INVESTOR OUTREACH
Summer 2024
Safe Harbor Statement
Forward-Looking Statements
Unless context otherwise requires, in this presentation, references to "we", "us" and "our" are to Southwest Gas Holdings, Inc. (NYSE: SWX) ("Southwest Gas" or the "Company" or "SWX") together with its current and former consolidated subsidiaries, which include, among others, Southwest Gas Corporation ("Southwest", "SWG", "Utility" or "Natural Gas Distribution" segment), MountainWest Pipelines Holding Company ("MountainWest", "MW" or "Pipelines and Storage" segment), Centuri Holdings, Inc., Centuri Group, Inc. ("Centuri" or "Utility Infrastructure Services" segment) and Great Basin Gas Transmission Company ("Great Basin" or "GBGTC"). The following are subsidiaries of Centuri: NPL Construction Co. ("NPL"), NPL Canada Ltd. ("NPL Canada"), New England Utility Constructors, Inc. ("Neuco"), Linetec Services, LLC ("Linetec"), Riggs Distler & Company, Inc. ("Riggs Distler"), Canyon Pipeline Construction, Inc. ("Canyon"), National Powerline LLC ("National Powerline") and WSN Construction Inc. ("WSN Construction").
This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include, without limitation, statements regarding the Company and the Company's expectations or intentions regarding the future. These forward-looking statements can often be identified by the use of words such as "will", "predict", "continue", "forecast", "expect", "believe", "anticipate", "outlook", "could", "target", "project", "intend", "plan", "pursue", "seek", "estimate", "should", "may" and "assume", as well as variations of such words and similar expressions referring to the future, and include (without limitation) statements regarding our expectations for our utility infrastructure services and natural gas operations, estimated future capital expenditures, projected rate base growth, O&M per customer expectations, our 2024 financial guidance and expected value drivers, 2024 - 2026 financial guidance and expected value drivers, 2024 financing plan, and expectations with respect to future dividends, expectations with respect to a separation of our remaining interests in Centuri, and the future performance of the Company, Southwest Gas Corporation and Centuri. The Company can provide no assurances that a separation of our remaining interests in Centuri will occur on the expected timeline or at all. For purposes of any forward-looking consolidated financial information at Southwest Gas, full consolidation of Centuri has been modeled in this presentation. A number of important factors affecting the business and financial results could cause actual results to differ materially from those stated in the forward-looking statements. These factors include, but are not limited to, statements regarding the proposed transaction structure and timing of a separation of our remaining interests in Centuri, the timing and impact of executing (or not executing) on such transaction alternatives, the timing and amount of rate relief, changes in rate design, customer growth rates, the effects of regulation/deregulation, tax reform and related regulatory decisions, the impacts of construction activity at Centuri, the potential for, and the impact of, a credit rating downgrade, future earnings trends, inflation, increasing interest rates, sufficiency of labor markets and similar resources, seasonal patterns, current and future litigation, the costs and effect of stockholder activism, and the impacts of stock market volatility. In addition, the Company can provide no assurance that its discussions about future operating margin, operating income, COLI earnings, interest expense, and capital expenditures of the natural gas distribution segment will occur. The Company does not assume any obligation to update the forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future developments, or otherwise.
Forward-looking statements are based on assumptions which we believe are reasonable, based on current expectations and projections about future events and industry conditions and trends affecting our business. However, whether actual results and developments will conform to our expectations and predictions are subject to a number of risks and uncertainties that, among other things, could cause actual results to differ materially from those contained in the forward-looking statements, including without limitation, those discussed under the heading "Risk Factors", "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Quantitative and Qualitative Disclosure about Market Risk" in the Company's most recent Annual Report on Form 10-K and in the Company's and Southwest Gas Corporation's current and periodic reports, including our Quarterly Reports on Form 10-Q, filed from time to time with the SEC, and other reports that we file with the SEC from time to time.
New factors that could cause actual results to differ materially from those described in forward-looking statements emerge from time to time, and it is not possible for us to predict all such factors, or the extent to which any such factor or combination of factors may cause actual results to differ from those contained in any forward-looking statement. The statements in this presentation are made as of the date hereof, even if subsequently made available on our website or otherwise. We do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.
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Non-GAAP Measures
This presentation contains financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. ("GAAP"). These non-GAAP measures include (i) natural gas distribution segment adjusted net income (loss), utility infrastructure services segment EBITDA and adjusted EBITDA. Management uses these non-GAAP measures internally to evaluate performance and in making financial and operational decisions. Management believes that its presentation of these measures provides investors greater transparency with respect to its results of operations and that these measures are useful for a period-to-period comparison of results. Management also believes that providing these non-GAAP financial measures helps investors evaluate the Company's operating performance, profitability, and business trends in a way that is consistent with how management evaluates such performance.
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Table of Contents
SWX at a Glance…………………………………………………………………………………….. | pg. 05 | Southwest Gas Holdings and Corporation History……...………………………………………….. | pg. 31 | |
Positioned for Sustainable Growth andLong-TermSuccess…………………………………… | pg. 06 | Regulatory Framework | ………………………………………………………………………………. | pg. 32 |
Why SWX? Compelling Investment Thesis…………………………………………………………. | pg. 07 | Regulatory Jurisdictions | …………………………………………………………………………….. | pg. 33 |
Focused on Executing Strategic Priorities………………………………………………………… | pg. 08 | Regulatory Commissioners…………………………………………………………………………. | pg. 34 | |
Delivering Strong Results and Advancing Strategy……………………………………………… | pg. 09 | Select Recent Regulatory Activity………………………………………………………………….. | pg. 35 | |
Executed Centuri IPO……………………………………………………………………………….. | pg. 10 | Legislative Activity…………………………………………………………………………………… | pg. 36 | |
Track Record of Prudent Capital Expenditures………………………………………… | pg. 11 | Affordability…………………………………………………………………………………………… | pg. 37 | |
Multipronged Approach to Utility ROE Improvement……………………………… | pg. 12 | Operating Cash Flows & Liquidity………………………………………………………………….. | pg. 38 | |
Utility 2024 and Forward-LookingFinancial Guidance……………………… | pg. 13 | Debt Maturity Profile of SWX and SWG…………………………………………………………… | pg. 39 | |
Utility Earnings Guidance Drivers……………………………………………… | pg. 14 | Best-In-ClassGovernance………………………………………………………………………….. | pg. 40 | |
Growth and Economic Expansion………………………………………………………………….. | pg. 15 | Safety and Damages Performance………………………………………………………………… | pg. 41 | |
AZ and NV Economic Snapshot……………………………………………………………………. | pg. 16 | System Reliability and Integrity…………………………………………………………………….. | pg. 42 | |
Large Volume Customer Updates………………………………………………………………….. | pg. 17 | Customer Satisfaction………………………………………………………………………………. | pg. 43 | |
Regional Housing Development……………………………………………………………………. | pg. 18 | Environmental Information……………………………………………………………………… | pg. 44 | |
Total System Rate Base Growth Forecast……………………………………………… | pg. 19 | Community Giving…………………………………………………………………………………… | pg. 45 | |
Regulatory Update - Nevada………………………………………………………………………. | pg. 20 | Employee Engagement……………………………………………………………………………….. | pg. 46 | |
Regulatory Update - Arizona……………………………………………………………………….. | pg. 21 | Non-GAAPMeasures……………………………………………………………………………….. | pg. 47 | |
Regulatory Update - GBGTC California………………………………………………… | pg. 22 | |||
2024 Financing Plan….……………………………………………………………………… | pg. 23 | |||
PGA Balance and Recovery Mechanisms..………………………………………………… | pg. 24 | |||
Balance Sheet Strength………………………………………………………………… | pg. 25 | |||
Utility Optimization Progress………………………………………………………………………... | pg. 26 | |||
Cost Management (O&M)………………………………………………………………… | pg. 27 | |||
Common Stock Dividend Information…………………………………… | pg. 28 | |||
Positioned to Unlock Significant Stockholder Value……………………………………………... | pg. 29 |
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SWX at a Glance
Corporate Overview:
Southwest Gas Holdings, Inc., through its primary operating subsidiary Southwest Gas Corporation, engages in the business of purchasing, distributing and transporting natural gas. In addition, Southwest Gas Holdings, Inc. is the majority owner of Centuri Holdings, Inc., which provides comprehensive utility infrastructure services across North America. Southwest Gas Corporation is a dynamic energy company committed to exceeding the expectations of over 2 million customers throughout Arizona, Nevada, and California by providing safe and reliable service while innovating sustainable energy solutions to fuel the growth in its communities.
Southwest Gas Corporation Financial Snapshot1:
2023 | Revenue: $2.5 billion | |
2023 | Net income: $242.2 million | California: |
2023 | Adjusted net income: $248.6 million | |
206,000 customers - 9% | ||
2023 | Estimated Rate Base: $5.8 billion2 | |
Nevada: | |||||
828,000 customers - 37% | |||||
Arizona: | |||||
2,226,000 | 1,192,000 customers - 54% | ||||
Total Customers Served1 | |||||
Southwest Gas Service Territory | |||||
LNG Facility | |||||
Great Basin Gas Transmission Company | |||||
Southwest Gas Transmission Company | |||||
Utility Headquarters |
Centuri Group, Inc. Financial Snapshot1:
2023 Revenue: $2.9 billion
2023 adjusted EBITDA: $282.5 million
Period-end adjusted EBITDA margin: 9.7%
Positioned to Unlock Significant Shareholder Value
SWX
- Strengthening capital and strategic flexibility through separation of Centuri
- Maintain balance sheet flexibility and investment grade credit ratings
SWG
- Positive regulatory developments and strong organic rate base growth
- 40,000 first-time meter sets over the last twelve months1, or ~1.8% increase3
- Optimizing the utility to deliver value
- Providing safe, reliable, sustainable and affordable energy solutions with a dedicated focus on service
- Capital expenditure plan supported by strong economic and customer growth throughout our service areas
- Well positioned to continue delivering sustainable energy options for our customers
Centuri
-
Following execution of an initial public offering in April 2024, transitioning into an independent, leading, pure-play utility infrastructure services that serves as a long-term strategic partner to, and an extension of,
North America's electric, gas and combination utility providers, delivering a wide range of infrastructure solutions that ensure safe, reliable and environmentally sustainable grid operations - Deleveraging the business organically through EBITDA growth
Notes:
- As of December 31,2023
- Rate base amounts reflect estimated total investment in facilities to provide utility service, less estimated retirements, depreciation, and deferred taxes plus working capital as of 12/31/2023. This is different than our authorized rate cases and that is reflected in current rates
- Calculated based on new meter sets added since 2022 final year end customer count
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Positioned for Sustainable Growth and Long-Term Success
Transitioning into a premier, fully regulated natural gas utility
Diversified, Fully-Regulated Business
Mix
Attractive Rate Base and Net Income
Growth
Favorable Demand Dynamics in Diversified Geographic Footprint
Well Positioned to Continue Delivering
Sustainable Energy Solutions
Strategic Investments in Long-Term
Safety and Reliability of Pipeline System
High Customer Satisfaction
Positive Rate Case Outcomes and
Constructive Regulatory Relationships
Multiple Paths for Value Creation
Optimizing Business Profile
- Disciplined cost management
- Efficient capital deployment
- Pursuing constructive regulatory outcomes
Attractive Rate Base Growth1
$5.8 | $6.4 | ||||
$5.0 | $5.4 | ||||
$4.5 | |||||
$4.1 | |||||
2019A 2020A 2021A 2022A 2023A 2024E 2 |
Favorable Share Price Performance | Strong Balance Sheet Position | |
Total Shareholder Return3 | ||
38% | ||
20% | Limited near-term financing needs | |
6% | ||
-1% | ||
1-Year | 3-Year | |
SWX | S15GASU4 |
Notes:
- Rate base amounts reflect estimated total investment in facilities to provide utility service, less estimated retirements, depreciation, and deferred taxes plus working capital as of 12/31 of each year depicted. This is different than our authorized rate cases and that is reflected in current rates
- 2024E rate base assumes CapEx at 2024 guidance (~830 million). Rate base eligible assets estimated as of the end of each period presented
- Total shareholder return ending 05/01/2024 - Bloomberg
- S&P Composite 1500 Gas Utilities Index ("S15GASU")
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Why SWX? Compelling Investment Thesis
Safe and Reliable Utility Operations with $5.8 Billion in Rate Base1; Fully Decoupled Rates in All Jurisdictions
Attractive Utility Growth ‒ Rate Base CAGR 6.5%-7.5% and Net Income CAGR 10%-12% (with 2024 as base year)2
Favorable Demand Dynamics in Diversified Geographic Footprint
Strategic Investments in Long-Term Safety and Reliability of Pipeline System
90%-95% of 2024-2026 Capital Plans Expected to Be Funded Through Internally Generated Cash
Investment Grade Balance Sheet with Limited Near-Term Equity Needs (less than $100 Million in 2024)
Improving Earned ROEs Through Positive Rate Case Outcomes, Utility Optimization, and Enhanced Regulatory Mechanisms
81% Ownership in Centuri (NYSE:CTRI) ‒ Stake Represents Current Market Value of $1.8 Billion3 with Full Separation Planned | ||
Notes: | ||
1. | Rate base eligible assets estimated as of December 31, 2023 | 7 |
2. | Affirmed as of May 8, 2024 | |
3. | As of 5/7/2024; CTRI market cap of $2.2 billion * 81% ownership = $1.8 billion current market value of 81% stake in CTRI |
Focused on Advancing Strategic Priorities
Centuri Separation
CEO onboarding | Complete | ✓ | 1Q 2024 |
Public Filing of S-1 | Complete | ✓ | 2Q 2024 |
Centuri Deleveraging/Refinancing | Complete | ✓ | 2Q 2024 |
IPO Execution | Complete | ✓ | 2Q 2024 |
Complete Separation | Pending |
2024 Financing Plan
SWX Equity issuance under ATM program (less than $100M)1
SWX $550M Term Loan Extension
SWGC $400M Revolving Credit Facility Extension
1Q - 4Q 2024
2Q/3Q 2024
2Q/3Q 2024
2024 Utility and Regulatory Strategy
NV Rate Case Approval | Complete | ✓ | 2Q | 2024 |
AZ Rate Case Filing | Complete | ✓ | 1Q | 2024 |
CA Rate Case Filing | 3Q | 2024 | ||
GBGTC Rate Case Filing | Complete | ✓ | 1Q | 2024 |
Utility Optimization Executing Planned Initiatives | Ongoing | 1Q - 4Q 2024 |
Notes: Checkmark denotes items that have been completed
1. Depending on Centuri separation strategy and timing
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Delivering Strong Results and Advancing Strategy - 1Q '24 Update
GAAP Net income of ~$136 million, $1 million year-over-year increase in 1Q 2024 earnings
Approximately 40,000 new meter sets during the last 12 months
NV rate general rate case approved (~$59 million revenue increase), including an increase in allowed return on equity (9.5%) and an allowed equity capitalization of 50%
Operations and maintenance expenses were flat between comparative periods, reflecting cost discipline
Advanced regulatory strategy: filed AZ and GBGTC general rate cases and anticipate a CA rate case filing in 3Q 2024
Deferred purchased gas cost balances decreased by ~$770 million from March 31, 2023 to March 31, 2024. Cash balance at March 31, 2024 now greater than $400 million.
Completed initial public offering with proceeds used to partially de-lever Centuri
First quarter consolidated revenue of $528 million despite unfavorable weather and timing of bid projects and storm work
Over $40M of new awards from existing MSA customers supporting the work to advance critical reliability and integrity spending
In April, paid $92 million to acquire the remaining 10% outstanding noncontrolling interest in Linetec Services, LLC
In April 2024, paid down $316 million of debt from proceeds of the successful IPO
Successfully onboarded Bill Fehrman as President and CEO
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Executed Centuri IPO
Initial Public Offering ("IPO") Details
- On April 17, 2024 SWX priced an IPO of Centuri Holdings stock, selling approximately 19% of Centuri at a price of $21.00 per share
- SWX retained ~81% interest in Centuri Holdings stock. Centuri's market capitalization was valued at $2.21 billion as of 5/7/20241. We expect to consolidate Centuri until conditions for consolidation are no longer met
Initial Public Offering
16.85M Shares
12.4M Base Deal
1.86M Overallotment
2.6M Private Placement
71.67M remaining shares owned by SWX2
Completed IPO Within Targeted Timeframe
Generated Significant Cash and Value
- Generated ~$329 million in net cash proceeds to Centuri
- Proceeds used to reduce Centuri Holdings debt by $316 million
Notes | 1010 |
1. SWX 81% ownership estimated value $1.79 billion as of 5/7/2024 |
2. As of 4/18/2024
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Southwest Gas Holdings Inc. published this content on 13 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 May 2024 20:57:02 UTC.