UPM BIOFUELS

Sari Mannonen, UPM Biofuels

World Bio Markets 2015

ADVANCED BIOFUELS PAVE THE WAY FOR

SUCCESSFUL BIOECONOMY

UPM today

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KEY FIGURES

Turnover 2013: 10 billion €

Personnel: 21,000Shareowners: > 90,000

• Plywoodproducts

UPM Plywood

• Label materialsfor product and information labeling

UPM Raflatac

• Magazine papers in Europe and the USA

• Newsprint and fine papers in Europe

UPM Paper ENA

• Fine papers in China• Label papers

globally

UPM Paper Asia

• Hydro-, nuclear- and condensing power(incl. shares in energy companies)

• Electricity production and trading

UPM Energy

• Pulp• Plantations• Biofuels• Sawmills

UPM Biorefining

UPM Biocomposites

UPM Biochemicals

Biofuels is the spearhead project in UPM’s change

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Wood biomass is in the forefront of new bioproductsdevelopment

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Wood is preferred biomass; technologies to convert lignocellulosicfeedstock into value added products developing fast

Advantages of wood:

• Limited price volatility

• Available year-round

• Easy to transport and store

• No overlap with food-chain

Europe - Most forest-rich region

• 1.02 billion ha = 25% of global resources• Forest area expanding (annually 800.000 ha) • Only ~ 40% of increment utilized

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Biofuels for transportation

Labels and composites

Biochemicals

Biofibrils

Pulp, paper, plywood and sawn timber

Bioenergy – heat and electricity

Biofore growth opportunities –added value of wood and biomass

Sourcing and logistics of wood and biomass

UPM BioVerno

UPM Grada

Biofibrils

UPM Formi

UPM ProFi

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Wood raw material is the basis of many different businesses at UPM

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Responsibility is a source of competitive advantage

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Anticipating and managing risks

Code of Conduct, environmental performance,

responsible sourcing and forestry

Creating competitive advantage and long-term value

High performing people, resource efficiency, ecolabels

and certification

New business opportunities with ecodesign

Biofuels, Biochemicals, Biocomposites

Value creation with stakeholders

Dialogue, feedback and engagement

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UPM Biofuels and latestsustainability recognitions

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UPM renewed its position as the industry

leader in Dow Jones Sustainability Indexes

for 2014-2015

Award for Breakthrough Innovation in

Technology in 2013

Winner in Travelling category 2014 awarded

by European Commission

Finalist in Sustainable Innovation category in

the Leading Technology Award 2014

“Now is the time to bring advanced

second-generation biofuels to the market.

The industry is committed to delivering on

its promise but we need stable long-term

investment conditions which encourage

investment while, at the same time,

promoting true advanced biofuels.”

Leaders of Sustainable Biofuels

Industry platform

driving development of

advanced biofuels in

Europe

Leader Companies

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UPM and Waste-based biofuels sector

“Wasted: Europe’s Untapped Resource”

• European Climate Foundation coordinated

• Biofuels from wastes &residues offer real, over 60% carbon savings

• Calls for a policy framework allowing investment

• Phase 2: National cases

If all sustainable waste from farms, forests, households and industry were used for transport fuels by 2030

• Displaces 37 million tonnes of oil annually

• Equal to 16% of road transport fuel demand

• Up to 300,000 direct jobs across Europe

• Up to 15 billion EUR additional revenues

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UPM and WWF Finland promotesustainability of wood-based biofuels

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• May 2014

UPM and WWF Finland

signed a contract to widen co-

operation into biofuels

• October 2014

New opportunities of

bioeconomy seminar to 100

Finnish key stakeholders

• November 2014

Dialogue paper signed to

promote sustainability of

wood-based biofuels

with list of joint measures

Wood-based biofuels are among most promising alternative fuels

Long history of working together

in sustainability

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UPM Biofuels Strategy

UPM will become

a major player in

advanced biofuels

Renewable

fuels

• Drop-in fuels fully compatible

with all all diesel engines and

fuel distribution systems

• Renewable wood-based raw

materials

• Not competing with food

production

• Sustainable supply chain

• Low emission products

Wood-based raw materials

Sustainableoperations

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UPM’s journey in advanced biofuels

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2006 2008 2015

20122008

UPM published its

plans to become a

significant producer

of advanced biofuels

Development of

hydrotreatment

process started in

UPM R&D

UPM Lappeenranta

biorefinery in

commercial

production in

January

First investment

decision of 175 M€

for UPM Lappeenranta

biorefinery.

Produces renewable

diesel from tall oil.

Development of

BTL technology

ongoing at GTI

pilot plant in

Chicago, USA

2015

Sales of UPM

BioVerno diesel

starts.

Business is

expanding in stages.

Capturing synergies by full integration into UPM Kaukas mill site in Lappeenranta, Finland

RESEARCH

CENTRE

BIOREFINERY

SAW MILL

PAPER MILL

BIOMASS POWER PLANT

PULP MILL

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5

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UPM Lappeenranta Biorefinery, Finland

Key facts:

• Product: Renewable diesel

• UPM investment: 175 M€

• Capacity: 100,000 tonnes/a

• UPM Patents & Applications: 200

• Commissioning: January 2015

• Employment: 200 persons

• Contributes approximately 25%

of Finland’s biofuel target (20%)

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Raw material: Crude Tall Oil (CTO) – a residue of pulp making process

LIGNIN

CELLULOSE

25%

40% 30% HEMICELLULOSE

EXTRACTIVES5%

PRIMARY

PRODUCTPulp for

paper

making

RECIDUE

STREAMCrude tall oil

2%

Crude tall oil must

be removed from the

chemical cycle to

secure pulping

process functionality

GREEN

ENERGY

50%

48%

PULPING PROCESS

Pulping process separates pulp

fibres from wood via chemical

processing

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Raw material: Crude Tall Oil (CTO)

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• Contains natural extractives of

wood

• Yield 20−50 kg CTO/t pulp

• Global production > 2 000 000 t/a

- CTO supply potential above

demand globally and increasing

- Significant share burned for

energy

- Production potential 2 600 000 t/a

Residue of pulping process

No increase in

harvesting or land use

Outside food value chain

Source: Ecofys:, Low ILUC assessment CTO, Pöyry

• UPM tapping into underutilized

lower grade CTO streams

• UPM biorefinery minor addition to

total demand, no effect on

demand-supply balance

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UPM renewable diesel process

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UPM BioVerno – Renewable drop-in diesel

RENEWABLE

RAW MATERIAL

100 %

CO2 EMISSIONS

(VS. FOSSIL FUEL)

–80 %

COMPATIBLE WITH

DIESEL VEHICLES

100 %

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UPM BioVerno - Suitable for all diesel engines

Fleet testing with 20% UPM BioVerno

renewable diesel with 4 Volkswagen

cars

• Independent testing by experienced

test drivers of Technical Research

Centre of Finland (VTT)

• Investigating fuel functionality in

engine, emissions and fuel

consumption

• Phase 2: heavy duty vehicles test

(busses)

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Summer and winter

conditions, various

distances

4 Volkswagen cars,

20 000 km/car

Functions as fossil diesel

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UPM Biofuels growth strategy

HYDROTREATMENTTall oil raw material

UPM Lappeenranta Biorefinery

THERMAL CONVERSIONSolid wood raw material

RESEARCH & DEVELOPMENTR&D activities and co-operation with

strategic partners

Entering

Business

Expanding

Business

Growth of

Business

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UPM's competitive edge in biofuels

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Competitive

Raw-material

• Part of the UPM ecosystem

• Optimise wood fractions to

right products

• Steady supply

• Outside food value chain

• No indirect land-use change

• Meets sustainability criteria

Efficient

Process

• Technology based on UPM

and partner’s innovations &

know-how

• Efficient use of raw material

• Integrate synergies

High quality

product

• 2nd generation hydrocarbons

• Compatible with current fleet

and standards

• 80% reduction in greenhouse

gas emissions

• High energy content

• No blend wall limitations

UPM is in an excellent competitive position tointegrate processes for new bioproducts

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Access, management and sourcing of biomass

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Three areas of competence

bring UPM in the position to become the frontrunner in new biomass based innovations

Chemical

processes• Kraft pulping

• Renewable

diesel

production

Biomass

handling• Debarking

• Saw mills

• Mechanical

pulping

Bioenergy &

Infrastructure• Biomass boilers

• CHP

• Water treatment

Run sustainably large industrial processes

Processes of biomass conversion1 2 3

Driving CLEANER trafficUPM Biofuels