Business Context and Reporting Period
This Form 8-K is filed by Spire Inc. on August 21, 2019, reporting an event under Item 8.01 Other Events. The filing concerns Spire STL Pipeline LLC, a subsidiary, and its amended application to the Federal Energy Regulatory Commission (FERC) regarding the Spire STL Pipeline project.
Key Financial Metrics and Project Costs
The filing details updated cost estimates and rate adjustments for the pipeline project rather than corporate-wide financial statements.
- Revised Total Construction Costs: $262.0 million.
- Allowance for Funds Used During Construction (AFUDC): $24.9 million.
- Revised Recourse Rate: Increased to $0.36 per dekatherm (previously $0.27 per dekatherm).
- Negotiated Rate with Foundation Shipper: Anticipated increase to $0.25 per dekatherm (previously $0.23 per dekatherm).
The filing text does not provide clear values for overall company revenue, profit, cash flow, margins, debt, or liquidity.
Material Changes Versus Prior Period
Compared to the July 30, 2019, earnings communication, the following material changes have occurred:
- Cost Escalation: Total construction costs are now estimated at $262.0 million, exceeding the previous upper range estimate of $240 million.
- Rate Adjustments: The recourse rate has been raised by $0.09 per dekatherm to reflect higher costs.
- Project Timeline: The expected in-service date remains targeted for later in calendar 2019, with a potential start date of November 1, 2019, contingent on flood conditions.
Outlook, Risks, and Management Commentary
Management attributes the cost increases and delays to historic flooding of major rivers along the pipeline route. Specific cost drivers include:
- Retention of external partners for engineering, inspection, and regulatory support.
- De-mobilizing and re-mobilizing construction crews.
- Additional work to repair right-of-way and road damage caused by flooding.
- Additional horizontal directional drilling required for two water bodies.
Outlook: Spire anticipates commercial service could begin as early as November 1, 2019, depending on how quickly flood conditions subside. The negotiated rate with Spire Missouri Inc. is expected to be adjusted in a subsequent filing following FERC approval.
Key Facts for Investor Verification
- Verify the final FERC approval status of the amended application and the $0.36 per dekatherm recourse rate.
- Monitor the actual in-service date, as it remains dependent on subsiding flood conditions.
- Confirm the subsequent filing regarding the adjusted negotiated rate with Spire Missouri Inc.
- Assess the impact of the $22 million cost overrun (from the $240 million prior estimate) on the company's capital expenditure budget and cash flow.