SPIRE INC Q1 FY2025 earnings call

Management Statement and Operational Highlights:

• Steve Lindsey, President and CEO, will return to work on February 10th.
• Regulatory matters: In Missouri, a rate case was filed in November 2024 for new rates effective by October 2025, and a $19M ISRIS request was filed in January. In Alabama, fiscal 2025 budgets for Spire Alabama and Spire Gulf were approved, with rates effective under RSE.
• Capital investments: Q1 CapEx totaled $260M, with utility CapEx up nearly 25% year-over-year. Fiscal 2025 plans to invest $790M focused on reliability, system modernization, etc.
• Missouri rate case: Requested a $289.5M revenue increase, with a 10.5% return on equity, 55% equity ratio, and estimated rate base of $4.4B. If approved, average customer bill expected to increase ~15% monthly, but paired with prior PGA decrease, bills may be lower/unchanged.
• Alabama: Rates effective under RSE, providing constructive regulatory outcomes.

Segment Performance:

• Gas Utility: Earnings higher, driven by Spire Alabama and Spire Gulf, though partially offset by lower Spire Missouri earnings. Contribution margin increased across all utilities. Absolute earnings: Gas utility earnings were higher.
• Midstream: Saw strong earnings growth due to new contracts on additional capacity and higher rates on contract renewals of existing capacity, with the acquisition of MOGAS in January contributing.
• Marketing: Lower than the prior year due to reduced market volatility combined with higher transportation storage fees. Absolute earnings: Marketing segment earnings were lower.

Guidance:

• Reaffirmed fiscal 2025 earnings guidance of $4.40 to $4.60 per share.
• Long-term adjusted earnings per share growth target of 5% to 7%.
• Reaffirmed ten-year CapEx plan of $7.4B, with ~98% targeted to utilities driving growth and rate base.

Risks:

• Regulatory uncertainties in rate cases, as seen with the Missouri rate case and potential impacts of legislation.
• Weather impacts on usage and margins, such as warmer than normal weather in Q1 affecting Missouri and Alabama usage.

Question and Answer: Q: Hey, good morning, everyone. First of all, Scott, sorry to hear your moment in the spotlight here might be a little bit shorter than you anticipated, but mostly just really glad that Steve is coming back soon. But with that, let me just ask about the weather impact for the quarter. Is there any way you make up some of the warmer than normal and the impact on customer classes, whether it's residential or C&I, with a colder than normal set in Q2? Obviously, you mentioned the weather in January, so I'm just curious if that might have reversed a little bit in Q2?

A: No. So, Gabe, I think you point out, you know, we are early in winter, and I think that's a fair observation. We did include quite a bit of detail in the appendix on page eighteen around the different classes and the performance over the quarter, but it's the first quarter. We're not even in the heart of winter yet. So to your point, there's a lot of winter to go, and I think your observation is a good one, and you are correct.

Q: Hey, guys. How are you doing?

A: Hey, Shar. Good morning.

Q: Morning. Morning. So just real quick on the rate case question. I guess if we're looking for a settlement, should we be looking for a settlement prior to the August hearings? Is that kind of the data point we should be looking at?

A: No. I would just look to the procedural schedule and just key off of the dates that are in there for key waypoints along the path. Too early to have any discussions around that.

Q: Hey, thanks so much. Good morning.

A: Hey, David. Good morning.

Q: Hey, great to hear the news about Steve. Really wish him all the best. Great to see him coming back in action. Question for me on the rate case. I was just wondering if you could frame the size of the customer bill increase that is being requested here and maybe more broadly, kind of how you think that might trend over time after this one-time bump? Obviously, this reflects multiple years since your last base rate case. But how do you see that evolving maybe beyond just this increase?

A: Yes. So maybe as we shared in our remarks, the customer impact is $14 to $15 on a monthly basis on an average bill. However, that's the all-in increase based on our proposal. As we mentioned late in the year last calendar year, we lowered rates as a result of our gas costs coming down. That reduction allows for when, if these rates are to be implemented, we basically return average customer bills to what they were prior to the reduction in gas cost. So a different way to think about it is our customers are receiving the benefit now of lower gas costs over the time period of the rate case being contemplated. So we feel really good about kind of how this is impacting our customers. Worked hard to maintain our O&M flat. That's how we're trending so far this year as well. When we think about future projections, this is really a function of the modernization program that we have in place associated with our capital investment in our systems and serving our customers more reliably and safely as we make those investments, and that's what will have the impact on customer bills going forward.