Methanex Corporation · TSX:MX
Methanex — Jefferies 2012 Global Industrial and A&D Conference
36 slides from Methanex's conference presentation, Aug 8, 2012
Slide 1: Jefferies 2012 Global Industrial and A&D Conference
Jefferies 2012 Global Industrial and A&D Conference John Floren, SVP, Global Marketing & Logistics New York, NY August 8, 2012 © 2012 METHANEX CORPORATION 1
Slide 2: Forward-looking Statements & Non-GAAP Measures
Forward-looking Statements & Non-GAAP Measures Information contained in these materials or presented orally at this meeting, either in prepared remarks or in response to questions, contains forward-looking statements. For more information, please refer to the Forward-looking Statements slide at the
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 • ~45% of shares bought back since 2000 • Regular
Slide 4: Industry Overview
Industry Overview • ~51 million tonnes annual global demand 1 2011 Estimated Global Market Share 20% • Top producers account for 18% ~ half of global sales 16% 14% • Methanex is the global 12% leader 10% 8% • ~15% global market 6% share 4% • Global company with a 2% presence in all major 0% Methanex
Slide 5: Methanol end uses
Methanol.. • Is primarily produced from natural gas • Has diversified end uses Traditional Uses (Mature Markets) Energy & MTO (High Growth Potential Markets) Formaldehyde Acetic Acid Pharmaceuticals, Wood Industry, Automotive Fleece, Adhesives, Paints DME (dimethyl-ether) Fuel Blending Dimethyl Tere
Slide 6: Strong Global Demand Growth
Strong Global Demand Growth • ~10% CAGR demand growth over the past two years (to end of 2011) • Demand into fuel blending, other energy applications and MTO driving higher industry growth 2012 - 2016 CAGR: 8.6% (000s tonnes) 80,000 2000 - 2011 CAGR: 4.6% 70,000 60,000 50,000 40,000 30,000 20,000 10
Slide 7: China Driving Strong Industry Demand Growth
China Driving Strong Industry Demand Growth • China is the largest methanol Methanol Demand in China market in the world (~40% of 25 global demand) 20 Energy Demand (primarily fuel blending and DME) Chemical Demand • Robust demand growth for millions of tonnes traditional chemical demand 15 (industr
Slide 8: Fuel Blending in China
Fuel Blending in China • China leading the way for Wholesale Gasoline Price vs. Methanol Price demand growth into fuel (Energy Equivalence and Volume Equivalence) blending supported by 5.00 4.50 provincial standards Energy Basis + Wholesale Gasoline Price 4.00 15% Efficiency Energy Basis 3.50 • Nati
Slide 9: Fuel Blending in China - Provincial standards
Fuel Blending in China - Provincial standards • Provincial Standards have been supporting strong demand growth for methanol fuel blending in China M15 Heilongjiang M15, M5, M15, M85 & M100 M15 M30 M15, Jilin M30 Liaoning M15 M15, M25 Inner Beijing Mongolia Xinjiang Hebei Tianjin Gansu Shanxi Shandon
Slide 10: Methanol to Olefins (MTO)
Methanol to Olefins (MTO) • MTO is an emerging oil product substitution opportunity • Two main pathways progressing – integrated & merchant • China is experiencing rapid development • 3 Integrated plants operating – methanol demand 5+ million tonnes per annum (mmtpa) • 1 merchant plant operating – m
Slide 11: New Opportunities Emerging for Methanol into Energy
New Opportunities Emerging for Methanol into Energy • ‘SPIRETH’ project – Methanol and DME for ships Stena ‘Scanrail’ running on methanol/DME North Europe Sulphur Emissions Control Area • Northern Europe introducing tighter ship emissions regulations starting Jan 2015 – Cleaner-burning marine fuels
Slide 12: Limited New Supply to Meet Demand Growth
Limited New Supply to Meet Demand Growth • Methanex has several initiatives to increase production in a favorable supply/demand environment over the next few years 25 Global Methanol Supply/Demand Outlook 20 Millions of Tonnes 15 10 Chile 5 North America Methanex New Zealand Projects Other Industry
Slide 13: 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 14: Industry Environment
Industry Environment • High crude oil and coal prices in China have supported a steep industry cost curve Energy Price of Methanol: $380 - 390/tonne methanol energy price equivalent when oil = $100/barrel 400 Estimated Delivered cash cost (US$/tonne) China, Russia Exports, Germany, India, 300 E. Eur
Slide 15: Global Methanol Leader
Global Methanol Leader • Production Capacity (millions of tonnes) • ~15% of global market share • Chile: 0.5-2.8 • Trinidad: 2.0 • Enterprise Value: ~US$ 3 Billion • New Zealand: 1.5-2.4 • Waterfront Shipping Subsidiary: ~17 vessels • Egypt (60%): 0.8 • Employees: ~1,000 • Canada: 0.5 • Louisiana:1.
Slide 16: Egypt
Egypt • 1.3 million tonne plant in Damietta, Egypt started up in March 2011 (Methanex 60% interest) • Excellent operating performance: 1.5 million tonnes produced since starting up to end of Q2- 2012 • Competitive cost structure EMethanex Plant Site, Damietta, Egypt © 2012 METHANEX CORPORATION 16
Slide 17: Canada
Canada • Plant restarted in April 2011 • The lower natural gas price environment in North America has made this plant competitive • Excellent operating performance: 561,000 tonnes produced since starting up to end of Q2- 2012 • Debottlenecking project to increase capacity by ~20% in Medicine Hat, Al
Slide 18: Chile
Chile • Opportunities to increase production from Chile assets 1. Chile gas development – increased drilling activity 2. Louisiana Relocation Project E&P Activity in Southern Chile Exploration Blocks in Southern Chile with Drilling Activity 12 10 Number of Blocks 8 6 4 2 0 2004 2005 2006 2007 2008 2
Slide 19: Louisiana Project
Louisiana Project • July 2012: Reached Final Investment Decision to proceed Geismar with the relocation of a 1 million tonne plant from Chile to Geismar, Louisiana • Plant start up targeted for 2H 2014: • Attractive project attributes: • Low natural gas price environment • Significant capital and sc
Slide 20: New Zealand
New Zealand • Increasing production from the improved natural gas supply outlook • Restarted the second Motunui plant in July 2012, increasing capacity from 0.85 million tonnes to 1.5 million tonnes • Potential to add up 0.9 million tonnes additional capacity from debottlenecking and restarting Wait
Slide 21: Valuation Considerations
Valuation Considerations • Methanol Prices have been closely correlated to crude oil • Methanol benefits from being manufactured from lower cost natural gas Methanol Prices vs Crude Oil Prices 150 600 Oil Prices, Brent (West Europe, FOB North Sea) Methanol Price, USGC Contract (US$/tonne) Oil Price
Slide 22: Valuation Considerations
Valuation Considerations • Methanex is trading at a significant discount to replacement cost (excluding further upside from idle Chile capacity) Replacement Cost Capacity Estimate Current + Current Growth Projects Operating Capacity (milllions of tonnes) Trinidad 2.0 2.0 Chile 0.5 0.5 Louisiana 1.0
Slide 23: Valuation Considerations
Valuation Considerations • Modest valuation relative to strong cash generation capability • Significant upside potential Cash Generation Capability Production (millions of tonnes) 1 Current Future Potential Operating Capacity Growth Projects Growth + Chile Trinidad 2.0 2.0 2.0 Chile 0.5 0.5 2.8 Lous
Slide 24: Strong Financial Position
Strong Financial Position Liquidity • Strong position to meet capex requirements Cash (at June 30,2012) $423 million 1 from current balance sheet + cash generation Bank Facility (undrawn) $200 million Total $623 million • 23% net debt to capitalization Capital Expenditures (US$ millions) 2H 2012 201
Slide 25: Capital Allocation
Capital Allocation • 9% increase to regular dividend in June 2012 (dividend implemented in 2002 and increased nine times). Current yield ~2.6% • ~45% of shares bought back since 2000 • Current focus: Louisiana and other initiatives to increase production from New Zealand & Chile assets $0.80 180 Reg
Slide 26: Summary
Summary • Positive Industry Dynamics • Strong Cash Generation & Financial Position • Global Leader with Competitive Assets • Considerable Upside / Growth Potential • Company – New Zealand, Louisiana, Chile • Industry - Methanol Energy Applications, MTO • Distributions Well-Positioned for Increased R
Slide 27: Appendix
Appendix © 2012 METHANEX CORPORATION 27
Slide 28: 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 © 2012 METHANEX CORPORATION 28
Slide 29: Methanol In Our Lives
Methanol In Our Lives APPENDIX © 2012 METHANEX CORPORATION 29
Slide 30: Methanol Usage..
Methanol Usage.. …By Derivative (2011) …By Region (2011) Formaldehyde North America Other 20% 33% 13% Europe 21% Latin America 5% MMA 2% Biodiesel 4% DME 7% China Fuel Blending Acetic Acid 39% 11% 11% Asia Pacific ex- China MTBE/TAME 22% 12% Source: Methanex APPENDIX © 2012 METHANEX CORPORATION 30
Slide 31: Impressive Financial Results
Impressive Financial Results • Average ROE of 20% from 2004-2011 $5.00 50% EPS Return on Equity (ROE) ROE $4.00 40% $3.00 30% EPS $2.00 20% $1.00 10% $0.00 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012F 2013F 1) EPS = Diluted net income per common share (before unusual items) 2) ROE = Income befor
Slide 32: Methanol for DME
Methanol for DME A simple dehydration reaction… DME 1.4 tonnes methanol to 1 tonne DME Water Non-toxic (used as aerosol propellant replacing CFC’s) Clean burning Physical properties similar to LPG High Cetane number = high fuel combustion quality making it attractive for use in diesel engines AP
Slide 33: DME Applications
DME Applications • 3 Major DME Applications • Blending with LPG most immediate opportunity Power Generation Blended with LPG DME Diesel alternative Source: Methanex APPENDIX © 2012 METHANEX CORPORATION 33
Slide 34: Gas Development in Southern Chile
Gas Development in Southern Chile 0 50 km ENAP • Producing existing reserves ENAP • Exploration drilling campaign in process. FELL (GeoPark) Coirón • Producing existing reserves Tranquilo Fell • Exploration drilling campaign in process. ENAP Dorado-Riquelme (ENAP – Methanex) • Producing existing res
Slide 35: Chile & Argentina – Pipelines
Chile & Argentina – Pipelines URUGUAY Buenos C Aires H I L Neuquina E Basin To Buenos Aires ARGENTINA CHILE YPF CONDOR CONDOR POSESION Sipetrol CALAFATE CALAFATE San Jorge Basin Mx CABO CABO NEGRO Total PUNTA BANDURRIA ARENAS Austral Pan American Basin Methanex Chile - natural gas consumption of 0.1
Slide 36: Forward-looking Statements
Forward-looking Statements Information in these materials or presented orally at this meeting, either in prepared remarks or in response to questions, contain forward-looking statements with respect to us and our industry. These statements relate to future events or our future performance. All state
Methanex — Jefferies 2012 Global Industrial and A&D Conference on 6ix