Peabody Energy Corporation · NYSE:BTU
Peabody Energy — Investor Presentation (August 2016)
48 slides from Peabody Energy's investor presentation, Aug 10, 2016
Slide 1: 2017 – 2021 Business Plan
2017 – 2021 Business Plan July/August 2016 Exhibit 99.1
Slide 2: Statement on Forward-Looking Information
Statement on Forward-Looking Information Certain statements included in this presentation are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. The Company uses words such as “anticipate,” “believe,” “expect,” “may,” “forecast,” “project,” “should,” “estimate,” “pla
Slide 3: Peabody Energy Business Plan Introduction
Peabody Energy Business Plan As part of Peabody’s Debtor-in-Possession (DIP) financing facilities, the company is required to meet certain milestones throughout the Chapter 11 process, including the approval of the U.S. and Australia business plans. These business plans will form the basis for the P
Slide 4: Table of Contents
Table of Contents Section One: Executive Summary 5 Section Two: Business Plan Industry Fundamentals/Outlook 18 Methodology and Assumptions 28 Americas Business Plan 32 Australia Business Plan 37 Consolidated Business Plan 41
Slide 5: Section One: Executive Summary
Section one: EXECUTIVE Summary
Slide 6: Peabody Energy Business Plan: Current State
Peabody Energy Business Plan As Peabody Energy focuses on emerging stronger from the Chapter 11 process, we provide this business plan to continue to shape the future state of the company. We look to capitalize on our strengths, build upon our strong operating performance, reduce our overall debt an
Slide 7: Current State: Largest Private-Sector Coal Company
Current State: Largest Private-Sector Coal Company Serving Thermal and Metallurgical Coal Customers in 25 Countries Target operating model includes: Two business units (Americas, Australia) Marketing/Trading services function Lean and scalable corporate structure offering strategy, compliance, share
Slide 8: Platform Benefits from Size, Geographic and Product Diversity
Platform Benefits from Size, Geographic and Product Diversity, Customer Access Located in the Best Mining Regions in the U.S. and Australia Trend toward aggregating large supply centers / complexes to lower costs and better compete
Slide 9: Highlights: Safety – Leading Measure of Operational Excellence
Highlights: Safety – Leading Measure of Operational Excellence Global Safety Rate Improves to New Company Record in 2015 Vision to operate safe and healthy workplaces that are incident free Safety – A Way of Life Management System sets clear and consistent expectations for safety and health across b
Slide 10: Highlights: Americas – Strong Asset Base and Margins
Highlights: Americas – Strong Asset Base and Margins Diversified product and geographic mix in best U.S. regions Strong average 2016 YTD EBITDA margins of 25% Margins reflect layered contracting strategies and 8% per ton cost reductions from 2012 (despite 35% lower volumes) Largest coal producer and
Slide 11: Highlights: Australia – Major Reductions in Capital and Costs
Highlights: Australia – Major Reductions in Capital and Costs $750 $41 ~5,900 ~3,800 Australian capital investment declines more than 90% while workforce decreases over 35% from peak in 2012 even with owner-operator conversions and rising volumes Average cost per ton declines 47% from 2012, aided by
Slide 12: Highlights: SG&A – Best Among Peers Despite Global Nature
Peabody Q1 16 Other U.S. Coal Producer Average: 5.5% Source: Public SEC filings of peers; Note: YTD 2016 through June 2016. Note: Other U.S. coal producers include: Alliance Resource Partners, Arch Coal, Cloud Peak Energy, Consol Energy, Foresight Energy and Westmoreland Coal. SG&A remains constant
Slide 13: Where We Are Going: Key Drivers of Future Value Creation
Where We Are Going: Key Drivers of Future Value Creation Aggressive pursuit of safe, low-cost operations Constant drive down cost curve Protect social license to operate Excellence in land restoration Emphasis on best products, regions and customers within essential industry In U.S., best asset base
Slide 14: Financial Overview: EBITDAR Rises to $631 Million in 2021
Financial Overview: EBITDAR Rises to $631 Million in 2021 on Stable Revenues Australia BU Americas BU Coaltrade/Corporate
Slide 15: Future State: Diversified Platform Capable of Generating Positive Cash Flow
U.S. Plan PRB and ILB – Drive lower costs through synergies, provide greater value Southwest and Colorado – Manage for cash Australia Plan Improve/optimize strategic assets Divest, sell or suspend non-strategic assets Restructure or mitigate take-or-pay agreements to improve cash flows Continue to d
Slide 16: How We Will Get There: Mission, Values and Strategy
How We Will Get There: Peabody Mission, Values and Strategy To create superior value as the leading global supplier of coal, which enables economic prosperity and a better quality of life. Our Mission Our Values Safety: We commit to safety and health as a way of life. People: We offer an inclusive w
Slide 17: Section Two: Business Plan
ENERGY: SECTION TWO: BUSINESS PLAN
Slide 18: Industry Fundamentals
ENERGY INDUSTRY FUNDAMENTALS
Slide 19: Industry Highlights
Industry Highlights UNITED STATES U.S. coal demand declines sharply in first half of 2016 on ~15-year-low natural gas prices and competition from other fuel sources; prices begin to show improvement in mid-2016 U.S. coal demand for generation expected to grow 20 to 25 million tons between 2016 and 2
Slide 20: Pressured U.S. Coal Industry Expected to Modestly Rebound in 2017
Pressured U.S. Coal Industry Expected to Modestly Rebound in 2017 Challenging start to 2016 with YTD demand decreasing approximately 20%; shipments fall nearly 30% Full-year utility demand projected to fall approximately 85 to 105 million tons to nearly 635 to 655 million tons driven by lower gas pr
Slide 21: Lower Natural Gas Prices Dictating U.S. Coal Demand
PRB 8800 Pricing Assumptions ($ per Ton) Lower Natural Gas Prices Dictating U.S. Coal Demand Overabundance of natural gas resulting in ~15-year-low prices in early 2016 Low production costs, sufficient reserves adversely affect coal prices and limit pricing upside Near-term U.S. coal prices expected
Slide 22: PRB and Illinois Basin Best Positioned in U.S. Coal Industry
PRB and Illinois Basin Best Positioned in U.S. Coal Industry PRB and ILB are most competitive on average against natural gas and other electricity generating fuels PRB: $2.50 – $3.00 per mmBtu ILB: $3.50 – $3.75 per mmBtu CAPP: $4.00 – $4.50 per mmBtu Demand to stabilize as expected coal plant retir
Slide 23: New Coal Generating Capacity Supports Seaborne Thermal Long-Term Demand
New Coal Generating Capacity Supports Seaborne Thermal Long-Term Demand Source: Platts, IHS, Wood Mackenzie, Country / Government Data and Peabody Global Energy Analytics. Represents potential new coal consumption of ~1 billion tonnes Over 85% of additions concentrated in Asia-Pacific ASEAN capacity
Slide 24: Seaborne Thermal Demand Recovery Expected from Recent Lows
Seaborne Thermal Demand Recovery Expected from Recent Lows Seaborne thermal demand projected to modestly increase from 2016 through 2021 by 50 to 60 million tonnes Growth driven by Asia-Pacific as power and coal demand expected to increase with new coal capacity Australia well-positioned to supply i
Slide 25: Seaborne Thermal Pricing Projected to Rise Modestly
Seaborne Thermal Pricing Projected to Rise Modestly; Remains Muted Q1 2016 seaborne thermal prices reach multi-year lows from oversupply, reduced China demand and lower costs Seaborne thermal coal demand has recently shown signs of improvement, with spot-prices currently above $60 per tonne Assumpti
Slide 26: Seaborne Metallurgical Coal Demand on Course for Stabilization
Seaborne Metallurgical Coal Demand on Course for Stabilization Signs of improvement in pricing, with coking coal benchmark settling higher for two consecutive quarters Has not happened since late 2010/early 2011 Low prices and capital constraints force some mine closures and defer new supply, bringi
Slide 27: Seaborne Metallurgical Pricing Improving from Multi-Year Lows
Seaborne Metallurgical Pricing Improving from Multi-Year Lows Q1 2016 HCC settlement $81 per tonne; rebounding in Q2 Moderate pricing growth assumed following supply/ demand balances Global average seaborne met coal cash costs decline 41% since 2012, further reductions likely limited Forecasted cost
Slide 28: Methodology & Assumptions
ENERGY METHODOLOGY & ASSUMPTIONS
Slide 29: Process: Business Plan Assumptions Developed Using Bottom-Up Approach
Process: Business Plan Assumptions Developed Using Bottom-Up Approach Macroeconomic assumptions developed for key variables, including country level GDP, industrial production and fixed asset investment, driving detailed supply / demand models Demand models focus on key regions for coal, generation
Slide 30: 2017 – 2021 Business Plan Key Assumptions & Sensitivities
2017 – 2021 Business Plan Key Assumptions & Sensitivities Increase in natural gas price drives higher U.S. pricing and volume over time Australia seaborne met and thermal pricing, along with A$ FX, increase steadily over the five-year plan Financial performance is highly sensitive to changes in assu
Slide 31: 2016 Updated Forecast vs. DIP Budget
2017 – 2021 Business Plan 2016 Updated Forecast vs. DIP Budget Although PRB volumes are trending towards the initial DIP budget projections (100MT), repositioning efforts have driven segment margins higher to ~24% YTD 2016, nearly back to 2015 levels (~26%) despite a 30% loss of volume period-over-p
Slide 32: Americas Business Plan
ENERGY AMERICAS BUSINESS PLAN
Slide 33: Americas Plan Objectives and Commercial Outlook
Plan Objectives Maintain safe and efficient operations while aggressively managing costs Continue to maximize profitability through cost reductions and cash preservation through execution of mine-level initiatives to maintain or improve cost metrics and productivity Focus on reclamation activities t
Slide 34: Americas Financial Summary
2017 – 2021 Business Plan Americas Financial Summary EBITDAR Volume improves in 2017 and 2018 on expected increase in natural gas prices and normalization of inventory stockpiles EBITDAR generation totals ~$2.9B over the five-year plan EBITDAR declines in 2018 and 2019 as volume benefit is offset by
Slide 35: Americas Costs and Margins
2017 – 2021 Business Plan Americas Costs and Margins Cost Containment Efforts in U.S. Lead to Sustainable Margins Despite losing over 30% of U.S. volume since 2014 (~60MT), the U.S. platform has successfully managed costs through right-sizing operations and ongoing productivity improvements 2016 – 2
Slide 36: Land Restoration and Reclamation Assurance
Land restoration essential part of coal mining process Peabody restored ~4,700 acres of mined land in 2015 $185 million spent to restore ~48,000 acres of land over past decade $560 million paid to federal abandoned mined lands (AML) program for others’ reclamation AML reclaims no Peabody lands Peabo
Slide 37: Australia Business Plan
ENERGY AUSTRALIA BUSINESS PLAN
Slide 38: Australia Business Plan Objectives and Commercial Outlook
Business Plan Objectives Maintain safe and efficient operations while aggressively managing costs Maximize profitability through cost reductions and cash preservation through execution of mine-level initiatives to maintain or improve cost metrics and productivity Continue to meet rehabilitation obli
Slide 39: Australia Financial Summary
Tons Sold EBITDAR Net Capital Declining metallurgical production profile anticipated over time Near-term EBITDAR will be challenged although results improve over the plan due to increasing Met ($95/t in 2017 to $123/t in 2021) and Thermal ($52/t in 2017 to $65/t in 2021) price assumptions, partially
Slide 40: Australia Costs and Margins
2017 – 2021 Business Plan Australia Costs and Margins Australia Cost Containment Actions Continue; Met Margins Lag 2016 – 2021 clean cash cost per ton CAGR is expected to be under 2% in both thermal and met segments, reflecting continued Project Excellence efforts to drive costs out of the mining op
Slide 41: Consolidated Business Plan
ENERGY CONSOLIDATED BUSINESS PLAN
Slide 42: Mining Volumes and Revenues
Mining Volumes Following a sharp decline in U.S. volume in 2016, 2017 mining volume rebounds, primarily in the PRB (10MT) due to expectations of higher natural gas prices and lower utility stockpiles U.S. volume also increases in 2018 from improving demand, although sales do not return to 2015 level
Slide 43: EBITDAR and Net Cash Flows
EBITDAR 2017 EBITDAR increases $93M (or 24%) as higher Australia pricing, U.S. volume, and Coaltrade earnings more than offset lower U.S. pricing EBITDAR increases in 2018 and beyond primarily due to higher Americas volumes and Australia pricing, partially offset by lower average U.S. pricing from r
Slide 44: Consolidated EBITDAR Bridge: 2016 to 2021
2017 – 2021 Business Plan Consolidated EBITDAR Bridge: 2016 to 2021 EBITDAR steadily increases from 2016 to 2021 (~$250M), although improvement is primarily dependent on rebound in seaborne met and thermal pricing Lower Americas pricing from roll off of higher-priced legacy contracts shifting to unc
Slide 45: EBITDAR by Region
2017 – 2021 Business Plan EBITDAR by Region Americas BU EBITDAR declines in 2018 primarily due to lower pricing from roll-off of higher-priced contracts and lower assumed pricing on uncommitted volume Resource Management contributes ~$10M EBITDAR gains per year, with ~$13M-$20M cash proceeds assumed
Slide 46: Consolidated Gross Capital Summary
2017 – 2021 Business Plan Consolidated Gross Capital Summary Operations continue to focus on cash preservation, with YTD 2016 annualized capital expenditures spending of ~$76M 2017 capital increases by $44M due to increase in Australia sustaining capital across multiple sites and project spend for t
Slide 47: 2016 and 2017 Cash Bridge
2017 – 2021 Business Plan 2016 and 2017 Cash Bridge ($ in Millions) 2017 Cash Usage 2016 Cash Usage 2016 cash from operations is not sufficient to cover capital ($112M), LBAs (~$250M), cash collateral needs ($94M) and other unfavorable working capital impacts primarily from tightening trade terms Ca
Slide 48: Peabody to Continue to Execute and Build Upon Business Plan
Peabody Energy to Continue to Execute and Build Upon Business Plan Excellent workforce Safety, land restoration Geographic, product diversity U.S. asset base Thermal coal platform in Australia Lean, scalable operating model Asia-Pacific seaborne access Building on Strengths… …Targeting Improvements