Slide 1: Methanex Business Update
Methanex Business Update Raymond James Methanol Forum March 29, 2017
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: Investment opportunity
Investment opportunity Global Methanol Leader • Leading market share and competitive assets • Solid cash generation capability Strong Cash Flow • Track record of returning excess cash – over 50% of shares bought Generation & in last 20 years Distributions • Dividend raised 11 times since implemented
Slide 4: Market Update
Market Update • Strong methanol price recovery commenced October 2016 fueled by: • Strong demand • Tighter supply • Low inventory 4
Slide 5: Strong demand growth
Strong demand growth (000s tonnes) 2016 – 2020 CAGR: 5% 100,000 2011 – 2016 CAGR: 7% 90,000 80,000 MTO/MTP (Merchant) 70,000 DME 60,000 Fuel 50,000 MTBE/TAME 40,000 Chemical 30,000 20,000 10,000 0 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E • Projected 5% CAGR for fours years to 2020, led
Slide 6: MTO leading methanol demand growth
MTO leading methanol demand growth 13,000 MTO Methanol Demand (Annualized) 12,000 • Two new plants started up in thousands of tonnes of methanol 11,000 December, 2016 10,000 9,000 • Combined demand 8,000 potential over 3 million 7,000 tonnes at full rates 6,000 5,000 4,000 • Two more new plants late
Slide 7: Methanol-to-Olefins (MTO)
Methanol‐to‐Olefins (MTO) Natural Food packaging, Polyethylene plastic bags • MTO production Gas or Coal mostly highly Pipes, window Feedstock EDC PVC frames integrated with Ethylene downstream Synthesis EO MEG PET Textile, bottles products Gas • Very difficult to Insulation Ethyl benzene Styrene Po
Slide 8: Emerging market – marine fuel
Emerging market – marine fuel • 100,000+ commercial vessels in the world operating on high sulphur Heavy Fuel Oil (HFO). Methanol is sulphur free. • International Maritime Organization • Reduced allowable sulphur limits in N. Europe and N. America to 0.1% in January 2015 ‐ precludes HFO. • In late 2
Slide 9: Positive marine fuel developments
Positive marine fuel developments • Waterfront Shipping launched seven new 50,000 dwt vessels in 2016 with methanol dual‐fuel MAN 2‐stroke engines • Stena Line converted Germanica ferry to run on methanol in 2015 using Wartsila 4‐stroke engines • Projects under development in Europe to One of Waterf
Slide 10: Emerging Market – Industrial Boilers
Emerging Market ‐ Industrial Boilers Significant potential to substitute coal‐fueled industrial boilers in China • China’s air quality emissions regulations are leading to phasing out of coal‐fueled boilers in favor of cleaner fuels including methanol • Currently ~1/2 million coal‐fueled industrial
Slide 11: Demand/supply balance
Demand/supply balance New Capacity Outside China: Iran 4.2 Natgasoline (OCI) 1.8 • Demand expected to 20.00 Other Atlantic Basin 1.0 outpace new supply Russia 0.5 Other 0.6 • Supply gap expected to 15.00 Total 8.1 be closed through MTO higher operating rates Millions of Tonnes China Additions for ex
Slide 12: Run-rate production growth versus 2008
250% Production Growth versus 2008 7.7 Production Volume – Methanex Share 7.0 (millions of tonnes) 5.2 4.9 4.3 4.1 3.8 3.5 3.5 2.7 2008 2009 2010 2011 2012 2013 2014 2015 2016 Run‐rate * * Run‐rate operating rate assumptions: Geismar / Medicine Hat – 100%; NZ 92% (2.2MM tonnes); Trinidad 85%; Egypt
Slide 13: Chile Growth Opportunity
Chile Growth Opportunity • Highly value accretive investment opportunity to restore Chile to a two‐plant operation (1.7 million tonnes) at a very low capital cost • Expect sufficient gas available to run a minimum of one plant for medium term • Decision by mid 2017 on restart of Chile IV • Prelimina
Slide 14: Balanced approach to capital allocation
Balanced approach to capital allocation • $95 MM annual interest expense Debt Service • $25 MM share of NCI debt payments Essential • Next maturity ‐ $350MM, end of 2019 Maintenance • $80 MM avg. annual maintenance capex • Dividend $1.10/share annually and Meaningful, approximately $100 million per
Slide 15: Valuation considerations
Valuation considerations • Strong cash generation capability at a range of methanol prices With Egypt & Full Operating Full Potential • Strong free cash flow Trinidad Restrictions 2 Capacity 3 (Chile 100%) generation at a range Annual Operating Capacity1 7.7 8.5 9.4 of methanol prices (millions of t
Slide 16: EBITDA and Free Cash Flow capability sensitivities
EBITDA and Free Cash Flow (“FCF”) capability sensitivities Sensitivities versus Base Case of: • Price (ARP): $350/tonne • Volume: 8.5 MM MT • EBITDA Capability: $1.1 Billion • FCF Capability: $700 million 16
Slide 17: Valuation considerations
Valuation considerations • Methanex is trading at a discount to replacement cost Operating millions of tonnes1 “What if Geismar and Medicine Hat were valued at Capacity estimated replacement cost 4 of $1,100/tonne?” USA (Geismar) 2.0 Capacity Enterprise Value Canada (Medicine Hat) 0.6 millions of Ne
Slide 18: Balance Sheet and Liquidity
Balance Sheet and Liquidity • Strong financial and liquidity position Liquidity as at Q4‐16 Capital Structure as at Q4‐161 (US$ millions) (US$ millions) Cash (MX Share) 211 Total Shareholders’ Equity 1,597 Undrawn Credit Line 300 Total Debt 1,371 511 Total Debt/Capitalization 46% Net Debt/Capitaliza
Slide 19: Leverage – rating agency perspective
Leverage – rating agency perspective Pro Forma Rating Agency Credit Rations • Leverage target = Investment Grade (US$ billions unless indicated) Total Debt 1 • Current leverage below IG threshold at prices well below mid‐cycle pricing Debt (Q4‐16) 1.4 Capital and Operating Leases 2 0.7 • Moody’s Baa
Slide 20: Summary
Summary • Global leader with competitive • Expect strong cash generation assets • Low capital cost growth potential in • Solid franchise value that is difficult Chile to replicate • Dividends / share buybacks • Global marketing, supply chain and shipping network • Strong financial position Committed
Slide 21: End Notes
End Notes (from slide 16) 1 Methanex interest (63.1% Atlas, 50% Egypt) 2 Assumed operating rate 100% except Trinidad (85%), Egypt (50%), Chile (one 0.9 million MT plant only), and New Zealand (2.2 MM tonnes vs. 2.4 MM tonnes capacity). We cannot predict actual gas restrictions at these plants. 3 Inc
Slide 22: Forward-looking information warning
Forward‐looking information warning This Presentation, our Fourth Quarter 2016 Management’s Discussion and Analysis (“MD&A”) and comments made during the Fourth Quarter 2016 investor conference call contain forward‐looking statements with respect to us and our industry. These statements relate to fu
Slide 23: Q&A
Q&A the power of agility
Slide 24: Thank you
Thank you www.methanex.com linkedin.com/company/methanex‐ corporation @Methanex