Neste Oyj

Juha-Pekka Kekalainen – Head-Investor Relations Matti Lievonen – President and Chief Executive Officer Jyrki Maki-Kala – Chief Financial Officer Kaisa Hietala – Head-Renewable Products Panu Kopra – Head-Oil Retail Matti Lehmus – Head-Oil Products

Henri Patricot – UBS Mukhtar Garadaghi – Citi Giacomo Romeo – Macquarie Georgia Harris – Bank of America Merrill Lynch Josh Stone – Barclays Thomas Adolff – Credit Suisse Jack Wittels – Argus Media Sasikanth Chilukuru – Morgan Stanley Matteo Bonizzoni – Kepler Cheuvreux Peter Low – Redburn

Thank you and very good afternoon ladies and gentlemen. Welcome to this conference call also on my behalf to discuss Neste’s fourth Quarter and full year 2016 results published earlier today.

I’m Juha-Pekka Kekalainen, Head of Neste’s IR and with me here today are President and CEO, Matti Lievonen; CFO, Jyrki Maki-Kala; and the business area heads Matti Lehmus, Oil Products; Kaisa Hietala, Renewable Products and Panu Kopra, Oil Retail for the newly renamed marketing and services. We’ll be referring to the presentation that can be found on our website.

As always please pay attention to the disclaimer, since we will be making forward-looking statements in this conference call. And with these remarks, I’m pleased to hand over to Matti Lievonen to start with the presentation.

Matti, please go ahead.

Thank you, Juha-Pekka. Good afternoon everyone.

Should that the last year 2016, it was good year for us. And when we was here back here, so I say that what the year, now I say that what the continuation 2016 and it was also very good surrounding, so demand in oil products, it went up 1.3 million barrels per day, 2016.

This year, it’s probably the same magnitude. Then in renewable side, we had also the good growth in the USA biomass-based diesel.

Mandate was increased. We got the new markets like Norway, they went to 7.5% by mandates and their target will be 20% by 2020 and it’s not the EU country.

Also the new customers, we got a lot. Also you know 100% blend in renewable side.

So I could not thank enough people here in the company, our customers said that how well we have done during the last year and then we will continue the same route. You will hear more the financials, but I’m very pleased that all the divisions did a better than 2015.

And if you look at our solid financial performance targets, so return of capital after tax16.9%, and the leverage 15.4%. The company has a very, very solid financial situation and we are pleased to go ahead during the 2017 and during the good result also post, but I will come back later to outlook.

And now, I hand over to Jyrki Maki-Kala and he will speak about financials.

Yes, good afternoon also on my behalf, really continuation what our CEO just mentioned about the details about our financials relating to 2016. It was really a good year when talking about all the financials.

You will see in the table in front of you. And it’s really, you think about, growth overall in revenues, yes, coming out of the volumes and also part of these overall prices.

But if you look comparable EBITDA or IFRS EBITDAs, you will see a clear improvement there year-on-year, really affecting our performance. And really this EUR983 million comparable operating profit, it’s really an achievement coming out of all our three businesses: Oil Products, Renewable Products and Oil Retail, they all made strong improvement 2016 and improved their profitability compared to 2015, so 2016 was a great year.

And our IFRS operating profit EUR1.1 billion certainly has the valuation differences now with the increased crude oil price inside, but nevertheless comparable previous year 2015, it’s a totally different level, what kind of profitability we have achieved. Like our CEO mentioned, cash flow very strong year coming out certainly with financial performance, but also management of working capital, management of capital expenditures meaning everything what we can do inside Neste.

Neste, we managed through well with cash flow point of view. And then of course finally thinking about the comparable earnings per share, which is basically the basis for our dividend policy, minimum 40% of that and actually this proposal what is their out in the year EUR1.30, it is more than 40% out of the comparable earnings per share.

If we look at Q4 2016 versus pervious year 2015, it’s really when we are comparing apples to apples, because 2015 like you probably remember, we recorded a full BTC in quarter four 2015 and that is basically EUR120 million kind of booking difference, so if we are comparing apple to apple, 2015 the last quarter was roughly EUR230 million and now it was EUR260 million. So the improvement is very visible like you see is coming from volumes, better volumes in quarter four, like also in renewable we will hear a little bit later.

Market where better reference margin, but then unfortunately we have this fixed cost increased EUR20 million roughly recorded for quarter four 2016 and that is really coming out of this hiccups what we face in Porvoo and also in Rotterdam and you will hear more about those, but that’s basically how quarter four at the end of the day came alive. So it was better performance in 2016 compared to 2015.

And then looking into full-year, comparable EBIT reached, here you will see more let’s say bigger figures if you think about roughly EUR60 million comparable EBIT improvement between two years. Volume is fine coming out of both oil products and slightly coming out of our Oil Retail, Renewables were slightly below with the volumes coming out of the major turnaround we had in quarter three in Rotterdam, that really the markets didn’t help us basically with the reference margin, OP was down EUR230 million and then RP improved roughly EUR5o million, reference margin, that’s how we came to this minus 185.

But then the big thing was around the additional margin, things what Neste is doing in supply chain logistics, the whole value chain et cetera. Operation what we manage and that was a significant change, Oil Products improved EUR200 million year-on-year coming out of the additional margin.

It’s really coming out of contangos actually with its solid performance with our refineries. All the success in sales and supply chain, et cetera which is forming just EUR200 million improvement, basically same-store; it can be applied also to our previous EUR50 million improvement.

We had a very good year thinking about margin management certainly in the California carbon credit were higher than 2015, giving a positive thing, but also the whole supply chain, value chain management was in a very strong position in 2016 with RP and that’s how we basically improved EUR258, the profitability by our own doings. And it was also managing the report or mentioned in the report about the fixed cost.

These hiccups in the products and basically increase half of this fixed cost increased EUR64 million, so that is certainly something we need to focus on for 2017 as we get the fixed cost to a downward trend and this basically what the management certainly is very committed to do. And finally the others, it is mentioned there at it is mostly the joint venture, Nynas that has lower profitability.

And then we ended basically minus 14 in the others and that is something to be then see how 2017 goes within, but that’s basically how we ended to this record high EUR983 million comparable EBIT. And that’s the starting point now for the segment reviews and I hand over to Matti Lievonen to talk about the oil products.

Thank you Jyrki and I’ll start with the comment that when I look at the over the year 2016, I’m quite pleased with the financial result, it was a solid year for oil products and our EBITDA ended up being EUR453 million, which is slightly above the 2015 results in spite of a weaker market. If I take some of the highlights for the full year, I think one obvious thing is that, our sales volume went up 2.4 million tonnes.

This is a result of not having a major turnaround important of all, but also having good operational performance and average at the refineries. The share of the sales into the Baltic Sea area was at quite a normal level I would say, given that, of course, the export sales went up with higher volume.

And one thing that I’m particularly pleased about is that Urals share of the feed went up to 68%. And that means we are well on track towards the target we mentioned on our Capital Markets Day to get towards 75% once we have completed our strategic investment program.

Final comment would be that we continue to pay a lot of attention to our working capital management in oil products and that means that also the RONA of 18.7% is a result of that work in parallel with the EBIT. Then perhaps a couple of comments on the fourth quarter, the EBIT came mean at a solid level of EUR98 million.

And when you look at the main changes versus a year ago, you can see that the reference margin was $0.50 lower than a year ago at $5.2 per barrel. But still seasonally at a quite good level.

This was more than compensated and by the additional margin, which came out at $5.3 per barrel. And this is actually a very good level for this high sales volume.

And it was supported by good operational performance in the third quarter still and then also unwinding some of our contangos. In this picture in the waterfall, you can also see that the fixed cost were exceptionally high in the fourth quarter.

And this is indeed the result of the PL4 maintenance, but also some other unit maintenance that we had to carry out. So clearly there is still room to improve when I look at the operational performance in the next year.

Then the same waterfall quarter for the 2016 overview. And it’s actually quite easy to see from the bars that there are 2 main themes.

First of all, the reference margin was clearly lower than in 2015, Almost $3 per barrel over. At $4.9 per barrel, which is actually in line with the longer-term average, so quite a typical reference margin level.

This impact, which was EUR235 million lower was then compensated largely by the clear improvement in the additional margin. And we came out $1.5 higher than a year ago at $5.5 for the whole year.

And indeed reasons were already mentioned. Good operational performance, in particular, second and third quarter.

Contangos no shutdown. These are the main reasons that helped us to improve the additional margin.

And on the fixed cost side, we will continue to focus on this one into 2017. Our target is clearly to improve the trend, so that we get to stable fixed cost level.

Then some comments on the oil products market. In general, if I look at 2016, I would say like a year ago, it was gasoline that was the strongest performer, roughly $13 per barrel on average margin, diesel average around $10 per barrel.

What happened then in the autumn and towards the end of the year that we could see diesel slightly recovering, whereas gasoline was somewhat weaker than in the first half. You can also see in the picture that the margins actually improved in the fourth quarter versus the third quarter.

On the right hand side, you can see that the rate differential versus Brent, which is also very important for Neste was clearly wider than a year ago, it was minus $2.5 per barrel and when I look into the current situation I think similar dynamics are continuing into 2017. And also, in general, I would say that right now the inventories for different products are on a quite a similar level than a year ago.

So we are in a way starting the year with some relatively similar dynamics. Then, my final comments would be on the total refining margin and like you can see in the chart, we have been able to actually have a relatively stable total refining margin around $10.5 per barrel on average.

And here I am particularly pleased indeed about the additional margin, that was clearly higher than in 2015. Some of the highlights I would raise here is that, Porvoo average utilization rate came out at 89%, clearly higher than a year ago.

Like said earlier the systematic work continues to further improve on this one going into next year. And then commenting on the refining production cost, the average $4.2 per barrel for the full year and also here we are doing a lot of actions to improve efficiency, energy efficiency, maintenance efficiency and the target is to maintain stable production cost in spite of this energy price increase.

With these words, I’ll handover to Kaisa Hietala, who will be talking about Renewable Products.

Thank you Matti. Good afternoon.

Let’s now discuss the Renewable Product performance and I will start with highlights from 2016. We are very pleased to continue the value chain optimization, in 2016 we were able to increase our sales volume, even though there was a major turnaround taking place in Rotterdam.

Naturally this was done through the capacity increase program and we were only 2% behind year 2015 when it comes to sales volume. Our sales allocation was also successfully supporting our results.

Our North America sales was 34% of the total sales volume and we also increased the share of waste and residue feedstock from 68% to 78%. All of these activities are part of our value chain optimization and with these activities, we were able to deliver comparable EBIT EUR469 million for 2016.

If we then look at the Q4 waterfall and here I would like to remind all of us that the – in 2015 in December, the blenders’ tax credit decision was done in the USA and it was done retroactively for the year 2015 as well as for year 2016. And therefore, the BTC was shown in the renewable products comparable EBIT result in Q4 in 2015.

And therefore, we have highlighted this share of one of BTC profits with the light blue color, here as a part of the additional margin. Otherwise, in Q4, we were really successfully increasing the sales volumes.

The market was supporting us, the reference margin created a positive impact. However, we had our production problems in Rotterdam.

We had a mechanical problem after our turnaround regarding some materials that were used for the refinery and this production loss is now visible in our additional margin. Otherwise, Q4 went as planned.

And we scored EUR146 million in EBIT. If we then look at the similar waterfall for year 2016, the turnaround here is visible in the volumes.

And then the reference margin that was – the market and the margin environment was supporting us. Our value chain optimization products, higher additional margin, we were able to increase the waste residue share.

And we were still improving our sales allocation. For example, our 100% renewable diesel sale was bit over 15% and now the target for this year is already 25%.

So we are not only looking of markets, but we are looking segments and pockets inside those markets. The whole year went pretty well according to our plans.

And the EUR469 million EBIT was the result. If we then look at the markets, this is the slide describing the European biodiesel margins and the feedstock prices.

And here we can see the seasonality of the European market, the fact that there is a summer grade and a winter grade for biodiesel, it’s clearly visible in the biodiesel margins. Another point, I would like to make is the increasing trend of feedstock prices.

We have seen this trend continuing throughout the 2016 and this is linked to the overall tightness of the veg oil complex, which we have seen. If we then look at the U.S.

markets, they were more stable than the European markets and the margins. The mandate growth announced late last year was clearly giving a support for the market.

And then if we look at the RIN prices, the supply-demand balance for the (D4) RIN, which is the biomass-based diesel where also Neste’s renewable diesel is part of it, was pretty healthy and has been remaining close to $1 per gallon level, while the ethanol the (D6) RIN has been decreasing quite a lot, since the high levels. And this is partly also due to the fact that there has been quite a lot of overproduction of ethanol.

So if we then look at the reference and additional margins for the quartiles. The reference margin has been increasing throughout the year.

We are roughly $25 high – on a higher level in 2016 compared to 2015 and the same applies also to our average additional margin. Our utilization rate was 88%, naturally for example the Rotterdam hiccup in Q4, has been lowering this number.

And this is also visible in the additional margin in Q4 and we foresee that our additional margin is increasing and now when going forward, since we are expecting high utilization rates. Our capacity creep program which was successfully completed last year has been lowering our production costs.

We are now giving a guidance that our variable cost is $110 per tonne, instead of the previous $130 per tonne. Before closing, the Renewable Products presentation, I would like to remind us regarding the new reference margin calculation, which we implemented at the beginning of January 2017.

Here you can see the previous margin model calculation as well as the new margin model calculation. Also, if you look at the bottom of both boxes, you will see what would be the average reference margins for 2016 calculated through both models, so there is a roughly $60 per ton difference depending on the previous margin model or the new margin model being used.

So I would like to remind all of us that this is now the new margin model that we have started to use. And therefore, please have a look at our website for further information.

And if there is any questions don’t hesitate to contact us. I would now like to handover to Panu Kopra to discuss Oil Retail’s performance.

Thank you, Kaisa. This is Panu Kopra speaking.

We had a good year in marketing and services business area. We are able to increase comparable EBIT and the same-time continued to grow.

We opened 26 new stations and increased the number of B2C and B2B customers. In addition to that, both old and new customers were satisfied to our services.

We measure customer satisfaction by Net Promoter Score, which was developing according to our plans. Overall in network sales, we sold diesel more than 100 million liters more than year 2015, and in direct sales heating oil plus 50 million liters more than the year before.

In Finland, our gasoline market share growth was healthy, and truck volumes increased by 5% due to active sales and strengthening of our services. We were able to open 10 new stations in Finland and continue rebranding of old stations to new Neste K format.

There are now 23 new Neste K stations opened in Finland and the customer feedback about the concept have been promised. In Baltics, volumes were growing very well especially in Latvia and Lithuania.

Diesel sales grew by 12% and gasoline plus 2%. We launched Porvoo diesel in Latvia and piloted cardless payment service with biggest customers in all Baltic countries.

In Russia, we lost slightly volumes, but non-fuel business generated healthy growth, especially fast food was growing better than expected. So overall, taking into account Russian economical outlook, we can be satisfied to our performance in Russia.

All in all, return on net assets reaching already 47% and even higher. If we move to third slide, here, I just want to make a comment on increase of fixed cost, you can take one slide more – thank you.

They were EUR5 million higher than year before due to some extraordinary site soil cleaning cost, higher maintaining cost and increase of staff costs which were actually according to business plan. So, no any unpredictable increase there.

As a summary 2016 was a record year for us. Thank you, handing over back to Lievonen.

Thank you. So we have had several good years and how we see it in 2017.

We will continue our strategy implementation and its proceeding well. So we are very confident with that.

And then this our way to look at the market its true customers and then the growth initiative. So we are looking very much not only countries but very much the customers, end users and to focus where we could really utilize our excellent products.

Oil Products side and then the Renewables and then the marketing and services side. So all in all, we are confident that 2017 will be another successful year for Neste.

And if you think about segments, Oil Products we expect that the reference margin is pretty much the same like in 2016, somewhere $4.9 per barrel to $5 per barrel. Then the additional margins we are able to post more than $5.5 after we have completed in our strategic investment in Porvoo SDA unit and Naantali change season in the processes there.

And then utilization rate should be high, we have only these Naantali turnaround its two months – lasting two months and then we have a normal unit maintenance in Porvoo and Naantali. Renewable Products, reference margins, we expect that to be about last year level could be better.

And then the total margin to be supported by optimizing phase and here I’m very pleased that we are finding new growth all the time at the new markets like such as Norway for example, it’s a Nordic it’s a – they need to be very good fuel and also these 100% contains renewable diesel sales will increase us. Kaisa Hietala mentioned and this is really something that we are focusing the customers who could really use and like to use a 100% renewable diesel.

And of course then we continue to use even lower quality feedstock what we have today and all these items should boost our EBIT contribution. In the renewable side, so we have a new nameplate capacity 2.6 million ton that was since Rotterdam turnaround, so now it’s available for us.

And on retail, we expect that it will follow the previous year’s seasonality pattern, but as mentioned there is a lot of initiative also to improve the results as we have done year-by-year. Then I review where it’s about the global renewables growth and we have there two ways; one way is to increase the existing alliance and luckily we found out that that we could still increase 15% of our both Singapore, Rotterdam and partially also Finnish’s plants.

So it’s a very good – it’s a very cheap pattern to increasing the capacity. And then we’re looking to feasibility of building the new capacity and currently we are evaluating location options including USA and Singapore.

And of course it’s very important to look at the total picture that’s the demand, feedstock, logistics, and even the incentive structure what the countries today have, so all those things are we need to look after. And then, I think that the one good part of this [indiscernible] product is that we may complete the acquisition, Sluiskil pretreatment capacity so we can use in the future, even more difficult feedstock can improve in our EBIT in that way.

But as mentioned so, the market and the customers, they’re really big thing for us and we have been able to increase the renewable to 100% renewable diesel sales and that has been in our focus a long time. It’s not only California, it’s also the Scandinavian markets where we are growing with that.

There is a several new cities again that they have chosen our renewable diesel for their fleets. It’s basically it’s a 100% blend what we are selling to those places.

And in here, Finland, we are launching – we launched the Neste MY Renewable Diesel for consumers and has got the good welcoming. And then as mentioned, Norway, they introduced a few biofuel targets, also the California continue with their bulk up on credit standards, and then in the oil product side, these low-sulfur marine fuels.

I think that now we are really the master of the Baltic Sea result of big cruising companies, they are using our low-sulfur for marine fuel. But all in all, we are focusing a safety there.

We have been improved compared to last year, cash flow, same thing, refinery productivity. And as we had last year some incidence in oil product side, but also in renewable side, so we feel that there is a good opportunity also, improve our financial performance and operational performance there this year compared to last year.

And the markets and customers – number of customers we have been increase, we have been gathered a good, good customer base and that is our focus. So all in all, I’m very confident that this year will be also another very good year for Neste.

Now we are ready for the questions.

Yes, everyone, thank you for the presentation. Couple of questions from me.

First one on renewable products, just want to get a better understanding on the evolution of the additional margin between the third and fourth quarter, roughly a $100 per ton drop. I was wondering if you can give us an idea of how much the unplanned maintenance at Rotterdam, what about the negative impact from that exactly?

And also what can we expect for 2017 for this additional margin? And then secondly on the announcement that you will sort of debottleneck the capacity.

Can you give us some details on how you’re going to do that, what’s the CapEx associated with this debottlenecking and the timing of the increase in capacity? Thank you.

All right. This is Kaisa Heitala speaking.

Thank you for the questions, let me start with the first one, which was about additional margin difference between Q3 and Q4 last year. And clearly, it was our Rotterdam refinery, having the problems, the mechanical problem, which we were then fixing and Rotterdam refinery has been running very well for two months now in a row, so the problems are behind us.

However, it was impacting our feedstock optimization as well of course less production in Q4 and that was the main contributor for the difference – additional margin difference between Q3 and Q4. And second question was about expectation for 2017.

When it comes to additional margin as already said, we are expecting higher utilization rates. We continue the value chain optimization looking at the lower quality raw materials as well as opening up new markets and maximizing the profitable sales allocation.

And with all of this we are expecting that we are improving the additional margin from those levels that we saw in Q4. Then the third question was about capacity creep, about the CapEx and timing.

We will be doing this in a stepwise because it typically requires changes at the refineries, which are then done during the turnaround. We are not expecting major CapEx impact for 2017 or 2018, but then when we have – we have the major turnarounds ahead of us.

There will be some more CapEx needed compared to the previous capacity creep. We are talking about couple of tens of millions and will be then giving guidance when we get closer to those years.

Okay, thank you. Just to clarify on your first answer.

Most of the drop quarter-on-quarter in the additional margin can be attributed to this unplanned maintenance Rotterdam. Is that right?

Exactly, the Rotterdam unplanned maintenance sort of like a related optimization issues around it.

Okay, thank you.

Good afternoon. Thanks for taking my questions.

A couple if I may, so quickly just coming back to this additional margin this year in Q4, how much – could you please break down how much was the maintenance impact, but perhaps how much was the growth in volume? I’m just wondering are you seeing that – as you’re trying to play them you had record sales in terms of tons.

As you’re trying to place that volume, you’re starting to hit low profitability market. Is that a factor and sort of how do we think about that you’re sales look to be growing for the next couple of years?

My second question hopefully a very short one is the direct sales increased from 15% to 25%. Should we assume that’s incremental to your additional margin, hasn’t you make own money on 100% NExBTL sale versus blended?

And my third question is thinking on your investment, it sounded like you’re shifting the timeline a bit from – you had a deadline in 1Q when you talked at the Capital Markets Day. What sort of timeline should we thinking about and how do you corporate the changes we’re seeing in U.S.

into that thinking? Thank you.

All right, thank you very much. Let me start with the additional margin in Q4.

Unfortunately, we will not provide a breakdown of that, it is sort of a complex – or many elements impacting it. But the driver there really was the Rotterdam unplanned maintenance and the sort of the snowball effect from there.

Sales volume in Q4 that was another topic that did we sort of hit the demand well and did that impact our additional margin. That’s not the case, the seasonality especially in a situation where now the Blender’s Tax Credit is expiring in USA.

This is a typical seasonality that the Q4 sales very well. We saw this last year and also in the previous year, so there was a good demand in the market and we did not have problems to place the volumes.

So sales volume – high sales volume was not behind the lower additional margin, but it was the Rotterdam unplanned maintenance. Then there was a question regarding our renewable diesel sales, the 100% sort of a pure sales and now around 50% – sorry last year, around 15% and now growing to 25% and what is sort of the impact.

Clearly, these are the markets where Neste can be very competitive. Any other biodiesel cannot be sold and used as 100% pure.

This also gives the highest greenhouse gas emission savings for the end user. And therefore, we have already a successfully supported several cities in California.

We have expanded this approach also to Scandinavian markets and clearly there are many benefits that our product – the full value of Neste renewable diesel is then realized and naturally these are the good markets for us. However we have not given sort of a numeric guidance on the EBIT impact, its part of our overall value chain optimization and a good sales allocation.

And then the last point was about the new investment. First of all, we – during the Capital Markets Day, our guidance was that we will give further information in Q1 and that has now been done.

Preparing for large investment like this, it takes time and requires a very careful and detailed evaluation and therefore that work is continuing now for potential sites in USA as well as in Singapore. And we will then give further notice when the time is right.

Here is Matti Lievonen. Exactly as Kaisa said but there are 15% to 25%, I could say that it’s a positive impact but how much, you do not disclose and then this capacity growth so, as Kaisa mentioned we didn’t say that we will announced capacity growth.

There is a several things what’s coming to the new sides or the new plan. There is a permit issues for example there is a places that the permits could take really long time.

We need to be very sure of that then there is a logistics, this is as Kaisa mentioned earlier, this is that we are optimizing the whole value chain. It’s not only that this is the one plant somewhere or nil.

But it’s really that the whole value chain what we optimize. We are also looking very well and very details of the incentive because it could be the very big one.

So we need to be sure of those. So we are negotiating multiple different things at the same time.

It’s not only to build up the plant, it’s too easy to build up the plant, we always look at the complete business case and we always look at that. It’s really something to shareholders, that’s when we are investing, we are not investing only for sake of investments and I think that we have been proven that as a very good strategy.

Now we have informed that we could increase 15% our existing capacity and it’s a cheap investment. So that is how we are doing.

But we will give information when we [indiscernible] appropriate. Thank you, Mukhtar.

Thanks for your answer that makes a lot of sense. Guys, if I may follow-up taking in account all the comment you’ve made around direct sales, lack of hopefully unmaintenance in 2017.

Should we expecting higher additional margin year-on-year in 2017?

We do not give a guidance on the additional margin. Unfortunately, this has been the case and it still continues to be the case.

But compared to Q4, when we had these unplanned maintenance problems in Rotterdam, we are expecting higher additional margin than what we saw in Q4.

Thank you. That’s very clear.

Good afternoon and thanks for taking my question. First one is on these full blend product sales moving from 15% to 25%.

Can you provide a split of how much of this is North America, how much is Europe and how much the split moves looking to 2017. Second question is on the renewable fuels margin guidance you have provided.

Just wanted to understand if you are – when you’re saying your flat reference margin and additional margin improving versus Q4, whether you’re making any sort of assumption there in terms of BTC renewal or anything related to that. And finally, one question on refining, again on the margin guidance.

Just wanted to understand what sort of underlying assumption you’re making on the Euro Sprint spread for 2017?

This is Kaisa Heitala speaking. Thank you for the questions.

The first question was around 100% pure renewable diesel like Neste MY, for example, sales split between North America and Europe. Unfortunately, we are not disclosing this.

Naturally, if you look at our press releases, you notice that there are many cities who are adopting this product in California have been doing so very well also in 2016. But we have also a very good segments and pockets here in Europe.

But at the moment the only – we have now introduced this concept of sharing information around RD 100 sales and so far, unfortunately there is no split between the between the sales regions. The second question was about the – is there any assumptions, other than the reference margin sort of remaining flattish and better than Q4, 2015 additional margin, had we taken any other assumptions in our outlook, the segment outlook for example BTC.

Good to highlight here that there is no decision done on the BTC and we have not included BTC in any of our forecasts or outlooks that remains to be seen. And then on top of BTC, there is no other assumptions, which are regulatory driven or our quality driven, which we would have included in our outlook.

So our outlook is like it was projected by our CEO, that we’re expecting flat reference margin environment and improving the additional margin from Q4 levels.

And this is Matti Lehmus, there was third question on the Euro Sprint differential. I would start with the comment that the fundamental still look very solid in terms of supporting quite a wide differential.

We continue to see that export volume through the Baltic Sea is on a growing trend. In general, we also expect rep production to be still on a good level and also from the Middle East, we continue to see competing medium heavy qualities being offered on the market.

The one to watch is, of course, to what extent OPEC cuts could have an impact if I today make an estimate, I would say anywhere around minus $2 per barrel, would be a good estimate.

Perfect. Thank you.

Hi, thanks taking my questions. Just a couple from me.

Firstly, are you able to put a number on how much of your new renewables EBIT in this quarter came from the U.S. in particular, the combined impact of blenders tax credit RINs and California fuel credits.

And secondly, could you comment please on the outlook for renewable feedstock prices, particularly in just waste and residues. So you’re finding, it’s easy to maintain low cost feedstocks or is it becoming more competitive and how in these local sources.

Thanks.

This is Kaisa Hietala speaking. Thank you for the questions.

The first question was that would we – could we put the number for the EBIT contribution from USA, for example, for the Q4 2016 numbers. And unfortunately, we do not make the split between the different markets or their contribution into our EBIT.

What we are telling and sharing is the share of sales either for North America and to Europe. And for example in Q4, our North America sales was 34% of the total sales.

So unfortunately we do not share the EBIT contributions per market. Then there was a question regarding the feedstock prices outlook, especially focused on waste and residues.

In my presentation, I mentioned that the feedstock price, especially the veg oil complex price outlook having increasing trend throughout 2016. And this has been driven by the weather patterns like El Ninos and the crop – how successful the crop season has been, for example for canola and rapeseed and soya beans and so on.

Currently the view in the market is that the tightness should be easing up in 2017, but most probably only during the second half of the year. When it comes to the waste and residues, those markets are not transparent and they’re very fragmented and we have several waste and residues that we keep collecting and using and therefore we have not been discussing the waste and residue part in details.

And therefore, our information is regarding the veg oil complex, which is the main raw material for biofuels in the world.

Yeah, hi guys, I have one follow-up and two other questions as well please. On the debottlenecking renewable, just following up on – you just give any – the timing of that, you mentioned major CapEx in 2017 or 2018.

But with 2017 which we will have to think we might see production creep up of 2.6 million tons. And then secondly on these feedstock availability, I am just wondering if you see that change over the year and posting comments on with the acquisition of the pretreatment capacity whether you’re seeing any impact from that and perhaps what you expect from that and when?

And then thirdly, on fossil and renewables, the seasonality where we see 1Q sales are typically low in the U.S. and I want to – whether you’d seen that thus far, and whether the latest freeze on mandates by the EPA has had any impact as well.

Thank you.

This is Kaisa Hietala speaking. Thank you for the questions.

Let’s start from the capacity creep and do we have a timing for the steps when we are creeping the current platform. And those are typically happening during the major turnaround.

We will be doing some creeping by just a pushing more volumes through the system, as we run the systems, but to create larger steps towards the 3 million tons that always requires a major turnaround. And therefore, when we give the guidance on the turnaround, so that’s the timing also for the capacity creep steps.

The second question was about feedstock availability, have we seen sort of a changes in their availability and also what is the link of the pretreatment facility we acquired at the end of last year in Holland. Indeed, as our capacity is growing, while we are creeping the plants.

And at the same we want to – we have been increasing the waste and residues feedstock share. This kind of a pretreatment facilities like the one is Sluiskil are fitting our strategy very well.

What we are doing is that we are opening up even more lower quality raw materials for Neste to be used. And those typically require bit more pretreatment than what we have designed for our current unit.

And therefore, our feedstock strategy, if you remember from the Capital Markets Day, it was all about finding the right partners, investing in pretreatment facilities and expanding our sort of position in the global market to find more waste and residue materials and so on. And so far, these have been exactly the right steps to take.

We are very pleased to have announced Sluiskil as a part of our global optimization. Then the last question was about the seasonality and the fact that we have seen sort of a lower sales volumes typically in Q1.

And this has been because of the mechanism to roll over mandate fulfillment from the previous year to the next year. Interesting to see how it’s going to be in Q1 and especially in USA, because now EPA has already announced increasing mandates.

The administrative freeze that took place will be lifted in March, but so far, we haven’t seen the difference compared to a typical Q1 sales pattern. So far we do not consider that the current situation in USA would be sort of a changing our Q1 sales plans.

Great. Thank you.

Good afternoon, few questions please. I want to start with oil products.

In 2016, you had a decent margin uplift from as you say operational performance and contango profits and I’m not an oil trader, and I don’t look at it on a daily basis, perhaps you can comment on how the contango opportunities looking so far in 2017 and how it compares to 2016. The other few questions I have on renewables, you talked about Singapore versus the U.S.

in terms of potentially a new Greenfield Project, perhaps you can talk about the pros and cons region by regions. You talked about permits, logistic and centers, et cetera, et cetera assuming tax breaks of BTC on into domestic producers.

Just wanted to get a better sense from what is looking better where and perhaps you can also talk about what your internal return thresholds is for such a Greenfield Project. The last question I had was Kaisa said in your forecast, you do not assume any contribution from BTC in 2017, perhaps you can comment, why?

Thank you.

Okay. This is Matti Lehmus, thanks for the questions and I’ll start with a question on the margin uplift and the contango outlook for 2017.

In 2016, we had a very steep contango structure and we got the timing perfect in locking actually on contangos. When I look into 2017, we do still see a contango include also in number of products, especially for the first half of the year and we have again taken these opportunities and have built contango storages.

So I again look at that to be an important profit contributor, at the same it’s fair to say that the market structure so far haven’t been steep. So in that sense the opportunities are not quite as large as in 2016 at the moment.

This is Kaisa Heitala speaking. There was a question regarding U.S.

versus Singapore, the new Greenfield Projects, what our pros and cons. We are now doing the evaluation, and the evaluation will cover several fields or several topics.

Naturally, there are strengths and weaknesses like in every project. But at the moment, we do not share information or speculate on those.

This will definitely be discussed when we have further information to be shared with you. Then there was a question that what is our IRR, internal IRR requirement for this kind of new Greenfield Project that we confirm that it’s 15% as it has been also in the past.

And then final question was that why aren’t we considering BTC after sort of a potential contribution in 2017. We have taken this view already some years ago that if there is sort of uncertain regulatory decision, we will not take view on that.

We want to focus on our own doings and be excellent in what we do. And therefore we have not included the BTC in our outlook or in our forecast.

Do you feel you can offset the loss from BTC through production costs going down maybe diversifying the feedstock base into something even cheaper? And maybe what timeframe if you think you can offset these things.

Thanks.

We continue to optimize our value chain, as you mentioned the feedstock flexibility, the higher production rates, finding the right pockets to sell renewable diesel those are exactly the right things that we want to do. And I also want to remind that we have very good markets also in Europe.

So we do not give a clear guidance on exactly on these things, but the value chain optimization continues and it has been very successful also in the past.

Perfect. Thank you very much.

Hi. And thanks very much for taking my question.

I just wanted to ask if – it’s about oil product side of the business. I just wanted to ask if you could give any more details it’s all about some of the strategic investments you mentioned specifically the SDA approval.

And then you have the changing processes at Naantali. So anything you can give about the capacity of the SDA, the deadline, how it will help improve profits, the impact on any sort of veg oil purchases for example.

Anything along those lines would be greatly appreciated. Thanks.

Yes. Thank you.

I would start with a comment that the implementation of this strategic investment program is progressing very well and like discussed in the Capital Markets Day. We expect to complete it during this year.

We are on track with the SDA unit to be mechanically completed very soon and the target is to have it up and running in the first half of the year. Then to get also the Naantali configuration changes completed.

We are synchronizing this with major turnaround in Q3. So overall I would say very pleased and looking forward to this being in place along exactly the lines discussed in the Capital Markets Day last autumn.

Hi, this is Sasikanth from Morgan Stanley. Thanks for taking my questions.

I’ve got two questions, please. The first one is on gearing levels, you’re current gearing of 15% is well below the target band of 25% to 50%.

Do you plan to move to the target band or do you think this band needs to be reviewed? And the second one, I’ve just had a question on the reduction in the variable production cost guidance, I was just wondering, what was driving it to move from $130 per ton to $110 per ton.

Okay. First, about the question about the balance sheet, that’s a strong balance what we’re currently having.

We have got our leverage ratio really down to 15% level, what we have currently, and certainly our gearing is also improved. We have said our leverage target or long-term target to be between 25% to 50%.

So we are happy that we have a strong cash flow supporting our balance sheet and looking for the future, how to develop our business further. So balance it is certainly not a burden for us it’s really – enabling for us for the future.

This is Kaisa Hietala speaking. The second question was about the variable production guidance within the RP business area.

Last year we completed our first wave of creeping the capacity of refineries and naturally when we have been able to grow the production capacity from the original 2 million tons to 2.6 million tons, this had a great impact on our cost base. And therefore we felt that now it’s the right moment also to give the guidance to the markets that the variable production cost is at the level of $110 per ton.

Thank you.

Yes, good afternoon, I have two questions. The first one is, if you can disclose the percentage retention of the Blender’s Tax Credit in 2016 and also the absolute impact on the EBIT.

You disclose the EUR89 million in 2014, I think it was EUR169 million on the EBIT in 2015, I can’t see anything on 2016 on the last fiscal year. So if you can disclose the absolute impact on the EBIT.

And then the second question is on the additional margin in renewable products. So you guys for a recovery of additional margin compared to $187 per ton that you posted in Q4, this is under the assumption that the Blender’s Tax Credit is not renewed.

Thanks.

Kaisa Hietala speaking here, thank you for the questions. The BTC was retroactively decided for 2013 and then again for 2015.

And in those cases when we get it as a one-off element in December we have been sharing that information with you. However, now in 2016 it has been known throughout the year and it has become sort of a normal pricing element.

And therefore we have not been calculating and we are not sharing the absolute impact of the EBIT. However, I would like to state that as previously, we do capture a majority of the BTC ourselves.

Then there was a question regarding additional margin recovery from Q4 2016 now going to Q1 2017 that do we include BTC in it. And we do not have BTC included in any of our outlook or forecast for 2017.

Thank you.

Okay, thanks.

Hi. Thanks for taking my question.

It’s actually just a longer-term question on the refining side of the business. What impact, if any, do you expect the new IMO sulfur regulations do you have – kind of the industry margins when they come in 2020.

And specifically how do you see Neste is positioned to benefit or lose out from those. Thanks.

Yes. Matti Lehmus, here.

Thank you for the question. I think first of all it was a very important decision that the IMO made than it has important ramifications for the refining industry.

And what it will mean, of course, is that what we have now seen already in the Baltic Sea that there is strong demand for low-sulfur bunker will become a global phenomenon. And if you look, there is a variety of ways to meet this demand.

One is to go into low-sulfur diesel or to create other low-sulfur fuels for the bunker industry. And then other possibility would be for the industry to invest in scrubbers.

If I look at the impact, I would say it’s still a few years to go, but clearly I would expect this to have a positive impact on middle distillate demand. And I would say that it favors those refiners throughout a low share of fuel oil in their portfolio, because obviously if you put pressure at the same time on the high-sulfur fuel oil.

And I would say Neste as a company particularly well positioned in this regard after the completion of our program, our share of fuel oil goes under 6% already. We do at the same time, have the capability to produce high share of middle distillates.

And in parallel, we are also working on possibilities to actually create new low-sulfur bunker qualities that could be very interesting for the customers. So I very much look forward to this change.

And hope that it’s a great opportunity for us.

Thanks.

Okay. If there are no further questions, we thank you very much for your attention and active participation.

Neste’s first quarter results will be published on the April, 27. Until then, thank you and goodbye.