LACLEDE GROUP INC

On January 25, 2019, the Federal Energy Regulatory Commission (“FERC”) approved the Company’s application to combine its two adjacent natural gas storage facilities in Wyoming into one FERC certificate with a market-based tariff. On February 13, 2019, Spire Storage filed a prior notice request pursuant to the FERC’s regulations and Spire Storage’s blanket certificate authority proposing to construct and operate 10.1 miles of dual 20-inch-diameter pipeline, one new pipeline interconnection with measurement equipment, and related facilities in Uinta County, Wyoming. If authorized by the FERC, the pipeline, interconnection and measurement facilities, will allow Spire Storage to enhance the link between its two storage facilities, provide new, bi-directional access to Kern River Gas Transmission Company’s mainline and afford enhanced access with other interstate pipelines. On April 26, 2019, FERC staff filed a protest stating that Spire Storage did not provide documentation of the project’s compliance with the National Historic Preservation Act. Under the FERC’s regulations, a protested prior notice filing will be treated like a traditional application under Section 7 of the Natural Gas Act unless the protest is withdrawn within 30 days from the date upon which protests are due.

Spire STL Pipeline LLC is a wholly owned subsidiary of Spire constructing and planning the operation of a 65-mile pipeline to connect to the Rockies Express Pipeline in Scott County, Illinois, to delivery points in St. Louis County, Missouri, including Spire Missouri’s storage facility. The Federal Energy Regulatory Commission (“FERC”) issued a Certificate of Public Convenience and Necessity in August 2018 and a Notice to Proceed in November 2018, allowing construction to begin. The pipeline will operate under FERC jurisdiction and will be capable of delivering up to 4 million therms per day of natural gas into eastern Missouri. Spire Missouri will be the foundational shipper with a contractual commitment of 3.5 million therms per day. Construction is underway and is anticipated to be completed by the end of the fiscal year.

Spire Storage is engaged in the storage of natural gas in the Western region of the United States. Spire Storage consists of two adjacent storage facilities: Ryckman Creek acquired in December 2017 and Clear Creek acquired in May 2018. The acquisition of Clear Creek created an opportunity to develop a larger, more flexible, and more reliable combined storage platform that optimizes the commercial opportunity in the region. Accordingly, Spire Storage filed an application with the FERC to operate both facilities in an integrated fashion under a single market-based tariff, which the FERC approved seven months later on January 25, 2019. The timing of the FERC approval, coupled with the additional review of the geological and operational capabilities of the combined facilities, has lengthened the time required to finalize a new development plan that will position Spire Storage to optimize the combined facilities. It is anticipated that the final development plan will result in added investments in resources, infrastructure and pipeline connectivity between the facilities and with nearly interstate pipelines to ensure Spire Storage can deliver the enhanced deliverability, services and value that exists in the region.

Spire’s operating revenues for the six months ended March 31, 2019, increased by $19.2 at the Gas Utility segment and were $10.4 higher in the Gas Marketing segment. The Gas Utility increase was due principally to the Missouri rate case reset (net of TCJA giveback) and weather/volumetric impacts (net of weather mitigation), offset by lower gas cost recoveries. The Gas Marketing increase was due to a combination of higher pricing and volumes. Spire’s contribution margin increased $51.8 compared with the same six-month period last year. The growth in contribution margin was primarily attributable to the Gas Utility segment, up $24.6, with the Missouri Utilities up $20.7 and Spire Alabama up $3.0, with remaining growth from the utilities of Spire EnergySouth. In addition, Gas Marketing’s contribution margin was up $25.8, reflecting a $23.6 year-over-year improvement in derivative activity and fair value mark-to-market adjustments, combined with geographic expansion. Depreciation and amortization expenses were higher in the Gas Utility segment, due to higher capital investments in both the Missouri Utilities and Spire Alabama. Gas Utility O&M expenses were lower in the current year driven primarily by the Missouri rate case write-offs in the prior year.  These fluctuations are described in more detail below.

Operating revenues during the six months ended March 31, 2019, increased $44.3 from the same period last year primarily due to a $15.2 increase attributable to the new rate design (net of TCJA giveback), a $19.1 increase in volumetric impacts (net of weather mitigation) relating to colder weather conditions in the current year, and $6.0 higher wholesale gas costs passed on to customers. Contribution margin increased $20.7 primarily due to the $15.2 increase attributable to the new rate design (net of TCJA giveback), $2.5 increase due to higher volumes and weather, a $1.5 increase due to off-system sales and capacity relief and a $1.3 increase due to customer growth. O&M expenses during the six months ended March 31, 2019, decreased $20.3 from the same period last year. Excluding the $38.4 of Missouri rate case write-offs in the prior year, offset by $9.8 net year-over-year increase due to the mix of service and non-service postretirement benefits costs now recorded in other income and expense, O&M expenses were $8.3 higher in the current year versus the prior-year period. This increase is the result of higher employee benefits and energy efficiency costs (recovered in rates) resulting from the 2018 rate case, partly offset by lower discretionary expenses. Depreciation increased by $5.0 as a result of continuing increases in the levels of capital investment.