Peabody Energy Corporation

Good day, and welcome to the Peabody Q4 2024 Earnings Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Vik Shvek, Please go ahead.

Well, thank you, Operator, and good morning, everyone. Thank you all for joining today to take part in Peabody's fourth quarter conference call. Remarks today will be from Peabody's President and CEO, Jim Grech, CFO, Mark Sperbeck, and our Chief Marketing Officer, Malcolm Roberts. Following the remarks, of course, we'll open up the call to questions. Now, we do have some forward-looking statement information today's. And you'll find our statements on forward-looking info in the release. We do encourage you to consider the risk factors that we reference here, along with our public filings with the SEC. And I'll now turn the call over to Jim.

Thanks, Vic, and good morning, everyone. KeyBuddy had a strong finish to 2024 marked by a highly productive quarter that sets the foundation for multiple years of substantial growth and value creation. Consider that in the past three months, we turned in a solid fourth quarter results, even in the face of some geologic and pricing challenges. Shipped the first coal to market from the Centurion mine. Agreed to buy multiple premium hard-coking coal mines from Anglo-American. Entered into an agreement with clean energy leader RWE to develop renewable energy projects on reclaimed mine lands. Completed a year in which we returned $221 million to shareholders while continuing to reinvest in the business. Set a new 140 plus year company record for lowest accident rates. Reclaimed 70% more land than we disturbed while freeing up more than $100 million in reclamation bonding obligations. And again, achieved the top rating for governance by ratings firm ISS. We know of no other coal company that can cite that record of recent positive momentum. And while it is an impressive list, by no means can we say that we're hitting on all cylinders yet. Case in point, seaborne met coal prices are off 45% in the past year as we move through the low ebbs of the cycle with expectations of improvement later in the year. U.S. coal demand hasn't yet caught the uplift that can be expected from growing domestic power demand. which we believe will occur over time. And we've worked through geologic challenges at our 20-mile mine with increased production just now taking hold. I'll spend a moment updating you on our major actions to transform Peabody into a company focused on serving growing met coal demands at Asian steel mills. Late in the quarter, Peabody shipped its first coal from the Centurion mine to a Southeast Asian steel mill. We now have four continuous miners in coal and Centurion Southern District and expect two continuous miners to enter coal in the Northern District in the third quarter. For 2025, we're looking at half a million tons of development coal from Centurion, ahead of a projected 3.5 million tons in 2026, when longwall production in the Southern District begins. I'm also pleased to report that Peabody's planned acquisition of premium hard coking coal mines in Australia from Anglo-American is progressing well. Since signing the agreement, we've been active on a number of fronts. We've received regulatory approvals from several jurisdictions, advanced the contractual preemption process, started the permanent financing process, and have begun in-depth integration planning. We're now targeting completion of the acquisition next quarter, obviously subject to clearing the closing conditions. I'll remind investors of the many strategic and financial aspects that make this transaction so appealing. First of all, this positions Peabody as a leading seaborne met coal supplier. On a pro forma basis, we expect three-fourths of Peabody's EBITDA in 2026 to come from metallurgical coal. This is also an acquisition that we believe is accretive to cash flows across all periods. The transaction boosts both coking coal quality improving realizations and mine lives with averages of more than 20 years. Geographically, we will have the logistics advantage of having most of our met coal production and sales in the Pacific Rim as global steel production continues to shift to Asia. We are highly confident that there are some $100 million a year in synergies to be captured post acquisition. Finally, we believe that the strong cash flows of the acquired assets will accommodate continued shareholder returns and lead to a favorable re-rating of the stock. From the acquired mines, we're projecting 11.3 million tons of saleable production our first full year of ownership in 2026. Since our November announcement, our confidence in those numbers has only grown. For example, a number of operational improvements are being implemented by Anglo. And as we speak, the new long wall at Moran by North is being ordered. In a moment, I'll turn a call over to Malcolm Roberts, our chief marketing officer to talk through the global coal markets. As a lead in, I would note that the U S is experiencing the strongest confluence of policy and commercial tailwinds that we've seen in more than two decades. Consider these facts. First of all, After some 15 years of flat electricity load growth in the U.S., utility experts and industry observers are now expecting 2 to 3 percent annual load growth in coming years due to data centers and increased electrification. Second, following multiple years of premature retirements in coal fuel generation, we've now seen deferrals in retirement plans extending the lives of 51 coal units in 17 states constituting 26 gigawatts of power and up to power 20 million homes. Third, we have a new administration that is vocally pro-coal and is already taking steps to facilitate common sense policies to assist our utility customers while also encouraging greater exports of LNG to Europe. Fourth, we are seeing a favorable environment to increase utilization of existing coal plants. which ran at 72% of capacity on average early last decade, but most recently we're only averaging 42% utilization. And finally, we have new entrants into merchant power generation to look to change up the dynamics of recent years. Peabody itself has been approached by household name private equity funds that are looking for creative means to match up reliable, low-cost coal plants with growing data center needs. or backfill generation to feed a capacity-hungry grid. Having covered U.S. markets, Malcolm, I'll ask you to complete the discussion with Seabourn Supply Demand Dynamics. Thanks, Jim.