Slide 1: First quarter fiscal 2018 earnings conference call
First quarter fiscal 2018 Earnings conference call February 1, 2018
Slide 2: Participants on today's call
Participants on today’s call Suzanne Sitherwood President and Chief Executive Officer Steven L. Lindsey Executive Vice President and Chief Operating Officer, Distribution Operations and Gas Utilities Steven P. Rasche Executive Vice President and Chief Financial Officer 2 Spire | First Quarter FY18 E
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: We are Spire
We are Spire Our mission Answer every challenge, advance every community and enrich every life through the strength of our energy. Transforming our company • Growing organically • Investing in infrastructure • Acquiring and integrating • Technology and innovation 4 Spire | First Quarter FY18 Earning
Slide 5: Delivering on our promises
Delivering on our promises • Delivered solid Q1 earnings of $1.19 per share • Continuing our commitment to organic growth and investing in our utility business • Pursuing opportunities in interstate and intrastate pipelines and storage • Seeking reasonable regulatory outcomes while pursuing change l
Slide 6: Investing in pipelines
Investing in pipelines • Progressing on Spire STL Pipeline – Expect to receive FERC approval in early 2018 – Land acquisition and construction planning continues – On track for mid-FY19 in-service date and investment of $190 - $210 million • Assessing additional opportunities in Missouri and Alabama
Slide 7: Investing in gas storage
Investing in gas storage • Acquired majority interest in Ryckman Creek Resources – Natural gas storage facility in Wyoming – Certificated at 35 Bcf of working gas – Interconnects with five interstate pipes and has access to REX • Positioned to serve multiple customer groups and geographic markets •
Slide 8: Growing our dividend
Growing our dividend Annualized dividends per share +7.1% $2.30 $2.251 Dividend Yield +7.1% 3.2%2 $2.10 $2.10 +6.5% +4.5% $1.96 +2.4% +3.5% $1.90 $1.84 $1.76 $1.70 $1.70 $1.66 $1.50 $1.30 2012 2013 2014 2015 2016 2017 2018 • Board declared quarterly dividend of $0.5625 per share, payable April 3 • 1
Slide 9: Maintaining positive momentum in operations
Maintaining positive momentum in operations • Further growing customers and margins • Increased investment in infrastructure upgrades, new business and technology – $55 million for pipeline replacement – $22 million in new business spend • Tracking against our targets to further improve operating pe
Slide 10: Legislative update
Legislative update • Filed Missouri Senate Bill 730, The Rate Case Modernization Act ‒ Improves rate stability by establishing annual rate reviews ‒ Encourages performance-based incentives and cost accountability ‒ Voted out of committee on January 24 ‒ Companion legislation in the House (HB 1878),
Slide 11: Regulatory update
Regulatory update • Ryan Silvey (R) joined the MoPSC in January – Former state senator and Chair - Committee on Commerce, Consumer Protection, Energy and the Environment – Replaces Commissioner Stoll (D) whose term ended in December 2017 • Seeking fair and reasonable outcomes in our Missouri rate ca
Slide 12: Benefiting from normal weather
Benefiting from normal weather First Quarter Ended December 31 Millions Per Diluted Share Net Economic Earnings1 2017 2016 2017 2016 Gas Utility $ 59.5 $ 51.8 $ 1.22 $ 1.13 Gas Marketing 3.6 1.4 0.08 0.03 Other (5.2) (5.7) (0.11) (0.12) $ 57.9 $ 47.5 $ 1.19 $ 1.04 • Net Economic Earnings (NEE) exclu
Slide 13: Revenues and margin
Revenues and margin First Quarter Ended December 31 Millions Change (Millions) 2017 2016 $ % Operating Revenues Gas Utility $ 542.0 $ 476.7 $ 65.3 14% Gas Marketing 19.6 21.7 (2.1) -10% Other and Eliminations 0.2 (3.3) 3.5 n/m $ 561.8 $ 495.1 $ 66.7 13% 1 Contribution Margin Gas Utility $ 255.5 $ 24
Slide 14: Expenses
Expenses First Quarter Ended December 31 Millions Change (Millions) 2017 2016 $ % Operating Expenses Gas Utility Natural & propane gas $ 240.8 $ 193.8 $ 47.0 24% Operation and maintenance (O&M) 97.9 99.4 (1.5) -2% Depreciation & amortization 40.3 37.7 2.6 7% Taxes, other than income taxes 36.7 33.4
Slide 15: Financially strong
Financially strong 1 EBITDA (Millions) $150 • Q1 FY18 EBITDA1 of $148 million, up 16% from last year $148 • Ample liquidity at the peak of our seasonal borrowing $127 • Solid LT equity capitalization2 49.4%, $100 up 0.7% from last quarter Q1 FY17 Q1 FY18 • Spire Alabama completed issuance Long-term
Slide 16: Tax Cuts and Jobs Act
Tax Cuts and Jobs Act • Tax reform improves U.S. competitiveness, benefits our customers by lowering their energy bills and driving economic growth • All companies will see their tax rate decrease • Since regulated entities recover tax expense as part of cost of service, we expect to pass the benefi
Slide 17: Tax reform going forward
Tax reform going forward • 2018 impacts appear minimal – No change to 2018 plans assuming fair and reasonable regulatory treatment – Already engaging with our state regulators to pass the benefits to our customers – Cash flow will be reduced due to lower tax collections from customers – Interest ded
Slide 18: Investing in future growth
Investing in future growth Capital expenditures – First quarter (Millions) $125 • Q1 FY18 capital spend up ~24% $100 • FY18 forecasted spend of $490 million $75 – $415 million investment for gas utilities $111 $50 – $70 million for Spire STL Pipeline $89 – $5 million for storage $25 • 5-year capital
Slide 19: Bringing people and energy together
We’re bringing people and energy together in ways that enrich the lives of those we serve and add value for our stakeholders. 19 Spire | First Quarter FY18 Earnings Conference Call
Slide 20: Appendix
Appendix 20 Spire | First Quarter FY18 Earnings Conference Call
Slide 21: Tax Cuts and Jobs Act
Tax Cuts and Jobs Act • Signed into law on December 22, 2017 • Generally effective beginning January 1, 2018 • Key overall corporate provisions include – Reduces the statutory rate from 35% to 21% – Immediate expensing of capital investment – Limits certain deductions for compensation and interest –
Slide 22: Net economic earnings (non-GAAP) reconciliation
Net economic earnings (non-GAAP) reconciliation Gas Gas Per Diluted (Millions, except per share amounts) Utility Marketing Other Total Share2 Three Months Ended December 31, 2017 Net Income (GAAP) $ 45.2 $ 3.5 $ 67.3 $ 116.0 $ 2.39 Adjustments, pre-tax: Unrealized loss (gain) on energy-related deriv
Slide 23: Contribution margin (non-GAAP) reconciliation
Contribution margin (non-GAAP) reconciliation Gas Gas (Millions) Utility Marketing Other Eliminations Consolidated Three Months Ended December 31, 2017 Operating income (loss) (GAAP) $ 101.8 $ 5.0 $ (1.7) $ - $ 105.1 Operation and maintenance 99.8 1.6 4.3 (2.3) 103.4 Depreciation and amortization 40
Slide 24: EBITDA and adjusted long-term capitalization reconciliation
EBITDA1 (non-GAAP) reconciliation Three Months Ended December 31, (Millions) 2017 2016 Net Income $ 116.0 $ 45.2 Add back: Interest charges 24.4 22.1 Income tax (benefit) expense (33.1) 22.3 Depreciation & amortization 40.4 37.8 EBITDA $ 147.7 $ 127.4 Adjusted long-term capitalization reconciliation