Important disclosures appear on the last page of this report.

The Henry Fund

Henry B. Tippie School of Management Michael Kelleher [Michael-Kelleher@uiowa.edu] UGI Corporation (UGI) April 22nd, 2015 Utilities – Natural Gas Utilities Stock Rating HOLD

Investment Thesis Target Price $38.00-41.00

UGI is positioned with 65% of revenue accountable from non-regulated business segments. Classified in the utility sector, UGI’s business diversification has high organic growth potential, and is naturally defensive against potential interest rate hikes. With current market conditions and 8-14% upside potential, we confidently recommend a hold on UGI. Drivers of Thesis x UGI is labeled as a utility company, yet the regulated UGI utility segment

only accounted for 35.2% of 2014 revenue. We project stagnant earnings across the utility sector, yet UGI has a competitive advantage over peers with 65% derived not regulated utilities.

x UGI engaging in a stock buy back program aiming to repurchase 10 million

shares, or 5.8% of current shares outstanding.

x UGI’s Marketing and Mainstream segment has seen significant distribution expansion; net income rose 124% in 2014 to $96 million. Net Income is forecasted to improve an additional 18% by 2018 to $232 million, contributing 25% to UGI’s total.

Risks to Thesis x UGI is extremely sensitive to winter temperatures. UGI’s 2015 Q1 year

over year revenue dropped 5.2%, mainly attributable above average temperatures. As a result we forecast 2015 revenue to decline 1%.

x UGI’s cost of goods sold will remain constant due to regulation, though

natural gas and propane prices have fallen. COGS are forecasted to 62% of sales, only seeing slight decline commodity hedging reflects lower prices.

x Utility companies are subject to inverse movement in relation to interest

rates. The Henry fund projects the Federal Funds rate to rise above 0.60% within two years, potentially hampering UGI’s long-term growth.

Henry Fund DCF $42.00 Henry Fund DDM $37.50 Relative Multiple $35.50 Price Data

Current Price $35.11 52wk Range $29.93 – 39.74 Consensus 1yr Target $36.90 Key Statistics

Market Cap (B) $6.01 Shares Outstanding (M) 172.79 Institutional Ownership 79.20% Five Year Beta .59 Dividend Yield 2.50% Est. 5yr Growth 10.6% Price/Earnings (TTM) 24.64 Price/Earnings (FY1) 16.56 Price/Sales (TTM) .74 Price/Book (mrq) 2.24 Profitability

Operating Margin 8.99% Profit Margin 3.13% Return on Assets (TTM) 4.24% Return on Equity (TTM) 8.67%

Chart and 12 Month Performance Source: Yahoo Finance

Earnings Estimates

Year 2012 2013 2014 2015E 2016E 2017E

EPS $1.18 $1.62 $1.96 $1.60 $2.23 $2.17 growth 7.0% 37.3% 21.0% -22.5% 39.4% 2.75%

12 Month Performance Company Description

UGI is a natural gas utility, propane distributer, and electricity producer based in PA. UGI’s mission is to “In a rapidly evolving marketplace, we will deliver competitively priced, high quality energy products and services to costumers in our communities in a manner that expands opportunities, meets shareholders’ expectations and fosters economic growth.1”

24.6

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UGI Industry Sector

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UGI S&P 500

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EXECUTIVE SUMMARY

UGI is a uniquely positioned utility company offering services both in government regulated, and non-regulated segments. Additionally, UGI has an international segment offering propane and natural gas distribution to Europe and Western China.

The utility sector in the near future could be affected by Federal Reserve fiscal policy. In times of low interest rates, as experienced since 2009 in the US, utility companies have experienced solid growth. Though the Federal Reserve has not formally proposed interest rate hikes in 2015, indications have been building. UGI could be seen as a defensive utility play as 65% is deregulated, and it does not offer industry standard dividend yields.

UGI, having 35% of net income regulated, has room to expand beyond traditional utility natural monopolies. The Marketing and Midstream segment nearly doubled in net income last year alone, still being a major segment of growth.

As UGI is not a traditionally pure utility company, it opens its business strategy to opportunity and risks. We currently recommend a hold on the company given current economic factors. Monitoring global macro economic changes, as well as local yearly weather patterns, will determine the future strength of UGI stock.

COMPANY DESCRIPTION

UGI is a utility and gas distribution company with operations based mainly in the eastern US and Europe. UGI Corporation is a parent holding company of four main subsidiaries; AmeriGas Propane, UGI Utilities, UGI International, and Midstream and Marketing. UGI is heavily diversified in services and location, though subject to heavy government regulation.

AmeriGas Propane

AmeriGas Propane is the nations largest retail propane distributer. AmeriGas contributed 18% of overall revenue to UGI in 2014. It serves 2 million customers across all 50 states from 2,000 distribution centers. AmeriGas additionally installs propane based heating systems and appliances. Service is mainly based in rural or suburban areas where natural gas infrastructure is not in place. 2014 sales represented 41% to residential, 36% commercial/residential, 13% motor fuel, and 6%

agriculture. Sales are highly diversified as no customer represents more than 5% of total revenue.

Source: UGI 2014 10k

The propane industry is predictably cyclical due to fluctuating propane costs and winter weather. AmeriGas has attempted to reduce volatility by purchasing over 90% of their supply under 1-3 year agreements. Additionally, they have increased summer storage volume to maintain inventory during the non-heating season (67% of revenue is recognized between October-March)2. The winter of 2013-2014 experienced a propane shortage. UGI prepared in summer 2014 by purchasing additional propane to avoid a similar crisis. As natural gas and propane have since dropped in price and December temperatures were above average, UGI is still distributing the now overpriced summer storage.

Source: UGI

AmeriGas is UGI’s only non-fully owned subsidiary. UGI owns a 26% minority interest with the remaining 74% being publicly owned, traded on the NYSE under AmeriGas Partners (APU). APU is currently trading at

41%

36%

13%6%

AmeriGas Revenue

Residential

Commercial

Motor Fuel

Agriculture

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$48.86 per share with a market cap of $4.54 billion. Based on UGI’s $6.01 billion market cap, APU accounts for 18% of UGI’s valuation, or approximately $6.30 of the current stock price. Proceeds from the ownership will be represented as non-controlling interest on financial statements.

UGI Utilities

UGI Utilities is the regulated utility portion of UGI Corporation, adhering to the Pennsylvania Public Utility Commission (PUC). Utility was UGI’s main source of revenue in 2014, contributing 35.2%. The main segment of UGI Utilities supplies natural gas to over 600,000 customers (adding 6,500 customers in 2015 Q1) in eastern and central Pennsylvania, in additional to a single western Maryland county. UGI operates 12,000 miles of gas main throughout their service area. In 2014, 69% of the 208.8 billion cubic feet throughput was supplied to commercial and industrial customers with the remaining 31% going to system sales. By March 2017, pipelines constructed of cast iron (approximately 3% of total infrastructure) must be replaced with contemporary materials. By 2043, bare steel pipelines (approximately 10%) must additional be replaced. UGI expects to spend a total of $1.2 billion over the 30-year remaining project life. Our model calls for $500 million yearly cap ex with the pipeline replacement included.

Source: UGI.com

UGI Utility is subject to heavy government regulation. Utility can charge for service in two ways: rates designed to recover purchased gas costs (PGC’s), and rates designed to recover costs other than PGCs. PGC’s are reviewed annually by the PUC and adjusted appropriately based on actual cost of gas and economic factors. If extenuating circumstances exist between meeting dates, utilities can request a quarterly review, or even a monthly review under extreme conditions.

UGI additionally operates an Electrical Utilities segment. Electric Utilities serves 62,000 customers in northeastern Pennsylvania via 1,900 miles of line and 13 substations. PUC regulates the Electric Utilities segment, and requires additional requirements in regards to alternative energy3.

UGI International

UGI International is comprised of two entities; Antargaz, and Flaga & Others. These subsidiaries expand UGI’s global exposure into Europe and Asia. In 2014, UGI International accounted for 14.3% of total company revenue.

Antargaz is a wholly owned French subsidiary Liquid Petroleum Gas (LPG) distributer. They are the largest LPG distributer in Belgium and Luxembourg, and holds large market share in France and the Netherlands. Antargaz distributes heavily to small purchasers distributing from 15,000 retail outlets and supermarkets. In 2014, 60% of sales were small bulk, 17% medium bulk, 20% large bulk and 3% automobile service stations. Antargaz additionally operates a natural gas marketing segment in France and Belgium.

Flaga & Others is a wholly owned subsidiary providing LPG distribution throughout Europe and China. Flaga is the largest distributer in Austria and Denmark, and holds competing market share in Poland, the Czech Republic, Hungary, Slovakia, Norway, Sweden, and Finland. Additional partners are AvantiGas who distributes LPG through England, and ChinaGas Partners, L.P. who distributes in portions of Western China4.

Europe experience above average winter temperatures, severely hurting the international segment’s profitability. Additionally, Europe’s economy is expected to make a slower recovery in comparison to the US, placing additional growth risk on the sector. Though UGI hedges successfully against the weakening Euro, growth will be difficult as the dollar strengthens. We forecast a 3% decline in the segment in 2015, and an additional 2% in 2016. We believe the international segment will be the weakest performer moving forward.

Midstream and Marketing

Midstream and Marketing is the fastest growing subsidiary of UGI. Midstream and Marketing accounted for 34.9% of 2014 overall revenue, up 124.4% from 2013’s 18.9% contribution. The Auburn pipeline became operational in Q1 2014 increasing throughput for the

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remainder of the year. Additionally, extremely cold weather in early 2014 spiked demand above normal. Midstream and Marketing operates two segments: Energy Services and Electricity generation.

Energy Services sells natural gas, liquid fuels, and electricity to 19,000 customers in Pennsylvania, New Jersey, Delaware, New York, Ohio, Maryland Massachusetts, Virginia, North Carolina, and the District of Columbia. Energy services utilize a natural gas distribution system of 36 locally connected gas utility companies, and an electric distribution system of 20 local utility companies. Opposed to a fixed period cost “take-or-pay” contract, Energy Services has switched to a fixed price pay as you go contract model due to pricing competition. Supply cost volatility is mitigated via diverse suppliers, owning distribution networks, futures and derivative instruments, and utilizing hedging against transmission costs.

Electric Generation (UGID) owns a 130-megawatt natural gas-fuel generator in Wilkes-Barre, Pennsylvania. An additional 102 megawatts are produced via a 5.97% interest in Conemaugh generation station in Johnstown, PA. UGID owns and operates an 11-megawatt, gas-fueled landfill earning renewable energy credits. Finally, UGID has 11.67 megawatts of solar-power capacity across Pennsylvania, Maryland, and New Jersey. UGI competes with other electric utilities tied into the PJM Interconnection, LLC., the largest competitive power grid in the nation, further tightening price competition. UGID adheres to the regulations of the Federal Energy Regulatory Commission (FERC)5.

Company Analysis

Segment as Percentage of UGI Overall Revenue

Source: UGI 10K

UGI Corporation is uniquely position as a utility classified company. Operating as a US based natural gas utility provider, a natural gas distributer, propane deliverer, and international energy business places UGI separate from its US based competitors. UGI exposes itself to strengths and weaknesses pending future global market macro effects.

x UGI’s Marketing and Mainstream segment is quickly growing and has competitive proximity to the Marcellus shale. Continuing to expand their pipeline network will increase throughput and profit for the company.

x UGI Utilities market is mature; unless small market mergers and acquisitions occur in directly surrounding areas, utilities will be dependent on cold winters to drive winter revenues.

x As UGI utilities will grow quickest through M&A, so must the international segment. The rising strength of the dollar will only hamper current gains overseas if the segment does not grow in the near future.

x AmeriGas is the strength of UGI’s overall profitability. Propane is mostly distributed to rural areas that do not have infrastructure reaching the service area. Local natural gas distributers and electricity companies pose as threat of substitution.

x As UGI derives its income mainly from heating, the company is extremely sensitive to winter temperatures. Outside of natural seasonal cyclicality, UGI is exposed to potential yearly cyclicality pending weather patterns.

RECENT DEVELOPMENTS

Sunbury Pipeline Announcement

UGI recently announced planes to construct a 35 mile, 20 inch pipeline connecting the Marcellus Shale to a soon to be constructed natural gas fueled power plant. The $150 million project (included in our model capex projections) would extend from Lycoming County, PA to a 1,000-megawatt power facility currently being planned by Panda Power Funds and Sunbury Generation LP. Once complete, the pipeline is expected to transport 200,000 dekatherms per day. The project is aiming to capitalize on the recently boosted production in the Marcellus natural gas basin. UGI is aiming to increase their natural gas throughput in the northeast. The Sunbury pipeline would further increase the quickly growing Marketing

0.00%10.00%20.00%30.00%40.00%

2013

2014

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and Mainstream segment, which currently accounts for roughly 35% of revenue. Additionally, It could potentially take away market share of current transportation companies serving the Marcellus shale6.

UGI is expecting to make their initial filings for the project in mid 2015. Little resistance is expected in the legal proceedings. The Marcellus shale has experienced a drilling influx since 2008, with many major companies investing heavily in infrastructure since output has increased. UGI is strategically located in the vicinity of the Marcellus Shale, but are generally considered latecomers. We believe the expansion has strategic benefits for several reasons. First, the Sunbury will serve a direct power plant creating steady cash flows. Second, this move benefits the Marketing and Midstream segment, which is the fastest growing in the company. Finally, UGI’s broad portfolio will not rely on the Sunbury pipeline to be a cash cow. It will simply add revenues to an already established and profitable company.

Source: State Impact

1Q 2015 Results

UGI’s fiscal year begins on October 1st. UGI reported below expected results in the companies first fiscal reporting quarter (October – December). Year over year Q1 performance fell from 122 million in 2014 Q1 to 116 million in 2015 Q1. Analyst expected earnings was set at $0.78 per share, however UGI missed estimates by $0.12, recording actual earnings of $0.66. Taking out AmeriGas profits, the non-fully owned partnership, profits attributable to UGI were $36 million.

Weather, which will be covered in detail shortly, was a major contribution to lower revenues. Below average Q1 2015 temperatures, during the winter heating season was a major contributing factor to the earnings

disappointment. An additional factor in missed earnings was losses on derivative instruments; UGI utilizes both futures and swaps. Both natural gas and propane have dramatically fallen in price since the end of 2014, causing UGI to recognize a $6.6 million dollar loss after taxes compared to a $4.3 million gain recognized in 2013. UGI uses short term revolving hedging strategies, meaning derivative losses should quickly diminish in Q2-Q3.

On the quarterly conference call, management reaffirmed the company performed strongly amongst the challenging conditions. Weather is generally unpredictable, and hedging contracts will quickly reflect the current low price of natural gas. Through the poor winter season, UGI managed to gain 6,500 utility customers and make headwinds on acquiring a Hungarian natural gas distribution company. Management sounded optimistic on Q2 while describing cold weather in the Northeast since January. Management did downgrade their 2015 EPS forecast to $1.89 in response to missed earnings in Q1. Our model projects 2015 EPS at $1.75. Missing earnings during a major revenue producing quarter leaves us bearish on 2015. However, the company’s diversification should be able to produce solid capital gains through 2015.

Strong Dollar

Source: Capital Management Services

Since mid-2014, the US dollar has strengthened significantly against the Euro. As the Eurozone financial risk increases, the Euro faces further devaluation against the dollar. UGI is uniquely position as a utility company as it has overseas exposure, unlike many of its US based competitors. In 2014, approximately 15% of revenue came from overseas business, dramatically dropping from

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its nearly 30% contribution in 2013. UGI hedges against foreign currency risk via derivative financial interments. This hedge was well position and mitigated nearly all loses attributable to foreign currency devaluation. The derivatives are revolving short term, offering flexibility in strategy. The biggest threat to UGI would be a sudden rise in Euro value, though losses would be short lived. UGI is still well hedged against the Euro, though global markets will still play a role in international business for UGI.

Warmer Winter Season

UGI Utility, AmeriGas Propane, and Marketing and Midstream were all affected by the warmer 2014-2015 winter heating season. UGI Utility operates in PA. 2014-2015’s average winter temperature was 30.1 degrees, compared to 28.1 degrees the year before. February 2015 in PA was 8 degrees below normal giving the appearance of a below average winter. However, October - December 2014 (UGI’s first fiscal quarter) was high above average resulting in less heating natural gas being used, and thus a major contributing factor to the year over year quarter loss7. Winter weather patterns and temperature trends are difficult to predict into the future, though better guidance for the 2015-2016 heating season should be available towards Q4. Q2 reporting (January – March 2015) will mark the end of the heating season and the below average February should help recoup losses endured in Q1.

Pennsylvania 2014 Temperatures Versus Average

Source: Weather Spark

INDUSTRY TRENDS

Government Regulation

As early as the mid-1800’s, it was discovered that the vast distribution network needed to service natural gas made one company more profitable than having two competing in the same area8. With a natural monopoly over the local market, government saw the need to regulate the natural gas utility companies. Regulations limited how much above cost utility companies could charge those they serviced. The early 1900’s saw the pipeline redefine the industry allowing shipment of product well beyond the well it was produced from. The Natural Gas Act of 1938 was the first federal government regulation over natural gas shipment stating that “no new interstate pipeline could be built to deliver natural gas into a market already served by another pipeline.” This set the stage for natural monopolies upon the utility companies: heating, water, and electric.

Currently, each state operates their utilities regulations in different manors. Most effective on UGI is the PA Public Utility Commission. UGI is not only regulated on the price paid for gas, but natural gas utilities have an additional set of rules to follow over when they can or cannot cease service to customers. A complete copy of PA laws can be found at the PUC’s government website9

Negative Correlation to Interest Rates

Utility companies, traditionally offering high dividend yields, have been known to move in contrary to interest rate changes. Below depicts 2014 performance of the S&P 500 Utilities index (XLU) versus the 10-year T-bill floating interest rate. As can be seen, there is clearly a direct negative correlation in the movement between the two. Q1 2015 saw a 12% decline in the ETF price, as the 10-year T-bill raised 53 basis points to 2.2%. This period, shown below, shows general trends between the two indexes.

Source: ETF Guide

Since 2008, as interest rates have been near zero, fixed-income investors seek greater returns from the highly stable, high dividend yielding utility sector. If the Fed

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does raise the target Fed Funds rate, causing short and long-term treasuries to increase yield, utility companies across the board could see correction as fixed-income investors revert to holding bonds. UGI is more favorably positioned among its peers as it offers lower dividend yields compared to its competitors. Current companies among local competition offer an average of 4.45% dividend yield, while UGI distributes 2.7%. UGI has experienced recent growth based on it nonregulated segments offering capital gains. If interest rates do increase, the low dividend offering could make UGI less sensitive to higher treasury yields, though it will still carry risk associated with the utility sector.

Natural Gas Prices

Source: Market Realist

Natural gas prices have fallen 40% since December 2014. Falling prices should have little effect on Government regulated utilities, since utility companies are under obligation to recover cost of gas purchased. However, several utility companies operate non-regulated segments. Non-regulated distributers, companies involved in transportation or sales, will experience lower margins in times of falling natural gas prices. The largest loses will be realized from large summer storage facilities buying natural gas or propane prior to price declines. UGI is still distributing natural gas that was purchased under hedging rates, unable to quickly distribute the supply due to warmer October – December temperatures. Forward hedging strategies will determine the profitability of heating utilities as prices are predicted to remain low.

Cyclicality

The heating utility industry experiences high levels of seasonal cyclicality. UGI generates 65% of their yearly revenue during the heating months of October – March. The chart below shows the winter spikes in US natural gas usage during typical winter months. A warm winter season can have high effects on natural gas usage, and thus profitability. This places more risk on utility companies that provide heating services opposed to a less versatile water utility company. Additional risk is carried in the form of summer storage. UGI increased storage in summer of 2015 to avoid a shortage. Consequently, natural gas prices fell leaving UGI with high inventory purchased at a premium. Further, the above average winter temperatures lowered consumption, making it difficult for UGI to turnover the high priced inventory.

Natural Gas Yearly Storage and Usage

Source: Energy Trends Insider

MARKETS AND COMPETITION

The utility industry is mainly shaped on three factors: the natural monopolies, government regulations, and mergers and acquisitions. Through the years, the market competition has come from major holding companies expanding their serviceable reach via mergers and acquisitions. UGI is one of the few utilities to expand to international operations in addition to nonregulated segments. Though they have been hurt recently from derivative hedging, it could prove a profitable model in the future.

Neither buyers nor sellers have strong power over price. Rather, it is market rates and government regulation controlling pricing. In regulated segments, government regulations are in place for utility companies to capture a percentage above price paid for the product. Regulations

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are in place to protect users against overpricing of necessities. For natural gas and propane, pricing is dependent on supply and market conditions. Price fluctuation does occur within regional spot markets, but it is still based on broader commodity pricing. The main way for companies to increase profitability is to maximize throughput.

Barriers to entry are extremely high, offering long-term security to UGI. Regulated utilities often operate in a regional monopoly in exchange for regulated pricing. The biggest threat to utilities is M&A, usually conducted by larger companies to expand their footprint into new markets. Shipping and distribution companies are dependent on extensive pipeline infrastructure and distribution networks, requiring extremely high initial capital expenditures. Again, large players expanding operational area will be the biggest risk to entering UGI’s market.

Given the high rate of M&A and fixed customer base (population), competition in the industry is very high, especially in the distribution industry. With pricing controlled mainly by the market, companies’ sole aim is to increase throughput to grow revenue. Recent activity around the Marcellus and Backken Shales show the willingness of distributers to invest capital to capture future throughput.

Threat of substitution has a moderate affect on UGI. Pending geographical location, a house can be heated via natural gas, propane, or electricity. Propane is mainly used in rural areas where natural gas distribution lines have not yet been constructed. However, as natural gas becomes cheaper and more widely distributed, AmeriGas could see a diminishing customer base. A future dependence on renewable energy could see electric heating rise as well. Changing heating mediums does require a capital investment. Appliances are designed to run off a single energy source. Though there is a threat of substitution, the process takes time. Management would be able to see a trend emerge and take corrective action before revenues could unexpectedly drop.

Peer Comparisons

Company Market Cap

Profit Margin

ROE (%)

EV/ EBITDA

Dividend Yield

UGI 5.75b 3.13 8.67 8.63 2.7 PPL 22.58b 15.11 12.13 8.93 4.4 EXC 28.7b 5.92 7.73 7.28 3.8

NFG 5.15b 14.47 12.44 7.19 2.5 FGP 2.0b 2.23 - 14.78 8.3 SPH 2.57b 4.99 8.46 11.3 8.3 D 42.1b 10.53 11.24 15.31 3.6 CPK 752m 7.24 12.47 9.83 2.1 Sector - 8.52 8.24 - 3.15 Source: Yahoo Finance

Dominion is the largest market cap natural gas distribution in the eastern US. They have the largest market cap that will compete with UGI’s marketing and midstream segment. The Marcellus shale is the largest natural gas basin in the US and has been extensively drilled since 2008. Dominion has had extensive infrastructure set up for years, giving a competitive advantage over UGI’s newly created pipelines; and the soon to be created Sunbury Pipeline.

UGI ranks in the low middle averages of major company ratios in comparison to its competitors. Unlike competition, UGI operates in a several separate segments. UGI’s peers operate in utilities, distribution, and electricity generation. When the Euro was strong over the dollar, the international business segment of UGI was a proven performer in the utility sector. Having the international business segment opens up UGI to risk factors that most of its competitors are not exposed to.

A major utility investing factor is dividend yield. UGI is currently offering a 2.7% yield, as the sector average is 3.15%. If integrates do rise, it is reasonable to believe that utility companies that will be hurt the least will be those that are non-cyclical with the highest dividend yields; as they can be substituted most for fixed-income. UGI’s 2.7% yield ranks towards the bottom with its peers, suggesting that improving treasury bonds could be a quick substitute. UGI lowered Q1 2015 dividend payments by a fraction of a cent. However we project dividends to reach $0.95 per share by 2019.

ECONOMIC OUTLOOK

US GDP Projections

The US has experienced a reduction in GDP percentage growth since 2014, with the Federal Reserve predicting real GDP growth rates to be 2.1-2.3% through 2020. The forecast is in line with the Q1 2015 GDP growth rate. Cold climate residents need heat in the winter months. Three factors will dictate energy volume consumed; temperature, cost of product, and purchasing power.

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Utility companies have no control on winter temperatures the demand it will place on heat. Natural gas prices have dropped, with the savings being past on to consumers. People will be more likely consume more heat when the cost is reduced. This will be favorable for UGI’s throughput totals. Finally, most affected by GDP, is purchasing power as a result of personal capital. As people will tend to increase heat when prices are low, a person with excess capital is more likely to comfortably heat their home during cold temperatures. A strengthening GDP will aid this last factor. Though GDP growth is not near the historical average of 3.0-3.5%, steady projected growth will still be beneficial to utility companies.

Interest Rates

US interest rates have been near zero since the 2009 financial crises. The US Federal Reserve has recently removed the word “patient” from statements released regarding a potential rise in Fed Funds rate target. Utilities are generally strong performers during times of low interest rates. The usually slow growth, steady performing utility companies often offer high dividend yields posing as a fixed income substitute. When rates rise, investors will be more prone to exposure in treasuries that potentially offer higher rates of guaranteed return. If the Fed raises the Fed Funds target, utility companies have the potential to see declines in stock value. Future 2015 Feral Reserve meetings (April 28-29, June 16-17, July 28-29, September 16-17, October 27-28, December 15-16) will indicate the Fed’s intentions of raising rates10. Raised rates could have an inverse correlation to utility companies future earnings potential. The Henry Fund does not project interest rates to rise within the next six months, but we project a Fed Funds rate of 0.68% (43 basis points) within the next two years.

Source: ICIS

Strengthening Dollar and the Eurozone

UGI generates nearly 15% of revenue via European unregulated propane distribution. Like every US company with international exposure, recent strong US dollar performance weakens earnings once revenue is exchanged back to US dollars. As seen below, few Eurozone countries are seeing consecutive periods of economic growth with many seeing negative trends. Europea.EU, a government agency, projects slow European rebounds. 2015 GDP growth is project at 1.7 for the Eurozone and 2.1 for 2016; both below US Federal Reserve US projections11. UGI’s international segment’s revenue nearly dropped 50% in 2014, mostly attributable to weather and economic factors as UGI does hedge against the Euro. If the Eurozone is as slow to rebound as analyst predict, UGI could face continual slow growth from their international business.

Source: Money Week

CATALYSTS FOR GROWTH

The natural gas utility and propane distribution markets are fully saturated and mature. UGI’s main source of growth will come from small-scale mergers and acquisitions and increased throughput. Utility companies operate as heavily regulated natural monopolies in concentrated markets. Geographical growth will come mainly from M&A.

Several economic trends will directly have effects on UGI’s revenue. The falling price in natural gas has affected profits. Recent US production from the Backken and Marcellus formations has boosted domestic production to record levels. Since the December fall off in prices, UGI’s derivatives have suffered major losses. If

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natural gas prices rebound, UGI could again experience derivative gains as they did in 2013. Global markets will influence UGI’s international performance. If the dollar stays strong, overseas growth will remain stagnant. A strengthening European economy will grow UGI’s international segment with tremendous potential for upside growth.

Winter weather plays a major roll in heating utilities profits. 2013’s historically cold winter boosted UGI revenue, but a warmer 2014-2015 winter saw throughput diminish. If Eastern US and European winter weather patters remain at or below average temperatures, UGI will see organic growth. However, this is one factor that cannon be easily be hedged against.

INVESTMENT POSITIVES

x Utility companies experience steady revenue streams from a committed customer base. Natural monopolies offer barriers to entry for outside threats.

x UGI has positioned itself to increase natural gas throughput by utilizing the highly productive Marcellus shale via the proposed Sunbury pipeline.

INVESTMENT NEGATIVES

x Natural gas utility companies face heavy government regulation decreasing potential for increased profitability outside of throughput expansion.

x A rise in interest rates will undoubtedly have a negative impact on the utility sector, possible negatively influencing UGI greater due to its cyclical nature.

x The European economy has greatly affected UGI’s Internationals profitability. Slow growth out of the European recession could further hinder UGI’s profitability.

VALUATION

We are expecting negative growth in 2015 of 1%. UGI hedges against foreign risk and falling natural gas prices via commodity derivative instruments. Derivatives were a major factor of Q1 losses. Q2 2015 earnings will be reported on May 4th, which will show the critical second half of the heating season. Natural gas prices have remained low and the dollar has proven stronger over the

period. Further derivative loses and unfavorable economic trends could result in greater loses.

x Management attributed the $0.66 EPS mainly due to the warmer weather in Q1 (Oct – Dec). Management has a yearly EPS set to $1.89. We project a 1% reduction in revenue, and 2015 EPS to reach $1.78. We are discouraged that UGI underperformed during their peak season. January – March temperatures were reported to be colder, meaning UGI could slightly recover losses from Q1.

x UGI announced $571 million in capital expenditures for 2015. UGI is making aggressive infrastructure expansions surrounding the Marcellus shale. The Sunbury Pipeline will begin construction in 2016, thus we have increased CapEx to $600 million, and $700 million in 2017. CapEx should remain near $500 million yearly due to pipeline modernization. It should not spike higher unless new infrastructure is announced.

x Cost of goods sold is forecasted to stay consistent in terms of percentage of sales. UGI is still distributing the higher priced summer storage propane. We have forecasted a slight reduction in COGS moving forward once UGI is able to take advantage of the current low prices. COGS are not expected to make any significant reductions in relation to the lower natural gas and propane costs. COGS increases and decreases are usually passed along to the consumer, given the nature of the market. Additional revenue is mostly derived through higher throughput, in which COGS still remains constant.

x UGI is projected a 2015 yearly dividend pay out of $0.86. The dividend pay out has remained constant since the September 2014 3:2 split. Prior to the split, UGI showed a long trend of boosting quarterly dividends, eventually reaching $0.295 in June 2014. Now entering the third quarter of stagnant dividend payout, we expect UGI to begin boosting quarterly payouts again next year. Yearly payouts beginning in 2015 are forecasted as $0.86, $0.90, 0.92, $0.95, respectively. UGI’s dividend yield is still well below the Utility Sector average (2.52% to 4.37%). A rise in dividend payouts would be no surprise to the industry.

x UGI is engaged in a limited share repurchase program, authorizing 10 million shares to be purchased over the next four years. This represents 5.8% of shares outstanding. UGI is only scheduled to distribute 102,000 shares in the next five years through their employee stock options program, the

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remainder are projected to be distributed five years out or later. Forward guidance regarding stock repurchasing should be monitored, as 3 million ESOP shares could be exercised in 2020.

x Utility companies will often mirror US GDP growth. The Federal Reserve is projecting 2015 GDP growth to be between 2.1-2.3%. We have set UGI’s continuing value growth at 2.2%. Slower growth in Europe could have a negative affect on 15% of revenues. Additionally, the Marcellus Shale will be highly saturated by 2019 limiting future growth possibility in the region.

x UGI’s beta is 0.83. This was derived from Bloomberg, using a two-year, two-week measurement. The sub 1 beta reflects UGI’s tendency to move with the market, but at a slower pace. UGI, though, is higher than industry averages. New York University reporting the utility sector average to be .5912. UGI’s higher beta is attributable to having 65% of the business outside of the traditional government regulated segment.

Below is description of the three Henry Fund models used in deriving our target price of $38-$41 (DDM, DCF, Relative P/E).

Dividend Discount Model – The DDM produces a 5-year target price of $37.64. UGI has leveled their 2015 dividends, making predictions on future dividend growth difficult. However we do project a gradual increase. With the projected negative 2015 growth rate, we do not expect dividends to rise this year. Therefor, a $0.86 yearly dividend has been projected for 2015, with incremental increases leading to $0.95 in 2019. We believe these estimates are in line with pre-stock split practices of increasing yields.

Discounted Cash Flows – The DCF model produces a target of $42.06. The DCF represents a near 20% upside (sensitive to daily price changes), or 5.7% over the 52-week range. The DCF is heavily dependent on a strong Q2 reporting performance. If UGI continued to underperform through the winter months, the model will need to be adjusted accordingly. Through sensitivity analysis, -3% 2015 revenue would result in a $39.93 target price, and a 1% growth in revenue produces a target of $44.84. Through this 4% range in revenue projections, the DCF still shows upside potential.

Relative Valuation Model – The Relative P/E valuation produces a 2015 projection of $35.55, and a 2016 target projection of $34.77. This model is closest to current UGI

stock price. The P/E valuation used peers both in utility and natural gas distribution, since UGI has exposure to both. The cross industry analysis and UGI’s international exposure could result in the relative P/E producing an artificially low projection.

KEYS TO MONITOR

x Rising interest rates will have great affect on utility stock prices. Monitoring the Fed’s policy will be a solid indicator of the movement of utility stock prices

x Weather patters and temperatures play a major role in UGI’s winter heating month’s production. Below average temperatures will negatively affect yearly earnings.

x Q2 2015 10Q will show earnings from the second half of the winter heating months. The US had below average temperatures in early 2015; meaning Q1 underperformance could be supplemented.

x The strength of the dollar versus the Euro impacted overseas organic growth Q1 2015. Though UGI hedges strongly against the Euro, it still affects growth.

REFERENCES

1. UGI, Our Mission. http://ns2.ugi.com/about/mission.html

2. UGI, 2014 10K 3. Ibid 4. Ibid 5. Ibid 6. Ibid 7. NPR, “UGI plans $150 Million Natural Gas Pipeline”,

Marie Cusick. December 22, 2014. http://stateimpact.npr.org/pennsylvania/2014/12/22/ugi-plans-150-million-natural-gas-pipeline/

8. UGI, 2015 1Q 10Q 9. Penn Live, “It fels like the coldest winter ever, but it’s

not even close” Wesley Robinson, Feb 17, 2015. http://www.pennlive.com/midstate/index.ssf/2015/02/midstate_winter_better_than_la.html

10. NaturalGas.org. The History of Regulation. http://naturalgas.org/regulation/history/

11. PA Public Utility Commission. http://www.puc.state.pa.us

12. ETF Guide. “Should You Make Portfolio Decisions Based Upon Historic Correlations?” March 19, 2015. http://www.etfguide.com/%3Fp%3D4350

Page 12

13. New York University, Betas by Sector (US). http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/Betas.html

14. Market Realist. “Natural Gas Prices Fall, Affecting the Power Utilities Industry” Matt Philips, Dec 30, 2014. http://marketrealist.com/2014/12/natural-gas-prices-fall-affecting-power-utilities-industry/

15. PPL Electric Utilities, About Us. https://www.pplelectric.com/about-us.aspx

16. Excelon, About Us. http://www.exeloncorp.com/aboutus.aspx

17. National Fuel and Gas, About Us. http://www.nationalfuelgas.com/AboutUs.aspx

18. FerrellGas, Our Company. http://www.nationalfuelgas.com/AboutUs.aspx

19. Suburban Propane Company, About Us. http://www.suburbanpropane.com

20. Dominion, Customer Service. https://www.dom.com/residential/dominion-virginia-power

21. Chesapeake Utilities Corporation, Investors. http://www.chpk.com

22. Federal Reserve, Board of Governors of the Federal Reserve System. http://www.federalreserve.gov/monetarypolicy/fomccalendars.htm

23. Europea, European Economic Forecast, Winter 2015. http://ec.europa.eu/economy_finance/publications/european_economy/2015/pdf/ee1_en.pdf

IMPORTANT DISCLAIMER

Henry Fund reports are created by student enrolled in the Applied Securities Management (Henry Fund) program at the University of Iowa’s Tippie School of Management. These reports are intended to provide potential employers and other interested parties an example of the analytical skills, investment knowledge, and communication abilities of Henry Fund students. Henry Fund analysts are not registered investment advisors, brokers or officially licensed financial professionals. The investment opinion contained in this report does not represent an offer or solicitation to buy or sell any of the aforementioned securities. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Henry Fund may hold a financial interest in the companies mentioned in this report.

UGIIncome'Statement

Fiscal'Years'Ending'Dec.'31 2012 2013 2014 2015E 2016E 2017E 2018E 2019E

Report Date 09/30/2012 09/30/2013 09/30/2014 09/30/2015 09/30/2016 09/30/2017 09/30/2018 09/30/2019

Total revenues 6,519,200 7,194,700 8,277,300 8,235,914 8,400,632 8,652,651 8,912,230 9,090,475 Cost of Goods Sold 4,111,200 4,324,400 5,175,700 5,106,266 5,250,395 5,364,643 5,436,460 5,590,642 Operating & administrative expenses 1,591,700 1,692,000 1,752,600 1,811,901 1,848,139 1,903,583 1,960,691 1,999,904 Utility taxes other than income taxes 17,300 16,900 16,600 18,119 18,481 19,036 19,607 19,999 Depreciation 264,200 301,400 305,700 342,685 376,185 416,385 463,285 496,785 Amortization 51,800 61,700 57,200 57,600 58,004 58,410 58,818 59,230 Other income, net (38,300) (32,800) (36,100) (36,100) (36,100) (36,100) (36,100) (36,100) Total costs & expenses 5,997,900 6,363,600 7,271,700 7,300,472 7,515,104 7,725,957 7,902,761 8,130,461 Operating income 521,300 831,100 1,005,600 935,442 885,528 926,694 1,009,469 960,014

Income (loss) from equity investees (300) (400) (100) - - - - - Interest expense 221,500 240,300 237,700 142,508 14,364 15,513 16,754 18,095 Income taxes 99,600 162,800 235,200 290,530 275,027 287,813 313,521 298,161

Net income (loss) 186,600 427,600 532,600 502,404 596,137 623,368 679,194 643,758

Less: net income attributable to noncontrolling interests 12,800 (149,500) (195,400) (200,480) (205,693) (211,041) (216,528) (222,158) Net income attributable to UGI Corporation 199,400 278,100 337,200 301,924 390,444 412,327 462,666 421,601

Year end shares outstanding 168931 171643 172274 169,876 167,376 164,876 162,376 159,876Earnings2per2Share 1.18 1.62 1.96 1.78 2.33 2.50 2.85 2.64Yearly2Dividends2Paid 0.71 0.74 0.82 0.86 0.86 0.86 0.86 0.86

UGIBalance'Sheet

Fiscal'Years'Ending'Dec.'31 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E

UGI Corp. (NYS: UGI)

Report Date 9/30/10 09/30/2011 09/30/2012 09/30/2013 09/30/2014 09/30/2015 09/30/2016 09/30/2017 09/30/2018 09/30/2019

ASSETS

Cash & cash equivalents 260,700 238,500 319,900 389,300 419,500 667,431 1,758,422 1,445,566 1,835,121 2,845,363 Restricted cash 34,800 17,200 3,000 8,300 16,600 18,554 20,502 22,305 24,380 26,298 Accounts receivable, net 467,800 546,700 632,600 745,600 684,700 700,053 714,054 735,475 757,540 772,690 Accrued utility revenues 14,000 14,800 16,900 18,900 14,300 16,472 16,801 17,305 17,824 18,181 Inventories 314,000 363,000 356,900 365,500 423,000 428,268 436,833 449,938 463,436 472,705 Deferred income taxes (Asset) 32,600 44,900 56,800 10,600 10,100 12,354 12,601 12,979 13,368 13,636 Utility regulatory assets 26,100 8,600 6,500 8,200 13,200 14,825 15,121 15,575 16,042 16,363 Derivative financial instruments 11,300 10,200 13,200 23,800 14,500 5,000 4,500 7,500 8,000 8,500 Prepaid expenses & other current assets 58,800 43,000 66,500 57,100 67,100 65,887 67,205 69,221 71,298 72,724

Total current assets 1,220,100 1,306,100 1,504,500 1,627,300 1,663,000 1,928,844 3,046,040 2,775,864 3,207,009 4,246,460

Net property, plant & equipment 3,053,200 3,204,500 4,233,100 4,480,200 4,543,700 5,114,700 5,614,700 6,214,700 6,914,700 7,414,700 Goodwill 1,562,700 1,562,200 2,818,300 2,873,700 2,833,400 2,833,400 2,833,400 2,833,400 2,833,400 2,833,400 Intangible assets 150,100 147,800 658,200 607,900 576,400 518,800 460,796 402,386 343,568 284,338 Other assets 388,200 442,700 495,600 419,700 209,000 209,000 209,000 209,000 209,000 209,000 Total assets 6,374,300 6,663,300 9,709,700 10,008,800 10,093,000 10,604,743 12,163,936 12,435,350 13,507,677 14,987,898

Liabilities

Current maturities of long-term debt 573,600 47,400 166,700 67,200 77,200 76,700 748,200 51,700 46,600---------- 456,000-------Bank loans 200,400 138,700 165,100 227,900 210,800 225,416 227,670 229,947 232,246 234,569 Accounts payable 372,600 399,600 411,300 472,300 459,800 494,155 504,038 519,159 534,734 545,428 Employee compensation & benefits accrued 86,300 73,900 91,100 97,000 106,500 107,067 109,208 112,484 115,859 118,176 Deposits & advances 165,300 161,500 252,800 205,200 211,500 205,898 210,016 216,316 222,806 227,262 Derivative financial instruments 58,000 49,700 100,900 30,000 40,200 41,004 41,619 42,243 42,666 42,964 Accrued interest - - 72,700 60,600 57,900 55,100 54,000 52,800 52,000---------- 49,000----------Other current liabilities 218,500 207,100 226,400 264,700 267,000 272,340 277,787 283,343 289,009 294,790

Total current liabilities 1,674,700 1,077,900 1,487,000 1,424,900 1,430,900 1,477,679 2,172,538 1,507,992 1,535,920 1,968,189

Long-term debt 1,432,200 2,110,300 3,347,600 3,542,200 3,433,600 3,467,936 3,502,615 3,537,642 3,573,018 3,608,748 Deferred income taxes (Liability) 601,400 709,200 935,000 962,300 1,005,100 1,055,355 1,108,123 1,163,529 1,221,705 1,282,791 Deferred investment tax credits 5,300 5,000 4,600 4,300 3,900 3,600 3,200 1,900 1,500------------ 1,200------------Other noncurrent liabilities 599,100 569,800 616,700 527,200 539,700 550,494 561,504 572,734 584,189 595,872 Total liabilities 4,312,700 4,472,200 6,390,900 6,460,900 6,429,800 6,555,064 7,347,980 6,783,797 6,916,332 7,456,800

Equity

Common stock 906,100 937,400 1,157,700 1,208,100 1,215,600 1,215,600 1,215,600 1,215,600 1,215,600 1,215,600 Retained earnings (accumulated deficit) 966,700 1,085,800 1,166,100 1,308,300 1,509,400 1,895,879 2,662,159 3,497,762 4,437,564 5,377,327 Accumulated other comprehensive income (loss) (10,100) (17,700) (62,000) 8,400 (21,200) (21,200) (21,200) (21,200) (21,200) (21,200) Treasury stock, at cost 38,200 27,800 28,700 32,300 44,700 44,700 44,700 44,700 44,700 44,700 Total UGI Corporation stockholders' equity 1,824,500 1,977,700 2,233,100 2,492,500 2,659,100 3,045,579 3,811,859 4,647,462 5,587,264 6,527,027

Noncontrolling interests, principally in AmeriGas Partners, L.P. 237,100 213,400 1,085,700 1,055,400 1,004,100 1,004,100 1,004,100 1,004,100 1,004,100 1,004,100 Total equity 2,061,600 2,191,100 3,318,800 3,547,900 3,663,200 4,049,679 4,815,959 5,651,562 6,591,364 7,531,127

UGICash%Flows

Fiscal%Years%Ending%Dec.%31 2015 2016 2017 2018 2019

UGI Corp. (NYS: UGI)Report DateOperating AvctivitiesNet Income 502,404 596,137 623,368 679,194 643,758 Depreciation 342,685 376,185 416,385 463,285 496,785 Restricted Cash (1,954) (1,948) (1,803) (2,075) (1,918) Accounts receivable, net (15,353) (14,001) (21,422) (22,064) (15,151) Accrued utility revenues (2,172) (329) (504) (519) (356) Inventories (5,268) (8,565) (13,105) (13,498) (9,269) Deferred income taxes (Asset) (2,254) (247) (378) (389) (267) Utility regulatory assets (1,625) (296) (454) (467) (321) Derivative financial instruments 9,500 500 (3,000) (500) (500) Prepaid expenses & other current assets 1,213 (1,318) (2,016) (2,077) (1,426) Current maturities of long-term debt (500) 671,500 (696,500) (5,100) 409,400 Bank loans 14,616 2,254 2,277 2,299 2,322 Accounts payable 34,355 9,883 15,121 15,575 10,695 Benefits Accrued 567 2,141 3,276 3,375 2,317 Deposits and Advances (5,602) 4,118 6,300 6,489 4,456 Derivative Financial Instruments 804 615 624 422 299 Accrued interest (2,800) (1,100) (1,200) (800) (3,000) Deferred income taxes (Liability) 50,255 52,768 55,406 58,176 61,085 Deferred investment tax credits (300) (400) (1,300) (400) (300) Other current liabilities 5,340 5,447 5,556 5,667 5,780 Total Cash From Operations 921,957 1,691,395 384,830 1,184,517 1,602,471

Investing Activities Capital Expenditures (571,000) (500,000) (600,000) (700,000) (500,000) Other Liabilities 10,794 11,010 11,230 11,455 11,684 Total Cash From Investing (560,206) (488,990) (588,770) (688,545) (488,316)

Finance Activities Long Term Debt 34,336 34,679 35,026 35,376 35,730 Issuance of Common Stock - - - - - Dividends Paid (148,155) (146,093) (143,943) (141,793) (139,643) Cash From Financing (113,819) (111,414) (108,917) (106,417) (103,913)

Change in Cash 247,931 1,090,991 (312,857) 389,555 1,010,242 Cash at Start of Period 419,500 667,431 1,758,422 1,445,566 1,835,121 Cash at end of Period 667,431 1,758,422 1,445,566 1,835,121 2,845,363

UGICommon%Size%Income%Statement

Fiscal%Years%Ending%Dec.%31 2012 2013 2014 2015E 2016E 2017E 2018E 2019E

Total revenues 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%Cost of Goods Sold 63.06% 60.11% 62.53% 62.00% 62.50% 62.00% 61.00% 61.50%Operating & administrative expenses 24.42% 23.52% 21.17% 22.00% 22.00% 22.00% 22.00% 22.00%Utility taxes other than income taxes 0.27% 0.23% 0.20% 0.22% 0.22% 0.22% 0.22% 0.22%Depreciation 4.05% 4.19% 3.69% 4.16% 4.48% 4.81% 5.20% 5.46%Amortization 0.79% 0.86% 0.69% 0.70% 0.69% 0.68% 0.66% 0.65%Other income, net -0.59% -0.46% -0.44% -0.44% -0.43% -0.42% -0.41% -0.40%Total costs & expenses 92.00% 88.45% 87.85% 88.64% 89.46% 89.29% 88.67% 89.44% Operating income 8.00% 11.55% 12.15% 11.36% 10.54% 10.71% 11.33% 10.56%Income (loss) from equity investees 0.00% -0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Interest expense 3.40% 3.34% 2.87% 1.73% 0.17% 0.18% 0.19% 0.20%Total deferred (benefit) income taxes 1.53% 2.26% 2.84% 3.53% 3.27% 3.33% 3.52% 3.28%Income taxes 1.53% 2.26% 2.84% 3.53% 3.27% 3.33% 3.52% 3.28% Net income (loss) 2.86% 5.94% 6.43% 6.10% 7.10% 7.20% 7.62% 7.08%Less: net income attributable to noncontrolling interests 0.20% -2.08% -2.36% -2.43% -2.45% -2.44% -2.43% -2.44%Net income attributable to UGI Corporation 3.06% 3.87% 4.07% 3.67% 4.65% 4.77% 5.19% 4.64%

UGICommon%Size%Balance%Sheet

Fiscal%Years%Ending%Dec.%31 2012 2013 2014 2015E 2016E 2017E 2018E 2019E

UGI Corp. (NYS: UGI)

ASSETS

Cash & cash equivalents 5.72% 6.96% 7.50% 11.94% 31.45% 25.85% 32.82% 50.89%Restricted cash 0.05% 0.15% 0.30% 0.33% 0.37% 0.40% 0.44% 0.47%Accounts receivable, net 11.96% 14.04% 12.94% 8.50% 8.50% 8.50% 8.50% 8.50%Accrued utility revenues 0.65% 0.71% 0.70% 0.18% 0.18% 0.18% 0.18% 0.18%Inventories 11.31% 13.33% 12.25% 0.06% 12.77% 13.15% 13.55% 13.82%Deferred income taxes 0.30% 0.34% 0.26% 0.80% 0.30% 0.31% 0.32% 0.33%Utility regulatory assets 4.30% 4.11% 5.07% 23.42% 0.00% 0.00% 0.00% 0.00%Derivative financial instruments 1.03% 1.41% 1.48% 0.15% 0.15% 0.15% 0.15% 0.15%Prepaid expenses & other current assets 1.05% 1.01% 1.01% 0.80% 0.80% 0.80% 0.80% 0.80% Total current assets 23.08% 22.62% 20.09% 23.42% 36.26% 32.08% 35.98% 46.71%Net property, plant & equipment 64.93% 62.27% 54.89% 62.10% 66.84% 71.82% 77.59% 81.57%Goodwill 43.23% 39.94% 34.23% 34.40% 33.73% 32.75% 31.79% 31.17%Intangible assets 10.10% 8.45% 6.96% 6.30% 5.49% 4.65% 3.86% 3.13%Other assets 7.60% 5.83% 2.52% 2.54% 2.49% 2.42% 2.35% 2.30% Total assets 148.94% 139.11% 121.94% 128.76% 144.80% 143.72% 151.56% 164.87%

Liabilities

Current maturities of long-term debt 2.56% 0.93% 0.93% 0.93% 8.91% 0.60% 0.52% 5.02%Bank loans 2.53% 3.17% 2.55% 2.74% 2.71% 2.66% 2.61% 2.58%Accounts payable 6.31% 6.56% 5.55% 6.00% 6.00% 6.00% 6.00% 6.00%Employee compensation & benefits accrued 1.40% 1.35% 1.29% 1.30% 1.30% 1.30% 1.30% 1.30%Deposits & advances 3.88% 2.85% 2.56% 2.50% 2.50% 2.50% 2.50% 2.50%Derivative financial instruments 1.55% 0.42% 0.49% 0.50% 0.50% 0.49% 0.48% 0.47%Accrued interest 1.12% 0.84% 0.70% 0.67% 0.64% 0.61% 0.58% 0.54%Other current liabilities 3.47% 3.68% 3.23% 3.31% 3.31% 3.27% 3.24% 3.24% Total current liabilities 22.81% 19.80% 17.29% 17.94% 25.86% 17.43% 17.23% 21.65%Long-term debt 51.35% 49.23% 41.48% 42.11% 41.69% 40.89% 40.09% 39.70%Deferred income taxes 14.34% 13.38% 12.14% 12.81% 13.19% 13.45% 13.71% 14.11%Deferred investment tax credits 0.07% 0.06% 0.05% 0.04% 0.04% 0.02% 0.02% 0.01%Other noncurrent liabilities 9.46% 7.33% 6.52% 6.68% 6.68% 6.62% 6.55% 6.55%Total liabilities 98.03% 89.80% 77.68% 79.59% 87.47% 78.40% 77.60% 82.03%

Equity

Common stock 17.76% 16.79% 14.69% 14.76% 14.47% 14.05% 13.64% 13.37%Retained earnings (accumulated deficit) 17.89% 18.18% 18.24% 23.02% 31.69% 40.42% 49.79% 59.15%Accumulated other comprehensive income (loss) .0.95% 0.12% .0.26% .0.26% .0.25% .0.25% .0.24% .0.23%Treasury stock, at cost 0.44% 0.45% 0.54% 0.54% 0.53% 0.52% 0.50% 0.49% Total UGI Corporation stockholders' equity 34.25% 34.64% 32.13% 36.98% 45.38% 53.71% 62.69% 71.80%Noncontrolling interests, principally in AmeriGas Partners, L.P. 16.65% 14.67% 12.13% 12.19% 11.95% 11.60% 11.27% 11.05%Total equity 50.91% 49.31% 44.26% 49.17% 57.33% 65.32% 73.96% 82.85%

UGIValue&Driver&Estimation

Fiscal&Years&Ending&Dec.&31 2012 2013 2014 2015E 2016E 2017E 2018E 2019E

Revenenue1 111116,519,2001 111117,194,7001 111118,277,3001 111118,235,9141 111118,400,6321 111118,652,6511 111118,912,2301 111119,090,4751

Cost1of1Goods1Sold 111114,111,2001 111114,324,4001 111115,175,7001 111115,106,2661 111115,250,3951 111115,364,6431 111115,436,4601 111115,590,6421

SG&A 111111,591,7001 111111,692,0001 111111,752,6001 111111,811,9011 111111,848,1391 111111,903,5831 111111,960,6911 111111,999,9041

Depreciation 11111111264,2001 11111111301,4001 11111111305,7001 11111111342,6851 11111111376,1851 11111111416,3851 11111111463,2851 11111111496,7851

Amortization1 111111111151,8001 111111111161,7001 111111111157,2001 111111111157,6001 111111111158,0041 111111111158,4101 111111111158,8181 111111111159,2301

Interest1on1Corporate1Lease 111111111111113.411 111111111111121.771 111111111111123.951 111111111111125.141 111111111111126.401 111111111111127.721 111111111111129.111 111111111111130.561

$$$EBITA 500,3131111111 815,2221111111 986,1241111111 917,4861111111 867,9361111111 909,6571111111 993,0051111111 943,9441111111

Tax1Shields

Income1Tax1Provision 99,6001111111111 162,8001111111 235,2001111111 290,5301111111 275,0271111111 287,8131111111 313,5211111111 298,1611111111

11Tax1on1Corporate1Leases 4.1711111111111111 6.7611111111111111 7.4411111111111111 7.8111111111111111 8.2011111111111111 8.6111111111111111 9.0411111111111111 9.4911111111111111

Interest expense 68,7931111111111 74,6321111111111 73,8251111111111 44,2601111111111 4,461111111111111 4,818111111111111 5,204111111111111 5,620111111111111

Utility taxes other than income taxes 5,373111111111111 5,249111111111111 5,156111111111111 5,627111111111111 5,740111111111111 5,912111111111111 6,090111111111111 6,211111111111111

Total1Adjusted1Taxes 173,7711111111 242,6881111111 314,1881111111 340,4251111111 285,2371111111 298,5511111111 324,8231111111 310,0021111111

Differed1Income1Tax 213,9001111111 73,5001111111111 43,3001111111111 48,0011111111111 52,5211111111111 55,0281111111111 57,7871111111111 60,8181111111111

NOPLAT 540,4431111111 646,0341111111 715,2361111111 625,0621111111 635,2201111111 666,1341111111 725,9691111111 694,7601111111

Working1Capitol1

Cash 319,9001111111 389,3001111111 419,5001111111 667,4311111111 1,758,4221111 1,445,5661111 1,835,1211111 2,845,3631111

Accrued utility revenues 16,9001111111111 18,9001111111111 14,3001111111111 16,4721111111111 16,8011111111111 17,3051111111111 17,8241111111111 18,1811111111111

Accounts1Receivable 632,6001111111 745,6001111111 684,7001111111 700,0531111111 714,0541111111 735,4751111111 757,5401111111 772,6901111111

Inventory 356,9001111111 365,5001111111 423,0001111111 428,2681111111 436,8331111111 449,9381111111 463,4361111111 472,7051111111

Utility regulatory assets 6,500111111111111 8,200111111111111 13,2001111111111 14,8251111111111 15,1211111111111 15,5751111111111 16,0421111111111 16,3631111111111

Other1Current1Assets1and1pre1paid1expenses 66,5001111111111 57,1001111111111 67,1001111111111 65,8871111111111 67,2051111111111 69,2211111111111 71,2981111111111 72,7241111111111

Current1Assets 1,399,3001111 1,584,6001111 1,621,8001111 1,892,9351111 3,008,4361111 2,733,0801111 3,161,2611111 4,198,0261111

Accounts1Payable 411,3001111111 472,3001111111 459,8001111111 494,1551111111 504,0381111111 519,1591111111 534,7341111111 545,4281111111

Employee1Compensation1Accrued 91,1001111111111 97,0001111111111 106,5001111111 107,0671111111 109,2081111111 112,4841111111 115,8591111111 118,1761111111

Deposits1and1Advances 252,8001111111 205,2001111111 211,5001111111 205,8981111111 210,0161111111 216,3161111111 222,8061111111 227,2621111111

Accrued1Interest 72,7001111111111 60,6001111111111 57,9001111111111 55,1001111111111 54,0001111111111 52,8001111111111 52,0001111111111 49,0001111111111

Other1Current 226,4001111111 264,7001111111 267,0001111111 272,3401111111 277,7871111111 283,3431111111 289,0091111111 294,7901111111

Current1Liabilities1 1,054,3001111 1,099,8001111 1,102,7001111 1,134,5601111 1,155,0491111 1,184,1021111 1,214,4081111 1,234,6561111

Working1Capitol1 345,0001111111 484,8001111111 519,1001111111 758,3761111111 1,853,3881111 1,548,9781111 1,946,8531111 2,963,3701111

111Net1PPE 4,233,1001111 4,480,2001111 4,543,7001111 5,114,7001111 5,614,7001111 6,214,7001111 6,914,7001111 7,414,7001111

111Intangible1Assets 658,2001111111 607,9001111111 576,4001111111 518,8001111111 460,7961111111 402,3861111111 343,5681111111 284,3381111111

111PV1Operating1Leases 224111111111111111 363111111111111111 399111111111111111 419111111111111111 440111111111111111 462111111111111111 485111111111111111 509111111111111111

111Other1Long1Term1Assets 11111111495,6001 11111111419,7001 11111111209,0001 11111111209,0001 11111111209,0001 11111111209,0001 11111111209,0001 11111111209,0001

111Other1Long1Term1Liabilities 11111111616,7001 11111111527,2001 11111111539,7001 11111111550,4941 11111111561,5041 11111111572,7341 11111111584,1891 11111111595,8721

Invested1Capitol 111115,115,4241 111115,465,7631 111115,308,8991 111116,050,8001 111117,576,8201 111117,802,7921 111118,830,4171 1110,276,0441

Change1in1Invested1Capitol 111111,517,5151 11111111350,3391 111111(156,864) 11111111741,9011 111111,526,0191 11111111225,9721 111111,027,6251 111111,445,6271

NOPLAT 540,4431111111 646,0341111111 715,2361111111 625,0621111111 635,2201111111 666,1341111111 725,9691111111 694,7601111111

Beginning1Invested1Capitol 3,597,9091111 5,115,4241111 5,465,7631111 5,308,8991111 6,050,8001111 7,576,8201111 7,802,7921111 8,830,4171111

ROIC 15.02% 12.63% 13.09% 11.77% 10.50% 8.79% 9.30% 7.87%

NOPLAT 540,4431111111 646,0341111111 715,2361111111 625,0621111111 635,2201111111 666,1341111111 725,9691111111 694,7601111111

Capitol1Expenditure 1,517,5151111 350,3391111111 (156,864)111111 741,9011111111 1,526,0191111 225,9721111111 1,027,6251111 1,445,6271111

Free$Cash$Flow (977,072)111111 295,6941111111 872,1001111111 (116,839)111111 (890,799)111111 440,1621111111 (301,656)111111 (750,867)111111

Beginning1Invested1Capitol 3,597,9091111 5,115,4241111 5,465,7631111 5,308,8991111 6,050,8001111 7,576,8201111 7,802,7921111 8,830,4171111

ROIC 15.02% 12.63% 13.09% 11.77% 10.50% 8.79% 9.30% 7.87%

Economic$Profit 324,5681111111 339,1081111111 387,2901111111 356,4601111111 329,0811111111 282,7871111111 331,1891111111 247,9871111111

UGIWeighted(Average(Cost(of(Capital((WACC)(Estimation

Cost%of%Equity Er=r(f)+B[E(rm)4r(f)] Cost%of%Debt

Risk%Free 2.55% Risk%Free 2.55%Implied%Premium 4.85% UGI%30%Year%Spread 123%basis%PointsBeta 0.83 Cost%of%Debt 3.78%Cost%of%Equity 6.58%

Cost%of%Equity 6.58% Cost%of%Debt 3.78%Shares%Outstanding 169,875,781%%%%%%%%%%% Long%Term%Debt 3,433,600,000%%%%%%%%Current%Market%Price 35 Short%Term%Loans 210,800,000%%%%%%%%%%%Equity%Value 5,945,652,335%%%%%%%% Operating%Leases 399,087%%%%%%%%%%%%%%%%%%%

Current%Debt 77200Corporate%Finances 39,908,727%%%%%%%%%%%%%Total%Debt 3,684,785,015%%%%%%%%

WACC 5.06% %

WACC%=%Re(E/V)%+%Rd(14t)(D/V)%+%Rpfd(PFD/V)

UGIDiscounted+Cash+Flow+(DCF)+and+Economic+Profit+(EP)+Valuation+Models

Key$Inputs:$$$$$CV$Growth 2.20%$$$$$CV$ROIC 7%$$$$$WACC 5.06%$$$$$Cost$of$Equity 6.58%

Fiscal+Years+Ending+Dec.+31 2015E 2016E 2017E 2018E 2019E

DCF'Model

WACC 5.06%

NOPLAT $$$$$$$$625,062$ $$$$$$$$635,220$ $$$$$$$$666,134$ $$$$$$$$725,969$ $$$$$$$$$$$$$$$$$$$$$$$$694,760$Invested$Capital 5,308,899$$$$ 6,050,800$$$$ 7,576,820$$$$ 7,802,792$$$$ 8,830,417$$$$$$$$$$$$$$$$$$$$ROIC 11.77% 10.50% 8.79% 9.30% 7.87%

NOPLAT 625,062$$$$$$$ 635,220$$$$$$$ 666,134$$$$$$$ 725,969$$$$$$$ 694,760$$$$$$$$$$$$$$$$$$$$$$$(Q)$Capital$Expenditures 741,901$$$$$$$ 1,526,019$$$$ 225,972$$$$$$$ 1,027,625$$$$ 1,445,627$$$$$$$$$$$$$$$$$$$$FCF (116,839)$$$$$$ (890,799)$$$$$$ 440,162$$$$$$$ (301,656)$$$$$$CV 16,660,630$$$$$$$$$$$$$$$$$$

Number$of$Discounts 1 2 3 4 4PV$of$Cash$Flows (111,212)$$$$$$ (807,067)$$$$$$ 379,583$$$$$$$ (247,612)$$$$$$ 13,675,729$$$$$$$$$$$$$$$$$$Total$Operating$Value 12,889,421$$$$$$$$$$$$$$$$$$

(Q)$Long$Term$Debt 3,433,600$$$$$$$$$$$$$$$$$$$$(Q)Current$Debt$Due 77,200$$$$$$$$$$$$$$$$$$$$$$$$$$(Q)$Bank$Loans 210,800$$$$$$$$$$$$$$$$$$$$$$$(Q)$ESOP 1,601,399$$$$$$$$$$$$$$$$$$$$(Q)$Derivative$Liabilities$ 40,200$$$$$$$$$$$$$$$$$$$$$$$$$$(Q)$PV$Operating$Leases 399,087$$$$$$$$$$$$$$$$$$$$$$$Firm$Value 7,127,135$$$$$$$$$$$$$$$$$$$$

Shares$Outstanding 172,274$$$$$$$$$$$$$$$$$$$$$$$Target'Price 41.37Today's'Price 42.06

EP'Model

Economic$Profit 356,460$$$$$$$ 329,081$$$$$$$ 282,787$$$$$$$ 331,189$$$$$$$ 247,987$$$$$$$$$$$$$$$$$$$$$$$CV$Economic$Profit 7,830,213$$$$$$$$$$$$$$$$$$$$Number$of$Discounts 1 2 3 4 4PV$Cash$Flows 339,293$$$$$$$ 298,148$$$$$$$ 243,867$$$$$$$ 271,853$$$$$$$ 6,427,360$$$$$$$$$$$$$$$$$$$$PV$Operations 7,580,522$$$$$$$$$$$$$$$$$$$$(+)$Beginning$Invested$Capital 5,308,899$$$$$$$$$$$$$$$$$$$$EP$CV$Value 12,889,421$$$$$$$$$$$$$$$$$$

(Q)$Long$Term$Debt 3,433,600$$$$$$$$$$$$$$$$$$$$(Q)$Current$Debt$Due 77,200$$$$$$$$$$$$$$$$$$$$$$$$$$(Q)$Bank$Loans 210,800$$$$$$$$$$$$$$$$$$$$$$$(Q)$ESOP 1,601,399$$$$$$$$$$$$$$$$$$$$(Q)$Derivative$Liabilities$ 40,200$$$$$$$$$$$$$$$$$$$$$$$$$$(Q)$PV$Operatiing$Leases 399,087$$$$$$$$$$$$$$$$$$$$$$$Firm$Value 7,127,135$$$$$$$$$$$$$$$$$$$$

Shares$Outstanding 172,274$$$$$$$$$$$$$$$$$$$$$$$Target$Price 41.37Price$Today 42.06

UGIDividend'Discount'Model'(DDM)'or'Fundamental'P/E'Valuation'Model

Fiscal'Years'Ending'Dec.'31 2015E 2016E 2017E 2018E 2019E

EPS 1.78$........ 2.33$........ 2.50$........ 2.85$........ 2.64$........ROE 12.41% 12.38% 11.03% 10.30% 8.55%

Key$Assumptions...CV.growth 2.20%...CV.ROE 8.55%...Cost.of.Equity 6.58%

Future$Cash$Flows.....P/E.Multiple.(CV.Year) 16.97.....EPS.(CV.Year) 2.64$.............Future.Stock.Price 44.76.....Dividends.Per.Share 0.86 0.9 0.92 0.95 0.95.....Future.Cash.Flows 0.86 0.86 0.86 0.86 44.76$......

.....Discounted.Cash.Flows 0.8069397 0.757$...... 0.710$...... 0.667$...... 34.692$...

Intrinsic.Value 36.83$......Todays*Value 37.62$......

UGIRelative(Valuation(Models

EPS EPS Est.'5yrTicker Company Price 2015E 2016E P/E'15 P/E'16 EPS'gr.EXC Excelon $33.61 $2.45' $2.55' 13.7'''''''''' 13.2'''''''''' 4.4FGP Ferrellgas'Partners $24.38 $1.03' $1.17' 23.7'''''''''' 20.8'''''''''' 3.6SPH Suburban'Propane'Partners $42.97 $1.90' $2.15' 22.6'''''''''' 20.0'''''''''' 9.0PPL PPL'Corperation $33.67 $2.25' $2.29' 15.0'''''''''' 14.7'''''''''' K2.2NFG National'Fuel'Gas'Co. $60.27 $2.79' $3.04' 21.6'''''''''' 19.8'''''''''' 9.6D Dominion'Recources $71.72 $3.73' $3.93' 19.2'''''''''' 18.2'''''''''' 6.0CPK Company'Name $20.00 $1.90' $2.07' 10.5'''''''''' 9.7'''''''''''' 8.8

Average 18.0(((((((((( 16.6((((((((((

UGI UGI'Corperation $33.48 $1.97' $2.09' 17.0'''''''''' 16.0'''''''''' 8.21%

Implied(Value:(((Relative(P/E((EPS15) ($(((((35.55((((Relative(P/E((EPS16) 34.77$(((((

UGIKey$Management$Ratios

Fiscal$Years$Ending$Dec.$31 2012 2013 2014 2015 2016 2017 2018 2019

Liquidity(RatiosCurrent1Ratio1(Current1Assets/Current1Liabilities) 1.01 1.14 1.16 1.31 1.40 1.84 2.09 2.16Quick1Ratio1(Current1Assets1B1Inventory1/1Current1Liabilities) 0.77 0.89 0.87 1.02 1.20 1.54 1.79 1.92Cash1Ratio1(Cash1+1Marketable1Securites1/1Current1Liabilites) 0.22 0.27 0.29 0.45 0.81 0.96 1.19 1.45

Activity(or(Asset2Management(RatiosInventory1Turnover1(COGS1/1Average1Inventory) 11.42 11.97 13.13 12.00 12.14 12.10 11.90 11.94Invetory1Period1(3651/1Inventory1Turnover) 31.96 30.49 27.80 30.42 30.07 30.17 30.66 30.56Fixed1Asset1Turnover1(Sales1/1Net1PPE) 1.54 1.61 1.82 1.61 1.50 1.39 1.29 1.23Asset1Turnover1(Sales1/1Total1Assets) 0.67 0.72 0.82 0.78 0.69 0.70 0.66 0.61

Financial(Leverage(RatiosDebt1Ratio1(Total1Debt1/1Total1Assets) 0.38 0.38 0.37 0.36 0.37 0.31 0.29 0.29Debt1to1Equity1Ratio1(Total1Debt1/1Total1Equity) 1.11 1.08 1.02 0.93 0.93 0.68 0.58 0.57Interest1Coverage1(EBITA1/1Interest1Charges) 2.26 3.39 4.15 6.44 60.42 58.64 59.27 52.17

Profitability(RatiosGross1Profit1Margin1(Sales1B1COGS1/1Sales) 36.94% 39.89% 37.47% 38.00% 37.50% 38.00% 39.00% 38.50%Return1on1Assets1(Net1Income1/1Total1Assets) 1.92% 4.27% 5.28% 4.74% 4.90% 5.01% 5.03% 4.30%Return1on1Equity1(Net1Income1/1Shareholder1Equity) 5.62% 12.05% 14.54% 12.41% 12.38% 11.03% 10.30% 8.55%

Payout(Policy(RatiosPayout1Ratio1(Dividends1per1Share1/1EPS) 0.60 0.46 0.42 0.48 0.37 0.34 0.30 0.33Dividend1Cover1(EPS1/1Dividends1per1Share 1.66 2.19 2.39 2.07 2.71 2.91 3.31 3.07

Present'Value'of'Operating'Lease'Obligations'(2014) Present'Value'of'Operating'Lease'Obligations'(2013) Present'Value'of'Operating'Lease'Obligations'(2012)

Operating Operating OperatingFiscal.Years.Ending.Dec..31 Leases Fiscal.Years.Ending. Leases Fiscal.Years.Ending. Leases2015 72.6 2014 66.7 2013 77.42016 107 2015 97.3 2014 107.92017 107 2016 97.3 2015 64.72018 65 2017 58.9 2016 0.012019 65 2018 58.9 2017 0.01Thereafter 64.5 Thereafter 58.2 Thereafter 68.6Total.Minimum.Payments 481.1 Total.Minimum.Payments 437.3 Total.Minimum.Payments 318.62Less:.Interest 82 Less:.Interest 74 Less:.Interest 95PV.of.Minimum.Payments 399 PV.of.Minimum.Payments 363 PV.of.Minimum.Payments 224

Capitalization'of'Operating'Leases Capitalization'of'Operating'Leases Capitalization'of'Operating'Leases

PreKTax.Cost.of.Debt 6.00% PreKTax.Cost.of.Debt 6.00% PreKTax.Cost.of.Debt 6.00%Number.Years.Implied.by.Year.6.Payment 1.0 Number.Years.Implied.by.Year.6.Payment 1.0 Number.Years.Implied.by.Year.6.Payment 6860.0

Lease PV.Lease Lease PV.Lease Lease PV.LeaseYear Commitment Payment Year Commitment Payment Year Commitment Payment1 72.6 68.5 1 66.7 62.9 1 77.4 73.02 107 95.2 2 97.3 86.6 2 107.9 96.03 107 89.8 3 97.3 81.7 3 64.7 54.34 65 51.5 4 58.9 46.7 4 0.01 0.05 65 48.6 5 58.9 44.0 5 0.01 0.06.&.beyond 64.5 45.5 6.&.beyond 58.2 41.0 6.&.beyond 0.01 0.1PV.of.Minimum.Payments 399.1 PV.of.Minimum.Payments 362.9 PV.of.Minimum.Payments 223.5

Present'Value'of'Operating'Lease'Obligations'(2011) Present'Value'of'Operating'Lease'Obligations'(2010)

Operating OperatingFiscal.Years.Ending. Leases Fiscal.Years.Ending. Leases2012 68.3 2011 57.42013 103.9 2012 78.92014 61.4 2013 78.92015 0.01 2014 41.12016 0.01 2015 41.1Thereafter 44.3 Thereafter 19.7Total.Minimum.Payments 277.92 Total.Minimum.Payments 317.1Less:.Interest 69 Less:.Interest 49PV.of.Minimum.Payments 209 PV.of.Minimum.Payments 268

Capitalization'of'Operating'Leases Capitalization'of'Operating'Leases

PreKTax.Cost.of.Debt 6.00% PreKTax.Cost.of.Debt 6.00%Number.Years.Implied.by.Year.6.Payment 4430.0 Number.Years.Implied.by.Year.6.Payment 1.0

Lease PV.Lease Lease PV.LeaseYear Commitment Payment Year Commitment Payment1 68.3 64.4 1 57.4 54.22 103.9 92.5 2 78.9 70.23 61.4 51.6 3 78.9 66.24 0.01 0.0 4 41.1 32.65 0.01 0.0 5 41.1 30.76.&.beyond 0.01 0.1 6.&.beyond 19.7 13.9PV.of.Minimum.Payments 208.6 PV.of.Minimum.Payments 267.8

Effects'of'ESOP'Exercise'and'Share'Repurchases'on'Common'Stock'Balance'Sheet'Account'and'Number'of'Shares'Outstanding

Number'of'Options'Outstanding'(shares):' 8,957,290Average'Time'to'Maturity'(years): 6.98Expected'Annual'Number'of'Options'Exercised: 1,283,196

Current'Average'Strike'Price: 21.43$'''''''''''Cost'of'Equity: 9.00%Current'Stock'Price: $33.48

2015E 2016E 2017E 2018E 2019EIncrease'in'Shares'Outstanding: 0 0 0 0 0Average'Strike'Price: 14.47$''''''''''' 18.15$''''''''''' 18.15$''''''''''' 18.15$''''''''''' 18.15$'''''''''''Increase'in'Common'Stock'Account: A'''''''''''''''''' A'''''''''''''''''' A'''''''''''''''''' A'''''''''''''''''' A''''''''''''''''''

Change'in'Treasury'Stock 0 0 0 0 0Expected'Price'of'Repurchased'Shares: 33.48$''''''''''' 36.49$''''''''''' 39.78$''''''''''' 43.36$''''''''''' 47.26$'''''''''''Number'of'Shares'Repurchased: A'''''''''''''''''' A'''''''''''''''''' A'''''''''''''''''' A'''''''''''''''''' A''''''''''''''''''

Shares'Outstanding'(beginning'of'the'year) 172,274 169,876 167,376 164,876 162,376Plus:'Shares'Issued'Through'ESOP 102 0 0 0 0Less:'Shares'Repurchased'in'Treasury 2,500'''''''''''''' 2,500'''''''''''''' 2,500'''''''''''''' 2,500'''''''''''''' 2,500''''''''''''''Shares'Outstanding'(end'of'the'year) 169,876 167,376 164,876 162,376 159,876

VALUATION)OF)OPTIONS)GRANTED)IN)ESOP

Ticker'Symbol UGICurrent'Stock'Price $33.48Risk'Free'Rate 0.00%Current'Dividend'Yield 0.00%Annualized'St.'Dev.'of'Stock'Returns 38.80%

Average Average BJS ValueRange'of Number Exercise Remaining Option of'OptionsOutstanding'Options of'Shares Price Life'(yrs) Price GrantedRange'1 102,000 14.47 1.40 19.14$'''''''''' 1,952,479$'''''''''''Range'2 3,452,480 18.15 5.70 18.61$'''''''''' 64,263,327$''''''''Range'3 3,500,910 21.45 7.20 17.81$'''''''''' 62,339,522$''''''''Range'4 1,901,900 27.74 9.20 16.61$'''''''''' 31,584,572$''''''''

Total 8,957,290 21.43$'''''''''' 6.98 17.68$'''''''''' 160,139,900$))))))

2015 CapEx CV Growth43.03 525000 550000 571000 580000 600000 43.03 1.75% 2.00% 2.20% 2.50% 3.00%,5% 37.82 37.65 37.50 37.44 37.30 4.50% 54.82 59.28 63.55 71.56 92.02,3% 40.27 40.10 39.96 39.90 39.76 4.75% 46.21 49.53 52.65 58.37 72.27

Growth ,1% 42.73 42.56 42.42 42.36 42.22 WACC 5.02% 38.41 40.82 43.06 47.09 56.451% 45.19 45.02 44.88 44.81 44.68 5.25% 32.72 34.56 36.25 39.23 45.983% 47.65 47.48 47.33 47.27 47.13 5.50% 27.34 28.70 29.92 32.07 36.80

2015 Growth Cost of Equity43.03 ,3% ,2% ,1% 0% 1% 43.03 5.50% 6.00% 6.58% 7.00% 7.50%29% 41.37 42.62 43.87 45.12 46.37 3.25% 78.74 62.27 47.85 39.59 31.4530% 40.69 41.93 43.17 44.41 45.65 3.50% 74.65 59.17 45.51 37.64 29.86

Tax Rate 31% 39.93 41.16 42.39 43.62 44.84 Cost of Debt 3.78% 70.37 55.90 43.03 35.56 28.1532% 39.30 40.52 41.74 42.96 44.18 4.00% 67.21 53.47 41.18 34.00 26.8633% 38.60 39.81 41.02 42.22 43.43 4.25% 63.83 50.85 39.16 32.31 25.45

2015 Growth Shares Outstanding43.03 ,3% ,2% ,1% 0% 1% 43.03 160,000 165,000 172,274 175,000 180,0000.58 39.97 41.20 42.43 43.65 44.88 2.0% 43.93 42.59 40.80 40.16 39.040.6 39.96 41.19 42.42 43.65 44.88 2.1% 45.09 43.72 41.88 41.22 40.08

COGS 0.62 39.96 41.19 42.42 43.65 44.88 CV Growth 2.2% 46.33 44.93 43.03 42.36 41.180.64 39.96 41.18 42.41 43.64 44.87 2.3% 47.67 46.22 44.27 43.58 42.370.66 39.95 41.18 42.41 43.64 44.87 2.4% 49.11 47.62 45.61 44.90 43.65

CapEx43.03 525000 550000 571000 580000 6000005.50% 52.02 51.88 51.76 51.71 51.606.00% 48.40 48.25 48.12 48.07 47.94

Depreciation 6.70% 43.35 43.18 43.03 42.97 42.837.00% 41.18 41.00 40.85 40.79 40.647.50% 37.57 37.37 37.21 37.14 36.99

CV Growth43.03 1.75% 2.00% 2.20% 2.50% 3.00%6.00% 34.09 35.48 36.77 39.09 44.496.50% 36.40 38.34 40.14 43.38 50.90

CV ROIC 7.00% 38.39 40.80 43.03 47.05 56.407.50% 40.10 42.92 45.53 50.23 61.168.00% 41.60 44.78 47.72 53.02 65.33