Methanex Investor Presentation September 2014 1
Forward-looking Statements & Non-GAAP Measures Information contained in these materials or presented orally on the earnings conference call, either in prepared remarks or in response to questions, contains forward-looking statements. Actual results could differ materially from those contemplated by the forward-looking statements. For more information, we direct you to our 2013 MD&A and our second quarter 2014 MD&A, as well as the last slide of this presentation. This presentation also contains certain non-GAAP financial measures that do not have any standardized meaning and therefore are unlikely to be comparable to similar measures presented by other companies. For more information regarding these non-GAAP measures, please see our 2013 MD&A and our second quarter 2014 MD&A. 2 2
Methanex - Investment Opportunity • Methanol Global Leader • Leading market share, competitive assets, strong balance sheet • Positive Industry Outlook • Healthy demand growth outlook, limited new supply • Strong Cash Flow Generation & Distributions • 5% Normal course issuer bid implemented April 2014 • ~45% of shares bought back since 2000 • Dividend increased 10 times since implemented in 2002; ~1.5% yield • Growth Potential • Production: Geismar, Louisiana; Chile • Demand growth into energy applications & Methanol-to-Olefins (MTO) • Value • Attractive cash flow multiple and discount to replacement value 3 3
Industry Overview • ~57 million tonnes annual global demand 1 • Top producers account for ~ half of global sales • Methanex is the global leader • ~18% global merchant market share 2 • Presence in all major regions • Methanex posted methanol prices are a key pricing reference in all major markets Source: Methanex 1 Estimated annualized demand at Q2, 2014 (excluding integrated methanol to olefins (MTO) demand). Source: Methanex 2 Merchant market share represents share of total sales to non-integrated consumers of methanol. Source: Methanex 4 4
Methanol-to-Energy • Methanol prices have been closely correlated to crude oil • Methanol is manufactured from lower cost natural gas Data Source: IHS Chemical July 2014; data are averages for the period shown 5 5
Methanol-to-Energy • Liquid fuel and oil substitute, natural gas derivative • Energy security & diversification • Clean-burning, easy to transport Source: Historical data and forecast from IHS Chemical, July 2014 6 6
Methanol.. • Is primarily produced from natural gas • Has diversified end uses Energy & MTO (40% of Demand; High Growth) Traditional Uses (60% of Demand) Formaldehyde Acetic Acid Wood Industry, Pharmaceuticals, Automotive Fleece, Adhesives, Paints Fuel Blending DME (di-methyl-ether) MTO Methyl Methacrylate Methyl Chloride Methanol-to- PMMA- LCD screens, automotive Silicones Olefins MTBE Marine Fuels 7 7
Methanol Usage.. …By Derivative …By Region Source: Methanex – last 12 months as at June 30, 2014 8 8
Methanol Consumers • Concentrated consumer base • 30% of global demand from top 20 consumers • Main consumers are large, global chemical companies: • Celanese, BP, Momentive, Skyford, Sabic, BASF, etc. • Methanex supplies primarily traditional chemical derivative customers who value: • Security of supply • Global presence • Quality product 9 9
Industry Review – Strong Demand Growth • Projected 8.2% CAGR, led by energy applications 2013 – 2017 2013 2017 CAGR: R: Ene Energy: 12 12.8 .8% 2003 – 20 2003 2013 13 CAGR: R: Energy: 11 Ene 11.0 .0% Tot otal: 8.2% .2% (000s tonnes) Tot otal: 6.1% 6.1% 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E 2017E Chemical MTBE/TAME Fuel DME MTO/MTP (Merchant) Source: IHS Chemical 2014 Update, July, 2014. Excludes integrated methanol demand for methanol to olefins and propylene 10 10
Demand / Supply Balance • Demand expected to outpace new capacity over next several years • A number of projects under discussion, but limited committed capital • Supply gap will be filled through a combination of new China supply and higher operating rates for existing high-cost China plants, or lower demand Source: IHS Chemical and Methanex. IHS Chemical demand growth forecast excludes integrated demand for methanol into olefins; New capacity additions excludes China. 11 11
Methanol to Olefins (MTO) Ethylene Natural Gas Coal Oxides (EO) Petroleum Residues MEG High Purity Synthesis Ethylene Gas Production Acrylic Acid (AA) Methanol to Methanol Olefins Production ACN High Purity Propylene Propylene Wison’s 0.8 MMT merchant methanol to 0.3 MMT olefins plant Oxide PE • MTO is an emerging oil product substitution opportunity • Two main pathways progressing Integrated – olefins produced directly from coal, methanol an intermediate step • Merchant (MTO) – methanol purchased from external suppliers • • China merchant capacity is developing rapidly 3 merchant plants operating (methanol demand over 3 million tonnes per annum) • 12 12
Methanol as a Fuel • Methanol has attractive features as a transportation fuel: • Liquid fuel – can be blended with gasoline and ethanol in today’s vehicles at minimal incremental costs • High octane fuel which reduces emissions when blended with (or substituted for) gasoline • A safe fuel which biodegrades quickly (compared to petroleum fuels) in case of a spill. The toxicity is similar to gasoline. • No technical hurdles either in terms of vehicle application or of distribution infrastructure to introduce methanol significantly into a marketplace. • Can be produced from renewable feedstock For further information, see June 6, 2011 MIT study “The Future of Natural Gas” (section on Conversion to Liquid Fuels beginning page 125 of the report) at http://mitei.mit.edu/publications/reports-studies 13 13
Fuel Blending in China - Provincial standards • Provincial Standards have been supporting strong demand growth for methanol fuel blending in China M15 Heilongjiang M15 M15, M5, M15, M85 & M100 M15, M30 Jilin M30 Liaoning M15 M15, M25 Inner Beijing M15 Mongolia Tianjin Xinjiang Hebei Gansu Shandong Shanxi M45 Ningxia Henan Qinghai Shaanxi Jiangsu Shanghai Hubei Anhui Tibet Sichuan Zhejiang Hunan Jiangxi Chongqing M10 M15, M30 Fujian & M50 Guizhou Guangdong Guangxi Yunnan Hong Kong Macau Example: “M15”=15% methanol, 85% gasoline M15 Hainan 14 14
Methanol / DME as a Fuel Outside China • Europe permits 3% methanol blending today • Australia - Coogee demonstration project targeting limited launch of methanol blends in 2014 • Israel - M15 demo program (market potential ~400kta), target commercial introduction in the next few years • Other countries with demo programs: Azerbaijan, Trinidad, Denmark, Uzbekistan, Iran, Libya Methanol / gasoline pump at • Coogee plant site North America • Open Fuel Standard Bill recently re-introduced in Congress • Volvo commercializing DME trucks in 2015 • Oberon Fuels producing DME DME truck 15 15
Carbon Recycling International - Renewable Methanol in Iceland CRI’s GO Plant in Svartsengi, Iceland • World’s greenest methanol – technology captures carbon dioxide from industrial emissions and converts it into Renewable Methanol • Sales into Europe & Iceland gasoline blending market (M3) • George Olah (GO) semi-commercial plant commissioned in 2011 • Growth plans – expand existing plant and add commercial scale plants • Methanex became a CRI shareholder in 2013 16 16
Methanol as a Marine Fuel – Regulations Driving Change ~40 MMTPA methanol equivalent market Stena Ferry Lines converting to methanol Global Emission Control Areas (ECA’s) • Northern Europe and North America introducing tighter ship emissions regulations starting Jan 2015. In 2020, IMO scheduled to require all marine fuels globally to be less than 0.5% sulphur. 40 MMTPA methanol equivalent market in Northern Europe Sulphur Emissions Control Area alone • ‘SPIRETH’ project – testing methanol as an alternative for ships • Stena Ferry Lines and Methanex’s Waterfront Shipping have both announced plans to use flex-fuel vessels • capable of running on methanol. Two different engine technologies to be proven: Wartsilla’s 4-stroke engine and Man Diesel & Turbo’s 2 stroke engine. 17 17
Methanex Cost Structure • Natural gas • Fixed Manufacturing and • Long-term gas contracts have fixed base price G&A costs and variable component linked to the price of • Primarily people costs methanol (approx. 1100 employees) • Reduces exposure to low methanol prices; shares upside • Medicine Hat plant purchases gas on Alberta gas market • Freight • Fleet of 17-18 leased and owned time charter vessels supplemented with shorter term COA vessels and spot vessel shipments • Integrated supply chain allows benefit of back- haul shipments * Assumes average realized methanol price of • Network of leased and owned terminal approx. US$400/tonne (gas costs vary with infrastructure worldwide methanol pricing). 18 18
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