Slide 1: Third Quarter 2016 Earnings Conference Call
Third Quarter 2016 Earnings Conference Call August 3, 2016
Slide 2: Participants on today’s call
Participants on today’s call Suzanne Steven P. Steven L. Michael C. Sitherwood Rasche Lindsey Geiselhart President and E x e c u t i v e V i c e P r e si d e n t , E x e c u t i v e V i c e P r e si d e n t S e n i or V i c e P r e si d e n t , Chief Executive Officer Chief Financial Officer and Str
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: Spire delivers
Spire delivers • Another solid quarter of financial and operating performance • While delivering on our promises to our customers, communities and shareholders • At Spire, we are about: ‒ Bringing people and energy together ‒ Championing people by delivering energy that inspires • We remain focused
Slide 5: Successfully executing on our growth strategy
Successfully executing on our growth strategy Growing our gas Acquiring and Modernizing Investing in utility business integrating gas our gas assets innovation utilities Investing in prudent Added 1 million Positioning Gas newBLUE IT infrastructure customers Marketing for modernization upgrades cont
Slide 6: Third quarter highlights
Third quarter highlights • Higher net economic earnings¹ per share of $0.33 with Gas Utility and Gas Marketing both contributing to increase • Spire STL Pipeline underway with launch of open season • Acquisition of Mobile Gas and Willmut Gas remains on track 1See Net economic earnings (non-GAAP) rec
Slide 7: Legislative and regulatory
Legislative and regulatory • Current developments ‒ Missouri regulatory reform initiatives by Senate and Missouri Public Service Commission (MoPSC) ‒ Office of Public Counsel (OPC) earnings complaint ‒ OPC and MoPSC Staff investigation into recent acquisitions • We support efforts to reform and mode
Slide 8: EnergySouth acquisition
EnergySouth acquisition • Parent company of Mobile Gas and Willmut Gas • Grows our gas utility business ‒ Adds 104,000 customers and growing commercial and industrial load ‒ Provides additional capital investment and organic growth opportunities • Adds to cash flow and earnings ‒ Accretive to NEE pe
Slide 9: Spire STL Pipeline
Spire STL Pipeline 70-mile pipeline with • Helps modernize our gas assets to: capacity of 400 MMcf/d ‒ Achieve more diverse supply portfolio ‒ Improve reliability and resiliency ‒ Access lower-cost shale gas Connects to • FERC-regulated pipeline 100% Rockies Express owned by Spire pipeline • July 22
Slide 10: Net economic earnings
Net economic earnings Third Quarter Ended June 30 Millions Per Diluted Share Net Economic Earnings1 FY16 FY15 FY16 FY15 Gas Utility $ 18.0 $ 16.5 $ 0.41 $ 0.38 Gas Marketing 1.8 0.5 0.04 0.01 Other (5.2) (5.9) (0.12) (0.14) $ 14.6 $ 11.1 $ 0.33 $ 0.25 • Net economic earnings (NEE) per share of $0.33
Slide 11: Operating revenues and margin
Operating revenues and margin Third Quarter Ended June 30 Millions Change FY16 FY15 $ % Operating Revenues Gas Utility $ 253.2 $ 260.2 $ (7.0) -3% Gas Marketing & Other (3.9) 15.0 (18.9) -126% $ 249.3 $ 275.2 $ (25.9) -9% Operating Margin1 Gas Utility $ 176.9 $ 172.9 $ 4.0 2% Gas Marketing (0.2) 3.1
Slide 12: Expenses
Expenses Third Quarter Ended June 30 Millions Change FY16 FY15 $ % Operating Revenues $ 249.3 $ 275.2 $ (25.9) -9% Operating Expenses Gas Utility Natural & propane gas 54.1 57.7 (3.6) -6% Other operation & maintenance 91.8 90.6 1.2 1% Depreciation & amortization 34.2 32.5 1.7 5% Taxes, other than in
Slide 13: Year-to-date highlights
Year-to-date highlights Nine Months Ended June 30 Millions Per Diluted Share 1 Net Economic Earnings FY16 FY15 FY16 FY15 Gas Utility $ 170.5 162.8 $ 3.91 $ 3.75 Gas Marketing 4.5 3.0 0.10 0.07 Other (11.8) (11.4) (0.27) (0.26) $ 163.2 154.4 $ 3.74 $ 3.56 • Gas Utility earnings up $7.7 million (~5%)
Slide 14: Strong cash flow, capital structure and liquidity
Strong cash flow, capital EBITDA1 structure and liquidity (Millions) $400 • YTD EBITDA1 of $396 million, up 4% from last year $300 • Significant liquidity with more than $200 $381.0 $395.8 $650 million of capacity $100 • LT capitalization ~52% equity $0 ‒ Reflects equity units as equity 9 Mos. FY15
Slide 15: Capital investment
Capital investment (Millions) $250 • YTD spend reflects run rate growth $200 after removing nonrecurring facility $150 and ITS projects in 2015 $100 $202.9 $195.3 • Full year target of $310 million with over 73% of spend recoverable in rates $50 with minimal regulatory lag $0 9 Mos. FY15 9 Mos. FY16
Slide 16: Strong dividend track record
Strong dividend track record Dividend Yield Annualized dividends per share 2.8%2 $2.00 $1.961 $1.84 $1.80 $1.76 $1.70 $1.66 $1.62 $1.60 $1.40 2011 2012 2013 2014 2015 2016 • Quarterly dividend of $0.49 per share declared July 28 • Increase accelerated to 6.5 percent in 2016 based on our growing earn
Slide 17: Outlook for growth
Outlook for growth • We expect to fall in the upper end of our FY16 net economic earnings per share (NEEPS) target $3.34 - $3.441 • Long-term annual NEEPS growth target remains 4% - 6% • Mobile Gas and Willmut Gas anticipated to add to NEEPS in 2018 • Spire STL Pipeline targeted for 2019 in-service
Slide 18: The Spire journey continues
The Spire journey continues • Spire continues on its journey of growth and transformation • The names of our gas utilities and other businesses will transition to Spire during 2017 • Our focus remains squarely on: – Growing our gas utilities organically and through prudent investment in upgrades – C
Slide 19: Energy exists to help people.
Energy exists to help people. To enrich their lives, grow their businesses, advance their communities. It’s a simple idea, but one that’s at the heart of our business. 19 S pire | 3 r d Quarter FY16 Earnings Conference Call
Slide 20: Appendix
Appendix 20 S p i r e | 3 rd Q u a r t e r F Y 1 6 E a r n i n g s C o n f e r e n c e C a l l
Slide 21: 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 June 30, 2016 Net Income (Loss) (GAAP) $ 17.9 $ (1.0) $ (6.2) $ 10.7 $ 0.24 Adjustments, pre-tax: Unrealized loss on energy-related derivat
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 Nine Months Ended June 30, 2016 Net Income (Loss) (GAAP) $ 169.6 $ 2.8 $ (14.0) $ 158.4 $ 3.60 Adjustments, pre-tax: Unrealized (gain) loss on energy-related
Slide 23: Operating margin (non-GAAP) reconciliation
Operating margin (non-GAAP) reconciliation Gas Gas (Millions) Utility Marketing Other Eliminations Consolidated Three Months Ended June 30, 2016 Operating revenues $ 253.3 $ 2.3 $ 0.9 $ (7.2) $ 249.3 Natural and propane gas expense 61.1 2.5 - (6.9) 56.7 Gross receipts tax expense 15.3 - - - 15.3 Ope
Slide 24: EBITDA (non-GAAP) reconciliation; Adjusted long-term capitalization reconciliation
EBITDA1 (non-GAAP) reconciliation Nine Months Ended June 30 (Millions) FY16 FY15 Net Income $ 158.4 $ 155.6 Add back: Interest Charges 57.7 56.1 Income Tax Expense 77.7 71.9 Depreciation & Amortization 102.0 97.4 EBITDA $ 395.8 $ 381.0 Adjusted long-term capitalization reconciliation As of June 30,