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Investor presentation

August 2018

Investor presentation August 2018

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The most important infrastructure. Of all.

The future is electric3

1

2

3

4

Focused investments

Business Risk: Excellent

Low finance risk

THE MOST IMPORTANT

INFRASTRUCTURE. OF ALL.

The most important infrastructure. Of all.4

1

Government (AAA) ownership and backing. Fully regulated.

The most important infrastructure. Of all.5

Critical infrastructure in one of the world's richest countries

Statnett is the TSO in the Kingdom of Norway (Aaa/AAA/AAA)

• "Pure play" - transmission

• No volume or commodity risk

• Organised as a State Enterprise – by law, only the government can be the owner

• On a mission from a supportive owner

- Category 4 State ownership (Sector political purpose)

- Politically sanctioned investments

- Proven support - equity injection and lowered dividends (50%25%)

• Fully regulated - low volatility in underlying earnings

• Stable regulatory regime, one of the longest track records in Europe

• The board committed to a "robust A rating"

- Issuer rating A2/A+ by Moody’s and S&P, respectively

See appendix for details on revenue regulation model

Ministry of Petroleum and Energy

The most important infrastructure. Of all.6

The Board

Customers

RegulatorNVE

Governance reflects the strategic role

One business –

functional

divisions and

subsidiaries

Long term state

ownership

The most important infrastructure. Of all.

Ownership and financing

7

CRITICALINFRA-

STRUCTURE

Predictable, mature

regulation

All investments

politically sanctioned

Ownersupport

"The TSO's essential role in the

power system makes it important that

these functions are unified

and owned by the State."

- 2012 Meld. St. No 14

(Government white

paper)

Full year 2017 H1-2018

Grid size (km high voltage lines) 12,000

Substations 160

Employees 1404

Balance sheet (NOK billion) 58.7 63.5

Revenues (adj) (NOK billion) 8.0 4.5

EBITDA (adj) (NOK billion) 4.3 2.5

Profit after tax (adj) (NOK billion) 1.3 1.1

The most important infrastructure. Of all.8

Financial snapshots

The most important infrastructure. Of all.9

Norway – hydro reservoirs supporting a greener Europe

• Norwegian power production dominated by hydro (96%)

• Power surplus – clean energy export

• Reservoir flexibility supports European renewables

Friday Saturday Sunday Monday

Storms "Dagmar" and "Egon"

hit Danish wind power,

turbines forced to shut down

“BUSINESS RISK:

EXCELLENT”

"Business risk: Excellent" - S&P10

2

_________

S&P

11

"Efficient electricity network" – S&P Global Ratings

"In our view, Statnett operates an efficient grid and transmission system with a proven ability to cope with the often harsh Norwegian terrain and climate. This is supported by several international benchmarking studies, which have shown Statnett's transmission operations to be among the most efficient European networks”

S&P Global Ratings, 21 February 2018

"Business risk: Excellent" - S&P

"Business risk: Excellent" - S&P12

“Moody's: Norwegian electricity networks operators benefit from

most stable and predictable regulatory regime among Nordic electricity

networks”

Moody´s Sector In-Depth Report, 15 June 2016

"Norwegian regulation is independent, well-established and

transparent with regulatory principles clearly defining risk allocation

between companies and customers and is consistently applied. The

ex-ante revenue cap regulatory framework has a 20 year track-

record, one of the longest within Europe, and its development has

been evolutionary. We note material changes to the regulatory

framework have only been implemented after significant

engagement, improving transparency and predictability"

"Business risk: Excellent" - S&P13

Cost based revenue with a regulated rate of return

• "Pure play" transmission - fully regulated

• No power price or volume exposure

• Allowed revenue – cost based - 100% when efficient

- Operating costs (with 2 year time lag, plus inflation, some costs are back-to-back same year). Depreciation is cash compensated same year

- RAB (as of 31 Dec each year), regulated return1 (WACC, 6.1% in 2017).

- Allowed Revenue annually adjusted to fit updated costs and rates – no regulatory period end point

- No "x-factor" (no general across industry efficiency improvement requirement)

• Allowed revenue distributed between customers through tariffs

- Differences to allowed revenues made up in subsequent years

- No significant counterparty risk - limited credit allowed and any losses would be picked up by all customers (included in allowed revenues)

1 Regulator has proposed moderate changes to the WACC formula from 2019. See appendix for details on revenue regulation model

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RAB (index) EBITDA (IFRS) EBITDA excl. higher/lower revenues

"Business risk: Excellent" - S&P14

Stable earnings, driven by growing Regulated Asset Base (RAB).

Mill NOK

FOCUSED

INVESTMENTS

Focused investments15

3

Focused investments16

Experienced

builder

Security of supply

Focused investments

One defined mission

17

MISSION

ClimateValue

creation

“To develop the

next generation

power system

in Norway

by 2030"

• Already well under way

• Strong project track record

Focused investments18

Significant investments successfully completed

Execution

on track

Numerous major projects completed within the last 10 years

Consistent and

significant

savings

Focused investments19

Connecting the European power market

North Sea LinkCapacity app. 1400 MW

Est. compl. 2021

NordLinkCapacity app. 1400 MW

RAB 2019 with trial and

commercial operation in 2020

20

Significant domestic activities ongoing

Western corridor, substations package

1 and 2 (81%) Aug. 21

NSL Interconnector UK (31%) Dec. 21

Western corridor, package 3 (20%) Jun. 22

NordLink

Interconnector (62%)

RAB 2019

Inner Oslofjord subsea cable (97%) Dec. 18

As of July 2018. Percentages show progress. Dates indicate expected completion. Major projects.

Bjerkreim Transformer station (79%) Jul. 19

Sylling Reinvestment

(16%) Dec. 21

Smestad-Sogn station and cabel (22%) Nov. 21

Focused investments

21

Significant domestic activities ongoing

Balsfjord - Skaidi

(38%), Mar.23

Namsos - Nedre Røssåga

(93%), Aug. 20

Namsos - Åfjord and Surna-Snilldal

(74%), Sep. 19

Klæbu - Namsos

Voltage upgrade (97%), Dec. 18

Ofoten - Balsfjord

(99,7%), Des. 18

As of July 2018. Percentages show progress. Dates indicate expected completion. Major projects.

Focused investments

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Expected Investments Investments

Focused investments22

Bringing Statnett´s investments to a new level

Bill NOK

• Contractual obligations exceeding NOK 50

million amounted to NOK 12.7 billion as of 30

June 2018, with an estimated additional NOK 2.0

billion in a grid purchase option.

• Investments will stay at a high level until both

interconnectors are completed in 2021. After

2021, investment levels are expected to be more

moderate.

Focused investments23

Priority 1:

HSE

0,0

2,0

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6,0

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Focused investments24

Health and safety comes first - always

• Injury frequency halved

• No severe environmental damages

• Stable absence due to illness: 3.4%

Number of lost time injuries (incl contractors) per mill hours worked (12 month rolling mean)

LOWFINANCE RISK

Low finance risk25

4

Low finance risk26

Prudent financial policies and low financial risk

Sufficient liquidity

• To fund operations, investments and redemptions over a minimum 12 months period

• NOK 8.0 billion committed RCF (undrawn, matures Jan 2023)

• EUR 200 million undrawn under loan agreement with EIB

• Normalised cash position: Approx. NOK 2.0 billion

Low counterparty risk

• Minimum rating requirement of A-

• Credit Support Annex (CSA)

Low interest rate risk

• Regulated rate of return 6.1% in 2017

• Seek to correlate rate on debt with NVE-interest rate (regulated return)

Domestic Bonds (NOK 11 160 mill.)

Drawn Bank Loans EIB* & NIB (NOK 7 034 mill.)

Issues in Domestic CPs (NOK 0 mill)

30 %

27 %

20 %

3 %

0,5 %

0,5 %19 %

0 %

Low finance risk27

Multiple sources of capital as of 30.06.2018

*Only drawn amount1

under EUR 300 mill loan

agreement with EIB

included

1) As of 30.06.2018: EUR 100 mill of EUR 300 mill drawn.

-

500

1 000

1 500

2 000

2 500

3 000

3 500

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International Bonds Domestic Bonds Bank Loans (EIB & NIB)

Low finance risk28

Low refinancing risk as of 30.06.2018

Average time to

maturity: 8,8 years

Mill NOK

Rating Agency Short-term Rating Long-term Rating Outlook

Moody´s P-1 A2 Stable

S&P Global A-1 A+ Stable

Low finance risk29

Long term funding

• Credit Facility NOK 8.0 billion, undrawn EIB financing

• Strong and supportive bank group

• Robust A rating policy

Access to capital markets supported by

The owner of Statnett SF (The Kingdom of Norway), is rated Aaa/AAA/AAA by Moody´s, S&P and Fitch, respectively

Latest credit opinion report on Statnett SF from S&P Global: 21 Feb 2018, from Moody's: 12 Jun 2018

SUMMARY

Summary30

5

The most important infrastructure. Of all.

The future is electric31

1

2

3

4

Focused investments

Business Risk: Excellent

Low finance risk

Summary32

Key investment highlights

• Critical infrastructure in one of the world's richest countries,

the Kingdom of Norway (Aaa/AAA/AAA)

• "Pure play" - transmission

• No volume or commodity risk

• Organised as a State Enterprise – by law, only the government can own

• On a mission from a supportive owner

- Category 4 State ownership (Sector political purpose)

- Politically sanctioned investments

- Proven support - equity injection and lowered dividends (50%25%)

• Fully regulated - low volatility in underlying earnings

• Stable regulatory regime, one of the longest track records in Europe

• The board committed to a "robust A rating"

See appendix for details on revenue regulation model

APPENDIX

Appendix33

6

Under implementation Region Expected investment

in million NOK

Western Corridor, voltage upgrade South 6,600 – 6,800

Balsfjord – Skaidi (-Hammerfest), new 420 kV power line North 4,260 – 4,440

Namsos – Åfjord , Snildal – Surna, new 420 kV power lines Central 2,950 – 3,090

Smestad – Sogn, substation and cable installation East 1,250 – 1,390

Interconnectors

NSL - Interconnector to England EUR 750 – 1,0001)

NordLink - Interconnector to Germany EUR 750 – 1,0001)

Latest commissioned facilities

Increased transformation capacity East Norway East

Ofoten – Balsfjord, new 420 kV power line North

Inner Oslo Fjord, reinvestment cable connections East

Klæbu – Namsos, voltage upgrade Central

Appendix34

Key investments

1) Statnett's share

In million NOK

Unadjusted figures 2008 2009 2010 2012 2013 2014 2015 2016 2017 H1-2018

Revenue 4 256 2 862 7 247 5 334 4 561 5 563 5 906 6 678 7 401 4 472

EBITDA 1 722 259 3 945 2 260 1 394 2 528 3 340 3 296 3 715 2 509

EBIT 1 194 -403 3 279 1 433 346 1 378 1 714 1 152 1 312 1 559

Profit after tax 1 517 -480 2 198 837 82 829 1 103 645 813 1 033

Adjustments

Accumulated higher revenue* 428 -633 1 554 3 455 2 413 1 790 1 346 343 -303 -342

Adjustment for changes in acc. higher/lower revenue -721 1 061 -2 187 -838 1 042 623 444 1 003 646 39

Adjusted figures

Adjusted revenue 3 535 3 923 5 060 4 496 5 603 6 186 6 350 7 681 8 047 4 511

EBITDA 1 001 1 320 1 758 1 422 2 436 3 151 3 784 4 299 4 361 2 548

EBIT 473 658 1 092 595 1 388 2 001 2 158 2 155 1 958 1 598

Profit after tax 998 284 623 234 832 1 284 1 427 1 397 1 304 1 063

Appendix35

Reconciliation of financial key figures

*) See note 4 in annual reportand note 2 in H1-2018 report

Appendix36

Predictable revenues and profitability dynamically adapted to costs

Efficiency score: 100%Successful benchmark with other

European TSOs. The 15%

efficiency programme initiative

Timely compensationNo time lag on investments, system service

costs or depreciation, two years lag on operational costs

(compensated with inflation)

2.5% + Inflation + 0.875 x 5%

(1-Tax rate)

Costs1 x 40% + Costs1 x 60% x Efficiency Score

2Regulated rate of return (2017: 6.1%)

1Revenues:

x 40%2 + (5y swap rate + margin) x 60%2

1) See separate slide for definition of costs 2) 40% equity share regulatory assumption – fixed parameter independent of company

Appendix37

Transportation Loss in grid in

year n-2, times updated power

market price in year n (which

takes away practically all price

risk for Statnett)

Cost of

Energy

not

delivered

times 0.6

Cost of

system

services

40% actual

+60% norm

Transit

costs

(back-

to-back)

Property

tax (back-

to-back)

Norm Cost = Cost Base * Efficiency score

Cost Base = O&Mn-2 * CPIn

CPIn-2

+ Dn + RABn * NVEraten

Revenue Cap = 0.4 * Cost Base + 0.6 * Norm Cost + TLn-2 * Pn + CENS + S + TrC + Ptax

Inflation adjusted operating

and mainenance costsDepreciation in

year n

Rate of return on Regulatory

Asset Base in year n

Note that the regulator calculated Dn and RABn*NVEraten in two steps, first with two year's timelag on Dn-2 and RABn-2,

then adding the increase in basis from n-2 to n. Total effect as described above.

Regulator's description available at: https://www.nve.no/energy-market-and-regulation/revenue-regulation/

Calculation of allowed revenue

Appendix38

Organizational structure

Knut HundhammerCFO and Executive Vice PresidentCorporate Finance and Services

Hundhammer was educated at the Norwegian Military Academy and has an MBA from Wharton School of Business in the US. He joined Statnett in May 2011, and is responsible for the Group's economy, finances, HR, HSE, legal affairs, risk management and quality. He has previously been Deputy Managing Director/CFO of Finansbanken ASA and CFO/COO of Høegh Autoliners. He has also been president of the commercial shipping division in the Klaveness Group, and a consultant for McKinsey & Co.

Auke LontPresident and CEO

Lont holds a Master's degree in econometrics from Vrije University in Amsterdam. He became President and CEO of Statnett in February 2009 after having held the position of CEO with the consulting company Econ in Norway. Lont has previously held top executive positions in Statoil, has worked in South Africa and was the CEO of Naturkraft AS. He has more than 30 years’ experience from the energy sector. Auke Lont is a member of the board of the employers' association Spekter and the railway infrastructure company Bane NOR

Appendix39

Connecting the European Power Market

NordLink• Interconnector between Norway and Germany• The last few years have seen a significant increase in wind power and

solar power in Germany. When the winds blow and the sun shines this creates a surplus of renewable energy in Germany, which also leads to lower prices than in Norway. Norway can then import this power and conserve the water in Norway's many hydropower reservoirs.

• When there is little production of wind power and solar power in Germany the need for power increases and the prices will be higher than in Norway. Norway can then produce hydropower and export it to Germany. This way we get more out of the resources on both sides of the cable.

North Sea Link (NSL)• Interconnector between Norway and the UK• The interconnector will link the Nordic and UK markets, providing

benefits on both sides• When the winds blow in the UK and wind power production is

high, Norway will be able to import power from the British to a lower price than in the Norwegian market and conserve the water in Norway's many hydropower reservoirs.

• When there is little wind and a greater need for power in the UK, the situation will be the other way around. The UK can then import Norwegian hydropower at a lower price than in the British market and through this secure the power supply.

• The advantages of this exchange of green energy include:• Increased security of supply because one can import more electricity at a lower price when the power situation is tight• Increased market for power producers when there is a surplus of power in the national markets• Facilitation of higher production and consumption of renewable energy in Norway, the UK and Germany, thereby contributing to future climate-friendly energy• More predictable supply situation and price throughout the year and from year to year

• Both projects are organized as "unincorporated joint ventures". Statnett holds 50%. Statnett's part in NordLink is organized in a wholly owned subsidiary, but fully financed by the parent company. Costs and trade revenues are shared equally. Counterparts are National Grid for the NSL and TenneT and KfW owns the southern part of NordLink through a jointly owned German company.

• Statnett's parts are fully regulated, revenues are cost based, same as for onshore grid. So the trade revenue risk rests with the customers.

Appendix40

The tariff

• Set by Statnett ahead of each year.

• Defines how Statnett distributes the allowed

revenue between different customer groups

• The tariff does not define the long term

revenue

• Any difference between collected tariffs and the allowed revenue is made up in subsequent years

• End result: Over time, Statnett ends up with the cost based regulated allowed revenue cap.

• Tariff is split between a variable part and a

fixed part.

• The variable part (approximately 20%) is

based on marginal transmission loss in each

node and billed weekly

• The fixed part is designed to cover the

remaining part of the allowed revenues. It is

allocated according to customer groups,

load/production and point of connection, and

paid mid-month for the same month

Appendix41

Financial information and contact info

Contact details:

Knut Hundhammer (Executive Vice President, CFO, Chief of Staff)

Tel. +47 23 90 32 10

knut.hundhammer@statnett.no

Petter Erevik (Director of Finance)

Tel. +47 23 90 35 70

petter.erevik@statnett.no

Availableat:

http://www.statnett.no/en/investor-relations/