We are exposed to certain market risks related to our ongoing business operations. Management uses derivative financial and commodity instruments, among other things, to manage these risks. The primary risks managed by derivative instruments are (1) commodity price risk; (2) interest rate risk; and (3) foreign currency exchange rate risk. Although we use derivative financial and commodity instruments to reduce market risk associated with forecasted transactions, we do not use derivative financial and commodity instruments for speculative or trading purposes. The use of derivative instruments is controlled by our risk management and credit policies, which govern, among other things, the derivative instruments we can use, counterparty credit limits and contract authorization limits. Although our commodity derivative instruments extend over a number of years, a significant portion of our commodity derivative instruments economically hedge commodity price risk during the next twelve months. For additional information on the accounting for our derivative instruments, see Note 2.

Gas Utility’s tariffs contain clauses that permit recovery of all prudently incurred costs of natural gas it sells to retail core-market customers, including the cost of financial instruments used to hedge purchased gas costs. As permitted and agreed to by the PAPUC pursuant to Gas Utility’s annual PGC filings, Gas Utility currently uses NYMEX natural gas futures and option contracts to reduce commodity price volatility associated with a portion of the natural gas it purchases for its retail core-market customers. Gains and losses on Gas Utility’s natural gas futures contracts and natural gas option contracts are recorded in regulatory assets or liabilities on the Condensed Consolidated Balance Sheets because it is probable such gains or losses will be recoverable from, or refundable to, customers through the PGC recovery mechanism (see Note 8).

and our UGI International operations also use over-the-counter price swap contracts to reduce commodity price volatility associated with a portion of their forecasted LPG purchases. The Partnership, from time to time, enters into price swap agreements to reduce the effects of short-term commodity price volatility. Also, Midstream & Marketing, from time to time, uses NYMEX futures contracts to economically hedge the gross margin associated with the purchase and anticipated later near-term sale of propane.

In order to manage market price risk relating to fixed-price sales contracts for physical natural gas, Midstream & Marketing enters into NYMEX and over-the-counter natural gas futures and over-the-counter and ICE natural gas basis swap contracts. In addition, Midstream & Marketing uses NYMEX and over-the-counter futures and options contracts to economically hedge price volatility associated with the gross margin derived from the purchase and anticipated later near-term sale of natural gas storage inventories. Outside of the financial market, Midstream & Marketing also uses ICE and over-the-counter forward physical contracts. UGI International also uses natural gas futures and forward contracts to economically hedge market price risk associated with fixed-price sales contracts with its customers.

In order to manage market price risk relating to fixed-price sales contracts for electricity, Midstream & Marketing enters into electricity futures and forward contracts. Midstream & Marketing also uses NYMEX and over-the-counter electricity futures contracts to economically hedge the price of a portion of its anticipated future sales of electricity from its electric generation facilities. UGI International also uses electricity futures and forward contracts to economically hedge market price risk associated with fixed-price sales and purchase contracts for electricity.

The remainder of our long-term debt is typically issued at fixed rates of interest. As these long-term debt issues mature, we typically refinance such debt with new debt having interest rates reflecting then-current market conditions. In order to reduce market rate risk on the underlying benchmark rate of interest associated with near- to medium-term forecasted issuances of fixed-rate debt, from time to time, we enter into IRPAs. We account for IRPAs as cash flow hedges. There were no unsettled IRPAs during any of the periods presented. At March 31, 2020, the amount of pre-tax net losses associated with interest rate hedges (excluding pay-fixed, receive-variable interest rate swaps) expected to be reclassified into earnings during the next twelve months is $3.5.

In order to reduce the volatility in net income associated with our foreign operations, principally as a result of changes in the U.S. dollar exchange rate to the euro and British pound sterling, we enter into forward foreign currency exchange contracts. We layer in these foreign currency exchange contracts over a multi-year period to eventually equal approximately 90% of anticipated UGI International local currency earnings before income taxes. Because these contracts are not designated as hedging instruments, realized and unrealized gains and losses on these contracts are recorded in “Other non-operating income, net,” on the Condensed Consolidated Statements of Income.

In order to reduce exposure to foreign exchange rate volatility related to our foreign LPG operations, we previously entered into forward foreign currency exchange contracts to hedge a portion of anticipated U.S. dollar-denominated LPG product purchases primarily during the heating-season months of October through March. The last such contracts expired in September 2019. We accounted for these foreign currency exchange contracts as cash flow hedges.

Certain euro-denominated long-term debt issued under the 2018 UGI International Credit Facilities Agreement and the UGI International 3.25% Senior Notes in October 2018 have been designated as net investment hedges of a portion of our UGI International euro-denominated net investment. We recognized pre-tax gains (losses) associated with these net investment hedges in the cumulative translation adjustment component in AOCI of $11.9 and $16.4 during the three months ended March 31, 2020 and 2019, respectively, and $(8.5) and $10.3 during the six months ended March 31, 2020 and 2019, respectively.



			Notional Amounts (in millions)
Type	Units	Settlements Extending Through	March 31, 2020		September 30, 2019		March 31, 2019
Commodity Price Risk:
Regulated Utility Operations
Gas Utility NYMEX natural gas futures and option contracts	Dekatherms	March 2021	11.3		23.3		11.6
Non-utility Operations
LPG swaps	Gallons	September 2022	816.4		800.4		369.2
Natural gas futures, forward and pipeline contracts	Dekatherms	December 2024	185.5		196.1		213.7
Natural gas basis swap contracts	Dekatherms	December 2024	155.4		131.1		84.0
NYMEX natural gas storage futures contracts	Dekatherms	March 2021	2.2		0.3		0.3
NYMEX natural gas option contracts	Dekatherms	N/A	—		2.4		—
NYMEX propane storage futures contracts	Gallons	April 2020	0.1		0.5		0.1
Electricity long forward and futures contracts	Kilowatt hours	January 2024	4,165.5		3,098.1		3,685.0
Electricity short forward and futures contracts	Kilowatt hours	April 2024	502.5		366.7		265.0
Interest Rate Risk:
Interest rate swaps	Euro	October 2022	€	300.0	€	300.0	€	300.0
Interest rate swaps	USD	July 2024	$	1,350.7	$	1,357.3	$	114.1
Foreign Currency Exchange Rate Risk:
Forward foreign currency exchange contracts	USD	September 2023	$	460.1	$	516.0	$	299.1
Net investment hedge forward foreign exchange contracts	Euro	October 2024	€	172.8	€	172.8	€	172.8

We are exposed to risk of loss in the event of nonperformance by our derivative instrument counterparties. Our derivative instrument counterparties principally comprise large energy companies and major U.S. and international financial institutions. We maintain credit policies with regard to our counterparties that we believe reduce overall credit risk. These policies include evaluating and monitoring our counterparties’ financial condition, including their credit ratings, and entering into agreements with counterparties that govern credit limits or entering into netting agreements that allow for offsetting counterparty receivable and payable balances for certain financial transactions, as deemed appropriate. Certain of these agreements call for the posting of collateral by the counterparty or by the Company in the forms of letters of credit, parental guarantees or cash. Additionally, our commodity exchange traded futures contracts generally require cash deposits in margin accounts. Restricted cash in brokerage accounts is reported in “Restricted cash” on the Condensed Consolidated Balance Sheets. Although we have concentrations of credit risk associated with derivative instruments, the maximum amount of loss we would incur if these counterparties failed to perform according to the terms of their contracts, based upon the gross fair values of the derivative instruments, was not material at March 31, 2020. Certain of the Partnership’s derivative contracts have credit-risk-related contingent features that may require the posting of additional collateral in the event of a downgrade of the Partnership’s debt rating. At March 31, 2020, if the credit-risk-related contingent features were triggered, the amount of collateral required to be posted would not be material.

Derivative assets and liabilities are presented net by counterparty on the Condensed Consolidated Balance Sheets if the right of offset exists. We offset amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral against amounts recognized for derivative instruments executed with the same counterparty. Our derivative instruments include both those that are executed on an exchange through brokers and centrally cleared and over-the-counter transactions. Exchange contracts utilize a financial intermediary, exchange or clearinghouse to enter, execute or clear the transactions. Over-the-counter contracts are bilateral contracts that are transacted directly with a third party. Certain over-the-counter and exchange contracts contain contractual rights of offset through master netting arrangements, derivative clearing agreements and contract default provisions. In addition, the contracts are subject to conditional rights of offset through counterparty nonperformance, insolvency or other conditions.

In general, most of our over-the-counter transactions and all exchange contracts are subject to collateral requirements. Types of collateral generally include cash or letters of credit. Cash collateral paid by us to our over-the-counter derivative counterparties, if any, is reflected in the table below to offset derivative liabilities. Cash collateral received by us from our over-the-counter derivative counterparties, if any, is reflected in the table below to offset derivative assets. Certain other accounts receivable and accounts payable balances recognized on the Condensed Consolidated Balance Sheets with our derivative counterparties are not included in the table below but could reduce our net exposure to such counterparties because such balances are subject to master netting or similar arrangements.



	March 31, 2020			September 30, 2019			March 31, 2019
Derivative assets:
Derivatives designated as hedging instruments:
Foreign currency contracts	$	27.2		$	17.4		$	7.1
Derivatives subject to PGC and DS mechanisms:
Commodity contracts	1.4			1.4			1.3
Derivatives not designated as hedging instruments:
Commodity contracts	46.9			40.7			59.7
Foreign currency contracts	30.8			41.6			22.7
	77.7			82.3			82.4
Total derivative assets — gross	106.3			101.1			90.8
Gross amounts offset in the balance sheet	(25.7		)	(29.0		)	(35.8		)
Total derivative assets — net	$	80.6		$	72.1		$	55.0
Derivative liabilities:
Derivatives designated as hedging instruments:
Interest rate contracts	$	(54.1	)	$	(12.3	)	$	(5.7	)
Derivatives subject to PGC and DS mechanisms:
Commodity contracts	(1.9		)	(3.7		)	(0.2		)
Derivatives not designated as hedging instruments:
Commodity contracts	(311.9		)	(171.3		)	(72.5		)
Foreign currency contracts	(6.8		)	(4.3		)	(4.9		)
	(318.7		)	(175.6		)	(77.4		)
Total derivative liabilities — gross	(374.7		)	(191.6		)	(83.3		)
Gross amounts offset in the balance sheet	25.7			29.0			35.8
Cash collateral pledged	58.0			29.3			—
Total derivative liabilities — net	$	(291.0	)	$	(133.3	)	$	(47.5	)



Three Months Ended March 31,:
	Gain (Loss) Recognized in AOCI						Gain (Loss) Reclassified from AOCI into Income						Location of Gain (Loss) Reclassified from AOCI into Income
Cash Flow Hedges:	2020			2019			2020			2019			Location of Gain (Loss) Reclassified from AOCI into Income
Foreign currency contracts	$	—		$	0.2		$	—		$	1.3		Cost of sales
Interest rate contracts	(49.7		)	(2.4		)	(0.8		)	(1.3		)	Interest expense
Total	$	(49.7	)	$	(2.2	)	$	(0.8	)	$	—

Net Investment Hedges:
Foreign currency contracts	$	13.3		$	5.9

	Gain (Loss) Recognized in Income
Derivatives Not Designated as Hedging Instruments:	2020			2019			Location of Gain (Loss) Recognized in Income
Commodity contracts	$	(205.5	)	$	(26.2	)	Cost of sales
Commodity contracts	5.6			4.6			Revenues
Commodity contracts	(0.4		)	0.1			Operating and administrative expenses
Foreign currency contracts	11.7			7.8			Other non-operating income, net
Total	$	(188.6	)	$	(13.7	)

Six Months Ended March 31,:
	Gain (Loss) Recognized in AOCI						Gain (Loss) Reclassified from AOCI into Income						Location of Gain (Loss) Reclassified from AOCI into Income
Cash Flow Hedges:	2020			2019			2020			2019			Location of Gain (Loss) Reclassified from AOCI into Income
Foreign currency contracts	$	—		$	1.2		$	—		$	2.1		Cost of sales
Cross-currency contracts	—			(0.1		)	—			(0.3		)	Interest expense/other operating income, net
Interest rate contracts	(41.9		)	(5.2		)	(1.8		)	(2.8		)	Interest expense
Total	$	(41.9	)	$	(4.1	)	$	(1.8	)	$	(1.0	)

Net Investment Hedges:
Foreign currency contracts	$	9.8		$	6.8

	Gain (Loss) Recognized in Income
Derivatives Not Designated as Hedging Instruments:	2020			2019			Location of Gain (Loss) Recognized in Income
Commodity contracts	$	(238.6	)	$	(185.9	)	Cost of sales
Commodity contracts	8.1			1.8			Revenues
Commodity contracts	(0.3		)	(0.3		)	Operating and administrative expenses
Foreign currency contracts	0.4			16.7			Other non-operating income, net
Total	$	(230.4	)	$	(167.7	)

used in the normal course of operating our business and the price in the contract is based on an underlying that is directly associated with the price of the product or service being purchased or sold. These contracts include, among others, binding purchase orders, contracts that provide for the purchase and delivery, or sale, of energy products, and service contracts that require the counterparty to provide commodity storage, transportation or capacity service to meet our normal sales commitments.