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 Network Build and operate Build and operate hydro power stations distribution network
Market Energy Management and LOS: Private end user sales Trading Otera: Infra structure contractor Maximising profit of the Varme: District heating and cooling hydro power portfolio, business retail sales Hydro power with high flexibility
9.1 9.0 River system Mean production Reservoir capacity 8.9 (TWh/year) (TWh) 8.1 Otra 3.6 2.7 7.7
Mandal 1.7 0.5 TWh Arendal 1.3 0.7
Sira-Kvina 0.8 0.7 Production
Ulla-Førre 0.3 0.5
Andre 0.4 0.1
Sum 8.1 5.3 2012 2013 2014 2015 2016 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 Strategic goals toward 2020
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 Focus areas
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 Investments 2017-2021
3% 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
47% 50% 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 Hydro Network Other Investments 2017-2021
Largest projects Project cost Completion (ca, NOK mill) 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 Highlights second quarter 2017
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) Reservoir levels NO2
100%
80%
60% % % of normal 40%
20%
0% jan. feb. mar. apr. may jun. jul. aug. sep. oct. nov. dec. 2017 2016 Avg. 10 yrs Power prices NO2
40
35
30
25
Øre/KWh 20
15
10
5
0 jan. feb. mar. apr. may jun. jul. aug. sep. oct. nov. dec. Spot/forward price 2017 Spot price 2016 Revenues and EBITDA per segment
Revenues (NOK mill) EBITDA (NOK mill)
12 000 3 000
2 531 2 537 10 000 2 500 2 440 2 194
8 000 2 000
1 377 6 000 1 500
4 000 1 000
2 000 500
0 0 2013 2014 2015 2016 2017H1 2013 2014 2015 2016 2017H1 Hydro Network Market Hydro Network Market Solid cash flow providing financial strength
Cash Flow (NOK mill) FFO*/Net Debt
2 000 1 779 30% 1 486 1 512 1 502 1 500 25,1% 25% 21,8% 1 000 19,4% 20% 18,4% 500
0 15%
-500 10% -1 000 5% -1 500
-2 000 0% 2013 2014 2015 2016 2013 2014 2015 2016 Operational CF Net investments Dividends FFO*/Net Debt
*Unadjusted, adjustments are made in rating. Interest bearing debt on 4 quarters rolling basis Robust funding structure and diverse maturity profile
Funding sources Maturity profile (NOK mill) 1 600
1 400 7% 7% 1 200
1 000
800 54% 600 33% 400
200
0 2017 2019 2021 2023 2025 2027+ Bonds EUR Loans USPP CP Bonds EUR Loans USPP CP
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 Obtained Scope credit rating in Aug-17
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 organized and show ability and willingness for potential parent support Agder Energi Green Bonds
Agder Energi: God kraft-godt klima Renewable hydro power in context of emissions
1 200 Grams CO2/KWh
1 000 Hydro power part of future ambitions of low emissions 800 ‒ Rule of thumb conventional coal fired plants 1 000 x higher CO2 emissions than hydro power 600 ‒ Source: Eurelectric, LCA figures
400 Green Certificates 200 ‒ Norwegian-Swedish political initiative to increase renewable power production by 28 TWh by 2021 - ‒ Agder Energi build profitable hydro power projects with granted concession Agder Energi’s Green Bond Framework
Eligible Projects Project • Renewable Energy – hydro power (wind power) and pool 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 Eligible Projects CICERO - an independent provider of second opinions
Assessment Begins Draft Second Opinion Final Second Opinion
Green Bond Framework
Green Bond Climate Principles Science
Clarifications with Sustainability the Issuer as needed Strategy and Reports
Relevant ✓ Use of proceeds standards ✓ Management of proceeds Other relevant ✓ Governance and Transparency documentation ✓ Impact Reporting
Input from Issuer Week 1-2 Week 3 Second Opinion CICERO’s second opinion of Agder Energi’s Green Bond Framework
“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”
Strengths: Weaknesses: • HSE risk assessment established across all • Environmental overview of supply chain is operations insufficient • Environmental risk analysis on a project level through Miljøoppfølgingsprogrammet (“MOP”) • Focus on environmental concerns in hydro power projects • Good reporting standards 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
AE produces OED produces AE produces NVE to decide impact study NVE produce proposition to note of comprehensive and send proposition to the national intention to -ness of impact application to OED assembly for NVE study NVE 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 Åseral Projects – maintain existing and build Kvernevatn new hydro power capacity ‒ Several separate projects with individual investment decision ‒ New dam Langevatn,
Øygard ‒ New tunnel Langevatn/Nåvatn 13 km ‒ Kvernevatn and Øygard hydro power stations ‒ Skjerka generator 2 ‒ Concessions granted
Åseral Nord – maintain hydro power infra structure
Skjerka 2 ‒ 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 Annual Green Bond Report
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 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 Disclaimer
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 of 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 other contract or engagement in any jurisdiction.