Peabody Energy Corporation · NYSE:BTU
Peabody Energy — Investor Presentation (May 2018)
45 slides from Peabody Energy's investor presentation, May 14, 2018
Slide 1: Investor Presentation May 2018
Investor Presentation May 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: BTU Offers Unique Investment Opportunity
BTU Offers Unique Investment Opportunity Investment Thesis We’re the leading 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 G
Slide 4: 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 5: Extensive Diversity of Geography, Customers and Products
Company Offers Extensive Diversity of Geography, Customers and Products Serving more than 25 countries on 6 continents 5 Note: Highlighted countries represent customers served in at least one year between 2015 – 2017.
Slide 6: 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 Taiwan Other and demand risks Increased risk-adjusted returns;
Slide 7: Industry Overview
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 centers and w
Slide 8: Seaborne Conditions: Global Coal Undergoing Several Long-Term Trends
Seaborne Conditions: Global Coal 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 Australi
Slide 9: IHS Markit: Total Global Coal Generation Capacity to Increase 15% by 2030
IHS Markit: Total Global Coal Generation Capacity to Increase 15% by 2030 Total world coal- Dalrymple Bay Coal Terminal fueled capacity grows 15% by 2,030 to 2,389 GW While ROW coal-fueled capacity expected to decline 125 GW from 2017 – 2030, Asia capacity rises 439 GW World growth greater than enti
Slide 10: Small Changes in Seaborne Metallurgical 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 11: Seaborne Coal Pricing Remains Robust During First Quarter
Seaborne Coal Pricing Remains Robust on Strong Global Coal Conditions During First Quarter Seaborne Thermal Coal Seaborne Metallurgical Coal India seaborne demand up 21% Global steel production up 4% due to utility stockpiles restocking India imports increase 21% and weak domestic production China i
Slide 12: 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 13: U.S. Coal Demand Declines From First Quarter 2017
U.S. Coal Demand Declines From First Quarter 2017 on Increased Gas and Wind Generation U.S. Utility Coal Stockpiles Total load up 5% YTD through March; Coal generation down 3% PRB consumption flat through March compared 51 50 to 6% decline in other coal 49 producing regions U.S. exports robust; Coal
Slide 14: 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 15: Australian Operations: Multiple Benefits to Peabody
Australian Operations: Multiple Benefits to Peabody Australia strategically positioned to serve 1 higher-growth Asia-Pacific demand centers 2 Australian segment strengthens and diversifies Peabody’s portfolio Nine mines offer quality export thermal and 3 met coal products to multiple countries Tier-
Slide 16: Australia Spotlight: Advancing New Longwall at North Goonyella
Australia 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 – Transitioning to hig
Slide 17: U.S. Operations: Multiple Benefits for Peabody
U.S. Operations: Multiple Benefits for Peabody 1 Strategically positioned in best U.S. regions serving broad customer base 2 Operates regions as complexes, sharing resources for best value 3 PRB operations routinely deliver margins above other producers 4 Strong cash generator offering meaningful re
Slide 18: U.S. Operations: PRB Adjusted EBITDA Margins Superior to Peers
U.S. Operations: PRB 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 25% to other PRB producers – 56% higher Adjusted EBITDA 21% margins than average of 17% oth
Slide 19: U.S. Spotlight: Contracting Strategies and Broad Customer Base
U.S. 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. 19
Slide 20: Strategies Implemented by Aligned and Engaged Employees, Management and Board
Strategies Implemented by Aligned and Engaged Employees, Management and Board Employee Management Board Base Team of Directors 7,100 globally Team combines over Board reconstituted Average tenure 150 years of industry in April 2017 with company experience Eight of nine directors nearly 10 years Seni
Slide 21: Generate Cash – Record Free Cash Flow in First Quarter 2018
Generate Cash – Record Free Cash Flow in First Quarter 2018 Operational results paramount to strong cash generation Operational Non-core asset sales provide Result incremental cash flows Substantial global NOL positions Non-Core significantly limit future cash taxes Asset Sales for extended time – ~
Slide 22: Maintain Financial Strength – Achieves Higher End of Long-Term Debt Target
Maintain Financial Strength – Achieves Higher End of Long-Term Debt Target of $1.2 to $1.4 Billion Current Debt Maturity and Liquidity Sources Represent Increased Financial Strength $1,500 April 2017 Debt and Liquidity Sources Current Debt and Liquidity Sources $1,200 $900 Loan 4.50% Term loan reduc
Slide 23: Invest Wisely – Default Position to Return Cash to Shareholders
Invest Wisely – Default Position to Return Cash to Shareholders Particular emphasis on amount and Maintain Returns timing of returns financial above cost strength of capital – Direct correlation between rate of return and shareholder value Earned 21% ROIC in Reasonable Core regions: PRB, ILB, paybac
Slide 24: Return Cash to Shareholders – Cash Allocation Shifts
Return Cash to Shareholders – Cash Allocation Shifts from Debt Repayment to Returning Cash to Shareholders in 2018 Cash Allocation Company repurchases 5.7 $300 ($ in millions) million shares in 2018 Repurchases total $239 $400 million, 8% of shares $200 outstanding, since initiation of buyback progr
Slide 25: First Quarter 2018 Reflects Multiple Achievements
First Quarter 2018 Reflects Multiple Achievements Increased volumes, revenues and Progress continues Adjusted EBITDA over prior year in April Improved total liquidity $409 Expanded share million to $1.65 billion at repurchase quarter end program to $1.0 billion Generated record free cash flow of $57
Slide 26: Second Quarter 2018 Expectations
Second Quarter 2018 Expectations Increase Australian thermal volumes sequentially as year progresses, lower unit costs Reduce Australian metallurgical costs through improved operational performance Improve Midwest cost performance on greater equipment reliability; Expect seasonally lower Q2 PRB volu
Slide 27: Peabody Outperforms S&P MidCap on Multiple Investor Comps
Peabody Outperforms S&P MidCap 400 on Multiple Investor Comps Peabody S&P 400 BTU vs. S&P 400 Operating Margin 17% 9% 84% Adjusted EBITDA Margin 26% 14% 88% Profit Margin 16% 6% 175% Return on Common Equity 22% 10% 126% Focused on Earning Improved Multiple With Strong Performance, Disciplined Capita
Slide 28: Peabody: 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 29: Appendix
Appendix
Slide 30: 2018 Guidance Targets
2018 Guidance Targets Sales Volumes (Short Tons in millions) PRB 115 – 125 ILB 18 – 19 Western 13 – 14 Total U.S. 146 – 158 Aus. Metallurgical1 11 – 12 Aus. Export Thermal2 11.5 – 12.5 Aus. Domestic Thermal 7 – 8 Total Australia 29.5 – 32.5 U.S. Operations—Revenue per Ton Total U.S. $17.50 – $18.50
Slide 31: 2018 Guidance Targets (Metallurgical Coal)
2018 Guidance Targets 1 Metallurgical coal sales volumes may range from ~55%-65% PCI and ~35%-45% coking coal (including semi-hard and semi-soft coking coals). Approximately 30% of seaborne coking sales may be priced on a spot basis, with the remainder linked to an index. Approximately 30% of seabor
Slide 32: Historical Seaborne Pricing ($/Tonne)
Historical Seaborne Pricing ($/Tonne) Time HCC – HCC – LV PCI – LV PCI – NEWC – Period Settlement Spot Settlement Spot Spot Q1 2018 $ 237 $228 $ 156.50 $ 149 $ 103 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 $ 1
Slide 33: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures 2018 2017 Successor Predecessor Quarter Ended March 31 (In Millions) Tons Sold Powder River Basin Mining Operations 32.4 31.0 Midwestern U.S. Mining Operations 4.7 4.5 Western U.S. Mining Operations 3.7 3.4 Total U.S. Mining Operations 40.8 38.9 Australian Metallu
Slide 34: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures 2018 2017 Successor Predecessor Quarter Ended March 31 (In Millions) Reconciliation of Non-GAAP Financial Measures Income from Continuing Operations, Net of Income Taxes $208.3 $ 124.3 Depreciation, Depletion and Amortization 169.6 119.9 Asset Retirement Obligatio
Slide 35: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Adjusted EBITDA (1) Powder River Basin Mining Operations $74.5 $91.7 Midwestern U.S. Mining Operations 31.2 50.0 Western U.S. Mining Operations 32.0 50.0 Total U.S. Mining Operations 137.7 191.7 Australian Metallurgical Mining Operations 166.4 109.6 Australian The
Slide 36: 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
Slide 37: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Successor April 2 through Quarter Ended April 2 through December 31, 2017 March 31, 2018 March 31, 2018 (In Millions) Reconciliation of Non-GAAP Financial Measures Income from Continuing Operations, Net of Income Taxes $713.1 $ 208.3 $921.4 Interest Expense 119.7
Slide 38: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures April 2, 2017 March 31, 2018 (In Millions) Reconciliation of Non-GAAP Financial Measures Peabody Energy Corporation Stockholders’ Equity $3,081.0 $3,609.8 Less: Series A Convertible Preferred Stock 1,305.4— Common Equity (3) $1,775.6 $3,609.8 Successor April 2 thr
Slide 39: Reconciliation of Non-GAAP Measures: Definitions
Reconciliation of Non-GAAP Measures: Definitions (1) Operating Profit is a non-GAAP measure defined as income (loss) from continuing operations before deducting net interest expense, income taxes, net periodic benefit costs, excluding service cost and reorganization items, net. Operating Profit is u
Slide 40: Middlemount Joint Venture Offers Economic Exposure to ~2 Million Met Tons Annually
Middlemount Joint Venture Offers Economic Exposure to ~2 Million Met Tons Annually Peabody owns 50% equity interest in Middlemount Share of operations delivered 2.1 million tons in 2017 – Mix of semi-hard coking coal, LV PCI – Port capacity through Abbot Point, future capacity secured at DBCT Earned
Slide 41: Potential Opportunities for Metallurgical Development and Organic Growth in Bowen Basin
Potential Opportunities for Metallurgical Development and Organic Growth in Bowen Basin Over Time 41
Slide 42: Spotlight: North Antelope Rochelle
Spotlight: North Antelope Rochelle World’s Largest Coal Mine Offers reliable source of supply to over 50 customers in 21 states, powering ~4.5% of total U.S. electricity generation Strategically positioned on rail joint line with multiple entry/exit points for simultaneous arrivals and departures Be
Slide 43: Peabody's Financial Approach: Invest Wisely
Peabody’s Financial Approach: Invest Wisely Moderate maintenance capex Planned Capital Expenditures required across 3-year plan ($ in millions) – Includes lease buyouts $325 – $375 that lowers opex $275 – $325 Life extension projects offer s multiple benefits: Major Project – Improves met production
Slide 44: Substantial Interest in BTU from Multiple Sectors of 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 – $1.5 b
Slide 45: Focused Engagement: Support for Highly Responsible Coal Mining and Use
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 thr