Good morning, and welcome to Spire’s 2022 First Quarter Earnings Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation there’ll be an opportunity to ask questions. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Scott Dudley, Head of Investor Relations. Please go ahead.

Good morning and welcome to Spire’s fiscal 2022 first quarter earnings call. We issued an earnings news release this morning, and you may access it on our website at spireenergy.com under the news room. There's a slide presentation that accompanies our webcast and you may download it from either the webcast site or from our website under Investors and then Events and Presentations. 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 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 both non-GAAP measures used by management when evaluating our performance and results of operations. Explanations and reconciliations of these measures to their GAAP counterparts are contained in both our news release and the slide presentation. On the call today is Suzanne Sitherwood, Spire's President and CEO; Steve Lindsey, Executive Vice President and Chief Operating Officer; and Steve Rasche, Executive Vice President and CFO. Also in the room today are Scott Carter, President of Spire Missouri and Adam Woodard, Vice President and Treasurer and CFO of our Gas Utilities. With that, I will turn the call over to Suzanne.

Thank you Scott and good morning to those participating on the call. Here in the St. Louis region we're expecting a major winter storm thus our Spire employees are busy this week keeping people warm and keeping our communities safe with natural gas service and supply. I like to take a quick moment to express our gratitude for everyone who is working round the clock to provide reliable and resilient natural gas, that's our number one goal, that's exactly what we're here to do. At Spire, everything begins and ends with our mission. After every challenge, advance every community, and enrich every life due to the strength of our energy. We use that energy to make a positive measurable impact on the world around us. Our energy keeps us stepping forward, advancing, and innovating, and energizing the future and we continue in that spirit regardless of challenges. As you know we faced a number of challenges over the last year or so including an unprecedented order in our recently completed Missouri rate review and a challenge to the continued operation of Spire STL Pipeline. As fiscal 2022 unfolds we continue to work through these issues including moving forward to address the significant shortcomings in the Missouri rate order that went into effect late December. Specifically, we are already taking steps to repair a new general rate review to ensure a fair and reasonable regulatory outcome for the future. At the same time, we're working through the remand process at FERC to secure a permanent operating certificate for Spire STL Pipeline. Amidst these challenges we have remained steadfast in delivering on our strategic priorities and commitments. We continue to invest significant amounts of capital into our utilities for upgrading infrastructure, gaining new businesses, by adding customer connections and furthering our innovation through technology. We're doing this while enhancing all aspects of our operating performance from customer service to safety and system reliability including reductions in methane emissions as we fulfill our commitment to be a carbon neutral company by mid-century. Steve Lindsey will provide more information in his remarks including regulatory matters in Missouri, the Spire STL Pipeline, and our capital investments today. You know that in everything we do we always strive to provide significant support for our communities and create increased value for our shareholders. Steve Rasche will provide details on our first quarter earnings. As you have probably already seen on our news release, we reported $1.14 per share which reflected the impact of warmer weather and higher costs. Now I'll pass the call to Steve Lindsey.

Thank you Suzanne. I want to start by also acknowledging our employees who continue their focus on maintaining safe and reliable gas delivery operation and outstanding service to our customers, through efforts and dedication that are especially important during the winter heating season. First, I wanted to talk about the Missouri rate review and order which I know you've all been following closely over the last year. As we discussed on year-end call, orders we receive indicate including an amended order on November 12th deviated from longstanding precedents in Missouri. Our approach to virtually every aspect of the case from rate base and treatment of costs to capital structure and return on equity was based on what have been established and decided in prior cases. We will resolve many issues in the case of other parties, few of the issues want to be commissioned for final resolution. Two most significant areas where the order went against longstanding practices were rate of return and recovery of non-operating overhead costs. Especially we received the lowest rate of return in utility in the state. This was due in large part to a lower than normal equity capitalization due to the inclusion of short-term debt for the first time in the capital structure. The recovery of non-operating overhead was also problematic and has potentially a much larger negative impact. Missouri PSC order capitalization of non-operating overheads deceased starting with the effective date of the order which was December 23rd. Capitalization will be paused while the commission staff completes an audit of the costs. We are currently working with staff on expedited study of those costs. The mission did provide language to allow deferral of these calls for consideration at a future case. However, the order does not provide sufficient language necessary to defer for…

Thanks, Steve and good morning, everyone. As Suzanne noted, while warm weather nicked us in the first quarter, weather has quickly turned as we're in the middle of a good-sized snow and cold weather event here in the Midwest this week. Go figure. Let's start with a brief review of our results. For the first quarter, we posted net economic earnings of $63 million, tripling last year by $14 million or $0.28 per share, reflecting significantly warmer weather and higher costs. Looking at the businesses, our gas utilities had earnings of $67 million, roughly $9 million below last year. As I mentioned, weather this quarter was warm, roughly 26% warmer than normal. And while we do have weather mitigation for our residential load, our commercial load and the opportunity for off-system sales were lower this quarter. Additionally, as you see on the next slide, our cost especially appreciation were higher than last year. Gas Marketing posted earnings of $0.5 million, down $2.8 million from last year. Again, weather was the limiting factor with lower demand and less favorable market conditions, including much thinner storage spreads compared to last year's unusually wide spreads. And finally, other corporate costs were higher this quarter due largely to timing. Looking at a few details here on Slide 9. Gas utility contribution margin was flat as lower demand due to weather was offset by rate increases. Gas marketing margins are down, net of fair value accounting adjustments reflecting market conditions. Operations and maintenance costs were up $3 million after considering the reclassification of pension costs and regulatory deferral. This increase includes $1 million of Missouri utility overhead costs that would have been capitalized before the commission order. Remaining costs were up by less than $2 million as slightly higher employee-related costs were largely offset by…

Thank you, Steve. We are on track with our plan for the year as we work to resolve regulatory matters in Missouri via a new general rate review. We are confident that we can achieve a fair and reasonable outcome. We are on pace with our capital investment plans to support rate base growth and 5% to 7% earnings per share growth over the long term. We look forward to updating you on our progress as the year unfolds, including the Spire STL Pipeline and laying down the groundwork for an innovative, resilient and sustainable energy future. And we look forward to having an opportunity to connect with you in person at the AGA Financial Forum in May. Thank you for your continued interest and investment in Spire. We're now ready to take your questions.

[Operator Instructions]. Our first question comes from Shar Pourreza with Guggenheim Partners. You may go ahead.

Hey, good morning guys.

Good morning Shar.

Just two quick ones here if it's okay. Just on sort of the GRC. So once you file the rate case in early March, do you expect the case to take the statutory 11 months or could it be faster just given you were just in embedded [ph] a few items and how has sort of that overhead cost allocation audit and review been going with the staff, any takeaways that will factor into, will you be filing for the next case?

Good morning and I'll start that, and I think probably Adam will pick up the second half of that question. Sorry, this is Scott Carter, President of Spire, Missouri. The question on the rate case timing, we file a 60-day notice. That means the earliest we can file is early March. We're going to work through that. We're seeing the spring, so we haven't picked the exact data filing. But it will be close to that 60-day period. We've got to feel like we need to make some progress on the overheads audit and then make sure we put together a case that's obviously filing quality. As far as the timing goes, the commission has an 11-month statutory window. As we look at it and think through that case, they just came out of the case, so a lot of the updates that are necessary to look back for a year, say, won't have to be in place because they'll have the reasons to have that most recent proceeding. So we're setting everything up in a way that gives us the opportunity to expedite resolution of the case, but we have to understand that the commission can take up to that full 11-month cycle. So we're preparing for the best and making sure we're in it for the long haul to put the best case forward and get the right outcome in a reasonable time frame.

Yeah, hey Shar, it's Adam. On the study that is ongoing, we're working with commission staff. We do expect that to wrap up this quarter with a recommendation or report from staff to the commission, and then we'll kind of go from there, but we would fully expect that to be digested in the next case.

And Shar, this is Steve. One last point I would make that we mentioned earlier in addition to the two main points that Scott covered, this will also include our infrastructure investments, the impact of inflation, and the cost of service. So it is in its entirety, but as Scott mentioned, a lot of what has already been solved. If you really think about it in this case, shouldn't be much issue other than just kind of updating, really trying to address the two main issues.

Got it, perfect. And then just last one on STL Pipeline. I mean, obviously, your release says you expect the demand process to continue into 2023. Do you see the potential for clarity to come before that, do you mean, like, the entire administrative process of issuing the new permit certificate -- permanent certificate or do you not expect to have any idea until 2023, so I guess just a little bit of clarity on what you mean through 2023?

Yes. And so if you think about what we're going through on this process with the new EIS, it's a little bit more extended than the typical environmental assessment that we went through on the first certificate. And FERC has indicated that they're looking for that to be probably somewhere in the October time frame. Then if you also go to -- typically, there's a 90-day period for comments that occurs after that, that's how we kind of get into the calendar year of 2023. That's not the entire remand process. That's just a piece of it, but we're using that as kind of some guidepost for timing right now.

Okay, perfect. That's the clarity that I was seeking. Thanks guys. Appreciate it.

Thanks Shar.

Our next question comes from Richard Sunderland with J.P. Morgan. You may go ahead.

Hi, good morning. Thanks for taking my questions. I just want to pick it up with STL Pipeline first. Can you speak a little bit more to the supplemental EIS and to potential interest in alternative solutions to the pipeline there?

Sure. I'll start. This is Steve again. And so as you think about some of the things that are being looked at from an alternative, we view the pipeline being in place from an environmental perspective is the best alternative. Some of the options would actually be having to physically take some of the pipe out of the ground. And then if you have to reinstate things such as some of the compression and propane, we just think from an environmental perspective, this is the best option relative to the outcome.

Understood. And then maybe turning back to the rate case. Could you go a little bit more to the strategy around handling cap structure, the upcoming rate review, maybe timing around how to manage that? Also, I noticed the short-term debt ticked up in the quarter. Just curious on drivers there and how that factors into, I guess, the target cap structure for the case?

Hey Rich, it's Adam. Yes, no, we're -- I mean, obviously, we're going to -- we'll wait to fully lay out the case here a little bit later this year. But the reference to short-term debt, Missouri short-term debt actually declined in the quarter, but I would draw your attention to our current assets in Missouri are actually higher than our current liabilities. And it's not just about cap structure, but also about our -- what we're carrying with excess short-term debt as well. So we'll be vetting through that and putting on a robust case there.

Hey Richard, this is Scott Carter. I will just add on to that. Really two ways to think about it. Historically, Missouri has excluded short-term assets from rate base and excluding short-term debt from the capital structure. That was the premise that we filed under. We financed according with that consistently with what we had done previously and what the commission had found previously. Staff recommended that in their report to the commission, and when the commission finally made their decision, obviously, pulled in the short-term debt, didn’t [ph] pull any short-term assets into the equation. So obviously, there's a mismatch right now that is very out of the mainstream with rate making across the country. And so there's two ways to solve it, and it's either included in short-term assets or going back to the traditional route of exclusion of short-term debt. So we think there's certainly a path forward there that reaches resolution regardless of which path the commission picks.

Understood. Very helpful color there. Thank you.

Our next question comes from Julien Dumoulin-Smith with Bank of America. You may now go ahead.

Hey, good morning team. Thanks for the time and the opportunity. Perhaps just to pick up where Rich was a moment ago, can we talk a little bit more about that short-term debt dynamic? First off, just the short-term asset side of that, if you think about the parity. Can you elaborate just where you stand with respect to driving some understanding in the commission on that point, I know that you've got this rate case filing coming, but as you talk to various parties, how do you think about driving consensus back there, I know that you mentioned specifically a number of parties being onboard with this earlier, but just if we can come back to a short-term asset piece of it?

Sure. And Julien, this is Adam. Our observation, certainly, we carry quite a bit of winter storm cost into the last case. It was kind of average down. And I would -- going into this next case, we now have a full -- we will have a full 13 months of carry there. And then like many utilities have extra deferred costs and gas costs this winter as well, which contributes to that balance. So we'll be putting all that -- certainly all that information into the case and having that conversation with all the intervening parties.

Got it. But just to confirm here, how are you thinking about this short-term debt balance evolving through the course of the year, you said earlier, I think, in your remarks, expecting higher overall leverage through the course of this year, I know you said specifically Missouri was lower in the quarter, just how are we thinking about that dynamic here?

Well, I mean, we -- it is something Missouri's short-term debt has declined quarter-over-quarter. Not sure what -- as far as what you're referring to as far as an evolution of that throughout the rest of the year.

You're not expecting those balances to increase as well. I know you alluded to higher leverage here, maybe more driven by FFO being lowered from the rate case outcome than necessarily the denominator being higher. But I just wanted to confirm that you're expecting that short-term debt to remain kind of at a steady or lower level here with Missouri?

We do believe it will be relatively steady. But you're correct, the lower rate of return fundamentally lowers FFO to debt metric. So if that's what you're referencing, that does lower cash flow. We don't necessarily believe that will pick up short-term debt significantly or materially in the near term.

Yes. And Julien, this is Steve. I'd also point out that in December, we did term out a lot of that excess gas cost, which for argument's sake is about $300 million, that's associated only with Winter Storm Uri. And hopefully, we can carve that down by almost two thirds once the ongoing dispute with the marketers is adjudicated in front of the Missouri Public Service Commission in April of this year. But we did term that out. So we did book some bonds, $300 millions of floaters in order to fix the carrying cost on that component. So we're just doing the right smart things in order to manage the financing going forward. But we see a clear path to regaining reasonable rate of return, including the right cap structure for the utility.

Alright. Thanks for the details here. Just one bigger picture question, how are you thinking about the guidance range for this year given, obviously, the weather impacts at the start of the year and obviously, I know there's a lot of big moving pieces here, obviously, and the amount of capitalized overhead deferral being a big one, but how would you position yourself on the capitalized question for the year and/or just overall within this range, if you will?

Yes. And we spoke to it just a bit earlier in the prepared remarks. We're as comfortable with a range with a very wide breadth as we can be. And you're right, it comes down to the question on overheads. As we mentioned in our prepared remarks, our rate structure in Missouri has become more variable and that's because in the last rate case, we rolled the ISRS, which was a bit charged into the variable component of rates going forward. So you will see more variability, therefore, more recovery in Q2, the quarter we're in now, physically versus Q1 when you look back at the last rate structure. So we're not -- we deal with weather. That's the risk that is a utility, we have to manage not only every month and every quarter, but over a longer period of time. And we clearly still have some tools in our tool belt to manage to get to where we want to drive expectations for the full year knowing that we're going to be in another general rate case, unfortunately, but that's part of the process we need to go through. So I think we're confident in being able to get into the range and as I mentioned, the range is structured so that if you think about the top part of the range, that's really where we would be assuming we can do what we do every day, which is to manage the utility and offset any headwinds we might get from weather. The bottom end of the range has to do with the expensing or deferral or recovery on overheads and we hope that we can put a stake in the ground on that sooner rather than later as we talked about earlier.

Alright, guys. I'll leave it there. Thank you.

Thanks Julien.

Our next question comes from Gabe Moreen with Mizuho. You may now go ahead.

Good morning everyone. The short-term debt stuff has been pretty much beaten to death, but I wanted to ask about whether anything else needs to change for the upcoming rate case filing with the forward curve and spot gas prices being so much higher, whether it's, I guess, bad debt ask or anything like that, just how you're thinking about that? And then also, can you just walk me through again the weather norm, whether I guess no pun intended, what you had asked for last time, would have helped out actually for this quarter and whether that's going to be a focus for the upcoming GRC?

Yes, Gabe I'll start that and anyone else can jump in. As far as anything else, as Steve had mentioned, the rate case will be a general rate case and a full update. So as you think about increasing cost elements, whether that be bad debt, the additional capital deployed or other inflationary pressures, that will be reflected in the filing that we'll make. So that will be a full update. Obviously, the focus is on these high-profile areas, but we're filing a full general rate case, so we will include all of those elements. Weather normalization, what we have filed and requested would have expanded that and refined it a bit. So we do believe it would have improved the performance of that, tightened the range if you will. Again, we have pretty good performance around the weather normalization. We certainly want to improve that going forward and yes, we'll bring that into the next case as well, trying to make sure we get that refined as possible to make sure we don't win in cold events, we don't lose in warm events, or we balance it with customers.

Yes. And Gabe, this is Steve. The weather norm actually worked fairly well. It's the areas around the edges, it's the commercial load it's off system sales, which -- most of which we share back with the customers. Those are the things that we will and no doubt, will be continue to be exposed to. But that's okay, because over time and more likely than not over this entire winter heating season, everything will balance out. I don't want to take one down and draw a line, give us the chance to make it through the winter. And once we get to the next update, we'll have a much better feel for what the entire year of winter delivered for us and then what's -- what are we doing going forward during the back half of the year.

Great, thank you. And then if I can also just get an update, I guess, on sort of RNG efforts, where things stand at the moment, any new developments this past quarter? Thank you.

I'll take a start at it. Gabe, good to hear from you this morning. So from an RNG perspective, we continue to look for opportunities, for projects particularly in Missouri given that we've just had some legislation passed. We're in the stages now of working towards the rule-making process, which could be extended obviously. But a lot of this is looking at opportunities to include some RNG projects and rate base here in Missouri, so we're continuing to be active, and then we think there are opportunities there. But again, with the legislation just being passed and the rule-making started, that's kind of where we are right now.

Great, thank you.

Thanks Gabe.

[Operator Instructions]. Our next question comes from Vedula Murti with Hudson Bay Capital. You may now go ahead.

Good morning. Can you hear me?

Yes.

Yes.

You alluded to the audit that the staff is working on, presenting the commission on the study of the overheads. One, can you give a sense when to start this [indiscernible] to present to commission? And two, can you remind us perhaps the scope of that, and what the report may, what the report will address or what it may not address?

Vedula, this is Steve. I'll take a shot at that. Yes, the process, we're just continuing to work through it. I wish I could give you a procedural schedule, there isn't one associated with this, but I can tell you absolutely we are working right next to staff as we work through this because we're both aligned in getting this addressed as soon as possible. As we mentioned a bit earlier, the study, which we're taking on internally which is a classic time study where you look at a sample, which is a fairly large sample of your population and from that you derive a capitalization percentage. This is a standard approach that is well-trodden and relied upon for FERC capitalization purposes, which is why we're taking it on. We'll get that study done this quarter, figure the month of March, and we'll work with the staff. At that point, the staff needs to perform whatever procedures they need to do in order to get comfortable on that, that’s the time frame that I can't really speak to right now. But let's say, a month or two and I don't -- I can't really answer that question. That pushes the discussion until early in the next quarter. And at that point, the staff will render a decision and if they agree, that's great. If they mingle in the engines, we'll kind of work our way through that. The finality of the process will be a formal recommendation to the Missouri Public Service Commission, and they will issue a formal order that addresses capitalization going forward. And that's the point at which we will then know what amounts are being capitalized and what amounts are not being capitalized. In terms of the scope of the study, that's one of the questions we're working through right now with staff because it was unclear in our earlier communications how big the pot is that we are looking at. We believe it’s the non-operational overheads. Think about the stuff that isn’t directly related to our teams that are out doing capital work every day. And the study will clarify that and also bring finality to what the bucket is that won't be capitalized going forward. And as we mentioned, that's really the question that we want to answer as part of this process is not only snap the line on capitalization, but then also determine through an AAO or whatever the right approach is, how we're going to defer the other prudent cost for consideration in the next rate case. Hopefully, that helps.

[Question Inaudible]?

I'm sorry, Vedula, you're breaking up. We didn't pick up all that.

I'm wondering whether the staff reporting in commissions [Question Inaudible]?

Yes. I don't -- the commission determination, there is certainly -- the wording and their order could certainly affect how we account for things, but we don't want to predict anything, and we'll wait to see how that comes out. Right.

And one last one in the STL Pipeline, given the EIS timeline you suggested until the EIS is completed and the October -- comment, is it basically business as usual thing [Technical Difficulty]?

Yes, I'll take a shot. I think the question was, in essence, as we go through this remand process, is it business as usual for the pipeline, and that is the case. And so again, the EIS is targeted to be completed in October. Then you'll have the comment period after that, which pushes into 2023. So clearly, we'll get through this winter, and really the remainder of the calendar year. And as Suzanne mentioned at the start of the call, given the weather events that we're having right now, we're very pleased to have this pipeline in service doing what it was intended to do all along, which is sort of the customers at the eastern side of Missouri.

Thank you.

Our next question comes from Brian Russo of Sidoti. You may now go ahead.

Yeah, hi, good morning. Hey, just curious the uncertainty with the audit regarding overhead costs. Does that create uncertainty regarding the 11 million ISRS filing that you're seeking recovery of?

Yes, Brian, so we -- the ISRS filing, the commission's determination around the overhead issue started with the completion of this final order, December 23rd is the effective date. The capital we filed under the ISRS case all relates to capital deployed prior to that date. So they decided that they would look at that in context of this case, but it really shouldn't affect the capital deployed that is -- seem to be recovered in that case. So it's a long way of saying, we don't expect it to but again, as we look through this and think through the minutia of it, and way parties may play it out, we'll have to see how that plays out. But our expectation is the capital that we're seeking recovery of is deployed under the methodology prior to the commission change. And so therefore, it should be fully recoverable in the ISRS filing.

Got it, understood. And I guess if you're going to file a case in March, we shouldn't expect another ISRS filing, right, because you're not allowed to file -- in ISRS while you have a rate case ongoing, is that accurate?

Brian, this is Scott again. We can file a case, so we have filed in the past. We decided to defer the last case, the last ISRS under the last rate case. We were having -- that case would have been a change in the rule under the legislation which got changed recently. And so we defer that to this most recent filing. Depending on the timing of when a commission decision comes out and how we see that playing out, we may or may not call on other ISRS in that intervening period. So we reserve that right, and we'll see how the timing works out to figure out if it's valuable or not, whether the commission that's going to be three months before commission final determination when they want to file one. If it's going to be contemporaneously, we may just say we want to include in that final resolution of the general rate case.

Okay. In terms of -- are you still expecting normalized marketing margins in fiscal 2022, even what appears to be kind of a light start given the mild weather and lack of spreads?

Yes Brian, this is Steve. At best we can tell yes, there's always volatility. And clearly, the market was not as favorable last quarter, but it's clearly -- we've seen more volatility and a lot more weather this quarter. So that's our expectation. We'll clearly give you an update as we get to the half year. And I have to remind you that when we look at last year, we had embedded significant amounts of value from the storage positions that we had laid in the summer before because of the COVID-related dislocation in the natural gas marketplace. We're in a more normalized market now. So I wouldn't overthink the year-over-year variance, but we are clearly positioned to take advantage of the market when it gives us opportunities. And it's good to see some weather in the mid-continent and we saw some volatility last week, and those were all the milk and honey and how we create value above and beyond the normal margins that we make by serving our customers during the winter season.

Okay. And then just lastly, can you quantify what the margin impact was from weather versus normal in this first fiscal quarter?

Yes. We generally don't get down to that level of detail, but I will tell you that although the margins were down year-over-year, they weren't as far off from our expectations as you would imagine by looking at the year-over-year comparison. That gives you maybe qualitatively, gives you a little bit better view.

Okay, alright. Thank you very much.

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

Well, thank you all for joining us this morning. If there are any follow-ups, we'll be around throughout the day. And looking ahead, we are very much looking forward to seeing many of you at the AGA Financial Conference in May, first time in a couple of years. So until then, be well, be safe. Thank you.

Thank you.

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