Southwest Gas Holdings, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Southwest Gas Holdings 2021 Third Quarter Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session, and if you would like to ask a question during that time, simply press star 1 on your telephone keypad. If anyone should require assistance during the conference, please press star 0. I would now like to turn the conference over to Greg Peterson, Senior Vice President and Chief Financial Officer, please go ahead.

Thank you, Alexander, and thank you, everyone, for joining us, and welcome to Southwest Gas Holdings' third quarter 2021 earnings conference call. As Alexander stated, my name is Greg Peterson, and I'm the Senior Vice President and CFO of the company. Ken Kenney, our Vice President of Finance and Treasurer, is ill today and unable to join us. Our conference call is being broadcast live over the Internet. For those of you who would like to access the webcast, please visit our website at www.swgasholdings.com and click on the conference call link. We have slides on the Internet which can be accessed to accompany our discussion. Today we have Mr. John P. Hester, President and Chief Executive Officer, Ms. Karen S. Haller, Executive Vice President, Chief Legal and Administration Officer, Mr. Justin L. Gas Corporation and other members of senior management to provide a brief overview of the company's operations and results ended September 30th, 2021, and an update to our earnings per share guidance for 2021. Also, the company will address certain factors that may impact this coming year's earnings and provide longer-term guidance for 2022. Further, our attorneys have asked me to remind you that some of the information that will be discussed today contains forward-looking statements. These statements are based on management's assumptions, which may or may not come true, and you should refer to the language on slide three of this presentation, as well as in the press release and also our SEC filings for a description of the factors that may cause actual results to differ from our forward-looking statements. All forward-looking statements are made as of today, and we assume no obligation to update any such statement. With that said, I'd like to turn the call over to John.

Thanks, Greg. Turning to slide number four, we have an outline for today's call. I will 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 rate-based 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 number five, 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. We're 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 our regulated business mix and allow us new opportunities in the energy transition with a business that has a robust stream of steady contracted earnings and cash flows. We're also very excited to have separately announced today the addition of two new board members effective January 1. We're happy to welcome E. Renee Conley and Carlos Ruiz Sanchez to our board the beginning of next year as we anticipate the retirements of two valued board members, Michael Malarkey and Stephen Comer, at our May annual meeting. The addition of these two 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 won't 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 We're 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 Trace 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 Century Infrastructure Services business, We continue our high-quality acquisition track record with the completed acquisition during the quarter of Riggs-Dissler, expanding Century's geographic footprint and service offering suite to include the provision of unionized electrical contracting services, 5G, offshore wind, and more. Relatedly, we were excited to see Riggs-Dissler being selected as general contractor for the 880-megawatt Sunrise Wind offshore wind farms. Overall, we saw Century's third quarter revenues increase by $52 million, or 9%, and we're also eager to explore the opportunities that Century may have to capitalize on as part of the federal government's infrastructure spending plans. Moving to slide six, we present additional detail on our recently announced new board members, Ms. Connolly and Mr. Rui-Sanchez, bring excellent experience and skills to our board, and we're very excited to welcome them to the holdings team. With the simultaneously announced planned retirements of Mr. Malarkey 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 years. Current Holdings Director Robert Bogner is anticipated to become chairman of the Holdings Board upon Mike Malarkey's retirement in May. Our board's continuing refreshment efforts ensure shareholders are represented by a board of directors with excellent diversity of business experience, professional background, gender, and ethnicity. Turning to slide seven. We recap the excellent fit and finish that our planned year-end Questar Pipeline acquisition brings to Holdings shareholders. A comprehensive Questar Pipelines asset brings high-quality contracted customers with an average relationship length of 49 years. Questar Pipelines are a unique and hard-to-replace suite of assets that serve strong and growing regional demands and provide strong and consistent cash flows and earnings. Questar Pipelines is also an excellent cultural fit with Southwest Gas Holdings, given our mutual and independent prioritization of safety, reliability, affordability, customer service, and environmental stewardship. For Holdings, welcoming Questar Pipelines to our family increases our regulated business mix, reduces earnings volatility and business risk, increases earnings per share, provides strong incremental cash flows, allows us increased participation in the energy transition with opportunities in renewable natural gas, responsibly sourced natural gas, hydrogen, carbon dioxide transportation, and more. The acquisition will be done with a flexible financing plan that enables holdings to maximize returns for our shareholders. On slide eight. We provide further insight into the positive ramifications of the Riggs-Dissler transaction that we closed during the quarter. This acquisition fits a need that we've communicated to shareholders over the past two years and will accelerate earnings per share and dividends for Holdings shareholders. As mentioned earlier, Riggs-Dissler's core competencies in unionized electric services, storm restoration, 5G, and renewable energy provide Century an enviable expansion opportunity to grow its electric services segment, expand further into the renewable energy space, and support our nation's drive for changes to reduce greenhouse gas emissions. We're very excited that the acquisition will be accretive for 2022, likely exhibiting a similar seasonal business revenue profile to Century's existing businesses. Turning to slide nine. We show the exceptional growth in EBITDA that the Century business has cultivated over the past 10 years. Serial successive acquisitions, including LinkLine, NUCO, LineTech, and now Riggs-Dissler, along with organic growth, has demonstrated this board and management team's focus on creating tremendous shareholder value and growing the Century business. 2020 EBITDA is five times that experience just 10 years ago. While this business could have been sold two, four, or six years ago, its continued growth under the stewardship of the Holdings Board has allowed continued polish of this gem of a business, while EBITDA valuation multiples for the infrastructure services sector have expanded dramatically over those same periods. Now more than ever, Century is poised to increase Holdings' profitability while providing a growing source of cash to fund continued capital investments in our state-regulated distribution business. Moving to slide 10, the Holdings board and management team believe our utility-oriented businesses, state-regulated distribution systems, federally-regulated pipeline assets, and unregulated utility infrastructure services offer a compelling and complementary investment proposition for our shareholders. Continued strong growth is inherent in each aspect of the business, from strong regional economies, from utilities refreshing aging distribution systems, from significant federal governmental spending initiatives to support new infrastructure, and the ability for all these businesses to support the energy transition that desires to increase renewable opportunities while recognizing customer demands for reliability and affordability. The businesses exhibit great diversity from varied regulatory venues, geographic locales, and the symbiotic nature of state-regulated segments that grow earnings through significant capital reinvestment with federally regulated and unregulated segments that produce excellent cash flows. comprehensive holdings growth theme will reward shareholders with strong earnings and dividend growth while maintaining investment-grade credit ratings and serving current customer needs while aggressively pursuing opportunities in the years ahead to support increased deployment of renewable energy resources nationwide. With that, I'll now turn the call back to Greg.