SUSTAINABLE GROWTH FROM BIOMASS

Biomass in district heating

Belgrade 26.3.2015

Valmet Technology Oy Ilkka Heikkilä

Valmet key figures 2014

2015 © Valmet 2

18%

13%

43%

11%

15% 40%

39%

21% > Orders received 3,071 MEUR > Net Sales 2,473 MEUR

> EBITA 106 MEUR ( before NRI (1 ) > Employees 10,464

Services Pulp and Energy Paper

1) NRI = non-recurring items

Sales by geographic area Sales split by business

North America

EMEA South America

Asia-Pacific China

Strong global presence close to our customers

2015 © Valmet 3

Over 100 locations in 30 countries

• 70 service centers • 50 sales offices • 30 production units • 13 technology centers

Valmet’s business areas - projects for our various customer groups

Paper

• 200 wood handling systems

• 470 cooking systems

• 300 complete fiber lines

• 400 evaporation systems

• 350 recovery islands

Pulp

• 900 paper machines

• 700 board machines

• 200 tissue machines

• 200 mechanical pulping lines

Energy

• 270 fluidized bed boilers

• 120 BioGrate boilers

• 400 environmental protection systems

Biotechnologies

• Gasification • Pyrolysis • LignoBoost • Prehydrolysis of

biomass

2015 © Valmet 4

Key customers Key customers Key customers

Serving a broad range of customers in three main business sectors

2015 © Valmet 5

Valmet is a registered trademark of Valmet Corporation. Other trademarks appearing here are trademarks of their respective owners.

Services Pulp and Energy Paper

Yunnan Yun-Jing Forestry & Pulp Mill

Valmet’s business areas - projects for our various customer groups

Paper Pulp Energy

• 270 fluidized bed boilers

• 120 BioGrate boilers

• 400 environmental protection systems

Biotechnologies

2015 © Valmet 6

Heat and Power Generation

Efficient solutions for district heating

Valmet – Heat and power generation milestones

© Valmet Customer Days 2014 | Kai Janhunen 8

1856 Metal, forest and textile company Tampella established

1841 Götaverken – shipyard established in Gothenburg

1936 First Delivery

1933 First Delivery

Götaverken Energy

Tampella Power

1989 Steamservice

Keeler

1994-1996 Kvaerner Pulping

1996 • Generator • Kvaerner • Enviropower

2003 • Kvaerner

Power • Fortum

Boilers business

2007 Metso Power (in Pulp, Paper)

Jan 1, 2014 Re-birth of Valmet

2009 MW Power (JV with Wärtsilä )

2006 Noviter

Security

Combustion Based Power Generation Energy efficiency through CHP

31 March, 2015 © Valmet | 10

Biomass

Waste

Coal

Oil

Gas

Thermal energy

Steam Heat

Steam turbine

Mechanical energy

Electrical energy

Valmet’s boiler technologies • Circulating Fluidized Bed

(CFB) technology – CYMIC • Bubbling Fluidized Bed (BFB)

technology - HYBEX • BioGrate • Oil & gas (water-tube) boilers

Water

Process steam

Peat

Valmet’s air pollution control systems for reducing emissions

Emissions

Combustion

Fuel

han

dlin

g Valmet’s fuel

handling systems

Generator

District heating

Valmet – Heat and power generation delivery models

© Valmet Customer Days 2014 | Kai Janhunen 11

Power boilers Boiler plants

Gasification plants

Large power plants with partners

Small power plants Air pollution control Service

Services Rebuilds Upgrades

Equipment provider Boiler plants ‘From fuel to stack’

Complete power plants

Rebuilds • Rebuilds • Conversions

Multifuel to energy • Boiler plants • Coal-fired boiler

plants • Repowering

Waste to energy • Boiler plants • Modular power

plants • Gasification plants

Biomass to energy • Boiler plants • Modular power

plants • Heat plants • Gasification plants

Comprehensive Offering for Energy Customers Solutions for demanding fuels: biomass, waste and multifuel to energy

© Valmet 12 Customer Days 2014 | Kai Janhunen

Air pollution control

Automation

Combustion solutions to meet with customers’ need

13

Gas and oil boilers

BioGrate concepts

Gasification concepts

HYBEX concepts

CYMIC concepts

Waste (municipal, industrial, commercial)

Recycled wood

Agro

Wood+

Wood

Natural gas, oil

Peat

Lignite

Coal

Pet coke

Low-grade coals

Cha

lleng

e

Main fuel In fuel mixture

Bio

Fo

ssil

Multifuel suitability

31 March, 2015 Customer Days 2014 | Kai Janhunen

Financing

Our strength in power plant delivery Our offering that outrules the competition

Date Author Title 15

• Participation in project development –

dimensioning and environmental data • EPC delivery – single-point

responsibility for entire delivery • O&M services – capable operator

ensuring plant operation

O&M and services EPC delivery

Valmet presence

Development

31.3.2015 16

Typical project finance structure

SPV

PPA

EPC CONTRACT

EQUITY INVESTORS

LENDERS

FUEL SUPPLY CONTRACT

OPERATOR

PERMITTING

HEAT CONTRACT

LAND

INSURANCE

Support from export credit agency

31.3.2015 17

Finnvera

Seller’s Bank

Valmet

Customer’s bank

Customer

1. indication

1. Financing indication from a bank (assuming commercial and political risk coverage for the credit amount from Export credit agency) for financing of 85% of the transaction between Valmet and Customer

2. LC

2. Customer ask Customer bank to issue the respective Letter of Credit to Seller’s bank. Customer bank and Seller’s bank to mutually agree the details of ”Bank to Bank” financing arrangement.

2. LC

3. Minimium 15% down payment from Customer to Valmet Power outside L/C

Seller’s bank Buyer’s bank

Guarantee from Finnvera to be used as security for the bank to bank financing between Seller’s and Buyer’s bank

3. down payment

4. payments 4. Seller’s bank will pay at sight to Valmet acc to L/C terms and extend financing accordingly to Customer bank

6. Deliveries from Valmet to Customer.

5. repayments

6. shipments 5. Repayments under L/C from Customer => Customer bank => Seller’s bank according to the financing indication of Seller’s bank.

4. financing

5. repayments

1. indication

If all parties are satisfied then... 1. indication

Some references

Fortum Jelgava

Valmet – delivering solutions for district heating 90 % of heat and power business supplies for CHP plants

31 March, 2015 © Valmet | Author / Title 19

Tampereen Energiantuotanto

Pellet-fired heating plant, peak load

33 MWth

Multifuel, CHP plant

Porin Prosessivoima

177 MWth

Tampereen Energiantuotanto

Biomass, Heat plant

49.5 MWth

5 MWe / 10MWth

Värnamo Energi

Biomass, CHP

3.6 MWe / 13.4 MWth

155 MWth

Mälar Energi

Waste, CHP plant

Jönköping Energi

Biomass CHP plant

100 MWth

Heizkraftwerk Zwickau Süd

Biomass, CHP plant

Fortum Jelgava

69 MWth

Biomass, CHP plant

Securing Energy Supply with Renewables Babina Creda, Croatia Complete biomass fired power plant utilizing bubbling fluidized bed (BFB) technology for power and heat production.

Capacity: 9.7 MW (power), 10 MW (heat)

The turnkey delivery includes a boiler island, a turbine, buildings, installation and construction works.

Key results Electricity from renewable and local energy sources contributes

to the long-term sustainable development More secure supply of energy New business and job opportunities

– Plant operatiom – Fuel supply chain – Further business opportunities

Complete biomass fired power plant

31 March, 2015 © Valmet | 20

18.3.2015

Renewable Energy in Texas Largest biomass BFB boiler in the world

Biomass fired power plant Bubbling fluidized bed (BFB) boiler

plant fuelled by 100 percent non-merchantable wood

Complete delivery with erected boiler island, flue gas cleaning system, automation and long-term service agreement

Key results Renewable power to 70,000 homes

in Texas helps to reduce CO2 emissions

BFB Boiler Nacogdoches Generating Facility, Southern Company, Texas, USA

21

Project of the Year in 2012 in the Biomass category by Power Engineering Magazine.

Case

© Valmet

Utilization of a Wide Range of Locally Available Fuels

CYMIC boiler utilizing circulating fluidized bed combustion technology Total capacity of 177 MWth Key results Utilization of a wide range of locally

available fuels Multifuel operation increases

operation reliability and keeps fuel costs down by offering several fuel alternatives

Minimum emissions with optimum economics

Co-combustion of different fuel types Porin Prosessivoima, Pori, Finland

22

High fuel flexibility is the foremost advantage offered by the CYMIC boilers

Case

© Valmet

Valmet – Heat and power generation solutions

The expert in converting divers fuels efficinetly into heat and electricity

© Valmet Customer Days 2014 | Kai Janhunen 23

EU: in 2030 ≥ 27% renewable

energy

Market drivers

*) Source: IEA 31 March, 2015 © Valmet | Kai Janhunen 25

Economic growth → increased electricity demand

Aging power plants

Sustainability • Stable policies, incentives and

regulations needed

Security of supply • Increased focus

More capacity - Greenfield

- Repowering and rebuilds

Biomass has an important role in fullfilling renewables

targets; CHP share will increase.

Increased demand for air pollution control

Increasing role of local fuel and multifuel

solutions

In the EU, 45% of power generation capacity is more than 30 years old

Demand will increase by more than 2/3 in 2011-2035,

an average annual rate of 2.2%

70% in non-OECD countries

CHP = combined heat and power produciton

EU: 53% of energy imported - almost 90% of crude oil - 66% of natural gas - 42% of solid fuel - 40% of nuclear fuel energy

Affordability

Japan: In 2030 ≥ 20% renewable energy

Indonesia: In 2025 ≥ 15%

Philippines: In 2030, 50% of primary energy from renewables

In the USA, 50% of power generation capacity is more than 30 years old

Valmet – Heat and power generation products

© Valmet Customer Days 2014 | Kai Janhunen 26

Biomass to energy Waste to energy Multifuel to energy

CYMIC X X X HYBEX X X Gasification X X Biograte X

CYMIC boilers, circulating fluidized bed (CFB) technology

HYBEX boilers, bubbling fluidized bed (BFB) technology

Gasification Biograte

Comprehensive Offering for Energy Customers Available technologies

Biomass to Energy, Waste to Energy and Multifuel solutions – Fuel handling systems – Boiler islands, modularized power plants and heating plants – Air pollution control systems

Products and Technologies – Circulating fluidized bed boilers (CYMIC) and Bubbling fluidized bed boilers (HYBEX) – Biomass and waste gasification – Oil and gas boilers, waste heat recovery boilers

Rebuilds and conversions – BFB conversions, capacity increases and lower emission levels

Services

27 © Valmet

28

Facts • Solutions for demanding

fuels: biomass, waste and multifuel

• Multifuel capabilities • Wide capacity range • From-Fuel-to-Stack

solutions • Large installed base

Results • High fuel flexibility gives

economic advantage and security

• Replacement of fossil fuels • Reducing CO2 emissions

economically • Minimum emissions

• Municipalities • Utilities • IPPs • Pulp Mills • Process industries

Energy customers

Long-term development for the benefit of customers Small-scale pilot plant Medium-scale pilot plant Full-scale pilot plant

12 March, 2015 © Valmet | Jussi Mäntyniemi 29

Valmet’s R&D Center, Tampere

Fortum’s bio-oil production plant, Joensuu VTT’s Bioruukki, Espoo

1980’s The first laboratory studies about pyrolysis - VTT 1990’s

First pyrolysis R&D projects in Finland

2007 Technology development consortium - Valmet, UPM and VTT

Cold model tests – Valmet’s R&D Center in Tampere

2010 Combustion tests Planning for a commercial demo plant

2013 Commissioning of Fortum’s Joensuu plant

2012 Contract on Joensuu bio-oil plant – Fortum and Valmet