Investor presentation December 2018
Disclaimer The following presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated ( relevant persons ). Any person who is not a relevant person should not rely, act or make assessment on the basis of this presentation or anything included therein. The following presentation may include information related to investments made and key commercial terms thereof, including future returns. Such information cannot be relied upon as a guide to the future performance of such investments. The release, publication or distribution of this presentation in certain jurisdictions may be restricted by law, and therefore persons in such jurisdictions into which this presentation is released, published or distributed should inform themselves about, and observe, such restrictions. This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in Scatec Solar ASA or any company within the Scatec Solar Group. This presentation contains statements regarding the future in connection with the Scatec Solar Group s growth initiatives, profit figures, outlook, strategies and objectives as well as forward looking statements and any such information or forward-looking statements regarding the future and/or the Scatec Solar Group s expectations are subject to inherent risks and uncertainties, and many factors can lead to actual profits and developments deviating substantially from what has been expressed or implied in such statements. 2
Scatec Solar a leading emerging market player Develops, builds, owns and operates utility-scale solar power plants IN OPERATION & UNDER CONSTRUCTION 1.5 GW PROJECT BACKLOG & PIPELINE 4.3 GW CAPACITY BY END 2021 3.5 GW 3
A solid track record of developing and building utility scale solar 585 MW in operation: Czech South Africa Rwanda Honduras Jordan Brazil Malaysia 20 MW 190 MW 9 MW 95 MW 43 MW 162 MW 65 MW 877 MW under construction: Malaysia Mozambique Egypt South Africa Argentina Ukraine 132 MW 40 MW 400 MW 258 MW 117 MW 47 MW Installation track record:more than 1 GW- 15 years of experience - 60+ projects in 10 countries 4
A diversified asset portfolio with 1.5 GW in operation and under construction CAPACITY ECONOMIC MW INTEREST In operation Czech Republic 20 100% South Africa 190 39% Rwanda 9 54% Honduras 60 40% Jordan 43 59% Honduras (phase I) 35 70% Brazil 162 44% Malaysia (Gurun) 65 68% Total 584 51% HQ Under construction Malaysia 132 68% Mozambique 40 52% Egypt 400 51% South Africa 258 42% Ukraine (Rengy) 47 51% Argentina 117 50% Total 877 51% Projects in backlog Malaysia (Redsol) 40 100% Honduras (phase II) 18 70% Mali 33 51% Ukraine 204 65% Total 295 64% Grand total 1,873 55% Projects in pipeline 3,820 MW 5
Solid project backlog and pipeline of 4.1 GW Backlog: Ukraine 204 Mali 33 Price tender 12 % Bi-lateral 28 % Honduras 18 Backlog 295 Project tender 32 % 4.1 GW Backlog 295 MW Pipeline 3,820 MW Latin America 563 MW Africa 1,725 MW Europe and Central Asia 670 MW Southeast Asia 862 MW FiT 28 % Pipeline figures are as per reporting date for third quarter 2018. 6
We have advanced into a top 10 global independent solar PV developer MW, operational and under development GCL New Energy First Solar Canadian Solar Total (SunPower and Eren) SunEdison EDF Engie Enel Green Power Equis Enerparc Scatec Solar Adani Marubeni Lightsource Neoen 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 Top 10 global utility-scale solar developer A broad portfolio across emerging markets Upstream Direct peers Asia Pacific Europe Latin America Middle East and North Africa North America Sub-Saharan Africa Source: GTM Research 7
Scatec Solar s value chain Scatec Solar develops, builds, owns & operates solar plants for 20 years Project development Financing Construction Operations Ownership (IPP) Site development System design Business case Component tendering Debt/Equity structuring Due diligence Engineering and procurement Construction management Maximize performance and availability Maintenance and repair Asset management Financial and operational optimization Permitting Grid connection PPA negotiation/tender/fit 8
Market
Demand for solar is growing significantly across emerging markets Multiple governmental drivers for solar PV demand Annual global solar PV demand forecast - GW Rest of Asia Latin America India Climate treaty & national action plans Employment and economic growth Time-tomarket Main drivers Cost of energy Energy security MENA Sub-Saharan Africa 75 64 USA Europe China Rest of World 99 97 123 146 More foreign investments 2014 2016 2017 2018 2019 2020 Source: BloombergNEF conservative forecast 10
Solar is one of the most competitive sources of energy The levelized cost of solar has come down 75% since 2010 industry scale and technology Solar is now the lowest cost source of energy across the sun-rich regions globally Storage and hybrid solutions are expected to become increasingly important for demand New business propositions are emerging when solar is cost competitive with base load Cost of alternative energy sources (LCOE, USD/MWh) 250 200 150 100 50 0 Solar PV Wind Gas Base load Coal Gas Peak Load Diesel Source: Lazard Capital, LCOE v11, Scatec Solar 11
Continued decrease in module prices in 2017 and 2018 Module price development (USD/W) USD/W 0.55-0.60-29% USD/W 0.40-0.43-44% Main drivers: Policy changes in China and India in Q2/Q3 2018 Continuous cost reductions and technology development USD/W 0.23-0.25 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Est Q418 Est Source: BloombergNEF, polycrystalline modules 12
Business model
Our success is based on our integrated business model combined with a strong entrepreneurial culture Business model Fully integrated Structuring and financing Financial discipline Partnerships People Agile and lean Entrepreneurial culture Passionate and empowered people Strong talent bench Predictable Working together Driving results Changemakers 14
Scatec Solar is partnering with Governments and Development banks As cost of solar continues to decline - governments are looking to solar to cover their power needs and grow the economy Governments in emerging economies finds private/public partnerships very attractive implementation model (IPPs) Multilateral development banks typically with a long standing presence and experience in the county Project structures and contracts designed to mitigate risk (political financial, compliance etc) Creates business opportunities and Reduces risks of Scatec Solar s investments 15
Our business model and typical project structure Simplified illustration of company structure and main contracts in place Scatec Solar Equity coinvestors Component Suppliers 100% 39%-100% Shareholders agreement Land lease agreements Land owners Sub-Contractors Scatec Solar O&M / EPC World Bank/others (Onshore) EPC contract O&M contract Asset Management contract Political risk insurance (when relevant) Single Purpose Vehicle PPA agreement State owned utility Loan agreements Project financing Sovereign guarantee Concession agreement State government
The integrated business model is supported by our operating system Ensures consistency in way of working and scalability through all phases Secures learning and feedback to improve quality of decision making Our project phases and decision gates Decision Gate Decision Gate Decision Gate Decision Gate Origination Development Structuring Delivery Power production O&M 17
Stable project cash flows based on PPAs - allowing for a non-recourse debt structure Managing financial risk Power price & volume Counterparty Interest rate Currency Tariffs fixed for 20-25 years Take or pay all volume produced PPAs with state owned utilities with government guarantees Financing partners with strong government relations Project finance debt with fixed interest of 10 years or more from grid connection Structuring of project debt in same currency as power sales revenues Inflation adjusted tariffs in PPA PPA: Power purchase agreement Political risk insurance or equivalent in selected markets 18
A business model enabling «self funded» growth All projects enters 20-25 year PPAs with fixed tariffs with state owned utilities USDm 100 (100%) 75 (75%) The power plants are financed with non-recourse debt, and the PPAs allows Scatec Solar to operate with high financial leverage at project level 13 (12.5%) The D&C gross margin covers a large part of the Scatec Solar s equity contribution in the project 13 (12.5%) 13 (12.5%) Total capex Debt Financing Partner s equity share D&C margin SSO equity 100 MW project expample 19
Sustainability to mitigate risk and create stakeholder value Sustainability is an integrated part of our business Manage and mitigate risk Identify and manage the impact of our operations IFC Performance Standards and the Equator Principles Further professionalizing our sustainability work Integration of environmental and social work streams Implementation of Global Reporting Standards (GRI) Improvements based on lessons learned 20
Financials
Our principles for investments and financing stay firm Transactional and operational control - SSO the lead developer and investor D&C margins - key contribution to equity positions Working capital - managed through project structuring Moderate debt at group level - reflecting debt capacity of long term cash flows Dividends - 50% of free cash flow from operating power plants 22
High construction activity new plants to be grid connected in the near future Proportionate revenues, NOK million Proportionate EBITDA, NOK million 3,059 2,539 687 632 1,236 1,022 760 369 413 442 351 286 294 5 301 347 353 YTD 16 YTD 17 YTD 18 YTD 16 YTD 17 YTD 18 Corporate Development & Construction Power Production Operations & Maintenance Note: Q3 2017 EBITDA includes NOK 375 million gain on the partial sale of the Apodi project in Brazil. 23
Cash flow significant equity investments in new solar power plants NOK million 25-61 Projects Under Construction 188 226 Net working capital construction projects 688-1,305 Development of project backlog and pipeline -81 282 489 590-61 End 2017 Distributions from operating power plants Cash flow to equity D&C Cash flow to equity O&M Cash flow to equity Corporate Project equity Project Development capex Share capital increase Dividend distributions Working Capital/other End Q3 24
New investments generate significant value from D&C and Power Production In operation New capacity for 1.5 GW New capacity for 3.5 GW Total Capacity (MW), 100% 322 1,183 2,000 3,500 Capex (NOK million), 100% 5,100 12,900 14,000 17,000 32,000 35,000 Key figures - SSO proportionate: SSO s economic interest 46% 57% 50% 70% 50% 70% SSO s equity investments (NOK million) 800 1,850 2,000 2,500 4,600 5,200 Development & Construction CF to equity (NOKm) 950 1,050 1,000 1,500 2,000 2,500 Annual cash flow to equity Power P. & O&M (NOKm) 170 260 310 300 400 750 850 Average equity value per MW (NOK million) 2.1 1.5 1.7 25
Financial targets and guidance Short term guidance Targets and guidance 2021 2018 O&M revenues of NOK 80-85 million with an EBITDA margin of around 40% Total D&C contract value of projects under construction of about NOK 8.0 billion Around 50% of the D&C contract value is expected to recognised in 2018 balance in 2019 Power production volumes: GWh Q3 18 Q4 17 Q4 18e Proportionate 73 71 105-115 100% basis 155 167 220-240 Realizing 3.5 GW capacity Value of NOK 1.5 mill. per MW for +2 GW D&C contribution of NOK 2.0 2.5 billion Annual cash flow from operating solar plants of NOK 750 850 million D&C gross margin; 12-15% Equity IRR on power plant investments; 15% 26
Summary
Accelerating growth Increase installed capacity to above 3.5 GW by end 2021 Effective execution of current project portfolio Secure growth in priority regions Broaden commercial and technology scope Optimise financing and asset portfolio to enhance value 28
Targeting 3.5 GW by end of 2021 We will more than double installed capacity Summary 3,820 High activity - almost 1.0 GW under construction 585 1,057 MW 877 295 3,500 Continued conversion of project pipeline to backlog 357 MW In operation Under construction Backlog Pipeline Target end 21: in operation and under construction Further cost reductions and technology development will drive demand 29