NOVEMBER 09, 2021 / 6:00PM, SWX.N - Q3 2021 Southwest Gas Holdings Inc Earnings Call
John P. Hester - Southwest Gas Holdings, Inc.CEO, President &
Director
Thanks, Greg. Turning to Slide #4. We have an outline for todays call. Ill start reviewing some highlights and recapping the
investment thesis for our shareholders at Southwest Gas Holdings. Greg will follow with a review of our financial results for the quarter, including breakdown detail for each business segment. Justin will review our numerous regulatory initiatives
and activities. Karen will cover recent customer growth, liquidity and capital expenditures, dividend and rate base growth and expectations for 2021 and beyond. And I will wrap up our presentation, recapping the value proposition we believe
Southwest Gas Holdings offers its shareholders.
Moving to Slide #5. We present a variety of highlights for our combined businesses. First, from a
holdings perspective, last month, we announced the planned acquisition of Questar Pipelines. Were very excited about this planned acquisition, which is forecasted to be accretive to earnings in 2022. Questar Pipelines is a compelling,
high-return suite of assets with unique strength and stability that is both commercially and geographically adjacent to our existing portfolio. The acquisition will significantly increase and diversify regulated business mix and allows new
opportunities in the energy transition with a business that has a robust stream of steady contracted earnings and cash flows.
Were also very
excited to have separately announced today the addition of 2 new Board members effective January 1. Were happy to welcome E. Renae Conley and Carlos Ruisanchez to our Board at the beginning of next year as we anticipate the retirements of 2
valued Board members, Michael Melarkey and Stephen Comer at our May Annual Meeting.
The addition of these 2 new expertly qualified directors is the
culmination of a methodical, thoughtful, planned Board refreshment effort that began last year and, as is now seen, was anticipated to bolster our Board for the new year in advance of expected director retirements at the May annual meeting.
Also separately, today, we filed a 14D9 response to a tender offer for Southwest Gas Holdings shares presented last month by Carl Icahn. The tender offer
seeks to secure shares of Southwest Gas Holdings at a price of $75 a share, which in consultation with our outside investment bankers and attorneys our Board has concluded is inadequate. We wont be going into the numerous factors the Board
considered in deciding to reject the tender offer on this call, but all of that content can be found in the response to the tender offer that we filed today with the Securities and Exchange Commission.
Were also focused on the promising role our company can play in the energy transition as our businesses are poised to support the delivery of reliable
and affordable energy services, both now and for decades to come.
Next, at our natural gas distribution company, we continue to see strong growth across
our service territory, having added 37,000 net new customers over the past year. On the regulatory front, we saw a very promising decision from the Arizona Corporation Commission just this past week, authorizing the recovery of $74 million in
margin related to our customer-owned yard line and vintage steel pipe replacement programs.
Also, third quarter operating margin increased by
$18 million or 10%. And we continued executing on our sustainability goals as seen with our partnership with Pima County in Arizona supporting the harvesting of renewable natural gas at the now operational Tres Rios RNG processing facility and
walking the talk on the energy transition with our announced investment as a founding partner in the Energy Capital Ventures fund.
Meanwhile, at our
Centuri and Infrastructure Services business, we continue our high-quality acquisition track record with the completed acquisition during the quarter of Riggs Distler, expanding Centuris geographic footprint and service offering suite to
include the provision of the unionized electrical contracting services, 5G, offshore, wind and more. Relatedly, we were excited to see Riggs Distler being selected as general contractor for the 880-megawatt
Sunrise Wind offshore wind farm.
Overall, we saw Centuris third quarter revenues increased by $52 million or 9%. And were also eager to
explore the opportunities that Centuri may have to capitalize on as part of the federal governments infrastructure spending plans.
Moving to Slide
6. We present additional detail on our recently announced new Board members. Ms. Conley and Mr. Ruisanchez bring excellent experience and skills to our Board. And were very excited to welcome them to the Holdings team. With the
simultaneously announced planned retirements of Mr. Melarkey and Mr. Comer at our May Annual Meeting, year-on-year, we anticipate the average tenure of
Southwest Gas Holdings directors will decrease from 10.3 years to 8. Current Holdings Director, Robert Bogner, is anticipated to become Chairman of the Holdings Board upon Mike Melarkeys retirement in May. Our Boards continuing
refreshment efforts ensure shareholders are represented by a Board of Directors with excellent diversity of business experience, professional background, gender and ethnicity.
3