Nel : Q2 2021 Quarterly Report

Nel ASA

Q2 and half-year 2021 report

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Condensed interim financial statement and notes - second quarter 2021

Highlights of the quarter

• Nel ASA (Nel) reported revenue and operating income in the second quarter 2021 of NOK 163.7 million, up 10 % from the second quarter 2020 (Q2 2020: 148.6)
• Global travel restrictions and extraordinary measures related to the Covid-19 pandemic have continued to negatively impact progress on customer/partner dialogue, order intake, installation, commissioning, and production efficiency
• Order backlog ended at NOK 1 078 million at the end of the quarter, up 4% from the second quarter 2020 (down 7% compared to the first quarter 2021)
• EBITDA of NOK -120.3 million (Q2 2020: -48.7), negatively impacted by the organisation growing faster than revenues and quality costs related to introduction of the next generation products.
• Operating loss of NOK -149.1 million (Q2 2020: -72.0)and a pre-taxloss of NOK -314.1million (Q2
  2020: 594.3), mainly related to loss from operations and a net negative unrealised fair value adjustment from shareholdings of NOK 171.0 million
• Cash balance of NOK 3 074.0 million (Q2 2020: 2 566.1)
• Continued commercial progress

1. Received a purchase order (PO) from H2 Energy for a 2 MW, fully containerized MC400 PEM electrolyser

• 1. Nel received a PO from HTEC for a H2Station™ hydrogen fueling station to operate in
     Quebec, Canada
• Nel continues delivering on its partnership strategy
• 1. Entered partnerships with major EPC companies Wood and Aibel to strengthen Nel's global delivery and project execution capabilities

• 1. Announced the collaboration with leading solar company First Solar Inc to develop integrated Photo Voltaic (PV) Hydrogen power plants
• Signs frame agreement with Howden for supply of hydrogen compressors
• Announced the collaboration for a fossil-free steel rolling facility in Hofors, Sweden, together with partners Ovako, Volvo, Hitachi ABB Power Grids Sweden and H2 Green Steel

Subsequent events

• July 23, Nel joined the consortium agreement for the PosHYdon project, which aims to validate the integration of offshore wind, natural gas, and hydrogen, offshore in Netherlands. Nel will provide a MW-scale PEM electrolyser for the project.
• August 11, Nel received a contract for a 1.25 megawatt (MW) containerized PEM electrolyser from a leading utility in the US with a value of approximately USD 2.6 million.
• August 17, Nel received a PO for delivery of a H2Station™ to Everfuel for fueling of taxis in Aarhus.
• August 18, Nel entered a development agreement with SFC energy to jointly develop and integrate electrolyser and fuel cell technology systems for decentralized energy generation and storage.

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Condensed interim financial statement and notes - second quarter 2021

Key figures

	Q2	Q2	Q1-Q2	Q1-Q2	Full year
(unaudited amounts in NOK million)	2021	2020	2021	2020	2020
Revenue and operating income	163.7	148.6	320.6	275.1	651.9
Operating expenses	312.8	220.6	567.8	434.0	1 066.4
EBITDA	-120.3	-48.7	-194.6	-113.2	-251.5
Operating loss	-149.1	-72.0	-247.2	-158.9	-414.5
Pre-tax income (loss) 1)	-314.1	594.3	-894.0	589.1	1 245.5
Net income (loss) 1)	-312.3	596.4	-890.3	593.2	1 261.9
Net cash flow from operating activities	-47.1	-51.2	-231.7	-55.8	-215.9
Cash balance end of period	3 074.0	2 566.1	3 074.0	2 566.1	2 332.9
Order intake	146.8	602.3	410.1	705.5	1 043.2
Order backlog	1 078.4	1 036.6	1 078.4	1 036.6	981.1

1. Q2 2021 includes a positive fair value adjustment of the shareholding in Nikola Corporation of NOK 40.0 million (a value of USD 18.06 per share as of June 30, 2021). The fair value adjustment was NOK 675.6 million and NOK 100.2 million in the second quarter 2020 and full year 2020, respectively. A USD 10 increase/reduction in the share price of Nikola Corporation will lead to gains/losses of about NOK 100 million with a USD/NOK of 9.0.
   Q2 2021 includes a negative fair value adjustment of the shareholding in Everfuel of NOK -212.9 million (a value of NOK 70.10 per share as of June 30, 2021). The fair value adjustment was NOK 0.0 and NOK 1 531.8 million in the second quarter 2020 and full year 2020, respectively. The Everfuel shares are subject to a lock-up expiring on October 29, 2021. A NOK 10 increase/reduction in share price of Everfuel will lead to gains/losses of about NOK 120 million.

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Condensed interim financial statement and notes - second quarter 2021

Financial development

Nel revenues and operations have been and are expected to continue to be negatively impacted by disruptions in the value chain, travel restrictions and general business slowdown caused by Covid-

19. Despite the impact, Nel remains committed to its strategy and has since 2019 taken on additional costs to prepare for future growth.

Nel reported revenue and operating income in the second quarter 2021 of NOK 163.7 million (148.6), following a growth in both the Fueling and Electrolyser segment of 9.8% and 10.6%, respectively, compared to the same quarter in 2020.

At the end of the second quarter 2021, Nel had an order backlog of NOK 1 078.4 million, up from NOK 1 036.6 million a year earlier. Total order intake was NOK 146.8 million (412.2) in the quarter. This quarter order intake in Fueling and Electrolyser segment were NOK 25.6 million (183.2) and NOK 121.2 million (405.3), respectively.

Total operating expenses comprises raw materials expenses, personnel expenses, depreciation, amortisation and impairment and other operating expenses. The total operating expenses in the quarter has increased by 41.8%, to NOK 312.8 million up from NOK 220.6 million same quarter last year.

Raw material expenses have increased with 37.7% from second quarter 2020. The increased raw materials of NOK 32.8 million is partly explained by the 10.2% increase in revenue from contracts with customers, while the margins have been negatively impacted by increase in commodity prices and warranty obligations. In this quarter, Nel has recognised additional costs of NOK 15.0 million related to the final cell stack batches produced at Notodden, Norway. This increase is transient as the electrode manufacturing is being

replaced by the manufacturing facility at Herøya, Norway, going forward.

Personnel expenses increased by 39.9% compared to the same quarter in 2020, which is explained by a higher number of employees, up from 361 employees by the end of second quarter 2020 to 470 at the end of second quarter 2021. Contracted personnel come in addition.

Other operating expenses increased by 72.1% compared to same quarter in 2020. The high level of personnel and other operating costs are the results of Nel's strategic decision to pursue growth and higher activity levels.

Costs for the share option incentive program, which are included in personnel expenses, were NOK 1.7 million (2.9) in the quarter.

EBITDA ended at NOK -120.3 million (-48.7), while the EBITDA margin was -73.5%(-32.8%). The negative EBITDA was impacted by the strategic ramp-up and the increase in raw materials and personnel expenses. In addition, project execution in both Fueling and Electrolyser divisions had a negative impact. Nel's customer projects often include new geographies, customer segments, technological components and/or products leading to additional costs and increased risk.

Depreciation, amortisation, and impairment were NOK 28.8 million (23.4) in the quarter.

Operating loss amounted to NOK -149.1million (-72.0)in the period.

Net financial items amounted to a loss of NOK 165.0 million (666.4) and was driven by a net negative unrealised fair value adjustment from shareholdings of NOK 171.0 million.

Pre-tax loss was 314.1 million (594.3) in the quarter and the net loss was NOK 312.3 million, compared to income of NOK 596.4 million in the same quarter 2020. Q2 2020 income was mainly related

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Condensed interim financial statement and notes - second quarter 2021

to positive unrealised fair value adjustment of the shareholding in Nikola Corporation of NOK 675.6 million.

Total comprehensive income is negative with NOK 306.9 million (543.7). There was a positive currency translation difference, net of tax, of NOK

5.6 million in the quarter (-49.8) related to converting statement of financial position from subsidiaries in USD and DKK into NOK using a higher currency rate than in the previous quarter.

Total assets were NOK 6 557.8 million at the end of the quarter, compared to NOK 6 136.7 million at the end of 2020, mainly due to an increase of cash from share capital increases in February offset by the decline in fair value of equity instruments. Total equity was NOK 5 777.6 million, thus, the equity ratio was 88.1%.

Net cash flow from operating activities in the quarter was NOK -47.1 million, compared to NOK -51.2 million in the second quarter in 2020. The development is mainly due to increased personnel and other operating expenses were NOK 44.1 million higher in this quarter compared to same quarter last year as Nel continues to invest in its organisation. In addition, net working capital decreased by NOK 70.8 million. Net cash flow from investing activities was NOK -122.6 million (-18.6).

Nel's cash balance at the end of second quarter 2021 was NOK 3 074.0 million. The increase from end of 2020 is mainly due to raising net proceeds of NOK 1 209.7 million from the share capital increase in February. This is partly offset by negative cash flow from operations and investments.

First half of 2021

Nel reported revenues in the first half of 2021 of NOK 320.6 million (1H 2020: 275.1 million). Operating expenses increased to NOK 567.8 million (434.0), resulting in an operating loss of NOK -247.2 million (-158.9) and a net loss of NOK -890.3 (593.2). First half 2021 included net unrealised fair value adjustment of the shareholding in Everfuel and Nikola Corporation of NOK -651.5million (684.2).

EBITDA amounted to NOK -194.6 million in first half 2021 compared to NOK -113.2 million in the same period in 2020. The development is mainly due to increased personnel and other operating expenses by NOK 49.6 million and NOK 38.6 million, respectively, higher in first half 2021.

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