Q2 2022 Spire Inc Earnings Call
Good morning, and welcome to the spire second quarter earnings call all participants will be in a listen only mode.
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I'd now like to turn the conference over to Scott Dudley Managing director of Investor Relations. Please go ahead.
Good morning, and welcome to spire fiscal 2022 second quarter earnings call.
We issued an earnings news release this morning, and you may access it on our website at 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.
Before we begin let me cover our safe Harbor statement and use of non-GAAP earnings measures.
Today's call, including responses to 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 the economic earnings which is a non-GAAP measure used by management when you're evaluating our performance and results of operations.
An explanation and reconciliation of this measure to its GAAP harder part is contained in both our news release and slide presentation.
On the call today is Steve Lindsey Executive Vice President and Chief operating Officer.
Steve Rasche, Executive Vice President and CFO and.
And Scott Carter.
President spire, Missouri.
Also in the room with US is Adam water, Vice President and Treasurer, and also CFO of our gas utilities.
With that I'll turn the call over to Steve Lindsey.
Thank you Scott and good morning to those participating on the call.
I know many of you are wondering what you can do and what isn't picking off the call today.
Complex is simply wasn't able to join US rest assured she is very much looking forward to connecting with all of you to <unk> financial forum in less than two weeks.
I want to start by acknowledging our employees, who continue their focus on maintaining safe and reliable gas delivery operation and outstanding service to our customers your efforts and dedication of our especially important during the winter heating season that just concluded.
Also we are extremely proud of earlier this week group of our employees receive the Meritorious Service award at the Agi operations accomplish.
With annual awards in recognition of their brave actions <unk>, two alpha and the young mother trapped in an apartment fire, we cannot be more proud of these team members.
As you know is fire everything begins and ends with our mission and for every challenge advance every community and a rich every life the strength of our energy.
We're using that energy to make a positive measurable impact on the world around us our energy keeps us stepping forward advancing an innovative and energizing the future.
Despite the near term regulatory matters that were working to address we remain steadfast in delivering our long term strategic priorities and commitments to support our growth while working toward an innovative resilient and sustainable energy future.
We continue to invest significant amounts of capital into our utilities for upgrading infrastructure, gaining new business by adding customer connections and furthering our innovation through technology.
We're doing this while enhancing all aspects of our operating performance and customer service safety and system reliability, including reductions in methane emissions as we move forward our commitment to be a carbon neutral company by mid century.
As we announced this morning, we delivered solid financial results for our fiscal second quarter, including higher earnings for our gas utilities.
As you will cover our results in more detail.
Oh good many of you been following closely our regulatory matters in Missouri and for our most recent rate order.
<unk> heard us discuss the steps, we're taking as we continue pursuing a fair and reasonable regulatory outcome.
Lastly, a few comments on the operating certificate for spire, STL pipeline and with that I'll, Let Scott Carter hit on the Missouri regulatory matters.
Thank you Steve as you all know our last Missouri rate case order less open significant issues that the commission noted could only be addressed in context of another general rate case, particularly those issues, where the rate of return and the return of non operational overhead costs.
We never intended to file another case immediately after the conclusion of the most recent one it is essential that our rates reflect the full actual cost of service and then allow us to earn a reasonable rate of return.
On April 1st we filed a new case to address these matters.
Requesting a $152 million of additional revenue.
The Pie chart on this slide breaks down the major pieces of Rs.
The largest pieces are related to the two items I just mentioned right of return and recovery of overheads. Those two items combined represent 85% of the requested revenue increase.
For what we believe to be a fair and reasonable overall return on rate base of seven 5% based.
Based on the ROE and equity layer shown on this slide.
The other 45% of the request is tied to cost of service, including return on a $3 4 billion rate base as well as higher depreciation and cost of service updates, including the impact of inflation.
The test bearing for this case as calendar year 2021.
And as a reminder, the test period is generally updated during the case or closer to the decision. We have included an estimate for that through in our overall request.
We've been working with other parties in the case of develop a procedural schedule for consideration by the Missouri PSC. The company continues to advocate for an accelerated schedule given the recency of our last fully litigated case, we shouldnt that schedule by mid May.
Turning to overheads, the Missouri PSC originally ordered the capitalization of non operational overhead six starting with the effective date of the order which was December 23rd.
Pending a study an audit by the commission staff to determine our compliance with the FERC uniform system of the cabinets.
I wouldn't know the prudency of these overhead costs were never questioned or challenged.
So that he has been completed and staff submitted its report on March 18th.
Report recommended that spire, Missouri would be allowed to defer the overheads in question into a regulatory asset to be recovered in future rate proceedings.
While April 13th the commission issued an order authorizing the accounting treatment for those costs.
As I just described recovery of overheads are a major part of the revenue request in our 2022 rate case.
Overheads are split into two buckets. If you will there are amounts that are to be capitalized plants and of course with the study and.
And there are amounts that are expected to be expensed.
Based on the orders we received from the Missouri PSC related to both buckets. These amounts are deferred into a regulatory asset starting December 23 of last year.
As this table shows the steady base capitalized amounts to be deferred in fiscal year 2022 are expected to total $21 million, including $6 $6 million deferred in our second quarter.
For overheads that will no longer be capitalized based on the study the costs are expected to total $15 billion for FY 'twenty, two with $5 $9 million already booked in Q2.
I would like to also highlight that the Missouri Public Service Commission recently approved an <unk> revenue increase of $8 5 million effective may seven including in this order is $5 million of overheads that were deferred as part of that settlement.
So we have these overhead cost identified and compartmentalized with Alaska up remaining to receive final clarification from the commission on how and when these costs will be recovered from customers.
That will be addressed in the context of this rate case with these actions we are taking positive steps towards regaining momentum in Missouri.
Now I'll pass the call back to Steve.
Thank you Scott.
Let me turn to an update on our capital expenditure program.
As far as planned spend continues to be focus on our gas utilities with most of the dollars earmark for upgrades to our distribution network through pipeline replacement as well as new business.
For the first half of fiscal 2022, our capex totaled $276 million with 265 billion dedicated to our gas utilities.
Invested nearly $130 million in infrastructure upgrades and $67 million for new business.
Another important aspect of our standard that we've noted is for technology.
Invested tens of millions of dollars for the purchase and installation of advanced meters. This year containing our program that's been underway for several years.
In fact through the end of April we've installed more than 193000 ultrasonic meters across our utilities since the program again.
There are many benefits associated with newer meter technology, both our customers and our utilities for example, the new meters provide auto shut off to enhance safety.
And there are more reliable more accurate provide enhanced data that can be used to better serve our customers.
Our forecast for this year has been revised to $540 million from $570 million previously reduction.
The reduction largely reflects at about $21 million overhead costs will be deferred into a regulatory asset Scott Carter noted earlier.
Our five year capital plan through 2026 remaining $3 $1 billion, but more than 98% to be invested in our utilities.
Again, the focus is on our long term pipeline replacement programs, which have good recovery mechanisms plus new business technology and innovation.
This investment drives annual rate base growth at 7% to 8%.
Next month's fire will publish its fourth annual report on sustainability, reflecting our continued progress in measuring performance and impact as we strive to become more sustainable.
In that regard I'm pleased to note that with our 2021 report will be nearly 100% compliant with the global reporting initiative or <unk> disclosures and will be including full reporting on the metrics related to our industry sub category for the sustainability accounting standards board or SaaS fee reporting framework.
Let me cover a few highlights of the report starting with protecting the environment as.
As the top chart on this slide shows in 2021, our gas utilities achieved a 46% reduction in methane emissions since 2005 meeting our target for the year.
Much of the credit for achieving the reduction goes through our pipeline upgrade program, but we also have other initiatives such as damage Prevention program pipeline safety management system distribution integrity management program and specifically target lead production.
Over the last five years, we've reduced our lease per thousand system miles by over two thirds.
We've enhanced our environmental focus establishing an internal team to oversee our commitment.
The team has already successfully created a baseline for scope, one and two emissions.
Our sustainability report also highlights how we care for people.
Includes further strengthening our safety culture for the benefit of our employees and those they serve our employee safety as measured by the Osha Dart rate continued to improve in 2021, representing a more than 50% decline in the rate of employee injuries over the past five years.
At the same time, we're focused on building a greater diversity across our company, including our workers well suppliers.
Continue to expand our outreach activities to support our customers and our communities.
Over the years far has built a reputation for strong corporate governance.
Other enhanced our governance by formally assigning oversight for sustainability to committee of our board of directors.
I would note that despite our board continues to be independent diverse and highly qualified.
Let me conclude my remarks, with a status update on spire STL pipeline.
As you recall early last December the pipeline was issued a new open ended temporary operating certificate by the FERC.
This was a timely and important action that provide certainty of gas supply the St. Louis region during the winter.
It also allowed the pipeline to sustain operation indefinitely, while the FERC continues to address a new permanent certificate as part of the remaining process is underway.
The remainder will include environmental impact statement or EIS to.
To be prepared by the FERC.
I asked a supplemental for the environmental assessment completed as part of the original certification for the project.
It's unexpected issuance of the EIF late this fall we expect to remain to conclude in early 2023.
With that I'll turn it over to Steve Rasche for a financial review and update Steve.
Thanks, Steve and good morning, everyone.
Let's start with a brief review of our results for our second fiscal quarter.
Posted net economic earnings of $181 million or $3 42 per share.
Comparisons to prior year come with a reminder, that this time last year, we were dealing with the unusual perhaps once in a lifetime event winter storm year.
Isolating these impacts as best we can our current year earnings would've been nearly $175 million up $4 6 million or nine cents a share from last year.
Let's look at the results at our business segments.
Gas utilities had earnings of $169 million $95 million ahead of last year as growth from new rates in Missouri, and Alabama more than offset the benefits of winter storm year in last year that did not recur.
We also saw a continuation of warm weather, especially in Alabama, where temperatures were roughly 16% warmer than normal.
Compared to a return of more normal temperatures in Missouri.
As a reminder, while we do have weather mitigation in a residential loan.
No mitigation mechanism is perfect and the timing of temperature changes as well as lower commercial demand did adversely impact us this quarter, especially in the south east.
Gas marketing posted earnings of $14 million down significantly from last year as expected given the tough comp from Yuri.
I would point out the current quarter earnings do include the benefit of favorable resolution of customer disputes totaling just over $6 million after tax.
Overall market conditions have remained challenging this year.
As we have not seen wider basis differentials or storage spreads despite higher and more volatile commodity costs.
Looking at a few other variances here on slide 12 operation and maintenance expenses were lower across the board.
Yeah. She totally expenses as reported were equal to last year. However, after removing the Missouri regulatory adjustments and the reclassification of pension costs and deferral as outlined here on the slide O&M costs were $5 million below last year.
Higher marketing and other O&M costs were lower due to principally winter storm Yuri expenses incurred last year.
We are also seeing higher depreciation and property tax expenses consistent with our utility rate base growth.
Turning to our outlook.
We continue to be confident and narrow our long term growth prospects driven by our $3 $1 billion capital spending plan over the next five years.
Our per share earnings growth target remains 5% to 7%.
And while our current year will fall short of that target due largely to regulatory headwinds, we do anticipate growth above the range in fiscal years 2023 and 'twenty four.
Assuming a reasonable outcome in the Missouri rate case.
And we see continued growth within the target range beyond 2024, driven by a projected rate base growth.
As Scott outlined earlier with the deferral of our Missouri overhead costs, we have revised our fiscal year 'twenty two earnings target to a range of $3 75 to.
To $3 95 per share.
Here's how we arrived at that range.
As we discussed last quarter, let's start with our run rate from 2021 after removing our estimate of jewelry benefits from regulatory adjustments.
Later in the reduced Missouri rate of return.
And then add back annual growth expectations, consistent with our long term targets.
Finally adjust our forecast based upon our first half results.
We reduced gas marketing forecast by a nickel per share given the less than favorable market conditions with perhaps the opportunity to reclaim some of that shortfall given continued volatility in demand from LNG and gas fire generation. This summer.
And while our gastro choice delivered a strong quarter, we have lowered our forecast to reflect the impacts of three headwinds first warmer weather in the south East second a higher run rate of depreciation and property tax expenses offset in part by continued cost control and the O&M line.
And finally recognition of the cadence or seasonality of rate recovery, which has pushed more of our recovery to the winter heating season, just ended and out the back half of the year.
And while we may see some utility pickup from cooler weather that we've seen so far this spring it is unlikely to offset the year to date shortfall.
Combination an interplay of these factors are reflected in our updated guidance range, which we also narrowed given the reduction in regulatory uncertainty in Missouri.
Turning briefly to our financing guidance, our liquidity remains solid and our long term financing plan remains largely unchanged.
I would note that our board reauthorized, our ATM program at $200 million for the next three years.
And we will continue to use this program to finance, our capital needs, while maintaining a balanced capital structure.
In support of credit metrics.
With that let me turn it back over to you Steve.
Thank you Steve and.
In summary, we are on track with our plans for the year as we work to resolve regulatory matters in Missouri via a new general rate review, we are focused on achieving a fair and reasonable outcome.
We remain committed to our capital plan and advancing our ESG profile and we are very much looking forward to connecting with you in person at the AGM financial Forum in Miami less than two weeks. Thank.
Thank you for your continued interest and investment in spire and we're now ready to take your questions.
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 a question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Shar <unk> with Guggenheim Partners. Please go ahead.
Hi, guys, it's actually James on for Shar, how are you.
Great how about Jameson.
Sure.
Hi.
So having seen the results of the staff report and then of course, the order came out.
Can you just touch on the overhead cost allocations in your guidance for the year. When you said a moment ago that your guidance update included a reduction to regulatory uncertainty in Missouri does that mean that whatever portion of the 20 to $35 and you excluded from 2022 guidance.
Back in November has now been fully included going forward or should we anticipate any further adjustments.
Steve Great question.
As far as were concerned based upon that.
Feedback and guidance, we've gotten from the regulators in Missouri, We're deferring all those costs that it wouldn't hit the P&L. So the range does not include any impact.
And as <unk> mentioned, we'll address that in the rate case that we filed not too long ago.
Perfect very clear understood. Thank you and then second question.
We've seen some other utilities in Missouri.
<unk> some reasonable outcomes in recent rate cases, which is promising given.
Europe communicated here ongoing one.
<unk>.
Have you been perhaps looking at some of the strategies or approaches that those companies might have taken and do you think there's anything that you might.
Perhaps.
Approach differently or things you might incorporate in order to ensure that you get a result, more consistent with what youre looking for and what with.
Some of those companies have achieved.
This time around.
Yes, Jamie this is Scott Carter.
You certainly need to be a student of what's going on.
The jurisdiction and regulation are more generically, but but the short answer is yes.
You're talking about.
The timing of the last case, so a lot of information in a rate case to audit is already there.
Certainly looking at those.
Wei.
IDEXX ourselves relevant to the outcomes in those cases, and then posturing our case around previous accelerated cases in Missouri. So we've taken all that into account and we will continue to work with parties I think we've gotten good encouragement from the commission to move this thing along and reshape reasonable resolution and we will continue to work that through.
In this case.
Got it. Thank you very much those are all the questions I have I'm sorry.
Our next question comes from Richard Sunderland with Jpmorgan. Please go ahead.
Hi, Good morning, Thank you for the time today.
Maybe starting with this 20 cents impact with utility could.
Could you break that down into its component pieces, I guess really in terms of weather versus depreciation and property taxes.
Yeah, No hey, rich it's Adam.
Yes, I think a large portion of that is yes.
As Steve mentioned as weather related in the southeast in particular, we did see more normal weather in Missouri.
This last quarter, but a lot of that was the southeast related.
I don't I don't have the.
Property tax component of that Andy, but we can get we can get that back to you.
It.
Just thinking of the weather impacts here.
It was just something in terms of the Emperor.
In perfect weather mitigation.
Commercial usage.
We expect to remain in the results going forward.
It's something you can address at some point in time, you're curious about just your thinking there.
Fair to think about this is.
Versus normal meaning fully reverting next year, just just any of those thoughts at a high level.
As Steve mentioned, the west while we have weather normalization in this is similar to a lot of.
Lot of our peers. It doesn't cover every class of service.
So there is some variability still left in there.
Effective as design, but there is there is some.
There is some variability in it when you have a warmer quarter season.
And Richard the way that the calculation works in Alabama, Steve Allen Good morning by the way.
It's really based upon individual temperature ASIC as it plays out each day, so although the average temperature overall minus 16%, which it was for the quarter versus normal if we had to call base without a warm day Nicole made a one day, it's the interplay of the individual days that causes that.
That calculation to be ineffective, we've seen that cuts both directions, depending on which year. This this year just because of the way in which the temperatures played out it actually kind of against us.
Alright, where Adam is that overall the mechanism is largely effect that we just have to deal with the intricacies of the weather we've dealt with this year versus what.
Our normal cadence.
Whether at all into the southeast would generate.
Yeah.
Got it that's helpful and maybe turning to the rate case real quick you alluded to this briefly before in terms of that.
Appetite for an accelerated schedule could you just speak a little bit more to see kind of what you're hearing from folks on that matter. Given that you were in a rate case last year, and then I guess speaking kind of similarly.
On that front.
You know how accelerated could kind of quote unquote accelerated schedule b.
Yeah, Richard Scott Carter.
Take that.
That we've been trying to work with parties all of that acceleration.
And again the commission had mentioned in their order as well as from the bench the disease.
<unk> or the interest in the possibility of moving this case alone more expeditiously. So keep in mind, Missouri has one of the longer.
Our review Windows in the country and so with the recently in the case, we really do feel like that that process can move along quicker.
So the question is as far as to really come to the twofold can we accelerate the schedule and then.
So we're if not.
How willing are other parties come to the table for each resolution.
More timely manner. So those are the two elements that we're working with one of the other.
There are some resistance to accelerating the schedule just.
So people given themselves full opportunity.
We consider our case I mean.
Is there any kind of build around that 11 months schedule, but I think there is there is an interest of parties to accelerate a resolution of this so we'll work both of those and really looking to try to land as prior to the end of calendar year.
Understood. Thank you for the color.
Our next question comes from Julien Dumoulin Smith with Bank of America. Please go ahead.
Oh, Hey, good morning team, thanks for the time and opportunity to connect there.
Also thanks to the numbers here.
Just to clarify the capitalized overhead has an estimated $20 million to $30 million impact the expense. Daniel you guys had said so on top of the rate asked us to return to kind of a more normalized structure et cetera, et cetera, you would need to seek recovery of these further cost through.
Cost of service.
The commission has some discretion, but how are you thinking about the impact to customer bills.
Mechanism and frankly, any offset that further impact too.
Yes, Thanks, Sheila Scott Carter.
That's been kind of at the heart of what we're trying to address around this issue.
We follow the capitalization methodology and that's been accepted by Missouri for decades, and the benefit that I provided was to lower the current period cost and then build that into capital. We do a lot of internal capital work. So it made sense at the ball.
All of that and frankly, the outcome of that study in the new way that the commission staff and the commission want to look at it.
Accelerates that cost and accelerate that cost recovery so.
You're right about the two components one is the shift so we're going to have to re said something north of $20 million just to get the 2020 and $23 million just to get the period recovery and then with the deferred asset we're building up a backlog and so everyday that goes by and again. This is another reason to accelerate the case to get consideration.
The bigger that backlog is the bigger recovery has to be on it so.
The issue that will play out there I think is the timing of it so.
Put in the case of two year recovery window for that to try to match it up to where they want to treat it from a current cost standpoint, we can we can adjust that amortization period and that will adjust the rate impact to customers, so well work through that.
Independency of the case.
Got it is there an ability to settle this case and indoor sort of a holistic way to address some of these various issues here.
Yes, we're certainly hopeful of that again, we just came through a full case.
There's not a ton of new issues are the roll forward is pretty simple straightforward the business hasn't changed.
I think everyone understands the importance of these issues. So I believe that is the case then obviously all the parties have come to the table in good faith and go through that process are we.
Believe that opportunity exists and we will see that opportunity as we as we proceed.
Got it excellent and just this last little detail here, you were able to collect.
$6 million from customer claims falling early here in <unk>, what is the remaining customer claims that are outstanding and presumably.
Presumably this is actually upside the guidance right.
Are you just talking about the.
Resolution of.
Some some disputes and marketing.
Yeah.
Yeah no at this point Julien as we do at every point, Yeah, we make our best estimate of what we believe the actual settlement will be in a couple of those things traded in our favor this quarter, but what's left we think is a fair estimate of what is left in there.
Ideally, we'd love to get that all resolved would love to have it all resolved since we're now one year plus but those things take their own their own path on their own timing. So no. Other adjustment is factored into the forecast nor would we expect there to be any going forward.
Right. So any further resolution we upside.
If it's resolved outside of what our estimate is.
Excellent. Thank you alright speakeasy.
Hey, Julien.
Again, if you have a question. Please press Star then one.
Our next question comes from Christopher Jeffrey with Mizuho Securities. Please go ahead.
Hi, good morning, everyone.
Wanted to ask about higher gas costs and potential impact on customer bills for the upcoming heating season.
If you could remind us the mechanism for recovering maybe some of the bad debt expense related to the costs.
And what's the plan would be for that.
Hey, Christopher L. Scott Carter I'll start it and then maybe Adam has some add ons to it but.
Gas costs are obviously higher we do have a.
Mechanism to have some mitigation of that through physical storage, which creates a huge opportunity and then actually having some some instruments in place in Missouri to mitigate that and do some forward purchases.
Kind of dollar cost, averaging which helps bring that down.
So we're working through that but it is a concern as we go into the winter to make sure we maintain that affordability, while we're still dealing with the winter storm euro costs and so we think thats all in the range of the Manageability, but it is a concern that there will continue to focus on and look for ways to mitigate that overall cost impact.
As far as the way it works on bad debt, we tried to factor that in.
Gas costs have gone up.
We've been monitoring the bad debt component and we seem to be staying in a manageable range will that we haven't seen a huge uptick in the in the arrearage.
So.
Watching that obviously, but again it seems to be in the range of Manageability at this point.
The one thing I'll add this is Steve Lindsey is that in Missouri. We did go to the commission proposed a three year deferral of these you'll recall and that was approved so that will help spread some of the costs over a longer period of time, which I think will help ease the commodity portion of the customer's bill.
Yeah.
Got it but just to clarify the any bad debt related to the guests we'd have to be settled at the next is risks or rate case.
So in Missouri, So the rate case, and so we will have the opportunity to update that Alabama has more of a real time recovery mechanism around this RSC settings. So that gets adjusted annually and we see those true ups. So it's more of a real time opportunities to adjust so again it should be in the range of the manageable and not something that was great.
And outsize risk force on that front.
Got it thanks.
We'll probably see more in the Q, but just curious as far as the 50 to 100 million in equity financing for 'twenty, two with the sharing a bit more strength recently, just the cadence around that and if there was any desire to kind of pull through from from future years as well.
Yeah, Chris you're right we have seen some.
Strength in the share price.
We are our intent as we've said is to use our ATM program, which was just reauthorized and think you could expect us to continue to do that.
Periodically through our forecast period.
Yeah, Chris we raised just over $23 million worth of equity through the ATM program yet.
In the first quarter, you'll see that in the Q that we'll file as soon as possible.
Great. Thanks, everyone in Miami.
Mhm.
Our next question comes from for Doula Murky with Hudson Bay Capital. Please go ahead.
Oh Hello, Good morning can you hear me.
Yeah.
Hi, I'm okay.
Sure.
And in terms of the treatment the capitalized overhead based on the audit.
How much does the 2022.
Earnings per share.
Benefit in terms of how much how much kudos to the income statement as a consequence.
Yes.
Zero because all of it has now been deferred on the on the balance sheet.
Oh you did.
Okay. So would you.
Hello.
Okay.
Actually cleared the 27 billion deployed $4.
Turning to guidance.
The conference was this kind of a pause.
Does the outcome.
Hi, Tony.
Okay.
Thank you.
Okay.
It's coming back.
And what they look like between income statement.
You're saying that that didn't happen.
That's true and there isn't as much hard as there is science and the significant uncertainty that we were dealing with when we put our original range out and truth be told and Youre seeing it there wasn't at the top end of the range, we anticipated that the Nic would be would be minimal at the bottom end of the range would be more significant and we had to.
Estimate on what we thought at that part of either 20 to 35 cents was going to be impacting us, but I think that's the key is if you go back to the slide deck and you look at the waterfall you look at that.
The results of operation at our forecast for the year and we brought down our forecast from our own expectations against the normal growth at <unk>.
Marketing, a little bit but really at.
The utility driven by a combination.
What's happening down in Alabama.
Which is probably half to two thirds of the total.
A reduction.
As happened in Missouri from a cost run and then you have to play that against the recovery mechanism in Missouri, because that a recovery mechanism is so much more seasonal.
Biggest recovery periods are behind us in the rearview mirror those costs.
A flatline, especially depreciation and property taxes through the year. So it's really the interplay of borrowers.
The development of the actual businesses. So this year against that original forecast, which kind of bridge the gap between the math you're doing in your head.
Cash is now.
Okay.
Maybe maybe in this vertical.
And maybe some upfront conversations.
Does the potential that a consequence of the audit in the cool pool P&C Oh, there's overhead.
It would be restored to the income statement, rather than being quite a bit going to the balance sheet.
Was it does that was that something that kind of a volatile period.
So before final conclusion.
Well if you.
Think about it in those mechanical terms the risk of the overheads went away. So that got added to the range on the operating results and prospects for the year took away from the range. So the answer is yes and yes.
So that means everything else being equal come next year with the rate case, you'll also Wilton.
Depending on how Covid case huh.
Be stripping able to realize.
Got it through the income statement.
They put the historical treatment.
That's correct.
Yeah, and that will all be dependent upon as Scott Carter mentioned earlier, the timing of the rate case, when new rates go into effect in and what's the recovery mechanism that will ultimately be included in either the settlement or the or the bull case once we get through that process.
Okay. Thank you.
Again, if you have a question. Please press Star then one.
Our next question comes from Andrew Levi with heightened edge. Please go ahead.
Hey, guys how are you.
Hey, Scott.
Uh huh.
Just dry.
Very simple question.
Tommy SJI transaction and how it may or may not relate to you guys.
Yeah.
You know Andy.
We're well aware of the Sci transaction and also.
Yeah.
Valuation that private buyers are putting on on the announced deals versus what we're seeing in the public market I think we're at.
<unk> by the fact that and especially if you look at it I know you do their.
They are trading ranges for us and our peers over the last two to three months that we're now bridging that gap between what we believe is not fair valuation of the public markets and where the private markets with values. So.
I won't speak specifically to the <unk> transaction that Theres, a lot of moving parts underneath that that headline number but we very much appreciate the affirmation from the private markets on the underlying value.
Our sector and our company, but also the long term value of natural gas and I think that's the other thing that the private side.
<unk> is seeing and the public side is now seeing because let's face it.
Six or eight weeks ago energy security.
On the top five list of things that that countries are companies. We're thinking about it is clearly a common to the <unk>.
On page as a result of what we're seeing over in Europe .
And we've done that for many years being in the industry and although I would prefer to have.
It gotten that.
In addition to a more normalized means that conflict over in Europe . It does point out that let's face it the future for our power worldwide and in North America is going to be a balanced portfolio of all sources and that includes natural gas.
And then last one.
Sure.
Yes.
No.
On that.
I was out there that would be interested in spire.
That makes sense.
Your company.
Dear shareholders your customers in Europe .
And the premium was attractive would that be.
Something that.
Do you think the spire board would entertain.
That's a theoretical question Andy.
And you know you've been doing this for an extremely long time, Scott Dudley smiling right now.
And as a public company and we always have to be extremely educated on what our value is and what is the value of our underlying plan and ability to grow and drive value to our shareholders.
Any board, whether it be ours or any public company board would have to evaluate their options because that's their charter as members of the board sought I'm we're.
We're not aware of anything.
In the makeup of your specific question, but I can assure you we are very well versed and what the values of our business are under the plan that we have and will have going forward to continue to grow and provide shareholder value.
Okay. Thank you very much.
Thanks, Dan.
Yeah.
Again, if you have a question. Please press Star then one.
This concludes our question and answer session I would now like to turn the conference back over to Scott Dudley for any closing remarks.
Thank you all for joining us today will be around throughout the day for any follow ups and again, we look forward very much to seeing all of you down in Miami in less than two weeks, we don't take care. Thanks.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.