Elmera Group ASA

Investor Presentation • Aug 30, 2018

Q2 2018 PRESENTATION

Rolf Barmen (CEO) Birte Strander (CFO)

Oslo, 30th August

Q2 2018 HIGHLIGHTS

Rolf Barmen (CEO)

Highlights second quarter 2018

A solid performance in a warm and volatile quarter

• Adjusted net revenue was NOK 242.0m, +18% YoY
• Growth ~60/40 split between improved margins and increased volume sold
• Significant drop in NWC, as volume is seasonally lower and effects from last quarter normalise
• +15% YoY growth in deliveries, of which 3% organic
• TrønderEnergi Marked ("TEM") acquisition contributing with 12%
• Gross revenue increasing +45% YoY, reflecting volume growth and significantly higher elspot prices than last year (+47%)¹
• Adjusted EBIT increased +4% YoY and was NOK 78.0m. 20% increase in EPS YoY
• Consumer EBIT margin better than targeted. Business EBIT margin contraction due to inclusion of TEM figures
• TEM included in P&L and other figures as from closing date 18 April 2018
• Acquisition of Oppdal Everk's customer portfolio closing expected October 1st

Sources: Company information

• 2) Number of deliveries excl. Extended Alliance deliveries. Number of deliveries incl. Extended Alliance deliveries: 621.478
• 3) Not including Alliance volume. Volume turnover for alliance partners Q2 2018: 910 GWh
• 4) Adj. Net revenue and EBIT are reported figures adjusted for any estimate deviations on sales and distribution of electricity related to previous reporting periods and unallocated items (incl. unrealised gains and losses on financial derivatives, depreciations from acquisitions and non-recurring cost/revenue)

Key Highlights

2 # of deliveries (end of period)	Net change in # of deliveries
595 627	63 432
Increase of 15 % YoY	Of which org. growth: 2 553
3 Volume sold	Gross revenue
2 704 GWh	NOK 1 297,3m
Increase of 8 % YoY	Increase of 45 % YoY
4 Net revenue (adj.) K2	4 EBIT (adj.) K6
NOK 242,0m	NOK 78,0m
Increase of 18 % YoY K9	32 % Adj. EBIT margin (this q.) K7
EPS (reported)	K13Net debt / (Net cash)
NOK 0,52	(NOK 43,0m)
Increase of 20 % YoY	K19NIBD/LTM EBITDA: -0,09

¹⁾ Arithmetic average difference in nordpool's monthly system prices in NOK between Q2 2018 and Q2 2017

Trondheim Kraft and TrønderEnergi Marked merging into TrøndelagKraft

• Becoming the largest player in the Trøndelag area, comprising ~100k deliveries
• Local brand, sponsoring e.g. Ranheim Fotball and Olavsfestdagene
• Expected one-off integration costs of NOK 10m, as previously communicated. ~5 million accrued so far
• Expected synergies from the TrønderEnergi Marked acquisition remain the same as previously communicated
• Minimum of NOK 15m p.a. with full effect in 2019
• 1/3 is expected to be realised in 2018
• The customer portfolio was integrated into the Fjordkraft Factory as of July 1 st , thus no synergy effects in Q2
• The TEM business portfolio has a relatively lower profitability than Fjordkraft's business portfolio, thus the inclusion of TEM figures reduces the segment's EBIT margin

Agreement to acquire the customer portfolio of Oppdal Everk

• Agreement to acquire Oppdal Everk's customer portfolio
• The customer portfolio comprise approx. 5 200 electricity deliveries, primarily consumer customers (~95%)
• Further strengthened position in Mid-Norway
• Cost synergies per delivery are expected to be in line with the TEM transaction.
• Agreed purchase price is NOK 19.375m, including net financial assets of NOK 1.0m, and will be financed by available cash in Fjordkraft.
• The purchase price does not include working capital
• Completion of the transaction is expected to be 1 October 2018
• The Oppdal Everk customer portfolio will be included with full effect in the Q4 financial reporting

Transaction highlights Customer portfolio ('000)

Key financials 2017 (NGAAP)

BUSINESS REVIEW

Rolf Barmen (CEO)

Market development

Key highlights in Q2 2018

• Elspot prices have been volatile in the second quarter of 2018
• Price drop in second half of April and first half of May, followed by a sharp increase through the last half of May and into June
• Prices 47% higher than 2017
• Elspot prices expected to remain at a high level for the rest of 2018. Expected 77% higher than 2017 in Aug-Des³ .
• Warmer than normal weather⁴ in three out of three months, including a record-breaking May.
• April: +1.4°C above normal
• May: +4.4°C above normal
• June: +0.5°C above normal
• NVE figures for Q1 2018 not published. Churn is expected to increase – fueling consolidation

Sources:

• 1) Historical elspot prices are from Nordpool. Forward prices are from Nasdaq OMX Commodities 22 August, 2018 using a conversion ratio of EUR/NOK 9.7187.
• 2) Figures from NVE. Q4-17 figures were published 18 March 2018
• 3) Arithmetic average difference between Aug-Des 2018 from Nasdaq OMX Commodities and Aug-Des 2017 from Nordpool
• 4) Temperature figures from met.no's monthly reports

Monthly elspot prices (NOK/kWh)¹

Segment development - Consumer

• Continued organic growth accompanied by substantial M&A growth from TEM acquisition
• Net additions in Q2 2018 were 51,360, of which 1,902 organic
• Volume growth of 5% YoY driven by growth in # of deliveries. However, warmer than normal weather¹ is reducing the impact
• Avg. volume per delivery decreasing -5% YoY 2,785 kWh in Q2 2018 vs. 2,946 kWh in Q2 2017
• Entered into a partnership with a new distribution channel – Spond – offering cashback to teams and organisations of the customer's choice

1) Temperature figures from met.no's monthly reports

2) Number of electricity deliveries at the end of the period

Key highlights in Q2 2018 # of electricity deliveries² ('000)

Segment development - Business

• Continued organic growth accompanied by substantial M&A growth from TEM acquisition
• Net additions in Q2 2018 were 12,072, of which 651 organic
• Volume growth of 12% YoY driven by growth in # of deliveries. However, warmer than normal weather¹ is reducing the impact
• Avg. volume per delivery decreasing -4% YoY 19,043 kWh in Q2 2018 vs. 19,820 kWh in Q2 2017

1) Temperature figures from met.no's monthly reports

2) Number of electricity deliveries at the end of the period

Key highlights in Q2 2018 # of electricity deliveries² ('000)

New Growth Initiatives

Key highlights in Q2 2018 # of Mobile subscribers²

• The organic growth in mobile subscribers continues according to plan – targeting 125k subscribers at the end of 2020
• +7,567 subscribers in Q2 2018
• A new range of products launched in Q2 2018
• 2, 4 and 6 GB plans are introduced
• 3 GB and 5 GB plans no longer offered to new customers
• 21% YoY Alliance volume growth
• One new partner on the Extended Alliance service in Q2 2018 – Svorka Energi AS with 7,385 deliveries

Sources: Company information

• 1) Temperature figures from met.no's monthly reports
• 2) Number of mobile subscribers at the end of the period

('000)

Volume Alliance (GWh)

FINANCIAL REVIEW

Birte Strander (CFO)

Strong improvement in adj. net revenue YoY

Change in adj. net revenue (NOKm) Adj. net revenue LTM (NOKm)

• Increase in adj. net revenue across all segments. Consumer segment particularly strong
• Adjusted net revenue increased +18% YoY
• ~ 60/40 split between improved margins and volume growth
• TEM adj. net revenue amounts to NOK 15m, corresponding to 7% of the increase YoY
• A new all-time high LTM adjusted net revenue, breaking the NOK 1 billion barrier and increasing by +17% YoY
• 8 pp of the increase¹ is related to improved product margins
• 9 pp of the increase¹ is related to increase in volume, where growth in number of deliveries accounts for more than 100% of the increase

Sources: Company information

1) New Growth Initiatives figures are excluded from the calculations, as high volumes with very low margins distorts the analysis

Consistent adj. EBIT performance

• 4% increase in adjusted EBIT YoY, driven by the Business and NGI segments
• TEM adj. EBIT amounts to NOK 5m
• Sales and marketing costs increase due to strong competition. High elspot prices also affecting churn.
• The number of customer enquiries has increased by 22% from Q2 2017 to Q2 2018, driven by higher than normal elspot prices and the smart meter roll-out. This is increasing customer service costs
• Losses on receivables affected by the high elspot prices, reinvoicing of grid rent and acquisition of TEM
• 6 percentage points LTM margin contraction YoY primarily driven by increasing sales and marketing costs and launch of mobile

Sources: Company information

Adj. net revenue and adj. EBIT by segment – quarterly

• Solid increase in net revenue driven by ~3/4 improved margins and 1/4 volume growth

• 8 pp margin contraction YoY driven by increased sales and marketing costs, customer service, and losses on receivables

• Growth in revenue mainly because of growth in # of deliveries

• 2 pp margin contraction YoY. TEM business portfolio with relatively lower profitability reducing EBIT margin in the segment. EBIT margin in line with Q2 17 excl. TEM.

• Net revenue growth driven by 21% Alliance volume growth and increase in # of Extended Alliance deliveries

• YoY EBIT growth ~60/40 split between Alliance and Mobile

Sources: Company information

Drop in net working capital from last quarter

Net working capital (NOKm)

• Net working capital (NWC) significantly lower than last quarter, as volume seasonally decreases
• Effects from last quarter normalise (quarter-end during Easter public holidays and disposal of 2017 el-certificates)
• NWC reduced by 92 NOKm YoY, despite customer growth and elspot prices being considerably higher in Q2 2018 than in Q2 2017
• This is partly because of variation in customer due dates and invoicing pattern, but also reflects continuous efforts on reducing NWC

Sources: Company information

1) NWC includes the following items from current assets: Inventories, intangible assets, trade receivables, derivative financial instruments and other current assets (that is, all current assets in the balance sheet except cash and cash equivalents); and the following items from current liabilities; trade payables, current income tax liabilities, derivative financial instruments, social security and other taxes and other current liabilities (that is, all items under current liabilities, except proposed dividend (zero according to IFRS))

NIBD - from net debt to net cash

Change in net debt Q-o-Q (NOKm)

• From net debt to net cash 278 NOKm in long term debt to fund TEM acquisition
• Highly affected by positive change in net working capital
• Net cash outflow (purchase price less cash in acquired company) from acquisition of TEM of 254 NOKm
• Solid underlying cash generation

Sources: Company information

1) OpFCF defined as EBITDA adj. less CAPEX excl. M&A, payments to obtain contract assets and tax.

2) Other includes CAPEX related to M&A and customer portfolios, interest and adjustments made on EBITDA.

OUTLOOK

Rolf Barmen (CEO)

Outlook

• Market development:

Elspot prices are expected to remain at a high level throughout the year¹ , as the hydrology is well below normal²

• Gross revenue expected at a higher than normal level
• High elspot prices are a trigger for churn, which in turn fuels consolidation
• Increased awareness and high elspot prices generates customer enquiries, driving customer service cost

• Consumer margin:

Target³ : A decrease in EBIT margin to 25-30% over the next three years⁴ , with in the area of 2/3 of the reduction in 2018. Better than target so far in 2018

• Business margin:

Target³ : An increase in EBIT margin to 55-60% over the next three years⁴ , with more than half of the increase in 2018. On track so far in 2018

• NGI:

Target³ : 10% of group net revenues and 5% of EBIT in 2020. Growth in mobile subscriptions according to plan. Growth in Extended Alliance postponed due to Elhub. On track to attain 2018 target of EBIT loss slightly below 2017 level

• Growth:

Previously stated that growth is expected to be evenly distributed between organic growth, M&A and Extended Alliance. Currently shifting efforts more towards M&A, as the current market situation fuels consolidation.

Sources:

¹⁾ Temperature figures from met.no's monthly reports

²⁾ NVE's weekly reports on the energy situation

³⁾ See financial targets from IPO process in appendix 4) Base line for the financial targets is adjusted 2017 financials

^| Quarterly Presentation | Q2 2018

Appendix

Depreciation profile of the TrønderEnergi Marked acquisition

NOK in millions	2018	2019	2020	2021	2022	2023	2024	2025	2026	2027	2028	2029	2030	2031	2032	2033	2034	2035	2036	2037	2038
Annual depreciation		30,8 32,8 20,7 12,0			7,3	4,9	3,4	2,3	1,6	1,1	0,7	0,5	0,3	0,2	0,2	0,1	0,1	0,1	0,0	0,0	0,0
Accumulated depreciation													30,8 63,5 84,2 96,3 103,6 108,5 111,9 114,2 115,8 116,9 117,6 118,1 118,5 118,7 118,9 119,0 119,0 119,1 119,1 119,2 119,2

PROFIT AND LOSS ACCOUNT

Summary reported financials

NOK million	Q2 2018	Q2 2017	∆ YoY
Operating income	1 297,3	892,4	404,9
Cost of sales	-1 048,6	-688,2	-360,5
Net revenues	248,7	204,3	44,4
Personnel expenses	-40,7	-31,1	-9,6
Other operating expenses	-95,4	-88,2	-7,2
Operating expenses	-136,1	-119,2	-16,8
Other gains and losses, net	2,0	-2,1	4,1
EBITDA	114,6	83,0	31,7
Depreciation & amortization	-43,6	-25,2	-18,3
Operating profit (EBIT)	71,1	57,7	13,3
Net financials	0,1	2,2	-2,1
Profit / loss before taxes	71,2	59,9	11,2
Taxes	-16,7	-14,5	-2,2
Profit / loss for the period	54,5	45,4	9,0
Basic earnings per share (in NOK)	0,52	0,43	0,1
Diluted earnings per share (in NOK)	0,52	0,43	0,1

EBIT adjustments

The following adjustments are made to the reported EBIT, in order to give a better representation of underlying performance:

1) Estimate deviations from previous years:

A large proportion of the Group's final settlement of sales and distribution of electricity is made after the Group has finalised its financial statements. At the date of reporting, the Group recognises electricity revenue and the associated cost of sales based on a best estimate approach. Thus, any estimate deviation related to the previous reporting period is recognised in the following reporting period. Management is of the opinion that the underlying operating profit in the reporting period should be adjusted for such estimate deviations related to previous reporting periods.

2) Other gains and losses, net:

Consist of gains and losses on derivative financial instruments associated with the purchase and sale of electricity.

3) Non-recurring items:

Non-recurring one-time items. These are described in the table on the following page.

4) Depreciation of acquisitions:

Depreciation related to customer portfolios and acquisitions of companies. The Group has decided to report the operating profit of the segments adjusted for depreciation of acquisitions, as this, in the Group's opinion, better represents underlying performance. In order to accommodate this, historically reported figures have been adjusted accordingly.

ADJUSTED EBIT reconciliation

NOK in thousands	Q2 2018	Q2 2017
Adjusted operating profit (before unallocated and estimate deviations)	78 042	75 119
Adjustment: (Positive)/negative estimate deviations previous year 1)	2 592	-
Other gains & losses 2)	2 011	-2 061
Non-recurring 3)	-1 629	-14 826
Depreciation of acquisitions 4)	-9 948	-490
Operating profit	71 068	57 742
Interest income	3 594	3 244
Interest expense	-1 606	-66
Other financial items, net	-1 866	-978
Profit/(loss) before tax	71 189	59 942
3) Non-recurring items consists of one-time items as follows:
NOK in thousands	Q2 2018	Q2 2017
Non-recurring items incurred specific to:
- the process of listing the company on Oslo Stock Exchange	-124	-
- integration of acquisitions	-5 125	-
- the launch of new products and services	-	-14 826
- compensatory damages	4 080	-
- legal costs related to the compensatory damages above	-460	-
Non-recurring	-1 629	-14 826

BALANCE SHEET

Summary reported financials

NOK million	Q2 18	Q2 17	Q4 17
Intangible assets	198,8	73,9	82,1
PP&E	4,2	3,7	3,6
Goodwill	150,9	-	-
Financial assets	17,2	14,6	14,2
Other non-current assets	154,0	120,1	137,5
Total non-current assets	525,2	212,2	237,4
Trade receivables	1 054,7	970,3	1 364,5
Derivative financial instruments	399,9	70,3	113,4
Other current assets	120,3	68,7	44,0
Cash and cash equivalents	321,0	71,2	363,2
Total current assets	1 895,9	1 180,5	1 885,2
Total assets	2 421,1	1 392,7	2 122,6
Total equity	772,5	633,5	716,3
Net employee defined benefit liabilities	72,8	42,6	73,7
Interest-bearing long term debt	278,0	-	-
Deferred tax liabilities	40,1	17,6	12,9
Other provisions	1,0	-	-
Total non-current liabilities	391,8	60,1	86,7
Trade payables	527,5	361,0	726,6
Overdraft facilities	-	-	-
Current income tax liabilities	52,5	29,3	71,2
Derivative financial instruments	384,2	62,4	95,4
Social security and other taxes	21,9	28,2	50,1
Other current liabilities	270,7	218,2	376,3
Total current liabilities	1 256,8	699,1	1 319,6
Equity and liabilities	2 421,1	1 392,7	2 122,6

CASH FLOW

Summary reported financials

NOK million	Q2 2018	Q2 2017	∆ YoY
EBITDA	114,6	83,0	31,7 -
Other non-cash adjustments	-8,1	-8,1	-0,0
Change in fair value of financial instruments	-2,0	2,1	-4,1
Changes in working capital, etc.	598,0	16,4	581,6
Cash from operating activities	702,5	93,4	609,2 -
Interest paid	-1,6	-0,1	-1,5
Interest received	3,6	3,2	0,3
Income tax paid	-35,1	-41,7	6,6
Net cash from operating activities	669,4	54,9	614,5 -
Purchases of property, plant and equipment	-0,2	-1,0	0,8
Purchase of intangible assets	-11,5	-7,5	-4,0
Payments to obtain a contract (contract assets)	-27,9	-25,4	-2,5
Net cash outflow on aquisition of subsidiares	-254,1	-	-254,1
Proceeds from non-current receivables	-2,1	-0,5	-1,6
Net cash used in investing activities	-295,8	-34,5	-261,3 -
Proceeds from borrowings	278,0	-	278,0
Net (outflow)/proceeds from change in overdraft facilities	-330,6	-	-330,6
Dividends	-	-120,1	120,1
Net cash used in financing activities	-52,6	-120,1	67,5 -
Net change in cash and cash equivalents	321,0	-99,7	420,7 -
Cash and cash equivalents at beginning	-	170,9	-170,9
Cash and cash equivalents at end	321,0	71,2	249,8

Financial targets¹

	▪ Targeting mid-single digit net revenue growth over the coming years on an organic basis
Group	▪ Ambition to act as a consolidator in a fragmented market
	▪ Focus on building on Fjordkraft's strong brand and customer relationships to develop adjacent services and businesses
Consumer	▪ Tough comparable vs. a very strong 2017 and competitive dynamics affecting targets for the segment Growth ▪ Targeting slightly positive net revenue growth on an organic basis over the next three years
	EBIT ▪ Targeted to go down towards a sustainable level of 25-30% on an organic basis over the next three years with in the area of 2/3 margin of the reduction in 2018
Business	▪ Untapped growth potential and target to strengthen value added services supporting an attractive outlook for the segment Growth ▪ Target net revenue growth above double digits driven by an organic increase in power deliveries and stable net revenue margin
	EBIT ▪ Targeted to increase towards a sustainable level of 55-60% on an organic basis over the next three years, mainly driven by margin scale effects, and with more than half of the increase in 2018
New	▪ Continued investment in growth over the coming years, with EBIT loss in 2018 targeted to be slightly below 2017 level
growth initiatives	▪ Current growth initiatives (Mobile, Alliance) targeted to comprise up towards 10% of net revenues and 5% of EBIT in 2020, with additional positive effects on the group from increased customer loyalty
Cap.ex.	40m annually on an organic basis over the next three years2 ▪ Targeted to be in the area of NOK 35 –
Tax rate	▪ Prevailing corporate tax rate for Norway – 23% for 2018
Gearing	▪ Moderate leverage ▪ Variations in gearing intra-year due to seasonality in net working capital
	▪ Attractive and increasing dividend
Dividend	▪ Target pay-out ratio of at least 80% (based on adjusted net income)

1) Base line for the financial targets is adjusted 2017 financials

FORWARD-LOOKING STATEMENTS

This presentation contains, or may be deemed to contain, statements that are not historical facts but forward-looking statements with respect to Fjordkraft's expectations and plans, strategy, management's objectives, future performance, costs, revenue, earnings and other trend information. There can be no assurance that actual results will not differ materially from those expressed or implied by these forward-looking statements due to many factors, many of which are outside the control of Fjordkraft.

All forward-looking statements in this presentation are based on information available to Fjordkraft on the date hereof. All written or oral forwardlooking statements attributable to Fjordkraft, any Fjordkraft employees or representatives acting on Fjordkraft's behalf are expressly qualified in their entirety by the factors referred to above. Fjordkraft undertakes no obligation to update this presentation after the date hereof.

For more information: Fjordkraft's Investor Relations Morten A. W. Opdal +47 970 62 526 morten.opdal@fjordkraft.no