Investor Presentation June 28, 2016
2 Spire | Investor Presentation – June 28, 2016
Forward-looking statements and use of non-GAAP measures This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our forward- looking statements in this presentation speak only as of today, and we assume no duty to update them. Forward-looking statements are typically identified by words such as, but not limited to: “estimates,” “expects,” “anticipates,” “intends,” and similar expressions. A lthough our forward-looking statements are based on reasonable assumptions, various uncertainties and risk factors may cause future performance or results to be different than those anticipated. For a more complete description of these uncertainties and risk factors, see our Form 10-K for the fiscal year ended September 30, 2015 and our Form 10-Q for the quarter ended March 31, 2016, both filed with the Securities and Exchange Commission (SEC). This presentation also includes “net economic earnings,” “net economic earnings per share,” “operating margin,” “EBITDA,” and “adjusted long -term capitalization” non -GAAP measures used internally by management when evaluating the Company’s performance and results of operations. Net economic earnings exclude from net income the after-tax impacts of fair-value accounting and timing adjustments associated with energy-related transactions, as well as the after-tax impacts related to acquisition, divestiture, and restructuring activities, including costs related to the acquisition and integration of Missouri Gas Energy (MGE) and Alabama Gas Corporation (Alagasco). Operating margin adjusts operating income to include only those costs that are directly passed on to customers and collected through revenues, which are the wholesale cost of natural gas and propane, and gross receipts taxes. These internal non-GAAP operating metrics should not be considered as an alternative to, or more meaningful than, GAAP measures such as operating income or net income. EBITDA is earnings before interest, taxes, depreciation and amortization. A reconciliation of net income to net economic earnings is contained in the Company’s SEC filings, and a summary reconciliation is contained in the Appendix to this presentation. A reconciliation of EBITDA to net income and of operating margin to operating income can be found in the Appendix to this presentation. A reconciliation of capitalization per balance sheet to adjusted long-term capitalization is contained in the Appendix to this presentation. Note: Years shown in this presentation are fiscal years ended September 30, unless otherwise indicated. Investor Relations Contact Scott W. Dudley Jr. Managing Director, Investor Relations 314.342.0878 Scott.Dudley@SpireEnergy.com 3 Spire | Investor Presentation – June 28, 2016
We are Spire • Our new name better reflects the growing company we have become • Will unite our natural gas companies under one name in 2017 • We are about championing people by delivering energy that inspires • Our transformational journey has been guided by a well-articulated growth strategy • Over the last three years we have: ‒ Significantly increased our scale ‒ Expanded our geographic footprint ‒ Quadrupled our enterprise value 4 Spire | Investor Presentation – June 28, 2016
We are a gas company at our core 1 • Five gas utilities 1 across three states • Largest gas company in Missouri and Alabama • Focus on safe and reliable service, community development and growth 1 Gives effect to the pending acquisition. 5 Spire | Investor Presentation – June 28, 2016
Successfully executing on our growth strategy Growing our gas Acquiring and Modernizing Investing in utility business integrating gas our gas assets innovation utilities Investing in prudent Added 1 million Positioned Gas NEWblue infrastructure customers Marketing for IT upgrade upgrades continued success MGE (2013) Two Spire CNG Successful organic fueling stations Improving supply Alagasco (2014) growth initiatives diversity, reliability Mainstay and resiliency Mobile Gas and Growing partnership Willmut Gas commercial and Spire St. Louis (pending 2016) industrial load Pipeline 6 Spire | Investor Presentation – June 28, 2016
Growing our gas utility business 7 Spire | Investor Presentation – June 28, 2016
Growing organically • Increasing revenues and margins – Growing customers and improving retention – Increasing penetration – Achieving operating efficiencies • Seizing market opportunities – Building commercial/industrial load – Line extensions in Missouri service areas – Developing other products and services – Acquiring municipal gas utilities • Realizing early successes – ~1% customer growth across all three utilities – Converted several large industrial customers – Economic development partnerships in AL 8 Spire | Investor Presentation – June 28, 2016
Higher capital investment Capital expenditures (Millions) $150 • FY16 capital target of $320 million $100 • 2/3 of FY16 utility spend recoverable with minimal regulatory lag $129.5 $121.8 $50 • 5-year forecast raised to $1.8 billion from $1.6 billion $0 1st Half FY15 1st Half FY16 • Additional upside from Mobile Gas and Willmut Gas upon closing 5-year forecast: $1.8B+ (Millions) – Run rate capital spend of ~$17 million $430 – Opportunity to increase investment in $400 $370 $365 95 $335 prudent infrastructure upgrades $320 40 40 $290 10 $300 110 110 110 110 98 96 $200 $171 72 225 225 220 212 215 $100 194 99 $0 2014 2015 2016E 2017E 2018E 2019E 2020E Other Utility and Non-Utility Utility, with Minimal Lag Spire St. Louis Pipeline 1 ISRS is Infrastructure System Replacement Surcharge in Missouri. 9 Spire | Investor Presentation – June 28, 2016
Regulatory update • Missouri – traditional rate-setting approach ‒ Laclede Gas and MGE due to file rate cases in April 2017 ‒ ISRS increased $9 million (to $35.3 million annually) effective May 31 ‒ Office of Pubic Counsel (consumer advocate) • April 16: filed complaint alleging our Missouri Utilities are over-earning based on FY15 unadjusted ROE • May 31: we filed Motion to Dismiss and Answer to Complaint • June 14: Staff of Missouri Public Service Commission filed response recommending complaint be dismissed • Alabama – progressive approach using forward year budget, quarterly reviews ‒ Rates set based on retained shareholders’ equity Alagasco: 10.85% allowed ROE and 56.5% equity ratio • • Mobile Gas: 10.8% allowed ROE and 56.0% equity ratio ‒ Next review of RSE scheduled for 9/30/18 (Alagasco) and 9/30/17 (Mobile Gas) • Mississippi – annual rate reviews based on test year ‒ 9.32% allowed ROE and 50.0% equity ratio ‒ Acquisition approval standard: “consistent with public interest” 10 Spire | Investor Presentation – June 28, 2016
Acquiring and integrating gas utilities 11 Spire | Investor Presentation – June 28, 2016
Mobile Gas and Willmut Gas • Grows our gas utility business ‒ Adds 104,000 customers and growing commercial load ‒ Provides opportunities for additional capital investment and organic growth • Benefits customers and communities ‒ Focus on safe, reliable, and efficient service ‒ Commitment to community support • Expands Southern footprint • Adds to earnings and cash flow ‒ Accretive to NEE per share in FY18 ‒ Supports investment and dividends • Targeting close in 2016, subject to ‒ Customary closing conditions ‒ Mississippi regulatory approval of Willmut Gas acquisition (filed May 20) 12 Spire | Investor Presentation – June 28, 2016
Modernizing our gas assets 13 Spire | Investor Presentation – June 28, 2016
Spire St. Louis Pipeline • Supports gas asset modernization: ‒ Achieve more diverse supply portfolio ‒ Improve reliability and resiliency Marcellus/Utica • Gives our eastern Missouri system access to lower cost shale gas from Rockies Express Marcellus and Utica – 100% Spire ownership Spire – FERC regulated St. Louis Pipeline – Laclede Gas is expected foundation shipper MISSOURI • 60-mile pipeline • Capacity of 400 MMcf/d • Project cost $170 - $200 million • 30-36 months from open season to in-service date 14 Spire | Investor Presentation – June 28, 2016
Gas Marketing • Provides wholesale natural gas services to diverse, sophisticated customer base • Operates primarily in the Midwest • Leverages market expertise and risk management protocols and skills • Optimizes portfolio of commodity, transportation and storage contracts – Operated on 17 interstate and intrastate pipelines in FY15 – 4.75 Bcf of leased storage • 1st half FY16 NEE 1 of $2.7 million 1 See net economic earnings (non-GAAP) reconciliation in Appendix. 15 Spire | Investor Presentation – June 28, 2016
Investing in innovation 16 Spire | Investor Presentation – June 7, 2016
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