Good day and welcome to the Spire first 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 note, this event is being recorded. I would now like to turn the conference over to Scott Dudley, Managing Director of Investor Relations. Please go ahead.

Good morning and welcome to Spire's first quarter earnings conference call. We issued an earnings news release this morning and you may access that on our website at spireeneergy.com under News. There's also a slide presentation that accompanies our webcast today and you may download it either from the webcast site or from spireeneergy.com under Events and Presentations. Our call today is scheduled for about an hour and will include a question-and-answer session. 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 with us is Steve Lindsey, Executive Vice President and Chief Operating Officer of Distribution Operations. Before we begin, let me cover our Safe Harbor statement and use of non-GAAP earnings measures. Today's call, including our responses during the Q&A session, 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-Q for the first quarter ended December 31 which will be filed 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. 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 the after-tax impacts related to acquisition, divestiture and restructuring activities. Operating margin adjust operating income to include only those costs that are directly passed on to customers and collected through revenues, which is the wholesale cost of natural gas and propane and related 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 Happy New Year to everyone who is on the call and joining the webcast today. Earlier, we reported results for our first quarter and I am pleased to say that we are off to a good start in fiscal 2017. Spire employees continued to deliver on our commitments while building on our strong performance of last year. While weather in our operating footprint was warmer than normal, much like the rest of the nation, we nonetheless reported solid financial results. At the same time, we achieved further improvements in our operating performance across all of our utilities. We continued to do what we said we would do by executing on our plans and transforming our company. First, we are growing our gas utilities organically and we are investing in utility infrastructure upgrades. We are integrating our Mobile Gas and Willmut Gas utilities into our Alabama utility creating a larger footprint in the Southern region. We are on schedule and within our projected cost range with our Spire STL Pipeline project. We are active participants in the legislative process and managing the various regulatory efforts across our jurisdiction. This includes being heavily engaged in the legislative efforts in Missouri that seeks to improve the regulatory constructs for gas utilities and for the state of Missouri. And last week, we continued to transition all of our business to the Spire brand and all that it stands for. This includes our utilities so they can better lean into our collective resources and talent. Now turning to our fiscal 2017 year-to-date highlights. We reported a 5.3% increase in net economic earnings for the first quarter. This increase reflects higher earnings on both our Gas Utility and Gas Marketing business. As Steve Rasche will cover in more detail, first quarter net…

Thanks Suzanne and good morning everyone. Let's begin with a review of our operating results for the first quarter of fiscal 2017. Starting on slide 10, first quarter net economic earnings were $47.5 million, up 5.3% from last year. Year-over-year growth was driven by improved earnings in both of our business segments, as Suzanne noted. On a per share basis, net economic earnings was $1.04 in the first quarter of both this year and last year as higher earnings were offset by a 5% increase in average shares outstanding from the equity issued for the EnergySouth acquisition. As noted in our news release this morning, our first quarter results were impacted by mild winter weather compared to normal as well as the timing and variability of degree days. For our gas utilities, these conditions tend to reduce demand and operating margin, while benefiting certain weather sensitive expenses. This is the second year in a row where we have seen mild weather in the first quarter. In Missouri, first quarter heating degree days were roughly 16% below normal this year, slightly colder than the 27% lower than normal last year. Similarly, Alagasco bill degree days were 29% lower than normal this year and 37% below normal last. On the flipside, the volatility in commodity prices and demand creates opportunities for our Gas Marketing business, Spire Marketing. Now looking at first quarter economic results by segment. Gas Utility posted earnings of $51.8 million, up from $50 million last year. This increase is due to higher margins and operating and maintenance expenses largely driven by the addition of EnergySouth. Gas Marketing earnings were up $1.7 million, reflecting higher volumes and favorable market conditions. Other corporate expenses were $5.7 million, up by about $1.1 million. This increase reflects principally interest cost. Let's look at…

Thanks Steve. As you can see, we continued to do the things we said we would do. We remain on a solid growth trajectory as we look forward to completing the transition of Spire for all of our businesses later this summer. We have a proven formula for acquiring, integrating and organically growing our gas utilities and we are fully executing on our plans. We are progressing with Spire STL Pipeline project and we continue to work to redefine what it means to serve our customers and communities, leveraging innovation and technology in the process. Thank you much for your time today and for your continued interest and investment in Spire. Operator, we are now ready to take questions.

[Operator Instructions]. The first question comes from Michael Weinstein with Credit Suisse. Please go ahead.

Hi. Good morning.

Hi Michael. Good morning.

Good morning.

I was wondering if you could talk about the next steps in the timeline for legislation in Missouri this year. You announced there has been some prefiling activity and what are the next steps that you expect to see as we move forward?

Yes. It's a great question, Mike. I never try to predict the legislative process. Well, we do know it's in session. It will run actually until about May. There's obviously a new Governor in place. And so they are working together to try to set an agenda but we don't know what order they will take that up. But what we do know is there is an interest both by the legislature of the House and the Senate and also coming from the Commission where this past fall that I mentioned an interest in regulatory reform and specifically to the gas companies that's addressing, the goal is of the drive some of the elements that I discussed in my opening remarks. So from an interest standpoint, there is high interest in all of that but predicting the timing is difficult in terms of, will it be early, mid or late session and then of course having two chambers. But I can assure you that we are working extensively with the legislative leadership, the Governor's office as well as the committee that manage this type of legislation and there is, I would say, a great interest. And again, but predicting the timing of that it is difficult. What we also stay focused on and I mentioned in my opening remarks is that we do have our rate case filing which we will do by April and so we are focused with that as well as this legislation. And so those pieces are, in our minds, equally important.

Great. And for the rate case, what impact do you think the election has had on the makeup of the commission and what impact do you think it might have on the rate case going forward?

So from a commissions standpoint and I think I have mentioned this before, maybe in the year-end remarks that it's a membership of five, they are required to have two Republicans and two Democrats and then the Governor change the chair out. That's the ability. He can't remove commissioners on the bench, but he can change the chair. So there is some thought that that may occur. It may occur who knows when, but that will occur. So we may have a different chair and that would be a Republican chair. There are two sitting Republicans on the commission now. So we are watching that closely. So that mostly would be what, if anything, that the governor would do in terms of action with the commission.

Great. And just lastly, I wonder if you could provide an update on merger savings heading into the rate case? And also just in terms of the shared services, shared costs between the utilities, maybe you could just discuss how that works? And what the agreements are between your different utilities? Thanks.

Yes. So from a filing standpoint, like I mentioned, we would file in April and as you know we have started this journey with an acquisition of the shared services model. So yes, there is savings with shared services. As we talked to you before, you don't need two of me, three of me, four of me just like fees. So there are savings and that's the good part from a consumer standpoint. Also as you recall, when we closed the transaction with MGE, we entered into an agreement with the commission in terms of one-time cost to achieve. So we will both be paying special attention to that in the regulatory process and just by deploying technology and shared services and the one-time cost to achieve we brought savings for our customers and our filing will reflect all of that math. We don't have that finalized, obviously at this point in time. So I really can't get to the mathematical computations of that. But that's some of the items that we are paying special attention to.

Yes. And Michael, this is Steve. I would add that remember, the other side of that coin is accelerating rate base growth and that's one thing we have been able to do in space, not only at the legacy Laclede utility, but clearly to MGE and a lot of the increase that you are seeing in our capital spend in the last 12 months, even in this quarter, is really big driven by a ramp up on the Western side of the state. And one other comment on shared services and how we think about those costs. We have a cost allocation methodology which has been long used in Missouri has been through many rate cases and that's the methodology we use in order to allocate cost over our expanding footprint. So clearly there will be discussions during the rate case. That's the reason why we are filing concurrent rate cases in the Western and Eastern side of the station, so that we can get one wholesome look at all of our cost and make sure they get allocated correctly.

And Michael, this is Steve Lindsey. One benefit I would clearly want to emphasize for our customers is that as we brought these company in. it's allowed us to achieve standardization across the broader footprint, continuous improvement, enhance service levels and we have really pickups some best practices from each of these company that we been able to apply. So I think customers realize some very good benefits as well.

Okay. And I am assuming also with our shared services agreement as well between Missouri and Alabama and Mississippi, all the utilities share services and savings together. Is that accurate?

Not together. For example, like I mentioned earlier, you still only have one of me. So there is savings for customers. And the way that the savings show up in Alagasco, for example, if there is a mechanism, you are familiar with the RSE and we manage inside of the band. That's a big step that creates savings. There is sharing of those savings. And that's how all of that shows up. And from every year that we have owned Alagasco, there have been saving for customers which quite frankly has never really occurred with that RSE mechanism. So from a customer impacts and regulatory observation, what they seen is saving to offer customers every years since we have owned them. And that's how that shows up.

Okay. Thank you very much.

Thanks Mike.

Thank you Mike.

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

Good morning. I wanted to talk in a little bit more detail about the quarter itself. If I look at adjusted earnings per share and look at it just for the utilities alone, you guys had significantly better weather year-over-year and then you also had what it looks like is some cost savings excluding the impact of EnergySouth and that acquisition, but earnings-per-share did go down there. So what are the other drivers there? And maybe you could give us some color on the impact year-over-year of the change in interest rates on your kind of legacy debt there, excluding EnergySouth?

Yes. Hi, Chris. This is Steve. First of all, earnings went up 5.3%, but we issued shares. So the delta between the absolute earnings and the cost that I can speak to and the earnings-per-share is really the additional equity load, which shouldn't be a surprise. We have long been talking about that when we close the EnergySouth acquisition last year. You are right in, this is an interesting quarter, because if you look at the weather this year versus last year, they are both warmer than normal. This year is a little bit colder than normal, but they are both pretty darn warm. So when we think about what headwinds or tailwinds that creates for utilities, as I mentioned in our prepared remarks, it really kind of cuts both ways. We saw margins lower than clearly we would have expected in normal weather this year and last, a little bit better this year, but if you followed the information on the slides and then in the prepared remarks, most of that came from mechanisms like a lower RSE adjustments in Alagasco and higher ISRS revenues in Missouri. Everything else, including weather was a small drag because especially the way in which the temperatures came through, which is not something you are going to understand when you look at degree days, but the volatility of the temperatures, 70 degrees one day, 32 the next and then 55 the day after that, is really kind of, it's one of the challenges we as a gas utility have to deal with every day. We take that on but it does tend to change the way in which our customer charge and therefore the margins we get from our customers. So it's a headwind that we will deal with. We dealt with it last year. And so I think we are very comfortable with where we are driving the bus for the year overall. So weather, from the margin standpoint, was clearly a headwind, but if you look at our capital spend and you look at some of our operating costs including our employee cost because our employees are much more efficient we can do more work when it's warmer there. We actually did have some savings and we saw that last year too. There is a natural hedge built into our business. So you are right. When you look at the headline numbers, our earnings per share was flat year-on-year, but you have to look underneath that to understand where we are driving the business and where we will drive it for the remainder of the year. I think it's important to note that that we issued our earnings range, knowing full well in November that October was warm and November was looking warm. So this isn't a surprise to us and we will continue to manage through it this year just like we did last year.

And Chris, one final point I would add. This is Steve Lindsey. As Steve mentioned, with the timing of the weather this year, it was much more condensed in December and it was spread a little bit more across some of the earlier months of the quarter last year, but what that also impacts is the delay of our seasonal activation of customers. We do have a certain group of customer that are seasonal. They come on when the weather starts getting cold. This year they came on much later in the year, which caused a little bit of difference when you look at it year-over-year as well.

And the macro points that both Steve and Steve are making here is when we set that range and we talk about normal weather, we always know normal is within a range and we are going to manage through those slightly colder, slightly warmer and how that weather impacts. That's just part of our business and we talked about before the various levers that we have as a business that we pull over the year, quarter-by-quarter, to manage the business. And the levers that we pull depends on how cold the weather is or how warm the weather is. And that's what Steve Lindsey, with his team, predominantly what their job is all about in addition to the customer service aspect that wrap around that.

Okay. I certainly didn't appreciate some of the weather nuances there. You can't just tell from degree days, like you said, but speaking more specifically about the interest expense impact, maybe you could kind of talk about the change in rates versus before the election and maybe quantify, if you could, the impact on your earnings per share as a result of that specifically or alternatively just kind of looking at year-over-year impact of higher rate so we can try to match it there and how much currently of your total debt load is exposed to short-term rates?

Fair question. If you look at the higher interest year-over-year, I think it was about $3 million, about a third of that was due to higher rates in our floating rate notes and that, as I mentioned in our prepared remarks, the biggest chunk of our exposure on floating rates is the $250 million floater which will mature late this summer. And as we mentioned, once we complete the mandatory conversion, we will have significant proceeds. So it's our expectation to pay some of that down. And we have already hedged away most of our interest rate exposure in the market and we hedged it away in the market before the election. So from that standpoint, I think we are very comfortable with how we are managing that exposure going forward. The remainder of the interest change is really reflective of the parent company debt that we took on in order to close the EnergySouth transaction and overall when you think about interest on the P&L on a consolidated basis, it's the debt that we assumed in EnergySouth when we closed the transaction.

Okay. Great. That's very clear. Thanks guys.

Thank you.

Our next question comes from Paul Patterson with Glenrock Associates. Please go ahead.

Good morning.

Good morning Paul.

Good morning Paul.

Just, you guys filed an amicus brief yesterday in the Great Plains-Westar complaint case the industrials have put forward basically regarding whether or not the PSE has authority in that merger and I guess sort of wider implications. I was wondering if you could address what the issue is there with respect to Spire and how we should think about that?

A couple of things. One, we filed just to say that we can make sure that we get all the documentations from the case. So it's more of a friendly filing, if you will, again to make sure that we are receiving all the documentation. And obviously, in terms of Great Plains and the State of Missouri and that transaction, we want to make sure that we stay on top of what's going with the case. No particular worry. It's just so that we could track that and other regulatory cases, for that matter, across the United States.

Okay. And that's pretty common to want to be involved in other cases, but the amicus brief itself basically seems to raise the position, a pretty well thought out position with respect to whether or not the commission has jurisdiction over the Westar-Great Plains merger? And I am just wondering, as you know, the staff, there is some controversy here f with respect to that case with the PSE staff and what have you, if the PSE was determined that it does have authority, in other words find a mix of finding that's contra to the amicus brief, is there anything that we should think about as being a potential issue for Spire?

We don't see it as a potential issue. We are obviously watching that with great interest. But we don't see it as an issue. Our transactions occurred. There was not commission intervention or requirement in terms of those, except for the case, as I mentioned earlier. When Laclede Gas and MGE, that transaction occurred, the only commission request and we agreed to it was that we file these cases contemporaneously and Steve Rasche spoke to that, we wanted to do that because we knew we were implementing a shared services model and then the one-time cost to GP was attached tot that order and we felt like both of those conditions were important and agreed to. But that is the only conditions that have been on any transaction, including our acquisition of Alagasco as well as EnergySouth. There was no state requirement in Missouri for us to seek approval in Missouri.

Okay. Thank you.

Our next question comes from Brian Russo with Ladenburg Thalmann. Please go ahead.

Yes. Hi. Good morning.

Good morning Brian.

I am sorry if I missed this earlier, but could you just talk about some of the upcoming milestones with the STL pipeline project?

Yes. Sure and again I encourage you to visit our website and look under projects because we have the timing of the schedule and the activities that need to occur, basically the critical path and we are on schedule. We have had our FERC filing that was made, as I mentioned in my opening remarks and we will continue to work with FERC and work through the process that we are on remain on schedule for the pipeline to fill in the gap ahead of schedule. I will tell you, every Monday the team comes and talks to the signal leadership team, because we have a regular standing Monday meeting and every Monday it's all about, they are on time, they are on dollars, from a budget perspective and the scope remains the same. So everything that we have laid out to you both in calls and one-on-ones as well as what's on our project site is consistent and unchanged.

Okay. In order to get it in service in 2019, can you be more specific, is it early 2019, late 2019?

Early 2019.

Are you talking about the in-service date, Brian?

Yes.

Yes. The filing has an in-service date of 11-1-2018. That's the occurred schedule that's up on the website. And I think we have been pretty clear, as we think about the impact, we expect it happens some time during fiscal 2019. You have to have a aggressive schedule in which to drive toward. In the grand scheme of things, if you think about it from a financial impact this year, doing your modeling, we get AFUDC for the project. So whether it happens, then it happens in mid-year, it isn't really going to change how we think about or driving growth in the future. And I think we have been clear that as we think about it in fat math, as we model out over a number of years, we expect it to be in-service sometime in mid fiscal 2019.

Okay. Thank you.

Our next question comes from Insoo Kim with RBC Capital Markets. Please go ahead.

Good morning guys.

Good morning Insoo.

Hi Insoo.

Just a follow-up question to the STL Pipeline, given the expected Commissioner Bay's resignation after this week which will, we know, result in FERC having no quorum. Although it seems that it's likely that a replacement may be named in the next few months, if it does not happen in a timely fashion, does that have any adverse impacts to the timing of the construction of the STL Pipeline, if the approval is delayed beyond the December 17, 2017 requested date?

It has no impact to the in-service date of the second quarter 2019. The staff is the one that manages the process and the process then goes into a recommendation, right, before the in-service date to the commission. So the staff is there and working as they normally do. So we don't see any interruption at all that we have looked at that and that's our determination.

Understood. And then regarding the potential tax reform, I thank you for giving the potential earnings impact of the two different plans, but could you perhaps give a little more color on the potential cash impact and how that results in your financing plans going forward?

Yes. Great question. I have got to think about it, broadly from a cash perspective, to the extent that our rates go down which they would, because if you think about rates, rates are established presuming a certain marginal federal tax rate. If that marginal federal tax rate will come down, then we are going to receive less cash from our customers and since we are at the holding company level, not a cash taxpayer, that means that there will be a little bit less cash that goes up to the parent company, but that's not as significant impact. We have done some modeling. It's in the single-digit or low double-digit millions, which in the grand scheme of things, let's be practical, when Steve and I worked through our capital plan for the year, a $10 million swing in our capital plan is many times in the rounding and the timing of individual projects. So that's well within the span that we have to continue to manage as we are managing our growing business.

Got it. Thank you very much.

[Operator Instructions]. Our next question comes from Joe Zhou with Avon Capital Advisors. Please go ahead.

Hi Suzanne and Steve. My question has been answered. Thank you very much.

Thank you Joe.

Nice job.

Thanks for joining us.

This concludes our question-and-answer session. I would like to turn the conference back over to Scott Dudley for any closing remarks.

Well, thank you all for joining us this morning. We will be around throughout the day for any follow-up questions. Thanks again. Have a great day.

This concludes today's conference call. Thank you for attending today's presentation. You may now disconnect.