Scott Dudley - IR Suzanne Sitherwood - President and CEO Steve Rasche - EVP and CFO Steve Lindsey - EVP and COO.

Insoo Kim - RBC Capital Markets Gabe Moreen - Bank of America Michael Weinstein - Credit Suisse Brian Russo - Ladenburg Thalmann.

Good morning and welcome to the Spire Third Quarter Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Scott Dudley, Head of Investor Relations. Please go ahead..

Good morning everyone and welcome to our third quarter earnings call. We issued an earnings news release this morning and you can access that on our website at spireeneergy.com under News. There's also a slide presentation that accompanies our webcast today and that can be downloaded it either from the website or from the webcast site.

Today’s scheduled for about an hour and will include a question-and-answer session. Presenting on the call today are Suzanne Sitherwood, President and CEO and Steve Rasche, Executive Vice President and CFO also in the room with us is Steve Lindsey, Executive Vice President and Chief Operating Officer of Distribution Operations.

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. 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, there are various uncertainties and risk factors that 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-Q for the third quarter ended June 30, which we plan to file later today.

In our comments, we will be discussing financial results in terms of net economic earnings and contribution margin, which are both non-GAAP measures used by management when evaluating our performance and results of operations.

Net economic earnings exclude from net income the after-tax impacts of fair value accounting and timing adjustments associate with energy-related transactions also the after-tax impacts related to acquisition, divestiture and restructuring activities.

Contribution margin adjust revenue to remove cost that are directly passed on to customers and collected through revenues, which is a wholesale cost of natural gas and gross receipts taxes. A full explanation of the adjustments and a reconciliation of 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 welcome to everyone joining us this morning. I'm pleased to have this opportunity to update you on how we continue to deliver on our promises and earn your trust. Our overarching promise to our investors is to grow the company in a way that we can best serve our customers and we have done that.

With another solid performance in the third quarter you can see that we continue to deliver on that commitment. Thanks to the hard work and dedication of our 3,300 Spire employees across Alabama, Mississippi, and Missouri.

These employees give their best to our customers every day and continues to raise the bar and result including strong customer satisfaction rating, continuously improving operating and safety metrics and strong financial performance.

It's all about executing on our strategy, a consistent four part strategy that has kept us laser focused on growing our company over the last five years. It's about what we've all committed to doing.

And it's also about how well we execute against that strategy, which means that we need to be able to flex our priorities to respond to market opportunities, while understanding new opportunities that come along from being a bigger company.

Our four growth strategies are fundamentally the same as they were four years ago, what's changed is the maturity of each strategy and how we prioritize them.

First, growing our company and business organically; secondly, investing in infrastructure; thirdly, acquisitions and integration and finally supporting growth through innovation and technology. Let’s start at the top on slide five, organic growth means driving growth at the top-line and efficiently managing the cost structure overtime.

We continue to achieve and create customer growth for our gas companies across our three state footprints. As you’ll see in our numbers, our increased scale help drive better cost management to our shared services structure including business improvements and efficiencies.

All of which is enable with technology, where we've invested in the right systems and the right way to grow and seek benefits for our employees, customers and shareholders. As you have seen over the last few years, we are significantly upgrading our infrastructure and investing for the future to support our growth and to manage operating costs.

Our year-to-date capital expenditures are up more than 50% over the last year. To put this in perspective, this year we expect to replace over 325 miles of pipe across our five utilities that's over 200 miles more than was replaced five years ago.

And while the vast majority of our investments are in our gas utilities, we are also investing in projects like Spire STL pipeline, which I'll talk about in a moment. As we turn to acquiring and integrating, you know that we've increased our scale through smart value-add acquisition that's our promise to you.

Integration is all about bringing people and technology together in a way that adds value for both our customers and our shareholders. It's about working smarter by using technology better and by taking good care of the people who take of our customers. In that spirit, I'm pleased to say that we're on track with the integration of EnergySouth.

So much so that we are ready to include Mobile Gas and Willmut Gas in the change to the Spire brand this fall. At that point, we will have integrated the systems and the people and we will be one team operating the business under one brand, one brand focused on our business and financial objectives year-after-year.

I'll tell you more about how we're becoming Spire in my closing comments. Finally, as examples of how across the organization, we’re using tech tools to better serve people I’ll share two data points.

This fall, we will debut a new modern customer technology platform that will simplify and enhance the ways our customer are able to manage their accounts on the go. It will be a fresh, easy and seamless solution for our growing company connecting the vast majority of our customer systems on one platform.

In addition, we just launched a multi-year wide effort to standardize our information technology platform, which will greatly simplify and enhance workflow. Great new opportunities to learn from synchronize analytics and overall enable us to run our business better.

Before I leave the discussion of our strategy, I’d like to give you a little more color around our thoughts on future acquisitions. We get ask this a lot so I want to make sure how we think about it. As you know we’ve successfully grown the utility acquisitions over the last few years.

And we now have the scale necessary to serve as a platform for our broader growth ambitions. We all know that we’re in a consolidating industry where valuations are up, regulatory outcomes are less certain and financing cost have increased.

As we have seen the market changing, we have shifted our thinking, while we believe there maybe opportunities for future utility consolidation. At this point in time, our position is that these market conditions do not support utility acquisitions for Spire.

That said, rest assured that we do not need future utility acquisitions to achieve our long-term growth targets. We do see other opportunities such as in the midstream space for investment in infrastructure like we’re doing with our Spire STL pipeline. So let’s turn to slide six for our pipeline update.

As we reported last time in April we filed an amended application with FERC to change the STL pipeline preferred route to include a 6-mile new built segment rather than modifications to an existing Laclede gas pipeline.

Right now, we’re completing the necessary steps to keep the project on track including finishing work on environmental assessments and attaining land rights. In terms of construction, we’ve purchased the pipe for the project and are currently evaluating construction bids.

And we’re still on track with our expected fiscal 2019 in service date and our investment in the range of $190 million to $210 million. Lastly a normal course we’re managing our Missouri rate case proceedings. Everything is on schedule and consistent with the information we’ve ported.

With that Steve Rasche will review our results including the strong quarter we announced this morning.

Steve?.

Thanks, Suzanne and good morning, everyone. As Suzanne just touched on we finished a strong quarter and our outlook for the year has improved. Let's review both starting with our third quarter results on slide seven.

Net economic earnings were $21.6 million, up $7 million or 48% from a year ago, driven by growth in our Gas Utility segment, which benefited from higher infrastructure investment and customer growth. Gas marketing earnings were also up by $0.5 million and other corporate costs were lower than last year by $1.2 million.

Net economic earnings per share of $0.44 was $0.11 or 33% higher than last year. With the current year calculation factoring in the $4.7 million share increase due to the two recent equity offerings that I’ll touch on in a moment. With that as a backdrop, let’s review the income statement, turning to the next slide.

For the quarter, total operating revenues were nearly $324,000, up 30% from last year due principally to higher commodity cost and the addition of EnergySouth. Contribution margin was up 18% overall and 13% or nearly $24 million for the Gas Utility segment.

EnergySouth accounted for just under $13 million of that increase, meaning that the margin for the remaining utilities was $11 million or 6% higher than last year. That increase reflects higher Missouri ISRS revenues of $4 million as well as lower Alabama regulatory adjustments of $5 million for quarterly RSE true ups and the sharing of cost savings.

Gas Marketing operating revenues for the quarter were up $3.1 million as both higher volumes and higher commodity prices were partially offset by a higher mix of trading activity, which is recorded net of cost. Contribution margin was higher by $7.8 million, primarily due to greater spreads and increased asset optimization.

Looking at our operating expenses, all categories are higher this year, with most of the increases except for fuel costs, reflecting the addition of EnergySouth. I'll focus my comments on variances after that addition.

Gas Utility operations and maintenance expenses increased slightly $1.2 million as higher professional services and employee related cost in Missouri were offset impart by lower Alagasco expenses.

Higher capital spending over the last year drove net increases in both depreciation and amortization expense, as well as the property tax component of taxes other than income. Gas Marketing operating expenses were lower by $4.4 million as a higher mix of trading activity more than offset that higher volumes and commodity prices.

Interest expense was up $700,000, reflecting higher rates on short-term debt.

And finally income tax expense was higher reflecting higher pre-tax income, importantly the effective tax rate was a bit lower this quarter due to both return to provision adjustments typical of this quarter each year and to record the one-time tax benefit of roughly $1 million on equity compensation.

Note that our year-to-date effective tax rate remains within guidance as expected in the low to mid-30% range. On slide 10 you’ll see the results for the first nine months for fiscal year.

Net economic earnings were up nearly $15 million or 9% and per share earnings of $3.82 a share was up 8% from last year or $0.08 from last year even with the increase in shares. Gas Utility earnings increased nearly $17 million or 10% driven by the addition of EnergySouth as well as higher earnings from both our Missouri utilities and Alagasco.

We achieved this increase despite adverse weather during the winter hitting season that reduced our contribution margin by nearly $20 million compared to normal weather or $10 million compared to last year. This impact was more than offset by the benefits of higher ISRS in Missouri and lower regulatory adjustments in Alabama.

Gas Marketing earnings were down $800,000 from last year reflecting lower contribution margin, primarily due to lower storage optimization. And other corporate cost which reflect higher interest expense principally from the addition of EnergySouth.

The quality of our earnings remains very high with earnings before interest, income tax, depreciation and amortization, up 11% from last year to $440 million as shown here on slide 11. Our long-term capitalization at the end of the third quarter was 51.3% equity, representing 150 basis point improvement since the end of the last fiscal year.

This improvement reflects the capital markets activity that I discussed last quarter, which resulted in a $142 million increase in equity and a nearly $144 million decrease in long-term debt.

And as a reminder, Laclede Gas has committed to fund $170 million in first mortgage bonds later this quarter, where we use those proceeds to pay down short-term debt. We also have ample liquidity from our credit facilities and our commercial paper program.

At quarter end our short-term debt stood at $451 million this level will decrease with the proceeds from Laclede Gas debt, whipping [ph] overall unused capacity of roughly 71% about typical for this time of year in comparable over last year. As you know one of the important uses of our cash flow is for our dividend.

I'm pleased to report that our Board of Directors declared the next quarterly dividend of $0.525 per share payable on October 3rd. We’re in our 14th consecutive year of increasing dividends and this year’s annualized dividend is 7% above last year’s run rate.

As Susanne noted we continue to execute on our growth plans and as part of those plans infrastructure upgrades remains a top priority. As you can see here on slide 12 we continue to ramp up our capital investments, which increased to nearly $300 million in the first nine months of the year, up $104 million or 53% from last year.

Our spend continue to be driven by infrastructure upgrades and new business at our Missouri utilities and Alagasco, as well as the incremental spend added by EnergySouth and the Spire STL pipeline.

In fact if we consider our regulatory recovery mechanisms the margins associated with new business and the AFUDC from our pipeline investment nearly 98% of our spend so far this year is being recovered with minimal regulatory lag or is adding to earnings in the near-term.

Our targeted capital investment for 2017 remains $445 million and over the five year period through 2021 we anticipate spending $2.3 billion. Most of that spend is being driven by infrastructure upgrade programs at our utilities, programs that will stretch for roughly 20 years.

We also have good regulatory recovery mechanisms that will ensure that roughly 85% of our spend is expected to be recovered with minimal regulatory lag or reflected in earnings.

Turning to slide 13, a quick update on our Missouri rate proceedings, as a reminder we filed two concurrent rate cases in April with net increases to customers of just over $25 million or 4% for Laclede Gas and $34 million or 8% for MGE.

These net amounts reflect the most recent ISRS rates effective June 1st and as proposed our customers on both sides of the state would have bills slower than 10 years ago. The filings also reflect the significant progress both from a company and our customer perspective as we upgraded our infrastructure, deployed technology and streamline processes.

It also sets the stage to more closely align our two Missouri utilities and offers the opportunity to begin modernizing Missouri’s rate setting approach. Our filed rate basis of just over $2 billion represent compound annual growth rates of between 6.4% of Laclede and 9.6% in MGE.

And our filing is based upon the Laclede Gas capital structure, which we anticipate being roughly 54% equity at the end of the September update period. Here at the bottom of slide 14 is the procedural schedule based on the full 11 month process.

As you can see we’re currently in the discovery phase during which we respond to information request from Missouri Public Service Commission staff and other parties as they prepare to file their testimony in September. Now turning to our outlook, first we reaffirm our 2017 earnings range of $3.50 to $3.60 per share.

In fact given our strong third quarter results we now expect to land in the upper half of that range. Our guidance fully reflects the impact of the increase in shares from the recent equity offerings both the 2.5 million share offering we issued in April of this year from the conversion of our equity units.

And the 2.2 million shares we issued last May to support the EnergySouth acquisition. Our long-term earnings per share growth target remains 4% to 6%, a target that reflects as Susanne mentioned our organic growth and investment growth initiatives and is not predicated on additional utility acquisitions.

That growth is supported by our five year capital investment program totaling $2.3 billion. And as you can see here on slide 15 our capital spend is fairly evenly split between our two Missouri utilities and Alabama, and again supported by long term upgrade programs of roughly 20 years in length.

One more thought about guidance, over the last five years we’ve seen a pretty dramatic improvement in our ability to deliver both timely and useful information to our investors. We launched earnings calls and short-term capital investment guidance.

Along the way we added long-term growth in capital spend targets and in November 2014 we launched formal annual earnings guidance. As we look forward to this November we think it’s best to delay launching earnings per share guidance for fiscal year 2018 given the timing of our Missouri rate cases.

We’ll plan to pick it up again after the proceedings are complete likely in our fiscal second quarter. So in summary, we delivered a strong third quarter and we’ve upgraded our view for the current year. We remain on track with our infrastructure investment plans and our financial position remains strong.

With that Suzanne I’ll turn it back over to you..

Thanks, Steve. It’s remarkable to see how far we’ve come since our journey started in 2012 we’re now operating five natural gas utilities in three states, we’ve tripled [ph] our enterprise value and to better reflect the growth and transformation of our company the Laclede Group became Spire in April of 2016.

It’s hard to believe that was over a year ago. Today we’re moving forward with our plan to bring the gas companies together and transition them to the Spire brand. This September our 1.7 million customers will start seeing changes beginning with new fleet graphics, building signage and tech tools to name a few.

The most personal change for our employees happens on September 25th which we’re calling Go On Stay Spire that’s the day the uniforms will change across the company, while we have trickled this out over several weeks our employees want to share a moment when all 3,300 of us would step into Spire together.

Yes that includes me I’ll be wearing my best orange that day September 25th. This transition is about much more than a color change or a name change. It’s about a promise to bring people and energy together by delivering energy that inspires. It’s about answering challenges in a rapidly changing industry.

It’s about adding value and working smarter, it’s about enriching lives. But mostly it’s about using our combined strength to create a better experience in three ways service, savings, and support. One, very visible way we are bringing to life our commitment to our communities is through a new initiative that’s going on right now.

If a program engages Spire employees across three states in a day of community service. Volunteering to work in food pantries, food kitchens, animal shelters, community gardens and parks, schools and more to offer helping hand wherever needed.

We are calling this initiative day for good because I can think of no better way to share the heart and soul of who we are as a company with the people of Birmingham, Hattiesburg, Kansas City, Mobile, St. Louis and everywhere between and to do what we do best to serve others.

With all of our employees wanting their arms Spire serves voluntary shirt, day for good is a very visible sign that our gas utilities are becoming Spire, but all the good that brings is just one more way we are communicating our transition to Spire.

If you want to learn more about how we are becoming Spire, visit to website of the individual gas utility and then visit again on Go Orange Day September 25th to see a whole new online experience that makes it easy for our customers to join us on the journey of transformation and growth.

Thank you for your time today and for your continued interest and investment in Spire, we are much appreciative. And operator we are now ready to take questions..

We will now begin the question-and-answer session. [Operator instructions] First question comes from Insoo Kim with RBC Capital Markets. Please go ahead..

Hey, good morning everyone..

Good morning, Insoo..

Congrats on the good quarter. Just may be starting up with a quarterly results and kind of the updated guidance for the year.

Besides, I guess the tax item that you guys mentioned what are some of the main things that you didn’t really anticipate last quarter when you guided to the lower end of the range that’s now change your outlook to guide at the higher end..

Hi Insoo, this is Steve. I’ll take shot at that. Actually the performance in the utilities and also in Gas Marketing what drove our improved outlook for the year. The actual the income tax benefit which came to the floor this quarter. We actually had in our sites and we did actually talk about it in the earnings call last quarter.

So, that was actually baked in it’s really some improved market opportunities it’s Spire marketing. So we’ve seen their performance move a little bit closer to what our expectations work for the year. And then better performance of both across all three of our utilities, which includes both the Missouri and also down in Alabama.

We are actually at the point now in Alabama where this quarter this would be included in the Form 10-Q which should be released here later on this morning where we are projecting a RAC give back for the quarter.

We weren’t in that positioned in the earlier quarter this year, which is unusual that’s reflective of that headwind for the winter weather that we talked about last quarter..

Got it. Apologize for missing the tax discussion in last quarter and got it.

In term of CapEx do you see CapEx pretty much maxed up through ‘19 at this point may be with moderate upside and I know we had mentioned fairly recently that AMI and other modernizing the grid investments to provide outside but more in the 2020 and beyond, is that still the case or is there opportunity for that to be more near-term?.

Hey Insoo this is Steve Lindsey I will take that one. So on the infrastructure as Steve mentioned during his remark we are getting to a pretty solid run rate really across the three utilities and as he mentioned that’s probably looking at a 20 year run rate relative to those three.

One of the other piece of that we are strongly focused on is in our growth area and part of our organic growth is grow new business in Missouri we’re up 30% year-over-year relative to CapEx and in Alabama we’re up 50%. So clearly that focus is really starting to take some hold.

And then on the AMR, AMI that you mentioned, we are looking at an overall strategy across our footprints. So here at Laclede we are moving to purchase the devices that we currently lease. We are doing upgrades at MGE and then in Mobile and Willmut. We are looking at an opportunity there for AMR and AMI. So clearly there is more to go there.

And then at MGE we have a literally a 10-15 year master plan that’s going to be very similar what we have done here at Laclede relative to upgrading our infrastructure and backbone of our system. So there are some opportunities there as well as the IT platform that Steven mentioned.

So, I think there is a long line of sight on capital and what we are doing now and again the five year forecast that we've given you I think really is a long-term approach to what we’ve got across our entire footprint..

And into -- this is Steve Rasche, I’d add that the other opportunity that wouldn't yet be in our forecast would be if there is any other investment opportunities in the western side of Missouri or down in Alabama similar to what we're doing with the Spire STL pipeline.

As we've talked about in the past, we are evaluating the systems and where we expect them to be in the future and what options that presents for us. We haven't yet reached a conclusion, so it would be a bit premature to be adding those dollars to the capital plan. But as we firm up our plans we'll certainly be talking to you all about that..

Understood. And then finally for me, looking at dividend policy, I know the recent increase is a 7% increase on a year-over-year basis and you're talking about long-term any per share growth of 4% to 6%, hopefully in that upper half the range that you guys mentioned.

Just taking that math it seems like that 55% to 65% payout ratio will definitely start to creep up in the 60% to 65% range in the next few years.

How do you think about your dividend policy or as it relates to payout ratio longer term or dividend growth longer term?.

Yes, great question. We did guide that we expect our dividend growth to be at the top-end or maybe even above the long-term growth target range for earnings per share.

Because as you mentioned, we're in the lower half of our target payout ratio range and we would love to get at least to the middle of the range which is you think about and do the math that would mean we have to continue to grow the dividend like last year we grew it at 7% and it was 7% the year before.

So I think you can expect over the next several years that if we stay true to that goal that we want to get at least to middle of the range that the dividend growth will be at or little bit above the earnings growth that's how the math would work.

I think in context if you take one step back and you look at the broader industry, the payout ratios for our peer set is probably 200 to 300 basis points above the midpoint of our range and for the electrics it's probably another 200 basis points above that. We believe right now we allocate our capital in a number of ways.

One of those is dividends, the other one is investing back into business to drive growth and we’ve talked a lot about how we're investing in capital spending getting good recovery on and of those. And then also we tend to delever the business at an overall perspective and certainly at the holding company.

And so we actively manage those big bucket uses of capital and we think that payout ratio in the middle of our range is the right spot right now. But it's something that we evaluate with our bond on an annual basis based upon what our forward view is of where capital is needed, and where it's going to drive the most value for our investors..

Got it, All right. Thank you very much..

The next question comes from Gabe Moreen with Bank of America. Please go ahead..

Hey, good morning..

Good morning, Gabe..

I'm wondering if I could follow-up on Suzanne’s comments about further midstream investments ex-M&A potentially helping meet the long term growth guidance.

Can you just maybe elaborate a little bit more in terms of what you have in mind beyond the STL pipeline? And is there a specific I guess CapEx amount that you kind of had in mind that you think would be comfortable for Spire to pursue?.

Sure. I will start with the latter part of your question around the capital investments for other projects like Spire STL. It really connects back to what Steve Rasche was describing and gave you, probably recall me talking in the last few years over about our project whereby we started evaluating the infrastructure in the St. Louis region.

And when I talk about the infrastructure not just the distribution infrastructure in how we receive gas from the interstate pipeline, but also the interstate pipelines and also where we're sourcing gas and storage facilities.

And take a fresh look, a blank sheet of paper look at if we were to build these upstream assets today to accommodate the growth in the regions, shale gas, the way pipelines are operating today versus the way they were in a legacy wave many decades ago, what would that look like.

And what would that look like in terms of bringing the best service, the best reliability and the best cost to our customers. And that body of work in the St. Louis region is how we got to the Spire STL pipeline, while in that analysis and Steve Lindsey has talked about the capital deploy for pipeline replacement.

But we just don't take a piece of pipe out of the ground and put another piece in. His engineering group actually rebuilds the header of the receipt points, the backbone for the distributions that’s been in the region. And so that's how we think about making those choices and this again the Spire STL pipeline.

As we've gotten going on our construction work, we've been evaluating the Kansas City region if you will and we are evaluating projects right now in that area. And as Steve alluded to we haven’t landed on what projects we think make the most sense we’re on the engineering analysis and cost analysis right now.

And then we’ll begin that work, that same body of work in the Alabama area. So more to come as Steve mentioned on that. From M&A perspective and the color that I was adding because many of you have asked about sort of our views on that.

And as I have mentioned a lot of the more recent acquisitions have been I know a lot of people like to use the words frothy and amount of the premiums and those sorts of things. And how do they get financed and regulatory activities around that. We have invested so much in acquisitions over the years and now have this bigger enterprise.

And we have always been focused on organic growth. I mean, you may recall three years ago we hired an executive to report Steve Lindsey to assist with that. We have been spending a lot of time building the technology infrastructure, the people infrastructure to better connect our communities and customers.

And you are hearing it showing up in the numbers, Steve Lindsey mentioned it. And how do -- we talk about 1.7 million customers but the reality is those are premises and behind those premises be it a home or small business, larger business, manufacturing our people many more people than a 1.7 million premise count.

And how do you connect and retain them and add furniture and what would builders and developers include your products and services and what they are building. And we have a very large focus in that area and we are seeing results because we have heavily invested I guess that people and technology.

So with a bit of a resorting that we have acquired companies a larger scale and it’s really I have been talking about it since the day arrived it’s also incumbent upon us to grow. Those companies organically after we acquire and then after we integrate the systems and the people. .

Thanks, Suzanne and maybe if I could just follow-up and press you a little bit on sort of let’s say the Kansas City market review is that’s something where the rise of associated gas coming out of the mid comp, from the scooping stack is that where you are kind of seeing the opportunities potentially relative to where that territory has been supply traditionally?.

Yes, I would say we are seeing it more broadly, because we have evaluated racks to the North side and will that pipeline function by directional what storages are we using how flexible are those storages, what are the incumbent pipeline in the area, how they serve, working closely again with Steve Lindsey’s group where we need to receive gas because region sprawl, they were very tight from an urban perspective and how the systems were originally designed and then region sprawl, higher growth further out.

Supply basis to your point but you also want to think about how do you diversify create almost a mini hub because if you diversify you do risk around pipeline usage and supply basis and optimize that because you are really building these systems for decades to come.

So I don’t want to identify any particular region and all of that cost structure if you will gets managed through the purchase gas adjustment as a lot of people like to call it or PGA which is 60% on average of a customer a premise bill versus the 40% that everyone sees in the rate case.

So it’s very important analysis and attributes for customers not just for now, but really for decades to come because they are large scale commitment..

Got it, thanks Suzanne. And then just last one for me on the STL pipeline in terms of further permits does it matter whether the FERC gets quorum or not and if you maybe can talk about kind of state permits you are still waiting on potentially and do you expect those to be issued..

Yes, we actually had a discussion on that yesterday in fact and our analysis is we’re still on schedule. Yes we would like to see FERC sooner than later get a quorum, but right now based on our construction schedules and so forth we keep moving we are working with the staff and its process right now.

So we do hope they get a quorum I guess sooner than later, but we are fine in terms of the schedule and the announced completion day that we’ve guided to. So we will keep moving and hopefully by next quarter by the time I talk to you we will be able to talk about a quorum. .

Hope so as well. Thanks Suzanne. .

Thank you. .

Next question comes from Mike Weinstein with Credit Suisse. Please go ahead. .

Hi, good morning..

Good morning..

I was wondering if you could comment a little bit about your appetite for M&A and whether that stands in your priority list of growth options going forward?.

Thanks. I appreciate it.

It’s a little bit of what I was trying to get to with the discussion, but if you go back with us in time a bit and you look at the four strategic pillars that we've laid out, we used to have utility M&A as the top priority and part of the reason for that is because we needed to grow and growth scale, grow diversity in our investment community, better analyst coverage and so forth.

Before we can start some of the other investments in technology and so forth that I've talked about. So now if you look at the list, a cut to the chaff show -- see that we've dropped it to third on our priority list if you will. And we've dropped the word utility and just have it general generically M&A.

And the reason for that is what I just was describing to Gabe and also in my opening comments the reasons that we've dropped it. Plus we're a much to my point we're from a scale perspective we're a much larger enterprise.

We have $1.7 million premises, we have 3,300 employees, we have enterprise technology systems with technology that we're adding on to better serve customers. We've stood up in organic growth team. The salesforce.com and other tools to better connect to builders, developers, engineers, architects, those promises.

And so we number one on the list now that we have is larger utility organization because again we’re 98% gas company. We're using these tools to better deploy create stronger organic growth forward, if you harken back, many of the utilities and I will just generalize.

If you go back to certainly 2008 forward most utilities were in a negative growth rate from an organic growth perspective, pipeline replacement was spoken to as organic growth.

We're in a position now given what I just talked about in terms of our investments and our larger scale is to retain customers, add new burner chips and add new customers especially as we're seeing new premises go up and those conversion opportunities.

So that's where Steve Lindsey earlier was talking about, 30% growth year-over-year and 50% growth year-over-year in Alabama. That's where you are starting to see some of that investment of our resources that we've developed the last year few years show up in the math..

And Mike I will follow-up little bit on that. This is Steve Lindsey as Suzanne mentioned on the organic growth piece, the CapEx is clearly up and we're starting to see those results just year-over-year we're up over 10% in our new meters, which is a great outcome and the capital that we're putting in now has future opportunity.

Also we're focusing and taking a different approach on economic development in all three states and we're really trying to work with state leaders to help the states that we operate in to really try to bring business to those states as well as retention that Suzanne mentioned.

Signing up new customers is great, but if you don't keep them it's not great and we're really focused on things such as energy efficiency programs, appliance rebates and energy assistance programs with our customers that are challenged to pay their bill, taken a different approach as to how we interact with those customers.

We're looking at expansions into under-served areas and we've seen some great outcomes in the Western side of the state with MGE and in Alabama. And then one final piece is municipal opportunities.

While that seems small if you think about 5,000 to 10,000 customer opportunities those are very large organic growth opportunities aren't really considered inquisitory but we view those as really something that helps build our platform in each of our different jurisdiction.

So I think when you put all that together even if we don't have the utility acquisition, we're really focusing on growing the businesses that we have..

Which I have to then close this part of the conversation and just say with all of that as part of the reason that we're rolling out fire master brand, because to deploy those technologies, those services and those programs and view that as one master brand fire where we all show up in the same way to our technology, to our people the way that we talk to and connect to people.

Master brand is a much powerful to accomplish all the objectives that I've spoken to and then Steve has spoken to.

In our view to do that with more vulcanized brand it's much harder to communicate and connect it can be done, but it’s much harder to communicate and connect and get the outcomes that we are expecting from the organic growth perspective..

That's very helpful, thank you.

And I’m just looking at the -- after this STL pipeline drops off in 2020, from the CapEx plan, maybe you could talk just a little bit about the timing of when you think you might be able to grow earnings faster than 4% to 6% perhaps or at least update that forecast in the later years of the program?.

Mike, this is Steve, I'll take that one. We evaluate what we're actually always exercising our five year plan, we formerly evaluated twice a year.

I would say as you think -- as you get to 2020 going with your timing that's when some of the decisions that Steve alluded to earlier in terms of AMR deployment especially at Laclede Gas clearly will have made some fundamental decisions by then, which could be an increase.

And then if you think about the stuff that Suzanne spoke to a second ago, in terms of other investments that helped up take advantage of our position in the natural gas food chain. I think both of those will give us plenty of opportunity to continue to drive growth.

We also have and we continue to manage what's the right level of capital spend at our utilities. And we like the run rate that we add now that we've finally achieved this year and we've been talking about that for a while that is much more than putting numbers on a worksheet.

There is a lot of logistics and coordination that goes into getting our programs in place. We continue to look at those and we always have the opportunity to change those plus or minus and it’s something we do actively in response to where the other opportunities to invest are.

So I think you can take our commitment, we understand we're managing this business for three to five years out. So while we're thinking about how we fill up the funnel for years three, four and five because that’s the long tail nature of our business..

Great, thank you so much..

[Operator Instructions] The next question comes from Brian Russo with Ladenburg Thalmann. Please go ahead..

Hi, good morning..

Hey, Brian..

Just with the Missouri rate cases, it seems to be limited history of settlements at least on the electric side, and I just wanted to get your thoughts is a goal to reach the settlement or are there some items in the rate case that likely will have to go to hearings?.

Hey Brian, Suzanne. So I'll start with sort of a higher point I guess the rate case proceeding as Steve went through the calendar on our earlier slide, sort of is what it is and we're working through that. We have not gotten yet and you will see on the schedule the timing of that the interveners testimony.

So from your question about positions and concerns and those sorts of things we've been in data request land and then the staff and OPC and others that have intervene will file their testimony. And so we'll have a better handle on what those concerns might be.

The schedule obviously we can go to hearing and I can't foreshadow one way or the other, whether or not that we will go into -- we always go into settlement discussions whether or not it comes out into a formal settlement that's offered to the commission is a different question.

And I can't foreshadow that we just have to work through that process and see what happens.

But you are correct, if you just look at history and just look at data that historically we have settled the reason of that is generally you hope to get to where you’re just arguing about a few things at the end and there is a smaller things because you deal with that front with the bigger items.

So we don't know this is really two cases and one we've got the eastern side of state, and the western side of the state. And we agreed and as mentioned before that we had filed both of those cases contemporaneously. So the commission can see the overall business structure on outcomes for the state.

And so we agreed to do that and so again we're just going to follow the schedule and we’re working very hard at it as well as commission and more to come, as we learn more and we get this testimony back from the interveners..

Okay, great.

And then just to clarify the 46% EPS annual growth rate that can be achieved with the current capital budget, correct?.

With the forecast that we've laid out over the five-year period, yes..

Okay.

And then lastly, your comments earlier on consolidation in M&A is it that the multiples are too robust for you to transact or you just not seeing opportunities to transact irrespective of any sort of bid out spread?.

I would say this way, we've acquired three companies, well in a sequential way and so we've integrated them from a system and people perspective. And we've gone through our capital plans and we’ve laid out a lot of the work that we're doing and in our ability to meet our three to five-year plan as Steve has said.

But we have seen transactions that have high premiums, attached to them and regulatory concerns and I never -- I’ve been in this 37 years and I never try to predict what the market will do what the future is we just know that the more recent transactions and we have more than enough work ahead of us and opportunities ahead of us that we don’t need to do another utility transaction if you will.

So that’s where we are right now and we’re actually in a very good place as Steve said and I think that was Steve Rasche’s ending pointed is we’re on target to deliver on our three to five year plan in that growth range.

I don’t know Steve do you want to add anything?.

No Brian I would just echo that but if you kind of look at the last set of transactions over the last say 12 months announced that it always starts with valuation and valuations have escalated in our mind far beyond the underlying value with the utilities.

And as a result that causes regulatory push back and then the financing has to be more highly levered in order to make the metrics work it kind of starts with valuation, but a quick response into a number of things, which is why as you know because you follow the space we’ve seen push back from regulators, push back from investors push back from rating agencies that do these make sense and it starts with that valuation, but then it’s the things that companies have to do.

We’ve always approached things in a balanced way. We don’t over lever, we try to lever in the right way we keep our capital structure overall at a good balanced place.

And we have a plan that drive growth after we close the deal and in order to do that you got to buy at the right value and we don’t see the values anywhere near what would make sense for us. I would argue don’t make sense, but we’ll stick with it and keep it personally don’t make sense for us..

And Brian to close on Suzanne’s point on the rate proceedings as she mentioned this is a combine case concurrent with both MGE and Laclede and we’re required to do that from the ISRS requirement which is legislative.

But also I think it’s noted that if as Steve mentioned the proposed request goes into place customers total bills will still be less than they were 10 years ago. I think that’s a credit to the growth of the company the way we manage our business and the fact that we do take this very seriously.

And so as we go through this we’re looking at other opportunities such as revenue stabilization, performance measurements relative to our business metrics around customer service and operational metrics, economic development opportunities. So this is a different kind of rate case than we’ve had traditionally in the past.

But I think it’s moving us more towards a modernized rate design and hopefully the outcomes will reflect that. So we view this as a very good opportunity for our customers as well as the company and we’re looking forward to moving forward with the process..

Great, thank you very much. .

Thanks, Brian..

This concludes our question-and-answer session. I would like to turn the conference back over to Scott Dudley for any closing remarks..

Well thank you all for your time and interest in Spire. We’ll be around throughout the day for any follow ups and we look forward to connecting with you then. Thanks so much, have a good day..

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