SOGN OG FJORDANE ENERGI

Martin Holvik, Chief Financial Officer Ragna Flatla Haugland, Environmental Specialist in SFE Produksjon AS

Green Bond Investor Presentation, 9 May 2018 Agenda

• og Fjordane Energi

• Financial overview

• Green Bonds Framework

2 100% public ownership

Sogn og Fjordane Holding AS (Sogn og municipality Fjordane county municipality) 1,48% 49,56%

Selje municipality BKK 1,34% 36,83%

Flora municipality Eid municipality 4,64% 0,15%

Gloppen municipality municipality 3,46% 0,07%

Bremanger municipality 2,47%

3 Company overview

• was established more than 100 years ago • Top 10 largest utility company in – 22 wholly- and partially owned plus 5 leased hydro power plants with mean production of 1.9 TWh – 4,000km of regulated grid network with 24,000 customers • Revenues of NOK 1,287m with 250 employees

(NOK mill) 2017 2016 2015 Operating Revenues 1,287 1,229 1,035 Sogn og Fjordane Energi EBITDA 533 546 412 Profit before tax 365 359 212 Net Profit 193 189 113 Equity 2,747 2,503 2,334 Net Interest Bearing Debt 1,803 1,895 1,885 Production Power Grid Services Total Assets 6,551 6,327 6,002 Revenues NOK 1,186m Revenues NOK 425m Revenues NOK 71m Power Production (TWh) 2.0 2.1 2.1 EBITDA NOK 378m EBITDA NOK 163m EBITDA NOK 6.5m

4 SFE’s hydro power plants

• SFE operates 27 wholly- and Skorge partially owned renewable hydro power plants Åskåra I&II, Øksenelvane, Dauremål og Bjørndalen • Mean production of 1.9 TWH I,II,III&IV, Fossekallen og – Power plants are located in Straumane Evebøfoss, Eidsfoss the Sogn and Fjordane County og Trysilfoss Skogheim og – Reservoir capacity of 0.9 TWh Sagefossen

Fossheim Øvre- og Nedre Stongfjorden og Markevatn, Oslandsbotten Leknesvatn og Grunnevatn

Mel Sværen

5 Approx. 500 GWh identified hydro power potential Bredvatn (), 67 GWh Øksenelvane (Bremanger), 35 GWh

Svelgen (Bremanger), 30 GWh Hauge (Hellesylt), 15 GWh

Norddalsfjord (Flora), 20 GWh Gjengedal (), 143 GWh

Ommedal (Gloppen), 18 GWh

Under construction

Concession received

Østerbø (Høyanger) Concession applied for 165 GWh (SFE-share 96 GWh) (Naustdal/Førde) Concession not Ca. 30 GWh (several mini applied for power plants) 6 Wind power concessions of almost

200 MW Close to development. Falck Renewables SpA 80% ownership, Svelgen Kraft Holding 20% Okla (, ), 21 MW

Hennøy (Bremanger), 50 MW Wholly owned by Svelgen Kraft Holding

Bremangerlandet, 78 MW

Lutelandet (), 45MW

7 Power grid – Regulated business

• SFE owns and operates 4,257km of regulated grid with 24,324 customers • NOK 1bn in investments past 5 years – NVE capital of NOK 1,339m 2017YE • Average return of 8.1% (2013-2017)

Reduction in grid losses (GWh)

80 69 62 58 56 60 55

40

20 SFE distribution network 0 SFE regional network 2013 2014 2015 2016 2017

8 Structural considerations

• Agreement on merger of the county municipalities and Sogn og Fjordane – Sogn og Fjordane aim to keep SFE-values in today’s region by passing them the ownership on to local municipalities – Preemptive rights to purchase shares is a central topic of discussion – now pending legal process – Vestlandskraft (BKK, Hydro and SFE)

• SFE and Energi is currently negotiating models for full structural integration

9 Agenda

• Sogn og Fjordane Energi

• Financial overview

• Green Bonds Framework

10 Income statement

Revenues (NOKm) EBITDA (NOKm) Net profit (NOKm)

1,800 1,200 450 1,629 404 1,600 400 1,000 948 1,400 1,315 350 1,287 1,229 1,200 1,160 800 300 1,042 1,000 250 600 546 533 800 494 200 189 193 450 412 600 400 150 113 92 400 100 81 200 200 50

0 0 0 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017

11 Balance sheet

Total Assets (NOKm) NIBD / EBITDA (x) Equity Ratio (%)

7,000 6.0x 45 6,551 41.9 6,327 6,002 40 38.9 39.6 6,000 5,837 37.5 5.0x 4.8x 5,274 4.6x 35 34 5,000 4.0x 30 29.3 4,410 3.7x 3.5x 3.4x 4,000 25 3.0x 3,000 20

2.0x 1.8x 15 2,000 10 1.0x 1,000 5

0 0.0x 0 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017

12 Investment program 2018-2020

Capex • Production: Power plant Prod. Status (NOKm) – 500 GWh potential identified Østerbø 96 GWh 406 Project started – completion 2020 Hennøy Vindpark 30 GWH 90 Project started, SFE share 20% – Will only be materialized if profitable and Total 696 not jeopardizes investment grade status

• Power Grid: – AMS project capex ~NOK 100m to be completed by 2019 – Annual capex ~NOK 100-200m, a large share related to connecting new renewable energy onto the grid

13 Shareholders are contributing

70% dividend of parent company 50% dividend of results (current dividend policy) net profits

101

77 77 63 58 60

2012 2013 2014 2015 2016 2017

• Raised NOK 211m through share • Less dividend to the shareholders the issue in 2017 to fund investments past two years

14 Funding overview and financial policy

Debt maturity profile (NOKm) • Funding policy – Maintain a well diversified 600 maturity profile where 500 maximum 40% of outstanding debt mature within a 12 400 months period 300 – Liquidity reserves shall cover

200 minimum 50% of total maturities the next 6 months 100 • Sogn og Fjordane Energi has 0 NOK 400m in unused credit 2018 2019 2020 2021 2022 2023 2024 2025 2026 Bonds CP Bank lines

SFE shall maintain an investment grade company profile

15 Agenda

• Sogn og Fjordane Energi

• Financial overview

• Green Bonds Framework

16 Green Bonds Framework

• Eligible projects – Renewable Energy (Hydro, wind power with related infrastructure) – Energy Efficiency (Connection of renewable energy to distribution networks, upgrading of distribution networks and smart grids)

• 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

17 CICERO second opinion

• Strengths – Focuses on a clean, efficient, cost effective grid. With 98% renewable energy in the Norwegian grid, these investments are not expected to promote the use of fossils fuels for power generation – Strong governance procedures for advanced environmental management – Strong monitoring, management and reporting of waste • Weaknesses – No significant weaknesses perceived in Sogn og “ Fjordane’s Green Bonds Framework”

18 Environmental strategy (1/2)

• Sogn og Fjordane Energi focuses on: – Environmental friendly hydro power productions and operation, achieved by water course knowledge and local contributions – A proactive approach towards environmental friendly solutions – Accommodating regulations given by authorities • Examples – 80% vs. 60% recycling towards contractors in larger projects – Bio-gradable liquid on all transformers in distribution grid – Preparing for potential use of bio-gradable liquids in new power plants and substitution in older plants – Fish surveys and habitat measures – Flood controls – Voluntary cleaning up materials from old building sites

19 Environmental strategy (2/2)

• We also set high standards towards ourselves when it comes to the environment – Performing supervisory program for environmental objects based on best practice – Environmental heating through extracting heat from local for main offices in and Florø • Awarded Miljøfyrtårn certificate for our strict policies on work environment, procurement, transportation and waste management • SFE is also a coordinator for the utility industry in Song og Fjordane with respect to administrating water management regulations (EU framework)

20 SFE is also active in other areas

• Co-operation with Høgskulen på Vestlandet – Partner in research project RELEASE (local environment initiatives and sustainable energy) • Partner in Norsk Vannkraftsenter – Industry research within renewable energy organized through Energi Norge and REN • Partner in “Green School” project – SFE has been an important partner in the “Grøn Skule” project in Gloppen kommune. The project highlights environmental friendly initiatives and sustainable energy solutions in local schools • Long term partners with Ungt Entreprenørskap • Partner in establishing two Newton-rooms

21 Østerbø Hydro Power Plant

• New capacity of 165 GWh, 96 GWh SFE share, combined with a new 132 kV 20km grid cable – Total investment of ~NOK 700m – to be completed 2020 • SFE pro-actively works together with NVE on finding environmental friendly solutions by detailed planning on landscape/environment • Health, environment and safety on the agenda in each building meeting with contractors/entrepreneurs • Waste management during construction

22 Other renewable investments

Svelgen I Hennøy Vindpark

• Built in 1921 • Under construction • Rehabilitation of NOK 100m in 2017 • Will generate 150GWh when completed – Building of new tunnel and machinery • Total capex of ~NOK 450m to maintain production capacity – SFE ownership 20%

23 Green bond reporting

• To enable investors to follow the development and provide insight to prioritized areas, SFE will provide an annual investor letter to investors including

– A list of projects financed and CO2 reductions – A summary of SFE’s Green Bond Development

• Selection of Eligible Projects and use of proceeds will be verified by an internal committee Green Bond Investor Report Sogn og Fjordane Energi AS

24 QUESTIONS?

Martin Holvik CFO +47 91 69 52 34 / [email protected]