UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): March 11, 2014
SUNCOKE ENERGY PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware | 001-35782 | 35-2451470 | ||
(State of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) | ||
1011 Warrenville Road, Suite 600 Lisle, Illinois |
60532 | |||
(Address of principal executive offices) | (Zip code) |
Registrants telephone number, including area code: (630) 824-1000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 7.01. | Regulation FD Disclosure. |
On March 11, 2014, SunCoke Energy Partners, L.P. (the Company) announced that the Company expects to raise its cash distribution per common unit by 5.3%, to $0.50, for its first quarter 2014 distribution payable in May 2014. In addition, the Company announced that its sponsor, SunCoke Energy, Inc. (SunCoke) plans to contribute to the Company a 33% ownership interest in each of the Haverhill and Middletown cokemaking facilities located in Ohio. A copy of the press release is attached as Exhibit 99.1, and is incorporated herein by reference.
Also on March 11, 2014, officers of SunCoke Energy Partners GP LLC, the Companys general partner, presented at an investor day conference hosted jointly by the Company and SunCoke, and held in New York City. A copy of the slide presentation is attached as Exhibit 99.2 and is incorporated herein by reference. These slides were made available on the Companys website at www.SXCPartners.com, simultaneously with the presentation.
The information in this Current Report on Form 8-K being furnished pursuant to Items 7.01 and 9.01 shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that Section, and is not incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
Exhibit No. |
Description | |
99.1 | Press release dated March 11, 2014 | |
99.2 | March 11, 2014 Joint Investor Day Conference presentation slides. |
Forward-Looking Statements
Statements contained in the exhibits to this report that state the Companys or its managements expectations or predictions of the future are forwardlooking statements. The Companys actual results could differ materially from those projected in such forwardlooking statements. Factors that could affect those results include those mentioned in the documents that the Company has filed with the Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
SUNCOKE ENERGY PARTNERS, L.P. | ||||
By: | SunCoke Energy Partners GP LLC, | |||
its General Partner | ||||
By: | /s/ Mark E. Newman | |||
Mark E. Newman | ||||
Senior Vice President and | ||||
Chief Financial Officer |
Date: March 11, 2014
EXHIBIT INDEX
Exhibit No. |
Exhibit | |
99.1 | Press release dated March 11, 2014 | |
99.2 | March 11, 2014 Joint Investor Day Conference presentation slides. |
Exhibit 99.1
Investors
Ryan Osterholm: 630.824.1907
Media
Anna Rozenich: 630.824.1945
SUNCOKE ENERGY PARTNERS, L.P. HOSTS INVESTOR DAY AND
ANNOUNCES EXPECTED INCREASE IN CASH DISTRIBUTION AND
PLANS FOR INITIAL DROPDOWN TRANSACTION
| Cash distribution per unit expected to increase 5.3 percent to $0.50 for the first quarter 2014 distribution |
| Expect initial cokemaking asset dropdown transaction from sponsor to consist of a 33 percent interest in the Companys Haverhill and Middletown cokemaking facilities |
| Anticipate future dropdowns of cokemaking assets will support 8 percent to 10 percent annual growth in cash distributions per unit through 2016 |
Lisle, IL (March 11, 2014) SunCoke Energy Partners, L.P. (NYSE: SXCP) the first steel facing master limited partnership (MLP), announced today that it expects to raise its per unit cash distribution 5.3 percent to $0.50 for its first quarter 2014 distribution payable in May.
SXCPs sponsor, SunCoke Energy, Inc. (NYSE: SXC), announced plans to drop down a 33 percent ownership interest in the Haverhill and Middletown cokemaking facilities to SXCP. This planned transaction will increase SXCPs ownership interest in both facilities to 98 percent from the current 65 percent level. SXC will continue to retain a 2% interest in these facilities. SXC, the largest independent producer of coke in the Americas, is SXCPs general partner and largest unitholder, owning a 56 percent limited partnership interest and all the incentive distribution rights.
On an annual basis, the additional interest in Haverhill and Middletown is projected to raise SXCPs Adjusted EBITDA attributable to unitholders by approximately $45 million and contribute approximately $38 million to distributable cash flow before financing costs. The proposed terms of the initial dropdown are being reviewed by the independent members of SXCPs Board of Directors.
On the strength of our cokemaking operations and successful coal logistics acquisitions, we have now increased cash distributions per unit four times since our initial public offering in January 2013. said Fritz Henderson, Chairman and Chief Executive Officer of SXCP. More importantly, with the expected acquisition of additional interests in Haverhill and Middletown, we are well positioned to build on this momentum. Both facilities sustain high levels of operating and safety performance, and considering the ease of execution and expected contribution to annual Adjusted EBITDA and distributable cash flow, this was a logical next step.
The Companys sponsor, SXC, also indicated that over time it expects to drop down to SXCP all of its domestic cokemaking assets. The pace of future dropdowns is flexible based on the execution of potential greenfield and acquisition opportunities. The Company discussed these announcements, its initiatives to enhance the productivity of existing assets and potential growth opportunities in the cokemaking, coal logistics and ferrous processing businesses at a joint Investor Day meeting held today with SXC.
Henderson continued, With the initial dropdown transaction and prospective dropdown of the rest of our sponsors domestic coke fleet over time, we believe we can increase cash distributions per unit by 8 percent to 10 percent annually through 2016. In addition, any potential greenfield developments or acquisition opportunities we successfully pursue can provide upside to this outlook.
SunCoke Energy Partners, L.P.
Investor Day 2014 Release
March 11, 2014
UPCOMING EVENTS
Our management team is hosting a joint Investor Day with SXC at the New York Stock Exchange this afternoon, March 11, 2014 at 2:00 p.m. EST. Presentations will be webcast live and archived for replay for a limited time in the Investor Relations section of the Companys website at www.sxcpartners.com.
In addition, we plan to participate in the BB&T Commercial and Industrial Conference in Miami, FL on March 27, 2014.
ABOUT SUNCOKE ENERGY PARTNERS, L.P.
SunCoke Energy Partners, L.P. (NYSE: SXCP) is a publicly-traded master limited partnership that manufactures coke used in the blast furnace production of steel and provides coal handling services to the coke, steel and power industries. Our advanced, heat recovery cokemaking process produces consistently high-quality coke, captures waste heat to generate steam or electricity, and reduces environmental impacts. Our coal handling terminals have the collective capacity to blend and transload more than 30 million tons of coal annually and are strategically located to enable material delivery to U.S. ports in the Gulf Coast, East Coast and Great Lakes. Our General Partner is a wholly owned subsidiary of SunCoke Energy, Inc. (NYSE: SXC), the largest independent producer of coke in the Americas, with 50 years of cokemaking experience and an international reputation for leadership, innovation and environmental stewardship in our industry.
NOTICE
This statement is intended to serve as qualified notice to nominees as provided for under Treasury Regulation Section 1.1446-4(b)(4) and (d) given by a publicly traded partnership for the nominee to be treated as a withholding agent. Please note that SunCoke Energy Partners, L.P.s quarterly cash distributions are treated as partnership distributions for federal income tax purposes and that 100 percent of these distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, all of SunCoke Energy Partners, L.P.s distributions to a nominee on behalf of foreign investors are subject to federal income tax withholding at the highest marginal tax rate for individuals or corporations, as applicable. Nominees, and not SunCoke Energy Partners, L.P., are treated as the withholding agents responsible for withholding on the distributions received by them on behalf of foreign investors.
DEFINITIONS
| Adjusted EBITDA represents earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) adjusted for sales discounts and the interest, taxes, depreciation, depletion and amortization attributable to our equity method investment. EBITDA reflects sales discounts included as a reduction in sales and other operating revenue. The sales discounts represent the sharing with customers of a portion of nonconventional fuel tax credits, which reduce our income tax expense. However, we believe our Adjusted EBITDA would be inappropriately penalized if these discounts were treated as a reduction of EBITDA since they represent sharing of a tax benefit that is not included in EBITDA. Accordingly, in computing Adjusted EBITDA, we have added back these sales discounts. Our Adjusted EBITDA also includes EBITDA attributable to our equity method investment. EBITDA and Adjusted EBITDA do not represent and should not be considered alternatives to net income or operating income under GAAP and may not be comparable to other similarly titled measures in other businesses. Management believes Adjusted EBITDA is an important measure of the operating performance of the Companys net assets and provides useful information to investors because it highlights trends in our business that may not otherwise be apparent when relying solely on GAAP measures and because it eliminates items that have less bearing on our operating performance. Adjusted EBITDA is a measure of operating performance that is not defined by GAAP, does not represent and should not be considered a substitute for net income as determined in accordance with GAAP. Calculations of Adjusted EBITDA may not be comparable to those reported by other companies. |
2
SunCoke Energy Partners, L.P.
Investor Day 2014 Release
March 11, 2014
| Adjusted EBITDA attributable to SXC/SXCP equals Adjusted EBITDA less Adjusted EBITDA attributable to noncontrolling interests. |
| Distributable Cash Flow equals Adjusted EBITDA less net cash paid for interest expense, on-going capital expenditures, accruals for replacement capital expenditures, and cash distributions to noncontrolling interests; plus amounts received under the Omnibus Agreement and acquisition expenses deemed to be Expansion Capital under our Partnership Agreement. Distributable Cash Flow is a non-GAAP supplemental financial measure that management and external users of the Partnerships financial statements, such as industry analysts, investors, lenders and rating agencies use to assess: |
| the Partnerships operating performance as compared to other publicly traded partnerships, without regard to historical cost basis; |
| the ability of the Partnerships assets to generate sufficient cash flow to make distributions to the Partnerships unitholders; |
| the Partnerships ability to incur and service debt and fund capital expenditures; and |
| the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities. |
The Partnership believes that Distributable Cash Flow provides useful information to investors in assessing the Partnerships financial condition and results of operations. Distributable Cash Flow should not be considered an alternative to net income, operating income, cash flows from operating activities, or any other measure of financial performance or liquidity presented in accordance with generally accepted accounting principles (GAAP). Distributable Cash Flow has important limitations as an analytical tool because it excludes some, but not all, items that affect net income and net cash provided by operating activities and used in investing activities. Additionally, because Distributable Cash Flow may be defined differently by other companies in the industry, the Partnerships definition of Distributable Cash Flow may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
FORWARD LOOKING STATEMENTS
Some of the statements included in this press release constitute forward looking statements. Forward-looking statements include all statements that are not historical facts and may be identified by the use of such words as believe, expect, plan, project, intend, anticipate, estimate, predict, potential, continue, may, will, should or the negative of these terms or similar expressions. Forward-looking statements are inherently uncertain and involve significant known and unknown risks and uncertainties (many of which are beyond the control of the Company) that could cause actual results to differ materially.
Such risks and uncertainties include, but are not limited to domestic and international economic, political, business, operational, competitive, regulatory and/or market factors affecting the Company, as well as uncertainties related to: pending or future litigation, legislation, or regulatory actions; liability for remedial actions or assessments under existing or future environmental regulations; gains and losses related to acquisition, disposition or impairment of assets; recapitalizations; access to, and costs of, capital; the effects of changes in accounting rules applicable to the Company; and changes in tax, environmental and other laws and regulations applicable to the Companys businesses.
Forward-looking statements are not guarantees of future performance, but are based upon the current knowledge, beliefs and expectations of Company management, and upon assumptions by the Company concerning future conditions, any or all of which ultimately may prove to be inaccurate. The reader should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company does not intend, and expressly disclaims any obligation, to update or alter its forward-looking statements (or associated cautionary language), whether as a result of new information, future events or otherwise after the date of this press release except as required by applicable law.
3
SunCoke Energy Partners, L.P.
Investor Day 2014 Release
March 11, 2014
The Company has included in its filings with the Securities and Exchange Commission cautionary language identifying important factors (but not necessarily all the important factors) that could cause actual results to differ materially from those expressed in any forward-looking statement made by the Company. For information concerning these factors, see the Companys Securities and Exchange Commission filings such as its annual and quarterly reports and current reports on Form 8-K, copies of which are available free of charge on the Companys website at www.sxcpartners.com. All forward-looking statements included in this press release are expressly qualified in their entirety by such cautionary statements. Unpredictable or unknown factors not discussed in this release also could have material adverse effects on forward-looking statements.
###
4
Exhibit 99.2
|
Investor day 2014
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Agenda
2:00 pm Strategies for Value Creation
Fritz Henderson, Chairman & Chief Executive Officer
2:20 pm Operations Excellence: Maximizing Asset Productivity
Mike Thomson, President & Chief Operating Officer
2:50 pm Framing the Growth Opportunity
Jonathan Lock, Vice President, Strategy
3:10 pm Break
3:20 pm Restructuring and Capital Allocation
Mark Newman, Senior Vice President & Chief Financial Officer
3:50 pm Concluding Remarks
Fritz Henderson, Chairman & Chief Executive Officer
4:00 pm Q&A
5:00 pm Cocktail Reception
Investor Day 2014 2
|
Forward-Looking Statements
Some of the information included in this presentation constitutes forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All statements in this presentation that express opinions, expectations, beliefs, plans, objectives, assumptions or projections with respect to anticipated future performance of SunCoke or the Partnership, in contrast with statements of historical facts, are forward-looking statements. Such forward-looking statements are based on managements beliefs and assumptions and on information currently available. Forward-looking statements include information concerning possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, the effects of competition and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and may be identified by the use of forward-looking terminology such as the words believe, expect, plan, intend, anticipate, estimate, predict, potential, continue, may, will, should or the negative of these terms or similar expressions.
Although management believes that its plans, intentions and expectations reflected in or suggested by the forward-looking statements made in this presentation are reasonable, no assurance can be given that these plans, intentions or expectations will be achieved when anticipated or at all. Moreover, such statements are subject to a number of assumptions, risks and uncertainties. Many of these risks are beyond the control of SunCoke and the Partnership, and may cause actual results to differ materially from those implied or expressed by the forward-looking statements. Each of SunCoke and the Partnership has included in its filings with the Securities and Exchange Commission cautionary language identifying important factors (but not necessarily all the important factors) that could cause actual results to differ materially from those expressed in any forward-looking statement. For more information concerning these factors, see the Securities and Exchange Commission filings of SunCoke and the Partnership. All forward-looking statements included in this presentation are expressly qualified in their entirety by such cautionary statements. Although forward-looking statements are based on current beliefs and expectations, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date hereof. SunCoke and the Partnership do not have any intention or obligation to update publicly any forward-looking statement (or its associated cautionary language) whether as a result of new information or future events or after the date of this presentation, except as required by applicable law.
This presentation includes certain non-GAAP financial measures intended to supplement, not substitute for, comparable GAAP measures. Reconciliations of non-GAAP financial measures to GAAP financial measures are provided in the Appendix at the end of the presentation. Investors are urged to consider carefully the comparable GAAP measures and the reconciliations to those measures provided in the Appendix.
Investor Day 2014 3
|
Fritz Henderson
Chairman and
Chief Executive Officer
|
The SunCoke Journey
2011: Laid The Foundation
IPO of ~18% of SXC
Established standalone structure
Proved cokemaking expertise
2012: Operating Focus
Executed successful Middletown startup
Invested in coal to drive productivity
Built financial strength and flexibility
Completed final distribution of SXC
2013: Creating the Future
Launched SXCP
Completed two coal logistics acquisitions
Formed India JV
Renewed Indiana Harbor contract; substantially refurbished facility
2014+: Transformation
Restructuring limitations lifted
First coke asset dropdown planned
Planned completion of Indiana Harbor refurbishment and
2H 2014 ramp-up
Strategic evaluation of coal business
Pursue growth opportunities in coke, coal logistics and ferrous
Enterprise Value
SXC SXC SXC & SXCP SXC & SXCP $1.7 billion $1.6 billion $2.4 billion $2.5 billion at IPO at 12/31/2012 at 12/31/2013 at 3/6/2014
Investor Day 2014 5
5
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Todays NewsSXC
SXC Board supports management plan to drop down Domestic Coke business into SXCP
Expect timing of dropdowns balanced with organic and M&A growth opportunities
SXC Board approved initial dropdown
33% interest in Haverhill and Middletown
Offer made to SXCP Conflicts Committee
Anticipate de-leveraging with initial drop
Believe dropdown plan will create significant value for SXC shareholders and SXCP unitholders
Haverhill
Investor Day 2014 6
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Todays NewsSXC
Estimate severe weather and Indiana Harbor challenges to lower Q1 Adjusted EBITDA by ~$10-$15 million
Q1 production down ~60 thousand tons, about half of shortfall at Indiana Harbor
Indiana Harbor incurred higher O&M on additional refurbishment scope
Expect to recover portion of Q1 production shortfall over balance of year
Customer demand solid
Excluding Indiana Harbor, expect domestic coke to perform above contract max
Reaffirm FY 2014 Adjusted EBITDA guidance of $230 million to $255 million
Expect to be in lower half of range
Indiana Harbor
Investor Day 2014 7
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Coal Business Strategic Evaluation
Developing strategic exit plan
Retained advisors to assist with restructuring plan
Have significant structuring flexibility and will evaluate all options
Preferred option is potential sale but will consider other alternatives including joint ventures, partnerships or further downsizing
New prep plant part of evaluation
Generates MLP qualifying income
Willing to invest to optimize potential exit transaction
Key transaction objectives include
Ensure reliable, cost-effective supply of coal to Jewell Coke
Enable standalone Jewell Coke operation
Create value for SXC shareholders
Investor Day 2014 8
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SXC Priorities
Given domestic coke dropdown plan and coal business restructuring, evaluating strategic alternatives for SXC
Focus on maximizing value of SXC by
Increasing value of SXCs ownership of SXCP & GP interest
Maximizing cash flow from remaining SXC level assets
Deploying capital in projects delivering attractive risk-adjusted returns
Expect SXC to become a flexible recycler of capital
Focus on investing to drive productivity in existing assets and incubate projects for SXCP
Plan to review capital allocation priorities with Board after first drop
Investor Day 2014 9
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Todays NewsSXCP
Intend to raise per unit cash distribution 5.3% to $0.50 for Q1 2014 payment
Expect to be above 1.15x annual cash coverage ratio on existing operations
Initial drop expected to add
~$38 million annually to distributable cash flow (pre-financing) (1)
Supports additional future increases to per unit cash distribution rate
Assessing optimal dropdown funding structures
Expect first dropdown financed by combination of SXCP equity and debt
Middletown
(1) Distributable Cash Flow (pre-financing) equal to EBITDA less ongoing capex and replacement capex accrual. Does not include interest expense related to potential debt financing.
Investor Day 2014 10
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SXCP Distribution Outlook
Expect dropdowns will support 8%-10% annual distribution growth
Distributable Cash Flow Growth Drivers
Dropdowns from SXC
~$175 million of EBITDA
Greenfield Projects at SXC
Right to purchase new U.S. coke plant when complete
Potential for DRI with private letter ruling request
M&A
Near-term priority building coal logistics business
Pursue coke and ferrous opportunities over time
Distribution Growth Implications
Expect dropdowns alone can support 8%-10% annual distribution growth through 2016
Greenfield opportunities plus acquisitions can provide additional upside and/or extend growth runway
Strong balance sheet provides flexibility to finance growth and support distribution growth as target leverage achieved
Pace of dropdowns flexible based on M&A success
Investor Day 2014 11
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Pathway to Value Creation
Deliver Operations Excellence
Foundation of long-term success
Leverage Technology to Drive Results
Maximize asset productivity
Pursue Growth Pillars
Expand presence in steel value chain and diversify customer base
Prioritize SXCP growth
Restructure & Allocate Capital
Execute dropdown domestic coke asset plan
Exit coal business
Restructure and allocate capital between growth and shareholders to optimize value
SXC Shareholder/ SXCP Unitholder Value
Investor Day 2014 12
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Mike Thomson
President and
Chief Operating Officer
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Pathway to Shareholder Value
Deliver Operations Excellence
Leverage
Technology to Drive Results
Pursue Growth
Pillars
Restructure & Allocate Capital
Enhance
Shareholder Value
Investor Day 2014 14
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Deliver Operations Excellence
Focus of The SunCoke Way
Financial Performance
Productivity
Execution
Safety & Environmental
Leverage operating know-how and technology to continuously improve yields, operating and maintenance costs
Rigorous discipline around systems and processes of coke and coal mining operations
Sustain and enhance top quartile safety performance
Meet and exceed environmental standards
Investor Day 2014 15
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SunCoke Way Production & Yield
Tangible impact on production & yield
(excluding Indiana Harbor)
1% coal-to-coke yield improvement contributes
~$6 million to Adjusted EBITDA
(based on $100 per ton coal price)
2013 production ~50,000 tons above contract maximum
Enabled spot sale to new customer
Domestic Coke Production & Yield
(ex. Indiana Harbor)
105.1% 106.1% 100.0% 99.5% 70.5% 70.2% 69.4% 68.8% 3,167 3,202
2,583 602 617
2,453 68
684 702 686 635
1,103 1,124 1,164 1,173
715 707 699 726
2010 2011 2012 2013
Middletown Haverhill Yield (%)
Granite City Jewell Capacity Utilization (%)
Investor Day 2014 16
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SunCoke Way Coke Safety
Achieved historical best health and safety performance in 2013
Including Brazil, SXC/SXCP represents four of five positions in top quartile
Total Incident Rate Top Quartile and SXC
1.55 1.52
1.49
1.25
1.05
0.91
0.85
0.75
2010 2011 2012 2013
Top Quartile TIR for coke plants per ACCCI* data SXC TIR
*ACCCI American Coke and Coal Chemical Institute
Investor Day 2014 17
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International Coke
Brazil Coke
Demonstrated exceptional flexibility operating at ~50% utilization
2013 Adj. EBITDA of $16 million on 876 thousand tons
Expect improvement in 2014 on higher volumes
VISA SunCoke
Strong operating performance
Merchant market experiencing margin compression due to slower economic growth, import pricing pressure and high inventories
Anticipate contribution of ~$3 million to 2014E Adj. EBITDA
Brazil Coke
VISA SunCoke
Investor Day 2014 18
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Coal Mining Business
Continued focus on decreasing cash costs per ton on productivity gains and reduced royalty rates
Maintaining focus on top quartile safety and compliance performance
Preserve assets and capabilities to maximize strategic flexibility
Investor Day 2014 19
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LEVERAGE TECHNOLOGY
Investor Day 2014 20
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Leverage Technology
Focused on driving greater productivity from existing assets and enhancing competitive advantages
Asset Support
Improve and
optimize productive
capabilities of
existing assets
Faster Coking
Environmental Performance
Meet current environmental requirements
Develop designs and processes to meet and surpass next generation environmental standards
Gas Sharing
Technology
Advancement
Extend and protect our proprietary technological edge for implementation at existing and new assets
Improve Yield
& Breeze Recycle
21 Investor Day 2014
Investor Day 2014 21
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Faster Coking
Goal: Improve existing asset utilization
Existing oven loading processes 1 ton of coal per hour
Increase coking rate by varying charge size and burn practices
Expected Benefits:
Flexibility to accelerate production opportunistically to meet market demand but limited by quality considerations and permit limits
Potential Value:
Potential to increase production by 5% to 10% across U.S. fleet
Per ton profit on incremental tons greater than average
Increased Coking Rate
(coal tons processed in 48 hours)
48 tons
54 tons
Standard Loading Optimized Loading
Investor Day 2014 22
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Gas Sharing
Goal: Develop and implement new technology to minimize venting
Background:
Address NOVs at Haverhill and Granite City as part of U.S. EPA Consent Decree
Expected Benefits:
Substantially reduces venting
Sets new emission standard for cokemaking
Capital Investment:
Estimated cap ex $120 million to be invested 2012 2016
$33 million in 2012-2013; $41 million planned in 2014
Investor Day 2014 23
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Improve Yield
Goal: Improve coke yield by minimizing burn losts
Background:
Existing technology typically results in 2%-3% burn loss
Redesigning oven air flow
Expected Benefits:
Reduce burn loss to drive higher coke yield
Potential Value:
1% burn loss reduction across U.S. fleet could drive ~$8 million benefit (@ $100/ton coal price)
Earliest implementation 2016
Burn Loss
Investor Day 2014 24
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Breeze Recycle
Goal: Repurpose low value outpu
Background:
Breeze has limited market value
Recycling 1%-3% into coal blend
Expected Benefits:
Reduces blend cost substituting low cost input (breeze) for higher cost input (coal)
Potential Value:
~$5M-$10M across U.S. fleet
(@ $100/ton coal price)
Earliest implementation 2017
Breeze Value: ~$15-$30 per ton
Coke Value: ~$320 per ton
Investor Day 2014 25
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INDIANA HARBOR REFURBISHMENT
Investor Day 2014 26
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Indiana Harbor Refurbishment
Capital Project
Plant
Expense
Oven Externals
Pusher/ Charger Machine
Common Tunnel
Oven
Floors/
Sole Flues
Scope and Challenges
Replace/repair doors, lintels and buckstays for 268 ovens and replace stacks
Labor productivity lower than expected due to operating schedule conflicts and weather
Work caused disequilibrium in plant, impacting production and oven condition
Replace two machines to reduce maintenance expense, improve reliability, decrease oven wear and decrease coal spillage
Underestimated impact of draft restriction in original scope
Draft critical to oven performance
Plan to repair/replace common tunnel to improve draft
Disequilibrium created by oven refurbishment impacted condition of the most challenged ovens
Plan to repair/replace oven floors/sole flues on underperforming ovens (~ 25% of ovens)
Investor Day 2014 27
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Indiana Harbor Refurbishment
Capital Project Plant Expense
Oven Externals
Pusher/ Charger Machine
Common Tunnel
Oven
Floors/
Sole Flues
Status and Outlook
3 of 4 batteries complete; final battery to be completed in March 2014
All stacks replaced in 2013
Capital expenditures of $85 million; ~$15 million higher than originally expected due to productivity issues
Design and engineering complete; manufacturing in process
Deliveries expected in June and November 2014
Capital expenditure of $16 million in-line with expectations
Common tunnel repairs/replacement to be completed by April 2014
Incremental expense in Q1/Q2 results
Work on target ovens underway
Expect completion of target oven repairs by June
Incremental expense in Q1/Q2 results
Investor Day 2014 28
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Refurbishment End State
New Oven Exterior New Tunnel/Stack New Oven Internals
Investor Day 2014 29
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Refurbishment End State
New Pusher/Charger Pusher/Charger Machine at Middletown
Machines
Next generation modular design with upgraded features
Targeting zero spillage
Improved operations and maintenance
~$16M total spend; deliveries expected in June and November
Facilitates ramp-up to 1.22 million tons annual production
Investor Day 2014 30
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Indiana Harbor Outlook TM
Indiana Harbor Ramp-up Indiana Harbor: Projected 2014
Refurbishment project and severe Coke Production and Ovens Pushed weather impacted Q1 production and costs
131
Q2/early Q3 anticipated blast furnace outage
Expect reduced production during outage; may result in inventory build and/or deferred payment terms
300-310
After outage, maximum production needed 285-295
260-270 200-210
With completion of refurbishment scope in Q2 expect improvement in 2H
Delivery of pusher/charger machines to further enable ramp-up in 2H Q1 2014 Q2 2014 Q3 2014 Q4 2014
Projected FY 2014 Adjusted EBITDA of Ovens Pushed per Day $20M$ 25M to be Coke Production (000s tons) second-half loaded
Investor Day 2014 31
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POTENTIAL NEW COKE PLANT
Investor Day 2014 32
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New Coke Plant South Shore, KY TM
Site/Plant Attributes Permit Status
Good inbound & outbound logistics Final permit estimate Q2 2014
Multi-customer site can serve Earliest construction Q4 2014 contract and spot markets
First coke delivery Q1 2017
Design enhancements
Customer dialogue ongoing
30% smaller footprint
Modular design enables future
South
expansion Shore
Improved yields due to better coal/coke handling and oven design/control
Higher energy production
Capital expenditure expected $570$670 per ton
Middletown was $745 per ton
Investor Day 2014 33
|
Proposed New Site TM
Proposed new coke plant expected to have 120 ovens and annual coke production capacity of 660 thousand tons and ~60MW of power generation
Investor Day 2014 34
|
COAL LOGISTICS
Investor Day 2014 35
|
Coal Logistics Opportunity
Coal logistics complements existing cokemaking business, offers near-term growth opportunities and customer diversification
Strategic Assets
KRT strategically advantaged with access to barge, rail and truck
Locations in Ohio River System well positioned to serve CAPP miners, power companies and steelmakers
Ability to blend Illinois Basin with CAPP coal may help drive organic growth with power companies
Bolt-on acquisition opportunities
Broadening customer base diversifies credit and market risk
Platform for Growth
Strategically Located Assets
Experienced Management Team
Extend Capability to Broaden Exposure to Steel Value Chain
Investor Day 2014 36
|
Coal Logistics Organic Growth Opportunity
Organic Growth Target Areas for Volume Growth at KRT
(tons handled)
Moved ~800K internal tons
~1M
from competitors to KRT ~1 2M
Discussion with steelmakers ~1 2M
~3.5 6M
to increase met coal tonnage ~0.5 1M
Anticipate increased throughput from nearby coal producers
16M
Exploring opportunity to
16M
expand with public utilities
Incremental revenue flows
primarily to EBITDA 2013A KRT 3rd Party CAPP IL Basin New SXC 2017E Coal Tons Domestic Thermal Blending Domestic Coal Tons Handled Coking Rebound Coke Plant Handled
Investor Day 2014 37
|
Jonathan Lock
Vice President
Strategy
|
Pathway to Shareholder Value
Deliver Operations Excellence
Leverage
Technology to Drive Results
Pursue Growth
Pillars
Restructure & Allocate Capital
Enhance
Shareholder Value
Investor Day 2014 39
|
The Steel Value Chain TM
Steel value chain survey identified attractive adjacent opportunities
Investor Day 2014 40
|
Our Growth Priorities TM
1 Look to generate growth which is
Similar in risk profile to core business
Consistent with existing business model
Aligned with Core Competencies
2 Seek organic growth and acquisitions with focus on
Opportunities that generate qualifying income
Increased customer diversification
Investor Day 2014 41
|
Growth Strategy TM
Area of focus Cokemaking Coal Logistics Iron Ore Processing
Greenfield development Acquisition or development Investment in ferrous side and/or acquisition of of selective coal handling & of steel value chain, such existing cokemaking processing assets, as in concentrating,
Summary facilities with long-term with long-term pelletizing and off-take agreements off-take arrangements transport/handling and limited of iron ore commodity exposure
Contract renewal and Exploring greenfield Evaluating potential Organic Growth ramp-up at Indiana Harbor development opportunities greenfield DRI (SXC) Expect permit for a new opportunities plant in 1H 2014
Discussing potential Two acquisitions completed Received favorable ruling M&A acquisition of targeted Evaluating targeted on qualifying income coke assets opportunities status of concentrating & (SXCP) implies
Complexity 2014 pelletizing and beyond timeframe Submitted PLR for DRI timing uncertain
Investor Day 2014 42
|
Coke Market Dynamics TM
Expect stable coke demand on rebounding steel production
Domestic Steel Production & Capacity Utilization Industry Outlook
(Mt Production) Steel demand outlook driven
100 100%
by automotive, construction
80 80%
EAFs expected to capture
62
58 majority of growth
53 56 62
53 53 54
60 52 60%
49
Expect BF/BOF to hold
40 36 40%
volumes based on quality & advanced product design 38
20 38 38 38 20%
34 36 35 35 36 31 22
Forecast stable coke utilization
0 0% rates
2008 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E
BF/BOF EAF Capacity Utilization (%)
Source: AISI, CRU, Internal Company Analysis
Investor Day 2014 43
|
Coke Market Dynamics
Expect coke battery retirements to reduce coke capacity over time
U.S. & Canada Coke Battery Age Distribution
(Mtpa capacity) 4 Meter By-product 5.0 6 Meter By-product 4.5 Heat Recovery
4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5
0.0
49
14 19 24 29 34 39 44 49 54 59 64 69 74
0 5 101520 253035404550 5560 65 70 -
Battery Age
Source: CRU Met. Coke Market Outlook, Internal Company Analysis
Industry Outlook
By-product coke battery productivity falling as fleet ages
Early 6-meter battery retirements increasingly possible
Alternative coke projects do not appear to be yielding reliable coke
Recent coke battery closures include AM Dofasco & US Steel Gary Works
Represents ~1 million tons of coke production
44 Investor Day 2014
Investor Day 2014 44
|
Coke Market Dynamics TM
Forecast U.S. & Canada coke shortage in excess of 1M tons by 2017
U.S. & Canada Blast Furnace Demand vs. Capacity1 Industry Outlook
(Kt capacity) Expect market tightening as aging
Age & Evolving
500 435 Environmental batteries shutdown
MACT
Standards
0
Forecast domestic coke short
(89) (52) (55)
>1M tons by 2017
-500 (377)
(522) (562)
Virtually no imports in 2013
-1,000
-1,500 (1,384) Imports or DRI/EAF could reduce coke demand, but evolving
(1,722)
-2,000 environmental standards may
10 11 12 13 14E 15E 16E 17E 18E accelerate retirements
1. Data represents BF demand and capacity exclusive of imports
Source: Internal Company Analysis
Investor Day 2014 45
|
Coke Prospective Economics TM
Next Generation Coke Plant Economics Plant Specifications
Total CAPEX: ~$375M-$440M
1
Total Capacity: 660Ktpa
~$375m-$440m Power Output: ~60MW
Capital
Location: South Shore, KY
Outlay
Contracting Strategy
4 2
Valuable Multi-customer plant delivering ~6x EBITDA Growth Low double customers value via competitive prices
Opportunity digit
Multiple Target commitments for 60%-70% for returns
SXC/SXCP capacity under 7-10 year terms
Open to selling remaining coke capacity 3 via merchant market
Competitive Coke Pricing
SXCP has preferential right to acquire once operational
Investor Day 2014 46
|
Coal Logistics Market Size TM
Rail Barge Truck Terminals (1)
Tonnage 600M-800M tons 150M-350M tons 100M-200M tons 350M-550M tons Per Ton Rate(2) $16-$19/ton $5-$8/ton $4-$7/ton $3-$8/ton EBIT Margin(3) 25%-30% 15%-20% 5%-10% 20%-30%
Profit Pool $2.4B-$4.6B $100M-$600M Up to $100M $200M-$1.3B
(EBIT)
Capital Intensity High Medium Low Medium
Fragmentation Low Medium High High
Note: tonnage estimates reflect primary mode of transportation for any multi-modal shipping
(1) Per ton rates represent allin service offerings (e.g., any combination of blending, storage, sampling, crushing, transloading, etc.)
(2) Rates sourced from internal analysis and EIA & STB reports; barge and truck transportation rates reflect coal transported to electric power plants 47 (3) EBIT margins derived from internal analysis, logistics company financials and industry-wide estimates
Investor Day 2014 47
|
Coal Logistics Developing our Pipeline TM
Applied rigorous screening process to identify high-priority, near-term coal logistics targets
Competitive Mode of
Commodity Geography Size Advantage Transport
Coal Biased Advantaged Rail Midwest Focus on small
MLPable Location Barge East Coast and medium Bulk Well Run Truck US Gulf Fit within MLP
(to customer) Coast
>50 Coal Focused Logistics Assets
High
+ Priority >175 Targets Logistics Companies w/ Coal Assets
Initial Universe
~1B Tons of Coal
Investor Day 2014 48
|
Ferrous Concentration & Pelletization TM
U.S. Iron Ore Production Cokemaking Parallels
(Mtpa capacity) Essar High capital intensity ($100- $150/ton); similar material
10 ~65 conversion process to coke
~55 7 3
Potential for similar commercial structure;
USS 24 processing fee with return on
AK/Mag capital and limited commodity risk
Cliffs 23
Assets highly concentrated in hands of few large operators
AM 9
In Operation(1) Under Development Total Market SXCP cost of capital provides
1. Estimated capacity in accordance with ownership structure potential advantage
Source: Internal Company Analysis
Investor Day 2014 49
|
Ferrous DRI Market Size TM
U.S. & Canadian DRI market in early stages; expect need-based demand will dominate near term
2013E Global DRI Production Potential U.S. & Canada Demand
(Mtpa) (Mtpa)
Mid. East 31 SunCoke focus on 3-5 Mtpa medium-
Asia Pacific term demand 6 -9
18 ~10
Latin America 12
CIS/E. Europe 5 Voestalpine
3-5 SDI 6
Africa 2
ArcelorMittal Nucor LA 3
US/Canada 1
Nucor T&T 2
W. Europe 1
Current Medium-Term Long-Term Market Demand Potential
Source: Midrex 2012 Statbook, World Steel Association
Investor Day 2014 50
|
Ferrous DRI Near-Term Demand TM
DRI demand fragmented and driven by different needs
Drivers of DRI Demand Size of Opportunity by Region
Customer #1 1.5
Raw DRI an alternative to Customer #2 0.9 Material pig iron and premium
Great
Flexibility scrap Lakes Customer #3 0.8 Customer #4 0.4
& West
Others 0.5
DRI provides pure iron Total ~3-5 Mtpa
Steel Quality
units for higher quality
Premium
steel
Customer #1 0
.6
DRI helps reduce input South Customer #2 0.2
Challenged East Others 0.1
costs for logistically
Logistics
challenged EAFs Total ~1 Mtpa
Investor Day 2014 51
|
Ferrous DRI Project Scale and Economics TM
Opportunity to aggregate demand to achieve economic scale and leverage SXCP cost of capital
DRI Project Capital Cost per Ton DRI Project Characteristics
Substitute pig iron and hedge
($/mt)
scrap due to low natural gas
500
Most Attractive Economic Scale pricing
DRI capital intensive, requiring scale to optimize (1.5 mt plant
~$500M investment)
400
SXC/SXCP Value Proposition
Voestalpine
Provide capital and operate facility
Nucor
Long-term supply contract with anchor customer for hot DRI,
300
balance sold to market as cold DRI
Cost pass-through of
all commodities (iron pellets & nat. gas)
200
1.0 Mtpa 1.5 Mtpa 2.0 Mtpa 2.5 Mtpa Target low to mid-double-digit return
52 Investor Day 2014
Investor Day 2014 52
|
Mark Newman
Senior Vice President &
Chief Financial Officer
|
Pathway to Shareholder Value TM
Deliver Operations Excellence
Leverage
Technology to Drive Results
Pursue Growth
Pillars
Restructure & Allocate Capital
Enhance
Shareholder Value
Investor Day 2014 54
|
Value Creation to Date TM
SXC and SXCP delivered value since IPOs
Since SXC IPO (07/21/11) Since SXCP IPO (01/18/13)
75% 75% SXCP +67% S&P 600 +50%
50% 50%
SXC
25% +44% 25% Alerian +10%
0 0
Integrated
-25% -25%
Integrated Steel (7%) Steel (60%)
-50% -50%
-75% -75%
Jul 11 Jan 12 Jul 13 Jan 14 Mar 14 Jan 13 Mar 13 Jul 13 Jan 14 Mar 14
(1) (1) (2)
Integrated Steel S&P Small Cap 600 SXC Integrated Steel Alerian Index SXCP
1. Integrated Steel Group includes AKS, X, MT, and CLF.
2. Data is unit price performance only, and does not include distributions.
Investor Day 2014 55
|
Future Value Creation TM
Intend to continue to create value by optimizing structure and efficiently allocating capital
1 2 3
Drop down
Restructure Coal Optimize Capital Domestic Coke Mining Business Allocation Assets to SXCP
Board supports drop Potential exit from coal Invest in existing assets to down of domestic coke business expected to drive performance assets over time unlock value
Finance potential capital
Increase distributions Ensure reliable, long- intensive growth projects to SXC as General term supply of coal for that can drive future cash Partner Jewell Coke flow growth (new coke
Generate cash plant, DRI)
Reduce/eliminate proceeds to invest, exposure to Evaluate capital allocation de-lever or return to commodity price and priorities as dropdowns shareholders mining risks occur
Enable Jewell Coke standalone operation
Investor Day 2014 56
|
Dropdown Value Drivers TM
Expected Impact from Impact to SXC
Expected End Result Dropdown Plan Equity Value
1 Higher achievable LP unit ??Multiple
Value of SXCP expansion on
LP Units distribution growth rate leads to increased SXCP existing assets unit price ??Maximum value of GP/IDR
2 GP cash flows increase interests as Value of GP higher IDR splits reached
Cash Flows ??Financial
fl
exibility to invest for 3 growth or to
Debt paid down and cash support Cash Proceeds builds over time through potential return dropdown proceeds and to shareholders free cash flow
Investor Day 2014 57
|
Asset Considerations TM
All SXC Domestic Coke assets are good candidates; Haverhill and Middletown are most attractive initial dropdown
- Relative attractiveness
Haverhill &
Granite City Indiana Harbor Jewell Coke Middletown
Ease of Execution / Asset Readiness
Customer / Asset Diversification
DCF / % of EBITDA
Estimated Run-Rate
Adj. EBITDA $35M$45M $40M$50M(1) $35M$45M $45M$55M
~$175M in Domestic Coke Adj. EBITDA remains to be dropped from SXC to SXCP
Expect to include incremental allocation of corporate costs with dropdowns
1. 33% basis for both plants combined.
58 I
nvestor Day 2014
Investor Day 2014 58
|
Tax Efficiency Illustration TM
Simplified Example of Tax Implications for Sale to SXCP Implications for SXC
Asset Fair Value = $150 SXC Assumption of debt and/or ~58% Sold to Tax Basis = 0 Interest taking back units provides
SXCP Tax Life = 15 years in SXCP (pre-transaction) significant tax benefits for sale of low basis assets to SXCP
Cash Only Assumed Debt
Form of Consideration: or Units Only
Estimated tax basis in remaining SXC domestic coke
Consideration to Seller $150 $150 assets ~$200M as of 12/31/13
Less: Tax Basis 0 0
Gain on Sale SXC debt of ~$500M as of $150 $150 12/31/13 available to use with
Day 1 Tax (35% Rate) ($53) $0 future dropdowns
Future (Income)/
6 (4) However, SXC units retained
Depreciation per year have very low basis; sale of
PV of Future Tax
15 (11) units would trigger gain
(@ 10% Discount Rate)
XC delivers depreciation to public
Total PV of Taxes ($38) ($11) unitholders as if asset basis SXC receives et depreciation on stepped up; income recognition stepped up basis value over asset life for SXC offsets public deduction Investor Day 2014 ($150 ÷ 15) x 58% ($150 ÷ 15) x 42% 59
|
Dropdown Considerations and SXCP Impact
Variable Considerations
Drop Balance accretion to SXCP with providing SXC appropriate value Multiple Subject to SXCP Conflict Committee approval
SXCP Excess leverage capacity at SXCP provides flexibility; expect to move Financing toward target 3 3.5x leverage over time
Distribution Anticipate flexing coverage with drops to achieve ratable growth
As we increase scale and asset/customer diversity over time, expect
Coverage
to reduce target cash coverage ratio to 1.1x
Discussing terms of first dropdown; remaining coke assets to support Timing distribution growth target
Flexibility to adjust pace based on M&A opportunities
Expect to deliver 8%-10% annual distribution growth through 2016 with potential upside
Investor Day 2014 60
|
Dropdown Considerations and SXC Impact TM
Variable Considerations
Drop Drop value to SXC includes direct multiple received plus indirect value from SXCP stake and GP/IDR cash flows; provides SXC flexibility
Multiple
Form of Expect to take back portion of proceeds in SXCP units for tax efficiency and de-lever through SXCP assumption (and pay down) of SXC debt
Proceeds
Balance tax efficiency with potential liquidity needs at parent
SXC Capital Right-size SXC leverage as assets move to SXCP over time Structure Maintain flexibility for funding growth projects for SXCP
Use of With dropdown plan, expect to de-lever, retain significant LP stake and near/attain high IDR splits
Proceeds
Allocate cash flow between investments and return of capital
Expect dropdowns to provide multiple expansion on existing assets, proceeds for redeployment and increasing GP/IDR cash flows approaching high splits
Investor Day 2014 61
|
Illustrative Dropdown Scenario TM
Illustrative Dropdown Assumptions Potential SXC Value
EBITDA: ~$175M total over several years ??SXC LP interest in SXCP:
Multiple: reasonable range Relatively unchanged from current
SXCP Financing: 50/50 Debt/Equity
(~ half of equity taken back by SXC) (~58%) but with higher unit count
??Potential increase to SXCP Unit $2.40$2.53 Price on higher distributions $1.90 ??Annual GP Cash Flow:
~$10M
(at/within 50% GP split)
??Cash Proceeds/Debt Assumption:
~$175M * EBITDA multiple for ~75% of consideration
Current 2016E Annual Distribution Distribution Rate per LP per LP Unit Unit
Investor Day 2014 62
|
Initial Dropdown Key Points TM
Expect to drop 33% interest in Haverhill and Middletown into SXCP
Subject to SXCP Conflicts Committee approval
Expect 33% interest in Haverhill and Middletown to be dropped into SXCP subject to market conditions
SXCP Conflicts Committee reviewing offer; have retained advisors
Expect to finance through a mix of debt, units taken back and public unit offering
De-leveraging at parent and minimizing of tax leakage will be priorities for initial drop; expect limited cash proceeds at SXC
Investor Day 2014 63
|
Fritz Henderson
Chairman &
Chief Executive Officer
|
Pathway to Shareholder Value TM
Deliver Operations Excellence
Leverage
Technology to Drive Results
Pursue Growth
Pillars
Restructure & Allocate Capital
Enhance
Shareholder Value
Investor Day 2014 65
|
Critical Early 2014 Priorities TM
Operations Excellence
Recover from winter across U.S. coke plants to improve results and sustain strong safety performance
Execute Indiana Harbor revitalization and re-commission plant
Drive mining cash cost productivity and safety excellence
Growth Strategy
Pursue bolt-on growth opportunities
Continue South Shore permitting and secure customer commitments
Evaluate DRI and possible coke plant acquisitions
Focus on SXCP qualifying income and distributable cash flow growth
Portfolio Strategy
Exit coal consistent with objectives: coal supply, coke plant independence, value creation
Capital Allocation Strategy
Execute first dropdown transaction
Develop SXC capital allocation framework to be executed with dropdown strategy over next three years
Investor Day 2014 66
|
APPENDIX
Investor Day 2014 67
|
Definitions
Adjusted EBITDA represents earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) adjusted for sales discounts and the interest, taxes, depreciation, depletion and amortization attributable to our equity method investment. EBITDA reflects sales discounts included as a reduction in sales and other operating revenue. The sales discounts represent the sharing with customers of a portion of nonconventional fuel tax credits, which reduce our income tax expense. However, we believe our Adjusted EBITDA would be inappropriately penalized if these discounts were treated as a reduction of EBITDA since they represent sharing of a tax benefit that is not included in EBITDA. Accordingly, in computing Adjusted EBITDA, we have added back these sales discounts. Our Adjusted EBITDA also includes EBITDA attributable to our equity method investment. EBITDA and Adjusted EBITDA do not represent and should not be considered alternatives to net income or operating income under GAAP and may not be comparable to other similarly titled measures in other businesses. Management believes Adjusted EBITDA is an important measure of the operating performance of the Companys net assets and provides useful information to investors because it highlights trends in our business that may not otherwise be apparent when relying solely on GAAP measures and because it eliminates items that have less bearing on our operating performance. Adjusted EBITDA is a measure of operating performance that is not defined by GAAP, does not represent and should not be considered a substitute for net income as determined in accordance with GAAP. Calculations of Adjusted EBITDA may not be comparable to those reported by other companies.
EBITDA represents earnings before interest, taxes, depreciation, depletion and amortization.
Adjusted EBITDA attributable to SXC/SXCP equals Adjusted EBITDA less Adjusted EBITDA attributable to noncontrolling interests.
Adjusted EBITDA/Ton represents Adjusted EBITDA divided by tons sold
Ongoing capital expenditures (capex) are capital expenditures made to maintain the existing operating capacity of our assets and/or to extend their useful lives. Ongoing capex also includes new equipment that improves the efficiency, reliability or effectiveness of existing assets. Ongoing capex does not include normal repairs and maintenance, which are expensed as incurred, or significant capital expenditures. For purposes of calculating distributable cash flow, the portion of ongoing capex attributable to SXCP is used.
Replacement capital expenditures (capex) represents an annual accrual necessary to fund SXCPs share of the estimated costs to replace or rebuild our facilities at the end of their working lives. This accrual is estimated based on the average quarterly anticipated replacement capital that we expect to incur over the long term to replace our major capital assets at the end of their working lives. The replacement capex accrual estimate will be subject to review and prospective change by SXCPs general partner at least annually and whenever an event occurs that causes a material adjustment of replacement capex, provided such change is approved by our conflicts committee.
Investor Day 2014 68
|
Consolidated SXC Guidance Summary
Metric 2014 Guidance*
Adjusted EBITDA (1)
Consolidated $230 $255 million Attributable to SXC $183 $203 million
EPS Attributable to SXC Shareholders (diluted) $0.35 $0.60
Cash Flow from Operations ~$170 million
Capital Expenditures ~$117 million Investments n/a Effective Tax Rate 20% 26% Cash Tax Rate 10% 18% Domestic Coke Production ~4.3 million tons Coal Production ~1.3 million tons
* Prior to proposed cokemaking asset dropdowns.
(1) Please see appendix for a definition of Adjusted EBITDA.
Investor Day 2014 69
|
69 Investor Day 2014
Expected SXC 2014 EBITDA Reconciliation
2014E 2014E (in millions) Low High Net Income $53 $71
Depreciation, depletion and amortization 105 100 Interest expense, net 55 53 Income tax expense 13 24
EBITDA $226 $248
Sales discounts Adjustment to unconsolidated affiliate earnings(1) 4 7
Adjusted EBITDA $230 $255
EBITDA attributable to noncontrolling interests(2) (47) (52)
Adjusted EBITDA attributable to SXC $183 $203
(1) Represents SXC share of India JV interest, taxes and depreciation expense.
(2) Represents Adjusted EBITDA attributable to SXCP public unitholders prior to proposed cokemaking asset dropdowns and to DTE Energys interest in Indiana Harbor.
Investor Day 2014 70
|
SXCP Adjusted EBITDA and Distributable Cash Flow Reconciliations
FY 2014 Guidance*
($ in Millions) Low High
Net income $ 94 $ 107
Add:
Depreciation 43 41 Interest expense, net 18 17 Income tax expense 1 Sales discounts -
Adjusted EBITDA $ 155 $ 166
Adjusted EBITDA attributable to NCI (50) (54)
Adjusted EBITDA attributable to Predecessor/SXCP $ 105 $ 112
Less:
Ongoing capex (SXCP share) (12) (12) Replacement capex accrual (4) (4) Cash interest accrual (15) (15)
Distributable cash flow $ 74 $ 81
* Before proposed dropdown transaction
Investor Day 2014 71
|
Capital Expenditures & Investments
2014E Capex
($ in millions) SXC SXCP Consolidated
On-Going $39 $17 $56 Environmental Project $5 $36 $41 Indiana Harbor $20 n/a $20 Refurbishment
Total CapEx $64 $53 $117
Investments -
Total CapEx &
$64(1) $53 $117 Investments
(1) Does not include spending to initiate construction of potential new coke plant (~$30M) or potential new coal prep plant
($30-$60M).
Investor Day 2014 72
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