Q1 2024 Spire Inc Earnings Call

Good morning, and welcome to the spire, Inc. First quarter 'twenty 'twenty four earnings conference call.

All participants will be in listen only mode.

Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad.

To withdraw your question. Please press Star then two.

Please note this event is being recorded.

I would now like to turn the conference over to Megan Mcphail, managing director of Investor Relations. Please go ahead.

Megan Mcphail: Good morning, and welcome to spires physical 2024 first quarter earnings call.

You didn't earnings news release. This morning, you may access it on our website at aspire energy Dot com under newsroom.

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

Megan Mcphail: Before we begin let me cover our safe Harbor statement and use of <unk>.

Megan Mcphail: non-GAAP earnings measures.

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

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

Megan Mcphail: These risks and uncertainties are outlined in our quarterly and annual filings with the T V.

Megan Mcphail: In our comments, we will be discussing our economic earnings and contribution margin.

Megan Mcphail: Which are both non-GAAP measures used by management when evaluating our performance and results of operations.

Megan Mcphail: And reconciliations of these measures to their GAAP counterparts.

Megan Mcphail: And both our news release and slide presentation.

Megan Mcphail: On the call today, I have Steve Lindsay, President and CEO, and Steve Rasche, Executive Vice President and CFO.

Speaker Change: Also in the room today are Scott Doyle Executive Vice President and C O O Adam what areas, Vice President and Treasurer, and Scott Dudley Investor Relations.

Speaker Change: I will turn the call over to Steve Lindsey.

Speaker Change: Yes.

Steven P. Rasche: Thanks, Mike and good morning, everyone. Thank you for joining us today to review, our first quarter performance and an update on recent developments and outlook.

Steven P. Rasche: Let me begin by thanking our employees for their continuing dedication and commitment to serving our customers as we entered the important winter heating season.

Steven P. Rasche: Following a warmer than normal fiscal year first quarter, we experienced extreme cold weather across our service territories last month.

Steven P. Rasche: Richard conditions impacted customers in Alabama temperatures in parts of our Missouri service territory dipped as low as negative 12 with windshield as low as negative 35.

Steven P. Rasche: As a result of our preparation a significant investment in our gas utilities are well positioned to deliver safe reliable and affordable natural gas energy for our customers and communities when they needed it the most.

Steven P. Rasche: Our gas utilities to our midstream gas marketing segments. Our teams worked tirelessly and I'm incredibly proud of our employees their dedication and collaboration during this time.

Steven P. Rasche: We will remain focused on continued execution of our strategy, while achieving operational excellence and doing so our priorities remain the same to grow our businesses invest in central infrastructure and drive continuous improvement.

Steven P. Rasche: During the first quarter, we delivered net economic earnings of $1 47 per share compared to an <unk> of $1 55 per share a year ago.

Steven P. Rasche: Our results reflect growth in our gas utility segment and returned to a more normal market conditions, our gas marketing and midstream segments compared to very favorable conditions a year ago.

Steven P. Rasche: In regulatory matters, new rates under the rate stabilization and equalization or RSC mechanism are now effective very utilities, Alabama and as you may recall this constructive annual rate setting framework Jesus the forward your budget average common equity rather than rate base for ratemaking purposes.

Steven P. Rasche: Further I'm pleased to say, we recently welcomed Scott Williams, our leadership team as executive Vice President and Chief Operating Officer Scott.

Steven P. Rasche: Scott has nearly 30 years of experience in the industry and brings with him deep knowledge capital deployment regulatory strategy and operational leadership.

Steven P. Rasche: C. L O. He will oversee our gas utilities across Alabama, Missouri, and Mississippi confident that Scott will be a tremendous addition to our company.

Steven P. Rasche: I'd also like to take this opportunity to recognize Ed Glotzbach, who retired from our board of directors last week.

Steven P. Rasche: It has been a director of our company for 19 years and served as board chair since 2015.

Steven P. Rasche: Service spanned the transformation of inspire from a regional utility. It's one of the largest publicly traded natural gas companies in the United States.

Steven P. Rasche: We are grateful for his considerable contributions as far as success.

Steven P. Rasche: Rob Jones, who has been a valuable member of our board. Since 2016 was elected chair inspires board of directors meeting last week.

Rob Jones: Rob has played a key role in the strong oversight and governance provided by our board and look forward to working closely with them going forward.

Rob Jones: As far as we were strongly committed to delivering value over the long term for our customers communities employees and shareholders will achieve this by remaining focused on providing essential energy with exceptional service.

Rob Jones: We're positioned well for success in FY, 'twenty 'twenty, four and over the longer term as we execute on our capital investment plans to support the growth expansion and performance of our utilities and our gas related businesses.

Rob Jones: Turning to an update on capital investments in the first quarter, our capex totaled $227 billion with the majority of the spend for our gas utilities.

Rob Jones: Over here, our gas utility capex increased nearly 20% with an emphasis on upgrading distribution infrastructure and connecting more homes and businesses to safe reliable and affordable natural gas.

Rob Jones: The investment in our midstream segment totaled $52 million largely for the expansion to the spire storage west which remains on pace to be completed for next years heating season.

Rob Jones: In January we filed a new his first request with the Missouri Public Service Commission revenues of $17 $3 million.

This filing includes recovery of his first eligible investment, but a September 2023 through February 2024 period.

Rob Jones: Once approved for later rating Crazy is anticipated to be effective by July 2024.

Rob Jones: I'm pleased to note that we completed our acquisition of the Mo gas and Omega pipeline companies in mid January.

Rob Jones: That's pipeline consists of 263 miles of Interstate natural gas pipelines, primarily in Missouri, and Interconnects with spire STL pipeline to deliver gas for our growing customer base.

Rob Jones: Mega pipelines at the 75 mile natural gas distribution system, primarily serving Fort Leonard Wood Army base in South Central Missouri is interconnected with the low gas pipeline system.

Rob Jones: Yeah, that's an omega are ideal fits with our existing midstream businesses.

Rob Jones: The resiliency and expand our footprint within Missouri.

Rob Jones: With that I'll turn it over to Steve Rasche for a financial review and update on our guidance and outlook.

Steven P. Rasche: Thanks, Steve and good morning, everyone.

Steven P. Rasche: Certainly been an interesting start to the fiscal year from a weather standpoint, and our team delivered.

Steven P. Rasche: <unk>.

Steven P. Rasche: Let's take a look at our results and outlook.

For our first fiscal quarter, we reported net economic earnings of $82 7 million compared to roughly $85 million last year.

Steven P. Rasche: On a per share basis earnings of $1.47 were eight cents lower than last year.

Steven P. Rasche: All of our businesses performed well and the key factors to focus on our first we saw higher earnings in our gas utilities, driven by new rates in Missouri and Alabama.

Steven P. Rasche: Secondly, our marketing and midstream businesses delivered solid results might be acknowledgment as Steve noted at the bottom of the market. We saw a year ago did not recur this year.

Steven P. Rasche: And lastly, other corporate costs were lower reflecting an $8 $2 million pre tax gain on the settlement of an interest rate swap.

Steven P. Rasche: Slide seven provides detail on key variances I'd say a couple of the highlights.

Steven P. Rasche: Gas utility margins were higher as we benefited from new rates.

Steven P. Rasche: And while we did experienced warmer temperatures across our utility footprint, our weather normalization mechanisms were effective in both Missouri and Alabama.

Resulting residential bar since we're in line with expectations.

Steven P. Rasche: Margins in marketing and midstream were lower as I just mentioned.

Steven P. Rasche: And looking at operations and maintenance expenses.

Steven P. Rasche: Expenses were down $3 $3 million due to lower employee related costs, partially offset by higher insurance expenses.

Steven P. Rasche: Spire marketing costs were lower due to lower business volumes.

Steven P. Rasche: And midstream costs were higher due to growth in scale of the segment and $1 $9 million in Mo gas acquisition cost.

Steven P. Rasche: And as a reminder, these acquisition costs are excluded from our consolidated net economic earnings.

Steven P. Rasche: Interest expense was higher by $7 million with.

Higher interest expense on long term debt, principally due to higher debt levels combined with higher short term interest expense due to higher rates at marginally lower debt levels compared to last year.

Operator: Good morning, and welcome to the Spire, Inc. first quarter 2024 earnings conference call. All participants will be in listen-only mode.

Steven P. Rasche: As a reminder, we get recovery on a portion of our higher interest expense due carrying cost credits in Missouri, and those credits grew by $1 $7 billion last quarter.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2.

Steven P. Rasche: And finally, other income was $11 $4 million above last year due to the gain on the settlement of the interest rate swap and those carrying cost credits.

Turning to our outlook.

We remain confident in our growth strategy and our results. So far this fiscal year support our goals as a result, we are affirming our guidance, including long term net economics per share growth of 5% to 7%.

Operator: Please note, this event is being recorded. I would now like to turn the conference over to Megan McPhail, Managing Director, Investor Relations. Please go ahead.

Megan Mcphail: Good morning, and welcome to SPIRE's fiscal 2024 first quarter earnings call. We issued an earnings news release this morning, and you may access it on our website at spireenergy.com under the newsroom. There is a slide presentation that accompanies our webcast. You may download it from either the webcast site or from our website under Investors and then Events and Presentations.

Steven P. Rasche: Fiscal 'twenty four net economic earnings of $4 25 to $4 45 per share.

Steven P. Rasche: Our earnings target ranges by business segment.

Steven P. Rasche: And both current year and 10 year Capex targets.

Steven P. Rasche: Moving to slide nine our three year financing plan also remains unchanged.

Steven P. Rasche: We've now settled our forward equity sale and are on track for our equity unit conversion.

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

Steven P. Rasche: Last week our.

Steven P. Rasche: Ward reauthorized, our ATM program at $200 million and we will use this program to meet our very modest remaining equity needs through 2026.

Steven P. Rasche: As I mentioned earlier, we are seeing lower total short term borrowings even after factoring in our nine month term loans noted here.

Steven P. Rasche: We are on track to collect our deferred gas cost balances and expect to be substantially recovered by the end of the heating season.

Steven P. Rasche: Our long term debt financing plan is largely tied to refinancing activity.

Steven P. Rasche: The remarketing I just mentioned.

And an incremental $50 million to $100 million to fund the Mo gas acquisition.

Steven P. Rasche: Our interest rate hedging program is well positioned relative to these needs and future interest rates.

Megan Mcphail: Explanations and reconciliations of these measures to their GAAP counterparts are contained in both our news release and slide presentation. On the call today are Steve Lindsey, President and CEO, and Steve Rasche, Executive Vice President and CFO. Also in the room today are Scott Doyle, Executive Vice President and Treasurer, Adam Waters, Vice President and Treasurer, and Scott Dudley, Investor Relations. With that, I will turn the call over to Steven and you. Thanks, Megan. Good morning, everyone.

Steven P. Rasche: And we continue to target that SAP out of that in 15, and 16% on a consolidated basis and expect to be in this range by fiscal 2020 five.

In summary, we are executing in line with our plans and are favorably positioned going forward, both operationally and financially.

Speaker Change: Oh and before I wrap up I would like to take this opportunity to recognize Scott Dudley managing director of Investor Relations Who's joined US today on the call and as many of you know Scott. He is retiring on March 1st after a distinguished career in Investor relations spanning nearly 40 years.

Steven P. Rasche: Thank you for joining us today to review our first quarter performance and an update on recent developments and outlook. We'd like to begin by thanking our employees for their continuing dedication and commitment to serving our customers as we enter the important winter heat. Following a warmer-than-normal fiscal year first quarter, we experienced extreme cold weather across our service territories last year. Rigid conditions impacted customers in Alabama, and temperatures in parts of our Missouri service territory dipped as low as negative 12, with wind chills as low as negative 35.

Speaker Change: Most of that time was spent in the power utility space and the term F O D or a friend of duds, which applies to many of you listening today is a batch of highest honor here inspire.

Speaker Change: We were very fortunate to convince Scott to join US 11 years ago to build out our IR program and I will Miss working with you my friend.

Scott: That's the bucket in this next phase of your life, which I suspect will include a lot more time on the golf course.

Steven P. Rasche: As a result of our preparation and a significant investment in our gas utilities, we were well positioned to deliver safe, reliable, and affordable natural gas energy to our customers and communities when they needed it the most. From our gas utilities to our midstream and gas marketing segments, our teams worked tirelessly, and I'm incredibly proud of our employees for their dedication and collaboration during this time. We will remain focused on the continued execution of our strategy while achieving operational excellence. In doing so, our priorities remain the same: to grow our businesses, invest in essential infrastructure, and drive continuous improvement. During the first quarter, we delivered net economic earnings of $1.47 per share compared to an NEE of $1.55 per share a year ago.

Scott: With that let me turn it back over to you Steve.

Scott: Thanks, Steve and I would like to Echo your comments about Scott.

Scott: Personal lingual Miss your hard work.

Steve: He is in personality, we truly appreciate the dedication you've displayed over the years, we wish you and your family nothing but the best in your retirement.

Speaker Change: Wrap up during the first quarter, we were able to deliver solid financial and operating performance, while executing our capital investment plan, which supports the growth safety and reliability of our gas utilities and the expansion of the spire storage west.

Speaker Change: We continue to remain focused on executing our strategy in fiscal year 'twenty four and beyond.

Speaker Change: Finally, we wish the best of luck through the Kansas City Chiefs and the upcoming Super Bowl in Las Vegas, we're very proud to be the natural gas provider to Kansas City, and Arrowhead stadium, including providing more under the field and the recent frigid playoff game.

Steven P. Rasche: Our results reflect growth in our gas utility segment and a return to more normal market conditions in our gas marketing and midstream segments compared to very favorable conditions a year ago. In regulatory matters, new rates under the Rate Stabilization and Equalization, or RSE, mechanism are now effective for our utilities in Alabama. As you may recall, this constructive annual rate-setting framework uses the forward-year budget and average common equity rather than rate base for rate-making purposes.

Speaker Change: That concludes our prepared remarks, we're now ready to take questions.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question you May press Star then one on your telephone keypad.

Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.

Steven P. Rasche: Further, I'm pleased to say we recently welcomed Scott Doyle to our leadership team as Executive Vice President and Chief Operating Officer. Scott has nearly 30 years of experience in the industry and brings with him deep knowledge of capital deployment, regulatory strategy, and operational leadership. As COO, he will oversee our gas utilities across Alabama, Missouri, and Mississippi.

Speaker Change: To withdraw your question. Please press Star then two.

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

Speaker Change: Okay.

Speaker Change: Our first question today is from sharper razor with Guggenheim Partners. Please go ahead.

Steven P. Rasche: I'm confident that Scott will be a tremendous addition to our company. I'd also like to take this opportunity to recognize Ed Glosbach, who retired from the Spire Board of Directors last year. Ed has been a director of our company for 19 years and served as board chair since 2015, spanning the transformation inspire from a regional utility to one of the largest publicly traded natural gas companies in the United States. We are grateful for his considerable contributions to Spire's success. Rob Jones, who has been a valuable member of our board since 2016, was elected chairperson at SPIRE's board of directors meeting last week.

Jamison Word: Good morning, guys. This is jamison word on for Shar how are you.

Jamison Word: Hey, Dave Jamieson.

Jamison Word: Hey.

Jamison Word: In the prepared remarks, you mentioned the weather normalization mechanisms were affected this quarter in Missouri, and Alabama could you give us a bit more color on the lower C&I usage in the quarter compared to your expectations and maybe how you're thinking about weather normalized volumes, but the rest of fiscal 'twenty four.

Jamison Word: Yeah, that's great great questions, Jamie said, I think and this is Adam.

Scott W. Dudley: I think the.

Scott W. Dudley: Lower C&I usage some of that is certainly weather related.

Steven P. Rasche: Rob has played a key role in the strong oversight and governance provided by our board, and I look forward to working closely with him going forward. Through FIRE, we are strongly committed to delivering value over the long term for our customers, communities, employees, and shareholders. We'll achieve this by remaining focused on providing essential energy with exceptional service. We're positioned well for success in FY 2024 and over the longer term if we execute on our capital investment plans to support the growth, expansion, and performance of our utilities and our gas-related business. Turning to an update on capital investments, in the first quarter, our CapEx totaled $227 billion, with the majority to be spent on our gas utility. Year over year, our gas utility TAPEX increased nearly 20% with an emphasis on upgrading distribution infrastructure and connecting more homes and businesses to safe, reliable, and affordable natural gas. The investment in our midstream segment totaled $52 million, largely from the expansion of Aspire Storage West, which remains on pace to be completed for next year's heating season. In January, we filed a new interest request with the Missouri Public Service Commission for revenues of $17.3 million.

Scott W. Dudley: And that we don't have weather normalization over smaller commercial and industrial accounts. So I think that's probably the lion's share of that that piece of it and that's that's always been outside of the normalization factors.

Speaker Change: Perfect. Okay, just wanted to confirm there and then the second part is also on weather.

Given the significant impact of weather in the second quarter last year I think it was about $20 million or so could you expand a bit on the potential impact of the extreme cold weather in January on fiscal Q2 this year.

Speaker Change: Hey, Jamie This is Steve Yeah, you know it's funny, we went from extreme warm in Q1 two two.

Steve: Two really cold in January Unfortunately, it's going to be 65 degrees today here in St. Louis and it's amazing how quickly why the changes.

Steve: That happened next quarter, and we clearly want to get through the worst of winter and then we'll update the market I. The rest is assured that we were well positioned across all of our businesses. So we served our customers well on the utility side first and foremost we were well positioned in marketing and we were actually well positioned.

Steven P. Rasche: This filing includes recovery of ISRS-eligible investment for the September 2023 through February 2024 period, and they want to prove that their later rating increase is anticipated to be effective by July of 2024. I'm pleased to note that we completed our acquisition of the MoGas and Omega pipeline companies in mid-January. The MoGas Pipeline consists of 263 miles of interstate natural gas pipelines primarily in Missouri and interconnects with Spire STL Pipeline to deliver gas to our growing customer base.

Steve: The midstream business too and just hang tight once we get through winter, we'll update everybody on our next earnings call.

Speaker Change: Perfect. That's all I have thank you very much.

Speaker Change: Thanks Jay.

Speaker Change: The next question is from Richard Sunderland with Jpmorgan. Please go ahead.

Richard Sunderland: Hi, good morning, Thanks for the time today.

Richard Sunderland: Good morning Rich.

Richard Sunderland: Maybe to take another stab at Tunis and second question. There I'm wondering if you can frame once you resolve versus budget, given what sounds like working weather normalization and I realize that you're reaffirming guidance, but trying to get a sense of if that reaffirm is look you got one coupon.

Steven P. Rasche: The Omega Pipeline is a 75-mile natural gas distribution system primarily serving Fort Leonard Wood Army Base in south-central Missouri as interconnected with the MOGAS pipeline system. MOGAS and OMEGA are ideal fits with our existing midstream businesses as they bolster resiliency and expand our footprint within Missouri. With that, I'll turn it over to Steve Rasche for a financial review and update on our guidance and operations.

The January wet weather really just considering one Q and of itself.

Richard Sunderland: Yeah Rich this is Steve I'll take a shot at it and then Hum like everybody else can weigh in.

Steve: We obviously know where January was soon it would be impossible to not think about that but even before we had the cold weather in January we were very comfortable with our first quarter results and they support our expectations across our business units and again as we get through the winter as we always do we'll look at what the bushes.

Steven P. Rasche: Thanks, Steven. Good morning, everyone. It has certainly been an interesting start to the fiscal year from a letter standpoint, and our team delivered. Class of 2018.

Steve: Ozark across all of our businesses and and you know which is why we have ranges of earnings as we we have to deal with the things that we can deal with and that's all the stuff that we focus on to serve our customers and then the things that we have to manage that includes weather and customer demand at certain classes. So not all of it.

Steven P. Rasche: Let's take a look at our results in Outlook. For our first fiscal quarter, we reported net economic earnings of $82.7 million, compared to roughly $85 million last year. On a per share basis, earnings of $1.47 were $0.08 lower than last year. However, all of our businesses performed well.

Steve: I think you can rest assure that the first quarter results were very supportive of our plans for the year and we'll see how the rest of the winter plays out.

Steven P. Rasche: And the key factors to focus on are first, we saw higher earnings in our gas utilities driven by new rates in Missouri and Alabama. Secondly, our marketing and midstream businesses delivered solid results, with the acknowledgment, as Steve noted, that the volatile market we saw a year ago did not recur. And lastly, other corporate costs were lower, reflecting an $8.2 billion pre-tax gain on the settlement of an interest rate swap. Slide seven provides detail on key variances. Let's see a couple of the highlights. Gas utility margins were higher as we benefited from new rates.

Speaker Change: Great. That's helpful context, there and then on the utility for one Q there were some O&M savings you've called out.

Speaker Change: Curious if that's kind of on target for the year what are your expectations.

Speaker Change: Going forward with one quarter on the books now anything else worth on packages on the O&M front.

Speaker Change: No.

Speaker Change: Hey, Richard It's Adam I don't know.

Scott W. Dudley: Don't know if there's a whole lot board on pack after one quarter.

Scott W. Dudley: We're still.

Scott W. Dudley: Watching watching the expense.

Speaker Change: Be very careful there.

Speaker Change: We like the results for the first quarter and you know well.

Speaker Change: We continue to make that a focus for us during the rest of the year and rich I would add that you know we.

Steven P. Rasche: And while we did experience warmer temperatures across our utility footprint, our weather normalization mechanisms were effective in both Missouri and Alabama, and resulting residential margins were in line with that expectation. However, margins in marketing and midstream were lower, as I just mentioned, and looking at operation and maintenance expenses. Utility expenses were down $3.3 million due to lower employee-related costs, partially offset by higher insurance expenses. Spire marketing costs were lower due to lower business volume. And midstream costs were higher due to growth and scale of the sector and $1.9 million in MOGAS acquisition costs. And as a reminder, these acquisition costs are excluded from our consolidated net economic. Interest expense was higher by $7 million, with higher interest expense on long-term debt principally due to higher debt levels, combined with higher short-term interest expense due to higher rates and marginally lower debt levels compared to last year.

Speaker Change: We never want to draw a line based on one dot we liked where the first stop landed but our overriding goal is to manage O&M below the rate of a normalized rate of inflation. So we started off in a good spot. There is clearly always some timing things that go back and forth, but I think it's very supportive of our overall plan for the year.

Speaker Change: Great very helpful well I'll leave it there and to Scott best of luck in retirement.

Scott: Okay, Sir thanks.

Scott: Thanks Rich.

Speaker Change: The next question is from Julien Dumoulin Smith with Bank of America. Please go ahead.

Speaker Change: Hi, This is Turner on for Julian Good morning team.

Turner: Hey, there again.

Hi, I just wanted to ask about the growth related capex in the quarter. It looked like a slight run rates step up from fiscal year. 'twenty. Three is that growth is fully attributable to new residential connections is there a geographic focus to this growth and are you seeing any trends with respect to new connections in the customer composition.

Turner: <unk> specifically.

Speaker Change: Yeah, Great. Great question 10, right I don't I don't know if I would attribute that to specific growth trends that some of it was there's movement from quarter to quarter of some items.

Steven P. Rasche: As a reminder, we get recovery of a portion of our higher interest expense through carrying cost credits in Missouri, and those credits grew by $1.7 billion last quarter. And finally, other income was $11.4 million above last year due to the gain on the settlement of the interest rate swap and those carrying cost credits, turning it to our benefit. We remain confident in our growth strategy, and our results so far this fiscal year support our. As a result, we are affirming our guidance, including long-term economics-per-share growth of 5% to 7%, and fiscal 24 net economic earnings of 425 to 445 per share. Our earnings target ranges by business segment, and both current year and 10-year CABB-X targets. Moving to slide nine, our three-year financing plan also remains unchanged.

Speaker Change: We you know we've seen some some movement around the path or the the the the Capex profile of the object storage project also in the utilities, we you know from quarter to quarter, we have different prioritization around what was what's getting in the specific quarter. So.

Speaker Change: I don't know if there I would I wouldn't draw a trend line from that.

Speaker Change: It's really just a.

Speaker Change: So something that's moving across borders and followed this is Steve that are one thing that we are very focused on is the consistency year over year of our capital deployment in terms of infrastructure and new business and so I don't think the uptick has anything to do relative to that I think it's a pretty consistent year over year message relative to our our new construction.

Speaker Change: We do have other types of programs meters and things like that in investment and some other types of things that are not necessarily infrastructure specific but again I think if you think about the way we deploy our it's very consistent it's very even across all of our footprints. So whether it's Missouri east whether its Missouri west whether its the south east that's the way we really.

Steven P. Rasche: We've now settled our forward equity sale and are on track for our equity unit conversion. Last week, our board reauthorized our ATM program at $200 million, and we will use this program to meet our very modest remaining equity needs through 2026. As I mentioned earlier, we are seeing lower total short-term borrowings even after factoring in our nine-month term load noted here.

Speaker Change: Focused over the long term and we reaffirmed we used to have a five year plan that we have a 10 year plan and I think we're very confident in our ability to deliver on that.

Speaker Change: Goodbye.

Speaker Change: Great. Thank you and then if the parents stripping out one time items for the hedging and the interest expense in the quarter. You noted based corporate costs were higher year over year, how should we think about the cadence of those ongoing base corporate costs going forward through the rest of fiscal 'twenty four.

Steven P. Rasche: We are on track to collect our deferred gas cost balances and expect to be substantially recovered by the end of this year. Our long-term debt financing plan is largely tied to refinancing activity, the remark I just mentioned, and an incremental $50 to $100 billion to fund the MoGas acquisition. Our interest-rate hedging program is well-positioned relative to these needs and future interest rates, and we continue to target FFO to debt at 15-16% on a consolidated basis and expect to be in this range by fiscal 2025. In summary, we are executing in line with our plans and are favorably positioned going forward, both operationally and financially. Oh, and before I wrap up, I would like to take this opportunity to recognize Scott Dudley, our managing director of investor relations, who joined us today on the call. As many of you know, Scott is retiring on March 1st after a distinguished career in investor relations spanning nearly 40 years. Most of that time was spent in the power utility space, and the term F.O.D., or Friend of Duds, which applies to many of you listening today, is a badge of highest honor here at Spire.

Speaker Change: I think theyre going to be pretty flat a tender. This is the other Steve and it's it's very consistent with.

Speaker Change: Functions, we had underlying the guidance up out of corporate cost and as you might recall when we launched guidance last year for that other category, which would include corporate cost that was down pretty significantly problems from the run rate. We had the year before again part of that was due to one time costs that didn't recur late in our fiscal year 'twenty three.

Speaker Change: Alright, great. Thank you and congratulations to Scott Dudley by the way. Thank you for all of your help.

There are like there.

Speaker Change: Again, if you have a question. Please press Star then one.

Speaker Change: The next question comes from Christopher Jeffrey with Mizuho. Please go ahead.

Christopher James Turnure: Hi, everyone maybe to approach the puts and takes for the guidance for the year from a couple of different angles, just wondering as far as like the regulatory aspects. The RSC and Alabama is races in Missouri have those been kind of in line. So far as what you were expecting in the budget.

Christopher James Turnure: And then maybe on the also the other income items, where you're kind of expecting those one times. The the interest hedging recovery on some of those higher debt levels like how is that kind of trending against expectations for the year.

Steven P. Rasche: We were very fortunate to convince Scott to join us 11 years ago to build out our IR program, and I will miss working with you, my friend. Best of luck in this next phase of your life, which I suspect will include a lot more time on the go. With that, I will turn it back over to you, Suzanne. Thanks, Steve, and I would like to echo your comments about Scott. I know I personally will miss your hard work, enthusiasm, and personality.

Christopher James Turnure: Chris Hi, this is <unk>.

Chris: Yeah, I think I think that I think they had those items that met our expectations. Thus.

Speaker Change: As far as the <unk>.

Chris: Coming back to a normalized.

Chris: RSC and Alabama, I think the cadence of our Israel filings as has been planned in and has come in as expected.

Suzanne Sitherwood: We truly appreciate the dedication you've displayed over the years. We wish you and your family nothing but the best in your retirement. To wrap up, during the first quarter, we were able to deliver solid financial and operating performance while executing our capital investment plan, which supports the growth, safety, and reliability of our gas utilities and the expansion of Spire Storage West. We continue to remain focused on executing our strategy in fiscal year 24 and beyond. Finally, we wish the best of luck to the Kansas City Chiefs in the upcoming Super Bowl in Las Vegas.

Chris: So I yeah.

Chris: I think your your observation there is a good one question. It's a good one it is it's a I think those items have really met our expected expectations, thus far through the year and where are you now.

Chris: Things are running according to plan.

Speaker Change: Chris I would add that yeah, we fully contemplated that but one time items, which was that the hatch setting, but which happened in early October. So it will show up before we're even watch guidance. If there is one one thing that we saw in Q1 and we're seeing it reverse in Q2 that would be the that they draw down of deferred gas.

Speaker Change: Cost because that's tied to a customer demand so even though the weather norm worked at the additional amount we would get from the PGA and the deferred gas cost specifically in Missouri was a little below where we had expected but I can assure you that what we're seeing in January that comes back around which is why we never want to get overly exercised about what happens in one.

Suzanne Sitherwood: We are very proud to be the natural gas provider to Kansas City and Arrowhead Stadium, including providing warmth under the field in the recent frigid playoffs. That concludes our prepared remarks. We're now ready to take questions. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key.

Speaker Change: Small piece of the overall winter, we want to get through the entire winter season, and then we'll reevaluate, but we're still on track to get those largely paid off by the end of the heating season.

Speaker Change: Great. Thanks, and then as far as the January weather I think people have asked for on the utility side, but on the marketing side and then it also sounds like there's some midstream.

Operator: To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question today is from Shahr Poreza with Guggenheim Partners. Please go ahead. Good morning, guys. This is Jameson Ward on for Char. How are you?

Speaker Change: Leverage to those types of weather events dislocations, just wondering how you're thinking about both of those pieces the marketing in the midstream for two <unk> and the rest of the year.

Speaker Change: Yeah, I don't know where in Q2 right now so let us get through the rest of the winter and and again, we all know it was called for 10 days.

Operator: Thank you. Thank you. Hey. In the prepared remarks, you mentioned that weather normalization mechanisms were effective this quarter in Missouri and Alabama.

Speaker Change: In January which was a welcome relief from the heat that we saw in Q1, but it's warm again today and we have to plan for the entire winter or not and again. The most important thing is we were well positioned to serve our customers across all of our businesses that that's what our primary focus is and we'll update everybody as we get through the end of winter quarter.

Adam Waters: Could you give us a bit more color on the lower CNI usage in the quarter compared to your expectations and maybe how you're thinking about weather-normalized volumes for the rest of fiscal 24? Yeah, great, great question, James. And I think, and this is Adam, I think the lower CNI usage is certainly weather related, in that we don't have weather normalization over smaller commercial and industrial accounts. So I think that's probably the lion's share of that, that piece of it. And that's always, you know, been outside of the normalization factor.

Speaker Change: Great Thanks, everyone and congratulations Scott.

Speaker Change: Thank you.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Megan Mcphail for any closing remarks.

Megan Mcphail: Thank you for joining us on the call. This morning, we look forward to speaking with many of you later today and in the coming weeks.

Steven P. Rasche: Perfect. Okay, just wanted to confirm that. And then the second part is also on weather. Given the significant impact of weather in the second quarter last year, I think it was about 20 million or so, could you expand a bit on the potential impact of the extreme cold weather in January on fiscal Q2 this year? Hey, Jameson, this is Steve. Yeah, you know, it's funny, we went from extremely warm in Q1 to really cold in January. Unfortunately, it's going to be 65 degrees today here in St. Louis.

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

Okay.

Speaker Change: [music].

Steven P. Rasche: So it's amazing how quickly the weather changes. You know, that happened next quarter, and we clearly want to get through the rest of winter. And then we'll update the market. I rest assured that we are well positioned across all of our businesses. So we served our customers well on the utility side, first and foremost; we were well positioned in marketing, and we were actually well positioned in the mystery business too. Just hang tight; once we get through winter, we'll update everybody on our next earnings. Perfect. That's all I have.

Operator: Thank you very much. Thanks, James. The next question is from Richard Sunderland with J.P. Morgan. Please go ahead.

Operator: Hi, good morning. Thanks for your time today. Good morning.

Speaker Change: Yeah.

Operator: Good morning, Reg. Maybe to take another stab at Jameson's second question there, I'm wondering if you can frame 1Q results versus budget, given what sounds like working weather normalization, and I realize here that you're reaffirming guidance, but trying to get a sense of if that reaffirmation is looking at 1Q plus the January wet weather or really just considering 1Q in and of itself. Rich, this is Steve.

Speaker Change: [music].

Steven P. Rasche: I'll take a shot at it, and then everybody else can weigh in. You know, we obviously know where January was, so it'd be impossible not to think about that. But even before we had the cold weather in January, we were very comfortable with our first quarter results, and they supported our expectations across our business units. And again, as we get through the winter, as we always do, we'll look at what the pushes and pulls are across all of our businesses. And, you know, it's why we have ranges of earnings because we have to deal with the things that we can deal with. And that's all the stuff that we focus on to serve our customers. And then there are things that we have to manage, and that includes weather and customer demand in certain classes.

Steven P. Rasche: So now I think you can rest assured that the first quarter results were very supportive of our plans for the year. And we'll see how the rest of the winter plays out. Great, that's helpful context there.

Adam Waters: And then diving in on the utility for 1Q, there were some O&M savings you called out. Curious if that's kind of on target for the year? What are your expectations going forward with one quarter on the books now? Anything else worth unpacking on the O&M front? Hey Rich, it's Adam.

Adam Waters: I don't know if there's a whole lot more to unpack after one quarter. You know, we're still watching the expenses and being very careful there, but we like the results for the first quarter, and we will continue to make that a focus for us during the rest of the year. And Rich, I would add that, you know, we never want to draw a line based on one dot. We like where the first dot landed, but our overriding goal is to manage O&M below the rate of normalized rate of inflation. So we started off in a good spot. There's clearly always some timing things that go back and forth, but I think it's very supportive of our overall plan for the year. Great. Very helpful.

Operator: Well, I'll leave it there. And to Scott, best of luck in retirement. Thanks, sir. Thanks, Rich. The next question is from Julian Dumoulin Smith with Bank of America. Please go ahead. Hi, this is Tanner on behalf of Julian. Good morning.

Operator: Hey there, morning. Yeah. Hi, I just wanted to ask about the growth-related CapEx in the quarter; it looked like a slight run rate step up from fiscal year 23. Is that growth fully attributable to new residential connections? Is there a geographic focus to this growth? And are you seeing any trends with respect to new connections and customer composition specifically? Yeah, great question, Tanner. I don't know if I would attribute that to specific growth trends, but some of it was movement from corridor to corridor of some items.

Adam Waters: We've seen some movement around the path or the CAPEX profile of the storage project. Also, in the utilities, from corridor to corridor, we have different prioritization around what's getting in at a specific corridor. So I don't know if there's a trend line from that. I think it's really just something that's moving across corridors.

Steven P. Rasche: Yeah, and I would follow – this is Steve – that one thing that we are very focused on is the consistency year-over-year of our capital deployment in terms of infrastructure and new business. And so I don't think the uptick has anything to do with that. I think it's a pretty consistent year-over-year message relative to our new construction. But we do have other types of programs, meters, and things like that, and investment in some other types of things that are not necessarily infrastructure-specific. But again, I think if you think about the way we deploy, it's very consistent. It's very even across all of our footprints.

Steven P. Rasche: So whether it's Missouri East, whether it's Missouri West, whether it's the Southeast, that's the way we really focus over the long term. And we reaffirm: we used to have a five-year plan. Now we have a 10-year plan, and I think we're very confident in our ability to deliver on that. And then at the parent, stripping out one-time items for the hedging and the interest expense in the corner, you noted base corporate costs were higher year over year. How should we think about the cadence of those ongoing base corporate costs going forward through the rest of fiscal 24? I think they're going to be pretty flat, Tanner. This is the other Steve.

Steven P. Rasche: And it's very consistent with the assumptions we had underlying the guidance for corporate costs. And as you might recall, when we launched guidance last year for that other category, which would include corporate costs, that was down pretty significantly from the runway we had the year before. Again, part of that was due to one-time costs that didn't recur late in fiscal year 2020.

Steven P. Rasche: All right, great. Thank you. And congratulations to Scott Dudley, by the way. Thank you for all of your help.

Operator: I really appreciate it. Again, if you have a question, please press star then 1. The next question comes from Christopher Jeffrey with Mizzouho. Please go ahead.

Operator: Hi, everyone. Maybe to approach the puts and takes for the guidance for the year from a couple different angles, just wondering, as far as the regulatory aspects, the RSC in Alabama, the ISRIs in Missouri, have those been kind of in line so far as what you were expecting in the budget? And then maybe on the other income items, were you kind of expecting those one times the interest hedging, and recovery on some of those higher debt levels? Just like how is that kind of trending against expectations for the year? Chris, hi, this is Adam.

Adam Waters: Yeah, I think those items have met our expectations as far as coming back to a normalized RSC in Alabama. I think the cadence of our ISRS filings has been planned and has come in as expected. So, yeah, I think your observation there is a good one. The question is a good one.

Adam Waters: I think those items have really met our expectations thus far in the year, and things are running according to plan. And Chris, I would add that, yeah, we fully contemplated the one-time item, which was the hedge settlement, which happened in early October, so it was well before we even launched guidance. You know, if there is one thing that we saw in Q1 and we're seeing it reverse in Q2, that would be the drawdown of deferred gas costs because that's tied to customer demand.

Steven P. Rasche: So, even though the weather norm worked, the additional amount we would get from the PGA and the deferred gas costs, specifically in Missouri, was a little below where we had expected, but I can assure you that what we're seeing in January will come back around, which is why we never want to get overly excited about what happens in one small piece of the overall winter. We want to get through the entire winter season, and then we'll reevaluate. We're still on track to get those largely paid off by the end of the heating season. Great, thanks. And then, as far as that January weather, I think people have asked on the utility side, but on the marketing side, and then it also sounds like there's some midstream kind of leverage to those types of weather events, dislocations. Just wondering how you're thinking about both of those pieces, the marketing and the midstream, for 2Q and the rest of the year. Yeah, I don't know.

Steven P. Rasche: We're in Q2 right now, so let us get through the rest of winter. And again, we all know it was cold for 10 days in January, which was a welcome relief from the heat that we saw in Q1. But it's warm again today. And we have to plan for the entire winter. And again, the most important thing is that we are well positioned to serve our customers across all of our businesses. That's what our primary focus is.

Steven P. Rasche: And we'll update everybody as we get through the end of winter next quarter. Great. Thanks, everyone, and congratulations to Scott. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Megan McPhail for any closing remarks. Thank you for joining us on the call this morning. We look forward to speaking with many of you later today and in the coming weeks. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Pinkalicious, BF-WATCH TV 2021