Q3 2021 Southwest Gas Holdings Inc Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by and welcome to the southwest gas Holdings two added one third.
Third quarter earnings conference call.
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 one on your telephone keypad.
If anyone should require assistance during the conference. Please press star zero.
I'd now like to turn the conference over to Greg Peterson, Senior Vice President and Chief Financial Officer. Please go ahead.
Thank you Alexandra and thank you everyone for joining us and welcome to southwest gas Holdings third quarter 2021 earnings Conference call.
Alexander stated my name is Greg Peterson, Senior Vice President and CFO of the company.
Ken Kenny 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 Dot SW gas hold these dot 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 <unk> Executive Vice President and Chief Legal and Administration Officer, Mr. Justin L. Brown Senior Vice President General Counsel of Southwest Gas Corporation and other members of senior management to provide a brief overview of the companys.
Operations that results ended September 32021.
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 statements.
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'll start reviewing some highlights and recapping the investment thesis for our shareholders of 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 our recent customer growth liquidity and capital expenditures dividend rate base growth and expectations for 2021 and beyond.
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 our holdings perspective last month, we announced the planned acquisition of Questar pipeline.
We're excited about this planned acquisition, which is forecasted to be accretive to earnings in 2020 to cluster, our pipelines and the 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.
Secondly, 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.
<unk> January one we're happy to welcome Rene Connolly and Carlos really Sanchez to our board at the beginning of next year as we anticipate the retirements of two valued board members, Michael Malarkey and Stephen Comber 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 is now seen was anticipated to bolster our board for the new year in advance of expected <unk>.
Rector retirements at the May annual meeting.
Also separately today, we filed a $14 nine response to a tender offer for southwest gas holdings shares presented last month like Carl Icahn that tender offer seeks to secure shares of southwest gas holdings.
Rice of $75, a share which in consultation with our outside investment bankers and attorneys are board has concluded is an adequate.
We won't be going into the numerous factors the board considered and deciding to tender offer on this call, but all of that content can be found in the response to the tender offer that we filed today with the Securities and Exchange Commission.
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 37000 net new customers over the past year on the regulatory front you saw a very promising decision from the Arizona Corporation Commission just this past week.
Authorizing the recovery of $74 million and 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%.
We continued executing on our sustainability goals.
With our partnership with Pima County in Arizona, supporting the harvesting of renewable natural gas at the now operational Tres Rios RMG 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 rigs distler.
Expanding centuries geographic footprint and service offerings suite to include the provision of unionized electrical contracting services five G offshore wind and more Relatedly. We were excited to see rigs destler being selected as general contractor for the 880 megawatt Sunrise wind.
Offshore wind farm overall, we saw centuries third quarter revenues increased by $52 million or 9% and we're also eager to explore the opportunities that century, you 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 Connelly and Mr. Rielly Sanchez bring excellent experience and skills to our board and we're very excited to welcome them to the holdings team, but the simultaneously announced planned retirements of Mr. <unk> and Mr. <unk>.
At our annual meeting.
On year, we anticipate the average tenure of southwest gas Holdings directors will decrease from $10 three years two eight.
<unk> Holdings director, Robert Wagner is anticipated to become chairman of the Holdings Board. Upon <unk> retirement in May Our board is continuing refreshment efforts ensure shareholders are represented by our board of directors with excellent diversity of business experience professional background.
Tender and ethnicity.
Turning to slide seven.
We recap the excellent fit and finish that are planned yearend questar pipeline acquisition.
<unk> to holding shareholders comprehensive cluster, our pipelines asset brings high quality contracted customers with an average relationship length of 49 years Quest, our pipelines are unique and hard to replace suite of assets that serve strong and growing regional demands and provides strong.
And consistent cash flows and earnings Questar pipeline 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.
<unk> holdings welcoming questar pipeline sort of family increases our regulated business mix reduces earnings volatility and business risk increase.
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 rigs distiller 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 in dividends for holdings shareholders.
And earlier rigs this core competencies and unionized electric services storm restoration five G and renewable energy provided century, an enviable expansion opportunity to grow its electric services segment expand further into the renewable energy space and support our.
<unk> drive for changes to reduce greenhouse gas emissions.
Excited that the acquisition will be accretive for 2022 likely exhibiting a similar seasonal business revenue profile to century's existing business.
Turning to slide nine.
We show the exceptional growth in EBITDA that the century business has cultivated over the past 10 years.
Aerial success of acquisitions, including link line Newco line Tech and now rigs discipline, along with organic growth as demonstrated this board and management team's focus on creating tremendous shareholder value and growing the century business.
2020, EBITDA is five times that experienced just 10 years ago. While this business could have been sold two four or six years ago. It's continued growth under the stewardship of the holdings Board has allowed continued Polish this gem of a business, while EBIT evaluation multi.
Polls 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 believes our utility oriented businesses state regulated distribution systems federally regulated pipeline assets and unregulated utility infrastructure services offer a compelling and complimentary investment proposition for our shareholders.
<unk> 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 of 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 to grow earnings through significant capital reinvestment with federally regulated and unregulated segments that produced excellent cash flows the comprehensive holding's growth theme or reward shareholders with strong earnings and dividend growth, while maintaining investment grade.
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. Thank.
Thank you John.
As a reminder, our earnings press release and quarterly report on Form 10-Q were made available this morning.
I invite you to read those documents for additional details of our quarterly results and outlook for 2021.
For today's call, let's start with the summary of total company operating results on slide 11.
For the 12 months ended September 32021, net income was $234 million or $4 <unk> per diluted share compared to net income in the prior year period of $220 million or $3 97 per diluted share for.
For the third quarter of 2021, we reported a consolidated net loss of <unk> 19 per share compared to third quarter EPS of <unk> 32 cents.
In 2020 knots.
Not presented here the detailed in the earnings press release as adjusted EPS of <unk> <unk> per share in the current quarter, which reflects the impacts of two items $113 million or <unk> 18 per share of transaction costs for the rig is Florida acquisition and to a $5 million or <unk> <unk>.
Per share legal reserve at the utility.
The next several slides detailed results by segment, let's start with the third quarter natural gas operation results on slide 12.
This waterfall chart shows the components of the change in natural gas operations results between quarters as a reminder, due to the seasonality of this business utility losses during the third were expected.
As I previously mentioned current quarter results reflect the impact of a $5 million legal reserves.
Operating margin increased nearly $18 million, including $13 million associated with rate relief in all three states.
As well as $2 million from customer growth, reflecting 37001st time meter sets over the past 12 months.
The increase in O&M expenses includes $2 2 million of incremental temporary staffing training and stabilization costs associated with our new customer information system, which we implemented in May 2021.
The timing of vacation other time off and miscellaneous employee benefits were up to $5 million between quarters.
I should note that last year's third quarter O&M was unusually low and.
Reflected the impacts of COVID-19, which limited the in person training travel delayed the hiring of new and replacement employees and deferred various planned projects.
Excluding the $5 million legal reserve O&M for the third quarter of 2021, only increased five 2% cumulatively are 2% to 6% annually since the third quarter of 2019, which was pre COVID-19.
The $9 7 million increase in depreciation amortization and general taxes reflects the impact of the $574 million or 7% increase in average gas plant in service.
The new customer information system.
This customer information system as a 100 plus million dollar project with a 15 year depreciable lives.
The $6 million decline in other income reflects no change in the cash surrender value of company owned life insurance or coli policies. This quarter compared to net income of $4 5 million in last year's quarter.
Next let's go to slide 13, and centuries quarterly results.
Century, our utility infrastructure services segment results for the third quarter were impacted by onetime transaction costs associated with the rigs disciplined acquisition of $13 million.
Revenues increased $52 5 million or 9% between quarters.
Including 49 5 million from rigs discipline following the August 27th acquisition.
The overall increase in revenues was somewhat muted by reduced activities with two significant gas utility customers due to timing and mix of work and a slightly lower level of storm restoration work.
The increase in infrastructure and expenses was primarily due to the significant growth in overall revenues, including rigs disciplined results.
Profit margins were somewhat hampered by the lower level of storm restoration work, which generally generates a higher tip generates a higher profit margin.
And reduced operating efficiencies related to timing and mix of projects.
And customers.
The $5 $8 million increase in depreciation and amortization is primarily attributable to costs added with the rigs this quarter acquisition and other equipment placed in service to support the higher volume with centuries businesses.
The $4 $3 million increase in interest expense reflects the higher level of borrowings under centuries expanded credit facility utilized to acquire rigs disorder.
Next we'll transition to a review of 12 months activities.
On slide 14.
This slide depicts the components of the $26 $1 million increase in natural gas operations net income between 12 month periods.
The $72 million or 7% improvement in operating margin reflects $52 billion in combined rate relief in Arizona, Nevada and California.
<unk> and customer growth provided $13 million of the improvement in overall operating margin.
The increase in O&M reflects seven reflect seven $3 million of service related pension costs and $1 1 million of higher bad debt allowances, we continue to work with our customers to establish payment plans for those impacted by COVID-19.
The $31 9 million increase in depreciation amortization and general taxes reflects the impact of a $579 million or 7% increase in average gas plant in service.
And the incremental Arizona property taxes that are ultimately recovered under our regulatory tracking mechanism.
Let's move to slide 15, and centuries 12 month activities.
Slide 15 shows the components of the $9 $9 million decrease in centuries net income between 12 month periods.
As shown $14 million of onetime transaction costs associated with the acquisition of rigs disorder caused the decline in earnings.
Revenues increased nearly $188 million or 10% between periods, reflecting $129 5 million of incremental electric infrastructure revenues from both line Tech, which we acquired in November 2018, and rigs disciplined which we acquired in August 2021.
Infrastructure services expenses increased primarily due to the higher level of revenue.
Depreciation and amortization increased $10 $7 million, primarily attributable to incremental costs related to electric infrastructure, including $4 7 million for bricks discipline following the acquisition.
Additional equipment and computer systems to support the growing volume of work also contributed to the increase in depreciation.
The next couple of slides are focused specifically on risk discipline.
Slide 16 shows the current primary operating areas rigs disclosure and darker red and the expanded areas, where they've performed emergency storm restoration services, including the recent hurricane Ike in lighter revenue.
We are excited about the solid Union electric foundation that rigs discipline provide and the expansion into ESG and energy transition work.
About a month ago, we announced that rigs discipline had been selected as a general contractor for the horse net ever sort of Sunrise wind project in New York.
We will be responsible for building and Assembly wind Tower Foundation parts onshore for use in this offshore wind project.
This is the one piece of the growth that we expect from our acquisition of rigs dissimilar.
John mentioned earlier, we anticipate $600 million of revenue growth from risk discipline through 2024.
It will be a building process over time, such that rigs discipline will not only be very profitable on a standalone basis, but it is expected to cover the interest carrying charges and acquisition intangibles amortization and be accretive to EPS in 2022.
Slide 17 depicts the initial asset allocation of the rigs disciplined acquisition in August 2021.
The weighted average useful lives of the property and equipment as well as those of the amortizing intangibles are designed to provide additional clarity and to the expected amounts of depreciation and amortization to be reflected in 2021 and forward.
On the right side of the slide are the key terms of centuries amended and restated credit facility at one $145 billion term loan b that we utilized to finance the acquisition.
With that I'll now turn the call over to Justin Brown for a regulatory update.
Thanks, Greg.
Slide 18 highlights our most recent rate case outcome that will contribute to an increase in revenues of approximately $66 million during the course of calendar year 2021.
A continuing theme throughout each of our rate cases has been the partnerships, we maintain with each of our commissions to support the very attractive growth profile at the utility.
As part of our most recent rate case decisions, Arizona saw 46% increase in rate base, Nevada at 20% increase which was also on the hills of an over 30% increase in 2018, and a 73% increase in California.
This growth in rate base would simply not be possible without strong collaborative relationships with each of our commissions.
Turning to slide 19, and consistent with prior guidance that we provided about rate case timing, we filed a nevada rate case during the third quarter as previously mentioned, the Nevada Commission referred us to file more frequent rate cases to timely recover our investment in the recently completed customer information system. In addition to this investment in the primary.
As a driver of the request is to reflect the ongoing investments to <unk>.
Support customer demand from new growth as well as our continuing efforts to modernize our system to ensure safe and reliable service to our customers, including minimizing fugitive methane emissions.
The request includes a proposed increase in revenues of $30 5 million, resulting from an increase in rate base of nearly $250 million and almost 20% increase the commission also established a COVID-19 regulatory asset early in the pandemic and we are requesting recovery of over $6 million of revenue related to.
The deferral of late payment charges were requesting to recover this amount over a period of two years.
We continue to work towards filing our Arizona General rate case before year end and.
And we filed our notice of intent with the Arizona Corporation Commission. This morning.
We anticipate a test year ended August 2021, and we plan to request for approval of an adjustment for up to 12 months post test year plan.
Based on our proposals, we anticipate a proposed increase the rate base of about 35% to 40%.
Moving to slide 20 last week, the ACC approved a 100% of the requested revenue requirement associated with our coil and VSP filings that John mentioned.
The $14 million associated with the <unk> program will be recovered over a period of one year, starting this month and the $60 million related to the VSP program will be recovered over three years, beginning March 2022, we're appreciative of the commission's commitment to consider these amount and allow recovery over a reasonable period of time.
Lastly, moving to slide 21.
As reflected in our presentation today, we have seen tremendous growth in our regulated business and a key partner in that growth story has been our regulators a strong partnership with each of our regulatory commissions that help support an increase in rate base of $1 6 billion or nearly 70% in 2017.
Simply would not be possible without the support of our regulators who are constructive rate case outcomes combined with supportive regulatory mechanisms slide 'twenty. One also highlight some of the key regulatory mechanisms that have contributed to our ability to deliver on the mutual goals of providing safe reliable service and supporting growth within our service territory.
As well as partnering with key stakeholders to pursue initiatives to help reduce greenhouse gas emissions greenhouse gas emission and support a clean energy future and with that I'll turn it over to Karen.
Thanks Jackson.
On slide 20.
Our regulated utility customers give us high marks for customer satisfaction.
They had customers conducted through a third party research firm our customer satisfaction scores for an impressive 95% on a 12 months Rolling average and we are proud to have ranked number one for utility customers.
<unk>.
The study conducted by an independent leading national consumer insights.
For two years running we were ranked first among gas utilities in the west region for business customer satisfaction.
Similarly, we were ranked first in the west region for residential customer satisfaction for 2020.
2021 results are yet to be published we were also ranked number one in the west for utility digital experience. This ranking affirmed the enhancements we made to our digital channel, including the implementation of a state of the art customer information system. This year.
This system enables us to deliver a higher level of service to our customers.
Survey results are testament to the excellent quality of the service, we provide our customers and a primary reason why 91% of customers through gains in Arizona, California, and Nevada indicated that they want natural gas in their home.
Turning to slide 23, we provide information on our diversified and growing customer base at the utility.
Customer growth in our service territory continues to be robust and in fact, we added 37001st time meter sets over the past 12 months as people continue to move the desert southwest.
In addition, we have decoupled rate designs in all three service territory that reduced volatility for both our customers and the company.
Slide 24 illustrates our strong liquidity position, we have a $400 million revolving credit facility and $215 million term loan.
As of the end of September we have nearly $523 million availability combined borrowing capacity and cash.
We highlight our capital expenditure program and funding source suspended three year period in December 2020 on slide 25.
New customer growth and ensure the safe and reliable natural gas service to our customers expect.
<unk> capital spending of approximately $2 1 billion over the three year period.
Plan to fund the $2 5 billion combined capital investment stockholder dividends with 50% from operations cash flows and the remaining balance with an equal mix of debt and equity.
On slide 26, we show the five year rate base growth expected from our ongoing capital investments in our natural gas distribution.
We expect to grow rate base from approximately $4 5 billion at the end of 2020 265 billion at the end of 2025, which translates into a seven 5% compound annual growth rate.
Moving to slide 27, you can see that we havent stockholder dividend of $2 38 per share.
NIM has increased each year for the past 15 years, and we have a compound annual growth rate for the past five years or five 8%.
Target a payout ratio of between 55% and 65%.
Our EPS guidance for 2021 as shown on slide 28.
As we approach the final quarter of 2021, we have refined our previous guidance to a range of $4 to $4 10.
The adjusted EPS excludes the transaction costs for the recently announced acquisition of Questar pipeline.
The partial year results in cost from the <unk> acquisition and costs associated with the accident in response.
On slide 29, we provide line item support for our 2021 EPS guidance range at the natural gas operations, we expect operating margin to increase 6% to 8% pension.
Pension costs to be relatively flat.
Operating income increased 46% up from our previous range of 3% to 5%.
Holy earnings $5, 7 million and capital expenditures to be $650 million to $675 million.
And potentially infrastructure business revenues, excluding Tesla for 2021.
Expected to be 1% to 3% greater than the record 2020 and mapped.
And operating income excluding discipline is expected to be 5% to five 4% of revenues.
Meanwhile, mix disciplined is expected to generate revenues of $150 million to $170 million with an operating loss of $11 million to $13 million from the date of acquisition.
Total interest expense has increased to a range of 19, 5% to $25 million due to the term loan and credit facility in connection with the acquisition.
Net income expectations are net of Noncontrolling interest and the Canadian exchange rates can influence results due to our Canadian operation.
Finally, we anticipate transaction related expenses at the corporate and administrative level due to the questar pipeline acquisition and activism response of approximately $25 million to $30 million.
Turning to slide three we.
We provide our longer term expectations.
The southwest gas holdings level, we are announcing an EPS growth range for 2022, and 22 2023, 5% to 8% Unadjusted 2021 EPS guidance.
We also expect equity issuances of 600 $800 million over the three years ending in 2023.
I previously mentioned, a target dividend payout ratio of 55% to 65%.
At the regulated natural gas utility, we expect capital expenditures to be approximately $3 5 billion over the five years ending in 2025 and.
And it's seven 5% compound annual growth rate for rate base for that same period.
At the infrastructure services business, we expect revenues to increase 27%, 33% in 2022 with a full year at <unk>.
Our operation in.
In 2023 revenues are expected to increase 7% to 10% over 2020.
Operating income is expected to be 5.25% six in a quarter percent of revenues during 2022 and 2023.
And EBITDA is expected to be 11% to 12% of revenues during that same period.
I will now turn the call back to John for concluding remarks.
Thanks Darren.
Wrapping up on page 31, we believe that southwest gas holdings offers a compelling value proposition for our investors, we are strong and growing and positioning for the future. Our natural gas operations are experiencing strong customer growth and opportunities for capital investment and rate base growth.
While maintaining affordability of service to customers, we will continue to pursue successful regulatory partnerships on the many initiatives described by Justin earlier and look for expanded opportunities in helping address national goals for greenhouse gas emission reductions all of this with.
Patients have a strong growth trajectory, our increased earnings and dividends for our shareholders. Meanwhile, at our century infrastructure services business segment will continue to grow our business revenues earnings cash flows customer base service offerings and geographic footprint to maximize the <unk>.
Value of this business for our shareholders. We believe this business has great opportunities in the energy transition as it expands its electrical portfolio grows its renewable opportunities and partners with natural gas distribution utilities to expand and refresh the natural gas infrastructure.
Structure are critical to support the anticipated increased deployment of renewable energy assets across our country.
I'll now turn the call to Greg.
John that concludes our prepared presentation for.
For those who have accessed our slides. We have also provided an appendix with slides that include other pertinent information about southwest gas holdings and its two business segments. These slides can be reviewed at your convenience our operator Alexander will now explain the process for asking questions.
Thank you at this time I would like to remind everyone in order to ask a question. Please press star one on your telephone keypad again, Thats star one to ask a question.
We have your first question is from Richard Sunderland with Jpmorgan. Your line is open.
Hi, Good morning, Thanks for taking my questions here just wanted to start maybe with the quest our acquisition what are your latest thoughts on timing and approach to the financing there.
Richard I'll start off John and then maybe Greg can add some commentary.
And of that but our anticipation is that this is on track to close by the.
The end of this year at the end of this year.
You may know from our previous discussions we do have a 360 for the loan.
That we have access to and we're frankly evaluating numerous different financing options that we've been looking at.
We hope to do a fair amount of that in the first quarter, it's possible with blackout periods et cetera. Some of that may get done in the second quarter and it's even possible that some of that get done in this calendar year. So.
Greg any other color on that I think you've covered that John we are certainly looking at the equity.
Markets as well as the debt markets and refined finding the efficient.
And the best way to accomplish that long term financing as John mentioned, we are glad that we have that flexibility of the term loan that provides us the flexibility to seek the best financing for this transaction.
Yes.
Understood have you thought about that stake sale at century in light of kind of the new considerations that you outlined around value there as a source of funds whether for quest or just overall.
Sure. This is John again that is one of the things that we're taking a look at it as something that our board frankly is looked at.
Annually for the past several years.
It certainly would be one way of accomplishing some of that financing. So that definitely has an option on the table that we're looking at.
Understood and then separately at a high level, what are the goals or milestones youre looking at to demonstrate medium term value on the back of the board's tender rejection.
Well I think Richard we've got a strong growth trajectory both at century and at the LDC and I think that the.
The new pipeline business is going to be a really solid component to that so I think it's really going to come down to executing on our business plan and providing you and others the proof and the accounting data that get realized from those efforts and ultimately I think that shareholders will appreciate that and that will be.
<unk> and our share price, we're also going to be undertaking.
<unk> Investor relations effort to try to make sure that the investors understand the value of the various different business components, including trying to make a special outreach to those investors that might be particularly interested are intrigued by infrastructure services.
Companies, especially in light of the federal government's plans to fund that infrastructure significantly.
Understood. Thank you for the time today, Okay. Thank you.
We have your next question is from Julien Dumoulin Smith with Bank of America. Your line is open.
Hey, its actually Coty Clark on for Julian Thanks for taking my question Hey.
Cody.
First kind of a housekeeping item, Greg can you add a little bit more color on the drivers for centuries trailing 12 months EBITDA correct me, if I'm wrong, but it looks like it was fairly flat year over year, even when rolling in rigs declared like is there anything that you would point out too.
That effect.
Yes. This is Greg.
Greg welcome to the call.
As you mentioned both of the numbers are relatively flat between the 12 month periods.
As I mentioned in my comments there was some additional storm work that occurred in.
The prior year 12 month period versus this year and so there is a little bit of that in there and.
Overall again century is gearing up for the expansion in their various system and.
We expect the tremendous growth to start.
Q4 going forward.
Thanks for that Gregg and then looking towards the Arizona rate case.
Followed towards the end of the year, how are you thinking about the rate increase ask as you look to roll in all of that capital. It seems like it would be a large step up so wondering how you would get stakeholders comfortable with it.
Especially with such an acute focus on low rates in the state.
Cody it's Justin.
Great question, it's something we're very much focused on is we're putting the filing together to make sure that we emphasize the various.
Cost savings cost management initiatives that have been going on that contribute to managing the reasonable level of our bills.
Because we recognize that given the capital investments that that's going to put upward pressure. So we're very focused on the O&M side I think we have a good story that we are in the process of putting together that will be incorporated in the filing.
Got it thank you for the time.
Thank you.
Your next question comes from the line of Chris Telehealth.
Williams Frank Your line is open.
Hey, everybody how are you.
Good thanks.
Just a little clarity on the transaction costs for rigs Distler I think in their press release, you also mentioned $3 million of other incremental cost.
Elaborate on what that was and why did you not exclude that as well.
Yes, Chris this is Greg.
Really trying to focus on those one time incremental costs and we knew that the cost to us.
<unk> incurred on rigs this lower end going forward for the Questar pipeline acquisition.
Things that most would most analysts would want to pull out and making that assessment. Some of these other costs.
While they were higher do recur on an ongoing basis.
Also the.
Customer information costs incrementally are those going to be ongoing and for how long.
Yes.
So far the.
The cost that I identified were kind of the stabilization that step up costs as we move from a system that we've been utilizing for the better part of three decades.
We certainly needed to train and help our people move forward with that so there were incremental costs, especially in incurred in Q2 and Q3. This year that project is relatively stable going forward the customers seem to really like it and we will have ongoing costs associated with the dip.
<unk> that property, but these ramp up costs that we experienced earlier this year.
Will dissipate and go away by year end.
Okay great.
Justin.
Coil in VSP.
Rulings seem to go really smoothly.
How do you reconcile that with how the <unk>.
Aps case was going.
And as a second question there.
Obviously, they've got a much lower ROE are you concerned about the Aps Roe.
Or do you feel that they treat you differently.
Well.
Good question Chris.
I'll answer it the same way we answered these types of questions.
From our perspective.
We have a plan of how we operate with respect to each of our partnerships with the different state commissions.
We believe that regardless of the different proceedings that occur in each of those jurisdictions and in Arizona and I think each of the filings in each of these still the utilities kind of stand on their own merit and based on.
Their relationships and the things that they are requesting as part of their filing and so it's hard for me to comment about other utilities in the state and the circumstances that lead to certain outcomes I know from our perspective, we feel like we have very good working relationships, we're very transparent and open with our regulators.
This is something that's <unk> and BSP filing is something that that came up.
Back in 2019, when they wanted to suspend the surcharges because of different interest at that time, we appreciate their commitment to give us the opportunity to re look at this at a future date, which is exactly what they did.
So we're appreciative of the fact that they held up that commitment and we felt like we held up our commitment of the bargain are providing them the information and working with them through the process.
Okay.
It looks like customer growth may be slowed a little bit in the quarter can you just elaborate on what youre seeing there.
Yeah, Chris This is Gregg I don't think that its slow down at all of the 37001st time meter sets. As you mentioned is consistent with what's going on.
We're very happy about that we certainly look forward I think as many due to continuing customer growth.
And so we're we're well positioned for that we did have as we mentioned in our quarterly report.
Reestablishment of <unk>.
Disconnects for nonpayment for certain of our customers.
And so that has a little bit of impact on the total customer counts, but customer growth is strong and we expect it to stay that way for the certainly the near term.
Yes.
Okay. Thanks for the color I appreciate it guys.
Im showing no further questions at this time I would now like to turn the conference back to Mr. Greg Peterson for any closing remarks.
Thank you Alexander and thank you all for your time today. This concludes our conference call and we appreciate your participation and your interest in southwest gas holdings.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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Yes.
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