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With western US energy market evolving, Spire rethinks gas storage strategyfrom SNL Daily Gas Report With western US energy market evolving, Spire rethinks gas storage strategyByline: Tom DiChristopher Spire Inc. wrote down the value of its natural gas storage assets by nearly $141 million, as executives acknowledged it would take longer than anticipated to execute growth plans for its Wyoming storage facilities following recent acquisitions. The gas utility operator, which warned investors about the write-down in July, attributed the delay to the continued evolution of western U.S. energy markets. The company came to the conclusion after consulting experts, ultimately deciding to take more time to validate its plans and ensure there is enough demand for its storage services before committing capital to the planned expansion, Executive Vice President and COO Steven Lindsey said on Spire's Aug. 5 fiscal third-quarter earnings conference call. Lindsey said Spire intends to "outline its development path and prove up the need for the expanded gas storage services" in a filing with the Federal Energy Regulatory Commission in fiscal year 2021. He anticipated it would take two to three years to secure commercial validation of those plans and regulatory approval. In the interim, Spire intends to invest $20 million in the storage assets through the end of fiscal year 2021. Two years ago, Spire President and CEO Suzanne Sitherwood highlighted "numerous opportunities for Spire storage to serve various geographic regions and customer growth, including utilities, power generators, pipelines and marketers." Asked whether she still saw California as a major opportunity, Sitherwood said the state remains "significant" in light of the growing intermittent power generation. However, the CEO also sees that trend playing out across the broader West and Midwest, where gas-fired generation backs up intermittent renewable energy sources. "Storage will play a significant role in how that works for the Midwest and the western part of the country, and so we feel like, with a long view on storage, it will play a key role in the way that gas flows in the western side of the country," she said. Sitherwood said Scott Smith, president of Spire Storage and Spire STL Pipeline, will have more capacity to engage customers, now that he has familiarized himself with the company's storage operations and helped complete a capital plan since joining the company in October 2019. The write-down puts the net value of the storage assets at roughly $40 million, down from a net book value of just over $180 million, Spire Executive Vice President and CFO Steven Rasche said. The company booked another $8 million write-down for its commercial compressed natural gas, or CNG, fueling stations, mostly tied to its Greer, S.C., location. "As we evaluated this venture, it became apparent that the demand for CNG fueling is continuing to lag ours and market expectations due in large part to persistently low diesel prices, which make the conversion of Class 8 trucks less financially attractive. We've begun an orderly process to exit the Greer facility in the next 12 months," Rasche said. The company issued fiscal-year 2020 earnings guidance for $3.70 per share to $3.75 per share. Executives had delayed issuing guidance until Spire reached a settlement with Missouri regulators over previously recovered infrastructure replacement costs that were later disputed. Spire reported fiscal third-quarter net economic earnings rose more than $2 million from a year ago to $7.3 million. Earnings per share of 7 cents matched the year-ago period and the S&P Capital IQ consensus normalized estimate. |
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