Alliance Resource Partners, L.P. Alliance Holdings GP, L.P. Wachovia Capital Markets Pipeline & MLP Symposium December 9, 2008 Exhibit 99.2 |
Forward-Looking Statements Forward-Looking Statements 2 2 This presentation contains forward-looking statements and information that are based on the beliefs of Alliance Resource Partners, L.P. and Alliance Holdings GP, L.P. (the “Partnerships”) and those of their respective general partners (the “General Partners”), as well as assumptions made by and information currently available to them. When used in this presentation, words such as “anticipate,” “project,” “expect,” “plan,” “goal,” “forecast,” “intend,” “could,” “believe,” “may,” and similar expressions and statements regarding the plans and objectives of the Partnerships for future operations, are intended to identify forward-looking statements. Although the Partnerships and their General Partners believe that such expectations reflected in such forward-looking statements are reasonable at the time such statements are made, neither the Partnerships nor the General Partners can give assurances that such expectations will prove to be correct. Such statements are subject to a variety of risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, actual results may vary materially from those the Partnerships anticipated, estimated, projected or expected. The Partnerships have no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. |
Outlook for coal |
Macro Coal Dynamics Macro Coal Dynamics Liquidity Crunch Hedge fund deleveraging Financial coal traders exiting the market Reduced capital availability Instinct to preserve capital countered by…. Anticipated 2009-2010 cash flow surge Alternative energy investments Demand Destruction China, India and global economic slowdown Domestic energy consumption Natural gas competition mitigated by…. Base load nature of Coal Recessionary Pressures Hyperinflation has been arrested 4 4 |
Macro Coal Dynamics Macro Coal Dynamics Obama and a Democratic Congress Positives Acknowledged importance of Coal Generates ~50% of U.S. electricity 1 Employees hundreds of thousand of Americans Provides millions in tax revenues to coal states America’s most abundant low-cost fuel source Economic stimulus & commitment to U.S. jobs Infrastructure investments will increase energy demand Investment in Clean Coal technology Negatives Challenging legislative/regulatory landscape Climate Change – Cap & Trade? Structure? Union influence – Card Check New MSHA 5 5 (1) Energy Information Administration |
Domestic Coal Supply Outlook Domestic Coal Supply Outlook Short Term Supply – Will Be Lower Reduced investment capital & credit capacity Lack of equipment availability MSHA – productivity declines Permitting delays and litigation Labor shortages are still a factor High cost operations at risk International production constraints continue 6 6 Long Term Supply Governmental action Depletion of low cost reserves |
Domestic Coal Demand Outlook Domestic Coal Demand Outlook Short Term Demand – Lower Due to Worldwide Economic Downturn Met market Steel production cuts Coal prices – U.S. vs. Australian production U.S. currency value PCI market Steam coal Natural gas competition Stockpiles are normal? 7 7 |
Domestic Coal Demand Outlook Domestic Coal Demand Outlook 8 8 Long Term Demand Positives 29 new U.S. coal-fired power plants (16.5GW) under construction Plug-in Hybrids Economic stimulus programs – U.S. $700B / China $300B Met market will return U.S. currency will reverse BTU conversion – coal to gas / liquids Clean coal technology Negatives Climate change Renewable energy standard Conservation/energy efficiency – smart meters, save a watt programs… Natural gas competition – price/demand volatility, depletion, capital constraints (1) U.S. Department of Energy, “Tracking New Coal-Fired Power Plants”, June 2008 1 |
Summary – Summary – Domestic Coal Outlook Domestic Coal Outlook Despite challenges…. Coal has been and is best positioned to remain the Cornerstone of America’s Electric Energy Future 9 9 |
Outlook for Alliance |
Alliance Snapshot Alliance Snapshot Fifth largest coal producer in the eastern United States Eight underground mining complexes in all major eastern coal producing regions Four significant organic development projects in the growing Illinois Basin and Northern Appalachia coal markets Marketable coal reserves of ~ 713 million tons at 12/31/07 FY2008 estimated coal sales of 26.8 to 27.3 million tons and revenue of $1.03 to $1.1 billion 1 1 2 2 3 3 5 5 6 6 4 4 9 9 8 8 12 12 11 11 10 10 Illinois Illinois Indiana Indiana Ohio Ohio Pennsylvania Pennsylvania Maryland Maryland Virginia Virginia West West Virginia Virginia Kentucky Kentucky 7 7 Current Mining Operation Future Growth Project Transfer Terminal Pattiki Complex River View Complex Dotiki Complex Mount Vernon Transfer Terminal Warrior Complex Hopkins Complex Gibson Complex Pontiki Complex MC Mining Complex Tunnel Ridge Complex Penn Ridge Complex Mettiki Complex 3 3 4 4 1 1 2 2 5 5 6 6 7 7 8 8 9 9 10 10 11 11 12 12 11 11 |
Consistent Track Record of Distribution Consistent Track Record of Distribution Growth Growth ARLP has increased distributions 40% since June 2006 AHGP has increased distributions 81% since June 2006 Source: Public filings ARLP ARLP 12 12 AHGP AHGP $2.24 $2.34 $2.34 $2.64 $2.80 $2.00 $2.16 $2.16 $2.24 $1.25 $1.50 $1.75 $2.00 $2.25 $2.50 $2.75 $3.00 $1.06 $1.15 $1.15 $1.41 $1.56 $0.86 $1.00 $1.00 $1.06 $0.25 $0.50 $0.75 $1.00 $1.25 $1.50 $1.75 |
Strong Realized Coal Price Growth Strong Realized Coal Price Growth $20.00 $30.00 $40.00 $50.00 $60.00 2008(e) 2009(e) 2010(e) ` (1) Based on guidance from October 27, 2008 earnings release. For 2008, estimate reflects midpoint of guidance. For 2009 estimate, the guidance range reflects an increase of 25% - 35% over the midpoint of 2008 estimated pricing. For 2010 estimate, the guidance range reflects an increase of 40% - 50% over the midpoint of 2008 estimated pricing. Estimated Coal Sales Price/Ton (1) Strong Coal Sales Commitments $59.72 $55.74 $53.74 $49.76 $39.81 Committed and priced coal sales • 2009 ~ 90% • 2010 ~ 80% Executed agreements during 2008Q3 for 22.9 million tons • Terms up to 10 years • Prices 65% above historical levels 13 13 |
Alliance’s Long Term Growth Strategy Alliance’s Long Term Growth Strategy Capitalize on the expected strong demand growth in scrubber quality coal Continue to be a disciplined producer - project developments tied to sales commitments Continuous focus on safety and operational optimization Pursue opportunistic acquisitions 14 14 |
Large Inventory of Organic Growth Projects Large Inventory of Organic Growth Projects Permitting in progress Estimated capital cost ~ $265 – $285 million Estimated reserves ~ 70 million tons high sulfur coal Production capacity ~ 6 million tons/year Initial production in 2010Q4 Tunnel Ridge Initiating permitting process Estimated capital cost ~ $165 – $175 million Estimated reserves ~ 57 million tons high sulfur coal Production capacity ~ 5 million tons/year Initial production in 2011 – 2013 Penn Ridge Constructing slope and shaft Estimated capital cost ~ $250 – $275 million Estimated reserves ~ 117 million tons high sulfur coal Production capacity ~ 6.4 million tons/year Initial production in 2009Q4 River View Permitting in progress Estimated capital cost ~ $100 – $110 million Estimated reserves ~ 83 million tons medium sulfur coal Production capacity ~ 2.7 – 3.1 million tons/year Initial production in 2010 – 2012 Gibson South Illinois Illinois Indiana Indiana Ohio Ohio Pennsylvania Pennsylvania Maryland Maryland Virginia Virginia West West Virginia Virginia Kentucky Kentucky Note: Estimated capital costs are based on 2007 dollars and exclude capitalized development and interest expenses. Timing of anticipated initial production dependent upon obtaining required permits and customer contracts. 15 15 |
Strong Balance Sheet Strong Balance Sheet Strong Balance Sheet 16 16 Net Debt as Percentage of Capitalization 2003YE 2004YE 2005YE 2005YE 2006YE 2006YE 2007YE 92.1% 64.3% 34.1% 30.1% 32.5% Source: Public filings 24.1% 2008Q3 $350 million private placement of Senior Notes completed 06/26/08 • $205 million at 6.28% due 2015 • $145 million at 6.72% due 2018 Existing $150 million revolving credit facility expires in 2012 Liquidity of ~$380 million available at 2008Q3 Current debt obligation of $18 million Visible cash flow growth |
Alliance Resource Partners, L.P. Alliance Holdings GP, L.P. Wachovia Capital Markets Pipeline & MLP Symposium December 9, 2008 |