UPM Annual Report 2024

WE ARE UPM

GOVERNANCE

ACCOUNTS AND PERFORMANCE

Our strategy

Our businesses

Sustainability

UPM Energy is driving a sustainable future with fossil-free nuclear and hydropower that plays a key role in balancing the Nordic power markets. We explore opportunities in wind, solar and power-to-X. UPM Energy

UPM Biorefining is leading the transition to renewable solutions, addressing the urgent need to reduce emissions. We pave the way for a sustainable future with biofuels and biochemicals that lower CO 2 footprints and use sustainable raw materials. UPM Biorefining

UPM Energy is the second largest electric ity producer in Finland, with its own and co-owned power plants, and a major player on the Nordic electricity markets. Our 99% fossil-free production portfolio consists of firm nuclear power and flexible hydropow er, and we have active trading operations both in the physical and financial electricity markets. Looking forward, we are exploring opportunities in wind and solar power devel opment, as well as in power-to-X-solutions. As UPM is both a large producer and consumer of electricity, we have a unique position in the markets. Besides producing competitive fossil-free electricity, we play an important balancing role in the volatile Nordic markets with our hydropower and paper mills. We have strong expertise in optimising hydropower production and industrial power consumption in the volatile power markets. Our flexibility is needed to balance the power system, which benefits society as a whole. Electricity demand is expected to grow significantly with decarbonisation and digitalisation. Industrial and district heating is already electrifying rapidly. Digitalisation

continues, requiring ever-larger data cen tres. Increasing demand for both firm and flexible electricity capacity offers attractive business prospects for us. 2024 was the first full year of continuous commercial production for the Olkiluoto 3 nuclear power unit, which increased UPM Energy’s electricity production by almost 50% in one go. The new unit performed well considering that it is one of the largest nuclear power units in the world in terms of nominal capacity. Another highlight of the year was the decision to install an ultracapacitor at the UPM Kuusankoski hydropower plant. An ultracapacitor enables the plant to provide very fast reserves through short-term energy storage (see below).

UPM Biorefining consists of UPM Biofuels and UPM Biochemicals. These businesses aim to grow in markets that need to replace fossil-based materials with renewable solu tions to reduce greenhouse gas emissions in line with climate targets. With fuels and chemicals contributing to roughly a quarter of emissions, the market for renewables is vast. The value of UPM’s products comes from a drastically reduced CO 2 footprint and the sustainable raw materials used. The UPM Biofuels refinery in Lappeen ranta utilises crude tall oil (CTO), a pulp mill residue, as feedstock for producing renewa ble UPM BioVerno™ diesel and naphtha, an intermediate chemical used in sustainable fuels and materials like PET and polyester. CTO does not compete with food production or cause land-use change, and results in high-quality end products. Tall oil-based fu els are being qualified for use as Sustainable Aviation Fuels (SAF) as we seek to enter this high-value global market. UPM’s current biofuels operations pro vide a strong basis for profitable growth. Basic engineering for a second refinery has progressed, and our focus will be on broad ening the feedstock pool and testing new

proprietary technology at a larger scale and on flexible feedstock options. The production of our new biorefinery in Leuna, Germany, will ramp up in 2025. The biorefinery is expected to reach full production and positive EBIT in 2027. The refinery’s products offer an attractive value proposition for consumer brands seeking sustainable materials. The supply of sustain able solutions in chemicals is limited, and UPM is entering with an innovative portfolio of renewable-based chemicals and materials, positioning itself as a forerunner. For example, UPM Biochemicals is among the first to offer Renewable Functional Fillers (RFF), a renewable product that can replace fossil-based carbon black in various plastics and rubber applications, such as tyres, with a significantly reduced CO 2 footprint and comparable or superior technical properties. Another product stream aims to replace fossil-based glycols, widely used in PET pack aging, polyester textiles and other materials used in clothing, footwear, building products, cooling agents, and heat exchange fluids. UPM Biochemicals has established several strategic partnerships with leading compa nies across different industries and regions,

KEY FIGURES 2024

KEY FIGURES 2024

on 31 Dec. PERSONNEL 468

SALES

COMPARABLE EBIT

EURm

EURm 181

627

In operation since 2015 UPM LAPPEENRANTA BIOREFINERY 130,000

-0%

-0%

PERSONNEL

COMPARABLE ROCE

Annual capacity in tonnes

on 31 Dec.

%

91

+1.5pp 7.5

Annual capacity in tonnes Full capacity expected in 2027 UPM LEUNA BIOREFINERY 220,000

testing a wide range of applications. The de mand for renewable wood-based chemicals has been confirmed, and UPM’s frontrunner status allows it to address markets and seg ments where demand and value are highest.

More key figures on page 116 www.upmenergy.com

www.upmbiofuels.com www.upmbiochemicals.com

CASE STUDY

CASE STUDY

NEW ULTRACAPACITOR AT KUUSANKOSKI

UPM AND NOKIAN TYRES ENTER A SIGNIFICANT COOPERATION

An ultracapacitor strengthens the ability of hydropower to balance the grid. The system uses short-term energy storage to respond in milliseconds to peaks in demand and production on the grid and to produce balancing power more quickly. Ultracapacitors are known for their ability to discharge at high power. They are maintenance-free and have a much longer lifetime than batteries, making them an ideal choice for sustainable energy solutions. The project will use digital systems and automation to optimise the performance of the energy system. UPM’s second ultracapacitor will be installed at the Kuusankoski hydropower plant site and is expected to be operational by the summer of 2025. The system was suc cessfully piloted at the Katerma hydropower site in 2022.

The partnership with Nokian Tyres marks UPM’s entry of UPM BioMotion TM Renewable Functional Fillers (RFF) into the global tyre market and demonstrates the versatility of replacing traditional CO 2 -intensive fillers with fully renewable alternatives. Functional fillers account for around 30% of a tyre and consist of materials such as primarily carbon black and precipitated silica. According to an initial test series by Nokian Tyres, replacing traditional carbon black with renewable functional fillers enables the production of more sustainable tyres. Nokian Tyres is the first tyre manufacturer to incorporate UPM’s Renewable Func tional Fillers in concept tyres. The company aims to increase the share of recycled or renewable raw materials used in tyres to 50% by 2030.

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UPM ANNUAL REPORT 2024

UPM ANNUAL REPORT 2024