Suncoke Energy, Inc. · NYSE:SXC
Suncoke Energy — Brean Capital Global Resources & Infrastructure Conference 2013
45 slides from Suncoke Energy's conference presentation, May 20, 2013
Slide 1: Brean Capital Global Resources & Infrastructure Conference
Brean Capital Global Resources & Infrastructure Conference May 20, 2013
Slide 2: Forward-Looking Statements
Forward-Looking Statements Some of the information included 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. All statements in this presentation that e
Slide 3: About SunCoke
About Suncoke Brean Capital Conference—May 2013 3
Slide 4: About SunCoke
About SunCoke Largest independent producer of coke in the Americas Coke is an essential ingredient in the blast furnace production of steel Cokemaking business generates ~89% of Adjusted EBITDA(1) 5.9 million tons of capacity in six facilities 2012 U.S. coke production = 4.3M tons General Partner an
Slide 5: The Leading Independent Cokemaker
More than doubled capacity since 2006 with four new plants Only company to design, build and operate new greenfield developments in U.S. in approximately 20 years Supply about 22% of U.S. and Canada coke needs(1) Industry-leading cokemaking technology meets U.S. EPA Maximum Achievable Control Techno
Slide 6: Cokemaking operations located near customers' steelmaking facilities
Our cokemaking operations are strategically located in proximity to our customers’ integrated steelmaking facilities SunCoke Operations Middletown* Haverhill 1* Haverhill 2* Granite City *65% owned by SXCP Coal Mining Jewell Coke Indiana Harbor Vitoria, Brazil Odisha, India 114M tons of reserves 6 B
Slide 7: SXC/SXCP Organizational Structure
SXC/SXCP Organizational Structure SXC/SXCP Organizational Structure (1) Net to SXC and SXCP’s ownership interest in Haverhill and Middletown, respectively. 3 U.S. coking facilities with ~2.6M tons of capacity 35% interest in 2 cokemaking facilities with ~0.6M tons(1) of capacity SXCP Coke Business 6
Slide 8: Strategic Roles of SXC and SXCP
Strategic Roles of SXC and SXCP Grow U.S. & Canada cokemaking business Steel facing MLP with advantaged cost of capital Develop new coke projects Grow international business Optimize coal GP & limited partner investor in SXCP 8 Brean Capital Conference—May 2013
Slide 9: SunCoke's Cokemaking Technology & Domestic Business Model
SunCoke’s Cokemaking TechnologY & DOMESTIC BUSINESS MODEL Brean Capital Conference—May 2013 9
Slide 10: Blast Furnaces and Coke
Most efficient blast furnaces require 800-900 lbs/NTHM of fuel to produce a ton of hot metal Blast Furnaces and Coke 1 short ton of hot metal (NTHM) Coke is a vital material to blast furnace steel making Blast furnaces are the most efficient and proven method of reducing iron oxides into liquid iron
Slide 11: SunCoke's Cokemaking Technology
SunCoke’s Cokemaking Technology Our industry-leading cokemaking technology meets U.S. EPA Maximum Achievable Control Technology (MACT) standards and makes larger, stronger coke Industry-leading environmental signature Leverage negative pressure to substantially reduce emissions Convert waste heat in
Slide 12: Advantages of Heat Recovery
Advantages of Heat Recovery Advantages of By-Product Negative Pressure OvensMinimal fugitive emissionsMACT standard for new batteries (1) Positive Pressure Ovens No air leaks into oven results in higher coal-to-coke yields Cogeneration potential (steam or electricity)More fungible by-product (power)
Slide 13: Domestic Cokemaking Business Model
We deliver coke to customers through a competitive turnkey solution, which produces a consistent stream of earnings Customer SunCoke Energy Domestic Cokemaking Business Model 13 Brean Capital Conference—May 2013
Slide 14: Our Market Opportunity
Our Market Opportunity 14 Brean Capital Conference—May 2013
Slide 15: U.S. and Canada Opportunity
U.S. and Canada Opportunity SunCoke’s coke is competitive on price, quality and reliability, providing us the opportunity to displace imported coke Source: World Price (DTC), Coke Market Report, CRU and company estimates Based on April 2013 prices U.S. and Canada Coke Imports Representative Delivere
Slide 16: U.S. and Canada Opportunity: replace aging coke batteries
(CHART) Source: CRU—The Annual Outlook for Metallurgical Coke 2012, company estimates Replace aging coke batteries operated by integrated steel producers Source: CRU—The Annual Outlook for Metallurgical Coke 2013, company estimates 56% of coke capacity is at facilities >30 years old Integrated Steel
Slide 17: Coke Industry Fundamentals
Evaluation of all existing batteries in U.S. & Canada Customer quality Blast furnace competitiveness Battery condition Coke Industry Fundamentals 17 Source: CRU, Metallurgical Coke Market Outlook 2012; Company analysis SXC Market Analysis Facilities with Potential for Acquisition 6 batteries 4.1 mil
Slide 18: The India Growth Opportunity
The India Growth Opportunity Sources: CRU, Metallurgical Coke Outlook 2012, World Steel Association, Company estimates (CHART) India Metallurgical Coke Demand India offers attractive coke market fundamentals driven by growing steel demand Per Capita Steel Demand (kg/yr) India Brazil China 2011 57 12
Slide 19: The India Growth Opportunity
The India Growth Opportunity The India Growth Opportunity 19 Brean Capital Conference—May 2013
Slide 20: 2013 Priorities
Operational Excellence Domestic Strength Expand Our Footprint Maintain top quartile safety performance Sustain momentum at our cokemaking facilities Execute coal mining action plan to reduce costs and position segment for long term strategic flexibility Implement environmental project at Haverhill a
Slide 21: North America M&A Growth Strategy
North America M&A Growth Strategy Cokemaking FOCUS Acquisition of existing cokemaking facilities with long- term off take agreements In active discussion with owners of targeted assets Degree of integration in steel operations and environmental issues will impact complexity and timing of transaction
Slide 22: SunCoke 1Q 2013 Financial Performance
suncoke 1Q 2013 FINANCIAL PERFORMANCE Brean Capital Conference—May 2013 22
Slide 23: Q1 2013 Highlights
Q1 2013 Highlights 23 Strong Liquidity Position Reduced Coal Production Costs (CHART) Solid Cokemaking Operations Combined liquidity Formed India Joint Venture Completed SXCP IPO >$550M (CHART) Combined cash as of Q1 2013 >$300M Brean Capital Conference—May 2013
Slide 24: Q1 2013 Earnings Overview
Q1 2013 Earnings Overview (CHART) Adjusted EBITDA results reflect: Weak coal price environment, partly offset by reduced cash production costs Improved cokemaking results, led by our Middletown operation EPS impacted by: Accelerated depreciation at Indiana Harbor ($0.06 EPS) Debt issuance costs and
Slide 25: Domestic Coke Business Summary
Domestic Coke Business Summary Domestic Coke Production Domestic Coke Adjusted EBITDA(1) Per Ton (Tons in thousands) ($ in millions, except per ton amounts) For a definition of Adjusted EBITDA and Adjusted EBITDA/Ton and reconciliations, see appendix. Includes a $2.8 million charge related to coke i
Slide 26: Coal Mining Financial Summary
Coal Mining Financial Summary Q1 2013 Adjusted EBITDA down $12 million from Q1 2012 Driven by $50 decline in average sales price Sales volume flat Delivered significant improvement in per ton cash production costs Jewell underground costs down sequentially and yr/yr $129 in Q1 2013; $149(3) in Q4 20
Slide 27: SunCoke Energy Partners, L.P. (SXCP)
SunCoke energy partners, l.p. (sxcp) Brean Capital Conference—May 2013 27
Slide 28: SXCP Q1 2013 Highlights
SXCP Q1 2013 Highlights SXCP Q1 2013 Highlights SXCP Q1 2013 Highlights (CHART) (CHART) Sustained solid results at Middletown and Haverhill provide a strong platform for future growth (1) For a definition and reconciliation of Adjusted EBITDA and proforma distributable cash flow, please see appendix
Slide 29: SXCP: 2013 Guidance Summary
SXCP: 2013 Guidance Summary Adjusted EBITDA equals SXCP’s 65% interest in Haverhill and Middletown’s Adjusted EBITDA (i.e., 65% net income attributable to the controlling and noncontrolling interests plus depreciation expense, interest expense, incremental public partnership expenses, and incrementa
Slide 30: SXCP Distribution Growth Outlook
SXCP Distribution Growth Outlook SXCP Distribution Growth Outlook Given current outlook, expect to increase our quarterly distribution rate in 2013 while maintaining coverage ratio of 1.1x or better Brean Capital Conference—May 2013
Slide 31: Financial Strength & Outlook
FINANCIAL STRENGTH & OUTLOOK Brean Capital Conference—May 2013 31
Slide 32: Consolidated Liquidity Position
Consolidated Liquidity Position Ended quarter with strong cash position and virtually undrawn revolver even after making ~$68 million VISA SunCoke JV investment ($ in millions) SXCP IPO transaction Includes $16.2M for Indiana Harbor Excludes $6.5 million in offering expenses paid in 2012 and include
Slide 33: Liquidity & Debt
Liquidity & Debt For SXC, reflects cash position of $307 million net of the $106 million in cash attributable to SXCP. For SXCP, cash position at 3/31/13 includes $63 million of cash allocated and committed at the time of the IPO for environmental capital expenditures For SXC, reflects total debt po
Slide 34: SXC: 2013 Adjusted EBITDA Outlook
SXC: 2013 Adjusted EBITDA Outlook 34 2013E results to be impacted by weak coal business, partly offset by continued solid coke operations ($ in millions) For a definition and reconciliation of Adjusted EBITDA, please see the appendix. Brean Capital Conference—May 2013
Slide 35: SXC: 2013 Guidance Summary
SXC: 2013 Guidance Summary SXC: 2013 Guidance Summary For a reconciliation of 2013E Adjusted EBITDA, please see reconciliation on slide 41 Includes ~$38 million of sales discounts payable to customers of which ~$12million is pre-funded at SXCP with IPO proceeds See page 43 of the appendix for detail
Slide 36: Appendix
Appendix Brean Capital Conference—May 2013 36
Slide 37: Adjusted EBITDA definition
Adjusted EBITDA represents earnings before interest, taxes, depreciation, depletion and amortization (“EBITDA”) adjusted for sales discounts and the interest, taxes, depreciation, depletion and amortization attributable to equity earnings in our unconsolidated affiliates. EBITDA reflects sales disco
Slide 38: Distributable Cash Flow definition
Distributable Cash Flow equals Adjusted EBITDA less net cash paid for interest expense, on-going capital expenditures, accruals for replacement capital expenditures, and cash distributions to noncontrolling interests. Distributable Cash Flow is a non-GAAP supplemental financial measure that manageme
Slide 39: Reconciliations
Reconciliations 39 Brean Capital Conference—May 2013
Slide 40: Reconciliations
Reconciliations 40 Brean Capital Conference—May 2013
Slide 41: 2013E Net Income to Adjusted EBITDA Reconciliation—SXC
2013E Net Income to Adjusted EBITDA Reconciliation—SXC SXC – Expected 2013E EBITDA Reconciliation Represents SXC share of India JV interest, taxes and depreciation expense Represents Adjusted EBITDA attributable to SXCP public unitholders and to DTE’s interest in Indiana Harbor 41 Brean Capital Conf
Slide 42: 2013E Net Income to Adjusted EBITDA Reconciliation—SXCP
2013E Net Income to Adjusted EBITDA Reconciliation—SXCP SXCP – Expected 2013E EBITDA Reconciliation Represents Adjusted EBITDA attributable to SXC’s 35% interest in Haverhill and Middletown facilities 42 Brean Capital Conference—May 2013
Slide 43: 2013E Capital Expenditures and Investments
2013E Capital Expenditures and Investments 43 Brean Capital Conference—May 2013
Slide 44: SXCP Adjusted EBITDA and Distributable Cash Flow Reconciliations
SXCP – Adjusted EBITDA and Distributable Cash Flow Reconciliations (1) SG&A expense for the time period prior to the January 24, 2013 IPO date (January 1 -23, 2013) Represents Adjusted EBITDA attributable to SXC’s 35% interest in Haverhill and Middletown facilities prior to the IPO date Includes 65%
Slide 45: Investor Relations
Investor Relations: 630-824-1987 www.suncoke.com
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