Alliance Resource Partners, L.P. · NASDAQ:ARLP
Alliance Resource Partners, L.P — Argus Research Vision 2007 Conference
33 slides from Alliance Resource Partners, L.P's conference presentation, Nov 13, 2006
Slide 1: Alliance Resource Partners, L.P. Alliance Holdings GP, L.P.
Alliance Resource Partners, L.P. Alliance Holdings GP, L.P. Argus Research Vision 2007 Conference November 13, 2006
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements and information that are based on the beliefs of Alliance Resource Partners, L.P. and Alliance Holdings GP, L.P. (the “Partnerships”) and those of their respective general partners (the “General Partners”), as well as a
Slide 3: Alliance Overview
Alliance Overview A ALLIANCE RESOURCE A ALLIANCE y N PARTNERS, L.P. y N HOLDINGS GP, LP.
Slide 4: Ownership of Alliance Partnerships
Ownership of Alliance Partnerships 80.0% 20.0% L.P. Alliance Holdings L.P. Management / Interest GP , L.P. Interest Public Others (NASDAQ: AHGP) Unitholders 59.9 million units outstanding 1.98% General IDRs 42.3% L.P. Partner Interest (a) Interest Alliance Resource Partners, L.P. Public (NASDAQ: ARL
Slide 5: Alliance Partnership Profiles
Alliance Partnership Profiles NASDAQ Symbol: ARLP AHGP Unit Price (11/07/06): $34.41 $19.49 Distribution: $2.00 $0.86 Total Unit Coverage: 1.99x 1.00x Equity Market Cap: $1,253 mm $1,167 mm Enterprise Value: $1,361 mm $1,167 mm Net Debt / Book Cap: 32.2% 0.0% Net Debt / Enterprise Value: 7.9% 0.0% A
Slide 6: Alliance Investment Highlights
Alliance Investment Highlights ¾ Strong operational and financial attributes of Alliance Resource Partners, L.P. Established history of operating and financial performance Efficient, low-cost operator Proven track record of executing growth strategy Robust industry fundamentals Meaningful
Slide 7: Complementary Business Objectives
Complementary Business Objectives Alliance Resource Partners, L.P. Create sustainable, capital efficient growth in distributable cash flow to maximize growth in distributions to ARLP unitholders ¾ Maximize existing asset base – expand / extend current operations, continuous focus on productivity imp
Slide 8: Alliance Resource Partners, L.P. Overview
Alliance Resource Partners, L.P. Overview
Slide 9: Alliance Resource Partners, L.P. Snapshot
Alliance Resource Partners, L.P. Snapshot ¾ ARLP is a diversified producer and marketer of coal to major U.S. utilities and industrial users Fifth largest eastern coal producer and eleventh largest in the U.S. (a) 6 Only publicly-traded master limited partnership involved in the production and m
Slide 10: Operations Summary
Operations Summary 2005 Production 2005 Summary (MM Tons) Northern Production Reserves Primary Customers Appalachia Illinois Basin 15% Dotiki 4.7 89.5 Seminole; TVA Central Warrior 4.1 17.8 Synfuel Solutions, LG&E Appalachia 15% Pattiki 2.6 47.6 TVA; Tampa Electric Illinois Basin Hopkins 0.9 64.3 LG
Slide 11: Efficient Operator
Efficient Operator ¾ ARLP is a low-cost, efficient coal operator, delivering sector-leading EBITDA margins 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Alliance Arch Consol Foundation Peabody Massey Alpha 2003 2004 2005 2006YTD __________________ Source: Public filings EBITDA margin represents EBITDA / T
Slide 12: Focused on Safety
Focused on Safety ¾ ARLP’s safety performance has been consistently better than our industry peer group ¾ State-of-the-art Leaky Feeder mine communication system installed at all operations in 2005 except Pontiki ¾ Fiber optic based mine monitoring system expected to be completed at all operations b
Slide 13: Consistent Track Record of Growth at ARLP
Consistent Track Record of Growth at ARLP Production Revenue $MM (excluding transportation revenue) 25.0 $1,000.0 24.1 $920.0 $800.0 22.3 $799.6 Millions of Tons 20.0 20.4 $600.0 19.2 $623.5 18.0 $523.2 $499.9 $400.0 15.0 CAGR: 7.6% $200.0 CAGR: 16.5% 10.0 $0.0 (a) 2002 2003 2004 2005 2006E 2002 200
Slide 14: Continuous Unit Distribution Growth
Continuous Unit Distribution Growth ¾ ARLP has increased its quarterly distribution by 100% over the last four years (a) th $2.00 $2.00 $1.95 G row i bution ) $1.84 $1.84 D istr CAGR Annualized Quarterly Distribution % 100 (18.9% $1.75 $1.65 $1.65 $1.55 $1.50 $1.50 $1.35 $1.30 $1.30 $1.25 $1.13 $1.1
Slide 15: Leader in Distribution Growth
Leader in Distribution Growth ¾ ARLP compares favorably to the broad MLP universe in terms of distribution growth since the beginning of 2004 (a) 114% 60% 54% Total Distribution Growth 48% 41% 39% 38% 38% 35% 33% 24% 21% 19% 17% 16% 16% 14% 9% 2% 0% ETP ARLP PVR NRP MWE MMP SXL XTEX APL PAA EPD OKS
Slide 16: Alliance Holdings GP, L.P. Overview
Alliance Holdings GP, L.P. Overview
Slide 17: AHGP Leverage to ARLP Growth
AHGP Leverage to ARLP Growth ¾ Incentive distribution rights provide AHGP unitholders with significant financial leverage to ARLP distribution growth $80,000 Resulting Hypothetical Annual Distributions to Alliance Holdings GP, L.P. ($ in 000s) Current ARLP $70,000 Distribution ($2.00 per unit) IDRs
Slide 18: Impact of ARLP Distribution Growth
Impact of ARLP Distribution Growth AHGP Leverage to ARLP Distribution Growth 32.6% Growth in Total Distributions to AHGP 30% 25.5% 20% 17.9% 10% 9.5% 0% 0% 5% 10% 15% 20% __________________ ARLP Distribution Growth Note: Assumes constant 36.4 million common units outstanding at ARLP. − 13 −
Slide 19: Benefits of Industry-Leading Distribution Coverage
Benefits of Industry-Leading Distribution Coverage ¾ ARLP’s coverage ratio is among the highest of publicly traded limited partnerships in the energy sector (a) ¾ Benefits to AHGP investors include: Greater potential for future distribution growth Capital efficient financing for ARLP organic gro
Slide 20: Value Inherent in Underlying Cash Flows
Value Inherent in Underlying Cash Flows Implied Yields (a) ¾ ARLP’s value proposition becomes 12.00% 10.55% clear through its current 10.50% 9.41% cash available for 9.00% 7.62% 7.41% distribution 7.50% 6.27% 6.64% 5.76% 6.00% 5.15% ¾ The impact is even more 4.50% 4.54% 4.27% pronounced at Alliance
Slide 21: Positioned for Continued Growth
Positioned for Continued Growth
Slide 22: Robust Coal Industry Fundamentals
Robust Coal Industry Fundamentals ¾ Growing Domestic Coal Demand Strong U.S. economy New coal-fired power plants expected to result in 120 MTPY of additional coal demand by 2010(a) Btu conversion technologies could more than double U.S. coal demand by 2030(b) ¾ Constrained Domestic Coal Supply
Slide 23: ARLP Has Benefited from Positive Coal Markets
ARLP Has Benefited from Positive Coal Markets ¾ 2006YTD average coal sales prices have increased 9.4% since 2005Q3(a) Coal Sales / Ton Sold $40.00 $38.53 $36.58 $33.65 $30.00 $28.79 $25.77 $20.00 CAGR: 10.6% $10.00 $0.00 2003 2004 2005 2006YTD (b) 2007E (c) __________________ (a) See ARLP Press rele
Slide 24: ARLP Is Positioned for Future Sector Growth
ARLP Is Positioned for Future Sector Growth ¾ Future revenue growth potential enhanced by meaningful exposure to market pricing Coal Sales Volumes Open to Market Pricing 20 15 15.8 Million Tons 10 5 3.4 0 0.1 2006 2007 2008 − 18 −
Slide 25: Major Supply Shifts Influenced by Clean Air Act
Major Supply Shifts Influenced by Clean Air Act U.S. Coal Supply (Million Tons) Change % Change 1990 1995 2000 2005 90 - '05 90 - '05 Illinois Basin 141 109 87 92 (49) -35% Northern Appalachia 166 137 140 140 (26) -16% Central Appalachia 287 272 263 232 (55) -19% Powder River Basin 199 286 362 430 2
Slide 26: Significant Scrubber Market Dynamics
Significant Scrubber Market Dynamics ¾ Current and pending legislation has caused utilities to add or announce plans to add scrubbers which management expects should lead to additional market opportunities for the Illinois Basin and Northern Appalachian regions ¾ As utilities execute their environme
Slide 27: ARLP Well Positioned in Scrubber Markets
ARLP Well Positioned in Scrubber Markets Approximately 590 million tons of “scrubber” quality coal Northern Appalachia ¾ Strong reserve base of ~168 million tons of high and medium sulfur coal ¾ Currently accounts for ~15% of total ARLP coal production Illinois Basin ¾ Second largest producer in the
Slide 28: Large Inventory of Organic Growth Projects
Large Inventory of Organic Growth Projects Penn Ridge Tunnel Ridge ¾ Initiating permitting process ¾ Permitting in progress ¾ Development cost ~ $165 million ¾ Development cost ~ $200 million ¾ Estimated reserves ~ 55 million tons high ¾ Estimated reserves ~ 70 million tons high sulfur coal sulfur c
Slide 29: Summary
A ALLIANCE RESOURCE A ALLIANCE y N PARTNERS, L.P. y N HOLDINGS GP, LP.
Slide 30: Alliance Investment Highlights
Alliance Investment Highlights ¾ Strong operational and financial attributes of Alliance Resource Partners, L.P. Established history of operating and financial performance Efficient, low-cost operator Proven track record of executing growth strategy Robust industry fundamentals Meaningful
Slide 31: Appendix
A ALLIANCE RESOURCE A ALLIANCE y N PARTNERS, L.P. y N HOLDINGS GP, LP.
Slide 32: ARLP EBITDA Reconciliation
ARLP EBITDA Reconciliation Year Ended December 31, 2006E 2002 2003 2004 2005 Midpoint Cash flows provided by operating activities $ 101,306 $ 110,312 $ 145,055 $ 193,618 $ 245,000 Reclamation and mine closing (1,365) (1,341) (1,622) (1,918) (2,000) Coal inventory adjustment to market (48) (687) (488
Slide 33: Alliance Resource Partners, L.P. Alliance Holdings GP, L.P.
Alliance Resource Partners, L.P. Alliance Holdings GP, L.P. Argus Research Vision 2007 Conference November 13, 2006
Alliance Resource Partners — Argus Research Vision 2007 Conference on 6ix