Peabody Energy Corporation · NYSE:BTU
Peabody Energy — Investor Day (February 2018)
124 slides from Peabody Energy's investor day presentation, Feb 22, 2018
Slide 1: Peabody Analyst and Investor Day February 22, 2018
Peabody Analyst and Investor Day February 22, 2018
Slide 2: Statement on Forward-Looking Information
Statement on Forward-Looking Information This presentation contains forward-looking statements within the meaning of the securities laws. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words or variation of
Slide 3: Peabody Analyst and Investor Day Agenda
Peabody Analyst and Investor Day Agenda 8:00 Registration and Breakfast 9:00 Welcome and Safety Contact 9:10 Peabody Overview – Glenn Kellow, President and Chief Executive Officer 9:55 Industry Highlights – Bryan Galli, Group Executive and Chief Marketing Officer 10:30 Break 10:45 Australian Operati
Slide 4: Delivering Results, Generating Value
BTU Analyst and Investor Day: Delivering Results, Generating Value Glenn Kellow President and Chief Executive Officer February 22, 2018
Slide 5: Overview
BTU Analyst and Investor Day: Overview Peabody is the leading global pure-play coal investment, and we have significant scale, high-quality assets and people, and diversity in geography and products We are executing an integrated approach to delivering results and generating value across the cycle T
Slide 6: Today's Presenters and Our Executive Leadership Team
Today’s Presenters and Our Executive Leadership Team Industry Fundamentals Bryan Galli Group Executive and Chief Marketing Officer Australian Operations George J. Schuller Jr. President Australia Americas Operations Kemal Williamson President Americas Improving Competitiveness Charles Meintjes EVP C
Slide 7: Key Takeaways and Investment Thesis
BTU Analyst and Investor Day: Key Takeaways and Investment Thesis Company: Leveraging significant scale; extensive diversity of product and customers; high quality of assets Industry: Peabody capitalizing on attractive seaborne thermal and met coal conditions and highly competitive positioning in U.
Slide 8: Peabody's Significant Scale Offers Numerous Benefits
Peabody’s Significant Scale Offers Numerous Benefits High reserve-to-production ratio allows for optimized mine planning, solid cost structure and expansion optionality Benefits customers by providing flexible production and sourcing, improved confidence in reliability of supply, “alternative brand
Slide 9: Extensive Diversity of Geography, Customers and Products
Company Offers Extensive Diversity of Geography, Customers and Products Met Coal Thermal Coal Met & Thermal Coal Serving more than 25 countries on 6 continents 6 Note: Highlighted countries represent customers served in at least one year between 2015 – 2017.
Slide 10: Diversity Offers Significant Competitive Advantage
Diversity Offers Significant Competitive Advantage Percentage of Total Revenue from Customer Large number of Geographic Region in 2017 revenue streams India Australia South Multi-regional exposure China Korea limits operating, logistics and demand risks Taiwan Other Increased risk-adjusted returns;
Slide 11: Global Industry Overview
Global Industry Overview Coal remains major part of global energy mix and essential ingredient in steelmaking 8 billion tonnes of coal fuels 37% of global electricity and enables continued growth in steel production Peabody strategically positioned with seaborne production to meet best demand center
Slide 12: Global Coal Industry Undergoing Several Long-Term Trends
Peabody View: Global Coal Industry Undergoing Several Long-Term Trends Global coal demand likely marked by modest overall growth Increases in Asia demand more than offset declines in U.S. and Europe as demand shifts to Pacific Small changes in supply-demand can lead to major shifts in pricing Austra
Slide 13: Seaborne Thermal Fundamentals
Seaborne Thermal Fundamentals: Asia-Pacific Demand Growth Expected as Atlantic Wanes Expecting 3 - 5% total growth in Pacific thermal coal imports over 5 years - Easing Chinese imports overcome by substantial growth from ASEAN, other Pacific nations Assumes 15 - 20% decline in Atlantic seaborne ther
Slide 14: Seaborne Met: Asia-Pacific Demand Growth
Seaborne Met: Asia-Pacific Demand Growth With Ongoing Tight Supplies Expected Expecting 8 - 10% total growth in met coal demand imports over 5 years - European and China imports stable - Growth in India, Japan and ASEAN Assumes 1 - 2% CAGR in global steel Supplies expected to remain tight with “stan
Slide 15: U.S. Fundamentals: Secular Decline Expected to Moderate
U.S. Fundamentals: Secular Decline Expected to Moderate Over Next 5 Years Declines in coal use and share of electricity expected to slow as gas prices stabilize from last 5-year period Lowest-cost basins most competitive against natural gas Retirements expected to drive 15 - 20 million ton-per-year
Slide 16: Policies and Technologies Offer Case for Optimism
While Headlines and Opponents Can Challenge, Policies and Technologies Offer Case for Optimism While European policies remain challenged, current U.S. and Australia administrations and Asia strongly supportive of coal use and technology advancement Improved global GDP outlook provides support for el
Slide 17: Peabody Guided by Core Mission and Values
Peabody Guided by Core Mission and Values Our mission is to create superior value for shareholders as the leading global supplier of coal, which enables economic prosperity and a better quality of life. OUR VALUES Safety: We commit to safety and health as a way of life. Customer Focus: We provide cu
Slide 18: Peabody's Strategies: Strong Foundation for 2018 Priorities
Peabody’s Strategies: Strong Foundation for 2018 Priorities A leading position in U.S. PRB and Illinois Basin Seaborne thermal and metallurgical coal platform to capture higher-growth Asian demand centers Operational Financial Portfolio Focused Best Excellence Strength Management Engagement People D
Slide 19: Strategy Begins With Operational Excellence
1) Peabody Strategy Begins With Operational Excellence Safe, productive operations Wilpinjong Mine allow for improved costs Peabody incident rate better than coal industry and most other sectors Reduced Australian costs 40% from peaks in 2012 Maintained U.S. costs per ton despite lower volumes in re
Slide 20: 2017 Operational Strength Drives Financial Successes
2) 2017 Operational Strength Drives Financial Successes Relists on New York Stock Exchange Actions in Early 2018 Increases liquidity to $1.24 billion Simplifies capital structure Releases ~$220 million of restricted as preferred shares convert to common stock cash since 2016 Secures $350 million rev
Slide 21: Four-Pronged Financial Approach: Generate Cash
2) Revisiting Our Four-Pronged Financial Approach –Generate Cash 18 Note: Unrestricted cash balance as of Dec. 31, 2017.
Slide 22: Four-Pronged Financial Approach: Maintain Financial Strength
2) Revisiting Our Four-Pronged Financial Approach - Maintain Financial Strength 19 Note: Liquidity of $1.24 billion as of Dec. 31, 2017.
Slide 23: Four-Pronged Financial Approach: Invest Wisely
2) Revisiting Our Four-Pronged Financial Approach - Invest Wisely 20
Slide 24: Four-Pronged Financial Approach: Return Cash to Shareholders
2) Revisiting Our Four-Pronged Financial Approach –Return Cash to Shareholders 21
Slide 25: Shaping the Portfolio to Create Value Within Australia
3) Peabody Continues to Shape the Portfolio to Create Value Within Continues to provide favorable exposure Australia… to growing demand centers Benefits from significant reserve position from prior acquisition Year-over-year continuous improvement Continuing methodical steps to upgrade met coal plat
Slide 26: Shaping the Portfolio Within the United States
3) Peabody Continues to Shape the Portfolio to Create Value Within the United States… Serves as strong cash generator, offering meaningful returns Benefits from significant reserve position Recent actions include modest sales of non-strategic assets Offers embedded optionality if West Coast export a
Slide 27: Focused Engagement: How We Behave
4)Focused Engagement: How We Behave as Important as What We Do Fundamental, consistent attention to social responsibility and “Coal Done Right” approach Recognition of ESG and Peabody’s ability to attract best possible capital – “Investment Principles” serve as our own benchmark – Peabody honored th
Slide 28: Support for Highly Responsible Coal Mining and Use
4) Focused Engagement: Support for Highly Responsible Coal Mining and Use Strong attention to Initiatives to promote Support for greater operational excellence by expanded access to deployment of advanced committing to safe reliable, low-cost coal technologies and workplaces, maximizing electricity
Slide 29: Coal Helps Advance Most U.N. Sustainable Development Goals
4) Focused Engagement: Coal Helps Advance Most U.N. Sustainable Development Goals HELE can achieve 90 – 99.99% reduction Continue to use coal to meet energy needs of both in particulates, SO developing and 2 and NO ; up to 25% industrialized nations X reduction in CO2 emissions Use today’s high-effi
Slide 30: Best People: Aligned and Engaged Employees, Management and Board
5) Best People: Strategies Implemented by Aligned and Engaged Employees, Management and Board Employee Management Board Base Team of Directors 7,100 globally Recent team Board reconstituted Average tenure combines over 150 in April 2017 with company years of industry Eight of nine directors nearly 1
Slide 31: Individual Strengths Create Peabody's DNA
Individual Strengths of Diversified Platform Unite to Create Peabody’s DNA Each operation and The Peabody Way region offers unique benefits, skills and perspectives Matrixed together to create characteristics distinctive to Peabody Australia: Global Mining Methods, Continuous improvement 28
Slide 32: Integrated Approach Creates Maximum Value
Peabody: Integrated Approach Creates Maximum Value The Peabody team delivered powerful achievements in 2017, and we’re not about to stop We are committed to outlining approach and then delivering We have the right assets, financial strength, people and strategies to succeed We are continuing to prog
Slide 33: Peabody Positioned to Create Value in All Industry Conditions
Peabody Positioned to Create Value in All Industry Conditions Bryan Galli Group Executive and Chief Marketing Officer February 22, 2018
Slide 34: Key Takeaways: Industry Dynamics and Peabody Positioning
Key Takeaways: Industry Dynamics and Peabody Positioning Seaborne coal demand growth 1 Asia-Pacific offsetting declines Atlantic demand NCIG Coal Export Terminal 2 Australia remains a key seaborne coal supplier Coal represents significant 3 part of U.S. electricity amid slow secular decline PRB and
Slide 35: Seaborne Coal: Pacific Demand, Australian Supply
Seaborne Coal: Dynamics Largely Influenced by Pacific Demand, Australian Supply Global Coal at a Glance… ~8 billion tonne coal industry ~1 billion tonnes of ~300 million tonnes seaborne thermal of seaborne met demand demand ~80% of seaborne ~20% of export ~80% of seaborne ~60% of export thermal dema
Slide 36: Quick Review of Industry Conditions With Lively Start to 2018
Spotlight: Quick Review of Industry Conditions With Lively Start to 2018 Sluggish Mongolian U.S. Coal Generation +1%, Atlantic Coal Exports -24% YOY Coal Production -8% YTD Prices Favor in January Reducing Stockpiles Pacific Flows China Coal Imports +12% YOY in January Low Gas Prices Lead to +19% In
Slide 37: Seaborne Thermal: Pacific Demand Growth Overcomes Atlantic Declines
Seaborne Thermal: Pacific Demand Growth Overcomes Declines in Atlantic; Supply Growth Remains Tight Pacific demand increases Seaborne Thermal Demand ~10% over past 5 years Growth 2012 – 2017 (tonnes in millions) led by India and ASEAN 80 Other 54% – China demand declined Growth ~35 million tonnes ov
Slide 38: New Coal-Fueled Generation Buildout
New Coal-Fueled Generation Buildout Totals ~110 GW in 2018 and 2019; Spans More Than 25 Countries >20,000 MW 5,000 MW – 19,000 MW 2,000 MW – 4,000MW Asia-Pacific home to nearly 90% of 500 MW – 1,900 MW world’s new coal-fueled generation <500MW 6 Source: Industry reports and Peabody Global Analytics.
Slide 39: IHS Markit: Global Coal Generation Capacity to Increase
IHS Markit: Total Global Coal Generation Capacity to Increase 15% by 2030 Nearly 300 GW of coal-fueled Dalrymple Bay Coal Terminal capacity being built in Asia over next 5 years Total world coal-fueled capacity grows 15% by 2,030 to 2,389 GW – While ROW coal-fueled capacity declines 125 GW from 2017
Slide 40: Chinese Policies and Actions Impacting Coal Imports
Multiple Chinese Policies and Actions Impacting Coal Imports Policies and actions include: Chinese Coal Mining Sector Continued closure Average Fixed-Asset Investment (RMB in billions) of unsafe mines $550 Rationalizing excess capacity by shutting down inefficient mines $450 ~50% decline since 2013
Slide 41: Global Steel Production Rises in 2017
Seaborne Metallurgical: Global Steel Production Rises in Most Steel-Producing Countries in 2017 Germany Russia +4% +1% Japan U.S. Italy Turkey China Stable +4% +3% +13% +6% S. Korea India +4% +6% Brazil +10% Global steel production up 5% in 2017; December marks 20th consecutive month of YOY steel pr
Slide 42: Seaborne Metallurgical Demand Centered in Pacific
Seaborne Metallurgical Demand Centered in Pacific; Australian Supply Eclipses All Other Producing Regions Expected Seaborne Metallurgical Australia Expected to Continue Coal Demand in 2022 to Represent Vast Majority of (tonnes in millions) Seaborne Met Coal Supply in 2022 350 Other Brazil Mongolia 3
Slide 43: Small Changes in Met Supply and Demand Impact Pricing
Small Changes in Seaborne Metallurgical Supply and Demand Have Outsized Impact on Pricing Seaborne Metallurgical Coal Supply & Demand Chinese imports increase (tonnes in millions) 10 million tonnes in 2017 300 – Chinese net finished steel exports decline 35% in 2017 250 $191 $188 Global demand incre
Slide 44: Australian Supply Growth Sluggish
Australian Supply Growth Sluggish Due to Limited Returns in Prior Years Expected Seaborne Metallurgical Peabody expects 12% Supply Change increase in global supply (2017 – 2022) through 2022 Australia +26 – 30 – Australia represents ~80 – 90% of seaborne Mozambique met growth +6 – 8 – U.S. export li
Slide 45: Peabody Leverages Broad Australian Quality Range
Spotlight: Peabody Leverages Broad Australian Quality Range to Cover Major Pacific Demand Centers Benchmark Newcastle, Peabody 2017 Australian Seaborne PCI and HCC brands Sales Diversity API 5 (5500 Ability to change blends NAR) Other Coking 17% Coal to meet customer 6% requirements PHCC 16% – Blend
Slide 46: Extensive Commercial Expertise to Optimize Value Chain
Spotlight: Peabody Utilizes Extensive Commercial Expertise to Optimize Value Chain Scale to manage logistics Differential Between NEWC chain, including ports and API5 Pricing (Price Per Tonne) and seaborne vessels $125 Monitor pricing $100 differentials to capture value arbitrage $75 Global sales of
Slide 47: U.S. Fundamentals: Coal Demand Impacted by Multiple Factors
U.S. Fundamentals: Coal Demand Impacted by Multiple Factors Over Last Decade Electricity Generation Natural Gas Production Increased energy efficiency (Thousand GWh) (billion cubic feet per day) and low growth rates result in slight decline 4,157 73 in electricity demand 4,043 Natural gas production
Slide 48: Coal Projected to Remain Essential Component of U.S. Energy Mix
Third-Parties Project Coal to Remain Essential Component of U.S. Energy Mix Coal expected to Third-Party Estimates of Coal’s Share represent significant of Electricity Generation in 2022 portion of U.S. electricity 31% 30% generation over next 5 28% years, despite coal plant retirements and low 24%
Slide 49: Natural Gas Pricing Greatest Determinant of U.S. Coal Demand
Natural Gas Pricing Greatest Determinant of Future U.S. Coal Demand Competitiveness With Natural Gas PRB, Illinois Basin most PRB competitive with $2.50—$2.75/mmBtu natural gas ILB $3.00—$3.50/mmBtu Competitiveness varies CAPP $3.75—$4.25/mmBtu depending on wind availability, basis Natural Gas Hub A
Slide 50: Contracting Strategies and Broad Customer Base
Spotlight: Peabody Benefits from Contracting Strategies and Broad Customer Base Peabody ships to more than 30 states, more than 80 customers and 145+ plants; utilizes multi-source, multi-destination agreements Note: Customers served in at least one year between 2015 and 2017. 18
Slide 51: Contracting Strategy Provides Long-Term Revenue Visibility
Spotlight: Peabody’s Contracting Strategy Provides Long-Term Revenue Visibility U.S. Contracted Position Multi-year contracting (Tons in Millions) strategy engaged in U.S. 160 – ~85% of 2017 140 volumes delivered under ~90% 120 long-term contracts Priced 100 Ability to maximize lowest 80 cost tons w
Slide 52: Closing Thoughts: Marketing Strategy
Closing Thoughts: Peabody has thoughtful, deliberate marketing strategy to take advantage of significant scale, geographic and product diversity Company has vast understanding of customer needs and provides products to meet their specific requirements Sophisticated blending capabilities and understa
Slide 53: Australia: Right Place, Right Products Generating Meaningful Returns
Australia: Right Place, Right Products Generating Meaningful Returns George J. Schuller Jr. President Australia February 22, 2018
Slide 54: Australian Operations: Key Takeaways
Australian Operations: Key Takeaways Operational Excellence: Drives safety, 1 productivity, cost efficiency, reclamation 2 Australia strategically positioned to serve higher-growth Asia-Pacific demand centers Strengthens and diversifies company’s portfol 3 offering substantial value for shareholders
Slide 55: Australia Well-Positioned to Serve Higher-Growth Demand Centers
Australia Well-Positioned to Serve Higher-Growth Demand Centers Strategy Operate safe and sustainable mines serving higher-growth Asian-Pacific demand centers, while exploring means to upgrade the platform and improve our cost position Nine operations providing a range of met and thermal coal produc
Slide 56: Portfolio Significantly Strengthened by Australian Platform
Peabody Portfolio Significantly Strengthened by Australian Platform Offers product, geographic diversity that increases risk-adjusted returns Adds significant earnings strength to Peabody portfolio during times of robust pricing Higher-quality products located closer to ports, ports closer to higher
Slide 57: Tier-One International Thermal Business
Operational Review: Tier-One International Thermal Business Offers Diversification of Products, Ports, Customers Open-cut and underground mines exporting 12.5 million tons Anchored by premier, low-cost Wilpinjong Mine – 3 to 1 strip ratio, comparable to some of the most productive mines in U.S. – Lo
Slide 58: Wilpinjong Semi-Autonomous Bulldozer
Spotlight: Wilpinjong Semi-Autonomous Bulldozer Increases Safety, Productivity Pioneering semi-autonomous dozer technology to increase safety, reduce costs – Reduces stress, driver fatigue Ability to remotely operate up to three dozers at once, improving equipment productivity – Targeting increased
Slide 59: Metallurgical Segment Offers Significant Upside
Operational Review: Metallurgical Segment Offers Significant Upside During Mid to Upper Parts of Cycle Ships to over 15 countries, delivering range of HCC and PCI products North Goonyella, Coppabella premium coals receiving and/or setting benchmark prices – Long-life assets with future brownfield ex
Slide 60: North Goonyella Delivers Highest Quality Hard Coking Coal
Spotlight: North Goonyella Delivers Peabody’s Highest Quality Hard Coking Coal Record sales, production and development led to Peabody delivering 2.9 million tons in high-priced 2017 environment Record safety results reflect 80% improvement since 2013 Sustainable, transferable productivity improveme
Slide 61: Middlemount Joint Venture
Spotlight: Middlemount Joint Venture Offers Economic Exposure to ~2 Million Met Tons Annually Peabody owns 50% equity interest in Middlemount Share of operations delivered 2.1 million tons in 2017 – Mix of semi-hard coking coal, LV PCI – Port capacity through Abbot Point, future capacity secured at
Slide 62: Continuous Improvement Reduces Costs 40%
Focus on Continuous Improvement Reduces Costs 40% Australia Costs per Ton (USD) Completed owner-operator conversions $89 Commenced formal continuous improvement culture, cost repositioning Maximizing asset, resource $53 utilization – Production, organizational alignment with market conditions – Mine
Slide 63: Over $900 Million in Cost Savings Since 2012
Building on Over $900 Million in Cost Savings Since 2012 to Further Enhance Margins, Returns 2013 2014—2015 2016—2017 2018 Initiatives Owner-Operator Cost Repositioning Project Excellence Project Excellence Transition Continued Savings $285 million $165 million (2014) $185 million (2016) Target sett
Slide 64: Targeting 2018 Volumes, Costs in Line with 2017
Targeting 2018 Volumes, Costs in Line with 2017; Focused on Further Improving Competitiveness Continued, deliberate focus on costs, productivity improvements mitigates external cost pressures of ~$5 to $7 per ton – Major A$ fluctuations, sales-related royalties, fuel costs Targeted total thermal vol
Slide 65: Extending Lives of Highest-Quality Mines
Extending Lives of Highest-Quality Met and Thermal Mines and Lowest-Cost Thermal Mine Targeting $170 million to $200 million of Australia capex in 2018 – ~$85 million in project spend advances mine planning for North Goonyella, Wilpinjong and Wambo – ~$30 million of equipment lease buyouts lowers op
Slide 66: Exploring Means to Expand Quality Thermal and Met Production
Exploring Means to Expand Quality Thermal and Met Production Over Five-Year Planning Horizon Strong reserve portfolio, with nearly 15 years of thermal reserves and over 20 years of met reserves Wilpinjong Extension Project extends life of low-cost, low strip-ratio mine Wambo Open-Cut / Glencore JV i
Slide 67: Opportunities for Met Development and Organic Growth in Bowen Basin
Potential Opportunities for Metallurgical Development and Organic Growth in Bowen Basin Over Time 15
Slide 68: Advancing New Longwall at North Goonyella
Spotlight: Advancing New Longwall at North Goonyella, Underwriting Double Digit Met Volumes New longwall expected to replace current longwall system in 2019 New longwall offers several benefits: – Avoids lease payments/buyout – Reduces longwall downtime in 2018, 2019 related to timing of repairs on
Slide 69: Accessing New Reserves in Southern Area
Spotlight: Accessing New Reserves in Southern Area of Highest-Quality Met Coal Mine Transitioning to southern area of North Goonyella with new longwall in second half of 2019 Southern panels expected to have increased seam thickness and improved coal quality compared to the northern panels – Cost, p
Slide 70: Australia's Platform: Key Part of Peabody Value Proposition
Peabody Australia’s Platform: Key Integrated Part of Peabody Value Proposition Location matters…Peabody is strategically positioned to serve higher-growth Asia-Pacific demand centers Products matter…Delivering high-quality products drives shareholder value Returns matter…Peabody focused on generatin
Slide 71: Americas: Tier-One Assets in a Competitive Environment
Americas: Tier-One Assets in a Competitive Environment Kemal Williamson President Americas February 22, 2018
Slide 72: Key Takeaways: Peabody Americas Platform
Key Takeaways: Peabody Americas Platform 1 Operational Excellence: Drives safety, productivity, cost efficiency, reclamation 2 Strategically positioned in best U.S. regions 3 Operates core regions as complexes, shari resources, contracts to maximize returns 4 Utilizing technology to increase competi
Slide 73: U.S. Operations: Strategically Positioned, Providing Reliable Value
U.S. Operations: Strategically Positioned, Providing Reliable Value Strategy Capitalize on highly productive operations and significant reserve position in most competitive U.S. coal regions to maximize returns and generate meaningful cash flows 3
Slide 74: PRB Operates as a Complex
Operational Review: PRB Operates as a Complex; Sharing Resources, Technologies, Contracts to Maximize Returns Mines out of more than a dozen pits, offering significant blending opportunities Focused on continuing to maximize margins, returns through contract optimization and cost reduction Most comp
Slide 75: PRB Labor Productivity and Adjusted EBITDA Margins
PRB Labor Productivity, Adjusted EBITDA Margins Routinely Superior to Other PRB Coal Companies Adjusted EBITDA Margin Consistently delivers Adjusted of PRB Producers (2014 – 2017 Average) EBITDA margins superior to other PRB producers 25% – 56% higher Adjusted EBITDA 21% margins than average of othe
Slide 76: North Antelope Rochelle: World's Largest Coal Mine
Spotlight: North Antelope Rochelle World’s Largest Coal Mine Offers reliable source of supply to over 50 customers in 21 states, powering ~4.5% of total U.S. electricity generation Strategically positioned on rail joint line with multiple entry/exit points for simultaneous arrivals and departures Be
Slide 77: Illinois Basin Mines Strategically Located
Operational Review: Illinois Basin Mines Strategically Located to Serve Local Demand Well positioned to serve local demand, Indiana sub-region Trend towards aggregating large supply centers/complexes to lower costs and better compete Multi-source, multi-destination contracts maximize returns Optimiz
Slide 78: Bear Run: Largest Surface Mine East of the Mississippi
Spotlight: Bear Run Largest Surface Mine East of the Mississippi Significant location advantages, serving 14 customers in 4 states; closest customer only 20 miles away Using technology to increase competitiveness, reduce costs Pegasys dragline monitoring system optimizes dragline productivity throug
Slide 79: Western Segment Capturing Export Opportunities
Operational Review: Western Segment Capturing Export Opportunities While Providing Reliable Supply Locking in export opportunities in higher-priced seaborne thermal environment, with approximately 800,000 tons committed for 2018 Establishing longer-term international demand for Colorado exports Mean
Slide 80: Advancing Post-2019 Kayenta Strategy
Spotlight: Peabody Advancing Post-2019 Kayenta Strategy Kayenta sole-provider to NGS, delivering approximately 5 – 6 million tons of coal per year – Captive mine operating on a closed-loop track Kayenta, NGS essential to economy, significant employers of Navajo Nation, major source of low-cost, reli
Slide 81: One-of-a-Kind Technology at North Antelope Rochelle
Spotlight: One-of-a-Kind Technology in Use at Flagship North Antelope Rochelle Mine Unique, Customized Blending Process Next 17 – 20 trains monitored from dispatch center Dispatch center communicates individual customer specifications to loadout facility “Dial-a-blend” technology allows NARM dispatc
Slide 82: Increasing Productivity, Maximizing Margins
Increasing Productivity, Maximizing Margins Relative Cost of Overburden Removal Maximizing lowest-cost by Method methods of moving overburden Truck / Shovel – ~60% of overburden removed through lower-cost methods – NARM dragline benchmarked as Dozer Push “best-in-class” against all other ~50% cheape
Slide 83: Lower-Cost Overburden Removal Methods
Spotlight: Lower-Cost Overburden Removal Methods NARM cast blast, maximizing lowest-cost method of overburden removal Best-in-class NARM Dragline Large, efficient dozer push at Wild Boar 13
Slide 84: Focus on Life-Cycle Costs Through Repurchases, Rebuilds
Spotlight: Keen Focus on Life-Cycle Costs Through Opportunistic Repurchases, Rebuilds Capital diligence saves Peabody ~$62 million Maximizing equipment utilization through rebuilds, condition-based monitoring Rebuilds run as well as rest of fleet Bear Run: NARM: NARM: Reduces total life- 5500 Shovel
Slide 85: Strong Cash Generator, Offering Meaningful Returns
Strong Cash Generator, Offering Meaningful Returns U.S. 2017 Adjusted EBITDA 2017 Segment Financial Performance margins average 25% ($ in millions) Excellent Adjusted EBITDA to cash conversion through low capex requirements Modest sustaining capital levels over planning horizon – Capex averages ~$11
Slide 86: Peabody Americas Platform: Closing Thoughts
Peabody Americas Platform: Closing Thoughts Location matters… Peabody is well positioned in the best, lowest-cost U.S. basins of the PRB and Illinois Basin Returns matter… Peabody focused on generating meaningful returns across the operations – Maximizing revenues through contracting strategy, blend
Slide 87: Maximizing Competitiveness: The Peabody Way
Maximizing Competitiveness “The Peabody Way” Charles Meintjes Executive Vice President Corporate Services and Chief Commercial Officer February 22, 2018
Slide 88: Key Takeaways: Path Toward Improved Competitiveness
Key Takeaways: Path Toward Improved Competitiveness The Peabody Way” is a critical component of our continuous improvement, allowing us 1 o transfer skills, knowledge and processes across the organization r simple goal is to maximize our 2 ompetitive advantage in a way we believe other coal company
Slide 89: The Peabody Way: Integrated Approach to Competitiveness
The Peabody Way: Our Fully Integrated Approach to Improving Competitiveness System designed to develop and transfer best practices and implement key standards across the platform as part of larger effort to connect, evolve and integrate organization Key Benefits Increased consistency across operatio
Slide 90: Five Ways We Create Added Value
The Coal Mining and Marketing Chain Has Hundreds of Steps… We Spotlight Five Ways We Create Added Value How We How We How we How we How we Mine Work Compare Optimize Partner SPOTLIGHT 1 SPOTLIGHT 2 SPOTLIGHT 3 SPOTLIGHT 4 SPOTLIGHT 5 Driving Improving Using robust Perfecting of Serving as meaningful
Slide 91: Spotlight 1: Margin Ranking Enhances Mine Planning
Spotlight 1: Margin Ranking Just One of Many Innovative Tools Used to Enhance Mine Planning Sophisticated margin-ranking Case Study: Optimizing Mine Plan process used to determine best Margin ranking unveils low-cost reserves mine sequencing among wide positioned near natural gas pipeline; reserves
Slide 92: Spotlight 1: Overburden Removal Methodology
Spotlight 1: Peabody’s Overburden Removal Methodology Combines Host of Established Technologies Optimal Resource Recovery Improvement in Cast Blast Strategic use of cast blasting, Efficiency at NARM 60% draglines and dozer push activities 53.4% 49.4% drives overburden removal efficiency 50% 43.2% Lo
Slide 93: Spotlight 2: Increasing Operator Proficiency Through Training
Spotlight 2: Increasing Operator Proficiency Through Training Programs, Collaboration Networks High-Tech Simulators Utilize computer-based modeling of surface/underground mining functions Allows Peabody to train new employees and analyze techniques in a virtual setting Ensures employee safety, reduc
Slide 94: Spotlight 2: Operator Proficiency Program Results
Spotlight 2: Operator Proficiency Program Shows Promising Results in Test Groups Operat Proficiency Program Productivity of Shovel Operators Developed initial scorecard at NARM system at Peabody 6,000 Australian mine Average System identifies issues, Hour 5,000 develops action plans and targeted tra
Slide 95: Spotlight 3: Benchmarking Key to Best Practices
Spotlight 3: Benchmarking Key to Uncovering Best Practices; Achieving Competitive Advantage Benchmarking used to improve U.S. Dozer Availability performance, productivity, returns 100% Internal Benchmarking 90% Establishes proven best practices 80% within Peabody and cascades Benchmarking across com
Slide 96: Spotlight 4: Condition-Based Monitoring Uses Big Data
Spotlight 4: Condition-Based Monitoring Uses Big Data as Part of Comprehensive Asset Management Strategy Operations Technology Center Expected manufacturer ~20,000 hours Real-time visibility into mining engine life of haul truck operations and advanced Engines operating 6 engines analytics above 40,
Slide 97: Spotlight 5: Advocating for HELE and CCUS
Spotlight 5: Peabody Also Advocates for Improved Competitiveness of Customer Base – HELE and CCUS Nearly 1,000 GW of HELE plants Peabody Supports Advanced in use or under construction; Coal Initiatives most being built in Asia Consortium for Clean Coal HELE technologies result in Utilization smaller
Slide 98: Carbon Capture, Use and Storage Allows Carbon Recycling
Carbon Capture, Use and Storage Allows for “Carbon Recycling” By Returning CO2 to the Earth CCS essential to achieve deep reductions in emissions in multiple industries Emissions reductions to meet global environmental goals without CCS would cost $3.5 trillion more by 2050 for power sector Current
Slide 99: Closing Thoughts
Closing Thoughts… Peabody’s approach to continuous improvement is a deliberate, integrated and all-encompassing endeavor Team assesses available technologies and techniques within mining and other industries around the world to drive real improvements and meaningful returns Company benefits from acc
Slide 100: Finance Strategies: Targeting Maximum Returns and Value
Finance Strategies: Targeting Maximum Returns and Value Amy Schwetz Executive Vice President and Chief Financial Officer February 22, 2018
Slide 101: Key Takeaways
Key Takeaways Financial approach: generate cash, maintain 1 financial strength, invest wisely, return cash to shareholders 2 Multiple means to drive cash flow generation Aggressive liability management 3 strengthens balance sheet 4 Strict investment filters lead to enhanced shareholder returns Empha
Slide 102: BTU Offers Unique Investment Opportunity
BTU Offers Unique Investment Opportunity Investment Thesis: We’re the largest global pure-play coal company, serving power and steel customers in more than 25 countries on 6 continents… We have significant scale, high-quality assets and diversity in geography and products Financial Approach: 1 2 3 4
Slide 103: Multiple Means to Drive Cash Flow Generation
1) Multiple Means to Drive Cash Flow Generation • Operational results paramount to strong cash generation Operational • Non-core asset sales provide Result incremental cash flows – $42 million in 2017 Non-Core • Substantial global NOL positions Asset Sales significantly limit future cash taxes for e
Slide 104: Diversified Portfolio Provides Robust 2017 Earnings Cash Flow
Diversified Portfolio Provides Robust 2017 Earnings Cash Flow 2017 Segment Financial Performance • Largest total Adjusted ($ in millions) EBITDA contribution $1,600 in 5 years 38% • Generated over $900 $1,200 34% million in free cash flow 31% • Australia platform 24% delivers superior $800 22% margi
Slide 105: Multi-Pronged Approach to Release Remaining Trapped Cash
Executing Multi-Pronged Approach to Release Nearly All Remaining Trapped Cash Progress Made on Releasing • Secured and upsized Restricted Cash $350 million revolver – $194 million available capacity at Dec. 2017 Remaining Restricted • Working with insurers Cash to develop Australian Replaced surety
Slide 106: Maintaining Financial Strength Through Liability Management
2) Maintaining Financial Strength Through Aggressive Liability Management Debt Balances • Taking holistic view of balance sheet ($ in billions) to maximize shareholder value $2.0 $2.0 • 25% voluntary debt reduction Bonds since April 6.375% • Manageable maturity profile $1.5 – Term Loan, 6.000% Bonds
Slide 107: Debt Reductions Transfer Enterprise Value to Shareholders
Debt Reductions Transfer Enterprise Value to Shareholders Emergence Enterprise Value Jan. 2018 Enterprise Value ($ in millions) ($ in millions) $828 Net Net Debt $449 Debt $49 $51 Minority Minority Interest $5,282 $3,081 Interest Market Cap Market Cap Shareholder value increased since emergence with
Slide 108: Establishing a Holistic Capital Structure
By the Numbers: Establishing a Holistic Capital Structure Debt & Liquidity Dec. 2017 • $800 million liquidity target ($ in millions) Balance • Potential to increase available Unrestricted Cash & Cash Equivalents $1,012 revolver liquidity over time, Revolver Availability $194 reducing required cash b
Slide 109: Investment Principles Around Key ESG Components
Investment Principles Designed to Advance Dialogue Around Key ESG Components • Peabody recognizes that ESG disclosure and transparency is becoming a larger piece of investor dialogue • Advancing principles as part of our overall approach to further engage with investors • Provides portfolio managers
Slide 110: Substantial Interest in BTU from Capital Markets
Substantial Interest in BTU from Multiple Sectors of Capital Markets • February 2017 – Targeted $1.5 billion debt offering upsized and heavily oversubscribed • April 2017 – $1.3 billion in third-party U.S. bonding facilities on emergence – $250 million accounts receivable securitization program – $1
Slide 111: Invest Wisely: Timing and Quantity of Returns
3) Invest Wisely: Focused on Timing and Quantity of Returns Moderate maintenance capex Planned Capital Expenditures required across 3-year plan ($ in millions) – Includes lease buyouts $325 – $375 that lowers opex $275 – $325 Life extension projects offer s multiple benefits: Major Project – Improve
Slide 112: Stringent M&A Criteria Applied to All Investments
Stringent M&A Criteria Applied to All Investments, Including Capex Particular emphasis on amount and timing of returns Maintain Returns – Direct correlation between rate financial above cost of return and shareholder value strength of capital Earned 21% ROIC in 2017, well above WACC of 10—11% Core r
Slide 113: Building on Progress Returning Cash to Shareholders
4) Building on Progress Already Made to Return Cash to Shareholders Already executed $214 million Post-Emergence Cash Allocation of share repurchase program – 43 percent of program completed Authorized Shareholder Targeting completion of share Returns & Debt Reduction repurchase program in 2018 – De
Slide 114: 2018 Emphasis on Returning Cash to Shareholders
2018 Emphasis on Returning Cash to Shareholders: Excellent Earnings to Cash Conversion 2017 2018 Maintain Return Cash to Return Cash to Reduce Debt Financial Shareholders Shareholders Strength At current price levels, Peabody will generate free cash flow in excess of $1 billion in 2018 Note: Free ca
Slide 115: Multiple Paths to Boost Shareholder Value
BTU Actively Pursuing Multiple Paths to Boost Shareholder Value, Earn a Premium Multiple Diversified platform offers numerous benefits, including non-correlative demand drivers balancing divergence in industry fundamentals Management team dedicated to transparency and execution against guidance targ
Slide 116: Earning a Higher Multiple Could Enhance Shareholder Value
Earning a Higher Multiple Has Potential to Further Enhance Shareholder Value in 2018 Scenario Implied Percent Share Price Change Recent Share Price $41 Price Target (“Hold”) Analysts $42 +2% Price Target (“Buy”) Analysts $50 +22% Applying Avg. Historical EV/EBITDA Multiple $79 +93% Applying Avg. His
Slide 117: BTU: Generating Results, Delivering Value
BTU: Generating Results, Delivering Value • Targeting release of over $300 million of trapped cash • Substantial NOL positions significantly limit cash taxes • Expecting ~$90 million of cash tax refunds in 2018 • Completing $500 million share repurchase program • Initiating quarterly dividend, signa
Slide 118: Appendix
Peabody Analyst and Investor Day Appendix February 22, 2018
Slide 119: 2018 Guidance Targets
2018 Guidance Targets Sales Volumes (Short Tons in millions) Capital Expenditures $275 – $325 million PRB 115—125 ILB 18—19 SG&A Expense ~$150 million Western 13—14 Total U.S. 146—158 Interest Expense $143 – $153 million Aus. Metallurgical1 11.0—12.0 Cost Sensitivities4 Aus. Export Thermal2 11.5—12.
Slide 120: 2018 Guidance Targets
2018 Guidance Targets 1 Metallurgical coal sales volumes may range from approximately 55%-65% PCI and approximately 35%-45% coking coal (including semi-hard and semi-soft coking coals). Approximately 30% of seaborne coking coal sales may be priced on a spot basis, with the remainder linked to an ind
Slide 121: Historical Seaborne Pricing
Historical Seaborne Pricing ($/Tonne) Time Period HCC – HCC – Spot LV PCI – LV PCI – Spot NEWC – Spot Settlement Settlement Q4 2017 $192 $205 $127 $126 $98 Q3 2017 $170 $189 $115/$127 $117 $93 Q2 2017 $194 $190 $135 $124 $80 Q1 2017 $285 $169 $180 $110 $82 Q4 2016 $200 $266 $133 $159 $94 Q3 2016 $93
Slide 122: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures 2017 2016 2017 2017 2016 Successor Predecessor Successor Predecessor Combined Predecessor Quarter Ended April 2 through January 1 Year Ended December 31 December 31 through April 1 December 31 (In Millions) Tons Sold Powder River Basin Mining Operations 31.8 33.1
Slide 123: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures 2017 2016 2017 2017 2016 Successor Predecessor Successor Predecessor Combined Predecessor Quarter Ended April 2 through January 1 Year Ended December 31 December 31 through April 1 December 31 (In Millions, Except Per Ton Data) Reconciliation of Non-GAAP Financial
Slide 124: Reconciliation of Non-GAAP Measures: Definitions
Reconciliation of Non-GAAP Measures: Definitions 1 Adjusted EBITDA is a non-GAAP measure defined as income (loss) from continuing operations before deducting net interest expense, income taxes, asset retirement obligation expenses, depreciation, depletion and amortization and reorganization items, n