Spire Inc (SR) 2018 Q2 法說會逐字稿

Good day, everyone, and welcome to the Spire Incorporated Second Quarter Conference Call. (Operator Instructions) Please also note, today's conference is being recorded.

At this time, I'd like to turn the conference call over to Mr. Scott Dudley, Managing Director of Investor Relations. Sir, please go ahead.

Good morning and welcome to Spire's second quarter earnings call. We issued our earnings news release this morning, and you can access that on our website at spireenergy.com, under Newsroom. There's also a slide presentation that accompanies our webcast today, 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 of Distribution Operations and Gas Utilities; and Steve Rasche, Executive Vice President and CFO.

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 described in our quarterly and annual filings with the SEC that may cause future performance or results to be different than those anticipated.

In our comments we will be discussing the economic earnings and contribution margin, which are non-GAAP measures used by management when evaluating our performance and results of operations. Net economic earnings exclude from net income, fair value accounting and timing adjustments associated with energy-related transactions, the impacts of acquisition divestiture and restructuring activities and the largely noncash impacts of other nonrecurring or unusual items. In fiscal 2018, these impacts include the revaluation of deferred taxes as a result of the tax reform and the write-off of certain assets disallowed in our recently concluded Missouri rate cases. A full explanation of the adjustments and a reconciliation of non-GAAP measures to their GAAP counterparts are contained in our news release.

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

Thank you, Scott, and a warm welcome to all who are joining us this morning for our second quarter update. We are Spire. You've heard us say these 3 words many times as we've described the inspiration that guides us and the aspirations to help us grow. At Spire, we brought all of our gas companies and businesses together under one name and one mission. We are one team focused on delivering on our promises. Through it all, a consistent set of strategic priorities has guided our transformation and growth. This quarter is no different. As we report on the second quarter of fiscal 2018, let's start with regulatory outcomes. After all, the utilities was the lion's share of our business and managing regulatory process is a big part of what we do. Our commitment is to manage all regulatory processes in each of our jurisdictions in a way that achieves constructive outcomes, outcomes that balance the interests of our customers, our shareholders and our employees. We made good on that promise this quarter by completing our 2 comprehensive Missouri rate cases.

Unlike most states, Missouri rate cases are a year-long journey that all of our stakeholders, including you, take with us. Unfortunately, this process with this structure and timeline creates ambiguity. And it was made even more complex and time consuming by the need to address both of our Missouri utilities concurrently, in addition to dealing with the impact of tax reform, which was not originally anticipated. I would like to remind everyone that although the rate cases were lengthy and challenging, they were necessary for us to continue to receive timely recovery on our pipeline replacement programs and to allow us to establish a new baseline for Missouri business. To that end, we have accomplished our objectives and set the stage for how we move forward. I would like to take this moment to thank our regulatory team and all the supporting team members for their endless professionalism and tireless talent, which enabled us to navigate this process to constructive closure.

With closure, all the important parameters that determine our rates have been decided, including rate base, return on equity, equity capitalization, rate design, weather normalization, ISRS reset and renewal and the cost of service. Now that we have clarity and certainty on all these parameters, it's up to Spire management to successfully lead and manage the business.

Importantly, due to the timing of the rate case, we were able to do the right thing and lower customer rates to reflect the benefit of lower federal income tax under the Tax Cuts and Jobs Act passed last December. Steve Lindsey and Steve Rasche will speak to the details and impact of the rate case outcome in a moment.

Months ago we promised that once the Missouri rate cases were concluded, we would provide earnings guidance for 2018 and update you on our long-term earnings growth target. With clarity regarding how our Missouri utilities will move forward, we have set a range for 2018 net economic earnings per share of $3.65 to $3.75. And with 2018 guidance in place, we set our annual long-term earnings growth target at 4% to 7%, this is up from 4% to 6%. Steve Rasche will walk you through these numbers in conjunction with a review of second quarter results. He will also discuss the earnings impact of a robust capital investment plan, driven by increasing spend for our gas utilities as well as investment in our STL Pipeline and storage.

Our capital plan expenditures have been increased to $2.5 billion for the 2018 to 2022 period, up from $2.3 billion a year ago.

Now turning to the quarter. We delivered yet another solid operating performance. The credit for that, as always, goes to the 3,300 Spire employees who dedicate themselves each day to safely and reliably serve 1.7 million homes and businesses.

In the heart of our heating season, our employees did an outstanding job maintaining a high level of system operating performance, while delivering the excellent customer service that we stand for at Spire. This was especially important this year as we experienced a long, cold winter.

For the second quarter we reported net economic earnings of $2.83 per share, reflecting strong Spire marketing results and growth at our gas companies. Our results include impacts of lower federal income taxes and some regulatory adjustments from the outcome of our Missouri rate cases. But suffice it to say that we are pleased to have both tax reform and the Missouri rate cases largely behind us, so that we can look ahead with confidence to our future growth.

As we look ahead, we're also focused on advancing are nonutility businesses, Spire Marketing, Spire STL Pipeline and storage. Let me briefly touch on each of these. As we have shown over the last several years, there's great value to be derived from the physical gas marketing business, if you are positioned with the right assets, the right team and the right relationships in the market to take advantage of market opportunities. These opportunities are tied to changes in weather, temperature volatility and regional supply and demand. In the first half of our fiscal year, Spire Marketing earning was strong, reflecting more favorable market conditions that resulted in wider regional basis differentials and greater storage optimization. Going forward, we are positioning the business for continued success and further growth by continuing to expand geographically. And I'm pleased to announce that we are opening a business center in Houston, the hub of activity in the energy space. To lead this effort and build an even stronger team, we recently named Patrick Strange as President of Spire Marketing. We are pleased to have been able to recruit such an accomplished industry veteran. We look forward to benefiting from Pat's 3 decades of experience.

Now moving on to storage. As discussed previously, last December we acquired a large storage facility in Wyoming with interconnections to 5 interstate pipelines, serving multiple regions. We've seen numerous opportunities to serve various geographic regions and customer groups, including utilities, power generators, pipelines and marketers. Now we are in the process of integrating the facility and taking steps to enhance its operating performance, while investing to expand capacity. I'm pleased to note that we have asked Laura Luce to come to our team to lead our storage business. She brings more than 20 years of experience in storage development, operations and management. We're very pleased that Laura has joined our team. We expect storage to be modestly accretive starting in fiscal 2019 after we complete the integration and upgrade work this year. We will be excluding the storage facilities' results from our fiscal 2018 net economic earnings per share, as we do with all of our acquisitions in the year they are required.

Regarding the Spire STL Pipeline, we continue to progress on this project to diversify and improve the resiliency of our supply and to bring economical shale gas to the St. Louis region. At this point, we are awaiting receipt of a certificate of public convenience and necessity from the FERC. We anticipate this approval will come later in 2018. Once we receive the FERC's approval, we are well positioned to complete necessary land acquisitions and begin construction. We are targeting a 2019 end service date, with a planned capital investment of $190 million to $210 million. We continue to assess other opportunities in other parts of our footprint, including the western side of Missouri and in Alabama.

Lastly, an update on our dividend. As we noted last quarter, the Spire Board raised the dividend by 7.1% for 2018 for an annualized rate of $2.25 per share. This extended our proud history to 15 years of consecutive increases and 73 years of continuous payments. I am pleased to note that the Board has declared the quarterly dividend of $0.5625 per share payable July 3.

Now I'd like to pass the call to Steve Lindsey.

Thank you, Suzanne. Good morning, everyone. I also want to acknowledge the outstanding efforts of our employees during the heart of our heating season for delivering a strong performance, great service to our customers, all while keeping themselves and our communities safe. As I noted last quarter, we are working hard to further improve our operating performance as we continue to build on the positive momentum coming out of last year. Our key areas of focus are employee safety, overall system operations reliability and customer service. I'm pleased to say we are seeing benefits of all the hard work of our employees.

In the midst of a colder winter, and all of our effort required to conclude our year-long Missouri rate cases, we stayed on track with our fiscal 2018 capital spending plan for our gas utilities. Spire's updated 2018 capital expenditure plan has increased to $500 million, up 14% from last year, and $10 million higher than we previously estimated. The increase reflects higher spend for our gas utilities of $425 million this year, which I could point out is on top of last year's robust level. We anticipate about $285 million will go toward spend that we expect to recover with minimal regulatory lag, which includes ISRS-related investments in Missouri, and all our spend in Alabama and Mississippi and about $80 million for new business. With these pieces combined, we expect that over 85% of our utility capital spend will be recovered with minimal lag or will add to earnings in the near-term in the case of a new business spend. We are on track with our plans for this year. For the first 6 months, we have invested $186 million, up about $8 million over the first 6 months of last fiscal year. While this increase isn't large, it is noteworthy when you consider that we were able to do relatively more infrastructure upgrade work last year, we experienced a warmer than normal winter. The capital spend for our gas companies continues to be driven by infrastructure upgrades in new business. So far this year we invested $114 million in pipeline replacement, while increasing our new business spend by nearly 40% to $42 million. Our investments have also supported a 5% growth in new meter installations compared to last year, which had been our strongest year ever.

Now let me update you on regulatory matters, starting with our recently concluded Missouri rate cases. As I referenced earlier, this was a year-long process that involved gas utilities and ultimately also included sharing with our customers the benefit of lower federal income taxes. The headlines in the case include a rate base of $2 billion, return on equity of 9.8% and a capital structure for the Missouri utilities of 54.2% equity. New rates went into effect on April 19, reflecting a $15.8 million reduction for our customers. The new rates reflect both the roughly $70 million in savings and synergies that were created from our transformative growth and a $33 million reduction in customer rates due to lower federal income taxes. The rate reduction also reflects that the ISRS we were collecting, $49 million on an annual basis, was reset to 0. Reflecting the ISRS reset, the amortization of regulatory assets, which are mainly pension, which enable us to recover cash investments made in prior years and the disallowance of certain expenses, the annualized earnings impact was a decrease of just under $6 million. In addition to a rate reduction, the design of our rates was also changed to include a higher volumetric component, and the rate design for residential customers are now aligned across our Missouri utilities. Although our new rates have a higher volumetric component, we got full weather normalization for our residential customers, which mitigates our margin exposure. As Steve Rasche will describe in more detail, the new rate design results in a higher concentration of earnings during the winter heating season.

We have reduced customer rates across all of our jurisdictions to reflect the benefit of lower taxes. Effective February 1, rates were reduced by $12.8 million for Spire Alabama, $1.9 million for Spire Gulf. Effective May 1, rates for Spire Mississippi customers were reduced by $200,000. And we now have weather normalization in all 5 of our utility jurisdictions. So I'm pleased to say that we've effectively concluded the majority of our regulatory matters. All that remains is the RSE for Spire Alabama. We're working on the process to reset the parameters for the annual rate-setting mechanism, or the RSE, and we expect that to occur later this year.

With that, let me turn the call over to Steve Rasche for a financial update.

Thanks, Steve, and good morning, everyone. As you've heard already, we've covered a lot of ground in the first half of our fiscal year, and gained certainty around 2 big movers, the Missouri rate cases and tax reform. The impacts from these 2 make our financial results a bit hard to decipher, but we try to put them into perspective and provide some clarity into our operating results without the noise, so to speak. I'll also give you a bit more detail on our guidance for the year and into the future.

First, let's unpack our financial results. For this quick exercise, I'm going to focus on our year-to-date results starting here on Slide 12. As Steve outlined, with the final amended Missouri Public Service Commission order for our Missouri rate cases, we recorded several write-offs this quarter, including $18.8 million after tax of disputed pension contributions made prior to 1997, and the net book value of properties sold in 2014. These write-offs have been excluded from our net economic earnings since they represent noncash adjustments that have no bearing on our operating results this period. The second set of write-offs, totaling a net $4.8 million after tax, relate to the disallowance of certain expenditures that have been historically capitalized and largely recovered in [rates]. In this case, the Missouri Public Service Commission disallowed both equity and selected earnings-based incentives dating back to the beginning of our test period, or January 2016 as well as a portion of the expenses we incurred in the rate proceedings. These amounts have been included in that economic earnings since they relate to cash expenditures made in good faith in the last 2 years. And note, the total of the 2, or $23.6 million, represents a reduction in Missouri rate base and was factored into our final order and revenue requirement.

Turning to the next slide. The Tax Cuts and Jobs Act of 2017 require us and all companies to revalue our net deferred tax balances, which for us resulted in a noncash benefit or reduction in income tax expense of $54 million. This amount is included in our GAAP results and excluded from net economic earnings. Secondly, as Steve and Suzanne mentioned, we have now reduced customer rates across all of our jurisdictions as a result of tax reform. The customer tax benefit was calculated beginning with the effective date of the legislation, or January 1, for our customers in Alabama and Mississippi, and the effective date of new rates, or April 19 in Missouri. As a result, net economic earnings includes $14.4 million in lower income tax expense that will be retained this year on a nonrecurring basis. More on tax expense and our go-forward adjustments in a minute. And just to wrap up this slide, after incorporating other adjustments for fair value accounting and integration costs, our 6-month results were $4.02 per share, up $0.60 from last year. As you can see, there's a lot of movement, most of it not operating, and we'll focus our comments going forward on net economic earnings.

So let's take a look at our fiscal second quarter ended March 31. Net economic earnings were just over $137 million, reflecting growth at both the Gas Utilities and Gas Marketing businesses, driven by colder weather, really, the return of normal weather as well as improved market conditions and lower income tax expense. Net economic earnings were $2.83 per share, which reflect higher earnings, in part offset by a 6% increase in shares from our April 2017 equity unit conversion.

Let's look at the key drivers for our performance beginning on the next slide. The total operating revenues of $813 million were 23% higher than last year on a combination of higher demand and higher utility commodity costs. Contribution margin was up as well, consistent with the colder weather this quarter. Our gas utilities margin grew $10 million or 3%, driven by the return of near-normal weather, with heating degree days this winter across our jurisdictions 3% warmer than normal, but significantly colder than each of the last 2 years. As a result, demand increased our margins by $17.6 million. In addition, we saw higher infrastructure system replacement surcharge, or ISRS revenues, of $2.2 million, plus $900,000 from customer growth and other revenues, all continuing the positive trends we saw last year and the tangible results of our commitments to invest in our communities and strengthen our relationship with our customers. These benefits were partially offset by a $9 million tax-related reduction in customer rates at Spire Alabama and Spire Gulf as well as a $1.8 million change in Spire Gulf's RSE adjustment compared to last year.

Gas Marketing margins increased by $2.8 million as market conditions improved, in part due to colder weather and the return of temperature volatility, resulting in wider basis differentials, higher margins and increased storage optimization.

Looking at our operating expenses, utility fuel costs were up $129 million and taxes other than income were up just under $10 million, both reflect higher demand and volumes. Other operating and maintenance expenses on the surface were up $45 million, due in large part to the regulatory write-offs I just mentioned. Removing these items, O&M expenses were $6.8 million higher due to weather-driven bad debt and employee-related costs. Depreciation and amortization was higher, consistent with our higher capital investments over the last year. Gas marketing operating expenses were down marginally as average commodity costs declined slightly. And finally, interest expense was higher by $2.7 million, largely due to the new utility debt totaling $245 million this year since the beginning of September last year.

Our year-to-date performance by segment is highlighted here on Slide 17, with the net economic earnings up nearly $35 million -- $39 million or 25% and trends consistent with our quarterly performance. Gas Utility segment up $27 million, from increased margins and lower taxes. Gas Marketing up just over $12 million on more favorable market conditions. And other expenses up $1 million on higher after-tax interest costs.

We continue to grow our cash flow and maintain a strong financial position with year-to-date EBITDA up 6% to $370 million. We also maintained ample liquidity coming out of our peak working capital period and our capital -- our capitalization strengthened again this quarter, and we stand essentially at a balanced long-term capitalization at quarter-end, an improvement of 110 basis points in equity capitalization from our fiscal year-end.

Now let's turn to our outlook, starting with our view for the remainder of 2018. As Suzanne mentioned, we expect our -- this year's net economic earnings to be in the range of $3.65 to $3.75 per share. This range is based upon our performance for the first half of the year, including the strong results from Spire Marketing; tax reform, including our expected full year effective tax rate of 20% to 21% excluding the noncash DTL revaluation; and the regulatory outcomes in Spire Gulf and Spire Mississippi. This range also incorporates the Missouri rate cases with 2 significant impacts on expenses and on the seasonality of our earnings. First, we expect our run rate expenses to increase by a net $12 million annually, falling into 2 buckets. One bucket of roughly $8 million in new expenses are offset by higher revenues, so no net impact to the bottom line. These include roughly $16 million annually and higher O&M expenses related to pension and OPEB amortization, offset in part by a reduction in the amortization expenses of approximately $8 million annually as $11 million of excess ADIT flowback, that's accumulated deferred income taxes by the way, is partially offset by $3 million in new amortization for regulatory assets, like onetime cost to achieve. The other bucket of expenses are higher expenses that will not be offset by higher revenues of roughly $4 million annually, consisting mainly of disallowed incentives.

In addition to expense changes, our Missouri rate design changed. As Steve noted a few minutes ago, we increased the volumetric portion of our rates and paired it with full weather normalization. This change is expected to concentrate more of our margin recovery in the winter heating season. And since our rates just went into effect, we anticipate our margins to be lower in the back half of this year. Note that this is not an issue over a 12-month cycle, but definitely a headwind for the rest of 2018 since we're heading into our low volume summer season. The totality of these rate case-driven changes have been factored into our overall 2018 guidance, and we expect our loss in our fiscal fourth quarter, a traditional period for loss in the utility space and also our summer season, to be nearly double the average levels of the last few years.

We've also increased our 5-year capital investment forecast to $2.5 billion, including raising our 2018 target to $500 million, as Steve mentioned. Our forecast is driven by utility infrastructure upgrades of lives of up to 20 years, and our spend is also balanced across our footprint and includes investments in both the Spire STL Pipeline and storage. As importantly, over 85% of that spend is expected to be recovered with minimal regulatory lag or contribute to earnings.

We're also increasing our long-term growth target, and now expect net economic earnings per share growth of 4% to 7%. This target reflects our expectations of stronger utility growth after resetting the baseline in 2018 to reflect the Missouri rate cases and the impact of tax reform. Our growth target uses our 2018 run rate earnings per share as the base for growth, essentially taking our 2018 guidance and removing the weather and market-driven overperformance in Spire Marketing of roughly $0.17 per share that is unlikely to repeat next year. We expect to drive overall rate base growth by roughly 6%, reflecting our capital investment plan and the benefits of tax reform. Our target also reflects growth from our nonutility businesses, with the important caveat that we still anticipate our business mix to remain predominantly regulated.

From a capital and cash flow standpoint, our headline goals remain unchanged: to support our investment-grade credit rating, continue to build our equity and capitalization, like you've seen in our results so far this year, and reduce holding company debt over time. Like all utilities, we anticipate a reduction in cash flow due to tax reform and our estimate is roughly $40 million annually, offset in part by new cash flows coming out of our Missouri rate cases and offset this year due to the benefit of lower taxes.

Our capital market plans also remain unchanged. We expect to access the debt markets at the operating company level as needed to support our capital spending plans, and still anticipate issuing equity tied to the development of Spire STL Pipeline and storage.

So if you step back for a moment, and Suzanne mentioned this earlier, 2018 is really a reset year. All the pluses and minuses of rate cases, rate design changes and tax reform all largely offset each other with some help from unexpected earnings from Spire Marketing this year. Or stated another way, we now have more regulatory certainly -- certainty and can focus on our windshield, our future growth, rather than on the rearview mirror, Missouri rate cases and tax reform. Trust me, we look forward to turning the page and focusing on expanding our businesses, investing for tomorrow and improving our service to our customers and communities.

Let me turn it back over to you, Suzanne, for some closing comments.

Thank you, Steve and Steve. That's it for our second quarter earnings report. I'm proud of how far we've come on our journey over the past 6 years. Today, we are a bigger company with larger scale, more diversity and more certainty. As we look forward, we'll continue to bring people and energy together in ways that reach the lives of those we serve and add value for our shareholders. We look forward to sharing more at the AGA Financial Forum in Phoenix in a couple of weeks and we hope to see you there.

Now we're ready to take your questions.

(Operator Instructions) Our first question today comes from Michael Weinstein from Crédit Suisse.

Maybe we could talk about the earnings guidance and if you subtract the $0.17 of positive weather impact on the marketing business, and then go forward with the new 47% rate, overall, that would be still below the original low-end 4% off 2017. And I'm assuming that's the reason -- the reason for that is probably an outcome of the rate case, and maybe we could talk about the factors that, I guess, reduced the, I guess, the base that we're setting our new growth rate off of, so the negative factors that came out of the rate case.

Yes, Mike, this is Steve Rasche, I can address that. You're spot on. We -- and I think we were very clear throughout the proceedings with Missouri that we're looking for a fair and reasonable and sustainable outcome. And in many ways, we were able to achieve that. We don't want to lose where we won. We won on getting a market-based ROE, we got the cap structure for operating company, we got recovery and confirmation of many of the things we've done, which were all very, very positive items. And I don't want to -- even though the rate design creates some headwind in the back half of 2018, on balance, we get a more derisk rate structure going forward in Missouri. And we've reconfirmed all of the mechanisms that you would expect us to have in order to deliver our authorized ROE, those were all the strong points. Clearly, we didn't expect to see the rate base write-offs that I outlined in my prepared remarks and those caught us a bit by surprise and brought the revenue requirement down, and the disallowed expenses, which historically, we've been able to recover and capitalize. So those are really the 2 biggest items that impacted us that ultimately changed our view going forward as we think about the state of Missouri. So let me stop right there, and I'm sure you have another question.

Are you embedding -- what ROE are you embedding as an earned ROE in the guidance?

We have, historically, been able to achieve our authorized ROE across all of our jurisdictions. So our expectation is we're going to be able to drive our business.

Okay. And maybe if you could just give an update on Missouri legislation. At this point, I guess, we're getting close to the end of the session.

Sure. Michael, it's Steve Lindsey. I think what we've seen this session, clearly there's been some challenges relative to some macro issues there, but we've seen progress relative to energy legislation. The electric bill, I think, has moved forward. And from a gas perspective, we continue to make progress. As we get to the end of the session, we'll see how it all plays out. But I think, relative to the last several years, this has been some of the best progress that we've seen. And I think we're seeing some trends that I think will have longer-term impacts from the energy perspective here in Missouri. But again, with everything that goes on there, it's a little early to predict, but I think, again, progress is being made.

Do you think that there will be a separate natural gas bill in addition to the electric bill that's moving forward?

Well there is -- there are separate bills that are currently filed and progressing through. And so, again we're seeing good progress in both chambers of the House and the Senate. The electric bill is a little farther along in terms of having progress in both those chambers, and so they are separate bills. So yes, I think the opportunity is there. Again we're seeing more progress than we have in previous years. And some of the challenges that we've seen, from the Senate perspective, I think, we're working to provide opportunities for them to move that forward.

This is Suzanne. It's intentional, obviously, that they're separate bills, it's not only electric and gas, but also water. And that was by design and requested as a legislative body.

Do you think the electric bill has to pass first though before you can get motion on the gas bill?

No. We just -- we know it's further ahead in process, if you will. Just, legislative process is just that, a process, and we know it's further ahead. And Steve Lindsey sort of alluded to it at the beginning of his comments, most of you probably know that the Governor of Missouri has some legal challenges right now, and so that's been a bit disruptive to the legislative process. So it's just a bit hard to predict that right now. What we do know is the committees and the 2 chambers understand the issues greatly because they have studied this now for a few years. It's just really more of a question of process and abilities to get it out and get it codified without the disruption of what's going on with the governor currently.

Our next question comes from Insoo Kim from RBC Capital Markets.

Just to go back to the guidance that you guys gave, I know Mike clarified what the new base is and you guys were fairly clear in that. But if I understand correctly, I think in 2018 you guys do get to keep some of those tax benefits that you get to retain. And given that they're not repeating, is it fair to say that, that 4% to 7% long-term growth is -- could be a little bit slower in the first couple of years, and then increasing towards that on the longer-term basis?

Insoo, this is Steve. Let me take a shot at that. Yes, you're right that we do get the onetime benefit of the tax benefits this year, and I have to say that we are very pleased. We think the right thing to do when it comes to tax reform, especially given the supportive jurisdictions we had and even, and I'll include Missouri, given the totality of all of the mechanisms that we have in the outcome of the rate case is to get those benefits back to the customers and reduce their bills, especially in the teeth of a fairly cold winter and higher volumetric-driven bills was a good thing, and we've seen significant positive feedback. Ultimately that adds some kudos in our little pot of kudos that eventually we'll start tugging on for some things that we need going forward, and that's our philosophy going forward. But you're right, this year we get to retain some of those benefits. It's really kind of funny that if you look at the positives and the negatives, they kind of all net out. The amounts we're retaining in tax benefits this year, in many ways, offset the seasonality headwind that we're going to see coming out of the back half of the year. And the write-offs that we're taking, that I outlined in our discussion, are really offset by the benefits that we saw from Spire Marketing, and that's why we have a marketing business, by the way, is for these kind of winters. So ultimately, 3 of the 4 of those don't repeat, it's really the Spire Marketing overperformance, which we have to recalibrate going forward. So you're right. I mean, as we go forward, we're still working through the impacts of, generally, the rate case. I think tax reform, we've got our arms around. We're very bullish about our growth going forward. And as we get clarity on a few items, there's still many moving parts and many things at the top of our funnel. We'll continue to update our growth guidance, but we wouldn't put out a range if we didn't think that we couldn't achieve that every year and couldn't achieve at least the midpoint of that range going forward over what is generally our planning period, which is current year plus 4 years going out.

And partly why Steve's -- as his articulation to is -- and we've used the word certainly, Steve Lindsey leaned into it a little bit, from all of our regulatory jurisdictions we've been through the process with the exception of Spire Alabama, and we're getting close to completion of that. And in Missouri, we can stay out for at least 4 years because of the pipeline replacement program known as ISRS. So when we talk about certainty and the ability of leadership and management to manage the business, we're together now as a team for 6 years, and have been working with staff. And so getting that regulatory certainty, if you will, and what the guideposts are and us moving forward and looking ahead 5 years, that's why we were confident in issuing the ranges that we issued.

Understood. And then just my last question is on the STL pipeline, just any more color and the reason for the delay in approval by the FERC? And in your growth guidance, I assume, at least you make some type of assumptions of that project going for -- being approved and being put into APDC.

Yes. I don't [hesitate] to say that it's "delayed." I guess this is the way I would characterize it: We have a new administration, we have the new Chairman and it's sort of a new mix at the commission. In terms of our filing, it's wholly consistent with the 1999 regulations that went into place, and our process, again, has been wholly consistent with that. There is nothing unusual about that. I think it's just more of a question of a new Chairman coming in. I do want to point out that also the Chairman issued an NOI that was specific around looking at this process that has been in place since 1999. But he was also very specific about his review of this process does nothing to impact those particular projects that are in the funnel, if you will. So just more to come. I think, it's just more of having a new Chairman in and a little bit of changes around the commission, and so we remain confident there's nothing about our filings that is a particular concern of ours.

Our next question comes from Shar Pourreza from Guggenheim Partners.

Sorry to beat the growth guidance, but it's obviously on investors' minds. So let me just reiterate or summarize. If you were to include the Marketing business, you would somehow be closer to the bottom end of that, right, of your CAGR as you guide today? But given like you guys have rate certainty and you've moved past some of the question marks that you've been looking to fill, it's still a bit of a wide band between 4% to 7%, it's 300 basis points. You've widened the band. So just remind us sort of what would drive you to the top end, right, given the fact that you do have somewhat rate certainty now?

It's a great question, Shar. You're right, the band is wide, and we'll continue to work that, as we always do. And as we get more certainty on the projects that are in our funnel, we'll clearly come back and talk to the market about it. We do have the benefit of looking at the end of the heating season in our utilities, normally we're having our discussions on guidance in the fall, which always is a little bit more of a question mark. And to answer your question directly because you are thinking about it right in terms of the math, to get to the high end of the range, it will take a couple things: One, we continue to work to find ways to grow each one of our businesses. It's not about any one business. And one thing that where we stand today in terms of regulatory certainty is we can look at our rate base growth and look at how we can drive fundamentally increasing value from an investor perspective, while we continue to do all the right things operationally and for our customers. And there's clearly some opportunities there that we'll continue to look at. But a strong rate base growth in the 6% range really across all of our utilities is a good place in which to base our growth. Where we get to the top end of the range or even above the range because we've been above our range in 2 of the last 4 years, really, is driven by some of the nonutility investments, Spire STL Pipeline, as Suzanne talked about getting that online, getting our storage up and running, and all the other things that we look at across our growth strategy, including investing in innovation and technology were all the things that we continue to work, it may be a little bit less mature than the utility space that as time goes on and we get more clarity, we'll clearly be talking about them.

Okay, got it. So basically, you'll fine tune sort of this band as you go through the process?

Absolutely. It's something that we review routinely. We formally review it once a year when we formally update our plan and we have ongoing discussions internally and with our Board about where we're driving the bus strategically, which is a good place to be because opportunities present themselves sometimes with not a lot of lead time. And so it's good to be aligned not only as a management team, but with the Board and understanding where we're trying to drive the bus.

And one more thing I would like to add. From a utility perspective, if you think about it, we're really now getting to kind of a run rate at all of our larger utilities around investment in infrastructure. Then if you go back to the new business investments that we were talking about, up nearly 40% over last year, which was a big year, those are investments in meters to come in terms of growth in our business. So I think those things coupled together give us some line of sight as we move forward over the next 3 to 5 years as well.

Got it, helpful. And then just from a modeling perspective, can you just remind us why weather-normal earnings were relatively flat year-over-year?

I'm not sure I understand your question, Shar, try again. We'll try to answer as best we can.

So weather normalized, the earnings look like they were flat year-over-year, but I can take this offline, it's not a problem.

Yes, I think it has to do with the seasonality of the business because if you -- because of the way in which we earned margins during under the old set of rates and rate structures in Missouri versus the new set of structures, which are going to be much more seasonally aligned in Missouri, it really does -- it does create a mismatch this year, which is why I mentioned this earlier when Insoo asked the question. You really -- they really do kind of all offset each other, so some of the one-off benefits we get and this change in rate structure, all do tend to net out when we get beyond this, what I call, a play-in year in Missouri, which will clearly creation some headwinds in the back half of the year just because of the rate structure.

(Operator Instructions) And our next question comes from Dennis Coleman from BofA Merrill Lynch.

I just have a couple sort of worked over the guidance question, but maybe a couple more on the STL line. You talked a little bit about the FERC process, but obviously, the FERC has quite a lot on its plate right now. I wonder, do you have any sort of timeframe when you expect them to sort of make a decision? Or are you talking to the staff there and know when your approval might move into the queue?

Yes. I mean, obviously, this is a docketed item that we do work with the staff, but I won't call it ex parte rules, but just those words probably put it in the best perspective for you, but there's work we do with the staff in the process, but we do not have direct conversation with commissioners and, ultimately, they're the ones that "place it on the agenda and make that decision." But just when you look at the precedent from 1999, the process and how that occurs and what needs to be done, we're past all the data requests and responses, so that part of the process is closed. So now I think it's a bit of a wait and see. But we stay optimistic, especially when you look at the precedents that are -- have been before FERC. And our pipeline, quite frankly, is fairly simple relative to some of the larger multistate pipelines that we have historically seen. So we, again, remain confident, not just in terms of the approval but also the capital expenditures that we predicted, and Mike Geiselhart, who leads this effort and the team, have got everything lined up, we're sort of ready to go as soon as we get notice of approval.

Perfect. And so on that sort of everything being in line, I mean, have you acquired the right-of-way access? I mean, where does that stand, is it just sort of in standby...

Yes, we're in process with that. Some, we have completed. Some, we need to get the FERC approval to effectuate those. So those are in the funnel, so to speak. We've got pipe lined up, we've got construction crews lined up, and we've got right of way lined up. So all those elements, so it's just a question of getting a FERC approval. The FERC approval drives some of the other pieces that I've mentioned.

Okay. And then just picking up the storage a little bit. That, again, appears to be in an area where you're hoping to drive growth. And you talk about -- mentioned perhaps expanding that with assets in Missouri or Alabama. Can you expand on that a little bit more? Are you -- is this sort of a near-term item or...

Yes, it's -- really there's 2 questions, one the conversation around Western Missouri and Alabama, that really has to do with the pipeline discussions. If you think back a few years, we started talking about project gas, and how we were evaluating our operating regions, our utility regions to see if we indeed have the best portfolio to serve those customers because a lot of these portfolios, which include supply, transportation and storage, were established decades ago when those urban regions looked different, they weren't as large, they didn't sprawl as much and so forth. Supply basins were different, it was prior to shale gas and the pipelines, the way they were built and operated were different. So we basically, in St. Louis, started with a blank sheet of paper and said, given all of that today, talking against storage, transportation and supply basins, how would we design the systems? Not just for today, but into the future for decades to come because these are investments on hard assets, and so that's the Spire STL Pipeline. We've -- we're conducting the same analysis on the west side of the state, near completion with that, so there's definitely projects on our drawing board. We haven't made those final determinations yet. And when we do, we will be sharing those with you. In terms of Alabama, we're early in that process, especially now that we've brought in a section of what we call Spire Gulf. And so we're evaluating all that mobile -- excuse me, in Alabama, but we're early on there. Regarding storage, in Wyoming, and this may be why you mentioned Alabama and Missouri as well, we are storage operators in Alabama and in Missouri. And so we have a team and the skill set, and so going to Wyoming, the storage facility there where we talked about 35 Bcf of gas and 5 interstate connecting pipelines, and integrating that into our organization as well. We're early on in that, but everything looks very good, and we'll have -- we'll continue to deploy capital there and bring more to you as time goes on. We -- I did mention in my opening remarks that we're not expecting any earnings from that storage facility, much like our other acquisitions. And as we integrate, that particular facility will bring more to you about that in regards to the earnings projections.

And our last question comes from Christopher Turnure from JP Morgan.

It's Rich on for Chris here. Most of my questions have been answered, but just wanted to ask about kind of the credit metric commentary. You've mentioned for investment -- commitment to investment grade, and maybe how you see with the rate case and tax reform, FFO from, say, last year to this year to next year, just trends there.

Rich, this is Steve Rasche. I think I can answer that. Yes, you're right. All utilities are having those discussions internally and with the rating agencies. And we've been pretty clear that, like everybody else, we're going to see our FFO go down. Our estimate on a run rate year before any of the mitigating factors is $40 million, which does put a little bit of pressure on that FFO to debt metric. We have the benefit, maybe some other folks don't have, of really getting additional cash, not an insignificant amount of cash, it's about $19 million on a run rate basis from the Missouri rate case, which is new cash flow that we weren't going to get out before and that's from amortization of some fairly significant regulatory assets that we've built up over the last 15 years. And then the tax reform, the tax benefits that we get to retain this year alone really takes some of the pressure off of the current year and it shouldn't be lost on anybody, if you look at our EBITDA performance through the first 6 months of the year, it remains pretty strong. As we go forward, it's clearly something that we have in our sights and as we think about our capital plan going forward, equity raises tied to Spire STL Pipeline and storage, and we have to consider what our credit metrics look like, and does that change or enhance the amount of equity that we would ultimately need to go out to the market in order to get. But I would also say that we're not in a position where we feel there's a gun to our head and we need to do something now. We have a great dialogue and relationship with our rating agencies. We have been able to achieve the things that we've told them we've been able to achieve and consistently improve our credit metrics. And a good example of that is not only EBITDA, but also our long-term capitalization, which we continue to strengthen from an equity percentage standpoint as we go forward, and we have a long history of being able to do that.

And ladies and gentlemen, with that, we'll conclude today's question-and-answer session. I'd like to turn the conference call back over to Mr. Dudley for any closing remarks.

Okay. Well thank you, all, for joining the call today. We will be around for the rest of the day for any follow-ups, and we look forward to catching up then. Thank you.

Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your lines.