Capital Markets Day Part II

Sarpsborg, March 11 2014

Agenda

PART II

• 13:30 - 16:00 - Presentation of site and operations, R&D projects, BALI Demo Plant visit

Ole Gunnar Jakobsen, Plant Director Sarpsborg Site
Kristin Misund, R&D Director
Harald G. Rønneberg, Business Director Exilva
Gisle Løhre Johansen, SVP R&D and Business Development
Q&A
Demonstration of lignin and Exilva product properties
Visit to BALI Biorefinery Demo Plant

• 16:00 - 17:15 Transfer to Oslo

– Light meal will be served in the bus

Sarpsborg Site

Ole Gunnar Jakobsen Plant Director Sarpsborg Site

Sarpsborg site Site visit and safety information

• Control centre

No need for safety equipment in this area
Emergency exits are marked with green lights
Emergency meeting point in front of the main entrance

• Visit (walk) to the Bali Biorefinery Demo plant

Safety equipment: helmet/eye protection and visibility vest
Photos are not allowed (without permission) during the visit
Stay together with your group
Emergency meeting point at the main entrance of the Bali Biorefinery Demo plant
Follow instructions from tour guides wearing yellow helmet and visibility jacket

Sarpsborg site Infrastructure and technology

• Biorefinery with unique technology base

Calcium sulphite specialty cellulose mill gives the best raw material for downstream biochemicals (lignin, vanillin and bioethanol)
Plans for further specialisation
Green energy solutions and new environmental investments in place
Plans in place to further reduce energy consumption

Sarpsborg site Technology, competence and organisation

• Operational stability and efficiency through state of the art technology and competence development

Continuous improvement by combining use of new and existing technology with skills development and a flexible organisation
Strong organisation founded on thoroughness and fact-based decisions
Changes through involvement of employees and a collaboration culture

Sarpsborg site Process flow and annual production capacity

River Glomma

Innovation Management

Kristin Misund R&D Director

Innovation Management What is innovation?

Innovation is the process of generating and implementing new ideas and solutions increasing the value added to our customers

Innovation Management Business driven innovation model

Innovation Management Scope and priorities

Plan, accomplish and document projects defined and prioritised by the Innovation Management Teams (IMT)

Development of new
Processes
Products
Applications
Optimisation of existing
Processes
Products
Applications
Annual R&D and innovation spending approx. 4% of turnover
Short-term vs long-term projects 40/60
~15% of Borregaard's revenues come from new products

Innovation Management IP Strategy

Each BU has an IP strategy that supports its business strategy
Typically these IP strategies include the following elements:

Offensive strategy

Evaluate the value of patenting innovative technology (products, processes, applications) on a regular basis
Apply for patent protection of selected technologies
Register selected trademarks and domain names
Defend, exploit and enforce our IP rights

Defensive strategy

Ensure that Borregaard does not violate 3rd party valid IP rights
Freedom-to-Operate analyses conducted at key development stages
Keep non-patented technology as trade secrets
Follow approval procedures for external publications
Maintain strict control of the use of secrecy agreements when exchanging confidential information with 3rd parties

Innovation Management R&D center in Norway – key figures and core competence

Number of employees	80	Organic chemistry	13
Number of MSc	12	Wood chemistry	9
Number of PhD	28	Biopolymer chemistry	6
Pilot/demo plant personnel	20	Physical chemistry	3
		Analytical chemistry Microbiology	2 4
Average experience (years)	10	Process technology	3
Female employees (%) Average age	40 41

Flexible, experienced and competent
Unique and strong competence platform
Attractive working environment
Specialists and generalists
Benefitting from each others' core competences

Innovation Management Market oriented R&D organisation

• Market oriented

– Dedicated groups serving the business units and strategic innovation projects

• Combined lab and pilot groups

– Merging production and research culture and knowledge

The Exilva Project

Harald G. Rønneberg Business Director Exilva

The Exilva Project Radical innovation - Innovation in three dimensions

The Exilva Project Product innovation

Exilva® - Key properties

• Ultra high surface area

Exilva® - A performance enhancer

Rheology modifier
Stabiliser
Reinforcer
Very high water binding capacity
Completely colourless and odourless

Exilva® - Sustainable and renewable

The Exilva Project Technology and process innovation - Black box

Technology developed in-house at Borregaard
Expansion of the pure cellulosic fiber under extreme shear force
We are determined to protect IP on product, process and applications
To our knowledge, the first MFC technology that enables production in commercial scale

The Exilva Project Market innovation

Opportunity cloud – a broad market approach

Borregaard has broad experience within both specialty chemicals and fine chemicals
Exilva will target niches with high value
Very high efficiency, low dosages needed
Superior performance
Adding value when substituting property modifiers like fumed silica, hydrocolloids like guar and xanthan, and in some cases cellulose based products
Offering a green, water based solution to applications that currently use chemical solvents

The Exilva Project The first step towards commercialisation

Exilva has the potential to become a new business area
First plant to verify market and technology
Location: Sarpsborg, Norway
Capacity: approx. 2000 mt
Investment estimate: 200-400 mNOK
Decision on investment during 2014
Construction time: approx. 18 months

The BALI Project

Gisle L. Johansen SVP R&D, Business Development and Fine Chemicals

The BALI project Borregaard value chains

The BALI project Scaling up the BALI concept – Biorefinery Demo

Demo plant commissioned January 2013
135 mNOK investment (total Capex)
58 mNOK grant from Innovation Norway
Minimum size commercially available equipment
450 mt biomass processed
Softwood, hardwood and sugar cane bagasse
Continuous operations
Demonstration mission
Process demonstration and optimisation
Product qualification

The BALI project BALI Demo - pretreatment step

Biomass feedstock Cellulose

Pretreatment

Lignin raw material water soluble

The BALI project BALI Demo: Enzymatic hydrolysis step

• Feedstock flexible process

Low cost biomass options are enabled
Lignin performance and value determined by choice of feedstock
Significant revenues from both lignin and cellulosic sugars
Only known 2nd generation bioethanol process with commercially viable lignin raw materials
Moderate capex
Significantly lower investment cost compared to traditional sulphite pulp mills
Enables lignin logistics optimisation
World wide lignin distribution costs may be reduced

The BALI project BALI – IP status

The BALI process has three layers of IP protection:

• BALI process patents

Main patent granted in Europe, pending in USA
Enzymatic hydrolysis of cellulose (pending)
Multiple lignin application patents
Trade secrets
Unique application and market knowledge

The BALI project Development of a business model for the first full scale BALI plant

• Products

– Lignin and bioethanol

• Biomass

– Softwood or bagasse

• Partner selection criteria

Local presence
Strategic fit strategic interest in bioethanol or cellulosic sugars
Willingness to co-invest
Available brownfield assets
Process integration opportunities

• Regional selection criteria

Price and long term availability of biomass
Lignin market
Bioethanol market
Outbound logistics
Acceptable business environment

The BALI project Global presence and potential areas for the first full scale plant

Partner discussions under secrecy agreements are ongoing inn all 3 regions GO/NO GO decision and region selection late 2014 Production startup approx. 24 months after final investment decision

The BALI project Example: Softwood based BALI plant

Capex elements

repurposing

– Borregaard share of capex dependent on partnership/JV structure

Ole Gunnar Jakobsen
Kristin Misund
Harald G. Rønneberg
Gisle L. Johansen

The BALI project Demonstration of lignin and Exilva product properties/BALI visit

• Lignin Martin Andresen PhD Group Manager Lignin R&D

• Exilva

Hans Henrik Øvrebø PhD Chief Technology Officer and Group Manager Exilva R&D

• Visit to BALI – Biorefinery Demo Plant Gisle L. Johansen, SVP R&D and Business Development Anders Sjöde, Chief Technology Officer, BALI project

Martin Lersch PhD, Group Manager, BALI project