UGI Reports Higher Margin from Retail Supply, Expands to Residential Gas Marketing

UGI's Midstream & Marketing segment reported lower net income for the full fiscal year of 2011 of $52.5 million, versus $68.2 million for the prior fiscal year.

Midstream & Marketing net income for the fourth fiscal quarter, ending September 30, 2011, was $4.4 million, versus $22.1 million a year ago.

For the full fiscal year, Midstream & Marketing revenues were down at $1.060 billion, versus $1.146 billion a year ago, largely due to the absence of year-ago revenues from an import and transshipment facility which was sold in July 2010.

Also contributing to lower revenues for the Midstream & Marketing segment were lower natural gas marketing revenues associated with lower average natural gas prices.

These decreases were partially offset by higher revenues from retail power sales and, to a lesser extent, incremental natural gas storage revenues.

Total margin at Midstream & Marketing for the year was $139.7 million, up from $135.2 million a year ago. The modest increase in total margin was mainly due to higher total margin from (1) incremental margin from natural gas storage ($8.4 million) (2) higher natural gas peaking activities ($4.6 million) and (3) greater natural gas and retail power marketing ($5.7 million), partially offset by lower contribution from electric generation assets and the absence of margin from the sold import and transshipment facility.

Midstream & Marketing operating income decreased for the fiscal year at $82.9 million, versus $120.0 million a year ago, primarily due to the absence of the pre-tax gain on the sale of the import and transshipment facility ($36.5 million) recorded in fiscal 2010.

During an earnings call, UGI executives said that Midstream & Marketing concluded a "strong year" in gas and power marketing.

"While natural gas remains the primary product for our marketing team, we've made great progress adding power to our customer offer over the past few years. Customer response has been excellent, and we benefited from the opportunity to expand our supply relationships with our core customers," executives said of the retail supply segment within Midstream & Marketing

UGI said that the retail supplier continues to grow its small commercial business through a combination of direct sales and telemarketing to reach customers on over 30 different LDCs in the Mid Atlantic region.

Additionally, in Pennsylvania, UGI Energy Services recently expanded its retail gas marketing to residential customers at certain LDCs (mostly its affiliated territories), and is contemplating expansion of its residential marketing efforts.