UGI Corporation, through subsidiaries and affiliates, distributes, stores, transports and markets energy products and related services.
In the U.S., the company owns and operates natural gas and electric distribution utilities; energy marketing (including RNG), midstream infrastructure, storage, natural gas gathering and processing, natural gas production and energy services businesses; and a retail propane marketing and distribution business. In Europe, the company markets and distributes prop...
UGI Corporation, through subsidiaries and affiliates, distributes, stores, transports and markets energy products and related services.
In the U.S., the company owns and operates natural gas and electric distribution utilities; energy marketing (including RNG), midstream infrastructure, storage, natural gas gathering and processing, natural gas production and energy services businesses; and a retail propane marketing and distribution business. In Europe, the company markets and distributes propane and other LPG, and market other energy products and services. The company’s subsidiaries and affiliates operate principally in the following four business segments: Utilities, Midstream & Marketing, UGI International, and AmeriGas Propane.
Business Strategy
The company’s business strategy is to grow the company by focusing on its core competencies of distributing, storing, transporting and marketing energy products. The company utilizes its core competencies from its existing diversified businesses and the company’s international experience, extensive asset base and access to customers to accelerate both organic growth in the company’s existing businesses, as well as in related and complementary businesses.
The company focuses on pursuing opportunities to optimize the company’s portfolio and drive reliable earnings growth in the base businesses; executing on an operational improvement plan at AmeriGas Propane.
Utilities segment
The Utilities segment consists of the regulated natural gas (PA Gas Utility) and electric (Electric Utility) distribution businesses of the company’s wholly owned subsidiary, UGI Utilities, and the regulated natural gas distribution business of the company’s indirect, wholly owned subsidiary, Mountaineer. PA Gas Utility serves customers in eastern and central Pennsylvania and in portions of one Maryland county, and Mountaineer serves customers in West Virginia. Electric Utility serves customers in portions of Luzerne and Wyoming counties in northeastern Pennsylvania. PA Gas Utility is subject to regulation by the PAPUC and FERC, and with respect to its customers in Maryland, the MDPSC. Mountaineer is subject to regulation by the WVPSC and FERC. Electric Utility is subject to regulation by the PAPUC and FERC.
PA Gas Utility
PA Gas Utility consists of the regulated natural gas distribution business of the company’s subsidiary, UGI Utilities. PA Gas Utility serves customers in eastern and central Pennsylvania and in portions of one Maryland county, and therefore is regulated by the PAPUC, and with respect to its customers in Maryland, the MDPSC.
Service Area; Revenue Analysis
PA Gas Utility provides natural gas distribution services to approximately 689,000 customers in certificated portions of 46 eastern and central Pennsylvania counties through its distribution system. Contemporary materials, such as plastic or coated steel, comprise approximately 93% of PA Gas Utility’s 12,700 miles of gas mains, with bare steel pipe comprising approximately 6% and cast and wrought iron pipe comprising approximately 1% of PA Gas Utility’s gas mains. In accordance with PA Gas Utility’s agreement with the PAPUC, PA Gas Utility will replace the cast iron portion of its gas mains by March 2027 and the bare steel portion of its gas mains by September 2041. Located in PA Gas Utility’s service area are major production centers for basic industries such as specialty metals, aluminum, glass, paper product manufacturing and several power generation facilities. PA Gas Utility also distributes natural gas to more than 550 customers in portions of one Maryland county.
System throughput (the total volume of gas sold to or transported for customers within PA Gas Utility’s distribution system) for the fiscal year ended September 30, 2024 (Fiscal 2024) was approximately 327 Bcf. System sales of gas accounted for approximately 17% of system throughput, while gas transported for residential, commercial and industrial customers who bought their gas from others accounted for approximately 83% of system throughput.
Sources of Supply and Pipeline Capacity
PA Gas Utility is permitted to recover all prudently incurred costs of natural gas it sells to its customers. PA Gas Utility meets its service requirements by utilizing a diverse mix of natural gas purchase contracts with marketers and producers, along with storage and transportation service contracts. These arrangements enable PA Gas Utility to purchase gas from Marcellus, Gulf Coast, Mid-Continent, and Appalachian sources. For its transportation and storage functions, PA Gas Utility has long-term agreements with a number of pipeline companies, including Texas Eastern Transmission, LP, Columbia Gas Transmission, LLC, Transcontinental Gas Pipeline Company, LLC, Eastern Gas Transmission and Storage, Inc., Tennessee Gas Pipeline Company, L.L.C., and Energy Services and its subsidiaries (including UGI Storage Company and UGI Sunbury, LLC).
Gas Supply Contracts
During Fiscal 2024, PA Gas Utility purchased approximately 82 Bcf of natural gas for sale to retail core-market customers (principally consisted of firm residential, commercial and industrial customers that purchase their gas from PA Gas Utility) and off-system sales customers. Approximately 97% of the volumes purchased were supplied under agreements with ten suppliers, with the remaining volumes supplied primarily by 21 producers and marketers. Gas supply contracts for PA Gas Utility vary in length by counterparty and type of supply. Typically, pipeline and storage contracts range from one to five years in length. PA Gas Utility also has long-term contracts with suppliers for natural gas peaking supply during the months of November through March.
Seasonality
Because many of its customers use natural gas for heating purposes, PA Gas Utility’s sales are seasonal. For Fiscal 2024, approximately 58% of PA Gas Utility’s sales volume was supplied, and approximately 89% of PA Gas Utility’s operating income was earned, during the peak heating season from October through March.
Outlook for Gas Service and Supply
PA Gas Utility anticipates having adequate pipeline capacity, peaking services and other sources of supply available to it to meet the full requirements of all firm customers on its system through Fiscal 2025. Supply mix is diversified, market priced and delivered pursuant to a number of long-term and short-term primary firm transportation and storage arrangements, including transportation contracts held by some of PA Gas Utility’s larger customers and natural gas suppliers serving customers on PA Gas Utility’s distribution system.
During Fiscal 2024, PA Gas Utility supplied transportation service to 11 electric generation facilities and 28 major co-generation facilities. PA Gas Utility continues to seek new residential, commercial and industrial customers for both firm and interruptible service. In Fiscal 2024, PA Gas Utility connected more than 1,250 new commercial and industrial customers. In the residential market sector, PA Gas Utility added more than 9,800 residential heating customers during Fiscal 2024. Approximately 50% of these customers converted to natural gas heating from other energy sources, mainly oil and electricity. New home construction and existing non-heating gas customers who added gas heating systems to replace other energy sources primarily accounted for the other residential heating connections in Fiscal 2024.
PA Gas Utility continues to monitor and participate, where appropriate, in rulemaking and individual rate and tariff proceedings before FERC affecting the rates and the terms and conditions under which PA Gas Utility transports and stores natural gas using interstate natural gas pipelines.
Mountaineer
Mountaineer provides a regulated natural gas distribution business to approximately 210,000 customers in 50 of West Virginia’s 55 counties. Mountaineer’s system is consisted of approximately 6,200 miles of distribution, transmission and gathering pipelines. Contemporary materials, such as plastic or coated steel, comprise approximately 77% of Mountaineer’s gas mains, with bare steel pipe comprising the remaining 23%.
As of September 30, 2024, Mountaineer’s customer base was approximately 90% residential, and 10% commercial and industrial customers, with throughput volumes consisting of approximately 23% residential, 32% commercial and 45% industrial and other. Because many of its customers use gas for heating purposes, Mountaineer’s sales are seasonal. For Fiscal 2024, approximately 66% of Mountaineer’s sales volume (including transport volumes) was supplied, and all of Mountaineer’s operating income was earned, during the peak heating season from October through March.
System throughput (the total volume of gas sold to or transported for customers within Mountaineer’s distribution system) for Fiscal 2024 was approximately 51 Bcf. Retail core-market sales of gas accounted for approximately 37% of system throughput, while gas transported for commercial and industrial customers who bought their gas from others accounted for approximately 63% of system throughput. Mountaineer anticipates having adequate pipeline capacity, peaking services and other sources of supply available to it to meet the full requirements of all firm customers on its system through Fiscal 2025.
Approximately 51% of Mountaineer’s annual throughput volume for commercial and industrial customers represents customers who are served under interruptible rates and are also in a location near an interstate pipeline. As of September 30, 2024, Mountaineer had 19 such customers, one of which has a transportation contract extending beyond September 30, 2025. The majority of these customers, including 10 of Mountaineer’s largest customers in terms of annual volumes, are served under evergreen transportation contracts having a 30- to 180-day termination notice.
Mountaineer meets its service requirements by utilizing a diverse mix of natural gas purchase contracts with marketers and producers, along with storage and transportation service contracts. During Fiscal 2024, Mountaineer purchased approximately 20 Bcf of natural gas for sale to retail core-market customers (principally consisted of firm- residential, commercial and industrial customers that purchase their gas from Mountaineer). Approximately 83% of the volume purchased was supplied under agreements with 10 suppliers, with the remaining volumes supplied by various producers and marketers. Gas supply contracts for Mountaineer are generally evergreen agreements with a 30-day termination notice.
Electric Utility
Electric Utility supplies electric service to approximately 62,900 customers in portions of Luzerne and Wyoming counties in northeastern Pennsylvania through a system consisting of approximately 2,700 miles of transmission and distribution lines and 14 substations. For Fiscal 2024, approximately 56% of sales volume came from residential customers, 33% from commercial customers and 11% from industrial and other customers. During Fiscal 2024, 11 retail electric generation suppliers provided energy for customers representing approximately 23% of Electric Utility’s sales volume.
Utilities Regulation
State Utility Regulation
PA Gas Utility
PA Gas Utility is subject to regulation by the PAPUC as to rates, terms and conditions of service, accounting matters, issuance of securities, contracts and other arrangements with affiliated entities, gas safety and various other matters. Rates that PA Gas Utility may charge for gas service come in two forms: (i) rates designed to recover PGCs; and (ii) rates designed to recover costs other than PGCs. Rates designed to recover PGCs are reviewed in PGC proceedings. Rates designed to recover costs other than PGCs are primarily established in general base rate proceedings.
Mountaineer
Mountaineer is subject to regulation of rates and other aspects of its business by the WVPSC. When necessary, Mountaineer seeks general base rate increases to recover increased operating costs and a fair return on rate base investments. Base rates are determined by the cost-of-service by rate class, and the rate design methodology allocates the majority of operating costs through volumetric charges.
Electric Utility
Electric Utility is permitted to recover prudently incurred electricity costs, including costs to obtain supply to meet its customers’ energy requirements, pursuant to a supply plan filed with and approved by the PAPUC. Electric Utility distributes electricity that it purchases from wholesale markets and electricity that customers purchase from other suppliers.
On January 27, 2023, Electric Utility filed for a base rate increase with the PAPUC. On July 14, 2023, Electric Utility filed a joint petition for settlement of the rate case, which included a revenue increase of approximately $8.5 million. In an order dated September 21, 2023, the PAPUC approved the settlement and authorized the increased rate to become effective October 1, 2023.
On May 31, 2024, Electric Utility filed its next default service plan with the PAPUC for the period June 1, 2025 through May 31, 2029, which is pending before the PAPUC.
Utility Franchises
PA Gas Utility and Electric Utility hold certificates of public convenience issued by the PAPUC and certain ‘grandfather rights’ predating the adoption of the Pennsylvania Public Utility Code and its predecessor statutes, which authorize it to carry on its business in the territories in which it renders gas service. Under applicable Pennsylvania law, PA Gas Utility and Electric Utility also have certain rights of eminent domain as well as the right to maintain their facilities in public streets and highways in their respective territories. PA Gas Utility also holds certain franchise rights issued by the Maryland Public Service Commission, which authorizes it to carry on its business in Maryland.
Similarly, Mountaineer holds certificates of public convenience issued by the WVPSC, which authorize it to carry on its business in substantially all of the territories in which it now renders gas service. Under applicable West Virginia law, Mountaineer also has certain rights of eminent domain as well as the right to maintain its facilities in public streets and highways in its territories.
Federal Energy Regulation
With the acquisition of Mountaineer on September 1, 2021, UGI and its subsidiaries became subject to FERC regulation under PUHCA 2005 pertaining to record-keeping and affiliate service pricing requirements. UGI provided notice of its non-exempt status on September 17, 2021.
Utilities is subject to Section 4A of the Natural Gas Act, which prohibits the use or employment of any manipulative or deceptive devices or contrivances in connection with the purchase or sale of natural gas or natural gas transportation subject to the jurisdiction of FERC, and FERC regulations that are designed to promote the transparency, efficiency, and integrity of gas markets.
Similarly, UGI Utilities is also subject to Section 222 of the Federal Power Act, which prohibits the use or employment of any manipulative or deceptive devices or contrivances in connection with the purchase or sale of electric energy or transmission service subject to the jurisdiction of FERC, and FERC regulations that are designed to promote the transparency, efficiency, and integrity of electric markets.
FERC has jurisdiction over the rates and terms and conditions of service of electric transmission facilities used for wholesale or retail choice transactions. Electric Utility owns electric transmission facilities that are within the control area of PJM and are dispatched in accordance with a FERC-approved open access tariff and associated agreements administered by PJM.
Under provisions of EPACT 2005, Electric Utility is subject to certain electric reliability standards established by FERC and administered by an ERO. Electric Utility anticipates that substantially all the costs of complying with the ERO standards will be recoverable through its PJM formulary electric transmission rate schedule.
Other Government Regulation
In addition to state and federal regulation discussed above, Utilities is subject to various federal, state and local laws governing environmental matters, occupational health and safety, pipeline safety and other matters. Each is subject to the requirements of the Resource Conservation and Recovery Act, CERCLA and comparable state statutes with respect to the release of hazardous substances.
Midstream & Marketing segment
The Midstream & Marketing segment consists of energy-related businesses conducted by the company’s indirect, wholly owned subsidiary, Energy Services. These businesses (i) conduct energy marketing, including RNG, in the Mid-Atlantic region of the United States, (ii) own and operate natural gas liquefaction, storage and vaporization facilities and propane-air mixing assets, (iii) manage natural gas pipeline and storage contracts, (iv) develop, own and operate pipelines, gathering infrastructure and gas storage facilities in the Marcellus and Utica Shale regions of Pennsylvania, eastern Ohio, and the panhandle of West Virginia, and (v) develop, own and operate RNG production facilities. Energy Services and its subsidiaries’ storage, LNG and portions of its midstream transmission operations are subject to regulation by FERC.
Retail Energy Marketing
The company’s retail energy marketing business is conducted through Energy Services and its subsidiaries, and sells natural gas, RNG, liquid fuels and electricity to approximately 10,800 residential, commercial, and industrial customers at approximately 40,000 locations. In Fiscal 2024, the company (i) served customers in all or portions of Pennsylvania, New Jersey, Delaware, New York, Ohio, Maryland, Virginia, North Carolina, South Carolina, Massachusetts, New Hampshire, Rhode Island, California, and the District of Columbia, (ii) distributed natural gas through the use of the distribution systems of 47 local gas utilities, and (iii) supplied power to customers through the use of the transmission and distribution lines of 20 utility systems.
Midstream Assets
LNG
The company’s LNG assets, which are owned by Energy Services and its subsidiaries, comprise a natural gas liquefaction, storage and vaporization facility in Temple, Pennsylvania, a natural gas liquefaction and storage facility in Mehoopany, Pennsylvania, liquefied natural gas vaporization and storage facilities in Steelton and Bethlehem, Pennsylvania, and three small mobile facilities located in Reading, Mount Carmel and Stroudsburg, Pennsylvania.
In addition, Energy Services sells LNG to customers for use by trucks, drilling rigs, other motor vehicles and facilities located off the natural gas grid. In Fiscal 2024, Energy Services sold LNG to Mountaineer under a WVPSC-approved contract. Further, in Fiscal 2024, the company’s Midstream & Marketing segment also managed natural gas pipeline and storage contracts for utility company customers, including UGI Utilities.
Natural Gas and Propane Storage
Energy Services and its subsidiaries own propane storage and propane-air mixing stations in Bethlehem, Reading, Hunlock Creek and White Deer, Pennsylvania. Energy Services and its subsidiaries also operate propane storage, rail transshipment terminals and propane-air mixing stations in Steelton and Williamsport, Pennsylvania. These assets are used in Midstream & Marketing’s energy peaking business that provides supplemental energy, primarily LNG and propane-air mixtures, to gas utilities at times of high demand (generally during periods of coldest winter weather).
A wholly owned subsidiary of Energy Services owns and operates underground natural gas storage and related high pressure pipeline facilities, which have FERC approval to sell storage services at market-based rates. The storage facilities are located in the Marcellus Shale region of north-central Pennsylvania and have a total storage capacity of 15 million dekatherms and a maximum daily withdrawal quantity of 224,000 dekatherms. In Fiscal 2024, Energy Services leased approximately 72% of the firm capacity at its underground natural gas facilities to third parties.
Gathering Systems and Pipelines
Energy Services operates the Auburn gathering system in the Marcellus Shale region of northeastern Pennsylvania with a total pipeline system capacity of 635,000 dekatherms per day. The gathering system delivers into both the Tennessee Gas and Transcontinental Gas pipelines and receives gas from Tennessee Gas Pipeline as part of a capacity lease with UGI Utilities. Energy Services also operates a 6.5-mile pipeline, known as the Union Dale pipeline, that gathers gas in Susquehanna County and has a capacity of 100,000 dekatherms per day. In addition, Energy Services owns and operates approximately 95 miles of natural gas gathering lines, dehydration and compression facilities, known as Texas Creek, Marshlands, and Ponderosa, located in Bradford, Tioga, Lycoming, Potter and Clinton Counties, Pennsylvania. The combined capacity of these three systems is more than 250,000 dekatherms per day.
Energy Services and its subsidiaries also own and operate a 35-mile, 20-inch pipeline, known as the Sunbury pipeline, with related facilities located in Snyder, Union, Northumberland, Montour, and Lycoming Counties, Pennsylvania, which has a design capacity of 200,000 dekatherms per day. In addition, Energy Services owns and operates the Mt. Bethel pipeline, which runs 12.5 miles in Northampton County, Pennsylvania and is designed to provide 72,000 dekatherms per day.
Including its joint venture with Stonehenge Energy Holdings III LLC in Pine Run Midstream, Energy Services’ subsidiary, UGI Appalachia, consists of seven natural gas gathering systems with approximately 330 miles of natural gas gathering pipelines and gas compressors and one processing plant in southwestern Pennsylvania, eastern Ohio, and the panhandle of West Virginia. The UGI Appalachia assets provide natural gas gathering and processing services in the Appalachian Basin with gathering capacity of approximately 3,110,000 dekatherms per day and processing capacity of approximately 240,000 dekatherms per day.
Electric Generation Assets
During Fiscal 2024, Midstream & Marketing held electric generation facilities conducted by Energy Services’ wholly owned subsidiary, UGID. Energy Services sold all of its ownership interest in UGID in September 2024. Accordingly, UGID’s ownership interest in the Hunlock Creek Energy Center located in Wilkes-Barre, Pennsylvania, a natural gas-fueled electricity generating station, was also disposed of in September 2024. UGID Solar, a wholly owned subsidiary of Energy Services, continues to own and operate 13.5 megawatts of solar-powered generation capacity in Pennsylvania, Maryland and New Jersey.
Renewable Natural Gas
GHI, a wholly owned subsidiary of Energy Services, purchases gas produced from landfills and biodigesters and resells the gas to fleet operators. Environmental credits are generated through this process, which are then sold to various third parties for an additional revenue stream.
Government Regulation
FERC has jurisdiction over the rates and terms and conditions of service of wholesale sales of electric capacity and energy, as well as the sales for resale of natural gas and related storage and transportation services. Energy Services has a tariff on file with FERC, pursuant to which it may make power sales to wholesale customers at market-based rates, to the extent that Energy Services purchases power in excess of its retail customer needs. Two subsidiaries of Energy Services, UGI LNG, Inc. and UGI Storage Company, operate natural gas storage facilities under FERC certificate approvals and offer services to wholesale customers at FERC-approved market-based rates. Two other Energy Services subsidiaries operate natural gas pipelines that are subject to FERC regulation. UGI Mt. Bethel Pipeline Company, LLC operates a 12.5-mile, 12-inch pipeline located in Northampton County, Pennsylvania, and UGI Sunbury, LLC operates the Sunbury Pipeline, a 35-mile, 20-inch diameter pipeline located in central Pennsylvania. Both pipelines offer open-access transportation services at cost-based rates approved by FERC. Energy Services and its subsidiaries undertake various activities to maintain compliance with the FERC Standards of Conduct with respect to pipeline operations. Energy Services is also subject to FERC reporting requirements, market manipulation rules and other FERC enforcement and regulatory powers with respect to its wholesale commodity business.
Midstream & Marketing’s midstream assets include natural gas gathering pipelines and compression and processing in northeastern Pennsylvania, southwestern Pennsylvania, eastern Ohio and the panhandle of West Virginia that are regulated under federal pipeline safety laws and subject to operational oversight by both the Pipeline and Hazardous Materials Safety Administration and the state public utility commissions for the states in which the specific pipelines are located.
Certain of the company’s Midstream & Marketing and RNG businesses are subject to various federal, state and local environmental, safety and transportation laws and regulations governing the storage, distribution and transportation of propane and the operation of bulk storage LPG terminals. These laws include, among others, the Resource Conservation and Recovery Act, CERCLA, the Clean Air Act, OSHA, the Homeland Security Act of 2002, the Emergency Planning and Community Right-to-Know Act, the Clean Water Act and comparable state statutes. CERCLA imposes joint and several liability on certain classes of persons considered to have contributed to the release or threatened release of a ‘hazardous substance’ into the environment without regard to fault or the legality of the original conduct. With respect to the operation of natural gas gathering and transportation pipelines, Energy Services also is required to comply with the provisions of the Pipeline Safety Improvement Act of 2002 and the regulations of the DOT.
The company’s Midstream & Marketing’s electricity generation assets own electric generation facilities that are within the control area of PJM and are dispatched in accordance with a FERC-approved open access tariff and associated agreements administered by PJM. Prior to the disposition of UGID in September 2024, UGID was the entity designated for dispatching and financially settling all company owned generation and receives certain revenues collected by PJM, determined under an approved rate schedule.
UGI International segment
UGI International, through its subsidiaries and affiliates, conducts an LPG distribution business in 16 countries throughout Europe (Austria, Belgium, the Czech Republic, Denmark, Finland, France, Hungary, Italy, Luxembourg, the Netherlands, Norway, Poland, Romania, Slovakia, Sweden and the United Kingdom). UGI International is the largest distributor of LPG in France, Austria, Belgium, Denmark and Luxembourg; and one of the largest distributors of LPG in Hungary, Norway, Poland, the Czech Republic, Slovakia, the Netherlands, Sweden and Finland.
During Fiscal 2024, the company completed its previously announced exit of substantially all of its non-core European energy marketing business, which had primarily marketed natural gas and electricity to customers in France, Belgium, the Netherlands and the United Kingdom. In addition, the company divested all of its LPG business in Switzerland.
Products, Services and Marketing
LPG Distribution Business
During Fiscal 2024, UGI International sold approximately 875 million gallons of LPG throughout Europe. UGI International operates under six distinct LPG brands, and its customer base primarily consists of residential, commercial, industrial, agricultural, wholesale and automobile fuel (‘autogas’) customers that use LPG for space heating, cooking, water heating, motor fuel, leisure activities, crop drying, irrigation, construction, power generation, manufacturing and as an aerosol propellant. For Fiscal 2024, approximately 49% of UGI International’s LPG volume was sold to commercial and industrial customers, 15% was sold to residential, 11% was sold to agricultural and 25% was sold to wholesale and other customers (including autogas).
UGI International supplies LPG to its customers in small, medium and large bulk tanks at their locations. In addition to bulk sales, UGI International sells LPG in cylinders through retail outlets, such as supermarkets, individually owned stores and gas stations and directly to businesses that operate LPG-powered forklifts. Sales of LPG are also made to service stations to fuel vehicles that run on LPG. UGI International’s Fiscal 2024 LPG sales were attributed to bulk, cylinder, wholesale and autogas.
Bulk
Approximately 63% of UGI International’s Fiscal 2024 LPG sales (based on volumes) were attributed to bulk customers. UGI International classifies its bulk customers as small, medium or large bulk, depending upon volume consumed annually at the customer locations. Based on volumes consumed, small bulk customers are primarily residential and small business users, such as restaurants, that use LPG mainly for heating and cooking. Medium bulk customers consist mainly of large residential housing developments, hospitals, hotels, municipalities, medium-sized industrial enterprises and poultry brooders. Large bulk customers include agricultural customers (including crop drying) and companies that use LPG in their industrial processes. UGI International had approximately 477,000 bulk LPG customers and sold 554 million gallons of bulk LPG during Fiscal 2024.
Cylinder
Approximately 15% of UGI International’s Fiscal 2024 LPG sales (based on volumes) were attributed to cylinder customers. UGI International sells LPG in both steel and composite cylinders and typically owns the cylinders in which the LPG is sold. The principal end-users of cylinders are residential customers who use LPG for domestic applications, such as cooking and heating. Non-residential uses include fuel for forklift trucks, road construction and welding. At September 30, 2024, UGI International had more than 21 million cylinders in circulation and sold approximately 132 million gallons of LPG in cylinders during Fiscal 2024. UGI International also delivers LPG to wholesale and retail customers in cylinders, including through the use of vending machines.
Wholesale, Autogas and Other Services
Approximately 17% of UGI International’s Fiscal 2024 LPG sales (based on volumes) were to wholesale customers (including small competitors and large industrial customers), and approximately 4% of Fiscal 2024 LPG sales (based on volumes) were to autogas customers. UGI International also provides logistics, storage and other services to third-party LPG distributors.
Energy Marketing Business
During Fiscal 2024, the company completed its previously announced exit of substantially all of the company’s non-core European energy marketing business, which had primarily marketed natural gas and electricity to customers in France, Belgium, the Netherlands and the United Kingdom.
LPG Supply, Storage and Transportation
UGI International is typically party to term contracts, with approximately 30 different suppliers, including producers and international oil and gas trading companies, to meet LPG supply requirements throughout Europe. LPG supply is transported via rail and sea, and by road for shorter distances. Additionally, LPG is purchased on the European spot markets to manage supply needs. In certain geographic areas, such as Austria, Czech Republic, Denmark, Finland, France and Poland a single supplier may provide nearly 50% or more of UGI International’s requirements.
UGI International stores LPG at various storage facilities and terminals located across Europe and has interests in both primary storage facilities and secondary storage facilities. LPG stored in primary storage facilities is transported by rail and road to secondary storage facilities where LPG is loaded into cylinders or trucks equipped with tanks and then is delivered to customers. UGI International also manages an extensive logistics and transportation network and has access to seaborne import facilities.
UGI International transports LPG to customers primarily through outsourced transportation providers to serve both bulk and cylinder markets. UGI International has long-term relationships with many providers of logistics and transportation services in most of its markets, and is not dependent on the services of any single transportation provider.
Trade Names, Trade and Service Marks
UGI International protects its intellectual property rights through tradenames, trade and service marks and foreign intellectual property laws. UGI International and its subsidiaries utilize a variety of tradenames, including, but not limited to, AmeriGas (Poland), Antargaz, AvantiGas, FLAGA, Kosan Gas and UniverGas, and related service marks to market its LPG products and services. UGI International and its subsidiaries have tradenames, trade and service marks registered in various countries. UGI International’s trademarks, tradenames and other proprietary rights are valuable assets and they have significant value in the marketing of the company’s products and services.
Seasonality
Because many of UGI International’s customers use LPG for heating, sales volumes are affected principally by the severity of the temperatures during the heating season months and traditionally fluctuates from year-to-year in response to variations in weather, prices and other factors, such as conservation efforts and the economic environment. During Fiscal 2024, approximately 60% of UGI International’s retail sales volumes occurred during the peak heating season from October through March. As a result of this seasonality, revenues are typically higher in UGI International’s first and second fiscal quarters (October 1 through March 31).
Government Regulation
UGI International’s business is subject to various laws and regulations at the country and local levels, as well as at the EU level, with respect to matters such as protection of the environment, the storage, transportation and handling of hazardous materials and flammable substances (including the Seveso II Directive), regulations specific to bulk tanks, cylinders and piped networks, competition, pricing, regulation of contract terms, anti-corruption (including the U.S. Foreign Corrupt Practices Act, Sapin II and the U.K. Bribery Act), data privacy and protection, and the safety of persons and property.
Properties
In addition to regional headquarter locations and sales offices throughout its service territory, UGI International has interests in eight primary storage facilities and more than 65 secondary storage facilities.
AmeriGas Propane
The AmeriGas Propane segment consists of the propane distribution business of AmeriGas Partners, an indirect, wholly owned subsidiary of UGI. The Partnership conducts its domestic propane distribution business through its principal operating subsidiary, AmeriGas OLP, and is the nation’s largest retail propane distributor based on the volume of propane gallons distributed annually. The general partner of AmeriGas Partners is the company’s wholly owned subsidiary, AmeriGas Propane, Inc.
Products, Services and Marketing
The company’s domestic propane distribution business is conducted through AmeriGas Propane. AmeriGas Propane serves over 1.1 million customers in all 50 states from approximately 1,360 propane distribution locations. Typically, propane distribution locations are in suburban and rural areas where natural gas is not readily available. The company’s local offices generally consist of operations facilities and propane storage. As part of its overall transportation and distribution infrastructure, AmeriGas Propane operates as an interstate carrier in all states throughout the continental U.S.
AmeriGas Propane sells propane primarily to residential, commercial/industrial, motor fuel, agricultural and wholesale customers. AmeriGas Propane distributed approximately 827 million gallons of propane in Fiscal 2024. Approximately 89% of AmeriGas Propane’s Fiscal 2024 sales (based on gallons sold) was to retail accounts and approximately 11% was to wholesale accounts. Sales to residential customers in Fiscal 2024 represented approximately 27% of retail gallons sold; commercial/industrial customers 42%; motor fuel customers 22%; and agricultural customers 3%. Transport gallons, which are large-scale deliveries to retail customers other than residential, accounted for approximately 5% of Fiscal 2024 retail gallons.
The ACE program continued to be an important element of AmeriGas Propane’s business in Fiscal 2024. At September 30, 2024, ACE cylinders were available at over 47,000 retail locations throughout the U.S. Sales of the company’s ACE cylinders to retailers are included in commercial/industrial sales. The ACE program enables consumers to purchase or exchange propane cylinders at various retail locations, such as home centers, gas stations, mass merchandisers and grocery and convenience stores. In addition, the company’s Cynch propane home delivery service was available in 20 cities as of September 30, 2024. The company also supplies retailers with large propane tanks to enable them to replenish customers’ propane cylinders directly at the retailers’ locations.
Residential and commercial customers use propane primarily for home heating, water heating and cooking purposes. Commercial users include hotels, restaurants, churches, warehouses and retail stores. Industrial customers use propane to fire furnaces, as a cutting gas and in other process applications. Other industrial customers are large-scale heating accounts and local gas utility customers that use propane as a supplemental fuel to meet peak load deliverability requirements. As a motor fuel, propane is burned in internal combustion engines that power school buses and other over-the-road vehicles, forklifts and stationary engines. Agricultural uses include tobacco curing, chicken brooding, crop drying and orchard heating. In its wholesale operations, AmeriGas Propane principally sells propane to large industrial end-users and other propane distributors.
Retail deliveries of propane are usually made to customers by means of bobtail and rack trucks. Propane is pumped from the bobtail truck, which generally holds 2,400 to 3,000 gallons of propane, into a stationary storage tank on the customer’s premises. AmeriGas Propane owns most of these storage tanks and leases them to its customers. The capacity of these tanks ranges from approximately 120 gallons to approximately 1,200 gallons. AmeriGas Propane also delivers propane in portable cylinders, including ACE and motor fuel cylinders. Some of these deliveries are made to the customer’s location where cylinders are either picked up or replenished in place.
Propane Supply and Storage
The U.S. propane market has approximately 200 domestic and international sources of supply, including the spot market. Supplies of propane from AmeriGas Propane’s sources historically have been readily available. In recent years, certain geographies experienced varying levels of reduced propane availability as a result of transportation issues within the supply chain. In response to these supply and transportation challenges, AmeriGas Propane utilized a combination of increased regional storage as well as rail and transport supply from different origins to offset localized supply/demand imbalances.
During Fiscal 2024, approximately 98% of AmeriGas Propane’s propane supply was purchased under supply agreements with terms of one to three years. In Fiscal 2024, AmeriGas Propane derived approximately 15% of its propane supply from Enterprise Products Operating LLC and approximately 12% of its propane supply from Targa Liquids Marketing and Trade LLC.
AmeriGas Propane uses a number of interstate pipelines, as well as railroad tank cars, delivery trucks and barges, to transport propane from suppliers to storage and distribution facilities. AmeriGas Propane stores propane at various storage facilities and terminals located in strategic areas across the U.S.
In Fiscal 2024, AmeriGas Propane’s retail propane sales totaled approximately 737 million gallons.
Properties
As of September 30, 2024, AmeriGas Propane owned approximately 87% of its nearly 520 local offices throughout the country. The transportation of propane requires specialized equipment. The trucks and railroad tank cars utilized for this purpose carry specialized steel tanks that maintain the propane in a liquefied state.
Other assets owned at September 30, 2024 included approximately 890,000 stationary storage tanks with typical capacities of more than 120 gallons, approximately 3.9 million portable propane cylinders with typical capacities of 1 to 120 gallons, 21 terminals and 11 transflow units.
Trade Names, Trade and Service Marks
AmeriGas Propane markets propane and other services principally under the ‘AmeriGas,’ ‘America’s Propane Company,’ and ‘Cynch’ trade names and related service marks. AmeriGas Propane owns, directly or indirectly, all the right, title and interest in the ‘AmeriGas’ name and related trade and service marks. AmeriGas Polska Sp. z.o.o. has an exclusive, royalty-free license from AmeriGas Propane to use the ‘AmeriGas’ name and related service marks in Poland and Germany and with respect thereto on the Internet. The term of the license is in perpetuity.
Seasonality
Because many customers use propane for heating purposes, AmeriGas Propane’s retail sales volume is seasonal. During Fiscal 2024, approximately 63% of the Partnership’s (AmeriGas Partners, L.P.’s) retail sales volume occurred, and substantially all of AmeriGas Propane’s operating income was earned, during the peak heating season from October through March. As a result of this seasonality, revenues are typically higher in AmeriGas Propane’s first and second fiscal quarters (October 1 through March 31). Cash receipts are generally greatest during the second and third fiscal quarters when customers pay for propane purchased during the winter heating season.
Government Regulation
AmeriGas Propane is subject to various federal, state and local environmental, health, data privacy, safety and transportation laws and regulations governing the storage, distribution and transportation of propane and the operation of bulk storage propane terminals.
Environmental
AmeriGas Propane is investigating and remediating contamination at a number of present and former operating sites in the U.S., including sites where its predecessor entities operated MGPs.
Health and Safety
AmeriGas Propane is subject to the requirements of OSHA and comparable state laws that regulate the protection of the health and safety of the company’s workers. These laws require the Partnership, among other things, to maintain information about materials utilized, stored, transported, or sold, in accordance with OSHA’s Hazard Communications Standard. Certain portions of this information must be provided to employees, federal and state and local governmental authorities, emergency responders, commercial and industrial customers and local citizens in accordance with the Environmental Protection Agency’s Emergency Planning and Community Right-to-Know Act requirements.
All states in which AmeriGas Propane operates have adopted fire and life safety codes that regulate the storage, distribution, and use of propane. In some states, these laws are administered by state agencies, and in others they are administered on a municipal level. AmeriGas Propane conducts training programs to help ensure that its operations comply with applicable governmental regulations. With respect to general operations, AmeriGas Propane is subject in all jurisdictions in which it operates to rules and procedures governing the safe handling of propane, including those established by National Fire Protection Association (‘NFPA’) in the Liquefied Petroleum Gas Code (NFPA 58) and National Fuel Gas Code (NFPA 54), the International Code Council’s International Fuel Gas Code and International Fire Code, as well as various state and local codes.
With respect to the transportation of propane, AmeriGas Propane is subject to regulations promulgated under federal legislation, including the Federal Motor Carrier Safety Regulations and Pipeline Hazardous Materials Regulations which fall under the enforcement and supervision of the DOT, Pipeline Hazardous Materials Safety Administration, Federal Railroad Administration, Federal Motor Carrier Safety Administration, and the Federal Aviation Administration. AmeriGas Propane facilities and containers are equally regulated by these agencies regarding security standards, as well as the Cybersecurity and Infrastructure Security Agency’s Chemical Facility Anti-Terrorism Standards. AmeriGas Propane’s programs related to the transportation and security of hazardous materials are regularly inspected and meet all applicable standards and regulations.
AmeriGas Propane maintains jurisdictional pipeline systems as defined by the Transportation of Natural and Other Gas by Pipeline: Minimum Federal Safety Standards as regulated by the Pipeline Hazardous Materials Safety Administration and multiple State Public Utility Commissions under the authority and authorization of the Pipeline Hazardous Materials Safety Administration. These pipeline safety regulations apply to, among other things, propane gas systems that supplies 10 or more residential customers or two or more commercial customers from a single source and to a propane gas system any portion of which is located in a public place. The DOT’s pipeline safety regulations require operators of all gas systems to provide operator qualification standards and training and written instructions for employees and third-party contractors working on covered pipelines and facilities, establish written procedures to minimize the hazards resulting from gas pipeline emergencies, and conduct and keep records of inspections and testing. Operators are subject to the Pipeline Safety Improvement Act of 2002.
History
UGI Corporation was founded in 1882. The company was incorporated in Pennsylvania in 1882.
