Peabody Energy Corporation · NYSE:BTU
Peabody Energy — Lehman CEO Energy / Power Conference 2008
33 slides from Peabody Energy's conference presentation, Sep 4, 2008
Slide 1: Peabody Energy Lehman CEO Energy / Power Conference
Peabody Energy Lehman CEO Energy / Power Conference September 4, 2008
Slide 2: Statement on Forward-Looking Information
Statement on Forward-Looking Information 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 protection
Slide 3: BTU: The Only Global Pure-Play Coal Investment
BTU: The Only Global Pure-Play Coal Investment Global coal demand exceeding supply near and long-term Global coal prices strong and rising BTU: Major global leverage with higher volumes and repricing contracts Global demand driving U.S. exports, Illinois Basin and PRB BTU: Major PRB and Illinois Bas
Slide 4: Coal Continues to be Fastest Growing Fuel
Compound Annual Growth Rate 0.6% 1.7% 2.9% 2.9% 5.1% Coal Continues to be Fastest Growing Fuel Global Coal Demand Grows 1.5+ Billion Tons in 6 Years Source: BP Statistical Review of World Energy, June 2008. Coal Natural Gas Hydro Oil Nuclear 2002 - 2004 35.15 19.02 18.93 10.53 3.51 35% 2001 - 2007 C
Slide 5: New Coal Plants Increase Global Coal Consumption by ~1 Billion Tons
New Coal Plants Increase Global Coal Consumption by ~1 Billion Tons China 101 354 India 80 280 Other Asia 46 160 Russia / FSU 28 98 U.S. 16 60 Europe 10 35 Africa 6 21 South America 6 21 Middle East 1 4 TOTAL 294 1,033 Nearly 300 GW of New Coal Plants Under Construction Country Plants (GW) Coal Grow
Slide 6: Key Nations Retain More Coal for Domestic Use and "Short" Seaborne Markets
Key Nations Retain More Coal for Domestic Use and "Short" Seaborne Markets INDONESIA YTD exports stall after years of double-digit growth; proposal to mandate 30-35% of low c.v. coal stay home; possible "price majeure" of lower priced contracts SOUTH AFRICA 45 MT stockpile rebuild needed; "Short 100
Slide 7: China's Export Withdrawal Creates Structural Shift in Seaborne Markets
China's Export Withdrawal Creates Structural Shift in Seaborne Markets 2003 2004 2005 2006 2007 2008 Thermal Coal 72 68 46 25 2 0.01 Metallurgical Coal 11 0 0 0 0 0 Ongoing supply problems reduce exports Second half 2008 export licenses still not issued; will be less than projected Coal imports may
Slide 8: Top Coal Exporting Nations Not Keeping Pace With Growing Demand
Top Coal Exporting Nations Not Keeping Pace With Growing Demand Source: Barlow Jonker, industry reports, Peabody Analysis. Venezuela Poland Kazakhstan Canada Vietnam China U.S. Colombia South Africa Russia Indonesia Australia 2002 - 2004 7 10 24 25 29 50 51 65 68 98 161 251 Indonesia S. Africa Russi
Slide 9: Structural Changes to Global Coal Markets Long Term in Nature
Structural Changes to Global Coal Markets Long Term in Nature Major growth in energy, coal use by emerging nations Global build-out of power plants Cost of competing fuels Peak oil concerns Weak dollar and inflation hedge Exporting nations requiring more coal for domestic use Deeper / thinning geolo
Slide 10: Peabody Energy: Key Growth Drivers
Global coal demand exceeding supply both near term and long term Global coal prices strong and rising BTU: Major global leverage with higher volumes and repricing contracts World demand drives U.S. exports, Illinois Basin and PRB BTU: Major PRB and Illinois Basin leverage with higher volumes and rep
Slide 11: Global Coal Markets Interconnected; Slack Quickly Taken from All Markets
Global Coal Markets Interconnected; Slack Quickly Taken from All Markets U.S. Dollars Per Ton PRB 8800 U.S. Dollars Per Ton(ne) API4, Newcastle, CAPP NYMEX Jan. 1 1Q 2Q 3Q 4Q 1Q 2Q Aug. 2007 2007 2007 2007 2007 2008 2008 2008 Central Appalachia (CAPP NYMEX) and Powder River Basin (PRB 8800) prices f
Slide 12: Peabody Energy: Key Growth Drivers
Global coal demand exceeding supply both near term and long term Global coal prices strong and rising BTU: Major global leverage with higher volumes and repricing contracts World demand drives U.S. exports, Illinois Basin and PRB BTU: Major PRB and Illinois Basin leverage with higher volumes and rep
Slide 13: BTU Advantage: 10+ MTPA of Australia Met Coal
2008 2009 2010 East 3 3 10.5 West 5.5 6.5 BTU Advantage: 10+ MTPA of Australia Met Coal Previously Priced Recently Priced Recently Priced Unpriced Unpriced Peabody's Met Coal Leverage 2007 Benchmark $98 $300 2008 Benchmark $ / Metric Ton High-Quality Hard Coking Coal Prices PLACEHOLDER PCI & Semi-So
Slide 14: BTU Advantage: 10+ Million Tons of Australia Met Coal Capacity
BTU Advantage: 10+ Million Tons of Australia Met Coal Capacity Millennium Mine interest acquired; ramping up to 3 MTPA Exploring North Goonyella / Eaglefield expansion Metropolitan Mine expanding long term to 2.5 MTPA Added rail / port throughput in 2010 with Goonyella- Abbot Point Expansion Conarco
Slide 15: BTU Advantage: Large, Growing Volumes of Australia Export Thermal Coal
2008 2009 2010 Previously Priced 6 2.5 1 Recently Priced 2.5 1.5 0 Unpriced 6 12 1/1/2007 1Q07 2Q07 3Q07 4Q07 4/1/2008 Aug. 2008 East 51.95 53.93 70.03 78 89.75 125 170 BTU Advantage: Large, Growing Volumes of Australia Export Thermal Coal Previously Priced Recently Priced Recently Priced Unpriced U
Slide 16: BTU Advantage: Expanded Australia Thermal Coal Capacity
Wilpinjong Wambo North Wambo Wilkie Creek Chain Valley Brisbane Newcastle NCIG Queensland New South Wales BTU Advantage: Expanded Australia Thermal Coal Capacity Higher capacity through North Wambo and expanded prep plant Expanding Wilpinjong Mine to 9+ MTPA over time Major owner of new NCIG termina
Slide 17: Peabody Australia Capacity Potential
2007 2008 RESERVES POTENTIAL Queensland N. Goonyella / Eaglefield 2.4 2.5 - 3.0 45 4 - 6 MT Burton 3.2 2.5 - 3.0 33 4 MT Millennium 1.0 1.0 - 1.5 23 3.5 MT Wilkie Creek 2.4 2.3 - 2.6 344 3+ MT 9.0 9 - 10 New South Wales Wilpinjong 5.1 6.5 - 7.0 190 9 - 11 MT Wambo Complex 4.7 4.5 - 5.0 121 7 - 8 MT
Slide 18: BTU Advantage: Global Platform Offers Growing and Diverse Earnings
BTU Advantage: Global Platform Offers Growing and Diverse Earnings 1st Qtr 2nd Qtr 1 99 2003 2003 and 2007 reflect actual results from continuing operations. International EBITDA Share Grows to 50% in 2008 1st Qtr 2nd Qtr 50 50 2008 United States International 1st Qtr 2nd Qtr 21 79 2007 $422 Million
Slide 19: Peabody Energy: Key Growth Drivers
Global coal demand exceeding supply both near term and long term Global coal prices strong and rising BTU: Major global leverage with higher volumes and repricing contracts World demand drives U.S. exports, Illinois Basin and PRB BTU: Major PRB and Illinois Basin leverage with higher volumes and rep
Slide 20: U.S. Exports Expected to Grow to 110 Million Tons in 2009
2006 2007 2008 2009 Export 49300 59300 87600 109600 Import 36000 36400 32000 31000 U.S. Exports Expected to Grow to 110 Million Tons in 2009 U.S. net exports growing >50 million tons between 2007 and 2009 U.S. inventories near or below targeted levels in all regions Peabody YTD transactions: 7.4 mil
Slide 21: International Markets Create Major Parity Price Opportunities
Recent API 2 (South Africa to Europe): $193 / tonne Implied Price at East Coast Port: $160 / ton Equivalent or "Parity Price" vs. Current Market (FOB Mine): Central Appalachia: $130 Parity vs. $127 Market Northern Appalachia: $136 Parity vs. $114 Market Backfill Equivalent vs. Current Market (FOB Mi
Slide 22: Peabody Energy: Key Growth Drivers
Global coal demand exceeding supply both near term and long term Global coal prices strong and rising BTU: Major global leverage with higher volumes and repricing contracts World demand drives U.S. exports, Illinois Basin and PRB BTU: Major PRB and Illinois Basin leverage with higher volumes and rep
Slide 23: BTU Advantage: Peabody's Volumes Largely Reprice Every 3.5 Years
2007 2008 2009 2010 2011 7.25 11.5 15 19.25 20.25 BTU Advantage: Peabody's Volumes Largely Reprice Every 3.5 Years OTC PRB 8800 Prices PRB moving as slack taken out of other markets 2011 published PRB prices nearly 3x 2007 levels Peabody's total unpriced U.S. volumes: 2009: 35 - 40 million 2010: 90
Slide 24: BTU Advantage: Repricing Illinois Basin Contracts at Higher Levels
BTU Advantage: Repricing Illinois Basin Contracts at Higher Levels Spot prices double YTD in 2008 Benchmarks move from $30s to $60s / $80s Peabody: 32 MTPA of Illinois Basin production 3.7 billion tons of reserves Peabody in late-stage evaluation of new mine development
Slide 25: Peabody Energy: Key Growth Drivers
Global coal demand exceeding supply both near term and long term Global coal prices strong and rising BTU: Major global leverage with higher volumes and repricing contracts World demand creating to the U.S., Illinois Basin and PRB BTU: Major PRB and Illinois Basin leverage with higher volumes and re
Slide 26: Cost Containment Actions Enable Margin Expansion in Strong Markets
Cost Containment Actions Enable Margin Expansion in Strong Markets Process Improvement Projects New Mine Efficiencies Newer surface mines (Wilpinjong, El Segundo) lower cost than existing mines Major Cost and Productivity Initiatives Safety Record 1.52 rate YTD Commodity Management Use of consumptio
Slide 27: BTU Advantage: Global Pipeline of Growth Opportunities
BTU Advantage: Global Pipeline of Growth Opportunities Cost / Quality Acquisitions / Exploration Organic Growth Caballo Truck/ Shovel NARM Dragline NARM Conveyor NARM Blending & Loadout Wambo Prep Plant Millennium Remaining 15% Startup Wilpinjong Startup Millennium North Wambo U/G Twentymile Prep Pl
Slide 28: Peabody: A Leader in Btu Conversion and Clean Coal Solutions
Peabody: A Leader in Btu Conversion and Clean Coal Solutions BTU is the only non-Chinese equity partner in GreenGen, China's centerpiece coal / climate initiative BTU partnering with ConocoPhillips on new coal-to- natural gas facility in Kentucky BTU has investment in GreatPoint Energy to develop co
Slide 29: BTU Advantage: Value Conversion as We Narrow the Energy Valuation Gap
Source: Company filings and reports. Market capitalization as of Aug. 25, 2008. BTU Advantage: Value Conversion as We Narrow the Energy Valuation Gap Market Capitalization on Btu-Equivalent Basis Peabody Market Capitalization $ per mmBtu ConocoPhillips Anadarko Chevron Apache BP ExxonMobil Shell
Slide 30: Valuation Metrics Suggest Valuation Upside for BTU
Valuation Metrics Suggest Valuation Upside for BTU ConocoPhillips Chevron Apache BP ExxonMobil Shell BTU Trading at Low Forward EBITDA Multiple Currently 6.5x vs. 10 - 12x in recent years Recent M&A & Equity Values Suggest Valuation Upside Recent valuations: up to $1,000 / ton of met coal production
Slide 31: Valuation Metrics Suggest Upside for BTU
Valuation Metrics Suggest Upside for BTU Coal Prices Newcastle Metallurgical PRB Illinois Basin BTU Earnings 2008 EBITDA 2008 EPS BTU Share Price YTD 2008 140% 200% 50% 140% 77% 72% (13)% Coal Prices, BTU Earnings Show Major Growth Source: Newcastle and Metallurgical based on JFY contracted levels;
Slide 32: The New BTU: Near-Doubling of 2008 Earnings and Growth Beyond
2003 2004 2005 2006 2007 2008 EBITDA 422 496 709 909 963 1800 EBITDA (in Millions) Reflects results from continuing operations (unaudited). 2008 targets per July 23, 2008 earnings release. The New BTU: Near-Doubling of 2008 Earnings and Growth Beyond $422 2008 Target $1,600- $1,800 Excellent leverag
Slide 33: Peabody Energy Lehman CEO Energy / Power Conference
Peabody Energy Lehman CEO Energy / Power Conference September 4, 2008
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