UGI Corporation · NYSE:UGI
UGI — Investor Presentation (March 2013)
56 slides from UGI's investor presentation, Mar 5, 2013
Slide 1: London, March 5, 2013
London March 5, 2013 March 5, 2013 1
Slide 2: Management Team
Management Team John Walsh President and COO (assuming CEO role - spring 2013) Kirk Oliver CFO Hugh Gallagher Treasurer March 5, 2013 2
Slide 3: About This Presentation
About This Presentation This presentation contains certain forward-looking statements that management believes to be reasonable as of today’s date only. Actual results may differ significantly because of risks and uncertainties that are difficult to predict and many of which are beyond management’s
Slide 4: About UGI Corporation
About UGI Corporation UGI Corporation is a distributor and marketer of energy products and services including natural gas, propane, butane, and electricity. UGI Corporation (NYSE: UGI) Domestic Propane* International Midstream and Utilities Propane Marketing (NYSE: APU) 100+ local brand names *100%
Slide 5: About UGI Corporation
About UGI Corporation UGI operates in 50 states and 16 European countries AmeriGas also operates in Hawaii and Alaska Domestic International Midstream & UGI Utilities Propane Propane Marketing March 5, 2013 5
Slide 6: UGI's Businesses Common Attributes
UGI’s Businesses Similar End Functionally related with Uses (heating, numerous common cooking, commercial Similar customer Margin / applications) mix attributes pricing management (Residential and commercial) Common approach to Common Large number of hedging / risk small dollar management Attributes
Slide 7: UGI's Businesses
UGI’s Businesses Diversification through: Geographies Value chain • Operations across the United States • Operations range from generation, and 16 European countries gathering, storage, transportation, and sale to the end user Customer segments Commodities • Retail end-users • Natural gas • Commerci
Slide 8: Our Track Record
Our Track Record Goals: Capital 4% 6-10% investment and M&A to Generate cash flow to pay for both growth strengthen our Dividend EPS growth position across projects and growth target target dividend units Accomplishments: Heritage 7.0% 13.7% acquisition $125+ MM Shell LPG Dividend EPS growth acquisi
Slide 9: Dividend Performance History
Dividend Performance History UGI has paid uninterrupted 4% dividends for 128 years and Dividend growth target increased its dividend for the past 25 consecutive years 7.0% Dividend growth (10- year CAGR*) *through FY12 March 5, 2013 9
Slide 10: Total Shareholder Return
Total Shareholder Return As of December 31, 2012 300 Total Return CAGR (%) 3 yr 5 yr 10 yr UGI UGI 14.5 7.2 13.7 S&P 500 Utilities 8.6 0.4 10.4 225 S&P 400 Midcap 13.6 5.1 10.5 Total Return (%) S&P 500 10.9 1.7 7.1 Domestic Utilities Propane 150 Int’l Propane 75 Midstream & Marketing - Dec-02 Dec-04
Slide 11: Total Shareholder Return Proposition
Total Shareholder Return Proposition ~ 14% UGI is a balanced growth and income investment 4% dividend growth ~ 10% Reinvestment 4% of Cash dividend 3% - 4% growth ~ 8% EPS growth EPS growth from 4% from projects dividend growth projects 2% - 3% 2% - 3% Base EPS Base EPS Growth Base EPS Growth Growth
Slide 12: The UGI "Virtuous Circle"
The UGI “Virtuous Circle” Income-producing businesses generate cash for growth opportunities and dividends Cash flow Dividends Base business earnings growth $250 MM- $125 MM- 3-4% $290 MM* $140 MM* Organic investment and M&A1 Incremental earnings growth $125 MM- 3-6% $150 MM* *multi-year average for
Slide 13: Meeting UGI's growth goals
Meeting UGI’s growth goals 4% Cash dividend generation growth Midstream Investments, Intl./domestic Reinvestment propane acq., of Cash 3% - 4% Utility acq. Auburn II, Storage EPS growth from enhancements, LNG projects expansion, gathering systems 2% - 3% Utility conversions/growth, AmeriGas Base EPS
Slide 14: Looking Forward: EPS
Base Growth Looking Forward: EPS Expected EPS Contribution 6% to 10% growth targets by business unit $3.05 (forecasted multi-year average) $3.00 $2.95 $2.90 19% 35% Domestic Utilities $2.85 Propane $2.80 Int’l Propane $2.75 23% 23% $2.70 Midstream & $2.65 Marketing $2.60 $2.55 BaseGrowth Base growth
Slide 15: Business Unit Overview
Business Unit Overview March 5, 2013 15
Slide 16: UGI Utilities
UGI Utilities Pennsylvania’s largest gas utility • 45 of the 67 PA counties served • Service provided in 709 PA municipalities Wide range of customer opportunities • ~600,000 gas customers • ~60,000 electric customers Attractive and growing service areas • Gas Utility customer growth of ~2% in 2012
Slide 17: Focus on Customer Growth
Focus on Customer Growth • In 2012 UGI Gas achieved +2% net customer growth Annual Natural Gas Savings over Oil • Focused on customer conversions from oil and other fuels $1,553 $1,485 • Historical growth was from new housing market $922 • Estimate that ~500,000 potential $860 customers in proximity
Slide 18: Historical Growth: Residential Annual Gas Customer Additions
Historical Growth: Residential 14,000 3.5% Annual Gas Customer Additions 12,000 3.0% 10,000 2.5% 8,000 2.0% 6,000 1.5% 4,000 1.0% 2,000 0.5% 0 0.0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 New Homes (LHS) Conversion (LHS) Net Growth % (RHS) March 5, 2013 18
Slide 19: Infrastructure Management
Infrastructure Management • UGI Utilities is in the process of replacing of all cast iron main within 14 years and all bare steel main within 30 years • We have accelerated our spending and rate of replacement in infrastructure over the last 5 years Replacement Investment ($MM) 71.2 60.3 63.4 50.0 4
Slide 20: New AmeriGas Profile
New AmeriGas Profile AmeriGas provides service to all 50 states 8,500+ Employees 2,000 Locations 2+ million Customers 1.2+ billion Propane gallons sold annually 160 Brands March 5, 2013 20
Slide 21: Unmatched Nationwide Footprint
Unmatched Nationwide Footprint Largest player in a fragmented industry with 15% market share Market share (%) 65 60.7 15.1 15 10 8.9 7.2 5 3.2 2.4 0.9 0.8 0.8 0 AmeriGas + Ferrellgas Suburban/ Growmark Cenex MFA Oil United Blossman All Heritage Inergy Co. Propane Gas Inc. Others Gas March 5, 2013 21
Slide 22: Business Diversification
Business Diversification Customer Base Geography 23% 36% Southwest 24% 47% Commercial/ Industrial Residential Northwest 26% Northeast 27% Southeast 11% Motor Fuel 3% 3% Agriculture Transport Based upon combined AmeriGas and Heritage retail gallons sold March 5, 2013 22 for the 12 month period ended
Slide 23: Competitive Advantages
Competitive Advantages • Unmatched geographic coverage • Customer density = efficiency • Advantage in acquisitions, serving multi-state customers • Geographic and end-use diversity • Size provides purchasing advantage • Counter-seasonal business (ACE) and non-volumetric revenue streams (AmeriGuard,
Slide 24: Strategic Growth Opportunities
Strategic Growth Opportunities AmeriGas Cylinder Exchange National Accounts • Counter-seasonal to heating • Leverages national footprint season • Service multiple locations – one bill • Significant scale - 44,000 distribution points • Centralized account management • 13 million cylinders per year •
Slide 25: International Propane
International Propane March 5, 2013 25
Slide 26: UGI's Propane Businesses
UGI’s Propane Businesses Domestic International Brand 100+ local brand names Countries of France, Belgium, Netherlands, Luxembourg, Austria, U.S. Poland, Czech Republic, Hungary, Slovakia, Romania, operation Switzerland, Norway, Sweden, Denmark, Finland, U.K. Approx volume >1.2 billion (retail) >600
Slide 27: Characteristics
Characteristics Customer segments: U.S. Europe Bulk delivery business (250 – 1,000 gallons) √ √ Cylinder exchange √ √ Motor fuel – forklifts √ √ Motor fuel – over the road autogas √ Competitive Landscape U.S. Europe Fragmented market √ Larger share / fewer independent marketers √ Pricing/Margin Mana
Slide 28: UGI Europe Growth Initiatives
UGI Europe Growth Initiatives ORGANIC GROWTH: • Heating Oil to LPG conversions in select countries • Penetration of new LPG markets in U.K. • Residential customer growth in Poland • Composite cylinder for specific channels • Commercial bulk business in Poland and Scandinavia • Expand natural gas mar
Slide 29: Midstream & Marketing
Midstream & Marketing Lines of Business Marketing Generation Midstream Natural Gas Generation Pipelines and • >100 Bcf • Hunlock: 125 MWs Gathering • > 30,000 locations combined cycle • 33 LDCs • Conemaugh: 102 Storage – 15 Bcf MWs coal-fired • Renewable energy: Peaking Power ~ 17 MWs • 1.25 Bcf LNG
Slide 30: Commodity Marketing
Commodity Marketing We supply over 100 bcf of gas and over 2 MM MWhrs of power to 40,000 commercial and industrial facilities throughout the Mid-Atlantic region Strategy Target small and medium-size businesses that value our services (hedging, management of energy requirements); we are not a wholesa
Slide 31: Commodity Marketing Margin History
Commodity Marketing Consistent, disciplined approach results in steady earnings growth through numerous disruptive events 22% warmer Commodity Marketing Margin than normal winter $80,000 Commodity spike to Katrina/Rita ~$13/Dth and price spikes drop to ~$3/Dth $60,000 TXU (last acquisition) $40,000
Slide 32: Electric Generation
Electric Generation Electric generation strategy: • Our assets are former utility rate plants that have been modestly expanded in recent years • Our generation portfolio: • provides balancing support for our growing retail power marketing business • reduces supplier credit • Electric generation asse
Slide 33: Midstream: UGI footprint and the Marcellus Shale
Midstream UGI footprint and the Marcellus Shale Erie Potter Warren McKean Tioga Bradford Susquehanna Crawford Wayne Forest Wyoming Venango Elk Cameron Sullivan Mercer Lycoming Pike Clinton Clarion Jefferson Luzerne Lawrence Monroe Clearfield Union Butler Centre Carbon Armstrong North Umberland Beave
Slide 34: Midstream Strategy
Midstream Strategy Leverage UGI’s geographic position/demand, assets, and intellectual capital to build a significant midstream business in the Marcellus • Link supply to markets by leveraging UGI’s existing pipeline infrastructure • Build new capacity from prolific Marcellus areas to market centers
Slide 35: Pipelines and Gathering: Auburn II
Pipelines and Gathering: Auburn II • 28 miles 20”/12” pipeline • Will run south to Transco and UGI PNG • Capacity 380,000 Dth/day • Investment: ~ $160 million • Announced: October 2011 • Current status: Awaiting final permits and mobilizing for construction • Expected in-service: FY14 • Shippers inc
Slide 36: UGI's Midstream Opportunities
UGI’s Midstream Opportunities Tenaska • Jointly developing gas resources with Tenaska Resources, LLC in the Marcellus Shale region in north-central PA • UGI will construct and operate 20 miles of new gathering pipelines • UGI also acquired a 19% interest in acreage that Tenaska operates • Both proje
Slide 37: In Conclusion
In Conclusion March 5, 2013 37
Slide 38: In conclusion
In conclusion UGI Corporation is a balanced growth and income investment AmeriGas Utilities • Significant scale drives 3% to 4% • Strong service territory EBITDA growth • Organic customer growth through • Diversified by end use and conversions geography • Low risk, A-rated Utility business • Diversi
Slide 39: Diversified Growth Opportunities
Diversified Growth Opportunities UGI has a variety of initiatives in place to drive growth in all its businesses 15 Bcf gas storage Gas Acquisitions gathering / pipelines Cylinder exchange and Natural gas national peaking/LNG accounts Natural gas Energy marketing marketing Incorporate Organic growth
Slide 40: Total Shareholder Return Proposition
Total Shareholder Return Proposition ~ 14% UGI is a balanced growth and income investment 4% dividend growth ~ 10% Reinvestment 4% of Cash dividend 3% - 4% growth ~ 8% EPS growth EPS growth from 4% from projects dividend growth projects 2% - 3% 2% - 3% Base EPS Base EPS Growth Base EPS Growth Growth
Slide 41: Appendix
we -- UG I CORPORATION UGI BALANCED DIVERSIFIED DISCIPLINED INNOVATIVE STRATEGIC
Slide 42: UGI Summary Financial Information
UGI Summary Financial Information Year Ended September 30, (millions of dollars) 2012 2011 2010 2009 2008 Income Statement Revenues $ 6,519.2 $ 6,091.3 $ 5,591.4 $ 5,737.8 $ 6,648.2 Cost of sales (4,111.2) (4,010.9) (3,584.0) (3,670.6) (4,744.6) Total Margin 2,408.0 2,080.4 2,007.4 2,067.2 1,903.6 O
Slide 43: UGI EPS Reconciliation
UGI EPS Reconciliation Year Ended September 30, (millions of dollars, except where otherwise indicated) 2012 2011 2010 2009 2008 GAAP Net Income $ 199.4 $ 232.9 $ 261.0 $ 258.5 $ 215.5 Adjustments: Acquisition and transition expenses $ (13.3) Loss on early extinguishment of debt at AmeriGas $ (2.2)
Slide 44: AmeriGas Propane
AmeriGas Propane Year Ended September 30, (millions of dollars, except where otherwise indicated) 2012 2011 2010 2009 2008 Income Statement - AmeriGas Propane Revenues $ 2,921.6 $ 2,538.0 $ 2,320.3 $ 2,260.1 $ 2,815.2 Cost of sales (1,719.7) (1,605.3) (1,395.1) (1,316.5) (1,908.3) Total Margin 1,201
Slide 45: AmeriGas Supplemental Information: Footnotes
AmeriGas Supplemental Information: Footnotes The enclosed supplemental information contains a reconciliation of Earnings before interest expense, income taxes, depreciation and amortization ("EBITDA"), Adjusted EBITDA to Net Income and Distributable Cash Flow to Cash Flow from Operations. EBITDA
Slide 46: AmeriGas Propane EBITDA Reconciliation
AmeriGas Propane EBITDA Reconciliation Year Ended September 30, (millions of dollars) 2012 2011 2010 2009 2008 Net income attributable to AmeriGas Partners, L.P. $ 11.0 $ 138.5 $ 165.3 $ 224.6 $ 158.0 Income tax expense 1.9 0.4 3.2 2.6 1.7 Interest expense 142.6 63.5 65.1 70.4 72.9 Depreciation and
Slide 47: International Propane
International Propane Year Ended September 30, (millions of dollars, except where otherwise indicated) 2012 2011 2010 2009 2008 Income Statement - International Propane Revenues $ 1,946.0 $ 1,488.7 $ 1,059.5 $ 955.3 $ 1,124.8 Cost of sales (1,325.8) (970.8) (582.1) (429.5) (651.9) Total Margin 620.2
Slide 48: UGI Utilities
UGI Utilities Year Ended September 30, (millions of dollars) 2012 2011 2010 2009 2008 Income Statement - UGI Utilities Revenues $ 884.3 $ 1,137.4 $ 1,169.5 $ 1,381.3 $ 1,289.1 Cost of sales (459.1) (678.5) (730.5) (944.8) (920.4) Total Margin 425.2 458.9 439.0 436.5 368.7 Operating expenses (174.8)
Slide 49: Midstream & Marketing
Midstream & Marketing Year Ended September 30, (millions of dollars) 2012 2011 2010 2009 2008 Income Statement - Energy Services Revenues $ 859.4 $ 1,059.7 $ 1,145.9 $ 1,224.7 $ 1,619.5 Cost of sales (730.9) (920.0) (1,010.7) (1,098.5) (1,495.4) Total Margin 128.5 139.7 135.2 126.2 124.1 Operating e
Slide 50: 2013 guidance
EPS Growth: 6% to 10% REINVESTMENT OF $3.25 CASH: 2013 guidance Midstream investments $3.00 Propane acquisitions - Int’l & domestic Utility acquisitions $2.75 PROJECTS: $2.50 Auburn II, Storage enhancements, LNG 2013 guidance expansion, gathering 2013 guidance systems $2.25 $2.00 BASE GROWTH: Utilit
Slide 51: Composition of Base Growth
Composition of Base Growth* .01 .09-.11 .02-.03 .04-.05 .01-.02 .01-.02 Utilities Generation Midstream & International AmeriGas Base growth target Marketing BASE GROWTH of 3% to 4%: Utility conversions/growth, AmeriGas EBITDA growth, Midstream & Marketing organic growth, natural gas marketing in Fra
Slide 52: Looking Forward: Growth beyond FY13
Looking Forward: Growth beyond FY13 $2.75 .07-.10 .04-.06 .09-.11 .03 .04-.06 $2.50 $2.25 $2.00 FY13 APU FY13 Base Growth Projects Reinvested FY 14 Guidance** transition (Auburn II, cash costs Storage, Marcellus) **As disclosed in the press release dated January 31, 2013 March 5, 2013 52
Slide 53: AmeriGas Unit Margin Management
AmeriGas Unit Margin Management A long track record of exceptional margin management through volatile propane cost environments AmeriGas Margin History $1.80 $1.80 Propane Unit Margins Avg. Mt. Belvieu Cost $1.60 $1.60 $1.40 $1.40 $1.20 $1.20 $1.00 $1.00 $0.80 $0.80 $0.60 $0.60 $0.40 $0.40 $0.20 $0.
Slide 54: International Unit Margin Management
International Unit Margin Management Intl. Propane has demonstrated the ability to manage margins in various cost environments – this is a core strength of all of UGI’s Propane businesses Antargaz Margin History 700 € 700 € Propane Unit Margins (€/T) Avg. Platt’s Cost (€/T) 600 € 600 € 500 € 500 € 4
Slide 55: FAQs
FAQs Frequently Asked Questions Is natural gas making significant inroads on areas traditionally served by heating oil? • Yes. Natural gas is less expensive and more convenient for consumers • Most conversions take place within 75-100 feet from the main • A significant number of heating oil customer
Slide 56: Investor Relations
Investor Relations: 610-337-7000 Hugh Gallagher (x1029) [email protected] Simon Bowman (x3645) [email protected] March 5, 2013 56