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

Good afternoon, and welcome to Spire's Fiscal 2022 third quarter earnings call. We issued an earnings news release this morning, and you may access it on our website at spireenergy.com under Newsroom. There's a slide presentation that accompanies our webcast and you may download it either from the webcast site or from our website under Investors and then Events & 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, which is a non-GAAP measure used by management when evaluating our performance and results of operations. An explanation and reconciliation of this measure to its GAAP counterpart is contained in both our news release and slide presentation. On our call today is Suzanne Sitherwood, President and Chief Executive Officer; Steve Lindsey, Executive Vice President and Chief Operating Officer; and Steve Rasche, Executive Vice President and CFO. Also in the room with us is Scott Carter, President of Spire Missouri, and Adam Woodard, Vice President and Treasurer and CFO of Gas Utilities. With that, I will turn the call over to Suzanne.

Thank you, Scott, and good afternoon, everyone. As we all know, the U.S. energy industry is changing. As customer expectations and the energy technologies that serve them continue to evolve, there are different philosophies on the future of our industry. Our philosophy is, whatever path the energy transition ultimately takes, natural gas is vital to a sustainable energy future. In that spirit, our mission has guided us to build a strong, resilient natural gas company that's grounded in serving people through changing time, answer every challenge, advance every community and enrich every life is the strength of our energy. That strength showed up in a big way over the last 10-years as we built a solid foundation and successfully executed on our strategy to grow and transform our company. We did it through acquisitions and organic growth, as well as infrastructure investment and innovation that has enabled us to continually raise the bar for how we serve our customers and communities. The next 10-years calls upon the strength of our energy to continue that growth, while balancing the needs of both people and the planet. So we are increasingly focused on environmental sustainability and elevated customer experience for millions of people and 1.7 million homes and businesses. In addition, the next 10-years requires our industry as a whole to think differently about service. As you know, I've been in the natural gas business more than 40-years. And if there's something I'm committed to above all else, it's changing the paradigm around the concept of a ratepayer. Ratepayer is a word and a mind-set that the relet of an industry that believed it was in the regulated utility business. We are not. We are in the business of providing essential energy to people. And while the businesses we operate work inside…

Thank you, Suzanne. Let me begin with an update on the progress we continue to make on regulatory matters in Missouri and at the FERC level regarding Spire STL Pipeline and Spire Storage. Starting with our Missouri rate case, as you know, we filed a new general rate case on April 1st, seeking full recovery of the updated cost of service, including deferred overhead costs as well as higher capital investment and a reasonable rate of return. We've talked many times about what we filed for, but for your reference, this information is included in the appendix of the slide presentation. On May 18th, Missouri Public Service Commission issued a procedural schedule in the case. The upcoming dates include the filing of testimony by third-parties to the case, including the Missouri Public Service Commission staff, Office of Public Counsel and others on August 31st and September 9th. All the hearings are scheduled to take place in mid-October, followed by Missouri Public Service Commission hearings right after Thanksgiving and into the first week or so in December. We believe there will be an opportunity to have substantive settlement discussions once intervener testimony is filed. As reported last quarter, we received an $8.5 million annual increase in ISRS effective May 7th. Following that, we filed a new interest request on June 3rd, seeking $11.9 million for recovery of infrastructure upgrade spend for the January 1st through June 30th period this year. Regarding the Spire STL Pipeline, as you know, the pipeline continues to operate under a temporary certificate of FERC considers approval of a new permanent certificate under a court order Greenman. As part of the Greenman, the FERC staff issued a draft Environmental Impact Statement, or EIS, on June 16th, finding that operation of the pipeline had insignificant impact on the…

Thanks, Steve and good afternoon, everyone. Let me touch on a few highlights for the third quarter. We delivered consolidated net economic earnings of $4.1 million or $0.01 a share, down $2.8 million or $0.05 from last year. Our gas utilities earned just over $4 million, down to $8 million from the prior year. As we discussed last quarter, with the last Missouri rate case, the cadence of our recovery changed, shifting a greater share to our first and second fiscal quarters. For our fiscal third quarter, this shift reduced earnings by roughly $6 million. Quarter results also reflect higher margins from rate increases in Alabama and Missouri, offset by higher costs tied to our pipeline upgraded investments, which I'll touch on more in a second. Gas Marketing posted earnings of $400,000 compared to a loss last year. This quarter, we were well positioned to capture some of the price volatility we've seen in the market over the last several months. As a reminder, last year's results were also weighed down by some costs we incurred post Winter Storm Uri. [indiscernible] summarizes other key variances for the quarter. Hitting a few of the highlights, operation and maintenance expenses net of pension re-class were lower by $5 million or 4%, driven by lower employee-related costs. These cost savings were more than offset by higher depreciation and property tax expenses consistent with our utility rate base growth. Interest expense was also higher, reflecting higher debt levels and higher short-term interest rates. And other income was also lower, reflecting losses on investments and non-qualified employee benefit plans. I would note that these are all unrealized losses and all plans are adequately funded. Turning to our outlook, we remain confident in our long-term growth prospects, driven by our $3.1 billion capital spending plan over the next five years. Our per share earnings growth target remains 5% to 7%, and our fiscal ‘22 earnings target remains $3.75 to $3.95 per share. We anticipate growth to accelerate next year with a reasonable outcome in the Missouri rate case. Our financing guidance remains unchanged, and our capital raises for this fiscal year are now complete, reflecting the equity raise in our ATM program and the net operating company debt, including financing for Uri excess gas cost in Missouri. Our liquidity remains strong, and I would note that we just closed on an expanded and extended credit facility in July, which provides us access to $1.3 billion through 2027. So in closing, we are on track operationally and financially, and we look forward to updating you later this year. And as always, we appreciate the time you spent with us today and your continued interest in Spire. Let me turn it back over to you, Suzanne.

Thank you, Steve. In closing, we're on track with our plans for the year, including our capital investment that supports rate base growth and drive 5% to 7% earnings per share growth over the long-term. We continue to progress on our Missouri rate case and the FERC remain process to secure a new permanent certificate for Spire STL Pipeline. And as always, we are thankful for our [3,700] (ph) employees to make sure that people have safe and reliable natural gas every day. Thank you for your continued interest and investments in Spire. We're now ready to take your questions. Thank you.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Julian Dumoulin-Smith with Bank of America.

Hey, it’s actually Kody Clark on for Julian. Thanks for the time.

Hey, Kody.

Hey, so first, wondering if you can talk through your expectations within the guidance range for the remainder of '22 results have been helped by gas marketing. So I'm just wondering how we're thinking about the main drivers of that $3.75 to $3.95 million into the final quarter. And also curious if the impact of the mark-to-market of the non-qualified benefit plans were considered in that guidance?

Let me take a shot at that, Kody and good afternoon. Yes, our guidance for the year is unchanged, and as you know, it's driven by the performance of the utility. And the fourth quarter, as it is in our service territories is a loss given the lack of demand. So you can do the math, but everything we've seen squarely points to that. Spire marketing, we're in the wheelhouse of where we expected the business to be. We have clearly seen an uptick in price volatility, and we were well positioned to take advantage of some of that in the market. And if that continues, that might provide a little bit of tailwinds to help us push further into the range, although at this time of the year, given the demand, it's not nearly anywhere close to the demand we see during the winter time. That's when Spire marketing makes most of this money. So if it moves by $0.01 or $2, that would be a good thing, and I think we're well positioned going into the end of the year. With regard to the mark-to-market unrealized losses in our nonqualified plans, we don't plan for plus or minus in those, and clearly, you've seen it with some of our peers on this quarter. Both the fixed income and the equity markets through June 30, traded against a lot of us, and so we're all reporting losses on that line. I will tell you, we've seen a rebound in both of those markets as we've gone into this quarter, but it doesn't really take our view of how we think about the full-year, and should we have any unusual moves one way or another, we'll highlight it. I mean as we go forward, but frankly, we focus our guidance on the operating results of the utilities first and then Spire marketing segment.

Understood. Thanks for that. I'm wondering if you can talk about financing here as we look out the next couple of years. I'm wondering how you're thinking about the impact of higher interest rates and also if you have any swaps or hedges locked in at this point?

Hey Kody, it's Adam. Yes, as we've chatted, we do go out and forecast expected financing, and we do have a pretty significant hedge position that was locked in at much lower markets on long-term. So yes, I think we'll stick to the guidance that we provided thus far. We'll probably step it up a year next quarter as we look out another an extra year, but we are planning ahead, and we do regularly hedge those debt offerings.

Got it. Thanks for that. And the average rate on those hedges?

It’s -- I would say they're quite a bit below where the current market is, but it's a series of hedges, it would be tough to get to -- specifically to an average rate they're across multiple planned offerings, too.

Okay, understood. Thanks for that. I’ll jump back in the queue.

Thanks, Kody.

The next question comes from Rich Sunderland with JPMorgan.

Hi, good afternoon. Thanks for the time. Starting on the RNG side, curious what the time line is for the PSC rulemaking process, and is that more of just a technical matter in terms of laying out how the utilities will functionally take advantage of that legislation, are there any kind of key items to watch in that?

Yes, Rich, Scott Carter. When you think about that, the legislation passed, the PSC typically goes through a rulemaking to kind of put more definition to it. The idea is certainly never change the legislation, the legislation is very enabling, and we see a great opportunity out of that rather than just make sure that the rules are set in a way. So we're working through that now with the commission staff who's putting together the kind of the primary rulemaking on that. And we'll certainly participate in that process to make sure it matches up with the opportunity that we see to bring that R&D opportunity to our customers.

And just any sense on how long the process takes?

Hey Rich, it's Adam. I think we expect that process to extend into '23, although at the same time, it's not holding us up from developing some of those opportunities that Suzanne mentioned and Scott just mentioned, as well. So more to come on that, but the finer points of the rule making will probably extend into ’23.

Okay, got it. Very helpful color. Just another broad one for me, the next heating season, the bill outlook there, could you just speak a little bit to your expectations at this point, and maybe what your positioning is relative to supply at this point, how much that could change into the fall?

Hey Rich, this is Scott again. I'll start and Adam may add on to it, but especially in Missouri, we stretched out the Uri call so we're still amortizing that over like a three-year time frame, and we're monitoring gas costs. The good thing is we have a significant hedge position between physical volumes in storage, as well as financial hedges in place. So that should help mitigate. And then we are watching, obviously, the forward movement in that market. And while it's been a little persistently high right now, the market does prove or show that it's going to mitigate in the future. So we're looking at how we can take advantage of that. Alabama has less hedging to it, but it typically looks out 24-months, it's looking into that forward market and pricing it accordingly. So we're seeing bill impacts, but they seem to be in the manageable range, and we're looking to take advantage of the market, and make sure we're appropriately positioned in this more volatile than usual market and making sure our hedges are working effectively in the case.

Yes. The only thing I'd add, Rich, is that we also are smoothing through and deferring some of those costs in Alabama as well, which is kind of a regular thing for them --

Understood.

[Operator Instructions] The next question comes from Christopher Jeffrey with Mizuho Securities LLC.

Hi, everyone. Good afternoon. Actually, just picking up in Alabama and the South, I was kind of wondering if there's any updates on regulatory milestones coming that we should be aware of, maybe in particular, about incremental weather adjustment or combining the jurisdictions, if that's still a desire? Thanks.

Yes. Christopher, nothing specific to report yet, coming into the year-end, we'll be working through and laid out new budgets that both Alabama and Gulf are forward rate-making jurisdictions, and so that we'll have resets there in our forward budgets. So I think we'll speak to forward expectations more specifically on the next call. And Chris, the other part, I think the second part of your question, as you combine [indiscernible] that would be the ultimate goal so that we can have one consistent operating platform across the entire state. I think that gets the scale of the customers and helps us do some things again for both parts of the state that would be a little more consistent than perhaps we've been operating in the past.

Great. Thanks. And then maybe just on storage, so it seems like you've got some more regulatory green lights, could you just remind us what the CapEx attributable to that would be? And if it's in the plan right now and if it was to be put in the plan, what kind of time line we'd be looking at?

Yes. Chris, there's nothing in the plan right now. And you can go back to the 7c for the total absolute maximum that could be spent if we pursued the expansion as outlined in the 7c. And as a reminder, that's a long process, you asked for everything in the [indiscernible] you only get that consideration and approval on time. But got to step back, there's nothing in the plan because we're still in the process of evaluating what our go-forward plan and development is going to be. And once we've made that call, we'll make sure to update the market. I would expect it to be a good update in our year-end earnings call late this calendar year.

Great. Thank you.

[Operator Instructions] Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Mr. Scott Dudley for any closing remarks.

Thank you all for joining us. I know this is an extremely busy earnings day and week. We will be here throughout the rest of the day for any follow-ups. Thanks again for your interest. Have a great day.

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