Southwest Gas Holdings, Inc. · NYSE:SWX
Southwest Gas — Proxy Contest (November 2021)
18 slides from Southwest Gas's proxy contest presentation, Nov 15, 2021
Slide 1: Ratepayers and Shareholders Are Suffering at the Hands of the Board and Management
ICAHN ENTERPRISES LP. Southwest Gas Holdings (“SWX”) Ratepayers and Shareholders Are Suffering at the Hands of the Board and Management November 2021
Slide 2: Additional Information; Participants in the Solicitation
Additional Information; Participants in the Solicitation Additional Information and Where to Find It; Participants in the Solicitation and Notice to Investors SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT AND OTHER DOCUMENTS RELATED TO THE SOLICITATION OF PROXIES BY CARL C. ICAHN AND HIS
Slide 3: Forward-Looking Statements; Special Note Regarding Presentation
Forward-Looking Statements; Special Note Regarding Presentation Forward-Looking Statements Certain statements contained in this presentation are forward-looking statements including, but not limited to, statements that are predications of or indicate future events, trends, plans or objectives. Undue
Slide 4: Introduction
Introduction GOAL TO PROVIDE INTRODUCTION TO COMPLICATED SITUATION. Topics: SWX Share Price Underperformance Causes of Underperformance (low ROE, high G&A, broken trust, excessive debt) Multi-Year Track Record Revealing a Lack of Accountability and Oversight Failing Diversification Strategy Timeline
Slide 5: Long-Term Share Price Underperformance
Long-Term Share Price Underperformance SINCE HESTER BECAME CEO, SWX’S SHARE PRICE MATERIALLY UNDERPERFORMED PEERS. Regulated Gas LDC Peers
Slide 6: Long-Term Share Price Underperformance: Utility Services Peers
Long-Term Share Price Underperformance EVEN MORE SHOCKING WHEN CONSIDERING PERFORMANCE OF UTILITY SERVICES PEERS! Utility Services Peers
Slide 7: Return on Equity (ROE) Underperformance
(1) SWX adjusted for excess COLI income. Unadjusted ROE of 7.5% as per SWX. Return on Equity (ROE) Underperformance 42% INCREASE IN G&A SINCE HESTER’s REIGN LOW ROE IS LIKELY THE BIGGEST DRIVER OF STOCK PRICE UNDERPERFORMANCE. SWX HAS THE LOWEST ROE OF UTILITIES IN ARIZONA AND NEVADA. AZ & NV 2020 U
Slide 8: ROE Underperformance Partially the Result of Bloated G&A
ROE UNDERPERFORMANCE PARTIALLY THE RESULT OF BLOATED G&A THAT HAS GROWN 42% SINCE HESTER BECAME CEO. ROE Underperformance Utility G&A Hester’s Added Cost
Slide 9: Nevada Public Utilities Commission Staff Findings on Spending
Source: State of Nevada Public Utilities Commission filings (2018-2020). “Staff believes SWG needs to change its culture to be a better steward of ratepayer money, which begins by holding SWG’s Senior Executives accountable for the including of such invoices, costs and expenditures without thorough
Slide 10: ROE Underperformance and Declining Credit Ratings
ROE Underperformance … AND PARTIALLY THE RESULT OF DECLINING CREDIT RATINGS
Slide 11: The Board Fails to Hold Management Accountable & Tie Pay to Performance
The Board Fails to Hold Management Accountable & Tie Pay to Performance NEO COMPENSATION INCREASED 25% AND 27% IN 2019 AND 2020 WHILE SWX UNDERPERFORMED THE S&P UTILITIES INDEX BY 24% AND 18%, RESPECTIVELY. THE BOARD LET HESTER PAY HIMSELF $6.5M IN 2020! NEO Compensation(1) Excludes “Change in Pensi
Slide 12: Board is Over Tenured
Board is Over Tenured THEY CARE MORE ABOUT KEEPING THEIR BOARD SEATS THAN QUESTIONING THE $6M MAN. Carlos Ruisanchez served as President and CFO of Pinnacle Entertainment – the same Company that Stephen Comer served as a Director. Potential crony? Is anyone surprised? There is more casino experience
Slide 13: Underperformance is Masked by M&A Diversification and Optionality
Underperformance is Masked by M&A Diversification and “Optionality” WE BELIEVE THE BOARD AND MANAGEMENT ARE INTENTIONALLY RUNNING A COUNTER-TREND M&A DIVERSIFICATION STRATEGY TO DISTRACT FROM OPERATIONAL UNDERPERFORMANCE. Industry Trend is to Simplify by Selling Non-Core Assets. SWX is Pursing a Con
Slide 14: Questar Pipelines Deal is the Last Straw
Questar Pipelines Deal is the Last Straw OVER-PRICED, UNDER-THOUGHT, NO SYNERGIES, DILUTIVE TO GROWTH (AND SOMEHOW MAYBE EVEN TO EPS). THE QUESTAR DEAL IS SIMPLY A DISASTER. Why pay $300M more than Warren Buffet? He had so many synergies his deal was blocked. SWX is going to have to increase costs.
Slide 15: Timeline
Timeline WE HAVE COMMUNICATED OPENLY AND TRANSPARENTLY IN BEST INTERESTS OF ALL SHAREHOLDERS, WHILE BOARD AND MANAGEMENT ONLY DESTROY VALUE. Questar deal is leaked – stock falls Icahn objects to Questar deal – stock rises SWX pursues Questar deal anyway – stock falls Icahn makes offer and shows a pa
Slide 16: Our Financing Proposals
Our Financing Proposals WE HAVE OFFERED MULTIPLE SHAREHOLDER-FRIENDLY OPTIONS AND RECEIVED MINIMAL COMMUNICATION FROM THE COMPANY. Proposal #1: If SWX must issue equity, issue to your existing shareholders through a rights-offering We offered to backstop this at no cost and to share that backstop wi
Slide 17: Our Plan
Our Plan SIMPLIFY THE BUSINESS STRUCTURE. OPTIMIZE THE REGULATED UTILITY. NEW BOARD AND NEW MANAGEMENT COMPRISED OF EXPERIENCED PROFESSIONALS. We believe our directors will: Act as real fiduciaries to the stakeholders with respect to holding this (or new) management accountable for performance Fairl
Slide 18: The Upside & Downside for All Stakeholders
The Upside & Downside for All Stakeholders IF SHAREHOLDERS ACT, SIGNIFICANT SHARE PRICE APPRECIATION IS POSSIBLE. IF WE DO NOT ACT, CONTINUED HIGH-RISK LOW-RETURN ACTIONS WILL INEVITABLY LEAD TO CALAMITY.
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