Good day everyone and welcome to the Spire Incorporated Second Quarter Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note, today’s conference is being recorded. At this time, I would like to turn the conference call over to Mr. Scott Dudley, Managing Director of Investor Relations. Sir, please go ahead.

Good morning and welcome to Spire’s second quarter earnings call. We issued our earnings news release this morning and you can access that on our website at spireenergy.com, under Newsroom. There’s also a slide presentation that accompanies our webcast today and you may download it from either from the webcast site or from our website under Investors and then Events & Presentations. Presenting on the call today are Suzanne Sitherwood, President and CEO; Steve Lindsey, Executive Vice President and Chief Operating Officer of Distribution Operations, and Gas Utilities; and Steve Rasche, Executive Vice President and CFO. Before we begin, let me cover our Safe Harbor statement and use of non-GAAP earnings measures. Today’s call, including responses to 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 described in our quarterly and annual filings with the SEC that may cause future performance or results to be different than those anticipated. In our comments, we will be discussing net economic earnings and contribution margin, which are non-GAAP measures used by management when evaluating our performance and results of operations. Net economic earnings excludes from net income, fair value accounting and timing adjustments associated with energy-related transactions, the impacts of acquisition, divestiture and restructuring activities, and the largely non-cash impacts of other non-recurring or unusual items. In fiscal 2018, these impacts include the revaluation of deferred taxes as a result of the tax reform and the write-off of certain assets disallowed in our recently concluded c cases. A full explanation of the adjustments and a reconciliation of 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 a warm welcome to all who are joining us this morning for our second quarter update. We are Spire. You’ve heard us say these three words many times as we describe the inspiration that guides us in the aspiration to help us go. At Spire, we’ve brought all of our gas companies and businesses together under one name and one mission. We are one team, focused on delivering on our promises. Through it all a consistent set of strategic priorities has guided our transformation and growth. This quarter is no different. As we report on the second quarter of fiscal 2018, let’s start with regulator outcomes. After all, utilities were the lion share of our business and managing regulatory processes is a big part of what we do. Our commitment is to manage all regulatory processes in each of our jurisdictions in a way that achieves constructive outcomes, outcomes that balance the interest of our customers, our shareholders and our employees. We made good on that promise this quarter by completing our two comprehensive Missouri rate cases. Unlike most states, Missouri rate cases are a year long journey that all of our stakeholders including you take with us. Unfortunately, this process with this structure and timeline creates ambiguity. And it was made even more complex and time-consuming by the need to address both of our Missouri utilities concurrently in addition to dealing with the impact of tax reform, which was not originally anticipated. I would like to remind everyone that although the rate cases were lengthy and challenging, they were necessary for us to continue to receive timely recovery on our pipeline replacement programs and to allow us to establish a new baseline for Missouri business. To that end, we have accomplished our objective and set…

Thank you, Suzanne. Good morning, everyone. I also want to acknowledge the outstanding efforts of our employees during the heart of our heating season for delivering a strong performance, great service to our customers, all while keeping themselves and our communities safe. As I noted last quarter, we are working hard to further improve our operating performance as we continue to build on the positive momentum coming out of last year. Our key areas of focus are employee safety, overall system operations reliability, and customer service. I am pleased to say we’re seeing benefits of all the hard work of our employees. In the midst of a colder winter and all of our effort required to conclude our year-long Missouri rate cases, we stayed on track with our fiscal 2018 capital spending plan for our gas utilities. Spire’s updated 2018 capital expenditure plan has increased to $500 million, up 14% from last year and $10 million higher than we previously estimated. The increase reflects higher spend for our gas utilities of $425 million this year, which I could point out is on top of last year’s robust level. We anticipate about $285 million will go towards spend that we expect to recover with minimal regulatory lag, which includes, ISRS related investment in Missouri and all our spend in Alabama and Mississippi, and about $80 million for new business. These pieces combined, we expect that over 85% of our utility capital spend will be recovered with minimal lag or will add to earnings in the near term in the case of the new business spend. We are on track with our plans for this year. For the first six months, we’ve invested $186 million, up about $8 million over the first six months of last fiscal year. While this increase isn’t…

Thanks, Steve, and good morning, everyone. As you’ve heard already, we’ve covered a lot of ground in the first half of our fiscal year and gained certainty around two big movers, the Missouri rate cases and tax reform. The impacts from these two make our financial results a bit hard to decipher. Let me try to put them into perspective and provide some clarity into our operating results without the noise, so to speak. I’ll also give you a bit more detail on our guidance for the year and into the future. First, let’s tackle [ph] our financial results. For this quick exercise, I am going to focus on our year-to-date results, starting here on slide 12. As Steve outlined with the final amended Missouri Public Service Commission’s order for Missouri rate cases, we recorded several write-offs this quarter, including $18.8 million after-tax of disputed pension contributions made prior to 1997, and the net book value of property sold in 2014. These write-offs have been excluded from a net economic earnings since they represent non-cash adjustments that have no bearing on our operating results this period. The second set of write-offs totaling a net of $4.8 million after-tax related to the disallowance of certain expenditures that have been historically capitalized and largely recovered in rates. In this case, the Missouri Public Service Commission disallowed both equity and selected earnings based incentives, dating back to the beginning of our test period, or January 2016, as well as portion of the expenses we incurred in the rate proceedings. These amounts have been included in net economic earnings since they relate to cash expenditures made in good faith in the last two years. And note, the total of the two or $23.6 million represents a reduction in Missouri rate base and was factored…

Thank you, Steve and Steve. That’s it for second quarter earnings report. I’m proud of how far we’ve come on our journey over the past six years. Today, we are a bigger Company with larger scale, more diversity, and more certainty. As we look forward, we’ll continue to bring people and energy together in ways that enrich the lives of those we serve and add value for our shareholders. We look forward to sharing more at the AGA Financial Forum in Phoenix in a couple of weeks, and we hope to see you there. Now, we’re ready to take your questions.

Ladies and gentlemen, at this time, we’ll begin the question-and-answer session. [Operator Instructions] Our first question today comes from Michael Weinstein from Credit Suisse. Please go ahead with your question.

Hi, guys. Good morning. Maybe we could talk about the earnings guidance. And if you subtract the $0.17 of positive weather impact on the marketing business and then go forward with the new 47% rate, overall that would be still below the original low-end, 4% off 2017. And I’m assuming that’s the reason -- the reason to that is probably outcome of the rate case, maybe we could talk about the factors that I guess reduced I guess the base that we’re setting our new growth rate off of, some of the negative factors that came out of the rate case?

Yes. Mike, this is Steve Rasche. I can address that. You’re spot on. And I think, we were very clear throughout the proceedings with Missouri that we were looking for fair and reasonable and sustainable outcome. And in many ways, we were able to achieve that. We don’t want to lose where we won. We won on getting a market-based ROE, we got the cash structure for operating company, we got recovery and confirmation of many of the things we’ve done which were all very, very positive items. And I don’t want to -- even though the rate design creates some headwind in the back half of 2018 on balance, we got more derisked rate structure going forward in Missouri. And we’ve reconfirmed all of the mechanisms that you would expect us to have in order to deliver our authorized ROE. Those are all the strong points. Clearly, we didn’t expect to see the rate based write-offs that I outlined in my prepared remarks. And those caught us a bit by surprise and brought the revenue requirement down, and the disallowed expenses which historically we’ve been able to recover and capitalize. So, those are really the two biggest items that impacted us that ultimately changed our view going forward as we think about the state of Missouri. So, let me stop right there. And I’m sure you have another question.

Are you embedding -- what ROE are you embedding as an earned ROE in the guidance?

We have historically been able to achieve our authorized ROE across all of our jurisdictions. So, our expectation is we’re going to be able to drive our business.

Okay. Maybe you could just give an update on Missouri legislation at this point. I guess, we’re getting close to the end of the session?

I think, what we’ve seen this session, and clearly, there’s been some challenges relative to some macro issues there. But, we’ve seen progress relative to energy legislation. The electric bill I think has moved forward. And from the gas perspective, we continue to make progress. As we get to the end of the session, we’ll see how it all plays out. But, I think, relative to the last several years, this has been some of the best progress that we’ve seen. And I think we’re seeing some trends that I think will have longer term impacts from the energy perspective here in Missouri. But again with everything that goes on there, it’s little early to predict. But, I think, again, progress has been made.

Do you think that there’ll be a separate natural gas bill in addition to the electric bill that’s moving forward?

Well, there are separate bills that are currently filed and progressing through. And so, again, we’ve seen good progress in both chambers of the House and the Senate. The electric bill is a little farther along in terms of having progress in both those chambers. And so, there are separate bills. So, yes, I think, the opportunity is there. Again, we’re seeing more progress that we have in previous years, and some of the challenges that we’ve seen from the Senate perspective, I think we’re working to provide opportunities for them to move that forward.

The intention obviously that there’s separate bills, it’s not only electric and gas but also water, and that was by design and plus it has a legislative body.

Do you think the electric bill has to pass first, before you can get motion on a gas bill?

We know it’s further ahead in process, if you will, just legislative process is just that a process, and we know it’s further ahead. And Steve Lindsey sort of alluded to at the beginning of his comments, most of you probably know the Governor of Missouri has some legal challenges right now. And so that’s been a bit disruptive to the legislative process. So, it’s just a bit hard to predict that right now. What we do know is the committees and the two chambers understand the issues greatly because they have studied this now for a few years. It’s just really more of a question of process and ability to take that and get it qualified with the disruption of what’s going on with the Governor currently.

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

Just to go back to the guidance that you guys gave. I know, Mike clarified what the new basis and you guys are fairly clear on that. But, if I understand correctly, I think in 2018, you guys do need to keep some of those tax benefits that you get to retain. And given that they’re now repeating, is it fair to say that 4 to 7 long term growth is -- could be a little a bit slower in the first couple of years and then increasing towards that on the longer term basis?

Let me take a shot at that. Yes, you’re right. We do get the one-time benefit of the tax benefits this year. And I have to say that we are very pleased. We think the right thing to do when it comes to the tax reform, especially given the support of jurisdictions we have, even and including Missouri, given the totality of all of the mechanisms that we have and the outcome of the rate case is to get those benefits back to the customers and reduce their bills, especially in the teeth of a fairly cold winter and higher volumetric driven bills was a good thing. And we have seen significant positive feedback. Ultimately that adds some kudos in our little pot of [ph] kudos that eventually will start tugging on for some things that we need going forward. And that’s our philosophy going forward. But, you’re right. This year, we get to retain some of those benefits. It’s really kind of funny. If you look at the positives and negatives, they kind of all net out. The amounts we’re retaining in tax benefits this year in many ways offset the seasonality headwind that we’re going to see coming out of the back half of the year. And the write-offs that we’re taking that I outlined in our discussion are really offset by the benefits that we saw from Spire Marketing. And that’s why we have a marketing business by the way as for these kind of winters. So, ultimately, three or the four of those don’t repeat. It’s really the Spire Marketing over-performance which we have to recalibrate going forward. So, you’re right. I mean, as we go forward, we’re still working through the impacts of generally the rate case. So, I think tax reform, we’ve got our arms around. We’re very bullish about our growth going forward. And as we get clarity on a few items, there are still many moving parts and many things at the top of our funnel. We’ll continue to update our growth guidance. But, we wouldn’t put out a range if we didn’t think that we couldn’t achieve that every year, and couldn’t achieve at least the midpoint of that range going forward over what is generally our planning period, which is current year plus four years going out.

And partly by Steve -- his articulation of this and we’ve used the word certainty. Steve Lindsey went into a little bit. From all of our regulatory jurisdictions we’ve been through the process with the exception of Spire Alabama and we’re getting close to completion of that. And in Missouri, we can stay out for at least four years because of the pipeline replacement program that is ISRS. So, when we talk about certainty and the ability of leadership and management to manage the business and we’re together now the team for six years and have been working with staff. And so getting that regulatory certainty if you will and what the guideposts are and us moving forward and looking ahead five years. That’s why we were confident in issuing the ranges that we issued.

Understood. And then, just my last question is, on the STL Pipeline. Just any more color and the reason for the approval by the FERC? And then, in your growth guidance, I assume, at least, you make some type of assumptions of that project going -- being approved and being [indiscernible]

Yes, I don’t [technical difficulty]. I guess, this is the way I would characterize it. We have a new administration; we have the new Chairman and he serves the new mix [ph] of the commission. In terms of our filing, it’s wholly consistent with the 1999 regulations that went into place and our process again has been wholly consistent with that. There is nothing unusual about that. And I think it’s just more of a question of a new Chairman coming in. I do want to point out that also the Chairman issued an NOI that was specific around looking at this process and have been in place since 1999. But, he was also very specific about his review of this process. There is nothing to impact those particular projects that are in the funnel, if you will. So, just more to come. I think, it’s just more having a new Chairman in and a little bit of changes around the commission. And so, we remain confident there is nothing about our filing particular concern of ours.

Our next question comes from Shar Pourreza from Guggenheim Partners. Please go ahead with your questions.

Sort of beat the growth guidance. But it’s obviously on investors’ minds. So, let me just reiterate or summarize. If you were to include the marketing business, you would somehow be closer to the bottom end of that of you CAGR as you guide today. But given might you guys have rate certainty and you moved past some of the question marks that you’ve been looking at, so it’s still a bit of wide band between 4 to 7, it’s 300 basis points. You’ve widened the band. So, just remind us sort of what would drive you to the top end, given the fact that you do have somewhat rate certainty now?

It’s a great question, Shar. You’re right, the band is wide and we’ll continue to work that as we always do. And as we get more certainty on the projects that are in our funnel, we’ll clearly come back and talk to the market about it. We do have the benefit of looking at the end of the heating season in our utility is normally we’re having our discussions on guidance in the fall, which as always look at more question marks. And to answer your question directly because you’re thinking about it right in terms of the math. To get to the high end of the range, we’ll take a couple things. One, we continue to work to find ways to grow each one of our businesses. It’s not about any one business and one thing that where we stand today in terms of regulatory certainty is we can look at our rate base growth and look at how we can drive fundamentally increasing value from an investor perspective while we continue to do all the right things operationally and for our customers. And there’s clearly some opportunities there that we’ll continue to look at. But a strong rate base growth in the 6% range really across all of our utilities is good place in which to base our growth. Where we get to the top end of the range, or even above the range because we’ve been above our range in two of the last four years, really is driven by some of the nonutility investments, Spire STL Pipeline, as Suzanne talked about getting that online, getting our storage up and running, and all the other things that we look at across our growth strategy, including investing in innovation and technology for all the things that we continue to work that maybe a little bit less mature than the utility space that as time goes on and we get more clarity, we’ll clearly be talking about them.

So basically, you will fine tune sort of this band as you go through the process?

Absolutely. It’s something that we review routinely. We formally review it once a year when we when we formally update our plan. And we have ongoing discussions internally and with our Board about where we’re driving the bus strategically, which is a good place to be because opportunities present themselves, sometimes with not a lot of a lead time. And so, it’s good to be aligned not only as the management team but with the Board and understanding where we’re trying to drive the bus.

And one thing I would like to add from the utility perspective, if you think about, we’re really now getting to kind of a run rate at all of our larger utilities around investment in infrastructure. And then, if you go back to the new business investments that we were talking up nearly 40% over last year, which was a big year, those were investments in meters to come in terms of growth in our business. So, I think those things coupled together give us some line of sight as we move forward over the next three to five years as well.

And then, just from a modeling perspective. Could you just remind us why weather normal earnings were relatively flat year-over-year?

I am not sure I understand your question, Shar. Try again. We’ll try to answer as best we can.

So, weather normalized, the earnings look like they were flat year-over-year. But I can take this offline. It’s not a problem.

Yes. I think it has to do with the seasonality of the business because if you -- because of the way in which we earn margins during -- under the old set up rates and rate structures in Missouri versus the new set of structures which are going to be much more seasonally aligned in Missouri, it really does -- it does create a mismatch this year, which is why I mentioned this earlier when Insoo asked the question, you really -- they really do kind of all offset each other. So, some of the one-off benefits we get in this change in rate structure, all do tend to net out when we get beyond this, what I call pioneer in Missouri which will clearly create some headwinds in the back half of the year just because of the rate structure.

Got it. That actually did answer it. Thanks guys.

Thank you.

[Operator Instructions] And our next question comes from Dennis Coleman from BOA Merrill Lynch. Please go ahead with your question.

I just have a couple of sort of work over the guidance questions. But, maybe a couple more on the STL line. You talked a little bit about the FERC process. But obviously, the FERC has quite a lot on its plate right now. I wondered, do you have any sort of timeframe when you expect them to sort of make a decision, are you talking to the staff there and know when your approval might move into the Q?

Yes. Obviously, this is a docketed item. So, we do work with the staff. I won’t call it ex parte rules, but just those words probably put it in the best perspective for you, but there is work we do with the staff and the process. But, I have direct conversations with commissioners and ultimately they’re the ones that place it on the agenda and make that decision. But just when you look at the precedent from 1999, the process and how that occurs and what needs to be done, we’re past all the data requests and responses. So that part of the process is closed. So, now, I think it’s a bit of wait and see. We say optimistic, especially when you look at the precedents that are again before FERC. And our pipeline quite frankly is fairly simple relative to some of the larger multi-state pipelines that we have historically seen. So, we again remain confident, not just in terms of the approval but also the capital expenditures that we predicted and Mike Geiselhart who leads this effort and the team, have got everything lined up. We’re ready to go as soon as we get notice of approval.

Perfect. And so on that sort of everything being in line, I mean, have you acquired the right of way access? I mean, where does that stand? Is it just sort of…

Yes. We’re in process with that. Some we have completed; some we need to get the FERC approval to effectuate those. So, those are in the funnel, so to speak. We’ve got pipe lined up, we’ve got construction crews lined up and we’ve got right away lined up, so all of those elements. So, it’s just a question of getting a FERC approval. The FERC approval drives some of the other pieces that I’ve mentioned.

Okay. And then, just picking up the storage a little bit. So, that again appears to be an area where are you hoping to drive growth. You’ve talked about -- mentioned perhaps expanding that with assets in Missouri or Alabama. Can you expand on that a little bit more, are you -- is this sort of a near-term item or…

Yes. It’s two questions. One, the conversation around Western Missouri and Alabama that really has to do with the pipeline discussions. So, if you think back a few years, we started talking about project gap and how we were evaluating our operating regions, our utility regions to see if we indeed have the best portfolio to serve those customers. Because a lot of these portfolios which include supply transportation and storage were established decades ago when those urban regions looked different. They weren’t as large; they didn’t as far [ph] as much and so forth. Supply basins were different; it was prior to shale gas. The pipelines, the way they were built and operated were different. So, we basically in St. Louis started with a blank sheet of paper and said, given all of that today, again storage, transportation, supply basins, how would we design the systems, not just for today but into the future, for decades to come, because these are investments on hard assets, and so, thus the Spire STL pipeline. We [indiscernible] conducting the same analysis on the west side of the state near completion with that. So, it is definitely projects on our drawing board. We haven’t made those final determinations yet; and when we do, we will be sharing those with you. In terms of Alabama, we’re early in that process especially now that we’ve brought in mobil [ph] section or what we call Spire Gulf. [ph] and so we’re evaluating all that -- in Alabama, but we’re early on there. Regarding storage, in Wyoming and this may be why you mentioned Alabama and Missouri as well. We are storage operators in Alabama and in Missouri and so we have a team and the skill set. And so, going to Wyoming, the storage facility there where we talked about 35 bcf o gas and five interstate connecting pipelines and integrating that into our organization as well, we’re early on in that. But everything looks very good and we’ll have -- we’ll continue to deploy capital there and bring more to you as time goes on. I did mention in my opening remarks that we’re not expecting any earnings from that storage facility, much like our other acquisitions. And as we integrate that particular facility, we’ll bring more to you about that in regards to earnings projections.

And ladies and gentlemen, our last question comes from Christopher Turnure from JP Morgan. Please go ahead with your question.

Hi it’s Rich [ph] for Chris here. Most of my questions have been answered, but just wanted to ask about credit metric commentary, you mentioned for investment -- coming to investment grade. And maybe how you see with the rate case and tax reform, FFO from say last year to this year to next year, just trends there?

I think I can answer that. Yes. You’re right. All utilities are having those discussions internally and with the rating agencies. And we’ve been pretty clear that like everybody else, we’re going to see our FFO go down. Our estimate on a run rate year before any of the mitigating factors is $40 million, which does put a little bit of pressure on that FFO to debt metric. We have the benefit, maybe some other folks don’t have of really getting additional cash, not an insignificant amount of cash, it’s about $90 million on a run rate basis from the Missouri rate case, which is new cash flow that we weren’t going to get before. And that’s from amortization and that’s some fairly significant regulatory assets that we’ve built up over the last 15 years. And then, the tax reform, the tax benefits that we get to retain this year alone really takes some of the pressure off of the current year. And it shouldn’t be loss on anybody, if you look at our EBITDA performance through the first six months of the year; it remains pretty strong. As we go forward, it’s clearly something that we have in our sites. And as we think about our capital plan going forward, equity rates is tied to Spire STL Pipeline and storage. We have to consider what our credit metrics look like and does that change or enhance the amount of equity that we would ultimately need to go out to the market in order to get. But I would also say that we’re not in a position where we feel those going to go ahead and we need to do something now. We have a great dialogue and relationship with our rating agencies. We’ll be able to achieve the things that we’ve told and we’ve been able to achieve and consistently improve our credit metrics. A good example of that is not only EBITDA but also our long-term capitalization, which we continue to strengthen from an equity percentage standpoint as we go forward. And we have a long history of being able to do that.

And ladies and gentlemen, with that we’ll conclude today’s question-and-answer session. I’d like to turn the conference call back over to Mr. Dudley for any closing remarks.

Okay. Well, thank you all for joining the call today. We will be around for the rest of the day for any follow-ups, and we look forward to catching up then. Thank you.

Ladies and gentlemen, that does conclude today’s conference call. We do thank you for attending. You may now disconnect your lines.