Peabody Energy Corporation · NYSE:BTU
Peabody Energy — UBS 2008 Houston Energy Field Trip
34 slides from Peabody Energy's conference presentation, Aug 13, 2008
Slide 1: Peabody Energy UBS 2008 Houston Energy Field Trip
Peabody Energy UBS 2008 Houston Energy Field Trip August 13, 2008
Slide 2: Statement on Forward-Looking Information
Statement on Forward-Looking Information Some of the following information contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, and is intended to come within the safe-harbor protection
Slide 3: BTU: The Only Global Pure-Play Coal Investment
BTU: The Only Global Pure-Play Coal Investment Global coal demand exceeding supply both near term and long term Global coal prices strong and rising BTU: Major global leverage with higher volumes and repricing contracts World demand drives U.S. exports, Illinois Basin and PRB BTU: Major PRB and Illi
Slide 4: Coal Continues to be Fastest Growing Fuel
Compound Annual Growth Rate 0.6% 1.7% 2.9% 2.9% 5.1% Coal Continues to be Fastest Growing Fuel Global Coal Demand Grows 1.5+ Billion Tons in 6 Years Source: BP Statistical Review of World Energy, June 2008. Coal Natural Gas Hydro Oil Nuclear 2002 - 2004 35.15 19.02 18.93 10.53 3.51 35% 2001 - 2007 C
Slide 5: New Coal Plants to Increase Global Coal Consumption by ~1 Billion Tons
New Coal Plants to Increase Global Coal Consumption by ~1 Billion Tons China 101 354 India 80 280 Other Asia 46 160 Russia/FSU 28 98 U.S. 16 60 Europe 10 35 Africa 6 21 South America 6 21 Middle East 1 4 TOTAL 294 1,033 Nearly 300 GW of New Coal Plants Under Construction Country Plants (GW) Coal Gro
Slide 6: Key Nations Retain More Coal for Domestic Use and Strain Seaborne Markets
Key Nations Retain More Coal for Domestic Use and Strain Seaborne Markets INDONESIA Government likely to mandate that some coal stay home; 2008 exports stall after years of double-digit growth SOUTH AFRICA 45 million ton rebuild needed; "Short 100 million tons by 2017"; More coal to India and domest
Slide 7: China's Export Withdrawal Creates Structural Shift in Seaborne Markets
China's Export Withdrawal Creates Structural Shift in Seaborne Markets 2003 2004 2005 2006 2007 2008 Thermal Coal 72 68 46 25 2 0.01 Metallurgical Coal 11 0 0 0 0 0 Ongoing supply problems will limit exports Second-half 2008 export licenses still not issued Imports may be made exempt from 13% VAT ta
Slide 8: Top Coal Exporting Nations Not Keeping Pace With Growing Demand
Top Coal Exporting Nations Not Keeping Pace With Growing Demand Source: Barlow Jonker, Peabody Analysis. Venezuela Poland Kazakhstan Canada Vietnam China U.S. Colombia South Africa Russia Indonesia Australia 2002 - 2004 7 10 24 25 29 50 51 65 68 98 161 251 Indonesia S. Africa Russia Colombia China U
Slide 9: Structural Changes to Global Coal Markets Long Term in Nature
Structural Changes to Global Coal Markets Long Term in Nature Major growth in energy, coal use by emerging nations Global build-out of power plants Cost of competing fuels Peak oil concerns Weak dollar and inflation hedge Exporting nations requiring more coal for domestic use Deeper / thinning geolo
Slide 10: Peabody Energy: Key Growth Drivers
Global coal demand exceeding supply both near term and long term Global coal prices strong and rising BTU: Major global leverage with higher volumes and repricing contracts World demand drives U.S. exports, Illinois Basin and PRB BTU: Major PRB and Illinois Basin leverage with higher volumes and rep
Slide 11: Global Coal Markets Interconnected; Slack Quickly Taken from All Markets
Global Coal Markets Interconnected; Slack Quickly Taken from All Markets Central Appalachia (CAPP NYMEX) and Powder River Basin (PRB 8800) prices for calendar 2009 delivery. Newcastle and API4 (South Africa coal for delivery to Europe) pricing for prompt delivery. Updated July 25, 2008.
Slide 12: Peabody Energy: Key Growth Drivers
Global coal demand exceeding supply both near term and long term Global coal prices strong and rising BTU: Major global leverage with higher volumes and repricing contracts World demand drives U.S. exports, Illinois Basin and PRB BTU: Major PRB and Illinois Basin leverage with higher volumes and rep
Slide 13: BTU Advantage: 10+ MTPA of Australia Met Coal
2008 2009 2010 East 3 3 10.5 West 5.5 6.5 BTU Advantage: 10+ MTPA of Australia Met Coal Previously Priced Recently Priced Recently Priced Unpriced Unpriced Peabody's Met Coal Leverage 2007 Benchmark $98 $300 2008 Benchmark $ / Metric Ton High-Quality Hard Coking Coal Prices PLACEHOLDER PCI & Semi-So
Slide 14: BTU Advantage: 10+ Million Tons of Australia Met Coal Capacity
BTU Advantage: 10+ Million Tons of Australia Met Coal Capacity Millennium Mine interest acquired; ramping up to 3 MTPA Exploring North Goonyella / Eaglefield expansion Metropolitan Mine expanding long term to 2.5 MTPA Added rail / port throughput in 2010 with Goonyella- Abbot Point Expansion Conarco
Slide 15: BTU Advantage: Large, Growing Volumes of Australia Export Thermal Coal
2008 2009 2010 Previously Priced 6 2.5 1 Recently Priced 2.5 1.5 0 Unpriced 6 12 1/1/2007 1Q07 2Q07 3Q07 4Q07 4/1/2008 July 2008 East 51.95 53.93 70.03 78 89.75 125 180 BTU Advantage: Large, Growing Volumes of Australia Export Thermal Coal Previously Priced Recently Priced Recently Priced Unpriced U
Slide 16: BTU Advantage: Expanded Australia Thermal Coal Capacity
Wilpinjong Wambo North Wambo Wilkie Creek Chain Valley Brisbane Newcastle NCIG Queensland New South Wales BTU Advantage: Expanded Australia Thermal Coal Capacity Higher capacity through North Wambo and expanded prep plant Expanding Wilpinjong Mine to 9+ MTPA over time Major owner of new NCIG termina
Slide 17: Peabody Australia Capacity Potential
2007 2008 RESERVES POTENTIAL Queensland N. Goonyella / Eaglefield 2.4 2.5 - 3.0 45 To 4 - 6 MT Burton 3.2 2.5 - 3.0 33 To 4 MT Millennium 1.0 1.0 - 1.5 23 To 3.5 MT Wilkie Creek 2.4 2.3 - 2.6 344 To 3+ MT 9.0 9 - 10 New South Wales Wilpinjong 5.1 6.5 - 7.0 190 To 9 - 11 MT Wambo Complex 4.7 4.5 - 5.
Slide 18: Peabody Advantage: Leading Global Coal Trading Operations
Peabody Advantage: Leading Global Coal Trading Operations Operations Trading & Local Offices Countries Served Ports BTU Clean Coal Projects Coal Exports Domestic Sales St. Louis London Beijing Sydney
Slide 19: BTU Advantage: Global Platform Offers Growing and Diverse Earnings
BTU Advantage: Global Platform Offers Growing and Diverse Earnings 1st Qtr 2nd Qtr 1 99 2003 2003 and 2007 reflect actual results from continuing operations. International EBITDA Share Grows to 50% in 2008 1st Qtr 2nd Qtr 50 50 2008 United States International 1st Qtr 2nd Qtr 21 79 2007 $422 Million
Slide 20: Peabody Energy: Key Growth Drivers
Global coal demand exceeding supply both near term and long term Global coal prices strong and rising BTU: Major global leverage with higher volumes and repricing contracts World demand drives U.S. exports, Illinois Basin and PRB BTU: Major PRB and Illinois Basin leverage with higher volumes and rep
Slide 21: U.S. Exports Expected to Grow to 110 Million Tons in 2009
2006 2007 2008 2009 Export 49300 59300 87600 109600 Import 36000 36400 32000 31000 U.S. Exports Expected to Grow to 110 Million Tons in 2009 U.S. net exports growing >50 million tons between 2007 and 2009 U.S. inventories near or below targeted levels in all regions Peabody transactions: 7.4 million
Slide 22: International Markets Create Major Parity Price Opportunities
Recent API 2 (South Africa to Europe): $195 / tonne Implied Price at East Coast Port: $158 / ton Equivalent or "Parity Price" vs. Current Market (FOB Mine): Central Appalachia: $129 Parity v. $131 Market Northern Appalachia: $134 Parity v. $117 Market Backfill Equivalent vs. Current Market (FOB Mine
Slide 23: U.S. Utility Coal Inventories Likely Below Average For Remainder of 2008
U.S. Utility Coal Inventories Likely Below Average For Remainder of 2008 June 30 Stockpiles 52 Days in 2007 vs. 43 Days in 2008
Slide 24: Peabody Energy: Key Growth Drivers
Global coal demand exceeding supply both near term and long term Global coal prices strong and rising BTU: Major global leverage with higher volumes and repricing contracts World demand drives U.S. exports, Illinois Basin and PRB BTU: Major PRB and Illinois Basin leverage with higher volumes and rep
Slide 25: BTU Advantage: Peabody's Volumes Largely Reprice Every 3.5 Years
2007 2008 2009 2010 7.25 14 18.25 22.75 BTU Advantage: Peabody's Volumes Largely Reprice Every 3.5 Years OTC PRB 8800 Prices PRB moving as slack taken out of other markets Historically lags other regions 2010 published PRB prices >3x 2007 levels Peabody's total unpriced U.S. volumes: 2009: 35 - 40 m
Slide 26: BTU Advantage: Repricing Illinois Basin Contracts at Higher Levels
BTU Advantage: Repricing Illinois Basin Contracts at Higher Levels Spot prices double YTD in 2008 Benchmarks move from $30s to $60s / $70s Peabody: 32 MTPA of Illinois Basin production 3.7 billion tons of reserves Peabody in late-stage evaluation of new mine development
Slide 27: Natural Gas Prices Provide Significant Upside for Coal
Natural Gas Prices Provide Significant Upside for Coal Current Coal Prices Competitive at $6.60 - $7.90 Natural Gas Cal'09 pricing based on average MTD indices as of July 25, 2008.
Slide 28: Peabody Energy: Key Growth Drivers
Global coal demand exceeding supply both near term and long term Global coal prices strong and rising BTU: Major global leverage with higher volumes and repricing contracts World demand creating to the U.S., Illinois Basin and PRB BTU: Major PRB and Illinois Basin leverage with higher volumes and re
Slide 29: Cost Containment Actions Enable Margin Expansion in Strong Markets
Cost Containment Actions Enable Margin Expansion in Strong Markets Process Improvement Projects New Mine Efficiencies Newer surface mines (Wilpinjong, El Segundo) lower cost than existing mines Major Cost and Productivity Initiatives Safety Record 1.52 rate YTD Commodity Management Use of consumptio
Slide 30: BTU Advantage: Global Pipeline of Growth Opportunities
BTU Advantage: Global Pipeline of Growth Opportunities Cost / Quality Acquisitions / Exploration Organic Growth Caballo Truck/ Shovel NARM Dragline NARM Conveyor NARM Blending & Loadout Wambo Prep Plant Millennium Remaining 15% Startup Wilpinjong Startup Millennium North Wambo U/G Twentymile Prep Pl
Slide 31: Peabody: A Leader in Btu Conversion and Clean Coal Solutions
Peabody: A Leader in Btu Conversion and Clean Coal Solutions BTU is the only non-Chinese equity partner in GreenGen, China's centerpiece coal / climate initiative BTU partnering with ConocoPhillips on new coal-to- natural gas facility in Kentucky BTU has investment in GreatPoint Energy to develop co
Slide 32: BTU Advantage: Value Conversion as We Narrow the Energy Valuation Gap
Source: Company filings and reports. Market capitalization as of July 24, 2008. BTU Advantage: Value Conversion as We Narrow the Energy Valuation Gap Market Capitalization on Btu-Equivalent Basis
Slide 33: The New BTU: Near-Doubling of 2008 Earnings and Growth Beyond
2003 2004 2005 2006 2007 2008 EBITDA 422 496 709 909 963 1800 EBITDA (in Millions) Reflects results from continuing operations (unaudited). 2008 targets per July 23, 2008 earnings release. The New BTU: Near-Doubling of 2008 Earnings and Growth Beyond $422 2008 Target $1,600- $1,800 Excellent leverag
Slide 34: Peabody Energy UBS 2008 Houston Energy Field Trip
Peabody Energy UBS 2008 Houston Energy Field Trip August 13, 2008