Appendix II to
FAIRNESS OPINION PRESENTATION TO THE
SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF
STAR GAS CORPORATION
Analyses performed under 15-year weather scenario
Changed Pages Only
CONFIDENTIAL
A,G. EDWARDS & SONS, INC.
INVESTMENT BANKING
October 16, 1998
TABLE OF CONTENTS
Please note: Appendix II follows the same page numbering format as Appendix I
and contains only those pages that changed as a result of performing the
analyses under the 15-year weather scenario. Appendix II should be read in
conjunction with Appendix I.
Section
-------
Overview of Petroleum Heat and Power Co., Inc............... A
Overview of Star Gas Partners, L.P.......................... B
Pro Forma Merger Analysis................................... E
Relative Contribution Analysis.............................. G
Discounted Cash Flow Analysis............................... H
Comparable Transactions Analysis............................ I
Public Company Analysis..................................... J
Pro Forma Model............................................. K
Overview of Petro
EBITDA Projections
($ in thousands)
- ------------------------------------------------------------------------------------------------------------------
Adjusted for
Actual Normalized Projected
------------------------------------------------------------------------
1998 1998 1999 2000 2001 2002
-----------------------------------------------------------------------------------------------------
EBITDA $37,630 $44,749 $46,463 $48,897 $51,040 $52,989
- -------------------------------------------------------------------------------------------------------------------
Major Assumptions for 1999 - 2002
- ---------------------------------
[_] 15 Year Weather
[_] Flat Attrition.
[_] $30 million of acquisitions at 4.75x EBITDA multiple using half-year
convention.
[_] Increase in gross profit margin of $0.01 in 1999 and $0.005 in 2000 to
2002.
Page A - 8
Overview of Star Gas
EBITDA Projections
($ in thousands)
- --------------------------------------------------------------------------------------------------------------------------
Adjusted for
Actual Normalized Projected
---------------------------------------------------------------------------
1998 1998 1999 2000 2001 2002
------------------------------------------------------------------------------------------------------------
EBITDA $18,781 $20,731 $23,032 $24,465 $25,898 $27,331
- --------------------------------------------------------------------------------------------------------------------------
Major Assumptions for 1999 - 2002
- ---------------------------------
[_] 15 Year Weather
[_] No growth in base business.
[_] $10 million of acquisitions at 6.5x EBITDA multiple using half-year
convention.
[_] No increase in gross profit margin.
Page B - 4
PRO FORMA MERGER ANALYSIS
[_] A.G. Edwards analyzed the impact of the Transaction on the Partnership's
distributable cash flow per unit, the related accretion, common unit
coverage and total unit coverage on a pro forma basis.
---------------------------------------------------------
STAR GAS STAR GAS
STAND-ALONE PRO FORMA
------------- -----------
DCF PER UNIT
1998 Adjusted for Actual (a) $1.27 $1.53
1998 Normalized (b) 1.62 2.15
1999 Projected 1.77 2.31
ACCRETION / DILUTION
1998 Adjusted for Actual (a) $0.26
1998 Normalized (b) 0.53
1999 Projected 0.54
COMMON UNIT COVERAGE
1998 Adjusted for Actual (a) 0.96x 0.89x
1998 Normalized (b) 1.22 1.25
1999 Projected 1.30 1.33
TOTAL UNIT COVERAGE
1998 Adjusted for Actual (a) 0.58x 0.66x
1998 Normalized (b) 0.74 0.94
1999 Projected 0.81 1.00
--------------------------------------------------------------
(a) Projected results are adjusted for year to date actual
performance.
(b) Adjusted to represent normal weather.
Page E-1
RELATIVE CONTRIBUTION ANALYSIS (a)
($ in thousands)
[_] A.G. Edwards analyzed the relative pro forma
contribution of both Star Gas and Petro to the
ownership of capital in the pro forma entity based on
Star Gas' and Petro's historical results from
operations and their respective projections.
Star Gas' Average
Gross Profit GROSS PROFIT
Contribution [GRAPH APPEARS HERE]
96-97 26.7%
98-99 29.0%
96-99 27.8%
Star Gas'Average EBITDA (c)
EBITDA Contribution [GRAPH APPEARS HERE]
96-97 35.4%
98-99 32.4%
96-99 33.8%
--------------------------
(a) For purposes of its analysis, A.G. Edwards converted
Petro's historical December 31 st fiscal year-end to
a September 30th fiscal year-end for comparison
purposes. Petro's projections are based on a December
31st calendar year end. Other measures of relative
contribution analysis are non-meaningful.
(b) Assumes normalized weather.
(c) Includes only heating oil EBITDA for Petro.
Page G - 1
RELATIVE CONTRIBUTION ANALYSIS
($ IN THOUSANDS)
(continued)
FOR STAR GAS' IMPLIED FIRM VALUE
CONTRIBUTION OF
APPROXIMATELY 27.8% OF
THE COMBINED ENTITY'S
GROSS PROFIT AND 33.8%
OF THE COMBINED ENTITY'S
EBITDA, IT WILL RECEIVE [PIE CHART APPEARS HERE]
APPROXIMATELY 37.1% OF
THE IMPLIED FIRM VALUE.
Page G-2
DISCOUNTED CASH FLOW ANALYSIS
[_] A.G. Edwards performed discounted cash flow analyses for Petro, Star Gas
and Star Gas Pro Forma using projected tax-adjusted operating cash flows
for 1999 through 2002, terminal values calculated on 2002 EBITDA, and
discount rates based on the related weighted average cost of capital.
Assumptions:
[_] Weighted average cost of capital ("WACC")
- Petro Stand Alone of 13.4% to 13.9% (calculated WACC of 13.6%)
- Star Gas Stand Alone of 6.8% to 7.2% (calculated WACC of 7.0%)
- Star Gas Pro Forma of 7.3% to 7.7% (calculated WACC of 7.5%)
[_] Terminal value EB1TDA multiple
- Petro Stand Alone of 6.0x to 8.0x (calculated normalized 1998 EBITDA
multiple of 6.5x)
- Star Gas Stand Alone and Star Gas Pro Forma of 9.0x to 11.0x (calculated
normalized 1998 EBITDA multiple of 10.6x)
Page H - 1
DISCOUNTED CASH FLOW ANALYSIS
(continued)
PETRO STAND ALONE
- ------------------------------------------------------------------------------
15 Year Terminal Value EBITDA Multiple
--------------------------------------------------------------
6.0x 6.5x 7.0x 7.5x 8.0x
- ------------------------------------------------------------------------------
13.4% $49,406 $65,422 $81,439 $97,455 $113,472
WACC 13.6% 47,103 62,984 78,865 94,746 110,628
13.9% 44,822 60,570 76,317 92,064 107,812
- ------------------------------------------------------------------------------
STAR GAS STAND ALONE
- ------------------------------------------------------------------------------
15 Year Terminal Value EBITDA Multiple
--------------------------------------------------------------
9.0x 9.5x 10.0x 10.5x 11.0x
- ------------------------------------------------------------------------------
6.8% $92,914 $99,255 $105,597 $111,939 $118,281
WACC 7.0% 91,847 98,141 104,436 110,730 117,024
7.2% 90,790 97,037 103,284 109,532 115,779
- ------------------------------------------------------------------------------
STAR GAS PRO FORMA
- ------------------------------------------------------------------------------
15 Year Terminal Value EBITDA Multiple
--------------------------------------------------------------
9.0x 9.5x 10.0x 10.5x 11.0x
- ------------------------------------------------------------------------------
7.3% $128,663 $136,782 $144,902 $153,021 $161,141
WACC 7.5% 127,328 135,389 143,449 151,510 159,570
7.7% 126,006 134,008 142,010 150,012 158,014
- ------------------------------------------------------------------------------
Page H - 2
DISCOUNTED CASH FLOW ANALYSIS
PETRO - STAND ALONE
EXCLUDING DISTRIBUTIONS FROM STAR GAS
($ IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------------------------------
Normalized
Cash Flow Summary (a): 1998 1999 2000 2001 2002 Terminal
- ----------------- ---------- -------- -------- -------- -------- ----------
EBITDA $44,749 $46,463 $ 48,897 $51,040 $52,989
Taxes (500) (500) (500) (500)
Maintenance capital expenditures (3,000) (3,060) (3,121) (3,184)
Working capital increases (b) (500) (500) (500) (500)
-------- -------- -------- --------
Net operating cash flow (free cash flow) 42,463 44,837 46,919 48,805
----------------
Weighted average cost of capital (c) 13.6%
----------------
----------------
Terminal EBITDA multiple (d) 6.5x
----------------
Discount factor 0.8799 0.7742 0.6812 0.5994 0.5994
Terminal value (e) $344,429
-----------------
Present value $339,749 $37,363 $34,714 $31,963 $29,254 $206,455
----------------- -------- -------- -------- -------- ----------
Current net debt and preferred stock (f) ($276,765)
-----------------
-----------------
Net present value of equity $62,984
-----------------
- --------------------------------------------------------------------------------
(a) Based on management projections.
(b) A.G. Edwards' estimate.
(c) Based on comparable companies' WACC.
(d) Petro's current firm value of $304.4 million/$46.9 million normalized 30-
year weather 1998 EBITDA = 6.5x, which represents a multiple of current year
normalized EBITDA.
(e) Terminal value calculated using EBITDA multiple.
(f) Net of $33.2 million of cash. Market value of debt used.
Page H-3
DISCOUNTED CASH FLOW ANALYSIS
PETRO - STAND ALONE USING STAR GAS' PRO FORMA WACC
EXCLUDING DISTRIBUTIONS FROM STAR GAS
($ IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
Normalized
Cash Flow Summary (a): 1998 1999 2000 2001 2002 Terminal
- --------------------- ---------- ---------- ---------- ---------- ---------- ----------
EBITDA $ 44,749 $ 46,463 $ 48,897 $ 51,040 $ 52,989
Taxes (500) (500) (500) (500)
Maintenance capital expenditures (3,000) (3,060) (3,121) (3,184)
Working capital increases (b) (500) (500) (500) (500)
---------- ---------- ---------- ----------
Net operating cash flow (free
cash flow) 42,463 44,837 46,919 48,805
Weighted average cost of capital (c) 7.5%
---------
Terminal EBITDA multiple (d) 6.5x
---------
Discount factor 0.9299 0.8647 0.8041 0.7477 0.7477
Terminal value (e) $ 344,429
Present value $ 409,993 $ 39,486 $ 38,770 $ 37,725 $ 36,490 $ 257,522
---------- ---------- ---------- ---------- ---------- ----------
Current net debt and preferred
stock (f) $(276,765)
----------
Net present value of equity $ 133,228
----------
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Based on management projections.
(b) A.G. Edwards' estimate.
(c) Based on comparable companies' WACC.
(d) Petro's current firm value of $304.4 million/$46.9 million normalized
30-year weather 1998 EBITDA = 6.5x, which represents a multiple of current
year normalized EBITDA.
(e) Terminal value calculated using EBITDA multiple.
(f) Net of $33.2 million of cash. Market value of debt used.
Page H-4
Discounted Cash Flow Analysis
Star Gas - Stand Alone
($ in thousands)
- ------------------------------------------------------------------------------------------------------------------------------
Normalized
Income Statement Summary (a): 1998 1999 2000 2001 2002 Terminal
- ---------------------------- ---------- ---------- ---------- --------- ---------- -----------
EBITDA 20,731 23,032 24,465 25,898 27,331
% increase 11.1% 6.2% 5.9% 5.5%
Net income 1,395 2,075 2,213 2,305 2,560
Cash Flow Summary:
- -----------------
After-tax EBI 10,649 11,097 11,656 12,379
Depreciation and amortization 12,358 13,343 14,217 14,927
Maintenance capital expenditures (2,657) (2,705) (2,753) (2,803)
Working capital increases (b) (500) (500) (500) (500)
--------- --------- --------- ---------
Net operating cash flow (free cash flow) 19,850 21,235 22,620 24,003
Weighted average cost of capital (c) [ 7.0%]
Terminal EBITDA multiple (d) [ 10.6x]
Discount factor 0.9342 0.8728 0.8154 0.7618 0.7618
Terminal value (e) $289,709
Present value [$294,513] $18,545 $18,534 $18,445 $18,286 $220,703
--------- --------- --------- --------- ---------
Current net debt (f) ($109,285)
Net present value of equity $185,228
==========
Common units/Total units (g) 60.5%
Equity value to common units (h) [$111,989]
- ------------------------------------------
(a) Based on management projections.
(b) A.G. Edwards' estimate.
(c) Based on comparable companies' WACC.
(d) Star's current firm value of $234.1 million/$22.1 million normalized 30-year
weather 1998 EBITDA=10.6x, which represents a multiple of current year
normalized EBITDA.
(e) Terminal value calculated using EBTIDA multiple.
(f) Represents total projected 9/30/98 debt less cash.
(g) Total units include common, subordinated and GP units.
(h) Current nearest value of common units is 3,858 units * $19.563 unit
price=$75,472.
Page H-5
DISCOUNTED CASH FLOW ANALYSIS
STAR GAS - PRO FORMA
($ IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------------
NORMALIZED
INCOME STATEMENTS SUMMARY (a): 1998 1999 2000 2001 2002 TERMINAL
- ------------------------ ---------- -------- -------- -------- -------- ------------
EBITDA 65,980 69,995 73,862 77,438 80,820
% increase 6.1% 5.5% 4.8% 4.4%
Net income (3,711) (3,694) (7,056) (10,430) (13,719)
Cash Flow Summary:
- ------------------
After-tax EBI 25,310 23,373 21,255 19,101
Depreciation and amortization 43,661 49,463 55,159 60,694
Maintenance capital expenditures (5,657) (5,765) (5,874) (5,987)
Working capital increases (b) (1,000) (1,000) (1,000) (1,000)
-------- -------- -------- --------
Net operating cash flow (free cash flow) 62,314 66,071 69,540 72,808
Weighted average cost of capital (c) 7.5%
----------
Terminal EBITDA multiple (d) 10.6x
----------
Discount factor 0.9299 0.8647 0.8041 0.7477 0.7477
Terminal value (e) $856,692
Present value $865,956 $57,945 $57,131 $55,914 $54,437 $640,530
---------- -------- -------- -------- -------- ------------
Less net debt (f) ($291,997)
----------
Net present value of equity $573,959
==========
Original common units/Total units (g) 26.7%
Equity value to common units (h) $153,122
----------
- --------------------------------------------------------------------------------------------------------------------------
(a) Based on management projections. See Appendix K for model.
(b) A.G. Edwards' estimate
(c) Based on comparable companies' WACC.
(d) Star's current firm value of $234.1 million/$22.1 million normalized 30-year
weather 1998 EBITDA = 10.6x, which represents a multiple of current year
normalized EBITDA.
(e) Terminal value calculated using EBITDA multiple.
(f) Represents total proforma projected 9/30/98 debt less cash and cash
collateral.
(g) Total units include common, newly issued common, senior subordinated,
subordinated and GP units.
(h) Current market value of common units is 3,858 units* $19.563 unit price =
$75,472.
Page H - 6
COMPARABLE TRANSACTIONS ANALYSIS
FIRM VALUATION
[_] A.G. Edwards noted that public disclosure regarding transactions in
the retail home heating oil distribution industry was extremely
limited.
[_] A.G. Edwards analyzed the financial terms related to divestitures by
Petro of certain of its retail home heating oil branches and compared
them to the implied multiples of the aggregate purchase price of
Petro's heating oil assets.
[_] Petro has sold three branches for an average EBITDA multiple of 9.0x.
[_] A.G. Edwards calculated the purchase price of Petro's heating oil
assets and calculated multiples based on Petro's EBITDAs.
---------------------------------------------------------------------------------------------------
Purchase Price of Heating Oil Assets
-------------------------------------------
Equity purchase price of heating oil assets
including CUs $ 25,549
Cost of Debt to be Redeemed ($206,250 + $2,844 premium) 209,094
Cost of Debt to be Assumed 69,646
Cost of Preferred stock at Redemption Value 31,767
Consent Fees 2,110
Transaction Fees 19,343
---------
Aggregate purchase price of heating oil assets $ 357,509
=========
Multiples
----------------------------------------- -----------
Multiples Notes
----------- ---------------------------
Normalized 1998 EBITDA budget (a) 44,749 8.0 X As a multiple of aggregate
1999 Projected EBITDA (a) 46,463 7.7 x transaction value.
-----------
As a multiple of aggregate
transaction value.
___________________________________________________________________
(a) Calculated as gross profit minus SG&A expense and direct
delivery expense.
Page I - 1
PUBLIC COMPANY ANALYSIS
[_] A.G. Edwards compared certain financial and market information of Star
Gas on a historical and pro forma basis to that of certain public
propane master limited partnerships which A.G. Edwards deemed relevant
for the purposes of this analysis. A.G. Edwards reviewed the trading
multiples from a total of six master limited partnerships.
[_] The selected propane master limited partnerships are as follows:
- AmeriGas Partners, L.P. - Heritage Propane Partners,
L.P.
- Cornerstone Propane Partners, L.P. - National Propane Partners,
L.P.
- Ferrellgas Partners, L.P. - Suburban Propane Partners,
L.P.
[_] No company used in the analysis is identical to Star Gas.
===========================================================================================================
PUBLIC COMPARABLES COMPANIES (a)
===========================================================================================================
Public Public
Pro forma Company Company
Star Star Medians Ranges
-----------------------------------------------------------------------------------------------------------
Yield 11.2% 11.8% 10.1% 9.1% to 22.3%
Firm value/LTM EBITDA 12.5x (b) 10.0x (b) 11.6x 9.0x to 12.7x
Firm value/1999E EBITDA 10.2x 8.1x 9.2x 8.4x to 11.7x
Equity Market Cap/LTM DCF 15.4x (c) 12.5x (c) 13.4x 8.1x to 15.3x
Equity Market Cap/1999E DCF 10.6x 8.1x 9.8x 4.9X to 12.2x
LTM common unit coverage 1.0x (d) 0.9x (d) 1.5x 0.6x to 1.6x
1999E common unit coverage 1.3x 1.3x 2.1x 1.1x to 2.3x
LTM total unit coverage 0.6x (d) 0.7x (d) 0.7x 0.4x to 1.2x
1999E total unit coverage 0.8x 1.0x 1.0x 0.7x to 1.2x
-----------------------------------------------------------------------------------------------------------
(a) Public comparable companies include APU, CNO, FGP, HPG, NPL and
SPH.
(b) Firm value/adjusted for actual 1998 budget EBITDA.
(c) Equity market cap/adjusted for actual 1998 budget EBITDA.
(d) Adjusted for actual 1998 budget.
Page J-1
PUBLIC COMPANY ANALYSIS
($ IN MILLIONS, EXCEPT PER UNIT DATA)
====================================================================================================================================
Closing Implied Implied Common
Price on Market Value Firm Distribution Units/
Company Ticker (10/14/98) of Equity Value per unit Yield Total Units
- ------------------------------------------------------------------------------------------------------------------------------------
Star Gas Partners, L.P. (a) SGU $19.563 $ 124.9 $ 234.1 $2.20 11.2% 60.5%
AmeriGas Partners, L.P. APU 24.125 1,031.2 1,739.4 2.20 9.1% 52.8%
Cornerstone Propane Partners, L.P. (c) CNO 18.000 365.2 596.7 2.16 12.0% 66.8%
Ferrellgas Partners, L.P. (d) FGP 20.000 638.6 1,131.2 2.00 10.0% 47.0%
Heritage Propane Partners, L.P. HPG 20.813 180.0 354.6 2.00 9.6% 56.3%
National Propane Partners, L.P. NPL 9.438 108.2 250.9 2.10 22.3% 59.6%
Suburban Propane Partners, L.P. (e) SPH 19.625 575.3 922.5 2.00 10.2% 75.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Mean 12.2% 59.6%
Median 10.1% 58.0%
====================================================================================================================================
Pro Forma $19.563 $ 276.5(f) $ 568.5(g) $2.30 11.8% 74.9%
====================================================================================================================================
LTM Common LTM Total FY99E FY99E Common FY99E Total
Unit Coverage Unit Coverage DCF/Unit Unit Coverage Unit Coverage
- ------------------------------------------------------------------------------------------------------------------------------------
Star Gas Partners, L.P. (a) 1.0x (b) 0.6x (b) $1.77 1.3x 0.8x
AmeriGas Partners, L.P. l.4x 0.8x 2.39 2.1x 1.1x
Cornerstone Propane Partners, L.P. (c) 0.8x 0.6x 1.51 1.1x 0.7x
Ferrellgas Partners, L.P. (d) 1.5x 0.7x 2.15 2.3x 1.1x
Heritage Propane Partners, L.P. 1.5x 0.8x 2.38 2.2x 1.2x
National Propane Partners, L.P. 0.6x 0.4x 1.87 NA 0.9x
Suburban Propane Partners, L.P. (e) 1.6x 1.2x 1.98 1.3x 1.0x
- ------------------------------------------------------------------------------------------------------------------------------------
Mean 1.3x 0.7x 1.8x 1.0x
Median 1.5x 0.7x 2.lx 1.0x
===================================================================================================================================
Pro Forma 0.9X(b) 0.7x(b) 2.31 1.3x 1.0x
______________________________________
1999 estimates per A. G. Edwards' research, except for Star and Pro Forma. 1999
estimates for National Propane from Merril Lynch research report dated July
29,1998.
Implied Firm Value equals common, subordinated and GP units, multiplied by the
market price of common units plus debt, less cash.
(a) Pro forma for the Pearl Gas acquisition and the common unit offering.
(b) For Star and Pro Forma only, LTM DCF figures are adjusted for actual 1998
budget DCF estimates.
(c) Financial information pro forma for common unit offering. Maintenance
capital expenditures assumed to be 8% of EBITDA due to lack of disclosure.
(d) Maintenance capital expenditures assumed to be 8% of EBITDA due to lack of
disclosure.
(e) Financial figures exclude $5.1 million gain from sale of minority interest.
(f) Calculated as: (10,841 common units x $19.563) + (2,767 senior subordinated
units x $18.52) + (857 junior subordinated and GP units x $15.41).
(g) $276.5 in equity plus $313.9 pro forma debt, less $21.9 in cash and cash
collateral.
Page J - 2
PUBLIC COMPANY ANALYSIS
($ IN MILLIONS, EXCEPT PER UNIT DATA)
(continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Long Term LTM Firm Value/ Firm Value/ Equity Equity
Debt/ EBITDA/ LTM 1999E Market Cap/ Market Cap/
Firm Value Int. Exp. EBITDA EBITDA LTM DCF 1999E DCF
-------------------------------------------------------------------------------------------
Star Gas Partners, L.P. 44.8% 2.4x (a) 12.5x (a) 10.2x 15.4x (a) 10.6x
AmeriGas Partners, L.P. 39.9% 2.2x 11.8X 9.9X 14.8x 10.4x
Cornerstone Propane Partners, L.P. 39.7% 2.4x 12.7x 11.1X 15.3x 12.2x
Ferrellgas Partners, L.P. 44.1% 2.1x 11.4x 9.0X 14.2x 9.5x
Heritage Propane Partners, L.P. 49.8% 2.6x 9.7x 9.0x 12.6x 8.8x
National Propane Partners, L.P. 55.2% 2.6x 12.7x 9.3x 12.0x 4.9x
Suburban Propane Partners, L.P. 46.4% 3.3x 9.0x 8.4x 8.1x 10.1x
- ------------------------------------------------------------------------------------------------------------------------------------
Mean 45.8% 2.6x 11.2x 9.5x 12.9x 9.3x
Median 45.2% 2.5x 11.6x 9.2x 13.4x 9.8X
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma 55.2% 2.0x (a) 10.0x (a) 8.1x 12.5x (a) 8.1x
______________________________________________
EBITDA is defined as net income (loss) before extraordinary items plus interest,
income taxes, depreciation and amortization, impairment expense, and other
non-recurring and non-operating items.
(a) For Star and Pro forma only, LTM figures use adjusted for actual 1998
budget estimates.
Page J-3
====================================================================================================================================
TRANSACTION SUMMARY AND ASSUMPTIONS
(in thousands except per share and per unit data)
- ------------------------------------------------------------------------------------------------------------------------------------
SUMMARY CASH FLOW AND COVERAGE ANALYSIS
- ------------------------------------------------------------------------------------------------------------------------------------
($ on per Unit basis)
ESTIMATED NORMALIZED PROJECTED
-----------------------------------------------------
1998 1998 1999 2000 2001 2002
--------- ---------- --------- ---------- ---------- ---------
STAR STAND ALONE
EBITDA $ 18,781 $ 20,731 $ 23,032 $ 24,465 $ 25,898 $27,331
Interest Expense (7,922) (7,662) (8,574) (8,884) (9,351) (9,819)
Maintenance CapEx (2,710) (2,710) (2,657) (2,705) (2,753) (2,803)
Other (25) (25) (25) (25) (25) (25)
--------- ---------- --------- ---------- ---------- ---------
Distributable Cash Flow $ 8,124 $ 10,334 $ 11,776 $ 12,851 $ 13,769 $ 14,684
========= ========== ========= ========== ========== =========
DCF per Common Unit $ 2.11 $ 2.68 $ 2.87 $ 2.85 $ 2.87 $ 2.90
DCF / Common Unit MQD 0.96 x 1.22 x 1.30 x 1.30 x 1.31 x 1.32 x
DCF per Total Unit $ 1.27 $ 1.62 $ 1.77 $ 1.83 $ 1.88 $ 1.93
DCF / Total MQD 0.58 x 0.74 x 0.81 x 0.83 x 0.85 x 0.88 x
Indicated Distribution per Common Unit $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20
STAR PRO FORMA
EBITDA
------
Star $ 18,781 $ 20,731 $ 23,032 $ 24,465 $ 25,898 $ 27,331
Petro 37,630 44,749 46,463 48,897 51,040 52,989
Synergies 500 500 500 500 500 500
--------- ---------- --------- ---------- ---------- ---------
Total 56,911 65,980 69,995 73,862 77,438 80,820
--------- ---------- --------- ---------- ---------- ---------
Interest Expense (28,307) (28,307) (29,004) (30,429) (31,685) (32,820)
Maintenance CapEx (5,486) (5,486) (5,657) (5,765) (5,874) (5,987)
Other (1,025) (1,025) (1,025) (1,025) (1,025) (1,025)
--------- ---------- --------- ---------- ---------- ---------
Distributable Cash Flow 22,093 31,162 34,309 36,643 38,854 40,988
========= ========== ========= ========== ========== =========
DCF per Common Unit $ 2.04 $ 2.87 $ 3.06 $ 3.02 $ 2.95 $ 2.87
DCF per Sr. Sub & Common Unit $ 1.62 $ 2.29 $ 2.45 $ 2.46 $ 2.44 $ 2.41
DCF per Total Unit $ 1.53 $ 2.15 $ 2.31 $ 2.33 $ 2.32 $ 2.29
Indicated Distribution per Common Unit $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ACCRETION/DILUTION
- ------------------------------------------------------------------------------------------------------------------------------------
DCF per Unit - Star Stand Alone $ 1.27 $ 1.62 $ 1.77 $ 1.83 $ 1.88 $ 1.93
DCF per Unit - Pro Forma $ 1.53 $ 2.15 $ 2.31 $ 2.33 $ 2.32 $ 2.29
- ------------------------------------------------------------------------------------------------------------------------------------
ACCRETIVE ($/UNIT) $ 0.25 $ 0.54 $ 0.54 $ 0.50 $ 0.44 $ 0.36
Accretive (%) 20.0% 33.0% 30.2% 27.5% 23.4% 18.9%
- ------------------------------------------------------------------------------------------------------------------------------------
PRO FORMA HEATING OIL DCF PER UNIT $ 2.74 $ 2.73 $ 2.66 $ 2.56
DPUs ISSUED AS Sr SUB UNITS AT BEG OF YEAR - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PRO FORMA CREDIT ANALYSIS
- ------------------------------------------------------------------------------------------------------------------------------------
EBITDA/Interest 2.01 x 2.33 x 2.41 x 2.43 x 2.44 x 2.46 x
LT Debt/EBITDA 5.43 4.69 4.74 4.73 4.72 4.71
LT Debt/EBITDA (Pro Forma for Full-Year
Acquisitions) 5.27 4.55 4.50 4.50 4.50 4.50
# of Units Issued to Meet Debt Covenant - - 772 1,007 1,075 1,126
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PRO FORMA COVERAGE RATIOS
- ------------------------------------------------------------------------------------------------------------------------------------
MQD Coverage
------------
Common Unit 0.89 x 1.25 x 1.33 x 1.31 x 1.28 x 1.25 x
Senior Subordinated Unit 0.71 1.00 1.07 1.07 1.06 1.05
Total Unit 0.66 0.94 1.00 1.01 1.01 1.00
Indicated Distribution Coverage
-------------------------------
Common Unit 0.89 x 1.25 x 1.33 x 1.31 x 1.28 x 1.25 x
Senior Subordinated Unit 0.71 1.00 1.07 1.07 1.06 1.05
Total Unit 0.66 0.94 1.00 1.01 1.01 1.00
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT MODEL ASSUMPTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Scenario Version: 15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att.
Petro Acqs/yr $30,000
Star Acqs/yr $10,000 G.P. Interest Subordinate
Price per Petro Share $ 2.42
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
EQUITY RESTRUCTURING
- ------------------------------------------------------------------------------------------------------------------------------------
PETRO
------------------------------------------------
PUBLIC INSIDERS
---------------- ----------------
Securities Offered Sr Sub Sub & GP
Incentive Rights 76% 24%
Value Offered $ 2.42 $ 2.45
Current Market $ 1.31 $ 1.31
Premium to Market 84.1% 86.7%
Implied Value of Security Offered $ 18.52 $ 15.41
Security Offered per Share 0.13064 0.15920
Total Shares 14,609 11,953
Insiders to Receive Sr. Sub 6,572 (6,572)
Shares to Be Converted 21,181 5,382
Units Offered 2,767 857
DPUs Offered 909
Implied Value of GP/Unit $ 15.41
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
SOURCES AND USES OF FUNDS
- ------------------------------------------------------------------------------------------------------------------------------------
SOURCES: USES:
Excess Cash on Hand $ 841 Repay Debt Principal $206,250
New Star Debt 120,O00 Redeem Preferred 31,767
New MLP Equity 139,363 Premium on Redemption/
New MLP E Equity - Exchange/Defeasance 2,844
Equity for Consent Fees 2,110 Consent Fees 2,110
Cash Balance 0 Transaction Fees 19,343
--------- ----------
$262,314 $262,314
========= ==========
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCING SUMMARY
- ------------------------------------------------------------------------------------------------------------------------------------
AMOUNT RATE UNIT PRICE
----------- ----------- ----------------
New Common Raised $ 139,363 $ 20.26
New Debt Raised 120,000 9.00%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
UNITS OUTSTANDING
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT PRO FORMA
----------------------- ------------------------------
UNITS % UNITS %
----------- --------- ----------- -----------
Existing Common 3,858 60.5% 3,858 26.7%
New Common 0 0.0% 6,983 48.3%
New Common for Acquisitions 0 0.0% 0 0.0%
Common to Petro Shareholders 0 0.0% 0 0.0%
Sr Sub (Petro S/H's) 0 0.0% 2,767 19.1%
Existing Sub 2,396 37.5% 567 3.9%
Implied GP 128 2.0% 289 2.0%
----------- --------- ----------- -----------
Total Units 6,382 100.0% 14,465 100.0%
=========== ========= =========== ===========
- ------------------------------------------------------------------------------------------------------------------------------------
Main Model Oct-7 Rev I with new Star & AGE 30 yr Petro
Projections and tax effect. For discussion purposes only.
1 of 19
================================================================================
TRANSACTION SUMMARY AND ASSUMPTIONS
-------------------------------------------------------------------------
(in thousands except per share and per unit data) 15-yr;$30mm @ 4.75x mid-year; $.01 '99,$.005 '00-'01, flat att.
$10,000 Star Acqs/yr
$30,000 Petro Acqs/yr G.P. Interest Subordinate
$2.42 / Petro Share
-------------------------------------------------------------------------
OPERATING ASSUMPTIONS
- ----------------------------------------------------------------------------
PETRO STAR STAR NORMAL
--------- -------- --------------
Normalized Maintenance CapEx $2,776 $ 2,710 $2,710
Maintenance CapEx Life 15 yrs 15 yrs
Growth CapEx Life 6.5 yrs 15 yrs
Marginal Tax Rate 33.0% 33.0%
Deferred Tax Percent 0.0%
Required Cash at Beginning for Initial Distribution 7,956
Minimum Star Stand Alone Cash Balance $ 500
Minimum Star Pro Forma Cash Balance $10,142
Consolidation Savings $ 500
Annual Bank Fees $ 692 $ 222
Last 20 Days Average Stock Price @ 10/14 $ 1.31 $ 20.26
Annual Transaction/Deal Expenses $ 450
Debt/EBITDA Bank Covenant Ratio 4.5x
Issue Equity to Meet Bank Debt Covenants (Y/N)? yes
DEBT RESTRUCTURING
- ---------------------------------------------------------------------------------------------------------------
PROJECTED
12/31/97
PRIVATES: % TENDERED PRINCIPAL STRATEGY PRICE
------------- --------------- ----------------- ----------------
11.96% Sr Notes 100.0% 60,000 Exchange 105.2%
14.10% Sr Notes 100.0% 3,100 Exchange 105.2%
14.10% Sub Notes 100.0% 3,100 Exchange 105.2%
14.33% Pfd Stock 100.0% 4,167 Neg. Tender 100.0%
PUBLICS:
10.13% Sub Notes & Sr Notes 100.0% 50,000 Neg. Tender 100.0%
9.38% Sub Notes & Sr Notes 100.0% 75,000 Tender 100.0%
12.25% Sub Notes & Sr Notes 100.0% 81,250 Tender 103.5%
12.88% Pfd Stock 100.0% 30,000 Tender 92.0%
NEW SECURITY ASSUMPTIONS
- ------------------------------------------------------
NEW MLP EQUITY
- --------------
Gross Proceeds $139,363
Common Units for Consent Fee 2,110
Common Units to Enron -
Total New Equity Value --------
Common Units to Public $141,473
6,983 units
NEW STAR DEBT
-------------
Gross Proceeds 120,000
Gross Spread % 5.0% Gross Spread % 3.0%
Gross Spread $ $6,968 Gross Spread $ $ 3,600
Offering Price/Share (current market price) $20.26 Coupon 9.00%
ACQUISITION ASSUMPTIONS
- ------------------------------------------------------------------------------------
PETRO MULTIPLE 1998 1999 2000 2001 2002
- ----- ------------ ------------- ------------ ------------ ------------- --------------
Amount 4.75x $ 0 $ 30,000 $ 30,000 $ 30,000 $ 30,000
Timing End Mid Mid Mid Mid
% EBITDA 0.0% 50.0% 50.0% 50.0% 50.0%
Amount 4.75x $ 0
Timing Beg
% EBITDA in Initial Year 100.0%
Units Issued at: Common $ 22.00
Sr. Sub. $ 18.52
STAR STAND-ALONE
- ----------------
Weather 15 Year
Amount 6.50x $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000
Timing End Mid Mid Mid Mid
% EBITDA in Initial Year 0.0% 50.0% 50.0% 50.0% 50.0%
Amount Financed with Equity $ 600 $ 11,169 $ 6,641 $ 6,375 $ 6,082
New Units @: 27 508 302 290 276
Units Issued at Price of: $ 22.00 $ 22.00 $ 22.00 $ 22.00 $ 22.00
Amount 6.50x $ 0
Timing Beg
% EBITDA in Initial Year 100.0%
EXCHANGE ASSUMPTIONS
- ------------------------------------------------------------------------------------
EXISTING GETS NEW UNITS OF:
---------------------------------------------------------------
SHAREHOLDERS OF: SHARES COMMON SR SUB JNR SUB G.P. DPUs (1)
- ----------------------------------------------------------- ------------ ------------ ---------- ---------- ------------
Public Class A Shareholders 14,609 0 1,909 0 0 479
Insider Class B Shares 11 0 0 0 0
Insider Class C Shareholders 0
Class A & C Shares to Receive Jr Sub & GP 5,382 0 0 567 289 215
Class A Shares to Receive Sr Sub 6,572 0 859 0 0 215
-------- ----------- ----------- --------- --------- ----------
26,574 0 2,767 567 289 909
E Sr. Sub - -
----------- ----------
Total 2,767 909
=========== ==========
(1) Includes 2.0% G.P. Interest.
TRANSACTION COSTS SUMMARY
--------------------------------------------------------------
New MLP Equity $ 6,968
New Star Debt 3,600
Fairness Opinion 1,000
Financial Advisory 1,500
Exchange Fees on Public Petro Debt/Preferred 1,375
Legal Fees 2,500
Printing 1,000
Account Fees 250
Other:
-----
Environmental 350
Rating Agencies 100
Roadshow 200
Asset Appraisal 250
Solicitation expenses 100
Other Bank Fees 150
--------
$19,343
========
HEATING OIL DPU TRIGGER
----------------------
DCF/Unit % Convert
$2.90 33.3%
CONSENT FEE CALCULATION
- ---------------------------------------------
% of Petro Stock 3.0%
New Petro Shares 797
Exchange Ratio 7.65x
--------
New Common Units 104
Common Unit Price $20.26
--------
Implied Value $2,110
========
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections
and tax effect. For discussion purposes only.
2 of 19
- ------------------------------------------------------------------------------------------------------------------------------------
SUMMARY DISTRIBUTIONS
-------------------------------------------------------------------------
(in thousands except per share and per unit data) 15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005'00-'01, flat att.
$10,000 Star Acqs/yr
$30,000 Petro Acqs/yr G.P. Interest Subordinate
$2.42 / Petro Share
-------------------------------------------------------------------------
PROJECTED
-----------------------------------------
UNITHOLDER CLASS (1) 1998 1999 2000 2001 2002
-------- -------- -------- -------- --------
COMMON UNITHOLDERS
MQD $25,823 $27,869 $30,264 $32,796
Incentive Distributions - - - -
-------- -------- -------- --------
Total $25,823 $27,869 $30,264 $32,796
CAPITAL
Existing Sr. Sub Units - - - -
Number of DPUs Issued as Sr Sub Units - - - -
New Sr. Sub Units - - - -
-------- -------- -------- --------
Total Sr. Sub Units - - - -
Existing Common - - - -
New Common - - - -
-------- -------- -------- --------
Total Common - - - -
Common MQD - - - -
Common Incentive Distributions - - - -
Sr. Sub MQD - - - -
Sr. Sub. Incentive Distributions - - - -
-------- -------- -------- --------
Total Distributions - - - -
SENIOR SUBORDINATED UNITHOLDERS (1)
Number of DPUs Issued as Sr Sub Units - - - -
Base MQD $ 6,364 $ 6,364 $ 6,364 $ 6,364
Incremental MQD from DPUs Issued as Sr. Sub Units - - - -
Incentive Distributions - - - -
Incremental Incentive Distributions from DPUs Issued as Sr. Sub Units - - - -
-------- -------- -------- --------
Total $ 6,364 $ 6,364 $ 6,364 $ 6,364
SUBORDINATED UNITHOLDERS (1)
Numbers of DPUs Issued as Sr Sub Units - - - -
Base MQD $ 1,305 $ 1,305 $ 1,305 $ 1,211
Incremental MQD from DPUs Issued as Sr. Sub Units - - - -
Incentive Distributions - - - -
Incremental Incentive Distributions from DPUs Issued as Sr. Sub Units - - - -
-------- -------- -------- --------
Total $ 1,305 $ 1,305 $ 1,305 $ 1,211
GENERAL PARTNER
Numbers of DPUs Issued as Sr Sub Units - - - -
Base MQD $ 665 $ 665 $ 665 $ 617
Incremental MQD from DPUs Issued as Sr. Sub Units - - - -
Incentive Distributions - - - -
Incremental Incentive Distributions from DPUs Issued as Sr. Sub Units - - - -
-------- -------- -------- --------
Total $ 665 $ 665 $ 665 $ 617
UNITHOLDER CLASS TOTAL
Common Unitholders $25,823 $27,869 $30,264 $32,796
Senior Subordinated Unitholders 6,364 6,364 6,364 6,364
Subordinated Unitholders 1,305 1,305 1,305 1,211
General Partner 665 665 665 617
-------- -------- -------- --------
Total $34,158 $36,204 $38,599 $40,988
DISTRIBUTIONS TO DPUS CONVERTED TO SENIOR SUBORDINATED UNITS
MQD $ 0 $ 0 $ 0 $ 0
Incentive Distributions - - - -
-------- -------- -------- --------
Total - - - -
check - - - -
________________________
(1) Reflects distributions for respective Unitholder class. All DPUs are
issued as Senior Subordinated Units but are distributed pro rata to all
Petro shareholders. Consequently, the Subordinated Unitholder class
includes DPUs which have been issued as Senior Subordinated Units.
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro
Projections and tax effect. For discussion purposes only.
3 of 19
=======================================================================================================================
TRANSACTION SUMMARY AND ASSUMPTIONS
(in thousands per share and per unit data)
15-yr; $30mm @ 4.75x mid-year; $.01'99, $.005 00-'01, flat att.
RECAPITALIZATION ASSUMPTIONS
- ------------------------------------------------------------------------------------------------------------------------
(D)EFEASE
(T)ENDER
(R)EDEEM PRINCIPAL
LOCKUP (E)XCHANGE AS OF MATURITY PERIOD COUPON/ SINKING FUND PAYMENT
----------------- ----------------------
PETRO INSTRUMENTS: PREMIUM (N)OTHING 9/30/98 M/D YR DIVIDEND PAYMENT YEAR START
- -------------------------------- -------------------- --------- --- -- -------- ------- ----------
11.96% Sr Notes e $ 60,000 v 1-Oct 0 11.960% $ 0 0
14.10% Sr Notes e 3,100 v 15-Jan 2001 14.100% - 1997
14.10% Sub Notes e 3,100 v 15-Jan 2001 14.100% - 1997
10.13% Sub Notes & Sr Notes 0.0% t 50,000 v 1-Apr 2003 10.130% -
9.38% Sub Notes & Sr Notes 0.0% t 75,000 v 1-Feb 2006 9.375% -
12.25% Sub Notes & Sr Notes 0.0% t 81,250 v 1-Feb 2005 12.250% -
8.00% Acq. & Other Notes Pay n 14,508 v 0 8.000% - 0
8.25% Existing Credit Facility n 0 v 1998 8.250% -
0.00% Other Notes n 0 v NA NA 0.000% 0 NA
--------
$286,958
PFRD STOCK:
- ----------
14.33% Pfd Stock t 4,167 v 1-Aug 1999 14.330% 4,167 1997
12.88% Pfd Stock 0.0% t 30,000 v 15-Feb 2009 12.875% 0
0.00% n 0 0.000%
--------
$ 34,167
--------
Total Petro $321,125
--------
STAR INSTRUMENTS:
- --------------------------------
8.04% 1st Mortgage Notes 0.07 n 85,000 v NA NA 8.040% - 0
7.25% WC Revolver 0.00 n 4,785 NA NA 7.250% - NA
7.25% Acquisition Facility 0.01 n 9,000 v NA NA 7.250% - NA
9.00% New Debt n 120,000 v NA NA 9.000% 0 NA
7.17% Pearl Notes 0.01 n 11,000 NA NA 7.170% 0 NA
--------
8.21% $218,785
--------
Total Combined $539,910
========
% RED./ RED/EXCHG DEFEASANCE RED/EXCHG/DEFEASE EXCHNAGED
PETRO INSTRUMENTS: EXCHANGED PRICE PRICE ----------------- ---------
- ----------------- --------- --------- ---------- VALUE PREMIUM INT RATE SECURITY TYPE
------ ------- -------- -------------
11.96% Sr Notes 100.0% 105.2% $63,126 $ 0 9.0% Sr Notes
14.10% Sr Notes 100.0% 105.2% 3,260 - 11.5% Sr Notes
14.10% Sub Notes 100.0% 105.2% 3,260 - 11.5% Sub Notes
10.13% Sub Notes & Sr Notes 100.0% 100.0% 106.2% 50,000 - Sub Notes & Sr Notes
9.38% Sub Notes & Sr Notes 100.0% 100.0% 108.2% 75,000 - Sub Notes & Sr Notes
12.25% Sub Notes & Sr Notes 100.0% 103.5% 116.2% 84,094 2,844 Sub Notes & Sr Notes
8.00% Acq. & Other Notes Pay 0.0% 100.0% - - Acq. & Other Notes Pay
8.25% Existing Credit Facility 0.0% 100.0% - - Existing Credit Facility
0.00% Other Notes 0.0% 0.0% - - 11.0% Other Notes
--------
$ 2,844
PFRD STOCK:
- ----------
14.33% Pfd Stock 100.0% 100.0% 4,167 - Pfd Stock
12.88% Pfd Stock 100.0% 92.0% 27,600 - Pfd Stock
0.00% - -
--------
$ 0
--------
Total Petro $ 2,844
--------
STAR INSTRUMENTS:
- --------------------------------
8.04% 1st Mortgage Notes 0.0% 0.0% - - 1st Mortgage Notes
7.25% WC Revolver 0.0% 0.0% - - WC Revolver
7.25% Acquisition Facility 0.0% 0.0% - - Acquisition Facility
9.00% New Debt 0.0% 0.0% - - New Debt
7.17% Pearl Notes 0.0% 0.0% - - Pearl Notes
--------
$ 0
--------
Total Combined $ 2,844
--------
2,843.75
STAR STAND ALONE DISTRIBUTION ASSUMPTIONS
- -----------------------------------------------------------------------------
Distribution
------------
Minimum Quarterly Distributions $2.20
First Target Distribution $2.42
Second Target Distribution $2.84
Third Target Distribution $3.70
Thereafter NM
Target Distribution Level $2.20
Annual Distribution Increase $0.00
------
Standard Distribution Structure ("S") or Target ("T") t
------
- -----------------------------------------------------------------------------------
STAR PRO FORMA DISTRIBUTION ASSUMPTIONS
- --------------------------------------------------------------------------------
Distribution
------------
Minimum Quarterly Distribution $2.30
First Target Distribution $2.42
Second Target Distribution $2.84
Third Target Distribution $3.70
Thereafter NM
1998 1999 2000 2001 2002 Thereafter
---- ---- ---- ---- ----
Annual Indicated Distribution Increase $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Target Indicated Distribution Level $2.30 $2.30 $2.30 $2.30 $2.30
-------------
Standard Distribution Structure ("S") or Target ("T") t
--------------
- --------------------------------------------------------------------------------
Main Model Oct.8 Rev 2 with new Star & AGE 15 yr Petro Projections and
tax effect. For discussion purposes only.
4 of 19
================================================================================================================================
PRO FORMA OPENING BALANCE SHEET
(in thousands except per share and per unit data) 15-yr; $30mm @ 4.75x mid-year; $0.1 '99, $.005 '00-'01, flat att.
OPENING BALANCE SHEET STAR GAS PETRO PRO FORMA
------------ ----------
------------ ---------- MERGER STAR GAS
9/30/98 9/30/98 ADJUSTMENTS 9/30/98
------------ ---------- ----------- ----------
ASSETS:
-----------
Cash $500 $9,642 $0 $10,142
-----------
Other Current Assets 15,376 71,498 - 86,874
------------ ---------- ----------- ----------
Total Current Assets 15,876 81,140 - 97,016
PP&E and Intangibles, Net 161,292 106,695 - 267,987
Investments in Unconsolidated Affiliates - 1,582 (1,582) -
Other Assets - 12,802 - 12,802
------------ ---------- ----------- ----------
Total Assets 177,168 202,219 (1,582) 377,805
============ ========== ==========
LIABILITIES:
Current Liabilities 10,101 80,870 - 90,971
8.25% Existing Credit Facility 4,785 - - 4,785
Long Term Debt 105,000 286,958 (82,804) 309,154
Total Preferred Stock - 34,167 (34,167) -
Other Liabilities 76 10,710 - 10,786
------------ ---------- ----------- ----------
Total Liabilities 119,962 412,705 (116,971) 415,696
Common Shareholder's/Partner's Equity 57,206 (210,486) 115,389 (37,891)
------------ ---------- ----------- ----------
Total Liabilities and Equity $177,168 $202,219 ($1,582) $377,805
============ ========== =========== ==========
check 0 - - -
PRO FORMA CAPITAL STRUCTURE STAR GAS PETRO
------------ ----------
------------ ---------- % NOT MERGER STAR GAS
9/30/98 9/30/98 TENDERED ADJUSTMENTS 9/30/98
------------ ---------- ---------- ----------- --------
DEBT:
8.04% 1st Mortgage Notes $85,000 $0 $0 $85,000
7.25% WC Revolver 4,785 - - 4,785
7.25% Acquisition Facility 9,000 - - 9,000
7.17% Pearl Notes 11,000 - - 11,000
11.96% Sr Notes - 60,000 100.0% (60,000) -
14.10% Sr Notes - 3,100 100.0% (3,100) -
14.10% Sub Notes - 3,100 100.0% (3,100) -
10.13% Sub Notes & Sr Notes - 50,000 100.0% (50,000) -
9.38% Sub Notes & Sr Notes - 75,000 100.0% (75,000) -
12.25% Sub Notes & Sr Notes - 81,250 100.0% (81,250) -
0.00% Other Notes - 0 - -
8.00% Acq. & Other Notes Pay - 14,508 - 14,508
8.25% Existing Credit Facility - 0 - -
9.00% Exchanged Debt - - 63,126 63,126
11.50% Exchanged Debt 6,520 6,520
9.00% New Debt - - 120,000 120,000
Total L.T. Debt ------------ ---------- ----------- --------
109,785 286,958 (82,804) 313,939
------------ ---------- --------
PREFERRED STOCK:
14.33% Pfd Stock - 4,167 (4,167) -
12.88% Pfd Stock - 30,000 (30,000) -
------------ ---------- ----------- --------
Total Preferred - 34,167 (34,167) -
------------ ---------- --------
Common Equity 57,206 (210,486) 115,389 (37,891)
------------ ---------- --------
$166,991 $ 110,639 $276,048
============ ========== ========
Total Capital
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and tax
effect. For discussion purposes only.
5 of 19
================================================================================
(in thousands except per share and per unit data)
15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-01, flat att.
STAR GAS STAND ALONE INCOME STATEMENT
ESTIMATED NORMALIZED PROJECTED
----------------------------------------------
1998 1998 1999 2000 2001 2002
--------------------------------------------------------------------------------
EBITDA $18,781 $20,731 $23,032 $24,465 $25,898 $27,331
Depreciation and Amortization 11,927 11,649 12,358 13,343 14,217 14,927
------- ------- ------- ------- ------- -------
EBIT 6,854 9,082 10,674 11,122 11,681 12,404
Interest Expense (7,922) (7,662) (8,574) (8,884) (9,351) (9,819)
Interest Income - - - - - -
Other Income - - - - - -
------- ------- ------- ------- ------- -------
Income Before Taxes (1,068) 1,420 2,100 2,238 2,330 2,585
Current Income Taxes (25) (25) (25) (25) (25) (25)
Deferred Income Taxes - - - - - -
------- ------- ------- ------- ------- -------
Net Income Available to Common ($1,093) $ 1,395 $ 2,075 $ 2,213 $ 2,305 $ 2,560
======= ======= ======= ======= ======= =======
STAR GAS STAND ALONE UNITS OUTSTANDING
Common Units
Beginning Balance 3,832 3,832 3,858 4,356 4,652 4,936
Issuance 27 27 498 296 284 271
Buyback 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Ending Balance 3,858 3,858 4,356 4,652 4,936 5,207
------- ------- ------- ------- ------- -------
Average Common Units Outstanding 3,858 3,858 4,107 4,504 4,794 5,071
Subordinated Units
Beginning Balance 2,396 2,396 2,396 2,396 2,396 2,396
Issuance 0 0 0 0 0 0
Buyback 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Ending Balance 2,396 2,396 2,396 2,396 2,396 2,396
------- ------- ------- ------- ------- -------
Average Subordinated Units Outstanding 2,396 2,396 2,396 2,396 2,396 2,396
GP Implied Units
Beginning Balance 127 127 128 138 144 150
Issuance 1 1 10 6 6 6
Buyback 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Ending Balance 128 128 138 144 150 155
------- ------- ------- ------- ------- -------
Average Implied GP Units Outstanding 128 128 133 141 147 152
Total Units 6,382 6,382 6,890 7,192 7,481 7,758
======= ======= ======= ======= ======= =======
Average Units Outstanding 6,382 6,382 6,636 7,041 7,337 7,620
======= ======= ======= ======= ======= =======
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and tax
effect. For discussion purposes only.
6 of 19
====================================================================================================================================
(in thousands except per share and per unit data) 15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005'00-'01, flat att.
ESTIMATED PROJECTED
-----------------------------------------
STAR GAS STAND ALONE BALANCE SHEET 1998 1999 2000 2001 2002
--------- -------- -------- -------- --------
ASSETS:
Cash
Other Current Assets $ 500 $ 500 $ 500 $ 500 $ 500
Total Current Assets 15,376 17,662 18,433 19,204 19,974
--------- -------- -------- -------- --------
15,876 18,162 18,933 19,704 20,474
PP&E and Intangibles, Net 161,292 162,041 161,853 160,839 159,165
Other Assets - - - - -
--------- -------- -------- -------- --------
Total Assets 177,168 180,203 180,786 180,543 179,639
========= ======== ======== ======== ========
LIABILITIES:
Current Liabilities - Excluding Working Capital Borrowings 10,101 12,387 13,158 13,929 14,699
Total Debt 109,785 111,890 118,337 124,783 131,231
Other Liabilities 76 76 76 76 76
--------- -------- -------- -------- --------
Total Liabilities 119,962 124,353 131,571 138,788 146,007
Partner's Equity 57,206 55,850 49,215 41,755 33,633
--------- -------- -------- -------- --------
Total Liabilities and Equity $ 177,168 $180,203 $180,786 $180,543 $179,639
========= ======== ======== ======== ========
Check 0 0 0 0 0
STAR GAS STAND ALONE CASH FLOW STATEMENT
Net Income $ 2,075 $ 2,213 $ 2,305 $ 2,560
Depreciation and Amortization 12,358 13,343 14,217 14,927
Deferred Taxes - - - -
Other Income - - - -
Other Assets/Liabilities - - - -
Change in Working Capital (0) 0 - -
-------- -------- -------- --------
Cash from Operations 14,433 15,556 16,522 17,487
-------- -------- -------- --------
Maintenance CapEx (2,657) (2,705) (2,753) (2,803)
Internal Growth CapEx - - - -
External Growth CapEx (10,000) (10,000) (10,000) (10,000)
-------- -------- -------- --------
Cash from Investments (12,657) (12,705) (12,753) (12,803)
-------- -------- -------- --------
Acquisition Borrowing (1,169) 3,359 3,625 3,918
Remaining Distributions to Repay Debt 0 (0) 0 (0)
Amortization of Mortgage Notes - - - -
Borrowing to Repay Existing Debt - - - -
Borrowing for Changes in WC 0 (0) - -
Borrowing to Pay Full MQD 2,824 2,638 2,371 2,080
Change in Equity 11,169 6,641 6,375 6,082
Transaction/Deal Expenses (450) (450) (450) (450)
Distributions (14,599) (15,490) (16,141) (16,763)
-------- -------- -------- --------
Cash from Financing (2,226) (3,301) (4,219) (5,134)
-------- -------- -------- --------
Net Cash Flow (450) (450) (450) (450)
Initial Cash Balance 500 500 500 500
-------- -------- -------- --------
Cash Available for Paydown on WC Revolver and Acq. Facility 50 50 50 50
Minimum Cash Balance 500 500 500 500
Borrowing/(Paydown) on WC Revolver and Acq. Facility 450 450 450 450
-------- -------- -------- --------
Net Change in Cash - - - -
-------- -------- -------- --------
Ending Cash Balance $ 500 $ 500 $ 500 $ 500
======== ======== ======== ========
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and tax
effect. For discussion purposes only.
7 of 19
===============================================================================================================================
(in thousands except per share and per unit data)
15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att.
ESTIMATED NORMALIZED PROJECTED
------------------------------------------
1998 1998 1999 2000 2001 2002
--------- ---------- -------- -------- --------- --------
STAR GAS STAND ALONE EBITDA CALCULATION
(See Tab 3: Cases)
- -------------------------------------------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5
EBITDA Growth Rate 10.4% 11.1% 6.2% 5.9% 5.5%
- -------------------------------------------------------------------------------------------------------------------------------
Base EBITDA: Timing
------
End 1998
Mid 1999
Mid 2000
Mid 2001
Mid 2002
Mid 2003
Mid 2004
Mid 2005
--------- --------- -------- -------- --------- --------
Total EBITDA $18,781 $20,731 $23,032 $24,465 $25,898 $27,331
========= ========= ======== ======== ========= ========
Pro Forma Full-Year EBITDA for Debt Covenant Analysis 18,781 20,731 23,748 25,181 26,614 28,047
STAR GAS STAND ALONE DEPRECIATION CALCULATION
Existing Depreciation $11,927 $11,649 $11,649 $11,649 $11,649 $11,649
1998 Normal 2,710
Maintenance CapEx: 1998 2,710 $ 0 $ 0 $ 181 $ 181 $ 181 $ 181
Annual Growth: 1.8% 1999 2,657 89 177 177 177
2000 2,705 90 180 180
2001 2,753 92 184
2002 2,803 93
Internal Growth CapEx: 1998 0 - - - - - -
Annual Growth: 0.0% 1999 0 - - - -
2000 0 - 0 0
2001 0 - 0
2002 0 -
2003 0
2004 0
2005 0
External Growth CapEx: 1998 10,000 - - 667 667 667 667
Annual Growth: 0.0% 1999 10,000 333 667 667 667
2000 10,000 333 667 667
2001 10,000 333 667
2002 10,000 333
2003 10,000
2004 10,000
2005 10,000
--------- --------- -------- -------- --------- --------
Total Depreciation: $11,927 $11,649 $12,358 $13,343 $14,217 $14,927
========= ========= ======== ======== ========= ========
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and tax
effect. For discussion purposes only.
8 of 19
=================================================================================================================================
STAR GAS STAND ALONE DEBT SCHEDULE
(in thousands except per share and per unit data)
15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att.
ESTIMATED NORMALIZED PROJECTED
--------------------------------------------------
1998 1998 1999 2000 2001 2002
--------- ---------- -------- -------- -------- --------
8.04% 1st Mortgage Notes
Beginning Balance $ 85,000 $ 85,000 $ 85,000 $ 85,000 $ 85,000 $ 85,000
Borrowing 0 0 0 0 0 0
Amortization 0 0 0 0 0 0
-------- -------- -------- -------- -------- --------
Ending Balance 85,000 85,000 85,000 85,000 85,000 85,000
Interest Payment 8.04% 6,834 6,834 6,834 6,834 6,834 6,834
Make-Whole Payment 0 0 0 0 0 0
7.17% Pearl Notes
Beginning Balance $ 0 $ 0 $ 11,000 $ 11,000 $ 11,000 $ 11,000
Borrowing 11,000 11,000 0 0 0 0
Amortization 0 0 0 0 0 0
-------- -------- -------- -------- -------- --------
Ending Balance 11,000 11,000 11,000 11,000 11,000 11,000
Interest Payment 7.17% 613 613 789 789 789 789
% of year Pearl Notes Outstanding 77.7% 77.7% 0 0 0 0
7.25% WC Revolver
Beginning Balance - - $ 4,785 $ 4,785 $ 4,785 $ 4,785
Borrowing for Change in WC - - 0 (0) - -
Borrowing/(Payment) 4,785 4,785 0 0 0 0
-------- -------- -------- -------- -------- --------
Ending Balance 4,785 4,785 4,785 4,785 4,785 4,785
Effective Avg WC Balance 3,490 (97) 14 0 0 14
Interest Payment 7.25% 253 (7) 1 0 0 1
7.25% Acquisition Facility
Beginning Balance - - $ 9,000 $ 11,105 $ 17,552 $ 23,998
External Acquisitions 9,400 9,400 (1,169) 3,359 3,625 3,918
External Acquisitions at
Beginning of 1999 - - - - - -
Internal Acquisitions (400) (400) - - - -
Borrowing to Pay Full MQD - - 2,824 2,638 2,371 2,080
Borrowings to Repay Existing Debt - - - - - -
Borrowings/(Payment) - - 450 450 450 450
Remaining Distributions to Repay Debt - - 0 (0) 0 (0)
-------- -------- -------- -------- -------- --------
Ending Balance 9,000 9,000 11,105 17,552 23,998 30,446
Interest Payment 7.25% 0 0 729 1,039 1,506 1,974
TOTAL DEBT
Beginning Balance $ 85,000 $ 85,000 $109,785 $111,890 $118,337 $124,783
Amortization of Mortgage Notes - - - - - -
Borrowing for Pearl Notes 11,000 11,000 - - - -
Borrowing for Changes in WC - - 0 (0) - -
Borrowing to Pay Full MQD - - 2,824 2,638 2,371 2,080
Acquisition Borrowing 9,000 9,000 (1,169) 3,359 3,625 3,918
Borrowing to Repay Existing Debt - - - - - -
Remaining Distributions to Repay Debt - - 0 (0) 0 (0)
Borrowing/Payment on WC Revolver and
Acq. Facility 4,785 4,785 450 450 450 450
-------- -------- -------- -------- -------- --------
Ending Balance $109,785 $109,785 $111,890 $118,337 $124,783 $131,231
======== ======== ======== ======== ======== ========
INTEREST EXPENSE
Interest Expense $ 7,700 $ 7,440 $ 8,352 $ 8,662 $ 9,129 $ 9,597
Bank Fee 222 222 222 222 222 222
-------- -------- -------- -------- -------- --------
Total Interest Payment $ 7,922 $ 7,662 $ 8,574 $ 8,884 $ 9,351 $ 9,819
======== ======== ======== ======== ======== ========
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and tax
effect. For discussion purposes only.
9 of 19
- ------------------------------------------------------------------------------------------------------------------------------------
STAR GAS STAND ALONE SCHEDULE OF ACTUAL DISTRIBUTIONS 15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att.
(in thousands except per share and per unit data)
ESTIMATED NORMALIZED PROJECTED
-----------------------------------------
ASSUMES REVISED TARGET DISTRIBUTIONS STRUCTURE 1998 1998 1999 2000 2001 2002
-------- --------- -------- -------- -------- --------
Distributable Cash
- ------------------
Cash from Operations $ 10,834 $ 13,044 $ 14,433 $ 15,556 $ 16,522 $ 17,487
Maintenance CapEx (2,710) (2,710) (2,657) (2,705) (2,753) (2,803)
Other 0 0 0 0 0 0
-------- --------- -------- -------- -------- --------
Total MLP Distributable Cash Flow 8,124 10,334 11,776 12,851 13,769 14,684
Distributable Cash Flow/Unit $ 1.27 $ 1.62 $ 1.77 $ 1.83 $ 1.88 $ 1.93
Average Units for Calculating Annual Distributions 2 2 2 2
- --------------------------------------------------
Common Units 3,858 3,858 4,107 4,504 4,794 5,071
Subordinated Units 2,396 2,396 2,396 2,396 2,396 2,396
General Partner Interest Unit Equivalent 128 128 133 141 147 152
-------- --------- -------- -------- -------- --------
Total Units Outstanding 6,382 6,382 6,636 7,041 7,337 7,620
Distribution Levels
- -------------------
MQD $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20
First Target $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42
Second Target $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84
Third Target $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70
Indicated Cash Distribution $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20
Distribution of MQD
- -------------------
Cash Available 8,124 10,334 11,776 12,851 13,769 14,684
Cash Borrowed to Pay Full MQD 5,917 3,707 2,824 2,638 2,371 2,080
Allocation to:
Common Units 8,489 8,489 9,036 9,909 10,546 11,157
Subordinated Units 5,271 5,271 5,271 5,271 5,271 5,271
General Partner Interest 281 281 292 310 323 335
First Target Distribution
- -------------------------
Cash Available 0 0 0 0 0 0
Cash Required for Target Distribution 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Second Target Distribution
- --------------------------
Cash Available 0 0 0 0 0 0
Cash Required for Target Distribution 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Distribution 0 0 0 0 0 0
Main Model Oct-8 rev 2 with new Star & AGE 15yr Petro Projections and
tax effect. For discussion purposes only.
10 of 19
- ----------------------------------------------------------------------------------------------------------------------------------
STAR GAS STAND ALONE SCHEDULE OF ACTUAL DISTRIBUTIONS (CONT'D) 15-yr; 30 mm @ 4.75x mid-year ; $ 0.1 '99, $.005 '00.01, flat att
(in thousands except per share and per unit data)
ESTIMATED NORMALIZED PROJECTED
-------------------------------------------
1998 1998 1999 2000 2001 2002
------------ ---------- ------------ -------- --------- ---------
REMAINING DISTRIBUTION
- ----------------------
Cash Available 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Distribution 0 0 0 0 0 0
Repay Indebtedness (0) (0) (0) 0 (0) 0
TOTAL DISTRIBUTIONS
- -------------------
Common Units 8,489 8,489 9,036 9,909 10,546 11,157
Subordinated Units 5,271 5,271 5,271 5,271 5,271 5,271
General Partner Interest 281 281 292 310 323 335
Incentive Distribution 0 0 0 0 0 0
------------ ---------- ------------ -------- --------- ----------
Total Distributions $14,041 $14,041 $14,599 $15,490 $16,141 $16,763
============ ========== ============ ======== ========= ==========
TOTAL DISTRIBITION PER UNIT
- ---------------------------
Common Unit $2.20 $2.20 $2.20 $2.20 $2.20 $2.20
Subordinated Unit 2.20 2.20 2.20 2.20 2.20 2.20
GP Unit 2.20 2.20 2.20 2.20 2.20 2.20
Main Model Oct-8 Rev 2 with new Star & AGE 15yr Petro Projections and tax
effect. For discussion purposes only.
11 of 19
====================================================================================================================================
(in thousands except per share and per unit data)
15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att.
Estimated Normalized Projected
-------------------------------------------------
1998 1998 1999 2000 2001 2002
--------- ---------- ------- --------- ---------- -----------
PETRO EBITDA CALCULATION
- ------------------------------------------------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5
EBITDA Growth Rate
- ------------------------------------------------------------------------------------------------------------------------------------
Base EBITDA: Timing
------
Acquisitions: End 1998 $ 0
Mid 1999 30,000
Mid 2000 30,000
Mid 2001 30,000
Mid 2002 30,000
Mid 2003 30,000
Mid 2004 30,000
Mid 2005 30,000
-------- -------- -------- -------- -------- --------
Total EBITDA $ 37,630 $ 44,749 $ 46,463 $ 48,897 $ 51,040 $ 52,989
======== ======== ======== ======== ======== ========
Pro Forma Full-Year EBITDA for Debt Covenent Analysis 37,630 44,749 49,534 51,968 54,111 56,060
PETRO DEPRECIATION CALCULATION
Existing Depreciation $ 28,710 $ 28,710 $ 28,710 $ 28,710 $ 28,710 $ 28,710
Maintenance CapEx: 1998 $ 2,776 - - 185 185 185 185
Annual Growth: 2.0% 1999 3,000 100 200 200 200
2000 3,060 102 204 204
2001 3,121 104 208
2002 3,184 108
2003 3,247
2004 3,312
2005 3,378
Internal Growth CapEx: 1998 $ 0 - - - - - -
Annual Growth: 0.0% 1999 0 - - - -
2000 0 - - -
2001 0 - -
2002 0 -
2003 0
2004 0
2005 0
External Growth CapEx: 1998 $ 0 - - 0 0 0 0
Annual Growth: 0.0% 1999 30,000 2,308 4,615 4,615 4,615
2000 30,000 2,308 4,615 4,615
2001 30,000 2,308 4,615
2002 30,000 2,308
2003 30,000
2004 30,000
2005 30,000
-------- -------- -------- -------- -------- --------
Total Depreciation 28,710 28,710 31,303 36,120 40,942 45,767
======== ======== ======== ======== ======== ========
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and tax
effect. For discussion purposes only.
12 of 19
==========================================================================================================================
(in thousands except per share and per unit data)
15-YR; $30MM @ 4.75X MID-YEAR; $.01 '99, $.005 '00-'01, FLAT ATT.
STAR PRO FORMA INCOME STATEMENT
ESTIMATED NORMALIZED PROJECTED
------------------------------------------
1998 1998 1999 2000 2001 2002
--------- ---------- -------- -------- --------- --------
Combined EBITDA $56,411 $65,480 $69,495 $73,362 $76,938 $80,320
Consolidated Savings 500 500 500 500 500 500
--------- ---------- -------- -------- --------- --------
Pro Forma EBITDA 56,911 65,980 69,995 73,862 77,438 80,820
Depreciation and Amortization 40,637 40,359 43,661 49,463 55,159 60,694
--------- ---------- -------- -------- --------- --------
EBIT 16,274 25,621 26,334 24,399 22,279 20,126
Interest Expense (28,307) (28,307) (29,004) (30,429) (31,685) (32,820)
Interest Income - - - - - -
Other Income - - - - - -
EBT (12,033) (2,686) (2,669) (6,031) (9,045) (12,694)
--------- ---------- -------- -------- --------- --------
Current Income Taxes (1,025) (1,025) (1,025) (1,025) (1,025) (1,025)
Deferred Income Taxes - - - - - -
--------- ---------- -------- -------- --------- --------
Net Income Available to Common ($13,058) ($3,711) ($3,694) ($7,056) ($10,430) ($13,719)
========= ========== ======== ======== ========= ========
Pro Forma Full-Year EBITDA for Debt Covenant Analysis 56,911 65,980 73,782 77,649 81,225 84,607
STAR PRO FORMA UNITS OUTSTANDING
Common Units - -
Beginning Balance 10,842 10,842 11,614 12,621 13,696
Issuance - - - - -
Issued to Meet Debt Covenant Ratio - 772 1,007 1,075 1,126
Issued to E - - - - -
Buyback - - - - -
--------- ---------- -------- -------- --------- --------
Ending Balance 10,842 10,842 11,614 12,621 13,696 14,822
--------- ---------- -------- -------- --------- --------
Average Common Units Outstanding 10,842 10,842 11,228 12,117 13,158 14,259
Deferred Participation Units -
Beginning Balance - - 909 909 909 909
DPUs Issued at Beginning of Year - - - - - -
--------- ---------- -------- -------- --------- --------
Ending Balance - - 909 909 909 909
SR Subordinated Units
Beginning Balances - Sr Sub Units 2,767 2,767 2,767 2,767 2,767
DPUs Issued - - - - -
Sr Sub Issuance - - - - -
Sr Sub to E - - - - -
Sr Sub Converted to G.P. Interest - - - - -
--------- ---------- -------- -------- --------- --------
Ending Balance 2,767 2,767 2,767 2,767 2,767 2,767
--------- ---------- -------- -------- --------- --------
Average Sr Subordinated Units Outstanding 2,767 2,767 2,767 2,767 2,767 2,767
Subordinated Units
Beginning Balance 567 567 567 567 567
Issuance - - - - -
Buyback - - - - -
--------- ---------- -------- -------- --------- --------
Ending Balance 567 567 567 567 567 567
--------- ---------- -------- -------- --------- --------
Average Subordinated Units Outstanding 567 567 567 567 567 567
GP Implied Units
Beginning Balance 289 289 289 289 289
Issued in conjuction with DPUs - - - - -
Issued to Meet Debt Covenant Ratio - - - - -
Issued in conjuction with E Equity - - - - -
Buyback - - - - -
--------- ---------- -------- -------- --------- --------
289 289 289 289 289 289
--------- ---------- -------- -------- --------- --------
Average Implied GP Units Outstanding 289 289 289 289 289 289
Total Units Outstanding 14,465 14,465 15,237 16,245 17,320 18,446
--------- ---------- -------- -------- --------- --------
Average Total Units Outstanding 14,465 14,465 14,851 15,741 16,782 17,883
========= ========== ======== ======== ========= ========
Pro Forma Heating Oil Units Used for DPU
Issue Calculation 8,215 8,700 9,446 10,263
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and
tax effect. For discussion purposes only.
13 of 19
================================================================================
(in thousands except per share and per unit data)
15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att.
ESTIMATED PROJECTED
------------------------------------------------------
STAR PRO FORMA BALANCE SHEET 1998 1999 2000 2001 2002
----------- ------------ ------------ ------------ ------------
ASSETS:
Cash $ 10,142 $ 10,142 $ 10,142 $ 10,142 $ 10,142
Other Current Assets 86,874 92,410 97,741 102,672 107,335
----------- ------------ ------------ ------------ ------------
Total Current Assets 97,016 102,552 107,883 112,814 117,477
PP&E and Intangibles, Net 267,987 269,983 266,285 257,001 242,293
Other Assets 12,802 12,802 12,802 12,802 12,802
----------- ------------ ------------ ------------ ------------
Total Assets 377,805 385,337 386,971 382,617 372,572
=========== ============ ============ ============ ============
LIABILITIES:
Current Liabilities 90,971 96,507 101,838 106,769 111,432
8.25% Existing Credit Facility 4,785 4,785 4,785 4,785 4,785
Total LT Debt 309,154 332,019 349,421 365,513 380,732
Other Liabilities 10,786 10,786 10,786 10,786 10,786
----------- ------------ ------------ ------------ ------------
Total Liabilities 415,696 444,097 466,830 487,852 507,734
Preferred Stock - - - - -
Common Shareholder's Equity (37,891) (58,760) (79,859) (105,236) (135,162)
----------- ------------ ------------ ------------ ------------
Total Liabilities and Equity $377,805 $385,337 $386,971 $ 382,617 $ 372,572
=========== ============ ============ ============ ============
Check - - - 0 0
STAR PRO FORMA CASH FLOW STATEMENT
Net Income ($3,694) ($7,056) ($10,430) ($13,719)
Depreciation and Amortization 43,661 49,463 55,159 60,694
Deferred Taxes - - - -
Other Assets/Liab - - - -
Change in Non-Cash Working Capital - - - -
------------ ------------ ------------ ------------
Cash from Operations 39,966 42,408 44,728 46,975
Maintenance CapEx (5,657) (5,765) (5,874) (5,987)
Internal Growth CapEx - - - -
External Growth CapEx (40,000) (40,000) (40,000) (40,000)
------------ ------------ ------------ ------------
Cash from Investments (45,657) (45,765) (45,874) (45,987)
Acquisition Borrowing 40,000 40,000 40,000 40,000
Remaining Distributions to Repay Debt (151) (438) (255) (0)
Amortization of Existing Debt (6,127) (8,141) (60) (60)
Borrowing to Repay Existing Debt 6,127 8,141 60 60
Borrowing for Changes in WC - - - -
Change in Common Equity & GP Interest 16,984 22,160 23,653 24,781
Repayment of Preferred Stock - - - -
Distributions (34,158) (36,204) (38,599) (40,988)
------------ ------------ ------------ ------------
Cash from Financing 22,675 25,518 24,799 23,793
Net Cash Flow 16,984 22,160 23,653 24,781
Initial Cash Balance 10,142 10,142 10,142 10,142
------------ ------------ ------------ ------------
Cash Available for Paydown on WC Revolver and Acq. Facility 27,126 32,302 33,795 34,923
Minimum Cash Balance 10,142 10,142 10,142 10,142
Borrowing/(Paydown) on WC Revolver and Acq. Facility (16,984) (22,160) (23,653) (24,781)
------------ ------------ ------------ ------------
Ending Cash Balance 10,142 10,142 10,142 10,142
Net Change in Cash $ 0 ($0) ($0) $ 0
============ ============ ============ ============
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and tax
effect. For discussion purposes only.
14 of 19
====================================================================================================================================
(in thousands except per share and per unit data)
15-YR; $30MM @ 4.75X MID-YEAR; $.01 '99, $.005 '00-'01, FLAT ATT.
ESTIMATED NORMALIZED PROJECTED
----------------------------------------------
STAR PRO FORMA DEBT SCHEDULE 1998 1998 1999 2000 2001 2002
--------- --------- --------- --------- --------- --------
8.04% 1st Mortgage Notes
Beginning Balance $ 85,000 $ 85,000 $ 85,000 $ 85,000 $ 85,000 $ 85,000
Borrowing - - - - - -
Amortization - - - - - -
--------- --------- --------- --------- --------- --------
Ending Balance 85,000 85,000 85,000 85,000 85,000 85,000
Interest Payment 8.04% 6,834 6,834 6,834 6,834 6,834 6,834
7.17% Pearl Notes
Beginning Balance 11,000 11,000 11,000 11,000 11,000 11,000
Borrowing - - - - - -
Amortization - - - - - -
--------- --------- --------- --------- --------- --------
Ending Balance 11,000 11,000 11,000 11,000 11,000 11,000
Interest Payment 7.17% 613 613 789 789 789 789
% of year Pearl Notes Outstanding 77.7% 77.7%
10.13% Sub Notes & Sr Notes
Beginning Balance 50,000 50,000 - - - -
Borrowing - - - - - -
Amortization (50,000) (50,000) - - - -
--------- --------- --------- --------- --------- --------
Ending Balance - - - - - -
Interest Payment 10.13% - - - - - -
9.38% Sub Notes $ Sr Notes
Beginning Balance 75,000 75,000 - - - -
Borrowing - - - - - -
Amortization (75,000) (75,000) - - - -
--------- --------- --------- --------- --------- --------
Ending Balance - - - - - -
Interest Payment 9.38% - - - - - -
12.25% Sub Notes & Sr Notes
Beginning Balance 81,250 81,250 - - - -
Borrowing - - - - - -
Amortization (81,250) (81,250) - - - -
--------- --------- --------- --------- --------- --------
Ending Balance - - - - - -
Interest Payment 12.25% - - - - - -
9.00% New Debt
Beginning Balance - - 120,000 126,127 134,268 134,328
Borrowing 120,000 120,000 6,127 8,141 60 60
Amortization - - - - - -
--------- --------- --------- --------- --------- --------
Ending Balance 120,000 120,000 126,127 134,268 134,328 134,388
Interest Payment 9.00% 10,800 10,800 11,076 11,718 12,087 12,092
Exchange of 11.96% Senior Notes
Beginning Balance - - 63,126 63,126 63,126 63,126
Borrowing 63,126 63,126 - - - -
Amortization - - - - - -
--------- --------- --------- --------- --------- --------
Ending Balance 63,126 63,126 63,126 63,126 63,126 63,126
Interest Payment 9.00% 5,681 5,681 5,681 5,681 5,681 5,681
8.00% Acq. & Other Notes Pay
Beginning Balance 16,507 16,507 14,508 8,381 240 180
Borrowing - - - - - -
Amortization (1,999) (1,999) (6,127) (8,141) (60) (60)
--------- --------- --------- --------- --------- --------
Ending Balance 14,508 14,508 8,381 240 180 120
Interest Payment 8.00% 1,241 1,241 916 345 17 12
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and
tax effect. For discussion purposes only.
15 of 19
=================================================================================================================================
(in thousands except per share and per unit data)
15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att.
ESTIMATED NORMALIZED PROJECTED
-------------------------------------------
STAR PRO FORMA DEBT SCHEDULE (CONT'D) 1998 1998 1999 2000 2001 2002
--------- ---------- --------- --------- --------- ---------
Exchange of 14.10% Senior Notes
Beginning Balance - - 6,520 6,520 6,520 6,520
Borrowing 6,520 6,520 - - - -
Amortization - - - - - -
--------- ---------- --------- --------- --------- ---------
Ending Balance 6,520 6,520 6,520 6,520 6,520 6,520
Interest Payment 11.50% 750 750 750 750 750 750
7.25% WC Revolver
Beginning Balance - - 4,785 4,785 4,785 4,785
Borrowing for Change in WC - - - - - -
Borrowing to Pay full MQD - - - - - -
Borrowing/(Payment) 4,785 4,785 - - - -
--------- ---------- --------- --------- --------- ---------
Ending Balance 4,785 4,785 4,785 4,785 4,785 4,785
Effective Avg WC Balance 23,600 23,600 10,828 9,379 9,379 9,379
Interest Payment 7.25% 1,711 1,711 785 680 680 680
7.25% Acquisition Facility
Beginning Balance - - 9,000 31,865 49,266 65,358
External Acquisitions 9,400 9,400 40,000 40,000 40,000 40,000
External Acquisitions at Beginning of 1999 - - - - - -
Internal Growth CapEx (400) (400) - - - -
Payment - - (16,984) (22,160) (23,653) (24,781)
Remaining Distributions to Repay Debt - - (151) (438) (255) (0)
--------- ---------- --------- --------- --------- ---------
Ending Balance 9,000 9,000 31,865 49,266 65,358 80,577
Interest Payment 7.25% ($15) ($15) $ 1,481 $ 2,941 $ 4,155 $ 5,290
Total Pro Forma Debt
Beginning Balance $ 318,757 $ 318,757 $ 313,939 $ 336,804 $ 354,206 $ 370,298
Amortization of Existing Debt (208,249) (208,249) (6,127) (8,141) (60) (60)
Exchange of Notes 69,646 69,646 - - - -
Borrowing for Changes in WC - - - - - -
Acquisition Borrowing 9,000 9,000 40,000 40,000 40,000 40,000
Borrowing to Pay Full MQD - - - - - -
Borrowing to Repay Existing Debt 120,000 120,000 6,127 8,141 60 60
Remaining Distribution to Repay Debt - - (151) (438) (255) (0)
Borrowing/(Payment) on WC Revolver and Acq. Facility 4,785 4,785 (16,984) (22,160) (23,653) (24,781)
--------- ---------- --------- --------- --------- ---------
Ending Balance 313,939 313,939 336,804 354,206 370,298 385,517
Preferred Stock
Beginning Balance 34,167 34,167 - - - -
Repayment (34,167) (34,167) - - - -
--------- ---------- --------- --------- --------- ---------
Ending Balance - - - - - -
Dividend Payment 14.33% - - - - - -
Interest Expense/Dividends 27,615 27,615 28,312 29,737 30,993 32,128
Chase Fees 692 692 692 692 692 692
--------- ---------- --------- --------- --------- ---------
Total Interest Payment/Dividends $ 28,307 $ 28,307 $ 29,004 $ 30,429 $ 31,685 $ 32,820
========= ========== ========= ========= ========= =========
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections
and tax effect. For discussion purposes only.
16 of 19
- --------------------------------------------------------------------------------
(in thousands except per share and per unit data)
15-yr $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att.
STAR PRO FORMA DISTRIBUTION SCHEDULE OF ACTUAL DISTRIBUTIONS
Estimated Normalized Projected
-------------------------------------------
1998 1998 1999 2000 2001 2002
--------- ---------- --------- -------- ---------- ----------
Distributable Cash
- ------------------
Cash from Operations (excl chg in WC) 27,579 36,648 $39,966 $42,408 $44,728 $46,975
Maintenance CapEx (5,486) (5,486) (5,657) (5,765) (5,874) (5,987)
Other - - - - - -
-------- ------- ------- ------- ------- -------
Total MLP Distributable Cash Flow 22,093 31,162 34,309 36,643 38,854 40,988
Distributable Cash Flow / Unit $ 1.53 $ 2.15 $ 2.31 $ 2.33 $ 2.32 $ 2.29
Distributable Cash Flow / Unit Pro Forma for DPU Conversion
Average Units for Calculating Annual Distributions
- --------------------------------------------------
Common Units 10,842 10,842 11,228 12,117 13,158 14,259
SR Subordinated Units 2,767 2,767 2,767 2,767 2,767 2,767
Subordinated Units 567 567 567 567 567 567
General Partner Interest Unit Equivalent 289 289 289 289 289 289
-------- ------- ------- ------- ------- -------
Total Units Outstanding 14,465 14,465 14,851 15,741 16,782 17,883
Distribution Levels $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
- -------------------
MQD $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
First Target $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42
Second Target $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84
Third Target $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70
Indicated Cash Distribution $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
Distribution of MQD
- -------------------
Cash Available 22,093 31,162 34,309 36,643 38,854 40,988
Allocation to:
Common Units 22,093 24,936 25,823 27,869 30,264 32,796
SR Subordinated Units 0 6,226 6,364 6,364 6,364 6,364
Subordinated Units 0 0 1,305 1,305 1,305 1,211
General Partner Interest 0 0 665 665 665 617
First Target Distribution
- -------------------------
Cash Available 0 0 151 438 255 0
Cash Required for Target Distribution 0 0 1,783 1,892 2,020 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
SR Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Total Distributions to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and
tax effect . For discussion purposes only.
17 of 19
================================================================================
(in thousands except per share and per unit data)
STAR GAS PRO FORMA SCHEDULE OF ACTUAL DISTRIBUTIONS (CONT'D) 15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att
ESTIMATED NORMALIZED PROJECTED
-------------------------------------------------------
1998 1998 1999 2000 2001 2002
--------- ---------- ----------- -------- --------- -----------
Second Target Distribution
- --------------------------
Cash Available 0 0 0 0 0 0
Cash Required for Target Distribution 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
SR Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Right 0 0 0 0 0 0
Incentive Right to GP Interest 0 0 0 0 0 0
Incentive Right to Sub Units 0 0 0 0 0 0
Incentive Right to Sr. Sub Units 0 0 0 0 0 0
Total Distributions to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Third Target Distribution
- -------------------------
Cash Available 0 0 0 0 0 0
Cash Required for Target Distribution 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Right 0 0 0 0 0 0
Incentive Right to GP Interest 0 0 0 0 0 0
Incentive Right to Sub Units 0 0 0 0 0 0
Incentive Right to Sr. Sub Units 0 0 0 0 0 0
Total Distributions to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Remaining Distribution
- ----------------------
Cash Available 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Right 0 0 0 0 0 0
Incentive Right to GP Interest 0 0 0 0 0 0
Incentive Right to Sub Units 0 0 0 0 0 0
Incentive Right to Sr. Sub Units 0 0 0 0 0 0
Repay Indebtedness 0 0 151 438 255 0
Total Distributions to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Main Model Oct-8 Rev 2 with new Star & AGE 15 yr Petro Projections and
tax effect. For discussion purposes only.
18 of 19
====================================================================================================================================
(in thousands except per share and per unit data)
STAR GAS PRO FORMA SCHEDULE OF ACTUAL DISTRIBUTIONS (CONT'D) 15-yr; $30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att.
Estimated Normalized Projected
-------------------------------------------------
1998 1998 1999 2000 2001 2002
----------- ----------- ----------- ---------- ---------- ----------
Total Distributions
- -------------------
Common Units $ 22,093 $ 24,936 $ 25,823 $ 27,869 $ 30,264 $ 32,796
SR Subordinated Units 0 6,226 6,364 6,364 6,364 6,364
Subordinated Units 0 0 1,305 1,305 1,305 1,211
General Partner Interest 0 0 665 665 665 617
--------- --------- --------- --------- --------- ---------
Total Distributions $ 22,093 $ 31,162 $ 34,158 $ 36,204 $ 38,599 $ 40,988
========= ========= ========= ========= ========= =========
14,041 14,041 14,599 15,490 16,141 16,763
Total Distributions Per Unit
- ----------------------------
Common Units $ 2.04 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
SR Subordinated Units 0.00 2.25 2.30 2.30 2.30 2.30
Subordinated & GP Units 0.00 0.00 2.30 2.30 2.30 2.13
Main Model Oct-8 Rev 2 with new Star & AGB 15 yr Petra Projections
and tax effect. For discussion purposes only.
19 of 19
PETRO PRO FORMA WORKING CAPITAL REQUIREMENTS
(IN 000S, EXCEPT PER SHARE AMOUNTS)
- -----------------------------------------------------------------------------------------------------------------
ASSUMPTIONS
- -----------------------------------------------------------------------------------------------------------------
DEBT ATTRIBUTED TO PETRO:
9/30/98
Pro Forma Interest Annual
Balance Rate Interest
--------- ---------- -----------
8.00 % Acquisition & Other Notes Pay $ 14,508 8.00% $ 1,161
9.00 % Exchanged Debt 63,126 9.00% 5,681
11.50 % Exchanged Debt 6,520 11.50% 750
9.25 % New Debt (a) 120,000 9.25% 11,100
-----------
$18,692
NEW COMMON UNITS TO REFINANCE OLD DEBT & CONSENT FEE:
Price Per Number Annual
Amount to be Raised Share of Units MQD Distribution
- --------------------------------------------------- ---------- ----------- -------------------
$141,473 $20.259 6,983 $2.30 $16,061
INCREASE IN MDQ ON OLD COMMON UNITS Number Increase in Annual
of Units MDQ Distribution
---------- ----------- -------------------
Old Common Units 3,832 $0.10 $383
OPERATING WORKING CAPITAL REQUIRE $ 500
TAX LIABILITY: $ 5,000
(a) AGE assumed rate of 9.25%
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
REQUIREMENT CALCULATION
- -----------------------------------------------------------------------------------------------------------------
Closing Date
--------------------------------------------------
Jan 31 Feb 28 Mar 31
1999 1999 1999
-------------- ------------- --------------
Interest on Debt Attributed to Petro: $17,134 $15,576 $14,019
MDQ on New Common Units 16,061 16,061 16,061
Increase in MDQ on old Common Units 383 383 383
Operating Working Capital Requirement 500 500 500
Tax Liability 5,000 5,000 5,000
----- ----- -----
Sub Total $39,078 $37,521 $35,963
Petro EBITDA
Historical Quarter Ended:
6/30/98 ($6,355) ($6,355) ($6,355)
9/30/97 (20,908) (20,908) (20,908)
12/31/97 16,716 16,716 16,716
------
Projected Month Ended:
2/28/99 20,434
3/31/99 13,281 13,281
------ ------
Sub Total $23,168 $ 2,734 ($10,547)
TOTAL $15,910 $34,787 $46,510
- -----------------------------------------------------------------------------------------------------------------
WORKING CAPITAL REQUIREMENT 18,000 35,000 46,500
- -----------------------------------------------------------------------------------------------------------------
Projected Month Ended Working Capital:
Standard Calculation $20,670 $36,836 $47,341
Excess Cash Assuming a March 31 Close $ 841
- --------------------------------------------------------------------------------