Arendals Fossekompani

Investor Presentation • Aug 20, 2020

Company presentation

Strictly private and confidential ||

20 August 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 comprise major markets for the businesses of Arendals Fossekompani ASA and its subsidiaries and affiliates («AFK Group»), including Volue AS and its subsidiaries and affiliates («Volue»). 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 either the AFK Group or Volue, energy price development, 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 and Volue believe that the expectations as presented in this Presentation are based upon reasonable assumptions, there can be made no assurance that those expectations will be achieved or that the actual results will be as set out in the Presentation. Neither the AFK Group nor Volue are making any representation or warranty, express or implied, as to the accuracy, reliability or completeness of the Presentation, and neither the AFK Group nor Volue, including any of its directors, officers or employees will have any liability to you or any other persons resulting from the use of the Presentation.

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Volue in brief: A leading supplier of software and technology solutions for the energy, power grid and infrastructure markets

Volue serves three market segments

Help customers master the energy transition by enabling wall-to-wall digitalisation of the green energy value chain

LTM sales	NOK 435m
ARR share	64%

Energy Production & Trading Power Grid & Flexibility Infrastructure

Enable power distributors to support electrification of society by unlocking flexibility and digital management of the power grid

Deliver flexible capabilities for digital water management and help automate processes and machines for the construction industry

One-stop-shop with leading competencies and capabilities across the clean energy value chain

End-to-end coverage in the clean energy value chain

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Volue's integrated offering well received in the marketplace, recent major contract awards sign of step-change in customer adoption of new digital solutions

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Large international client base a testament to Volue's high-quality service offering

High-quality offering with a strong value proposition

Value-add from improved operational efficiency resulting in high customer stickiness with low churn

Increasing share of SaaS as customers seek flexible, dynamic and efficient solutions

Short lead times require customers to move away from onpremise solutions towards dynamic cloud-based models

International, blue chip customer base

Complexity of EU power trading increases with accelerating trading volumes and more non-controllable power capacity

Non-controllable power capacity becoming majority in Europe

Sun & wind are not controllable production sources, with production changing in seconds and low predictability only c. 30% of capacity on average utilized

Physical markets; few and expensive storage or switchoff alternatives to delivery to the grid

Intra-day power trading volumes accelerating, increasingly based on algo-traders

Intraday trading close to doubled since 2014 and is expected to continue growing – though still only making up 17% of trading volumes

Algorithmic trading gaining traction in an increasingly high speed and data intensive environment, now comprising >50% of volumes

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Producers must evaluate a large number of decision factors every 15 minutes (5 minutes), to re-position through trading

The producer's new reality – highly complex routines requiring state-ofthe-art systems

Complex process to model for optimisation

• On-premise hardware/software and complex integration of 20+ software and data packages
• Need to evaluate large number of factors in real-time:
  • Price forecasts by market and country from next minutes to months
  • Water, wind, sun and temperatures
  • Storage capacity
  • Production asset optimisation
• Often manual elements in linking operations, trading and external/internal data

Completely new architecture needed for faster optimisation

In response, market participants are transforming its organisations, business models and technology systems

Changing landscape		Levers to stay competitive
	Higher pace of operations	Data access & processing capabilities	Infrastructure to support big data and analytics crucial to facilitate profitability and reduce risk
	Increased complexity of "asset" base and trading options	Optimisation	Efficient combined optimisation of assets and market positions necessary to stay competitive
	Continuous optimisation – need for direct market access linked with operations	Trading capabilities	Real-time trading essential for value creation: algorithmic trading and 24/7 operation are key levers
	Exponential growth in flows of information	Consolidation and scale	Consolidation of highly fragmented market to build scale and one-stop shop offering

Profitability of industrial commodity companies depends on ability to adapt in real-time to market movements

Trading is becoming a stronger competitive differentiator for companies – and is higher on the corporate agenda

Supportive market trends affecting Volue across all industry verticals

Key market trends

Volue's ambition is to provide an industrial platform for sustainable energy and robust infrastructure construction & management

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Energy markets are moving towards real-time – increasing the complexity and need for digital optimisation solutions

• Changes in the energy sector is a key rationale behind the creation of Volue
• Increased share of nonregulated production, electrification of society combined with market harmonisation is driving new technology needs
• Digitalisation across the entire value chain is opening new areas of value realisation for those able to seize the opportunities

Volue's digital solutions, from sensors to trading, enabling transition to 15 minutes markets, and eventually real-time

Optimising production positions and pricing

Example offering: Production Planning as a Service

• For decades we have helped our customers optimise their portfolio of assets and monetise energy production
• With an integrated cloud platform and a centralised 24/7 team, Volue will grow market footprint by increasing the value of customer partnerships

Revenue growth and margins strengthening in H1 2020 despite Covid-19, supportive of Volue's ambitious mid to long-term targets

Key metrics (NOKm)	H1 2019	H1 20201	2019A	LTM1	Mid to long-term financial ambitions
Revenue	409	443	818	852
EBITDA	60	85	103	128
EBIT	29	50	38	59
ARR growth (%)	12%	15%	15%	9%
Revenue growth (%)	2%	8%	2%	7%	15% p.a.
EBITDA margin (%)	14%	19%	13%	15%	25-30%
ARR % of revenue	61%	63%	62%	65%	75-80%

Financial performance and targets

1) In 2020, Volue decided to capitalise R&D-related capex in order to harmonise its accounting principles. This impacts the comparability between the 2019 and 2020 figures as presented herein

• Revenue growth of 8% year-to-date, despite Covid-19
• Annual recurring revenue (ARR) at 63% of total revenue in H1 2020
• 15% growth in ARR year-to-date based on H1 2020 figures
• H1 2020 EBITDA margin of 19%, including adjustment for R&D capex

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Key takeaways

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Renewable energy and green transition triggering need for digitalisation and increased requirements for system uptime, security and performance

Volue uniquely positioned with integrated offering and business critical software across energy asset and operations value-chain

Recent contract wins and customer response to the creation of consolidated group underpinning Volue's differentiation

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Volue's leading market position and well-defined SaaS roadmap coupled with high customer stickiness facilitate high growth in ARR and margin expansion