The world is in continuous motion, and we need to be too. We offer sustainable solutions that enable people to move with a clear conscience. Annual Report 2011 Table of contents Neste Oil . 1 Investor information . 284 Business areas in brief . 2 Shares and shareholders . 285 CEO’s review . 3 Information for shareholders . 292 Key figures . 5 Review by the Board of Directors . 295 Strategy . 8 Financial statements . 320 Industry overview . 18 Key financial indicators . 320 Business . 26 Calculations of key financial indicators . 322 Oil Products and Renewables . 27 Consolidated financial statements . 325 Oil Products . 28 Consolidated income statement and Renewable Fuels . 33 Consolidated statement Oil Retail . 39 of comprehensive income . 325 Production & Logistics . 46 Consolidated balance sheet . 327 Research, technology, and engineering . 51 Consolidated cash flow statement . 329 Sustainability . 58 Consolidated statement Sustainability at Neste Oil . 59 of changes in equity . 331 Managing sustainability . 74 Notes to the Consolidated Sustainability targets . 81 financial statements . 332 Financial responsibility . 84 Parent company financial statement . 419 Environmental responsibility . 98 Parent company income statement . 419 Sustainability of supply chain . 138 Parent company balance sheet . 420 Social responsibility . 155 Parent company cash flow statement . 421 Stakeholder engagement . 158 Notes to the parent company Personnel . 173 financial statements . 423 Safety . 201 Proposal by the Board of Directors . 441 Product safety . 212 Auditor’s report . 442 Sustainability reporting . 217 Quarterly segment information . 444 Governance . 232 Pro Motion . 446 Corporate Governance Statement . 233 Motion, transportation, and community . 445 Risk management . 262 Forest fooprint and protecting forests . 448 Remuneration and shareholdings . 273 Car industry and emission reduction . 451 Biofuels in aviation industry . 454 Annual Report 2011 Neste Oil Neste Oil in brief Neste Oil Corporation is a refining and marketing company concentrating on low-emission, high-quality traffic fuels. The company produces a comprehensive range of major petroleum products and is the world's leading supplier of renewable diesel. The company has operations in 15 countries. Neste Oil had net sales of EUR 15.4 billion in 2011 and employs around 5,000 people. Neste Oil's share is listed on NASDAQ OMX Helsinki in the Energy sector under the trading code NES1V.HE. Message from the President & CEO, Matti All of Neste Oil’s Lievonen operations are driven by its four core values: I believe that advanced refiners responsibility, cooperation, such as Neste Oil will be well-placed innovation, and excellence. to weather today's challenges. Read CEO's review > Case: Strategy dialogue Neste Oil carried out an extensive strategy dialogue during 2011, which generated over 7,000 ideas from a total of approx. 1,000 employees. This pdf document may contain less content than the complete Annual Report. The page numbers may differ from the other self-generated pdf documents. 1/456 Annual Report 2011 Neste Oil › Business areas in brief Business areas in brief Oil Products and Renewables Oil Retail Business Sales of petroleum and renewable Sales of petroleum products to end- products to wholesale customers users Main markets Europe and North America Finland and the Baltic Rim Capacity Oil Products: 15 million t/a 819 outlets in Finland NExBTL renewable diesel: 2 326 outlets in Russia, the Baltic million t/a countries, and Poland Strategic role To maximize the cash flow To act as a marketing channel for provided by the sales of the Neste Oil’s products products Neste Oil refines To maximize the cash flow To generate profitable growth on generated by product sales the growing market for premium- To leverage the market potential in quality base oil and renewable the countries around the Baltic fuels Strengths High-quality products High-quality traffic fuels Ability to use Russian crude and Strong brand and market position other feedstocks Extensive station network NExBTL technology developed by Competitive unit costs Neste Oil Possibility to use a flexible mix of sustainably produced renewable raw materials Market position Oil Products: 1. on Neste 1. in Finland Oil's home markets 2. in the St Petersburg area, Base Oils (Group III): 2. in Europe, Russia 3. globally 2. in Estonia High-quality renewable diesel: 1. 2. in Latvia globally 3. in Lithuania 7. in Poland This pdf document may contain less content than the complete Annual Report. The page numbers may differ from the other self-generated pdf documents. 2/456 Annual Report 2011 Neste Oil › CEO's review CEO's Review 2011 2011 was a year very much linked to the implementation of our cleaner traffic strategy. Profitable growth and efficient production are also some of the key goals that we have set ourselves between 2010 and 2013. During 2011, we completed our major investment program aimed at achieving a significant increase in both our NExBTL renewable diesel and base oil capacity. We also took some important steps forward in improving our overall efficiency and productivity. The recovery of the world economy, geopolitical tensions in oil-producing countries, and fears about a worsening of the Eurozone crisis towards the end of the year were the most important factors shaping the global oil market in 2011. Uncertainty over the likely development of the world economy overshadowed market prospects at the beginning of 2012, as did the expectation that Europe, in particular, was heading for a short-term recession or worse. New oil refining capacity is also expected to come on stream during the year. I believe, however, that advanced refiners such as Neste Oil will be well-placed to weather these and other challenges. The ramp-up of Neste Oil’s renewable fuels business was particularly prominent in 2011, and the future looks positive in this area, as our premium-quality NExBTL renewable diesel more than meets the requirements expected of tomorrow’s fuels. Demand for biodiesel is expected to grow by a total of 1.6 million tons in Europe and North America in 2012, equivalent to the combined capacity of our new refineries in Rotterdam and Singapore. Legislation on renewable fuels has progressed, but there is still a lot more to do in this area in 2012 and later. I am, nevertheless, happy to report that sales volumes of NExBTL renewable diesel developed positively towards the end of last year, and we aim to continue building on this momentum during 2012. In terms of our financial targets, our leverage ratio matched our target level, but we failed to achieve our long-term return on capital employed target. The Board of Directors will propose paying a dividend of EUR 0.35 a share to the Annual General Meeting. Sustainability is central to our operating principles and our core values. It is also a fundamental part of our strategic focus on developing and supplying premium-quality, cleaner products. I am proud to report in this respect that Neste Oil was recently selected for inclusion in The Global 100 list of the world’s most sustainable companies for the sixth year in succession. We were ranked 19th, which I believe is an excellent achievement against such tough international competition. Good examples of the continued progress that we are making in the area of sustainability are the ISCC certificates that we have secured for This pdf document may contain less content than the complete Annual Report. The page numbers may differ from the other self-generated pdf documents. 3/456 Annual Report 2011 Neste Oil › CEO's review all our NExBTL plants and our good safety performance in 2011. Both achievements were the result of a lot of systematic and positive work. Although our safety performance in 2011 was our best-ever, we must be careful not to fall into the trap of resting on our laurels, as ensuring that Neste Oil remains a safe workplace will require our ongoing vigilance. And although our safety performance was excellent compared to other Finnish companies, we still have some way to go to attain the safety levels achieved by the very best internationally. Which is why we will be continuing to focus on safety in the years to come. We launched five internal Value Creation Programs during 2011 to leverage the implementation of our strategy – Profitable Growth, Productivity, Renewables Feedstock, Customer Focus, and Winning Culture – and these highlight the themes that we will be focusing on over the next few years. We at Neste Oil are committed to becoming a better company and ensuring our future success by being better. This commitment includes making a significant investment in R&D. The major achievements that we have made in R&D recently include our work on microbial oil research, where Neste Oil is now at the cutting edge internationally. We have also not compromised on organizational or HR development work, as we see this as an important investment in our future. We achieved a lot in 2011, and I would like to thank our personnel, our customers, our suppliers, our shareholders, and all our partners for the contribution they made. What we achieved was the outcome of excellent collaboration between everyone involved, and I hope this will continue during 2012. Matti Lievonen President & CEO This pdf document may contain less content than the complete Annual Report. The page numbers may differ from the other self-generated pdf documents. 4/456 Annual Report 2011 Neste Oil › Key figures Key figures 2011 2010 Change, % Income