Wärtsilä Oyj : Roadshow presentation March 2024

Wärtsilä

Shaping the decarbonisation of marine and energy Roadshow presentation

March 2024

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Wärtsilä - Shaping the decarbonisation of marine and energy

Wärtsilä simplified the	Marine	Energy
Group structure from 1st	Our offering of engines, propulsion	We support the change towards a
January 2024 onwards	systems, hybrid technologies and	future where electricity is produced
with two main	integrated power transmission	with 100% renewable energy by
businesses:	systems and related services	offering grid-balancing power plants,
	support our customers in moving	hybrid solutions, energy storage and
	towards carbon neutrality.	optimisation technology.

MEUR					%	Key growth opportunities
8,000					12%	Energy Storage & Optimisation: Fast
7,000						growing demand for power system
					optimisation solutions
6,000					9%
				Marine newbuild driven by
5,000
					decarbonisation: Uptake of solutions ready
4,000					6%
				for sustainable fuels and recovery in
3,000						passenger and offshore segments
2,000					3%	Moving up the service value ladder in
1,000						Marine and Energy: Continuous growth in
					agreement coverage
0					0%
				Energy Engine Power Plants new build
2019	2020	2021	2022	2023
Net sales					driven by balancing and baseload:
				Gradual shift to renewables
Order intake					Portfolio Business divestments
Comparable operating result, % of net sales

Committed to financial targets

Net sales

5% annual organic growth

Profitability

12% operating margin

Capital structure

Gearing below 0.50

Dividend

Distribute a dividend of at least 50% of earnings

Strong track record in innovations

Investing ~4% of net sales on R&D yearly

Today: engines run on biofuels, methanol, up to 25% hydrogen blends, pure ammonia fuel engine concept

By 2025: pure hydrogen fuel engine concept ready

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Market fundamentals

Marine will move with unprecedented speed towards decarbonisation

Policies & regulations	Technology	Connectivity & data
▪	IMO target/ EU Regulations	▪ Carbon neutral and zero	▪ Vessels as data pools
▪	Access to capital		carbon fuels	▪	Optimisation solutions
▪	Cost of carbon	▪ Carbon fuels for many years,	▪	Performance-based
▪ Demand for green sea		still		agreements
	transport	▪	Abatement technologies	▪	Cyber security
		▪	Battery systems, hybrids
			& energy saving devices
		▪ Fuel efficiency & flexibility

Energy is moving towards a 100% renewables future

	Policies & regulations	Technology	Growing demand
	▪ EU: Carbon neutral by	▪ Wind and solar growing	▪ By 2050, electricity generation
		2050		rapidly	needs to grow by 3X, renewables
	▪	USA: carbon free electricity	▪	Intermittent sources	by 8X to reach Net Zero targets 1)
		production by 2035, net		requiring	▪ Gradual replacement of coal
		zero emissions by 2050		balancing power	▪ Renewables expected to become
	▪ China: Carbon neutral by	▪	Sustainable fuels for	the largest source of global
		2060		thermal balancing	electricity by early 2025 2)
	▪	RePower EU, Inflation	▪	Digitalisation and cyber	▪ Power systems becoming
		Reduction Act		security	increasingly complex
3	©				1) IEA World Energy Outlook 2022 (Net Zero Emissions Scenario)
			2) IEA Renewables 2022 report

Our value creation potential is based on two strategic themes

Transform -	Perform -
attractive growth	clear path for
opportunities at	operational
the center of the	improvements
decarbonisation	and increased
transformation	profitability

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Significant milestones reached in strategy execution

1) 2023 vs. 2021 net sales

Transform

• Market leader in:
• • 4-strokemedium speed main engines
  • Engine power plants
  • Marine hybrid solutions
• Technology leader in green fuels
• Pioneer in marine carbon capture & storage
• Significant growth since 2021:
• • +26%1) in services
  • +17% in thermal balancing installed base
  • 3X1) in Energy Storage & Optimisation

Perform

• Good growth in service agreements by leveraging digital solutions
• Improved quality of new build order book margins
• Turned Energy Storage & Optimisation to profit
• Divested businesses and optimised footprint
• Revitalised team and organisation

Clear path to 12% operating margin

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Transform -

attractive growth opportunities at the center of the decarbonisation transformation

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Strong market fundamentals and the decarbonisation transformation will support profitable growth in Marine business

Key target segments

Annual newbuild contracting of 4-stroke medium speed main engine- powered units (GW)1); CAGR

+11%

5.8

2.5

• IMO MEPC 80 has adopted a revised strategy to reduce GHG emissions by 20% by 2030, 70% by 2040 and to net-zeroby 2050
• In the EU, regulatory landscape will double fuel costs up to 20302)
• Small but growing market for green transport driven by corporate carbon reduction pledges
• Switch to carbon neutral and zero carbon fuels will be progressive
• Drop-infuels, hybrid solutions and abatement technologies will be key to reach short-termreduction targets
• Long-termreduction targets will require a fundamental shift towards sustainable fuels and abatement solutions

20222030

Source: Clarksons 1) cruise, ferries, offshore, merchant, and other (incl. fishing, dredgers, support units, yachts, navy, tugs etc.) 2) assuming 5,000 tons/year VLSFO consumption subject to Fit for 55, VLSFO at 550 EUR/ton; EU allowances from 100 EUR/ton today to 230 EUR/ton in 2050

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Wärtsilä is a global technology and service leader in shaping the decarbonisation of marine

#1		#1		Pioneer

+60%

of net sales3)

Industry leading medium speed engine offering

Industry leading hybrid	Pioneer in carbon capture &
solutions	storage

Global services network to ensure maximum uptime & fuel efficiency

• Biofuels and methanol available already today
• Product industrialisation for ammonia ongoing
• Fuel conversion packages for both 4-stroke and 2- stroke engines available already today

• Hybrid-electricto challenge 2-stroke engines as prime- mover for LNG carriers
• 6% more cargo space, 10% lower fuel consumption1)
• Lower maintenance costs compared to 2-stroke

• Complementary technology to engines
• EUR ~10bn market opportunity in the next 10 years2)
• Commercial release in 2025, CCS-ready scrubbers available already today

▪ Transactional: spare parts &
	field services
▪	Enhanced support &
	technical management
	agreements
▪	Optimised maintenance &
	guaranteed asset
	performance leveraging

1) example on 174,000 cbm LNG carrier 2) estimated market size for newbuild and retrofit 3) 2023 (Marine Power)

digital solutions

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The increasing share of renewables and need for balancing power will support profitable growth in Energy business

Thermal balancing

Energy storage

Addressable market	Addressable market
GW; CAGR	GWh; CAGR

+19%	+17%
22	83

▪ Thermal balancing market is expected to grow +4X by 2030

driven by accelerating intermittent baseload. US is an important

market for thermal balancing

▪ Power generation related regulatory changes support uptake of

thermal balancing (US Federal and State bills, EU electricity

market reform and China market reform)

▪ Sustainable fuels together with flexible engine power plants

balance grids in an affordable and sustainable way, also for

longer shortages in intermittent renewable generation

Energy storage incentives in the US (IRA1) investment and

5

24

▪

production tax credits) support the energy storage market growth.

Local regulatory changes in general support the uptake of energy

storage

2022

2030

2022

2030

Source: BNEF, Wärtsilä estimates 1) Inflation Reduction Act

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Wärtsilä is a global leader in engine power plants. Energy Storage &

Optimisation has grown ~3X since 2021 and is now profitable

#1		#1-5

+40%

of net sales2)

Industry leading engine power plants1)	Top 5 in energy storage	Global services network to ensure
		maximum uptime & fuel efficiency
▪ Superior operational flexibility	▪ Focus on profitable growth	▪ Transactional: spare parts &
through fast ramp-up/ramp-down	▪ Reliable partner with high bankability		field services
compared to gas turbines	▪ Highest safety standards (recent	▪ Maintenance & operational support
▪ Fuel conversion packages available	milestone in passing UL 9540A	▪	Guaranteed performance services
already today	requirements)	▪	Outcome-based agreements,
▪ Hydrogen 25 vol% in pilot operation,	▪ Leading software (GEMS) for power		including decarbonisation services,
full hydrogen technology readiness in	system optimisation		leveraging digital solutions
2025

3X growth in Energy Storage & Optimisation LTM Q3/2023 vs. 2021 net sales 1) units >5MW 2) 2023

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