UGI ENERGY SERVICES, LLC
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
and MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
for the years ended September 30, 2023 and 2022
UGI ENERGY SERVICES, LLC AND SUBSIDIARIES
TABLE OF CONTENTS
Pages | |
Glossary of Terms and Abbreviations | |
Report of Independent Auditors | 6 |
Financial Statements: | |
Consolidated Balance Sheets as of September 30, 2023 and 2022 | |
Consolidated Statements of Comprehensive Income for the years ended September 30, 2023 and 2022 | |
Consolidated Statements of Cash Flows for the years ended September 30, 2023 and 2022 | |
Consolidated Statements of Changes in Member's Equity for the years ended September 30, 2023 and 2022 | 11 |
Notes to Consolidated Financial Statements | 12 |
Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited) | 30 |
UGI ENERGY SERVICES, LLC AND SUBSIDIARIES
GLOSSARY OF TERMS AND ABBREVIATIONS
Terms and abbreviations used in this document are defined below:
UGI Energy Services and Related Entities
AmeriGas - AmeriGas Propane, L.P., an indirect wholly owned subsidiary of UGI
Aurum Renewables - Aurum Renewables LLC
Company - UGI Energy Services, LLC and its consolidated subsidiaries collectively
Energy Services - UGI Energy Services, LLC, a wholly owned subsidiary of Enterprises, or collectively, UGI Energy Services, LLC and its consolidated subsidiaries
Enterprises - UGI Enterprises, LLC, a wholly owned subsidiary of UGI
ESFC - Energy Services Funding Corporation, a wholly owned subsidiary of Energy Services
MBL Bioenergy - MBL Bioenergy, LLC, a joint venture partnership with the sole purpose of developing RNG projects in South Dakota.
Pennant - Pennant Midstream, LLC, an indirect wholly owned subsidiary of Energy Services
PennEast - PennEast Pipeline Company, LLC, formed to construct an approximate 120 mile natural gas pipeline from Luzerne County Pennsylvania to the Trenton-Woodbury interconnection in New Jersey. In September 2021 the partners of PennEast announced that further development of the pipeline project had ceased.
Pine Run - Pine Run Gathering, LLC
Stonehenge - Stonehenge Appalachia, LLC, a midstream natural gas gathering business
UGI - UGI Corporation
UGI Dakota, LLC - A wholly owned subsidiary of Energy Services that holds a 99.99% membership interest in MBL Bioenergy
UGI Moraine East - UGI Moraine East Gathering LLC, a wholly owned subsidiary comprising the assets acquired in the Stonehenge Acquisition
UGI PennEast, LLC - A wholly owned subsidiary of Energy Services that holds a 20% membership interest in PennEast UGI Pine Run, LLC - A wholly owned subsidiary of Energy Services that holds a 49% membership interest in Pine Run UGI Utilities - UGI Utilities, Inc., a wholly owned subsidiary of UGI comprising PA Gas Utility and Electric Utility UGID - UGI Development Company, a wholly owned subsidiary of Energy Services
Other Terms and Abbreviations
AFUDC - Allowance for Funds Used During Construction
AOCI - Accumulated Other Comprehensive Income (Loss)
ARO - Asset Retirement Obligation
ASC - Accounting Standards Codification
ASC 606 - ASC 606, "Revenue from Contracts with Customers"
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UGI ENERGY SERVICES, LLC AND SUBSIDIARIES
ASC 820 - ASC 820, "Fair Value Measurement"
ASC 980 - ASC 980, "Regulated Operations"
ASU - Accounting Standards Update
CMG - Columbia Midstream Group, LLC
Energy Services Amended Term Loan Credit Agreement - The first amendment to the Energy Services Term Loan Credit Agreement, entered into on February 23, 2023, comprising an $800 million variable-rate term loan with a final maturity of February 2030
Energy Services Credit Agreement - A five-year unsecured revolving credit agreement, as amended, entered into by Energy Services on March 6, 2020, providing for borrowings up to $260 million, including a letter of credit subfacility of up to $50 million, scheduled to expire in March 2025.
Energy Services Term Loan Credit Agreement - A seven-year $700 million variable rate senior secured term loan agreement entered into on August 13, 2019, by Energy Services which was amended on February 23, 2023 and referred to thereafter as the
Energy Services Amended Term Loan Credit Agreement
FERC - Federal Energy Regulatory Commission
Fiscal 2021 - The fiscal year ended September 30, 2021
Fiscal 2022 - The fiscal year ended September 30, 2022
Fiscal 2023 - The fiscal year ending September 30, 2023
Fiscal 2024 - The fiscal year ending September 30, 2024
Fiscal 2025 - The fiscal year ending September 30, 2025
Fiscal 2026 - The fiscal year ending September 30, 2026
Fiscal 2027 - The fiscal year ending September 30, 2027
Fiscal 2028 - The fiscal year ending September 30, 2028
GAAP - U.S. generally accepted accounting principles
ICE - Intercontinental Exchange
LNG - Liquefied natural gas
MBL Bioenergy - MBL Bioenergy, LLC
NOL - Net operating loss
NPNS - Normal purchase and normal sale
NYMEX - New York Mercantile Exchange
Pennant Acquisition - Energy Services' Fiscal 2022 acquisition of the remaining 53% equity interest in Pennant
PennEnergy - PennEnergy Resources, LLC
PJM - PJM Interconnection, LLC
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UGI ENERGY SERVICES, LLC AND SUBSIDIARIES
Receivables Facility - A receivables purchase facility of Energy Services with an issuer of receivables-backed commercial paper
ROU - Right-of-use
RNG - Renewable natural gas
SCAA - Storage Contract Administrative Agreement
Stonehenge Acquisition - Acquisition of Stonehenge Appalachia, LLC, which closed January 27, 2022 Term SOFR - Secured Overnight Financing Rate
U.S. - United States of America
USD - U.S. Dollar
VIE - Variable Interest Entity
5
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Report of Independent Auditors
To the Member and Management of UGI Energy Services, LLC
Opinion
We have audited the consolidated financial statements of UGI Energy Services, LLC and Subsidiaries (the Company), which comprise the consolidated balance sheets as of September 30, 2023 and 2022, and the related consolidated statements of comprehensive income, cash flows and changes in member's equity for the years then ended, and the related notes (collectively referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2023 and 2022, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for one year after the date that the financial statements are available to be issued.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free of material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
6
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
- Exercise professional judgment and maintain professional skepticism throughout the audit.
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, no such opinion is expressed.
- Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
- Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
December 15, 2023
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UGI ENERGY SERVICES, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Millions of dollars)
September 30, | |||||
2023 | 2022 | ||||
ASSETS | |||||
Current assets: | |||||
Cash and cash equivalents | $ | 28 | $ | 62 | |
Restricted cash | 42 | 43 | |||
Accounts receivable (less allowances for doubtful accounts of $2 and $2, respectively) | 116 | 243 | |||
Accounts receivable - related parties | 20 | 27 | |||
Inventories | 25 | 59 | |||
Derivative instruments | 6 | 61 | |||
Prepaid expenses and other current assets | 59 | 61 | |||
Total current assets | 296 | 556 | |||
Property, plant and equipment: | |||||
Gross property, plant and equipment | 2,401 | 2,311 | |||
Accumulated depreciation | (432) | (377) | |||
Net property, plant and equipment | 1,969 | 1,934 | |||
Goodwill | 337 | 337 | |||
Intangible assets, net | 236 | 250 | |||
Derivative instruments | 6 | 49 | |||
Investments in equity method investees | 264 | 110 | |||
Other assets | 43 | 45 | |||
Total assets | $ | 3,151 | $ | 3,281 | |
LIABILITIES AND MEMBER'S EQUITY | |||||
Current liabilities: | |||||
Current maturities of long-term debt | $ | 12 | $ | 10 | |
Short-term borrowings | 103 | - | |||
Accounts payable | 84 | 211 | |||
Accounts payable - related parties | 15 | 12 | |||
Derivative instruments | 17 | 29 | |||
Other current liabilities | 29 | 51 | |||
Total current liabilities | 260 | 313 | |||
Long-term debt | 808 | 700 | |||
Deferred income taxes | 275 | 301 | |||
Derivative instruments | 23 | 16 | |||
Other noncurrent liabilities | 40 | 14 | |||
Total liabilities | 1,406 | 1,344 | |||
Member's equity | 1,745 | 1,937 | |||
Total liabilities and member's equity | $ | 3,151 | $ | 3,281 | |
See accompanying notes to consolidated financial statements.
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UGI ENERGY SERVICES, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Millions of dollars)
Year Ended | |||||
September 30, | |||||
2023 | 2022 | ||||
Revenues | $ | 1,853 | $ | 2,322 | |
Costs and expenses: | |||||
Cost of sales (excluding depreciation and amortization shown below) | 1,596 | 1,897 | |||
Operating and administrative expenses | 132 | 129 | |||
Depreciation and amortization | 86 | 79 | |||
Other operating income, net | (17) | (4) | |||
1,797 | 2,101 | ||||
Operating income | 56 | 221 | |||
Income (loss) from equity method investees | 6 | (12) | |||
Interest expense | (45) | (41) | |||
Income before income taxes | 17 | 168 | |||
Income tax benefit (expense) | 13 | (24) | |||
Net income | $ | 30 | $ | 144 | |
Other comprehensive income: | |||||
Net gains on derivative instruments (net of tax of $(4) and $(13), respectively) | 9 | 32 | |||
Reclassifications of net (gains) losses on derivative instruments (net of tax of $7 and $(1), | (16) | 4 | |||
respectively) | |||||
Other comprehensive (loss) income | (7) | 36 | |||
Comprehensive income | $ | 23 | $ | 180 | |
See accompanying notes to consolidated financial statements.
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UGI ENERGY SERVICES, LLC AND SUBSIDIARIES | |||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||
(Millions of dollars) | |||||
Year Ended | |||||
September 30, | |||||
2023 | 2022 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||
Net income | $ | 30 | $ | 144 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||||
Depreciation and amortization | 86 | 79 | |||
Deferred income tax benefit, net | (22) | (4) | |||
Changes in unrealized gains and losses on derivative instruments | 230 | 14 | |||
(Income) loss from equity method investees | (6) | 12 | |||
Distributions received from equity method investees | - | 19 | |||
Settlement of interest rate swap, net of amortization | 19 | - | |||
Other, net | 7 | 9 | |||
Net change in: | |||||
Accounts receivable | 120 | (145) | |||
Inventories | 34 | (23) | |||
Accounts payable | (134) | 84 | |||
Derivative instruments collateral (paid) received | (134) | 8 | |||
Other current assets | 2 | (10) | |||
Other current liabilities | (22) | 10 | |||
Net cash provided by operating activities | 210 | 197 | |||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||
Expenditures for property, plant and equipment | (126) | (38) | |||
Acquisitions of assets, net of cash acquired | - | (242) | |||
Investments in equity method investments | (119) | (34) | |||
Other, net | - | 11 | |||
Net cash used by investing activities | (245) | (303) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||
Distributions | (215) | - | |||
Increase in short-term borrowings | 57 | - | |||
Receivables Facility net borrowings | 46 | - | |||
Issuances of debt, net of discount and issuance costs | 792 | - | |||
Repayments of debt | (680) | (7) | |||
Net cash used by financing activities | - | (7) | |||
Cash, cash equivalents and restricted cash decrease | $ | (35) | $ | (113) | |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH: | |||||
End of year | $ | 70 | $ | 105 | |
Beginning of year | 105 | 218 | |||
Cash, cash equivalents and restricted cash decrease | $ | (35) | $ | (113) | |
SUPPLEMENTAL CASH FLOW INFORMATION: | |||||
Cash paid for: | |||||
Interest | $ | 21 | $ | 40 | |
Income taxes | $ | 1 | $ | 20 |
See accompanying notes to consolidated financial statements.
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UGI Corporation published this content on 16 December 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 December 2023 18:24:57 UTC.