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Capital Markets DayCapital Markets DayRotterdam

21 September 2011 Rotterdam

21 September 2011

2

Focus on value creation Matti Lievonen

President & CEO

Capital Markets Day 2011

21 September 2011

Results and outlook

4

EBITDA shows our ability to generate cash flow

-50

0

50

100

150

200

250

300

Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11

Comparable EBIT Comparable EBITDA

EUR million

Comparable EBITDA has been over EUR 100 million, even in a low-margin environment

5

We have kept our leverage under 50%

*12-month rollingLeverage = net debt to capital

05

1015

202530

3540

4550

Q1/06

Q2/06

Q3/06

Q4/06

Q1/07

Q2/07

Q3/07

Q4/07

Q1/08

Q2/08

Q3/08

Q4/08

Q1/09

Q2/09

Q3/09

Q4/09

Q1/10

Q2/10

Q3/10

Q4/10

Q1/11

Q2/11

0

200

400

600

800

1,000

1,200

Leverage, left axis Capex*, right axis

Large investments have now been completed

Leverage target range: 25-50%

EUR million%

6

Oil Products

Updated short-term outlook

• Reference margin Q3-to-date average is roughly USD 4.6/bbl, compared to USD 4.5/bbl in Q2 (new)

• Production Line 4 at the Porvoo refinery to be off-line for 4 weeks in Q4 due to decoking maintenance (unchanged)

• Full-year 2011 comparable operating profit set to be higher than in 2010 (unchanged)

• Q3 is expected to be weaker than Q2 as high unit costs and start-up of the Rotterdam plant will impact results (unchanged)

• Sales volumes to double in the third quarter, thanks to new customers in Europe (unchanged)

• Sales volumes will continue to increase in Q4 (new)

• As a result, Q4 comparable operating profit is expected to improve but will remain negative (new)

• Retail’s performance to be similar to 2010 (unchanged)

• Fixed costs roughly EUR 650 million and cash investments EUR 300 million in 2011 (unchanged)

Renewable Fuels

Other

Strategy and vision

8

Neste Oil StrategyOur strategy is unchanged but the vision is sharpened

9

Vision: The preferred partner for cleaner traffic fuel solutions

• Profitable over the cycle• Forerunner and quality leader in

cleaner traffic fuels• Customer’s number-one choice• Solution provider• Fully sustainable value chain• Broad feedstock base,

maximizing use of waste

10

Implementing our vision through coordinated value creation programs

Value creation programs

11

Our journey of change

TOFROM

Functional Cross-functional collaboration

Internal focus Active partnering

Product Solution

Supplier Customer-focused

Cost & Profit Outperforming the competition

Suitable feedstock Wider feedstock range

Technology Customers & technology

Baltic Sea mindset Globally local

12

Roles of Businesses and Production & Logistics

Oil Products Maximizing cash flow from refinery products

Base Oils Capturing value from a growing premium base oils market

Renewable Fuels Generating profitable growth in the renewable fuels market

Oil Retail Maximizing cash flow from existing business and leveraging market opportunities for growth and captivity

Production & Logistics Improving the efficiency of production and logistics assets

13

Our aim is to be number one or the runner-up on our core markets

Oil Products on the home markets

Base Oils in Europeglobally

Renewable Fuels in high-quality renewable diesel

Oil Retail Finland: Estonia: Latvia: Lithuania: Poland:

23

1

22

24

1

1

= our current position

in Group III

2St Petersburg area:

14

Trends in the business environment

World economy Economic growth outlook is uncertain but oil prices are likely to remain moderately high

Refining margin Margins are dependent on the global economic development

Base oil market Demand for premium base oils is expected to match strong supply growth

Biofuels market Demand is projected to continue growingHigh-quality products offer real value for customersOvercapacity in traditional biodiesel

Biofuel regulations Proceeding but some regional delays and uncertainties

Biofeedstock Current feedstocks will be used in the foreseeable future Prices to stay volatileAlternatives emerging slowly

Freight market Expected to remain challenging

Retail market Shift to diesel will continue, growing volumes in NW Russia, market to stay highly competitive

15

Our responses to current market challenges

World economy Focus on cash flowCompetitive costs Proactive financing and healthy liquidity

Refining margin Higher productivity and focus on the home markets to support the additional margin

Base oil market Globalization of the business

Biofuels market Expansion of the customer base and new solutionsActive advocacy

Biofeedstock Maximizing use of waste and sidestreamsHedging possibilities to manage volatilityFocused R&D program to develop alternative feedstocks

Freight market Reduced number of vessels and high fleet utilization

Retail market Continued focus on efficiency, customer loyalty and network development

16

Value creation roadmap Profitability

improvement in Oil Retail

Competitive costs, working capital

management, investment

management

Refinery productivity

and utilization

Ramp-up of Renewable fuels’

profitability

Base oil growth

refining the futurerefining the future

18

Oil Products – Creating value from high-quality assets

Matti Lehmus, EVP


21 September 2011

19

A complex refiner focused on middle distillates

• High share of middle distillates

• High share of gasoline• Low share of fuel oil

44 %54 %

19 %

33 %19 %

6 %18 %7 %

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

90 %

100 %

NWE average Neste Oil

Middle distillates Motor gasoline Fuel oil Other

Source: NWE 2011 data from WoodMackenzie

20

75%

10%

15%

Strategic focus on the Baltic Sea states continues

• Share of the Baltic Sea states’ volumes has grown in 2009-2011

• Solution concept• Logistics flexibility• Biomandate services• Tailored products and blends

• Logistics advantage versus other regions

Oil Products’ sales volumes in 1-7/11

Baltic Sea statesOther EuropeOther continents

Baltic Sea statesOther EuropeOther continents

21

Key market drivers for Neste Oil

• REB price differential versus Brent

• Cracking margin, in particular diesel and gasoline margin

• Fuel oil versus diesel price differential

Estimated impact of $1/bbl change in key market parameters on Oil Products’ annual comparable EBIT

Calculations are based on USD/EUR exchange rate of 1.42

0

10

20

30

40

50

60

70

Urals-Brent Gasoline Diesel

MEUR MUSD

22

0

1

2

3

4

Q 1/10 Q 2/10 Q 3/10 Q 4/10 Q 1/11 Q 2/11 Q 3/11-to -date

Urals-Brent price differential outlook

Russian oil production • Russian oil production is expected to increase slightly in 2012

• Proposed lower export tax could increase export volumes

• Brent-Urals price differential is expected to average USD 1.5 to 2.5/bbl

Urals discount to Brent$/bbl

Source: PIRA

23

Global supply-demand outlook relatively balanced

• Asia and the Middle East are driving both demand and supply growth – balance sensitive to demand fluctuations

Source: Wood Mackenzie June 2011

24

Regional balances - Europe to stay short of diesel

• European demand trends• Middle distillate demand

growing, gradual growth in need for imports

• Gasoline demand shrinking, surplus is growing

• Regional highlights in the Baltic Sea states• Quality fragmentation due to

biolegislation • Winter diesel balance tight

Source: Wood Mackenzie 2011

Estimated product balances in Greater Europe in 2015

25

0

2

4

6

8

10

12

14

Q1/08

Q2/08

Q3/08

Q4/08

Q1/09

Q2/09

Q3/09

Q4/09

Q1/10

Q2/10

Q3/10

Q4/10

Q1/11

Q2/11

Q3/11 t

o date

Neste Oil’s reference refining margin development$/bbl

Market environment expected to be similar to 2010-11 in the foreseeable future

26

Oil Products strategy focus areas

Productivityimprovement

Product valuemaximization

Working capitalmanagement

Maximize cash flow generation

27

-4.00

-2.00

-

2.00

4.00

6.00

8.00

US$

/bbl

Source Wood Mackenzie 2011

2010 Net Cash Margin - Europe

Top Quartile refineries Second Quartile refineries Third Quartile refineries Bottom Quartile refineries

5.3

1.0

PORVOO5th in 20109th in 2009

NAANTALI

Productivity – Comparison of European refineries’ net cash margins in 2010

Note: 24% (36%) of European refineries operating below breakeven in 2010 (2009)

28

Productivity improvement – positive fixed cost development

4,0

3,22,9

3,1

0,0

1,0

2,0

3,0

4,0

5,0

2008 2009 2010 2011e

Fixed costs 1.7Utilities 2.0Local sales -0.8








Note: Local sales include sales of utilities and services to other companies at the Porvoo industrial site

Porvoo and Naantali unit costsEUR/bbl

29

Productivity improvement – Production Line 4 performance

621

845 860880

500

550

600

650

700

750

800

850

900

950

1 000

2008 2009 2010 FC201150 %

55 %

60 %

65 %

70 %

75 %

80 %

85 %

90 %

95 %

100 %

Middle distillate output Urals in feed

Kt/a

30

• Focus on highest value customers and market segments

• Focus on the Baltic Sea states• Export value maximization by

leveraging quality flexibility• Base oils

• Product and crude slate optimization

• Leveraging logistical flexibility

Product value maximization – Additional margin increase

0

1

2

3

4

5

6

Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11

Neste Oil’s additional margin$/bbl

Major turnaround at the Porvoo refinery

31

Successful working capital managementEUR million $/bbl

0

200

400

600

800

1,000

1,200

1,400

Q1/08 Q3/08 Q1/09 Q3/09 Q1/10 Q3/10 Q1/11-10

10

30

50

70

90

110

130

150

Oil Products' net working capital, left axis Brent dated, right axis

32

Value from high-quality assets

Working capital management and

optimization

Reliability and productivity

Energy efficiency

Future potential

Focus on highest value customers

and markets

Base Oils –

Globalizing in an attractive growth market

34

Demand for high-performance base oils is growing at more than 10% annually

0

5

10

15

20

25

30

35

40

45

2005 2010 2015 2020

Group I -13 Mtpa

Group II +11 Mtpa

Group III +5 Mtpa

Mt

Source: In-house estimates

Growth drivers:• Emission legislation• Fuel economy• Oil drain intervals

35

Group III NEXBASE® Base Oil Improved traffic energy efficiency

• Base oils designed for improved fuel economy• High-stability base oils• Emission reduction• Extremely low sulfur and aromatic content

High-quality products that meet increasingly stringent environmental and performance requirements

36

Application areas for premium-quality base oils

1. Engine oil

2. Driveline fluids

3. Power steering fluid

4. Shock absorber fluid

5. Gear oil

6. Greases

37

Neste Oil’s base oil roadmap

Time

Kt/a

1,000

2008 2015

Joint venture project with Bahrain Petroleum Company

Partnership with ADNOC in Ruwais/UAE

Bahrain JV+400 kt/a VHVI

Abu Dhabi+500 kt/a VHVI

Porvoo250 kt/a VHVI

Neste Oil is committed to grow with its customers and strives to be the preferred partner and solutions provider

38

Our global presence

Santos

Production siteTerminals currently in operation

Houston

EHVI Production, Finland 250kt/a

EHVI Production, Bahrain 400kt/a

Singapore

TerminalNWE Antwerp

Terminal location under evaluation

Terminal NWE Hamburg

Global Sales, Geneva

Global sales office

39

Americas 900 kt/a

Europe1,000 kt/a

Asia Pacific650 kt/a

Group III base oil market

Group III competitor capacities 2012kt/a

650

1165 1125

500

0

200

400

600

800

1000

1200

1400

Neste Oil A B C

Neste Oil market position• Top 3 player with global market

share of approx. 20-25 %• Non-integrated supplier • Strong position in Europe

40

Partnership strategy to drive growth

Bahrain JV with BaPco and OGHC• USD 430 million investment• Neste Oil’s share is 45%• Neste Oil responsible for marketing• Commissioning of the site is ongoing• Maximum utilization rate expected

to be reached rapidly due to the positive market situation

Abu Dhabi partnership• 600 kt/a unit under construction at

Adnoc’s Ruwais refinery• Neste Oil as marketing partner

VHVI site in Bahrain (September 2011)

41

0

200

400

600

800

1000

1200

1400

1600

Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11

European Group I ICE gasoil

Key business drivers

Supply/demand balance• Specification

development• Car sales driving

factory fill demand

Added value through• Formulation

development• Quality and quality

consistency

MarginVHVI base oil price differential versus

feedstock

Group III premium to Group Iis dependent on the market situation

$/t

Source: Argus 2011

Group I premium to gasoil

42

Globalization and growth

Solution concept- high-quality

products and formulations

Capacity growth - Bahrain joint

venture

Capacity growth- Abu Dhabi

partnershipExpanding

customer base and global supply

chain optimization

Future opportunities –

leverage market position

Matti Lehmus, EVP

Capital Markets Day 2011 21 September 2011

Matti Lehmus, EVP

Capital Markets Day 2011 21 September 2011

Renewable Fuels - Driving growth and profitability

Renewable Fuels - Driving growth and profitability

44

Policy forces are driving the adoption of biofuels

Agricultursupport

Energy securit

GHG reduction

These factors have a different emphasis in different markets

45

20,000

15,000

10,000

5,000

02010200920082001 2002 2003 2004 2005 2006 20072000

Latin AmericaNorth AmericaAsia-Pacific

Europe

Biodiesel demand has grown rapidly since 2005, especially in Europe

Source: Wood Mackenzie 2011

kt/a

46

Global bio/renewable diesel demand is expected to nearly double by 2020

Bio/renewable diesel to grow at ~7% p.a.Bio/renewable diesel to grow at ~7% p.a.

12 1420

34

64

5

8

0

5

10

15

20

25

30

35

40

45

Bio/renewable diesel demand (Mt)

2

+7%

2020

41

7

2015

27

421

2011Share of global diesel/gasoil (weight-%) 1.7 % 2.0 % 2.6 %

Source: Wood Mackenzie, Kingsman, Neste Oil and BCG analysis & estimates

Rest of WorldAsia-PacificNorth AmericaEurope

47

Hydrogenated Vegetable Oils (HVO) – Legislative status in EU

HVO not yet recognized in legislation

HVO recognizedin legislation

• Renewable Energy Directive stipulates mandates

• Biofuels to represent 10% by energy of the traffic fuel pool by 2020

• Current level typically in the 4-6% range, depending on country

48

• US• Renewable Fuels Standard (RFS-2) stipulates minimum volumes

of renewable fuels; approx. 20% of the traffic fuel pool by 2022• HVO approved as a biofuel but limited number of feedstocks are

recognized for Advanced Biofuels • Definition of import procedures for Advanced Biofuels has been ongoing

but has not been officially approved

• Canada• 2% biomandate in place at Federal level• HVO approved as a biofuel• Sustainability legislation under development

Hydrogenated Vegetable Oils (HVO) – Legislative status in the US and Canada

49

Current HVO producers and capacity

250

US CompetitorNeste Oil

2,000 kt/a

250 kt/a

NExBTL capacity growth

Global HVO capacity

0200400600800

1,0001,2001,4001,6001,8002,000

2007 2009 2010 2011

Porvoo I Porvoo II Singapore Rotterdam

kt/a

50

Selected NExBTL business drivers

Feedstockcost

Product and customer value

Productioncost

Logistics cost

Margin

51

Key business drivers - Feedstock

Crude palm oilWaste and side streams (waste animal fat, PFAD,stearin)Other (e.g. rapeseed, jatropha, camelina)

Feedstock pool in 2011

<50%~40%

~10%

Feedstock strategy

• Ensure sustainability of all feedstock used currently

• Certification schemes• Audit trail• Projects to further improve

sustainability

• Expand feedstock range• Focus on waste, sidestreams and

residues• Animal fat share will rise to >20 %

during 2011• New feedstocks through focused R&D

52

Feedstock flexibility is an important profitability driver

Source: Neste Oil

0

50

100

150

200

250

300

350

400

450

500

550

European Rapeseed oil vs. Malaysian crude palm oil + freight ($ 45/t)$/t

0

50

100

150

200

250

300

350

400

450

500

550

European Rapeseed oil vs. Malaysian crude palm oil + freight ($ 45/t)$/t

07/08 07/09 01/1001/08 07/1001/09 01/11 07/11

53

Key business drivers – Product and customer value

Margin is dependent on• Feedstock price differentials• Biodiesel margin (e.g. FAME vs RSO)• Additional margin (quality premiums)

Different product pricing schemes, e.g.• FAME + premium• Gasoil + premium• SME + premium

Customer value creation via NExBTL

Biofuel cost (cost of biomandate fulfillment)

Quality compensation

in blending

NExBTL value

Energy content

compensation

Infrastructure

requirements

Cost of FAMEbiodiesel (market

price)

Biofuel cost (cost of biomandate fulfillment)

Quality compensation

in blending

NExBTL value

Energy content

compensation

Infrastructure

requirements

Cost of FAMEbiodiesel (market

price)

54

Key business drivers – Production cost

Production cost drivers

• Utilization rate• Utility cost• Yield

Estimated cost per NExBTL ton produced (estimates published in 2009 in brackets)

Production costs have been impacted by increased energy costs

Calculation is based on estimated average annual costs, assuming maximum utilization at all plants

USD/t

Fixed costs 50 (50)

Hydrogen and utilities 170 (125)

TOTAL 220 (175)

55

Driving growth and profitability

Production efficiency through

full capacity utilization

Working capital/ supply chain optimization

Expansion of competitive

feedstock base

Capacity creep and yield

improvement opportunities at

existing units

Value-added growth in new geographic

markets and in new application

areas (e.g. biojet)

Focus on highest margin market segments and

solution concepts

57

Firm grip on financials Ilkka Salonen, CFO


21 September 2011

Focus on cash flow

59

EBITDA shows our ability to generate cash flow

-50

0

50

100

150

200

250

300

Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11

Comparable EBIT Comparable EBITDA

EUR million

Comparable EBITDA has been over EUR 100 million, even in a low-margin environment

6060

641

501 540

38

74110

558

45

0

100

200

300

400

500

600

700

800

2008 2009 2010 2011e

Group excl. Renewable Fuels Renewable Fuels

604679

575650

Fixed costs are significantly lower than in 2008 when adjusting for Renewable Fuels growth

EUR million

61

Capex to settle at the same level with depreciation

0100

200300

400500600

700800

9001 000

2008 2009 2010 2011e

Capex Depreciation

EUR million

62

Focus on working capital management

0

200

400

600

800

1000

1200

1400

Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/110

20

40

60

80

100

120

140

160

Net working capital ex Renewable Fuels Net working capital Brent dated

EUR million $/bbl

Dividend and financial targets

64

Dividend policy remains unchanged

20102009

200820072006

USD per share

SOURCE: CPAT database

Dividend per share over the last 5 years

US peer 1 US peer 2 US peer 3 Euro peer 1 Euro peer 2 Euro peer 3

We have paid a more consistent dividend than our peers

Target is to pay at least 33% of annual comparable net profit as dividend

65

Leverage target remains unchanged

*12-month rolling

05

1015

202530

3540

4550

Q1/06

Q2/06

Q3/06

Q4/06

Q1/07

Q2/07

Q3/07

Q4/07

Q1/08

Q2/08

Q3/08

Q4/08

Q1/09

Q2/09

Q3/09

Q4/09

Q1/10

Q2/10

Q3/10

Q4/10

Q1/11

Q2/11

0

200

400

600

800

1,000

1,200

Leverage, left axis Capex*, right axis

Leverage target range: 25-50%

% EUR million

66

0

5

10

15

20

Q1/06

Q2/06

Q3/06

Q4/06

Q1/07

Q2/07

Q3/07

Q4/07

Q1/08

Q2/08

Q3/08

Q4/08

Q1/09

Q2/09

Q3/09

Q4/09

Q1/10

Q2/10

Q3/10

Q4/10

Q1/11

Q2/11

0

200

400

600

800

1,000

1,200

ROACE*, left axis Capex*, right axis

Long-term ROACE target is also unchanged Major investment program has impacted ROACE over the last few years

Long-term target of 15%

% EUR million

*12-month rolling

FX, margin hedging and liquidity

68

Foreign exchange rate hedging

Q1 Q3Q2 Q4

0%

100%

All material forecasted cash flow exposures arehedged for the rolling 12 month period

Por

tion

of th

e ex

posu

re

69

Margin hedging

Oil Products

High conversion refineries give us reasonable natural protection against low margin environment. Thus usual margin hedging ratio is relatively low.

Higher hedging ratio can be used if needed by the Group’s financial position.

Renewable Fuels

Due to lack of natural margin protection in renewable products, a notable portion of sales volume is hedged.

70

Liquidity position on 30 June 2011

Size Utilized Available

Committed Credit Facilities- Short-term 150 0 150- Long-term 1,575 400 1,175

Cash and Cash Equivalents 140

Total Cash andCommitted Credit Facilities 1,465

Uncommitted Programs

Commercial Papers 400 255 145

EUR million

71

Debt maturity profile

0

10 0

20 0

30 0

40 0

50 0

60 0

70 0

2 011 2 01 2 2 01 3 201 4 20 15 20 16 2 017 +

S hor t-te rm L ong-term

EUR million

72

Targeting better and less volatile returnsMarket risk

management

Fixed costs

Investment management

Liquidity

Working capital management

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