Item 1A. Risk Factors

Spire’s and the Utilities’ business and financial results are subject to a number of risks and uncertainties, including those set forth below. The risks described below are those the Company and the Utilities consider to be material. When considering any investment in Spire or the Utilities’ securities, investors should carefully consider the following information, as well as information contained in the caption “Forward-Looking Statements,” Item 7A, and other documents Spire, Spire Missouri, and Spire Alabama file with the SEC. This list is not exhaustive, and Spire’s and the Utilities’ respective management places no priority or likelihood based on the risk descriptions, order of presentation or grouping by subsidiary. All references to dollar amounts are in millions.

RISKS AND UNCERTAINTIES THAT RELATE TO THE BUSINESS AND FINANCIAL RESULTS OF SPIRE AND ITS SUBSIDIARIES

Failing to secure a permanent re-authorization of the Spire STL Pipeline to operate could adversely affect the Company.

On June 22, 2021, the U.S. Court of Appeals for the District of Columbia Circuit issued an order vacating Spire STL Pipeline’s certificates to operate by the FERC and remanding the proceeding back to the FERC, which took effect on October 8, 2021. The FERC, however, has issued a temporary emergency certificate authorization for the continued operation of the Spire STL Pipeline through December 13, 2021, unless otherwise shortened or revoked. Whether to extend the temporary emergency authorization or issue a new temporary authorization remains pending with the FERC. Also pending with the FERC is its decision on remand regarding whether to grant or deny permanent re-authorization of the pipeline. The commissioners’ statements at the November 18, 2021 FERC open meeting suggest they do not intend to allow the pipeline’s authorization to lapse in a manner that causes service to be interrupted this winter; however, they have not yet issued an order to extend the temporary authorization through the end of the 2021-2022 winter, and there is no assurance that the FERC will act to do so.

The court decision to vacate the Spire STL Pipeline’s Certificate of Public Convenience and Necessity previously issued by the FERC in 2018 could, depending on the course of action the FERC takes, cause a temporary or permanent halt in the natural gas supply transported by the pipeline or result in new regulatory conditions imposed on the pipeline, any of which could adversely affect the Company (including Spire Missouri) and our customers.

Spire Missouri relies on the Spire STL Pipeline to transport natural gas into the St. Louis region. In the event the pipeline is taken out of service or even as a result of regulatory uncertainty and business constraints associated with ongoing temporary authorization of the pipeline, Spire Missouri’s customers, financial condition and results of operations may be adversely impacted, which could result in a material adverse effect on the Company’s financial condition and operating results, as discussed under RISKS THAT RELATE TO THE GAS UTILITY SEGMENT below.

In addition, in the event the pipeline is taken out of service, the Company’s financial condition and results of operations may be adversely impacted by impairment of Spire STL Pipeline’s assets, currently carried at over $270 million, and other effects. Spire STL Pipeline will continue to pursue all legal and regulatory avenues to ensure its continued and future operation.

Reductions in capacity of interconnecting, third-party pipelines could cause a reduction in volumes transported by the Spire STL Pipeline, which could adversely affect the Company.

Spire STL Pipeline is dependent upon third-party pipelines and other facilities to provide delivery options to and from its pipeline. If any pipeline connection were to become unavailable for volumes of natural gas due to repairs, damage to the facility, lack of capacity or any other reason, Spire STL Pipeline’s ability to continue shipping natural gas to end markets could be restricted, and to the extent not mitigated by contractual indemnification, insurance or tariffs, would thereby reduce its revenues. Any permanent interruption at any key pipeline interconnect that causes a material reduction in volumes transported on its pipeline could result in an impairment loss that could have a material adverse effect on the Company’s financial condition and operating results.

As a holding company, Spire depends on its operating subsidiaries to meet its financial obligations.

Spire is a holding company with no significant assets other than the stock of its operating subsidiaries and cash investments. Spire, and Spire Missouri prior to the holding company’s formation in 2000, has paid common stock dividends continuously since 1946. Spire’s ability to pay dividends to its shareholders is dependent on the ability of its subsidiaries to generate sufficient net income and cash flows to pay upstream dividends and make loans or loan repayments. In addition, because it is a holding company and the substantial portion of its assets are represented by its holdings in the Utilities, the risks faced by the Utilities as described below under RISKS THAT RELATE TO THE GAS UTILITY SEGMENT may also adversely affect Spire’s cash flows, liquidity, financial condition and results of operations.

A downgrade in Spire’s and/or its subsidiaries’ credit ratings may negatively affect its ability to access capital and its cost of capital.

Currently, Spire, Spire Missouri, and Spire Alabama have investment grade credit ratings. There is no assurance that such credit ratings for any of the Spire companies will remain in effect for any given period of time or that such ratings will not be lowered, suspended or withdrawn entirely by the rating agencies, if, in each rating agency’s judgment, circumstances so warrant. Spire has a working capital line of credit to meet its short-term liquidity needs. Spire’s line of credit may be used to meet the liquidity needs of any of its subsidiaries, subject to sublimits. If the rating agencies lowered the credit rating at any of these entities, particularly below investment grade, it might significantly limit that entity’s ability to secure new or additional credit facilities and would increase its costs of borrowing. Spire’s or the Utilities’ ability to borrow under current or new credit facilities and costs of that borrowing have a direct impact on their ability to execute their operating strategies.

Pipeline integrity programs and repairs may impose significant costs and liabilities on the Company.

The U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) requires pipeline operators to develop integrity management programs to comprehensively evaluate certain areas along their pipelines and to take additional measures to protect pipeline segments located in “high consequence areas” where a leak or rupture could potentially do the most harm. As the operator of a pipeline, Spire STL Pipeline is required to:

• perform ongoing assessments of pipeline integrity;

• improve data collection, integration and analysis;

• repair and remediate the pipeline as necessary; and

• implement preventative and mitigating actions.

The Company is required to maintain pipeline integrity testing programs that are intended to assess pipeline integrity. Any repair, remediation, preventative or mitigating actions may require significant capital and operating expenditures. Should the Company fail to comply with applicable statutes and the PHMSA Office of Pipeline Safety’s rules and related regulations and orders, it could be subject to significant penalties and fines.

We face risks related to widespread public health concerns, such as the COVID-19 outbreak.

The actual or perceived effects of a disease outbreak, epidemic, pandemic or similar widespread public health concern, such as COVID-19, could negatively affect our operations, liquidity, financial condition, cash flows and results of operations. The outbreak of COVID-19 has adversely impacted economic activity and conditions worldwide. In particular, efforts to control the spread of COVID-19 led to shutdowns of customer operations and disrupted financial markets and supply chains.

During fiscal 2020 and, to a lesser extent, 2021, we experienced impacts on our results of operations as a result of COVID-19 including, but not limited to:

• increased bad debt expenses;

• decreases in expense for travel and medical claims; and

We are continuing to assess the developments involving our workforce, customers and suppliers, as well as the ongoing response of federal and state authorities, our regulators and other business and community leaders. For example, the Company is currently reviewing the potential financial impacts related to the emergency temporary standard related to COVID-19 vaccination and testing released by the Occupational Safety and Health Administration on November 4, 2021. An extended slowdown of the United States' economy or demand for commodities and/or material changes in government policy in response to COVID-19 could result in lower demand for natural gas, particularly among our commercial and industrial customers, as well as negatively impact the ability of our customers, contractors, suppliers and other business partners to remain in business or return to reasonable business activity in the near future. While the crisis has not had a material effect on the Company to date, the impacts continue to unfold, and the full extent of future developments is not known at this time and may have a material impact on our results of operations, financial condition, liquidity and prospects. We have identified the following potential categories of risks for Spire, Spire Missouri and Spire Alabama outside of those already experienced through September 2021:

• Decreases in non-essential operational functions and/or capital investment;

Spire is an essential business and continues to operate, while adhering to precautionary safety measures, to ensure that critical infrastructure improvements continue and to maintain the safety of the gas distribution network.

To the extent the COVID-19 health crisis adversely affects our business, it may also have the effect of heightening many of the other risks described in this item.

Climate change and regulatory and legislative developments in the energy industry related to climate change may in the future adversely affect operations and financial results.

Climate change, and regulatory, public policy, or legislative changes to address the potential for climate change, could adversely affect operations and financial results of the Company. Management believes it is likely that any such resulting impacts would occur over a long period of time and thus would be difficult to quantify with any degree of specificity. To the extent climate change results in warmer temperatures, financial results could be adversely affected through lower gas volumes and revenues and lack of marketing opportunities. Another possible impact of climate change may be more frequent and more severe weather events, such as hurricanes and tornadoes, which could increase costs to repair damaged facilities and restore service to customers or result in lost revenues if the Company were unable to deliver natural gas to customers. To the extent such impacts are not covered by insurance or recovered in rates, this could have a material adverse effect on the Company’s financial condition, operating results and cash flows.

In addition, there have been a number of federal, state and local legislative and regulatory initiatives proposed in recent years in an attempt to control or limit the effects of global warming and overall climate change, including greenhouse gas emissions, such as methane and carbon dioxide. The adoption in the future of this type of legislation by Congress or similar legislation by states or localities, or the adoption of related regulations by federal, state or local governments mandating a substantial reduction in greenhouse gas emissions, restricting the use of fossil fuels, such as natural gas, or restricting the construction of infrastructure necessary to deliver natural gas to customers could have far-reaching and significant impacts on the energy industry. Such new legislation or regulations could result in increased compliance costs or additional operating restrictions, affect the demand for natural gas or impact the prices charged to customers. At this time, we cannot predict the potential impact of such laws or regulations that may be adopted on the Company’s and the Utilities’ future business, financial condition or financial results.

Transporting, distributing, and storing natural gas and propane involves numerous risks that may result in accidents and other operating risks and costs.

Natural gas transportation, distribution and storage activities inherently involve a variety of hazards and operations risks, such as leaks, accidental explosions, damage caused by third parties, and mechanical problems, which could cause substantial financial losses. In addition, these risks could result in serious injury to employees and non-employees, loss of human life, significant damage to property, environmental pollution, impairment of operations, and substantial losses to the Company and its subsidiaries. The location of pipelines and storage facilities near populated areas, including residential areas, commercial business centers, and industrial sites, could increase the level of damages resulting from these risks. Similar risks also exist for Spire Missouri’s propane storage, transmission and minor distribution operations. These activities may subject the Company to litigation or administrative proceedings. Such litigation or proceedings could result in substantial monetary judgments, fines, or penalties against the Company and its subsidiaries or be resolved on unfavorable terms. The Utilities and other Spire businesses are subject to federal and state laws and regulations requiring them to maintain certain safety and system integrity measures by identifying and managing storage and pipeline risks. Compliance with these laws and regulations, or future changes in these laws and regulations, may result in increased capital, operating and other costs which may not be recoverable in a timely manner from customers in rates. In accordance with customary industry practices, the Utilities and other Spire businesses maintain insurance against a significant portion, but not all, of these risks and losses. To the extent that the occurrence of any of these events is not fully covered by insurance, it could adversely affect the financial condition and results of operations of the Company and its subsidiaries.

In connection with acquisitions, Spire and Spire Missouri recorded goodwill and long-lived assets that could become impaired and adversely affect its financial condition and results of operations.

Spire and Spire Missouri assess goodwill for impairment annually or more frequently if events or circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company and Spire Missouri assess their long-lived assets for impairment whenever events or circumstances indicate that an asset’s carrying amount may not be recoverable. To the extent the value of goodwill or long-lived assets becomes impaired, the Company and Spire Missouri may be required to incur impairment charges that could have a material impact on their results of operations.

Since interest rates are a key component, among other assumptions, in the models used to estimate the fair values of the Company’s reporting units, rises in interest rates would generally decrease the calculated fair values and future impairments may occur. Due to the subjectivity of the assumptions and estimates underlying the impairment analysis, Spire and Spire Missouri cannot provide assurance that future analyses will not result in impairment. These assumptions and estimates include projected cash flows, current and future rates for contracted capacity, growth rates, weighted average cost of capital and market multiples.

Changes to income tax policy, certain tax elections, tax regulations and future taxable income could adversely impact the Company’s financial condition and results of operations.

The Company has significantly reduced its current federal and state income tax obligations over the past few years through tax planning strategies including the use of bonus depreciation deductions for certain expenditures for property. As a result, the Company has generated large annual taxable losses that have resulted in significant federal and state net operating losses. The Company plans to utilize these net operating losses in the future to reduce income tax obligations. The value of these net operating losses could be reduced if the Company cannot generate enough taxable income in the future to utilize all of the net operating losses generated prior to the Tax Cuts and Jobs Act of 2017 before they expire due to lower than expected financial performance or regulatory actions.

Changes to income tax policy, laws and regulations, including but not limited to changes in tax rates, the deductibility of certain expenses including interest and state and local income taxes and/or changes in the deductibility of certain expenditures for property, could adversely impact the Company. Those impacts could include reducing the value of its net operating losses and could result in material charges to earnings. Further, the Company’s financial condition and results of operations may be adversely impacted.

Spire’s pension and other postretirement benefit plans are subject to investment and interest rate risk that could negatively impact its financial condition.

The Company and its subsidiaries have pension and other postretirement benefit plans that provide benefits to many of their employees and retirees. Costs of providing benefits and related funding requirements of these plans are subject to changes in the market value of the assets that fund the plans. The funded status of the plans and the related costs reflected in the Company’s financial statements are affected by various factors, which are subject to an inherent degree of uncertainty, including economic conditions, financial market performance, interest rates, life expectancies and demographics. Recessions and volatility in the domestic and international financial markets have negatively affected the asset values of Spire’s pension plans at various times in the past. Poor investment returns or lower interest rates may necessitate accelerated funding of the plans to meet minimum federal government requirements, which could have an adverse impact on the Company’s and its subsidiaries’ financial condition and results of operations. For more information, including regulatory provisions affecting the Utilities’ plans, see Note 13, Pension Plans and Other Postretirement Benefits, of the Notes to Financial Statements in Item 8.

The Company’s natural gas storage business includes inherent geologic and operational risks, as well as risks from competition and changes in market fundamentals.

In 2017 and 2018, the Company acquired two neighboring storage facilities, one of which had been operating in bankruptcy for an extended period. The Company has restructured to integrate these facilities into one, now known as Spire Storage, to increase capacity, improve operating performance, and improve the integrity of its storage fields and associated above-ground facilities. Any damage to the storage facility or pipelines, or lack of integrity to its storage fields, to the extent not covered by insurance, could have a material adverse effect on the Company’s financial condition, operating results and cash flows.

The Company’s storage assets are connected to third-party-owned pipelines. The continuing operation of such third-party pipelines is not within its control. If any of these pipelines become unable to transport, treat or process natural gas or natural gas liquids, or if the volumes it gathers or transports do not meet the quality requirements of such pipelines, the Company’s revenues and cash flows could be adversely affected.

The Company does not own all the land on which its storage facilities were constructed, and it is, therefore, subject to the possibility of more onerous terms or increased costs to retain necessary land use, if and when applicable property rights expire or are renewed. Changes in the terms of such land use could have an adverse impact on the financial condition, results of operations and cash flows for the Company’s storage business.

Spire Storage is subject to competition from similar services provided by pipelines and from competing independent storage providers capable of serving its customers. Natural gas storage is a competitive business, with competitors having the ability to expand storage capacity. Increased competition in the natural gas storage business could reduce the demand and drive rates down for the Company’s natural gas storage services.

Storage businesses are affected by various gas market fundamentals which impact the level of demand for storage services and the rates that can be charged for these services. These market fundamentals include: seasonal price spread; monthly, daily and hourly price volatility; locational basis for pricing points on pipelines connected to a storage facility; seasonal, daily and hourly weather; and operational impacts in supply and market areas served by a storage facility and its connected pipelines. These fundamentals have varying and potentially material adverse impacts on the various services offered by storage facilities and the rates that can be charged for these services in the market. These services include long-term firm storage, short-term park and loan, wheeling, and optimization. Rates below the variable costs to operate a storage facility could result in a decision to not operate all the capacity in the facility or to operate the facility at a loss if required to fulfill firm customer contract obligations. A sustained decline in these rates or a shut-in of all or a portion of one or more facilities’ capacity could have an adverse impact on the Company’s financial condition, results of operations and cash flows.

RISKS THAT RELATE TO THE GAS UTILITY SEGMENT

Regulation of the Utilities’ businesses may impact rates they are able to charge, costs, and profitability.

The Utilities are subject to regulation by federal, state and local authorities. At the state level, the Utilities are regulated in Missouri by the Missouri Public Service Commission (MoPSC), in Alabama by the Alabama Public Service Commission (APSC), and in Mississippi by the Mississippi Public Service Commission (MSPSC). These state public service commissions regulate many aspects of the Utilities’ distribution operations, including construction and maintenance of facilities, operations, safety, the rates the Utilities may charge customers, the terms of service to their customers, transactions with their affiliates, the rate of return they are allowed to realize, and the accounting treatment for certain aspects of their operations. For further discussion of these accounting matters, see Regulatory Accounting under Critical Accounting Estimates in Item 7.

Accounting for the economics of rate regulation affects multiple financial statement line items, including property, plant, and equipment; regulatory assets and liabilities; operating revenues; and depreciation expense, and affects multiple disclosures in the Company’s financial statements. There is a risk that the state public service commissions will not approve full recovery of the costs of providing utility service or recovery of all amounts invested in the utility business and a reasonable return on that investment. A material disallowance of deferred costs could adversely affect the Utilities’ results of operations.

The MoPSC also approves Spire Missouri’s Infrastructure System Replacement Surcharge (ISRS). The ISRS allows Spire Missouri expedited recovery for its investment to upgrade its infrastructure and enhance its safety and reliability without the necessity of a formal rate case. Such investments are subject to review, and there is risk that any material disallowance of costs under ISRS could adversely affect the timing of revenues.

The Utilities’ ability to obtain and timely implement rate increases and rate supplements to maintain the current rate of return is subject to regulatory review and approval. There can be no assurance that they will be able to obtain rate increases or rate supplements or continue earning the current authorized rates of return. Spire Alabama’s and Spire Gulf’s rate setting process, Rate Stabilization and Equalization (RSE), is subject to regulation by the APSC and is implemented pursuant to APSC orders expiring September 30, 2022 and 2021, respectively. RSE adjustments would continue after those dates unless the APSC enters an order to the contrary in a manner consistent with the law. Spire Mississippi is subject to regulation by the MSPSC and utilizes the Rate Stabilization Adjustment (RSA) Rider. For further details, see Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8.

The Utilities could incur additional costs if required to adjust to new laws or regulations, revisions to existing laws or regulations or changes in interpretations of existing laws or regulations. In addition, as the regulatory environment for the natural gas industry increases in complexity, the risk of inadvertent noncompliance could also increase. If the Utilities fail to comply with applicable laws and regulations, whether existing or new, they could be subject to fines, penalties or other enforcement action by the authorities that regulate the Utilities’ operations.

The Utilities’ ability to meet their customers’ natural gas requirements may be impaired if contracted gas supplies, interstate pipeline and/or storage services are not available or delivered in a timely manner.

In order to meet their customers’ annual and seasonal natural gas demands, the Utilities must obtain sufficient supplies, interstate pipeline capacity, and storage capacity. If they are unable to obtain these, either from their suppliers’ inability to deliver the contracted commodity or the inability to secure replacement quantities, to the extent not mitigated by tariffs, contractual indemnification or insurance, the Utilities’ financial condition and results of operations may be adversely impacted. If a substantial disruption in interstate natural gas pipelines’ transmission and storage capacity were to occur during periods of heavy demand, the Utilities’ financial results could be adversely impacted.

In particular, the natural gas supply provided to Spire Missouri by Spire STL Pipeline is currently at risk due to the order issued by the U.S. Court of Appeals for the District of Columbia Circuit vacating the Spire STL Pipeline’s Certificate of Public Convenience and Necessity previously issued by the FERC and remanding the matter back to the FERC for further action. In the event this pipeline is taken out of service, either temporarily or permanently, Spire Missouri’s ability to secure new pipeline contracts on other systems serving the region may be significantly constrained, and Spire Missouri would not be able to replace that supply based on similar terms or at all over the short term based on current market and operating conditions. In the event that the Spire STL Pipeline is unavailable and an extreme weather event occurs, Spire Missouri would face heightened risks, including service outages and other disruptions; the need for service restoration, creating hazards for Spire Missouri, its employees, and its customers; the potential for loss of life and property in its service territory; and associated exposure to litigation or administrative proceedings. If this pipeline is taken out of service, Spire Missouri may need to design, construct, and place in service new facilities or modify existing facilities in order to receive gas from alternate sources, giving rise to additional regulatory and business risks and hazards.

Spire Missouri will continue to pursue all legal and regulatory avenues to ensure access to reliable, affordable and safe delivery of energy for eastern Missouri. If Spire Missouri is unable to obtain sufficient pipeline capacity to meet its customers’ annual and seasonal natural gas demands, Spire Missouri’s financial condition and results of operations may be adversely impacted which could result in a material adverse effect on the Company’s financial condition and operating results.

The Utilities are involved in legal or administrative proceedings before various courts and governmental bodies that could adversely affect their results of operations, cash flows and financial condition.

The Utilities are involved in legal or administrative proceedings before various courts and governmental bodies with respect to general claims, rates, environmental issues, gas cost prudence reviews and other matters. For further details, see Contingencies in Note 16 to the financial statements in Item 8. Adverse decisions regarding these matters, to the extent they require the Utilities to make payments in excess of amounts provided for in their financial statements, or to the extent they are not covered by insurance, could adversely affect the Utilities’ results of operations, cash flows and financial condition.

The Utilities’ liquidity may be adversely affected by delays in recovery of their costs, due to regulation.

In the normal course of business, there is a lag between when the Utilities incur increases in certain of their costs and the time in which those costs are considered for recovery in the ratemaking process. Cash requirements for increased operating costs, increased funding levels of defined benefit pension and postretirement costs, capital expenditures, and other increases in the costs of doing business can require outlays of cash prior to the authorization of increases in rates charged to customers, as approved by the MoPSC, APSC, and MSPSC. Accordingly, the Utilities’ liquidity can be adversely impacted to the extent higher costs are not timely recovered from their customers.

The Utilities’ liquidity and, in certain circumstances, the Utilities’ results of operations may be adversely affected by the cost of purchasing natural gas during periods in which natural gas prices are rising significantly.

The tariff rate schedules of Spire Missouri, Spire Gulf and Spire Mississippi contain Purchased Gas Adjustment (PGA) clauses and Spire Alabama’s tariff rate schedule contains a Gas Supply Adjustment (GSA) rider that permit the Utilities to file for rate adjustments to recover the cost of purchased gas. Changes in the cost of purchased gas are flowed through to customers and may affect uncollectible amounts and cash flows and can therefore impact the amount of capital resources.

Currently, Spire Missouri is allowed to adjust the gas cost component of rates up to four times each year while Spire Alabama and Spire Gulf (collectively, the “Alabama Utilities”) and Spire Mississippi may adjust the gas cost component of their rates on a monthly basis. Spire Missouri must make a mandatory gas cost adjustment at the beginning of the winter, in November, and during the next twelve months may make up to three additional discretionary gas cost adjustments, so long as each of these adjustments is separated by at least two months.

The MoPSC typically approves the Spire Missouri PGA changes on an interim basis, subject to refund and the outcome of a subsequent audit and prudence review. Due to such review process, there is a risk of a disallowance of full recovery of these costs. Any material disallowance of purchased gas costs would adversely affect results of operations. The Alabama Utilities’ gas supply charges are submitted for APSC review on a monthly basis, regardless of whether there is a request for a change, so prudence review occurs on an ongoing basis. Spire Mississippi’s PGA is adjusted on a monthly basis for the most recent charges and is filed at the MSPSC on a monthly basis.

Increases in the prices the Utilities charge for gas may also adversely affect revenues because they could lead customers to reduce usage and cause some customers to have trouble paying the resulting higher bills. These higher prices may increase bad debt expenses and ultimately reduce earnings. Rapid increases in the price of purchased gas may result in an increase in short-term debt.

To lower financial exposure to commodity price fluctuations, Spire Missouri enters into contracts to hedge the forward commodity price of its natural gas supplies. As part of this strategy, Spire Missouri may use fixed-price forward physical purchase contracts, swaps, futures, and option contracts. However, Spire Missouri does not hedge the entire exposure of energy assets or positions to market price volatility, and the coverage will vary over time. Any costs, gains, or losses experienced through hedging procedures, including carrying costs, generally flow through the PGA clause, thereby limiting Spire Missouri’s exposure to earnings volatility. However, variations in the timing of collections of such gas costs under the PGA clause and the effect of cash payments for margin deposits associated with Spire Missouri’s use of natural gas derivative instruments may cause short-term cash requirements to vary. These procedures remain subject to prudence review by the MoPSC.

Other than fixed-price forward physical purchase contracts, Spire Alabama currently does not utilize risk mitigation strategies that incorporate commodity hedge instruments but has the ability to do so through its GSA. Spire Gulf and Spire Mississippi typically hedge a portion of their gas supply for up to 30 months in advance.

Environmental laws and regulations may require significant expenditures or increase operating costs.

The Utilities are subject to federal, state and local environmental laws and regulations affecting many aspects of their present and future operations. These laws and regulations require the Utilities to obtain and comply with a wide variety of environmental licenses, permits, inspections, and approvals. Failure to comply with these laws and regulations and failure to obtain any required permits and licenses may result in costs to the Utilities in the form of fines, penalties or business interruptions, which may be material. In addition, existing environmental laws and regulations could be revised or reinterpreted and/or new laws and regulations could be adopted or become applicable to the Utilities or their facilities, thereby impacting the Utilities’ cost of compliance. The discovery of presently unknown environmental conditions, including former manufactured gas plant sites, and claims against the Utilities under environmental laws and regulations may result in expenditures and liabilities, which could be material. To the extent environmental compliance costs are not fully covered by insurance or recovered in rates from customers, those costs may have an adverse effect on the Utilities’ financial condition and results of operations.

The Utilities’ business activities are concentrated in three states.

The Utilities provide natural gas distribution services to customers in Alabama, Mississippi, and Missouri. Changes in the regional economies, politics, regulations and weather patterns of these states could negatively impact the Utilities’ growth opportunities and the usage patterns and financial condition of customers and could adversely affect the Utilities’ earnings, cash flows, and financial position.

The Utilities may be adversely affected by economic conditions.

Periods of slowed economic activity generally result in decreased energy consumption, particularly by industrial and large commercial companies, a loss of existing customers, and fewer new customers especially in newly constructed buildings. As a consequence, national or regional recessions or other downturns in economic activity could adversely affect the Utilities’ revenues and cash flows or restrict their future growth. Economic conditions in the Utilities’ service territories may also adversely impact the Utilities’ ability to collect accounts receivable, resulting in an increase in bad debt expense.

Because of competition, the Utilities may not be able to retain existing customers or acquire new customers, which could have an adverse impact on their business, operating results and financial condition.

The Utilities face the risk that larger commercial or industrial customers may bypass gas distribution services by gaining distribution directly from interstate pipelines or, in the case of Spire Alabama and Spire Gulf, also from municipally or publicly owned gas distributors located adjacent to its service territory. The Utilities cannot provide any assurance that increased competition will not have a material adverse effect on their business, financial condition or results of operations.

The Utilities compete with distributors offering a broad range of services and prices, from full-service distributors to those offering delivery only. The Utilities also compete for retail customers with suppliers of alternative energy products, principally propane and electricity. If they are unable to compete effectively, the Utilities may lose existing customers and/or fail to acquire new customers, which in the aggregate could have a material adverse effect on their business, operating results and financial condition.

Changes in the wholesale costs of purchased natural gas supplies may adversely impact the Utilities’ competitive position compared with alternative energy sources.

Changes in wholesale natural gas prices compared with prices for electricity, fuel oil, coal, propane, or other energy sources may affect the Utilities’ retention of natural gas customers and may adversely impact their financial condition and results of operations.

Significantly warmer-than-normal weather conditions, the effects of climate change, legislative and regulatory initiatives in response to climate change or in support of increased energy efficiency, and other factors that influence customer usage may affect the Utilities’ sale of heating energy and adversely impact their financial position and results of operations.

The Utilities’ earnings are primarily generated by the sale of heating energy. Spire Missouri and Spire Mississippi each have a Weather Normalization Adjustment rider, Spire Alabama has a Temperature Adjustment Rider, and Spire Gulf has a Weather Impact Normalization Factor. These mechanisms, approved by the respective state regulatory body, provide better assurance of the recovery of fixed costs and margins during winter months despite variations in sales volumes due to the impacts of weather, while the annual rate designs of Alabama and Mississippi help adjust for other factors that affect customer usage. However, significantly warmer-than-normal weather conditions in the Utilities’ service areas and other factors, such as climate change, alternative energy sources and increased efficiency of gas furnaces and other appliances, may result in reduced profitability and decreased cash flows attributable to lower gas sales. Furthermore, continuation of these adjustment factors is subject to regulatory discretion.

In addition, legislative and regulatory initiatives by the federal, state and local governments addressing greenhouse gas emissions or restricting the use of natural gas could adversely affect customer demand. The promulgation of regulations of the emissions of greenhouse gases and efficiency for residential gas furnaces and other gas appliances or the potential enactment of congressional legislation addressing global warming and climate change may decrease customer usage, encourage fuel switching from gas to other energy forms, and may result in future additional compliance costs that could impact the Utilities’ financial conditions and results of operations.

Regional supply/demand fluctuations and changes in national infrastructure, as well as regulatory discretion, may adversely affect the Utilities’ ability to profit from off-system sales and capacity release.

Spire Missouri’s and Spire Alabama’s income from off-system sales and capacity release is subject to fluctuations in market conditions and changing supply and demand conditions in areas the Utilities hold pipeline capacity rights. Specific factors impacting the Utilities’ income from off-system sales and capacity release include the availability of attractively priced natural gas supply, availability of pipeline capacity, and market demand. Income from off-system sales and capacity release is shared with customers. Spire Missouri and Spire Alabama are allowed to retain 25% of the net margins achieved as a result of such off-system sales and capacity releases. The Utilities’ ability to retain such income in the future is subject to regulatory discretion.

RISKS THAT RELATE TO THE GAS MARKETING SEGMENT

Increased competition, fluctuations in natural gas commodity prices, expiration of supply and transportation arrangements, and infrastructure projects may adversely impact the future profitability of Gas Marketing.

Competition in the marketplace and fluctuations in natural gas commodity prices have a direct impact on the Gas Marketing business. Changing market conditions and prices, the narrowing of regional and seasonal price differentials and limited future price volatility may adversely impact its sales margins or affect its ability to procure gas supplies and/or to serve certain customers, which may reduce sales profitability and/or increase certain credit requirements caused by reductions in netting capability. Also, Gas Marketing profitability may be impacted by the effects of the expiration, in the normal course of business, of certain of its natural gas supply contracts if those contracts cannot be replaced and/or renewed with arrangements with similar terms and pricing. Although the FERC regulates the interstate transportation of natural gas and establishes the general terms and conditions under which Spire Marketing may use interstate gas pipeline capacity to purchase and transport natural gas, Spire Marketing must occasionally renegotiate its transportation agreements with a concentrated group of pipeline companies. Renegotiated terms of new agreements, or increases in FERC-authorized rates of existing agreements, may impact Gas Marketing’s future profitability. Profitability may also be adversely impacted if pipeline capacity or future storage capacity secured is not fully utilized.

Reduced access to credit and/or capital markets may prevent the Gas Marketing business from executing operating strategies.

The Gas Marketing segment relies on its cash flows, ability to effect net settlements with counterparties, parental guaranties, and access to Spire’s liquidity resources to satisfy its credit and working capital requirements. Spire Marketing’s ability to rely on parental guaranties is dependent upon Spire’s financial condition and credit ratings. If Spire’s credit ratings were lowered, particularly below investment grade, counterparty acceptance of parental guaranties may diminish, resulting in decreased availability of credit. Additionally, under such circumstances, certain counterparties may require Spire Marketing to provide prepayments or cash deposits, amounts of which would be dependent upon natural gas market conditions. Reduced access to credit or increased credit requirements, which may also be caused by factors such as higher overall natural gas prices, may limit Spire Marketing’s ability to enter into certain transactions. In addition, Spire Marketing has concentrations of counterparty credit risk in that a significant portion of its transactions are with (or are associated with) energy producers, utility companies, and pipelines. These concentrations of counterparties have the potential to affect the Company’s overall exposure to credit risk, either positively or negatively, in that each of these three groups may be affected similarly by changes in economic, industry, or other conditions. Spire Marketing also has concentrations of credit risk in certain individually significant counterparties. Spire Marketing closely monitors its credit exposure and, although uncollectible amounts have not been significant, increased counterparty defaults are possible and may result in financial losses and/or capital limitations.

Risk management policies, including the use of derivative instruments, may not fully protect Spire Marketing’s sales and results of operations from volatility and may result in financial losses.

In the course of its business, Spire Marketing enters into contracts to purchase and sell natural gas at fixed prices and index-based prices. Commodity price risk associated with these contracts has the potential to impact earnings and cash flows. To minimize this risk, Spire Marketing has a risk management policy that provides for daily monitoring of a number of business measures, including fixed price commitments.

Spire Marketing currently manages the commodity price risk associated with fixed-price commitments for the purchase or sale of natural gas by either closely matching the offsetting physical purchase or sale of natural gas at fixed prices or through the use of natural gas futures, options, and swap contracts traded on or cleared through the New York Mercantile Exchange, Inc. and/or the Intercontinental Exchange to lock in margins. These exchange-traded/cleared contracts may be designated as cash flow hedges of forecasted transactions. However, market conditions and regional price changes may cause ineffective portions of matched positions to result in financial losses. Additionally, to the extent that Spire Marketing’s natural gas contracts are classified as trading activities or do not otherwise qualify for the normal purchases or normal sales designation (or the designation is not elected), the contracts are recorded as derivatives at fair value each period. Accordingly, the associated gains and losses are reported directly in earnings and may cause volatility in results of operations. Gains or losses (realized and unrealized) on certain wholesale purchase and sale contracts, consisting of those classified as trading activities, are required to be presented on a net basis (instead of a gross basis) in the statements of consolidated income. Such presentation could result in volatility in the Company’s operating revenues.

As a natural gas market participant, Spire Marketing is subject to applicable FERC- and Commodity Futures Trading Commission (CFTC)-administered statutes, rules, regulations and orders, including those directed generally to prevent manipulation of or fraud involving natural gas physical transactions and financial instruments, such as futures, options and swaps. Spire Marketing could be subject to substantial penalties and fines by the FERC or CFTC, or both, for failure to comply with such rules.

Spire Marketing’s ability to meet its customers’ natural gas requirements may be impaired if contracted gas supplies and interstate pipeline services are not available or delivered in a timely manner.

Spire Marketing’s ability to deliver natural gas to its customers is contingent upon the ability of natural gas producers, other gas marketers, and interstate pipelines to fulfill delivery obligations to Spire Marketing under firm contracts. To the extent that it is unable to obtain the necessary supplies, Spire Marketing’s financial position and results of operations may be adversely impacted.

Regulatory and legislative developments pertaining to the energy industry may adversely impact Gas Marketing’s results of operations, financial condition and cash flows.

The Gas Marketing business is non-regulated, in that the rates it charges its customers are not currently established by or subject to approval by any regulatory body with jurisdiction over its business. However, it is subject to various laws and regulations affecting the energy industry. New regulatory and legislative actions may adversely impact Gas Marketing’s results of operations, financial condition, and cash flows by potentially reducing customer growth opportunities and/or increasing the costs of doing business.

Gas Marketing uses bilateral contracts and derivative instruments such as futures contracts, options and swaps to hedge or mitigate ongoing commercial risks. Most standardized swaps, under the Dodd-Frank Act, are required to be cleared through a registered clearing facility and traded on a designated exchange or swap execution facility, subject to certain exceptions. In addition, the CFTC’s rules require companies, including Spire Marketing, to maintain regulatory records of swap transactions, and to report swaps to centralized swap data repositories, among other compliance obligations. Although Spire Marketing may qualify for exceptions to certain of these CFTC rules, its derivatives counterparties are subject to capital, margin, documentation and business conduct requirements imposed as a result of the Dodd-Frank Act. These obligations may increase transaction costs and may make it more difficult for Spire Marketing to enter into hedging transactions on favorable terms or affect the number and/or creditworthiness of available swap counterparties. Spire Marketing’s inability to enter into derivatives instruments or other commercial risk hedging transactions on favorable terms, or at all, could increase operating expenses and expose it to unhedged commercial risks, including potential adverse changes in commodity prices.

In October 2020, the CFTC finalized its rules that modify and expand the applicability of speculative position limits on the amounts of certain futures contracts (including options thereon), cash-settled “lookalike” contracts for or linked to the commodities underlying the foregoing futures contracts, as well as economically equivalent swaps containing “identical material” contractual specifications, terms and conditions as the foregoing contracts. While Spire Marketing anticipates qualifying for a bona fide hedging exemption from such limits, the CFTC’s final rules and earlier adopted aggregation rules may cause Spire Marketing’s hedging strategies described above to be limited if Spire Marketing is unable to qualify for an exemption.

GENERAL RISK FACTORS

Unexpected losses may adversely affect Spire’s or its subsidiaries’ financial condition and results of operations.

As with most businesses, there are operations and business risks inherent in the activities of Spire’s subsidiaries. If, in the normal course of business, Spire or any of its subsidiaries becomes a party to litigation, such litigation could result in substantial monetary judgments, fines, or penalties or be resolved on unfavorable terms. In accordance with customary practice, Spire and its subsidiaries maintain insurance against a significant portion of, but not all, risks and losses. In addition, in the normal course of its operations, Spire and its subsidiaries may be exposed to loss from other sources, such as bad debt expense or the failure of a counterparty to meet its financial obligations. Spire and its operating companies employ many strategies to gain assurance that such risks are appropriately managed, mitigated, or insured, as appropriate. To the extent a loss is not fully covered by insurance or other risk mitigation strategies, that loss could adversely affect the Company’s and/or its subsidiaries’ financial condition and results of operations.

Increased dependence on technology may hinder Spire’s and its subsidiaries’ business operations and adversely affect their financial condition and results of operations if such technologies fail.

Spire and its subsidiaries have implemented or acquired a variety of technological tools including both Company-owned information technology and technological services provided by outside parties. These tools and systems support critical functions including Spire and its subsidiaries’ integrated planning, scheduling and dispatching of field resources, its automated meter reading system, customer care and billing, procurement and accounts payable, operational plant logistics, management reporting, and external financial reporting. The failure of these or other similarly important technologies, or the Company’s or its subsidiaries’ inability to have these technologies supported, updated, expanded, or integrated into other technologies, could hinder their business operations and, to the extent not covered by insurance, could adversely impact their financial condition and results of operations.

Although the Company and its subsidiaries have, when possible, developed alternative sources of technology and built redundancy into their computer networks and tools, there can be no assurance that these efforts to date would protect against all potential issues related to the loss of any such technologies or the Utilities’ use of such technologies.

A cyberattack may disrupt Spire’s operations or lead to a loss or misuse of confidential and proprietary information or potential liability.

The Company and its subsidiaries are subject to cybersecurity risks primarily related to breaches of security pertaining to sensitive customer, employee, and vendor information maintained by the Company, its subsidiaries, or its third-party vendors in the normal course of business, as well as breaches in the technology that manages natural gas distribution operations and other business processes. A loss of confidential or proprietary data or security breaches of technology for operations or business processes could adversely affect the Company’s and its subsidiaries’ reputation, diminish customer confidence, disrupt operations, and subject the Company and its subsidiaries to possible financial liability, any of which could have a material effect on the Company’s and its subsidiaries’ financial condition and results of operations.

The Company acknowledges that increased dependence on technology increases the Company’s exposure to cyberattack. The Company and its subsidiaries closely monitor both preventive and detective measures to manage these risks and maintain cyber risk insurance to mitigate a significant portion, but not all, of these risks and losses. To the extent that the occurrence of any of these cyber events is not fully covered by insurance, it could adversely affect the Company’s and its subsidiaries’ financial condition and results of operations.

Workforce risks may affect the Company’s financial results.

The Company and its subsidiaries are subject to various workforce risks, including, but not limited to, the risk that it will be unable to attract and retain qualified personnel; that it will be unable to effectively transfer to new personnel the knowledge and expertise of an aging workforce as those workers retire; and that it will be unable to reach collective bargaining arrangements with the unions that represent certain of its workers, which could result in work stoppages.

Resources expended to pursue or integrate business acquisitions, investments or other business arrangements may adversely affect Spire’s financial position and results of operations and return on investments made may not meet the Company’s expectations.

From time to time, Spire may seek to grow through strategic acquisitions, investments or other business arrangements. Attractive acquisition and investment opportunities may be difficult to complete on economically acceptable terms. It is possible for Spire to expend considerable resources pursuing acquisitions and investments but, for a variety of reasons, decide not to move forward. Similarly, investment opportunities may be hindered or halted by regulatory or legal actions. To the extent that acquisitions or investments are made, such transactions involve a number of risks, including but not limited to, the assumption of material liabilities, the diversion of management’s attention from daily operations, difficulties in assimilation and retention of employees, securing adequate capital to support the transaction, and regulatory approval. Uncertainties exist in assessing the value, risks, profitability, and liabilities associated with certain businesses or assets and there is a possibility that anticipated operating and financial efficiencies expected to result from an acquisition or investment do not develop. Additionally, there are no assurances that resources expended will achieve their intended result.

The failure to complete an acquisition successfully or to integrate acquisitions or investments it may undertake could have an adverse effect on the Spire’s financial condition and results of operations and the market’s perception of the Company’s execution of its strategy. To the extent Spire engages in any of the above activities together with or through one or more of its subsidiaries, including the Utilities, such subsidiaries may face the same risks.

Changes in accounting standards may adversely impact the Company’s financial condition and results of operations.

Spire and its subsidiaries are subject to changes in U.S. generally accepted accounting principles (GAAP), SEC regulations and other interpretations of financial reporting requirements for public utilities. Neither the Company nor any of its subsidiaries have any control over the impact these changes may have on their financial condition or results of operations nor the timing of such changes. The potential issues associated with rate-regulated accounting, along with other potential changes to GAAP that the U.S. Financial Accounting Standards Board (FASB) continues to consider may be significant.

Catastrophic events may adversely affect the Company’s facilities and operations.

Catastrophic events such as fires, earthquakes, explosions, floods, tornadoes, hurricanes, tropical storms, terrorist acts, acts of civil unrest, pandemic illnesses or other similar occurrences could adversely affect the Utilities’ facilities and operations, as well as those of Spire STL Pipeline and Spire Storage. The Utilities have emergency planning and training programs in place to respond to events that could cause business interruptions. However, unanticipated events or a combination of events, failure in resources needed to respond to events, or slow or inadequate response to events may have an adverse impact on the operations, financial condition, and results of operations of the Company and its subsidiaries. The availability of insurance covering catastrophic events may be limited or may result in higher deductibles, higher premiums, and more restrictive policy terms.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Spire

Refer to the information below about the principal properties of Spire Missouri and Spire Alabama. The Spire EnergySouth utilities own approximately 5,500 miles of pipelines. Other properties of Spire and its subsidiaries do not constitute a significant portion of its properties. The current leases for office space in downtown St. Louis commenced in early 2015, with terms ranging from 10 to 20 years, with multiple renewal options. For further information on leases see Note 17, Leases, of the Notes to Financial Statements in Item 8.

Spire Missouri

The principal properties of Spire Missouri consist of its gas distribution system, which includes more than 31,000 miles of main and related service lines, odorization and regulation facilities, and customer meters. The mains and service lines are located in municipal streets or alleys, public streets or highways, or on lands of others for which Spire Missouri has obtained the necessary legal rights to place and operate its facilities on such property. Spire Missouri has an underground natural gas storage facility, several operating centers, and other related properties. Substantially all of Spire Missouri’s utility plant is subject to the liens of its mortgage. All the properties of Spire Missouri are held in fee, by easement, or under lease agreements.

Spire Alabama

The properties of Spire Alabama consist primarily of its gas distribution system, which includes more than 24,000 miles of main and related service lines, odorization and regulation facilities, and customer meters. The mains and service lines are located in municipal streets or alleys, public streets or highways, or on lands of others for which Spire Alabama has obtained the necessary legal rights to place and operate its facilities on such property. Spire Alabama also has four LNG facilities, several operating centers, and other related properties. All of the properties of Spire Alabama are held in fee, by easement, or under lease agreements.

Item 3. Legal Proceedings

For a description of pending regulatory matters of Spire, see Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8. For a description of environmental and other legal matters, see Contingencies in Note 16 of the Notes to Financial Statements in Item 8.

Item 4. Mine Safety Disclosures

Not applicable.

INFORMATION ABOUT OUR EXECUTIVE OFFICERS– Listed below are executive officers as defined by the SEC for Spire. Their ages, at September 30, 2021, and positions are listed below along with their business experience during the past five years.

Name Age Position with Company (1) Appointed (2)

S. Sitherwood 61 President and Chief Executive Officer February 2012

Chairman of the Board, Spire Missouri January 2015

Chairman of the Board, Spire Alabama September 2014

S. L. Lindsey 55 Executive Vice President, Chief Operating Officer January 2020

Chief Executive Officer, Spire Missouri December 2018

President and Chief Executive Officer, Spire Missouri January 2015

Chief Executive Officer, Spire Alabama September 2014

Chief Financial Officer, Spire Missouri (until January 2020) May 2012

Chief Financial Officer, Spire Alabama (until January 2020) September 2014

Senior Vice President, Commercial Operations January 2017

President, Spire Missouri December 2018

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

Spire

Spire’s common stock trades on The New York Stock Exchange (NYSE) under the symbol “SR”. The number of holders of record as of November 12, 2021 was 2,733.

Dividends are payable on the Company’s common stock at the discretion of its Board of Directors (the “Board”). Spire, and Spire Missouri prior to the holding company’s formation in 2000, has paid common stock dividends continuously since 1946, with 2021 marking the 18th consecutive year of increasing dividends on an annualized basis. Although the Board expects to continue paying dividends on the common stock for the foreseeable future, the declaration of dividends is not guaranteed. The amount of dividends on the common stock, if any, will depend upon the Company’s financial condition, results of operations, capital requirements, and other factors.

Performance Graph

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*

The S&P 500 Utilities Index is comprised of 28 utilities heavily weighted to large capitalization (median market cap of $21.6 billion) electric utilities. Stocks of small and mid cap electric utilities and gas utility companies in general (like Spire) were recently trading lower relative to the large cap electric sector.

For disclosures related to securities authorized for issuance under equity compensation plans, see Note 3, Stock-Based Compensation, of the Notes to Financial Statements in Item 8.

During the three months ended September 30, 2021, the only repurchases of the Company’s common stock were pursuant to elections by employees to have shares of stock withheld to cover employee tax withholding obligations upon the vesting of performance-based and time-vested restricted stock and stock units. The following table provides information on those repurchases:

Spire Missouri

Spire Missouri common stock is owned by its parent, Spire Inc., and is not traded on any stock exchange.

Spire Missouri’s mortgage contains restrictions on its ability to pay cash dividends on its common stock, as described in further detail in Note 5, Shareholders’ Equity, of the Notes to Financial Statements in Item 8. As of September 30, 2021 and 2020, the amount under the mortgage’s formula that was available to pay dividends was $1,413.4 million and $1,269.4 million, respectively.

Spire Alabama

Spire Alabama common stock is owned by its parent, Spire Inc., and is not traded on any stock exchange.

Item 6. (Reserved)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Dollars in millions, except per share and per unit amounts)

INTRODUCTION

This section analyzes the financial condition and results of operations of Spire Inc. (the “Company”), Spire Missouri Inc., and Spire Alabama Inc. Spire Missouri, Spire Alabama and Spire EnergySouth are wholly owned subsidiaries of the Company. Spire Missouri, Spire Alabama and the subsidiaries of Spire EnergySouth are collectively referred to as the “Utilities.” The subsidiaries of Spire EnergySouth are Spire Gulf and Spire Mississippi. This section includes management’s view of factors that affect the respective businesses of the Company, Spire Missouri and Spire Alabama, explanations of financial results including changes in earnings and costs from the prior periods, and the effects of such factors on the Company’s, Spire Missouri’s and Spire Alabama’s overall financial condition and liquidity. Unless otherwise indicated, references to years herein are references to the fiscal years ending September 30 for the Company and its subsidiaries.

Reference is made to “Item 1A. Risk Factors” and “Forward-Looking Statements,” which describe important factors that could cause actual results to differ from expectations and non-historical information contained herein. In addition, the following discussion should be read in conjunction with the audited financial statements and accompanying notes thereto of Spire, Spire Missouri and Spire Alabama included in “Item 8. Financial Statements and Supplementary Data.”

OVERVIEW

The Company has two reportable segments: Gas Utility and Gas Marketing. Nearly all of Spire’s earnings are derived from its Gas Utility segment, which reflects the regulated activities of the Utilities. Due to the seasonal nature of the Utilities’ business and the Spire Missouri rate design, earnings of Spire and each of the Utilities are typically concentrated during the heating season of November through April each fiscal year.

Gas Utility - Spire Missouri

Spire Missouri is Missouri’s largest natural gas distribution utility and is regulated by the MoPSC. Spire Missouri serves St. Louis, Kansas City, and other areas throughout the state. Spire Missouri purchases natural gas in the wholesale market from producers and marketers and ships the gas through interstate pipelines into its own distribution facilities for sale to residential, commercial and industrial customers. Spire Missouri also transports gas through its distribution system for certain larger customers who buy their own gas on the wholesale market. Spire Missouri delivers natural gas to customers at rates and in accordance with tariffs authorized by the MoPSC. The earnings of Spire Missouri are primarily generated by the sale of heating energy.

Gas Utility - Spire Alabama

Spire Alabama is the largest natural gas distribution utility in the state of Alabama and is regulated by the APSC. Spire Alabama’s service territory is located in central and northern Alabama. Among the cities served by Spire Alabama are Birmingham, the center of the largest metropolitan area in the state, and Montgomery, the state capital. Spire Alabama purchases natural gas through interstate and intrastate suppliers and distributes the purchased gas through its distribution facilities for sale to residential, commercial, and industrial customers and other end-users of natural gas. Spire Alabama also transports gas through its distribution system for certain large commercial and industrial customers for a transportation fee. Effective December 1, 2020, for most of these transportation service customers, Spire Alabama will also purchase gas on the wholesale market for sale to the customer upon delivery to the Spire Alabama distribution system. All Spire Alabama services are provided to customers at rates and in accordance with tariffs authorized by the APSC.

Gas Utility - Spire EnergySouth

Spire Gulf and Spire Mississippi are utilities engaged in the purchase, retail distribution and sale of natural gas to approximately 100,000 customers in southern Alabama and south-central Mississippi. Spire Gulf is regulated by the APSC, and Spire Mississippi is regulated by the MSPSC.

Gas Marketing

Spire Marketing is engaged in the marketing of natural gas and related activities on a non-regulated basis and is reported in the Gas Marketing segment. Spire Marketing markets natural gas across the central and southern U.S. It holds firm transportation and storage contracts in order to effectively manage its transactions with counterparties, which primarily include producers, municipalities, electric and gas utility companies, and large commercial and industrial customers.

Other

Other components of the Company’s consolidated information include:

Business Evaluation Factors

Based on the nature of the business of the Company and its subsidiaries, as well as current economic conditions, management focuses on several key variables in evaluating the financial condition and results of operations and managing the business.

For the Gas Utility segment, these include:

• the effect of natural gas price volatility on the business; and

In the Gas Marketing segment, these include:

• the risks of competition;

• fluctuations in natural gas prices;

• the changing flow and availability of natural gas;

• new national infrastructure projects;

• credit and/or capital market access;

• counterparty risks; and

• the effect of natural gas price volatility on the business.

Further information regarding how management seeks to manage these key variables is discussed below.

Gas Utility

The Utilities seek to provide reliable natural gas services at a reasonable cost, while maintaining and building secure and dependable infrastructures. The Utilities’ strategies focus on improving both performance and the ability to recover their authorized distribution costs and rates of return. The Utilities’ distribution costs are the essential, primarily fixed, expenditures they must incur to operate and maintain more than 60,000 miles of mains and services comprising their natural gas distribution systems and related storage facilities.

The Utilities’ distribution costs include wages and employee benefit costs, depreciation and maintenance expenses, and other regulated utility operating expenses, excluding natural and propane gas expense. Distribution costs are considered in the rate-making process, and recovery of these types of costs is included in revenues generated through the Utilities’ tariff rates. Spire Missouri’s tariff rates are approved by the MoPSC, whereas Spire Alabama’s tariff rates are approved by the APSC. Spire Gulf and Spire Mississippi have tariff rates that are approved by the APSC and MSPSC, respectively.

Spire Missouri and Spire Alabama also have off-system sales and capacity release income streams that are regulated by tariff but remain subject to fluctuations in market conditions. Some of the factors impacting the level of off-system sales include the availability and cost of Spire’s natural gas supply, the weather in its service areas and the weather in other markets. When Spire’s service areas experience warmer-than-normal weather while other markets experience colder weather or supply constraints, some of Spire’s natural gas supply is available for sale to third parties not on Spire’s system.

The Utilities work actively to reduce the impact of wholesale natural gas price volatility on their costs by strategically structuring their natural gas supply portfolios to increase their gas supply availability and pricing alternatives. They may also use derivative instruments to hedge against significant changes in the commodity price of natural gas. Nevertheless, the overall cost of purchased gas remains subject to fluctuations in market conditions. The Purchased Gas Adjustment (PGA) clause of Spire Missouri, Spire Gulf and Spire Mississippi and the Gas Supply Adjustment (GSA) rider of Spire Alabama allow the Utilities to flow through to customers, subject to prudence review by the public service commissions, the cost of purchased gas supplies, including costs, cost reductions and related carrying costs associated with the use of derivative instruments to mitigate volatility in the cost of natural gas. As of September 30, 2021, Spire Missouri had active derivative positions, but Spire Alabama has had no gas supply derivative instrument activity since 2010. Except in certain situations discussed under the caption “—The Utilities’ ability to meet their customers’ natural gas requirements may be impaired if contracted gas supplies, interstate pipeline and/or storage services are not available or delivered in a timely manner” under Item 1A, Risk Factors, and in Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8, the Utilities believe they will continue to be able to obtain sufficient gas supply. The price of natural gas supplies and other economic conditions may affect sales volumes, due to the conservation efforts of customers, and cash flows associated with the timing of collection of gas costs and related accounts receivable from customers.

The Utilities rely on short-term credit and long-term capital markets, as well as cash flows from operations, to satisfy their seasonal cash requirements and fund their capital expenditures. The Utilities access the commercial paper market through a program administered by the holding company, which then loans borrowed funds to the Utilities. The Utilities directly access the long-term bond market. Access to debt markets is dependent on current conditions in the credit and capital markets. Management focuses on maintaining a strong balance sheet and believes the Utilities currently have adequate access to credit and capital markets and will have sufficient capital resources to meet their foreseeable obligations. See the “Capital Resources” section for additional information.

Gas Marketing

Spire Marketing is engaged in the marketing of natural gas and related services throughout the United States, which includes customers within and outside of the Utilities’ service areas. Spire Marketing utilizes its natural gas supply agreements, transportation agreements, park and loan agreements, storage agreements and other executory contracts to support a variety of services to its customers at competitive prices. It closely monitors and manages the natural gas commodity price and volatility risks associated with providing such services to its customers through the use of a variety of risk management activities, including the use of exchange-traded/cleared derivative instruments and other contractual arrangements. Spire Marketing is committed to managing commodity price risk while it seeks to expand the services that it now provides. Nevertheless, income from the Gas Marketing operations is subject to more fluctuations in market conditions than the Utilities’ operations.

The Gas Marketing business is directly impacted by the effects of competition in the marketplace, the impacts of new infrastructure, surplus natural gas supplies, and the addition of new demand from exports, power generation and industrial load. Spire Marketing’s management expects a growing need for marketing services across the country as customers manage seasonal variability and marketplace volatility.

In addition to its operating cash flows, Spire Marketing relies on Spire’s parental guaranties to secure its purchase and sales obligations of natural gas, and it also has access to Spire’s liquidity resources. A large portion of Spire Marketing’s receivables are from customers in the energy industry. It also enters into netting arrangements with many of its energy counterparties to reduce overall credit and collateral exposure. On a net dollar exposure basis, the majority of Spire Marketing’s customers are utilities or utility affiliates. Although Spire Marketing’s uncollectible amounts are closely monitored and have not been significant, increases in uncollectible amounts from customers are possible and could adversely affect Spire Marketing’s liquidity and results of operations.

Spire Marketing carefully monitors the creditworthiness of counterparties to its transactions. It performs in-house credit reviews of potential customers and may require credit assurances such as prepayments, letters of credit or parental guaranties when appropriate. Credit limits for customers are established and monitored.

Spire Marketing cannot be certain that all of its wholesale purchase and sale transactions will settle physically. As such, these transactions are designated as trading activities for financial reporting purposes, due to their settlement characteristics. Results of operations from trading activities are reported on a net basis in natural gas expenses.

In the course of its business, Spire Marketing enters into commitments associated with the purchase or sale of natural gas. In accordance with U.S. GAAP, some of its purchase and sale transactions are not recognized in earnings until the natural gas is physically delivered, while other energy-related transactions, including those designated as trading activities, are required to be accounted for as derivatives with the changes in their fair value (representing unrealized gains or losses) recorded in earnings in periods prior to settlement. Because related transactions of a purchase and sale strategy may be accounted for differently, there may be timing differences in the recognition of earnings under GAAP and economic earnings realized upon settlement. The Company reports both GAAP and net economic earnings (non-GAAP), as discussed in the section “Non-GAAP Measures”.

COVID-19

The outbreak of COVID-19 has adversely impacted economic activity and conditions worldwide. We are continuing to assess the developments involving our workforce, customers and suppliers, as well as the response of federal and state authorities, our regulators and other business and community leaders. The Company has implemented what we believe to be appropriate procedures and protocols to ensure the safety of our customers, suppliers and employees. These actions include activating incident management procedures, work-from-home for our office-based employees, limiting direct contact with our customers, and suspending disconnections and late payment fees for our utility customers for several months in 2020.

We have experienced impacts on our results of operations from COVID-19, including:

Spire Missouri received an Accounting Authority Order from the MoPSC to defer certain costs incurred through March 31, 2021, and has recorded a related regulatory asset of $6.2 as of September 30, 2021. Even with the cost increases and lost revenues, Spire Alabama exceeded the allowed return and recorded a Rate Stabilization and Equalization giveback in September 2020 and in January 2021, so there was no bottom-line impact of these COVID-19 effects.

An extended slowdown of the United States' economy, changes in commodity costs and/or significant changes in policy and regulation could result in lower demand for natural gas as well as negatively impact the ability of our customers, contractors, suppliers and other business partners to remain in business or return to operating health. These could have a material adverse effect on our results of operations, financial condition, liquidity and prospects.

The Company is participating in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provisions allowing for a payroll tax deferral which does not have an impact on our results of operations but defers the payment of the Company’s portion of certain payroll taxes until later in fiscal 2021 and 2022. Although the Company does not currently expect to seek relief under any other CARES Act provisions, we will continue to monitor all pending and future federal, state and local efforts related to the COVID-19 health crisis and assess our need and, as applicable, eligibility for any such relief.

NON-GAAP MEASURES

Net income, earnings per share and operating income reported by Spire, Spire Missouri and Spire Alabama are determined in accordance with GAAP. Spire, Spire Missouri and Spire Alabama also provide the non-GAAP financial measures of net economic earnings, net economic earnings per share and contribution margin. Management and the Board of Directors use non-GAAP financial measures, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting, to determine incentive compensation and to evaluate financial performance. These non-GAAP operating metrics should not be considered as alternatives to, or more meaningful than, the related GAAP measures. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are provided on the following pages.

Net Economic Earnings and Net Economic Earnings Per Share

Net economic earnings and net economic earnings per share are non-GAAP measures that exclude from net income the impacts of fair value accounting and timing adjustments associated with energy-related transactions, the impacts of acquisition, divestiture and restructuring activities, and the largely non-cash impacts of impairments and other non-recurring or unusual items such as certain regulatory, legislative or GAAP standard-setting actions. In addition, net economic earnings per share would exclude the impact, in the fiscal year of issuance, of any shares issued to finance acquisitions that have yet to be included in net economic earnings.

The fair value and timing adjustments are made in instances where the accounting treatment differs from what management considers the economic substance of the underlying transaction, including the following:

These adjustments eliminate the impact of timing differences and the impact of current changes in the fair value of financial and physical transactions prior to their completion and settlement. Unrealized gains or losses are recorded in each period until being replaced with the actual gains or losses realized when the associated physical transactions occur. Management believes that excluding the earnings volatility caused by recognizing changes in fair value prior to settlement and other timing differences associated with related purchase and sale transactions provides a useful representation of the economic effects of only the actual settled transactions and their effects on results of operations. While management uses these non-GAAP measures to evaluate all of its businesses, the net effect of these fair value and timing adjustments on the Utilities’ earnings is minimal because gains or losses on their natural gas derivative instruments are deferred pursuant to state regulation.

Contribution Margin

In addition to operating revenues and operating expenses, management also uses the non-GAAP measure of contribution margin when evaluating results of operations. Contribution margin is defined as operating revenues less natural gas costs and gross receipts tax expense. The Utilities pass to their customers (subject to prudence review by, as applicable, the MoPSC, APSC or MSPSC) increases and decreases in the wholesale cost of natural gas in accordance with their PGA clauses or GSA riders. The volatility of the wholesale natural gas market results in fluctuations from period to period in the recorded levels of, among other items, revenues and natural gas cost expense. Nevertheless, increases and decreases in the cost of gas associated with system gas sales volumes and gross receipts tax expense (which are calculated as a percentage of revenues), with the same amount (excluding immaterial timing differences) included in revenues, have no direct effect on operating income. Therefore, management believes that contribution margin is a useful supplemental measure, along with the remaining operating expenses, for assessing the Company’s and the Utilities’ performance.

EARNINGS

This section contains discussion and analysis of the results for the year ended September 30, 2021 compared to the results for the year ended September 30, 2020. The discussion and analysis of the results for the year ended September 30, 2020 compared to the results of the year ended September 30, 2019 can be found in Part II, Item 7 of Spire Inc.’s fiscal 2020 Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (SEC) on November 18, 2020.

Spire

Net Income (Loss) and Net Economic Earnings (Loss)

The following tables reconcile the Company’s net economic earnings to the most comparable GAAP number, net income.

Gas Utility Gas Marketing Other Consol- idated Per Diluted Share**

Adjustments, pre-tax:

Missouri regulatory adjustments (9.0 ) — — (9.0 ) (0.17 )

Fair value and timing adjustments 0.3 3.0 — 3.3 0.06

Acquisition, divestiture and restructuring activities — — (1.3 ) (1.3 ) (0.02 )

Income tax effect of adjustments* 2.1 (0.8 ) 0.3 1.6 0.03

Adjustments, pre-tax:

Fair value and timing adjustments (0.3 ) 2.8 — 2.5 0.05

Income tax effect of adjustments* 0.1 (0.7 ) (31.3 ) (31.9 ) (0.62 )

Adjustments, pre-tax:

Fair value and timing adjustments — 1.2 — 1.2 0.03

Acquisition, divestiture and restructuring activities — — 0.4 0.4 0.01

Income tax effect of adjustments* (2.9 ) (0.3 ) (0.1 ) (3.3 ) (0.06 )

Consolidated

Spire’s net income was $271.7 in fiscal 2021, compared with $88.6 in fiscal 2020. Basic and diluted earnings per share were $4.97 and $4.96, respectively, for fiscal 2021 compared with basic and diluted earnings per share of $1.44 for fiscal 2020.

The prior year amount reflects the impact of the third quarter 2020 impairment charge of $148.6 ($117.3 after tax). Excluding this charge, net income increased $65.8, driven by increases of $37.8 and $23.6 in Gas Marketing and Gas Utility, respectively, combined with a $4.4 improvement in results from Other.

Net economic earnings were $266.3 ($4.86 per diluted share) for the twelve months ended September 30, 2021, compared to $207.8 ($3.76 per diluted share) for the same period last year, reflecting earnings improvements in both the Gas Marketing and Gas Utility segments, as well as Other. These variances are discussed in greater detail below.

Gas Utility

Gas Utility net income increased by $23.6 from the prior year. The Gas Utility segment is higher due principally to a $24.1 increase in contribution margin resulting from higher off-system sales in the second quarter of the current year. This increase was a result of managing our gas inventory levels to serve our customers during the cold weather events in February 2021 and allowed Spire Missouri to capitalize on gas flow disruptions resulting in increased off-system sales which also benefited our customers. The current year also benefited from a $15.9 increase in Spire Missouri ISRS revenues (including the impact of a prior-year provision of $2.2 related to the ISRS ruling settled in the year), $9.8 in net favorable rate adjustments under the RSE mechanism at Spire Alabama, the Missouri Supreme Court ruling that partially reversed 2018 rate case pension cost disallowances totaling $9.0 ($6.8 after tax), and $6.3 higher contribution margin due to the impacts of colder weather in the second quarter of the current year. These positive impacts were partially offset by higher run-rate operating costs and a $14.7 increase in depreciation and amortization reflecting increased capital investment and a disallowed meter cost recovery in Spire Missouri.

Net economic earnings in the current year were $230.6, an increase of $17.2 over the same period in the prior year. The increase was primarily driven by higher contribution margin that was only partly offset by an increase in depreciation and amortization and higher run-rate operating expenses, after reclassification of certain postretirement benefit costs to other income and expense (no impact on net income) (“Nonservice Cost Transfer”) and the Missouri Supreme Court ruling that partially reversed 2018 rate case pension cost disallowances. These impacts are described in further detail below.

Gas Marketing

The Gas Marketing segment reported net income totaling $44.8 for the twelve months ended September 30, 2021, versus net income of $7.0 during the same period last year. Net economic earnings for the twelve months ended September 30, 2021, was $47.0, an increase of $37.9 from the same period last year. Both net income and net economic earnings reflect strong operating results in the current year, driven by storage positions established last year and the resulting optimization of market conditions in the second fiscal quarter due to extreme weather as a result of Winter Storm Uri.

Other

The Company’s other non-utility activities generated a net loss of $10.3 for fiscal 2021, compared to a net loss of $132.0 for the same period last year. Fiscal 2020 reflects the $117.3 after-tax impairment charge previously mentioned. Net economic loss was $11.3 for fiscal 2021, an improvement of $3.4 compared to fiscal 2020. The improvement was driven primarily by a smaller loss from Spire Storage.

Operating Revenues and Operating Expenses

Reconciliations of contribution margin to the most directly comparable GAAP measure are shown below.

Gas Utility Gas Marketing Other Eliminations Consolidated

Less: Gross receipts tax expense (93.9 ) (0.1 ) — — (94.0 )

Gross receipts tax expense 93.9 0.1 — — 94.0

Gas Utility Gas Marketing Other Eliminations Consolidated

Less: Gross receipts tax expense (91.1 ) (0.4 ) — — (91.5 )

Gross receipts tax expense 91.1 0.4 — — 91.5

Gas Utility Gas Marketing Other Eliminations Consolidated

Less: Gross receipts tax expense (99.1 ) (0.2 ) — — (99.3 )

Gross receipts tax expense 99.1 0.2 — — 99.3

Consolidated

Spire’s operating revenues increased by $380.1, driven by higher revenues across all segments, net of intercompany eliminations. Both the Gas Utility and Gas Marketing segments saw their favorable results driven principally by the extreme weather experienced as a result of Winter Storm Uri in February of the current year. Specifically, the Gas Utility increase was $367.3, Spire Marketing increased $8.6, while Other (net of intercompany eliminations) increased $4.2, reflecting higher combined revenues from both Spire Storage and Spire STL Pipeline (which entered service in late calendar 2019).

Spire’s contribution margin increased $127.4 compared with the same twelve-month period last year, with all segments reporting increases. The Gas Utility contribution margin increased $63.0, primarily driven by the $51.2 increase from Spire Missouri and the $10.8 increase at Spire Alabama. The $55.2increase in Gas Marketing reflects very favorable weather and market conditions in the current year second quarter. Higher contribution margins at Spire STL Pipeline are consistent with its in-service date early in fiscal 2020, and Spire Storage’s improvement reflects higher utilization of its storage capacity.

Depreciation and amortization expenses were higher in the Gas Utility segment, due principally to higher capital investments. Gas Utility O&M expenses were $0.9 higher in the current year, largely due to the Missouri Supreme Court ruling that partially reversed 2018 rate case pension cost disallowances totaling $9.0 offset by Nonservice Cost Transfer of $2.1. These fluctuations are described in more detail below.

Gas Utility

Operating Revenues – Gas Utility operating revenues for fiscal 2021 increased $367.3 compared to fiscal 2020, and was attributable to the following factors:

Spire Missouri – Higher PGA gas cost recoveries $ 183.2

Spire Missouri and Spire Alabama – Off-system sales and capacity release 113.0

Spire Missouri – Higher ISRS (including ISRS rulings prior year true-up) 15.9

Spire Alabama – RSE: net adjustments 9.4

Spire EnergySouth growth 5.3

All other factors 8.6

Total Variation $ 367.3

As shown in the table above, the increase in revenues was driven primarily by a $183.2 increase in Spire Missouri gas costs (including $195.8 of cover charges and OFO penalties to certain wholesale customers), a $113.0 increase in off-system sales, and higher weather/volumetric impacts of $31.9. The segment also benefited from a $15.9 increase of Spire Missouri ISRS, a $9.4 increase due to Spire Alabama’s rate adjustments under the RSE mechanism, and $5.3 growth from Spire EnergySouth.

Contribution Margin – Gas Utility contribution margin was $1,063.7 for fiscal 2021, a $63.0 increase over the same period last year. The increase was attributable to the following factors:

Spire Missouri and Spire Alabama – Off-system sales and capacity release $ 24.1

Spire Missouri – Higher ISRS (including ISRS rulings prior year true-up) 15.9

Spire Alabama – RSE: net adjustments 9.8

Spire Missouri and Spire Alabama – Volumetric usage 6.3

All other factors 6.9

Total Variation $ 63.0

The contribution margin increase resulted primarily from higher off-system sales, Missouri ISRS (net of ISRS ruling provisions), Spire Alabama rate adjustments under the RSE mechanism, and higher volumetric margins. The higher off-system sales and volumetric impacts were primarily the result of the extreme weather conditions from Winter Storm Uri in February of the current year.

Operating Expenses– O&M expenses in fiscal 2021 increased by $0.9 million compared to the prior-year period. This variance reflects the Nonservice Cost Transfer of $2.1 and the $9.0 decrease attributable to the Missouri Supreme Court ruling that partially reversed 2018 rate case pension cost disallowances. Excluding these impacts, O&M expenses increased by $7.8 due primarily to higher employee-related costs and $3.7 due to one-time cost adjustments relating to stipulations settled in the current Spire Missouri rate case. Depreciation and amortization expenses for the twelve months ended September 30, 2021 increased $14.7 from the same period last year, principally the result of continued infrastructure capital spending, with $11.2 of the increase attributable to Spire Missouri and $2.8 attributable to Spire Alabama. Included in the Spire Missouri increase is a $3.4 charge pertaining to meter cost recovery that was disallowed by the MoPSC.

Gas Marketing

Operating Revenues –Gas Marketing operating revenue for the year ended September 30, 2021 increased $8.6 from the prior year. The variance in revenues reflects higher volumes and pricing, combined with the monetizing of incremental storage capacity.

Contribution Margin – Gas Marketing contribution margin during the twelve months ended September 30, 2021, increased $55.2 from the same period last year, driven principally by strong second quarter results in the current year. During the second quarter, the February 2021 cold weather events drove significantly higher regional basis differentials and volumes.

Spire Marketing, along with many natural gas industry participants, faced the unprecedented effects of Winter Storm Uri. Numerous natural gas producers and midstream operators were unable to deliver natural gas to market as they experienced wellhead freeze-offs, power outages and equipment failure from the extreme weather. These events resulted in supply curtailments, and related notices of force majeure to excuse performance, from and to certain counterparties. Further, these events have made Spire Marketing subject to various commercial disputes (including regarding force majeure) and a regulatory dispute regarding tariff obligations as a shipper on an interstate pipeline. As such, Spire Marketing recorded an estimate of potential liabilities for damages based on the facts and circumstances surrounding each counterparty transaction as of March 31, 2021. During the subsequent two quarters, a number of these disputes have been resolved and/or exposures clarified based on further communication with the counterparties. It is expected that the estimate will change as new facts emerge or further settlements are reached, and it is possible that final settlement amounts may materially differ from the current estimate.

Other

Other operating revenue increased $9.9 for the year ended September 30, 2021 compared to 2020, driven principally by Spire Storage and Spire STL Pipeline that was placed in service in November of 2019. Other operating expenses were $2.0 higher than the prior year reflecting higher activity levels at Spire Storage and Spire STL Pipeline FERC Certificate defense costs.

Interest Charges

Consolidated interest charges during the year ended September 30, 2021 increased $1.1 versus the prior year. The increase was primarily driven by net long-term debt issuances in the current year and the prior year benefiting from Allowance for Funds Used in Construction (AFUDC) non-cash income at Spire STL Pipeline. The current year also benefited from lower interest rates that were only slightly offset by higher levels of average short-term borrowings. Short-term rates averaged 0.4% in the current year versus 1.7% for the prior year and, for the years ended September 30, 2021 and 2020, average short-term borrowings were $610.5 and $576.2, respectively.

Income Taxes

Consolidated income tax expense during the year ended September 30, 2021 was $68.5, compared to $12.4 for fiscal 2020. This increase of $56.1 is primarily the result of the $31.3 tax benefit relating to the impairment loss recorded in the third quarter of fiscal 2020, combined with higher pre-tax book income this year and a higher effective rate due to mix of earnings among entities in the current year.

Spire Missouri

Summary Operating Results

Year ended September 30,

Operation and maintenance expenses 261.1 251.0

Depreciation and amortization 129.2 118.0

Taxes, other than income taxes 110.9 103.2

Less: Gross receipts tax expense (64.3 ) (63.5 )

Contribution Margin [Non-GAAP] 665.5 614.3

Gross receipts tax expense 64.3 63.5

Operating revenues during the twelve months ended September 30, 2021, increased $323.0 from the same period last year primarily due to a $183.2 increase attributable to higher gas costs (including $195.8 of cover charges and OFO penalties to certain wholesale customers), a $110.6 increase due to higher off-system sales, $15.9 higher ISRS, and a $6.7 increase in volumetric impacts (net of weather mitigation) relating to colder weather conditions primarily in the second quarter of the current year.

Contribution margin increased $51.2 versus the same period in the prior year. The variance was attributable to a $22.9 increase in off-system sales and $6.5 higher volumetric margins (both principally due to the extreme weather in February of the current year), as well as the previously mentioned $15.9 increase in ISRS, and $1.3 related to customer growth.

O&M expenses during the twelve months ended September 30, 2021, increased $10.1 from the same period last year. Excluding the Nonservice Cost Transfer of $5.0 and the Missouri Supreme Court ruling totaling $9.0 discussed above, O&M was higher by $14.1, reflecting higher employee-related expenses and $3.7 relating to cost adjustments relating to stipulations settled in the current Spire Missouri rate case. Depreciation increased by $11.2 as a result of continuing capital investment and a $3.4 charge pertaining to disallowed meter cost recovery by the MoPSC.

Spire Missouri’s other expense increased $0.2 versus the comparable prior-year period. Removing the impact of the Nonservice Cost Transfer of $5.0, other expense increased $5.2, primarily due to higher charitable contributions in the current year only being partly offset by increases in the value of investments associated with non-qualified employee benefit plans reflecting market conditions.

Net income for the twelve months ended September 30, 2021, increased $13.9 versus the same period in the prior year.

Temperatures in Spire Missouri’s service areas during the twelve months ended September 30, 2021, were 2.1% warmer than the same period last year and 4.0% warmer than normal. Despite the slightly warmer overall period temperatures, the Spire Missouri total system therms sold and transported were 1,700.2 million for the twelve months ended September 30, 2021, compared with 1,684.0 million for the same period last year. The increase was entirely due to the February cold weather events in the second quarter of the current year. Total off-system therms sold and transported were 22.4 million for the twelve months ended September 30, 2021, compared with 30.6 million for the same period last year. The 29.7% year-over-year increase in the second quarter of this year resulting from the February cold weather events was more than offset by lower therms transported in all remaining quarters of the current year.

Spire Alabama

Summary Operating Results

Year ended September 30,

Operation and maintenance expenses 132.5 139.1

Depreciation and amortization 62.1 59.3

Taxes, other than income taxes 37.1 34.8

Less: Gross receipts tax expense (25.1 ) (23.3 )

Contribution Margin [Non-GAAP] 323.6 312.8

Gross receipts tax expense 25.1 23.3

Operating revenues for the twelve months ended September 30, 2021, increased $39.0 from the same period last year. The change was principally driven by a $25.2 increase in weather and usage impacts (net of weather mitigation) and $9.4 higher net rate adjustments under the RSE mechanism. Off-system sales in the current year contributed $2.4 to revenue growth, as off-system sales only commenced in the fourth quarter of fiscal 2020.

Contribution margin increased $10.8, which was principally a result of the rate adjustments under the RSE mechanism of $9.8 and $1.2 related to higher off-system sales. O&M expenses for the twelve months ended September 30, 2021, decreased $6.6 from the same period last year. Excluding the impact of the Nonservice Cost Transfer of $2.4, the decrease of $4.2 was primarily driven by lower operations and employee-related costs.

Net income for the twelve months ended September 30, 2021, increased $8.1 versus the same period in the prior year.

Temperatures in Spire Alabama’s service area during the twelve months ended September 30, 2021, were 12.0% colder than the same period last year but 6.4% warmer than normal. Spire Alabama’s total system therms sold and transported were 1,029.6 million for the twelve months September 30, 2021, compared with 1,034.8 million for the same period last year. Off-system sales, and related therms sold totaled 48.4 million, versus 54.3 million in the prior year.

LIQUIDITY AND CAPITAL RESOURCES

Recent Cash Flows

Net cash provided by operating activities $ 249.8 $ 469.9 $ 450.9

Net cash used in investing activities (622.0 ) (631.6 ) (838.3 )

Net cash provided by operating activities decreased $220.1 from 2020 to 2021 and increased $19.0 from 2019 to 2020. Principally, these changes were related to regulatory timing and fluctuations in working capital items, as discussed below in the Future Cash Requirements section. More specifically, when looking at the change from 2020 to 2021, the large increase in accounts receivable was due to the February 2021 cold weather event and the related delayed collections. In addition, this significant cold weather event impacted other areas, including increased inventories to ensure supply and increased accounts payable as related gas costs had risen. For more information, see the discussion of Spire Missouri’s Operational Flow Order in Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8.

In fiscal 2021, the Company used $9.6 less cash in investing activities than in fiscal 2020, primarily driven by a $13.6 decrease in capital expenditures. The primary driver of the lower capital expenditures was a $53.3 decline related to Spire STL Pipeline and Spire Storage, largely offset by a $42.6 capital spending increase at Gas Utility, where the focus remained on infrastructure upgrades and new business development.

In fiscal 2020, the Company used $206.7 less cash in investing activities than in fiscal 2019. The major driver of the reduction was lower capital expenditures, down $184.9 versus the prior year. TheSpire STL Pipeline, which was placed into service in the first fiscal quarter of 2020, accounted for $97.4 of the reduction, and expenditures at Spire Storage were $59.6 below prior year levels. Capital expenditures at the Utilities were down $29.1.

Net cash provided by financing activities was up $219.4 when comparing fiscal 2021 to fiscal 2020. Current year long-term debt issuances were $629.1, or $119.1 higher than in fiscal 2020, and the combination of lower net repayments of both long-term and short-term debt in fiscal 2021 contributed $150.8 to the year-over-year increase. Partially offsetting these increases was a $40.1 decline in cash generated from common stock issuances and $5.2 higher common stock dividend payments.

Net cash provided by financing activities declined $211.8 in fiscal 2020 versus fiscal 2019, the major driver being the prior year issuance of preferred stock that generated $242.0 in proceeds. Year-over-year net debt issuance increased by $32.3, and the issuance of common stock generated $21.6 more cash in fiscal 2020 than in fiscal 2019. These increases in cash were only partly offset by a $20.4 increase in common and preferred stock dividends in fiscal 2020 versus fiscal 2019.

Future Cash Requirements

The Company’s short-term borrowing requirements typically peak during colder months when the Utilities borrow money to cover the lag between when they purchase natural gas and when their customers pay for that gas. Changes in the wholesale cost of natural gas (including cash payments for margin deposits associated with Spire Missouri’s use of natural gas derivative instruments), variations in the timing of collections of gas cost under the Utilities’ PGA clauses and GSA riders, the seasonality of accounts receivable balances, and the utilization of storage gas inventories cause short-term cash requirements to vary during the year and from year to year, and may cause significant variations in the Company’s cash provided by or used in operating activities.

Spire’s material cash requirements as of September 30, 2021, are related to capital expenditures, principal and interest payments on long-term debt, natural gas purchase obligations, and dividends.

Total Company capital expenditures are planned to be $570 for fiscal 2022, though Spire had purchase commitments for only a small portion of these as of September 30, 2021.

As detailed in Note 6, Long-Term Debt, of the Notes to Financial Statements in Item 8, $55.8 of the total $3,014.6 principal amount is due in fiscal 2022. Using each long-term debt instrument’s stated maturity and fixed rates or variable rates as of September 30, 2021, interest payments are projected to total $1,645.7, of which $108.3 is due in fiscal 2022.

Spire’s natural gas purchase obligations totaled $1,889.0, including $759.1 for fiscal 2022, representing the minimum payments required under existing natural gas transportation and storage contracts and natural gas supply agreements. The amounts reflect fixed obligations as well as obligations to purchase natural gas at future market prices, calculated using forward market prices as of September 30, 2021. Each of the Utilities generally recovers costs related to its purchases, transportation and storage of natural gas through the operation of its PGA clause or GSA rider, subject to prudence review by the appropriate regional public service commission. Additional contractual commitments are generally entered into prior to or during the heating season.

Spire dividends declared and payable as of September 30, 2021, totaled $39.4, while annualized dividends based on the regular quarterly amounts declared on November 11, 2021, are estimated at $156.

Source of Funds

It is management’s view that the Company, Spire Missouri and Spire Alabama have adequate access to capital markets and will have sufficient capital resources, both internal and external, to meet anticipated requirements.

The Company’s, Spire Missouri’s and Spire Alabama’s access to capital markets, including the commercial paper market, and their respective financing costs, may depend on the credit rating of the entity that is accessing the capital markets. Their debt is rated by two rating agencies: Standard & Poor’s Corporation (“S&P”) and Moody’s Investors Service (“Moody’s”). As of September 30, 2021, the debt ratings of the Company, Spire Missouri and Spire Alabama, shown in the following table, remain at investment grade with a stable outlook.

S&P Moody’s

Spire Inc. senior unsecured long-term debt BBB+ Baa2

Spire Inc. preferred stock BBB Ba1

Spire Inc. short-term debt A-2 P-2

Spire Missouri senior secured long-term debt A A1

Spire Alabama senior unsecured long-term debt A- A2

Cash and Cash Equivalents

Bank deposits were used to support working capital needs of the business. Spire had no temporary cash investments as of September 30, 2021 or 2020.

Short-term Debt

The Utilities’ short-term borrowing requirements typically peak during the colder months, while most of the Company’s other needs are less seasonal. These short-term cash requirements can be met through the sale of commercial paper or the use of a revolving credit facility. For information about these resources, see Note 7, Notes Payable and Credit Agreements, of the Notes to Financial Statements in Item 8 and “Interest Rate Risk” under “Market Risk” below.

Long-term Debt and Equity

At September 30, 2021, including the current portion but excluding unamortized discounts and debt issuance costs, Spire had long-term debt totaling $3,014.6, of which $1,348.0 was issued by Spire Missouri, $625.0 was issued by Spire Alabama, and $211.6 was issued by other subsidiaries. For more information about long-term debt, see Note 6 of the Notes to Financial Statements in Item 8 and “Interest Rate Risk” under “Market Risk” below.

On December 15, 2020, Spire Alabama issued and sold to certain institutional investors in a private placement $150.0 of 2.04% Series 2020 Senior Notes due December 15, 2030. Interest is payable semi-annually. The notes are senior unsecured obligations of Spire Alabama and rank equal in right to payment with all its other senior unsecured indebtedness. Spire Alabama used the proceeds to repay short-term debt.

In February 2021, Spire issued 3.5 million equity units for an aggregate stated amount of $175.0, resulting in net proceeds of $169.3 after underwriting fees and other issuance costs. See Note 5, Shareholders’ Equity, of the Notes to Financial Statements in Item 8 for additional discussion of these equity units.

On May 20, 2021, pursuant to its registration statement on Form S-3 filed with the SEC, Spire Missouri issued $305.0 of 3.30% first mortgage bonds due June 1, 2051, secured equally with all its other first mortgage bonds. Interest is payable semi-annually. Spire Missouri used the proceeds to redeem $55.0 principal amount of 3.00% first mortgage bonds due March 15, 2023, and to repay short-term debt.

Spire Missouri was authorized by the MoPSC to issue registered securities (first mortgage bonds, unsecured debt and preferred stock), common stock, and private placement debt in an aggregate amount of up to $660.0 for financings placed any time before September 30, 2023. As of September 30, 2021, $355.0 remained available under this authorization. Spire Alabama has no standing authority to issue long-term debt and must petition the APSC for each planned issuance.

Spire has a shelf registration statement on Form S-3 on file with the SEC for the issuance and sale of up to 250,000 shares of common stock under its Dividend Reinvestment and Direct Stock Purchase Plan. There were 182,689 and 177,295 shares at September 30, 2021 and November 12, 2021, respectively, remaining available for issuance under this Form S-3. Spire and Spire Missouri also have a universal shelf registration statement on Form S-3 on file with the SEC for the issuance of various equity and debt securities, which expires on May 14, 2022.

On February 6, 2019, Spire entered into an “at-the-market” equity distribution agreement, supplemented as of May 14, 2019, pursuant to which the Company may offer and sell, from time to time, shares of its common stock having an aggregate offering price of up to $150.0. Those shares are issued pursuant to Spire’s universal shelf registration statement referenced above and a prospectus supplement dated May 14, 2019. Under this program, a total of 626,249 shares were issued in fiscal 2019 and 2020, and as of September 30, 2021, Spire can still issue shares having an aggregate offering price of up to $102.2.

Including the current portion of long-term debt, the Company’s long-term consolidated capitalization consisted of 47% equity at September 30, 2021 and 50% equity at September 30, 2020. For more information about equity, see Note 5 of the Notes to Financial Statements in Item 8.

ENVIRONMENTAL MATTERS

The Utilities and other Spire subsidiaries own and operate natural gas distribution, transmission and storage facilities, the operations of which are subject to various environmental laws, regulations and interpretations. While environmental issues resulting from such operations arise in the ordinary course of business, such issues have not materially affected the Company’s, Spire Missouri’s or Spire Alabama’s financial position and results of operations. As environmental laws, regulations and their interpretations change, however, the Company and the Utilities may be required to incur additional costs. For information relative to environmental matters, see Contingencies in Note 16 of the Notes to Financial Statements in Item 8.

REGULATORY MATTERS

In May and July 2021, the U.S. Department of Homeland Security’s Transportation Security Administration issued security directives that included several new cybersecurity requirements for critical pipeline owners and operators. Among these requirements is the implementation of specific mitigation measures to protect against ransomware attacks and other known threats to information and operational technology systems; development and implementation of a cybersecurity contingency and recovery plan; and performance of a cybersecurity architecture design review. We are currently implementing several of these directives and evaluating the potential effect of several others on our operations and facilities, as well as the potential cost of implementation, and will continue to monitor for any clarifications or amendments to these directives. We are also engaged in a continuous program of testing and updating our cybersecurity measures.

For discussions of other regulatory matters for Spire, Spire Missouri, and Spire Alabama, see Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8.

ACCOUNTING PRONOUNCEMENTS

The Company, Spire Missouri and Spire Alabama have evaluated or are in the process of evaluating the impact that recently issued accounting standards will have on their financial position or results of operations upon adoption. For disclosures related to the adoption of new accounting standards, see the New Accounting Pronouncements section of Note 1 of the Notes to Financial Statements in Item 8.

CRITICAL ACCOUNTING ESTIMATES

Our discussion and analysis of our financial condition, results of operations, liquidity and capital resources are based upon our financial statements, which have been prepared in accordance with GAAP, which requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. We believe the following represent the more significant items requiring the use of judgment and estimates in preparing our financial statements:

Regulatory Accounting – The Utilities account for their regulated operations in accordance with FASB Accounting Standards Codification Topic 980, Regulated Operations. The provisions of this accounting guidance require, among other things, that financial statements of a rate-regulated enterprise reflect the actions of regulators, where appropriate. These actions may result in the recognition of revenues and expenses in time periods that are different than non-rate-regulated enterprises. When this occurs, costs are deferred as assets in the balance sheet (regulatory assets) and recorded as expenses when those amounts are reflected in rates. Also, regulators can impose liabilities upon a regulated company for amounts previously collected from customers and for recovery of costs that are expected to be incurred in the future (regulatory liabilities). Management believes that the current regulatory environment supports the continued use of these regulatory accounting principles and that all regulatory assets and regulatory liabilities are recoverable or refundable through the regulatory process. For Spire Missouri and Spire Alabama, management believes the following represent the more significant items recorded through the application of this accounting guidance:

PGA Clause – Spire Missouri’s PGA clauses allows it to flow through to customers, subject to a prudence review by the MoPSC, the cost of purchased gas supplies, including the costs, cost reductions and related carrying costs associated with the use of natural gas derivative instruments to hedge the purchase price of natural gas. The difference between actual costs incurred and costs recovered through the application of the PGA clauses are recorded as regulatory assets and regulatory liabilities that are recovered or refunded in a subsequent period. The PGA clauses also permit the application of carrying costs to all over- or under-recoveries of gas costs, including costs and cost reductions associated with the use of derivative instruments, and also provide for a portion of income from off-system sales and capacity release revenues to be flowed through to customers.

GSA Rider –Spire Alabama’s rate schedules for natural gas distribution charges contain a GSA rider, established in 1993, which permits the pass-through to customers of changes in the cost of gas supply. Spire Alabama’s tariff provides a temperature adjustment mechanism, also included in the GSA, that is designed to moderate the impact of departures from normal temperatures on Spire Alabama’s earnings. The temperature adjustment applies primarily to residential, small commercial and small industrial customers. Other non-temperature weather related conditions that may affect customer usage are not included in the temperature adjustment. In prior years, Spire Alabama entered into cash flow derivative commodity instruments to hedge its exposure to price fluctuations on its gas supply. Spire Alabama recognizes all derivatives at fair value as either assets or liabilities on the balance sheet. Any realized gains or losses are passed through to customers using the mechanisms of the GSA rider in accordance with Spire Alabama’s APSC approved tariff and are recognized as a regulatory asset or regulatory liability. All derivative commodity instruments in a gain position are valued on a discounted basis incorporating an estimate of performance risk specific to each related counterparty. Derivative commodity instruments in a loss position are valued on a discounted basis incorporating an estimate of performance risk specific to Spire Alabama. Spire Alabama currently has no active gas supply derivative positions.

ISRS –The ISRS allows Spire Missouri expedited recovery for its investment to upgrade its infrastructure and enhance its safety and reliability without the necessity of a formal rate case. Spire Missouri records ISRS revenues as authorized by the MoPSC and estimates the probability and amount of any refunds based on commission precedent, current legal rulings, the opinion of legal counsel, and other considerations.

For more information, see Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8.

Employee Benefits and Postretirement Obligations – Pension and postretirement obligations are calculated by actuarial consultants that utilize several statistical factors and other assumptions provided by management related to future events, such as discount rates, returns on plan assets, compensation increases, and mortality rates. For the Utilities, the amount of expense recognized and the amounts reflected in other comprehensive income are dependent upon the regulatory treatment provided for such costs, as discussed further below. Certain liabilities related to group medical benefits and workers’ compensation claims, portions of which are self-insured and/or contain “stop-loss” coverage with third-party insurers to limit exposure, are established based on historical trends.

The amount of net periodic pension and other postretirement benefit costs recognized in the financial statements related to the Utilities’ qualified pension plans and other postretirement benefit plans is based upon allowances, as approved by the MoPSC (for Spire Missouri) and as approved by the APSC (for Spire Alabama). The allowances have been established in the rate-making process for the recovery of these costs from customers. The differences between these amounts and actual pension and other postretirement benefit costs incurred for financial reporting purposes are deferred as regulatory assets or regulatory liabilities. GAAP also requires that changes that affect the funded status of pension and other postretirement benefit plans, but that are not yet required to be recognized as components of pension and other postretirement benefit costs, be reflected in other comprehensive income. For the Utilities’ qualified pension plans and other postretirement benefit plans, amounts that would otherwise be reflected in other comprehensive income are deferred with entries to regulatory assets or regulatory liabilities.

For more information, see Note 13, Pension Plans and Other Postretirement Benefits, of the Notes to Financial Statements in Item 8.

The tables below reflect the sensitivity of Spire’s plans to potential changes in key assumptions:

Expected Return on Plan Assets 0.25 % — (1.1 )

Rate of Future Compensation Increase 0.25 % 1.3 0.3

Expected Return on Plan Assets 0.25 % — (0.7 )

Impairment of Long-lived Assets – Long-lived assets classified as held and used are evaluated for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Whether impairment has occurred is determined by comparing the estimated undiscounted cash flows attributable to the assets with the carrying value of the assets. If the carrying value exceeds the undiscounted cash flows, the Company recognizes an impairment charge equal to the amount of the carrying value that exceeds the estimated fair value of the assets. In the period in which the Company determines an asset meets held-for-sale criteria, an impairment charge is recorded to the extent the book value exceeds its fair value less cost to sell.

On July 1, 2020, Spire’s Board of Directors, based upon the recommendation of senior management, revised the development plan for Spire Storage, resulting in an impairment charge of $140.8 related to Spire Storage assets in the quarter ended June 30, 2020. The revision was driven by the realization that a longer time horizon will be required for optimization and positioning of the storage facility to serve energy markets in the western United States. Among other factors, evaluations of the continuing evolution of market dynamics in the region led management to update models of various development alternatives. Separately in the quarter ended June 30, 2020, Spire recorded impairment charges totaling $7.8 related to two commercial compressed natural gas fueling stations as a result of revised projections reflecting lower diesel prices and slower conversions of Class 8 vehicles. The fair values used in measuring the impairment charges were determined with an expected present value technique using a discounted cash flow method under an income approach. Our impairment loss calculations required management to make assumptions and to apply judgment in order to estimate fair values of the assets. This involved estimating cash flows, useful lives, and current market value for similar assets and selecting a discount rate that reflects the risk inherent in future cash flows. Cash flow projections were based on assumptions about future market demand and achievement of certain operational capabilities. Assumptions were selected from a range of reasonably possible amounts and were supported by relevant and reliable data. However, if actual results are not consistent with our estimates and assumptions, we may be exposed to additional impairments that could be material. We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate asset impairment losses.

Income Taxes – Income tax calculations require estimates due to book-tax differences, estimates with respect to regulatory treatment of certain items, and uncertainty in the interpretation of tax laws and regulations. Critical assumptions and judgments also include projections of future taxable income to determine the ability to utilize net operating losses and credit carryforwards prior to their expiration. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Management regularly assesses financial statement tax provisions to identify any change in regulatory treatment or tax related estimates and assumptions that could have a material impact on cash flows, financial position and/or results of operations. For more information, see Note 12, Income Taxes, of the Notes to Financial Statements in Item 8.

For further discussion of significant accounting policies, see Note 1, Summary of Significant Accounting Policies, of the Notes to Financial Statements in Item 8.

MARKET RISK

Commodity Price Risk

Gas Utility

The Utilities’ commodity price risk, which arises from market fluctuations in the price of natural gas, is primarily managed through the operation of Spire Missouri’s PGA clauses and Spire Alabama’s GSA rider. The PGA clauses and GSA rider allows the Utilities to flow through to customers, subject to prudence review by the MoPSC and APSC, the cost of purchased gas supplies. Spire Missouri is allowed the flexibility to make up to three discretionary PGA changes during each year, in addition to its mandatory November PGA change, so long as such changes are separated by at least two months. Spire Missouri is able to mitigate, to some extent, changes in commodity prices through the use of physical storage supplies and regional supply diversity. The Utilities also have risk management policies that allow for the purchase of natural gas derivative instruments with the goal of managing its price risk associated with purchasing natural gas on behalf of its customers. These policies prohibit speculation. As of September 30, 2021, Spire Missouri had active natural gas derivative positions, but Spire Alabama did not. Costs and cost reduction, including carrying costs, associated with the use of natural gas derivative instruments are allowed to be passed on to customers through the operation of the PGA clauses or GSA rider. Accordingly, the Utilities do not expect any adverse earnings impact as a result of the use of these derivative instruments. However, the timing of recovery for cash payments related to margin requirements may cause short-term cash requirements to vary. For more information about the Utilities’ natural gas derivative instruments, see Note 10, Derivative Instruments and Hedging Activities, of the Notes to Financial Statements in Item 8.

Gas Marketing

In the course of its business, Spire’s non-regulated gas marketing subsidiary, Spire Marketing, enters into contracts to purchase and sell natural gas at fixed prices and natural gas index-based prices. Commodity price risk associated with these contracts has the potential to impact earnings and cash flows. To minimize this risk, Spire Marketing has a risk management policy that provides for daily monitoring of a number of business measures, including fixed price commitments. In accordance with the risk management policy, Spire Marketing manages the price risk associated with its fixed price commitments. This risk is currently managed either by closely matching the offsetting physical purchase or sale of natural gas at fixed-prices or through the use of natural gas futures, options and swap contracts traded on or cleared through the New York Mercantile Exchange (NYMEX) and Intercontinental Exchange (ICE) to lock in margins. At September 30, 2021 and 2020, Spire Marketing’s unmatched fixed-price positions were not material to Spire’s financial position or results of operations.

As mentioned above, Spire Marketing uses natural gas futures, options and swap contracts traded on or cleared through the NYMEX and ICE to manage the commodity price risk associated with its fixed-price natural gas purchase and sale commitments. These derivative instruments may be designated as cash flow hedges of forecasted purchases or sales. Such accounting treatment, if elected, generally permits a substantial portion of the gain or loss to be deferred from recognition in earnings until the period that the associated forecasted purchase or sale is recognized in earnings. To the extent a hedge is effective, gains or losses on the derivatives will be offset by changes in the value of the hedged forecasted transactions. Information about the fair values of Spire Marketing’s exchange-traded/cleared natural gas derivative instruments is presented below:

Derivative Fair Values Cash Margin Derivatives and Cash Margin

Net balance of derivative assets at September 30, 2020 $ 5.7 $ (0.4 ) $ 5.3

Changes in fair value 77.5 — 77.5

Settlements/purchases - net (31.1 ) — (31.1 )

Changes in cash margin — (38.9 ) (38.9 )

Net balance of derivative assets at September 30, 2021 $ 52.1 $ (39.3 ) $ 12.8

Fair values of basis swaps - net 1.7 1.1 0.5 0.1 —

Fair values of puts and calls - net (8.3 ) (8.2 ) (0.1 ) — —

Position volumes:

MMBtu - net (short) long futures/swap/option positions 61.9 41.5 18.4 1.8 0.2

MMBtu - net (short) long basis swap positions 0.1 2.4 (1.9 ) (0.4 ) —

MMBtu - net (short) puts and calls positions (2.4 ) (2.4 ) — — —

Certain of Spire Marketing’s physical natural gas derivative contracts are designated as normal purchases or normal sales, as permitted by GAAP. This election permits the Company to account for the contract in the period the natural gas is delivered. Contracts not designated as normal purchases or normal sales, including those designated as trading activities, are accounted for as derivatives with changes in fair value recognized in earnings in the periods prior to settlement.

Below is a reconciliation of the beginning and ending balances for physical natural gas contracts accounted for as derivatives, none of which will settle beyond fiscal 2022:

Net balance of derivative liabilities at September 30, 2020 $ (7.4 )

Changes in fair value (50.8 )

Settlements (3.3 )

Net balance of derivative liabilities at September 30, 2021 $ (61.5 )

For further details related to Spire Marketing’s derivatives and hedging activities, see Note 10, Derivative Instruments and Hedging Activities, of the Notes to Financial Statements in Item 8.

Counterparty Credit Risk

Spire Marketing has concentrations of counterparty credit risk in that a significant portion of its transactions are with energy producers, utility companies and pipelines. These concentrations of counterparties have the potential to affect the Company’s overall exposure to credit risk, either positively or negatively, in that each of these three groups may be affected similarly by changes in economic, industry or other conditions. Spire Marketing also has concentrations of credit risk with certain individually significant counterparties. To the extent possible, Spire Marketing enters into netting arrangements with its counterparties to mitigate exposure to credit risk. It is also exposed to credit risk associated with its derivative contracts designated as normal purchases and normal sales. Spire Marketing closely monitors its credit exposure and, although uncollectible amounts have not been significant, increased counterparty defaults are possible and may result in financial losses and/or capital limitations. For more information on these and other concentrations of credit risk, including how Spire Marketing manages these risks, seeNote 11,Concentrations of Credit Risk, of the Notes to Financial Statements in Item 8.

Interest Rate Risk

The Company is subject to interest rate risk associated with its short-term debt issuances. Based on average short-term borrowings during fiscal 2021, an increase of 100 basis points in the underlying average interest rate for short-term debt would have caused an increase in interest expense (and a decrease in pre-tax earnings and cash flows) of approximately $6.1 on an annual basis. Portions of such an increase may be offset through the Utilities’ application of PGA and GSA carrying costs. At September 30, 2021, Spire had fixed-rate long-term debt totaling $3,014.6, of which $1,348.0 was issued by Spire Missouri, $625.0 was issued by Spire Alabama, and $1,041.6 was issued by Spire and other subsidiaries. While the long-term debt issues are fixed-rate, they are subject to changes in fair value as market interest rates change. However, increases or decreases in fair value would impact earnings and cash flows only if the Company were to reacquire any of these issues in the open market prior to maturity. Under GAAP applicable to the Utilities’ regulated operations, losses or gains on early redemptions of long-term debt would typically be deferred as regulatory assets or regulatory liabilities and amortized over a future period.

Refer to Note 10, Derivative Instruments and Hedging Activities, of the Notes to Financial Statements in Item 8 for additional details on the Company’s interest rate swap transactions.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

For this discussion, see “Market Risk” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 8. Financial Statements and Supplementary Data

Page

Management Reports on Internal Control over Financial Reporting 50

Reports of Independent Registered Public Accounting Firm 51

Financial Statements (for years ended September 30, 2021, 2020, and 2019):

Spire Inc.

Consolidated Statements of Income 58

Consolidated Statements of Comprehensive Income 59

Consolidated Balance Sheets 60

Consolidated Statements of Shareholders’ Equity 62

Consolidated Statements of Cash Flows 63

Spire Missouri Inc.

Statements of Comprehensive Income 64

Balance Sheets 65

Statements of Shareholder’s Equity 67

Statements of Cash Flows 68

Spire Alabama Inc.

Statements of Income 69

Balance Sheets 70

Statements of Shareholder’s Equity 72

Statements of Cash Flows 73

Notes to Financial Statements

Note 1. Summary of Significant Accounting Policies 74

Note 2. Revenue 81

Note 3. Stock-Based Compensation 83

Note 4. Earnings Per Common Share 86

Note 5. Shareholders’ Equity 86

Note 6. Long-Term Debt 90

Note 7. Notes Payable and Credit Agreements 92

Note 8. Fair Value of Financial Instruments 93

Note 9. Fair Value Measurements 94

Note 10. Derivative Instruments and Hedging Activities 96

Note 11. Concentrations of Credit Risk 102

Note 13. Pension Plans and Other Postretirement Benefits 105

Note 14. Information by Operating Segment 115

Note 15. Regulatory Matters 117

Note 16. Commitments and Contingencies 124

Management Reports on Internal Control over Financial Reporting

Spire Inc.

Management is responsible for establishing and maintaining adequate internal controls over financial reporting. Spire Inc.’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Spire Inc.’s management, including its Chief Executive Officer and Chief Financial Officer, conducted an assessment of the effectiveness of Spire Inc.’s internal control over financial reporting as of September 30, 2021. In making this assessment, management used the criteria in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, management concluded that Spire Inc.’s internal control over financial reporting was effective as of September 30, 2021. Deloitte & Touche LLP, an independent registered public accounting firm, has issued an attestation report on Spire Inc.’s internal control over financial reporting, which is included herein.

Spire Missouri Inc.

Management is responsible for establishing and maintaining adequate internal controls over financial reporting. Spire Missouri Inc.’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Spire Missouri Inc.’s management, including its Chief Executive Officer and Chief Financial Officer, conducted an assessment of the effectiveness of Spire Missouri Inc.’s internal control over financial reporting as of September 30, 2021. In making this assessment, management used the criteria in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, management concluded that Spire Missouri Inc.’s internal control over financial reporting was effective as of September 30, 2021.

Spire Alabama Inc.

Management is responsible for establishing and maintaining adequate internal controls over financial reporting. Spire Alabama Inc.’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Spire Alabama Inc.’s management, including its Chief Executive Officer and Chief Financial Officer, conducted an assessment of the effectiveness of Spire Alabama Inc.’s internal control over financial reporting as of September 30, 2021. In making this assessment, management used the criteria in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, management concluded that Spire Alabama Inc.’s internal control over financial reporting was effective as of September 30, 2021.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Spire Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Spire Inc. and subsidiaries (the “Company”) as of September 30, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended September 30, 2021, of the Company and our report dated November 22, 2021, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for their assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Reports on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

St. Louis, Missouri

November 22, 2021

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Spire Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Spire Inc. and subsidiaries (the “Company”) as of September 30, 2021 and 2020, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows, for each of the three years in the period ended September 30, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2021 and 2020, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 22, 2021, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Note 15 to the financial statements

Critical Audit Matter Description

SR US Equity

SR · 10-K · period ended 2021-09-30

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Mine Safety Disclosures

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

Item 6. (Reserved)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

SR US Equity☆

SR · 10-K · period ended 2021-09-30

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Mine Safety Disclosures

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

Item 6. (Reserved)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

SR US Equity