This document is a pitch presentation for a proposed merger between Peabody Energy and Cloud Peak Energy. It provides an overview of each company, including operational details, financial statistics, and analyst commentary. Peabody is the world's largest private-sector coal company, while Cloud Peak operates solely in the Powder River Basin of Wyoming. The presentation outlines the benefits of combining the two companies and forming a new entity called "Summit Coal" to capitalize on growth opportunities in metallurgical and international thermal coal markets.

1. August 2011
P E A B O D Y - C L O U D P E A K M E R G E R P I T C H
Arame Niang and Joseph L. Reynolds
STRICTLYPRIVATEANDCONFIDENTIAL

2. P E A B O D Y E N E R G Y
H:Summit Coal Pitch (Arame and Joseph).pptx
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PEABODY-CLOUDPEAKMERGERPITCH

3. Agenda
Page
P E A B O D Y E N E R G Y
H:Summit Coal Pitch (Arame and Joseph).pptx
1
Peabody overview 1
Cloud Peak overview 6
Summit Coal™ 11
PEABODY-CLOUDPEAKMERGERPITCH

4. P E A B O D Y E N E R G Y
H:Summit Coal Pitch (Arame and Joseph).pptx
Peabody Energy overview
 Peabody Energy (NYSE:BTU) is the
world's largest private-sector coal
company, serving 330 customers on
six continents
 Peabody products fuel approximately
10 percent of America's and 2
percent of the world's electricity
 Peabody Energy‟s mission is to be a
leading worldwide producer and
supplier of sustainable energy
solutions
 Develop projects that provide a reliable, low-cost supply of energy
 Promote balanced energy policies and provide industry leadership in developing
clean coal technologies
 Use our assets and expertise to develop and protect the natural, human and
societal resources in the communities where we operate
 Create skilled, high paying jobs and a safe work environment
Operational overview
Peabody sustainability
2
PEABODYOVERVIEW

5. P E A B O D Y E N E R G Y
H:Summit Coal Pitch (Arame and Joseph).pptx
40
45
50
55
60
65
70
75
7/26/2010
8/26/2010
9/26/2010
10/26/2010
11/26/2010
12/26/2010
1/26/2011
2/26/2011
3/26/2011
4/26/2011
5/26/2011
6/26/2011
Source: FactSet, Company filings, Equity research
Market data as of 7/25/11
Stock price performance
Public market overview
$ mm
Price 60.58
52 week high 73.95
% of 52-week high 81.9%
Shares outstanding 270.6
Equity value $16,390.5
Total debt 2,750.0
Minority interest & preferreds 0.0
Cash 1,103.7
Firm value $18,036.8
2011 2012 2013
Sales 8,156.5 9,055.5 9,371.7
% growth 11.0% 3.5%
EBITDA 2,375.9 2,831.2 2,791.5
% margin 29.1% 31.3% 29.8%
EBIT 2193.425 2012 2013
% margin 26.9% 22.2% 21.5%
EPS 2193.425 1006.156 1006.649
Trading multiples 2011 2012 2013
FV/EBITDA 7.6x 6.4x 6.5x
P/EPS 0.0x 0.1x 0.1x
Public market overview
3
PEABODYOVERVIEW

6. P E A B O D Y E N E R G Y
H:Summit Coal Pitch (Arame and Joseph).pptx
Research analyst recommendations
“We reiterate our Buy-rating, as Peabody continues to have the best
organic growth profile and be the best-positioned to benefit from strong
Asia met and thermal coal fundamentals of companies under coverage.
We viewed positively BTU‟s confirmation its Queensland mines are fully
operational and organic growth projects continue to progress. Potential
catalysts for outperformance include continued strong met/international
thermal prices/contracting, sustained or increased Asia/European coal
imports, and greater clarity on medium term growth opportunities not
currently in our estimates.
-Goldman Sachs, 7/20/2011
“Peabody remains well positioned to benefit from the growth in
emerging economies, through both its current growth initiatives as
well as the moves it is making for longer-term growth projects in
the pipeline, most notably developing deposits in Mongolia and
China. Given Peabody‟s growing met leverage, increasing
exposure to the world‟s hottest coal markets, and recent pullback
we reiterate our Outperform rating and our target price of $75.”
-Raymond James, 7/20/2011
Firm Date „11 Recommendation
Target
price
Premium to
current
Stifel Nicolaus 07/25 Buy 74 22%
Dahlman Rose & Co 07/25 Buy 84 39%
Raymond James 07/21 Outperform 75 24%
FBR Capital Markets 07/21 Outperform 76 25%
Goldman Sachs 07/20 Buy/attractive 75 24%
Brean Murray Carret & Co 07/20 Buy 81 34%
Howard Weil Inc 07/20
Market
perform 75 24%
Iberia Capital Partners LLC 07/20 Outperform 80 32%
BMO Capital Markets 07/19 Outperform 77 27%
Deutsche Bank 07/19 Hold 70 16%
Credit Suisse 07/19 Outperform 80 32%
BB&T Capital Markets 07/19 Buy 75 24%
Atlantic Equities LLP 07/19 Overweight 75 24%
Credit Agricole Securities
(USA) 07/19 Underweight 64 6%
Citi 07/18 Buy 77 27%
JPMorgan 07/11 Restricted
(100%
)
RBC Capital Markets 06/17 Outperform 86 42%
Median 75.0 24%
Mean 75.5 6%
Select analyst targets Selected research commentary
76%79%79%84%84%
17%12%12% 17% 19%
Aug-11Jun-11Apr-11Feb-11Dec-10
Buy Hold
Research sentiments
4
PEABODYOVERVIEW

7. P E A B O D Y E N E R G Y
H:Summit Coal Pitch (Arame and Joseph).pptx
67.256.7
64.257.1
8660
73.9540.79
0 10 20 30 40 50 60 70 80 90 100
Price per share in USD
Source:
Valuation summary
52 week range
Analyst price Targets
FV/EBITDA 2011E
FV/EBITDA 2012E
5
PEABODYOVERVIEW

8. Agenda
Page
P E A B O D Y E N E R G Y
H:Summit Coal Pitch (Arame and Joseph).pptx
6
Cloud Peak overview 6
Peabody overview 1
Summit Coal™ 11
PEABODY-CLOUDPEAKMERGERPITCH

9. P E A B O D Y E N E R G Y
H:Summit Coal Pitch (Arame and Joseph).pptx
Cloud Peak Energy: Corporate overview
Business Overview Locations of Mining Operations
 Cloud Peak Energy Inc., a Delaware corporation organized on July 31, 2008, is a holding company that manages CPE
Resources.
 On December 15, 2010, Cloud Peak Energy Inc. completed the Secondary Offering, resulting in CPE Resources
becoming a wholly-owned subsidiary of Cloud Peak Energy Inc.
 Headquartered in Gillette, WY, Cloud Peak energy is among the largest producers of coal in the U.S.
 In 2010, it was named by Mine Safety and Health Administration as having one of the lowest employee injury rate.
Cloud Peak Energy operates some of the safest mines in the industry.
 It operates solely in the Powder River Basin and for this reason metallurgical coal isn‟t produced. Steam coal is
produced and is primarily consumed by electric utilities and industrial consumers as fuel for electricity generation.
 In 2010, the coal produced by Cloud Peak Energy generated approximately 4% of the electricity produced in the
U.S.
 In 2010, Cloud Peak Energy produced 95.3 million tons of coal.
 The following condensed diagram depicts the organizational structure of the company as of December 31, 2010:
 Strong Liquidity
 Expansion possibilities
 the company is in the process of expanding the
permitted mining capacity through the LBA process
 Low legacy liabilities
 The company only operates surface mines. For this
reason, its exposure to liabilities are relatively low
 Significant past investment in facilities and equipment
 The company has invested $371 million in its
mining since 2006 .
 Senior management has long experience with Cloud
Peak mines.
 Long customer relationships
Some Positives
Source: Cloud Peak Energy Inc. 10 K, equity research
7
CLOUDPEAKOVERVIEW

10. P E A B O D Y E N E R G Y
H:Summit Coal Pitch (Arame and Joseph).pptx
13
14
15
16
17
18
19
20
21
22
23
24
25
7/26/2010
8/26/2010
9/26/2010
10/26/2010
11/26/2010
12/26/2010
1/26/2011
2/26/2011
3/26/2011
4/26/2011
5/26/2011
6/26/2011
Source: FactSet, Company filings, Equity research
Market data as of 7/25/11
Stock price performance
Public market overview
$ mm
Price 23.11
% of 52-week high 93.6%
Shares outstanding 60.9
Equity value $1,406.9
Plus: Total debt 60.0
Plus: Minority interest 0.0
Less: Cash 0.3
Firm value $1,407.1
2011 2012 2013
Sales 1,469.0 1,565.9 1,693.1
% growth 6.6% 8.1%
EBITDA 337.6 346.0 419.9
% margin 23.0% 22.1% 24.8%
EBIT 229.6 277.5 310.4
% margin 15.6% 17.7 % 18.3%
EPS 1.8 1.8 2.6
Trading multiples 2011 2012 2013
FV/EBITDA 4.2x 4.1x 3.5x
P/EPS 12.8x 12.6x 8.8x
Public market overview
8
CLOUDPEAKOVERVIEW

11. P E A B O D Y E N E R G Y
H:Summit Coal Pitch (Arame and Joseph).pptx
“
“We maintain our positive stance towards the US thermal coal
market, which we believe will tighten over the next 12 months due
to quickly rising exports and continued US supply constraints, even
with weak US consumption. CLD shares are trading at 4.3x 2012
and 3.5x 2013 EBITDA…In our view this transaction should serve as
the catalyst to close that valuation gap. We reiterate our Outperform
rating.”
Credit Suisse, 5/12/2011
Research analyst recommendations
Selected research commentarySelect analyst targets
“In short, while we expected CLD to win the LBA, the purchase price
was a big positive surprise. Cloud Peak was the sole bidder on the
property…. could represent an important milestone for
CLD, which trades at a material discount to other coal producers, in
part because of the short reserve life and in part because excess cash
flow must be allocated toward reserve purchases rather than share
repurchases, dividends, etc.”
BB&T Capital Markets, 5/12/2011
Broker Date Recom.
Target
price
Premium
to current
Dahlman Rose & Co 07/25/11 Hold (100%)
Johnson Rice & Co 07/22/11 Equalweight (100%)
Raymond James 07/21/11 Outperform 26.0 13%
FBR Capital Markets 07/21/11 Outperform 28.0 21%
Brean Murray Carret & Co 07/14/11 Hold (100%)
Credit Suisse 07/14/11 Outperform 26.0 13%
Howard Weil Inc 07/13/11 Market perform 24.0 4%
Iberia Capital Partners LLC 07/08/11 Outperform 30.0 30%
IPOfinancials.com 07/05/11 Buy (100%)
BMO Capital Markets 06/05/11 Market perform 22.0 (5%)
BB&T Capital Markets 05/13/11 Hold (100%)
Simmons & Co International 05/08/11 Neutral 25.0 8%
RBC Capital Markets 05/05/11 Sector perform 25.0 8%
Tudor Pickering & Co 03/03/11 Buy 28.0 21%
Median 26.0 6%
Mean 26.0 (28%)
“Cloud’s winning PRB reserve bid is a positive for the stock, in
our view. .. bid will effectively add 12 years to the life of its flagship
Antelope mine.. The winning bid comes at a 23% lower cost than
we had modeled, reducing Cloud’s capex requirements by ~$75 mm
vs. our estimate. Reserve funding is cheaper than expected;
positive implications for next round of LBAs.”
Morgan Stanley, 5/12/2011
44%40%43%46%46%
57%54%54% 60% 56%
Aug-11Jun-11Apr-11Feb-11Dec-10
Buy Hold
Research sentiments
9
CLOUDPEAKOVERVIEW

12. P E A B O D Y E N E R G Y
H:Summit Coal Pitch (Arame and Joseph).pptx
20 26
22 28
22 30
15 25
0 5 10 15 20 25 30 35
Price per share in USD
Source:
Valuation summary
52 week range
Analyst price Targets
FV/EBITDA 2011E
FV/EBITDA 2012E
10
CLOUDPEAKOVERVIEW

13. Agenda
Page
P E A B O D Y E N E R G Y
H:Summit Coal Pitch (Arame and Joseph).pptx
11
Summit Coal™ 11
Peabody overview 1
Cloud Peak overview 6
PEABODY-CLOUDPEAKMERGERPITCH

14. P E A B O D Y E N E R G Y
H:Summit Coal Pitch (Arame and Joseph).pptx
Summit Coal™ will be that largest coal producer in the United States
 Mines in the PRB would have
access to BNSF and UP
railroads.
 Access to many equipment that
is already owned.
 Peabody will be able to develop
relationships with new domestic
utility companies and industry
plants.
 Peabody will in the future fuel
more electricity generated in the
U.S..
 Peabody‟s footprint in the PRB
would be expanded.
 This would make Peabody
become a more reliable
source of thermal coal.
 Increase the amount of mines
Peabody has in the U.S.
 Competition in the PRB would
lessen for Peabody.
 Peabody would have an
easier time acquiring more
coal reserves through the
LBA process.
New Customers Access to new materials
Competition Geographic Expansion
12
SUMMITCOAL™

15. P E A B O D Y E N E R G Y
H:Summit Coal Pitch (Arame and Joseph).pptx
Cloud Peak geographically diversifies Peabody in the US
Source:
Source: http://maps.google.com/maps/ms?authuser=0&vps=23&hl=en&ie=UTF8&oe=UTF8&msa=0&msid=208590207111999002120.0004a99b33c6839fa2085
13
SUMMITCOAL™

16. P E A B O D Y E N E R G Y
H:Summit Coal Pitch (Arame and Joseph).pptx
Height: 4.75”
Width: 8.84”
Horizontal: 1.33”
Vertical: 2.00”
Existing railways cut down on Cloud Peak to Peabody transportation time
Source: http://transportationfortomorrow.com/final_report/volume_3_html/technical_issues_papers/images/paper2d_01_img_1.jpg
14
SUMMITCOAL™

17. P E A B O D Y E N E R G Y
H:Summit Coal Pitch (Arame and Joseph).pptx
Peabody Cloud Peak Total
sales ($mm) 8,156.5 1,469.0 9.625.5
Percentage of total sales 85% 15%
Peabody
Met Coal
5%
Thermal
Coal
95%
Peabody / Cloud Peak: Illustrative combination impact
Peabody Cloud Peak Total
Thermal Coal (tons) 212.6 96.9 309.5
Met Coal (tons) 12.0 0 12.0
2012 Sales
Summit Coal
Thermal coal
96%
Met coal 4%
2012 Coal Production
Cloud Peak
Thermal
Coal
100%
Percentage of type of coal produced
15
SUMMITCOAL™

18. P E A B O D Y E N E R G Y
H:Summit Coal Pitch (Arame and Joseph).pptx
Merger would benefit Peabody‟s domestic thermal coal industry
Peabody Coal Production Cloud Peak Thermal Coal Production In Each Mine
Percentage of shipped tons of coal by state of
destination during 2010
A merger would allow Peabody to have access to
all of Cloud Peak‟s coal reserves which consist of
mainly thermal coal.
A merger would also allow Peabody access to a
wider range of thermal coal customers in the
United States.
16
SUMMITCOAL™

19. P E A B O D Y E N E R G Y
H:Summit Coal Pitch (Arame and Joseph).pptx
Acquisition financial breakdown
Four
(in millions)
Cash 1,103.7
Equity Value
16,390.5
(in millions)
Firm Value 1,407.1
Allocate Funds Raise Debt
17
SUMMITCOAL™

20. P E A B O D Y E N E R G Y
H:Summit Coal Pitch (Arame and Joseph).pptx
Acquisition financial breakdown cont‟d
Equity Value
302.2
21%
Cash
403.7
29%
Debt
701.2
50%
Cloud Peak FV Breakdown
Cloud Peak Firm Value
1,407.1 mm
18
SUMMITCOAL™

21. P E A B O D Y E N E R G Y
H:Summit Coal Pitch (Arame and Joseph).pptx
Should Peabody merge with Cloud Peak?
Our answer:
19
SUMMITCOAL™