global pellet markets and growth of co-firing

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    GLOBAL PELLET MARKETS &GROWTH OF BIOMASS CO-FIRING

    BIOMASS PELLET TRADE ASIA, JAKARTASeptember 27, 2010Saku Rantanen, Head of Bioenergy, Asia-Pacific

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    AGENDA

    Short Pyry Introduction

    Market Fundamentals

    Production and Consumption

    Trade Flows and Industry Players

    Growth of Biomass Co-firing

    Price Trends

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    SELECTED EXAMPLE PELLET PROJECTS

    2010 Evaluation of pellet market opportunities and future trends.

    2010 Technical and economical assessment of pellet production and valuation of market opportunities.

    2010 Evaluation of biomass price development and future trends in biomass consumption.

    2010 Assessment of biomass availability development and biomass trade trends in the future.

    2009 Business strategy development and market evaluation of wood pellet market in the UK.

    2009 Assessment of business opportunities and due diligence and of a large scale pellet production.

    2009 Global pellet supply and demand assessment and detailed market analysis, multiclient study.

    27 September 2010BIOMASS PELLET TRADE ASIA 4

    2009 Development of sales strategy and advisory services for solid biofuel producer.

    2009 Wood biomass potential in Romania and business opportunities identification.

    2009 Technological assessment of torrefaction viability and evaluation of business potential.

    Source: Buhler Group

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    PELLET MARKET FUNDAMENTALS

    GLOBAL PELLET MARKETS &GROWTH OF BIOMASS CO-FIRINGSeptember 27, 2010Saku Rantanen

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    WOOD PELLET PRODUCT DESCRIPTION

    Densified biomass typically produced from forestindustry residues

    Pure or white pellets

    Sawdust, woodchips, or wood shavings(softwood)

    Bark or brown pellets

    Harvesting residues

    High density transporting efficiency

    Hygroscopic and need to be stored and transportedcarefully in order to prevent exposure to moisture

    The energy content of 4.8 MWh/t

    Source: Finnish Pellet Association

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    GLOBAL PRODUCTION ANDCONSUMPTION

    GLOBAL PELLET MARKETS &GROWTH OF BIOMASS CO-FIRINGSeptember 27, 2010Saku Rantanen

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    Estimated growth

    12 million tonnes in 2008

    26 million tonnes by 2015

    CAGR of 12%

    GLOBAL PELLET CONSUMPTION 2008 AND 2015 OUTLOOK

    Russia

    NorthAmerica

    EasternEurope

    WesternEurope

    5.3

    2.0

    9.0

    0.3 0.9

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    GLOBAL PELLET PRODUCTION AND RAW MATERIALAVAILABILITY, 2008-2015

    NorthAmerica

    WesternEurope

    EasternEurope

    Russia

    China

    2.9

    7.7

    9.7

    2.21.7 0.6

    1.4

    0.40.1

    6.3

    2.4

    Production

    (million tonnes)

    SouthAmerica

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    CAPACITY INCREASE HOTSPOTS

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    PELLET TRADE FLOWS &INDUSTRY PLAYERS

    GLOBAL PELLET MARKETS &GROWTH OF BIOMASS CO-FIRINGSeptember 27, 2010Saku Rantanen

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    600

    200

    500

    600

    1,300*

    1,300

    100

    WORLD PELLET TRADE FLOWS IN 2008 AND EMERGING

    FLOWS

    12

    50

    Trade flows in 1,000 tonnes, >50,000

    * Intra Western European net trade

    Current

    Emerging

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    BIOMASS PELLET TRADE ASIA 12

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    TOP 15 GLOBAL PLAYERS

    VAPO

    Magnolia Biopow er

    JCE Group

    German Pellets

    IntrinergyPlantation Energy Australia

    Suzano Energia Renovvel

    Pellet production capacities in 2015

    1327 September 2010BIOMASS PELLET TRADE ASIA 13

    0 500 1,000 1,500 2,000 2,500 3,000 3,500

    Lantmnnen AgroenergiPoint Bio Energy

    General Biofuels

    Canadian Bio Pellets

    Pinnacle Pellet

    RWE

    Graanul InvestVyborgskaya Cellulose

    2009 Planned/decided

    1,000 metric tonnes

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    GROWTH OF BIOMASS CO-FIRING

    GLOBAL PELLET MARKETS &GROWTH OF BIOMASS CO-FIRINGSeptember 27, 2010Saku Rantanen

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    Residential users (small)

    Commercial users (medium)

    Industrial users (large)

    Source: Finnish Pellet Association

    MARKET SEGMENTATION

    r va e res ences

    4-8 tonnes per household/a

    High quality wood pellets

    Bulk and large sacks

    n us r a an o ce u ngs,

    schools, hotels Annual consumption 100-500

    tonnes

    Bulk or in large sacks

    Ash content up to 2%

    , s r c ea ng

    Mainly mixed with coal,chips and peat.

    Annual consumption can beup to 400,000 tonnes

    Bulk pellets

    Higher levels of impuritiesand ash

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    MARKET SEGMENTATION EXAMPLES

    50%

    60%

    70%

    80%

    90%

    100%

    Residential Commercial IndustrialThe pellet market initially developed toserve residential heating demand. The

    commercial and industrial sectors bycomparison are relatively young marketsegments, and expected to demonstratethe highest growth potential.

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    0%

    10%

    20%

    30%

    40%

    Swe

    den

    Italy

    Belg

    ium

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    Combusting biomass and coal

    Commonly used in UK, Netherlands, Belgium and Japan

    Pellets can be milled together with coal Alternatives: woodchips, sawdust, straw,

    recovered wood, peat etc.

    Typical co-firing levels are 3-10%

    INTRODUCTION TO CO-FIRING

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    Current global pellet consumption is12 million tonnes

    If 5% of coal replaced with pellets thedemand would be

    Europe 45 million tonnes

    US 70 million tonnes

    Japan and Korea 15 milliontonnes

    15%

    20%

    25%

    30%

    35%

    Share of total coal consumed in primaryenergy production, 2007

    CO-FIRING POTENTIAL

    Potential more than 10 times thecurrent global pellet market

    0%

    5%

    10%

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    CO-FIRING ECONOMICS

    Pellets compare financially unfavorable to coal Without governmental subsidy schemes, not economically viable solution

    The economics closely linked to Biomass pricing, carbon certificates and subsidies

    Government support systems Renewable portfolio standard

    Feed-in tariff

    Feed-in premium, Green certificate trading, Quota system, Fiscal incentives, Other subsidies The wood pellet market has largely been created by renewable energy policies

    Can be defined as artificial

    Pellet prices are seen as a main obstacle for large-scale co-firing of pellets

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    PRICE TRENDS

    GLOBAL PELLET MARKETS &GROWTH OF BIOMASS CO-FIRINGSeptember 27, 2010Saku Rantanen

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    240

    260

    EUR/tonne

    Sweden Germany Italy

    Industrial pellets (CIF Rotterdam) Residential pellets(incl. VAT and delivery)

    120

    140

    160

    EUR/tonne

    ENDEX 1 front Calendar Wood Pellet contracts, CIF Rotterdam

    PRICE LEVELS

    Source: Pellets@tlas

    160

    180

    200

    Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-0960

    80

    100

    Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09

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    RISKS

    GLOBAL PELLET MARKETS &GROWTH OF BIOMASS CO-FIRINGSeptember 27, 2010Saku Rantanen

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    Feedstock security

    Feedstock pricing

    Feedstock sustainability

    Logistics

    Low entry barriers

    RISKS, INDONESIAN PERSPECTIVE

    New major capacity announcement willcreate a risk of unhealthy overcapacity

    Industrial wood pellets compete with woodchips for a market share

    Japan and Korean markets still uncertain

    First mover advantages start to be shared

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    MARKETS IN ASIA-PACIFIC

    GLOBAL PELLET MARKETS &GROWTH OF BIOMASS CO-FIRINGSeptember 27, 2010Saku Rantanen

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    Existing pellet production

    Australia, China, Japan

    Emerging in several SE-Asian countries Demand mainly from

    South Korea

    Japan

    PELLETS IN ASIA-PACIFIC

    China and Australia holds great potential but

    political will missing

    Raw material availability

    Indonesia

    Australia

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    Europe will keep the leadership position inthe near future

    In many areas the market is still at nascentstage

    South-East Asia has great feedstockpotential

    CONCLUSIONS

    opportunities Key risks

    Feedstock security and pricing

    Logistics

    Off-take

    Operational experience

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    PYRY COVERS THE ENTIRE VALUE CHAIN FROM BIOMASS TO

    PRODUCTS Logistics

    ProcessingCollecting

    and harvesting

    Energy /Biorefinery

    Chemical Refiningand Energy Use

    Fuels

    Replanting

    Resources

    with Pyry

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    THANK YOU!

    CONTACT:NAME: SAKU RANTANEN

    TITLE: HEAD OF BIOENERGY, ASIA-PACIFIC

    MAIL: [email protected]

    PHONE: +65 9650 2889

    2827 September 2010BIOMASS PELLET TRADE ASIA 28