Second Quarter 2016 Earnings Conference Call May 4, 2016 - PowerPoint PPT Presentation

Second Quarter 2016 Earnings Conference Call May 4, 2016

Participants on today’s call Suzanne Steven P. Rasche Steven L. Lindsey Sitherwood Executive Vice President, Executive Vice President Chief Financial Officer and President and Chief Operating Officer, Chief Executive Officer Distribution Operations 2 Spire | 2 nd Quarter Earnings Conference Call

Forward-looking statements and use of Non-GAAP measures This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our forward- looking statements in this presentation speak only as of today, and we assume no duty to update them. Forward-looking statements are typically identified by words such as, but not limited to: “estimates,” “expects,” “anticipates,” “intends,” and similar expressions. A lthough our forward- looking statements are based on reasonable assumptions, various uncertainties and risk factors may cause future performance or results to be different than those anticipated. For a more complete description of these uncertainties and risk factors, see our Form 10-K for the fiscal year ended September 30, 2015 filed with the Securities and Exchange Commission (SEC) and our Form 10-Q for the quarter ended March 31, 2016 to be filed with the SEC later today. This presentation also includes “net economic earnings,” “net economic earnings per share,” “operating margin,” and “EBITDA,” non -GAAP measures used internally by management when evaluating the Company’s performance and results of operations. Net economic earnings exclude from net income the after-tax impacts of fair-value accounting and timing adjustments associated with energy-related transactions, as well as the after-tax impacts related to acquisition, divestiture, and restructuring activities, including costs related to the acquisition and integration of Missouri Gas Energy (MGE) and the acquisition of Alabama Gas Corporation (Alagasco). Operating margin adjusts operating income to include only those costs that are directly passed on to customers and collected through revenues, which are the wholesale cost of natural gas and propane, and gross receipts taxes. These internal non-GAAP operating metrics should not be considered as an alternative to, or more meaningful than, GAAP measures such as operating income or net income. EBITDA is earnings before interest, taxes, depreciation and amortization. A reconciliation of net income to net economic earnings is contained in the Company’s SEC filings, and a summary reconciliation is contained in the appendix to this presentation. A reconciliation of EBITDA to Net Income and of operating margin to operating income can be found in the appendix to this presentation. Note: Years shown in this presentation are fiscal years ended September 30, unless otherwise indicated. Investor Relations Contact Scott W. Dudley Jr. Managing Director, Investor Relations 314.342.0878 Scott.Dudley@SpireEnergy.com 3 Spire | 2 nd Quarter Earnings Conference Call

We are Spire SpireEnergy.com 4 Spire | 2 nd Quarter Earnings Conference Call

We are Spire • Spire better reflects the growing company we have become • It will unite our natural gas companies as we migrate to one brand in 2017 • We are about: ‒ Bringing people and energy together Championing people by delivering energy ‒ that inspires • We have been on a transformational journey, guided by a well-articulated growth strategy • Over the last three years we have: – Significantly increased our scale – Expanded our geographic footprint – Added nearly one million customers – Quadrupled our enterprise value 5 Spire | 2 nd Quarter Earnings Conference Call

Successfully executing on our growth strategy Growing our gas Acquiring and Modernizing Investing in utility business integrating gas our gas assets innovation utilities 6 Spire | 2 nd Quarter Earnings Conference Call

Second quarter highlights • Higher second quarter net economic earnings ¹ per share of $2.37, driven by Gas Utility • We continue to execute on our growth strategy: ‒ Acquisition of Mobile Gas and Willmut Gas ‒ Moving forward with our STL Pipeline to modernize our gas assets ‒ Focus on organic growth initiatives and infrastructure investment 1 See Net Economic Earnings (Non-GAAP) Reconciliation in Appendix. 7 Spire | 2 nd Quarter Earnings Conference Call

Mobile Gas and Willmut Gas • A strategic acquisition that delivers many benefits: ‒ Grows our gas utility business by adding 104,000 customers ‒ Delivers safe, reliable and efficient service to customers while continuing our commitment to civic involvement and community support ‒ Expands Southern footprint in highly rated regulatory environments ‒ Adds to earnings and cash flow • $344 million price represents 11.3 times LTM Adjusted EBITDA • Targeting close in 2016, subject to customary closing conditions and regulatory approvals 8 Spire | 2 nd Quarter Earnings Conference Call

STL Pipeline 60-mile pipeline with capacity of • Supports strategy to modernize our 400 MMcf/d gas assets to: ‒ Achieve more diverse supply portfolio Improve reliability and resiliency Connects to ‒ Rockies Express ‒ Access lower cost shale gas and Panhandle • Gives our eastern Missouri Eastern pipelines distribution system access to shale gas from Marcellus and Utica – 100% Spire ownership Project investment of – FERC regulated $170 - $200 million – Laclede Gas expected to be foundation shipper 30-36 months from open season to in-service date 9 Spire | 2 nd Quarter Earnings Conference Call

Net economic earnings Second Quarter Ended March 31 $ in Millions Per Diluted Share Net Economic Earnings 1 FY16 FY15 FY16 FY15 Gas Utility $ 102.5 $ 96.5 $ 2.35 $ 2.22 Gas Marketing 3.0 2.1 0.07 0.05 Other (2.0) (1.0) (0.05) (0.02) $ 103.5 $ 97.6 $ 2.37 $ 2.25 • Net economic earnings (NEE) per share up $0.12 (5.3%) to $2.37 • Strong quarterly performance was broad-based ‒ Solid Gas Utility earnings, as the mild winter weather pressured margins and lowered expenses ‒ Improved Gas Marketing earnings • Other expenses were up slightly reflecting higher corporate costs and interest 1 See Net Economic Earnings (Non-GAAP) Reconciliation in Appendix. 10 Spire | 2 nd Quarter Earnings Conference Call

Operating revenues and margin Second Quarter Ended March 31 $ in Millions Change FY16 FY15 $ % Operating Revenues Gas Utility $ 611.5 $ 847.0 $ (235.5) -28% Gas Marketing & Other (2.2) 30.4 (32.6) -107% $ 609.3 $ 877.4 $ (268.1) -31% Operating Margin 1 Gas Utility 307.5 305.8 1.7 1% Gas Marketing 3.9 2.1 1.8 86% Other and Eliminations 0.6 0.5 0.1 20% $ 312.0 $ 308.4 $ 3.6 1% • Mild winter weather across our service territories – Temperatures were ~20% warmer than last year and 16% warmer than normal – Second warmest winter on record in Missouri • Gas Utility margin, after removing the $3.9 million favorable decrease in RSE adjustment, decreased $2.2 million due to lower demand – Weather related decreases of $6.1 million – Offset, in part by higher ISRS revenues of $3.9 million • Gas Marketing margin up, reflecting favorable impact of storage services 1 Operating margin is operating revenues less gas costs and gross receipts taxes. See Operating Margin (Non-GAAP) Reconciliation in Appendix. 11 Spire | 2 nd Quarter Earnings Conference Call

Expenses Second Quarter Ended March 31 $ in Millions Change FY16 FY15 $ % Operating Revenues $ 609.3 $ 877.4 $ (268.1) -31% Operating Expenses Gas Utility Natural & propane gas 261.1 482.8 (221.7) -46% Other operation & maintenance 94.3 103.8 (9.5) -9% Depreciation & amortization 33.8 32.2 1.6 5% Taxes, other than income taxes 43.9 55.7 (11.8) -21% Gas Marketing & Other 8.5 45.2 (36.7) -81% Operating Income 167.7 157.7 10.0 6% Other Income 0.8 0.7 0.1 14% Interest Expense 19.3 19.1 0.2 1% Income Tax Expense 48.4 44.9 3.5 8% • Commodity and volume based tax expenses lower, consistent with lower demand • Operating expenses were favorably impacted by the mild weather, as well as cost efficiencies and favorable timing of expenses • Depreciation up $1.6 million reflecting increased capital investment • Gas Marketing costs lower reflecting primarily lower commodity costs and a higher mix of trading revenues (recorded net), partially offset by higher volumes 12 Spire | 2 nd Quarter Earnings Conference Call

Year-to-date highlights First Half Ended March 31 $ in Millions Per Diluted Share Net Economic Earnings 1 FY16 FY15 FY16 FY15 Gas Utility $ 152.5 146.3 $ 3.50 $ 3.38 Gas Marketing 2.7 2.5 0.07 0.06 Other (6.6) (5.5) (0.16) (0.13) $ 148.6 143.3 $ 3.41 $ 3.31 • Gas Utility earnings +$6.2 million, reflecting consistent themes with Q2 – Lower operating margin (weather and lower demand), partially offset by ISRS revenues and lower RSE reset in Alabama – Lower operating costs due to milder weather, cost efficiencies and timing of expenses • Gas Marketing earnings up $0.2 million from prior year • Other expenses were up slightly reflecting interest and other corporate costs 1 See Net Economic Earnings (Non-GAAP) Reconciliation in Appendix. 13 Spire | 2 nd Quarter Earnings Conference Call