Southwest Gas Holdings, Inc. · NYSE:SWX
Southwest Gas — FY2021 Earnings Presentation
40 slides from Southwest Gas's earnings presentation, Mar 2, 2022
Slide 1: Unlocking Value by Separating Centuri
On March 2, 2022, Southwest Gas Holdings, Inc. released an investor presentation: Unlocking Value by Separating Centuri 2021 Year End Earnings Conference Call March 2, 2022
Slide 2: Safe Harbor Statements
Safe Harbor Statements 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 consolidated subsidiaries, which include, among
Slide 3: Safe Harbor Statements (Continued)
Safe Harbor Statements (Continued) How to Find FurtherInformation This presentation does not constitute a solicitation of any vote or approval in connection with the 2022 annual meeting of stockholders of Southwest Gas Holdings, Inc. (the “Company”) (the “Annual Meeting”). In connection with the Ann
Slide 4: Non-GAAP Measures
Non-GAAP Measures 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) adjusted consolidated earnings per diluted share, (ii) adjusted conso
Slide 5: Participants
Participants PAUL DAILY JOHN HESTER KAREN HALLER GREG PETERSON JUSTIN BROWN BOYD NELSON PRESIDENT AND CEO PRESIDENT AND CEO SVP/CFO SVP/GENERAL COUNSEL VP/STRATEGY/INVESTOR RELATIONS EVP/CHIEF LEGAL/ADMIN OFFICER CENTURI SOUTHWEST GAS HOLDINGS SOUTHWEST GAS HOLDINGS SOUTHWEST GAS CORPORATION SOUTHWE
Slide 6: Agenda
Agenda ▪ Unlocking Value through the Separation of Centuri: positions both SWX and Centuri to maximize stockholder value ▪ SWX Standalone Value Proposition: fully regulated natural gas business ▪ Centuri Standalone Value Proposition: world-class utility infrastructure services platform ▪ 2021 Financ
Slide 7: Unlocking Value through the Separation of Centuri
Unlocking Value through the Separation of Centuri
Slide 8: A Timeline of Successful Business Growth Toward Separation
A Timeline of Successful Business Growth Toward Separation Over 25 years, SWX has developed Centuri into a utility infrastructure services leader with $2.5 billion in pro forma revenues (2021) 1996 2000 2012 2014/15 2017 2018 2019/20 2021 2022 Transformational Acquisition by Strategic Record Strateg
Slide 9: Creating Two, Independent Growth Oriented Companies
Creating Two, Independent Growth Oriented Companies Fully Regulated Natural Gas Business Utility Infrastructure Services CEO: John Hester CEO: Paul Daily HQ: Las Vegas, NV HQ: Phoenix, AZ ▪ ~10,500 employees ▪ 2,550 employees ▪ Located in 45+ states/provinces in the U.S. ▪ SWGC 2,300 and Canada ▪ MW
Slide 10: Separation to Unlock Value for Stockholders
Separation to Unlock Value for Stockholders ▪ Unlock value for stockholders and enhance transparency through more direct comparability to Unlock Value pure-play industry peers Reduced Equity ▪ Flexibility to meaningfully reduce future equity financing needs, including with respect to Needs MountainW
Slide 11: SWX Standalone Value Proposition
SWX Standalone Value Proposition
Slide 12: SWX: Pure-play, Fully Regulated Natural Gas Business
SWX: Pure-play, Fully Regulated Natural Gas Business Two Complementary Fully Regulated Businesses Premier Gas Delivery Network in Western United States ▪ Founded in 1931 ▪ Headquartered in Las Vegas, Nevada ▪ Fully regulated natural gas distribution operations ▪ Serves more than 2 million customers
Slide 13: Positioned for Continued Value Creation
Positioned for Continued Value Creation Committed to ROE Performance Delivering Rate Base Growth Authorized Rate Base ▪ Rate base has nearly doubled ▪ ROE improvement at SWGC SWGC Earned ROE ($ in billions) in last 5 years $4.9 supported by optimized capital 7.8% plan and frequent rate case 7.5% ▪ G
Slide 14: Favorable Demand Dynamics in Our Diversified Geographic Footprint
Favorable Demand Dynamics in Our Diversified Geographic Footprint SWX’s Diverse Geographic Footprint Strong Regional Demand Dynamics Driving Consistent Growth Strong Regional Pop. Growth Strong Regional GDP Growth Southwest Gas Holdings has assembled a (’20 to ’21 national growth rankings) (YOY % ch
Slide 15: Regulation – Rate Case Activity
Regulation – Rate Case Activity Positive rate case outcomes demonstrate constructive regulatory relationships Nevada Arizona Application Filed August 31, 2021 Application Filed December 3, 2021 ▪ $28.7M requested rate relief at Certification, including:▪ $90.7M rate relief ▪ 2-year recovery of $6.6M
Slide 16: Regulation – Favorable Environment for Growth
Regulation – Favorable Environment for Growth Safety/Reliability/Growth Programs (1) Authorized Rate Base (Billions) ▪ Capital Tracker Programs: ▪ Post Test Year Plant Adjustments $ 5.0 ▪ COYL programs ▪ Expansion Programs: 4.5 ▪ Pipe replacement programs ▪ Mesquite (NV) 4.0 ▪ Mobile home park ▪ Spr
Slide 17: Positioned for the Energy Transition
Positioned for the Energy Transition We are steadfast in delivering on our responsibility to create a sustainable future for our customers and the communities we serve A Variety of Clean Energy Projects Strategic Focus Hydrogen NV Hydrogen blending and creation pilot with UNLV ▪ Operating a tight sy
Slide 18: Benefits for SWX as a Fully Regulated Natural Gas Business
Benefits for SWX as a Fully Regulated Natural Gas Business ✓ Predictable, low-risk growth associated with utility earnings Stable Regulated ✓ Strong, consistent cash flow production by pipeline assets Earnings Profile ✓ Optimized capital plan ✓ Utility: Arizona, Nevada, and California Diverse Geogra
Slide 19: Centuri Standalone Value Proposition
Centuri Standalone Value Proposition
Slide 20: Strategic Utility Infrastructure Services Leader
Strategic Utility Infrastructure Services Leader High-Quality Utility Customer Base Service Territory ⚫ Centuri Corporate Headquarters ⚫ Canyon Pipeline Gas Electric Combination ⚫ Linetec Services ~10,500 ⚫ Neuco employees ⚫ NPL supporting North ⚫ NPL Canada American gas and ⚫ National Powerline ⚫ R
Slide 21: Proven Performance Track Record
Proven Performance Track Record ($ in millions) (2) Revenues Adjusted EBITDA Riggs Distler Pro Forma Riggs Distler Pro Forma $3,000 $300 $2,500 $250 $38 $307 (4) (4) CAGR 15.2% CAGR 14.1% $2,000 $200 $1,500 $150 $2,159 $213 $214 $1,000 $100 $1,948 $1,751 $176 $1,522 $142 $1,246 $1,139 $115 $110 $500
Slide 22: Long-Term Utility Customer Contracts Bolster Cash Flow Quality
Long-Term Utility Customer Contracts Bolster Cash Flow Quality and Growth Potential (1) Diverse Infrastructure Service Offerings Gross Profit by Segment Revenues by Geography Revenues by Segment IL 15% 11% 16% All Other MA 29% 6% 30% AZ 24% 59% 60% 6% TX Canada 5% 13% CA 5% MD PA LA OK 5% IN 3% 5% 4
Slide 23: Strong Tailwinds Across Related Infrastructure End Markets
Strong Tailwinds Across Related Infrastructure End Markets Support Long-Term Growth Electric Utility Distribution Gas Utility Distribution (2) Aging Gas Aging Electric Growing CapEx Spend 5% 2% 9% 15% 13% 16% 21% 19% (1) (3) Infrastructure Infrastructure North American Distribution Capex Distributio
Slide 24: Centuri Well-Positioned with Experienced Leadership and High-Quality Business Model
Centuri is Well-Positioned with Experienced Leadership and High-Quality Business Model ✓ Utility focused infrastructure services company with high-quality businesses located Strategic Focus throughout North America Positioned for ✓ Strong tailwinds across utility end markets support long-term growth
Slide 25: 2021 Financial Results and 2022 Guidance
2021 Financial Results and 2022 Guidance
Slide 26: Summary of Operating Results
Summary of Operating Results Results of Consolidated Operations Year months ended December 31, 2021 2020 (in millions, except per share items) Natural gas operations income $ 187.1 $ 159.1 Utility infrastructure services income 40.4 74.9 Corporate and administrative (26.8) (1.7) Net income $ 200.8 $
Slide 27: Company Guidance
Company Guidance OUTLOOK FOR 2022 2022 Revenue: 2022 Capex: 2022 Revenue: MountainWest Pipelines (5) Term Loan Refinancing : $2.65 - $2.80 billion $650 - $700 million $240 - $245 million $1.6 billion term loan to (2) 2022 Normalized 2022 Net Income : 2022 Normalized be refinanced (1) (4) EBITDA Marg
Slide 28: Strategic Separation to Create Two Great Companies
Strategic Separation to Create Two Great Companies Positioned for Excellence Continuing Strong Growth and Value Proposition for Stockholders ✓ Separation of Centuri unlocks value and positions Southwest Gas and Centuri to optimize stockholder value ✓ Compelling financial profiles, more accurately re
Slide 29: Appendix
Appendix & Southwest Gas. HOLOINGS
Slide 30: Authorized Rate Base And Rates Of Return
Authorized Rate Base And Rates Of Return NATURAL GAS OPERATIONS SOUTHWEST GAS CORPORATION GAS OPERATIONS SEGMENT Authorized % of Authorized Authorized Rate Base Total Rate of Authorized Common Rate Jurisdiction (In thousands) Rate Base Return ROE Equity Ratio (1) Arizona $ 1,930,612 48.49 % 7.03 % 9
Slide 31: Diversified And Growing Customer Base
Diversified And Growing Customer Base NATURAL GAS OPERATIONS Year Ended December 31, 2021 Customer & Operating Margin Distribution 4% By State 11% ▪ Decoupled rate structure in all three Other Sales Transportation states Margin Customers Customers Customers ▪ Residential and small commercial custome
Slide 32: Rate Base Growth
Rate Base Growth Total Increase Decrease $ 9 Rate base amounts reflect estimated total investment in 8 $1.5 facilities necessary to provide $1.5 7 $3.4 utility service. This is different $0.12 6 than our authorized rate base, which is the rate base investment 5 that has been approved by our 4 regula
Slide 33: Summary Operating Results – Utility Infrastructure Services
Summary Operating Results UTILITY INFRASTRUCTURE SERVICES (IN THOUSANDS) Twelve Months Ended December 31, 2021 2020 Revenues $ 2,158,661 $ 1,948,288 (1) Cost of sales 1,950,893 1,734,433 Gross profit 207,768 213,855 (2) General and administrative expenses 104,901 80,939 Amortization of intangible as
Slide 34: Top Customers
Top 20 Customers Total Centuri Revenue >87% From Regulated Utilities UTILITY INFRASTRUCTURE SERVICES (1) Trailing Twelve Months Ended December 31, 2021 2021 Year End Earnings Presentation March 2, 2022 34
Slide 35: Centuri Leadership
Centuri Leadership PAUL M. DAILY KEVIN L. NEILL President and Chief Executive Officer Executive Vice President, Paul is the President and Chief Executive Officer for Centuri Group, Chief Financial Officer and Treasurer Inc. He is responsible for the management, strategy, profitable growth, and opera
Slide 36: Net Debt Summary
Net Debt Summary (in millions as of 12/31/2021) Consolidated Total debt $ 1,247 $ 2,966 $ 450 $ 1,659 $ 6,322 Less: cash (115) (38) (18) (52) (223) Net debt $ 1,132 $ 2,928 $ 432 $ 1,607 $ 6,099 2021 Year End Earnings Presentation 36 March 2, 2022
Slide 37: Credit Ratings
Credit Ratings Southwest Gas Holdings, Inc. Moody's S&P Fitch Issuer Rating Baa2 BBB- BBB+ Outlook Stable Negative Rating Watch Negative Southwest Gas Corporation Moody's S&P Fitch Senior Unsecured Baa1 BBB A Outlook Stable Negative Negative Dominion Energy Questar Pipeline, LLC Centuri Group, Inc.
Slide 38: Non-GAAP Measure
Non-GAAP Measure (IN THOUSANDS) Non-GAAP Measure Operating Margin – Southwest recognizes operating revenues from the distribution and transportation of natural gas (and related services) to customers. Gas cost is a tracked cost, which is passed through to customers without markup under purchased gas
Slide 39: Non-GAAP Measure – EBITDA
Non-GAAP Measure UTILITY INFRASTRUCTURE SERVICES (IN MILLIONS) Non-GAAP Measure EBITDA - The following table presents the non-GAAP financial measures of EBITDA and Adjusted EBITDA for the twelve-month periods ended December 31, 1996 - 2021, which, when used in connection with net income attributable
Slide 40: Non-GAAP Measure – Adjusted Net Income Attributable to Centuri
Non-GAAP Measure UTILITY INFRASTRUCTURE SERVICES (IN THOUSANDS) Adjusted Net Income Attributable to Centuri - The following table presents the non-GAAP financial measure of Adjusted Net Income Attributable to Centuri for the twelve-month periods ended December 31, 2020 - 2021, which, when used in co
Southwest Gas Holdings — FY2021 Earnings Presentation on 6ix