Metso Power

Metso Capital Markets Day March 21-22, 2007 Karlstad, Sweden Lennart Ohlsson President, Power Business Line, Metso Paper

Contents • • • •

Sustainable energy solutions Metso Power today Metso Power financials and competitive position Profitable growth in Metso Power

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.

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Sustainable energy solutions

Climate change is a fact Global warming Melting glaciers Soil erosion Forest fires

“Something has to be done!”

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Global energy perspective Energy consumption continues to increase We are running out of oil Emphasis on local fuel World energy consumption sources

”The growth is in renewable and demanding fuels!”

Proportion of different fuels of energy production

Oil reserves M. East Other Russia USA

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Europe

Renewable energy in Europe The biggest potential in biomass, waste and solar energy

"Europe as a forerunner - other continents to follow"

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Scandinavian traditions in biomass utilization Demanding operating environment has encouraged Scandinavian energy and forestry cluster for innovations in biomass utilization and energy efficiency.

"We have the know-how!"

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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.

”Versatility in fuels is wisdom!”

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Metso Power’s focus World’s electricity production capacity by fuels

Oil

Gas

Coal

Lignite

Peat

Biofuel

Hydro

Waste

Nuclear

Solar & wind

Solid fuels Solid fuel energy production by technology

PC

CFB

BFB Solid fuels

Grate

Pulverized coal (Hard coal, lignite)

Circulating Fluidized Bed (Coal, lignite, waste, biofuel)

Bubbling Fluidized Bed (Peat, waste, biofuel)

Mass burn (waste, biofuel)

Capability coverage Technology coverage

Geographical coverage Customer coverage

Metso Power’s scope Market share ~ 15-20% of the served market

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Gasification

From local biomass utilization… Communities, municipalities Medium-sized industry (sawmills, dairys) Local energy utilities

”Think globally, act locally!”

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…to large-scale biomass utilization Forest industry Process industry Municipalities Power utilities

"World's largest biomass boilers come from us!"

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Commitment in continuous R&D Challenges in demanding fuels: • Emissions • Corrosion • Fouling • Agglomeration

“It takes know-how and skills to do this job!”

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Metso Power today

Metso Power’s global operations • Annual net sales of approximately EUR 500 million • 1,500 employees • Sales and engineering offices around the world • Five manufacturing facilities worldwide Tampere Gothenburg

Charlotte

Curitiba Main offices Manufacturing units Sales and/or engineering offices

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Metso Power’s markets and customer segments Power generation in Europe and North America

• Fluidized bed boilers • Environmental systems • Service

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Pulp & Paper globally

• Recovery boilers • Evaporators • Fluidized bed boilers • Environmental systems • Service

Metso Power’s 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

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Metso Power’s global business units

Capital projects

Heat & Power

Service

•

•

•

• • •

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Fluidized bed boilers Recovery boilers Evaporators Environmental systems

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Oil and gas boilers Biofuel boilers

• • • •

Rebuilds and upgrades Maintenance Spare parts Accessory products Partner Services

Metso Power technology

• • •

A forerunner in fluidized bed combustion for the pulp and paper industry and power producers Global leader in chemical recovery systems to pulp and paper mills Dedicated to development of sustainable solutions to combat global warming

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Metso Power’s products and technologies

Recovery boilers

BFB power boilers

CFB power boilers

RECOX™

HYBEX®

CYMIC®

RB technology Recovery Boilers up to 5000 t ds/24h

BFB technology Bubbling Fluidized Bed Boilers 10-300 MWth

CFB technology Circulating Fluidized Bed Boilers 50-600 MWth

> 300 deliveries

> 100 deliveries

> 60 deliveries

Evaporators EVAPS™/TUBEL® Evaporation plant High dry solids Condensate system

> 400 deliveries

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Environmental Systems ODOCON™, GASCON™ NCG treatment Flue gas scrubbers/condensing White liquor oxidation

> 500 deliveries

Oil and Gas boilers Fire tube boilers Water tube boilers 1-150 MWth

Selected projects in power generation industry

Manitowoc Public Utilities CYMIC

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E.ON UK Lockerbie

Ängelholms Energi

Falu Energi & Vatten

Paimion Lämpökeskus

HYBEX

2 x Fluidized bed boiler rebuilds

HYBEX

Hot water boiler plant, Noviter

Selected projects in pulp & paper industry

GeorgiaPacific, Port Hudson CYMIC

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Stora Enso Skoghall

Cenibra Celulose

Arauco, Nueva Aldea

APP China, Hainan

RECOX EVAPS NCG Fluidized bed boiler conversion

Evaporator capacity increase and technology conversion

RECOX HYBEX EVAPS NCG

RECOX 2 x CYMIC Burner upgrades

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

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Life-cycle support

Metso Power financials and competitive position

Metso Power’s orders received, net sales and order backlog EUR million

572

600

556

537

525

480

500

495

415 379

400

379 348 315

288

300 200 100 0

2003 Orders received

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2004 Net sales

2005 Order backlog

2006

Metso Power’s net sales by customer segment 500

EUR million

30%

400 20% 26% 300 33% 200 80%

70%

2005

2006

74% 100

67%

0 2003 Pulp & Paper

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2004 Power generation

Metso Power’s net sales by destination % 100

80

60

40

20

0 2003

27

2004

Scandinavia

Other Europe

North America

Asia Pacific

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2005 South America

2006

Average

Metso Power’s products, customers and competitors Business Line

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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 RODDINGMASTER AshLeach RunScaff

Pulp & Paper Industrial Municipal Utility

OEM Regional maintenance companies

1-3.

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Profitable growth in Metso Power

Important drivers for Metso Power’s success • • • • • • • • •

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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. This increases 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 Production facilities restructuring from high to low cost areas New technologies create market opportunities, i.e. gasification, biofuels, and CO2 capture Aging installed base boosts the service market within the next few years

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Metso Power’s strategic focus is on profitable growth Growth • Applying current technology to related industries • Covering wider markets with current technology • Innovation and development of new technologies, products and solutions • Leverage the Metso organization for solution development and increased scope of delivery • Capture larger part of the aftermarket • Defining alliances and potential acquisitions with strategic fit Profitability improvement • Reduction of COGS • Reduction of quality costs • Focus on solutions • Manage competencies and resources effectively

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Profitable growth in Metso Power •

Technology leadership

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•

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Global execution model Tight project control

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Proactively Best value

Flexible production

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Focus on life-cycle cost Internal and external partners

Excellent project execution

Strategic sourcing

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Intelligent business solutions

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•

Understanding future requirements Active R&D

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Balance own and subcontracted Automation

Metso synergies

Metso Power and Paper

Excellent strategic fit, complementing energy efficiency and recovery products for the pulp and paper industry: • Pulping industry – Energy, recovery and APC solutions • Paper industry – Energy and APC solutions • Extension for Metso’s mill-wide service concept and offering

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Metso Power and Automation

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Leading combustion technology for power generation industry and growing sustainable energy markets: • Supplier of the world’s largest fluidized bed boilers for biomass and co-firing • Products to combat against climate change • Strategic fit with Metso Automation to enhance power plant solution capability • Possibility to expand power plant service offering © Metso Corporation 2007

We can do it! To be the provider of choice for environmental combustion and recovery solutions.

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List of sources • • • • • • • • • •

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World energy consumption History: Energy Information Administration (EIA), International Energy Annual 2002 Projections: EIA, System for the Analysis of Global Energy markets 2005 International Energy Outlook 2005: www.eia.doe.gov/oiaf/ieo/figure_7.html Proportion of different fuels of energy production, IIASA, www.iiasa.ac.at Oil reserves, www.peakoil.org Biomass in Europe Map adapted from Päivinen et al 2001, Data: European Research Institute, www.efi.fi Rewenable energy potential in EuropeTeres II (The Rewenable Energy Study II)

© Metso Corporation 2007