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

Apply World-Class Sales & Trading SkillsPeabody’s second strategy is to apply world-classsales, marketing and trading skills to createadditional value from its backlog of business andbusiness relationships.Peabody is the world’s largest coal company, aposition it has held for 34 years. Our coal fuelsapproximately 9.8 percent of U.S. electricity generationand nearly 2.5 percent of the world’s electricity. Weserve approximately 270 generating plants and industrialcustomers in 11 countries on five continents.Peabody’s industry-record 2003 sales volume of203.2 million tons includes record production fromthe Powder River Basin, the fastest growing coal regionin America. Peabody holds leadership positions in thePowder River, Southwestern and Midwestern regions.The mission of Peabody’s sales, trading, brokerageand analytical team is to provide superior customerservice, satisfy customer needs and create beneficialtransactions for all parties. Our sales backlog exceeds1 billion tons and includes customer agreementswith durations ranging from one to 18 years. Thisbacklog offers good revenue visibility; reduces therisk in capital deployment decisions; allows theoperations to optimize costs due to the secure salesbase; and provides opportunities to create customersolutions and increase value.Peabody expects to benefit from near-term andlong-term market trends that indicate greater coaldemand. Near term we expect coal demand toincrease as existing generating plants operate athigher capacity levels to satisfy the improvingeconomy, and competing fuels continue to facerestrictions or high prices.Longer term, the construction of new coal-fueledgenerating plants will also increase Peabody’s salesExport activities bustle at the DTA coal export terminal in Newport News, Va., which exported 5.2 million tons of coal in 2003. DTA, which is30 percent owned by Peabody, is anticipating increased throughput of steam and metallurgical coal in 2004 to meet growing global demand.opportunities. More than 90 new coal plants havebeen announced in the past three years, and anumber of them advanced in development andconstruction in 2003. With significant reserves andoperations in all key regions, Peabody is uniquelypositioned as a reliable, financially strong supplierof fuel for the new generating investments.For example, in 2003 Peabody entered intolong-term coal supply agreements with the ownersand operators of the Springerville GeneratingStation, which is increasing its capacity to servethe Southwest. Under the new agreements,Peabody will supply up to 51.5 million tonsof coal from our mines in New Mexico andWyoming, furthering a long-term relationshipwith the Springerville owners.Peabody is the Leader in Sales and Reserves2003 Sales (Tons in Millions)200Peabody150100Primary U.S. Competitors5000 2 4 6 8 10Reserves (Tons in Billions)Peabody is the largest coal company in the world and is far largerthan U.S. competitors in sales and reserves.Source: Industry reports and company estimates.1213