PERIOD ENDED DECEMBER 31, 2003 Annual ... - Peabody Energy

In the midst of the robust coal markets, Peabody begins2004 with an excellent sales position and portfolio ofproducts. Peabody also has strong financial upside tothe improving coal markets. This upside is an outcomeof our thorough market analysis capability, which allowsus to spot market trends and to properly position ournear- and long-term book of business.Peabody’s brokerage and trading operations continueto differentiate us from others in the coal industry andcreate additional value. We utilize a combination ofsourcing flexibility contained in our sales agreements,(Above) Peabody’s tradingoperations create valuefor customers and layer inadded profitability usingthe company’s 1 billionton sales backlog.(Right) Peabody servesnew coal units like theone under constructionat the SpringervilleGenerating Station inArizona. A new 15-yearcoal supply agreementwith Peabody mines inNew Mexico and Wyomingwill serve Springerville.Peabody’s extensivereserve position, financialstrength and history ofreliable supplies offer newplant developers securelong-term fuel sources.sourcing arrangements with other producers, and thefinancial markets to generate additional profits. Strongcredit and risk controls are used to manage Peabody’srisk exposure and trading activities.In 2004, Peabody intends to further expand its productline, strengthen its international coal trading capability, andincrease its third-party sourcing arrangements. The marketleader has maintained its position through a combinationof innovation, fair dealing and hard work. We aim tomaintain that leadership position for decades to come.BTU Has Strong Upside to Improving MarketsUnpriced Volume of Expected Production (Tons in Millions)110-120Peabody has strongupside to improvingmarkets, with 70 millionto 80 million tons ofcoal unpriced for 2005and 110 million to 120million tons unpricedfor 2006, based onexpected productionat Dec. 31, 2003.9-14200470-80200520061415