Marko Janhunen UPM 19.09.2018, Gothenburg

Beyond fossils- Exploring the limitless opportunities in Bioeconomy

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Inspired by the limitless opportunities of bioeconomy

Delivering renewable and responsible solutions

Innovating for a future beyond fossils

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The limitless opportunities of Bioeconomy Evolution towards Biomolecules Sustainable land-use

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Global businesses – local presence

54 production plants in 12 countries

19,100 employees in 46 countries

12,000 customers in 120 countries

90,000 shareholders in 35 countries

25,000 b-to-b suppliers in 75 countries

UPM’s sales by market 2017

EUR 10 billion

13% North America

62% Europe

5% Rest of the world

20% Asia

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UPM today

UPM BIOREFINING

Pulp Plantations Biofuels Sawmills Wood Sourcing and Forestry

UPM ENERGY

Hydro-, nuclear- and condensing power (incl. shares in energy companies) Electricity production and trading Optimisation services

UPM RAFLATAC Label materials for product and information labelling

UPM SPECIALTY PAPERS Fine and specialty papers in China and APAC

Labelling material globally

Packaging papers mainly in Europe

UPM COMMUNI- CATION PAPERS Extensive product range of graphic papers for advertising and publishing as well as home and office uses

UPM PLYWOOD

WISA® Plywood and veneer products

UPM Grada® wood material

UPM BIOCOMPOSITES

UPM ProFi UPM Formi

UPM BIOCHEMICALS Chemical building blocks Biomedical products Lignin products

NEW OPPORTUNITIES

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Biomolecules

Fibres

Logs

Trees

Biofuels Biochemicals

Pulp Paper Packaging Tissue Labelling materials Biocomposites

Sawn timber Plywood

Energy

Evolution of wood usage

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UPM has an excellent position for the attractive biomolecules opportunities

Increasing demand for sustainable alternatives

Competitive forest industry platform and access to sustainable feedstocks

Disruptive innovations and long-term perspective

Replacing fossil materials

Huge and growing fuels and chemicals markets

Biofuels

Biochemicals

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UPM BIOCHEMICALS

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physical goods are made from and/or with chemicals

Megatrends convert to strong end-use development

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UPM Biochemicals

Construction, textiles, pharma, industrial,

detergents…

Paints, furniture, cosmetics, electronics,

aviation...

Toys, food packaging, transportation, hygiene,

office supplies…

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Biochemicals products are sustainable and competitive alternatives to replace fossil materials

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UPM Biochemicals

40% Cellulose

30% Hemi-

cellulose

25% Lignin

2%

STEP 1: SUGAR PULPING Disintegrating wood into sugars,

lignin and green energy

STEP 2: CHEMICAL CONVERSION Conversion of sugars into targeted

biochemicals

GREEN ENERGY

SUGARS

Lignin

BIOMASS

Biochemicals

BIOREFINERY PROCESS FIXED TECHNOLOGY PLATFORM VARIABLE FOR EACH BIOREFINERY

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UPM Biochemicals Biochemicals biorefinery targeting to produce bio-MEG, bio-MPG and lignin from hardwood

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Monopropylene glycol

Biorefinery lignin Monoethylene glycol

Textiles

Monopropylene glycol

Composites Wood resins

Existing fossil-based market Market demand > 26 m tonnes CAGR > 3% Application examples:

Existing fossil-based market Market demand > 2 m tonnes CAGR > 5% Application examples:

Bottles & packaging

Deicing fluids

Pharma & cosmetics

Detergents

Plastics

Foams & coatings

Performance chemical Application driven Strong IP position Application examples:

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bMPG bMEG Lignin

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UPM BIOFUELS

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UPM Lappeenranta Biorefinery

18-09-20 UPM BIOFUELS –

DRIVING CLEANER TRAFFIC

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179M€ UPM

investment

250 Direct and

indirect employees

200 UPM patents and

applications

The world’s first biorefinery producing wood-based renewable diesel and naphtha

100,000 t/a production

capacity

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Renewable fuels are needed in road transport energy mix to meet EU’s GHG-reduction targets

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GHG-reduction targets calculated vs. reference year 2005 (2020 -6% FQD, 2030 -30% ESR, 2040 -50% proj.)

Source: UPM analysis based on Bloomberg and WoodMackenzie

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Electric vehicles

Increase in road transport

2020 -6% in GHG 2030

-30% in GHG 2040 -50% in GHG

Engine efficiency

Renewable fuels

Fossil fuels

Required fossil oil displacement in EU road transport to meet GHG-targets

EU target

450

300

150

0 2015 2020 2025 2030 2035 2040

Mto

n (o

il eq

uiva

lent

)

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UPM studies the feasibility of possible new Biorefinery in Kotka, Finland

The proposed second UPM biorefinery would •  produce approximately 500,000 tonnes of advanced

biofuels •  use several new sustainable feedstocks different from

UPM Lappeenranta Biorefinery - e.g. solid wood biomass and Brassica carinata

•  have partly different technology: conversion of solid biomass and hydrotreatment

•  Biofuels regulation decisions to be made by the EU and

Member States will impact the future investment consideration

Environmental impact assessment (EIA) for a possible biorefinery in Mussalo, Kotka, Finland has been started and takes approximately 1 year

Kotka, Mussalo, Finland – the area of dismantled power plant formerly run by Pohjolan Voima

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The possible Kotka Biorefinery: an innovative and robust concept to scale up the business

Lappeenranta Biorefinery 100kt

Potential Kotka Biorefinery 500kt

Residual oils

Carbon farming (Carinata oil)

UPM renewable fuels UPM feedstocks

Residues, saw dust, bark

ü  Competitive and sustainable feedstocks

ü  World-scale biorefinery leveraging UPM ecosystem ü  Significant efficiency gains enabled by economy of

scale and synergies with Lappeenranta

ü  Low-carbon fuels for road, aviation, shipping and petrochemicals

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SUSTAINABLE LAND-USE

Targeting net-zero emissions; a disruption for all industries and transport modes

2020 onwards à

Peaking of emissions

Positive emissions, atmospheric CO2

rises Net-zero

emissions Net-negative

emissions Atmospheric CO2 falls

Emission sinks

Greenhouse gas emissions CO2 absorbed by emission sinks

Source: Shell

Carbon negative

(emission sinks)

Carbon neutral

CO

2

Soil carbon

Carbon positive

Fossil energy

Renewable energy

Renewable energy

CO

2

X

Going beyond fossils - Carinata is a good fit to UPM’s sustainable land use operations

COMMERCIALFORESTRY

PLANTATIONS SEQUENTIALCROPPING

WOOD (COMPONENTS) to bio products and energy

EXTRACTIVES and SAW DUST to renewable fuels

FIBRE to pulp

SEED PROTEIN to animal feed

TECHNICAL SEED OIL to renewable fuels

STEM AND ROOTS to soil carbon

0 -1,5Carbon negative

Carbon neutral

CO2

Soil carbon sequestration

Renewable fuels are

considered carbon neutral

The biomass of Carinata captures

carbon to soil, creating a carbon

negative renewable fuel

t/ha

CO2

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Carinata – Sustainable alternative for biofuel feedstock

Non-edible oil for biofuels production High protein animal feed

Erosion control More biomass to soil and enhanced

soil carbon balance

Deep rooting system Diversification of crop rotation

Better growth conditions Soil quality improves

Efficient nutrient uptake Better pest and weed control for main crop

Additional biomass

Soil cover around year Crop residues left on soil

WINTER: PRODUCTIVE COVER CROP

SEASON (Carinata)

SUMMER: CASH CROP SEASON (Soy)

December

May

South America

42% 2200 kg/ha 58%

Oil

Meal

Additional biomass generated through productive cover

cropping (Carinata)

Summary

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Molecular bioproducts businesses – replacing fossil materials

UPM BIOFUELS Decarbonising traffic

Renewable fuels are the fast track to reduce transport emissions

Large and growing markets Emission reduction targets and mandates drive the demand

UPM’s advantages: - Sustainable feedstocks - Biorefinery technologies and IPR

Commercial market entry successful Exploring next steps to scale up Scale up is possible by 2022*

CO2 reduction 70-80%

UPM BIOCHEMICALS Sustainable solutions for consumers

Chemicals markets today are based on fossil raw materials (oil/gas/coal)

Large and growing markets Strong market pull for sustainable alternatives

UPM’s advantages: - Sustainable feedstocks - Biomass processing technologies and IPR

Basic engineering under way for the possible first biorefinery Commercial market entry is possible by 2021*

100%

* If all preparation phases are concluded successfully, UPM will initiate its regular process of analysing and preparing an investment decision

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Driving cleaner traffic

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