Spire Inc. · NYSE:SR
Spire — Investor Presentation (June 2018)
40 slides from Spire's investor presentation, Jun 6, 2018
Slide 1: Moving forward confidently
Moving forward confidently Investor Presentation June 2018
Slide 2: Spire | Investor Presentation | June 2018
2 Spire | Investor Presentation | June 2018
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: 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 4 Sp
Slide 5: 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 6: 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 6 Spire | Investor Presentation | June 2018
Slide 7: 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 8: We are building rate base
We are building rate base Capital expenditures forecast (Millions) 5-year forecast: $2.5B • 2018 capex forecast now $500M $560 $500 $490 $500 – Higher utility spend of $425M 110 $475 10 10 75 10 70 70 70 – $80M for new business investment 60 70 • Increased our 5-year capital spend forecast to $2.5 b
Slide 9: 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 10: We’re investing in pipelines
We’re investing 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 opportu
Slide 11: Spire | Investor Presentation | June 2018
11 Spire | Investor Presentation | June 2018
Slide 12: 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 13: 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 14: We delivered solid 1H FY18 performance
We delivered solid 1H FY18 performance Net economic earnings per share1 $4.02 • Net economic earnings per share $4.00 $3.42 0.29 up $0.60 or 18% $3.00 0.03 • Both segments benefited from return $2.00 of normal weather 3.40 3.76 • Gas Utility up $0.36 per share $1.00 – Higher volumes, growing ISRS $0
Slide 15: 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 16: 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 Tax reform MO rate case Rate design Equity 2018 midpoint results write-offs offering • 2018 NEEPS targeted at $3.6
Slide 17: Targeting long-term earnings growth of 4%-7%
Targeting long-term earnings growth of 4%-7% Net economic earnings per share 1 • Long-term NEEPS growth target ‒ Base year is 2018 run-rate earnings ‒ Frames both annual and long-term expectations • Driven by rate base growth and our $2.5 billion capex forecast • Anticipate growing contribution from
Slide 18: Strengthening our financial position
Strengthening our 1 Adjusted EBITDA (Millions) financial position $400 • YTD FY18 adjusted EBITDA1 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 1st
Slide 19: We’re growing our dividend
We’re growing our dividend Annualized dividends per share +7.1% $2.30 $2.251 Dividend Yield +7.1% 3.2%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 July
Slide 20: 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 21: 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. 21 Spire | Investor Presentation | June 2018
Slide 22: Appendix
Appendix 22 Spire | Investor Presentation | June 2018
Slide 23: 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 24: 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 25: 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 26: 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 27: 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 28: 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 29: t a t i o n |
29 S p i r e | I n v e s t o r P r e s e n t a t i o n | J u n e 2 0 1 8
Slide 30: Our Spire utility portfolio
Our Spire utility portfolio Missouri Alabama East West Gulf Mississippi (Alagasco) (Laclede Gas) (MGE) (Mobile Gas) (Willmut Gas) 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 84,900
Slide 31: 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 4,000
Slide 32: 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 33: Legislative update
Legislative update • The Rate Case Modernization Act, Missouri SB 730 and HB 1878 – Sought to improve rate stability using annual rate reviews – Encouraged performance-based incentives and cost accountability • Positive progress this session – Regulatory reform bills for electric and water utilities
Slide 34: 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 35: 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 36: 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 37: 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 38: 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 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 - - 30.6
Slide 39: 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 40: 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