Southwest Gas Holdings, Inc.

Ladies and gentlemen, good day and welcome to the Southwest Gas Holdings First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the prepared remarks. If you would like to ask a question at that time, please press the star and 1 on your telephone keypad. As a reminder, today's conference is being recorded. I would now like to turn the call over to Boyd Nelson, Vice President Strategy and Investor Relations for Southwest Gas. Please go ahead, sir.

Thank you, David. Good afternoon, everyone, and welcome to the Southwest Gas Holdings First Quarter 2022 Earnings Call. Throughout the call, we will be referencing presentation slides, which we have posted on our IR website. I am joined on today's call by Karen Haller, new President and CEO of Southwest Gas Holdings, Paul Daley, President and CEO of Century, Greg Peterson, Senior Vice President and Chief Financial Officer, and Justin Brown, Senior Vice President and General Counsel of Southwest Gas Corporation. Please note that on today's call, the company will address certain factors that may impact this coming year's earnings and provide some longer-term guidance. 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 slides 34 and 35 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, I'll now turn the call over to Karen.

Thanks, Boyd, and good afternoon, everyone. I'm pleased to join you today as president and CEO of Southwest Gas to discuss the company's first quarter results and provide an update on our strategic alternatives process and the announcements we made last week. First off, turning to slide five, John Hester has retired as president CEO and board member of the company, and I have been appointed by the board to serve as president and CEO. I worked with John for many years, and I know I speak for all Southwesters in thanking him for his leadership and service to our communities. Looking to the future, I am excited to step into this role at such an important time for the company. Before I begin discussing the company, I'd like to briefly cover our agreement to settle the proxy contest with Mr. Icahn and his affiliates, covered on slide six. Our board received valuable feedback from our stockholders and determined the best course of action was to eliminate the uncertainty of the proxy contest and concentrate on the strategic alternatives review process. We are committed to continuing valuable engagement with our investors as we work to execute on our strategy to maximize value for all stockholders. Some of the key terms of our settlement agreement with Mr. Icahn are outlined here. First off, at least three and up to four new directors will join the Southwest Gas Board. The details around this are as follows. Mr. Icahn has the right to appoint at least three directors, effective immediately following the annual meeting. These directors are Andrew Evans, Russell Frisbee Jr., and Henry Lingenfelter. A fourth director will join the board in the event that the company determines not to spin off Sentry. This fourth director will be Andrew Tino, unless he is otherwise already appointed to the board, in which case one of Mr. Evans, Mr. Frisbee, or Mr. Lingenfelter will be appointed instead. The decision on whether to spin off Sentry will be made within 90 days after the date of the settlement agreement. Mr. Icahn may also elect to have Mr. Tino replace one of the three new directors within 90 days after the date of the settlement agreement. Current board members Bob Boatner and Thomas Thomas have resigned effective immediately following the annual meeting. Current board member Jose Cardenas will resign from the board if and when a fourth new director joins the board. Our current board member Renee Conley will be appointed as chair of the board following the annual meeting. Taken together with my addition to the board following the annual meeting, the board will comprise 11 directors, 10 of whom will be independent. Also, the board's Strategic Transactions Committee will be expanded following the annual meeting to comprise six new members. These members will be three current directors and existing committee members Anne Mariucci, Carlos Ruiz Sanchez, Jane Lewis Raymond, and three new directors, Mr. Evans, Mr. Frisbee, and Mr. Lingenfelter. If Mr. Tino joins the board, he may replace one of the new committee members at Mr. Icahn's discretion. Some other key terms of the agreement are as follows. Mr. Icahn has agreed to withdraw his slate of director nominees with respect to the annual meeting, and he will vote in favor of our nominees. We have agreed to amend the terms of the Southwest Gas Stockholder Rights Plan to increase the triggering percentage from 10% to 24.9%. Mr. Icahn will amend his $82.50 tender offer to extend the expiration date to the date that is 10 business days following the date of the amendment. As part of that amendment, he will purchase shares validly tendered and not withdrawn as of that date subject to the 24.9% ceiling. Mr. Icahn will not further extend or amend his tender offer. The agreement also includes customary standstill and voting commitments. These will extend until 30 days prior to the end of the advance notice period for the 2024 Annual Meeting in the event there is a definitive agreement for the sale of the entire company or our natural gas utility. Otherwise, they extend until 30 days prior to the end of the advance notice period for the 2023 Annual Meeting. While the standstill is in effect, Mr. Icahn has agreed to vote all of his shares in favor of any board-approved sale of the entire company for its natural gas utility, Southwest Gas Corporation. Finally, in order to provide stockholders with adequate time to review the terms of the settlement agreement, we rescheduled the company's upcoming annual meeting to May 19th. The record date of March 21st, 2022 remains unchanged. Now, turning to slide seven, I can provide an update on the strategic alternatives process. As we previously talked about, on April 10, 2022, the Board received a credible, attractive written proposal to acquire the whole company. After our legal and financial advisors engaged in follow-up discussions with the potential acquirer over the next several days to clarify certain elements of the proposal, our Board concluded that commencing a formal process To review strategic alternatives would be in the best interest of all our stockholders. To lead the process, our board formed a dedicated strategic transactions committee, which, as I mentioned, will now comprise six directors. The expanded strategic transactions committee has deep collective regulatory and M&A experience and expertise. As part of the strategic alternatives review process, we will consider all available alternatives and pursue the option that will create the most value. These include considering the sale of the company, a separate sale of one or more of its business units, and or the spinoff of Century, which is expected to be tax-free to stockholders. The committee also engaged its own independent financial advisor, Mollison Company, to work with the company's lead financial advisor, Lazard, to conduct a thorough auction process. We are confident that there will be significant interest in Southwest Gas. Moving on to slide eight, as you can see, we have three independently strong businesses under a consolidated platform. This provides a position of strength and offers many paths for value creation for all our stockholders. The Southwest Gas utility delivered 187 million in net income in 2021. We are positioned for value creation with stable long-term rate-based growth of 5% to 7%, driven by $2.5 to $3.5 billion of investments over the next five years. Mountain West, with its unique structurally advantaged critical infrastructure, has deep long-term customer relationships. More than 90% of Mountain West's revenue is contracted, and over 70% of revenues are backed by investment-grade customers. Finally, Century has been completely transformed from a low-growth infrastructure services company focused primarily on gas utility customers to a scaled, pure-play utility services platform in attractive end markets with a high-quality business model. We are confident in Century's long-term prospects, founded on a proven performance track record of a 17% compound annual revenue growth rate over the last 10 years. I'll now turn the call over to Justin to discuss our utility business and our rate case activity.