Praxair, Inc. Ray Roberge SVP and Chief Technology Officer
Making our planet more productive SM Praxair, Inc. Ray Roberge SVP and Chief Technology Officer
Citi Chemicals for the Non-Chemist Conference November 29, 2010
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 1 Forward Looking Statement
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s reasonable expectations and assumptions as of the date the statements are made but involve risks and uncertainties. These risks and uncertainties include, without limitation: the performance of st ock mar ke ts genera lly; d evel opment s i n world wid e and nati onal economi es and other international events and circumstances; changes in foreign currencies and in interest rates; the cost and availability of electric power, natural gas and other raw materials; the ability to achieve price increases to offset cost increases; catastrophic events including natural disasters, epidemics and acts of war and terrorism; the ability to attract, hire , and retain qualified personnel; the impact of changes in financial accounting standards; the impact of changes in pension plan liabilities; the impact of tax, environmental, healthcare and other legislation and government regulation in jurisdictions in which the company operates; the cost and outcomes of investigg,gations, litigation and reg gypg;ulatory proceedings; continued timely development and market acceptance of new products and applications; the impact of competitive products and pricing; future financial and operating performance of major customers and industries served; and the effectiveness and speed of integrating new acquisitions into the business. These risks and uncertainties may cause actual future results or circumstances to differ materially from the projections or estimates contained in the forward-looking statements. The company assumes no obligation to update or provide revisions to any forward-looking statement in response to changing circumstances. The above listed risks and uncertainties are further described in Item 1A (Risk Factors) in the company’s Form 10-Kand10K and 10-Q reports filed with the SEC which should be reviewed carefully . Please consider the company’s forward-looking statements in light of those risks.
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 2 Global Industrial Gas Industry Total sales 2010F: ~$65 billion
Praxair Linde
Air Products Airgas
Air Liquid e
Other
Consolidated industry with few large, global players
Source: Spiritus Consulting Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 3 Industrial Gas Industry - Diverse End Markets
Other Chemicals 9% 14% Healthcare 11% Refining 9% Electronics 7%
Metals 12% FdFood 7%
Manufacturing 31%
Industrial gases are fundamental to many industries
Source: Spiritus Consulting, 2009 sales Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 4 Products We Make y We supply customers with atmospheric, process and specialty gases, high-performance coatings, and related services and technologies
y Atmospheric Gases – Produced when air is pp,p,urified, compressed, cooled, distilled and condensed – Oxygen, nitrogen, argon and rare gases
y Process & Specialty Gases – Produced as by-products of chemical production or recovered from natural gas – Carbon dioxide, helium, hydrogen, semiconductor process gases, and acetylene
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 5 Components of Air
Argon, 0.93% CO2 0.03% Oxygen Helium 20. 95% 0.0005% Nitrogen Other 78.09% Neon 0.0024% 0.0018% Krypton, 0.0001% Xenon, 0. 00001%
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 6 Vertically Integrated System
On-Site/Pipeline Supply Merchant Liquid (O2, N2, Ar)
Packaged gas facility (dililtbld)(pure gases, medical, specialty gas blends)
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 7 Oxygen Systems – Modes of Supply
99.5
Liquid VPSA Cryogenic PiPurity Oxygen (non-cryo) % O2
20 TPD 250TPD Volume
Customer demand matched with optimum supply systems
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 8 Air Separation – Cryogenic Distillation First commercialized in 1896 Æ Continuous improvements and enhancements
Nitrogen -320 °F
Air Argon Filtration & -302 °F Conditioning Oxygen -297 °F
Air Purify Liquefy by Separate cooling to by 78% N2 -320 °F distillation 21% O2 1% Other Gases Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 9 Air Separation – VPSA (Non-Cryogenic) First commercialized in 1960
Oxygen
Adsorbent
Air zeolites
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 10 Merchant Liquid Supply Systems
Sized for customers’ specific requirements
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 11 On-site Pipeline Supply BATON LOUISIANA ROUGE TEXAS ExxonMobil LAKE CHARLES Citgo Motiva HOUSTON PORT Conoco GEISMAR LCR ARTHUR Valero MONT BELVIEU BAYTOWN DEER ExxonMobil PARK LAPORTE BP Amoco TEXAS CITY HYDROGEN PIPELINE Valero GALVESTON REFINERIES GULF OF MEXICO HYDROGEN PRODUCTION HYDROGEN STORAGE CAVERN
Lake Michigan Praxair Chicago Area AMOCO BP - AMOCO Pipeline Enclave SAFETY PRAXAIR MITTAL SAFETY WHITING MITTAL KLEEN WHITING
MITTAL MITTAL MITTAL MITTAL PRAXAIR EAST CHICAGO CHICAGO PRAXAIR USS LAKESIDE PRAXAIR USS PRAXAIR LOW PURITY PURITY MITTAL USS MITTAL BETA Pipeline Legend PX LH2 Oxygen INDUSTRIAL STEEL STEEL Nitrogen CONSTRUCTION Hydrogen REPUBLIC PRAXAIR BURNS HARBOR HARBOR Pipeline enclaves offer highest returns and customer reliability
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 12 Hydrogen – a Process Gas
Praxair Steam Methane Reformers Port Arthur, TX – 100 MMSCFD Texas City, TX – 100 MMSCFD
Steam Methane Reforming H2 O + CH4 Æ 3H2 + CO
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 13 Strong Growth Outlook for Hydrogen zDeveloped markets – Environmental fuel standards Refining Capacity Growth – Efficiency/flexibility/reliability (2010 – 2015) – Shift to diesel US/Europe 2% zEmerging Markets India 15% – Greenfield refining capacity – Adoption of Euro fuel standards China 20% – Heavy/sour crude capability Middle East 24% – H2 for chemicals – Trend toward outsourcing Brazil 25%
Praxair targeting 3 B scfd of hydrogen supply
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 Source: Purvin & Gertz, Praxair estimates 14 Role of Technology at Praxair y We continually drive cost reduction – New supply systems with reduced capital and operating cost – Efficiency of existing infrastructure y We grow our business by developing and commercializing new applications technologies – EitiExisting cust omer b ase l ooki ng f or sol ltiutions – Expand our markets – Industrial ggypypas solution typically lower capital or operating cost
New technologies drive growth and cost reduction
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 15 Continuous Improvement in Plant Design y PdProduct tlil line plant s Product Line Plants Low Purity Oxygen High Purity Oxygen
– >90% of plant builds 10-250 TPD – Flexible platforms
y Increased sizes for gasification 3,000TPD y Technology Roadmap Oxygen Cost Index ($ per ton O ) – Distillation 2 080.8 – Heat transfer
– Pre-purification 0.6
2006 – Turbomachinery Up to 30% improvement 0.4 2008 – 45+ programs through 2015 over 2006 2012 2010
500Plant Size (TPD) 3000 3 + % capital and energy savings p.a.
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 16 Applications for Industrial Gases
y Increase energy efficiency Oxy-fuel combustion −Oxy-fuel combustion
y Higher productivity Food freezing −Throughput, yield
Improve environmental y Wastewater performance treatment −Air −Water Renewable biofuels
~2-3% per year sales growth from high margin applications
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 17 Increasing Gas Intensity – Two Examples
Argon Intensity - Welding O2 Intensity - Steel
(CF argon per lb consumables) (scf O2 / ton steel)
10 5000
W. Europe 4000 Increasing Stove Blast Oxygen Furnace and DOC 3000 injection
United States DOC 5 2000 FoamyCoJet Sla ® Water g Cooled 1000 lances Burners
China 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
0 Integrated Mills Minimills 1976 1984 1992 2000 2008
Industrial gas intensity increasing with new applications
Source: Praxair estimates Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 18 Unique Revenue Model On-Site/Pipeline 24% *
z 15 year take-or-pay contracts
z Indexed to energy , inflation , currency
Merchant Liquid 29%*
zExclusive supply agreements
zSourced as by-product from on-site
Packaged/Medical 31%*
zCylinder and equipment rental
zSourced as by-product from bulk
Integrated supply & contract terms drive high ROC
*2009 sales Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 19 Production and Distribution Density…
PiSttNthAiPraxair: Strongest North American suppl y syst em Distribution Locations Homecare Locations
Merchant Plants On-site and Carbon Dioxide Plants Bulk Gases Specialty Gas Plants PipelineMajor Pipeline Systems Systems z 300 production plants Distributors Helium Transfill z 8000 customer locations Dry Ice z 1500 distribution vehicles z 11 pipeline enclaves
Packaged and Sppyecialty Gases Illustrative 200 Mile Radius z 400 distribution facilities z >400,000 customers z 1000 distribution vehicles z 83 filling stations
… drives reliability, growth, and profitability
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 20 Praxair Key Growth Drivers
z Increasing domestic consumption; infrastructure Emerging development EiEconomies z Migra ting app licati on t ech nol ogi es z Outsourcing of captive production
z Global growth of refinery hydrogen Energy z Coal gasification in China z Enhanced oil recovery
z Air, water, waste regulations Environment z Development of alternative fuels z Potential GHG regulations
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 21 Long-Term Growth Outlook
Annual Organic Sales Growth Project Backlog Major projects >$5MM capital +8-12% $2.5 B Est.
$2.0 B
On-site $1.0 B 3-5% projtject backlog
December 2006 December 2008 December 2010F 2-3% Applications and technology transfer
3-4% Base business follows IP*
Generates 12-18% annual organic EPS growth
*Industrial production Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 22 Unique and Profitable Business Model
y No commodity pricing
y Long-term contracts – high renewal rates
y Raw material cost pass-through
y No speculative capex
y High value, low cost product – reliability is key
y Production/distribution density drives returns
y Applications technologies drive growth above Industrial Production
y Secular growth trends – energy production, environmental legislation and emerging market infrastructure development
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 23 Steady Earnings Growth Through Economic Cycles
Indexed EPS 16% CAGR
Praxair 8% CAGR
S&P 500
1992 1995 1998 2001 2004 2007 2010F*
Recession
*Source: Thomson First Call
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 24 Principles of Sustainable Development
Governance and Integrity Maintain strong systems and a culture of global corporate governance, compliance, ethics, human rights, integrity and accountability.
Strategic Leadership Stay current with, and take advantage of, emerging global opportunities, developments and challenges to position Praxair for the future.
Customer Commitment Focus relentlessly on the delivery of customer value through continuous innovation that helps our customers enhance their product quality, service, reliability, productivity, safety, energy effici ency and env ironmen ta l per formance.
Environmental Responsibility Achieve continuous environmental performance improvement and energy efficiency in our operations.
Employee Safety and Development Provide opportunities that allow employees to develop to their fullest potential in a creative, inclusive and safe environment.
Community Support Participate in community development in regions where we operate.
Financial Performance Maintain year-on-year recognition from shareholders and stakeholders for top-tier financial performance.
Stakeholder Engagement and Communication Partner with internal and external stakeholders to achieve a strong, secure and sustainable society, economy and environment.
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 25 APPENDIX
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 26 Glossary
LIN/LOX/LAR – Liquid nitrogen, liquid oxygen and liquid argon
Cryogenic -A state of extreme cold characterized by low temperatures, usually -130°F(F (-90°C) or below
Air Separation Unit (ASU) – A cryogenic air separation unit typically ranges in size from 50 to 5000 tons per day, capable of producing high purity gaseous O2, N2 and Ar, when equipped with a liquefier can also produce LIN/LOX/LAR
N-Plant - A Praxair acronym for plants that use cryogenic distillation columns to produce ultra high purity nitrogen only.
Non-cryogenic - An air separation process that operates at near-ambient temperatures and uses physical property differences other than boiling point, suchllidtdh as molecular size and mass, to produce commerc illlblially valuable gaseous products such as nitrogen and oxygen. Typically lower purity than cryogenic
Membrane Plants - . A non-cryygogenic technolo gy that uses hollow-fiber ppyolymer membranes to separate gaseous nitrogen from air by selective permeability.
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 27 Glossary cont. Vacuum Pressure Sw ing Adsorp tion (VPSA) - APA Praxa ir acronym for non- cryogenic oxygen plants. VPSA plants use one or two molecular sieve-filled beds to hold all the impurities of air and allow purified oxygen to pass through.
Steam Methane Reformer (SMR) - A reaction of natural gas (methane CH4) or other light hydrocarbons (ethane or propane) with steam for the on-purpose production of hydrogen and/or carbon monoxide.
Pressure Swing Adsorption (PSA) – Advanced H2 purification technology
Partial oxidation - A reaction of hyy(drocarbons (such as natural g g,as, naphtha, petroleum coke or coal) with oxygen to produce hydrogen and carbon monoxide
Integrated Gasification Combined Cycle (IGCC) – Most advanced (clean coal) power generation technology
Gasification – Partial oxidation of hydrocarbons to produce synthesis gas
Synthesis Gas – Combination of H2 and CO
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 28 Praxair Air Separation Units (ASUs)
SOPO – 3000 TPD Texas City, TX – 1800 TPD
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 29 Air Separation – Non-Cryogenic
VPSA
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 30 Praxair Pipeline Complex
Burns Harbor, IN; Northwest Indiana pipeline complex ~12,000 TPD
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 31 Packaged Gases
Citi Chemicals for the Non-Chemist Conference – NYC 11/29/10 32