BUSINESS PROSPECT - BIOGAS PLANTS IN DENMARK

BUSINESS PROSPECT - BIOGAS PLANTS IN DENMARK [DATO] GAS VITAE [Firmaadresse]

Summary This prospect contains nine biogas plants to be constructed by individual groups of farmers in 2018. The plants are of similar capacity and technology, and eight of the plants have contracts for energy saving funds that yield a value corresponding to 25 % of the CAPEX investment. The farmer groups invest these 25 % as starting capital and are open for financing through loans for the remaining 75 %. The remaining 9 th biogas plant provide the 25 % from own funds. Operation and maintenance of the biogas plants (arranged as individual entities) will be contracted to common professional actors to ensure effective operation of the biogas and upgrading plants. The nine plants all have Engineering, Procurement & Construction (EPC) contracts ready and are expected to obtain final building and environmental permits before April 2018. CAPEX CAPEX Biogas Plant tdkk 336,500 teur 45,168 CAPEX Upgrading Plant tdkk 117,000 teur 15,705 CAPEX Grid Connection tdkk 73,300 teur 9,839 CAPEX total tdkk 544,800 teur 73,128 Energy Savings Farmer investment tdkk -118,260 teur -15,874 Open investment pool tdkk 411,200 teur 55,195 OPEX, annually 1 Biomasses & Energy input (2020) tdkk 159,178 21,366 teur O&M & transport etc. tdkk 28,350 3,805 teur OPEX total tdkk 187,528 25,172 teur Revenue, annually 1 Year 2019 2020 Biomethane production 39,523,000 Nm 3 CH4 42,733,000 Nm 3 CH4 437,000 MWh 472,500 MWh Revenue teur 36,678 teur 37,456 Investment key figures 1 10-year NPV (5 % WACC) 2 120,000 tdkk 16,050 teur Payback period from commission 4 years, 10 months 10-year IRR 11.3 % Project maturity Status of legal permits First permits are ready - last in summer 2019 Commission time - first gas production 6-8-month construction period - Ultimo 2018 Greenhouse gas reductions Estimated total project CO2-eq savings in 2020 97,000 tonnes CO2-eq per year Please contact Gas Vitae at info@gasvitae.com for further information. 1 All figures are corrected for inflation and presented in 2017 values. 2 WACC is based on: 75 % loan, 4,6 % interest, 22 % company taxes, 10 % internal interest on the 25 % equity. 1 Gas Vitae

Annual biomethane capacity (GWh) Share of annual gas usage Business prospect Biogas in Denmark Biogas is renewable climate neutral gas that can be upgraded to natural gas quality and injected to the gas grid, where it substitutes fossil natural gas. Depending on raw materials and production form, biogas is classified as an energy carrier with a double positive climate impact. Use of biogas itself is carbon neutral and production of biogas reduces emissions of a wide range of potent climate gas emissions meaning that the biogas value chain is actively removing climate gas emissions. Biogas plants are considered as wind turbines of the Danish gas grid, and in the past four years, the Danish biogas production has developed to a point where more than 5 % of gas in the gas grid consist of upgraded biogas. The Danish Energy Agency expects that the share of biomethane in the natural gas grid will increase by 70 % to 2.200 GWh in 2022. The current production potential from Danish biomasses including manure is estimated to be 11,100 GWh. Biomethane in the Danish gas grid 1.300 1.200 1.100 4,00% 1.000 900 3,00% 800 700 600 2,00% 500 400 300 1,00% 200 100 0 0,00% 01-2014 07-2014 01-2015 07-2015 01-2016 07-2016 01-2017 07-2017 01-2018 The upgrading process removes CO 2 and various residues from the raw biogas to condition it for the gas grid. Biogas that is upgraded and injected to the gas grid (biomethane) can be exported across the pan-european gas grid. Biogas is an attractive premium product at the European gas markets, where it is used as a fuel in transportation, industries and households. Biogas is primarily produced from anaerobic digestion of manure, other farm residues and bio-waste. Apart from energy utilization, biogas production with anaerobic digestion also deliver a range of other advantages to the farmer, such as improving the fertilization properties of digested manure and reducing odour and nutrient leaching. Subsidies and biomethane price projection The value of biomethane injected to the natural gas grid consists of three parts. 1) A feed-inpremium, 2) the natural gas price given at the Nordic gas exchange and 3) a certification value reflecting the green value of the biogas. The feed-in-premium is a subsidy paid by the Danish state and consists of three parts 3. 1. Subsidy part one is determined at 79 DKK / GJ in 2013 and regulated annually with 60 % of the change in the consumer price index. 2. Part two is determined as the difference between a basic natural gas price of 53,2 DKK / GJ and the average natural gas price as traded on Gaspoint Nordic in the previous year, plus a basic premium of 26 DKK / GJ. 3. Part three is determined as a premium of 10 DKK / GJ and is reduced by 2 DKK / GJ every year from 2016 until 2020 where the subsidy will be phased out. 3 Bekendtgørelse af lov om naturgasforsyning. LBK nr 1157 af 06/09/2016. Link. Gas Vitae 2

EUR / MWh Business prospect In 2023, the feed-in-premium will be reduced by 7 DKK / GJ, due to the energy settlement of 2016 4. A new Danish law regulating energy production incentives is expected mid-2018. However, this law is not expected to affect the business cases of the plants in this Business Prospect, as Denmark has a long and firm tradition of grandfathering energy incentives. Thus, changes in subsidy schemes will not affect plants that have reached the final investment decision before the date of the new law. The natural gas price is projected to rise steadily over the next decade, according to The Danish Energy Agency 5. The biomethane has a certificate value from the sustainability certificates. Several certification schemes are accepted by the EU Commission, but the most utilized schemes in the biogas sector are REDcert and ISCC. These schemes validate that the produced biomethane is of sustainable origin and produced in a way that reduces greenhouse gas emissions. The schemes are mostly utilized in the transportation sector due to expanding requirements of the utilization of biofuels. From 2020, a fixed share of fuel used in the transportation sector must originate from waste. Biogas is currently the least expensive way to meet these requirements. Development of upgrading subsidy, natural gas price and certificates (2017 prices) 90,00 80,00 70,00 60,00 50,00 40,00 30,00 20,00 10,00 0,00 Subsidy part 3 Subsidy part 2 Subsidy part 1 Natural gas price Certificate price Projection of the biomethane price including its component s. Organisation and common characteristics of the nine biogas plants The nine individual biogas projects in this prospect are organized in Gårdbiogas Foreningen (GBF - English: The Farm Biogas Association ). The association was founded by farmers to share knowledge and realise biogas projects. Currently, GBF has 14 members. The biogas projects in this prospect share common characteristics: Each project is owned by a group of 1-5 farmers operating cattle and pig farms near the biogas plant. To abide the rules governing the energy savings scheme, only the local famers can be owners of the plant. The farmers are obliged to 1) deliver +75 % of the biomasses to the plant and 2) to receive the digestate (treated waste residues) as fertilizer for their fields. The plot for the biogas plant has been secured by a contract with the plot owner. 4 Danish Energy Agency website (2017). Link. 5 Energistyrelsen (2017). Samfundsøkonomiske beregningsforudsætninger for energipriser og emissioner. Link. 3 Gas Vitae

Each project holds an energy savings contract yielding an amount corresponding to 25 % of the CAPEX needed for the biogas project. The farmers will deposit the funds in their individual biogas companies. All plants are underway with legal permits, which are expected to be granted primo 2018. All biogas plants will upgrade and inject the biogas to the gas grid. Offers on grid connection and upgrading plants are secured. Biogas plant Building permit Gas production 2018 Nm 3 CH4 2019 Nm 3 CH4 2020 Nm 3 CH4 2021 Nm 3 CH4 Biogas plant DKK Upgrading plant DKK Grid connection DKK CAPEX DKK Odsherred Bioenergi ApS Østergårde BioEnergi ApS Kollund Østergårde BioEnergi ApS Grøndal Glamsbjerg Biogas ApS Nov-17 Jul-18 1,645,000 4,934,000 4,934,000 4,934,000 42,500,000 13,000,000 7,000,000 62,500,000 Mar-18 Nov-18 1,540,000 4,860,000 5,339,000 5,339,000 39,000,000 13,000,000 9,725,000 61,725,000 Mar-19 Nov-19-1,540,000 4,860,000 5,339,000 39,000,000 13,000,000 9,725,000 61,725,000 Jan-18 Aug-18 1,532,000 4,809,000 5,235,000 5,235,000 39,000,000 13,000,000 4,000,000 56,000,000 Grauballegaard Bioenergi ApS Jan-18 Aug-18 1,394,000 4,468,000 5,041,000 5,041,000 39,000,000 13,000,000 9,500,000 61,500,000 Febjerg Biogas A/S Apr-18 Nov-18 1,648,000 4,952,000 4,971,000 4,971,000 39,000,000 13,000,000 10,400,000 62,400,000 Ølgod BioEnergi ApS Mar-18 Dec-18 1,699,000 5,096,000 5,096,000 5,096,000 39,000,000 13,000,000 7,200,000 59,200,000 Bioselskabet ApS Feb-18 Oct-18 1,664,000 4,992,000 4,992,000 4,992,000 39,000,000 13,000,000 7,050,000 59,050,000 Bramsgaard Bioenergi ApS Sep-17 Jul-18 1,617,000 4,965,000 5,193,000 5,193,000 39,000,000 13,000,000 8,700,000 60,700,000 Financial specifications Each biogas project is based on 25 % equity from the 1-5 farmers as private funds and/or as Energy Saving Grants. The regulation of the Energy Saving Funds only allows farmers to own the biogas plant. The financing of the remaining 75 % will be loan-based. The loans will be guaranteed by collaterals in the biogas plants, and farmer contracts will secure delivery of manure and deep litter to the biogas plant in the financing period. Cash flow (2017 teur) 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Revenue 29,820 36,777 37,557 37,752 37,238 35,153 34,626 34,084 33,609 33,134 Cost of goods sold -7,127-21,212-21,272-21,065-21,974-21,091-21,108-21,124-21,145-21,165 Operations and Maintenance -1,269-3,799-3,790-3,782-3,775-3,767-3,759-3,752-3,745-3,738 EBITDA 21,423 11,766 12,495 12,905 12,389 10,295 9,758 9,208 8,720 8,231 Depreciations -1,594-4,670-4,558-4,456-4,367-4,270-4,176-4,079-3,993-3,907 EBIT 19,829 7,096 7,937 8,449 8,022 6,026 5,583 5,130 4,727 4,324 Tax - -38-368 -1,230-1,539-1,375-1,497-1,576-1,635-1,669 Cash flow ex capex 21,423 11,728 12,127 11,675 10,851 8,920 8,261 7,632 7,085 6,563 CAPEX -71,887 - - - - - - - - - Cash flow -50,463 11,728 12,127 11,675 10,851 8,920 8,261 7,632 7,085 6,563 Accumulated cash flow -50,463-38,735-26,608-14,933-4,083 4,837 13,098 20,730 27,815 34,377 Gas Vitae 4

Turn-key biogas plants To achieve cost-effective economies of scale, the biogas projects are pooled as standard turn-key elements. The biogas projects consist of three key elements: 1. An anaerobic digester that produces biogas from the supplied biomasses. 2. A biogas upgrading plant which upgrades the biogas to natural gas quality by removing CO 2 and other impurities. 3. A pipeline and connection plant which injects the upgraded biogas to the natural gas grid. Each biogas plant will be a standard biogas plant with a capacity of digesting 80.000 tonnes of biomass per year and an upgrading capacity of 5,000,000-6,000,000 Nm 3 CH 4 per year. Operations and Maintenance (O&M) contractor A key factor in securing feasible biogas projects is steady gas production. This is achieved by engaging with a professional O&M contractor, who will focus on stimulating the biological processes in the digesters by continuous data collection and benchmarking. The O&M contractor will operate all nine biogas plants. Several highly skilled biogas O&M contractors have shown interest in the project. We have a signed NDA and a letter of intent with a very solid and experienced 40.000+ employee company with a turnover of more than 1.5 billion EURO. Besides the classical O&M tasks, the O&M partner will also take care of buying and handling biomass, transportation, optimizing gas production, benchmarking biogas plants, etc. The contract with the O&M partner will run for 10 years and will be based on the performance of the plants. 5 Gas Vitae

Biomass and biogas potential The biogas production is primarily based on agricultural waste products as manure from pig and dairy farms, deep litter, waste fodder, straw from cereal production, corn silage and glycerine. Specific biomass plan for a typical plant year 2020 (based on Grauballegaard BioEnergi): Biomass type Biomass tonnes / year Biomass price DKK / tonne Biogas potential kwh / tonne biomass Biogas output MWh / year Methane output Nm3 Total biomass cost DKK / year Sow slurry 10,000 1.10 55 548 49,600 11,020 Slaughter swine slurry 31,660 20.43 117 3,705 335,089 646,656 Cattle deep litter 5,000 47.50 548 2,742 248,000 237,500 Piglets slurry 7,500 20.43 91 683 61,740 153,188 Corn silage 7,000 332.50 1,140 7,978 721,525 2,327,500 Straw, wheat 5,500 570.00 2,232 12,277 1,110,313 3,135,000 Fish waste silage 1,800 570.00 1,728 3,111 281,358 1,026,000 Glycerine 4,800 1,615.00 5,075 24,362 2,203,200 7,752,000 Recirculated liquid 31,195 0.00 20 616 55,683 0 Total 73,260 56,023 5,066,508 15,288,863 Sensitivity analysis The sensitivity analysis shows how some of the most important parameters may affect the projected budget if they are worse than what is expected in the standard scenario. The budget is particularly sensitive to higher than expected biomass prices and less sensitive to drops in certificate value and energy saving funds. None of the adjustments of these key parameters cause the business case to fail. Analysis for one plant: NPV 15-years (tdkk) Standard scenario Biomass price +15 % Certificate value -50 % Value of energy saving funds -30 % 25,830 8,749 15,501 22,638 IRR 15-years 13.8% 8.3% 10.6% 12.2% Payback period from commissioning 5 years, 0 months 6 years, 7 months 5 years, 10 months 5 years, 5 months Gas Vitae 6

Economics of a biogas plant The presented budgets are adjusted for inflation and presented in 2017 DKK. Operational budget (thousands DKK) 2018 2019 2020 2021 2022 Power use, AD-plant -238-774 -972-915 -933 Power use, upgrading plant -344-992 -1,047-985 -1,004 Procurement of biomasses -4,323-13,742-15,289-15,289-15,289 O&M agreement and transport -1,050-3,150-3,150-3,150-3,150 Total -5,954-18,659-20,458-20,338-20,376 Cash flow budget (thousands DKK) 2018 2019 2020 2021 2022 Biogas plant -61,500 0 0 0 0 Energy Saving Funds 14,662 0 0 0 0 Interest -2,138-1,815-1,476-1,111-793 OPEX -5,954-18,659-20,458-20,338-20,376 Gas sales 8,963 28,020 30,793 31,021 30,660 Taxes 0 0-5 -1,020-1,239 Total -45,968 7,547 8,854 8,552 8,253 Assets (thousands DKK) 2018 2019 2020 2021 2022 Plots and buildings 1,917 1,749 1,586 1,431 1,285 Production plant and machines 57,037 52,026 47,178 42,574 38,221 Receivables 2,241 2,631 2,566 2,585 2,555 Deposit in bank 0 0 1,328 6,110 10,494 Total assets 61,195 56,406 52,658 52,700 52,555 Equity and liabilities (thousands DKK) 2018 2019 2020 2021 2022 Equity 9,866 12,227 16,981 21,217 25,348 Deferred tax 4,088 5,045 4,922 5,023 4,967 Long-term debt 39,009 34,682 30,353 26,075 21,847 Short-term debt 8,232 4,453 402 385 393 Total liabilities 61,195 56,406 52,658 52,700 52,555 7 Gas Vitae

Made by Gas Vitae Scion DTU, Diplomvej 381 DK-2800 Kgs. Lyngby Further information Knud Boesgaard Lars Byberg Managing Director kbo@gasvitae.com Chairman lby@gasvitae.com (+45) 6171 8811 (+45) 2963 5444