SunCoke Energy Partners L.P — Merger or Acquisition (February 2019)
41 slides from SunCoke Energy Partners L.P's merger presentation, Feb 26, 2019
Slide 1: SunCoke Investor Presentation
SunCoke Investor Presentation
Slide 2: Important information about the proposed transaction
This communication includes important information about an agreement for the acquisition by SXC of all publicly held common units of SXCP. SXC expects to file a registration statement on Form S-4 with the Securities and Exchange Commission (“SEC”) containing a prospectus/consent statement/proxy stat
Slide 3: Forward-looking statements
Except for statements of historical fact, information contained in this presentation constitutes “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements are ba
Slide 4: SunCoke Overview
SunCoke Overview (1) See appendix for definition and reconciliation of Adjusted EBITDA (2) Midpoint of 2019 guidance range of $265 to $275 million; (3) Represents gross debt divided by Adjusted EBITDA; (4) Calculated using 2018 gross debt divided by midpoint of 2019 Adjusted EBITDA guidance range (2
Slide 5: Advantaged Assets Driving Value Creation
Advantaged Assets Driving Value Creation Industry leading cokemaking and logistics market positions Youngest and most technologically-advanced cokemaking fleet Low cost, logistically advantaged terminals Advantaged Assets with Leading Market Positions Steel and coal industry tailwinds driving growth
Slide 6: Strategically Located Network of Assets
Strategically Located Network of Assets PA NY OH MI IN IL WI MN IA MO AR LA MS AL GA FL SC NC TN VA KY WV VT NH ME MD DE NJ MA CT RI 2 3 4 5 7 8a 9 1 8b Domestic assets strategically located to serve customers’ blast furnace assets Three facilities co-located with customer BF and remaining two facil
Slide 7: Simplification Positions SunCoke for Long-Term Success
Simplification Positions SunCoke for Long-Term Success (1) See appendix for reconciliation of adjusted free cash flow per share Illustrative SXC adjusted free cash flow per share(1) Status Quo 27% Reduces complexity and simplifies governance Aligns interests of SXC shareholders and SXCP unitholders
Slide 8: Cokemaking Overview
Cokemaking Overview
Slide 9: Durable Model with Strong Market Dynamics
Durable Model with Strong Market Dynamics Steady cash flow generation Limited commodity price exposure as a result of cost pass through provisions Average remaining cokemaking contract life of ~6 years across fleet Stable Long-term Business Model Newest fleet of cokemaking facilities and equipment i
Slide 10: Long-term, Contracted Earnings Stream
Long-term, Contracted Earnings Stream Represents production capacity for blast furnace-sized coke, however, customer takes all on a “run of oven” basis, which represents >600k tons per year Dec. 2032 Take-or-Pay Contract Provisions General Provisions Fixed Fee ü Take-or-Pay ü Minimal Termination Pro
Slide 11: Industry Leading Technology: Negative Pressure Ovens
Negative Pressure Ovens MACT standard for heat recovery / non-recovery batteries Cogeneration potential (convert waste heat into steam or electricity) More fungible by-product (generate ~9MW of electrical power per 110Kt annual coke production) No wall pressure limitations on coal blend Higher turnd
Slide 12: U.S. coke market in balance
U.S. coke market in balance Increase in utilization or further closures of coke capacity would tip to shortfall Estimate a 1% increase in BF utilization would result in ~200Kt coke demand(1) Canadian coke market is generally in balance with 600ktpy from the U.S. going to Essar and ArcelorMittal If S
Slide 13: Shrinking Coke Supply Base Creates Opportunity
Expect aging by-product battery closures to continue, creating opportunity for SunCoke Shrinking Coke Supply Base Creates Opportunity Source: CRU Group – Metallurgical Coke Market Outlook Report, Company Estimates Closures driven by combination of deteriorating facilities and environmental challenge
Slide 14: Performance Improvement at Indiana Harbor
To-date, ~80% of the facility completely rebuilt (A/C/D batteries) In 2019, anticipate to complete comprehensive rebuild on 57 remaining B-battery ovens Expect 2019 B-battery rebuilds can be executed at $50M - $60M $40M -$48M of capital expenditures $10M - $12M of operating expenses Once 2019 campai
Slide 15: SunCoke's Superior Assets Will Drive Contract Renewals
SunCoke’s Superior Assets Will Drive Contract Renewals Value Proposition Competitive Advantage SunCoke’s average asset age is ~15 years compared to ~48 years for all other US/Canadian capacity Advantaged operating cost structure and capital investment requirements Improved ability to capture additio
Slide 16: Logistics Overview
Logistics Overview
Slide 17: Strategic Network of Low Cost Facilities
Strategic Network of Low Cost Facilities Strategically located assets with access to barge, rail and truck Provide key logistics services for various met. and thermal coal producers and consumers Well Positioned Domestic Logistics Facilities Only dry-bulk, rail-serviced terminal on lower Mississippi
Slide 18: CMT Positioned for Continued Throughput Opportunities
CMT Positioned for Continued Throughput Opportunities CMT strategically located as only dry-bulk, rail-serviced terminal on lower Mississippi Fastest shiploader on lower Mississippi Low-cost, efficient operations Largest export terminal on the U.S. Gulf Coast Outbound throughput capacity of ~15M ton
Slide 19: Global Seaborne Thermal Coal Expected to Remain Stable
Coal fired generation will continue as primary global energy source Demand for seaborne coal may exceed supply by 400 million tons by 2030(2) Expect new coal-fired capacity in emerging markets will offset coal-fired replacements in developed markets CMT services low cost ILB producers through long-t
Slide 20: Profitable ILB Netback Economics
Profitable ILB Netback Economics Source: Platts Coal Trader International, Internal Company Estimates Netback calculation example assuming $72 and $87 per metric tonne mid-February 2019 API 2 & Newcastle benchmark Ocean Freight for US Gulf/ARA Coal Panamax freight. Consists of CN rail transportation
Slide 21: Financial Performance and 2019 Outlook
Financial Performance and 2019 Outlook
Slide 22: Q4 & FY 2018 Financial Performance
Commentary Q4 ‘18 EPS of $0.03 and FY ‘18 EPS of $0.40 Full-year EPS comparisons primarily driven by: Favorably impacted by operating performance ($0.32/share) and lack of debt refinancing costs ($0.17/share) Unfavorably impacted by revaluation of deferred tax items ($1.91/share) and higher deprecia
Slide 23: Expected 2019 Adjusted EBITDA
Expected 2019 Adjusted EBITDA See appendix for a definition and reconciliation of Adjusted EBITDA. Corporate and Other segment includes the results of our former coal mining business. Does not reflect the benefit from the Simplification Transaction. Adj. EBITDA (Consolidated) Adj. EBITDA (Consolidat
Slide 24: 2019 Guidance Summary
2019 Guidance Summary Reflects 2019 guidance if the merger of SXC and SXCP was completed on July 1, 2019. The pro-forma amounts exclude one-time transaction costs of ~$5M that will be expensed. See appendix for a definition and reconciliation of Adjusted EBITDA and a definition of Adj. EBITDA/ton. C
Slide 25: 2019 Strategic Growth Priorities
Growing market share in the North American coke market Disciplined expansion and optimization of logistics assets Developing additional business lines within the domestic steel/carbon markets Leveraging technology to expand in select global markets 2019 Strategic Growth Priorities Logistics Continue
Slide 26: Balanced Capital Allocation Priorities
Balanced Capital Allocation Priorities Expect to establish $0.06 quarterly dividend; $0.24 annually Initiate Dividend Accelerate delevering efforts to reach 3.0x gross Debt / EBITDA Reduce Debt Flexibility to return capital to shareholders through opportunistic share repurchases Return Excess Capita
Slide 27: Compelling Value Creation Opportunity
Compelling Value Creation Opportunity Advantaged Assets with Leading Market Positions Attractive Industry Dynamics Steady Cash Flow Generation Balanced Capital Allocation Strategy Well Positioned for to Drive Long-Term Value for SunCoke Stakeholders
Slide 28: SunCoke Energy
*% - Sincoke Energy
Slide 29: Legal and Capital Structure Overview
Legal and Capital Structure Overview Note: Market Cap. and TEV data as of 2/15/2018 and Liquidity data as of 12/31/2018 DTE Energy owns a 14.8% non-controlling interest in Indiana Harbor Legend Domestic Cokemaking International Logistics (Domestic) 98% Market Cap: $662M TEV: $1,506M Total Liquidity:
Slide 30: Cokemaking Process
Cokemaking Process C.A C.A Generator Grid Condenser Cooling Tower Steam Hot Flue Gas Blended Coal Coal Storage Piles Blended & Crushed Coal Coke Ovens Coke Emergency Vent Stack Dome C.A Wet Quench Screening & Crushing Heat Recovery Steam Generators Flue Gas Desulfurization System Fan Main Stack Feed
Slide 31: Reconciliation to Illustrate SXC FCF/Share
Reconciliation to Illustrate SXC FCF/Share Based on mid-point of 2019E SXC Consolidated Adjusted EBITDA guidance Based on mid-point of 2019E Adjusted EBITDA attributable to SXCP guidance Anticipated 2019 interest payments associated with SXC term loan Based on mid-point of 2019E SXC cash tax guidanc
Slide 32: Adjusted EBITDA – FY '17 to FY '18
Adjusted EBITDA – FY ‘17 to FY ‘18 See appendix for a definition and reconciliation of Adjusted EBITDA. Corporate and Other includes the activity from our legacy coal mining business, which incurred expenses of $9.8 million and $10.5 million during the year ended December 31, 2018 and 2017, respecti
Slide 33: 2019 Domestic Coke Business Outlook
Commentary Anticipate a $9M to $15M increase in Domestic Coke Adj. EBITDA in 2019 due to: Increased production, higher energy revenue and lower operating and maintenance costs Improved yield benefit from higher coal pricing Expect increased production of ~85K tons in 2019 primarily due to improved o
Slide 34: 2019 Logistics Business Outlook
Commentary 2019 Logistics Business Outlook See appendix for a definition and reconciliation of Adjusted EBITDA. M M $73M – $75M ~ (1) Logistics Performance Expect strong Logistics performance in 2019 Anticipate CMT will handle ~10.5Mt for our coal export customers and ~1.0Mt business (e.g., aggregat
Slide 35: 2019 CapEx Overview
2019 CapEx Overview At the midpoint of the range 2019 ongoing CapEX includes approximately $104M in ongoing Coke CapEx and $5M ongoing Logistics. Expect the gas sharing project to be completed in Q2 2019. Excludes ~$4M of cash payments expected to be made in 2019 for work performed in 2018. 2019 Cap
Slide 36: Definitions
Definitions Adjusted EBITDA represents earnings before interest, loss (gain) on extinguishment of debt, taxes, depreciation and amortization (“EBITDA”), adjusted for impairments, coal rationalization costs, changes to our contingent consideration liability related to our acquisition of CMT and the e
Slide 37: Adjusted EBITDA reconciliation
($ in millions) Q1 '17 Q2 '17 Q3 '17 Q4 '17 FY '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 FY '18 Net cash provided by operating activities $ 29.5 $ 24.9 $ 73.9 $ 20.2 $ 148.5 $ 57.3 $ 28.0 $ 85.3 $ 15.2 $ 185.8 Depreciation and amortization expense 33.3 33.3 30.6 31.0 128.2 32.9 32.0 35.4 41.3 141.6 Loss on ex
Slide 38: Adjusted EBITDA and Adjusted EBITDA per ton
Adjusted EBITDA and Adjusted EBITDA per ton Reconciliation of Segment Q4 2017 Adjusted EBITDA includes $16.4M recognition of previously deferred revenue related to take-or-pay shortfalls throughout 2017. Corporate and Other includes the results of our legacy coal mining business. Reconciliation of S
Slide 39: 2019E Guidance Reconciliation
($ in millions) 2019E Low 2019E High Net cash provided by Operating activities $180 $195 Depreciation and amortization expense (150) (145) Changes in working capital and other 14 1 Net Income $44 $51 Depreciation and amortization expense 150 145 Interest expense, net 65 65 Income tax expense 6 14 Ad
Slide 40: Balance Sheet & Debt Metrics
Balance Sheet & Debt Metrics As of 12/31/2018 ($ in millions) SXC Consolidated Attributable to SXCP Balance Attributable to SXC Cash $ 146 $ 13 $ 133 Available Revolver Capacity 254 178 76 Total Liquidity $ 400 $ 191 $ 209 Gross Debt (Long and Short-term) $ 859 $ 815 $ 44 Net Debt (Total Debt less C
Slide 41: SunCoke Energy
SunCoke Energy”
SunCoke Energy Partners — Merger or Acquisition (February 2019) on 6ix