Good morning and welcome to the Spire Third Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note that this event is being recorded. I would now like to turn the conference over to Scott Dudley. Please go ahead.

Good morning and welcome to our third quarter earnings conference call. We issued earnings news release this morning and you may access it on our website at spireenergy.com, under News. There is also a slide presentation that accompanies our webcast today and you may download it either from the webcast site or from spireenergy.com under Events & Presentations. Today’s call will include a question-and-answer session and the operator will provide instructions on how to join the queue to ask a question. Presenting on the call today are Suzanne Sitherwood, President and CEO; and Steve Rasche, Executive Vice President and CFO. Also in the room is Steve Lindsey, Executive Vice President and Chief Operating Officer of Distribution Operations; and Mike Geiselhart, Senior Vice President of Strategy and Corporate Development. Before we begin, let me cover our Safe Harbor statement and use of non-GAAP 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. Our forward-looking statements speak only as of today and we assume no duty to update them. Although our forward-looking statements are based on reasonable assumptions, various uncertainties and risk factors may cause future performance or results to be different than those anticipated. For a more complete description of these uncertainties and risk factors, see our Form 10-K for the fiscal year ended September 30, 2015, and our Form 10-Q for the third quarter ended June 30, which we will be filing later today. In our comments, we will be discussing financial results in terms of net economic earnings and operating margin, which are non-GAAP measures used by management when evaluating our performance and results of operations. Net economic earnings exclude from net income, the after-tax impacts of fair value accounting and timing adjustments associated with energy-related transactions as well as after-tax impacts related to acquisition, divestiture and restructuring activities. Operating margin adjust operating income to include only those costs that are directly passed onto customers and collected through revenues, which are the wholesale cost of natural gas and propane and gross receipts taxes. A full explanation of the adjustments and a reconciliation of these non-GAAP measures to their GAAP counterparts are contained in our news release. So with that, I will turn the call over to Suzanne.

Thank you, Scott, and many thanks to everyone who joined the call and webcast today. Earlier today, Spire reported another very solid quarter of operating and financial results. We did what we said we would do and we did it the right way by delivering on the promise to champion our customers, our communities and our shareholders and all that we do. It was just last quarter when we announced that our Company would become Spire. That’s when we shared our mission and vision for the Company, along with our new symbol and name. We talked about how the energy sector is changing and how we’re changing with it. We talked about our focus on bringing people and energy together and how it’s not just about the energy we deliver, it’s about what that energy makes possible for people. During the AGA Conference in May, we had the chance to meet with many of you and talk about our accomplishment, our thoughts about Spire and having a clearly articulated mission and strategy guides us every day. I can’t tell you how much we appreciate and are truly thankful for your interest in and support of our Spire vision. As you’ve come to understand, Spire reflects the company we are becoming, a company that is focused on growth, that delivers on what we say we’ll do and that changes the conversation. Always the conversation is about delivering safe, reliable and sustainable energy, but now also redefining what it means to serve. You’ll continue to hear more about this as we bring Spire to life for our utilities over the next year. So, now on Spire, I’m proud to share an update on how we’re delivering on our group strategy. First, we’ve grown our gas utilities the prudent infrastructure upgrade, organic growth…

Thanks, Suzanne, and good morning, everyone. Let’s take a look at our operating results for our third quarter ended June 30 and review our outlook for the rest of the year. Starting on Slide 10, third quarter net economic earnings were $14.6 million or $0.33 per share, up from $11.1 million or $0.25 a share a year ago. The $0.08 year-over-year increase was driven by improvement across all business segments. Gas Utility posted net economic earnings of $18 million, up $1.5 million. Gas Marketing posted an increase of $1.3 million and other corporate expenses were also lower this year by $700,000. With that as a backdrop, let’s take a look at the key drivers of that improved performance turning to Slide 11. For the quarter, total operating revenues were $249 million, down 9% from last year with that decline primarily due to lower commodity costs, which represents the majority of our customer bill, offset in part by higher sales volumes. A better measure of our topline performance is operating margin or earnings contribution after gas cost and gross receipts taxes. Gas utility operating margin of nearly $177 million was up $4 million or about 2% due to higher ISRS revenues in Missouri and reduction in the RSC adjustment at Alagasco, partially offset by other movements, including the timing of gas cost recovers. Remember, when looking at operating margin in Alabama, RSC rate adjustments, which true-up actual and authorized ROE flow through the margin line. In this quarter, that adjustment was $2.8 million lower than last year. We’re moving this rate true-up in both periods; utility margins were up $1.2 million. Gas marketing operating margin was lower than last year by $3.3 million, driven by fair value adjustments in both 2016 and 2015. Removing these adjustments, margins were higher by approximately…

Thanks, Steve. As you can see, our transformational journey continues. Now at Spire, we are driven by organic and acquisitive growth. We continue to leverage technology to increase efficiency and best serve our customers. We are moving full speed ahead with modernizing our gas assets and we are focused on innovating. In short, we’re delivering on our promises, including living into our mission at Spire, changing the conversation around energy, and redefining what it means to serve. I can hardly wait for all of our gas utilities and business units to become Spire in 2017. Thank you for your time today and for your continued interest and investment in Spire. As always, we look forward to continuing our conversation with you and sharing results and future progress, including in November when we host our earnings call for the fourth quarter and the full year of fiscal 2016. Operator, we are now ready to take questions.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Joe Zhou from Avon Capital Advisors. Please go ahead sir.

How are you guys doing? It’s Andy Levi.

Hey, Andy, good morning.

Hi, Andy.

How are you guys doing? All right

Pretty good.

I think the numbers rundown was pretty good. We just had a question and I know we’ve been talking to IR about a little bit, but just want to kind of get your view on it as well. So, just the Missouri kind of the regular - and you did discuss a little bit the regulatory landscape and obviously there is potential in 2017, maybe getting some type of legislation done or maybe even before that or during that year or maybe even at the commission level, seems that there may be some reforms too. But at the same time, there seems to be the two things that you outlined as far as the staff recommendation to on over earnings or some type of ROE check and just some other items kind of surrounding that. Is something changing in Missouri or obviously, we know we’re just changing to the positive, but just specifically for you guys, is anything changing or I’m just curious why all of a sudden, especially since you supposed to file a rate case anyway at some point next year, this kind of came up?

Yes, I guess a couple of things and to start back at the top or the broader level, the last few legislative sessions, there’s been an interest from all the utilities in the stage and in terms of thinking prospectively and having more of an alternative rate mechanism. So as you know a lot of us have gone to the General Assembly and have introduced legislation and so forth, just try to move in that direction. The good news about all that with all the different utilities and having conversation year-over-year, there is an interest by several of the parties to think about that and think about how we do that. So, the net effect coming out of the session is that the Senate is having basically a study committee that is active in August and in September. All the interested parties are involved, they’re inviting speakers and for different states that are now operating under these alternative rate mechanisms. So, we will stay highly engaged like I’m sure a lot of the other utilities in the state. We actually think that’s a very positive next step, if you will. Now what the net effect of that would be I can’t predict, but I can say that I do think, again, there’s a very positive step as long as we are continuing the conversation. It’s not only good for the utilities for the Senate, the House and the executive branch of the state to think about these things, it’s also good for the state and I know you’re well hold on this topic, it’s good for the state from an economic development perspective as industrials and think about coming here or expansion, because you do need a healthy utility. So that’s sort of that and you mentioned the rate case.…

Okay. And then just on the over-earning aspect of it, I understand, I guess there may be like some calculation differences on how the OPC came up with their ROE, but can you just also explain how goodwill kind of plays a role in it, and then if goodwill in Missouri is part of that calculation or with goodwill be stripped out and actually make your ROE higher?

Andy, this is Steve, I can take that. You’re right that there are several fundamental flaws in the OPC calculation including not the least of which is that $7.6 million pretax gain that we referenced in the prepared remarks earlier, that would clearly on a snapshot basis would take our ROE up, but that’s not how one-time one-off gains are treated historically by press in Missouri. And also that the ROE equity that they use, the bottom part of that calculation, they conveniently chose the biggest number rather than what we normally do in the state and that’s an average over a period of time. Goodwill is not part of the calculation. There are some adjustments between the GAAP numbers that you would see and the regulatory numbers and those are stripping away all of the impacts of the acquisition, including any goodwill impact and impact on deferred taxes, because again, our agreement and approach with the customers in Missouri as it is with the customers in Alabama, and will be in Mississippi is that, the customer should not pay for any of the goodwill or the premium associated with our acquisitions. We work on a historic cost basis and that makes perfect sense. So, it is part of the calculation. It’s really in the details of how you get to the adjusted bottom number, which is the equity use for the ROE calculation.

Go ahead Andy, I’m sorry.

No, you go ahead. I don’t mean to interrupt you, go ahead.

I was just going to do a little bit of a wrap up on that. And just to remind you that the OPC request - the Commission basically told the OPC that they would have responsibility for that investigation and that the staff would not conduct the investigation. And again, I just want to emphasize, we’ve always planning, unless there is a legislative change or regulatory change that would enable it; we’re always planning on filing that case by April. So in our view, it’s just moving forward, and marching to April as we were always planning on doing. And as a reminder, we have to file these cases contemporaneously, both MGE and Laclede Gas, because we agreed to that during the - closing of the transaction for MGE as we’ve always been planning on doing that. So, nothing new there.

Could we just go over the goodwill, because that’s the one thing that I’m like a little confused on? Could we go over the amount of goodwill that relates to Missouri, and how - what the calculation would be, because I guess, if you kind of did it on a regulatory basis like you said, what if the ROE be well above where you’re authorized right now, doing the goodwill calculation or would it not?

To get to the answer, Andy, which is probably the best place to go with the discussion, I think you only have to look at the staff recommendation to the Commission when this complaint first came up. And I think we were pretty clear when the complaint was originally filed that the inflated number that the OPC was using was factually incorrect. We had a calculation that would put us in the 9.6% to 9.7% range and we were very clear about that and which would be market based upon recent awards. And if you were to go to the staff recommendation to the Commission low and behold and they have all the information, they can do the calculation. They came up with a 9.6% roughly ROE. So, you’ve got two fairly well-schooled independent bodies who were coming essentially to the same calculation. So, in the final analysis, we’re all in agreement that we’re right where we need to be, right where the authorized ROE is, right where the ROE would be from an industry standpoint in the state of Missouri, which is really what you you’d have to have to focus on. The specific number and this is in our filings for Laclede Gas, the goodwill at Laclede Gas, which would be the MGE transaction, because that was acquisition of assets by Laclede Gas of the MGE assets, is about $210 million.

Based on everything you said, does the interest expense account towards the ROE calculation, the way that you’re calculating it, given the goodwill?

The capital structure for Missouri for the Laclede Gas, all factors into the absolute bottom line return when that’s standard fare understanding that that line is snapped and reset at every rate case and the last time it was reset was before the acquisition was consummated.

Okay. I think I may understand it differently, but I’ll deal with it. I’ll talk this afterwards. Then the last question I got and I’m sorry for taking so much time, this is – when are you going to give 2017 guidance, is that on the third quarter call typically?

We would typically do that in our November call, which is our year-end call, because we were…

Year-end, that’s right, I apologize. We’re on a different calendar year. And I just want to confirm that you’re expecting to have EPS growth in 2017, is that correct?

Yes, sir. I think we spoke to that on the call.

Okay, perfect. Thank you very, very much.

Thank you, Andy.

Our next question comes from Sarah Akers with Wells Fargo. Please go ahead.

Hey, good morning.

Good morning, Sarah.

Hi, Sarah.

Just a question on the STL Pipeline. I know it’s early in the process, but has there been any acquisition to the line thus far and do you expect any pushback in the permitting process?

Thanks, Sarah, for your question. I’m going to send it over to Mike Geiselhart as he has been actively working on this project and one reason I wanted him to be included today to make sure he touched and answered any questions you guys may have.

Sure. Hi, Sarah, let me address your second question first. We don’t have any at this point, any unusual environmental challenges that we see on the project. It’s always difficult to predict exactly what may come up as you get further down the road, but at this point, we feel reasonably confident under the circumstances and all the input we’re getting from our experts that we’ve got sort of the typical environmental challenges and nothing more.

Got it. And when do you expect the open season to wrap up and what are the steps after that?

Yes. It ends on Friday, the 19th of August. So, we’re running it for three weeks. We typically run them for anywhere from two weeks to four weeks. We’re running ours for three weeks. After that, we’ll have to incorporate any responses that we get. There is some possibility it could lead to a change in the designer size of the project. We’re not necessarily anticipating that right now, but that’s really the purpose of the open season. So, we’ll see what sort of responses we get, assuming there are no unexpected responses for large amounts of capacity then we would anticipate just continuing on the same path that we’ve been on for several months now in terms of processing the filing.

Got it. And then, Steve, just a quick clarification and a bit of follow-up to Andy’s questions on the 4% to 6% heading into 2017, can we use the 2016 EPS in the top half of the range as the base for that growth?

What we guided to the upper half of the range, so I’ll let you all figure out where you want to start that, but yeah. As I mentioned in the prepared remarks, we view the 4% to 6% growth is kind of the long-term growth and also the bandwidth when we think about each individual year.

Great, thanks a lot, appreciate it.

Thanks, Sarah.

Our next question comes from Chris Turnure from JPMorgan. Please go ahead.

Good morning. I want to go into a little bit more detail on the OPC investigation into your prior mergers. You obviously touched on it already, but when was this filed, is this a formal investigation at this point or an investigation into doing an investigation kind of like Great Plains and Westard? Would you kind of characterize this as providing some cover for the OPC’s efforts and I should say the staffs efforts into establishing jurisdiction in that merger?

A lot of questions there. So, let’s see if I can get them all, if not give me a follow-up. Office of Public Counsel filed a complaint on April 26 and Missouri Commission denied our motion and also the other – remember, it’s an investigation at this point; it’s not a docketed case if you will. And so the whole aspect of just investigating whether or not there’s any detriments and that’s what I was trying to hit on earlier, that’s really the test for this case and they’re trying to understand that. And so, whether or not the other transactions, they drove OPC to bother some plan or not, I mean I would assume that is the case, but again, the Missouri Commission denied our motion dismiss, but they also were clear that this is an investigation by the staff and they acknowledge that we would be filing our case by April. So again for us, we’re just marching towards our April case and we know enough about the data, not just on the financial information, which all of you are keenly aware and we talked about returns and so forth and we’ve been very transparent about the financing of these few transactions and so forth, which are markedly different than some of the other transaction and particularly the one that we’re referencing, but also the service metrics that we file monthly and quarterly across the Board. We also know those metrics and there is no detriment whatsoever to our customer. On the return basis, I think Steve went through the math with you. He did mention the numbers specifically for OPC, but their calculation was 10.45%. That’s what they asserted. And even that assertion, while unfounded, it’s within the range of the allowed rate of return, so even their calculation itself and again that’s been upheld by the Supreme Court. So, right now, in my view, there is no fact you can point to in either case that would cause us to think differently or to do anything differently.

And Chris, this is Steve, wanted to follow-up a little bit on Suzanne’s point. I think you take a very balanced approach in what it means from a service level for our customers to whether those are around operational metrics such as infrastructure upgrades, [indiscernible] we’ve seen improvements. We think about our customer metrics, we’ve seen improving our J.D. Power scores, our appointment retainment; we’ve lowered our estimated bills. And then if you think about just from a growth perspective, we continue to grow all these utilities, which gives a bigger footprint obviously to spread the costs across and then with the lower commodity costs, customer bills are literally lower than they’ve been in over a decade. So we feel very comfortable that these acquisitions have actually enhanced customer levels of service across all of our footprint.

And to that end and I don’t want to sort of beat the dead horse, so to speak, but I’m extremely proud of the way our employees have come together across three utilities and every day get up and work hard to make sure that they’re thinking about how to provide service in a better way. And they actually uses data and the metrics that Steve talked about, and I’m talking about. They get together and they analyze. Here, I’m going to turn this back over to Steve to give you an example or two, but they look at the data in terms of their service levels, elite call, as an example, or your time is this time, our time is that time, why is that and if we just give them a couple of examples and in all instance as you guys are working together to improve those service levels and we see a showing up in our report each and every month.

Yes. I think one of the examples as Suzanne just mentioned is on our leak response time. We’re taking a very hard look at that, and we’ve had record levels of performance at all three of these utilities in the past couple of months. And again, that’s a focus on process and leveraging technology. And other thing we’ve done is use the technology that we’ve implemented to provide more appointments for our customers, and provide greater service level. So really it’s hard for us to imagine that we would take the approach of any type of detrimental service for our customers would be acceptable, and I think if anything we’ve seen pretty much increases across the board.

Okay. So, just kind of going back to that original filing against your kind of past mergers that was filed back in April, and that’s a completely distinct investigation from the over-earning accusation that the OPC was going after?

Correct.

Okay. And I just wanted to get some color on the O&M decrease this quarter, and I guess maybe year-to-date as well. After you move the one-time item, you guys are still benefiting from kind of lower bad debt expense, and some personnel expenses. Are these kind of still merger synergies that are flowing through right now on the personnel or is that something else that’s being done in response to kind of weaker weather year-to-date?

Hey, Chris. This is Steve. Yes, I would say if you want to think about what’s driving the lower O&M and you are thinking about the right way, you do need to take that gain out of last year’s, you got a good run rate. Our run rate is clearly down, and the biggest single driver is really the impact of a favorable weather from an O&M perspective during the winter, because our utilization of our staff, bad debts as you mentioned and just the hard cost of operating the system, all were significantly lower. And that’s kind of the natural hedge that a gas utility, not just us, but every gas utility has when the weather is warmer, and the opposite is true when the weather is a lot colder, and we saw that a couple of winters ago where the O&M costs were a lot higher because of very, very cold winter, puts additional stress on the system that enables or requires us to spend more money in order to provide our safe and reliable service. Clearly, we have and Steve mentioned as we continue to put our utilities together, we are seeing some operation efficiencies and that’s really on the employee area. A number of those really are benefits in the consolidating plants and things like that. So it’s primarily weather, but there is a little bit of that as I think about the run rate for our cost and how we think about the run rate for the year, it’s clearly below last year. The fourth quarter is usually our big quarter in terms of O&M costs and so I would expect our O&M to be a little bit above the trend line, particularly the first three quarters versus the last quarter, but that’s not unusual. That’s how we normally see our cost run through the four quarters of our year because we are a highly seasonal business.

Okay. That makes sense. Thanks.

Our next question comes from Rodney Rebello from Cannon Asset Management. Please go ahead.

It’s actually Scott Senchak. Thanks for taking the question.

Hey, Scott.

Hey. So I just wanted to clarify one thing from Andy’s questions, when you guys make these quarterly filings that you talked about and then also when you talk about kind of your earned ROE, are you guys using the cost of capital, the cost of debt from the last approved rate case or using your current kind of metrics on that front?

We are using the cost of capital of the Laclede Gas Operating Company, which is how we think about and how we manage our business overall just as we think about Alabama and we look at their cost of capital and our capital structure in Alabama. So it would reflect all of the borrowings including some borrowings since the last rate case at the Laclede Gas operating unit and the debt that we assumed as part of the MGE deal and whatever debt was issued at the Laclede Gas Company in order to support that deal.

Okay, got it. So it’s not just the one from the filed rate case, you are actually updating it for the current data?

Yes. I mean, it’s a current view and for Laclede Gas, all of that activity was at the Laclede Gas Company. So, it isn’t all-in view. When we get to Alagasco, as you all know, we issued some debt at the holding company level because of the rate structure and the desires of how we want to manage the business for Alagasco. It’s completely different situation, a completely different transaction, but for Laclede, it was actually pretty clean, it was an acquisition of assets by Laclede Gas and all of the debt financing was done in that entity. The equity obviously was issued at the parent company and slowed down, but that’s fairly standard in a public company.

Gotcha. Thank you. And then just kind of a broader question in Missouri, this issue of parent leverage as well as it’s cropping up in some of the other electric utilities there. Do you guys have a view on how that has historically been treated and how it applies to you?

Historically, it’s been treated any number of ways, it depends upon the utility and the precedence. So I think there’s a number of precedence in the state. Historically, for us, we looked at the consolidated group structure, which we have to remember the last time we filed a rate case; we were a single utility holding company. So, there was no difference essentially between the utility and the parent company. In fact, there was no debt at the holding company. I can assure you that as we’ve gone forward and as we’ve grown, we have been operating each of our utilities in a ring fence fashion as we would expect in our agreement with each of the Public Service Commissions in the states and that includes managing those operating company capital structures. That’s the right way to manage it from a customer perspective and that’s the right way to management as we think about the business. So as we go forward, our clear expectation is we’re going to continue to operate that way and when we file the rate case, we will file the rate case on the operating capital structure for Laclede Gas, which would impact both the Laclede Gas operating at a service territory and the Missouri Gas Energy service territory, because they both operate under the legal entity of Laclede Gas.

Gotcha. Thank you very much. End of Q&A

[Operator Instructions] 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 all for your time today and for your good questions. We will be around the rest of the day for any follow-ups that you have and we look forward to catching up with you again. Thank you so much. Bye-bye.

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