Suncoke Energy, Inc. · NYSE:SXC
Suncoke Energy — Investor Day (March 2014)
72 slides from Suncoke Energy's investor day presentation, Mar 11, 2014
Slide 1: Investor Day 2014
Exhibit 99.2 Investor Day 2014
Slide 2: Agenda
Agenda Chief President Operating 2:00 & Chief pm Officer Strategies Financial 2:50 for Officer pmValue Framing 3:50 Creation pm theConcluding Growth Fritz Henderson, Opportunity RemarksChairman Fritz Jonathan Henderson, & Lock, Chief Vice Executive Chairman President, Officer & Chief Strategy 2:20 E
Slide 3: Forward-Looking Statements
Forward-Looking Section respect management’s strategies, regulations. “plan,” plans, expectations SunCoke in materially Partnership. current or GAAP theits after Partnership comparable filings intentions measures. beliefs to “intend,” the 21E and anticipated financing from date Forward-looking All w
Slide 4: Fritz Henderson, Chairman and Chief Executive Officer
Fritz Henderson Chairman and Chief Executive Officer
Slide 5: The SunCoke journey
The SunCoke successful productivity structure SXC SXC• Completed logistics SXC Indiana Journey & SXCP acquisitions Harbor final 2014+: SXC • contract; Strategic Transformation &dropdown SXCP substantially evaluation $1.7 planned billion 2013: of•Middletown •IPO $1.6 Creating Proved of billion ~18% c
Slide 6: Today's News: SXC dropdown plan
•Today’s will SXC create Board News—SXC significant approved•value initial SXCfor Board dropdown SXCsupports shareholders – 33%management interest and SXCP in plan Haverhill unitholders to drop anddown Middletown Domestic– Coke Offer business made to SXCP into SXCP Conflicts – Expect Committee timin
Slide 7: Today's News: Indiana Harbor and guidance
Today’s Harbor Indiana Excluding News—SXC Indiana – Indiana Harbor, • Estimate Harbor expectsevere incurred domestic weather higher cokeand to O&Mperform Indiana on additional above Harborcontract challenges refurbishment maxto• Reaffirm lower scope Q1• FY Adjusted Expect 2014toAdjusted EBITDA recov
Slide 8: Coal business strategic evaluation
Coal Business option Willing Create is value topotential invest forStrategic SXC tosale optimize shareholders but Evaluation will potential consider Developing exit other transaction alternatives strategic • Key exit including transaction plan • Retained jointobjectives ventures, advisors include pa
Slide 9: SXC Priorities
SXC Priorities ownership flexible recycler of SXCP TMof Given capital & GPdomestic interest – Focus–on coke Maximizing investing dropdown tocash drive plan flow productivity andfrom coalremaining business in existing restructuring, SXCassets level assets and evaluating incubate – Deploying strategic
Slide 10: Today's News: SXCP expected structures
Today’s expected structures Does notNews—SXCP to include – add Expect ~$38 interest first million • dropdown Intend expense annually to related raise financed toper to distributable unit potential by combination cash distribution debt cashfinancing. flow of SXCP (pre-financing) 5.3%equity to $0.50 a
Slide 11: SXCP distribution growth outlook
SXCP can purchase flexibility flexible • ~$175 Distribution based new to million finance U.S. on opportunities upside Outlook of growth EBITDA and/or Expect andover support extend dropdowns timegrowth 8%-10% distribution M&Awill success Greenfield annual support growth distribution Projects 8%-10% a
Slide 12: Pathway to Shareholder Value: pillars
Pathway chain allocate andcapital todiversify Value between Creation Pursue growth Growth Deliver andOperations Pillars shareholders customer • Foundation to base optimize • Prioritize ofvalue long-term SXCP Excellence growth • Execute success Leverage dropdownTechnology domestic coke to •Restructur
Slide 13: Mike Thomson, President and Chief Operating Officer
Mike Thomson President and Chief Operating Officer
Slide 14: Pathway to Shareholder Value
Pathway to Shareholder Value TM Deliver Operations Excellence Leverage Technology to Drive Results Pursue Growth Pillars Restructure & Allocate Capital Enhance Shareholder Value
Slide 15: Deliver Operations Excellence
Deliver maintenance and exceed Operations environmental costs •Excellence Rigorous standards discipline TM Financia around Performan Executio• Leverage systems and operating processes know-how of coke and coal Focusmining of technology operations to Safety The SunCoke & •Sustain Wayand Productivity
Slide 16: SunCoke Way: production and yield
SunCoke 70.5% 635 (%) Granite • 2013 • 1% Way production City coal-to-coke – Production Jewell~50,000 Capacity yield & Yield 70.2% tons Utilization above TM69.4% Tangible contract (%) improvement impact maximum oncontributes Domestic 1,103 1,124 68.8% Coke1,164 Production 3,167 1,173 3,202 –&Enabled
Slide 17: SunCoke Way: top quartile safety
SunCoke Top Institute Quartile Wayand – Coke SXC Safety 1.55 1.52 TM1.49 • Achieved 1.25 1.05 historical 0.91 0.85 best 0.75 health 2010and 2011 safety 2012performance 2013 Top Quartile in 2013 TIR – Including for cokeBrazil, plants SXC/SXCP per ACCCI*represents data SXC four TIR of *ACCCI five posi
Slide 18: International coke operations
International volumes Anticipate VISA contribution Coke SunCoke Brazil of•Coke ~$3 Strong million • Demonstrated operating to 2014E performance exceptional Adj. EBITDA • Merchant flexibilitymarket operating experiencing at ~50% utilization margin compression • 2013 Adj.due EBITDA to slower of $16 ec
Slide 19: Coal Mining business
Coal Mining Preserve assets Business and capabilities • Continued to maximize focus on decreasing strategic flexibility cash costs per ton on productivity gains and reduced royalty rates • Maintaining focus on top quartile safety and compliance performance •
Slide 20: Leverage Technology
> Xe) Investor Day 2014
Slide 21: Leverage Technology
Leverageand Improve implementation Technology • Meet and processes current TM Focused • Extend to at on existing and driving protect and greater new optimize meet productivity productive and surpass from environmental assets existing nextassets generation ourand proprietary enhancing environmental c
Slide 22: Faster Coking
Faster Coking varying permit limits charge Potential TM sizeGoal: andValue: burn Improve practices • Potential existing 54totons asset increase 48utilizati tons production Expected • Existing by Benefits: 5% oventoloading 10% • Flexibility across processes U.S. to accelerate fleet 1 tonStandard of I
Slide 23: Gas Sharing
Gas Sharing Substantially planned in 2014 Goal: reduces Develop ventingand • Sets implement new emission new technology standard for to minimize cokemaking venting Capital Background: Investment:• Address • Estimated NOVscapatexHaverhill $120 million and Granite to be invested City as2012 part of –
Slide 24: Improve Yield
Improve loss to drive Yield higher Goal:coke Improv yieldcoke Potential yield by Value: minimizing • 1% burn burn losslosreduction Background: across• Existing U.S. fleettechnology could drivetypically ~$8 million results benefit in 2%-3% (@ $100/ton burn loss coal • Redesigning price) • Earliest ov
Slide 25: Breeze recycle
Breezecost blend implementation Recycle substituting Goal: 2017 Repurpose low cost input low (breeze) value outpu for higher Background: cost input Breeze (coal) Value: Coke~$15-$30 Value: ~$320 per ton per• ton Breeze Potential has limited Value:market • ~$5M-$10M value • Recycling across U.S. 1%-3
Slide 26: Indiana Harbor Refurbishment
INDIANA HARBOR REFURBISHMENT
Slide 27: Indiana Harbor Refurbishment scope and challenges
Indiana operating maintenance oven ovensperformance Floors/ Harbor schedule expense, • Plan Refurbishment Tunnel conflicts toimprove repair/replace • Plan andTM reliability, to Externals repair/replace Scope ovenCharger and weather floors/sole Challenges common decrease • Work flues•caused tunnel on
Slide 28: Indiana Harbor Refurbishment status
Indiana $85 expected Incremental results million; Harbor in June expense ~$15 Refurbishment and million in November Q1/Q2 higher results TM2014 than Status Machine Plant originally and Expense Outlook • expected Capital Oven • 3expenditure due of • Work 4tobatteries productivity on of target $16 com
Slide 29: Refurbishment End State
Refurbishment End State TM New Oven Exterior New Tunnel/Stack New Oven Internals
Slide 30: Refurbishment End State
Refurbishment operations and maintenance End State TM• ~$16M New Pusher/Charger total spend; deliveries Pusher/Charger expected Machine in Juneatand Middletown NovemberMachines • Facilitates • Next ramp-up generation to 1.22modular million design tons annual with upgraded productionfeatures – Target
Slide 31: Indiana Harbor 2014 outlook
Indiana 131 maximum in 2H costs Q1Harbor 2014 125 production 126 Q2 Outlook 107 2014 needed • TM Q2/early Q3 2014 Indiana 285-295 Q3 Q4Harbor anticipated 2014 260-270 • Ramp-up Projected 200-210 blast furnace Indiana FY • With 2014outage Harbor: completion Adjusted –Projected Expect EBITDA of refurb
Slide 32: Potential New Coke Plant
POTENTIAL NEW COKE PLANT > &Xe) Investor Day 2014
Slide 33: New coke plant: site and permit status
Newton construction expansion per Coke Shore Plant – Q4– 2014 South Improved contract Shore, yields KY anddue TM spotto Site/Plant markets better coal/coke •Attributes First coke handling Permit delivery and Status – oven Q1• 2017 Good design/control • inbound Design enhancements &– outbound Higher
Slide 34: Proposed New Site
Proposed New Site TM Proposed new coke plant expected to have 120 ovens and annual coke production capacity of 660 thousand tons and ~60MW of power generation
Slide 35: Coal Logistics
COAL LOGISTICS =X e= Investor Day 2014
Slide 36: Coal Logistics strategically advantaged
Coal Logistics strategically Experienced Broadening customer advantaged – Ability Opportunity base to with blend diversifies Coal access Illinois logistics toBroaden Basin barge, complements with rail Exposure and Management truck existing t credit Strategically Team cokemaking and market CAPPLocate
Slide 37: Coal Logistics organic growth opportunity
Coal public Discussion with Coking Logistics Rebound with utilities Organic steelmakers Coke • Incremental Plant Growth~1 Handled Opportunity – revenue 2M ~3.5flows – Organic 6M primarily to increase Growth tomet EBITDA Target coalAreas tonnage 2013A for KRT ~0.5 Volume –3rd 1M Growth Party • Antici
Slide 38: Jonathan Lock, Vice President—Strategy
Jonathan Lock Vice President—Strategy
Slide 39: Pathway to Shareholder Value
Pathway to Shareholder Value TM Deliver Operations Excellence Leverage Technology to Drive Results Pursue Growth Pillars Restructure & Allocate Capital Enhance Shareholder Value
Slide 40: The Steel Value Chain
The Steel Value Chain TM Steel value chain survey identified attractive adjacent opportunities
Slide 41: Our Growth Priorities
Our acquisitions and Growth Priorities with focus 1 Look onto • Opportunities generate growth thatwhich generate is • Similar qualifying in risk income profile • Increased to core business customer• Consistent diversification with existing business model • Aligned with Core Competencies 2 Seek organ
Slide 42: Growth strategy summary
Growth coal arrangements development acquisition Submitted handling Strategy PLR ofopportunities transport/handling & targeted for of TM steel DRI Area • Evaluating –value timing of greenfield focus chain, and uncertain Cokemaking targeted limited such DRI existing (SXC) on of qualifying iron Coal •
Slide 43: Coke market dynamics: capacity utilization
Coke –100 driven quality Capacity& Market Utilization advanced 100%Dynamics byproduct (%) automotive, Source: TMdesign Expect AISI, construction 38 stable 20 CRU, 38 coke 38 Internal 803880% demand 20%Company • EAFs 34on 36rebounding expected 35Analysis 35 36 31 tosteel capture 22 •production Foreca
Slide 44: Coke market dynamics: battery age
Coke – 4Market battery projects 30—35 — do Meter 40 not45 1.5 Dynamics By-product —appear 50—55 TM to5.0 60 beExpect 6— yielding Meter 65—70 coke By-product reliable Gary battery Works 1.0retirements productivity coke Battery 0.5 0.0 to Age falling •reduce Recent – Represents as coke coke fleetcapac
Slide 45: Coke market dynamics: evolving standards
Coke accelerate market Virtually ’18E – tightening Market no imports Dynamics retirements as in aging 2013 TM Age 1.-1,000 Data Forecast & Evolving represents -1,500 U.S.(1,384) 500 &BF Canada 435 demand • Imports Environmental coke andshortage orcapacity DRI/EAF batteries inexclusive excess could s
Slide 46: Prospective new coke plant economics
CokeMultiple Capital digit SXCP –has Prospective Location: preferential • Target South Economics commitments right Shore, to acquire KY TM Outlay Next foronce 60%-70% Generation Contracting operational forCoke returns Strategy Plant SXC/SXCP 4Economics 2 Valuable capacity Plant • Multi-customer Spec
Slide 47: Coal Logistics market
Coal $3-$8/ton Fragmentation combination to electric Logistics EBIT power of–Low blending, Margin(3) Market plants Medium 47 Size storage, (3) 25%-30% High TM EBITRail sampling, High margins 15%-20% Barge Note: crushing, Truck derived tonnage 5%-10% Terminals from transloading, estimates 20%-30% int
Slide 48: Coal Logistics acquisition screening
Coal Logistics Advantage customer) Coast Transport – >50 Developing Coal • CoalFocused Biased our Pipeline Logistics • Advantaged TMAssets Applied • Rail High rigorous • Midwest + Priority screening • >175 Focusprocess Targets on small Logistics to •identify MLP’able Companies high-priority, Locatio
Slide 49: Ferrous: iron ore pelletizing
Ferrous process of Source: few large to Internal – Concentration coke operators ~55 Company 7 3AM •&Potential Analysis 9Pelletization In Operation(1) for similar TM U.S. Under commercial Iron Development Ore structure; Production Total USS Cokemaking Market 24 processing • SXCP Parallels cost fee wi
Slide 50: Ferrous: DRI market
Ferrous(Mtpa) (Mtpa) US/Canada – DRI 1 Nucor Market Mid. East T&T Size 31 2 TM W. SunCoke Europe U.S. &focus 1Canadian Current on 3-5 Medium-Term DRI Mtpa market medium- in Long-Term early Asiastages; Pacific Market expect term Demand demand need-based 6Potential -9demand 18 ~10Source: will Latindom
Slide 51: Ferrous: DRI near-term customer demand
Ferrousquality Customer higher – DRI #2 0.9 Premium Near-Term Material steel pig Demand Customer iron and TMpremium #1 DRI0.6demand • DRI Greathelps fragmented Flexibility reduceand scrap input driven Lakes South byCustomer Customer different #3 #2 needs 0.8 0.2 Drivers Customer Challenged of #4 DRI
Slide 52: Ferrous: DRI project characteristics
Ferrousas Characteristics ~$500M market –investment) DRI cold Project DRI • Substitute • 400 Cost Scale SXC/SXCP pass-through pig andiron Economics and Value hedge of allProposition TMcommodities ($/mt) Opportunity scrap Voestalpine due (iron toto aggregate pellets low• Provide natural & demand nat.
Slide 53: Mark Newman, SVP & Chief Financial Officer
Mark Newman Senior Vice President & Chief Financial Officer
Slide 54: Pathway to Shareholder Value
Pathway to Shareholder Value TM Deliver Operations Excellence Leverage Technology to Drive Results Pursue Growth Pillars Restructure & Allocate Capital Enhance Shareholder Value
Slide 55: Value creation to date
Value 25% (1) not (1) include Alerian Creation (2) Integrated distributions. +10% to Date 0 Steel 0 TM Integrated S&P SXCSmall and -25% SXCP Cap -25% 600 delivered Integrated SXC Integrated value Steel since (7%) Steel IPOs Steel Alerian Since (60%) Index SXC-50% IPO SXCP -50% (07/21/11) 1. -75% Int
Slide 56: Capital allocation and value creation
Futureflow Business unlock Coke dropdowns Value value Allocation growth shareholders Creation • Finance (new Assets TM potential coke mining Intend to –SXCP Generate risks capital to continue • occur Board –cash Increase –supports to Enable plant, create distributions DRI) Jewell drop value –•Reduce
Slide 57: Dropdown value flows
Dropdown Units Flows flow distribution ü Financial Value Drivers growth flexibility TM ratetoExpected leads invest to for increased Impact 3 growth from SXCP orImpact toexisting • Debt to SXC paid assets down Expected unit and price End cash ü Maximum Result support Dropdown Cash valueProceeds ofPla
Slide 58: Asset considerations for dropdowns
Asset Considerations Indiana $50M(1) dropdowns Harbor $35M—$45M ___________________________ JewellTM Coke $45M—$55M AllMiddletown SXC Domestic • ~$175M EaseCoke 1.of33% Execution inassets Domestic basisare for / good Asset both Cokecandidates; Readiness plants Adj. EBITDA combined. Customer Haverhil
Slide 59: Tax efficiency
TaxUnits Interest or $150 PV on stepped of Efficiency $150 Future taking Only 12/31/13 up;Tax •back income Illustration Estimated 15units available (11) recognition units provides tax TMbasis towould Simplified use SXCP stepped inwith trigger remaining Tax Day Example upgain Life basis 1 Tax SXC (@
Slide 60: Dropdown timing and financing considerations
Dropdown approval achieve coke upside assets ratable SXCP Considerations to support growth • Excess Timing • As leverage and wedistribution SXCP increase capacity Impact scale growth at Variable SXCP and target asset/customer provides Considerations • Flexibility flexibility; diversity toDrop adjust
Slide 61: Dropdown provides SXC balance sheet flexibility
Dropdown provides Balance SXCP dropdowns Usetax SXC of Considerations to efficiency •provide flexibility With dropdown multiple with Multiple and potential SXC expansion plan, Form Impact expect liquidity ofon • TM to Expect existing needs de-lever, Variable to atassets, take parent retain Considera
Slide 62: Illustrative dropdown scenario
Illustrative Relatively Price 2016E onAnnual higher unchanged Dropdown Distribution distributions from Scenario Distribution current $1.90 TMq•Illustrative Annual SXCP RateFinancing: GP perDropdown Cash LP per Flow: 50/50 LPAssumptions Unit ~$10M Debt/Equity Unit(at/within Potential (~58%) 50%SXC bu
Slide 63: Initial dropdown key points
Initial Middletown and public Dropdown unit to be offering Key dropped Points • De-leveraging into TMSXCP Expect subject attoparent drop to market 33% and minimizing interest conditions in Haverhill of– tax SXCPleakage and Conflicts Middletown will be Committee priorities into SXCP reviewing for ini
Slide 64: Fritz Henderson, Chairman & Chief Executive Officer
Fritz Henderson Chairman & Chief Executive Officer
Slide 65: Pathway to Shareholder Value
Pathway to Shareholder Value TM Deliver Operations Excellence Leverage Technology to Drive Results Pursue Growth Pillars Restructure & Allocate Capital Enhance Shareholder Value
Slide 66: 2014 priorities
Critical revitalization secure with objectives: dropdown customer Early and 2014 strategy coal commitments re-commission Priorities supply, over coke next TM – Evaluate plant •three plant Operations –years independence, Drive DRI Excellence and mining possible value cash– cost coke Recover creation
Slide 67: Appendix
> &Xe) Investor Day 2014
Slide 68: Definitions
Definitions depletion these alternatives measure relying GAAP, reported less expenditures effectiveness distributable estimated the at least sharing long Adjusted discounts sales annually solely does term by ofand costs discounts. the with TM other tonot cash made of EBITDA to amortization on net op
Slide 69: 2014 Guidance Summary
Consolidated Shareholders Domestic Coke(diluted) SXCProduction Guidance $0.35~4.3 –Summary $0.60 million Cash Metric tons Flow Coal 2014 from Production Guidance* Operations ~1.3 Adjusted ~$170 million million EBITDA tons *—Prior Capital (1) Consolidated Expenditures to proposed$230 cokemaking ~$117
Slide 70: Adjusted EBITDA Reconciliation 2014E
Expected expense (47) public (52) unitholders 13 Adjusted SXC 24 EBITDA 2014prior EBITDA EBITDA to $226 proposed attributable $248 Reconciliation Sales cokemaking todiscounts SXC2014E $183 asset –2014E –Adjustment $203 dropdowns (1) (in millions) Represents and to unconsolidated to Low DTE SXCHigh E
Slide 71: SXCP Adjusted EBITDA and Distributable Cash Flow Reconciliations
SXCP Adjusted Income Ongoingtax capex expense—1 (SXCP EBITDA share) Sales and discounts (12) Distributable (12) Replacement — Adjusted Cash Flow EBITDA capex Reconciliations accrual $ 155(4) $ 166 (4) FY Cash Adjusted 2014 interest Guidance* EBITDA accrual ($attributable in(15) Millions) (15) Distri
Slide 72: Capital Expenditures & Investments
Capital CapEx prep plant $64 Expenditures ($30-$60M). $53 $117 & Investments Investments ——Total 2014E Capex CapEx($&in$64(1) millions) $53SXC $117SXCP Investments Consolidated (1) Does On-Going not include $39spending $17 $56 to Environmental initiate construction Project of $5potential $36 $41 new