Spire Inc. · NYSE:SR
Spire — AGA Financial Forum 2018
42 slides from Spire's conference presentation, May 20, 2018
Slide 1: Moving forward confidently
Moving forward confidently AGA Financial Forum May 20-22, 2018
Slide 2: 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 3: At Spire, we’re connecting people and energy
At Spire, we’re connecting people and energy 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 • Innovation and technology 3 Sp
Slide 4: We’re expanding to serve more customers and markets
We’re expanding to serve more customers and markets • We’ve transformed our company by increasing our geographic footprint • Our gas companies serve 1.7 million homes and businesses across Alabama, Mississippi and Missouri • We are advancing our other businesses – Expanding into gas storage – Pursui
Slide 5: Moving forward confidently
Moving forward confidently • Moving forward with clarity after regulatory reset • Executing on our strategy with confidence • Driving regulated growth • Advancing our non-regulated businesses • Strengthening our financial position 5 Spire | AGA Financial Forum | May 20-22, 2018
Slide 6: Regulatory certainty offers clarity
Regulatory certainty offers clarity • Missouri rate cases finalized, parameters set – Rate base, ROE, equity capitalization, cost of service – Rate design harmonized across Spire Missouri – ISRS reset and renewed • Finalized RSE reset for Spire Gulf and updated Spire Mississippi rates • Spire Alabam
Slide 7: We continue to drive earnings growth
We continue to drive earnings growth • Growing Gas Utility earnings after rate regulatory resets, a normal part of being a public utility • FY18 net economic earnings per share (NEEPS) guidance of $3.65 - $3.75 • Long-term annual NEEPS growth target of 4%-7% Gas Utility Gas Marketing Other2 Net econ
Slide 8: We continue to drive growth in our regulated businesses
We continue to drive growth in our regulated businesses. 8 Spire | AGA Financial Forum | May 20-22, 2018
Slide 9: We are building rate base
We are building rate base Capital expenditures forecast (Millions) 5-year forecast: $2.5B $560 $500 $500 • 2018 capex forecast now $500M 110 $475 10 $490 10 10 75 70 70 70 70 – Higher utility spend of $425M 60 – $80M for new business investment 410 420 • Increased our 5-year capital spend 365 380 39
Slide 10: We’re growing organically
We’re growing organically Total utility customers1 (Millions) 1.8 1.68 1.69 1.55 1.57 1.5 • Targeting programs that add 1.2 1.12 customers and increase utility margin 0.9 0.63 – Enhanced new business approach 0.6 – More focused economic development 0.3 • Seizing market opportunities through 0 2012 2
Slide 11: We continue to invest in pipelines
We continue to invest in pipelines • Progressing on Spire STL Pipeline – Anticipate FERC approval in 2018 – Ready to begin construction • 65-mile pipeline connecting to REX to bring shale gas to Missouri East • Targeting 2019 in-service date and investment of $190 - $210 million • Evaluating other o
Slide 12: S p i1r8 M a y
12 20 S p i1r8e | A G A F i n a n c i a l F o r u m | M a y 2 0 - 2 2 , 2 0 1 8
Slide 13: We also continue to advance our non-regulated businesses to drive earnings growth
We also continue to advance our non-regulated businesses to drive earnings growth. 13 Spire | AGA Financial Forum | May 20-22, 2018
Slide 14: Spire Marketing is expanding its reach
Spire Marketing is expanding its reach • Positioning Spire Marketing for continued growth and success – Named industry veteran, Pat Strange, to lead the business and grow the team – Expanding geographically by opening a business center in Houston – Strengthening our strategic position • Strong YTD 2
Slide 15: We’re investing in natural gas storage
We’re investing in natural gas storage • Acquired storage facility in Wyoming – Interconnections with five interstate pipes and access to REX ‒ Strategically located near Opal hub ‒ Positioned to serve multiple regions and customers (utilities, power generators, marketers and pipelines) • Hired Laur
Slide 16: With solid performance, regulatory certainty and well-developed strategies, we have confidence in our outlook
With solid performance, regulatory certainty and well- developed strategies, we have confidence in our outlook. 16 Spire | AGA Financial Forum | May 20-22, 2018
Slide 17: In the first half of FY18, we delivered solid performance
In the first half of FY18, we delivered solid performance Net economic earnings per share1 $4.02 $4.00 • Net economic earnings per share $3.42 0.29 up $0.60 or 18% $3.00 0.03 • Both segments benefited from return $2.00 3.76 of normal weather 3.40 • Gas Utility up $0.36 per share $1.00 – Higher volum
Slide 18: We have set our FY18 earnings guidance
We have set our FY18 earnings guidance Net economic earnings per share $4.25 $0.30 ($0.10) ($0.31) $4.00 $0.31 ($0.06) $3.75 $3.70 $3.56 $3.50 $3.25 $3.00 $2.75 2017 actual 1H operating T ax reform M O ratecase R atedesign Equity 2018 m idpoint results w rite-offs offering • 2018 NEEPS targeted at $
Slide 19: Targeting long-term earnings growth
Targeting long-term earnings growth Net economic earnings per share 1 • Long-term NEEPS growth target increased to 4%-7% ‒ Base year is 2018 run-rate earnings ‒ Targeted annual and long-term expectations • Driven by rate base growth and our $2.5 billion capex forecast • Anticipate growing contributi
Slide 20: Strengthening our financial position
Strengthening our Adjusted EBITDA1 (Millions) financial position $400 1 • YTD FY18 adjusted EBITDA of $350 $370 million, up 6% from last year $300 • Ample liquidity provided by our $349 $370 $975 million credit facility and $250 commercial paper program $200 • Solid LT equity capitalization2 of 1stH
Slide 21: We’re growing our dividend
We’re growing our dividend Annualized dividends per share +7.1% $2.30 $2.251 Dividend Yield +7.1% 3.3% 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 July
Slide 22: Moving forward confidently
Moving forward confidently • Growing our gas utilities with higher regulatory certainty • Poised to develop our Spire STL Pipeline • Advancing our non-regulated businesses • Strengthening our financial position with the recent equity offering • Increasing our long-term earnings growth target to 4%-7
Slide 23: We’re 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. 23 S p i r e | A G A F i n a n c i a l F o r u m | M a y 2 0 - 2 2 , 2 0 1 8
Slide 24: Appendix
Appendix 24 Spire | AGA Financial Forum | May 20-22, 2018
Slide 25: Spire leadership team
Spire leadership team A. Suzanne Sitherwood B. Steven P. Rasche President and Executive Vice President, Chief Executive Officer Chief Financial Officer A B C. Steven L. Lindsey D. Mark C. Darrell Executive Vice President, Chief Senior Vice President, Operating Officer of Distribution General Counsel
Slide 26: We delivered solid first half performance
We delivered solid first half performance Six Months Ended March 31, (Millions, except earnings per share) 2018 2017 Earnings by Segment Gas Utility $ 191.2 $ 164.0 Gas Marketing 13.8 1.4 Other (9.9) (8.9) Net Economic Earnings (non-GAAP)1 $ 195.1 $ 156.5 Net Economic Earnings Per Share (non-GAAP)1
Slide 27: First half 2018 earnings growth
First half 2018 earnings growth • Net economic earnings1 (NEE) $195.1 million, up $38.6 million or 25% • Gas Utility: NEE $191.2 million (+$27.2 million) ‒ Contribution margin2 +$22.4 million • Higher demand (+$25.9 million) due to the return of near normal weather • Higher MO ISRS, customer growth
Slide 28: Missouri rate cases
Missouri rate cases • New rates went into effect on April 19 – 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 Rate reduction for tax b
Slide 29: Tax Cuts and Jobs Act
Tax Cuts and Jobs Act • We lowered customer rates for all utilities as a result of tax reform • 1H financial results include impacts based on the available guidance, including – Lowering our effective tax expense by $14.4 million, reflecting lower federal income taxes, net of amounts reflected in lo
Slide 30: Income tax expense
Income tax expense Six Months Ended March 31, Quarter Ended March 31, (Millions) 2018 2017 2018 2017 GAAP income tax (benefit) expense $ (14.2) $ 75.6 $ 18.9 $ 53.3 Add: Benefit from revaluation of net deferred tax liabilities (TCJA) Balance at 12/31/17 50.0 - - - Adjustment due to the Missouri rate
Slide 31: Capital expenditures by jurisdiction
Capital expenditures by jurisdiction (Millions) $560 $500 $490 $500 110 $475 10 10 75 10 155 155 145 150 135 150 155 140 145 135 155 165 170 175 180 2018 2019 2020 2021 2022 MO East MO West Alabama/Mississippi Pipelines and storage 31 Spire | AGA Financial Forum | May 20-22, 2018
Slide 32: Our Spire utility portfolio
Our Spire utility portfolio Alabama MO East MO West Gulf Coast Mississippi (Alagasco) (L acledeGas) (M GE) (M obile Gas) (W illm utGas) Founded 1852 1857 1867 1836 1933 Primary Office Birmingham St. Louis Kansas City Mobile Hattiesburg Employees 826 1,670 579 1631 Customers 421,000 651,000 513,000 8
Slide 33: Pipeline replacement program
Pipeline replacement program Robust infrastructure replacement programs with lives up to ~20 years Estimated replacement miles As of 12/31/17 Vintage Est. years to 1 Steel Cast iron plastic Total completion Missouri 1, 750 800 - 2, 550 16-18 Alabama 550 650 250 1, 450 18-20 Total 2, 300 1, 450 250 4
Slide 34: Missouri regulatory summary
Missouri regulatory summary • Below-average rated regulatory jurisdiction by RRA1 • Traditional approach: general rate case typically filed every three years ‒ Cost-of-service, rate base and capital structure determined using historical test year ‒ Both utilities have weather mitigated rate designs
Slide 35: Legislative update
Legislative update • Filed Missouri Senate Bill 730, The Rate Case Modernization Act • Companion bill in House (HB 1878) ‒ Improve rate stability by establishing annual rate reviews ‒ Encourage performance-based incentives and cost accountability • Both bills advanced to floor debate • Some issues a
Slide 36: Alabama regulatory summary
Alabama regulatory summary • Top-rated regulatory jurisdiction by RRA • Progressive approach using forward year budget • Rate Stabilization and Equalization (RSE) ‒ Annual rate-setting process with quarterly reviews for potential rate reductions ‒ Rates set based on retained shareholders’ equity Spi
Slide 37: Mississippi regulatory summary
Mississippi regulatory summary • Above-average rated regulatory jurisdiction by RRA • Rate Stabilization Adjustment (RSA) ‒ RSA provides for annual rate performance reviews rather than periodic rate cases • Formulaic approach to ROE setting with equity capitalization currently set at 50% • Rate adju
Slide 38: Growing Spire Marketing
Growing Spire Marketing • Provides wholesale services to diverse Spire Marketing’s operational reach customer base • Optimizes portfolio of commodity, transportation and storage contracts • Operates on 20+ pipelines • Average sales of 1.2 Bcf/d in FY18 • 7.2 Bcf of leased storage • Core operating fo
Slide 39: Net economic earnings per share (non-GAAP) reconciliation
Net economic earnings per share (non-GAAP) reconciliation Fiscal years ended September 30, 2012 2013 2014 2015 2016 2017 Total Spire Diluted Earnings Per Share (GAAP) $2.79 $2.02 $2.35 $3.16 $3.24 $3.43 Adjustments, pre-tax: Unrealized (gain) loss on energy-related derivatives (0.02) 0.04 (0.04) (0.
Slide 40: Net economic earnings (non-GAAP) reconciliation
Net economic earnings (non-GAAP) reconciliation Gas Gas Per Diluted 2 (Millions, except per share amounts) Utility Marketing Other Total Share Six Months Ended March 31, 2018 Net Income (Loss) (GAAP) 147.7 $ 3.8 $ 62.7 $ 214.2 $ 4.42 Adjustments, pre-tax: Missouri regulatory adjustments 30.6 - - 30.
Slide 41: Contribution margin (non-GAAP) reconciliation
Contribution margin (non-GAAP) reconciliation Gas Gas (Millions) Utility Marketing Other Eliminations Consolidated Six Months Ended March 31, 2018 Operating income (loss) (GAAP) $ 244.5 $ 6.1 $ (3.7) $ - $ 246.9 Operation and maintenance 245.6 3.1 10.1 (4.9) 253.9 Depreciation and amortization 81.4
Slide 42: Adjusted EBITDA and adjusted long-term capitalization reconciliation
Adjusted EBITDA1 (non-GAAP) reconciliation Six Months Ended March 31, (Millions) 2018 2017 Net Income $ 214.2 $ 153.2 Add back: Interest charges 49.8 44.8 Regulatory asset write-offs 38.4 - Income tax (benefit) expense (14.2) 75.6 Depreciation & amortization 81.9 75.8 Adjusted EBITDA $ 370.1 $ 349.4