A LEADING PRODUCER OF NATURAL SODA ASH

Transcription

1 A LEADING PRODUCER OF NATURAL SODA ASH OCI RESOURCES LP INVESTOR PRESENTATION AUGUST 2014 OCI Resources LP 1

2 ORGANIZATIONAL OVERVIEW

3 Organizational Structure OCI Enterprises Inc. 100% OCI Chemical Corporation OCI Company (Korea) - Strong sponsor commitment from $4+ bn market cap company - Since 1996, OCI has invested more than $400 mn in maintenance, efficiency, and expansion capital expenditures increasing production to 2.5 mn short tons Natural Resource Partners L.P. 100% 100% OCI Wyoming Holding Co. (Common and Subordinated units) 100% NRP Trona LLC Public Unitholders (Common units) OCI Resource Partners LLC (General partner) 25.1% L.P. Interest 72.9% L.P. Interest 2% G.P. Interest IDRs OCI Resources LP ( OCI Resources ) 51% Member Interest OCI Wyoming LLC 49% Member Interest ( OCI Wyoming ) OCI Resources LP 3

4 INVESTMENT HIGHLIGHTS

5 Attractive Industry Structure Limited Natural Capacity Globally (Production Method, by Percentage of Volume) Well-Structured Industry (North America Soda Ash Market Share by Capacity) Hou 25% Other Synthetic 5% Natural 25% Searles 10% Alcali 2% OCI 19% Total Global Capacity: 73.5 mn ST Tata 20% Total North American Capacity: 14 mn ST Synthetic Production Capacity Solvay 45% Solvay 19% FMC 30% US soda ash producers using Trona have significant cost advantages (1/3 to 1/2 of competing processes) from lower energy costs and raw material price exposures year reserve life - Lowest ore-to-ash ratio - Closest to surface minerals - Highest production per employee - Best safety record Source: IHS OCI Resources LP 5

6 Stable End-Markets with Broad Geographic Exposure Global Soda Ash Consumption by End Market (By Volume) U.S. Soda Ash Domestic / Export Split (By Percentage of Volume) Other 19% Flat 26% Glass Products Metals & Mining 6% Total Global Demand: 59 mn ST 58% 56% 54% 52% 53% 49% 49% 45% 43% Chemicals 9% 42% 44% 46% 48% 47% 51% 51% 55% 57% Soaps & Detergents 14% Other 6% Container 20% Exports Domestic Global market demand expected to grow at ~5% from E Source: IHS Source: IHS, U.S. Geological Survey. OCI Resources LP 6

7 Stable Customer Relationships Approximately 70% of OCI s domestic sales were made to customers with which OCI has had relationships in excess of 10 years. Sales Breakdown by Revenue ($ in millions) $363.1 $421.9 $462.6 $442.1 Majority export sales via ANSAC Domestic Customers Most domestic customer contracts range from 1-3 years Domestic contracts are typically renewed upon expiration 10+ year relationship with 70% of domestic customers 44% $ % $ % $ % $247.1 Export Customers 56% 43% 48% 44% $205.3 $203.3 $199.4 $195.1 Majority of export sales sold through American Natural Soda Ash Corp. (ANSAC) International sales, marketing and logistics for OCI and two other leading U.S. producers Domestic Export Incremental increases in production volume have been exported due to growing international demand Conducive to stability and growth of U.S. producers Leverages economies of scale (logistics) Operates under an exemption from the antitrust laws allowing it to be the exclusive export outlet OCI Resources LP 7

8 Organic and Acquisition Growth Opportunities OCI will capitalize on organic expansion & make accretive acquisitions to drive growth. Capitalize on organic expansion opportunities Emerging Market Growth Debottlenecking, Deca and Efficiency Enhancements driving approximately 100,000 ST annual production volume growth Low additional fixed cost from expansion projects leads to annual EBITDA growth of 6%-8% Increasing baseline of production promotes healthy quarterly distribution growth Pursue accretive acquisitions Aggressively pursuing qualifying MLP opportunities Industrial Minerals / Inorganic Chemical Assets Logistics Assets Assets currently existing or to be developed at OCI OCI Resources LP 8

9 OCI Resources Investment Highlights 1 Lowest Cost Soda Ash Production 2 Significant Reserve Life 3 Operational Advantages 4 Strong Safety Record and Environmental Responsibility 5 Stable Customer Relationships 6 Organic and Acquisition Growth Opportunities 7 Strong Management Team OCI Resources LP 9

10 FINANCIAL SUMMARY

11 Second Quarter 2014 Financial Highlights $ Millions (except Per Unit and Volume Amounts) 2Q14 2Q13 1H H 2013 Net Sales Net Income Adjusted EBITDA Distributable Cash Net Income per Unit Net Debt (Cash) Volumes Sold ST ,265 1,238 Ore to Ash Ratio Capital Expenditures Coverage Ratio since IPO OCI Resources LP 11

12 Operating and Financial Performance of OCI Wyoming LLC Soda Ash Volume Sold (millions of ST) Adjusted EBITDA & Margin (2) ($ in millions) 29.9% 30.8% % 23.1% $ % 24.6% 1.8 $126 $ $90 $84 $ YTD YTD EBITDA EBITDA Margin (1) Operating rate expresses the amount of soda ash produced in a given year as a percentage of our effective capacity for that year. Effective capacity reflects the volume of soda ash that we can produce using our current operational resources, taking into account scheduled and unscheduled downtime and idled capacity (2) See slide 30 and 31 for reconciliation of Adjusted EBITDA to GAAP net income OCI Resources LP 12

13 Strong Financial Position and Financial Strategy Leverage & Liquidity Total Debt / Adjusted EBITDA of 1.5x Debt to Capitalization of 39% $45 million of available liquidity under our credit facilities at end of June 2014 Distribution Stability 1.28x coverage ratio in first half of 2014 Diversity of domestic and international contracts and customers Distribution Growth Capitalize on growing demand for soda ash Increase operational efficiencies: Invested $400mn in maintenance, efficiency, and expansion related capital expenditures since 1996 Maintain financial flexibility Expand operations strategically OCI Resources LP 13

14 Appendix

15 Lowest Cost Soda Ash Production US soda ash producers using Trona have significant cost advantages from lower energy costs and raw material price exposures. U.S. Trona Solvay Hou Process Mining and refining Trona Synthetic production Synthetic production Raw Materials Trona Salt (brine), Limestone, Ammonia Salt (brine), Ammonia, Carbon Dioxide Energy Usage ~1/3 energy cost Energy Intensive Energy Intensive By-Products Deca (able to process into soda ash) Calcium Chloride (waste product) Ammonium chloride (co-product) 1/3~1/2 cost of competing processes (1) 2.9x 2.7x 2.6x Relative Soda Ash Production Costs (1) 1.0x U.S. Trona (Natural Gas) European Solvay China Solvay China Hou Source: IHS (1) Cost to produce 1 metric ton of soda ash as a multiple of Trona based production. OCI Resources LP 15

16 Significant Reserve Life Reserve Life Summary Ore Layout Summary LOWER BED UPPER BED Upper Bed Lower Bed 800ft 1,100ft Reserve Life Calculation (Hollberg) Basis Recoverable Reserves Projected Annual Consumption minimum 85% Grade 263 mn ST 4 mn ST = Implied Mine Life 66 Years Source: Hollberg Professional Group Note: Assumes 2013 mining rate of 4.0mn ST per year OCI Resources LP 16

17 Trona Beds Closest to the Surface Beds 24 & 25 (closest to surface) are the key for lower manufacturing costs as lower halite impurities and shallow beds are conducive to efficient mining. Schematic Section Green River Basin OCI Resources LP 17

18 Unique Pond Network Lowers Ore to Ash Ratio Wider pond surface area and a unique pond network facilitate the minimization of soda ash lost in processing Trona. Advantageous Facility Layout Ponds enable OCI to recover soda ash via deca rehydration otherwise lost in processing Trona Technological innovation enables OCI to be more cost efficient Ore to Ash Ratio (1) (1) Amount of short tons of Trona ore required to produce one short ton of soda ash/liquor OCI Resources LP 18

19 Most Efficient Soda Ash Producer in Green River Basin OCI has the highest soda ash production per employee. We have the most efficient soda ash production facility in the Green River Basin. Production Per Employee (x10 ST, 2013) 575 Peer Peer Peer Source: State of Wyoming Mining Report, Wyoming Department of Environmental Quality, Annual Report State Inspector of Mines of Wyoming. OCI Resources LP 19

20 Strong Safety Record and Environmental Responsibility Consistent safety recognition to date is a testament to our commitment. Long Tradition of Excellence in Safety 2009, 2010 and 2011 IMA-NA / MSHA Top Safety Achievement Award (National) 2008, 2009, 2010, 2011 and 2012 WY State Mine Inspector s Top Safety Excellence Award Environmentally Responsible Trona based process produces less CO 2 emissions than synthetic production processes Technology for Tailings Management Zero discharge for waste water from operations Safety Statistics for Wyoming Soda Ash Producers (For Year Ended December 31, 2013) Peer 3 Peer 2 Peer 1 Citations Recordable Injuries Lost Work Day Injuries Source: Mine Safety and Health Administration. OCI Resources LP 20

21 Process Overview Mining Process Flow Refining Process Flow Continuous Mining Haulage Crushing Surge Storage Hoisting OCI s Unique Process Screening & Crushing Calcining Dissolving Filtering Deca Rehydration Shipping Storage Drying Evaporation OCI Resources LP 21

22 Facilities Overview and Mining Assets Mining Assets Mining Lease Map Land Surface Area: approx. 880 Acres Mine Lease Area: 23,500 Acres Water Supply Electricity Railroad Storage Green River Rocky Mountain power Union Pacific WATCO (Switching Provider) 7 storage silos with 65,000 short ton capacity Mining Assets Shafts 2 mining beds (upper & lower) 6 large continuous mining machines 5 active faces 10 underground shuttle cars 3 shafts 1 Man & materials Fresh air 2 Ore Return air to fans 3 Ore Fresh Air Source: Hollberg Professional Group (for Mining Lease Map ) OCI Resources LP 22

23 Chinese FOB Export Prices $320 $290 $290 $250 $230 $230 $270 $250 $220 $265 $240 $220 $205 $195 $195 $225 $255 $220 $230 $213 $240 $223 $190 $185 $180 $185 $165 $165 Q Q Q Q Q Q Q Q Q Q Q Q Q Q High - Per Metric Ton Low - Per Metric Ton Source: IHS. OCI Resources LP 23

24 Stable and Growing Demand Global demand grew by ~3% annually from The growth in demand was primarily driven by China. Industry forecasts volume to grow ~3-4% over the next 5 years with demand driven by emerging markets. Global Demand by Volume (million of ST) ~ E 2023E Source: IHS. OCI Resources LP 24

25 Non-GAAP Reconciliation OCI Resources Pro Forma Quarter Ended 6/30/13 Quarter Ended 6/30/14 Net Income $16.6 $21.1 Add Depreciation and Amortization Interest Expense (net) Provision for Income Taxes Adjusted EBITDA Less: Adjusted EBITDA Attributable to Non-controlling Interest Adjusted EBITDA Attributable to Predecessor / OCI Resources $10.5 $14.0 Non-GAAP Financial Measures We define Adjusted EBITDA as net income (loss) plus net interest expense, income tax, depreciation and amortization, unrealized derivative gains and losses and certain other expenses that are non-cash charges or that we consider not to be indicative of ongoing operations. Adjusted EBITDA is a non-gaap supplemental financial liquidity and performance measure that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess: our operating performance as compared to other publicly traded partnerships in our industry, without regard to historical cost basis or financing methods; the ability of our assets to generate sufficient cash flow to make distributions to our unitholders; our ability to incur and service debt and fund capital expenditures; and the viability of capital expenditure projects and the returns on investment of various investment opportunities. We believe that the presentation of Adjusted EBITDA in this investor presentation provides useful information to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA are net income and cash flow from operations. Our non-gaap financial measure of Adjusted EBITDA should not be considered as an alternative to net income or cash flow from operations. Adjusted EBITDA has important limitations as an analytical tool because it excludes some but not all items that affect net income and cash flows from operations. You should not consider Adjusted EBITDA in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA may be defined differently by other companies, including those in our industry, our definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing its utility. OCI Resources LP 25

26 Non-GAAP Reconciliation OCI Resources Pro Forma Year Ended 12/31/12 Year Ended 12/31/13 Net Income $101.0 $70.6 Add Depreciation and Amortization Interest Expense (net) Provision for Income Taxes Adjusted EBITDA Less: Adjusted EBITDA Attributable to Non-controlling Interest Adjusted EBITDA Attributable to Predecessor / OCI Resources $72.7 $52.9 Non-GAAP Financial Measures We define Adjusted EBITDA as net income (loss) plus net interest expense, income tax, depreciation and amortization, unrealized derivative gains and losses and certain other expenses that are non-cash charges or that we consider not to be indicative of ongoing operations. Adjusted EBITDA is a non-gaap supplemental financial liquidity and performance measure that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess: our operating performance as compared to other publicly traded partnerships in our industry, without regard to historical cost basis or financing methods; the ability of our assets to generate sufficient cash flow to make distributions to our unitholders; our ability to incur and service debt and fund capital expenditures; and the viability of capital expenditure projects and the returns on investment of various investment opportunities. We believe that the presentation of Adjusted EBITDA in this investor presentation provides useful information to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA are net income and cash flow from operations. Our non-gaap financial measure of Adjusted EBITDA should not be considered as an alternative to net income or cash flow from operations. Adjusted EBITDA has important limitations as an analytical tool because it excludes some but not all items that affect net income and cash flows from operations. You should not consider Adjusted EBITDA in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA may be defined differently by other companies, including those in our industry, our definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing its utility. OCI Resources LP 26

27 Non-GAAP Reconciliation OCI Resources Historical Year Ended December 31, Net Income $77.6 $54.9 $51.6 $88.0 $101.8 Add Depreciation and Amortization Interest Expense (net) Provision for Income Taxes Adjusted EBITDA Non-GAAP Financial Measures We define Adjusted EBITDA as net income (loss) plus net interest expense, income tax, depreciation and amortization, unrealized derivative gains and losses and certain other expenses that are non-cash charges or that we consider not to be indicative of ongoing operations. Adjusted EBITDA is a non-gaap supplemental financial liquidity and performance measure that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess: our operating performance as compared to other publicly traded partnerships in our industry, without regard to historical cost basis or financing methods; the ability of our assets to generate sufficient cash flow to make distributions to our unitholders; our ability to incur and service debt and fund capital expenditures; and the viability of capital expenditure projects and the returns on investment of various investment opportunities. We believe that the presentation of Adjusted EBITDA in this investor presentation provides useful information to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA are net income and cash flow from operations. Our non-gaap financial measure of Adjusted EBITDA should not be considered as an alternative to net income or cash flow from operations. Adjusted EBITDA has important limitations as an analytical tool because it excludes some but not all items that affect net income and cash flows from operations. You should not consider Adjusted EBITDA in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA may be defined differently by other companies, including those in our industry, our definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing its utility. OCI Resources LP 27

28 Non-GAAP Reconciliation Coverage Ratio Rolling Non-GAAP Reconciliation Schedule Year ended December 31, Q1 Q Total ($ in millions, except per unit data) Reconciliation of net income to EBITDA and distributable cash flow: Net income $ 70.6 $ 21.6 $ 21.1 $ Add backs: Depreciation and amortization expense Interest expense, net Taxes EBITDA $ $ 28.2 $ 28.2 $ Less: EBITDA attributable to non-controlling interest EBITDA attributable to OCI Resources LP/Predecessor $ 47.1 $ 13.9 $ 14.0 $ 75.0 Less: EBITDA attributable to Predecessor through September 17, $ 29.8 EBITDA attributable to OCI Resources LP $ $ 45.2 Less: Cash interest expense, net attributable to OCIR $ 0.8 $ 1.9 Maintenance capital expenditures attributable to OCIR (1) $ 3.8 Distributable cash flow attributable to OCI Resources LP (2) $ $ 39.5 Cash distribution declared per unit $ Total units outstanding Total distributions to unitholders and general partner $ Distribution Coverage Ratio (1) The Partnership may fund expansion-related capital expenditures with borrowings under existing credit facilities such that expansion-related capital expenditures will have no impact on cash on hand or the calculation of cash available for distribution. In certain instances, the timing of the Partnership s borrowings and/or its cash management practices will result in a mismatch between the period of the borrowing and the period of the capital expenditure. In those instances, the Partnership adjusts designated reserves (as provided in the partnership agreement) to take account of the timing difference. Accordingly, expansion-related capital expenditures have been excluded from the presentation of cash available for distribution. (2) Distributable cash flow is only calculated subsequent to September 17, OCI Resources LP 28

29 Capital Structure Capitalization OCI Resources Pro Forma Available Liquidity ($ in millions) As of June 30, 2014 ($ in millions) Facility Size Available Liquidity Cash and Cash Equivalents $46.4 Long Term Debt OCI Wyoming Credit Facility $135.0 Revenue Bonds due Revenue Bonds due Revolving Credit Facility 0.0 Total Long Term Debt $155.0 Total Equity Total Capitalization $395.2 Revolving Credit Facility $10.0 $10.0 OCI Wyoming Credit Facility (1) Total $200.0 $45.0 (1) Includes outstanding borrowing of $135 mn and $20 mn of revenue bonds. OCI Resources LP 29

30 IDR Structure and Subordination Period OCIR IDR Structure Marginal Percentage Distribution per Unit Range Interest in Distributions (expressed as % of MQD) LP Share GP Share From To Initial Split 98% 2% 0% % 2nd Split 85% 15% 115% % 3rd Split 75% 25% 125% % 4th Split 50% 50% 150% -- above OCIR Subordinated LP Units Subordination % 49% Subordination Period Early Termination of Subordination Period The subordination period will end on the first business day after the MLP has earned and paid at least the minimum quarterly distribution on an annualized basis on each outstanding common, subordinated and general partner unit, for each of three consecutive, non-overlapping four-quarter periods ending on or after September 30, 2016 None OCI Resources LP 30

31 Safe Harbor Statement This presentation may contain forward-looking statements. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. Caution should be taken not to place undue reliance on any such forward-looking statements because actual results may differ materially from the results suggested by these statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and present expectations or projections. These risks and uncertainties include, but are not limited to, those described in the Risk Factors section of OCIR s 10-K dated March 14, 2014, and those described from time-to-time in our periodic and other reports filed with the Securities and Exchange Commission. OCI Resources LP 31