Spire Missouri has a risk management policy to utilize various derivatives, including futures contracts, exchange-traded options and swaps for the explicit purpose of managing price risk associated with purchasing and delivering natural gas on a regular basis to customers in accordance with its tariffs. The objective of this policy is to limit Spire Missouri’s exposure to natural gas price volatility and to manage, hedge and mitigate substantial price risk. Further discussion of this policy can be found in the Spire Missouri section.

From time to time Spire Missouri and Spire Alabama purchase NYMEX futures and options contracts to help stabilize operating costs associated with forecasted purchases of gasoline and diesel fuels used to power vehicles and equipment. Further information on these derivatives can be found in the Spire Missouri and Spire Alabama sections, respectively.

In the course of its business, Spire’s gas marketing subsidiary, Spire Marketing (including a wholly owned subsidiary), enters into commitments associated with the purchase or sale of natural gas. Certain of Spire Marketing’s derivative natural gas contracts are designated as normal purchases or normal sales and, as such, are excluded from the scope of ASC Topic 815 and are accounted for as executory contracts on an accrual basis. Any of Spire Marketing’s derivative natural gas contracts that are not designated as normal purchases or normal sales are accounted for at fair value. At September 30, 2019, the fair values of 323.4 million MMBtu of non-exchange-traded natural gas commodity contracts were reflected in the Consolidated Balance Sheet. Of these contracts, 245.2 million MMBtu will settle during fiscal 2020, and 68.5 million MMBtu, 8.7 million MMBtu, 0.9 million MMBtu, and 0.1 million MMBtu will settle during fiscal years 2021, 2022, 2023, and 2024, respectively. These contracts have not been designated as hedges; therefore, changes in the fair value of these contracts are reported in earnings each period.

Furthermore, Spire Marketing manages the price risk associated with its fixed-priced commitments by either closely matching the offsetting physical purchase or sale of natural gas at fixed prices or through the use of NYMEX or ICE futures, swap, and option contracts to lock in margins.

At September 30, 2019, Spire Marketing’s unmatched fixed-price positions were not material to Spire’s financial position or results of operations. Spire Marketing’s NYMEX and ICE natural gas futures, swap and option contracts used to lock in margins may be designated as cash flow hedges of forecasted transactions for financial reporting purposes.

During the second quarter of fiscal 2017, Spire entered into an interest rate swap with a fixed interest rate of 2.658% and a notional amount of $60.0 to protect itself against adverse movements in interest rates on future interest rate payments. In September 2019 this hedge was settled, resulting in a loss of $6.1 which will be amortized over the hedged periods. In August 2018, Spire entered into a three-year interest rate swap with a fixed interest rate of 2.7675% and a notional amount of $100.0 to protect itself against adverse movements in interest rates on future interest rate payments. The Company recorded a $2.9 mark-to-market loss on this swap as part of other comprehensive income for the year ended September 30, 2019. During the first quarter of fiscal 2019, the Company entered into a three-year interest rate swap with a fixed interest rate of 3.250% and a notional amount of $100.0 to protect itself against adverse movements in future interest rates on future interest rate payments. The Company recorded a $34.4 mark-to-market loss on this swap as part of other comprehensive income for the year ended September 30, 2019.

The Company’s and Spire Missouri’s exchange-traded/cleared derivative instruments consist primarily of NYMEX and ICE positions. The NYMEX is the primary national commodities exchange on which natural gas derivatives are traded. Open NYMEX and ICE natural gas futures and swap positions at September 30, 2019 were as follows:

	Gas Utility				Gas Marketing
	MMBtu (millions)		Avg. Price Per MMBtu		MMBtu (millions)		Avg. Price Per MMBtu
NYMEX/ICE open short futures positions/swap positions
Fiscal 2020		—	$	—		10.04	$	2.77
Fiscal 2021		—		—		1.76		2.71
NYMEX/ICE open long futures/swap positions
Fiscal 2020		66.36		2.66		11.00		2.63
Fiscal 2021		2.68		2.68		4.91		2.64
Fiscal 2022		—		—		1.13		2.73
Fiscal 2023		—		—		0.22		2.69
ICE open short daily swap positions
Fiscal 2020		—		—		1.12		2.00
ICE open long daily swap positions
Fiscal 2020		—		—		0.27		2.38
ICE open short basis swap positions
Fiscal 2020		—		—		53.06		0.13
Fiscal 2021		—		—		5.35		0.25
Fiscal 2022		—		—		0.31		0.25
ICE open long basis swap positions
Fiscal 2020		—		—		28.95		0.45
Fiscal 2021		—		—		1.32		0.49
Fiscal 2022		—		—		0.92		0.52
Fiscal 2023		—		—		0.16		0.52
ICE puts short positions
Fiscal 2020		—		—		4.80		0.14
ICE calls long positions
Fiscal 2020		—		—		2.10		0.10

At September 30, 2019, neither Spire Missouri nor Spire Marketing had any further price mitigation in place.

Derivative instruments designated as cash flow hedges of forecasted transactions are recognized on the balance sheets of the Company at fair value, and the change in fair value of the effective portion of these hedge instruments is recorded, net of income tax, in other comprehensive income or loss (OCI). Accumulated other comprehensive income or loss (AOCI) is a component of Total Common Stock Equity. Amounts are reclassified from AOCI into earnings when the hedged items affect net income, using the same revenue or expense category that the hedged item impacts. Based on market prices at September 30, 2019, it is expected that an immaterial amount of unrealized gains will be reclassified into the Consolidated Statements of Income of the Company during the next twelve months. Cash flows from hedging transactions are classified in the same category as the cash flows from the items that are being hedged in the Consolidated Statements of Cash Flows.

Effect of Derivative Instruments on the Consolidated Statements of Income and Comprehensive Income
	Location of Gain (Loss)
	Recorded in Income	2019			2018			2017
Derivatives in Cash Flow Hedging Relationships
Effective portion of gain (loss) recognized in OCI on derivatives:
Gas Utility gasoline and heating oil contracts		$	—		$	—		$	0.1
Interest rate swaps			(46.4	)		3.9			11.4
Total		$	(46.4	)	$	3.9		$	11.5
Effective portion of gain (loss) reclassified from AOCI to income:
Natural gas contracts	Gas Marketing Operating Revenues	$	—		$	—		$	(0.4	)
	Gas Marketing Operating Expenses		—			—			0.1
Subtotal			—			—			(0.3	)
Gasoline and heating oil contracts	Gas Utility Other Operating Expenses		—			0.1			0.2
Interest rate swaps	Interest Expense		1.3			1.4			0.1
Total		$	1.3		$	1.5		$	—
Ineffective portion of gain (loss) on derivatives recognized in income:
Interest rate swaps	Interest Expense		—			—			0.5
Total		$	—		$	—		$	0.5

Derivatives Not Designated as Hedging Instruments*
Gain (loss) recognized in income on derivatives:
Natural gas commodity contracts	Gas Marketing Operating Revenues	$	2.5		$	10.2		$	0.7
	Gas Marketing Operating Expenses		(8.4	)		(8.1	)		—
NYMEX / ICE natural gas contracts	Gas Marketing Operating Revenues		—			—			(4.4	)
Total		$	(5.9	)	$	2.1		$	(3.7	)

Fair Value of Derivative Instruments in the Consolidated Balance Sheets
	Derivative Assets*			Derivative Liabilities*
September 30, 2019	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Other: Interest rate swaps	Derivative Instrument Liability	$	—	Derivative Instrument Liability	$	43.4
Subtotal			—			43.4

Derivatives not designated as hedging instruments
Gas Utility:
Natural gas contracts	Accounts Receivable – Other		—	Accounts Receivable – Other		12.3
Gas Marketing:
NYMEX / ICE natural gas contracts	Derivative Instrument Assets		7.0	Derivative Instrument Assets		7.3
	Deferred Charges – Other		0.5	Deferred Charges – Other		1.6
Natural gas commodity	Derivative Instrument Assets		10.4	Derivative Instrument Assets		0.9
	Deferred Charges – Other		4.8	Deferred Charges – Other		—
	Current Liabilities – Other		1.4	Current Liabilities – Other		11.5
	Deferred Credits – Other		0.1	Deferred Credits – Other		1.5
Subtotal			24.2			35.1
Total derivatives		$	24.2		$	78.5

September 30, 2018
Derivatives designated as hedging instruments
Other: Interest rate swaps	Derivative Instrument Assets	$	3.0	Derivative Instrument Assets	$	—
Subtotal			3.0			—

Derivatives not designated as hedging instruments
Gas Utility:
Natural gas contracts	Accounts Receivable – Other		2.7	Accounts Receivable – Other		1.9
Gas Marketing:
NYMEX / ICE natural gas contracts	Derivative Instrument Assets		3.8	Derivative Instrument Assets		10.7
	Deferred Charges – Other		0.4	Deferred Charges – Other		0.7
Natural gas commodity	Derivative Instrument Assets		10.9	Derivative Instrument Assets		1.0
	Deferred Charges – Other		6.3	Deferred Charges – Other		0.2
	Current Liabilities – Other		0.3	Current Liabilities – Other		6.3
	Deferred Credits – Other		—	Deferred Credits – Other		0.2
Subtotal			24.4			21.0
Total derivatives		$	27.4		$	21.0

Following is a reconciliation of the amounts in the tables above to the amounts presented in the Consolidated Balance Sheets:

	2019			2018
Fair value of derivative assets presented above	$	24.2		$	27.4
Fair value of cash margin receivable offset with derivatives		14.3			6.4
Netting of assets and liabilities with the same counterparty		(23.7	)		(14.8	)
Total	$	14.8		$	19.0
Derivative Instrument Assets, per Consolidated Balance Sheets:
Current Assets – Other	$	4.2		$	13.3
Deferred Charges and Other Assets – Other		10.6			5.7
Total	$	14.8		$	19.0

Fair value of derivative liabilities presented above	$	78.5		$	21.0
Netting of assets and liabilities with the same counterparty		(23.7	)		(14.8	)
Total	$	54.8		$	6.2
Derivative Instrument Liabilities, per Consolidated Balance Sheets:
Current Liabilities – Other	$	50.0		$	6.0
Deferred Credits and Other Liabilities – Other		4.8			0.2
Total	$	54.8		$	6.2

Additionally, at September 30, 2019 and 2018, the Company had $8.1 and $4.1, respectively, in cash margin receivables not offset with derivatives, which are presented in Accounts Receivable – Other.

Spire Missouri has a risk management policy to utilize various derivatives, including futures contracts, exchange-traded options, swaps and over-the-counter instruments for the explicit purpose of managing price risk associated with purchasing and delivering natural gas on a regular basis to customers in accordance with its tariffs. The objective of this policy is to limit Spire Missouri’s exposure to natural gas price volatility and to manage, hedge and mitigate substantial price risk. This policy strictly prohibits speculation and permits Spire Missouri to hedge current physical natural gas purchase commitments or forecasted or anticipated future peak (maximum) physical need for natural gas delivered. Costs and cost reductions, including carrying costs, associated with Spire Missouri’s use of natural gas derivative instruments are allowed to be passed on to Spire Missouri customers through the operation of its PGA clause, through which the MoPSC allows Spire Missouri to recover gas supply costs, subject to prudence review by the MoPSC. Accordingly, Spire Missouri does not expect any adverse earnings impact as a result of the use of these derivative instruments.

Spire Missouri does not designate these instruments as hedging instruments for financial reporting purposes because gains or losses associated with the use of these derivative instruments are deferred and recorded as regulatory assets or regulatory liabilities pursuant to ASC Topic 980, Regulated Operations, and, as a result, have no direct impact on the statements of income.

The timing of the operation of the PGA clause may cause interim variations in short-term cash flows, because Spire Missouri is subject to cash margin requirements associated with changes in the values of these instruments. Nevertheless, carrying costs associated with such requirements are recovered through the PGA clause.

From time to time, Spire Missouri purchases NYMEX futures and options contracts to help stabilize operating costs associated with forecasted purchases of gasoline and diesel fuels used to power vehicles and equipment used in the course of its business. These contracts are designated as cash flow hedges of forecasted transactions pursuant to ASC Topic 815, Derivatives and Hedging. The gains or losses on these derivative instruments are not subject to Spire Missouri’s PGA clause. At September 30, 2019, Spire Missouri had no gasoline futures contracts outstanding.

Derivative instruments designated as cash flow hedges of forecasted transactions are recognized on the balance sheets at fair value and the change in the fair value of the effective portion of these hedge instruments is recorded, net of income tax, in OCI. AOCI is a component of Total Common Stock Equity. Amounts are reclassified from AOCI into earnings when the hedged items affect net income, using the same revenue or expense category that the hedged item impacts. Based on market prices at September 30, 2019, it is expected that an immaterial amount of pre-tax gains will be reclassified into the statements of income during fiscal 2020. Cash flows from hedging transactions are classified in the same category as the cash flows from the items that are being hedged in the statements of cash flows.

Spire Missouri’s derivative instruments consist primarily of NYMEX positions. The NYMEX is the primary national commodities exchange on which natural gas derivatives are traded. Open NYMEX natural gas futures positions at September 30, 2019 were as follows:

At September 30, 2019, Spire Missouri had no other price mitigation derivatives in place.

Effect of Derivative Instruments on the Statements of Comprehensive Income
	Location of Gain (Loss)
	Recorded in Income	2019		2018		2017
Derivatives in Cash Flow Hedging Relationships
Effective portion of gain (loss) recognized in OCI on derivatives:
Gasoline and heating oil contracts		$	—	$	—	$	0.1
Effective portion of gain (loss) reclassified from AOCI to income:
Gasoline and heating oil contracts	Gas Utility Other Operating Expenses	$	—	$	0.1	$	0.2

Fair Value of Derivative Instruments in the Balance Sheets

Derivative Assets*

Derivative Liabilities*

September 30, 2019

Balance Sheet Location

Fair

Value

Balance Sheet Location

Fair

Value

Derivatives not designated as hedging instruments

Natural gas contracts

Accounts Receivable – Other

—

Accounts Receivable – Other

12.3

September 30, 2018

Derivatives not designated as hedging instruments

Natural gas contracts

Accounts Receivable – Other

2.7

Accounts Receivable – Other

1.9

Following is a reconciliation of the amounts in the tables above to the amounts presented in Spire Missouri’s Balance Sheets:

Additionally, at September 30, 2019 and 2018, Spire Missouri had $7.8 and $3.8, respectively, in cash margin receivables not offset with derivatives, which are presented in Accounts Receivable – Other.

During the fiscal second quarter of 2016, Spire Alabama commenced a gasoline derivative program to help stabilize operating costs associated with forecasted purchases of gasoline and diesel fuels used to power vehicles and equipment used in the course of its business. Most of these contracts are designated as cash flow hedges of forecasted transactions pursuant to ASC Topic 815, Derivatives and Hedging. The gains or losses on these derivative instruments are not subject to Spire Alabama’s GSA rider. There were no contracts outstanding as of September 30, 2019 and 2018.