MARKEDSMULIGHETER I ET "HYDROGEN SOCIETY"

MARKEDSMULIGHETER I ET "HYDROGEN SOCIETY" Jon Erik Engeset, CEO, Hexagon Composites ASA Oslo, 1 st of June 2016

DISCLAIMER AND IMPORTANT NOTICE This company presentation (the Presentation ) has been prepared by Hexagon Composites ASA ( Hexagon or the Company ). The Presentation has not been reviewed or registered with, or approved by, any public authority, stock exchange or regulated market place. The Company makes no representation or warranty (whether express or implied) as to the correctness or completeness of the information contained herein, and neither the Company nor any of its subsidiaries, directors, employees or advisors assume any liability connected to the Presentation and/or the statements set out herein. This presentation is not and does not purport to be complete in any way. The information included in this Presentation may contain certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words believes, expects, predicts, intends, projects, plans, estimates, aims, foresees, anticipates, targets, and similar expressions. The forwardlooking statements contained in this Presentation, including assumptions, opinions and views of the Company or cited from third party sources are solely opinions and forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. None of the Company or its advisors or any of their parent or subsidiary undertakings or any such person s affiliates, officers or employees provides any assurance that the assumptions underlying such forward-looking statements are free from errors nor does any of them accept any responsibility for the future accuracy of the opinions expressed in this Presentation or the actual occurrence of the forecasted developments. The Company and its advisors assume no obligation to update any forwardlooking statements or to conform these forward-looking statements to the Company s actual results. Investors are advised, however, to inform themselves about any further public disclosures made by the Company, such as filings made with the Oslo Stock Exchange or press releases. This Presentation has been prepared for information purposes only. This Presentation does not constitute any solicitation for any offer to purchase or subscribe any securities and is not an offer or invitation to sell or issue securities for sale in any jurisdiction, including the United States. Distribution of the Presentation in or into any jurisdiction where such distribution may be unlawful, is prohibited. This Presentation speaks as of 1 June 2016, and there may have been changes in matters which affect the Company subsequent to the date of this Presentation. Neither the issue nor delivery of this Presentation shall under any circumstance create any implication that the information contained herein is correct as of any time subsequent to the date hereof or that the affairs of the Company have not since changed, and the Company does not intend, and does not assume any obligation, to update or correct any information included in this Presentation. This Presentation is subject to Norwegian law, and any dispute arising in respect of this Presentation is subject to the exclusive jurisdiction of Norwegian courts with Oslo City Court as exclusive venue. By receiving this Presentation, you accept to be bound by the terms above. 2

TOKYO IN THE 70 S 3

TOKYO ANNO 2016 The 3775 m high volcano was visible on 126 days in 2012 Nearly six times as often as in 1965 Source: Regular observations performed by Seikei junior high school and high school since 1963 4

THE HYDROGEN SOCIETY 2011 earthquake and tsunami triggered Fukushima nuclear plant disasters Renewable energy Nuclear energy 17% 3% 10% 11% 1% 29% All nuclear power plants were shut down Power generation from fossil fuels increased significantly Fossil fuels (Thermal power) 80% 62% 88% 1973 2010 2013 Source: Japan s Ministry of Economy, Trade and Industry (METI) 5

THE HYDROGEN SOCIETY Trillion yen $ 10 billion 30 25 20 15 10 5 0-5 -10-15 2010 2011 2012 2013 Fuel imports Current account Trade balance Following Fukushima Japan saw a significant increase in fossil fuel imports and significant decline in trade balance (first deficits in 30 years) driving current account to very low levels Source: Japan s Ministry of Economy, Trade and Industry (METI) 6

THE HYDROGEN SOCIETY Japan s CO2 emissions increased by 38% Japan s energy self-sufficiency declined to historical low 1. Norway 677% 2010 0,413 2. Australia 3. Canada 166% 235% 2013 0,571 +38% 8. US 33. Japan 6% 85% 6% of power from domestic resources (2012 data) kg CO2 / kwh 34. Luxembourg 3% Source: Japan s Ministry of Economy, Trade and Industry (METI) 7

THE HYDROGEN SOCIETY Japan had to take drastic measures to save the economy and the environment and to secure future energy supply Japan went out and searched for the optimal future solution April 2014 Strategic Energy Plan approved by the Cabinet stating that: It is essential for Japan to have a road map toward the realization of a hydrogen society Strategy is more ambitious with regards to the environment than what has been put forward by any nation so far Source: Japan s Ministry of Economy, Trade and Industry (METI) 8

THE HYDROGEN SOCIETY H2 generated by renewables H2 will power homes, industry and vehicles 9

PHASE 1 2013-2025 Introduction of Hydrogen use Market intro of fuel cell applications Residential fuel cells (2013) Fuel cell vehicles (2015) Commercial / industrial fuel cells (2017) 2020: Achieve hydrogen fuel price at or below level of fuels for hybrid vehicles 2025: Achieve fuel cell vehicle prices at or below level of comparable hybrid vehicles Source: Japan s Ministry of Economy, Trade and Industry (METI) 10

PHASE 2 Scaling up Mid 2020s Build a commercially viable system for efficient domestic hydrogen distribution Achieve sustainable delivery price of hydrogen from overseas ~ 2030 Large-scale production, distribution and hydrogen storage from unutilized sources overseas Large-scale introduction of hydrogen power generation Source: Japan s Ministry of Economy, Trade and Industry (METI) 11

PHASE 3 Zero carbon emission hydrogen society Before 2040: Systematic development and demonstration of system ~ 2040: Full-scale operation of production, distribution and storage Source: Japan s Ministry of Economy, Trade and Industry (METI) 12

JAPAN WILL USE 2020 OLYMPICS TO SHOWCASE THE HYDROGEN SOCIETY The 1964 Tokyo Olympics left the Shinkansen high-speed train system as its legacy. The upcoming Olympics will leave a hydrogen society as its legacy. Tokyo Governor Yoichi Masuzoe Tokyo plans to spend $385 million on fuel-cell vehicle subsidies and hydrogen fueling stations ahead of the Olympics Source: The Tokyo Metropolitan Government (TMG), Bloomberg 13

TARGETS IN THE NEARER TERM Fuel cell vehicles target in Japan Japanese OEMs targeting around 40,000 fuel cell vehicles on the roads for the Olympics in 2020 800 000 Up to $ 25,500 subsidized per fuel cell vehicle Subsidies are working so far: Toyota received 1,500 orders for 2016 Mirai in Japan, vs 400 target by end of year 400 40 000 Fuel station CAPEX subsidized up to 80% 2016 2020 2030 Source: Bloomberg, Japan s Ministry of Economy, Trade and Industry (METI) 14

HYDROGEN SOCIETY MARKET FORECAST 2020 Japan believes Hydrogen Society Policy has major potential to create economic growth, energy security and environmental health in Japan It forecasts that Japan s energy industry could grow from $300 billion in 2010 to $860 billion in 2020 Source: Japan s Ministry of Economy, Trade and Industry (METI) ( 1 trillion =~ $10 billion) 15

WHAT S IN IT FOR HEXAGON? Hexagon Offering 16

HEXAGON IS BUILDING ON ITS STRONG POSITION IN NATURAL GAS VEHICLES Hexagon has advantage in fuel cell tanks due to its global market leader position in composite tanks for natural gas vehicles and more Composite tanks are preferred in fuel cell vehicles because they perform better than steel under high pressure (>700 bar) In addition, composite tanks made of carbon fiber are lighter and do not corrode Hexagon has made composite tanks since 1965 and composite hydrogen tanks since 2002 Drop protection Plastic liner Carbon fiber shell Metal interface Composite (Type 4) tank for compressed hydrogen 17

A FUEL CELL VEHICLE IS AN ELECTRIC VEHICLE FUELED BY HYDROGEN Hydrogen Fuel Cell In a fuel cell, hydrogen from the fuel tank and oxygen from the air become electricity and water H 2 + O 2 > Energy + H 2 0 18

FUEL CELL VEHICLES IN DEVELOPMENT Toyota Mirai* Hyundai Tucson* Mercedes Benz F-Cell Mercedes-Benz F 105 Honda FCEV Honda FCX Clarity Volkswagen HyMotion Audi A-7 Sportback Toyota SUV * Launched models General Motors FCEV Nissan TeRRA FCEV BMW Grand Turismo 5 19

GROWTH IN PASSENGER CARS REPRESENTS A HUGE ENVIRONMENTAL CHALLENGE Global sales of light duty vehicles (# mn units) 1 85 +2.8% 109 98 100 103 106 88 90 93 95 42 44 46 47 49 51 53 55 57 59 43 44 44 45 46 47 47 48 49 50 16E 17E 18E 19E 20E 21E 22E 23E 24E 25E Developing countries Industrialised countries 1 Annual growth rates for light duty vehicle sales in developing and industrialized countries assumed to be 3.8% and 1.6% respectively Source: Navigant research (total vehicle sales); Frost & Sullivan (geographical split) 20

ELECTRIC WENT FROM NEAR ZERO IN 2011 TO 1 MILLION VEHICLES IN 2015/16 As of 1st of Jan 2015: ~740 000 vehicles Growing at an annual rate of ~320 000 cars (sales 2014) Source: Centre for Solar Energy and Hydrogen Research 21

FUEL CELL VEHICLE MARKET POTENTIAL Scenario: High (5%) Scenario: Medium (3%) Scenario: Low (1%) 5.0% 4.5% 4.0% In medium scenario 3 out of 100 cars sold in 2025 are assumed to be FCVs 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% % FCVs out of total LDVs 0.5% 2016E 17E 18E 19E 20E 21E 22E 23E 24E 0.0% 2025E 1 In order to achieve California's 2050 GHG emission reduction goal zero-emission vehicle (ZEV) sales must constitute nearly 100 percent of new vehicle sales in 2040. The largest share of the ZEV vehicle park is expected to be fuel cell vehicles in the long-term. An implication of their ambitious sustainability goals will push sales of ZEVs and plug-in hybrids to about 15,4 % of new sales by 2025; Source: California Environmental Protection Agency 22

Market value USD bn SIGNIFICANT LIGHT-DUTY VEHICLE MARKET POTENTIAL Fuel cell vehicle tank market expected to be 4-16 bn USD in 2025 * 1 Low Low case Medium 2 Medium case 3 High High case Market size (# of LDVs, million) 109 109 109 x Adoption rate 2025E 1.0% 3.0% 5.0% = No. of FCVs* (000') 1,090 3,270 5,450 x No. of tanks per FCV* 2 2 2 = no. of H2 fuel tanks (000') 1 2,180 6,540 10,900 x Price per H2 fuel tank (USD) 2,000 1,750 1,500 = Market value (USDm) 4,360 11,445 16,350 * FCV= Fuel Cell Vehicles Assumptions 109 million cars sold in 2025 ~2 cylinders per vehicle (conservative) Cylinder price: 1,500-2,000 USD. Current market price is ~3,000 USD Scenario: Low (1%) Scenario: Medium (3%) Scenario: High (5%) 11,45 16,35 7,68 0,03 0,07 0,13 0,16 0,33 0,03 0,03 0,07 0,07 0,10 0,14 0,13 0,17 0,23 0,37 0,67 0,42 0,79 1,36 1,69 0,75 3,60 2,77 1,35 2,43 5,64 4,36 2016E 17E 18E 19E 20E 21E 22E 23E 24E 2025E Source: Navigant Research, Frost & Sullivan, Hexagon Composites analysis 23

OTHER APPLICATIONS Fuel cell buses and trucks Hydrogen distribution systems Hydrogen fuel stations Backup power for e.g. telecom applications Marine applications Railways 24

EXCITING FUTURE Significant market potential for hydrogen tanks driven by hydrogen society policy and fuel cell electric vehicles Hexagon well positioned to take lead Demonstrated technology create barriers to entry that protect profitability and market share Hexagon, Mitsui and Toray are conducting a feasibility study of a jointly owned company in Japan for manufacturing and sales of hydrogen tanks Adjacent market opportunities using similar composite tank technology further adds to the Hexagon business case Hydrogen tank Market potential 2016-25 Estimated annual sales in mn$ (medium scenario) 48 2016 Backup Power (Norway only) Fuel Cell Bus Gas distribution Refueling stations Fuel Cell Vehicles 97 183 1 991 261 509 1 002 17 18 19 20 21 22 3 955 23 7 858 24 15 416 2025 Remark: Heavy duty trucks, marine and train market potential not incl. Source: Hexagon Composites analysis 25

Jon Erik Engeset