Peabody Energy Q4 2024 Earnings Report

Peabody Energy EPS Results

• Actual EPS: $0.28
• Consensus EPS: $0.53
• Beat/Miss: Missed by -$0.25
• One Year Ago EPS: N/A

Peabody Energy Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $1.09 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Peabody Energy Announcement Details

• Quarter: Q4 2024
• Date: 2/6/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, February 6, 2025
• Conference Call Time: 11:00AM ET

Peabody Energy (NYSE:BTU) engages in coal mining business in the United States, Japan, Taiwan, Australia, India, Brazil, Belgium, Chile, France, Indonesia, China, Vietnam, South Korea, Germany, and internationally. The company operates through Seaborne Thermal, Seaborne Metallurgical, Powder River Basin, Other U.S. Thermal, and Corporate and Other segments. It is involved in the mining, preparation, and sale of thermal coal primarily to electric utilities; mining bituminous and sub-bituminous coal deposits; low sulfur and high British thermal unit thermal coal; and mining metallurgical coal, such as hard coking coal, semi-hard coking coal, semi-soft coking coal, and pulverized coal injection coal. The company supplies coal primarily to electricity generators, industrial facilities, and steel manufacturers. It also engages in marketing and brokering of coal from other coal producers; trading of coal and freight-related contracts, as well as provides transportation-related services. The company was founded in 1883 and is headquartered in Saint Louis, Missouri.

Peabody Energy Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good day, and welcome to the Peabody Q4 twenty twenty four Earnings Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Vic Shvec.

[Operator]

Please go ahead.

[Vic Svec, SVP, Global Investor and Corporate Relations at Peabody Energy]

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 and you'll find our statements on forward looking info in the release.

[Vic Svec, SVP, Global Investor and Corporate Relations at Peabody Energy]

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.

[Jim Grech, President and CEO at Peabody Energy]

Thanks, Vic, and good morning, everyone.

[Jim Grech, President and CEO at Peabody Energy]

Peabody had a strong finish to 2024, marked 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.

[Jim Grech, President and CEO at Peabody Energy]

Completed a year in which we returned $221,000,000 to shareholders, while continuing to reinvest in the business. Set a new one hundred and forty plus year company record for lowest accident rates. Reclaimed 70% more land than we disturbed, while freeing up more than $100,000,000 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.

[Jim Grech, President and CEO at Peabody Energy]

Case in point, seaborne met coal prices are up 45% in the past year as we move through the low adds 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.

[Jim Grech, President and CEO at Peabody Energy]

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 in 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 500,000 tons of development coal from Centurion ahead of our projected 3,500,000 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.

[Jim Grech, President and CEO at Peabody Energy]

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.

[Jim Grech, President and CEO at Peabody Energy]

On a pro form a 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 twenty 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 $100,000,000 a year in synergies to be captured post acquisition.

[Jim Grech, President and CEO at Peabody Energy]

Finally, we believe that the strong cash flows of the acquired assets will accommodate continued shareholder returns and lead to a favorable rerating of the stock. From the acquired mines, we're projecting 11,300,000 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 longwall at Moranbah North is being ordered. In a moment, I'll turn the call over to Malcolm Roberts, our Chief Marketing Officer to talk through the global coal markets.

[Jim Grech, President and CEO at Peabody Energy]

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 fifteen years of flat electricity load growth in The U.

[Jim Grech, President and CEO at Peabody Energy]

S, Utility Experts and industry observers are now expecting 2% to 3% 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 and retirement plans extending the lives of 51 coal units in 17 states constituting 26 gigawatts of power and up to power 20,000,000 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 and look to change up the dynamics of recent years.

[Jim Grech, President and CEO at Peabody Energy]

Peabody itself has been approached by household name private equity funds, but are looking for creative means to match up reliable, low cost coal plants with growing data center needs for backfill generation to feed a capacity hungry grid. Having covered U. S. Markets, Malcolm, I'll ask you to complete the discussion with seaborne supply demand dynamics.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

Thanks, Jim. You've given a good overview of U. S. Policy and market trends. Those trends along with strong winter weather have drawn down stockpiles at our mines and at our customers.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

Our U. S. Thermal coal production is largely spoken for during the first half of the year and we expect to see our customer base come to market for additional volumes as the year progresses. In our discussions with customers, they are anecdotally confirming that the narrative of data centers driving electricity demand growth is real. Now I'll turn to what we're seeing in global seaborne markets starting with met coal.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

Near term seaborne met markets remain well supplied as the Chinese domestic economy remains soft. China's apparent steel consumption declined by approximately 5% in 2024 to just under 900,000,000 tons, leading to net steel exports to increase by 30% to the highest level since 2015. Another way of viewing steel from our perspective is its refined metallurgical coal. So China's strong steel exports translated into otherwise weaker met coal demand elsewhere. Steel production outside of China has remained largely steady as a result of growth in India.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

However, margins have become challenged. Like most observers, we don't view China as the growth engine for met coal demand growth over time though. That role is likely to be played by India and in 2025, we expect an 8% increase in Indian steel production underwritten by several new blast furnaces coming online. From a supply perspective, we're seeing some tightness in the premium low volt PCI segment. In the coking coal segment, there have been notable disruptions in high volt coking coal production, including mine fires and bankruptcies.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

That is partially offsetting some of the easing of demand from Atlantic fires. Longer term, we anticipate the demand and supply fundamentals to drive increasing price spreads between premium hard coking coals and lesser grades, which of course is a thesis underpinning the development of the Centurion mine and our premium hard coking coal acquisition. Turning to seaborne thermal markets. To wrap up 2024, China increased total coal imports to five forty three million metric tons, a 14.4% increase from 2023. China's imports of Australian coal increased by over 50% during the same period.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

The increase in Chinese imports was the key contributor to global seaborne demand growth during 2024. Within the global seaborne thermal market, we've seen a mix in the Northern Hemisphere of colder weather in The Atlantic and warmer winter weather in Asia. Recent demand for imports have been mixed with stockpiles in jurisdictions such as China and India higher than normal. Attention is now turning to industrial activity following Lunar New Year breaks in China and Asia more generally in coming weeks. As the year progresses, we'll see how Europe restocking of natural gas may influence LNG pricing and the relative competitiveness of Australian high energy coal.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

We'll also observe how recently announced trade tariffs influence seaborne trade flows as relative price competitiveness of U. S. Coal exports to China are likely impacted. That's a brief review of the coal market dynamics. I'll leave it there for now and welcome the opportunity to provide further details in Q and A.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

And now I'll turn the call over to Mark.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

Thanks, Malcolm, and good morning. Jim noted our strong finish to the year, and I'll provide some additional color. In the fourth quarter, we recorded net income attributable to common stockholders of $31,000,000 or $0.25 per diluted share and adjusted EBITDA of $177,000,000 The company generated $121,000,000 of operating cash flow from continuing operations. This contributed to a full year net income attributable to common stockholders of $371,000,000 and adjusted EBITDA of $872,000,000 The company generated $613,000,000 of operating cash flow from continuing operations. In 2024, we returned $221,000,000 to shareholders through share repurchases and dividends and advanced Centurion through its first coal shipment in the fourth quarter.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

I would note, since restarting our shareholder return program, we've returned $600,000,000 to shareholders and invested $500,000,000 in the development and expansion of Centurion. At December 31, Peabody had $700,000,000 of cash and available liquidity of $1,100,000,000 and our reclamation obligations remain fully funded. We believe this financial strength and balanced capital allocation will best reward our shareholders over time. They also position Peabody for the Anglo acquisition, marking a deliberate progression in Peabody's financial and strategic transformation. Looking ahead, Peabody's capital allocation will be heavily shaped by our pending acquisition.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

As a reminder, we have structured the transaction with a combination of upfront, deferred and contingent payments. This is all designed to enable the anticipated cash flows from the acquired assets to self fund the transaction and set up a higher baseline for sustainable shareholder returns. Let's now review the segment results. In the fourth quarter, Seaborne Thermal recorded $112,000,000 of adjusted EBITDA on margins of 36%. Tons shipped were ahead of expectations and that was primarily due to higher than anticipated production at Wambo Underground.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

Seaborne thermal cost per tonne remained stable with the third quarter beating expectations. For the full year, the Seaborne Thermal segment reported $430,000,000 of adjusted EBITDA. Shipments increased nearly 1,000,000 tons from 2023 and costs were down about $1 per ton, resulting in EBITDA margins of 35%. The segment generated over $350,000,000 of free cash flow. The Seaborne Met segment reported $23,000,000 of adjusted EBITDA in the fourth quarter.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

Shipments increased 500,000 tons compared to the third quarter, in line with expectations. Cost per ton improved by a better than expected 12% due to higher than anticipated production at Shoal Creek as well as a weaker Australian dollar. This was partly offset by lower production at Capobella. The average realized price was down about $21 per tonne compared to last quarter due to a higher mix of Shoal Creek sales. We also saw benchmark prices for PCI and high vol A coals each down about $15 a ton quarter over quarter.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

For the full year, the Seaborne Met segment reported $243,000,000 of adjusted EBITDA. Shipments increased 400,000 tons year over year to $7,300,000 dollars The segment achieved EBITDA margins of 15%, a favorable result considering that market prices pushed realizations down $44 per ton in the year. Switching to U. S. Thermal, the mines generated $93,000,000 of adjusted EBITDA in the fourth quarter and that resulted in $72,000,000 of free cash flow.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

PRB mines shipped 23,000,000 tons well ahead of expectations. Continued operational discipline kept costs at $11.5 per ton, the same as last quarter and that let us maintain the same 17% margins in the fourth quarter and generate $53,000,000 of adjusted EBITDA. The other U. S. Thermal mines delivered $41,000,000 of adjusted EBITDA.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

In the Midwest, we reached contractual agreements with certain customers to offset lower twenty twenty four shipments. Production was 200,000 tons less than expected as the previously disclosed geological conditions at 20 Mile required us to step the longwall around a rock lens. We've turned the corner on that issue and longwall production recently resumed with the mine set for a strong 2025. Together, The U. S.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

Thermal mines produced $289,000,000 of adjusted EBITDA in 2024 and required just $54,000,000 of capital resulting in $235,000,000 of free cash flow. The last comment I'll make on Q4 results relates to other operating costs. We recorded a $41,000,000 non cash charge for the remeasurement of our Australian balance sheet at year end due to a lower A dollar exchange rate. The weaker Australian dollar benefited operating costs throughout the quarter, providing a bit of a built in natural hedge to earnings. But as the $8 weakened throughout the quarter, the period end remeasurement resulted in a significant net negative impact to Q4 EBITDA.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

Looking ahead to 2025, I'll briefly review guidance for the full year. We see that some analysts are including the Anglo acquisition in their 2025 estimates for Peabody, but our guidance excludes contributions until the transaction is complete. This year, seaborne thermal volumes are expected to be lower than 2024 due to reduced production at Wilpignon and the closing of the Wambo underground mine mid year, which will be partly offset by higher production from Wambo's surface operations. Additionally, domestic cost plus sales requirements are down another 400,000 tons in 2025, allowing us to achieve export pricing on that volume. Shipments are targeted to be 14,700,000 tons including 9,300,000 export tons.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

Costs are projected to be consistent with 2024 levels at 47 to $52 per ton. Seaborne Metallurgical volumes are projected to increase over 1,000,000 tons to $8,500,000 primarily due to higher volume at Shoal Creek and the continued ramp up at Centurion. This occurs even as we work through the high wall stability challenges at Capobella as we reconfigure the mine for an optimal long term solution. Segment costs are targeted at $120 to $130 per ton in line with last year. In the PRB, we are forecasting shipments between 150,000,000 tonnes and currently have 71,000,000 tonnes priced at $13.85 Costs are expected to remain mostly flat with twenty twenty four levels at $12 to $12.75 per ton.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

Other U. S. Thermal volumes are expected to be about 14,000,000 tons. We have 13,600,000 tons priced at $52 and expect cost in the range of $43 to $47 per tonne, consistent with last year. Total capital expenditures for 2025 are estimated at $450,000,000 including $280,000,000 in project capital, primarily for the continued development of Centurion.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

In summary, we delivered on our 2024 goals. We remain committed to financial discipline and growing free cash flow per share. 2025 promises to be a busy year that will be shaped by the Anglo acquisition, advancing Centurion and U. S. Policy.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

For more on that, I'll turn

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

the call back to Jim.

[Jim Grech, President and CEO at Peabody Energy]

Thanks, Mark. I'll turn briefly to Peabody's main focus areas for the New Year. It's fair to say that we begin 2025 with an ambitious agenda. Our first focus is an every year item, the relentless pursuit of safe, productive and environmentally sound operations.

[Jim Grech, President and CEO at Peabody Energy]

Our second focus this year is to continue to ramp up the flagships and turning mine on time and on budget. I'm pleased to report that development is running ahead of schedule and all systems are go for our planned longwall startup early next year. Our third priority is to complete our premium heart coking coal acquisition, which together with Centurion will transform Peabody's product and financial profile. Priority number four is to serve growing Asian thermal coal demand to our low cost Australian export platform with longer term mine extensions teed up. It's no surprise that the International Energy Agency recently reported that last year the world used a record amount of coal, 8,770,000,000 metric tons, representing more than one ton for every man, woman and child on earth.

[Jim Grech, President and CEO at Peabody Energy]

IEA also projects that global coal use will continue to grow for the next several years. Our fifth priority is to leverage our low cost U. S. Coal production to capitalize on emerging favorable policy and commercial themes and that dynamic continues to unfold as we speak. And finally, we work every day to enhance long term cash flow per share creation.

[Jim Grech, President and CEO at Peabody Energy]

While the actions we're undertaking today are enhancing our shareholder value proposition in three areas earnings growth, sustainable shareholder returns and multiples expansion over time. And it's fair to say that our share price is reflecting none of the potential uplift in valuation from our recent actions. I've never been more optimistic about the prospects for Peabody and look forward to seeing those positive actions translate into tangible share price appreciation as we continue to execute. Operator, we're now ready to take questions.

[Operator]

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, First question comes from Nick Giles with B. Riley Securities.

[Operator]

Please go ahead.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Thank you, operator. Good morning, everyone. My first question is around the preemption rights process. I was wondering if you could add any color around what those conversations have looked like and I had the same question for any potential stake sale. Is there a preference for incremental stakes in the Anglo assets versus any stake at Centurion?

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Thank you very

[Nick Giles, Senior Research Analyst at B.Riley Securities]

much.

[Jim Grech, President and CEO at Peabody Energy]

Hey, Nick. Good morning. Jim Grech here. On the preemption question that is part of any sales process, it's a typical contract term when you have joint venture partners.

[Jim Grech, President and CEO at Peabody Energy]

It's progressing well. The timeline for the deadlines on that is sometime in mid March. We expect that to the deadline to come and pass and we'll move forward with the closing of the transaction. On the asset sales, could you again ask that question again, so I'm sure we respond to it correctly?

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Yes. Thanks, Jim. That's very helpful. And just on the asset sales, I was wondering if there would be a preference for additional stakes at the Anglo assets versus one at Centurion?

[Jim Grech, President and CEO at Peabody Energy]

Nick, we would if anybody if the discussions lead to fair value, full value offers on the asset sales, we'd look at some minority sales in those assets, whether it's with the Anglo assets or Centurion. So we are anticipating that to be part of the financing process that we have here for the acquisition and some of those steps have been undertaken already. And but it's too early to call what if any would be the results of that.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Got it. Jim, that's very helpful. Shifting gears, met guidance of 8,500,000 tons at the mid point. I assume around 500,000 tons could come from Centurion, but how should we think about bridging from the 2024 level to 2025 guidance? And then similarly on the cost side, costs are up at the midpoint versus 2024.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

So how should we bridge those as well? Thank you very much.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

Good morning, Nick, and welcome to the calls. I read your note this morning and you look like your model was perfect. So congratulations, I think you're doing a better job than Lucas already in your first call. But I say that tongue in cheek, I'm sure Lucas is listening in. So to answer your question on seaborne met, you're right, we're up over 1,000,000 tons and about 400,000 to 500,000 more year over year as that Centurion.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

Shoal Creek is also up about 600,000 tons. So that's the delta there. As far as costs go, we are forecasting $120,000,000 to $130,000,000 full year $2,024,000,000 dollars was $123,000,000 so pretty consistent. I'd say there's two things that may lead it to be a bit higher and that is one, as I mentioned in my remarks, we're resetting Capobella for optimal long term solution. We're going to be moving more ways, about 6,000,000 bank cubic meters more year over year.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

And don't forget, we had a pretty weak Aussie dollar as well in 2024.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Mark, I appreciate all the color. To you and the team, continue best of luck.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

Thank you.

[Operator]

Next question comes from Nathan Martin with The Benchmark Company. Please go ahead.

[Nathan Martin, Senior Research Analyst at The Benchmark Company LLC]

Thanks, operator. Good morning, everyone.

[Jim Grech, President and CEO at Peabody Energy]

Good morning, Nathan.

[Nathan Martin, Senior Research Analyst at The Benchmark Company LLC]

Maybe just one more question on the Engle acquisition. You guys mentioned several regulatory approvals have come already. What's left? Anything there from the standpoint that could hold you guys up beyond that targeted 2Q closing?

[Jim Grech, President and CEO at Peabody Energy]

Yes, Nate, we've had some in and the rest are in process and the various international ones and I think we have one left in Australia. The initial indications is everything is going just fine with them and the timing on those regulatory approvals is anywhere from later in February to maybe March, first week of April. So it spans that timeframe. So, just like with the pre emptions, we just got to work through the process. There's a timeframe involved.

[Jim Grech, President and CEO at Peabody Energy]

We're stepping through it and right now everything looks good to us, Nate.

[Nathan Martin, Senior Research Analyst at The Benchmark Company LLC]

Okay. Sounds good, Jim. And then maybe coming back to the preemptions or really just the minority interest sales, does your preference changed at all? Or how should we think about the balance between minority interest sales and debt for the transaction?

[Jim Grech, President and CEO at Peabody Energy]

Well, I'll just have a comment on the sales process and then I'll let Mark get to some of the details. But as I said, we started the beginning of looking at potential minority sales positions in the Anglo assets and Centurion And we've had some very robust interest in the assets coming from many different sectors in U. S, Australia and international. So again, I'm not going to sit here and predict what's going to happen because everything's in negotiation, but I will say that's been very robust interest at the beginning here of this process.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

Nate, not a lot has changed from when we announced the transaction and our plans for the permanent financing. The $1,700,000,000 upfront payment, we expect to be funded primarily with debt, the lion's share being high yield secured notes. We've talked about the project level equity, the minority stake sales as being another key option there. And as Jim mentioned, those discussions are underway. The timing as well as magnitude of those sell downs become factors here.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

And then lastly, we'd potentially round out with convertible notes or other financing. So not a lot's changed. I will say that that process is underway. It's going well in the early stages. There's strong inbound interest.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

We continue to test market capacity and we're highly confident that we'll arrange the financing along the lines we originally announced.

[Nathan Martin, Senior Research Analyst at The Benchmark Company LLC]

And Mark, any commentary around potentially needing to issue common equity? I know that's a question investors are focused on.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

Yes. I'd probably I'd echo Jim's comments that reflect our belief that a lot of the value in Peabody and the pending acquisition are not currently reflected in our share price. Unfortunately, we don't get to pick the time when these types of assets become available and we recognize spot coal prices are down, but we didn't buy these multi decade assets for short term changes in spot prices, which can influence the coal equities. Our number one goal remains to enhance shareholder value and you do that by increasing free cash flow per share. When we simulate free cash flow out of the acquisition, our P50 case without Grosvenor results in over $800,000,000 of free cash flow in the initial five years after all of the deferred and price contingent consideration, effectively paying one half of that initial consideration off, leaving us with a very manageable permanent debt slice of the capital stack and a significantly higher free cash flow base to provide sustainable shareholder returns.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

So we recognize the need to appreciate the volatility in seaborne coal prices and remain prudent to ensure financial resiliency throughout the price cycle so we can execute the strategy. The coal equities have all traded down since the announcement and we're going to take a good hard look at it. It's the last on our priority list, but we have all the tools in the kit and we continue to assess what the market

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

will provide.

[Nathan Martin, Senior Research Analyst at The Benchmark Company LLC]

Great. Appreciate those thoughts guys. And then maybe just one final, but I want to leave Malcolm out. I know you touched on this briefly in your prepared remarks, but coming back to China's new 15% tariff on U. S.

[Nathan Martin, Senior Research Analyst at The Benchmark Company LLC]

Coal imports, obviously the bulk of Peabody's export sales come from Australia, but how do you see that tariff potentially impacting your business as well as the seaborne markets in general?

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

Yes. Look, one thing with the markets is they're a little bit like a balloon. If you push something in one spot, it comes out somewhere else. And so, U. S.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

Exports are getting pushed here in terms of their price competitiveness into Asia. And for us, we've got about 600,000 tons of product that went to China last year. And that would mean that if we did nothing and continued supplying to China, we'd have a 15% lower price. And it really doesn't help when that's the clearing level and that's your alternative because other customers now, when you look to sell to them in Asia, we'll be looking at what that alternative is. It's positive for Australia in the sense that Australia becomes more and more competitive in Asia, which is the growth base for met coal demand.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

But for us, it's probably not such a big issue. I would have liked not to have seen this happen. But look, the markets will readjust, maybe there may be more product go to U. S. Product go to India and more Australian product go to China to balance that out or more U.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

S. Product to Europe and less Australian product to Europe. The market will work that out. But to deal with that, we need some cross signals and the cross signals to make that readjustment could be a little bit painful in terms of our Shoal Creek returns over the next quarter or so. But look, let's wait and see how it all plays out, but hopefully it's giving you more perspective on it.

[Nathan Martin, Senior Research Analyst at The Benchmark Company LLC]

That's great. And just to clarify, Malcolm, the 600,000 tons to China, is that from Shoal Creek you're referring to specifically?

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

Yes, that's Shoal Creek.

[Nathan Martin, Senior Research Analyst at The Benchmark Company LLC]

Okay, got it. Appreciate the time guys and best of luck in 2025.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

Thanks, Nate.

[Operator]

Next question comes from Katya Janchik with BMO Capital Markets. Please go ahead.

[Katja Jancic, Analyst at BMO Capital Markets]

Hi. Thank you for taking my questions. Maybe going back to the met coal cost guide, can you talk a bit more about how much Capobela is negatively impacting costs? Because I would assume with production higher in general and met coal prices lower, that costs should still be trending more positively or lower?

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

Katya, two things. One, for Q1, we're guiding a little bit higher than the full year on a rateable basis. Q4 returned in much better than expected and anticipated at only 113. But we think that Q1, we know will be impacted by a longwall move at Shoal Creek, so a little bit higher than ratable in Q1. For the full year, we've put our guidance at 120 to $130,000,000 20 20 4 million dollars came in at $123,000,000 As I mentioned before, it's really just moving those additional 6,000,000 BCMs and the really weak A dollar throughout 2024, particularly in the back half of the year, that's driving the difference.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

Otherwise, we see them pretty consistent. And really, we don't see any significant inflation or other issues. So that's really the story. Does that help?

[Katja Jancic, Analyst at BMO Capital Markets]

No, that's helpful. Thank you. And then maybe there were some reports that Dalrempel Port was impacted by weather. Are you seeing any impact from that quarter to date? And is are there any issues with production given the weather currently in Australia?

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

Hi, Kashuv, Malcolm here. Look, this is pretty normal. A monsoonal trough has come over Queensland probably ten days ago and moved from the North Of Queensland to the South. And so over the past week, Durranpur Bay has received around 400 millimeters of rain and most of the rain has remained coastal. What that means is that the ability to stack coal or reclaim coal when it's very wet with rain is very limited.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

So there has been outages at the port and there has been like a, let's call it a seven day interruption, but I view that as very short term. In terms of our mines, we've had a little bit of seasonal rain there, but nothing that's created a remarkable interruption at this stage.

[Katja Jancic, Analyst at BMO Capital Markets]

Okay. Thank you.

[Operator]

Our next question comes from Chris Lefebvrena with Jefferies. Please go ahead.

[Christopher LaFemina, Equity Research Analyst at Jefferies & Company Inc]

Thanks, operator. Hey, guys. Thanks for taking my question. So I wanted to ask about the thermal coal segments. If we look at the 2025 guidance, it's basically lower volumes and probably lower margins.

[Christopher LaFemina, Equity Research Analyst at Jefferies & Company Inc]

I mean, costs are flattish and prices are going to be down. I think costs in the PRB actually expect it to be up. But I wanted to kind of understand where the thermal segments will be heading after 2025. So it's helpful that we have given us met coal guidance for 2026 on costs and obviously on volumes as well. But where is thermal coal heading?

[Christopher LaFemina, Equity Research Analyst at Jefferies & Company Inc]

Because seaborne thermal volumes have been heading lower, PRB obviously heading lower. And it's hard to offset the negative impact of fixed cost leverage when you have declining volumes. So we're looking at thermal coal business that's going to have a flat to rising cost base and declining volumes and then the EBITDA upside really just depends on higher prices or is there anything else going on there that could lead to margin expansion and EBITDA growth without prices going up?

[Jim Grech, President and CEO at Peabody Energy]

Yes, Chris. I'll comment on The U. S. Platform and then Mark and maybe Malcolm can give you some comments on the Australian platform. On The U.

[Jim Grech, President and CEO at Peabody Energy]

S. Platform, the PRB tonnages, we have the ability to move those tons up and down. And some of the forecasts that you see maybe were pre all of the momentum we're getting currently here within the last few months in The U. S. Market with the Trump administration, the strong push for reliability and keeping coal plants open, the load growth.

[Jim Grech, President and CEO at Peabody Energy]

And so in The U. S, if the market demands are there, which we think those tailwinds are certainly getting much, much stronger, we can certainly respond with the tonnages in the PRB. Of course, we'll also maintain some pricing discipline on that as well-to-do that. So in The U. S, I would say the tonnages that you see any decreases made are based on market assumptions and not the physical asset base.

[Jim Grech, President and CEO at Peabody Energy]

So with that, I'll let the other guys talk about the Australian platform some.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

Yes. Good morning, Chris. Just briefly on seaborne thermal, we're down this year, year over year. And we kind of talked a bit about this last quarter, but just to reemphasize, I mean, we pulled about 200,000 tons forward at the WAMO underground in the fourth quarter and really beat Seymour and Thermo in the fourth quarter. We've already announced that that underground will cease operations mid year.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

So we're going to be down about 800,000 tons year over year at the Wambo underground for comparison purposes. And Wilpinion is declining as well about 1,400,000 tons, partially offset by the Wambo open cut, which we expect to be up 10%, maybe another 300,000 tons there. So that's really the delta year over year. And going forward, we haven't provided any guidance beyond 2025 except for what we anticipate from the acquisition, just to put a marker out there. So we haven't given any Peabody guidance.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

We've talked about this in the past. The L'Opinion production continues to decline until we open up pit nine and ten an extension a few years out. But along with that is a continued decline in the domestic ton requirements. So I think this year, we're probably looking at a net little over 5,000,000 tons of export out of Wilpennyang. And I think over the next five years, you're going to see something pretty close to that about 4.8 to five on average.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

So I really see that being pretty consistent. And then as Jim mentioned, The U. S. Piece is really just demand driven.

[Christopher LaFemina, Equity Research Analyst at Jefferies & Company Inc]

Okay. Thanks for that. And just secondly on Grover. I think Anglo had some comments this morning about having put some cameras down in the mine and they saw limited damage, which is pretty encouraging actually. And I think it seems like there's potential for that to maybe come online a bit sooner than people had expected based on what's been discovered so far.

[Christopher LaFemina, Equity Research Analyst at Jefferies & Company Inc]

Just could you comment on your understanding of what's happening there and what your thought is about the potential restart for that asset in terms of timing, etcetera? Thank you.

[Jim Grech, President and CEO at Peabody Energy]

Yes, Chris, we lots encouraging news to hear that you just mentioned about what the Anglo stated. We're really not in a good position to start putting out estimates of when we'll open that mine back up and the costs to do that until we get ownership of it and can really see the conditions firsthand. So, I will say that we do have optimism that we'll be able to do that based on what we've been able to do with the Centurion mine, the experience we have and the work we have with the regulators. We certainly are well positioned to bring that mine back online, but we're not at a point where we're going to start giving out estimates on timeline or costs or anything. It's just a little too early for us because we just don't have enough information to do that yet.

[Christopher LaFemina, Equity Research Analyst at Jefferies & Company Inc]

Understood. Thank you. Good luck.

[Jim Grech, President and CEO at Peabody Energy]

Thank you.

[Operator]

Next question is a follow-up from Nick Giles. Please go ahead.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Thank you very much, operator. Mark, maybe in response to your earlier comments, you outperformed my model pretty meaningfully in the PRB. So I'm sure Lucas took notice of that. But wanted to come back to Shoal Creek. It seems like production was stronger there, but wanted to get your take on kind of where realizations are today.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

And maybe bigger picture, where does this asset fit in your portfolio longer term? And could a sale of the asset be an additional lever you could pull in the case of permanent financing?

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

I'll start and then maybe Malcolm can talk about realizations a bit more. But yes, Shoal Creek is really operating extremely well, did a great, great year. We expect even better things in 2025, as I noted earlier. So operationally, it's hitting on all cylinders, doing absolutely everything that we anticipated they would do with the new longwall kit. Realizations have been a bit of a challenge, but maybe Malcolm, you want to add a little color to that.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

Yes. Look, sure. Last call, I did give a sort of a breakdown as to where those Asian realizations are. And obviously with Europe not as strong for us at the moment, a lot of our returns are coming from Asia. And at the moment, to be honest, you're talking an FOB return on a short term basis of somewhere between $120 and $130 for that greater product.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

That's where the price point is if you're selling into Asia.

[Nick Giles, Senior Research Analyst at B.Riley Securities]

Appreciate the color. Best of luck.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

Thank you.

[Operator]

The next question is from Matt Warder with thecoletrader.com. Please go ahead.

[Analyst]

Hey guys, hope all is well over there. I actually had a follow-up question to Nick who basically stole most of my thunder there. The realizations for Shoal Creek, is that basically just getting whacked due to the freight differential over to Asia? Is that the culprit there?

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

Yes, Matt. Look, there's two things. If you look at the top CSR coal, our CSR coal, we're talking about those being at around $180 FOB in Australia. And now when we talk about closer to 60 CSR top coals, which Shoal Creek is, their returns are about $150 FOB metric. Then you have to take a freight differential off that and convert it to short tons.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

And that's how I get to my $120 to $130

[Analyst]

Okay. That's all good. Also with regard to the guidance, how are you guys looking at semi soft and PCI realizations in 2025 this year? Any color on that would be really helpful.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

Yes. So within the existing Peabody portfolio, we don't really sell into the semi soft market. But what I can and I would like to talk about the semi soft market because that market is quite long at the moment, particularly out of Newcastle. So it's been a swing to coin from semi softs. And so that's part of what's happening with Newcastle returns.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

So there's a lot of that what used to be that lower semi soft products now coming back into thermal. So we think about Newcastle thermal that's the challenge there. So yes, semi soft quite challenged. In Europe there's been in Poland there's been a couple of outages, which we've seen some semi soft demand come out of there, but really semi soft is quite weak. But when it comes to PCI, there's two types of PCI.

[Malcolm Roberts, Chief Marketing Officer at Peabody Energy]

There's low vol PCI, high quality PCI coming from mines such as, as Copa Bella Morbar. And then there's byproduct PCIs, which tend to be higher volatile manner. So when you come to that premium low vol category, we see that as really quite short and challenged and the like. And we probably see the relative price point at over 80% for that coal at the moment relative to prime local coking coal.

[Analyst]

Got you. That's pretty helpful. If I can switch gears for a second, I think it was Jim, had a comment about receiving inbounds from PE firms about base load power for data centers. Is that something you guys are pursuing at all at this point? I know it was a kind of a discussion point with Thomas for a while there.

[Analyst]

Is that just wondered how you guys are thinking about that at this point in time?

[Jim Grech, President and CEO at Peabody Energy]

Well, Matt, first off, welcome to our earnings call. We appreciate the interest and the questions from me. So thank you for that. Secondly, we are getting inbounds from companies that are trying to figure out how to serve this growing electrical load demands and do it reliably. And so people are looking at coal plants and then if they're looking at coal plants, they want to know that that has long term supply to those coal plants.

[Jim Grech, President and CEO at Peabody Energy]

So with the long life and low cost reserves, we are people naturally come to us and ask us if there's if there's anything that we can work together, things that we would do, would we supply that, would we participate in that. So we are getting those inbounds. It certainly picked up with the Trump administration and their favorable stance towards coal. I won't say there's anything imminent or breaking on that, but from a few months ago where we had none of that type of interest coming in or almost none, it's been noticeably increased here in the recent month or two.

[Analyst]

That's interesting. I mean, I think that's something that the whole industry could take advantage of going forward. I did have one last sort of question, which pertains to the Anglo assets, specifically their CapEx. If I recall correctly from the presentation, I think you're targeting couple hundred million per year in CapEx for the first two or three years and then it goes to a maintenance CapEx level of like $150 like $13 per clean ton. Am I thinking about that right?

[Analyst]

And if so, what's the elevated level in the first couple of years? What was that being put toward?

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

Matt, you got that exactly right. Those are the numbers we've used. Really the initial couple of years being higher is really due to some of the objectives we have to get that production levels up to what we have forecasted. There's a new longwall obviously at Moore and Vine North, which is a big part in 2026. We also talked about some fleet enhancements at Capcol and etcetera.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

So there's a handful of things getting both the North And South District going to Moore and Bond North, walk on, walk off capabilities, that kind of stuff. And there's those types of things. And then we do see that leveling out to about 150 on an average basis going forward for I think we looked at it in the model probably for the next ten years on a sustainable basis.

[Analyst]

Okay. That's great. I think that's all I have here right now, but I'll turn it back over. Thanks a lot for the color guys. Appreciate it.

[Mark Spurbeck, Executive VP & CFO at Peabody Energy]

You bet, Matt. Thank you.

[Operator]

This concludes our question and answer session. I would like to turn the conference back over to Jim Grech for any closing remarks.

[Jim Grech, President and CEO at Peabody Energy]

Thank you, operator, and thank you all for the time today. I'd also like to express my gratitude to the BBuddy team for the many excellent accomplishments we had in 2024, and we're planning a highly productive next several months. So we look forward to keeping everyone apprised on our progress. Thank you.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Vic Svec, SVP, Global Investor and Corporate Relations
• Jim Grech, President and CEO
• Malcolm Roberts, Chief Marketing Officer
• Mark Spurbeck, Executive VP & CFO

Analysts

• Nick Giles, Senior Research Analyst at B.Riley Securities
• Nathan Martin, Senior Research Analyst at The Benchmark Company LLC
• Katja Jancic, Analyst at BMO Capital Markets
• Christopher LaFemina, Equity Research Analyst at Jefferies & Company Inc
• Analyst