Borregaard

Related Party Transaction • Jul 4, 2018

Borregaard: LignoTech South Africa

Borregaard: LignoTech South Africa

The owners of the lignin joint venture in South Africa, Borregaard and Sappi,

have agreed on an extension of the agreement governing the lignin co-operation

and on a reduction in the annual production capacity for lignin.

The parties have agreed to extend the term of the agreement to the end of 2032

(previously 2027).

With effect from 2021 the lignin production capacity will be scaled down from

the current 180,000 tonnes to 130,000 metric tonnes dry substance per year. The

reason is that Sappi's Saiccor dissolving pulp mill, which supplies the lignin

raw material to the joint venture company, will be expanded in order to increase

total cellulose capacity on the site. The expansion will be based on magnesium

sulphite technology, whereas the current calcium sulphite capacity will be

reduced. The remaining calcium sulphite line will continue to supply lignin raw

material to the joint venture.

The lignin capacity expansion by 20,000 tonnes carried out in 2017 was made

possible mainly by the installation of a pre-concentrator unit. This equipment

will continue to be in use as part of the new concept with reduced total

production capacity for lignin. No investments will be needed in order to adapt

to the new supply situation for lignin raw material.

For LignoTech South Africa this means that the whole production of lignin for

exports can be sold in powder form, based on the existing drying capacity. This

will be a good basis for further diversification of the product portfolio. The

company will be less dependent on the construction market, and sales of liquid

lignin to regions currently oversupplied with this type of product can be

eliminated.

LignoTech South Africa is a joint venture company owned by Borregaard (50%) and

Sappi (50%), established in 1997.

For background information see the stock exchange notice dated 7 July 2015.

Sarpsborg, 4 July 2018

Contacts:

Per Bjarne Lyngstad, Chief Financial Officer, +47 952 44 515

Jørn Syvertsen, Director Investor Relations, +47 958 36 335

This information is subject to the disclosure requirements pursuant to Section

5-12 of the Norwegian Securities Trading Act.