Slide 1: Second quarter fiscal 2018 earnings conference call
Second quarter fiscal 2018 Earnings conference call May 2, 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 | Second Quarter FY18
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 | Second Quarter FY18 Earnin
Slide 5: Delivering on our promises
Delivering on our promises • We have completed our Missouri rate cases • Key parameters have been set, giving us certainty for our Missouri utilities – Rate base – Return on equity – Equity capitalization – Rate design (harmonization) – Weather normalization – ISRS reset and renewal – Cost of servic
Slide 6: Delivering on our promises
Delivering on our promises • Updated our outlook ‒ Established FY18 EPS guidance of $3.65 - $3.75 ‒ Increased LT earnings growth target to 4% - 7% ‒ Increased 5-year capital spend to $2.5 billion • Delivered solid Q2 performance – Overall strong system operations – NEE per share of $2.83 – Executing
Slide 7: Growing Spire Marketing
Growing Spire Marketing • Strong earnings due to improved market conditions and wider regional basis differentials, driving – Higher volumes – Greater storage optimization • We are positioning Spire Marketing for continued growth and success by – Named industry veteran, Pat Strange, to lead the busi
Slide 8: Investing in pipelines and storage
Investing in pipelines and storage • Integration of newly acquired storage facility well underway – Enhancing operating performance and investing to expand capacity – Hired Laura Luce who brings extensive experience in storage development and operations – Storage expected to add to earnings in FY19;
Slide 9: Growing our dividend
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 3 • 15
Slide 10: Maintaining our momentum in operations
Maintaining our momentum Capital expenditures in operations (Millions) $500 $500 $438 75 • Improving operating performance $400 25 60 63 – Reduce employee injuries $300 – Enhance system operations/reliability $200 – Deliver even better service 350 365 $100 • FY18 capital expenditures target increase
Slide 11: Update on regulatory matters
Update on regulatory matters • New Missouri rates went into effect on April 19 – Authorized 9.8% ROE, utility cap. structure (54.2% equity) and $2.0B rate base – Reflect ~$70 million in savings and synergies from our transformative growth Impact ($ Millions) Customer rates Earnings Base rate increas
Slide 12: 2018 results
2018 results Year-to-Date March 31 Millions Per Diluted Share 2018 Change 2017 2018 Change 2017 Net income (GAAP) $214.2 $61.0 $153.2 $4.42 $1.08 $3.34 MO regulatory adjustments 18.8 18.8 - 0.39 0.39 - Tax Cuts and Jobs Act (54.0) (54.0) - (1.12) (1.12) - Other adjustments1 16.1 12.8 3.3 0.33 0.25 0
Slide 13: 2018 results
2018 results Year-to-Date March 31 Millions Per Diluted Share 2018 Change 2017 2018 Change 2017 Net income (GAAP) $214.2 $61.0 $153.2 $4.42 $1.08 $3.34 MO regulatory adjustments 18.8 18.8 - 0.39 0.39 - Tax Cuts and Jobs Act (54.0) (54.0) - (1.12) (1.12) - Other adjustments1 16.1 12.8 3.3 0.33 0.25 0
Slide 14: Quarterly results
Quarterly results Second Quarter Ended March 31 Millions Per Diluted Share 1 Net Economic Earnings 2018 2017 2018 2017 Gas Utility $ 131.7 $ 112.2 $ 2.72 $ 2.45 Gas Marketing 10.2 - 0.21 - Other (4.7) (3.2) (0.10) (0.07) $ 137.2 $ 109.0 $ 2.83 $ 2.38 Average Shares Outstanding 48.4 45.7 • NEE up $28
Slide 15: Higher revenues and margin
Higher revenues and margin Second Quarter Ended March 31 Millions Change (Millions) 2018 2017 $ % Operating Revenues Gas Utility $ 790.8 $ 643.7 $ 147.1 23% Gas Marketing 21.3 22.2 (0.9) -4% Other and Eliminations 1.3 (2.5) 3.8 n/m $ 813.4 $ 663.4 $ 150.0 23% 1 Contribution Margin Gas Utility $ 344.
Slide 16: Expenses
Expenses Second Quarter Ended March 31 Millions Change (Millions) 2018 2017 $ % Operating Expenses Gas Utility Natural & propane gas $ 383.7 $ 254.3 $ 129.4 51% Operation and maintenance (O&M) 143.6 98.4 45.2 46% 1 O&M expenses, net of write-offs 105.2 98.4 6.8 7% Depreciation & amortization 41.1 37
Slide 17: Year-to-date earnings
Year-to-date earnings Six Months Ended March 31, Millions Per Diluted Share Net Economic Earnings 2018 2017 2018 2017 Gas Utility $ 191.2 $ 164.0 $ 3.94 $ 3.59 Gas Marketing 13.8 1.4 0.29 0.03 Other (9.9) (8.9) (0.21) (0.20) $ 195.1 $ 156.5 $ 4.02 $ 3.42 Average Shares Outstanding 48.4 45.7 • Net ec
Slide 18: Financially strong
Financially strong 1 YTD EBITDA (Millions) $400 • YTD FY18 EBITDA1 of $370 million, $350 up 6% from last year $300 • Ample liquidity provided by our $349 $370 $975 million credit facility and $250 commercial paper program $200 2 • Solid LT equity capitalization FY17 FY18 49.8%, up 1.1% from fiscal y
Slide 19: Outlook for 2018
Outlook for 2018 • 2018 NEEPS targeted at $3.65 - $3.75, reflecting – First half results, including Spire Marketing strong performance due to improved market conditions – Tax reform • Reduced customer rates across all of our jurisdictions • Full year effective tax rate, excluding the non-cash revalu
Slide 20: Investment in growth remains a top priority
Investment in growth Capital expenditures forecast (Millions) remains a top priority 5-year forecast: $2.5B $560 • 2018 forecast increased to $500 million $500 110 $475 $490 10 $500 10 75 10 70 70 • Increasing 5-year capital investment 60 70 70 forecast to $2.5 billion ‒ Driven by utility infrastruc
Slide 21: Longer term outlook
Longer term outlook • Long-term NEEPS growth is targeted at 4% - 7% – Run-rate 2018 is the baseline for our target CAGR • Removing the current-year benefit in Spire Marketing (~$0.17) that is not anticipated to recur • Resets baseline for utilities given regulatory outcomes and tax reform – We expec
Slide 22: 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. 22 S p i r e | S e c o n d Q u a r t e r F Y 1 8 E a r n i n g s C o n f e r e n c e C a l l
Slide 23: Appendix
Appendix 23 Spire | Second Quarter FY18 Earnings Conference Call
Slide 24: Our Spire utility portfolio
Our Spire utility portfolio Alabama MO East MO 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 18,
Slide 25: 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 • 1H GAAP financials include impacts based on the available guidance, including – Lowering our effective GAAP tax expense, reflecting the new lower stat
Slide 26: 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 c
Slide 27: 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 March 31, 2018 Net Income (Loss) (GAAP) $ 102.5 $ 0.3 $ (4.6) $ 98.2 $ 2.03 Adjustments, pre-tax: Missouri regulatory adjustments 30.6 - -
Slide 28: Contribution margin (non-GAAP) reconciliation
Contribution margin (non-GAAP) reconciliation Gas Gas (Millions) Utility Marketing Other Eliminations Consolidated Three Months Ended March 31, 2018 Operating income (loss) (GAAP) $ 142.7 $ 1.1 $ (2.0) $ - $ 141.8 Operation and maintenance 145.8 1.5 5.8 (2.6) 150.5 Depreciation and amortization 41.1
Slide 29: EBITDA and adjusted long-term capitalization reconciliation
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 Adjusted