Good day, and welcome to the Spire Inc Second Quarter Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Scott Dudley. Please go ahead. Good morning, and welcome to Spire's Fiscal 2021 second quarter earnings call. We issued a news release this morning, and you may access it on our website at spireenergy.com under Newsroom. There is a slide presentation that accompanies our webcast, and you may download it from either the webcast site or from our website under Investors and then Events & Presentations. Presenting on the call today are Suzanne Sitherwood, President and CEO; Steve Lindsey, Executive Vice President and Chief Operating Officer; and Steve Rasche, Executive Vice President and CFO. Also in the room with us is Adam Woodard, Vice President and Treasurer. Before we begin, let me cover our safe harbor statement and use of non-GAAP earnings measures. Today's call, including responses to questions, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although our forward-looking statements are based on reasonable assumptions, there are various uncertainties and risk factors that may cause future performance or results to be different from those anticipated. These risks and uncertainties are outlined in our quarterly and annual filings with the SEC. In our comments, we will be discussing net economic earnings and contribution margin, which are both non-GAAP measures used by management when evaluating our performance and results of operations. Explanations and reconciliations of these measures to their GAAP counterparts are contained in both the news release and the slide presentation. With that, I'll turn the call over to Suzanne.

Thank you, Scott, and good morning everyone. We appreciate you joining us for our second quarter earnings conference call. As a company, we're always stepping forward to deliver on our mission, a mission to answer every challenge, advance every community, and enrich every life through the strength of our energy. We ground ourselves in this mission every day to reach our full potential in serving our customers, communities, and shareholders. So when challenging times came our way, we know the path to take. The past 12 months have been particularly challenging with the coronavirus pandemic followed by extreme weather in the midcontinent that significantly disrupted the supply and pricing of natural gas across many areas of our country. The combined impact of these challenges tested our industry, our company, and our employees in many ways. It tested our strategies, our operations, our technology systems, and our agility. In that context, I'm pleased to report that Spire performed exceptionally well across all our businesses. First, our utilities successfully delivered essential energy to our customers and communities throughout the weather event. Our ability to deliver was a result of our consistent approach to determining and planning for the best array of assets including storage, transportation, and gas supply. A shining example of our reliability planning process was our decision to construct the Spire STL Pipeline. This pipeline allowed us to connect to lower-cost, reliable shale gas at a critical time. Another example across the utility footprint is our upgraded delivery system that has been fortified by multi-year investments and the resiliency of our distribution system. While gas utility is our primary segment, our gas marketing business was also well-positioned to serve customers. As you might recall, we increased Spire Marketing's storage position heading into the 2020 winter season. So when February's cold weather hit, Spire Marketing was able to meet customer needs by accessing gas supplies at a critical moment, which also allowed us to realize incremental value due to market volatility. For all our business units, success has everything to do with solid planning, investment in resources and technology, and decisive action by the team. It's in moments like this that our Spire employees shine. We are committed to answering challenges and taking the best care of our customers. This shows up in our day-to-day work, but also in the late-night hours of cold winter days when supply is short, the situation is fluid, obstacles are great, and communication is key. Regardless of the circumstances, Spire employees don't quit until they get the job done. For this and so much more, I'm forever grateful. Moving to our financial performance, for the second quarter, we reported strong net economic earnings of $3.71 per share, showing solid results in the utilities and exceptional earnings growth, thanks to the performance of Spire Marketing. Steve Rasche will provide more details in a moment and will also highlight our revised earnings guidance and financing plans for 2021 and beyond. On maintaining the resiliency of our operations, we've been advancing our ESG initiatives and commitments. So I'm pleased to share that next Monday, May 10, Spire will issue its 2020 Corporate Social Responsibility report, or CSR report. This digital report will provide updates on our environmental, social, and governance commitments, including our promise to be a carbon-neutral company by mid-century. As part of our environmental focus, we continue to make significant progress in reducing methane emissions. As the chart on the slide shows, we've achieved a 43% reduction in 15 years, which represents even more improvement from the 39% reduction reported in 2019. Based on this, we've also increased our production targets through 2035. Other highlights in our CSR report include initiatives and programs that support the communities we serve, plus a deeper focus on inclusion and diversity. Starting Monday, you'll be able to access our CSR report on our website spireenergy.com. Now, I'll turn the call to Steve Lindsey to discuss how we're continuing to deliver on our commitments to our customers and employees while enhancing our operations, resilience, and driving growth through our investments.

Thank you, Suzanne. I want to echo your acknowledgment of the efforts of our employees in maintaining safe and reliable gas delivery operations and outstanding service to our customers during the heart of the heating season, especially in the midst of the February cold weather events. We plan carefully to ensure we have the right resources to handle the coldest days of the year. Certainly, no one expected the extent of the cold weather we saw or the impact it had on supply prices or overall market conditions. But thanks to our thoughtful preparations, we came through the storm in great shape, keeping gas flowing to our customers and communities without interruption. Getting to last summer, we took steps to secure the supply, transportation, and storage resources to ensure we were well positioned from a gas availability perspective. The STL Pipeline played a critical supply role for our Missouri customers, providing access to the Marcellus and Utica basins, which were largely unaffected by the cold weather event. In the days leading up to the February storm, we activated our incident support team, which is made up of functional leaders throughout the company, including operations and gas supply. This team remained extremely active prior to, during, and after the event, ensuring that we were executing on our plans and making necessary adjustments when appropriate. A few examples of actions taken included changes in supply sources, receipt points, and contractual modifications to ensure optimal outcomes for our customers from an operational perspective. We also did our very best to manage our cost of gas. Our estimate of the net gas costs during the weather event is approximately $110 million, which reflects projected offsets including recovery of penalties assessed against a handful of non-performing marketers. We're pursuing these marketers for tariff-based gas costs and penalties not yet recovered. For off-system sales, we were able to mitigate some of the higher cost of gas we incurred. We're fortunate to have a diversification of supplies that reach beyond the affected regions. Our conservative approach to gas storage also mitigated the impact of unprecedented gas prices we witnessed. Thanks to prudent planning and proactive management, we were able to manage through this weather event in a manner that will minimize the impact to our customers. Our ability to keep raising the bar and deliver when it really matters the most, such as through the investments we've continued to make in upgrading and strengthening our system and in deploying technology. This promotes greater service levels, both in customer care and our field operations, greater system integrity, and stronger resiliency, all supporting our environmental commitments; most notably, the methane emission reductions that Suzanne mentioned. Capital investment in our utilities is foundational for serving our customers. We continued on pace with our CapEx plans in the first six months of our fiscal year. Total spending was $304 million, including just over $280 million for our gas utilities. Pipeline upgrades have constituted the lion's share of our spending, amounting to nearly $150 million year-to-date. At the same time, we continue to ramp up our investment in new business, which totaled $75 million and was up about 40% compared to last year. We know that our non-utility investments were down considerably due to the lower spending for Spire STL Pipeline. We remain on track for our full-year CapEx target of $590 million, 95% of which is focused on our gas utilities, which drives 7% to 8% rate base growth. Meanwhile, we’re continuing to move forward with our Missouri rate review that we filed back in December. As a reminder, the rate review is really about recovering the significant capital we've invested to make our system safer, more reliable, and resilient, while implementing a number of service enhancements. For the last several months, we've been working diligently to complete numerous data requests for the staff at the Missouri Public Service Commission and other interested parties as they prepare to file their testimony in the case. We noted before our goal and expectation is to reach agreement on key issues sooner rather than later and ultimately achieve a timely settlement. Before I turn the call over to Steve Rasche, I wanted to note that in Alabama and Mississippi, laws have recently been signed that will ensure individuals and businesses in those states will continue to have the ability to select natural gas as their fuel of choice. With that, Steve Rasche will now provide a financial review and updates.

Thanks, Steve, and good morning everyone. Let me add my thanks to our team for their outstanding service to our customers during this historic weather period. For the second quarter, we delivered consolidated net economic earnings of nearly $196 million, or $3.71 per share, up from $144 million or $2.75 per share last year. Our gas utilities earned $160 million, up $15 million on higher demand and ISRS revenues, as well as some prior year headwinds that did not recur this year. As marketing successfully navigated the challenges from Winter Storm Uri and the chaotic market conditions that resulted in earnings nearing $40 million. All other businesses and corporate costs improved by just under $2 million, reflecting better performance by Spire Storage. Looking quickly at a few details, not surprisingly total operating revenues of $1.1 billion were up 54% from last year on higher demand and commodity prices. Likewise, contribution margin increased by $63 million or 17%. Net utility margins were higher by $22 million due to first, higher volumes for the quarter temperatures overall were slightly warmer than normal, but we were between 11% and 32% colder than last year depending upon geography. Secondly, more effective weather mitigation in Missouri, and lastly, higher RSE and ISRS revenues including a prior year ISRS provision that did not recur this year. Gas marketing margins were up by $49 million on an NEE basis. The Spire Marketing team rose to the occasion, working in a very challenging market to serve their customers, and their margins were enhanced by the withdrawal of gas from storage, including the incremental storage positions we added last summer. Like many other energy companies, our results for the quarter also reflect our current estimates of ongoing negotiations on commercial disputes arising from Uri. Looking at a couple of other key variances, natural gas costs were up significantly consistent with higher revenues. Operations and maintenance expenses on a run rate basis were up $3 million after removing the impact of two adjustments outlined here on Slide 11. First, the reclassification of pension costs, which we've discussed in prior quarters and has no bottom line impact. The second was the Missouri Supreme Court ruling on our 2018 rate case appeal. In February, the court ruled in our favor regarding $9 million to disallow pension cost in rate base. This issue was remanded back to the Public Service Commission for reconsideration, and we recorded a reversal of the right offer for GAAP purposes. This reversal is not included in that economic earnings. Excluding these two items, run rate O&M expenses reflect higher gas marketing and corporate costs, partially offset by lower operations and employee-related costs at the gas utilities. Other income net of the reclassification reflects higher value investments associated with our non-qualified plans. Finally, income tax expense was well above last year on higher taxable income and earnings mix. We maintain a strong financial position, and in a challenging quarter, we further strengthened our balance sheet and liquidity and delivered good growth in adjusted EBITDA. Our long-term capitalization remains balanced, including our highly successful $175 million equity offering in mid-February at a very attractive yield and conversion premium. The timing of this offering could not have arrived at a better time in the middle of the winter storm. Our financial flexibility remains excellent with over $675 million of liquidity and cash at quarter-end. Now turning to our guidance, with Spire Marketing's first-half results, we are raising our fiscal 2021 earnings target to a range of $4.30 to $4.70 per share. We reaffirm our long-term NEE per share growth target range of 5% to 7%, as well as our five-year capital expenditure target of $3 billion. As Steve mentioned, we are also on track with our current CapEx forecasts of $590 million for this year, ensuring that we will continue to deliver safe, reliable, and sustainable energy to our customers, while continuing to reduce our methane emissions. Our plan is well diversified across the service territories, supported by upgrade programs with long lives and covered by recovery mechanisms that minimize regulatory lag. We have also updated our financing plan through 2023, reducing our equity needs in each of the next two years given our strong position at March 31st. In what some would say is a historic quarter, we delivered for our customers, our communities, our environment, and our investors, and we are well-positioned to sustain that momentum going forward. With that, let me turn it back over to you, Suzanne.

Thank you. In closing, let me once again make the case for Spire as a compelling investment. As Steve Rasche noted, we continue to drive operational resiliency and growth through investments in upgrading our gas utility infrastructure, as well as in new business. Our business mix is over 90% regulated, which supports long-term earnings stability and consistent growth. We invest in our talented and focused workforce and management team, as evidenced by our performance in the extreme winter weather. We have a robust CapEx plan and timely regulatory recovery that underpins long-term annual growth in rate base and earnings per share. We also have a growing dividend that offers an attractive yield. I would note that our Board of Directors declared the regular quarterly dividend last week. We have strong ESG performance, including a focused effort to reduce greenhouse gas emissions in support of our commitment to becoming a carbon-neutral company by mid-century. As always, we appreciate the time you spent with us today and your interest in Spire. In closing, we look forward to connecting with many of you at the upcoming Virtual ADA Financial Forum in a few weeks. Until then, stay safe and healthy. Now we're ready to take your questions.

Our first question today will come from Shar Pourreza with Guggenheim Partners. Please go ahead.

Good morning, guys. Can you hear me?

Speakers, your line may be muted?

Yes. Sorry. Good morning, Shar.

Hey, good morning, Shar.

Love to start maybe with the rate case; it's obviously a key moving piece for 2021. Any updates on sort of how the conversations are progressing so far, understanding it's kind of still early days. I mean, give it kind of a sense on maybe where some of the parties stand on the issues. And I'm really maybe also thinking about some of the other items proposed in the case like combining east and west, the advanced metering, tech upgrades and RNG?

Hey, Shar. Thanks for the question. It's Steve Lindsey. I'll start. I think we just want to anchor back to the why for this rate case. Again, this is really about capital recovery. If you think we've invested over $850 million, we actually reached our cap relative to ISRS in Missouri West. The other part about this case is it's very consistent with the outcomes from the last case from the commission's decision, and we think we have very strong positions on this. The other parts, I think, are interesting because we are introducing some new programs, again, really focused on what customers want, whether it's around some RNG options, some other types of service technology, so I think this is a – I would call it a customer-first type of case and then that's the reason we're in here. Again, yanker back to the whys, and I think that's why we're in. Now, the really the part of your question around early discussions and things like that, that's what the next several weeks will bring about, as you know the schedule in terms of the filing. So that's when a lot of the discussions will start after that. I think it's probably early for us to speculate on that. But the same items are always relevant in cases such as REO, cap structure, all those types of items. So I think this won't be a lot different. I think the last one that was litigated set us up with a pretty good framework as we go forward, and we're very comfortable as we move forward with this one. The other part I think you mentioned was about combining the two utilities. I think that's something we've really strived for since bringing in MGP years ago, and I think that helps us to be more efficient for the 1.2 million customers across the state. It really provides everybody the same opportunities whether you're in Kansas City, St. Louis, Joplin, or wherever you are, really just benefitting from that and when they're disconnected sometimes, some of those efficiency opportunities really aren't there.

Got it. Got it. That's helpful. Thank you for that. And then obviously on the first quarter call you guys announced joining One Future that's obviously focused on reducing methane emissions from the wellhead to the burner tip. I'm wondering if you can maybe just outline the opportunity for RNG in your system, you have some RNG in the rate case. And then are you considering any, I don't want to call it unregulated, but non-utility investments in RNG, maybe similar to one of your LDC peers announced yesterday in New Jersey.

Hey, Shar, this is Suzanne. I'll start with the non-regulated piece, and then Steve is our lead on that organization, so I'll pass it back to him. As far as non-regulated interest, we're studying what's available in the market. We're highly focused on our utilities and what they can do on behalf of our customers, either in the rate structure itself or the PGA. And so part of the reason we joined the organization that you mentioned, I will pass it to Steve, is between AGA and that organization, and there are other organizations, we in the industry are collectively learning what those investments might look like in terms of benefit to our customers and our shareholders. But it's definitely part of the industry on a go-forward basis. And Steve, if you want to get to that.

Yes. And so I think as we've looked at the opportunities, this one felt right for us, given the other companies that are part of that, as well as the opportunities I think you get from scale. When you're looking at process changes, process improvements, advanced technology, at least the initial benefits we see are really collective for our industry, not necessarily just for our company. I think that's where the focus is. And then, even if you'd like down to the company level, obviously, we've been very proud of our methane emission reductions. If you go back to 2005, we're well over 40%. Now, we continue to accelerate that number, primarily through pipeline replacement, but I think a lot of that is through our advances in leak detection, some things relative to damage prevention, all those improvements. And even if you think about such things as our ultrasonic meters, that we're starting to deploy in the southeast, we'll continue to do that across our footprint, that’s going to reduce field trips and that is vehicle going somewhere. So, I think that has a positive impact as well. I think there's no one big home run on this; I think there's a lot of singles and doubles. Part of joining that organization was to give us access to some information opportunities that, as an individual company we might not have. We think, collectively as an industry, we're moving in the right direction, and it's time for us to really stand up and take a little credit for that.

Got it. Got it. And then just lastly for me on the storage side, that obviously took a bit of a backseat in your messaging after you guys initiated the review of the segment and the market when you filed for multiple passive FERC. Any updates on the review process so far? When should we expect additional visibility on that path forward for that segment? And has your viewpoints changed post sort of the weather event?

Well, and again, this is Steve. So I think first and foremost, what I would like to say is we delivered on what we were committed to for our customers through this winter. From a safety, reliability, and to be quite honest, we found some opportunities that you can imagine that emerge with these types of events that occur. Really nothing to report right now in terms of the future; we're still in that developmental stage, we're looking at the markets, we're looking at the way things are changing, and the dynamics. The thing that I would be most proud of is that literally over about the 1.5 years we really stepped up and improved the operations of the storage facility. We will continue to evaluate that as we move forward.

Terrific. Thank you, guys. Congrats, and I’ll pass it to someone else.

Yes. Thank you.

Our next question will come from Julien Dumoulin-Smith with Bank of America. Please go ahead.

Excellent. Hey, good morning, team. Thanks. Thanks for the opportunity and congratulations on just holding it together this winter; well done all together.

Thanks, Julien.

Thanks, Julien.

Indeed, quite a time. So I want to pick up where Shar left off if you don't mind. Looking at the gas marketing, obviously this last year, the performance is certainly something of an anomaly, one would hope. But given the amount of storage capacity carried into the season compounded with the winter weather events, can you give us your thoughts on the segment going forward and specifically around run rate guidance if you will. Like any hedges, any incremental ability – visibility relative to the $19 million to $20 million that you've talked about historically?

Yes. Julien, good morning. It's a great question, and I think you hit on it. First and foremost, like the utility, the gas marketing team rose to the occasion, and what sometimes seemed like third-world conditions that many folks and customers in Houston were dealing with, they did create a lot of value. And you are right, going into that part of the heating season with extra molecules to release to the market not only allowed us to meet our customers' needs but also create a lot of value. This is a one-time event, and it's interesting if you look at our year-to-date results, we're about 2x that run rate you referenced. I think that's a good way to think about the extra value that we're able to create as a result of Winter Storm Uri. We're still studying where the market is going to go and you follow this pretty closely. We're watching rig counts and gas costs and we're looking at storage value and positioning as we go into the next winter. It’s going to set up as a pretty interesting summer. We're behind on overall storage as an industry from where we were against the norm, and Henry Hub is hanging right in there just below $3 MMBtu, which is kind of an interesting place to be in. So we're watching that pretty closely. In terms of overall expectations, I think we stand with the comments that we made earlier that we expect that business to be a solid contributor. If you look at that range that you referenced in the low-20 range, that's a good place to think about the base business, which involves procuring, transporting, and delivering molecules to our customers and a few other services. Now, we would expect that to grow over time, but it will grow within the range of our overall growth guidance. Of course, this year we'll have that outsized return based upon our ability to take advantage of the market conditions in the back half of February.

And Julien, if I may, just want to add on to what Steve said, because I think it's an extremely important point. Spire Marketing has a role, and it's predominantly serving customers and its industrial customers and governments and those kinds of things, those sort of non-utility firm customers, if you will. Year after year they grow organically, either by geography or picking up some additional customers, if you will, in the footprint that we serve. They’re not unlike the utility. However, it is mostly about 40 years now and every, I don't know, five to seven years, there's a weather event. When those weather events occur, they take advantage of those events and the geographies that we serve with the contracts that they have. They predominantly provide those services in those weather events to other industrial customers, our heavy commercial customers, or potential marketers. They take advantage of those market conditions based on the contracts, vision, and assets they hold, their year-to-year work in Spire Marketing and serving those customers similarly to how our utilities do. So, I just wanted to emphasize that point.

Got it. Excellent. I wanted to close the loop on a couple of things super quick if I can. On the STL Pipeline, obviously challenges to the FERC certificate here, hearings in March. Just comment all together on the outcome of this. Obviously, we saw the February events; I think they speak for themselves, but any comments on your side about de-risking, if you will, on STL here?

Yes. I'll make one comment, and then I want to pass it to Lindsey. I said Lindsey because there are two Steve's in the room with me, so in my one comment I want to make is we were extremely proud of the operations of that pipeline during this weather event. When we produced all of our modeling and looked at the path, the size, the pressures, and how we were going to operate that, how it interconnects into our St. Louis System, holds that system and all the areas in this region in supporting our gas supply and distribution plan, it operated precisely as we expected it to operate, and it was a high value to this region. It has been since we started operating it, but with the weather event we just had it operated exactly as we expected it to. Between that investment and the investment in upgrading our infrastructure, our backbone system in and around St. Louis, a combination of those investments are powerful in terms of serving our customers during this winter event. I could go on about this a bit, but it's highly significant. The data we provided both the commission and the FERC initially when we were designing the pipeline completely held during this winter event. We did it at a low cost structure relatively speaking for our customers. Steve, I don't know if there's anything you'd like to add.

Yes. And it's probably not the best career move to even challenge the CEO, but I would say yes, it performed even better than we thought, and what I mean by that is yeah, if you think about what occurred and the opportunities with the additional interconnect that we did with MoGas, the ability to move gas around our system operationally. The supply diversity to get gas from the northeast is going to be an unbelievable benefit for our customers in a very, very short period of time. This is obviously a longer pipeline, and we were very, very comfortable, even coming into this before the event, that the reasons we did this were strongly supported. If we went through this even now, you have a whole lot more reasons that this pipeline makes sense. This gives us the opportunity to look at other opportunities, for example, on the west side of the state, in terms of what we have over there, and even in the southeast. So I think this was a great opportunity for us to enter into this, and everything that's come out of this is even better than we originally thought.

One more follow-up because I think it's so important. The criticality of the annual planning that we do around sitting down with our gas control and our distribution employees and looking at all of our supply, interstate pipelines, or storage facilities, and how that gas flows and these different bays into the market, and then how the distribution systems themselves work is done from a design day perspective. There's cold winters on a daily basis and a durational basis. What Steve's getting to, we design these projects and redesign our infrastructure, even our utilities based on that data for supply, storage, interstate pipelines, and our distribution system. It proved that this planning and long-term investment proved highly effective as Spire entered this winter storm. I can't say enough about the planning that our employees have done as well as the operation of the system during that event.

Excellent. Thank you guys. Just a slight, if you don't mind. Just with respect to the wider efforts to bring savings to customers or reduce the total bill, I'll frame it holistically. What are your thoughts about negotiating those costs lower? Obviously, you commented earlier with respect to some of the litigation and efforts you have underway. One of your peers disclosed yesterday that they'd made headway already with respect to some of the savings. Just curious on timeline and status around any of the pending efforts here?

Yes. Julien, this is Steve Rasche. I think you're referencing the lawsuits that Spire Missouri filed against the three marketers, and that situation is unique. We don't really have any update. We felt compelled to make that move legally because the counterparties hadn't paid anything. Not much for the cost of gas, much less the penalties defined and prescribed in the tariffs, which we have no control over that of some Missouri Public Service Commission activities. So we feel strongly we are in a good position, and we will continue to pursue those. If you look at our overall impact gas cost, it's fairly small compared to everybody else in the industry, and we clearly benefited by Spire STL Pipeline, as Steve Lindsey discussed. So we are always looking for ways to reduce our costs because we want to ensure that we are not only investing in upgrading the system, but also managing our operating cost and the cost of gas, so that our customers continue to benefit from not only reliable and resilient service but also a good economic value.

The part I'll add on to that is sometimes I think it gets just taken for granted that gas costs get passed along to customers. We take that personally as a company, because we view the entire bill – anything we can do to positively effectuate that for our customers is a good thing. In this emphasis, no different than when we go out and negotiate gas supply contracts. In this case, we're the ones who can step up on behalf of our customers and say, in this instance, we think there's some things that should be adjusted and brought back to really reduce those gas costs. So I think sometimes again, when you think about PGA terms, it is the cost of doing business as a utility, and we really take ownership of the entire thing and try to do everything we can for our customers.

Excellent. Thank you all for the time. Best of luck.

Our next question will come from Richard Sunderland with JPMorgan. Please go ahead.

Good morning. Thanks for taking my questions.

Good morning.

Good morning.

Maybe starting off with the revised financing forecast, just curious if you could provide more color around the changes there or I guess, think differently presumably the delta between the marketing benefits and the equity offsets in 2022 and 2023. Is that attributable to the equity units done this year?

Yes. Well, as we referenced in our prepared remarks, we were highly successful in issuing the equity units right before Storm Uri, as a matter of fact. Richard, if you look at where we stand at the end of the quarter in terms of total liquidity, clearly the extra earnings from Spire Marketing are what drove our ability to reduce our equity needs for 2022 and 2023, essentially taking about $50 million out of each year, if you look at the midpoint of the guided range. You can draw a direct line there from the results from Spire Marketing, which is a low capital-intensive business that when we do have these events, once every five years or so, it gives us the opportunity to take those funds and plow them back mainly into the CapEx in the utility. So that's how you can draw the line between the operating results and where we stand so far. Again, keeping an eye towards our liquidity, which became of great value during the February-March timeframe, we were never in a bad situation. As we mentioned, we're in a phenomenal position at the end of March and going forward.

Got it. That's helpful. And then separately, can you provide more color on the claims surrounding marketing that you referenced? Presumably these aren't material to the results; just curious what's going on there as you referenced in the prepared remarks.

Yes, I chuckled because this is the same situation that almost everybody in the energy sector, especially anybody who operates in the midcontinent going down to southwestern Texas, is dealing with. It has different flavors depending on who you're talking about in the food chain. Ours are really commercial disputes. There are a handful of them, and they deal with – principally with contract language and interpretation, which gas price to apply, what were the extra costs associated with meeting the supply when we were curtailed by some of our suppliers at the other end of the pipe, how do you allocate cuts because we didn't have to cut some of our customers when the supply became tight. I think about them as commercial negotiations. Where we stand today, we make our best estimate based on where we are in those negotiations, and those discussions continue. To the extent that when we resolve those and we are confident that we'll resolve those at the right time and at the right value, we'll take a look at our estimates and we will update our view of the performance for Spire Marketing. I can't really speak to the nouns and numbers. Clearly, we're in those negotiations, but as we get more information, we will definitely let you and the rest of the market know.

Got it, I appreciate the color there. And then one last one, just curious is there any expense opportunities with extra financial cushion this year and any programs you can advance to de-risk 2022 and beyond?

Well, I'll start. If you look underneath our expense management during this time period, and you can look at the last quarter as a great example, where expense in the utility was actually down over the last year for the reasons noted. For the first six months, they're up slightly, but they're trending well below inflation. We continue to – it's always a focus of us to manage those discretionary costs, because we clearly acknowledge and understand that investing in upgrading the system and rate base and infrastructure is going to add cost in other parts of the customer bill. We want to ensure that we're balancing those two out. We do a lot of that with the things that Steve mentioned a bit earlier. We're looking at technology, process improvement, all the things that companies do and we do, including innovation to find ways to fundamentally change how we interact with our customers to give them better service at a better value.

The only part I would add is that I think we've evolved as a company, as we brought these utilities together to think not just managing to the quarter, but managing to the year and managing to the three years. Our plan really is to think holistically about our businesses. Sometimes when you have those opportunities and sometimes it’s weather created for what you could or couldn't do because of a warmer winter or a colder winter. We'll pull things forward or in some cases have to defer a little bit. Obviously, we will keep everything from a compliance perspective where it needs to be, but I think we have the insight and transparency and the technology and processes to do some of that much better now than we could have perhaps just even five years ago.

The only other point I would raise after listening and Steve Lindsey actually says this a lot internally at the company as we modernize our infrastructure system, and we invest in modernized higher pressure systems, the maintenance costs on those facilities are lower. As we continue to invest capital to replace our systems, you will continue to see a downward curve on the maintenance cost of those facilities. As we deploy new meters, which we're investing in, and Steve you can talk a bit about that if you'd like. But as we make those investments, all the way to the meter, including the meter, you will see the same decline in the maintenance costs of those facilities because they're modern, they're constructed differently, and they're new.

Great, thanks for the time today.

Thank you, Rich.

Thank you.

Our next question will come from Gabe Moreen with Mizuho. Please go ahead.

Good morning, everyone. I guess I just wanted to ask explicitly, following up on the last question, I think on sort of setting up 2022 and 2023, the back half guidance for the year, it looks like it may come in somewhat lower than last year. I'm just wondering what's behind that? Is that some of the catch-up, which may be even spending percentage in the first half of the year? I mean, regardless, I realize you're going to have a great year, but I'm just wondering about, I guess, the implied guidance for the back half of this year.

Yes, I think you circled Gabe some of the items we – I think there is a little bit of expense in the back half of the year in the number – in our guidance range. Steve, anything else to add on that?

A lot of that is based on the cadence of the work that we are doing out in the field. And as you can imagine, Gabe, we were focused on here and now during February and even going into March. We'll ramp up our activity, both our capital and O&M activity. If you look at the expense run rate for this quarter, it's pretty standard in what you should think going forward. Now I say that, we continue to be in work-from-home mode. I can assure you we would love the opportunity to show up in the office probably on some flights and schedules, but we would love the opportunity to maybe travel a little bit and actually start seeing some of our customers face to face, especially on the marketing side. I think we all look forward to doing a little bit more of that, but I think we'll be able to handle any cost load that that would bring us.

Totally agree that a non-virtual AGA would be nice. Thanks, everyone. That's all I have.

Yes, thank you.

Thank you.

Our next question will come from Michael Weinstein with Credit Suisse. Please go ahead.

Hi, good morning guys.

Good morning, Michael.

Good morning.

Good morning, Michael.

Hi, I was just thinking about your comment about third world down in Texas. And I am just thinking about those guys sitting in the dark in Houston, making $40 million or $50 million without even having the lights on.

Yes.

Not even having heat.

Is there any chance – you just, I mean, very recently wrote down the value of Spire Storage. Is there any chance that there might be a write-up in the future? I mean based on the obvious value that is now present in all storage? And I guess…

Yes, Michael, it’s an interesting question. The larger strategic question, which Steve addressed earlier is what – we have to get through our assessment of what the next step in storage is. Once we make that decision, we will obviously come to the market and give the rationale for whatever move we make. Now we get down into the arcane accounting of everything. As you know what, an accountant then that’s how I was trained, we always look at the downside, and you never look at the upside. So write-downs have to happen immediately; write-ups can't happen. So, unfortunately, I would agree with you that the intrinsic value of storage has increased as a result of Winter Storm Uri. We have actually seen contract rates move up really across the nation. We've seen strong demand in our storage field out in the Rockies, but that doesn't translate into any GAAP adjustment with the write-up we took last July.

Right. But as you mentioned, there are new opportunities now, especially at the utility, right, in terms of – especially in West Missouri, I would think.

Well, I think it is clear that not only for us, but everyone in the energy space is taking the things that we’ve all learned from Winter Storm Uri, and we're assessing where the opportunities would present themselves. We’ve been pretty clear that we do see some opportunities, especially on the west side of Missouri and down in Alabama. We’re putting a finer point to those analyses now with a pretty good new data point that I think over time will give us the opportunity to find some incremental investment in CapEx either in the utility or outside; we’ll figure that out after we identify the opportunity.

Yes, Michael, just as an additional point, I guess I would say. What the market has reminded itself was the planning episode if you will that we go through annually. There is a financial flow of all that and what it means to customers, but also there is a physical flow. The physical aspects of your planning around supply, including storage as an example, it's a physical ability to get those molecules to you at the coldest times, either on a peak day or a durational basis. When you start looking at your system physically versus the financial flow, storage matters in terms of its ability to get to the right location at the right time. What Uri has done, I think, as Steve said, is a reminder of the significance, the importance of storage in these market basins. We've got a very strong executive leading that organization that's got decades of experience in Spire Storage; he's built a very strong team. They operated at facility this winter in a different way than they have the last few years because of this weather storm, even though it didn't just directly hit in that geography. Back to Steve – I'm not going to repeat everything Steve said, I just wanted to point out the significance of the physical locations of these facilities during these peak periods, which is really what they're a lot designed for.

Got you. Maybe you may have covered this earlier, but the $110 million of gas costs from the storm; at the utility is that going to be – is that part of the updated test year in the rate base – in the rate case? Is that going to be dealt with through that process? Or…

Yes, well, I think we need to separate these. That's part of in essence what will be the PGA, and those are handled outside of the rate review that we're in right now. These are separate items. I think we just need to clarify that – while I spoke to, we take and own the entire customers' bill, these are separate pieces that's actually to the PGA portion.

Right. And would you anticipate any kind of – is any securitization even needed? I mean, this is a more mild effect versus your neighbors. So…

Yes, Michael, that's still to be determined. We've had the on-camera review with the commission staff, and we continue to have discussions. I think every utility is looking at the options available to them. We're not looking to securitization as the option that we need. Our number is a lot smaller than some others in the industry. We think that using the PGA as it is currently configured works best for us. Now, I know that there is some securitization legislation to drive from some of the other utilities in the state, but that's aimed mostly toward the coal fleet and retirement of coal than it is recovering gas costs. But I can't speak for the other utilities in the state and where their plans are. And Michael, the one piece I will add is that while typically the PGA is an annual type event, I think in this case we're looking to work with the commission to see if we can spread this out over perhaps two or three years to minimize that impact on the customers from the gas cost perspective.

Right. And those with carrying costs, I assume, right?

Yes, I'm not sure we followed what you're saying, Michael.

Oh, in other words, if you spread it out over three years and you're not securitizing it, you would in theory get a return on equity during that time.

You know… Yes, this is just excess cash costs, and it is in the customer bill. Our philosophy that goes back to Suzanne, and how she started the earnings call, focuses on the customer. In this scenario, recovering the actual costs that we incur to finance that unusual cost is the best way to go. Frankly, it was one of the reasons we took out the short-term loan in Missouri was to separate some of the costs associated with that.

I got you. It's just a relatively small amount anyway. It's not really going to make a big impact. Anyway, thank you very much, and good work this last quarter.

Yes, thanks so much.

Thank you, Michael.

Thank you, Mike.

Ladies and gentlemen, this will conclude our question-and-answer session. I would like to turn the conference back over to Scott Dudley for any closing remarks. Well, first of all, thank you all for joining us today. I know it's a very busy earnings week, especially on Friday. We will be around later today for any follow-ups, and we look forward to chatting with many of you at AGA. Thanks again. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.