Methanex Corporation · TSX:MX
Methanex — Investor Presentation (February 2015)
41 slides from Methanex's investor presentation, February 2015
Slide 1: Methanex Investor Presentation
Methanex Investor Presentation February 2015 1
Slide 2: Forward-looking Statements & Non-GAAP Measures
Forward-looking Statements & Non-GAAP Measures Information contained in these materials or presented orally on the earnings conference call, either in prepared remarks or in response to questions, contains forward-looking statements. Actual results could differ materially from those contemplated by
Slide 3: Methanex - Investment Opportunity
Methanex - Investment Opportunity • Methanol Global Leader • Leading market share, competitive assets, strong balance sheet • Positive Industry Outlook • Healthy demand growth outlook, limited new supply • Strong Cash Flow Generation & Distributions • 10% normal course issuer bid expiring May 5, 201
Slide 4: Industry Overview
Industry Overview • ~59 million tonnes annual global demand1 • Top producers account for ~ half of global sales • Methanex is the global leader • ~15% global market share2 • Presence in all major regions • Methanex posted methanol prices are a key pricing reference in all major markets Source: Metha
Slide 5: Methanol End Uses
Methanol End Uses Energy & MTO Traditional Uses (60% of Demand) (40% of Demand; High Growth) Formaldehyde Acetic Acid Fuel Blending DME (di-methyl-ether) Wood Industry, Pharmaceuticals, Automotive Fleece, Adhesives, Paints MTBE Methanol-to- Methyl Methacrylate Methyl Chloride Olefins PMMA- LCD scree
Slide 6: Methanol Usage by Derivative and Region
Methanol Usage.. …By Derivative …By Region Source: Methanex – year ended December 31, 2014 6 6
Slide 7: Industry Review – Strong Demand Growth
Industry Review – Strong Demand Growth • Projected 8.0% CAGR, led by energy applications* 2004 – 2014 CAGR: Energy: 12.3%* 2015 – 2018 CAGR: (000s tonnes) Energy: 11.1%* Total: 6.3% 90,000 Total: 8.0% 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 2004 2005 2006 2007 2008 2009 2010 2011 2
Slide 8: Demand / Supply Balance
Demand / Supply Balance • Demand expected to outpace new capacity over next several years* • A number of projects under discussion, but limited committed capital • Supply gap will be filled through a combination of new China supply and higher operating rates for existing high-cost China plants, or l
Slide 9: Methanol-to-Energy
Methanol-to-Energy • Methanol is primarily made from natural gas • High priced oil versus natural gas creates substitution incentive • Methanol is a liquid fuel and oil substitute Source: Historical annual data and forecast from IHS Chemical, February 2015 9 9
Slide 10: Methanol Industry Cost Curve
Methanol Industry Cost Curve China, Russia Exports, Germany, India, E. Europe Eq. Guinea, Indonesia, Iran, Malaysia, Methanex Plants, Oman, Qatar, Saudi, Trinidad (MHTL), Venezuela, USA Source: Methanex • Steep cost curve • High-end set today primarily by China coal based production • Methanex plant
Slide 11: Methanol to Olefins (MTO)
Methanol to Olefins (MTO) Natural Gas Coal Ethylene Petroleum Residues Oxides (EO) Synthesis High Purity MEG Gas Ethylene Production Acrylic Acid (AA) Methanol to Methanol Olefins Production ACN High Purity Propylene Propylene Oxide PE • MTO is a fast growing oil product substitution opportunity • T
Slide 12: Significant MTO demand growth potential
Significant MTO demand growth potential Estimated Methanol Capacity Number of Plants Start-up (KMT) Completed 6 6,770 H1 2015 5 3,900 H2 2015 4 6,400 H1 2016 1 2,000 Total 16 18,470 6 merchant plants today, potential methanol demand almost 6 MM MT 10 more plants under construction expected to st
Slide 13: Methanol Affordability into Olefins (MTO)
Methanol Affordability into Olefins (MTO) • MTO plants are not able to switch to Naptha as feedstock • Many producers are integrated downstream beyond ethylene and propylene (polyethylene, monoethylene glycol, etc.) • Methanol affordability depends on the economics of the relative olefins derivative
Slide 14: Di-Methyl Ether (DME)
Di-Methyl Ether (DME) • DME can be blended directly with LPG (propane) up to approximately 20% • DME demand is approximately 4 million tonnes per year. • Much of the methanol being consumed as a raw material for DME comes from consumers’ own methanol production • DME generally trades above its energ
Slide 15: Methanol as a Fuel
Methanol as a Fuel • Methanol has attractive features as a transportation fuel: • Liquid fuel – can be blended with gasoline and ethanol in today’s vehicles at minimal incremental costs • High octane fuel which reduces emissions when blended with (or substituted for) gasoline • A safe fuel which bio
Slide 16: Fuel demand expected to continue growth
Fuel demand expected to continue growth Local Methanol Implemented Province Gasoline Standards Since Gansu M15 & M30 2009 Guizhou M15 2010 Hebei M15 & M30 2010 Heilongjiang M15 2005 Jiangsu M45 2009 Liaoning M15 2006 Shaanxi M15 & M25 2004 Shandong M15 2012 Shanghai M100 2013 M5, M15, M85 & Shanxi 2
Slide 17: Methanol affordability as a fuel
Methanol affordability as a fuel • Methanol a highly affordable gasoline substitute in China • Most fuel blending in China is at low percentages and sold based on volume China (Nanjing) Wholesale Gasoline Price: $2.58/gallon* Feb 13, 2015 USGC Conventional Regular Gasoline Price: $1.28/gallon Jan 31
Slide 18: MTG & MTA emerging opportunity
MTG & MTA emerging opportunity • Methanol-to-Gasoline (MTG) and MTG MeOH MeOH No. Location Demand Start-up Producers Supply Methanol-to-Aromatics (MTA) are (KMT) emerging methanol demand 1 Jincheng Jincheng, 300 Q4 2009 Integrated Tianxi Shanxi segments Internal • Six plants today using ExxonMobil’s
Slide 19: Methanol / DME as a Fuel Outside China
Methanol / DME as a Fuel Outside China • Europe is blending methanol into fuel today (up to 3% blending permitted) • Australia - Coogee demonstration project targeting limited launch of methanol blends in early 2015 • Israel - M15 demo program (market potential ~400kta), target commercial introducti
Slide 20: Methanol as a Marine Fuel – Regulations Driving Change
Methanol as a Marine Fuel – Regulations Driving Change ~40 MMTPA methanol equivalent market Stena Ferry Lines converting to methanol Global Emission Control Areas (ECA’s) • N. Europe and N. America introducing tighter ship emissions regulations starting Jan ‘15. In 2020, IMO scheduled to require all
Slide 21: Methanex Production Capacity
Methanex Production Capacity Annual Chile USA (Geismar) Year Production Built Capacity (000 tonnes) Chile I, IV 1988 / 2005 1,720 Chile II, III 1996 / 1999 Geismar, Louisiana 2014-16 2,000 New Zealand Trinidad Egypt (50%) 2011 630 Medicine Hat, Alberta 1981 560 New Zealand Motunui 1 1 1985 950 Motun
Slide 22: Geismar Project Update
Geismar Project Update • Geismar 1 • Achieved first methanol in January, 2015 • Geismar 2 • Start up targeted for late Q1 2016 • Attractive project attributes: • 10-year natural gas contract with Chesapeake to supply one plant • 11-year gas transportation agreement with Gulf South Pipeline for G2 ga
Slide 23: Chile – Potential Sources of Upside
Chile – Potential Sources of Upside • First prize: two-plant operation in Chile, supported by • Ongoing unconventional gas exploration and development in Chile • Argentina tolling arrangement • Argentina shale gas (EIA estimates over 500 tcf in the country) • Chile IV relocation • Delayed decision u
Slide 24: Impressive Financial Results
Impressive Financial Results • Average Modified ROCE of 15% from 2005-2014 $7.00 Adjusted EPS 50% $6.00 Modified ROCE Modified ROCE Adjusted EPS 40% $5.00 $4.00 30% $3.00 20% $2.00 10% $1.00 $0.00 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1) Adjusted EPS = Adjusted net income per common s
Slide 25: Valuation Considerations
Valuation Considerations • Methanex is trading at a discount to replacement cost Capacity millions of tonnes 1 incl. Growth Trinidad 2.0 Chile 0.4 USA (Geismar) 2.0 New Zealand 2.4 Canada (Medicine Hat) 0.6 Egypt 0.6 Total 8.0 . 2 Enterprise Value ($billions) 5.4 Capital Adjustment Geismar 0.4 Adjus
Slide 26: Valuation Considerations
Valuation Considerations • Modest valuation relative to strong cash generation capability 1 (millions of tonnes) With Growth Upside Initiatives Potential Current Operating Capacity 7.0 7.0 Geismar 2 1.0 1.0 Chile Incremental Potential 1.3 Total 8.0 9.3 Approx. Annual Adjusted EBITDA Capability (USD
Slide 27: Q4-14 Liquidity & Capex Outlook
Q4-14 Liquidity & Capex Outlook • Strong financial position to execute growth opportunities Estimated Capital Expenditures 1 Debt & Liquidity at end of Q4-14 (US$ millions) (US$ millions) Total Debt 2 1,528 Geismar ~ 350 Liquidity 2 Maintenance ~ 110 Cash 898 Undrawn Operator (Dec '19) 400 1,298 Tot
Slide 28: Returning Cash to Shareholders
Returning Cash to Shareholders • Meaningful, sustainable and growing dividend • Quarterly dividend of $0.25 per share, yield ~2%1 • 8.6 million share normal course issuer bid (10% of public float) expiring May 5, 2015 • 4.8 million shares repurchased as at January 30, 2014 • ~46% of shares bought ba
Slide 29: Summary
Summary • Positive industry dynamics • Growth led by methanol energy applications, MTO • Global leader with competitive assets • Solid franchise value that is difficult to replicate • Global marketing, supply chain and shipping network • Strong cash generation & financial position • Recently complet
Slide 30: Forward-looking Statements
Forward-looking Statements FORWARD-LOOKING INFORMATION WARNING This Presentation, the Fourth Quarter 2014 Management’s Discussion and Analysis (“MD&A”) and comments made during the Fourth Quarter 2014 investor conference call contain forward-looking statements with respect to us and our industry. Th
Slide 31: Q&A
the power of agility Q&A
Slide 32: Appendix
Appendix 3232
Slide 33: Methanol is..
Methanol is.. • Primarily produced from natural gas Natural Gas syngas Reforming @ ~900oC CO CO2 H2 Steam [& Oxygen] Compression Cooling crude chemical grade Synthesis Distillation CH3OH CH3OH H2O APPENDIX 3333
Slide 34: Methanol Consumers
Methanol Consumers • Concentrated consumer base • 30% of global demand from top 20 consumers • Main consumers are large, global chemical companies: • Celanese, BP, Momentive, Skyford, Sabic, BASF, etc. • Methanex supplies primarily traditional chemical derivative customers who value: • Security of s
Slide 35: Methanex Cost Structure
Methanex Cost Structure • Natural gas • Fixed Manufacturing and • Long-term gas contracts have fixed base price G&A costs and variable component linked to the price of methanol • Primarily people costs (approx. 1100 employees) • Reduces exposure to low methanol prices; shares upside • Medicine Hat p
Slide 36: Carbon Recycling International - Renewable Methanol in Iceland
Carbon Recycling International - Renewable Methanol in Iceland CRI’s GO Plant in Svartsengi, Iceland • World’s greenest methanol – technology captures carbon dioxide from industrial emissions and converts it into Renewable Methanol • Sales into Europe & Iceland gasoline blending market (M3) • George
Slide 37: Renewable Methanol
Renewable Methanol • Methanol and DME is produced from fossil fuels and renewables LNG = Liquefied Natural Gas; DME = Di-Methyl Ether; OBATE = On Board Alcohol to Ether (i.e. methanol converted to DME on board ships) APPENDIX 3737
Slide 38: Methanex Global Supply Chain
Methanex Global Supply Chain APPENDIX 3838
Slide 39: Operating Rates in China
Operating Rates in China • China has operated at ~50% based on nameplate capacity; however, market is tighter than it appears and effective operating rate is ~73% (source: MMSA) • Many plants are not operational due to various factors including: operational problems/maintenance, inability to access
Slide 40: Management Alignment
Management Alignment • Executive shareholding requirements: • CEO - 5 times salary in Methanex shares or share units • Senior executives (5 members) – 3 times salary • Other senior management (~50 employees) – 1 times salary • Short-term incentive linked to ROCE (return on capital employed) • Long-t
Slide 41: Thank You
Thank You A RESPONSIBLE CARE* COMPANY