Q1 2021 Spire Inc Earnings Call

[music].

Good morning, and welcome to spire first quarter earnings Conference call.

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Please note this event is being recorded.

I would now like to turn the conference over to Scott Dudley Managing Director Investor Relations. Please go ahead.

Good morning, and welcome to spire in fiscal 2021 first quarter earnings call.

We issued an earnings news release. This morning, and you may access on our website aspire energy dot com under newsroom.

There's a slide presentation that accompanies our webcast and you may download it from either the webcast site or from our website under investors and then events and presentations.

Presenting on the call today are Suzanne <unk>, President and CEO.

Steve Lindsey Executive Vice President and Chief operating Officer.

Steve Rasche.

The vice President and CFO.

Before we begin let me cover our safe Harbor statement and use of non-GAAP earnings measures.

Today's call, including responses to your questions may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Although our forward looking statements are based on reasonable assumptions there are various uncertainties and risk factors that may cause future performance or results to be different than those anticipated.

These risks and uncertainties are outlined in our quarterly and annual filings with the SEC.

In our comments, we will be discussing net economic earnings and contribution margin, which are both non-GAAP measures used by management when evaluating our performance and results of operations.

Explanations and reconciliations of these measures to their GAAP counterparts are contained in both of our news release and slide presentation.

With that I'll turn the call over to Suzanne.

Thank you Scott and good morning to everyone joining us today for our first quarter update on our year end call, we reported that fiscal 'twenty and 'twenty and continue to make strides towards our strategic priority. Despite the challenges from the coronavirus pandemic.

Iran, We delivered growth and solid financial and operating results, while advancing our sustainability objectives.

Athletes that four I'm pleased to tell you that we're building on last year's my matter and are off to a good start in fiscal 'twenty and 'twenty one.

We reported higher first quarter earnings largely driven by our gas utility.

And also thanks to solid results from gas marketing.

Steve Rasche will cover first quarter financial update in a moment.

At the same time, our operating performance is strong with improvements in safety system integrity service and environmental sustainability.

GAAP into the new year, we're committed to executing on our strategic priorities that drive our growth while building on our ESG record.

Particularly we remain focused on our commitment to being a carbon neutral company by mid century, and achieving our methane emissions reduction goals.

As you know currently the primary driver and emissions reduction of pipeline replacement. We are on track with our plans, including investment in infrastructure upgrades and other programs to identify and reduce weight.

At the same time, we continue to evaluate other ways to meet our environmental commitment because we believe that natural gas has an important role to play in the energy transition to a low carbon future.

Looking at our R&D at carbon offset in the near term.

Letting hydrogen as a longer term solution.

Keep in mind that these carbon reducing approaches represent investment opportunities that can support earnings growth.

That's because natural gas is critical to ensuring Americans have access to energy choices that are clean and affordable.

As we announced yesterday spire enjoying one future natural gas industry coalition focused on improving the management of methane emissions across the entire value chain.

Steve Lindsey will have more to say on that but we are pleased to join several of her LDC peers and combining efforts to reduce methane emissions and collectively report on our achievements.

We have also taken an important step in 91 of our spire executives to lead our environmental efforts earlier. This week, we named Nick Powalsky I've had a environmental commitment.

Currently the inspires business and economic development efforts. He brings expertise in data and analytics, that's new role as he works to develop new business processes and guidance of the company strategy behind our commitment to being a carbon neutral company I've been century.

Although the environment is the focus we're talking about today is only one area within our corporate social responsibility, our ESG strategy and I'm pleased to note that our total ESG efforts are getting noticed.

As one example fire was ranked by Newsweek as one of America's most responsible companies recognizing for the second year in a row, our strong performance I think corporate citizen.

Specifically, we are recognized for our commitment to the environment social issues and corporate governance.

At the start of our fiscal year. We've also progressed from separate regulatory matters, including completing the annual rate setting are cute am Alabama utility as fire Mississippi.

As well as filing a rate review in Missouri.

Lastly, I'll cover this in more detail.

As we build on our momentum from last year. It is important to capture our success and look to the future.

In that spirit last week, we launched our story our online annual review the outline where we are today and what we're focused on going forward.

I encourage you to explore the site at our story not our energy Dot com and see all the ways, we are stepping for advancing and innovating for a better tomorrow.

In the meantime, let me share a few quick highlights.

You'll see that we began our story by highlighting what we're doing to protect our environment.

This includes our commitment to be in a carbon neutral company the infrastructure upgrades and methane emissions reduction.

You'll also see that we're driving future growth and earnings through our investment in upgrading our infrastructure.

And the innovation.

We're advancing people and performance. This encompasses everything from our operating performance, including safety system integrity and service. It's a program that help employees smart growth.

All included.

And last but certainly not least we take good care of our communities.

Providing support during the pandemic.

Overall, our story is about being an essential energy provider, including what it means to have the privilege and responsibility of delivering affordable reliable and clean energy.

Working to create a sustainable energy future.

As I noted last time, achieving our collective success is only possible through the efforts of our 3600 amazing spire employees.

Our employees continue to step up in the face of challenges.

Whether it's the coronavirus or winter storms spire employees dedicate themselves to getting the job done and ensuring our customers and communities are well served supported and kept safe and healthy.

Now I'll turn the call over to Steve Harvey.

Thank you Suzanne I also want to acknowledge the continued efforts of our employees, especially in the midst of the pandemic and carrying for supporting and serving our customers and communities.

Work you do every day helps us keep advancing as a company, enabling us to raise the bar on our performance and stay on track with our plans and commitments.

Thanks to your efforts, we are stepping forward with confidence in our ability to achieve another year of success and growth.

As you know the key drivers of our growth continue to be the investments, we make in our infrastructure upgrades and adding customers to our organic growth efforts.

We've had a strong start to fiscal 2021 with our capital expenditure plan in the first quarter, our capital spend totaled $164 million, including a $150 million for our gas utilities on pace with our spend a year ago.

Over half of our utility Capex went towards pipeline replacement and our new business spend was nearly $38 million, which reflects more than 30% growth over what we invested in the first quarter a year ago.

You'll note that our spend from pipeline storage and other it is down significantly the.

The biggest drivers lower investment for spire, STL pipeline, which was completed and placed into service in mid November of 2019.

We are on track with our full year planned spend of $590 million 95 per cent of that which is earmarked for our gas utilities, our pipeline and storage investment is on track with our plan the year as well.

A robust five year Capex plan totaling $3 billion will drive, 7% to 8% utility rate base growth.

As Suzanne said, we are building on our momentum from last year and this was certainly true of our performance on the operating side.

We're seeing improvements in key areas that impact safety system integrity service and sustainability.

Example, our Osha dart rate continues to improve with a lower level of employee injuries. We're also seeing consistent year over year performance and damage rates and average leak response time and as was the case last year. The leaks per thousand system miles are down significantly, resulting in enhanced safety and reliability and lower operating costs and reduce methane emissions.

To support our efforts in this area. Suzanne noted earlier aspire has joined one future coalition leading companies across the natural gas supply chain focused on an innovative performance and science based approach the management of methane emissions.

As far as one of 37 member companies that include L. D CS producers and midstream operators across the U S.

The goal is to achieve an average rate of methane emissions across the entire natural gas value chain that is 1% or less of the total natural gas production delivery.

As a member companies spire will report its methane intensity per 2020.

We're excited to be partnering with likeminded companies to develop and implement innovative ways to reduce our industry's environmental footprint and create a more sustainable energy future for generations to come game of one future aligns with our strategic priority to advance through innovation.

Now, let me turn to a regulatory update starting with our Missouri rate review that we filed in mid December of last year.

This is a normal course filing designed to recover and reflect in base rates. The significant investment that we've made more than $850 million in fact, since our last rate reset in 2018.

This is the only focus on the benefits created for our customers and communities, including making our system safer more reliable and cleaner Inc.

<unk> customer service enhancements included an online customer portal technology platform enhancements and advanced metering technology.

Posing new programs and options, including a voluntary carbon neutral program and R&D.

Sure our customers have equal access to our beneficial programs and services, regardless of which side of the state thereon by combining our Missouri utilities.

Our request is for a $64 million increase in base rates, which is net of $47 million already being collected there is for us for typical residential.

Residential customers. This represents an increase of about five 6% on their monthly bill.

Our filing reflects a rate base at the end of fiscal 2020, a nearly $2.8 billion and equity ratio of $54, two 5% and return on equity of $9 95 per cent.

In terms of the rate review process. We're currently in the midst of discovery during which we are responding to data requests from the Missouri Public Service Commission staff.

Based on discussions with the commission and staff the procedural schedule includes.

Direct testimony from staff and other interested parties in May likely update period for the test year of May 31, 2021, and hearings that will likely start in June and continued through August.

While the right moving process in Missouri is 11 months, a fully litigated our history and preference is to reach an agreement sooner than that such as the key elements in the case can be settled in a constructive outcome for all can be achieved.

Turning to our southeast utilities, the annual rate setting process has been completed for our Alabama utilities with new rates effective on December one 2020.

These rates are based on allowed ROE was established under the RSC mechanism, including $10 five per cent for spire, Alabama, and 10, 7% per spire golf.

We also completed the annual rate reset for spire, Mississippi with new rates effective January 12th, reflecting an ROE of 10% at 50% equity ratio.

In addition to working with regulators on rate matters, we are increasingly engaging with public service commissions on initiatives to expand our natural gas service to rural parts of our service territories, including agricultural areas, we're working to sustain and grow critically important industries in advance rural economic development.

We were pleased to receive unanimous support from the Alabama Public Service Commission for a multi phase project to expand natural gas service to poultry farmers and Rambler in Alabama.

Shown in the photo on this slide is the groundbreaking ceremony for the project featuring Twinkle Cavanaugh President of the Alabama Public Service Commission was a driving force in working with us to bring this program to reality.

Before turning the call over to Steve Rasche I wanted to comment on initiatives across the states are utilities operating in to prohibit local natural gas vans.

Legislation has been filed or is expected in Missouri, Alabama, and Mississippi to address this issue. We're supportive of these legislative efforts because we strongly believe customers should have the right to energy choice to enjoy the benefit of reliable affordable and clean natural gas.

With that I'll turn it over to Steve Rasche, Inc. For a financial review and update.

Thanks, Steve and good morning, everyone.

It was one year ago in this call that I share in our life picture of the celebration of the Super Bowl Champion, Kansas City Chiefs.

What a difference a year makes in many ways.

Except of course, the chiefs are competing again for the championship. This Sunday and all of us will be cheering them on don't chiefs.

Okay now back to business.

Turning to our results for the quarter, we delivered consolidated net economic earnings of nearly $77 million or $1 42 per share up from $72 million or $1 33 per share last year.

Our gas utilities posted earnings of $76 million 7 million from last year, reflecting higher margins and lower operating costs.

Gas marketing posted solid results with earnings that were down $2 8 million compared to last year's strong first quarter.

And all other businesses and corporate costs improved to $2 $8 million, reflecting a full quarter of spire STL pipeline is operating contribution as well as earnings from spire storage compared to a loss last year.

Looking quickly at a few details total operating revenues of $513 million were down 10% as lower demand due to milder weather combined with lower commodity prices.

Contribution margin on the other half was up $29 million or 10%.

Yeah. She told me margin grew $7 6 million as lower usage was more than offset by higher, Missouri, esters, new Alabama, and golf rates and modest customer growth.

Gas marketing's margins, excluding fair value adjustments that we removed from net economic earnings purposes was down $3 $3 million from a year ago.

This decline reflects less favorable market conditions and as we discussed last quarter. The net cost associated with our storage positions. We did begin to monetize some of these positions in December as planned and we remain on track to unlock that value in the remainder of the winter heating season.

Other business margins were $13 million, well above last year, and reflecting improved performance at both the STL pipeline and spire storage.

Looking at a couple of other key variances here on slide 12.

Operations and maintenance expenses were down $4 million after considering the reclassification of pension costs and regulatory reform.

Main driver here was lower O&M cost at the gas utilities, reflecting both fundamentally lower operations and employee related cost and some favorable timing of expenses.

Other income reflects higher investment returns offset by prior year ASU D C for the STL pipeline.

And finally income tax, which reflects higher taxable income and a change in our effective tax rate from the mid 17% range last year to roughly 20% this year consistent with our expectations.

We remain in a strong financial position and our long term capitalization remains balanced.

During the quarter, we took advantage of very favorable market conditions by issuing $150 million of long term net at spire, Alabama to help fund our infrastructure upgrades.

And as we hit the peak of our seasonal working capital needs, we retained significant capacity and liquidity.

We also continue to grow our cash flow with first quarter, EBITDA up 19% to $188 million.

Net cash flow funds, both our investments in rate base as Steve just talked about as well as our dividends in fact, our board just declared a quarterly dividend of <unk> 65 per common share payable on April 2nd.

At spire, we have a long history of rewarding shareholders with prudent consistent and growing dividends.

In fact, we have paid a dividend each year for the past 76 years and has increased our dividend from the past 18 years running.

Turning to our guidance.

We reaffirm our long term net economic earnings per share growth target range of 5% to 7%.

We also reaffirm our fiscal 'twenty, one earnings target range of $4 to $4 20 per share.

As Steve mentioned, our long term capital expenditure plans are also unchanged with a targeted spend of $3 billion for the five years through 2025.

And our current year forecast of $598 million.

This plan ensures that we will continue to deliver safe reliable and sustainable energy to our customers.

Continued to reduce our methane emissions and drives rate base growth of between seven and 8%.

And as a reminder, our capital investment plan is well diversified across our service territories supported by upgrade programs with long lives and covered by regulatory mechanisms that ensure minimal regulatory lag from most of our spending.

Our financing plan is largely unchanged and reflects our commitment to a balanced and strong capital structure to support our growth and investment plans going forward <unk>.

Including our targets for both <unk> to debt and holding company debt and support our strong credit ratings.

So in summary, we're off to a solid start to the fiscal year and are investing from a long term success across our businesses.

With that let me turn it back over to you Suzanne Thank you, Steve and thank you Steve.

In closing, let me underscore what spire is a compelling investment.

As you've heard we continue to pursue growth through further investments in upgrading our gas utility infrastructure. We believe our focus on our growing regulated business is the key to what makes fire attractive are.

Our business mix is over 90 per cent regulated ensuring earnings stability and value.

We have a robust capex plan through 2025 totaling $3 million with 98% of that bad for our gas utility and timely regulatory recovery.

Our capital plan drive, 7% to 8% annual rate base growth, which supports our long term annual earnings per share growth target of 5% to 7% we.

We pay a growing dividend that offers an attractive yield in excess of 4% and we have strong ESG performance with a focused effort to further reduce greenhouse gas emissions on the way to achieving carbon neutrality.

We look forward to updating you on our progress and success in achieving our goals of 2021 continues to unfold.

As always we appreciate your interest and investment in spire, Inc.

Safe stay healthy and now we're ready to take your questions.

Yeah.

Thank you we will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

And the first question will be from Michael Weinstein with Credit Suisse. Please go ahead.

Michael Your line is open perhaps you're muted on your end.

Hi, sorry about that.

Hello, Good morning.

Hey.

Could you discuss the prospects for I know you briefly mentioned that you might instead of rate settlements have been our historic target you guys are in Missouri.

You discussed the prospects for rate settlement, Missouri, given the resolution of some of the more controversial issues resolved by legislation.

Our rate case focal points are surrounding tax reform capital structure prepaid interest expense you know had been resolved as well in the last case.

Are things are going to be substantially easier this time around.

Hey, Michael This is Suzanne I'll provide some color and Steve Lindsey may want to add something to that but as you know the the cadence of rate cases in Missouri, or 11 month process and there's a cadence to us filing the case and then intervenors pylon bear case and generally what happens after the intervenors filed their case between that.

Period of time, and then through the hearing process is when the parties get together and try to land to settlement.

If you go back multiple decades in fact with Missouri most of the time it results in a settlement or at least the partial sediment that'll net and then the commissioners may decide the hanging Chad. The last few items. If you will so that that is just by normal course, the cadence. So yeah. We always believe it's better to get around the table.

For all parties, if we can reach a settlement in whole or part so that would be our objective this time as well.

Yeah, and Michael This is Steve Lindsey I would I would just kind of would go back to the y <unk>.

And really the reason we're in there is a couple of pretty big pieces of the capital investment we've made and Theres just a natural cadence to that from an interest perspective, but really if you go back to what we're trying to do for customers. This is the right time as well lots of programs options enhancements to customer service investments and technology that provide customers with more.

<unk>, even from some R&D option. So I think if you really kind of go back to the why we're doing this right now I would anchor back to that and then as Suzanne said, obviously, we would like to have the process not go the full length of term and we think we're in a position that makes a lot of sense with some of the resolutions. We got on the recent interest issues. Some of the legislation that got passed so so we think.

The reason we're in there is for the right reasons and will work with all parties to make this as expedited as possible.

Got you Hey.

We weren't expecting to monetize those storage purchases in the marketing segment until little bit later like more like second quarter can you comment on market conditions that allowed earlier monetization in this quarter.

And then also do you expect similarly strong results from the second quarter or you know or is it did.

Did you front load most of those gains.

Yeah, Hi, Michael This is Steve I'll take a shot at that yeah. There was some there was a small amount of storage that we expect it to get tacked on in December which is really the beginning of the heating season for them.

Geographies that we serve so that wasn't surprising overall market conditions were.

Flattish not not particularly.

Supportive through the first quarter and actually even through January is as everybody knows on the call because we all watch it.

We've now seen a whole lot of snow in fact, most of you all are probably looking at a lot of snow and a lot of cold and the markets have.

Injected more volatility in the commodity prices up so yeah, we lived through the entire heating season, and I think we see some opportunities going forward. So I wouldn't read anything into the early withdrawal. It was planned clearly we look at daily markets and if we see an opportunity to optimize our position a little bit earlier.

We use that flexibility in order to maximize the value so from that standpoint.

I'm not particularly concerned are the most important point is we're on track to unlock that value that we essentially locked in last summer when we laid into positions in terms of seasonality are focused most of those that realization is going to happen in the quarter were physically in right now so I would expect to see.

Good strong numbers coming out of spire marketing when we chat with you all three months from now.

Got you.

Last question on one future.

How much of a how much of the plan I guess it seems like it's focused mostly on methane leak reduction.

Could you talk about plans to maybe blend of renewable natural gas into the system as part of the methane.

Staying admissions global of methane emissions reduction strategy.

Or is this a way to achieve carbon negative results for gas utilities. If you are actually helping to flare essentially flare gas coming off.

Landfills and dairy farms that kind of thing.

And I'll start with that and then pass it onto Steve to provide more color that he would like to provide I'll I'll start with Theres. Many organizations one gas's one of them, but there's also the American gas Association and many others that are looking at from wellhead to burner tip, what we can do to eliminate emissions and.

Do you worry about one gas it is from a wellhead to burner tip.

As far as fire as an example, and we're working with our commissions in terms of what we can introduce who you know legislation are using our pipeline replacement program and those kinds of things. So I think you'll see a time Nissan and there'll be several organizations doing multiple things and natural gas is abundant.

And expensive, we want consumer choices as we navigate through this process that these associations that bring us together it can be an American gas Association and one gas well lay out plans for carbon neutrality by a time certain it is very important price to be involved in it included and that's one of the reasons for one GAAP.

One feature.

Yeah.

I clearly think others from strong alignment for us with one future because what I like about the organization is it's not just for example, a segment in the natural gas value chain. For example, like L. D C's, where storage, it's literally from from wellhead to burner tip and I think that's the way we ought approaches as an industry is we need to address it on the entirety of that value chain and sell.

The other things that come from that for example are the technical committees that are a part of one future are going to allow us to potentially have access to better leak detection technology too.

Things that help us that predict artificial intelligence around damage prevention all the pieces that you know if we had to do this independently as companies may take a longer period of time I think that helps us accelerate that and then if you think about just the service areas that we that we're in right now theres opportunity with with agricultural landfill to do some things with R&D that's why we.

We're proposing some programs with the commission, we think we're in a good spot to be able to do that and you know, obviously theres gas quality and all the things that we would have to address but we really build this is a piece of the puzzle I don't think there's any one big thing that's going to get anybody there I think there's a lot of pieces and this is helping us solve a few of those pieces are.

Yeah.

Got you. Thank you very much that's all I have.

That's fine.

The next question will be from Richard Zuccarelli with Bank of America. Please go ahead.

Hi, good morning, Thanks for taking my question.

Good morning, everyone.

Hey, just back.

Back on the Missouri rate case, I know there are a couple of peers that one's in the midst of one right now one just recently went through one just curious if you can.

Ronnie comparisons to those outcomes and what's currently going on in any and I know you discussed settlements at any early.

Indication from the commission, thus far on how things are progressing.

Richie This is Steve I'll take a shot and the team will jump in as we need true yeah.

Of course, we're watching not only whats going on in Missouri, but we're watching.

Everything that's going on in our space across North America, and I think we're pretty optimistic.

Optimistic about getting to a reasonable outcome yes.

The rate proceeding that you referenced did have every company has their own unusual items that they have to deal with with the staff from the commission and that one in particular had a bunch of issues around cap structure, and especially around the cap structure at the holding company versus the operating company Winter thing.

That we've addressed them a long time ago My victory, we got to the right spot from a customer perspective and from a business operating perspective, its last rate case, and I think we're in a pretty good spot to be either in your D. C. You do see those complications.

Complications do reflect themselves in not only the cap structure, where they choose the cap structure and the ROE, but I think we're in a good strong position and frankly, we've been operating as we said we would leaving the last rate case, which is operating spire, Missouri for the benefit of the customers in Missouri ring fencing, it and doing all the right things.

That net.

Net commission.

The staff and our customers can be confident in our ability to lead going forward.

Hey, rich. Thanks for the question. This is Steve Lindsey the one piece that I would add that's a little different about this one than maybe some of our prior cases as it was one of the things. We're looking to do is to combine the two utilities, Missouri East, Missouri West under one tariffs. We think obviously that provides consistency across the state per $1 2 million customers. Do you think there is efficiency opportunities and so that's something that's a little.

About this one but for the most part again, we're in there for a lot of the same reasons that you typically are in Missouri around capital recovery, but in this case enhanced customer programs in combining the two utilities. So I'd say, that's a little bit of a difference but otherwise.

We're very comfortable that the positions that we have are benefiting from the customers and really from the Commission's perspective, we think it will help them from an efficiency perspective going forward as well.

Raise actually appointed Steve Lindsey just stays here raising and I'm glad you brought that up not only other point I would add to that the commission and the commission staff is fully aware since that acquisition. It was our plan to do that at the right time and in the right way for our customers and that there's nothing really new about that.

Got it that's that's very helpful.

And just switching gears, a little bit to the the STL pipeline I know, there's some challenges there but from an environmental one FERC.

The other in Missouri on the P. G E filing just curious how those are progressing.

What's your kind of comfort level with the potential outcome there.

Hey, Rich this is Steve Lundy I'll start yeah, and basically the process right. Now is it was it was brought forward by the environmental Defense Fund and it's really addressing the FERC process, it's not the STL pipeline per se, but it was there a process.

Moving now to share that pipeline has been operating since November of 2019, So we're well over a year. It's been operating very efficiently, we're accessing supply from parts of the country for our customers here that we didn't have before and the one thing that I will say is with some of the interconnects that we've recently made and some of the other operational benefits that are coming.

Benefits from the pipeline or even better and larger than we thought originally and so that that even to me makes the case, even stronger from a timing perspective right now I believe oral arguments are due to be in.

In March relative to the case right now and then we'll just have to go from there, but we feel very confident and the rationale behind the original certificate that was received and in the event that we have to go through that process again, we think if anything additional benefits have been added to the original case.

Yeah.

Alright got it that was very helpful. That's all I had thanks again.

Okay. Thank you.

The next question will be from Richard Sunderland with Jpmorgan. Please go ahead.

Hi, good morning, Thanks for taking my questions.

Okay.

Okay.

Maybe starting off with the utility results from the quarter. Just curious if you could speak to the O&M timing, particularly how you see that coming in throughout the balance of the year.

Maybe any other considerations specific to this quarter in particular with.

Covid related savings and whatnot.

Well it risks Richard let me take a shot at that day.

There was clearly some timing in O&M and part of that gets back to the weather and and again, we did comment that the demand because of milder weather was a little bit down and that does actually allow us to do a better job and be more effective and efficient in our capital program than we would normally expect had we had no.

The weather so that clearly is something that may or may not come back until we calibrate the capital spend plan for the rest of the year and again, we tend to think of life in 12 month increments. So we do adjust the cadence of spend accordingly.

So from that perspective that clearly was a timing benefit and then it is not unusual and in our history here to start the year, a little bit better on the O&M side than we had expect because some of those expenses usually start ramping up when we get into the season after the heating season, and we take the good.

Look at what we want to get done during the summer time period.

We have as we've talked about in past calls done.

Good job of working with our team internally to keep a lid on cost and as with most companies, we're still and and Covid phase with limited or no travel and meetings and all that stuff and frankly, we look forward to the time, when we can actually start going out and interacting with our customers potential customers.

And with our team members across the U S, but that net isn't going to happen until the second half of this calendar year at the rate things are going and we'll have to see how the vaccine rollout and everything else.

<unk> progresses in terms of absolute impact on Covid and as we mentioned last quarter really isn't impacting us that much we're not seeing we're seeing some benefit on the O&M side.

Our residential are largely residential customer base demand is holding up so we're not seeing a lot of headwinds right now as we enter the first part of the heating season in Covid, because remember last year, we werent really dealing with this until until March of 2020.

Yeah, and the one part that I would add that Steve talked about but you kind of you kind of ended with it was we are now in a new part of operating in this environment that we didnt have before we started in March of last year. So we have gone through the Coke light up season, we're now into the more extreme parts of winter and really even going back 345 years, we have done.

And I think a very good job of being able to balance what whether it gives us some of it is positive some of it is how we manage our construction process versus our O&M and we balance things really for the year not for the quarter and so I think we've done a good job of really having a historical ability to manage that and so I wouldn't look at things by the quarter per se I really think we try to take.

A longer term perspective on that and even with the environment. We're in right now we're doing a very good job. If you go back to our operational metrics that we discussed earlier, we're exactly where we need to be right. Now is we're in the middle of winter.

Great. Thank you I appreciate the color.

And maybe one final one from me just circling back to the rate cases.

<unk> gone through the kind of the settlement prospects a lot, but just curious on the.

The kind of jurisdictional consolidation in particular, how you see that impacting the settlement process versus prior experiences.

Is there any kind of.

They're sticky issues or particular items around kind of that aspect in particular that could impact our rate case.

Well I'll start sort of pass along like I said at the beginning day. It from day, one it's been our expectation and we've been transparent with the commission and we've navigated a different rate cases, along the way that day. The goal would be to combine the two on a statewide basis to have one utility serving customers.

At the same rate and the same structure and the same service levels and continuing to prove improve year over year is beneficial to the state and we don't see customers is just one big group when it gets down to the work that Steve Lindsey and his team that day in and day out and we really do see those customers an individual's what what are the residential.

<unk> is experiencing one of the residential customers that are lower on the socioeconomic level versus higher on the socioeconomic level, what about small commercial business is restaurants, what about light industry and so yeah. We do think technology and our people were able to look into our customers and how they were taking their experiences with us not just on a cost basis not on a service basis.

And to the extent that we are customer centric in this way and doing it the same way across.

Our great state of Missouri, as well as Alabama for that matter and we grow off this platform and we're able to provide better service for our customers and yeah. That's important. It's also important from an economic development perspective, you know if you have the governor and the economic development team energy is vital to how you attract industry and businesses and.

And then your utilities are strong in terms of the services, they provide and the cost structures and the ability to use technology to help them do what they need to do every day that that is high value and show them again. It was this past that started at the beginning where spire and spire has to be GAAP.

So the GAAP services in the states I see this as a strategic move from the state as well as for our customers.

Yeah, and the only thing I would add really Suzanne comments were if you think about it multiple companies operate within the state Theres, an inherent inefficiency in doing that and when you combine those companies. For example, you get opportunities for improved service efficiency I think that's really the case with us as well, where the same owner per se, but we're having to operate a little bit.

Really right now just because of tariffs I think again the consolidation of that just makes a lot of sense.

Got it thank you.

Once again, if you'd like to ask a question. Please press Star then one.

The next question will come from Selman <unk> with Stifel. Please go ahead.

Thank you.

Good morning, all so E.

Just going back to one future real quick.

Quick questions here first of all you said you.

Talk about it from the wellhead all the way through well you guys have any input than say on who the producers are really actually provide your cash.

Natural gas.

Well I don't know that I would anchor that back to one future I think that that's more of our business model and the way we're looking at it from that perspective, but I think what it does is it provides some some transparency with again people all along the value chain and I think that's what we're really looking at it as an industry is we want to get better.

Electively are not not a single companies and so.

The way the structure works there is as we collectively reported so if you think about all the different pieces on the value chain, we will be reporting on our L. D CS which would be the distribution side and even midstream with the pipeline and storage. There's other pieces that'll be reported we don't in essence have access to that specific information about companies that it's the aggregation of the companies what we will.

He is kind of where we land amongst the group amongst the 37, but we won't have any insider information. If you will relative to those companies, but again I think we're all signing up and committing to make that that outcome that the goal for one futures put out there I think what that says to me is those are the kind of companies that you would want to align with.

The other piece and you know Suzanne we're active in that so you may want to add on it the goal as Steve described front in the value chain, there theres a desire to set targets in that and keep moving that target say that theres a clearer message in terms of again from conduction area to burner tip in terms of what those carbon reduction or so that that is one.

One of the benefits of this organization as well more transparency and net reductions and what those targets are.

Understood and then just along those lines I think you said you will.

Youll see Youll say, where you were for 2020 I guess at the end of that.

My question is where are you going to provide also where you started out at I guess for 2019.

Yeah, and so you know again, we will use the the definitions that one futures looking relative to methane intensity and report for that but if you kind of go back to what we have been reporting we went back to 2005 and from that point, we have seen a 39% reduction in our methane emissions. This is on our distribution system where per.

Rejecting that number to go up to 53% by 2025, so we've been reporting really and the methane challenge the day methane challenge. So all of that information is out there will continue to report that the additional information that we'll provide to one future will be based on the calculation relative to methane intensity. So so everything that we have.

To be quite honest is going to be transparent is gonna be public. This is part of the coalition that we think goes above and beyond just what spire doesn't really reflects the efforts of the entire industry.

Understood and then.

Last question here.

On the ATM this quarter.

I know some of this state or the ATM wasn't active.

Alright, thank you.

Yeah. Thanks.

And again, if you have a question. Please press Star then one.

The next question is from Brian Russo with Sidoti. Please go ahead.

Hi, good morning.

Right.

You mentioned, some external growth opportunities in some rural gabel labatt them up.

And I also.

Possibly on the bag side with poultry.

Type customers could you just elaborate on that the size of the opportunity in Canada.

Trying to be synergistic in some of the <unk>.

Opportunities to add to that.

Ongoing.

Sure and the expansions that we're referencing and that we even out of a picture about in the presentation or in the southern parts of Alabama, and it's too primarily poultry and agricultural areas and for the most part those will result in conversions and typically those are conversions from propane and things like that these are.

Customers that had been raising their hand, and wanting natural gas available to them for a period of time and so we went in and put some programs together worked with the commission and as you can see president Kevin I was obviously part of that I think that is viewed as economic development. It's rural expansion Theres a lot of different ways, you can talk about it but it will provide.

Gas or parts of the state that didn't have it even down if you go all the way to the coast and in our Gulf operating area. There is some opportunity down there with expansion of industry and things like that come into the state and then if you come back here in Missouri on the Western side of the state we're doing a lot of that expansion as well and that's through a process in Missouri noted a CCN.

What's your certificate of convenience and necessity previously.

Previously we had to kind of do those one at a time customer by customer. We've recently had a good success in actually getting a CCN for entire county, which makes it much more efficient so I.

I don't want to put a number out there because we really don't know because the opportunities will come is as we get out and canvas areas, but it's clearly something customers want and I think what we're seeing in both of our jurisdictions as it's being supported by those commissions, which I think is a win win for both the company the customers and really the state from an economic development perspective.

Okay.

Okay. Thank you for that and you mentioned it.

You seem to not issue equity in this fiscal first quarter under the ATM and you alluded to earlier that the financing.

Needs remain unchanged should we just you know assume what should we just.

What was not issued in the first quarter just extrapolate it out over the rest of the year, how should we just view.

The incremental equity an increase in average share count.

Yeah, Brian This is Steve.

You're spot on.

Use the ATM in that way over since its life since we introduced it two years ago as I recall and I think you can think about it that way clearly we also look at the tape and make sure that we're trading at fair value I think hopefully we would all agree I think most of you all do on the call that we and many of our.

Peers are trading below fair value so yeah. It did.

Felt.

Appropriate to hang tight right now and wait for the market to settle out a little bit and again delivering good first quarter earnings. So that hopefully will be another participant we look at the value for us and for a few of our peers.

And were there any COVID-19 related deferrals.

Oh made in this fiscal first quarter I think you had a little over 3 million as of September just curious.

All right Brian.

I don't have the number off the top of my head, which would answer the question I think it was small a couple of hundred thousand dollars tweak. It was $100000 now that I found that the answer so now we have we had.

We had largely.

Assessed our position at the end of the year remember since we're a 930 year end, we were assessing up until mid November. So we were well into the quarter. We're reporting on now and had good visibility. So I'm not surprised that the number hasnt moved very much.

And any update.

Our film and the excess capacity at the STL pipeline.

Yeah.

Yeah. So.

The team is always working on you know what those opportunities might be nothing that we've announced and like Steve Lindsey said earlier were highly satisfied with the operation of that pipeline you know I'm, an old operator believe it or not and I know, what it's like to being GAAP controlling operate pipelines and the pressure volumes that we're bringing in the design.

In terms of into our system and around to different parts, where we have difficulty holding crushers and so forth like Steve Lindsey said that pipeline has outperformed our expectations and we're more than delighted to have that pipeline as part of our system and serving our customers and also like I mentioned earlier because of the volume and pressure it brings into the St. Louis.

Its region in terms of economic and development growth, we're able to now be able to invite the industry's yet because we do have those volumes of gas and the pressure needed to support those kinds of industries.

Great and then just one last just clarification the brake adjusted.

In Alabama, $1 3 million, what was that attributable to.

But we reset rates in Alabama at both ends of that.

Both of the utilities in Alabama on an annual basis and those rates go.

Go into effect on or about December one of each year based upon the budget that we're operating in so that's that's kind of the normal cadence, Brian how rates are adjusted.

Okay. Thank you.

Okay.

Yeah. Thank you.

And gentlemen, this concludes our question and answer session I would like to turn the conference back over to Scott Dudley for any closing remarks.

Thank you everyone for joining us today, we will be around the rest of the day for any follow ups and we look forward to catching up with us future have a great day.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Yeah.

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