Neste Oyj (NESTE) Earnings Call Transcript & Summary

Good afternoon, and welcome to Neste Capital Markets Day 2023. We are broadcasting live from the city of London, and it is so nice to see all of you here and all of you online. I'm Anssi Tammilehto, Head of Neste Investor Relations, and I will be moderating this event. Today is all about sharing with you how Neste will continue its transformation and take you on the journey of growth and value creation. This is something that we will be doing with our President and CEO, Matti Lehmus, supported by his team with us today. And with regards to Q&As, we have 3 joint Q&A sessions throughout the day. And after the Q&A's and after the formal presentation. So those of you who are here live in London, you will have the opportunity to join 3 breakout sessions. And the themes are very interesting, renewables supply chain value creation, renewable aviation deep dive and last but not least, the long-term growth initiatives at Neste's. And please pay special attention to the disclaimer as we will be making forward-looking statements in the presentations. Hey, let's get the day started, and welcome our first speaker, President and CEO, Matti Lehmus. Welcome.

Good to meet again here in London to have also so many people here in place, and we are really excited to share our views on our strategy today. Before we begin I would like to introduce my team here today. We have a strong team, it combines experience from the industry, leadership experience. We have some people with a long history in Neste, but we also have a number of fresh joiners at Neste. So I'll start with Carl Nyberg, he joined the company in 2005. And I have to say, Carl has really an extensive know-how about the renewables value chain and our feedstocks. We have Sami Jauhiainen, who is the acting EVP for Renewable Aviation, and Sami brings a long track record in renewable strategy and aviation with him. We have then Katja Wodjereck who just joined Neste a few months ago, bringing a valuable perspective from a related industry and a lot of experience in leading very result-oriented businesses. Then we have Markku Korvenranta, who joined Neste 1.5 years ago, long track record in the chemicals industry, a lot of experience in leading for performance. And finally, our CFO, Martti Ala-Harkonen experience a number of CFO positions in different companies and a lot of experience in leading capital and cost efficiency. So very happy to have this strong team here with you today. Also, building on the news that you probably noticed on last Friday that our EVP for Renewable Polymers & Chemicals, Mercedes Alonso has decided to pursue her career outside Neste, I will be giving the presentation on renewables, polymers and chemicals today, very good, just a second. So let us start, and I'm really pleased today to share Neste's views on our strategy, on our priorities and our focus on how we create value throughout all our businesses. And I will today leave you with 2 key messages. One is that we are very excited to enter a period of growth, short term growth, but also seeing a number of very attractive long-term growth opportunities. The second message is that we have a very powerful, flexible business model which has a number of important differentiation drivers. And it is something that we strongly believe will create value in different market environments in a growing market. Let me, however, start with some reflections on our strong track record. Many of you were probably listening to the CMD 1.5 years ago, and I have to say that I'm extremely pleased with how we have made progress, kept our targets, but especially build a strong foundation for growth in the coming years. If I firstly look at how we have strengthened our market presence, we are today the market leader in both renewable diesel and sustainable aviation fuel globally. We have expanded our presence to be in more than 30 countries. We have built branded sales outlets in road transportation. And if I look at renewable aviation, I'm very happy that we have today already 70 customers, which is an important basis for growth. Turning to the renewables platform. As you know, we have been constructing 2 major growth projects over the last few years. And that means that we are this year ready and have started up our 2 growth projects, which enable us to grow by 60% our nameplate capacity over 2023. I also note that we have in this period, made a decision to expand our Rotterdam refinery, and that construction is well underway. Feedstock is important for Neste and again, I note our strong track record in growing our feedstock platform, growing organically, being today in more than 60 countries but at the same time, also successfully executing a number of upstream vertical acquisitions. I hope that with these words, I have been able to share with you the progress we have made, but I'm very pleased with the progress, but especially that we have built a solid foundation for growth in the coming years. And I think the fact that we have, for example, last year, reached our all-time high EBITDA is a good sign of how we have really focused on value creation throughout this period. Let me then turn to a topic that is foundational for Neste, and that is our focus on continuous safety improvement. I just want to make here a very clear statement, continuous safety improvement is something that is an absolute top priority for everybody in Neste. And we have -- we basically see it not only as a top priority for us, but also our shareholders. Having a very strong safety culture, safety performance means that it's a strong foundation for today's business, but also for the growth that we are targeting in the coming years. And I note we are very pleased that we have been able to continuously improve, for example, process safety, halving our process safety event rate over the last 5 years and also, we are committed to continuing that same trend on occupational safety. Even though last year, we didn't reach our continuous improvement targets. So safety, top priority for Neste. Let me then turn to the business environment. And I want to start with a very clear statement. We see that while there is a lot of short-term movement, we are very pleased to see that the long-term trend and the long-term commitment and ambition towards carbon and CO2 reduction has stayed very strong. And when we look at the ambition, whether it's in Europe or whether in the U.S. and we update our long-term growth forecast. We actually see that those demand forecasts have stayed very robust, and we have actually a number of areas where we have even increased our forecast like in renewable aviation. So let me give you a couple of examples. In Europe, we are seeing that the Fit for 55 program is taking shape. We expect very soon decisions on some very important pieces of legislation. And it is our expectation that, for example, the renewable energy directive will clearly increase the ambition what comes to renewable energy in traffic once the RED III is issued. In a similar way, we are also expecting very shortly the first time a mandate to be passed in the sustainable aviation fuel across Europe creating that basis that will then grow also long term when we look at sustainable aviation fuel. We have, of course, observed that there is a number of countries where short term, the ambition has also been reduced because of the inflationary pressures. And we can take the example of Sweden that made such a decision a short while ago. I just note here that we have a very flexible business model with a large number of markets that we are operating in. And from Neste perspective, we are confident that we are able to allocate our volumes also in the coming years. Let me also here state that when I look more broadly at the world that also in North America, we see a lot of interesting development. And while there is a federal part, there is also the states that are driving with their clean fuel schemes a clear growing ambition for renewable fuels. And interestingly, I just note that also in Asia, we start seeing some emerging regulation, especially in the aviation field, and I'm sure Sami will be talking about this more in his part. Well, what does this mean for Neste? Neste has a very clear strategy that is focused on both growth and value creation in this growing market. And let me reiterate our 4 pillars of our strategy. Firstly, we are clearly focused to grow in the most attractive markets. And we see clearly that in the coming years ahead of us, rapid expansion in renewable aviation and renewable polymers and chemicals markets, while we also continue growing in the most attractive road markets. I also want to reiterate that the feedstock platform is an absolutely important part of Neste's strategy and we will continue to strengthen this platform going forward. Many of you have followed the last decade. We have been working for a decade on creating this unique platform, and we are building on the global visibility that we have on the strong platforms that we can grow and also unique capabilities in pretreatment in order to continue this growth. And I would argue this is a very important driver for any company in the renewables fuels industry. The third pillar is also very clear. It's value creation through our flexible unique business model and the operational excellence. I'll just take the example of the last few years. going through the pandemic, very volatile markets, everybody will understand how valuable this flexible business model has been. And finally, the fourth pillar of our strategy we see attractive long-term growth opportunities, building on our efforts and our development, our capabilities to expand the feedstock pool and, in that way, drive the growth of our businesses. What does this mean for our road map? We can see very clearly our growth not for growth in the coming years with a focus on growth and value creation. If I think of the upcoming years, we are now in a period where we are growing our capacity by 60% with Singapore and Martinez expansions. At the same time, we are growing rapidly our aviation and RPC businesses. These are very clear drivers for the short-term growth, and we are very focused on the value creation through these initiatives in the coming years. If I look a bit midterm, I can, first of all, see that we will continue the growth in all our attractive markets. And like you know, we are already having under construction our next big growth project in Rotterdam, which will again be expanding our capacity by 20%, but I also note that in this timeframe we will be working on increasing the optionality in our platforms and in that way, driving the growth of the new businesses. I also note that throughout the whole decade, we will be working on the expansion of our feedstock platform, focused on waste and residues, building on our strengths. At the same time, also seeing the opportunities to grow this platform with some new feedstocks, such as novel oils that Carl will be talking about. And this brings me to our long-term view where I again say that our focus on the markets, which are hard to abate, whether it's aviation, whether it's heavy-duty, whether it's renewable polymers and chemicals means that we see a growing demand for these solutions. And combined with our efforts to grow our long-term innovation platforms, we see a great opportunity to drive the long-term growth for Neste. I also note here that, for example, the study we are doing on the Porvoo transformation would be another example of an initiative that can create some very flexible capacity in the long run. What does this mean? We have a very clear vision. Today, road transportation represents clearly the largest business that Neste has, close to 90%. When we look at 2030 we see that with the focus we are putting into growing our aviation and RPC businesses, we will be having 3 strong businesses in 2030. We expect the aviation business to grow and to represent 30% to 40% of our business in this timeframe. We also expect Renewable Polymers & Chemicals business to grow and to represent up to 20% of our business. 3 strong businesses and a very flexible business model. This is important in our strategy. I also want to talk about the value creation that we can create through our unique business model. Two main drivers for the value creation that enable us to create also sales margin that are higher than for the average producer are the facts that we have high feedstock flexibility, and we have high market and product optionality in our platforms. And again, I mentioned that example. Think of the volatility we have lived through in the last few years. Think of how quickly markets can change and how much value this optionality can bring through our global platform and we will be continuing to work on this optionality. I also note that there are some other very unique value drivers that we have. For example, the fact that we have integrated upstream into the feedstock collection means under the feedstock aggregation that this is also a contributor to our value creation. For example, last week, I had the opportunity to meet the head of our U.S. platform for used cooking oil collection and we talked about the platform that we have in the U.S. And I note that this has already last year had a considerable contribution to our value creation. Very exciting also growth opportunities here. When I look long term, I have to say, first of all, an industry view. We are today looking at fatty waste and residues as being the most important feedstock for renewable products. And at the same time, when you look at all the work that the industry is doing on technology development. And we have here, for example, a perspective by the World Economic Forum, the Clean Skies for the Future Study. You can see that with the expansion into new feedstock fields, there is potential to grow into hundreds of millions of tons of feedstock in the long run. And this is also needed because we need the feedstock to come up with solutions to enable that high ambition that we see in the regulation. If I look at Neste, our approach is very clear. We are building on the capabilities that we have, both what comes to upgrading pretreatment, scaling up new technologies. And we have selected a number of innovation platforms that we are developing for the long run. We have, for example, renewable hydrogen and Power-to-X. We have lignocellulosics. We have algae and I also want to mention the chemical recycling that I will be talking more later about because it's also a way to expand the feedstock pool. And we are very pleased with the progress that we have been making in the last few years, and you have followed, for example, the announcements on the green hydrogen or the chemical recycling upgrading. So showing how we are making progress in these areas. Then I move towards our sustainability, which is an important part of our value creation. My message is very clear. We have ambitious targets in place and we are making progress towards these targets. I can just take 2 examples. We have an ambition to grow the CO2 reductions for our customers through our solutions by at least 20 million tons by the end of the decade and already today we are at 11 million tons and we have a number of growth projects that are important in getting us towards our target. In a similar way, we have made great progress towards our ambitious target of being carbon neutral in Scope 1 and 2 in 2035. And if I think, for example, of the initiatives we have ongoing around renewable electricity, around looking at green hydrogen, these are important steps to get towards our ambition. But sustainability is not only an ambitious climate targets. It's also Neste's vision, a broader sustainability field that we are working on, and it covers biodiversity, human rights, our entire supply chain. I just want to give you an example of the work we are doing here. Under biodiversity, we have worked extensively on the methodology to measure biodiversity impact. We have started for some of our sites, creating a biodiversity inventory, and we are making first pilot projects to protect the biodiversity. So again, very important part of Neste's strategy and value creation. Let me then look more broadly at value creation. Very clear message. Neste is a growth company with a number of very exciting growth projects ongoing. And at the same time, we are a company that is paying competitive dividends. If I think of our investments today, you can see that the vast majority of our investments is going into our renewable and circular growth projects. This is more than 80%, if you, for example, look at last year. It is good to note that at the same time, we are systematically investing in critical maintenance, critical safety investments. And overall, we maintain our target with all the growth we are targeting that our return on capital employed stays at over 50% after taxes. In parallel, we are now renewing our dividend policy. And our new dividend policy says that our target is to pay a competitive and, over time, increasing dividend. We are convinced that this is a way to maximize the value creation for our shareholders and we are combining the flexibility to take advantage of the attractive investment opportunities with a predictable dividend outlook for competitive dividends. And Martti will be talking more in his part about our capital allocation. So let me conclude. I want to conclude with a clear message. I hope, first of all, I have been able to convey my confidence in our people, our capabilities and our strategy. We have a strategy that is very clearly building on powerful differentiation drivers with 3 key pillars. First of all, we are looking at rapid growth in Renewable Aviation and Renewable Polymers & Chemicals and growth in the most attractive markets in general. Secondarily, we have a unique feedstock platform that we continue strengthening and that will be an important source of value creation also in the future. And finally, we have a very flexible or unique business model that enables us to create value in very different type of market environments in a growing market with new players also entering. And with these words, I would like to hand it over to my colleagues to discuss in more detail how we will execute this strategy. Thank you.

Thank you, Matti. And now it is time to welcome on stage EVP Renewables platform, Carl Nyberg. And by the way, you will have opportunity to ask questions from Matti as he will be joining the first Q&A session with the others. Thank you.

Good afternoon. I'm very excited to be here with you today here in London to share our renewables strategy together with my colleagues from the renewables business units. We are operating, like Matti described in a very exciting space. This is a fast-growing market that we'll see growing at an accelerating pace over the course of the coming years. We will also see a strong increase in competition as we see increasing amount of investments going into this market. That means that focusing on differentiating factor will be key in winning in this market. We are well positioned to be a winner in this market going forward. So I will share a bit more on what we are doing with the renewables platform to drive differentiation. But let me first start going a little bit through how we see the market shaping up. So as said, this is a picture of an accelerating growth. The demand will grow more than threefold over the course of the coming years to reach more than 40 million tons by 2030. And this is on the back of robust regulation that we are seeing in European Union as well as in North America and the U.S. legislation put in place to tackle climate change. This is truly -- will be truly a strong growing demand both in the road transportation sector as well as in the aviation sector, but we're also seeing increasing amount of opportunities when it comes to so-called voluntary demand. This is true for these sectors, but also in the RPC sector, and this will -- there are further upside potential when it comes to demand. On the other hand, of the picture, of course, we are also seeing a strongly growing competitive environment. We are seeing a lot of capital going into these markets and we see additional capacity coming on stream in the coming years. This will be important also from the perspective as it will give confidence to the legislator to drive further mandates and growth in demand. But it's also clear that over the coming years, differentiating will be key and we, as a long-lasting player in this field already, we are well set up to compete in this market. We have been building over the course of the year, we've been building a strong platform when it comes to feedstock sourcing as well as a global production platform with a global optimization that will help us optimize in this environment. I will talk a little bit more about the feedstock side as well in the coming slides. But let me first go into how we have been building the production platform over the course of this year. So let me start with Singapore refinery expansion. So we had -- in May, actually, we had a grand opening event in Singapore together with a lot of key stakeholders and customers and the Singapore refinery was actually started up in the second half of April. We are now in the phase of ramping up the refinery and we believe that we will be reaching design capacity over the course of the coming months. And we also expect that aviation production capabilities will be in place during the course of the third quarter. So this is a really important step in our journey to widen our product flexibility. With this soft production capability up to 1 million ton, it is truly game-changing production facility that we have brought online here. Another very important part of the Singapore refinery is also the advanced pretreatment capabilities that we are bringing on with this new facility. These pretreatment capabilities will mean that we will be able to widen our feedstock pool. We will be able to use much more difficult feedstocks, more impurities and that will give us a competitive edge against our competition going forward as well. A final remark about Singapore is also that actually the final CapEx expenditure for the project come in at EUR 1.6 billion, which is actually EUR 50 million below what we had communicated to investor community before. Let me then take you to the Martinez renewables. So as you know, we started up the Phase I of the Martinez Renewables facility in the beginning of this year. And we have, over the course of the previous months, we've been ramping up that facility and reached design capacity. We are now moving towards the second phase which will be bringing pretreatment capabilities and a much more wider pool of feedstock that we can use at this facility. This will be a very important part of the project. Then later on in the year, we will then reach full capacity as the third phase will be ramped up towards the end of the next year, early -- towards the end of this year, early next year. I think overall, I was visiting actually Martinez Renewables refinery last week. And I have to say that I'm very pleased about partnership that we have together with Marathon Petroleum. It was truly remarkable to see the engagement and excitement that the Marathon people are, who have that, are operating this refinery, turning this fossil refinery to a renewables refinery is truly something remarkable and something that is a great pride for all of us. I think 1 last thing I would want to say about Martinez Renewables is really also that this really completes our production footprint to be a truly global one. We are in Martinez really in the heartland of the U.S. renewables market. And we are able to serve our customers in California, in Washington State, Oregon, as well as British Colombia now with the local refinery. And I think this is an important part of our growth journey. Let me then move towards the feedstocks. So if you look at the waste and residue markets going forward, we expect that this market actually will grow to more than 40 million tons by 2030. They are then likely to still continue to grow when we go forward into 35% even beyond this. And if you look at the kind of split of where we are seeing the feedstock. We see that clearly, the largest feedstock market will be in Asia Pacific area as well as in North America and Europe will also be a big market when it comes to waste and residue feedstock. This sits rather well also in terms of how we are currently placed with our production platform as well as with our existing supply capabilities. But let -- if you then think about sort of the longer picture, and Matti already alluded to it in his part that actually, when we come towards closer to the third is, it is also clear that the waste and residue markets will not be sufficient to meet all the demand that we are seeing in HEFA and HVO that means that we will need to develop new feedstock pools. And here, we are seeing huge potential, for instance, when it comes to novel vegetable oils as well as algae, which we are currently are actually piloting in Spain as well. These will be important areas for growth and to drive further resilience when it comes to feedstock sourcing for our platform. Then if one takes a little bit longer-term look, it is also clear that we will need to find new feedstock sources that will be even further scalable, lignocellulosic may prove to be a very scalable solution as well as Power-to-X kind of technologies which are something that we are currently working on within our innovation platforms. But okay, let me then take you further a bit to what we are currently doing on our feedstock sourcing. So this is a rather busy slide, but let me try to take you through this quickly. So first of all, we are really focusing on expanding our current feedstock sourcing capabilities and reach. So we are looking at expanding regionally. We actually recently announced that we are opening an office in India. We are also in the progress of opening an office in Brazil. These are important steps on that journey to also expand. And we see a lot of opportunities in these markets. But it's not only about the regional reach. It's also around the feedstocks, having more flexibility around what kind of feedstocks we can use, and the pretreatment capabilities are really an important part of how we are expanding our reach. The second element is really around integrating further upstream. This is something, a journey that we've already been on for some years and we very much look forward to continue on this. And we have made certain acquisition, and I will come back to them a bit later on. And this -- we currently see opportunities in continuing that work. We are also seeing that we will, over the course of the coming years, continue to drive also other long-term type of arrangement, build partnership upstream to build further resilience in the feedstock space. And then the third part is really around the novel vegetable oil concepts. And here, as said, this will be an important part of driving further resilience and building on really scalable concept. So novel vegetable oils are really can be different types of concept. There are both annual crop concepts as well as the so-called perennial where we are talking about oil trees. And these are around really advanced agricultural practices true, for instance, intermediate cropping or growing crops on Silvopasture. So there are a lot of different concepts. We are looking at many different opportunities currently, but this may prove very, very important in the long term for our feedstock sourcing. Then maybe a couple of numbers. So actually, if you look at the feedstock sourcing, we are actually targeting to have more than 50% of our feedstock pool, secured through either long-term commitments or through captive sourcing. So this is a journey which we're on, and we will continue to drive this resilience to also securing the feedstock. Then on the NVOs, we believe that the NVOs actually could be up to 20% of our existing feedstocks by 2035. And that, of course, means that the whole NVO market will need to grow significantly. And we are seeing a lot of activities in this space currently, and we believe that this will likely be an outcome as well where NVO will be playing an important role for us. But now I would like to take a little bit deeper into how we are sourcing our feedstocks actually. And I think that this is an important picture because this kind of describes that how we are operating globally. And I said, we are operating a truly global platform when it comes to production, but also when it comes to our feedstock sourcing. And if you compare to last year, so we have been continuing to add new countries. We are sourcing from more than 60 countries today. We are having more than 500 suppliers that we are sourcing from and over the course of the past years, we have been more than doubling our terminal network. So this terminal network is a very, very important part of how we are also able to source the volumes and build from very small streams of feedstock building bulk and then taking it to our refineries around the globe. I would now then like to take you to a short view also on what's been happening in the U.S. So many of you probably remember that back in 2018, we acquired Mahoney Environmental. And I think when it comes to Mahoney and our U.S. UCO platform, it has been really a very exciting story. Since we acquired Mahoney, we have been continuing to organically grow our business in the U.S. in the used cooking oil collection business. But we've also been doing a number of bolt-ons to the platform. And that has really enabled us to grow this important platform in the field stock space. The latest acquisition we made was the acquisition of SeQuential, which was the used cooking oil collection business of Crimson biodiesel. And that really completed the kind of the best coast part that we were still missing. So now we are actually having a coast-to-coast used cooking oil collection business. And I think if you look at the numbers, I think it is very exciting. We are serving more than 76,000 restaurants. Today, we are having more than 500 trucks operating, and we had set the target for ourselves to serve 40 of the top metropolitan areas. And today, we are -- we have almost reached that. So we are serving 37 out of this 40 top metropolitan area. So it has been a tremendous growth and success story for us in the U.S., building this UCO collection platform. Now I would like to briefly still talk about how we are driving value. And I alluded to it already earlier here that we have been building a very flexible platform. We have a global production platform. We have a global optimization that is the backbone of how we are operating this business. We have also been building strong feedstock capabilities, which are really differentiating if you look at many of our competitors. And if you look at the numbers, actually, if one looks back and think about what kind of volatile environment we've been operating through over the past few years, I have to say that we have been able to consistently drive strong sales margin over the course of these years. And we believe that going forward as well, we are well positioned to continue to drive strong margins and value creation. And I think now if one looks forward, I think that we are putting a lot more focus actually on how we are going to be then able to diversify our businesses. Matti already shared with you that as we move forward, we will start to have 3 almost evenly strong business units. And this will also be in the core of how we continue to develop our production platform. So as we are saying here, we are on a growth and this year is a year -- a strong year of growth. We will be growing from 3.3 million tons, it was the capacity at the beginning of this year. In early '24, we will reach 5.5 million tons. Then in '26, with the Rotterdam capacity growth, we will be reaching 6.8 million tons. But our aspiration is to reach up to 9 million tons by the end of this decade. And actually, an important part here is also then the flexibility that we intend to build when it comes to SAS production. So we believe that we could reach more than 30% of SAS capacity by the end of the decade. So I truly believe that I've been sharing an exciting story about how -- what kind of exciting environment we are operating in. We are now on a step change when it comes to our production capacity. We are in a year of growth and then next year will be another year of growth as well as we will have the full capacity next year. And on the other hand, we are also in the execution phase of our Rotterdam capacity growth. So we are -- we will continue to grow in this space. We will also continue to execute on our feedstock strategy. This will be a core part and a backbone of how we will continue to drive value in this market. And I believe that we truly have a differentiating position when it comes to our vertical integration in this market. And then I think the last part is really about the product optionality. We are introducing new optionality now over the course of the coming years. And this will also be a very, very important driver going forward, driving strong margins and value going forward. So this concludes my part. Thank you very much.

Thank you, Carl. And let's now welcome on stage Acting EVP Renewable Aviation, Sami Jauhiainen.

Good afternoon. The global market for sustainable aviation fuels is entering an exciting phase of accelerating growth. We, as Neste have played an instrumental role in enabling this development. By investing early in sustainable aviation fuel production capacity, we have demonstrated to the global aviation industry and regulators that sustainable aviation fuels are an available and scalable solution to reduce aviation emissions. With the foundation we have created in this market, we believe that Neste is well positioned to capitalize on this accelerating growth of the sustainable aviation fuel market. Let me start with talking about the foundation that we have created in this market since we started commercial sales of sustainable aviation fuels in 2019. Our capacity will reach 1.5 million tons by early 2024, which is 15-fold increase to what we had by the end of last year. We have already served over 70 direct customers across the aviation value chain, including fuel suppliers, airlines, corporates as well as cargo and travel market participants. And this figure was over 30, 2021, at the time of our last CMD. Our product is already in use in 21 countries across Europe, Middle East, Asia Pacific and Americas. And just to give you an example of this development, we were in Asia Pacific region, one of our growth areas lately at 1 country, 2021. And at the moment, we are already supplying our product to 6 countries in the region. Our Neste MY Sustainable Aviation Fuel is also available on a branded basis in 25 key airports around the world. as well as on many smaller airports as well as on many general aviation-focused airports. This includes our key hubs, San Francisco, Los Angeles, Amsterdam Schiphol and Singapore Changi as well as various airports where our product is made available via our channel partners. When turning the view to the future, the key topic we need to start discussing is policy. Policy is in this market the fundamental role in enabling the growth of the sustainable aviation fuel market. The market to grow, it requires mechanisms that enables the transfer of sustainable aviation fuel cost premium, ultimately to the ticket prices or other means to bridge the cost premium for the consumers of the fuel. And this is an area where we have seen a lot of progress over the past 2 years with SAF policy frameworks being rolled out across the globe. Europe is here in a very central role. We already have sustainable aviation fuel blending mandates in place in France, Norway, Sweden. In late April, the European Parliament and Council reached the provisional agreement on ReFuelEU Aviation initiative, which will establish an EU-wide SAF mandate of 2% by 2025, growing gradually to 70% by 2050. U.K., we expect to follow the same time line, implementing its mandate in 2025, reaching 10% by 2030. And we see that the SAF policy discussion is already starting also in Middle East, in countries like Turkey and United Arab Emirates. In the Asia Pacific region, the frontrunner countries are Japan, Singapore, New Zealand, what we are expecting that they follow a fairly similar approach as we are seeing in Europe in creating a market for sustainable aviation fuels. Japan has already set a target of 10% SAF use by 2030, and there is a government proposal to drive the execution of this target through a mandate type policy framework. New Zealand published its intention to develop a SAF mandate already in late 2021, and they plan to follow the same time line as European Union implementing their mandate by 25. And Singapore, the government is developing its blueprint for aviation, decarbonization to be published later this year, and we expect policy measures to be as part of that road map as well. The second tier of countries in Asia Pacific region include South Korea, India, Australia, where we also see the policy discussion ongoing. In Americas, the tradition on the policy side is slightly different, especially in the U.S. We have seen more incentive type of mechanisms, tax credits and opt-ins to road transportation mandate as a means to driving the use of sustainable aviation fuels. But what we are seeing is that such policies are being scaled up both on the state as well as on the federal level. Good recent examples include SAF purchase credits implemented in Illinois and Washington state very recently. We also see in the Americas that SAF mandate type of policy frameworks are getting implemented there as well. British Columbia recently announced the intention to establish an aviation specific emission reduction target of 10% by 2030. And this is important because it would establish the first mandate type policy for SAF also in the Americas. Latin America, Brazil could be the first country to implement a SAF mandate during the latter half of the decade. So looking at this picture, what we see is an increasingly consistent view how the market for sustainable aviation fuels and the policies are going to be evolving, we see increasing in alignment towards mandate-type policies in driving this market. And what the policies create is the growth outlook for the sustainable aviation fuel market complemented with increasing voluntary demand for sustainable aviation fuels, arising from airlines and corporates who want to reduce their aviation-related emissions above and beyond any mandates to meet their climate targets. We expect this global demand for sustainable aviation fuels to rise from below 1 million tons this year to around 15 million tons by 2030. At the moment, this market is driven by the first mandates in place, government incentives, especially in countries like U.S., United Kingdom, Netherlands, as well as the voluntary demand. In 2025, we expect mandates to become the primary driver of demand, especially in Europe and in selected Asia Pacific countries. And 2030, we expect to see an increasingly global picture of sustainable aviation fuel policies complemented with increasing voluntary demand. But this is still only the takeoff phase. So for the world to meet the longer-term targets of ReFuelEU Aviation mandate level of 70% by 2050, and the net 0 targets of IATA and ICAO by 2050, there will need to be an accelerating growth of the sustainable aviation fuel market from 2030 onwards. We're also seeing that our customers are increasingly driven by their long-term climate targets. And with our leading sustainable aviation fuel production capability and our global supply capability, we believe that Neste is well positioned to be a strategic partner for airlines to enable them to meet their decarbonization targets. And we have signed global multiyear agreements on sustainable aviation fuel supplies with some of the leading airlines around the world, including likes of Air France KLM, United, DHL, the Air France KLM agreement of 1 million tons of SAF to be delivered over 8 years is probably one of the largest SAF agreements or maybe even the largest SAF agreement ever signed. The DHL agreement is 320 kilotons over 5 years, the United agreement, 160 kilotons over 3 years. What is common for all these agreements is that they provide deliveries of sustainable aviation fuel in multiple locations. And this is really the need of our customers. They have global networks, global procurement of fuels to be able to serve them, we need to have global supply chain capabilities. And this is what we have been building. Our global network includes global setup of distribution and blending terminals. The number of those has risen from 2 in 2021 to 5 at the moment, which allows us to supply the market with both pure neat sustainable aviation fuel as well as readily blended sustainable aviation fuel meeting the specifications for a drop in Jet-A1, it also includes our global network of key airports, which has risen from 7 in 2021 to over 25% at the moment. Including both airports where Neste has our own capability to supply sustainable aviation fuel directly on an end-to win basis to the airlines as well as airports where we are present via our channel partners. A key feature of this setup is flexibility. So we have the ability to supply the aviation supply chain from multiple entry points. So as this is an evolving market, depending on how the policies work, we can adjust our business accordingly. Efficiency is another key feature of the setup, we have spent considerable time thinking what does it -- what makes sense to do centrally, what makes sense to do closer to the markets that we serve, what makes sense for Neste to do ourselves and where do we work with partners who have complementary capabilities to what we have. So let me bring it together. Sustainable aviation fuel market is entering a period of accelerated growth. Neste has established a leading position in this market. We will see increasing competition coming to this space, especially as the policy outlook clarifies further that is likely to trigger further investments in sustainable aviation fuel production also from our competitors. But what we believe in is that we have differentiating advantages that position us well for growth and value creation in this space also in the future. A key driver for this is our leading global sustainable aviation fuel production platform and just global supply capability. reaching 2.2 million tons by 2026. And as Carl described, growing thereafter, along with our capacity as well as through our investments in product optionality positioning us well to be a strategic partner for our global customers. Secondly, it is about our integrated flexible position in the market being able to serve multiple customer segments and adjust our business in an evolving market. And thirdly, it is about our sustainability know-how and advantaged feedstock position, positioning us well to develop credible offerings for our customers, both in the regulatory market as well as in the voluntary market. Thank you.

Thank you, Sami. And now it is time for the first Q&A session. And Sami will be joined by Matti and Carl on stage. And if you are here live in London, I already see a couple of hands. So please just raise your hand, and we will pass you the microphone. And if you are joining online and wish to ask questions, please use the QR code, scan it with your camera.

So I think we have the first question here in the center.

It's Sasi from Morgan Stanley. I had a couple of questions. First, on the production capacity road map that you highlighted, the aspiration of more than 9 million tons by 2030. I was just wondering how we should be thinking about further growth from beyond where we are. Any guidance in terms of whether it is topical footprint, we you would like to expand, whether it's organic or inorganic, that would be helpful. The second question was related to the feedstocks. You've highlighted the target to secure more than 50% of net sales feedstock pool. I was just wondering how much was it right now, whether you're already there? Or is it something you need to build further on? And related to this the scale-up of the novel vegetable oil as a feedstock. Remember, this was an earlier target and the scale up was supposed to happen from 2023 onwards. Now it seems like it's gone to 2026, just wondering where that delay was and whether the existing NEXBTL technology is actually can be directly applied for these novel vegetable oil feedstock.

Thank you, Sasi. And perhaps I take the first question, Carl can comment on the feedstock questions. So just commenting on our production road map. Like you are aware, we have a very clear road map what comes to this year, growing through Singapore Martinez, we are in the process of constructing the Rotterdam expansion, so a very clear road map until 2026 to reach that 6.8 million tons. What we wanted to just convey is our aspiration to continue growing it is something that we will evaluate over the coming years, how to do that in which part of the world. So we don't have any fixed plans on that one, but it's signaling our aspiration to continue finding attractive growth platform growth in this market.

Okay. So if I take the second and the third question, so around how much we have secured today. So we are in the ballpark of where we want to be. But I think it's important to realize that we are growing a lot now over this year and the coming years, and that will mean that we'll need to put a lot more additional efforts in to really build that stickiness and build the security on the feedstock side to continue to also be on this path and drive up that growth of securing the volumes. With regards to the novel vegetable oil, so I mean, we are today already we are piloting, and we are looking at various different concepts. This is something that we are seeing quite broadly in the market. We believe a lot of players are looking into this, and we believe that this market will be scaling up over the course of the coming years. The oil in itself are typically is something that we can use in our refineries. We have been testing some batches already. And we are having targets to ramp up this as we go forward definitely already in the coming years as well. But I think that really, if 1 takes the perspective of the long term here. So in 2025, it's really the 20% of our full feedstock pool that is -- that we are targeting.

Okay. I think we have the next question, Peter. yes.

It's Peter Low from Redburn. One number that jumped out at me is you've stuck with your greater than 15% ROACE target. But clearly, you're generating kind of significantly higher returns at the moment. I was just interested in your perspective as to kind of why you think that 15% is the right level to set the target at? And then the second question was on kind of the evolution of the business mix this decade. You've suggested up to 20% of volumes by 2030 could be from renewable chemicals and polymers, what would have to happen to get you there? Would you have to build specific chemical capacity? Or could you get there using some of the byproducts from your existing facilities?

Thank you. Perhaps I can comment on both questions. So first of all, like I explained in my part, we obviously see that we have some very attractive growth projects ongoing. We also see opportunities going forward. At the same time, part of our business portfolio is also investing in critical maintenance, maintaining our valuable production platform and logistics platform that we have today. We are clearly seeing these growth opportunities. We will be, of course, maximizing the value and the returns, but we wanted to keep the 15% ROACE target because we feel it's for a growth business still, in a way, a good minimal target to have. On the second question, which was around -- sorry, now I have to -- give me again the...

You've suggested up to 20% of volumes by 2030.

Exactly. I will be having actually a presentation on that business shortly perhaps the important message just here already to convey is we are looking at the drop in solution where we could offer our customers streams that they can use instead of the fossil feedstocks they are using today when we look at that renewable part.

Yes, over there.

Jason Gabelman from TD Cowen. The first one I wanted to ask was on SAF. And you've been hesitant to discuss potential margin uplift there. Can you provide any color for potentially how much that could improve your margin? It seems pretty clear it's not going to be dilutive but any color into what you're seeing in terms of margin accretion would be helpful. And then secondly, I couldn't help but notice 4 of the 6 spaces on the first or second slide are different from 2021, and there's been a lot of turnover at the highest level of the company. And I just wanted to get some color on to what's going on there would be helpful. Just any broad comment, it's obviously hard to tell from the outside why that isn't a bit concerning. So any color on that would be great.

Thank you. Sami, the aviation margin question.

Well, I think the first thing to note on that with that respect is that this is still an early market. So we, at this stage, are not looking to provide any kind of detailed guidance on that. But what we believe in is that and look to achieve is competitive non-dilutive margins relative to the use of our product in the road applications. And also, you have seen Neste investing in product optionality. Clearly, those investments are driven by our view that the product optionality is value creating. So hopefully, that gives you a bit of guidance on this topic.

And on the other question, I would just note that like you can see here today, we have a strong team. We have a combination of long industry and Neste experience. We have members of the executive committee coming from adjacent industries, I think it's very clear for me that we have a strong team and certain rotation is a normal part of that. I also want to highlight that we have, of course, over the previous years, built strong teams also in these -- also the new businesses.

Okay. Raphaël.

This is Raphaël DuBois from SocGen. I have a few questions on Slide #20, where you show the spread between production capacity and demand. I can't help but notice how it has been modified since last CMD with higher overcapacity than what you expected before? My first question is you mentioned production capacity. So I guess it's different from actual production. So maybe can you better define what you mean by production capacity? And is this different from actual production. Can you also say what is embedded for the likes of Sweden, we all know that production -- sorry, demand is going to drop in 2024. What is your assumption for the years after? And lastly, is this a mix of SAF, renewable hydrocarbons, polymers, et cetera. Would it be possible to have your feel for SAF specifically? We know it's going to grow very much. How is production capacity comparing with demand for SAF over the next few years.

Thank you, Raphaël. Perhaps I can start with a general comment and then my colleagues can comment. I think it's obviously, like you can see in the picture, first message is that we do see continued long-term demand growth, and that is also visible in that supply-demand outlook, if you look all the way to 2030. I think equally clear is that while we see growth in the markets in the coming years, we also would expect clearly a significant number of players entering the market and hence, also seeing capacity growth. Our strategy, very clear. We are focused on the differentiation drivers, creating value in this market. And we will see, of course, over time what the actual production is. I mean what we have available is more of the announcements on the capacity plans by different companies. Sami first, a short comment on the aviation and then Carl can comment on the general demand outlook.

Yes, if looking at the kind of supply/demand on the sustainable aviation fuel side. At the moment, of course, relatively few renewable diesel HVO producers have the flexibility to optimize between SAF and renewable diesel. But of course, we have seen quite a lot of announcements, competing capacity coming to this market, it is also very much needed for this market to grow and be created. That can, of course, mean at times that the supply side jumps. But maybe what I would highlight still is that when looking at this trajectory towards 2030, we have a market which will have an accelerated growth phase. So overall, looking at this decade, we see a very strong supply-demand outlook to support our growth in this space.

Short comment.

Yes. But perhaps still to add, so the numbers that we show in that graph are based on mandated based driven demand. So then in addition to that, we will probably see a certain amount of demand also coming from voluntary markets, which have had an upside on those numbers. Perhaps also good to mention is, I mean, this is we know the capacity announcements that have been coming and how will these be operated, and that's a different question. So that's why it's a bit difficult also to assess what the supply/demand will look like.

I think we have to take 1 online question. We have a bunch of these here. So our long-term sustainable feedstock supply availability of over 40 million tons by 2030 compared to other industry forecasts. How do we see that as -- maybe the question is that please explain your optimistic forecast. So how do we believe that we can exceed 40 million tons by 2030. What are the key ingredients?

Carl?

Yes. So thanks for the question. So I mean, these projections are then based on a number of different assessments that we have seen in -- from independent analysts, and it's basically our compilation of how the market, in our opinion, will pan out. This is, of course, a projection on how the growth of Western residue availability will be, but a lot is pointing in this direction that we -- by 2030, we will have 40 million tons, and that will then continue to grow towards 50 further in the '30s.

Thank you. And I think we have time for 1 more question, I think, over there.

Naisheng Cui from Barclays. A couple of more questions, if that's okay. Just a follow-up on Slide 20 where you show the production capacity and demand gap. Neste had a really good renewable product margin around 950 for Q1. How shall we think about your margin in the short, medium term? And I think you also mentioned about divert your volume in the earlier slides, I just wonder the flexibility around that, how much volume can you redirect everything, Europe or direct from Europe to Japan, for example, a bit of color will be great.

And perhaps I can have a short comment on that. I mean, obviously, when we look at the very short term, we will be commenting in our quarterly updates like we always do. If I just look a bit at the big picture next year, and I'm sure Katja will be talking about it in her road picture. Of course, we can see that, for example, the development in Sweden means that some of the growth is taken away. So the supply-demand balance will be a bit longer. Of course, that could mean some margin pressure. At the same time, we are very confident with our business model that we can minimize that impact. And we are starting with, like you know, very extraordinary high margins, for example, in the first quarter.

Okay. Thank you all for the great questions. I think we have to move on, and we will have a short break, and we will be back at 1.45. Thank you so much.

Thank you.

Thank you. [Break]

All right. Welcome back. It is time to continue our program. And next, we will have Matti Lehmus taking you through the Renewable Polymers & Chemicals outlook. Matti?

So welcome back. And indeed, in the next 15 minutes, I will give you an update on a growing business that we have invested in renewable polymers and chemicals. In the background, you have a clear interest in the industry to find solutions, how to make polymers more sustainable, how to replace fossil-based crude oil-based products with either renewable or circular solutions. And this is why we believe that there is also a clearly growing demand for different type of renewable and circular solutions in this important market. Our vision here is very clear. On one hand, we see that it's a great approach to introduce into polymers or chemicals feedstocks that are renewable, a drop-in solution ideally, we're replacing a fossil feedstock with a renewable feedstock based on renewable raw materials is a way to reduce the life cycle CO2 emissions of polymers and chemicals. At the same time, we feel it's very important that we can also circulate and reuse the carbon again and again and this is where circular solutions, like chemical recycling, like mechanical recycling come into play. So a very clear vision by combining renewable raw materials and at the same time, increasing the circularity, the recycling rates, there is a clear approach to increase the sustainability of polymers. When we look at the demand picture, it is our expectation that from the market, which we currently estimate that's somewhere around 3 million tons for both renewable and circular solutions there will be a clear growth trajectory ahead until 2030. Our estimate is this market could reach as much as 17 million tons. And it's quite interesting also that we do believe that the growth in the circular segment could actually be even higher than in the renewable one, meaning that majority of this market in the 2030s could actually come from circular solutions. In the background, and you will remember this from our last CMD, we are looking, for example, at the naphtha pool globally, the 100 million tons we talked about that is currently being used for plastics production. And this is how we have built these estimates. And you can make the estimation that this would mean roughly a 15% recycling or renewable content in this time frame. When you look at the geographical split, it's also interesting to note that Asia, of course, represents a large market for polymers. We would expect this to grow over time. It could be the largest market with more than 7 million tons demand and for example, the U.S., which is also a large polymers market, we note here, at the same time, a lot of nonliquid feedstocks is also used. So this is 1 of the reasons why, in particular, Europe and Asia, we believe, have the potential to grow in these 2 segments. Well, looking at the demand drivers, it's very interesting, having listened now to the regulatory drivers that we already see, for example, in aviation, that we also see emerging regulation and rising regulatory pressure in the field of polymers of plastics. Some examples, the European Green Deal, for example, is considering recycling targets and setting targets for the recycling rates in different industries. We have, for example, seen proposals on packaging, and we would expect that dialogue to continue and to look also at fields such as construction, automotive and others. Interestingly, also the U.S., the administration has said that they have an aspiration to replace up to 90% of the fossil plastic with bio-based. And we also note that there are some very important global processes taking place. So for example, the Global Plastics Treaty is an initiative run by the UN environmental program with the ambition to create a framework with binding targets to make polymers and chemicals more sustainable. Interesting to note also as this regulation is evolving is that we also have the second pillar here or the second driver, which is more around corporates having their own sustainability ambition, pledges made by a number of large brand owners which is another driver for this industry. So a combination of today, mostly voluntary demand, tomorrow, possibly also some regulatory drivers. And of course, we see that in the background, there is that interest by consumers to really work on the sustainability of polymers and chemicals. Well, looking at it from an Neste perspective, we see that we are quite uniquely positioned to capture the value and to be part of this global demand growth. We are, of course, building on what I think of the renewable polymers business and supplying feedstocks, drop-in feedstocks to the polymers industry, we are building on the same strengths that I talked earlier about. We have a global platform. We have a very strong feedstock platform. We have very good sustainability processes. So all of these drivers are very relevant when thinking about the renewable polymers market developing. And at the same time, we see that the chemical recycling, we have an aspiration to, of course, develop similar strengths over time also in this business. When we look at some of the focus areas we have, we are looking after working extensively on building, for example, partner networks in Europe. We are putting a lot of emphasis also on Asia Pacific or North America at the moment to increase our market reach. And like you are aware, we are doing a lot of development work to also develop solutions and business models for the chemical recycling. I take some examples, and it's great actually when working and thinking of the partners we are working with that we, in this case, start with some of the end customers who are actually brand owners. And you have seen some of these very exciting examples. For example, McDonald's working on a pilot program to introduce cups, which use plastics made from Neste RE feedstock. We have also examples, for example, in sensitive industries like medical, like food packaging, such as Wellspect and FamilyMart. And also, a third field where we have had a number of very interesting partnerships is around products for baby care, for example, like the cooperation we have had with Bugaboo. What is important to note is that we, of course, have very important partners then who are serving these end customers, that is the production partners. And we have worked extensively with a number of these global companies such as LyondellBasell, Borealis, SK, Mitsui just to give a few examples. Well, let me turn a bit more closely to the chemical recycling part. Here, our aspiration is to build and develop unique capabilities, which would then enable this value chain of taking plastic waste, liquefying the plastic waste then pretreating and upgrading that liquefied waste and ultimately using it as a feedstock for plastics production. And obviously, where we see that Neste has clear capabilities that we are building on is, for example, this pretreatment and upgrading part. This is exactly building on the work we have done over the last decade to build our capabilities in this field. And you will have noticed that we just announced last week an investment to now create 150 kilotons of upgrading capacity at our Porvoo refinery. This is an important step in actually taking the first steps in this value chain. I also note that we are open to different type of partnerships. Of course, we are interested in the liquified waste plastic supply. We also have some technology knowhow that we are very open to make available to partners to accelerate that development of the liquefaction capabilities. I just want to spend a few more words on these investments that we announced last week. It is a big investment. It's EUR 111 million. And very importantly, it creates now when completed, targeting that first half of 2025 that capability to really move to 150 kilotons of upgrading capacity, we have so far made a number of test runs, we have processed 3 kilotons of liquefied waste plastics over '22, '21, '22 -- sorry, 2020 to '22. But now with this step, we are, of course, really enabling this in industrial scale. At the same time, I note this is part of a program that has also received EU funding and the aspiration of this program would be to ultimately reach a capacity of 400 kilotons. So let me very shortly then summarize our vision here in growing this very exciting renewable polymers and chemicals business. We obviously have a proven growth track record. We have unique capabilities that enable us to create solutions for both renewable polymers and chemicals, but also we are now starting the journey towards building a chemical recycling value chain. We have a firm belief that there is a clear need to come up with solutions to make plastics more sustainable. And this is why we clearly believe that the market will be growing during this decade. And we are building on our very strong network of partnerships that we have built over the last years already and that we continue building and this covers not only Europe but also North America and Asia Pacific. As a final comment, I note that in the long run, we believe this could be a platform to also introduce new type of streams to these customers. And that, of course, then creates an interesting long-term opportunity. Thank you very much.

Thank you, Matti, and it's time to move on, and invite on stage EVP Renewable Road Transportation, Katja Wodjereck.

Thank you. Let me share with you why I joined Neste. The business of renewable road transportation has more than doubled in value since 2018. And looking forward, we've seen it before, demand is going to triple in the next 7 years. But there's growth way beyond what we see today because there's off-road applications and markets. And there's regions out there that we haven't even started getting into it. That's why I'm excited about having joined Nest, and that's why I'm confident that we can realize all the demand that is out destined. Renewable fuels will continue to be needed for decades to come. Because when we look at the overall global oil consumption that is today still out there, and we also know at the same time that transportation makes more than half of it. We know that it will require a lot of strong technologies and the coexistence of technologies to tackle this big thing to decarbonize the sector. Today, renewable fuels play a role in that, so do other technologies electrical vehicle. But the problem is so huge that we have within Neste understood that we believe that renewable fuels have a potential to replace up to 1 billion metric tons of fossil fuels that is today being used in transportation. And together, with electrical vehicle really starting to scale up and other technologies that are coming to play here as well, power to liquid hydrogen, algae, we really believe that it has all the ingredients and the technologies out there to get there and tackle really the big issue that we see here. I want to now give you an outlook on how we see the long-term perspective of renewable diesels and the updated demand scenarios out there. And the key headline for you to take away is that renewable diesel is expected to triple its demand in the next 7 years, from today's 11 million metric tons to 30 million metric tons. And yes, this update is in line with what we shared with you at the last CMD despite the energy crisis that we have been now seeing over the last 2 years. But what made the greatest difference to this number here in the outlook is that we have been seeing North America clearly accelerating its ambition and also the ambition going forward. Let me unpack a little bit. When we look at North America, we see a beautiful combination of various factors coming together. North America marks today the biggest market of renewable diesel, and it's going to continue to do so. We look at California, where there is the expectation that carbon reduction targets are going to up from today's 20% to 30%. That's going to drive more renewable fuel demand out there. We see, at the same time, new states adopting the so-called LCFS programs. We look here specifically at the East Coast, New York, the Midwest, but also other cities. And we strongly believe that the incentive structure that the U.S. has put in place is going to allow for more players to put their volumes out there independent of suppliers ramping up capacity. Cross with me over the Atlantic over to Europe where we see a similar outlook. We see demand tripling from current 4 million to 11 million metric tons. And here, we heard it already at the beginning in Matti's introduction. The big legislative incentive here is going to be the RED III together in the combination with the Fit-for-55 program. That is going to increase the pressure on many European countries to tackle, to decarbonize the sector, and to look at renewable fuels as a solution to do so. We expect in the long-term outlook that the Nordic countries are going to play a smaller role here. And we expect at the same time that a lot of the strong, bigger Central European countries are going to play a bigger portion out here. But what's the exciting part of this slide. The exciting part is what you see below. Because the outlook that we're giving you here is all the demand outlook that is today on the regulated market that we see today. What is not out there is when we look at regions such as South America and Asia Pacific that today are eyeing on the incentive schemes that Europe and North America already has put in place. Good example is Brazil, and I'm excited small data, but an important one that last week, the team came back and reported that they have had the first sales of renewable fuels in Brazil. And we heard from Carl before that we have an office already being set up there. But also Asia Pacific, where the question on Japan was out there before, where we signed a partnership with 1 of our distribution partners and are going to look and drive stronger position into Japan, just to mention some of these examples. And what is not on the slide as well is off-road applications, such as mining, the railway, the shipping. I'm going to come into this in a second. Let me now take you more to the shorter term demand outlook. And if we look on the shorter-term demand outlook, I want to start with Europe first. Because if we look at Europe, most of you -- all of you are aware that Sweden has significantly lowered the mandate for the next 3 years starting out of January next year. And Sweden has been one or still today for this year is 1 of the very significant markets today. But I want to highlight and stress out at the same time that at Neste, we are positioned in more than 10 countries physically and we're selling into more than 30 countries already. And the big driver is on a long-term perspective but also on the shorter-term perspective, when we look at '24, '25, the RED III because that is going to drive short- and medium-term demand increase in Europe. And just to mention also a positive outlook here. We've been very much welcoming but in Italy, for example, the high plan supportive incentive scheme was put in place. Let's go over into North America. I already mentioned the LCFS targets an increase in California and also the states, but also in British Colombia are going to already drive year-over-year growth for next year and the year to come. But one change that we're going to see and expect to see and it has been already announced, is that on the tax side, the blender's tax credit is going to change off January 2021. So in 1.5 years from now, move to the clean fuel protection tax, and that's where we really believe going to favor our global production such as products coming from our Martinez refinery, that my colleague, Carl has alluded to in the beginning. Let me share a few words on the changing supply demand dynamics. Because what my experience having seen these dynamics in the petrochemical sector in over 20 years has taught me. But when you anticipate change and you act on it, you can and you will keep your pole position and I want to share some of the actions that we're taking as we speak now. We're going to accelerate our ambition in the U.S. that's already ongoing. We, at the same time, reshifting and accelerating our ambitions in other European countries, such as Italy, the U.K., Germany. When we look at the Sweden -- when we look into Sweden, we have a lot of customers and logistic partners that are today buying Neste MY 100% already. We have, in fact, more than 300 stations selling Neste MY in Sweden. Those are customers and logistic partners that have already gone beyond what mandate told them, and we will continue to supply them and they want to continue despite the mandate change. We're developing new regions. I mentioned Brazil and Japan, just to name one. And at the same time, and that's the part that I personally find very exciting, we're looking into off-road applications into non-incentive voluntary demands and here, one of the ones that I get pretty excited about is the mining sector, but also the railway sector. And I want to share a couple of examples that we brought here for you to share. Let's look at the mining sector. Today in mining, more than 130 million tons of fossil fuel is being used, 130 million tons. That's an area in the market. If you look at the scale, and unfortunately, we cannot put a man next to it, but when you see these machines live, that's an area that is going to be very hard to abate and to move into other technologies. We believe that renewable fuels can be an outstanding solutions there, not only we believe this, also big players such as Rio Tinto do this. In fact, as I'm standing here as we're here with you, there is trials going on with Neste MY in the U.S., and we look very forward to understand more how these are going to materialize. Another beautiful example that we wanted to share with you was a collaboration and an agreement partnership that we signed together with German railway company, Deutsche Bahn. And here, likewise, the sector of railcars consumes today 20 million metric tons of fossil fuel, the majority actually in the U.S. And we take pride in it that we already signed a partnership to accelerate and get a stronger position in this sector as well. And just to also give you a perspective on what's going to continue happening in the Nordic. In the Nordic, together with our long-term customer and partner Q8 we've signed an agreement, and we're going to get our Neste MY out and we're going to -- you're going to see Neste MY renewable diesel at the pump stations in Denmark over and above to what the mandate levels require. So it's really this combination of having a global footprint on the feedstock side, like we heard from my colleague, Carl in the beginning, but acting and serving your customers locally. Let me repeat, we are out there in more than 30 countries already of being trusted by your customers because we are not only reliable in the way we supply them and we act on them, but specifically trusted because of the sustainability impact and the proof that we give them because they know that when we say something, we deliver on that. And I want to share some examples. This business, although it's maturing, it's still a very young business to come and specifically from the sector that I come and it's a very young business to be in. And a lot of those customers that we started to grow with together, they've grown with us. And we take pride in that 6 out of the 10 largest customers that have started with us since 2017 are with us today, and we're going to maintain our pole position with them. That's our ambition. And why, because they trust us. They know that when we put a sustainability certificate out, they know we go beyond. They know that we track it, beyond any collection point, and they know that they can trust us because of that. So let me close with the following for you to take away with. Demand is there. It's going to triple, and that's a reconfirmation from what we've been telling you before. And there's upside in because, as I said, off-road applications as mining has not even been captured today in these numbers. And other regions out there, such as the Americas, Latin America, Asia Pacific are not in these numbers. That's really just the demand part on the regulatory. So then why because we strongly believe and so do many other players in markets and regions, renewable fuels are needed to combat climate change. And we have no -- we have only 1 strong ambition that is going to continue to be the leader in renewable deals and keep our pole position that we have built it up the last couple of years. I want to thank you very much for your attention, and I look forward to the questions in the Q&A, thank you.

Thank you, Katja, and very excited about the future of RRT as well. Now it's time to invite on stage our EVP Oil Products, Markku Korvenranta. Welcome.

Oil markets are emerging from a period of unprecedented volatility. Last year, we needed to reinvent significant elements of our business. We did it successfully. At the same time, the long-term trends for fossil fuels have not changed. They are pointing downwards. Against this backdrop, we have started to plan for the future of refining with renewable and circular feeds only. Before moving to the transformation study, allow me to say a few words about our recent performance. Looking at the last 5 quarters, total refining margin performance I think we can all conclude that we have been able to navigate the energy crisis well. According to our own peer group analysis, we have had the highest margin in this period. The key drivers here were advantaged energy position and our middle distillate heavy product mix. Strong market position in our home markets, that is Finland, Sweden and the Baltic countries is one of the key competitive advantage for us. We are glad that we have been able to maintain that position in the new environment. This strong position is because of the deep knowledge of the marketplace, the logistics and the terminal network, we have the ice-class vessels we operate. And of course, together with the innovation R&D, we have developed a product mix, which is perfectly fit for the harsh Nordic climates. We have also created an optionality to shift between natural gas and propane in hydrogen production. This was very important profit driver last year, and we are going to benefit from it going forward. A big part of that shift already happened last year when we converted our own hydrogen unit for propane service. And again, this is optionality, we can go backwards and forwards. We will complete this program early next year when the other hydrogen unit that we have for our availability will be converted as well. Crude slate changed last year when we moved to fully away from Urals to the other grades. Today, most of our crude oil comes from North Sea. We are actively developing other markets as well. And the upside of this 1 is not fully into the books yet as we learn experience from operating with new crudes in the operations. So I would sum up that the relative competitiveness of our fossil fuel refining in Porvoo has been maintained even in this changing market environment. So moving towards the transformation, the future. We announced a strategic study in September last year on the transformation of Porvoo refinery. We stated boldly that our ambition is to turn the refinery into a world-scale site for renewable and circular solutions. The study continues as we test the hypothesis and challenge our own thinking on what the refinery can really do when processing new raw materials. So what are we doing in practice? We are in practice looking at -- looking to add 2 million to 4 million tons of renewable and circular capacity in Porvoo. The large range 2 million to 4 million tons indicates the flexibility and modularity of our approach. The choice of the scale depends on the market demand for the particular products, and feedstock availability as well as, of course, our capability to process these blends of various feedstock in our current units and the units to be built. Through transformation, we will reach our 2035 climate commitments of carbon neutral production and the interim target of 50% reduction by 2030 compared to 2019. OPs role is particularly important in the Neste family in the footprint right. We have currently relatively large CO2 emissions that through the transformation we will be able to eliminate. The transformation would lead us ending crude oil refining by the middle of the next 10 year. This is a natural consequence of anticipated market changes. First of all, we anticipate increase in renewable circular solutions. And secondly, we anticipate a decline in fossil markets and particularly in our home markets in the Nordics. Neste has what it takes to implement the transformation successfully with our innovation and engineering capabilities, and totally unrivaled understanding of the value chains on both renewables and circular products. It's also worth to note that with our global supply capabilities, sourcing and logistics, we can continue to serve our customers with all of their fuel needs even beyond the middle of 2030. So why do we believe that the Porvoo refinery is the right refinery for the transformation and that they can contribute to the renewable and circular future. The value drivers are compelling. Let me say here upfront, I'm really happy from the statements of my colleagues on the importance of flexibility and optionality in Porvoo refinery, you will get exactly that. The refinery is one of the most complex refineries in Europe and complexity in refinery terms is a good thing. It means that we have multiple production units available to us to produce both renewable diesel, sustainable aviation fuels and chemical feedstock. The Porvoo site could become a real growth platform for my colleagues in our businesses. We have done some scenario thinking here. In one scenario, we have been looking at as much as 50% of the overall production to be directed towards sustainable aviation fuels. And the big part of the balance would be in RPC side of things. The most bullish RPC scenario would indicate more than 80% of the production actually going into the RPC applications. These are very big figures from one end to another one. And of course, if the market so desire, we can also swing the production to the renewable diesel to the extent of more than 50% of the overall volume. Neste has unique competencies in pretreatment technology for both renewable and circular feedstocks. These technologies will be put at good use as part of the Neste Porvoo transformation. This will play actually also to the heritage of portable organization and assets we have been successfully processing difficult fossil feeds in that refinery for decades, and we have what it takes to be successful in it. And I have no doubt that we can do the same in the renewable and circular space. Again, the CapEx productivity, we will get more for the CapEx dollars, Euros that we will be spending because we have a broad range of assets that we can retrofit and turn into a new use. And this is a big benefit for us. The greenfield investments in our thinking would include the pretreatment capabilities which we don't have today. Those would have to be built on the location. On the green hydrogen, Finland is 1 of the most competitive location for green electrolyzer hydrogen production given the abundance of carbon-neutral electricity. Electricity -- green electrolyzer hydrogen is a drop-in solution for the decarbonization of refining processes, be it fossil renewable or circular. Electrification together with utilizing light gases from the process is another avenue that we are looking at for the needs of our green hydrogen in Porvoo. It's an excellent combination with renewable electricity for electrifying and then utilizing the light gases from the process. It's great that we can continue to study the transformation. It's equally fantastic that we actually already taken the first steps towards a different future. The first I would like to raise is the basic engineering decision on the first electrolyzer in Porvoo. We can expect an FID on this in the first quarter of next year. The size of the electrolyzer is 120 megawatts. And with that, it's one of the largest and the most advanced electrolyzer projects in Europe. And Matti already mentioned about the final investment decision on the liquid waste plastic upgrading project. Again, 111 million, 150 kilotons of capacity and this is, again, a first of its kind and really shows Neste's leadership in this emerging sector. Beginning of this year, we started commercial scale coprocessing of waste and residues in Porvoo. Our goal for the year is a little bit short of 100 kilotons for the first year. So we are, again, moving into -- from trialing out with few kilotons, we are actually successfully moving into industrial scale production as a proof point of our capability to deliver. And finally, on green electricity, 2022 was the first year when all of the electricity used in Porvoo was green. And we, of course, will be continuing along the same path going forward. So summing up, we, at oil products, have a strong track record on value creation. The same drivers that we have been able to use in the past to deliver value will be available for us going forward in the fossil refining, but it will also support the transformation to a renewable and circular future. The reducing of emissions for climate commitments is important. I already mentioned the importance of OP, the oil products, particularly in the footprint reduction. That's where we have a significant role in the Neste family. And finally, to our colleagues, what the study and what the transformation when implemented, if implementation that would be creating a fantastic platform for growth in both renewable and circular. With that, I thank you for your attention.