POWER PLANTS UPDATE

CHRISTOPH VITZTHUM,
VITZTHUM GROUP VICE PRESIDENT

Wrtsil

Wrtsil Capital Markets Day

Agenda

1.
2.
3.
4.

Demand drivers
Wrtsils competitive advantages
New market focus and positioning
Why is it different this time?

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Wrtsil Capital Markets Day

The demand drivers

Growth in Electricity Generation
in the World
6%

5%

4%

3%

2%

1%

0%
91

93

Actual

Wrtsil

95

97

Trend

Wrtsil Capital Markets Day

99

01

03

Average

05

07

Economic development
p
Electricity demand growth and economic growth correlate almost 1:1
Impacts of a possible recession
Industrial sector demand may
decrease
Domestic consumption will
continue to grow unless the
recession becomes long
Total
T t l consumption
ti growth
th may
cease but will hardly become
negative
Construction
C
t ti off large
l
llong-lead
l d
time projects (coal, CCGT,
nuclear) will slow down

The demand drivers

Climate change
Emission trading and other
schemes target to reduce carbon
emissions
Difficult to p
permit and build p
power
plants with high carbon emissions
(Coal)
Nuclear p
power and renewables
gain ground
Wind power boom brings
unforeseen grid stability challenges
Strong technology and business
development on solar and biomass

New energy solutions and market

positions are necessary for the
power plant suppliers

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Rising electricity prices

Power plant construction costs
have increased
General fuel price trend is up, coal
prices have increased 50 % in
p
12 months
Emission (CO2) costs are included
in electricityy p
price
Energy security
Independence from (foreign) oil
Access to gas from several
sources, LNG
Domestic energy supplies,
bl
renewables
Local / decentralized power

Wrtsils competitive advantages

Fuel flexibility
Ability to use available fuels
Ability to use low cost fuels
Ability to convert from one fuel to
another
Backup fuel capability
Operational flexibility
Dynamic
D
i ffeatures
t
Continuous base load
Delivery flexibility
Scope of supply
Competitive delivery times
High electrical efficiency
Sustainable power generation and
high fuel prices demand and favor
high generation efficiency
5

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Competitive capital cost

Standardized solutions
Modularity
Professional delivery
Emission compliance
Compliance with all
norms, incl. California
R li bilit & Availability
Reliability
A il bilit
Proven products
O&M services
Local service
Global service network close to
most customers
24/7 service

Wrtsils competitive advantages

Global EPC
Wrtsil is the only power plant
contractor delivering EPC in the
whole developing world
Main enablers
Modular pre-fabricated power
plant product. Minimized site work
25 year experience from
developing countries

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High Business Entry Barrier

Prime mover development, 3-5 year
R&D
Modular, standardized power plant
products
p
Global sales and service network
Global experience in project
management
40,000 MW reference base

Power Plants Mission

We provide superior value to our customers with our

distributed, flexible, efficient and environmentally advanced
energy solutions, which enable a global transition to a more
sustainable and modern energy infrastructure.

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Wrtsil Capital Markets Day

Power Plants repositioning

We take an active role in improving

p
g the world
through active market development
We focus on products and services, businesses
and p
projects
j
that p
provide unquestionable
q
environmental benefits, and make economical
sense
We position ourselves as the active ENABLER of
Renewables (Wind, Solar, Hydro) and
Other sustainable and modern energy
solutions including
solutions,
Distributed power
Nuclear power safety
Grid stability
Energy security

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New market focus and positioning

Wrtsils has 4 legs with different
customers and industry cycles
1. OIL power plants
2. GAS power plants
3. Renewable power plants
4. OIL & GAS industry applications

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Wrtsil Capital Markets Day

Wrtsils legs

1. HFO p
power plants
p
2 separate markets:
Islands and remote areas:
Market steady due to non
availability of other practical fuel
options
Large grids: Market demand
depends more on oil price as
the projects often compete with
other fuel and power generation
options
Wrtsils market share
developed favorably to 49 %
Competition: MAN

10

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Wrtsil Capital Markets Day

LFO p
power plants
p
Demand steady despite high oil
prices. Mainly stand-by
applications
Reserve capacity constraints in
Europe open a new market
segment

LBF power plants

Prices for existing
g LBF have
increased and slowed down the
demand
New fuels are being developed

HFO Power Plants / 1-60 MW Engines

2008

HFO Power plant market (incl. crude)

Wrtsil

Recip. Competitors

Gas
Turbines
5%

Gas Turbines

4500
4000

Recip.
Competitors
46%

3500
3000
MW

Market size
4050MW

Wrtsil
49%

2500
2000
1500
1000

2007
Gas
Turbines
9%

500
0
1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008
Recip.
Market size
Competitors 1520MW
53%

Cumulative power plant market since 1996

35000
30000

Wrtsil
38%

Gas Turbines
Recip.
ec p Co
Competitors
pet to s
Wrtsil

25000

2006
Gas
Turbines
13%

MW

20000

15000

Recip.
Competitors
53%

10000
5000
0

1996

11

Wrtsil

1997

1998

1999

2000

Wrtsil Capital Markets Day

2001

2002

2003

2004

2005

2006

2007

2008

Market size
3180MW

Wrtsil
34%

LFO & LBF Power Plants / 3.5-60 MW Engines

2008

LFO
O Power
o e p
plant
a market
a e ((including
c ud g b
bio-oils)
o o s)
Wrtsil

Recip. Competitors

Gas
Turbines
21%

Gas Turbines

Wrtsil
20%

1800
1600

Market size
1300MW

1400

MW

1200

Recip.
Competitors
59%

1000
800
600

2007

400
200

Gas
Turbines
24%

Wrtsil
24%

0
1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Market size
1685MW

Cumulative power plant market since 1996

Recip.
Competitors
52%

14000

Gas Turbines
12000

Recip. Competitors
Wrtsil

10000

2006
Wrtsil
23%

MW

8000

Gas
Turbines
45%

6000

Market size
1195MW

4000

Recip.
Competitors
32%

2000

1996

12

Wrtsil

1997

1998

1999

2000

Wrtsil Capital Markets Day

2001

2002

2003

2004

2005

2006

2007

2008

Wrtsils legs

2. GAS p
power plants
p
2 separate markets
Developing world:
Strong gas infrastructure
construction expands the
markets to gas power plants
and gas conversions
conversions.
Distributed power model due
to lack of grid capacity
Wrtsil
W t il position
iti very strong
t
Competition: GE-Jenbacher,
CAT, gas turbines
Industrialized world
Traditionally industrial CHP
and large
g CCGTs

13

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Wind p
power g
growth opens
p
up
pa
new market for dynamic
resources
Reciprocating
p
g engines
g
are the
best technology option
Wrtsil position: Strong
Contender
Competition: Aeroderivate gas
turbines
Resistance against new coal
based power opens doors for
Nuclear power
D
t li ti off peaking
ki &
Decentralization
reserve capacity with small gas
power plants

GAS Power Plants / 3.5-60 MW Engines

GAS Power plant market (incl. Dual)
Wrtsil

Recip. Competitors

Recip.
Competitors
4%
Wrtsil
8%

2008

Gas Turbines

18000
16000

Market size
15630MW

14000

MW

12000

Gas
Turbines
88%

10000
8000
6000
4000

2007

Recip.
Wrtsil Competitors
12%
4%

2000
0
1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Market size
10860MW

Cumulative power plant market since 1996

Cumulative power plant market since 1996
140000

Gas
Turbines
84%

Gas Turbines
120000

Recip. Competitors
Wrtsil

100000

Recip.
Competitors
5%
Wrtsil
8%

2006

MW
W

80000

60000

Market size
10370MW
40000

Gas
Turbines
87%

20000

1996

14

Wrtsil

1997

1998

1999

Wrtsil Capital Markets Day

2000

2001

2002

2003

2004

2005

2006

2007

2008

Wrtsils legs
3. Renewable power plants
BioPower serves the market within Europe
p and other subsidized
regions
R&D for small scale gasification & reciprocating engine based power
plant for global markets

15

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Wrtsils legs
4. OIL & GAS industry applications
Industry
y cycle
y
different from electricityy business
High investments on exploration and transportation infra
Wrtsil a niche player in
Gas compression in selected markets
Field power applications in South America, Africa, Russia
Selected pumping applications world wide

Expansion opportunities
Product capable to combust crude oil and flare gases directly without onsite
it fuel
f l treatment
t t
t
High efficiency engines with reciprocating compressor enable major
savings in pipeline gas compression compared to traditional gas turbine
& centrifugal
t if
l compressor. W20V34 makes
k a totally
t t ll new product
d t size
i
(12000 hp) available for this business

16

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All fuels, Power Plants / Engines

2008
All ffuels,
l P
Power plant
l t market
k t (HFO 1
1-60MW,LFO
60MW LFO 3
3.5-60MW,GAS
5 60MW GAS 3
3.5-60MW)
5 60MW)
Wrtsil

Recip. Competitors

Wrtsil
17%

Gas Turbines

Recip.

25000

Market size
Competitors
20980MW

16%

Gas
Turbines
67%

20000

MW
W

15000

10000

2007

Wrtsil
16%

5000

0
1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Gas
Turbines
69%

2008

Cumulative power plant market since 1996

180000
160000

Market size
14065MW

Recip.
Competitors
15%

Gas Turbines
Recip. Competitors
Wrtsil

2006

140000

Wrtsil
15%

120000

MW

100000
80000

Gas
Turbines
68%

60000
40000
20000
0

1996

17

Wrtsil

1997

1998

1999

Wrtsil Capital Markets Day

2000

2001

2002

2003

2004

2005

2006

2007

2008

Market size
14750MW

Recip.
Competitors
17%

All fuels, Power Plants / Engines

Market share changes, linear average
70 0%
70.0%

65 0%
65.0%

60.1%
60.0%
50.0%

46.5%

44.6%
47.4%

40.0%

52.0% 51.6%

51.6%

51.3%

47.4%

44.5%

36.6%

40.2%
30.0%
22.9%
20.0%
11.3% 11.7%

13 7%
13.7%

16.3%

14 0%
14.0%

14 6%
14.6%

15.0%
%

16.3% 16.7%

2005

2006

2007

10.0%
9.8%

10.4%

7.9%

0 0%
0.0%
1996

1997

1998

Wrtsil share, Recips

18

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Wrtsil Capital Markets Day

1999

2000

2001

2002

Wrtsil share, Recips + GT

2003

2004

2008

Why is it different this time?

Wrtsils has 4 Legs with different customers and industry cycles

OIL
Power Plants

GAS
Power Plants

Renewable
Power Plants

OIL & GAS

Industry
Applications

Opportunistic Focused New focus areas

Standardized modular products enable customization
Total accessible markets are growing due to
Coal projects are cancelled due to CO2 concerns replacement by gas
gas,
wind and nuclear
Mind set change in large (western) utilities
Load divided to segments served with different technologies
Grid capacity optimization Locate peaking units inside the load pockets
Wind firming requires a new type of dynamic generation segment in the portfolio

Access
A
to
t gas in
i developing
d
l i countries
ti d
due to
t gas infrastructure
i f t t
d
development
l
t
19

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