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

Good morning and welcome to Spire's fiscal 2019 year-end earnings call. We issued our earnings news release last night and you may access it on our Web site at spireenergy.com, under Newsroom. There's also a slide presentation that accompanies our webcast and you may download that from either the webcast site or from our Web site under Investors and then Events & Presentations. Presenting on the call today are Suzanne Sitherwood, President and CEO; Steve Lindsey, Executive Vice President and Chief Executive Officer of Gas Utilities and Distribution Operations; and Steve Rasche, Executive Vice President and CFO. 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, contribution margin, adjusted EBITDA and adjusted long-term capitalization 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 our year-end update on our performance and outlook. As we begin our fiscal 2020, we’re pleased to have this opportunity to share how we’re continuing to execute on our growth strategy, a strategy focused on growing organically, investing in infrastructure, and advancing through innovation. For fiscal 2019, Spire once again achieved consistent growth and higher levels of financial and operating performance for 1.7 million homes and businesses across Alabama, Mississippi, and Missouri. Before we share the details, I’d like to address two items. First and foremost, I’d like to give thanks to every one of our Spire employees who work hard every day to deliver on our promises to our customers, communities, and shareholders. Spire employees know that we are responsible for safety providing energy; energy that families use to cook Thanksgiving dinner and stay warm when it’s cold outside. There’s great pride in taking care of our customers and communities and doing the right thing. To every employee, I extend my heartfelt gratitude and wishes for a Happy Thanksgiving with family and friends. The second thing I’d like to address is a matter I’m sure our investors and analysts are interested in, and that’s the recent ruling by Missouri Western District Court of Appeals regarding our Infrastructure System Replacement Surcharge or ISRS. As we outlined in a separate news release last evening, the court upheld appeals made by the Office of Public Counsel that disallowed recovery of portions of Spire Missouri ISRS. Additionally, the court overturned three prior Missouri Public Service Commission issued orders along with ordering refunds to customers. These rulings were made on November 19, the day before we had originally scheduled this earnings call. We appreciate your patience and understanding as we have worked to…

Thank you, Suzanne. I also want to acknowledge the outstanding efforts of our employees in delivering another strong performance this year, including providing great service to our customers while keeping themselves and our community safe. As you know, we've been focused on consistently growing our gas utilities through a robust capital program centered on pipeline replacement modernization as well as new business. In fiscal 2019, Spire’s total capital expenditures were $823 million driven by $575 million of investment in our gas utilities. About half of our utility spend was dedicated to infrastructure upgrades which helped us have another strong year which we replaced over 350 miles of distribution pipelines. We also invested $91 million in new business which represents a growth in spend about 10% over last year's record pace. I would point out that our utility CapEx for fiscal 2019 came in about 45 million higher than we originally forecasted. Thanks in part to favorable weather we were able to complete more infrastructure upgrade work than originally planned. Turning quickly to the non-utility capital, our investment this year was right in line with our forecast including $150 million for construction of our now completed STL Pipeline that serves Spire Missouri East. While we quickly see the benefits from our infrastructure upgrade investments in terms of increased safety, service, system, integrity and operating costs, we also continue to focus on the regulatory recovery of those investments. Regulatory mechanisms we have, including incentives to accelerate system upgrades in Missouri and Alabama, are key to supporting both infrastructure modernization and earnings growth. In Alabama, we recovered our investment in a nearly real-time fashion under the Rate Stabilization and Equalization or RSE mechanism via annual filings. In late October, we made filings for both our Alabama utilities with new rates expected to be…

Thanks, Steve, and good morning, everyone. Even with the great progress we've made this year, of course I need to start with our ISRS provision. And as you can tell from our discussions today, we truly believe that we are doing the right thing for our customers, in the most efficient manner and with the support of the Missouri Public Service Commission. But at this point, we are required to record the impact of ISRS revenues in accordance with the court ruling even though we remain confident in our ability to prevail. Here on Slide 10 you will see the detail supporting our current ISRS revenues by authorization date. A couple of things to point out. First, we are not currently recovering any ISRS revenues from intermittent plastics. In fact, we have roughly $6 million related to this issue on appeal right now and that represents upside to our ISRS recoveries if we are successful. Second, the plastics revenue in 2016 and 2017 totaling $4.2 million were collected prior to the completion of our 2018 rate cases. The appropriate revenues were included as they should be in the new rates set in those cases, and only the potential refund of the $4.2 million is in question. Third, revenues collected from ISRS effective October 8, 2018 totaling $8 million last year were also subject to the court ruling, questioning as Steve discussed whether cast iron and bare steel are worn out or deteriorated. As outlined here, the ISRS provision we recorded this quarter reduces revenue by $12.2 million and establishes a regulatory liability amounts due to customers pending the final determination. The earnings impact of that adjustment is $9.3 million or $0.18 a share. The ISRS rulings also impact how we record the customer billings under the October 8 rider in…

Thank you, Steve, and thank you, Steve. As you heard, we’re in a strong financial position. We’ve used our growing earnings and cash flow to support consistent dividend increases. So in closing, I’m pleased to say that our Board of Directors voted to raise the common stock dividend by 5.1% to an annualized $2.49 per share for 2020. The increase reflects our strong performance in 2019 and the Board’s confidence in our ability to drive continued earnings growth. The latest increase continues our 75-year track record of paying the dividend and marks 17 consecutive years of increases, while allowing us to maintain a conservative payout ratio in the range of 55% to 65%. In summary, our performance in fiscal 2019 was strong including the growth of our utilities, expansion of our gas marketing business and the advancement of our midstream operations. We achieved higher and in many cases record levels of operating performance at our gas utilities. This includes further reduction in methane emissions thanks to our robust pipeline upgrade program and other system integrity initiatives, and we continued our passionate involvement in the communities we serve. Heading into fiscal 2020, we’re poised to continue our track record of advancing our business driven by organic growth, investment and innovation. We look forward to updating you on our performance as the year unfolds. And as always, we appreciate your continued interest and investments in Spire. Now, we’re ready to take your questions.

We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Christopher Turnure with JPMorgan.

Good morning. Could you maybe walk us through the next steps in the appellate process here? I guess you have three separate orders that you need to appeal and kind of how that will play out depending on whether you succeed in those steps or have to go further or not?

Sure, Chris. This is Steve Lindsey. I think initially we’ll go through the normal appeals process which would be filing for reconsideration. Obviously, there are other opportunities such as taking it to the State Supreme Court. And then, I think ultimately there are legislative fixes that we can look forward to, to provide some clarification and even potential regulatory fixes. So, I think there's multiple opportunities, but in the immediate from the legal perspective, it will be reconsideration and then go from there.

[Indiscernible] Steve's point, the commission could create a cure on their own. But the way everything is written today, we would have to involve the judicial process to remand it back to the commission, unless the commission takes some other action to cure it on their own. So it’s a process and we're still outlining the timing and so forth of all of that with our counsel.

Okay. So then I guess a little bit more specifically on the rehearing process at the court, when do you make that filing? And then how long do they have to accept it or reject it? And how long would that process take?

Our General Counsel, Mark Darrell’s in the room here to give you a little bit more color on that process. I’ll turn it over to a smarter legal mind than mine. How about that?

Thank you, Suzanne. Yes. So, Christopher, basically what would happen is that we have to file an application for rehearing by December 4. And then after that, the Western District would have to make a decision on that application for rehearing and that's – we don't know exactly how long the Western District will take to do that. But that's what the next process would be. And if it turns out that they deny our application for rehearing, then we either have an opportunity either by the court order to go to the Missouri Supreme Court or we would ask that we – we'd asked the Missouri Supreme Court directly to take the case.

Okay. And then I guess in those various scenarios, what would be the soonest that we could see EPS guidance for fiscal 2020?

I won't answer that specifically. But with respect to the court, obviously there's nothing – there's no timetable for the court to make any – either courts, either the Western District or the Supreme Court to make a decision. So, obviously, we would have to kind of wait and see how that process plays out before we were able to give any further color on guidance.

And to follow up on that a little bit more color, going back to Steve Lindsey’s comments and your question was specific to the judicial process. I just want to remind that there's a regulatory process as well as Steve mentioned a legislative process. And even in that regulatory process that there's rate case processes and those sorts of things that we've got to work through, I'll just call it the critical path for all these paths that we have and make sure we understand what's best in terms of supporting this program that's been around for more than 15 years and the commission has reaffirmed time and time again. And so, there'll be more to come as we start mapping all this out.

Okay. Yes, I actually wanted to come back to that, Suzanne, just on the PSC itself. It sounds like when it does get back to them, they have pretty wide latitude on how they can interpret the court order in terms of giving you pretty full recovery of your ISRS requests or giving you a very small amount of them. Is that a fair interpretation?

I think it would be fair to me to say that I will not speak for the commission, but what I can say is based on prior ISRS filings, and we have, like Steve has talked to, up to 15 years of this program, so we have a long history with this program and the commission is reaffirmed, and we have frequent meetings with them. So, again, I don't want to speak for them and certainly not prospectively, but this was OPC that filed in the Western District Court, not the commission. And OPC has a responsibility too to protect consumers not just from a cost perspective but also from a safety and reliability perspective. And just again as a reminder, if you look at what customers are paying today, it's up to 20% less than they were paying say 15 years ago, which is really a win-win for the State of Missouri, our communities, and our customers to have a modernized system and be paying less than what they were paying years ago.

Okay. No, I appreciate that you can't speak for the commission, but I guess just in having read the court order, it sounds like there's a little bit of subjectivity or confusion in there at least on my part as to the recoverability of plastics or the recoverability of cast iron and bare steel itself. So it's just I guess a pretty uncertain process here. I guess – I’m sorry.

Well, I was just going to say I think to just reinforce the point on this particular issue, the commission is aligned with our position. Again, for 15 years, we've been filing this really twice a year from the perspective of the bare steel and cast iron. If you go back to the original statute, I think the intent of this has been accomplished which is accelerating the infrastructure upgrade program, and I go back to this, I believe the right thing to do regardless, but this mechanism was put in place to help us accelerate that. That’s what's been going on. So, again, like Suzanne said, we can't speak for the commission but I think their actions in the past has supported our position on what we've been going through relative to this program, and I think that's the direction we should take going forward.

Okay. And then just remind me on what your rate case filing plan was in terms of timing before the court order?

Hi, Chris. This is Steve. We are required by the ISRS legislation that underlies all the discussion we had to file a rate case no later than three years after the first ISRS rider hits the customer bill. And so that happened in early October of 2018. So if we play it by the tips to use a golf term, we would have to file our next ISRS by the beginning of October of 2021. There is nothing in the legislation or anything else that’s comes out. That precludes us from filing a rate case whenever we choose to based upon our assessment of regulatory liability.

Okay. That's extremely clear. Thank you, all.

Thank you, Chris.

[Operator Instructions]. Our next question will come from Sarah Akers with Wells Fargo.

Hi. Good morning.

Good morning.

Good morning.

Good morning.

Can you repeat the comments about how you’re going to be treating this going forward? Did you say that you will not be booking any ISRS revenue or margin until this is resolved?

Sarah, this is Steve. I can take care of that. If you would – there's a detailed slide in the deck, it's Page 22 which outlines all the different layers. It was also one of the slides that supported the prepared remarks. We have to as we go through the process that Steve and Suzanne and Mark just talked about, we have to record the revenues based upon the appellate court ruling until it is overturned, remanded or we get more guidance. So there are two pieces. The one piece is plastics. That's a history issue from 2016 to 2017. You're asking about the second piece which I believe was the third of the three rulings which dealt with the October 8, 2018 ISRS that the court remanded back to a public service commission because they didn't believe we have met the standards of worn out or deteriorated for cast iron and bare steel. I’ll refrain from any other comment at that point. So we have reversed the earnings that we recorded in 2019 that was $8 million and any collections we get in 2020 as a result of that, which it was authorized at $8 million. You're going to see on an annual run rate basis, it's about that much. We would record that in that same regulatory liability. So we would not get the revenue margin of our earnings benefit of those ISRS collections, but we will continue to collect those until we have better determination on how the overall ISRS rider is going to be handled.

Got it. And so then when will you normally make your next ISRS filing? And is that still planned?

Well, that's a great question and I think that falls in the same category as we've got a – we've got a few things that we need to do. Mark alluded to a couple of those in the legal realm. And then we'll figure out when the right time to file ISRS is. We generally have two per year. And so we would be coming up on the time period where we would normally under normal circumstances and normal recovery would be filing our next ISRS which would include the construction that happened during the December period. We have not decided if we’re going to file that ISRS and start the process or engage in more discussions with the various parties. And frankly we’ll need to have those discussions before we decide what to do next.

Yes. And Sarah the point that Steve made I think is critical and that it’s not exactly every six months. We have two within a year and so we do have some flexibility relative to the timing of the next filing.

Got it. Thank you.

Thank you, Sarah.

Our next question comes from Selman Akyol with Stifel.

Thank you. Good morning. I guess in your prepared comments, you stated that commission could create its own cure and then further along it was mentioned that the commission has been aligned with Spire’s position. So I guess just my first question is, is it still too early for any of those conversations or have you spoke to the commission about this pathway at all?

Our focus has been – obviously it’s been a very short period of focus on ending our year and getting on this call. So we have not had those conversations. And my reference to the commission in the 15 years is there’s a legal structure, there’s a legislative action that created this ISRS that went to the commission. The commission has authority over that and they’ve been regulating this program for 15 years for a mass buyer; buyer Missouri East, buyer Missouri West. And so there’s a history in terms of implementation of this program. And so my comment again was based on the historical aspect. And when you have a regulatory program and it’s been in existence that long, it’s really been legally tested in my view, again, not be an employer. So again trying to figure out what they may or may not do going forward, we’re simply sharing that there are multiple avenues to take and even in the regulatory environment they may take some action, as Steve Lindsey talked about with the ISRS filing, Steve Rasche talked about rate case filing. So we have a lot of options and directions that we can take that.

Okay. And then just thinking about STL Pipeline, it looked like there were still $50 million to be spent and I’m just kind of curious what was – with it being placed in service, what’s still outstanding for the pipe?

Selman, this is Steve. We just put the pipe in service literally last week, so all the spend that we’ve incurred since 9.30 to get it put in place would clearly fall into fiscal 2020. And then there’s still some restoration work to be done and other things that we need to do in order to finish up the construction project. It is not unusual to go into service and still have some of that ancillary stuff that needs to be done. But that’s our – our best estimate is the $50 million and a good chunk of that has already been spent. And as a reminder, when we talk about capital spend, we generally go to the capital spend that is on the cash flow statement, which is cash. So I can assure you that Michael and the other contractors have incurred work that will show up once we pay them in October and November as we finish up the work. So a key thing to remember is the total cost of the pipeline is $265 million, which is really right on top of the $262 million number we talked about three or four months ago once we knew that we were going to get the pipeline in before the end of the year. And as Suzanne mentioned, we were able to do that about six weeks earlier than the end of the period we had thought.

Very good. And then I guess you had also been looking around for maybe some additional pipeline opportunities on the West side of the state. Was there anything that has developed since past quarter?

Yes, we continue to study that. But this past year of course we've stayed very focused on moving our marketing team to Houston and expanding that business as well as what I've mentioned around storage and completing the pipeline here to this region. But yes, we are evaluating those options and also continue to study what is working in Alabama and other options we might have there as well as we continue our program.

All right. Thank you.

Thank you.

Thanks, Selman.

[Operator Instructions]. Our next question comes from Michael Weinstein with Credit Suisse.

Hi. Good morning.

Michael, good morning.

Hello, Michael.

Hi. So how much of the ISRS work going forward is going to be covered under that worn out and deteriorated standard now being enforced by the Court of Appeals? And more to the point, how much work going forward is going to be for intermittent plastics and cast iron and bare steel replacement that could be disputed? Is the entire amount of the spending going to be in that regulatory liability going forward, all spending?

The test that you referenced that was taken up by the court, any bare steel and cast iron pipe and at least based on that court’s vision would apply. The question is and in our view the commission again has proven that it’s worn out and deteriorated just by the very nature of the age of it. And so therefore the commission has approved our filings repeatedly. And so in our view, it speaks for itself. Not to mention and Steve Lindsey can talk about this, but we have what is called a DIMP plan. And I'll let Steve talk to that in terms of the planning and what that does. And again that DIMP plan is something that's across the United States for all gas companies that have bare steel and cast iron pipe.

Hi, Michael. This is Steve. And so, again, if you think about kind of the intent or the spirit of the ISRS legislation and ultimate statute, it was to accelerate the replacement of bare steel and cast iron. Now the criteria, it was been in place in the original language, but we've been operating for 15 years under if it's bare steel and cast iron and we prioritize, like Suzanne mentioned, based on our DIMP plan, which takes in consideration leak history, ongoing maintenance, things like that, that's the way we prioritize it. So from that perspective, we view that everything that we've been replacing is eligible under that statute. Now the plastic piece is different. Again, we contend that it's better and more efficient for us to replace entire segments, which include the interspersed small piece of the plastic within the system. We still think that's a better approach and really from the OPCs perspective, you would think they would support that because it is a lower cost ultimate outcome which should benefit consumers. So again, on both those pieces and on the plastic, I'll say, that's a very, very small amount. So I wouldn't get overly concerned about that. The bigger piece for us is, again, it's the bare steel and cast iron which is everything really that falls under the ISRS program.

And I hate to get too much in the reef here, but I've mentioned this on calls before. Against the backdrop of what Steve just described, our engineering team, there is a holistic planning for the entire region because pressures are changed, receive points are changed and so forth. So this DIMP plan is a master plan. It's not just simply removing one small piece of pipe and throwing in another piece in the ditch. It's holistic planning against the backdrop, as Steve mentioned, and a very structured approach consistent with what 42 other states are doing across our region. And again, the eight that aren't is because they don't have bare steel and cast iron pipe. So we absolutely believe that we're at the highest standard and doing all this work correctly on behalf of our customers and at the same time keeping their bills, like I've mentioned a few times on this call, 20% lower.

Yes, that will make sense. And I wouldn't question the safety aspects of it. You guys are the experts. But I'm wondering – so how much earnings are being essentially deferred by booking the regulatory liability going forward and what is your assumption in the 4% to 7% growth rate that you've reiterated?

Michael, this is Steve. I think I can handle that. The amount that was deferred as of 9.30 was $8 million and that is the estimated run rate for the only active ISRS layer that is subject to the appeal court ruling. So you can – if all things were to play out and we got no determination for the entire year, then $8 million of top line revenue and something less than that given the tax benefit would be at risk. That is kind of where we stand today and we’ll have to keep watching and see what happens as we go forward. We would hope that before the end of the fiscal year, we have some determination on what's going on. But we'll have to wait and play that out. A couple of other points. We're not talking about prudent rate based investment. In fact, there’s no debate and the court was clear that they're not debating the prudence of the investment. It's really about qualification for ISRS. So, if in the worst case scenario where we don't get favorable forward view or comfort about what's happening with ISRS, then we would go back to the earlier question and look at our rate case timing and we could accelerate our rate case timing if we needed to do that in order to minimize regulatory lag. The 4% to 7% is a five-year forward view. As you know, we are pretty, pretty manic about having a long-range plan, managing that and managing it with greater specificity, especially as we get closer to the current time period. And there is nothing that we had seen in any of the work that we've done so far, including and notwithstanding the Court of Appeals ruling that dissuades us from our ability to continue to grow rate base at about 6% per year, given the capital spend that we have and driving growth over time. Now that growth could be lumpier and tie closer to rate case outcomes if we don't get the recovery on ISRS that we would expect and that we’ve historically had for the last 15 years. That's the scratchy kind of uncertain part that we're dealing with right now, which is the singular reason why we're reticent to issue 2020 guidance until we have a bit more clarity into what's going on.

Got you. Thank you very much. One last question about STL Pipeline. You've got the ability to raise rates at Spire Missouri by $0.02 in MMBtu. Is that going to cover the full 265?

So we already went to FERC and enacted that process. So that's already been accomplished, the raising of the $0.02.

Yes. Michael that was de facto with the increase in the maximum rate and that was pre-negotiated in the present agreement, which is now three years old. We've talked about this in the past and our cost estimates haven't really changed too much. We're able to offset some, but not all of the additional total costs that are $265 million. So by definition, at the beginning of the pipeline, the ROEs will go down a little bit, but we still feel they're within the range of what we're seeing in terms of FERC rates right now, assuming a 50-50 cap structure, which is pretty standard in these projects. Our rate of return will be in the low 12% range, which is still the right place to be and it's actually if you read the tealeaves and what's happening in Washington DC, ROEs tend to be coming down a little bit based upon some of the discussions of the commissioners. So it's clearly an ROE, which is above what we're seeing in regulated utilities. And there is the opportunity over time for us to take advantage of the extra 50 a day that is not currently under contract with Spire Missouri East, or over the much longer period, if we find a customer who wants to take more than that to do a new construction project which would include – increase the capacity, probably add compression to the pipe that would increase the capacity above its MAU, its current capacity of 400 a day. That's a much longer-term project. We don't have anything to discuss at this point, because frankly we just got the pipe in service and those customers generally wouldn't be coming forward until they saw the pipeline was operating as it was intended.

Got you. Thank you very much.

[Operator Instructions]. As I'm showing no further questions, this will conclude our question-and-answer session. I would like to turn the conference back over to Scott Dudley for any closing remarks.

Well, thank you everyone for joining us. We will be around the rest of the day for any follow-up questions. We look forward to talking to you then. Have a great Thanksgiving. Talk to you soon.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.