COMPANY PRESENTATION 1 Fjordkraft at a glance a leading Norwegian - PowerPoint PPT Presentation

COMPANY PRESENTATION 1

Fjordkraft at a glance – a leading Norwegian electricity retailer for both consumer and business customers     Deregulated: Transmission system Distribution system Electricity retailers Energy production End-customers operator (TSO) operators (DSO) 2018 financials 3% New Growth Gross revenue Consumer Typical customer Initiatives (“NGI”) NOK 6,721m Private households Alliance buying electricity for Net revenue adj. 70% everyday life NOK 1,088m Service offering to local Primary Secondary homes homes and regional electricity producers EBIT adj. NOK 390m Business Typical customer SMEs, large Mobile # of electricity deliveries 1 enterprises and public ~605,000 27% sector customers Mobile offering purchasing electricity launched in 2017 Large enterprises, # of mobile subscriptions 1 and advisory services SMEs public sector ~66,000 1.4 million people are supplied with electricity from Fjordkraft! = Share of 2018 net revenues (adj.) Source: Company information 1) Number of deliveries and subscribers at the end of 2018 2 | Company Presentation | 2019

A highly successful strategy execution has resulted in an impressive profitability shift and net revenue growth Impressive net revenue and EBIT development… …enabled through optimisation & focused investment 2002-2012 2013-2018 Net revenue adj. 1 in NOKm Today 1 088 1200 New management and strategy in place 924 1000 Fjordkraft established 2001 through 767 merger of BKK and Skagerak Energi’s 724 800 respective electricity retail operations 593 600 Investment in sales 422 362 336 resources 326 293 273 400 251 244 245 237 217 199 200 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Investment in operational excellence EBIT adj. 1 in NOKm 390 400 354 Investment in top-of-mind 325 350 304 and loyalty programs 300 226 250 200 Optimisation of 150 87 82 78 product management 68 59 100 52 49 48 45 43 31 2014 8 50 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2014 Source: Company information 1) NGAAP until 2015, IFRS for 2016 and 2017. 2016, 2017 and 2018 excluding estimate deviations, other gains & losses, special items and depreciation of acquisitions 3 | Company Presentation | 2019

Ambitions & opportunities Roadmap to growth 2019-2020 Drivers for consolidation  Regulatory changes 2 million (+0.6 million) people supplied  Merging of grid companies with electricity from Fjordkraft  Merging of counties and municipalities  Intensified competition 875k deliveries (+235k) through  Technology development Vision / Target growing the customer base  Complexity and scale The market is evolving in a direction of increased complexity in every part of the  Continue leverage market leading brand and distribution capabilities value chain - growing the need for scale Organic  Product development to expand market reach  Capacity to expand alliance partner base on The M&A target is now 150k deliveries within current Fjordkraft set-up Alliance the end of 2020  Cost efficient operations and increasing investment savings attractive to partners  Fjordkraft one of very few with scale and capacity to consolidate M&A  Market and regulatory developments supportive – increased push for consolidation 4 | Company Presentation | 2019

Fjordkraft – Summary investment highlights Operating in the attractive Norwegian electricity retailing market with an unparalleled demand 1 profile and a level playing field favouring strong national brands such as Fjordkraft 2 A proven business model providing ‘need to have’ electricity combined with sought after value-added services - supporting differentiation and margin robustness 3 The leading and most recognized electricity retail brand in Norway Unmatched platform for distribution of best in class service offering to 4 consumer and business customers across Norway Strong competitive advantages and a robust platform for further organic 5 and bolt-on acquisition driven growth Attractive financial profile based on a robust business model with limited capital expenditure 6 requirements resulting in solid add-on acquisition- and dividend capacity 5 | Company Presentation | 2019

Impressive results driven by accelerating growth and strong product management Consumer segment Business segment New Growth Initiatives Adj. net revenue (NOKm) Adj. net revenue (NOKm) Adj. net revenue (NOKm) 1 000 1 000 1 000 800 800 800 600 600 600 400 400 400 766 660 548 200 200 200 291 31 23 23 241 197 0 0 0 FY 2016 FY 2017 FY 2018 FY 2016 FY 2017 FY 2018 FY 2016 FY 2017 FY 2018 Adj. EBIT (NOKm) Adj. EBIT (NOKm) Adj. EBIT (NOKm) 300 50% 300 53% 60% 300 42% 49% 40% 47% 250 35% 250 50% 40% 200 200 200 40% 30% 35% 35% 33% 150 150 30% 100 20% 3 100 100 20% 154 0 10% 119 32.2 -29 -30 50 50 10% 93 72.7 231 267 265 0 0% 0 0% -100 FY 2016 FY 2017 FY 2018 FY 2016 FY 2017 FY 2018 FY 2016 FY 2017 FY 2018 1 EBIT adj. EBIT margin adj. EBIT adj. EBIT adj. EBIT margin adj. • Net revenue improvement driven by growth • Net revenue improvement driven by growth • Launch of Mobile in April 2017 – rapid in # of deliveries and product optimisation in # of deliveries and launch of new products growth, now ~75k mobile subscribers and services • Fairly stable development in adj. EBIT • Significant loyalty effect from the margin 1 , with a slight decrease due to • Increasing adj. EBIT margin, driven by net bundling increased competition revenue performance and economies of Expected EBIT positive 2 nd half • scale 2020 • Ext. Alliance concept launched late 2017 Sources: Company information 1) The dotted line is adjusted for differences between amortisation of contract assets and payments to obtain contract assets 6 | Company Presentation | 2019

Strong underlying cash generation with low investment needs, supporting attractive dividends and acquisitions Change in net cash Y-o-Y (NOKm) OpFCF 1 before tax and change in NWC 900 («Cash EBIT adj.»): NOK 373m 800 (111) 700 (34) 600 518 500 (283) 400 (109) 300 (100) 200 (112) 363 100 132 - Net cash 31.12.17 Change in NWC EBITDA adj. Payments to CAPEX ex. M&A Acquisitions Dividend Tax, non-cash Net cash 31.12.18 obtain contract NWC elements 2 assets and other items Sources: Company information 1) OpFCF defined as EBITDA adj. less CAPEX excl. M&A and payments to obtain contract assets 2) Non-cash NWC relates to items included in “change in NWC” that are not affecting net cash position. Other includes interest, tax, change in long-term receivables, proceeds from non-current receivables, proceeds from other long-term liabilities, share based payment expense, change in post-employment liabilities, payment of lease liability and adjustments made on EBITDA. 7 | Company Presentation | 2019

Financial targets for the next two years 1  Targeting high-single digit net revenue growth on an organic basis Group  Targeting a stable EBIT margin on an organic basis  Ambition to act as a consolidator in a fragmented market Revised after Q1 2019: Expected to be  Growth Targeting mid-single digit net revenue growth on an organic basis somewhat higher than targeted for 2019 Consumer  EBIT Targeted to gradually go down towards a sustainable level of slightly above 30% on an organic basis, driven by increased margin competition  Growth Targeting around double digit net revenue growth on an organic basis Business EBIT  Targeted to increase to above 55% on an organic basis, driven by scale effects margin New  Targeting substantial growth in number of customers in both Extended Alliance and Mobile Clarified in Q1 2019: Expecting ~25% growth improvement in nominal EBIT from 2018  EBIT loss in 2019 targeted lower than 2018. Positive run rate EBIT expected from second half of 2020 to 2019 initiatives Revised in Q2 2019: Targeted in the area of 50 Cap.ex.  Targeted to be in the area of NOK 40m annually on an organic basis NOKm annually on an organic basis  Moderate leverage with variations intra-year due to seasonality in net working capital Leverage  Current balance sheet enabling substantial capacity to finance acquisitions  Attractive and increasing dividend Dividend  Target pay-out ratio of at least 80% of net income, adjusted for certain cash and non-cash items 2 1) Base line for the financial targets is adjusted 2018 financials. All targets are adjusted figures 2) Adjusted EBIT + net finance – estimated tax – amortisation of acquisition debt 8 | Company Presentation | 2019

Appendix 9 | Company Presentation | 2019

System price in the day-ahead market ILLUSTRATIVE Drivers for the electricity price level: Marginal production cost Cost of: Example demand • coal curve Gas turbines • gas The system reference • carbon price serves as a basis Clearing point Long And renewable Oil for financial trading and between supply term hedging through Nasdaq developments and demand • wind Coal System price • solar Heat power x Nuclear CHP Hydrological power industry Short Wind Hydro power PV situation and term temperature TWh Price determination is based on bids and offers from all market participants 10 | Company Presentation | 2019