21st Century Coal: Powering Progress and Global Development

21st Century Coal: Powering Progress and Global Development Christopher J. Hagedorn President Asia and Trading, Peabody Energy McDonnell Academy Global Energy and Environment Partnership, 4th International Symposium on Energy & Environment December 10, 2012 Mumbai, India

21st Century Coal Symbol for the Future of Coal in the World Introduced by the governments of China and the U.S. in 2009 to advance development of clean energy solutions Rests on a solid foundation of progress, advancement and innovation across our industry in recent decades in areas including safety, productivity sustainability and near-zero emissions technology Provides the solution for economic progress and energy access for the nearly one in five people on the planet who have no access to electricity 2

Coal: Powering Prosperity Key Discussion Themes Global Energy Access is a First Priority and Fuels Economic Growth Long Term Coal Market Fundamentals Remain Strong Education is the Backbone of Our Industry 3

Peabody Energy World s Only Global Pure-Play Coal Investment London Essen Ulaanbaatar Urumqi New Delhi Beijing St.Louis DTA Singapore Balikpapan International Offices Brisbane New Delhi Newcastle Beijing London Urumqi Ulaanbaatar Singapore Essen Jakarta Balikpapan Jakarta NCIG Mining Operations Position Sales Reserves S. PRB #1 148 2.7 Midwest #1 30 3.6 Southwest #1 18 1.1 Colorado #1 8 0.2 Australia #5 25 1.2 Mining position and sales based on 2011 reported sales volumes in millions of tons. Reserves based on 2011 10-K filing in billions of tons. 4

Rajasthan, India Global Energy Access is the First Priority

Energy is a Human Right and a Rapidly Rising Need 3.6 Billion People Have No or Only Partial Access to Electricity 136 2 70 21 1,054 493 378 184 449 31 209 585 Millions of People Who Lack Adequate Electricity Millions of People Who Have No Electricity Source: International Energy Agency World Energy Outlook 2011 and The World Bank World Development Indicators 2011. 6

Electricity Enables People to Live Longer and Better United Nations Links Affordable Energy to Quality of Life U.N. Human Development Index 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 Brazil Indonesia India Bangladesh Nigeria Ethiopia DR Congo Argentina China UK Germany South Africa Russia Japan United States Sweden Canada Qatar Finland Every 10-Fold Increase in Per Capita Electricity Use Drives a 10-Year Increase in Longevity 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 Electricity Use Per Capita (kwh/year) Source: CIA World Fact Book, United Nations Development Program s Human Development Report. 7

The Economic Miracle Powered by Coal Near Perfect Correlation Between Coal Use and GDP Growth Electricity from Coal (TWh) 16,000 14,000 12,000 10,000 8,000 6,000 4,000 Global Electricity from Coal World GDP $100,000 $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 World GDP (trillions of 2005 $) 2,000 1970 1980 1990 2000 2010 2020 2030 $10,000 Source: Developed from International Energy Agency World Energy Outlook (1995-2011); USDA 2011. 8

Long-Term Coal Market Fundamentals Remain Strong

Coal Expected to Overtake Oil as World s Largest Energy Source in 2013 Total World Primary Energy Demand by Fuel Million Tonne of Oil Equivalent 2013 Coal Oil Natural Gas Nuclear Hydro Renewables 2000 2005 2010 2015 2020 2025 2030 Source: Wood Mackenzie Energy Service. 10

Annual World Coal Demand Expected to Grow ~1.3 Billion Tonnes in Five Years 10,000 8,000 6,000 4,000 2,000 Expected Global Coal Demand 0 7,600 600 3,845 Source: Peabody Global Analytics. (Tonnes in Millions) 7,900 640 4,090 3,175 3,140 3,290 2011 2012P 2016P ROW China India 8,900 840 4,795 New coal-fueled generation of 395 GW expected by 2016 Steel production expected to grow 20%, requiring additional 200 MTPY of metallurgical coal More than 85% of global demand growth in China/India Seaborne demand expected to grow at 7% CAGR 11

China Demand Expected to Grow ~1.0 Billion Tonnes by 2016 Imports Expected to Double From 2011 to 2016 ~240 GW of coal-fueled generation expected to come on line by 2016 Much of buildout occurring in coastal areas Represents >800 MTPY of thermal coal use over time China NDRC seeks coking coal production limits for special and scarce resource China reducing domestic production; continuing to close small inefficient mines Tonnes in Millions 500 450 400 350 300 250 200 150 100 50 0 34 China Gross Coal Imports 37 Met 3 2008 Thermal 125 35 90 2009 186 47 139 2010 223 45 178 2011 280 50 230 2012P 400-450 100-110 300-350 2016P Source: Peabody Global Analytics, China National Bureau of Statistics. 2008, 2009 imports exclude other lignite product, now reported in total import figures. Projections assume 7.5% annual China GDP growth, as outlined in 12 th Five-Year Plan. 12

India Likely to be World s Fastest Growing Coal Importer ~75 GW of new coal generation expected to start over five years Requires additional ~250 MTPY of thermal coal use over time Thermal demand expected to outpace production by >150 MTPY within five years Coal India ordered to increase coal imports to meet shortfalls Blackouts highlight need for increased coal imports and improved power grid Multiple new port projects under way to enable increased imports Tonnes in Millions 200 150 100 50 0 India Coal Imports 74 43 Met Thermal 100 63 31 37 118 88 130 100 30 30 200-220 150-160 50-60 2009 2010 2011 2012P 2016P Source: Peabody Global Analytics and other industry sources. 13

Education is Integral to the Future of the Coal Sector

The Importance of Global University Networks Worldwide skills shortage for individuals with a science, technology, engineering and mathematics (STEM) education Strong link between STEM education and levels of innovation Multi-university networks promote knowledge transfer and sharing of best practices at local, regional and international level Investing in education makes good business sense 15

Peabody s Global University Network London Ulaanbaatar Essen Urumqi Gillette St. Louis New Delhi Beijing Tucson Singapore Balikpapan St.Louis Jakarta BTU Operations Trading and Local Offices BTU Corporate Headquarters Key BTU University Partnerships Brisbane 16

University Partnership Case Study: Ereen Mine Restoration, Mongolia June 2009 May 2010 August 2010 17

Peabody: Defining the Meaning of Long-Term Strategic Energy Partner When Mining is Complete, We will Leave the Land in a Condition Equal To or Better Than We Found It. Peabody aspires to be a strategic energy partner to Asian governments and communities We seek to forge cooperation throughout Asia on the basis of safety and sustainability In Indonesia, Peabody s team coaches employees of transaction partners in improving safety in various areas Ensuring that health, safety and environmental impacts are addressed Improving bridge and overpass infrastructure in Indonesia through new construction 55km haul road construction well underway with corrugated and box culverts for water drainage 18

Supercritical Technology Being Deployed Globally China Houses 40% of the World s Advanced Coal Fleet Technology Achieves One-Fifth the Average Emission Rate of Existing U.S. Coal Fleet and Lower CO 2 Emission Rate Supercritical and ultrasupercritical operating plants and plants under construction. Source: Platts World Electric Power Plant Database, January 2011. 429 GW On Line and Under Construction China 175 GW ROW 45 GW U.S. 96 GW Other EU 11 GW India 37 GW Russia 16 GW Japan 20 GW Germany 12 GW S. Korea 17 GW 19

Peabody Plan: Leadership to Advance 3Es Five Key Steps to Alleviate Energy Inequality Ensure at least half of new generation from coal Replace older coal plants with supercritical plants Develop 100 CCS projects in a decade Deploy coal-to-gas, coalto-chemicals, coal-toliquids Commercialize near-zero emissions technology GreenGen Power Plant, Tianjin 20

Key University Partnerships 21