Hello and welcome to the Spire Third Quarter Conference Call. You will be in listen-only mode during the presentation. But there will be an opportunity afterwards to ask questions, instructions will follow at that time. [Operator Instructions]. This conference call is being recorded. I would now like to turn the call over to Scott Dudley. Mr. Dudley?

Good morning and welcome to Spire's earnings call for fiscal 2019 third quarter. 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 the webcast site or from our website under investors and then events and presentations. Presenting on the call today are Suzanne Sitherwood, President and CEO; and Steve Rasche, Executive Vice President and CFO. Also joining us in the room today are, Steve Lindsey, Executive Vice President and Chief Executive Officer of Gas Utilities and Distribution Operations; and Mike Geiselhart, Senior Vice President of Strategic Planning 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 that may cause future performance or results to be different than those anticipated. These risks and uncertainties are outlined in our quarterly and annual filings with the SEC. 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. 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 good morning to everyone joining us for today's update. During our third quarter, we continued our momentum to successfully execute on our growth plans. Keeping us squarely on track with our full year earnings target. Before we share the detail, I'd like to thank more than 3,500 employees who teamed together to produce strong operating and financial results. Every time I stop at a job site in St. Louis to say hello, to our field technicians or walk into an operations office in Alabama to say good morning, I perhaps visit our teams in Houston and Edmonton, I'm inspired by the amazing people, who take care of our customers, our community and one another day after day. I'm grateful to be on this journey with them. And I'm also thankful for our shareholders, who make the work possible through their investments. In terms of financial and operating results, we continue to focus on organic growth, infrastructure upgrades and modernization at our utilities, as well as innovation and technology company wide. Our technology investments include those IT infrastructure for enterprise and customer focused applications. At the same time, we continue to invest in the development of our gas related businesses by our Spire marketing, Spire storage and Spire STL Pipeline. Combine these investments in strategic focus are leading to improvements in both our operating performance, as I'll discuss in a moment and financial results, which Steve Rasche, will cover in great detail. Our results for the quarter of $0.07 per share and net economic earnings came in where we expected, given the impacts of the regulatory reset in Missouri last year. These results to keep us on track with our full year earnings target of $3.70 to $3.80 per share. With that, let's turn to an update…

Thanks, Suzanne. Good morning, everyone. Let's take a look at our quarterly results starting here on slide 11. Our third quarter net economic earnings were $5 million, down just over $10 million from a year ago. As a reminder, prior year results included the noise of our rate resets, including a change in Missouri rate design. These impacts account for over 60% of the year-over-year variance. And thankfully, this was the last quarter that we'll have this lack of comparability with last year. Looking at the results by business segment. Gas utility posted earnings of $7.6 million, down $9.3 million from last year or down roughly $2.9 million after the rate case reset. That decline reflects growing utility earnings, more than offset by slightly higher interest costs and lower miscellaneous income from a non-recurring gain, we've recognized last year. Gas marketing earnings of $3.3 million were down marginally from a year ago, reflecting the benefits of our expansion effort that largely offset the return to more normal market conditions and higher operating costs. All other businesses and corporate expenses were $5.9 million, down slightly from last year. This includes a $5.1 million loss from Spire Storage, which was excluded from net economic earnings last year and higher interest expense. Offset by higher AFUDC from Spire STL pipeline. Net economic earnings were $0.07 per diluted share compared to $0.31 a year ago. With the current period per share earnings reflecting the increase in share count from our equity offering last May and our ATM program, as well as the preferred stock dividends. Turning to the details on the next slide. Total operating revenues of $321 million, were down $29 million from last year, reflecting lower utility volumes and the timing of gas cost recovers. Contribution margin of nearly $194 million was…

Thank you, Steve. In summary, our year-to-date financial and operating performance to the third quarter puts us on track to meet our targets for the year, including investment and growth in our business. Before going to questions, I'd like to say a few words about Spire's Corporate Social Responsibility Report, which we published online in May. We know that ESG and sustainability are increasingly important to our investors and other key stakeholders. That's why we took the initiative to develop a corporate social responsibility strategy, gather our data, benchmark disclosure, best practices and evaluate reporting template. We also asked the financial community, including some of you on this call, about what you'd like to see from us in terms of CSR and ESG reporting. We appreciate your input and I think you'll find our first ever report informative and inspiring. If you haven't already done so, we encourage you to read the report and let us know what you think. We included information on our efforts to operate sustainability, sustainably from an environmental, social and governance perspective. And we included stories and data on how we support our local communities and protect our environment, with a particular focus on reducing methane emissions. And as always, we appreciate your continued interest and investment at Spire. Now, we're ready to take your questions.

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

Hi, good morning, guys. So on the STL pipeline, the, you're saying that the total CapEx for this year has increased $40 million. I mean, roughly speaking, is there any percentage of that you can sort of hint that might be the amount that's allocated to STL's pipelines increase?

Michael, this is Steve, let me start on that and then I can turn it over to Mike, to give a little bit more color. Yes, the $40 million is really in the absolute sense as the increase in the spend rate for the utilities, because of the success we've seen this year. In fact, despite some cold winter weather and some wet spring, we've been able to really be successful at ramping up our utility spend this year. In an absolute sense that's the $40 million. If you look underneath that in terms of the timing between fiscal year '19 and fiscal year '20, we actually pushed about $25 million of our targeted spend for Spire STL pipeline to 2020, recognizing that we still can't get access to that three miles that was impacted by the historic flooding and we replace that with the $25 million that we discussed on the call, which would be our estimated spend on storage for the remainder this year. So that was really more of a timing aspect. In terms of increasing the total cost of the pipeline. We're really not in a position right now to be able to guide to a specific number. We kind of need the contractors and our team to be able to get an access to those done three miles so that we can figure out exactly what cost we need in order to complete. Mike, did you want to add anything?

No, I think that covers it, Steve.

And the official estimate for getting it done with, I think it was, is September, is that what you've been, is that what you've been originally targeting? And what's the, something that after September is now the new date?

Yes. We originally guided that we would have it in place by the end of our fiscal year, which would have been in September or October 1st. And now we expect it to be sometime in the fourth calendar quarter. Given what we know today.

Got you. Got you. Okay, great. Just, is there anything you guys can talk about in terms of further expansion opportunities? Looking beyond, after a rest of your pipeline is done. And after you get the storage consolidation done next year? I think in the past you've talked about expansion opportunities toward St. Louis, maybe some more gas opportunities and storage opportunities maybe in Kansas City or even Missouri, Alabama. Just wondering if there's anything else you can talk about, like what might be the next phase of growth?

Michael, just thinking about all of that correctly. In fact, Mike and his team conducted a lot of that analysis. We obviously are very focused right now on pipeline and storage where we are setting the market from supply and transportation perspective in and around the Alabama market. And it was the western side of the state of Missouri, Kansas City, you've got some ideas and thought about that. We're still working through that, but mostly the teams right now are focussed on the completion of the pipeline and storage.

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

Good morning. This is Jason on for Dennis.

Hi, Jay.

Maybe a little bit more on STL, I know you'll mentioned that we have to wait for the first filing later this year for the exact number of a, can you go and maybe it is a cost going to be significantly over 240 million that you've mentioned?

Yes. So Jason, here's the way, I think about it too. Because we've share, we have three miles remaining and you've seen from the picture and probably other pictures, the water level. We just need to get in there, but when we look at that three miles to simplify it, it might really simplify a 1.5 mile is really connecting that high conservative in the ground, if you will. And then we have about a 1.5 mile install connect, and then right away we need to sort of, re-prep that clean it up from the flood. So it's a short period of work, it's not in terms of timing, a lot of work. But to be able to provide a cost estimate, we really just need to get in there and be able to look at that. We don't want to speculate, but we also know the work's fairly contained, as I've described it. And so we look at it about up to a six-week amount of work. That we want also, again, want to be able to get in there and look at it. We can look at it from aerials kind of helicopters and that sort of thing. But it's hard to get our boots on the ground in some of these areas. Once again, one of the reasons we want to show you a picture. We have to keep reminding ourselves that this is record flooding that has occurred in this area and its been quite impactful actually to community more broadly up and down the river. And I'm sure, you've heard some of that coverage. Mike, is there anything like add to that here?

Yes, I mean, we've got 11 miles in between the two big rivers, six of which Suzanne's already spoken to. So I think we just need a better understanding of what sort of restorations really going to be required in general and that 11 miles between the rivers. And then like Suzanne also mentioned, it's probably around six-weeks of work with maybe a crew and a half. So, that part of it is not, hugely difficult. It's really just more, we need to wait for the water levels to get down and the water table to get down to a level where we can get back in there and hold the ditch and finish up this work. So and another reason for the uncertainty about costs at this point is, timing really does drive cost. I mean, we have a fair amount of kind of fixed type overheads that are involved in doing a project like this. And with each passing week, in each passing month, it sort of adds to the overall cost. Timing really matters as a fixed cost. So once we have a better kind of sense of, when we can get back in there and finish the work, that'll help us really get our arms around what's final cost is going to be.

Okay, great. Thanks. That's helpful. Suzanne and Mike, I appreciate it. And will, can you discuss how that turns might be impacted as those costs creep up?

Yes, this is Mike again. We have a precedent agreement with our anchor shipper, the utility inspired Missouri. There is a provision in there that enables us to do an increase to the extent that our maximum permitted rate approved by FERC goes up, as a result of increased project costs which is clearly happened in our case here. But there is a limitation on that provision and it's limited to $0.02. So the original negotiated rate with Spire was $0.23 and we have the ability under the precedent agreement to increase that by as much as $0.02, so we will make that filing in the not too distant future again, once we have a sense for what the final project costs are going to be. We'll make that filing and look to update that maximum permitted rate. And that will in turn drive an adjustment to that $0.23. And, you know at this point, our expense expectation would be that we would probably end up with the $0.25 rate for the anchor shipper or, as a result of that process.

Got it. Okay. And I guess, maybe looking at 2020, the new in-start day, we're missing a pretty big part of the winter season there. Can you, maybe talk about how that might impact 2020 earnings and you guys give the 4% to 7% long term range, but could give any color on that time?

Yes, the timing may impact a little bit, but you'd be surprised at how little the delta is between on the pipeline, between AFUDC and we'll be getting from cash earnings. Not that, I don't like cash earnings a lot more. We all like cash earnings a lot more. So I'd add, I think we can manage around that. And again, it'll be a little bit higher investment, which gives us a little bit more to get a return on. When you think about 4% to 7%, it begins with that 90% of our business, which is the gas utilities. And I think what you've seen this year, especially when you look at the year-to-date results because of the noise of the rate design reset that we've been able to drive fairly good growth from our utilities, we expect that to continue. And Spire marketing has color, clearly performed well, offsetting some pretty significant headwinds. So I tend to think about the utilities and our ability to continue to grow that starting with the 6% rate base growth. And that's where when you look at our spend this year in the utility and our ability to actually achieve and overachieve the targets that we had said earlier this year, I think that bodes well for our ability to continue to grow and going into 2020 and beyond. And that's our job is to deliver consistent growth over many years.

Sure. Okay. That's helpful. Thanks. Thanks, Steve. One last one from me is just on storage. Can you maybe provide an update for year-to-date in terms of how much has been spent and could you may be discuss the $12 million loss where those expenses are going into that's still part of the gas or maybe on the infrastructure side. Thanks.

Yes. This is Mike. With regard to year-to-date for fiscal '19, the total spend is right around $82 million and that's comprised of $56 million of base gas purchases we made last winter kind of in the first quarter of the fiscal year and into January as well. And then the remaining $26 million is sort of traditional CapEx, which just like the $25 million we are going to spend or expect to spend in the final quarter of this fiscal year, is largely focused on really trying to tighten up the operations. As we, as we've operate the business, we have a much better understanding of where there's opportunities to kind of improve some of the equipment, particularly with regard to surface equipment and processing equipment. And so we've been focused on that. So far, we've spent $26 million through the first three quarters and expect to spend around $25 million on similar types of projects in the last count, in the last quarter of this fiscal year.

Okay. I appreciate it.

And in terms of the components of cost, about a quarter of that is the, is the capital cost, the interest costs associated with the investments we made and the rest is really the lack of pull through. As we've been developing the facility at the margin line and we've been building team. So, we continue to build the team that we need for the long term, which means we're making the investment now in terms of team that's operating. And well operated going forward and we knew that was going to be investment in the short term. And those really are kind of the moving parts that result in the, just over $12 million for the first nine-months of this year.

Got it. Okay. Thanks, everyone.

Thanks.

[Operator Instructions] The next question comes from Shar Pourreza of Guggenheim Partners. Please go ahead.

Hi, good morning, guys. Most of the questions were answered. Just two minor ones on STL again. What's the AFUDC that you have in your numbers for 2019's guide?

We are looking…

Oh, boy, off, the top of my head, I'm trying to think if I have that number for you, Shar.

Okay.

I can tell you, in the first, through the first nine-months of the year, let me a second, I'm going to flip through pages, that one is just a little question. That was actually, a pretty good one. So,

You want a better one, but I'm trying to sort of, why I'm asking this, if you see some sort of a delay in STL, right. For instance, if the water levels don't recede and construct, you start flowing gas, maybe later in 2019 to maybe early 2020, is there sort of an impact we should be thinking about from your AFUDC earnings that you guys have been better than planned. And then just maybe a quick status update have the water levels receded. So I guess, what's given confidence that you'll be able to flow gas with only couple month delay?

So, in the water receding land you're looking at a map and Mike, you must do track that daily, so, to know, and maybe Mike can provide a little color on.

Yes. In that area between the rivers that I referred to earlier, at the peak of the flooding, we had around 8 to 10 feet of standing water above the surface, on the ground in that area. As of earlier this week, I think in parts of that area, we were pretty much down to nothing on the surface. And then the other portion kind of, on the other side of the tracks, was 1 to 2 feet of still standing water, right. So what we need to do, is obviously get rid of all the standing water and then we need, somewhere in the neighborhood of about 8 to 9 feet of a water table, right.

Okay.

So we've got sort of like the water table drop a, to at least 8, if not 9 feet. Because we need 7 foot of cover over our pipe. So we need to get to that point to finish the 3 miles that was mentioned earlier. But on the other sort of 8-ish miles in between the rivers, we can actually get started with restoration earlier than that, because we don't need to worry about the water table for the pipe that's already in the ground.

Got it. Okay, that's helpful. Yes, go ahead. Sorry.

For the year-to-date, AFUDC is $4 million, now that ramps up, of course, as the capital spend ramps up. But that gives you a feel for it. It was just around, it was $2 million for the last quarter.

Got it. And you don't envision if you get an incremental delay beyond what you have, it'll be material enough to impact your numbers for '19?

No, that I have, I have, we, we've brought the scenarios that you expect we would as we saw the flooding coming down and we think it pretty much trades inside the noise.

Perfect. Thanks, guys. Sorry about the minor question. Have a good morning.

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

Thank you. Good morning. I'm just pivoting back to storage real quick. I know you guys talked about defining customer needs, etc. But does delays in the Cheyenne Connector impact you would off from that standpoint?

No, this is Mike, I don't believe so. You were really kind of focused more in terms of gas flows to the west of our facility. And really the supply side is not really an issue for our facility right now. It's really more sort of shoring up the shippers and the withdrawal on our, in our asset.

Okay, great. And then just one another one. This is for Steve, I guess, you noted the equity capital is now at 53%. Is that sort of the ideal level for you, is that I should be thinking about Spire long term? A - Steve Rasche Yes. And the 53%, Selman, just to be clear as a pro forma number, kind of adds the rating agencies would look at it. If we're being fair and taking 50% credit for the preferred, which is how the rating agencies look at our actual preferred. And actually factoring in the $125 million that we plan to retire next month and holding company debt. And I would say, it's in the range, if you look at where the equity ranges are inside our utilities and we always want to make sure that we stay close between the various stacks in our company. Our equity returns are in that high to mid 50's range, so, I'm keeping our equity capital there is a good thing when you look at the consolidated entity in a long term basis. And I would also say, and we included in the presentation, what our financing means are going out over the next several years. You can see they're fairly well balanced. No plans for any holding company, long term debt. It's really all going to be offering company long term debt and then some equity, because as we continue to invest $500 million to $700 million a year going forward. We want to be clear that we have to finance it in a balanced way. And then the last point would be, having an equity capitalization that's in the low to mid 50s, gives us just a measure of security, given we don't know what the future holds in terms of where the economy is going to be going, where potential investments might be either inside the companies we have or know the companies. And we want to make sure not only that we're prepared, but we're ready, if the opportunity presents itself. And this is in keeping with what we committed to the rating agencies years ago, when we did the Alagasco acquisition primarily and we took on of, chuck of holding company debt. We charted a path for them to show how not only we were going to get the long term equity capitalization above 50, but also fundamentally pay down holding companies debt, when the cash flows of the new business and it's really about us achieving what we told everybody, including the rating agencies we were going to do over a period of time.

All right. Thank you very much.

The next question comes from Michael Weinstein of Credit Suisse. Please go ahead.

Hi, guys, just one quick follow up. Another quick, simple question. The equity raise for the, through the ATM is a three-year program. Just wondering, if the delays in the STL pipeline and maybe the cost increase might affect that in some way? Would you be pulling forward more or maybe issuing more equity this year than you originally planned for that?

Yes, Michael, I point back to that slide, where you, if you do the math and understand that we've already raised that $250 million in preferred it, it points to a fairly low level, but a little bit of usage in the ATM at the bottom end of the range. I don't honestly consider right now, knowing what we know that, that's really going to change, on our raises and we have some fairly wide bands to work within. In fact, I will always saying and I think you know us well, enough to know that, as we plan forward, we're always assessing where the market opportunities are, what are the needs of the business, and we would stand ready if the needs of the business presented or if the market opportunity presented itself to take advantage of that. And that's one of the reasons why we issued $250 million in perpetual preferred shares earlier this year. We saw market opportunity, the pricing was extremely advantageous. And we leaned into that a little bit, which actually helps to extend the life of our current ATM authorization.

Right. Okay. Thank you.

Thank you.

[Operator Instructions] There are currently zero questions in queue.

Okay, thank you, everyone, for joining us today. We will be around throughout the day for any follow-ups and we look forward to catching up then. Thank you all. Have a great day.

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