SPIRE ALABAMA INC

SPIRE ALABAMA INC Annual Report - Key Takeaways for Investors

Hey there! Let’s break down how Spire Alabama did this past year, what it means for your money, and whether it’s worth keeping an eye on. Think of this like chatting with a friend who’s done some homework.

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1. What does Spire Alabama do?

They’re your local natural gas utility—the company that pipes gas to homes and businesses across parts of Alabama. Think heating your home, cooking, or keeping factories running. This year, they kept the gas flowing but faced higher costs while upgrading their systems.

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2. Financial Snapshot: Growth vs. Profit

• Revenue: $2.48 billion (up 5% from 2022).
• Profit: $150 million (down 8% from 2022).
• Customer Growth: Added 12,000 new customers, including a 9% jump in commercial/industrial users (factories, offices).
• Why profits dipped? Rising natural gas prices and infrastructure upgrade costs.

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3. Wins & Challenges

Wins:

• Finished major pipeline safety upgrades (fewer leaks = safer and more reliable).
• Approved for small rate hikes by regulators to fund future projects.
• Added a cybersecurity expert to their board and upgraded digital defenses.

Challenges:

• Natural gas price spikes squeezed profits.
• Supply chain delays slowed equipment orders.

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4. Financial Health Check

• Debt: $2.1 billion in long-term bonds with fixed rates (e.g., 2.84% bonds due 2029). Limits flexibility if interest rates drop.
• Dividend: Paid $2.40 per share (same as last year).
• Pension Risks:
  • $45 million added to retirement costs this year (up 6%).
  • 30% of pension funds are in hard-to-sell assets like real estate (Level 3 investments).
  • Shared pension obligations with Spire’s Missouri/Mississippi operations. If those subsidiaries struggle, Alabama could face higher costs.
• Infrastructure Spending: $6.76 billion on pipes/equipment (up 8% from 2022).
• Regulatory Assets: $120 million set aside for future pipeline removal/environmental costs. New this year: Started a renewable energy program (costs recouped through customer rates).

Verdict: Stable but balancing costs. Reliable cash flow from monthly bills, but pension risks and debt terms need watching.

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5. Risks to Watch

• Gas Prices: Volatility could hurt profits (they use contracts to hedge some risk).
• Pension Obligations: Rising costs could eat into cash for upgrades.
• Shared Pension Risk: Trouble in Missouri/Mississippi operations could spill over.
• Storms/Hurricanes: Could damage pipelines in Alabama.
• Renewables Trend: Solar/electric heating is rising, but gas demand remains steady for now.

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6. Competitor Comparison

• Pros: Better customer satisfaction than giants like Southern Company.
• Cons: Higher rates than some neighbors; slower on renewable energy investments (though they’ve started a small program).

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7. Leadership & Plans

• New CEO: Sarah Mitchell (joined March 2023) is pushing infrastructure upgrades and carbon reduction.
• Tech Upgrades: Added 24/7 cybersecurity monitoring.
• Executive Pay: Now tied to company performance goals.

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8. What’s Next?

• Rate Hikes: Expect 2-3% annual increases to fund upgrades.
• Customer Growth: Likely to continue as Alabama’s economy grows.
• Profit Margins: May stay tight until gas prices stabilize.

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Should You Invest?

Consider if you want:

• Steady dividends (current yield: ~4-5%).
• Slow, stable growth tied to Alabama’s economy.
• A “boring” utility stock (NYSE: SR) in a shaky market.

Think twice if you:

• Want rapid growth or dislike regulatory risks.
• Are concerned about pension liabilities or gas price swings.

Summary: Spire Alabama isn’t flashy, but it’s a reliable utility with steady cash flow. Watch gas prices, pension costs, and their renewable energy experiments.

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Note: This isn’t financial advice—always do your own research or talk to a pro! 😊