Brad Hall Midstream & Marketing October 17, 2012
Overview Lines of Business Marketing Generation Midstream Natural Gas >100 Bcf > 30,000 locations 33 LDCs Power > 2 MM MWhrs > 10,000 locations 19 EDCs Generation Hunlock: 125 MWs combined cycle Conemaugh: 102 MWs coal-fired Renewable energy: ~ 17 MWs Pipelines and Gathering Storage 15 Bcf Peaking 1.25 Bcf LNG Storage Capacity 0.40 Bcf capacity in 6 Propane Air plants Asset Management 14 Bcf of storage October 17, 2012 88
Overview Net Income: FY01 ~$4MM, FY06 ~$31MM, FY11 ~$53MM Marketing Generation Midstream 55% of historical EBIT 13% of historical EBIT 32% of historical EBIT 55% of future EBIT <5% of future EBIT >40% of future EBIT October 17, 2012 89
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 wholesaler Characteristics Little commodity exposure - back-to-back fulfillment No trading or speculation Excellent sales team Very high customer retention rates Customer diversification Strong back office and IT to support the business Supplier diversification Very low bad debts rate Credit insurance on large accounts October 17, 2012 90
Commodity Marketing Consistent, disciplined approach results in steady earnings growth through numerous disruptive events $80,000 $70,000 $60,000 $50,000 Commodity Marketing Margin $'s in 000's TXU (last acquisition) Katrina/Rita price spikes Commodity spike to ~$13/Dth and drop to ~$3/Dth 22% warmer than normal winter $40,000 $30,000 Enron Collapse Other Retail Power Natural Gas $20,000 $10,000 $- 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 F October 17, 2012 91
Targeting organic growth of 5%-7% per year Historical financial / operational statistics: Commodity Marketing Drivers: Organic growth / margin management / Strong credit review process / working capital discipline ($ millions) FY08 FY09 FY10 FY11 FY12 (F) Natural gas margin $ 44.6 $ 45.1 $ 55.6 $ 59.7 $ 42.3 Retail power margin 1.9 4.6 12.3 13.9 18.7 Other margin 1.0 0.7 2.2 3.3 2.9 Total margin 47.5 50.4 70.1 76.9 63.9 Operating Expenses (9.3) (11.4) (14.5) (16.4) (20.8) EBITDA 38.2 39.0 55.6 60.5 43.1 Depreciation and Amortization (1.1) (0.7) (0.3) - - Operating Income $ 37.1 $ 38.3 $ 55.3 $ 60.5 $ 43.1 Key statistics: Total customers serviced: 3,000 8,000 9,000 10,000 18,000 Natural gas: indivdual locations serviced 12,900 24,600 29,000 27,000 32,000 gas transportation systems utilized 33 33 33 33 33 Retail power: indivdual locations serviced 100 400 1,000 3,000 11,000 electric transmission systems utilized 10 10 13 19 19 October 17, 2012 92
Electric Generation Electric generation strategy: Our electric generation 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 Major electric generation assets: Conemaugh: 6% ownership in Conemaugh, a coalfired station with a net heat rate of ~ 9,700 btu/kwh (~102 MW) Hunlock: 100% ownership of natural gas combined cycle plant with a net heat rate of ~7,700 btu/kwh (~125 MW) Renewable electric generation: landfill gas and solar October 17, 2012 93
Electric Generation Drivers: Capacity payments / forward strip / gas prices Electric Generation is not expected to be a significant source of earnings growth going forward Net income contribution: FY08: ~ $15MM FY10: ~ $7MM FY12 (fcst): ~ ($1MM) Future: ~ $4MM-$8MM about $.03 to $.06 per share net income contribution October 17, 2012 94
Natural Gas Peaking A customized, low-cost alternative to firm pipeline capacity designed to serve a Utility s needs on the coldest days of winter Works like an insurance contract utilities pay to have the asset ready for utilization Utilities reduce costs by using the cheaper peaking service thereby lowering customer rates Peaking facilities generate revenue based upon availability assets do not have to run to generate earnings Total margin from peaking has increased by nearly $11MM since FY08, a 12% CAGR UGI s Peaking Fleet: 1 Bcf LNG Tank expansion project is completed LNG capacity is 1.25 Bcf / total peaking capacity is1.65 Bcf Capacity to serve ~ 290,000 homes for 5 days during operation Average contract term is >3years October 17, 2012 95
Ancillary LNG Opportunities In July, UGI started supplying drill rigs in the Marcellus with LNG LNG displaces diesel in field compressors Active discussions with producers representing over 1 Bcf/yr of potential demand Very low cost liquefaction creates a competitive advantage Other opportunities: LNG for transportation LNG for large commercial facilities that are beyond the reach of gas mains October 17, 2012 96
Midstream UGI footprint and the Marcellus Shale Erie Warren McKean Potter Tioga Bradford Susquehanna Crawford Wayne Forest Venango Elk Cameron Mercer Clinton Clarion Jefferson Lawrence Clearfield Butler Centre Armstrong Beaver Indiana UGI Storage Allegheny Cambria Blair LNG Westmoreland Huntingdon Washington Propane-Air Marcellus Shale Auburn I Greene Fayette Somerset Bedford Fulton Franklin Auburn II Tennessee Transco Lycoming Perry Cumberland Adams Union Snyder Dauphin York Sullivan North Umberland Schuylkill Lebanon Lancaster Wyoming Luzerne Berks Carbon Chester Monroe Bucks Pike October 17, 2012 97
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 in PA and beyond Integrate pipeline infrastructure with other midstream assets such as storage, peaking, power generation and interstate contracts Develop integrated products and services to enable utilities to transition from long haul pipelines to local supply options Provide timely, competitive gathering services to producers October 17, 2012 98
Midstream Storage Assets ~ 15 Bcf in North-Central PA Dominion Transmission Tennessee Pipeline Tioga : 11 Bcf; 184,000 dth/day Meeker : 3 Bcf; 30,000 dth/day Wharton: 1 Bcf; 10,000 dth/day FERC regulated Marketbased rates Future plans include the addition of pipeline interconnects with Tennessee, wheeling service, direct producer tie-ins, and reservoir expansion Investment: $10MM - $12MM Expected Completion: FY13 October 17, 2012 99
Pipelines and Gathering: Auburn I 9 miles of existing 12 pipeline Runs north to Tennessee Interstate Pipeline Capacity 120,000 Dth/day Investment: ~ $16 million Announced: September 2010 At full capacity: February 2012 Anchor Shipper: Citrus Energy Corporation 100 October 17, 2012 100
Pipelines and Gathering: Auburn II 28 miles 24 /12 pipeline Will run south to Transco and UGI PNG Capacity 380,000 Dth/day Investment: ~ $160 million Announced: October 2011 Current status: permitting, zoning and right of way acquisition phases Expected in-service: winter FY14 Shippers include Citrus and UGI PNG 101 October 17, 2012 101
Pipelines: Commonwealth Begins at MARC I and ends at the Eagle interconnect near Downington, PA Includes interconnection with UGI s Temple LNG facility Approximately 800MMcf / day UGI and a subsidiary of WGL have executed precedent agreements Working to sign precedent agreements with additional shippers The proposed route preserves the option to extend from Eagle to Cove Point, MD Revised cost estimates prepared over the next 60 days based on more detailed engineering studies Conceptual Route October 17, 2012 102
Targeting growth of 15%-20% primarily due to new projects Historical financial and operating information: Midstream Drivers: Timely project completions / ROEs = expected returns ($ millions) FY08 FY09 FY10 FY11 FY12 (F) Peaking margin $ 18.4 $ 22.8 $ 22.5 $ 27.2 $ 29.0 Capacity management margin 10.9 10.9 7.1 9.2 3.4 Storage and gathering margin - - - 8.4 16.7 Total margin 29.3 33.7 29.6 44.8 49.1 Operating Expenses (3.4) (6.9) (4.2) (6.1) (9.1) EBITDA 25.9 26.8 25.4 38.7 40.0 Depreciation and Amortization (1.3) (1.7) (1.9) (2.1) (3.4) Operating Income $ 24.6 $ 25.1 $ 23.5 $ 36.6 $ 36.6 Key statistics: Peaking: LNG capacity (dth/day) 55,000 55,000 55,000 55,000 205,000 Propane air capacity (dth/day) 85,000 85,000 85,000 93,000 93,000 Average length of contract (yrs) 2.9 2.3 5.3 4.2 3.3 Storage Capacity: (BCF) 14.7 14.7 Gathering throughput: (dth/day) 120,000 October 17, 2012 103
Questions? October 17, 2012
Appendix October 17, 2012 141
UGI Reconciliation of Adjusted EPS to GAAP EPS UGI Corporation EPS Reconciliation Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 GAAP Net Income $ 75.5 $ 98.9 $ 111.6 $ 187.5 $ 176.2 $ 204.3 $ 215.5 $ 258.5 $ 261.0 $ 232.9 Adjustments: Loss on early extinguishment of debt at AmeriGas $ (0.2) $ (0.9) $ (9.4) $ (4.6) $ (10.3) Loss from discontinuance of cash flow hedge accounting at AmeriGas $ (3.3) Gain on sale of 50% ownership of Energy Venture $ 5.3 Gains from sale of AmeriGas storage terminals $ 12.5 $ 10.4 Gain from sale of Atlantic Energy LLC - UGI Energy Services $ 17.2 Adjusted Net Income $ 75.7 $ 99.8 $ 111.6 $ 196.9 $ 175.5 $ 191.8 $ 215.5 $ 248.1 $ 243.8 $ 246.5 GAAP EPS $ 0.90 $ 1.14 $ 1.15 $ 1.77 $ 1.65 $ 1.89 $ 1.99 $ 2.36 $ 2.36 $ 2.06 Adjusted EPS $ 0.90 $ 1.15 $ 1.15 $ 1.86 $ 1.64 $ 1.78 $ 1.99 $ 2.27 $ 2.21 $ 2.18 Diluted Shares Outstanding 83.8 86.5 96.7 105.7 106.7 107.9 108.5 109.3 110.5 112.9 October 17, 2012 142
Midstream & Marketing: Income Statements Year Ended September 30, (millions of dollars) 2006 2007 2008 2009 2010 2011 Revenues $ 1,414.3 $ 1,336.1 $ 1,619.5 $ 1,224.7 $ 1,145.9 $ 1,059.7 Cost of sales (1,328.2) (1,235.2) (1,495.4) (1,098.5) (1,010.7) (920.0) Total Margin 86.1 100.9 124.1 126.2 135.2 139.7 Operating expenses, net of other income (26.3) (36.6) (39.8) (52.9) (7.5) (48.8) Depreciation and amortization (6.7) (6.9) (7.0) (8.5) (7.7) (8.0) Operating income 53.1 57.4 77.3 64.8 120.0 82.9 Interest expense - - - - (0.2) (2.7) Income before income taxes 53.1 57.4 77.3 64.8 119.8 80.2 Income taxes (21.8) (22.9) (32.0) (26.7) (51.6) (27.7) Net income attributable to UGI (*) $ 31.3 $ 34.5 $ 45.3 $ 38.1 $ 68.2 $ 52.5 (*) Includes after tax gain from the sale of Atlantic Energy of $17.2 October 17, 2012 146
Investor Relations: 610-337-7000 Hugh Gallagher (x1029) gallagherh@ugicorp.com Simon Bowman (x3645) bowmans@ugicorp.com October 17, 2012 148