Scott Dudley - Managing Director, IR Suzanne Sitherwood - President and CEO Steve Rasche - SVP and CFO Steve Lindsey - EVP and COO, Distribution Operations.

Andy Levi - Avon Capital Sarah Akers - Wells Fargo Chris Turnure - JPMorgan Ashar Khan - Visium Asset Management.

Good day and welcome to today’s Laclede Group Fourth Quarter Fiscal 2014 Earnings Conference. My name is Caroline and I will be your web event specialist today. At the end of today’s presentation, we will have a question-and-answer session and questions will be taken over the telephone conference.

[Operator Instructions] Additional instructions will follow at that time. It is now my pleasure to turn today’s conference over to Scott Dudley, Managing Director of Investor Relations. Scott, the floor is yours..

Well thank you and good morning everyone. Welcome to the earnings conference call for our fiscal fourth quarter and full year of 2014. We issued a news release this morning announcing our results and you can access that release on our Web site at thelacledegroup.com and that's under the News Releases tab.

Our call today is scheduled for about an hour and will include a discussion of our results and a question-and-answer session at the end. Prior to opening up the call for questions, the operator will provide instructions on how to join the queue to ask your question.

Presenting on our call today are Suzanne Sitherwood, President and CEO; Steve Rasche, Executive Vice President and CFO; and also in the room with us are Steve Lindsey, Executive Vice President and Chief Operating Officer of Distribution Operations; and Mike Spotanski, Senior Vice President and Chief Integration and Innovation Officer.

Before we begin, let me cover our Safe Harbor statement and our use of non-GAAP earnings measures. Today's earnings conference call, including responses during the Q&A session, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Our forward-looking statements speak only as of today, and we assume no duty to update them. Although 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.

A description of the uncertainties and risk factors can be found in our annual report on Form 10-K which will be filed later today. In our comments, we will be discussing financial results in terms of net economic earnings and operating margin, which are non-GAAP measures used by management when evaluating the Company's performance.

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 impacts related to acquisition, divesture and restructuring activities, including one-time costs related to the integration of MGE and the costs related to the acquisition of Alabama Gas Corporation.

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.

A full explanation of the adjustments and a reconciliation of these non-GAAP measures to their GAAP counterparts are contained in the news release we issued this morning. So with that, I will turn the call over to Suzanne..

Thank you, Scott. Let me add my welcome to those who have joined us this morning. Before I get to the task at hand, I would like to share a few remarks regarding the Ferguson civil unrest. I’m sure most of you saw the Grand Jury’s decision and the aftermath.

Please note that under Steve Lindsey’s leadership, our operational teams have been working with the authority since August to make sure our customers and employees stay safe and we continue to maintain a reliable gas system. Two years ago, I had the good fortune to add Al Moore to our team as our Director of Security as he was retiring from the St.

Louis Metropolitan Police Department. Al’s 20 years of experience with the police have been invaluable. We also added two years ago a seasoned executive around employee and community safety as well as an expert on standing up and incident support team in the event of a need for crisis management at any level.

Steve Lindsey and I have worked closely with Tim Goodson over the years. The combination of Steve’s experience along with a seasoned operations team, supported by Al and Tim have allowed us to continue to manage our operations in a safe and reliable manner.

I’ll conclude by saying, please keep the impacted families and communities in your thoughts and prayers during this complicated time. Thank you. Now turning to our fiscal 2014 results, I’m happy to report that 2014 was a record year, as we continue to execute on our growth strategy. Mostly my remarks will focus on our many accomplishments.

Steve Rasche will follow me with a review of our operating results and other financial matters including our outlook for 2015 and beyond. As I’ve shared before, it’s not growth for growth's sake, rather growth that delivers on the commitments we made to investors and other stakeholders.

The strategy we have consistently pursued over the last two years include, investment and pipeline replacement infrastructure, organically growing our existing businesses, acquiring gas companies to which we can imply our operating model and leverage our natural gas industry expertise and developing and investing and CNG fueling and other technologies.

Let me take a moment to review our achievements in each of these areas starting with acquisitions. The marquee headline for us in 2014 was the purchase of Alabama Gas Corporation or Alagasco, which we completed effective August 31st, about a month ahead of our original target date and way ahead of industry precedent transaction.

We were able to finance and close on the strongly accretive acquisition in a relatively short period, less than five months from announcement to completion, thanks in large part to a straight forward and unanimous approval from the Public Service Commission Alabama.

Upon announcing completion of the Alagasco purchase I and other members of the leadership team are on the ground in Alabama to welcome Alagasco’s customers, employees and communities into the Laclede family. Even before closing, we have started looking ahead to our integration process.

The functional integration teams, which include members from both Laclede and Alagasco are now hard at work on the detailed integration planning which will continue through the first half of the fiscal 2015 year. This Laclede approach is very similar to how we manage the integration of MGE, which I'm pleased to note continues to go extremely well.

As noted last quarter, the planning for the MGE integration process included resulting labor matters, completing a general rate case and integrating the information technology platform.

Also as previously reported, we reached agreement in April and May with our clerical and field employee unions on new contracts that resulted in greater consistency around wages and benefits and expanded the participation in our Company wide performance program to align our teams and drive improved results.

And we reached agreement in MGE's rate case effective May 1 which made permanent approximately $7.8 million of annual revenue being collected under the Infrastructure System Replacement Surcharge or ISRS.

Regarding the integration of MGE’s information technology, we are on track to complete this summer from the integration of the customer care and billing system, as well as the work and asset management system. We’ve completed the finance supply chain and human resources system integration last April.

With regard to the rest of our detailed functional integration plans, I'm pleased to note that we ended the year ahead of our synergies planned. We remain on pace to achieve run rate savings in non-fuel O&M expenses of $25 million to $34 million in the third year of the process, which is fiscal 2016.

Now turning to pipeline replacement, investing in the safety and viability of our pipeline infrastructure continues to be an important driver of our organic growth. We ended the year ahead of target for miles of distribution infrastructures replaced at both Laclede and MGE.

We replaced a total of 139 miles, including 83 miles of tight at Laclede gas a 20% increase from fiscal 2013 and more than twice miles replaced in 2012. At MGE we replaced 56 miles of pipe, which is more than the total for the three prior years combined.

As Steve will discuss, we exceeded our goal for pipeline miles for understanding our original CapEx budget, again creating efficiencies. While among the topic of pipeline replacement, let me provide a quick update on our recoveries under interest. With a resolution of the rate case, MGE's ISRS surcharge was reset zero.

On July 25 MGE filed with the Missouri Public Service Commission to establish a new ISRS writer and effective October 18th we were approved to establish a new writer for $2 million annually.

Laclede Gas also filed for an ISRS increase for its recent pipeline replacement investment and was awarded a $2.8 million increase effective the same date, bringing its total interest recoveries to $9.8 million annually.

Turning to our initiative in compressed natural vehicles I am pleased to say that the performance of our first Spire natural gas vehicle fueling station at Lambert, Saint Louis International Airport has exceeded our volume and revenue projections in its first year of operation.

We teamed with Siemens on the development and construction of this flagship station. As we announced last week we have broken ground on our second Spire station located in Greer, South Carolina. The station is designed to primarily serve Class A trucks that is tractor trailers and will open in mid-calendar 2015.

It will be conveniently located next to an all new QuikTrip travel center at the intersection of Interstate I-85 and Highway 101. As with our first Spire station at the Saint Louis Airport, we are teaming again with Siemens as Spire will build, own, operate and maintain the station in addition to Laclede Energy Resources providing the fuel.

We have a number of other projects that are well along in the discussion phase and we look forward to sharing more about them when the time comes. We are having success in our growth initiative because we are focused and speaking to what we said we were going to do.

We understand the retail natural gas delivery business and how it enriches the life of our customers. It is this expertise that we are leveraging every day to increase the value we deliver to our customers and our shareholders and that expertise showed up this past winter is our industry navigated one of the coldest winters on record.

As Steve will cover in more detail, we were well positioned during the extreme cold of last winter to use our market knowledge and assets to capture value at LER and Laclede Gas to offer some sale.

We continue to believe there are opportunities to capture value by serving core natural gas customers, who are inside and outside of our traditional retail utility customer footprint. This value is achieved through having the right supply, transportation and storage assets, and relationships in the broader upstream market.

To that end, in addition to LER's function, there is an effort underway to better understand existing supply, transportation and storage assets and to evaluate all other upstream assets.

While system reliability planning is the objective of the effort, we are also evaluating how to better use those assets and expertise to create additional value for our customers and shareholders.

We will have more to say as we get deeper into the process, but suffice it to say that whatever to decide to do, or not do, will be squarely in line with our strategic focus. Before turning the call over to Steve, I wanted to note a couple of items related to our management team and Board.

First let me take this opportunity to acknowledge the significant contributions made by Mike Spotanski, our Senior Vice President of Integration and Innovation, who has announced his plans to retire, effective December 31st.

Mike has had a very successful 33 year career with Laclede, that most recently has focused on leading our integration efforts for MGE and now Alagasco as well as standing up our Spire natural gas fueling solutions business.

We are grateful for all of Mike’s contributions to the Company’s success, reflecting his leadership, hard work and commitment to Laclede over the years. We will certainly miss him, but we take comfort in knowing that he has built a strong bench that will carry on the fine work that’s already being done.

Mike, we wish you and your family great health and much happiness in future endeavors. As a Company, our ability to succeed is strongly linked to the support and leadership of our Board.

I'm pleased to note in fiscal 2014, we added two very capable and experienced individuals with energy background to our Board of Directors, Mark Borer and Maria Fogarty. We look forward to their contributions and guidance moving forward along our path to further growth and value creation.

One of the ways we deliver value to our shareholders is through dividends. Last week, the Laclede Board of Directors declared a quarterly dividend of $0.46 per share increasing the annualized rate to $1.84 per share. This represents an increase of 4.5% and marks the 12th consecutive year that the Company has increased its dividend.

Now, let me turn the call over to Steve Rasche to view our fiscal 2014 full year and fourth quarter results. Overall, we posted strong results. In fact, record net economic earnings per share $3.01. These results are in line with our original guidance, excluding the unplanned lift from extreme cold weather this last winter.

Steve?.

Thanks Suzanne. Good morning everyone. Let me review our operating results for the fiscal year 2014 and the fourth quarter ended September 30, and give a few updates, including our outlook for 2015 and beyond.

Looking first at our full year income statement, total operating revenues were $1.6 billion, operating margin or earnings contribution after gas cost and gross receipts tax of $600 million was higher by $229 million or 62% compared to last year.

Looking at the components of the operating margin, Gas Utility margins of $571 million were up $222 million from the prior year with approximately $187 million of that increase due to the additions of Missouri Gas Energy and $15 million due to the September addition of Alagasco.

The remaining margin improvement of $20 million was the result of higher demand and off-system sales capacity release as well as higher ISRS and propane revenues. We also saw customer growth, adding roughly 3,000 customers last year in Missouri. Including Alagasco we now serve over 1.56 million customers.

Gas marketing generated operating margins of $26 million, an increase of just over $80 million from last year as higher margins earned during last winter more than offset the expiration of two supply contracts in fiscal ’13 and early fiscal ’14. Stepping back, Laclede’s higher overall margins were offset in part by higher operating expenses.

Operating and maintenance expenses of just under $288 million were higher than last year by $107 million. This increase was due to several factors. First, nearly $92 million of that increase was due to adding MGE’s full year operating results, another $12 million is from Alagasco’s September operating results.

The remaining increase of roughly $3 million reflect higher operating cost associated with the severe winter, principally bad debts and maintenance cost, largely offset by cost controls and the benefits of scale in areas like compensation, benefits and supplies.

Depreciation and amortization of $82 million was up $34 million from last year, of which $26 million is due to MGE for a full year and $4 million is attributed to Alagasco. The remainder represents the added depreciation associated with our higher level of capital spend.

Taxes other than income of $112 million were higher by $52 million, of which $45 million was the incremental impact of MGE, $2 million was Alagasco and the remainder was driven by higher revenues at Laclede Gas.

Interest expense for the year of $46 million was higher year-over-year by $18 million or a net $13 million after removing Alagasco related interest. That increase represents the full year run-rate of the debt issued to finance the MGE acquisition. Income tax expense for the year was just over $32 million compared to $18 million last year.

Our full year effective tax rate was, 27.6% as compared to 25% last year. The result in GAAP net income was $85 million, up from $53 million last year. However, these results include significant cost associated with the Alagasco acquisition in 2014 and the MGE transaction last year.

In order to get transparency into the real run-rate earnings of the business, our net economic earnings excludes the impact of these transactions in the year in which they closed. As a result, just as 2013 net economic earnings excluded the impacts of the MGE transaction, 2014 results similarly exclude Alagasco.

We have included a full reconciliation of net economic earnings to net income in our earnings release. The key adjustments include first, transaction cost associated with the closing of the Alagasco deal in the fourth quarter totaling $15.5 million and comparable cost for the MGE acquisition last year of $17 million.

Second, one-time integration cost at MGE, net of the 50% deferral for Missouri regulatory purposes totaling $2.8 million in 2014 and $1.7 million in 2013. Third, interest cost incurred on debt issued in 2014 to finance the Alagasco acquisition totaling $3.3 million and comparable interest expense associated with MGE last year of $1.8 million.

Fourth, the operating results for MGE for the month of September 2013 and Alagasco for September of this year. To be clear, the 2014 results include MGE in its entirety including the financing cost associated with that acquisition. In 2015, looking forward, we will include the same for Alagasco.

It’s the stub period for each deal with limited operating results and significant transaction cost and financing incurred well in advance of the closing that we are removing to provide a clear path to run-rate operating results. With that said, on a consolidated basis, 2014 net economic earnings were $100 million, up from $65 million last year.

On a per share basis, that equates to $3.05 per fully diluted share, up 6.3% from $2.87 per share last year. Remember these per share calculations exclude the dilutive impacts of the 10.4 million shares issued to finance Alagasco in 2014, just as we excluded the 10 million shares issued for MGE last year.

Looking at the segments, gas utilities net economic earnings improved to $92.8 million, a 64% increase from a year ago, largely driven by adding MGE.

Gas marketing delivered net economic earnings of $10.2 million, beating last year’s earnings of $8.9 million as the expiration of two supply contracts was more than offset by the favorable impact of the severe winter of $5.6 million or $0.17 per share. Let me turn briefly to the fourth quarter operating results.

Net economic earnings or the net economic loss for the fourth quarter of $2.4 million or $0.07 per share compared to a loss of $3.9 million or $0.17 per share a year ago. This improvement is due to a smaller seasonal loss from our gas utility segment, reflecting the inclusion of MGE and its more evenly distributed earnings pattern.

This benefit was partially offset by a $1.2 million drop in gas marketing earnings. Stopping quickly at the cash flow statement, cash flow provided by operating activities for fiscal 2014 or $123 million was down $41 million from last year.

Fully $40 million of these variance relates to interest rate hedging we did in advance of the Alagasco and the MGE acquisitions, leaving operating cash flow essentially equal to last year.

Working capital changes, net of this financing impact were largely in regulatory accounts for inventory unamortized purchase gas adjustment and customer accounts receivable. Consolidated capital expenditures for the full year 2014 were $171 million, including $6 million for Alagasco in the month of September.

This compares to a total spend of $131 million last year. The current year spend was focused on pipeline replacement and as Suzanne mentioned a few minutes ago, we exceeded our goals by replacing 139 miles of pipes in Missouri, almost double last year’s results.

Our year-end balance sheet reflects the significant movement resulting from the Alagasco acquisition, including our initial purchase price allocation as well as final adjustments to the MGE allocation, both at the beginning of the year. As a result, our assets, liabilities and regulatory accounts now fully reflect our new larger company.

Our capitalization includes the June issuance of 10.4 million Laclede Group common shares and $144 million of equity units. Our successful offering of group unsecured debt totaling $625 million, including three year floating rate notes, as well as five and 30 year fixed rate debt and the assumption of $250 million of Alagasco debt at closing.

Taking a step back for a second, we were able to offer just over 32% of our existing shareholder equity in 2014 and nearly doubled our long term debt and do it in a way that secured outstanding pricing and demand in the market.

We have again increased our analyst coverage, deepened our pool of institutional investors and materially increased our equity flow and our resulting post deal capital structure remains very strong with a long term debt capitalization of 50.8%, better than our target range we introduced when we announced the Alagasco deal in April.

In addition we secured a new five year $150 million credit facility for Alagasco and exercised one year extensions of both our existing Laclede Group and Laclede Gas facilities, providing a full five year run way across the Company. In total these facilities provide us the headroom and liquidity we need to support our growth strategy.

Let’s turn our attention to 2015 and beyond for a second. First, we remain comfortable with our long term earnings per share growth target range of 4% to 6% and the fact that after adjusting for the $0.17 per share of weather benefit at LER in 2014, we should grow above that range in both fiscal 2015 and 2016.

These earnings fully include the accretion from adding Alagasco to the Laclede family and the financing to support the transaction, as well as continued organic growth initiatives across the gas utilities. The seasonality of earnings will continue and will change in 2015.

Our earnings release includes the table that compares our actual 2014 and anticipated 2015 earnings distributions by fiscal quarter.

Normalized net economic earnings per share for 2014, excluding the weather benefit of LER were distributed 38% in the first quarter, 50% in the second quarter, 15% in the third quarter and a small loss of 3% in the fourth quarter. Alagasco’s earnings were a bit more concentrated in the heating system season, given its rate design and milder climate.

As a result, we anticipate the distribution of net economic earnings per share in 2015 to change as noted in that table with the midpoint of our estimates at roughly 35% in the first quarter, 70% in the second quarter 5% in the third quarter and a loss of 10% in the final quarter.

Now again this is a forecast and it assumes normal weather, and as we all know weather is rarely normal. So we anticipate there will be a few percentage points plus or minus from that distribution estimate.

We also anticipate our earnings mix to change due to the largest scale of the company, a higher share count and expected growth in gas utility earnings due to the accretion from both Alagasco and MGE. We now expect our utility business to grow up from approximately 93% of our consolidated 2014 net economic earnings to roughly 98% in 2015.

Looking at income taxes, we anticipate our effective book tax rate to move up the low 30% range in 2015, reflecting both the change in the mix of pre-tax earnings and recognizing the fact that Alagasco has historically had an effective tax rate closer to the marginal rate.

Finally we anticipate capital spending to be approximately $300 million next year, up from $171 million this year. This increase is driven by the addition of Alagasco, as well as the continued ramped up in Missouri of our pipeline replacement program.

We have good line of sight into our plans in Missouri and we are currently working with Alagasco to more fully develop their plan. Given the support of regulatory environment in both Missouri and Alabama, we expect to continue this new level spend over at least the next five years or investments of roughly $1.5 billion.

We anticipate this spend will be financed with our ongoing and growing cash flows and periodic access to the debt markets at the operating company level. So in summary, it's been another busy and eventful quarter and year.

Laclede’s in a strong position with the team focused on meeting or exceeding our commitments to our investors, our customers, our communities, and our team. We thank you for your confidence in us and we look forward to sharing our success as we progress to 2015. Let me turn it back over to you Suzanne..

Thank you Steve. Overall 2014 was a very successful year in which we delivered on our strategic objective and commitments to the market and other stakeholders. We delivered record earnings reflecting strong performance during an extremely cold winter period and met our guidance for the year, excluding the weather benefit.

The MGE integration continues to go very well. We are ahead plan in terms of schedule and savings. We completed a second accretive acquisition, in line with our growth strategy as did so within five months from announcing it.

We exceeded our organic growth target tied to miles of pipeline replaced and we maintained a strong financial profile including solid investment rate credit ratings and excellent liquidity. In 2015 and beyond we will continue to be focused on integrating MGE and now Alagasco to deliver on our earnings growth target.

We will drive further organic growth through customer initiative and build our accelerated pipeline replacement program which will be rolled out in Alabama this year. We are in a strong financial position to carry out our growth plans and we have confidence in our ability to keep delivering value to investors, employees and customers alike.

We take these commitments very seriously and we look forward to updating on our success in meeting our goals and delivering on our commitments. We are now ready to take questions..

And at this time, we would like to take any questions that you might have for us today [Operator Instructions]. Your first question will come from the line of Andy Levi with Avon Capital..

Just a couple of questions, just on synergies for Alagasco. I didn’t hear you -- at least I missed it maybe.

How should we’d be thinking if -- on synergies if any for Alagasco ’15, ’16?.

We have not provided a specific number Andy or any range of number we've talked to you and others about. When we went through the Alagasco modeling process we looked at precedent transactions and much likely do with MGE and created a range of savings. As I mentioned in my remarks we have recent split up those integration teams.

They’re headed by both an Alagasco member as well as a Laclede member and they've just begun their work and they are supposed to be completed with their body of work by the end of the second quarter and that’s of this fiscal year..

Okay, so at some point you will share those with us? Is that kind of the thinking?.

Yes. I think at some point you will see us share what we shared with MGE. We're just looking at a range of synergies over a period of time and I think that’s how we think about it..

Okay. And then you didn’t gave specific guidance for ’15 and ’16, but can you give us any thoughts on I guess consensus for ’15 is about $3.13. Was it a fairly wide range to get you there and then for ’16 $3.33 is consensus, also with wide range as far as people on the low versus the top end.

Can you comment at all, help us a little bit since you didn’t give specific guidance?.

We do have a way that we think about that I'm going to pass the baton to Steve because he so elegantly summarizes it. So go ahead..

Andy this is Steve. Great question. As we've talked about in the past, and you and I have had that specific conversation, we understand the desire for earnings guidance in a range and I think we continue to work down to that path.

If you can remember, it was only a couple of years ago we started earnings calls and I want to make sure that we’re very confident in how we’re going to deliver that when we finally get to that point of introducing it.

You are right; if we look at the main analyst estimate, first call, for the next fiscal year 2015 at $3.15 a share, actually it’s not that bad of a range. It looks to me based on the information I have in front of me, high end of the range is $3.24, low end $3.10. I would say we’re comfortable with the mean and estimate.

I think that’s a representative sample.

And again, if you go back to the math that we already have been talking to the market about or what we confirmed today starting with the run rate earnings of our business, which would be $3.05 minus $0.17 per share because that was the unusual weather impact, and we should grow above our range at the top of that range for the long term at 6%.

So $3.15 clearly falls within that category and I think that’s a good spot to be thinking about going forward..

And then is there any comment on ’16?.

Not at this juncture. Again, if you go back to our guidance and we’re going to grow above that 4% to 6% range as we go to ’16. So if you do the math, we clearly indicate that the $3.33 is within that range to think about as we look two years up..

Thank you.

And then how is your work with senior management as far as compensation relative to making your earnings goals?.

We have a compensation plan that obviously is available in the public domain and basically it's made up of three components. There is a base salary component that is determined by the board for Section 16 and market driven based on years of experience, that sort of thing.

There is an annual incentive plan [indiscernible] that is focused on net economic earnings so that we stay focused on executing throughout the year and of course third piece is an equity component that has a longer term of sight -- it has a net economic earnings piece as well as the total shareholder return piece relative to our peers.

And so we believe and I believe the board believes that we have the right balance with our compensation structure and we’re focused on the right things which is why, I also believe you see in terms of our execution and I went through it in my remarks that we’re properly executing on a short-term basis while the long-term basis..

And again on the net economic earnings, is that reset every year.

So there’s a target for ’15, I guess?.

That’s right..

Well, what is the target for ‘15? [Multiple Speakers].

Andy, when we discuss with our Board, as we did in our meeting last week, we spend a lot of time looking our longer range plan. We plan over the traditional buckets of three and five years and we’re looking at how we’re going to drive value over the longer term.

And so all of the targets that Suzanne referenced are tied back to our longer range plan of how we’re going to drive value to everybody in the food chain but clearly to our shareholders also. .

Your next question will come from the line of Sarah Akers with Wells Fargo..

Just wondering if you could expand on the new opportunities that you’re evaluating, I know nothing is ripe for announcement right now, but can you say whether these initiatives are the inside or outside the utilities and the risk profile of the projects that you’re looking at?.

Yes. So there’s -- if you think, Sarah, I think from your question from a utility perspective, in terms of acquisition, we’ve had two major acquisitions there, as you are aware.

And you're also aware we have a corporate development group that is always looking at what’s available, but management will make the determination whether or not to proceed on any acquisition, be it large or small. And so that would just be over time an expansion of our gas utility segment.

We’ve also talked about our organic growth relative to pipeline replacement and we’ve ran through the map on that, what that has looked like and prospectively a little bit of what are the look like. And in addition to that, we’re focused on organic growth of the utility.

It's not just the pipeline replacement, but how we think about customer additions or expanding burner chips or new markets on our gas company system. So that’s the second piece that you’ve heard us talk about. We’ve also talked about Spire and LER. So let me hit those two rather quick. They look and act like gas company retail, gas company customers.

They’re not necessarily inside the franchise areas of our gas company, but they are retail customers and they are burner tips and meters and billing and so forth, the services that we provide inside the gas company. So it's Spire and LER.

We believe that they are important to our industry and important to providing services for those customers, but again don’t fit nicely inside that franchise area. And so that’s why we’re also focused on Spire and LER, and that’s the four categories that I have outlined earlier in my remarks..

So, when you talk about looking at the supply chain and storage and things like that, would you evaluate or are you evaluating midstream opportunities or potentially something like the rate basing of gas reserves? Are those in the opportunity set?.

Yes, I look at it this way and I’ve mentioned to you and others here, we’re a gas company and that’s what we are, and for the most part even including Spire and LER as I just described.

So when you think about all the upstream assets at the gas companies like you have articulated, the supply, transportation and storage component, we’re looking under Mike Geiselhart's leadership at a holistic project to make sure that we have the right array of those on a short-term and long-term basis for liability purposes.

And especially now having Laclede Gas, MGE and Alagasco, we want to make sure that we have that comprehensive planning process in place and have run that evaluation.

And also to the extent is that we can create value for our customers, then we also want to make sure that we’re looking at it from the perspective of value for when those assets are lying hollow.

The other piece and it gets more directly to your question, to the extent that, as we get through this process that, we believe by changing out our array that we improve our liability or create more value for our shareholders and for our customers, then we’ll embark on that and we’re not talking about being an upstream midstream company.

We're a gas company and so it is anchored back to our gas company..

Your next question will come from the line of Chris Turnure with JPMorgan..

Can you talk a little bit about Alagasco? I guess first, what their net income or net economic earnings contribution was on a full year 2014 fiscal basis, if you had owned them for the entire year? And the kind of equity -- book equity base there? And then how they’re going to contribute to growth going forward versus your 4% to 6% guidance?.

Chris this is Steve. Let me take a shot at that. I don’t have the fiscal year performance for Alagasco with me right now. We’ve owned them for exactly a month.

So we’ve really been focused on our plan of ownership and going forward, but I think more broadly speaking and getting to the second part of your question, yes, they consistently been able to earn their authorized ROE and I can assure you that they were able to do that this year.

In fact they will be returning some funds to the customers because of the cold winter weather, and they did actually move into the category in their cost containment mechanism where there is sharing mechanism below their cost range. So all good things and all things that bode well for the future for Alagasco.

So I think the important thing is they met their authorized ROE. They have five rates with the Alabama public service commission.

Those are currently under review and we would anticipate that they will go into effect at the beginning of next month, as they would undergo the normal process and those would be based upon the new ROE, about 10.8% or 10.85% with the customer service kicker.

So I think we are very confident in utility that we obtained and how we're driving that business.

From an ROE or from a capital structure perspective, as you know, when the RSE was reset almost a year ago, the bandwidth of the equity component, the capital structure from 55% to 56.5% and the Company during the last year did a great job of moving very close to that benchmark and I think that we're comfortable that we’ll be able to move up within the structure of the rates as they exit, so we can take full advantage of that increase in the bandwidth that was authorized a year ago.

So again, we're just put into a great position.

And then I think lastly on the cost, we ended below the band last year on the cost containment mechanism and clearly as we move forward, one of our goals is to operate the utility efficiently and do that within that band and I think that we’re very comfortable with where we are and I think that will create some additional value as we go forward in that aspect also..

Okay and then on your overall CapEx trends, you mentioned a $1.5 billion over five years.

Could you give us a little bit more color, one on any lumpiness there or whether that’s going to be consistent, kind of at the $300 million level over that period, and then also just how much of that’s going be flowing through the ISRS mechanism in Missouri or through Alabama and the potential writer there..

Yes couple of question there and keep me honest if I don’t get through all of that. The $300 million is clearly our target for this year and you’re right, capital spend can be lumpy. We do have long line of sight in terms of our investments in the utility business, and specifically driven by the pipeline replacement. So it could be lumpy.

But I'm not sure that lumpiness is going to be 50% swing one way or another, but it might where it will be 10% or 20% year-on-year; but I think we’re comfortable with the guidance of the amount of money that we would spend over the next five years. In terms of pipeline replacement, last year that was little bit over 50% of our total capital spend.

In that between 50% and 60%, if you go back a year earlier in Missouri, that’s our sweet spot in terms of how we allocate deploy capital in that total say $300 million capital spend and I think you can be comfortable that we’re going stay within that range going forward because we see many years' worth of opportunity to continue what we’ve already done in the state of Missouri, because we’re near run rate in the state of Missouri, looking at both sides of the state and we see the opportunity to continue to accelerate that at Alagasco.

With regard to how it fits through the mechanisms, you're right in Missouri that we have the ISRS mechanism and so there's a pretty clear path and how that translates into recovery from in return to the shareholder and recovery on our investment. In Alabama it actually works the same way.

It just -- it isn’t a specific mechanism that you can point to because we just have to go back to how the rates are actually established. So the rates that are being evaluated right now by the Alabama Public Service Commission include our assumption of the capital spend for the next year.

So it's already embedded in not only the investments we would make but also then the increase in the value of the Company and ultimately an increase in retaining shareholders equity, which again becomes part of that formula for the ultimate rate.

So although it's not as easy to identify a specific line or a specific writer, I can assure you that the investment spend down there has the same type of return dynamics that we see in the state of Missouri..

And Chris, this is Steve Lindsey.

I'll just add one other point to that, that we're often times asked kind of what’s your line of sight on pipeline replacement and given the three different jurisdictions that we're operating in, that’s somewhere in the 10 to 15 year range dependent upon the place but that gives a good long line of sight into the three jurisdictions..

Okay great.

And Steve, did you mention that 50% of the total CapEx was going flow through the ISRS or 50% of the Missouri CapEx?.

Yes, we almost Chris have to look at it in a little bit broader sense as how much is going into pipeline replacement or ISRS like investments. So that wouldn’t be 50% of the total collective years for us. It's really how much of our total capital spend are we allocating to pipeline replacement, and that would be that 50% to 60% range..

For all jurisdictions..

For all jurisdictions combined yes..

Your next question will come from the line of Ashar Khan with Visium Asset Management..

My questions have been answered. Thank you. .

Your next question is a follow up from the line of Andy Levi with Avon Capital..

Just a couple follow ups.

Just back on the Alagasco synergies, are those -- again we don’t know whether they're significant or not, but I guess when we kind of were talking about the growth rate and potential earnings, are synergies for Alagasco included in that or would that be up side?.

The synergies are included on our computation. Again that are based on subsequent transactions. And in my remarks I gave a percentage range for O&M non-fuel and so that percentage was based on historic precedent transactions again. So you could sort of do the math from there if you will..

Thanks.

And then what’s your dividend policy?.

We don’t have a "dividend policy". We have a history with our dividend and you've for couple of years seen us increase that dividend. And the line of sight that we've just talked to, I think you'll see a sort of continuation of that value add by us having a larger organization and longer scale and the investment capital and so forth.

So not a policy but surely, given what everything Steve Rasche -- I got a Steve on each of me here -- Steve Rasche went through and how that correlates back to the dividend, we seek to continue to increase value for our shareholders..

Again Andy, the kind of the -- the markers we look at is we -- as we plot our strategy over a longer period of time with dividends, because we never do this in a one year basket.

We're always thinking to the future, you would expect us to do that -- is we want to keep our payout ratio at a reasonable -- 55% to 65% is historically kind of the payout ratio that we’ve operated within and we're clearly up in middle of that range by all estimates right now.

We clearly look to the gas utilities as the organizations to fund the dividend. You don’t have to go back to many years to where -- the point where LER are making a lot of money, taking advantage of the market opportunities. But a marketing company such as LER really isn’t conducive to doing -- or paying a dividend over a long period of time.

So it’s great value when we create it and it's a key strategic part of our portfolio, but we wouldn’t want to base a dividend off of their earnings. So we will look to the utilities.

And then we also look into dividend yield to make sure that we’re in the upper half of the upper quartile of our peers and we watch that closely because we know that that dividend yield is a key component part of what our shareholders look to in terms of their overall return.

Clearly, we’re getting more folks interested in the growth component of our TSR. That’s where we’ve been driving a lot of our focus.

And finally, in terms of the increase, back to what Suzanne mentioned, we do look at that every year and we have made now two steps in a row where not only have we increased the dividend, keeping with our long standing tradition of increasing the dividend, but we’ve now increased it at a faster rate. It was a 3.5% increase last year.

So 4.5% increase this year. And I think that just shows our confidence and our ability to continue to drive earnings per share, which becomes one of the metrics we look at when we think about where our dividend is going to be for the long term and our confidence in our ability to execute on our strategy..

So should we assume I guess, with the earnings growth starting to accelerate in ’15 and ’16, above your 4% to 6% range and obviously like you said, you’ve accelerated slightly the dividend growth over the last two years? Is it possible that we could see a further acceleration of the dividend growth in ’15 and ’16, assuming you make the numbers that you hope to make?.

We clearly have the opportunity to consider that going forward. At the same time we’re investing a lot back in our business and investing a lot in capital.

So we do take a look -- a fairly holistic view of where the cash is and how much we want to invest in the business to drive the growth component of TSR and how much we want to return to our shareholders. It's always the balancing act but it is something we look at every year..

[Operator Instructions] And currently we have no further questions. I’ll turn the call back over to you for closing remarks. .

Okay, great. Well, thank you all for joining us for our call on earnings. Happy Thanksgiving and we’ll be talking to you soon. Thanks so much..

Thank you to all of our participants for joining today. We hope you found this presentation informative. This does conclude today’s conference. Have a good day..