Norske Skog ASA

Earnings Release • Feb 4, 2021

Q4 2020 presentation

4 February 2021

www.norskeskog.com

Fourth quarter in brief

Q4 2020 EBITDA of NOK 146 million up from NOK 73 million in the previous quarter

• Improvement resulting from increased sales volume and favourable cost development
• Europe contributing NOK 171 million up from NOK 84 million in the previous quarter, with Australasia remaining marginally EBITDA negative

Maintaining a robust balance sheet with net interest-bearing debt of NOK 725 million

• Cash position of NOK 980 million and cash flow from operations of NOK 73 million in the quarter
• Following the quarter, Norske Skog announced successfully raising NOK 400 million in equity to finance upcoming growth projects

Green growth projects seeing significant traction and progressing according to plan

• On track for containerboard production start-up in 2023 as e-commerce and sustainability drive demand to outpace 2020 supply additions
• Circa¹ contemplating Q1 2021 capital raise to finance the world's first large scale production facility for multiple high value biochemicals

Production capacity in Australasia and Europe adjusted to match supply demand

Impairment charge of NOK 258 million in the quarter due to COVID-19 market impact

▪ Impairment in Australasia of NOK 96 million and in Europe of NOK 161 million

EBITDA improving in Q4 2020 vs Q3 2020

3

Underlying EBITDA growth driven by better volumes and variable costs

• utilisation of 81% in the quarter (prior to capacity reductions¹ )
• Prices weakening towards the end of the quarter, coupled with unfavourable development in geographic and product grade mix
• Lower variable costs mainly resulting from reduced energy prices, wood prices and recovered paper prices
• Increase in fixed costs mainly a result of reduction in government COVID-19 support in Australasia received in Q3 2020
• Other relates to Nature's Flame operations, COVID-19 support arrangements and energy arrangements in Golbey

▪ Volumes continue to recover from low point in May 2020,

4 1) Saugbrugs PM5 ceased production of SC magazine paper (capacity of 100,000 tonnes) in Q4 2020 and Tasman ceased newsprint production (capacity of 150,000 tonnes) in favour of converting grade paper in Q4 2020

EBITDA bridge Q3 2020 to Q4 2020, NOKm

Significant EBITDA improvement in Europe

5

NOKm NOKm (and margin in %) NOKm (and margin in %)

Europe – Revenue Europe – EBITDA Europe – Underlying EBITDA

• Newsprint, SC and LWC demand in Europe decreased by 22%, 13% and 22%, respectively through November
• Volume improvements, with utilisation of 80% up from 72%¹
• Realised prices somewhat lower in the quarter due to a weak market end of year and unfavourable geographic and product mix
• Favourable raw material prices

Quarterly financials for Australasia

• Newsprint and magazine paper demand declined by 22% and 26% through December 2020
• Volume improvements, with utilisation of 87% up from 69%¹
• Favourable development in variable costs
• Reduction in government support driving reduction in EBITDA

Corporate strategy

Illustrative over-the-cycle EBITDA

Diversify and innovate within fibre and energy

Become a leading producer of renewable packaging

Improve and optimise publication paper cash flows

Publication paper will continue to generate significant cash flows as strategic focus shifts towards growth projects

Illustrative over-the-cycle EBITDA

• ➢ Remain a producer of all publication paper grades
• ➢ Publication paper capacity of ~2.1m tonnes¹
• ➢ Five paper mills with 11 paper machines combined²
• ➢ Over-the-cycle publication paper EBITDA of NOK 1,000m

8 1) Capacity of 1,350,000 tonnes newsprint, 400,000 tonnes LWC and 360,000 tonnes SC following closure of Saugbrugs PM5 and ceased newsprint production at Tasman to allow for production of converting grade paper; 2) Following closure of Saugbrugs PM5 and ceased newsprint production at Tasman

Expected price recovery in H2 2021 as market rebalances following industry reaction to COVID-19

Capacity closures in Western Europe,

Market recovery expected H2 2021

Monthly publication paper reference prices in Germany, EUR per tonne

News 45g SC rotogr. 56g LWC offset 60g

Active cash conversion management initiatives in 2021

Cash conversion initiatives in 2021 of NOK ~200-250m

NOKm

Gross margin improvement

• Efficiency investment at Saugbrugs¹ and optimisation of Australasian operations with repositioning of Tasman into production of conversion paper grades
• Favourable variable unit costs (energy and fibre) seen in 2020 unlikely to persist in an economic recovery

Fixed cost reduction

• Fixed cost reduction of NOK ~100-150m following closure of Saugbrugs PM5 and company wide cost reduction programme
• Sales volume down ~460,000 tonnes in 2020, resulting in a negative margin impact expected to be mitigated as sales volumes rebound

Maintenance capex reduction

▪ Annual maintenance capex revised from NOK 175-225m to NOK 150m reflecting capacity adjustments and cash conversion focus

10 1) Cash earnings defined as cash flows from operations less maintenance capex. Cash flow from operations of NOK 602m in 2019 and NOK 549m in 2020. Maintenance capex of NOK 254m in 2019 and NOK 264m in 2020; 2) NEXT/Therminator gross investment of NOK 165m of which NOK 99m net to Norske Skog as a result of ENOVA grant and NOX grant

Industry low CO² footprint enabling annual CO² emission allowance surplus

Emission allowance price

• Leading environmental profile enabled by sustainable energy mix
• Industry low CO² footprint basis for annual emission allowance surplus
• Waste-to-energy plant at Bruck will reduce CO² footprint with 150k tonnes annually, start H1 2022
• Surplus allowances can be sold in the market, recent pricing of EUR +30 per allowance
• Cost compensation received to cover increase in energy prices resulting from the EU ETS¹
• 2020 emission allowance sales of NOK ~80-85m and cost compensation of NOK ~300-350m²

11 Source: European Commission 1) Emission Trading Scheme; 2) Note that cost compensation is booked through the year 2020, but cash payment will be received during H1 2021

Norske Skog to become a leading European renewable packaging player

Illustrative over-the-cycle EBITDA

• ➢ Containerboard projects in Bruck and Golbey
• ➢ Replace newsprint with 765,000 tonnes of containerboard¹
• ➢ Annual European demand growth +600,000 tonnes²
• ➢ Enable recyclable logistics for e-commerce boom
• ➢ Capitalise on packaging moving away from plastics
• ➢ Financing commitment from banks expected Q1 2021
• ➢ Expected EBITDA of NOK ~700-800m from 2025-26

12 Source: External industry consultant (third-party)

1) Reduction of Western European newsprint capacity of 360,000 tonnes in 2022 to 2023, representing approximately 8% of Western European newsprint capacity following closures in 2020; 2) European demand of ~26m tonnes with annual growth rate of 2-3%

Strong price development within renewable containerboard

Industry trends favouring sustainable and light weight packaging

"By 2025 we will halve the amount of virgin plastic we use in our packaging"

"Our commitment is that 100% of our packaging is recyclable or reusable by 2025"

"Target to design our packaging to minimize waste and eliminate single-use plastics by 2023"

"Goal of ensuring that all plastic packaging is reusable or recyclable in a cost-effective manner by 2030"

14 Source: Centre for Retail Research (CRR), FEFCO, external industry consultant (third-party), European Commission, company statements 1) Combination of liner and fluting containerboards (the two containerboard grades Norske Skog plans to produce) provides corrugated board

Norske Skog will be a containerboard producer in 2023

Norske Skog Golbey – France

PM1

• 235k tonnes newsprint capacity
• Convert to 555k tonnes containerboard
• Capex estimate of EUR ~250m

PM2

• 330k tonnes newsprint capacity
• Strong candidate for future conversion
• Feasibility studies concluded

Norske Skog Bruck – Austria

PM3

• 125k tonnes newsprint capacity
• Convert to 210k tonnes containerboard
• Capex estimate of EUR ~100m

PM4

• 265k tonnes LWC magazine capacity
• Strong candidate for future conversion
• Feasibility studies concluded

Containerboard projects will unlock a growing and highmargin market solidifying future cash flow generation

✓Strong process and project competence locally at the mills

• ✓Leading competence on pulp & paper highly relevant in packaging
• ‒ Similar production process as for publication paper
• ✓In-house personnel with experience from previous and similar projects
• ✓Working with multiple experienced and best-in-class suppliers
• ‒ Specialised and competitive suppliers with strong reputations
• ‒ The same suppliers into containerboard and publication paper
• ‒ Targeting the best solutions from the most experienced suppliers

✓Support from experienced technical consultants

• ‒ Engineering and design services also covering delivery interfaces
• ✓Extensive commercial work initiated to place new volume in market
• ‒ Experienced personnel have been hired and consultants engaged

Norske Skog's promising portfolio of fibre and energy projects enable diversification and innovation opportunities

Illustrative over-the-cycle EBITDA

2020	2023	2026
Publication paper	Renewable packaging	Fibre and energy

• ➢ Waste-to-energy plant: Sustainable energy production of +400 GWh(th) and EBITDA of NOK ~200m, start-up in H1 2022
• ➢ Pellets: Producing 85,000 tonnes of renewable energy pellets in New Zealand with annual EBITDA of NOK ~30-35m
• ➢ Circa¹ : Biochemicals company planning a 1,000 tonnes plant in France with EUR ~12m EU grant (ReSolute² ), start-up Q1 2023
• ➢ CEBINA: First commercial sales in Q4 2020 and ambition to secure international distribution agreement in 2021
• ➢ Bio Composites: Decision on installation of pilot taken in Q4 2020 to enable further commercial development and qualification testing

16 1) Norske Skog holds ~32% of Circa, subject to final approvals; 2) ReSolute is an EU Flagship Project and consortium lead by Circa to develop and commercialise on a large scale the biobased solvent CyreneTM

Waste-to-energy plant 50 MW(th) of sustainable energy capacity being installed in Bruck

• Progressing according to plan with start-up expected in H1 2022
• Proven technology from Valmet with a turnkey installation contract
• Replace gas consumption with energy produced from regional waste
• Significant demand for waste offtake in Austria and surrounding areas
• Increasing landfill regulation to further drive demand for waste offtake
• Reducing the CO² footprint of the Bruck mill with 150,000 tonnes
• Revenue generation from waste gate fees and electricity production
• Expected EBITDA contribution of NOK ~200m
• EUR 72m investment of which EUR ~22m invested as of Q4 2020
• EUR ~10m of EUR 54m in local debt drawn as of Q4 2020

Circa Group Produces and sells valuable biochemicals with patented technology

• Circa¹ targets the bioeconomy ambition of replacing fossil and toxic chemicals with biochemicals
• Built on +50 years of biochemical research and more than 10 years of technology verification
• Unique ability to produce large amounts of the platform chemical LGO² using its patented FuracellTM process
• LGO is used to derive (among other) CyreneTM, a biobased solvent replacing toxic and fossil solvents NMP and DMF
• Such solvents are essential for the production of medicines, electronics, agrochemicals and more
• More than 1,000 tests with researchers and companies, and currently selling through Merck KGaA and directly
• Recent EU Horizon2020 grant of EUR ~12m to support a 1,000 tonnes plant in France for the production of LGO and CyreneTM
• Contemplated capital raise (IPO) during Q1 2021 to raise the remaining funding required for construction of the plant

CEBINA is an environmentally friendly input factor relevant in a range of applications

Produced from renewable fibre and hydro energy

CEBINA product portfolio comprises among other:

➢ CEBINA MB

➢ CEBINA 4%

➢ CEBINA 20% Exploring additional Exploring additional applications

… …

applications

• CEBINA developed by Norske Skog since 2006
• Originally developed as strength enhancer in paper
• Qualities relevant in a wide range of other applications
• Significant commercial work during 2019 and 2020
• Collaboration with technical partners and customers
• First commercial sales in Q4 2020 (proof of concept)
• Target international distribution agreement in 2021
• Pilot plant with capacity of up to 500 tonnes
• Reviewing capacity upscaling opportunities

Outlook

Clear priorities in the short term

• Focus on cash conversion
• Reposition Australasian operations
• Maintain a robust balance sheet

Execute on strategy in the long term

• Become a leading producer of renewable packaging
• Develop and commercialise fibre and energy projects
• Remain a producer of all publication paper grades

Contemplated CMD on hold until further clarity on COVID-19 restrictions

Appendix

World-class assets and fibre competence enable unique green growth opportunities

22 Note: PM = Paper Machine, FC = Furacell, LWC = Lightweight Coated (magazine paper), SC = Super Calendared (magazine paper), News = Newsprint 1) Subject to final approvals

Entering the containerboard market with first-quartile capacity

23 Source: External industry consultant (third-party), cost data as of Q3 2019 1) Europe excluding Russia

Sustainable production of premium quality pellets

Nature's Flame modern and state-of-the-art wood pellet production facility in Taupo, New Zealand

• NZD ~45m invested in state-of-the-art facility
• NOK ~30-35m EBITDA contribution
• Acquired by Norske Skog in July 2015
• FSC certified fibre supply
• Renewable geo-thermal energy supply
• DinPlus certification for premium pellets
• BioGro New Zealand organic certification
• Current production around 90,000 tonnes
• Expansion opportunities of ~120,000 tonnes
• Equivalent to thermal energy of +425 GWh(th) 1
• Fonterra offtake agreement for 50,000 tonnes

Identifying new value in former Saugbrugs administration office

Part of former Saugbrugs administration office in Halden to be used for high school

• Porsnes Utvikling¹ to redevelop part of former Saugbrugs administration office for high school purposes
• Financing and municipality lease agreement in place
• Redevelopment completion planned for Q2 2022
• Porsnes Utvikling to develop remaining sections of the administration office and surrounding area
• Norske Skog explores opportunities for areas owned in the 'greater' region surrounding Saugbrugs

Pilot plant to enable further commercial development and testing

Replace plastics with sustainable fibre

Wood fibre and recycled plastics will enable a circular economy

• Bio Composites have been developed by Norske Skog since 2015
• Mixes fibre (TMP) and recycled plastics into a composite material
• Demand driven by better environmental profile (less plastics consumption and improved recyclability)
• Range of applications including pipes, car interiors, furniture and packaging
• Executed industrial-scale tests in Germany and working closely with potential customers
• NOK 15m Innovation Norway Grant received in Q4 2020 to invest in a NOK ~25m pilot plant
• Enables further commercial development and qualification testing with customers in 2021 and 2022

Leverage quality assets and fibre competence towards green growth

Entry into high-margin and growing containerboard market through conversion of paper machines

• Containerboard projects on track for start up in 2023 with expected EBITDA contribution of NOK ~700-800m from 2025-26
• Expect commitment from banks on containerboard financing and refinancing of bond in Q1 2021, and finalised loan agreements during H1 2020
• Expected to cover 70-80% of EUR 350m project capex of which 50-60% guaranteed by ECAs, tenor of 10-11 years and no amortisation during construction

Promising green growth investment opportunities with significant earnings impact

• Bruck waste-to-energy plant on track for start up in H1 2022 with expected EBITDA contribution of NOK ~200m
• Nature's Flame pellets facility performing excellently with EBITDA contribution of NOK ~30-35m
• Circa¹ is leading a consortium towards construction of a 1,000 tonne biochemicals plant in France
• First sales of CEBINA in Q4 2020 with ambition for international distribution agreement during 2021

High-quality publication paper mills with competitive cost position and significant cash generation

• NOK 1,000m over-the-cycle EBITDA and continuous work to improve and optimise publication paper cash flows
• Cost reduction of NOK ~200-250m from 2021 due to machine closures, efficiency investments and cost programmes
• Industry low CO² footprint enabling annual CO² emission allowance surplus