UPM Annual Report 2017

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Stakeholders

In brief

Strategy

Businesses

Governance

Accounts

Climate actions and energy efficiency

REDUCING CO 2

EMISSIONS ON SEVERAL FRONTS

CAPACITY TO GENERATE POWER THROUGH OWN POWER PLANTS AND SHAREHOLDINGS

2017 was the first full year of the China More with Biofore research programme, which aims to improve the energy efficiency and environmental performance of the UPM Changshu paper mill. The ongoing projects are aiming to reduce the paper machines’ unit energy consumption by 25%, and to maximise the combined heat and power by achieving 70% thermal efficiency at the site. UPM co-operates with suppliers to find viable technologies that may further reduce the mill’s CO 2 emissions. UPM is also working with leading Chinese energy research institutes to explore renewable energy solutions. In Germany, the installation of a new 80 MW biomass boiler at the UPM Hürth paper mill is one of the most tangible examples of reducing CO 2 emissions in practice. The boiler from the former Myllykoski paper mill in Finland will be transferred to Hürth, and is expected to be in use at the beginning of 2019. UPM’s German paper mills also aim to find new power supply partners which have lower CO 2 emissions in power production. In Russia, UPM is expanding its Chudovo plywood mill and investing in a new 19 MW biomass boiler which will decrease fossil fuel consumption. Most of the mill’s heat energy will be generated using wood-based by-products from plywood production such as bark, chips and dust. The project is estimated to be completed by the end of 2019.

Nominal MW

Hydropower Nuclear power

732 584 191

SIGNIFICANCE • Climate change is a global megatrend, bringing with it both risks and opportunities and requires action • The global climate agreement aims to keep the average temperature rise at a level that does not threaten nature and society • Forests which act as carbon sinks and wood-based products have a unique role in climate change mitigation • UPM is both a significant energy producer as well as a user of energy OUR WAY • Ensure wood supply from sustainably managed forests • UPM’s biodiversity programme is making forest ecosystems less vulnerable to the impacts of climate change • Renewable and recyclable products that replace fossil-based materials • Efficient use and increasing share of renewable and low-emission energy • Continuous improvement of energy efficiency • Best Available Techniques (BAT) • Focus on 2030 targets TARGET • Create climate solutions and working towards carbon neutrality

Condensing power UPM Energy in total

UPM favours the use of renewable and other carbon-neutral energy sources and the use of natural gas. UPM’s Biofore strategy meets the challenge set by climate change, as the transition to a low-carbon economy is expected to bring business opportunities for UPM’s renewable and recyclable products.

1,507 1,415

Mill site combined heat and power (CHP)

Mill site hydropower

Mill site power generation in total

1,422 2,929

Total UPM

ELECTRICITY GENERATION THROUGH OWN POWER PLANTS AND SHAREHOLDINGS TWh

2017 2016

Biomass-based fuels account for 69% (69%) of the fuel usage. UPM is the second- largest generator of biomass-based electricity in Europe. As the use of weather-dependent energy sources increases, the need for balancing power in energy systems will also grow. In Finland, UPM is investing in hydropower, the most effective and sustainable method of producing balancing power. In 2017, refurbishment of the Harjavalta hydropower plant was completed. Paper and pulp mills, which use power and heat in their production processes, represent the majority of UPM’s total energy consumption. Most of the energy is consumed in the manufacture of mechanical pulp, pumping and paper drying. Steam and electricity are generated simultaneously by combined heat and power (CHP) plants at all pulp and almost all paper mills. At some mills, all or part of the energy is produced by external and co-owned power plant companies. Energy efficiency improvement as one of UPM’s climate actions UPM strives to continuously improve energy efficiency across all its operations. With the help of energy audits, innovations and internal campaigns, energy efficiency in production has improved. Electricity consumption per tonne of paper has decreased by 13% over the past 10 years, and UPM reached its annual energy efficiency target of 1% in 2017. As a result of the energy-saving actions carried out in 2017, UPM reduced its energy costs by EUR 3.0 (1.9) million, avoided 39,000 (18,000) tonnes of CO 2 emissions and achieved a 92,000 (49,000) MWh reduction in energy consumption. The annual savings were EUR 5.1 (2.0) million, 61,000 (17,300) t CO 2 and 143,000 (92,000) MWh. A climate actions project was established in 2017 with UPM experts from different areas, to ensure that UPM is able to reduce its fossil CO 2 emissions and to achieve its 30% reduction target by 2030. In 2017, UPM received an A- Leadership listing in the CDP Climate Program.

Mill CHP

6.2 3.3 4.4 0.3

6.1 3.6 4.7 0.6

Hydropower Nuclear power

Condensing power

Total

14.2 15.0

FUELS USED FOR HEAT GENERATION TWh

2017 2016 19.6 19.7

Black liquor

Bark and other biomass

8.7 1.3

9.1 1.3

Heat recovered from TMP production

Renewable fuels total

29.6 30.1

TARGETS 2030

Reduction in CO 2 compared to 2016

emissions

Peat

0.9 0.6 7.8 0.6 3.2

1.0 1.0 8.1 0.6 3.4

Purchased heat

Natural gas

Oil

31%

TARGETS 2030

Reduction in acidifying flue gases since 2008

Coal Total

42.7 44.2

69%

TARGETS 2030

Renewable fuels share