Wärtsilä Oyj : IR Marine theme call May 2024

Decarbonisation drives profitable growth in Marine

Roger Holm

President, Wärtsilä Marine & Executive Vice President

May 7, 2024

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We are growing both in sales and in profitability

Marine Order Intake		Marine Net Sales, Comparable Operating Profit
EURm		EURm and % of net sales

3,500	Non-comparable figures		3,000	Non-comparable figures		15.0%
3,000						2,500						12.5%
2,500						2,000						10.0%
2,000						1,500						7.5%
1,500
1,000						1,000						5.0%
500						500						2.5%
0						0						0.0%
	2019	2020	2021	2022	2023	LTM	2019	2020	2021	2022	2023	LTM

2023 data restated to reflect the redefined organisational structure as of 1 Jan 2024, as Exhaust Treatment and Shaft Line Solutions business units were moved from Marine Systems to Marine Power, and Marine Power changed its name to Marine; 2019-2022 reflect the data as per the organisation structure at that point of time and thus are not comparable with the restated data for 2023 and LTM; LTM = Last twelve months, Q2 2023-Q1 2024

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Market

Our marine market is growing: decarbonisation is transforming the industry, and our core segments will grow double digit

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After IMO net-zero commitment last year, the regulatory focus has moved to "mid-term measures"

For vessels operating in EU waters, fuel cost may double due to emission fees up to 2030, compared to 2023

IMO GHG Strategy1)

GHG emission reduction % vs 2008

0%				Emission gap		Business-as-usual		IMO strategy
-20%				EEXI3), CII4)
					-20%
-40%
-60%
			Mid-term measures:
-80%				a global carbon levy will	-70%
			likely be adopted in 2025
				and enforced in 20272)			Net-zero
-100%
2008	2023		2030	2040	2050

Vessel's lifetime

EU Fit-for-55

Fuel-related costs for Handymax bulker operating in EU, EURm3)

Annual fuel cost		ETS cost		FuelEU Maritime penalty

15

10~2x

5

0

2023

2024

2025

2026

2030

2035

2040

2045

2050+

Vessel's lifetime

1. Source: IMO; data refers to well-to-wake Green House Gases (GHG) emissions; 2) E.g., goal-based marine fuel standard, GHG emissions pricing mechanism; 3) Assuming 5 000 tons/year VLSFO (Very Low Sulphur Fuel Oil) consumption subject to EU Fit-for-55, VLSFO at EUR 550/ton; EU ETS allowances from EUR 100/ton today to EUR 230/ton in 2050 (source: Transport & Environment NGO)

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Cost of emissions will close the price gap between fossil and sustainable fuels; fuel selection impacts the vessel structure

Fuel type	Low Sulphur	Liquified	Methanol	Ammonia	Liquid	Compressed	Marine
	Fuel Oil	Natural Gas	@ 20°C	@ -33°C	Hydrogen	Hydrogen	Battery Rack
	@ 20°C	@ -162°C	@ -253°C	@ 350bar
Fuel price	1x	1.1x - 4.6x2)	2.6x - 5.5x3)	2.4x - 4.3x4)	3.6x - 4.6x4)	2.1x - 3.1x4)	2.0x - 5.3x8)
factor (per GJ)1)
Fuel price	1x	0.8x - 1.42)	0.8x - 1.6x3)	0.7x - 1.2x4)	1.2x - 1.5x4)	0.6x - 1.0x4)	0.8x - 2.0x8)
factor in 2035,
incl. carbon tax1) 5)
Gross tank	1x	1.7x - 2.4x7)	1.7x	3.9x	7.3x	19.5x	~40x (~20x
size factor6)							potential)

1. Fuel production cost estimate for 2025 and 2035; source: Maersk Mc-Kinney Møller Center for Zero Carbon Shipping - NavigaTE 2023; 2) Price range spans between fossil & electro- methane;

1. Price range spans between bio- & electro- methanol; 4) Price range spans between blue- & electro- ammonia/hydrogen; 5) Assuming 100% consumption subject to EU Fit-for-55, EU allowances at EUR 159/ton (source: Transport & Environment NGO); 6) Gross tank estimations based on Wärtsilä data; 7) 1.7x membrane tanks, 2.4x type C tanks; 8) Shore energy price EUR 0.1-0.27/kWh

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The regulatory changes impact maritime now: half of the total shipbuilding orderbook is set to run on alternative fuels

2023 saw the highest-ever alternative fuel capable vessel ordering, excluding gas carriers

Alternative fuels uptake

Orderbook by fuel type, mGT1)

250								50%
200								40%
150								30%
100								20%
50								10%
0								0%
2016	2017	2018	2019	2020	2021	2022	2023	2024
	Conventional	LNG	LPG	Methanol	Other	% Alt. Fuel

Alternative fuels

1) Source: Clarksons Research, March 2024; other includes ammonia, nuclear, ethane, hydrogen, biofuels, and battery/hybrid

~50%

vessel GT ordered since 2022 is set to run on alternative fuels

~60%

containerships contracted in 2023 - 2024 YTD are set to run on methanol

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We focus on the most high-value,performance-driven segments

Typical Wärtsilä Marine offering per vessel1)

Cruise	Ferries	Offshore	Navy	Specials	Merchant	Hy-El merchant

Engines /	Diesel-Electric	Main Engines	Hybrid-Electric	Aux Engines	Main Engines	Aux Engines	Hybrid-Electric
Hybrid1)			Aux Engines				Main Engines5)
			Hybrid System
Propulsion2)	Tunnel		CPP or	Steerable	CPP, FPP or	CPP or	CPP	CPP
	Thrusters		Waterjets	Thrusters	Waterjets	Steerable	Tunnel	Tunnel
						Thrusters
				Tunnel		Thrusters	Thrusters
				Thrusters		Tunnel	EST	EST
						Thrusters
Potential3)	EUR 15-40m	EUR 10-25m	EUR 5-15m	EUR 5-15m	EUR 5-15m	EUR 2-15m	EUR 25-30m
% of Order Intake4)	~25%	~5%	~10%	~5%	~50%	-

1. Non-exhaustivelist; offering depends on vessel specific configuration and may vary substantially. 2) CPP/FPP = Controllable/Fixed Pitch Propeller; EST = Energy Saving Technology, e.g., gate rudder, EnergoProFin, EnergoFlow, EnergoPac; 3) Potential per shipset; it includes catalyst systems and electrical systems; carbon capture is not included, and could unlock additional EUR 2-8m potential; 4) Marine Power equipment order intake, 2023; ~5% in non-vessel markets, mainly simulation and ports; 2-stroke cargo order intake mainly from LNG carriers and containerships;

1. Predominantly 2-stroke main engines, 4-stroke main engines only on small vessels and coastal vessels

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Recovery in our key target segments will double the 4-stroke medium speed main engine addressable market by 2030 compared to 2023

Newbuild ordering of 4-stroke medium speed main engines, MW1)

Wärtsilä market share, MW3)

13% CAGR

6,000

5,000

4,000

3,000

2,000

1,000

0

2023

2024

2025

2026

2027

2028

2029

2030

Cruise Ferries

Offshore Merchant

Others2)

Cruise ~85%

Ferries ~65%

Offshore ~55%

1) Source: Clarksons March 2024 forecasts; 2) Fishing, dredgers, support units, yachts, tugs, etc.; 3) Market share on 4-stroke main and auxiliary engines as per Q4 2023, Wärtsilä estimates, MW

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Global cruise capacity is forecast to grow over 10% from 2024 to 2028

Cruise passengers, million passengers

29.7				31.7	35.7	37.1	38.9	39.4
		20.4
	5.8	4.8
2019	2020	2021	2022	2023	2024	2025	2026	2027

Cruise capacity, 1000x lower berths1)

Cruise travel reached 107% of 2019 levels in 2023, with

31.7 million passengers sailing; this compares to overall international tourism arrivals, which are 12% lower than 2019

By 2027, cruise is forecast to grow to nearly 40 million passengers (+24% vs 2023)

60% of ships with delivery

	625	656	677
604

701	730	737	745

between 2023 and 2028 are set to run on LNG fuel

Methanol is gaining traction,

2021 2022 2023 2024 2025 2026 2027 2028

e.g., Celebrity Cruises new Edge Series ship will be equipped with Wärtsilä 46F methanol-ready engines

Source: CLIA, the state of the cruise industry 2024; 1) Lower berths indicate cruise capacity, assuming two passengers per stateroom

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Equipment

Decarbonisation is strengthening our market position, as we lead in fuel flexibility and fuel efficiency

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