Hello, and welcome to the Spire Third Quarter Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to Scott Dudley, Head of Investor Relations. Please go ahead.

Good morning. Welcome to Spire’s Fiscal 2023 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 is a slide presentation that accompanies our webcast and 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. Though 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 in evaluating our performance and results of operations. Explanations and reconciliations of these measures to their GAAP count parts are contained in both our news release and the slide presentation. On the call today is Suzanne Sitherwood, 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 is Adam Woodard, Vice President and Treasurer and CFO of our Gas Utilities. With that, I’ll turn it over to Suzanne.

Thank you, Scott, and good morning, everyone. Today, I’d like to provide an update on Spire’s quarterly performance, recent developments and outlook. Let me start with third quarter results. We reported a loss of $0.42 per share for the quarter, well below last year’s results and our expectations. The results this quarter reflect quite a few moving parts, including lower demand and the impact of milder weather this year as well as high cost in the current inflationary environment. Steve and Steve will speak more about our results for all our businesses, both operational and financial. But it’s important to point out that our Spire employees continue to do what they do best every day, serving our 1.7 million homes and businesses. And that spirit know that we continue our efforts to create path for more efficient and sustainable regulatory recovery while ensuring we provide safe, cost-effective and reliable energy for our customers and communities. Additionally, we are well positioned for a strong rebound in 2024 as interest rates moderate, cost structure management progresses and usage-related margin is restored. We continue to execute our midstream strategy through expansion and acquisition of storage facilities and pipeline systems. Our strategy is centered around highly contracted utility supply-focused assets that produce steady and consistent earnings much like our Gas Utilities. These businesses also bring longer-term growth opportunities to take advantage of the increasing demand for natural gas. We believe our future is bright. Spire is a strong, well-positioned company with a proven growth strategy. We have confidence in that strategy and the ability of our experienced management team and employees to successfully execute our plan well into the future. We also have a skilled and experienced Board of Directors to guide us. Last week, we announced the election of 2 additional directors to our Board, increasing the size to 11. Adding executives will who build upon the strong oversight in governance Spire has in the past. Denny brings extensive financial industry experience, having served in various roles with Edward Jones, including Chief Operating Officer and CIO. [indiscernible] retired in 2020 after a 38-year career in the energy sector, including 2 decades at Dominion Energy, where he was most recently served as the President, CEO of Dominion’s Power Generation. Now, I’ll pass the call to Steve Lindsey.

Thank you, Suzanne. Let me start with an update on our Gas Utilities. First and foremost, we continue to deliver our customers, providing the safe and reliable energy with excellent service. Our employees stay focused on our key operating metrics targets while also diligently managing costs. Financial results for our Gas Utilities in the quarter, a loss of $12.3 million, reflects the benefits from new rates in both Missouri and Alabama, albeit during a seasonally lower volume period or more than offset by mild weather on other items that Steven Rasche will cover. Across our service areas, the weather was 18% warmer than normal. This drove lower usage that was only partially offset by weather mitigation mechanisms in Alabama. In addition, our interest expense is up significantly year-over-year due to more than 400 basis point increase in short-term interest rates over last year. Our gas cost balances continue to decline, we expect to recover our pre-2023 deferrals by the end of the calendar year. This, combined with lower commodity costs, positions us well heading into next winter. We continue to pursue timely recovery of pipeline upgrade investments in Missouri via ISRS. As noted last quarter, Spire Missouri was granted $7.7 million of new ISRS revenues effective May 6 of 2023. Spire Missouri filed on June 20 for an additional $14.2 million in interest, covering infrastructure upgrade investments for March to August time period. We continue to very focus on controlling our O&M cost to claw back some of our margin shortfall this year. Turning to our Midstream segment, I’m pleased to note that the expansion of Spire Storage West, our facility in Southwest Wyoming, remains on track. The total project spend is $195 million to expand capacity of 16 Bcf to a total of 39 Bcf over this season and…

Thanks, Steve, and good morning, everyone. Let’s review a few key points from our fiscal third quarter. We reported a consolidated loss on a net economic earnings basis, just under $19 million or $0.42 a share compared to earnings of $4 million or $0.01 last year. While an earnings delta of $23 million is much bigger than we would like, it’s important to note that roughly $10 million of that difference relates to regulatory adjustments in Missouri and Alabama that we’ve discussed in previous quarters. Taking a quick look at the segments. Gas Utilities lost $12 million compared to earnings of $4 million in the prior year or a decline of roughly $6 million after regulatory adjustments. That decline reflects new rates, offset by the impacts of mild weather at higher cost. Both Gas Marketing and our Midstream businesses posted lower results, reflecting less favorable market conditions. And we continue to see higher interest expense in corporate costs. Looking a bit deeper into our results, starting with revenues and margins and focusing on the net brands after adjustment column, revenues were down almost 7% due to lower Spire market and commodity costs, and you can see a similar reduction in natural gas costs. Contribution margins were also lower by $5 million, with Gas Utility margins representing half of that shortfall. In Missouri, margins were up by $4.1 million as higher rates were only partially offset by lower usage. Now these margins were below last year by $6.6 million, with a few factors contributing to the shortfall. First, lower year-over-year cost control measure or CCM benefit as Spire Alabama. Note that this is due, in large part, to the timing of prior-year timing of recognition of the benefit booked in the third quarter and trued up in last year’s fourth quarter.…

Thank you, Steve. In closing, we are well positioned to continue growing and delivering stronger overall performance for our customers, communities and investors. We’re now ready to take your questions.

[Operator Instructions]. Today’s first question comes from Richard Sunderland with JPMorgan.

Can you hear me? Starting with the guidance revision and just a couple of mechanical questions here. See, first and foremost, the $0.05 lower on the range, but I think on Gas Utility net economic earnings, it’s more of a $0.09 delta on a segment basis. Curious if there are other offsets within there that you’re seeing or if this is in consideration of kind of where you are in the calendar? And then similarly, is that midpoint original guidance still the base for the 5% to 7% earnings CAGR?

Rich, this is Steve. Good questions. The last question is, yes, the is still the base for the long-term earnings guidance target. On the revision of guidance, you’re spot on, we continue to exercise all the controls we can in the time we have left this year. You know that we earn our margins and recovery during the winter and early spring. And so that ship has largely sailed. So we do expect to see our O&M costs to continue to stay in a narrow range. And it shouldn’t be lost on anyone that if you look at the quarterly results, after you take out the noise from regulatory adjustments, that we’re bending that curve down 2.9% year-over-year versus a lot higher percentage increase earlier quarters this year.

Understood. Very helpful color there. And then diving into the results a little more closely, the weather impact, is that a similar kind of degree day calculation issue that you’ve reference in Alabama in the past? And curious kind of what the path is to addressing that? Do you expect to -- you have conversations around that in the near term or any other considerations around getting some of that volatility out of results?

Rich, it’s Adam. Yes, it is a similar dynamic there, and we do intend to address that or continue to address that with the team and with the regulators in Alabama.

Got it. Is that something that could be addressed in advance of ‘24? Or is this a longer-term process?

It is. We do go through annual budgeting process that will be a topic of discussion.

The next question comes from David Arcaro with Morgan Stanley.

Let’s see, I wanted to check, is the original 2023 Gas Utility earnings power of to, is that a fair baseline off of which you could grow, going forward, assuming that weather kind of comes back to normal? Or are there other structural -- continued headwinds that would need to be worked through in terms of inflation being higher than expected or interest costs still being an incremental drag versus that?

Yes. David, this is Steve. It’s a great question. I think at this juncture, the answer is yes because we -- all of the mechanisms and the initiatives that we referenced in our prepared remarks really do get us back. We will clearly, as we get to the into the year and we get to typically our innings call in November, base everything, including reintroduce what our expectations are for all of our business lines, going forward. I would readily admit, interest continues to be a headwind, and rates are going to be a little bit higher for a little bit longer, your bank and most of the folks say that, and we’ll have to factor that in, and then what we can do on the other side in order to offset that headwind.

Got it. Okay. That’s helpful. And I was wondering if you could touch on the MoGas and Omega acquisition. Could you run through the financing plans for making that acquisition? What level of accretion you might be expecting from it? And then, would you expect there to be growth investments on the back end, going forward?

Sure. Sure, David. It’s Adam. Yes. We did -- on announcement, we did say that we would expect to finance on a balanced basis and in fact, did go out and escalate or bring forward some of our equity plans for the year, and so have effectively financed the equity side of the ledger on the transaction already prior to closing. So we’re -- we do expect it to be accretive. I don’t think we’ve addressed exactly how much -- how accretive it would be. We do see longer-term growth out of this specific asset. But again, a little premature, we’ve not closed the transaction yet.

And the one piece I would add is in addition to the pipeline, as most people think about it, it also comes with Omega, which is an LDC-like opportunity, which is at the southern end, and that’s on a long-term contract. So we look for opportunities to continue to grow that piece of the business as well.

Okay. Got it. Makes sense. Just last quick question. I saw that equity needs looked like ticked up slightly 2024. Just wondering, what was driving that?

Yes. So we -- in the quarter, we moved forward, as I just mentioned on -- moved up our equity because of the acquisition and really pretty much exhausted our ATM authorization for the year and don’t expect to be back in the market until early next year. That was not quite enough for our -- to completely satisfy our plans for ‘23. So that extra bit in ‘24 is really that’s just moving some of that remainder over into the next year.

Next question comes from Julien Dumoulin-Smith with Bank of America.

It’s Julien here. Can you hear me? Sorry, I apologize. I don’t know what that was, but we got that resolved here. But with that said, let me just follow up here on a couple of different details here. First off, high level, just a further interest in gas pipelines or LDC here at this point, obviously watching the MoGas update here in the last couple of months. Just want to understand how you think strategically about the direction of the company. Let me start there. I got a few follow-ups.

Julien, this Suzanne, thank you for the question. As you’re aware, because you and I have worked together since my arrival pretty much since 2011, 2012, I was brought here to grow the company and grow a natural gas company. And predominantly, we’ve grown, as you very well know, through acquisitions of utility companies, gas utility companies and the synergies and the efficiencies we get from finding these companies and also deploying technology and improving their operations and so forth and so on. But also, as a natural gas company, there are some strategic bites at time in storage facilities that make sense to us, and it’s our job to tell that story to you, of course. So we always stand ready, and we’re always steady in the market. As you know, we have a very disciplined approach, and we only do that in terms of acquiring. And we think it makes sense to the company, and I say ourselves [indiscernible], the company we’re acquiring and, of course, our shareholders. So again, as you know, we take a disciplined approach on these kinds of things. Yes, we’re in the natural gas business, we’re predominantly a utility company, a gas utility company, and I think that’s what you’ll see in the years to come.

Absolutely. Just wanted to clarify that for the update. I mean, actually, since you mentioned, I mean, as we’ve known each other for over a dozen years here and through your leadership, have you guys come to any further resolution or any sense of timeline on succession announcements and reshuffling?

Yes. Yes, thanks for that as well. So as you know, I’m on the Board here at Spire. And one of the primary responsibility of the Board of Directors is the CEO position and governance and some other environments. And so yes, it has taken a very methodical approach in terms of the search process. And as we’ve stated, there are internal candidates as well as external candidates, and the Board just want to make sure that they’re managing their process in the most effective manner. And as you know, I’m retiring at the end of the year. So I suspect there will be some maybe for the year. Sure.

Got it. Excellent. And if I can follow up on -- thank you again, Suzanne, for the -- for everything over the years. But if I can follow up here on just a couple of nuances here. You guys alluded a second ago to some of the interest expense headwinds for ‘24, you talked about rebounding. Can you just elaborate a little bit? I know this is probably a little bit of a moving target, but can you just -- as best you understand right now, maybe talk about what you’re seeing in terms of that headwind here. And then maybe talk at the same time about your FFO to debt expectations about where you get by year-end in the ‘24 period.

Julien, this is Steve. Yes, if you think about the interest rates, it’s really the tale of two pieces, it’s rates. And your bank and everybody else, we make our predictions, and it looks like it’d be higher for longer, and we’ll see how that goes on. That’s the uncertainty that we’ll continue to manage. What we can manage is the amounts that we’re financing. And as we outlined in the deck, we are seeing great traction in paying down our deferred gas costs and bringing our short-term debt into line with our expectations. So we’ll continue to manage that component of it, which you would expect us to, and then we’ll react to the market as the interest rate environment and outlook clarifies a little bit. Adam, on the FFO, I’ll let you talk.

Yes. We do -- Julien, we still continue to see us tracking towards our target by the end of ‘24. It had made good progress coming out of the deferred position that we’re in. So cash flow has been strong. We obviously need to lower the denominator a bit on that metric as well, and that will come with further recovery. We do see that tracking into the end of ‘24 when we would see us hitting that target.

Got it. And that target being 15% to 16%, right, Adam?

That’s right.

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

Just wanted to touch on the lower CCM benefit. And it looks like that might be trued up in 4Q a little bit. Just kind of wondering, is that something that we should expect, going forward, as far as potential timing consideration through the quarters?

Yes. Chris, this is Steve. It’s a great question. All of the discussion on CCM with ‘22, like we’re comparing year-over-year. And what we saw, and it was well documented in all of our disclosures last year, is that after -- and in discussions with the Alabama Public Service Commission and looking at the customer bills, we all agreed to spread the CCM benefit, which we used to recover in a very short period of time over a number of years. I believe it was over 5 years. Originally, it was shorter than that. So that agreement, which was the right answer for our customers, resulted in us changing the recognition of the CCM benefit in the fourth quarter of last year. So you got -- you have some scratchy timing stuff when you compare year-over-year. It has no bearing whatsoever on the CCM benefit, which we like, and it really does help us align with our customers in terms of keeping our costs under control. It’s just going to be one of those scratchy comparisons year-over-year this quarter. And then next quarter, you’ll see it reverse in the other direction, and we’ll make sure to highlight it.

Great. And then maybe just an update on your guys’ thinking about additional RNG projects to the one you have.

Yes. No, we continue to work on projects and have an interconnect working in or coming online or expected to come online early next year in Eastern Missouri and have a project that we’re close to talking more about on the west side of Missouri here in the next few months. We continue to examine and develop projects across specifically Missouri and really under the -- and continue to do that under the regulatory umbrella.

This concludes our question-and-answer session. I would now like to turn the call back over to management for closing remarks.

Thank you all once again for joining us. We will be around throughout the day for any follow-ups. We look forward to catching up with you then. Great day. Goodbye.

The conference has now concluded. Thank you for your participation. You may now disconnect.