Ugi Corporation · NYSE:UGI
Ugi — Merger or Acquisition (July 2019)
68 slides from Ugi's merger presentation, Jul 17, 2019
Slide 1: UGI Corporation July 17, 2019
UGI CORPORATION July 17, 2019
Slide 2: About This Presentation
About This Presentation All statements in this presentation (and oral statements made regarding the subjects of this communication) other than historical facts are forward-looking statements. The safe harbor provisions under Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Slide 3: Use of Non-GAAP Measures
Use of Non-GAAP Measures In this presentation, Management uses certain non-GAAP financial measures, including UGI Corporation adjusted earnings per share, UGI Corporation Free Cash Flow, Midstream & Marketing Total Margin, UGI International Total Margin, and UGI France and AmeriGas Unit Margins. The
Slide 4: Legal Disclaimer
Legal Disclaimer No Offer or Solicitation This presentation is for informational purposes only and shall not constitute an offer to sell or the solicitation of an offer to buy any securities pursuant to the proposed transaction or otherwise, nor shall there be any sale of securities in any jurisdict
Slide 5: Acquisition of Columbia Midstream Group, LLC
Acquisition of Columbia Midstream Group, LLC
Slide 6: Transaction Summary
Transaction Summary Transaction Structure UGI Energy Services, LLC (“UGIES”), a wholly-owned subsidiary of UGI Corporation (NYSE: UGI), will acquire Columbia Midstream Group (“CMG”), a wholly-owned subsidiary of TC Energy, for $1.275 billion in cash, subject to customary adjustments at closing CMG A
Slide 7: UGI Corporation's Strategy
UGI Corporation’s Strategy This transaction is in-line with our overall strategy Build businesses of scale Be the preferred provider in all markets ✓ Leverage our position as the last link in energy distribution Protect and enhance our brands Leverage successful programs and services across the corp
Slide 8: Strategy: A Closer Look
Strategy: A Closer Look Diverse business offering makes UGIES an ideal partner for future growth Establishes footprint in the core of the Appalachian Basin Assets located strategically – close to low-cost supply and Establishes midstream platform with demand centers substantial scale in prolific pro
Slide 9: CMG Assets
CMG Assets Initial Length Diameter Capacity System Asset Type In-service (miles) (in) (‘000 MMBtu/d) Big Pine Dry gas gathering 2013 67 20, 24 ~425 East Washington Infield gathering 2015 21 8, 12, 16 ~300 Gibraltar Dry gas gathering 2017 25 36 ~1,000 Majorsville Wet gas gathering 2010 46 16, 20 ~350
Slide 10: Strategically Located in the Core Regions of the Marcellus and Utica
Strategically Located in the Core Regions of the Marcellus and Utica •CMG’s pipelines are located in one of North America’s most prolific Active Rig Footprint in the Core of Basins natural gas producing basins •Activity has increased to drive both SW Appalachia & NE Appalachia production • Approxima
Slide 11: Rig Counts vs. Production
Rig Counts vs. Production Rig count has stabilized in the last three years in the Appalachia Region Production per rig and total production has continued to increase Appalachian Basin is one of the most prolific natural gas basins with attractive well economics Data on this slide is from EIA June 20
Slide 12: Critical Midstream Infrastructure Serving High-Demand Markets
Critical Midstream Infrastructure Serving High-Demand Markets Low cost supply: Natural Gas Demand Projections UGIES and CMG assets are located in the core region of the Appalachian Basin, with volumes supported by a long-lived, low-cost resources 140 Production from the Appalachian region has grown
Slide 13: Strategic Platform Underpinned by Long-Term Contracts
Strategic Platform Underpinned by Long-Term Contracts High quality assets with long-term fee-based contracts in 2019 Revenue Breakdown by contract tenor and profile one of North America’s most prolific shale basins Contract Tenor Five recently-constructed assets enhance our Usage existing gathering
Slide 14: UGIES: Increasing Fee-Based Income
UGIES: Increasing Fee-Based Income 2013 Margin1 Anticipated pro forma 2023 Margin 19% 39% 61% 81% Fee-Based Margin All Other Margin Fee-Based Margin All Other Margin 1Margin is a non-GAAP measure. Please see appendix for reconciliation.
Slide 15: Full Suite of Midstream Services in Appalachia Region
Full Suite of Midstream Services in Appalachia Region TL-94&96 Auburn Marshlands TGP Union Dale Texas Creek Transco (Leidy) Ponderosa Pennant Sunbury CORPORATION Big Pine Mt. Bethel TGP TETCO Penn East (Under Development) Majorsville E. Washington Storage TETCO Gas Processing Power Plant Gibraltar L
Slide 16: An Ideal Partner for Growth
An Ideal Partner for Growth 1. UGIES Other Services Retail end demand complements producers who are naturally long Work with producers to split bid/ask spread and increase netbacks Utilize existing capacity portfolio to optimize supply Offer producers hedging services and supply and marketing servic
Slide 17: Summary
Summary Transaction adds stable, visible cash flows underpinned by long-term take-or-pay contracts and acreage dedications with well-capitalized producers who hold some of the best acreage in the Appalachian Basin CMG complements UGI’s existing footprint in north-central and eastern PA and creates a
Slide 18: Corporate Overview
Corporate yam Overview
Slide 19: Corporate Overview
Corporate Overview UGI Corporation is a distributor and marketer of energy products and services including natural gas, propane, butane, and electricity Natural Gas Global LPG Utilities Midstream & AmeriGas UGI Natural gas & electric Marketing International Propane utilities Energy marketing, LPG di
Slide 20: A Compelling Value Proposition
A Compelling Value Proposition Highest 10-year free cash flow as a % of EBITDA among Outstanding cash generation Multi-Utilities in the S&P Utilities index Commitment FY 13-18 Strong track record of disciplined Actual capital deployment and meeting our Adjusted EPS1 6-10% 11.2% commitments Dividend
Slide 21: Core Strategic Principles
Core Strategic Principles Distribution and services business, marketing volume Minimize commodity exposure hedged back-to-back, LPG customer volume hedged as service offering Expanded into energy marketing in Europe, established Push boundaries of core business portable LNG, entered Italian market L
Slide 22: AmeriGas Merger Transaction Summary
AmeriGas Merger Transaction Summary • UGI Corp (NYSE: UGI) has executed a definitive agreement to acquire the 69.2 million common units of AmeriGas Partners, L.P. (NYSE: APU) not already owned by UGI for a total transaction value of approximately $4.6 billion1 • AmeriGas unitholders will receive 0.5
Slide 23: Benefits of AmeriGas Merger Transaction
Benefits of AmeriGas Merger Transaction • Strong business with exceptional cash flow • Expected to increase cash available for growth investments and dividends • Over $200 million in additional annual free cash flow to UGI • Funds growth opportunities across the business • Reduces MLP administrative
Slide 24: Strongest Cash Flow Among Sector Peers
Strongest Cash Flow Among Sector Peers 10 Year Free Cash Flow(1) / 10 Year EBITDA S&P Utilities Index – Multi-Utilities 18% 15% 11% 8% 7% CORPORATION 2% -1% -11% -20% -22% -32% UGI Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 (1) UGI Free Cash Flow = Cash Provided by Operat
Slide 25: Meeting our Commitments – EPS Growth
Meeting our Commitments – EPS Growth $3.00 12.1% Adjusted EPS CAGR Above 6-10% Long Term Target $2.74 $2.60 $2.50 $2.40 Share $2.29 $2.00 per $2.02 $2.01 $2.05 25 $1.50 $1.61 Earnings $1.57 $1.46 $1.33 $1.41 Annual $1.18 $1.26 $1.25 $1.00 $1.10 $0.76 $0.77 $0.50 $0.60 $0.47 $0.36 $0.28 $0.30 $0.00 1
Slide 26: UGI to Increase Dividend by 25%
UGI to Increase Dividend by 25% • Two part increase • $0.04 increase to next quarterly dividend and an additional $0.025 following the closing of the transaction $1.40 7.1% CAGR $1.302 Above 4% Long-Term Target $1.20 1 are $1.00 $1.04 $1.00 Sh $0.95 per $0.91 $0.87 $0.80 $0.75 $0.72 $0.69 Dividends
Slide 27: Outperformance Driven by Cadence of Disciplined Investments
Outperformance Driven by Cadence of Disciplined Investments 3450 Total Shareholder Return CAGR (as of 3/31/19) Manning LNG Project Sunbury Pipeline project 2950 1 Year 5 Year 10 Year 20 Year Finagaz acquisition nearly doubles UGI Corp 26.8% 17.7% 16.5% 18.5% volume in France 2450 Union Dale S&P 500
Slide 28: Cash Engine Drives Future EPS and Dividend Growth
Cash Engine Drives Future EPS and Dividend Growth $1.1—$1.4 Billion UGI Dividends Base Business & Cash from Operations 62% Propane and Share Regulatory 38% Nat Gas Repurchase Earnings Growth AmeriGas Transaction increases free cash flow over $200 million CORPORATION Investment Capital Capital and M&
Slide 29: Record Capital Deployment
Record Capital Deployment CAPEX expected to increase to ~$900 million in FY20 Capital Expenditures: 2018-2022 Capital Expenditures: 2013-2017 $3.7 Billion $2.6 Billion 30% 36% 64% 70% Natural Gas LPG Natural Gas LPG
Slide 30: UGI Energy Services / Utilities
UG Energy to do more
Slide 31: Business Overview
Business Overview Regulated gas & electric utilities Most contemporary serving over distribution system in 700,000 Pennsylvania customers Service territories 2nd Largest lie within or adjacent to the gas utility in Gas Utility 1 UGI Utilities (gas, ~642,000 customers) Marcellus Shale Pennsylvania se
Slide 32: Marcellus Advantage
Marcellus Advantage • Over 90% of UGI Utilities natural gas sourced from the Marcellus Shale • Marcellus natural gas priced at over 29% discount to NYMEX during FY18 • Strong demand for natural gas (conversions, power generation, etc.) • Favorable environment for economic development • Significant v
Slide 33: Marcellus Gas Driving Growth in PA
Marcellus Gas Driving Growth in PA Natural Gas Delivered to Customers in PA Natural Gas Delivered to Electric PA Power Customers 1,400,000 600,000 MMCF MMCF 1,200,000 500,000 1,000,000 400,000 800,000 300,000 600,000 200,000 400,000 100,000 200,000 0 0 Source: Energy Information Administration
Slide 34: Capital Investment Drives Rate Base Growth
Capital Investment Drives Rate Base Growth Capital Investment Rate Base Growth $450 $380-$420/year $3.0 $400 Millions $350 Billions $300 $2.0 $250 $200 34 $150 $1.0 $100 $50 $0 $0.0 2013 2014 2015 2016 2017 2018 2019P ‘20—‘22P 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E 2022E Replacement & Bette
Slide 35: Annual Customer Growth
Annual Customer Growth 258,600 customers added 1999—2018 20,000 18,000 16,000 14,000 Additions 12,000 35 Customer 10,000 8,000 Annual 6,000 4,000 2,000 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 New Homes Conversions Upgrades Commercial
Slide 36: Peak Day Growth
Peak Day Growth 2.5 2.0 1.5 BCF 1.0 0.5 - 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 PGC Customers Transportation Customers Capacity Reserve Requirement • Peak day demand growth driven by above average customer growth, power generation and large co
Slide 37: Energy Services
> .. (2) Enetgy Services
Slide 38: Business Overview
Business Overview Midstream Assets • Nearly 200 miles of pipeline • 15 MMDth of natural gas storage • ~2 MMDth LNG and propane storage used to support liquefaction and vaporization peak shaving Commodity Marketing SERV • Serving 13,000 residential, commercial, and industrial customers on 41 gas util
Slide 39: Midstream Assets Overview
Midstream Assets Overview LNG Peaking: • Temple LNG (205,000 Dth/day vaporization, 1.25 MMdth storage) • Manning liquefaction (10,000 to 15,000 Dth/day) • Steelton vaporization (65,000 Dth/day) • Bethlehem vaporization (70,000 Dth/day) • Portable LNG vaporization (15,000 Dth/day) Built Pipeline capa
Slide 40: Midstream – PennEast Pipeline System Highlights
Midstream – PennEast Pipeline System Highlights PennEast Pipeline (Red) • Connecting abundant Marcellus gas supply to high-value southeastern PA and NJ markets • 120 Mile, 36” diameter, $1.0+ billion interstate pipeline • Partnership between UGI (project manager), Spectra Energy Partners, Southern C
Slide 41: Cumulative Capital Investment
Cumulative Capital Investment $1,400,000 thousands) $1,200,000 in ( $ $1,000,000 Expenditures $800,000 Capital $600,000 $400,000 $200,000 $0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Midstream Power Generation Other
Slide 42: Fee-Based Income Stabilizes Earnings
Fee-Based Income Stabilizes Earnings 2013 Margin1 Anticipated 2022 Margin 44% 39% 61% 56% Fee-Based Margin All Other Margin 1Margin is a non-GAAP measure. Please see appendix for reconciliation.
Slide 43: Diversified Portfolio – Natural Synergy
Diversified Portfolio – Natural Synergy Midstream Supply Commodity (Wholesale/Asset Marketing Management)
Slide 44: UGI International
UGI INTERNATIONAL
Slide 45: UGI International Overview
UGI International Overview Operations in 17 Countries ~550,000 Total Customers LPG Distribution Energy Marketing ~1 Billion gallons ~28 BCF of LPG sold in FY 2018 of natural gas sold in FY 2018 Largest distributor in France, Austria, Belgium, Denmark, Luxembourg, and ~5% Hungary of 2018 total 18.5 m
Slide 46: Evolution – Major Acquisitions
Evolution – Major Acquisitions 2017 2017 2015 2011 2017 Italy 2010 2011 Belgium Finland INTERNATIONAL 2001 (20%) Denmark Luxembourg 2004 (100%) 2010 Norway 2006 Hungary Sweden 1999 Poland Netherlands Switzerland Romania United Kingdom 2004 2001 France 1999 Austria 2018: 886MM retail gallons Czech Re
Slide 47: Track Record of Margin Management
Track Record of Margin Management 1.50 € 1.25 € Gallon 1.00 € per INTERNATIONAL € 0.75 € France 0.50 € UGI 0.25 € 0.00 € 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Avg. Platt’s Cost LPG Unit Margins Unit margin is a non-GAAP measure. Please see appendix for reconciliation.
Slide 48: Strategically Located LPG Supply Assets Provide Flexibility
Strategically located LPG Supply Assets Provide Flexibility • UGI stores LPG at various Import terminal—SEA storage facilities and terminals Import terminal—PIPELINE Import terminal—RAILCARS across UGI Terminal—REFINERY • Ownership interests in 10 Intra-Europe trade Depots / Railheads / Storage flow
Slide 49: Energy Marketing – A Focused Strategy
Energy Marketing – A Focused Strategy FY18 GWh by Energy Type Total (Gas and Power) Volume Split by Segment 9% 1% 32% 19% INTERNATIONAL 49 68% 51% 20% Electricity Natural Gas SME Other Suppliers Government Exchange/Markets Residential Our primary focus is on Small and Medium Enterprises (SME) - Offe
Slide 50: Energy Marketing – Renewable Portfolio
Energy Marketing – Renewable Portfolio • Our Energy Marketing business has a significant position in renewable energy including production through Wind and Solar • Installed 400MW Wind • Installed 70MW solar INTERNATIONAL • Generating power equivalent to 40% of the total power demand of our electric
Slide 51: AmeriGas
AmeriGas
Slide 52: AmeriGas Overview
AmeriGas Overview Largest LPG Distributor in U.S.1 Agriculture & Transport 8% Residential Heating & Motor Fuel Cooking ~1.1 billion 18% 36% 1.7 million retail gallons sold in customers FY18 AMERIGAS Commercial / 52 Industrial 38% Bulk Distribution National Accounts Cylinder Exchange 1mm tanks with 1
Slide 53: Business Overview
Business Overview AMERIGAS 38% 36% 18% 8% Commercial / Residential Motor Agriculture Industrial Heating & Cooking Fuel & Transport Represents approximate percentages
Slide 54: Significant Transportation & Logistics Network
Significant Transportation & Logistics Network Most flexible, reliable supply chain coverage 12 quickly Transflow in the retail propane 22 Units xible truck, Terminals industry trans-loading 920 areas in PTI AMERIGAS Trailers Over 250 Propane Suppliers(a) 3,000 Bobtail 510 Trucks Rail Cars AmeriGas
Slide 55: Technology to Drive Efficiency
Technology to Drive Efficiency • Efficiency benefits are implemented across a broad platform • Improved distribution efficiency • Miles per stop improved 3% from FY17 and 7% from FY16 • Low fuel deliveries improved 7% from FY17 and 16% from FY16 • Route planning and visualization AMERIGAS • Enhanced
Slide 56: National Accounts Program
National Accounts Program • Roughly 50% less weather sensitive than base business Delivering to over • Customer-focused solution 50,000 • Best in class back office Customer Locations AME 56 • Turnkey installation options • Unparalleled footprint 21% • Leverage AmeriGas scale Volume increase • 1,900
Slide 57: Cylinder Exchange Program – Key Attributes
Cylinder Exchange Program – Key Attributes • Product of Convenience • Industry leader in automated vending • Home delivery pilot will go live this summer season • Continue to optimize distribution AMERIGAS • National footprint 57 • Expansion with major retailer and large convenience store chain • Ro
Slide 58: Summary
Summary • Proven track record of exceeding our commitments to our shareholders • 6%—10% long-term annual EPS growth • 4% annual dividend growth • Well-positioned to build on our momentum • Strong and growing natural gas demand UGI CORPORATION • Utility rate base and customer growth • Marcellus-based
Slide 59: Appendix
Appendix
Slide 60: UGI Corporation Adjusted Earnings Per Share
UGI Corporation Adjusted Earnings Per Share (Million of dollars, except per share amounts) Year Ended September 30, 2010 2011 2012 2013 2014 2015 2016 2017 2018 NON-GAAP RECONCILIATION: Adjusted net income attributable to UGI Corporation: Net income attributable to UGI Corporation $ 251.8 $ 245.4 $
Slide 61: 2019 UGI Corporation Adjusted EPS by Segment
2019 UGI Corporation Adjusted EPS by Segment UGI CORPORATION America MidsLtem & UGI Corporate Six Months Ended March 31, 2019 Total Propane UGI International Midstream & Marketing UGI Utilities & Other (Dollars in millions, except per Share data) Adjusted net income attributable to UGJ Corporation:
Slide 62: Transaction Value
Transaction Value ($69.2MM x 0.500) X $55.39 = $1.92BN Equity Converted AmeriGas units times UGI’s current stock price + + Cash $7.63 X 69.2MM = $528MM Cash consideration for each common unit of AmeriGas + UGI CORPORATION + Debt $2.9BN X 0.74 = $2.15BN = Proportion of total debt related to 74% owner
Slide 63: UGI Corporation Free Cash Flow
UGI Corporation Free Cash Flow ($ in millions) Year Ended September 30, 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Net Cash Provided By Operating Activities $ 178.5 $ 141.9 $ 132.7 $ 203.5 $ 247.5 $ 249.1 $ 260.7 $ 437.7 $ 279.4 $ 456.2 $ 464.4 Less: Expenditures for property, plant, and
Slide 64: Midstream & Marketing Total Margin
Midstream & Marketing Total Margin ($ in millions) Year Ended September 30, 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total Revenues $ 1,409.8 $ 1,696.4 $ 1,309.5 $ 1,222.6 $ 1,155.9 $ 942.2 $ 1,122.8 $ 1,473.7 $ 1,181.4 $ 876.6 $ 1,121.2 $ 1,421.7 Total Cost of Sales (1,282.3) (1,
Slide 65: AmeriGas Unit Margins
AmeriGas Unit Margins ($ in thousands) Year Ended September 30, 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Propane revenues $ 2,624,672 $ 2,091,890 $ 2,158,800 $ 2,360,439 $ 2,677,631 $ 2,884,766 $ 3,440,868 $ 2,612,401 $ 2,053,160 $ 2,183,538 $ 2,545,794 Propane cost of sales (1,836,917
Slide 66: UGI International Total Margin
UGI International Total Margin ($ in millions) UGI CORPORATION Margin excludes commodity derivative mark-to-market adjustments Year Ended September 30, 2008 2013 2018 Total Revenues $ 1,124.8 $ 2,179.2 $ 2,683.8 Total Cost of Sales (651.9) (1,498.4) ( 1,620.1} Net Margin $ 472.9 $ 680.8 $ 1,063.7
Slide 67: UGI France Unit Margins
UGI France Unit Margins ($ in thousands) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 LPG revenues $ 1,062,561 $ 837,676 $ 887,067 $ 1,050,628 $ 1,083,666 $ 1,244,753 $ 1,169,610 $ 942,511 $ 1,160,013 $ 1,144,939 $ 1,349,884 LPG cost of sales (615,944) (362,425) (465,867) (649,824) (650,30
Slide 68: N W*. E • 4swEP1 ] • Venango s rtage • .m... m c
N W*. E • 4swEP1 ] • Venango s rtage • .m... m 6 c , Lawrence PennEnergy Resources ,:::11 m s: N 0 <.0 0 m t1h Harrison t1ti Beaver lndianffl Allegheny Belmont Somerset Tug Hill . Operating L.::1 N ‘Wetzel Preston 0--4-8 16 24 32