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Making our planet more productive SM
Praxair, Inc.Jim SawyerExecutive Vice President andChief Financial OfficerOppenheimer 5th Annual Industrials Conference
1Oppenheimer 5th Annual Industrials Conference – NYC 9/30/10
September 30, 2010
Forward Looking StatementThis 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
f f t k k t ll d l t i ld id d ti l iperformance of stock markets generally; developments in worldwide and national economies 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 andnatural 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 investigations, litigation and regulatory proceedings; continued g , g g y p g ;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 K and 10 Q reports filed with the SEC which should be reviewed carefully
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company’s Form 10-K 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.
Praxair Delivers
16% CAGR
Indexed EPSUnique Revenue ModelDedicated supply pp ysystems
Long-term contracts
Praxair 8% CAGR
No commodity pricing
High ROC and cash flow
1992 1995 1998 2001 2004 2007 2010F*
S&P 500
flow
*Source: Thomson First Call
Recession
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Consistent outperformance versus the S&P 500
Dedicated Supply Systems
Merchant Contracts
On-site Contracts
Cylinder Rentals
Applications TechnologiesRentals
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Customer retention and price leverage
Praxair Key Growth Drivers
Increasing domestic consumption; infrastructure developmentMi ti li ti t h l i
Emerging E iEmerging
E i Migrating application technologiesOutsourcing of captive production
Economies Economies
Global growth of refinery hydrogenCoal gasification in ChinaEnhanced oil recovery
EnergyEnhanced oil recovery
Air, water, waste regulationsDevelopment of alternative fuelsPotential GHG regulations
Environment
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Sales in Emerging Markets
14% CAGR for Emerging market sales growth
$10B $15B$7.5B
35% 45% 26%
2010F 2015FAsiaS th A i US d C d
Europe
2005
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South AmericaMexico
US and Canada
Strong Growth Outlook for Emerging Economies
Per Capita Industrial Gas Consumption (% of US)
Brazil– Growing energy, metals and
manufacturing markets– Strong domestic growth
Mexico– Strong growth from energy sector
100%
g g gy– Upswing in industrial investment
ChinaPetrochemicals and gasification
52%
– Petrochemicals and gasification– Industrialization of inland provinces
IndiaE di iddl l
22%
27%
10%– Expanding middle class– Infrastructure investment
Middle East U.S. China IndiaBrazil
6%1%
MexicoME* Russia
10%
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– ROC acquisition*GCC countriesSource: Spiritus Consulting
Increasing Gas Intensity – Two ExamplesO2 Intensity - Acetic Acid
(CF argon per lb consumables) (Ton O2 / Ton AA)Argon intensity - Welding
1.8 10
W. Europe
~40,000 TPD of new O2 demand for China coal to
chemicals
5
United Stateschemicals
No oxygenChina No oxygen required
Butane oxidation
Butane oxidation
Methanol carbonylation
Methanol carbonylation
01976 1984 1992 2000 2008
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Air-based Air-enrichment
NG partialoxidation
Coal basedgasification
Source: Praxair estimates
Energy Market OpportunitiesEnhanced oil recovery–Nitrogen or CO2 injection
Large global market potential Enhanced oil recovery
N2Oil
–Large global market potential
Renewable energyBi f l
Enhanced oil recovery
–Biofuels–Solar
Natural gas BTU stabilization –Nitrogen blending
CO2 sequestration pilotsN2 for Sabine Pass LNG
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Significant long-term global opportunities
Strong Growth Outlook for HydrogenDeveloped markets
– Environmental fuel standardsEfficiency/flexibility/reliability
Refining Capacity Growth(2010 2015)– Efficiency/flexibility/reliability
– Shift to diesel
Emerging MarketsUS/Europe
(2010 – 2015)
2%
Emerging Markets– Greenfield refining capacity – Adoption of Euro fuel standards
India 15%
China 20%
– Heavy/sour crude capability – H2 for chemicals– Trend toward outsourcing
Middle East
Brazil
24%
25%g Brazil 25%
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Praxair targeting 3 B scfd of hydrogen supplySource: Purvin & Gertz, Praxair estimates
Coal GasificationCoal
H2
GasifierPowerPraxair Air O2
SyngasActive in China–Limited oil and gas availability
Power
Steam
Praxair Air Separation
Unit
2–Plenty of low-cost coal– Integrated coal to chemicals
Praxair oxygen supply– Integrated with gasification
technology–Large oxygen plants- 3,000 TPD
SOPO – started up Dec 2009Anhui Huayi – 2011
3,000 TPD ASU at SOPO
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$1B revenue potential in the next 5-7 years
Environmentally-Friendly Applications Technologies
Oxy-fuel Combustion Renewable Biofuels
PhotovoltaicsWater Treatment
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~2-3% per year sales growth from high margin applications
Helping Customers Improve Energy Efficiency
Oxy-fuel is the low cost solution for environmental compliance
Commercial Pipeline($MM)compliance
Lower energy usage reduces CO2 emissions and
Utilities – Mercury CaptureGlass & CementI
150160310
($MM)
continues to drive oxy-fuel applicationsPraxair has the expertise
IronSteelNon-Ferrous Metals
310190190
Praxair has the expertise and technology to capitalize on the opportunity
Refinery & Chemicals
Total
120
1,120
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Energy efficiency smaller carbon footprint
Water TreatmentScarce clean water resources
– Brazil, China, India
Stricter environmental regulationsStricter environmental regulations– Sludge minimization, nutrient
removal, water reuse
Large opportunity in emerging economies
– Municipal demand growth – Need for greenfield plants and
debottlenecking facilities
Oxygen improves productivity and O yge p o es p oduct ty a dreduces cost of disposal/treatment
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$80MM business growing ~10% p.a.
Renewable Energy - BiofuelsRenewable Fuels Standard creates current biofuels market
Renewable FuelStandard Requirements
market2nd generation biofuels are significant users of industrial gases on
s
Second Generation Biofuels
Conventional Biofuels
36
2115industrial gases
– O2, H2 for gasification of biomassH2 f h d i f B
illio
n G
allo 15
117
42
1– H2 for hydroprocessing of
oils– CO2 for algae growth
B9
12 13 1415 15 15 15
0
Source: Energy Independence and Security Act of 2007, Praxair estimates
Year
02008 2010 2012 2014 2016 2018 2020 2022
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Potential ~$500MM U.S. industrial gas market by 2015
Renewable Energy - Photovoltaics
$1.1B
PV Market Forecast Gases and Targets
~30%
Praxair serves over 40 PV customers
– Argon, hydrogen, nitrogen,
$.25B
30% CAGR
g , y g , g ,process gases
– Sputtering targets
2009 2011 2013 2015IG PG Targets
Aluminum Zinc Oxide (AZO) Targets
Strong policy-driven growth– Europe, US, China
Praxair strategically positioned– US, China, Korea, Taiwan, India, , , , , ,
Germany, Italy, Spain, Canada
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Praxair sales of $60MM growing ~30% p.a.
Continuous Improvement in Plant DesignP d t Li Pl t
Product line plants– >90% of plant builds
Product Line Plants Low Purity Oxygen High Purity Oxygen
10-250 TPD
Technology roadmap– Distillation– Heat transfer– Pre-purification– Turbomachinery
Oxygen Cost Index ($ per ton O2)
3,000TPD
Turbomachinery– 44 programs through 2012
2006
0.6
0.8
U t 30%
500 3000Plant Size (TPD)
2006
2008
2010
0.42012
Up to 30% improvement
over 2006
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~3% capital and energy savings p.a.
Long-Term Growth Outlook
Annual Organic Sales Growth
+8-12% Major projects >$5MM capital$2.5 B Est.
Project Backlog
3 5%On-site
j t$1.0 B
$2.0 B
3-5% project backlog
December 2006 December 2008 December 2010F
Applications andtechnology transfer
2-3%
Base business follows IP*3-4%
18Oppenheimer 5th Annual Industrials Conference – NYC 9/30/10*Industrial production
Generates 12-18% annual organic EPS growth
Strong Cash Flow GenerationCash Flow 2000-2010F ($MM)
2010F2,300
$B % SalesOperatingCash Flow
$2.3 23%
Capital $1.4 14%Reinvestment
Dividends and Stock Purchases (net)
$1.1 11%
400
Operating Cash Flow CAPEXF C h Fl (1)
(2)
4002000 2002 2004 2006 2008 2010F
1) Non-GAAP measure. Free cash flow equals operating cash flow minus capital expenditures.2) Excludes Leased Asset Purchase in 2003
Free Cash Flow (1)
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Return on capital of 15% after-tax generates cash flow for growth and shareholder return
Principles of Sustainable DevelopmentGovernance and IntegrityMaintain strong systems and a culture of global corporate governance, compliance, ethics, human rights, integrity and accountability.
Strategic LeadershipStay current with and take advantage of emerging global opportunities developments andStay current with, and take advantage of, emerging global opportunities, developments and challenges to position Praxair for the future.
Customer CommitmentFocus relentlessly on the delivery of customer value through continuous innovation that helps our customers enhance their product quality, service, reliability, productivity, safety, energy
ffi i d i t l fefficiency and environmental performance.
Environmental ResponsibilityAchieve continuous environmental performance improvement and energy efficiency in our operations.
Employee Safety and DevelopmentProvide opportunities that allow employees to develop to their fullest potential in a creative, inclusive and safe environment.
Community SupportParticipate in community development in regions where we operateParticipate in community development in regions where we operate.
Financial PerformanceMaintain year-on-year recognition from shareholders and stakeholders for top-tier financial performance.
Stakeholder Engagement and Communication
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Stakeholder Engagement and CommunicationPartner with internal and external stakeholders to achieve a strong, secure and sustainable society, economy and environment.