Equity Method Investments

12 Months Ended

Sep. 30, 2022

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments

Note 22 — Equity Method Investments

During Fiscal 2022 and Fiscal 2021, the Company’s principal equity method investments comprised Pine Run, Pennant and PennEast which are reflected in our Midstream and Marketing Segment. Our equity method investments are included within “Other assets” on the Consolidated Balance Sheets and totaled $130 and $174 at September 30, 2022 and 2021, respectively.

Pine Run. The Company has an approximately 49% interest in Pine Run, a company jointly owned by Stonehenge Energy Resources and UGI Pine Run, LLC. In February 2021, Pine Run, completed the acquisition of Pine Run Midstream, an affiliate of PennEnergy, and minority partners for approximately $205. The acquisition was funded by cash contributions by UGI Pine Run, LLC and Stonehenge Energy Resources totaling approximately $115, and the issuance by Pine Run of $90 of long-term debt. Pine Run Midstream operates dry gas gathering pipelines and compression assets in western Pennsylvania. Pine Run is accounted for as an equity method investment as we have the ability to exercise significant influence, but not control, over the entity. The carrying value of our investment in Pine Run at September 30, 2022 and 2021 was $68 and $60, respectively.

Pennant. As of September 30, 2021, Energy Services held a 47% membership interest in Pennant, a natural gas gathering system located in northeast Ohio and western Pennsylvania. In Fiscal 2022, relating to the Company’s acquisition of a controlling interest in Pennant, the Company recognized an other-than-temporary pre-tax impairment charge of $44 related to its 47% membership interest, which was recorded in “(Loss) income from equity investees” in the Consolidated Statements of Income. The Company acquired the outstanding interest in Pennant during the fourth quarter of Fiscal 2022. See Note 5 for additional information related to the acquired interest in Pennant. The carrying value of our investment in Pennant at September 30, 2021 was $93.

PennEast. UGI PennEast, LLC and four other members comprising wholly owned subsidiaries of Southern Company, New Jersey Resources, South Jersey Industries, and Enbridge, Inc., each hold a 20% membership interest in PennEast. PennEast was formed to construct an approximate 120-mile natural gas pipeline from Luzerne County, Pennsylvania to the Trenton-Woodbury interconnection in New Jersey. PennEast is accounted for as an equity method investment as we have the ability to exercise significant influence, but not control, over PennEast. In September 2019, a panel of the U.S. Court of Appeals for the Third Circuit ruled that New Jersey’s Eleventh Amendment immunity barred PennEast from bringing an eminent domain lawsuit in federal court, under the Natural Gas Act, against New Jersey or its agencies. On February 3, 2021, the U.S. Supreme Court issued an order granting PennEast’s petition for a writ of certiorari and the case was argued on April 28, 2021. On June 29, 2021, the U.S. Supreme Court ruled in favor of PennEast, overturning the Third Circuit’s decision that blocked PennEast from exercising federal eminent domain authority over lands in which a state has property rights interests.

Following the favorable Supreme Court decision, the partners of the PennEast project re-assessed the remaining legal and regulatory contingencies which needed to be resolved before construction could commence. Based on the significant remaining legal challenges and the expected further delays in obtaining the necessary regulatory approvals, which were preventing the commencement of construction and commercial operation of the project, the Company concluded that its investment in PennEast was impaired at June 30, 2021, and that such impairment was other-than-temporary. The estimated fair value of the Company’s investment in PennEast was measured using probability-weighted cash flows under an expected present value technique based on management's estimates and assumptions regarding the likelihood of certain outcomes (and the related timing) that would be used by market participants at the time. Based upon this analysis, the Company recognized an other-than-temporary pre-tax impairment charge of $93 in June 2021, which is recorded in “(Loss) income from equity investees” in the Consolidated Statements of Income.

On September 27, 2021, the PennEast partners announced that further development of the project is no longer supported. Following this announcement, the estimated fair value was assessed using the liquidation value of equipment held by PennEast and did not result in a significant change compared to June 30, 2021 and no further impairment loss was recognized. The estimated fair value of the Company’s investment in PennEast was determined to be a Level 2 measurement within the fair value hierarchy. During the fourth quarter of Fiscal 2022, the Company recognized $9 of equity earnings related to the ongoing liquidation of PennEast assets. The carrying value of our investment in PennEast at September 30, 2022 and 2021 was not material.

Other Equity Investments. Our other equity investments totaled $62 and $21 at September 30, 2022 and 2021, respectively, and principally comprise investments in biomass and other renewable energy projects at Midstream and Marketing and, in Fiscal 2022, an investment in a renewable energy joint venture at UGI International.