Peabody Energy Corporation · NYSE:BTU
Peabody Energy — Morgan Stanley Global Basic Materials Conference 2008
29 slides from Peabody Energy's conference presentation, Feb 21, 2008
Slide 1: Morgan Stanley Global Basic Materials Conference
MORGAN STANLEY GLOBAL BASIC MATERIALS CONFERENCE February 21, 2008 Richard A. Navarre President and Chief Commercial Officer Peabody Energy
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 Excellent leverage to rising prices Global expansion into high-growth, high-margin markets Levered to ongoing China and India expansion Long-term demand from new generation and Btu Conversion Portfolio of safe, low-cost operations Industry-best 9 billio
Slide 4: Robust Markets and Peabody's Position
ROBUST MARKETS AND PEABODY'S POSITION
Slide 5: Coal Continues to Be Fastest Growing Fuel, Straining Supplies & Raising Pricing
Coal Continues to Be Fastest Growing Fuel, Straining Supplies & Raising Pricing Five-Year Change in Global Energy Consumption Source: BP Statistical Review of World Energy, June 2007. Coal Natural Gas Hydro Oil Nuclear 2002 - 2004 29.57 16.37 15.39 8.97 4.03 30% 2001 - 2006 Change 16% 9% 15% 4% Coal
Slide 6: Roaring Global Coal Demand Growth Straining Supplies in All Markets
Roaring Global Coal Demand Growth Straining Supplies in All Markets Russia Export Declines Pinch European Customers Australia Struggles Through Rail, Port and Weather Issues Power Shortages Halt South Africa Export Mines Venezuela Government Cancels Contracts to Reprice Two-Year Tripling of Net Expo
Slide 7: Where Will the Coal Come From? Exporters Face Numerous Constraints
Where Will the Coal Come From? Exporters Face Numerous Constraints The World is Short Some 30 Million Tons in 2008 Source: Barlow Jonker, 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
Slide 8: Coal Prices Reaching Record Highs in Current Markets
PRB 2007 7.25 16 Coal Prices Reaching Record Highs in Current Markets Source: Global Coal Newcastle Index; McCloskey's Coal Report; Industry Reports. Australia/Newcastle CAPP China/Qinhuangdao Columbia/Bolivar into ARA Russia/Vostochniy South Africa/Richards Bay 2007 51.6 39.9 59 49 58 49.6 2008 152
Slide 9: Peabody: Outstanding Position to Serve Growth Markets
Peabody: Outstanding Position to Serve Growth Markets #1 in Powder River Basin #1 in Colorado #1 in Illinois Basin #1 Exporter of U.S.-based companies #1 U.S. coal trader Tripling Australian presence Leading global coal trader
Slide 10: Australia: Outstanding Conditions as 2008 Contract Season Begins
Australia: Outstanding Conditions as 2008 Contract Season Begins Source: Global Coal Newcastle Index; McCloskey's Coal Report; Industry Reports; * Represents prior-year price. High Quality Hard Coking Coal Industry & BTU Work Through Force Majeures and Weather Issues Newcastle Thermal Coal
Slide 11: Significant Leverage to Strong Seaborne Thermal and Metallurgical Coal Markets
Significant Leverage to Strong Seaborne Thermal and Metallurgical Coal Markets Unpriced Australia volumes as of Dec. 31, 2007. Met comprises a range of metallurgical coal qualities. Roll-Off of Legacy Contracts = Significant Upside
Slide 12: PRB Markets Strengthen from Pull of Exports and Domestic Growth
PRB Markets Strengthen from Pull of Exports and Domestic Growth PRB pricing doubles in one year Best U.S. volume leverage over next several years Unpriced U.S. volumes: 80 - 90 Million for 2009 140 - 150 Million for 2010 Peabody's 2007 realized premium PRB prices 29% higher than 2006 Source: Coal an
Slide 13: U.S. Net Exports Expected to More Than Triple Over Two Years
U.S. Net Exports Expected to More Than Triple Over Two Years Net exports grow due to global coal shortages, European demand, weak dollar and reduced U.S. imports Net export increases will further reduce stockpiles Creates pull to PRB and Colorado markets Peabody exports coal from CAPP, NAPP, Illinoi
Slide 14: International Markets Create Major Flow-Back Opportunities
API 2 (Implied Delivered to Europe, per tonne): $140 Implied CAPP Price at East Coast Port (ton): $105 Netback for Central Appalachia (ton): $84 Netback for Northern Appalachia (ton): $77 Eastern River Plant Netback to... PRB Colorado Illinois Netback FOB $/Ton $24.35 $50.85 $62.25 Current Price $16
Slide 15: Peabody's Global Operations and Trading Leverage Record-Setting Markets
Peabody's Global Operations and Trading Leverage Record-Setting Markets Operations Trading & Local Offices Countries Served Ports BTU Clean Coal Projects Coal Exports Domestic Sales St. Louis London Beijing Sydney
Slide 16: China, India and U.S. Represent Vast Majority of Global Coal Growth
China, India and U.S. Represent Vast Majority of Global Coal Growth Growth through 2030. Amounts in million short tons. Source: U.S. Department of Energy, Energy Information Administration, International Energy Outlook 2006. International Energy Agency. Projected Australia export flow for 2004-2030.
Slide 17: High Price of Power Spurs New U.S. Coal-Fueled Generation
High Price of Power and Competing Fuels Spurs New U.S. Coal-Fueled Generation 11 units began construction in 2007 16,790 MW under construction or recently on line 3,770 MW likely to begin construction in next two years Majority of plants to be sourced from PRB and Illinois Basin Largest New Coal Pla
Slide 18: Coal Use Expected to Accelerate Over Next Several Decades
Coal Use Expected to Accelerate Over Next Several Decades Million Kilowatt Hours Coal Nuclear Natural Gas Renewables Petroleum U.S. Electric Power Generation by Fuel Type Source: Energy Information Administration, Annual Energy Outlook 2007.
Slide 19: Peabody's Key Focus Areas
PEABODY’S KEY FOCUS AREAS if
Slide 20: Peabody Taking Decisive Steps To Benefit From Accelerating Global Coal Markets
Peabody Taking Decisive Steps To Benefit From Accelerating Global Coal Markets Improving productivity and costs Expanding access to high- growth, high-margin markets Improving capital efficiency Pursuing long-term operating, trading and joint-venture opportunities Advancing clean coal projects inclu
Slide 21: Improving Productivity and Costs
Improving Productivity and Costs 2007 full-year data per Platts Energy Advantage. Source: U.S. Department of Labor Mine Safety & Health Administration. 2007 Investments and Improvements Drive Productivity Gains Peabody U.S. Industry 3Q07 4Q07 Surface Underground 2Q07 1Q07
Slide 22: Peabody's Australian Portfolio Provides Major Product and Port Diversity
Peabody's Australian Portfolio Provides Major Product and Port Diversity 21.4 million tons in 2007 More than triple output in 3 years 2008 target: 23 - 25 million tons Growing to 30 - 35 million tons in several years
Slide 23: Improving Capital Efficiency and Productivity
Improving Capital Efficiency and Productivity Examples: PRB Conveyor, Wilpinjong, El Segundo
Slide 24: Peabody is a Leader in Advancing Clean Coal Solutions and Btu Conversion
Peabody is a Leader in Advancing Clean Coal Solutions and Btu Conversion Advancing Signature Climate Projects in U.S., China and Australia BTU is the only non-Chinese equity partner in GreenGen, China's centerpiece commercial climate initiative BTU is a long- standing supporter of the Vision 21 and
Slide 25: In an Energy-Short World, BTU's Energy Reserves Are Unmatched
Continental U.S. Proven Oil Reserves 117 176 Peabody's Proven and Probable Coal Reserves Continental U.S. Natural Gas Reserves Largest U.S. Oil Company 172 128 Reflects Oct. 31, 2007 spin-off. Source: Annual reports for selected energy companies, Energy Information Administration's U.S. Crude Oil, N
Slide 26: Btu Conversion = Value Conversion as We Narrow the Energy Valuation Gap
Source: Company filings and reports. Btu Conversion = Value Conversion as We Narrow the Energy Valuation Gap Market Capitalization on Btu-Equivalent Basis
Slide 27: Defining The Structural Shortage for the Global Coal Chain
Chinese economy fueled by coal power Coal growth in India/Korea/Taiwan/Vietnam/Philippines World coal expansion cannot keep pace with demand Fiscal, geologic and regulatory barriers in Appalachia Shortage of skilled workers Wait times for equipment and tires Cost of fuel, steel and explosives Deplet
Slide 28: Peabody Has an Outstanding Outlook
2004 2005 2006 2007 2008 2009 2010 EBITDA 496 708 901 956 1300 Revenue growth from higher- priced sales commitments Global expansion in high- demand, high-margin regions Market-focused U.S. production Unmatched, diversified reserve base Emerging markets from Btu Conversion $496 $708 $901 EBITDA ($ i
Slide 29: Richard A. Navarre, President and Chief Commercial Officer
Richard A. Navarre President and Chief Commercial Officer Peabody Energy MORGAN STANLEY GLOBAL BASIC MATERIALS CONFERENCE February 21, 2008
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