UGI CORP /PA/ (UGI)

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MD&A discusses our results of operations for Fiscal 2024 and Fiscal 2023, and our financial condition. For discussion of our results of operations and cash flows for Fiscal 2023 compared with Fiscal 2022, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Fiscal 2023 Annual Report on Form 10-K, filed with the SEC on November 28, 2023. MD&A should be read in conjunction with Items 1 and 2, “Business and Properties,” Item 1A, “Risk Factors,” and the Consolidated Financial Statements, including “Segment Information” in Note 22 to Consolidated Financial Statements.

Because most of our businesses sell or distribute energy products used in large part for heating purposes, our results are significantly influenced by temperatures in our service territories, particularly during the heating-season months of October through March. Accordingly, our results of operations, after adjusting for the effects of gains and losses on derivative instruments not associated with current-period transactions as further discussed below, are significantly higher in our first and second fiscal quarters.

Recent Developments

Disposition of UGID

In September 2024, Energy Services completed the sale of all of its ownership interest in UGID, which owns and operates the Hunlock Creek Energy Center located in Wilkes-Barre, PA, a 169-megawatt natural gas-fueled electricity generating station, for net cash proceeds of $43 million. In connection with the sale, the Company recorded a pre-tax loss of $66 million in Fiscal 2024.

Impairment of Goodwill

During the fourth quarter of Fiscal 2024, as part of its annual goodwill impairment assessment, the Company performed a quantitative assessment for its AmeriGas Propane reporting unit. In addition, during the third quarter of Fiscal 2023, the Company identified interim impairment indicators related to goodwill within the AmeriGas Propane reporting unit: (1) AmeriGas Partners issued $500 million of Senior Notes at an interest rate of 9.375%, which was significantly higher than the interest rates on the other AmeriGas Propane debt obligations; and (2) financial projections for the AmeriGas Propane reporting unit were reduced significantly compared to previous forecasts following declines in gross margins and customer retention and higher operating expenses. The Company concluded that these events constituted triggering events that indicate that the AmeriGas Propane goodwill may be impaired and, as such, performed an interim impairment test of its goodwill as of May 31, 2023.

Based on our evaluations in Fiscal 2024 and Fiscal 2023, the estimated fair value of the AmeriGas Propane reporting unit was determined to be less than its carrying value. As a result, the Company recorded a non-cash pre-tax goodwill impairment charge of $195 million and $656 million in Fiscal 2024 and Fiscal 2023, respectively, included in “Impairment of goodwill” on the Consolidated Statement of Income, to reduce the carrying value of AmeriGas Propane to its fair value. The Company calculated the deferred tax effect using the simultaneous equation method.

The performance of the AmeriGas Propane reporting unit and the potential for future developments in the global economic environment, including the prospect of higher interest rates, introduces a heightened risk for additional impairment in the AmeriGas Propane reporting unit. If there is continued deterioration in the results of operations, a portion or all of the remaining recorded goodwill for the AmeriGas Propane reporting unit, which was $1.2 billion as of September 30, 2024, could be subject to further impairment.

See Note 12 to Consolidated Financial Statements for additional information.

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UGI International Energy Marketing Transactions

As of the end of the first quarter of Fiscal 2024, pursuant to its previously announced decision, the Company had exited substantially all of its European energy marketing business which primarily marketed natural gas and electricity to customers through third-party distribution systems in France, Belgium, the Netherlands and the United Kingdom.

France. In October 2023, UGI International, through a wholly-owned subsidiary, sold substantially all of its energy marketing business located in France for a net cash payment to the buyer of $29 million. In conjunction with the sale, the Company recorded a pre-tax loss of $29 million in Fiscal 2024, which amount principally represents the net payment to the buyer. The carrying values of the assets and liabilities associated with this business, principally comprising certain commodity derivative instruments, energy certificates and certain working capital, were not material.

Belgium. In September 2023, UGI International, through a wholly-owned subsidiary, sold its energy marketing business located in Belgium for a net cash payment to the buyer of $3 million. Pursuant to the sale agreement, the Company transferred to the buyer certain assets, principally comprising customer and energy broker contracts. In conjunction with the sale, the Company recorded a pre-tax loss of $6 million in Fiscal 2023, which includes the net payment to the buyer, the write-off of certain prepaid energy broker payments and associated transaction costs and fees.

United Kingdom. In October 2022, UGI International, through a wholly-owned subsidiary, sold its natural gas marketing business located in the U.K. for a net cash payment to the buyer of $19 million. In conjunction with the sale, during the first quarter of Fiscal 2023, the Company recorded a pre-tax loss of $215 million substantially all of which was due to the non-cash transfer of commodity derivative instruments associated with the business.

Netherlands. In September 2023, a substantial number of DVEP’s customers agreed to modify their energy marketing contracts whereby the Company would continue to provide the delivery of electricity and natural gas at fixed prices through December 31, 2023, with the Company’s obligations to provide future services terminated effective January 1, 2024. As consideration for the early termination of such contracts, the Company agreed to make cash payments to the customers equal to the fair values of specific commodity derivative instruments associated with periods after December 31, 2023. During the first quarter of Fiscal 2024, the Company settled the commodity derivative instruments for a gain of $46 million, which represented the fair value of the specific commodity derivative instruments associated with periods after December 31, 2023 and reduced its revenues from these customers by $42 million, which represented the pro-rated performance obligation from October 1, 2023 through December 31, 2023.

In conjunction with the wind-down of its European energy marketing business, in December 2023, DVEP completed a sale of a substantial portion of its power purchase agreements to a third party for a total consideration to the buyer of $5 million. In conjunction with the sale, the Company recorded a pre-tax loss of $5 million.

During the first quarter of Fiscal 2023, the Company recorded a $19 million pre-tax impairment charge to reduce the carrying values of certain assets associated with its energy marketing business in the Netherlands, comprising property, plant and equipment and intangible assets.

See Note 5 to Consolidated Financial Statements for additional information.

Non-GAAP Financial Measures

UGI management uses “adjusted net income attributable to UGI Corporation” and “adjusted diluted earnings per share,” both of which are non-GAAP financial measures, when evaluating UGI’s overall performance. Management believes that these non-GAAP measures provide meaningful information to investors about UGI’s performance because they eliminate gains and losses on commodity and certain foreign currency derivative instruments not associated with current-period transactions and other significant discrete items that can affect the comparison of period-over-period results.

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UGI does not designate its commodity and certain foreign currency derivative instruments as hedges under GAAP. Volatility in net income attributable to UGI Corporation can occur as a result of gains and losses on such derivative instruments not associated with current-period transactions. These gains and losses result principally from recording changes in unrealized gains and losses on unsettled commodity and certain foreign currency derivative instruments and, to a much lesser extent, certain realized gains and losses on settled commodity derivative instruments that are not associated with current-period transactions. However, because these derivative instruments economically hedge anticipated future purchases or sales of energy commodities, or in the case of certain foreign currency derivatives, reduce volatility in anticipated future earnings associated with our foreign operations, we expect that such gains or losses will be largely offset by gains or losses on anticipated future energy commodity transactions or mitigate volatility in anticipated future earnings. Non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute for, the comparable GAAP measures.

The following tables reflect the adjustments referred to above and reconcile net income (loss) attributable to UGI Corporation, the most directly comparable GAAP measure, to adjusted net income attributable to UGI Corporation, and reconcile diluted earnings per share, the most directly comparable GAAP measure, to adjusted diluted earnings per share:

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(a)Corporate & Other includes certain adjustments made to our reporting segments in arriving at net income attributable to UGI Corporation. These adjustments have been excluded from the segment results to align with the measure used by our CODM in assessing segment performance and allocating resources. See Note 22 to Consolidated Financial Statements for additional information related to these adjustments, as well as other items included within Corporate & Other.

(b)Income taxes associated with pre-tax adjustments determined using statutory business unit tax rates.

(c)The loss per share for Fiscal 2023, was determined excluding the effect of 6.13 million dilutive shares as the impact of such shares would have been antidilutive due to the net loss for the period, while the adjusted earnings per share for Fiscal 2023, was determined based upon fully diluted shares of 215.94 million.

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Executive Overview

Fiscal 2024 Compared with Fiscal 2023

Net income (loss) attributable to UGI Corporation was $269 million (equal to $1.25 per diluted share) and $(1,502) million (equal to $(7.16) per diluted share) in Fiscal 2024 and Fiscal 2023, respectively. These results include net gains (losses) from changes in unrealized commodity derivative instruments and certain foreign currency derivative instruments of $38 million and $(1,252) million in Fiscal 2024 and Fiscal 2023, respectively. The higher net gains from changes in these derivative instruments during Fiscal 2024, principally reflects significantly less volatility in commodity energy prices in Europe following unprecedented volatility in such prices during Fiscal 2023 and the effects of significantly lower energy marketing activities in Europe resulting from the exit of substantially all of UGI International’s energy marketing business.

Net income attributable to UGI Corporation in Fiscal 2024 also includes (1) a $192 million loss associated with impairment of AmeriGas Propane goodwill; (2) $69 million of costs associated with the exit of our UGI International energy marketing business in Europe, principally reflecting wind-down activities in the Netherlands and the loss on the sale of the energy marketing business located in France; (3) restructuring costs of $56 million largely attributable to a reduction in workforce and related costs, primarily at UGI International; (4) a $55 million loss on disposal of UGID; (5) $30 million of impairments associated with equity method investments and certain other assets at UGI International; (6) external advisory fees of $19 million associated with AmeriGas operations enhancement for growth project; and (7) loss on extinguishments of debt of $6 million, primarily at AmeriGas Propane.

Net loss attributable to UGI Corporation in Fiscal 2023 also includes (1) a $660 million loss associated with impairment of AmeriGas Propane goodwill; (2) $181 million of costs associated with the exit of our UGI International energy marketing business in Europe, principally reflecting loss on the sale of the energy marketing business located in the U.K. and Belgium and wind-down activities in the Netherlands; (3) external advisory fees of $18 million associated with AmeriGas operations enhancement for growth project; (4) a $10 million net gain on sale of UGI Corporation’s headquarters building; (5) loss on extinguishments of debt of $7 million at AmeriGas Propane; and (6) business transformation expenses of $7 million associated with corporate support functions.

Adjusted net income attributable to UGI Corporation was $658 million (equal to $3.06 per diluted share) and $613 million (equal to $2.84 per diluted share) in Fiscal 2024 and Fiscal 2023, respectively. The increase in adjusted net income attributable to UGI Corporation during Fiscal 2024 reflects higher earnings contributions primarily from our UGI International and Midstream & Marketing segments and, to a lesser extent, our Utilities segment. Such increase was partially offset by lower earnings contributions from our AmeriGas Propane segment. In Fiscal 2024, temperatures in all of our business segments were warmer than the prior year.

Utilities adjusted net income increased $18 million in Fiscal 2024 compared to the prior year. The increase was largely attributable to higher total margin due in large part to increases in base rates at PA Gas Utility, Mountaineer and Electric Utility during Fiscal 2024, increases in DSIC revenues and impacts from customer growth.

Midstream & Marketing adjusted net income increased $45 million in Fiscal 2024 compared to the prior year. The increase is primarily attributable to higher total margin from capacity management activities and lower income taxes reflecting higher investment tax credits in Fiscal 2024.

UGI International’s adjusted net income increased $90 million in Fiscal 2024 compared to the prior year. The increase is mainly attributable to (1) higher margin contributions from our LPG business, principally reflecting the benefit from higher average unit margins attributable to strong margin management efforts; (2) lower operating and administrative expenses; and (3) lower income taxes primarily due to higher income tax benefits associated with interest deduction carryforwards.

AmeriGas Propane’s adjusted net (loss) income was $(23) million and $71 million in Fiscal 2024 and Fiscal 2023, respectively, principally reflecting lower total margin, primarily attributable to lower retail propane volumes sold, partially offset by lower operating and administrative expenses in Fiscal 2024.

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Analysis of Segment Results

The following analysis compares results of operations by our reportable segments for Fiscal 2024 and Fiscal 2023:

(a)Total margin represents total revenues less total cost of sales and revenue-related taxes (i.e. gross receipts and business and occupation taxes) of $24 million each during Fiscal 2024 and Fiscal 2023. For financial statement purposes, revenue-related taxes are included in “Operating and administrative expenses” on the Consolidated Statements of Income (but are excluded from operating expenses presented above).

(b)Deviation from average heating degree days is determined on a 10-year period utilizing volume-weighted weather data based on weather statistics provided by NOAA for airports located within Gas Utility service territories.

Temperatures in Gas Utility’s service territories during Fiscal 2024 were 16.0% warmer than normal and 4.5% warmer than the prior year. The decrease in Gas Utility core market volumes during Fiscal 2024 is largely related to the warmer weather, partially offset by growth in the core market customers. Notwithstanding the decrease in core market volume, total Gas Utility volume slightly increased during Fiscal 2024, primarily reflecting higher large firm delivery service volumes. The increase in Electric Utility distribution sales volumes during Fiscal 2024 is primarily attributable to customer growth.

Revenues decreased $256 million in Fiscal 2024 reflecting a $260 million decrease in Gas Utility revenues, partially offset by a $4 million increase in Electric Utility revenues. The decrease in Gas Utility revenues was largely attributable to lower PGC and PGA rates reflecting lower natural gas costs and, to a lesser extent, the lower core market volumes and lower off-system sales. These decreases were partially offset by the effects of increases in base rates for PA Gas Utility (effective October 1, 2023) and Mountaineer (effective January 1, 2024), increases in DSIC revenues and the effects of the weather normalization adjustments for PA Gas Utility (effective November 1, 2022). Electric Utility revenues slightly increased during Fiscal 2024, largely reflecting higher base rates and sales volumes, partially offset by lower DS rates.

Cost of sales was $674 million in Fiscal 2024 compared with $977 million in Fiscal 2023. The decrease of $303 million is primarily attributable to Gas Utility ($295 million) mainly reflecting lower PGC and PGA rates, the lower core market volumes and, to a lesser extent, lower cost of sales associated with off-system sales. Electric Utility cost of sales decreased $8 million in Fiscal 2024, largely reflecting the lower DS rates, partially offset by higher sales volumes.

Total margin increased $47 million during Fiscal 2024, primarily attributable to higher Gas Utility total margin ($35 million), notwithstanding the warmer weather, mainly reflecting the effects of increases in base rates for PA Gas Utility (effective October 1, 2023) and Mountaineer (effective January 1, 2024), the increases in DSIC revenues, the impacts from growth in the core market customers and the effects of the weather normalization adjustments for PA Gas Utility (effective November 1, 2022) . Electric Utility margin increased $12 million during Fiscal 2024, mainly reflecting the increase in base rates effective October 1, 2023 and the higher sales volumes.

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Operating income and earnings before interest expense and income taxes increased $37 million and $35 million, respectively, during Fiscal 2024. These increases largely reflect the previously mentioned increase in total margin ($47 million) and, to a lesser extent, lower operating and administrative expenses ($5 million), partially offset by higher depreciation expense ($14 million). The lower operating and administrative expenses primarily reflects lower uncollectible accounts expenses. The higher depreciation expense compared to the prior year reflects the effects of continued distribution system capital expenditure activity.

(a)Total margin represents total revenues less total cost of sales.

Average temperatures across Midstream & Marketing’s energy marketing territory during Fiscal 2024 were 13.3% warmer than normal and 4.9% warmer than the prior year.

Revenues decreased $478 million during Fiscal 2024, primarily reflecting lower revenues from natural gas marketing activities ($453 million) that were principally impacted by lower natural gas prices and lower volumes resulting from the warmer weather, partially offset by higher capacity management activities. The decrease also reflects, to a much lesser extent, lower revenues from renewable energy ($22 million).

Cost of sales decreased $496 million during Fiscal 2024, primarily reflecting lower natural gas costs ($488 million) related to the previously mentioned natural gas marketing activities and, to a much lesser extent, lower cost of sales related to renewable energy ($14 million).

Midstream & Marketing total margin increased $18 million in Fiscal 2024, primarily reflecting higher margins from capacity management activities ($31 million), partially offset by lower total margin from renewable energy ($8 million) and lower natural gas gathering and processing activities ($7 million).

Operating income and earnings before interest expense and income taxes during Fiscal 2024 increased $16 million and $22 million, respectively. The increase in operating income is largely attributable to the higher total margin ($18 million) and lower operating and administrative expenses ($8 million), partially offset by lower other operating income ($10 million). The lower operating and administrative expenses during Fiscal 2024 primarily reflects lower salary and benefits expenses and maintenance expenses. The increase in earnings before interest expense and income taxes principally reflects the higher operating income ($16 million) and, to a lesser extent, higher income from equity investees ($5 million).

(a)Total margin represents total revenues less total cost of sales.

(b)Deviation from average heating degree days is determined on a rolling 10-year period utilizing volume-weighted weather data at locations in our UGI International service territories.

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Average temperatures during Fiscal 2024 were 11.8% warmer than normal and 2.2% warmer than Fiscal 2023. Notwithstanding the warmer weather, total LPG retail gallons sold during Fiscal 2024 was comparable to Fiscal 2023 as the impacts from warmer weather and lower cylinder volumes were substantially offset by growth from natural gas conversions to LPG and higher auto gas volumes sold.

UGI International base-currency results are translated into U.S. dollars based upon exchange rates experienced during the reporting periods. The functional currency of a significant portion of our UGI International results is the euro and, to a much lesser extent, the British pound sterling. During Fiscal 2024 and Fiscal 2023, the average unweighted euro-to-dollar translation rates were approximately $1.08 and $1.07, respectively, and the average unweighted British pound sterling-to-dollar translation rates were approximately $1.27 and $1.23, respectively. Fluctuations in these foreign currency exchange rates can have a significant impact on the individual financial statement components discussed below. The Company uses forward foreign currency exchange contracts entered into over multi-year periods to reduce the volatility in earnings that may result from such changes in foreign currency exchange rates. These forward foreign currency exchange contracts resulted in realized net gains of $11 million and $15 million in Fiscal 2024 and Fiscal 2023, respectively.

Average wholesale prices for propane and butane during Fiscal 2024 in northwest Europe were approximately 2% and 5% lower, respectively, compared to Fiscal 2023. Revenues and cost of sales decreased $686 million and $744 million, respectively, in Fiscal 2024. The decrease in revenues and cost of sales principally reflects significantly lower energy marketing activities during Fiscal 2024 resulting from the exit of substantially all of UGI International’s energy marketing business in Belgium, France and the Netherlands in Fiscal 2024. The decrease in revenues from the energy marketing activities was partially offset by the translation effects of the stronger foreign currencies (approximately $52 million) and LPG price increases across Europe. The decrease in cost of sales was also attributable to lower LPG product costs, partially offset by the translation effects of the stronger foreign currencies (approximately $32 million).

Total margin increased $58 million during Fiscal 2024 primarily reflecting higher margin contributions primarily from our LPG business, the translation effects of the stronger foreign currencies (approximately $20 million) and, to a much lesser extent, higher margin contributions from our energy marketing activities. The higher margin from our LPG business reflects the effects of higher average unit margins attributable to strong margin management efforts, partially offset by the impacts from the lower LPG volumes sold. The slightly higher margin from our energy marketing activities primarily reflects the impact of the aforementioned exit of substantially all of UGI International’s energy marketing business.

Operating income and earnings before interest expense and income taxes increased $96 million and $89 million, respectively, during Fiscal 2024. The increase in operating income principally reflects the increase in total margin ($58 million) and lower operating and administrative expenses ($45 million), partially offset by lower other operating income ($6 million). The lower operating and administrative expenses during Fiscal 2024 primarily reflects (1) the impact of the aforementioned exit of substantially all of UGI International’s energy marketing business and (2) lower personnel-related costs and lower maintenance and advertising expenses in our LPG business, partially offset by the effects of inflationary increases and the translation effects of the stronger foreign currencies (approximately $12 million). The increase in earnings before interest expense and income taxes in Fiscal 2024 largely reflects the increase in operating income ($96 million), partially offset by lower realized gains on foreign currency exchange contracts ($4 million) entered into in order to reduce volatility in UGI International earnings resulting from the effects of changes in foreign currency exchange rates.

(a)Total margin represents revenues less cost of sales.

(b)Deviation from average heating degree days is determined on a rolling 10-year period utilizing volume-weighted weather data based on weather statistics provided by NOAA for 344 regions in the United States, excluding Alaska and Hawaii.

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Average temperatures during Fiscal 2024 were 8.0% warmer than normal and 8.0% warmer than the prior year. Total retail gallons sold decreased 10% during Fiscal 2024 primarily due to continuing customer attrition and the effects of the warmer weather.

Average daily wholesale propane commodity prices during Fiscal 2024 at Mont Belvieu, Texas, one of the major supply points in the U.S., were comparable to such prices during Fiscal 2023. Total revenues decreased $310 million during Fiscal 2024 largely reflecting the lower retail volumes sold ($228 million), the effects of lower average retail propane selling prices ($39 million) and lower wholesale revenues ($28 million).

Total cost of sales decreased $191 million during Fiscal 2024 largely reflecting the lower retail propane volumes sold ($109 million), the lower retail propane product costs ($37 million) and lower wholesale cost of sales ($26 million).

Total margin decreased $119 million in Fiscal 2024, substantially all of which was attributable to the lower retail propane volumes sold.

Operating income and earnings before interest expense and income taxes decreased $126 million in Fiscal 2024 primarily reflecting the decrease in total margin ($119 million) and lower other operating income ($23 million), mainly resulting from lower gains on sales of fixed assets during Fiscal 2024. These decreases were partially offset by lower operating and administrative expenses ($17 million), reflecting, among other things, lower compensation and advertising expenses, partially offset by higher general insurance costs and higher vehicle expenses.

Interest Expense and Income Taxes

Our consolidated interest expense during Fiscal 2024 was $394 million compared to $379 million during the prior year. The increase in interest expense is largely attributable to higher average long-term debt outstanding principally at Utilities and UGI Corporation, partially offset by lower average borrowings under our credit agreements and lower average long-term debt outstanding at AmeriGas Propane.

Our effective income tax rate decreased in Fiscal 2024 compared to Fiscal 2023, primarily due to (1) the release of a valuation allowance related to a notional interest deduction at our UGI International segment that exceeded the release of a valuation allowance in the prior year related to foreign tax credits; (2) higher investment tax credits available in Fiscal 2024 due to a larger level of project completions compared to the prior year; and (3) lower state income taxes in accordance with the lower statutory rate in Pennsylvania. These decreases were partially offset by the effect of establishing a full valuation allowance against current year losses in the Netherlands.

For additional information on our income taxes, including tax law changes, see Note 7 to Consolidated Financial Statements.

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Financial Condition and Liquidity

The Company expects to have sufficient liquidity including cash on hand and available borrowing capacity, to continue to support long-term commitments and ongoing operations. Our total available liquidity balance, comprising cash and cash equivalents and available borrowing capacity on our revolving credit facilities, totaled approximately $1.5 billion and $1.6 billion at September 30, 2024 and 2023, respectively. In October 2024, the Company used the proceeds from the borrowings under the UGI Corporation 2025 Credit Agreement to repay $630 million of long-term debt outstanding under the UGI Corporation Credit Facility Agreement which was scheduled to mature in August 2025 (see “Subsequent Event” below for further discussion). As a result, borrowings outstanding under the UGI Corporation Credit Facility Agreement totaling $630 million at September 30, 2024 have been classified as long-term debt on the Consolidated Balance Sheet. As of September 30, 2024, except for $218 million outstanding principal balance of AmeriGas Partners 5.50% Senior Notes maturing in May 2025, the Company does not have any senior notes or term loans maturing in the next twelve months. UGI and its subsidiaries were in compliance with all of its debt covenants as of September 30, 2024.

We depend on both internal and external sources of liquidity to provide funds for working capital and to fund capital requirements. Our short-term cash requirements not met by cash from operations are generally satisfied with borrowings under credit facilities and, in the case of Midstream & Marketing, also from a Receivables Facility. Long-term cash requirements are generally met through the issuance of long-term debt or equity securities. We believe that each of our business units has sufficient liquidity in the forms of cash and cash equivalents on hand; cash expected to be generated from operations; credit facility and Receivables Facility borrowing capacity; and the ability to obtain long-term financing to meet anticipated contractual and projected cash commitments. Issuances of debt and equity securities in the capital markets and additional credit facilities may not, however, be available to us on acceptable terms.

The primary sources of UGI’s cash and cash equivalents are the dividends and other cash payments made to UGI or its corporate subsidiaries by its principal business units. Our cash and cash equivalents totaled $213 million and $241 million at September 30, 2024 and 2023, respectively. Excluding cash and cash equivalents that reside at UGI’s operating subsidiaries, our cash and cash equivalents totaled $72 million and $51 million at September 30, 2024 and 2023, respectively. Such cash is available to pay dividends on UGI Common Stock and for investment purposes.

During Fiscal 2024 and Fiscal 2023, our principal business units paid cash dividends and made other cash payments to UGI and its subsidiaries as follows:

Common and Preferred Stock

Equity Units

Pursuant to the terms of the Equity Units issued in Fiscal 2021, in May 2024, the Company announced the unsuccessful final remarketing of its Convertible Preferred Stock. As a result, each holder of an Equity Unit received 2.2973 shares of UGI common stock, without par value, with cash paid in lieu of any fractional shares. During the third quarter of Fiscal 2024, the Company (i) made the final contract adjustment payment to settle the 2024 Purchase Contract in full; (ii) canceled the Convertible Preferred Stock; and (iii) in a non-cash transaction, converted the Equity Units into 5,054,030 shares of UGI Common Stock and issued the shares to the holders of the Equity Units under the 2024 Purchase Contract.

See Note 13 to Consolidated Financial Statements for additional information.

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Dividends

Quarterly dividends per share of UGI Common Stock paid during Fiscal 2024 and Fiscal 2023 were as follows:

On November 20, 2024, UGI’s Board of Directors declared a cash dividend equal to $0.375 per common share. The dividend will be payable on January 1, 2025, to shareholders of record on December 16, 2024.

Repurchases of Common Stock

During Fiscal 2024 there were no repurchases of UGI Common Stock. During Fiscal 2023, the Company repurchased 600,000 shares of its Common Stock at a total purchase price of $22 million. For additional information on the authorization of these repurchases, see Note 13 to Consolidated Financial Statements.

Long-term Debt and Credit Facilities

The Company’s debt outstanding at September 30, 2024 and 2023, comprised the following:

Significant Financing Activities

The following significant financing activities occurred during Fiscal 2024. See Note 6 to Consolidated Financial Statements for additional information on these transactions.

Utilities

Mountaineer 2023 Credit Agreement. In April 2024, Mountaineer entered into the fourth amendment to the Mountaineer 2023 Credit Agreement, which extends the maturity date of the agreement from November 2024 to December 2025.

UGI Utilities Senior Notes. In November 2023, UGI Utilities entered into a Note Purchase Agreement with a consortium of lenders. Pursuant to the Note Purchase Agreement, UGI Utilities issued (1) $25 million aggregate principal amount of 6.02% Senior Notes due November 30, 2030; (2) $150 million aggregate principal amount of 6.10% Senior Notes due November 30, 2033; and (3) $75 million aggregate principal amount of 6.40% Senior Notes due November 30, 2053. The net proceeds from these issuances were used to reduce short-term borrowings and for general corporate purposes.

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UGI Utilities 2023 Credit Agreement. In November 2023, UGI Utilities entered into the UGI Utilities 2023 Credit Agreement providing for borrowings up to $375 million (including a $50 million sublimit for letters of credit and a $38 million sublimit for swingline loans). UGI Utilities may request an increase in the amount of loan commitments under the credit agreement to a maximum aggregate amount of $125 million. The credit agreement is scheduled to expire November 2028. Borrowings under the credit agreement may be used to refinance UGI Utilities existing indebtedness and for general corporate purposes and ongoing working capital needs of UGI Utilities.

Midstream & Marketing

Energy Services Term Loan Credit Agreement. In June 2024, Energy Services entered into the second amendment to the Energy Services Term Loan Credit Agreement. The Energy Services Term Loan Credit Agreement was amended primarily to amend the applicable margins on borrowings to 2.50% per annum for Term SOFR loans and 1.50% per annum for base rate loans.

Energy Services Credit Agreement. In May 2024, Energy Services entered into the fourth amendment to the Energy Services Credit Agreement. The amended credit agreement provides for borrowings up to $300 million, including a $50 million sublimit for letters of credit. Borrowings under the credit agreement can be used for general corporate purposes and ongoing working capital needs of Energy Services and is scheduled to expire in May 2028.

UGI International

UGI International 2023 Credit Agreement. In June 2024, UGI International, LLC and its indirect wholly-owned subsidiary, UGI International Holdings B.V., entered into the first amendment to the UGI International 2023 Credit Agreement, which provides for the establishment and incorporation of specific key performance indicators with respect to Environmental, Social and Governance targets, whereby based on UGI International, LLC’s performance against the key performance indicators, certain adjustments of up to 0.05% in total to the applicable margin may be made.

AmeriGas Propane

AmeriGas Senior Secured Revolving Credit Facility. In August 2024, AmeriGas OLP entered into the AmeriGas Senior Secured Revolving Credit Facility, a five-year senior secured revolving credit facility maturing August 2029, providing for commitments up to $200 million (including a $20 million sublimit for letters of credit), subject to the terms and conditions of the agreement. Borrowings under this credit facility were used to pay off borrowings under the 2022 AmeriGas OLP Credit Agreement and are available for general corporate purposes and ongoing working capital needs of AmeriGas OLP. Borrowings under this credit agreement are secured by certain assets of AmeriGas OLP, including, but not limited to, accounts receivables and inventory, and are guaranteed by any material subsidiaries of AmeriGas OLP. In addition, this credit facility requires AmeriGas OLP to abide by certain financial covenants from time to time including a minimum fixed charge coverage ratio and a senior notes liquidity covenant, each as defined in the agreement. Concurrently with entering into AmeriGas Senior Secured Revolving Credit Facility, AmeriGas OLP terminated the 2022 AmeriGas OLP Credit Agreement.

AmeriGas Partners Senior Notes. In June 2024, pursuant to an early tender offer, AmeriGas Partners and AmeriGas Finance Corp, repurchased $475 million aggregate principal amount of the 5.50% Senior Notes due May 2025. Cash on hand, a $315 million cash contribution from the Company and other sources of liquidity were used for the repurchase. Following the repurchase, $218 million aggregate principal amount of the 5.50% Senior Notes remain outstanding at September 30, 2024.

In March 2024, AmeriGas Partners and AmeriGas Finance Corp entered into separate, privately negotiated repurchase agreements with a limited number of holders of the outstanding senior notes and repurchased $38 million aggregate principal amount of the senior notes.

UGI Corporation

UGI Corporation Credit Facility Agreement. In April 2024, UGI entered into the fourth amendment to the UGI Corporation Credit Facility Agreement which, among other things, extended the maturity date of substantially all of the borrowings under the UGI Corporation Credit Facility Agreement to August 29, 2025. Amounts outstanding under the amended agreement were repaid early in October 2025 with proceeds from the UGI Corporation 2025 Credit Agreement and the agreement was terminated.

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UGI Corporation Senior Notes. In June 2024, UGI issued, in an underwritten private placement, an aggregate $700 million principal amount of 5.00% UGI Corporation Senior Notes due June 2028. The UGI Corporation Senior Notes are senior, unsecured obligations and rank equal in right of payment with our existing and future senior, unsecured indebtedness. The net proceeds from the issuance of the UGI Corporation Senior Notes of approximately $682 million, after underwriters fees and other debt issuance costs, were used (1) to repay a portion of borrowings under the UGI Corporation Credit Facility Agreement; (2) to make a cash contribution of $315 million to the Partnership to repay a portion of its 5.50% Senior Notes as described above; and (3) for general corporate purposes.

The UGI Corporation Senior Notes are convertible subject to the occurrence of certain events and circumstances. Before March 1, 2028, noteholders will have the right to convert their notes only upon the occurrence of certain events. From and after March 1, 2028, holders of the UGI Corporation Senior Notes may convert their notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. As of September 30, 2024, none of the events permitting the noteholders to convert their notes early occurred. Accordingly, the UGI Corporation Senior Notes are classified as “Long-term debt” on the Consolidated Balance Sheet at September 30, 2024.

Upon conversion, the Company will pay cash up to the aggregate principal amount of the UGI Corporation Senior notes. For the remainder of the amount in excess of the aggregate principal amount, if applicable, the Company will have the sole right to elect the settlement method upon conversion which can be either entirely in cash or in a combination of cash and shares of its common stock. The default settlement method as defined in the agreement is combination settlement with a specified dollar amount of $1,000 per $1,000 principal of the UGI Corporation Senior Notes, and any incremental value settled in shares of the Company’s common stock. The initial conversion rate is 36.2319 shares of the Company’s common stock per $1,000 principal amount of the UGI Corporation Senior Notes, which represents an initial conversion price of approximately $27.60 per share of the Company’s common stock. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

The Company may not redeem the UGI Corporation Senior Notes at its option before maturity.

Subsequent Events

UGI Utilities Senior Notes. In November 2024, UGI Utilities entered into a Note Purchase Agreement with a consortium of lenders. Pursuant to the Note Purchase Agreement, UGI Utilities issued $50 million aggregate principal amount of 5.24% Senior Notes due November 30, 2029, and $125 million aggregate principal amount of 5.52% Senior Notes due November 30, 2034. The Note Purchase Agreement contains customary covenants and default provisions and requires compliance with certain financial covenants including a leverage ratio and priority debt ratio as defined in the agreement. These senior notes are unsecured and rank equally with UGI Utilities’ existing outstanding senior debt. The net proceeds from these issuances were used to reduce short-term borrowings and for general corporate purposes.

AmeriGas Senior Secured Revolving Credit Facility. In October 2024, AmeriGas OLP amended the AmeriGas Senior Secured Revolving Credit Facility to increase total commitments to a total of $300 million.

UGI Corporation 2025 Credit Agreement. In October 2024, UGI entered into the UGI Corporation 2025 Credit Agreement, providing a $475 million revolving credit facility, including a $10 million sublimit for letters of credit, and a $400 million term loan facility. Borrowings under the credit agreement can be used for general corporate purposes, including refinancing a portion of the UGI Corporation Credit Facility Agreement and ongoing working capital needs of the Company. The revolving credit facility is scheduled to expire in October 2028, and the term loan facility is scheduled to mature in October 2027. In connection with entering into the UGI Corporation 2025 Credit Agreement, the Company paid off in full and terminated the UGI Corporation Credit Facility Agreement.

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Credit Facilities

Information about the Company’s principal credit agreements (excluding Energy Services’ Receivables Facility, which is discussed below) as of September 30, 2024 and 2023, is presented in the tables below.

(a)In October 2024, AmeriGas OLP entered into the first amendment to the AmeriGas Senior Secured Revolving Facility which increased the total commitments to $300 million. The maximum amount available for borrowing at any time under the AmeriGas Senior Secured Revolving Credit Facility is limited to the borrowing base valuation, as defined by the agreement.

(b)Permits UGI International, LLC or UGI International Holdings B.V. to borrow in euros or USD.

(c)This facility was paid in full and terminated in October 2024, concurrent with entering into the UGI Corporation 2025 Credit Agreement in October 2024. See “Subsequent Events” above and Note 6 to Consolidated Financial Statements for additional information. At September 30, 2024, Borrowings outstanding under this facility have been classified as “Long-term debt” on the Consolidated Balance Sheets.

The average daily and peak short-term borrowings under the Company’s principal credit agreements are as follows:

Receivables Facility. Energy Services has a Receivables Facility with an issuer of receivables-backed commercial paper. On October 18, 2024, the expiration date of the Receivables Facility was extended to October 17, 2025. The Receivables Facility provides Energy Services with the ability to borrow up to $150 million of eligible receivables during the period October 18, 2024 to April 30, 2025, and up to $75 million of eligible receivables during the period May 1, 2025 to October 17, 2025, with the option to request an increase of $50 million. The interest rate of the Receivables Facility was replaced with a term SOFR based interest rate effective with the extension on October 18, 2024. Energy Services uses the Receivables Facility to fund working capital, margin calls under commodity futures contracts, capital expenditures, dividends and for general corporate purposes.

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Under the Receivables Facility, Energy Services transfers, on an ongoing basis and without recourse, its trade accounts receivable to its wholly owned, special purpose subsidiary, ESFC, which is consolidated for financial statement purposes. ESFC, in turn, has sold and, subject to certain conditions, may from time to time sell, an undivided interest in some or all of the receivables to a major bank. Amounts sold to the bank are reflected as “Short-term borrowings” on the Consolidated Balance Sheets. ESFC was created and has been structured to isolate its assets from creditors of Energy Services and its affiliates, including UGI. Trade receivables sold to the bank remain on the Company’s balance sheet and the Company reflects a liability equal to the amount advanced by the bank. The Company records interest expense on amounts owed to the bank. Energy Services continues to service, administer and collect trade receivables on behalf of the bank, as applicable.

At September 30, 2024, the outstanding balance of trade receivables was $51 million, none of which were sold to the bank. At September 30, 2023, the outstanding balance of trade receivables was $62 million, $46 million of which was sold to the bank. Amounts sold to the bank are reflected as “Short-term borrowings” on the Consolidated Balance Sheet. During Fiscal 2024 and Fiscal 2023, peak sales of receivables were $97 million and $150 million, respectively. During Fiscal 2024 and Fiscal 2023, average daily amounts sold were $22 million and $46 million, respectively.

For further information on the Company’s long-term debt, credit facilities and the Receivables Facility, see Note 6 to Consolidated Financial Statements.

Cash Flows

Due to the seasonal nature of the Company’s businesses, cash flows from operating activities are generally strongest during the second and third fiscal quarters when customers pay for natural gas, LPG, electricity and other energy products and services consumed during the peak heating season months. Conversely, operating cash flows are generally at their lowest levels during the fourth and first fiscal quarters when the Company’s investment in working capital, principally inventories and accounts receivable, is generally greatest.

Operating Activities:

Year-to-year variations in our cash flows from operating activities can be significantly affected by changes in operating working capital, especially during periods with significant changes in energy commodity prices. Cash flows from operating activities in Fiscal 2024 and Fiscal 2023 were $1,182 million and $1,107 million, respectively. Cash flows from operating activities before the effects of changes in operating working capital were $1,215 million in Fiscal 2024 and $1,258 million in Fiscal 2023. Changes in operating working capital and collateral deposits used operating cash flow of $33 million in Fiscal 2024 compared to $151 million of cash flow used in Fiscal 2023. Fiscal 2023 includes $420 million of derivative instrument collateral deposit net payments, principally at our UGI International and Midstream & Marketing segments, compared to only $9 million of such net payments in Fiscal 2024. The unusually high prior-year collateral deposit net payments were the result of significant declines in commodity energy prices that occurred during Fiscal 2023. The decrease in cash flow required to fund changes in operating working capital in Fiscal 2024 also reflects lower cash from changes in inventories and accounts receivable which were offset in large part by lower cash required to fund changes in accounts payable. The higher cash from changes in these operating working capital accounts in the prior year also reflect significantly less volatility in commodity energy prices in Europe following unprecedented volatility in such prices during Fiscal 2023 and the effects of significantly lower energy marketing activities in Europe resulting from the exit of substantially all of UGI International’s energy marketing business. Changes in operating working capital in Fiscal 2024 also reflects lower cash from income taxes and utility deferred fuel recoveries.

Investing Activities:

Investing activity cash flow is principally affected by cash expenditures for property, plant and equipment; cash paid for acquisitions of businesses and assets; investments in equity method investees; and cash proceeds from sales and retirements of property, plant and equipment. Cash expenditures for property, plant and equipment totaled $796 million in Fiscal 2024 and $974 million in Fiscal 2023. The decrease in cash payments for property, plant and equipment in Fiscal 2024 compared with Fiscal 2023 principally reflects lower cash capital expenditures at our Utilities segment and, to a lesser extent, at UGI International and AmeriGas Propane. Cash used for investments in equity method investees was $92 million in Fiscal 2024 principally comprising continuing investments in renewable energy projects principally at Midstream & Marketing. Net proceeds from the disposal of businesses and assets in Fiscal 2024 includes, among other things, proceeds from the sale of UGID.

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Financing Activities:

Changes in cash flow from financing activities are primarily due to issuances and repayments of long-term debt; net short-term borrowings; dividends on UGI Common Stock; quarterly payments on outstanding Purchase Contracts; and issuances and repurchases of equity instruments.

Cash flow used by financing activities was $506 million in Fiscal 2024 compared to cash flow used by financing activities of $168 million in Fiscal 2023. Cash flow from financing activities in Fiscal 2024 includes, among other things, the June 2024 issuance by UGI Corporation of the previously mentioned $700 million of the UGI Corporation 5.00% Senior Notes and UGI Utilities issuance of $250 million principal amount of senior notes. Proceeds from the UGI Corporation 5.00% Senior Notes were used to reduce amounts outstanding under UGI Corporation’s revolving credit facility, to repay its outstanding variable-rate amortizing term loan, and to fund a capital contribution to the Partnership in the amount of $315 million which, along with other sources of liquidity, the Partnership used to repurchase $475 million aggregate principal amount of its 5.50% Senior Notes. Fiscal 2023 cash flow from financing activities includes, among other things, the cash flow effects from (1) the UGI International 2023 Credit Agreement and the concurrent repayment of borrowings under the UGI International Credit Agreement (a predecessor agreement); (2) cash proceeds from the Energy Services Amended Term Loan Agreement and the concurrent repayment of amounts outstanding under the Energy Services variable-rate term loan; and (3) the May 2023 issuance of $500 million principal amount of AmeriGas Partners 9.375% Senior Notes and the repayment of $675 million aggregate principal balance of AmeriGas Partners 5.625% Senior Notes.

Capital Expenditures

In the following table, we present capital expenditures (which exclude acquisitions of businesses and assets) for Fiscal 2024 and Fiscal 2023. We also provide amounts we expect to spend on capital expenditures in Fiscal 2025. We expect to finance a substantial portion of our Fiscal 2025 capital expenditures from cash generated by operations and cash on hand.

The decrease in capital expenditures in Fiscal 2024 was primarily driven by a targeted reduction in capital spend as UGI prioritizes its efforts to maintain cost and capital discipline to create greater financial flexibility and capacity within the balance sheet.

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Contractual Cash Obligations and Commitments

The Company has contractual cash obligations that extend beyond Fiscal 2024. The following table presents contractual cash obligations with non-affiliates under agreements existing as of September 30, 2024:

(a)Based upon stated maturity dates for debt outstanding at September 30, 2024. At September 30, 2024, borrowings outstanding under the UGI Corporation Credit Facility Agreement totaling $630 million have been classified as “Long-term debt” on the Consolidated Balance Sheet based on the Company’s intent and ability to refinance the obligation with long-term debt issued under the UGI Corporation 2025 Credit Agreement.

(b)Based upon stated interest rates adjusted for the effects of interest rate swaps.

(c)Calculated using applicable interest rates or forward interest rate curves, and UGI’s and its subsidiaries’ leverage ratios, as of September 30, 2024.

(d)Represents the sum of amounts due if derivative instrument liabilities were settled at the September 30, 2024 amounts reflected in the Consolidated Balance Sheet (but excluding amounts associated with interest rate contracts).

“Other noncurrent liabilities” included in our Consolidated Balance Sheet at September 30, 2024, principally comprise operating lease liabilities; regulatory liabilities; refundable tank and cylinder deposits; litigation, property and casualty liabilities and obligations under environmental remediation agreements; pension and other postretirement benefit liabilities recorded in accordance with accounting guidance relating to employee retirement plans; and liabilities associated with executive compensation plans. These liabilities, with the exception of operating lease liabilities, are not included in the table of Contractual Cash Obligations and Commitments because they are estimates of future payments and not contractually fixed as to timing or amount. The minimum required contributions to the U.S. Pension Plans (as further described below under “U.S. Pension Plans”) in Fiscal 2025 are not expected to be material. The minimum required contributions to the U.S. Pension Plans in years beyond Fiscal 2025 will depend, in large part, on the impacts of future returns on pension plan assets and interest rates on pension plan liabilities.

U.S. Pension Plans

The U.S. Pension Plans consist of (1) a defined benefit pension plan for employees hired prior to January 1, 2009, of UGI, UGI Utilities, and certain of UGI’s other domestic wholly owned subsidiaries, and (2) a defined benefit pension plan for Mountaineer employees hired prior to January 1, 2023. The fair values of the U.S. Pension Plans’ assets totaled $635 million and $539 million at September 30, 2024 and 2023, respectively. At September 30, 2024 and 2023, the underfunded positions of the U.S. Pension Plans, defined as the excess of the PBO over the U.S. Pension Plans’ assets, were $38 million and $55 million, respectively.

We believe we are in compliance with regulations governing defined benefit pension plans, including the ERISA rules and regulations. The minimum required contributions to the U.S. Pension Plans in Fiscal 2025 are not expected to be material.

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GAAP guidance associated with pension and other postretirement plans generally requires recognition of an asset or liability in the statement of financial position reflecting the funded status of pension and other postretirement benefit plans with current year changes recognized in shareholders’ equity unless such amounts are subject to regulatory recovery. At September 30, 2024, we have recorded pre-tax charges to UGI Corporation’s stockholders’ equity of $3 million and recorded regulatory assets totaling $106 million in order to reflect the funded status of the U.S. Pension Plans. For a more detailed discussion of the U.S. Pension Plans and our other postretirement benefit plans, see Note 8 to Consolidated Financial Statements.

Related Party Transactions

During Fiscal 2024 and Fiscal 2023, we did not enter into any related-party transactions that had a material effect on our financial condition, results of operations or cash flows.

Off-Balance-Sheet Arrangements

UGI primarily enters into guarantee arrangements on behalf of its consolidated subsidiaries. These arrangements are not subject to the recognition and measurement guidance relating to guarantees under GAAP.

We do not have any off-balance-sheet arrangements that are expected to have a material effect on our financial condition, change in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Utility Regulatory Matters

UGI Utilities. On January 27, 2023, Electric Utility filed a request with the PAPUC to increase its annual base distribution revenues by $11 million. On September 21, 2023, the PAPUC issued a final order approving a settlement providing for a $9 million annual base distribution rate increase for Electric Utility, effective October 1, 2023.

On January 28, 2022, PA Gas Utility filed a request with the PAPUC to increase its base operating revenues for residential, commercial and industrial customers by $83 million annually. On September 15, 2022, the PAPUC issued a final order approving a settlement providing for a $49 million annual base distribution rate increase for PA Gas Utility, through a phased approach, with $38 million beginning October 29, 2022 and an additional $11 million beginning October 1, 2023. In accordance with the terms of the final order, PA Gas Utility was not permitted to file a rate case prior to January 1, 2024. Also in accordance with the terms of the final order, PA Gas Utility was authorized to implement a weather normalization adjustment rider as a five-year pilot program beginning on November 1, 2022. Under this rider, when weather deviates from normal by more than 3%, residential and small commercial customer billings for distribution services are adjusted monthly for weather related impacts exceeding the 3% threshold. Additionally, under the terms of the final order, PA Gas Utility was authorized to implement a DSIC once its total property, plant and equipment less accumulated depreciation reached $3,368 million (which threshold was achieved in September 2022).

Mountaineer. On July 31, 2024, Mountaineer submitted its 2024 IREP filing to the WVPSC requesting recovery of $19 million, which includes $3 million of prior year under-recovery, for costs associated with capital investments after December 31, 2022, that total $197 million, including $74 million in calendar year 2025. The filing included capital investments totaling $418 million over the 2025 - 2029 period. On October 28, 2024, the WVPSC issued an order approving Mountaineer’s request.

On July 31, 2023, Mountaineer submitted its 2023 IREP filing to the WVPSC requesting recovery of $10 million, an increase of $6 million, for costs associated with capital investments after December 31, 2022, that total $131 million, including $67 million in calendar year 2024. With new base rates expected to be effective January 1, 2024, revenues from IREP rates would decrease by $12 million. The filing included capital investments totaling $383 million over the 2024 - 2028 period. On December 20, 2023, the WVPSC issued a final order approving a settlement effective January 1, 2024.

On March 6, 2023, Mountaineer submitted a base rate case filing with the WVPSC seeking a net revenue increase of $20 million, which consisted of an increase in base rates of $38 million and a decrease in the IREP rates of $18 million annually to be effective on April 5, 2023. On March 31, 2023, the WVPSC suspended the effective date of the requested rate change increase until January 1, 2024 to allow for a full review of the filing. On October 6, 2023, Mountaineer filed a joint stipulation and agreement for settlement of the base rate case, which included a $14 million net revenue increase. On December 21, 2023, the WVPSC issued a final order approving the joint stipulation and agreement, except the WVPSC authorized Mountaineer to implement a weather normalization adjustment rider as a five-year pilot program beginning on October 1, 2024. The new rates went into effect on January 1, 2024. On April 11, 2024 the WVPSC approved the calculation methodology submitted by Mountaineer on March 28, 2024. Under this rider, when weather deviates from normal by more than 2%, for service rendered during the period October 1 through May 31, residential and small commercial customer billings for distribution services are adjusted for weather related impacts exceeding the 2% threshold.

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On July 29, 2022, Mountaineer submitted its 2022 IREP filing to the WVPSC requesting recovery of costs associated with capital investments totaling $354 million over the 2023 - 2027 period, including $64 million in calendar year 2023. On November 16, 2022, Mountaineer and the intervening parties submitted a joint stipulation and agreement for settlement to the WVPSC requesting approval of 2023 IREP revenue of $22 million to be charged effective January 1, 2023, which includes the recovery of a $1 million under-recovery of 2021 IREP revenue. On December 21, 2022, the WVPSC issued an order approving the joint stipulation and agreement for settlement as filed.

Other Matters

West Reading, Pennsylvania Explosion. On March 24, 2023, an explosion occurred in West Reading, Pennsylvania which resulted in seven fatalities, significant injuries to eleven others, and extensive property damage to buildings owned by R.M. Palmer, a local chocolate manufacturer, and other neighboring structures. The NTSB and the PAPUC are investigating the West Reading incident. On July 18, 2023, the NTSB issued an Investigative Update in its ongoing investigation. The report identifies a fracture in a retired UGI gas service tee and a fracture in a nearby steam system, but it does not address causation of the fractures or the explosion. The NTSB investigative team includes representatives from the Company, the PAPUC, the local fire department and the Pipeline and Hazardous Materials Safety Administration. The Company is cooperating with the investigation. The NTSB may invite other parties to participate. In September 2023, OSHA closed their investigation of this matter, without any finding pertaining to UGI Utilities.

While the investigation into this incident is still underway and the cause of the explosion has not been determined, the Company has received claims as a result of the explosion and is involved in lawsuits relative to the incident. The Company maintains liability insurance for personal injury, property and casualty damages and believes that third-party claims associated with the explosion, in excess of the Company’s deductible, are recoverable through the Company’s insurance. The Company cannot predict the result of these pending or future claims and legal actions at this time.

Regarding these pending claims and legal actions, the Company does not believe, at this early stage, that there is sufficient information available to reasonably estimate a range of loss, if any, or conclude that the final outcome of these matters will or will not have a material effect on our financial statements.

Market Risk Disclosures

Our primary market risk exposures are (1) commodity price risk; (2) interest rate risk; and (3) foreign currency exchange rate risk. Although we use derivative financial and commodity instruments to reduce market price risk associated with forecasted transactions, we do not use derivative financial and commodity instruments for speculative or trading purposes.

Commodity Price Risk

The risk associated with fluctuations in the prices the Partnership and our UGI International operations pay for LPG is principally a result of market forces reflecting changes in supply and demand for LPG and other energy commodities. Their profitability is sensitive to changes in LPG supply costs. Increases in supply costs are generally passed on to customers. The Partnership and UGI International may not, however, always be able to pass through product cost increases fully or on a timely basis, particularly when product costs rise rapidly. In order to reduce the volatility of LPG market price risk, the Partnership uses contracts for the forward purchase or sale of propane, propane fixed-price supply agreements and over-the-counter derivative commodity instruments including price swap and option contracts. Our UGI International operations use over-the-counter derivative commodity instruments and may from time to time enter into other derivative contracts, similar to those used by the Partnership, to reduce market risk associated with a portion of their LPG purchases. Over-the-counter derivative commodity instruments used to economically hedge forecasted purchases of LPG are generally settled at expiration of the contract.

Utilities’ tariffs contain clauses that permit recovery of all prudently incurred costs of natural gas it sells to its retail core-market customers, including the cost of financial instruments used to hedge purchased gas costs. The recovery clauses provide for periodic adjustments for the difference between the total amounts actually billed to customers through PGC and PGA rates and the recoverable costs incurred. Because of this ratemaking mechanism, there is limited commodity price risk associated with our Utilities operations. PA Gas Utility uses derivative financial instruments, including natural gas futures and option contracts traded on the NYMEX, to reduce volatility in the cost of gas it purchases for its retail core-market customers. The cost of these derivative financial instruments, net of any associated gains or losses, is included in PA Gas Utility's PGC recovery mechanism.

In order to manage market price risk relating to substantially all of Midstream & Marketing’s fixed-price sale contracts for physical natural gas and electricity, Midstream & Marketing enters into NYMEX, ICE and over-the-counter natural gas and electricity futures and option contracts, and natural gas basis swap contracts or enters into fixed-price supply arrangements.

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Midstream & Marketing also uses NYMEX and over-the-counter electricity futures contracts to economically hedge a portion of its anticipated sales of electricity from its electricity generation facilities. Although Midstream & Marketing’s fixed-price supply arrangements mitigate significant risks associated with its fixed-price sales contracts, should any of the suppliers under these arrangements fail to perform, increases, if any, in the cost of replacement natural gas or electricity would adversely impact Midstream & Marketing’s results. Any volume deviations from the amounts forecasted under fixed-price requirement sale contracts, would introduce price risks, which could adversely impact Midstream & Marketing’s results. In order to reduce this risk of supplier nonperformance, Midstream & Marketing has diversified its purchases across a number of suppliers. UGI International’s natural gas and electricity marketing businesses also use natural gas and electricity futures and forward contracts to economically hedge market risk associated with a substantial portion of anticipated volumes under fixed-price sales and purchase contracts. See Note 5 to Consolidated Financial Statements regarding recent transactions related to UGI International’s energy marketing business.

Prior to the Fiscal 2024 disposition of the Company’s ownership interest in UGID, Midstream & Marketing had entered into fixed-price sales agreements for a portion of the electricity expected to be generated by its electric generation assets. In the event that these generation assets would not be able to produce all of the electricity needed to supply electricity under these agreements, Midstream & Marketing would be required to purchase electricity on the spot market or under contract with other electricity suppliers. Accordingly, increases in the cost of replacement power could negatively impact Midstream & Marketing’s results. See Note 5 to Consolidated Financial Statements for additional information on the sale of UGID.

Interest Rate Risk

We have both fixed-rate and variable-rate debt. Changes in interest rates impact the cash flows of variable-rate debt but generally do not impact their fair value. Conversely, changes in interest rates impact the fair value of fixed-rate debt but do not impact their cash flows.

Our variable-rate debt at September 30, 2024, includes revolving credit facility borrowings and variable-rate term loans at UGI International, Utilities, Midstream & Marketing and UGI Corporation. These debt agreements have interest rates that are generally indexed to short-term market interest rates. We have entered into pay-fixed, receive-variable interest rate swap agreements on all or a significant portion of the term loans’ principal balances and all or a significant portion of the term loans’ tenor. We have designated these interest rate swaps as cash flow hedges. At September 30, 2024, combined borrowings outstanding under variable-rate debt agreements, excluding the previously mentioned effectively fixed-rate debt, totaled $732 million. Based upon average borrowings outstanding under variable-rate borrowings (excluding effectively fixed-rate term loan debt), an increase in short-term interest rates of 100 basis points (1%) would have increased our Fiscal 2024 interest expense by approximately $9 million. The remainder of our debt outstanding is subject to fixed rates of interest. A 100 basis point increase in market interest rates would result in decreases in the fair value of this fixed-rate debt of approximately $230 million at September 30, 2024. A 100 basis point decrease in market interest rates would result in increases in the fair value of this fixed-rate debt of approximately $250 million at September 30, 2024.

Long-term debt associated with our domestic businesses is typically issued at fixed rates of interest based upon market rates for debt with similar terms and credit ratings. As these long-term debt issues mature, we may refinance such debt with new debt having interest rates reflecting then-current market conditions. In order to reduce interest rate risk associated with near- to medium-term forecasted issuances of fixed rate debt, from time to time we enter into IRPAs.

Foreign Currency Exchange Rate Risk

Our primary currency exchange rate risk is associated with the USD versus the euro and, to a lesser extent, the USD versus the British pound sterling. The USD value of our foreign currency denominated assets and liabilities will fluctuate with changes in the associated foreign currency exchange rates. From time to time, we use derivative instruments to hedge portions of our net investments in foreign subsidiaries, including anticipated foreign currency denominated dividends. Gains or losses on these net investment hedges remain in AOCI until such foreign operations are sold or liquidated. With respect to our net investments in our UGI International operations, a 10% decline in the value of the associated foreign currencies versus the USD would reduce their aggregate net book value at September 30, 2024, by approximately $70 million, which amount would be reflected in other comprehensive income. We have designated certain euro-denominated borrowings as net investment hedges.

In order to reduce the volatility in net income associated with our foreign operations, principally as a result of changes in the USD exchange rate between the euro and British pound sterling, we enter into forward foreign currency exchange contracts. We layer in these foreign currency exchange contracts over a multi-year period to eventually equal approximately 90% of anticipated UGI International foreign currency earnings before income taxes.

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Derivative Instrument Credit Risk

We are exposed to risk of loss in the event of nonperformance by our derivative instrument counterparties. Our derivative instrument counterparties principally comprise large energy companies and major U.S. and international financial institutions. We maintain credit policies with regard to our counterparties that we believe reduce overall credit risk. These policies include evaluating and monitoring our counterparties’ financial condition, including their credit ratings, and entering into agreements with counterparties that govern credit limits or entering into netting agreements that allow for offsetting counterparty receivable and payable balances for certain financial transactions, as deemed appropriate.

We have concentrations of credit risk associated with derivative instruments and we evaluate the creditworthiness of our derivative counterparties on an ongoing basis. As of September 30, 2024, the maximum amount of loss, based upon the gross fair values of the derivative instruments, we would incur if these counterparties failed to perform according to the terms of their contracts was $140 million. In general, many of our over-the-counter derivative instruments and all exchange contracts call for the posting of collateral by the counterparty or by the Company in the forms of letters of credit, parental guarantees or cash. At September 30, 2024, we had received cash collateral from derivative instrument counterparties totaling $14 million. In addition, we may have offsetting derivative liabilities and certain accounts payable balances with certain of these counterparties, which further mitigates the previously mentioned maximum amount of losses. Certain of the Partnership’s derivative contracts have credit-risk-related contingent features that may require the posting of additional collateral in the event of a downgrade of the Partnership’s debt rating. At September 30, 2024, if the credit-risk-related contingent features were triggered, the amount of collateral required to be posted would not be material.

The following table summarizes the fair values of unsettled market risk sensitive derivative instrument assets (liabilities) held at September 30, 2024 and changes in their fair values due to market risks. Certain of UGI Utilities’ commodity derivative instruments are excluded from the table below because any associated net gains or losses are refundable to or recoverable from customers in accordance with UGI Utilities ratemaking.

(1)Change in fair value represents a 10% adverse change in the market prices of certain commodities

(2)Change in fair value represents a 50 basis point adverse change in prevailing market interest rates

(3)Change in fair value represents a 10% adverse change in the value of the Euro and the British pound sterling versus the USD.

Critical Accounting Policies and Estimates

The accounting policies and estimates discussed in this section are those that we consider to be the most critical to an understanding of our financial statements because they involve significant judgments and uncertainties. The application of these accounting policies and estimates necessarily requires management’s most subjective or complex judgments regarding estimates and projected outcomes of future events. Changes in these policies and estimates could have a material effect on our financial statements. Management has reviewed these critical accounting policies, and the estimates and assumptions associated with them, with the Company’s Audit Committee. Also, see Note 2 to Consolidated Financial Statements which discusses our significant accounting policies.

Goodwill Impairment Evaluation. Our goodwill is the result of business acquisitions. We do not amortize goodwill, but test it at least annually for impairment at the reporting unit level. A reporting unit is an operating segment, or one level below an operating segment (a component), if it constitutes a business for which discrete financial information is available and regularly reviewed by segment management. Components are aggregated into a single reporting unit if they have similar economic characteristics. A reporting unit with goodwill is required to perform an impairment test annually or whenever events or circumstances indicate that the value of goodwill may be impaired.

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For certain of our reporting units with goodwill, we assess qualitative factors to determine whether it is more likely than not that the fair value of such reporting unit is less than its carrying amount. For our other reporting units with goodwill, we bypass the qualitative assessment and perform the quantitative assessment by comparing the fair values of the reporting units with their carrying amounts, including goodwill. We determine fair values generally based on a weighting of income and market approaches. For purposes of the income approach, fair values are determined based upon the present value of the reporting unit’s estimated future cash flows, including an estimate of the reporting unit’s terminal value based upon these cash flows, discounted at appropriate risk-adjusted rates. We use our internal forecasts to estimate future cash flows, which may include estimates of long-term future growth rates based upon our most recent reviews of the long-term outlook for each reporting unit. Cash flow estimates used to establish fair values under our income approach involve management judgments based on a broad range of information and historical results. In addition, external economic and competitive conditions can influence future performance. For purposes of the market approach, we use valuation multiples for companies comparable to our reporting units. The market approach requires judgment to determine the appropriate valuation multiples. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to such excess but not to exceed the total amount of the goodwill of the reporting unit.

During the fourth quarter of Fiscal 2024, as part of its annual goodwill impairment assessment, the Company performed a quantitative assessment for its AmeriGas Propane reporting unit. In addition, during the third quarter of Fiscal 2023, the Company identified interim impairment indicators related to goodwill within the AmeriGas Propane reporting unit: (1) AmeriGas Partners issued $500 million of Senior Notes at an interest rate of 9.375%, which was significantly higher than the interest rates on the other AmeriGas Propane debt obligations; and (2) financial projections for the AmeriGas Propane reporting unit were reduced significantly compared to previous forecasts following declines in gross margins and customer retention and higher operating expenses. The Company concluded that these events constituted triggering events that indicate that the AmeriGas Propane goodwill may be impaired and, as such, performed an interim impairment test of its goodwill as of May 31, 2023.

Using level 3 inputs, we performed a quantitative assessment of the AmeriGas Propane reporting unit using a weighting of the income and market approaches to determine its fair value. With respect to the income approach, management used a discounted cash flow (“DCF”) method, using unobservable inputs. The significant assumptions in our DCF model include projected EBITDA and a discount rate (and estimates in the discount rate inputs). With respect to the market approach, management used recent transaction market multiples for similar companies in the U.S. The resulting estimates of fair value from the income approach and the market approach were then weighted equally in determining the overall estimated fair value of AmeriGas Propane.

Based on our evaluations in Fiscal 2024 and Fiscal 2023, the estimated fair value of the AmeriGas Propane reporting unit was determined to be less than its carrying value. As a result, the Company recorded a non-cash pre-tax goodwill impairment charge of $195 million and $656 million in Fiscal 2024 and Fiscal 2023, respectively, included in “Impairment of goodwill” on the Consolidated Statements of Income, to reduce the carrying value of AmeriGas Propane to its fair value. The Company calculated the deferred tax effect using the simultaneous equation method.

The performance of the AmeriGas Propane reporting unit and the potential for future developments in the global economic environment, including the prospect of higher interest rates, introduces a heightened risk for additional impairment in the AmeriGas Propane reporting unit. If there is continued deterioration in the results of operations, a portion or all of the remaining recorded goodwill for the AmeriGas Propane reporting unit, which was $1.2 billion as of September 30, 2024, could be subject to further impairment.

With respect to UGI International's Fiscal 2024 goodwill impairment test, the Company bypassed the qualitative assessment and performed a quantitative assessment. Such assessment used a weighting of income and market approaches to determine fair value. With respect to the income approach, management used a discounted cash flow (“DCF”) method, using unobservable inputs. The significant assumptions in our DCF model include projected EBITDA, and a discount rate (and estimates in the discount rate inputs). With respect to the market approach, management used recent transaction market multiples for similar companies. Based on our evaluation, we determined that UGI International’s fair value exceeded its carrying value by less than 30%. While the Company believes that its judgments used in the quantitative assessment of UGI International’s fair value are reasonable based upon currently available facts and circumstances, if UGI International were not able to achieve its anticipated results and/or if its discount rate were to increase, its fair value would be adversely affected, which may result in an impairment. There is $950 million of goodwill in this reporting unit as of September 30, 2024.

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Accumulated goodwill impairment was $851 million and $656 million at September 30, 2024 and 2023, respectively. Except for the previously mentioned impairment charges at the AmeriGas Propane reporting unit, there were no other impairments of goodwill recognized in all periods presented.

Impairment of Long-Lived Assets. An impairment test for long-lived assets (or an asset group) is required when circumstances indicate that such assets may be impaired. If it is determined that a triggering event has occurred, we perform a recoverability test based upon estimated undiscounted cash flow projections expected to be realized over the remaining useful life of the long-lived asset. If the undiscounted cash flows used in the recoverability test are less than the long-lived asset's carrying amount, we determine its fair value. If the fair value is determined to be less than its carrying amount, the long-lived asset is reduced to its estimated fair value and an impairment loss is recognized in an amount equal to such shortfall. When determining whether a long-lived asset has been impaired, management groups assets at the lowest level that has identifiable cash flows that are independent of other assets. Performing an impairment test on long-lived assets involves judgment in areas such as identifying when a triggering event requiring evaluation occurs; identifying and grouping assets; and, if the undiscounted cash flows used in the recoverability test are less than the long-lived asset's carrying amount, determining the fair value of the long-lived asset. Although cash flow estimates are based upon relevant information at the time the estimates are made, estimates of future cash flows are by nature highly uncertain and contemplate factors that change over time such as the expected use of the asset including future production and sales volumes, expected fluctuations in prices of commodities and expected proceeds from disposition.

The impairments of AmeriGas Propane’s goodwill were determined to be a triggering event requiring an impairment analysis of AmeriGas Propane’s long-lived and definite lived intangible assets. Accordingly, the Company performed a recoverability test of AmeriGas Propane’s long-lived assets, including ROU assets and definite lived intangible assets, as of July 31, 2024, the measurement date of our annual goodwill impairment test, and May 31, 2023, using estimated undiscounted cash flow projections expected to be generated over the remaining useful life of the primary asset of the asset group at the lowest level with identifiable cash flows that are independent of other assets. Based on the recoverability tests performed, we determined that (1) AmeriGas Propane’s long-lived assets, including ROU assets and definite lived intangible assets, were recoverable and, as such, no impairment charges were recorded; and (2) no adjustments to the remaining useful lives were necessary as of July 31, 2024 and May 31, 2023.

See Note 5 to Consolidated Financial Statements for information on the impairment loss associated with the disposal of UGID during Fiscal 2024. No other material provisions for impairments of long-lived assets were recorded during Fiscal 2024 and Fiscal 2023.

Loss Contingencies and Environmental Remediation Liabilities. We are involved in litigation that arises in the normal course of business, and we are subject to risk of loss for general, automobile and product liability and workers’ compensation claims for which we obtain insurance coverage subject to self-insured retentions or deductibles. We are also subject to environmental laws and regulations intended to mitigate or remove the effects of past operations and improve or maintain the quality of the environment. These laws and regulations require the removal or remedy of the effect on the environment of the disposal or release of certain specified hazardous substances at current or former operating sites.

We establish reserves for loss contingencies including pending litigation, and for pending and incurred but not reported claims associated with general and product liability, automobile and workers’ compensation when it is probable that a liability exists and the amount or range of amounts related to such liability can be reasonably estimated. When no amount within a range of possible loss is a better estimate than any other amount within the range, liabilities recorded are based upon the low end of the range. With respect to unasserted claims arising from unreported incidents, we may use the work of specialists to estimate the ultimate losses to be incurred using actuarially determined loss development factors applied to actual claims data.

The likelihood of a loss with respect to a particular loss contingency is often difficult to predict. In addition, a reasonable estimate of the loss, or a range of possible loss, may not be practicable based upon the information available and the potential effects of future events and decisions by third parties that will determine the ultimate resolution of the loss contingency. Reasonable estimates involve management judgments based on a broad range of information and prior experience. For litigation and pending claims including those covered by insurance policies, the analysis of probable loss is performed on a case by case basis and includes an evaluation of the nature of the claim, the procedural status of the matter, the probability or likelihood of success in prosecuting or defending the claim, the information available with respect to the claim, the opinions and views of outside counsel and other advisors, and past experience in similar matters. These judgments are reviewed quarterly as more information is received, and the amounts reserved are updated as necessary. Our estimated reserves for loss contingencies and for pending and incurred but not reported claims associated with general and product liability, automobile and workers’ compensation may differ materially from the ultimate liability and such reserves may change materially as more information becomes available and estimated reserves are adjusted.

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We accrue reserves for environmental remediation when assessments indicate that it is probable a liability has been incurred and an amount can be reasonably estimated. Amounts recorded as environmental liabilities on the Consolidated Balance Sheets represent our best estimate of costs expected to be incurred or, if no best estimate can be made, the minimum liability associated with a range of expected environmental investigation and remediation costs. These estimates are based upon a number of factors including whether the company will be responsible for such remediation, the scope and cost of the remediation work to be performed, the portion of costs that will be shared with other potentially responsible parties, the timing of the remediation and possible impact of changes in technology, and the regulations and requirements of local governmental authorities. Our estimated reserves for environmental remediation may differ materially from the ultimate liability and such reserves may change materially as more information becomes available and estimated reserves are adjusted. PA Gas Utility receives ratemaking recognition of environmental investigation and remediation costs associated with its in-state environmental sites.  This ratemaking recognition balances the accumulated difference between historical costs and rate recoveries with an estimate of future costs associated with the sites.

Regulatory Assets and Liabilities. The accounting for our rate regulated gas and electric utility businesses differs from the accounting for nonregulated operations in that these businesses are required to reflect the effects of rate regulation in the consolidated financial statements. Regulatory practices that assign costs to accounting periods may differ from accounting methods generally applied by nonregulated businesses. When it is probable that regulators will permit the recovery of current costs through future rates charged to customers, these costs that otherwise would be expensed by nonregulated companies are deferred as regulatory assets. Similarly, regulatory liabilities are recognized when it is probable that regulators will require customer refunds through future rates or when revenue is collected from customers for expenditures that have yet to be incurred. We continually assess whether the regulatory assets are probable of future recovery by evaluating the regulatory environment, recent rate orders and public statements issued by the PAPUC, WVPSC and MDPSC, and discussions with regulatory authorities and legal counsel. If future recovery of regulatory assets ceases to be probable, the elimination of those regulatory assets would adversely impact our results of operations and cash flows. As of September 30, 2024, our regulatory assets and regulatory liabilities totaled $319 million and $329 million, respectively. For additional information on regulatory assets and liabilities, see Notes 2 and 9 to Consolidated Financial Statements.

Income Taxes. We use the asset and liability method of accounting for income taxes. We recognize the tax benefits from income tax positions that have a greater than more likely than not likelihood of being sustained upon examination by the taxing authorities. A liability is recorded for uncertain tax positions where it is more likely than not the position may not be sustained based on its technical merits. We use assumptions, judgments and estimates to determine our current provision for income taxes. We also use assumptions, judgments and estimates to determine our deferred tax assets and liabilities and any valuation allowance to be recorded against a deferred tax asset. The interpretation of tax laws involves uncertainty since tax authorities may interpret the laws differently. Our assumptions, judgments and estimates relative to the current provision for income tax give consideration to current tax laws, our interpretation of current tax laws and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. Changes in tax law or our interpretation thereof and the resolution of current and future tax audits could significantly impact the amounts provided for income taxes in our consolidated financial statements. Our assumptions, judgments and estimates relative to the amount of deferred income taxes take into account estimates of the amount of future taxable income. Actual taxable income or future estimates of taxable income could render our current assumptions, judgments and estimates inaccurate. Changes in the assumptions, judgments and estimates mentioned above could cause our actual income tax obligations to differ significantly from our estimates. As of September 30, 2024, our net deferred tax liabilities totaled $910 million.

Recently Issued Accounting Pronouncements

See Note 3 to Consolidated Financial Statements for a discussion of recently issued accounting guidance.

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MD&A discusses our results of operations for Fiscal 2023 and Fiscal 2022, and our financial condition. For discussion of our results of operations and cash flows for Fiscal 2022 compared with Fiscal 2021, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Fiscal 2022 Annual Report on Form 10-K, filed with the SEC on November 21, 2022. MD&A should be read in conjunction with Items 1 and 2, “Business and Properties,” Item 1A, “Risk Factors,” and the Consolidated Financial Statements in Item 8 below including “Segment Information” included in Note 22 to Consolidated Financial Statements.

Because most of our businesses sell or distribute energy products used in large part for heating purposes, our results are significantly influenced by temperatures in our service territories, particularly during the heating-season months of October through March. Accordingly, our results of operations, after adjusting for the effects of gains and losses on derivative instruments not associated with current-period transactions as further discussed below, are significantly higher in our first and second fiscal quarters.

Executive Overview

Recent Developments

Review of Strategic Alternatives. In August 2023, the Company announced the commencement of a strategic review, focused on the LPG businesses, intending to unlock and maximize shareholder value. The Company is exploring a full range of options with the goal of reducing UGI’s earnings volatility and strengthening our balance sheet. In conjunction with the strategic review, the Company is also pursuing actions to optimize its cost structure and re-align its capital allocation priorities. The Company expects to continue on its existing plans while the review of strategic alternatives is ongoing.

Impairment of Goodwill. During the quarter ended June 30, 2023, the Company identified interim impairment indicators related to goodwill within the AmeriGas Propane reporting unit: (1) AmeriGas Partners issued $500 million of Senior Notes at an interest rate of 9.375%, which was significantly higher than the interest rates on the other AmeriGas Propane debt obligations; and (2) financial projections for the AmeriGas Propane reporting unit were reduced significantly compared to previous forecasts following declines in gross margins and customer retention and higher operating expenses. The Company concluded that these events constituted triggering events that indicate that the AmeriGas Propane goodwill may be impaired and, as such, performed an interim impairment test of its goodwill as of May 31, 2023.

Based on such impairment test, the estimated fair value of the AmeriGas Propane reporting unit was determined to be less than its carrying value. As a result, the Company recorded a non-cash pre-tax goodwill impairment charge of $656 million, included in “Impairment of goodwill” on the Consolidated Statement of Income, to reduce the carrying value of AmeriGas Propane to its fair value.

The performance of the AmeriGas Propane reporting unit and the potential for future developments in the global economic environment, including the prospect of higher interest rates, introduces a heightened risk for additional impairment in the AmeriGas Propane reporting unit. If there is continued deterioration in the results of operations, a portion or all of the remaining recorded goodwill for the AmeriGas Propane reporting unit, which was $1.3 billion as of September 30, 2023, could be subject to further impairment.

See Note 12 to Consolidated Financial Statements for additional information.

UGI International Energy Marketing Transactions

During Fiscal 2023 and in October 2023, the Company entered into a number of transactions pursuant to its previously announced decision to exit its European energy marketing business. The European energy marketing business primarily markets natural gas and electricity to customers through third-party distribution systems in France, the Netherlands and, prior to its sales, in Belgium and the United Kingdom.

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France. In October 2023, UGI International, through a wholly-owned subsidiary, sold substantially all of its energy marketing business located in France for a net cash payment to the buyer of $25 million (which approximates a pre-tax loss) subject to certain adjustments principally related to the pending transfer of certain customer contracts. As of September 30, 2023, the $25 million cash to be paid to the buyer in October 2023 had been placed in escrow and is reflected in “Other current assets” on the September 30, 2023 Consolidated Balance Sheet. The carrying values of the assets and liabilities associated with this business, principally comprising certain commodity derivative instruments, energy certificates and certain working capital, have been classified as held-for-sale on the September 30, 2023 Consolidated Balance Sheet. The Company did not recognize any impairment associated with the assets held for sale in Fiscal 2023 because, in accordance with our policy related to such assets, any impairment is limited to the disposal group’s long-lived assets, and such assets were not material.

Belgium. In September 2023, UGI International, through a wholly-owned subsidiary, sold its energy marketing business located in Belgium for a net cash payment to the buyer of $3 million. Pursuant to the sale agreement, the Company transferred to the buyer certain assets, principally comprising customer and energy broker contracts. In conjunction with the sale, the Company recorded a pre-tax loss of $6 million ($5 million after-tax) which amount includes the net payment to the buyer, the write-off of certain prepaid energy broker payments and associated transaction costs and fees. The loss is reflected in “Loss on disposal of UGI International energy marketing business” on the Consolidated Statements of Income.

United Kingdom. In October 2022, UGI International, through a wholly-owned subsidiary, sold its natural gas marketing business located in the U.K. for a net cash payment to the buyer of $19 million which includes certain working capital adjustments. In conjunction with the sale, the Company recorded a pre-tax loss of $215 million ($151 million after-tax) substantially all of which loss was due to the non-cash transfer of commodity derivative instruments associated with the business. The loss is reflected in “Loss on disposal of UGI International energy marketing business” on the Consolidated Statements of Income. At the date of closing of the sale, these commodity derivative instruments had a net carrying value of $206 million which is attributable to net unrealized gains on such instruments. At September 30, 2022, these derivative instruments were classified as held-for-sale assets and liabilities on the Consolidated Balance Sheets and had a net carrying value of $276 million. The change in the carrying value of these derivative instruments between September 30, 2022 and October 21, 2022 resulted from changes in their fair values during that period.

Netherlands. In September 2023, a substantial number of DVEP’s customers agreed to modify their energy marketing contracts whereby the Company will continue to provide for the delivery of electricity and natural gas at fixed prices through December 31, 2023 but the Company’s obligations to provide future services will be terminated effective January 1, 2024. As consideration for the early termination of such contracts, the Company has agreed to make cash payments to the customers equal to the fair values of specific commodity derivative instruments associated with periods after December 31, 2023. The carrying values of these commodity derivative instruments are subject to change until such contracts are settled, and the cash payments are made, during the first quarter of Fiscal 2024. At September 30, 2023, the carrying value of these commodity derivative instruments was $44 million. The early termination agreements with DVEP customers are considered contract modifications and the cash consideration to be paid to these customers has been, and will be, reflected as a reduction in revenues on a pro-rata basis, over the remaining performance period of such agreements through December 31, 2023. Accordingly, during the fourth quarter of Fiscal 2023, the Company reduced its revenues from these customers by $4 million, which represents the pro-rated performance obligation through September 30, 2023 from the aforementioned $44 million.

In conjunction with the wind-down of its European energy marketing business, in July 2023, DVEP agreed to sell a substantial portion of its power purchase agreements to a third party for a cash payment to the buyer of $6 million. The closing of the sale is expected to occur during the first quarter of Fiscal 2024. The loss from the sale is not expected to be material.

During the first quarter of Fiscal 2023, the Company recorded a $19 million pre-tax impairment charge to reduce the carrying values of certain assets associated with its energy marketing business in the Netherlands, comprising property, plant and equipment and intangible assets. The impairment charge is reflected in “Operating and administrative expenses” on the Consolidated Statements of Income and included in the UGI International reportable segment.

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Global Macroeconomic Conditions

Beginning in Fiscal 2021 and continuing into Fiscal 2023, global commodity and labor markets have experienced significant inflationary pressures attributable to various economic and political factors, including, among others: supply chain issues including those associated with labor shortages; significant increase and volatility in energy commodity prices; and geopolitical and regulatory conditions resulting from the war between Russia and Ukraine. These factors have contributed to inflationary pressures as evidenced by increases in various consumer price indices. In response to these inflationary pressures, central banks in the U.S. and Europe increased interest rates during Fiscal 2022 and Fiscal 2023. In addition, during the last several years, we have experienced significant volatility in energy commodity prices, particularly in LPG, natural gas and electricity prices, which, have resulted in substantial fluctuations in the fair values of our commodity derivative instruments. These inflationary pressures and commodity price fluctuations have resulted in, among other things, fluctuations in inventory and cost of sales, and increases in certain operating and distribution expenses across all of our businesses. Commodity price fluctuations have also significantly affected the cash collateral deposit requirements of our derivative instrument counterparties and the restricted cash required to be held in our derivative broker and clearing institution accounts. We cannot predict the duration or total magnitude of these conditions and the effects such conditions may have on our future business, financial results, financial position, liquidity and cash flows. However, we continue to monitor and respond to these global economic and geopolitical conditions and remain focused on managing our financial condition and liquidity as these conditions continue to evolve.

Non-GAAP Financial Measures

UGI management uses “adjusted net income attributable to UGI Corporation” and “adjusted diluted earnings per share,” both of which are non-GAAP financial measures, when evaluating UGI’s overall performance. Management believes that these non-GAAP measures provide meaningful information to investors about UGI’s performance because they eliminate gains and losses on commodity and certain foreign currency derivative instruments not associated with current-period transactions and other significant discrete items that can affect the comparison of period-over-period results.

UGI does not designate its commodity and certain foreign currency derivative instruments as hedges under GAAP. Volatility in net income attributable to UGI Corporation can occur as a result of gains and losses on such derivative instruments not associated with current-period transactions. These gains and losses result principally from recording changes in unrealized gains and losses on unsettled commodity and certain foreign currency derivative instruments and, to a much lesser extent, certain realized gains and losses on settled commodity derivative instruments that are not associated with current-period transactions. However, because these derivative instruments economically hedge anticipated future purchases or sales of energy commodities, or in the case of certain foreign currency derivatives, reduce volatility in anticipated future earnings associated with our foreign operations, we expect that such gains or losses will be largely offset by gains or losses on anticipated future energy commodity transactions or mitigate volatility in anticipated future earnings. Non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute for, the comparable GAAP measures.

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The following tables reflect the adjustments referred to above and reconcile net income (loss) attributable to UGI Corporation, the most directly comparable GAAP measure, to adjusted net income attributable to UGI Corporation, and reconcile diluted earnings per share, the most directly comparable GAAP measure, to adjusted diluted earnings per share:

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(a)Corporate & Other includes certain adjustments made to our reporting segments in arriving at net income attributable to UGI Corporation. These adjustments have been excluded from the segment results to align with the measure used by our CODM in assessing segment performance and allocating resources. See Note 22 to Consolidated Financial Statements for additional information related to these adjustments, as well as other items included within Corporate & Other.

(b)Income taxes associated with pre-tax adjustments determined using statutory business unit tax rates.

(c)The loss per share for Fiscal 2023, was determined excluding the effect of 6.13 million dilutive shares as the impact of such shares would have been antidilutive due to the net loss for the period, while the adjusted earnings per share for Fiscal 2023, was determined based upon fully diluted shares of 215.94 million.

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Fiscal 2023 Compared with Fiscal 2022

Discussion. Net (loss) income attributable to UGI Corporation was $(1,502) million in Fiscal 2023 (equal to $(7.16) per diluted share) compared to $1,073 million in Fiscal 2022 (equal to $4.97 per diluted share). These results include net (losses) gains from changes in unrealized commodity derivative instruments and certain foreign currency derivative instruments of $(1,252) million and $494 million in Fiscal 2023 and Fiscal 2022, respectively. The higher losses from changes in commodity derivative instruments in Fiscal 2023 principally reflects significant declines in commodity energy prices in Europe following unprecedented increases in such prices during Fiscal 2022.

Net loss attributable to UGI Corporation in Fiscal 2023 also includes (1) a $660 million loss associated with impairment of AmeriGas Propane goodwill; (2) $181 million costs associated with exit of our UGI International energy marketing business in Europe, principally reflecting loss on the sale of the energy marketing business located in the U.K. and Belgium and wind-down activities in the Netherlands; (3) external advisory fees of $18 million associated with AmeriGas operations enhancement for growth project; (4) a $10 million net gain on sale of UGI Corporation’s headquarters building; (5) loss on extinguishment of debt of $7 million at AmeriGas Propane; and (6) business transformation expenses of $7 million associated with corporate support functions.

Net loss attributable to UGI Corporation in Fiscal 2022 also includes (1) impairments of certain equity method investments of $22 million; (2) restructuring costs of $21 million largely attributable to reductions in workforce and related costs; (3) $19 million of income tax benefits related to tax law changes; (4) loss on extinguishment of debt of $8 million at UGI International; (5) business transformation expenses of $7 million associated with corporate support functions; (6) $4 million costs associated with exit of our UGI International energy marketing business in the U.K.; (7) external advisory fees of $3 million associated with AmeriGas operations enhancement for growth project; and (8) acquisition and integration expenses of $1 million associated with the Mountaineer Acquisition.

Adjusted net income attributable to UGI Corporation for Fiscal 2023 was $613 million (equal to $2.84 per diluted share) compared to adjusted net income attributable to UGI Corporation for Fiscal 2022 of $626 million (equal to $2.90 per diluted share). The decrease in adjusted net income attributable to UGI Corporation during Fiscal 2023 reflects lower earnings contributions from our LPG businesses, primarily AmeriGas Propane. Such decrease was partially offset by higher earnings contributions from our Midstream & Marketing and Utilities segments. In Fiscal 2023, temperatures in all of our business segments, except for AmeriGas Propane, were warmer than the prior year.

AmeriGas Propane’s adjusted net income attributable to UGI Corporation decreased $41 million during Fiscal 2023. This decrease principally reflects higher operating and administrative expenses primarily resulting from, among other things, higher vehicle expenses, higher overtime and other employee-related costs associated with distribution activity, and the effects of continuing inflationary pressures. These factors were partially offset by higher gains on sales of fixed assets.

UGI International’s adjusted net income attributable to UGI Corporation decreased $3 million during Fiscal 2023. This decrease mainly reflects the translation effects of weaker foreign currencies. UGI International operating results principally reflect (1) lower total LPG margin principally due to the effects of the lower LPG retail volumes sold attributable to the significantly warmer weather and lower residential LPG consumption resulting from energy conservation measures in Europe due in large part to the war between Ukraine and Russia; and (2) higher operating and administrative expenses primarily resulting from the effects of continuing inflationary pressures. These decreases were partially offset by higher margin from our natural gas energy marketing activities and higher retail LPG average unit margins attributable to strong margin management efforts and lower commodity prices.

Midstream & Marketing adjusted net income in Fiscal 2023 was $30 million higher than the prior year. This increase principally reflects incremental earnings contributions from UGI Moraine East and Pennant, partially offset by lower margins related to natural gas marketing activities.

Utilities Fiscal 2023 adjusted net income increased $13 million compared to the prior year. The increase was largely related to the increase in base rates and the implementation of the weather normalization adjustment at PA Gas Utility, both of which became effective during the first quarter of Fiscal 2023. This increase was partially offset by higher operating and administrative expenses.

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(a)Total margin represents revenues less cost of sales.

(b)Deviation from average heating degree days is determined on a rolling 10-year period utilizing volume-weighted weather data based on weather statistics provided by NOAA for 344 regions in the United States, excluding Alaska and Hawaii.

Average temperatures during Fiscal 2023 were 0.5% colder than normal and 1.9% colder than the prior year. Total retail propane gallons sold decreased 7% during Fiscal 2023 due to the effects of driver staffing shortages (which also limited growth), continuing customer attribution and structural conservation.

Average daily wholesale propane commodity prices during Fiscal 2023 at Mont Belvieu, Texas, one of the major supply points in the U.S., were approximately 39% lower than such prices during Fiscal 2022. Total revenues decreased $362 million during Fiscal 2023 largely reflecting the lower retail propane volumes sold ($179 million), lower wholesale revenues ($100 million) and the effects of lower average retail propane selling prices ($76 million). Total cost of sales decreased $363 million during Fiscal 2023 largely attributable to the lower average propane product costs ($160 million), lower wholesale cost of sales ($101 million) and the lower retail propane volumes sold ($95 million).

AmeriGas Propane total margin increased $1 million in Fiscal 2023 largely attributable to higher average retail propane unit margins ($84 million), substantially offset by the lower retail propane volumes sold ($83 million).

AmeriGas Propane operating income and earnings before interest expense and income taxes decreased $39 million in Fiscal 2023 primarily attributable to higher operating and administrative expenses ($61 million), partially offset by higher other operating income ($21 million), largely related to gains on sales of fixed assets. The increase in operating and administrative expenses reflects, among other things, higher vehicle expenses, higher staffing, overtime and other employee-related costs associated with distribution activity and higher advertising expenses, partially offset by lower salaries and benefits expenses, including the carryover impact of the workforce reductions made during Fiscal 2022.

(a)Total margin represents total revenues less total cost of sales.

(b)Deviation from average heating degree days is determined on a rolling 10-year period utilizing volume-weighted weather data at locations in our UGI International service territories.

Average temperatures during Fiscal 2023 were 10.5% warmer than normal and 8.4% warmer than Fiscal 2022. Total LPG retail gallons sold decreased 9% during Fiscal 2023, largely attributable to the significantly warmer weather; lower consumption, principally from residential customers, primarily resulting from the European conservation measures due in large part to high global energy prices and the war between Russia and Ukraine; lower cylinder volumes; and reduced crop drying campaigns. These decreases were partially offset by growth due to natural gas conversions.

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UGI International base-currency results are translated into U.S. dollars based upon exchange rates experienced during the reporting periods. The functional currency of a significant portion of our UGI International results is the euro and, to a much lesser extent, the British pound sterling. During Fiscal 2023 and Fiscal 2022, the average unweighted euro-to-dollar translation rates were approximately $1.07 and $1.08, respectively, and the average unweighted British pound sterling-to-dollar translation rates were approximately $1.23 and $1.28, respectively. Fluctuations in these foreign currency exchange rates can have a significant impact on the individual financial statement components discussed below. The Company uses forward foreign currency exchange contracts entered into over multi-year periods to reduce the volatility in earnings that may result from such changes in foreign currency exchange rates. These forward foreign currency exchange contracts resulted in realized net gains of $15 million and $13 million in Fiscal 2023 and Fiscal 2022, respectively.

Average wholesale prices for propane and butane during Fiscal 2023 in northwest Europe were approximately 25% and 26% lower, respectively, compared to Fiscal 2022. UGI International revenues and cost of sales decreased $721 million and $706 million, respectively, in Fiscal 2023. The decrease in revenues and cost of sales principally reflects the impact from our energy marketing business of lower volumes sold, partially offset by the impact of higher prices. The decrease in revenues and cost of sales also reflects the impact of the lower LPG retail volumes sold and the lower average LPG product costs. The decrease in revenues and cost of sales also reflects the translation effects of the weaker foreign currencies (approximately $115 million and $88 million, respectively).

UGI International total margin decreased $15 million during Fiscal 2023 primarily reflecting the effects of the lower LPG retail volumes sold ($90 million) and the translation effects of the weaker foreign currencies (approximately $27 million). These factors were substantially offset by higher average LPG retail unit margins attributable to strong margin management efforts, the lower average LPG product costs and higher total margin from our energy marketing business ($29 million). The higher energy marketing margin reflects higher natural gas energy marketing margin, partially offset by lower electricity energy marketing margin.

UGI International operating income and earnings before interest expense and income taxes decreased $22 million and $20 million, respectively, during Fiscal 2023. The decrease in operating income principally reflects the decrease in total margin ($15 million) and higher operating and administrative expenses ($12 million), partially offset by higher other operating income ($8 million). The higher operating and administrative expenses during Fiscal 2023 primarily reflects the effects of inflationary increases, partially offset by lower distribution and personnel-related costs and the translation effects of the weaker foreign currencies (approximately $11 million). The higher other operating income during Fiscal 2023 primarily represents higher foreign currency transaction gains ($12 million) and higher cylinder deposit income ($5 million), partially offset by lower gains associated with sales of fixed assets ($11 million). The decrease in earnings before interest expense and income taxes in Fiscal 2023 largely reflects the decrease in operating income partially offset by higher realized gains on foreign currency exchange contracts ($2 million) entered into in order to reduce volatility in UGI International earnings resulting from the effects of changes in foreign currency exchange rates.

(a)Total margin represents total revenues less total cost of sales.

Average temperatures across Midstream & Marketing’s energy marketing territory during Fiscal 2023 were 11.0% warmer than normal and 6.0% warmer than the prior year.

Midstream & Marketing’s revenues decreased $479 million during Fiscal 2023, principally reflecting lower revenues from natural gas marketing activities ($519 million), including the effects of peaking and capacity management activities, principally reflecting significantly lower average natural gas prices and, to a lesser extent, lower volumes from the warmer weather. This decrease was partially offset by higher natural gas gathering and processing activities ($43 million), primarily due to the impact on revenues from the prior-year acquisitions of UGI Moraine East and Pennant.

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Midstream & Marketing cost of sales decreased $516 million during Fiscal 2023, primarily reflecting the lower natural gas costs ($511 million) related to the previously mentioned natural gas marketing activities.

Midstream & Marketing total margin increased $37 million in Fiscal 2023, primarily reflecting incremental natural gas gathering and processing activities ($49 million), primarily from the prior year acquisitions of UGI Moraine East and Pennant, partially offset by lower margins from natural gas marketing activities ($8 million), including the effects of peaking and capacity management activities, despite the benefits from extremely cold weather in late December 2022. In Fiscal 2022, the margin from natural gas marketing activities included the positive impact of settlement timing of certain multi-year commodity storage hedge contracts.

Midstream & Marketing operating income and earnings before interest expense and income taxes during Fiscal 2023 increased $39 million and $22 million, respectively. The increase in operating income principally reflects the increase in total margin ($37 million) and higher other operating income ($13 million), partially offset by higher depreciation and amortization expense ($7 million) and higher operating and administrative expenses ($4 million). The increase in earnings before interest expense and income taxes principally reflects the higher operating income ($39 million), partially offset by lower income from equity investees ($17 million) following the acquisition of the remaining 53% ownership interest in Pennant during the fourth quarter of Fiscal 2022.

(a)Total margin represents total revenues less total cost of sales and revenue-related taxes (i.e. Electric Utility gross receipts and business and occupation taxes) of $24 million and $21 million, respectively, during Fiscal 2023 and Fiscal 2022. For financial statement purposes, revenue-related taxes are included in “Operating and administrative expenses” on the Consolidated Statements of Income (but are excluded from operating expenses presented above).

(b)Deviation from average heating degree days is determined on a 10-year period utilizing volume-weighted weather data based on weather statistics provided by NOAA for airports located within Gas Utility service territories.

Temperatures in Gas Utility’s service territories during Fiscal 2023 were 11.7% warmer than normal and 4.8% warmer than the prior year. The decrease in Gas Utility core market volumes during Fiscal 2023 is largely related to the warmer weather, partially offset by growth in the core market customers. The decrease in Electric Utility distribution sales volumes during Fiscal 2023 is primarily attributable to warmer weather.

Utilities revenues increased $234 million in Fiscal 2023 reflecting a $225 million increase in Gas Utility revenues and a $9 million increase in Electric Utility revenues. The increase in Gas Utility revenues was largely driven by higher PGC and PGA rates reflecting higher natural gas costs; the effects of the increase in base rates and weather normalization adjustments for PA Gas Utility that went into effect during the first quarter of Fiscal 2023; and higher other revenues. These increases were partially offset by the effects on core market volumes of the warmer weather and lower off-system sales. The increase in Electric Utility revenues during Fiscal 2023 was largely driven by higher DS rates, reflecting higher power costs.

Utilities cost of sales (including revenue-related taxes) was $977 million in Fiscal 2023 compared with $819 million in Fiscal 2022. The increase of $158 million is primarily attributable to Gas Utility ($149 million) mainly reflecting higher PGC and PGA rates and higher other cost of sales, partially offset by lower cost of sales associated with off-system sales. Electric Utility cost of sales increased $9 million in Fiscal 2023 largely reflecting the higher DS rates.

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Utilities total margin increased $76 million during Fiscal 2023 substantially attributable to higher Gas Utility total margin mainly reflecting the effects of the increase in base rates and weather normalization adjustments for PA Gas Utility that went into effect during the first quarter of Fiscal 2023 and, to a much lesser extent, impacts from growth in the core market customers and higher other revenues. Electric Utility margin was comparable to the prior year.

Utilities operating income and earnings before interest expense and income taxes during Fiscal 2023 increased $30 million and $29 million, respectively, compared to the prior year. These increases largely reflect the previously mentioned increase in total margin, partially offset by higher operating and administrative expenses ($36 million) and higher depreciation expense ($8 million). The higher operating and administrative expenses reflect, among other things, higher uncollectible accounts expenses, contract labor costs and personnel-related expenses. The higher depreciation expense compared to the prior year reflects the effects of continued distribution system capital expenditure activity.

Interest Expense and Income Taxes

Our consolidated interest expense during Fiscal 2023 was $379 million compared to $329 million during the prior year. The increase in interest expense largely reflects higher credit agreement interest rates and borrowings, higher average interest rates on UGI Corporation long-term debt and higher average long-term debt outstanding principally at our Utilities and Midstream & Marketing segments.

Our effective income tax rate decreased between Fiscal 2022 and Fiscal 2023, primarily due to the release of a valuation allowance related to the utilization of foreign tax credits and the availability of investment tax credits in Fiscal 2023 that were not available in Fiscal 2022. These decreases were partially offset by (1) a higher concentration of pre-tax losses in higher income tax rate jurisdictions resulting from losses on derivative instruments; (2) establishing a valuation allowance for interest expense disallowance at AmeriGas Propane; and (3) the impact on income taxes from the goodwill impairment at AmeriGas Propane, which included certain adjustments to the associated deferred tax assets. For additional information on our income taxes, including tax law changes, see Note 7 to Consolidated Financial Statements.

Financial Condition and Liquidity

The Company expects to have sufficient liquidity including cash on hand and available borrowing capacity, to continue to support long-term commitments and ongoing operations despite uncertainties associated with ongoing global macroeconomic conditions including, among others, changes in consumer behavior, the inflationary cost environment and ongoing energy commodity price volatility. Our total available liquidity balance, comprising cash and cash equivalents and available borrowing capacity on our revolving credit facilities, totaled approximately $1.6 billion and $1.7 billion at September 30, 2023 and 2022, respectively. The Company does not have any senior notes or term loans maturing in the next twelve months. The Company cannot predict the duration or total magnitude of the uncertain economic factors mentioned above and the total effects they will have on its liquidity, debt covenants, financial condition or the timing of capital expenditures. UGI and its subsidiaries were in compliance with its debt covenants as of September 30, 2023. See Note 6 to the Consolidated Financial Statements for additional information on compliance.

We depend on both internal and external sources of liquidity to provide funds for working capital and to fund capital requirements. Our short-term cash requirements not met by cash from operations are generally satisfied with borrowings under credit facilities and, in the case of Midstream & Marketing, also from a Receivables Facility. Long-term cash requirements are generally met through the issuance of long-term debt or equity securities. We believe that each of our business units has sufficient liquidity in the forms of cash and cash equivalents on hand; cash expected to be generated from operations; credit facility and Receivables Facility borrowing capacity; and the ability to obtain long-term financing to meet anticipated contractual and projected cash commitments. Issuances of debt and equity securities in the capital markets and additional credit facilities may not, however, be available to us on acceptable terms.

The primary sources of UGI’s cash and cash equivalents are the dividends and other cash payments made to UGI or its corporate subsidiaries by its principal business units. Our cash and cash equivalents totaled $241 million at September 30, 2023, compared with $405 million at September 30, 2022. Excluding cash and cash equivalents that reside at UGI’s operating subsidiaries, at September 30, 2023 and 2022, our cash and cash equivalents totaled $51 million and $140 million, respectively. Such cash is available to pay dividends on UGI Common Stock and for investment purposes. The decrease in cash and cash equivalents since September 30, 2022, can be attributed to, among other things, temporary restrictions on the payment of dividends from AmeriGas OLP to UGI resulting from the use of an equity cure, as defined by the 2022 AmeriGas OLP Credit Agreement and an increase in cash outflow in the form of capital contributions to AmeriGas Partners. In November 2023, the Company amended the 2022 AmeriGas OLP Credit agreement to reduce both the revolver amount and the minimum interest

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coverage ratio. As of September 30, 2023 the Partnership was in compliance with all debt covenants as set forth in the amended 2022 AmeriGas OLP Credit Agreement without the consideration of the equity cure provisions, alleviating the restriction on the subsidiaries ability to pay dividends to the parent. See Note 6 to the Consolidated Financial Statements for additional information.

During Fiscal 2023 and Fiscal 2022, our principal business units paid cash dividends and made other cash payments to UGI and its subsidiaries as follows:

Common and Preferred Stock

Issuance of Equity Units

On May 25, 2021, the Company issued 2.2 million Equity Units with a total notional value of $220 million. Each Equity Unit has a stated amount of $100 and consists of (1) a 10% undivided beneficial ownership interest in one share of Convertible Preferred Stock with a liquidation preference of $1,000 per share and (2) a 2024 Purchase Contract. The Company received approximately $213 million in proceeds from the issuance of the Equity Units, net of offering expenses and underwriting costs and commissions, and issued 220,000 shares of Convertible Preferred Stock, recording $213 million in “Preferred stock” on the accompanying Consolidated Balance Sheet. The proceeds were used to pay a portion of the purchase price for the Mountaineer Acquisition and related fees and expenses, and for general corporate purposes. For additional information on the Mountaineer Acquisition and the issuance of Equity Units, see Notes 5 and 13 to the Consolidated Financial Statements.

Dividends

Quarterly dividends per share of UGI Common Stock paid during Fiscal 2023 and Fiscal 2022 were as follows:

On November 16, 2023, UGI’s Board of Directors declared a cash dividend equal to $0.375 per common share. The dividend will be payable on January 1, 2024, to shareholders of record on December 15, 2023.

Repurchases of Common Stock

During Fiscal 2023 and Fiscal 2022, the Company repurchased 600,000 shares and 900,000 shares of its common stock at a total purchase price of $22 million and $38 million, respectively. For additional information on the authorization of these repurchases, see Note 13 to the Consolidated Financial Statements.

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Long-term Debt and Credit Facilities

The Company’s debt outstanding at September 30, 2023 and 2022, comprised the following:

Significant Financing Activities

2022 AmeriGas OLP Credit Agreement. Under the 2022 AmeriGas OLP Credit Agreement, AmeriGas OLP, as borrower, is required to comply with financial covenants related to leverage and interest coverage measured at the Partnership and at AmeriGas OLP. On November 15, 2023, the Company entered into an amendment to the 2022 AmeriGas OLP Credit Agreement, which amends certain provisions of the credit agreement dated as of September 28, 2022 to, among other things, (i) reduce the maximum revolver amount from $600 million to $400 million, (ii) reduce the minimum interest coverage ratio, effective for the fourth quarter of Fiscal 2023 through the end of the fourth quarter of Fiscal 2024 and (iii) beginning for the first quarter of Fiscal 2025, the minimum interest coverage ratio will remain reduced if the net leverage ratio is below a threshold as defined by the agreement; if the net leverage ratio exceeds such threshold, the minimum interest coverage ratio will revert to the original ratio as defined by the agreement.

As of March 31, 2023, AmeriGas OLP was in breach of the leverage ratio debt covenant and interest coverage ratio, which it cured with the funds received from UGI. The 2022 AmeriGas OLP Credit Agreement contains an equity cure provision, which allows AmeriGas OLP’s direct or indirect parent, including UGI and its other subsidiaries, to fund capital contributions to eliminate any EBITDA (as defined in the 2022 AmeriGas OLP Credit Agreement) shortfalls that would otherwise result in non-compliance with these financial covenants. UGI made capital contributions to AmeriGas OLP of $20 million and $11 million on March 31, 2023 and April 24, 2023, respectively, which in aggregate represented one equity cure in accordance with the 2022 AmeriGas OLP Credit Agreement. As a result of these capital contributions, AmeriGas OLP and the Partnership were in compliance with its financial covenants after considering the equity cure provision as of June 30, 2023 and March 31, 2023. As of September 30, 2023 the Partnership was in compliance with all debt covenants as set forth in the amended 2022 AmeriGas OLP Credit Agreement without the consideration of the equity cure provisions.

UGI also provided an irrevocable letter of support whereby UGI has committed to fund any such EBITDA shortfalls and debt service, if any. Based on the support and the projected EBITDA, AmeriGas OLP is expected to remain in compliance with its financial debt covenants for the succeeding twelve-month period. In addition, in May 2023, the Company contributed $52 million in an equity contribution to AmeriGas Partners principally to fund debt service on AmeriGas Partners Senior Notes.

UGI Utilities 2023 Credit Agreement. On November 9, 2023, UGI Utilities entered into the UGI Utilities 2023 Credit Agreement providing for borrowings up to $375 million (including a $50 million sublimit for letters of credit and a $38 million sublimit for swingline loans). UGI Utilities may request an increase in the amount of loan commitments under the credit agreement to a maximum aggregate amount of $125 million. The interest rates applicable to borrowings under the UGI Utilities 2023 Credit Agreement will remain unchanged. The credit agreement contains customary covenants and default provisions and requires compliance with certain financial covenants including a maximum debt to capitalization ratio as defined in the agreement. The maturity of the credit agreement was extended to November 2024 with an additional automatic 5-year extension upon receipt of authorization for such extension from the PAPUC. Borrowings under the credit agreement may be used to refinance UGI Utilities existing indebtedness, finance the working capital needs of UGI Utilities and for general corporate purposes.

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On December 13, 2022, UGI Utilities entered into an amendment to the UGI Utilities Credit Agreement, providing for borrowings up to $425 million and to replace the use of LIBOR with Term SOFR.

AmeriGas Partners Senior Notes. On May 31, 2023, AmeriGas Partners and AmeriGas Finance Corp. issued $500 million principal amount of 9.375% Senior Notes due May 2028. The 9.375% Senior Notes rank equally with AmeriGas Partners’ existing senior notes. The net proceeds from the issuance of the 9.375% Senior Notes, together with cash on hand, a $150 million cash contribution from the Company and other sources of liquidity, were used for the early repayment, pursuant to a tender offer and notice of redemption, of all AmeriGas Partners 5.625% Senior Notes having an aggregate principal balance of $675 million, plus tender premiums and accrued and unpaid interest. In conjunction with the early repayment of the 5.625% Senior Notes, in June 2023 the Partnership recognized a pre-tax loss of $9 million primarily comprising tender premiums and the write-off of unamortized debt issuance costs, which is reflected in “Loss on extinguishments of debt” on the Consolidated Statements of Income.

UGI International 2023 Credit Facilities Agreement. On March 7, 2023, UGI International, LLC and its indirect wholly-owned subsidiary, UGI International Holdings B.V., entered into the UGI International 2023 Credit Facilities Agreement, a five-year unsecured senior facilities agreement, maturing March 7, 2028, with a consortium of banks. The UGI International 2023 Credit Facilities Agreement consists of (1) a €300 million variable-rate term loan facility ("Facility A") and (2) a €500 million multicurrency revolving credit facility, including a €100 million sublimit for swingline loans ("Facility B"). We have designated borrowings under Facility A as a net investment hedge. In connection with the entering into of the UGI International 2023 Credit Facilities Agreement, UGI International, LLC paid off in full and terminated the UGI International Credit Facilities Agreement, dated as of October 18, 2018. Borrowings under the multicurrency revolving credit facility may be used to finance the working capital needs of UGI International, LLC and its subsidiaries and for general corporate purposes.

UGI Energy Services Credit Agreement. On May 12, 2023, Energy Services entered into the second amendment to the UGI Energy Services Credit Agreement, which provides that the Term SOFR rate (as defined in the UGI Energy Services Credit Agreement) shall replace LIBOR as a reference rate. After giving effect to the second amendment, the UGI Energy Services Credit Agreement shall bear interest at a floating rate of, at Energy Services’ option, either (i) Term SOFR plus the Applicable Rate (as defined in the UGI Energy Services Credit Agreement) plus a credit spread adjustment of 0.10%, or (ii) the base rate plus the Applicable Rate. The Applicable Rate will be based on the leverage of Energy Services.

Energy Services Amended Term Loan Credit Agreement. On February 23, 2023, Energy Services entered into the Energy Services Amended Term Loan Credit Agreement, the first amendment to the Energy Services Term Loan Credit Agreement, dated August 13, 2019. The Energy Services Amended Term Loan Credit Agreement provides, among other items, that (i) the outstanding principal amount of the loans shall be increased by $125 million to $800 million, (ii) the maturity date of the loans shall be extended to February 22, 2030, and (iii) Term SOFR (as defined in the Energy Services Amended Term Loan Credit Agreement) shall replace LIBOR as a reference rate.

Mountaineer 2023 Credit Agreement. On October 20, 2022, Mountaineer entered into the Mountaineer 2023 Credit Agreement, as borrower, with a group of lenders. The Mountaineer 2023 Credit Agreement amends and restates a previous credit agreement and provides for borrowings up to $150 million, including a $20 million sublimit for letters of credit. Mountaineer may request an increase in the amount of loan commitments to a maximum aggregate amount of $250 million, subject to certain terms and conditions. Borrowings under the Mountaineer 2023 Credit Agreement can be used to finance the working capital needs of Mountaineer and for general corporate purposes. The Mountaineer 2023 Credit Agreement is scheduled to expire in November 2024, and Mountaineer has the option, with the consent of the lenders, to request extension of the maturity date to November 2025, and then to November 2026, upon fulfillment of specified conditions.

UGI Corporation Credit Facility Agreement. On May 12, 2023, the Company entered into the second amendment to the UGI Corporation Credit Agreement, which provides that the Term SOFR rate (as defined in the UGI Corporation Credit Agreement) shall replace LIBOR as a reference rate. After giving effect to the second amendment, the UGI Corporation Credit Agreement shall bear interest at a floating rate of, at the Company’s option, either (i) Term SOFR plus the Applicable Rate (as defined in the UGI Corporation Credit Agreement) plus a credit spread adjustment of 0.10%, or (ii) the base rate plus the applicable margin that will be based on the leverage of the Company or credit ratings assigned to certain indebtedness of the Company.

On September 20, 2023, UGI amended the UGI Corporation Credit Facility Agreement which extended the maturity date of the (1) five-year $250 million amortizing variable-rate term loan and (2) five-year $300 million revolving credit facility to May 2025 and increased the applicable rates (as defined in the amended UGI Corporation Credit Agreement) by 0.125%.

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Credit Facilities

Information about the Company’s principal credit agreements (excluding Energy Services’ Receivables Facility, which is discussed below) as of September 30, 2023 and 2022, is presented in the tables below.