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Norske Skog ASA

Investor Presentation Feb 4, 2022

3687_rns_2022-02-04_22fae225-ac68-492a-a23c-4b501096dc64.pdf

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Q4 2021 presentation

04 February 2022

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Visit our website www.norskeskog.com

Quarterly reports and presentations in the Quartr app

Sustainable and innovative industry

  • Global industrial company focusing on publication paper, packaging paper, energy and bio products
  • Transitioning into markets with strong growth outlook and higher margins
  • Takeover of waste-to-energy facility from Valmet Q2 2022 improving green energy mix
  • Becoming a leading independent European recycled containerboard company in 2023
  • Promising biochemicals and materials projects with CEBINA, CEBICO and Circa
  • Portfolio of industrial sites foundation for further business development

2 1) Norske Skog is the largest shareholder with ~26% ownership position in Circa; 2) Installed capacity for biofuel and waste from recycled paper of 230 MW. Energy mainly used internally in the publication paper production process

Earnings normalising as operating environment remains highly challenging

3 1) Cash earnings defined as cash flow from operations less maintenance capex

Fourth quarter in brief

Necessary price increases for all product grades realised in Q4 2021 and into 2022

  • Publication paper market tightening following significant capacity closures, further closures announced in 2022 and 2023
  • Price increases addressing continued and unprecedented increases in energy and raw material prices

EBITDA of NOK 422m in the quarter

  • EBITDA improvement from previous quarter with margins normalising towards the >10% area
  • Continued strong negative earnings pressure from energy and raw material costs

Sale of CO2 allowances

  • All allowances for 2021 received, the full net surplus sold in the quarter leading to a positive cash impact
  • CO2 compensation for 2021 expected to be paid during H1 2022

Entered into credit facilities to fully finance packaging paper projects

  • Attractive terms for EUR 265m debt financing with average maturity towards the end of 2030
  • Capex being incurred and debt facilities being drawn for both projects

Entered into agreement to sell Nature's Flame pellets facility following end of quarter

  • Signed agreement to sell New Zealand pellets facility to Talley's for a consideration of NZD ~47.8m
  • Cash proceeds of NZD ~47.8m and book value gain of NOK 150-200m expected during Q1 2022

Liquidity headroom to execute strategic growth projects

5 1) Includes waste-to-energy project at the Bruck industrial site and packaging paper projects at the Bruck and Golbey industrial sites; 2) Cash earnings defined as cash flow from operations less maintenance capex

Total liquidity sources of EUR ~490m

  • Cash balance of NOK 1,489m (EUR ~149m)
  • Proceeds of NZD ~47.8m (EUR ~28m) from Nature's Flame sale in Q1'22
  • 2021 CO2 compensation of NOK ~290m (EUR ~29m) expected paid in H1'22
  • Undrawn strategic project1 debt facilities of EUR ~255m
  • Undrawn RCF of EUR 31m
  • Excluding future cash earnings2

Remaining strategic project1 capex of EUR ~335m

Segment financials for Q4 2021

Segment financials
NOKm Q4 2021 Q3 2021 Q4 2020 2021 2020
Europe
Total operating income 2,648 2,183 1,899 8,412 7,412
EBITDA 395 113 171 628 659
EBITDA margin 14.9% 5.2% 9.0% 7.5% 8.9%
Production (1 000 tonnes) 428 428 382 1,628 1,468
Deliveries (1 000 tonnes) 427 433 403 1,645 1,482
Production / capacity 96% 96% 80% 91% 77%
Australasia
Total operating income 395 426 526 1,792 2,106
EBITDA 46 0 -13 44 106
EBITDA margin 11.6% 0.0% -2.5% 2.5% 5.0%
Production (1 000 tonnes) 62 62 94 292 332
Deliveries (1 000 tonnes) 62 68 97 308 343
Production / capacity 87% 87% 87% 79% 76%
Other activities
Total operating income 71 61 68 228 204
EBITDA -19 -
2
-12 -11 -29
  • Utilisation of 96% (equivalent to full utilisation)
  • Realised prices in the quarter up +20% to previous quarter
  • Continued high raw material prices (energy and recovered paper)

  • Utilisation of 87%

  • Boyer is the only domestic publication paper supplier
  • Publication paper price increases end of 2021

Historical and ongoing investments in green energy enables low CO2 footprint and emission allowance surplus

Allowance surplus due to green energy mix

Allocated allowances and net surplus, thousand allowances

CO2 prices reflecting the green shift

Price per allowance, EUR / allowance

  • Daily price Annual average 0 10 20 30 40 50 60 70 80 90 100 2013 2015 2017 2019 2021
  • Net allowance surplus for 2021 sold during Q4 2021, allowances for 2022 expected received in Q1 2022
  • Indication to receive gross ~410k allowances per year in period 2022-2025
  • Annual fossil CO2 emissions of ~220k tonnes, to be reduced with ~150k tonnes from waste-to-energy plant (takeover from Valmet in Q2 2022)
  • Allowance sale income booked quarterly based on annual surplus, cash proceeds received upon sale
  • CO2 cost compensation booked quarterly, cash proceeds received the year after booking

Publication paper market tightening as COVID-19 restrictions ease and significant capacity exits the market

Publication paper capacity closures since H2 2020

Capacity closures in Western Europe, thousand tonnes

Demand stabilising as COVID-19 restrictions ease

Fibre and energy costs have squeezed industry margins to unsustainable levels driving necessary price increases

Source: RISI, Nord Pool, European Energy Exchange (EEX), Dutch Title Transfer Facility (TTF) 1) 1.11 sorted graphic paper for deinking in Germany; 2) Dutch Title Transfer Facility (TTF) natural gas price Bruck waste-to-energy facility in commissioning and on track for takeover from Valmet in two months

10 1) Based on historical and normalised prices; 2) RDF = Refuse Derived Fuel, is a fuel produced from various types of waste such as municipal solid waste (MSW), industrial waste or commercial waste

On time and on budget for entry into the containerboard market

Containerboard projects in progress Site preparations and equipment orders underway

Invested EUR ~30m as of Q4 2021

Project investment of EUR 350m (large share on contract)

EUR 265m debt financing

ECA1 -backed debt financing enables highly competitive interest rates

Q4 2022 first production

Stepwise introduction with Bruck in Q4 2022 and Golbey in Q4 2023

760,000 tonnes

Recycled containerboard production capacity

Expected EBITDA of EUR 70-80m

Based on historical trend prices and full utilisation in 2025-26

11 Sources: RISI 1) ECA = Export Credit Agency

Packaging projects on track to enter high growth market

Norske Skog Golbey – France

  • Today, 235k tonnes newsprint capacity
  • Convert to 550k tonnes containerboard
  • Stop newsprint production Q2 2023
  • Start containerboard production Q4 2023
  • Capex estimate of EUR ~250m

Paper Machine 2 (PM2)

  • 330k tonnes newsprint capacity
  • Ongoing production during PM1 conversion
  • Strong candidate for future conversion

Norske Skog Bruck – Austria

Paper Machine 3 (PM3)

  • Today, 125k tonnes newsprint capacity
  • Convert to 210k tonnes containerboard
  • Stop newsprint production Q3 2022
  • Start containerboard production Q4 2022
  • Capex estimate of EUR ~100m

Paper Machine 4 (PM4)

  • 265k tonnes LWC magazine capacity
  • Ongoing production during PM3 conversion
  • Strong candidate for future conversion

Strong recycled containerboard demand growth

Projects chosen on basis of first quartile cash cost position enabled by fundamental properties of the machines

13 Source: External industry consultant (third-party), cost data as of Q3 2019

1) Europe excluding Russia; 2) Being developed in partnership with Pearl Infrastructure Capital and Véolia. Norske Skog to hold 10% of the equity in the development company, Green Valley Energie

Production of high quality and sustainable wood pellets to continue under new and local ownership

Nature's Flame state-of-the-art wood pellet production facility in Taupo, New Zealand ~90kt capacity 17.5 GJ per tonne DinPlus & BioGro accredited

Grant of EUR 8.2m under the France Relance programme, de-risking the ReSolute project

  • Significantly de-risked financing for ReSolute with France Relance grant of EUR 8.2m
  • Seek to establish strong supplier partnerships to enable and de-risk future growth journey
  • High interest and several ongoing vendor dialogues regarding reactor and equipment orders
  • Investigate on site conversion of biochar to energy for ReSolute production process (proof-of-concept)
  • Norske Skog owns ~26% of Circa and will remain a strategic and long-term supporter of its ambition to deliver sustainable biochemicals at scale

Reducing the environmental impact is at the forefront of all business decisions

Carbon footprint development and ambition

Kg CO2 direct and indirect (scope 1 and 2) emissions per tonne produced1

below the EU ETS2 benchmark in 2020

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Highlighted green initiatives

  • ✓ New energy efficiency initiatives introduced during 20214
  • ✓ Waste-to-energy facility reducing CO2 footprint by 150k tonnes, takeover Q2 2022
  • ✓ New Golbey biomass boiler5 from Q2 2024, producing green steam and electricity from sludge and waste wood
  • ✓ Increasing use of rail transport for fresh fibres in Norway, reducing road traffic

16 1) Scope 1 includes direct emissions from stationary fuel combustion, transportation and mobile sources. Scope 2 includes indirect emissions from steam and power imports; 2) ETS = Emission Trading Scheme, Norske Skog is a net receiver of carbon emission allowances, indicating that Norske Skog is better than the industry emission intensity benchmark; 3) GRI = Global Reporting Initiative; 4) The NEXT and Therminator energy efficiency projects announced at the Norske Skog Saugbrugs mill in March 2020 have come on stream in 2021 to further improve the energy efficiency of Norske Skog. The projects are supported by the NOx Fund and Enova; 5) Being developed in partnership with Pearl Infrastructure Capital and Véolia. Norske Skog to hold 10% of the equity in the development company, Green Valley Energie

CSR reporting applying the GRI3 guidelines since 2003

Outlook

Publication paper markets

  • Improving operating rates in the industry
  • Considerable paper price increases in Q4 2021 and into 2022
  • Continued high prices for energy, recycled fibre and other input factors
  • Remain a reliable supplier of all publication paper grades

Strategic shift into new markets

  • Continued commercialisation of CEBINA and CEBICO
  • Bruck waste-to-energy facility takeover in Q2 2022
  • Containerboard production to start in Q4 2022

Norske Skog ASA Postal address: P.O. Box 294 Skøyen, 0213 Oslo, Norway Visitors: Sjølyst Plass 2, 0278 Oslo, Norway

Phone: +47 22 51 20 20 Email: [email protected] Email: [email protected]

This presentation contains statements regarding the future in connection with Norske Skog's growth initiatives, profit figures, outlook, strategies and objectives. All statements regarding the future are subject to inherent risks and uncertainties, and many factors can lead to actual profits and developments deviating substantially from what has been expressed or implied in such statements.

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