Methanex Corporation · TSX:MX
Methanex — FY2006 Earnings Presentation
32 slides from Methanex's earnings presentation, January 2007
Slide 1: Methanex Investor Presentation
Methanex Investor Presentation January 2007 1
Slide 2: Forward-looking Statements & Non-GAAP Measures
Forward-looking Statements & Non-GAAP Measures Information contained in these materials or presented orally at this meeting, either in prepared remarks or in response to questions, contains forward-looking statements. Certain material factors or assumptions were applied in drawing the conclusions or
Slide 3: Overview
Overview Page I. Introduction 4 II. Industry Overview 5 III. Methanex Overview 14 IV. Summary 25 Appendix: Emerging Methanol Energy Applications 26 3
Slide 4: Introduction
I. Introduction Introduction • Methanol global leader • Strong industry fundamentals • Emergence of energy related demand is changing industry dynamics • Upward pressure on industry cost structure • Commitment to shareholders 4
Slide 5: Methanol is...
II. Industry Overview Methanol is... • Produced from natural gas • Diversified end uses Traditional Uses Emerging Energy Uses (Mature Markets) (High Growth Potential Markets) Formaldehyde Acetic Acid MDF, Plywood Fleece, Adhesives, Paints DME (dimethyl-ether) Fuel Blending Dimethyl Methyl Chloride T
Slide 6: Competitive Landscape
II. Industry Overview Competitive Landscape For the next 12 months… Expected New Supply Potential Offsets NPC 4, Iran (1.65 M tonnes x 50%) 0.8 Million Methanex, New Zealand 0.5 Million (Zagros 1) Oman 1.0 Million North America 1.0 Million Canada, USA Expansions/Restarts 0.3 Million W. & E. Europe,
Slide 7: Global Demand Growth
II. Industry Overview Global Demand Growth 2006 - 2011 CAGR ~ 4.5% (000s tonnes) 1995 - 2005 CAGR ~ 4.5% 50,000 40,000 30,000 20,000 10,000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E 2008E 2009E 2010E 2011E MTBE and Fuels Formaldehyde Acetic Acid Other *This graph reflects
Slide 8: Current Industry Cost Curve
II. Industry Overview Current Industry Cost Curve 450 $220-240/tonne methanol energy price USA, Canada, Germany, 300 equivalent when oil = $60/barrel E. Europe, India, Mexico China, Brazil, Russia Exports Estimated Delivered cash cost (US$/tonne) SE Asia, India, E Europe, 150 China, Argentina, New Z
Slide 9: 2007 Industry Cost Curve
II. Industry Overview Global gas shortages 2007 Industry Cost Curve Russian Exports $350 $330 Delivered Cash Cost (US$/MT) $310 $290 Novomoskovsk, $270 Shchekino $250 Tomsk $230 Metafrax $210 Togliatti $190 $170 $150 - 200 400 600 800 1,000 1,200 1,400 1,600 1,800 Cummulative Capacity (kMT/year) ¾ P
Slide 10: Chinese Methanol Industry
II. Industry Overview Chinese Methanol Industry Domestic Methanol Production: • Most plants in China are sub-world scale & coal-based • Most Chinese methanol doesn’t meet international specification • High delivered costs to E. China, transport is costly & unreliable • Many new projects are located
Slide 11: Methanol Has Energy Value
II. Industry Overview Methanol Has Energy Value Methanol Spot Price vs. Methanol Energy Value 600 500 Methanol Spot Price - $/MT 400 300 200 100 0 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 USGC No. 2 Heating Oil (Equiv MeOH energy value) CMAI USG Spot Methanol ($/M
Slide 12: Methanol's Energy Value Compared to LPG and Distillate
II. Industry Overview Methanol’s Energy Value Compared to LPG (Propane) and Distillate: 700 87 Distillates - No.2 Diesel Fuel 600 75 500 62 (US$/bbl) (US$/MT) Propane 400 50 300 37 200 25 100 120 140 160 180 200 220 240 260 280 300 Methanol (US$/Tonne) Propane Spot Price (Mont Belvieu Texas), Decemb
Slide 13: Near Term Opportunities in Energy Markets
II. Industry Overview Near Term Opportunities in Energy Markets • Large growth potential in energy applications • Global methanol market is very small (~37 mmtpa) relative to the global energy market • Largest growth prospects are in China • Attractive near-term growth prospects in: Fuel Blending, D
Slide 14: Methanex Corporation Overview
III. Methanex Overview Methanex Corporation Overview • Head Office: Vancouver, BC, Canada • Methanol Production Capacity: 6.3 million tonnes • Chile: 3.8, Trinidad 1.9, New Zealand 0.5 (Flexible Asset) • Commercial Offices: Dallas, Brussels, Bellingham, Auckland, Santiago, Seoul, Tokyo, Shanghai, Ho
Slide 15: Chile and Trinidad Hubs
III. Methanex Overview Chile and Trinidad Hubs A decade of strategy execution…. Chile – 3.8 million Trinidad - 1.9 tonnes per annum million tonnes per annum 15
Slide 16: Egypt Project
III. Methanex Overview Egypt Project • 1.3 million tonne plant in Damietta, Egypt DAMIETTA • EMethanex JV • Methanex (60%) • Egyptian JV Partners & Apicorp (40%) • Methanex will off-take and market 100% of EMethanex’s production. • All commercial agreements signed • FID expected in 1H-07 EMethanex P
Slide 17: Methanol Pipeline
III. Methanex Overview Methanol Pipeline Billingham Brussels Seoul Dallas Shanghai Tokyo Hong Kong Egypt Trinidad Santiago Current Production Potential Project Marketing Offices New Zealand Chile Î2006 sales ~20% of global demand 17
Slide 18: Chile & Argentina – Pipelines & Reserves
III. Methanex Overview Chile & Argentina – Pipelines & Reserves URUGUAY Buenos C Aires H Total proven and probable gas I reserves in Argentina as of L Neuquina December 2005 = 25 TCF E Basin To Buenos Aires ARGENTINA CHILE YPF CONDOR CONDOR POSESION Sipetrol CALAFATE CALAFATE San Jorge Basin Mx CABO
Slide 19: Argentina Gas Solution: Gas Development in Southern Chile
III. Methanex Overview Argentina Gas Solution: Gas Development in Southern Chile • ENAP is planning ~$115 million in Magallanes Region – 11 Blocks for Bidding Round the Magallanes Region in 2007 • Drilling of third well underway in Lago Mercedes area • Drilling in Dorado-Riquelme area targeted for t
Slide 20: Impressive Financial Results
III. Methanex Overview Impressive Financial Results For the year ending December 31, 2006: Income1 US$457 million EPS1 (diluted) US$4.18/share Adjusted EBITDA2 US$800 million EV/Adjusted EBITDA3 3.6x ROCE4 31% ROE 42% 1. Before unusual items (after-tax). 2. See 2005 MD&A for definition of Adjusted E
Slide 21: A Balanced Approach
III. Methanex Overview A Balanced Approach For the five year period ending December 31, 2006, Methanex generated US$2.3 billion in Adjusted EBITDA Reinvested ~US$838 million in our business Distributed ~US$753 million to shareholders Balance Sheet Current net debt to capitalization ~10% …and deliver
Slide 22: Liquidity & Capital Projects
III. Methanex Overview Liquidity & Capital Projects Liquidity …through 2008 At Dec. 31/06 Cash $355 million Bank Facility $250 million Total $605 million Estimated Cash Requirements for Maintenance & Growth ($ millions): 2007E 2008E Total Maintenance 1 40 40 80 Strategic Capital: Egypt 752 752 150 T
Slide 23: Commitment to Shareholders
III. Methanex Overview Commitment to Shareholders 300 Longstanding track record… 200 250 150 (millions of shares) 200 (millions US$) 150 100 100 50 50 0 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Dividend Special Dividend Share Repurchase Shares O/S year end Î May 9, 2006 – a
Slide 24: Sell Side Analyst Coverage
III. Methanex Overview Sell Side Analyst Coverage • Analysts have not been good predictors of our share price performance $30.00 $28.00 Jan 2005 Analysts' Ratings $26.00 Buy Hold Jan 2004 Analysts' Ratings Hold $24.00 Hold Hold Hold Hold Sell Methanex Share Price (US$) Hold $22.00 Hold Sell 2005 Sha
Slide 25: In Summary
IV. Summary In Summary • Methanol market is tight • Strong cash flows and earnings • Energy related methanol demand emerging • Industry cost structure increasing • Plans for growth • Excess cash to shareholders - dividend growth and share repurchases 25
Slide 26: Appendix: Methanol Emerging Energy Applications
APPENDIX Appendix Methanol Emerging Energy Applications 26
Slide 27: Methanol Value in Gasoline Blending
APPENDIX Methanol Value in Gasoline Blending Wholesale Gasoline Price vs Methanol Price Energy Equivalence and Volumetric Equivalence 3.00 119 2.60 102 Energy basis Volumetric basis Wholesale Gasoline Price WTI Crude Price ($/bbl) 2.20 85 ($/gallon) 1.80 69 1.40 52 1.00 35 0.60 18 0.20 1 100 200 300
Slide 28: Fuel Blending in China
APPENDIX Fuel Blending in China • Up to ~70 mmtpa Units: Tons methanol based on a Heilongjiang 8.9 B potential ‘M50’ Market Inner Mongolia 16.1 B • Economic incentive to Shanxi Hebei 80 blend in-land coal 49.5 B 10 B based methanol with Shaanxi 9.8 B Shandong 12.2 B gasoline World Energy Council’s A
Slide 29: Methanol for DME
APPENDIX Methanol for DME A simple dehydration reaction… DME 1.4 tonnes methanol to 1 tonne DME Water ¾Non-toxic (used as aerosol propellant replacing CFC’s) ¾Clean burning ¾Physical properties similar to LPG ¾High Cetane number 29
Slide 30: DME Applications
APPENDIX DME Applications • 3 Major DME Applications • Blending with LPG most immediate opportunity Power Generation Blended with LPG DME Diesel alternative Source: Methanex 30
Slide 31: Bio-Diesel
APPENDIX Bio-Diesel • Bio-Diesel expected to replace Methanol Demand for MTBE • ~ 2.0 mmtpa market by 2011 (Mx estimate) • Other industry followers projecting methanol use for biodiesel to grow to ~3.0 mmtpa by 2008 (Source: Jim Jordan & Associates) Meoh Demand Global MTBE & Biodiesel Demand Forecas
Slide 32: Thank you.
MET A Responsible Care® Company Thank you.