Southwest Gas Holdings, Inc. Q4 FY2024 earnings call

• Southwest Gas Holdings is pursuing a transformational strategy to be a premier fully regulated natural gas utility. - Achieved all 2024 strategic priorities, including strengthening balance sheets and advancing regulatory strategy. - Made progress on Century separation, with a CEO onboarded at Century and monitoring market conditions for disposition transactions. - Regulatory progress: Nevada general rate case had positive outcome, Great Basin refresh rates adjusted, California case progressing, Arizona rate case on schedule with ALJ recommendation. - Plan to invest about $4.3 billion over next five years for safety, reliability, and economic development, expecting rate base CAGR 6%-8% from 2025-2029. - Committed to maintaining investment-grade balance sheet and competitive dividends.

The utility segment, Southwest Gas Corporation, saw utility operating margin increase by $72.5 million in 2024 compared to 2023. This was driven by $66 million of increased rate relief from prior investments in Nevada and California, $12 million from customer growth, and other components. Century's consolidated results were lower in 2024 due to less work compared to 2023, partially offset by lower interest expense. The utility's revenue contribution is significant, with the utility being the core segment for natural gas utility operations.

• 2025 utility net income expected to be in the range of $265 million to $275 million. - Expect net income growth from margin improvements and regulatory strategy. - Plan to invest approximately $880 million in 2025 utility CapEx. - Forward-looking capital spending plan of about $4.3 billion over 2025-2029, expecting rate base CAGR 6%-8%.

• Uncertainties surrounding future economic conditions and regulatory approvals that could impact actual results. - Market conditions needed for successful Century separation, including favorable conditions for taxable sell-downs or share exchanges. - Risks associated with timing and execution of Century separation plans depending on market conditions.

Q: Does the nonlinear growth with formula rates in Arizona suggest convergence to more linear growth over time?

A: Karen Haller states that under current regulatory structure it's nonlinear, but a formula rate would likely lead to more linear growth.

Q: Does market conditions factor into timing of Century separation, and could the process extend into next year?

A: Karen Haller mentions they are watching market conditions and will update when more can be shared, and the process could extend into next year depending on market conditions.

Q: Does the utility net income CAGR assume impact from pending SIM mechanism or formula rate, and how does that relate to earned ROE improvement?

A: Rob Stefani says the range doesn't include the SIM tracker, and Justin Brown notes directionally formula rates are positive and could be a driver of earned ROE improvement in future filings.