Peabody Energy Corporation · NYSE:BTU
Peabody Energy — Merrill Lynch Global Metals, Mining & Steel Conference 2006
31 slides from Peabody Energy's conference presentation, May 10, 2006
Slide 1: Merrill Lynch Global Metals, Mining & Steel Conference
Merrill Lynch Global Metals, Mining & Steel Conference NYSEBTU May 10, 2006
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 the Securities Act of 1933 and the Securities Exchange Act of 1934 and is intended to come within the safe-harbor protection provided by those sections. Our forward-lo
Slide 3: BTU: Premier Investment in Sector
BTU: Premier Investment in Sector Best leverage to rising markets from diverse portfolio Aggressive focus on safety and costs Future growth from new contracts at higher prices Unmatched reserve base feeds significant organic pipeline Global expansion into high-growth markets Major generation and Btu
Slide 4: BTU in Early Stages of Strong Growth from Higher Base
2001 2002 2003 2004 2005 2006 16 105.5 95 178 423 506 149 2001 2002 2003 2004 2005 2006 378 406.1 410.3 559 870 1000 150 BTU in Early Stages of Strong Growth from Higher Base 2001 2002 2003 2004 2005 2577 2717 2829 3632 4664 EBITDA In millions. Excludes discontinued operations and charges related to
Slide 5: Industry Overview
Peabody INDUSTRY OVERVIEW
Slide 6: World Events Drive Coal to Displace Oil & Gas
"Morales ordered soldiers to secure Bolivia's natural gas fields and installations..." - - Los Angeles Times 5/2/06 World Events Drive Coal to Displace Oil & Gas "In Nigeria, a quarter of oil production remained shut down due to militant violence." - - FX Street.com 5/5/06 "Crude oil prices broke th
Slide 7: Coal Resources Are Meeting Higher Than Expected Demand
Source: World Energy Outlook 2004, International Energy Agency. BP Statistical Review of World Energy, 2005. Global Energy Demand Million Tonnes of Oil Equivalent Coal Resources Are Meeting Higher Than Expected Demand Coal Growing 5 Times Faster Than Expected +52% +70% +146% +2,286% +57% +51% +89% +
Slide 8: Developing Countries Will Greatly Expand Per-Capita Energy Use
Electricity Usage per Capita Passenger Vehicles per Capita Per-Capita Coal Use Just 1/3rd (China) and 1/9th (India) the U.S. Level Developing Countries Will Greatly Expand Per-Capita Energy Use Source: United Nations' Human Development Report 2005, World Energy Outlook & ConocoPhillips.
Slide 9: Coal Demand in China, India and U.S. to Grow Nearly Billion Tons
Coal Demand in China, India and U.S. to Grow Nearly 3 Billion Tons Countries Served by BTU Customer Plants Served Peabody Mines Export Terminals +680 +315 +1,820 Growth in Total Annual Coal Demand 2002-2025 (Million Short Tons) +113 +19 Amounts in million short tons. Source: U.S. Department of Energ
Slide 10: Buildout of New Coal-Fueled Power Plants Has Started
Buildout of New Coal-Fueled Power Plants Has Started Source: U.S. Department of Energy, National Energy Technology Laboratory, March 20, 2006, multiple news sources; and Peabody data. 140 Planned U.S. Plants Represent 85,000 MW of Capacity Prairie State Energy Campus Washington County, Illinois An A
Slide 11: 1/1/1998 2/1/1998 3/1/1998 4/1/1998 5/1/1998 6/1/1998 7/1/1998 8/1/1998 9/1/1998 10/1/1998 11/1/1998 12/1/1998 1/1/19…
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Slide 12: Btu Conversion Technologies Further Expand Coal Markets
Btu Conversion Technologies Further Expand Coal Markets Gasification Gasification for industrial generation at $4 - $5/mmBtu Pipeline-quality gas as low as $6/mmBtu High oil prices point to need for coal-to-liquids Coal-to-liquids at $35 - $40/barrel oil Liquefaction Hydrogen Coal can produce H2 for
Slide 13: NCC Sees Coal Converted to Natural Gas, Other Energy Sources
Clean coal technologies are available to turn abundant U.S. coal into multiple energy forms including electricity, natural gas, transportation fuels and hydrogen By 2025, new capital investments of $515 billion (present value of $350 billion) in Btu Conversion technologies would create: 100 GW in ne
Slide 14: U.S. Coal Has Experienced Very Long Market Cycles
U.S. Coal Has Experienced Very Long Market Cycles Nominal dollars. Source: Bureau of Mines prior to 1949, EIA data 1949 - 2002. Peabody estimates 2003-2004. U.S. Bituminous Coal Prices Dollars Per Ton (logarithmic scale) 5 yrs 15 yrs 16 yrs ? 1900 1930 1920 1910 1940 1950 1960 1970 1980 1990 2000 20
Slide 15: Company Overview
Peabody COMPANY OVERVIEW
Slide 16: Peabody is the World's Largest Coal Company
Peabody is the World's Largest Coal Company Source: 2004 & 2005 company reports & websites and SEC filings. Values are on a short-ton basis. Reserves (tons in billions) Sales (tons in millions) Leading Sales and Reserve Position CNX
Slide 17: Peabody Best Positioned to Grow Shareholder Value
Peabody Best Positioned to Grow Shareholder Value Growth Fueled By... Executing the basics: safe, low-cost operations Capitalizing on organic growth opportunities Expanding into high-growth global markets Participating in new generation and Btu Conversion projects
Slide 18: Executing the Basics Improves Safety
Source: Peabody 2006; U.S. Department of Labor, Occupational Safety & Health Administration, 2004 Executing the Basics Improves Safety Peabody 2005 2.8 Peabody 2004 4.15 Wholesale 4.5 Leisure & Hospitality 4.7 Utilities 5.2 Retail 5.3 Coal Mining 5.6 Education & Health Services 5.8 Agriculture/Fores
Slide 19: Executing the Basics Improves Productivity
Executing the Basics Improves Productivity Rawhide Caballo North Antelope Rochelle Industry Average (Underground) Industry Average (Surface) 2005 data. Source: U.S. Department of Labor Mine Safety & Health Administration. Peabody Also Sets 2005 Production Records at 8 Mines Representing 60% of Volum
Slide 20: Peabody has the Leading Position in Coal's Strongest Markets
Peabody has the Leading Position in Coal's Strongest Markets Values represent 30-day moving average over-the-counter (OTC) prices per various broker sources for ratable delivery in subsequent calendar year. This is a thinly traded market for small quantities of coal. (Updated May 4, 2006.) Peabody i
Slide 21: Recent PRB Actions Reinforce Long-Term Growth
Recent PRB Actions Reinforce Long-Term Growth PRB price is double prior year despite: Transportation disruptions that hinder additional purchases Very mild winter weather Current shoulder months that ease spot pricing Softening of SO2 allowance prices Long-term growth profile continues to improve Mo
Slide 22: PRB Coal Remains a Bargain to Alternatives
PRB Coal Remains a Bargain to Alternatives Premium Powder River Basin Coal Central Appalachian Coal Imported South American Coal Oil Natural Gas Delivered Cost Per mmBtu to Southeastern U.S. Plant $2.22 $2.96 $3.55 $5.92 $7.50 Assumes non-coastal generating plant. PRB product with 8,800 Btu/lb. (0.8
Slide 23: Peabody will Benefit Most from Higher-Priced Contracts
Peabody will Benefit Most from Higher-Priced Contracts 2006 2007 2008 Dec. 31, 2005 8 75 140 5 - 10 70 - 80 135 - 145 Peabody Has Largest Volumes to be Repriced Unpriced tons of expected production at March 31, 2006.
Slide 24: Significant Revenue Growth from Price and Volume
Significant Revenue Growth from Price and Volume Powder River Basin 135 - 145 Price doubles from early 2005 1 billion tons of ultra-low sulfur coal acquired before price increases Developing 35 - 40 MTPY School Creek ultra-low sulfur mine Colorado 10 - 11 Prices more than doubled in two years Capaci
Slide 25: Substantial Organic Growth Pipeline
75 MTPY of Developments and Expansions by 2010 9.8 Billion Tons Create Substantial Organic Growth Pipeline COMPLETED UNDER CONSTRUCTION IN PERMITTING IN PLANNING
Slide 26: Btu Conversion Projects Expand Markets and Growth Opportunities
Btu Conversion Projects Expand Markets and Growth Opportunities Coal to Synthetic Gas (Industrial) 30% ownership in Econo-Power International PRB and Illinois Basin coal transformed into low-Btu syngas Coal to Natural Gas (Pipeline) Agreement with Arclight to evaluate Illinois location for pipeline-
Slide 27: Peabody's Energy Reserves Are Unmatched
Continental U.S. Proven Oil Reserves 121.5 184.9 Peabody's Proven & Probable Coal Reserves Continental U.S. Natural Gas Reserves ExxonMobil 160.2 108.3 Source: 2004 annual reports for selected energy companies, Energy Information Administration's U.S. Crude Oil, Natural Gas, and Natural Gas Liquids
Slide 28: Oil and Gas Receive Far Higher Valuations on a Btu Basis
Source: Company filings and reports. Market capitalization values per YahooFinance on May 3, 2006. Oil and Gas Receive Far Higher Valuations on a Btu Basis Market Capitalization on Btu-Equivalent Basis Williams Anadarko ChevronTexaco Apache Devon Chesapeake ExxonMobil Peabody
Slide 29: Significant Value Flowing to Btu-Rich Companies
Significant Value Flowing to Btu-Rich Companies Natural Gas Company 12 TCF gas equivalent 80% located within North America $35 billion purchase ~$3 per mmBtu implied value Goal: Narrow the Gap in BTU's Btu Valuation Peabody Energy 243 TCF gas equivalent 98% located within North America $12 billion m
Slide 30: BTU has Outstanding Outlook
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 EBITDA 381 406 410 559 870 1100 Earnings Per Share 0.1 0.98 0.865 1.375 3.15 4.25 Best record of results Most leverage to rising markets Expanding margins from safe, low-cost operations Major organic growth using leading reserves Global expansion Btu
Slide 31: NYSE: BTU May 10, 2006
NYSEBTU May 10, 2006 Merrill Lynch Global Metals, Mining & Steel Conference
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