Peabody Energy Corporation · NYSE:BTU
Peabody Energy — Investor Presentation (August 2019)
41 slides from Peabody Energy's investor presentation, Aug 7, 2019
Slide 1: Investor Presentation August 2019
Investor Presentation August 2019
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: Leading Global Pure-Play Coal Producer
Peabody: Leading Global Pure-Play Coal Producer Note: Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures. Refer to the reconciliation to the nearest GAAP measures in the appendix. All metrics for calendar-year 2018, with the exception of awards received , 3 which cover the past decad
Slide 4: Scale and Diversity Offer Significant Competitive Advantage
Scale and Diversity Offer Significant Competitive Advantage Percentage of Total Revenue from Customer • Wide distribution Geographic Region in 2018 of revenue, Adjusted China South EBITDA contributions India Korea • Multi-regional exposure limits demand, logistics and Australia Other seasonal operat
Slide 5: Among Top Global Producers with Diverse Production Portfolio
Among Top Global Producers with Diverse Production Portfolio; Well-Positioned to Serve Long-Term Coal Demand Seaborne Thermal Coal Producers by Volume 1H 2019 Adjusted EBITDA 130 by Mining Portfolios (million tons) Global Producers U.S. Producers Seaborne BTU Met 35 32 32 $174.6M 19 15 11 8 5 3 Meta
Slide 6: Peabody Implementing Multiple Strategies in Support of Mission
Peabody Implementing Multiple Strategies in Support of Mission to Create Superior Value for Shareholders 1) Continuing to reweight our investments toward greater seaborne thermal and Creek excels seaborne metallurgical coal access t 6 months to capture higher-growth Asian demand 2) Optimizing our lo
Slide 7: Seaborne Metallurgical Shoal Creek Mine
Seaborne Metallurgical Shoal Creek Mine
Slide 8: Seaborne Metallurgical: Shoal Creek Upgrades Portfolio
Seaborne Metallurgical: Shoal Creek Upgrades Portfolio; Opportunities for Development/Organic Growth Over Time • Metallurgical coal serves as HVA and HCC Index Price primary component for ~70% (USD per tonne) of world’s steel production $400 $300 • Strong demand growth Avg: $174 per tonne from China
Slide 9: Shoal Creek Acquisition Upgrades Seaborne Met Portfolio
Shoal Creek Acquisition Upgrades Seaborne Met Portfolio; Represents Multiple Strategic and Financial Benefits • YTD cash flows imply payback period of less than 2 years • Targeting ~2.5 million tons of high-quality HVA seaborne met coal shipments in 2019 • Mine well-capitalized – Includes two longwa
Slide 10: Assessing Prospective Paths for North Goonyella
Peabody Assessing Prospective Paths, Timetables and Costs for North Goonyella to Maximize Value All potential paths preserve opportunity to access more than 40 million tons of HCC in lower seam reserves over time 10 Note: Mine map not to scale. For illustration purposes only.
Slide 11: Seaborne Thermal Wilpinjong Mine
Seaborne Thermal Wilpinjong Mine
Slide 12: Seaborne Thermal: Well Positioned to Serve Higher-Growth Asia-Pacific Demand
Seaborne Thermal: Well Positioned to Serve Higher-Growth Asia-Pacific Demand • Global coal generation capacity Global Coal Generation Capacity surpasses 2,000 GW for first time ~2,015 GW 62% increase from ever in 2018 per WoodMac 2000 to 2018 • ~45 gigawatts of new coal-fueled ~1,245 GW generation e
Slide 13: Seaborne Thermal Coal Platform Represents Tier-One Assets
Seaborne Thermal Coal Platform Represents Tier-One Assets; Expected Costs of $32 – $36 Per Short Ton for 2019 Seaborne Thermal Coal Adjusted EBITDA Margins Margin % Average NEWC Price per Tonne 50% 48% 44% 45% 42% 40% $117 40% 38% 38% 37% $103 $104 $105 34% 35% $98 $93 31% $97 30% $80 $80 25% 20% 15
Slide 14: U.S. Thermal Rawhide Mine
U.S. Thermal Rawhide Mine
Slide 15: U.S. Thermal: Two-Thirds of Shipments Go to Coal-Reliant Regions
U.S. Thermal: Two-Thirds of Shipments Go to Regions That Generate More than 40% of Electricity From Coal Positioning NYISO Coal: 1% essential Rockies SPP BTU: NW Power Coal: 51% Coal: 43% Pool Gas 0 mt given intense BTU: BTU: MISO ISO-NE Coal: 33% 3 mt 30 mt Coal: 1% BTU: 1 mt Coal: 47% all-fuels BT
Slide 16: JV Expected to Unlock Pre-Tax Synergies of ~$820 Million
JV Expected to Unlock Pre-Tax Synergies of ~$820 Million; Projected 10-Year Average Synergies of ~$120 Million Per Year • Integration projected to lead to substantial synergies, including: of mine planning Progress Update – Optimization and sequencing and accessing • Advancing regulatory otherwise i
Slide 17: Financial Approach
Financial Approach
Slide 18: Peabody Taking Aggressive Steps to Return Cash to Shareholders
Peabody Taking Aggressive Steps to Return Cash to Shareholders Highly active share repurchase program Target to return amount greater than 2019 free cash flow Third increase to quarterly dividend per share in just one year Periodic review of supplemental dividends Actions move Peabody closer to liqu
Slide 19: BTU Offers Significant Intrinsic Value; Results Superior to Benchmarks
BTU Offers Significant Intrinsic Value; Generating 2018 Results Superior to Benchmarks SG&A as a Adjusted EBITDA Return on TEV/EBITDA % of Revenue Margin Equity 11.4x 25% 22% 18% 17% 16% 14% 6.2x 13% 5.4x 9% 6% 2.6x 4% 3% BTU Coal & Consumable Fuels S&P 400 -8% S&P 400—Energy Source: CapitalIQ; Coal
Slide 20: Intends to Return to Shareholders Amount Greater Than Free Cash Flow
Financial Approach: Peabody Intends to Return to Shareholders Amount Greater Than Free Cash Flow in 2019 Investment Filters Cumulative Shareholder Returns ($ in millions) ✓ Strategic portfolio fit $1,506 ✓ Maintains financial strength ✓ Generates returns above cost of capital ✓ Provides a reasonable
Slide 21: Commitment to Shareholder Returns Brings Liquidity Closer to Targets
Commitment to Shareholder Returns Brings Liquidity Closer to Targeted Liquidity Levels; Operating at High End of Debt Range Debt & Liquidity June June • Reduced total liabilities since Change ($ in millions) 2017 2019 mid-2017 by ~$1.19 billion Unrestricted Cash $1,096 $853 ($243) – $550 million vol
Slide 22: Emphasis on ESG Complements Financial Approach
Peabody’s Emphasis on ESG Complements Financial Approach to Create Long-Term Value for Shareholders Environmental Social Governance • Restored 1.4 acres • Outperforms • Separation of CEO for every acre industry averages and Chairman disturbed in 2018 for safety • Independent and • Recycled/reused •
Slide 23: Peabody Holds Favorable ESG Position Among Peers in ISS Ratings
Peabody Holds Favorable ESG Position Among Peers in ISS Ratings Environmental Social Governance Lower Score represents Reduced Governance risk and Better Environmental 3 and Social Disclosure 2 8 5 7 5 6 1 5 7 9 2 7 2 5 1 3 1 2 2 1 Peabody Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Note: ISS Governan
Slide 24: Delivering Results, Generating Value
DELIVERING RESULTS GENERATING VALVE
Slide 25: 2019 Guidance Targets
2019 Guidance Targets Sales Volumes (Short Tons in millions) PRB 105 – 115 Quarterly SG&A Expense ~$40 million ILB 17.5 – 18.5 Full-Year Capital Expenditures $350 – $375 million Western 11 – 12 Full-Year DD&A $600 – $650 million Seaborne Metallurgical 9.4 – 10.4 Full-Year Interest Expense4 ~$150 mil
Slide 26: 2019 Guidance Targets (Notes)
2019 Guidance Targets 1 Peabody expects to realize ~80%-90% of the premium HCC quoted index price on a weighted average across its HCC products. 2 Approximately 40% of Peabody’s seaborne metallurgical PCI sales are on a spot basis, with the remainder linked to the quarterly contract. Peabody expects
Slide 27: Historical Seaborne Pricing ($/Tonne)
Historical Seaborne Pricing ($/Tonne) Time HCC – HCC – LV PCI – LV PCI – NEWC – API 5 –Period Settlement Spot Settlement Spot Prompt Prompt Q2 2019 $208 $203 $138.50 $125 $80 $57 Q1 2019 $210 $206 $141 $126 $97 $60 Q4 2018 $212 $221 $139 $128 $105 $63 Q3 2018 $188 $189 $150 $128 $117 $69 Q2 2018 ~$1
Slide 28: Advanced Technologies Offer Path for Significant Reduction in Emissions
Advanced Technologies Offer Path for Significant Reduction in Emissions from Coal-Fueled Generation CO2 Reduction Potential of Advanced Coal Technologies Subcritical CO2 Reduction 30% 1,116g CO2/kWh Supercritical ISOGO Power Station, Japan 21% kWh 38% 33% 881g CO /kWh Gas OCGT per 2 45% 40% 700 CO2/
Slide 29: Proven Access to Capital Markets Strengthens Financial Position
Proven Access to Capital Markets Strengthens Financial Position; Allows for Significant Cash Returns to Shareholders $500 million Second increase Third share Quarterly to quarterly increase repurchase dividend per dividend to quarterly program Quarterly share increased per share dividend authorized
Slide 30: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Apr. 2 through Quarter Ended Quarter Ended Jun. 30, 2017 Sept. 30, 2017 Dec. 31, 2017 Tons Sold (In Millions) Seaborne Thermal Mining Operations 4.6 5.2 4.8 Seaborne Metallurgical Mining Operations 2.0 3.5 4.0 Powder River Basin Mining Operations 28.5 33.7 31.8 Mi
Slide 31: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Quarter Ended Quarter Ended Quarter Ended Quarter Ended Year Ended Mar. 31, 2018 Jun. 30, 2018 Sept. 30, 2018 Dec. 31, 2018 Dec. 31, 2018 Tons Sold (In Millions) Seaborne Thermal Mining Operations 3.8 5.0 4.8 5.5 19.1 Seaborne Metallurgical Mining Operations 3.0 2
Slide 32: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Quarter Ended Quarter Ended Six Months Ended Mar. 31, 2019 Jun. 30, 2019 Jun. 30, 2019 Tons Sold (In Millions) Seaborne Thermal Mining Operations 4.5 4.7 9.2 Seaborne Metallurgical Mining Operations 2.3 2.1 4.4 Powder River Basin Mining Operations 25.3 25.0 50.3 M
Slide 33: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Apr. 2 through Quarter Ended Quarter Ended Jun. 30, 2017 Sept. 30, 2017 Dec. 31, 2017 Total Reporting Segment Costs (1) Summary (In Millions) Seaborne Thermal Mining Operations $ 133.3 $ 168.0 $ 164.6 Seaborne Metallurgical Mining Operations 215.9 272.8 317.4 Net
Slide 34: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Quarter Ended Quarter Ended Quarter Ended Quarter Ended Year Ended Mar. 31, 2018 Jun. 30, 2018 Se . 30, 2018 Dec. 31, 2018 Dec. 31, 2018 Total Reporting Segment Costs (1) Summary (In Millions) Seaborne Thermal Mining Operations $ 139.8 $ 159.8 $ 159.8 $ 187.8 $ 64
Slide 35: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Quarter Ended Quarter Ended Six Months Ended Mar. 31, 2019 Jun. 30, 2019 Jun. 30, 2019 Total Reporting Segment Costs (1) Summary (In Millions) Seaborne Thermal Mining Operations $ 156.3 $ 145.8 $ 302.1 Seaborne Metallurgical Mining Operations 238.7 233.5 472.2 Net
Slide 36: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Apr. 2 through Quarter Ended Quarter Ended Jun. 30, 2017 Sept. 30, 2017 Dec. 31, 2017 Reconciliation of Non-GAAP Financial Measures (In Millions) Income from Continuing Operations, Net of Income Taxes $ 101.4 $ 233.7 $ 378.0 Depreciation, Depletion and Amortizatio
Slide 37: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Quarter Ended Quarter Ended Quarter Ended Quarter Ended Year Ended Mar. 31, 2018 Jun. 30, 2018 Sept. 30, 2018 Dec. 31, 2018 Dec. 31, 2018 Reconciliation of Non-GAAP Financial Measures (In Millions) Income from Continuing Operations, Net of Income Taxes $ 208.3 $ 1
Slide 38: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Quarter Ended Quarter Ended Six Months Ended Mar. 31, 2019 Jun. 30, 2019 Jun. 30, 2019 Reconciliation of Non-GAAP Financial Measures (In Millions) Income from Continuing Operations, Net of Income Taxes $ 133.3 $ 42.9 $ 176.2 Depreciation, Depletion and Amortizatio
Slide 39: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Reconciliation of Non-GAAP Financial Measures (In Millions) Dec. 31, 2017 Dec. 31, 2018 Average Total Stockholders’ Equity $ 3,655.8 $ 3,451.6 $ 3,553.7 Jun. 30, 2017 Dec. 31, 2018 Mar. 31, 2019 Total Debt $ 1,957.1 $ 1,367.0 $ 1,361.7 Cash and Cash Equivalents 1,
Slide 40: Reconciliation of Non-GAAP Measures: Definitions
Reconciliation of Non-GAAP Measures: Definitions Note: Total Reporting Segment Costs; Adjusted EBITDA; Free Cash Flow; Net Debt; Return on Equity and Total Enterprise Value are non-GAAP financial measures. Return on equity is equal to income from continuing operations, net of income taxes, divided b
Slide 41: Reconciliation of Non-GAAP Measures: Definitions
Reconciliation of Non-GAAP Measures: Definitions (4)Includes gains (losses) on certain surplus coal reserve and surface land sales, property management costs and revenues and the Q1 2018 gain of $20.6 million on the sale of certain surplus land assets in Queensland’s Bowen Basin and the Q3 2018 gain