UGI CORP /PA/ Q1 FY2025 earnings call

• Natural gas businesses: Benefited from strong demand and higher gas rates at Mountaineer; deployed over $200 million in capital investment for infrastructure modernization. - Global LPG businesses: Realized relatively comparable volumes and reduced operating and administrative expenses. - Midstream and Marketing: Substantially completed RNG facilities, acquired Superior Appalachian (valued at $120 million), and filed a gas base rate case with PUC. - AmeriGas transformation: Implemented new organizational structure, pod model, and focused on five key pillars to enhance customer experience and operations. - Awards: UGI Utilities recognized as a Cogent 2024 utility customer champion.

Utilities segment: Adjusted diluted EPS was positively impacted by higher gas base rates at Mountaineer. Margin was up $9 million, EBIT increased $6 million. Midstream and Marketing segment: EBITDA was $95 million compared to $102 million in the prior year. Total margin was down $17 million due to lower gathering/processing margins, absence of power generation margin, and reduced capacity management margins. Global LPG businesses (UGI International): LPG volumes were up, but total margin was down $15 million due to lower energy marketing margin and LPG unit margins. Operating and administrative expenses were down $13 million. AmeriGas: EBIT was up $3 million over prior year, but adjusted diluted EPS declined due to higher income tax expense. LPG volumes were down 1%, but total margin was comparable as higher unit margins offset lower volumes and reduced fee income.

• Reaffirmed guidance range of $2.75 to $3.05 for fiscal 2025. - Used intercompany loan from UGI International to AmeriGas to address 2025 senior note maturity, with plan to repay using AmeriGas' free cash flow. - Focus on addressing 2026 debt maturities.

• Uncertain weather patterns impacting volumes and demand. - Volatility in gas prices affecting margins in midstream and marketing segments. - Potential delays or changes in regulatory approvals for rate cases.

Q: How are you thinking about larger maturities coming up ahead and the strategic direction of the international business?

A: Bob Flexon mentioned using an intercompany loan from international to AmeriGas as an elegant way to handle near-term maturity, and plans to focus on 2026 maturities. On international, they'll optimize storage flexibility and evaluate portfolio for potential divestitures.

Q: Given the intercompany loan and AmeriGas' pod structure, does it preclude asset sales?

A: Sean O'Brien stated it does not preclude asset sales, and Bob Flexon added they'll evaluate underperforming assets and portfolio for divestitures if they lack competitive advantage.

Q: Can you expand on midstream margins being lower year on year and capital allocation for acquisitions?

A: Sean O'Brien said midstream margin decline was baked into guidance, with factors like contract renewals at lower pricing and sale of Hunlock Creek asset. Bob Flexon mentioned the Superior acquisition was financed at the JV level and they'll continue to look for opportunistic acquisitions in the area meeting return thresholds.