Spire Inc (SR)

A. Company Overview

Spire Inc., established in 2000, serves as a holding company for several subsidiaries, notably Spire Missouri Inc. and Spire Alabama Inc., as well as other gas utilities and gas-related businesses. The company's lineage can be traced back to Spire Missouri, founded in 1857, and Spire Alabama, which commenced operations in 1948 through the merger of two gas enterprises. Spire focuses on transformative business practices aimed at growth—expanding both organically and through strategic investments in infrastructure and innovation. The company operates across three primary business segments: Gas Utility, Gas Marketing, and Midstream.

B. Business Segments

Gas Utility

The Gas Utility segment comprises regulated operations of Spire Missouri, Spire Alabama, Spire Gulf Inc., and Spire Mississippi Inc. These utilities provide retail distribution and sale of natural gas. Operations within this segment are characterized by seasonal demand, typically peaking during the winter heating season from November through April.

Spire Missouri

As the largest natural gas distribution system in Missouri, Spire Missouri serves approximately 1.2 million customers across residential, commercial, and industrial sectors, primarily in major urban centers such as St. Louis and Kansas City. The utility engages in the purchase and distribution of natural gas and has its operational headquarters in St. Louis.

Spire Alabama

With its primary offices in Birmingham, Spire Alabama serves over 400,000 customers in central and northern Alabama. It operates similarly to Spire Missouri, focusing on the purchase and distribution of natural gas.

Spire Gulf and Spire Mississippi

These subsidiaries cater to niche markets, serving around 100,000 customers combined in areas like Mobile, Alabama, and south-central Mississippi.

Gas Marketing

Spire Marketing Inc., a wholly-owned subsidiary, leads Spire's efforts in natural gas marketing services. It serves a diverse clientele, extending its operations beyond the utilities' service areas. The company managed an average volume of 1.40 billion cubic feet (Bcf) per day during fiscal years 2023 and 2022. Through this segment, Spire Marketing targets both commercial and industrial users, employing market expertise to optimize its portfolio of natural gas and related services.

Midstream

The Midstream segment consists of Spire STL Pipeline LLC and Spire Storage—comprising Spire Storage West LLC and Spire Storage Salt Plains LLC. These entities focus on natural gas transportation and storage, offering critical infrastructure for the market.

Spire STL Pipeline

This 65-mile pipeline connects the Rockies Express Pipeline in Illinois to various delivery points in St. Louis County, Missouri, serving as a foundational component for Spire Missouri's gas supply. It operates under the oversight of the Federal Energy Regulatory Commission (FERC).

Spire Storage

Spire Storage encompasses two operational facilities, strategically located to service the western and midwestern U.S. markets. Spire Storage West, situated in Wyoming, offers significant storage capacity thriving under a market-based rate tariff, while Spire Storage Salt Plains in Oklahoma provides essential gas storage capabilities, regulated at the intrastate level.

C. Operations and Supply Chain

Natural Gas Supply Strategy

The fundamental strategy guiding the utilities' gas supply is twofold: ensuring a reliable gas supply while seeking to purchase at competitive prices. Spire Missouri's procurement approach emphasizes diversity, maintaining partnerships with various natural gas suppliers in multiple regions, including the Midcontinent, Gulf Coast, and Rocky Mountain areas.

In fiscal 2023, Spire Missouri procured natural gas from 24 suppliers, utilizing an intricate web of pipeline systems—Southern Star, Enable MRT, Spire STL Pipeline, and others—to meet customer needs. The peak demand scenario on December 23, 2022, illustrates this strategy's effectiveness, with significant volumes transported to meet extreme weather conditions.

Similarly, Spire Alabama's supply chain incorporates various interstate and intrastate pipeline systems, with procurement strategies diversifying sources between firm commitments and spot purchases.

Natural Gas Storage Capacity

Both Spire Missouri and Spire Alabama maintain robust gas storage capacities to handle seasonal fluctuations. Spire Missouri has contracts for ample storage in multiple facilities, bolstered by its underground storage capabilities. Spire Alabama also holds contracts for substantial storage capacity, enabling effective management of peak demand scenarios through liquid natural gas (LNG) storage options.

D. Customer Base and Revenue Structure

The customer base across Spire's utilities primarily comprises residential, commercial, and industrial users. In fiscal 2023, these segments accounted for approximately 95% and 83% of operating revenues for Spire Missouri and Spire Alabama, respectively. The utilities provide gas transportation services for large customers, ensuring revenue stability through equitable tariff structures.

E. Environmental and Regulatory Considerations

Spire operates within a framework of stringent environmental laws and regulations, which have not materially affected its operations to date. Maintaining compliance is critical, considering the potential competitive pressures from electric companies and alternative fuel suppliers. The regulatory landscape is further shaped by franchise agreements in service regions, which are essential for operational continuity.