Fortum, UPM & Valmet developing biomass-based fuels

March 11, 2014, Espoo, Finland – Fortum, UPM and Valmet have
joined forces to develop a new, winning technology to produce advanced high
value lignocellulosic fuels, such as transportation fuels or higher value bio
liquids. The idea is to develop catalytic pyrolysis technology for upgrading
bio-oil and commercialize the solution.

According to several studies pyrolysis technology is seen as
the most competitive route to produce advanced lignocellulosic biofuels, and is
one of the most efficient routes for meeting EU2020 greenhouse gas emission
reduction targets.

The five-year project is called LignoCat (lignocellulosic
fuels by catalytic pyrolysis). The project is a natural continuation of the
consortium's earlier bio-oil project together with the VTT Technical Research
Centre of Finland, commercialising integrated pyrolysis technology for
production of sustainable bio-oil for replacement of heating oil in industrial
use.

In this project, the consortium aims higher and the target
is to develop novel integrated technology to produce high value biofuels to
replace fossil transportation fuels, and thereby create new business for the
consortium companies.

"We will develop pyrolysis technology enabling
improvement of bio-oil quality compatible for further refining to
transportation fuels or intermediate products. This is a business opportunity
for us, which will lead to new sustainable processes and products. We see a
great potential in this project and look forward to continued
cooperation," says Jussi Mantyniemi, Director, Technology and R&D,
Valmet.

Successful project execution will help utilities and the
forest industry sector in making investment decisions for entering advanced
biofuel production.

UPM's knowledge of biofuels plays a key role in the project.
"Our aim is to become a significant advanced biofuel producer. In
accordance with our strategy, we will start production in Lappeenranta with
crude tall oil residue as a raw material, and simultaneously we are looking for
ways of producing biofuels out of solid wood biomass. Catalytic pyrolysis is
one of the promising options we are looking into," says Petri Kukkonen,
Vice President, UPM Biofuels.

New technologies based on integration enable energy
efficient production of advanced biofuels and is a way to maximise the value of
Nordic biomass.

"Fortum is eager to continue this work towards higher
value bio liquids based on the former successful co-operation with our R&D
partners. This project is a straight continuation to our first CHP (Combined
Heat and Power) -integrated bio oil investment in Joensuu and supports
perfectly our strategy to increase total efficiency and value of our fleet of
CHPs. The project's scope opens us the possibility to explore interesting new
business opportunities and to define our role in the production chain of
advanced biofuels", says Jukka Heiskanen, Head of R&D at Fortum's Heat
business.

The LignoCat project is funded by Tekes – the Finnish
Funding Agency for Technology and Innovation. The outcome, when successful,
will be a new sustainable product on the market. It will significantly reduce
CO2 emissions in the transportation and heating sectors, and thus help in
achieving national and international targets in greenhouse gas emission
reduction. The project will create a knowledge cluster within biorefining for
universities, research centres and consortium partners.

In addition to employment opportunities, final products will
have a positive impact on the Finnish and European trade balance as the target
market for second generation transportation fuels by 2020 is 10 million tonnes
per year.