Please stand by. Your program is about to begin. 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. [Operator Instructions] 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 Daily, President and CEO of Centuri. 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 announcements we made last week. First off, turning to Slide 5. 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've worked with John for many years, and I know I speak for all Southwesters in thanking him for his leadership and service to our community. Looking to the future, I'm 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 its affiliates, covered on Slide 6. 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 reviewing 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 Frisby Junior, and Henry Linginfelter. A fourth Director will join the board in the event that the company determines not to spin off Centuri. This fourth Director will be Andrew Teno, unless he is otherwise…

Thank you Karen. Starting on Slide 10, we continue to focus on working with all stakeholders to secure positive regulatory outcomes. Most recently, this was in the form of a settlement in our Nevada rate case that was approved by the commission with rates effective April 1st, 2022. This settlement resulted in an increase in revenues of just over $14 million relative to an increase in rate base of nearly $250 million, for a total authorized rate base in Nevada of $1.7 billion. This settlement also provides for an approved ROE of 9.4% relative to a 50% equity ratio. We also received approval to continue our decoupling mechanism, which included a proposal to add certain large commercial customers, which incrementally improves revenue stability, and the amount of revenue we have under our decoupled rate structures. We continue to make progress on our $90 million Arizona general rate case that was filed in December 2021. If approved, we expect this will result in a nearly 40% increase in rate base or $711 million, of which a $190 million is part of our proposed 12-month post test-year plan adjustment. The proposed $90 million increase in revenues is also reflective of our proposed 9.9% ROE and 51% target equity ratio. Another component to the case we're really excited about is our move to zero carbon offset program. This is similar to the program that was recently approved in Nevada, whereby customers would like to move toward becoming net zero or carbon-neutral will be given an option to purchase carbon offsets that will offset their individual combustible related greenhouse gas emissions. We continue to meet periodically with staff and rogue go to discuss the filing and any questions they may have. We are scheduled to receive their testimony in July with hearings beginning in late September 2022. Turning to slide 11, our common theme in our recent activity has been a significant rated growth we continue to experience. Our investments in our system have been driven by new customer growth, robust pipeline, replacement efforts, and capital tracker programs where we have partnered with our regulators on different investment opportunities, as well as a variety of service territory expansions. These various investments in constructive regulatory mechanisms have supported a 79% increase in rate base since 2016. As shown on this slide, we have a strong track record of working with stakeholders to ensure we have the necessary regulatory or legislative frameworks in place to continue to make the capital investments necessary to meet and exceed the expectations of our customers and regulators when it comes to delivering safe, reliable, affordable, and sustainable gas service. We remain focused and committed to continuing to work with all stakeholders to identify and execute on additional opportunities that will be presented by the attractive service territories that we serve. Now I'll turn the call back to Karen to discuss MountainWest.

Thanks, Justin. Turning to Slide 12 to discuss MountainWest, an attractive asset with incredibly strong customer base, evidenced by deep long-term relationships and followed customer credit profiles. In service of these customers, MountainWest has proven itself as a critical platform and key intermediary for its customer base. We believe this substantially minimizes re-contracting risk, and we believe there is more value to be unlocked in MountainWest. As I mentioned, we also have investment opportunities that offer the potential for significant growth. Turning to Slide 13. One examples are carbonate half expansion, which held a successful open season. We're targeting a July 1, 2023 target in-service date, and expect it to deliver capacity of 47,000 dekatherm per day volume over 15 year term. We also have other expansion projects that would provide additional delivery and receipt points for increased capacity, ranging from approximately $30,000 to $325,000 dekatherm per day. In summary, MountainWest is expected to deliver significant value for our stockholders. Now I'll turn the call over to Paul to talk about Centuri.

Thank you, Karen. Now turning to Slide 14, in Centuri. Southwest Gas acquired Centuri for $25 million in 1996, and since then has built Centuri into the scale business than it is today. A business that generated record revenues of $2.5 billion on a proforma basis in 2021. Having delivered sustained organic growth and with the addition of successful acquisitions like Link-Line, NewCo, Linetec, and most recently Riggs Distler, Centuri has substantial scale capabilities and geographic diversity. With our North American focus on utility infrastructure investment, a long-term multi-decade relationships for blue-chip customers Centuri is well positioned to deliver consistently strong earnings and cash flow. As Greg Peterson will note, during the full company guidance, Centuri reaffirms its guidance for 2022 and is also expecting strong sustained growth during the 2022 to 2026 five-year period, including revenue compound annual growth rate of 7% to 8% percent, adjusted EBITDA compound annual growth rate of 9% to 11%, adjusted EBITDA margin of 11.5% to 13% by 2026 and beyond. And a more diversified growth -- gross profit by work type within more even split between gas and our electric business. Moving to slide 15, you can see that Centuri is very well positioned to benefit from what many trade sources forecast to be decades of heavy investment across our end markets of electric, gas, 5G, data com and energy transition, which includes offshore wind renewables. Before I turn the call over to Greg, I'd like to highlight just a few of the very recent contract awards, extensions or expansions that support our long-term growth expectations. These include a $125 million offshore wind support contracts, that are in backlog and that we are [Indiscernible] for later this quarter. Several additional offshore contracts are pending award that would be performed over a multiyear period; it should be noted that the magnitude of these contracts is very significant in comparison to the existing offshore wind contracts we already have in backlog. A new multiyear MSA contract was recently signed for 5G datacom work with a new client in the Northeast. Cross-selling between Riggs Distler and Linetec resulted in expansion of an existing bricks contracts into additional 5G datacom work over the next five years throughout the Southeast United States. Linetec's electric transmission and distribution crew count has expanded by over 25% in the past two quarters alone, providing additional work for existing customers. And we negotiated contract modifications and extensions with two of our largest gas LDC customers, for increased scope and higher rates, spanning multiyear durations. With that, I'll turn it over to Greg to discuss first quarter 2022 business results and performance highlights.

Thanks, Paul. Earlier this afternoon, we announced our first-quarter 2022 earnings and provided segment financial and some additional statistical information. We will file our first quarter 2022 Form 10-Q tomorrow with the SEC. Please refer to these documents for a comprehensive analysis of our first-quarter results. As shown on slide 17, adjusted consolidated EPS was a $1.74 per diluted share for the first quarter of 2022. We are focused on delivering value to our stockholders, providing excellent service to our customers, and enhancing opportunities for our employees. Let me touch on some of the highlights that are operating segments. At Southwest Gas, our natural gas distribution utility, we continue the trend of growing our customer base, adding 38,000 customers over the past 12 months. Those new customers provided about half of the $14 million margin increase between the quarters with the other half coming primarily from recoveries under the VSP and coil programs in Arizona, as well as rates release in California. For the quarter we invested a $141 million in the expansion, safety, and reliability of our natural gas distribution system to better serve our customers. We also completed a $600 million debt financing for 10 years of 4.05%. At MountainWest, we recorded $67 million of revenue during our first quarter of ownership and recognized adjusted net income of $23.5 million, both were consistent with our internal expectations. In March 2022, Southwest Gas holdings issued $468 million of common stock as part of the permanent financing for our acquisition of MountainWest. This is about half of our originally estimated equity raise and completes the equity components of the MountainWest financing. At Centuri, first quarter revenues were $524 million reflecting 13% organic growth. Coupled with the addition of Riggs Distler, total revenue growth was 44% when compared to the first…

Thank you Greg. I want to touch on a couple of the key points we've made today. We have compelling opportunities in each of our businesses that we continue to pursue. We're pleased to settle the proxy contest with Mr. Icahn, so we can focus on completing a well-run successful strategic alternatives process to maximize value for all stockholders. And we're confident that there will be strong interest in Southwest Gas as we conduct an expedition, review of strategic alternatives. With that I'll turn it over to the operator to explain the process for asking questions.

[Operator Instruction] And we will take our first question from Richard Sunderland with JPMorgan. Please go ahead, your line is open.

All right. Good afternoon. And thank you for the time today. We appreciate the update across the board here. Maybe you wanted to start on some of the settlement language at first, particularly around the Centuri spin and the 90-day window. Is that indicative of a kind of a 90-day decision around interest in the whole company sale with Centuri then being the alternative path forward in terms of the tax-free spin or just any high-level color you can lay out around the process for the company versus Centuri will be helpful.

This is Karen. And yes, with respect to the 90 days, we are looking into make some types of determination with respect to whether the best option it is, is to spend Centuri. We're really looking at all alternatives at this point, so that the ideas to maximize value for all shareholders and we don't know what that is at this point. And so the 90 days is to give us the opportunity to make a determination as to whether the best option it is to spend Centuri or not.

Understood, so just in terms of 90 days then is, is that kind of process-wise, the next time-frame to look at for an update absent -- some sort of announcement sooner?

No, we really want to be as transparent as possible with all of our stockholders. And so as soon as we have additional information to update, we will do so. It may be prior to that and it may not be depending upon the process, we're really focused on running a well ran process at this point and we don't know -- we know it will be timely and focused, but we don't know exactly the timing on all of that.

Got it. That's helpful and then maybe just sort of the results themselves. Can you speak a little bit more to the inflation impacts from the quarter and I guess what offsets you're seeing your stay within the '22 range?

This is Greg. Certainly inflation has had an impact and I think for not only for us, but for all companies, certainly in the United States. And we are working with that. I personally think and I think as we look forward, we anticipate that the inflationary impacts will somewhat diminish as we move throughout the year. We know that interest rates on the other hand, will feel some of the impact as those rates are being moved upward by the Fed. But we think that we're still on track for 2022 guidance and are working to mitigate the impacts of inflation on our operations.

Got it. So are you targeting kind of a catch-up over the balance of the year or did you have some cushion already baked in that's basically bearing the inflation now?

As I mentioned, Rich, we're monitoring and certainly working to minimize the impact of inflation. I don't think we ever really have cushion in our expectations, but we do have a range of expectations and we're working to stay within that range.

Got it, very helpful. Thank you for the time.

Thanks.

And we'll take our next question from Julien Dumoulin-Smith with Bank of America. Please go ahead, your line is open.

Hey, good afternoon, team. Thanks for the time and the opportunity. Congrats to Karen for the promotion here. If I can jump into the process here, and I want to word this carefully just given the parameters of the call, but broadly speaking, what level of interest have you received already? Can you speak to the inbounds? It seems as if you've referred really some level of interest already. And then given the backdrop of rising rates, and you've been running a process for a bit. Can you talk a little bit about how that could be impacting the process altogether here? I'll be -- I'll let you guys respond as open ended as possible here. Just given the sensitivity of -- and your ability to respond.

Thank you, and I appreciate that very much. First of all, we have received multiple inbound interest already. Our financial advisors really and the direction of our strategic transactions maybe are making outbound calls to ensure our process is robust. We believe there will be significant interest in Southwest Gas and its businesses. I'm not going to go beyond that with respect to what inbound calls we have. Our financial advisors are reaching out, trying to make sure that we're looking at all possible sellers or buyers I should say, and we sent out process letters containing process detail, which provide for confidential information. Parties will need some time to conduct their preliminary due diligence, after which we'll expect non-binding proposal. From there, we'll analyze the proposals and determine which alternative will recreate the most value for our stockholders.

Got it. I wish you the best on that effort. And if I can just follow-up on a couple of more mundane items here. Specific the year, just capturing the 5% to 7% rate base CAGR, your gross CapEx range of $2.5 billion to $3.5 billion, that's a particularly wide range here. Can you kind of capture how do you think about what that rate base and earnings growth could be at the lower and higher end of that CapEx, if you will? Again, understanding that there is [Indiscernible] you see a range of recovery scenarios and earned returns that might accompany those scenarios as well.

Yes, this is Greg. I will certainly -- starting if Justin -- I have some additional commentary. But certainly by having a five-year range of $2.5 billion to $3.5 billion. That is what derives as you are well aware, Julien, the rate base CAGR that we have, we have a solid and a quite a large rate base currently existing and will be finalized the Arizona rate case we expect to add a significant amount to that. So that will be the big thing, there is not really much in the way of deferred taxes that come into play when we calculate rate base, so the rate base growth is a direct correlation to the amount of CapEx that we have. And we're just providing ourselves of some flexibility to focus our CapEx, and both the amount and the timing to the areas will provide the best benefit for our stockholders and allow us to provide a safe and reliable service to our customers.

Fair enough. And then the last one if I can just squeeze it in here if I can. On offshore as you talk about it, the various opportunities you alluded to, how substantive could that become as a part of Riggs here? Is there any framework or range that you could offer to the extent which that you're awarded any number of these opportunities? How meaningful is the percent of the total business on any metric could you speak to?

Julien, this is A - Paul Daily here. We have framework agreements in place with the client that we're working with and they basically just as you noticed just -- notice to proceed often they call them callouts. Really the thing that would hold me of amount is more environmental, efficient mount of lobster sue and they are successful. But they are extending their very material. I don't think I should be saying more than that as far as what percent of Riggs's business, it would be, but it's a very bright future.

Excellent. Well, I wish you all the best. Speak soon. Thank you.

And our next question comes from Ryan Levine with Citi. Please go ahead. Your line is open.

Thank you for taking my question. I guess on the utility process, are you open to selling utilities in pieces or on a state-by-state basis. And is there a certain ownership per threat -- ownership percentage that are -- that would trigger certain regulatory reviews and the base that you operate.

This is Karen. So we really have been focused on the process of looking at either to sell the entire company, or each one of individual businesses. So the utility, the MountainWest or Centuri, and not on breaking up the utility into pieces at this point. You had a follow-up question. What was -- what was that?

In terms of ownership percentages in the 25% that was in the recent settlement, can you elaborate as to why it was 25%?

Sorry. This is Greg, Ryan. So you're asking why 25% is -- that is the Nevada threshold. If you have the change in ownership, that requires then Nevada to be involved or allows them to be involved in that process. So I think you can find some correlation between that and the 24.9% that we are affording through the poison pill to all of our shareholders.

That's right. Each one of the states require -- would require approval, and the 24.9% would require regulatory approval if we go beyond that.

Okay. And what's your tax basis in Centuri as of the end of the quarter?

We do not disclose that, hence at this point we'll not be disclosing that, but the tax is an important issue with respect to looking at how we separate Centuri going forward and why we've been focused on the spend and doing it in a tax-free manner.

Okay. And then last topic for me, in terms of the midstream CapEx $100 million number that you put out there, with the release. What portion of the CapEx is Carbonate? And can you provide additional color on the drivers of the other projects?

The carbonate is a very small portion of that CapEx, the primary piece is related to a project that we will be going to open season on shortly as the over thrust pipeline. Over thrust pipeline -- there's a lot of demand for expansion, it'll be a compression of projects that will be going out on an open seasons for. That will take several years to put in place, but is very significant project and allows gas to flow from east to west. And so we've had a lot of demands from customers for that project.

Appreciate the color. Thank you.

Thanks, Ryan.

And as a reminder, if you'd like to ask a question today, [Operator Instructions].We can pause for a moment to allow further questions to queue. And there are no further questions on the line at this time. So this will conclude the Q&A portion of today's conference. I would now like to turn the call back over to Mr. Boyd Nelson for any closing remarks.

Thank you, David. And thank you all for joining us today. This concludes our conference call. Thank you for your interest in Southwest Gas Holdings. Have a good evening.

This concludes today's Southwest Gas Holdings First Quarter 2022 Earnings Call and webcast. You may disconnect your line at this time, and have a wonderful day.