Q4 2023 UGI Corp Earnings Call

Speaker 1: Good day and thank you for standing by. Welcome to the UGI Corporation's fourth quarter 2023 earnings conference call. At this time, all participants are in a listen only mode. After the speakers.

Good day and thank you for standing by welcome to the UGI Corporation fourth quarter 2023 earnings Conference call.

At this time all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

Speaker 1: To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised.

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Speaker 1: To withdraw your question, please press star 1-1 again. Please be advised that today's session will begin at 10 a.m.

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Please be advised that today's conference is being recorded.

I would now like to hand, the conference over to your host today to meet the Morris Senior director of Investor Relations. Please.

Speaker 1: I would now like to hand the conference over to your host today, Tamika Morris, Senior Director of Industrial Relations.

Please go ahead.

Speaker 2: Good morning, everyone. Thank you for joining our fiscal 2023 4th quarter earnings call. With me today are Roger Perot, President and CEO , Sean O'Brien, CFO , and Bob Beard, CEO .

Good morning, everyone. Thank you for joining our fiscal is plenty plenty for your fourth quarter earnings call with me today are Roger Carrillo, President and CEO, Shawn O'brien, CFO and Bob Beard C O.

Speaker 2: On today's call, we will review our financial results and some notable performance highlights for the year, discuss the strategic priorities and financial outlook for fiscal 2024, and conclude with a question and answer session.

On today's call, we will review our financial results and notable performance highlights for the year discuss the strategic priorities and financial outlook for fiscal 'twenty 'twenty, four and conclude with a question and answer session.

Before we begin let me remind you that our men's today include certain forward looking statements, which management believes to be reasonable and look to database.

Speaker 2: Actual results may differ significantly because of risks and uncertainties that are difficult to predict.

Actual results may differ significantly because of risks and uncertainties that are difficult to predict please.

Speaker 2: Please read our earnings release and our most recent annual and quarterly reports for an extensive list of factors that could affect results.

Please read our earnings release, and our most recent annual and quarterly reports for an extensive list of factors that could affect results.

Speaker 2: We assume no duty to update or revise forward-looking statements to reflect events or circumstances that are different from expectations.

We assume no duty to update or revise forward looking statements to reflect events or circumstances that are differing from expectations.

Speaker 2: We will also describe orbismus using certain non- GAAP financial measures.

He will also describe our business using certain non-GAAP financial measures.

Speaker 2: For conciliations of these measures to the comparable GAAP measures are available within our presentation. Now, I'm pleased to turn the.

Reconciliations of these measures to the comparable GAAP measures are available in our presentation.

I'm pleased to turn the call over to Roger.

Speaker 3: Thank you, Tamika, and good morning, everyone. We appreciate your interest in joining our call today.

Thank you Tamika and good morning, everyone. We appreciate your interest in joining our call today.

Speaker 3: Fiscal 2023 was a year where we continued to see uncertainty in the macroeconomic environment, particularly with high interest rates and elevated inflation.

Fiscal 2023 was a year, where we continue to see uncertainty in the macroeconomic environment, particularly with high interest rates and elevated inflation levels.

Speaker 3: Across most of our service territory, weather was significantly warmer than normal, and we experienced challenges within our global LPG business.

Across most of our service territory weather was significantly warmer than normal and we experienced challenges within our global LPG businesses, largely due to operational headwinds at Amerigas and energy conservation in Europe.

Speaker 3: largely due to operational headwinds at Amerigas and energy conservation in Europe .

Against that backdrop UGI reported adjusted diluted earnings per share of $2 84 for the fiscal year.

Speaker 3: Against that backdrop, UGI reported adjusted diluted earnings per share of $2.84 for the fiscal year.

Speaker 3: The utilities and midstream and marketing segments delivered record earnings and an 8% growth in EBIT over the prior year.

The utilities and midstream and marketing segments delivered record earnings and an 8% growth of EBIT over the prior year.

Speaker 3: This performance was aided by the weather normalization rider that was implemented in the fiscal first quarter and the higher gas base rates at our Pennsylvania gas utility, as well as incremental earnings from the prior year acquisitions of UGI Moraine East and Penn.

This performance was aided by the weather normalization rider that was implemented in the fiscal first quarter and the higher gas base rates at our Pennsylvania gas utility as well as incremental earnings from the prior year acquisitions of UGI moraine East and pennant.

We also benefited from margin management actions taken to deviate volume and costs related pressures in the global LPG businesses.

Speaker 3: We also benefited from margin management actions taken to alleviate volume and cost-related pressures in the global LPG business.

Speaker 3: These businesses continue to generate attractive free cash flow, which support actions to return capital to shareholders, service the balance sheet, and make growth investments in other portions of the business.

These businesses continue to generate attractive free cash flow, which support actions to return capital to shareholders service the balance sheet and make growth investments in other portions of the business.

Speaker 3: This diversified portfolio has provided a solid foundation for consecutively paying dividends over the past 139 years, increasing dividends in the past 36 consecutive years.

This diversified portfolio has provided a solid foundation for consecutively paying dividends over the past 139 years, increasing dividends in the past 36 consecutive years and delivering a 10 year EPS CAGR of 6% and dividend CAGR of 7%.

Speaker 3: and delivering a 10-year EPS CAGR of 6% and dividend CAGR of 7%.

Speaker 3: Of course, our performance would not have been possible without the tremendous dedication of our employees who continue to safely serve our customers.

Of course, our performance would not have been possible without the tremendous dedication of our employees, who continue to safely serve our customers and other stakeholders, despite the challenging economic and operating environment.

Speaker 3: and other stakeholders despite the challenging economic and operating environment.

Speaker 3: In fiscal 2023, we continue to execute on critical elements of our long-term strategy in areas that provide the foundation for reliable earnings growth in the years to come.

In fiscal 2023, we continue to execute on critical elements of our long term strategy in areas that provide the foundation for reliable earnings growth in the years to come.

Speaker 3: At our regulated utilities, we deployed a significant amount of capital with approximately 563 million dollars invested, primarily in infrastructure replacement and better.

At our regulated utilities, we deployed a significant amount of capital with approximately $563 million invested primarily in infrastructure replacement and betterment.

The team replaced roughly 142 miles of pipeline and made noteworthy updates to its infrastructure, including an upgrade to its ahlborn station to increased natural gas capacity as we accommodate growing customer demand.

Speaker 3: The team replaced roughly 142 miles of pipeline and made noteworthy updates to its infrastructure.

Speaker 3: including an upgrade to its Auburn station to increase natural gas capacity as we accommodate growing customer demand.

Speaker 3: Customer additions remain robust with more than 13,000 new residential heating and commercial customers added during the year, reflecting further growth in the business.

Customer additions remain robust with more than 13000, new residential heating and commercial customers added during the year, reflecting further growth in the business.

We also continue to facilitate programs designed to aid our customers of energy affordability.

Speaker 3: We also continue to facilitate programs designed to aid our customers with energy affordability.

Along with various customer assistance programs in fiscal 'twenty. Three we were pleased that nearly 51000 utility customers receive lai heat grants totaling more than $15 million, enabling those customers to pay for heating costs.

Speaker 3: Along with various customer assistance programs in fiscal 23, we were pleased that nearly 51,000 utility customers received LIHEAP grants totaling more than $50 million, enabling those customers to pay for heating.

Speaker 3: At Mountaineer, the rate case continues to progress as expected, and on October 6th, the company filed a joint stipulation and agreement for settlement, which included a revenue increase of 13.9 million dollars.

At Mountaineer the rate case continues to progress as expected and on October six the company filed a joint stipulation and agreement for settlement, which included a revenue increase of $13 9 million.

Speaker 3: We anticipate that the new rates will go into effect on January 1st.

We anticipate that the new rates will go into effect on January one.

Speaker 3: Looking at the midstream and marketing segment, we continue to provide a full suite of midstream services, which includes LNG peaking, pipeline capacity, storage and gathering services.

Looking at the midstream and marketing segment, we continue to provide a full suite of midstream services, which includes LNG, peaking pipeline capacity storage and gathering services.

Speaker 3: Approximately 86% of our margins are underpinned by fee-based contracts, which includes take or pay arrangements and minimum volume commitments.

Approximately 86% of our margins are underpinned by fee based contracts, which includes take or pay arrangements and minimum volume commitments.

Speaker 3: These contracts are with gas and electric utilities, top tier producers, and other commercial and industrial customers.

These contracts are with gas and electric utilities top tier producers and other commercial and industrial customers.

Many of our midstream assets, which include LNG facilities pipeline capacity storage and other assets are either located on or connected via pipelines to our utility system.

Speaker 3: Many of our midstream assets, which include LNG facilities, pipeline capacity, storage, and other assets are either located on or connected via pipelines to our utility system.

Speaker 3: Given the strategic positioning, UGI Utilities has typically been the largest customer of the midstream business with all contractual arrangements completed through open RFP.

Given the strategic positioning UGI utilities has typically been the largest customer of the midstream business with all contractual arrangements completed through open rfps.

Speaker 3: Next, we made progress on the previously announced RNG projects, and we were pleased to complete construction of 2 such projects in upstate New York. Namely, Allen Farms and Albee Farms.

Next we made progress on the previously announced RMG projects and we were pleased to complete construction of two such projects is in upstate New York, namely our farms and all of the farms.

Speaker 3: These facilities have the capacity to produce 140 million cubic feet of RNG annually in total that will be sold to local gas utilities.

These facilities have the capacity to produce 140 million cubic feet of LNG add alone in total that will be sold to local gas utilities.

Speaker 3: GHI Energy, our wholly owned subsidiary, is the exclusive marketer of the environmental credits on these projects.

<unk> energy our wholly owned subsidiary is the exclusive marketer of the environmental credits on these projects.

Speaker 3: Moving to the global LPG businesses, at UGI International, we made important progress in exiting the non-core energy marketing business as we sold our operations in the UK and Belgium during fiscal 23.

Moving to the global LPG businesses UGI International we made important progress in exiting the noncore energy marketing business as we sold our operations in the U K and Belgium during fiscal 'twenty three.

In addition in October 2023, we completed the sale of substantially all of the energy marketing portfolios in France.

Speaker 3: In addition, in October 2023, we completed the sale of substantially all of the energy marketing portfolios in France.

And completing these transactions, we have been able to substantially reduce our exposure to natural gas and power marketing in Europe, and we anticipate that we will fully exit this business by the end of calendar 2025.

Speaker 3: In completing these transactions, we have been able to substantially reduce our exposure to natural gas and power marketing in Europe . And we anticipate that we will fully exit this business by the end of calendar 2025.

At Amerigas, we continue to see a positive trend in several of our critical operating metrics such as on time deliveries zero fills and inefficient fills.

Speaker 3: At Amerigas, we continue to see a positive trend in several of our critical operating metrics, such as on-time deliveries, zero fills,

Speaker 3: Our teams have been focused on enhancing the customer experience and optimizing our systems to enable more efficient delivery. During the year, we also made investments in technology and other areas to promote the safety of our employees and the communities we serve.

Our teams have been focused on enhancing the customer experience and optimizing our systems to enable more efficient delivery. During the year. We also made investments in technology and other areas to promote the safety of our employees and the communities we serve.

At UGI, we are committed to making a difference in the communities in which we operate.

Speaker 3: At UGI, we are committed to making a difference in the communities in which we operate. I am so proud of our employees who continue to spend time each year serving their local communities through programs such as United Way, Big Brothers Big Sisters, Reading is Fundamental and Habitat for Humanity, among others.

So proud of our employees continue to spend time, each year, serving their local communities through programs such as United Way Big Brothers Big Sisters Reading is fundamental and habitat for humanity among others.

Speaker 3: And with that, I'll turn the call over to Sean, who will comment on the financial results for the year.

And with that I'll turn the call over to Sean who will comment on the financial results for the year.

Speaker 4: Thanks Roger and good morning. I'll start by sharing the key drivers of our financial performance for the year. As Roger mentioned for fiscal 2023, UGI delivered adjusted diluted EPS of $2.84 in comparison to $2.90 in the prior year.

Thanks, Roger and good morning.

I'll start by sharing the key drivers of our financial performance for the year as Roger mentioned for fiscal 2023, UTI delivered adjusted diluted EPS of $2.84 in comparison to $2 90 in the prior year the.

Speaker 4: The utility segment was up 6 cents as benefits from the weather normalization rider and higher gas based rates offset the impact of warmer weather and higher operating expenses.

The utility segment was up six centers benefits from the weather normalization rider and higher gas base rates offset the impact of warmer weather and higher operating expenses.

Speaker 4: Next, midstream and marketing was up $0.13 with incremental earnings from the prior year acquisitions of UGI, Moraine East and Pennant. As well as benefits from investment tax credits associated with the previously announced RNG facilities that were placed in the service during the year. Turning to the global.

Midstream and marketing was up 13 with incremental earnings from the prior year acquisitions of UGI re leased and tenant as well as benefits from investment tax credits associated with the previously announced RMG facilities that were placed into service during the year.

Turning to the global LPG businesses UGI International was down a penny at the impact of lower LPG volumes was largely offset by higher LPG unit margins higher margin from the noncore energy marketing business and lower taxes due to the optimization of foreign tax credits, which yielded a benefit of approximately nine.

Speaker 4: UGI International was down a penny as the impact of lower LPG volumes was largely offset by higher LPG unit margins, higher margin from the non-core energy marketing business, and lower taxes due to the optimization of foreign tax credits, which yielded a benefit of approximately $0.09.

Amerigas was down 19 centers, the business dealt with lower volumes and higher operating and administrative expenses as it experienced inflationary pressures and made investments to improve driver capacity.

Speaker 4: Amerigas was down 19 cents as the business dealt with lower volumes and higher operating and administrative expenses. As it experienced inflationary pressures and made investments to improve driver capacity.

Speaker 4: With these investments, we believe that Amerigas is positioned to meet our customer demand in the heating season.

With these investments we believe that amerigas is positioned to meet our customer demand in the heating season.

Speaker 4: Lastly, Corporate Other was down five cents due to higher interest expense.

Lastly, corporate and other was down <unk> <unk> due to higher interest expense.

Turning to the next slide.

For each reportable segment I'll walk you through the key drivers of our results when compared to the prior year, starting with the utility segment, our regulated utilities delivered record EBIT of $365 million up $29 million or 9% over the prior year.

Speaker 4: For each reportable segment, I'll walk you through the key drivers of our results when compared to the prior year. Starting with the utility segment, our regular utilities delivered record EBIT of 365M. Up 29M or 9% over the prior year.

Speaker 4: Despite significantly warmer weather, the business benefited from the weather normalization rider that was implemented in the 1st quarter. Utilities also realized higher margins due to higher gas base rates in Pennsylvania. Incremental benefits from the disk and IRA programs as well as continued customer.

Despite significantly warmer weather the business benefited from the weather normalization rider that was implemented in the first quarter utilities also realized higher margins due to higher gas base rates in Pennsylvania incremental benefits from the desk and I rip programs as well as continued customer growth.

Speaker 4: Operating and administrative expenses were up 36 million largely due to higher uncollectible account expenses, contract labor costs and personnel related expenses.

Operating and administrative expenses were up $36 million largely due to higher uncollectible account expenses contract labor costs and personnel related expenses.

Next midstream and marketing reported a record EBIT of $291 million, an increase of $22 million or 8% over the prior year.

Speaker 4: Midstream and Marketing reported a record EBIT of $291 million, an increase of $22 million or 8% over the prior year.

Speaker 4: While weather was warmer than normal and also the prior year, the company benefited from its fee-based portfolio and the optimization of its peaking assets during a cold weather snap in December .

While weather was warmer than normal and also the prior year. The company benefited from its fee based portfolio and the optimization of its peaking assets during a cold weather snap in December.

Speaker 4: These benefits help to offset lower capacity management margins due to the settlement timing of certain multi-year commodity storage hedge contracts in fiscal 2022.

These benefits helped to offset lower capacity management margins due to the settlement timing of certain multi year commodity storage hedge contracts in fiscal 2022.

Speaker 4: In addition, the business realized incremental margin from UGI Marine East acquired in January 2022 and from the full buy-in of tenant that occurred in August 2022. These acquisitions have performed well, delivering robust returns for the fiscal year.

In addition, the business realized incremental margin from UGI Moraine East acquired in January 2022, and from the full bag in a tenant that occurred in August 2022. These acquisitions have performed well delivering robust returns for the fiscal year.

At UGI International LPG volumes were down 9% due to significantly warmer weather and the effects of energy conservation efforts in Europe as a result of the ongoing geopolitical situations.

Speaker 4: At UGI International, LPG volumes were down 9% due to significantly warmer weather and the effects of energy conservation efforts in Europe as a result of the ongoing geopolitical situation.

Speaker 4: Total margin was down 15 million as the impact of lower volume and the translation effect of weaker foreign currencies were partially offset by higher LPG unit margins and the 29 million improvement in margin from the non-core energy marketing business.

Total margin was down $15 million as the impact of lower volume and the translation effect of weaker foreign currencies were partially offset by higher LPG unit margins and a $29 million improvement in margin from the noncore energy marketing business.

Speaker 4: The segment also experienced increased operating and administrative expenses, largely due to the global inflationary cost environment.

The segment also experienced increased operating and administrative expenses largely due to the global inflationary cost environment.

Speaker 4: The effect of the reduced total margin and higher operating and administrative expenses were partially offset by an increase in other income largely associated with the release of cylinder.

The effect of the reduced total margin and higher operating and administrative expenses were partially offset by an increase in other income largely associated with the release of cylinder deposits.

Speaker 4: Lastly, at Amerigas, LBG volumes were down 7% due to the effects of driver staffing shortages, which also limited growth, continuing customer attrition and structural conservation, largely in the residential sector.

Lastly, at Amerigas, LPG volumes were down 7% due to the effects of driver staffing shortages, which also limited growth.

<unk> customer attrition and structural conservation largely in the residential sector.

Speaker 4: Total margin was up 1 million as a result of higher LPG unit margins that helped offset increased operating and administrative expenses.

Total margin was up $1 million as a result of higher LPG unit margins that helped to offset increased operating and administrative expenses. The increase in cost was attributable to inflationary pressures increase staff employed to meet customer demand during the winter season, higher overtime and employee related costs.

As well as increased vehicle and advertising expenses the.

Speaker 4: The business also benefited from higher gains from asset sales of approximately $21 million during the year.

The business also benefited from higher gains from asset sales of approximately $21 million during the year.

Turning to liquidity at the end of the fiscal year UGI had available liquidity of $1 6 billion inclusive of cash and cash equivalents and available borrowing capacity on our revolving credit facilities over.

Speaker 4: Turning to liquidity, at the end of the fiscal year, UGI had available liquidity of $1.6 billion, inclusive of cash and cash equivalents, and available borrowing capacity on our revolving credit facility.

Speaker 4: Over the past few months, we have emphasized our priority to strengthen the balance sheet focused on America.

Over the past few months, we have emphasized our priority to strengthen the balance sheet focused on amerigas. Additionally in fiscal 2023, we completed over $2 6 billion of long term debt financing to support our ongoing operations and improved liquidity.

Speaker 4: Additionally, in fiscal 2023, we completed over $2.6 billion of long-term debt financing to support our ongoing operations and improve liquidity.

Speaker 4: In November 2023, we also amended the Marigas credit.

In November 2023, we also amended the Amerigas credit agreement decreasing the minimum interest coverage ratio from 275 times to two five times, while also right sizing the revolver from $600 to $400 million.

Speaker 4: decreasing the minimum interest coverage ratio from 2.75 times to 2.5 times, while also right-sizing Revolver from 600 million to 400 million.

Speaker 4: The business did not utilize this revised threshold in Q4 and was in full compliance with its debt covenant.

The business did not utilize this revised threshold in Q4 and was in full compliance with its debt covenants.

Speaker 4: Going forward, these changes provide further support and financial flexibility as we continue to address the operational performance of the business and the balance sheet.

Going forward. These changes provide further support and financial flexibility as we continue to address the operational performance of the business and the balance sheet.

Speaker 4: Now before I pivot to fiscal 2024, I'd like to take a moment to summarize the year. As Roger noted, this was a challenging year due to both external and internal factors affecting certain parts of our business. Despite these circumstances, our natural gas businesses delivered record EBIT. We made key investments to strengthen operations in the global LPG businesses, and we continue to make progress on several important priorities.

Now before I pivot to fiscal 2024, I'd like to take a moment to summarize the year as Roger noted this was a challenging year due to both external and internal factors affecting certain parts of our business. Despite these circumstances, our natural gas businesses delivered record EBIT, we made key investments to strengthen.

Operations and the global LPG businesses, and we continued to make progress on several important priorities.

With fiscal 2024, now underway I would like to address an important near term priorities for the company as we strive to unlock and maximize shareholder value.

Speaker 4: With fiscal 2024 now underway, I'd like to address some important near-term priorities for the company as we strive to unlock and maximize shareholder value.

Speaker 4: First, we remain focused on continuing to reduce costs.

First we remain focused on continuing to reduce cost.

Speaker 4: We believe we have further opportunities to enhance efficiencies while providing our customers with optimal service levels and maintaining a relentless focus on safety. That is more crucial than ever as we see continued inflationary pressures. As such, we are scrutinizing costs across the entire business, including the corporate functions and evaluating essential versus non-essential spend.

We believe we have further opportunities to enhance efficiencies, while providing our customers with optimal service levels and maintaining a relentless focus on safety that is more crucial than ever as we see continued inflationary pressures as such we are scrutinizing costs across the entire business, including the corporate functions.

In evaluating essential versus nonessential spend.

Speaker 4: We're also taking a hard look at our processes to identify inefficiencies and opportunities to reduce expenses.

We're also taking a hard look at our processes to identify inefficiencies and opportunities to reduce expenses. These efforts are currently underway with some actions already taken to help us with achieving 25% to 30% of the targeted cost savings in fiscal 2024, and totality where target.

Speaker 4: These efforts are currently underway with some actions already taken to help us with achieving 25 to 30% of the targeted cost savings in fiscal 2024. In totality, we are targeting permanent savings of approximately 70 to 100M by the end of fiscal 2025.

In permanent savings of approximately $70 million to $100 million by the end of fiscal 2025.

Speaker 4: Secondly, we are focused on strengthening the balance sheet to reduce leverage and provide more flexibility and capacity to make attractive growth investments. As a result, we have realigned our capital allocation plan to align with our strategic priorities.

Secondly, we are focused on strengthening the balance sheet to reduce leverage and provide more flexibility and capacity to make attractive growth investments as a result, we have realigned our capital allocation plan to align with our strategic priorities next during Q4, we announced a strategic review of the LPG businesses.

Speaker 4: Next, during Q4, we announced a strategic review of the LPG businesses with a focus on America.

With a focus on Amerigas, we're running a thorough process with external advisors and will provide an update once we have more information that we're able to share lastly, we continue to execute our growth strategy with regards to the natural gas businesses, we will prioritize investments in the regulated utilities as we.

Speaker 4: We're running a thorough process with external advisors and we'll provide an update once we have more information that we're able to share. Lastly, we continue to execute our growth strategy with regards to the natural gas businesses. We will prioritize investments in the regulated utilities as we continue to meet our commitments, promote pipeline safety, reliability and improvement and to take into consideration customer affordability.

Continue to meet our commitments promote pipeline safety reliability and improvement and to take into consideration customer affordability.

Speaker 4: We will also leverage our midstream assets that are located in highly productive sections of the Marsalis and Utica production areas to derive reliable earnings growth.

We will also leverage our midstream assets that are located in highly productive sections of the Marcellus and Utica production areas to drive reliable earnings growth.

Speaker 4: Yesterday we announced our fiscal 2024 guidance range for adjusted diluted EPS of $270 to $3, which assumes normal weather based on a 10-year average, our existing portfolio, and the current tax regime.

Yesterday, we announced our fiscal 2024 guidance range for adjusted diluted EPS of $2 70 to $3, which assumes normal weather based on a 10 year average our existing portfolio and the current tax regime.

Speaker 4: Looking first at the natural gas businesses, we ended fiscal 2023 with strong momentum and we expect that trajectory to continue into fiscal 2024 as these assets prove their resiliency and stability in delivering robust terms.

Looking first at the natural gas businesses, we ended fiscal 2023 with strong momentum and we expect that trajectory to continue into fiscal 2024 as these assets improve their resiliency and stability in delivering robust earnings at the utilities are margins are attractive.

Speaker 4: At the utilities, our margins are attractive as a substantial majority are underpinned by the weather normalization rider at the Pennsylvania gas utility.

A substantial majority are underpinned by the weather normalization rider at the Pennsylvania gas utility.

Speaker 4: We also anticipated higher base rates and similar trends in customer growth.

We also anticipated higher base rates and similar trends and customer growth.

Speaker 4: In midstream and marketing, our margins are approximately 86% fee-based with limited commodity exposure due to our hedging program.

In midstream and marketing our margins are approximately 86% fee based with limited commodity exposure due to our hedging programs.

Speaker 4: In the natural gas businesses, the benefits are expected to offset modest inflationary pressures and higher interest rates.

In the natural gas businesses, the benefits are expected to offset modest inflationary pressures and higher interest expense.

Speaker 4: Moving to global LPG. At UGI International for fiscal 2024, we've assumed normal weather, a similar level of energy conservation to fiscal 2023, higher margins from the non-core energy marketing business, partially offset by lower benefits from foreign tax credit optimization.

Moving to global LPG at UGI International for fiscal 2024, we've assumed normal weather a similar level of energy conservation to fiscal 2023 higher margins from the noncore energy marketing business, partially offset by lower benefits from foreign tax credit optimization.

Speaker 4: Lastly, for Amerigas, we are expecting a slight decline in volumes over the prior year as the business continues to execute on operational improvements. These operational improvements will enable us to more effectively serve our customers during the winter season with the goal to stabilize volumes and ultimately achieve growth in the future. Roger will also provide additional updates on the outlook for this business.

Lastly for Amerigas, we are expecting a slight decline in volumes over the prior year as the business continues to execute on operational improvements. These operational improvements will enable us to more effectively serve our customers during the winter season with the goal to stabilize volumes and ultimately achieve growth in the future.

Roger will also provide additional updates on the outlook for this business.

Speaker 4: Slide 14 walks you through our targeted cash deployment plan for fiscal 2024 and how it aligns with the priorities that we've shared with you.

Slide 14 walks you through our targeted cash deployment plan for fiscal 2024, and how it aligns with the priorities that we've shared with you.

Speaker 4: First, and of the utmost importance, is meeting our commitment to the dividend as we return cash to shareholders.

First and of the utmost importance is meeting our commitment to the dividend as we return cash to shareholders.

Speaker 4: Similar to fiscal 2023, we expect to maintain an attractive payout ratio as we anticipate returning roughly $330 million of capital to shareholders.

Similar to fiscal 2023, we expect to maintain an attractive payout ratio as we anticipate returning roughly $330 million of capital to shareholders.

Speaker 4: Next, as we look at the capital allocation plan, during 2023, we invested approximately $1.1 billion in capital expenditures, with close to 75% of this amount attributable to our natural gas business.

Next as we look at the capital allocation plan. During 2023, we invested approximately $1 $1 billion in capital expenditures with close to 75% of this amount attributable to our natural gas businesses for.

Speaker 4: For fiscal 2024, we will employ strong working capital management and tighten our capital expenditures in order to strengthen our balance sheet. As a result, total capital spend is expected to decline to roughly 960.

For fiscal 2024, we will employ strong working capital management and tightened our capital expenditures in order to strengthen our balance sheet. As a result total capital spend is expected to decline to roughly $960 million.

Speaker 4: of the total capital expenditure for fiscal 2024, we anticipate that approximately 80 percent will be allocated to natural gas businesses, predominantly to our regulated utilities, where we have a long runway of opportunities to deploy capital at attractive returns.

Of the total capital expenditure for fiscal 2024, we anticipate that approximately 80% will be allocated to natural gas businesses predominantly linked to our regulated utilities, where we have a long runway of opportunities to deploy capital at attractive returns.

Speaker 4: Included in this amount is also capital related to the previously committed renewables projects where we continue to target unlevered internal rate returns of 10% or more. And with that, I'll hand back the call to Roger.

Included in this amount is also capital related to the previously committed renewables projects, where we continued to target unlevered internal rate of returns of 10% or more and with that I'll hand back the call to Roger.

Thanks, Sean.

As we've highlighted before we are evaluating our amerigas business as part of our previously announced strategic review.

Speaker 3: Amerigas is the largest propane distribution company in the US with an unparalleled supply and distribution network.

Amerigas is the largest propane distribution company in the U S with an unparalleled supply and distribution network.

Speaker 3: Over the years, Amerigas has been a generator of robust free cash flow that was used to fund growth investments in natural gas businesses and return capital to shareholders.

Over the years Amerigas and has been a generator of robust free cash flow that was used to fund growth investments in the natural gas businesses and return capital to shareholders.

Despite the current challenges the business has continued to generate free cash flow and as we look to fiscal 2024, we have the opportunity to use that cash to improve the balance sheet and reduce leverage.

Speaker 3: Despite the current challenges, the business has continued to generate free cash flow, and as we look to fiscal 2024, we have the opportunity to use that cash to improve the balance sheet and reduce leverage.

Simultaneously with the strategic review, we will continue to focus on the operational improvements needed to improve customer experience and assure that we are running the business as effectively as possible.

Speaker 3: Simultaneously with the strategic review, we will continue to focus on the operational improvements needed to improve customer experience and assure that we are running the business as effectively as possible.

Speaker 3: This means that we will continue to support and enhance our customer-facing activities.

This means that we will continue to support and enhance our customer facing activities.

Optimize our processes.

Speaker 3: and scrutinize our costs to achieve savings and reduce inefficiency.

And scrutinize, our costs to achieve savings and reduce inefficiencies.

Speaker 3: We're also looking at ways to more accurately forecast demand and optimize our transportation network as we continually work on meeting the needs of customers.

We're also looking at ways to more accurately forecast demand and optimize our transportation networks as we continually work on meeting the needs of customers.

Speaker 3: That is of the outmost importance in our distribution business.

That is of the outmost importance in our distribution businesses.

Similarly, we are focused on improving the balance sheet, we have reassessed our capital spend to ensure that we are being disciplined in how we are deploying capital within the LPG businesses. In particular, we anticipate the capital will be primarily focused on maintenance spend and select organic growth initiatives that provide.

Speaker 3: Similarly, we are focused on improving the balance sheet. We have reassessed our capital spend to assure that we are being disciplined in how we are deploying capital within the LPG business.

Speaker 3: In particular, we anticipate the capital will be primarily focused on maintenance spend and select organic growth initiatives that provide a strong return.

A strong return.

As I close I want to emphasize that we are confident in our ability to execute on the key strategic priorities that will further solidify our foundation to deliver consistent and reliable results and create long term value for our shareholders.

Speaker 3: As I close, I want to emphasize that we are confident in our ability to execute on the key strategic priorities that will further solidify our foundation to deliver consistent and reliable results and create long-term value for our shareholders.

Speaker 3: We have already identified many of the actions required to drive further improvements in our business and fiscal 2024 will be an important year in executing on these.

We have already identified many of the actions required to drive further improvements in our business and fiscal 2024 will be an important year in executing on these initiatives.

Speaker 3: Thank you for your continued interest in UGI and your participation on today's call. And with that, we will.

Thank you for your continued interest in UGI and your participation on today's call.

With that we will open the line for your questions.

Just a reminder, if you'd like to ask a question at this time that is star one one on your Touchtone telephone.

Speaker 1: As a reminder, if you'd like to ask a question at this time, that is star 11 on your touchtone telephone.

Speaker 1: Our first question will come from the line of Gabriel Maureen with Mizuho.

Our first question will come from the line of Gabriel Moreen with Mizuho.

Hey, good morning, everyone.

Speaker 5: If I could maybe start out on the strategic review. Can you give us a sense maybe around timing of evaluation with a specific focus on Amerigas? Given Amerigas being embedded in the guidance for FY24, we do assume that UGI will still be Amerigas' owner through the winter heating season. So any comments you could maybe make in that regard?

Good morning, if I could start out on the strategic review can you give us a sense maybe around <unk>.

Timing of evaluation with a specific focus on amerigas.

Given amerigas being embedded in the guidance for FY 'twenty four we do assume that UGI will still be amerigas as owners through the winter heating season. So any comments you could maybe make in that regard.

Speaker 3: Yeah, good morning, Gabe, and thanks for your question.

Yes, good morning Gabe.

Thanks for your question.

Speaker 3: As we announced at the last earnings call, the strategic review is something that's still in its early days. So we have launched it and at this time we really don't have an update that we can provide on weather timing or the outcome. Just as a reminder, the strategic review was launched with a view on the LPG businesses with a focus on Amerigas.

Yes, as we announced that the glass quiet the last earnings call. The strategic review is something that's still in its early early days. So we have launched it.

And at this time, we really don't have an update that we can provide on whether timing or the outcome.

As a reminder, right. The strategic review is was launched with a view on the LPG businesses with a focus on amerigas in parallel to that strategic review we also.

Speaker 3: In parallel to that strategic review, we also announced that our operational efficiency objectives here, which is to take 70 to 100 million dollars of expense out of the business.

<unk>.

Our operational efficiency objectives here, which is to take $70 million to $100 million of expense out of the business.

Speaker 3: So that's something that we are executing. So what you see in our guidance right now is the impact of about the 30% of that that we will get in addition to a continued focus on operating AmeriGas and continuing to improve customer delivery metrics, which are trending quite nicely. And once we have more information on the strategic review, we'll be pleased to come back to you and to the market with some updates.

So thats something that we are executing so what you see in our guidance right now.

As the impact of about 40% of that that we will we will get in addition to continue.

Our continued focus on operating amerigas, and continuing to improve customer delivery metrics, which are trending quite nicely.

And once we have more information on the strategic review will be pleased to come back to you and to the market with some updates.

Speaker 5: Understood. And then maybe if I can drill down a little bit on the global LPG assumptions for 24, I think you're assuming normal weather.

Understood and then maybe if I can drill down a little bit on the global LPG assumptions for 'twenty, four I think you're assuming normal weather.

Speaker 5: You're also assuming volumes decline despite what was a warm winter last winter. I'm trying to reconcile those. I know you talked about a little bit in your remarks earlier. Then also as far as margins declining, it seems like the propane pricing environment is pretty benign at the moment. I'm wondering to what degree that may be a conservative assumption or not given, I guess, prices being so low right here.

But youre also assuming volumes decline despite what was a warm winter last winter. So I'm trying to reconcile those that I know you talked about a little bit in your remarks earlier and then also as far as margins declining it seems like the propane pricing environment is pretty benign at the moment, so I'm wondering to what.

Degree that may be a conservative assumption or not given I guess propylene prices being so low rate here.

Yes, I can start gave this shanghai.

Speaker 4: Yeah, I can start. Gabe, this is Sean. Let me hit the volume question. So we'll start with international LPG. It was a warm winter last year. So we did have, I think, around eight percent more, seven, eight percent warmer than normal. So we have normalized that with the 10 year average.

Let me hit the volume questions. So we'll start with.

International LPG. It was a warm winter of last year. So we did have I think around 8% more 7% to 8% warmer than normal.

So we have normalized that with the 10 year average.

Speaker 4: In our 24 assumptions, but and we have assumed, you know, we saw some of that conservation last year. We've kept that constant. So that would not be a variable as you go into 24. we'll keep an eye on that, but we've kept that at the levels that we saw in 23, maybe closing out the international, you know, with the exits, we see some, we definitely see some improvements.

24 assumptions and.

And we have assumed we saw some of that conservation last year, we've kept that constant so that would not be a variable as you go into 'twenty four we'll keep an eye on that but we've kept that at the levels that we saw in 'twenty three maybe closing out internationally with the.

Exits, we see some we definitely see some improvements in the <unk> side of the equation.

Speaker 4: In the side of the equation that are helping the outlook for international. And then, as Roger said, we've got a lot of self help initiatives underway and that's across the board. So we're going to continue to focus on cost on.

The outlook for International and then as Roger said, we've got a lot of self help initiatives underway and that's across the board. So we're going to continue to focus on cost on Amerigas. We did not remember we were fairly balanced on the on the weather front. When you look at 2023, we had some areas that had warm weather, we had some areas that had cooler weather.

Speaker 4: We did not remember we were fairly balanced on the weather front when you look at 2023. We had some areas that had warm weather. We had some areas that had cooler weather.

Speaker 4: So, really what you're doing, what you're seeing from Amerigas going from 23 to 24 is a pretty, you know, really not much of a weather shift. What we're indicating on volume.

So really what youre doing what youre seeing for Amerigas going from 23 to 24 is a pretty really not much of a weather shift what we are indicating on volumes there.

Speaker 4: is that we do still, you know, expect to continue to see volume declines. We expect those volume declines in 24 to be at a lower rate than what we saw 22 to 23. Roger alluded to some improvements that we're seeing. You know, we're going to be cautious, but we've made some investments and we really are focused on getting through the winter, but we still anticipate some volume declines at Amerigas.

We do still.

Do you expect to continue to see volume declines we expect those volume declines in 2004 to be at a lower rate than what we saw at 'twenty two to 'twenty three Roger alluded to some improvements that we're seeing we're going to be cautious, but we've made some investments and we really are focused on getting through the winter, but we still anticipate some volume.

Declines at Amerigas same concepts, they're self help all focused on cost in that business as well and you heard Roger say capital is going to be pretty focused on just our sustaining and maintenance type capital. So that's sort of the outlook on amerigas.

Speaker 4: Same concepts there, self-help will focus on cost in that business as well. And you heard Roger say, capital is gonna be pretty focused on just a sustaining and maintenance type capital. So that's sort of the outlook.

Speaker 4: On Amerigas, you know, as you move from from twenty three to twenty four. Thanks.

As you move from from 'twenty three to 'twenty four.

Thanks, Sean in terms of pricing.

Sorry go ahead sorry.

Speaker 4: So, sorry, if you mentioned pricing, you know, I think we see pricing at similar levels, you know, in terms of how we're currently forecasting, but we did see obviously you're, you're referencing that maybe pricing's down a little bit. So, we don't see that as a big driver in terms of the Delta, the variance to our, our 24 versus 23. Okay, great.

I'm, sorry, you mentioned pricing I think we see pricing at similar levels.

In terms of.

How we are currently forecasting, but we did see obviously youre referencing the maybe pricing is down a little bit.

So we don't see that as a big driver in terms of the Delta the variance to our 24 versus 23.

Okay, great. Thanks.

Thanks, guys.

Thank you Gabe.

Speaker 1: Our next question comes from the line of Julian Dumoulin-Smith with Bank of America.

Our next question comes from the line of Julien Dumoulin Smith with Bank of America.

Good morning Julien.

Speaker 6: Hey, good morning guys. This is actually Cameron. I'm for Julian. Um, thank you guys for taking our questions. Hey, hey, um,

Hey, Good morning, guys. This is actually Cameron on for drilling.

Are you guys taking the questions.

Hey, good morning Happy Friday.

Speaker 6: Um, real quick, I wanted to, uh, just, you know, continue on the discussion of volumes in primary gas and 24. so, um, can appreciate the fact that obviously you guys work into, uh, you know.

Real quick I wanted to.

Just continue.

Continue on the discussion of volumes and for Amerigas and 24. So you can appreciate the fact that obviously you guys are working too.

Speaker 6: right size of business or just kind of get it on, on, on, you know, more solid footing. You got a couple of quarters now three quarters of elevated OpEx as you kind of

Right size of the business or just kind of given on more solid footing you got a couple of quarters now three quarters of elevated opex in Chicago.

Speaker 6: you know, are embarking on this this effort. So maybe just can you speak to the many benefits you're seeing thus far? And I guess just, you know, considering you've had a few quarters to work on this, why maybe we're not seeing a little bit more of a positive impact for volumes in 24 versus, you know, what maybe you'd expect?

Are embarking on this this effort.

Maybe just can you speak to the many benefits youre seeing thus far and I guess just.

Considering you had a few quarters to work on most why maybe we're not seeing a little bit more of a positive impact of volumes and 24 versus <unk>.

Maybe you would expect.

Speaker 6: Um, you know, given these efforts. Yeah, let me.

Given these efforts.

Yes, let me kick that off.

Speaker 3: Yeah, a couple of things to keep in mind. When we went into 23, Cameron, we saw a very severe driver shortage. And we talked extensively about that throughout the year. That did lead to customer losses. And what we're seeing going into 24 is kind of the tail end of that. We're seeing a continuation of volume that really is lost from the driver shortage issue we had at 23. So it's a lingering effect.

Yes, a couple of things to keep in mind. When we went into 'twenty three cabinet. We saw a very severe driver shortage, we've talked extensively about that throughout the year that did lead to customer losses.

What we're seeing going into 'twenty four is kind of the tail end of that right, we're seeing a continuation of volume.

It really is lost problem.

Driver shortage issue, we added 23, so it's a lingering effect.

Speaker 3: When we look at the elevator, the OPEX we put into the business, that OPEX was very focused on ensuring we have the right number of drivers going into fiscal 24, service tax, frontline employees, ensure that we are delivering the promise we make to customers.

When we look at the elevated <unk>.

Opex, we put into the business that.

That opex was very focused on ensuring we have the right number of drivers going into fiscal 'twenty four service tax frontline employees ensure that we are delivering the promise we make to customers.

Speaker 3: What we are seeing, and we continue to see an improvement in this throughout the summer and leading into the winter, is

What we are seeing and we continue to see an improvement in this throughout the summer and leading into the winter is.

Speaker 3: good progress on on-time deliveries, good progress on improving zero-fills or minimizing zero-fills, good progress on efficient fills. And that's thanks to the fact that we now feel very good about the staffing levels we have going into 24.

Good progress on time deliveries good progress.

Proving zero sales or minimizing zero sales.

Good progress on an efficient sales and thats. Thanks to the fact that we now feel very good about the staffing levels, we have going into 'twenty four.

Now about that.

Speaker 3: that did put pressure on OPEX and that is why we also are very focused on the 70 to 100 million dollar of expense takeout because what we've done is we've put OPEX in more customer-facing areas and of course we're very focused on taking and controlling costs that do not impact the customer.

That did put pressure on Opex and that is why we also are very focused on the 70 to 100 million.

Stakeout, because what we've done is we've put opex, Ed and more customer facing areas and of course, we're very focused on taking and controlling costs.

That do not impact the customer experience. So what we're seeing going into 'twenty for some lingering effects from that level as Sean mentioned.

Speaker 3: So what we're seeing going into 24 is some lingering effects from that. Now, as Sean mentioned.

Speaker 3: You know, we are and we are, we are confident that we're going to see some improvement in that, but it is going into the year with still a negative trend.

We are Ed. We are we are confident that we're going to see some improvement in that but it is going into the year with still a negative trend but.

But smaller than what we saw in 'twenty two 'twenty three.

Speaker 6: Got it. Got it. Okay, thanks. That's super helpful. Maybe pivoting here just to the strategic review, a few questions here. One, just want to confirm, I mean, I understand that the review is, you know, LPG focused on Amerigas, but just to what extent is international also being kind of, you know, lumped in here and what are some, you know, potential

Got it got it okay. Thanks, that's super helpful. Maybe.

Maybe pivoting here just to this strategic review a few questions here one.

Just want to confirm I understand that the review is.

LPG focus on Amerigas.

To what extent is international also being kind of.

Lumped in here and what are some potential.

Speaker 6: avenues you guys were thinking about as far as the international LPG business goes and then related on midstream, obviously strong year, that's been a good business for you guys. What's the potential for any kind of midstream assets to enter into the strategic review just in terms of just how are you guys thinking about the go forward business on that side of the house as well?

Avenues, you guys were thinking about as far as the international LPG business goes and related.

<unk>.

On midstream, obviously strong year.

That's been a good business for you guys.

Whats the potential for any kind of midstream.

Assets to enter into the strategic review just in terms of just.

How are you guys thinking about the go forward business on that side of the house as well.

Yes.

Speaker 3: Yeah, so a couple of things and I'll encourage Sean and Bob.

Yes, so a couple of things and volatility Sean It Bob.

Speaker 3: add commentary if you see fit. So the strategic review is really focused on LPG businesses so we were very deliberate in that focus with a focus on Amerigas. What we see is

Add commentary as you see fit.

So the strategic review is really focused on LPG businesses. So we were very deliberate in that focus with a focus on amerigas, what we see is.

Our focus on Amerigas as the area that would have the biggest impact.

Speaker 3: focus on Amerigas as the area that would have the biggest impact.

Speaker 3: on shareholder value, right? But the whole process of us launching strategic review was really to commit to unlocking and maximizing.

On shareholder value like the the whole the whole process of less launch a strategic review was really to commit to us locking in maximizing shareholder value and where we see that potential is with a focus on are areas that being said.

Speaker 3: shareholder value. And where we see that potential is with a focus on Amerigas. Now, that being said, we remain very open-minded on the strategic review process and really, again, with an eye on what's going to unlock shareholder value the most.

We remain very open minded on the strategic review process and really again with an eye on what's going to unlock shareholder value. The most.

Speaker 3: So we're not eliminating ideas from the process, but we are wanting to ensure that we're very clear that the strategic review is LPG businesses with a focus on America.

So we are not eliminating ideas from the from the process, but we are wanting to make sure that we're very clear that the strategic review is LPG businesses with a focus on amerigas.

Speaker 3: Which then leads to your second part of your question, which is Mitch.

Which then leads to your second part of your question, which is midstream.

Speaker 3: And in the midstream part, I mean, midstream has been and is just a phenomenal business, right? This is a business that continues to show very nice progress on vertical ratios, on ability to control costs, and a very effective shift to more fee-based contracts, like more fee-based structures. So a business model that is very robust.

And in.

In the midstream part of the midstream has been and is just a phenomenal business right. This is a business that continues to show very nice progress on vertical ratios on ability to control costs in a very effective shift to more fee based contracts more fee based structure. So a business model that is.

Very robust.

Speaker 3: with a very good relationship with.

With a very good relationship with.

Speaker 3: LDCs, including our regulated utility, and with some good opportunities for continued growth and investments as we continue to provide that essential service in Pennsylvania to move molecules from various sites to LDCs, etc.

Ldc's, including our regulated utility and with some good opportunities for continued growth and investments as we continue to provide that essential service in Pennsylvania to move molecules from various sites to our Dcs et cetera. So we see midstream as a very core business. It's a business we are.

Speaker 3: So we see midstream as a very core business. It's a business we are excellent at, like we are at operating a regulated utility. So that's gonna continue to be a focus. And as you can see in our thesis that we talk about in our fiscal 24, we continue to allocate more and more capital to that natural gas.

Excellent.

We are operating a regulated utility.

So thats going to continue to be a focus and as you can see in our thesis that we talked about in in our fiscal 'twenty four.

Continuing to allocate more and more capital to that natural gas business.

Speaker 4: Yeah, yeah, Cameron, maybe to add just one quick point, you know, Roger talking about the strategic review, the overall goal of the company, which the review is helping us is to, you know, we want to be a bigger, have a bigger, not gas presence than LPG. I think we're sitting in that 60 to 40 range currently now.

Yes, maybe to add just one quick point Roger talk about the strategic review the overall goal of the company, which the review is helping US is we want to be a bigger a bigger nat gas presence than LPG I think we're sitting in that 60% to 40 range currently now and when you look at sort of the composite of the.

Speaker 4: And when you look at sort of the composite of the company, and I believe we want to grow that gas portion of that in the future. So a lot you mentioned actions overseas. Obviously, the exit of the E. M. business that the company's been doing.

A company and I believe we want to grow that that gas portion of that in the future. So a lot you mentioned actions overseas obviously, the exit of the EAM business with the company has been doing.

Speaker 4: and other things that we're looking at, just keep that in mind that the goal is to be a much more weighted Nat Gas company in the future, and we're well down that path already.

Other things that we're looking at just keep that in mind that the goal is to be a much more weighted Nat gas company in the future and we're well down that path already.

Sure.

Speaker 6: Got it. Thank you. And then just sorry for the tweezer. One more. The asset sale that's included in the Amerigas segment. Twenty one million. Can you comment on what that was when that took place? I may have missed that. What exactly was that?

Got it. Thank you and then just sorry, if I could squeeze one more the asset sale.

That's included in the Amerigas second $21 million.

Can you comment on what that was when they take place.

I may have missed that.

What exactly was that.

Speaker 4: Yes. So a couple of things, Cameron, those we have in the Amerigas portfolio, there are asset sales that occur, you know, that have occurred, they're pretty common throughout the years.

Yes, so a couple of thanks Kamran those we have in Amerigas portfolio, yes, there were asset sales that occur.

And then have occurred and they are pretty common throughout the years that one occurred in Q4 late Q late Q4, so that so you didn't miss it. So this is the first time, we're talking about it but it was planned it was in our guidance ranges and those are common in <unk> and <unk>.

Speaker 4: That one occurred in Q4, late Q4, so you didn't miss it, so this is the first time we're talking about it, but it was planned. It was in our guidance ranges.

Speaker 4: And those are common and we have some in our guidance ranges for 24 as well. It's something that we constantly are evaluating.

We have some.

And our guidance ranges for 'twenty four is well, it's something that we constantly are evaluating.

Speaker 4: um you know some assets and some of the land and some of the uh facilities that we have in the marigass business every

Some assets in some of the land and some of the facilities that we have in Amerigas business every year.

Speaker 6: Perfect. Okay. Thank you. I'm glad I didn't miss anything. Can you comment on what is baked into the guide for 24 on that front?

Perfect. Okay. Thank you I'm glad it in Michigan.

Can you comment on what is baked into the guide for 'twenty for on that front.

Speaker 4: Um, what I can say is that, um, 23 was a heavier, a little bit heavier than normal year. So you could assume that it's going to be smaller than what we saw in 23.

What I can say is that.

<unk> 23 was a heavier a little bit heavier than normal year. So you could assume that it's going to be smaller than what we saw in 'twenty three.

Speaker 6: Perfect. Okay. Got it. Thank you guys. I will turn it back.

Perfect. Okay got it. Thank you guys I'll turn it back.

Thank you Kevin.

Speaker 1: Our next question will come from the line of Sarah Akers with Wells Fargo.

Our next question will come from the line of Sarah Akers with Wells Fargo.

Hey, good morning.

Hey, good morning, Sir.

Speaker 2: Just a couple questions on leverage. Can you talk about where you ended 2023 relative to the target? I think it was 3.25 to 3.75. And when you forecast, you'll be in that targeted range.

Just a couple of questions on leverage can you talk about where you ended 2023 relative to the target I think it was three to five to $3 75.

When you forecast youll be in that targeted range.

Yes, Sarah this is Sean so theres too.

Speaker 4: you know, two primary leverage targets we're looking at. The one you're referencing is Corp.

Two primary leverage targets, we're looking at the one you're referencing as Corp. So we're trying to get three five to 375 on Corp. We ended in the low fours at the end of the year and we do think we can get sub four.

Speaker 4: So we're trying to get 3-5 to 3-7-5 on court. We ended in the low fours.

Speaker 4: At the end of the year, and we do think we can get sub four, you know, we're very focused on this. We think we can get sub four and twenty four.

We're very focused on this we think we can get sub four and 'twenty four.

Speaker 4: One other one that I think that's important to think through is Amerigas. That's another one that we focus on every day. Our covenant range, our covenant max on that's 575. I'll take this opportunity to say I'm incredibly pleased that we were able to get a, you know, end the year and not utilize equity cure and actually free up.

One other one that I think it's important to think through is amerigas. That's another one that we focus on every day.

Our covenant range, our covenant Max on that $5 75.

I will take this opportunity to say I'm incredibly pleased that we were able to get it and the year and not utilize equity cure and actually free up.

Speaker 4: the revolver at Amerigas. That means we're not utilizing any equity cure at the end of the year. So I'm very, very excited about that. And we closed the year at Amerigas at five, roughly five, two, five, three. And our goal is to get that.

Revolver at Amerigas that means we're not utilizing any equity cure at the end of the year. So very very excited about that and we closed the year at Amerigas at five roughly 5253 and our goal is to get that by the end of the year sub five so we're making pretty good progress actually almost a fee.

Speaker 4: by the end of the year, sub five. So we're making pretty good progress, actually almost a full turn improvement at Amerigas from just a couple quarters ago. And we hope we're really focused by the end of the year to try and get sub five and sub four, high threes, sub four at quarter.

We'll turn improvement at Amerigas from just a couple of quarters ago.

And we hope, we'll really focus by the end of the year to try and get sub five and sub four high threes sub four at Corp.

Speaker 4: And the getting to sub five presumably would be without additional equity from the parent, correct? Correct. Correct. Yeah. Correct. We, as I mentioned, we, we, we got out of the quarter. We got out of the year with no with with again, not having to utilize that equity cure, which is why that now the revolvers freed up, you know, there's no restrictions on it. And our goals going forward are not to, you know, are not to utilize additional equity cure. That's that's the plan.

Getting to sub five presumably would be without additional equity from the parent correct correct correct yes.

Correct, we as I mentioned, we got out of the quarter, we got out of the year with note with again not having to utilize that equity cure, which is why that now the revolvers freed up there is no restrictions on it and our goals going forward or not.

Our not to utilize additional equity cure that's the plan.

Great and then in a row.

Speaker 7: Great. And then in the release, it mentions share repurchases, obviously, with balance sheet considerations, that that would seem to be a constraint. But can you just talk about how you're thinking about the possibility and how that coincides with the balance sheet consideration?

It mentions share repurchases, obviously with balance sheet considerations that would seem to be.

Constraint, but can you just talk about how youre thinking about the possibility and.

And how that coincides with the balance sheet considerations.

Speaker 4: Yeah, I can start and Roger can chime in. It's it's a nod to, you know, as you can imagine, we're doing forward modeling and we're looking at all the options and, you know, goes without saying we think we're undervalued. But, you know, member on my I had a slide in there that talked about capital prioritization. It's the dividend. It's the balance sheet. You know, we're going to continue to invest in the regulated utility. But as we look forward.

I can start with 100 can chime in it's a nod to <unk>.

You can imagine we're doing forward modeling and we're looking at all the options and it goes without saying, we think we're undervalued but.

Remember I had a slide in there that talked about capital prioritization. It's the dividend. It's the balance sheet, we're going to continue to invest in the regulated utility, but as we look forward.

Speaker 4: The only thing we're trying to point out that is, is we continue to get the company healthier, the balance sheet healthier. It is an option that we think we should should be on the table down the road. It's not something eminent at the moment though, Sarah.

The only thing we're trying to point out that as we continue to get the company healthy or the balance sheet healthier. It is an option that we think we should should be on the table down the road, it's not something eminent at the moment dose there.

Great. Thank you.

Okay.

Thank you Sir.

Speaker 1: We have a follow-up question from the line of Gabriel Maureen with Mizuho.

We have a follow up question from the line of Gabriel Moreen with Mizuho.

Speaker 5: Hey, good morning everyone. If I could just hey, just hello again. I wanted to just ask a quick follow up on the utilities outlook specifically.

Hey, good morning, everyone. If I could just hey, Hello, again I wanted to ask a quick follow up on the utilities outlook specifically.

Speaker 5: What you're assuming on O&M and any moderation there in 24 and the second part of that is I noticed that the capex outlook there over the next couple of years, maybe tweak slightly downwards, along with rate based growth. Just wondering what what may be behind that.

What's your consuming on O&M and any moderation there in 'twenty four and the second part of that because I noticed that.

Capex outlook there over the next couple of years, maybe tweak slightly downwards, along with rate base growth just wondering what what may be behind that.

Yeah, I'll kick it off and I'll ask Bob to to add some color as well, yes. So so as we've been talking about right. We continue to prioritize capital in our natural gas businesses.

Speaker 3: Yeah, I'll I'll kick it off and I'll ask Bob to to add some color as well. Yeah. So so as we've been talking about, right, we we continue to prioritize capital in our natural gas businesses. And, you know, we're we're wanting to tighten it in this higher inflation environment right now. We just see it as very prudent to.

We are.

Wanting the tightening in this higher inflation environment right now.

We just see it as very prudent too.

Speaker 3: Keep our philosophy, keep investing a significant amount of capital in the regulated utility and in our natural gas businesses, however, just be prudent and tightening a little bit. And that's what you're seeing. You're seeing us just being very modest.

Keep keep our philosophy keep investing a significant amount of capital in our regulated utility and in our natural gas businesses, However, just being prudent and tightening a little bit and Thats why youre seeing youre seeing us just being very modest.

Speaker 3: On how we're tying, we are ahead of schedule with our commitments to the PUC and that's our full intention is to continue to be ahead of schedule with our pipeline and betterment process.

On advertising.

<unk> ahead of schedule with our commitments the PUC and Thats. Our full attention is to continue to be ahead of schedule with our pipeline of betterment process.

Speaker 3: We have the benefit of having been ahead of schedule in prior years, and that gives us this opportunity to, in this high inflation environment, to just be cautious and say, hey, let's right size this for now, but keep to our game plan of being ahead of schedule for our program.

We have the benefit of having been ahead of schedule from in prior years and that gives us this opportunity to in this high inflation environment to just be cautious and say hey, lets lets right size. This for now but key to our game plan of being.

Ahead of schedule for our programs.

Speaker 8: Yeah, anything that sure. Good morning. Your question about the company has grown. The utility company has grown. We had anywhere between 13,000 and maybe 15,000 customers a year. So the customers, the company is growing.

Yes.

Sure good morning.

Question about Opex Cape The company has grown the utility company has grown we have.

Anywhere between 13000, and maybe 15000 customers a year so the customers the company is growing.

Speaker 8: However, we continue to take a look across all four of our businesses at opportunities to become more efficient. So your question about OpEx creep, absolutely. We're aware of that, and we believe we've got a handle on that.

However, we.

We continue to take a look across all four of our businesses.

Opportunities to become more efficient. So your question about Opex creep, absolutely we're aware of that.

We believe we've got a handle on that and as far as capital I'll, just echo what Roger say first and foremost the agreement that we made with the public utility Commission a little over a decade ago. We're ahead of schedule on that we're retiring non contemporary material.

Speaker 8: And as far as capital, I'll just echo what Roger say first and foremost, the agreement that we made with.

Speaker 8: Public Utility Commission a little over a decade ago. We're ahead of schedule on that. We're retiring non contemporary material.

Speaker 8: System safety performance, things like leaks and leak occurrences are trending in the favorable direction, so we're comfortable. And again, as you pointed out, this is not a massive reset of capital, it's just a reallocation.

Systems' safety performance things like leaks and.

Leave occurrences.

Are trending in a favorable direction. So we're comfortable and again as you pointed out this is not a massive reset of capital. It's just a reallocation.

Understood. Thanks, Bob Thanks, Roger.

Thank you again.

Speaker 1: Our next question comes from the line of Michael Gogler with Jenny.

Our next question comes from the line of Michael Gaugler with Janney.

Good morning, everyone.

Speaker 9: Morning. I'd like to go back to the guidance range for a moment.

Good morning, good morning.

I'd like to go back to the guidance range for a moment.

Speaker 9: So as I look across your presentation, you know, we've got 14 million in new rates at Mountaineer, positive trends.

So as I look across your presentations.

$14 million of new rates at mountaineer.

Positive trends at Amerigas.

We are assuming normal weather across your businesses.

I would think there would be some economic benefit from the R&D projects.

Speaker 9: I would think there would be some economic benefit from the RNG project.

Speaker 9: And then you've got new assets at midstream and marketing and you're taking cost out of the business so

And then you've got new assets at midstream and marketing.

And you're taking cost out of the business.

So I look at the guidance and where.

Your midpoint is exactly what you did this year.

Speaker 9: So I'm wondering where the offset to all that good news is that would get you to the midpoint or lower of your guidance.

So I'm wondering where the offsets all of that good news is.

That would get you to the midpoint or lower of your guidance.

Speaker 4: I can start, Michael. I mean, you know, the slide that we have in there.

I can start Michael I mean.

Slide that we have in there.

Speaker 4: You highlighted all the good news, and that is true. We do see some growth. We're blessed to have a diversified portfolio, so the utility is growing, services is growing. You know, we see international growing slightly, but we do see, you know, it is a rebound year, recovery year for Amerigas, so we do see volumes continuing to decline in Amerigas.

You highlighted all the good news in that and that is true we do see some growth.

We're blessed to have a diversified portfolio said the utility is growing services is growing.

We see international growing slightly.

But we do see it as a rebound year recovery year for Amerigas. So we do see volumes continuing to decline and Amerigas, we do see some impact on our margins at Amerigas.

Speaker 4: We do see some impact on our margins at Amerigas on a, you know, on even on a twenty three to twenty four basis. So bottom line, we, we, we're seeing growth in three divisions and that's being predominantly offset as we continue to reset and get Amerigas back on track.

Even on a 23% to 24 basis. So bottom line, we are seeing growth in three divisions and thats being predominantly offset as we continue to reset and get amerigas back on track.

Yeah.

Alright, and so all I had gentlemen, thank you.

Thanks, Thank you Mike.

Speaker 1: That concludes today's question and answer session. I'd like to turn the call back to Roger Parole for closing remarks.

That concludes today's question and answer session I would like to turn the call back to Roger Perreault for closing remarks.

Speaker 3: Okay, thank you Liz and thank you all for joining us today. We appreciate your continued interest in UGI. I wish you all a great weekend and Thanksgiving.

Okay. Thank you Liz.

Thank you all for joining US today. We appreciate your continued interest in UGI I wish you all a great weekend and Thanksgiving.

Okay.

Speaker 1: This concludes today's conference call. Thank you for participating. You may now disconnect.

This concludes today's conference call. Thank you for participating.

May now disconnect.

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Speaker 10: I.