UGI Corporation · NYSE:UGI
UGI — Merger or Acquisition (July 2019)
67 slides from UGI's merger presentation, Jul 17, 2019
Slide 1: July 17, 2019
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 July 17, 2019
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
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 th
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 Establishes midstream platform with ▪ Assets located strategically – close to low-cost supply and demand centers substantial scale in prolific
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 9 UGI CORPORATION Majorsville Wet gas gathering 2
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 natural gas producing basins Active Rig Footprint in the Core of Basins •Activity has increased to drive both SW Appalachia & NE Appalachia production • Approxima
Slide 11: Rig Counts vs. Production
Rig Counts vs. Production UGI CORPORATION 11 ▪ 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 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 gr
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 gatherin
Slide 14: UGIES: Increasing Fee-Based Income
UGIES: Increasing Fee-Based Income 2013 Margin1 Anticipated pro forma 2023 Margin 19% UGI CORPORATION 39% 14 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 Big Pine UGI CORPORATION Mt. Bethel 15 TGP TETCO Penn East (Under Development) Majorsville E. Washington Storage TETCO Gas Processing Power Plant Gibr
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 marketin
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 creat
Slide 18: Corporate Overview
Corporate Waa 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 UGI CORPORATION 19 Utilities Midstream & AmeriGas UGI Natural gas & electric Marketing Propane International utilities Energ
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 UGI CORPORATION capital deployment and meeting our Adjusted EPS1 6-10% 11.2% 20 co
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 billion 1 • AmeriGas unitholders will receive 0.
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 UGI CORPORATION • Funds growth opportunities across the business 23 • Reduces
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% UGI CORPORATION 2% 24 -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
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 Annual Earnings per Share $2.29 $2.00 $2.02 $2.01 $2.05 UGI CORPORATION 25 $1.50 $1.57 $1.61 $1.46 $1.41 $1.33 $1.26 $1.25 $1.18 $1.00 $1.10 $0.76 $0.77 $0.50 $0.60 $0.47 $0.36 $0.
Slide 26: Dividends per Share
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 2 Above 4% Long-Term Target $1.30 $1.20 Dividends per Share1 $1.00 $1.04 $1.00 UGI CORPORATION $0.95 26 $0.91 $0.80 $0.87
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 Base Business & Cash from Operations UGI Dividends Regulatory 62% Propane and Share 38% Nat Gas Earnings Growth AmeriGas Transaction Repurchase increases free cash flow over $200 million UGI CORPORATION 28 Investment Capital Capit
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 UGI CORPORATION 29 30% 36% 64% 70% Natural Gas LPG Natural Gas LPG
Slide 30: UGI Utilities
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Slide 31: UGI Utilities Business Overview
UGI UTILITIES Business Overview Regulated gas & electric utilities Most contemporary serving over distribution system in 700,000 Pennsylvania UTILITIES customers 31 Service territories lie within or adjacent 2nd Largest Gas Utility to the gas utility in UGI Utilities (gas, ~642,000 customers) Marcel
Slide 32: Marcellus Advantage
UGI UTILITIES 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 UTILITIES generation, etc.) 32 • Favorable environment for economic
Slide 33: Marcellus Gas Driving Growth in PA
UGI UTILITIES 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 UTILITIES 1,000,000 33 400,000 800,000 300,000 600,000 200,000 400,000 100,000 200,000 0 0 Source: Energy Infor
Slide 34: Capital Investment Drives Rate Base Growth
UGI UTILITIES Capital Investment Drives Rate Base Growth Capital Investment Rate Base Growth $450 $380-$420/year $3.0 $400 Billions Millions $350 $300 $2.0 $250 $200 UTILITIES 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
Slide 35: Annual Customer Growth
UGI UTILITIES Annual Customer Growth 258,600 customers added 1999 - 2018 20,000 18,000 16,000 14,000 Annual Customer Additions 12,000 UTILITIES 35 10,000 8,000 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 Conversion
Slide 36: Peak Day Growth
UGI UTILITIES Peak Day Growth 2.5 2.0 1.5 BCF 1.0 UTILITIES 36 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, po
Slide 37: Energy Services
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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 ENERGY SERVICES 38 • Serving 13,000 residential, commercial, and industrial customers
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) ENERGY SERVICES • Portable LNG vaporization (15,000 Dth/day) 39
Slide 40: Midstream – PennEast Pipeline
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, $1.0+ billion interstate pipeline • Partnership between UGI (project manager), ENERGY SERVICES Spectra Energy Part
Slide 41: Capital Expenditures
Cumulative Capital Investment Capital Expenditures ($ in thousands) $1,400,000 $1,200,000 $1,000,000 ENERGY SERVICES $800,000 41 $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 ENERGY SERVICES 42 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 ENERGY SERVICES 43 Supply Commodity (Wholesale/Asset Marketing Management)
Slide 44: International
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Slide 45: UGI International Overview
UGI International Overview Operations in 17 Countries ~550,000 Total Customers LPG Distribution Energy Marketing INTERNATIONAL ~1 Billion gallons ~28 BCF 45 of LPG sold in FY 2018 of natural gas sold in FY 2018 Largest distributor in France, Austria, Belgium, Denmark, Luxembourg, and Hungary ~5% of
Slide 46: Evolution – Major Acquisitions
Evolution – Major Acquisitions 2017 2017 2015 2011 2017 Italy 2010 2011 Belgium Finland INTERNATIONAL 2001 (20%) 46 Denmark Luxembourg 2004 (100%) 2010 Norway Sweden 1999 2006 Hungary Poland Netherlands Romania United Kingdom 2004 Switzerland 2001 France 1999 Austria 2018: 886MM retail gallons Czech
Slide 47: Track Record of Margin Management
Track Record of Margin Management 1.50 € 1.25 € UGI France € per Gallon 1.00 € INTERNATIONAL 47 0.75 € 0.50 € 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 Import terminal - PIPELINE storage facilities and terminals Import terminal - RAILCARS across UGI Terminal - REFINERY Depots / Railheads / Storage Intra-Europe trade • Ownership interests in
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 50 the total power demand of our elect
Slide 51: Slide 51
Slide 52: AmeriGas Overview
AmeriGas Overview Largest LPG Distributor in U.S.1 Agriculture & Transport 8% Residential Heating & ~1.1 billion Motor Fuel 18% Cooking 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 53 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 Ability to quickly Transflow 22 in the retail propane Units Terminals industry focus flexible truck, rail and trans-loading 920 PTI assets to areas in AMERIGAS Trailers need 54 Over 250 Propane Suppliers(
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 55 • Enhan
Slide 56: National Accounts Program
National Accounts Program • Roughly 50% less weather sensitive than base business Delivering to over • Customer-focused solution 50,000 AMERIGAS • Best in class back office Customer Locations 56 • Turnkey installation options • Unparalleled footprint • Leverage AmeriGas scale 21% Volume increase • 1
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 • National footprint AMERIGAS 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 58 • Marcellus-
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 61
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 + 62 Debt $2.9BN X 0.74 = $2.15BN = Proportion of total debt related to 74% ow
Slide 63: UGI Corporation Free Cash Flow
UGI Corporation Free Cash Flow ($ 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 66 Margin excludes commodity derivative mark-to-market adjustments
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