UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 1, 2008

UGI Utilities, Inc.
(Exact name of registrant as specified in its charter)

Pennsylvania		1-1398		23-1174060
(State or other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

100 Kachel Boulevard, Suite 400, Green Hills Corporate Center, Reading, Pennsylvania		19607
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: 610 796-3400

Not Applicable

(Former name or former address if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Exhibit No.		Description
99.1		Unaudited Financial Statements of PPL Gas Utilities Corporation and Subsidiaries.
99.2		Unaudited Condensed Consolidated Pro Forma Financial Information of UGI Utilities, Inc. and Subsidiaries.

		UGI Utilities, Inc.
November 7, 2008		By:		/s/ John C. Barney
				Name: John C. Barney
				Title: Senior Vice President — Finance and Chief Financial Officer of UGI Utilities, Inc.

Exhibit No.		Description
99.1		Unaudited Condensed Consolidated Financial Statements of PPL Gas Utilities Corporation and Subsidiaries.
99.2		Unaudited Condensed Consolidated Pro Forma Financial Information of UGI Utilities, Inc. and its Subsidiaries.

Exhibit 99.1

 

 

 

 

Unaudited Condensed Consolidated
Financial Statements

PPL Gas Utilities Corporation and Subsidiaries
June 30, 2008 and 2007

 

 

INDEX

		Page
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Statements of Income for the six months ended June 30, 2008 and 2007			1
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007			2
Condensed Consolidated Balance Sheet at June 30, 2008			3
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)			5

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30,
PPL Gas Utilities Corporation and Subsidiaries
(Unaudited)
(Thousands of Dollars)

		2008				2007
Operating Revenues
Utility
Natural gas sales		$	91,851			$	100,487
Natural gas sales — off-system			12,609				9,544
Natural gas transportation			8,400				7,369
Natural gas storage			4,159				4,074
Propane sales			18,330				15,985
Other			768				532
Total			136,117				137,991
Operating Expenses
Operation
Natural gas purchases			65,105				74,328
Natural gas purchases — off-system			12,151				9,469
Propane purchases			13,264				10,541
Other operation, maintenance and administrative			26,230				25,550
Depreciation			4,817				4,540
Taxes, other than income			322				402
Other			302				317
Total			122,191				125,147
Operating Income			13,926				12,844
Other Income			251				108
Interest Expense			841				181
Interest Expense with Affiliates			2,201				2,203
Income Before Income Taxes			11,135				10,568
Income Taxes			5,377				5,401
Net Income		$	5,758			$	5,167

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
PPL Gas Utilities Corporation and Subsidiaries
(Unaudited)
(Thousands of Dollars)

		2008				2007
Cash Flows from Operating Activities
Net income		$	5,758			$	5,167
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation			4,817				4,540
Deferred income taxes and investment tax credits			2,266				(3,208	)
Defined benefits			984				951
Environmental remediation provision			(35	)			4,723
Regulatory assets							(3,945	)
Other			595				534
Change in current assets and current liabilities
Accounts receivable			(879	)			123
Accounts receivable with affiliates			495				937
Materials and supplies			(256	)			(287	)
Natural gas in storage and propane			5,469				6,861
Accounts payable			(1,922	)			(2,763	)
Accounts payable to affiliates			(1,251	)			(134	)
Taxes			(5,520	)			625
Natural gas recoveries in excess of costs			(3,063	)			9,696
Other			62				(171	)
Other operating activities
Other assets			391				35
Other liabilities			(362	)			(118	)
Net cash provided by operating activities			7,549				23,566
Cash Flows from Investing Activities
Expenditures for property, plant and equipment			(6,171	)			(6,582	)
Proceeds from the sale of assets			220				210
Net cash used in investing activities			(5,951	)			(6,372	)
Cash Flows from Financing Activities
Payment of common stock dividends to PPL			(5,000	)			(4,000	)
Net increase (decrease) in short-term debt with affiliates			2,230				(13,355	)
Net cash used in financing activities			(2,770	)			(17,355	)
Net Decrease in Cash and Cash Equivalents			(1,172	)			(161	)
Cash and Cash Equivalents at Beginning of Period			2,791				1,592
Cash and Cash Equivalents at End of Period		$	1,619			$	1,431

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the financial statements.

CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 2008
PPL Gas Utilities Corporation and Subsidiaries
(Unaudited)
(Thousands of Dollars)

Assets

Current Assets
Cash and cash equivalents		$	1,619
Accounts receivable (less reserve: $2,559)
Customer			14,929
Other			1,905
Accounts receivable from affiliates			3,029
Unbilled revenues			3,157
Inventory
Natural gas in storage and propane			9,491
Materials and supplies			2,824
Prepayments			5,604
Deferred income taxes			8,402
Other			2,005
Total Current Assets			52,965
Property, Plant and Equipment
Plant in service
Natural gas			304,355
Propane			13,717
			318,072
Less: accumulated depreciation			100,339
			217,733
Construction work in progress			4,581
Natural gas stored underground			5,341
Total Property, Plant and Equipment			227,655
Regulatory and Other Noncurrent Assets
Regulatory assets			28,481
Goodwill			55,480
Other intangibles			3,870
Other			188
Total Regulatory and Other Noncurrent Assets			88,019
Total Assets		$	368,639

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the financial statements.

CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 2008
PPL Gas Utilities Corporation and Subsidiaries
(Unaudited)
(Thousands of Dollars)

Liabilities and Equity

Current Liabilities
Short-term debt with affiliates		$	36,152
Long-term debt			10,000
Long-term debt with affiliates			56,500
Accounts payable			15,215
Accounts payable to affiliates			2,590
Taxes			869
Natural gas recoveries in excess of costs			2,412
Other			7,953
Total Current Liabilities			131,691
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes and investment tax credits			39,691
Defined benefit obligations			16,506
Accrued environmental costs			5,115
Other			641
Total Deferred Credits and Other Noncurrent Liabilities			61,953
Commitments and Contingent Liabilities
Shareowner’s Equity
Common stock — $0.01 par value (a)
Additional paid-in capital			151,928
Earnings reinvested			23,822
Accumulated other comprehensive loss			(755	)
Total Shareowner’s Equity			174,995
Total Liabilities and Equity		$	368,639

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of the financial statements.

PPL Gas Utilities Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Dollars are in thousands, unless otherwise noted.

1.

Interim Financial Statements

PPL Gas Utilities Corporation (PPL Gas Utilities) is not required to file its financial statements with the Securities and Exchange Commission. However, the accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X, with the exception of including only those balance sheet and income statement periods specified in the definitive sales agreement (as noted below.) Therefore, the condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements. In the opinion of management, all adjustments (including normal and recurring accruals) considered necessary for a fair presentation in accordance with accounting principles generally accepted in the U.S. are reflected in the condensed consolidated financial statements. The condensed consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes contained in PPL Gas Utilities’ annual financial statements for the year ended December 31, 2007. The results of operations for the six months ended June 30, 2008, are not necessarily indicative of the results to be expected for the full year ending December 31, 2008, or other future periods, because results for interim periods can be disproportionately influenced by various factors and developments and seasonal variations.

In 2007, PPL Corporation (PPL) announced its intention to sell PPL Gas Utilities. In March 2008, PPL signed a definitive agreement to sell PPL Gas Utilities for $268 million in cash, adjusted for working capital, pursuant to a stock purchase agreement. This sale was completed in October 2008, following the receipt of necessary regulatory approvals. PPL received proceeds of $303 million after adjusting for working capital.

2.

Summary of Significant Accounting Policies

Comprehensive Income

For the six months ended June 30, 2008 and 2007, PPL Gas Utilities’ net income approximates comprehensive income.

New Accounting Standards

EITF 06-4

On January 1, 2008, PPL Gas Utilities adopted Emerging Issues Task Force (EITF) 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements.” This guidance requires the deferred-compensation or postretirement benefit aspects of an endorsement-type split-dollar life insurance arrangement to be recognized as a liability. Upon adoption, PPL Gas Utilities recorded a liability of $291 with an offsetting cumulative-effect adjustment to “Earnings reinvested.”

SFAS 157, as amended

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 157 “Fair Value Measurements.” SFAS 157 provides a definition of fair value as well as a framework for measuring fair value. In addition, SFAS 157 expands the fair value disclosure requirements of other accounting pronouncements to require, among other things, disclosure of the methods and assumptions used to measure fair value as well as the earnings impact of certain fair value measurement techniques. SFAS 157 excludes from its scope fair value measurements related to stock-based compensation.

In February 2008, the FASB amended SFAS 157 through the issuance of FASB Staff Position (FSP) FAS 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurement for Purposes of Lease Classification or Measurement Under Statement 13,” and FSP FAS 157-2, “Effective Date of FASB Statement No. 157.” FSP FAS 157-1 was effective upon the initial adoption of SFAS 157 and amends SFAS 157 to exclude from its scope certain accounting pronouncements that address fair value measurements associated with leases. FSP FAS 157-2 was effective upon issuance and delays the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, for nonfinancial assets and nonfinancial liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).

PPL Gas Utilities adopted SFAS 157, as amended by FSP FAS 157-1 and FSP FAS 157-2, prospectively, effective January 1, 2008. Limited retrospective application for financial instruments that were previously measured at fair value in accordance with footnote 3 of EITF Issue No. 02-3, “Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities,” was not required. The January 1, 2008 adoption did not have a significant impact on PPL Gas Utilities. As permitted by this guidance, PPL Gas Utilities will apply SFAS 157, as amended, prospectively effective January 1, 2009, to nonfinancial assets and nonfinancial liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis. PPL Gas Utilities is in the process of evaluating the impact of applying SFAS 157, as amended, to these items. The potential impact of this application is not yet determinable, but it could be material.

In October 2008, the FASB amended SFAS 157 through the issuance of FSP FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active,” which was effective upon issuance, including prior periods for which financial statements have not been issued. FSP FAS 157-3 amends SFAS 157 to clarify its application in a market that is not active. PPL Gas Utilities adopted FSP FAS 157-3, prospectively, effective July 1, 2008.

PPL Gas Utilities’ election to defer the effective date of this standard for eligible assets and liabilities had an insignificant impact on its 2008 financial statements.

SFAS 159

In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115.” SFAS 159 provides entities with an option to measure, upon adoption of this standard and at specified election dates, certain financial assets and liabilities at fair value, including available-for-sale and held-to-maturity securities, as well as other eligible items. The fair value option (i) may be applied on an instrument-by-instrument basis, with a few exceptions, (ii) is irrevocable (unless a new election date occurs), and (iii) is applied to an entire instrument and not to only specified risks, cash flows, or portions of that instrument. An entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date.

SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between similar assets and liabilities measured using different attributes. Upon adoption of SFAS 159, an entity may elect the fair value option for eligible items that exist at that date and must report the effect of the first remeasurement to fair value as a cumulative-effect adjustment to the opening balance of retained earnings.

PPL Gas Utilities adopted SFAS 159 effective January 1, 2008. PPL Gas Utilities did not elect the fair value option for eligible items; therefore, the January 1, 2008 adoption did not have an impact on PPL Gas Utilities. However, if the fair value option is elected for eligible items in periods subsequent to the initial adoption, the impact could be material.

3.

Income Taxes

Reconciliations of effective income tax rates are:

		Six Months Ended June 30,
		2008				2007
Reconciliation of Income Tax Expense
Indicated federal income tax on “Income Before Income Taxes” at statutory tax rate - 35%		$	3,897			$	3,699
Increase (decrease) due to:
State income taxes			805				777
Pension and post-retirement not normalized			446				416
Depreciation not normalized			279				567
Other			(50	)			(58	)
			1,480				1,702
Total income tax expense		$	5,377			$	5,401
Effective income tax rate			48.3	%			51.1	%

Based on a tax sharing policy, PPL Gas Utilities or its subsidiaries indirectly or directly file tax returns in two major tax jurisdictions. With a few exceptions, at September 30, 2008, these jurisdictions, as well as the tax years that are no longer subject to examination, were as follows:

U.S. (federal)		1997 and prior
Pennsylvania (state)		2002 and prior

4.

Defined Benefits

Net periodic defined benefit costs were:

		Six Months Ended June 30,
		Pension								Other Postretirement Benefits
		2008				2007				2008				2007
Service cost		$	706			$	713			$	117			$	90
Interest cost			1,550				1,468				296				247
Expected return on plan assets			(1,733	)			(1,734	)			(5	)			(18	)
Amortization of:
Prior service cost			100				101				46				56
Actuarial loss			22				132				121				77
Net periodic defined benefit costs		$	645			$	680			$	575			$	452

5.

Long-term Debt

At June 30, 2008, PPL Gas Utilities had $10,000 of 8.70% Senior Notes outstanding that were scheduled to mature in December 2022. In August 2008, PPL Gas Utilities prepaid the $10,000 aggregate principal amount of these notes and incurred a premium of $3,261 in connection with the prepayment. As a result of the prepayment, this debt was classified as current at June 30, 2008.

See Note 7 for information on “Long-term Debt with Affiliates.”

6.

Commitments and Contingencies

Environmental Matters

Superfund and Other Remediation

PPL Gas Utilities has been investigating and remediating several sites that were not being addressed under another regulatory program such as Superfund (federal environmental legislation that addresses remediation of contaminated sites; states also have similar statutes), but for which PPL Gas Utilities may be liable for remediation. These include all currently owned coal gas manufacturing facilities, potential mercury contamination from natural gas meters and regulators at PPL Gas Utilities’ sites and plugging of abandoned wells by PPL Gas Utilities. Sites previously owned by PPL Gas Utilities, but not under current ownership, are included only if PPL Gas Utilities is aware of any claim by a third party or has received notice from a government agency regarding the site. If any governmental notice or third party claim has been made or threatened with respect to such unowned sites, and there is no cost-sharing agreement in place, then PPL Gas Utilities has assumed that it will be responsible for the entire investigation and remediation cost. For all sites, (owned and unowned) where there is a cost-sharing agreement, PPL Gas Utilities’ share of the projected costs under the agreement has been assumed. At June 30, 2008, the accrued balance for PPL Gas Utilities’ portion of projected investigation and remediation costs was $8,135 of which $3,078 has been classified in current liabilities “Other” on the Balance Sheet. “Regulatory assets” include $2,368 for the portion that relates to well-plugging costs. These costs reflect remaining exposures after the consideration of insurance settlements that have been reached for many of these sites in prior periods. The remediation liability has not been discounted. The costs have been calculated assuming that all known or suspected source areas will be remediated and remediation will be done under Pennsylvania’s Act 2 or under an applicable agency consent order or agreement. The costs are based on PPL Gas Utilities’ experience with similar sites and based on site-specific information. However, the costs of remediation and other liabilities could be substantially higher than currently projected if ongoing investigations show additional source areas or unexpected levels of contamination. PPL Gas Utilities also could incur other non-remediation costs at sites included in the consent orders or other contaminated sites and could incur remediation and non-remediation costs at sites that have either not been included as explained above or at sites presently unknown, the costs of which are not now determinable, but could be significant.

The Environmental Protection Agency (EPA) is evaluating the risks associated with naphthalene, a chemical by-product of coal gas manufacturing operations. As a result of the EPA’s evaluation, individual states may establish stricter standards for water quality and soil clean-up. This could require PPL Gas Utilities to take more extensive assessment and remedial actions at former coal gas manufacturing facilities. The costs to PPL Gas Utilities of complying with any such requirements or any other new regulatory requirements imposed by the EPA or any state agency are not now determinable, but could be significant.

Gas Seepage

PPL Gas Utilities owns and operates the Meeker gas storage field and has a partial ownership interest in the Tioga gas storage field, both located in north-central Pennsylvania. There continues to be an issue with natural gas observed in several drinking water wells that the Pennsylvania Department of Environmental Protection (DEP) has been working to address. The Pennsylvania DEP has raised concerns that potential leakage of natural gas from the Tioga gas storage field could be contributing to this issue. To help determine the cause of the natural gas in the potable water wells, the Pennsylvania DEP enlisted the services of the U.S. Geological Survey Department. The results of the U.S. Geological Survey study were published in mid-2007 and indicate that natural gas in the groundwater in the area, including in certain residential wells, may be due in part to natural gas stored in the storage fields. PPL Gas Utilities is working with the Pennsylvania DEP and the co-owner/operator of the Tioga field to develop a comprehensive study to determine whether natural gas in the wells is, in fact, due to storage field operations. In the interim, pending completion of a more detailed study of the issue, PPL Gas Utilities and the co-owner of the Tioga storage field are sampling potable water wells within an agreed-upon program area and are installing water treatment systems on any wells in which natural gas exceeds 20 parts per million with approval of the property owner. At June 30, 2008, the accrued balance for such costs was insignificant. The costs of the broader study and any required mitigation actions are not now determinable, but could be significant.

General

PPL Gas Utilities is subject to environmental permits. As of June 30, 2008, PPL Gas Utilities was in compliance with the requirements of these permits.

7.

Related Party Transactions

The Balance Sheet reflects the following balances with related parties: “Accounts receivable from affiliates,” “Short-term debt with affiliates,” “Accounts payable to affiliates” and “Long-term debt with affiliates.”

During the six months ended June 30, 2008 and 2007, PPL Gas Utilities purchased $3,896 and $1,254 of natural gas from an affiliate, which is reflected in “Natural gas purchases — off-system” on the Statements of Income. PPL Gas Utilities also sold natural gas to this affiliate during the six months ended June 30, 2008 and 2007. These sales totaled $8,186 and $1,504 and are reflected in “Natural gas sales — off-system” on the Statements of Income. At June 30, 2008, PPL Gas Utilities had a net receivable from this affiliate of $1,351 which is reflected in “Accounts receivable from affiliates” on the Balance Sheet. During the six months ended June 30, 2008 and 2007, PPL Gas Utilities used this affiliate as an agent to purchase natural gas and to complete its off-system sales. The fee charged by this affiliate for these services was insignificant for both periods.

PPL Gas Utilities provides natural gas to certain property owners residing on land where mineral rights are owned by an affiliate. Additionally, PPL Gas Utilities pays a fee to the property owners, on behalf of the affiliate, for the mineral rights. PPL Gas Utilities charges the affiliate for the natural gas provided and payments made to the property owners. During the six months ended June 30, 2008 and 2007, PPL Gas Utilities recognized an insignificant amount of revenue associated with the natural gas provided. At June 30, 2008, PPL Gas Utilities had a receivable from this affiliate of $1,023, which is reflected in “Accounts receivable from affiliates” on the Balance Sheet.

At June 30, 2008, PPL Gas Utilities had a $100,000 demand note payable to an affiliate, with $35,832 outstanding. Interest is due quarterly at a rate equal to the 3-month London Interbank Offered Rate (LIBOR) plus 1.50% (4.19% at June 30, 2008). At June 30, 2008, a PPL Gas Utilities subsidiary had a $10,000 demand note payable to an affiliate, with $320 outstanding. Interest is due quarterly at a rate equal to the 3-month LIBOR plus 1.25% (3.94% at June 30, 2008). These notes are shown on the Balance Sheet as “Short-term debt with affiliates.” Interest expense is reflected in “Interest Expense with Affiliates” on the Statements of Income. These notes were subsequently repaid in 2008.

At June 30, 2008, PPL Gas Utilities had a $50,000 note due to an affiliate, with interest due quarterly at a rate equal to 5.75%. This note was scheduled to mature in December 2015. At June 30, 2008, a PPL Gas Utilities subsidiary had a $6,500 note due to an affiliate, with interest due quarterly at a rate equal to the 3-month LIBOR plus 1.40% (4.09% at June 30, 2008). This note was scheduled to mature in December 2009. These notes were prepaid in August 2008. As a result of the prepayment, these notes have been classified as current at June 30, 2008. These notes are shown on the Balance Sheet as “Long-term debt with affiliates.” Interest expense is reflected in “Interest Expense with Affiliates” on the Statements of Income.

Allocation of Corporate Service Costs

Certain affiliates of PPL Gas Utilities provide corporate functions such as financial, legal, human resources and information services. For the six months ended June 30, 2008 and 2007, PPL Gas Utilities was allocated and expensed $5,499 and $4,743 for these services. These costs are primarily included in “Other operation, maintenance and administrative” on the Statements of Income.

Contributions

In August 2008, PPL Gas Utilities received a $120,000 cash capital contribution from PPL.

Distributions

During the six months ended June 30, 2008 and 2007, PPL Gas Utilities paid common stock dividends to PPL of $5,000 and $4,000.

Exhibit 99.2

UGI UTILITIES, INC.

INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Dollars In Thousands)

The following Unaudited Pro Forma Condensed Consolidated Financial Statements of UGI Utilities, Inc. and Subsidiaries (“UGI Utilities”) give effect to the October 1, 2008 (“Closing Date”) acquisition (the “Acquisition”) of all of the issued and outstanding stock of PPL Gas Utilities Corporation (“PPL Gas”), the natural gas distribution utility of PPL Corporation (“PPL”), for $267,600 plus estimated working capital pursuant to a Stock Purchase Agreement between PPL and UGI Utilities dated March 5, 2008, as amended on May 2, 2008 (the “Purchase Agreement”). Also on the Closing Date, the assets of PPL Gas’ wholly owned subsidiary, Penn Fuel Propane, LLC (“Penn Fuel”), a retail propane distributor, were sold to AmeriGas Propane, L.P. (“AmeriGas Propane”), an affiliate of UGI Utilities (the “Penn Fuel Closing”). PPL Gas is a regulated natural gas local distribution company serving approximately 76,000 customers in eastern and central Pennsylvania. PPL Gas also distributes natural gas to several hundred customers in one county in Maryland. Under the terms of the Purchase Agreement, on the Closing Date, UGI Utilities made a cash payment of $267,600 to PPL for the stock of PPL Gas plus an estimated working capital payment of $35,370. UGI Utilities funded the total cash payment of $302,970 with capital contributions of $120,000 from UGI Utilities’ parent company, UGI Corporation (“UGI”); proceeds from the issuance of $108,000 of Senior Notes of UGI Utilities bearing an interest rate of 6.375%; and $74,970 of borrowings under its revolving credit facility. The cash payment is subject to adjustment for the actual working capital on the Closing Date and for required pre-Closing capital expenditures to be determined in accordance with the Purchase Agreement within 90 days of the Closing Date. On the Closing Date, the assets of Penn Fuel were sold to AmeriGas Propane for $32,000 cash plus estimated working capital of $1,621. The cash payment received by UGI Utilities for Penn Fuel, which was used by UGI Utilities to reduce borrowings under its revolving credit facility, is subject to adjustments for the actual working capital on the Closing Date and for required pre-Closing capital expenditures to be determined within 90 days of the Penn Fuel Closing. The Unaudited Pro Forma Condensed Consolidated Financial Statements reflect UGI Utilities’ estimated net purchase price of $303,470, including an estimated working capital adjustment of $35,370, and $500 in transaction fees and expenses.

The pro forma adjustments are based upon available information and assumptions that management believes are reasonable. The Unaudited Pro Forma Condensed Consolidated Financial Statements do not purport to represent what the results of operations or financial position of UGI Utilities would have been if the purchase transaction had occurred on the dates indicated below, nor do they purport to project the results of operations or financial position of UGI Utilities for any future period or as of any future date.

The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2008 was prepared by combining the Unaudited Condensed Consolidated Balance Sheet of UGI Utilities and the Unaudited Condensed Consolidated Balance Sheet of PPL Gas and subsidiaries, and giving effect to the sale of Penn Fuel assets to AmeriGas Propane, as though those transactions had been completed on June 30, 2008. The Unaudited Pro Forma Condensed Consolidated Statement of Income for the nine months ended June 30, 2008 was prepared by combining UGI Utilities’ Unaudited Condensed Consolidated Statement of Income for the nine months ended June 30, 2008 with PPL Gas’ Unaudited Consolidated Statement of Income for the nine months ended June 30, 2008 to give effect to the acquisition of PPL Gas and subsidiaries as though it had occurred on October 1, 2006, the earliest year presented. The Unaudited Pro Forma Condensed Consolidated Statement of Income for the year ended September 30, 2007 was prepared by combining UGI Utilities’ audited Consolidated Statement of Income for the year ended September 30, 2007 with PPL Gas’ Unaudited Condensed Consolidated Statement of Income for the twelve months ended September 30, 2007 to give effect to the acquisition of PPL Gas and subsidiaries as though it had occurred on October 1, 2006.

UGI UTILITIES, INC.

INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
(In Thousands)

The Unaudited Pro Forma Condensed Consolidated Financial Statements were prepared using the purchase method of accounting with UGI Utilities as the acquirer. Accordingly, we have adjusted the historical financial statements to give effect to the impact of the estimated net purchase price in connection with the acquisition of the stock of PPL Gas. In the Unaudited Pro Forma Condensed Consolidated Balance Sheet, UGI Utilities’ estimated net purchase price has been allocated to the assets acquired and liabilities assumed based on a preliminary valuation of their fair values using currently available information which is subject to final adjustments. Any difference between the estimated net purchase price and the fair value assigned to the assets acquired and liabilities assumed has been reflected as goodwill. Accordingly, the actual adjustments to be recorded in connection with the final purchase price allocation may differ from the pro forma adjustments reflected in the Unaudited Pro Forma Condensed Consolidated Financial Statements and any such differences may be material.

UGI Utilities’ historical amounts as of and for the nine months ended June 30, 2008 were derived from unaudited financial statements included in the Quarterly Report on Form 10-Q filed by UGI Utilities on August 8, 2008 with the U.S. Securities and Exchange Commission (“SEC”). UGI Utilities’ historical amounts for the fiscal year ended September 30, 2007 were derived from audited consolidated financial statements included in the Annual report on Form 10-K filed by UGI Utilities on November 29, 2007 with the SEC.

PPL Gas and subsidiaries historical unaudited balance sheet amounts as of June 30, 2008 were derived from the Unaudited Condensed Consolidated Balance Sheet of PPL Gas and subsidiaries included elsewhere in this Current Report on Form 8-K/A, which does not include all disclosures required by accounting principles generally accepted in the United States (“GAAP”). The unaudited statement of income data of PPL Gas and subsidiaries for the nine months ended June 30, 2008 were derived by combining data in the Unaudited Condensed Consolidated Statement of Income for the six months ended June 30, 2008 with unaudited statement of income information for the three months ended December 31, 2007. The unaudited statement of income data of PPL Gas and subsidiaries for the twelve months ended September 30, 2007 was derived by combining data in the PPL Gas and subsidiaries unaudited statement of income information for the three months ended December 31, 2006 with the Audited Consolidated Statement of Income of PPL Gas and subsidiaries for the twelve months ended December 31, 2007, incorporated by reference into this Current Report on Form 8-K/A, and excluding the unaudited consolidated statement of income information of PPL Gas and subsidiaries for the three months ended December 31, 2007.

You should read these Unaudited Pro Forma Condensed Consolidated Financial Statements in conjunction with the statements of PPL Gas, filed separately in this Current Report on Form 8-K/A or incorporated by reference, along with UGI Utilities’ financial statements and accompanying notes included in its prior SEC filings.

UGI UTILITIES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

As of June 30, 2008
(In Thousands)

		UGI				PPL				Pro								Sale of				Pro
		Utilities				Gas				Forma								Penn				Forma
		(Historical)				(Historical) (2)				Adjustments								Fuel (11)				Consolidated
ASSETS
Current assets:
Cash and cash equivalents		$	8,401			$	1,619			$	—							$	(374	)		$	9,646
Accounts receivable			114,500				16,834				—								(1,189	)			130,145
Accounts receivable — related parties			7,589				3,029				(3,029	)			(3	)			—				7,589
Accrued utility revenues			22,253				3,157				—								—				25,410
Inventories			91,723				12,315				—								(1,058	)			102,980
Deferred income taxes			21,654				8,402				(8,402	)			(7	)			—				21,654
Derivative financial instruments			51,298				—				—								—				51,298
Prepaid expenses and other current assets			3,128				7,609				—								(321	)			10,416
Total current assets			320,546				52,965				(11,431	)							(2,942	)			359,138
Property, plant and equipment, net			1,091,991				227,655				2,724				(6	)			(10,230	)			1,312,140
Goodwill			162,309				55,480				(55,480	)			(4	)			(16,325	)			188,816
											42,832				(4	)
Other intangibles			—				—				5,402				(6	)			(5,402	)			—
Regulatory assets			91,831				28,481				(11,780	)			(7	)			—				108,059
											(473	)			(5	)
Other assets			8,719				4,058				400				(8	)			—				13,177
Total assets		$	1,675,396			$	368,639			$	(27,806	)						$	(34,899	)		$	1,981,330
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Bank loans		$	30,000			$	—			$	75,870				(8	)		$	(33,621	)		$	72,249
Short-term debt with related parties			—				36,152				(36,152	)			(3	)			—				—
Current maturities of long-term debt, principally with related parties			—				56,500				(56,500	)			(3	)			—				—
Current maturities of long-term debt			—				10,000				(10,000	)			(3	)			—				—
Accounts payable			69,706				15,215				—								(624	)			84,297
Accounts payable — related parties			23,253				2,590				(2,590	)			(3	)			—				23,253
Accrued income taxes			29,014				869				—								(189	)			29,694
Deferred fuel refunds			87,926				2,412				—								—				90,338
Other current liabilities			63,572				7,953				—								(465	)			71,060
Total current liabilities			303,471				131,691				(29,372	)							(34,899	)			370,891
Long-term debt			532,000				—				108,000				(8	)			—				640,000
Deferred income taxes			191,646				38,505				(38,505	)			(7	)			—				181,757
											(9,889	)			(7	)
Deferred investment tax credits			6,133				1,186				(1,186	)			(7	)			—				6,133
Other noncurrent liabilities			43,798				22,262				(1,859	)			(5	)			—				64,201
Total liabilities			1,077,048				193,644				27,189								(34,899	)			1,262,982
Commitments and contingencies
Total common stockholders’ equity			598,348				174,995				(174,995	)			(9	)			—				718,348
											120,000				(10	)
Total liabilities and stockholders’ equity		$	1,675,396			$	368,639			$	(27,806	)						$	(34,899	)		$	1,981,330

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

UGI UTILITIES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

Nine Months Ended June 30, 2008
(In Thousands)

		UGI				PPL				Eliminate				Pro								Pro
		Utilities				Gas				Penn				Forma								Forma
		(Historical)				(Historical) (2)				Fuel (12)				Adjustments								Consolidated
Revenues		$	1,119,930			$	193,230			$	(28,675	)		$	—							$	1,284,485
Costs and expenses:
Cost of sales			803,914				124,708				(20,222	)			—								908,400
Operating and administrative expenses			110,920				31,301				(5,819	)			1,275				(15	)			137,677
Operating and administrative expenses — related parties			9,332				6,866				(135	)			(5,825	)			(15	)			10,238
Utility taxes other than income taxes			13,650				335				—				—								13,985
Depreciation and amortization			30,826				7,163				(673	)			—								37,316
Other income, net			(9,048	)			(389	)			328				—								(9,109	)
			959,594				169,984				(26,521	)			(4,550	)							1,098,507
Operating income			160,336				23,246				(2,154	)			4,550								185,978
Interest expense			29,880				4,665				(222	)			(4,443	)			(13	)			36,031
															6,151				(14	)
Income before income taxes			130,456				18,581				(1,932	)			2,842								149,947
Income tax expense			52,489				7,555				(684	)			1,179				(16	)			60,539
Net income		$	77,967			$	11,026			$	(1,248	)		$	1,663							$	89,408

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

UGI UTILITIES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

Year Ended September 30, 2007
(In Thousands)

		UGI				PPL				Eliminate				Pro								Pro
		Utilities				Gas				Penn				Forma								Forma
		(Historical)				(Historical) (2)				Fuel (12)				Adjustments								Consolidated
Revenues		$	1,183,247			$	212,253			$	(27,148	)		$	—							$	1,368,352
Costs and expenses:
Cost of sales — gas, fuel and purchased power			816,451				137,856				(17,657	)			—								936,650
Operating and administrative expenses			140,013				41,382				(7,375	)			1,700				(15	)			175,720
Operating and administrative expenses — related parties			11,584				9,287				(685	)			(7,456	)			(15	)			12,730
Utility taxes other than income taxes			17,736				841				—				—								18,577
Depreciation and amortization			40,934				8,994				(794	)			—								49,134
Other income, net			(8,564	)			(734	)			431				—								(8,867	)
			1,018,154				197,626				(26,080	)			(5,756	)							1,183,944
Operating income			165,093				14,627				(1,068	)			5,756								184,408
Interest expense			42,327				5,581				(916	)			(4,665	)			(13	)			50,881
															8,554				(14	)
Income before income taxes			122,766				9,046				(152	)			1,867								133,527
Income tax expense			48,579				5,555				(66	)			775				(16	)			54,843
Net income		$	74,187			$	3,491			$	(86	)		$	1,092							$	78,684

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

UGI UTILITIES, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In Thousands)

1.

On October 1, 2008, UGI Utilities acquired all of the issued and outstanding stock of PPL Gas for $267,600 plus estimated working capital pursuant to a Stock Purchase Agreement between PPL and UGI Utilities dated March 5, 2008, as amended on May 2, 2008. The estimated net purchase price in these pro forma financial statements of approximately $303,470 includes an estimated working capital payment of $35,370 and $500 in estimated transaction fees and expenses. The following table reflects the sources and uses of funds related to the Acquisition:

Source of funds:
Issuance of Senior Notes		$	108,000
Revolving credit facility borrowings			75,470
Capital contribution from UGI			120,000
		$	303,470
Use of funds:
Cash payments pursuant to the Agreement		$	(267,600	)
Estimated working capital at Closing			(35,370	)
Estimated transaction fees and expenses			(500	)
		$	(303,470	)

The preliminary fair value adjustments to the assets acquired and liabilities assumed in the Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2008, are as follows:

										Adjusted
		Book Value								Book Value
		of Assets				Adjustments				of Assets				Preliminary
		Acquired				Prior				Acquired				Fair				Preliminary
		(Liabilities				to				(Liabilities				Value				Fair
		Assumed)				Closing (1)				Assumed)				Adjustments				Value
Current assets		$	52,965			$	(3,029	)		$	49,936			$	(8,402	)		$	41,534
Property, plant and equipment			227,655				—				227,655				2,724				230,379
Goodwill			55,480				—				55,480				(12,648	)			42,832
Other intangibles			—				—				—				5,402				5,402
Regulatory assets			28,481				—				28,481				(12,253	)			16,228
Other assets			4,058				—				4,058				—				4,058
Current liabilities			(131,691	)			105,242				(26,449	)			—				(26,449	)
Noncurrent liabilities			(61,953	)			—				(61,953	)			51,439				(10,514	)
		$	174,995			$	102,213			$	277,208			$	26,262			$	303,470

(1)

See Note 3 below.

UGI UTILITIES, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
(In Thousands)

		The Unaudited Pro Forma Condensed Consolidated Financial Statements are not necessarily indicative of the operating results or financial position that would have occurred had the acquisition been completed as of the dates indicated, nor are they necessarily indicative of future operating results or financial position. The purchase accounting adjustments made in connection with the final purchase price allocation may differ from the pro forma adjustments reflected in the Unaudited Pro Forma Condensed Consolidated Financial Statements and any such differences may be material.
2.		Certain reclassifications have been made to PPL Gas’ historical presentation in order to conform to UGI Utilities’ presentation. These reclassifications had no impact on net income, net assets or stockholder’s equity.
3.		Reflects the settlement of certain accounts receivable, accounts payable and debt balances, principally balances with related parties, prior to the Closing Date.
4.		Reflects net pro forma adjustment to eliminate PPL Gas and subsidiaries’ historic goodwill of $55,480 and record goodwill of $42,832 representing the excess of the net purchase price over the preliminary fair values of PPL Gas and subsidiaries net assets acquired.
5.		Reflects net adjustments resulting from (a) the difference between the projected benefit obligation (“PBO”) and the estimated fair value of the plan assets of the PPL Gas and subsidiaries’ pension plan at the Closing Date; (b) the difference between the accumulated postretirement benefit obligations (“APBOs”) and the estimated fair value of the plans assets of PPL Gas and subsidiaries’ postretirement health and welfare plans; and (c) the after-tax impact on PPL Gas’ regulatory assets resulting from the adjustments in (a) and (b) above at an effective income tax rate of 41.5%.

Eliminate historical unfunded pension liabilities		$	(7,978	)
Eliminate historical unfunded health and welfare liability			(9,579	)
Record the difference between the PBO and the estimated fair value of plan assets of PPL Gas’ pension plan			7,798
Record the difference between the APBOs and the estimated fair value of plan assets of PPL Gas’ postretirement health and welfare plans			7,900
		$	(1,859	)
Adjust regulatory asset for adjustments related to PPL Gas above, net of tax		$	(473	)

6.		Reflects estimated fair value of intangible assets acquired, principally noncompete agreements and customer relationship intangibles, and adjustments to the fair value of property, plant and equipment acquired associated with Penn Fuel.
7.		Reflects adjustments to deferred income taxes resulting from the Acquisition and the associated impact on regulatory income tax assets at an effective income tax rate of 41.5%.

UGI UTILITIES, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
(In Thousands)

8.		Reflects the issuance of $108,000 of UGI Utilities 6.375% Senior Notes in conjunction with the Acquisition, debt issuance costs of approximately $400, and total revolving credit agreement borrowings of $75,870 to fund $75,470 of the purchase price and Senior Notes’ debt issue costs of $400.
9.		Reflects the elimination of the historical balance of stockholder’s equity of PPL Gas.
10.		Reflects cash capital contribution of $120,000 from UGI to fund a portion of the purchase price of the Acquisition.
11.		Reflects the sale of the net assets of Penn Fuel to AmeriGas Propane immediately following the Acquisition for cash totaling $32,000 plus estimated working capital of $1,621 and the application of such cash proceeds to reduce UGI Utilities’ revolving credit agreement borrowings.
12.		Reflects elimination of the historical results of Penn Fuel the net assets of which were sold to AmeriGas Propane immediately following the Acquisition.
13.		Reflects the elimination of historical interest expense on indebtedness repaid prior to the Acquisition.
14.		Reflects pro forma interest expense (1) on $108,000 of 6.375% Senior Notes due 2013 issued in conjunction with the Acquisition; (2) on estimated revolving credit agreement borrowings to finance a portion of the purchase price and estimated working capital requirements; and (3) from amortization of debt issuance costs associated with the Senior Notes.
15.		Reflects net adjustment to allocated corporate expenses of affiliates resulting from the Acquisition and incremental direct expenses resulting from the transaction expected to have a continuing impact.
16.		Reflects the income tax effects of the pro forma income statement adjustments above at an effective income tax rate of 41.5%.