Suncoke Energy, Inc. · NYSE:SXC
Suncoke Energy — Non-Deal Roadshow (March 2015)
39 slides from Suncoke Energy's roadshow presentation, March 2015
Slide 1: Investor Meetings March 2015
Investor Meetings March 2015
Slide 2: Forward-Looking Statements
Forward-Looking Statements Some of the information included in this presentation constitutes “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All statements in this presentation that e
Slide 3: SXC and SXCP
SXC and SXCP Investor Meetings – March 2015 2
Slide 4: Who We Are
WHO WE ARE Investor Meetings – March 2015 3
Slide 5: Role of SXC and SXCP
Role of SXC and SXCP • SXCP General Partner & 56% LP • Long-term, fee-based, take-or-pay owner with 100% of IDRs contracts that generate stable cash flow with minimal commodity risk • Capitalized to finance and develop growth projects • Significant growth opportunities via acquisition of new raw mat
Slide 6: Business Verticals
Business Verticals Raw materials processing and handling company with growth opportunities in cokemaking, coal logistics & other industrial verticals Current Business Future Platforms Cokemaking Coal Logistics Industrial Materials • 6.3M tons total global capacity; • Strategically located coal • Act
Slide 7: Our Operations
Our Operations Operations located to serve our customers’ most strategic assets Lake Terminal Indiana (Coal Logistics) Harbor Coke Plant Characteristics KRT – 3 Terminals (Coal Logistics) • Advantaged inbound and outbound logistics • Support strategic U.S. blast furnaces serving high value-add end m
Slide 8: Strategic Customer Blast Furnace Assets
Strategic Customer Blast Furnace Assets Our cokemaking assets supply coke to our customers’ strategic blast furnaces Customer Asset Supported Primary Product Line Comment • One of the most productive BF in Middletown Auto the country • $19 million BF reline in 2014; now Ashland Auto operating at ful
Slide 9: Cokemaking Business Model
Cokemaking Business Model Secure, long-term take-or-pay contracts generate stable cash flow with limited commodity risk Fixed Fee Take-or-Pay (1) Termination Provisions / Contract Duration 15-20 years SunCoke Avg. Remaining Contract Life 9 years Contract Pass-through provisions: Significantly Attrib
Slide 10: Coal Logistics
Coal Logistics Coal Logistics complements our cokemaking business and broadens exposure to industrial customers Platform for Growth Strategically located assets with access to barge, rail and truck Experienced management team capable of driving growth Broadening customer base diversifies credit and
Slide 11: Key Investment Considerations
Key Investment Considerations TM Stable, Long-Term Cash Flow • Long-term, fee-based, take-or-pay contracts at strategic customer assets Strong Balance Sheet • Essentially no net debt at SXC and conservative 3.1x leverage at SXCP Potential Growth Opportunities • Pursuing raw materials processing and
Slide 12: Growth Strategy
GROWTH STRATEGY Investor Meetings – March 2015 11
Slide 13: Transformational Strategy
Transformational Strategy Capitalize Leading raw Fuel our Leverage MLP on strengths in Replicate materials steel customers raw materials structure processing with coke business processing and model to drive value and handling and power creation handling company Investor Meetings – March 2015 12
Slide 14: Broadening our Growth Universe
Broadening our Growth Universe SunCoke has broadened its scope of verticals for M&A SunCoke’s Growth Thesis M&A Guardrails • Leverage manufacturing/logistics core Strategic Fit competencies There are a significant number of • Provide platform for additional organic and assets that can benefit from t
Slide 15: New Platforms for Growth
New Platforms for Growth Pursuing M&A across a range of material handling verticals in addition to greenfield projects Examples of New Verticals Activated Carbon Carbon Black Industrial Clays Limestone Salt Calcined Coke Wood Pellets Soda Ash/Bicarb Continued pursuit of coal handling/logistics bolt-
Slide 16: Value of Growth to SXC
Value of Growth to SXC TM Greenfield growth combined with M&A, utilizing both SXC’s and SXCP’s balance sheets, has potential to create significant value Growth Opportunity GP/LP Cash Flow(1,2) • $400M to $500M investment at ~6x EBITDA for low double-digit return LP: $2M - $4M/yr Greenfield • Drop do
Slide 17: Guidance and Distribution Outlook
GUIDANCE AND DISTRIBUTION OUTLOOK Investor Meetings – March 2015 16
Slide 18: Consolidated Guidance Summary
Consolidated Guidance Summary TM Metric 2014 Actual 2015 Guidance Adjusted EBITDA(1) Continuing Operations $237.8 million $225 – $245 million Consolidated $210.7 million $190 – $210 million Attributable to SXC $150.0 million $115 – $130 million Capital Expenditures ~$125 million ~$90 million Domesti
Slide 19: GP/LP Distribution Growth to SXC
GP/LP Distribution Growth to SXC TM Expect significant amount of GP/LP distributions over the next 3 years ($ in millions) $350M to $400M upfront after-tax No Dropdowns proceeds Without dropdowns, expect • High-end of distribution to receive over $170M in GP/LP distributions during $80M - $90M range
Slide 20: Dropdown Strategy
Dropdown Strategy TM Executing against strategy to drop down all domestic cokemaking assets to SXCP through 2016 • Completed two dropdowns since expiration of tax sharing agreement in January 2014 • Initiated quarterly dividend per share equivalent to 33% GP/LP cash flow • Expect to execute at least
Slide 21: SXC Capital Allocation
SXC Capital Allocation TM SXC’s top quartile cash yield demonstrates commitment to returning capital to shareholders 15.0% Total Cash Return Yield 12.1% 10.0% 5.0% 4.6% 2.6% 0.0% SXC S&P 500 (Average) Russell 2000 (Average) Note: • Cash return yield defined as sum of dividend yield (annualized LTM)
Slide 22: SXCP Distribution Growth
SXCP Distribution Growth Investors have benefitted from top quartile(1) distribution growth; Q4 ‘15E distribution represents 42% increase over MQD(2) SXCP Distribution Growth ($/unit) +42% +14% $0.4125 MQD(2) $0.5854 $0.5000 $0.5150 $0.5275 $0.5408 $0.4325 $0.4750 $0.4225 $0.3071 7th consecutive qua
Slide 23: Shareholder Value Creation
Shareholder Value Creation TM Shareholder value creation via organic and inorganic growth projects, backed by disciplined capital management Pursue organic Acquire industrial- growth projects in facing processing steel value-chain Organic Inorganic and handling assets Projects Platforms Capital Opti
Slide 24: Appendix
APPENDIX Investor Meetings – March 2015 23
Slide 25: Definitions
Definitions Adjusted EBITDA represents earnings before interest, taxes, depreciation, depletion and amortization (“EBITDA”) adjusted for impairments, costs related to exiting our Coal business, sales discounts and the interest, taxes, depreciation, depletion and amortization attributable to our equi
Slide 26: Definitions
Definitions Distributable Cash Flow equals Adjusted EBITDA less net cash paid for interest expense, ongoing capital expenditures, accruals for replacement capital expenditures, and cash distributions to noncontrolling interests; plus amounts received under the Omnibus Agreement and acquisition expen
Slide 27: SXC Guidance and Reconciliations
SXC GUIDANCE AND RECONCILIATIONS Investor Meetings – March 2015 26
Slide 28: 2015E Guidance Reconciliation
2015E Guidance Reconciliation TM 2015E 2015E ($ in millions) Low High Net Income $21 $38 Subtract: Net Loss from Discontinued Operations (16) (13) Net Income from Continuing Operations $37 $51 Depreciation, depletion and amortization 89 89 Interest expense, net 68 66 Income tax expense 12 20 Legacy
Slide 29: Capital Expenditures
Capital Expenditures 2014 Capex ($ in millions) SXC SXCP(1) Consolidated Ongoing (2) $27 $17 $44 Expansion 4 0 4 Environmental Project 1 45 46 Indiana Harbor Refurbishment 24 0 24 Total CapEx from Continued Operations $56 $62 $118 Ongoing: Discontinued Operations (3) 7 0 7 Total CapEx (Consolidated)
Slide 30: Balance Sheet & Debt Metrics
Balance Sheet & Debt Metrics TM (1) As of 12/31/2014 Proforma Post-Granite City Transaction Balance Balance SXC Attributable SXC Attributable Attributable Attributable Consolidated to SXCP Consolidated to SXCP ($ in millions) to SXC to SXC Cash $139 $33 $106 $188 $82 $106 Revolver Capacity 398 250 1
Slide 31: SXCP Guidance and Reconciliations
SXCP GUIDANCE AND RECONCILIATIONS Investor Meetings – March 2015 30
Slide 32: 2015 Outlook
2015 Outlook Distributable cash flow outlook reflects Granite City dropdown benefit; potential upside should we tighten our cash coverage ratio over time 2015 Outlook ($ in millions, except per unit data) Low High Adjusted EBITDA attributable to SXCP $169 $179 Less: Ongoing capital expenditures (SXC
Slide 33: Expected 2015E EBITDA Reconciliation
Expected 2015E EBITDA Reconciliation 2015E 2015E ($ in millions) Low High Net Income $ 69 $ 79 Depreciation and amortization 57 57 Interest expense, net 56 56 Income tax expense 1 1 Adjusted EBITDA $ 183 $ 193 EBITDA attributable to noncontrolling interest(1) (14) (14) Adjusted EBITDA attributable t
Slide 34: Additional Information About SunCoke, Our Technology and Coke Demand
ADDITIONAL INFORMATION ABOUT SUNCOKE, OUR TECHNOLOGY AND COKE DEMAND Investor Meetings – March 2015 33
Slide 35: SXC/SXCP Organizational Structure
SXC/SXCP Organizational Structure TM SXC owns: 2% GP interest 56% LP interest 100% IDRs Domestic Coal Mining* International Coke (~110M tons SXC provides via Omnibus Coke reserves) Agreement: • Commercial contract support; 5 yrs from IPO Middletown • Environmental indemnification (2% interest) for c
Slide 36: SunCoke's Cokemaking Technology
SunCoke’s Cokemaking Technology TM Our industry-leading cokemaking technology meets U.S. EPA MACT standards and makes larger, stronger coke Industry-leading environmental signature • Leverage negative pressure to substantially reduce emissions • Convert waste heat into steam and electrical power • G
Slide 37: Coke Market Dynamics
Coke Market Dynamics TM Expect stable coke demand on rebounding steel production Domestic Steel Production & Capacity Utilization Industry Outlook (Mt Production) 100 100% • Stable BF/BOF production outlook driven by automotive & construction 80 80% • Forecast stable coke demand 57 59 62 51 55 50 60
Slide 38: Coke Market Dynamics
Coke Market Dynamics TM Macro thesis playing out with recent coke battery retirements U.S. & Canada Coke Battery Age Distribution Industry Outlook (Mtpa capacity) 4 Meter By-product • By-product coke battery 5.0 6 Meter By-product productivity falling as fleet ages 4.5 SunCoke Heat Recovery 4.0 • Ea
Slide 39: Blast Furnaces and Coke
Blast Furnaces and Coke TM Best in Class (lbs/st) Iron Iron Ore/Pellets 3,100 Burden Scrap 198 Flux Limestone 30 Fuel Coke 600 Top Gas Blast Furnace Steelmaking • BFs are most efficient and proven method of reducing iron oxides into Best in Class (lbs/st) liquid iron Natural Gas Up to 80-120 • Coke