Peabody Energy Corporation · NYSE:BTU
Peabody Energy — Howard Weil Energy Conference 2005
36 slides from Peabody Energy's conference presentation, Apr 6, 2005
Slide 1: Howard Weil Energy Conference April 6, 2005
Howard Weil Energy Conference April 6, 2005 PEABODY ENERGY Good afternoon. I appreciate your interest in BTU, and I am pleased to talk to you at a particularly bright time in our company and industry.
Slide 2: Forward-Looking Information
Forward-Looking Information Some of the following information contains forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 and is intended to come within the safe-harbor protection provided by those sections. Our forward-looking stateme
Slide 3: Investment Highlights
Investment Highlights An expanding global product line focused on growth markets Safe, low-cost operations fuel more than 10% of U.S. electricity & 3% of worldwide electricity Sales & trading skills enhance 1 billion ton sales backlog Excellent growth opportunities Organic growth through leading res
Slide 4: BTU in 2005: Continuing a Strong Record
2000 2001 2002 2003 2004 -61 16 105.5 95 178 BTU in 2005: Continuing a Strong Record 2000 2001 2002 2003 2004 331 381 406.1 410.3 559 EBITDA $331 In millions. All years based on calendar 12-month performance. Excludes operations discontinued in 2001. 1 Income from continuing operations, excluding ch
Slide 5: Industry Overview
INDUSTRY OVERVIEW Let's briefly review the very strong market fundamentals that we're seeing all over the world.
Slide 6: Coal Leads Growing Global Energy Demand
Coal Leads Growing Global Energy Demand Coal Natural Gas Oil Hydro Nuclear 2002 6.9 2.8 0.1 1.3 1.5 2003 6.9 2 2.1 0.4 -2 Percent Change in Global Energy Consumption Percent Change from Prior Year Source: BP Statistical Review of World Energy, 2003 & 2004. 2002 2003 2002 2003 2002 2003 2002 2003 200
Slide 7: Strong Economies Drive Long-Term Coal Use
Strong Economies Drive Long-Term Coal Use Key Areas of Coal Demand Growth Through 2025 +507 +77 +41 +251 +1,374 +51 +36 +54 +74 +18 Amounts in million short tons. Source: 2004 Energy Information Administration's International Energy Outlook, 2001 - 2025 growth in tons. Growth in Total Annual Coal De
Slide 8: U.S. Forecasts Largest Coal Generation Capacity Installation in 40 Years
U.S. Forecasts Largest Coal Generation Capacity Installation in 40 Years Source: U.S. Department of Energy NETL & Annual Energy Outlook 2005. Capacity Added (GWs) 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 19
Slide 9: Imbalance Forecast in U.S. Natural Gas Supply & Demand
Imbalance Forecast in U.S. Natural Gas Supply & Demand 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 Consumption 21.14 19.54 19.88 17.28 19.17 22.21 23.33 22.32 25.44 27.96 29.95 30.67 Production 21.01 19.24 19.4 16.45 17.81 18.6 19.18 19.27 20.42 20.77 21.89 21.83 23.3 19.2 21.1 21.0
Slide 10: "Btu Conversion" Technologies Economic at Today's Energy Prices
"Btu Conversion" Technologies Economic at Today's Energy Prices Gasification IGCC technology developers: GE, Bechtel, Fluor IGCC development: Southern Co., AEP, Cinergy Pipeline-quality gas forecast at $5 - $6/MM Btu China plans $15 billion in coal liquefaction plants Developers include Sasol, Royal
Slide 11: Company Review
An 80-foot thick coal seam at Peabody's North Antelope Rochelle Mine COMPANY REVIEW We'd love to take you all to our coal mines. For the time being, we offer this view of the 80-foot-thick coal seams at our North Antelope Rochelle Mine in Wyoming.
Slide 12: Peabody: The Worldwide Leader in Coal Sales & Reserves
PEABODY Arch Rio Tinto Anglo American BHP Billiton CONSOL Rio Tinto Arch Anglo American PEABODY CONSOL Foundation NRP Luscar Xstrata BHP Billiton North American Yanzhou Massey NRP Sales (million tons) Reserves (billion tons) Peabody: The Worldwide Leader in Coal Sales & Reserves Source: 2004 company
Slide 13: Strategy One: Manage Safe, Low-Cost, World-Class Operations
Midwest Position #1 Sales Volume 35.8 Reserves 3,977 Appalachia Position #6 Sales Volume 15.9 Reserves 651 St. Louis Southern Powder River Basin Position #1 Sales Volume 115.8 Reserves 2,986 Colorado Position #1 Sales Volume 7.7 Reserves 280 DTA Terminal Queensland Dalrymple Bay Terminal Port of New
Slide 14: Steady Safety & Productivity Improvements
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Productivity 33.5 37.5 41.2 48.9 56.7 77.3 89.4 87.6 95.5 90.1 97.37 94.65 95.58 97.7 98.9 Accident Rate* 16.1 14.5 12.06 10.33 8.29 6.47 5.65 5.12 4.52 4.47 4.55 4.42 5.39 4.68 4.15 U.S. PRODUCTIVITY U.S. SAFETY Steady Safet
Slide 15: Operations Most Productive in Four of Five U.S. Regions
Operations Most Productive in Four of Five U.S. Regions 2003 Productivity Source: Platts CoalDat. COMPANY REVIEW In addition to our number-one sales positions, Peabody had the leading productivity position in the PRB, Midwest, Colorado, and Four Corners region for 2003, the most recent full-year dat
Slide 16: Strategy Two: Use World-Class Sales & Trading Skills to Add Value
Strategy Two: Use World-Class Sales & Trading Skills to Add Value 1 Billion Ton Backlog Serves Customers in 16 Countries COMPANY REVIEW BTU Fuels >10% of U.S. & 3% of World's Electricity Countries Served by BTU Peabody Customers Served Peabody Mines Export Terminals Our second strategy is to use wor
Slide 17: Coal Markets Strong Around the Globe
Values represent average over-the-counter (OTC) prices for Powder River Basin rail coal & Appalachian barge coal per various broker sources for ratable delivery in subsequent calendar year. This is a thinly traded market for small quantities of coal. Product specs: Southern Appalachia - 12,000 Btu,
Slide 18: Peabody's Ultra-Low Sulfur Coal Warrants Premium Value
Peabody's Ultra-Low Sulfur Coal Warrants Premium Value Values represent average bid-ask, over-the-counter (OTC) prices for 8,800 Btu/lb, 0.8 lb/MMBtu SO2 as of April 1, 2004 for prompt quarter delivery, and as of April 1, 2005 for 2006 delivery per Coal & Energy Price Report. This is a thinly traded
Slide 19: BTU Has Secured Favorable Pricing With Upside to Strong Markets
BTU Has Secured Favorable Pricing With Upside to Strong Markets 95% of 2005 production priced, including 90% of met coal 8 million tons of 2005 met coal signed in the new contracting season 3 million tons of Australian met coal priced at US$110 to $125, with deliveries in last 3 quarters 5 million o
Slide 20: Strategy Three: Aggressively Manage Our Resource Position
Strategy Three: Aggressively Manage Our Resource Position 9+ Billion Tons of Reserves & 400,000+ Surface Acres Resource Management Transaction Skills Organic Growth Generation Development Pipeline of Growth Opportunities COMPANY REVIEW Strategy Three is to aggressively manage our unmatched resource
Slide 21: Unmatched Reserves Generate Numerous Growth Opportunities
Unmatched Reserves Generate Numerous Growth Opportunities Peabody has some of the best undeveloped reserve blocks in America Enables low-cost mining, long-term contracts for new generation, mine-mouth plants Offers synergies with large number of other properties Provides opportunities to reduce tran
Slide 22: Peabody's Reserve Base is Unparalleled
Proven Oil Reserves in Continental United States 121.5 184.9 Peabody's Proven & Probable Coal Reserves Quadrillion British Thermal Units Natural Gas Reserves in Continental United States Proven Oil & Gas Reserves of Largest Energy Co. 160.2 108.3 Source: 2004 annual reports for selected energy compa
Slide 23: Additional Value: Resource Management & Transaction Skills
Additional Value: Resource Management & Transaction Skills Acquisitions Divestitures 10% Black Beauty, IN 1998 Chaco Royalty Stream, NM [$136 million] 38% Black Beauty, IN 1999 55% Moura Mine, QLD [$30 million] 49% Kanawha Eagle, WV 25% Arclar, IL & 25% United Minerals, IN 2000 Citizens Power, MA [$
Slide 24: Generating Plants Provide Long-Term Growth Opportunities
The planned Prairie State Energy Campus in Washington County, Ill. 20% to 40% cost advantage vs. plants served by rail Agreement with partners for 47% of Prairie State Preliminary agreement with Fluor as EPC contractor for Prairie State Final air quality permits working through appeals process Provi
Slide 25: BTU's View of U.S. Coal Demand by Supply Region
BTU's View of U.S. Coal Demand by Supply Region Growing Demand for NAPP, SPRB, Illinois Basin & Imported Coals SPRB increases by 206 Mtons / 54% Appalachia decreases by 29 Mtons / 11% NAPP increases by 19 Mtons / 14% Illinois Basin increases by 68 Mtons / 76% U.S. Imports increase by 24 Mtons / 89%
Slide 26: Peabody Positioned for Long-Term Growth in the PRB
Peabody Positioned for Long-Term Growth in the PRB Powder River Basin demand expected to grow more than 200 million tons by 2025 Acquired nearly 950 million tons of federal coal leases since July 2004 Ultra-low sulfur, premium Btu coal Enhances optimization of mine plans for lowest costs Contiguous
Slide 27: Peabody Positioned for Long-Term Growth in the PRB
Peabody Positioned for Long-Term Growth in the PRB COMPANY REVIEW High-Quality Southern PRB Leases 28 This map shows the reserve positions of two Southern PRB competitors, in yellow and pink, with Peabody in the Blue. There is very little coal to the east of these high-quality-product mines. And to
Slide 28: Financial Highlights
An 80-foot thick coal seam at Peabody's North Antelope Rochelle Mine FINANCIAL HIGHLIGHTS We've reviewed the industry and the company. I'd like to pass the microphone to Rick Navarre for a brief discussion of the company's strong financial profile.
Slide 29: Peabody Energy's Record is Unmatched
2000 2001 2002 2003 2004 -61 16 105.5 95 178 Peabody Energy's Record is Unmatched 2000 2001 2002 2003 2004 331 381 406.1 410.3 559 EBITDA $331 In millions. All years based on calendar 12-month performance. Excludes operations discontinued in 2001. 1 Income from continuing operations, excluding charg
Slide 30: Peabody Energy's Record is Unmatched
Peabody Energy's Record is Unmatched 2000 2001 2002 2003 2004 1.9 3.3 4.7 5.3 7.4 1.9x 3.3x 4.7x Interest Coverage2 5.3x Mar 31 1999 Mar 31 2001 Dec 31 2003 Dec 31 2004 2.5 1.4 1.2 1.4 Total Debt $1.4 $1.2 $2.5 In Billions 1 Defined as total debt less cash divided by total debt less cash plus equity
Slide 31: Peabody Continues a Record of Success
Peabody Continues a Record of Success Achieved investment grade rating for credit facility by Fitch Completed 2-for-1 stock split Named best coal company in the world at the Global Energy Awards "Coal Company of the Year" for the second year in a row & third in five years Named to Fortune 500 & "Mos
Slide 32: U.S. Coal Industry Subject to Very Long Market Cycles
U.S. Coal Industry Subject to Very Long Market Cycles Nominal dollars. Source: Bureau of Mines prior to 1949, EIA data 1949 - 2002. Peabody estimates 2003-2004. U.S. Bituminous Coal Prices Dollars Per Ton (logarithmic scale) 5 yrs 15 yrs 16 yrs ? Global energy crisis Arab oil embargo Iranian crisis
Slide 33: BTU's Strategies Deliver Continued Growth
BTU's Strategies Deliver Continued Growth EBITDA & EPS Leverage to strong global coal markets Organic growth to serve existing & new coal-fueled plants Aggressive management of unmatched resource base High-return generation projects Accretive acquisitions Strong balance sheet to capture opportunitie
Slide 34: Howard Weil Energy Conference April 6, 2005
Howard Weil Energy Conference April 6, 2005 PEABODY ENERGY
Slide 35: Coal vs. Natural Gas: Near-Term Economics are Compelling
Coal vs. Natural Gas: Near-Term Economics are Compelling Fuel Comparisons at Reference Costs ECAR/Cinergy scenario assumes Over-the-Counter (OTC) coal with delivered cost of $8/ton via barge and Selective Catalytic Reduction (SCR) technology to control NOx. SERC/Southern Company scenario assumes Sou
Slide 36: CAPP vs. SPRB: Near-Term Economics are Compelling
CAPP vs. SPRB: Near-Term Economics are Compelling Peabody's Ultra-Low Sulfur Products = Additional Upside