The Board of Directors in Bergen Carbon Solutions AS has decided that company's first full-scale production factory will be based in Høyanger municipality, Vestlandet and has approved the start of construction for a factory with annual production capacity of up to 160tons EcoNano carbon nanofibers. On 22 March 2022 BCS signed an option agreement with the municipality of Høyanger for the potential establishment of a full-scale production factory. The experience from the detailed engineering work already conducted for the potential production factory in Møsjøen, Vefsn municipality, provided the company with very valuable input for assessing the opportunities and risk aspects in connection with a potential establishment in Høyanger.

Due to the scalability and transferability of the company's technology, the same lay-out of production lines can be used also in Høyanger. The Board has carefully considered the situation with two good investment alternatives and is of the opinion that the opportunity to accelerate the development in Høyanger is the best alternative for the company not only in terms of risk profile, but also in terms of capital efficiency and flexibility. In Høyanger, BCS will utilize an existing production hall, which has significantly lower construction and timing risk as opposed to building a completely new production hall, and also lowers the project capex by approximately NOK 90 million.

This is equivalent to reduction of approximately 20% on a project basis. Høyanger offers reliable access to renewable energy through hydropower and the Board expects to enter a long-term power purchase agreement as part of the project. The location also offers good synergies with already existing industry in the area.

Bergen Carbon Solutions expects production to commence mid-2023. The ramp-up to 160 tons will be step-wise and, as previously guided, such ramp-up phase is estimated to 9-12 months. The Board estimates total project capex of NOK 325 million to reach 160 tons annual capacity, excluding working capital at start-up.

The main capex for the project will be production and separation equipment. The lay-out with independent production lines also provides the company timing and capital flexibility, if required. At the end of First Quarter 2022 the company had NOK 335 million in cash on hand, zero debt and 93% equity ratio.

A significant part of the capex will occur in 2023, hence the Board considers the company to be well capitalized to start the construction of the first factory. The Board will evaluate all funding opportunities available going forward, including soft funding, customer prepayments, debt and equity. On 29 June 2022 the Norwegian Government announced its battery strategy for Norway, with the ambition that Norway shall become a major player throughout the battery value chain in Europe.

The Government will also support this strategy financially and has already granted billions of NOK in loans and guarantees to different players. Bergen Carbon Solutions have ongoing projects and discussions with many of the companies mentioned in the government report and the Board believes that Bergen Carbon Solutions will become an integrated, important participant in this value chain. The Board therefore believes it is realistic that the company could get access to such funding and this process has already been initiated.

However, there is no guarantee that this process eventually will be successful. While the original plan was to build the first full-scale factory in Mosjøen, the company is still dedicated to continuing the process despite now building the first factory in Høyanger. The construction sector has witnessed significant value-chain and lead-time disruptions, which potentially could have impacted the project in Mosjøen negatively, in particular for the production building.

The Board's decision will minimize this risk, while the equipment risk is considered the same for both locations. The company, suppliers and the municipality will now have better time to prepare the project for future development. Carbon Development Solutions, which will be a hub for material research used in combination with CNF, is already established and the first requirements have been made.

This project will continue with full force in Mosjøen, independent of the location of the first BCS factory.