Spire Inc. (SR) Earnings Call Transcript & Summary

Good morning, and welcome to the Spire Inc. Sustainability Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Scott Dudley, Managing Director of Investor Relations. Please go ahead.

Good morning, and thank you for joining us today for Spire's Sustainability Call. We published our annual sustainability report online on June 8 and issued a news release highlighting the continued progress we made in 2022 on environmental, social, governance matters, while moving Spire towards becoming a carbon-neutral company by mid-century. And we had expanded disclosures that we put into the report. You can view the report on our website at spireenergy.com/sustainability, and the news release is available on our website under Newsroom. There's a slide presentation that accompanies our call today and you may access it either from our website or the website for this call. On the call today is Suzanne Sitherwood, President and Chief Executive Officer; and Steve Lindsey, Executive Vice President and Chief Operating Officer. Also in the room with us is Steve Rasche, Executive Vice President and Chief Financial Officer; Adam Woodard, Treasurer and CFO of our Gas Utilities; Nick Popielski, Vice President of Sustainability; and Courtney Vomund, Vice President, Compliance and Corporate Secretary. With that, I will turn the call over to Suzanne.

Thank you, Scott, and good morning, and thank you for joining us today for Spire's Sustainability Conference Call. We're pleased once again to have an opportunity to update you on our ESG commitments, programs and performance. We believe natural gas plays a key role in supporting a sustainable energy future for our country and in delivering affordable, reliable and cleaner energy. Our efforts go beyond serving the energy needs of our customers. For example, our efforts include supporting our communities through time and philosophic investments, supporting our commitment to diversity and inclusion as well as protecting the planet through emissions reduction. 2022, we built upon the results we previously achieved while furthering our reporting on environmental, social and governance. Reflecting our commitment to sustainability, we recently named our first Vice President of Sustainability. Many of you will remember Nick Popielski, who we introduced during last year's sustainability call, Head of Environmental Commitment. In his new position, Nick will retain the responsibility for Spire's environmental commitment, but he's also taking on responsibilities for our enterprise sustainability strategy. This role also includes social and governance business practices. Needless to say, it will make him quite busy. To that end, last week, we published our 2022 Sustainability Report online at spireenergy.com. I encourage you to access the report, which details our continuing progress on environmental, social and governance matters for further enhancements to our reporting. We're focused on 4 sustainability priorities, environment, safety, people and governance. Spire has a great story to tell in each of these areas, starting with how we care for the planet we all share. We are highly focused on operating in an environmentally responsible manner for future generations, including fulfilling our commitment to be a carbon-neutral company by mid-century. Our environmental focus has been on reducing methane emissions from our gas utility operations. We continue to make significant strides, as Steve Lindsey will discuss, through a combination of infrastructure upgrades, accelerated leak detection and damage prevention. Steve will also discuss safety, which is a core value at Spire. One of our greatest responsibilities is ensuring the safety and well-being of employees, customers and communities. Our performance here continues to be strong and [indiscernible]. Our focus on people includes serving and supporting our employees, customers and communities. I'll discuss this in greater detail in just a moment. Finally, it is the priority of governing responsibility, strong financial and operating results come about through effective governance practices overseen by our Board of Directors. Turning to people, beginning with our employees, we strive to foster a strong, safe, sustainable workforce. Our efforts are focused on improving gender and racial diversity, along with integrating broader initiatives to provide a more equitable and inclusive workplace. In that regard, we are improving how we go about recruiting and developing our workforce as well as proactively planning succession across our company. At the same time, we continued our program to better understand and meet the evolving needs of our customers. To support that effort, we established what we call a customer success team. The team piloted a new program to offer individualized support solutions, especially for new customers and those with limited income. Last year, we helped customers access more than $27 million in energy assistant funding. Supporting our communities has always been an important part of who we are at Spire. Last year, we invested nearly $6 million to enrich the communities we serve. As a company, we also serve our communities by volunteering through nonprofit and other support organizations. I'm proud to note that in 2022 the number of Spire employees involved in volunteer and community support activities increased 20% and the total hours they contribute 45%. Through our focus on responsible sourcing, specifically our Smart Sourcing Initiatives, we are taking steps to increase efficiency, standardization while reducing costs within our supply chain. We remain committed to supply diversity and working with companies that are focused on equity and sustainability across their operations. Corporate governance has consistently been one of Spire strengths, and we continue to make it even stronger. For example, we completed a review of the skills and experience of each director to support Board succession planning. And after formally assigning oversight of sustainability to committee on the Board last year, further refined the Board's oversight responsibility. In addition, in keeping with best practices, we continue to review and update our governance policies, all the while maintaining a well-qualified and experienced Board which at year-end calendar 2022 was 50% female, 20% racially diverse, 9 out of 10 directors being independent. Before turning things over to Steve Lindsey, I would like to note that our sustainability report remains very strong. Our disclosures are aligned with ONE Future, SASB and TCFD platforms. With the 2022 report, Spire has achieved 100% compliance with GRI, the Global Reporting Initiative index. Now let me turn to Steve.

Thank you, Suzanne. Safety is the core value at Spire, and we continue to advance already well-established safety culture across our company. One of the important employee safety measures we focus on is injuries as measured by the Occupational Safety and Health Administration or OSHA. We track safety using industry standard metric for injuries called the OSHA DART rate, which measures the number of recordable injuries and illnesses per 100 employees, resulting days away from work, restricted duty or transfer of duties. As you can see, the rate has been steadily declining [ in fact ] by more than half over the last 5 years and has dropped 18.5% to a record low last year. As we go about our daily work of serving our customers with affordable, reliable and cleaner energy, we continue to implement programs to keep our employees and communities safe. An area of particular focus is driving safety. Reducing our at-fault motor vehicle accident rate is an ongoing goal. For fiscal 2022, we completed the installation of in-vehicle technology, including safety cameras and GPS systems to help our employees become safer drivers. And we're seeing results. Our motor vehicle accident rate was markedly improved compared to the prior 2 years, accidents down more than 17% from 2022. As Suzanne noted, we're highly focused on operating our business in an environmentally responsible manner and meeting our carbon-neutral commitment. One of our efforts to date has been reducing methane emissions from our gas utility operations. I'm pleased to note we achieved further reductions in 2022. As noted in our 2021 report, we established baselines for Scope 1 and Scope 2 emissions for All spire. For 2022, we reduced carbon equivalent emissions by 6.3% compared to last year's baseline. We've done this primarily through our continued program of investing in infrastructure upgrades to replace pipelines constructed of older, more leak ped materials. Last year, we spent almost $260 million to replace more than 250 miles of pipelines related to distribution infrastructure. This upgrade work combined with accelerated leak repair programs has enabled us to further tighten our system leading to a 19.5% reduction in leaks per 1,000 system miles. Another way we've been able to cut our methane emissions is through reducing third-party damage to our system typically occurs due to excavation in our lines. At a record low damage rate last year, thanks to our participation along with other utilities and awareness campaigns to promote the call before you dig programs. Part of our plan to reduce greenhouse gas emissions includes evaluating alternative energy sources such as renewable natural gas or RNG as well as certified natural gas. Last year, we began implementing our RNG strategy as I'll describe in a moment. We have shared previously in 2022, we achieved a reduction in methane emissions, specifically leaks from mains and services in our distribution system by 50% from 2005 levels. We're targeting cumulative methane reductions of 60% by 2025 and 73% by 2035. As I noted earlier, you can see graphically the steady improvement in damages and leaks over the last 5 years to record lows in fiscal 2022. Damage rate is down 13%, while leaks per 1,000 system miles has been reduced by nearly 2/3. Turning to alternative and renewable energy. We've been exploring RNG opportunities across our utility footprint, especially in Missouri, including methane capture from wastewater treatment plants and landfills and to a lesser extent, animal waste from agricultural operations. Key to our assessment is the level of interest and demand from customers for renewable energy. While we await regulatory rule-making in Missouri regarding alternative fuels, we had several projects in the works in the state, including 1 in implementation stage in St. Louis region and another final evaluation in Kansas City. Meantime, Spire Marketing is already providing its customers with certified natural gas to help them meet their environmental goals and Spire Missouri is including certified natural gas and supply portfolio. We continue to study the use of hydrogen as a renewable fuel that can be offered in our system. Over the next year or 2, we'll be evaluating feasibility, including resolving technical and production supply issues while also working with Missouri regulators on rule making. With that, let me turn the call back over to Suzanne for some closing comments.

Thank you, Steve. In conclusion, let me reiterate our firm belief that the future of our industry and company is bright. Natural gas plays a vital role in ensuring an affordable, reliable and clean energy future for our country. We'll continue to advance our business through innovation in how we serve our customers and communities while protecting the planet and achieving overall greater sustainability in all we do. Thank you for joining our call today. We're now ready to take your question .

[Operator Instructions] There are no questions in the queue. This concludes our question-and-answer session. I would like to turn the conference back over to Scott Dudley for any closing remarks.

Well, thank you all for joining us for our annual sustainability call. And we'd be happy to follow up with any of you that have any questions. Thank you so much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.