Valero GP Holdings, LLC Reports Third Quarter 2006 Earnings and Announces Increased Initial Quarterly Distribution

  
    
  
  
    
      Valero GP Holdings, LLC (NYSE:VEH) today announced earnings of $9.7 
      million, or $0.23 per unit for the three months ended September 30, 
      2006, in its first earnings report since it closed an initial public 
      offering of common units on July 19, 2006. Distributable cash flow 
      available to unitholders for the third quarter of 2006 was $13.5 million 
      or $0.317 per unit.
    
    
      Valero L.P. today announced an increase in their quarterly distribution 
      from $0.885 per unit to $0.915 per unit. As a result of this increase in 
      the quarterly distribution from Valero L.P., Valero GP Holdings, LLC has 
      declared, for the period from its initial public offering on July 19, 
      2006 to September 30, 2006, a prorated initial quarterly distribution of 
      $0.2574 per unit, which is based on an increased quarterly distribution 
      of $0.32 per unit, or $1.28 per unit on an annual basis. This represents 
      a 6.7 percent increase over the expected quarterly distribution rate of 
      $0.30 per unit, or $1.20 per unit on an annual basis, as stated in 
      Valero GP Holdings’ IPO prospectus dated July 
      14, 2006. The distribution is expected to be paid on November 17, 2006, 
      to holders of record as of November 7, 2006.
    
    
      A conference call with management is scheduled for 2:30 p.m. ET (1:30 
      p.m. CT) today to discuss the financial results for the third quarter of 
      2006. Investors interested in listening to the presentation may call 
      800/622-7620, passcode 8566945. International callers may access the 
      presentation by dialing 706/645-0327, passcode 8566945. The company 
      intends to have a playback available following the presentation, which 
      may be accessed by calling 800/642-1687, passcode 8566945. A live 
      broadcast of the conference call will also be available on the company’s 
      website at www.valerogpholdings.com.
    
    
      Valero GP Holdings, LLC is a publicly traded limited liability company 
      that owns the 2 percent general partner interest, a 21.4 percent limited 
      partner interest and the incentive distribution rights in Valero L.P., 
      one of the largest independent terminal and petroleum liquids pipeline 
      operators in the nation with operations in the United States, the 
      Netherlands Antilles, Canada, Mexico, the Netherlands and the United 
      Kingdom. For more information, visit Valero GP Holdings, LLC’s 
      web site at www.valerogpholdings.com.
    
    
      Cautionary Statement Regarding Forward-Looking Statements
    
    
      This press release includes forward-looking statements within the 
      meaning of the Securities Litigation Reform Act of 1995 regarding future 
      events and the future financial performance of Valero GP Holdings, LLC. 
      All forward-looking statements are based on the company’s 
      beliefs as well as assumptions made by and information currently 
      available to the company. These statements reflect the company's current 
      views with respect to future events and are subject to various risks, 
      uncertainties and assumptions. These risks, uncertainties and 
      assumptions are discussed in Valero GP Holdings, LLC’s 
      filings with the Securities and Exchange Commission.
    
    
      
        
          Valero GP Holdings, LLCConsolidated Financial 
          InformationSeptember 30, 2006(unaudited, 
          thousands of dollars, except unit data and per unit data)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
          Three Months EndedSeptember 30, 2006
        
      
      
        
          Statement of Income Data:
        
        
        
        
        
      
      
        
        
        
          
            Equity in earnings of Valero L.P.
          
        
        
        
        
          $ 11,637 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
          General and administrative expenses
        
        
        
        
          (877)
        
      
      
        
        
        
          Other expense, net
        
        
        
        
          (286)
        
      
      
        
        
        
          Interest expense
        
        
        
        
          (6)
        
      
      
        
        
        
          Interest expense - affiliated
        
        
        
        
          (901)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income before income tax benefit
        
        
        
        
          9,567 
        
      
      
        
        
        
          Income tax expense benefit
        
        
        
        
          130 
        
      
      
        
          Net income
        
        
        
        
          $ 9,697 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Basic net income per unit
        
        
        
        
          $ 0.23 
        
      
      
        
          Weighted average number of basic units outstanding
        
        
        
        
          42,500,000 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Diluted net income per unit
        
        
        
        
          $ 0.23 
        
      
      
        
          Weighted average number of diluted units outstanding
        
        
        
        
          42,500,626 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Equity in Earnings of Valero L.P.:
        
        
        
        
        
      
      
        
        
        
          General partner interest (2%)
        
        
        
        
          $ 753 
        
      
      
        
        
        
          General partner incentive distribution
        
        
        
        
          3,909 
        
      
      
        
        
        
          Direct charges to Valero GP Holdings, LLC (Note 1)
        
        
        
        
          (352)
        
      
      
        
        
        
          General partner's interest in earnings of Valero L.P.
        
        
        
        
          4,310 
        
      
      
        
        
        
          Limited partner interest in earnings of Valero L.P.
        
        
        
        
          8,048 
        
      
      
        
        
        
          Amortization of step-up in basis related to Valero L.P.'s assets and 
          liabilities
        
        
        
        
          (721)
        
      
      
        
          Equity in earnings of Valero L.P.
        
        
        
        
          $ 11,637 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Distributable Cash (Note 2):
        
        
        
        
        
      
      
        
        
        
          Cash distributions expected from Valero L.P. associated with:
        
        
        
        
        
      
      
        
        
        
        
        
          General partner interest:
        
        
        
        
        
      
      
        
        
        
        
        
          General partner interest (2%)
        
        
        
        
          $ 955 
        
      
      
        
        
        
        
        
          Incentive distribution rights
        
        
        
        
          3,909 
        
      
      
        
        
        
        
        
          Limited partner interest-common units
        
        
        
        
          9,351 
        
      
      
        
        
        
          Total cash distributions expected from Valero L.P.
        
        
        
        
          14,215 
        
      
      
        
        
        
          Deduct expenses of Valero GP Holdings, LLC:
        
        
        
        
        
      
      
        
        
        
        
        
          General and administrative expenses
        
        
        
        
          (877)
        
      
      
        
        
        
        
        
          Income tax benefit
        
        
        
        
          130 
        
      
      
        
        
        
        
        
          Interest expense - non-affiliated
        
        
        
        
          (6)
        
      
      
        
        
        
        
        
          
            Distributable cash
          
        
        
        
        
          $ 13,462 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Cash distributions to be paid to the unitholders of Valero GP 
          Holdings, LLC:
        
        
        
        
        
      
      
        
        
        
          Distribution per unit (prorated $0.32 per unit distribution) (Note 3)
        
        
        
        
          $ 0.2574 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
          Distributions to be paid to public unitholders (17,250,000 units)
        
        
        
        
          4,440 
        
      
      
        
        
        
          Distributions to be paid to Valero Energy (25,250,000 units) (Note 3)
        
        
        
        
          6,499 
        
      
      
        
        
        
        
        
          Cash distributions for the period from July 19, 2006 to September 
          30, 2006
        
        
        
        
          $ 10,939 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          Cash distributions to Valero Energy for the period from July 1, 2006 
          to July 18, 2006
        
        
        
        
          $ 2,661 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Total distributions
        
        
        
        
          $ 13,600 
        
      
    
    
      
        
          Valero GP Holdings, LLCConsolidated Financial 
          InformationSeptember 30, 2006(unaudited, 
          thousands of dollars, except per unit data)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          
            Notes:
          
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          
            1. We reimbursed Valero L.P. for these costs, and we were in turn 
            reimbursed by Valero Energy. Generally accepted accounting 
            principles require us to record this as an increase in our 
            investment of Valero L.P. and for Valero L.P. to record the full 
            expense and reimbursement as a capital contribution. Valero L.P. 
            allocated 100% of these costs to us because we paid the amounts in 
            full.
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          
            2. Valero GP Holdings, LLC utilizes distributable cash as a 
            financial measure, which is not defined in United States generally 
            accepted accounting principles. Management uses this financial 
            measure because it is a widely accepted financial indicator used 
            by investors to compare general partner performance. In addition, 
            management believes that this measure provides investors an 
            enhanced perspective of the ability to make a minimum quarterly 
            distribution. Distributable cash is not intended to represent cash 
            flows for the period, nor is it presented as an alternative to net 
            income. It should not be considered in isolation or as substitutes 
            for a measure of performance prepared in accordance with United 
            States generally accepted accounting principles.
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          The following is a reconciliation of net income to distributable 
          cash to net cash provided by operating activities (in thousands):
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
          
            Three Months EndedSeptember 30, 2006
          
        
      
      
        
          Net Income
        
        
          $ 9,697 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Adjustments to derive Distributable Cash:
        
        
        
      
      
        
          Equity in earnings of Valero L.P.
        
        
          (11,637)
        
      
      
        
          Quarterly distribution expected from Valero L.P.
        
        
          14,215 
        
      
      
        
          Other expense, net
        
        
          286 
        
      
      
        
          Interest expense - affiliated (a)
        
        
          901 
        
      
      
        
          Distributable cash
        
        
          13,462 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          
            Adjustments to Distributable Cash to derive Net Cash Provided 
            by Operating Activities:
          
        
        
        
      
      
        
          Quarterly distribution expected from Valero L.P.
        
        
          (14,215)
        
      
      
        
          Cash distribution of equity earnings received from Valero L.P.
        
        
          11,637 
        
      
      
        
          Interest expense - affiliated (a)
        
        
          (901)
        
      
      
        
          Net effect of changes in operating accounts
        
        
          221 
        
      
      
        
          Net cash provided by operating activities
        
        
          $ 10,204 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          (a) In connection with our initial public offering, Valero Energy 
          made a capital contribution to us in the form of a note receivable, 
          including affiliated interest expense. Therefore, affiliated 
          interest expense is excluded from the calculation of distributable 
          cash.
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          
            3. The quarterly distribution for the period between the closing 
            of the offering on July 19, 2006 and September 30, 2006 based on 
            $0.32 per unit is prorated. The following is the calculation of 
            the prorated per unit distribution:
          
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          (A)
        
        
          (B)
        
        
          (A) / (B) = (C)
        
        
          (D)
        
        
          
            (C) x (D) = (E)
          
        
      
      
        
          
            Days in quarter after IPO(July 19 - September 30)
          
        
        
          
            Total days in quarter
          
        
        
          Percentage of days after IPO
        
        
          
            Per unit distribution
          
        
        
          
            Prorated per unit distribution
          
        
      
      
        
          74
        
        
          92
        
        
          80.43%
        
        
          $0.32
        
        
          $0.2574
        
      
    
  
Valero GP Holdings, LLC (NYSE:VEH) today announced earnings of
$9.7 million, or $0.23 per unit for the three months ended September
30, 2006, in its first earnings report since it closed an initial
public offering of common units on July 19, 2006. Distributable cash
flow available to unitholders for the third quarter of 2006 was $13.5
million or $0.317 per unit.

   Valero L.P. today announced an increase in their quarterly
distribution from $0.885 per unit to $0.915 per unit. As a result of
this increase in the quarterly distribution from Valero L.P., Valero
GP Holdings, LLC has declared, for the period from its initial public
offering on July 19, 2006 to September 30, 2006, a prorated initial
quarterly distribution of $0.2574 per unit, which is based on an
increased quarterly distribution of $0.32 per unit, or $1.28 per unit
on an annual basis. This represents a 6.7 percent increase over the
expected quarterly distribution rate of $0.30 per unit, or $1.20 per
unit on an annual basis, as stated in Valero GP Holdings' IPO
prospectus dated July 14, 2006. The distribution is expected to be
paid on November 17, 2006, to holders of record as of November 7,
2006.

   A conference call with management is scheduled for 2:30 p.m. ET
(1:30 p.m. CT) today to discuss the financial results for the third
quarter of 2006. Investors interested in listening to the presentation
may call 800/622-7620, passcode 8566945. International callers may
access the presentation by dialing 706/645-0327, passcode 8566945. The
company intends to have a playback available following the
presentation, which may be accessed by calling 800/642-1687, passcode
8566945. A live broadcast of the conference call will also be
available on the company's website at www.valerogpholdings.com.

   Valero GP Holdings, LLC is a publicly traded limited liability
company that owns the 2 percent general partner interest, a 21.4
percent limited partner interest and the incentive distribution rights
in Valero L.P., one of the largest independent terminal and petroleum
liquids pipeline operators in the nation with operations in the United
States, the Netherlands Antilles, Canada, Mexico, the Netherlands and
the United Kingdom. For more information, visit Valero GP Holdings,
LLC's web site at www.valerogpholdings.com.

   Cautionary Statement Regarding Forward-Looking Statements

   This press release includes forward-looking statements within the
meaning of the Securities Litigation Reform Act of 1995 regarding
future events and the future financial performance of Valero GP
Holdings, LLC. All forward-looking statements are based on the
company's beliefs as well as assumptions made by and information
currently available to the company. These statements reflect the
company's current views with respect to future events and are subject
to various risks, uncertainties and assumptions. These risks,
uncertainties and assumptions are discussed in Valero GP Holdings,
LLC's filings with the Securities and Exchange Commission.

-0-
*T
                       Valero GP Holdings, LLC
                  Consolidated Financial Information
                          September 30, 2006
(unaudited, thousands of dollars, except unit data and per unit data)

                                                   Three Months Ended
                                                   September 30, 2006
                                                   -------------------
 Statement of Income Data:
    Equity in earnings of Valero L.P.                         $11,637

    General and administrative expenses                          (877)
    Other expense, net                                           (286)
    Interest expense                                               (6)
    Interest expense - affiliated                                (901)
                                                   -------------------

 Income before income tax benefit                               9,567
    Income tax expense benefit                                    130
                                                   -------------------
 Net income                                                    $9,697
                                                   ===================

 Basic net income per unit                                      $0.23
 Weighted average number of basic units
  outstanding                                              42,500,000

 Diluted net income per unit                                    $0.23
 Weighted average number of diluted units
  outstanding                                              42,500,626


 Equity in Earnings of Valero L.P.:
   General partner interest (2%)                                 $753
   General partner incentive distribution                       3,909
   Direct charges to Valero GP Holdings, LLC
    (Note 1)                                                     (352)
                                                   -------------------
   General partner's interest in earnings of
    Valero L.P.                                                 4,310
   Limited partner interest in earnings of
    Valero L.P.                                                 8,048
   Amortization of step-up in basis related to
    Valero L.P.'s assets and liabilities                         (721)
                                                   -------------------
 Equity in earnings of Valero L.P.                            $11,637
                                                   ===================


 Distributable Cash (Note 2):
    Cash distributions expected from Valero
     L.P. associated with:
         General partner interest:
            General partner interest (2%)                        $955
            Incentive distribution rights                       3,909
         Limited partner interest-common units                  9,351
                                                   -------------------
    Total cash distributions expected from
     Valero L.P.                                               14,215
    Deduct expenses of Valero GP Holdings, LLC:
         General and administrative expenses                     (877)
         Income tax benefit                                       130
         Interest expense - non-affiliated                         (6)
                                                   -------------------
             Distributable cash                               $13,462
                                                   ===================

 Cash distributions to be paid to the
  unitholders of Valero GP Holdings, LLC:
    Distribution per unit (prorated $0.32 per
     unit distribution) (Note 3)                              $0.2574
                                                   ===================

    Distributions to be paid to public
     unitholders (17,250,000 units)                             4,440
    Distributions to be paid to Valero Energy
     (25,250,000 units) (Note 3)                                6,499
                                                   -------------------
         Cash distributions for the period from
          July 19, 2006 to September 30, 2006                 $10,939
                                                   ===================

         Cash distributions to Valero Energy
          for the period from July 1, 2006 to
          July 18, 2006                                        $2,661
                                                   ===================

 Total distributions                                          $13,600
                                                   ===================
*T

-0-
*T
                       Valero GP Holdings, LLC
                  Consolidated Financial Information
                          September 30, 2006
       (unaudited, thousands of dollars, except per unit data)

Notes:

1. We reimbursed Valero L.P. for these costs, and we were in turn
 reimbursed by Valero Energy. Generally accepted accounting principles
 require us to record this as an increase in our investment of Valero
 L.P. and for Valero L.P. to record the full expense and reimbursement
 as a capital contribution. Valero L.P. allocated 100% of these costs
 to us because we paid the amounts in full.


2. Valero GP Holdings, LLC utilizes distributable cash as a financial
 measure, which is not defined in United States generally accepted
 accounting principles. Management uses this financial measure because
 it is a widely accepted financial indicator used by investors to
 compare general partner performance. In addition, management believes
 that this measure provides investors an enhanced perspective of the
 ability to make a minimum quarterly distribution. Distributable cash
 is not intended to represent cash flows for the period, nor is it
 presented as an alternative to net income. It should not be
 considered in isolation or as substitutes for a measure of
 performance prepared in accordance with United States generally
 accepted accounting principles.


The following is a reconciliation of net income to distributable cash
 to net cash provided by operating activities (in thousands):


                                                   Three Months Ended
                                                   September 30, 2006
                                                   -------------------
Net Income                                                     $9,697

Adjustments to derive Distributable Cash:
   Equity in earnings of Valero L.P.                          (11,637)
   Quarterly distribution expected from Valero L.P.            14,215
   Other expense, net                                             286
   Interest expense - affiliated (a)                              901
                                                   -------------------
Distributable cash                                             13,462

Adjustments to Distributable Cash to derive Net
 Cash Provided by Operating Activities:
   Quarterly distribution expected from Valero L.P.           (14,215)
   Cash distribution of equity earnings received
    from Valero L.P.                                           11,637
   Interest expense - affiliated (a)                             (901)
   Net effect of changes in operating accounts                    221
                                                   -------------------
Net cash provided by operating activities                     $10,204
                                                   ===================

(a) In connection with our initial public offering, Valero Energy made
 a capital contribution to us in the form of a note receivable,
 including affiliated interest expense. Therefore, affiliated interest
 expense is excluded from the calculation of distributable cash.


3. The quarterly distribution for the period between the closing of
 the offering on July 19, 2006 and September 30, 2006 based on $0.32
 per unit is prorated. The following is the calculation of the
 prorated per unit distribution:

                                                         (C) x (D) =
       (A)          (B)   (A) / (B) = (C)      (D)            (E)
Days in quarter
 after IPO        Total                                 Prorated per
(July 19 -        days in  Percentage of    Per unit         unit
 September 30)    quarter  days after IPO  distribution  distribution
----------------------------------------------------------------------
       74           92         80.43%         $0.32        $0.2574
*T