Progressing towards profitable growth Jaakko Eskola President & CEO 1 Wärtsilä 29 September 2016 Jaakko Eskola
OUR STRATEGIC GROWTH AGENDA Focused on fostering a high performance culture committed to continuous improvement, and on leveraging our global presence Committed to achieving profitable growth Well-positioned to benefit from market trends affecting our customers Key growth areas defined around global megatrends 2 Wärtsilä 29 September 2016 Jaakko Eskola
MARKET TRENDS Future energy investments will favor renewable power production Global annual gross capacity additions (GW) 500 400 300 200 100 0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Traditional baseload Gas Wind Solar Other Batteries Other flexible capacity Source: Bloomberg New Energy Finance Traditional baseload = coal, oil, nuclear, hydro Other = geothermal, biomass, waste to energy, other REs Other flexible capacity = demand response and other potential sources 3 Wärtsilä 29 September 2016 Jaakko Eskola
MARKET TRENDS Marine emission regulations are driving a shift towards gas-fuelled vessels LNG capable fleet 3603 2826 Fleet growth based on current order book 2069 268 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Fleet Order book LOW CASE SCENARIO BASE CASE SCENARIO HIGH CASE SCENARIO Source: Clarksons Research 4 Wärtsilä 29 September 2016 Jaakko Eskola
MARKET TRENDS Environmental and economic considerations are increasing the focus on efficiency Voyage cost breakdown of a container ship Port and canal 14% Bunker fuel and consumables 41% Average OPEX breakdown of a utility power plant Operation 6% Maintenance 7% Fuel 87% Handling and stevedoring 45% Source: CMA CGM Annual report 2015, data for 2014 Source: EIA, https://www.eia.gov/electricity/annual/html/epa_08_04.html, data for 2014 5 Wärtsilä 29 September 2016 Jaakko Eskola
OUR STRATEGIC GROWTH AGENDA Well-positioned to benefit from market trends affecting our customers Key growth areas defined around global megatrends Gas-based technology Energy efficient solutions Innovative solutions 6 Wärtsilä 29 September 2016 Jaakko Eskola
WE SUPPORT OUR CUSTOMERS THROUGHOUT THE GAS VALUE CHAIN OFFSHORE SERVICE VESSEL (OSV) PLATFORM SUPPLY VESSEL (PSV) FLOATING STORAGE & (REGESIFICATION) UNIT (FSRU/FSU) POWER PLANT OIL & GAS PLATFORM POWER PLANT SMALL LNG CARRIER LARGE TERMINAL POWER PLANT RELIQUEFACTION UNIT LNG CARRIER RELIQUEFACTION UNIT REGASIFICATION UNIT LNG PEAK SHAVING PLANT SATELLITE TERMINAL BUNKERING TERMINAL LNG FUELLED PASSENGER SHIP MINI LIQUEFACTION PLANT STORAGE AND REGASIFICATION BARGE POWER BARGE POWER PLANT SATELLITE TERMINAL LNG FUELLED CARGO SHIP BUNKERING VESSEL SATELLITE AND BUNKERING TERMINAL LBG FILLING STATION BIOGAS LIQUEFACTION PLANT BUNKERING TERMINAL SMALL LIQUEFACTION PLANT SMALL LNG CARRIER JETTY SMALL/MEDIUM TERMINAL LNG FILLING STATION Exploration & Drilling Production & Liquefaction Transport & storage Receiving terminals & Regasification Distribution & transport to the users Gas-based power generation 7 Wärtsilä 29 September 2016 Jaakko Eskola
GAS-BASED TECHNOLOGY We are a leader in the gas equipment markets Cumulative gas-fuelled vessel deliveries 250 200 Market share in gas engine power plants Other internal combustion engines 23% 150 100 50 0 85 86 88 91 00 03 04 06 07 08 09 10 11 12 13 14 15 16 Wärtsilä's deliveries Others Wärtsilä 77% 8 Wärtsilä 29 September 2016 Jaakko Eskola
GAS-BASED TECHNOLOGY which creates growth opportunities for our Services business Installed base according to fuel type in % of MW 100% 90% 80% 70% 60% 50% 40% 43% 5% 39% 35% 7% 9% 30% 20% 53% 55% 57% 10% 0% 2010 2011 2012 2013 2014 2015 2016 YTD 4-Stroke - Oil 4-Stroke - Gas 2-Stroke - Oil 9 Wärtsilä 29 September 2016 Jaakko Eskola
ENERGY EFFICIENT SOLUTIONS Improving efficiency is a key cornerstone in our product development WST14 WÄRTSILÄ 31 WST-14 STEERABLE NACOS PLATINUM SHIP DESIGN THRUSTER 10 Wärtsilä 29 September 2016 Jaakko Eskola
INNOVATIVE SOLUTIONS Our new innovations in hybrid solutions increase customer efficiency Benefits of hybrid solutions: Fuel savings and reduced emissions Optimised engine operation Thermal power generation optimisation 250 MW ENGINE UNIT 46 MW SOLAR PV UNIT INTERCONNECTING CABLES 11 Wärtsilä 29 September 2016 Jaakko Eskola
INNOVATIVE SOLUTIONS Moving from hardware to software Our digital journey Products equipped with sensors, enabling condition-based monitoring Developing our digital service offering Expanding our portfolio with software-based products Extending data analysis & modelling to external factors Creating customer value through optimised performance 12 Wärtsilä 29 September 2016 Jaakko Eskola
INNOVATIVE SOLUTIONS Digitalisation increases our overall productivity Integrated product solutions (Eniram, Genius, UNIC) Manufacturing models (Robotics, Manufacturing execution system, 3D printing) Manufacturing Building blocks for digitalisation (Smart sensors, simple user interfaces) Productivity enablers Product platforms Components Research Infrastructure Infrastructure enablers (Simulation clusters, connectivity, big data storage, cyber security) Diverse research areas (Engine component traceability, parameter management) Tools & way of working (Engine simulation models, performance, big data analytics, IoT) 13 Wärtsilä 29 September 2016 Jaakko Eskola
OUR STRATEGIC GROWTH AGENDA Focused on fostering a high performance culture committed to continuous improvement, and on leveraging our global presence Well-positioned to benefit from market trends affecting our customers Key growth areas defined around global megatrends 14 Wärtsilä 29 September 2016 Jaakko Eskola
REACHING OUR FINANCIAL TARGETS THROUGH CONTINUOUS IMPROVEMENT Value for customers First time right Make it visual Demand driven flow 15 Wärtsilä 29 September 2016 Jaakko Eskola
AND STRENGTHENING OUR HIGH PERFORMANCE CULTURE Over 130 nationalities in 70 countries Diversity Building an inclusive company culture Leadership Developing excellent leaders with common goals Continuous development Ensuring competent and motivated personnel Over 55,000 learning days in 2015 16 Wärtsilä 29 September 2016 Jaakko Eskola
AND STRENGTHENING OUR HIGH PERFORMANCE CULTURE LOST TIME INJURY FREQUENCY 6.3 2.8 QUALITY COSTS -10% Safety 11 12 13 14 15 High ethical standards Quality 2014 2015 Creating a hazard-free working environment Ensuring responsible actions and integrity among our people Providing the most reliable products and services in our industry 17 Wärtsilä 29 September 2016 Jaakko Eskola
AS WELL AS OUR UNRIVALLED GLOBAL NETWORK North America: Changing energy mix Growing installed base Opportunities in environmental solutions South America: Increasing energy demand Target market for solar applications Large installed base Europe: Changing energy mix LNG infrastructure development Significant shipping market Opportunities in environmental solutions Middle East & Africa: Increasing energy demand Target market for solar applications Growing installed base Asia: Increasing energy demand Target market for solar applications Significant shipping market, growing cruise industry Large installed base Local presence through partnerships 18 Wärtsilä 29 September 2016 Jaakko Eskola
WE ARE COMMITTED TO ACHIEVING OUR LONG-TERM FINANCIAL TARGETS GROW FASTER THAN GLOBAL GDP Focus on strengthening our position in strategic growth markets REACH 14% PROFITABILITY Enhanced performance through continuous improvement MAINTAIN GEARING BELOW 50% Unleveraged balance sheet supports growth through acquisitions DIVIDEND OF AT LEAST 50% OF EPS OVER THE CYCLE Committed to providing shareholder returns 19 Wärtsilä 29 September 2016 Jaakko Eskola
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