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 River system Mean production Reservoir capacity 9.1 9.0 8.9 ( TWh/year) (TWh) 8.1 7.7 Otra 3.6 2.7 Mandal 1.7 0.5 Production TWh 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 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% % of normal 60% 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 Øre/KWh 25 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 2 537 2 531 2 440 10 000 2 500 2 194 2 000 8 000 1 377 1 500 6 000 1 000 4 000 500 2 000 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 30% 1 779 1 512 1 502 1 486 25,1% 1 500 25% 21,8% 1 000 19,4% 18,4% 20% 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 CO 2 /KWh Hydro power part of future ambitions of low 1 000 emissions ‒ Rule of thumb conventional coal fired plants 800 1 000 x higher CO 2 emissions than hydro power ‒ Source: Eurelectric, LCA figures 600 400 Green Certificates ‒ Norwegian-Swedish political initiative to increase 200 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 CO 2 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
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