Presentation to the University of Colorado Investment Banking March 30, 2011.

Presentation to the University of ColoradoInvestment Banking

March 30, 2011

Overview of the PresentationAgenda

I. Introduction to Valuation

II. M&A Valuation

A. Drivers of M&A and Role of an Investment Banker

B. Valuation Methodologies and the “Football Field”

III. IPO Valuation

A. What Matters and is Most Important?

B. In-depth IPO Valuation

Agenda

Introduction to Valuation

Valuation is a Central Discipline in Investment Banking

Nearly Every Activity in Investment Banking and Private Equity is Driven by Valuation Analyses Determining the value of the Company is generally the first step

– M&A Determining the value in a transaction⇛

– Equity Capital Pricing the Initial Public Offering⇛

– Leveraged Finance Determining collateral value and/or financing capacity⇛ Securities design and pricing is an extension of the same fundamental concepts

Valuation Requires the Interpretation of Information and Sound Judgment (Balance of “Science” & “Art”) Information provides a foundation of knowledge about the asset and the marketplace Interpretation of the information and correct judgment distinguishes the quality of the analysis

At the Core, Valuation is About Finding the Equilibrium Between Risk and Reward Fair market value is typically defined as the price at which a willing buyer and a willing seller will

transact around an asset / company when both have complete information and neither is under any compulsion to act

Obviously, buyers and sellers may value assets differently based on a variety of factors, thereby creating a market

Valuation OverviewIntroduction to Valuation

1

Firm Value (or “Enterprise Value”) The total value of an operating business regardless of its capital structure

Equity Value (or “Market Value of Equity”, “Market Value” or “Market Cap”) The value of an operating business to its equity holders The value of an operating business after the satisfaction of its creditors and preferred claim holders

Equity ValueNet DebtFirm Value equalsless

Valuation Overview (Cont’d)

Definition of Key Terms


Net Debt The sum of:

– Total indebtedness for borrowed money

– Preferred claims against the value of the business Less the sum of:

– Cash and cash equivalents

Preferred Claims against the Value of the Business May include preferred stock, “out-of-the-money” convertible securities or minority interests

2

Control Value

IPO Value

Typically involves a premium over the publicly traded equity value

Ability to control the Board, management and strategy of the business

Ability to integrate with other assets and capture synergies

Ability to access all cash flows and create the optimal capital structure

Commonly represented by publicly traded equity value

Assumes adequate liquidity in the market

Generally subject to existing Board, management and strategy

Access to cash flow limited to dividends

Typically involves a discount to the publicly traded

equity value

Discount reflects a lack of market history and therefore certain liquidity and valuation risk

Also reflects an attempt to “entice” shareholders of similar companies to buy IPO (bargain price)

@ IPO

@ Trading

@ M&A

Valuation Overview (Cont’d)

Definition of Key Terms


Fully Distributed Equity Value

3

M&A Valuation

M&A Valuation

Drivers of Mergers & Acquisitions

Compelling Strategic Rationale for a Transaction Diversification vs. Focus (Broaden or Narrow Business

Mix) Manage Market Position and Scale (Commit to a

Product / Market or Exit) Geographic Expansion vs. Retrenchment (Globalization

/ Cost of Entry) Vertical Integration vs. Outsourcing Defensive (What If Our Competitor / Pursuer Wins?)

Compelling Financial Rationale for a Transaction Low Relative Cost or High Relative Opportunity Financing Markets (Ability to Leverage Equity Returns) Equity Market Perception / Reaction (Valuation Metrics /

Business Model / Growth / Profitability) Financial Synergies (Different Value Available to

Different Owners) Financial Stress (Company Selling Subsidiary to Raise

Cash) Financial Sponsor Exit

Other Reasons Management Ego Change in Management

Why Deals Happen Insufficient Strategic or Financial Rationale

Management / Board of Directors Resistance (Social Issues)

Market / Shareholder Concerns (Dilution / Lack of Understanding / Credibility)

Inadequate Financial Resources Available to the Buyers

Anti-Trust Considerations

Changes in Relative Valuation

Accounting, Tax, Legal, and Environmental Issues Are Insurmountable

Regulatory (Domestic or Abroad)

Why Deals Don’t Happen

Why Deals Happen and Don’t Happen

4

M&A Valuation

What are the Deal Mechanics and the Process?

Exclusive Sale Private Sale to a Single Buyer Limited Auction (Formal vs. Informal) Full Auction (Public vs. Private)

Buy-Side Advisory Willing Target Pursuing a Sale Process Unsolicited Approach – Target Attitude Unknown

(Formal vs. Informal)– Friendly Negotiations– “Bear Hug” – Target is Resistant (Disclosure Issues)– Hostile Offer

Equity Restructurings Spin-off – shares of subsidiary distributed tax-free to all

parent shareholders on a pro-rata basis Split-off – shares of subsidiary distributed tax-free to

self-selected parent shareholders Targeted Stock – distributed tax-free in either manner

outlined above or IPO’d

Leveraged Buyouts and Recapitalizations

Types of Deals and Processes Asset Sale

Transaction of specific assets and liabilities Required if operations are not held in a distinct

subsidiary or set of subsidiaries Provides the buyer the ability to deduct transaction

goodwill for tax purposes over 15 years

Stock Sale

Stock Sale with IRC Section 338(h)(10) election Stock sale treated like an asset sale for tax purposes

Subsid./Private Company Transaction Structures

Types of Deals and Structures

5

Role of an Investment Banker

Drive the Process – From “cradle to grave”

Valuation Advice – Provide comprehensive financial analysis to formulate (buyside) or evaluate (sellside) a bid

Diligence – Assist client in the completion of a thorough and organized diligence process

Marketing – Assist client in preparing diligence materials and public / investor communications

Structuring – Structure transaction to meet the needs of the parties

Market Intelligence – Provide industry knowledge, a perspective on any public market activity and the ability to assess the likelihood of other potential bidders of the target

Bidding Strategy – Advise the client on the best way to ensure success

Financing – Arrange financing alternatives (if necessary)

Negotiations – Increase negotiating flexibility and leverage by acting as a go-between with the other side

Opinion – Deliver fairness opinion (if appropriate)

Market Reaction – Anticipate market reaction and marketability of securities

A financial advisor performs a broad range of functions in the M&A process

M&A Valuation

6

What is a Football Field?

Fairness Opinion Presents the range of “fair value” for a Board of Directors’

consideration in a sale context Provides guidance to justify a bid value in a buy-side

Sell-Side Summarizes Barclays’ proposed positioning and target valuation

range based on preliminary analysis

Buy-Side Demonstrates Barclays’ knowledge of the asset, suggests how other

buyers might approach valuation and provides bid range guidance

Internal Reference For example – supports loan to value analysis when examining

financing alternatives

Barclays Capital

Barclays Capital

Important to remember that the valuation metrics used will vary

depending on both the industry and the assignment

A football field summarizes the various metrics and assumptions used to determine the valuation of a company or business segment

M&A Valuation

7

Summary of Valuation MethodologiesMultiple types of valuation analyses will be included in a valuation summary depending on industry, type of presentation, available information and numerous other factors

Metric ConsiderationsTrading

ValueControl

ValuePrivate Co.

Metric

Forward P/E, P/CF, EV/EBITDA, EV/Revenue most common – may show more than one metric

LTM P/E, P/CF, EV/EBITDA, EV/Revenue most common – may show more than one metric. Operational metrics used too, particularly in commodity-oriented businesses

Make sure to apply premium to unaffected price (i.e. pre-announcement or pre-leak)

Alternatively, may apply premium to trading multiples

Choose appropriate target range of IRR Solve for price based on fixed leverage and range of exit

multiples

Option to show with and/or without synergies

Use for distinct business segments or individual assets with different value parameters

Used as reference point 52-week most common; also 3-months, 6-months, period

since significant event

Used as reference point High/low research price targets; check length of time

forward and ensure consistent (or discount back)

Trading Multiples

Wall Street Research Price Targets

Comparable Transactions

Leveraged Buyout

Stock Price Trading Ranges

Premiums Paid

Discounted Cash Flow

M&A Valuation

Sum-of-the-Parts

8

Source of the Assumptions / Data

The Projections Consideration must be given to which projections to use – can present multiple cases or one case only Fairness opinion valuations may involve a base case and a downside and should be provided by or

blessed by management Buy-side valuations may involve management case and revised due diligence case If preliminary valuation, consider adding due diligence contingencies for unknown factors that may impact

value

The Key Assumptions Trading Comps: must have back-up for all analysis and consistently apply methodology (e.g. IBES

consensus, exclude finance subsidiaries, include / exclude underfunded pension liabilities, etc.) Transaction Comps: be sure to use publicly available data if creating a fairness opinion for a public

company; and be thorough in your search – have rationale for exclusion of deals Exit multiples: justify LBO and DCF exit multiples through trading and transaction comps or cycle analysis WACC: perform a detailed WACC analysis to justify discount rates for DCF Leverage: discuss leverage assumptions with Lev Fin to make appropriate LBO valuation Premiums: clearly define the transaction size, time period and reference point of premiums used in

analysis Share count: use exercisable or outstanding options where appropriate Change in Control Costs: review proxy materials to determine if change in control costs are relevant

An analysis is only as good as its inputs

Always keep good back-up of all data sources and assumptions

M&A Valuation

9

Presenting the Football Field Analysis

Valuation “Bar” Presentation Options

Which value should be presented and is most relevant? Enterprise value, equity value, equity value/share

(apply circular shares depending on metric)

How should metrics be grouped? Trading value vs. control/acquisition value or other

How should synergies be presented (if applicable)? With or without for different metrics

How should additional scenarios be presented (if applicable)? Dotted lines, additional bars, etc.

Should trading values also be shown with a premium? Comparability to control value

Stock-for-stock football field complexities (exchange ratio): range type (high to low, same to same),

typically similar assumptions for metrics (multiples, discount rates, etc.)

Other Items for Inclusion

What other analytics/metrics should be included on the page? Implied multiples; implied EV, equity value

or equity value/share; other ratios; lines for averages, transaction price, current price, etc.

What key assumptions should be presented for each metric? What needs to be footnoted?

Formatting Nuances

Rounded results vs. actual

Horizontal vs. vertical

Presentation options and complexities allow for additional tailoring of the valuation summary to the needs of the analysis

M&A Valuation

10

Determining Appropriate Valuation Ranges

“Science” Market information; financial data Mechanics of valuation methodologies

“Art” Valuation inputs and assumptions are based on industry knowledge, experience and

common sense Senior bankers and industry coverage will opine on the appropriate ranges and

assumptions

Individual valuation ranges may seem reasonable, but do they make sense with respect to one another? i.e., Transaction multiples vs. trading multiples

Are assumptions consistent between methodologies? i.e., DCF or LBO exit multiples vs. trading multiples or transaction multiples

Is the valuation range too wide or too narrow? Go back and check the assumptions and calculations

Are there any outliers in the comparable multiples? Are the earnings drivers correct? (i.e., LFCF & earnings for equity value multiples,

EBITDA for enterprise value multiples) Have I used the right share count (exercisable vs. outstanding options)? Is implied perpetuity growth rate appropriate? What metric does the industry trade on?

Step Back and Look at the “Bigger Picture”

Sanity Check

“Science” vs. “Art”

M&A Valuation

Science, Art or Sanity?

11

M&A Valuation

Illustrative Sellside Valuation Analysis

Financial Projections

Base EBITDA

$94$87$77$68$66

$0

$20

$40

$60

$80

$100

2011 2012 2013 2014 2015

$MM

Expansion EBITDA

9.3% CAGR

___________________________Note: 2011 PF EBITDA of $80.8 million defined as 2011E base cash EBITDA ($65.6 million) plus 2013 growth projects EBITDA of $15.2 million. Excludes re-contracting of remaining "below market” barrels.

1H 2011E 2H 2011E 2011E 2011E PF 2012E 2013E 2014E 2015E 2016E

Base EBITDA $36.9 $36.9 $73.9 $73.9 $76.0 $81.9 $89.1 $95.5 $98.9Development EBITDA $0.4 $0.4 $0.9 $15.2 $4.2 $15.2 $15.5 $15.8 $16.1

Adjusted EBITDA $37.4 $37.4 $74.8 $89.1 $80.3 $97.1 $104.6 $111.3 $115.0Contract Amortization (non-cash) (4.1) (4.1) (8.3) (8.3) (8.3) (5.2) (2.2) (1.8) 0.0

Cash EBITDA $33.2 $33.2 $66.5 $80.8 $71.9 $91.9 $102.4 $109.5 $115.0

OpCo Interest Expense (6.8) (6.8) (13.6) (13.6) (15.2) (16.3) (17.1) (17.6) (18.2)Maintenance Capex (0.9) (0.9) (1.9) (1.9) (2.7) (2.0) (2.0) (2.1) (2.1)

OpCo Distributable Cash Flow $25.5 $25.5 $51.0 $65.3 $54.0 $73.6 $83.3 $89.8 $94.7

Growth Capital Expenditures (55.3) (22.6) (77.9) (77.9) (19.9) (2.0) 0.0 0.0 0.0

OpCo Free Cash Flow ($29.8) $2.9 ($26.9) ($12.6) $34.2 $71.6 $83.3 $89.8 $94.7

$16$15$15

$4$1

$13$12

$0

$0$0

$0

$10

$20

$30

2011 2012 2013 2014 2015

$MM

Development EBITDA Upside

12

$975

$1,100

$1,150

$850

$1,000

$925

$1,000

$1,025

$1,100

$1,100

$850 $925 $1,000 $1,075 $1,150 $1,225


Private Equity LBO

Infrastructure LBO

Ability-to-Pay

Discounted Cash Flow

Preliminary Valuation – the “Football Field”

Preliminary Review of Valuation Parameters

Initial EBITDA Multiple: 14x – 16x

RR EBITDA Multiple Range: 8x – 10x

Enterprise Value ($MM):

WACC: 8.0%-10.0%

Terminal EBITDA Multiple: 10.0x

M&A Valuation

Target 0% 2012 AccretionMLPs: 11.0x to 13.0x 2012 EBITDAMLPs: 10.0x to 12.0x 2013 EBITDA

Exit Multiple: 10.0x

IRRs: 10%-15%

Exit Multiple: 10.0x

IRRs: 17.5%-22.5%

EBITDA Multiple Statistic

2011 $66.5 12.8x 13.9x 15.0x 16.2x 17.3x 18.4x

2011 PF $80.8 10.5x 11.5x 12.4x 13.3x 14.2x 15.2x

2013 $91.9 9.2x 10.1x 10.9x 11.7x 12.5x 13.3x

2014 $102.4 8.3x 9.0x 9.8x 10.5x 11.2x 12.0x

13

Purchase Price Ratio AnalysisM&A Valuation

Preliminary Valuation Analysis

PPR Analysis($ in millions)

Enterprise Value $900 $950 $1,000 $1,050 $1,100 $1,150 $1,200 $1,250

Less: Projected OpCo Debt (6/30/11) (294) (294) (294) (294) (294) (294) (294) (294)

Implied Equity Value to the Buyer $606 $656 $706 $756 $806 $856 $906 $956

Less: Projected HoldCo Debt (6/30/11) (305) (305) (305) (305) (305) (305) (305) (305)

Net Proceeds to Sponsor A $301 $351 $401 $451 $501 $551 $601 $651

Enterprise Value as a Multiple of: Statistic:

2011E PF EBITDA $80.8 11.1x 11.8x 12.4x 13.0x 13.6x 14.2x 14.9x 15.5x

2012E Cash EBITDA 71.9 12.5x 13.2x 13.9x 14.6x 15.3x 16.0x 16.7x 17.4x



14

M&A Valuation

Discounted Cash Flow Analysis

DCF Analysis

Present Value of Terminal ValueDiscount PV of Based on EBITDA Multiples of: Preliminary Enterprise Value Preliminary Equity Value to the Buyer

Rate Cash Flows 9.0x 9.5x 10.0x 10.5x 11.0x 9.0x 9.5x 10.0x 10.5x 11.0x 9.0x 9.5x 10.0x 10.5x 11.0x10.0% $275.9 $673.8 $711.3 $748.7 $786.2 $823.6 $949.7 $987.1 $1,024.6 $1,062.0 $1,099.5 $655 $693 $730 $768 $8059.0% $282.5 $702.1 $741.1 $780.1 $819.1 $858.1 $984.6 $1,023.6 $1,062.6 $1,101.6 $1,140.6 $690 $729 $768 $807 $8468.0% $289.3 $731.8 $772.5 $813.2 $853.8 $894.5 $1,021.2 $1,061.8 $1,102.5 $1,143.1 $1,183.8 $727 $767 $808 $849 $889

($ millions) Year-End2H 2011E 2012E 2013E 2014E 2015E 2016E

EBITDA $37.4 $80.3 $97.1 $104.6 $111.3 $115.0Contract Amortization (4.1) (8.3) (5.2) (2.2) (1.8) Maintenance Capital Expenditures (0.9) (2.7) (2.0) (2.0) (2.1) Growth Capital Expenditures (22.6) (19.9) (2.0) - - Unlevered Free Cash Flow 0 9.7 49.4 87.9 100.4 107.4 1,149.7

Terminal Value Calculation2016E EBITDA 115.0FWD EBITDA Multiple 10.0xTerminal Enterprise Value of FCF $1,149.7

Discount Rate 9.0% 9.0% 9.0% 9.0% 9.0% 9.0%Discount Factor 0.979 0.917 0.842 0.772 0.708 0.679PV of Cash Flows $9.5 $45.3 $74.0 $77.5 $76.1 $780.1

Enterprise Value $1,062.1

Less: OpCo Debt (6/30/11) ($294.4)

Less: HoldCo Debt (6/30/11) ($305.0)

Net Proceeds to Sponsor A $462.7

15

M&A Valuation

Discounted Cash Flow Analysis (Upside Case)

DCF Analysis

Present Value of Terminal ValueDiscount PV of Based on EBITDA Multiples of: Preliminary Enterprise Value Preliminary Equity Value to the Buyer

Rate Cash Flows 9.0x 9.5x 10.0x 10.5x 11.0x 9.0x 9.5x 10.0x 10.5x 11.0x 9.0x 9.5x 10.0x 10.5x 11.0x11.0% $255.9 $719.4 $759.3 $799.3 $839.3 $879.2 $975.3 $1,015.3 $1,055.2 $1,095.2 $1,135.1 $681 $721 $761 $801 $84110.0% $262.4 $749.3 $790.9 $832.5 $874.1 $915.8 $1,011.7 $1,053.3 $1,094.9 $1,136.6 $1,178.2 $717 $759 $801 $842 $8849.0% $269.2 $780.7 $824.1 $867.4 $910.8 $954.2 $1,049.8 $1,093.2 $1,136.6 $1,180.0 $1,223.3 $755 $799 $842 $886 $929

The valuation below includes all of the potential expansion projects and is discounted at a 10% rate to account for the additional risk associated with un-contracted projects

($ millions) Year-End2H 2011E 2012E 2013E 2014E 2015E 2016E

EBITDA $37.4 $80.3 $97.1 $117.0 $123.9 $127.8Contract Amortization (4.1) (8.3) (5.2) (2.2) (1.8) Maintenance Capital Expenditures (0.9) (2.7) (2.0) (2.0) (2.1) Growth Capital Expenditures (22.6) (38.0) (18.2) (2.0) - Unlevered Free Cash Flow 0 9.7 31.2 71.8 110.8 120.1 1,278.4

Terminal Value Calculation2016E EBITDA 127.8FWD EBITDA Multiple 10.0xTerminal Enterprise Value of FCF $1,278.4

Discount Rate 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%Discount Factor 0.976 0.909 0.826 0.751 0.683 0.651PV of Cash Flows $9.5 $28.4 $59.3 $83.2 $82.0 $832.5

Enterprise Value $1,094.3

Less: OpCo Debt (6/30/11) ($294.4)

Less: HoldCo Debt (6/30/11) ($305.0)

Net Proceeds to Sponsor A $494.9

16

$1,104 $1,044 $1,029$914 $887 $884 $822 $794 $776

0

200

400

600

800

1,000

1,200

MMP BPL EPD NS GEL PAA SXL KMP NGLS

$MM

MLPs will be willing to bid up to a 2012 breakeven accretion assuming they can receive accretion in 2013 once contracted growth projects are running

M&A Valuation

MLP Ability-to-Pay Analysis

___________________________1. Assumes seller is responsible for retirement of HoldCo debt.

Enterprise Value at 2012 Breakeven Accretion (1)

2013 Accretion Assuming 2012 Breakeven Purchase Price

3.4% 3.5%

0.5%

3.1%

9.8%

1.1%

3.0%

0.5%

2.7%

0%

2%

4%

6%

8%

10%

12%

MMP BPL EPD NS GEL PAA SXL KMP NGLS

17

Infrastructure funds will be an important part of the process

M&A Valuation

We believe that infrastructure funds will be highly attracted to Company A

Although these funds typically target businesses with longer-term contracts, the Company’s proven track record of rolling contracts and increasing rates, combined with the fact that there is a waiting list will be key selling points

With a longer holding period and a lower return threshold (generally 10-15%), infrastructure funds would be able to pay significantly more than a private equity sponsor

Infrastructure funds also differ from traditional private equity funds in that they target a “cash on cash” return as well and generally like to structure transactions to allow for distributions 10% of initial equity is generally the goal, but 5-6% is acceptable

Further, infrastructure funds generally like to maintain investment grade ratings

Accordingly, we have structured the financing to meet the requirements set forth above; we would expect a HoldCo bond to be preferred given its more liberal distribution capacity but can also offer a loan structure

We believe that the infrastructure funds will be competitive or even beat the MLPs / strategics in the process

Infrastructure Funds

18

M&A Valuation

Indicative IRR Analysis

Private Equity Infrastructure Funds

Sources & Uses Sources & Uses

Pro Forma Capitalization at 6/30/2011 Pro Forma Capitalization at 6/30/2011

Capitalization & Sources / Uses

___________________________Note: 2011 PF EBITDA of $80.8 million defined as 2011E cash EBITDA ($65.6 million) plus 2013 growth projects EBITDA of $15.2 million.

Adj 2011($ in millions) Pro Forma % of EBITDA

6/30/11 Capitalization MultipleOpCo Debt

Revolver $34.4 3.3% 0.4xSenior Notes 185.0 17.6% 2.3xIKE Bonds 75.0 7.1% 0.9x

Total OpCo Debt 294.4 28.0% 3.6x

HoldCo DebtNew Senior Notes 250.0 23.8% 3.1x

Total Debt 544.4 51.8% 6.7x

Equity 505.6 48.2% 6.3xEnterprise Value $1,050.0 100.0% 13.0x

Adj 2011($ in millions) Pro Forma % of EBITDA

6/30/11 Capitalization MultipleOpCo Debt

Revolver $34.4 3.5% 0.4xSenior Notes 185.0 19.0% 2.3xIKE Bonds 75.0 7.7% 0.9x

Total OpCo Debt 294.4 30.2% 3.6x

HoldCo DebtNew Term Loan 350.0 35.9% 4.3x

Total Debt 644.4 66.1% 8.0x

Equity 330.6 33.9% 4.1xEnterprise Value $975.0 100.0% 12.1x

2011 AdjEBITDA

Sources Multiple UsesBuyer Equity $330.6 4.1x Company A Equity $375.6New Term Loan 350.0 4.3x Refi Holdco Notes 305.0Assumed Debt 294.4 3.6x Assumed Debt 294.4Total Sources $975.0 12.1x Total Uses $975.0

2011 AdjEBITDA

Sources Multiple UsesBuyer Equity $505.6 6.3x Company A Equity $450.6New Senior Notes 250.0 3.1x Refi Holdco Notes 305.0Assumed Debt 294.4 3.6x Assumed Debt 294.4Total Sources $1,050.0 13.0x Total Uses $1,050.0

19

M&A Valuation

Indicative IRR Analysis – Infrastructure Funds

Sensitivity to Exit Multiple

Assumptions

Sensitivity to Financing Mix (1)

___________________________1. Assumes a 10.0x EBITDA exit multiple.

Sensitivity to Cash Sweep on HoldCo Debt

The returns analysis assumes a 5-year holding

period

We target an IRR of 10% to 15% which equates to

an enterprise value of $1,050 million

We made the following debt assumptions:

Current OpCo Debt assumed to stay in place

– While there is additional debt capacity at the

OpCo level, we assumed additional leverage

would be placed at the HoldCo level for

greater flexibility

We have assumed a 7.5% interest rate on new

debt financing at the HoldCo level

– Assumes 100% distribution

We assumed a debt level that will still be

appropriate for acquirer to take equity

distributions

5-Year IRRCash Sweep

0.0% 25.0% 50.0% 75.0% 100.0%

$1,000 15.7% 15.4% 15.1% 14.9% 14.5%

$1,025 14.1% 13.9% 13.7% 13.4% 13.2%

$1,050 12.6% 12.4% 12.3% 12.1% 11.9%

$1,075 11.2% 11.1% 11.0% 10.9% 10.7%

$1,100 9.9% 9.8% 9.7% 9.7% 9.6%

En

terp

rise

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5-Year IRRExit Multiple (EBITDA)

9.0x 9.5x 10.0x 10.5x 11.0x

$1,000 11.4% 13.7% 15.7% 17.7% 19.5%

$1,025 9.8% 12.1% 14.1% 16.0% 17.8%

$1,050 8.4% 10.6% 12.6% 14.5% 16.3%$1,075 7.0% 9.2% 11.2% 13.1% 14.9%

$1,100 5.7% 7.9% 9.9% 11.7% 13.5%

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HoldCo Debt$150 $200 $250 $300 $350

$1,000 14.4% 15.0% 15.7% 16.6% 17.8%

$1,025 13.1% 13.6% 14.1% 14.8% 15.6%

$1,050 11.8% 12.2% 12.6% 13.1% 13.7%$1,075 10.7% 10.9% 11.2% 11.5% 12.0%

$1,100 9.5% 9.7% 9.9% 10.1% 10.3%

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20

Recent Storage Transactions


___________________________1. Per Wells Fargo research and Spectra press release. Initial EBITDA assumed to be run-rate at time of acquisition. Post-expansion EBITDA as of 2015. EBITDA backed into based on multiples provided by Wells Fargo research.2. Per Inergy investor presentation. 3. Per PAA investor presentation. Initial EBITDA represents 2010E EBITDA.4. Adjusts for expansion project which is projected to cost ~$400 million and add $75 million of EBITDA.

M&A Valuation

Valuation

($ in millions) Tres SouthernBobcat (1) Palacios (2) Pines (3) BORCO (4)

Mean

Purchase Price $540.0 $725.0 $750.0 $1,700.0Expansion Capex / Milestone Payment 425.0 85.5 105.0 400.0

Total Capital Investment $965.0 $810.5 $855.0 $2,100.0

Initial EBITDA $38.6 $56.2 $32.0 $138.0Post-Expansion EBITDA 120.6 95.0 82.5 215.0

Investment as a Multiple of:Initial EBITDA 14.0x 12.9x 23.4x 12.3x 15.7xPost-Expansion EBITDA 8.0x 8.5x 10.4x 9.8x 9.2x

($ in millions)

EBITDA $MM Relevant Multiples Implied Value Range ($MM)Initial EBITDA (2011E) $66.5 14.0x - 16.0x $930 - $1,0632011 PF EBITDA $80.8 12.0x - 14.0x $969 - $1,131Post-Expansion EBITDA (2014E) $102.4 8.0x - 10.0x $819 - $1,024

Preliminary Comparable Transactions Value Range $1,000 - $1,100

21

9.3x

12.3x

10.3x

12.9x

11.8x

7.4x

8.2x

11.6x

15.5x

13.4x

12.7x11.8x

11.2x

6.2x

11.4x 11.3x

7.8x

9.9x

8.3x

7.9x

8.5x

8.0x

9.0x9.6x

10.5x

13.0x

7.0x

11.0x

7.0x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

Oct-98 Aug-00 Mar-01 Oct-02 Dec-02 Jun-03 Dec-03 Mar-04 Jun-04 May-05 Jun-06 Mar-07 Jul-07 Jul-09 Feb-11

EBITDA Multiple

Historical Liquids Pipeline Transactions

TEPPCO / Duke

KN Energy /Kinder Morgan

Alberta / AEC

Alberta / TransCanada

Pembina / AEC

Plains All American /

Murphy

Koch / BP Colonial

Kaneb / Tesoro

MDP / Riverstone /

Williams

Enbridge Income Fund /

Enbridge Inc.BC Gas / EnCana

Announcement Date

Plains All American /

Shell Pipeline

Enbridge Energy / Shell Pipeline

Pacific Energy /

Rangeland Pipeline

Plains All American / Link Energy

Magellan /

Osage Pipeline

Selected Comparable Midstream Transactions

Magellan / Shell Oil Products

Buckeye / Shell Oil Products

Koch NGL / ONEOK

Pacific Energy / Valero

Plains All American / Pacific Energy

Energy Funds Mgmt. /

Citgo (Colonial)

Inter Pipeline Fund / KMI

KMP / Transmontaigne

ONEOK / KMP

M&A Valuation

10.0x Median

Enterprise Products Partners acquires TEPPCO Partners

Magellan / Longhorn

KKR / Colonial

Buckeye Partners / First Reserve (BORCO)

22

IPO Valuation

The equity of fundamentally similar, or “comparable” companies tends to be valued on a relatively consistent basis by the public markets Broadly speaking, if Company A competes in the same industry as Company B, using a similar

business model, the equity markets are likely to value the two businesses in a relatively consistent manner

The Comparable Company Analysis seeks to identify a group or “universe” of public companies which are deemed fundamentally comparable to the target and compares the “market trading multiples” of these companies to determine a range of value for the target, expressed in valuation multiples

By analyzing certain key ratios and operating data for each of the comparable companies it is possible to determine how the comparable companies valued relative to their profitability, growth prospects, etc. Public markets typically place premiums to companies which portrays growth and margin profiles better

than those of industry average

As Comparable Company Analysis is based on an analysis of currently publicly trading companies, valuations received by the comparable universe DO NOT typically reflect: Premium a buyer must pay for control of a company in an M&A transaction; or Discount the market may place on shares which are newly introduced in an IPO

Comparable Company Analysis Defined

Comparable Company Analysis Explained

IPO Valuation

23

Comparable Company Analysis Defined (Cont’d)

What is it? Use of Trading Multiples

IPO Valuation

Fundamental valuation tool used for deriving

company value

Helps in benchmarking performance and

valuations across companies within a sector

Valuation tool based on how comparable

companies are valued by the stock market as a

multiple of profit, sales or other parameters

Assumes that the stock market is relatively

efficient in valuing comparable companies

Importance

Initial Public Offering

Buy-side M&A

Sell-Side M&A

Add-on financings

Share repurchases

Leveraged Buy-out

Most Widely Used Valuation Tool

24

IPO Valuation

Enterprise and Equity Value Multiples

Takes into account capital structure in decision making

Denominator after interest expense

Main multiples are P/E ratio Equity Market Value / Net Income Price / Book ratio Price / CFPS

Equity Value Multiples Focus towards quality of operation

Unlevered Capital Structure

Denominator before interest expense

Main multiples are EV / Sales EV / EBITDA EV / EBIT or EV / EBITA EV / Capital Employed EV / Subscribers (telecom, similar ratios based on operating

figures in other industries)

Enterprise Value Multiples

Summary Statistics Mean, Median, High Low (The Median is the most meaningful statistic because it will naturally screen outliers)

Outliers should be evaluated and possibly eliminated 1st Quartile (25th percentile) and 3rd Quartile (75th percentile) are sometimes used to define the multiple range

for particularly large or wide-ranging results

Summarize the Results

25

Comparison of Multiples

Multiple Advantage Disadvantage

EV / Sales

Meaningful for loss-making companies Very limited impact of

accounting differences

Does not take differences in profitability into account

EV / EBITDA No distortions based on different

depreciation policies Does not take differences in capital

expenditures into account

EV / EBIT Valuation based on quality of operation Possible distortions based on different

accounting policies

EV / Capital Employed

Based on invested capital, which determines potential earnings power

Does not take differences in profitability into account

Distortions through accounting differences

P/E Ratio Focuses on earnings to shareholders Accounting differences may distort true

measures of earnings

Price / CFPS “Cash is king” Does not take differences in capital

expenditures into account

Price / Book Based on equity, which determines

earnings power Does not take differences in profitability

into account

Choice of the Multiple Depends on Industry, Profitability, Accounting Regimes

IPO Valuation

26

Industry and Sector Outlook

Competitive Position

Research Views

Historical Performance One of Key Indicators of Future Performance Revenue Growth Operating Margins

Qualitative Factors Impact Market’s Belief of the Company’s Future Performance Management Quality and Track Record Corporate and Operating Strategy Ownership Profile

Valuation ultimately assesses the present value of the potential future financial rewards

Current trading valuations or “multiples” of a Company are a reflection of public market’s belief in the future financial rewards by owning the securities of the Company

Cash Flow

Net Income

Regulatory Issues

Environmental Issues

Legal Issues

Understanding Key Drivers of “Multiples”

Why Do Comparable Companies Differ in Valuation?

IPO Valuation

27

Many Factors are Evaluated at Time of IPO

IPO Valuation

What Else Matters in an IPO?

Peer Group: Clear peer group with sizeable number of companies Only need one; none allows Company / Banks to define the “valuation / story”

Liquidity: % of float and ADTV vs. other comparable companies Need adequate IPO size to attract institutional investors

Growth: What are organic and acquisitive growth prospects of the Company? How do those projects / returns compare vs. peers and how achievable / financeable are they?

Stability vs. Volatility: Is Company’s business volatile, risky, stable, cyclical? Ability to dampen volatility or smooth out earnings? Capital structure and risk policies

Stage of Company: What stage is the Company experiencing in its life cycle? Developing, nascent, growth, mature? Capital structure and cash flow generation / reinvestment

Capital Structure: Credit ratings and leverage vs. peers and appropriate levels for Company / industry

Market Conditions at time of IPO

Management, Board composition and PE backing

Banking relationships and research coverage Credit support and capital markets access in the future

28

Illustrative IPO Valuation

$1.58 Bn – $1.93 Bn 4.0x – 4.9x EBITDA

$2.25 Bn – $2.57 Bn 5.7x – 6.5x EBITDA

$1.88 Bn – $2.16 Bn 4.8x – 5.5x EBITDA

$1.80 Bn – $2.20 Bn 4.6x – 5.6x EBITDA

$2.57 Bn – $3.01 Bn 6.5x – 7.6x EBITDA

$2.16 Bn – $2.56 Bn 5.5x – 6.5x EBITDA

$600 Mm ~36% of Company (at mid-

point)

$500 Mm ~25% of Partnership (at

mid-point)

$500 Mm ~27% of Partnership (at

mid-point)

~$50 Mm ~$200 Mm ~$50 Mm

~$400 Mm None ~$400 Mm

~$102 Mm ~$242 Mm ~$15 Mm

~$48 Mm ~$58 Mm ~$35 Mm

Net Debt: ~$97 Mm Net Debt: ~$358 Mm Net Debt: ~$185 Mm

Enterprise Value (Fully Distributed)

Enterprise Value(At IPO)

Debt Pay down

IPO Valuation

MLP ScenariosC-Corp Scenario

Distribution to Private Owners

Make Whole / Fees

IPO Size (Base Deal)

Maximum claw-back Pre funding capexPre funding capex

Growth Capex / Cash

Use

of

Pro

ceed

s

Leverage Post IPO

C-Corp vs. MLP

29

IPO Valuation

Positioning Company B vs. Its C-Corp Peers

Positioning “Company B” vs. Its C-Corp Peers

Metric

Contract Profile (2)

2011E 86% 78% 92% 87% 90%

2012E 65% 43% 41% 40% 58%

2013E 54% 0% 1% 0% N/A

2014E 51% 0% 1% 0% N/A

2015E 56% N/A N/A N/A N/A

2011E Production 28.7 159.8 87.3 130.2 97.1

% Met 0.0% 4.3% 15.8% 19.0% 0.0%

Reserves 856.8 4,445.2 2,253.5 5,029.8 970.0

Reserve Life (relative to 2011E Production) 29.8 27.8 25.8 38.6 10.0

Cash Cost ($ / ton) $35.84 $18.70 $33.62 $44.47 $9.10

Coal Reserve LocationNorthern App 61.2% - 38.1% 19.1% -Central App - 8.3% 31.6% 67.4% -Illinois Basin 31.4% 8.2% 1.3% 0.6% -PRB - 77.5% 29.0% 13.0% 100.0%Other 7.4% 6.0% - - -

Coal Type: Steam / Metallurgical (reserves) 100% / 0% 97% / 3% 86% / 14% 81% / 19% 100% / 0%

MinesUnderground 86% 70% 58% 69% 0%Surface 14% 30% 42% 31% 100%

Number of Mines 7 23 66 150 4

Union Status Minor Minor ~20% ~10% Non-union

S&P Debt Adjustments $262.5 $623.3 $866.8 $0.0 $120.0

'11 - '13 Projected EBITDA CAGR 41.6% 16.1% 7.0% 9.5% 10.1%

Primary Comp Secondary Comps

Peer 1 Peer 2 Peer 3 Peer 4Company B

30

IPO Valuation

Relative Benchmarking

$15,717

$7,412 $7,292

$2,000 $1,716

$0

$4,000

$8,000

$12,000

$16,000

Peer 3 Peer 2 Peer 1 Company B Peer 4

$ in millions

Enterprise Value ($ in millions)

5,030

4,445

2,254

970 857

0

1,000

2,000

3,000

4,000

5,000

Peer 3 Peer 1 Peer 2 Peer 4 Company B

tons in millions

2010A Reserves (million tons)

EBITDA CAGR: 2011E – 2013E 2010A EBITDA / ton

41.6%

16.1%

10.1% 9.5%7.0%

0%

10%

20%

30%

40%

Company B Peer 1 Peer 4 Peer 3 Peer 2

%$12.50

$9.69$8.87

$4.65

$3.39

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

Peer 3 Peer 2 Company B Peer 1 Peer 4

$/ton

___________________________Note: Peer group data as per company filing and Wall Street equity research. Market data as of 3/23/2011.Note: Company B data per Company’s projections.

Reserves /2011E Prod.

38.6 yrs 27.8 yrs 25.8 yrs 10.0 yrs 29.8 yrs

31

3.1x 2.7x1.9x 2.1x

1.2x1.6x

0.3x1.0x0.7x

2.0x

1.9x2.2x2.2x2.2x

2.8x3.4x

4.0x

1.8x 1.6x

1.0x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

4.0x

4.5x

Peer 6 Peer 8 Peer 7 Peer 10 Peer 1 Peer 4 Peer 3 Peer 9 Peer 5 Peer 2

(Multiple)

Net Debt/LTM EBITDA Total Debt/LTM EBITDA

Relative Benchmarking: Balance Sheet Strength

Total Liquidity (1)

___________________________Source: Company information and IBES Estimates.Note: All companies per 12/31/2010 filings.1. Total liquidity is calculated cash & cash equivalents as of latest balance sheet data plus remaining balance on companies’ revolving credit facility, including LOCs.

IPO Valuation

BB+ (Stable)Ba1 (Stable)

BB (Watch)Ba2 (Watch)


BB- (Stable)Ba3 (Stable)

B+ (Watch)B2 (Stable)

BB- (Pos)B1 (Pos)

B+ (Stable)Caa1 (Stable)

B- (Stable)Caa2 (Stable)


BB- (Watch)B1 (Stable)

Total Debt/Net Debt/LTM EBITDABB (Watch)Ba2 (Watch)



Net Debt Median 1.9x

Total Debt Median 2.2x

B- (Stable)Caa2 (Stable)

BB- (Watch)B1 (Stable)

B+ (Watch)B2 (Stable)

BB- (Pos)B1 (Pos)


B+ (Stable)Caa1 (Stable)

BB+ (Stable)Ba1 (Stable)

$1,713

$952

$775

$330$162

$0

$300

$600

$900

$1,200

$1,500

$1,800

P eer 3 P eer 2 P eer 1 P eer 4 Company B

($ in millions)

2011E Cash Flow from Operations2011E EBITDA

$2,115

$1,181$1,031

$348$236

$0

$300

$600

$900

$1,200

$1,500

$1,800

$2,100

$2,400

Peer 3 Peer 2 Peer 1 Peer 4 Company B

($ in millions)

$2,507

$1,488 $1,480

$1,063

$730

$450 $395 $390$235

$87

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

P eer 5 P eer 2 P eer 3 P eer 1 P eer 4 P eer 6 P eer 6 P eer 8 P eer 9 P eer 10

($ in millions)

32

IPO Valuation

Current Trading Multiples

7.1x 7.4x6.3x

4.9x 5.6x7.2x

5.1x

8.1x 8.8x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

Peer 1 Peer 3 Peer 2 Peer 4 Peer 7 Peer 8 Peer 10 Peer 9 Peer 5

Multiple

EV / 2011E EBITDA

EV / 2012E EBITDA

___________________________Note: IBES consensus estimates as of 3/23/2011.

5.5x 6.1x5.3x

4.4x 5.2x 4.5x 4.6x5.6x

7.3x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x


Multiple

EV / 2013E EBITDA

5.2x6.2x 5.5x

4.1x

6.1x4.5x 5.0x 5.4x

7.1x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x


Multiple

Secondary Comps OthersPrimary Comp

33

IPO Valuation

Illustrative C-Corp IPO Valuation

Illustrative C-Corp IPO Valuation

___________________________1. Per company projections as of 9/30/2011. Some of the IPO proceeds are used for debt repayment.2. Adjusted for the interest decrease after debt pay down with the IPO proceeds of $101.9 million and an indicative tax rate of 28%.

Pre funding capex scenario

($ in millions) SOURCES USESFully Distributed IPO C-Corp IPO $600.0 Cash for Expansion Projects $300.0Enterprise Value $1,800.0 $1,900.0 $2,000.0 $2,100.0 $2,200.0 Cash to Balance Sheet 100.0

Less: Net Debt (1) 97.4 97.4 97.4 97.4 97.4 Distribution to Owners 50.0Pro Forma Equity Value $1,702.6 $1,802.6 $1,902.6 $2,002.6 $2,102.6 Debt Pay-down 101.9Discounted IPO IPO Transaction Fees 38.0Pro Forma Equity Value $1,702.6 $1,802.6 $1,902.6 $2,002.6 $2,102.6 Est. Debt Tender Premium 10.2

Less: 15% Discount (222.1) (235.1) (248.2) (261.2) (274.3) TOTAL $600.0 TOTAL $600.0IPO Equity Value 1,480.5 1,567.5 1,654.4 1,741.4 1,828.4

Plus: Net Debt (1) 97.4 97.4 97.4 97.4 97.4IPO Enterprise Value $1,577.9 $1,664.9 $1,751.8 $1,838.8 $1,925.7

IPO Size, and as % sold of total IPO equity value $600.0 41% 38% 36% 34% 33%Company B Peer Group Trading Multiples (as of: 3/23/11)

Statistic Average Median Peer 1 Peer 3 Peer 4Enterprise Value to:EBITDA 2011E $236.1 7.6x 8.0x 8.5x 8.9x 9.3x 6.5x 7.1x 7.1x 7.4x 4.9x

2012E $394.6 4.6x 4.8x 5.1x 5.3x 5.6x 5.3x 5.5x 5.5x 6.1x 4.4x2013E $473.4 3.8x 4.0x 4.2x 4.4x 4.6x 5.2x 5.2x 5.2x 6.2x 4.1x

Equity Value to:Net Income (2)

2011E $55.5 30.7x 32.5x 34.3x 36.1x 37.9x 13.2x 14.0x 14.0x 14.3x 11.3x2012E $120.4 14.1x 15.0x 15.8x 16.6x 17.5x 9.6x 9.3x 9.3x 10.5x 9.1x2013E $148.0 11.5x 12.2x 12.9x 13.5x 14.2x 9.3x 8.7x 8.7x 10.8x 8.4x

CFFO (2)2011E $172.5 9.9x 10.4x 11.0x 11.6x 12.2x 6.4x 7.4x 7.4x 7.8x 4.1x2012E $268.9 6.3x 6.7x 7.1x 7.4x 7.8x 5.2x 5.6x 5.6x 6.1x 3.7x2013E $337.5 5.0x 5.3x 5.6x 5.9x 6.2x 4.8x 4.7x 4.7x 6.2x 3.6x

Ent. Value / Reserves 856.8 mm tons $2.10 $2.22 $2.33 $2.45 $2.57 $2.18 $1.77 $1.64 $3.12 $1.77

Enterprise Value to:EBITDA 2011E $236.1 6.7x 7.1x 7.4x 7.8x 8.2x

2012E $394.6 4.0x 4.2x 4.4x 4.7x 4.9x2013E $473.4 3.3x 3.5x 3.7x 3.9x 4.1x

Equity Value to:Net Income (2)

2011E $55.5 26.7x 28.3x 29.8x 31.4x 33.0x2012E $120.4 12.3x 13.0x 13.7x 14.5x 15.2x2013E $148.0 10.0x 10.6x 11.2x 11.8x 12.4x

CFFO (2)2011E $172.5 8.6x 9.1x 9.6x 10.1x 10.6x2012E $268.9 5.5x 5.8x 6.2x 6.5x 6.8x2013E $337.5 4.4x 4.6x 4.9x 5.2x 5.4x

Ent. Value / Reserves 856.8 mm tons $1.84 $1.94 $2.04 $2.15 $2.25

Fully Distributed Multiples

IPO Discounted Multiples

34

Drivers of MLP Valuation 1. Distributable Cash Flow: Determining Appropriate Forward 12-Month Period

We believe that for a 3Q 2011 IPO, the appropriate period for calculating Company B’s “ability to pay” is Q4 2011 through Q3 2012

– Our valuation is therefore based on an estimated EBITDA level of $382.8 million

Capture of expected increases in production / pricing should be balanced with desired timing of monetization

2. Maintenance and Replacement Capex Accruals Capex accrual methodology will need to be explained

We can work with the management team throughout the process to arrive at the number that adequately supports the MLP while at the same time maximizing valuation, for the purposes of the valuation we’ve assumes $4.50/ton production in line with “MLP Peer 1” guidance

Given the length of the reserve life, impact should be muted

3. Coverage Investors will focus on three primary issues when analyzing the appropriate level of coverage

1. Coverage levels for coal comparables

2. Cushion to underpin any growth story

3. Cushion to protect MQD in a protracted pricing downturn

We believe that given Company B’s contract and growth profile (potential EBITDA CAGR of 41.6% from 2011-2013), a level of coverage inside of MLP Peer 1’s is supportable. We are recommending an initial level of 1.40x versus Peer 1’s 2011 coverage of 1.63x and Peer 1’s 2012 coverage of 1.54x

4. Fully Distributed Yield MLP Peer 1 is the most relevant comparable partnership given its scale, asset base, attractive contract profile and seasoned management team

MLP Peer 2 has exposure to similar market fundamentals as Company B, however is a less relevant comparable given its smaller size and surface mining operations

MLP Peer 3 is less comparable given its significant smaller size and met exposure, but might be still considered as a comp by some investors

5. IPO Discount Given the size of the offering, we have assumed an IPO discount of 100 bps in structuring the Company B MLP IPO

IPO Valuation

35

IPO Valuation

Positioning Company B vs. Other Coal MLPsPositioning Company B vs. Other Coal MLPs

___________________________Source: Company guidance and Wall Street equity research. Company B Information as of November 30, 2010. 1. Based on Wall Street equity research estimates of production and committed tons per year.

Easier to execute accretive deals when not in “high splits”

Company B stable and relative high contract profile will be very well received by investors as a sign of certainty of future cash flows

Total Company B production position is sizeable

Large reserves base with a long reserve life

Less mine diversity

Primarily non-union workforce will be perceived positively

Attractive growth story

Lack of substantial met coal exposure will be additionally favored by MLP investors, as it implies less volatility of future cash flows

Metric

Current IDR Status 98% / 2% 50% / 50% 98% / 2% 98% / 2%

Contract Profile (1)

2011E 86% 95% 100% 76%

2012E 65% 69% 78% 39%

2013E 54% 49% 52% N/A

2014E 51% 35% 47% N/A

2015E 56% N/A N/A N/A

2011E Production 28.7 32.6 9.1 4.9

% Met 0.0% 0.0% 0.0% 8.7%

Reserves 856.8 647.2 68.6 309.0

Reserve Life 29.8 19.9 7.5 63.4

Maintenance & Replacement Capex ($ / ton) ~$4.50/ton $4.50 $4.12 $3.74

Cash Cost ($ / ton) $35.84 $32.33 $29.56 $36.89

Coal Reserve LocationNorthern App 61.2% 23.3% 73.6% 21.5%Central App - 4.2% - 32.5%Illinois Basin 31.4% 72.5% 26.4% 35.4%PRB - - - -Other 7.4% - - 10.6%

3Coal Type: Steam / Metallurgical (reserves) 100% / 0% 100% / 0% 100% / 0% 96% / 4%

MinesUnderground 86% 99% 0% 50%Surface 14% 1% 100% 50%

Number of Mines 7 13 17 10

Union Status Minor Non-union Non-union Non-union

Total Legacy Liabilities $263mm $171mm $13mm $42mm

'11 - '13 Projected EBITDA CAGR 41.6% 3.7% 17.4% N/A

'11 - '13 Projected Distribution CAGR 6.9% 9.8% N/A

2011E DCF Yield 7.17% 8.35% 9.15%Current Distribution Yield 4.07% 6.40% 7.01%2011 DCF per L.P. Unit / 2011E Distribution per Unit 1.63x 1.23x 1.24x2011 DCF per L.P. Unit / LQA Distribution per Unit 1.76x 1.30x 1.31x

Company B MLP Peer 1 MLP Peer 2 MLP Peer 3

36

IPO Valuation

Peer Comparison – Yields & Distribution Coverage

Distribution Yield Comparison (1)

2011E Distribution Coverage and Yield Comparison (2)

4.07%

6.40%7.01%

0.00%

3.00%

6.00%

9.00%

MLP Peer 1 MLP Peer 2 MLP Peer 3

Yield

5.50% 4.41%6.76% 7.40%

0.00%

3.00%

6.00%

9.00%

12.00%


7.70%

Implied Coverage

Distribution Yield DCF Yield

(2)

7.17%

1.40x 1.63x

___________________________1. As of 3/23/2011.2. Coverage for the coal comps is calculated as DCF per LP unit divided by estimated distribution due to higher variability in cash flows associated with the coal operators.

1.23x

8.35%

1.24x

9.15%

5.50% 4.90%7.68% 8.30%

0.00%

3.00%

6.00%

9.00%

12.00%


2012E Distribution Coverage and Yield Comparison (2)

7.70%7.55%

8.95%

10.68%

1.40x 1.54x 1.17x 1.29x

Current2011E Distribution At 100 bps IPO

Comparables DCF Yield Yield Discount

MLP Peer 1 7.17% 4.07% 5.07%MLP Peer 2 8.35% 6.40% 7.40%MLP Peer 3 9.15% 7.01% 8.01%

37

Maximum claw-back scenario IPO Valuation

Illustrative MLP IPO Valuation – Scenario 1

Preliminary IPO Valuation IPO Capitalization

___________________________1. Estimates represent data at time of IPO based on numbers provided by management,

as Q4 2011E EBITDA and 75% of the estimated EBITDA for 2012E.2. Maintenance capital expenditures based on $4.50/ton production for the next twelve months

as of 9/30/2011 and will require further diligence by Barclays Capital. 3. Estimated net debt at 9/30/2011, adjusted for the $242 million pay down from net IPO proceeds.4. Assumes 6.00% gross spread, 0.375% structuring fee and additional transaction fees of $2.0 million.5. Interest saved of $24.8 million. Interest expense reflects application of $500 million of IPO proceeds which will be used to pay down debt and as a distribution the Owners. 6. Assumes that the 35% equity claw will occur at 110 to par.

($ in millions)NTM as of 9/30/2011E

EBITDA (1)$382.8 Interest Expense Adj.

Less: Maintenance Capex (2) 149.2 Incremental Public Company Expense 2.0Unlevered Distributable Cash Flow $231.6 Interest Expense (5)

(46.0)Distributable Cash Flow $185.6

Coverage Ratio 1.40xDistributed Cash Flow $132.6

Implied Valuation at IPOAssumed IPO Equity Yield 6.00% 6.50% 7.00%Implied MLP Equity Value $2,209.4 $2,039.4 $1,893.7

Net Debt (as of 9/30/2011E, post IPO) (3)357.7 357.7 357.7

Implied MLP Enterprise Valuation $2,567.1 $2,397.1 $2,251.5

Implied Multiple of 2012E EBITDA 6.5x 6.1x 5.7xImplied Multiple of 2012E EBITDA less Maint Capex 10.5x 9.8x 9.2x

Implied Fully Distributed ValuationAssumed Fully Distributed Yield 5.00% 5.50% 6.00%Implied MLP Equity Value $2,651.2 $2,410.2 $2,209.4


Implied MLP Enterprise Value $3,009.0 $2,767.9 $2,567.1


($ in millions)IPO

At IPO: Capitalization % of CapPublic Common Interest (IPO Size) $500.0 24.5%Sponsor Common Interest 499.3 24.5% Total Common L.P. Interest $999.3 49.0%

Subordinated Interest 999.3 49.0% Total L.P. Equity Value $1,998.6 98.0%

General Partner Interest 40.8 2.0% Total Partnership Interest $2,039.4 100.0%Net Debt (as of 9/30/2011E, post IPO) (3) 357.7 Total Capitalization $2,397.1

Fully Distributed:Public Common Interest $590.9 24.5%Sponsor Common Interest 590.1 24.5% Total Common L.P. Interest $1,181.0 49.0%

Subordinated Interest 1,181.0 49.0% Total L.P. Equity Value $2,362.0 98.0%


SourcesIPO Proceeds $500.0

Total Sources $500.0

Uses:Distribution to the Owners $200.5Paying down outstanding debt (3) 241.5Est. IPO Transaction Fees and Expenses (4) 33.9Est. Debt Tender Premium (6) 24.2

Total Uses $500.0

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Pre-funding capex scenarioIPO Valuation

Illustrative MLP IPO Valuation – Scenario 2

Preliminary IPO Valuation IPO Capitalization

___________________________1. Estimates represent data at time of IPO based on numbers provided by management,

as Q4 2011E EBITDA and 75% of the estimated EBITDA for 2012E.2. Maintenance capital expenditures based on $4.50/ton production for the next twelve months

as of 9/30/2011 and will require further diligence by Barclays Capital. 3. Estimated net debt at 9/30/2011, adjusted for the $14.7 million pay down from net IPO proceeds.4. Assumes 6.00% gross spread, 0.375% structuring fee and additional transaction fees of $2.0 million.5. Interest saved of $5.5 million. 6. Assumes that the equity claw will occur at 110 to par.

($ in millions)NTM as of 9/30/2011E

EBITDA (1)$382.8 Interest Expense Adj.

Less: Maintenance Capex (2) 149.2 Incremental Public Company Expense 2.0Unlevered Distributable Cash Flow $231.6 Interest Expense (5)

(65.3)Distributable Cash Flow $166.3

Coverage Ratio 1.40xDistributed Cash Flow $118.8

Implied Valuation at IPOAssumed IPO Equity Yield 6.00% 6.50% 7.00%Implied MLP Equity Value $1,980.2 $1,827.9 $1,697.3


Implied MLP Enterprise Valuation $2,164.8 $2,012.4 $1,881.9


Implied Fully Distributed ValuationAssumed Fully Distributed Yield 5.00% 5.50% 6.00%Implied MLP Equity Value $2,376.2 $2,160.2 $1,980.2


Implied MLP Enterprise Value $2,560.8 $2,344.8 $2,164.8


($ in millions)IPO

At IPO: Capitalization % of CapPublic Common Interest (IPO Size) $500.0 27.4%Sponsor Common Interest 395.7 21.6% Total Common L.P. Interest $895.7 49.0%

Subordinated Interest 895.7 49.0% Total L.P. Equity Value $1,791.3 98.0%


Fully Distributed:Public Common Interest $590.9 27.4%Sponsor Common Interest 467.6 21.6% Total Common L.P. Interest $1,058.5 49.0%

Subordinated Interest 1,058.5 49.0% Total L.P. Equity Value $2,117.0 98.0%


SourcesIPO Proceeds $500.0

Total Sources $500.0

Uses:Cash for Expansion Projects $300.0Cash to Balance Sheet 100.0Distribution to the Owners 50.0Paying down outstanding debt (3) 14.7Est. IPO Transaction Fees and Expenses (4) 33.9Est. Debt Tender Premium (6)

1.5Total Uses $500.0

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DisclaimerThis document has been prepared by Barclays Capital, the investment banking division of Barclays Bank PLC ("Barclays"), for information purposes only. This document is an indicative summary of the terms and conditions of the securities/transaction described herein and may be amended, superseded or replaced by subsequent summaries. The final terms and conditions of the securities/transaction will be set out in full in the applicable offering document(s) or binding transaction document(s).

This document shall not constitute an underwriting commitment, an offer of financing, an offer to sell, or the solicitation of an offer to buy any securities described herein, which shall be subject to Barclays’ internal approvals. No transaction or services related thereto is contemplated without Barclays‘ subsequent formal agreement. Barclays is not acting as a fiduciary. Accordingly you must independently determine, with your own advisors, the appropriateness for you of the securities/transaction before investing or transacting. Barclays accepts no liability whatsoever for any consequential losses arising from the use of this document or reliance on the information contained herein.

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Presentation to the University of Colorado Investment Banking March 30, 2011.

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Transcript of Presentation to the University of Colorado Investment Banking March 30, 2011.