Spire Inc (SR) 2014 Q1 法說會逐字稿

Good day and welcome to the first-quarter earnings call with The Laclede Group. My name is Patricia and I will be your web event specialist today.

(Operator Instructions) It is now my pleasure to turn the webcast over to Scott Dudley, Director Investor Relations. Mr. Dudley, the floor is yours.

Good morning and welcome to the earnings conference call for our first quarter of fiscal 2014.

We issued a news release this morning announcing our financial results and you may access the release on our website at TheLacledeGroup.com under the news releases tab. Today's call is scheduled for one hour and will include a discussion of our results and a question-and-answer session. Prior to opening up the call for questions the operator will provide instructions on how to join the queue to ask a question.

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

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

Our forward-looking statements speak only as of today and we assume no duty to update them. Although our forward-looking statements are based on reasonable assumptions, various uncertainties and risk factors may cause future performance or results to be different than those anticipated. A description of the uncertainties and risk factors can be found in our quarterly report on Form 10-Q, which will be filed later today.

In our comments, we will be discussing results in terms of net economic earnings, a non-GAAP measure used by management when evaluating the Company's performance. Net economic earnings exclude from net income the after-tax impacts of fair value accounting and timely adjustments associated with energy-related transactions as well as the impacts related to the MGE acquisition. A full explanation of the adjustments and a reconciliation of net income to net economic earnings are contained in the news release we issued this morning.

So with that, I will turn the call over to Suzanne.

Thank you, Scott. Let me add my welcome to those who have joined us this morning. Steve Rasche will follow me and cover our operating results and other financial matters in more detail in a moment. I would like to give you a broader update on the Company as we continue to move ahead with our growth strategy in 2014.

In our just-published annual report, we recounted our successes and achievements in 2013 under an umbrella theme of upward. As we shared, last year's acquisition of Missouri Gas Energy was transformational for our company. It doubled our size and set in motion a new direction for Laclede. We are growing and now moving onward with an upward trajectory.

As we progress in 2014, we are continuing to pursue our strategic imperative. We are integrating MGE, a significant element of our growth by acquisition. We are further investing in our core utility operations with accelerated pipeline replacement. And we are building Spire, a provider of fueling solutions of operators of natural gas vehicles.

Now I would like to update you on each of these initiatives.

Regarding the integration of MGE, I am pleased to say that the process is well underway and began in earnest upon our closing of the transaction in September. A great deal of planning went into the process to bring Laclede Gas and Missouri Gas Energy together. Internal teams from across the two organizations have been working with our outside partners to first identify synergies and ways to improve processes and now our internal teams are implementing those plans.

When Laclede completed its information technology upgrade last year, I mentioned how important technology is as an enabler of our success as we work to achieve synergies in the integration and continue to grow.

One of the key elements we are working on right now is a systems integration for MGE. This important effort is going well and progressing according to plan. We expect to complete the integration of the supply chain and accounting systems later this spring, with the conversion of the customer care and billing system occurring over the summer of 2015.

Meanwhile, the teams are working on other elements of the integration that generally relate to efficiency and best practices with an eye towards delivering the overall synergies that we originally identified. We are making great progress across the board thanks to the effort and hard work of employee-led teams across the organization.

At our initial integration planning we fully considered MGE's need to file a general rate case and the company's normal labor matters. As announced back in September, MGE filed a general rate case, its first in more than three years, as required under state statute to remain eligible to file for revenue increases under the infrastructure system replacement surcharge, or ISRS, mechanism.

MGE filed for a $23.4 million revenue increase. After including ISRS revenues already being collected, the net increase requested is $17.1 million, an increase of 3.6%. In Q1 we continued to invest in the replacement of our distribution infrastructure, which now includes some 30,000 miles of pipeline with the addition of MGE.

The year-over-year increase in our capital spending was driven by pipeline replacement investments which are recoverable under ISRS. This surcharge supports learning growth for the gas utility through timely return of and return on these infrastructure investments between general rate cases. These investments not only enhance the safety and reliability of our distribution system, they also reduce maintenance costs going forward.

The other element of our growth strategy, developing and investing in emerging technologies, is also progressing according to our plans. A year ago we launched Spire, an initiative to provide tailored end-to-end fueling solutions for natural gas vehicles. At that time we announced our first and flagship project, a fueling station at Lambert St. Louis International Airport.

I'm pleased to announce that this fueling station, which serves a number of commercial fleets, began commercial operations in December. We are pleased with initial volumes and customer traffic, which have been as good as, if not a little better, than we projected.

Our pipeline of possible future projects is growing. We continue to have discussions with a number of other potential customers, operators of heavy-duty trucks, transit, waste haulers, and municipal vehicle fleets about projects nationally. We look forward to updating you as these projects come to fruition.

When we first laid out our strategic vision we took time at the beginning to make sure we had the team, the structure, the resources, and the processes needed to be successful as we pursued growth. We realigned our senior team, made some changes in functional responsibilities, and build a structure to support a shared service model capable of handling growth and managing a large organization.

To ensure we had a strong leadership team in place to harness the full potential of Spire and initiatives involving other emerging technologies, we recently named [Peter Stansky] as Senior Vice President and Chief Operating Officer of Laclede Venture Corp., the entity that houses Spire. Peter brings significant sales management experience and technical expertise to our team and we will be responsible for driving continued growth of the innovation side of the business.

Last quarter I spoke about our efforts in fiscal 2013 to ramp up communications engagements with key stakeholders -- our customers, employees, regulators, and the financial community -- to build an understanding of our strategy and specific plans for executing against that strategy. We recently announced that Craig Dowdy has joined us as Senior Vice President of External Affairs, Corporate Communications, and Marketing. He will provide leadership for regulatory affairs, government, and legislative matters, and economic development strategies in addition to communications and marketing.

Another announcement we made last week was our agreement to relocate to new offices in downtown St. Louis, driven in part by our pending sale of one of our service facilities, as well as our MGE integration. With the addition of MGE, we knew we would need a new space to accommodate our growth. We are excited about creating a different kind of space as well, one with a work environment that fosters collaboration and efficiency and helps us attract and retain top talent to continue to drive value for our customers and our shareholders.

Now, before turning to a review of our financial results, I want to ask Steve Lindsey to say a few words about the operation of our system during the recent cold snap across the US.

Thank you, Suzanne. Good morning to everyone. In the first quarter we experienced temperatures that were 18% colder than last year and about 8% colder than normal. The low temperatures continued in January and the early parts of February as well.

These conditions drive up gas usage for heating and so it's particularly important that our gas supplies and distribution system are able to readily serve our customers' needs during these critical times. Very pleased to say that our system at both Laclede Gas and MGE performed extremely well in handling the increased load, including the highest send out day in over 17 years, with minimal impact to our customers.

Our ability to deliver reliable service when the need is greatest is attributable to the efforts we put in our demand planning and to the investments we have made in upgrading our distribution infrastructure. It is also a tribute to the hard-working men and women of Laclede who take pride and dedicate themselves to consistently delivering safe, reliable, and cost-effective gas service every day.

Thank you, Steve. Before turning the call over to Steve Rasche, let me quickly review our first-quarter results headlines.

Overall, we posted a solid quarter. Net economic earnings grew 29%, reflecting growth in our gas utility operations, particularly offset by lower earnings from gas marketing as expected. Our results are on track with our goals for the full year 2014.

And now let me turn it over to Steve to cover our operating results in a bit more detail.

Thanks, Suzanne. Good morning, everyone. Let me review our operating results for fiscal first quarter ended December 31, 2013, and give you a few updates on other initiatives.

As usual, we will focus on net economic earnings and our news release includes a reconciliation between net economic earnings and net income. As a reminder, our current year results include Missouri Gas Energy, or MGE, in its entirety including the debt and equity capital raised to finance the transaction.

Looking first at our income statement, total operating revenues were nearly $469 million with gas utility revenues up 74%, due largely to the addition of MGE. Gas marketing revenues were down about $9 million after taking into account the roughly $12 million change in the intersectional revenues during the quarter.

A better measure of growth in scale is operating margin, or revenues less gas cost and gross receipts tax. Consolidated operating margin for the quarter was $156.8 million, up just over $52 million over the prior year and driven by a nearly 59% increase in utility margins, which I will touch on a bit more in a second.

Walking down the rest of the income statement, operating and maintenance expenses were also higher, up $22.7 million over the prior year, but higher by just $2.6 million after removing the impact of adding MGE this year. And that increase was due largely to a mix of customer activity and compliance work little higher than last year and slightly lower levels of capital work compared to our plan. All due to the colder weather that we experienced last quarter that Steve Lindsey just mentioned.

These variances were largely due to timing and we expect our capital spending and our synergy realization to ramp up as we progress through the year. And both remain on target.

Depreciation and amortization was higher by $9.1 million, of which $7.6 million is due to MGE. The remaining increase reflects our continued investment in infrastructure over the last year.

Operating expenses in the other category were down significantly from last year, since 2013 included MGE transaction costs that did not recur in 2014. Interest expense was higher year on year, reflecting the debt issued to support the MGE transactions. And income tax expense at an effective rate of 34.2% for the quarter was about 300 basis points higher than a year ago and consistent with our guidance at the beginning of the year that the addition of MGE, historically a marginal rate taxpayer, would increase our overall effective tax rate into the low 30% range for 2014.

Resulting GAAP net income for the quarter was $35.6 million, up from $25.6 million last year. On a net economic earnings basis first-quarter earnings were $36.3 million, up 29% year on year from $28.2 million last year. On a per-share basis, net economic earnings were $1.11 per fully diluted share compared to $1.25 per share for last year.

It is important to remember that the current year per-share amounts reflect the increase in our equity outstanding to 32.6 million common shares, roughly 45% higher than last year. It is also important to note that with the addition of MGE our earnings pattern has changed a bit, due in large part to the rate designs used by Laclede and MGE. And while both rate designs provide a high level of certainty in our recovery of costs over the full fiscal year, each does have a different slight pattern of how the recoveries are received between quarters.

Laclede's weather-mitigated rate design places a portion of the recovery in the first block of usage during the winter heating season. As a result, Laclede has historically seen almost all of its earnings in the first two quarters of the fiscal year, the heating season here in Missouri, and it has often had an operating loss in the fourth fiscal quarter of the year, the peak of the summer season.

MGE's straight fixed variable rate design tends to smooth out its earnings a bit more, resulting in a higher percentage of its earnings during the summer months compared to Laclede. Putting these two rate designs together, we anticipate our consolidated earnings pattern to smooth out a bit compared to last year, with between 80% to 85% of our earnings coming during the first half of the fiscal year and the remainder spread over the last two quarters of the year.

Now let's take a quick look at our operating results for our two segments. Gas utility operating margins were up by $57.2 million in the first quarter, with $51.3 million of that increase attributed to MGE. The remaining increase was driven by asset optimization activities, colder weather compared to last year, and some modest customer growth.

Margins were offset in part by higher depreciation and amortization expenses, as I mentioned earlier, as well as higher other operating expenses due principally to MGE. Resulting net economic earnings for the quarter improved to $35.8 million, up $10.5 million or almost 42% from last year. Gas marketing, principally the operations of Laclede Energy Resources, saw operating margins of $2.2 million compared to $6 million last year, with the decline largely attributed to the expiration of two favorable supply agreements in December of 2012 and October of 2013.

Resulting net economic earnings for the quarter of $800,000 compared to $3.3 million last year. LER's business continues to be impacted by the narrow basis differentials and low natural gas price volatility, although both price and volatility has increased of late due to the extraordinary winter conditions, as Steve Lindsey mentioned a second ago.

Turning to the balance sheet at December 31, most of the movements in working capital were tied to our seasonal needs with both accounts payable and accounts receivable increasing with the higher gas usage by our customers, offset in part by declining inventories used to meet that heating demand. I should also point out that goodwill decreased during the quarter, due principally to the closing of our agreement with Algonquin Power & Utilities that, in effect, allow them to purchase New England Gas Company directly from Southern Union Company.

Laclede received $11 million as part of that deal, which effectively reduced our purchase price for MGE and reduced goodwill. Taking a step back, Laclede Group remains in a strong financial position. Our long-term capitalization stands at just over 56% equity, reflecting, among other things, continued earnings as well as the redemption of $80 million of Laclede Gas first mortgage bonds on January 6 of this year.

At quarter end, our short-term commercial paper borrowings were just $94 million, up just $10 million from a year ago despite the fact that the borrowing now supports a much larger utility than the prior year. Needless to say, we continue to have ample liquidity to meet our needs.

Turning to our cash flow statement, cash flow provided by operating activities was a net usage of $15.7 million for the quarter, due largely to the seasonal working capital needs that I just mentioned. Excluding those temporary changes, first-quarter operating cash flows were $55.6 million, up from $37.5 million last year.

Capital spending for the quarter was also strong, increasing to $34.6 million, up almost $7 million from the same period last year. This increase was driven by the addition of MGE and infrastructure investments across the utilities. And, as I mentioned earlier, our spending was impacted slightly by the cold weather this quarter.

It is also important to remember that nearly 55% of our capital spend this quarter was ISRS recoverable. And during the quarter MGE filed with the Missouri Public Service Commission to increase in its ISRS surcharge by $1.6 million, while Laclede filed to establish a new ISRS for $7.4 million, its first since its general rate case become effective in 2013. We anticipate the MGE and the Laclede filings be reviewed by the staff and ruled upon by the commission later this spring.

Looking forward to the rest of 2014, let me recap our outlook. As Suzanne mentioned, the MGE integration began in earnest this quarter and our goal remains to achieve net synergies of between $25 million and $34 million annually by fiscal 2016, which is year three post-close, with those net synergies ramping up this year and into fiscal 2015 as we fully integrate Missouri Gas Energy. And as Suzanne noted, we remain on track with those goals.

As we discussed last quarter, we expect to incur significant one-time costs to integrate MGE and Laclede and in the first quarter we incurred $1.2 million of those costs. As a reminder, we deferred 50% of that balance, or $600,000, last quarter for recovery in a future rate case.

Overall, we remain on track to deliver 2014 consolidated net economic earnings per share equal to the 2013 per-share results. And we expect our regulated earnings to grow from 2013 levels as nonregulated earnings are anticipated to be no more than 5% of the overall earning mix for the current fiscal year. And we remain on track with our capital spending goals for fiscal year of approximately $185 million with almost 60% of those spending being ISRS recoverable.

So in summary, we are off to a solid start for fiscal 2014 and we are tracking according to our plans. We are maintaining a strong financial position and continuing our 11th consecutive year of increasing dividends, as we announced last week a quarterly dividend of $0.44 per share payable in April.

We thank you again for your support and confidence in Laclede and look forward to updating you on progress as the year continues. Let me turn it back over to you, Suzanne.

Thank you, Steve. We are indeed off to a good start in 2014. As the year progresses, we are going to adhere to our strategic imperatives and build on the success and momentum from last year.

We will keep our promises to our stakeholders, most importantly our customers and our shareholders. We will continue to successfully integrate MGE and meet our earnings goals. We will continue to drive innovation and natural gas fueling and other emerging technologies.

We will finalize the MGE general rate case. We will continue to invest in utility infrastructure to ensure safety and reliability and reduce maintenance costs. We will develop a plan to connect to our customers, community, and company through communications to improve customer service at every touchpoint.

And we will continue to deliver shareholder value by leveraging our assets, our expertise, and our people. And we will do all this while scouting for new opportunities.

We look forward to updating you on our progress and we are now ready to take questions.

(Operator Instructions) Sarah Akers, Wells Fargo.

Now that we have the staff recommendation in the MGE case, are you able to outline the key areas of disagreement there and the prospects for a settlement?

Sarah, this is Steve. Let me take a shot at that and then Steve Lindsey can weigh in if he has anything else to add. At this point, the issues that we continue to have discussions on start with ROE.

And, not surprisingly, both the staff and the OPC filed for an ROE below the 9.7%, which was exactly the ROE that Laclede got in their rate case mid-2013. And that will clearly be one of the areas of discussion. We still feel confident that the rate we filed at is the right rate which we will end up at.

Aside from that there's a number of other issues underneath the surface, none of which I think rise to the occasion. Clearly, the staff is focused on operational performance and making sure that we continue to meet the customer service metrics that they value and that we value also so that the transition into the Laclede Group is seamless.

Okay. Then I know we talked -- go ahead.

I was just going to I guess at a macro level comment; as someone who has been in this industry for 30 something years, it's just the traditional path of the negotiation taking up staff concerns and staff taking up our concern. And so we are -- the parties are in process is the way I would summarize it.

Sarah, this is Steve Lindsey. I guess one other point I would add is the reason for this rate case is, as Suzanne had mentioned earlier, to continue to collect on our three-year plan from an ISRS perspective. So this is a pretty straightforward case. There are some things that we are going to continue to work on with all the parties, but the reason for this case was to continue with the ISRS revenues.

Great. And with the staff coming in at the 7.9% to 8.9% on the ROE recommendation, does that make it pretty challenging to bridge that gap and reach a settlement? Or do you still think that there's potential there without coming off the 9.7%?

I think, again, we are continuing to work with all the parties. I think this is not unusual in these types of cases from starting positions. I think we appreciate both the staff as well as the other parties being willing to sit down and have these discussions, and we are continuing to work towards a settlement.

So I don't consider this unusual and I think it is pretty much going as normal from a timing perspective.

Great, appreciate it. Then one on LER. Is the expectation still for a 40% decline year over year in those earnings? And then does the more favorable winter weather and gas conditions provide upside to that forecast, or how should we think about that full-year impact?

Sarah, this is Steve. It would still stick with our macro guidance of where LER is going to go. Clearly, there has been more volatility returned to the market and if you have the assets in the right place, and we have, you get to take advantage of those.

Those have been spotty and they generally last for a day or two. Clearly, that's the strategic advantage of having a marketing company in our mix is that we get to take advantage of market opportunities when we have the assets in the right place. But I think that on a macro level it's still important to think of the nonregulated business as being at 5% or less of our overall consolidated earnings per share for this year.

Great, thanks a lot.

(Operator Instructions) Dan Fidell, U.S. Capital Advisors.

Good morning. Just a few questions from me. I guess just following up on Sarah's question just on the marketing side. As we look forward should we be thinking -- I think in the past you've talked about the marketing business being less than 10% of total EPS. This year it's sort of less than 5%.

Is that a better run rate we should be thinking about just on a forward basis?

Yes is the simple answer, Dan. 10% is the percentage we used we were just Laclede Gas, but adding Missouri Gas Energy into the mix it's now, as Steve Rasche had said, 5% of -- less than 5% or up to 5%. And the other piece that Steve mentioned, which is absolutely right and we talked about before, is we liked having LER in the mix. So when these opportunities do arise -- when they do arise we still don't see it, when you look at the math, exceeding that 5% marker that Steve has placed out there.

Great. Just a quick question on CapEx, too. Just making sure you are still kind of tracking for the $185 million total CapEx for fiscal 2014, which I think was in your most recent slide deck. And then if you could just kind of remind us how that breaks out between Laclede and MGE.

Dan, this is Steve. We are clearly on track for our $185 million. And the breakdown between the two businesses; historically MGE has been at a run rate in the high $30s million to low $40 million range and we would certainly expect that to tick up into the mid-$50s million at a minimum.

Again most of that increase is going to be in ISRS recoverable spending, pipeline replacement programs, which was clearly one of the opportunities we had when we acquired MGE. The spend at Laclede will stay fairly consistent with what we saw last year when you think about the investments in pipeline.

What you're going to see is a little bit difference in mix because the significant investments that we've made in IT over the last few years on the Laclede side drop off to a much lower level in 2014 and we will see a little bit higher level of spend on the pipes even at the Laclede side.

Dan, this is Steve Lindsey. One point I would add to that is obviously we managed our ISRS spend within the cap guidelines and so at Laclede we are going to do a slight amount more of a pipeline perspective. At MGE we will do probably about twice as much as what they did last year, to give you a frame of reference, on pipeline replacement.

Great, thanks for the color. Just last question from me, I think for Steve Rasche, I think for you. Some tax and credit-related questions. Can you just kind of tell us what your expectations are for an effective tax rate for the year?

I think you had said low 30%s. This quarter came in I think about 34%. And then, secondarily, just in terms of on the credit side, how do you gauge kind of the impact from Moody's recent upgrade? How should we be thinking about that in terms of the benefit to you guys going forward?

Great question. On the tax rate, yes, our effective tax rate for the new consolidated group will be in the low 30% range, probably a percentage point lower than what we saw in the first quarter.

And we will see some -- we will see that rate move a little bit during the four quarters, but I think with the addition of MGE we will see that smooth out a little bit from maybe some of the volatility that we might have seen in prior years with just Laclede.

From a credit and rating agency standpoint, yes, we were pleased to see Moody's action. That was something that was well signaled to the market a while back and Moody's is following where S&P landed during 2013 that the collectability for LDC, especially for first mortgage bonds, is very high. Clearly, that puts us in a great position as we look in the longer term on what we would want to do from a borrowing perspective.

They didn't change the commercial paper rating, so from that standpoint it really doesn't change our day-to-day borrowing needs. But just to keep it all in perspective, the commercial paper borrowing rate for the Company is in the 22 to 29 basis points range so that number on an annual basis still rounds to zero, which is kind of where the market is now for issuers of our quality.

But it is always good to get an upgrade notch. We work closely, not only with Moody's but with S&P and Fitch, to make sure that they are well aware of what's going on. And I think all that spadework over the years has paid dividends for us and for our peers.

Great, thanks for the color. That's all I had. Appreciate it and best of luck with the integration as we move forward into 2014.

(Operator Instructions) Selman Akyol, Stifel.

Thank you, good morning. First, now that you have started integrating MGE have you found any surprises, any more synergies, bigger opportunity than you originally thought?

Well, to answer the first part of your question, have we found any surprises, no. The simple answer on that one.

What we have found that we expected it was, quite frankly, a great group of employees that understand the gas business and work hard every day, which makes it easier when you are implementing things like technology projects and so forth to ultimately get to your synergy commitments that we've articulated here this morning. And it has actually been quite a pleasure working with the employees and working on these business plans together, because as I mentioned earlier, we have had MGE employees and Laclede Gas employees working together on these integration teams and bringing forward the best and brightest solutions from both sides of the state. That has been rewarding.

So we are still on target to meet the expectations that Steve Rasche mentioned earlier in his comments.

Great. Then on the operating margin, if you back out MGE, I'm coming up with 103 versus 97 and the commentary in the press release you talked about asset optimization and colder weather driving the growth. Can you break that out or is there any additional color you can give there in terms of which is the larger portion of that?

This is Steve. Asset optimization really is the bucket that we think about when we think about how we optimize all of the assets that we use to support what we do every day. And that includes not only the transportation commitments that we have on pipelines, but also the natural gas and other fuels that we have in storage.

During the quarter what we saw is we saw an opportunity to sell a bit of propane into the market. We did that December. We were not in the market during the January timeframe when propane market really took off, but we saw an opportunity to sell a little bit of propane out of our cavern in our service territory in December.

And we did that to take advantage of prices which were really driven by the demand for propane in the fall harvest season. Because we had such a wet harvest season here in the Midwest there was a lot of propane demand to dry the crops so that they could go into further processing.

We -- that was offset in part by a little bit lower volume on off-system sales from capacity release because that market remains pretty soft. If you think about it we're talking about it last quarter and through last quarter the storage of natural gas was riding at or above all-time high. That has certainly changed as we have gotten into January with some fairly large draws because of the cold weather, but during the first fiscal quarter we saw our opportunities for capacity release and also some sales drop a little bit.

So those are really kind of the two big pieces. We continue to have a little bit of sales of other fuels and use our assets as best we can to drive value to our customers and to our shareholders.

Great, thank you. Then in terms of the emergency technologies and Spire, I heard you mentioned sort of a backlog starting to grow, additional products that may be out there. Is there any way you can put more color around that and give us some goal posts to track on?

Yes, I will sort of do a quick intro and then I'm going to pass it to Mike, who's in the room. We are excited about talking about Lambert International Airport, but your point we've got a lot of other customers that are in the funnel that we have been working with and that is one of our reasons for the announcement of Peter.

He brings years of sales and technical experience so that we can continue to work to get some of those customers to closing. Because Mike's role, as you know, is innovation and integration. He has got dual responsibilities, so we wanted an executive over that piece of the business to continue those customers down the path under Mike's leadership. And Mike may want to share a little more color.

I think that's very well said, Suzanne. That sums it up very well. In sum, we do have a number of opportunities.

As we have continued to watch this market and develop our business model and listen to what our customers want and need, we have continued to look at the business model, look at the offerings that we provide and talk to that customer base out there. Again, we are forming a model and don't forget that Spire's business model is an end-to-end custom solution. So we've got a number of those opportunities in the hopper right now and, as Suzanne mentioned, bringing Peter on to help us drive those home is a huge step forward for us.

All right. Then my last question, and again I heard you loud and clear in terms of the non-reg being 5% of less than this year, but if we were to look out, say, three years is there a goal? Would it still be at 5% or would you think it may be increasing to something larger than that?

We don't have a goal. What we know is we have two gas companies right now that we are integrating and so sort of do the math; it's less than 5%. I talked a lot about growth and acquisitions and organic growth, and so if we add other gas companies into our group then obviously that percentage will shrink. It's just the mathematical computation.

So we don't have a marker out there. We just continue to stay focused on our growth strategies and work those hard. Time will tell what the percentages look like.

We continue to look at the assets of the new larger organization, how we can optimize those and LER clearly plays up -- plays a role in making sure that we can maximize that value.

All right, thank you very much.

(Operator Instructions) Selman Akyol.

All my questions have been answered, thanks.

(Operator Instructions) At this time I'm not showing any further questions.

Okay, thank you all for joining us today. We will be around throughout the rest of the day for any follow-ups. Thanks again. Have a great day.

Thank you again for joining us today. This concludes today's program. You may now disconnect. Have a great day.