UGI Corporation · NYSE:UGI
UGI — Investor Presentation (May 2018)
51 slides from UGI's investor presentation, May 2018
Slide 1: Investor Overview May 2018
UGI CORPORATION Investor Overview May 2018
Slide 2: Index
Index Company Overview UGI International Safe Harbor 3 UGI International Business Overview 26 Four Growing Businesses with Strong Cash Flow 4 Strong Growth Driven by Quality Acquisitions and Integration 27 Strategically located Supply Assets Provide Flexibility 28 Investment Case Unit Margin Expansi
Slide 3: Cautionary Statement
Cautionary Statement 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 con
Slide 4: Four Growing Businesses with Strong Cash Flow
Four Growing Businesses with Strong Cash Flow UGI Utilities Midstream & Marketing Natural gas & electric utilities Energy marketing, midstream, and ~635,000 natural gas customers power generation in the Eastern U.S. Marcellus Shale 31% Marcellus Shale 24% First Half 2018 First Half 2018 Adjusted EPS
Slide 5: A Compelling Value Proposition
A Compelling Value Proposition • Outstanding cash generation Highest 5-year free cash flow as % of market cap among Multi-Utilities in the S&P Utilities index • Strong track record of disciplined COMMITMENT FY12–17 ACTUAL capital deployment and meeting our Adjusted EPS1 Dividend 6-10% 4% 13% 7% comm
Slide 6: Core Strategic Areas of Focus
Core Strategic Areas of Focus Distribution and services business, marketing volume hedged back-to-back, LPG Avoid commodity exposure customer volume hedged as service offering Outstanding cash flow with no debt at corporate level with additional debt Maintain strong balance sheet capacity Growing Mi
Slide 7: Strongest Free Cash Flow Among Sector Peers
Strongest Free Cash Flow Among Sector Peers 5 Year Free Cash Flow1 / Market Cap 16% 15% S&P Utilities Index – Multi-Utilities 9% 1% 0% -2% -1% -4% -14% -15% -19% -31% Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 1 Cash from from operations less capital expenditures
Slide 8: Cash Engine Drives EPS and Dividend Growth
Cash Engine Drives EPS and Dividend Growth The core of the UGI investment thesis 3% – 4% Base Growth $700-750 million Free Cash Flow1 + ~70% ~30% 3% – 6% Investment Drives Incremental Growth Organic Investment Dividends & Share Incremental Growth & M&A Repurchase Commitments to Investors 6% – 10% 4%
Slide 9: Consistent Execution Has Yielded Results
Consistent Execution Has Yielded Results Invested Adjusted EPS1 ~$9.5 billion +69% since 1997 to build current portfolio $2.70 +51% $0.28 benefit Expanded legacy Rapidly grew Energy from tax reform businesses of Services and UGI $2.42 Utilities and International AmeriGas $1.60 11.4% 15.0% Free Cash
Slide 10: Outperformance Driven by Cadence of Disciplined Investments
Outperformance Driven by Cadence of Disciplined Investments 1750 Manning LNG project Sunbury Pipeline project Total Shareholder Return CAGR (as of 3/31/18) Finagaz acquisition 1550 nearly doubles 5 Year 10 Year 15 Year 20 Year volume in France Union Dale 1350 UGI Corp 14.4% 13.5% 13.6% 14.5% pipelin
Slide 11: UGI Utilities
UGI Utilities 11 11
Slide 12: UGI Utilities Overview
UGI Utilities Overview Service Territories • Four regulated utilities – 3 gas, 1 electric • 2nd largest gas utility in Pennsylvania1 serving 44 of 67 counties • Service territories within or adjacent to Marcellus shale reserves • Most contemporary distribution system in Pennsylvania Key Growth Drive
Slide 13: Proximity to Marcellus Shale is an Advantage
Proximity to Marcellus Shale is an Advantage • Over 90% of UGI Utilities natural gas sourced from the Marcellus Shale • Reduces gas cost and customer bills • Provides growth opportunities • Four power plant customers with combined generation capacity of >2,000 MWs • Favorable environment for economi
Slide 14: Marcellus Gas Driving Growth in PA
Marcellus Gas Driving Growth in PA PA Natural Gas Deliveries to Electric Natural Gas Delivered to Power Customers Consumers in PA 600,000 1,200,000 2017: 440,807 MMCF 500,000 1,000,000 400,000 800,000 600,000 300,000 1998-2006 0.3% CAGR 400,000 200,000 Residential: -0.7% Non-Residential: 0.9% 1998:
Slide 15: Infrastructure Investment Accelerating Rate Base Growth
Infrastructure Investment Accelerating Rate Base Growth UGI PNG base ~$1.2 billion UGI Gas base rate case rate case, its first in 21 years $1.8 billion UGI Utilities Rate Base Capital deployed FY18-21 $1.2 billion Pipeline Replacement & Betterment ~1,000 miles of bare ~220 miles of cast steel pipeli
Slide 16: Strong Customer Growth with Extensive Opportunity
Strong Customer Growth with Extensive Opportunity TOTAL GAS UTILITY CUSTOMERS (000s) 640 1.6% CAGR 1.6% CAGR 635 ~350,000 Potential customers within 80 feet of UGI gas mains 630 627 Customer count totals are seasonally-impacted. All periods presented are fiscal year-end. 620 610 606 617 ~65% Of new
Slide 17: Positioned for Continued Growth
Positioned for Continued Growth • Strong customer growth continues driven by new home construction and conversions • $1.2 billion in capital expenditures generates rate base growth and accelerates cadence of rate cases • Trends drive natural gas demand • Demand for Combined Heat and Power (“CHP”) Pr
Slide 18: Midstream & Marketing
Midstream & Marketing Energy Services 18 18
Slide 19: Midstream & Marketing Overview
Midstream & Marketing Overview Commodity Marketing • Serving 14,000 residential, commercial, and industrial customers on 39 gas utility systems and 20 electric utility systems Midstream Assets • 241 miles of pipeline (operating or in development) • 15 Bcf of natural gas storage Marcellus Shale • ~2
Slide 20: Opportunities Created by Infrastructure Gap
Opportunities Created by Infrastructure Gap Well positioned in capacity Participating in constrained areas: infrastructure build-out: • Natural gas storage • Sunbury pipeline • Auburn pipeline • PennEast pipeline • Uniondale pipeline • LNG peaking and trucking • Capacity management Energy Services 2
Slide 21: Strategically Located LNG Enables Dynamic Use
Strategically Located LNG Enables Dynamic Use Favorable market NEW fundamentals ENGLAND Strong asset base, capabilities Track record of success Manning LNG Eastern Bethlehem Middle LNG Atlantic Temple LNG Steelton LNG Energy Services 21
Slide 22: Midstream Assets Overview
Midstream Assets Overview LNG Peaking: • Temple LNG (205,000 Dth/day vaporization, 1.25 BCF storage) • Manning liquefaction (10,000 Dth/day) • Steelton vaporization (65,000 Dth/day) • Bethlehem (70,000 Dth/day) (FY21 est) Pipelines: • Auburn system (470,000 Dth/day) • Sunbury pipeline (200,000 Dth/d
Slide 23: Track Record of Growth Driven by Midstream Expansion
Track Record of Growth Driven by Midstream Expansion Increasing midstream margin drives overall growth 11% colder 12% than colder $350,000 normal than winter normal 21% 15% winter warmer warmer $300,000 than than normal normal winter winter $250,000 22% warmer Margin1 (in 000s) $200,000 than normal
Slide 24: Increasing Fee-Based Income Reduces Weather Dependence
Increasing Fee-Based Income Reduces Weather Dependence 2013 Margin Composition1 Anticipated 2021 Margin Composition Historical Fee-Based Margin 39% Anticipated Fee-Based Margin 56% 6% 19% 18% 35% 46% 76% Commodity Margin Midstream Margin Generation Margin 1Margin is a non-GAAP measure. See appendix
Slide 25: UGI International
UGI International 25
Slide 26: UGI International Overview
UGI International Overview LPG Distribution Energy Marketing ~930mm gallons 17 million Dth of LPG sold in FY 2017 natural gas sold FY 2017 Largest distributor in France, Austria, Belgium, Denmark, Luxembourg, and Hungary Key Growth Drivers M&A in existing markets and new geographies (LPG and energ
Slide 27: Strong Growth Driven by Quality Acquisitions and Integration
Strong Growth Driven by Quality Acquisitions and Integration 2017 2017 2015 energy marketing 2011 2017 Italy 2010 2011 Belgium 2017: Finland 2001 (20%) 2004 (100%) Luxembourg 828mm gallons 2010 Denmark Norway $0.88 Sweden 1999 2006 Hungary Poland Netherlands Romania United Kingdom 2004 Switzerland 2
Slide 28: Strategically Located Supply Assets Provide Flexibility
Strategically Located Supply Assets Provide Flexibility • Centralized European supply in 2017 • Contracts with more than 50 oil and gas trading companies and refineries • Supply transported via rail and sea • Ownership interests in 19 primary and over 60 secondary storage facilities Terminals Depots
Slide 29: Unit Margin Expansion Despite Commodity Price Changes
Unit Margin Expansion Despite Commodity Price Changes 1.50 € 1.25 € UGI France € per Gallon 1.00 € 0.75 € 0.50 € 0.25 € 0.00 € 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Avg. Platt's Cost LPG Unit Margins Unit margin is a non-GAAP measure. See appendix for reconciliation. UGI Intern
Slide 30: LPG Distribution in Europe versus U.S.
LPG Distribution in Europe versus U.S. Europe U.S. COMMONALITIES Serve bulk and cylinder segments Benefit from scale Driving unit margin increases over time through efficiencies Distribute through “hub and spoke” truck-based logistics Focus on safety and customer service DIFFERENCES Concentrated Hig
Slide 31: Significant Opportunity Beyond LPG
Significant Opportunity Beyond LPG Energy Marketing • Grew business from ground up beginning in 2012 • Leveraging sales force and best practices with goal to double the existing business • Acquired Dutch energy marketer DVEP in 2017 LNG Distribution • Longer-term business objective • Assessing LNG d
Slide 32: AmeriGas Propane
AmeriGas Propane AmeriGas 32
Slide 33: AmeriGas Overview
AmeriGas Overview Largest LPG Distributor in U.S.1 Agriculture & Transport Residential 8% Heating & Motor Fuel ~1.1 billion 17% Cooking 37% 1.8 million retail gallons sold in FY17 customers Commercial / Industrial 38% Bulk distribution National Accounts Cylinder Exchange 1.7mm tanks with 120 – 1200
Slide 34: Differentiated in Core Functional Areas
Differentiated in Core Functional Areas Leading supply chain control ensures certainty of supply; deploying tools that are Service enhancing the customer experience Geographic coverage Provides customer, weather, and end-market diversification Scale Largest purchaser of propane in the U.S. enables A
Slide 35: Balanced Financial Objectives
Balanced Financial Objectives Solid Distribution Maintain Strong Prudent Use of Coverage Balance Sheet Capital Markets 1.1x – 1.2x <4.0x Fund all capex and bolt-on Targeted distribution coverage Targeted leverage ratio M&A without accessing Estimate coverage ratio above Estimate Debt/EBITDA 4.3x cap
Slide 36: Driving Unit Margin Growth In All Cost Environments
Driving Unit Margin Growth In All Cost Environments Avg. Mt. Belvieu Cost Propane Unit Margins $1.60 $1.40 AVG. MT. BELVIEU COST $1.20 PROPANE UNIT MARGINS $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Unit margin is a non-GAAP measure. See appendix
Slide 37: Industry-Leading Logistics Network is a Competitive Advantage
Industry-Leading Logistics Network is a Competitive Advantage Most flexible, reliable supply chain 10 coverage in the retail propane industry Transflow Units 21 Terminals Ability to quickly focus flexible truck, rail 940 and trans-loading assets to areas in need PTI Trailers Over 250 Propane Supplie
Slide 38: Multiple Levers to Drive Growth
Multiple Levers to Drive Growth Acquisitions + Organic Growth + Reducing Cost The foundation of Utilizing Technology Cylinder Exchange National Accounts AmeriGas’s growth to Drive Efficiency • ~200 since early 1980s • Counter-seasonal • Less weather sensitive • Investments in technology reduce • 3,5
Slide 39: A Compelling Value Proposition
A Compelling Value Proposition • Outstanding cash generation Highest 5-year free cash flow as % of market cap among Multi-Utilities in the S&P Utilities index • Strong track record of disciplined COMMITMENT FY12–17 ACTUAL capital deployment and meeting our Adjusted EPS Dividend 6-10% 4% 13% 7% commi
Slide 40: Appendix
Appendix 40
Slide 41: Strong EPS and Dividend Growth
Strong EPS and Dividend Growth $3.00 $1.20 6.0% CAGR 12.0% CAGR Above 4% Long-Term Target Above 6-10% Long-Term Target $2.50 $1.00 Annualized Year-End Dividends per Share Annual Earnings per Share $2.00 $0.80 $1.50 $0.60 $1.00 $0.40 $0.50 $0.20 $0.00 $0.00 2018E 1999 2000 2001 2002 2003 2004 2005 20
Slide 42: UGI Corporation Adjusted Earnings Per Share
UGI Corporation Adjusted Earnings Per Share Year Ended September 30, (Million of dollars, except per share amounts) 2010 2011 2012 2013 2014 2015 2016 2017 NON-GAAP RECONCILIATION: Adjusted net income attributable to UGI Corporation: Net income attributable to UGI Corporation $ 251.8 $ 245.4 $ 210.2
Slide 43: UGI Corporation 2017 Adjusted EPS
UGI Corporation 2017 Adjusted EPS AmeriGas UGI Midstream & Corporate & Year Ended September 3 0 , 2 0 1 7 Total UGI Utilities P ropane International Marketing O ther Adjusted net inc ome attributable to UGI Corporation: Net income attributable to UGI Corporation $ 436.6 $ 44.6 $ 158.6 $ 86.9 $ 116.0
Slide 44: UGI Corporation Free Cash Flow
UGI Corporation Free Cash Flow ($ in millions) 3 Years 3 Years 3 Years Year Ended September 30, 1995 1996 1997 Ended 1 9 9 7 2000 2001 2002 Ended 2 0 0 2 2005 2006 2007 Ended 2 0 0 7 ($ in millions) Cash Flow from Operations 76.8 111.2 172.0 360.0 132.7 203.5 247.5 583.7 437.7 279.4 456.2 1,173.3 Le
Slide 45: UGI Energy Services Total Margin
UGI Energy Services Total Margin ($ in millions) Year Ended September 30, 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total Revenues $ 90.4 $ 150.7 $ 409.2 $ 380.6 $ 714.5 $ 1,025.4 $ 1,420.2 $ 1,486.5 $ 1,409.8 $ 1,696.4 $ 1,309.5 $ 1,222.6 $ 1,155
Slide 46: AmeriGas Adjusted EBITDA
AmeriGas Adjusted EBITDA ($ in millions) Year Ended September 30, 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Net income attributable to AmeriGas Partners, L.P. (a) $ 91.2 $ 190.8 $ 158.0 $ 224.6 $ 165.2 $ 138.5 $ 11.0 $ 221.2 $ 289.9 $ 211.2 $ 207.0 $ 162.1 Income tax expense 0.2 0.
Slide 47: AmeriGas Unit Margin
AmeriGas Unit Margin ($ in thousands, except per unit amounts) Year Ended September 30, 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Propane revenues $ 1,953,714 $ 2,096,080 $ 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
Slide 48: UGI France Unit Margins
UGI France Unit Margins (thousands) Year Ended September 30, 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 LPG revenues $ 881,900 $ 796,653 $ 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 LPG cost of sales (478,400) (384
Slide 49: UGI Adjusted Net Income and EPS
UGI Adjusted Net Income and EPS AmeriGas UGI Midstream & Corporate & Quarter Ended Dec ember 3 1 , 2 0 1 7 Total UGI Utilities P ropane International Marketing O ther Adjusted net inc ome attributable to UGI Corporation: Net income attributable to UGI Corporation $ 365.9 $ 141.6 $ 61.1 $ 112.0 $ 68.
Slide 50: UGI Adjusted Net Income and EPS
UGI Adjusted Net Income and EPS Quarter Ended Marc h 3 1 , 2 0 1 8 AmeriGas UGI Midstream & Corporate & Total UGI Utilities ( Mi l l i ons of dol l a rs , except per s ha re) P ropane International Marketing O ther Adjusted net inc ome attributable to UGI Corporation: Net income (loss) attributable
Slide 51: 2013 UGI Adjusted Net Income and EPS
2013 UGI Adjusted Net Income and EPS For the Six Months ended March 31, 2013 (Millions of dollars, except per share) 2013 Adjusted net income attributable to UGI Corporation: Net income attributable to UGI Corporation $ 283.2 Net unrealized gains on Midstream & Marketing's unsettled commodity deriva