ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Forward-Looking Statements
Information contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements use forward-looking words such as "believe," "plan," "anticipate," "continue," "estimate," "expect," "may," "will," or other similar words. These statements discuss plans, strategies, events or developments that we expect or anticipate will or may occur in the future.
A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable. However, we caution you that actual results almost always vary from assumed facts or bases, and the differences between actual results and assumed facts or bases can be material, depending on the circumstances. When considering forward-looking statements, you should keep in mind the following important factors which could affect our future results and could cause those results to differ materially from those expressed in our forward-looking statements: (1) adverse weather conditions resulting in reduced demand; (2) cost volatility and availability of propane and other LPG, oil, electricity and natural gas and the capacity to transport product to our market areas; (3) changes in domestic and foreign laws and regulations, including safety, tax and accounting matters; (4) inability to timely recover costs through utility rate proceedings; (5) the impact of pending and future legal proceedings; (6) competitive pressures from the same and alternative energy sources; (7) failure to acquire new customers thereby reducing or limiting any increase in revenues; (8) liability for environmental claims; (9) increased customer conservation measures due to high energy prices and improvements in energy efficiency and technology resulting in reduced demand; (10) adverse labor relations; (11) large customer, counterparty or supplier defaults; (12) liability in excess of insurance coverage for personal injury and property damage arising from explosions and other catastrophic events, including acts of terrorism, resulting from operating hazards and risks incidental to generating and distributing electricity and transporting, storing and distributing natural gas, propane and other LPG; (13) political, regulatory and economic conditions in the United States and in foreign countries, including foreign currency rate fluctuations, particularly in the euro; (14) capital market conditions, including reduced access to capital markets and interest rate fluctuations; (15) changes in commodity market prices resulting in significantly higher cash collateral requirements; (16) reduced distributions from subsidiaries; and (17) the timing and success of the Company's efforts to develop new business opportunities.
These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results. We undertake no obligation to update publicly any forward-looking statement whether as a result of new information or future events except as required by the federal securities laws.

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UGI CORPORATION AND SUBSIDIARIES ANALYSIS OF RESULTS OF OPERATIONS The following analyses compare our results of operations for the three months ended March 31, 2009 ("2009 three-month period") with the three months ended March 31, 2008 ("2008 three-month period") and the six months ended March 31, 2009 ("2009 six-month period") with the six months ended March 31, 2008 ("2008 six-month period"). Our analyses of results of operations should be read in conjunction with the segment information included in Note 3 to the condensed consolidated financial statements.
Executive Overview
Because most of our businesses sell energy products used in large part for heating purposes, our results are significantly influenced by temperatures in our service territories, particularly during the peak-heating season months of November through March. As a result, our earnings are generally higher in the first and second fiscal quarters.
Our net income for the 2009 three-month period increased to $158.2 million from $126.1 million in the prior-year three-month period. The increase principally reflects greater net income from our International Propane operations and, to a much lesser extent, greater net income from AmeriGas Propane, Energy Services and Gas Utility. Temperatures in our International Propane operations were colder than normal in the 2009 three-month period and colder than in the prior year. International Propane volumes increased as a result of significantly colder weather while our AmeriGas Propane volumes were lower than in the prior year principally as a result of the effects of recessionary economic conditions, customer conservation and slightly warmer weather. Our International Propane and AmeriGas Propane 2009 three-month period results benefited from higher average retail unit margins resulting from significantly lower and less volatile LPG product costs following a rapid and precipitous decline in wholesale LPG product costs during the first quarter of Fiscal 2009. We expect unit margins in these businesses to return to more normal levels over the remainder of Fiscal 2009. Our higher Gas Utility results include the operations of CPG subsequent to its acquisition on October 1, 2008. Energy Services net income improved as greater natural gas unit margins and higher peaking services and asset management income were offset, in part, by lower electric generation net income.
Our net income for the 2009 six-month period increased to $273.1 million from net income of $206.1 million in the prior-year six-month period principally reflecting greater net income from International Propane and AmeriGas Propane and, to a much lesser extent, greater net income from Gas Utility. International Propane LPG volumes increased as a result of colder weather while our AmeriGas Propane volumes were lower than in the prior year due to the effects on volumes sold of recessionary economic conditions and customer conservation. As was the case in the 2009 three-month period, our International Propane and AmeriGas Propane results benefited from higher average retail unit margins resulting from significantly lower LPG product costs as a result of a rapid and precipitous decline in wholesale LPG commodity prices during the first quarter of Fiscal 2009. Our Gas Utility six-month period results include the results of CPG subsequent to its acquisition on October 1, 2008. Energy Services net income was equal to the prior-year period as greater natural gas unit margins and higher peaking services and asset management income were offset, in large part, by lower electric generation net income.

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UGI CORPORATION AND SUBSIDIARIES The U.S. dollar was stronger versus the euro in the 2009 three and six-month periods compared with such periods in Fiscal 2008. However, the adverse effects of the stronger dollar on reported International Propane net income were substantially offset by the effects of gains on forward currency contracts used to hedge purchases of dollar-denominated LPG. Net income (loss) by business unit: Three Months Ended Six Months Ended March 31, March 31, 2009 2008 2009 2008 (Millions of dollars) (Millions of dollars) Net income (loss): AmeriGas Propane (a) $ 40.2 $ 36.0 $ 74.5 (b) $ 51.0 International Propane 54.5 32.7 94.7 55.1 Gas Utility 41.8 39.8 70.1 63.8 Electric Utility 2.8 3.5 5.6 7.5 Energy Services 19.6 16.4 30.3 30.3 Corporate & Other (0.7 ) (2.3 ) (2.1 ) (1.6 ) Total net income $ 158.2 $ 126.1 $ 273.1 $ 206.1

(a) Amounts are net of minority interests in AmeriGas Partners, L.P.

(b) Includes net income of $10.4 million from sale of the Partnership's California LPG storage facility.

2009 three-month period compared to the 2008 three-month period AmeriGas Propane:

Increase For the three months ended March 31, 2009 2008 (Decrease) (Millions of dollars) Revenues $ 823.3 $ 1,006.6 $ (183.3 ) (18.2 )% Total margin (a) $ 349.3 $ 330.6 $ 18.7 5.7 % Partnership EBITDA (b) $ 187.3 $ 171.8 $ 15.5 9.0 % Operating income $ 168.1 $ 153.2 $ 14.9 9.7 % Retail gallons sold (millions) 342.9 368.5 (25.6 ) (6.9 )% Degree days - % (warmer) than normal (c) (2.3 )% (1.0 )% - -

(a) Total margin represents total revenues less total cost of sales.

(b) Partnership
EBITDA (earnings before interest expense, income taxes and depreciation and amortization) should not be considered as an alternative to net income (as an indicator of operating performance) and is not a measure of performance or financial condition under accounting principles generally accepted in the United States of America. Management uses Partnership EBITDA as the primary measure of segment profitability for the AmeriGas Propane segment (see Note 3 to condensed consolidated financial statements).

(c) Deviation from average heating degree-days for the 30-year period 1971-2000 based upon national weather statistics provided by the National Oceanic and Atmospheric Administration ("NOAA") for 335 airports in the United States, excluding Alaska.

Based upon heating degree-day data, average temperatures in our service territories were 2.3% warmer than normal during the 2009 three-month period compared with temperatures in the prior-year period that were 1.0% warmer than normal. Notwithstanding the benefit of the October 1, 2008 acquisition of the net assets of CPP, retail gallons sold were less than the prior-year period reflecting, among other things, the adverse effects of the significant deterioration in general economic activity which has occurred over the last year, continued customer conservation and the slightly warmer weather.

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UGI CORPORATION AND SUBSIDIARIES Retail propane revenues declined $154.9 million during the 2009 three-month period reflecting a $92.7 million decrease due to lower average selling prices and a $62.2 million decrease as a result of the lower retail volumes sold. Wholesale propane revenues declined $25.3 million reflecting a decrease in year-over-year wholesale selling prices. Wholesale propane commodity prices at Mont Belvieu, Texas, one of the major supply points in the U.S., generally stabilized during the three months ended March 31, 2009 following a more than 50% decline in prices during the first quarter of Fiscal 2009. Wholesale prices at Mont Belvieu during the 2009 three-month period were more than 50% lower than such prices a year ago. Total cost of sales decreased $202.0 million to $474.0 million principally reflecting the effects of the lower propane product costs.
Total margin was $18.7 million greater in the 2009 three-month period reflecting the beneficial impact of higher than normal retail unit margins resulting from the previously mentioned significantly lower and less volatile propane product costs. We expect unit margins to return to more normal levels over the remainder of Fiscal 2009.
EBITDA during the 2009 three-month period was $187.3 million compared with EBITDA of $171.8 million in the 2008 three-month period. The greater 2009 three-month period EBITDA reflects the previously mentioned $18.7 million increase in total margin partially offset by lower other income and slightly higher operating and administrative expenses. The higher operating and administrative expenses reflect greater compensation and benefits expenses, including incremental expenses resulting from the purchase of the CPP net assets, offset in large part by lower vehicle fuel expense.
Operating income increased $14.9 million reflecting the $15.5 million increase in EBITDA and slightly higher depreciation and amortization expense associated with acquisitions and plant and equipment expenditures made since the prior year.

International Propane: Increase For the three months ended March 31, 2009 2008 (Decrease) (Millions of euros) Revenues € 259.2 € 249.6 € 9.6 3.8 % Total margin (a) € 143.1 € 105.1 € 38.0 36.2 % Operating income € 68.1 € 37.0 € 31.1 84.1 % Income before income taxes € 62.4 € 31.5 € 30.9 98.1 % (Millions of dollars) Revenues $ 338.6 $ 375.0 $ (36.4 ) (9.7 )% Total margin (a) $ 187.1 $ 157.9 $ 29.2 18.5 % Operating income $ 89.7 $ 54.8 $ 34.9 63.7 % Income before income taxes $ 82.0 $ 46.1 $ 35.9 77.9 % Antargaz retail gallons sold 103.1 97.0 6.1 6.3 % Degree days - % colder (warmer) than normal (b) 5.4 % (10.3 )% - -

(a) Total margin represents total revenues less total cost of sales.

(b) Deviation from average heating degree days for the 30-year period 1971-2000 at more than 30 locations in our French service territory.

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UGI CORPORATION AND SUBSIDIARIES Based upon heating degree day data, temperatures in Antargaz' service territory were approximately 5.4% colder than normal during the 2009 three-month period compared with temperatures that were approximately 10.3% warmer than normal during the prior-year period. Temperatures in Flaga's service territory were colder than normal in the 2009 three-month period compared with weather that was warmer than normal in the prior-year period. Wholesale propane product costs were significantly lower during the 2009 three-month period following significant declines during the first quarter of Fiscal 2009. The average wholesale commodity price for propane in northwest Europe during the 2009 three-month period was approximately 44% lower than such price during the same period last year. Wholesale butane prices were also significantly lower in the 2009 three-month period. Antargaz' 2009 three-month period retail propane volumes were higher than in the prior-year period principally as a result of the colder weather partially offset by continued customer conservation, the effects of competition from alternate energy sources and the deterioration of general economic conditions in France.
Our International Propane base-currency results are translated into U.S. dollars based upon exchange rates experienced during each of the reporting periods. During the 2009 three-month period, the average currency translation rate was $1.30 per euro compared to a rate of $1.51 per euro during the prior-year three-month period. Although the stronger dollar resulted in lower translated International Propane operating results, the effects of the stronger dollar on reported International Propane net income were substantially offset by the effects of gains on forward currency contracts used to hedge purchases of dollar-denominated LPG.
International Propane euro-based revenues increased €9.6 million or 3.8% reflecting the higher retail gallons sold partially offset by lower average selling prices. The lower average selling prices reflect the effects of the previously mentioned year-over-year decrease in wholesale LPG product costs. In U.S. dollars, revenues declined $36.4 million or 9.7% as the previously mentioned higher euro-based revenues were more than offset by the effects of the stronger U.S. dollar. International Propane's total cost of sales decreased to €116.1 million in the 2009 three-month period from €144.6 million in the prior year reflecting the lower per-unit LPG commodity costs and the effects of gains on forward currency contracts used to hedge purchases of dollar-denominated LPG. International Propane total margin increased €38.0 million or 36.2% in the 2009 three-month period largely reflecting the beneficial impact of higher than normal retail unit margins resulting from lower and less volatile LPG product costs following a rapid and sharp decline in LPG product costs earlier in the 2009 Fiscal Year. We presently expect unit margins to return to more normal levels over the remainder of Fiscal 2009. Antargaz was adversely affected by lower unit margins in the prior-year period as a result of the rapid increase in LPG product costs which occurred last year. In U.S. dollars, total margin increased $29.2 million or 18.5% reflecting the effects of the stronger dollar on translated euro base-currency revenues and cost of sales.
International Propane euro-based operating income increased €31.1 million or 84.1% principally reflecting the previously mentioned increase in total margin and slightly higher operating and administrative costs principally resulting from the consolidation of the operations of ZLH effective in January 2009. On a U.S. dollar basis, operating income increased $34.9 million or 63.7% reflecting the previously-mentioned increase in U.S. dollar-denominated total margin and lower U.S. dollar-denominated operating expenses and depreciation and amortization principally as a result of the stronger U.S. dollar. Euro-based income before income taxes was €30.9 million or 98.1% greater than in the prior year principally reflecting the higher operating income. In U.S. dollars, income before income taxes increased $35.9 million or 77.9% reflecting the benefit of the higher dollar-denominated operating income and the effects of the stronger dollar on translated interest expense.

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UGI CORPORATION AND SUBSIDIARIES Gas Utility: For the three months ended March 31, 2009 2008 Increase (Millions of dollars) Revenues $ 542.8 $ 476.7 $ 66.1 13.9 % Total margin (a) $ 149.9 $ 121.6 $ 28.3 23.3 % Operating income $ 80.0 $ 75.5 $ 4.5 6.0 % Income before income taxes $ 69.6 $ 66.0 $ 3.6 5.5 % System throughput - billions of cubic feet ("bcf") 56.5 49.6 6.9 13.9 % Degree days - % colder (warmer) than normal (b) 4.1 % (1.7 )% - -

(a) Total margin represents total revenues less total cost of sales.

(b) Deviation from average heating degree days for the 15-year period 1990-2004 based upon weather statistics provided by the National Oceanic and Atmospheric Administration ("NOAA") for airports located within Gas Utility's service territory.

Temperatures in the Gas Utility service territory based upon heating degree days were 4.1% colder than normal in the 2009 three-month period compared with temperatures that were 1.7% warmer than normal in the prior-year period. In Fiscal 2009, Gas Utility began calculating normal degree days using the 15-year period 1990-2004. Previously, normal degree days were based upon recent 30-year periods. For comparability purposes, the prior-year period weather variance has been recalculated using the new 15-year period. Total distribution system throughput increased 6.9 bcf in the 2009 three-month period reflecting the effects of the CPG Acquisition and increases in firm- residential, commercial and industrial ("retail core-market") and retail delivery service (collectively, "core market") volumes resulting from the colder 2009 three-month period weather and year-over-year customer growth. These increases in system throughput were partially offset by the effects on volumes sold and transported from lower demand from commercial and industrial customers due to the deterioration in general economic activity which has occurred over the last year. Gas Utility revenues increased $66.1 million principally reflecting $85.5 million in incremental revenues from CPG partially offset by a decline in low-margin off-system sales revenues. Changes in average purchased gas cost ("PGC") rates did not have a significant effect on period-over-period revenues. Under the PGC recovery mechanism, Gas Utility records the cost of gas associated with sales to retail core-market customers at amounts included in PGC rates. The difference between actual gas costs and the amounts included in rates is deferred on the balance sheet as a regulatory asset or liability and represents amounts to be collected from or refunded to customers in a future period. As a result of this PGC recovery mechanism, increases or decreases in the cost of gas associated with retail core-market customers have no direct effect on retail core-market margin. Deferred fuel costs included on the Condensed Consolidated Balance Sheet at March 31, 2009 principally reflect the effects of significantly higher unrealized losses on natural gas futures contracts due to recent declines in wholesale natural gas prices. Gas Utility's cost of gas was $392.9 million in the 2009 three-month period compared with $355.1 million in the prior-year period principally reflecting incremental cost of sales of $60.4 million associated with CPG partially offset by the effects on cost of sales of the lower off-system sales.

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UGI CORPORATION AND SUBSIDIARIES Gas Utility total margin increased $28.3 million principally reflecting incremental margin from CPG and higher total retail core-market margin resulting from the higher retail core-market volumes sold.
The increase in Gas Utility operating income during the 2009 three-month period principally reflects the previously mentioned greater total margin partially offset by higher operating, administrative and depreciation expenses, including incremental expenses associated with CPG, and, to a lesser extent, higher provisions for bad debts, environmental matters, pension expense and distribution system maintenance expenses. The increase in income before income taxes reflects the previously mentioned higher operating income partially offset by higher interest expense associated with the $108 million face value of 6.375% Senior Notes issued to finance a portion of the CPG acquisition. Electric Utility:

For the three months ended March 31, 2009 2008 Decrease (Millions of dollars) Revenues $ 38.1 $ 38.6 $ (0.5 ) (1.3 )% Total margin (a) $ 11.9 $ 12.2 $ (0.3 ) (2.5 )% Operating income $ 5.5 $ 6.5 $ (1.0 ) (15.4 )% Income before income taxes $ 5.1 $ 5.9 $ (0.8 ) (13.6 )% Distribution sales - millions of kilowatt hours ("gwh") 273.1 279.1 (6.0 ) (2.1 )%

(a) Total margin represents total revenues less total cost of sales and revenue-related taxes, i.e. Electric
Utility gross
receipts taxes,
of $2.0 million
and
$2.2 million
during the
three-month
periods ended
March 31, 2009
and 2008,
respectively.
For financial
statement
purposes,
revenue-related
taxes are
included in
"Utility taxes
other than
income taxes"
on the
Condensed
Consolidated
Statements of
Income.

Electric Utility's kilowatt-hour sales in the 2009 three-month period were lower than in the prior year. Temperatures based upon heating degree days were approximately 2.2% colder than last year resulting in greater sales to residential heating customers. These greater sales were more than offset however by lower sales to commercial and industrial customers as a result of the deterioration in general economic activity. Electric Utility revenues decreased $0.5 million principally as a result of the lower sales partially offset by higher Provider of Last Resort ("POLR") rates. In accordance with the terms of its June 2006 POLR Settlement, Electric Utility increased its POLR rates effective January 1, 2009. This increase raised the average cost to a residential heating customer by approximately 1.5% over costs in effect during calendar year 2008. Electric Utility cost of sales were $24.2 million in both the 2009 three-month period and the 2008 three-month period principally reflecting the effects of the lower sales and slightly lower per-unit purchased power costs offset by greater electricity transmission costs.

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UGI CORPORATION AND SUBSIDIARIES Notwithstanding the increase in POLR rates, Electric Utility total margin decreased $0.3 million during the 2009 three-month period principally reflecting the effects of the lower sales and greater electricity transmission costs. Electric Utility operating income and income before income taxes in the 2009 three-month period were $1.0 million and $0.8 million lower than such amounts in the prior-year period, respectively, reflecting the previously mentioned lower total margin and higher operating and administrative costs including greater provisions for bad debts and higher pension expense. Energy Services: . . .