Prairie State Advances Employees Find Technology Ways to Save

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For Peabody Energy Employees and St akeholders

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Outdoor Education Blooms

Issue 1, 2013

Employees Earn Top Emergency Preparedness Honors C

all them masters of mine rescue. Since 1898, Peabody Energy employees have devoted countless hours of personal time practicing for an emergency they hope will never occur. That's not to say that the hard work goes unnoticed. Peabody's mine rescuers rank among the world's best. Consider the North Wambo Mine rescue team. Led by Captain Matt Bailey, the team earned second place at the eighth International Mine Rescue Competition this past September in Ukraine. The contest featured the best teams in the world across mining sectors, with a home team taking the top honor. The competition was comprised of four parts: a rescue performance scenario, which includes equipment preparation, simulated search and recovery; firefighting; roof support and ventilation work. Teams also compete in a first aid contest, Benchman exercise and engineering analysis. Competitions around the world feature similar tests of strength, savvy and courage, under stressful conditions.

Examples of Excellence • The Rawhide and North Antelope Rochelle Mine teams earned first and second places at the 32nd annual International Surface Mine Rescue Competition in Wyoming. • At the 74th annual Tri-State Fireman Competition, the Lee Ranch Mine team earned second place overall, and first in two- and three-man competitions, while the El Segundo Mine team took second in the three-man contest. Both operations are in New Mexico. • The North Goonyella Mine rescue team took third place at the E.K. Healy Cup, one of Queensland’s most demanding competitions. • The Indiana North Mine rescue team earned second place at the Robert Earl Jones Mine Rescue Competition in Southern Illinois.

Peabody's North Wambo Mine rescue team earned first place at the Hunter Valley Mines Rescue Competition, at top, and finished among the world's top two teams at the International Mines Rescue Competition. At bottom, the Gateway Mine rescue team took top honors at the 2012 Illinois State Mine Rescue Contest, earning first among all state teams and first all-around.

“A lot of discipline is required as part of mines rescue procedures and training, but our people have discipline in bucketfulls,” says Alan Miskin, Director of Health and Safety in the Australia business unit. “Our mines rescue team members have good reason to be proud of their commitment, professionalism and competence.” Matt adds his team's camaraderie is motivating. “I felt very proud to be part of a team that represents North Wambo and Peabody,” he says.

in the Americas business unit. Participating in contests also keeps employees “more aware and knowledgeable of the safest practices,” says Rescue Team Benchman Craig Hawkins at the Gateway Mine in Illinois. Craig has earned honors that include first place at the Kentucky State Mine Rescue Benchman event. These events test the ability to properly and quickly clean, check, locate and operate breathing apparatus.

“Employees train because they care about their fellow employees, their mine and Peabody,” says Chuck Burggraf, Senior Vice President of Health and Safety

Craig has been “benching,” as he calls it, only for the past year. He often practices at home by asking his wife to help rig his test apparatus, and then after by

examining it, catching and remedying bugs to ensure correct operation in simulated scenarios. “The process really helps you focus on the details and precision, as very small things can have significant effects,” says Craig. However, he notes one small downside. “My wife sometimes gets tired of me scratching up the dining room table with parts of the apparatus.”

Collaboration Across the Pacific Strengthens Australian Operations

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hen the phrases “Righto, mate” and “No worries” first came across the two-way radio at North Antelope Rochelle Mine, they raised eyebrows, says Millennium Mine Shovel Operator Peter Roulston. Yet just a few weeks in, Peter found his U.S.-based colleagues adopting and using the same Australian phrases. “What also united us was the company’s commitment to the safest and best practices when it comes to producing coal,” says Peter, who returned to Millennium to operate the mine's newly commissioned shovel. He was among a group of Australian miners who trained in the U.S. Powder River Basin in 2012 as part of a multiyear initiative to expand the company's Australian platform through investment and best-practice sharing. A “One Peabody” sense of teamwork is behind the progress, says Jerry Tystad, Vice President of Continuous Improvement, Asset Management and

Applied Technology. “It's taken many people to help make this cross-continent training possible: Americas' continuous improvement specialists and the Western Training Center team contributed to coordination and training. Operations leadership provided support and the prime location in the Powder River Basin. And Peabody's Australian leadership demonstrated foresight in driving these opportunities as that platform grows.” Fleet upgrades have rolled out as expansion projects near completion and operations convert to an owneroperator status, eliminating contractor operations at these mines. As a result, the company expects to see significant productivity gains and cost efficiencies while advancing improvements in safety. “Australia remains a major cornerstone of growth for Peabody as we build production and our project pipeline,” says President – Australia Charles Meintjes. “As we continue to expand and strategically invest in the business, safety remains our top focus, with the need to continue to drive improvement, productivity and cost savings.”

The Wilpinjong, Millennium and Wambo Open Cut mines will transition to owner-operator April 1. Preparation activities are under way, including a new shovel – one of only two of its kind in the nation – and 400-ton ultraclass haul trucks at Millennium. New haul trucks and an excavator are also coming to Wilpinjong. “The owner-operator model will deliver increased control and management of safety, the Peabody culture, mine planning, costs and how we use resources,” says Charles. “We also believe it will increase our ability to attract, retain and develop employees who have a direct stake in the mines' performances." Improving production at the Coppabella Mine – one of three additions to Peabody’s Bowen Basin operations with the company's acquisition in late 2011 – is also a focus for the business unit, and fleet upgrades at the pulverized coal injection (PCI) operation will help improvements. The introduction of a new ultraclass truck fleet, workshop and grader will replace some equipment while other equipment will be redeployed. In addition, the operation has made notable strides in dragline performance.

A shovel, new ultraclass haul trucks and fleet upgrades at the Millennium Mine are part of owner-operator conversions that are expected to bring productivity gains and cost efficiencies.

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MESSAGE FROM CHAIRMAN AND CHIEF EXECUTIVE OFFICER GREG BOYCE

Long-term Fundamentals Drive and Shape Peabody's Success Our industry-leading reserves and access to the world’s best economies enabled progress this past year that includes: • Another record global safety incidence rate, improving 9 percent from record 2011 performance. Greg Boyce, Chairman and Chief Executive Officer

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wo words come to mind to characterize the coal industry in 2012. This past year was one of both challenge and change. For Peabody Energy, 2012 demonstrated the strength of Peabody's people, platform and position in all market conditions. This includes the near term, in which we are cautious amid lingering challenges, and the long term, in which the fundamentals for coal remain strong. Coal has been the fastest-growing fuel for the past decade and accounts for 30 percent of global energy consumption, which is the highest share since 1969. Global coal use is expected to rise 60 percent by 2035 – more than double the growth of oil. As early as 2013, coal could become the world’s largest energy source. Peabody succeeds by focusing on what matters: providing low-cost, clean coal that creates energy and steel, fuels jobs and stronger economies, and provides a higher quality of life for people around the world.

• A strengthened global platform and balance sheet, and more than 35 honors for performance, safety and environmental excellence.

Peabody succeeds by focusing on what matters: providing low-cost, clean coal that creates energy and steel, fuels jobs and stronger economies, and provides a higher quality of life for people around the world. As we begin the new year, another word comes to mind: optimism. Coal’s U.S. market share, which bottomed out at 33 percent in 2012, has returned to levels close to 40 percent while natural gas prices have doubled. Our U.S. customers are sourcing more coal from the low-cost Powder River and Illinois basins, where Peabody holds the leading positions. China and India still grew at multiples of more mature economies in 2012; Chinese and Indian

imports rose by more than 30 percent and about 14 percent, respectively, during the past year. In industrialized economies, coal remains the leading baseload fuel to replace declining nuclear generation. Electric coal generation in Europe increased 16 percent in 2012. We see strength in core markets with coal demand projected to expand by 1.6 billion tons over the next five years. As an organization, we need to remain focused on long-term fundamentals that have been Peabody's source of strength for 130 years: • Developing and managing safe, efficient, technology-driven and low-cost coal mining operations to provide customers with quality product, fueled by innovation; • Empowering others and continuing to foster a collaborative workplace that values safety, continuous improvement and opportunity; and • Sustaining our social license to operate, by being environmentally responsible, good corporate citizens and by strengthening community support. Peabody has the people, the strategies and the assets to weather tough times and to emerge even stronger in the months ahead. Be proud to be part of the world’s best energy company. And thank you for your hard work in helping build and maintain safe, world-class operations.

PERSPECTIVES

How You Play a Role in Workplace Security E

mployees often ask how we are making the Peabody Energy workplace more secure. We invest in everything from turnstiles to access offices, a coordinated guard effort at our mines, and an international Jeff Larner, support system for employees Chief Security Officer, who travel. We take these steps Peabody Energy not because we face a threat, but because research tells us that these are best practices to safeguard our people and our platform. Still, I've learned to appreciate that calm, wellprepared co-workers can be the best protection in an emergency. In law enforcement circles, we call this "situational awareness," and it defines a specific frame of mind in which you assess conditions, evaluate potential threats and take proactive measures to minimize those threats. Sound familiar? The idea of situational awareness is similar to Peabody Energy’s Stop, Look, Analyze and Manage (SLAM) process, and extends to every aspect of our lives. Put simply, it's listening to and trusting your instincts. In my role leading the company’s Global Security team, I see situational awareness in action each day at Peabody workplaces. We manage a broad range of security issues, including crisis and business continuity planning, risk management and mitigation, the security of company assets and travel security. Peabody’s top concern is your safety and security. And you have a role to play. Ensuring a secure workplace starts with each employee.

The idea of situational awareness is similar to Peabody Energy’s Stop, Look, Analyze and Manage (SLAM) process, and extends to every aspect of our lives. Put simply, it's listening to and trusting your instincts. One recent example stands out: In the U.S. Powder River Basin, employees demonstrated great teamwork in preparing for and responding to publicized activist demonstrations earlier this year. In mid-2012, an activist group made public its plans to target coal mines in Wyoming. The group made its goal clear in public statements to “interrupt business at the mines with arrestable activities to win publicity and cut into coal company profits.” A coordinated effort to educate and inform employees, local residents and community members helped instill vigilance and awareness. For example, employees were quick to report when they saw unfamiliar vehicles and people near Peabody operations. Their instincts told them when something didn’t look right, and they acted. Peabody operations and offices around the world have faced similar challenges. Many activist groups today seek to create confrontations to generate media coverage. We do not agree with many tactics or positions these organizations take. While we respect the right to free speech and assembly within the law, we will not tolerate trespassing, interrupting our business or otherwise burdening our employees,

philanthropic partners, customers or contractors. In these cases, Peabody works with local law enforcement to resolve issues. So what do employees need to know and do? Avoiding confrontation is essential to managing through potential actions, and in the rare instance protestors show up at your office or operation, immediately contact Peabody’s Global Security team at (314) 342-7530 or 1 (866) 333-5650, the local site or contract office security and your supervisor. They will take proper action depending on the situation. Threats to the workplace also may be more subtle, but situational awareness again plays a role. We recently began offering training regarding workplace violence as another proactive measure. More than 71 percent of those people who become violent in a workplace share signals in advance. As with any security concern, if you see something, say something. Our efforts are strictly preventive. Safety is always our first concern, which is why working at a Peabody mine is safer than working at a mall. Peabody offers a safe workplace. We intend to keep it that way, and thank you for your help.

About the Author Jeff Larner directs the development and implementation of policies and practices to ensure the security of the company’s worldwide assets. Jeff has more than 25 years of global security and law enforcement expertise. A military veteran, Jeff served in the U.S. Marine Corps.

SHOW YOUR

PEABODY

PRIDE Visit the Peabody eStore at PeabodyEnergy.com/eStore

Conveyor is written for employees and stakeholders, and is produced by the Investor Relations and Corporate Communications Department. The use of the words “Peabody,” “the company” and “our” relate to Peabody, our subsidiaries and our majority-owned affiliates. Printed on recycled paper.

© 2013 Peabody Energy

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Peabody Energy Peabody Plaza 701 Market Street St. Louis, MO 63101-1826 Phone: 314-342-3400 [email protected] Peabody Energy (NYSE: BTU) is an Equal Opportunity Employer.

10 Facts You Should Know About Coal

These simple and surprising facts illustrate clean coal’s importance in driving economic growth, environmental solutions and energy security.

Our world is turning to coal. The world’s fastest-growing fuel for the past decade, coal now accounts for 30 percent of the world’s energy consumption. The International Energy Agency projects coal use will grow 60 percent by 2035, and Wood Mackenzie predicts coal could surpass oil as the globe’s No.1 energy source in a few years. Coal is also in demand for steel, with 200 million tonnes per year of metallurgical coal estimated to be needed in the next five years.

The best economies power up with coal. One new 500-megawatt coal-fueled power plant is expected to start up somewhere in the world every three days for the next five years. And two of the world’s strongest economies lead in global coal growth: China and India. These nations have lifted hundreds of millions of people out of energy poverty, through coal.

Abundant electricity means longer lives. The United Nations and other groups have shown a direct correlation between longevity and greater electricity access, which fosters clean water, food preservation, safe lighting, industrial growth, job creation and modern technologies.

Coal keeps energy affordable, economies growing.

Coal is a growing export story. Australia already is the world’s leading coal exporter.

The 10 U.S. states that use the highest percentage of coal enjoy electricity rates significantly lower than states that rely mostly on other fuels.

Coal exports fueled Australia's continued growth during the worst global recession since the Great Depression. In the United States, 2012 coal exports reached a record level, and the United States will continue to raise its profile as an energy exporter. Coal is reducing America’s trade deficit and powering jobs and growth.

Clean coal technologies are a major environmental success story. Use of coal-fueled electricity has nearly tripled since 1970, as regulated emissions per megawatt hour have decreased 87 percent due to billions of dollars of investment in green technologies. Advanced coal power plants built today achieve greater efficiencies than would have been unimaginable a decade earlier, achieving one-fifth the criteria emissions of the existing fleet.

Real green jobs come from supercritical and ultra-supercritical coal technology. Southern Company's Turk Power Plant in Southwest Arkansas is one of the cleanest, most efficient coal-fueled plants ever constructed, with major emissions 80 percent below the existing fleet. The plant utilizes Powder River Basin coal and reached peak construction employment with 2,200 workers. The project and associated economic development will produce an estimated annual payroll of $9 million and about $4 million in annual tax revenues.

Coal has three ways to help power your car. Coal can be converted into diesel and jet fuels through liquefaction, and $100 per barrel oil makes such processes economic. Second, carbon capture, use and storage technologies can be used in enhanced oil recovery. Third, chances are good that people who own an electric car own one that is powered by electricity from coal.

Other energy sources are essential but have limits. Natural gas has seen wild price gyrations that prevent long-term reliance. Wind farms take up to thousands of times the footprint of an efficient surface coal mine and produce only variable power. Major nations are turning away from nuclear due to safety concerns. Oil has soared in price and is uneconomic for major electric generation. And solar has produced more headlines than power for more than half a century.

The Peabody Plan propels the “Three Es.” The company is advancing the Peabody Plan to drive energy security, economic growth and environmental solutions. It has five core elements: 1. Work to eliminate energy poverty and build economic competitiveness by ensuring that at least half of new generation is fueled by coal; 2. Replace older traditional coal plants with advanced supercritical and ultra-supercritical coal technologies; 3. Develop at least 100 major carbon capture and storage projects around the world within 10 years; 4. Deploy significant coal-to-gas, coal-to-chemicals and coal-to-liquids projects globally in the next decade; and 5. Commercialize next-generation clean coal technologies to achieve near-zero emissions.

Prairie State Represents Advanced Coal Technology in Action

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Deploying advanced coal plants like Prairie State is part of Peabody’s five-step path – called the Peabody Plan – to provide universal energy access by 2050. A global supercritical program could deliver significant economic returns while helping achieve environmental objectives. “We know that right now we can expand electrification, propel job creation and ignite the U.S. and developing nations’ economies through greater use of advanced coal technologies,” adds Greg.

n her morning commute, Marjorie Wayland witnesses the future of coal made real. Just outside Marissa, Illinois, the Gateway Mine Engineer passes the massive Prairie State Energy Campus, the largest coal-fueled power plant built in the United States in the past three decades. “Prairie State’s stacks rise in the distance, and they represent something important to me: the future for affordable, reliable and clean energy in our nation,” says Marjorie. “You see the economic benefits around my community, from the workers who support the local butcher shop and convenience stores, to new funding for emergency rescue equipment and education in the community made possible by the plant.” Peabody currently owns a 5 percent equity stake in Prairie State, a campus that features a 1600-megawatt power plant and coal mine. Other owners include eight Midwestern public power agencies and rural electric cooperatives. Peabody initiated the project more than a decade ago to use Illinois Basin coal to provide stable and competitively priced power to 2.5 million businesses and households across the U.S. Midwest and MidAtlantic. The plant’s second unit fired up in late 2012.

Prairie State: By the Numbers •

1,600 megawatts of power serving 2.5 million people

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$1 billion invested in best-available control technology

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$785 million in annual economic activity in Southern Illinois

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7 million tons of coal produced yearly from adjacent mine

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4,000 workers who built the plant

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700-foot stack, 70 feet higher than the Gateway Arch

Learn more at PrairieStateEnergyCampus.com.

Prairie State features $1 billion in environmental technologies, making the operation one of the cleanest coal-fueled plants in the nation.

From the beginning, planners designed Prairie State to be one of the cleanest coal-fueled power plants in the United States, if not the world, says Jacob Williams, Peabody Energy’s Vice President of Global Energy Analytics and a founding member of Prairie State’s board of directors. “Today, Prairie State is in the top 5 percent of most efficient coal-fueled plants in the nation.” Jacob adds that Prairie State ranks among the greenest 6 percent of all coal plants in America, virtually eliminating major emissions. Peabody Chairman and Chief Executive Officer Greg Boyce views Prairie State as a global model. “As the world increases its use of coal, we’re also advancing clean coal solutions toward the ultimate objective of near-zero emissions,” says Greg. “Prairie State provides the path forward: Here is an operation using green technology that is real, available right now and delivering affordable, reliable and clean energy. We need to build many, many more Prairie States.”

The plant is ultra efficient, achieving approximately one-fifth the emissions rate of the existing U.S. fleet and carbon dioxide (CO2) emissions rates some 13 percent lower than the average U.S. plant and 25 percent lower than the oldest plants in the fleet. Sound long-term forecasts show electricity costs from Prairie State will be extremely competitive with other fuels during the anticipated 30-year life of the facility. In fact, Prairie State has the lowest fuel and operating costs of any coal plant in the United States. Coal used by the plant comes from the adjacent underground mine, which eliminates carbon dioxide emissions that would come from transporting coal by train or barge. Already, Prairie State is performing above high expectations. Testing indicates that both of the power plant’s generating units are being scheduled at higher than nameplate capacities of 800 megawatts each and are operating more efficiently than expected. “Prairie State’s higher output – combined with improved efficiency – provides owners with a financially sound and sustainable investment for the next 30-plus years,” says Jacob.

Conveyor Issue 1, 2013|3

Ways to Save: How Employees Are Helping Manage Costs Peabody Energy appealed to employees in late 2012 to maintain an intense focus on helping the company manage costs. The call was clear, and employees have responded with innovation, process improvements, lower-cost production and greater awareness. “Every corner of the company is helping drive results... from the operations to offices,” says Peabody Chairman and Chief Executive Officer Greg Boyce. “Peabody has weathered countless market cycles throughout our 130-year history, only to emerge stronger. The ingenuity of our employees continues to make a difference in times of challenge.” Here are just some of these stories.

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3 Ways You Can Help 1. Realize every day that a safe mine is a productive and cost efficient mine, and safety is the first measure of operational excellence. 2. Within the scope of your role, define the areas in which you can personally help make a difference. 3. Ask questions, communicate ideas, and share success stories by emailing [email protected].

Vending Machines Deliver Safety Savings

Stockpiled Coal Brings Cash at Burton Mine

Twentymile Improves Organization of Longwall Moves

For decades, they’ve carried candy, chips and cans of soda. But vending machines at a growing number of Peabody operations are now dispensing as many safety products as sugary treats. In the process, the devices are reducing the high turnover costs of these consumable products.

Talk about being worth its weight in coal; thanks to the smart thinking of employees, a 250,000-metric-ton stockpile has turned into A$10 million in cash for Peabody.

Moving a longwall is complex to say the least. One move involves 2,100 components, including 630 hoses and pipes, 107 electrical cables and 1,345 pieces of equipment. It all adds up to 7,500-plus tons. It's the equivalent of disassembling, moving and reassembling 48 haul trucks, seven dozers and five wheel loaders.

The technology helps mines more effectively distribute a variety of items, from hand, eye and ear protection, to flashlights, high-visibility vests, small hand tools and small electrical, welding and adhesive products. Each employee enters a personal identification number to retrieve an item, enabling the operation to better track orders. What's more, employees are directly enlisted in containing costs. With each use of the machine, an employee can see the costs associated with an order.

Vending machines that dispense a wide variety of safety and workplace items are rolling out across Peabody Energy operations to reduce high costs associated with these consumable projects.

The first machines in the Midwest U.S. arrived at the Wildcat Hills underground mine in early 2012. Since then, the mine's average monthly savings has reached nearly 40 percent. Vending machines are also in place across Powder River Basin operations, with Rawhide Mine as one of the first to test them there, and at the Francisco, Twentymile and Bear Run mines, with rollout at El Segundo Mine and in Australia set for 2013. Wildcat Hills General Manager Mark Cavinder says employees have embraced the technology. “The machines help instill personal accountability for the products we use,” says Mark. “They also allow employees to get what they need when they need it, rather than waiting before a shift to get an item from the warehouse.” He adds that employees have seen how the machines have helped achieve savings and benefit the business. “We are getting the results we had hoped for.”

The coal had gradually increased in size at the Burton Mine in Queensland. This product presented a challenge at the Burton coal handling and preparation plant. Lead Process Engineer James Agenbag and Senior Process Engineer Rahul Patel wondered about its value and quality. James and Rahul decided to investigate the yield and whether the coal could be processed. Two trials were organized to test the product’s viability. “The coal came from a few stockpiles with very different qualities,” says Rahul. “We constantly have to monitor thickener and flotation performances, while keeping an eye on the product quality. The trials gave the operators and lab staff a good workout.” The yields were well worth the effort, as the product kept piling into bins. On average, the trials achieved a 65 percent yield, with 12.5 percent ash. “We want to encourage everyone to think outside the box, and not to be afraid of challenging the status quo,” says Upstream Coal Quality Manager Ken Blackwell. “There are many opportunities out there to unearth value, and in times like these it’s important that we pursue them.”

Employees at the Burton Mine in Queensland discovered value in a pile of oxidized coal that had been set aside for years. After processing, the coal's worth amounted to A$10 million.

That’s why the invention and use of a precise, detailed and thorough kit system for every move is saving significant money and time at Twentymile Mine in Colorado. “We have been moving the longwall in some fashion every year since 1990, and it is always a big undertaking,” says Dave Long, Supply Chain Manager for Peabody’s Colorado operations. “Before we put in place the kitting, the move used to take on average 28 days. And each day the longwall is down, it costs the company.” Today, the mine prepares more than 22 kits before a move. Every part, supply, instruction and documentation is organized by job and ready to go. The kits help improve the safety and efficiency of the longwall crew’s work, preventing delays to search for and retrieve missing parts or similar activities. In recent years, a typical longwall move at Twentymile Mine has averaged just 20 days. In 2012 alone, Dave estimates the kitting approach has saved more than $575,000 in addition to the financial impact of decreasing the average move time. “Twentymile employees have really contributed to and driven the success of the process by being organized and prepared for this significant task, and they have taken active roles in planning. They've also done an excellent job of recovering and reconditioning components during the move,” says Dave. “Every effort to prepare before a job helps to lower our costs and keeps us on budget.” Continuous improvement also remains a focus, as the team is looking to incorporate underground tracking technology with kits for the next move in 2013, which will pinpoint locations of components to ensure they are in the right place at the right time, adds Dave.

At top, as part of the company's cost containment efforts, a task force is seeking feedback and ideas from all employees on smart ways to save money. Left, Twentymile Mine in Colorado uses a precise, detailed and thorough kit system for every move of the longwall. This system is saving significant money and time with each longwall move.

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Peabody Energy Expands Leadership Model to Guide Employees

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t is said that leadership starts at the top. At Peabody Energy, leaders can be found everywhere. This is the central insight behind updates to the company’s Leadership Competency Model. The new model is based on widespread employee feedback and is being integrated into employee development and performance management processes throughout the company. “Leadership is not just reserved for a title,” says Andy Slentz, Senior Vice President of Global Human Resources. “To lead is a decision that all employees must make individually. You decide that you are going to step forward to make a difference, and you learn how to persuade others to join you.” Peabody’s Leadership Competency Model is designed to guide employees by better defining expectations. It also helps employees better understand how they contribute to the company’s success. “We all still have performance goals that are ‘what we do.’ Now we have a companywide model of leadership that defines the ‘how’ for all employees,” says Andy. The model has been based on four existing pillars: inspiration, innovation, collaboration and execution.

“We all still have performance goals that are 'what we do.' Now we have a companywide model of leadership that defines the 'how' for all employees.” Andy Slentz, Senior Vice President of Global Human Resources Now five new competencies join existing ones, and each has a set of behavioral expectations for job performance: • Innovation – Leading Change: How an employee positions Peabody to successfully move through short and long-term change. • Innovation – Strategic Agility: How an employee translates opportunity into realistic business strategies and initiatives. • Collaboration – Being Open and Transparent in Relationships: How an employee acts in an authentic and approachable manner when interacting with others to enhance companywide working relationships.

• Execution – Problem Solving: How an employee identifies, analyzes and resolves issues to improve business performance. • Execution – Enhancing Employee Performance: How an employee aligns, manages and rewards performance to support Peabody's mission and strategies. In coming weeks, global and local Human Resources teams will share more details about both the model and the integration of competencies and behaviors into HR processes. The expanded approach has already been integrated into new manager and front-line supervisor development programs. In 2013, the integration will continue with the introduction of the competencies and behavioral descriptions into other processes for training, development and performance management. Developed in 2006, Peabody’s original Leadership Model targeted employees at the director level and above. Company leaders reviewed that model, identifying important additions to address future company needs. In all, more than 400 employees from across functions and business units helped contribute to the expanded and revised model.

Peabody Energy Leadership Competency Model

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NEW NEW

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Leaders… on Leadership Effective leadership inspires others to perform at the highest level. Conveyor asked the company’s Executive Leadership Team to share its insights on leadership at Peabody and each of Peabody’s leadership pillars.

“Our future wouldn’t be what it is today without company leaders who for years have inspired, innovated, collaborated and executed. Today, we’ve modeled these into being the pillars of leadership that support our future. To achieve our strategic initiatives, we must inspire employees to perform at the highest level; innovate through new approaches, new technologies and new markets; collaborate through teams, using our best thinking to solve challenges and continuously improve; and finally execute to achieve strong results.” − Greg Boyce, Chairman and Chief Executive Officer

Inspiration

Innovation

Collaboration

Execution

“Leaders have to earn the right to lead and win the trust of their teams. By investing time to coach, mentor and develop those around them, leaders can become an inspiration for others to follow them.”

“Be a person who looks for innovative solutions. When there is a challenge or issue, I look around the table to find the person who has an idea about how the challenge can be overcome. It is easy to say why something won’t work. Be the person who helps solve the problem.”

“Collaboration isn’t just about working well with others. It means making sure that the whole is more than the sum of its parts. That involves identifying and recognizing the unique talents and strengths of each team member and putting them to work in ways that will produce the best result.”

“Execution at Peabody starts with managing safety, taking responsibility for performance and being resourceful. It is taking initiative to identify, analyze and resolve issues that improve performance.”

−Eric Ford, Chairman − Australia

“Evidence of leadership is having people willing to follow you, to cheer when you succeed and support you during challenges. A leader inspires people to believe that they truly win as a team, not as individuals. They recognize that a leader empowers them to add value and makes the entire group more successful.”

−Charles Meintjes, President − Australia

−Sharon Fiehler, Executive Vice President

“Peabody Energy is full of innovators − the people who come up with the patents, the processes, the technical ideas that make companies more competitive. Our challenge is to harness that creativity and curiosity to find solutions and meet our business objectives.”

and Chief Administrative Officer

−Jeane Hull, Executive Vice President and Chief Technical Officer

−Chris Hagedorn, President – Asia and Trading

“Peabody seeks to help more people live longer and live better, and we make a product that does just that: coal. Governments that partner with us understand that we have the right values and we can deliver. Working together toward the same goal is collaboration, and it's what we do every day as an industry leader.” −Fred Palmer, Senior Vice President Government Relations

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−Kemal Williamson, President – Americas

“Strategies are just paper without execution. By reducing costs and increasing margins, Peabody generates the cash that we reinvest in the business. This is how we earn the right to grow.” −Mike Crews, Executive Vice President and Chief Financial Officer

“Execution is both about doing what is right and doing the right things. With the continued global expansion of Peabody’s business platform, it is vital to understand and comply with the laws and regulations applicable to our global operations.” −Alex Schoch, Executive Vice President Law, Chief Legal Officer and Secretary

WATTS UP Leaders in Education Program Continues to Make Headlines “Thank you for honoring me with such an amazing award… I am also so appreciative that Peabody recognizes the importance of education, as well as the need for strong leaders in the world of education,” wrote Cindy Hettenhausen, a teacher at Ellis Elementary School in Belleville, Illinois. And the words of Kathy Kintz, a third grade teacher at Sunflower Elementary in Gillette, Wyoming, echo the sentiment: “Your recognition not only inspires us to try harder but sends an ‘I can’ message to all of our students and colleagues.” Feedback from these Peabody Energy Leaders in Education honorees continues to speak volumes about the program. Leaders in Education

honors educational professionals who are selected anonymously by a committee of top educators and community and business leaders across a number of communities where Peabody operates. There will be about 95 honorees in the 20122013 academic year. In 2012, the program grew to reach 1,728 schools in 44 different counties – having a potential impact on more than 1.2 million students across Missouri, Indiana, Illinois, Colorado and Wyoming. In addition, honorees continue to earn recognition in their local community newspapers and radio and television stations. Learn more at PeabodyEnergyLeadersinEducation.org.

At left, Nick Breunig – the son of Peabody Energy Finance and Planning Director Steve Breunig and wife Jill – nominated and presented St. Louis University High School science teacher Mary Russo, second from left, with the Peabody Energy Leaders in Education honor this past December. Steve and Jill are also pictured. Nick, now a college freshman, also spoke to junior students about why he nominated Mary for the program.

Operations Honored for Innovations in Safety Across Peabody An idea for haul road roundabouts was recognized as the most inventive across the company. North Antelope Rochelle Mine won the Best Overall Innovation for its introduction of the circular roads to improve traffic flow. The honor is part of Peabody Energy's 2012 Safety Innovation Awards program. In its third year, the awards recognize the creativity and achievement of workforces across the company’s global platform. The Safety Innovation Awards also foster the sharing of best

practices across Peabody and the industry. This 2012 program attracted 79 entries.

Winners were: • Best Overall Innovation: Haul Road Roundabouts, North Antelope Rochelle Mine, Wyoming

• Best Overall – Second Place: Safe Road System, Coppabella and Moorvale mines, Queensland

• Best Overall – Third Place and Most Transferable: Cardinal Rules DVD, Brisbane office, Queensland

• Most Original: Ladder Spotter, Twentymile Mine, Colorado

• Best Cost-to-Impact Ratio: Continuous Miner Cover Handles, Columbia Rebuild Shop, Indiana From left are Health and Safety Senior Vice President Chuck Burggraf, North Antelope Rochelle Mine Safety Manager Deb Diedrich and President – Australia Charles Meintjes during the presentation of 2012 Safety Innovation honors.

Congratulations also go to the Twentymile Mine, which is the only Peabody operation to have earned innovation awards in each of the past three years since the program launch.

Former Mined Indiana Land Becomes Place of Refuge More than 1,000 acres of formerly mined lands are now part of a vital conservation effort in Southwestern Indiana. In October, the Patoka River National Wildlife Refuge acquired management rights to a tract of land that housed Peabody Energy's former Columbia Mine. The refuge, which was created in 1994, spans more than 8,000 acres of wetlands, floodplain forest and uplands along the Patoka River. Peabody is proud of this vital partnership with the U.S. Fish and Wildlife Service, the Indiana Department of Natural Resources and a number of conservation groups that helped make this Patoka Wildlife Refuge expansion possible, says Bryce West, Director of Environmental Services for Peabody’s Midwest operations. “Our restoration plan at the Columbia Mine raised the bar for what is considered best practice,” says Bryce. “The diversity of the lands we developed was intended to be attractive for many species, large and small on land or water. “I had the privilege of being one of the leaders of the restoration project for the Columbia Mine in the 1990s, working with a team from Peabody in consultation with the Indiana Department of Natural Resources,” he says. “We take great personal pride in seeing that the lands we restored offer such diversity of habitat and such terrific success.”

Sealant Minimizes Coal Dust Technology deployment at the North Antelope Rochelle Mine in Wyoming safely and effectively applies a sealant to coal as it is loaded by train cars. The water-based product forms a crust over the coal, essentially creating a veneer cover to minimize coal dust.

In reclamation efforts at the former Columbia Mine, Peabody created a variety of habitat such as marshes, wetlands, hardwood forests and grasslands. These today house waterfowl, deer and coyote, among a number of endangered and threatened species such as the Indiana bat, the copper belly water snake and Henslow’s sparrow.

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Environmental Cross-Fertilization in Practices Improves Outcomes

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global exchange of ideas and innovations  is enabling operations and environments to thrive on two continents. Just ask Americas reclamation specialists Vern Pfannenstiel and Paul Griswold, who spent weeks conducting a technical review of rehabilitation or land restoration progress at Australian sites. The two witnessed the Wambo Mine's effective  partnership with the nonprofit organization Greening Australia to collect native seeds that enhance rehabilitation quality. They also visited the Moorvale Mine, where the environmental team sucessfully tried overburden configurations that mimic natural landforms and reduce erosion. “At the Bowen Basin mines, there also was emphasis and energy put toward re-establishing sensitive plant species that are vital to maintaining habitat for endangered wildlife,” shared Paul, Senior Technologist − Environmental. “We saw how Wilpinjong is working to establish grazing management to enhance rehab and improve sustainability for the post-mine land use.” Now in its third year, this technical review has a core purpose: strengthening the growing Australian rehabilitation program. But knowledge sharing isn’t just one-way. “With both the U.S. and Australian experience to draw on, we effectively have a brain trust of cross-continent land management expertise,” says Vern, Senior Manager of International Reclamation. “We are seeing team members think globally by applying lessons learned at one site to resolve challenges at another.” For Vern, a surprising consequence has been growing interest in rehabilitation beyond

From left, Americas reclamation specialists Paul Griswold and Vern Pfannenstiel survey rehab at the Moorvale Mine along with Moorvale Mine Environmental Coordinator Murray Van Tienhoven and Corporate Senior Environmental Advisor Craig Lockhart.

“We are seeing team members think globally by applying lessons learned at one site to resolve challenges at another.” Vern Pfannenstiel, Senior Manager of International Reclamation environmental teams. “There is enthusiasm and support for rehab among mine general managers, technical services staff and in the mine planning function,” says Vern. “This is vital to progress.”

Australian Senior Environmental Advisor Craig Lockhart echoes that sentiment; he says environmental integration is becoming part of the mine planning process, and there is a growing culture supporting both quality and quantity environmental results. “We’re seeing engineers and technical services managers becoming more involved in thinking about land use and planning for rehabilitation as part of the way Peabody does things,” says Craig, who also spent time on a similar tour in the United States earlier in the year. “It’s partially driven by having such a strong rehabilitation target. This culture is emerging and producing strong outcomes.

Teaching Green: Peabody Energy Helps Education Bloom T hey say that seeing is believing, and thanks to support from Peabody Energy, students across two continents are seeing important lessons come to life.

Grants from Peabody, in partnership with the West Central Indiana Watershed Alliance and U.S. Fish and Wildlife Service, made possible expanded outdoor learning for dozens of students near the Bear Run Mine in Sullivan County, Indiana. At Farmersburg Elementary School, a rain garden and weather station will engage children.

with students and aid the Ulan Public School, which educates kindergarteners to sixth graders. The mine helps support the school’s Environmental Education Program and other initiatives.

Wilpinjong and two surrounding mines supported the recent planting of 50 native shrubs around the school’s perimeter. The plants will provide habitat for a number of small birds that frequent the school playground, including common wrens and endangered Regent Honeyeaters.

“Wilpinjong is particularly supportive of environmental projects at the Ulan School, and in turn, we see firsthand the students’ At center, Wilpinjong Mine Property Officer Lloyd Coleman and, at right, Environment appreciation,” says Lloyd Coleman, the and Community Manager Kieren Bennetts interact with Ulan Public School students mine’s Land and Property Officer. “The during a recent environmental education day. “In a matter of weeks, what had been a end result will be one big park with some small pond with overgrown brush has changed. After open playgrounds and gardens, all surrounded by trees students are engaging. “We are able to put students Union students helped plant the small seedlings or and shrubs.” in direct contact with hands-on activities – such as plugs, the wow factor soon kicked in,” says Lisa. water sampling and species identification – that This collaborative operation was also aided by “Soon, spotted and heard on the site were wildlife make a far stronger impression than just a textbook.” the Red Hill Environmental Centre, a community that included Greater Yellowlegs – a large North Students also play an important role in planting and organization that promotes understanding, respect and American shorebird, grebes – freshwater diving birds, maintaining habitats, and become invested in the a connection among youth with the natural and built and Southern Leopard Frogs.” outcomes, adds Doug. environments. Peabody is also playing a pivotal role in He is in good company. Staff at the Wilpinjong Mine, Doug Mayfield, Union Junior and Senior High one of Red Hill’s projects to help preserve the Regent near Mudgee in New South Wales, regularly interact Honeyeater, which is struggling with habitat loss. School biology and science teacher, described how And at the Union Junior and High School, the outdoor classroom transformation has been dramatic, according to Watershed Coordinator Lisa Holscher.

The Union outdoor classroom underwent an expansion in 2012 to further create a wetlands ecosystem with a new design that captures and filters runoff water from school buildings and parking lots and uses the water to help the habitat thrive.

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