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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): August 24, 2006
UGI Utilities, Inc.
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(Exact name of registrant as specified in its charter)
Pennsylvania 1-1398 23-1174060
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
100 Kachel Boulevard, Suite 400,
Green Hills Corporate Center,
Reading, Pennsylvania 19607
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: 610 796-3400
Not Applicable
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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:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
Assignment and Assumption Agreements.
On August 24, 2006, UGI Penn Natural Gas, Inc. ("UGIPNG"), a wholly owned
subsidiary of the Registrant, entered into an Assignment and Assumption
Agreement (the "Assignment Agreement") with UGI Corporation ("UGI"), the parent
company of the Registrant. Under the Assignment Agreement, UGIPNG accepted the
assignment of (i) UGI's rights to acquire the natural gas utility business and
stock being acquired under the Purchase and Sale Agreement, dated January 26,
2006 (the "Agreement"), between UGI and Southern Union Company ("SUG"), as
amended on August 24, 2006 by the First Amendment Agreement (the "Amendment" and
collectively with the Agreement, the "Purchase Agreement"), and (ii) UGI's
rights under the related Employee Agreement, dated January 26, 2006 between UGI
and SUG, as amended by the Amendment (the "Employee Agreement"). In addition,
UGIPNG agreed to assume, pay and perform (i) all obligations of UGI with respect
to the business and stock being acquired in accordance with the terms and
conditions of the Purchase Agreement and (ii) all obligations of UGI in
accordance with the Employee Agreement, other than certain obligations relating
to the sponsorship of and all assets (held in trust), liabilities and
obligations under the Employees' Retirement Plan of Southern Union Company
Pennsylvania Division (the "SUG Pension Plan"), which were assigned to and
assumed by the Registrant on August 24, 2006 pursuant to an Assignment and
Assumption Agreement dated August 24, 2006 between the Registrant and UGI (the
"Pension Assignment").
First Amendment Agreement.
The Amendment provides for the assumption by UGI of sponsorship of and all
assets (held in trust), liabilities and obligations under the SUG Pension Plan,
after SUG contributed an amount equal to the unfunded accrued benefit obligation
to the SUG Pension Plan. The Amendment also amended the definition of the
working capital target and certain of the employee related provisions, insurance
related provisions and indemnification provisions in the Purchase Agreement.
Transition Services Agreement.
On August 24, 2006, UGI, the parent company of the Registrant, executed a
Transition Services Agreement (the "Transition Services Agreement") with SUG
defining the terms under which the parties will provide certain services and
licenses to each other or designated affiliates over the course of a transition
period following the August 24, 2006 acquisition by UGIPNG of the natural gas
utility business of PG Energy, an operating division of SUG, and the capital
stock of PG Energy Services, Inc. from SUG.
Columbia Gas Transmission -- FSS Service Agreement No. 79615.
On August 24, 2006, UGIPNG received assignment of and assumed the obligations of
PG Energy under a Service Agreement dated August 16, 2004 (the "Columbia FSS
Service Agreement") with Columbia Gas Transmission Corporation ("Columbia"),
under Columbia's FERC Rate Schedule FSS. The Columbia FSS Service Agreement will
remain in effect until March 31, 2010. UGIPNG holds a right of first refusal
under FERC regulations for extension of the Columbia FSS Service Agreement upon
expiration of the current term.
The Columbia FSS Service Agreement provides UGIPNG with firm natural gas storage
service. Under the terms of the Columbia FSS Service Agreement, UGIPNG can
inject into storage up to 5,641 Dth of natural gas per day, store up to a
maximum quantity of 797,898 Dth of natural gas in Columbia storage facilities
and withdraw up to 11,282 Dth per day of natural gas. The storage service is
used to meet the peak consumption needs of UGIPNG's retail customers during the
winter season.
UGIPNG pays maximum tariff rates for FSS service from Columbia, which includes
reservation, capacity, injection and withdrawal charges together with fuel
retention and applicable surcharges. The rates for service are subject to change
from time to time in accordance with FERC ratemaking procedures. The Columbia
FSS Service Agreement is subject to the general terms and conditions of
Columbia's FERC Gas Tariff.
Columbia Gas Transmission -- SST Service Agreement No. 79616.
On August 24, 2006, UGIPNG received assignment of and assumed the obligations of
PG Energy under a Service Agreement dated August 16, 2004 (the "Columbia SST
Service Agreement") with Columbia under Columbia's FERC Rate Schedule SST. The
Columbia SST Service Agreement is tied to UGIPNG's Columbia FSS Service
Agreement. The Columbia SST Service Agreement will remain in effect until March
31, 2010 and UGIPNG holds a right of first refusal under FERC regulations for
extension of the Columbia SST Service Agreement upon expiration of the current
term. The Columbia FSS Service Agreement and the Columbia SST Service Agreement
must both be extended or renewed for like time periods.
The Columbia SST Service Agreement provides for the transportation of natural
gas on the Columbia pipeline system, for injection or withdrawal into storage
under UGIPNG's Columbia FSS Service Agreement. Under the Columbia SST Service
Agreement, UGIPNG can ship up to 5,641 Dth per day of natural gas on Columbia
for injection into storage between the months of April and October, and can ship
up to 11,282 Dth per day of natural gas storage withdrawals on Columbia for
delivery to UGIPNG between the months of November and March. The Columbia SST
Service Agreement permits UGIPNG to take deliveries of up to 7,000 Dth per day
directly to the UGIPNG distribution system at Renova without scheduling such
deliveries with Columbia in advance. This "no-notice" capability of the Columbia
SST Service Agreement provides balancing and swing flexibility to UGIPNG 's
distribution operations.
UGIPNG pays maximum tariff rates for SST service from Columbia, which includes
reservation, and commodity charges, together with fuel retention and applicable
surcharges. The rates for service are subject to change from time to time in
accordance
with FERC ratemaking procedures. The Columbia SST Service Agreement is subject
to the general terms and conditions of Columbia's FERC Gas Tariff.
Transcontinental Gas Pipe Line -- FT Service Agreement No. 1003690.
On August 24, 2006, UGIPNG received assignment of and assumed the obligations of
PG Energy (as successor to Pennsylvania Gas and Water Company) under a Service
Agreement dated February 1, 1992 (the "1992 Transco FT Service Agreement") with
Transcontinental Gas Pipe Line Corporation ("Transco"), under Transco's FERC
Rate Schedule FT. The primary term of the agreement expired in 2004, however the
1992 Transco FT Service Agreement continues under a contractual evergreen
provision which requires three years prior written notice by either party in
order to terminate. The contract will therefore continue until at least August
23, 2009. In addition, UGIPNG holds a right of first refusal under FERC
regulations for extension of the 1992 Transco FT Service Agreement if Transco
elected to invoke its termination rights.
The 1992 Transco FT Service Agreement provides UGIPNG with the firm natural gas
transportation service on the Transco Pipeline system. Under the 1992 Transco FT
Service Agreement, UGIPNG can ship up to 48,542 Dth per day of natural gas for
delivery to UGIPNG's distribution system. The 1992 Transco FT Service Agreement
permits UGIPNG to nominate firm gas receipts from 79 separate receipt points on
the Transco pipeline system, which provides flexibility in accessing gas
supplies.
UGIPNG pays maximum tariff rates for FT service from Transco, which include
fixed and variable charges, together with fuel retention and applicable
surcharges. The rates for service are subject to change from time to time in
accordance with FERC ratemaking procedures. The 1992 Transco FT Service
Agreement is subject to the general terms and conditions of Transco's FERC Gas
Tariff.
Transcontinental Gas Pipe Line -- FT Service Agreement No. 1021106.
On August 24, 2006, UGIPNG received assignment of and assumed the obligations of
PG Energy under a Service Agreement dated July 10, 1997 (the "1997 Transco FT
Service Agreement") with Transco, under Transco's FERC Rate Schedule FT. The
1997 Transco FT Service Agreement will remain in effect until October 31, 2017.
UGIPNG holds a right of first refusal under FERC regulations for extension of
the 1997 Transco FT Service Agreement upon expiration of the current term.
The 1997 Transco FT Service Agreement provides UGIPNG with the firm natural gas
transportation service on the Transco Pipeline system. Under the 1997 Transco FT
Service Agreement, UGIPNG can ship up to 33,500 Dth per day of natural gas for
delivery to UGIPNG's distribution system. The 1997 Transco FT Service Agreement
permits UGIPNG to receive gas on a firm basis from Transco's interconnection
with the Leidy storage fields in Pennsylvania, which represents a reliable
source of year-round gas deliveries.
UGIPNG pays maximum tariff rates for FT service from Transco, which includes
fixed and variable charges, together with fuel retention and applicable
surcharges. The rates for service are subject to change from time to time in
accordance with FERC ratemaking procedures. The 1997 Transco FT Service
Agreement is subject to the general terms and conditions of Transco's FERC Gas
Tariff.
Transcontinental Gas Pipe Line --GSS Service Agreement No. 1000798.
On August 24, 2006, UGIPNG received assignment of and assumed the obligations of
PG Energy of a Service Agreement dated July 1, 1996 (the "Transco GSS Service
Agreement") with Transco under Transco's FERC Rate Schedule GSS. The Transco GSS
Service Agreement will remain in effect until March 31, 2013. Rate Schedule GSS
is an individually certificated service under FERC Regulations, so Transco is
required to file for and receive authorization to abandon service to UGIPNG
after expiration of the primary term.
The Transco GSS Service Agreement provides UGIPNG with a firm natural gas
storage and delivery service on the Transco Pipeline system. Under the terms of
the Transco GSS Service Agreement, UGIPNG can store up to a maximum quantity of
2,746,576 Dth of natural gas in Transco's storage facilities and to withdraw and
take delivery of up to 56,532 Dth per day of natural gas. The storage service is
used to meet the peak consumption needs of UGIPNG's retail customers during the
winter season.
UGIPNG pays maximum tariff rates for FT service from Transco, which includes
demand, capacity, injection and withdrawal charges together with fuel retention
and applicable surcharges. The rates for service are subject to change from time
to time in accordance with FERC ratemaking procedures. The Transco GSS Service
Agreement is subject to the general terms and conditions of Transco's FERC Gas
Tariff.
Copies of the Assignment Agreement, the Amendment, the Pension Assignment, the
Columbia FSS Service Agreement, the Columbia SST Service Agreement, the 1992
Transco FT Service Agreement, the 1997 Transco FT Service Agreement and the
Transco GSS Service Agreement are attached hereto as Exhibits 10.1, 10.2, 10.3,
10.4, 10.5, 10.6, 10.7 and 10.8, respectively, and are incorporated herein by
reference. The summary of the terms of the Assignment Agreement, the Amendment,
the Pension Assignment, the Columbia FSS Service Agreement, the Columbia SST
Service Agreement, the 1992 Transco FT Service Agreement, the 1997 Transco FT
Service Agreement and the Transco GSS Service Agreement are qualified in their
entirety by reference to the respective agreements filed herewith.
Copies of the Agreement and the Employee Agreement, filed as Exhibits 10.1 and
10.2, respectively, to UGI's Form 8-K filed on January 27, 2006 are incorporated
herein by reference.
A copy of the Transition Services Agreement, filed as Exhibit 10.1 to UGI's Form
8-K filed on August 30, 2006, is incorporated herein by reference. The summary
of the terms
of the Transition Services Agreement is qualified in its entirety by reference
to the Transition Services Agreement.
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
On August 24, 2006, the Registrant's wholly owned subsidiary, UGIPNG, completed
the acquisition of the natural gas utility business of PG Energy, an operating
division of SUG, and the capital stock of PG Energy Services, Inc. from SUG for
approximately $580 million in cash, subject to certain adjustments in accordance
with the terms and conditions of the Purchase Agreement. The acquisition was
first announced by UGI on January 27, 2006.
The purchase price for the acquisition was funded by (i) a capital contribution
from UGI in the amount of $265 million, (ii) approximately $40 million in
borrowings under the Registrant's unsecured, revolving credit agreement, dated
as of August 11, 2006, with Citibank, N.A., as agent, Wachovia Bank, National
Association, as syndication agent, and Citizens Bank of Pennsylvania, Credit
Suisse, Cayman Islands Branch, Deutsche Bank AG New York Branch, JPMorgan Chase
Bank, N.A., Mellon Bank, N.A., PNC Bank, National Association, and the other
financial institutions from time to time parties thereto, and (iii) $275 million
in borrowings under the Registrant's Credit Agreement, dated as of August 18,
2006 with Credit Suisse Securities (USA), LLC as syndication agent, Credit
Suisse, Cayman Islands Branch, as administrative agent, Credit Suisse Securities
(USA), LLC, Citigroup Global Markets Inc. and Wachovia Capital Markets, LLC as
joint lead arrangers and the financial institutions from time to time parties
thereto as lenders.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
The financial statements required by this item are not included with this
initial report. The required financial statements will be filed by amendment as
soon as practicable, but not later than 71 days after the date this Current
Report on Form 8-K was required to be filed.
(b) Pro Forma Financial Information.
The pro forma financial information required by this item is not included with
this initial report. The required pro forma financial information will be filed
by amendment as soon as practicable, but not later than 71 days after the date
this Current Report on Form 8-K was required to be filed.
(d) Exhibits.
10.1 Assignment and Assumption Agreement, dated August 24, 2006, by and between
UGI Corporation, as Assignor, and UGI Penn Natural Gas, Inc., as Assignee.
10.2 First Amendment Agreement, dated August 24 2006, by and between Southern
Union Company, as Seller, and UGI Corporation, as Buyer.
10.3 Assignment and Assumption Agreement, dated August 24, 2006, by and between
UGI Corporation, as Assignor, and UGI Utilities, Inc., as Assignee with
respect to the Southern Union Company Pension.
10.4 Service Agreement (Rate FSS) dated August 16, 2004 between Columbia Gas
Transmission Corporation and PG Energy.
10.5 Service Agreement (Rate SST) dated August 16, 2004 between Columbia Gas
Transmission Corporation and PG Energy.
10.6 Firm Transportation Service Agreement (Rate FT) dated February 1, 1992
between Transcontinental Gas Pipe Line Corporation and PG Energy (as
successor to Pennsylvania Gas and Water Company).
10.7 Firm Transportation Service Agreement (Rate FT) dated July 10, 1997 between
Transcontinental Gas Pipe Line Corporation and PG Energy.
10.8 Firm Storage and Delivery Service Agreement (Rate GSS) dated July 1, 1996
between Transcontinental Gas Pipe Line Corporation and PG Energy.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UGI Utilities, Inc.
August 30, 2006 By: Margaret M. Calabrese
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Name: Margaret M. Calabrese
Title: Secretary
EXHIBIT INDEX
Exhibit No. Description
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10.1 Assignment and Assumption Agreement, dated August 24, 2006,
by and between UGI Corporation, as Assignor, and UGI Penn
Natural Gas, Inc., as Assignee.
10.2 First Amendment Agreement, dated August 24 2006, by and
between Southern Union Company, as Seller, and UGI
Corporation, as Buyer.
10.3 Assignment and Assumption Agreement, dated August 24, 2006,
by and between UGI Corporation, as Assignor, and UGI
Utilities, Inc., as Assignee with respect to the Southern
Union Company Pension..
10.4 Service Agreement (Rate FSS) dated August 16, 2004 between
Columbia Gas Transmission Corporation and PG Energy.
10.5 Service Agreement (Rate SST) dated August 16, 2004 between
Columbia Gas Transmission Corporation and PG Energy.
10.6 Firm Transportation Service Agreement (Rate FT) dated
February 1, 1992 between Transcontinental Gas Pipe Line
Corporation and PG Energy (as successor to Pennsylvania Gas
and Water Company).
10.7 Firm Transportation Service Agreement (Rate FT) dated July
10, 1997 between Transcontinental Gas Pipe Line Corporation
and PG Energy.
10.8 Firm Storage and Delivery Service Agreement (Rate GSS)
dated July 1, 1996 between Transcontinental Gas Pipe Line
Corporation and PG Energy.