DTP/2789.ppt 1

Some Directions for Forest Business Research – an Industry View

&Introduction to Weyerhaeuser

Solutions

Ernesto Wagner, PhD

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Energy

+

+

-

-

Population

Climate

+50% by 2050

+100% by 2050

Food+70% by 2050

+2o by 2050

Several new global challenges.......

Weyerhaeuser Confidential

The World Is Changing…

Growing Recognition of How Forests Influence Both the Global Economy and Environment

44

Weyerhaeuser Confidential

Demand for Wood• Demographics• Renewable Energy

Global Warming• Greenhouse Gases• Carbon Footprint

Sustainability• License to Operate• Corporate Social

Responsibility

Forestry as an Asset Class• Pension Funds• Sovereign Funds

Public Policy• Conservation• Incentives & Subsidies

Creating

CHALLENGES&

OPPORTUNITIES

Shrinking Area• Land Use/Land Change• Illegal Logging

Trends Impacting the World’s Forests

5Weyerhaeuser Confidential

Some Directions for Forest Business Research – an Industry View

DTP/2789.ppt 7

This map is the western third of a world map drawn on gazelle skin, The map was signed by Piri Reis, an Ottoman-Turkish admiral, geographer and cartographer, and dated 1513 AD - he copied this map from several originals that included eight Ptolemaic maps made during the era of Alexander the Great (330 BC) and a map by Christopher Columbus!

The directions will not be as good as the ones of the Piri

Reis map!

Forest Business Research

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• First of all, we cannot think of forest business as just the forests any more!

• Today, forests products and forest & land related services span beyond the normal forestry boundaries to industries / stakeholders as different as: • Energy Companies• Corporations with strong sustainability goals• Heavy Industries (Mining, Cement, aluminum, etc)• Global Institutional investors• Governments

• Why?

Forest Business Research (Cont.)• Because forests and land-based assets can provide:

– Biomass– Environmental services / Watersheds– Biofuels– Carbon credits– And the “normal” forest products……

• As an example, 20 years ago it would have been unthinkable that utilities in Europe would approach forestland owners in the US – today they are….

Location of biofuels and solid biomass

installations in the UK

Forest Products Companies selling electricity to the national grids is today a reality

• They sell their excess energy production to the national grid, often with much better comparable margins on a ROA than the wood products they produce

• Weyerhaeuser does that in a small scale in Uruguay• A notable example is Arauco in Chile

– Arauco has been energy self-sufficient for several years –they have a generation capacity of 640 MW, currently producing 550 MW and selling to the grid about 180 MW

DTP/2789.ppt 12

Even low quality wood can move a lot! Selling Small Logs to Asia

the trade secret are not the logs, but the logistics part!

•About 12000 miles, whereas the Earth’s circunference is 25000!

Forest Business Research (Cont.)• Because forests and land-based assets can provide:

– Biomass– Environmental services / Watersheds– Biofuels– Carbon credits– And the “normal” forest products……

Environmental Services / WatershedsForest watersheds provide buffers against flood flows,reduce soil erosion, recharge water in the soil, aquifers, wetlands and floodplains, and also controls water runoff reducing the amount of pollutants and sediments that affects water quality. Even though forests provide a number of ecosystem services, freshwater for human consumption can be the most vital and useful product obtained from a watershed.

Worldwide water consumption will increase 40% in the next 20 years (Source - Fundacion Chile)

What is the point?• It is not clear what is valuable for those customers and

stakeholders.• When buying/hiring environmental services, biomass,

etc, how much attention these different industries and stakeholders bring to issues like Global Execution Capabilities, Reputation, Technology, to just name a few?

• And again, the objectives/background/view of the world of global investors/heavy industry/governments are radically different!

Consultancy Services

• A lot has been studied and written about how to charge for consultancy jobs, still, when those jobs involve technology transfer/intellectual property, things get quite blur.

• How to charge for those? The tricky part is to have a way that is transparent for the customer and not depend just on a “brandname” for charging extra bucks!

Introduction to Weyerhaeuser Solutions

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Operating Regions

OwnedAcres

Southern US 4,114,000

Western US 2,063,000

Uruguay 341,000

Total U.S. & Int’l 6,518,000

• Weyerhaeuser Company – Established in 1900– $5.5 billion revenues in 2009– 15,000 employees

• Company business segments– Timberlands– Wood Products– Cellulose Fibers– Real Estate– Worldwide sales in >60 countries

• Weyerhaeuser's Timberlands– 6.5 million acres

• In Canada we manage public land under long-term license– 15 million acres

• Other current and past international operations– Managing 50,000 acres in China– 188,000 acres,1 sawmill in New Zealand– 62,000 acres, 4 sawmills in Australia

Weyerhaeuser’s Reputation

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Sustainability• All timberlands are certified to sustainable forestry standards• 500,000 square foot research facility with over 350

scientists, engineers and technology experts across the company

• Environmental research since 1948; held in high regard by academic institutions and NGOs

• On-going extensive research in carbon LCAs, soil health, biodiversity studies, water quality and quantity

• “Landscape-level” studies conducted across entire watersheds for decades to understand long-term ecosystem response

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“This is not for us, nor for our children, but for our grandchildren.” – Frederick Weyerhaeuser, founder, 1900

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ConsultingWeyerhaeuser Solutions, the innovative consulting subsidiary of globalforest product leader Weyerhaeuser, helps clients develop, manage, andcommercialize forest-based solutions to mitigate risks, diversify investments, andexpand economic opportunities. We operate on a global scale, providing rawmaterial supply systems and expertise to unlock the economic and environmentalpotential of forests.

•Mostly Softwoods • Mostly Hardwoods •Both

•Global Operating Experience

Customized Solutions

Weyerhaeuser Solutions provides customized services, project development and implementation, and ongoing management in distinct phases

• Phase I Initial advice and project evaluation• Phase II Consulting• Phase III Detailed Plan Development• Phase IV “Boots on the Ground” Project Implementation• Phase V Ongoing Management and Technical Oversight• Phase VI Monetization of forest commodities and environmental

credits through Weyerhaeuser channels

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Phase I Phase II Phase III Phase IV Phase V Phase VIBare Land

Sustainable Forest Project

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Unlocking Forest Value

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Weyerhaeuser Solutions understands the different components of the value chain, and works with the client’s specific needs to recommend the best way to achieve their goals

Products to global marketsProducts to optimal client base

Industrial processesOptimizing industrial downstream

options

Resource managementForests and plantations

Forest with multiple outputs

Solid Wood Pulp Wood Biomass

Solid Wood Product Market

VALUE

CHAI N

Logs & Biomass

Sawn Wood

Pulp Residuals

Pulp Market

Ecosystem & emissionsSuperior geneticsTechnology R&D

Species, Seed, and Silviculture Selection

Forests

Win

d

Biom

ass

Geo

ther

mal Ca

rbon

Weyerhaeuser Consulting, Implementing, & Project Management Weyerhaeuser timber, R&D, sales & marketing capabilities

Solid WoodProduct Market

Energy / Biomaterials

Market

Weyerhaeuser Confidential

Products & Services

Weyerhaeuser

Consulting & Management

Services

Biomass

Carbon & Ecosystems

Wind & Geothermal

Technical Products

• Fertilization systems

• Manufactured seeds

• Seedlings• LIDAR

• Forest design & management• Validate consultants work• Wood basket reviews• Sourcing supply

• Power projects• Renewable,

sustainable feedstock

• Procurement and aggregation services

• Liquid fuels

• Wetland banks• Carbon projects (USA &

Uruguay• 14+ wind projects in USA

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Our Integration Sets Us Apart

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Wood processing expertise – in the forests and across the value chain

Years of experience operating pulp, paper, lumber, panel and other wood processing facilities, and biomass power plants

Weyerhaeuser’s Technology Center has world renowned credibility for research & development in forestry, environmental and sustainable practices

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Weyerhaeuser Skills at Work in Uruguay

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Just as an Example - Biomass• Clients need assurance of sustainability water,

diversity, wildlife, or soil productivity

• Carbon life cycle?

• Clients often have unique sustainability protocols

• What range of biomass materials are clients willing to accept? How do they fit with product conversion requirements?

• Can the more variable materials like understory vegetation or energy crops be integrated into a supply system?

•Logs •Harvest Residuals

•Process Residuals

•Pulp Chips

•Micro Chips

•Phyto Sanitized or

Dried•Densified •Torrefied•Land

Current Weyerhaeuser Product

Maturity (1 = Emerging to 5 = Mature)

5 5 2 5 5 1 1 3 1

Primary Customer Types

•Investors•Backward integrated biomass users

•Lumber•Wood Products

•Power•Fuels•Chemicals

•Power•Wood Products

•Pulp & Paper•Power•Fuels•Chemicals

•Fuels•Chemicals

•Distance or Export Users•Fuel•Chemicals

•Distance Users•Power

•Distance Users•Power•Fuels or Chemicals

Let’s not forget deforestation

and the unthinkable problems it involves…