To rrb1981 (my "pen pal" from the PLX/LUK boards)--
Indeed, UGI is the GP of the AmeriGas MLP, and also owns some 47-48% of the LP units.
But the GP does NOT earn the hefty incentive payouts the GPs of, say, AAP or KMP.
Altogether, UGI is a different animal from most GPs in the energy dist business:
1) UGI has some modest-sized cashcows in the gas utility and electric distribution business
2) Starting with a smallish AmeriGas propane division, UGI expanded its propane interests by being the largest factor in the consolidation in the propane biz (acquiring Petrolane and others) over a 15-20 year period
3) UGI runs a solid balance sheet, it's a conservative "dividend and growth" story, and a very good one long-term, low beta holding(look at the 15+ year returns)....The leverage is really only at the APU level
4) The recent Antargaz acquisition in France is, in my view, the sort of thing only an industry leader like UGI can pull off and make money at. Note UGI (not APU), is the 100% owner of Antargaz.
5) The Antargaz deal will, by my analysis, double the free cashflow (after dividends, which were recently increased) to some $100m (to roughly $2/sh) per year. In other words, Antargaz looks like a good, earnings- and cashflow-accretive deal (aside from some acquisition related expenses in FY 2004).
5) I like the UGI management---100% focused on what they know best (propane), solid financial management, no hype and fluff....I see UGI producing average total returns in the 12-15% range over the next 5+ years. (The almost 4% dividend yield today, based on a $1.25 annual div payout as of June 2004, is not too shabby).
6) The balance sheet consolidates the leveraged APU holding, with the wholly-owned electric, nat gas, Antargaz and energy service businesses. If you strip out APU, and account for it on an equity basis, you'll see quite an attractive holding company, with debt only at the operating sub levels, i.e. solid financials.
No joke, when you said the GP wasn't raking in big bucks you weren't kidding!!! I looked at the distribution history and realized they have paid .55 a quarter for going on 9 years!!! I think if they grew APU like NRGY has been growing, they could greatly boost the incentive distribution rights and grow the bottom line to UGI very fast.
Has there been any consideration by UGI at trying to grow APU at a faster clip. Seems like they would be interested in increasing the incentive distribution rights and since they own such a large number of LP units.
excellent summary. I will look over some of the annuals etc. I may add this one to my watch list.
What is your opinion of MWE/MWP.MWE is a small but rapidly growing midstream MLP. MWP is the GP, it is very similar to PLX, plain jane GP, owns about 20% of the LP units. Undergoing a huge transformation from a E&P to GP. Still a little shaky because of keep-wholes. Its debt free, has about $40 million in cash, close to 90 million in LP units and owns 90% of the GP of MWE. Trades at less than NAV, just initiated the first regualr quarterly dividend. Dividend is less than 1% but management has focused on growing it.
APU is heavily levered in my opinion. Debt to cap is alot higher than most, although not dangerously high enough to hurt the ability to pay distributions. UGI indeed looks like a very conservative company.
On MWP, yes, well below NAV if you haven't read my posts I give a summary. They own 2.469 million units of MWE as well as 90% of the GP and they have around $40 million in cash. NAV is around $15-$16, maybe more if you give the GP a decent multiple based on future growth. Chairman John Fox is buying MWP on the open market. MWP has initiated a dividend....Flores and Raymond did not buy PLX on the open market from willing sellers, they did it with slight of hand. PLX never initiated a dividend.