Net change in
unrealized gains or losses on foreign currency reflects the change in the value of foreign currency held, receivables or accruals during the reporting period due to the impact of foreign currency
fluctuations.

Uncertainty in Income Taxes

We evaluate our tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for
uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax benefits or liabilities in our consolidated financial statements. Recognition of a
tax benefit or liability with respect to an uncertain tax position is required only when the position is "more likely than not" to be sustained assuming examination by taxing authorities. We recognize
interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in our consolidated statements of operations. During the three months ended March 31, 2018
and 2017, we did not incur any interest or penalties.

See
Note 2 to our unaudited consolidated financial statements included herein for additional information regarding our significant accounting policies.

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 value of our gross assets and an incentive fee based on our performance. Base management
fees are paid on a quarterly basis in arrears. FS/EIG Advisor agreed to waive incentive fees on income for a period of twelve months ending December 31, 2018. See Notes 4 and 11 to our
unaudited consolidated financial statements included herein for a discussion of these agreements and for the amount of fees and expenses accrued under these similar agreements with FS Advisor during
the three months ended March 31, 2018 and 2017.

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A
summary of our significant contractual payment obligations for the repayment of outstanding indebtness at March 31, 2018 is as follows:



Payments Due By PeriodMaturity
Date(1)

Total

Less than
1 year

1-3 years

3-5 years

More than
5 yearsBNP Facility(2)(3)

December 26, 2018

$
200,000

$
200,000








Deutsche Bank Credit Facility(4)

June 11, 2018

$
290,000

$
290,000








Fortress Facility(5)

November 6, 2020

$
155,000




$
155,000





Goldman Facility(5)

September 15, 2019

$
425,000




$
425,000








(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)The
BNP facility generally is terminable upon 270 days' notice by either party. As of March 31, 2018, neither Berwyn Funding nor BNP had provided
notice of its intent to terminate the facility.(3)At
March 31, 2018, $100,000 remained unused under the financing arrangement.(4)At
March 31, 2018, $50,000 remained unused under the financing arrangement.(5)At
March 31, 2018, no amounts remained unused under the financing arrangement.


As
of March 31, 2018, no amounts were outstanding under the Barclays credit facility. All borrowed amounts under the facility will mature, and all accrued and unpaid interest
thereunder will be due and payable, on March 26, 2019.

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, 2018, 40.5% of our portfolio investments
(based on fair value) paid variable interest rates, 48.6% paid fixed interest rates, 0.7% were income producing equity/other investments and the remainder (10.2%) consisted of non-income producing
equity or 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.

Pursuant
to the terms of each credit facility and financing arrangement, all credit facilities and financing arrangements borrow at a floating rate based on a benchmark interest 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

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of
our investment portfolio, including the accrual status of our investments, and our borrowing arrangements in effect as of March 31, 2018 (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
IncomeDown 100 basis points

$
(13,770
)
$
(10,603
)
$
(3,167
)

(1.2
)%No change











Up 100 basis points

$
14,155

$
10,603

$
3,552


1.4
%Up 300 basis points

$
42,466

$
31,808

$
10,658


4.1
%Up 500 basis points

$
70,776

$
53,013

$
17,763


6.8
%


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,
2018 and 2017, we did not engage in interest rate hedging activities.

In
addition, we may have risk regarding portfolio valuation. 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,
2018. 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, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

62

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Table of Contents

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.

Investing in our common shares involves a number of significant risks. In addition to the other information contained in this quarterly report
on Form 10-Q, investors should consider carefully the risk factors set forth in our annual report on Form 10-K for the year ended December 31, 2017 and our additional filings with
the SEC before making an investment in our common shares. All of the risk factors identified in Item 1A of our annual report on Form 10-K for the year ended December 31, 2017 that
relate to our former investment adviser, FS Advisor, are generally applicable to our current investment adviser, FS/EIG Advisor.

Risks Related to FS/EIG Advisor and Its Affiliates

There may be conflicts of interest related to obligations FS/EIG Advisor's senior management and investment
teams have to our affiliates and to other clients.

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 we do, 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 our best interests or in the best interest of our shareholders. Our investment objectives may overlap with the
investment objectives of such investment funds, accounts or other investment vehicles. For example, we rely on FS/EIG Advisor to manage our day-to-day activities and to implement our investment
strategy. FS/EIG Advisor and certain of its affiliates are presently, and plan in the future to continue to be, involved with activities which are unrelated to us. As a result of these activities,
FS/EIG Advisor, its employees and certain of its affiliates will have conflicts of interest in allocating their time between us 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 our business as FS/EIG Advisor and its
employees, in their judgment, determine is reasonably required, which may be substantially less than their full time.

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, 2018 pursuant to
our share repurchase program.



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
ProgramsJanuary 1 to January 31, 2018


9,018,665

$
6.70


9,018,665


(1
)February 1 to February 28, 2018











March 1 to March 31, 2018











​
​
​
​
​
​
​
​
​
​
​
​
​
​Total


9,018,665

$
6.70


9,018,665


(1
)​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)The
maximum number of common shares available for repurchase on January 12, 2018 was 10,224,187. A description of the maximum number of common shares that may
be repurchased under our share repurchase program is set forth in Note 3 to our unaudited consolidated financial statements contained in this quarterly report on Form 10-Q.


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Table of Contents

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.

Item 3.    Defaults upon Senior Securities.

Not applicable.

Item 4.    Mine Safety Disclosures.

Not applicable.

Item 5.    Other Information.

Not applicable.

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Table of Contents

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

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.)10.12

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.)10.13

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.)10.14

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.)10.15

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.)10.16

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.)10.17

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.)10.18

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.)10.19

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.)10.20

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.)10.21

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.)10.22

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.)10.23

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.)10.24

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.


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10.25

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.)10.26

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.)10.27

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.)10.28

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.)10.29

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.)10.30

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.)10.31

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.)10.32

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.)10.33

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.)10.34

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.)10.35

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.)10.36

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.)


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10.37

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.)10.38

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.)10.39

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.)10.40

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.)10.41

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.)10.42

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.)10.43

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.)10.44

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.)10.45

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.)10.46

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.)10.47

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.)10.48

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.)10.49

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.)10.50

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.)


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10.51

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.)10.52

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.)10.53

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.)10.54

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.)10.55

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.)10.56

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.)10.57

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.)10.58

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.)10.59

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.)10.60

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.)10.61

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.)10.62

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.)10.63

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.)31.1*

Certification of Chief Executive Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended.


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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 14, 2018.



FS Energy and Power FundBy:

/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)


71

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