Peabody Energy Corporation · NYSE:BTU
Peabody Energy — Non-Deal Roadshow (August 2012)
35 slides from Peabody Energy's roadshow presentation, August 2012
Slide 1: West Coast Roadshow Investor Presentation August 2012
West Coast Roadshow Investor Presentation August 2012
Slide 2: Statement on Forward-Looking Information
Statement on Forward-Looking Information Some of the following information contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, and is intended to come within the safe-harbor protection
Slide 3: Global Market Fundamentals Mixed
Global Market Fundamentals Mixed ● Higher third quarter settlements Metallurgical Coal ● Easing in thinly traded spot markets ● Short-term macroeconomic concerns; long-term structural undersupply ● Seaborne market demand strong Thermal Coal ● Indonesia exports surge in early 2012; production down in
Slide 4: U.S. Markets Working Through Challenges
U.S. Markets Working Through Challenges ● Prices rebounded >50% off May 2012 Natural Gas lows; record heat, lower rig count ● Gas-to-coal switching in PRB ● Annualized Q2 output down 104 million Coal tons; June/July stockpile draws ~50% Fundamentals above average ● Expect 2012 down 100 – 120 million
Slide 5: Peabody Reports Solid Results: Second Quarter 2012 Highlights
Peabody Reports Solid Results Second Quarter ● Revenues of $2.0 billion ● Adjusted EBITDA of $453 million 2012 Highlights ● Adjusted Diluted EPS of $0.73 (includes net tax benefit of $0.22) ● Reduced 2012 planned capex to $1.0 – $1.2 billion ● 100% priced in U.S. for 2012; Outlook 70% – 75% priced f
Slide 6: Positioning Diversified Global Operations for Long-Term Success
Positioning Diversified Global Operations for Long-Term Success ● Transitioning to new Burton area in Q3 ● Converting to owner operator at 2 mines Australia – Represents 40% of 2012 Australia production ● Advancing corrective actions at PCI mines ● Ramping up Middlemount, Wilpinjong and Millennium p
Slide 7: Strong Financial Position from Diversified Operations
Strong Financial Position from Diversified Operations Improving ● Repurchased $242 million in bonds in Q2 ● Debt repayment a top priority Balance Sheet ● Target return to historic debt-to-capital ratio ● No significant near-term maturities ● Best coal company credit rating ● Strong YTD margins Stron
Slide 8: Global Coal Markets
Global Coal Markets nm
Slide 9: Annual World Coal Demand Expected to Grow ~1.3 Billion Tonnes in Five Years
Annual World Coal Demand Expected to Grow ~1.3 Billion Tonnes in Five Years Expected Global Coal Demand 10,000 (Million Tonnes) ● Coal-fueled generation 8,900 expected to grow 7,900 840 390+ GW by 2016 8,000 7,600 600 640 ● Volume growth expected to exceed last 6,000 4,795 3,845 4,090 five year incr
Slide 10: Global Met Coal Use Likely to Increase 25% by 2016 to Track Steel Growth
Global Met Coal Use Likely to Increase 25% by 2016 to Track Steel Growth Global Steel Production Expected to Grow 25% by 2016 Global Steel Production 2,000 ● Steel growth would 1,800 require 250 MTPY of India metallurgical coal by 1,600 2016 1,400 Million Tonnes ● China NDRC treating 1,200 China cok
Slide 11: Global Seaborne Demand Growth Expected by 2016
Global Seaborne Demand: 450 – 550 MTPA Growth Expected by 2016; 8% CAGR Pacific Demand Growth 85+% of Total Demand Increase Estimated Growth in Seaborne Imports 1,500 – 1,600 2011 – 2016 1600 (Millions Tonnes) 1400 Growth 2011-2016 1200 Growth 1,050 China 1000 225 - 275 Million Tonnes 800 Thermal 60
Slide 12: China Coal Imports Expected to Double by 2016
China Coal Imports Expected to Double by 2016 Raising 2016 Projected Coal Imports to 400 – 450 Million Tonnes ● 2011 coal imports rise China Gross Coal Imports 20% to record 223 500 400 - 450 million tonnes 450 ● Net coal imports up 400 Met Thermal 100- 110 350 Tonnes in Millions 78% YTD 2012 300 28
Slide 13: India's New Generation Built for Coal Imports
India’s New Generation Built for Coal Imports ~120 GW ● Majority of 70 GW of Current Coal Capacity new coal plants built along coastal regions ● Recent blackouts highlight need for more coal and generation ● Multiple new port Coal Port Coal Plants Under Construction projects under way Capacity Unit:
Slide 14: India Likely to be World's Fastest Growing Coal Importer
India Likely to be World’s Fastest Growing Coal Importer ● June YTD 2012 coal-fueled India Coal Imports generation up 11%; Thermal 200 - 220 imports +13% 200 Met Thermal ● Thermal demand expected to outpace production by 150 Tonnes in Millions >150 MTPY within five years 130 150- 160 ● 70 GW of new
Slide 15: U.S. Coal: PRB and Illinois Basin to Gain from Rising Gas Prices, Exports
U.S. Coal: PRB and Illinois Basin to Gain from Rising Gas Prices, Exports NEAR TERM: ● Expect use down 100 – 120 million tons in 2012 ● June/July stockpile declines ~50% higher than average ● Q2 shipments down an annualized 104 million tons versus 2011 ● Coal use rebounding as gas prices rise LONG T
Slide 16: Rising Gas Prices to Benefit PRB First
Rising Gas Prices to Benefit PRB First Natural Gas Prices Favorable for PRB and ILB U.S. Natural Gas Prices $5 ($/mmBtu) ● PRB to benefit as gas Futures prices move above $2.50 – $2.75/mmBtu $4 ● ILB more competitive at $3.25 – $3.50/mmBtu ILB Competitive ● Eastern coal requires $3 gas prices of PRB
Slide 17: U.S. Coal Plant Retirements Largely Offset by New Plants, Capacity Utilization
U.S. Coal Plant Retirements Largely Offset by New Plants, Capacity Utilization GW of Coal Capacity Retired & Million Tons Consumed by Plants Retiring 2011 – 2016 Cumulative Generation Changes Million Tons New Generation SPRB / ILB 27 2 GW 5 GW Other 11 5 MT 1 GW 2 GW 5 MT Total New Gen 38 3 MT 3 MT
Slide 18: Significant Demand Shift Towards PRB and Illinois Basin
Significant Demand Shift Towards PRB and Illinois Basin Expected U.S. Production PRB advantage Change 2011 – 2016P ● Low end of cost curve (Tons in Millions) ● Primary source for new plants ● Benefits from basin switching ILB ● Asian export potential Illinois Basin advantage SPRB ● Major source for
Slide 19: Coal: The World's Fastest Growing Major Fuel
Coal: The World’s Fastest Growing Major Fuel Growth 2001 – 2011 Growth to 2035 60% 56% 5,000 50% 4,000 Million Tonnes of Oil Equivalent 40% 35% 31% 3,000 30% 2,000 20% 13% 10% 1,000 0% 2009 2020 2035 0% 0 Coal Hydro Natural Oil Nuclear Coal Oil N. Gas Nuclear Hydro Other Gas Largest Share of Global
Slide 20: Peabody's Global Platform: Driving Results
Peabody’s Global Platform: Driving Results
Slide 21: Peabody Continues Global Expansion to Serve High-Growth Regions
Peabody Continues Global Expansion to Serve High-Growth Regions World’s Only Global Pure-Play Coal Investment London Ulaanbaatar Essen Urumqi St .Louis DTA Beijing New Delhi Singapore Balikpapan International Offices Brisbane New Delhi Jakarta Mining Operations Newcastle Beijing Position Sales Reser
Slide 22: Peabody Consistently Delivers Superior Margins
Peabody Consistently Delivers Superior Margins Peabody’s Gross Margins Average Nearly 30% Above NYSE Peers 33% 32% ● Peabody‟s U.S. and 29% Australia margins 25% 25% 23% surpass NYSE Gross Margins Peabody Mining Operations coal peers ● Leading producer in low-cost regions in the U.S. Peer Average U.
Slide 23: Americas and Australia Units Each Contribute Half of Earnings Base
Americas and Australia Units Each Contribute Half of Earnings Base Adjusted EBITDA: Five-Fold Increase in Eight Years 2003 2011 Americas Australia 50% 50% Americas >99% Adjusted EBITDA: $422 Million $2,129 Million Percentages represent share of Mining Adjusted EBITDA. 23
Slide 24: Strong U.S. Operating Results
Strong U.S. Operating Results ● U.S. Adjusted EBITDA up 17% to $591 million YTD ● 2012 U.S. shipments target: 185 – 195 million tons – Current-year position fully priced since late 2011 – Reducing production by ~10 – 20 million tons versus 2011 through customer negotiations, preserving contract NPV
Slide 25: Peabody U.S. Export Opportunities
Peabody U.S. Export Opportunities ● Peabody exporting PRB, Illinois Basin and Colorado coals through Canada, Gulf and East coasts ● Recently secured a long-term agreement with Kinder Morgan for coal exports through the Gulf coast − Increases Peabody‟s Gulf Coast export capacity to ~ 5 – 7 million to
Slide 26: Australia Platform Expanding Through Acquisition and Organic Growth
Australia Platform Expanding Through Acquisition and Organic Growth Expected Australia Volumes PEA Met 45 – 50 PEA Thermal 50 Port Abbot PCI Mine Point Burton North Goonyella 22 – Eaglefield Dalrymple Bay 40 25 Coppabella Moorvale 31 – 34 Tons in Millions Millennium Middlemount Gladstone 30 25.3 13
Slide 27: Australia Organic Pipeline to Deliver Growth in 2012 and Beyond
Australia Organic Pipeline To Deliver Growth in 2012 and Beyond 2011 ● Wilpinjong expansion complete ● Millennium expansion near completion ● Burton extension – Moving to new mining area ● Middlemount ramping up – Permit approval obtained in July ● Metropolitan expansion – Rescheduled for 2014 – 201
Slide 28: Acquisition Significantly Strengthens Bowen Basin Position
Acquisition Significantly Strengthens Bowen Basin Position Peabody Energy Australia Bowen Basin Positioning Before Acquisition Existing Mines: – North Goonyella – Eaglefield – Burton – Millennium 28
Slide 29: Acquisition Significantly Strengthens Bowen Basin Position (New Portfolio)
Acquisition Significantly Strengthens Bowen Basin Position New Bowen Basin Portfolio New Mines: – Coppabella – Moorvale – Middlemount Resources: – Addition of significant metallurgical and LV PCI potential in high-demand Bowen Basin Cautionary Note to U.S. Investors – The United States Securities an
Slide 30: Acquisition Enables Significant Long-Term Growth Potential for Platform
Acquisition Enables Significant Long- Term Growth Potential for Platform Peabody’s Targeted Production Profile ● Expansions of both met and PCI New thermal quality coal PCI Active PEA New ● Acquisition PEA Active offers long-term growth potential for decades 2011 2012 2013 2014 2015 2016 2017 2018 2
Slide 31: Australia: Conversion to Owner Operator on Target
Australia: Conversion to Owner Operator on Target at Millennium and Wilpinjong Moving ~40% of Australia Production to Owner-Operator ● 15% – 20% cost improvement by avoiding contractor margins and using „right-sized‟ equipment, mitigating other pressures ● Increased control over all aspects of minin
Slide 32: Peabody Focused on Strengthening Balance Sheet
Peabody Focused on Strengthening Balance Sheet ● Debt-to-capital at 52% Total Debt-to-Capital % 60 – Repurchased $242 of 57 55 debt in second quarter 52 52 ● No significant debt 50 47 maturities until 2015 ● Ability to increase 42 cash flows by 40 37 reducing capex – Maintenance capex 30 $1.25 – $1.
Slide 33: Peabody: Outstanding Position for Value Creation
Peabody: Outstanding Position for Value Creation Why Coal? Why Peabody? Why Now? ● Rapidly rising ● Increasing ● U.S. gas prices seaborne Australian coming off lows demand exports ● Beginning to ● Major global ● Leader in U.S. realize benefits buildout of steel regions at low of organic and generati
Slide 34: West Coast Roadshow Investor Presentation
West Coast Roadshow Investor Presentation August 2012
Slide 35: Appendix: Reconciliation of Non-GAAP Measures
Appendix: Reconciliation of Non-GAAP Measures Reconcilation of Adjusted EBITDA to Income from Continuing Operations, Net of Income Taxes (Unaudited) Quarter Ended June 30, Year Ended December 31, 2012 2011 2010 2009 2008 2007 (Dollars in millions) Adjusted EBITDA $ 453.4 $ 2,128.7 $ 1,838.7 $ 1,262.