Earnings Call: Q1 2019

Feb 6, 2019

Good morning, and welcome to the Spire First Quarter Fiscal Year 2019 Earnings Conference Call. All participants will be in a listen only After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Scott Dudley, Managing Director of Investor Relations. Sir, please go ahead. Good morning and welcome to our earnings call for the Q1 of fiscal 2019. We issued our earnings news release this morning and you may access it on our website atspireenergy.com under Newsroom. There's also a slide presentation that accompanies our webcast today and you may download that either from our webcast site or from our website. And that's 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 in the room with us today are Steve Lindsey, Executive Vice President and Chief Operating Officer of Distribution Operations and Mike Geiselhart, Senior Vice President of Strategic Planning and Corporate Development. Before we begin today, let me cover our Safe Harbor statement and use of non GAAP earnings measures. Today's call, including responses to questions, may contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although our forward looking statements are based on reasonable assumptions, there are various uncertainties and risk factors that may cause future performance or results to be different than those anticipated. These risks and uncertainties are outlined in our quarterly and annual filings with the SEC. In our comments, we will be discussing net economic earnings and contribution margin, which are both non GAAP measures used by management when evaluating our performance and results of operations. Explanations and reconciliations of these non GAAP measures to their GAAP counterparts are contained in our news release today. With that, let me turn the call over to Suzanne. Thank you, Scott, and hello to everyone joining us this morning in St. Louis for our Q1 update. I hope everyone made it safely through last week's bitter cold as the polar vortex descended upon the Midwest. Across Bayer's footprint, our gas control experts and field employees were working round the clock to make sure everyone we serve have the energy needed to stay safe and warm. We delivered thanks to the people who manage our system and our ability to operate in the most severe weather conditions. Service delivery is directly correlated to the significant investments we've made in the last 5 years to modernize infrastructure and technology. It's time like this when we are keenly aware of our vital role in taking care of our communities. To all our Spire employees, I'd like to say thank you for answering the challenge. On our year end earnings call in November, I took some time to outline Spire's journey of transformation and how that set us up for another successful year in fiscal 2018. This transformation also positions us for further success in 2019 beyond. Today, I'm happy to report that we're off to a strong start again this year as we continue to put our energy in motion, guided by our mission and our consistent set of strategic priorities for delivering long term growth. We remain laser focused on organic growth for our gas utilities and our gas related businesses, Spire Marketing, Spire STL Pipeline and Spire Storage. And we continue to make significant investments in organic growth, infrastructure modernization and innovation and technology, all of which combine to drive our overall performance. Coming off a strong year in fiscal 2018, when we wrapped up regulatory resets in every area we serve, we continued the momentum and delivered improved financial and operating performance in Q1 2019. I'm pleased to tell you that we posted 1st quarter net economic earnings of $1.30 per share, up 9% from a year ago, reflecting growth at our gas utilities and continued solid performance by Spire Marketing. In fact, our gas utilities posted a 7% increase in earnings per share in the Q1, thanks to regulatory outcomes and growth in our core business, which I'll describe in a moment. We remain focused on raising the bar on the operations side too, and I'm proud of how our dedicated gas related businesses. Construction is underway on our Spire STL Pipeline and Spire Storage. Indeed, we recently received approval from FERC to consolidate the operating certificate for our storage facility. More on this in a moment. We also continue to successfully implement technology solutions and innovation to achieve the targeted growth of our gas utilities. It starts with organic growth initiatives to increase customers and margins and lower operating costs. These initiatives include enhancements to our new business processes and the technologies we use track and successfully pursue opportunities. We're also seeing further success for our increased focus on economic development. In fact, we are extensively engaged in reimagining the economic development landscape in Missouri. While we've always had an active voice in early conversations on projects, for the past year, we've been working with top business and government leaders to restructure and coordinate economic development efforts across the St. Louis region. In fact, last week, the leading business organizations publicly announced the St. Louis Regional Economic Development Alliance. The alliance creates a world class private sector initiative to attract and retain businesses, jobs and top talent to the St. Louis region. I've personally been involved in this effort for quite some time, and I have the honor of serving as the 1st Board Chair for the Alliance. I'm proud to say that with this new coordinated approach to economic development, we now have an incredible opportunity to retain, expand and attract large regional projects to the region. Now turning to the current business development, our investment in new business continues to ramp up. This quarter, we invested $27,000,000 up 19% over last year's record pace. We achieved growth of 9% in new meters, again an increase on top of last year's record levels, which also was supported by an increase of conversion activity. In addition, we're increasing our overall utility investments focused on infrastructure modernization. In the Q1, utility CapEx was up 40%, primarily driven by infrastructure upgrades and increased new business capital. This was accomplished in spite of the challenging construction conditions this winter. The regulatory mechanisms we have, which include incentives to accelerate pipeline upgrades in both Missouri and Alabama and the real time rate making in Alabama are key to timely recovery that helps drive our ability to holistically modernize our infrastructure system and return earnings to our shareholders. In Missouri, we just filed for an additional $19,000,000 in annual revenues under the infrastructure system replacement surcharge or ISRS. We expect new rates to go into effect in May. In Alabama, you may recall that the commission established a rider to incent the accelerated replacement of remaining cast iron and bare steel distribution lines. The Accelerated Infrastructure Modernization Rider, or AIM, provides an opportunity earn an additional 10 basis points of equity return if target levels of replacement are met. I'm pleased to share that our infrastructure upgrade spend is on track for us to earn the increased ROE next year. And finally, we support growth through the day in, day out rigor of managing our costs to efficiently deliver safe and reliable natural gas, while delivering exceptional service for our 1,700,000 homes and businesses. On the operations side of our gas utilities, we continue to see improving performance, driven by the investments we've made in infrastructure, technology and our people. At Spire, everything begins with safety, and we're seeing lower employee injury rates and better safety overall, continuing the momentum from last year. Our strategic priority and invest in modernizing our pipeline system is leading to enhanced system integrity with overall reductions in leaks and better leak response times. This investment is driving lower maintenance costs across our system. 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 are higher and appointment attainment rates continue to go up, building on the record levels we achieved last year. In addition to the important work we do in the field to operate a safe room reliable system, we're also investing in technology to help us better connect and serve our customers. About 15 months ago, we launched a technology enabled platform called My Account that provides customers with more options for easily connecting and contacting us and managing their accounts on the go. I'm pleased to report that more than 680,000 buyer homes and businesses have signed up for my account. And as a result, we're seeing increasing enrollment in programs such as paperless billing, budget billing and auto pay. Plus, our new automated start service and transfer service options are quickly becoming favorites among our customers. By offering people more options and greater convenience, we are seeing higher satisfaction overall. Let me now turn to Spire STL Pipeline. Following receipt of approval from FERC to proceed with our project, we have secured land rights and have begun construction on the 65 mile route. Our contractor, Michael, is highly regarded in terms of quality and safety. And based on our current construction schedule, we expect the pipeline to be in service by September 30. Our estimated total spend on the project remains $210,000,000 to $225,000,000 We have also been working to further advance Spire Marketing and Spire Storage. At Spire Marketing, we've devoted significant effort over the last year to build an even stronger team, positioning us for long term growth and success. The team has expanded its long standing business model of managing the complicated logistics of moving gas for customers, including utilities, power generators and producers, by creating a larger geographic footprint, growing its customer base and increasing its volume. As a reminder, our marketing growth strategy is focused on contracting directly with producers and end users. We're doing this while serving our growing customer base and leveraging our expertise to optimize our portfolio of supply, transportation and storage assets based on market conditions, including weather, regional basis and price volatility. Spire Marketing continues to be a valuable resource in our portfolio of business and once again posted strong performance, reflecting its expansion and continuing favorable market conditions. 1st quarter net economic earnings doubled over last year to $0.16 per share. Turning to Spire Storage, the FERC approved our application to strategically combine the operation of our 2 gas storage facilities into one certificate. This positions us to offer new valuable services and enhanced reliability to a broader and more diverse mix of customers from utilities and power generators to producers. As we continue to integrate these facilities, we're now finalizing our development plan to reflect the combined operations and take advantage of the expanded market opportunities. We're focused on unlocking long term value by investing in infrastructure and resources, thereby increasing injection and withdrawal capabilities, expanding working gas capacity and building on our service offerings. As a result, we expect Spire Storage to contribute to earnings in fiscal 2020. Rest assured that we've assembled a very talented team to support this strategy. An important part of how we deliver value to our investors is through our dividend. Very proud of our track record, 74 years of uninterrupted dividend payments, including increases for 16 years in a row. This includes a 5.3% increase effective in January of this year to an annualized rate of $2.37 per share. I'm pleased to report that our Board has declared the quarterly dividend of $0.5925 per share, payable April 2. With that, let me turn the call over to Steve Rasche to cover the financial performance and outlook. Steve? Thanks, Suzanne, and good morning, everyone. Let's review our results starting here on Slide 12. We delivered strong growth this quarter with consolidated net economic earnings of nearly $66,000,000 up 14% from last year with growth in both our businesses. Gas utility posted earnings of $66,400,000 up $6,900,000 or nearly 12% from last year. Gas marketing earnings of $8,300,000 were $4,700,000 higher or over doubled last year's results. These were offset in part by $3,600,000 in higher corporate expenses and Spire Storage losses included in net economic earnings for the first time this year. Net economic earnings were $1.30 per fully diluted share or over 9% higher than last year, reflecting the higher share count from our equity offering last spring. Now I normally don't comment on GAAP earnings, but we've included it here in this slide since our comparables like those of many other companies are impacted by tax reform adjustments last year. For us, a non cash benefit of nearly $60,000,000 or $1.24 per share, which frankly makes the GAAP earnings comparison and the significant drop in headline earnings misleading at best. As a reminder, we excluded these non cash benefits from our net economic earnings last year and we believe that the comparison of NEE and the resulting year over year growth to be a fairer view into our performance. With that, let's take a look at the key drivers starting on the next slide. Total operating revenues of $602,000,000 were 7% higher than last year on the combination of higher weather related demand and higher commodity cost. Contribution margin was up as well consistent with colder weather this quarter. Our gas utility margins grew $2,000,000 but that measure includes a $14,000,000 customer rate reduction related to tax reform that is offset by lower income tax expense further down the income statement. Excluding that rate reduction, margins were up $16,000,000 or over 6% driven by 1st, colder weather. Temperatures in our service territory were about 12% colder than last year and roughly 10% colder than normal. This colder weather helped us to grow our off system sales and capacity release in Missouri, which benefits both our customers and utility. Secondly, rate design changes in Missouri, including weather normalization, which on balance pushed more of our margin into this quarter compared to a year ago. And finally, continued modest customer growth. Turning to gas marketing, margins increased by $8,700,000 as our geographic expansion and continued favorable market conditions allowed us to create value by optimizing our supply, transportation and storage portfolio. Looking at operating expenses, utility fuel cost and volume based taxes were higher as we would expect from higher revenues and commodity costs. Operation and maintenance expenses were up by $3,500,000 but that increase was driven by higher benefit and energy efficiency costs that were defined by our Missouri rate cases last year. Outside of those increases, our run rate or controllable expenses were actually lower than last year. Not surprisingly, depreciation and amortization was higher consistent with our investments. Gas marketing and other has 2 moving parts, gas marketing and storage. First, gas marketing expenses increased due to higher commodity costs and volumes, offset in part by a higher mix of trading business. Remember the transactions are recorded net as trading margins if we don't physically procure and deliver the same molecules, which is not uncommon if we can trade at origin or destination to lower our delivered gas costs while meeting our customers' needs. Secondly, this expense line also includes fire storage expenses totaling $4,000,000 this quarter. And finishing up the slide, interest expense was higher by $1,500,000 largely due to higher short term interest rates and debt levels. Turning to Slide 15, capital spend for the Q1 was $207,000,000 reflecting our continued focus on infrastructure upgrades and new business investment in our utilities as well as higher spend in our other gas related businesses. We are tracking against our 2019 full year CapEx target of $650,000,000 with a note that we anticipate updating this target once we finalize our Spire Storage development plan as Suzanne mentioned a few minutes ago. Our 5 year capital spending plan through 2022 remains $2,600,000,000 focused on utility infrastructure investments that are well diversified across our footprint and supported by long term upgrade programs of up to 20 years. More importantly, 85% of that spend is recovered with minimal regulatory lag or driving higher margins. We also continue to grow our cash flow and maintain a strong financial position. 1st quarter EBITDA was up 3% from last year $2,000,000 Short term liquidity was also very solid as we hit the peak of our seasonal working capital needs. Our long term equity capitalization also strengthened year over year and we now stand at just above 51% equity capitalization, up nearly 190 basis points from last year. And we continue to execute on planned financings. At Spire Missouri, we funded a $100,000,000 term loan in December. At Spire Alabama, we completed a $90,000,000 private placement of senior notes in January. On the equity side of our capital structure, today we announced the establishment of a $150,000,000 at the market or ATM program that will help us meet our incremental equity needs over the next couple of years. An ATM is a great tool and fits our situation well. The need for incremental equity capital over time to ensure that we maintain a balanced capital structure and strong credit metrics as we continue to grow and invest. I should note here that we do not expect to activate the ATM program this quarter and we'll update you as our plans change. Our sales agents on the program will be RBC and Bank of America Merrill Lynch. Turning to our earnings outlook, we reaffirm our long term net economic earnings per share growth target range of 4% to 7% as well as our 2019 guidance range of $3.70 to $3.80 per share. Earnings growth is supported by greater regulatory certainty and our strong rate base growth and our organic growth across our utilities. It also reflects the updates that we've shared today. Strong first quarter performance in our Gas Utility and Marketing businesses, the progress we've made with Spire STL Pipeline and our targeted in service date, as well as the continued investment in our storage business. So in summary, we're off to a great start and we continue to invest for long term success across businesses. With that, let me turn it back over to you to Suzanne for some closing comments. Thank you, Steve. In closing, I'd like to thank all of our Spire employees for their hard work and personal commitment to serving our customers and community, especially during the winter heating season when our customer count on us to safely and reliably keep their homes and businesses warm. We're off to a fine start this fiscal year, keeping pace with our plans to invest in and grow our businesses and drive increasing value for our shareholders. We appreciate your interest and investment in Spire and look forward to updating you on the progress and achievements as we continue to move forward. In that spirit, I hope you're able to join us for Spire's first ever Investor Day on April 4 in New York. That's where we'll have the chance to meet with you face to face and engage in a deeper conversation. Conversations around organic growth, infrastructure modernization, Spire's marketing business model and growth plans, the progress on constructing Spire STL Pipeline and how we're developing an integrated platform for Spire Storage. Now we're ready to take your questions. We will now begin the question and answer session. First question comes from Michael Weinstein with Credit Suisse. Please go ahead. Hi, guys. Hey, good morning. Thanks, Michael. Good morning. Could you talk a little bit about the ATM and I guess more about the reasons why it was filed and what you're seeing over the next couple of years in terms of higher CapEx spend that might justify or might require it? And I guess mainly what I'm asking for is a kind of a preview of what you might be talking about in April for how you're going to change the plan? Yes. A great question, Michael. I think we've been talking for a while that ATM programs are great tools to have in your toolbox. In fact, I know I've spoken in the past about the fact that I've had these in prior lives in other companies and it's a great way to keep fine tune the capital structure and make sure that we support our strong credit metrics. And I don't think it should be a surprise to anybody on the call that we want to make sure to be prepared as we continue to invest somewhere in the next 2 years, dollars 1,100,000 to $1,200,000 in investments in our businesses that we can't reasonably finance only through debt capital and cash flow. So from that standpoint, I view an ATM as a tool that makes sense for us. It's a 3 year program, dollars 150,000,000 fairly low in terms of size compared to capitalization. I think it's a reasonable program for us to put in place. We as when we did our equity offering in May of last year, we did that in anticipation of the Spire STL Pipeline and clearly it met our equity needs for the next year. That's how we talked about it on the call, which is why we're not activating the program right now. But I think you can expect as we get later on into the year and into fiscal 2020 that we'll activate program at the right time and do it in a measured way so that we maintain those strong credit metrics over time because our expectations we're going to continue to invest in our business and we have to keep an eye on the capital structure while we're keeping an eye on the accelerator to continue to grow. Got it. Hey, on the storage business, I think you said that you expected a contribution from that next year. And I think on the last call, we talked about a small contribution in 2018 with a kind of an indication that maybe it would be earning money in 2019. So maybe you could just talk more about the timing of how that investment is coming along. Yes, Michael. So you're right. That is how we spoke about it. At that time, we had not secured the second facility, and so now we are in the process of refining those development plans to integrate the 2 facilities. We've gotten approval from the PIRC, as I mentioned, to do just that, which helps us in terms of our service offerings and the types of services we can offer. So on a long term basis, the combination of integrating these two facilities, they're obviously in the same territory geographically, and provides us much more flexibility and, again, the ability to enhance our service offering. So it's a little bit of go slow now to go fast because, we're in a much better position with that storage facility, fire storage combined. And we'll speak, in greater details too at the Analyst Day. So hopefully, you can join us to run we're working on those plans and we'll spend some time running through what exactly that looks like for you. Okay. Thank you. Thanks a lot. And I'll give it up to other people at this point. Yes. Thanks. Appreciate it. And our next question comes from Shahriar Pourreza with Guggenheim Partners. Please go ahead with your question. Hey, good morning guys. Hey, Shahriar. Good morning. Just two quick ones for you. So on first on the STL approvals, so given the fact that it's kind of behind us and construction has already commenced, Is there any sort of demand there to modestly upsize the pipe through other light levels of compression? And the way we're thinking about it is there any incremental growth opportunities that you can get from this project? I'll give you a high fly by and Mike's in here, so he may want to expand on it a little bit more. But as you said, the pipeline itself is under construction and the anchor customer obviously is our Fire East utility and which we've talked a lot about what flexibility that brings us in the region. And it is the shipper on that pipeline. But that being said, there is some small amount of capacity remaining, and we can add compression to it over time. We've talked about that, but as I mentioned earlier, we're laser focused right now in getting that pipeline up and operating, and we're very satisfied with where we are in terms of scheduling costs. And Mike, you may want to add a little more color. And that's another item we'll give you greater details on in the Analyst Day. Yes. I mean, we'll continue to focus on longer term opportunities to add shippers to that system. Part of it really depends on interconnected pipelines and where we end up with our chain of rocks interconnect with MRT, for example, as to whether our pipeline could potentially be part of a longer path that other shippers might buy. So, we'll continue to work on that very much in the long term. As of right now, we expect to go in service with really just the one contract with the affiliate. And then that's helpful. And then if you take the upsizing the route, the filing process I would have to assume is going to be much more rapid than what we've seen in the past with the current pipe? Yes, we certainly have the ability to add compression to the project. There's no compression on it in its current form, and that would require another filing add compression in the future. But we'd have a fairly long lead time in terms of what customers would be driving that expansion. So we would anticipate any delay between getting that approval versus when the revenue would start to flow from any additional customers and larger capacity. Excellent. And then just lastly, it's good to see that there's obviously some pretty good growth in the marketing business. Is there sort of a mix you're targeting as you think about the consolidated business mix like the marketing business is becoming more and more material. I guess in the end, how large do you want this segment to be? Is there sort of a target that you're aiming for? I wouldn't say per se that we have a target, but we also what we're mostly focused on is geography and the quality of our customers. Like I mentioned earlier, we have utilities, which obviously we have 5 utility companies, power generation and producers, which is much like our utility operations, we serve that same type of customer mix. So from an earnings mix, we obviously will only grow that so much based on those geography and the type of customers that we're serving. And we're predominantly utility today. Over 90% of our earnings is utility today. So we're very comfortable with where we are and we're very comfortable with the quality of team that we've placed in our Houston office and the technology and so forth that we have to support that business. Yes. And remember also, Shar, that we'll when the pipeline comes online that adds to a regulated side of our mix. And we continue to expect every business to grow and the utility continues to show strong growth. So our goal is to grow every part of the pie, but we're always cognizant of how the pieces play out. And then, yes, I was just going to add and Mike will give more color on this again at the Analyst Day. It is a logistics business and it's logistics for and to serve those customers, which again is what we do every day in the Utility business. Got it. Got it. So just to summarize the growth in that marketing business will commensurate with the regulated growth that you're seeing? That's right. Excellent. Thanks guys. Thanks. Appreciate it. And our next question comes from Dennis Coleman with Bank of America Merrill Lynch. Please go ahead with your question. Hi. This is Jason Siang in for Dennis. Good morning. Hey, Jason. How are you doing, Jason? Doing well. Thanks. Regarding the gas marketing, again, I guess, maybe look at it from the other view, earnings are definitely up. Can you give me maybe a little bit more granularity about what drove it? You indicated geographic coverage and favorable market conditions. Can you maybe talk about how each contributed? Yes. I think maybe what might be helpful if Mike's in here, let Mike provide a little color, more color than what I'd say earlier. Yes. Over the last couple of years, we've been pretty methodical about putting in place a plan to kind of expand the current business model, if you will, into a broader geography. And so part of that vision in moving the business to Houston was to add folks to the team that could bring existing relationships with high quality customers that would essentially fit into our existing business model. And so really the way I would describe growth, it's been pretty gradual and pretty steady and incremental. And it's essentially adding new customers in new regions, particularly in the Gulf Coast and the Southeast that have expanded our geographic footprint. So we're just doing more of the same kind of business with the same kinds of customers and volumes are up in a lot of cases across the board as well with existing customers. And so you combine that with a relatively supportive market conditions and locational basis and that sort of explains the large part of the growth today. Okay. Thanks for speaking to that a little bit. My next question is sort of around STL and flows coming off of REX. You mentioned that STL is going to receive gas, most likely from Marcellus and Utica. We've heard from some industry guys that and gals that they've indicated there might be cheaper gas out of the West. Is there any discussion around East versus West flows? Yes, that's an interesting point and it certainly has evolved somewhat over time. I think when we originally created the project, there was a clear expectation that we would use primarily Rec Zone 3 Gas, which is Marcellus, Utica Gas for the most part. That we still believe that gas will be extremely cheap long term. But part of the reason we really like the project is upon completion, our interconnect point, which will be a new interconnect point on REX, will be essentially the null point in terms of physical flows between westbound gas and eastbound gas. And so we expect to have in the neighborhood of 4 Bcf of total physical flows kind of meeting on the pipeline in that area. And so at least for the foreseeable future, we expect that to remain the null point on REX. And so we would have optionality, conceptually anyway, we would have optionality between both eastbound flows and westbound flows, which is a pretty interesting place to be. Definitely. All right. Thanks for those insights. I'll jump off. Yes. Thanks. And our next question comes from Selman Akyol with Stifel. Please go ahead with your question. Thank you. Good morning. Hi, good morning. Can you talk a little bit about your 9% meter growth? And I think I thought I heard you say that was supported by conversion activity as well. So could you talk about that too? Sure. Good morning. This is Steve Lindsey. I'll speak a little bit on behalf of the utilities. And so the 9% is a year over year comparison for Q1. And if you think back last year when we referenced a record year for us, we had over 11,000 new meters across all of our jurisdictions. And that was primarily in the residential and commercial markets as you can imagine. We have had some increased activity on conversions. And when we say conversions, those could be propane customers on our existing system and in some areas in the southwestern part of Missouri, we're actually looking to expand into some poultry applications where our infrastructure just isn't there now. And so those would be poultry and chicken houses and those type of applications that would be converting from propane to natural gas. So I think it's really the buildup of what we've been putting in place over the last 3 years. We've become very focused. We've been really focusing on our relationships with builders and developers and being there when they're making decisions, as well as architects and engineers. So I don't think it's any one big thing. I think it's a lot of pieces that are starting to come together. And as we also mentioned on our new business capital, which is infrastructure that we're putting for really meters that are to come over the next 3 years, We're up significantly over last year, which was a big year for us as well. So our focus on organic growth, I think, is really starting to pay off in the utilities as we continue to grow our base business. Okay. If I can just ask a little or dig a little deeper on that. So if I asked you, I guess, I don't know, 5, 7 years ago about organic growth, I think you probably would have said maybe 1%, maybe 1.5%, 2%. So do you think that organic growth number would be higher now? I mean, if we move to a plateau or a higher level, say 3%, What do you think about it? Yes. So let me start and I'll pass it to Steve because I'm harkening back, I'm thinking back, reflecting back based on your question, 5 to 6 years ago, we started talking about organic growth on these calls and our investment in people and technology like salesforce.com, like the way we serve our customers, like the way that we think about conversion and started implementing programs that we're seeing the fruits of that work today. So we took the long view, again, on organic growth and the type of customers coupled with economic development, which I talked about earlier. And we're continuing to invest in organic growth for our future and think about it with a whole lot more commercial acumen. And again, that started 5 years ago. We brought in an executive in outside the industry to run that area for us and he reports to Steve. And Steve, you may want to add a little bit more color than that. Yes. I think when you're talking about overall net growth, and so what we were referencing earlier on new meters and new business capital is on the new side. Obviously, you've got to keep all the customers that you have. So from a retention standpoint, that's an issue that really as recently as 2 or 3 years ago, in some of our jurisdictions, we were seeing negative overall growth if you think about it on an annual basis. And so the fact that we're positive in all of our jurisdictions and continue to trend up, I think is a result of a lot of things. Some of the data and analytics we're putting together, we now know on a daily basis by zip code our customer either increases or decreases so that we can put together very focused programs to address that whether it's around rebates, energy efficiency programs. And so again, I think we've been building for the last 3 years a lot of data, a lot of tools and now we're really starting to use those tools and data to make decisions and effectuate outcomes. And Sumit, I would add that we view organic growth, including the commercial and industrial sector, which especially when you get down to the southern parts of our service territory is a much bigger part of the overall pie. So it's hard to look at net customer or residence or business growth and really equate that to an impact in our earnings because one business can be thousands of residential customers. And I'd also add that we think about organic growth, we think about it holistically and it is about managing cost and making sure that we're managing to get to the right margin and dropping the right earnings through the cost line. And I think we've shown that we consistently have been able to keep our cost in line and you saw that again quarter. It's all part of that puzzle to make sure that we're doing the right thing growing, but also doing the right thing for our customer and they're seeing the benefits in their bill at the same time we're growing. And I think the last piece that Suzanne mentioned in her remarks is we really have put a strong emphasis on economic development. And this is in all of our jurisdictions and we've even seen some strong things go on in the state of Missouri as we focus on economic development across the state. So I think more good is to come on that as well. Very good. Thanks. Appreciate all that. Just going over to storage, you referenced sort of 39 Bcf now and you're looking to expand. Can you say what size you're looking to take storage to? Yes. This is Mike. We haven't what I can tell you is that number is comprised of 2 pieces, right? The 35 is the certificated capacity at Rickman and the 4 is the 2nd facility at Clear Creek. Right now, we're involved in very extensive kind of reservoir engineering work and geology work to really understand the potential size of the storage facility at Clear Creek. We have only owned it since May and have really kind of dug in to try and understand it. It's part of the same formation as the Rickman facility, so we think it has comparable size. But until we finish that analysis, we're really not in a position to say how much larger that Clear Creek facility can be made beyond its current 4 Bcf certificated capacity. Now when we look over on the Rickman side, at this point, we don't anticipate a large change in that capacity sitting here today. But again, that's still subject to the same kind of ongoing analysis. So part of the development plan will be to refine that number and to come up with a number that is in fact going to be the certificated capacity of the 2 facilities on a combined basis, and that will be filed with FERC at the appropriate point in time. Okay. And then you guys commented that storage ran loss this quarter. Do you anticipate storage run losses every quarter this year or do you expect that to moderate as we approach 2020? Yes, it's a fair question, Selman. We expect as we start ramping up the development plan that we should start moving closer and closer to earnings contribution. We'll get into more detail. We still have to finish the development plan. And I think the important point to take away is we're looking we always try to make the right decision for the medium and long term. We see a great opportunity for even more value in the medium and long term and we think it's the right thing to do to make sure we're driving for the right balance of investment and return, which is why to the question earlier, we're willing to accept no earnings contribution and some subsidy this year because we think in the medium to long term that's the best place to be for our customers and also for our investors. All right. Thank you very much. Thank you. And our next question comes from Richard Sunderland with JPMorgan. Please go ahead with your question. Hi, good morning. Just wanted to follow-up on some of the marketing commentary earlier. It seems like the performance and the strength year over year might be putting you a little bit ahead of plan. Could you frame sort of the performance in Q1? And maybe you can revisit the expectations from last year of the $0.17 non recurring outperformance there? Yes. Rich, this is Steve. Clearly, there are 2 components. If you think about the marketing business at the 5,000 foot level, there are 2 components to think about. 1 is building the base business, additional relationships, additional contracts, more storage transport, that we can optimize. That's the fundamental way in which we grow the business over the long term. And Mike, Geiselhart spoke to that in a few minutes ago. The second part is the icing on the cake and what's going on with the market and are the market opportunities creating unusual or opportunities that marketing businesses deal with every day to optimize those investments specifically in the assets. And clearly through the 1st 3 months of this year, we've seen some strong market conditions. Let's face it, price volatility we saw in the early part of our year, right as we were getting into the fall in the early winter with a 4 handle plus on gas and volatility and the early cold did give us some opportunities in the marketing business. And that's what marketing businesses do. Take advantage of opportunities that may be intraday much less over a longer period of time. But as we know, markets change relatively quickly. Henry Hub traded at $2.54 last night. So the price volatility that we saw early in the season now that we're through the polar vortex and we really didn't see price spikes except for a single day. We have to look at this business over the long term and we're not willing at this point to speak to what it looks like for the full year because as we look at the rest of the year, especially going into the last part of the winter and into spring, the market fundamentals are easing off a little bit for all the reasons that we talked about and it really starts with weather. What we will do and we do this every year is we'll take a look at our performance after we get through the winter heating season and then make an assessment on how do we think about that in totality and how do we think about that going forward so that you all can understand the baseline for the business. But I think Mike's comments earlier stand. We expect every business to grow and we're investing in a great team and relationships and everything else associated with that to grow that business in the right way, doing what we do now, which is physically procure and deliver gas. And over time, we expect that business to grow. That's the fundamental part that you all should come to expect every year. Great. Thanks, Steve. And just a few mechanical ones here. The storage investment balance as of the quarter, I'm curious as to where that stands? And then also if there are agency thresholds that you guys monitor for sort of the non regulated business versus total business mix? The second piece gets back to the question that was asked earlier about mix of business. And we obviously take a look at all of our businesses. We expect them to grow, be financed in a conservative fashion. And ultimately, we will and continue to be a largely regulated business, but you have to look underneath the businesses because that's a surfacey comment. Right now as we stand today, roughly 40% of the customers that we serve in marketing are utilities and power generation. So under deals that can extend over a period of time, which is a clearly different customer base than what you see with a pure marketer who might be selling into other places or to other marketers. And the same as we developed the storage business, our goal is to make that facility attractive to utilities, power generators, LNG providers, the kind of folks who need long term reliable storage services. And in that vein, the complexion of that business and how we think about that business changes. So that's how we think about the mix of business. We're clearly aware of of where the guidelines are. We know our peers really well and we understand how to think about that and actively exercise that internally to make sure that we are comfortable with where we are, where we're driving. But again, we expect every one of our businesses to grow. That's one of the tenants of our underlying business. In terms of overall investment, we're not quite at the $100,000,000 mark. This quarter, if you look at the capital spend that we had this year or this quarter of $207,000,000 about 2 thirds of that investment was in the utility. And the other third was between the pipeline and the storage business. And I think it was probably nearly $40,000,000 in the storage business, maybe it's $45,000,000 in fact it is $45,000,000 And the rest was in the pipeline as we now will see that ramp up fairly significantly going through the rest of the year. So that's kind of where we stand right now. And as Suyann mentioned in the prepared remarks, we'll update that not only the development plan for storage, but how that impacts our go forward view on investment and capital and base gas and other things that you need in order to adequately operate a storage facility, once we have finalized that plan. Great. Thank you for the update. And our next question comes from Andrew Levi with ExodusPoint. Please go ahead with your question. Hi, good morning guys. Hey Andy. Great pictures in the handout of you 2. Thanks. Not really. We'll give corporate communication a little credit on that one. Yes. Oh, that's not Scott. But anyway, you both look good. Just two very simple questions. Just on the ATM, just for modeling purposes, how much should we kind of put into our earnings model a year? Should it be $50,000,000 $75,000,000 Any type of guidance you can give us on that? Yes. Andy, I can't give you any more guidance at this point. It's a 3 year program. I did mention that we expect it to meet our needs for the next couple of years and we clearly haven't activated the program at this point and we'll update you all in the next call where we stand on that. I think you'll have to figure out a reasonable way to address that over time. As you because I know you will, you'll put yourself in our shoes then look at our capital structure and our credit metrics to make sure that we keep everything in balance. And should we be more focused on the FFO to debt or your equity ratio? Actually, we look at all of those and a few others. Our FFO to debt were in the swim lane that would support current credit ratings, but it's something over time that we have a commitment to continue to improve. And then the equity ratio at 51% at the end of quarter, is that kind of where you want to be as well? Yes, we've worked really hard to get to the more equity than leverage on our long term capital structure. We would like to keep that powder dry, because we think that's the right place to be, for us and that our investors actually appreciate that. What you will see and continue to see, Andy, is a continuous shift of the leverage and where it sits. We continue to draw down the leverage at the holding company, which is shareholder debt as we continue to borrow at the right times. And we talked about a couple of those in the prepared remarks at the operating company, the utilities, where we get regulatory recovery. I think you'll continue to see that and that's another component of that of the overall mix and that's that holdco debt as a percentage of total debt. We've been very successful and continue to driving that down and it's one of our commitments to ourselves, to our Board and to our investors. Got it. And then just separately, just on the weather, just in Missouri and Alabama, kind of interested just kind of overall for companies within your area. How could you can you categorize the weather in the Q4 that maybe what I mean, not the Q4, your Q1? And then kind of what you're seeing in the Q2 because it's kind of hot, cold, hot, cold. So kind of where we stand weather wise, whether it's in your Southern service territory or your American service territory? And then I have one more follow-up to that. I'll take a shot at this. This is Steve. I'm not a weather expert, but relative to just norms, worried about this, Steve, I think he mentioned this, about 12% colder on average for the quarter than last year and about 10% from normal. But as we all know, there's variability. So you might have, as you described, some very, very cold periods followed by some warm. So you have some cyclical periods. And the one thing I will say too as we talked about our capital, we were able to have in essence a 40% increase in the utility capital spend Q1 year over year and that was in spite of some of the more challenging weather conditions. So I think it clearly helps from a margin perspective as you've seen and we went through those examples as well as we've been able to manage it from a construction perspective. In the South, I think it's been again, it's been up and down quite a bit. We've had some very warm periods followed by some very cold. So I think when you get into averaging, it might be pretty close to average there, but we've had some rain, some snow and then some warm periods. So it's a little bit of a mix. And for the quarter that we're in right now, Now obviously this week we saw extreme conditions and the one thing I will say is that our systems across the board held up very well. And I think a lot of that goes to a lot of the reinforcement and infrastructure upgrades that we put in place over the last 5 years. So I think if you put all these things together, we've operated very well. We continue to grow our system. And from a margin perspective, I think we're doing about as well as we could expect at this point in the year. And the flow through of that, too, as you think about it, the way that we read meters and the way we cycle those meters through the month and then the way that data cycles through the rate design in those areas is how it flows to the bottom line. It all arrives eventually, but the timing from a quarter by quarter perspective is driven obviously by the way there's meters. Some are read at the 1st of the month on a cycle, some are in the middle, some at the end. Every day we're reading meters. And then that's where technology on the longer term basis and we'll speak more about that at the Analyst Day. How we're deploying meter reading technology and how we think about designing those rates even in these last rate resets that was very much topical. Again, the math shows up, the calendarization of those meter reads and also those rate designs have impact. But again, over time, it all flows to the bottom line. It's more of a timing perspective. And I think you had one more question. I don't want to cut you off. Yes. No, that's fine. And then just guidance wise, just to understand kind of where you started and kind of where you are today. And just focusing on the gas storage and on the marketing. So are you kind of where you expected to be when you gave guidance in both those areas or a little better or a little worse? Just maybe you can tell us on that. Yes. So I look at it this way. So again, our gas companies, we have 5 gas companies and how they collectively come in and then our gas related businesses, marketing, storage and pipeline. And from a gas related businesses perspective, we're actually where we expected to come in, in fact, feeling a little better. Same thing with the gas companies, the utilities, there's 5 of them and they're doing well on all performance metrics. And I know we've had a lot of conversations so far about gas related businesses as well as the utilities. And when I think of them collectively and when we think of them collectively, we are physically moving gas for customers, be it residential customers that are in a utility or small businesses, large industrial or power generators. And our gas related business as well as our utilities are every day physically moving gas for those customers. The difference obviously with the utility side regulated by the state, other regulation FERC or other criteria for gas related businesses that fundamentally, which is what I've been doing for 38 years, we're physically moving gas for these customers to use it to keep their homes warm, heat hot water, improve their business processes or generate power. And so we pull those together and we manage it collectively. Okay. Thank you. Thanks, Andy. Thanks, Andy. And this concludes our question and answer session. I would like to turn the conference back over to Scott Dudley for any closing remarks. Thank you all for joining us today. We will be around throughout the day for any follow-up questions. And we look forward to seeing you at some upcoming industry conferences in March. And of course, we very much look forward to continuing the conversation at our Investor Day in New York on April 4. Thanks and have a great day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.