Wind Denmark Energy Annual Event 2015 Financing of companies within the wind industry from a bank perspective Torben André Petersen, Head of Branch Region Nordea 22 September 2015

The wind industry is growing but is also facing challenges - the industry is volatile and strongly influenced by political and governmental decision-making processes Strong industry drivers and growth opportunities Clean industry fitting well into overall global political agenda: Reduction of emission of green house gasses High growth rates and positive prospects in many major markets, including China etc. Technological development and innovation The increasingly lower cost of wind generated electricity State tax and financial incentives However, substitution risk by alternative energy sources Volatile and political influenced industry The players face significant fluctuations in turnover and earnings as well as share price development Very large investments – long decision-making processes increase uncertainty Political issues US: PTC-schemes for renewable energy Dependence on governmental subsidies Market, wind and environmental risks

Small and medium sized companies as sub-suppliers - sub-suppliers to the wind industry should strive to achieve a high degree of financial robustness Value chain pressure The sub-suppliers in the wind industry are often family owned, small and medium sized companies One product company and/or one customer company Customers are typically large (wind) companies Seeking outsourcing opportunities in order to be asset light Increasing value chain pressure Low price and margin pressure from large customers Short deadlines of delivery Financial strength Cost-efficient and flexible production setup The financing conditions and payment terms are under pressure from customers as well as suppliers Requirement of enhanced financial strength and strong balance sheet

High business risks in the industry - the risk profile of the industry requires a strong capital structure and balance sheet of the company Strong capital structure The nature of the industry - volatility and political issues - implies a strong capital structure in order to absorb uncertainties and fluctuations in earnings Equity financing The owner(s) and external equity investors Willingness to share profits with your external investors Debt financing Credit facilities on a daily basis (bank) Working capital finance (bank) Other credit lines and financial instrum ents (bank and other) Management and reporting Strong management Extensive and deep knowledge about the industry and dynamics Financial reporting: Budget / forecast, including P&L, balance sheet and cash flow statements on a regular basis Financial policy and risk management Financial covenants

Debt capacity is determined by several factors - but a number of the factors could be influenced by the company itself Good corporate governance Competition and barriers of entries The industry Business model Country and debtor risks Finance policy and Risk management Produktansvar Private consumption and investments Debt capacity Earnings and cash flow (accounts and budget) Capital basis and ownership structure A strong capital structure deemed important especially in industries where: Competition is fierce, earnings are challenged and low profit margins Significant fluctuations in earnings and working capital Important to maintain a high operational and financial freedom Political issues / duties Predictability and transparency Working capital (fluctuations) Internal factorsExternal factors Debt capacity Debt capacity is not just a question of financial ratios, but a level which is determined by many factors The industry

Strong earnings and balance sheet is crucial - debt capacity is very dependent on transparent earnings and strong cash flow Net interest-bearing debt Gældskapacitet Debt capacity based on key financial figures Debt capacity and capital structure A significant debt capacity is crucial for achieving a strategic and operational freedom, and allows the company even better to cope with unforeseen events and changing market conditions Seasonal fluctuations and significant changes in working capital may also mean that there must be a certain cash position NIBD Level is too high Level should not be increased Level is appropriate

Summary - Compelling industry characteristics - growing industry which due to the risk profile demands a strong financial position Strong capital structure Strong capital structure is needed due to the nature of the volatile industry, demanding a high equity ratio Strong industry drivers On the overall global political agenda: Reduction of emission of green house gasses Volatile and political influenced Volatile industry in terms of turnover and earnings and globally political influenced Value chain pressure Increasing value chain pressure from customers and suppliers Financial strength Enhanced financial strength and strong balance sheet Debt capacity Although debt capacity is more than number, it is very dependent on transparent earnings and strong cash flows

Financial benchmarking of producers of wind power plants - the average equity ratio amounts approximately 34%