MLP Investor Conference March 9, 2006 Exhibit 99.2 |
Statements in this presentation which are not statements of historical fact are forward- looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current factual information and certain assumptions which management believes to be reasonable at this time. The Partnership’s actual current and future results, however, are dependent upon numerous factors outside the control of the Partnership. These factors, and other applicable risks and uncertainties that could cause actual results to differ materially from projected results, are described more fully in the Partnership’s public periodic and other reports filed with the Securities and Exchange Commission. Except as required by applicable securities laws, the Partnership undertakes no obligation to update any forward-looking statements at any time in the future. FORWARD-LOOKING STATEMENTS |
3 2006 MLP Investor Conference Alliance Resource Partners Overview ARLP Trading Information ARLP General Information ARLP is the nation’s only publicly traded master limited partnership involved in the production and marketing of coal ARLP produces a wide variety of steam coals from eight mining complexes located throughout the major eastern U.S. coal fields Visit us at www.arlp.com for more information ($ in million, except per share data) Ticker: ARLP Exchange: NASDAQ Total L.P. Units Outstanding (mm) 36.3 Management % of L.P. Units Owned 42.7% Unit Price at 3/1/2006 37.02 $ Market Capitalization 1,413.8 $ Net Debt Outstanding 124.8 $ Enterprise Value 1,538.6 $ 2005 Annual Distribution / L.P. Unit 1.58 $ 2005 Distributable Cash Flow / L.P. Unit 4.16 $ 2005 Distribution Coverage Ratio (a) 2.64 x Current Annual Distribution 1.84 $ Distribution Yield 4.97% (a) Coverage calculated as total cash available for distribution divided by current annualized cash distributions |
4 2006 MLP Investor Conference Alliance Resource Partners, L.P. Focused on Primary Business Objective – Create sustainable, capital efficient growth in distributable cash flow to maximize growth in distributions to ARLP unitholders |
5 2006 MLP Investor Conference Diversified producer and marketer of coal to major U.S. utilities and industrial users 2005 production of 22.3 million tons ranked ARLP as the fifth (a) largest eastern coal producer and eleventh (b) in the U.S. Currently controls approximately 549.0 million tons of proven and probable coal reserves in the Illinois Basin, Central Appalachia and Northern Appalachia regions Diversified Operations (a) Source: Platts Coaldat as of 9/30/05. (b) Source: National Mining Association, Mine Safety and Health Administration, company data, and Lehman Brothers estimates. |
6 2006 MLP Investor Conference Efficient Operations Source: Citigroup EBITDA margin represents EBITDA / Total Revenues. EBITDA is a non-GAAP measure. See Slide 25 for a reconciliation of EBITDA to Net Income. By maximizing existing assets ARLP has consistently delivered sector leading EBITDA margins 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% Alliance Foundation Consol Peabody Massey Arch Alpha 2003 2004 2005 |
7 2006 MLP Investor Conference Consistent Cash Flows ARLP’s product and geographic diversity provides strong and stable cash flow $70.5 $101.3 $110.3 $145.1 $193.6 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 $160.0 $180.0 $200.0 2001 2002 2003 2004 2005 |
8 2006 MLP Investor Conference Exceptional Long-Term Performance Production Revenues EBITDA Net Income Five Consecutive Years of Record Results - |
9 2006 MLP Investor Conference Solid Production Growth 18.0 19.2 20.4 22.3 24.5 0.0 5.0 10.0 15.0 20.0 25.0 2002 2003 2004 2005 2006E Production increased more than 9% in 2005 and is expected to grow more than 9% in 2006 With identified growth projects, ARLP is targeting annual production of up to 38 million tons by 2010 |
10 2006 MLP Investor Conference Strong Revenue Growth $499.9 $523.2 $623.5 $799.6 $910.0 - $930.0 $400 $500 $600 $700 $800 $900 $1,000 2002 2003 2004 2005 2006E Revenues have grown at a 17% CAGR since 2002 Future revenue growth potential enhanced by meaningful exposure to market pricing Tons of Coal Year (MM) 2006 1.65 2007 10.34 2008 16.62 Coal Sales Volumes Open to Market Pricing As of March 1, 2006 |
11 2006 MLP Investor Conference Strong EBITDA Growth EBITDA is a non-GAAP measure defined as income before net interest expense, income taxes and depreciation, depletion and amortization. See Slide 25 for a reconciliation of EBITDA to Net Income. EBITDA has grown at a 31% CAGR since 2002 and is expected to increase by up to 15% in 2006 $102.5 $119.0 $147.9 $230.1 $245.0 - $265.0 $50 $100 $150 $200 $250 $300 2002 2003 2004 2005 2006E |
12 2006 MLP Investor Conference Consistent Net Income Growth Net Income has grown at a 76% CAGR since 2002 and is expected to increase by up to 13% in 2006 $34.8 $47.9 $76.6 $160.0 $160.0 - $180.0 $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 2002 2003 2004 2005 2006E |
13 2006 MLP Investor Conference Solid Financial Position Significant financial capacity available for growth EBITDA is a non-GAAP measure defined as income before net interest expense, income taxes and depreciation, depletion and amortization. See Slide 25 for a reconciliation of EBITDA to Net Income. ($ in thousands) 2004YE 2005YE Cash and Securities 80,574 $ 81,296 $ EBITDA 147,889 $ 230,145 $ Interest Expense 14,963 $ 11,816 $ Senior Notes 180,000 $ 162,000 $ $85MM Credit Facilitiy - - Total Debt 180,000 $ 162,000 $ Total Capital 235,187 $ 317,777 $ Debt to Capital 76.53% 50.98% Market Capitalization 1,341,653 $ 1,355,059 $ Debt to Market Capitalization 13.42% 11.96% EBITDA / Interest Expense 9.88 x 19.48 x Total Debt / EBITDA 1.22 x .70 x |
14 2006 MLP Investor Conference With Strong Distribution Growth… 2002 2003 2004 $0.20 $0.25 $0.30 $0.35 $0.40 $0.45 $0.50 2005 Distributions to unitholders increased 24% in 2005 and 84% since the beginning of 2002 Compared to MLP Composite average annual distribution growth rate of 6% (a) (a) Source: Citigroup Investment Research |
15 2006 MLP Investor Conference ... And Industry-Leading Distribution Coverage 0.00 0.25 0.50 0.75 1.00 1.25 1.50 1.75 2.00 2.25 2.50 2.75 3.00 Alliance Pipeline Composite Propane Composite Others 2003 2004 2005(e) Source: Citigroup (9/21/05). Coverage calculated as total cash available for distribution divided by current annualized cash distributions. Note: Pipeline composite includes Buckeye, Enbridge, Energy Transfer, Kinder Morgan, Magellan, Northern Border, Pacific Energy, Plains All American, Sunoco Logistics, TC Pipelines, TEPP CO and Transmontaigne. Propane composite includes Amerigas, Ferrellgas, Inergy and Suburban. Others include Natural Resource Partners, Teekay LNG and US Shipping. 1.83 2.74 2.16 1.15 1.06 0.94 1.13 1.23 1.19 1.07 1.18 1.14 ARLP’s distribution coverage ratio of greater than 2.0x is the highest in the MLP universe |
16 2006 MLP Investor Conference -50 0 50 100 150 200 250 300 350 400 1/1/2003 6/15/2003 11/27/2003 5/10/2004 10/22/2004 4/5/2005 9/17/2005 3/1/2006 Indexed Total Return (%) ARLP Coal MLP Index Pipeline MLP Comps S&P 500 +271.6% +223.2% +78.2% Total Returns Since 1/1/2003 +46.6% ARLP has Delivered Superior Total Returns (a) Coal MLP Index includes NRP and PVR. (b) Pipeline MLP Index includes APL, BPL, BWP, DPM, XTEX, EEP, EPD, ETP, HLND, HEP, KMP, MMP, MWE, MMLP, NBP, PPX, PAA, SXL, TCLP, TLP, TPP, WPZ and VLI. __________________ (a) (b) Source: Lehman Brothers |
17 2006 MLP Investor Conference …and Remains Attractively Valued 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 Peabody Arch Consol Massey Alliance Foundation Alpha EV/2006E EBITDA (1) Peabody Arch Consol Massey Alliance Foundation Alpha Source: ARLP (1) EV represents Enterprise Value which reflects Market Capitalization plus Debt. Average EBITDA estimates from Thompson One Analysis for all companies, ARLP EBITDA adjusted for General Partner interests. EBITDA is a non-GAAP measure. See Slide 25 for a reconciliation of EBITDA to Net Income. |
18 2006 MLP Investor Conference 130 127 118 126 112 113 112 123 106 90.0 100.0 110.0 120.0 130.0 140.0 3Q 2003 4Q 2003 1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 U.S. Coal Inventories (a) 0.0 15.0 30.0 45.0 60.0 1980 1990 2000 2010 2020 2030 Historical and Projected Energy Consumption by Source (a) Petroleum Coal Gas Nuclear Renewable Hydropower __________________ (a) Source: Energy Information Administration. Favorable Coal Fundamentals Growing Domestic Demand for Coal Continued U. S. economic strength Electric power demand near all-time high and expected to grow ~ 2% annually through 2030 (a) Energy Policy Act of 2005 favors coal as fuel of the future New coal-fired power plants total ~ 174 GW by 2030 (a) Domestic Coal Supply Constraints Significant barriers to entry (permitting, regulatory compliance, etc.) Higher capital costs and extended mining equipment backlog Skilled labor shortages Ongoing transportation infrastructure issues Low Coal Stockpiles Inventory levels at 3Q’05 8% below prior year and 20% below five-year average (a) Favorable Export Dynamics Continued global expansion (China, India, U.S.) Lagging global supply response Challenges for Competing Fuels Nuclear utilization at full capacity Non-competitive oil and natural gas prices Continued challenges for LNG |
19 2006 MLP Investor Conference Significant High-Sulfur Market Dynamics Current and pending legislation has caused utilities to announce or plan to add scrubbers which should lead to additional market opportunities for the Illinois Basin and Northern Appalachian regions As utilities execute their environmental compliance initiatives, a significant amount coal demand historically supplied from the Central Appalachian region should switch to higher sulfur Illinois Basin and Northern Appalachian coal Scrubber Additions - Announced Planned |
20 2006 MLP Investor Conference Impact of Scrubber Installations Emphasis on sulfur content will diminish and coal purchasing decisions will be based on lowest delivered cost per MMBtu Transportation costs will play major role in determining ultimate amount of coal switching in the future As scrubber installations are completed – Illinois Basin & Northern Appalachia High-Sulfur Coals Will Benefit From These Changing Market Dynamics |
21 2006 MLP Investor Conference Recent coal sales agreement have solidified ARLP’s presence in the scrubber markets Allegheny Coal Sales Agreement • New 10 year, 20 million ton coal supply agreement commencing with initial production from Penn Ridge mine currently estimated in 2009 - 2010 • Penn Ridge to supply annually 2 million tons of scrubber quality high- sulfur coal for use in Allegheny’s power plants LG&E Coal Sales Agreement • New 6 year, 23.5 million ton coal supply agreement commencing January 1, 2007 with option to extend beyond primary term for additional 4 years and 16 million incremental tons • Alliance will ship annually up to 4 million tons of high-sulfur coal to LG&E VEPCO Coal Sales Agreement • New 7 year, 15.8 million ton coal supply agreement commencing January 1, 2007 • Alliance will ship annually ~2.25 million tons of medium-sulfur coal to VEPCO’s Mt. Storm Station ARLP Recent Positioning in Scrubber Markets |
22 2006 MLP Investor Conference ARLP has a number of significant, near-term development opportunities which could be financed with internally generated cash flow Tunnel Penn Gibson Elk Development Project: Ridge Ridge South Creek Status: Permitting in progress Inititating permitting process Permitting in progress Completing development Expected Development Capital: $200 million $165 million $83 million $68.8 million Anticipated Initial Production: 2009 - 2010 2009 - 2010 2008 - 2009 2006 Estimate Reserves (million tons): 70 55 83 33 Coal Quality: High Sulfur High Sulfur Medium Sulfur High Sulfur Estimated Annual Production Capacity (million tons): 6.0 5.0 3.1 2.0 in 2006 ramping to 3.8 in 2007 ARLP Future Positioning in Scrubber Markets |
23 2006 MLP Investor Conference ARLP Investment Highlights Diversified asset base with operations in all major eastern U. S. coal fields producing a wide variety of steam coals Proven track record of financial and operating performance and growth Demonstrated market performance Highest distribution coverage ratio in the MLP sector Stable coal industry fundamentals and robust growth dynamics for high-sulfur coal Visible inventory of growth prospects looking forward |
Questions and Answers * * * * * * * |
25 2006 MLP Investor Conference EBITDA Reconciliation EBITDA is defined as income before net interest expense, income taxes and depreciation, depletion and amortization. Management believes EBITDA is a useful indicator of its ability to meet debt service and capital expenditure requirements and uses EBITDA as a measure of operating performance. EBITDA should not be considered as an alternative to net income, income from operations, cash flows from operating activities or any other measure of financial performance presented in accordance with generally accepted accounting principles. EBITDA is not intended to represent cash flow and does not represent the measure of cash available for distribution. The Partnership's method of computing EBITDA may not be the same method used to compute similar measures reported by other companies, or EBITDA may be computed differently by the Partnership in different contexts (i.e. public reporting versus computation under financing agreements). ($ in thousands) Year Ended December 31, 2006E 2002 2003 2004 2005 Midpoint Cash flows provided by operating activities 101,306 $ 110,312 $ 145,055 $ 193,618 $ 250,000 $ Reclamation and mine closing (1,365) (1,341) (1,622) (1,918) (1,800) Coal inventory adjustment to market (48) (687) (488) (573) - Other 1,014 353 (255) (2,057) (1,000) Net effect of changes in operating assets and liabilities (13,714) (8,240) (12,405) 26,577 (5,700) Interest expense 16,360 15,981 14,963 11,816 10,700 Income taxes (1,094) 2,577 2,641 2,682 2,800 EBITDA 102,459 $ 118,955 $ 147,889 $ 230,145 $ 255,000 $ Depreciation, depletion and amortization (52,408) (52,495) (53,664) (55,637) (71,500) Interest expense (16,360) (15,981) (14,963) (11,816) (10,700) Income taxes 1,094 (2,577) (2,641) (2,682) (2,800) Net income 34,785 $ 47,902 $ 76,621 $ 160,010 $ 170,000 $ |
MLP Investor Conference March 9, 2006 * * * * * * * * |