Green Bond Investor Presentation Our vision: A leading Norwegian - - PowerPoint PPT Presentation

October 26, 2017

Green Bond Investor Presentation

Our vision:

A leading Norwegian renewable energy group

Agder Energi in brief

Vertically integrated utility company Fourth largest supplier of hydro power – mean production of 8.1 TWh Fourth largest network company – 195 000 customers Leading market share in retail power sales – appox. 18 TWh in end user sales Operating revenues approximately NOK 10 bn with 1 430 employees Government owned – 54.5 % by Agder municipalities and 45.5 % by Statkraft Headquarter in Kristiansand, Norway

Key credit strengths Strong market position

Low cost profile and flexible producer of hydro power Monopoly position through operation of distribution grids in the Agder Counties

Strong cash flow

High share of price hedging next 3-5 years, robust hedge the following 10 years due to long term power sales contracts Stable and considerable cash flow from monopoly business

Investment flexibility

Optionality in existing project portfolio

Strong and stable ownership structure

30 coordinated municipalities and Statkraft (A-), which is 100 % owned by the Norwegian state (AAA)

Core business activites

Hydro Power Build and operate hydro power stations Network Build and operate distribution network Energy Management and Trading Maximising profit of the hydro power portfolio, business retail sales Market LOS: Private end user sales Otera: Infra structure contractor Varme: District heating and cooling

River system Mean production (TWh/year) Reservoir capacity (TWh) Otra 3.6 2.7 Mandal 1.7 0.5 Arendal 1.3 0.7 Sira-Kvina 0.8 0.7 Ulla-Førre 0.3 0.5 Andre 0.4 0.1 Sum 8.1 5.3

Hydro power with high flexibility

8.1 7.7 9.1 9.0 8.9

2012 2013 2014 2015 2016

Production TWh

Sole network owner in Agder

• Agder Energi Nett owns and operates the regulated transmission and distribution

networks in Aust-Agder and Vest-Agder

• Stable and considerable cash flow
• Smart metering (AMS) replacement on track, investment completed in 2018
• Network capital NOK 4 101 mill

Results and value creation best in industry 20% improved profitability in existing business Develop business models and positions related to digitalization and new energy markets Strategic goals toward 2020

Optimizing existing business activities Positioning to offer scalable hydro power capacity Market operations posisitioning for future energy markets with flexibility and effect Posistioning for future network business Energy solutions to private consumers Focus areas

Investments 2017-2021

50% 47% 3%

Hydro Network Other

Planned investments cirka NOK 1 050 mill per year on average in the 5 year period, of which NOK 550 mill per year is comitted and government imposed Investments include AMS and Honna, which Agder Energi Nett has the option to sell to Statnett Reinvestments in the network is included in the network capital base Flexibility in the hydro power project portfolio

Investments 2017-2021

Largest projects Project cost (ca, NOK mill) Completion Network AMS 960 2018 Hydro power Skjerka reservoirs 550 2018 Hydro power Skjerka generator 300 2019 Hydro power Åseral Nord – not approved

Dividend policy

NOK 400 mill plus 60 % of excess profit Based on the Group’s net income to majority according to NGAAP previous year The dividend policy is a rule of thumb, qualitative assessment annually

Financial update

Profit from operations

NOK 1 329 mill (NOK 1 270 mill) in underlying EBITDA

Production

Power generation 4 746 GWh (5,486 GWh) Average spot price NO2 26,5 øre/KWh (21,2 øre/KWh)

Other activities

NetNordic Holding AS was sold in June, closing in August Agder Energi Nett is more than half way to completion of replacing the electricity meters with new digital ones (AMS)

Highlights second quarter 2017

Reservoir levels NO2

0% 20% 40% 60% 80% 100% jan. feb. mar. apr. may jun. jul. aug. sep.

• ct.

nov. dec. % of normal 2017 2016

• Avg. 10 yrs

Power prices NO2

5 10 15 20 25 30 35 40 jan. feb. mar. apr. may jun. jul. aug. sep.

• ct.

nov. dec. Øre/KWh Spot/forward price 2017 Spot price 2016

Revenues and EBITDA per segment

2 000 4 000 6 000 8 000 10 000 12 000 2013 2014 2015 2016 2017H1 Hydro Network Market 2 531 2 440 2 194 2 537 1 377 500 1 000 1 500 2 000 2 500 3 000 2013 2014 2015 2016 2017H1 Hydro Network Market

Revenues (NOK mill) EBITDA (NOK mill)

Solid cash flow providing financial strength

1 486 1 512 1 502 1 779

• 2 000
• 1 500
• 1 000
• 500

500 1 000 1 500 2 000 2013 2014 2015 2016 Operational CF Net investments Dividends 21,8% 25,1% 19,4% 18,4% 0% 5% 10% 15% 20% 25% 30% 2013 2014 2015 2016 FFO*/Net Debt

*Unadjusted, adjustments are made in rating. Interest bearing debt on 4 quarters rolling basis

Cash Flow (NOK mill) FFO*/Net Debt

Robust funding structure and diverse maturity profile

200 400 600 800 1 000 1 200 1 400 1 600 2017 2019 2021 2023 2025 2027+ Bonds EUR Loans USPP CP 54% 33% 7% 7% Bonds EUR Loans USPP CP

Funding sources Maturity profile (NOK mill)

Unutilized credit facilities NOK 1 500 mill to support short term funding and refinancing risk, overdraft facility NOK 1 000 mill for operational liquidity and Nasdaq cash requirement

Vertically integrated business model with monopolistic power distribution, strong position of hydro power generation in the merit system and leading retail sales business Profitable and environmentally-friendly hydro power production with substantial hedging agreements and sizeable reservoir capacity Long-term, committed majority owners that are jointly

• rganized and show ability and willingness for potential

parent support

Obtained Scope credit rating in Aug-17

Agder Energi:

God kraft-godt klima Agder Energi Green Bonds

Renewable hydro power in context of emissions

Hydro power part of future ambitions of low emissions

‒ Rule of thumb conventional coal fired plants 1 000 x higher CO2 emissions than hydro power ‒ Source: Eurelectric, LCA figures

Green Certificates

‒ Norwegian-Swedish political initiative to increase renewable power production by 28 TWh by 2021 ‒ Agder Energi build profitable hydro power projects with granted concession

• 200

400 600 800 1 000 1 200

Grams CO2/KWh

Agder Energi’s Green Bond Framework

Eligible Projects Project pool

Eligible Projects

• Renewable Energy – hydro power (wind power) and

related infrastructure

• Energy Efficiency – connection of renewable energy

to transmission networks, upgrading of transmission and distribution networks, energy storage, energy recovery and smart grids

Selection of projects

• Cooperation treasury, relevant business unit and

environmental advisor

Use of Green Bond Proceeds

• The green bond proceeds may be used to purchase or

develop new eligible projects as well as to renovate, upgrade and refinance existing eligible projects

CICERO - an independent provider of second opinions

Green Bond Framework Sustainability Strategy and Reports Other relevant documentation

Green Bond Principles Climate Science ✓ Use of proceeds ✓ Management of proceeds ✓ Governance and Transparency ✓ Impact Reporting Input from Issuer Relevant standards Second Opinion Clarifications with the Issuer as needed

Assessment Begins Draft Second Opinion Final Second Opinion

Week 1-2 Week 3

CICERO’s second opinion of Agder Energi’s Green Bond Framework

Strengths:

• HSE risk assessment established across all
• perations
• Environmental risk analysis on a project level

through Miljøoppfølgingsprogrammet (“MOP”)

• Focus on environmental concerns in hydro

power projects

• Good reporting standards

Weaknesses:

• Environmental overview of supply chain is

insufficient “Based on the assessment of the project types that will be financed by the green bond, and the assessment of policies and reporting standards, Agder Energi’s Green Bond Framework receives a Dark Green shading”

Agder Energi’s environmental policy

Agder Energi’s Corporate Social Responsibility policy

‒ Based on national and international laws regulations with focus on human rights, labour rights, environment and anti-corruption ‒ Subsidiaries are responsible for monitoring and reporting risks, group CRS reporting on CO2 and NOx emissions

Agder Energi Vannkraft’s environmental strategy

‒ Production within concessions and national and international laws and regulations ‒ Work pro-actively and systematically to reduce negative environmental impacts from operations within any given concession

‒ Waste Management ‒ Hydrology / Biology / Natural Resources

‒ Maintain high knowledge on environment where the company is operating ‒ New projects are monitored under a separate environmental management plan, setting targets and requirements to the contractors

Extensive NVE concession process

NVE to decide comprehensive

• ness of impact

study AE produces note of intention to NVE AE produces impact study and send application to NVE NVE produce proposition to OED OED produces proposition to the national assembly for final decision

‒ Process takes normally 5-10 years before final concession is granted ‒ Througout the process, there are several open public hearings ‒ Independent expertise do separate studies within different focus areas, such as local environmental impact on fishing, farming, natural environment, emissions etc ‒ NVE does the professional evaluation of the project ‒ OED does the professional and political evalutation and arrives at a positive conclusion if the advantages outnumber the disadvantages

Iveland II, Otra river system

Iveland II – new renewable hydro power production

‒ Increased annual production 140 GWh (150 GWh qualify for green certificates) ‒ Applicaton 2007, concession 2012, completed in 2016 ‒ Installed capacity increased by 45 MW ‒ Total investment of NOK 700 mill ‒ Reduction of 275 tons of CO2 due to utilization of non-standard concrete ‒ Option in new project to utilize non-standard concrete ‒ 140 GWh hydro power capacity compare to more than 130 000 tons of CO2 emissions from a conventional coal power plant ‒ NIB issued a green bond based on financing part of Iveland

Åseral Projects, Mandal river system

Dam Langevatn Øygard Skjerka 2 Kvernevatn

Åseral Projects – maintain existing and build new hydro power capacity

‒ Several separate projects with individual investment decision ‒ New dam Langevatn, ‒ New tunnel Langevatn/Nåvatn 13 km ‒ Kvernevatn and Øygard hydro power stations ‒ Skjerka generator 2 ‒ Concessions granted

Åseral Nord – maintain hydro power infra structure

‒ Replacing Langevatn dam, government imposed ‒ Regulation increases by 10 meters/14% ‒ New tunnel ‒ Investment total (not approved, to be deceded) ‒ Ongoing procurement process ‒ Expected completion 2021

Skjerka generator and dams, Mandal river system

Skjerka 2 – safeguard existing and increase production capacity

‒ Existing generator 650 GWh ‒ A 2nd generator reduces production risk, loss at maintenance, increases flexibility premium ‒ Increase production of 18 GWh ‒ Investment of NOK 300 mill ‒ Expected completion 2019 ‒ Production site prepared for a 2nd generator

Skjerka dams – maintain hydro power infrastructure

‒ 2 new dams replacing 5 ‒ Increase production of 40 GWh ‒ Lifting water level of Skjerkevann by 23 meters ‒ Investment of NOK 550 mill ‒ Expected completion 2018 ‒ Government imposed

Agder Energi will provide an annual investor letter covering:

‒ Projects financed (eligible projects are defined together with environmental advisor) ‒ Impact reporting ‒ Use of proceeds from the ear marked account

Annual Green Bond Report

Annual Green Bond Report 2018

Summary

Agder Energi is a Norwegian vertically integrated utility company owned by 30 municipalities and Statkraft (A-)

‒ Highly competitive and flexible producer of renewable hydro power ‒ Mean production 8.1 TWh, 5.6 TWh reservoir capacity ‒ 4th largest grid company with 195 000 customers ‒ Strong and stable cash flow, high share of price hedging ‒ Scope rating of BBB+

The Green Bond Framework will primarily finance renewable energy

‒ Examples of eligible projects Iveland, Skjerka and Åseral Nord totaling approximately NOK 2.3 bn in investments ‒ Received the highest possible rating by CICERO – Dark Green ‒ Green Bonds natural funding source for hydro power investments ‒ Adds to the diversification of funding sources

This document has been prepared by Agder Energi AS (“The Company”). This document is not to be reproduced or distributed, in whole or in part, by any person other than the Company. The Company takes no responsibility for the use of these materials by any person. The information contained in this document has not been subject to independent verification and no representation, warranty or undertaking, express or implied, is made as to, and no reliance may be placed on, the fairness, accuracy, completeness or correctness

• f the information or opinions contained herein. Neither the Company nor its shareholders, its advisors, its

representatives or any other person shall be held liable for any loss arising from any use of this document or its contents or otherwise arising in connection with this document. In the event of any discrepancies between the information contained in this document and the public documents, the latter shall prevail. This document does not constitute an offer to sell or an invitation or solicitation of an offer to subscribe for or purchase any securities, and this shall not form the basis for or be used for any such offer or invitation or

• ther contract or engagement in any jurisdiction.

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