Earnings Call: Q3 2019

Jul 30, 2019

Hello, and welcome to the Spire Third Quarter Conference Call. This conference call is being recorded. I would now like to turn the call over to Scott Dudley. Mr. Dudley? Good morning, and welcome to Spire's earnings call for fiscal 2019 Q3. We issued our earnings news release this morning, and you may access it on our website at spireenergy.comundernewsroom. 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 and Presentations. Presenting on the call today are Suzanne Sitherwood, President and CEO and Steve Rasche, Executive Vice President and CFO. Also joining us in the room today are Steve Lindsey, Executive Vice President and Chief Executive Officer of Gas Utilities and Distribution Operations and Mike Geiselhart, Senior Vice President of Strategic Planning and Corporate Development. 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 on reasonable assumptions, there are various uncertainties and risk factors that may cause future performance or results to be different than those anticipated. These risks and uncertainties are outlined in our quarterly and annual filings with the SEC. In our comments, we'll be discussing net economic earnings and contribution margin, which are non GAAP measures used by management when evaluating our performance and results of operations. Explanations and reconciliations of these 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 good morning to everyone joining us for today's update. During our Q3, we continued our momentum to successfully execute on our growth plan, keeping us squarely on track with our full year earnings target. Before we share the details, I'd like to thank our more than 3,500 employees who team together to produce strong operating and financial results. Every time I stop at a job site in St. Louis to say hello to our field technicians or walk into an operations office in Alabama to say good morning, I perhaps visit our teams in Houston and Evanston. I'm inspired by the amazing people who take care of our customers, our community and one another day after day. I'm grateful to be on this journey with them and I'm also thankful for our shareholders who make the work possible through their investments. In terms of financial and operating results, we continue to focus organic growth, infrastructure upgrades and modernization at our utilities as well as innovation and technology company wide. Our technology investments include those IT infrastructure for our enterprise and customer focused applications. At the same time, we continue to invest in the development of our gas related businesses, Spire Marketing, Spire Storage and Spire STL Pipeline. Combined, these investments and strategic focus are leading to improvements in both our operating performance, as I'll discuss in a moment, and financial results, which Steve Rasche will cover in great detail. Our results for the quarter of 0 point $7 per share and net economic earnings came in where we expected given the known impact of the regulatory reset in Missouri last year. These results keep us on track with our full year earnings target of $3.70 to $3.80 per share. With that, let's turn to an update on the performance of each of our businesses starting with our gas utilities which account for about 90% of our earnings. We're consistently growing our gas utilities through a robust capital program focused on pipeline replacement and modernization, as well as new businesses. Year to date through our Q3, our utility capital spend is $405,000,000 with more than half of that dedicated to infrastructure upgrades. While we quickly see the benefits from these investments in terms of improved safety, service, system integrity and operating costs, we also want to ensure timely financial recovery. In Missouri, the infrastructure system replacement surcharge or ISRS allows recovery of the cost of our pipeline with minimum regulatory lag. We generally file for additional interest revenue every 6 months. Because of those filings, we received approval for $8,000,000 in additional annual interest revenue near the start of fiscal 2019 and another $13,200,000 in May. Few weeks ago, we filed for additional ISRS of $11,000,000 for recovery of new investments plus another $3,400,000 for disputed costs associated with replacement of plastic materials. As you may recall, the qualification of incidental plastic pipe replacement is under appeal at the Western Missouri District Court. We have included the cumulative impact of our July interest request. In Alabama, rate making is essentially real time and we recover our capital spend through the annual rate making process called RSE. Plus, we have an incentive for pipeline replacement in Alabama in the form of an additional 10 basis points of return on equity. I'm pleased to report that we're on track with the required replacement miles to qualify for the additional return in next year's rate. Growth for our utilities also comes from organic initiatives designed to add customers and burner tips to deliver higher margins. Our investment in new business is up nearly 19% year to date over last year. Our new premise activations continue to grow outpacing last year's record levels. And finally, we continue to control our discretionary costs to ensure we deliver consistent earnings growth and the best cost structure for our customers. At our gas utilities, we continue to see improvements in operating performance driven by our investments in pipeline upgrades, technology and our people. At Fire, everything begins with safety and I'm proud to share that we're seeing lower employee injury rates and better safety overall. Modernizing our pipeline system is leading to enhanced system integrity with overall reductions in leaks and better leak response times. We're also seeing success in reducing 3rd party damages to our system, thanks to several programs that promote safe evacuation 811 program. These changes were designed to help 811 program. These changes were designed to help reduce excavation damages by requiring all utilities to be members of the state's 811 system, as well as adding stronger enforcement provisions to the existing law. And finally, our service levels and performance in the field continue to build on last year's success. Our customer satisfaction scores for our field technicians and appointment attainment rates continue to trend upward. Aspire Marketing, we position the business for long term growth and success by building an even stronger team that's actively extending business model across a broader geography. Team is managing the logistics of moving more gas for more utilities, power generators and producers, resulting in growth in both customers and volumes. I'd like to note that based on net dollar exposure, more than 75% of Spire's marketing customers are utilities, our utility affiliates. Thanks in part to the geographic expansion of the business, Spire Marketing delivered net economic earnings of 17,800,000 dollars for the 1st 9 months of our fiscal year. This is just slightly lower than a year ago when market conditions were stronger than normal. Now turning to Spire Storage, our current focus is on ensuring reliable operations during the upcoming winter. Our commercial and operating execution this year has been based on a single strategic objective. To demonstrate to to prospective customers and the market the ability of our facilities to reliably meet contractual commitments and the operational needs of our customers during the upcoming winter. Commercially, we've been prudent selling volumes for the upcoming winter that are consistent with our expected operating capabilities. Operationally, we've been focused on completing specific capital projects designed to enhance our current withdrawal capacity and winter preparedness. We anticipate spending approximately $25,000,000 of incremental capital on these specific projects and the remainder of FY 2019. In addition, we're pleased to report that we've increased our engagement with both existing and prospective customers. As a result, we continue to advance our understanding of their needs and the broader set of market opportunities for our business throughout the Rockies and the West. Finally, regarding staffing, we continue to build the team that supports efforts to grow the business. Regarding the Fire STL Pipeline, I'm proud to report that construction which began in December is now substantially complete with 97% of the 65 mile pipeline installed. As you've no doubt heard, the Midwest and the St. Louis area specifically experienced historic flooding this year. This caused a delay in completing about 3 miles of the project near the confluence of the Mississippi and Missouri Rivers. Construction in the impacted area will resume as soon as the waters recede sufficiently to allow the crews and their equipment back on the site. Due to the delay, we expect to incur additional costs to complete construction and restoration, causing total project costs to exceed $240,000,000 which is the top end of our estimated cost range. We will be updating the total cost in our final FERC filing later this year. We also expect the flood delay to push the in service date to later in calendar 2019. In closing, I'm pleased to report that our Board has declared the quarterly common stock dividend of $0.5925 per share payable October 2nd. We're very proud of our dividend track record. 74 years of uninterrupted dividend payments, increases for 16 years in a row and a conservative payout ratio within our targeted range of 55% to 65%. Also, Pryor's Board of Directors declared the regular quarterly dividend on our newly issued preferred stock. The prorated dividend $0.444 per share is payable August 15 to holders of record on August 5. With that summary, I'd like to turn the call over to Steve Rasche to provide a review of our results and other financial updates. Steve? Thanks, Suzanne, and good morning, everyone. Let's take a look at our quarterly results starting here on Slide 11. Our 3rd quarter net economic earnings were $5,000,000 down just over $10,000,000 from a year ago. As a reminder, prior year results included the noise of our rate resets, including a change in Missouri rate design. These impacts account for over 60% of the year over year variance. And thankfully, this is the last quarter that we'll have this lack of comparability with last year. Looking at the results by business segment, Gas Utility posted earnings of $7,600,000 down $9,300,000 from last year or down roughly 2 $900,000 after the rate case reset. That decline reflects growing utility earnings more than offset by slightly higher interest cost lower miscellaneous income from a non recurring gain we recognized last year. Gas marketing earnings of $3,300,000 were down marginally from a year ago, reflecting the benefits of our expansion effort that largely offset the return of more normal market conditions and higher operating costs. All other businesses and corporate expenses were $5,900,000 down slightly from last year. This includes a $5,100,000 loss from Spire storage, which was excluded from net economic earnings last year and higher interest expense offset by higher AFUDC from Spire economic earnings were $0.07 per diluted share compared to $0.31 a year ago, with the current period per share earnings reflecting the increase in share count from our equity offering last May and our ATM program as well as the preferred stock dividends. Turning to the details on the next slide. Total operating revenues of $321,000,000 were down $29,000,000 from last year, reflecting lower utility volumes and the timing of gas cost recoveries. Contribution margin of nearly $194,000,000 was also down from last year due mostly to fair value adjustments at Spire Marketing. In fact, after removing the change in fair value adjustments of just under $27,000,000 marketing margins decreased just $700,000 as higher volumes and margins from our expansion were offset by narrower basis differentials. Cash utility margins of $195,000,000 were down a little more than $1,000,000 as rate resets that reduced margins by $4,200,000 were largely offset by new ISRS revenues and modest customer growth. Looking at operating expenses, starting with the gas utilities. Utility fuel costs and gross receipt taxes were down on lower volumes. Operation and maintenance or O and M expenses were higher, largely due to the regulatory reset and a reclassification of post retirement benefit costs between miscellaneous income and O and M costs. Excluding those variances, our O and M costs were up $2,800,000 on slightly higher employee costs and bad debt expense. Depreciation expenses were higher, consistent with our higher capital investments. Gas marketing expenses, after removing the other side of the fair value impact, were higher by just over $7,000,000 reflecting higher volume and transportation charges, not surprising given the business expansion. Miscellaneous income was higher by $9,500,000 primarily reflecting the other side of the $8,000,000 benefit cost reclassification. Interest expense was up on higher rates and short term borrowing levels. And finally, income taxes. Expense for this quarter was a benefit of $2,900,000 reflecting our pre tax loss position as well as the amortization of excess accumulated deferred income tax in Missouri. Our year to date effective tax rate currently stands at 17.1% and we do expect that to dip a bit for the full year by 0.5 point or so. And just to finish up the tax discussion, we expect our full year effective tax rate to be about 18% next year. Our year to date performance is highlighted here on Slide 15 and gives good perspective on how we're performing this year given last year's rate resets. A couple of things to point out. Overall, net economic earnings grew by $8,500,000 or 4%. Gas utility earnings were up by 12,600,000 reflecting the rate design changes at our Missouri utilities, other positive regulatory adjustments and modest customer growth. And if you look at the utility O and M cost on a year to date basis, after removing the impacts of rate resets and reclassifications, we're holding the line on expenses, about up 1% from last year. Gas marketing earnings were just below last year, but recall that we benefited from very favorable market conditions 2 winters ago, and our plans to grow this business by expanding geographically has resulted in year to date volumes that are up 62% from last year and earnings that have largely offset the changing market conditions. Other expenses were up by $3,700,000 reflecting a $12,500,000 loss from Spire Storage, largely offset by higher Spire STL Pipeline earnings and lower corporate costs. We continue to grow our cash flow and maintain a strong financial position. Our year to date adjusted EBITDA is up $11,000,000 to $478,000,000 We have solid short term liquidity and our long term capitalization improved again and now stands at just over 53% equity. We were also active in the market this quarter with both a successful offering of perpetual preferreds with net proceeds of $242,000,000 as well as our at the market equity program that we activated this quarter and raised just under $5,000,000 We're in a strong position and stand ready to fund and retire $125,000,000 in holding company debt that matures in August. Turning to Slide 17, we continue to drive capital expenditures that's fueling our long term growth. Year to date, we've invested $609,000,000 as Suzanne mentioned, which is up 82% from last year, with increases across all businesses. Our utility investments are up over 35% and that higher investment is being driven by infrastructure upgrades and new business spend. We've invested $123,000,000 in Spire STL Pipeline as we near completion of the project. And we continue to invest in Spire Storage with year to date investments and operational upgrades of $25,000,000 in addition to the base gas investment that we discussed last quarter. Finally, let's take a look at our outlook. We reaffirm our current year net economic earnings guidance range of $3.70 to $3.80 per share and our long term per share growth target of 4% to 7%. Given our progress across the businesses so far this year, we are increasing our current year capital spend target to $780,000,000 up $40,000,000 from our last update, which reflects the higher spend rate at our utilities, the retiming of a portion of the spend on the Spire STL Pipeline and our anticipated story spend for the remainder of the fiscal year of roughly $25,000,000 Those updates also push our 5 year capital target to $2,900,000 up $100,000,000 from our last update. As a reminder, our capital spend targets are supported by infrastructure upgrade programs that will continue for 15 to 18 years, spread across our utility footprint and help drive 6% rate based growth, generally minimal regulatory lag, and also supports our goal of providing consistent earnings growth over time. And given our solid financial position, our financing needs going forward are relatively balanced between operating company debt and equity as shown here on the slide. So we're on track with our plans for this year and increasing our investments to drive growth in the coming years, all from a position of financial strength, focused on continued long term success across our businesses and consistent earnings growth over the long term. With that, let me turn it back over to you, Suzanne. Thank you, Steve. In summary, our year to date financial and operating performance through the 3rd quarter puts us on track to meet our targets for the year, including investment and growth in our businesses. Before going to questions, I'd like to say a few words about Spire's corporate social responsibility report, which we published online in May. We know that ESG and sustainability are increasingly important to our investors and other key stakeholders. That's why we took the initiative to develop a corporate social responsibility strategy, gather our data, benchmark disclosure best practices and evaluate reporting templates. We also asked the financial community, including some of you on this call, about what you'd like to see from us in terms of CSR and ESG reporting. We appreciate your input and think you'll find our first ever report informative and inspiring. If you haven't already done so, we encourage you to read the report and let us know what you think. We included information on our efforts to operate sustainably from an environmental, social and governance perspective. And we included stories and data on how we support our local communities and protect our environment with a particular focus on reducing methane emissions. And as always, we appreciate your continued interest and investment in Spire. Now we're ready to take your questions. Our first question comes from Michael Weinstein of Credit Suisse. Please go ahead. Hi, good morning guys. Good morning, Michael. Good morning. So on the STL Pipeline, you're saying that the total CapEx for this year has increased $40,000,000 I mean roughly speaking, is there any percentage of that that you can sort of hint that might be the amount that's allocated to FTL pipelines increase? Michael, this is Steve. Let me start on that and then I can turn it over to Mike to give a little bit more color. Yes, the $40,000,000 is really in the absolute sense the increase in the spend rate for the utilities because of the success we've seen this year. And in fact, despite some cold winter weather and some wet spring, we've been able to really be successful at ramping up our utility spend this year. And in absolute sense, that's the $40,000,000 If you look underneath that in terms of the timing between fiscal year 2019 fiscal year 2020, we actually pushed about $25,000,000 of our targeted spend for Spire STL Pipeline to 2020, recognizing that we still can't get access to that 3 miles that was impacted by the historic flooding. And we replaced that with the $25,000,000 that we discussed on the call, which would be our estimated spend on storage for the remainder of this year. So that was really more of a timing aspect. In terms of increasing the total cost of the pipeline, we're really not in a position right now to be able to guide to a specific number. We kind of need the contractors in our team to be able to get access to those 3 miles so that we can figure out exactly what cost we need in order to complete. Mike, did you want to add anything? No, I think that covers it, Steve. And the official estimate for getting it done, I think, is September. Is that what you've been originally targeting? And what's the something after September is now the new date? Yes. We originally guided that we would have it in place by the end of our fiscal year, which would have been in September or October 1, and now we expect it to be sometime in the 4th calendar quarter, given what we know today. Got you. Okay, great. Just is there anything you guys can talk about in terms of further expansion opportunities looking beyond after SEO pipeline is done and after you get the storage consolidation done next year? I think in the past, we've talked about expansion opportunities towards St. Louis, maybe some more gas opportunities and storage opportunities maybe in Kansas City or even Missouri or Alabama. Just wondering if there's anything else you can talk about like what might be the next phase of growth? Michael, just thinking about all of that correctly, Mike and his team conducted a lot of that analysis. We obviously are very focused right now on pipeline and storage, but we are setting the market from a supply and transportation perspective in and around the Alabama market and as well as the western side of the state of Missouri and Kansas City. We've got some ideas and thought about that. We're still working through that, but mostly the teams right now are focused on the completion of the pipeline and storage. The next question comes from Dennis Coleman with Bank of America. Please go ahead. Good morning. This is Jason Fernandez on for Dennis. Maybe a little bit more on STL. I know you all mentioned that we'll have to wait for the FERC filing later this year for the exact number. But can you guide maybe is the cost going to be significantly over $240,000,000 that you've mentioned? Yes. So Jason, here's the way I think about it. So as we've shared, we have 3 miles remaining and you've seen from the picture and probably other pictures the water level. We just need to get in there. But when we look at that 3 miles just to simplify it, I'm not really simplify, 1.5 mile is really connecting that ice facility in the ground, if you will. And then we have about a mile and a half install connect. And then the right of way, we need to sort of re prep that and clean it up from the flood. So it's a short period of work. It's not in terms of timing a lot of work. But to be able to provide a cost estimate, we really just need to get in there and be able to look at that. We don't want to speculate, but we also know the work is fairly contained as I've and look at it. We can look at it from aerials out of helicopters and that sort of thing. And look at it. We can look at it from aerials out of helicopters and that sort of thing, but it's hard to get our boots on the ground in some of these areas. It's one of the reasons we wanted to show you a picture. We have to keep reminding ourselves that this is record flooding that has occurred in this area. It's been quite impactful actually to the community more broadly up and down the river. And I'm sure you've heard some of that coverage. But Mike, is there anything you'd like to add to that? Yes. I mean, we've got 11 miles in between the 2 big rivers, 6 of which Suzanne's already spoken to. So I think we just need a better it's probably around 6 weeks of work with maybe a crew and a half. So it's probably around 6 weeks of work with maybe a crew and a half. So that part of it is not hugely difficult. It's really just more we need to wait for the water levels to get down and the water table to get down to a level where we can get back in there and hold the ditch finish up this work. So, and another reason for the uncertainty about cost at this point is timing really does drive cost. I mean, we have a fair amount of kind of fixed type overheads that are involved in doing a project like this. And with each passing week and each passing month, it sort of adds to the overall cost burden. So timing really matters as it relates to cost too. So once we have a better kind of sense of when we can get back in there and finish the work, that will help us really get our arms around what the final cost is going to be. Okay, great. Thanks. That's helpful, Susan and Mike. Appreciate it. And can you maybe discuss how the returns might be impacted as those costs creep up? Yes. This is Mike again. We have a precedent agreement with our anchor shipper, the utility Spire Missouri. There is a provision in there that enables us to do an increase to the extent that our maximum permitted rate approved by FERC goes up as a result of increased project cost, which has clearly happened in our case here. But there is a limitation on that provision and it's limited to $0.02 So the original negotiated rate with the shipper was $0.23 and we have the ability under the precedent agreement to increase that by as much as $0.02 So we will make that filing in the not too distant future. Again, once we have a sense for what the final project costs are going to be, we'll make that filing and look to update that maximum permitted rate. And that will in turn drive an adjustment to that $0.23 And at this point, our expectation would be that we would probably end up with a $0.25 rate for the anchor shipper as a result of that process. Got it. Okay. And I guess maybe looking at 2020, given the new in start day we're missing a pretty big part of the winter season there, can you maybe talk about how that might impact 2020 earnings? I know you guys give the 4% to 7% long term range, but can you give any color on that side? Yes. The timing may impact a little bit, but I think you'd be surprised at how little the delta is between on the pipeline between AFUDC and what we'd be getting from cash earnings. Not that I don't like cash earnings a lot more. We all like cash earnings a lot more. So I think we can manage around that. And again, it will be a little bit higher investment, which gives us a little bit more to get returned on. When you think about the 4% to 7%, it begins with that 90% of our business, which is the gas utilities. And I think what you've seen this year, especially when you look at the year to date results because of the noise of the rate design reset that we've been able to drive fairly good growth from our utilities. We expect that to continue and Spire Marketing has clearly performed well offsetting some pretty significant headwinds. So I tend to think about the utilities and our ability to continue to grow that starting with the 6% rate base growth. And that's where when you look at our spend this year in the utility and our ability to actually achieve and overachieve the targets that we had said earlier this year, I think that bodes well for our ability to continue to grow going into 2020 beyond. And that's our job is to deliver consistent growth over many years. Sure. Okay. That's helpful. Thanks. Thanks, Steve. One last one from me is just on storage. Can you maybe provide an update for year to date in terms of how much has been spent? And could you maybe discuss the $12,000,000 loss where those expenses are going into if that's still part of the gas or maybe on the infrastructure side? Thanks. Yes. This is Mike. With regard to year to date for fiscal 2019, the total spend is right around $82,000,000 and that's comprised of $56,000,000 of base gas purchases we made last winter, kind of in the Q1 of the fiscal year and in January as well. And then the remaining $26,000,000 is sort of traditional CapEx, which just like the $25,000,000 we're going to spend or expect to spend in the final quarter of this fiscal year is largely focused on really trying to tighten up the operation. As we operate the business, we have a much better understanding of where there's opportunities to kind of improve some of the equipment, particularly with regard to surface equipment and processing equipment. And so we've been focused on that. So far, we spent $26,000,000 through the 1st three quarters and expect to spend around $25,000,000 on similar types of projects in the last count in the last quarter of this fiscal year. And in terms of the components of cost, about a quarter of that is the capital cost, the interest cost associated with facility at the margin facility at the margin line. And then we've been building a team. So we continue to build the team that we need for the long term, which means we're making the investment now in terms of the team that's operating and will operate it going forward. And we knew that was going to be investment in the short term. And those really are kind of the moving parts that result in just over $12,000,000 for the 1st 9 months this year. Got it. Okay. Thanks, everyone. The next question comes from Shahriar Pourreza of Guggenheim Partners. Please go ahead. Most of the questions were answered. Just two minor ones on STL again. What's the AFUDC that you have in your numbers for 2019 guide? We are looking. Oh, boy. Off the top of my head, I'm trying to think if I have that number for you, Shar. Shahriar. Okay. Through the 1st 9 months of the year. Bear with me a second. I got to flip through a page. That one is just a little question. That was a pretty good one. And what I'm trying to sort of the way I'm asking this, if you see some sort of a delay in STL, right? So for instance, if the water levels don't recede and construct you start flowing gas maybe later in 2019 to maybe early 2020. Is there sort of an impact we should be thinking about from your AFUDC earnings that you guys have embedded in plan? And then just maybe a quick status update. Have the water levels receded? So I guess what's giving confidence that you'll be able to flow gas with only a couple of month delay? Let's start with the water receding when they're looking at the math. And Mike, you want to track that daily so that you know and so maybe Mike can provide a little color on what we're seeing. Yes. In that area between the rivers that I referred to earlier, at the peak of the flooding, we had around 8 to 10 feet of standing water above surface on the ground in that area. As of earlier this week, I think in parts of that area, we were pretty much down to nothing on the surface. And then, the other portion kind of on the other side of the tracks was 1 to 2 feet of still standing water, right? So what we need to do is obviously get rid of all the standing water and then we need somewhere in the neighborhood of about 8 to 9 feet of a water table, right? So we've got sort of like the water table drop to at least 8, if not 9 feet, because we need 7 foot of cover over our pipe. So we need to get to that point to finish the 3 miles that was mentioned earlier. But on the other sort of 8 ish miles between the rivers, we can actually get started with restoration earlier than that because we don't need to worry about the water table for the pipe that's already in the ground. Got it. Okay. That's helpful. For the year to date, AFUDC is $4,000,000 Now that ramps up, of course, as the capital spend ramps up. But that gives you a feel for it. It was just around it was around $2,000,000 for the last quarter. Got it. And you don't envision if you get an incremental delay beyond what you have, it will be material enough to impact your numbers for 2019? No. We've run the scenarios that you expect we would as we saw the flooding coming down and we think it pretty much trades inside the noise. Perfect. Thanks guys. Sorry about the minor question. The next question comes from Selman Akyol with Stifel. Please go ahead. Thank you. Good morning. Just pivoting back to storage real quick. And I know you guys talked about defining customer needs, etcetera. But does delays in the Cheyenne Connector impact you at all from that standpoint? No. This is Mike. I don't believe so. You were really kind of focused more in terms of gas flows to the west of our facility. And really, the supply side is not really an issue for our facility right now. It's really more sort of shoring up the shippers and the withdrawal in our asset. Okay, great. And then just one other one, and this is for Steve. I guess you noted the equity capital is now at 53%. Is that sort of the ideal level for you? Is that how should we be thinking about Spire long term? Yes. And the 53% Selman, just to be clear, is a pro form a number kind of as the rating agencies would look at it. We're being fair in taking a 50 percent credit for the preferred, which is how the rating agencies look at our perpetual preferred and actually factoring in the 125,000,000 that we plan to retire next month in holding company debt. And I would say it's in the range. If you look at where the equity ranges are inside our utilities and we always want to make sure that we stay close between the various stacks in our company, Our equity returns are in that kind of mid-50s range. So and keeping our equity capital there is a good thing when you look at the consolidated entity on a long term basis. And I would also say and we've included in the presentation what our financing needs are going out over the next several years. You can see they're fairly well balanced. No plans for any holding company long term debt. It's really all going to be operating company long term debt. And then some equity because as we continue to invest $500,000,000 to $700,000,000 a year going forward, we want to be clear that we have to finance it in a balanced way. And the last point would be having an equity capitalization that's in the low to mid-50s gives us just a measure of security given we don't know what the future holds in terms of where the economy is going to be going, where potential investments might be either inside the companies we have or in other companies. And we want to make sure not only that we're prepared, but we're ready if the opportunity presents itself. And this is in keeping with what we committed to the rating agencies years ago when we did the Alagasco acquisition primarily and we took on a equity capitalization above 50,000,000 but also fundamentally pay down holding company debt with the cash flows of the new business. And it's really about us achieving what we told everybody, including the rating agencies we were going to do over a period of time. All right. Thanks very much. The next question comes from Michael Weinstein of Credit Suisse. Please go ahead. Hey, guys. Just one quick follow-up, another quick simple question. The equity raise through the ATM is a 3 year program. Just wondering if the delays in the steel pipeline and maybe the cost increase might affect that in some way? Would you be pulling forward more or maybe issuing more equity this year than you originally planned for that? Yes. Michael, I'd point back to that slide where if you do the math and understand that we've already raised that 2 $50,000,000 in preferreds, it points to a fairly low level, but a little bit of usage in the ATM at the bottom end of the range. I don't honestly consider right now knowing what we know that that's really going to change our raises and we have some fairly wide bands to work within. But I will always say and I think you know us well enough to know that as we plan forward, we're always assessing where the market opportunities are, what are the needs of the business and we would stand ready if the needs of the business presented or if the market opportunity presented itself to take advantage of that. And that's one of the reasons why we issued $250,000,000 in perpetual preferred shares earlier this year. We saw market opportunity. The pricing was extremely advantageous and we leaned into that a little bit, which actually helps to extend the life of our current ATM authorization. Right, right. Okay. Thank you. Yes. Thank you. There are currently zero questions in queue. Okay. Thank you, everyone, for joining us today. We will be around throughout the day for any follow ups, and we look forward to catching up then. Thank you all. Have a great day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.