Southwest Gas Holdings, Inc. · NYSE:SWX
Southwest Gas — Proxy Contest (November 2021)
28 slides from Southwest Gas's proxy contest presentation, Nov 24, 2021
Slide 1: Customers Should Not Suffer From Poor Management and Bad Decisions
ICAHN ENTERPRISES L.P. Southwest Gas Holdings (“SWX”) Customers Should Not Suffer From Poor Management and Bad Decisions November 2021
Slide 2: Introduction
Introduction SOUTHWEST GAS (“SWX”) IS IN A PUBLIC DISPUTE WITH ICAHN ENTERPRISES L.P. (“IEP”). THIS PRESENTATION DISCUSSES THE IMPACT TO CUSTOMERS. Situation Overview The “Status Quo” and “Why this Matters to Customers” Poor management + bad decisions = higher costs over the long term for customers
Slide 3: Situation Overview
Situation Overview IEP HAS LAUNCHED A PROXY CONTEST TO REPLACE SWX’S BOARD. IEP HAS ALSO LAUNCHED A TENDER OFFER TO BUY ANY AND ALL SHARES. Southwest Gas Corp. (“SWG”) is a subsidiary of Southwest Gas Holdings, Inc. (“SWX”) Icahn Enterprises L.P. (“IEP”) is a diversified holding company that is ~90%
Slide 4: What is a Proxy Contest? What is a Tender Offer?
What is a Proxy Contest? What is a Tender Offer? IEP IS PURSUING A PROXY CONTEST AND A TENDER OFFER. WE ARE LOOKING TO INFORM AND RECEIVE INPUT FROM THE STATES AS TO PATH FORWARD. Proxy Contest IEP has nominated ten candidates for election as directors to the Board of Directors of SWX, who, if elect
Slide 5: Why Does This Matter to Arizona, California and Nevada?
Why Does This Matter to Arizona, California and Nevada? POOR MANAGEMENT AND BAD DECISIONS INCREASE COSTS FOR CUSTOMERS. SWG’s general and administrative expenses increased 42% under current CEO Hester’s watch. These expenses include million-dollar homes, manicures and golf memberships. Executive com
Slide 6: General and Administrative Expenses Have Grown 42% Since Hester Became CEO
GENERAL AND ADMINISTRATIVE EXEPENSES HAVE GROWN 42% SINCE HESTER BECAME CEO. THIS SEEMS HIGH! SOME IS LIKELY LEGITIMATE BUT... Status Quo: General and Administrative Costs Are Too High Utility General & Administrative Expenses Hester’s Added Cost
Slide 7: Nevada Public Utilities Commission Staff Findings on Expenses
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 8: Status Quo: Management Compensation is Increasing Rapidly
Status Quo: Management Compensation is Increasing Rapidly NEO Compensation(1) Excludes “Change in Pension Value and Non-Qualified Deferred Compensation.” … AND MANAGEMENT HAS DECIDED TO PAY THEMSELVES MORE. COMPENSATION INCREASED 25% AND 27% IN 2019 AND 2020. CEO HESTER WAS PAID $6.5M IN 2020.
Slide 9: Status Quo: Credit Rating Downgrades
Status Quo: Credit Rating Downgrades INCREASING GENERAL AND ADMINISTRATIVE EXPENSES IS NOT THE ONLY PROBLEM. DEBT-HEAVY ACQUISITIONS IN NON-REGULATED INDUSTRIES HAVE LED TO CREDIT RATING DOWNGRADES. CREDIT DOWNGRADES => HIGHER INTEREST => HIGHER CUSTOMER BILLS. Note: Emphasis added.
Slide 10: Status Quo: Questar Pipelines Deal
Status Quo: Questar Pipelines Deal THE QUESTAR DEAL MADE NO SENSE FOR SHAREHOLDERS AND CUSTOMERS. IT ADDS DEBT, RISK AND DISTRACTION. INSTEAD, SWX SHOULD BE PREPARING FOR ENERGY TRANSITION. How does buying a natural gas pipeline from S.W. Wyoming and W. Colorado to Utah benefit the customers of Ariz
Slide 11: Status Quo: Current SWX Board Has Minimal Utility Experience
Status Quo: Current SWX Board Has Minimal Utility Experience SWX’S BOARD IS TRYING TO COVER UP ITS INABILITY TO HOLD MANAGEMENT ACCOUNTABLE BY MAKING MODEST CHANGES. THIS IS NOT ENOUGH.
Slide 12: Our Plan: Experienced & Independent Director Slate
Our Plan: Experienced & Independent Director Slate EXPERIENCED. QUALIFIED. DIVERSE. INDEPENDENT. Ten new directors including former Chairs, CEOs, CFOs, EVPs, GMs, MDs, FERC and State Regulatory Commissioners Eight of the ten directors are independent of IEP. No prior affiliation or overlapping Board
Slide 13: Our Plan: Commitment to Safety
Our Plan: Commitment to Safety THERE IS NO HIGHER PRIORITY THAN THE SAFETY OF OUR CUSTOMERS, OUR EMPLOYEES AND THE PUBLIC. Our directors would commit to maintaining existing safety practices (at a minimum) and would bring their combined expertise to ensure that SWG is doing all that it can to mainta
Slide 14: Our Plan: Likely Steps
Our Plan: Likely Steps SIMPLIFY THE BUSINESS STRUCTURE. OPTIMIZE THE REGULATED UTILITY. We believe our directors will: Act as real fiduciaries to all stakeholders with respect to holding this (or new) management accountable for performance Evaluate IEP’s tender offer and, assuming they determine the
Slide 15: Our Plan: Improve the Balance Sheet
Our Plan: Improve the Balance Sheet IF SWX MONETIZED ITS SOON TO BE ACQUIRED PIPELINE UNIT AND ITS SERVICES UNIT (“CENTURI”), WE ESTIMATE IT COULD RETIRE ALL HOLDCO DEBT AND HAVE $1.1-$2.6 BILLION OF CASH TO FUTURE-PROOF THE BUSINESS. Management’s plan includes completing the Questar deal and adding
Slide 16: Our Plan: Affiliate Transactions No Longer A Worry
Our Plan: Affiliate Transactions No Longer A Worry ASSET SALES WOULD BETTER INSULATE THE BALANCE SHEET, AND WOULD ALSO REMOVE ANY CHANCE THAT CUSTOMERS ARE BEING OVER-CHARGED BY SWX’S SERVICE DIVISION. Centuri provides pipeline maintenance and other modernization services to SWG and other utilities
Slide 17: Our Plan: Customer Savings
Our Plan: Customer Savings WE ESTIMATE THAT OUR SLATE COULD DELIVER CUSTOMER SAVINGS OF AT LEAST $9 PER YEAR OVER THE NEXT 10 YEARS WITH THE POTENTIAL FOR MUCH MORE. Simplifying the balance sheet through asset sales would leave residual cash to restore the balance sheet back to its prior credit rati
Slide 18: Our Plan: Customer Service
Our Plan: Customer Service WE BELIEVE SWX’S ALREADY HIGH CUSTOMER SERVICE SCORES COULD GO EVEN HIGHER. Currently, SWG’s JD Power Customer Service scores are high vs. industry standards We are committed to maintaining and improving SWG’s already high performing customer service scores As SWG’s cost s
Slide 19: Why is IEP Doing This?
Why is IEP Doing This? ECONOMICALLY INCENTIVIZED AND ALIGNED. IEP believes that SWX’s share price is very undervalued. We believe SWX’s share price could increase if SWX simplifies its business into a strictly state-regulated natural gas LDC As a standalone entity, SWX management will not be distrac
Slide 20: Appendix: IEP Overview
Appendix: IEP Overview Icahn Enterprises L.P., a master limited partnership (NASDAQ: IEP), is a diversified holding company engaged in seven primary business segments: Investment, Energy, Automotive, Food Packaging, Real Estate, Home Fashion and Pharma (Metals segment divestiture pending) Legendary
Slide 21: Appendix: IEP Overview (Cont.)
Appendix: IEP Overview (Cont.) Mr. Icahn began his career on Wall Street in 1961 and has become one of the most influential investors in America. He has taken substantial or controlling positions in many companies, including: RJR Nabisco, TWA, Texaco, Phillips Petroleum, Viacom, Marvel, Revlon, Imcl
Slide 22: Appendix: FirstEnergy Case Study
Appendix: FirstEnergy (“FE”) Case Study 02/18/21: FE announced that IEP was a shareholder 03/16/21: FE announced that two Icahn executives (the same two nominated at SWX) had joined the Board. There was no public dispute Since our involvement, FE sold a 20% stake in a business unit at record valuati
Slide 23: Appendix: Proxy and Tender Offer Timeline
Appendix: Proxy and Tender Offer Timeline Proxy Contest: IEP has provided official notice to SWX management regarding the IEP director slate Election to be held at SWX’s 2022 Annual Meeting, which is expected to occur in May, with elected Board sitting shortly thereafter Tender Offer: Current Tender
Slide 24: Appendix: Selling Non-Utility Assets Improves Balance Sheet
Appendix: Selling Non-Utility Assets Improves Balance Sheet $1.6 billion of committed deal financing adjusted for $1 billion of future “equity and equity-linked” implies $600M of holdco debt financing as per SWX financing plan released on 10/5/21.
Slide 25: Appendix: Interest Savings Calculation
Appendix: Interest Savings Calculation Pre-tax basis. Increase in debt in 2021 and beyond is equal to average of 2018-2020 increase.
Slide 26: Appendix: Remaining OPEX and Capital Efficiency Savings
Appendix: Remaining OPEX and Capital Efficiency Savings Pre-tax basis.
Slide 27: 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 28: 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
Southwest Gas Holdings — Proxy Contest (November 2021) on 6ix