Renewable diesel from tall oil

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1 Uudet energialähteet ja joustava voimantuotanto Renewable diesel from tall oil Ville Vauhkonen UPM Biofuels R&D

2 UPM today UPM Plywood Plywood and veneer products UPM Biorefining Pulp Plantations Biofuels Sawmills Wood sourcing and Forestry UPM Paper Asia Fine papers in China and Asia Pacific Labelling materials globally UPM Paper ENA Magazine papers in Europe and the USA Newsprint and fine papers in Europe Sales 2014: EUR 10 billion Personnel: 20,000 Shareholders: approx. 90,000 UPM Raflatac Label materials for product and information labelling UPM Energy UPM Biocomposites UPM Biochemicals Hydro-, nuclear- and condensing power (incl. shares in energy companies) Electricity production and trading

3 Biofore growth opportunities added value of wood and biomass Biofibrils UPM BioVerno Biofibrils Biochemicals UPM ProFi Biofuels for transportation Bioenergy heat and electricity UPM Grada Labels and composites UPM Formi Pulp, paper, plywood and sawn timber 3 Sourcing and logistics of wood and biomass Internal

4 Wood raw material is the basis of many different businesses at UPM Fibres to biofibrils and biocomposites Fibres to pulp Extractives to renewable diesel or biochemicals Ligning, cellulose or hemicellulose to biochemicals Bark and branches to renewable diesel and energy Logs for sawn goods and plywood 4

5 UPM Biofuels Strategy

6 UPM BIOFUELS UPM s journey in advanced biofuels In 2006 UPM published its plans to become a significant producer of advanced biofuels. Development of BTL technology ongoing at GTI pilot plant in Chicago, USA Development of hydrotreatment process started in UPM R&D In 2012, first investment decision of 175 MEUR for UPM Lappeenranta biorefinery. Produces renewable diesel from tall oil. Business is expanding in stages. 6

7 UPM BIOFUELS UPM Biofuels Strategy Renewable fuels Wood-based raw materials Sustainable operations Drop-in fuels fully compatible with all vehicles and fuel distribution systems Renewable wood-based raw materials not suitable for food production Sustainable supply chain Low emission products UPM will become a major player in advanced biofuels Revenue target > 1 billion /a 7

8 UPM BIOFUELS UPM Biofuels growth strategy ENTERING BUSINESS HYDROTREATMENT Tall oil UPM Lappeenranta Biorefinery start-up 2014 EXPANDING BUSINESS THERMAL CONVERSION Wood raw material Gasification (BTL) / Pyrolysis GROWTH OF BUSINESS FUTURE DEVELOPMENT New technologies, processes and raw materials R&D activities and co-operation with strategic partners 8

9 UPM and Biofuels have gained global recognitions UPM renewed its position in Dow Jones Sustainability Indexes in UPM recognized as one of world leaders for corporate action on climate change on the A list in the CDP Climate Performance Leadership index 2014 UPM Biofuels - Award for Breakthrough Innovation in Technology in 2013 UPM BioVerno - Winner in Travelling category 2014 awarded by European Commission 9 Internal

10 UPM Lappeenranta Biorefinery

11 UPM BIOFUELS HYDROTREATED BIOFUELS UPM invests in wood based renewable diesel in Lappeenranta UPM invests in the world s first advanced wood based biofuels production in South Eastern Finland, Lappeenranta Main product of the biorefinery is advanced, second generation renewable diesel Raw material is sustainably produced crude tall oil, which is used in a highly efficient hydrotreatment process Technology is based on UPM s innovations and Biofore strategy inspired long-term development work 11

12 UPM BIOFUELS HYDROTREATED BIOFUELS First step in UPM s biofuels business - UPM Lappeenranta Biorefinery Commercial scale industrial investment Total investment 175 EUR Production tons/a of renewable diesel Crude tall oil as raw material, residue of pulp making process Hydrotreatment as process Production started January 2015, Investment decision 2012 Employs in total 200 persons (incl. indirect) Contributes to 25% of Finland s biofuel target in 2020 RENEWABLE DIESEL 12

13 UPM BIOFUELS HYDROTREATED BIOFUELS Raw material: Crude Tall Oil (CTO) Residue of chemical pulping process Yield kg CTO/ton of pulp Global production now > tons/a - Additional CTO supply potential clearly above demand globally - Significant share burnt for energy Most of the raw material comes from Finnish pulp mills UPM Lappeenranta refinery minor addition to total demand of crude tall oil More efficient use of wood without increasing logging Utilization of low grade CTO Residue No indirect land-use change Outside food value chain 13

14 UPM renewable diesel process 14

15 Capturing synergies by full integration into UPM Kaukas mill site in Lappeenranta, Finland 1 2 RESEARCH CENTRE BIOREFINERY 3 4 BIOMASS POWER PLANT PULP MILL 5 6 SAW MILL PAPER MILL

16 UPM BioVerno Unique Renewable Diesel

17 UPM BIOFUELS UPM BioVerno Renewable diesel RENEWABLE RAW MATERIAL 100 % CO2 EMISSIONS (VS. FOSSIL FUEL) 80 % COMPATIBLE WITH DIESEL VEHICLES 100 % 17

18 UPM BIOFUELS Sustainably Produced Renewable Diesel Unique renewable diesel - Drop-in hydrocarbon - comparable to fossil fuel - Ready component for commercial blends - No blend wall limitations - Compatible with fossil diesel EN590 standard quality Tested in engines & vehicles with independent research organizations (e.g. FEV & AVL ) - Fully compatible with current diesel engines and fuel distribution network - Tail pipe emission benefits (e.g. NOx,PM) Crude Tall Oil-Based Renewable Diesel as a Blending Component in Passenger Car Diesel Engines (Heuser B. et al. SAE Int. J. Fuels Lubr. 6(3): , 2013, doi: /

19 Fleet tests completed with VTT Technology Center of Finland Fleet testing with 20% UPM BioVerno renewable diesel with 4 Volkswagen cars km/car Spring, summer, autumn and winter conditions Independent testing by experienced test drivers of Technical Research Centre of Finland (VTT) Investigating fuel functionality in engine, emissions and fuel consumption Functions as fossil diesel and reduction of emissions Crude Tall Oil-Based Renewable Diesel in Passenger Car Field Test, Laurikko et al. SAE Technical Paper , 2014, doi: /

20 BioVerno fuel launched to St1 fuel stations

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