Peabody Energy Corporation · NYSE:BTU
Peabody Energy — Investor Day (November 2022)
59 slides from Peabody Energy's investor day presentation, Nov 17, 2022
Slide 1: BTU Investor Day November 17, 2022
B U I L D I N G B R I G H T E R F U T U R E S BTU Investor Day November 17, 2022
Slide 2: Safety Contact
2 Safety Contact • At Peabody, safety is a core value that is integrated in all areas of our business • We start all our meetings with a safety contact • Today’s safety contact is on procedures in the event of an emergency
Slide 3: Disclosure Regarding Forward-Looking Statements
3 Disclosure Regarding Forward-Looking Statements This presentation contains forward-looking statements within the meaning of applicable 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
Slide 4: Agenda
4 Agenda Overview Coal Producer of Choice Jim Grech President & Chief Executive Officer Portfolio Diversity Pat Forkin Chief Development Officer Operational Excellence Darren Yeates EVP & Chief Operating Officer Market and Operations Q&A The Future of Coal Dr. Richard Axelbaum Washington University
Slide 5: Meet the new Peabody Team
5 Meet the new Peabody Team From Left: Pat Forkin Chief Development Officer Marc Hathhorn President – U.S. Operations Scott Jarboe Chief Administrative Officer and Corporate Secretary Jamie Frankcombe President – Australia Operations Darren Yeates Executive Vice President and Chief Operating Officer
Slide 6: What it Means to be the Coal Producer of Choice
6 What it Means to be the Coal Producer of Choice Resilient in All Cycles Growing Shareholder Value Operational Excellence Portfolio Diversity ESG Focus Financial Strength The Coal Producer of Choice
Slide 7: A Compelling Opportunity
7 A Compelling Opportunity Our global scale and diversification enable us to target the most attractive market segments Exposed to growing global demand through our met and thermal seaborne segments, while our low-cost US thermal segments produce strong cash flows at attractive margins throughout ma
Slide 8: Portfolio Diversity
Portfolio Diversity Peabody BUILDING BRIGHTER FUTURES 8
Slide 9: Peabody Snapshot
9 • PRB Thermal • Other US Thermal Mining Operations • Seaborne Met • Seaborne Thermal Peabody Snapshot Surface Mine Underground Mine
Slide 10: Portfolio Diversity Makes Peabody Unique
10 Portfolio Diversity Makes Peabody Unique Coal delivered primarily to Asia Pacific market Australian operations anchored by low cost Wilpinjong Mine Consistently high margins throughout price cycle 2022 Adjusted EBITDA Estimate of $630 million Seaborne Thermal Seaborne Met U.S. Thermal Coal delive
Slide 11: Attractive Market Fundamentals
11 Attractive Market Fundamentals
Slide 12: Coal – The Viable and Reliable Choice
12 Coal – The Viable and Reliable Choice • 70% of the world’s steel production relies on coal. It is the backbone of both the steel and cement industries • Thermal coal is the largest source of global electricity today and is projected to maintain that lead role in 2025 at a 28% share • Not only is
Slide 13: Supply shortages and met and thermal coal price performance
13 • 2022 has seen extreme supply shortages across the energy complex while demand continues to increase • Supply response challenged by lack of capital investment and ever- increasing barriers to entry • Rainfall records in the southern hemisphere, labor shortages, and domestic market obligations h
Slide 14: The World Needs Steel, Steel Needs Metallurgical Coal
14 1.3 1.2 1.2 0.6 0.7 0.9 2022 2030 2040 BOF EAF/Other Long Term – The World Needs Steel, Steel Needs Metallurgical Coal Source: World Steel Association; The graph was obtained from Wood Mackenzie Long Term Outlook (Apr 2022) In 2020, the number of buildings in the world over 200 meters high was 1,
Slide 15: Seaborne Met Coal Demand Growing – Supply Response Constrained
15 Seaborne Met Coal Demand Growing – Supply Response Constrained – Portfolio Well-Positioned • China’s rapid urbanization drove met coal consumption growth the last 15- years, India is projected to drive the next ~25-years • Australia projected to continue to dominate seaborne met coal supply, adva
Slide 16: Global Electricity Demand Continues to Grow
16 28% 24% 2% 10% 16% 21% - 5,000 10,000 15,000 20,000 25,000 30,000 35,000 2015 2020 2025 World Electricity Generation (TWh) Coal Natural Gas Oil Nuclear Hydro Renewables Global Electricity Demand Continues to Grow – Coal Continues To Lead All Generation Sources Source: BP Energy Outlook, S&P Capit
Slide 17: U.S. Thermal Coal Remains #1 Electricity Source in Major Regions
17 U.S. Thermal Coal Remains #1 Electricity Source in Major Regions Served by Peabody Sources: MISO, ERCOT, SPP MISO - Midcontinent Independent System Operator – 34% of Peabody’s sales • Manages electricity flow across 15 U.S. States and Canadian province of Manitoba • Serves 42 million customers •
Slide 18: U.S. Thermal - Best and Most Diverse Assets in the Right Regions
18 • Peabody is the largest producer in the PRB and is committed to serve customers’ long-term needs – a differentiator • Peabody has a unique ability to supply low-cost products out of the PRB with various qualities ranging from 8,200 Btu up to >8,900 Btu with ultra low sulfur (<0.50 lbs SO2) and l
Slide 19: Operational Excellence
Operational Excellence Peabody BUILDING BRIGHTER FUTURES 19
Slide 20: Operational Excellence Drives Operating Strategy
20 Operational Excellence Drives Operating Strategy • Commitment to Safe, Sustainable operations drives all activities – 1st to achieve CoreSafety Certification – Award winning Mine Rescue teams – 2 operations won Sentinels of Safety Award in 2021 – 1.02 TRIFR(1) vs industry average of 2.86 • Operat
Slide 21: Peabody's Business Segments
21 Peabody’s Business Segments Mines Full Year 2022 Estimate* Seaborne Thermal • Wilpinjong • Wambo Underground • Wambo OC JV • Tons Sold (millions) • Revenue per Ton • Costs per Ton • Margin per Ton 15.8 $85.00 $45.00 $40.00 Seaborne Metallurgical • Shoal Creek • Metropolitan • Coppabella / Moorval
Slide 22: Seaborne Thermal Business Segment Operations Overview
22 Seaborne Thermal Business Segment Operations Overview Strategic Advantage: High margin operations positioned to serve Asia Pacific market Wilpinjong Mine Volume: 4.7 / 7.7 million tons (export / domestic) Reserves: 76 million tons Type: Surface – Dozer/Cast, Truck/Shovel Product: Export (5,000-6,
Slide 23: Seaborne Thermal Business Segment Operations Overview: Costs per Ton
23 • 2022 costs impacted by inflationary pressures, sales price sensitive costs, Wambo UG extension, and unprecedented rain events • Wambo complex, with a ~4-million-ton run-rate, offers Newcastle benchmark quality products • Wilpinjong export coal, with a ~5-million-ton run-rate, is a ~24% ash prod
Slide 24: Seaborne Met Business Segment Operations Overview
24 Seaborne Met Business Segment Operations Overview Strategic Advantage: Multiple locations and products, positioned to serve Asia Pacific and Atlantic market Metropolitan Mine Volume: 2.1 million tons Reserves: 16 million tons Type: Underground - Longwall Product: Semi-hard (65%), PCI (25%), Therm
Slide 25: Seaborne Met Business Segment Operations Overview: Costs per Ton
25 • 2022 cost increases due to inflation pressures, sales price sensitive costs, and Shoal Creek ramp-up • Total seaborne met production is comprised of 10% high-vol A (HVA), 20% semi-hard coking coal (SHCC), 60% pulverized coking coal (PCI), and 10% thermal • On average the seaborne met segment pr
Slide 26: PRB Business Segment Operations Overview
26 North Antelope Rochelle Mine (NARM) Volume: 61.5 million tons Reserves: 1,484 million tons Type: Surface - Dragline, Dozer/Cast, Truck/Shovel Product: Sub-Bit Thermal (~8,800 BTU/lb, <0.50 lbs SO2) Rail: BNSF and UP Location: Wyoming PRB Business Segment Operations Overview Strategic Advantage: L
Slide 27: PRB Business Segment Operations Overview: Costs per Ton
27 • 2022 cost increases due to inflation pressures, sales price sensitive costs, and poor rail performance and related lower volumes • Strong book of forward sales contracts with 82 million tons priced for 2023 at an average price of $13.25 per ton PRB Business Segment Operations Overview $4.13 / 4
Slide 28: Other U.S. Thermal Business Segment Operations Overview
28 Other U.S. Thermal Business Segment Operations Overview Strategic Advantage: Located to serve regional customers in high coal utilization regions Bear Run Mine Volume: 6.5 million tons Reserves: 137 million tons Type: Surface - Dragline, Dozer/Cast, Truck/Shovel Product: Thermal ~11,000 Btu/lb, 4
Slide 29: Other U.S. Thermal Business Segment Operations Overview (continued)
29 Other U.S. Thermal Business Segment Operations Overview (continued) with competitive cost operations and ample reserves / resources Gateway North Mine Volume: 2.4 million tons Reserves: 41 million tons Type: Underground – Continuous Miner Product: Thermal ~11,000 Btu/lb, 5.4 lbs. SO2 Rail: UP Loc
Slide 30: Other U.S. Thermal Business Segment Operations Overview: Costs per Ton
30 • 2022 cost increases due to inflation pressures, sales price sensitive costs, and costs associated with incremental volumes • Increased production volume to meet increased customer demand • Strong book of forward sales contracts with 18.6 million tons priced for 2023 at an average price of $50.7
Slide 31: Unique Organic Growth Opportunity: North Goonyella Redevelopment
31 Unique Organic Growth Opportunity: North Goonyella Redevelopment Takeaways Redevelopment utilizing existing infrastructure and equipment in place Premium grade hard coking coal, considered the cornerstone of coking coal feedstocks globally Proximity advantage to supply India and wider Asia. Regio
Slide 32: North Goonyella Redevelopment: World-Class Infrastructure in Place
32 North Goonyella Redevelopment World-Class Infrastructure in Place • Brownfield redevelopment benefits from significant infrastructure with replacement cost estimated at more than $1 billion • Infrastructure includes: Coal Handling Prep Plant (CHPP) with successful history Dedicated accommodation
Slide 33: North Goonyella Redevelopment Project Stages
33 • Stage 1 capital of $140 million anticipated to be completed in early 2024 • Stage 2 capital of $240 million, over two years, to complete development and allow longwall mining of 20 million tons beginning in 2026 • The only approval needed from regulators is to re-enter Zone B • Various options
Slide 34: Market and Operations Q&A
Market and Operations Q&A Peabody BUILDING BRIGHTER FUTURES 34
Slide 35: The Future of Coal
The Future of Coal Peabody BUILDING BRIGHTER FUTURES 35
Slide 36: Brighter
BRIGHTER z 36
Slide 37: ESG Focus
ESG Focus BRIGHTER z 37
Slide 38: ESG Focus: To Be the Coal Producer of Choice
38 ESG Focus To Be the Coal Producer of Choice We want to make it as easy as possible for counterparties to do business with us. • Improved reporting and keystone projects like R3 Renewables are opening doors previously closed to us We differentiate ourselves to make Peabody the partner of choice in
Slide 39: Opportunities to Accomplish ESG Goals Leveraging Our Existing Assets
39 Opportunities to Accomplish ESG Goals Leveraging Our Existing Assets • Land: 185,000+ acres in US alone - Opportunity to develop wind and solar projects in US and AUS - Commercial scale or to reduce site energy costs • Water: 38 million gallons managed per day - Opportunity for pump-hydro energy
Slide 40: Emphasis on ESG for Stakeholder Engagement
40 Emphasis on ESG for Stakeholder Engagement • Responsible coal mining, reducing impact from operations and making best use of natural resources while creating economic value • Targets for greenhouse gas reduction and land reclamation • Collaborating with stakeholders on a pipeline of projects aime
Slide 41: ESG Pipeline Highlight: R3 Renewables
41 ESG Pipeline Highlight: R3 Renewables Reclaim, Reimagine, Repower • Creates value while utilizing Peabody’s core competencies, in addition to monetizing existing Midwest land assets • Ability to serve customer ESG ambitions and demand for renewables by potentially delivering credits with coal sup
Slide 42: Financial Strength
Financial Strength Peabody BUILDING BRIGHTER FUTURES 42
Slide 43: Financial Strategy
43 Financial Strategy • Generate cash in excess of liquidity and capital requirements • Eliminate secured debt, currently ~$545 million • Establish asset retirement obligation (ARO) funding mechanism for final reclamation expenditures • Other debt-like obligations include legacy retiree healthcare a
Slide 44: Secured Debt Reduction
44 2020 2021 2022* Revolving Credit Facility PIC AU (Wilpinjong ) Notes PEC 2025 Term Loan PIC AU (Wilpinjong) Term Loan PEC 2022 Secured Notes PEC 2024 Secured Notes PEC 2025 Secured Notes $1,563 $1,143 $545 (USD in millions) Secured Debt Reduction • Retirement of remaining senior secured debt (~$5
Slide 45: Reclamation Bonding Requirements
45 Reclamation Bonding Requirements $262 $316 $326 $15 $24 $150 $728 $720 $726 $1,452 $1,295 $1,235 2020 2021 2022* (USD in millions) Cash Collateral Non-Cash Collateral GAAP Liability Reclamation Surety Bonds • Reclamation surety bonds: ~$1.2 billion - Regulatory mandated financial insurance for fi
Slide 46: Future Surety Framework
46 Future Surety Framework • Existing surety agreement includes - Formulaic approach to increasing collateral based on Free Cash Flow - Prohibition on shareholder returns • Seeking amendments to 2020 Surety Agreement - Eliminate LC facility and cash back reclamation expenditures - Pre-fund to fully
Slide 47: Strong Free Cash Flow Potential
47 Strong Free Cash Flow Potential 1) 2022 operating performance with forward or spot pricing and 2023 priced volume. 2) Forward pricing and spot pricing as of November 4, 2022. 3) Cash Margin posted in 2022 related to 2023 hedged tons. Note: Free Cash Flow is a non-GAAP financial measure defined as
Slide 48: Significantly Undervalued Free Cash Flow Potential
48 Significantly Undervalued Free Cash Flow Potential 1) 2022 operating performance with forward or spot pricing and 2023 priced volume. 2) Forward pricing, spot pricing and Market Cap as of November 4, 2022. 3) Indicative December 31, 2022 Cash Balance does not include potential Q4-2022 debt retire
Slide 49: Returning Value to Shareholders
49 Returning Value to Shareholders • A de-risked balance sheet and strong cash flow projections allow us to deliver shareholder returns AND reinvest in the portfolio with high- return projects • Developing shareholder return program - Proportionate to free cash flow generation - Flexible to include
Slide 50: Our Financial Outlook is Bright
50 Our Financial Outlook is Bright • Repay remaining secured debt • Complete pre-funding of final reclamation • Maximize value from a de-risked balance sheet Bullet Proof Balance Sheet • Maximize cash generation from price volatility and careful control of costs and capital Free Cash Flow Generation
Slide 51: Growing Shareholder Value
51 Growing Shareholder Value
Slide 52: What it Means to be the Coal Producer of Choice
52 What it Means to be the Coal Producer of Choice Resilient in All Cycles Growing Shareholder Value Operational Excellence Portfolio Diversity ESG Focus Financial Strength The Coal Producer of Choice
Slide 53: Coal Producer of Choice – Building Brighter Futures
53 Coal Producer of Choice – Building Brighter Futures $353 $439 $178 $594 $299 $228 $87 $83 $500 $917 $1,844 2021 2022 Adjusted EBITDA (USD in millions) Seaborne Thermal Seaborne Met U.S. Thermal Other Note: 2022 YTD at September 30, 2022. 2022 YTD Consensus Q4 Our financial strength has us proceed
Slide 54: Brighter
BRIGHTER 54
Slide 55: Appendix Materials
Appendix Materials Peabody
Slide 56: 2022 Guidance Table
56 2022 Guidance Table Certain forward-looking measures and metrics presented are non-GAAP financial and operating/statistical measures. Due to the volatility and variability of certain items needed to reconcile these measures to their nearest GAAP measure, no reconciliation can be provided without
Slide 57: Reconciliation of Non-GAAP Measures
57 Reconciliation of Non-GAAP Measures Note: Refer to definitions and footnotes on slide 59. Year Ended Nine Months Ended Dec. 31, 2021 Sept. 30, 2022 Tons Sold (In Mill ions) Seaborne Thermal Mining Operations 17.3 11.5 Seaborne Metallurgical Mining Operations 5.5 4.6 Powder River Basin Mining Oper
Slide 58: Reconciliation of Non-GAAP Measures
58 Reconciliation of Non-GAAP Measures Note: Refer to definitions and footnotes on slide 59. Year Ended Nine Months Ended Dec. 31, 2021 Sept. 30, 2022 Reconciliation of Non-GAAP Financial Measures (In Mill ions) Income from Continuing Operations, Net of Income Taxes 347.4$ 675.9$ Depreciation, Deple
Slide 59: Reconciliation of Non-GAAP Measures: Definitions
59 Reconciliation of Non-GAAP Measures: Definitions (1) Year Ended Nine Months Ended Dec. 31, 2021 Sept. 30, 2022 Net unrealized loss (115.1)$ (235.1)$ (2) (3) (4) Year Ended Nine Months Ended Dec. 31, 2021 Sept. 30, 2022 Tons sold 2.0 1.2 10.4$ 5.7$ Net interest expense 7.4 0.2 Income tax provision