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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 SEPTEMBER 30, 2017o

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 441,636,540 common shares of beneficial interest outstanding as of November 13, 2017.





---





Table of Contents



TABLE OF CONTENTS





PagePART IFINANCIAL INFORMATIONITEM 1.

FINANCIAL STATEMENTSConsolidated Balance Sheets as of September 30, 2017 (Unaudited) and December 31, 2016


1Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016


2Unaudited Consolidated Statements of Changes in Net Assets for the nine months ended September 30, 2017 and 2016


3Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016


4Consolidated Schedules of Investments as of September 30, 2017 (Unaudited) and December 31, 2016


5Notes to Unaudited Consolidated Financial Statements


21ITEM 2.

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


52ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


69ITEM 4.

CONTROLS AND PROCEDURES


70PART IIOTHER INFORMATIONITEM 1.

LEGAL PROCEEDINGS


71ITEM 1A.

RISK FACTORS


71ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


71ITEM 3.

DEFAULTS UPON SENIOR SECURITIES


71ITEM 4.

MINE SAFETY DISCLOSURES


71ITEM 5.

OTHER INFORMATION


71ITEM 6.

EXHIBITS


72SIGNATURES


78


---





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)





September 30, 2017
(Unaudited)

December 31,
2016AssetsInvestments, at fair valueNon-controlled/unaffiliated investments (amortized cost$3,552,508 and $2,959,314, respectively)

$
3,384,392

$
2,838,377Non-controlled/affiliated investments (amortized cost$883,774 and $977,010, respectively)


857,892


1,071,032Controlled/affiliated investments (amortized cost$27,164 and $26,664, respectively)





1,031​
​
​
​
​
​
​
​Total investments, at fair value (amortized cost$4,463,446 and $3,962,988, respectively)


4,242,284


3,910,440Cash


97,565


317,520Receivable for investments sold and repaid


18,288


22Income receivable


63,730


37,857Deferred financing costs


1,032


2,443Reimbursement due from sponsor(1)


7,095


Prepaid expenses and other assets


117


15​
​
​
​
​
​
​
​Total assets

$
4,430,111

$
4,268,297​
​
​
​
​
​
​
​LiabilitiesPayable for investments purchased

$
21,240

$
6,046Credit facilities payable (net of deferred financing costs of $1,988 and $1,045, respectively)(2)


1,218,012


547,620Repurchase agreement payable (net of deferred financing costs of $0 and $91, respectively)(2)





324,909Shareholder distributions payable


10,875


9,474Management fees payable


22,031


20,855Administrative services expense payable


1,054


1,477Interest payable


4,723


4,328Trustees' fees payable


244


250Other accrued expenses and liabilities


4,026


4,444​
​
​
​
​
​
​
​Total liabilities


1,282,205


919,403​
​
​
​
​
​
​
​Commitments and contingencies ($22,457 and $0, 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, 447,166,265 and 440,162,095 shares issued and outstanding, respectively


447


440Capital in excess of par value(4)


3,854,106


3,802,263Accumulated undistributed net realized gains (losses) on investments and gain/loss on foreign currency(4)


(457,695
)

(387,452
)Accumulated undistributed (distributions in excess of) net investment income(4)


(27,770
)

(13,738
)Net unrealized appreciation (depreciation) on investments and unrealized gain/loss on foreign currency


(221,182
)

(52,619
)​
​
​
​
​
​
​
​Total shareholders' equity


3,147,906


3,348,894​
​
​
​
​
​
​
​Total liabilities and shareholders' equity

$
4,430,111

$
4,268,297​
​
​
​
​
​
​
​Net asset value per common share at period end

$
7.04

$
7.61


(1)See
Note 4 for a discussion of expense reimbursements payable to the Company by its investment adviser and affiliates and recoupment of such amounts paid by
the Company to its 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
September 30,

Nine Months Ended
September 30,2017

2016

2017

2016Investment incomeFrom non-controlled/unaffiliated investments:Interest income

$
56,016

$
66,628

$
201,939

$
207,825Paid-in-kind interest income


5,704


8,665


16,461


18,119Fee income


7,056


2,624


37,419


5,251From non-controlled/affiliated investments:Interest income


28,660


9,727


53,525


30,872Paid-in-kind interest income


3,635


1,738


9,957


6,195Fee income








656


7,356​
​
​
​
​
​
​
​
​
​
​
​
​
​Total investment income


101,071


89,382


319,957


275,618​
​
​
​
​
​
​
​
​
​
​
​
​
​Operating expensesManagement fees


22,031


20,086


67,104


55,725Subordinated income incentive fees(1)








10,499


5,774Administrative services expenses


611


1,118


2,218


2,885Share transfer agent fees


658


750


2,066


2,134Accounting and administrative fees


384


384


1,216


994Interest expense(2)


13,648


8,921


35,454


27,200Trustees' fees


244


245


744


757Offering costs





755





1,378Other general and administrative expenses


563


1,392


2,672


3,624​
​
​
​
​
​
​
​
​
​
​
​
​
​Total operating expenses


38,139


33,651


121,973


100,471Less: Expense reimbursement from sponsor(3)


(7,095
)




(25,315
)

Add: Expense recoupment to sponsor(3)








2,858


​
​
​
​
​
​
​
​
​
​
​
​
​
​Net expenses


31,044


33,651


99,516


100,471​
​
​
​
​
​
​
​
​
​
​
​
​
​Net investment income


70,027


55,731


220,441


175,147​
​
​
​
​
​
​
​
​
​
​
​
​
​Realized and unrealized gain/lossNet realized gain (loss) on investments:Non-controlled/unaffiliated


7,271


(118,187
)

(70,244
)

(196,536
)Non-controlled/affiliated


(1,060
)

(1,699
)




572Net realized gain (loss) on foreign currency








1


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


13,176


194,873


(47,179
)

454,465Non-controlled/affiliated


(20,439
)

19,447


(119,904
)

147,788Controlled/affiliated





(3,837
)

(1,531
)

(17,037
)Net change in unrealized gain (loss) on foreign currency


(1
)

(2
)

51


12​
​
​
​
​
​
​
​
​
​
​
​
​
​Total net realized and unrealized gain (loss)


(1,053
)

90,595


(238,806
)

389,264​
​
​
​
​
​
​
​
​
​
​
​
​
​Net increase (decrease) in net assets resulting from operations

$
68,974

$
146,326

$
(18,365
)
$
564,411​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​Per share informationbasic and dilutedNet increase (decrease) in net assets resulting from operations (Earnings per Share)

$
0.16

$
0.35

$
(0.04
)
$
1.41​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​Weighted average shares outstanding


443,940,981


421,515,796


442,503,872


400,151,400​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)See
Note 2 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 investment adviser and affiliates and recoupment of such amounts paid by
the Company to its 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)





Nine Months Ended
September 30,2017

2016OperationsNet investment income

$
220,441

$
175,147Net realized gain (loss) on investments and foreign currency


(70,243
)

(195,964
)Net change in unrealized appreciation (depreciation) on investments


(168,614
)

585,216Net change in unrealized gain (loss) on foreign currency


51


12​
​
​
​
​
​
​
​Net increase (decrease) in net assets resulting from operations


(18,365
)

564,411​
​
​
​
​
​
​
​Shareholder distributions(1)Distributions from net investment income


(234,473
)

(211,989
)​
​
​
​
​
​
​
​Net decrease in net assets resulting from shareholder distributions


(234,473
)

(211,989
)​
​
​
​
​
​
​
​Capital share transactions(2)Issuance of common shares





313,739Reinvestment of shareholder distributions


140,580


132,928Repurchases of common shares


(88,730
)

(45,151
)​
​
​
​
​
​
​
​Net increase (decrease) in net assets resulting from capital share transactions


51,850


401,516​
​
​
​
​
​
​
​Total increase (decrease) in net assets


(200,988
)

753,938Net assets at beginning of period


3,348,894


2,417,861​
​
​
​
​
​
​
​Net assets at end of period

$
3,147,906

$
3,171,799​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Accumulated undistributed (distributions in excess of) net investment income(1)

$
(27,770
)
$
(22,818
)​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


(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)





Nine Months Ended
September 30,2017

2016Cash flows from operating activitiesNet increase (decrease) in net assets resulting from operations

$
(18,365
)
$
564,411Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating
activities:Purchases of investments


(1,591,008
)

(679,004
)Paid-in-kind interest


(26,418
)

(24,314
)Proceeds from sales and repayments of investments


1,064,392


425,906Net realized (gain) loss on investments


70,244


195,964Net change in unrealized (appreciation) depreciation on investments


168,614


(585,216
)Accretion of discount


(17,668
)

(11,514
)Amortization of deferred financing costs


3,160


2,355Amortization of deferred offering costs





1,378(Increase) decrease in receivable for investments sold and repaid


(18,266
)

13,497(Increase) decrease in income receivable


(25,873
)

(14,060
)(Increase) decrease in expense reimbursement due from sponsor(1)


(7,095
)

(Increase) decrease in prepaid expenses and other assets


(102
)

180Increase (decrease) in payable for investments purchased


15,194


8,075Increase (decrease) in management fees payable


1,176


1,748Increase (decrease) in subordinated income incentive fees payable





(12,048
)Increase (decrease) in administrative services expense payable


(423
)

(316
)Increase (decrease) in interest payable(2)


395


778Increase (decrease) in trustees' fees payable


(6
)

(9
)Increase (decrease) in other accrued expenses and liabilities


(418
)

(954
)​
​
​
​
​
​
​
​Net cash provided by (used in) operating activities


(382,467
)

(113,143
)​
​
​
​
​
​
​
​Cash flows from financing activitiesIssuance of common shares





320,654Reinvestment of shareholder distributions


140,580


132,928Repurchases of common shares


(88,730
)

(45,151
)Offering costs incurred





(3,600
)Shareholder distributions


(233,072
)

(212,009
)Borrowings under credit facilities(2)


858,263


Borrowings under repurchase agreement(2)





16Repayments of credit facilities(2)


(186,928
)

(175,638
)Repayments of repurchase facility(2)


(325,000
)

Deferred financing costs paid


(2,601
)

(1,607
)​
​
​
​
​
​
​
​Net cash provided by (used in) financing activities


162,512


15,593​
​
​
​
​
​
​
​Total increase (decrease) in cash


(219,955
)

(97,550
)Cash at beginning of period


317,520


368,867​
​
​
​
​
​
​
​Cash at end of period

$
97,565

$
271,317​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Supplemental disclosureState taxes paid

$
5

$
109​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Non-cash purchase of investments

$
(16,957
)
$
(309,593
)​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Non-cash sales of investments

$
16,957

$
309,593​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


(1)See
Note 4 for a discussion of expense reimbursements payable to the Company by its investment adviser and affiliates and recoupment of such amounts paid by
the Company to its investment adviser and affiliates.(2)See
Note 8 for a discussion of the Company's financing arrangements. During the nine months ended September 30, 2017 and 2016, the Company paid $26,945
and $15,751, respectively, in interest expense on the credit facilities and $4,954 and $8,316, 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 September 30, 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30.0%Abaco Energy Technologies LLC

(g)(j)

Service & Equipment

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


1.0
%
11/20/20

$
86,850

$
83,074

$
85,112Allied Wireline Services, LLC

(k)(l)

Service & Equipment

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


1.5
%
2/28/19


113,526


112,957


111,681Altus Power America, Inc.

(j)(p)

Power

L+750


1.5
%
9/30/21


77,378


77,378


78,442Altus Power America, Inc.

(e)(p)

Power

L+750


1.5
%
9/30/21


23,872


23,872


24,200BL Sand Hills Unit, L.P.

(l)

Upstream

Prime+650


3.5
%
12/17/17


40,807


35,439


30,809BL Sand Hills Unit, L.P.

(e)

Upstream

Prime+650


3.5
%
12/17/17


15,000


13,027


11,325Cactus Wellhead, LLC

(f)(j)

Service & Equipment

L+600


1.0
%
7/31/20


64,867


63,143


63,678Cimarron Energy Inc.



Service & Equipment

L+1150 (11.5% Max PIK)


1.0
%
12/15/19


24,811


24,811


21,710CITGO Holding, Inc.

(f)

Downstream

L+850


1.0
%
5/12/18


26,081


26,281


26,375Crestwood Holdings LLC

(f)

Midstream

L+800


1.0
%
6/19/19


29,273


29,341


29,237Eagle Midstream Canada Finance Inc.

(m)

Midstream

8.5%




9/27/20


175,000


175,000


175,000Gulf Finance, LLC

(f)

Midstream

L+525


1.0
%
8/25/23


18,531


18,056


17,593Industrial Group Intermediate Holdings, LLC



Service & Equipment

L+800


1.3
%
5/31/20


23,040


23,040


23,155JSS Holdings, Inc.

(l)

Service & Equipment

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


1.0
%
3/31/23


14,970


14,831


14,979JSS Holdings, Inc.

(e)

Service & Equipment

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


1.0
%
3/31/23


2,727


2,727


2,729Lusk Operating LLC

(r)(z)(aa)

Upstream

Prime+500 PIK (8.8% Max PIK)


3.3
%
10/31/17


28,997


27,164


MB Precision Holdings LLC



Service & Equipment

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


1.3
%
1/23/21


13,569


13,569


12,552Moxie Liberty LLC

(j)

Power

L+650


1.0
%
8/21/20


14,457


14,524


12,930Panda Temple Power, LLC

(j)(r)(z)

Power

L+625


1.0
%
3/6/22


9,923


9,782


6,930Panda Temple Power, LLC



Power

L+900


1.0
%
4/28/18


377


377


377Power Distribution, Inc.



Power

L+725


1.3
%
1/25/23


30,004


30,004


30,304Strike, LLC



Midstream

L+800


1.0
%
5/30/19


7,000


7,000


7,175Strike, LLC

(e)

Midstream

L+800


1.0
%
5/30/19


28,000


27,546


28,700Strike, LLC

(j)

Midstream

L+800


1.0
%
11/30/22


39,218


38,195


39,806Swift Worldwide Resources US Holdings Corp.

(j)

Service & Equipment

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


1.0
%
7/20/21


58,466


58,466


58,612UTEX Industries, Inc.

(f)

Service & Equipment

L+400


1.0
%
5/21/21


24,272


21,932


21,997Warren Resources, Inc.

(j)(l)(p)

Upstream

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


1.0
%
5/22/20


79,034


79,034


77,453Warren Resources, Inc.

(e)(p)

Upstream

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


1.0
%
5/22/20


5,590


5,590


5,478​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Senior Secured LoansFirst Lien
















1,056,160


1,018,339Unfunded Loan Commitments
















(72,762
)

(72,762
)​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Net Senior Secured LoansFirst Lien
















983,398


945,577​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


See notes to unaudited consolidated financial statements.

5

---



Table of Contents

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of September 30, 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27.7%Aethon United BR LP



Upstream

L+675


1.0
%
9/8/23

$
85,938

$
84,651

$
84,898Aethon United BR LP

(e)

Upstream

L+675


1.0
%
9/8/23


39,063


39,063


38,590Arena Energy, LP

(j)(k)

Upstream

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


1.0
%
1/24/21


106,579


106,579


104,010Ascent ResourcesMarcellus, LLC

(r)(z)

Upstream

L+750


1.0
%
8/4/21


10,000


9,874


725Brock Holdings III, Inc.

(j)(z)

Service & Equipment

Prime+725




3/16/18


29,605


29,646


15,617Chief Exploration & Development LLC

(f)(j)

Upstream

L+650


1.0
%
5/16/21


32,656


31,813


32,034Chisholm Oil and Gas Operating, LLC

(j)(k)(l)

Upstream

L+800


1.0
%
3/21/24


196,000


196,000


196,608Emerald Performance Materials, LLC

(f)

Downstream

L+775


1.0
%
8/1/22


11,819


11,761


11,838Fieldwood Energy LLC

(f)(j)

Upstream

L+713


1.3
%
9/30/20


33,591


34,107


16,124Granite Acquisition, Inc.

(f)

Power

L+725


1.0
%
12/19/22


18,694


18,315


18,764Gruden Acquisition, Inc.

(j)

Service & Equipment

L+850


1.0
%
8/18/23


15,000


14,440


14,281Horn Intermediate Holdings, Inc.

(j)

Service & Equipment

L+775


1.3
%
10/2/18


50,250


50,250


49,999Jonah Energy LLC



Upstream

L+650


1.0
%
5/12/21


36,523


35,555


36,535P2 Upstream Acquisition Co.

(f)(j)

Service & Equipment

L+800


1.0
%
4/30/21


42,399


42,025


40,703Penn Virginia Holding Corp.

(m)

Upstream

L+700


1.0
%
9/29/22


50,000


50,000


50,000Talos Production LLC

(k)(l)

Upstream

11.0%




4/3/22


43,250


40,364


40,925Titan Energy Operating, LLC

(k)(p)

Upstream

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


1.0
%
2/23/20


113,409


99,256


81,167UTEX Industries, Inc.

(f)(j)

Service & Equipment

L+725


1.0
%
5/20/22


85,192


79,022


76,864​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Senior Secured LoansSecond Lien
















972,721


909,682Unfunded Loan Commitment
















(39,063
)

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
















933,658


870,619​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


See notes to unaudited consolidated financial statements.

6

---



Table of Contents

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of September 30, 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 Bonds17.7%Black Swan Energy Ltd.

(j)(m)

Upstream

9.0%




1/20/24

$
90,000

$
90,000

$
88,875CITGO Holding, Inc.

(f)

Downstream

10.8%




2/15/20


9,000


9,053


9,765CSVC Acquisition Corp.

(f)

Service & Equipment

7.8%




6/15/25


30,608


30,608


30,034EP Energy LLC

(f)(h)(m)

Upstream

8.0%




2/15/25


54,880


52,791


42,806FourPoint Energy, LLC

(j)(k)(l)(p)

Upstream

9.0%




12/31/21


235,125


228,910


239,534Mirant Mid-Atlantic Trust

(f)(h)

Power

10.1%




12/30/28


31,752


33,747


30,304Ridgeback Resources Inc.

(k)(m)(p)

Upstream

12.0%




12/29/20


3,887


3,821


3,887Sunnova Energy Corp.

(j)(p)

Power

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




10/24/18


33,173


33,173


33,173Velvet Energy Ltd.

(j)(l)(m)

Upstream

9.0%




10/5/23


80,000


80,000


79,416​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Senior Secured Bonds
















562,103


557,794​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Subordinated Debt42.8%Alta Mesa Holdings, LP

(f)(h)(o)

Upstream

7.9%




12/15/24


20,425


20,425


22,072Archrock Partners, L.P.

(h)(m)(o)

Midstream

6.0%




4/1/21


8,555


7,661


8,427Archrock Partners, L.P.

(h)(m)

Midstream

6.0%




10/1/22


14,283


12,595


14,015Ascent Resources Utica Holdings, LLC

(f)(h)(j)

Upstream

10.0%




4/1/22


225,000


225,000


242,719Bellatrix Exploration Ltd.

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

Upstream

8.5%




5/15/20


60,120


59,159


56,269Brand Energy & Infrastructure Services, Inc.

(f)(h)

Service & Equipment

8.5%




7/15/25


44,759


44,759


48,508Canadian International Oil Corp.

(m)

Upstream

9.0%




7/10/22


100,000


97,082


98,500Canbriam Energy Inc.

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

Upstream

9.8%




11/15/19


115,200


112,990


118,440Compressco Partners, LP

(f)(h)(o)

Service & Equipment

7.3%




8/15/22


20,050


19,923


18,534Covey Park Energy LLC

(h)(o)

Upstream

7.5%




5/15/25


8,333


8,333


8,723Dynegy Finance I/II Inc.

(h)(m)(o)

Power

7.6%




11/1/24


24,542


23,825


25,462Eclipse Resources Corp.

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

Upstream

8.9%




7/15/23


62,745


57,307


64,296EP Energy LLC

(h)(m)(o)

Upstream

9.4%




5/1/20


48,970


44,786


40,974EP Energy LLC

(h)(m)

Upstream

6.4%




6/15/23


27,095


20,263


16,797EV Energy Partners, L.P.

(f)(h)(o)

Upstream

8.0%




4/15/19


48,814


39,274


17,756Extraction Oil & Gas Holdings, LLC

(h)(o)

Upstream

7.9%




7/15/21


37,500


37,500


39,609Genesis Energy, L.P.

(f)(m)

Midstream

6.8%




8/1/22


23,540


23,012


24,092


See notes to unaudited consolidated financial statements.

7

---



Table of Contents

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of September 30, 2017
(in thousands, except share amounts)



Portfolio Company(a)

Footnotes

Industry

Rate(b)

Floor

Maturity

Principal
Amount(c)

Amortized
Cost

Fair
Value(d)Genesis Energy, L.P.

(f)(m)

Midstream

6.0%




5/15/23

$
15,280

$
14,226

$
15,204Global Jet Capital Inc.



Service & Equipment

15.0% PIK (15.0% Max PIK)




1/30/25


818


818


832Global Jet Capital Inc.



Service & Equipment

15.0% PIK (15.0% Max PIK)




4/30/25


5,199


5,199


5,289Global Jet Capital Inc.



Service & Equipment

15.0% PIK (15.0% Max PIK)




9/3/25


1,074


1,074


1,093Global Jet Capital Inc.



Service & Equipment

15.0% PIK (15.0% Max PIK)




9/29/25


1,011


1,011


1,029Global Jet Capital Inc.



Service & Equipment

15.0% PIK (15.0% Max PIK)




12/2/26


889


889


905Global Partners L.P.

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

Midstream

6.3%




7/15/22


69,435


69,282


70,650Global Partners L.P.

(f)(m)

Midstream

7.0%




6/15/23


2,824


2,453


2,862Great Western Petroleum, LLC

(f)(h)(o)

Upstream

9.0%




9/30/21


35,830


35,710


36,385Gulfport Energy Corporation

(h)(m)

Upstream

6.0%




10/15/24


10,000


10,000


10,099Jupiter Resources Inc.

(h)(m)

Upstream

8.5%




10/1/22


76,125


72,252


54,671Lonestar Resources America Inc.

(f)(h)

Upstream

8.8%




4/15/19


24,200


24,033


23,625Martin Midstream Partners L.P.

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

Midstream

7.3%




2/15/21


24,660


24,018


25,210Moss Creek Resources, LLC

(l)

Upstream

L+800


1.5
%
4/7/22


65,000


65,000


65,796ONEOK, Inc.

(f)(m)

Midstream

7.5%




9/1/23


12,600


11,763


15,124SRC Energy Inc.

(j)(m)

Upstream

9.0%




6/14/21


40,000


40,000


41,700Tenrgys, LLC

(j)(k)

Upstream

L+900


2.5
%
12/23/18


75,000


75,000


55,688Whiting Petroleum Corp.

(h)(m)(o)

Upstream

5.0%




3/15/19


11,685


10,909


11,732Whiting Petroleum Corp.

(f)(m)

Upstream

5.8%




3/15/21


7,000


6,444


6,882WildHorse Resource Development Corporation

(h)(m)(o)

Upstream

6.9%




2/1/25


10,000


9,928


9,992Zachry Holdings, Inc.

(f)

Service & Equipment

7.5%




2/1/20


23,925


23,930


24,707​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Subordinated Debt
















1,357,833


1,344,668​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


See notes to unaudited consolidated financial statements.

8

---



Table of Contents

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of September 30, 2017
(in thousands, except share amounts)



Portfolio Company(a)

Footnotes

Industry







Number of
Shares

Amortized
Cost

Fair
Value(d)Equity/Other16.6%(n)Abaco Energy Technologies LLC, Common Equity

(r)

Service & Equipment









6,944,444

$
6,944

$
521Abaco Energy Technologies LLC, Preferred Equity

(r)

Service & Equipment









28,942,003


1,447


2,894Allied Downhole Technologies, LLC, Common Equity

(k)(q)(r)

Service & Equipment









7,431,113


7,223


2,229Allied Downhole Technologies, LLC, Warrants, 2/28/2019

(k)(q)(r)

Service & Equipment









5,344,680


1,865


1,603Altus Power America Holdings, LLC, Common Equity

(k)(p)(r)

Power









12,474,205


12,474


11,850Altus Power America Holdings, LLC, Preferred Equity

(k)(p)(s)

Power









25,792,683


25,793


25,825AP 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


895Ascent 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)

Upstream









N/A


5,180


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

(v)

Upstream









N/A


740


35Chisholm Oil and Gas, LLC, Series A Units

(i)(r)

Upstream









11,472,461


11,472


11,243Cimarron Energy Holdco Inc., Common Equity

(r)

Service & Equipment









3,675,487


3,323


Extraction Oil & Gas, Inc., Common Equity

(k)(r)

Upstream









1,140,637


11,250


17,554FourPoint Energy, LLC, Common Equity, Class C-II-A Units

(k)(p)(q)(r)

Upstream









66,000


66,000


22,770FourPoint Energy, LLC, Common Equity, Class D Units

(k)(p)(q)(r)

Upstream









12,374


8,176


4,300FourPoint Energy, LLC, Common Equity, Class E-II Units

(i)(p)(r)

Upstream









274,688


68,672


92,020FourPoint Energy, LLC, Common Equity, Class E-III Units

(i)(k)(p)(q)(r)

Upstream









222,750


55,688


76,292Global Jet Capital Holdings, LP, Preferred Equity

(r)

Service & Equipment









2,785,562


2,786


3,203Industrial Group Intermediate Holdings, LLC, Common Equity

(k)(q)(r)

Service & Equipment









472,755


473


733JSS Holdco, LLC, Net Profits Interest

(r)

Service & Equipment









N/A





67Lusk Operating LLC, Common Equity

(r)(u)(aa)

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)(p)(r)(w)

Upstream









9,599,928


58,985


55,635SandRidge Energy, Inc., Common Equity

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

Upstream









1,009,878


22,542


20,288Sunnova Energy Corp., Common Equity

(p)(r)

Power









6,667,368


25,026


34,737Sunnova Energy Corp., Preferred Equity

(p)(r)

Power









578,468


3,080


3,077Swift Worldwide Resources Holdco Limited, Common Equity

(m)(r)(x)

Service & Equipment









3,750,000


6,029


1,875Synergy Offshore LLC, Preferred Equity

(k)(r)(y)(z)

Upstream









71,131


93,009


48,654TE Holdings, LLC, Common Equity

(i)(r)

Upstream









2,225,950


18,921


6,678TE Holdings, LLC, Preferred Equity

(l)(r)

Upstream









1,475,531


14,734


14,018Titan Energy, LLC, Common Equity

(k)(p)(r)

Upstream









555,496


17,554


2,500Total Safety Holdings, LLC, Common Equity

(j)(r)

Service & Equipment









12,897


4,707


4,595Warren Resources, Inc., Common Equity

(l)(p)(r)

Upstream









4,415,749


20,754


15,014White Star Petroleum Holdings, LLC, Common Equity

(i)(r)

Upstream









4,867,084


4,137


3,894​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Equity/Other
















626,454


523,626​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​TOTAL INVESTMENTS134.8%















$
4,463,446


4,242,284​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​LIABILITIES IN EXCESS OF OTHER ASSETS(34.8%)



















(1,094,378
)​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​NET ASSETS100.0%


















$
3,147,906​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


See notes to unaudited consolidated financial statements.

9

---



Table of Contents

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)

As of September 30, 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
September 30, 2017, the three-month London Interbank Offered Rate, or LIBOR or 'L,' was 1.33% and the U.S. Prime Lending Rate, or Prime, was 4.25%. PIK means paid-in-kind.(c)Denominated
in U.S. dollars, unless otherwise noted.(d)Fair
value determined by the Company's board of trustees (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 September 30, 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
September 30, 2017, 71.7% 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 September 30, 2017, the fair value of securities rehypothecated by BNP was $241,320.(p)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 September 30, 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 nine months ended September 30,
2017:


See notes to unaudited consolidated financial statements.

10

---



Table of Contents

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of September 30, 2017
(in thousands, except share amounts)



Portfolio Company

Fair Value at
December 31,
2016

Purchases,
Paid-in-Kind
Interest and
Other

Sales,
Repayments
and Other

Accretion of
Discount

Net Change
in Unrealized
Appreciation
(Depreciation)

Fair Value at
September 30,
2017

Interest
Income(3)

Fee
Income(3)Senior Secured LoansFirst LienAltus Power America, Inc.(1)

$
73,294

$
5,433

$


$


$
43

$
78,770

$
5,326

$
Sunnova Asset Portfolio 5 Holdings, LLC


151,148





(149,652
)

2,217


(3,713
)




6,992


Warren Resources, Inc.(2)


78,437


597








(1,693
)

77,341


6,651


Senior Secured LoansSecond LienTitan Energy Operating, LLC


85,427


9,000


(332
)

3,454


(16,382
)

81,167


23,114


Senior Secured BondsFourPoint Energy, LLC


240,709








1,051


(2,226
)

239,534


16,294


Ridgeback Resources Inc.


3,887








12


(12
)

3,887


353


Sunnova Energy Corp.





33,173











33,173


2,089


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


12,474











(624
)

11,850





Altus Power America Holdings, LLC, Preferred Equity


23,982


1,811








32


25,825


2,663


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


31,845











(9,075
)

22,770





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


6,032











(1,732
)

4,300





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


125,670











(33,650
)

92,020





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


107,477











(31,185
)

76,292





Ridgeback Resources Inc., Common Equity


58,985











(3,350
)

55,635





Sunnova Energy Corp., Common Equity


36,204











(1,467
)

34,737





Sunnova Energy Corp., Preferred Equity


3,141











(64
)

3,077





Titan Energy, LLC, Common Equity


13,332











(10,832
)

2,500





Warren Resources, Inc., Common Equity


18,988











(3,974
)

15,014





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

$
1,071,032

$
50,014

$
(149,984
)
$
6,734

$
(119,904
)
$
857,892

$
63,482

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


(1)Security
includes a partially unfunded commitment with an amortized cost of $23,872 and a fair value of $24,200.(2)Security
includes a partially unfunded commitment with an amortized cost of $5,590 and a fair value of $5,478.(3)Interest
and fee income presented for the full nine months ended September 30, 2017.


See notes to unaudited consolidated financial statements.

11

---



Table of Contents

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of September 30, 2017
(in thousands, except share amounts)






(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 September 30, 2017.(x)Investment
denominated in British pounds. Amortized cost and fair value are converted into U.S. dollars as of September 30, 2017.(y)Security
held within EP Synergy Investments, Inc., a wholly-owned subsidiary of Foxfields Funding LLC.(z)Security
was on non-accrual status as of September 30, 2017.(aa)Under
the 1940 Act, the Company generally is deemed to "control" a portfolio company if it owns more than 25% of the portfolio company's voting securities or it has
the power to exercise control over the management or policies of such portfolio company. As of September 30, 2017, the Company held an investment 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 nine months ended September 30, 2017:


Portfolio Company

Fair Value at
December 31,
2016

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
September 30,
2017Senior Secured LoansFirst LienLusk Operating LLC

$
1,031

$
1,500

$








$
(2,531
)

Equity/OtherLusk Operating LLC, Common Equity








(1,000
)







1,000


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

$
1,031

$
1,500

$
(1,000
)






$
(1,531
)

​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​




See notes to unaudited consolidated financial statements.

12

---



Table of Contents

FS Energy and Power Fund

Consolidated Schedule of Investments
As of December 31, 2016
(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27.2%Abaco Energy Technologies LLC

(g)(i)(j)

Service & Equipment

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


1.0
%
11/20/20

$
60,455

$
58,038

$
45,795Allied Wireline Services, LLC

(g)(i)(k)(l)

Service & Equipment

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


1.5
%
2/28/19


108,920


108,099


106,877Alon USA Partners, L.P.

(g)(i)(j)(m)

Downstream

L+800


1.3
%
11/26/18


11,063


11,199


11,035Altus Power America, Inc.

(j)(p)

Power

L+750


1.5
%
9/30/21


71,945


71,945


73,294Altus Power America, Inc.

(e)(p)

Power

L+750


1.5
%
9/30/21


29,305


29,305


29,854AP Exhaust Acquisition, LLC

(g)(l)

Service & Equipment

L+775


1.5
%
1/16/21


15,811


15,811


14,309BL Sand Hills Unit, L.P.

(l)

Upstream

Prime+650


3.5
%
12/17/17


40,821


35,451


38,321BL Sand Hills Unit, L.P.

(e)

Upstream

Prime+650


3.5
%
12/17/17


15,000


13,027


14,081Cactus Wellhead, LLC

(g)(i)(j)

Service & Equipment

L+600


1.0
%
7/31/20


56,392


54,715


51,458Cimarron Energy Inc.

(g)

Service & Equipment

L+775, 3.8% PIK (3.8% Max PIK)


1.0
%
12/15/19


23,664


23,664


24,019CITGO Holding, Inc.

(f)

Downstream

L+850


1.0
%
5/12/18


16,822


16,947


17,109Crestwood Holdings LLC

(f)(g)

Midstream

L+800


1.0
%
6/19/19


29,703


29,794


29,146EnergySolutions, LLC

(i)(j)

Service & Equipment

L+575


1.0
%
5/29/20


18,193


17,965


18,375Gulf Finance, LLC

(f)(i)

Midstream

L+525


1.0
%
8/25/23


18,953


18,407


19,095Industrial Group Intermediate Holdings, LLC

(i)

Service & Equipment

L+800


1.3
%
5/31/20


22,240


22,240


22,573Lusk Operating LLC

(r)(z)(aa)

Upstream

Prime+500 PIK (8.8% Max PIK)


3.3
%
1/31/17


27,497


25,664


1,031MB Precision Holdings LLC

(g)

Service & Equipment

L+725, 1.5% PIK (1.5% Max PIK)


1.3
%
1/23/20


12,853


12,853


12,355Moxie Liberty LLC

(g)(j)

Power

L+650


1.0
%
8/21/20


32,155


32,241


31,794P2 Upstream Acquisition Co.

(f)

Service & Equipment

L+400


1.0
%
10/30/20


5,101


4,801


4,865Panda Temple Power, LLC

(j)

Power

L+625


1.0
%
3/6/22


9,825


9,677


8,744Panda Temple Power II, LLC

(g)(j)

Power

L+600


1.3
%
4/3/19


27,531


27,761


25,604ProPetro Services, Inc.

(i)

Service & Equipment

L+625


1.0
%
9/30/19


10,839


10,833


9,837Strike, LLC

(e)

Midstream

L+800


1.0
%
5/30/19


35,000


34,482


34,475Strike, LLC

(i)(j)(bb)

Midstream

L+800


1.0
%
11/30/22


52,500


50,937


51,975Sunnova Asset Portfolio 5 Holdings, LLC

(j)(l)(p)

Power

12.0%, 0.0% PIK (12.0% Max PIK)




11/14/21


149,652


147,435


151,148Swift Worldwide Resources US Holdings Corp.

(g)(j)

Service & Equipment

L+1100


1.0
%
7/20/21


58,614


58,614


58,614UTEX Industries, Inc.

(f)

Service & Equipment

L+400


1.0
%
5/21/21


5,432


4,275


5,085Warren Resources, Inc.

(k)(p)

Upstream

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


1.0
%
5/22/20


78,437


78,437


78,437Warren Resources, Inc.

(e)(p)

Upstream

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


1.0
%
5/22/20


5,590


5,590


5,590​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Senior Secured LoansFirst Lien
















1,030,207


994,895Unfunded Loan Commitments
















(82,404
)

(82,404
)​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Net Senior Secured LoansFirst Lien
















947,803


912,491​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


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, 2016
(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26.1%Alison US LLC

(f)(j)(m)

Service & Equipment

L+850


1.0
%
8/29/22

$
23,722

$
22,591

$
23,011Ameriforge Group Inc.

(g)

Service & Equipment

L+750


1.3
%
12/21/20


35,950


36,352


5,707AP Exhaust Acquisition, LLC



Service & Equipment

12.0% PIK (12.0% Max PIK)




9/28/21


3,763


3,763


3,279Arena Energy, LP

(i)(k)

Upstream

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


1.0
%
1/24/21


103,410


103,410


103,927Ascent ResourcesMarcellus, LLC



Upstream

L +750


1.0
%
8/4/21


10,000


9,874


1,325Ascent ResourcesUtica, LLC

(g)(j)(k)(l)

Upstream

L+950


1.5
%
9/30/18


285,257


284,490


287,753Brock Holdings III, Inc.

(g)(j)

Service & Equipment

L+825


1.8
%
3/16/18


29,605


29,699


28,273Chief Exploration & Development LLC

(f)(i)

Upstream

L+650


1.3
%
5/16/21


36,576


35,139


35,935Emerald Performance Materials, LLC

(f)

Downstream

L+775


1.0
%
8/1/22


11,819


11,754


11,834EP Energy, LLC

(f)(m)

Upstream

L+875


1.0
%
6/30/21


17,209


17,379


18,047Fieldwood Energy LLC



Upstream

L+713


1.3
%
9/30/20


41,047


41,788


29,246Granite Acquisition, Inc.

(f)

Power

L+725


1.0
%
12/19/22


20,150


19,718


19,445Gruden Acquisition, Inc.

(j)

Service & Equipment

L+850


1.0
%
8/18/23


15,000


14,372


11,875Horn Intermediate Holdings, Inc.

(g)(j)

Service & Equipment

L+775


1.3
%
10/2/18


50,250


50,250


50,250Jonah Energy LLC

(f)(i)

Upstream

L+650


1.0
%
5/12/21


34,293


33,325


32,579Neff Rental LLC

(f)(j)

Service & Equipment

L+625


1.0
%
6/9/21


33,789


33,089


33,657Oxbow Carbon LLC

(g)

Midstream

L+700


1.0
%
1/17/20


15,000


14,927


14,738P2 Upstream Acquisition Co.

(f)(g)(j)

Service & Equipment

L+800


1.0
%
4/30/21


34,099


34,144


31,243Titan Energy Operating, LLC

(k)(p)

Upstream

2.0%, L+900 PIK (L+900 Max PIK)


1.0
%
2/23/20


104,409


87,134


85,427UTEX Industries, Inc.

(f)(j)

Service & Equipment

L+725


1.0
%
5/20/22


36,192


36,227


25,696W3 Co.

(g)(j)

Service & Equipment

L+800


1.3
%
9/13/20


14,795


14,943


6,695WP CPP Holdings, LLC

(g)(j)

Service & Equipment

L+775


1.0
%
4/30/21


14,680


14,394


13,927​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Senior Secured LoansSecond Lien
















948,762


873,869​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


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, 2016
(in thousands, except share amounts)



Portfolio Company(a)

Footnotes

Industry

Rate(b)

Floor

Maturity

Principal
Amount(c)

Amortized
Cost

Fair
Value(d)Senior Secured Bonds11.9%Calpine Corp.

(f)(m)

Power

5.3%




6/1/26

$
19,800

$
19,809

$
19,508Cheniere Corpus Christi Holdings, LLC

(f)

Midstream

7.0%




6/30/24


4,000


4,134


4,357CITGO Holding, Inc.

(f)

Downstream

10.8%




2/15/20


9,000


9,063


9,645EP Energy LLC

(h)(m)

Upstream

8.0%




11/29/24


10,000


10,000


10,780FourPoint Energy, LLC

(j)(k)(l)(p)

Upstream

9.0%




12/31/21


235,125


227,859


240,709Mirant Mid-Atlantic Trust

(f)(h)

Power

10.1%




12/30/28


31,752


33,838


26,936Ridgeback Resources Inc.

(k)(m)(p)

Upstream

12.0%




12/29/20


3,887


3,809


3,887Velvet Energy Ltd.

(j)(l)(m)

Upstream

9.0%




10/5/23


80,000


80,000


81,792​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Senior Secured Bonds
















388,512


397,614​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Subordinated Debt31.2%Alta Mesa Holdings, LP

(h)

Upstream

7.9%




12/15/24


20,425


20,425


21,242Archrock Partners, L.P.

(h)(m)

Midstream

6.0%




4/1/21


8,555


7,505


8,384Archrock Partners, L.P.

(h)(m)

Midstream

6.0%




10/1/22


14,283


12,400


13,881Bellatrix Exploration Ltd.

(f)(h)(m)

Upstream

8.5%




5/15/20


53,590


52,560


52,753Brand Energy & Infrastructure Services, Inc.

(f)(h)

Service & Equipment

8.5%




12/1/21


43,311


42,479


44,502Calpine Corp.

(f)(m)

Power

5.8%




1/15/25


5,100


5,093


4,941Canbriam Energy Inc.

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

Upstream

9.8%




11/15/19


115,200


112,341


121,536Compressco Partners, LP

(f)(h)(m)

Service & Equipment

7.3%




8/15/22


20,050


19,908


18,972Crestwood Equity Partners L.P.

(f)(m)

Midstream

6.1%




3/1/22


5,500


5,500


5,641Dynegy Finance I/II Inc.

(f)(m)

Power

7.6%




11/1/24


22,542


21,968


20,894Dynegy Finance I/II Inc.

(f)(m)

Power

8.0%




1/15/25


12,000


11,995


11,243Eclipse Resources Corp.

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

Upstream

8.9%




7/15/23


59,745


53,883


62,334EP Energy LLC

(h)(m)

Upstream

9.4%




5/1/20


19,970


16,006


18,440EV Energy Partners, L.P.

(h)(m)

Upstream

8.0%




4/15/19


48,814


36,060


34,609Extraction Oil & Gas Holdings, LLC

(h)(o)

Upstream

7.9%




7/15/21


37,500


37,500


40,313Genesis Energy, L.P.

(f)(m)

Midstream

6.8%




8/1/22


23,540


22,949


24,473


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, 2016
(in thousands, except share amounts)



Portfolio Company(a)

Footnotes

Industry

Rate(b)

Floor

Maturity

Principal
Amount(c)

Amortized
Cost

Fair
Value(d)Genesis Energy, L.P.

(f)(m)

Midstream

6.0%




5/15/23

$
15,280

$
14,116

$
15,599GenOn Energy, Inc.

(h)

Power

7.9%




6/15/17


4,000


3,945


2,868GenOn Energy, Inc.

(h)

Power

9.9%




10/15/20


32,698


34,010


22,419Global Jet Capital Inc.



Service & Equipment

15.0% PIK (15.0% Max PIK)




1/30/25


732


732


727Global Jet Capital Inc.



Service & Equipment

15.0% PIK (15.0% Max PIK)




4/30/25


4,649


4,649


4,620Global Jet Capital Inc.



Service & Equipment

15.0% PIK (15.0% Max PIK)




9/3/25


961


961


955Global Jet Capital Inc.



Service & Equipment

15.0% PIK (15.0% Max PIK)




9/29/25


904


904


899Global Jet Capital Inc.



Service & Equipment

15.0% PIK (15.0% Max PIK)




12/2/26


795


795


795Global Partners L.P.

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

Midstream

6.3%




7/15/22


69,435


69,264


66,831Global Partners L.P.

(h)(m)(o)

Midstream

7.0%




6/15/23


2,824


2,419


2,744Great Western Petroleum, LLC

(f)(h)

Upstream

9.0%




9/30/21


23,830


23,692


24,932Gulfport Energy Corp.

(f)(m)

Upstream

6.0%




10/15/24


10,000


10,000


10,205Jupiter Resources Inc.

(h)(m)

Upstream

8.5%




10/1/22


71,125


67,772


61,760Laredo Petroleum, Inc.

(f)(m)

Upstream

7.4%




5/1/22


25,384


25,093


26,375Lonestar Resources America Inc.

(h)

Upstream

8.8%




4/15/19


21,500


21,566


19,780Martin Midstream Partners L.P.

(f)(h)(m)

Midstream

7.3%




2/15/21


29,660


29,102


29,438NRG Energy, Inc.

(f)(m)

Power

7.3%




5/15/26


28,000


27,823


27,965ONEOK, Inc.

(f)(h)(m)

Midstream

7.5%




9/1/23


28,000


26,887


31,910SandRidge Energy, Inc.

(l)(m)(r)

Upstream

0.0%




10/4/20


10,550


14,060


13,245Synergy Resources Corp.

(j)(m)

Upstream

9.0%




6/14/21


40,000


40,000


41,700Talos Production LLC

(h)

Upstream

9.8%




2/15/18


43,250


43,249


24,004Tenrgys, LLC

(j)

Upstream

L+900


2.5
%
12/23/18


75,000


75,000


73,125Whiting Petroleum Corp.

(h)(m)

Upstream

5.0%




3/15/19


11,685


10,552


11,739Zachry Holdings, Inc.

(f)

Service & Equipment

7.5%




2/1/20


23,925


23,934


24,374​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Subordinated Debt
















1,049,097


1,043,167​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


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, 2016
(in thousands, except share amounts)



Portfolio Company(a)

Footnotes

Industry







Number of
Shares

Amortized
Cost

Fair
Value(d)Equity/Other20.4%(n)Abaco Energy Technologies LLC, Common Equity

(r)

Service & Equipment









6,944,444

$
6,944

$
347Abaco Energy Technologies LLC, Preferred Equity

(r)

Service & Equipment









28,942,003


1,447


1,447Allied Downhole Technologies, LLC, Common Equity

(k)(q)(r)

Service & Equipment









7,431,113


7,223


5,945Allied Downhole Technologies, LLC, Warrants, 2/28/2019

(k)(q)(r)

Service & Equipment









5,344,680


1,865


4,276Altus Power America Holdings, LLC, Common Equity

(p)(r)

Power









12,474,205


12,474


12,474Altus Power America Holdings, LLC, Preferred Equity

(p)(s)

Power









23,981,707


23,982


23,982AP Exhaust Holdings, LLC, Common Equity

(k)(q)(r)

Service & Equipment









811


811


41Ascent Resources Utica Holdings, LLC, Common Equity

(r)(t)

Upstream









148,692,909


44,700


33,307BL Sand Hills Unit, L.P., Net Profits Interest

(r)(v)

Upstream









N/A


5,180


570BL Sand Hills Unit, L.P., Overriding Royalty Interest

(v)

Upstream









N/A


740


212Cimarron Energy Holdco Inc., Common Equity

(r)

Service & Equipment









3,201,631


2,991


1,921Extraction Oil & Gas, Inc. Common Equity

(k)(r)

Upstream









1,140,637


11,250


22,858Fortune Creek Co-Invest I L.P., LP Interest

(m)(r)(w)(z)

Midstream









N/A


16,697


553FourPoint Energy, LLC, Common Equity, Class C-II-A Units

(k)(p)(q)(r)

Upstream









66,000


66,000


31,845FourPoint Energy, LLC, Common Equity, Class D Units

(k)(p)(q)(r)

Upstream









12,374


8,176


6,032FourPoint Energy, LLC, Common Equity, Class E-II Units

(p)(r)(cc)

Upstream









274,688


68,672


125,670FourPoint Energy, LLC, Common Equity, Class E-III Units

(k)(p)(q)(r)(cc)

Upstream









222,750


55,688


107,477Global Jet Capital Holdings, LP, Preferred Equity

(r)

Service & Equipment









2,785,562


2,786


2,786Industrial Group Intermediate Holdings, LLC, Common Equity

(k)(q)(r)

Service & Equipment









472,755


473


827Lusk Operating LLC, Common Equity

(r)(u)(aa)

Upstream









2,000


1,000


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

(k)(q)(r)

Service & Equipment









490,213


490


98Ridgeback Resources Inc., Common Equity

(k)(l)(m)(p)(r)(w)

Upstream









9,599,928


58,985


58,985SandRidge Energy, Inc., Common Equity

(h)(m)(o)(r)

Upstream









447,491


11,187


10,538Summit Midstream Partners, LLC, Preferred Equity

(l)

Midstream









24,830


24,830


24,955Sunnova Energy Corp., Common Equity

(p)(r)

Power









6,667,368


25,026


36,204Sunnova Energy Corp., Preferred Equity

(p)(r)

Power









578,468


3,080


3,141Swift Worldwide Resources Holdco Limited, Common Equity

(m)(r)(x)

Service & Equipment









3,750,000


6,029


1,875Synergy Offshore LLC, Preferred Equity

(k)(y)

Upstream









66,250


83,988


89,040TE Holdings, LLC, Common Equity

(r)(cc)

Upstream









2,225,950


18,921


16,695TE Holdings, LLC, Preferred Equity

(r)

Upstream









1,475,531


14,734


22,133Titan Energy, LLC, Common Equity

(k)(p)(r)

Upstream









555,496


17,554


13,332Warren Resources, Inc., Common Equity

(l)(p)(r)

Upstream









4,415,749


20,754


18,988White Star Petroleum Holdings, LLC, Common Equity

(r)(cc)

Upstream









4,867,084


4,137


4,745​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Equity/Other
















628,814


683,299​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​TOTAL INVESTMENTS116.8%















$
3,962,988


3,910,440​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​LIABILITIES IN EXCESS OF OTHER ASSETS(16.8%)



















(561,546
)​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​NET ASSETS100.0%


















$
3,348,894​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


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, 2016
(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, 2016, the three-month London Interbank Offered Rate, or LIBOR or 'L,' was 1.00% and the U.S. Prime Lending Rate, or Prime, was 3.75%. PIK means paid-in-kind.(c)Denominated
in U.S. dollars, unless otherwise noted.(d)Fair
value determined by the Company's board of trustees (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)Security
or portion thereof held within Energy Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility
with Natixis, New York Branch (see Note 8).(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
or portion thereof held within Wayne Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility
with Wells Fargo Securities, LLC (see Note 8).(j)Security
or portion thereof held within Gladwyne Funding LLC and is pledged as collateral supporting the obligations outstanding under the repurchase
transaction 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,
2016, 77.1% 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, 2016, the fair value of securities rehypothecated by BNP was $106,488.


See notes to unaudited consolidated financial statements.

18

---



Table of Contents

FS Energy and Power Fund

Consolidated Schedule of Investments (Continued)
As of December 31, 2016
(in thousands, except share amounts)






(p)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, 2016, the Company held investments in portfolio companies of which it is deemed to be an "affiliated person" but is not deemed to
"control". The following table presents certain information with respect to such portfolio companies for the year ended December 31, 2016:  Portfolio Company

Fair Value at
December 31,
2015

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
December 31,
2016

Interest
Income

Fee
IncomeSenior Secured LoansFirst LienAltus Power America, Inc.




$
88,820

$
(16,875
)






$
1,349

$
73,294

$
5,835


Sunnova Asset Portfolio 5 Holdings, LLC




$
258,383

$
(114,519
)
$
1,991

$
566

$
4,727

$
151,148

$
21,050

$
7,356Warren Resources, Inc.




$
78,437













$
78,437

$
11,477

$
335Senior Secured LoansSecond LienTitan Energy Operating, LLC




$
85,609




$
1,525




$
(1,707
)
$
85,427

$
5,685


Senior Secured BondsFourPoint Energy, LLC

$
222,069




$
(55,688
)
$
1,535




$
72,793

$
240,709

$
24,737


Ridgeback Resources Inc.




$
3,809










$
78

$
3,887

$
12


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




$
12,474













$
12,474





Altus Power America Holdings, LLC, Preferred Equity




$
23,982













$
23,982

$
1,554


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

$
46,200













$
(14,355
)
$
31,845





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

$
8,724













$
(2,692
)
$
6,032





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




$
68,672










$
56,998

$
125,670





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




$
55,688










$
51,789

$
107,477





Ridgeback Resources Inc., Common Equity




$
58,985













$
58,985





Sunnova Energy Corp., Common Equity




$
25,026










$
11,178

$
36,204





Sunnova Energy Corp., Preferred Equity




$
46,196

$
(43,122
)



$
6

$
61

$
3,141





Titan Energy, LLC, Common Equity




$
17,554










$
(4,222
)
$
13,332





Warren Resources, Inc., Common Equity




$
20,754










$
(1,766
)
$
18,988








(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 the Company.(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, 2016.(x)Investment
denominated in British pounds. Amortized cost and fair value are converted into U.S. dollars as of December 31, 2016.(y)Security
held within EP Synergy Investments, Inc., a wholly-owned subsidiary of Foxfields Funding LLC.(z)Security
was on non-accrual status as of December 31, 2016.


See notes to unaudited consolidated financial statements.

19

---



Table of Contents

FS Energy and Power Fund

Consolidated Schedule of Investments (Continued)
As of December 31, 2016
(in thousands, except share amounts)






(aa)Under
the 1940 Act, the Company generally is deemed to "control" a portfolio company if it owns more than 25% of the portfolio company's voting securities or it has
the power to exercise control over the management or policies of such portfolio company. As of December 31, 2016, the Company held an investment 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 year ended December 31, 2016:  Portfolio Company

Fair Value at
December 31,
2015

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
December 31,
2016Senior Secured LoansFirst LienLusk Operating LLC




$
17,414










$
(16,383
)
$
1,031Senior Secured BondsSunnova Asset Portfolio 5 Holdings, LLC

$
244,349




$
(244,349
)










Equity/OtherLusk Operating LLC, Common Equity




















Sunnova Holdings, LLC, Common Equity

$
29,561




$
(29,561
)













(bb)Position
or portion thereof unsettled as of December 31, 2016.(cc)Security
held within FS Energy Investments, LLC, a wholly-owned subsidiary of the Company.


See notes to unaudited consolidated financial statements.

20

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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 upon raising gross proceeds in excess of $2,500, or the minimum offering requirement, from sales of its common shares of beneficial interest, or common shares, in
its continuous public offering to persons who were not affiliated with the Company or the Company's investment adviser, FS Investment Advisor, LLC, or FS Advisor, a private investment firm that
is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, or the Advisers Act, and an affiliate of the Company.

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 September 30, 2017, 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 September 30, 2017. 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.

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, 2016 included in the Company's annual report on
Form 10-K. Operating results for the nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.
The December 31, 2016 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, 2016. 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

21

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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)

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:The Company entered into an investment advisory and administrative services agreement with FS Advisor,
dated as of
April 28, 2011, which was amended on August 10, 2012, and which, as amended, is referred to herein as the investment advisory and administrative services agreement. Pursuant to the terms
of the investment advisory and administrative services 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.

Subordinated Income Incentive Fee:Pursuant to the investment advisory and administrative services 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.

Reclassifications:Certain amounts in the unaudited consolidated financial statements for the three and nine months ended
September 30, 2016
may have been reclassified to conform to the classifications used to prepare the unaudited consolidated financial statements for the three and nine months ended September 30, 2017. These
reclassifications had no material impact on the Company's consolidated financial position, results of operations or cash flows as previously reported.

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 2. Summary of Significant Accounting Policies (Continued)

Revenue Recognition:In May 2014, the FASB issued ASU No. 2014-09,Revenue from Contracts with
Customers, which provides for revenue recognition based on the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a
customer. When it becomes effective, the new revenue recognition guidance in ASU No. 2014-09 will replace most revenue recognition guidance under existing GAAP. In 2016, the FASB issued
additional guidance that clarified, amended and technically corrected prior 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. For public entities,
the new standards are effective during the interim and annual periods beginning after December 15, 2017, with early adoption permitted. The standards permit the use of either the retrospective
or cumulative effect transition method. The Company is currently evaluating the applicability of the new revenue recognition guidance to the Company's revenue recognition policies and assessing the
impact of this guidance on the Company's consolidated financial statements.

Note 3. Share Transactions

Below is a summary of transactions with respect to the Company's common shares during the nine months ended September 30, 2017 and 2016:



Nine Months Ended September 30,2017

2016Shares

Amount

Shares

AmountGross Proceeds from Offering




$



46,441,062

$
343,786Reinvestment of Distributions


18,821,761


140,580


19,503,968


132,928​
​
​
​
​
​
​
​
​
​
​
​
​
​Total Gross Proceeds


18,821,761


140,580


65,945,030


476,714Commissions and Dealer Manager Fees











(30,047
)​
​
​
​
​
​
​
​
​
​
​
​
​
​Net Proceeds to Company


18,821,761


140,580


65,945,030


446,667Share Repurchase Program


(11,817,591
)

(88,730
)

(6,701,687
)

(45,151
)​
​
​
​
​
​
​
​
​
​
​
​
​
​Net Proceeds from Share Transactions


7,004,170

$
51,850


59,243,343

$
401,516​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​


Public Offering of Shares

In November 2016, the Company closed its continuous public offering of common shares to new investors. The Company sold 449,543,498 common
shares (as adjusted for share distributions) for gross proceeds of $4,362,119 in its continuous public offering, including shares issued pursuant to its distribution reinvestment plan during that
period. Following the closing of its continuous public offering, the Company has continued to issue shares pursuant to its distribution reinvestment plan. As of November 13, 2017, the Company
had raised total gross proceeds of $4,570,880, including $200 of seed capital contributed by the principals of FS Advisor in December 2010 and $20,004 in proceeds raised from the principals of FS
Advisor, other individuals and entities affiliated with FS Advisor, certain members of the Company's board of trustees and certain individuals and entities affiliated with GSO Capital
Partners LP, or GSO, the Company's investment sub-adviser, in a private placement conducted in April 2011 (see Note 4).

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

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 3. Share Transactions (Continued)

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 (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.

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 3. Share Transactions (Continued)

The
following table provides information concerning the Company's repurchases of common shares pursuant to its share repurchase program during the nine months ended September 30,
2017 and 2016:



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(1)

Aggregate
Consideration
for Repurchased
SharesFiscal 2016December 31, 2015

January 6, 2016


2,716,924


100
%

0.73
%
$
6.750

$
18,339March 31, 2016

April 6, 2016


2,196,742


100
%

0.56
%
$
6.345


13,938June 30, 2016

July 6, 2016


1,788,021


100
%

0.43
%
$
7.200


12,874​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total




6,701,687










$
45,151​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Fiscal 2017December 31, 2016

January 3, 2017


2,239,480


100
%

0.51
%
$
7.700

$
17,244March 31, 2017

April 17, 2017


4,587,306


100
%

1.03
%
$
7.750


35,552June 30, 2017

July 3, 2017


4,990,805


100
%

1.12
%
$
7.200


35,934​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total




11,817,591










$
88,730​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)On
October 13, 2016, and in connection with the closing of its continuous public offering, the Company amended the terms of its share repurchase program,
which was first effective for the Company's quarterly repurchase offer for the fourth quarter of 2016 to provide that shares repurchased under the program would be repurchased at a price determined as
described above. Prior to amending the share repurchase program, the Company offered to repurchase common shares at a price equal to 90% of the offering price in effect on the date of repurchase.


On
October 2, 2017, the Company repurchased 7,682,421 common shares (representing 100% of common shares tendered for repurchase and 1.72% of the shares outstanding as of such
date) at $7.15 per share for aggregate consideration totaling $54,929.

Note 4. Related Party Transactions

Compensation of the Investment Adviser and Dealer Manager

Pursuant to the investment advisory and administrative services agreement, FS Advisor is entitled to an annual base management fee of 2.0% 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 investment advisory and administrative services agreement on July 18, 2011, upon commencement of the Company's investment operations. Base
management fees are paid on a quarterly basis in arrears. See Note 2 for a discussion of the capital gains and subordinated income incentive fees that FS Advisor may be entitled to under the
investment advisory and administrative services agreement.

Pursuant
to an investment sub-advisory agreement between FS Advisor and GSO, or the sub-advisory agreement, GSO will receive 50% of all management and incentive fees payable to FS
Advisor under the investment advisory and administrative services 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

25

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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 (Continued)

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.

Under
the investment advisory and administrative services agreement, the Company, either directly or through reimbursement to FS Advisor or its affiliates, was responsible for its
organization and offering costs in an amount up to 1.5% of gross proceeds raised in the Company's continuous public offering. Organization and offering costs primarily included legal, accounting,
printing and other expenses relating to the Company's continuous public offering, including costs associated with technology integration between the Company's systems and those of its selected
broker-dealers, marketing expenses, salaries and direct expenses of FS Advisor's personnel, employees of its affiliates and others while engaged in registering and marketing the Company's common
shares, which included the development of marketing materials and presentations, training and educational meetings, and generally coordinating the marketing process for the Company.

Prior
to satisfaction of the minimum offering requirement and for a period of time thereafter, FS Investments funded certain of the Company's organization and offering costs. Following
this period, the Company paid certain of its organization and offering costs directly and reimbursed FS Advisor for offering costs incurred by FS Advisor on the Company's behalf, including marketing
expenses, salaries and other direct expenses of FS Advisor's personnel and employees of its affiliates while engaged in registering and marketing the Company's common shares. Organization and offering
costs funded directly by FS Investments were recorded by the Company as a contribution to capital. The offering costs were offset against capital in excess of par value on the consolidated financial
statements and the
organization costs were charged to expense as incurred by the Company. All other offering costs, including costs incurred directly by the Company, amounts reimbursed to FS Advisor for ongoing offering
costs and any reimbursements paid to FS Investments for organization and offering costs previously funded, were recorded as a reduction of capital. Commencing January 1, 2016, offering costs
incurred by the Company were deferred and amortized as an expense over twelve months. Following the closing of the Company's continuous public offering to new investors in November 2016, all deferred
offering costs were expensed.

The
dealer manager for the Company's continuous public offering was FS Investment Solutions, LLC (formerly FS2 Capital Partners, LLC), or FS Investment
Solutions, which is one of the Company's affiliates. Under the dealer manager agreement among the Company, FS Advisor and FS Investment Solutions, or the dealer manager agreement, FS Investment
Solutions was entitled to receive sales commissions and dealer manager fees in connection with the sale of common shares in the Company's continuous public offering, all or a portion of which were
re-allowed to selected broker-dealers and financial representatives. The dealer manager agreement terminated in connection with the closing of the Company's continuous public offering in November
2016.

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)

The
following table describes the fees and expenses accrued under the investment advisory and administrative services agreement and the dealer manager agreement during the three and nine
months ended September 30, 2017 and 2016:



Three Months Ended
September 30,

Nine Months Ended
September 30,Related Party

Source Agreement

Description

2017

2016

2017

2016FS Advisor

Investment Advisory and Administrative Services Agreement

Base Management Fee(1)

$
22,031

$
20,086

$
67,104

$
55,725FS Advisor

Investment Advisory and Administrative Services Agreement

Subordinated Incentive Fee on Income(2)







$
10,499

$
5,774FS Advisor

Investment Advisory and Administrative Services Agreement

Administrative Services Expenses(3)

$
611

$
1,118

$
2,218

$
2,885FS Advisor

Investment Advisory and Administrative Services Agreement

Offering Costs(4)




$
950




$
3,320FS Advisor

Expense Support and Conditional Reimbursement Agreement

Expense Recoupment(5)







$
2,858

$
FS Investment Solutions

Dealer Manager Agreement

Dealer Manager Fee(6)




$
1,704




$
5,822


(1)During
the nine months ended September 30, 2017, $58,207 in base management fees were paid to FS Advisor and $7,721 in base management fees were applied to
offset the liability of FS Investments under the expense reimbursement agreement (see "Expense Reimbursement" below). During the nine months ended September 30, 2016, $53,977 in
base management fees were paid to FS Advisor. As of September 30, 2017, $22,031 in base management fees were payable to FS Advisor, and it is intended that $7,095 of such fees will be applied
to offset the liability of FS Investments under the expense reimbursement agreement and the balance, $14,936, will be paid to FS Advisor.(2)During
the nine months ended September 30, 2017, $10,499 in subordinated incentive fees on income were applied to offset the liability of FS Investments under
the expense reimbursement agreement (see "Expense Reimbursement" below). See footnote (1) above for an additional offset to the liability of FS Investments under the expense
reimbursement agreement. During the nine months ended September 30, 2016, $17,822 of subordinated incentive fees on income were paid to FS Advisor. As of September 30, 2017, the Company
did not have any subordinated incentive fee on income payable to FS Advisor.(3)During
the nine months ended September 30, 2017 and 2016, $2,061 and $2,784, 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 $2,641 and $3,201 in
administrative services expenses to FS Advisor during the nine months ended September 30, 2017 and 2016, respectively.(4)During
the nine months ended September 30, 2016, the Company incurred offering costs of $3,600, of which $3,320 related to reimbursements to FS Advisor for
offering costs incurred on the Company's behalf, including marketing expenses, salaries and other direct expenses of FS Advisor's personnel and employees of its affiliates while engaged in registering
and marketing the Company's common shares.(5)During
the nine months ended September 30, 2017 and 2016, the Company accrued $2,858 and $0, respectively, for expense recoupments payable to FS Advisor under
the expense reimbursement agreement (see "Expense Reimbursement" below). During the nine months ended September 30, 2017 and 2016, $2,858 and $0, respectively, of expense
recoupments were paid to FS Advisor. As of September 30, 2017, the Company did not have any expense recoupments payable to FS Advisor.(6)Represents
aggregate dealer manager fees retained by FS Investment Solutions and not re-allowed to selected broker-dealers or financial representatives.


27

---



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)

Capital Contribution by FS Advisor and GSO

In December 2010, Michael C. Forman and David J. Adelman, the principals of FS Advisor, contributed an aggregate of $200 to purchase 22,444
common shares (as adjusted for share distributions) at $8.91 per share, which represents the initial public offering price (as adjusted for share distributions), net of selling commissions and dealer
manager fees. The principals have agreed not to tender these common shares for repurchase as long as FS Advisor remains the Company's investment adviser.

In
April 2011, pursuant to a private placement, Messrs. Forman and Adelman agreed to purchase, through affiliated entities controlled by each of them, 224,444 additional common
shares (as adjusted for share distributions) at $8.91 per share (as adjusted for share distributions). The principals have agreed not to tender these common shares for repurchase as long as FS Advisor
remains the Company's investment adviser. In connection with the same private placement, certain members of the Company's board of trustees and other individuals and entities affiliated with FS
Advisor agreed to purchase 1,459,320 common shares (as adjusted for share distributions), and certain individuals and entities affiliated with GSO agreed to purchase 561,111 common shares (as adjusted
for share distributions), in each case at a price of $8.91 per share (as adjusted for share distributions). In connection with the private placement, the Company issued an aggregate of 2,244,875
common shares (as adjusted for share distributions) for aggregate proceeds of $20,004, upon satisfaction of the minimum offering requirement on July 18, 2011. As of November 13, 2017,
the Company has issued an aggregate of 6,164,991 common shares (as adjusted for share distributions) for aggregate gross proceeds of $51,381 to members of its board of trustees and individuals and
entities affiliated with FS Advisor and GSO, including common shares sold to Messrs. Forman and Adelman in December 2010 and common shares sold in the private placement conducted in April 2011.

Potential Conflicts of Interest

FS Advisor's senior management team is comprised of substantially the same personnel as the senior management teams of the investment advisers
to certain other BDCs, open-and closed-end management investment companies and real estate investment trusts sponsored by FS Investments, or the Fund Complex. As a result, such personnel provide
investment advisory services to certain other funds or products in the Fund Complex and such personnel may serve in similar or other capacities for the investment advisers to future investment
vehicles in the Fund Complex. While none of the investment advisers are currently providing investment advisory services to clients other than the funds in the Fund Complex, any, or all, may do so in
the future. In the event that FS Advisor or its management team undertakes to provide investment advisory services to other clients in the future, it intends to allocate investment opportunities in a
fair and equitable manner consistent with the Company's investment objectives and strategies, if necessary, so that the Company will not be disadvantaged in relation to any other client of FS Advisor
or its management team. For additional information regarding potential conflicts of interest, see the Company's annual report on Form 10-K for the year ended December 31, 2016.

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, the SEC granted exemptive relief permitting the Company, subject to the
satisfaction of certain conditions, to co-invest in certain privately negotiated

28

---



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)

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. The Company believes this relief has and may continue to
enhance its ability to further its investment objectives and strategy. The Company believes this relief may also increase favorable investment opportunities for the Company, in part, by allowing it to
participate in larger investments, together with the Company's co-investment affiliates, than would be available to it if such relief had not been obtained. Because the Company did not seek exemptive
relief to engage in co-investment transactions with its investment sub-adviser, GSO, and its affiliates, it will continue to be permitted to co-invest with GSO and its affiliates only in accordance
with existing regulatory guidance (e.g., where price is the only negotiated term).

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

29

---



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)

common
shares represented by "other operating expenses" during the fiscal year in which such expense support payment from FS Investments was made (provided, however, that this clause (B) shall
not apply to any reimbursement payment which relates to an expense support payment from FS Investments made during the same fiscal year) and (ii) the Company will not reimburse FS Investments
for expense support payments made by FS Investments if the aggregate amount of distributions per share declared by the Company in such calendar quarter is less than the aggregate amount of
distributions per share declared by the Company in the calendar quarter in which FS Investments made the expense support payment to which such reimbursement relates. The Company is not obligated to
pay interest on the payments it receives from FS Investments. "Other operating expenses" means the Company's total "operating expenses" (as defined below), excluding base management fees, incentive
fees, organization and offering expenses, financing fees and costs, interest expense, brokerage commissions and extraordinary expenses. "Operating expenses" means all operating costs and expenses
incurred, as determined in accordance with GAAP for investment companies.

The
Company or FS Investments may terminate the expense reimbursement agreement at any time. The specific amount of expenses reimbursed by FS Investments, if any, will be determined at
the end of each quarter. Upon termination of the expense reimbursement agreement by FS Investments, FS Investments will be required to fund any amounts accrued thereunder as of the date of
termination. Similarly, the Company's conditional obligation to reimburse FS Investments pursuant to the terms of the expense reimbursement agreement shall survive the termination of such agreement by
either party.

During
the nine months ended September 30, 2017, the Company accrued $25,315 for expense reimbursements that FS Investments has agreed to pay, including $7,095 in expense
reimbursements
accrued for the three months ended September 30, 2017. As discussed in the footnotes to the table above, the Company offset $7,721 in management fees payable and $10,499 in subordinated income
incentive fees payable by the Company to FS Advisor during the nine months ended September 30, 2017. As of September 30, 2017, the Company had $7,095 of reimbursements due from FS
Investments, which the Company expects to offset against management fees payable by the Company to FS Advisor.

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 nine months ended September 30, 2017, the Company paid $2,858 in expense recoupments to FS Investments. As of September 30, 2017, $22,457 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 September 30, 2017 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, 2020​
​
​
​
​
​
​
​
​
​
​
​Total

$
22,457​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​


(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 the $2,858 accrued during the nine months ended September 30, 2017 for expense recoupments payable to FS Investments.


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 4. Related Party Transactions (Continued)

FS
Investments is controlled by the Company's chairman, president and chief executive officer, Michael C. Forman, and the Company's vice-chairman, David J. Adelman. There can be no
assurance that the expense reimbursement agreement will remain in effect or that FS Investments will reimburse any portion of the Company's expenses in future quarters.

FS Benefit Trust

On May 30, 2013, FS Benefit Trust was formed as a Delaware statutory trust for the purpose of awarding equity incentive compensation to
employees of FS Investments and its affiliates. During the nine months ended September 30, 2016, FS Benefit Trust purchased $142 of the Company's common shares at a price equal to 90% of the
public offering price in effect on the applicable purchase date.

Note 5. Distributions

The following table reflects the cash distributions per share that the Company declared and paid on its common shares during the nine months ended September 30, 2017 and 2016:



DistributionFor the Three Months Ended

Per Share

AmountFiscal 2016March 31, 2016

$
0.17713

$
66,720June 30, 2016


0.17713


70,788September 30, 2016


0.17713


74,481​
​
​
​
​
​
​
​Total

$
0.53139

$
211,989​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Fiscal 2017March 31, 2017

$
0.17713

$
77,984June 30, 2017


0.17713


78,374September 30, 2017


0.17713


78,115​
​
​
​
​
​
​
​Total

$
0.53139

$
234,473​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


Effective
November 30, 2016, and subject to applicable legal restrictions and the sole discretion of the Company's board of trustees, the Company authorizes, declares and pays
regular cash distributions on a monthly basis. On September 29, 2017 and October 30, 2017, the Company's board of trustees declared regular monthly cash distributions for October 2017
and November 2017, respectively. 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 in
the amount of $0.059042 per share. 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

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 5. Distributions (Continued)

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.

For
the nine months ended September 30, 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 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. 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, 10% of the aggregate amount of distributions
paid during the nine months ended September 30, 2017 would have been funded from offering proceeds or borrowings.

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 5. Distributions (Continued)

The
following table reflects the sources of the cash distributions on a tax basis that the Company paid on its common shares during the nine months ended September 30, 2017 and
2016:



Nine Months Ended September 30,2017

2016Source of Distribution

Distribution
Amount

Percentage

Distribution
Amount

PercentageOffering proceeds

$





$



Borrowings











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


210,425


90
%

209,564


99
%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


1,591


0
%

2,425


1
%Expense reimbursement from sponsor


22,457


10
%




​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
234,473


100
%
$
211,989


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


(1)During
the nine months ended September 30, 2017 and 2016, 82.5% and 81.5%, respectively, of the Company's gross investment income on a tax basis was
attributable to cash income earned and 0.3% and 5.0%, respectively, was attributable to non-cash income earned. In addition, 14.0% and 10.6%, respectively, was attributed to paid-in-kind, or PIK,
interest and 3.2% and 2.9%, respectively, was attributed to accretion of discount during the nine months ended September 30, 2017 and 2016.


The
Company's net investment income on a tax basis for the nine months ended September 30, 2017 and 2016 was $232,882 and $198,465, respectively. As of September 30, 2017
and December 31, 2016, the Company had $0 and $242, respectively, of undistributed ordinary income on a tax basis and distributions received from investments in portfolio companies.

During
the nine months ended September 30, 2017, certain investments in the portfolio were restructured or experienced defaults due to the continued depressed prices of oil and
natural gas, and the Company may experience additional restructurings or defaults in the future. These restructurings and defaults may have an impact on the level of income received by the Company. As
a result, the Company is continuing to evaluate the current distribution rate payable on its common shares and there can be no assurance that the Company will be able to maintain a monthly cash
distribution amount of $0.059042 per common share.

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 and prepayment fees recognized upon prepayment of loans from income for GAAP purposes to realized gains for tax purposes, the impact of consolidating certain subsidiaries for purposes of
computing GAAP-basis net investment income but not for purposes of computing tax-basis net investment income and income subject to tax but not recorded for GAAP purposes.

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 5. Distributions (Continued)

The
following table sets forth a reconciliation between GAAP-basis net investment income and tax-basis net investment income during the nine months ended September 30, 2017 and
2016:



Nine Months Ended
September 30,2017

2016GAAP-basis net investment income

$
220,441

$
175,147Reclassification of unamortized original issue discount and prepayment fees


(20,176
)

(3,503
)GAAP versus tax-basis impact of consolidation of certain subsidiaries


21,443


11,343Income subject to tax not recorded for GAAP


11,190


14,118Other miscellaneous differences


(16
)

1,360​
​
​
​
​
​
​
​Tax-basis net investment income

$
232,882

$
198,465​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


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 September 30, 2017 and December 31, 2016, the components of accumulated earnings (deficit) on a tax basis were as follows:



September 30, 2017
(Unaudited)

December 31, 2016Distributable ordinary income, net of distributions received from investments in portfolio companies

$


$
242Accumulated capital losses(1)


(421,056
)

(367,653
)Other temporary differences


(205
)

79Net unrealized appreciation (depreciation) on investments and unrealized gain/loss on foreign currency(2)


(358,621
)

(115,266
)​
​
​
​
​
​
​
​Total

$
(779,882
)
$
(482,598
)​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


(1)Net
capital losses may be carried forward indefinately, and their character is retained as short-term or long-term losses. As of September 30, 2017, the
Company had short-term and long-term capital loss carryforwards available to offset future realized capital gains of $55,975 and $365,081, respectively.(2)As
of September 30, 2017 and December 31, 2016, the gross unrealized appreciation on the Company's investments and unrealized gain on foreign currency
was $101,522 and $224,411, respectively. As of September 30, 2017 and December 31, 2016, the gross unrealized depreciation on the Company's investments and unrealized loss on foreign
currency was $460,143 and $339,677, respectively.


The
aggregate cost of the Company's investments for federal income tax purposes totaled $4,624,706 and $4,014,678 as of September 30, 2017 and December 31, 2016,
respectively. The aggregate net unrealized appreciation (depreciation) on a tax basis was $(358,621) and $(115,266) as of September 30, 2017 and December 31, 2016, respectively.

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 5. Distributions (Continued)

As
of September 30, 2017 and December 31, 2016, the Company had deferred tax liabilities of $0 and $46,278, respectively, resulting from unrealized appreciation on
investments held by the Company's wholly-owned taxable subsidiaries and deferred tax assets of $88,136 and $81,116, respectively, resulting from unrealized depreciation on investments, and net
operating and capital losses of the Company's wholly-owned taxable subsidiaries. As of September 30, 2017 and December 31, 2016, 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 $88,136 and $34,838, respectively.
For the three and nine months ended September 30, 2017, the Company did not record a provision for taxes related to 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 September 30, 2017 and December 31, 2016:



September 30, 2017
(Unaudited)

December 31, 2016Amortized
Cost(1)

Fair Value

Percentage
of Portfolio

Amortized
Cost(1)

Fair Value

Percentage
of PortfolioSenior Secured LoansFirst Lien

$
983,398

$
945,577


22
%
$
947,803

$
912,491


23
%Senior Secured LoansSecond Lien


933,658


870,619


21
%

948,762


873,869


22
%Senior Secured Bonds


562,103


557,794


13
%

388,512


397,614


10
%Subordinated Debt


1,357,833


1,344,668


32
%

1,049,097


1,043,167


27
%Equity/Other


626,454


523,626


12
%

628,814


683,299


18
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
4,463,446

$
4,242,284


100
%
$
3,962,988

$
3,910,440


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 September 30, 2017, the Company held investments in one portfolio company of which it is deemed to "control." As of September 30, 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
(p) and (aa) to the unaudited consolidated schedule of investments as of September 30, 2017 in this quarterly report on Form 10-Q.

As
of December 31, 2016, the Company held investments in one portfolio company of which it is deemed to "control." As of December 31, 2016, 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
(p) and (aa) to the consolidated schedule of investments as of December 31, 2016 in this quarterly report on Form 10-Q.

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 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 September 30, 2017, the Company had six senior secured loan investments with aggregate unfunded commitments of $111,825 and five equity/other investments with
aggregate unfunded commitments of $16,357. As of September 30, 2017, these unfunded equity/other investments were Altus Power America Holdings, LLC, preferred equity, BL Sand Hills
Unit, L.P., net profits interest, BL Sand Hills Unit, L.P., overriding royalty interest, Chisholm Oil and Gas, LLC and Synergy Offshore LLC. As of December 31, 2016,
the Company had four senior secured loan investments with aggregate unfunded commitments of $82,404 and four equity/other investments with aggregate unfunded commitments of $14,942. As of
December 31, 2016, these unfunded equity/other investments were Altus Power America Holdings, LLC, preferred equity, BL Sand Hills Unit, L.P., net profits interest, BL Sand Hills
Unit, L.P., overriding royalty interest and Synergy Offshore 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 September 30,
2017 and December 31, 2016:



September 30, 2017
(Unaudited)

December 31, 2016Industry Classification

Fair Value

Percentage
of Portfolio

Fair Value

Percentage
of PortfolioUpstream

$
2,674,312


63
%
$
2,270,769


58
%Midstream


445,549


11
%

343,713


9
%Downstream


47,978


1
%

49,623


1
%Power


313,957


7
%

523,153


13
%Service & Equipment


760,488


18
%

723,182


19
%​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
4,242,284


100
%
$
3,910,440


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.

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 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 September 30, 2017 and December 31, 2016, the Company's investments were categorized as follows in the fair value hierarchy:



Valuation Inputs

September 30, 2017
(Unaudited)

December 31, 2016Level 1Price quotations in active markets

$
40,342

$
46,728Level 2Significant other observable inputs





Level 3Significant unobservable inputs


4,201,942


3,863,712​
​
​
​
​
​
​
​Total

$
4,242,284

$
3,910,440​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


The
Company's investments consist primarily of debt investments that are either acquired directly from the issuer or traded on an over-the-counter market for institutional investors.
Debt investments, for which broker quotes are not 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 debt. 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.

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 7. Fair Value of Financial Instruments (Continued)

The
following is a reconciliation for the nine months ended September 30, 2017 and 2016 of investments for which significant unobservable inputs (Level 3) were used in
determining fair value:



For the Nine Months Ended September 30, 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)


3,769


5,850


1,034


7,015





17,668Net realized gain (loss)


(4,219
)

(42,952
)

801


(8,916
)

(14,958
)

(70,244
)Net change in unrealized appreciation (depreciation)


(2,509
)

11,854


(13,411
)

(7,235
)

(139,572
)

(150,873
)Purchases


316,317


417,845


240,254


596,374


25,820


1,596,610Paid-in-kind interest


9,074


12,282


361


950


3,751


26,418Sales and repayments


(289,346
)

(408,129
)

(68,859
)

(286,687
)

(28,328
)

(1,081,349
)Net transfers in or out of Level 3

















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

$
945,577

$
870,619

$
557,794

$
1,344,668

$
483,284

$
4,201,942​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​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

$
(2,208
)
$
(16,657
)
$
(8,966
)
$
(41,985
)
$
(51,054
)
$
(120,870
)​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​






For the Nine Months Ended September 30, 2016Senior
Secured
Loans
First Lien

Senior
Secured
Loans
Second Lien

Senior
Secured
Bonds

Subordinated
Debt

Equity/
Other

TotalFair value at beginning of period

$
929,790

$
923,402

$
323,948

$
579,740

$
312,618

$
3,069,498Accretion of discount (amortization of premium)


3,352


1,528


1,133


4,145


1,356


11,514Net realized gain (loss)


(18,725
)

(72,127
)

(10,043
)

(95,075
)

6


(195,964
)Net change in unrealized appreciation (depreciation)


27,892


180,197


81,938


246,276


50,080


586,383Purchases


164,903


178,067


44,470


296,960


286,643


971,043Paid-in-kind interest


11,782


6,526


468


784


4,754


24,314Sales and repayments


(237,149
)

(298,810
)

(78,995
)

(40,920
)

(79,625
)

(735,499
)Net transfers in or out of Level 3

















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

$
881,845

$
918,783

$
362,919

$
991,910

$
575,832

$
3,731,289​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​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

$
(464
)
$
107,781

$
18,520

$
182,255

$
68,922

$
377,014​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


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 7. Fair Value of Financial Instruments (Continued)

The
valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements as of September 30, 2017 and December 31, 2016 were as
follows:



Type of Investment

Fair Value at
September 30, 2017
(Unaudited)

Valuation Technique(1)

Unobservable Input

Range

Weighted
AverageSenior Secured LoansFirst Lien

$
458,588

Market Comparables

Market Yield (%)

7.8% - 18.3%

11.2
%EBITDA Multiples (x)

4.8x - 8.0x

5.8xProved Reserves Multiples (Mmboe)

$6.0 - $6.5

$6.4PV-10 Multiples (x)

0.4x - 0.5x

0.5x175,000



Cost

100% - 100%

100.0
%311,989

Market Quotes

Indicative Dealer Quotes

68.0% - 103.0%

97.4
%Senior Secured LoansSecond Lien


557,134

Market Comparables

Market Yield (%)

8.9% - 16.9%

10.2
%EBITDA Multiples (x)

6.0x - 6.5x

6.3x50,000



Cost

100% - 100%

100.0
%15,617

Other(2)

Other(2)

N/A

N/A247,868

Market Quotes

Indicative Dealer Quotes

6.3% - 100.8%

92.2
%Senior Secured Bonds


411,712

Market Comparables

Market Yield (%)

8.3% - 10.3%

9.0
%Production Multiples (Mboe/d)

$42,250.0 - $44,750.0

$43,500.0Proved Reserves Multiples (Mmboe)

$10.0 - $11.0

$10.5PV-10 Multiples (x)

0.7x - 0.8x

0.8xEBITDA Multiples (x)

4.8x - 5.3x

5.0x33,173

Other(2)

Other(2)

N/A

N/A112,909

Market Quotes

Indicative Dealer Quotes

77.9% - 108.8%

90.7
%Subordinated Debt


172,332

Market Comparables

Market Yield (%)

7.3% - 14.8%

9.0
%Production Multiples (Mboe/d)

$27,500.0 - $30,000.0

$28,750.0PV-10 Multiples (x)

0.9x - 1.0x

1.0xEBITDA Multiples (x)

7.0x - 7.5x

7.3xDiscount Rate (%)

22.5% - 27.5%

25.0
%1,172,336

Market Quotes

Indicative Dealer Quotes

36.3% - 120.1%

99.4
%Equity/Other


442,877

Market Comparables

EBITDA Multiples (x)

4.8x - 16.0x

8.6xProduction Multiples (Mboe/d)

$42,250.0 - $50,000.0

$44,729.9Proved Reserves Multiples (Mmboe)

$4.3 - $11.3

$9.9Production Multiples (MMcfe/d)

$5,750 - $6,750.0

$6,250.0Proved Reserves Multiples (Bcfe)

$1.7 - $1.9

$1.8PV-10 Multiples (x)

0.4x - 3.3x

2.4xCapacity Multiple ($/kW)

$2,500.0 - $2,750.0

$2,625.0Market Yield (%)

13.8% - 14.3%

14.0
%35

Discounted Cash Flow

Discount Rate (%)

7.5% - 21.8%

20.6
%67

Option Valuation Model

Volatility (%)

30.0% - 30.0%

30.0
%15,014

Other(2)

Other(2)

N/A

N/A25,291

Market Quotes

Indicative Dealer Quotes

$2.6 - $367.5

$70.8​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
4,201,942​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​


(1)Investments
using a market quotes valuation technique were valued by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant
period end, which were provided by an independent third-party pricing service and screened for validity by such service. For investments utilizing a market comparables valuation technique, a
significant increase (decrease) in the market yield, in isolation, would result in a significantly lower (higher) fair value measurement, and a significant increase (decrease) in any of the valuation
multiples, in isolation, would result in a significantly higher (lower) fair value measurement. For investments utilizing a discounted cash flow valuation technique, a significant increase (decrease)
in the discount rate, in isolation, would result in a significantly lower (higher) fair value measurement. For investments utilizing an option valuation model valuation technique, a significant
increase (decrease) in the volatility, in isolation, would result in a significantly higher (lower) fair value measurement.(2)Fair
valued based on expected outcome of proposed corporate transactions, the expected value of the liquidation preference of the investment or other factors.


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 7. Fair Value of Financial Instruments (Continued)



Type of Investment

Fair Value at December 31, 2016

Valuation Technique(1)

Unobservable Input

Range

Weighted
AverageSenior Secured Loans
First Lien

$
581,550

Market Comparables

Market Yield (%)

8.0% - 17.8%

11.5
%1,024

Other(2)

Other(2)

N/A

N/A329,917

Market Quotes

Indicative Dealer Quotes

72.0% - 102.0%

93.7
%Senior Secured Loans
Second Lien


530,636

Market Comparables

Market Yield (%)

8.8% - 22.9%

12.7
%343,233

Market Quotes

Indicative Dealer Quotes

12.0% - 105.4%

89.6
%Senior Secured Bonds


326,388

Market Comparables

Market Yield (%)

7.5% - 9.0%

8.0
%Production Multiples (Mboe/d)

$45,000.0 - $50,000.0

$47,500.0Proved Reserves Multiples (Mmboe)

$14.5 - $15.0

$14.8EBITDA Multiples (x)

6.8x - 7.3x

7.0xPV-10 Multiples (x)

0.8x - 0.9x

0.9x71,226

Market Quotes

Indicative Dealer Quotes

84.2% - 109.3%

96.6
%Subordinated Debt


122,821

Market Comparables

Market Yield (%)

7.5% - 15.3%

11.2
%920,346

Market Quotes

Indicative Dealer Quotes

54.5% - 125.5%

97.7
%Equity/Other


594,404

Market Comparables

EBITDA Multiples (x)

4.5x - 16.3x

9.4xProduction Multiples (Mmb/d)

$2,225.0 - $55,000.0

$41,329.5Proved Reserves Multiples (Mmboe)

$0.7 - $15.0

$8.9PV-10 Multiples (x)

0.3x - 2.1x

0.7xCapacity Multiple ($/kW)

$2,375.0 - $2,875.0

$2,625.0Undeveloped Acreage Multiple ($/acre)

$8,000.0 - $10,000.0

$9,000.0Market Yield (%)

10.0% - 14.3%

12.2
%Discounted Cash Flow

Discount Rate (%)

9.3% - 24.8%

23.7
%3,339

Other(2)

Other(2)

N/A

N/A38,828

Market Quotes

Indicative Dealer Quotes

$7.0 - $16.0

$10.7​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
3,863,712​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​


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


Note 8. Financing Arrangements

The following tables present a summary of information with respect to the Company's outstanding financing arrangements as of September 30, 2017 and December 31, 2016. 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, 2016 and the additional disclosure set forth in this Note 8.



As of September 30, 2017 (Unaudited)Facility(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%(2)


300,000




June 27, 2018(3)Deutsche Bank Credit Facility

Revolving

L+2.05%


340,000




June 11, 2018Fortress Facility

Term

L+5.00%(4)


155,000




November 6, 2020Goldman Facility

Term

L+3.72%


425,000




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





$
1,220,000

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


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)




(1)The carrying amounts outstanding under the facilities approximate their fair value.(2)Beginning on January 2, 2017, borrowings under the BNP facility began to accrue interest at a rate equal to LIBOR plus 1.35%.(3)As described below, the BNP facility generally is terminable upon 270 days' notice by either party. As of September 30, 2017, neither
Berwyn Funding nor BNP had provided notice of its intent to terminate the facility.(4)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%.




As of December 31, 2016Facility(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+1.10%(2)


113,737


186,263

September 27, 2017(3)Deutsche Bank Credit Facility

Revolving

L+2.05%(4)


200,000


115,000

June 11, 2017Fortress Facility

Term

L+5.00%(5)


155,000




November 6, 2020Goldman Repurchase Financing

Repurchase

L+3.38%(6)


325,000




September 15, 2018Natixis Credit Facility

Revolving

CP+2.25%


50,328




July 11, 2023Wells Fargo Credit Facility

Revolving

L+2.50% to 2.75%


29,600


30,400

September 9, 2018​
​
​
​
​
​
​
​
​
​
​
​
​Total





$
873,665

$
431,663​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​


(1)The
carrying amounts outstanding under the facilities approximate their fair value.(2)Beginning
on January 2, 2017, borrowings under the BNP facility will accrue interest at a rate equal to LIBOR plus 1.35%.(3)As
described below, the BNP facility generally is terminable upon 270 days' notice by either party. As of December 31, 2016, neither Berwyn Funding nor
BNP had provided notice of its intent to terminate the BNP facility.(4)Prior
to June 11, 2016, borrowings under the Deutsche Bank credit facility accrued interest at a rate equal to LIBOR plus 1.80% per annum. Beginning on
June 11, 2016, borrowings under the Deutsche Bank credit facility accrue interest at a rate equal to LIBOR plus 2.05% per annum.(5)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%.(6)Prior
to September 21, 2016, borrowings under the Goldman repurchase financing accrued interest at a rate equal to LIBOR plus 2.75% per annum. Beginning on
September 21, 2016, borrowings under the Goldman repurchase financing accrue interest at a rate equal to LIBOR plus 3.38% per annum.


41

---



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 and nine months ended September 30, 2017 and 2016, the components of total interest expense for the Company's financing arrangements were as follows:



Three Months Ended September 30,2017

2016Facility(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

$
96

$
15

$
111

$
97

$
8

$
105BNP Facility


1,825





1,825


810





810Deutsche Bank Credit Facility


2,285


298


2,583


1,609


276


1,885Fortress Facility


2,401


68


2,469


1,495


68


1,563Goldman Facility


5,425


148


5,573








Goldman Repurchase Financing











2,879


33


2,912Natixis Credit Facility


64





64


460


262


722Wells Fargo Credit Facility


62


961


1,023


791


133


924​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
12,158

$
1,490

$
13,648

$
8,141

$
780

$
8,921​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)Borrowings
of each of the Company's wholly-owned special-purpose financing subsidiaries are considered borrowings of the Company for purposes of complying with the
asset coverage requirements applicable to BDCs under the 1940 Act.(2)Direct
interest expense may include non-usage fees.




Nine Months Ended September 30,2017

2016Facility(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

$
301

$
43

$
344

$
142

$
10

$
152BNP Facility


4,537





4,537


2,326





2,326Deutsche Bank Credit Facility


6,163


856


7,019


4,871


869


5,740Fortress Facility


6,946


203


7,149


4,480


202


4,682Goldman Facility


8,762


265


9,027








Goldman Repurchase Financing


4,305


91


4,396


8,384


97


8,481Natixis Credit Facility


750


342


1,092


1,783


781


2,564Wells Fargo Credit Facility


530


1,360


1,890


2,859


396


3,255​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
32,294

$
3,160

$
35,454

$
24,845

$
2,355

$
27,200​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)Borrowings
of each of the Company's wholly-owned special-purpose financing subsidiaries are considered borrowings of the Company for purposes of complying with the
asset coverage requirements applicable to BDCs under the 1940 Act.(2)Direct
interest expense may include non-usage fees.


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 8. Financing Arrangements (Continued)

For
the nine months ended September 30, 2017 and 2016, 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:



Nine Months Ended September 30,2017

2016Facility

Cash Paid
for Interest
Expense

Average
Borrowings(7)

Effective
Interest
Rate

Weighted
Average
Interest
Rate(1)

Cash Paid
for Interest
Expense

Average
Borrowings

Effective
Interest
Rate

Weighted
Average
Interest
Rate(1)Barclays Credit Facility(2)

$
301

$
549





4.56
%
$


$






BNP Facility(3)(4)


4,777


200,403


2.68
%

2.99
%

2,341


113,737


1.95
%

2.69
%Deutsche Bank Credit Facility(3)(5)


5,837


230,037


3.38
%

3.53
%

4,941


222,190


2.71
%

2.88
%Fortress Facility(3)(5)


6,654


155,000


6.06
%

5.91
%

3,580


89,600


5.75
%

6.57
%Goldman Facility(5)


7,824


235,623


4.97
%

4.90
%










Goldman Repurchase Financing(6)


4,954


128,571





4.42
%

8,316


324,985


4.03
%

3.39
%Natixis Credit Facility(6)


943


28,470





3.47
%

1,881


78,700


3.32
%

2.98
%Wells Fargo Credit Facility(6)


609


18,878





3.70
%

3,008


107,330


3.47
%

3.50
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​$
31,899

$
997,531


4.10
%

4.27
%
$
24,067

$
936,542


3.53
%

3.49
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)If
applicable, the weighted average interest rate presented for periods of less than one year is annualized, unless otherwise noted below.(2)The
weighted average interest rate includes the effect of non-usage fees and is representative of a two day period for which borrowings were outstanding during the
nine months ended September 30, 2017. Interest is paid quarterly in arrears and commenced on February 6, 2017.(3)Effective
interest rate and weighted average interest rate may include non-usage fees.(4)Interest
is paid monthly in arrears.(5)Interest
is paid quarterly in arrears.(6)Interest
was paid quarterly in arrears.(7)The
average borrowings calculated for the period in which amounts were outstanding during the nine months ended September 30, 2017 were $75,000, $389,849,
$325,000, $36,489 and $24,897 under the the Barclays credit facility, Goldman facility, Goldman repurchase financing, Natixis credit facility and Wells Fargo credit facility, respectively.


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. 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.

43

---



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)

The
Barclays credit facility provides for a four year revolving period followed by a one year term-out period, after which time all outstanding advances and other amounts will become due
and payable. 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 3.25% per annum; and
(ii) loans for which the Company elects the base rate option is payable at a rate equal to 2.25% per annum plus the greatest of (a) the U.S. Prime Rate, (b) the federal funds
effective rate for such day plus 0.50%, (c) three-month LIBOR plus 1.00% per annum and (d) zero. Bryn Mawr Funding will pay a commitment fee of 0.375% 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. Interest and fees are payable in arrears at the end of each interest period or three-month measurement period, as applicable, and, in each case, began on
October 31, 2016.

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 September 30, 2017, $211 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, Inc., or BNP. As amended to date, BNP's
maximum commitment under the BNP facility is $300,000. 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 a special custody and pledge agreement by and among Berwyn Funding, BNP and State Street Bank and Trust Company, or State Street, as
custodian, each dated as of December 11, 2013, as amended to date, and which are collectively referred to herein as the BNP financing agreements.

The
Company may contribute securities to Berwyn Funding from time to time, subject to certain restrictions set forth in the committed facility agreement, and will retain a residual
interest in any securities contributed through its ownership of Berwyn Funding or will receive fair market value for any securities sold to Berwyn Funding. Berwyn Funding may purchase additional
securities from various sources. Berwyn Funding has appointed the Company to manage its portfolio of securities pursuant to the terms of an investment management agreement. Berwyn Funding will pledge
certain of its securities as collateral to secure borrowings under the BNP facility. Such pledged securities will be held in a segregated custody account with State Street. 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. On May 4, 2016, Berwyn Funding entered
into an amendment to the BNP financing arrangements that permits Berwyn Funding to enter into trades, including but not limited to purchasing options, through the prime brokerage arrangement provided
under the BNP financing arrangements.

44

---



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)

Prior to January 2, 2017, borrowings under the BNP facility accrued interest at a rate equal to
three-month LIBOR plus 1.10% per annum and Berwyn Funding paid a non-usage fee of 0.55% per annum to the extent the aggregate principal amount available under the BNP facility was not borrowed. On
May 4, 2016, Berwyn Funding entered into an amendment to the BNP facility which increased the (i) interest rate payable on borrowings to LIBOR plus 1.35% per annum effective on and after
January 2, 2017 and (ii) the commitment fee payable on all unused amounts to, effective on and after January 2, 2017, (a) 0.65% per annum on unused amounts so long as 75%
or more of the facility amount is utilized or (b) 0.85% per annum on unused amounts if less than 75% of the facility amount is utilized. 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.

Under
the terms of the BNP financing agreements, BNP has the ability to borrow a portion of the pledged collateral, or, collectively, the rehypothecated securities, subject to certain
limits. Berwyn Funding may designate any security within the pledged collateral as ineligible to be a rehypothecated security, provided there remain securities eligible to be rehypothecated within the
segregated custody account in an amount equal to the outstanding borrowings owed by Berwyn Funding to BNP. Berwyn Funding may recall any rehypothecated security at any time and BNP must return such
security or an equivalent security within a commercially reasonable period. In the event BNP does not return the security, Berwyn Funding will have the right to, among other things, apply and set off
an amount equal to 100% of the then-current fair market value of such rehypothecated securities against any outstanding borrowings owed to BNP under the facility. Rehypothecated securities are
marked-to-market daily and if the value of all rehypothecated securities exceeds 100% of the outstanding borrowings owed by Berwyn Funding under the facility, BNP may either reduce the amount of
rehypothecated securities to eliminate such excess or deposit into the segregated custody account an amount of cash equal to such excess. Berwyn Funding will continue to receive interest and the
scheduled repayment of principal balances on rehypothecated securities. For the nine months ended September 30, 2017 and 2016, Berwyn Funding received a fee of $4 and $0, respectively, from BNP
for securities that had been rehypothecated pursuant to the BNP financing agreements. As of September 30, 2017 and December 31, 2016, the fair value of those securities rehypothecated by
BNP was $241,320 and $106,488, respectively.

The
Company incurred costs in connection with obtaining and amending the BNP facility, which the Company recorded as deferred financing costs on its consolidated balance sheets and
amortized to interest expense over the 270 day period following the closing date of the BNP facility or the amendment thereto, as applicable. As of September 30, 2017, all of such
deferred financing costs had been amortized to interest expense.

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. The
Deutsche Bank credit facility subsequently was amended multiple times, most recently, to set the maximum commitments under the facility at $340,000 and extend the maturity date to June 11,
2018. On September 29, 2017, FSEP Funding borrowed an additional $50,000 commitment under the Deutsche Bank credit facility to increase the amount outstanding to $340,000, the facility's
maximum commitment.

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FS Energy and Power Fund

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



Note 8. Financing Arrangements (Continued)

Under
the Deutsche Bank credit facility, the Company has transferred from time to time cash or securities to FSEP Funding as a contribution to capital and retains a residual interest in
the contributed cash or securities through the Company's ownership of FSEP Funding. The Company may contribute additional cash or securities to FSEP Funding from time to time and FSEP Funding may
purchase additional securities from various sources. FSEP Funding has appointed the Company to manage its portfolio of securities pursuant to the terms of an investment management agreement. 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.

During
the period from June 24, 2011 to June 10, 2016, interest on borrowings under the Deutsche Bank credit facility accrued at a rate equal to LIBOR for an interest
period closest to the weighted average LIBOR interest period of eligible securities owned by FSEP Funding plus 1.80% per annum. During the period from June 11, 2016 to June 10, 2017,
interest on borrowings under the Deutsche Bank credit facility accrued at a rate equal to LIBOR for an interest period closest to the weighted average LIBOR interest period of eligible securities
owned by FSEP Funding plus 2.05% per annum. Beginning June 11, 2017, interest on borrowings under the Deutsche Bank credit facility is based on three-month LIBOR plus 2.05% per annum. FSEP
Funding is subject to a non-usage fee of 0.75% per annum to the extent that the aggregate principal amount available under the Deutsche Bank credit facility is not borrowed. 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.

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 September 30, 2017, $821 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. The Fortress facility, as amended, provides for $155,000 of term loans available to be borrowed during the first two years after the initial closing date of November 6, 2015
with an option for the Company to request, at one or more times during the first two years after the closing date, that existing or new lenders, at their election provide up to $45,000 of additional
commitments.

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 0.75%) plus 5.00% per annum, and
(ii) loans bearing interest by reference to the base rate accrues at 4.00% 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) 1.75% per annum. Interest is payable quarterly in arrears and began accruing during the
quarter ended March 31, 2016. During the first year after the closing date, Foxfields Funding is subject to a commitment fee at a rate equal to 1.00% per annum of the average daily undrawn
amount under the Fortress facility. Under certain conditions, Foxfields Funding will be subject to a prepayment premium if all or any part of the principal balance of the borrowings is prepaid prior
to November 6, 2017. Foxfields Funding incurred certain customary fees, costs and expenses in connection with obtaining the Fortress facility.

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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)

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 September 30, 2017, $842 of such deferred financing costs had yet to be amortized to interest expense.

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.

As
of September 30, 2017 and December 31, 2016, Notes in an aggregate principal amount of $0 and $577,750, respectively had been purchased by Strafford Funding from
Gladwyne Funding and subsequently sold to Goldman under the Goldman repurchase financing for aggregate proceeds of $0 and $325,000, respectively. The carrying amount outstanding under the Goldman
repurchase financing approximated its fair value. The Company funded each purchase of Notes by Strafford Funding through a capital contribution to Strafford Funding. As of September 30, 2017
and December 31, 2016, Strafford Funding's liability under the Goldman repurchase financing was $0 and $325,000, respectively, plus $0 and $649, respectively, of accrued interest expense. The
Notes issued by Gladwyne Funding and purchased by Strafford Funding eliminate in consolidation on the Company's financial statements.

The
Company incurred costs in connection with obtaining and amending the Goldman repurchase financing, which the Company recorded as deferred financing costs on its consolidated balance
sheets and amortized to interest expense over the life of the Goldman repurchase financing. As of September 30, 2017, all of such deferred financing costs had been amortized to interest
expense.

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, pursuant to which Goldman advanced $325,000 to Gladwyne Funding with a
60-day availability period for Gladwyne Funding to borrow an additional $100,000. Pursuant to the Goldman term facility, the Company may contribute cash, loans or bonds to Gladwyne Funding from time
to time, subject to certain restrictions, and will retain a residual interest in any assets contributed through its ownership of Gladwyne Funding or will receive fair market value for any assets sold
to Gladwyne Funding. Gladwyne Funding may purchase additional assets from various sources. Gladwyne Funding has appointed the Company to manage its portfolio of assets pursuant to the terms of an
investment management agreement. Gladwyne Funding's obligations to Goldman under the Goldman term facility are secured by a first priority security interest in substantially all of the assets of
Gladwyne Funding, including its portfolio of assets. The obligations of Gladwyne Funding under the Goldman term facility are non-recourse to the Company, and the Company's exposure under the Goldman
term facility is limited to the value of the Company's investment in Gladwyne Funding. On June 16, 2017, Gladwyne Funding borrowed the additional $100,000 commitment under the Goldman term
facility to increase the amount outstanding to $425,000.

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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)

As
of September 30, 2017, borrowings under the Goldman term facility accrue interest at a rate equal to three-month LIBOR plus 3.72% per annum. Interest is payable in arrears
beginning on June 15, 2017 and each quarter thereafter. 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 (3.72% 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.

Pursuant
to the Goldman term facility, Gladwyne Funding has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other
customary requirements for similar transactions. The Goldman term facility contains customary events
of default for similar financing transactions, including: (a) failure to pay certain fees and make-whole amounts when due; (b) failure to post cash collateral as required; (c) the
occurrence of insolvency events with respect to Gladwyne Funding; and (d) the admission by Gladwyne Funding of its inability to, or its intention not to, perform any of its obligations under
the Goldman term facility.

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 September 30, 2017, $1,146 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 2.25% per annum.

The
Company incurred costs in connection with obtaining the Natixis credit facility, which the Company recorded as deferred financing costs on its consolidated balance sheets and
amortized to interest expense over the life of the Natixis credit facility. As of September 30, 2017, all of such deferred financing costs had been amortized to interest expense.

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 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

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FS Energy and Power Fund

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



Note 8. Financing Arrangements (Continued)

three-month
LIBOR plus a spread ranging between 2.50% and 2.75% per annum, depending on the composition of the portfolio of assets for the relevant period.

The
Company incurred costs in connection with obtaining the Wells Fargo credit facility, which the Company recorded as deferred financing costs on its consolidated balance sheets and
amortized to interest expense over the life of the Wells Fargo credit facility. As of September 30, 2017, all of such deferred financing costs had been amortized to interest expense.

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.

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FS Energy and Power Fund

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



Note 10. Financial Highlights

The following is a schedule of financial highlights of the Company for the nine months ended September 30, 2017 and the year ended December 31, 2016:



Nine Months Ended
September 30, 2017
(Unaudited)

Year Ended
December 31, 2016Per Share Data:(1)Net asset value, beginning of period

$
7.61

$
6.50Results of operations(2)Net investment income (loss)


0.50


0.57Net realized and unrealized appreciation (depreciation) on investments and gain/loss on foreign currency


(0.54
)

1.25​
​
​
​
​
​
​
​Net increase (decrease) in net assets resulting from operations


(0.04
)

1.82​
​
​
​
​
​
​
​Shareholder distributions(3)Distributions from net investment income


(0.53
)

(0.67
)Distributions representing tax return of capital





(0.04
)​
​
​
​
​
​
​
​Net decrease in net assets resulting from shareholder distributions


(0.53
)

(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

$
7.04

$
7.61​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Shares outstanding, end of period


447,166,265


440,162,095​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Total return(6)


(0.58
)%

29.53
%​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Total return (without assuming reinvestment of distributions)(6)


(0.53
)%

28.00
%​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Ratio/Supplemental Data:Net assets, end of period

$
3,147,906

$
3,348,894Ratio of net investment income to average net assets(7)


8.81
%

8.19
%Ratio of total operating expenses to average net assets(7)


4.84
%

4.88
%Ratio of net expenses to average net assets(6)


4.15
%

4.88
%Portfolio turnover(8)


25.75
%

35.85
%Total amount of senior securities outstanding, exclusive of treasury securities

$
1,220,000

$
873,665Asset coverage per unit(9)


3.58


4.83


(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


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FS Energy and Power Fund

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



Note 10. Financial Highlights (Continued)

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 nine months ended September 30, 2017. (5)The
per share impact of the Company's repurchases of common shares was a reduction to net asset value of less than $0.01 per share during each period.(6)The
total return for each period presented was calculated based on the change in net asset value during the applicable period, including the impact of distributions
reinvested in accordance with the Company's distribution reinvestment plan. The total return (without assuming reinvestment of distributions) for each period presented was calculated by taking the net
asset value per share as of the end of the applicable period, adding the cash distributions per share which were declared during the applicable period and dividing the total by the net asset value per
share at the beginning of the applicable period. The total returns (with and without assuming reinvestment of distributions) 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 (with and without assuming reinvestment of distributions) 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 (with and without assuming
reinvestment of distributions) in the table should not be considered representations of the Company's future total returns (with and without assuming reinvestment of distributions), 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 nine months ended September 30, 2017 are annualized
with the exception of certain expenses that may be non-recurring, such as subordinated income incentive fees. Annualized ratios for the nine months ended September 30, 2017 are not necessarily
indicative of the ratios that may be expected for the year ending December 31, 2017. The following is a schedule of supplemental ratios for the nine months ended September 30, 2017 and
year ended December 31, 2016:


Nine Months Ended
September 30, 2017
(Unaudited)

Year Ended
December 31, 2016Ratio of subordinated income incentive fees to average net assets


0.32
%

0.20
%Ratio of interest expense to average net assets


1.44
%

1.31
%Ratio of offering costs to average net assets





0.17
%


(8)Portfolio
turnover for the nine months ended September 30, 2017 is not annualized.(9)Asset
coverage per unit is the ratio of the carrying value of the Company's total consolidated assets, less liabilities and indebtedness not represented by senior
securities, to the aggregate amount of senior securities representing indebtedness.


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Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations.
                              (in thousands, except share and per share amounts)

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

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:



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

Overview

We were formed as a Delaware statutory trust under the Delaware Statutory Trust Act on September 16, 2010 and formally commenced
investment operations on July 18, 2011 upon raising gross proceeds in excess of $2,500 from sales of our common shares in our continuous public offering to persons who were not affiliated with
us or FS Advisor. 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. Prior to satisfying the minimum offering requirement, we had no operations except for
matters relating to our organization. In November 2016, we closed our continuous public offering of common shares to new investors.

Our
investment activities are managed by FS Advisor and supervised by our board of trustees, a majority of whom are independent. Under our investment advisory and administrative services
agreement, we have agreed to pay FS Advisor an annual base management fee based on our gross assets as well as incentive fees based on our performance. FS Advisor has engaged GSO to act as our
investment sub-adviser. GSO assists FS Advisor in identifying investment opportunities and makes investment recommendations for approval by FS Advisor according to guidelines set by FS Advisor.

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 leverage our relationships and our relationship with GSO and its global sourcing and origination
platform,
including its industry relationships, 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 expect to make equity investments (other than income-oriented 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 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 both
event driven investments and anchor orders.

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

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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 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 certain 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, i.e., an anchor order. 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, Energy
industry sub-sector or financial sponsor, and the broader investment experiences of FS Advisor and GSO.

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.

In
addition, a portion of our portfolio may be comprised of minority interests in the form of common or preferred equity or other equity-related securities, such as rights and warrants
that may be converted into or exchanged for common stock or other equity or the cash value of common stock or other equity, in our target companies, as well as derivatives, including total return
swaps and credit default swaps. FS Advisor will seek to tailor our investment focus as market conditions evolve. Depending on market conditions, we may increase or decrease our exposure to less senior
portions of the capital structure or other more opportunistic investments. We expect that the size of our individual investments will generally range between $5 million and $75 million
each, although investments may vary proportionately as the size of our capital base changes and will ultimately be at the discretion of FS Advisor, subject to oversight by our board of trustees.

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

54

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Table of Contents

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. Any such fees generated in connection with our
investments will be recognized as earned.

Expenses

Our primary operating expenses include the payment of advisory fees and other expenses under the investment advisory and administrative services
agreement, interest expense from financing arrangements and other expenses necessary for our operations. Our investment advisory fee compensates FS Advisor for its work in identifying, evaluating,
negotiating, executing, monitoring and servicing our investments. FS Advisor is responsible for compensating our investment sub-adviser.

We
reimburse FS Advisor for expenses necessary to perform services related to our administration and operations, including FS Advisor's allocable portion of the compensation and related
expenses of certain personnel of FS Investments providing administrative services to us on behalf of FS Advisor. Such services include the provision of general ledger accounting, fund accounting,
legal services, investor relations and other administrative services. FS 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 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. See "Related Party Transactions" for additional information regarding the reimbursements
payable to FS Advisor for administrative services and the methodology for determining the amount of any such reimbursements. We bear all other expenses of our operations and transactions. For
additional information regarding these expenses, see our annual report on Form 10-K for the year ended December 31, 2016.

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 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 and Nine Months Ended September 30, 2017 and for the
Year Ended December 31, 2016

Total Portfolio Activity

The following tables present certain selected information regarding our portfolio investment activity for the three and nine months ended
September 30, 2017:



Net Investment Activity

For the
Three Months Ended
September 30, 2017

For the
Nine Months Ended
September 30, 2017Purchases

$
355,933

$
1,607,965Sales and Repayments


(310,268
)

(1,081,349
)​
​
​
​
​
​
​
​Net Portfolio Activity

$
45,665

$
526,616​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


55

---



Table of Contents





For the
Three Months Ended
September 30, 2017

For the
Nine Months Ended
September 30, 2017New Investment Activity by Asset Class

Purchases

Percentage

Purchases

PercentageSenior Secured LoansFirst Lien

$
178,894


50
%
$
316,317


20
%Senior Secured LoansSecond Lien


164,291


46
%

417,845


26
%Senior Secured Bonds








240,254


15
%Subordinated Debt


8,985


3
%

596,374


37
%Equity/Other


3,763


1
%

37,175


2
%​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
355,933


100
%
$
1,607,965


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


The
following table summarizes the composition of our investment portfolio at cost and fair value as of September 30, 2017 and December 31, 2016:



September 30, 2017
(Unaudited)

December 31, 2016Amortized
Cost(1)

Fair Value

Percentage
of Portfolio

Amortized
Cost(1)

Fair Value

Percentage
of PortfolioSenior Secured LoansFirst Lien

$
983,398

$
945,577


22
%
$
947,803

$
912,491


23
%Senior Secured LoansSecond Lien


933,658


870,619


21
%

948,762


873,869


22
%Senior Secured Bonds


562,103


557,794


13
%

388,512


397,614


10
%Subordinated Debt


1,357,833


1,344,668


32
%

1,049,097


1,043,167


27
%Equity/Other


626,454


523,626


12
%

628,814


683,299


18
%​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
4,463,446

$
4,242,284


100
%
$
3,962,988

$
3,910,440


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 September 30, 2017 and December 31, 2016:



September 30, 2017

December 31, 2016Number of Portfolio Companies


79


84% Variable Rate (based on fair value)


40.6
%

43.6
%% Fixed Rate (based on fair value)


47.1
%

38.9
%% Income Producing Equity/Other Investments (based on fair value)


0.6
%

3.5
%% Non-Income Producing Equity/Other Investments (based on fair value)


11.7
%

14.0
%Average Annual EBITDA of Portfolio Companies

$
194,115

$
304,299Weighted Average Purchase Price of Debt Investments (as a % of par value)


96.9
%

97.2
%% of Investments on Non-Accrual (based on fair value)


1.7
%

0.0
%Gross Portfolio Yield Prior to Leverage (based on amortized cost)


8.7
%

8.8
%Gross Portfolio Yield Prior to Leverage (based on amortized cost)Excluding Non-Income Producing Assets


10.2
%

10.2
%


Based
on our regular monthly cash distribution rate of $0.059042 per share as of September 30, 2017 and December 31, 2016, and the price at which we issued shares pursuant
to our distribution reinvestment plan of $7.15 and $7.70, respectively, per share, the annualized distribution rate to shareholders as of September 30, 2017 and December 31, 2016 was
9.91% and 9.20%, respectively. The
distribution rate to shareholders may include income, realized capital gains and a return of investors' capital. For the nine months ended September 30, 2017 and year ended December 31,
2016, our total return was (0.58)% and 29.53%, respectively, and our total return without assuming reinvestment of distributions was (0.53)% and 28.00%, respectively.

56

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Table of Contents

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, 2016 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 and nine months ended
September 30, 2017:



New Direct Originations

For the
Three Months Ended
September 30, 2017

For the
Nine Months Ended
September 30, 2017Total Commitments (including unfunded commitments)

$
350,000

$
902,558Exited Investments (including partial paydowns)


(273
)

(486,062
)​
​
​
​
​
​
​
​Net Direct Originations

$
349,727

$
416,496​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​






For the
Three Months Ended
September 30, 2017

For the
Nine Months Ended
September 30, 2017New Direct Originations by Asset Class
    (including Unfunded Commitments)

Commitment
Amount

Percentage

Commitment
Amount

PercentageSenior Secured LoansFirst Lien

$
175,000


50
%
$
225,388


25
%Senior Secured LoansSecond Lien


175,000


50
%

371,000


41
%Senior Secured Bonds








122,812


14
%Subordinated Debt








165,000


18
%Equity/Other








18,358


2
%​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
350,000


100
%
$
902,558


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






For the
Three Months Ended
September 30, 2017

For the
Nine Months Ended
September 30, 2017Average New Direct Origination Commitment Amount

$
116,667

$
60,171Weighted Average Maturity for New Direct Originations


1/28/22


10/2/22Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Funded during Period


8.4
%

8.9
%Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Funded during PeriodExcluding Non-Income Producing
Assets


8.5
%

9.1
%Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Exited during Period


10.8
%

11.1
%


The
following table presents certain selected information regarding our direct originations as of September 30, 2017 and December 31, 2016:



Characteristics of All Direct Originations held in Portfolio

September 30, 2017

December 31, 2016Number of Portfolio Companies


35


28Average Annual EBITDA of Portfolio Companies

$
90,714

$
71,509Average Leverage Through Tranche of Portfolio CompaniesExcluding Equity/Other Securities


5.5x


4.8x% of Investments on Non-Accrual (based on fair value)


2.0
%

0.1
%Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct Originations


8.4
%

8.9
%Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct OriginationsExcluding Non-Income Producing Assets


10.7
%

11.4
%


57

---



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 September 30, 2017 and December 31, 2016:



September 30, 2017

December 31, 2016Portfolio Composition by Strategy

Fair Value

Percentage
of Portfolio

Fair Value

Percentage
of PortfolioDirect Originations

$
2,407,468


57
%
$
2,208,234


57
%Opportunistic


1,149,866


27
%

867,477


22
%Broadly Syndicated/Other


684,950


16
%

834,729


21
%​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
4,242,284


100
%
$
3,910,440


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



Investment Rating

Summary 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 September 30, 2017 and December 31, 2016:



September 30, 2017

December 31, 2016Investment Rating

Fair Value

Percentage
of Portfolio

Fair Value

Percentage
of Portfolio1

$
129,994


3
%
$
115,927


3
%2


3,195,806


75
%

2,719,833


70
%3


697,223


17
%

899,835


23
%4


57,782


1
%

85,427


2
%5


161,479


4
%

89,418


2
%​
​
​
​
​
​
​
​
​
​
​
​
​
​Total

$
4,242,284


100
%
$
3,910,440


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.

58

---



Table of Contents

Results of Operations

Comparison of the Three Months Ended September 30, 2017 and 2016

Revenues

Our investment income for the three months ended September 30, 2017 and 2016 was as follows:



Three Months Ended September 30,2017

2016Amount

Percentage of
Total Income

Amount

Percentage of
Total IncomeInterest income

$
84,676


84
%
$
76,355


85
%Paid-in-kind interest income


9,339


9
%

10,403


12
%Fee income


7,056


7
%

2,624


3
%​
​
​
​
​
​
​
​
​
​
​
​
​
​Total investment income(1)

$
101,071


100
%
$
89,382


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


(1)Such
revenues represent $86,460 and $75,249 of cash income earned as well as $14,611 and $14,133 in non-cash portions relating to accretion of discount, PIK interest
and accrual of limited partnership income for the three months ended September 30, 2017 and 2016, 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 amendment and consent fees, prepayment fees, structuring fees, upfront fees and other non-recurring 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 September 30, 2017 and 2016 were as follows:



Three Months Ended
September 30,2017

2016Management fees

$
22,031

$
20,086Administrative services expenses


611


1,118Share transfer agent fees


658


750Accounting and administrative fees


384


384Interest expense


13,648


8,921Trustees' fees


244


245Offering costs





755Expenses associated with our independent audit and related fees


132


114Legal fees


74


132Printing fees


305


727Insurance expense


48


56Other


4


363​
​
​
​
​
​
​
​Total operating expenses


38,139


33,651Less: Expense reimbursement from sponsor


(7,095
)

​
​
​
​
​
​
​
​Net operating expenses

$
31,044

$
33,651​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


59

---



Table of Contents

During the three months ended September 30, 2017 and 2016, our ratio of total operating expenses to average net assets was 1.21% and 1.10%, respectively.
During the three months ended September 30, 2017 and 2016, the ratio of our net expenses to our average net assets, which includes $7,095 and $0, respectively, of expense reimbursements from FS
Investments was 0.98% and 1.10%, respectively. During the three months ended September 30, 2017 and 2016, our ratio of total operating expenses to average net assets included $13,648 and
$8,921, respectively, related to interest expense and $0 and $755, respectively, related to amortization of deferred offering costs. Without such expenses, our ratio of total operating expenses to
average net assets would have been 0.78% and 0.78% for the three months ended September 30, 2017 and 2016, respectively. 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 September 30, 2017 and 2016, we accrued $7,095 and $0, respectively, for expense reimbursements that FS
Investments has agreed to pay. It is intended that these reimbursements will be 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 September 30, 2017 and 2016, 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 $70,027 ($0.16 per share) and $55,731 ($0.13 per share) for the three months ended September 30, 2017
and 2016, respectively. The increase in net investment income on a per share basis can be attributed primarily to an increase in fee income and the reimbursement of expenses provided to us by FS
Investments through the offset of certain advisory fees payable to FS Advisor.

Net Realized Gains or Losses

We sold investments and received principal repayments of $306,350 and $3,918, respectively, during the three months ended September 30,
2017, from which we realized a net gain of $6,211. We sold investments and received principal repayments of $10,159 and $250,161, respectively, during the three months ended September 30, 2016,
from which we realized a net loss of $119,886.

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

For the three months ended September 30, 2017 and 2016, the net change in unrealized appreciation (depreciation) on investments totaled
$(7,263) and $210,483, respectively, and the net change in unrealized gain (loss) on foreign currency was $(1) and $(2), respectively. The change in unrealized appreciation (depreciation) on our
investments during the three months ended September 30, 2017 was primarily driven by the performance of our directly originated investments. The
change in unrealized appreciation (depreciation) on our investments during the three months ended September 30, 2016 was primarily driven by a general improvement in the energy markets, a
tightening of credit spreads and the performance of our anchor order and broadly syndicated investments.

Increase (Decrease) in Net Assets Resulting from Operations

For the three months ended September 30, 2017 and 2016, the net increase (decrease) in net assets resulting from operations was $68,974
($0.16 per share) and $146,326 ($0.35 per share), respectively.

60

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Table of Contents

Comparison of the Nine Months Ended September 30, 2017 and 2016

Revenues

Our investment income for the nine months ended September 30, 2017 and 2016 was as follows:



Nine Months Ended September 30,2017

2016Amount

Percentage of
Total Income

Amount

Percentage of
Total IncomeInterest income

$
255,464


80
%
$
238,697


87
%Paid-in-kind interest income


26,418


8
%

24,314


9
%Fee income


38,075


12
%

12,607


4
%​
​
​
​
​
​
​
​
​
​
​
​
​
​Total investment income(1)

$
319,957


100
%
$
275,618


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


(1)Such
revenues represent $279,323 and $242,463 of cash income earned as well as $40,634 and $33,155 in non-cash portions relating to accretion of discount, PIK
interest and accrual of limited partnership income for the nine months ended September 30, 2017 and 2016, 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 amendment and consent fees, prepayment fees, structuring fees, upfront fees and other non-recurring 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 nine months ended September 30, 2017 and 2016, were as follows:



Nine Months Ended
September 30,2017

2016Management fees

$
67,104

$
55,725Subordinated income incentive fees


10,499


5,774Administrative services expenses


2,218


2,885Share transfer agent fees


2,066


2,134Accounting and administrative fees


1,216


994Interest expense


35,454


27,200Trustees' fees


744


757Offering costs





1,378Expenses associated with our independent audit and related fees


393


360Legal fees


202


516Printing fees


1,212


1,527Insurance expense


139


174Other


726


1,047​
​
​
​
​
​
​
​Total operating expenses


121,973


100,471Less: Expense reimbursement from sponsor


(25,315
)

Add: Expense recoupment to sponsor


2,858


​
​
​
​
​
​
​
​Net operating expenses

$
99,516

$
100,471​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


During
the nine months ended September 30, 2017 and 2016, our ratio of total operating expenses to average net assets was 3.71% and 3.74%, respectively. During the nine months
ended September 30, 2017 and 2016, the ratio of our net expenses to our average net assets, which includes $2,858 and $0,

61

---



Table of Contents

respectively,
of expense recoupments payable to FS Investments and $25,315 and $0, respectively, of expense reimbursements from FS Investments, was 3.02% and 3.74%, respectively. During the nine
months ended September 30, 2017 and 2016, our ratio of total operating expenses to average net assets included $35,454 and $27,200, respectively, related to interest expense, $10,499 and
$5,774, respectively, related to accruals for incentive fees and $0 and $1,378, respectively, related to amortization of deferred offering costs. Without such expenses, our ratio of total operating
expenses to average net assets would have been 2.31% and 2.46% for the nine months ended September 30, 2017 and 2016, respectively. 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 nine months ended September 30, 2017 and 2016, we accrued $25,315 and $0, respectively, for expense reimbursements that FS
Investments has agreed to pay. During the nine months ended September 30, 2017 and 2016, we offset $7,721 and $0, respectively, in management fees payable and $10,499 and $0, respectively, in
subordinated income incentive 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 nine months ended September 30, 2017 and 2016, we paid $2,858 and $0, respectively, in expense recoupments to FS Investments or its affiliates. See
"OverviewExpense Reimbursement" for a discussion of the expense reimbursement agreement.

Net Investment Income

Our net investment income totaled $220,441 ($0.50 per share) and $175,147 ($0.44 per share) for the nine months ended September 30, 2017
and 2016, respectively. The increase in net investment income on a per share basis can be attributed primarily to an increase in fee income and the reimbursement of expenses provided to us by FS
Investments through the offset of certain advisory fees payable to FS Advisor.

Net Realized Gains or Losses

We sold investments and received principal repayments of $531,736 and $549,613, respectively, during the nine months ended September 30,
2017, from which we realized a net loss of $70,244. We sold investments and received principal repayments of $361,229 and $374,270, respectively, during the nine months ended September 30,
2016, from which we realized a net loss of $195,964. We realized a net gain of $1 from settlements on foreign currency during the nine months ended September 30, 2017.

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

For the nine months ended September 30, 2017 and 2016, the net change in unrealized appreciation (depreciation) on investments totaled
$(168,614) and $585,216, respectively, and
the net change in unrealized gain (loss) on foreign currency was $51 and $12, respectively. The change in unrealized appreciation (depreciation) on our investments during the nine months ended
September 30, 2017 was primarily driven by the performance of our directly originated investments. The change in unrealized appreciation (depreciation) on our investments during the nine months
ended September 30, 2016 was primarily driven by a general improvement in the energy markets, a tightening of credit spreads and the performance of our directly originated and anchor order
investments.

Net Increase (Decrease) in Net Assets Resulting from Operations

For the nine months ended September 30, 2017 and 2016, the net increase (decrease) in net assets resulting from operations was $(18,365)
($(0.04) per share) and $564,411 ($1.41 per share), respectively.

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Financial Condition, Liquidity and Capital Resources

Overview

As of September 30, 2017, we had $97,565 in cash, which we or our wholly-owned subsidiaries held in custodial accounts, and $100,000 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
September 30, 2017, we also had broadly syndicated investments and opportunistic investments that could be sold to create additional liquidity. As of September 30, 2017, we had six
senior secured loan investments with aggregate unfunded commitments of $111,825 and five equity/other investments with aggregate unfunded commitments of $16,357. We maintain sufficient cash on hand,
available borrowings and liquid securities to fund such unfunded commitments should the need arise.

Public Offering of Shares, Private Placement, Distribution Reinvestment Plan and Share Repurchase
Program

In November 2016, we closed our continuous public offering of common shares to new investors. Following the closing of our continuous public
offering, we continue to issue shares pursuant to our distribution reinvestment plan.

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.

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.

To
provide our shareholders with limited liquidity, we conduct quarterly tender offers pursuant to our share repurchase program. The first such tender offer commenced in August 2012, and
the repurchase occurred in connection with our October 1, 2012 semi-monthly closing.

For
additional information regarding our continuous public offering, private placement, distribution reinvestment plan and share repurchase program, see Note 3 to our unaudited
consolidated financial statements included herein.

Financing Arrangements

The following table presents a summary of information with respect to our outstanding financing arrangements as of September 30, 2017:



Facility(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%(2)


300,000




June 27, 2018(3)Deutsche Bank Credit Facility

Revolving

L+2.05%


340,000




June 11, 2018Fortress Facility

Term

L+5.00%(4)


155,000




November 6, 2020Goldman Facility

Term

L+3.72%


425,000




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





$
1,220,000

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


(1)The
carrying amounts outstanding under the facilities approximates their fair value.(2)Beginning
on January 2, 2017, borrowings under the BNP facility began to accrue interest at a rate equal to LIBOR plus 1.35%.(3)The
BNP facility generally is terminable upon 270 days' notice by either party. As of September 30, 2017, neither Berwyn Funding nor BNP had provided
notice of its intent to terminate the facility.(4)As
described in Note 8, borrowings under the Fortress facility accrue interest at a rate equal to LIBOR plus 5.00%, subject to a floor of 0.75%.


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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 and pay regular cash distributions on a monthly
basis. We will calculate each shareholder's specific distribution amount for the period using record and declaration dates and each shareholder's distributions will begin to accrue on the date that
common shares are issued to such shareholder. From time to time, we may also pay special interim distributions in the form of cash or common shares at the discretion of our board of trustees. The
timing and amount of any future distributions to shareholders are subject to applicable legal restrictions and the sole discretion of our board of trustees.

During
certain periods, our distributions may exceed our earnings. As a result, it is possible that a portion of the distributions we make will represent a return of capital. A return of
capital generally is a return of an investor's investment rather than a return of earnings or gains derived from our investment activities and will be made after deducting the fees and expenses
payable in connection with our continuous public offering, including any fees payable to FS 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.

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The
following table reflects the cash distributions per share that we have declared and paid on our common shares during the nine months ended September 30, 2017 and 2016:



DistributionFor the Three Months Ended

Per Share

AmountFiscal 2016March 31, 2016

$
0.17713

$
66,720June 30, 2016


0.17713


70,788September 30, 2016


0.17713


74,481​
​
​
​
​
​
​
​Total

$
0.53139

$
211,989​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​Fiscal 2017March 31, 2017

$
0.17713

$
77,984June 30, 2017


0.17713


78,374September 30, 2017


0.17713


78,115​
​
​
​
​
​
​
​Total

$
0.53139

$
234,473​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​


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 for the nine months ended September 30, 2017 and 2016, the components of accumulated earnings on a tax basis and deferred taxes as
of September 30, 2017 and December 31, 2016.

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 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 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 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
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 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 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 Advisor's management team, and has authorized FS 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 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 previously recognized 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 payments 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 of a loan or security, any unamortized loan origination fees and original issue discount are recorded as

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interest
income. Structuring and other non-recurring upfront fees are recorded as fee income when earned. We record prepayment premiums on loans and securities as fee income when we earn such amounts.

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 nine months ended September 30, 2017 and
2016, 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 Advisor to provide us with investment advisory and administrative services. Payments for investment
advisory services under the investment advisory and administrative services agreement are equal to (a) an annual base management fee of 2.0% of the average value of our gross assets and
(b) an incentive fee based on our performance. FS Advisor, and to the extent it provides such services, GSO, are reimbursed for administrative expenses incurred on our behalf. See Note 4
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 agreements during the nine months
ended September 30, 2017 and 2016.

A
summary of our significant contractual payment obligations for the repayment of outstanding borrowings under the BNP facility, the Deutsche Bank credit facility, the Fortress facility
and the Goldman facility at September 30, 2017 is as follows:



Payments Due By PeriodTotal

Less than
1 year

1-3 years

3-5 years

More than
5 yearsBNP Facility(1)

$
300,000

$
300,000

$


$



Deutsche Bank Credit Facility(2)


340,000


340,000








Fortress Facility(3)


155,000








155,000


Goldman Facility(4)


425,000





425,000





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

$
1,220,000

$
640,000

$
425,000

$
155,000


​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​


(1)At
September 30, 2017, no amounts remained unused under the BNP facility. The BNP facility generally is terminable upon 270 days' notice by either
party. As of September 30, 2017, neither Berwyn Funding nor BNP had provided notice of its intent to terminate the facility.


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(2)At
September 30, 2017, no amounts remained unused under the Deutsche Bank credit facility. All amounts borrowed under the facility will mature, and all
accrued and unpaid interest thereunder will be due and payable, on June 11, 2018.(3)At
September 30, 2017, no amounts remained unused under the Fortress facility. All amounts borrowed under the facility will mature, and all accrued and unpaid
interest thereunder will be due and payable, on November 6, 2020.(4)At
September 30, 2017, no amounts remained unused under the Goldman facility. All amounts borrowed under the facility will mature, and all accrued and unpaid
interest thereunder will be due and payable, on September 15, 2019.


As
of September 30, 2017, 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 May 18, 2021.

Off-Balance Sheet Arrangements

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

Related Party Transactions

Compensation of the Investment Adviser and Dealer Manager

Pursuant to the investment advisory and administrative services agreement, FS Advisor is entitled to an annual base management fee of 2.0% of
the average value of our gross assets (gross assets equals total assets set forth on our consolidated balance sheet) and an incentive fee based on our performance. Pursuant to the investment
sub-advisory agreement, GSO will receive 50% of all management and incentive fees payable to FS Advisor under the investment advisory and administrative services agreement with respect to each year.
We commenced accruing fees under the investment advisory and administrative services agreement on July 18, 2011, upon commencement of our investment operations. Base management fees are paid on
a quarterly basis in arrears.

The
dealer manager for our continuous public offering was FS Investment Solutions, which is one of our affiliates. Under the dealer manager agreement, FS Investment Solutions was
entitled to receive sales commissions and dealer manager fees in connection with the sale of common shares in our continuous public offering, all or a portion of which were re-allowed to selected
broker-dealers and financial representatives. The dealer manager agreement terminated in connection with the closing of our continuous public offering in November 2016.

See
Note 4 to our unaudited consolidated financial statements included herein for additional information regarding our related party transactions and relationships, including a
description of the fees and amounts due to FS Advisor, capital contributions by FS Advisor and GSO, potential conflicts of interest, our exemptive relief order, our expense reimbursement arrangement
with FS Investments and FS Benefit Trust's purchases of our common shares.

Recent Developments

During the period from October 1, 2017 to November 13, 2017, we issued 2,152,696 common shares under our distribution reinvestment
plan for gross proceeds of $15,341 at an average price per share of $7.13.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk.

We are subject to financial market risks, including changes in interest rates. As of September 30, 2017, 40.6% of our portfolio
investments (based on fair value) paid variable interest rates, 47.1% paid fixed interest rates, 0.6% were income producing equity/other investments and the remainder (11.7%) 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

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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 Advisor with respect to our increased pre-incentive fee net investment income.

Pursuant
to the terms of the Barclays credit facility, BNP facility, Deutsche Bank credit facility, Fortress facility and Goldman facility, Bryn Mawr Funding, Berwyn Funding, FSEP
Funding, Foxfields Funding and Gladwyne Funding, respectively, 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 of our investment portfolio, including the accrual status of our investments, and our borrowing arrangements in effect as of September 30, 2017 (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

$
(4,639
)
$
(12,200
)
$
7,561


2.2
%No change











Up 100 basis points

$
16,504

$
12,200

$
4,304


1.3
%Up 300 basis points

$
51,667

$
36,599

$
15,068


4.5
%Up 500 basis points

$
86,942

$
60,999

$
25,943


7.7
%


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 nine months ended September 30, 2017
and 2016, 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 September 30,
2017. 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 September 30, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART IIOTHER INFORMATION

Item 1.    Legal Proceedings.

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

Item 1A.    Risk Factors.

There have been no material changes from the risk factors set forth in our annual report on Form 10-K for the fiscal year ended
December 31, 2016.

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 September 30, 2017
pursuant to our share repurchase program.



Period

Total
Number of
Shares
Purchased

Average
Price Paid
per Share(2)

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
ProgramsJuly 1 to July 31, 2017


4,990,805

$
7.20


4,990,805


(1
)August 1 to August 31, 2017











September 1 to September 30, 2017











​
​
​
​
​
​
​
​
​
​
​
​
​
​Total


4,990,805

$
7.20


4,990,805


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


(1)The
maximum number of common shares available for repurchase on July 3, 2017 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.(2)On
October 13, 2016, and in connection with the closing of our continuous public offering, we amended the terms of our share repurchase program, which was
first effective for our quarterly repurchase offer for the fourth quarter of 2016 to provide that shares repurchased under the program would be repurchased at a price determined as described above.
Prior to amending the share repurchase program, we offered to repurchase common shares at a price equal to 90% of the offering price in effect on the date of repurchase.


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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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 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.)10.2

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.)10.3

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.)10.4

Dealer Manager Agreement, dated as of April 28, 2011, by and between FS Energy and Power Fund and FS Investment
Solutions, LLC (formerly FS2 Capital Partners, LLC)(Incorporated by reference to Exhibit (h)(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.)10.5

Form of Follow-On Dealer Manager Agreement by and among FS Energy and Power Fund, FS Investment Advisor, LLC and
FS Investment Solutions, LLC (formerly FS2 Capital Partners, LLC)(Incorporated by reference to
Exhibit (h)(2) filed with Pre-Effective Amendment No. 3 to FS Energy and Power Fund's registration statement on Form N-2 (File No. 333-184407) filed on May 10, 2013.)10.6

2014 Follow-On Dealer Manager Agreement, dated as of January 7, 2015, by and among FS Energy and Power Fund, FS
Investment Advisor, LLC and FS Investment Solutions, LLC (formerly FS2 Capital Partners, LLC)(Incorporated by reference to Exhibit (h)(3) filed with Post-Effective Amendment No. 1 to FS Energy and Power Fund's registration statement on Form N-2 (File No. 333-199777) filed on April 1, 2015.)10.7

Form of Selected Dealer Agreement (Included as Appendix A to the Dealer Manager Agreement).(Incorporated by reference to Exhibit (h)(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.)10.8

Form of 2014 Follow-On Selected Dealer Agreement. (Included as Exhibit A to the Form of Follow-On Dealer Manager
Agreement.)(Incorporated by reference to Exhibit (h)(5) filed with FS Energy and Power Fund's registration statement on
Form N-2 (File No. 333-199777) filed on October 31, 2014.)10.9

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.)


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10.10

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.)10.11

Credit Agreement, dated as of June 24, 2011, by and among FSEP Term Funding, LLC, Deutsche Bank AG, New York
Branch, and the other lenders party thereto.(Incorporated by reference to Exhibit 10.7 to FS Energy and Power Fund's
Quarterly Report on Form 10-Q filed on June 27, 2011.)10.12

First Amendment to Credit Agreement, dated as of May 30, 2012, by and among FSEP Term Funding, LLC, Deutsche Bank AG,
New York Branch, 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 May 30, 2012.)10.13

Second Amendment to Credit Agreement, dated as of August 28, 2012, by and among FSEP Term Funding, LLC, Deutsche Bank
AG, New York Branch, 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 August 30, 2012.)10.14

Third Amendment to Credit Agreement, dated as of October 18, 2012, by and among FSEP Term Funding, LLC, Deutsche Bank AG,
 New York Branch, 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 October 18, 2012.)10.15

Fourth Amendment to Credit Agreement, dated as of June 24, 2013, 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 25, 2013.)10.16

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.)10.17

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.)10.18

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.)10.19

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.)10.20

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.)10.21

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.)10.22

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.)10.23

ISDA 2002 Master Agreement, together with the Schedule thereto and Credit Support Annex to such Schedule, each dated as
of August 11, 2011, by and between EP Investments LLC and Citibank, N.A.(Incorporated by reference to
Exhibit 10.11 to FS Energy and Power Fund's Quarterly Report on Form 10-Q filed on August 15, 2011.)


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10.24

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.)10.25

Amendment Agreement, dated as of May 11, 2012, to the ISDA 2002 Master Agreement, together with the Schedule
thereto and Credit Support Annex to such Schedule, by and between EP Investments LLC and Citibank, N.A.(Incorporated by
reference to Exhibit 10.16 to FS Energy and Power Fund's Quarterly Report on Form 10-Q filed on May 15, 2012.)10.26

Amended and Restated Confirmation Letter Agreement, dated as of May 11, 2012, by and between EP
Investments LLC and Citibank, N.A.(Incorporated by reference to Exhibit 10.17 to FS Energy and Power Fund's
Quarterly Report on Form 10-Q filed on May 15, 2012.)10.27

Amended and Restated Confirmation Letter Agreement, dated as of October 11, 2012, 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 October 12, 2012.)10.28

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.)10.29

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.)10.30

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.)10.31

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.)10.32

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.)10.33

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.)10.34

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.)10.35

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.)10.36

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.)10.37

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.)10.38

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.)


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10.39

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.)10.40

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.)10.41

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.)10.42

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.)10.43

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.)10.44

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.)10.45

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.)10.46

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.)10.47

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.)10.48

Securities Account Control Agreement, dated as of September 9, 2014, by and among Wayne Funding LLC, as
pledgor, Wells Fargo Bank, National Association, as collateral agent, and Wells Fargo Bank, National Association, as securities intermediary.(Incorporated by reference to Exhibit 10.4 to FS Energy and Power Fund's Current Report on Form 8-K filed on September 15, 2014.)10.49

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.)10.50

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.)10.51

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.)


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10.52

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.)10.53

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.)10.54

September 1996 Version Master Repurchase Agreement between Goldman Sachs Bank USA and Strafford Funding LLC,
together with the related Annex and Master Confirmation thereto, each dated as of September 11, 2014.(Incorporated by
reference to Exhibit 10.8 to FS Energy and Power Fund's Current Report on Form 8-K filed on September 15, 2014.)10.55

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.)10.56

Amended and Restated Master Confirmation, dated as of December 15, 2014, by and between Goldman Sachs Bank USA and Strafford
Funding LLC.(Incorporated by reference to Exhibit 10.2 of FS Energy and Power Fund's Current Report on Form 8-K filed on
December 19, 2014.)10.57

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 10, 2016.)10.58

Revolving Credit Agreement, dated as of September 11, 2014, by and between FS Energy and Power Fund and Strafford
Funding LLC.(Incorporated by reference to Exhibit 10.9 to FS Energy and Power Fund's Current Report on
Form 8-K filed on September 15, 2014.)10.59

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.)10.60

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.)10.61

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.)10.62

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.)10.63

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.)10.64

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.)10.65

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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10.66

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.)10.67

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.)10.68

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.)10.69

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.)10.70

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.)10.71

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.)10.72

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.)10.73

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.)10.74

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.)10.75

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.)10.76

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.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 November 13, 2017.



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)


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