Neste Oyj (NESTE) Earnings Call Transcript & Summary

Good afternoon, and welcome to Neste Capital Markets Day 2021. This is a virtual event, which we are broadcasting live from the Helsinki area. I'm Juha-Pekka Kekalainen, the Head of Neste Investor Relations, and I will be moderating this event. First, let's have a look at the program. First, we will have presentations on group strategy and businesses by our President and CEO, Peter Vanacker, and his team. There will be a short Q&A after each presentation. [Operator Instructions] We will also have a joint Q&A session with all the speakers at the end of the program. Then you will have a chance to ask live questions via the separate call lines provided. We will have one short break in the middle, and the event will be wrapped up by Peter with his concluding remarks. As always, please pay attention to the disclaimer since we will be making forward-looking statements in the presentations. Let's now begin with our first speaker, Neste's President and CEO, Peter Vanacker.

Welcome also from my side. And of course, I mean, it's a virtual event. Hopefully, it's going to be the last virtual event because I'm really looking forward to meeting you again in person and being able also to answer your questions in person. So we're going to do this virtually as said, and I'm really looking forward also to receiving quite a lot of your questions. As usual, I have no doubt about the fact that you will ask a lot of questions and good questions as well. We have a full program for you but also with breaks in between so that there is time, I mean, for questions. We have a number of speakers. And we've selected the speakers that fits with our aspirations, and our aspirations or we want to be a leader in renewable and circular solutions. So therefore, I will be supported also today by Thorsten, who will speak after me on the potential that we are having in Renewable Aviation. Mercedes, who is heading the Renewable Polymers & Chemicals business will then speak about the progress we that have made in Polymers & Chemicals as well as the huge potential we are having in this area. And then we will have Carl also talking about Renewable Road Transportation. As you know, he is managing that business extremely successfully with the expansion that we have on a global basis. And we continue to see a continuous growth in that area. Matti will talk about all the efforts that we have undertaken in going more upstream, a leadership position that we have built up in waste and residues, but also in the supply chain as well as, of course, our plans that we have in terms of the expansion of our production. And Jyrki, of course, as you know very well, he will talk about the financials as well as what are our aspirations that we have. So with this, let me, first of all, remind you on our purpose. Our purpose is creating a healthier planet for our children. And this is what drives us at Neste. This is extremely important, and that's why I want to start the Capital Markets Day with this slide. Every person that we have hired in the company is meeting that expectation. We are looking when we are hiring our people if with their heart, they're standing behind this purpose. And that is what makes this company so strong because every individual in our company is having that inner motivation to create a healthier planet for our children. Now a healthier planet also means that we need to focus on safety in our company. And you see here that we have made excellent progress in terms of our safety. On one hand side, when we are talking about occupational safety, so personal safety, it has been one of the best years ever in our history, very low accident rate. The same, I can say also about the progress that we have made in process safety, one of the best years in process safety. Now you need to put this into the context. And the context is that we're building up a huge facility in Singapore. We had quite a lot of shutdowns during the last year and this year that were scheduled, plus we have a pandemic environment, and on top of that, we had the 5-year scheduled shutdown in Porvoo. Nevertheless, we have the best performance in occupational and process safety. Now if I move from the safety point of view towards what has happened, I mean, to our company in terms of the share price development. And here, you see that we -- if we compare it to 2018, our share price has had a tremendous development, 190% plus compared to 2018. And even more so, if you compare it to the share price development of a group of our peers, well, we have outperformed by far our peers. And that delta is, of course, more than 210% if you add it up. But also a lot has changed in the ownership of our company. And that change, if you look at the available shares, so if I now just take out the shares that are in the hands of the state of Finland as well as the climate fund in Finland, then you see here that ESG funds already represent 44% of the top 100 institutional owners. And this doesn't come just by being lucky, I would say. But it is because of the progress that we are making because of continuously being 1 of the top 10 in the Knights index of the most sustainable companies in the world. Now if I look back a little bit what has happened compared to the last Capital Markets Day? And a lot has happened, as you know. So if I look, first of all, commercially. We have raised the sales margin levels from where we were in the past around $400 to $500 per ton to being now what we call healthy $600 to $700 per ton. We have a numerous amount of sustainable aviation fuel agreements that we have signed. We are in a numerous amount of airports. We have lots of partners in the Renewable Aviation business. And Thorsten will talk about that in more details. And you will see it is impressive in that short period of time what we have been able to accomplish. The same is valid also when we are talking about Renewable Polymers & Chemicals. Substantial amount of progress has been made. We're developing a leadership position in the circular bioeconomy and that on a global basis. In terms of our production, we have our Singapore expansion that is, despite the pandemic, quite challenging, but on track to be able to start it up at the end of Q1 2023. In addition to that, we have also decided that we want to invest in our Rotterdam facility and build up that optionality so that we can also produce, out of the existing, capacity 0.5 million tons of sustainable aviation fuel by 2023. So that project is also very well on track underway. You know that we are investigating where are we going to build up the next world-scale facility. Well, also that work is currently being conducted, a so-called definition phase is well on track. Matti will talk about it so that we are ready to take such a final investment decision than at the beginning of next year. But also in the Oil Products business, accelerated by the pandemic, we have driven forward a consolidation, and that consolidation has led to the fact that we're now fully focusing on our Porvoo refinery after we have shut down the refinery operations in Naantali. So an enormous amount of work also here in terms of production. M&A. Huge amounts of M&As that we have been able to accomplish. And this is really -- I want to reinforce that, that message that where we came from in the past where we hardly did any M&A, we have done the highest ever number of M&As in the history of our company in a pandemic environment. And M&A for us needs to be strategic. So it is, on one hand side, going upstream in getting access to more waste and residues, including the supply chain. And you have seen a number of these acquisitions and just recently, the announcement on the acquisition of Agri Trading in the United States. But also the other part is getting access to new technologies as we are going broader in the amount of technologies that we are applying to be a leader in renewable and circular solutions. In terms of sustainability, we had made the promise on scope 1 and scope 2 emissions. We also have made our promise that we want to help our customers reduce their greenhouse gas emissions, well on track on both of these promises and the implementation. But we have embedded that also into how we are measuring the performance of the management top in the company. So today, it is embedded in our long-term incentive. Now if I now move from looking at what we have accomplished during the last 12, 18 months towards what is happening in the market, what is happening around us, what's the future going to bring, and how is our strategy going to make sure that we build up that position, as I said, leader in renewable and circular solutions? Then the demand for Renewable Products is growing substantially, and that has to do with higher climate ambitions, a supportive regulation. You all know that the Fit for 55 is raising the bar in Europe. We've seen with the Biden administration that the bar is also being raised substantially both in road transportation as well as with the latest discussions around the sustainability of flying of aviation. But also plastic taxes are being imposed. Here, the front runner, again, is European Union. You see a lot is happening. And if you look back into history, then I can't remember a period where so much has happened in 12, 18 months period time. So that will continue to drive the demand for our Renewable Products. If I look at our strategy, global leader in renewable and circular solutions. What does it actually mean? Well, it is based upon 3 different pillars. The first pillar is, of course, growing, growing, growing, and that is growing our renewable and circular solutions. The second pillar is getting ready for the future. We'll need more technologies in the future to be able to decarbonize our industries. The third pillar is, of course, boosting our competitiveness and continuing with our transformation. So let me go through those 3 pillars from a very high level in what it means in terms of our strategy. If we look at growth, and we think in 2030, how will Neste actually look like? Well, we try to imagine ourselves, I mean, how big could the Renewable Aviation business be? How big could a Renewable Polymers & Chemicals business be? And we came up with, well, Renewable Road Transportation will continue to grow. I mean the potential is huge that we have. So that will continue also by 2030 to be a very, very important part of our business, let's say, around 60% in terms of volumes. And Polymers & Chemicals as well as Renewable Aviation, they each could be around 20%. Will it be more? We don't know. But at least, it will be substantial businesses. That is the key message by 2030. And why am I saying that? I'm saying that because of all the progress that we have made during the last 12, 18 months, and Thorsten, Mercedes as well as Carl, they will talk about that. They will give you the evidence of what is happening around you. And therefore, why we are so convinced about that being very substantial businesses by 2030. Now if I look at the second pillar of our strategy, and that is getting ready for the future, then here, we're talking about different types of technologies that will be needed. At the end, what we are talking about in our businesses, we need renewable carbon and renewable hydrogen, green hydrogen. So these are, let's say, our basic components. Then we develop different production technologies so that with these components, we can produce drop-in molecules, specialty molecules that our customers in our target industries, they can immediately switch from fossil-based towards these renewable or circular molecules. So we have different types of raw materials coming out of different types of waste and residues. The renewable carbon can commodity assets, which today is what we're using with our NEXBTL process technology. But of course, they can also come out of municipal solid waste, they can come out of the air CO2, out of steel mills CO2, algae technologies, lignocellulosic technologies, recycled waste plastics. If you add that all up, I've seen an analysis from McKinsey that is talking about more than 1 billion tons of waste and residue that eventually would be available. So the core is developing the production technologies so that we can recycle that very good carbon, that renewable carbon to make drop-in solutions, molecules for aviation, polymers, chemicals as well as road transportation. If we look at the different production technologies, I mentioned NEXBTL already, but also investing into co-processing, Porvoo plays an important role here, chemical recycling and polymers and chemicals as well as the different innovation business platforms that we have referred to in the past that we are developing. So what's the progress that we have made on these innovation business platforms? We have -- if I go one by one. Renewable hydrogen, we have a pilot project ongoing in Rotterdam. Together with partners, we have a feasibility study ongoing for Porvoo, how can we get renewable hydrogen? Secondly, Power-to-X e-fuels or e-hydrocarbons. Here, we talk about the technology end-to-end mapping that is ongoing. There are different types of technologies currently that we are evaluating. There are different start-up companies with projects that we are evaluating. There are more than 30 actually in the world. And we're looking at, okay, with whom do we actually want to work? What is helping us in our strategy to accelerate? Algae, very good progress because in laboratory, it fits to our NEXBTL technology. So here, it's about how can we now move from a laboratory to a demonstration scale. Lignocelluloses, we have evaluated alternative technologies, and we are now in the next phase of project development that is then ongoing. Municipal solid waste, also here, we are in an initial assessment of scalable production technologies and then that need to then lead to decisions. What is important, I mean, to take away is that we are targeting that at least in 1 of these innovation business platforms, by 2030, we want to have an industrial-scale operation. Which one it will be? I cannot tell you today because we need to evaluate all these different options and see what is the economical feasibility and scalability of these technologies. When I talk about the third pillar, and that is when we're talking about sustainability, we reflected upon sustainability, and you know that we are very advanced in terms of our standards with regards, I mean, to climates. But we're now enhancing that vision so that we are also covering biodiversity, human rights as well as supply chain and raw materials. And we're increasing the bar for us, for our company, for our employees. Now in terms of climates, we have already the scope 1 and scope 2 definition. As you know, production carbon footprints, we want to reach a carbon-neutral production by 2035. We have our carbon handprint. Last year, we helped our customers to reduce their greenhouse gas emissions, CO2 emissions by 10 million tons. Our aspiration is to double that by 2030. And of course, we need to have capacity in order to get there. The new thing that we are adding to our plate is on the scope 3. So to reduce the carbon emission intensity of our sold products. We're now working with our suppliers, with the partners to reduce those emissions across the value chain. And we will talk about that more during the next 12 months. What does it mean? What is it that we concretely want to commit to? As usual, as a company, we do, first of all, our bottom-up analysis, and then we make our promise. If I talk about the third pillar of our strategy, remember, operational excellence. On the Neste Excellence program, I will leave that up to Jyrki. He will talk about the new targets. But if I talk about what is happening in Porvoo, then we have a clear ambition now that we have stopped the production in the Naantali facility in terms of oil-based refining and we fully focus now on Porvoo, the ambition is to make Porvoo the most sustainable refinery in Europe by 2030. And how do we want to get there? Fastest net zero production ambition, 50% of production cO2 emissions cut by 2030, enabling customers our to reduce their own emissions, which means that at least 10% of the raw material by 2030 will be based upon renewable and circular feedstock instead of fossil products, crude oil. And then thirdly, of course, ensuring a sustainable cash flow generation. The function of the Oil Products business in our entire portfolio in the company is cash flow generation. And that also means that we need to then look at what is the setup in terms of our portfolio of assets as well as in products so that it generates the maximum in terms of cash flow. So if I summarize now to just start, I mean, this Capital Markets Day, then we have made strong progress strategy in execution and that also since the Capital Markets Day in March 2020. No doubt about the fact that growth of renewable businesses will continue and actually is being accelerated. Thirdly, we're setting very high standards for sustainability with a new broader vision. And fourth, innovation is core. It is in our DNA. That is what is differentiating us compared to our peers. It will continue to be at our core. We're expanding in innovation. We're investing more in innovation, and therefore, it will be the key to success not just on NEXBTL but also for the future generations of technologies. So with this introduction, I would like to open the floor to some questions. JP?

Thank you very much, Peter. We're getting questions through the chat box. And then as a reminder, please keep them coming. Let's start with the first, a sort of a personal note question. Are you satisfied with the progress so far considering the pandemic and things like that?

Yes, it's a very good question. And if I look at when we're just going into the pandemic and the concerns that we had and business continuity plans that we developed and, of course, also some cost containment. Well, it is impressive what this group of people have been able to accomplish in a pandemic environment. So am I happy? I would say I'm much more than happy. I'm actually really -- I mean it's amazing. It's just as amazing.

A question from Iiris. Given your strong balance sheet, can you discuss more about your capacity expansion plans beyond '25, i.e., after Singapore and Rotterdam? And do you still aim to keep a 40% market share in road traffic in the long term?

Yes. Very good question, Iiris, and thanks for the question as well. You know how we operate. We look at what can we do and go one step at the time, and that is also how we are communicating. So now today, we're focusing on the transformation of the Oil Products business. We're focusing on that Singapore EUR 1.5 billion investment. We're focusing on a couple of hundred millions that we're investing in Rotterdam with the optionality to have 0.5 million tons of sustainable aviation fuel. And we are also having our engineers working on a definition phase for the next 1 -- 1.3, 1.4 Singapore scope of investment if we take that final investment decision then as you know, in Rotterdam. So that's a lot that we have on our plate, and I like our people to be focused on this. We've said we want to help our customers reduce our greenhouse gas emissions by at least 20 million tons by 2030. So that gives you an indication of what the direction that we are taking.

Great. Then a question on the making Porvoo carbon-neutral by '35. [indiscernible] is asking, what is your ambition based on this carbon-neutrality ambition? Does it imply that stopping the use of fossil-based raw materials? Or is it based on carbon offsetting?

Well, it's 80 projects that we are [indiscernible] working upon. And they go from replacing crude oil by waste and residue streams. We're looking at how can we get access to green hydrogen. So first of all, we want to reduce the emissions. And of course, if there is a remaining part, then we will have to go to carbon capture and storage. In that whole context, of course, we also compare what is the capacity that we will need in the future, yes? So you can't take it for granted the current capacity will also be the capacity that we will have in 10 years or 15 years from now. It may be, yes? But it is not, let's say, a predefined number of capacity, and then we transform it into green capacity.

Very good. Henri Patricot asks, do you feel a need to speed up the feedstock supply chain integration given the speed of capacity additions by competitors?

Well, I think we have been able, Henri, I mean, to demonstrate that we are extremely fast despite, I mean, the pandemic as I said. We've gone organically as you know, I mean, in China, in Australia, New Zealand, Eastern Europe, Southern part of Europe. We've gone through acquisitions, I mean, upstream in the United States, wherever we have a chance. When we find something, we have acquired. So I wouldn't know what we can do faster than what we have been able, I mean, to do. But having said that, it means that it is a core element of our strategy, so we continue will to work, I mean, on that and continue to make progress.

Good. Question from [indiscernible] How do you see the role of Oil Products business for Neste longer term? In your view, does Oil Refining shadow the ESG story in Renewables?

That's a very good question. And as I said, I showed it on one slide. We won -- we have consolidated Naantali. So we're talking only now about 1 slide, which is one of the best net cash margin sites in the industry in Europe. So that one side, we want to turn it into the most sustainable refinery in Europe.

Good. Then Jason Gabelman asks, how do margins from recycled chemicals compare to renewable diesel? And will recycle chemicals be processed at Porvoo plant or different facility?

Yes. As I've said before, I mean, the way how we go into the different markets that we're developing is that it should not be dilutive to what we can accomplish today. So that is valid for sustainable aviation fuel. It's valid for polymers and chemicals as well.

Good. Lastly, [ Rosala ] has a question on Naantali. Have you got any short- or long-term plans for the Naantali plant?

Well, we have turned Naantali now into a harbor and terminal. Of course, it was already a harbor and it was already a terminal, but that's the focus now of the facilities that we have. And that is because it is having a very good location to serve our customers. The second point is we're working together in a consortium to look at what could be a future purpose of the Naantali facility, one may think, in terms of longer-term industry business park-type of approach.

Good. [indiscernible] has a question on the COVID impact on aviation fuel sales, how largely by percentage he asks?

Well, we didn't have in our business as we are starting up this business, and we have positioned ourselves, like Thorsten will say, as a global leader in sustainable aviation fuel. We didn't have any reduction because of a pandemic. It has been continuous growth despite of the pandemic. And we've seen that the airlines have made the sustainability budgets available.

Yes. Continuing on the SAF theme. [ Andrea ] asks, what do you think will be your market share in SAF?

Well, I would refer to that question then later on. I mean if Thorsten is giving his presentation, then he can talk about that. And if there are still, of course, open questions around it, then we have the chance, there will be a Q&A.

Very good. Artem has a question. In terms of production technology development, coprocessing is expected to mature in 1 to 3 years. What are the most interesting carbon sources here and whether Neste is planning to make-related investments in this area within the next 2 years?

Yes, we are talking mainly about 2 sources. One source is the waste carbon or renewable carbon that is coming out of very low-quality waste and residues. They can be lipids, but they can also come out of lignocellulosics. And then the other group is that commitment that we have made up to 2030 that we want to use at least 1 million tons of liquified waste plastic. Liquefied was plastic is a good source of renewable carbon.

Henri has a question, Henri Patricot. Any sense of which ones on the innovation platforms are most likely to reach commercial level by 2030 and which ones are more challenging?

Our approach, I mean, in the innovation business platforms is that we are all treating them equally. So they have the resources that they need to further develop. They have a stage gate with what needs to be accomplished. And we try to avoid to jump to conclusions too early because that would eventually -- we will run the risk that we make a mistake, we are focusing on one technology, and then later on, I mean, another technology may show to be more economically feasible, or from an incentive, from a regulation point of view and technology that gets more attention than the other technologies. So all things are equal at this point in time, and we are not yet taking any decision on accelerating one versus the other.

Good. Still one on SAF. You will have 1.5 million ton capacity by the end of '23. But over what time frame would you expect that to be fully utilized, asks Peter Low from Redburn.

Well, Peter, we will continue, of course, to ramp up. As said, today, we have 100,000 tons of capacity available and pretty much, I mean, sold out. Then we will have 1 million tons of capacity in Q1, towards the end of Q1 with the Singapore facility. And we will have 0.5 million tons in the Rotterdam facility towards the end of 2023. So that will enable us, I mean, to grow in that market at the right margins, very important, at the right margins on a global basis. Again, Thorsten will talk more about that. But to put it into context, it also means that we build up this optionality in all our plans. I have not mentioned that in my presentation. But you know that I've mentioned it multiple times, which means that we have in Singapore, full optionality, we can serve polymers chemicals, aviation as well as road transportation. And that can be steered out of a control room, so it's not a batch process. It's a continuous process. And the same thing is what we are now doing in the Rotterdam facility.

Thank you, Peter. That was the last question for this time. We will have the Q&A later on and so forth. Let's welcome on stage, our next speaker, who will be the EVP of Renewable Aviation, Thorsten Lange.

Good morning, good afternoon and good evening, wherever you are. And thank you, Peter, for the nice introduction. And by the way, for all the question on sustainable aviation fuel that you had already. I will do my best to entering all of them. It is now 18 months that I was standing last on that stage here talking to you about sustainable aviation. And I promised you that sustainable aviation will kick off or will take off as we say in aviation. And actually it did. It did much better than even I expected, and I'm normally a huge optimist. It is a very attractive and high-growth market due to various reasons, by the way, one we heard already, it's about regulations and regulations are actually developing the way we expected it to develop in different areas of the globe, and I will be coming later to that. But also in parallel and massively, especially in the last 18 month, the voluntary market has developed. What does voluntary mean? I mean it's the deeper meaning of that word, it is on top of what people have to do or where people have incentives that they can get when they're buying something. So voluntary means there is a potential to selling products with the full premium without any help from any regulations or markets. This voluntary market is growing. Why is it growing? Because SAF has now been identified as the real tool to reducing greenhouse gas emissions. That's the third thing why things have been developing that quickly, and that is perception. People have realized, especially during the pandemic, that flying must become more sustainable. So if you're talking to passengers at airport -- at airports, now they're saying, yes, sure, I'm willing to contribute. I'm willing to compensate. Same applies to corporates, to corporates that have to sharpen their profile, and they do. And I come to that later as well. The last thing is that also regulators have now realized that they have to do things, and they do, and that I will tell you in a minute. So in a nutshell, we were able to really strengthening the leadership position that we already had when I was talking to you 1.5 years ago. And actually, here, you can see what happened. Peter already referred to that. We will be able to be producing 1.5 million tons of sustainable aviation fuel by the end of 2030. Will it be fully used as sustainable aviation fuel? Nobody knows. You heard the explanation earlier. It could well be that we have other optionalities and that those products will go into other channels. But potentially end of '23, we will be able to selling 1.5 million tons of sustainable aviation fuel, and we will be growing with the market as the market grows. Now I'm in particular very proud of the column #2 here with than more 30 partners having joining our journey on the sustainability aviation fuel path. And it's a very diverse group. It includes airlines, business aviation, cargo, corporates, fuel suppliers, other interested parties like the regulators are also onboard, and something we must not forget here, it's the airports. Airports are playing a very, very important and crucial role in building up our supply chain, in demonstrating that sustainable aviation fuel can be made available. And as you can see here, we have been successful on more than 20 airports across the globe, in Europe, in North America and in Asia Pac since I talked to you last time, early 2020. Regulators have come on board. Regulators have introduced regulations, some of them more ambitious, some of them less. But all the regulations that are kicking in have one in common, they are supporting the use of SAF. How does it look like? And I would say wherever you look on the globe, you have areas of different maturities when it comes to regulation. If I may start from left to the right, from west to the east, you see that there is a very, very attractive opt-in scheme in place already in the West Coast of the U.S. that attracted a lot of business and made us moving into those locations and made the airlines buying the fuel there. It was so attractive and so interesting that now the East Coast, let's say, woke up, and are also looking into respective programs. And on top of that, Biden administration now is really making an effort to pushing SAF, but also introducing, hopefully introducing the so-called sustainable aviation fuel BTC, a dedicated BTC for sustainable aviation fuel between $1.25 and $1.75 cents a gallon. So quite something that helps the business. Then we have Europe, where you can see quite the big development from '21 into 2030 where there is kind of modest mandates being introduced in typically the northern countries, but with the high, high, high ambition when it comes to 2030 where you have some countries even moving up to a goal or a target of 30% mandate in 2030, 7 countries here, led by the Nordics followed by the Netherlands, but also the France, U.K. and not to forget, a very good story here that the refuel is now on its way. So the European Union basically managed to agreeing on the basic mandate that will really support and push the business here. And then we have Asia where we are having our facilities, where we will be having our production from 2023 on. And we will be in that market with public affairs, with sustainability people, but also with sales in parallel to our production to helping our customer in that region. And you have seen now New Zealand and Australia, Japan and Singapore thoroughly observing the markets, especially in Europe and probably following that example. So that altogether results in a massive increase in potential demand from a relatively small number, as you can see here, in '21 to already more than 3 million tons in '25 and more than 12 million tons most likely in 2030. And that 12 million tons is a number that is massively smaller than what you may have heard just yesterday, the announcement coming from the World Economic Forum and the Clean Skies for Tomorrow Coalition where 60 of the global leader in aviation, all the stakeholders, from banks, fuel producers, airlines, airports and OEMs declaring that they are willing to pushing for a 10% share of the overall worldwide uplift on fuel. If you just take Europe or the U.S. and Europe and just assuming there is no increase in consumption, we're talking about a fossil consumption of 60 million tons, which would already lead to a share of 6 million tons of sustainable aviation fuel in Europe alone. What you also can see here is the shift from incentives and modest mandates into a strong mandate market in 2030. While all this cannot be done without our partners. And I'm very proud to see that a very strong team of aviation into the years that we have in Neste managed to getting in touch and managed to partner up with all the airlines, with all the OEMs, with distributors and other customers that you can see on that screen here to spreading the message, to being at the airport, to making sustainable aviation fuel available, which is the most important thing. Prove the case, show that it's possible, establish logistics, like we did in San Francisco, where we are the first ones actually introducing sustainable aviation fuel into a common pipeline. Moving to Japan, all those things we did together with our partners because, again, this is a partnership business. Aviation relies on partnership and joint solution. And that's what we have. What we have here is the direct stakeholders in the aviation industry. What you don't see here is the corporates, and I was talking about that earlier. Corporates are playing a more and more important role in our business here. And we have developed a product, a product that helps the corporates to reduce their business travel emissions, and as I said earlier, for real. No offsets, but really buying the stuff. And we put a lot of effort in making sure that this business model is water-tight. So the solution is aligned with the SBTI guidelines to provide the pathway to reportable emission reductions, and it showcases that what power the partnership with the right partners in the aviation ecosystem could have. We are very proud to announcing that we did that and tested it already with the Boston Consulting Group, Boston Consulting Group, funding the stuff and then let their preferred airlines in the Nordics, which has been SAS and Finnair, uplifting and burning the fuel. So you see me very optimistic for the future. It's a business that is growing. We are very well positioned. We are in the middle. We are in the center of gravity. We are the largest supplier. We have production. We will be growing. We will be driving our partnerships, and again, it's partnerships with airlines, with the suppliers, but I said also with corporates, and other channel partners. Very proud of having one of the strongest sustainability teams maybe in the world, but also do we have colleagues in public affairs that do have a really good understanding of what to do to moving the regulatory framework into the right directions. Also important to making sure that the reporting requirements for our customers are fully met. And rest assured, we will not rest in bringing new innovations, new ideas, be it on the corporate, on the voluntary market, but also on the interplane market, on the supply chain, into the market to making sure that we will stay to being ahead of the crowd, making use of our first-mover advantages and hopefully, surprising you with one or the other good news also on the next Capital Markets Day. Thank you very much.

Thank you, Torsten. We have some excellent questions from the online, starting with Sasi from Morgan Stanley asks, more recently, we have seen European U.S. majors, including Chevron and Shell announcing aggressive targets for soft capacity by 2030. What would you say is Neste's biggest competitive advantage compared to these companies?

Sasi, very good question. And I have to say, not unexpected. But I was just presenting what our biggest advantage is, we are the first mover. We know our customers. We have a very strong team that knows exactly what to do, how to react, how to partner up. On the other hand, I'm not really worried about the competition, which I told you last year already because the market is growing. The potential is there. And actually, I welcome competition because obviously, there's something we did perfectly right in the last 18 months that we now have competitors copying what we're doing.

Good. Then a clarifying question. Peter Low asks, what is an opt-in scheme? Can you run through how this work briefly?

Yes, sure. Our opt-in scheme is where there is an obligation to fulfilling the renewable mandates, and you can do that in various ways. Typically, it's done on the renewable diesel side with my colleagues, but also Renewable Aviation can opt into existing system and get the respective incentives from that, the credits, as we say.

Good. Mehdi from Bank of America asks, you keep highlighting that the HEFA technology is the steepest one. Why some of your competitors are looking for other technologies? Is it in order to avoid the feedstock supply bottleneck?

No, I don't think so. I think there is all solutions needed. And we are the most advanced on HEFA. So one could maybe assume that people think don't go the way Neste is going because they are so well advanced already. Because, as you know, it takes some time until you're there. And as I said, there's not only the HEFA pathway open for the future. There's various pathways that need to be explored. And they decided maybe to go another way, which is also a good choice, but not for the short term, more for the longer term. All the pathways, we are also working on and exploring as well.

Good. [ Keri Preston ] has a question on a bit on the operations and our optimization. Might you or would you shift SAF from Singapore to Europe or the U.S.?

Yes. It's all about the LCA value. So actually, the question is very good. We just did it the other way around. Just to give you an example. We shipped from Europe to Japan. I was talking about Japan. And we shipped the vessel there and got a certified LCA value of almost 90%, exactly 89.7%. So that tells you that the shipping portion is playing a minor role in the overall LCA value discussion here, which is important because I hear that argument very often. It's not really an argument. It works that way. So we would, yes.

Good. [indiscernible] has a question. How do you see the regulations of use of Renewable Aviation fuel to develop in terms of mandatory use to react to climate change and larger market for SAF, specifically in Asia?

Well, Asia, as said, Asia is developing. I see, as I mentioned earlier, I see New Zealand, Australia, but maybe also Japan looking into what the European Union is doing, thinking about a mandate. And for me, currently, it looks like more they will go that way rather than the way of incentives and opt-in schemes as we see that in the U.S. New Zealand is already making an approach, and I'm sure the rest of that region of the new center of gravity of aviation will follow.

Thank you. That was the last question for this session for Thorsten. And let's welcome on stage, EVP of Renewable Polymers & Chemicals, Mercedes Alonso.

Good afternoon, or good morning, good evening, ladies and gentlemen. Mercedes Alonso, Executive Vice President of Neste. I'm responsible for the Renewable Polymers & Chemicals business unit. Last year, we introduced you to the expansion of Neste's sustainability promise into the plastics and chemicals industry. Driven by the growing concerns of the citizens and population towards the plastic change -- plastic waste challenge and climate change, we had seen how brand owners were responding by committing substantial resources and creating concrete action plans and pledging to replace their products with more sustainable solutions. If anything has changed in the last 18 months is the speed and the scope of the response of the plastics and chemicals industry to support the brand owners to fulfill those pledges. We have seen many more brand owners joining these market leaders into their fulfillment. And we are seeing that this segment growth is in an accelerated adoption rate and is expanding globally in a multitude of markets and applications. As last year, we were also discussing how we were seeing the demand growing. This year, we will be then looking at how Neste is leading the creation of a circular bioeconomy and what does it mean and completely translate into a tangible opportunity for this business unit. Let's go and take a look and see effective examples on how this accelerated adoption rate is looking like. In 2019, our partner, LyondellBasell, ran for the first time a production of polyethylene and polypropylene based on Neste renewable hydrocarbons. Since then, 18 -- we have developed 18 active partnerships across the globe. In Europe, we continue working with LyondellBasell or companies like Borealis, but also in Asia, for example, with companies like LG Chem in South Korea or Mitsui in Japan. Brand owners in selected 10 industry segments that we are collaborating with have started incorporating these materials produced in the -- with our Neste renewable solutions into their applications. For example, a company Covestro from the [indiscernible] group has been already since a while successfully commercializing a clean film with a content of up to 35% renewable or recycled materials. In the automotive industry, for example, we have seen products based on polycarbonates for Covestro already being in use. And also in the home and personal care, more and more renewable and recycled solutions are used by companies such as Unilever or Henkel. One of the examples that I like most about and describes very well this accelerated adoption rate is the case of LG Chem. Only in June this year, they had the first production run with our materials in South Korea. Already in August, they were able to announce that the company in Jordan had already taken the superabsorbent materials and use them to create a baby diaper based on renewable materials. Normally, when you introduce a product in the chemical industry or a plastic, it takes up to 2 years to convert. The fact that our materials are what we call a drop-in solution demonstrates that one can replace one by one the crude and naphtha with virtually no changes in the production assets of the polymer chemicals or in the processing industry in the past that needs to be made until we end up having a baby diaper. This means that the companies today can fulfill their pledges on becoming more sustainable and delivering sustainable products already today, not in 5 or 10 years from now. We continue also to make progress in chemical recycling. And since our first trials in the manufacturing plant in the refinery in Finland, we have been able to process the equivalent of the waste plastic generated by 20,000 average companies -- employees in Europe. Well, last year, we were talking about the demand that it was being created by the -- based on the demand of these brand owners and the pledges, and we were estimating how we converted the plastic and chemicals ratio that we were seeing potentially converted to renewables. The fact that we are already talking about the replacing of naphtha allow us to have a much better view on what is the potential business and more concrete numbers for Neste. So let's take a look about this naphtha market. The naphtha demand for petrochemicals is projected to grow to over 300 million tons by 2030. We see a higher adoption rate in Europe following the regulatory efforts that are shaping up in the last 18 months, starting with the European plastic pact, the green deal, green recovery and more recently, the Fit for 55 package. But also in the largest market that is today producing the largest amount of polymers and chemicals, we see Asia, we've seen a fast-growing market as it's in the example of the companies that we're working today, and we see that being addressed already now. Based on the collaboration that we have with our companies and colleagues and the brand owner space, we have a clear line of sight of the potential addressable market for Neste. And we assume that after 2030, the Renewable Polymers & Chemicals business unit as well as all the renewable and recycle hydrocarbons can see an addressable market well in excess of 100 million tons. The reason why it's also clear, while the energy and transportation sectors amount of 55% of the global greenhouse gas emissions, the materials industry, like steel, cement or chemicals account for the other 45%. Using scientific data and studies of life-cycle analysis, for example, making a single -- a simple plastic polypropylene cup, we have been able to demonstrate that one can replace over 80% of the fossil resources with renewable materials on making these kind of products. It is easy then to see that with this huge addressable market potential, there is enormous amount of millions of tons of greenhouse gas reduction that the material space can also contribute towards climate change and mitigating the effects. So we have talked about what is this accelerated rate of adoption and the size of the market. Let's take a look now on how is Neste leading this transformation and this creation of a circular bioeconomy and how we are also the preferred partner for many of these large brand owners and companies. First and foremost, we are appreciated for what we call this double circularity, which is the heart of our value proposition. Neste has been working already since over 2 decades on replacing fossil resources by using waste and residues in the production of renewable materials. The fact that we have been already working for 2 decades in this give us the reputation and the credibility which these brand owners can relate to and can also feel attached to. As I said before, these are drop-in solutions. And it means that also in the same way that the materials can be used directly in the same assets, they are also equally recyclable in the same systems that we see today. And Neste bringing also now with chemical recycling the ability to expand the amount of waste plastics that we can be processing and preventing that they end up in incineration or in landfill is what closes the second leg of the double circularity we were talking about. In the chemical industry, we cannot decarbonize. Carbon is at the core of all the materials and everything that surround us. But what we can do and we are doing with chemical recycling is closing the loop and making sure that the carbon is kept in circulation over and over again. Another clear advantage as well is that we have a dedicated business unit that is working relentlessly to bring these solutions to the customers, and the fact that we have already now a substantial global capacity available in Asia and Singapore with our plants in The Netherlands in Finland so that we can cater to the needs of these global leading brands. Having a very talented and experienced team is also helping to close in the loop and being able to address multiple different projects in different markets and applications and being able to bring results already now. One of these collaborations which we are very proud of is the partnership with Unilever to replace virgin fossil carbon. Together with Neste, Unilever committed as one of the founding partners to the renewable carbon initiative in which also they have said that their home and personal care business will be fossil fuel free by 2030. They are talking about the carbon rainbow. This is a way of showing how many different sources of carbon being biobased, waste plastics, algae or, in future, also powder to liquid all come together to replace more and more the virgin fossil carbon they are using and fulfilling the pledge of being complete carbon-free in the next few years. Together with Neste, we are working in projects with Unilever, very concrete, some of them that have a short time as to deliver results already in 1 year, some others in which we will be working together to develop the technologies that will help us bring in results in the next 3 to 5 years in areas not only like plastic packaging, but also in the ingredients in the surfactants. Before closing, I wanted to also bring you a brief update on how we are progressing with chemical recycling. Despite the pandemic and the fact that the teams cannot be working together face-to-face, we are absolutely on track to deliver on our promise of processing over 1 million tons of waste plastics by year 2030. We have continued after the first trial in December in our refinery in Porvoo to run further large-scale trials, and those products have been delivered to polymers and plastic producers and are at the moment being evaluated for further commercialization. Together with partners like companies like Ravago or REMONDIS, we have been looking at expanding the waste plastics that we can use in chemical recycling and preventing those for ending in landfill or in incineration. Our investment with Alterra Energy is allowing us to work together with them to create a robust, efficient and safe technology ready for deployment. And in that sense, we are progressing towards deploying this first commercial waste plastic liquefaction plant, together with a partner in Europe. So to wrap it up and in a nutshell, I think that we have shown you clearly a progress and acceleration of the adoption of renewable solutions in the chemicals and polymers industry. The delivery of drop-in solutions to producing and partners brand owners is enabling them to act now on a global scale. And as we said also in chemical recycling, we are progressing very well to move to an industrial-scale production with recycling partners in the very near future. Thank you very much.

Thank you very much, Mercedes. Now question from the audience. Nick from Exane asks, how much can you scale up your chemical recycling technology? Do you see the device being positioned alongside mechanical recycling plants?

We're positioned in chemical recycling as a complementary technology to mechanical recycling. So the capacities are probably going to be around 50,000 to 100,000 tons each plant, but they don't need to necessarily be on the same site.

Okay. Sam asks, how would you compare the voluntary market for plastics renewable to SAF? Are consumers more or less motivated?

It's a very good question because we often talk, Thorsten and I. The chemical industry and the polymer medical industry is already a voluntary market. So in terms of comparison, I think that we have seen that brand owners and consumers are determined to avoid plastic waste and bring climate change solutions to the chemical industry already now without any legislative support.

Good. Henry Tarr has a question. What is the main barrier to scaling up this business today? Is it recycling technology, economics or something else?

I will say exactly as you say, economics. At the moment, there is quite a price differential with naphtha. So we need to work more on solutions that we're also making fossil crude prototypes, for example, less subvention, and legislation is moving into that direction. So we spend that expansion to happen in the next couple of years.

Josh from Barclays has a question. Where do you see the highest barriers to entry in the renewable recycled naphtha markets? And to what extent do the potential returns differ between these 2 different ways of producing Neste RE?

Well, as Peter said in his presentation, we can foresee that this business could be well at 20% of the total capacity of Neste by 2030, which means that it's itself also competitive and attractive an opportunity Neste compared with the other markets. As the higher body to entries, again, the fact that it's a new product, that there is some logistics and side logistic topics that need to be addressed and, of course, then the willingness of customers to select brands that have sustainable options versus just going with the standard ones.

Very good. Matt Lofting from JPM has a question. Can you expand on what you mean by double circularity and why it's potentially significant as a source of value creation?

Thank you. Yes, in essence, the amount of naphtha you have seen is over 300 million tons in the future. If we are going be to able to replace more and more to tackle than the climate change problems associated with materials, we need to look at all solutions. The brand owners working with us see that Neste is already posed to do attractive fossil crude with waste and residues, with waste plastics and also in the near future, renewable polymers and chemicals can be used in materials coming from our innovation platforms. So the double circularity of today, it shows that Neste is one of the unique companies that is having both solutions already now already deployable.

Good. Jason has a question. What type of premium price are you getting for your renewable chemical product compared to chemical commodity prices? And how does the processing cost compared to traditional chemical manufacturing?

The processing cost remains pretty much the same. So there might be some changes in terms of having a storage of our materials if they want to be segregated from fossil fuel resources, but the processing costs are the same. And the premiums that we've seen over naphtha, they are basically around 3 to 4x the price of naphtha today.

Thank you very much, Mercedes. This was the last question at this stage. And let's welcome on stage, EVP of Renewable Road Transportation, Carl Nyberg.

Good afternoon, ladies and gentlemen. My name is Carl Nyberg, and I'm leading renewable road transportation business at Neste. So let's shift gear and move to the Road Transportation part of our business. The road transportation sector is where our renewables business really has been started and through where we have been building the business from the beginning. It's a business that we have been building over the past decade and growing to a market which is about 7 million tons today. We have also been building our business and our global model along to serve exactly this business and as a market leader. Going forward now, this market will be growing at an accelerating pace. And we see that over the next 10 years, we will be reaching a market size which is more than 30 million tons. So this is a very exciting business to be in, and we are well positioned as a market leader and a first mover to continue winning in this business. But let's first start to have a look at what kind of progress we've had over the past year. So over the past year, we have been continuing to build our global business model. We have been serving customers in almost 30 countries across the world. We have also been busy in further expanding our Neste MY Renewable Diesel global network. This year, we entered the Belgium market, and we reached almost 600 stations worldwide that we are offering Neste MY in now. A very important milestone that we had this year was also the partnership that we did -- made together with OKQ8 in Sweden. For the first time in history, we are now moving our branded fuels under the canopy of another fuel retailers' stations. And I believe that this really marks a significant shift in the value of how the market is seeing the value of our branded fuel as a solution, but also the Neste MY brand as itself. So we believe that this will really open up new avenues to further expand the branded offering and the fuel globally. This growth of the network as well as our vast network of channel partners has also enabled us to serve more than 4,000 B2B customers worldwide. So as Peter was saying in the beginning, despite of the pandemic, we have had great progress over the past year in continuing building on our global business model and coverage in the market. But let's now go into a little bit to see how actually this market now will be growing in the coming years. So as I said, we will be seeing a growing market that will reach more than 30 million tons by 2030. This is a significant change from our perspective that we had 1 year back in the previous CMD, where we were projecting volumes to exceed 20 million tons. So what has happened? We have seen now a significant change in how programs are being built up in North America and Europe. For instance, in North America, we are now seeing an increasing amount of LCFS programs being introduced. Washington State recently passed a bill. And we are now seeing also things happening on the East Coast, in New York, for instance. But we also see things happening in Canada, pushing towards lowering the emissions of transport and combating climate change. Of course, with the change in administration, we're also seeing a much stronger push in the same direction with the Biden administration. If we then look at Europe, the Fit for 55 package that came out earlier this summer is now also raising the overall level of ambition. Here in the Fit for 55 package, you see a number of elements that is steering towards higher demand of renewable fuels. For instance, the ETS specifically for the transport transportation sector, but also the effort sharing regulation will be driving demand higher than previously assumed. In addition to this, we're also see interesting elements like the Annex IXA-based products creating new interesting opportunities for us in the European market. Finally, we're, of course, seeing also some of the members that's going much further, much faster than the European level and which will also drive demand in Europe. But not only in North America and Europe are we seeing things happening now. Now as well in South America, we are seeing things happening in Brazil with the renewable bio program, for instance. We have also had some cases in Japan as well as in New Zealand, where there are programs being developed. But what about renewable diesel demand then beyond 2030? To really understand that, I think I need to go a bit deeper and have a look at how the diesel demand will develop. So looking at the diesel -- road diesel demand growth for the coming decade, it is clear that it will be growing significantly. We will reach 880 million tons per annum by 2030. And actually, out of that demand, about 70% will actually come from commercial road transportation. This is also the reason why the demand is so resilient. So while we are seeing private cars, passenger cars being electrified at an increasing pace, electrification of heavy duty remains difficult. We will see hydrogen entering the scene as well, but also that will take time. Building green hydrogen production, building infrastructure to supply hydrogen to their truck fleets will take time. And hence, 90% of the truck fleet will be diesel-based still in 2030. For us, that is, of course, good news. 85% of the trucks today are already now certified for Neste MY Renewable Diesel, meaning that we have an excellent solution that enables this segment to decarbonize without changes to the infrastructure or the fleet in use. So let's a little bit then talk about how do we actually address this market. So as mentioned, we have been building our global reach with our network stations growing. We have a strong network of distributor partners operating in North America and Europe. And we are able to reach out to a vast group of customers and specifically, typically the heavy-duty customers. So we are well positioned. And in terms of our solution, it is also a very intuitive solution that enables a fast switch to a low-carbon fuel without any changes to the fleet or the infrastructure. This, combined with our strong track record in producing and marketing sustainable renewable fuels, makes for a very good position in serving this increasingly growing segment, which are looking to decarbonize to help customers reach their climate target. In addition to this, we're also now working on different collaboration concepts. So we are, for instance, working with IKEA to help them reduce their customers' carbon emissions by supplying renewable diesel to them. With IKEA as well, we see a lot of opportunities to come with a holistic offering and cross-selling together with our colleagues in Renewable Polymers & Chemicals as well as Renewable Aviation. We have also been developing circular concepts for cities and brands. One such example is the fries for miles concept that we did together with McDonald's and have -- taking use oil cooking from the McDonald's restaurants and turning it to Neste MY Renewable Diesel that can be used in the heavy trucks transporting for McDonald's. So we see a lot of opportunities to create this kind of exciting concept. So what does this then mean in terms of business result? So our global model is -- has been a very, very important part in driving business performance and margin. So Peter was talking in the beginning already that we have been moving our margins from being around $400 to now being a healthy level around between $600 and $700 per metric ton. Despite raising up feedstock prices, this has been very, very stable. And despite pandemic and other situation, we have been very -- we have been able to steer this business in a very efficient way with an excellent supply chain steering as well as very, very strong market intelligent pricing capabilities as well as our strong customer-focused approach creating value for our customers, combined with the branded offering. So to summarize then, we are well positioned to win in this exciting and growing market in the long term. Our branded platform is an excellent way to communicate towards the end customers and understand what the end customers are needing through our data-driven efforts. With this, we will be able to create more awareness about our solution, about renewable diesel and create demand for it. With the increased customer intimacy, we're also able to better connect with the customer through the end customer insights and create solutions and offering that is actually customer need based and therefore, also create more value. Finally, with the global model with the global model, with our global optimization and with our very, very strong understanding of the different markets, we are well positioned to continue to drive margin creation and value through optimizing between different market with flexible business models. With these words, it summarize my part, and I welcome any questions. Thank you very much for listening.

Thank you very much, Carl.

Thank you.

Question from the audience. Can HVO produce from soybean oil compete in Europe?

That's an excellent question, actually. And as you know, many of our U.S. competitors are focusing very much on soybean oil. Our focus has been on based on residues, and that remains in our focus while we're, of course, looking also at other potential solutions. But we believe that residues will be will be a strong value proposition for us in Europe.

Good. Question from Mehdi. For how long do you expect the renewable diesel market to remain tight in Europe?

That's an excellent question. Of course, when we have a market that is growing at this kind of pace, it's clear that we will have fluctuations along the years. We see that the kind of buildup that we're seeing now in production, it is more or less synced with the demand growth as well. So we see actually that the coming decade will be very much balanced like we're seeing today as well. And we believe that we will be well positioned to drive value and margin -- strong margins also in the coming years.

Good. A bit continuing on the supply-demand balance. Nick has a question. Have you run the supply-demand balance analysis on greenhouse gas emissions basis? Does that show a bigger difference between supply and demand? I don't know how we...

We become very specific then, but we are -- we have a number of ways of steering the mandates and the regulation in Europe and North America. And the greenhouse gas based mandate is one such approach. And of course, when we look at our supply-demand models, we are taking into account the different types of requirements that are set in this different markets. So I would say that we have taken into account and I would say that we very much believe still that we see a balanced market from that perspective.

A question on Neste MY from Nick. I felt like the importance given on Neste MY had declined. He refers to the earlier target we had. Has something changed?

Well, margin optimization remains in the core of what we are doing. At the same time, I think it's important to realize that what I was saying as well that we have the Neste MY platform to also be able to communicate and drive demand for our solution. And from that perspective, the brand plays an important role. And we also believe that over time, the branded offering will be a source of additional value creation. So it plays an important role. But still, what is in the core is the margin management and driving the business performance.

Good. Sasi has a question on the technology development. Does the increasing adoption of trucks run on hydrogen in the 2030s mean a declining market for renewable road transportation post-2030?

Well, I would put the perspective that the heavy-duty sector will be growing over the coming 10 years. And I do believe that it will be growing after that as well. And we still have so much fossil diesel in the pool. So there will be room for all the low-carbon solutions. So I definitely believe that we will see an increasing demand for renewable diesel despite the fact that we will see probably electrification to some extent and hydrogen as well as probably some other low-carbon solutions as well. But I remain confident that that this market will be growing into the 30s, 40s and probably maybe even into the 50s.

Thanks, Carl. This concludes this part. We now take a short break and come back in 5 minutes. So see you soon. [Break]

Welcome back, everybody. Please welcome our next speaker, Executive Vice President of Renewables Platform, Matti Lehmus.

Ladies and gentlemen, it's a pleasure to be here and give you an update on our progress in driving growth in our feedstock and production platform. If I reflect back on the last year, it's been an exciting year for Neste. While the whole environment has been characterized by the COVID pandemic, we have made tremendous progress in our feedstock and production platforms. And I would actually like to start this presentation by giving you a short update on the progress we have made in the last 18 months, since the last CMD. Let me start with operational excellence, which is a core part of our strategy. I note that we have had very good performance in safety. I'm also noting that our reliability, our operational availability has continued to be very good throughout this period. What has been very important has also been the continued focus on capacity creep. When I look back in 2018, our nameplate capacity was 2.7 million tons. Last time when I spoke at CMD, we had 3 million tons, and we have now reached 3.2 million ton nameplate capacity. This means we have actually, without significant investment, added 0.5 million ton of capacity over the last 4 years. So this is an important part of our operational excellence. Let me then turn to the continued expansion of our feedstock platform. Our target here is very clear. We want to grow the range of feedstocks, and we want to strengthen our position in the value chain by also moving upstream. And if I note some of the milestones that we have achieved during the last 18 months, I have to say I'm very pleased with the progress. I note, for example, that our waste and residue share in our feedstock pool reached 92% in the first half of the year. I also note that we have made great progress with a number of acquisitions, whether it's Mahoney, whether it's the Count Terminal acquisition or, recently, the announcement of the Agri Trading acquisition. And I'll talk about this more in detail later. The third area that I want to highlight when reflecting about the progress is that also the deployment of our production growth strategy has clearly advanced. And while we have, of course, been continuing the very important construction of the Singapore expansion project, I also want to highlight 2 other milestones that we have reached. The first one was the acquisition of the Bunge Loders pretreatment facility, which will play an important role in developing our pretreatment capabilities going forward. And the other one, also a very important milestone, we made the decision to invest in a sub-optionality project in Rotterdam and are currently in execution phase for this project. I'll be happy to talk more about our strategy execution in these areas, but before doing that, I would like to give you overview of the macro environment. When we look at renewable diesel, sustainable aviation fuel and renewable polymers and chemicals demand outlook, it is clear that we see a very robust long-term demand outlook all the way until 2030. And like you could hear from my colleagues, we see the same robust demand outlook, whether it's in road transportation, whether it's in aviation or whether it's in renewable polymers and chemicals. If we pull the demand outlook together, we currently see that the 2030 demand will grow to more than 40 million tons, which is clearly higher than what we, for example, estimated in our last Capital Markets Day. But I would also say that we clearly see that the demand could reach 50 million tons in 2030. So what is driving this very strong demand outlook? It is really a combination of a high ambition in both Europe and in North America. We have seen that, for example, in Europe, the Renewable Energy Directive has been transposed into national legislation. We have seen in North America, new states adopting low carbon fuel schemes. And lately, if you look at Sustainable Aviation Fuel, we see clear development, for example, in Europe, considering the adoption of an European-wide scheme refuel, or in the U.S., the possible adoption of different incentive schemes such as BTC scheme for aviation. So clearly signs that in both main regions, the ambition is growing. At the same time, there is also drivers beyond this regulatory ambition that will create demand potential. And for example, the voluntary markets discussed both for aviation and renewable polymers or, for example, new regions, such as in Asia Pacific, could drive that demand growth. Let me then turn my view to the supply side. What is also clear since the last CMD that we have seen big number of announcements for new projects, and we have seen the supply growth accelerating. When we combine our model, which takes into account all the different announcements, but also puts then a certain likelihood to the different projects, we come to the conclusion from this model that supply growth will be clear in the next midterm period until '25, but we also come to the conclusion that it looks quite balanced with the demand growth that we are predicting. Here, it's, of course, good to note that when we look at supply, we will see changes to this model. It is very likely with these large projects that you will see delays in some projects. At the same time, some of the projects which have been classified as unlikely may actually materialize. So this is, of course, something that needs to be continuously followed. If I turn back to the long-term demand outlook, there is actually a very important third message on this slide. And that is that the demand outlook looks very robust, not only until 2030, but also it is going to be very robust beyond 2030. And this, in turn, means that also new process technologies will be needed to support the long-term growth. And this is, of course, one of the very important reasons why also we, as Neste, are putting a lot of effort into our new business platforms in parallel to developing the HVO platform. Let me now move from this macro view to look at the waste and residues more in detail. When we update our view on the global waste and residues availability, we currently expect it to grow to 40 million tons by 2030. And you will note that when I compare this to the view we presented at the last CMD, we have actually increased our outlook from the 35 million tons that we mentioned at the time. What is driving this growth? It is, in our view, the fact that as we have a global feedstock platform, as we are more closely seeing the development in different regions, we are now also identifying some streams that we didn't have in our previous estimate. And when updating our view, we come to the conclusion that we expect global availability to be growing towards 40 million tons. What can then drive the waste and residues availability beyond 40 million tons is, of course, that we need the collection, the aggregation to develop, especially in those regions where it's currently not yet developed. Again, there is also another important message on this slide. And that is that when we look in the long term, we also see feedstock categories that have substantial growth potential beyond the 40 million tons. And I want to here just mention 2 examples of such categories. The first one is novel vegetable oils. So this is vegetable oils from advanced agricultural concepts, such as intermediate cropping, such as crops growing on degraded land, which have a 0 or very low indirect land use impact. And while not today being available in large quantities, it's clearly a category where we see substantial long-term growth potential. Another example would be lignocellulosics, municipal solid waste, PTX. These are examples of technologies where we need actually new technologies, but they will then open new raw material sources, which again grow substantially the feedstock pool in the long run. Let me now move to what Neste has been doing in our waste and residue strategy. The Neste waste and residue strategy is focused on growing and expanding the access to different waste and residue streams globally. It means that we are growing both in existing markets, but we are also growing in new markets. And if I look back at the year, I can see that we have made very good progress in Europe, in North America, but also I want to highlight that in the last few years, the development we have seen in China and Australia to develop our aggregation network, to grow the number of suppliers has been tremendous. So this is a very important part of our waste and residue supply growth. The other one that I want to highlight is that we also see an important role to move upstream in the value chain to strengthen our position in the waste and residue value chains. And again, it's an area where I take an example, the acquisition of the Mahoney platform last year and the subsequent organic growth combined with bolt-on acquisitions to also inorganically grow this platform, has been a great example of how we have been strengthening in the used cooking oil collection. Let me take 2 examples how this waste and residue growth strategy shows in practice. The first one is that our share of waste and residues has grown to a record level in the first half of 2021 and reached 92%. It actually was as high as 93% in the second quarter. And what we continue to see being the biggest waste and residue categories is animal fat waste, used cooking oil and residues from vegetable oil processing. The second one I want to highlight is that our palm oil share reduced to approximately 7% already during the first half of 2021. And this again shows how the trend we have been driving in the last few years continues to lead to lower and lower share of palm oil. Let me now move to 2 examples, 2 deep dives of what we are doing to drive our waste and residue position. The first one is that we have been strengthening our global aggregation network. During the last year, we have actually opened 10 new terminal locations in Europe, in Asia, in North America. And in parallel, we have made decisions to establish feedstock hubs in both Europe and in the U.S. for our most important waste and residues. In Europe, it was the acquisition of the Neste Terminal of Rotterdam, which created a platform that we can expand. In the U.S., we have made long-term partnerships to create such hub in the U.S. Gulf. Why is this so important? Logistics capabilities are important for a number of reasons. First of all, it enables us to grow our supplier network. We already today have more than 400 suppliers in 2020. Secondarily, it improves the reliability of our feedstock supply. In a year of pandemic, we were able to run our system without any logistics bottlenecks, which is very different from some other industries. And thirdly, of course, it's a very important platform to optimize our logistics cost as we can move from nonbulk to bulk at the right location. Let me then move to another example, and this is more about moving upstream. And it is the recent acquisition of Agri Trading, which is one of the leading waste and residue traders in the U.S. Why is this such an important move for Neste? It fits into our strategy for 2 reasons. First of all, Agri Trading has a broad access to a number of different waste and residues in significant volumes, including animal fats, used cooking oil, technical corn oil, brown grease. And there are clear synergies with the Mahoney platform. But I also want to highlight here that Agri Trading actually means comes with a very good capabilities for logistics in the U.S., a nationwide network of transloading sites of railcar and truck capabilities. For example, having more than 300 railcars in their system. And this is a very important capability also for the future. Let me now summarize our feedstock strategy. It rests on 4 pillars. The first one is the continued organic and inorganic growth in our existing markets. The second one is the continued expansion by entering new markets. And this could be, for example, in the future, our focus areas, examples could be India, South America. And third very important element is the diversification into challenging feedstocks. Why is this so important? First of all, because there is a clear customer preference and the regulatory preference for these type of advanced feedstocks. Secondarily, it's again an area where Neste can differentiate from other players because we combine the global commercial capabilities with very good technical capabilities for treating these challenging feedstocks. And finally, I want to highlight that we put a big focus on the development of novel vegetable oils from advanced agricultural concepts because we do see the importance of this longer term. If I turn this into a clear strategic ambition, I would highlight 2 things. First of all, we target our palm oil share to reach 0 by end of 2023. And secondarily, we want to grow the share of novel vegetable oils and other low-ILUC feedstocks post 2023. I would now like to still move to give you an update on our production platform growth. I'm happy to state that we have made very good progress with our production platform development. And I would obviously start with the Singapore expansion, because this is a milestone, a cornerstone of our growth strategy. We will be reaching 1.3 million tons of capacity starting up by the end of Q1 2023, and that will come with the optionality to produce up to 1 million tons of sustainable aviation fuel. And while it has been a difficult environment in the pandemic to run a large construction site, I'm very happy to state that we have made good progress, and we are currently on track to start up by the end of Q1 2023 and also maintain the CapEx forecast of EUR 1.5 billion. The other project that is a very important part of our growth strategy is the Rotterdam sustainable aviation fuel project. And again, after the investment decision, we have made excellent progress in the construction, and we are on track to complete this project by the end of 2023. A very important third example is the engineering work we are doing on the Rotterdam worldscale unit. We are currently in the definition phase for this project, which means that we are completing the engineering, getting more accurate cost estimates. And in practice, we have made good progress, and we are on target to reach the maturity for the engineering phase and the readiness to make then a final investment decision in early 2022. I also want to highlight one more thing from the production platform. We are very committed to the target of reaching carbon-neutral production by 2035. And we are currently in the process of defining the exact road map how to get there. There are already first elements. We have made progress in moving towards 100% renewable electricity share. We are also having a green hydrogen pilot in Rotterdam. But it is our clear target to develop this road map and to reach carbon neutrality by 2035. And of course, as part of the process, even evaluate if this can be accelerated. Let me now come to a conclusion. I'm very proud of our feedstock and production platforms. And I hope that with this presentation, I have given you a good overview of the progress we have been making on our strategy execution. In particular, I hope that it has given you a good insight into how this unique platform enables us to differentiate from our competition and hence create value in the future. With this, I would be happy to take any questions you may have.

Thank you, Matti, for the presentation, wide area and a lot to cover, a lot of questions here as well. Question from Michael. Can you talk about what you have included in the supply upside? And does the supply model include recent news from the international oil companies of new projects in Europe and Canada?

Yes. Thank you for the question. The way we built this supply model is that you could see a dark green bar, which basically covers all the investments where we have an information that actually an investment decision has been taken. The upside on top of that, that we indicated actually takes into account projects which are not yet having an investment decision, and those we have categorized with certain likelihood. Some of them have been categorized high probability; others, middle probability; others, low probability. So this is the way the model has been built. And for the concrete projects which have been announced also recently, we have been taking them into the model, but then applying this methodology I explained.

Good. Feedstock question from Chris. How important is UCO and animal fats in the feedstock mix? And how will this be impacted by the hard cap the EU recently put on this feedstock? Can you easily shift to alternatives?

Our feedstock mix today covers a broad range of different waste and residues. Animal fats, used cooking oil and residues from vegetable oil processing are the biggest categories to date. These are also categories we continue developing together then with opening new sources such as challenging feedstocks. If you look at the proposal that EU has made, we see that there are still caps included in the proposal. We feel it is important that there is a broad enough feedstock range so that it can support the high ambition that has been set on the product side.

Good. Specific feedstock question. What is the most promising feedstock under Annex IXA by total volume and cost competitiveness? And when will feedstocks under Annex IXA become more significant than other feedstocks, including vegetable oils and UCO?

This is an excellent question. What is typical for the Annex IXA is that there is actually a variety of different feedstocks that have been listed on this list. There is, for example, acid oils. There is algae oils. There is municipal solid waste. So I wouldn't, at the moment, take one of them to be the main category. I -- from our perspective, we are looking at a number of different alternatives and trying to develop the volume growth and accelerate the volume growth in all of these.

Good. A question on the supply side. After the wave of conversions in the U.S. comes to an end, are we going to see more greenfield? And what does that mean for competitive behavior and pricing?

If you look at the number of announcements that have been made in the last few years and especially in North America, many of them -- most of them have actually been retrofits. And I think it's something time will show whether there are new announcements. It will be, for me, primarily also a question of how much feedstock there is available to support then even further projects.

Good. Another feedstock question. How does the regulator classify the novel vegetable oils?

Novel vegetable oils, clearly, we see them as a category of oils which come with a very good greenhouse gas reduction potential. And as it's a new category, where we are currently in the stage as an industry to pilot solutions to scale them up, it is also something where the regulatory status then still needs to be confirmed in a number of member states, for example, in Europe.

Another one on novel feedstock, what is the earliest you could commercialize a novel feedstock? I guess one of them.

Again, very good question. If I think of the process of introducing this kind of new feedstock, it typically means first selecting a [ crop ] technology. It means piloting. It means building up the value chain. And then it's, of course, about scaling up. So this is something that does not happen overnight. Obviously, we do have an ambition that first sets would be available in the midterm future.

Then a bit wider question on biofuels. Considering ethanol has questionable net environmental benefits, do you think the entire ethanol market could be displaced by next-generation renewable fuels?

Ethanol for me is a solution which is, of course, tailored for the gasoline market. And here, of course, also, I'm sure there will be development about other solutions for this market. But Neste's focus has been on developing solutions, in particular, for the renewable diesel, the aviation market, the renewable polymers and chemicals market, including naphtha.

Good. A question on the availability. What's the availability of waste and residues today, I guess, compared to 2030?

It's something where I don't have a fully accurate number, but we would estimate it to be somewhere around 35 million tons. And again, by developing the aggregation, by developing the collection, we expect that to grow towards the 40 million tons by 2030.

Thanks, Matti. This concludes this part. And now let's welcome on stage, our last speaker, CFO, Jyrki Mäki-Kala.

Thank you.

So good afternoon from Finland. I'm Jyrki Mäki-Kala, I'm the CFO of Neste. You have now heard and seen in the presentation concerning Neste group strategy, but also about the renewable product units. It's my pleasure now to talk about the financials. I'm not going to go through the last 10-year financials, so don't worry. You know those as well as I do. I'm just going to focus on 2 financial topics and also 1 special item about Neste Excellence. I'm going to focus on the cash flow, and I'm going to focus on the strong balance sheet. Why these 2? These are very important as these are truly the enablers for us in Neste to execute our strategy. And that's basically kind of a starting point for my presentation. So let's start with the cash flow. On the left, you'll see here a KPI called cash conversion. This basically tells you how much out of our comparable EBITDA, we have been able to deliver as cash. This cash means how we basically have financed our capital expenditures, financial expenses and also like taxes. If we look at the 5-year history going back, you'll see that as an average, we have delivered 95% of our comparable EBITDA as cash flow. And this has been a very important thing because at the same time, our net debt has been basically 0, our leverage has been basically 0. So we have basically financed our operations through our cash flow. So that's why cash conversion and cash is also very important for us. If we then look the right side of the presentation of this slide, here, I'm trying to describe what it means for us when we talk about a strong balance sheet. We have one financial target, it's called that we like to be in the leverage below the 40% level. This graph, especially talking about 2020, it tells you that roughly staying below the 40% leverage, we could take roughly EUR 4 billion debt to execute our strategy and we will still be below the 40% leverage. And I think that one additional to this material is really that this year, [ 2019 ], we basically released our first green bond in March, EUR 500 million, and we could have easily done EUR 1.5 billion. So that's why a strong balance sheet is important going forward. And remembering also that both of these things, both cash flow and also the strong balance sheet, they are in our hands. It's up to us what we want to do with this. Let's then look a little bit closer about the cash allocation. We have a very simple cash allocation strategy and policy. We either invest on growth and at the same time keeping our shareholders happy. So it's 2 items, investment growth and shareholders. If you think about this year, 2021, we have slightly changed our guidance concerning our capital expenditures, excluding M&A, from EUR 1.2 billion to a level of EUR 1.1 billion. Nothing dramatic, it's more about prioritizing and also a little bit about the Singapore expansion ramp-up is a little bit slower because of the COVID-19. If you think about the period 2016-2020, we have basically increased some EUR 3 billion and also, at the same time, increasingly lately on the M&A, like the Agri Trading as an example. This year, basically, we are investing in CapEx, organic way, and also inorganic with M&A, roughly EUR 1.4 billion. So cumulatively, during this period, basically EUR 4.4 billion overall with activities around the growth. It's truly a change if you look the earlier years in this period, especially '16 to '18. Like Peter and also Matti earlier discussed about the M&A, we have basically finalized more than 10 different acquisitions during the last 2 years, and most of these during the COVID-19 period, where we are also integrating these units to Neste. So I would say that we have a very nicely oiled M&A team. If we then move to the other side of the cash allocation strategy, talking about the shareholders. We have the dividend policy, minimum 50% of our comparable earnings per share, that we have kept and certainly continue to do so. So overall, if you look at this graph, you'll see that it's very balanced cash allocation between the growth, meaning CapEx and M&A, and dividends. So this is the way how we look our cash. If we then go to our investments. You'll see this graph, it's really like a hockey stick. We are investing for our future. We are coming from EUR 400 million level per annum to the level of EUR 1.1 billion. And more important, if you think about the renewable products, basically our growth engine, in the beginning of this period, it was roughly 20% of our total CapEx, now it's 60%. So strategy execution continues. And of course, here, you'll see very clearly the impact of the Singapore CapEx, especially in 2019 to 2021. Oil Products is a little bit different story. Oil Products CapEx today is more focusing on safety, productivity, reliability and certainly with maintenance, roughly this EUR 250 million to EUR 300 million a year. Of course, this year, more as we had the Porvoo big turnaround. And like mentioned earlier, OPs' strategic position is to manage their own cash flow. That's how they basically invest for their future. We have earlier also mentioned that our group overall CapEx for the next few years, it will be EUR 1 billion minimum. This is without M&A. So the strategy execution continues as it is basically seen important for Neste. So this is basically kind of the way how we are looking for cash and how we are looking at the strong balance sheet. So now let's look the next one special topic, Neste Excellence. I'm happy here to say that really we are updating our targets for next year and also certainly then for 2030. We introduced this Neste Excellence in our Capital Markets Day roughly 1.5 years ago, and we have done a lot. So what does it really mean? Just maybe kind of recap for all of you who's listening and seeing this material. We are talking about things how we are improving our long-term performance. It's not about short term. It needs to be sustainable. And it needs to last for a minimum, let's say, 3 years. And it needs to be auditable. So this is really about how we are ensuring the business transformation and growth. So basically, at the end of '20, on a cumulative level, basically 2019 and 2020, we reached EUR 237 million. Examples coming out of renewable products, capacity creep, talking about the catalyst development, we're talking about the oil product restructuring that started basically last year, like Naantali closure as an example, et cetera, et cetera. But this is truly something that is for the whole Neste organization. And that is important that this is the thing that certainly continues. And that's why we are very happy to see that for next year 2022, on a cumulative level, we are saying that we are at the level of EUR 350 million improvement. And 2030, we have raised the target to a level of EUR 500 million. And this story continues. So then the final slide, maybe to wrap up what I have just said, 4 items to remember: Strong cash flow, strong balance sheet, they are enablers for us to execute our strategic road map. We are focusing on investing in organic and organic way as well. We are not changing our financial targets. It is ROACE minimum 15%. It is leverage below 40%. And finally, with the dividends, it is the same policy, minimum 50% of the comparable earnings per share. So overall, the song remains the same. So thank you.

Thank you, Jyrki, for the presentation. A question on the Neste Excellence program. Does it include capacity creep and that kind of things?

Absolutely. I think that is one big thing coming out of renewable products. Like we have said that our capacity is today 3.2 million ton. And when we started Neste Excellence, it was 2.7 million tons. So certainly that is big part of this achievement what we have basically made.

Good. You already referred to the dividend policy, but coming from the background that we have a very strong balance sheet and basically are in net cash position, is there any room to maybe increase the dividends?

Let's say that at this point, minimum 50% is the policy. And certainly, this is then up to the Board, et cetera, to think about going forward. But 50% is a nice solid dividend, what we are basically delivering back to the shareholders.

Very good. I think -- thank you, Jyrki. Next, you have a possibility to ask questions from all the speakers who will come on stage. If you would like to ask a question, you can find the call line instructions on the webcast platform. When calling, you will be instructed by the operator. Let's start our Q&A. And now we would be ready for the questions. I hand it over to the operator. Thank you.

Our first question comes from the line of Michael Alsford at Citigroup.

I appreciate the presentation. I've got a couple of questions, please. Firstly, you've successfully delivered on what you call a healthy margin of around $600, $700 a ton for renewable products. As you look over the medium term, I think there were a number of drivers for strong demand growth, but also the change in mix towards certain polymers but also the risk of potentially higher feedstock costs. So could you perhaps comment on your views around -- and confidence on maintaining this range going forward is my first question? And then secondly, Neste has always been an early mover in whatever it's done historically. However, you referenced the strong demand growth in renewable diesel, but also sustainable aviation fuel in North America, and within that include U.S. and Canada. But you've got no production capacity there. So does that not put you at a big disadvantage relative to local players that are building capacity in that region? And therefore, would you consider both new capacity or even a retrofit opportunity in this region going forward?

Good questions, Michael. And let me take the first question, and then maybe I hand over then the second question to you, Matti. I mean, of course, we are not giving any guidance, no surprise, I mean, to you either. But of course, I mean, we're defining $600 to $700 as a healthy margin. And we're developing also the optionality in our business model so that we can also, in the future, navigate if one market would not be as attractive compared to the other market, which is pretty much what we have been doing. And I said in my presentation, we moved from the $400, $500 towards the $600, $700. So we're going to continue to do the same, let's say, and focus on getting the maximum out of our business, of course. Matti, second question?

Thank you. So the second question was on North America. How I look at it, I went through it in my presentation, we are really proud about both the global feedstock platform that we have and also the global production platform that we have. And the idea of these platforms is that they are global by nature and it enables us to be competitive in all the main markets. It's clear at the moment, we have very significant growth projects on the table, with the Singapore expansion, with the Rotterdam sub-optionality project and, obviously, the engineering for a European worldscale plant. So our focus is obviously now on making sure we make good progress on these projects.

And if I could squeeze in a follow-up. There's been always a lot of speculation around whether you'd look to spin off your oil refining business. But it looks to me in the way that you presented and looking at the future, that it's quite core in the way that you're looking to develop key parts of your strategy, such as, I guess, chemical recycling, et cetera. So could you perhaps comment on whether you've considered the spin-off? And if not, why not?

Good question. Of course, again, and we've done quite a lot already on divestitures on the one hand side and then acquisitions on the other hand side, so I was about to say that in my final remarks, I mean, that you know, Michael, that the company today is not the same as the company as it was, I mean, 3 years ago. So we have selected, I mean, that on the Oil Products side. We have a chance, I mean that, that business can be turned in one of the most sustainable refineries globally. And we said as a target, the most sustainable refinery in Europe. We've done the first step by the rationalization. So Naantali has been closed. We've reduced about 350,000 tons of CO2 emissions with that measure. And now we are focused on the implementation of coprocessing net-zero by 2035. And then what does it mean in Scope 3 emissions.

And our next question comes from the line of Peter Low at Redburn.

On the renewables, polymers and chemicals, you plan to grow a substantial business in that area by 2030. But at the moment, there are no specific capacity plan. And I think initially you'll use byproducts of the RD production process. Over what time frame might you look to add capacity designed specifically to produce renewable naphtha? And the second was just you updated on 2021 CapEx guidance today. Could you give any indication of what level of CapEx you expect in 2022 and onwards to deliver the growth that you've outlined this afternoon?

Yes. Let me take, I mean, your first question just for clarification, then Jyrki is going to answer that question on CapEx. It's very clear, I mean, to understand that in the polymers and chemicals business, the molecules, the drop-in molecules that Mercedes was referring to, that we're selling in that market, they are, for example, biopropane, here, it's an upgrading of a gas stream that we have, a renewable gas stream. It is the quality of renewable naphtha. But it is also middle distillates component that we have. And these are, the naphtha and middle distillates components, they are products that currently we are producing. We are producing them in our Singapore facility. We're producing them in the Rotterdam facility. So we are already today going with those molecules into the market. So we don't need to have specific capacity that is only dedicated to polymers and chemicals. Remember, our business model is focused on having that full optionality. So Singapore facility will be able to serve sustainable aviation fuel, renewable diesel as well as middle distillates, renewable hydrocarbons that are drop-in solutions in the steam crackers in the polymers and chemicals chain. So if we go to Jyrki on the second question on CapEx.

Yes. Thank you, Peter. I a little bit opened the window in my presentation concerning the coming years. And like we are seeing the kind of the views today is that we are going to spend in CapEx is a figure that is EUR 1 billion plus. That is basically our view today.

And our next question comes from the line of Nick Konstantakis of Exane BNP Paribas.

Got a few different topics. Starting on innovation, what do you think is the probability that one of the technologies you want to commercialize is actually featuring in your plant after Rotterdam? And can you give us an idea of where we think the economics are today? Does it need to get competitive with NEXBTL to be sanctioned in a plant? Secondly, on the feedstock market, I mean, you're a clear leader. Can you give a rough idea, you doubled -- your suppliers are now 400. What is the proportion of implementation that you have what proportion -- what the facilities is rapidly integrated? And I guess thinking about the long term and the new players, can you discuss a bit the mechanism you have in place with some of your suppliers so they don't switch over to what they're selling? And lastly, and apologies for the long questions, can we expect a step down in your feedstock costs on a like-for-like basis once Singapore pretreatment starts up? You only have 1 pretreatment plant at the moment. You're adding essentially 2 more with Singapore. Does it also open up new fixed categories? Can you just remind us a bit around that?

Well, Nick, sorry, but could you repeat, I mean, your first question for me.

Yes, absolutely. So I'm saying on the innovation and the technologies you want to commercialize, do you believe this, by 2030, it probably means that it will feature likely on the plant after Rotterdam? So can you just discuss a little bit the economics, where they are today and where you want to get them? And I guess a different way to ask this is, when you say commercial and at industrial scale, does it have to be competitive with NEXBTL in terms of dollar per ton or your other metric?

Yes, let me take that question. And then on the waste and residue, Matti, if you can take that as well as then on the third question with regards to the pretreatment. As I said, I mean, in the innovation business platforms, of course, we are looking today, I mean, very broadly, and we are not excluding anything. There may be technologies in the future whereby I mean the waste and residue costs are extremely low, but then your process technology is extremely expensive. So we always look at the entire business case to then make up our minds. And as you remember, IRR, we want to have 15% as a minimum target. So that's how we are looking at these different technologies. From today's perspective, of course, we continue to also develop our NEXBTL technology. So it's not set that the next investments will be in a new technology. It could be still NEXBTL technology. We're not yet at that point whereby we have taken a decision if it will be 1, if it will be 2 different types of technologies, and how the scaling up eventually would go. Something that is a bit more concrete is going into the liquefied waste plastic. As Mercedes explained, we are ramping up. We have already done quite some tests in an industrial scale, the amount of the waste that 20,000 people -- European people are having in terms of plastic waste per year. So that is already substantial. So here, of course, we are now looking at, okay, what could be then the next step after repeating, of course, the industrial scale trials in terms of an investment strategy. Matti?

Thank you. And I'll answer the question, Nick, that you had on the waste and residue and how we can ensure that we have long supply relationships. I think it's a very good question as it's quite fundamental. I look at it a little bit like on the sales side, Carl talked about customer intimacy, in the same way it is very important for us that we build strong supplier relationships. If you look at practical ways how to ensure that long-term relationship, there is a number of different ways we can do it. One is, of course, the reliability of our needs. This is very valuable for many of our suppliers as we have such a large system behind it. Secondarily, I talked about the importance of logistics. This is actually whether we think of trading capabilities that we have acquired or whether we think of actual terminal network buildup, big element of this is that there is also the flexibility to receive on time products and this is highly valued by our suppliers. And the third element that makes Neste, of course, if you think of our feedstock strategy very unique is that we also have a lot of flexibility in our production system, what comes to different feedstock qualities. So again, a valuable partner for our suppliers to have that flexibility. And it is really through all these elements that we are building that supplier relationships. On top of that, of course, we have had acquisitions like Mahoney, where we really move into the collection. So that is then complementing that approach. Your second question was on the pretreatment question. And it comes actually again at the core of the feedstock strategy when I said that one of the pillars is that we focus on challenging feedstocks, both because there is a customer preference but also because we feel that we have a good set of capabilities to really find technical solutions also to convert these challenging feedstocks. And it is then really through having already today very sophisticated and advanced pretreatment, but also with our new project like Singapore, not only adding new capacity, but at the same time, also, again, improving the quality of that pretreatment. And it is really through both avenues that we want to grow that window when it comes to feedstock quality.

And our next question comes from the line of Erwan Kerouredan of RBC.

And thanks for the wonderful presentation. So I've got two questions, please. One on the U.S. and one on feedstock. So on the U.S., there's speculation around lower renewable volume obligations for 2020, 2021, but also potentially 2022. Does it make the U.S. potentially less attractive longer term? And I guess the other question is that, is there flexibility to sell out of California if LCFS prices decline? That would be my first question. My second question is on feedstock. So we've seen the current feedstock base, animal fats, rapeseed oil, vegetable oils kind of move together. The question is longer term, how the future feedstock base of Neste help mitigate price inflation risk? These are my 2 questions.

Let me take the first one, and that was a question, of course, as expected. And then, Matti, again, if you take the second question. As we said, I mean, in the presentation, and hopefully, we were able to demonstrate that with some facts that we brought to the table is the North American markets, and I'm not just saying the U.S. market, but the North American market will continue to be highly attractive. We see that the Biden administration is really going into that direction, is looking at what is happening in Europe, is defining their own measures and so on and so on. We do know there is lots of speculation going on, on the short term, on the RVO volumes we need to see, I mean, how that will evolve, that speculation. It's still unclear despite the fact what you can read in the newspapers or online. But generally spoken, I mean, you see what is going on in terms of road transportation, what Carl talked about on LCFS credit mechanism systems, the expansion, I mean, beyond California, Oregon, British Columbia, et cetera, et cetera. So in addition to that, I mean, federal systems, discussions around prolongation on the BTC for road transportation, discussions around SAF incentive and so on so. We are quite convinced, I mean, that the North American market will be a very attractive market. Matti?

Thank you. On the feedstock question, I think we come actually to the core of our feedstock strategy. The pillars that I talked about, it's about global platform, having global reach to different waste and residue streams. It is also about a broad range of feedstock. And then thirdly, it was about developing our pretreatment capabilities to have that flexibility for different qualities. And I still see these are, especially looking into a tight feedstock market, all of these are extremely important elements that help us differentiate, but also that help us then untap value potential.

And our next question comes from the line of Joshua Stone at Barclays.

Yes, two questions, please. One on the dividend. I think to press you a little bit further on that, you cut the dividend last year based on lower earnings. 2021 looks like net income will be down again. So is it the implication we should expect another dividend cut? Or would you be actually willing to just lift that payout ratio a bit further to protect that dividend level you're paying out? Second question, Jyrki, you talked a lot about the sort of EUR 4 billion of room before you hit your leverage target. So does that mean -- does that highlight that you have an appetite to do large-scale acquisitions? And if so, generally, just on your acquisition strategy, which parts of the value chain are you likely now to target?

Yes, very good questions. Jyrki, if you want to take the first one. Of course, I mean, I can make a comment on that as well. Yes, we have our dividend strategy, and Jyrki explained, we are not changing the dividend strategy. But maybe Jyrki, if you can also add to that.

Yes, I think that's a good question. Thank you, Joshua. It's really that we have the dividend policy. Like we have said, it's a minimum 50% of the comparable earnings per share. And certainly, that is up to the -- what kind of comparable earnings per share you have. But this is the policy and that is how we see the world as we see it today.

And then maybe also the second question, Jyrki, if you can take the second question as well on our...

Our, let's say, capacity of taking external debt. I think that was kind of the example why I wanted to raise it, that we have this element. Cash flow is in our hands. And we see also that if we want to raise capital from the market, it's in our hands. I'm not talking about specific target, et cetera. It just illustrates that the strategy execution is not about funding.

Yes, let me add to that. I mean, I said it also in my presentation. I mean, we have, I mean, a lot of growth opportunities in our markets that we are seeing. So we are spending quite a lot in terms of CapEx. We've had the question also before. You see EUR 1.1 billion is probably going to be the spending for this year. With the plans that we have in place, that seems to be also, well, quite robust number, maybe also for the future. We need to wait, of course, until we take the final investment decision on the European facility. But if you look at the coprocessing on one hand side and if you look at Singapore on the other hand side, we want to pay, as Jyrki said also in his presentation, very good dividends in addition to that. And of course, if we see the opportunities, I mentioned it, to go more upstream in the waste and residue side, we're just signed on the Agri Trading side, so that's 1 acquisition that we're now proceeding with. Plus also, if we see that in our technology evaluations, if there is a platform and if we want to do an equity investment or an acquisition in that area, these are the kind of things that we are mainly focusing upon right now.

And our next question comes from the line of Sasikanth Chilukuru of Morgan Stanley.

I had two, please. The first one was related to the pace in which you can actually increase your capacity. Assuming an FID is taken on the Rotterdam expansion and the project starts in 2025, it appears that there is a difference of around 2 to 3 years between the delivery of 2 greenfield NEXBTL projects. Is that representative of the pace at which Neste can increase capacity organically? Or can this be accelerated? Does the time line for the design and construction of a greenfield project increase if it's not an expansion facility? And the second one was related to the global supply and demand outlook that you presented. When I look at 2025, it seems like Neste's market share could actually be 33% or lower in 2025. Just wanted to check, is that something that you're kind of comfortable with?

Yes. Let me take again the first question, and then I need to look at Matti, you take the second one. I could look at Carl as well to take the second one.

Sure.

Yes. Okay. Then yes, on the first question, we talked about our Singapore investments. We have huge investments ongoing right now, I mean, in the Rotterdam facility. There are 2 projects currently ongoing. We've talked about the SAF optionality investments, but also we have an investment ongoing on waste water treatment. We are looking into Porvoo. I talked about the coprocessing. I talked about the net-zero, gave a couple of examples, what is in that scope. That means that we have a lot on our plate. Don't forget, we have 5,000 people in our company. So that's the focus that we currently have to deliver on those investments and deliver in the right way in those investments. I do not like to now speculate, I mean, what will be the next one and how much time will it take, I mean, for the next one. The way how we are approaching is, we come from today, we look at the bottom up, what are the projects that we can do and that's what we are delivering. Instead of saying, oh, you know what, we make a big promise that we are going to be in 2030 with X million tons of capacity. And then we have difficulties on how to get there. And then eventually, what, you changed on your words and so on. That's not our culture. That's not our company. One small comment also on the greenfield. It's clear if you have an existing facility that you have, of course, a lower risk profile. If you build your capacity or a new line on an existing site compared to that if you have to deploy, let's say, that capital in a completely new site. That takes, of course, always more time. And one can easily say that, that takes 1, 2 years more. Matti, supply and demand.

Thank you. Yes. And there was a question on the market share. How I look at it, like you have heard today, we are obviously, according our strategy, working on both opening new markets, like aviation, like polymers and chemicals. We are at the same time growing in road. And at the same time, we are developing our feedstock platform and the production platform to support that growth. For me, what is important, I think that ambition we said already some time ago that our impact on greenhouse gas reductions is at the minimum 20 million tons by the end of the decade. I think we are well on track, and that is clearly something we are focusing on to reach that target. The market share, I would more perhaps see it as something that as the market demand outlook is very robust that, that underlines the opportunities that there are to grow in this market.

And our next question comes from the line of Matthew Lofting at JPMorgan.

Two, if I could, just capital allocation. I think you talked earlier about a minimum of EUR 1 billion CapEx per annum for the coming years. Can you just clarify whether that includes M&A, i.e., it's an all-in number or whether any continued M&A moves could be additional. And also just expand on the capital allocation across the businesses within that balance. I think you referenced sort of minimum 15% hurdle rates earlier. Is that what you're sort of pivoting around? Or, in particular, as you allocate more capital to sustainable aviation and chemicals-related activities over the coming years, are there more holistic metrics that you're using to support? And then just a quick second one. In the context of decarbonization, and in particular, looking to decarbonize the value chain, what are some of the biggest challenges that you see around that process for the coming years?

Yes. In terms of capital allocation, it is -- you mentioned, I mean, EUR 1 billion, I mean, per year, that does not include mergers and acquisitions. So we're clearly talking about steel and iron, building up our own facilities. Then the way we look at the capital allocation between the business units, if I'm talking about now the renewable business units, then you know how -- the setup is that we have in the organization and you know what the model is that we are running in terms of our production facilities. So that means that what we are building has full optionality. So that means that therefore, we have, with Matti under his responsibility, we have the platform. And in the platform, we are deploying and we are trying to build every time, like in Singapore, that full optionality because we don't know how fast a polymers and chemicals market will develop. We don't know how fast a sustainable aviation fuel market will develop. We don't know where we will, in the future, capture the best margin. And therefore, we believe that the right business model to run is having that full optionality so that we actually can maneuver and then we can continue to optimize our margin like we have done successfully during the last years. There is one exemption to that rule. And that is when we are really talking about chemical recycling. When we talk about chemical recycling, then, of course, we would have to deploy capital that is dedicated to what we want to achieve, that dual value proposition that Mercedes was talking about to the polymers and chemicals chain because that's where it makes sense, I mean, to build up that full circularity and get the benefits out of it.

Our next question comes from the line of Jason Gabelman of Cowen.

I first wanted to go back to feedstocks, and I appreciate you're building out a platform to access more feedstocks globally. But do you see a risk to the margin benefit you're getting from running lower-cost feedstocks that are priced at a discount from vegetable oils just given increasing competition for those feedstocks globally and probably having to go further to access the feedstocks? Then further along those lines, how big of an issue, if at all, is the Annex IX Part B limitations on feedstocks? Is that something that you have the ability to mitigate the risk of? And then my second question, I just wanted to ask on the Porvoo refinery, which wasn't discussed much today. How do you see the EBITDA per barrel trending in the future from where it was pre-COVID? Do you think you could achieve the same profitability now that you shut down the less profitable refinery mentality? And is the Porvoo plant potentially something that could be a divestment candidate?

You want to take the first one, Matti?

Yes. Thank you.

And I'll take the Porvoo one.

So the first question was on waste and residue competitiveness versus vegetable oils. That's -- the way I look at it fundamentally is why we have focused on waste and residues in our strategy is that we fundamentally see that they have typically very good carbon reduction scores, so low carbon intensity. And while I fully agree with you, in a way, it's harder because you have the complexity of the collection, the aggregation. You have the more challenging technical. We also view this obviously as an area where, with the right capabilities, we can differentiate. So that is the rationale why we believe a focus on the waste and residues is the right one for us and enables us to capture value also in the future.

Okay. Let me take the second question then, which was around Porvoo. Part of it, I mean, we already answered, and that is that we want to make Porvoo the most sustainable refinery in Europe. That's currently the focus of our people, identified more than 80 different projects, and we are now in the evaluation on what project comes first because, of course, it goes hand-in-hand, not just with how we run the facility, but also with certain investments just, for example, green hydrogen, electrolysis, carbon capture and storage and so on and so on. The question, I mean, around the profitability, I think we all know, I mean, that the pandemic is not over yet. So we continue to see, I mean, a high volatility with regards, I mean, to reference margins. Needless to say, I mean, these days, that electricity prices have skyrocketed. That is also valid, I mean, for Finland. Needless to say, I mean, that hydrogen prices have skyrocketed generally spoken, I mean, energy prices, they have skyrocketed. So what will be the effect, I mean, out of that? How long will that take? Will it normalize? Will there be measures, I mean, from the politicians, I mean, being taken in Europe to level that out? We don't know. What we do know is we need to run this very efficiently, the refinery in Porvoo. It's one of the best net cash margin refineries in Europe. We have that very high complexity that we have there, and we want to make it the most sustainable refinery in Europe.

Is it possible just to sneak one more? What's the sensitivity on gas prices to the renewable diesel business?

Well, it also does definitely play a role because on one hand side, of course, we are using to produce, I mean, our renewable diesel. We are using green -- we are using hydrogen. We want to get to green hydrogen in the future. But currently, I mean, it is, of course, I mean, fossil-based hydrogen because there is no green hydrogen available. Electricity is not so much, I mean, a cost element in the production of renewable diesel. So yes, it does have an element, but we have a pre-silent call tomorrow, and I'm looking at the direction of Jyrki that will then brief on where we're standing with the current quarter.

Thank you very much. Unfortunately, the time is up. I'm sure the discussion will continue on other forums. Thank you very much for your excellent question -- questions and active participation. Now it's time to wrap up and move to Peter's concluding remarks.

So very good. We are now at the end of our 2021 Capital Markets Day and some concluding remarks, I mean from my side. This company, Neste, is not the same company as it was 3 years ago. We have -- about 40% of our people have been, so to say, exchanged because we did quite a lot of streamlining of our portfolio. We did a consolidation in the Oil Products business. We sold certain parts that we considered not strategic for our strategy, renewable and circular solutions. Jyrki talked about more than 10 acquisitions that we did. In addition to that, we hired people in building up the business units renewable aviation, polymers and chemicals, a longer supply chain as well as in innovation in different parts of the organization. So we're still the same amount of people if you look at it and compare it to 3 years ago, but that 40% that we have exchanged are now people that are highly experienced in the renewable and circular solutions. They are experts that we have in the company. So that means that, that shift that we have made is really going into supporting the strategy. We've had very good progress in strategy execution. You see the result out of that, and I hope that you're convinced about it as well, I mean, during this presentation with a couple of elements that we were able to explain to you. This successful transformation is not over. We will continue to look at how can we further develop the entire portfolio of the company. We have excellent growth opportunities for the current and the future businesses. And let's not forget, it is all about waste and residue. It's not about steel and iron. What kind of waste and residues? What is the carbon intensity that you have for your waste and residues? And do you actually have access to waste and residues? And that's where we believe we are the global leader, and we are not standing still, but we will continue to expand. So that leads strong value creation but with a purpose of creating a healthier planet for our children. Thank you for your attention and all the very good questions. And hopefully, we will see you again soon in person. Thank you.