Good day and welcome everyone to the UGI and AmeriGas Partners' First Quarter Fiscal Year 2008 Earnings Results Conference Call and Webcast. As a reminder, this call is being recorded. At this time, for opening remarks and introduction, I would like to turn the call over to Vice President and Treasurer, Bob Krick. Please go ahead.

Thank you, Allen. Good afternoon and thank you all for joining us today. As we begin, let me remind you that our comments will contain certain forward-looking statements, which the management of UGI and AmeriGas believe to be reasonable as of today's date only. Actual results may differ significantly because of risks and uncertainties that are difficult to predict and many of which are beyond management's control. You should read the annual reports on Form 10-K for a fuller list of factors that could affect results, but among them are adverse weather conditions, price volatility and availability of all energy products including natural gas, propane and fuel oil, increased customer conservation measures, political, economic and legislative and regulatory changes in the U.S. and abroad, currency exchange rates and competition from the same and alternative energy sources. UGI and AmeriGas undertake no obligation to release revisions to these forward-looking statements to reflect events or circumstances occurring after today. With me today are John Walsh, President and COO of UGI; Gene Bissell, President and CEO of AmeriGas; and Peter Kelly, CFO of UGI; and of course your host, Chairman and CEO of UGI, Lon Greenberg. Lon?

Thank you, Bob and welcome everyone. I trust you've all had the opportunity to review our press releases reporting our first quarter results. To summarize, UGI reported earnings per share of $0.74 for first quarter, an increase of 28% over last year's $0.58. And AmeriGas reported EBITDA of approximately $93 million, virtually unchanged from last year, with net income of $54.3 million being slightly down from last year's net income. This was a very good quarter for us as our utility, Energy Services and International Propane businesses had double-digit increases in operating income. There were different drivers for this improvement in our overseas propane distribution businesses. Winter weather returned to more levels compared to last year's extraordinary warmth. Therefore, you saw a significant volume improvement, and that was what drove the results. On the utility side, our utility businesses benefited both from investments made for customer growth and further improvements in the performance of our Penn Natural Gas acquisition, due to both the achievement of additional synergies and the full year effect of a rate case from last year. And lastly, our Energy Services businesses benefited from higher electric prices and capacity charges, received on our electric generating assets, as well as new sources of income from investments made over the last few years to provide natural gas peaking services to gas utilities. AmeriGas' results were flat with last year. This was principally due to volume being somewhat lower than we expected, was essentially the same as last year. We expected to see growth in volume both from our customer growth last year as well as the full year effect of several acquisitions we completed last year. However, warm weather, different weather patterns than last year and to some extent, customer conservation all led to volume falling below our goals. Gene will have more to say on this, but the flat volume performance is not of undue concern to us, especially given volume performance to date in January, which is in line with our expectations. But of course, a lot of winter remains to be seen. At this point, I would like to turn it over to Peter Kelly to provide you with financial overview of our performance. Following Peter will be John Walsh who will comment further on our operating performance. Gene Bissell will then pick up and give you an overview of AmeriGas' performance. And then, the microphone will return back to me for some closing remarks. Now, Peter?

Thanks Lon. As noted in our earnings release this morning, we've gotten off to a very good start to the year. Earnings per share were $0.74, a 28% improvement on the $0.58 reported in the same quarter last year. Double-digit growth in earnings, in Utilities, Energy Services and International Propane more than offset the small decline in earnings we experienced in our domestic propane business. I would now like to spend a few minutes outlining the year-on-year performance of our main business segments. Net income in our Gas Utility increased $7.5 million to $24 million, on weather that was 6.2% warmer than normal versus weather that was 15% warmer than normal last year. Throughput increased by 6.1 Bcf to 39.5 Bcf, reflecting the effects of the colder whether and customer growth. This, along with the full quarter of the PNG rate increase that came into effect on December 1, 2006, and lower operating expenses were the main drivers for the substantial increase in earnings. In our Electric Utility, net income increased $800,000 to $4 million on weather that was approximately 9% colder than last year, but still almost 7% warmer than normal. We sold 254.4 gigawatt hours, up 2.2% on the same period in 2007. And this, along with the rate increase that went into effect on January the 1st, 2007 drove the increase in net income. In Energy Services, net income was $13.9 million, up 4.9 million from the $9 million reported in the first quarter of 2007. The investments in our asset base and the execution of our peaking strategy continue to drive excellent returns. In addition, net income from electric generation increased by $2.1 million following the recent run-up in the electric prices. In International Propane, net income was $22.4 million, up just over 22% on the…

Thanks Peter. Lon and Peter have both commented on the key drivers for our strong first quarter performance. I would like to focus my remarks on critical achievements within each business in Q1. Our Utilities business delivered a strong performance in the quarter as we benefited from weather in our gas service territories that, while still warmer than normal, was almost 9% colder than last year. Gas throughput increased by 18%, driven by weather-related demand and growth in our customer base. Operating income for Gas Utility increased by over 30% to 50.1 million, due to the increase in throughput and to a lesser extent, reduced operating expenses. Our PNG integration plan remains on track as we enter the second full fiscal year with our expanded gas utilities operations. We were pleased to be recognized for the fifth consecutive year with the J.D. Power award for customer service, as the top rated company among Northeast gas utilities. This is the first year where the customer survey included the PNG customers. Growth in new gas utility customers during the first quarter ran about 10% below last year. We are monitoring activity closely with our leading commercial and residential developers and focusing on opportunities to generate growth in other segments such as the conversion market during the cyclical downturn in the new housing market. Our Electric Utility delivered another in its series of strong quarters. Operating income increased to $7.2 million, due to a combination of increased throughput, higher rates and a slight reduction in operating expenses. Our Energy Services business continues to perform at a high level. Operating income increased by over 50% in Q1 to 23.7 million. Our peaking and asset management segment had a particularly strong quarter, as we benefited from the expansion of our peaking services customer base and…

Thanks John. As Peter mentioned, AmeriGas's reporting EBITDA that is equal to last year, despite slightly lower volumes. Volume in the first quarter was somewhat below expectations, given that weather was a bit colder than last year, and we had the benefit of additional volume from the acquisitions we completed last year. Our customer count is up even without the acquisitions. So we have to attribute the lower volume to lower deliveries per customer. While it's difficult to draw any firm conclusions until the end of the heating season, it appears we may be experiencing customer conservation, due to the dramatic increase in propane prices. Also propane prices are now above the average, to $1.51 in the first quarter, a 58% increase from the first quarter of last year. This higher cost was reflected in our selling prices to customers. Our average selling prices increased from $2.01 a gallon to $2.51 a gallon, or 25%. Also propane is trading today at about $1.50 a gallon, about the same level as the first quarter average. The cost continues to move in proportion to crude oil. Just a few weeks ago, when the price of crude was in the range of $100 a barrel, propane rose to $1.64 per gallon. In addition to affecting our volumes, high energy prices are affecting our expenses, particularly in terms of diesel and gasoline for our vehicles, bad debt expense and utilities, which together explained about 20% of the increase in our expenses quarter-to-quarter. Vehicle fuel expense alone was up 25%. The acquisitions we completed last year and strong volume growth in ACE also contributed to the expense increase in the quarter. In reviewing our results, its worth noting that our trailing 12 distribution coverage, excluding the effects of the Bumstead sale is 1.4 times compared…

Thank you, Gene and thanks everybody. Let me leave you with the following thoughts as we end our prepared remarks. Overall, we are pleased with our first quarter's performance. It was somewhat better than we expected, especially given the fact that weather domestically was about 7% warmer than normal. As you know, I do not comment on earnings guidance for the year after the first fiscal quarter for us. This is because our earnings have some degree of weather sensitivity and a significant portion of the winter remains. I will update guidance at our next earnings call in April. There are certain points I would like to make about our performance. I know there were some concern and question about our international operations following the fall off in earnings from those businesses last year. We described the fall off to the extraordinarily warm winter last year. Volumes in our international businesses have fully recovered this year, and I hope that removes any heightened concern about the performance of those businesses. This is not to suggest there aren't issues overseas, with competition intensifying and with passing on cost increases rapidly to customers. What it does say is those issues are more or like the challenges we face in any of our businesses; and that those issues are manageable. Performance of our utilities demonstrates that we are achieving the financial benefits we expected from the Penn Natural Gas acquisition. We're happy with the way that integration is going and look forward to continue the good results there. Similarly, the three facets of our Energy Services businesses are performing well. Our gas marketing business is achieving its strategic goals. Our electric generation operation is capitalizing on rising revenue streams from both capacity and commodity prices, and our natural gas peaking business is benefiting from investments we made and its ability to provide a valuable service to its customers. We are seeing a variety of investment opportunities, both acquisition and internal investments. We continue to pursue suitable acquisition opportunities in all of our businesses at the same time, and perhaps -- and for perhaps the first time in sometime, we are also seeing opportunities to invest internally with internally generated options, as we capitalize on market opportunities. I consider this a very good development for the company. Importantly, we have the financial resources to make many of these investments. We anticipate having approximately $200 million of investable cash by year-end. Equally important is the fact that our balance sheets remain strong as Peter said they were. In conclusion, we had an excellent first quarter. All of our businesses are executing on their strategies effectively, and we are not short of opportunity to make acquisition and internal investments and continue our track record of growth. At this point Allen, I'd like to turn the call over to the folks to ask some questions. Question And Answer

Thank you very much. [Operator Instructions]. And we will take our first question from Shneur Gershuni from UBS.

Hi. Good afternoon guys.

Hi.

Lon, you sort of ended your comments there with -- with respect to a comment of that 200 million of investable cash and that the balance sheet is in good position to make acquisitions. I guess some of my questions are going to be along the lines of, where do you see the best opportunities to make acquisitions and as well as where do you believe the best internal opportunities are? Is it something that's going to be in the line of Flaga or China, or is it something safe side? And then secondly, how far are you willing to push the balance sheet to like, what is their net debt to EBDITA multiple that you're willing to take the balance sheet up to, is there a limit, size of acquisition that you are willing to take on, be it 800 million, or 1 million, or 500 million?

Okay, let me try to take those in some order. With regard first to, let's talk about internal investment opportunities because that's somewhat of a change from recent years certainly. We've always invested internally in what I'll call customer growth. Obviously, there is a sizeable piece of AmeriGas' capital budget, utilities capital budget and international propane as well that goes to what's considered normal internal investment customer growth opportunities. What we are seeing in addition to that is some more internal investment opportunities of scale, and I would say, they are principally in the Energy Services area. Energy markets are going through a great deal of change, and some opportunities are presenting themselves. Directionally, these capital investments, internally generated capital investments though could exceed $100 million, and we are looking at some electric generation opportunities, we are looking at some natural gas peaking asset kind of opportunities as well, both of those of some scale and, also some renewable kind of opportunities. We had some opportunities to make some investment in renewable energy areas that look promising to us as well. In the internal investments, it's nice to see those arise for us because we've not had non-ordinary course internal investment opportunities in some years and it's good to see those and they all are associated with pretty good returns. On the acquisition side, we are seeing opportunities across the spectrum of our businesses. As you know, we have the normal propane acquisition. There are a few publicly announced acquisition opportunities in the utility space. There are opportunities overseas as well and to invest some money. We are in love with any one of those, more than any of the others. I would tell you that, if we are focused on achieving our returns in all of those transactions, so that they add value to shareholders. We always will finance those prudently, and we would do nothing that would jeopardize the credit rating of our utility. It's important that we maintain a strong investment, create credit there. We probably have a little flak on the AmeriGas side. The rating agencies don't seem to give us the credit, which we believe we deserve for the strength of the balance sheet of AmeriGas, and we think we have some room there to keep strong credit ratings while we pursue opportunities. But we are not going to do anything there that jeopardizes our credit rating in AmeriGas either. And lastly, the size of the cash that we have, really gives us an opportunity to fund a decent size acquisition without any equity, and that's a nice thing to have available to us as well. So we are looking across a broad range in all of our business units of acquisition opportunities and we are not limiting ourselves to scale, where we feel really comfortable with the opportunity.

If I can just have one follow-up question, when you talk about utility space in the past, you have mentioned that you kind of want to stay in your home court and so forth. Is that still the case, given that there is actually quite a few assets there available in Pennsylvania and so forth?

Yes, that's largely still the case. We have long felt that you cannot -- you can't make a utility acquisition work on the backs of savings and corporate overhead. And where we have unique advantages in the utility space, are where we have broader synergies, I am just taking out a few people and overhead. And so we look at staying pretty close to home in our utility acquisitions to ensure that we can accept the -- get return in those, that's acceptable not only for us but to our owners.

Great thank you very much

Sure.

And next we will take a question from Ron Londe from Wachovia.

Thank you. It looks like your operating and administrative expense was up about $0.06 a gallon year-over-year. Is that something we should build in going forward into our models?

Ron, you are referring to the AmeriGas side?

Yes, AmeriGas

Gene?

It was up about $14 million.

Which is about $0.06 a gallon, yes. And again, Gene -- some of that Ron is clearly run rate of acquisitions as Gene pointed out, some of its fuel-related. Gene?

The big growth in ACE.

Big growth in ACE as well, which you don't see the benefit EBITDA wise at this point, because at the time of New Year that you would see, for example in the summer and when the -- that seed [ph] business turns into its season. But I don' think -- you wouldn't take that number Gene and multiply it by four.

No.

Yes. So some of that is clear that you should build in your modeling and some of that is stuff that is more seasonal and less of concern.

Some related to the integration of those acquisitions...

That's true. We do have one-time numbers in there.

In the quarter, we had some one-time expenses that won't recur in every quarter.

Yes, we don't think, I guess Ron, may be the best way to answer your question is, we don't think we have an expanse issue in AmeriGas. We knew that those expenses would show up that we are not shocked in terms of our -- where we are compared to our own expectations. In fact, we are aligned with our expectations at where we thought we'll be on that, and I think the issue is really one of the volume hasn't been commensurate with our expectations, given the weather patterns and given the warmer weather that we experienced, compared to normal. And the obvious heightened watching of potential conservation out there because of the cost of the product.

It looks like your margins held up pretty well in the quarter and look to me like you are making profit margin of about $0.76 a gallon versus 70 a year before. Is that a good number?

Yes, that's directionally correct. Yes, so that will be directionally correct margins, we are up along that lines, clearly less than 10% but kind of in the 7% range, maybe margins were up. And that's a variety of factors that contribute to that increase. But and some of that -- obviously, some good work by our folks out in the field.

Is that you're experiencing the same thing in January?

We haven't seen -- typically in this industry, it would be really unusual to see folks cutting prices in an environment where weather has been warm. And we haven't seen that kind of unusual activity.

Okay, so margins...

Yes, we aren't concerned about where our margins are.

Also the units, can you give me a feel for the units outstanding after the performance unit contingency awards?

That was modest, that was -- you're looking at under 100,000 units there.

Okay.

Way under 100,000. I am getting the thumbs down sign. So it seems like 20 to 25,000 units by the time we got sale [ph] for taxes and things.

It's not really meaningful?

No, not really.

Are you feeling any significant effect from what's going on in the housing market right now? I know you've briefly commented on it, but is that a growing problem for your customer base?

Let me hand it over to Gene.

Ron, it's an issue we saw last year to some degree. We see it again this year and it mostly is affecting the rate of growth in the base business.

Is that a bad debt expense?

Bad debt? You know, at this point, have not been a problem. In fact, over 60 is better than it was last year at this time. This is the time of year when you are going to pay your fuel bill, so no issues there.

Okay. I know you said you wouldn't provide any guidance, but your 300 to 310 million in EBITDA, still looking decent?

If I answer that I will be giving guidance. I always thought, as I am not confirming or denying what you said. But I always thought that by saying I wasn't changing guidance, but that was okay. But that then lures me, if you say you're not changing guidance, that's effectively reiterating guidance and so I have to say as I said there and the thing is that we are not going to comment on guidance until we get through the next quarter.

Okay and one last question. What's your weather experience been in January in America, from a degree day standpoint?

To an extent somewhat warmer than normal, but not egregiously so. And if I can answer it differently for you that I think our volume expectations for January in line -- actual volumes in line with our expectations, give or take a drop, but it's in line with where we thought volume would be, which is a good sign for us given what we think weather has been and what happened earlier.

Okay thank you.

Yes.

[Operator Instructions]. And next we will take a question from Faisal Khan with Citigroup.

Hi, good afternoon

Hi Faisal.

On Energy Services, can you elaborate a little bit more; I heard in your prepared remarks kind of what was going on. You said higher power prices and peaking demand, but if you can elaborate a little bit more in terms of why our business performed so well in the quarter, especially compared to last year and other previous quarters too?

Okay. Before I answer yours, one of our folks here carries more information with them than I do. And degree days are 4.5% warmer through January... 4.5% warmer than normal, but about 8% colder than last year for AmeriGas. On Energy services; John, do you want to take a shot at this or I could do it too.

Yes, in terms of the improvement in Energy Services, a couple of things. We have increased capacity available and that's a combination of things. I have mentioned the two new projects coming on stream and that's helped us in terms of commitments we have made for the seeding season. But we also on an ongoing basis with those assets, which are the existing propane air plants and our LNG plants do engineering projects to increase throughput and reliability. So the combined effect of that is giving us increased capacity through those engineering projects and the new investments. So we probably added between 20% and 25% of additional capacity in terms of our peaking business. And in terms of what's going on in the market, the energy market, the value of that service in terms of the rate regular charge for that peaking service has increased. And that's just because I think the attractiveness of the service, utilities being able to call on that service with very short notice, kind of taking advantage of the operational expertise we have and positional advantage we have with those assets sitting within the Mid Atlantic region have enabled us to get very attractive contract rates for those services. It was a combined effect of improved contract charges and increased total capacity available within our peaking portfolio.

What's the deliverability of that peaking portfolio; peak deliverability?

Yes, reaching about 110, 120.

Okay. 120, you think would be a day [ph].

Yes.

Okay.

And on the electric side, just to hit that issue, as we said many times, we hedge out a portion of our electric generation and it's up, on the order of 50% of it is get hedged out and so we dampen volatility to spot prices. But spot prices had been kind compared to last year and so, some of the electric generation improvement is in spot prices and then, the capacity options in PJM have also produced higher numbers and we got very small amount of generation, but it does for us become noticeable in the scale of our electric business.

So with some of this new Cohen [ph] pricing coming out that should give you further uplift in the future, is that correct?

It's unclear to me a little bit how that will affect, because it's a market bidding and you are saying that they would have achieved the same result have they not changed that Cohen [ph] pricing. But it is a good -- certainly a good development for our capacity auctions. But again that will only affect capacity auctions in the kind of 11 timeframe to begin with, and then it will go 11-12 and so, but looking out at next year and the year after, if they have already had those capacity auctions and capacity prices has gone up considerably.

Okay, can you remind us how much generation you guys are bidding into PJM?

About 150 megawatts.

Okay, some of that is baseload and peaking capacity, is that right or it --

Yes, I would say 100 of its base and... actually, probably a 130 of it's base and we have a piece of Conama [ph].

Right.

And that's about a 100 megawatts there and we have a small coal plant that we cycled up and down, not all the way down, but we will cycle it between nominally, 50 on the high side and 30 on the low side, depending upon time of day and prices.

Your comments about possibly looking at generation assets to plug into your portfolio of assets, given your free cash flow you have at the end of the year, would that be in PJM or is that something outside of PJM?

Yes that would be PJM, inside of PJM.

Okay. I got you. Fair enough. So I mean, the sustainability of the profit levels you have seen in the Energy Services... I am sorry, the earnings levels we have seen this last quarter from Energy Services could be sustainable in the future. Is that fair to say?

Yes, no, I think that given the market dynamics and how we see that market evolving, absolutely there will be some volatility around marginal electric prices for the part of our generation. But on the Energy Services side, itself looks sustainable with improvements, as we add assets and then improve the efficiency of plants and bring them on full.

And we are having good experience in terms of retention of customers on the gas marketing side and our continued strong margins as well.

But this... the uplift here wasn't just a result of maybe wider storage differential or anything like that. This is, real assets that you have ramped up?

That's exactly right. We invested in two propane air plants last year and they came on stream and we were able to sell a good part of their capacity this year at decent rates, and as you know there is a great need for that peaking because it is so much cheaper than pipeline capacity.

Right. On the propane side of the equation, looking at both AmeriGas and Antargaz, is there anyway you could tell me in terms of the... what was the volumetric impact to your AmeriGas volumes from weather as compared to normal.

It's hard to say that exactly. The --.

I know you give heating degree difference --

Yes, we got about... I know the temperatures were about 7 and change, warmer than normal, and you know if you had normal weather, you'd see about half of that temperature affecting so, about 3, say about 3% to 4% improvement in volume.

Okay, got you. And then Antargaz, would it be... I guess will go the other way?

Antargaz, it probably would go some or the other way. There is some dynamics going on with Antargaz, that were a little bit different. The company is doing an outstanding job in what was a declining market, the cylinder market by innovation in new products, and they are gaining some market share on the cylinder side of the business as opposed to following a declining market down in past years. And the... we have an Antargaz probably compared to our competitors, somewhat higher level of domestic residential heat than they do, and so when weather shows up at all, we seem to get more of a pop than they do at the same time. So there is clearly some effect there, but the volumes that we experienced this quarter are like the volumes we experienced in 2005 when the weather was very similar.

Okay and in terms of your... the integration of the previously acquired gas utility, is the integration complete? Was about to do a kind of the two... the moving up... moving up operations from... I am forgetting the name of the utility you brought that's still somehow escaping my head

Yes, it's a PGE acquisition which is now PNG. We're... it's largely complete. In terms of... certainly, we have achieved everything we set out to achieve over the first couple of years of the project, but we are continually looking for opportunity to sort of align our infrastructure and opportunities for increased productivity. So for example, we just combined our electric utility head office which was within the PNG service territory with our... with the PNG head office. So we will continue to look. Certainly, the most significant synergies had been delivered, but there is continued opportunities for us looking across the combined utilities business for to take up some cost and be more efficient and we will continue to strive to identify those and then deliver them.

Got you, great. Thanks for time

Sure

[Operator Instructions]. And it does appear we have no further questions.

Okay, I want to thank you all for tuning into our call. I hope you can tell from the tone of the conversation that we feel good about our business, where we are headed, executing on our strategies and what lies ahead for us. And we look forward to reporting good results to you at the end of our next quarter and will probably talk to you at the end of April at that time. So thank you all very much. I appreciate your time and attention.

And that does conclude the UGI and AmeriGas Partners Q1 2008 conference call and webcast. We thank for your participation and ask that you enjoy the remainder of your day.