Metso Power Handelsbanken Breakfast Club: Biopower Equipment November 9, 2007 Lennart Ohlsson, President, Metso Power Johanna Sintonen, Vice President, Investor Relations, Metso Corporation Forward looking statements It should be noted that certain statements herein which are not historical facts, including, without limitation, those regarding expectations for general economic development and the market situation, expectations for customer industry profitability and investment willingness, expectations for company growth, development and profitability and the realization of synergy benefits and cost savings, and statements preceded by expects, estimates, forecasts or similar expressions, are forwardlooking statements. These statements are based on current decisions and plans and currently known factors. They involve risks and uncertainties which may cause the actual results to materially differ from the results currently expected by the company. Such factors include, but are not limited to: (1) general economic conditions, including fluctuations in exchange rates and interest levels which influence the operating environment and profitability of customers and thereby the orders received by the company and their margins (2) the competitive situation, especially significant technological solutions developed by competitors (3) the company s own operating conditions, such as the success of production, product development and project management and their continuous development and improvement (4) the success of pending and future acquisitions and restructuring. 2 Metso Corporation 2007 Metso Corporation 2007 1
Metso s power opportunity Environmentally sound, biomass and waste based power generation solutions provide exciting new growth opportunities for Metso. Metso Power A forerunner in fluidized bed combustion of biomass, coal and other fuels to power plants A global leader in chemical recovery systems to pulp and paper mills Products: Fluidized bed boilers and recovery boilers, oil and gas boilers, evaporators, environmental systems and services Part of Metso Paper business area. Annual net sales in 2006 ~ EUR 500 million - 70% derived from the pulp industry - 30% from independent power producers Demand for Metso Power s products continues very strong - Capacity constraints limiting our capability to take new orders. Actions underway to address the capacity issues. 3 Metso Corporation 2007 Climate change is a fact Global warming Melting glaciers Soil erosion Forest fires Something has to be done! 4 Metso Corporation 2007 Metso Corporation 2007 2
Global energy perspective Energy consumption continues to increase We are running out of oil Emphasis on local fuel sources World energy consumption Proportion of different fuels of energy production The growth is in renewable and demanding fuels! Oil reserves M. East Other Russia Europe USA 5 Metso Corporation 2007 EU Initiative Traditional technology, combined with innovations New technology Source: EU, DG TREN 6 Metso Corporation 2007 Metso Corporation 2007 3
Renewable energy in Europe The biggest potential in biomass, waste and solar energy 7 Metso Corporation 2007 EU Target on Bioenergy In 1997, the European Commission published a White Paper on renewable energy (12% of total primary energy consumption by 2010) setting the target of increasing the use of bioenergy by 90 Mtoe by 2010. A part of this is covered by wood based biomass. Recently the Comission announced a new target fro renewable energy of 20% by 2020. Gross inland consumption of biomass and waste, Mtoe 140 120 100 80 60 Municipal solid waste Biogas Wood & wood waste Assuming that 40% of the 2010 target for agricultural and forest residues and energy crops would be covered by wood, an additional 175 million m 3 of wood would be needed. The annual harvest of industrial roundwood in EU-15 is some 275 million m 3 at the moment (245 million m 3 industrial roundwood and 30 million m 3 fuelwood). Biogas Agricultural and forest residues Energy crops EU White Paper target for additional bioenergy use by 2010 40 20 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Source: Jaakko Pöyry 8 Metso Corporation 2007 Total biomass and waste consumption in 1995 EU Commission s new target for renewable energy 20% of total primary energy consumption by 2020 2020 Metso Corporation 2007 4
Environmentally-compatible primary bioenergy potential in the EU Source: European Environment Agency 9 Metso Corporation 2007 Bioenergy and the European P&P Industry (from McKinsey and Jaakko Pöyry study for CEPI) 10 Metso Corporation 2007 Metso Corporation 2007 5
Bioenergy and the European P&P Industry (from McKinsey and Jaakko Pöyry study for CEPI) 11 Metso Corporation 2007 Consensus? Despite some legitimate but unfounded fears, analyses show that large-scale biofuel production will not have any noticeable effects on food prices. Marianne Fischer Boel EU Commissioner for Agriculture 12 Metso Corporation 2007 Metso Corporation 2007 6
Scandinavian traditions in biomass utilisation Scandinavian industrial cluster was born from winter and forest. 13 Metso Corporation 2007 Metso Power expertise Selected technologies developed during the decades Fluidized bed technology Chemical recovery technology Customers choice 200 fluidized bed boilers 300 recovery boilers 400 evaporation plants 400 environmental systems 14 Metso Corporation 2007 Metso Corporation 2007 7
15 Metso Corporation 2007 Metso Power s focus World s electricity production capacity by fuels Biofuel Oil Gas Coal Lignite Hydro Nuclear Peat Waste Solar & wind Solid fuels Solid fuel energy production by technology PC Pulverized coal (Hard coal, lignite) CFB Circulating Fluidized Bed (Coal, lignite, waste, biofuel) Solid BFB fuels Bubbling Fluidized Bed (Peat, waste, biofuel) Grate Mass burn (waste, biofuel) Gasification Capability coverage Technology coverage Geographical coverage Customer coverage Metso Power s scope Market share ~ 15-20% of the served market 16 Metso Corporation 2007 Metso Corporation 2007 8
Fuel flexibility requires expertise Opportunity fuels, multi-fuel capability and co-firing are the key success factors in the future energy production. Combustion solutions required by the energy market are becoming more challenging. 17 Metso Corporation 2007 Metso Power s global operations 1,600 employees Sales and engineering offices around the world Five manufacturing facilities worldwide Gothenburg Tampere Charlotte Curitiba Main offices Manufacturing units Sales and/or engineering offices 18 Metso Corporation 2007 Metso Corporation 2007 9
From local biomass utilisation Communities, municipalities Medium-sized industry (sawmills, dairys) Local energy utilities 19 Metso Corporation 2007 to large-scale biomass utilisation Forest industry Process industry Municipalities Power utilities 20 Metso Corporation 2007 Metso Corporation 2007 10
Metso Power s markets and customer segments Power generation in Europe and North America Fluidized bed boilers Environmental systems Service Pulp & Paper globally Recovery boilers Evaporators Fluidized bed boilers Environmental systems Service 21 Metso Corporation 2007 Metso Power s global business units Capital projects Heat & Power Service Fluidized bed boilers Recovery boilers Evaporators Environmental systems Oil and gas boilers Biofuel boilers Rebuilds and upgrades Maintenance Spare parts Accessory products Partner Services 22 Metso Corporation 2007 Metso Corporation 2007 11
Metso Power s products, customers and competitors Business Line Main products Trade names Customers Competitors Pos. Pulp & Paper Recovery boilers Fluidized bed boilers Evaporators Environmental systems RECOX HYBEX CYMIC EVAPS GASCON ODOCON Chemical pulping Paper Andritz Mitsubishi Wuhan Foster Wheeler AEE HPD 1-3. Power generation Fluidized bed boilers Oil / gas boilers Environmental systems HYBEX CYMIC Noviter VEÅ GASCON Industrial Municipal Utility Foster Wheeler AEE Alstom B&W Wärtsilä Biopower Vølund 1-3. Service Rebuilds & upgrades Mill / plant service Spare parts Partner service ROSE BLRBO RODDING- MASTER AshLeach RunScaff Pulp & Paper Industrial Municipal Utility OEM Regional maintenance companies 1-3. 23 Metso Corporation 2007 Metso Power s services Rebuilds and upgrades Capacity increases Environmental compliance Fuel flexibility Maintenance Maintenance Replacement in kind Engineered parts Acessory products Spare parts Spare and wear parts Partner services Service agreements Inspections Mill and plant studies Training Remote support 24 hrs service Emergency relief Life-cycle support 24 Metso Corporation 2007 Metso Corporation 2007 12
Commitment in continuous R&D Challenges in demanding fuels: Emissions Corrosion Fouling Agglomeration 25 Metso Corporation 2007 Biofuel in Transport Fuels - Biorefineries Source: DOE 26 Metso Corporation 2007 Metso Corporation 2007 13
Biofuel in Transport Fuels - Biorefineries Source: DOE 27 Metso Corporation 2007 Paths forward 28 Metso Corporation 2007 Metso Corporation 2007 14
and many challenges 29 Metso Corporation 2007 Important drivers for Metso Power s success Investment activity in the pulp & paper industry Strong growth in the power generation segment, fuelled by economic growth and environmental issues Natural gas losing ground due to high prices, resulting in increased demand for steam-based power generation Strong biomass focus in Europe Clean Coal Act increases coal-based electricity production in the Unites States Markets are moving with the GDP growth to Asia and China New technologies create market opportunities, i.e. gasification, biofuels, and CO 2 capture Increased value added from P&P mills through biorefinery initiatives 30 Metso Corporation 2007 Metso Corporation 2007 15
We can do it! To be the provider of choice for environmental combustion and recovery solutions. 31 Metso Corporation 2007 Metso Corporation 2007 16
Metso s financial statements and other financial information are available on Metso s website at: www.metso.com/investors Metso Corporation - Investor Relations Fabianinkatu 9 A, P.O. Box 1220, FIN-00101 Helsinki, Finland Tel. +358 20484 100 Fax +358 20 484 3236 Johanna Sintonen, Vice President, Investor Relations Tel. +358 20 484 3253 johanna.sintonen@metso.com Marja Kortesalo, Financial Communicator, Investor Relations Tel. +358 20 484 3211 marja.kortesalo@metso.com Lilli Riikonen, Financial Communicator, Investor Relations Tel. +358 20 484 3215 lilli.riikonen@metso.com Anne-Mari Ylikulppi, Assistant, Investor Relations Tel. +358 20 484 3117 anne-mari.ylikulppi@metso.com North America: Mike Phillips, Senior Vice President, Finance and Administration, Metso USA Inc. Tel. +1 770 246 7237 mike.phillips@metso.com 33 Metso Corporation 2007 List of sources 34 Metso Corporation 2007 Metso Corporation 2007 17