Spire Inc. · NYSE:SR
Spire — Q3 2019 Earnings Presentation
30 slides from Spire's earnings presentation, Jul 30, 2019
Slide 1: Energy in motion
Energy in motion Third quarter fiscal 2019 July 30, 2019
Slide 2: Participants on today’s call
Participants on today’s call • Suzanne Sitherwood President and Chief Executive Officer • Steven P. Rasche Executive Vice President and Chief Financial Officer 2 Spire | Third quarter fiscal 2019 earnings results
Slide 3: Forward-looking statements and use of non-GAAP measures
Forward-looking statements and use of non-GAAP measures This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our forward- looking statements in this presentation speak only as of today, and we assume no duty to update them.
Slide 4: Continuing our momentum
Continuing our momentum • Achieving consistent utility growth through investment and organic growth • Driving improved operating and financial performance • Growing and developing our gas-related businesses • Delivered Q3 FY19 net economic earnings of $0.07 per share • On track with our full-year ne
Slide 5: Growing our gas utilities
Growing our gas utilities • $405M capital spend year to date, focused on infrastructure upgrades • Recovering our utility investment – MO pipeline upgrades via annualized ISRS revenue increases • $8M authorized effective Oct. 18, 2018 • $13.2M authorized effective May 3, 2019 • July 15 request filed
Slide 6: Improving operating performance
Improving operating performance Investment in infrastructure upgrades, technology and our people are driving improved operating performance: • Reducing employee injuries • Strengthening system integrity • Enhancing pipeline safety – Lower third-party damage rates – Faster average leak response times
Slide 7: Growing Spire Marketing
Growing Spire Marketing • We provide gas marketing services Spire Marketing’s operational reach in the central and southern U.S. • Utilities account for 75+% of customers (by net dollar exposure) • We’re a logistics-based business providing physical delivery of gas – Optimizing our portfolio of comm
Slide 8: Developing Spire Storage
Developing Spire Storage • Completing several targeted capital projects to ensure reliable operations during upcoming winter • Approximately $25M of incremental capex on these projects in the remainder of FY19 • Engaging with current and prospective customers to better understand their needs and ass
Slide 9: Completing Spire STL Pipeline
Completing Spire STL Pipeline • The 65-mile pipeline will bring new gas supply to the St. Louis region • Pipe installation 97% complete • Historic flooding has delayed completion of ~3 miles – Affected area near confluence of Mississippi and Missouri Rivers – Construction in impacted area to resume
Slide 10: Growing the dividend
Growing the dividend Annualized common stock dividend per share Dividend yield 2.8%2 1 Dividend payout ratio Dividend per share Dividend payout ratio • Quarterly common stock dividend of $0.5925 declared, payable October 2 ‒ 16 consecutive years of increases; 74 years of continuous payment ‒ Conserv
Slide 11: Net economic earnings
Net economic earnings Per diluted Millions common share Third quarter ended June 30, 2019 2018 2019 2018 Gas Utility $ 7.6 $ 16.9 Gas Marketing 3.3 4.4 Other (5.9) (6.1) 1 Net Economic Earnings (NEE) $ 5.0 $ 15.2 $ 0.07 $ 0.31 2 NEE adjustments (8.0) 10.7 (0.16) 0.21 Net (Loss) Income [GAAP] $ (3.0)
Slide 12: Contribution margin
Contribution margin Millions Change Third quarter ended June 30, 2019 2018 $ % Operating Revenues Gas Utility $ 301.6 $ 334.8 $ (33.2) -10% Gas Marketing 18.3 14.4 3.9 27% Other and eliminations 1.4 1.4 $ 321.3 $ 350.6 $ (29.3) -8% 1 Contribution Margin Gas Utility $ 195.3 $ 196.5 $ (1.2) -1% Ga
Slide 13: Controlling expenses
Controlling expenses Millions Change Third quarter ended June 30, 2019 2018 $ % Operating Expenses Gas Utility Natural & propane gas $ 75.5 $ 107.2 $ (31.7) -30% Operation and maintenance (O&M) 111.2 99.1 12.1 12% Depreciation & amortization 45.1 40.5 4.6 11% Taxes, other than income taxes 29.7 33.5
Slide 14: Controlling expenses (cont.)
Controlling expenses (cont.) Millions Change Third quarter ended June 30, 2019 2018 $ % Operating Expenses Gas Utility Natural & propane gas $ 75.5 $ 107.2 $ (31.7) -30% Operation and maintenance (O&M) 111.2 99.1 12.1 12% Depreciation & amortization 45.1 40.5 4.6 11% Taxes, other than income taxes 2
Slide 15: Year-to-date net economic earnings
Year-to-date net economic earnings Per diluted Millions common share Nine months ended June 30, 2019 2018 2019 2018 Gas Utility $ 220.7 $ 208.1 Gas Marketing 17.8 18.2 Other (19.7) (16.0) Net Economic Earnings (NEE) 1 $ 218.8 $ 210.3 $ 4.27 $ 4.30 MO regulatory adjustments . (30.6) . (0.63) Effect
Slide 16: Strengthening our financial position
Strengthening our financial position Adjusted EBITDA 1 (Millions) 1 • YTD adjusted EBITDA of $478M $500 $478 $467 • Ample liquidity with credit facility $450 and commercial paper program $400 • Solid adjusted long-term capitalization2 of 53.1% equity $350 • Issued $250M of 5.90% preferred $300 stock
Slide 17: Increasing capital investment
Increasing capital investment Capital expenditures (Millions) $700 $609 $600 • YTD spend on track with FY19 plans 204 $500 – Gas utility spend $405M, up 35% $400 $334 64 • $211M for pipeline upgrades 35 $300 29 • $70M for new business 341 $200 – $204M for pipelines and storage 270 $100 • $123M for S
Slide 18: Affirming our guidance
Affirming our guidance Capital expenditures (Millions) 5-year forecast: $2.9B $780 • FY19 NEEPS range $3.70-$3.80 250 $560 $520 $520 $515 • Long-term NEEPS growth target 100 75 90 90 30 100 10 100 10 of 4%-7% • 5-year capital spend target increased 430 395 400 405 410 to $2.9B reflecting FY19 update
Slide 19: Spire’s CSR Report
Spire’s CSR Report In our CSR Report, you’ll see how we’ve used our energy for good, influencing each of our targeted areas in FY18—the first full year of our CSR efforts. We’re committed to driving positive and significant change in the communities we serve. Learn more at CSRReport2018.SpireEnergy.
Slide 20: At Spire, we’re always in motion, using our energy to get the job done
At Spire, we’re always in motion, using our energy to get the job done today while exploring new and innovative ideas for tomorrow. 20 S p i r e | T h i r d q u a r t e r f i s c a l 2 0 1 9 e a r n i n g s r e s u l t s
Slide 21: Appendix
Appendix 21 Spire | Third quarter fiscal 2019 earnings results
Slide 22: Our Spire utility portfolio
Our Spire utility portfolio Alabama Gulf Mississippi Missouri Primary office Birmingham Mobile Hattiesburg St. Louis Employees1 861 123 33 2,321 Customers1 420,600 83,900 18,500 1,169,900 Pipeline miles ~23,000 ~4,300 ~1,200 ~30,000 Rate base (Millions) $5092 $922 $243 $2,2174 Return on equity 10.40
Slide 23: Gaining regulatory certainty
Gaining regulatory certainty • 2018 marked the completion of regulatory resets across our footprint • The last major component was the reset of Spire Alabama’s Rate Stabilization and Equalization (RSE) metrics • As expected, we reset ROEs and CCM benefit sharing and harmonized capital structures acr
Slide 24: Missouri rate cases – 2018 impacts
Missouri rate cases – 2018 impacts • New rates went into effect on April 19, 2018 – Reflect ~$70 million in cost savings from our transformative growth – Authorized 9.8% ROE, utility LT capital structure and $2.0B rate base Impact (Millions) Customer rates Earnings Base rate increase $ 66.2 $ 66.2 R
Slide 25: Income tax expense and effective rate
Income tax expense and effective rate Quarter ended June 30, Nine months ended June 30, (Millions) 2019 2018 2019 2018 GAAP expense (benefit) before ADIT1 amortization $ (0.8) $ 5.7 $ 51.5 $ (8.5) Amortization of excess ADIT (2.1) — (6.3) — GAAP income tax expense (benefit) $ (2.9) $ 5.7 $ 45.2 $ (8
Slide 26: Net economic earnings [non-GAAP] reconciliation
Net economic earnings [non-GAAP] reconciliation Per diluted Gas Gas common (Millions, except per share amounts) Utility Marketing Other Total share2 Three months ended June 30, 2019 Net Income (Loss) [GAAP] $ 7.6 $ (4.7) $ (5.9) $ (3.0) $ (0.09) Adjustments, pre-tax: Unrealized loss on energy-relate
Slide 27: Net economic earnings [non-GAAP] reconciliation
Net economic earnings [non-GAAP] reconciliation Per diluted Gas Gas common (Millions, except per share amounts) Utility Marketing Other Total share2 Nine months ended June 30, 2019 Net Income (Loss) [GAAP] $ 220.7 $ 18.2 $ (20.0) $ 218.9 $ 4.27 Adjustments, pre-tax: Unrealized gain on energy-related
Slide 28: Contribution margin [non-GAAP] reconciliation
Contribution margin [non-GAAP] reconciliation Gas Gas (Millions) Utility Marketing Other Eliminations Consolidated Three months ended June 30, 2019 Operating Income (Loss) [GAAP] $ 25.3 $ (7.0) $ (5.0) $ $ 13.3 Operation and maintenance 113.4 3.2 8.4 (2.6) 122.4 Depreciation and amortization 45
Slide 29: Contribution margin [non-GAAP] reconciliation
Contribution margin [non-GAAP] reconciliation Gas Gas (Millions) Utility Marketing Other Eliminations Consolidated Nine months ended June 30, 2019 Operating Income (Loss) [GAAP] $ 317.2 $ 22.3 $ (11.6) $ $ 327.9 Operation and maintenance 330.3 8.5 22.3 (8.2) 352.9 Depreciation and amortization
Slide 30: Adjusted EBITDA and Adjusted long-term capitalization reconciliation
Adjusted EBITDA [non-GAAP] reconciliation Nine months ended June 30, (Millions) 2019 2018 Net Income [GAAP] $ 218.9 $ 240.1 Add back: Interest charges 79.1 74.0 Regulatory asset write-offs !! 38.4 Income tax expense (benefit) 45.2 (8.5) Depreciation & amortization 134.9 122.9 Adjusted EBITDA [non-G