Spire Inc. (SR) Q3 2018 Earnings Report, Transcript and Summary

Good day everyone and welcome to the Spire Third Quarter 2018 Earnings 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. I would now like to turn the conference call over to Scott Dudley, Managing Director, Investor Relations. Please go ahead.

Good afternoon and welcome to our third quarter earnings call. We issued our earnings news release this morning and you may access it 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 our call today are Suzanne Sitherwood, President and CEO and Steve Rasche, Executive Vice President and CFO. Also in the room with us today are 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 our 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 today, 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. Explanations and reconciliations 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 a warm welcome to all who are joining us this afternoon. I am pleased to have yet another opportunity to share with you how we at Spire are continuing to live our mission and deliver on a strategic priority. Spire continues to be transformed by our pursuit of growth. The organic initiative, investing in infrastructure, acquiring and integrating and innovation in technology. We are moving forward with confidence as evidenced by our posting of yet another solid quarter. Our results reflect further improvements in our operating performance and building our momentum for the first half of the year. Our third-quarter net economic earnings came in at $0.31 per share, in line with our [Indiscernible] patients for the year. Our gas utility segment turned in another solid performance. Meanwhile, Spire marketing continued to deliver strong results from favorable market conditions. Our ability to hit our earnings target reflects execution on our strategic priorities and more specifically, organic growth and investment and infrastructure. At the same time, we continue to advance our non-regulated or nonutility business, including Spire marketing, Spire storage and Spire STL Pipeline. Therefore, based on our year-to-date performance, we reaffirm our fiscal year 2018. earnings guidance range of 365 to 375 per share and our capital expenditure forecast of $500 million. Let me turn to our gas utility business and provide some highlights an updates. As I already stated, we continue to execute well on our teammate [ph] strategic growth priorities, investing in infrastructure and pursuing organic growth. As Steve Rasche will cover in more detail, we are on track with our capital spend target which as you know is primarily focused on infrastructure upgrades for our gas utilities. Our spending on new business was $59 million year-to-date and that’s up by more than one third compared to last year. We also continue to see solid results from our organic growth effort, showing modest customer growth across our utility footprint. We achieved year-over-year growth in new meters for the first nine months of our fiscal year of 5.7%, which is impressive given that we had record growth in this area last year. On our last call, Steve Lindsey described the improvements we've made in our operating performance in the first half of the year. We are continuing to see gains across the board, including an overall system performance and safety. And we continue to raise the bar on customer service by leveraging technology and innovation. Inherent in our utility business is ongoing regulatory engagement, so I’ll turn to that update now. As most of you know, in Missouri we have a rider called infrastructure system replacement surcharge or ISRS that allows us more timely recovery of our spend on infrastructure upgrade to replace older pipe in our system. We have recently filed a quest to recover our infrastructure upgrade spend through June 2018. This plan was not included in rate base and the recent rate cases. We are seeking an annualized revenue increase of $11.9 million for our Missouri utility. In addition, we recently filed in Missouri for a new financing authority covering the next three fiscal years. We are seeking authorization to issue $500 million, which we believe is the appropriate amount to meet our needs for 2019 through 2021. With regard to our recently completed Missouri rate cases, we have filed legal appeals on certain cost disallowance after our request for rehearing by the Missouri Public service commission was denied. It is important to gain clarity on these issues for future rate proceeding and we believe that we have a strong position. However, our plan going forward is not predicated on the outcome. In Alabama, the parameters used to set Alabama's rates under the rate stabilization and equalization mechanism are RSE are up for review, which periodically occurs. The Alabama Commission have the opportunity, but not the obligation, to adjust the RSE parameters at the end of each term. Now I like to turn to our nonutility businesses. As I noted last quarter, we are taking steps to advance this businesses. Spire marketing, Spire storage and Spire STL pipeline. We are positioning Spire marketing for continued growth and success. Reflecting our efforts to date, Spire marketing has been able to take advantage of favorable market conditions to deliver strong year-to-date earnings. As planned, we are transitioning Spire marketing to Houston with its own office space and we have bought to the team, a season leader who has already grown and strengthened the business. Meanwhile, the team is working to build new customer relationship and expand its geographic reach. We are also hard at work to advance our Spire storage business. As you know, we acquired a majority interest in a large storage facility in Wyoming last December. And this quarter, we acquired a smaller adjacent facility. Efforts are underway to integrate the two facilities while making investments to improve their operations and expand the capacity. We see numerous opportunities for Spire storage to serve various geographic regions and customer groups including utilities, power generators, pipelines and marketers. With respect to Spire STL pipeline, we are ready to move forward with our project once we receive a Certificate of Public Convenience and Necessity from the FERC. As soon as the FERC concludes its final status in the administrative review process, we will complete the necessary land acquisitions and other preconstruction activities. Now, I like to pass the call to Steve Rasche

Thanks Suzanne and good afternoon everyone. We posted solid financial results for the third quarter and let’s take a closer look, starting here on slide 8. Net economic earnings were $15 million or $0.31 per share as continuing strong performance in our Gas Marketing business was offset by lower gas utility earnings and higher corporate costs as expected. Our per share results also reflect our successful equity offering in May, which increased our share comp by nearly 5%. Looking at the key drivers of our performance, beginning on the next slide, total operating revenues of $351 million were 8% higher than last year on a combination of higher demand, and utility commodity cost. It’s hard to remember as we deal with the record summer heat, but April was the coldest in two decades than the Continental United States, which help drive demand at our gas utilities and supported strong market conditions overall. Contribution margin was also up by $13 million or 6%. Looking at the two business units, gas utilities margins were down 2% from last year, reflecting several trends. On the positive side, we saw off demand during the quarter due to cooler weather, pushing margins up $3.1 million. We also continue to see modest customer growth. These positive trends were offset by two utility rate changes. In Missouri, we now have a new rate design effective April 19 that has a higher volumetric component, and whether normalization. This design reduces the risk of recovery but also pushes more of our margin to the winter heating season and out of the summer quarters, which includes this quarter. While the impact balances out over 12 month cycle. It will be a headwind in the back half of our fiscal 2018 as we discussed last quarter. The second headwind was a customer rate reduction in Alabama due to tax reform that lowered margins by roughly $2 million. Gas Marketing margins were up by $16.1 million, with $13.7 million of that increase due to fair value accounting adjustments. Excluding those adjustments, margins were up by $2.4 million due to improved market conditions and favorable basis differential due in part to cooler weather that provided the opportunity for increased trading value and storage optimization. Turning to slide 10 let’s take a look at expenses. Utility fuel cost were up nearly $31 million and taxes other than incomes were up by $3 million, both reflecting higher demand and volumes. Other operations and maintenance expenses were up about $5 million with roughly $4 million increase in pension and amortization cost from the Missouri rate cases, as well as higher demand driven bad debt expense. Depreciation and amortization was higher, reflecting our ramp-up and capital investment. Gas Marketing operating expenses were down by $19 million, but that includes a little over $19 million of derivative gains that were mark-to- market. Excluding that fair value adjustment, expenses were relatively flat year-over-year. And finally, interest expense was higher reflecting the long-term debt issued over the last 12 months at both Spire Missouri and Spire Alabama, as well as higher short-term rates that were offset in part by lower average short-term borrowing levels this year. Our year-over-year performance as highlighted here on slide 11 shows our economic earnings up by $32 million or 18% reflecting the benefits of the return to normal weather and improved market conditions, which benefited our utilities and gas marketing. Other corporate expenses were up by $3 million and higher after-tax interest and other corporate costs. We continue to grow our cash flow and maintain a strong financial position with year-to-date adjusted EBITDA up 6% to $467 million. We also maintain adequate utility -- liquidity provided by our credit facility and the commercial paper program. Our long-term capitalization improved to 51.5% equity this quarter, up 280 basis points from our fiscal year-end. This is due in part to our successful equity offering that closed on May 10 when we issued 2.3 million shares with net proceeds of $153 million. I also wanted to take this opportunity to welcome Adam [Indiscernible] who joins us as the treasurer, replacing Lynn Rawlings, who retired in April. We thank Lynn for her years of service and look forward to taking advantage of Adam's extensive public and corporate finance experience in the coming years. Moving to slide 13, our year-to-date capital spend of $334 million is up 12% from last year, reflecting higher utility infrastructure upgrades of $188 million, up 5% from last year and higher new business investment and meter sets as Suzanne mentioned a few minutes ago. Our progress this year reflects our renewed focus on organic growth, and infrastructure investment. Our CapEx forecast for fiscal '18 remains $500 million and includes a small shift in forecasted spending on Spire STL pipeline between 2018 and 2019, as well as higher utility spend for the balance of this year. And as a reminder, we anticipate over 85% of our capital spend will be recovered with minimal regulatory lag or reflected in earnings. Besides from investing for growth, a portion of our growing cash flow supports our dividend as shown here on the next slide. Our board just declared a quarterly dividend of 56 and a quarter cents per share payable on October 2. At Spire, we have a long history of rewarding the shareholders with prudent and consistent dividends. In fact, we have paid a dividend each year for the last 73 years and have increased our dividend for the last 15 years running. Now let’s look at our outlook. We are on track to meet our 2018 earnings guidance of $3.65 to $3.75 per share, with a reminder that our earnings cadence has changed due to the new Missouri rate design and we expect to increase our fourth quarter loss materially from prior years. In addition, we are confident that we can deliver long-term net economic growth per share of 4% to 7%. With a base year of run rate 2018 earnings, that removes roughly $0.17 of Spire marketing performance tied to market conditions that we do not expect to recover next year. Our growth is supported by strong rate base and organic growth across our utilities, as well as growth in our non-utility businesses. Our long term growth is also supported by five year CapEx forecast as shown here on slide 16. We anticipate total investment of $2.5 billion through 2022, supported by utility upgrade programs of up to 20 years in line with minimal regulatory lag, and well diversified across our entire footprint. So, in summary, we continue to grow and invest in our gas utilities with more regulatory certainty and are advancing our non-regulated and nonutility businesses. We strengthened our financial position with well-timed equity offering and we continue to work to deliver on our long-term growth objectives. With that, let me turn it back to you Susan.

Thank you, Steve. I am pleased with the momentum of our strong operating and financial performance across all Spire businesses as we have moved forward with confidence, and I’m forever grateful for the hard work and dedication of our 3300 employees who make it happen. Together, we continue to live our mission and deliver on our strategic growth priorities. While we grow our utilities, we are expanding and strengthening our existing nonutility businesses, Spire marketing and Spire storage and we are ready to move forward with our pipeline project once we receive approval from the FERC. As always, we continue to bring people and energy together in ways that enrich the lives of those who we serve and add value to our shareholders. Thank you again for joining us today and I look forward to updating you again soon. Now, we are ready to take your questions.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Michael Weinstein of Credit Suisse. Please go ahead.

Hi guys, how are you doing?

Hey Michael.

So at this point, it’s August 2 and we haven't heard from FERC on STL pipeline, right?

That will be correct, yes. It comes with the approval again.

Yes, I mean what’s the latest that you would need to hear from them in order to start construction this year?

There’s a series of advance and now I’ll turn it over to Mike and he can kick through the construction aspect that what’s the latest. Right now the FERC has a formal agenda every month with the exception of August, and they have notational process whereby basically what I call as non-formal commissioners on at the bench if you will, and they decide matters every week. We fall into that category so we are awaiting a FERC decision, so hopefully that’s soon, but if not and as we’ve said in our opening remarks, we are prepared to move forward whenever the FERC Commission makes that decision, and again I think about our long-term plan changes, that Mike if you would – if you would sort of think through how the team has worked through that and how they are thinking about that?

Yes, so good afternoon. We’ve been looking at scenarios for a while as this process has gone on a bit and now at this point I think where we are in response to your question is we will need to see when the certificate is issued, there’s a process by which we need to accept that certificate. And then we also need to file a construction plan, and get that approved before we get a notice to proceed and actually begin construction on the project, which we need to enter there right away for the projects. So that entire process will certainly take over a month from the time that we received a certificate. So, given the timing and where we are now right, we’re still involved in evaluating with the right schedule, we’ll be moving forward and there’s a number of considerations involved in that. There’s certainly the risk and the cost of when a construction is one consideration, but also you know all things being equal, we’d like to get the project in service sooner rather than later, but we also want to coordinate with the contract renewal process that we have ongoing with MRT. So there's really a number of considerations that were still juggling and we’re going to wait and see when we get the order and then finish off that analysis before we revise, formally revise our schedule and our in-service day. And there may be some change in project cost, but at this point, we expect that to be in a pretty narrow range.

And the $60 million that’s in the 2018 CapEx forecat of pipelines and storage, is that – what’s the date of – I guess what does that assume in terms of when you start construction on STL?

Michael, this is Steve. It’s our best estimate when we look at a range of outcomes and what we know we need to continue to work on. So as you can imagine and Mike mentioned we have a number of different scenarios, we’re obviously very confident in not only getting the certificate but getting this started and 60 million is our best estimate. Once we do get the certificate and as Mike mentioned we finalize our evaluation of the construction timeline and everything else that's associated with that to the extent that number needs to be updated, we’ll update the market.

Okay, great. And just one last question. Just the fourth-quarter loss is a seasonal affect only from the rate case, right there is no ongoing annual effect.

There's -- not sure I completely understand your question. We have traditionally in past years if I look at say the last three fiscal years of earnings results. I think we’ve lost about $0.25 a share. Get to take a penny or two, I mean so that's kind of a normal cadence. The addition, and we've guided if you do the math it’s probably about double that amount given our results for this quarter. Most of that is due to the change in the rate structure in Missouri.

Yeah, but basically you would have an offset in the second and third quarters, is it fair to say?

We would in a normal year, we would have an offset in the late first quarter and in the second quarter and maybe a little bit in the third quarter. In fact, we did see a little bit of that in the month of April given the cooler weather that we had, but it's really concentrated in the winter season which for us is generally now begins in November and runs through the early part of March under a normal weather condition.

Got you. Okay. Thank you.

Thank you.

The next question comes from Dennis Coleman of Bank of America. Please go ahead.

Yes. Thanks. Good afternoon everyone.

Hey, Dennis.

If I can pick up on the STL issue again, just a few more details there. There have been some changes at the FERC. I think the Commissioner now is retired and so we're down to four. I could be wrong on that, but that I believe it was the end of July his retirement. So that any potential impacts there that or read through that that you guys are looking at, concerned about maybe this is too strong a word, but the any impacts?

Dennis, I think you referencing Commissioner, Paulison and this announce date for departing from the FERC is 15th or 16th and therefore he is available, yes, he is available to those between now and then, so that's where I was bringing into the notational schedule that the commissioner manages from week-to-week with the staff of the commission. There is opportunity for him to engage and that decision making until then, and there is no sort of public notice if you will, of those agendas, nor there's outcome, there's a cadence that we can look at over the years as to how that occurs, but they do happen every week. And while there is no explicit rule making there is historically the commissioners have not had a formal agenda in August, which is why I put that out there in my earlier response. So there is a formal agenda and that is posted if the commissioners decide on every month with the exception of August. Again it’s not written into any of their rule making, they [Indiscernible] any kind of way, it just an practice, just general practice if you will with FERC. So that being said, as long as Commissioner Paulison there, there is opportunity from decision making from the full bench of five commissioners. Clearly those who track the commission have recognized that, I would say, more recent decisions on procedure and administrative process have been voted along party lines. So we have now three Republican commissioners and two Democratic commissioners. And so post to departure, at least four, which if you just can look at some of the President decisions, if one could lean into, but what has occurred and wonder if it would be at two to two vote, so in that instance, what would need to happen is President Trump would need to name a replacement, the Senate would need to confirm and obviously, I can't predict how long that would take. All that being said, as my [Indiscernible] speaking to, we've ran all these scenarios, pluses and minuses and the reality is our business is diverse enough with our non-utility work and our investment in infrastructure and organic growth that we're experience, because we been working hard at that for the last four years. Nothing about our long-term growth rate changes that Steve and I talked to about, so it just the matter of timing and we're obviously not going to get ahead of the FERC commission.

Right, right. People are watching the FERC quite closely these day for sure and obviously there's been some action on enable and implication there for MLPs, but part of that was you also re-up on MRT for another year. Is that expected? I don't think guy STL would've really been done, so I'm guessing maybe that was expected that you would carry that over for another year?

From our gas utility perspective, specifically and to the eastern part of our state, the preponderance of the supply is delivered to the MRT system and yes we went through an evaluation phase and look at what was needed for this reason not just today but prospectively in terms of amount of growth that we expect on the system and also the way that the region here is [Indiscernible] not unlike other urban centers that have changed over the last 150 years and came back with the best array that we believe, best serve this community on a long-term basis, and which include the Spire STL Pipeline. It also way the utility, the gas company sign those contracts to extend that capacity. I mean, I believe as a result of that when MRT file this case and said that they're going to determine firm included but indeed they should have done and the FERC has now ask MTR to refile a case and update those still determinants and that's another factors in the case including testimony, that is my understanding.

Yes. No, that's my understanding as well. Changing just a little bit, can any details you can share about the additional storage in Wyoming and how that further your plans there or what exactly the implications are?

I'll flip it to Mike, Susan, into that information everyday, because he owns the project, But I'll connected it to somewhat I've spoken with everyone on the phone about before. When we look at the non-utility work, we're looking at either upstream or storage or pipeline. And what that means in terms of serving customers much like our utility customer, our utility companies are serving customers. This allows us just like marketing to serve customers in very way where there's a need outside the utility company and storage meets that requirement. So it's between the five interstate pipelines that we're seeing in that region and our desire to serve power generation, utility customers and other pipelines, its really a sweet spot for us and I'll pass it Mike and let him give you a little bit more detail.

Yes. The field that we acquired is very complementary to the asset that we acquired in December of last year. It has some very nice complementary attributes. Its connected to some of the same pipelines but we'll be able to be directly interconnected with our existing storage asset and give us a fair degree of flexibility and we have to do both injection and withdrawal. And its got some really nice characteristics with regard to the geology, in terms of the operating cost associated with injection and especially with withdrawal. We think it’s going to really fundamentally improve the economics of the assets that we bought in December. We think the asset in December would have been great on its own but it will be even better in combination with this asset over time.

Is it the same kind of size? Is it any details you can share in terms of what you've added there storage-wise?

It's not currently certificated for the same size, but the formation itself we believe has comparable size capability over time. There need to be additional geologic work down, where we're actually in the process of doing and then you need to go through certification process at FERC to get the capacity upsize if have something more comparable to the Ryckman facility that we acquired in December. But yes, we think it has comparable size capability and as I mentioned earlier its really has some unique attributes and its really potentially better from injection and withdrawal standpoint.

That's great. Thanks for that. And that's all I have.

Thanks, Dennis.

Thanks, Dennis.

The next question comes from Selman Akyol of Stifel. Please go ahead.

Thank you. Good afternoon.

Hi, Selman.

Going back to, you guys talked about record growth 5.7% in terms of meter adds. Can you break that at a little bit by geography?

Sure. Good afternoon. This is Steve Lindsey, and its very nice because as we think about our infrastructure spend is relatively spread out across our three major utilities on the East side, west side of Missouri and Alabama and a lot of our new growth is along the same lines. And so from the new business CapEx we talked about, its spread pretty evenly as well as the new meters. Now there's fluctuations depending upon economic development opportunities and things like that, but the thing that I do want to note is that the growth that we're talking about this year and this year to-date is actually coming off of our record your last year where we had over 10,000 and this is on annual basis over 10,000 new meters. Again, pretty evenly spread across three, so we have different fluctuations from quarter to quarter, but overall we're seen a pretty steady growth in all of our jurisdictions.

Okay. I guess what really caught my ear there, it sounds like Missouri is growing faster than it used to?

Definitely, I mean, if you look back three or four years ago at least for a gas customer perspective we are, and so I think some of that and we see a strong surge on the western side of the state and some of the things we've done is we're expanding into underserved areas. We're making some inroads into the multifamily area that we hadn't seen in the past. And then we're just working with builders and developers to try to help them as their thinking about their growth project. So I think if you look relative to just really the last four to five years we are seeing some changes, we're seen some downtown redevelopment opportunities and things like that. And so again I think it's not dramatic relative to what we like or to be over the next two years, but it is definitely an upturn.

I want to add to the work that Steve and the team there, and as mentioned here before thing like we've implemented salesforce.com, we just aggregated the market and at the discrete areas and focus on what the needs of those particular market like Steve mentioned multifamily. We're high-grading our processes. We've got technology in place like builder platform where builders can go to, those kinds of thing. So while the economy is picking up we've also the last four years working very diligent way to do, no matter what the market conditions are to do our very best to get meter set and also retain meters to that matter.

And one last piece on that is, as you mentioned Missouri specifically, I do think we're starting to see an emphasis on economic development in general. Rob Dixon and his team have really try to take a focus on where we're missing some opportunities at that state and what can we do. So I think we're seeing some benefits from that as well.

Very nice. Seems like you're blocking and tackling is really paying off. As we think your CapEx budget that you have out there 2020 – going through 2022, pipeline storage seems to fall off pretty dramatically. Should we expect that to have an upward bias as time goes by?

Yes. Selman, this is Steve, I can answer that. Yes, clearly what we include in our capital -- long-term capital forecast or the things that we believe are actionable that we talk to the market about, and as you know we have a funnel full of potential opportunities and as those become more mature you would expect us to add those to the capital plan. I think we're fairly solid on the utility spend and you can see if you've been following us over the last number years we've even found a way to hit the accelerator a little bit faster, our probabilities in that scenario we continue to look at. We have to balance that against the capital needs and the impact on our customers, but – so there's always a chance for us to modify that. But I take on your comment that as we identify new projects or opportunities that clearly would be a adder to the 2.5 billion that we're currently operating on.

All right. Thank you very much.

[Operator Instructions] The next question comes from Christopher Turnure of JPMorgan. Please go ahead.

Good afternoon guys. Since the year started you guys have purchased the Wyoming storage and it looks like added a little bit to that purchase and then had a very successful early part of the year with Spire marketing. And it looks like now you're investing in maybe expanding that business and that potential a bit. Could you speak to that as it does seem to be a bit of a shift from the prior strategy which was utility focused for the company?

Yes. I wouldn't say, its shifted off from a Spire marketing perspective, since Steve and I been working together for six years we talked about we've talked about how important Spire marketing to our business that it was really an outshoot of our gas company business and what I mean by that is providing services like I mentioned earlier to or highly sophisticated customer inside our geographic utility region and out. Because there was a need in the marketplace for this utility like services, so its a physical transaction. So we've ran a business case to see if it make sense for us to even grow into other geographic areas and we decided it did make sense because we have the talent and we've invested in the IT systems to do that. And so that is what we've done and of course attracting and retaining challenge for this business the best place to be as in Houston. And we having that people in our critical mass now where it make sense to move this. So I just really see it again as organic growth around Spire marketing not really an expansion, the business model is the same, we're improving the systems, we're bringing in other talent. Mike, as Mike stay, Mike also leads Spire marketing and he may want to add something that I haven't mentioned, but that's the way [Indiscernible].

Yes. We spend a lot of time putting together very detail bottom up expansion plan for the business which we had multiple meetings on internally with our board over the last couple of years and felt very confident that we could geographically extend the current model, which really have been growing pretty nicely even prior to that. I mean if you go back and look at our volumes, they've grown very consistently and very strongly for probably the last four to five years. And so, we're just continuing to build on that. It takes more expertise, more talent to do that. We generally founded a little challenging to land that talent here in St. Louis. So we just recognize that we really want to kind of continue to move that business forward. We needed several key people especially on the origination and trading side and it will be much easier to do that in Houston and that's actually already bearing fruit and underway.

Yes. And Chris, I would add a couple of things. One, you would expect us to want to drive all of our businesses to grow, its how we're wired. So we expect every business that were in best and to grow and so the things you're seeing as to on the storage side and on marketing and also on pipeline, are really focused driving growth, because that's how we create value for shareholders. Also got to keep it in perspective, a non-utility business was 3% of our business last year from an earnings perspective. It might grow to 10% this but that's because Spire marketing is having one of the home run years and it's great when the market gives you the opportunity to do that. But the most important fact is we are still predominantly a natural gas utility even given the outside performance in Spire marketing this year which obviously we don't expect to recur because we can't predict where the market conditions are going to be. So we can stay what we do best which run gas utilities and then we do, as our expertise to find other opportunities to create value.

Got it. And then on the gas storage transaction and of itself I think your latest message on that was that you were going to exclude some impact this year, but you expected it I think to be modestly accretive beginning next fiscal year, does that still stand or is that improve now because of this small secondary purchase that you made?

Our guidance still stands and what we expect next year. And just to keep it all in perspective, we spend an order of magnitude 25 million of consideration to invest in the first storage facility. The total all in price of the second facility was less than half of that and it was already on our radar screen and was part of our plan as we started down the path because they are literally within three miles of each other. So having those two operators, one, ultimately one facility has been our plan our along and its great that we're able to execute and actually keep moving down the path on the strategy that we outlined our ourselves when we announce the first part of that move in our fiscal first quarter.

Great. Thanks, Steve.

The next question comes from Andrew Levi of ExodusPoint. Please go ahead.

Those supply basins and what storage if any are we using. And what happened with gas Hey Steven, Suzanne, Scott.

Hey Andy.

Just back to the STL pipeline, any idea what seems to be the hold up on approval?

The simple answer is no, obviously FERC has a process the docket has been closed in terms of any requests from us or any other party for some weeks now, so I certainly would not try a second quess the timing of the FERC. So what we do know is there is a lot of precedent for pipeline approval. I also know we've got our environmental assessment very early and Greg that's usually the big-game factor and then obviously that interveners come into the process and there has to be responses as a part of that process and that has been closed like I said for several weeks now. So we remain hopeful that we'll get a decision sometime and hopefully like I said before Commissioner Altman [ph] departs. [Indiscernible] scenario work and like I said it doesn’t impact our long-range plan in terms of what we've guided.

Okay, so I have a couple of more questions just regarding this, the first question is basically what’s the premise of replacing the pipe or building the pipe and leaving the enable pipe?

The premise now backup to some of my earlier comments to how did we get to arrive, did we decide to build the Spire STL pipeline. Early on about five really more like five year [Indiscernible] and we decided to evaluate the array of assets that are supporting this region, obviously we have done these leadership, we have the gas distribution system, now how do we get gas into our distribution system, whether companies over the last 100 years the pieces have been added onto the system or pipelines have been serving these areas but we’ve had fall on the region and gas loads have shifted and changed and conservation we are operating the way that we’ve received gas into the distribution systems based on the original had accessed [ph] from decades ago, aging infrastructure, you are managing systems at lower pressure. So with a change in our distribution infrastructure and the other changes in the region over the decade, we’ve started a basic or the blank sheet of paper and said how do we want to build an array of assets that brings supply from not only traditional supply basins like East Texas and Gulf of Mexico, but shale gas it’s prolific and low cost to our customers. And also how do we want to derisk the region by not bringing gas just from the south in it traditionally hasn’t over the decade, but bringing gas into the system in a way that creates more of a hub when we are replacing the higher system in the region. And so as a part of that evaluation and with REX lateral there is now by directional to a node basically north of us and the supply basin in Ohio and Pennsylvania again that’s prolific. I’m not bringing that inexpensive shale gas that’s prolific into this region via a REX lateral not giving that would not be fulfilling the best cost obligation that we have to our customers. Again, not just for today, but well into the future. And we didn’t start out with the Spire STL Pipeline. We started out with an evaluation of the region and what is available from pipeline infrastructure, supply basin’s cost structure. Peaking [ph] load means the durational load means and so forth. And very comprehensive really over a couple year period, building back an array that made the most sense to our customers, industrial customers, small businesses and residential for today and for decades to come, because these are you know long term investments that need to be made if made. So that’s how we came to the conclusion for that pipeline and then we thought with FERC and now we are awaiting the FERC approval.

Right, and I understand that, that sounds very good. Wasn’t there also in the filing if I’m not mistaken to what I read that earthquakes or – an earthquake potential plays a role and part of the diversity is well, is that correct?

Yes, I think it’s a great point. Yes it was in the filing and I’m started going a little bit because there is what is called the new Magic [Indiscernible] and it basically runs from South of St. Louis North and the pipeline infrastructure runs just the same direction, similar path and I was shuffling a little bit because when I was recruited here and subsequently when Steve Lindsey was recruited here nobody told us about the new macro [ph] lines during those interviews. But yes, you are correct and that certainly was part of the evaluation process. There was resiliency in the system, building ahead of system and more of a hub to be able to break gas in different ways and not be a 100% if you will tied to that pipeline and along that spot [ph] line.

Okay. And most of [Indiscernible] are there earthquakes in Missouri or…

I don’t really recall the last time we experienced it, but there are people that are monitoring that earthquake pass all the time seismic managing much like they do in other areas that are susceptible to earthquakes and obviously we build – we like other companies build in resiliency based on that other areas we have hurricanes, there is tornadoes and it’s just – hate to say that is somewhat day to day operational for us to understand weather patterns into the region and how we manage these emergencies and conditions.

Okay. And then I have two more questions and I apologize for so many questions. But I guess Senator Durbin sent a letter to the FERC asking what states were taking so long if I’m not mistaken and then now Commissioner McEntire wrote back, could you kind of just describe kind of what’s been going on with that I think, Commissioner McEntire [ph] brought up things in the letter back to Durbin regarding market demand, cost, financing and project design, could you kind of….

Yes, I’d rather not second guess, the correspondence is between Senators and Commissioners I -- what I do now with the FERC process and when a commission issues it’s order either in the affirmative, are not in the affirmative there’s an order with all the supporting material that we’ll need to make a determination. So until then, I guess, I will reserve my sort of my judgment. I prefer to be commission orders be at a state level or the federal levels and are pining on correspondence to you.

Okay, thank you very much.

Thank you.

Thanks, Annie.

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. I know it's a busy time with a lot of other earnings. I appreciate your time and we’re around the rest of the day for any follow ups. Thank you.

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