Southwest Gas Holdings, Inc. · NYSE:SWX
Southwest Gas — Merger or Acquisition (July 2021)
48 slides from Southwest Gas's merger presentation, Jul 27, 2021
Slide 1: Centuri & Riggs Distler Presentation July 2021
Exhibit 99.1 CENTURI & RIGGS DISTLER PRESENTATION JULY 2021 1Exhibit 99.1 CENTURI & RIGGS DISTLER PRESENTATION JULY 2021 1
Slide 2: Disclosure
DISCLOSURE This document contains statements which constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“Reform Act”). All statements other than statements of historical fact included or incorporated by reference in this document are for
Slide 3: Executive Summary
EXECUTIVE SUMMARY » Centuri Group, Inc. (“Centuri” or the “Company”) is a comprehensive utility services enterprise dedicated to delivering a diverse array of solutions to North America’s gas and electric providers – The Company generated LTM 3/31/21 revenue and compliance EBITDA of $1,979 million a
Slide 4: Centuri Overview
CENTURI OVERVIEW 4 4CENTURI OVERVIEW 4 4
Slide 5: Centuri Owned by Investment-Grade Rated SWX
CENTURI OWNED BY INVESTMENT-GRADE RATED SWX » SWX is a holding company that owns all of the shares of common stock of Centuri and Southwest Gas Corporation (“Southwest Gas”) Baa2 / BBB+ / BBB+ » Centuri represents SWX’s “utility infrastructure services” segment, which comprised ~59% and ~32% of SWX
Slide 6: Company History
COMPANY HISTORY 1967 1987 1996 2000 2014 2017 2018 2020 2021 NPL Phoenix Southwest Strategic Industry Record Riggs Strategic Alliances Neuco Acquisition Founded Move Gas Growth Leadership Achievements Acquisition NPL was founded in NPL becomes a wholly- With a focus on Strategic Alliances With a 100
Slide 7: Centuri at a Glance
CENTURI AT A GLANCE Overview Work Type Breakdown 1 1 Revenue Gross Profit » Comprehensive utility services enterprise dedicated to delivering a diverse Other Utility Other Utility array of solutions, including replacement and installation work, to North Services Services America’s gas and electric p
Slide 8: Company Overview
COMPANY OVERVIEW Gas Utility Business Headquarters Phoenix, Arizona Lawrence, Massachusetts Salt Lake City, Utah Year Founded 1967 1972 2016 » Distribution and urban pipeline construction » Distribution and urban pipeline construction » Urban pipeline construction Primary Services » Pipeline integri
Slide 9: Company Overview (Cont'd)
COMPANY OVERVIEW (CONT’D) Electric Utility Canada Group Business Headquarters Alexandria, Louisiana Phoenix, Arizona Vaughan, Ontario Cambridge, Ontario Year Founded 2014 2019 1994 1996 » Distribution and urban pipeline construction » Utility pole wire maintenance » Pipeline integrity management Pri
Slide 10: Broad Existing Geographic Footprint
BROAD EXISTING GEOGRAPHIC FOOTPRINT Centuri’s Significant North American Presence Across Key Business Units l Centuri Corporate Headquarters » Operations in 55 primary locations across 40 states and >9,000 l Canyon Pipeline provinces in the U.S. and Canada employees supporting l Linetec Services Nor
Slide 11: Diverse, Blue-Chip Customers
DIVERSE, BLUE-CHIP CUSTOMERS 1 Top 20 Customers Revenue Relationship Contract Customer # Credit Rating Revenue as % of Total ($ in Millions) Length (Yrs) Length (Yrs) 1 A2/A $233 43 5 12% 6% 2 Baa1/A- 126 36 4 18% 2 6% 3 Baa1/A- 112 25 7 24% 6% 4 A2/A 111 19 5 30% 6% 5 Baa2/BBB+ 111 7 3 Top 5 35% 5%
Slide 12: Diverse Revenue Streams Underpinned by Stable MSA Agreements
DIVERSE REVENUE STREAMS UNDERPINNED BY STABLE MSA AGREEMENTS Contract Overview Diverse Service Offerings… 1 Work Type » Centuri has two types of agreements with its customers: master service agreements (“MSAs”) and bid contracts Electric 23% – Under MSAs, customers issue work authorizations that des
Slide 13: Proven Business Strategy and Track Record of Successful Acquisition Integrations
PROVEN BUSINESS STRATEGY AND TRACK RECORD OF SUCCESSFUL ACQUISITION INTEGRATIONS » Acquisition strategy has allowed Centuri to diversify its utility services platform and expand its geographic footprint » Disciplined and targeted approach to evaluating opportunities, including strategic fit and syne
Slide 14: Riggs Distler Overview
RIGGS DISTLER OVERVIEW 14 14RIGGS DISTLER OVERVIEW 14 14
Slide 15: Riggs at a Glance
RIGGS AT A GLANCE 1 Overview Segment Breakdown Revenue Adjusted EBITDA » Leading utility services contractor (electric & gas) in the Mid-Atlantic and Northeast U.S. Other Other Infrastructure Infrastructure Services Services » Headquartered in Cherry Hill, NJ with ~1,500+ employees 35% 21% Utility »
Slide 16: Market Leader in Northeast & Mid-Atlantic
MARKET LEADER IN NORTHEAST & MID-ATLANTIC Riggs By the Numbers Geographic Footprint 20 200+ Riggs Location States Annual Current Riggs Market Served Customers Expansion Opportunity 1 Riggs Storm Work Coverage ~120 19 Customer Company MSAs Facilities 1,200+ 800+ >1,500 employees Company Operating Veh
Slide 17: Ability to Serve the Entire Utility and Infrastructure Value Chain
ABILITY TO SERVE THE ENTIRE UTILITY AND INFRASTRUCTURE VALUE CHAIN Turnkey capabilities equip Riggs to serve as a one-stop shop for customers, resulting in revenue opportunities across the utility and infrastructure landscape Unique Ability to Serve All Customer Needs Why it Matters to Customers » P
Slide 18: Long-Standing Relationships with Blue-Chip Customers
LONG-STANDING RELATIONSHIPS WITH BLUE-CHIP CUSTOMERS » Average relationships with top utility customers of over 30 years » Complementary to Centuri’s 22-year average tenure for top 20 customers No overlap between Riggs’ top 10 » Extensive relationship and long-term contracts with major investor-owne
Slide 19: Highly Recurring Revenue Underpinned by Long-Term MSAs
HIGHLY RECURRING REVENUE UNDERPINNED BY LONG-TERM MSAs AND STABLE CONTRACTS » Riggs has 60 unique utility MSAs and 59 non-utility MSAs across multiple geographies − Annual volumes consistent given steady rate base driven nature of utility spending programs − Work across both segments is predominantl
Slide 20: Centuri Intends to Retain Key Members of Riggs Management
CENTURI INTENDS TO RETAIN KEY MEMBERS OF RIGGS MANAGEMENT » Post acquisition, the Riggs management team will continue to manage the Riggs business as a standalone operating company » Similar to the Neuco and Linetec acquisitions, Centuri intends to retain key members of management via multi-year emp
Slide 21: Acquisition Rationale
ACQUISITION RATIONALE 21 21ACQUISITION RATIONALE 21 21
Slide 22: Riggs Is the Perfect Fit for Centuri
RIGGS IS THE PERFECT FIT FOR CENTURI… Combining our existing industry-leading utility services platform with a scaled, union electric utility distribution focused provider A Perfect Complementary Fit A Balanced Service Provider » Enhances electric utility distribution service capabilities, with abil
Slide 23: Complements Centuri's Existing Business
…COMPLEMENTS CENTURI’S EXISTING BUSINESS… Centuri Riggs » Utility services enterprise dedicated to delivering a diverse and » Utility infrastructure services contractor with a primary focus on Business Overview comprehensive array of solutions to North America’s gas and electric union electric and s
Slide 24: Enhances Scale & Diversification
…ENHANCES SCALE & DIVERSIFICATION… 1 2017 Centuri Transformation 2021E Pro Forma Centuri Addition of electric utility creates comprehensive pure- Business Units play utility distribution services platform Revenue $1,246 2x+ increase in revenue $2,500 ($ in millions) Adjusted EBITDA Margin ~8% ~340 b
Slide 25: Adds ESG Opportunities
…ADDS ESG OPPORTUNITIES… » Provides real ESG market messaging opportunity for SWX and Centuri with renewable projects Riggs has accomplished so far » Riggs has experience building several of the renewable opportunities Centuri has been assessing – Solar Projects – Anaerobic Digester Facilities – Bat
Slide 26: And Reinforces Centuri's Business Profile
…AND REINFORCES CENTURI’S BUSINESS PROFILE Centuri + Riggs creates a premier diversified utility services company with balanced growth optionality Low Risk… …Drives Highest Growth and Least Volatility 1 1 Revenue by Contract Structure Revenue by Contract Type 2 3 Rank 10Y EBITDA CAGR 10Y EBITDA Vola
Slide 27: Key Credit Highlights
KEY CREDIT HIGHLIGHTS 27 27KEY CREDIT HIGHLIGHTS 27 27
Slide 28: Key Credit Highlights
KEY CREDIT HIGHLIGHTS 1 Leading Utility Services Company Consistent Free Cash Flow Generation 2 Commitment to a Conservative Credit Profile 3 4 Recurring and Stable Revenue from MSAs Blue Chip Customer Base with Longstanding Relationships 5 Favorable Industry Tailwinds 6 Highly Experienced Managemen
Slide 29: Enhanced Scale & Diversification
1 ENHANCED SCALE & DIVERSIFICATION… 1 $2,437 million of Revenue 1 $308 million of Adjusted EBITDA 2 Solidified North American Leader Diverse Earnings Composition End Market Geography Over 10,500 Top State Other Utility employees Services 15% supporting North 17% American gas All Other and electric G
Slide 30: Creates Top Player in Utility Services Sector
1 …CREATES TOP PLAYER IN UTILITY SERVICES SECTOR 1 Top 10 Utility Services Firms ($ in millions) $5,502 $3,950 $1,620 $1,610 $1,547 $1,467 $731 $505 $350 Fourth largest utility services provider by total revenue 1 By 2019 Utility Revenue; includes Centuri + Riggs utility only pro forma FY 2019 reven
Slide 31: Consistent Free Cash Flow Generation
2 CONSISTENT FREE CASH FLOW GENERATION » $400+ million of Free Cash Flow generation since 2018 » $100+ million in Free Cash Flow generation since 2018 » Key cash flow drivers: » Key cash flow drivers: – Stable, recurring revenue supported by majority MSA contract structure – Accelerated growth from
Slide 32: Commitment to Conservative Credit Profile with Proven De-Leveraging
3 COMMITMENT TO CONSERVATIVE CREDIT PROFILE WITH PROVEN DE-LEVERAGING » Centuri has a demonstrated history of prudence and discipline when managing its balance sheet, despite being acquisitive » Significant cash flow generation has allowed Centuri to consistently and quickly delever below its total
Slide 33: Highly Visible, Recurring Revenue from Customer Contracts
4 HIGHLY VISIBLE, RECURRING REVENUE FROM CUSTOMER CONTRACTS 1 Growing Utility MSA Count ü Sticky, multi-year MSAs with 207 183 high renewal rates ensure 175 60 44 consistent volume and create 42 a stable revenue base 147 139 133 ü ~3-5% built-in price escalators in MSAs to drive continued 2019 2020
Slide 34: Well-Tenured, Blue-Chip Utility Customer Base
5 WELL-TENURED, BLUE-CHIP UTILITY CUSTOMER BASE Key Blue Chip Customers Key Statistics Gas Electric Combination ~25 Years Weighted Average Customer 1 Tenure ~5 Years Weighted 1 Average Contract Length Top Customer 10% All other 52% Top 10 Customers 48% Denotes new Centuri customers from Riggs acquis
Slide 35: Favorable Industry Tailwinds: Aging Utility Infrastructure
6 FAVORABLE INDUSTRY TAILWINDS: AGING UTILITY INFRASTRUCTURE Strong tailwinds across utility distribution end markets support long-term growth Utility Distribution Outlook Electric Utility Distribution Gas Utility Distribution » Aging infrastructure will demand significant replacements and upgrades
Slide 36: Favorable Industry Tailwinds: New High-Growth Infrastructure End Markets
6 FAVORABLE INDUSTRY TAILWINDS: NEW HIGH-GROWTH INFRASTRUCTURE END MARKETS Strong tailwinds across related infrastructure end markets support long-term growth Wireless and Renewable Energy 5G Datacom Energy Transition » Small cell wireless density requires significant buildout, and existing utility
Slide 37: Highly Experienced Management Team
7 HIGHLY EXPERIENCED MANAGEMENT TEAM Executive Leadership Paul Daily Kevin Neill Richard Delaney Rob Lyons Michael Cicchella, Jr. James Connell, Jr. Steve Adams President & Chief Executive Vice Executive Vice President, Centuri Executive Vice Executive Vice Senior Vice Executive Officer President, C
Slide 38: Historical Financial Summary
HISTORICAL FINANCIAL SUMMARY 38 38HISTORICAL FINANCIAL SUMMARY 38 38
Slide 39: Centuri Historical Financial Performance
CENTURI HISTORICAL FINANCIAL PERFORMANCE Revenue Compliance EBITDA and Margin ($ in millions) $2,25(0 $ in millions) $1,979 $233 $1,948 $240 $219 $1,751 $1,522 $178 $1,500 $160 $141 12% 11% $750 $80 10% 9% $0 $0 2018 2019 2020 LTM 3/31/21 2018 2019 2020 LTM 3/31/21 Compliance EBITDA EBITDA Margin 1
Slide 40: Riggs Historical Financial Performance
RIGGS HISTORICAL FINANCIAL PERFORMANCE Revenue Adjusted EBITDA and Margin ($ in millions) ($ in millions) >300 bps of margin expansion from 2019- $80 2020 due to improved performance across $458 both business segments, largely driven by $440 $401 Project Controls Group initiatives $58 $383 $55 $41 $
Slide 41: Recent Performance Update
RECENT PERFORMANCE UPDATE Centuri Financial Summary Centuri Commentary ($ in Millions) Actual Performance » FY 2020 and Q1 2021 performance exceeded Centuri’s original budget across revenue, gross profit, and compliance EBITDA, largely attributable FYE YTD YTD LTM to weather events in the Southeast
Slide 42: Centuri Has Demonstrated Stable, Long-Term Performance
CENTURI HAS DEMONSTRATED STABLE, LONG-TERM PERFORMANCE Revenue ($ in millions) $1,979 $1,948 $1,751 $1,522 $1,246 $1,139 $1,009 $740 $651 $606 $483 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 LTM 3/31/21 Compliance EBITDA ($ in millions) $233 $219 $178 $141 $116 $111 $101 $97 $77 $65 $60 2011
Slide 43: Conservative Financial Policies
CONSERVATIVE FINANCIAL POLICIES » Lower risk contract profile, focusing on recurring services MSA contracts with blue-chip utility operators; contract Operating pricing structures heavily weighted towards unit price and time & materials vs. lump-sum fixed price Philosophy » Target total leverage pro
Slide 44: Appendix
APPENDIX 44 44APPENDIX 44 44
Slide 45: Centuri Compliance EBITDA Reconciliation
CENTURI COMPLIANCE EBITDA RECONCILIATION Centuri Compliance EBITDA Reconciliation ($ in millions) FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 LTM 3/31/21 Centuri Standalone Audited Net Income $20.3 $16.0 $20.7 $24.3 $14.6 $20.5 $23.7 $26.9 $26.7 $53.6 $63.9 1 Good
Slide 46: Riggs Adjusted EBITDA Reconciliation
RIGGS ADJUSTED EBITDA RECONCILIATION Riggs Distler Adjusted EBITDA Reconciliation ($ in millions) FY 2018 FY 2019 FY 2020 LTM 3/31/21 Net Income $10.2 ($0.4) $19.0 $22.0 Interest Expense 2.6 3.6 2.1 2.1 Income Taxes (6.8) 5.5 - 0.0 Depreciation & Amortization 18 .3 25 .4 28 .9 29.2 Reported EBITDA $
Slide 47: Pro Forma Legal Structure
PRO FORMA LEGAL STRUCTURE U.S. Borrower Centuri Group, Inc. Canadian Borrower Centuri Canada Centuri U.S. Division Inc. Division, Inc. Centuri Centuri Oil & Gas Group LLC Power Group LLC Union Non-Union Non-Union Non-Union Union Union Union Union Canyon New England NPL Linetec National Riggs W.S. Ni
Slide 48: Thank You
THANK YOU 48 CONFIDENTIALTHANK YOU 48 CONFIDENTIAL
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