How we build a new business out of Biofuels

Platform Duurzame Biobrandstoffen Dordrecht 25 Oktober, 2016 Mika Aho Nordic Oy

1 21.10.2016 St1 vision: ”To be the leading producer and MARKET SHARES 2015 KEY FIGURES 2015 seller of CO2-aware energy” ST1 NORDIC Net Sales, MEUR ST1 Operates in Finland, and Petrol 22.0% . Company’s headquarters Diesel 19.1% 3,602.4 in . Light fuel oil 22.2% ST1 GROUP SWEDEN Net Sales, MEUR 39 403 283 209 287 222 STATION NETWORK Petrol 21.7% Total of ca. 1450 St1- and Shell-sites in Finland, Sweden and in Norway. Diesel 15.5% 2,245.2 Light fuel oil 29.8%

NORWAY

ENERGY PRODUCTION Petrol 28.9% Ethanol plants producing waste- based advanced ethanol. Industrial Diesel 24.4% wind power plants. Geothermal Wind power plant Light fuel oil 14.7% pilot heat plant under construction. Bioethanol production facility Oil refinery in Sweden. * Owned by North European Bio Tech Oy (NEB), Oil refinery an associated company of St1 and SOK Corporation, Kajaani under construction.

2 21.10.2016 Kirkenes NEOT Terminal network Tromsö and supply chain Bodö

Luleå Namsos Oulu Kuopio Varkaus Ålesund Vaasa Lappeenranta Bergen/Skålevik Mongstad Pori Gävle Hamina Naantali Haugesund Porvoo Oslo Karlstad Tananger Slagen Södertälje Brofjorden Jönköping Visby Gothenburg

Fredericia Kalundborg

Gdansk Transport is responsible for 25% of all GHG emissions . . . Road transport GHG in the EU by vehicle segment, 2012 [%] Road transport corresponds over 70% of the total transport GHG emission

Due to the difficulty, cost and urgency of the road transport decarbonization measures, it should not left to be handled by market based mechanisms, eg. Emission Trading System (ETS) • ETS will contribute to sectors with lowest costs to GHG emissions by transportation decarbonize first (outside transport), thus delaying transport mode in EU28 by sector in 2013 [%] decarbonizing measures easily by 15-25 years

Urgent transport decarbonization measures are imperative requiring maximal use of existing infrastructure to start with existing vehicle fleet

. . . thus is in a an urgent need of decarbonisation 4

Advanced Biofuels is cost effective way to decarbonise . . .

1) Internal Combustion Engine (ICE) vehicles are estimated to have the highest impact on GHG emission reduction until 2030, mainly through energy efficiency improvements1)

Due to slow renewal rate of car fleet, e-mobility or ultra low carbon transport modes can deliver only marginal GHG savings until 2030. It’s vital to capture the relatively cost effective and fast decarbonisation potential advanced biofuels can offer

Advanced Biofuels can decarbonise existing car fleet using existing fuel infrastructure 1) Integrated Fuels and Vehicles Roadmap to 2030+, Roland Berger, April 2016 . . . enabling the use of existing fuel infrastructure 6 St1 Biofuels Products & Services

Waste & process residues St1 Biofuels Products & Products and sources Services co-products

Ethanol Biogas

Food Industry & Retail Etanolix® Advanced Biofuels

Electricity Heat

Municipal & Commercial Bionolix® Renewable Energy

Fertilizers New Animal Feed Products Wood Industry Cellunolix® Nutrient Recovery and more

Business Plant Life Partners Develop- Design & Cycle Partners ment Delivery Services Turn your waste into a salable high demand product and gain business benefits with Etanolix®

View the video on Etanolix® at: Annual production http://www.st1biofuels.com/solutions capacity starts from 5 million liters of fuel grade bioethanol Recycling waste into bioethanol with St1 Biofuel’s Etanolix® plant is both profitable and sustainable, and does not capitalize the land needed for food production.

The end product is CO2 –aware, sustainable and it is traceable to its source.

8 21.10.2016 St1 Company presentation St1 Biofuels Products & Services

Waste & process residues St1 Biofuels Products & Products and Limted Volumes?sources Services co-products

Ethanol Biogas

Food Industry & Retail Etanolix® Advanced Biofuels

Low Yield? Electricity Heat

Municipal & Commercial Bionolix® Renewable Energy

Fertilizers New Animal Feed Products Wood Industry Cellunolix® Nutrient Recovery and more

Business Plant Life Partners Develop- Design & Cycle Partners ment Delivery Services Cellunolix® Kajaani Finland

Ethanol with 90% GHG reduction • Capacity 10 M liters/a • Double counting / advanced biofuel classification enabled the investment decision

Co-products • Turpentine, Lignin (natural wood components) • Raw furfural, Biogas and Carbon dioxide (produced in process)

Feedstock • Fresh Saw dust (80 % pine & 20 % spruce) 80.000 m3/a (solid m3), available on- site and regional saw mills • Currently incinerated in local boiler with poor efficiency

Investor North European Biotech Oy (St1 & SOK owned 50/50) • Investment of 40 m€ supported by national investment grant 30% (max 12m€) • St1 Biofuels responsible of technology, plant delivery and operation • Commissioning 2016

10 21.10.2016 Saw Mill

Feedstock Power Plant Receiving

Cellunolix Ethanol Plant Starting point 06/2015 Cleaning up 11/2015 First Equipment 11/2015 More Equipment 1/2016

Work in Progress in Summer 2016 Neighbors visiting the site 9/2016 Getting ready for commissioning 10/2016 Different measures in the Nordic countries

Norway Sweden Finland

Mandate 2016: 5,5% 2016: No mandate 2016: 10%e/e 2017: 7% Introduced propably 2018 or 2020: 20%e/e (legally binding) 2019 Objective 40% by 2030 Double counting Yes, positive list No Yes, RED definitions

Tax Structure Taxes volume based Taxes volume based Technology neutral: Road use tax Energy tax Energy tax: 1,6 c/MJ

CO2 tax CO2 tax CO2 tax: 58 €/t CO2 Energy security fee: 0,68 c/l Tax exemptions for biofuel Many different tax exemptions volumes beyond mandate for biofuel Market Fuel biofuel blends Gasoline: E5 Gasoline: E5, E85 Gasoline: E10, E5, E85 Diesel: B7, increasing HVO high Diesel: B7, increasing B and Diesel: B7, some HVO high blends HVO high blends blends

19 21.10.2016 St1 Company presentation Blending mandate triggers domestic investments

⬄ EU measure vs. ⬄ Domestic measure Feedstock • Definition of Advanced Biofuels ⬄ RED, FQD . . . • Availability & signifigance vs. demand ⬄ RED, FQD, WFD . . . • Sustainability criteria ⬄ RED, ILUC, WFD . . .

Production (investments) • Domestic investments & production vs. import ⬄ Mandate, Inv. grants • Technology maturity (TRL) ⬄ Inv. grants • Production cost ⬄ R&D support, (Mandate)

Market uptake • Mandates with penalty of non-compliance ⬄ Mandate • Product price ⬄ Fuel taxation • Products offered (E10, E20/E25, HVO100) ⬄ Fuel standadrs

• Powertain developoment ⬄ DAFI, CO2 95g cap . . . AND TOGETHER WITH BALANCED TAX STRUCTURE ENABLES MARKET UPTAKE

20 Regulation is needed to create the market

Domestic investments in production capacity require long term policy framework

Quota obligation (blending mandate) is the most effective tool to trigger market driven investments

Clear and long term taxation with two components pivotal at the pump:

• Energy tax based on the energy content of the fuel

• CO2 tax based on life cycle carbon intensity of the product

Ensure market demand of biofuels always up to the maximum levels allowed by fuel standards, eg. E20/E25 etc.

MARKET UPTAKE REQUIRES CLOSE CO-OPERATION THROUGH ENTIRE VALUE CHAIN

21 Leaders of Sustainable Biofuels

• Industry platform driving development of advanced biofuels in Europe • “Now is the time to bring advanced biofuels to the market. The industry is committed to delivering on its promise but we need stable long-term investment conditions which encourage investment while, at the same time, promoting true advanced biofuels.”