Arendals Fossekompani

Investor Presentation • Feb 14, 2020

AFK overview and 2019 preliminary results 14.02.2020

Disclaimer

This Presentation includes and is based on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ from the projected results. These statements and this Presentation are based on current expectations, estimates and projections about global economic conditions and the economic conditions of the regions and industries that compose major markets for the businesses of Arendals Fossekompani ASA and its subsidiaries and affiliates (the "AFK Group"). These expectations, estimates and projections are generally identifiable by statements containing words such as "expects", "believes", "estimates" or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for the businesses of the AFK Group, energy prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time in the Presentation. Although the AFK Group believes that its expectations and the Presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the Presentation. The AFK Group is making no representation or warranty, express or implied, as to the accuracy, reliability or completeness of the Presentation, and neither the AFK Group nor any of its directors, officers or employees will have any liability to you or any other persons resulting from the use of the Presentation.

Presenters and agenda

Overview

Financials 2019

Strategic priorities

AFK´

s digital energy companies

Ørjan Svanevik CEO, AFK

Trond Straume CEO, Powel

Overview

Software solutions	Induction heating equipment
Sensors and data harvesting	Satellite communication services
Portfolio manager, electricity market	Spanish cogeneration plants
Power market analysis	3D metal powder and systems

Provides solutions for sustainability and more reliable renewable energy

• Energy production
• Digitalization
• •Industrials with efficient use of energy

AFK company portfolio

Key priority to drive growth in digital energy businesses and 3D-printing

The AFK stock complies with ESG focused investors

In 2021, AFK will be reporting relevant KPI's for sustainability alongside business results

Exploiting excess heat from electricity production, to produce heat, steam or

Industrial systems contributes to increased usage of clean and environmental

Wattsight tells the story in numbers about the drivers for the market and the

¹ Estimated benchmark to the German power market. Production mix provided by Wattsight

Arendals Fossekompani in 90 seconds

DEVELOPING BETTER COMPANIES 7

Portfolio 2019 Highlights – Mixed performance

• Very strong performance due to favourable product mix and high bandwith usage

• +50% increase in 3D powder sales • Aperam JV within nickel powder

• Losses from one major tunnel project

• Major turn-around achieved • MNOK 16 EBITDA in 2018 to 86M in 2019

• Low revenue and EBITDA mainly due to automotive market weakness

Financials

Group revenue 2019: Largely flat development

Outlook 2020:

Excluding electricity price uncertainty, flat revenue growth expected. Focus is on profitability and capacity costs

Revenues, MNOK	FY2019	FY2018
EFD Induction	1 170	1 250
NSSLGlobal	889	758
Cogen Energia	1 261	1182
Tekna	140	144
Powel	548	585
Scanmatic 1)	422	649
Markedskraft	68	70
Wattsight	73	66
Other	219	202
AKF consolidated	4 790	4 906

1 Includes 311 MNOK of Scanmatic Elektro revenue in 2019 DEVELOPING BETTER COMPANIES ¹⁰

• Scanmatic includes consolidation of Scanmatic Elektro (51%), witch had substantial loss on a major tunnel project

• EFD had high capacity costs, now aligned with 2019 revenue levels

• Financial positions in stocks provided 223 MNOK of gains in 2019, but mainly booked directly to equity

• Outlook 2020: Overall weaker due to current market forecast for 2020 electricity prices. Excluding power production, results expected to improve

EBITDA, MNOK	FY 2019	FY 2018
EFD Induction	55	134
NSSLGlobal	230	167
Cogen Energia	22	40
Tekna	-24	-22
Powel	86	16
Scanmatic 1)	-41	44
Markedskraft	-6	-2
Wattsight	13	11
Other	131	113
AKF consolidated	465	501
AKF consolidated (ex. IFRS16 effects)	401	501

EBITDA disappointing, but excludes 223 MNOK of gain in real estate and Oslo Boers stocks

• High quality portfolio providing basis for stable dividend pay-outs
• The board has proposed a dividend of 56 NOK per share for 2019. To be approved at AGM on May 7th, 2020
  • Payment date around May 18
• Including gains on financial positions, EPS for 2019 is 139 NOK
• New dividend policy to be recommended
  • Change to quarterly dividend and aiming for stable growth
  • First quarterly payment proposed for Q2, 2020 at around September 2

P&L consolidated 2019
MNOK	FY 2019	FY 2018
Revenues	4 790	4 906
EBITDA	465	501
EBITDA %	9,7%	10,2%
EBIT	189	261
EBIT %	3,9%	5,3%
Net Financials	17	18	at AGM
Profit before tax	205	276
Tax income	-126	-135
Profit for the period	79	141
Earnings per Share (NOK)1	32	51

¹ The number of outstanding shares on 31.12.2019 was 2 193 519, outstanding shares on 31.12.2018 was 2 188 958

Ordinary EPS 32 NOK and dividend recommendation of 56 NOK for 2019. New quarterly dividend policy proposed by board

The parent company with net cash of 335 MNOK. Above 2 BNOK in available liquidity, before financial shares

• Financial investments of approx. 900 MNOK

Strategic priorities

Competitive edge both in operational excellence and technology position

1) Metal and Ceramic Powders 2) Plasma Systems

The Powder market addressed by Tekna are primarily Additive Manufacturing (micro size metals for 3D printing) and Printed Electronics (nano size metals and ceramic materials).

The Plasma Systems are mostly machine orders generating revenue annually of around \$10M – \$15M (2019: 10 M), and funds R&D efforts, with sales to non-competing customers

Tekna operates in two markets

• Total installed number of 3D printers end 2018 at 6,500. End 2020 forecasted at near 15,000 1

• Industrial use finally booming:

• Material cost (waste)
• Labour
• Lead times
• Weight
• Working capital
• Design for 3D

High expectations for powder sales outlook. Tekna with 50% growth in 2019

¹Source: Wohlers Report 2018 (Wohlers Associates, 2018), AFK investment team

Estimated market size (MUSD), Selected metal powders ¹

Exponential market growth expected to continue in metal markets

• Scale across value chain driving down cost

• New compact and automated 3D printer systems

• Higher powder quality and properties

• From prototyping to mass production

¹Source: Titanium Additive Manufacturing 2019 (Smartech, 2019), Tekna

Hydro Solar Thermal Wind

• Optimizing production mix and monitoring distribution network • Maximizing profit potential

• Outsourcing partner of trading activities • Transforming to robots as market increasingly trades towards real time

• Delivering price forecasts ranging from years to minutes
• Big data analytics to improve forecasting

Sensor expert with data capturing and formatting

• Water, snow, wind, temperature, sun, etc.
• HW devices and SW to format and relay data

Battery Hydrogen

AFK's digital energy companies play a significant role throughout the rapidly changing energy value chain

DEVELOPING BETTER COMPANIES 19

Evaluating strategic opportunities and long term market direction, in context of adjusted subsidy regime

More aggressive sales and marketing approach. Right size capacity, including global footprint, to 2020 market progress

Focus on existing clients and contract renewals

Evaluating strategic opportunities

Core company portfolio continued

Hydropower: 500 GWh production in AFK

AFK has been a reliable producer of hydropower for more than 100 years

AFK owns and operates two hydropower plants in Nidelva in the south of Norway

Flatenfoss

Installed capacity: 12,5 MW Annual production: approx. 100 GWh

Bøylefoss

Installed capacity: 65 MW Annual production: approx. 400 GWh

AFK has two potential projects under development together with other partners:

KILANDSFOSS

Estimated annual production approx. 40 GWh

GLOMSDAM Estimated annual production approx. 7,3 GWh

Later years transactions have shown a hydropower market price evolving around 3-5 NOK/kWh 1

Overview of hydropower transaction values in the Norwegian market (NOK /kWh

¹Transaction multiples for hydropower (SEB 2020)

• Net cash position in parent of about 300 MNOK and real estate shares of around 900 MNOK
• Market transactions valuing kWh hydro power production between 3-5 NOK
• Around 0.5 BNOK in book equity at Cogen and EFD
• Book equity in NSSL of 389 MNOK, and AFK ownership 80%. EBITDA of 230 MNOK in 2019
• Software revenue seen valued at 5-7 x sales (relevant for AFK digital energy companies), but needs high recurring revenue and growth rate, combined with solid margin
• 3d printing expected to grow 4x next 3-4 years (AFK investment in Tekna at approx. 470 MNOK, incl. loans)

Valuation Considerations and Uncertainty

Improve profitability and increase focus on strategic agenda

• ✓ Cost base, Sales efficiency, Streamlined offering, Product development
• ✓ Invest in strategic position

Increased investment churn willingness, although remain long term

• ✓ Both exits and new investments on agenda
• ✓ But patience required

Improve visibility and position of AFK

• ✓ Bring forward inherent ESG profile
• ✓ Become more shareholder friendly; including quarterly dividend policy
• ✓ Strengthen investment team capacity

Key AFK parent agenda

AFK's digital energy companies (Trond Straume)