##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 FORM 10-K
 ANNUAL REPORT
PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 o
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 or
 þ
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from 07/01/08 to 12/31/08
 Commission File number 0-14183
 ENERGY WEST, INCORPORATED
  Montana
    
    81-0141785(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 1 First Avenue South, Great Falls, Montana 59401
   Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon, par value $.15 per share
    
    Nasdaq National Market
  Yes o No þ
 Yes o No þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ




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##### 



TABLE OF CONTENTS
 PagePart I
    
    
    1Item 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    15Item 2. Properties
    
    
    23Item 3. Legal Proceedings
    
    
    23Item 4. Submission of Matters to a Vote of Security Holders
    
    
    24Part II
    
    
    25Item 5. Market for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
    
    
    25Item 6. Selected Financial Data
    
    
    28Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    32Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    51Item 8. Financial Statements and Supplementary Data
    
    
    51Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure
    
    
    51Item 9T. Controls and Procedures
    
    
    52Item 9B. Other Information
    
    
    53Part III
    
    
    53Item 10. Directors, Executive Officers and Corporate Governance
    
    
    53Item 11. Executive Compensation
    
    
    56Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
    
    
    59Item 13. Certain Relationships and Related Transactions and Director Independence
    
    
    60Item 14. Principal Accountant Fees and Services
    
    
    62Part IV
    
    
    62Item 15. Exhibits and Financial Statement Schedules
    
    
    62Signatures
    
    
    67Exhibit 10.8Exhibit 10.13Exhibit 10.27Exhibit 10.39Exhibit 10.40Exhibit 21Exhibit 23.1Exhibit 31Exhibit 32
  Forward-Looking Statements
 This Form 10-K contains forward-looking statements within the meaning of the federal
securities laws. Statements that are not historical facts, including statements about our beliefs
and expectations, are forward-looking statements. Forward-looking statements include statements
preceded by, followed by or that include the words may, could, would, should, believe,
expect, anticipate, plan, estimate, target, project, intend, or similar expressions.
These statements include, among others, statements regarding our current expectations, estimates
and projections about future events and financial trends affecting the financial condition and
operations of our business. Forward-looking statements are only predictions and not guarantees of
performance and speak only as of the date they are made. We undertake no obligation to update any
forward-looking statement in light of new information or future events.
  i




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Although we believe that the expectations, estimates and projections reflected in the
forward-looking statements are based on reasonable assumptions when they are made, we can give no
assurance that these expectations, estimates and projections can be achieved. We believe the
forward-looking statements in this Form 10-K are reasonable; however, you should not place undue
reliance on any forward-looking statement, as they are
based on current expectations. Future events and actual results may differ materially from
those discussed in the forward-looking statements. Factors that could cause actual results to
differ materially from our expectations include, but are not limited to:
 
    
    fluctuating energy commodity prices,
    
    the possibility that regulators may not permit us to pass through all of our increased costs to our
customers,
    
    the impact of the Federal Energy Regulatory Commission (FERC) and state public service commission
statutes, regulations, and actions, including allowed rates of return, and the resolution of other
regulatory matters,
    
    the impact of weather conditions and alternative energy sources on our sales volumes,
    
    future utilization of pipeline capacity, which can depend on energy prices, competition from alternative
fuels, the general level of natural gas and propane demand, decisions by customers not to renew expiring
natural gas contracts and weather conditions,
    
    changes in federal or state laws and regulations to which we are subject, including tax, environmental,
and employment laws and regulations,
    
    the ability to meet financial covenants imposed by lenders,
    
    the effect of changes in accounting policies, if any,
    
    the ability to manage our growth,
    
    the ability to control costs,
    
    the ability of each business unit to successfully implement key systems, such as service delivery systems,
    
    our ability to develop expanded markets and product offerings and our ability to maintain existing
markets,
    
    our ability to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley
Act of 2002,
    
    our ability to obtain governmental and regulatory approval of various expansion or other projects,
including acquisitions and a holding company structure.
  ii




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PART I
 
 Item 1. Business.
 Change in Fiscal Year
  Overview
       Natural Gas Operations
    
    Annually, we distribute
approximately 26 billion
cubic feet of natural gas
to approximately 37,000
customers through regulated
utilities operating in and
around Great Falls and West
Yellowstone, Montana, Cody,
Wyoming, Bangor, Maine and
Elkin, North Carolina. The
approximate population of
the service territories is
177,000. The operation in
Elkin, North Carolina was
added October 1, 2007. The
operation in Bangor, Maine
was added December 1, 2007.     Marketing and Production
Operations (EWR)
    
    Annually, we market
approximately 2.3 billion
cubic feet of natural gas
to commercial and
industrial customers in
Montana and Wyoming and
manage midstream supply and
production assets for
transportation customers
and utilities through our
subsidiary, Energy West
Resources, Inc. (EWR). EWR
owns an average 60% gross
working interest (an
average 51% net revenue
interest) in 160 natural
gas producing wells and gas
gathering assets. Energy
West Propane, Inc. dba
Missouri River Propane
(MRP), our small Montana
wholesale distribution
company that sells propane
to our affiliated utility,
had been reported in our
propane operations. It is
now being reported in
marketing and production
operations.     Pipeline Operations (EWD)
    
    We own the Shoshone
interstate and the Glacier
gathering natural gas
pipelines located in
Montana and Wyoming through
our subsidiary Energy West
Development, Inc. (EWD).
Certain natural gas
producing wells owned by
our pipeline operations are
being managed and reported
under our marketing and
production operations.     Propane Operations
(Discontinued Operations)
    
    Our Arizona assets were
sold during fiscal year
2007, and the results of
operations for the propane
assets related to this sale
have been reclassified as
income from discontinued
operations. Prior to
discontinuance, we
distributed approximately
5.4 million gallons
annually, of propane to
approximately 8,000
customers through utilities
operating underground vapor
systems in and around
Payson, Pine, and
Strawberry, Arizona and
retail distribution of bulk
propane to approximately
2,300 customers in the same
Arizona communities. The
associated assets and
liabilities are shown on
the consolidated balance
sheet as Assets held for
sale and Liabilities held
for sale. MRP, our small
Montana wholesale
distribution company that
sells propane to our
affiliated utility, had
been reported in propane
operations. It is now being
reported in our marketing
and production operations.     Corporate and Other
    
    This segment was not
reported prior to fiscal
2008. Corporate and other
was established to
encompass the results of
corporate acquisitions and
other equity transactions.
Reported in Corporate and
other for the six months
ended December 31, 2008 are
costs associated with
business development and
acquisitions, and dividend
income from marketable
securities.
 See Note 14 to our Consolidated Financial Statements for financial information for each of our
segments.
  1




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Recent Acquisitions and Future Acquisition Strategy
       2




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
    
    cost-effective expansion of our existing customer base by prudently managing capital
expenditures and ensuring that new customers provide sufficient margins for an
appropriate return on the additional resources and investment required to serve these
customers,
    
    appropriate regulatory treatment of increases in the cost of natural gas,
    
    continuous improvement of our operational efficiencies, and
    
    maintenance and improvement of our positive reputation with our regulators and customers.
 Pending Acquisitions
     3




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New Holding Company Structure
   Recent Industry Trends
  Natural Gas Operations
    4




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Natural Gas  Montana
     Gas Revenue
 6 months ended
    
    
    Years EndedDecember 31,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2006Residential
    
    $
    9,704
    
    
    $
    7,801
    
    
    $
    21,692
    
    
    $
    19,492
    
    
    $
    21,863Commercial
    
    
    5,896
    
    
    
    4,895
    
    
    
    13,923
    
    
    
    12,894
    
    
    
    14,233Transportation
    
    
    1,011
    
    
    
    1,008
    
    
    
    2,337
    
    
    
    2,058
    
    
    
    1,961Total
    
    $
    16,611
    
    
    $
    13,704
    
    
    $
    37,952
    
    
    $
    34,444
    
    
    $
    38,057
  Note:
    
    Higher revenues in the six months ended December 31, 2008 compared to the six months
ended December 31, 2007 are due to higher gas costs which are passed on to the customers in
accordance with approvals from the MPSC, and higher sales volumes.  5




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Gas Volumes
 6 months ended
    
    
    Years EndedDecember 31,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2006Residential
    
    
    891
    
    
    
    841
    
    
    
    2,212
    
    
    
    2,097
    
    
    
    1,978Commercial
    
    
    478
    
    
    
    476
    
    
    
    1,336
    
    
    
    1,267
    
    
    
    1,210Transportation
    
    
    742
    
    
    
    749
    
    
    
    1,652
    
    
    
    1,526
    
    
    
    1,524Total Gas Sales
    
    
    2,111
    
    
    
    2,066
    
    
    
    5,200
    
    
    
    4,890
    
    
    
    4,712
 Note:
    
    Volumes were higher for the six months ended December 31, 2008 compared to the six
months ended December 31, 2007 primarily due to colder weather.    Natural Gas  Wyoming
    6




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Gas Revenue
 6 months ended
    
    
    Years EndedDecember 31,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2006Residential
    
    $
    2,227
    
    
    $
    1,996
    
    
    $
    4,982
    
    
    $
    4,657
    
    
    $
    5,883Commercial
    
    
    2,239
    
    
    
    1,944
    
    
    
    4,438
    
    
    
    2,990
    
    
    
    5,771Industrial
    
    
    914
    
    
    
    862
    
    
    
    2,008
    
    
    
    4,348
    
    
    
    5,741Total
    
    $
    5,380
    
    
    $
    4,802
    
    
    $
    11,428
    
    
    $
    11,995
    
    
    $
    17,395
 Note:
    
    Higher revenues were realized in the six months ended December 31, 2008 compared to the
six months ended December 31, 2007, due primarily to higher gas costs which are passed on to the
customers in accordance with approvals from the WPSC, and slightly higher sales volumes.  Gas Volumes
 6 months ended
    
    
    Years EndedDecember 31,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2006Residential
    
    
    230
    
    
    
    219
    
    
    
    567
    
    
    
    526
    
    
    
    478Commercial
    
    
    286
    
    
    
    271
    
    
    
    613
    
    
    
    593
    
    
    
    567Transportation
    
    
    138
    
    
    
    146
    
    
    
    334
    
    
    
    472
    
    
    
    684Total Gas Sales
    
    
    654
    
    
    
    636
    
    
    
    1,514
    
    
    
    1,591
    
    
    
    1,729
     7




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Natural Gas  North Carolina
    Gas Revenue
 6 months ended
    
    
    Year EndedDecember 31,
    
    
    June 30,2008
    
    
    2007
    
    
    2008Residential
    
    $
    145
    
    
    $
    90
    
    
    $
    258Commercial
    
    
    1,764
    
    
    
    651
    
    
    
    2,171Transportation
    
    
    1,870
    
    
    
    869
    
    
    
    2,631Total
    
    $
    3,779
    
    
    $
    1,610
    
    
    $
    5,060
 Note:
    
    The six months ended December 31, 2007 includes three months of Frontier operations and
the fiscal year ended June 30, 2008 includes nine months of operations.  Gas Volumes
 6 months ended
    
    
    Year EndedDecember 31,
    
    
    June 30,2008
    
    
    2007
    
    
    2008Residential
    
    
    8
    
    
    
    6
    
    
    
    18Commercial
    
    
    107
    
    
    
    49
    
    
    
    162Transportation
    
    
    840
    
    
    
    506
    
    
    
    1,533Total Gas Sales
    
    
    955
    
    
    
    561
    
    
    
    1,713
 Note:
    
    The six months ended December 31, 2007 includes three months of Frontier operations and
the fiscal year ended June 30, 2008 includes nine months of operations.   8




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Natural Gas  Maine
    Gas Revenue
 6 months ended
    
    
    Year EndedDecember 31,
    
    
    June 30,2008
    
    
    2007
    
    
    2008Residential
    
    $
    187
    
    
    $
    55
    
    
    $
    232Commercial
    
    
    1,636
    
    
    
    713
    
    
    
    3,218Transportation
    
    
    672
    
    
    
    138
    
    
    
    778Bucksport
    
    
    575
    
    
    
    96
    
    
    
    671Total
    
    $
    3,070
    
    
    $
    1,002
    
    
    $
    4,899
 Note:
    
    The six months ended December 31, 2007 includes one month of Maine operations and the
fiscal year ended June 30, 2008 includes seven months of operations.  Gas Volumes
 6 months ended
    
    
    Year EndedDecember 31,
    
    
    June 30,2008
    
    
    2007
    
    
    2008Residential
    
    
    13
    
    
    
    3
    
    
    
    16Commercial
    
    
    134
    
    
    
    47
    
    
    
    221Transportation
    
    
    400
    
    
    
    81
    
    
    
    532Bucksport
    
    
    6,811
    
    
    
    1,158
    
    
    
    8,131Total Gas Sales
    
    
    7,358
    
    
    
    1,289
    
    
    
    8,900
 Note:
    
    The six months ended December 31, 2007 includes one month of Maine operations and the
fiscal year ended June 30, 2008 includes seven months of operations.  9




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Marketing and Production Operations
    10




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Pipeline Operations
  Propane Operations  (Discontinued Operations)
   Corporate and Other
    11




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Competition
   Gas Supply Marketers and Gas Supply Contracts
    12




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Governmental Regulation
 State Regulation
   Franchise Agreements
   Federal Regulations
 
  13




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Seasonality
  Environmental Matters
 Environmental Laws and Regulations
     14




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Environmental Issues
      Employees
  
 Item 1A. Risk Factors.
  Risks Related to Our Business
 We are subject to comprehensive regulation by federal, state and local regulatory agencies that
impact the rates we are able to charge, our costs and profitability.
   15




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Our gas purchase practices are subject to an annual review by state regulatory agencies which could
impact our earnings and cash flow.
  Operational issues beyond our control could have an adverse effect on our business.
   Storing and transporting natural gas involves inherent risks that could cause us to incur
significant financial losses.
  Our earnings and cash flow are sensitive to decreases in customer consumption resulting from warmer
than normal temperatures and customer conservation.
    16




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The increased cost of purchasing natural gas during periods in which natural gas prices are rising
significantly could adversely impact our earnings and cash flow.
  The loss of a major commercial or industrial gas customer to which we provide natural gas may
negatively impact our profitability.
  Volatility in the price of natural gas could result in customers switching to alternative energy
sources which could reduce our revenues, earnings and cash flow.
  The gas industry is intensely competitive and competition has increased in recent years as a result
of changes in the price negotiation process within the supply and distribution chain of the gas
industry, both of which could negatively impact earnings.
  Earnings and cash flow may be adversely affected by downturns in the economy.
   17




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Changes in the regulatory environment and events in the energy markets that are beyond our control
may reduce our earnings and limit our access to capital markets.
  We acquired interests in our natural gas wells by quitclaim deed and cannot guarantee that we hold
clear title to our interests or that our interests will not be challenged in the future.
   Failure to maintain effective internal controls in accordance with Section 404 of the
Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.
   Our actual results of operations could differ from estimates used to prepare our financial
statements.
   18




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We are subject to numerous environmental laws and regulations that may increase our cost of
operations, impact our business plans and expose us to environmental liabilities.
    We
have a net deferred tax asset of $11.5 million and we cannot guarantee that we will be able to
generate sufficient future taxable income to realize a significant portion of this net deferred tax
asset, which could lead to a writedown (or even a loss) of the net deferred tax asset and adversely
affect our operating results and financial position.
     19




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Changes in the market price and transportation costs of natural gas could result in financial
losses that would negatively impact our results of operations.
  Risks Related to Our Acquisition Strategy
 We face a variety of risks associated with acquiring and integrating new business operations.
  
    
    identify suitable acquisition candidates or opportunities,
    
    acquire assets or business operations on commercially acceptable terms,
    
    effectively integrate the operations of any acquired assets or businesses with our existing operations,
    
    manage effectively the combined operations of the acquired businesses,
    
    achieve our operating and growth strategies with respect to the acquired assets or businesses,
    
    reduce our overall selling, general, and administrative expenses associated with the acquired
assets or businesses, or
    
    comply with the internal control requirements of Section 404 as a result of an acquisition.
  To the extent we are successful in making an acquisition, we may be exposed to a number of risks.
  Subsequent to the consummation of an acquisition, we may be required to take write-downs or
write-offs, restructuring and impairment charges or other charges that could have a significant
negative impact on our financial condition, results of operations and our stock price.
   20




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Risks Related to Our Common Stock
 Our ability to pay dividends on our common stock is limited.
  The possible issuance of future series of preferred stock could adversely affect the holders of our
common stock.
  Organization, Structure and Management Risks
 Our credit facility contains restrictive covenants that may reduce our flexibility, and adversely
affect our business, earnings, cash flow, liquidity and financial condition.
  
    
    requiring us to dedicate a substantial portion of our cash flow from
operations to the payment of principal and interest on our
indebtedness, thereby reducing the availability of cash flow for
working capital, capital expenditures and other business activities,
    
    requiring us to meet certain financial tests, which may affect our
flexibility in planning for, or reacting to, changes in our business
and the industries in which we operate,
    
    limiting our ability to sell assets, make investments or acquire
assets of, or merge or consolidate with, other companies,
    
    limiting our ability to repurchase or redeem our stock or enter into
transactions with our shareholders or affiliates, and
    
    limiting our ability to grant liens, incur additional indebtedness or
contingent obligations or obtain additional financing for working
capital, capital expenditures, acquisitions and general corporate and
other activities.
   21




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Our performance depends substantially on the performance of our executive officers and other key
personnel and the ability of our new management team to fully implement our business strategy.
   We have entered a limited liability operating agreement with third parties to develop and operate
oil, gas and mineral leasehold estates, which exposes us to the risk associated with oil, gas and
mineral exploration as well as the risks inherent in relying upon third parties in business
ventures and we may enter into similar agreements in the future.
   We have entered into certain transactions with persons who are our directors and may enter into
additional transactions in the future.
   22




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We have filed applications with the MPSC and the WPSC to reorganize our operations into a holding
company structure, which could affect our ability to pay dividends in the future.
  
 Item 2. Properties.
        
 Item 3. Legal Proceedings.
  Shelby Gas Association v. Energy West Resources,
Inc.
  23




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Item 4. Submission of Matters to a Vote of Security Holders.
  Name
    
    For
    
    
    WithheldIan J. Abrams
    
    
    3,765,956
    
    
    
    193,989W.E. Gene Argo
    
    
    3,775,190
    
    
    
    184,755Steven A. Calabrese
    
    
    3,762,516
    
    
    
    197,429Mark D. Grossi
    
    
    3,752,906
    
    
    
    207,039Richard M. Osborne
    
    
    3,581,555
    
    
    
    378,390James R. Smail
    
    
    3,763,929
    
    
    
    196,016Thomas J. Smith
    
    
    3,764,056
    
    
    
    195,889James E. Sprague
    
    
    3,738,966
    
    
    
    220,979Michael T. Victor
    
    
    3,756,872
    
    
    
    203,073
  24




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PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.
 Our Common Stock
   Six
Months Ended December 31, 2008
    
    High
    
    
    LowFirst Quarter
    
    $
    10.70
    
    
    $
    7.27Second Quarter
    
    $
    8.48
    
    
    $
    5.92
 Fiscal Year 2008
    
    High
    
    
    LowFirst Quarter
    
    $
    9.49
    
    
    $
    8.14Second Quarter
    
    $
    9.80
    
    
    $
    8.19Third Quarter
    
    $
    9.68
    
    
    $
    7.59Fourth Quarter
    
    $
    11.21
    
    
    $
    7.40
 Fiscal Year 2007
    
    High
    
    
    LowFirst Quarter
    
    $
    7.96
    
    
    $
    6.01Second Quarter
    
    $
    8.00
    
    
    $
    7.19Third Quarter
    
    $
    10.00
    
    
    $
    7.40Fourth Quarter
    
    $
    10.81
    
    
    $
    9.01
 Holders of Record
  Dividend Policy
  February 13, 2007
    
    $
    0.093May 3, 2007
    
    $
    0.100September 25, 2007
    
    $
    0.106November 19, 2007
    
    $
    .107
  25




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December 28, 2007
    
    $
    0.036January 28, 2008
    
    $
    0.036February 28, 2008
    
    $
    0.036March 28, 2008
    
    $
    0.036April 30, 2008
    
    $
    0.036May 30, 2008
    
    $
    0.036June 30, 2008
    
    $
    0.040July 31, 2008
    
    $
    0.040August 29, 2008
    
    $
    0.040September 30, 2008
    
    $
    0.040October 30, 2008
    
    $
    0.040December 1, 2008
    
    $
    0.040December 30, 2008
    
    $
    0.040
 Restrictions on Payment of Dividends
    Recent Sales of Unregistered Securities
   26




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Purchases of Equity Securities by Our Company and Affiliated Purchasers
 Total number of
    
    
    Maximum number ofshares purchased as
    
    
    shares that may yet beTotal Shares
    
    
    Average price
    
    
    part of publicly
    
    
    purchased under thePeriod
    
    Purchased
    
    
    paid per share
    
    
    announced plans
    
    
    stock repurchase planMay 30, 2007  June 30, 2007
    
    
    219,522
    
    
    $
    10.00
    
    
    
    219,522July 1, 2007  June 30, 2008
    
    
    16,780
    
    
    $
    9.50
    
    
    
    16,780July 1, 2008  December 31,
2008
    
    
    53,416
    
    
    $
    7.60
    
    
    
    53,416289,718
    
    
    
    
    
    
    
    289,718
    
    
    
    158,782
   Performance Graph
  
  27




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Item 6. Selected Financial Data.
   28




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##### Table of Contents



Six months ended December 31,2008
    
    
    2007(in thousands, except per share)Operating resultsOperating revenue
    
    $
    38,757
    
    
    $
    28,313Operating expensesGas and electric purchases
    
    
    27,230
    
    
    
    19,895General and administrative
    
    
    5,717
    
    
    
    4,602Maintenance
    
    
    320
    
    
    
    326Depreciation and amortization
    
    
    1,023
    
    
    
    889Taxes other than income
    
    
    1,285
    
    
    
    864Total operating expenses
    
    
    35,575
    
    
    
    26,576Operating income (loss)
    
    
    3,182
    
    
    
    1,737Other income (expense)
    
    
    (420
    )
    
    
    191Total interest charges
    
    
    677
    
    
    
    530Income (loss) before taxes
    
    
    2,085
    
    
    
    1,398Income tax expense (benefit)
    
    
    926
    
    
    
    274Discontinued operations (net of tax)
    
    
    
    
    
    
    Net Income (Loss) before extraordinary item
    
    
    1,159
    
    
    
    1,124Extraordinary Gain
    
    
    
    
    
    
    6,819Net Income
    
    $
    1,159
    
    
    $
    7,943Basic earnings (loss) per common share
    
    $
    0.27
    
    
    $
    1.85Diluted earnings (loss) per common share
    
    $
    0.27
    
    
    $
    1.85Dividends per common share
    
    $
    0.28
    
    
    $
    0.25Weighted average common shares
Outstanding  diluted
    
    
    4,331,726
    
    
    
    4,304,559At year end:Current assets
    
    $
    31,484Total assets
    
    $
    75,818Current liabilities
    
    $
    30,114Total long-term debt
    
    $
    13,000Total stockholders equity
    
    $
    30,082Total capitalization
    
    $
    43,082
  29




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##### Table of Contents



Fiscal year ended June 30,(in thousands, except per share)2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Operating resultsOperating revenue
    
    $
    76,833
    
    
    $
    59,373
    
    
    $
    74,696
    
    
    $
    67,889
    
    
    $
    58,664Operating expenses
Gas and electric purchases
    
    
    56,170
    
    
    
    43,806
    
    
    
    60,398
    
    
    
    53,510
    
    
    
    46,981General and administrative
    
    
    10,662
    
    
    
    6,198
    
    
    
    6,389
    
    
    
    7,309
    
    
    
    8,020Maintenance
    
    
    650
    
    
    
    567
    
    
    
    505
    
    
    
    521
    
    
    
    399Depreciation and amortization
    
    
    1,865
    
    
    
    1,692
    
    
    
    1,672
    
    
    
    1,790
    
    
    
    1,812Taxes other than income (1)
    
    
    2,080
    
    
    
    1,697
    
    
    
    1,453
    
    
    
    1,479
    
    
    
    1,058Total operating expenses
    
    
    71,427
    
    
    
    53,960
    
    
    
    70,417
    
    
    
    64,609
    
    
    
    58,270Operating income (loss)
    
    
    5,406
    
    
    
    5,413
    
    
    
    4,279
    
    
    
    3,280
    
    
    
    394Other income-net
    
    
    316
    
    
    
    241
    
    
    
    391
    
    
    
    235
    
    
    
    204Total interest charges (2)
    
    
    1,077
    
    
    
    2,124
    
    
    
    1,649
    
    
    
    2,113
    
    
    
    1,933Income (loss) before taxes
    
    
    4,645
    
    
    
    3,530
    
    
    
    3,021
    
    
    
    1,402
    
    
    
    (1,335
    )Income tax expense (benefit)
    
    
    1,333
    
    
    
    1,273
    
    
    
    1,109
    
    
    
    475
    
    
    
    (412
    )Discontinued operations (net of tax)
    
    
    
    
    
    
    3,955
    
    
    
    405
    
    
    
    454
    
    
    
    367Net Income (Loss) before extraordinary item
    
    
    3,312
    
    
    
    6,212
    
    
    
    2,317
    
    
    
    1,381
    
    
    
    (556
    )Extraordinary Gain
    
    
    6,819Net Income
    
    $
    10,131
    
    
    $
    6,212
    
    
    $
    2,317
    
    
    $
    1,381
    
    
    $
    (556
    )Basic earnings (loss) per common share
    
    $
    2.35
    
    
    $
    1.40
    
    
    $
    0.53
    
    
    $
    0.35
    
    
    $
    (0.14
    )Diluted earnings (loss) per common share
    
    $
    2.35
    
    
    $
    1.39
    
    
    $
    0.52
    
    
    $
    0.35
    
    
    $
    (0.14
    )Dividends per common share (3)
    
    $
    0.47
    
    
    $
    0.34
    
    
    $
    0.11
    
    
    $
    
    
    
    $
    Weighted average common shares
Outstanding  diluted
    
    
    4,316,244
    
    
    
    4,484,073
    
    
    
    4,422,069
    
    
    
    3,946,019
    
    
    
    3,894,681At year end:Current assets
    
    $
    16,340
    
    
    $
    18,830
    
    
    $
    23,669
    
    
    $
    15,423
    
    
    $
    16,739Total
assets
    
    $
    58,377
    
    
    $
    51,582
    
    
    $
    56,629
    
    
    $
    57,986
    
    
    $
    60,219Current liabilities
    
    $
    11,962
    
    
    $
    8,756
    
    
    $
    10,796
    
    
    $
    11,525
    
    
    $
    16,725Total long-term debt
    
    $
    13,000
    
    
    $
    13,000
    
    
    $
    17,605
    
    
    $
    18,677
    
    
    $
    21,697Total stockholders equity
    
    $
    30,649
    
    
    $
    22,296
    
    
    $
    19,165
    
    
    $
    17,187
    
    
    $
    13,401Total capitalization
    
    $
    43,649
    
    
    $
    35,296
    
    
    $
    36,770
    
    
    $
    35,864
    
    
    $
    35,098
  30




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##### Table of Contents



(1)
    
    Taxes other than income include approximately $290,000 increases in property tax in
fiscal 2004, 2005 and another $250,000 in 2007 for additional personal property taxes assessed
by the Montana Department of Revenue. The 2008 increase results from personal property taxes
on our acquired companies in Maine and North Carolina.(2)
    
    Total interest charges reflect the costs associated with the addition of
$6,000,000 of long-term debt and a $2,000,000 bridge loan incurred in March 2004. In May 2005,
we paid off the $2,000,000 bridge loan and during fiscal 2006 we reduced the line of credit
significantly, thus reducing interest in fiscal 2006. In fiscal 2007, we refinanced our long-term
debt, resulting in the $991,000 expensing of debt issue costs related to the refinanced debt.(3)
    
    There were no cash dividends paid between April 2003 and September 2005.  31




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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Forward-Looking Statements
 Executive Overview
   Critical Accounting Policies and Estimates
  Regulatory Accounting
 Accounting for the
Effects of Certain Types of Regulation
   32




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##### Table of Contents



Accumulated Provisions for Doubtful Accounts
  Unbilled Revenues and Gas Costs
    33




---



##### Table of Contents



Fair Value of Financial Instruments
  Recoverable/Refundable Costs of Gas and Propane Purchases
  Deferred Tax Asset and Income Tax Accruals
        34




---



##### Table of Contents



Results of Consolidated Operations
  Six Months Ended December 31, 2008 Compared to Six Months Ended December 31, 2007
        35




---



##### Table of Contents



Extraordinary Gain
  Discontinued Operations
   Fiscal Year Ended June 30, 2008 Compared to Fiscal Year Ended June 30, 2007
      36




---



##### Table of Contents



Extraordinary Gain
  Discontinued Operations
     Fiscal Year Ended June 30, 2007 Compared to Fiscal Year Ended June 30, 2006
   37




---



##### Table of Contents



Discontinued Operations
      38




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##### Table of Contents



Operating Results of our Natural Gas Operations
   (in thousands)
    
    
    (in thousands)Six Months Ended December 31,
    
    
    Years Ended June 30,2008
    
    
    2007

    
    
    2008
    
    
    2007
    
    
    2006Total LessNew
    
    
    NewTotal
    
    
    Acquisitions
    
    
    AcquisitionsNatural Gas OperationsOperating revenues
    
    $
    28,840
    
    
    $
    21,118
    
    
    $
    59,339
    
    
    $
    9,960
    
    
    $
    49,379
    
    
    $
    46,439
    
    
    $
    55,453Gas Purchased
    
    
    19,460
    
    
    
    13,972
    
    
    
    41,337
    
    
    
    5,159
    
    
    
    36,178
    
    
    
    33,542
    
    
    
    43,161Gross Margin
    
    
    9,380
    
    
    
    7,146
    
    
    
    18,002
    
    
    
    4,801
    
    
    
    13,201
    
    
    
    12,897
    
    
    
    12,292Operating expenses
    
    
    7,879
    
    
    
    6,247
    
    
    
    13,954
    
    
    
    3,681
    
    
    
    10,273
    
    
    
    9,307
    
    
    
    9,160Operating income
    
    
    1,501
    
    
    
    899
    
    
    
    4,048
    
    
    
    1,120
    
    
    
    2,928
    
    
    
    3,590
    
    
    
    3,132Other (income)
    
    
    (160
    )
    
    
    (190
    )
    
    
    (245
    )
    
    
    7
    
    
    
    (252
    )
    
    
    (229
    )
    
    
    (358
    )Income before interest and taxes
    
    
    1,661
    
    
    
    1,089
    
    
    
    4,293
    
    
    
    1,113
    
    
    
    3,180
    
    
    
    3,819
    
    
    
    3,490Interest expense
    
    
    584
    
    
    
    462
    
    
    
    933
    
    
    
    30
    
    
    
    903
    
    
    
    1,897
    
    
    
    1,425Income before income taxes
    
    
    1,077
    
    
    
    627
    
    
    
    3,360
    
    
    
    1,083
    
    
    
    2,277
    
    
    
    1,922
    
    
    
    2,065Income tax (expense)
    
    
    (519
    )
    
    
    (120
    )
    
    
    (1,091
    )
    
    
    (417
    )
    
    
    (674
    )
    
    
    (653
    )
    
    
    (741
    )Net income
    
    $
    558
    
    
    $
    507
    
    
    $
    2,269
    
    
    $
    666
    
    
    $
    1,603
    
    
    $
    1,269
    
    
    $
    1,324
 Six Months Ended December 31, 2008 Compared to Six Months Ended December 31, 2007
     39




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Fiscal Year Ended June 30, 2008 Compared to Fiscal Year Ended June 30, 2007
  th
       40




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##### Table of Contents



Fiscal Year Ended June 30, 2007 Compared to Fiscal Year Ended June 30, 2006
        Operating Results of our Marketing and Production Operations (EWR)
 (in thousands)
    
    
    (in thousands)Six Months Ended December 31
    
    
    Years Ended June 302008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2006Energy West ResourcesOperating revenues
    
    $
    9,692
    
    
    $
    7,008
    
    
    $
    17,124
    
    
    $
    12,545
    
    
    $
    18,832Gas Purchased
    
    
    7,770
    
    
    
    5,923
    
    
    
    14,833
    
    
    
    10,264
    
    
    
    17,238Gross Margin
    
    
    1,922
    
    
    
    1,085
    
    
    
    2,291
    
    
    
    2,281
    
    
    
    1,594Operating expenses
    
    
    369
    
    
    
    321
    
    
    
    631
    
    
    
    559
    
    
    
    711Operating income
    
    
    1,553
    
    
    
    764
    
    
    
    1,660
    
    
    
    1,722
    
    
    
    883Other (income)
    
    
    37
    
    
    
    0
    
    
    
    (1
    )
    
    
    (2
    )
    
    
    (33
    )Income before interest and taxes
    
    
    1,516
    
    
    
    764
    
    
    
    1,661
    
    
    
    1,724
    
    
    
    916Interest expense
    
    
    83
    
    
    
    59
    
    
    
    125
    
    
    
    185
    
    
    
    182Income before income taxes
    
    
    1,433
    
    
    
    704
    
    
    
    1,536
    
    
    
    1,539
    
    
    
    734Income tax (expense)
    
    
    (551
    )
    
    
    (135
    )
    
    
    (344
    )
    
    
    (593
    )
    
    
    (284
    )Net income
    
    $
    882
    
    
    $
    570
    
    
    $
    1,192
    
    
    $
    946
    
    
    $
    450
  41




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##### Table of Contents



Six Months Ended December 31, 2008 Compared to Six Months Ended December 31, 2007
       Fiscal Year Ended June 30, 2008 Compared to Fiscal Year Ended June 30, 2007
     42




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##### Table of Contents



Fiscal Year Ended June 30, 2007 Compared to Fiscal Year Ended June 30, 2006
         43




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##### Table of Contents



Operating Results of our Pipeline Operations
 Six Months Ended December 31
    
    
    Years Ended June 30(in thousands)
    
    
    (in thousands)2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2006Pipeline OperationsOperating revenues
    
    $
    226
    
    
    $
    187
    
    
    $
    370
    
    
    $
    388
    
    
    $
    411Gas Purchased
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gross Margin
    
    
    226
    
    
    
    187
    
    
    
    370
    
    
    
    388
    
    
    
    411Operating expenses
    
    
    97
    
    
    
    113
    
    
    
    233
    
    
    
    289
    
    
    
    149Operating income
    
    
    129
    
    
    
    74
    
    
    
    137
    
    
    
    99
    
    
    
    262Other (income)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11
    )
    
    
    Income before interest and taxes
    
    
    129
    
    
    
    74
    
    
    
    137
    
    
    
    110
    
    
    
    262Interest expense
    
    
    9
    
    
    
    9
    
    
    
    17
    
    
    
    42
    
    
    
    41Income before income taxes
    
    
    120
    
    
    
    65
    
    
    
    120
    
    
    
    68
    
    
    
    221Income tax (expense)
    
    
    (46
    )
    
    
    (19
    )
    
    
    (40
    )
    
    
    (26
    )
    
    
    (85
    )Net income
    
    $
    74
    
    
    $
    46
    
    
    $
    80
    
    
    $
    42
    
    
    $
    136
  Results of our Discontinued Operations
 Year Ended June 302007
    
    
    2006(in thousands)Discontinued Operations:Income from discontinued operations
before income tax
    
    $
    976
    
    
    $
    671Gain from disposal of operations
    
    
    5,479
    
    
    
    Income tax (expense)
    
    
    (2,500
    )
    
    
    (266
    )Income from discontinued operations
    
    $
    3,955
    
    
    $
    405
  Fiscal Year Ended June 30, 2007 Compared to Fiscal Year Ended June 30, 2006
  Income from discontinued operations before income tax
  44




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##### Table of Contents



Gain from disposal of operations
 Income Tax (Expense)
 Results of our Corporate and Other Operations
 Six months ended December 31,
    
    
    Year Ended June 302008
    
    
    2007
    
    
    2008(in thousands)
    
    
    (in thousands)
    
    
    (in thousands)Corporate and OtherOperating revenues
    
    $
    
    
    
    $
    
    
    
    $
    Gas Purchased
    
    
    
    
    
    
    
    
    
    
    Gross Margin
    
    
    
    
    
    
    
    
    
    
    Operating expenses
    
    
    
    
    
    
    
    
    
    
    441Operating income
    
    
    
    
    
    
    
    
    
    
    (441
    )Other (income)
    
    
    544
    
    
    
    
    
    
    
    (70
    )Income before interest and taxes
    
    
    (544
    )
    
    
    
    
    
    
    (371
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    Income before income taxes
    
    
    (544
    )
    
    
    
    
    
    
    (371
    )Income tax (expense)
    
    
    189
    
    
    
    
    
    
    
    142Income before extraordinary item
    
    
    (355
    )
    
    
    
    
    
    
    (229
    )Extraordinary gain
    
    
    
    
    
    
    (6,819
    )
    
    
    (6,819
    )Net income
    
    $
    (355
    )
    
    $
    6,819
    
    
    $
    6,590
  Six Months Ended December 31, 2008 Compared to Six Months Ended December 31, 2007
   Fiscal Year Ended June 30, 2008
   45




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##### Table of Contents



Consolidated Cash Flow Analysis
 Sources and Uses of Cash
       Six Months Ended December 31,
    
    
    Years Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2006Cash (used in) provided by operating activities
    
    $
    (8,102,000
    )
    
    $
    (4,105,000
    )
    
    $
    5,437,000
    
    
    $
    (905,000
    )
    
    $
    9,137,000Cash (used in) provided by investing activities
    
    
    (7,673,000
    )
    
    
    (6,526,000
    )
    
    
    (9,798,000
    )
    
    
    15,453,000
    
    
    
    (2,190,000
    )Cash provided by (used in) financing activities
    
    
    16,044,000
    
    
    
    5,526,000
    
    
    
    (1,853,000
    )
    
    
    (9,178,000
    )
    
    
    (5,401,000
    )Increase (decrease) in cash
    
    $
    269,000
    
    
    $
    (5,105,000
    )
    
    $
    (6,214,000
    )
    
    $
    5,370,000
    
    
    $
    1,546,000
    46




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##### Table of Contents



Liquidity and Capital Resources
   Long-term Debt  $13.0 million 6.16% Senior Unsecured Notes
  47




---



##### Table of Contents



Bank of America Line of Credit
  First
    
    
    SecondQuarter
    
    
    QuarterSix Months Ended December 31, 2008Minimum borrowing
    
    $
    
    
    
    $
    11,285,000Maximum borrowing
    
    $
    11,685,000
    
    
    $
    18,695,000Average borrowing
    
    $
    5,286,000
    
    
    $
    14,733,000Six Months Ended December 31, 2007Minimum borrowing
    
    $
    
    
    
    $
    3,775,000Maximum borrowing
    
    $
    
    
    
    $
    7,525,000Average borrowing
    
    $
    
    
    
    $
    4,558,000
  First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterYear Ended June 30, 2008Minimum borrowing
    
    $
    
    
    
    $
    3,275,000
    
    
    $
    
    
    
    $
    Maximum borrowing
    
    $
    
    
    
    $
    7,525,000
    
    
    $
    6,525,000
    
    
    $
    Average borrowing
    
    $
    
    
    
    $
    4,558,000
    
    
    $
    2,256,000
    
    
    $
    Year Ended June 30, 2007Minimum borrowing
    
    $
    
    
    
    $
    2,900,000
    
    
    $
    
    
    
    $
    Maximum borrowing
    
    $
    2,900,000
    
    
    $
    6,200,000
    
    
    $
    3,502,000
    
    
    $
    6,700,000Average borrowing
    
    $
    282,000
    
    
    $
    4,384,000
    
    
    $
    392,000
    
    
    $
    485,000Year Ended June 30, 2006Minimum borrowing
    
    $
    3,100,000
    
    
    $
    5,200,000
    
    
    $
    
    
    
    $
    Maximum borrowing
    
    $
    5,200,000
    
    
    $
    12,250,000
    
    
    $
    12,050,000
    
    
    $
    Average borrowing
    
    $
    4,167,000
    
    
    $
    9,489,000
    
    
    $
    5,619,000
    
    
    $
    
   48




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##### Table of Contents



Capital Expenditures
  EstimatedActual
    
    
    Future CashSix months ended December 31,
    
    
    Fiscal
    
    
    Requirements2008
    
    
    2007
    
    
    2008
    
    
    2009(In thousands)
    
    
    (In thousands)Natural Gas Operations
    
    $
    4,813
    
    
    $
    1,151
    
    
    $
    3,577
    
    
    $
    5,100Energy West Resources
    
    
    69
    
    
    
    197
    
    
    
    250
    
    
    
    Pipeline Operations
    
    
    
    
    
    
    37
    
    
    
    41Total capital expenditures
    
    $
    4,882
    
    
    $
    1,385
    
    
    $
    3,868
    
    
    $
    5,100
   49




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##### Table of Contents



Contractual Obligations
  1 year
    
    
    
    
    
    
    
    
    
    
    AfterContractual Obligations
    
    Total
    
    
    or less
    
    
    2-3 years
    
    
    4-5 years
    
    
    5 yearsInterest payments (a)
    
    $
    6,806,800
    
    
    $
    800,800
    
    
    $
    1,601,600
    
    
    $
    1,601,600
    
    
    $
    2,802,800Long Term Debt (b)
    
    
    13,000,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,000,000Operating Lease Obligations
    
    
    241,328
    
    
    
    133,367
    
    
    
    35,191
    
    
    
    10,273
    
    
    
    62,497Transportation and Storage Obligation (c)
    
    
    9,921,338
    
    
    
    4,759,770
    
    
    
    2,066,472
    
    
    
    1,001,748
    
    
    
    2,093,348Total Obligations
    
    $
    29,969,466
    
    
    $
    5,693,937
    
    
    $
    3,703,263
    
    
    $
    2,613,621
    
    
    $
    17,958,645
 (a)
    
    Our long-term debt interest payments are projected based on actual interest rates
on long-term debt until the underlying debts mature.(b)
    
    See Note 11 of the Notes to Consolidated Financial Statements for a description
of this debt.(c)
    
    Transportation and storage obligations represent annual commitments with
suppliers for periods extending up to nine years. These costs are recoverable in customer rates.  Off-Balance-Sheet Arrangements
  New Accounting Pronouncements
  Business Combinations,
 Accounting for Noncontrolling Interests
   50




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##### Table of Contents



The
Hierarchy of Generally Accepted Accounting Principles
   
 Item 7A. Quantitative and Qualitative Disclosures about Market Risk
  Commodity Price Risk
  Credit Risk
  
 Item 8. Financial Statements and Supplementary Data.
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
   51




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##### Table of Contents



Item 9A(T). Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Control over Financial Reporting
    Changes in Internal Control over Financial Reporting
  Attestation Report of Independent Registered Public Accounting Firm
  
 Item 9B. Other Information.
   52




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##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
 Board of Directors
 Name
    
    Age
    
    Position
    
    Director SinceIan Abrams
    
    63
    
    Director
    
    2008W.E. Gene Argo
    
    67
    
    Director
    
    2002Steven A. Calabrese
    
    48
    
    Director
    
    2006Mark D. Grossi
    
    55
    
    Director
    
    2005Richard M. Osborne
    
    63
    
    Chairman of the Board, Chief Executive Officer and Director
    
    2003James R. Smail
    
    62
    
    Director
    
    2007Thomas J. Smith
    
    64
    
    Vice President, Chief Financial Officer and Director
    
    2003James E. Sprague
    
    48
    
    Director
    
    2006Michael T. Victor
    
    47
    
    Director
    
    2008
 Ian Abrams
 W. E. Gene Argo
 Steven A. Calabrese
 Mark D. Grossi
 Richard M. Osborne
  53




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##### Table of Contents



Thomas J. Smith
 James R. Smail
 James E. Sprague
 Michael T. Victor
 Executive Officers
 Name
    
    Age
    
    PositionKevin J. Degenstein
    
    
    49
    
    
    President and Chief Operating OfficerThomas J. Smith*
    
    
    64
    
    
    Vice President and Chief Financial
Officer and DirectorDavid C. Shipley
    
    
    48
    
    
    Vice President of Eastern OperationsJed D. Henthorne
    
    
    49
    
    
    Vice President of Administration
 
 *
    
    Biographical information for Mr. Smith can be found under Board of Directors. Kevin J. Degenstein
 David C. Shipley
 Jed D. Henthorne
 Section 16(a) Beneficial Ownership Reporting Compliance
  54




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##### Table of Contents



Code of Business Conduct and Ethics
 
    
    honest and ethical conduct, including the ethical handling of actual or apparent
conflicts of interest between personal and professional relationships,
    
    full, fair, accurate, timely and understandable disclosure in public reports,
    
    compliance with applicable governmental laws rules and regulations,
    
    prompt internal reporting of code violations to an appropriate person identified in
the code, and
    
    accountability for adherence to the code.
 www.ewst.com
 Audit Committee Report www.ewst.com
   55




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##### Table of Contents



Audit Committee
 James E. Sprague, Chairman  Mark D. Grossi  James R. Smail
 
 ITEM 11. Executive Compensation
 Summary Compensation Table
 Option
    
    
    All OtherName and
    
    
    
    
    
    Salary
    
    
    Bonus
    
    
    Awards
    
    
    Compensation
    
    
    TotalPrincipal Position
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)Richard M. Osborne
    
    
    2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,000
    
    
    
    24,000Chairman and Chief
Executive
Officer(1)Kevin J. Degenstein,
    
    
    2008
    
    
    
    170,771
    
    
    
    25,000
    
    
    
    
    
    
    
    7,775
    
    
    
    203,546President and Chief
Operating OfficerDavid C. Shipley,
    
    
    2008
    
    
    
    132,750
    
    
    
    32,500
    
    
    
    
    
    
    
    23,037
    
    
    
    188,287Vice President of
Eastern
Operations(2)James W. Garrett, Former
    
    
    2008
    
    
    
    170,000
    
    
    
    
    
    
    
    
    
    
    
    5,494
    
    
    
    175,494Vice President of
Business
Development(3)
 
 (1)
    
    Mr. Osborne does not receive compensation for service as our chairman and chief executive
officer. All other compensation consists of fees paid to Mr. Osborne for service as a director.(2)
    
    Mr. Shipley was appointed as our vice president of eastern operations in May 2007. All other
compensation consists of relocation expenses.(3)
    
    Mr. Garrett resigned as our vice president of business development effective January 31, 2009.  56




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##### Table of Contents



Employment and Separation Agreements
 Kevin J. Degenstein
     David C. Shipley
      Benefit Plans
 401(k) Plan
  57




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##### Table of Contents



Employee Stock Ownership Plan
 Retiree Health Plan
 Dividend Reinvestment Policy
 Outstanding Equity Awards at December 31, 2008
  Number of
    
    
    Number ofSecurities
    
    
    SecuritiesUnderlying
    
    
    UnderlyingUnexercised
    
    
    Unexercised
    
    
    Option
    
    
    OptionOptions
    
    
    Options
    
    
    Exercise Price
    
    
    ExpirationName
    
    Exercisable
    
    
    Unexercisable
    
    
    ($)
    
    
    DateJames W. Garrett
    
    
    7,500
    
    
    
    7,500
    
    
    
    9.93
    
    
    
    12/1/2017
    (1)Kevin J. Degenstein
    
    
    2,500
    
    
    
    7,500
    
    
    
    7.10
    
    
    
    12/1/2018
    (2)
 (1)
    
    The option is exercisable as follows: 25% of the shares on 12/1/2007; 25% of the shares on
12/1/2008; 25% of the shares on 12/1/2009 and 25% of the shares on 12/1/2010.(2)
    
    The option is exercisable as follows: 25% of the shares on 12/1/2008; 25% of the shares on
12/1/2009; 25% of the shares on 12/1/2010 and 25% of the shares on 12/1/2011. Director Compensation
  58




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##### Table of Contents



Fees Earned or
    
    
    Stock
    
    
    All OtherPaid in Cash
    
    
    Awards(1)
    
    
    Compensation
    
    
    TotalName
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)Ian Abrams
    
    
    14,000
    
    
    
    10,000
    
    
    
    
    
    
    
    24,000W.E. Gene Argo
    
    
    24,000
    
    
    
    
    
    
    
    
    
    
    
    24,000Steven A. Calabrese
    
    
    24,000
    
    
    
    
    
    
    
    
    
    
    
    24,000Michael I. German(2)
    
    
    18,000
    
    
    
    
    
    
    
    
    
    
    
    18,000Mark D. Grossi
    
    
    24,000
    
    
    
    
    
    
    
    
    
    
    
    24,000James R. Smail
    
    
    24,000
    
    
    
    
    
    
    
    
    
    
    
    24,000Thomas J. Smith(3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    James E. Sprague
    
    
    24,000
    
    
    
    
    
    
    
    
    
    
    
    24,000Michael T. Victor(4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 (1)
    
    Mr. Abrams elected to receive compensation in shares of our common stock as of September 2008.
Amounts reflect the number of shares issued using the closing market price on the date of issuance
to fulfill the monthly fee to Mr. Abrams.(2)
    
    Mr. German was not nominated for re-election to our board of directors at our 2008 annual
meeting of shareholders held on December 11, 2008.(3)
    
    Mr. Smith, our chief financial officer, does not receive compensation for serving as a
director.(4)
    
    Mr. Victor was elected director at our 2008 annual meeting of shareholders held on December 11,
2008. 
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 Security Ownership of Principal Shareholders and Management
 Beneficial Ownership(1)Names and Address(2)
    
    Shares
    
    
    Stock Options(3)
    
    
    Total
    
    
    PercentageRichard M. Osborne(4)
    
    
    922,271
    
    
    
    
    
    
    
    922,271
    
    
    
    21.2
    %Steven A. Calabrese(5)
    
    
    211,496
    
    
    
    
    
    
    
    211,496
    
    
    
    4.9
    %James R. Smail(6)
    
    
    32,550
    
    
    
    
    
    
    
    32,550
    
    
    
    
    *Thomas J. Smith
    
    
    9,750
    
    
    
    
    
    
    
    9,750
    
    
    
    
    *Ian Abrams
    
    
    6,600
    
    
    
    
    
    
    
    6,600Mark D. Grossi(7)
    
    
    4,860
    
    
    
    
    
    
    
    4,860
    
    
    
    
    *W.E. Gene Argo
    
    
    1,275
    
    
    
    
    
    
    
    1,275
    
    
    
    
    *James E. Sprague
    
    
    465
    
    
    
    
    
    
    
    465
    
    
    
    
    *Kevin J. Degenstein(8)
    
    
    347
    
    
    
    2,500
    
    
    
    2,847
    
    
    
    
    *David C. Shipley(8)
    
    
    118
    
    
    
    
    
    
    
    118
    
    
    
    
    *Michael T. Victor
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    James W. Garrett
    
    
    1,000
    
    
    
    7,500
    
    
    
    8,500
    
    
    
    
    *2653 Dodd Rd. 
Willoughby Hills OH 44094All directors and executive officers as a group
    
    
    1,205,799
    
    
    
    10,000
    
    
    
    1,215,799
    
    
    
    27.9
    %(13 individuals)
 
 *
    
    Less than 1%  59




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##### Table of Contents



(1)
    
    Unless otherwise indicated, we believe that all persons named in the table have sole investment
and voting power over the shares of stock owned.(2)
    
    Unless otherwise indicated, the address of each of the beneficial owners identified is c/o
Energy West, Incorporated, 1 First Avenue South, Great Falls, Montana 59401.(3)
    
    Shares of common stock the beneficial owners have the right to acquire through stock options
that are or will become exercisable within 60 days.(4)
    
    Shares owned by the Richard M. Osborne Trust, an Ohio trust of which Mr. Osborne is sole
trustee.(5)
    
    Includes (1) 57,580 shares held by the Steven A. Calabrese Profit Sharing Trust, an Ohio trust
of which Mr. Calabrese is co-trustee, (2) 16,646 shares held by CCAG Limited Partnership, an Ohio
limited partnership of which Mr. Calabrese is the president and only member of the board of
directors, and (3) 17,100 shares held by Mr. Calabreses minor children. Mr. Calabrese disclaims
beneficial ownership of the shares held by his minor children.(6)
    
    Shares are held by J.R. Smail, Inc., an Ohio corporation of which Mr. Smail is chairman and
sole shareholder.(7)
    
    Shares are held by Westwood Douglas LLC, a limited liability company of which Mr. Grossi is
managing member and beneficial owner.(8)
    
    Shares are held in our 401(k) plan. Pursuant to the terms of the plan, each participant has
the right to direct the voting of the shares held by the plan. Equity Compensation Plan Information
 Number ofsecuritiesremaining availableNumber of
    
    
    
    
    
    
    
    
    
    
    for future issuancesecurities
    
    
    
    
    
    
    
    
    
    
    under equityto be issued upon
    
    
    Weighted-average
    
    
    compensation plansexercise of
    
    
    exercise price of
    
    
    (excluding securitiesoutstanding options,
    
    
    outstanding options,
    
    
    reflected in the firstPlan category
    
    warrants and rights
    
    
    warrants and rights
    
    
    column)Equity compensation
plans approved by
security holders*
    
    
    177,453
    
    
    
    
    
    
    $
    8.42
    
    
    
    
    
    
    
    65,547Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    177,453
    
    
    
    
    
    
    $
    8.42
    
    
    
    
    
    
    
    65,547
 
 *
    
    Includes 150,000 shares available for future issuance to our directors pursuant to a policy that
permitted directors to defer payment of fees in stock for service as a director, 147,953 shares of
which have been issued or allocated for issuance pursuant to the policy. 
 Item 13. Certain Relationships and Related Transactions and Director Independence
 Certain Relationships and Related Transactions
 
    
    Richard M. Osborne, our chairman of the board and chief executive officer, has invested
approximately $518,000 and owns an 18.2% membership interest in Kykuit.
  60




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##### Table of Contents




    
    Steven A. Calabrese, a member of our board of directors, has an interest in Kykuit as a
result of his involvement with CCAG Limited Partnership (CCAG) and R.C. Enterprises &
Development, LLC (R.C. Enterprises). CCAG and R.C. Enterprises are members of Kykuit, each
owning approximately a 5.5% membership interest in Kykuit and each having invested
approximately $156,750. Mr. Calabreses interest arises from his position as president of TGF
Corporation, the general partner of CCAG, and as managing member of R.C. Enterprises.
    
    John D. Oil and Gas Company, a publicly-held oil and gas exploration company, is the
managing member of Kykuit and owns 19% of the membership interests. Mr. Osborne is the
chairman of the board and chief executive officer of John D. Oil and Gas Company, and Energy
West directors Mr. Calabrese, Mark D. Grossi, James R. Smail and Thomas J. Smith are directors
of John D. Oil and Gas Company.
      
    
    on terms at least as favorable as those that we would be able to obtain from
unrelated parties,
    
    for bona fide business purposes, and
    
    reviewed and approved by the audit committee or other independent directors in
accordance with the Montana Business Corporation Act after full disclosure of the
existence and nature of the conflicting interest in the related party transaction by
the director involved in the transaction.
 Director Independence
  61




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##### Table of Contents



Item 14. Principal Accountant Fees and Services
  Six MonthsEnded
    
    
    Year ended
    
    
    Year EndedDecember 31, 2008
    
    
    June 30, 2008
    
    
    June 30, 2007Audit Fees
    
    $
    184,000
    
    
    $
    277,000
    
    
    $
    137,280Audit-Related Fees
    
    
    -0-
    
    
    
    19,000
    
    
    
    21,923Tax Fees
    
    
    6,300
    
    
    
    34,000
    
    
    
    40,588All Other Fees
    
    
    -0-
    
    
    
    -0-
    
    
    
    12,159Total
    
    $
    190,300
    
    
    $
    330,000
    
    
    $
    211,950
 Audit Fees.
 Audit-Related Fees.
 Tax Fees.
 All Other Fees.
  
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules.
 Financial Statements:
 PageReport of Independent Registered Public Accounting Firm  Hein & Associates LLP
    
    
    F-2Consolidated Balance Sheets
    
    
    F-3Consolidated Statements of Income
    
    
    F-4Consolidated Statements of Stockholders Equity
    
    
    F-5Consolidated Statements of Cash Flows
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-8Schedule II  Valuation and Qualifying Accounts
  62




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##### Table of Contents



Exhibit Index.
 3.1(a)
    
    
    Restated Articles of Incorporation. Filed as Exhibit 3.1 to Amendment No. 1 to the
Registrants Annual Report on Form 10-K/A for the year ended June 30, 1996 and
incorporated herein by reference3.1(b)
    
    
    Articles of Amendment to the Articles of Incorporation dated January 28, 2008. Filed
as Exhibit 3.1 to the Registrants Current Report on Form 8-K dated February 1, 2008
and incorporated herein by reference3.1(c)
    
    
    Articles of Amendment to the Articles of Incorporation dated December 5, 2007. Filed
as Exhibit 3.1(e) to the Registrants Quarterly Report on Form 10-Q for the quarter
ended December 31, 2007 and incorporated herein by reference3.1(d)
    
    
    Articles of Amendment to the Articles of Incorporation dated May 29, 2007. Filed as
Exhibit 3.1 to the Registrants Current Report on Form 8-K, filed on June 4, 2007,
and incorporated herein by reference3.2
    
    
    Amended and Restated Bylaws. Filed as Exhibit 3.2 to the Registrants Current Report
on Form 8-K on March 5, 2004 and incorporated herein by reference3.2(a)
    
    
    Amendment No. 3 to Amended and Restated Bylaws dated August 12, 2008. Filed as
Exhibit 3.1 to the Registrants Current Report on Form 8-K dated August 12, 2008 and
incorporated herein by reference3.2(b)
    
    
    Amendment No. 2 to Amended and Restated Bylaws dated April 10, 2008. Filed as Exhibit
3.1 to the Registrants Current Report on Form 8-K dated April 10, 2008 and
incorporated herein by reference3.2(c)
    
    
    Amendment No. 1 to Amended and Restated Bylaws dated November 14, 2007. Filed as
Exhibit 3.1 to the Registrants Current Report on Form 8-K dated November 14, 2007
and incorporated herein by reference10.1
    
    
    Satisfaction and Discharge of Indenture dated June 22, 2007, between the Registrant
and HSBC Bank USA, National Association, as Successor Trustee for the Series 1997
Notes. Filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed
July 5, 2007, and incorporated herein by reference10.2
    
    
    Satisfaction and Discharge of Indenture dated June 22, 2007, between the Registrant
and US Bank National Association, as Successor Trustee for the Series 1993 Notes.
Filed as Exhibit 10.2 to the Registrants Current Report on Form 8-K, filed July 5,
2007, and incorporated herein by reference.10.3
    
    
    Discharge of Obligor under Indenture dated June 22, 2007, between the Registrant and
HSBC Bank USA, National Association, as Successor Trustee for the Series 1992-B
Bonds. Filed as Exhibit 10.3 to the Registrants Current Report on Form 8-K, filed
July 5, 2007, and incorporated herein by reference10.4
    
    
    Note Purchase Agreement dated June 29, 2007, between the Registrant and various
Purchasers relating to 6.16% Senior Unsecured Notes due June 29, 2017. Filed as
Exhibit 10.4 to the Registrants Current Report on Form 8-K, filed July 5, 2007, and
incorporated herein by reference10.5
    
    
    Credit Agreement dated as of June 29, 2007, by and among the Registrant and various
financial institutions and LaSalle Bank National Association. Filed as Exhibit 10.5
to the Registrants Current Report on Form 8-K, filed July 5, 2007, and incorporated
herein by reference.10.6
    
    
    Amendment dated October 22, 2007 to the Credit Agreement among the Registrant,
various financial institutions and LaSalle Bank National Association, as agent. Filed
as Exhibit 10.1 to the Registrants Current Report on Form 8-K dated October 22, 2007
and incorporated herein by reference10.7
    
    
    Energy West, Incorporated 2002 Stock Option Plan. Filed as Appendix A to the
Registrants Proxy Statement on Schedule 14A, filed on October 30, 2002, and
incorporated herein by reference10.8
    *
    
    First Amendment to Energy West Incorporated 2002 Stock Option Plan10.9
    
    
    Employee Stock Ownership Plan Trust Agreement. Filed as Exhibit 10.2 to Registration
Statement on Form S-1 (File No. 33-1672) is incorporated herein by reference10.10
    
    
    Management Incentive Plan. Filed as Exhibit 10.12 to the Registrants Annual Report
on Form 10-K/A for the year ended June 30, 1996, filed on July 8, 1997, and
incorporated herein by reference
  63




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##### Table of Contents



10.11
    
    
    Energy West Senior Management Incentive Plan. Filed as Exhibit 10.19 to the
Registrants Annual Report on Form 10-K for the year ended June 30, 2002, filed on
September 30, 2002, and incorporated herein by reference10.12
    
    
    Energy West Incorporated Deferred Compensation Plan for Directors. Filed as Exhibit
10.20 to the Registrants Annual Report on Form 10-K for the year ended June 30,
2002, filed on September 30, 2002, and incorporated herein by reference10.13
    *
    
    Amended and Restated Energy West Incorporated Deferred Compensation Plan for Directors10.14
    
    
    Amended and Restated Operating Agreement of Kykuit Resources, LLC, dated October 24,
2007. Filed as Exhibit 10.6 to the Registrants Quarterly Report on Form 10-Q for
the quarter ended September 30, 2007 and incorporated herein by reference10.15
    
    
    First Amendment to Amended and Restated Operating Agreement of Kykuit Resources, LLC,
dated December 17, 2007. Filed as Exhibit 10.2 to the Registrants Quarterly Report
on Form 10-Q for the quarter ended December 31, 2007 and incorporated herein by
reference10.16
    
    
    Stock Purchase Agreement dated January 30, 2007 between the Registrant and Sempra
Energy. Filed as Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q for
the quarter ended September 30, 2007 and incorporated herein by reference10.17
    
    
    Amendment No. 1 to Stock Purchase Agreement dated April 11, 2007 between the
Registrant and Sempra Energy. Filed as Exhibit 10.2 to the Registrants Quarterly
Report on Form 10-Q for the quarter ended September 30, 2007 and incorporated herein
by reference10.18
    
    
    Amendment No. 2 to Stock Purchase Agreement dated August 7, 2007 between the
Registrant and Sempra Energy. Filed as Exhibit 10.3 to the Registrants Quarterly
Report on Form 10-Q for the quarter ended September 30, 2007 and incorporated herein
by reference10.19
    
    
    Amendment No. 3 to Stock Purchase Agreement, dated November 28, 2007, by and between
the Registrant and Sempra Energy. Filed as Exhibit 10.1 to the Registrants
Quarterly Report on Form 10-Q for the quarter ended December 31, 2007 and
incorporated herein by reference10.20
    
    
    Stock Purchase Agreement dated January 30, 2007 between the Registrant and Sempra
Energy. Filed as Exhibit 10.4 to the Registrants Quarterly Report on Form 10-Q for
the quarter ended September 30, 2007 and incorporated herein by reference10.21
    
    
    Amendment Number 1 to Stock Purchase Agreement dated August 2, 2007 between the
Registrant and Sempra Energy. Filed as Exhibit 10.5 to the Registrants Quarterly
Report on Form 10-Q for the quarter ended September 30, 2007 and incorporated herein
by reference10.22
    
    
    Stock Purchase Agreement dated December 18, 2007 between the Registrant, Dan F.
Whetstone, Pamela R. Lowry, Paula A. Poole, William J. Junkermier and Roger W.
Junkermier. Filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K
dated December 17, 2007 and incorporated herein by reference10.23
    
    
    First Amendment to Stock Purchase Agreement dated as of November 11, 2008, between
Dan F. Whetstone, Pamela R. Lowry, Paula A. Poole, William J. Junkermier, Roger W.
Junkermiern and Energy West, Incorporated. Filed as Exhibit 10.1 to the Registrants
Current Report on Form 8-K dated November 11, 2008 and incorporated herein by
reference10.24
    
    
    Non-Competition and Non-Disclosure Agreement dated December 18, 2007 between the
Registrant and Daniel F. Whetstone. Filed as Exhibit 10.2 to the Registrants
Current Report on Form 8-K dated December 17, 2007 and incorporated herein by
reference10.25
    
    
    Lease Agreement dated February 25, 2008 between OsAir, Inc. and the Registrant. Filed
as Exhibit 10.1 to the Registrants Current Report on Form 8-K dated February 25,
2008 and incorporated herein by reference10.26
    
    
    Employment Agreement dated November 16, 2007 between James W. Garrett and the
Registrant. Filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K
dated November 14, 2007 and incorporated herein by reference10.27
    *
    
    First Amendment to Employment Agreement dated as of December 31, 2008, between Energy
West, Incorporated and James W. Garrett
  64




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##### Table of Contents



10.28
    
    
    Gas Sales Agreement dated as of July 1, 2008 between John D. Oil & Gas Marketing Co.,
LLC, Northeast Ohio Natural Gas Corp., Orwell Natural Gas Company and Brainard Gas
Corp. Filed as Exhibit 10.25 to the Registrants Annual Report on 10-K for the year
ended June 30, 2008 and incorporated herein by reference10.29
    
    
    Natural Gas Transportation Service Agreement dated as of July 1, 2008 between
Orwell-Trumbull Pipeline Co., LLC, Orwell Natural Gas Company and Brainard Gas Corp.
Filed as Exhibit 10.26 to the Registrants Annual Report on 10-K for the year ended
June 30, 2008 and incorporated herein by reference10.30
    
    
    Transportation Service Agreement dated as of July 1, 2008 between Cobra Pipeline Co.,
Ltd., Northeast Ohio Natural Gas Company, Orwell Natural Gas Company and Brainard Gas
Corp. Filed as Exhibit 10.27 to the Registrants Annual Report on 10-K for the year
ended June 30, 2008 and incorporated herein by reference10.31
    
    
    First Amendment dated July 1, 2008 to the Orwell-Trumbull Pipeline Co., LLC
Operations Agreement between Orwell Natural Gas Company and Orwell-Trumbull Pipeline
Co., LLC. Filed as Exhibit 10.28 to the Registrants Annual Report on 10-K for the
year ended June 30, 2008 and incorporated herein by reference10.32
    
    
    Orwell-Trumbull Pipeline Co., LLC Operations Agreement dated January 1, 2008 between
Orwell Natural Gas Company and Orwell-Trumbull Pipeline Co., LLC. Filed as Exhibit
10.29 to the Registrants Annual Report on 10-K for the year ended June 30, 2008 and
incorporated herein by reference10.33
    
    
    Triple Net Lease Agreement dated as of July 1, 2008 between Station Street Partners,
LLC and Orwell Natural Gas Company. Filed as Exhibit 10.30 to the Registrants Annual
Report on 10-K for the year ended June 30, 2008 and incorporated herein by reference10.34
    
    
    Triple Net Lease Agreement dated as of July 1, 2008 between OsAir, Inc. and Orwell
Natural Gas Company. Filed as Exhibit 10.31 to the Registrants Annual Report on 10-K
for the year ended June 30, 2008 and incorporated herein by reference.10.35
    
    
    Triple Net Lease Agreement dated as of July 1, 2008 between Richard M. Osborne,
Trustee and Orwell Natural Gas Company. Filed as Exhibit 10.32 to the Registrants
Annual Report on 10-K for the year ended June 30, 2008 and incorporated herein by
reference10.36
    
    
    Triple Net Lease Agreement dated as of July 1, 2008 between OsAir, Inc. and Northeast
Ohio Natural Gas Company. Filed as Exhibit 10.33 to the Registrants Annual Report on
10-K for the year ended June 30, 2008 and incorporated herein by reference10.37
    
    
    Stock purchase agreement dated September 12, 2008, between Energy West, Incorporated,
and Richard M. Osborne, trustee, Rebecca Howell, Stephen G. Rigo, Marty Whelan, and
Thomas J. Smith, filed as exhibit 10.1 to the registrants current report on Form 8-K
dated September 17, 2008, and incorporated herein by reference Filed as Exhibit 10.34
to the Registrants Annual Report on 10-K for the year ended June 30, 2008 and
incorporated herein by reference10.38
    
    
    Employment Agreement dated August 25, 2006 between Energy West, Incorporated
and Kevin J. Degenstein, filed as Exhibit 10.1 to the Registrants Current Report on
Form 8-K dated September 18, 2006 and incorporated herein by reference10.39
    
    
    First Amendment to Employment Agreement dated as of December 31, 2008, between Energy
West, Incorporated and Kevin J. Degenstein10.40
    *
    

Employment
Agreement dated April 13, 2007 between Energy West,
Incorporated and David C. Shipley14
    
    
    Code of Business Conduct, filed as Exhibit 14 to the
Registrants Annual Report on 10-K for the year ended
June 30, 2006 and incorporated herein by reference.21
    *
    
    Company Subsidiaries23.1
    *
    
    Consent of Hein & Associates LLP31
    *
    
    Certifications pursuant to SEC Release No. 33-8238, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 200232
    *
    
    Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
 
    
    Management agreement or compensatory plan or arrangement*
    
    Filed herewith  65




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##### Table of Contents



Financial Statement Schedules:
 Schedule II
 Valuation and Qualifying Accounts
Energy West, Incorporated
December 31, 2008
 Balance at
    
    
    Charged to
    
    
    Write-Offs
    
    
    BalanceBeginning
    
    
    Costs &
    
    
    Net of
    
    
    at End ofDescription
    
    of Period
    
    
    Expenses
    
    
    Recoveries
    
    
    PeriodAllowance for bad debtsYear Ended June 30, 2007
    
    $
    121,453
    
    
    $
    210,956
    
    
    $
    (268,355
    )
    
    $
    64,054Year Ended June 30, 2008
    
    $
    64,054
    
    
    $
    174,531
    
    
    $
    (102,186
    )
    
    $
    136,399Six Months Ended December 31, 2007 (unaudited)
    
    $
    64,054
    
    
    $
    57,055
    
    
    $
    14,790
    
    
    $
    135,899Six Months Ended December 31, 2008
    
    $
    136,399
    
    
    $
    58,085
    
    
    $
    13,458
    
    
    $
    207,942
   66




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##### Table of Contents



SIGNATURES
  ENERGY WEST, INCORPORATED/s/ Richard M. OsborneRichard M. OsborneChief Executive Officer
(principal executive officer)    /s/ Richard M. Osborne

Richard M. Osborne
    
    Chief Executive Officer 
(Principal Executive Officer)
    
    March 31, 2009/s/ Thomas J. Smith

Thomas J. Smith
    
    Chief Financial Officer
(Principal Financial Officer
and Principal Accounting
Officer)
    
    March 31, 2009/s/ W.E. Argo

W.E. Argo
    
    Director
    
    March 31, 2009/s/ Mark D. Grossi

Mark D. Grossi
    
    Director
    
    March 31, 2009/s/ Ian Abrams

Ian Abrams
    
    Director
    
    March 31, 2009/s/ Steven A. Calabrese

Steven A. Calabrese
    
    Director
    
    March 31, 2009/s/ James E. Sprague

James E. Sprague
    
    Director
    
    March 31, 2009/s/ James R. Smail

James R. Smail
    
    Director
    
    March 31, 2009/s/ Michael T. Victor

Michael T. Victor
    
    Director
    
    March 31, 2009
  67




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##### Table of Contents



CONSOLIDATED FINANCIAL STATEMENTS
OF
ENERGY WEST, INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
 PageReport of Independent Registered Public Accounting FirmHein & Associates LLP
    
    
    F-2Consolidated Balance Sheets as of December 31, 2008 and June 30, 2008 and 2007
    
    
    F-3Consolidated Statements of Income for the Six Months Ended December 31, 2008 and 2007 (unaudited),
and the Years Ended June 30, 2008, 2007, and 2006
    
    
    F-4Consolidated Statements of Changes in Stockholders Equity and Comprehensive Income
for the Six Months Ended December 31, 2008, and the Years
Ended June 30, 2008, 2007 and 2006
    
    
    F-5Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2008
and 2007 (unaudited), and the Years Ended June 30, 2008, 2007 and 2006
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-8




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     /s/ HEIN & ASSOCIATES LLP
 
  F-2




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##### Table of Contents



ENERGY WEST INCORPORATED AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 DECEMBER 31,
    
    
    JUNE 30,(audited)
    
    
    (audited)2008
    
    
    2008
    
    
    2007ASSETSCurrent Assets:Cash and
cash equivalents
    
    $
    1,065,529
    
    
    $
    796,302
    
    
    $
    7,010,020Marketable securities
    
    
    3,376,875
    
    
    
    910,778
    
    
    
    Accounts receivable less $207,942, $136,399
and $64,054 respectively, allowance for bad debt
    
    
    7,430,694
    
    
    
    5,108,796
    
    
    
    3,532,083Unbilled gas
    
    
    4,839,138
    
    
    
    1,252,638
    
    
    
    649,939Derivative assets
    
    
    
    
    
    
    145,428
    
    
    
    57,847Natural gas and propane inventories
    
    
    9,891,802
    
    
    
    5,505,337
    
    
    
    5,474,309Materials and supplies
    
    
    1,175,596
    
    
    
    955,467
    
    
    
    377,296Prepayment and other
    
    
    422,514
    
    
    
    193,581
    
    
    
    142,964Income tax receivable
    
    
    1,014,806
    
    
    
    417,164
    
    
    
    162,432Recoverable cost of gas purchases
    
    
    2,041,280
    
    
    
    1,054,875
    
    
    
    1,369,584Deferred tax asset
    
    
    225,953
    
    
    
    
    
    
    
    53,370Total current assets
    
    
    31,484,187
    
    
    
    16,340,366
    
    
    
    18,829,844Property, Plant and Equipment, Net
    
    
    34,904,442
    
    
    
    31,051,419
    
    
    
    29,160,084Deferred Charges
    
    
    2,558,156
    
    
    
    2,761,656
    
    
    
    3,031,425Deferred Tax Assets  Long term
    
    
    5,693,310
    
    
    
    6,825,575
    
    
    
    Other Investments
    
    
    1,081,423
    
    
    
    1,118,264
    
    
    
    Other Assets
    
    
    97,447
    
    
    
    279,810
    
    
    
    560,463TOTAL ASSETS
    
    $
    75,818,965
    
    
    $
    58,377,090
    
    
    $
    51,581,816LIABILITIES AND CAPITALIZATIONCurrent Liabilities:Bank overdraft
    
    $
    773,199
    
    
    $
    532,901
    
    
    $
    Accounts payable
    
    
    5,783,927
    
    
    
    7,439,748
    
    
    
    4,543,525Line of credit
    
    
    17,551,276
    
    
    
    
    
    
    
    Derivative liabilities
    
    
    
    
    
    
    146,206
    
    
    
    58,018Accrued income taxes
    
    
    35,236
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    
    
    
    
    18,039
    
    
    
    Overrecovered gas purchases
    
    
    1,022,853
    
    
    
    522,347
    
    
    
    1,061,685Accrued and other current liabilities
    
    
    4,947,448
    
    
    
    3,302,712
    
    
    
    3,092,726Total current liabilities
    
    
    30,113,939
    
    
    
    11,961,953
    
    
    
    8,755,954Other Obligations:Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    4,585,170Deferred investment tax credits
    
    
    239,565
    
    
    
    250,096
    
    
    
    271,158Other long-term liabilities
    
    
    2,383,323
    
    
    
    2,516,262
    
    
    
    2,673,824Total other obligations
    
    
    2,622,888
    
    
    
    2,766,358
    
    
    
    7,530,152Long-Term Debt
    
    
    13,000,000
    
    
    
    13,000,000
    
    
    
    13,000,000Commitments and Contingencies (note 16)Stockholders Equity:Preferred stock; $.15 par value, 1,500,000 shares authorized,
no shares outstanding
    
    
    
    
    
    
    
    
    
    
    Common stock; $.15 par value, 5,000,000 shares authorized,
4,296,603, 4,347,769 and 4,288,657 shares outstanding at
December 31, 2008 and June 30, 2008 and 2007, respectively
    
    
    652,503
    
    
    
    652,165
    
    
    
    643,299Treasury stock
    
    
    (8,012
    )
    
    
    
    
    
    
    Capital in excess of par value
    
    
    5,926,028
    
    
    
    6,280,649
    
    
    
    5,867,726Accumulated other comprehensive income (loss)
    
    
    (319,147
    )
    
    
    
    
    
    
    Retained earnings
    
    
    23,830,766
    
    
    
    23,715,965
    
    
    
    15,784,685Total stockholders equity
    
    
    30,082,138
    
    
    
    30,648,779
    
    
    
    22,295,710TOTAL CAPITALIZATION
    
    
    43,082,138
    
    
    
    43,648,779
    
    
    
    35,295,710TOTAL LIABILITIES AND CAPITALIZATION
    
    $
    75,818,965
    
    
    $
    58,377,090
    
    
    $
    51,581,816
   F-3




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##### Table of Contents



ENERGY WEST INCORPORATED AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 SIX MONTHS ENDED
    
    
    YEARS ENDEDDECEMBER 31,
    
    
    JUNE 30,(audited)
    
    
    (unaudited)
    
    
    (audited)2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2006REVENUES:Natural gas operations
    
    $
    28,840,123
    
    
    $
    21,118,295
    
    
    $
    59,338,996
    
    
    $
    46,439,506
    
    
    $
    55,452,395Gas and electricwholesale
    
    
    9,691,560
    
    
    
    7,008,122
    
    
    
    17,124,081
    
    
    
    12,545,359
    
    
    
    18,831,929Pipeline operations
    
    
    226,157
    
    
    
    186,855
    
    
    
    370,171
    
    
    
    388,175
    
    
    
    411,237Total revenues
    
    
    38,757,840
    
    
    
    28,313,272
    
    
    
    76,833,248
    
    
    
    59,373,040
    
    
    
    74,695,561COST OF SALES:Gas purchased
    
    
    19,459,908
    
    
    
    13,972,427
    
    
    
    41,337,397
    
    
    
    33,541,993
    
    
    
    43,160,830Gas and electricwholesale
    
    
    7,770,347
    
    
    
    5,922,616
    
    
    
    14,833,353
    
    
    
    10,264,633
    
    
    
    17,237,396Total cost of sales
    
    
    27,230,255
    
    
    
    19,895,043
    
    
    
    56,170,750
    
    
    
    43,806,626
    
    
    
    60,398,226GROSS MARGIN
    
    
    11,527,585
    
    
    
    8,418,229
    
    
    
    20,662,498
    
    
    
    15,566,414
    
    
    
    14,297,335Distribution, general, and administrative
    
    
    5,717,406
    
    
    
    4,601,908
    
    
    
    10,661,878
    
    
    
    6,197,529
    
    
    
    6,389,130Maintenance
    
    
    319,798
    
    
    
    325,915
    
    
    
    650,553
    
    
    
    566,683
    
    
    
    504,671Depreciation and amortization
    
    
    1,023,381
    
    
    
    889,371
    
    
    
    1,865,294
    
    
    
    1,692,486
    
    
    
    1,671,647Taxes other than income
    
    
    1,284,557
    
    
    
    863,613
    
    
    
    2,080,144
    
    
    
    1,696,936
    
    
    
    1,453,375Total expenses
    
    
    8,345,142
    
    
    
    6,680,807
    
    
    
    15,257,869
    
    
    
    10,153,634
    
    
    
    10,018,823OPERATING INCOME
    
    
    3,182,443
    
    
    
    1,737,422
    
    
    
    5,404,629
    
    
    
    5,412,780
    
    
    
    4,278,512OTHER INCOME (EXPENSE)
    
    
    (420,349
    )
    
    
    190,093
    
    
    
    315,779
    
    
    
    241,519
    
    
    
    390,677INTEREST (EXPENSE)
    
    
    (677,056
    )
    
    
    (529,711
    )
    
    
    (1,076,345
    )
    
    
    (2,124,155
    )
    
    
    (1,648,897
    )INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAX EXPENSE
    
    
    2,085,038
    
    
    
    1,397,804
    
    
    
    4,644,063
    
    
    
    3,530,144
    
    
    
    3,020,292INCOME TAX (EXPENSE)
    
    
    (926,457
    )
    
    
    (273,828
    )
    
    
    (1,332,688
    )
    
    
    (1,272,664
    )
    
    
    (1,109,043
    )INCOME FROM CONTINUING OPERATIONS
    
    
    1,158,581
    
    
    
    1,123,976
    
    
    
    3,311,375
    
    
    
    2,257,480
    
    
    
    1,911,249DISCONTINUED OPERATIONS:Gain from disposal of operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,479,166
    
    
    
    Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    975,484
    
    
    
    671,084Income tax (expense)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,499,875
    )
    
    
    (265,663
    )INCOME FROM DISCONTINUED OPERATIONS
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,954,775
    
    
    
    405,421INCOME BEFORE EXTRAORDINARY ITEM
    
    
    1,158,581
    
    
    
    1,123,976
    
    
    
    3,311,375
    
    
    
    6,212,255
    
    
    
    2,316,670EXTRAORDINARY GAIN
    
    
    
    
    
    
    6,819,182
    
    
    
    6,819,182
    
    
    
    
    
    
    
    NET INCOME
    
    $
    1,158,581
    
    
    $
    7,943,158
    
    
    $
    10,130,557
    
    
    $
    6,212,255
    
    
    $
    2,316,670BASIC INCOME PER COMMON SHARE:Income from continuing operations
    
    $
    0.27
    
    
    $
    0.26
    
    
    $
    0.77
    
    
    $
    0.51
    
    
    $
    0.43Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.89
    
    
    
    0.09Income from extraordinary gain
    
    
    
    
    
    
    1.59
    
    
    
    1.58
    
    
    
    
    
    
    
    $
    0.27
    
    
    $
    1.85
    
    
    $
    2.35
    
    
    $
    1.40
    
    
    $
    0.53DILUTED INCOME PER COMMON SHARE:Income from continuing operations
    
    $
    0.27
    
    
    $
    0.26
    
    
    $
    0.77
    
    
    $
    0.51
    
    
    $
    0.43Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.88
    
    
    
    0.09Income from extraordinary gain
    
    
    
    
    
    
    1.58
    
    
    
    1.58
    
    
    
    
    
    
    
    $
    0.27
    
    
    $
    1.85
    
    
    $
    2.35
    
    
    $
    1.39
    
    
    $
    0.52WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:Basic
    
    
    4,330,200
    
    
    
    4,287,437
    
    
    
    4,314,748
    
    
    
    4,437,807
    
    
    
    4,386,768Diluted
    
    
    4,331,726
    
    
    
    4,304,559
    
    
    
    4,316,244
    
    
    
    4,484,073
    
    
    
    4,422,069
   F-4




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##### Table of Contents



CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME  FOR THE YEARS ENDED JUNE 30, 2007, 2008, AND THE SIX MONTHS ENDED DECEMBER 31, 2008
 AccumulatedCapital in
    
    
    OtherCommon
    
    
    Common
    
    
    Treasury
    
    
    Treasury
    
    
    Excess of
    
    
    Comprehensive
    
    
    RetainedShares
    
    
    Stock
    
    
    Shares
    
    
    Stock
    
    
    Par Value
    
    
    Income (Loss)
    
    
    Earnings
    
    
    TotalBALANCE AT JULY 1, 2005
    
    
    4,368,846
    
    
    $
    655,338
    
    
    
    
    
    
    $
    
    
    
    $
    7,216,863
    
    
    $
    
    
    
    $
    9,314,424
    
    
    $
    17,186,625Sales of common stock at $6.03 to
$7.67 per share under the Companys
dividend reinvestment plan
    
    
    960
    
    
    
    144
    
    
    
    
    
    
    
    
    
    
    
    6,020
    
    
    
    
    
    
    
    (10,780
    )
    
    
    (4,616
    )Stock contributions at $6.03 to $7.67
to the 401(k) plan
    
    
    2,915
    
    
    
    426
    
    
    
    
    
    
    
    
    
    
    
    39,195
    
    
    
    
    
    
    
    (39,621
    )
    
    
    Stock compensation
    
    
    24,795
    
    
    
    3,720
    
    
    
    
    
    
    
    
    
    
    
    131,530
    
    
    
    
    
    
    
    
    
    
    
    135,250Exercise of stock options @ $5.66
    
    
    3,750
    
    
    
    563
    
    
    
    
    
    
    
    
    
    
    
    20,665
    
    
    
    
    
    
    
    
    
    
    
    21,228Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,316,670
    
    
    
    2,316,670Dividends paid @ $0.11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (490,044
    )
    
    
    (490,044
    )BALANCE AT JUNE 30, 2006
    
    
    4,401,266
    
    
    $
    660,191
    
    
    
    
    
    
    $
    
    
    
    $
    7,414,273
    
    
    $
    
    
    
    $
    11,090,649
    
    
    $
    19,165,113Stock Compensation
    
    
    13,163
    
    
    
    1,974
    
    
    
    
    
    
    
    
    
    
    
    83,111
    
    
    
    
    
    
    
    
    
    
    
    85,085Repurchase of Stock  stock buyback program
    
    
    (219,522
    )
    
    
    (32,928
    )
    
    
    
    
    
    
    
    
    
    
    (2,162,133
    )
    
    
    
    
    
    
    
    
    
    
    (2,195,061
    )Costs associated with stock buyback
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (81,280
    )
    
    
    
    
    
    
    
    
    
    
    (81,280
    )Stock option liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115,603
    
    
    
    
    
    
    
    
    
    
    
    115,603Exercise of stock options @ $4.31 to $7.00
    
    
    93,750
    
    
    
    14,062
    
    
    
    
    
    
    
    
    
    
    
    498,152
    
    
    
    
    
    
    
    
    
    
    
    512,214Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,212,255
    
    
    
    6,212,255Dividends paid @ $0.34
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,518,219
    )
    
    
    (1,518,219
    )BALANCE AT JUNE 30, 2007
    
    
    4,288,657
    
    
    $
    643,299
    
    
    
    
    
    
    $
    
    
    
    $
    5,867,726
    
    
    $
    
    
    
    $
    15,784,685
    
    
    $
    22,295,710Stock compensation
    
    
    3,750
    
    
    
    563
    
    
    
    
    
    
    
    
    
    
    
    248,528
    
    
    
    
    
    
    
    
    
    
    
    249,091Repurchase of Stock  stock buyback program
    
    
    (16,780
    )
    
    
    (2,517
    )
    
    
    
    
    
    
    
    
    
    
    (156,821
    )
    
    
    
    
    
    
    
    
    
    
    (159,338
    )Costs associated with stock buyback
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,313
    )
    
    
    
    
    
    
    
    
    
    
    (2,313
    )Exercise of stock options @ $4.31 to $10.00
    
    
    109,500
    
    
    
    16,424
    
    
    
    
    
    
    
    
    
    
    
    611,491
    
    
    
    
    
    
    
    
    
    
    
    627,915Intrinsic value of stock exercised  tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,933
    
    
    
    
    
    
    
    
    
    
    
    80,933Return of stock at market price in exchange
for stock options
    
    
    (37,500
    )
    
    
    (5,625
    )
    
    
    
    
    
    
    
    
    
    
    (368,874
    )
    
    
    
    
    
    
    
    
    
    
    (374,499
    )Rounding adjustments for stock split issuance
    
    
    142
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    (0
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,130,557
    
    
    
    10,130,557Dividends paid @ $0.47
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,199,277
    )
    
    
    (2,199,277
    )BALANCE AT JUNE 30, 2008
    
    
    4,347,769
    
    
    $
    652,165
    
    
    
    
    
    
    $
    
    
    
    $
    6,280,649
    
    
    $
    
    
    
    $
    23,715,965
    
    
    $
    30,648,779Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,158,581
    
    
    
    1,158,581Net unrealized losses on
available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (319,147
    )
    
    
    
    
    
    
    (319,147
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    839,434Stock compensation
    
    
    2,250
    
    
    
    338
    
    
    
    
    
    
    
    
    
    
    
    35,655
    
    
    
    
    
    
    
    
    
    
    
    35,993Repurchase of Stock  stock buyback program
    
    
    (53,416
    )
    
    
    
    
    
    
    53,416
    
    
    
    (8,012
    )
    
    
    (398,027
    )
    
    
    
    
    
    
    
    
    
    
    (406,039
    )Intrinsic value of stock exercised  tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,751
    
    
    
    
    
    
    
    
    
    
    
    7,751Dividends paid @ $0.47
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,043,780
    )
    
    
    (1,043,780
    )BALANCE AT DECEMBER 31, 2008
    
    
    4,296,603
    
    
    $
    652,503
    
    
    
    53,416
    
    
    $
    (8,012
    )
    
    $
    5,926,028
    
    
    $
    (319,147
    )
    
    $
    23,830,766
    
    
    $
    30,082,138
   F-5




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##### Table of Contents



ENERGY WEST INCORPORATED AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 SIX MONTHS ENDED
    
    
    YEARS ENDEDDECEMBER 31,
    
    
    JUNE 30,(audited)
    
    
    (unaudited)
    
    
    (audited)2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    1,158,581
    
    
    $
    7,943,158
    
    
    $
    10,130,557
    
    
    $
    6,212,255
    
    
    $
    2,316,670Adjustments to reconcile net income toNet cash provided by (used in) operating activities:Depreciation and amortization, including deferred charges and financing costs
    
    
    1,204,233
    
    
    
    934,567
    
    
    
    2,037,070
    
    
    
    3,011,727
    
    
    
    2,356,448Stock-based compensation
    
    
    35,993
    
    
    
    
    
    
    
    249,090
    
    
    
    
    
    
    
    Derivative assets
    
    
    145,428
    
    
    
    (6,339
    )
    
    
    (87,581
    )
    
    
    80,018
    
    
    
    (18,796
    )Derivative liabilities
    
    
    (146,206
    )
    
    
    6,339
    
    
    
    88,188
    
    
    
    15,354
    
    
    
    (71,573
    )Deferred gain
    
    
    (82,062
    )
    
    
    120,758
    
    
    
    
    
    
    
    (325,582
    )
    
    
    (643,280
    )Gain on sale of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,479,166
    )
    
    
    Investment tax credit
    
    
    (10,531
    )
    
    
    (10,531
    )
    
    
    (21,062
    )
    
    
    (21,062
    )
    
    
    (21,062
    )Deferred gain on sale of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,639
    )Deferred income taxes
    
    
    491,286
    
    
    
    (6,701,691
    )
    
    
    (176,719
    )
    
    
    (1,573,249
    )
    
    
    (259,022
    )Extraordinary gain
    
    
    
    
    
    
    
    
    
    
    (6,819,182
    )
    
    
    
    
    
    
    Changes in assets and liabilities:Accounts receivable
    
    
    (5,908,400
    )
    
    
    (5,650,941
    )
    
    
    (779,559
    )
    
    
    509,893
    
    
    
    1,450,570Natural gas and propane inventories
    
    
    (4,386,465
    )
    
    
    (2,596,296
    )
    
    
    (31,027
    )
    
    
    (615,710
    )
    
    
    (1,615,395
    )Accounts payable
    
    
    (1,520,915
    )
    
    
    563,691
    
    
    
    1,925,899
    
    
    
    971,466
    
    
    
    549,217Recoverable/refundable cost of gas purchases
    
    
    (485,900
    )
    
    
    (111,595
    )
    
    
    (260,137
    )
    
    
    (228,388
    )
    
    
    1,034,494Prepayments and other
    
    
    (228,933
    )
    
    
    (419,585
    )
    
    
    (25,069
    )
    
    
    118,800
    
    
    
    (37,572
    )Equity in income of Kykuit
    
    
    36,841
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net assets held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,219,927
    )
    
    
    240,355Other assets
    
    
    18,378
    
    
    
    450,573
    
    
    
    (309,466
    )
    
    
    (275,609
    )
    
    
    1,895,776Accrued and other liabilities
    
    
    1,576,528
    
    
    
    1,373,063
    
    
    
    (483,719
    )
    
    
    (2,086,253
    )
    
    
    1,983,484Net cash provided by (used in) operating activities
    
    
    (8,102,144
    )
    
    
    (4,104,829
    )
    
    
    5,437,283
    
    
    
    (905,433
    )
    
    
    9,136,675CASH FLOWS FROM INVESTING ACTIVITIES:Construction expenditures
    
    
    (4,534,120
    )
    
    
    (1,384,540
    )
    
    
    (3,869,832
    )
    
    
    (2,406,910
    )
    
    
    (1,865,594
    )Construction expenditures  discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (365,845
    )
    
    
    (607,378
    )Purchase of marketable securities
    
    
    (2,985,898
    )
    
    
    
    
    
    
    (1,301,524
    )
    
    
    
    
    
    
    Sale of marketable securities
    
    
    
    
    
    
    
    
    
    
    390,746
    
    
    
    
    
    
    
    Purchase of fixed assets  Acquisition of Bangor and Frontier
    
    
    
    
    
    
    (4,601,599
    )
    
    
    (5,357,850
    )
    
    
    
    
    
    
    Acquisition of cash purchased in acquisition
    
    
    
    
    
    
    
    
    
    
    960,464
    
    
    
    
    
    
    
    Collection of note receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174,561Proceeds from sale of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,899,266
    
    
    
    Other investments
    
    
    (242,606
    )
    
    
    (644,777
    )
    
    
    (875,658
    )
    
    
    
    
    
    
    Customer advances received for construction
    
    
    90,093
    
    
    
    65,972
    
    
    
    129,641
    
    
    
    327,376
    
    
    
    115,305Increase (decrease) from contributions in aid of construction
    
    
    
    
    
    
    38,874
    
    
    
    125,678
    
    
    
    
    
    
    
    (7,093
    )Net cash provided by (used in) investing activities
    
    
    (7,672,591
    )
    
    
    (6,526,070
    )
    
    
    (9,798,335
    )
    
    
    15,453,887
    
    
    
    (2,190,199
    )CASH FLOWS FROM FINANCING ACTIVITIES:Repayments of long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,663,213
    )
    
    
    (1,027,073
    )Repayments of other short-term borrowings
    
    
    (1,309
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from lines of credit
    
    
    22,100,000
    
    
    
    8,475,495
    
    
    
    14,075,495
    
    
    
    11,012,000
    
    
    
    14,850,000Repayments of lines of credit
    
    
    (4,605,000
    )
    
    
    (1,950,000
    )
    
    
    (14,075,495
    )
    
    
    (11,012,000
    )
    
    
    (18,750,000
    )Proceeds from long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,000,000
    
    
    
    Repurchase of common stock
    
    
    (406,038
    )
    
    
    (150,911
    )
    
    
    (161,651
    )
    
    
    (2,276,192
    )
    
    
    Debt issuance cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (317,539
    )
    
    
    Sale of common stock
    
    
    
    
    
    
    221,890
    
    
    
    334,350
    
    
    
    597,151
    
    
    
    21,229Dividends paid
    
    
    (1,043,691
    )
    
    
    (1,070,334
    )
    
    
    (2,025,365
    )
    
    
    (1,518,219
    )
    
    
    (494,660
    )Net cash provided by (used in) financing activities
    
    
    16,043,962
    
    
    
    5,526,140
    
    
    
    (1,852,666
    )
    
    
    (9,178,012
    )
    
    
    (5,400,504
    )NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    269,227
    
    
    
    (5,104,759
    )
    
    
    (6,213,718
    )
    
    
    5,370,442
    
    
    
    1,545,972CASH AND CASH EQUIVALENTS:Beginning of year
    
    
    796,302
    
    
    
    7,010,020
    
    
    
    7,010,020
    
    
    
    1,639,578
    
    
    
    93,606End of year
    
    $
    1,065,529
    
    
    $
    1,905,261
    
    
    $
    796,302
    
    
    $
    7,010,020
    
    
    $
    1,639,578
   F-6




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##### Table of Contents



ENERGY WEST INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 SIX MONTHS ENDED
    
    
    YEARS ENDEDDECEMBER 31,
    
    
    JUNE 30,(audited)
    
    
    (unaudited)
    
    
    
    
    
    
    (audited)2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2006SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:Cash paid during the period for interest
    
    $
    624,549
    
    
    $
    472,755
    
    
    $
    922,359
    
    
    $
    1,410,114
    
    
    $
    1,047,633Cash paid during the period for income taxes
    
    
    444,000
    
    
    
    
    
    
    
    1,929,499
    
    
    
    5,474,500
    
    
    
    8,000SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:Shares issued to satisify deferred board compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84,046
    
    
    
    135,242Acquisition of Kykuit investment
    
    
    
    
    
    
    
    
    
    
    242,606
    
    
    
    
    
    
    
    Construction
expenditures included in accounts payable
    
    
    338,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares issued under the Companys 401k
reinvestment plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,436Capitalized interest
    
    
    11,322
    
    
    
    11,428
    
    
    
    11,512
    
    
    
    21,414
    
    
    
    18,855Repurchase of stock  noncash
    
    
    
    
    
    
    
    
    
    
    374,499
    
    
    
    
    
    
    
    Accrued dividends
    
    
    174,001
    
    
    
    155,261
    
    
    
    173,911
    
    
    
    
    
    
    
    
   F-7




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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended December 31, 2008 and 2007, and the years ended June 30, 2008 and 2007
 1. Summary of Business and Significant Accounting Policies
 Nature of Business
  Basis
of Presentation
  Reclassifications
 Principles of Consolidation
 Segments
 Use of Estimates in Preparing Financial Statements
  F-8




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##### Table of Contents



Natural Gas Inventories
 Accumulated Provisions for Doubtful Accounts
 Recoverable/Refundable Costs of Gas and Propane Purchases
 Property, Plant, and Equipment
 Contributions in Aid and Advances Received for Construction
 Natural Gas Reserves
 Impairment of Long-Lived Assets
 Stock-Based Compensation Share-Based Payment
  F-9




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##### Table of Contents



Six Months Ended
    
    
    Twelve Months EndedDecember 31,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2006(unaudited)Expected dividend rate
    
    
    5.81
    %
    
    
    3.06
    %
    
    
    4.47
    %
    
    
    4.00
    %
    
    
    2.00
    %Risk free interest rate
    
    
    1.87
    %
    
    
    3.70
    %
    
    
    3.61
    %
    
    
    5.10
    %
    
    
    4.87
    %Weighted average expected lives, in years
    
    
    3.50
    
    
    
    3.50
    
    
    
    2.50
    
    
    
    2.26
    
    
    
    3.40Price volatility
    
    
    73.24
    %
    
    
    31.16
    %
    
    
    31.16
    %
    
    
    30.00
    %
    
    
    39.00
    %Total intrinsic value of options exercised
    
    $
    
    
    
    $
    300,340
    
    
    $
    419,890
    
    
    $
    218,609
    
    
    $
    4,087Total cash received from options exercised
    
    $
    
    
    
    $
    115,805
    
    
    $
    293,930
    
    
    $
    512,175
    
    
    $
    21,228
 Comprehensive Income
 Six months ended
    
    
    Twelve months endedDecember 31
    
    
    June 302008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2006(unaudited)Net income
    
    $
    1,158,581
    
    
    $
    7,943,158
    
    
    $
    10,130,557
    
    
    $
    6,212,255
    
    
    $
    2,316,670Other comprehensive incomeChange in unrealized gain/loss on
available-for-sale securities, Net of $199,454 of income taxes
    
    
    (319,147
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive income
    
    $
    839,434
    
    
    $
    7,943,158
    
    
    $
    10,130,557
    
    
    $
    6,212,255
    
    
    $
    2,316,670
  F-10




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##### Table of Contents



Revenue Recognition
 Derivatives Accounting for Derivative Instruments and Hedging Activities Accounting for Certain Derivative Instruments and Certain Hedging
Activities Amendment of Statement 133 on
Derivatives and Hedging Activities
 Debt Issuance and Reacquisition Costs
 Cash and Cash Equivalents
 Earnings Per Share
 Credit Risk
 Effects of Regulation Accounting for the Effects of Certain
Types of Regulation
  F-11




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##### Table of Contents



Income Taxes
    Financial Instruments
 Asset Retirement Obligations (ARO)
   Balance  July 1, 2006
    
    $
    650,717Accretion
    
    
    37,654Balance  June 30, 2007
    
    $
    688,371Accretion
    
    
    37,860Balance  June 30, 2008
    
    $
    726,231Accretion
    
    
    19,968Balance  December 31, 2008
    
    $
    746,199
 Equity Method Investments
  F-12




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##### Table of Contents



New
Accounting Pronouncements
 Business Combinations,
 Accounting for Noncontrolling Interests
  The
Hierarchy of Generally Accepted Accounting Principles
   2.
    
    Discontinued Operations
   F-13




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##### Table of Contents



Years Ended June 302007
    
    
    2006(in thousands)Propane Operations  (Discontinued operations)Operating revenues
    
    $
    10,266
    
    
    $
    9,583Propane purchased
    
    
    6,906
    
    
    
    5,971Gross Margin
    
    
    3,360
    
    
    
    3,612Operating expenses
    
    
    2,104
    
    
    
    2,623Operating income
    
    
    1,256
    
    
    
    989Other (income)
    
    
    (51
    )
    
    
    (114
    )Income before interest and taxes
    
    
    1,307
    
    
    
    1,103Interest expense
    
    
    333
    
    
    
    431Income before income taxes
    
    
    974
    
    
    
    672Income tax (expense)
    
    
    (378
    )
    
    
    (266
    )Income from discontinued
operations
    
    
    596
    
    
    
    406Gain from disposal of operations
    
    
    5,479
    
    
    
    Income tax (expense)
    
    
    (2,120
    )
    
    
    Net Income
    
    $
    3,955
    
    
    $
    406
   F-14




---



##### Table of Contents



3. Acquisitions and Extraordinary Gain
     October 1, 2007Frontier Utilities of North Carolina, Inc.Current assets
    
    $
    957,439Property and equipment
    
    
    Noncurrent assets
    
    
    4,522,076Total assets acquired
    
    
    5,479,515Current liabilities
    
    
    666,524Long-term debt
    
    
    Other long-term obligations
    
    
    Total liabilities assumed
    
    
    666,524Net assets acquired:
    
    $
    4,812,991
 December 1, 2007Penobscot Natural Gas, Inc.Current assets
    
    $
    1,281,199Property and equipment
    
    
    Noncurrent assets
    
    
    197,545Total assets acquired
    
    
    1,478,744Current liabilities
    
    
    726,035Long-term debt
    
    
    Total liabilities assumed
    
    
    726,035Net assets acquired:
    
    $
    752,709
  F-15




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##### Table of Contents



Six Months Ended
    
    
    Year Ended June 30,December 31, 2007
    
    
    2008
    
    
    2007(in thousands)
    
    
    (in thousands)Pro forma revenues
    
    $
    30,977
    
    
    $
    79,497
    
    
    $
    71,505Pro forma income before extraordinary items
    
    
    850
    
    
    
    3,037
    
    
    
    4,973Pro forma net income
    
    
    7,669
    
    
    
    9,856
    
    
    
    4,973Pro forma earnings per share  basicIncome before extraordinary items
    
    $
    0.198
    
    
    $
    0.700
    
    
    $
    1.120Net income
    
    $
    1.789
    
    
    
    2.280
    
    
    
    1.120Pro forma earnings per share  dilutedIncome before extraordinary items
    
    $
    0.198
    
    
    $
    0.700
    
    
    $
    1.120Net income
    
    $
    1.782
    
    
    
    2.280
    
    
    
    1.110
    4. Natural Gas Wells
       F-16




---



##### Table of Contents



Disclosures About the Oil and Gas Producing Properties
 5. Marketable Securities
   December 31, 2008Investment
    
    
    Unrealized
    
    
    Estimatedat cost
    
    
    Gains (losses)
    
    
    Fair ValueCommon stock
    
    $
    3,895,476
    
    
    $
    (518,601
    )
    
    $
    3,376,875
  6. Fair Value Measurements
 Fair Value Measurements,
 Valuation Hierarchy
  December 31, 2008Level I
    
    
    Level 2
    
    
    Level 3
    
    
    TOTALAvailable-for-sale
securities
    
    
    3,376,875
    
    
    
    
    
    
    
    
    
    
    
    3,376,875Total assets at fair value
    
    $
    3,376,875
    
    
    $
    
    
    
    $
    
    
    
    $
    3,376,875
  F-17




---



##### Table of Contents



7. Property, Plant and Equipment
  December 31,
    
    
    June 30,2008
    
    
    2008
    
    
    2007Gas transmission and distribution facilities
    
    $
    49,362,905
    
    
    $
    46,187,291
    
    
    $
    44,666,105Land
    
    
    153,891
    
    
    
    137,037
    
    
    
    139,132Buildings and leasehold improvements
    
    
    2,945,258
    
    
    
    2,940,816
    
    
    
    2,907,975Transportation equipment
    
    
    1,628,103
    
    
    
    1,696,286
    
    
    
    1,581,196Computer equipment
    
    
    3,200,370
    
    
    
    3,560,478
    
    
    
    4,481,310Other equipment
    
    
    3,497,776
    
    
    
    3,351,006
    
    
    
    3,752,790Construction work-in-progress
    
    
    2,494,646
    
    
    
    1,136,504
    
    
    
    258,029Producing natural gas properties
    
    
    3,677,872
    
    
    
    3,677,872
    
    
    
    2,381,88366,960,821
    
    
    
    62,687,290
    
    
    
    60,168,420Accumulated depreciation, depletion,
and amortization
    
    
    (32,056,379
    )
    
    
    (31,635,871
    )
    
    
    (31,008,336
    )Total
    
    $
    34,904,442
    
    
    $
    31,051,419
    
    
    $
    29,160,084
  8. Deferred Charges
  December 31,
    
    
    June 30,2008
    
    
    2008
    
    
    2007Regulatory asset for property tax
    
    $
    1,554,244
    
    
    $
    1,707,370
    
    
    $
    2,013,623Regulatory asset for income taxes
    
    
    452,646
    
    
    
    452,646
    
    
    
    452,646Regulatory assets for deferred environmental remediation costs
    
    
    114,960
    
    
    
    149,625
    
    
    
    247,617Rate case costs
    
    
    18,538
    
    
    
    11,525
    
    
    
    Unamortized debt issue costs
    
    
    417,768
    
    
    
    440,490
    
    
    
    317,539Total
    
    $
    2,558,156
    
    
    $
    2,761,656
    
    
    $
    3,031,425
    F-18




---



##### Table of Contents



9. Accrued and Other Current Liabilities
  December 31,
    
    
    June 30,2008
    
    
    2008
    
    
    2007Property tax settlementcurrent portion
    
    $
    235,772
    
    
    $
    235,772
    
    
    $
    243,000Payable to employee benefit plans
    
    
    57,617
    
    
    
    119,269
    
    
    
    132,131Accrued vacation
    
    
    464,153
    
    
    
    310,472
    
    
    
    224,588Customer deposits
    
    
    501,248
    
    
    
    498,880
    
    
    
    394,128Accrued interest
    
    
    4,897
    
    
    
    276
    
    
    
    9,069Accrued taxes other than income
    
    
    457,084
    
    
    
    474,775
    
    
    
    506,448Deferred short-term gain
    
    
    
    
    
    
    
    
    
    
    243,519Deferred payments from levelized billing
    
    
    2,075,860
    
    
    
    554,765
    
    
    
    605,031Other
    
    
    1,150,817
    
    
    
    1,108,503
    
    
    
    734,812Total
    
    $
    4,947,448
    
    
    $
    3,302,712
    
    
    $
    3,092,726
 10. Other Long-Term Liabilities
  December 31,
    
    
    June 30,2008
    
    
    2008
    
    
    2007Asset retirement obligation
    
    $
    746,199
    
    
    $
    726,231
    
    
    $
    688,371Customer advances for construction
    
    
    824,955
    
    
    
    734,862
    
    
    
    605,221Deferred gain  long-term
    
    
    
    
    
    
    
    
    
    
    82,063Regulatory liability for income taxes
    
    
    83,161
    
    
    
    83,161
    
    
    
    83,161Property tax settlement
    
    
    729,008
    
    
    
    972,008
    
    
    
    1,215,008Total
    
    $
    2,383,323
    
    
    $
    2,516,262
    
    
    $
    2,673,824
 11. Credit Facility and Long-Term Debt
  Bank of America Line of Credit
   F-19




---



##### Table of Contents



$13,000,000 6.16% Senior Unsecured Notes


Series 1997 Notes Payable


Series 1993 Notes Payable


Series 1992B Industrial Development Revenue Obligations


Term Loan




F-20



---



##### Table of Contents



Debt Covenants


12. Employee Benefit Plans










F-21



---



##### Table of Contents



13. Income Taxes
  December 31,
    
    
    June 30,2008
    
    
    2008
    
    
    2007Current
    
    
    Long-Term
    
    
    Current
    
    
    Long-Term
    
    
    Current
    
    
    Long-TermDeferred tax asset:Allowances for doubtful accounts
    
    $
    79,323
    
    
    $
    
    
    
    $
    58,047
    
    
    $
    
    
    
    $
    23,827
    
    
    $
    Unamortized investment tax credit
    
    
    
    
    
    
    (17,502
    )
    
    
    
    
    
    
    2,806
    
    
    
    
    
    
    
    10,907Contributions in aid of construction
    
    
    
    
    
    
    334,460
    
    
    
    
    
    
    
    349,538
    
    
    
    
    
    
    
    318,455Property, plant, and equipment
    
    
    
    
    
    
    8,858,733
    
    
    
    
    
    
    
    14,432,180
    
    
    
    
    
    
    
    Other nondeductible accruals
    
    
    203,893
    
    
    
    26,265
    
    
    
    359
    
    
    
    
    
    
    
    77,445
    
    
    
    Recoverable purchase gas costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Derivatives
    
    
    31,561
    
    
    
    
    
    
    
    31,561
    
    
    
    
    
    
    
    93,657
    
    
    
    Deferred incentive and pension accrual
    
    
    
    
    
    
    4,147
    
    
    
    
    
    
    
    60,875
    
    
    
    
    
    
    
    14,997Unrealized
loss on securities held for sale
    
    
    199,454
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net
operating loss (NOL) carryforwards
    
    
    
    
    
    
    3,660,736Other
    
    
    10,383
    
    
    
    972,409
    
    
    
    92,588
    
    
    
    511,596
    
    
    
    
    
    
    
    533,298Total
    
    
    524,614
    
    
    
    13,839,248
    
    
    
    182,555
    
    
    
    15,356,995
    
    
    
    194,929
    
    
    
    877,657Deferred tax liabilities:Recoverable purchase gas costs
    
    
    418,575
    
    
    
    
    
    
    
    234,297
    
    
    
    
    
    
    
    189,294
    
    
    
    Property, plant, and equipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,110,398Debt issue costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Property tax liability
    
    
    
    
    
    
    403,341
    
    
    
    
    
    
    
    190,134
    
    
    
    
    
    
    
    214,028Covenant not to compete
    
    
    
    
    
    
    36,010
    
    
    
    
    
    
    
    2,624,737
    
    
    
    
    
    
    
    42,374Other
    
    
    (119,914
    )
    
    
    236,701
    
    
    
    (33,703
    )
    
    
    71,133
    
    
    
    (47,735
    )
    
    
    96,027Total
    
    
    298,661
    
    
    
    676,502
    
    
    
    200,594
    
    
    
    2,886,004
    
    
    
    141,559
    
    
    
    5,462,827Net deferred tax asset (liabilities)
    
    
    225,953
    
    
    
    13,163,196
    
    
    
    (18,039
    )
    
    
    12,470,991
    
    
    
    53,370
    
    
    
    (4,585,170
    )Less valuation allowance
    
    
    
    
    
    
    (7,469,886)
    )
    
    
    
    
    
    
    (5,645,416
    )
    
    
    
    
    
    
    Net deferred tax asset (liabilities)
    
    $
    225,953
    
    
    $
    5,693,310
    
    
    $
    (18,039
    )
    
    $
    6,825,575
    
    
    $
    53,370
    
    
    $
    (4,585,170
    )
  F-22




---



##### Table of Contents



December 31,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2006(unaudited)Current income taxes:Federal
    
    $
    (120,435
    )
    
    $
    232,406
    
    
    $
    1,058,405
    
    
    $
    957,135
    
    
    $
    1,281,537State
    
    
    (39,303
    )
    
    
    18,847
    
    
    
    52,121
    
    
    
    164,240
    
    
    
    131,331Total current income taxes
    
    
    (159,738
    )
    
    
    251,253
    
    
    
    1,110,526
    
    
    
    1,121,375
    
    
    
    1,412,868Deferred income taxes:Federal
    
    
    944,144
    
    
    
    27,146
    
    
    
    241,244
    
    
    
    137,881
    
    
    
    (240,349
    )State
    
    
    152,582
    
    
    
    5,960
    
    
    
    1,980
    
    
    
    34,470
    
    
    
    (42,414
    )Total deferred income taxes
    
    
    1,096,726
    
    
    
    33,106
    
    
    
    243,224
    
    
    
    172,351
    
    
    
    (282,763
    )Total income taxes before credits
    
    
    936,988
    
    
    
    284,359
    
    
    
    1,353,750
    
    
    
    1,293,726
    
    
    
    1,130,105Investment tax credit, net
    
    
    (10,531
    )
    
    
    (10,531
    )
    
    
    (21,062
    )
    
    
    (21,062
    )
    
    
    (21,062
    )Total income tax expense
    
    $
    926,457
    
    
    $
    273,828
    
    
    $
    1,332,688
    
    
    $
    1,272,664
    
    
    $
    1,109,043
  December 31,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2006(unaudited)Tax expense at statutory rate of 34%
    
    $
    708,913
    
    
    $
    475,253
    
    
    $
    1,578,981
    
    
    $
    1,200,249
    
    
    $
    1,026,763State income tax, net of federal tax
benefit
    
    
    92,993
    
    
    
    65,138
    
    
    
    179,835
    
    
    
    154,620
    
    
    
    132,271Amortization of deferred investment
tax credits
    
    
    (10,531
    )
    
    
    (10,531
    )
    
    
    (21,062
    )
    
    
    (21,062
    )
    
    
    (21,062
    )Other
    
    
    135,082
    
    
    
    (256,032
    )
    
    
    (405,066
    )
    
    
    (61,143
    )
    
    
    (28,929
    )Total
    
    $
    926,457
    
    
    $
    273,828
    
    
    $
    1,332,688
    
    
    $
    1,272,664
    
    
    $
    1,109,043
   F-23




---



##### Table of Contents



14. Segments of Operations
  Six Months Ended December 31, 2008
 Natural Gas
    
    
    
    
    
    
    Pipeline
    
    
    Corporate andOperations
    
    
    EWR
    
    
    Operations
    
    
    Other
    
    
    Eliminations
    
    
    ConsolidatedOperating revenue:Natural gas operations
    
    $
    29,158,035
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (317,912
    )
    
    $
    28,840,123Marketing and wholesale
    
    
    
    
    
    
    14,623,793
    
    
    
    
    
    
    
    
    
    
    
    (4,932,233
    )
    
    
    9,691,560Pipeline operations
    
    
    
    
    
    
    
    
    
    
    226,157
    
    
    
    
    
    
    
    
    
    
    
    226,157Total operating revenue
    
    
    29,158,035
    
    
    
    14,623,793
    
    
    
    226,157
    
    
    
    
    
    
    
    (5,250,145
    )
    
    
    38,757,840Gas purchased
    
    
    19,777,820
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (317,912
    )
    
    
    19,459,908Gas and electric  wholesale
    
    
    
    
    
    
    12,702,580
    
    
    
    
    
    
    
    
    
    
    
    (4,932,233
    )
    
    
    7,770,347Distribution, general, and
administrative
    
    
    5,460,205
    
    
    
    205,087
    
    
    
    52,114
    
    
    
    
    
    
    
    
    
    
    
    5,717,406Maintenance
    
    
    317,112
    
    
    
    40
    
    
    
    2,646
    
    
    
    
    
    
    
    
    
    
    
    319,798Depreciation and
amortization
    
    
    841,405
    
    
    
    152,767
    
    
    
    29,209
    
    
    
    
    
    
    
    
    
    
    
    1,023,381Taxes other than income
    
    
    1,260,475
    
    
    
    11,155
    
    
    
    12,927
    
    
    
    
    
    
    
    
    
    
    
    1,284,557Operating expenses
    
    
    27,657,017
    
    
    
    13,071,629
    
    
    
    96,896
    
    
    
    
    
    
    
    (5,250,145
    )
    
    
    35,575,397Operating income
    
    
    1,501,018
    
    
    
    1,552,164
    
    
    
    129,261
    
    
    
    
    
    
    
    
    
    
    
    3,182,443Other income
    
    
    160,326
    
    
    
    (36,516
    )
    
    
    94
    
    
    
    (544,253
    )
    
    
    
    
    
    
    (420,349
    )Interest (expense)
    
    
    (584,484
    )
    
    
    (83,300
    )
    
    
    (9,272
    )
    
    
    
    
    
    
    
    
    
    
    (677,056
    )Income from continuing
operations
before income taxes
    
    
    1,076,860
    
    
    
    1,432,348
    
    
    
    120,083
    
    
    
    (544,253
    )
    
    
    
    
    
    
    2,085,038Income taxes (expense)
    
    
    (518,933
    )
    
    
    (550,701
    )
    
    
    (45,943
    )
    
    
    189,120
    
    
    
    
    
    
    
    (926,457
    )Net income
    
    $
    557,927
    
    
    $
    881,647
    
    
    $
    74,140
    
    
    $
    (355,133
    )
    
    $
    
    
    
    $
    1,158,581Capital expenditures and
natural gas properties
    
    $
    4,648,150
    
    
    $
    68,700
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4,716,850Total assets
    
    $
    59,748,521
    
    
    $
    7,819,863
    
    
    $
    717,977
    
    
    $
    28,468,131
    
    
    $
    (20,935,527
    )
    
    $
    75,818,965Equity Method investments
    
    $
    
    
    
    $
    1,081,423
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,081,423
  F-24




---



##### Table of Contents



Six
Months Ended December 31, 2007 (unaudited)
 Natural Gas
    
    
    
    
    
    
    Pipeline
    
    
    Corporate andOperations
    
    
    EWR
    
    
    Operations
    
    
    Other
    
    
    Eliminations
    
    
    ConsolidatedOperating revenue:Natural gas operations
    
    $
    21,417,728
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (299,433
    )
    
    $
    21,118,295Marketing and wholesale
    
    
    
    
    
    
    10,519,272
    
    
    
    
    
    
    
    
    
    
    
    (3,511,150
    )
    
    
    7,008,122Pipeline operations
    
    
    
    
    
    
    
    
    
    
    186,855
    
    
    
    
    
    
    
    
    
    
    
    186,855Total operating revenue
    
    
    21,417,728
    
    
    
    10,519,272
    
    
    
    186,855
    
    
    
    
    
    
    
    (3,810,583
    )
    
    
    28,313,272Gas purchased
    
    
    14,271,860
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (299,433
    )
    
    
    13,972,427Gas and electric  wholesale
    
    
    
    
    
    
    9,433,766
    
    
    
    
    
    
    
    
    
    
    
    (3,511,150
    )
    
    
    5,922,616Distribution, general, and
administrative
    
    
    4,341,105
    
    
    
    188,163
    
    
    
    72,640
    
    
    
    
    
    
    
    
    
    
    
    4,601,908Maintenance
    
    
    323,332
    
    
    
    595
    
    
    
    1,988
    
    
    
    
    
    
    
    
    
    
    
    325,915Depreciation and amortization
    
    
    737,472
    
    
    
    123,713
    
    
    
    28,186
    
    
    
    
    
    
    
    
    
    
    
    889,371Taxes other than income
    
    
    845,191
    
    
    
    8,222
    
    
    
    10,200
    
    
    
    
    
    
    
    
    
    
    
    863,613Operating expenses
    
    
    20,518,960
    
    
    
    9,754,459
    
    
    
    113,014
    
    
    
    
    
    
    
    (3,810,583
    )
    
    
    26,575,850Operating income
    
    
    898,768
    
    
    
    764,813
    
    
    
    73,841
    
    
    
    
    
    
    
    
    
    
    
    1,737,422Other income
    
    
    189,990
    
    
    
    67
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    190,093Interest (expense)
    
    
    (461,980
    )
    
    
    (59,054
    )
    
    
    (8,677
    )
    
    
    
    
    
    
    
    
    
    
    (529,711
    )Income from continuing operations
before income taxes
    
    
    626,778
    
    
    
    705,826
    
    
    
    65,200
    
    
    
    
    
    
    
    
    
    
    
    1,397,804Income taxes (expense)
    
    
    (119,284
    )
    
    
    (135,452
    )
    
    
    (19,092
    )
    
    
    
    
    
    
    
    
    
    
    (273,828
    )Net income before extraordinary item
    
    
    507,494
    
    
    
    570,374
    
    
    
    46,108
    
    
    
    
    
    
    
    
    
    
    
    1,123,976Extraordinary gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,819,182
    
    
    
    
    
    
    
    6,819,182Net income
    
    $
    507,494
    
    
    $
    570,374
    
    
    $
    46,108
    
    
    $
    6,819,182
    
    
    $
    
    
    
    $
    7,943,158Capital expenditures and
natural gas properties
    
    $
    1,150,194
    
    
    $
    197,258
    
    
    $
    37,088
    
    
    $
    
    
    
    $
    
    
    
    $
    1,384,540
  F-25




---



##### Table of Contents



Year Ended June 30, 2008
 Natural Gas
    
    
    
    
    
    
    Pipeline
    
    
    Corporate andOperations
    
    
    EWR
    
    
    Operations
    
    
    Other
    
    
    Eliminations
    
    
    ConsolidatedOperating revenue:Natural gas operations
    
    $
    60,093,090
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (754,094
    )
    
    $
    59,338,996Marketing and wholesale
    
    
    
    
    
    
    29,395,960
    
    
    
    
    
    
    
    
    
    
    
    (12,271,879
    )
    
    
    17,124,081Pipeline operations
    
    
    
    
    
    
    
    
    
    
    370,171
    
    
    
    
    
    
    
    
    
    
    
    370,171Total operating revenue
    
    
    60,093,090
    
    
    
    29,395,960
    
    
    
    370,171
    
    
    
    
    
    
    
    (13,025,973
    )
    
    
    76,833,248Gas purchased
    
    
    42,091,491
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (754,094
    )
    
    
    41,337,397Gas and electric  wholesale
    
    
    
    
    
    
    27,105,232
    
    
    
    
    
    
    
    
    
    
    
    (12,271,879
    )
    
    
    14,833,353Distribution, general, and
administrative
    
    
    9,710,294
    
    
    
    370,374
    
    
    
    140,087
    
    
    
    441,123
    
    
    
    
    
    
    
    10,661,878Maintenance
    
    
    641,211
    
    
    
    1,094
    
    
    
    8,248
    
    
    
    
    
    
    
    
    
    
    
    650,553Depreciation and amortization
    
    
    1,566,359
    
    
    
    242,551
    
    
    
    56,384
    
    
    
    
    
    
    
    
    
    
    
    1,865,294Taxes other than income
    
    
    2,035,403
    
    
    
    16,704
    
    
    
    28,037
    
    
    
    
    
    
    
    
    
    
    
    2,080,144Operating expenses
    
    
    56,044,758
    
    
    
    27,735,955
    
    
    
    232,756
    
    
    
    441,123
    
    
    
    (13,025,973
    )
    
    
    71,428,619Operating income
    
    
    4,048,332
    
    
    
    1,660,005
    
    
    
    137,415
    
    
    
    (441,123
    )
    
    
    
    
    
    
    5,404,629Other income
    
    
    245,487
    
    
    
    578
    
    
    
    17
    
    
    
    69,697
    
    
    
    
    
    
    
    315,779Interest (expense)
    
    
    (933,655
    )
    
    
    (124,827
    )
    
    
    (17,863
    )
    
    
    
    
    
    
    
    
    
    
    (1,076,345
    )Income from continuing operations
before income taxes
    
    
    3,360,164
    
    
    
    1,535,756
    
    
    
    119,569
    
    
    
    (371,426
    )
    
    
    
    
    
    
    4,644,063Income taxes (expense)
    
    
    (1,091,105
    )
    
    
    (343,646
    )
    
    
    (40,007
    )
    
    
    142,070
    
    
    
    
    
    
    
    (1,332,688
    )Net income before extraordinary
item
    
    
    2,269,059
    
    
    
    1,192,110
    
    
    
    79,562
    
    
    
    (229,356
    )
    
    
    
    
    
    
    3,311,375Extraordinary gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,819,182
    
    
    
    
    
    
    
    6,819,182Net income
    
    $
    2,269,059
    
    
    $
    1,192,110
    
    
    $
    79,562
    
    
    $
    6,589,826
    
    
    $
    
    
    
    $
    10,130,557Capital expenditures and
natural gas properties
    
    $
    3,578,307
    
    
    $
    250,091
    
    
    $
    41,434
    
    
    $
    
    
    
    $
    
    
    
    $
    3,869,832Total assets
    
    $
    49,414,217
    
    
    $
    7,486,996
    
    
    $
    988,318
    
    
    $
    25,713,911
    
    
    $
    (25,226,352
    )
    
    $
    58,377,090Equity Method Investments
    
    $
    
    
    
    $
    1,118,264
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,118,264
  F-26




---



##### Table of Contents



Year Ended June 30, 2007
 Natural Gas
    
    
    
    
    
    
    Pipeline
    
    
    DiscontinuedOperations
    
    
    EWR
    
    
    Operations
    
    
    Operations
    
    
    Eliminations
    
    
    ConsolidatedOperating revenue:Natural gas operations
    
    $
    47,074,560
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (635,054
    )
    
    $
    46,439,506Marketing and wholesale
    
    
    
    
    
    
    22,466,030
    
    
    
    
    
    
    
    
    
    
    
    (9,920,671
    )
    
    
    12,545,359Pipeline operations
    
    
    
    
    
    
    
    
    
    
    388,175
    
    
    
    
    
    
    
    
    
    
    
    388,175Total operating revenue
    
    
    47,074,560
    
    
    
    22,466,030
    
    
    
    388,175
    
    
    
    
    
    
    
    (10,555,725
    )
    
    
    59,373,040Gas purchased
    
    
    34,177,047
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (635,054
    )
    
    
    33,541,993Gas and electric  wholesale
    
    
    
    
    
    
    20,185,304
    
    
    
    
    
    
    
    
    
    
    
    (9,920,671
    )
    
    
    10,264,633Distribution, general, and
administrative
    
    
    5,676,195
    
    
    
    315,279
    
    
    
    206,055
    
    
    
    
    
    
    
    
    
    
    
    6,197,529Maintenance
    
    
    563,912
    
    
    
    297
    
    
    
    2,474
    
    
    
    
    
    
    
    
    
    
    
    566,683Depreciation and amortization
    
    
    1,414,003
    
    
    
    222,110
    
    
    
    56,373
    
    
    
    
    
    
    
    
    
    
    
    1,692,486Taxes other than income
    
    
    1,652,661
    
    
    
    20,529
    
    
    
    23,746
    
    
    
    
    
    
    
    
    
    
    
    1,696,936Operating expenses
    
    
    43,483,818
    
    
    
    20,743,519
    
    
    
    288,648
    
    
    
    
    
    
    
    (10,555,725
    )
    
    
    53,960,260Operating income
    
    
    3,590,742
    
    
    
    1,722,511
    
    
    
    99,527
    
    
    
    
    
    
    
    
    
    
    
    5,412,780Other income
    
    
    228,515
    
    
    
    1,592
    
    
    
    11,412
    
    
    
    
    
    
    
    
    
    
    
    241,519Interest (expense)
    
    
    (1,896,650
    )
    
    
    (185,365
    )
    
    
    (42,140
    )
    
    
    
    
    
    
    
    
    
    
    (2,124,155
    )Income from continuing operations
before income taxes
    
    
    1,922,607
    
    
    
    1,538,738
    
    
    
    68,799
    
    
    
    
    
    
    
    
    
    
    
    3,530,144Income taxes (expense)
    
    
    (653,130
    )
    
    
    (593,078
    )
    
    
    (26,456
    )
    
    
    
    
    
    
    
    
    
    
    (1,272,664
    )Income from continuing operations
    
    
    1,269,477
    
    
    
    945,660
    
    
    
    42,343
    
    
    
    
    
    
    
    
    
    
    
    2,257,480Discontinued operations:Gain from disposal of operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,479,166
    
    
    
    
    
    
    
    5,479,166Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    975,484
    
    
    
    
    
    
    
    975,484Income tax (expense)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,499,875
    )
    
    
    
    
    
    
    (2,499,875
    )Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,954,775
    
    
    
    
    
    
    
    3,954,775Net income
    
    $
    1,269,477
    
    
    $
    945,660
    
    
    $
    42,343
    
    
    $
    3,954,775
    
    
    $
    
    
    
    $
    6,212,255Capital expenditures and
natural gas properties
    
    $
    2,024,443
    
    
    $
    361,379
    
    
    $
    21,088
    
    
    $
    
    
    
    $
    
    
    
    $
    2,406,910Total assets
    
    $
    38,260,280
    
    
    $
    5,882,390
    
    
    $
    1,003,145
    
    
    $
    
    
    
    $
    6,436,001
    
    
    $
    51,581,816Equity Method Investments
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  F-27




---



##### Table of Contents



Year Ended June 30, 2006
 Natural Gas
    
    
    
    
    
    
    Pipeline
    
    
    DiscontinuedOperations
    
    
    EWR
    
    
    Operations
    
    
    Operations
    
    
    Eliminations
    
    
    ConsolidatedOperating revenue:Natural gas operations
    
    $
    56,044,531
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (592,136
    )
    
    $
    55,452,395Marketing and wholesale
    
    
    
    
    
    
    32,879,779
    
    
    
    
    
    
    
    
    
    
    
    (14,047,850
    )
    
    
    18,831,929Pipeline operations
    
    
    
    
    
    
    
    
    
    
    411,237
    
    
    
    
    
    
    
    
    
    
    
    411,237Total operating revenue
    
    
    56,044,531
    
    
    
    32,879,779
    
    
    
    411,237
    
    
    
    
    
    
    
    (14,639,986
    )
    
    
    74,695,561Gas purchased
    
    
    43,752,966
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (592,136
    )
    
    
    43,160,830Gas and electric  wholesale
    
    
    
    
    
    
    31,285,246
    
    
    
    
    
    
    
    
    
    
    
    (14,047,850
    )
    
    
    17,237,396Distribution, general, and
administrative
    
    
    5,830,719
    
    
    
    473,341
    
    
    
    85,070
    
    
    
    
    
    
    
    
    
    
    
    6,389,130Maintenance
    
    
    504,473
    
    
    
    198
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    504,671Depreciation and amortization
    
    
    1,394,169
    
    
    
    221,814
    
    
    
    56,064
    
    
    
    
    
    
    
    
    
    
    
    1,672,047Taxes other than income
    
    
    1,430,101
    
    
    
    15,672
    
    
    
    7,602
    
    
    
    
    
    
    
    
    
    
    
    1,453,375Operating expenses
    
    
    52,912,428
    
    
    
    31,996,271
    
    
    
    148,736
    
    
    
    
    
    
    
    (14,639,986
    )
    
    
    70,417,449Operating income
    
    
    3,132,103
    
    
    
    883,508
    
    
    
    262,501
    
    
    
    
    
    
    
    
    
    
    
    4,278,112Other income
    
    
    358,213
    
    
    
    32,464
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    390,677Interest (expense)
    
    
    (1,425,186
    )
    
    
    (182,422
    )
    
    
    (41,290
    )
    
    
    
    
    
    
    
    
    
    
    (1,648,898
    )Income from continuing operations
before income taxes
    
    
    2,065,130
    
    
    
    733,550
    
    
    
    221,211
    
    
    
    
    
    
    
    
    
    
    
    3,019,891Income taxes (expense)
    
    
    (740,624
    )
    
    
    (283,339
    )
    
    
    (85,080
    )
    
    
    
    
    
    
    
    
    
    
    (1,109,043
    )Income from continuing operations
    
    
    1,324,506
    
    
    
    450,211
    
    
    
    136,131
    
    
    
    
    
    
    
    
    
    
    
    1,910,848Discontinued operations:Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    671,485
    
    
    
    
    
    
    
    671,485Income tax (expense)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (265,663
    )
    
    
    
    
    
    
    (265,663
    )Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    405,822
    
    
    
    
    
    
    
    405,822Net income
    
    $
    1,324,506
    
    
    $
    450,211
    
    
    $
    136,131
    
    
    $
    405,822
    
    
    $
    
    
    
    $
    2,316,670Capital expenditures and
natural gas properties
    
    $
    1,744,046
    
    
    $
    114,747
    
    
    $
    6,801
    
    
    $
    
    
    
    $
    
    
    
    $
    1,865,594Equity Method Investments
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  F-28




---



##### Table of Contents



15. Stockholders Equity
  Purchases of Equity Securities by Our Company and Affiliated Purchasers
 Total number of
    
    
    Maximum number ofshares purchased as
    
    
    shares that may yet beTotal Shares
    
    
    Average price
    
    
    part of publicly
    
    
    purchased under thePeriod
    
    Purchased
    
    

paid per share
    
    
    announced plans
    
    

stock repurchase planMay 30, 2007  June 30, 2007
    
    
    219,522
    
    
    $
    10.00
    
    
    
    219,522July 1, 2007  June 30, 2008
    
    
    16,780
    
    
    $
    9.50
    
    
    
    16,780July 1, 2008  December 31, 2008
    
    
    53,416
    
    
    $
    7.60
    
    
    
    53,416289,718
    
    
    
    
    
    
    
    289,718
    
    
    
    158,782
   2002 Stock Option Plan
  SFAS No. 123 Disclosures Accounting for Stock-Based Compensation Accounting for Stock-Based CompensationTransition and Disclosure
  F-29




---



##### Table of Contents



Weighted
    
    
    AggregateNumber of
    
    
    Average
    
    
    IntrinsicShares
    
    
    Exercise Price
    
    
    ValueOutstanding
June 30, 2005
    
    
    189,000
    
    
    $
    5.56Granted
    
    
    72,750
    
    
    $
    6.74Exercised
    
    
    (3,750
    )
    
    $
    5.66Expired
    
    
    (39,750
    )
    
    $
    Outstanding June 30, 2006
    
    
    218,250
    
    
    $
    5.56Granted
    
    
    45,000
    
    
    $
    7.03Exercised
    
    
    (93,750
    )
    
    $
    5.47Expired
    
    
    (4,500
    )
    
    $
    Outstanding June 30, 2007
    
    
    165,000
    
    
    $
    5.98Granted
    
    
    30,000
    
    
    $
    6.59Exercised
    
    
    (109,500
    )
    
    $
    3.82Expired
    
    
    (66,000
    )
    
    $
    Outstanding June 30, 2008
    
    
    19,500
    
    
    $
    9.10Granted
    
    
    10,000
    
    
    $
    7.10Exercised
    
    
    
    
    
    $
    Expired
    
    
    
    
    
    $
    Outstanding December 31, 2008
    
    
    29,500
    
    
    $
    8.42
    
    
    $
    20,210Exerciseable December 31, 2008
    
    
    10,000
    
    
    $
    9.22
    
    
    $
    2,900
   F-30




---



##### Table of Contents



WeightedAverageWeighted
    
    
    Remaining
    
    
    
    
    
    
    WeightedAverage
    
    
    Contractual
    
    
    
    
    
    
    AverageGrant
    
    Exercise
    
    
    Number
    
    
    Exercise
    
    
    Life
    
    
    Number
    
    
    ExerciseDate
    
    Price
    
    
    Outstanding
    
    
    Price
    
    
    (Years)
    
    
    Exercisable
    
    
    Price1/6/2006
    
    $
    6.35
    
    
    
    4,500
    
    
    $
    6.35
    
    
    
    2.01
    
    
    
    
    
    
    $
    6.3512/1/2007
    
    $
    9.93
    
    
    
    15,000
    
    
    $
    9.93
    
    
    
    8.92
    
    
    
    7,500
    
    
    $
    9.9312/1/2008
    
    $
    7.10
    
    
    
    10,000
    
    
    $
    7.10
    
    
    
    9.92
    
    
    
    2,500
    
    
    $
    7.1029,500
    
    
    
    
    
    
    
    
    
    
    
    10,000
  Termination of Preferred Stock Rights Agreement by Amendment of Final Expiration Date 
Expiration of the Preferred Stock Purchase Rights
   F-31




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##### Table of Contents



16. Commitments and Contingencies
 Commitments
 Year ending December 31:2009
    
    $
    4,258,8962010
    
    
    1,064,724Total
    
    $
    5,323,620
  Year ending December 31:2009
    
    $
    500,8742010
    
    
    500,8742011
    
    
    500,8742012
    
    
    500,8742013
    
    
    500,874Thereafter
    
    
    2,093,348Total
    
    $
    4,597,718
 Environmental Contingency
     Derivative Contingencies
 Litigation
  F-32




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##### Table of Contents



Shelby Gas Association v. Energy West Resources,
Inc.
    Operating Leases
 Year ended:December 31, 2009
    
    
    133,367December 31, 2010
    
    
    25,420December 31, 2011
    
    
    9,771December 31, 2012
    
    
    7,126December 31, 2013
    
    
    3,147Thereafter
    
    
    62,497$
    241,328
  17. Financial Instruments and Risk Management
 Management of Risks Related to Derivatives
    F-33




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##### Table of Contents



18. Pending Acquisitions
     F-34




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##### Table of Contents



19. Quarterly Information (Unaudited)
  Six Months Ended December 31, 2008
 For the quarters endedSeptember 30
    
    
    December 312008
    
    
    2008Revenues
    
    $
    13,987
    
    
    $
    24,771Gross margin
    
    $
    4,544
    
    
    $
    6,984Operating income
    
    $
    711
    
    
    $
    2,471Income (loss) before extraordinary items
    
    $
    386
    
    
    $
    773Extraordinary gain
    
    $
    0
    
    
    $
    0Net income (loss)
    
    $
    386
    
    
    $
    773Basic earnings (loss) before extraordinary items per
common share
    
    $
    0.09
    
    
    $
    0.18Basic earnings (loss) per common share  extraordinary gain
    
    $
    0.00
    
    
    $
    0.00Basic earnings (loss) per common share  net income
    
    $
    0.09
    
    
    $
    0.18Diluted earnings (loss) per share
    
    $
    0.09
    
    
    $
    0.18Diluted earnings (loss) per share  extraordinary gain
    
    $
    0.00
    
    
    $
    0.00Diluted earnings (loss) per share  net income
    
    $
    0.09
    
    
    $
    0.18
  F-35




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##### Table of Contents



Year Ended June 30, 2008
 For the quarters endedSeptember 30
    
    
    December 31
    
    
    March 31
    
    
    June 302007
    
    
    2007
    
    
    2008
    
    
    2008Revenues
    
    $
    6,951
    
    
    $
    20,171
    
    
    $
    30,878
    
    
    $
    18,833Gross margin
    
    $
    2,675
    
    
    $
    5,742
    
    
    $
    7,639
    
    
    $
    4,606Operating income
    
    $
    117
    
    
    $
    1,620
    
    
    $
    3,553
    
    
    $
    114Income (loss) before extraordinary items
    
    $
    75
    
    
    $
    1,049
    
    
    $
    2,307
    
    
    $
    (120
    )Extraordinary gain
    
    $
    0
    
    
    $
    6,819
    
    
    $
    0
    
    
    $
    0Net income (loss)
    
    $
    75
    
    
    $
    7,868
    
    
    $
    2,307
    
    
    $
    (120
    )Basic earnings (loss) before extraordinary items per
common share
    
    $
    0.02
    
    
    $
    0.24
    
    
    $
    0.53
    
    
    $
    (0.03
    )Basic earnings (loss) per common share  extraordinary gain
    
    $
    0.00
    
    
    $
    1.59
    
    
    $
    0.00
    
    
    $
    0.00Basic earnings (loss) per common share  net income
    
    $
    0.02
    
    
    $
    1.83
    
    
    $
    0.53
    
    
    $
    (0.03
    )Diluted earnings (loss) per share
    
    $
    0.02
    
    
    $
    0.24
    
    
    $
    0.53
    
    
    $
    (0.03
    )Diluted earnings (loss) per share  extraordinary gain
    
    $
    0.00
    
    
    $
    1.58
    
    
    $
    0.00
    
    
    $
    0.00Diluted earnings (loss) per share  net income
    
    $
    0.02
    
    
    $
    1.83
    
    
    $
    0.53
    
    
    $
    (0.03
    )
 Year Ended June 30, 2007
 For the quarters endedSeptember 30
    
    
    December 31
    
    
    March 31
    
    
    June 302006
    
    
    2006
    
    
    2007
    
    
    2007Revenues
    
    $
    8,456
    
    
    $
    18,041
    
    
    $
    21,516
    
    
    $
    11,360Gross margin
    
    $
    3,200
    
    
    $
    5,566
    
    
    $
    6,935
    
    
    $
    3,225Operating income
    
    $
    326
    
    
    $
    2,121
    
    
    $
    2,358
    
    
    $
    606Income (loss) from continuing operations
    
    $
    4
    
    
    $
    1,113
    
    
    $
    1,293
    
    
    $
    (152
    )Discontinued operations
    
    $
    (199
    )
    
    $
    157
    
    
    $
    636
    
    
    $
    3,360Net income (loss)
    
    $
    (195
    )
    
    $
    1,270
    
    
    $
    1,929
    
    
    $
    3,208Basic earnings (loss) per common share  continuing operations
    
    $
    0.00
    
    
    $
    0.25
    
    
    $
    0.29
    
    
    $
    (0.03
    )Basic earnings (loss) per common share  discontinued
operations
    
    $
    (0.05
    )
    
    $
    0.04
    
    
    $
    0.14
    
    
    $
    0.76Basic earnings (loss) per common share  net income
    
    $
    (0.04
    )
    
    $
    0.29
    
    
    $
    0.43
    
    
    $
    0.72Diluted earnings (loss) per share  continuing operations
    
    $
    0.00
    
    
    $
    0.25
    
    
    $
    0.28
    
    
    $
    (0.03
    )Diluted earnings (loss) per share  discontinued operations
    
    $
    (0.04
    )
    
    $
    0.04
    
    
    $
    0.14
    
    
    $
    0.75Diluted earnings (loss) per share  net income
    
    $
    (0.04
    )
    
    $
    0.28
    
    
    $
    0.42
    
    
    $
    0.71
   F-36




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##### Table of Contents



EXHIBIT INDEX
 3.1
    (a)
    
    Restated Articles of Incorporation. Filed as Exhibit 3.1 to Amendment No. 1 to the
Registrants Annual Report on Form 10-K/A for the year ended June 30, 1996 and
incorporated herein by reference3.1
    (b)
    
    Articles of Amendment to the Articles of Incorporation dated January 28, 2008. Filed
as Exhibit 3.1 to the Registrants Current Report on Form 8-K dated February 1, 2008
and incorporated herein by reference3.1
    (c)
    
    Articles of Amendment to the Articles of Incorporation dated December 5, 2007. Filed
as Exhibit 3.1(e) to the Registrants Quarterly Report on Form 10-Q for the quarter
ended December 31, 2007 and incorporated herein by reference3.1
    (d)
    
    Articles of Amendment to the Articles of Incorporation dated May 29, 2007. Filed as
Exhibit 3.1 to the Registrants Current Report on Form 8-K, filed on June 4, 2007,
and incorporated herein by reference3.2
    
    
    Amended and Restated Bylaws. Filed as Exhibit 3.2 to the Registrants Current Report
on Form 8-K on March 5, 2004 and incorporated herein by reference3.2
    (a)
    
    Amendment No. 3 to Amended and Restated Bylaws dated August 12, 2008. Filed as
Exhibit 3.1 to the Registrants Current Report on Form 8-K dated August 12, 2008 and
incorporated herein by reference3.2
    (b)
    
    Amendment No. 2 to Amended and Restated Bylaws dated April 10, 2008. Filed as Exhibit
3.1 to the Registrants Current Report on Form 8-K dated April 10, 2008 and
incorporated herein by reference3.2
    (c)
    
    Amendment No. 1 to Amended and Restated Bylaws dated November 14, 2007. Filed as
Exhibit 3.1 to the Registrants Current Report on Form 8-K dated November 14, 2007
and incorporated herein by reference10.1
    
    
    Satisfaction and Discharge of Indenture dated June 22, 2007, between the Registrant
and HSBC Bank USA, National Association, as Successor Trustee for the Series 1997
Notes. Filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed
July 5, 2007, and incorporated herein by reference10.2
    
    
    Satisfaction and Discharge of Indenture dated June 22, 2007, between the Registrant
and US Bank National Association, as Successor Trustee for the Series 1993 Notes.
Filed as Exhibit 10.2 to the Registrants Current Report on Form 8-K, filed July 5,
2007, and incorporated herein by reference.10.3
    
    
    Discharge of Obligor under Indenture dated June 22, 2007, between the Registrant and
HSBC Bank USA, National Association, as Successor Trustee for the Series 1992-B
Bonds. Filed as Exhibit 10.3 to the Registrants Current Report on Form 8-K, filed
July 5, 2007, and incorporated herein by reference10.4
    
    
    Note Purchase Agreement dated June 29, 2007, between the Registrant and various
Purchasers relating to 6.16% Senior Unsecured Notes due June 29, 2017. Filed as
Exhibit 10.4 to the Registrants Current Report on Form 8-K, filed July 5, 2007, and
incorporated herein by reference10.5
    
    
    Credit Agreement dated as of June 29, 2007, by and among the Registrant and various
financial institutions and LaSalle Bank National Association. Filed as Exhibit 10.5
to the Registrants Current Report on Form 8-K, filed July 5, 2007, and incorporated
herein by reference.10.6
    
    
    Amendment dated October 22, 2007 to the Credit Agreement among the Registrant,
various financial institutions and LaSalle Bank National Association, as agent. Filed
as Exhibit 10.1 to the Registrants Current Report on Form 8-K dated October 22, 2007
and incorporated herein by reference10.7
    
    
    Energy West, Incorporated 2002 Stock Option Plan. Filed as Appendix A to the
Registrants Proxy Statement on Schedule 14A, filed on October 30, 2002, and
incorporated herein by reference10.8
    *
    
    First Amendment to Energy West Incorporated 2002 Stock Option Plan




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##### Table of Contents



10.9
    
    
    Employee Stock Ownership Plan Trust Agreement. Filed as Exhibit 10.2 to Registration
Statement on Form S-1 (File No. 33-1672) is incorporated herein by reference10.10
    
    
    Management Incentive Plan. Filed as Exhibit 10.12 to the Registrants Annual Report
on Form 10-K/A for the year ended June 30, 1996, filed on July 8, 1997, and
incorporated herein by reference10.11
    
    
    Energy West Senior Management Incentive Plan. Filed as Exhibit 10.19 to the
Registrants Annual Report on Form 10-K for the year ended June 30, 2002, filed on
September 30, 2002, and incorporated herein by reference10.12
    
    
    Energy West Incorporated Deferred Compensation Plan for Directors. Filed as Exhibit
10.20 to the Registrants Annual Report on Form 10-K for the year ended June 30,
2002, filed on September 30, 2002, and incorporated herein by reference10.13
    *
    
    Amended and Restated Energy West Incorporated Deferred Compensation Plan for Directors10.14
    
    
    Amended and Restated Operating Agreement of Kykuit Resources, LLC, dated October 24,
2007. Filed as Exhibit 10.6 to the Registrants Quarterly Report on Form 10-Q for
the quarter ended September 30, 2007 and incorporated herein by reference10.15
    
    
    First Amendment to Amended and Restated Operating Agreement of Kykuit Resources, LLC,
dated December 17, 2007. Filed as Exhibit 10.2 to the Registrants Quarterly Report
on Form 10-Q for the quarter ended December 31, 2007 and incorporated herein by
reference10.16
    
    
    Stock Purchase Agreement dated January 30, 2007 between the Registrant and Sempra
Energy. Filed as Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q for
the quarter ended September 30, 2007 and incorporated herein by reference10.17
    
    
    Amendment No. 1 to Stock Purchase Agreement dated April 11, 2007 between the
Registrant and Sempra Energy. Filed as Exhibit 10.2 to the Registrants Quarterly
Report on Form 10-Q for the quarter ended September 30, 2007 and incorporated herein
by reference10.18
    
    
    Amendment No. 2 to Stock Purchase Agreement dated August 7, 2007 between the
Registrant and Sempra Energy. Filed as Exhibit 10.3 to the Registrants Quarterly
Report on Form 10-Q for the quarter ended September 30, 2007 and incorporated herein
by reference10.19
    
    
    Amendment No. 3 to Stock Purchase Agreement, dated November 28, 2007, by and between
the Registrant and Sempra Energy. Filed as Exhibit 10.1 to the Registrants
Quarterly Report on Form 10-Q for the quarter ended December 31, 2007 and
incorporated herein by reference10.20
    
    
    Stock Purchase Agreement dated January 30, 2007 between the Registrant and Sempra
Energy. Filed as Exhibit 10.4 to the Registrants Quarterly Report on Form 10-Q for
the quarter ended September 30, 2007 and incorporated herein by reference10.21
    
    
    Amendment Number 1 to Stock Purchase Agreement dated August 2, 2007 between the
Registrant and Sempra Energy. Filed as Exhibit 10.5 to the Registrants Quarterly
Report on Form 10-Q for the quarter ended September 30, 2007 and incorporated herein
by reference10.22
    
    
    Stock Purchase Agreement dated December 18, 2007 between the Registrant, Dan F.
Whetstone, Pamela R. Lowry, Paula A. Poole, William J. Junkermier and Roger W.
Junkermier. Filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K
dated December 17, 2007 and incorporated herein by reference10.23
    
    
    First Amendment to Stock Purchase Agreement dated as of November 11, 2008, between
Dan F. Whetstone, Pamela R. Lowry, Paula A. Poole, William J. Junkermier, Roger W.
Junkermiern and Energy West, Incorporated. Filed as Exhibit 10.1 to the Registrants
Current Report on Form 8-K dated November 11, 2008 and incorporated herein by
reference10.24
    
    
    Non-Competition and Non-Disclosure Agreement dated December 18, 2007 between the
Registrant and Daniel F. Whetstone. Filed as Exhibit 10.2 to the Registrants
Current Report on Form 8-K dated December 17, 2007 and incorporated herein by
reference10.25
    
    
    Lease Agreement dated February 25, 2008 between OsAir, Inc. and the Registrant. Filed
as Exhibit 10.1 to the Registrants Current Report on Form 8-K dated February 25,
2008 and incorporated herein by reference




---



##### Table of Contents



10.26
    
    
    Employment Agreement dated November 16, 2007 between James W. Garrett and the
Registrant. Filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K
dated November 14, 2007 and incorporated herein by reference10.27
    *
    
    First Amendment to Employment Agreement dated as of December 31, 2008, between Energy
West, Incorporated and James W. Garrett10.28
    
    
    Gas Sales Agreement dated as of July 1, 2008 between John D. Oil & Gas Marketing Co.,
LLC, Northeast Ohio Natural Gas Corp., Orwell Natural Gas Company and Brainard Gas
Corp. Filed as Exhibit 10.25 to the Registrants Annual Report on 10-K for the year
ended June 30, 2008 and incorporated herein by reference10.29
    
    
    Natural Gas Transportation Service Agreement dated as of July 1, 2008 between
Orwell-Trumbull Pipeline Co., LLC, Orwell Natural Gas Company and Brainard Gas Corp.
Filed as Exhibit 10.26 to the Registrants Annual Report on 10-K for the year ended
June 30, 2008 and incorporated herein by reference10.30
    
    
    Transportation Service Agreement dated as of July 1, 2008 between Cobra Pipeline Co.,
Ltd., Northeast Ohio Natural Gas Company, Orwell Natural Gas Company and Brainard Gas
Corp. Filed as Exhibit 10.27 to the Registrants Annual Report on 10-K for the year
ended June 30, 2008 and incorporated herein by reference10.31
    
    
    First Amendment dated July 1, 2008 to the Orwell-Trumbull Pipeline Co., LLC
Operations Agreement between Orwell Natural Gas Company and Orwell-Trumbull Pipeline
Co., LLC. Filed as Exhibit 10.28 to the Registrants Annual Report on 10-K for the
year ended June 30, 2008 and incorporated herein by reference10.32
    
    
    Orwell-Trumbull Pipeline Co., LLC Operations Agreement dated January 1, 2008 between
Orwell Natural Gas Company and Orwell-Trumbull Pipeline Co., LLC. Filed as Exhibit
10.29 to the Registrants Annual Report on 10-K for the year ended June 30, 2008 and
incorporated herein by reference10.33
    
    
    Triple Net Lease Agreement dated as of July 1, 2008 between Station Street Partners,
LLC and Orwell Natural Gas Company. Filed as Exhibit 10.30 to the Registrants Annual
Report on 10-K for the year ended June 30, 2008 and incorporated herein by reference10.34
    
    
    Triple Net Lease Agreement dated as of July 1, 2008 between OsAir, Inc. and Orwell
Natural Gas Company. Filed as Exhibit 10.31 to the Registrants Annual Report on 10-K
for the year ended June 30, 2008 and incorporated herein by reference.10.35
    
    
    Triple Net Lease Agreement dated as of July 1, 2008 between Richard M. Osborne,
Trustee and Orwell Natural Gas Company. Filed as Exhibit 10.32 to the Registrants
Annual Report on 10-K for the year ended June 30, 2008 and incorporated herein by
reference10.36
    
    
    Triple Net Lease Agreement dated as of July 1, 2008 between OsAir, Inc. and Northeast
Ohio Natural Gas Company. Filed as Exhibit 10.33 to the Registrants Annual Report on
10-K for the year ended June 30, 2008 and incorporated herein by reference10.37
    
    
    Stock purchase agreement dated September 12, 2008, between Energy West, Incorporated,
and Richard M. Osborne, trustee, Rebecca Howell, Stephen G. Rigo, Marty Whelan, and
Thomas J. Smith, filed as exhibit 10.1 to the registrants current report on Form 8-K
dated September 17, 2008, and incorporated herein by reference Filed as Exhibit 10.34
to the Registrants Annual Report on 10-K for the year ended June 30, 2008 and
incorporated herein by reference10.38
    
    
    Employment Agreement dated August 25, 2006 between Energy West, Incorporated
and Kevin J. Degenstein, filed as Exhibit 10.1 to the Registrants Current Report on
Form 8-K dated September 18, 2006 and incorporated herein by reference10.39
    *
    
    First Amendment to Employment Agreement dated as of December 31, 2008, between Energy
West, Incorporated and Kevin J. Degenstein10.40
    *
    
    Employment
Agreement dated April 13, 2007 between Energy West,
Incorporated and David C. Shipley14
    
    

Code
of Business Conduct, filed as Exhibit 14 to the
Registrants Annual Report on 10-K for the year ended
June 30, 2006 and incorporated herein by reference.21
    *
    
    Company Subsidiaries23.1
    *
    
    Consent of Hein & Associates LLP31
    *
    
    Certifications pursuant to SEC Release No. 33-8238, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 200232
    *
    
    Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
 
    
    Management agreement or compensatory plan or arrangement.*
    
    Filed herewith.