AHGP Alliance Holdings Dec 2009 Presentation
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Wells Fargo SecuritiesWells Fargo SecuritiesMLP & Pipeline SymposiumMLP & Pipeline Symposium
December 8, 2009December 8, 2009
Brian L. CantrellBrian L. Cantrell
Chief Financial OfficerChief Financial Officer
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Why Coal?Why Coal?
Drives Economic GrowthDrives Economic Growth
AbundantAbundant
ReliableReliable
AffordableAffordable
DomesticDomestic
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Coal Consumption Grows with GDPCoal Consumption Grows with GDP
0
200
400
600
800
1000
1
9
4
9
1
9
5
4
1
9
5
9
1
9
6
4
1
9
6
9
1
9
7
4
1
9
7
9
1
9
8
4
1
9
8
9
1
9
9
4
1
9
9
9
2
0
0
4
Coal ConsumptionCoal Consumpt ion
Source: EIA, Bureau of Economic Analysis (BEA)
GDPGDP
0
2000
4000
6000
8000
10000
12000
1
9
4
9
1
9
5
4
1
9
5
9
1
9
6
4
1
9
6
9
1
9
7
4
1
9
7
9
1
9
8
4
1
9
8
9
1
9
9
4
1
9
9
9
2
0
0
4
BillionsofD
ollars
AnnualCo
alConsumption(MillionShortTons)
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Coal Creates HighCoal Creates High--Paying JobsPaying Jobs
How Many People areHow Many People are
directly employed in the coaldirectly employed in the coalindustry?industry?
~ 134,000~ 134,000
What is the average annualWhat is the average annual
wage in the coal industry?wage in the coal industry?
Over $72,000Over $72,000
Source: National Mining Association
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Sources: EIA 2008 Annual Energy Review; Barclays Capital Markets Research
U.S. Total Electricity Generation by FuelU.S. Total Electricity Generation by Fuel
Coa l
H y d r o
W i n d O the r
Nuc l e a r
O i l
N a t u r a l Ga s
49%
21%
20%
2%
6%
1%
1%
66
Coa l i s t he bac kbon e o fCoa l i s t he bac kbon e o f
el ect r i c i t y g en er a t i o n i n t h eel ect r i c i t y g en e r a t i o n i n t h e
U n i t ed St a t e s & t he r easons a r eU n i t ed St a t e s & t he r easons a r e
sim p l e ~ Coa l i s b y f a r t h e m ostsim p l e ~ Coa l i s b y f a r t h e m ost
a bu n dan t a n d l e a st ex pen si v eabu n dan t a nd l ea st ex pen si v e
f o ssi l f u el i n t h e coun t r y f o ssi l f u el i n t h e coun t r y
Cost in $ per mmbtuCost in $ per mmbtu
Fuel TypeFuel Type 19931993 19981998 20032003 20082008
CoalCoal $1.39$1.39 $1.25$1.25 $1.28$1.28 $2.07$2.07
NaturalNaturalGasGas $2.56$2.56 $2.38$2.38 $5.39$5.39 $9.11$9.11
OilOil $2.43$2.43 $2.14$2.14 $4.94$4.94 $15.50$15.50
Coal Serves as the Cornerstone forCoal Serves as the Cornerstone for
AmericaAmericas Electricity Generations Electricity Generation
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Anthracite
Bituminous Coal
Subbituminous Coal
Lignite
Powder RiverBasin (PRB)
NorthernAppalachiaRegion(NAPP)
CentralAppalachiaRegion (CAPP)
Illinois BasinRegion (ILB)
Source: Energy Information Agency; BP Statistical Study 2009Source: Energy Information Agency; BP Statistical Study 2009
77
SouthernAppalachiaRegion (SAPP)
Gulf LigniteFour Corners
NorthernLignite
Western Bit
Coal is AbundantCoal is Abundant
Coa l i s t h eCoa l i s t h ef ou n d a t i o n o ff ou n d a t i o n o f
Ame r i c a Ame r i c a ss
e n e r g ye n e r g y
secu r i t y ~secu r i t y ~
a cco u n t i n g f ora cco u n t i n g f o r
93% o f f ossi l93% of fossi lf u el r eser v es i nf u el r eser v es i n
t h e U .S. & 27%t h e U.S. & 27%
o f w o r l d w i d eo f w o r l d w i d e
coa l r eser vescoa l r eser ves
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$0
$4
$8
$12
$16
$20
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009YTD
Coal Oil Natural Gas
$ per mmBtu
Th e de l i v e r edThe del i v er ed
cost o f coa l i scost o f coa l i s
cons i st en t l y l esscons i s t en t l y l ess
t h a n t h a t o f o t h ert h a n t h a t o f o t h erf ossi l f u el sf ossi l f u el s
Sources: Energy Information Agency; Barclays Capital Markets ReSources: Energy Information Agency; Barclays Capital Markets Researchsearch
Coal is Reliable
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MA 16.2 25%
CT 17.0 15%
NH 14.6 15%
RI 16.1 0%
NJ 14.9 15%VT 12.3 0%
MD 13.0 58%
DE 12.3 70%
= average retail priceper kilowatt hour
for CY 2008% = percent of totalgeneration from coalfor CY 2008
10.830%
7.462%
6.6
91%
6.78%
6.566%
5.794%
8.665%
7.37%
7.673%
8.374%
9.922%
13.01%
6.5
82%
7.152%
10.937%
7.077%
7.860%
8.048%
6.981%
9.248%
9.137%
9.066%
7.847%
9.426%
9.261%
7.195%
8.485%
8.935%
8.651%
9.063%
7.941%
6.3 94%
9.453%
8.161%
8.0 63%
5.71%
14.510%
29.215%
< 9.5
> 9.5
Hydro
16.714%
8.1
44%
5.698%
Coal is Affordable and Results in LowerCoal is Affordable and Results in Lower
Electricity Costs to ConsumersElectricity Costs to Consumers
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Coal Drives Economic GrowthCoal Drives Economic Growth
November 3, 2009: Warren BuffettNovember 3, 2009: Warren Buffett
announced Berkshire Hathaway, Inc.announced Berkshire Hathaway, Inc.ss
Purchase of Burlington Northern Santa FePurchase of Burlington Northern Santa FeCorp. for $44 BillionCorp. for $44 Billion
Coal accounted for almost half theCoal accounted for almost half the
tonnage moved by BNSF in the first ninetonnage moved by BNSF in the first nine
months of 2009months of 2009
ItIts an alls an all--in wager on the economicin wager on the economic
future of the United States.future of the United States.
-- Warren Buffett, Berkshire Hathaway, Inc.Warren Buffett, Berkshire Hathaway, Inc.
Source: Reuters
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Coal is the WorldCoal is the Worlds Fastest Growing Fuels Fastest Growing Fuel
27 %
20 %
16%
7 %
4%
0 5 10 15 20 25 30
Coal
Hydro
Natural Gas
Oil
Nuclear
FiveFive--year change in global energy consumption (2003year change in global energy consumption (2003 2008)2008)
CAGR
0.7%
1.3%
3.1%
3.8%
4.9%
Source: BP Statistical Review of World Energy, June 2009.Figures represent change from 2003 to 2008.
1111
Coal demand expected toCoal demand expected to
exceed growth in naturalexceed growth in naturalgas, nuclear, hydro, wind,gas, nuclear, hydro, wind,
and solar combinedand solar combined
through 2025through 2025(1)(1)
(1) International Energy Agency, World Energy Outlook 2008.
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Coal Provides Developing Nations A Path ToCoal Provides Developing Nations A Path To
ProsperityProsperity
Electricity Usage Per Capita
0
3,000
6,000
9,000
12,000
15,000
$0 $10,00
0
$20,00
0
$30,00
0
$40,00
0
$50,00
0
GDP Per Capita (in $U.S.)
Kilowatt-HoursPerCapita
U.S.U.S.
RussiaRussia
AustraliaAustralia
U.K.U.K.
ItalyItaly
MexicoMexico
BrazilBrazil
IndiaIndia
S. KoreaS. Korea
ChinaChina
Sources: World Bank (2208); United Nations Human DevelopmentSources: World Bank (2208); United Nations Human Development
Report 2007/2008; and United Nations World Statistic PocketbookReport 2007/2008; and United Nations World Statistic Pocketbook
and Statistical Yearbookand Statistical Yearbook
Passenger Vehicles / 1,000 People
0
200
400
600
800
$0 $10,000 $20,000 $30,000 $40,000 $50,000
GDP Per Capita (in $U.S.)
Carsper1,00
0People
U.S.U.S.
RussiaRussia
AustraliaAustralia
U.K.U.K.
ItalyItaly
MexicoMexicoBrazilBrazil
IndiaIndia
S. KoreaS. Korea
ChinaChina
Saudi ArabiaSaudi Arabia
Saudi ArabiaSaudi Arabia
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Outlook for CoalOutlook for Coal
Main fuel source for electricity generationMain fuel source for electricity generation
Global demand outpaces other energy sourcesGlobal demand outpaces other energy sources
U.S. demand slowed due to downturn,U.S. demand slowed due to downturn,
growth expected to rebound with recoverygrowth expected to rebound with recovery
Illinois Basin and Powder River Basin willIllinois Basin and Powder River Basin will
gain market share, Northern Appalachia will holdgain market share, Northern Appalachia will holdsteady, Central Appalachia will retreatsteady, Central Appalachia will retreat
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Investing in AllianceInvesting in Alliance
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Why Alliance?Why Alliance?
3939thth out ofout of 10,00010,000 companies forcompanies for total returntotal return toto
shareholders over the lastshareholders over the last 10 years10 years
DeliveredDelivered 29.0% compounded annual return29.0% compounded annual return toto
ARLP unitholdersARLP unitholders over that periodover that period
1515
Standard & Poors recently rankedStandard & Poors recently ranked ARLP ARLP ..
Source: S&P, November 2009
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Why Alliance?Why Alliance?
Positive longPositive long--term coal fundamentalsterm coal fundamentals
Growing scrubber marketsGrowing scrubber markets
Strong balance sheet and liquidityStrong balance sheet and liquidity
Aligned interests of management and unitholdersAligned interests of management and unitholders
Consistent track record of cash flow and distributionConsistent track record of cash flow and distribution
growthgrowth
1616
TheThe M L P Co a l I n v estm en t M L P Co a l I n v estm en t leveragingleveraging..
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Alliance SnapshotAlliance Snapshot
Corporate HeadquartersCorporate Headquarters Tulsa, OklahomaTulsa, Oklahoma
11
22
33 55 66
44
99
88
1212
1111
1010
llinois
llinois
ndiana
ndiana
Ohio
hio
Pennsylvaniaennsylvania
Maryland
aryland
Virginia
irginia
West
est
Virginia
irginia
entucky
entucky
77
Current Mining OperationCurrent Mining Operation Future Growth ProjectFuture Growth Project Transfer TerminalTransfer Terminal
Pattiki ComplexPattiki Complex
River View ComplexRiver View Complex
Dotiki ComplexDotiki Complex
Mount VernonMount Vernon
Transfer TerminalTransfer Terminal
Warrior ComplexWarrior Complex
Hopkins ComplexHopkins Complex
Gibson ComplexGibson Complex
Pontiki ComplexPontiki Complex
MC Mining ComplexMC Mining Complex
Tunnel Ridge ComplexTunnel Ridge Complex
Penn Ridge ComplexPenn Ridge Complex
Mettiki ComplexMettiki Complex
33
44
11
22
55
66
77
88
99
1010
1111
1212
1717
Nine underground miningNine underground mining
complexescomplexes
Three development projectsThree development projects
in the growing ILB and NAPPin the growing ILB and NAPP
marketsmarkets
Currently over 3,000Currently over 3,000employees growing to moreemployees growing to more
than 3,700 by 2011than 3,700 by 2011
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Alliance Operations SummaryAlliance Operations Summary
2008 Production26.4 Million Tons
Reserves - 2008686 Million Tons
Illinois Basin77% Illinois Basin74%NorthernAppalachia
22%
CentralAppalachia
12%
NorthernAppalachia
11%
CentralAppalachia
4%
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Well Positioned in Scrubber MarketsWell Positioned in Scrubber Markets
Future growth potential for scrubber market bodes well for AlliaFuture growth potential for scrubber market bodes well for Alliancences highs high
sulfur operationssulfur operations
Source:Source: VentyxVentyxNet Winter Capacity as of September 2009Net Winter Capacity as of September 2009
(1)(1) Assumption used to convert gigawatts of capacity to million tonsAssumption used to convert gigawatts of capacity to million tons of coal:of coal:9,600 Btu/9,600 Btu/KwhrKwhrplant heat rate, 75% plant capacity factor, 12,500 Btu coal.plant heat rate, 75% plant capacity factor, 12,500 Btu coal.
Current and Projected Eastern U.S. Installed Scrubber CapacityCurrent and Projected Eastern U.S. Installed Scrubber Capacity
220220220220220220 220 220 220 220 220 220
190160
13011060
0
170 170 170 170 180 190
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
MillionTo
ns
(1)
Installed Scrubber Capacity Incremental Scrubber Capacity
12,500 Btu Equivalent12,500 Btu Equivalent
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Large Inventory of Organic GrowthLarge Inventory of Organic Growth
ProjectsProjects Under constructionUnder construction
Estimated reserves ~ 70 million tons high sulfur coalEstimated reserves ~ 70 million tons high sulfur coal
Production capacity ~ 6 million tons/yearProduction capacity ~ 6 million tons/year
Initial longwall production in late 2011Initial longwall production in late 2011
Capital estimated to be $265Capital estimated to be $265--$285 million excluding$285 million excludingcapitalized development and interest costscapitalized development and interest costs
Tunnel RidgeTunnel Ridge
Initiating permitting processInitiating permitting process
Estimated reserves ~ 57 million tons high sulfur coalEstimated reserves ~ 57 million tons high sulfur coal
Production capacity ~ 5 million tons/yearProduction capacity ~ 5 million tons/year
Penn RidgePenn Ridge
Currently operating three production unitsCurrently operating three production units
Scheduled to reach full production capacity of 6.4Scheduled to reach full production capacity of 6.4million tons/year by mid 2010million tons/year by mid 2010
Estimated reserves ~ 105 million tons high sulfur coalEstimated reserves ~ 105 million tons high sulfur coal
Estimated capital expenditures of $250Estimated capital expenditures of $250--$275 million$275 million
River ViewRiver View
Permitting in progressPermitting in progress
Estimated reserves ~ 83 million tons medium sulfurEstimated reserves ~ 83 million tons medium sulfurcoalcoal
Production capacity ~ 2.7Production capacity ~ 2.7 3.1 million tons/year3.1 million tons/year
Gibson SouthGibson South
IllinoisIllinois
IndianaIndiana OhioOhio
PennsylvaniaPennsylvania
MarylandMaryland
VirginiaVirginia
WestWest
VirginiaVirginia
KentuckyKentucky
2020
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Strong Balance SheetStrong Balance Sheet
Ample LiquidityAmple LiquidityConservative LeverageConservative Leverage
$350 million private placement of$350 million private placement ofSenior Notes completed 06/26/08Senior Notes completed 06/26/08
$205 million at 6.28% due 2015$205 million at 6.28% due 2015
$145 million at 6.72% due 2018$145 million at 6.72% due 2018
Existing $150 million revolvingExisting $150 million revolving
credit facility expires in 2012credit facility expires in 2012
Liquidity of ~ $228 millionLiquidity of ~ $228 millionavailable at September 2009available at September 2009
Current debt amortization of $18Current debt amortization of $18million annuallymillion annually
Visible cash flow growthVisible cash flow growth
2121
ARLP Oil & Gas
MLPs
Propane
MLPs
Pipeline &
Processing
All Ener gy
MLPs
2.2x2.2x
1.1x1.1x
4.5x4.5x4.5x4.5x
3.1x3.1x
Debt / LTM EBITDADebt / LTM EBITDA(1)(1)
(1) Source: SMH Capital, Inc. as of October 29, 2009.
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Alliance Partnership ProfilesAlliance Partnership Profiles
NASDAQ Symbol:NASDAQ Symbol: ARLPARLP AHGPAHGP
Unit Price:Unit Price: $39.04$39.04 $24.61$24.61
Annualized Distribution:Annualized Distribution: $3.04$3.04 $1.76$1.76
Distribution Yield:Distribution Yield: 7.8%7.8% 7.2%7.2%
Equity Market Cap:Equity Market Cap: $1,424 mm$1,424 mm $1,455 mm$1,455 mm
Enterprise Value:Enterprise Value: $1,772 mm$1,772 mm $1,455 mm$1,455 mm
Ownership Interests in Alliance ResourceOwnership Interests in Alliance Resource
1.98% G.P. Interest1.98% G.P. Interest
100% of Incentive Distribution Rights100% of Incentive Distribution Rights
15.5 mm Alliance Resource common15.5 mm Alliance Resource common
units representing approximatelyunits representing approximately
42.5% of the ARLP units outstanding42.5% of the ARLP units outstanding
5th largest eastern coal producer5th largest eastern coal produceroperating 9 underground miningoperating 9 underground mining
complexescomplexes
686 million tons of reserves at686 million tons of reserves atDecember 31, 2008December 31, 2008
Asset Profile:Asset Profile:
Source: Market data as of December 2, 2009.Source: Market data as of December 2, 2009.
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Consistent Track Record of GrowthConsistent Track Record of Growth
(1)(1) Excludes transportation revenuesExcludes transportation revenues
(2)(2) EBITDA is a nonEBITDA is a non--GAAP measure defined as income before net interest expense, incoGAAP measure defined as income before net interest expense, income taxes and depreciation, depletion and amortizationme taxes and depreciation, depletion and amortization(3)(3) LTM as of September 30, 2009LTM as of September 30, 2009
EBITDAEBITDA(2)(2) ARLP Distribution Per UnitARLP Distribution Per Unit
CAGR:1
8.4% $2.89
$1.24 $1.58
$1.92$2.20
$2.53
2004 2005 2006 2007 2008 2009LTM
ProductionProduction RevenueRevenue (1)(1)
CAGR:1
4.8% $1,243.8
$623.5
$799.6
$920.0$995.6
$1,111.8
2004 2005 2006 2007 2008 2009LTM
$inmillio
ns
CAGR: 16.7
%
$320.0
$147.9
$230.1 $250.9 $267.0 $257.8
2004 2005 2006 2007 2008 2009LTM
$inMillions
CAGR:5.0%
26.026.424.323.722.3
20.4
2004 2005 2006 2007 2008 2009LTM
MillionsofTon
s
2323Source: Company filingsSource: Company filings
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Consistent Track Record of DistributionConsistent Track Record of Distribution
GrowthGrowthOver the last three yearsOver the last three years
ARLP has increased distributions 52%ARLP has increased distributions 52%
AHGP has increased distributions 105%AHGP has increased distributions 105%
$2.24
$2.64
$3.04
$2.00
$1.25
$1.50
$1.75
$2.00
$2.25
$2.50
$2.75
$3.00
$3.25
Sep-06
Dec-06
Mar-0
7
Jun-07
Sep-07
Dec-07
Mar-0
8
Jun-08
Sep-08
Dec-08
Mar-0
9
Jun-09
Sep-09
ARLPARLP
Source: Company filings
AHGPAHGP
$1.06
$1.76
$1.56
$0.86
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
Sep-06
Dec-0
6
Mar-0
7
Jun-0
7
Sep-07
Dec-0
7
Mar-0
8
Jun-0
8
Sep-08
Dec-0
8
Mar-0
9
Jun-0
9
Sep-09
15.0%
CAGR
AnnualizedQuarterlyD
istribution
AnnualizedQuarterlyD
istribution
27.0%
CAGR
Annuali
zedQuarterlyDistribution
Annuali
zedQuarterlyDistribution
2424
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8.6%
12.8%
(16.7%)
1.4%
2.4%
0.7%
7.1%
ARLP AHGP Oil & Gas
MLPs
Propane
MLPs
Pipeline &
Processing
All Energy
MLPs
All GPs
Strong Distribution GrowthStrong Distribution Growth
LTM Distribution Growth %LTM Distribution Growth %
Source: SMH Capital, Inc. as of October 29, 2009
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Alliance Resource Partners, L.P.Alliance Resource Partners, L.P.
Pe r f o rm a n c e P e r f o rm a n c e
Proven track record ofProven track record of superior operatingsuperior operating andand financial resultsfinancial results
Clear strategy andClear strategy andvisible inventory of growth prospectsvisible inventory of growth prospects
Resu l t sResu l t s ( a )( a )
ARLPARLP has delivered a 603has delivered a 603% total return to unitholders% total return to unitholders since its IPOsince its IPO
Alliance Holding GP, L.P.Alliance Holding GP, L.P.
Op p o r t u n i t y O p p o r t u n i t y
IDRsIDRs provide leverage to distribution growth potential of ARLPprovide leverage to distribution growth potential of ARLP
Management Investors own 79.4% of all outstanding unitsManagement Investors own 79.4% of all outstanding units
Resu l t sResu l t s ( a )( a )
AHGPAHGP hashas increased distributions 105%increased distributions 105% since its IPOsince its IPO
(a) As of November 2, 2009 (assuming reinvestment of dis(a) As of November 2, 2009 (assuming reinvestment of distributions)tributions)
Alliance Investment Take AwaysAlliance Investment Take Aways
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Wells Fargo SecuritiesWells Fargo SecuritiesMLP & Pipeline SymposiumMLP & Pipeline Symposium
December 8, 2009December 8, 2009
Brian L. CantrellBrian L. Cantrell
Chief Financial OfficerChief Financial Officer