Peabody Energy Corporation · NYSE:BTU
Peabody Energy — Investor Day (June 2012)
112 slides from Peabody Energy's investor day presentation, Jun 27, 2012
Slide 1: 2012 Analyst and Investor Forum: Creating Value for Both Near Term and Long Term
2012 Analyst and Investor Forum Creating Value for Both Near Term and Long Term Gregory H. Boyce Chairman and Chief Executive Officer June 27, 2012 Exhibit 99.1
Slide 2: Statement on Forward-Looking Information
Statement on Forward-Looking Information 2 Some of the following information contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, and is intended to come within the safe-harbor protecti
Slide 3: Key Takeaways
Peabody Energy 2012 Analyst and Investor Forum Key Takeaways 3 ● Global coal demand expanding; Met coal in structural undersupply; Thermal growth driven by emerging Asia ● Met coal prices rebounding ● U.S. fundamentals showing signs of recovery ● BTU platform best positioned to weather macro challen
Slide 4: Topics
Peabody Energy 2012 Analyst and Investor Forum ● Global Coal Demand ● Peabody Platform ● Growth and Value Creation Topics 4
Slide 5: Global Coal: Variability But Solid Underlying Fundamentals
Global Coal: Variability But Solid Underlying Fundamentals 5 Trends: Rising Global Coal Demand from Record Levels ● Emerging record coal demand in China and India even assuming easing GDP growth rates ● Unprecedented global urbanization; Record new generation and steel production ● Imports comprise
Slide 6: Major Markets: New Coal Generation Drives Thermal Coal Growth
Major Markets: New Coal Generation Drives Thermal Coal Growth Source: Platts Worldwide Power Plant Database and Peabody Global Analytics. New Coal-Fueled Generating Capacity 2011-2016 ● Coal-fueled generation expected to grow 385+ GW by 2016 ● Additional 1.3+ billion tonnes of coal demand anticipate
Slide 7: Industrialization and Urbanization Drive Steel/Met Coal Growth
59 173 466 851 924 1,402 0 200 400 600 800 1,000 1,200 1,400 India Brazil China Japan Taiwan Korea K g/ C ap ita ● Significant steel increases required to reach levels of developed Asia economies ● Stable stage intensity may take 20 – 40 years to reach ● Countries to rely on imports for met coal nee
Slide 8: China Coal Imports Expected to Double by 2016
0 50 100 150 200 250 300 350 400 450 500 400 - 450 300- 350 100- 110 285 225 60 223 178 45 186 139 47 125 90 35 2016P 37 34 3 2012P 2011 2010 2009 2008 Thermal Met ● 2011 coal imports rise 20% to record 223 million tonnes ● Gross coal imports up 68% YTD 2012 – Met coal imports up 34% YTD ● Imports e
Slide 9: China Coal Use Consistently Exceeds National Targets
China Coal Use Consistently Exceeds National Targets ● New stimulus move to add more steel capacity ● 240 GW of coal-fueled generation coming on line in next five years – Represents >800 MTPY of thermal coal use over time ● 2011 coal consumption already 3.8 billion tonnes ● New Five-Year Plan encour
Slide 10: India Likely to be World's Fastest Growing Coal Importer
10 India Likely to be World’s Fastest Growing Coal Importer 31 37 30 30 50- 60 43 63 85 100 150- 160 0 50 100 150 200 2009 2010 2011 2012P 2016P To nn es in M ill io ns Thermal Met India Coal Imports ● 2011 coal-fueled generation up 9%; Thermal imports +35% ● Thermal demand expected to outpace produ
Slide 11: Supply Constraints to Increase, Affecting Global Coal Markets
Supply Constraints to Increase, Affecting Global Coal Markets ● Mine closures, weather and labor issues reduce met supplies ● Met coal in structural undersupply ● China: Costs rising, quality declining ● New China coal traveling much farther distances ● India’s domestic thermal production below targ
Slide 12: U.S. Coal: PRB and Illinois Basin to Gain from Rising Gas Prices, Exports
NEAR TERM ● Coal use likely to be down 100 – 120 million tons in 2012 ● U.S. shipments down 20 million tons in April/May ● Coal use to begin rebound in 2013 as gas prices rise ● Inventories lowest in West and Midwest LONG TERM ● PRB, Illinois Basin to gain as CAPP declines ● Plant retirement effects
Slide 13: U.S. Coal Production Cuts Taking Hold
U.S. Coal Production Cuts Taking Hold ● U.S. May shipments at ~945 million ton annualized pace – ~145 million tons lower than 2011 shipments of 1.09 billion ● April/May shipments 20 million tons below 2011 levels ● Additional industry cuts announced, further expected 13 U.S. Coal Production 50 60 70
Slide 14: PRB and Illinois Basin Expected to Serve U.S. and Global Markets
● U.S. basins expected to see significant demand shift ● Lower-cost PRB and ILB regions expected to grow: – New plants – Rising exports – Backfill to Eastern plants ● U.S. port capacity could grow ~100 million tons within five years based on announcements – Two-thirds of growth in West Coast/Gulf Co
Slide 15: Coal: The World's Fastest Growing Major Fuel
0 1,000 2,000 3,000 4,000 5,000 Coal Oil N. Gas Nuclear Hydro Other Coal: The World’s Fastest Growing Major Fuel 0% 10% 20% 30% 40% 50% 60% Coal Hydro Natural Gas Oil Nuclear 56% 35% 13% 31% 0% Source: BP Statistical Review of World Energy 2012; International Energy Agency, World Energy Outlook 2011
Slide 16: World's Only Global Pure-Play Coal Investment
Mining position and sales based on 2011 reported sales volumes in millions of tons. Reserves based on 2011 10-K filing in billions of tons. International Offices Brisbane New Delhi Newcastle Beijing London Urumqi Ulaanbaatar Singapore Essen Jakarta Balikpapan Essen London Beijing Ulaanbaatar Urumqi
Slide 17: Delivering on Long-Term Journey to Remake Peabody's Asset Base
Queensland, Venezuela Colorado Assets Queensland, NSW Assets London Trading Office Ulaanbaatar Office 100 Million Tons in 10 Yrs Delivering on Long-Term Journey to Remake Peabody’s Asset Base 2010 Asia 100 Strategy 2007 Mongolia Entry 2006 UK Expansion 2006 Excel Acquisition 2005 Entry into Asia 200
Slide 18: 2011 Safest Year in Peabody History
2011 Safest Year in Peabody History 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 Peabody Global Peabody Australia Peabody Americas 18 In ci de nce Ra te 2.16 1.98 1.37 2.77 4.03 4.43 2.92 2.71 1.92 Incidence rate per 200,000 hours worked. All values are for a calendar-year basis. Excludes operations acquired in
Slide 19: Diverse Platform Delivers Record Financial Results
Diverse Platform Delivers Record Financial Results 2007 2008 2009 2010 2011 $4,42 2 $7,97 4 $6,74 0 $6,33 6 $5,84 7 2007 2008 2009 2010 2011 $1,59 3 $1,28 2 $1,35 4 2007 2008 2009 2010 2011 $2,12 9 $1,72 8 $1,26 3 $1,83 9 +80% Revenues +169% Operating Profit +122% Adjusted EBITDA Dollars in millions
Slide 20: Americas and Australia Units Each Contribute Half of Earnings Base
Americas and Australia Units Each Contribute Half of Earnings Base 20 2003 Americas 50% Australia 50% 2011 Americas >99% Percentages represent share of Mining Adjusted EBITDA. Adjusted EBITDA From Mining: Five-Fold Increase in Eight Years Adjusted EBITDA: $422 Million $2,129 Million
Slide 21: The New Peabody Organization: Greater Focus on Geomarkets
The New Peabody Organization: Greater Focus on Geomarkets Americas Asia and Trading Australia
Slide 22: 2012: Starting the Year Strong
22 2012: Starting the Year Strong ● Major first quarter increases – Revenues +17% – Adjusted EBITDA +18% – Operating Profit +11% – Operating Cash Flows +79% ● Adjusted EBITDA at mining operations up – Australia +41% – U.S. +10% ● Targeting 2012 sales of 235 to 255 million tons – Australia sales: 33
Slide 23: Delivering Growth and Value Creation
Delivering Growth and Value Creation ● Peabody has deep portfolio of project opportunities and financial capacity to deliver ● Also cognizant of cautious global environment ● Completing late-stage projects while re-evaluating timing of several emerging projects ● Shift in use of cash: – Tightly mana
Slide 24: Australia Platform Expanding Through Acquisitions and Organic Growth
Australia Platform Expanding Through Acquisitions and Organic Growth 24 Australia Volume Targets Dom. Thermal Seaborne Thermal Met 2015 projections include attributable ownership of expected Middlemount production. 2.5 5.9 5.8 0 10 20 30 40 50 2005 2011 2012P 2015 - 17P 10.1 Ton s in M illion s 8.3
Slide 25: The Macarthur Equation: The Value Proposition
The Macarthur Equation: The Value Proposition ● Global steel demand expected to grow above world GDP ● China has limited quality and quantity of met coal ● Hard coking coal and LV PCI are increasingly scarce ● Peabody expects organic growth through existing operations and expansions ● Acquisition ma
Slide 26: Macarthur Integration: Promising Progress Report
Macarthur Integration: Promising Progress Report 26 Today’s Assessment ● Improvement in 2013 and beyond expected following operational initiatives in 2012 ● Successful outcome of MDL 162 litigation ● Synergies targeted at $750 million – $1 billion NPV ● Long-term view of operations has improved; We
Slide 27: Significant Project Pipeline Enables Sustainable Long-Term Growth
Significant Project Pipeline Enables Sustainable Long-Term Growth 27 West Burton Monto Capricorn Coppabella U/G Codrilla South Vermont East West Walker Amaroo West Rolleston Yeerun Olive Downs South Moorvale West Moorvale U/G Wambo South Burton North Denham Wambo O/C Olive Downs North NGC GLB2 Metro
Slide 28: Peabody: Outstanding Position for Value Creation
Peabody: Outstanding Position for Value Creation ● Major global build out of steel and generation ● Rising China, India imports ● Fast growing seaborne market ● Increasing Australian exports ● Delivering on expansion projects ● #1 in low-cost U.S. regions ● Strong cash flows Why Coal? Why Peabody? W
Slide 29: Key Topics of Interest
Key Topics of Interest ● China Demand – Easing Growth Rates; Rising Imports ● Metallurgical Coal – Demand, Supply and Pricing ● Future of U.S. Coal – Effects from Gas and Retirements ● U.S. Export Profile – How Much; How Fast? ● Global Fundamentals – Trends in Supply and Demand 29
Slide 30: Near-Term Coal Concerns Tug Against Fundamental Market Strength
Near-Term Coal Concerns Tug Against Fundamental Market Strength Market Challenges GLOBAL ● Global steel growth rising less than prior year ● Easing thermal coal prices UNITED STATES ● Economic growth low ● Gas supply robust ● Coal inventories reach record levels in May Market Strengths GLOBAL ● Risi
Slide 31: Annual World Coal Demand Expected to Grow ~1.3 Billion Tonnes in Five Years
0 2,000 4,000 6,000 8,000 10,000 2011 2012P 2016P ROW China India Annual World Coal Demand Expected to Grow ~1.3 Billion Tonnes in Five Years ● Volume growth expected to exceed last five-year increase in global demand ● More than 90% of global demand growth in China/India ● Rising share supplied by
Slide 32: Global Seaborne Demand: 450-550 MTPY Growth Expected by 2016
India 100 - 150 China 200 - 250 Japan 20 - 30 South Korea 20 - 40 Taiwan 5 - 15 Other Pacific 40 - 50 Atlantic 30 - 40 0 200 400 600 800 1,000 1,200 1,400 1,600 2011 2016P 32 Source: Peabody Global Analytics. Estimated Growth in Seaborne Imports 2011 – 2016 (Million Tonnes) 2011-2016 Growth Pacific
Slide 33: Mixed Signals from China's Short-Term Growth
Mixed Signals from China’s Short-Term Growth ● First quarter GDP of 8.1% above Five-Year Plan target – All growth from internal consumption and infrastructure spending ● Net coal imports up 82% May YTD ● Coal generation growth of 4.1% ● Strong retail sales and export trends 33 Source: China National
Slide 34: China Coal Demand Expected to Grow ~1.0 Billion Tonnes by 2016
China Coal Demand Expected to Grow ~1.0 Billion Tonnes by 2016 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 To nn es in M ill io ns ● 50 GW of new coal generation coming on line in 2012 ● Expect ~240 GW of new coal generation by 2016 – Every 1 GW of coal requires 3.5 MTPY at full capa
Slide 35: Majority of 240 GW Capacity Growth Through 2016 in North and Coasts
Capacity Growth Unit: GW >10 GW 5-10 GW 1-5 GW <1 GW Capacity Unit: GW >30 GW 20-30 GW 10-20 GW <10 GW Source: Platts and Peabody Global Analytics. 35 Majority of 240 GW Capacity Growth Through 2016 in North and Coasts Current Coal Capacity ~700 GW Five-Year Growth ~240 GW
Slide 36: China Well Situated for Significant Additional Coal Imports
as 12a a Source: Wood MacKenzie, China National Bureau of Statistics and Peabody Global Analytics. 2011 imports include land-based imports from Mongolia. Net Exporter >100 MTPY Net Exporter <100 MTPY Self Sufficient Net Importer >100 MTPY Net Importer >50 MTPY Net Importer <50 MTPY ~600 Million Tonn
Slide 37: China's Coal Cost Increases Encouraging Imports
China’s Coal Cost Increases Averaging 7 – 9% CAGR, Encouraging Imports ● Significant cost increases driven by: – Currency appreciation; Escalating at 4% CAGR in recent years – Wage pressures – Longer transportation routes – Heightened safety attention; 95+% of coal mining is underground – Materials/
Slide 38: India's New Generation Built for Coal Imports
38 ● Majority of 70 GW of new coal plants built along coastal regions ● Plants designed to burn lower quality coals ● Multiple new port projects under way to enable increased imports Source: Platts. ~120 GW Current Coal Capacity Capacity Unit: GW >10 GW 5-10 GW 1-5 GW <1 GW Coal Plants Under Constru
Slide 39: India Coal Use Expected to Increase ~240 Million Tonnes by 2016
39 ● Domestic coal production unable to grow last two years ● Imports up 40+ million tonnes last two years ● Coal India ordered to increase coal imports Source: Peabody Global Analytics. 2009 2010 2011 2012P 2016P Production Imports 840 630 210 640 510 130 597 482 115 595 495 100 556 482 74 India Pr
Slide 40: Indonesia: World's Largest Thermal Coal Exporting Nation
40 ● Fast growing supplier to China and India ● 17 GW coal-fueled generation build out under way by 2020 requiring additional ~60 MTPY ● Potential future growth restricted by domestic hold-backs and export taxes Indonesia: World’s Largest Thermal Coal Exporting Nation Source: Peabody Global Analytic
Slide 41: High CV Coal Growth to Benefit Australia
Source: Peabody Global Analytics. High CV Coal Growth to Benefit Australia; Low CV from Indonesia and PRB 41 7.8% 2016P 1,139 158 288 203 648 Low CV (<=4,700 NAR) 43 156 2011 782 130 160 492 Global Seaborne Thermal Coal Demand (Million Tonnes) CAGR Mid CV (>4,700 & <5,500 NAR) High CV (>=5,500 NAR)
Slide 42: Global Met Coal Use Likely to Increase 25% by 2016
Global Met Coal Use Likely to Increase 25% by 2016 to Track Steel Growth ● Steel growth would require 250 MTPY of metallurgical coal by 2016 ● China NDRC treating coking coal as “special and scarce” resource to be managed by Government 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2011 2016P
Slide 43: PCI Growing in Demand from Global Steel Producers
43 PCI Growing in Demand from Global Steel Producers ● Pulverized Coal Injection a replacement for coke made from coking coal – 1.1 tonnes of low-vol PCI replaces 1 tonne of coke ● Steelmakers use PCI to reduce costs and free up coking capacity – If coke at ~$340/tonne and PCI at $162/tonne, then 1.
Slide 44: Global Seaborne Supply: Australia and Indonesia Expected to Lead Growth
Source: Peabody Global Analytics; McCloskey and Wood Mackenzie. Data shown in million tonnes. Excludes land-based exports, except Mongolia. Australia Majority of Met Seaborne Supply Growth 2011-2016 Growth 160 – 190 160 – 190 30 – 50 15 – 25 35 – 45 10 – 15 (5 – 15) 0 – 5 450 – 550 0 50 100 150 200
Slide 45: Alternative Coal Supply Sources Limited
Alternative Coal Supply Sources Limited ● Colombia: Expansions under way; Some expansions delayed due to environmental permitting concerns ● South Africa: Growth plans struggle to materialize; Domestic markets need additional coal first ● Russia: Expansions continue but long rail distance from ports
Slide 46: Rising Gas Prices to Benefit PRB First
$1 $2 $3 $4 $5 2011 2012 2013 2014 2015 2016 2017 Futures Rising Gas Prices to Benefit PRB First ● Forecast coal generation to be down 100 – 120 million tons for 2012 ● PRB to benefit as gas prices settle above $2.50 – $2.75/mmBtu ● ILB more competitive at $3.25 – $3.50/mmBtu ● Eastern coal requires
Slide 47: U.S. Coal Plant Retirements Largely Offset by New Plants
Source: Peabody Global Analytics and Ventyx . 47 U.S. Coal Plant Retirements Largely Offset by New Plants, Capacity Utilization GW of Coal Capacity Retired & Million Tons Consumed by Plants Retiring 2011 – 2016 Cumulative Generation Changes Million Tons New Generation SPRB / ILB 27 Other 11 Total Ne
Slide 48: Significant Demand Shift Towards PRB and Illinois Basin
Significant Demand Shift Towards PRB and Illinois Basin PRB advantage ● Low end of cost curve ● Primary source for new plants ● Benefits from basin switching ● Asian export potential Illinois Basin advantage ● Major source for new plants ● Benefits from new scrubbers and basin switching ● Transport
Slide 49: Near-Term Challenges But Solid Global Coal Fundamentals
Near-Term Challenges But Solid Global Coal Fundamentals ● Near-term headwinds from U.S. gas prices, European debt crisis and Asia worries ● Positive near-term signs with rising global met coal prices, strong coal generation in China, India and Europe and higher China imports ● Long-term fundamentals
Slide 50: Building on Industry-Leading Southern Powder River Basin Position
50 ● NARM: World’s largest and most productive coal mine; State-of- the-art equipment, conveyor and loadout facility ● Increasing market share in recent years ● Leading reserve position enhanced by recent reserve acquisition ● Focusing on highest-margin products and cost management – Balancing produ
Slide 51: Expanding Margins in Illinois Basin: Bear Run and Wild Boar
51 ● Developed Bear Run and Wild Boar Mines – Now highest-margin mines in Americas portfolio ● Focus areas: – High-volume low-cost operations – Capture growth from switching Eastern utilities and export demand – Position Bear Run for expansion – Advance Gateway North Expanding Margins in Illinois Ba
Slide 52: Project Delivery: Bear Run Achieving Targeted Results
Project Delivery: Bear Run Achieving Targeted Results ● Largest Midwest surface mine expected to ship ~ 8 million tons in 2012; Generates significant earnings ● Project delivered on time and budget at ~$350 million – ~$40 per ton installed capex ● Potential to expand to 12 million tons by 2016 ● Bes
Slide 53: Extending the Lives of High-Margin Operations: Gateway North
Extending the Lives of High-Margin Operations: Gateway North in Illinois Gateway preparation plant modernization under way. ● Follow-on and expansion to Gateway Mine – Peabody’s lowest cost mine in Midwest ● Expected to produce 4.5 million tons per year ● Serving customers in U.S., Europe, India and
Slide 54: Leveraging Leading Colorado and Southwest Position
● Developed low-ratio greenfield El Segundo Mine – Most productive surface mine outside PRB ● Focus areas: – Optimize sourcing in New Mexico to expand margins – Continue to contract Colorado export volumes – Develop Twentymile Sage Creek extension 54 Colorado / Southwest Leveraging Leading Colorado
Slide 55: Twentymile Sage Creek Extension
55 Extending Lives of High-Margin Mines: Twentymile Sage Creek Extension First development coal at the Sage Creek extension was produced last month. ● Extension of highly productive longwall mine – Backed by 16-year agreement with nearby Hayden Station – Marketed internationally through Gulf of Mexi
Slide 56: Expanding Export Capacity Available to U.S. Suppliers
● U.S. port capacity could grow ~100 million tons within five years ● Two-thirds of growth is expected in West and Gulf Coast ● West Coast port capacity driven by new port developments, enabling access to Asian markets Expanding Export Capacity Available to U.S. Suppliers 56 Colorado Legend Coal Sup
Slide 57: Coal Exports: Bright Spot for Market Growth
Coal Exports: Bright Spot for Market Growth ● Gulf Coast exports expand with shipments of ILB, Colorado and PRB ● West Coast exports from PRB forecast to grow rapidly with West Coast terminal ● East Coast export growth flattens due to slower thermal exports from CAPP 57 31 62 65 65 -70 12 28 34 42 -
Slide 58: Peabody Developing Large-Volume Export Business
● Peabody exporting PRB, Illinois Basin and Colorado coals through Canada, Gulf and East coasts ● U.S. exports of 6.6 million tons in 2011; Targeting 10 million tons for 2012 ● Multiple export initiatives: – Gateway Pacific Terminal in Washington; 24 MTPY initial throughput – Additional avenues to e
Slide 59: Peabody Energy Americas: Leveraging Leadership into Value Creation
● Largest and best positioned U.S. coal producer ● Operational excellence in safety, production, productivity and costs ● Commercial success and strong contracting strategies ● Growing technology solutions and best practice sharing ● Expanding capacity to fuel rising export demand 59 Peabody Energy
Slide 60: Asia 100 Target: Steady Progress Toward Fueling Growing Pacific Demand
Peabody Vision: Delivering 100 million tons into Asia markets by 2020 by creating an integrated coal production and trading business that diversifies BTU’s global supply portfolio and trading capacity. Asia 100 Target: Steady Progress Toward Fueling Growing Pacific Demand Drive Coal Conversion Initi
Slide 61: Peabody in China: Helping to Supply the World's Largest Coal-Consuming Nation
Peabody’s Approach ● Leverage expertise in safety, operations and environmental stewardship to develop world-class large-scale surface mines within China ● Continue to grow Asian trading business ● Play leading role in coal supply for conversion projects ● Serve growing demand through asset producti
Slide 62: Advancing Plans to Develop One of China's Largest Surface Mines
120 250- 300 0 100 200 300 2011 2016 M ill io n To nn es Expected Xinjiang Coal Production Advancing Plans to Develop One of China’s Largest Surface Mines ● Peabody and Xinjiang Government pursuing development of a large scale surface mine – Peabody to construct, manage and operate the mine – Valida
Slide 63: Infrastructure Build Out Connects Xinjiang to Eastern Population Centers
Infrastructure Build Out Connects Xinjiang to Eastern Population Centers Chengdu Xinjiang Planned and Existing Railroad Major Coal Basins in Xinjiang Hami Yili Coal Field Kubai Coal Field East Junngar Coal Field Hami Coal Field Planned Transmission Lines Urumqi Lanzhou Linhe Ge’ermu Rail ● Capacity
Slide 64: Peabody in Mongolia: Pursuing Development of Untapped Resources
Peabody in Mongolia: Pursuing Development of Untapped Resources Peabody’s Approach ● Position Peabody to participate in Tavan Tolgoi development, the large-volume high-quality metallurgical coal reserve located in the South Gobi desert ● Pursue active or near-term metallurgical coal operations and e
Slide 65: Peabody Progressing Efforts to Play Role in Tavan Tolgoi Development
● Significant base of metallurgical quality coal ● Peabody chosen by Mongolian government in July 2011 to participate in consortium effort to develop resources ● Commercial advancement slowed pending June 2012 parliamentary elections Next Steps: ● Accelerate commercial discussions following June ele
Slide 66: Peabody in Indonesia: Expanding Access to Major Seaborne Thermal Supply Base
Peabody in Indonesia: Expanding Access to Major Seaborne Thermal Supply Base Why Indonesia? ● World’s largest exporter of thermal coal will play role in meeting Asia’s rapidly growing coal demand Peabody’s Approach ● Expand access to third-party sourced volumes through portfolio of offtake agreement
Slide 67: Indonesian Sourcing Creates Additional Trading Opportunities
Indonesian Sourcing Creates Additional Trading Opportunities 67 Jakarta Balikpapan Singapore Offtake Agreement Locations ● Peabody currently has third-party term offtake agreements over the 2012 – 2016 period ● Secured Indonesian Trading License allowing management of transportation and logistics to
Slide 68: Peabody in India: Increasing Supply to Fastest Growing Thermal Importer
Peabody in India: Increasing Supply to Fastest Growing Thermal Importer Why India? ● Fueling strong growth with coal and will eventually surpass United States as world’s second-largest coal consumer Peabody’s Approach ● Continue to serve growing import demand from Australian and U.S. production as w
Slide 69: Peabody's Trading Operations Are a Solid Earnings Contributor
$46 $41 $43 $93 $117 $219 $193 $77 $197 $- $50 $100 $150 $200 $250 2003 2004 2005 2006 2007 2008 2009 2010 2011 Peabody’s Trading Operations Are a Solid Earnings Contributor A dj us te d E B IT D A in M illi on s Expanded Global Trading Platform Drives Increased Earnings London Beijing St. Louis New
Slide 70: Trading Business Sources Coal for Delivery Around the Globe
Trading Business Sources Coal for Delivery Around the Globe COALTRADE Sourced and Sold More Than 30 Million Tons in 2011 COALTRADE 2011 Physical Coal 70 Primary Sources Primary Destinations Australia U.S. South Africa Indonesia U.S. Europe S. Korea Japan China India COALTRADE sales include both inte
Slide 71: Peabody Asia and Trading Platform Driving Next Leg of Growth
Peabody Asia and Trading Platform Driving Next Leg of Growth into Pacific Basin ● Peabody continues to build on its unmatched global footprint and trading platform ● ‘Asia 100’ strategy to drive long-term earnings growth and increased access to world’s strongest coal markets ● Integrated global trad
Slide 72: Multiple Reasons Peabody is in Australia
● 60% of world’s seaborne metallurgical coal supply ● Largest high-heat-value thermal coal exporter ● Enormous high-quality coal base ● Huge competitive advantage with mines close to port; Ports close to high-growth markets ● Strong skills base and safety improvement ● Peabody’s Australian margins u
Slide 73: Well Positioned to Successfully Manage Industry Challenges
Well Positioned to Successfully Manage Industry Challenges Cost Management ● Expansions generating operating efficiencies, cost improvements – Larger volumes reduce unit costs ● New technologies improving output, lowering unit costs – North Goonyella longwall top coal caving being installed – Metrop
Slide 74: Conversion to Owner Operator on Target at Millennium and Wilpinjong Mines
Conversion to Owner Operator on Target at Millennium and Wilpinjong Mines Moving ~1/3 of Australia Production to BTU’s Best-in-Class Mining Millennium ● 1.9 million tons sold in 2011 ● 450 employees ● Operated by Downer EDI Mining Wilpinjong ● 9.8 million tons sold in 2011 ● 440 employees ● Operated
Slide 75: Australia Platform Expanding Through Acquisition and Organic Growth
Australia Platform Expanding Through Acquisition and Organic Growth 75 Expected Australia Volumes 2.5 5.9 5.8 0 10 20 30 40 50 2005 2011 2012P 2015 - 17P 10.1 8.3 25.3 45 – 50 9.3 33 – 36 7 – 8 14 – 15 12 – 13 22 – 25 ~ 8 15 – 17 Domestic Thermal Seaborne Thermal Met PCI refers to legacy Macarthur C
Slide 76: Acquisition Enables Significant Long-Term Growth Potential
● Expansions of both met and thermal quality coal ● Acquisition offers long-term growth potential for decades Acquisition Enables Significant Long- Term Growth Potential for Platform 76 Peabody’s Targeted Production Profile PEA Active PCI Active PEA New PCI New 2011 2012 2013 2014 2015 2016 2017 201
Slide 77: Bowen Basin Positioning Before Acquisition
Peabody Energy Australia Bowen Basin Positioning Before Acquisition Existing Mines: ● North Goonyella ● Eaglefield ● Burton ● Millennium Acquisition Significantly Strengthens Bowen Basin Position 77
Slide 78: New Bowen Basin Portfolio
New Bowen Basin Portfolio New Mines: ● Coppabella ● Moorvale ● Middlemount Resources: ● Addition of significant metallurgical and LV PCI potential in high- demand Bowen Basin Cautionary Note to U.S. Investors – The United States Securities and Exchange Commission permits U.S. mining companies, in th
Slide 79: Potential Infrastructure Hub to Deliver Multiple Future Projects
Potential Infrastructure Hub to Deliver Multiple Future Projects ● Accommodation hub for projects; Nearest town is 50 km away ● Increased safety; Reduced travel for employees ● Centralized warehousing and administration ● Efficiencies in lower headcount, delivery of outputs ● Larger volume contracts
Slide 80: Acquisition Integration Remains on Track
Acquisition Integration Remains on Track ● Safety practices integrated – 11% improvement in 2012 average monthly incident rate versus 2011 – May incident rate best in more than a year following ‘Cardinal Rules’ roll out ● Upgrading operations to Peabody standards – Restoring production to nameplate
Slide 81: Improving Coppabella and Moorvale Production Capacity
0 1 2 3 4 5 6 New Mine Plan Initiatives New Equipment Processing & Coal Recovery Program Improved Contractor Performance Prep Plant Optimization & Yields Coppabella Moorvale Majority of Improvements Expected to Occur in 2012 Improving Coppabella and Moorvale Production Capacity 81 2011 Production Ta
Slide 82: Australia: Large and Growing Contributor to Peabody Platform
Australia: Large and Growing Contributor to Peabody Platform ● Fastest growing coal company in Australia and major contributor to Peabody earnings ● Operational excellence in managing industry challenges ● Rising volumes of metallurgical and thermal export coal provide outstanding growth ● Significa
Slide 83: Peabody Realizing Multiple Benefits from Expansions
Peabody Realizing Multiple Benefits from Expansions ●Additional volumes of high quality met and thermal product for export market ●Completed at lower cost per ton of added capacity than greenfield developments ● Lowers unit costs from existing operations; Fixed costs spread over higher volumes ● Low
Slide 84: Wilpinjong Case Study
84 Wilpinjong Case Study: Bought in 2006, Completed in 2007 and Expanded in 2011 ● Australia’s lowest cost mine expands thermal coal exports, producing above capacity ● Capital of ~$30 per ton of added export capacity – Australia industry thermal coal average: $176 per ton ● Costs benefit from low s
Slide 85: Millennium Expansion Near Complete, Adding Volumes in 2012
● Doubling production of SHCC/PCI export coal – Capital of ~$170 per ton of added capacity ● Owner-operator transition to provide additional benefits – Capital of ~$110 per ton of pre-expansion capacity ● Production from new pit began in Q4 2011 ● Increased stockpile space allows segregation/sales o
Slide 86: Middlemount Production Ramp Up Ongoing
Middlemount Production Ramp Up Ongoing with Operational Improvements 86 ● First cargoes exported through Abbot Point via ‘Northern Missing Link’ in Q1 2012 ● Improving performance via mine design and possible implementation of dozer push approach ● Prep plant upgrade on track; Allows coking coal seg
Slide 87: Burton Widening Adds Volume, Provides Five-Year Life Extension
Burton Widening Adds Volume, Provides Five-Year Life Extension to Operation ● First coal expected Q3 2012 ● 44 of 62 million bank cubic meters moved to date – Box cut ~70% complete; Q4 2012 completion ● Full operating capacity expected by 2013 ● Capital of ~$95 per ton of total capacity – Majority o
Slide 88: North Goonyella Using New Technology to Expand Met Production
North Goonyella Using New Technology to Expand High Quality Met Production ● Peabody licensing agreement with Yanzhou Coal to deploy LTCC beginning in Q3 2013 ● LTCC utilizes full-seam recovery to access additional high quality “Goonyella” brand coking coal from 2013 – 2017 ● Expansion capital of ~$
Slide 89: Eaglefield Co-Development Agreement Accesses Previously Sterilized Reserves
● Peabody and neighboring leaseholder agreed to allow extraction of barrier coal between leases; Subject to government approval ● Allows recovery of 3.3 million tons of HQHCC ● Coal would have been otherwise sterilized ● Extends Eaglefield mine life by 2 years ● Further co-development potential for
Slide 90: Metropolitan Modernization, Expansion to Add Hard Coking Coal
90 Metropolitan Modernization, Expansion to Add 1 – 1.5 MTPY Hard Coking Coal ● Phased investment over next three years – Major modernization under way – Expansion timing delayed due to drift challenges but will result in additional incremental volumes ● Infrastructure upgrades include: – New longwa
Slide 91: Codrilla Greenfield Mine Development Under Review
91 Codrilla Greenfield Mine Development Under Review to Increase PCI Volumes ●3.5 million tons capacity (2.6 attributable) LV PCI coal ●Environmental approvals in place, mining lease expected mid-2012 ●Stand-alone prep plant; Product coal hauled to Moorvale for rail load out to DBCT ●Completing dril
Slide 92: Peabody Has Secured Logistics Needs to Ship Growing Volumes
Peabody Has Secured Logistics Needs to Ship Growing Volumes to Market ● Australia has history of increasing export coal volumes via infrastructure expansions ● Additional rail and port investments under way ● Rail contracts and port investments enhance Peabody’s ability to deliver ● Peabody has suff
Slide 93: Strong Track Record of Australia Export Growth with More Ahead
0 50 100 150 200 250 300 350 400 450 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 T o n n es i n M il li o n s Strong Track Record of Australia Export Growth with More Ahead ● Australia delivers growing exports ● 400 – 450 MTPA throughput potential by 2016 ● Rail improvements expected to keep p
Slide 94: Australia Organic Pipeline Represents Long-Lived Growth
94 ● Peabody delivering on significant pipeline of projects ● Driving value through both increased volumes and cost improvements ● Ability to deliver product to market secured with multiple options for long-term growth ● Significant synergies available from proximity to existing/future infrastructur
Slide 95: Peabody Navigating Complex Global Policy Landscape
● Advance favorable global environment for permitting, production and rail/port development ● Enhance Peabody’s profile as strategic energy partner of choice in host countries, particularly in China and Mongolia ● Progress Btu Conversion and clean coal projects around the world, including in Austral
Slide 96: Carbon Tax and MRRT Take Hold in Australia
● Carbon Tax – At $23 per CO2, tax expected to raise nearly $1 billion from coal sector in year one – ~$2 per ton for Peabody, annualized beginning July 1, 2012 – Opposition committed to repeal if elected – Greens seek continued increase in CO2 pricing ● Minerals Resource Rent Tax – Commences July 1
Slide 97: Deepening Relationships in China
Deepening Relationships in China ● 12th Five-Year Plan is coal friendly, calls for safer, more productive and environmentally responsible sector ● Consolidation into safer, larger surface mines plays to Peabody’s strengths ● Encourages coal imports, benefiting Peabody’s global growth platform, parti
Slide 98: Improving the Global Public Policy Framework for Coal
Improving the Global Public Policy Framework for Coal ● Public policy pressure points exist on multiple levels – Extraction, royalties/fees, infrastructure, and use ● Governments also recognize the benefits of coal mining/use ● Peabody: Highly active from a company and industry perspective in advanc
Slide 99: Financial Strength for Growth, Differentiation and Value Creation
Financial Strength for Growth, Differentiation and Value Creation ● BTU’s Continued Strong Financial Results: A Key Differentiator ● Rising Cash Flows and Targeted Uses ● Potential Upside in Market Valuation Key Themes 99
Slide 100: Financial Strength Drives Value, Growth
Financial Strength Drives Value, Growth Peabody’s Approach ● Manage cost structure to achieve competitive advantage, expand margins and generate cash ● Put cash to work to balance capital structure, advance growth projects, pay dividends and repurchase shares ● Maintain best practices in financial r
Slide 101: Multiple Avenues to Strengthen Balance Sheet and Balance Capital Structure
• Exploring strategic joint ventures and partnerships to optimize value and spread risk Multiple Avenues to Strengthen Balance Sheet and Balance Capital Structure Capital Discipline Prudent Investment Strategy 101 • Wilkie Creek sales process announced in January • Ability to adjust capital expendit
Slide 102: Peabody Consistently Delivers Superior Margins
Peabody Consistently Delivers Superior Margins 23% 31% 26% 33% 32% 31% 17% 23% 25% 25% 25% 21% 0% 10% 20% 30% 40% 2007 2008 2009 2010 2011 Q1 2012 102 Peabody Australia results include impact of Macarthur since acquisition. U.S. peers include ACI, ANR, CNX, CLD, PCX, WLT, ICO, and MEE in years of op
Slide 103: Strong Cash Flows Provide Multiple Opportunities for Value Creation
Peabody’s Strong Cash Flows Provide Multiple Opportunities for Value Creation ● Flexibility to invest through all market conditions ● Focus on: – Deleveraging and major organic growth projects – Debt reduction and share repurchase in second quarter Uses of Cash 103 Current Cash Priorities
Slide 104: Peabody Focused on Strengthening Balance Sheet
57 52 47 42 37 55 53 20 30 40 50 60 2006* 2007 2008 2009 2010 2011 Q1 2012 Peabody Focused on Strengthening Balance Sheet Total Debt to Capital % ● Debt-to-capital level at 53% as of March 31 ● BTU repays debt in second quarter ● No significant debt maturities until 2015 – 2016 ● Best coal company c
Slide 105: Capital Targeted Primarily Toward Organic Growth Projects
Peabody Capital Targeted Primarily Toward Organic Growth Projects ● Primarily discretionary organic capital in Australia – Supports higher growth Asian demand – Ability to reduce spending and redeploy capital if needed ● Capital under regular review – Peabody 2012 capex now reduced to $1.0 – $1.2 bi
Slide 106: Emerging JVs: Limited Use of Cash and Alternative Financing
Emerging JVs: Limited Use of Cash and Emphasis on Alternative Financing Strategic Objective Potential Funding ● Emerging Markets ● Ports ● Other Financing ● JV partners ● Regional banks and capital markets (relationship with Asia/Chinese banks) ● Project financing from multilateral agencies ● Take-o
Slide 107: Financial Performance and Actions: Key Takeaways
Peabody’s Financial Performance and Actions: Key Takeaways ● Peabody has rising earnings and cash flows ● We lead our NYSE peers in performance and returns ● Our debt level is manageable and we are balancing our capital structure ● We have major upside potential through multiple expansions ● Our str
Slide 108: Bringing It Home: Market Overview
Bringing It Home: Market Overview ● Cautious macroeconomic environment ● Seaborne Metallurgical Coal – Rebounding from trough levels in Q1 – Met supply in long-term structural shortage ● Seaborne Thermal Coal – Atlantic markets pressured from recent East Coast U.S. exports – Raising our projections
Slide 109: Bringing It Home: Peabody in Excellent Position to Create Value
Bringing It Home: Peabody in Excellent Position to Create Value ● Rising Australian met and thermal coal exports ● Leader in regions at low end of cost curve ● Significant growth pipeline ● Favorable view of acquisition ● Deep exploration potential ● Solid cash flow generation ● Financial strength 1
Slide 110: Bringing It Home: Strong Catalysts to Close the Value Gap
Bringing It Home: Strong Catalysts to Close the Value Gap ● Peabody has upside on all three levers of earnings growth – Production, pricing and costs ● BTU has significant potential for multiple expansion – Historical multiples well above current levels – Relative premium to peers and Australia/U.S.
Slide 111: 2012 Analyst and Investor Forum: Creating Value for Both Near Term and Long Term
2012 Analyst and Investor Forum Creating Value for Both Near Term and Long Term Gregory H. Boyce Chairman and Chief Executive Officer June 27, 2012
Slide 112: Appendix: Reconciliation of Adjusted EBITDA
Appendix: Reconciliation of Adjusted EBITDA Adjusted EBITDA is defined as income from continuing operations before deducting net interest expense, income taxes, asset retirement obligation expense, depreciation, depletion and amortization, and amortization of basis difference associated with equity