ENCE Energía y Celulosa S A : Results 3Q20

9M 2020 Results

18

October 28th, 2020

82 Overall ESG Score

Disclaimer

The information contained in this presentation has been prepared by Ence Energía y Celulosa, S.A. (hereinafter, "Ence").

This presentation includes data relating to future forecasts. Any data included in this presentation which differ from other data based on historical information, including, in a merely expository manner, those which refer to the financial situation of Ence, its business strategy, estimated investments, management plans, and objectives related to future operations, as well as those which include the words "anticipate", "believe", "estimate", "consider", "expect" and other similar expressions, are data related to future situations and therefore have various inherent risks, both known and unknown, and possess an element of uncertainty, which can lead to the situation and results both of Ence and its sector differing significantly from those expressly or implicitly noted in said data relating to future forecasts.

The aforementioned data relating to future forecasts are based on numerous assumptions regarding the current and future business strategy of Ence and the environment in which it expects to be situated in the future. There is a series of important factors which could cause the situation and results of Ence to differ significantly from what is expounded in the data relating to future forecasts, including fluctuation in the price of wood pulp or wood, seasonal variations in business, regulatory changes to the electricity sector, fluctuation in exchange rates, financial risks, strikes or other kinds of action carried out by the employees of Ence, competition and environmental risks, as well as any other factors described in the document. The data relating to future forecasts solely refer to the date of this presentation without Ence being under any obligation to update or revise any of said data, any of the expectations of Ence, any modification to the conditions or circumstances on which the related data are based, or any other information or data included in this presentation.

The information contained in this document has not been verified by independent experts and, therefore, Ence neither implicitly nor explicitly gives any guarantee on the impartiality, precision, completeness or accuracy of the information, opinions and statements expressed herein.

This document does not constitute an offer or invitation to acquire or subscribe to shares, in accordance with the provisions of Royal Legislative Decree 4/2015, of 23 October, approving the consolidated text of the Securities Market Act. Furthermore, this document does not constitute a purchase, sale or swap offer, nor a request for a purchase, sale or swap offer for securities, or a request for any vote or approval in any other jurisdiction.

2

Highlights

Highlights 9M20

Resilient operating performance in a low price environment

Ence continues operating safely despite COVID-19

Further cash cost reduction in 3Q20 to 373 €/t despite maintenance shutdowns

+27% renewable energy sales vs. 9M19

Renewables business adds stability to the Group

Financial results driven by lower prices

Stronger pulp demand than initially expected for 2020

Ence has hedged the price for 193,200 t at 770 $/t in 2021

No covenants, long term maturities and €360 Mn cash in balance

• Effective measures taken since February 24th against COVID-19 have allowed ENCE to protect its staff and to continue operating during the pandemic and subsequent virus outbreaks, maintaining full production and employment
• All ENCE's activities have been declared essential according to the Royal Decree 463/2020 approved on March 14th

 Renewable Energy Business:		 Pulp business:
o Sales (MWh): +27% vs. 9M19 (+28% vs. 3Q19)		o Production: +2% vs. 9M19 (-15% vs. 3Q19)
o New biomass plants commissioned on Jan. 31		o Sales (t): +7% vs. 9M19 (-11% vs. 3Q19)
and Mar. 31 2020		o Cash cost: -3% vs. 9M19 (-1% vs. 3Q19 to 373 €/t)
 €42 Mn EBITDA in the Renewables business:		 €7 Mn EBITDA in the Pulp business:
o +2% vs. 9M19 (-2% vs. 3Q19)		o -92% vs. 9M19
o Higher energy sales offset a 6% decline in the		o Higher pulp sales and lower cash cost partially
avg. sales price down to its regulatory minimum		offset a 26% decline in the average sales price

• Pulp demand improved by 5% vs. the first eight months of 2019, equivalent to 2.1 million tons.
• Producers' inventories have remained close to their normal levels despite the delay of some maintenance shutdowns to the second half of the year due to the spread of COVID-19
• €556 Mn Net Debt position at 30 Sep. 2020 (€350 Mn in the Pulp business and €206 Mn in the Renewable business)
• No covenants in the Pulp business and long-termmaturities in both businesses and
• €360 Mn cash in balance at 30 Sep. 2020 (€237 Mn in the Pulp business and €122 Mn in the Renewable business)

4

Ence continues operating safely despite COVID-19

All ENCE's activities have been declared essential

PEOPLE

• COVID-19Prevention Protocol
• • Entrance and exit temperature checks
  • Everyone wears masks
  • 2 meters social distancing and no visits
  • Regular ventilation and disinfection of hands and tools
  • Regular COVID-19 tests
• Minimum on-site work subject to regional rate of cumulated infections
• COVID Access Passport (Internal App)

Virus spread avoided in our

workplaces

OPERATIONS

• Implementation of Ence´s COVID-19 Prevention Protocol in all the supply chain, including subcontractors and logistic services
• Daily audits at all plants
• Adverse scenario analysis and action plans to mitigate risks
• Increased wood / raw material stocks
• Annual maintenance shutdowns delayed to 3Q20
• Isolated work teams

No activity interruptions due to

COVID-19

LIQUIDITY

• Use of the € 70 Mn RCF available in the Pulp business, maturing in May 2023.
• € 102 Mn in long-termback-up credit facilities with no covenants signed in 2Q20
• € 51 Mn capex payments postponed to 2021
• Optimization of factoring and confirming lines

+59% cash in balance

up to €360 Mn on 30 September 2020

5

Sustainability Plan 2019 - 2023

Highlights 3Q20

82 Overall ESG Score

Safe and

Waste

Lower water

Industry reference

Emissions

99% valorised

consumption

Covid-19

> 40% reduction

eco-efficient

< 10 mg /Nm3 in all

AENOR "0 Waste"

Pontevedra: -4%

Prevention

in odour impact

operations

our biomass plants

Certification

Navia: -8%

Protocols

vs. 2019

Climate

-25%

New Scope 1 & 2 emissions

Climate scenario analysis for supply areas

Action

target for 2025

according to TCFD recommendations

Sustainable

Patrimonial area certified FSC®

100%

Wood bought from small

agro-forestry

87% (Licence code FSC-C099970) or PEFC

97% suppliers

Wood inputs certified FSC®

Certified wood and

Biomass bought from small

biomass suppliers

management

79% (Licence code FSC-C081854) or PEFC

85% suppliers

(September 2020)

Sustainable

10%

Development of sustainable

products with reduced

European Ecolabel for primary material for

products

Of Pulp Sales

environmental footprint and with

cellulose at Navia and at Pontevedra

potential for plastic substitution

Commitment

+3,2M€

The Pontevedra´s annual Social

Involvement with the local community: the plants

to

Plan and other investments in the

received more than 400 organized visits from the

Communities

community

local stakeholders

People and

Gender

+13,2% Women employed vs. 2019

+7% in 2019

55% of new staff < 30 years are women

Values

0% salary gap

Happy Index

62% of new managerial & indefinite staff are women

Code of Conduct and complaints

Long-term incentive

Women present

Digitalisation of

on the Board of

Governance

channel procedure update.

plan linked to

Social Bodies

25%

22% Directors vs.

Anticorruption Policy approval

ESG targets

2017, up to29%.

6

+27% higher renewable energy sales vs. 9M19

Despite the difficulties caused by the pandemic

316 MW

Installed capacity

New Biomass Plant CIUDAD REAL 50 MW

31st MARCH

MÉRIDA

20 MW

HUELVA

50 MW

HUELVA

41 MW

New Biomass Plant HUELVA 46 MW

31st JANUARY

HUELVA

46 MW

JAÉN

16 MW

CÓRDOBA

27 MW

CIUDAD REAL

50 MW

CIUDAD REAL

50 MW

CIUDAD REAL

16 MW

7

A regulated business which adds stability to the Group

6% decline in our average sales price compared to a 36% drop in the pool price

Average sales price: Pool price + Ro + Regulatory Collar

(€/MWh)

			-5.7%
		104.6		98.3
		49.5		24.0
		58.0		31.9
					42.3
		(2.9)
		9M19			9M20
	Average Ro				Ence´s market price		Regulatory collar compensation

• Our renewable energy sales price is supported by its regulatory minimum.
• Ro and regulatory collar applicable during the sanitary crisis will be reviewed, according to Spanish Royal Decree-Law 23/2020.

Return on investment

(€ Mn)

47.6		47.6

9M19

9M20

• The regulated annual return on investment of our power plants was confirmed at 7.4% for 2020 - 2031 by Spanish Royal Decree-Law 17/2019.
• Implies an annual income of € 63 Mn subject to a minimum operation of just 3.000 hours per biomass power plant.

8

Renewables pipeline: 405 MW with grid access and locations secured

Awaiting upcoming public auctions of the National Renewable Energy Plan

CIUDAD REAL 50 MW

Biomass

RTB in 3Q21

HUELVA 40 MW

Solar PV

RTB in 4Q21

HUELVA 10 MW

Solar PV

RTB in 3Q21

SEVILLA 90 MW

Solar PV

RTB in 4Q21

RTB = Ready to build

CIUDAD REAL 25 MW

Biomass Hybridization

RTB in 4Q21

CÓRDOBA 50 MW

Biomass

RTB in 1Q22

JAÉN 100 MW

Solar PV

RTB in 3Q21

ALMERÍA 40 MW

Biomass

RTB in 3Q21

National Renewable Energy Plan

2020 - 2030

Solar PV: +30.1 GW

Wind: +22.3 GW

CSP: +5.0 GW

Hydro: +3.5 GW

Biomass: +0.8 GW

Upcoming Auctions Scheme

Spanish Royal Decree-Law 23/2020

• Annual actions 2020 - 2025
• Specific by technology
• Price mechanism: Pay as bid (€/MWh)

9

Further cash cost reduction in 3Q20 to 373 €/t

Despite annual maintenance shutdowns at both biomills

Pulp Production (t)				1,025,000
		+2.2%
		726,624	742,423
-15.1%
261,280	221,802
3 Q 1 9	3 Q 2 0	9 M 1 9	9 M 2 0	2020 E

Cash Cost breakdown (€/t)

	-1.0%			-3.3%
Overheads	376	373	389	376	375
	33	35	37	32
	31
Commercial and	31	28	30
logistic costs	104	109	112	111
Conversion costs
	208	201	209	204
Wood cost
	3Q19	3Q20	9M19	9M20	2020 E

Pontevedra biomill

• < 5% production vs. 9M19
• 25 days annual shutdown in 3Q20 (vs. 10 days in 1Q19)
• Energy efficiency improvements implemented

Navia biomill

• > 9% production vs. 9M19
• 7 days annual shutdown in 3Q20 (vs. 12 days in 2Q19)
• Fine tuning of second pulp dryer

13 €/t Cash cost reduction vs. 9M19:

 5 €/t lower wood costs  5 €/t lower overheads

 2 €/t lower commercial and logistic costs  1 €/t lower conversion costs

10

7% higher pulp sales in 9M 2020

Increasing the value of the European market and ENCE's differentiated products

Geographical distribution of sales

Breakdown by end product

Differentiated products

% of pulp sales

% of pulp sales

% of pulp sales

7% Other

Europe 93%

10%

Tissue 58%

27% Specialties

vs. 6% in 2019

vs. 82% in 2019

vs. 58% in 2019

vs. 31% in 2019

8% P&W

vs. 8% in 2019

7% Packaging

Source: Ence 9M20	vs. 3% in 2019	Source: Ence 9M20
Source: Ence 9M20
93% of ENCE´s pulp sales are to Spanish and		Ence's differentiated products already
58% of ENCE's pulp sales are to the growing	account for 10% of pulp sales.
European markets, where it has strong logistic	tissue and hygiene products segment.	These value-added products are environmentally
and service related competitive advantages.	Strong order backlog for 2020.	friendly and better adapted to replace softwood

pulp in speciality segments.

11

Pulp demand in 2020: stronger than initially expected

Producers inventories close to normal levels despite fewer maintenance shutdowns

BHKP and BSKP Demand Evolution (YoY)

000's t

2500

2250				Last 10 years average BHKP: +1.1 Mn t / year												2089
2000				Last 10 years average BSKP: +0.4 Mn t / year
													1729
1750
1500
1250
																													890
1000
									742																										736					689
750
									542				600			595																		584
500					121	253	267	308	319	301					248			208		278			325
250				30		57	119	155180		143				184 184	135									66							72
16
0
																																								-7	-37
-250																			-112																		-52
																						-214	-304
-500
																																	-496										-522
-750
																																		-808
-1000
-1250
-1500																															-1.354
																Hardwood (BHKP)					Softwood (BSKP)

Source: Ence, PPPC G-100

PPPC updated statistics show a stronger demand in 2020 than initially expected. It has recovered by 5% vs. the first eight months of 2019, which were affected by the destocking of pulp in the paper industry. Restocking, together with higher demand for tissue paper (+5% vs. 7M 2019) and some substitution of the less efficient integrated pulp, has offset the 18% drop in P&W demand vs. 8M 2019.

Producers' Inventories BHKP and BSKP

In Days (Quarterly average)

65					64
			61
60		Last 10 years average BHKP: 42 days
	Last 10 years average BSKP: 30 days	53		54
55

5047

45			41		41	43																	41								44			3942
39										40	38	40	40						38	41		41
40									37	37	35							35	36	36		34	38
35																																						33
31	30	30		31	29		28	29	29	30		28 32
30
								27						28
25
20
15
10
															Hardwood (BHKP)			Softwood (BSKP)
Source: Ence, PPPC G-100

Producer inventories have remained fairly stable during the first eight months of the year despite the postponement of most maintenance shutdowns to 2H20 due to the spread of COVID-19 and the more concentrated effect of lockdown measures on demand for printing and writing papers in the second quarter.

12

Pulp prices in 9M20 remain at their 10-year minimum

Ence has hedged the price for 193,200 t at 770 $/t in 2021

	Net BHKP Prices China	Global Market Pulp Industrial Cash Cost Curve (CIF Europe) 1
	$/t	$/Mn t

800

Last 10 years average BHKP: 627 $/t

700

600

500

400

300

200

Current Net Price BHKP China 450 $/t

100

0

Hardwood (BHKP)

Softwood (BSKP)

Mn t

Source: FOEX

Source: Ence, Hawkins Wright

Pulp business annual EBITDA: over €150 Mn at average cycle prices

13

Pulp demand set to outgrow supply over 2020-24

Average annual pulp demand growth of 1.5 Mn t during the last 10 years

Expected Annual Increase in Global Market Pulp Supply and Demand (Mn t)1

Mn t		2020	2021	2020-21	2022	2020-22	2023	2020-23	2024	2020-24
ESTIMATED ANNUAL MARKET PULP DEMAND CHANGE		(1.0)	1.0	-	1.5	1.5	1.5	3.0	1.5	4.5
ESTIMATED ANNUAL MARKET PULP SUPPLY CHANGE (CONFIRMED)	(0.3)	(0.7)	(1.0)	0.6	(0.4)	0.6	0.2	(0.7)	(0.5)
SUZANO (SALES RECOVERY)	BHKP	0.9		0.9		0.9		0.9		0.9
ENCE (NAVIA & PONTEVEDRA)	BHKP	0.1		0.1		0.1		0.1		0.1
ARAUCO (VALDIVIA)	BHKP	(0.2)	(0.3)	(0.5)		(0.5)		(0.5)		(0.5)
MONDI (RUZOMBEROK)	BHKP	0.1	(0.1)	-		-		-		-
APRIL (KERINCI)	BHKP	(0.1)	(0.2)	(0.3)	(0.2)	(0.5)	(0.2)	(0.7)	(0.2)	(0.9)
APRIL (RIZHAO)	BHKP	(0.1)	(0.2)	(0.3)	(0.2)	(0.5)	(0.2)	(0.7)	(0.2)	(0.9)
ARAUCO (HORCONES)	BHKP		0.5	0.5	0.7	1.2		1.2		1.2
UPM (PASO DE LOS TOROS)	BHKP				0.3	0.3	1.5	1.8	0.2	2.0
BRACELL (LENÇOIS PAULISTA)	BHKP / DP				0.5	0.5		0.5		0.5
SCA (OSTRAND)	BSKP	0.1		0.1		0.1		0.1		0.1
STORA (ENOCELL)	BSKP	(0.2)		(0.2)		(0.2)		(0.2)		(0.2)
NEW-INDY CONTAINERBOARD (CATAWBA)	BSKP	(0.2)		(0.2)		(0.2)		(0.2)		(0.2)
NORDIC KRAFT (LEBEL-SUR-QUEVILLON)	BSKP	0.1	0.2	0.3		0.3		0.3		0.3
STORA (OULU)	BSKP		(0.1)	(0.1)		(0.1)		(0.1)		(0.1)
UNEXPECTED & NON COMPETITIVE ANNUAL CAPACITY CLOSURES	(0.8)	(0.5)	(1.3)	(0.5)	(1.8)	(0.5)	(2.3)	(0.5)	(2.8)
SURPLUS / (DEFICIT)		0.7	(1.7)	(1.0)	(0.9)	(1.9)	(0.9)	(2.8)	(2.2)	(5.0)
Source: ENCE estimates

1. Estimates correspond to the expected increase in supply and demand for market pulp for paper production. They therefore exclude the production of integrated pulp and other pulp grades such as Dissolving Pulp or Fluff. We assume 70% of BRACELL´s project in Sao Paulo will be focused on Dissolving Pulp production.

14

9M 2020 Financial Results

Driven by lower pulp and energy prices

Pulp Business EBITDA (€ Mn)	Renewable Energy Business EBITDA (€ Mn)	Group Net Income (€ Mn)

	-91.7%		+2.0%
85			42
		41
	7
9M19	9M20	9M19	9M20

28
	-42
9M19	9M20
Pulp	Renewable Energy

€7 Mn EBITDA in the Pulp business:

• -92%vs. 9M19 driven by a 26% decrease in the average sales price
• Partially offset by a 7% increase in pulp sales and 3% reduction in cash cost

€42 Mn EBITDA in the Renewable business:

• +2% vs. 9M19 driven by 27% higher energy sales
• Offsetting a 4% decline in the average sales price down to its regulatory minimum

Net consolidated result of €-42 Mn following:

• €83 Mn Depreciation and other
• €21 Mn Net financing costs
• + €14 Mn Income tax

15

€50 Mn Normalized FCF and €62 Mn carry-over payments in 9M20

No covenants, long-term maturities and €360 Mn cash in balance

Normalized FCF1 (€ Mn)		Strategic Plan payments (€ Mn)

-39.5%		-70.9%
83		213
	50
			62
9M19	9M20	9M19	9M20
Renewable Energy	Pulp	Renewable Energy	Pulp

Net Debt (€ Mn)

+8.5%

	556
513	Lease
			contracts
				€54Mn

2019			9M20
Renewable Energy		Pulp	Operating Leases

Normalized Free Cash Flow generation of €50 Mn

Lower EBITDA vs. 9M19 partially offset by:

• Working capital reduction
• Lower taxes

Strategic Plan carry over payments of €62 Mn:

• €39 Mn carry-over payments in the Pulp business from capacity expansions and sustainability improvements in 2019
• €23 Mn carry over payments in the Renewable Energy business from two new biomass plants commissioned in 1Q20 and sustainability improvements

€556Mn Net Debt (+ €43 Mn vs. Dec.19):

• Including €54 Mn related to lease contracts (+ €2 Mn vs. Dec.19)
• €360 Mn cash in balance (+ €133 Mn vs. Dec.19)
• Covenant free in the Pulp business and long- term maturities in both businesses

1. FCF before Strategic Plan investments and regulatory collar

16

Pontevedra's biomill legal status

The first resolution of the National Court is expected in the coming months

On January 2016 the National Directorate of Coasts granted the extension of Pontevedra´s concession until 2073

• The 1958 biomill's original concession was extended for 60 years (starting November 8th 2013) by the National Directorate of Coasts via a resolution dated January 20th 2016 by virtue of: (i) Law 2/2013, on coastal protection and sustainability and amending the Coastal Act (22/1988); & (ii) General Coast Regulations enacted (Royal Decree 876/2014).

We expect a first resolution from the	 3 appeals presented by Pontevedra's City Council and by two environmental associations to the National Court´s Chamber for
National Court in the coming months	Contentious Administrative Proceedings against the Jan. 20th 2016 resolution.
		 On March 8th 2019, the National Directorate of Coasts accepted all 3 appeals, despite having previously argued at all stages that
The legal case against the extension could	the Ministerial Order Resolution of January 20th 2016 was totally legal.
last for up to 4 years, including appeals to	 On April 10th 2019, the National Court´s Chamber for Contentious Administrative allowed Ence to defend the case.
higher courts	 The court case is now in its final stage. COVID-19 may delay the National Court's first resolution.

€130 Mn invested in the biomill since the	 Investments carried out or committed since the extension of the concession for the period of 2016 - 2019 amount to approximately
€130 Mn.
extension of the concession in 2016	 In the unlikely event of operations being discontinued, the cash impact would amount to €74 Mn (€43 Mn corresponding to
		dismantling actions, €15 Mn to the cost of staff reductions and €16 Mn to the cancellation of existing contracts).

Given the uncertainty, the Board of Directors decided to concentrate the investments of the Business Plan in Navia's biomill

• Investments of €250 Mn initially planned to increase capacity in Pontevedra will be reallocated to Navia's biomill, in order to double the initially planned swing line by up to 340,000 t of BHKP or 200,000 t of dissolving pulp.

17

9M 2020 Results by Business

Pulp Business

9M 2020 results driven by lower pulp prices

Avg. Net Pulp Price (€/t)		Pulp Sales Volume (t)
	-25.9%			+7.4%

											756,258
								704,306
	549
				407
	9M19		9M20				9M19		9M20
	Avg. Cash Cost (€/t)						EBITDA (€ Mn)
			-3.3%								-91.7%

91.7% EBITDA decrease vs. 9M19:

• Resulted from the 26% drop in the average sales price.
• Partially offset by 7% higher sales and 3% lower cash cost following the 100,000 t capacity increase carried out in 2019
• Annual maintenance shutdowns successfully executed in 3Q20

		85	 € 1.5 Mn pulp inventory provision in 3Q20
389	376
			7
9M19	9M20	9M19	9M20

19

Pulp Business

P&L

9M20 P&L Bridge (€ Mn)

€9.8 Mn negative FX hedging

settlements

7.1
(48.7)	(45.5)		(41.2)
	(3.8)		13.5
		(8.9)
			(0.3)

EBITDA	Depreciation and other	Pontevedra	EBIT	Financial expenses Other financial result	Taxes	Net result
	results on fixed assets	Environmental Pact
		provisions

20

Pulp Business

Cash flow generation

9M20 Cash Flow Bridge (€ Mn)

																					2019 Strategic Plan
							(9.3)												carry over payments
						16.5
							(5.2)						(1.0)
		7.1	0.0			9.0

(39.5)

(30.8)

								0.7
EBITDA	Change in	Maintenance	Financial	Taxes	NORMALIZED	Other	Strategic Plan	Divestments	FCF
	working capital	CAPEX	charges/payments		FCF	collection/payments	CAPEX
						and non-cash
						adjustments

21

Ongoing FX hedging program

To mitigate FX volatility in the Pulp Business

Dollar/Euro Exchange Rate Evolution		Current Hedges

1,40
								Q4 2020: 66% revenues
1,35									Avg. cap: $ 1.19 €
1,30								 Avg. floor: $ 1.13 €
								Q1 2021: 58% revenues
1,25								 Avg. cap: $ 1.17 €
1,20								 Avg. floor: $ 1.09 €
								Q2 2021: 50% revenues
1,15								 Avg. cap: $ 1.19 €
1,10								 Avg. floor: $ 1.12 €
							Q3 2021: 30% revenues
1,05								 Avg. cap: $ 1.22 €
								 Avg. floor: $ 1.17 €
1,00
31-12-13	31-12-14	31-12-15	31-12-16	31-12-17	31-12-18	31-12-19	31-12-20	31-12-21

Ence has secured an average cap of $1.19/€ and an average floor of $1.12/€ for 50% of its dollar exposure until September 2021

9M20 FX settlements amount to - €9.8 Mn

22

Pulp Business

High liquidity and long-term financing without covenants

Leverage as of September 30th 2020 (€ Mn)		Debt Maturity Calendar (€ Mn)

Lease	587.8
contracts	45.1
	237.3
		350.4

€152 Mn Convertible bond 1 €253 Mn Bilateral loans

€68 Mn Public sector financing €70 Mn RCF

€45 Mn IFRS16

317.6

1.7

70.0

8.1

86.6

124.7

	39.1	75.7
30.6	1.9
2.1	5.8
0.6
3.4
4.4	67.9
25.6	33.3
0.3

151.3

38.7

46.4

39.6

Gross debt

Cash

Net debt

2020

2021

2022

20232024<

• 237 Mn cash in balance, long-term maturities and no covenants

Financial liability of €45.1 Mn in the Pulp business related to the application of IFRS16 on leases

1. €152 Mn accounted as gross debt and €8 Mn accounted as equity as of September 30th 2020, according to IAS 32

23

Renewable Energy Business

Higher contribution of new biomass power plants offset lower electricity prices

Energy Volume (MWh)	Average sale price (€/MWh)

	+27.3%			-5.7%
	997,115	1	1.9
		102.7	98.3
783,413
9M19	9M20		9M19	9M20
Revenues (€ Mn)			EBITDA (€ Mn)
	+17.0%			+2.0%

4.1 2

											42.4
81.1				98.9	41.6
47.6				47.6
		9M19				9M20	9M19		9M20
		Ri			Pool + Collar + Ro		Capitalized

2.0% EBITDA increase was driven by:

• 27.3% higher energy sales from new biomass power plants commissioned in 1Q20
• This has offset a 4.2% decline in the average sale price, down to its regulatory minimum

1 Note that the average sale price of 103.5 €/MWh in 9M19 included an adjustment of 1.9 €/MWh related to the temporary suspension of the electricity generation tax in 1Q19 and the attendant adjustment to the plants Ro with no effect on EBITDA. Comparable sale price decline would have been 5.7% or 6.3 €/MWh.

2 9M20 revenues include € 4.1 Mn from the energy sales of the new biomass plants during their testing phase in 1Q20, which have been capitalized together with their corresponding expenses, neutralizing their impact in EBITDA

24

Renewable Energy Business

P&L
			9M20 P&L Bridge (€ Mn)
	(33.6)
42.4
		8.8	(11.8)
				0.8	(2.3)		(3.5)
					(1.3)
EBITDA	Depreciation and	EBIT	Financial Expenses	Taxes	Net profit	Minorities	Net Attributable Profit
	others

25

Renewable Energy Business

Cash flow generation

9M20 Cash Flow Bridge (€ Mn)

	€22 Mn non cash income	Strategic Plan
(3.9)	related to the Regulatory Collar	carry-over payments 1

	10.5
			(8.6)
				0.8
						(16.3)
42.4					41.2
							(22.7)
								2.2
EBITDA	Change in working	Maintenance	Interest payment	Taxes	Normalized Free	Other collection /	Strategic Plan	FCF
	capital	CAPEX			Cash Flow	payments and non	CAPEX
						cash adjustments

1. Strategic Plan Capex excludes the contribution of the remaining pulp business assets in Huelva valued at € 26.9 Mn in 1Q20, with no impact on the Group's consolidated cash flow.

26

Renewable Energy Business

Long-term green financing and high liquidity

Leverage as of September 30th 2020 (€ Mn)

Lease	328.2	Leverage:
8.7	3.9 x
contracts	122.4

Debt Maturity Calendar (€ Mn)

€96 Mn solar thermal plant project financing €224 Mn Energy parent corporate financing

205.8

€20 Mn RCF - Fully available

€9 Mn IFRS 16

209.8

7.1

69.1

Gross debt

Cash

Net debt

14.3	36.3	34.5	33.5	133.6
	0.7	0.3	0.3
0.2
8.0	6.9	8.0
4.0
27.6	27.3	25.1
10.0
2020	2021	2022	2023	2024<

Energy business leverage at 3.9x Net Debt / LTM EBITDA as of September 2020

Financial liability of €8.7 Mn in the Renewable Energy business related to the application of IFRS16 on leases

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Closing Remarks

Closing Remarks

Resilient operating performance in a low price environment

 All our activities have been declared essential and we continue operating safely

 Good operating performance of the Pulp business following the 100,000 t capacity increase carried out in 2019

2020 Expected Pulp production (t)	2020 Expected Cash Cost (€/t)	2020 FX average floor ($/€)
1,025,000 (+13% vs. 2019)	375 (-6% vs. 2019)	1.15

 Strong growth of the Renewable Energy business following the commissioning of two new biomass plants in 1Q20

2020 Expected Energy sales (MWh)

1,400,000 (+34% vs. 2019)

• Pipeline of 405 MW awaiting for the upcoming public auctions of the National Renewable Energy Plan
• Long term financing with no covenants in the pulp business and high liquidity

29

Alternative Performance Measures (APMs)

Pg.1

Ence presents its results in accordance with generally accepted accounting principles, specifically IFRS. In addition, its quarterly earnings report provides certain other complementary metrics that are not defined or specified in IFRS and are used by management to track the company's performance. The alternative performance measures (APMs) used in this presentation are defined, reconciled and explained in the corresponding quarterly earnings report publicly available through the investor section of our web page www.ence.es.

CASH COST

The production cost per ton of pulp produced, or cash cost, is the key measure used by management to measure its efficiency as a pulp maker.

Cash cost includes all of the expenses incurred to produce pulp: timber, conversion costs, corporate overhead, sales and marketing expenses and logistics costs. It excludes fixed- asset depreciation and forest depletion charges, impairment charges and gains/losses on non-current assets, finance costs/income, income tax and certain operating expenses which management deems to be non-recurring, such as ad-hoc consultancy projects, Ence's long-term remuneration plan, the termination benefits agreed with staff or certain social expenses.

As a result, the difference between the average sales price and the cash cost applied to the total sales volume in tons yields a figure that is a very close proxy for the EBITDA generated by the Pulp business.

EBITDA

EBITDA is a measure of operating profit before depreciation, amortization and forestry depletion charges, non-current asset impairment charges, gains or losses on non-current assets and specific non-ordinary income and expenses unrelated to the ordinary operating activities of the company, which alter their comparability in different periods.

EBITDA is a measure used by the Ence´s management to compare the ordinary results of the company over time. It provides an initial approximation of the cash generated by the company's ordinary operating activities, before interest and tax payments, and is a measure that is widely used in the capital markets to compare the earnings performances of different companies.

NORMALISED FREE CASH FLOW

Ence reports normalised free cash flow within the cash flow metrics for each of its two business units in its quarterly earnings report. Normalised FCF is the sum of EBITDA, the change in working capital, maintenance capital expenditure, net interest payments and income tax payments.

30

Alternative Performance Measures (APMs)

Pg.2

Normalised free cash flow provides a proxy for the cash generated by the company's operating activities before collection of proceeds from asset sales; this cash represents the amount available for investments other than maintenance capex, for shareholder remuneration and for debt repayment.

MAINTENANCE, EFFICIENCY & GROWTH AND SUSTAINABILITY CAPEX

Ence provides the breakdown of its capital expenditure and related cash outflows for each of its business units in its quarterly earnings report, distinguishing between maintenance, efficiency & growth and sustainability capex.

Maintenance capex are recurring investments designed to maintain the capacity and productivity of the company's assets. Efficiency & growth capex, meanwhile, are investments designed to increase these assets' capacity and productivity. Lastly, sustainability capex covers investments made to enhance quality standards, occupational health and safety, to improve the environment and to prevent contamination.

Ence's 2019-2023 Business Plan includes a schedule of the amounts it expects to invest annually in efficiency & growth and sustainability capex in order to attain the strategic targets set. The disclosure of capex cash flows broken down by area of investment facilitates oversight of the execution of the published 2016-2020 Business Plan.

FREE CASH FLOW

Ence reports free cash flow as the sum of its net cash flows from operating activities and its net cash flows from the investing activities of its quarterly earnings report.

Free cash flow provides information about the cash generated by the Group's operating activities that is left over after its investing activities for the remuneration of shareholders and repayment of debt.

NET DEBT

The borrowings recognized on the balance sheet, as detailed in its quarterly earnings report, include bonds and other marketable securities, bank borrowings and other financial liabilities. They do not however include the measurement of financial derivatives.

Net debt is calculated as the difference between current and non-current borrowings on the liability side of the balance sheet and the sum of cash and cash equivalents and short- term financial investments on the asset side.

Net debt provides a proxy for the company's indebtedness and is a metric that is widely used in the capital markets to compare the financial position of different companies.

31

82 Overall ESG Score

Delivering value Delivering commitments