Q4 2021 Southwest Gas Holdings Inc Earnings Call

Good day, ladies and gentlemen, and welcome to the southwest Gas Holdings 2021 year end earnings Conference call. At this time, all participants are listen only mode.

After the Speakers' presentation, there'll be a question and session.

To ask a question. During this session you will need to press Star then one on you touched on the telephone.

If anyone should require assistance during the conference. Please press Star then zero switching operator as a reminder, this call is being recorded.

I would now like to turn the call over to avoid Nelson Vice President of strategy and Investor Relations.

May begin.

Thank you Michelle and welcome everyone to the southwest gas Holdings year end 2021 earnings call.

My name is voyage Nelson and I'm, the vice President of strategy and Investor Relations I am assuming responsibility for Investor Relations from Ken Kenny Our Vice President of Finance Treasurer, who after a period of transition we will focus full time on finance matters for the company.

We have posted today's presentation on our IR website.

On today's call, we have John Hester, President and CEO of southwest gas Holdings.

Oh, Daly, president and CEO of century.

Karen Chandler Executive Vice President Chief legal and administrative officer.

Greg Peterson senior Vice President and CFO .

And Justin Brown, Senior Vice President and General Counsel.

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 two and 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 I'd like to turn the call over to John .

Thanks, Paul.

On slide six we present in the agenda for today's call.

Exciting content for today's call. So let's dive right in really Big news today is the announcement yesterday holdings will be pursuing exciting separation of the century business.

In an effort to continue facilitating its growth trajectory.

<unk> value for shareholders for our call today, I'll kick things off with an overview of yesterday's announcement regarding our board of directors decision to pursue a separation centurys infrastructure services business.

Karen will review the value proposition, our ongoing regulated natural gas operations continue to offer our shareholders.

And we will provide an update on major rate case activity.

And our continuing collaboration with regulators to safely and reliably serve our customers energy needs.

Paul will overview the value proposition that our infrastructure services unit offers our shareholders, especially with the newly announced separation and Greg will then review our recent operating results and outlook.

<unk> thousand 22.

Turning to slide eight.

Provide some perspective around with century separation there.

And why we are confident and enthusiastic this isn't optimal time to pursue the strategic course of action.

Many of you are aware that we acquired centuries predecessor entity at $19 96.

Fill a need for high quality utility infrastructure services for own distribution systems. After acquisition, we quickly saw similar infrastructure contracting by many other peer regulated utilities the century brand and organization was established in its current form in 2014.

As a board and management team, we regularly strategically review of this business in conjunction with outside advisers to ensure our family of businesses maximizing value for shareholders.

Always been open minded about the possibility of the separation.

Could be the best way to unlock its value.

Same time guarding against any premature separation that would short change the tremendous value that this business is created for our shareholders.

After continued organic growth.

Along with major acquisitions like link line Newco line Tech and most recently rigs distler.

Now confident that century has the scale the capabilities and the geographic diversity to stand on its own.

We originally acquired century for $25 million and since then our board and management team has built essentially into the significant business that it is today a business that generated record revenues of $2 5 billion on a pro forma basis.

'twenty one.

Here's planning growth and investment.

The successful acquisitions I referenced if now positioned century.

Truong Independent company.

Notable opportunities in many aspects of the energy transition among others are attractive investment grade regulated utility customer base and our track record of significant EBIT growth position century.

Pretty attractive standalone entity expected to achieve a premium valuation among industry peers.

As Paul will review a little later century is now well placed to capitalize on the energy transition.

Moving to slide nine we show a snapshot of our regulated and unregulated businesses following the separation.

Our regulated business will be a fully regulated natural gas theater with continued focus on providing reliable affordable clean energy across Arizona, California, Nevada, and the Rocky Mountain region. It will continue to benefit from the significant population growth and <unk>.

Strong regional economies, we are experiencing across our service territories footprint and offer strong consistent risk adjusted total returns with a competitive dividend. There is no expected impact of the separation on utility operations customers customer rates.

Between southwest gas mountain West we have more than 2500 employees with the utility serving two 1 million customers financially southwest gas holdings delivered 152 billion and pro forma regulated operations revenue in 2021.

Meanwhile century as a Standalone company has a legacy of more than 100 years of operational experience and is well positioned for continued profitable growth at the forefront of the utility infrastructure modernization and the energy transition. The business now has significant scale with approximately <unk> <unk>.

1500 employees, serving clients in 45 states and provinces in the U S and Canada.

Century will continued to be led by CEO , Paul Daily and the current century management team Southwest Holdings management, including the participants in this call are expected to stay with the holdings entity moves.

Moving to slide 10, I want to highlight a few points in particular on the benefits of the separation fundamentally this transaction is about unlocking value for stockholders to encourage the market valuations of southwest gas and century in line with peers. In addition, we anticipate the flexibility too.

Meaningfully reduce future equity financing needs, including with respect to mountain West.

Subject to ongoing discussions with the rating agencies. This expectation results from revised consolidated risk position of our business segments post separation.

Separation will result in both southwest gas and century, having compelling financial profiles that more accurately reflects the strength and opportunities of each business.

As a result.

The separation will provide more targeted investment opportunities for shareholders and enhance transparency through more direct comparability two pure play industry peers. We're also very confident that both companies will benefit from improved capital allocation efficiency and strategic flexibility.

Which will encourage continued pursuit of value accretive opportunities that are in line with their distinct markets customer basis and business initiatives. This is especially notable given the consolidation trends in our industries. As you can tell we're really extremely proud of the businesses, we have built and the value they create.

For shareholders I do want to take a moment and call to thank all of our employees, who have worked so hard to help grow our respective business segments and help us reach this important milestone. This is an exciting time for all of US and we look forward to the next chapter of growth for both southwest gas holdings and century.

As we seek to maximize value for our shareholders deliver excellent service to our customers and create new opportunities for employees with that.

I'll now turn the call over to Ken to talk a little bit about southwest gas post separation Karen.

Thank you John Let me open the slide 12 under the southwest gas holdings umbrella.

Built premier gas delivery network in the Western United States.

Post separation will be a pure play fully regulated natural gas business, a strong collaborative relationships with our state regulatory commissions and the federal Energy Regulatory Commission.

Our collaborative approach to regulatory relationships contributed to near record growth in revenues.

Great base in 2021.

And we expect to continue to grow southwest gas customers rate base EBITDA and net income.

Further our recent acquisition of mountain West provides a complementary compelling suite of high return assets to drive value and earnings accretion.

Unique strength and stability mountain west both commercially and geographically adjacent to our regulated utility operations.

With long term customer relationships more than 90% of mountain west revenue contracted and over 70% of revenues are backed by investment grade customers.

So our strategy is clear.

Two advancing our growth and delivering significant value for our stockholders as we continue to deliver reliable.

And clean energy across our service territories.

Turning to page I'm going to discuss some of the drivers we see for continued value creation in our regulated business.

Our regulated natural gas operations provide stable and predictable cash flows and strong returns.

The types of assets that will be the backbone of the energy transition.

And this is reflected in our rate base that has nearly doubled in the last five years.

Driven by capital investment achieving good outcomes in our rate cases through our strong relationships with our regulators.

Of course, the mountain West acquisition.

Rate base growth has and will continue to support earnings growth that's there.

Great Nice crowd does impact our ROE and rate jurisdictions with historical test years, but we expect our leads to continued to improve.

Of course mountain West Awesome further bolster Roe.

As you know part of the rationale for the mountain West acquisition, what's the improved rate base and regulatory diversification that came with it.

Equally as important we are confident that we can enhance the value of the mountain west assets. As we are a focused owner in a way that is different from the past for these assets.

With regard well it is early days, we are already identifying opportunities beyond our investment case because.

Because we already own FERC regulated pipeline assets.

No what it takes to manage these businesses successfully.

And on the financial side mountain with balances out our portfolio by providing stable cash flows, which reduced our reliance on capital markets for the significant capital investment or utility requires that isn't covered by internal cash flow from operation.

On slide 14, we lay out some of the dynamics, we benefit from with a broader geographic footprint.

We continue to closely southwest gas added customers at close to 2% annually increasing the rates as.

As well as EBITDA and net income.

In part driven by significant population economic growth in our utility service territory.

Our regulatory jurisdictions are in some of the fastest growing states in the country, resulting in us, adding 37000, new customers in 2020 and 2021.

Further a mountain west attracted neighboring geographies, Utah, Colorado, and Wyoming are states, which are favorable jurisdictions for natural gas.

We're also seeing significant economic growth driving high demand.

As we grow we will remain laser focused on safety, our O&M for customer and our strong customer satisfaction metrics.

And let me ask Jeff to take you through some of our recent rate case activity Justin.

Thanks, Karen.

We continue to see strong demand for natural gas service in our service territories.

This demand translates into investment opportunities to support both customer growth and pipe replacement activity to ensure we continue to meet regulator and customer expectations. When it comes to providing safe and reliable service.

These investment opportunities underpin our expectation to deliver compound annual rate base growth of 7% over the next five years.

A critical part to sustain this growth is our focus on maintaining strong collaborative relationships with our state regulatory commissions were steadfast in our approach to ensuring we have a continuous open transparent and collaborative dialogue with all stakeholders to help ensure we worked together on outcomes that are in everyone's best interest.

Our most recent rate case cycle outcomes contributed to approvals of approximately $66 million for 2020 21.

We also received approval last quarter to recover $74 million associated with previously approved capital tracker programs in Arizona.

We currently have rate cases, pending in Nevada, and Arizona as shown on slide 15.

We're excited to announce that we worked collaboratively with all stakeholders in our Nevada rate case to develop a constructive settlement that proposes to increase statewide revenues by $14 million as well as potentially recover the COVID-19 regulatory asset amounts are requested certification was for approximately $28 million.

Included approximately $7 million reduction in operating expenses since our last rate case.

The request also included several non traditional adjustments to our proposed revenues, which totaled just under $5 million. In addition, we requested to utilize a target capital structure.

The proposed agreement is still subject to commission review and approval, but we expect that review on our final decision later this month.

With respect to our Arizona rate case, we recently finalized the procedural schedule and anticipate receiving staff and intervenor testimony this summer and to conduct hearings in late September early October .

Keeps us on track for a final decision by possibly year end, if not early part of 2023.

Turning to slide 16, the primary driver for our recent increases in revenues has been changes in authorized rate base in each of our jurisdictions.

Each of those rate case decisions saw record or near record increases in commission authorized rate base.

Rate base growth is driven by the targeted investments we've made constructive rate case outcomes and supportive regulatory mechanisms, which together have delivered growth of one 6 billion or 69% increase in rate base between 2017 and 2021.

Depending on the ultimate outcome of our two pending rate cases, we could see our rate base potentially increase to nearly $5 billion.

On the right hand on the right hand side of the slide.

Called out some of the key regulatory mechanisms that have positively contributed to our ability to deliver on the mutual goals, we share with our regulators are making investments to provide safe reliable service and responding to the strong demand for natural gas service that we continue to see across our service territories.

We also continue to work on developing constructive frameworks in each jurisdiction to support future investments in sustainability initiatives as well as developing solutions to ensure our customers have tools and options to help them achieve their environmental goals now I will turn it back to Karen to close out our discussion of our regulated business.

Thanks, Jeff I'm going to pick up on slide 17, with some comments on how we're positioned.

On the investment in the energy transition.

Business is benefiting from sign up an industry trends, such as gas infrastructure replacement and safety and reliability investments.

That translates into tangible stockholder value together now lapsed in our utility system provide extremely attractive energy transition opportunities in renewable natural gas compressed natural gas.

Possibly source gas hydrogen and CMT transportation.

Anything else from the clean energy transition and establishing the regulatory framework to advance sustainability across our business, including connecting sources to end users and investing in infrastructure to help make R&D available to the market.

Developing unique partnerships that even develop standards for hydrogen creation and blending exploring opportunities for <unk> transportation and sequestration.

Continuing to work with transportation partners to reduce greenhouse gas emissions with compressed natural gas and renewable natural gas.

Implementing emissions reductions technology as part of our operations procedures.

Before I hand over to Paul to talk more about century I'd like to make some remarks on the benefits our natural gas business operating as a pure play fully regulated company on slide 18 from.

From a financial perspective, we won't be able to deliver the stable low risk route which is characteristic to utility earnings.

And in our case is supported by population and economic growth in our service areas.

When you combine this with the geographic diversification and strong consistent cash flow protection from a pipeline asset we will have a highly predictable financial outlook, we will be able to optimize our capital plan and in turn our returns to stockholders.

Looking to the future, we will have really exciting opportunities in the energy transition.

With that let me turn the call over to Paul to talk about century.

Thanks, Kevin turning to slide 20, <unk> century presents a compelling value proposition.

A stand alone company.

As John mentioned earlier, we have built century into an incredible utility infrastructure services leader dedicated to delivering a diverse array of solutions to utilities across North America.

We have succeeded in growing the business because we haven't still did client century centric focus and our commitment to quality safety and efficiency.

The business grew initially at the need for utility infrastructure repair and replacement crude.

As construction outsourcing became more common we have taken strategic opportunities to add scale through organic growth and acquisitions.

During the past five years, we've added three platform companies to provide strategically targeted markets and services.

In 2017, we acquired Newco for non Union gas distribution services throughout the northeast.

<unk>, we acquired in late 2018 for non Union electric transmission and distribution throughout the Gulf Southeast and mid Atlantic States and most recently rich discipline or is there a union platform for providing electric T&D renewables and <unk> services throughout the United States.

Well strategically, adding significant scale through organic and M&A growth, we've maintained our disciplined staying within our low risk recurring MSA driven utility distribution services profile.

We have approximately 10500 incredibly talented employees within our eight operating companies throughout the U S and Canada.

It's their hard work dedication and support of our businesses each and every day.

Helped build the safety focused high performance company culture.

Serving a highly regulated blue chip customer basis, there is a table in the appendix that depicts that we have and we have over 23 years.

Contractual service to our top 20 customers in fact, we've been working for Mpls first customer for 55 years now and Theres four three clients that were in our four decades of service to.

Most importantly, as a stand alone company century has decades of outsized growth prospects given the continued significant investment in utility infrastructure with opportunities is diverse.

Gas pipeline replacement hardening of electric distribution assets and supporting onshore infrastructure for offshore wind development.

Moving to slide 21.

You can see on the left side.

<unk> delivered $2 5 billion of pro forma revenues in 2021.

And we have significantly grown adjusted EBITDA from $65 million in 2000 $12 million to $252 million in 2021 on a pro forma basis, representing a compound annual growth rate of 14, 1%, serving both gas and electric utilities.

During the last four years, we've transformed century from a low growth infrastructure services company focused primarily on the gas utility customers to our high growth.

<unk> services company, providing services to both gas and electric customers.

With the addition of line Tech and the recent transformational acquisition of rich discipline.

We accelerated centuries expansion into Union electric services have added five G built out in renewables infrastructure capabilities and we've put the combined century business on a trajectory to generate revenues of nearly two seven to $2 8 billion in 2022.

All without exposure to high risk cross country pipeline or electric transmission projects.

As a stand alone company we are.

<unk> normalized EBITDA margin of 11% to 12%, excluding nonrecurring separation costs.

Centered all around low risk recurring and predictable MSA driven utility projects.

Turning to slide 22.

With the continued national focus on infrastructure investment in our long term multi decade relationships with blue chip utility customers.

We are very well positioned to deliver strong earnings and cash flow.

Over time, we have continued to diversify our revenues and enhance our service offerings. As you can see on the right side. We are also highly diversified across geographies with the largest percentage of sales from one states at 15%.

Along the law.

And you can see that we haven't attracted in low risk contract mix, approximately 64% of our contracts, our unit price and 24% or by.

Time and materials.

Just 12% of our contracts are fixed price and many of those are a bit to our existing utility MSA customers.

With our highly recurring predictable revenue underpinned by long term master services agreements and stable contracts.

Century generate strong cash flows that we can allocate towards investing in our continued growth and returning capital to stockholders.

The revenues and gross profit by segment as depicted in the top left for 2021 include rigs just look through the period owned last year.

For the full year 2022 gas electric segments are anticipated to be more balanced.

Moving to slide 23.

As this slide makes clear there are decades of long term growth opportunities in our electric and gas distribution <unk> datacom in energy transition markets.

Our geographic breadth across the United States, and Canada integrated offerings, as well as our union and nonunion workforce.

The scale and Optionality to meet these evolving needs of utilities and utility holding companies.

We are.

Please.

<unk> decades long growth in electric utility distribution.

<unk> infrastructure will demand significant replacements and upgrades to maintain system performance as well as upgrades increased grid resiliency and reliability.

Of note on the top left you'll see that 45% of the electric utility distribution is accurate near its end of useful life.

That represents a very sizable opportunity for century.

Gas utility distribution.

<unk> infrastructure has led to a regulatory driven multi decade replacement cycle.

Similar to electric 45% of gas distribution infrastructure is near or at the end of its useful life and.

And we see continued strong growth and thats construction spend.

As I mentioned earlier the acquisition of rich just wear has positioned us to support the rollout of <unk> datacom.

Small cell wireless density requires significant build out an existing utility infrastructure will be a key component to densification, providing a major growth opportunity for century across our foot print.

We are already cross selling this service to <unk> customers.

The southeast.

Finally, as I noted earlier, we are incredibly well positioned to benefit from the energy transition as we support our utility clients across North America.

We expect the investment in renewable energy will continue to accelerate rapidly.

Renewable energy accounted for approximately 18% of U S energy mix and is projected to reach 31% by 2050 as utilities move towards renewables rigs.

Regarding renewable energy and specifically offshore wind breaks just warehouse already signs of supply agreement for advanced foundations.

With the <unk> joint venture with we're beginning.

Expected to begin later this year.

The energy transition is a very strong tailwind that will drive our growth for years to come.

Before I turn the call over to Greg I'd like to briefly summarize on slide 24, what I've covered today.

Century is strategically focused with high quality businesses throughout North America.

We are positioned for continued growth across our industry as we expand into new high growth markets, particularly those associated with the energy transition.

We have a long tenured blue chip utility customer base with highly recurring revenue underpinned by long term master services agreements and long low risk contracts.

With our strong relationships differentiated capabilities and a world class management team nearly all of whom have served at somewhere management roles and private are publicly held standalone companies.

We're well positioned to deliver strong growth earnings and cash flow as an independent company.

Together with this management team I am very excited to be able to elite century into its bright future as a high growth independent company.

We will be playing an important role in meeting the energy and infrastructure needs of tomorrow.

Looking ahead, we will continue pursuing pursuing exciting new electric and gas infrastructure opportunities.

Focusing on operational excellence cross selling our growing service offerings to combination utility customers and increasing profitability and growth, while maintaining our lower risk business profile.

We hope you share our excitement for the future of century.

With that I'll turn the call over to Greg Peters.

Thanks, Paul.

Yesterday afternoon, we announced our 2021 earnings and provided some additional statistical information.

We also filed our 2021 annual report on Form 10-K with the SEC.

Please refer to these documents for a comprehensive analysis of our operations for 2021.

As shown on slide 26, adjusted EPS was $4 17 per diluted share for 2021 versus $4 14 per diluted share for 2020.

This tops the full year adjusted guidance that we provided in November on our previous conference call. Let me touch on some of the highlights.

Record net income was posted at the utility as operating margin increased $83 million or 8% between years, driven by $61 million of incremental rate relief in Arizona, Nevada, and California, and 37000, new customers, who provided $13 million of operating margin.

During 2021, we invested over $600 million in the expansion safety and reliability of our natural gas distribution system to better serve our customers. This included a new customer information system implemented in May 2021.

As was previously mentioned century had record revenues of $2 $2 billion to $5 billion on a pro forma basis.

Included in total revenues, where emergency restoration services revenues of $65 million in 2021 compared to $82 million recorded in 2020.

Adjusted for the tax effected 21, and a half million dollars of acquisition related and partial year results associated with rigs disorder.

Centuries, net income was $61 9 million in 2021, our second best year ever.

The record $74 9 million recorded in 2020.

The corporate and administrative net expense of $26 8 million in 2021 reflects the net of tax acquisition and related costs of mountain West, which we acquired on December 31 2021.

And approximately $3 4 million of net of tax costs associated with stockholder activism responds.

As a reminder, the operating results of mountain West are not included in our 2021 results. So it will be reflected in our 2022 operations.

With that let's move to the next slide and talk about our outlook for 2022.

Slide 27 depicts important metrics of our 2022 guidance.

With the announced planned separation of century, we are replacing previous EPS and other guidance with component company guidance to assist investors and analysts and see our vision for 2022 and beyond.

At century, we expect 2022 revenues to be $2 65 to $2 8 billion driven by growth in all facets of the business and especially our recently acquired rigs disorder.

While we expect some incremental cost during this separation transition period normalized EBITDA margins are expected to be 11% to 12%.

For our utility operations at southwest gas, we estimate net income will be $200 million to $210 million.

Operating margin will continue to benefit from ongoing customer growth recoveries of previously deferred amounts in Arizona and refreshed rates in Nevada.

We continue to estimate coli income of $3 million to $5 million in 2022.

Investments in our natural gas distribution system will be $650 to $700 million through 2022 and are expected to continue through 2026, resulting in rate base, increasing at a compound annual growth rate of about 7%.

And our newest subsidiary Mountain West, we anticipate revenues will be $240 million to $245 million in 2022.

The run rate EBITDA margin of 68% to 72%.

We are on track in our integration plan about west and are already benefiting from strong operating cash flows from this acquisition.

Adjusting for onetime integration costs, we reiterate the mountain west will be accretive to EPS in 2022 and beyond.

At the holding company, we will strengthen our balance sheet as we refinanced the $1 $6 billion term loan associated with the mountain West acquisition.

As we move through the century separation process. The remaining regulated natural gas business focus at SWM is designed to improve our business risk profile with the credit rating agencies and provides flexibility in the timing and amount of future equity issuances.

With the recent announcement of an annualized dividend increase of <unk> 10 per share.

We continue our targeted dividend payout range of 55% to 65% of consolidated earnings.

After the century separation, we plan to increase the payout ratio to levels competitive with pure play utility.

As separate companies southwest gas holdings, and century will have capital structures and financial policies appropriate for each business.

Ill now turn the call back over to John for some concluding remarks.

Thanks, Greg before we move to Q&A.

A few thoughts referencing slide 28.

Really excited that the separation we've discussed today will unlock increased value for our shareholders inherent in both companies, but it is not currently reflected in our stock price. We are enthusiastic about the important role of these entities will play prospectively with major sector themes of infrastructure modernization.

<unk> and the energy transition for southwest gas, including Mountain West we will have compelling growth avenues as a pure play fully regulated natural gas business with promising opportunities in favorable jurisdictions from natural gas century will continue with this.

Stablish track record of significant revenue and EBIT growth and will be central to the construction of infrastructure across the United States from Canada, but it's necessary for the energy transition as you can see we're incredibly excited about the benefits of this planned separation and the value of <unk>.

Liver for customers employees, and our shareholders before we open it up for questions I'd like to note that today's call is focused on the separation of century outlook and fourth quarter and full year financial results today, we do not plan on answering any questions regarding the.

The tender offer or our engagement with Mr. Icahn, which we have covered in prior calls.

That I will turn it over to the moderator to explain the process for asking questions.

As a reminder, if you'd like to ask a question. Please press Star then one if your question has been answered and you'd like to remove yourself.

Okay.

Our first question comes from Richard Sutherland with JP Morgan Your line is open.

Hi, good morning, Thanks for taking my questions today, maybe starting with the separation I'm just curious what potential structures are under evaluation here is there something from a tax free spin through an outright sale in terms of possibilities.

We expect to communicate the final plant.

Thanks, Richard This is John I think that certainly both of those options that you mentioned are things that we will be considering.

There are other options as well, we're going to be evaluating that over the next month or two one of the issues that we're going to be sensitive to as tax efficiency. So I don't think we're eliminating anything from being an option to consider we're really going to try to identify the option that serves the best interest of.

Of our shareholders and take that course of action I think that you can expect more transparency, but ultimately the route that we're going to take probably in the next.

35 to 60 days.

Got it Thats very helpful.

And then turning to the credit side and thinking about your equity needs going forward what are the <unk> that kind of upgrading downgrade thresholds currently for southwest gas holdings, and how do you think about the potential moves or changes in those in consideration of the separation going forward.

Yes, Richard this is Greg certainly as we move forward and work with our credit rating agencies, we believe as we announced today and talked on the call.

Our financial position or.

Risk rating will improve at the credit rating agencies of course, that's ultimately up to them.

We will utilize the information as we move forward to make sure that we have a strong balance sheet and it will facilitate our ability and the timing and amount of equity that's issues, but a lot of that has to come and dependent upon the separation that we do and the timing of that with century.

Understood maybe if I can slip in one final question be the mountain West equity, what's your latest timing on completing guidance.

Pushed out versus the May timeframe, you've discussed before maybe how does the separation factor in there.

Yes.

The separation is certainly a consideration a key component of all of the things that we're doing at southwest gas holdings. So we will take that information into play with everything else that we're doing to make sure that as John mentioned that we are efficient.

In issuing capital to maximize shareholder value so more to come on that.

Got it thank you for the time today.

Thanks Richard.

Our next question comes from Madhu Liberty with Hudson Bay Capital. Your line is open.

Good morning.

Good morning, gentlemen.

Good morning.

Hi, I'm wondering in terms of you alluded to.

Increased room on your credit metrics.

With the holding company.

Can you elaborate a little bit in terms of who we think would.

Would be available to you and then I think the original clean number you've had.

$102 million, that's implied that Dennis whom debt equity number would be able to do so.

So is this.

Yes.

Has there been any has there been discussions with the agencies.

Do you feel about this.

Not yet.

Thank you Dave.

Putting yourself.

Yes. This is Greg I think the first thing is that we have engaged and talked with our credit rating agencies, we think that's appropriate to do especially with the significant.

<unk>.

Development as it relates to the separation of <unk> century, So we're working with them as we mentioned earlier as we proceed down the path and having more definite plan of the type of way that we will effectuate the century separation that will have important.

Aspect in the amount and timing of equity that we do we will have and certainly anticipate that we will have a stronger and better risk profile.

Few from all three of the rating agencies, and we think that that will help us on a go forward basis to have flexibility to issue less equity going forward, while maintaining those credit rating agency metrics. However, a lot of that is yet to be determined as we get to the details of the separation.

Okay.

Something more about what's there.

The separation will work.

Or decision.

Dave.

At this point given the options you have there.

The timeline for export.

Execution, because the business.

That you will decide on here.

It's a little bit.

Perfectly.

So this is John I think that the.

In terms of executing the separation of century.

We expect that that will take nine to 12 months.

Okay.

With that in mind.

With respect to the agencies want to see it.

<unk>.

Prior to ultimately.

Yes.

Chris.

Ed.

Dan.

Yes.

Yes.

Alone in terms of financing or whether you intend to perhaps extend.

Term loan in comparison.

This is John again, as Greg mentioned, we have had some initial conversations with the rating agencies, we will continue to do that.

We are not expecting that.

We're going to hold off on doing any kind of financing until we get to the end of the century separation.

And I think that we're going to continue to move forward and we're going to continue to have those discussions with the agencies, but I don't think that you can necessarily assume.

Since we have indicated it's going to take nine to 12 months to do the separation that we're going to need or that in fact, we're gonna desire.

An extension to that 364 day loan.

And then in terms of the equity financing.

Can you split that that will be done in a.

Physical passion or are you considering something more normalized.

The private placement or something like that.

This is John again, we're looking at a number of different options on that again, we want to make sure that we.

Do it in the most efficient manner possible.

We do it in a manner, that's going to maximize the value for our shareholders.

Okay. Thank you.

Our next question comes from Ryan Levine with Citi. Your line is open.

Hi, everybody.

Is this announcement or.

Is this announcement of our planned contingent on the valuation that southwest gas would receive for their stake or it's taken centrally.

Brian This is John no we don't have any.

Kind of contingency like that we're pretty excited about it.

And we're gonna be moving forward with US again under a timeframe that probably is going to take nine to 12 months. So there's there's no contingent factor.

Moving forward like this along the lines of what you referenced.

Okay.

And then do you have a current estimate of or any way of framing the dis synergy.

Associated with century for the Holdings company.

This is John again, no. We don't think that there really are going to be in particular dis synergies because century has.

Really operated somewhat independently from south will discuss the utility and certainly mountain west.

As we mentioned previously we don't see any.

Southwest gas holdings folks moving over to century sensory has its own management team.

We don't really think that there are going to be any notable dis synergies.

Okay and then last question for me the line Tech.

Noncontrolling interest you are anticipating the next.

2022.

Component will be evacuated before any.

Action.

Regarding the broader century platform would be enough.

Yes. This is Greg Ryan we are certainly looking at that as you are aware. This is the first year that we can.

Make the acquisition of 5% of that 20% that we have and that is certainly something that we're in discussions with internally as a management group and.

We will let the outside world know as we move forward on that.

Appreciate the color. Thank you.

Our next question is a follow up from the Doer Murdy with Hudson Bay Capital. Your line is open.

Yes, I'm wondering to annuity.

I mean the.

Necessitates shareholder approval.

No we're not anticipating that any of the options that we're going to pursue will require that those chung.

And are there any regulatory approvals.

For further actions Youre, taking pool either.

Century offered within the utility mountain West.

No, we don't anticipate any regulatory approvals being needed either.

Thank you.

Our next question comes from Stephen <unk> with.

Glenn is Lee your line is open.

Hi, guys congratulations on the announcement and thanks very much for taking my question.

On the dividend comment can you just highlight what you think are comparable with pure play utilities means.

Relative to the 55% to 65% of earnings and then also just to the construction peers typically pay a dividend.

Okay.

Yes, Stephen this is Greg I'll start by saying that we are a growth utility. So I think that that's important even as we've talked about the 55% to 65% we've been at the lower level of that because we are growing much more rapidly than many of our utility peers.

As we move forward.

Without putting a number next to that I would say that that number will move up as far as our payout ratio.

Strong cash flows that will be coming from mountain west to us and already are and so I think that will facilitate us moving up higher in that scale, but don't want to provide an exact number at this time, but we will be much more competitive in these.

Or half of that range than we had previously.

As it relates to centuries.

Struction Pearson.

<unk> have to start off by saying I don't know that they have a peer group because they are head and shoulders above.

The companies that operate in that market.

But there are some as you are aware that do pay dividends and some that don't and as I mentioned in my remarks, each company is going to look at their respective balance sheets and their peer groups to determine the way to think structure capital and the type of dividends.

Issue.

Okay. That's helpful. Thanks, again and congratulations guys.

Thanks Steven.

Our next question comes from Tim Winter with Gabelli Your line is open.

Congratulations guys on the announcement.

I appreciate.

No.

We got 45 to 60 days and maybe wait for more details, but I was wondering if you could maybe just talk a little bit or provide some color on.

Your perspective of the pros and cons and including tax considerations of.

Sale versus spin versus an IPO.

Yeah. Tim This is John I think that we're going to be considering all of those I think that the spec.

Rail option is the one that potentially has the most adverse tax consequences.

If we were to pursue an option like that it would have to be a pretty stout valuation.

The.

The spin options, including having some kind of sponsored spin.

We might have an investor.

Takes 19, 9% of the entity.

The option one of the advantages of that option is that it would help provide a marker on the valuation of the business.

The downside of that is versus let's say, an IPO or spin where all the shares issued would be that if you are bullish on this business and we are going if you think that there is further execution that we would like to demonstrate to the market related to rigs.

We think that certainly that would be some significant upside that would be able to be captured in terms of issuance of shares but all of those options are ones that we're going to be considering and looking at over the next couple of months.

Okay, Great that's very helpful.

No.

You provided a little bit of a.

Our growth targets for two of the businesses can you talk a little bit about the <unk> the.

The growth potential of the pipeline business.

Yes. This is Greg certainly we know that there is.

Assume.

Tim that you are talking about mountain west.

Yes, yes, yes.

Yes.

We've talked about how strong and stable Matt.

That business is I think in Karen's remarks, he talked about some of the opportunities that we are seeing now in that business that can provide future growth. So those are things that we've done up for two months now and those things are already coming to our attention and we.

As we evaluate those we will probably have more information to provide in the future, but we are certainly very bullish on mountain west not only their strong stable cash flows, but the growth prospects that are there.

Tim This is Karen I guess I would just add to that.

Mountain West some of the opportunities.

Because they are highly contracted <unk>.

Possibilities for connection to.

Pipelines to need more coal to gas conversions, they're working with oil producers to identify opportunities to increase associated natural gas transportation.

They've been fully contracted on all of our gas storage facilities and have a high demand for increased storage facility. So we can evaluate additional services there.

Yeah.

Expansion.

And that is fully contracted out Randy on the overthrust, we're looking not ready at ways to do expansions there as well.

We see a number of opportunities.

And are continuing to identify growth opportunities and mountain west.

Okay, great. Thank you.

Next question.

Question from Madhu <unk> with Hudson Bay Capital Your line is open.

I wanted to follow up on the dividend.

And then we've seen separations here fairly recently.

The dividend rate.

Utility company.

Company.

Yes.

What kind of end up having to reduce their dividend rate.

To fall within the longer term.

Gold.

The spin.

Sure.

I think that the.

Dividend rate.

Going forward.

Holdings with needed, perhaps a downward adjustment.

Part of it as part of its plan.

Obviously, the cadence of the pro for the.

The benefit of its.

Value from the separation.

Yes.

Mentioned this is Greg.

Our dividend rate, we actually think we'll move upward as a regulated.

<unk> strategic company going forward.

In our financial statements there are separate Standalone financial statements of southwest gas Corp, and you can see that that dividend rate on the cash flows was about 59% is what the what southwest gas Corp pay to its parent Swf's, that's a relationship up its earnings so.

No reason to think that the dividend rate on earnings will go down post separation actually it should go up.

Alright, thank you.

Our next question comes from Richard Sunderland with Jpmorgan. Your line is open.

Hey, just one more for me.

You referenced consolidation trends, just curious where you see southwest gas sitting amid kind of public to private transactions with industry consolidation overall.

Rich. This is John I think that we've got a really good game plan for moving forward. So I think the.

Our expectations are that we're going to continue to exist as a publicly traded company. We've got a big capital expenditures, we've got significant customer growth and we've got great opportunities in the energy transition. So we're not we're not ready to pull the plug on being a publicly traded company.

But just to be clear do you see yourself as a consolidator in kind of a transaction similar to the <unk> side, just curious on that angle.

We will continue to look at those opportunities I think that.

We've looked at some of the properties that have come up in the past couple of years.

And frankly.

<unk> had discussions with some of those parties. So thats something that definitely we will continue to look out we continue to be really bullish on the natural gas business and if there's something that makes sense and can be done on an accretive basis to enhance the value for our shareholders. We would definitely take a look at that.

I.

The color thanks.

There are no further questions I'd like to turn the call back over to Blake Nelson for any closing remarks.

Thank you Michelle and thank you all for joining US today. This concludes our conference call. Thank you for your interest in southwest gas holdings and century have a good day.

This concludes the program and you may now disconnect.

[music].

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Good day, ladies and gentlemen, and welcome to the southwest Gas Holdings 2021 year end earnings Conference call. At this time, all participants are listen only mode.

After the Speakers' presentation, there'll be a question and session.

That's a good question Dan necessity need to press Star then one on your touch some telephone.

Anyway should require assistance during the conference. Please press Star then zero. It takes an operator as a reminder, this call is being recorded.

I would now like to turn the call over to avoid Nelson Vice President of strategy and Investor Relations.

Begin.

Thank you Michelle and welcome everyone to the southwest gas Holdings year end 2021 earnings call.

My name is sports now stands and I'm, the vice president of strategy and Investor Relations.

Im assuming responsibility for Investor Relations from Ken Kenny Our Vice President of Finance Treasurer, who after a period of transition will focus fulltime on finance matters for the company.

We have posted today's presentation on our IR website.

On today's call, we have John Hester, President and CEO of southwest gas Holdings.

Oh, Daly, president and CEO of century.

Karen Chandler Executive Vice President Chief legal and administrative officer.

Greg Peterson, Senior Vice President and CFO , and Justin Brown, Senior Vice President and General Counsel.

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 and 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 two and 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 I'd like to turn the call over to John .

But.

On slide six we present in the agenda for today's call. We've got a lot of exciting content for today's call. So let's dive right in really Big news today is the announcement yesterday holdings will be pursuing an exciting separation of the century business.

In an effort to continue facilitating its growth trajectory.

<unk> value for shareholders for our call today, I'll kick things off with an overview of yesterday's announcement regarding our board of directors decision to pursue a separation centuri infrastructure services business Holdings Taryn.

Karen will overview the value proposition of our ongoing regulated natural gas operations continue to offer our shareholders, Justin who will provide an update on major rate case activity.

And our continuing collaboration with regulators to safely and reliably serve our customers energy needs.

Paul overview, the value proposition that our infrastructure services unit offers our shareholders, especially with the newly announced separation and Greg will then review our recent operating results and outlook.

For 2022.

Turning to slide eight we provide some perspective around the century separation there and why we are confident and enthusiastic. This is an optimal time to pursue the strategic course of action.

Many of you are aware that we acquired centuries predecessor entity at $19 96 to fulfill a need for high quality utility infrastructure services for our own distribution systems. After our acquisition. We quickly saw similar infrastructure contracting by many other peer regulated utilities.

Brand and organization was established in its current form in 2014.

As a board and management team, we regularly strategically review of this business in conjunction with outside advisers to ensure our family of businesses maximizing value for our shareholders.

<unk> always been open minded about the possibility of the separation.

Could be the best way to unlock its value while at the same time guarding against any premature separation that would short change the tremendous value that this business is created for our shareholders.

After continued organic growth along with major acquisitions like link line Newco Mitek and most recently rigs Destler. We are now confident that century has the scale the capabilities and the geographic diversity to stand on its own.

We originally acquired century for $25 million and since then our board and management team has built saturated into the significant business. What it is today a business that generated record revenues of $2 5 billion on a pro forma basis.

'twenty, one with years planning growth and investment.

Successful acquisitions I referenced have now positioned century as a strong independent company with notable opportunities in many aspects of the energy transition among others are attractive investment grade regulated utility customer base and our track record of significant EBIT growth.

<unk> positioned century is a very attractive standalone entity expected to achieve a premium valuation among industry peer set.

As Paul will review a little later century is now well placed to capitalize on the energy transition.

Moving to slide nine we show a snapshot of our regulated and unregulated businesses following the separation.

Our regulated business will be a fully regulated natural gas leader with continued focus on providing reliable affordable clean energy across Arizona, California, Nevada, and the Rocky Mountain region. It will continue to benefit from a significant population growth.

And strong regional economies, we are experiencing across our service territory footprint and offer strong consistent risk adjusted total returns with a competitive dividend. There is no expected impact of the separation on utility operations customers our customer rates.

Between southwest gas mountain West, we have more than 2500 employees with the utility serving $2 1 billion customers financially southwest gas holdings delivered 152 billion and pro forma regulated operations revenue in 2021 .

Meanwhile century as a Standalone company has a legacy of more than 100 years of operational experience and is well positioned for continued profitable growth.

Far front of utility infrastructure modernization and the energy transition the business now has significant scale with approximately 10500 employees serving clients in 45 states and provinces in the U S Canada.

We will continue to be led by CEO , Paul Daily and the current century management team.

Southwest Holdings management, including the participants in this call are expected to stay with the holdings entity.

Moving to slide 10, I want to highlight a few points in particular on the benefits of the separation funding.

Fundamentally this transaction is about unlocking value for stockholders to encourage the market valuations of southwest gas and century in line with peers. In addition, we anticipate the flexibility to meaningfully reduce future equity financing needs, including with respect to mountain West.

To ongoing discussions with our rating agencies. This expectation results from revised consolidated risk position of our business segments post separation.

Separation will result in both southwest gas and century, having compelling financial profiles that more accurately reflects the strength and opportunities of each business.

As a result.

The separation will provide more targeted investment opportunities for shareholders and enhance transparency through more direct comparability two pure play industry peers were.

Also very confident that both companies will benefit from improved capital allocation efficiency and strategic flexibility, which will encourage continued pursuit of value accretive opportunities that are in line with their distinct markets customer basis and business initiatives. This is especially notable given the.

Validation trends in our industries as you can tell we're really extremely proud of the businesses. We have built and the value created for shareholders I do want to take a moment and the call to thank all of our employees, who have worked so hard to help grow our respective business segments and help us reach is important.

Millstone. This is an exciting time for all of US and we look forward to the next chapter of growth for both southwest gas holdings and century, as we seek to maximize value for our shareholders deliver excellent service to our customers and create new opportunities for employees with that I'll now turn the call.

Call over to Ken to talk a little bit about southwest gas post separation Karen.

Thank you John Let me open the slide 12 under the southwest gas Holdings umbrella, we have built a premier gas delivery network in the Western United States.

Separation will be a pure play fully regulated natural gas business with strong collaborative relationships with our state regulatory Commission and federal Energy Regulatory Commission.

Our collaborative approach to regulatory relationships contributed to near record growth in revenues.

Great based in 2021.

And we expect to continue to grow southwest gas customers rate base EBITDA and net income.

Further our recent acquisition of mountain West provides a complementary compelling suite of high return assets to drive value and earnings accretion.

Unique strength and stability mountain West is both commercially and geographically adjacent to our regulated utility operations.

With long term customer relationships more than 90% of mountain West revenue is contracted and over 70% of revenues are backed by investment grade customers.

So our strategy is clear, we look forward to advancing our growth and delivering significant value for our stockholders as we continue to deliver reliable affordable and clean energy across our service territories.

Turning to page I'm going to discuss some of the drivers we see for continued value creation in our regulated business.

Our regulated natural gas operations provide stable and predictable cash flows and strong returns and are the types of assets that will be the backbone of the energy transition.

And this is reflected in our rate base that has nearly doubled in the last five years.

Driven by capital investment achieving good outcomes in our rate cases through our strong relationships with our regulators and of course, the mountain West acquisition.

Rate base growth has and will continue to support earnings growth.

That rate base growth does impact, our ROE and rate jurisdictions with historical test years.

Expect <unk> to continue to improve and of course mountain West will also further bolstered first RSV.

As you know part of the rationale for the mountain West acquisition once the improved rate base and regulatory diversification that came with it.

Equally as important we are confident that we can enhance the value of the mountain west assets. As we are focused on her in a way that is different from the past for these assets in this regard while it is early days, we are already identifying opportunities beyond our investment case, because we already own FERC regulated.

The pipeline assets.

No what it takes to manage these businesses successfully.

And on the financial side, Mount with balances out our portfolio by providing stable cash flows, which reduced our reliance on capital markets and the significant capital investment or utility requires.

Isn't covered by internal cash flow from operation.

On slide 14, we lay out some of the dynamics, we benefit from with our broader geographic footprint.

We continue to grow with southwest gas.

Customers had close to 2% annually increasing the rate.

As well as the EBITDA and net income.

This is in part driven by the significant population.

The growth in our utility service territories.

Our regulatory jurisdictions are in some of the fastest growing states in the country, resulting in us, adding 37000, new customers in post 2020 and 2021.

Further mountain west attractive neighboring geographies, Utah, Colorado and Wyoming.

<unk>, which are favorable jurisdictions for natural gas. They are also seeing significant economic growth driving high demand.

As we grow we will remain laser focused on.

Our O&M per customer and our strong customer satisfaction metrics.

And let me ask Jonathan to take you to some of our recent rate case activity Justin.

Thanks, Karen.

Continue to see strong demand for natural gas service in our service territories.

Demand translates into investment opportunities to support both customer growth and pipe replacement activity to ensure we continue to meet regulator and customer expectations. When it comes to providing safe and reliable service fees.

These investment opportunities underpin our expectations to deliver compound annual rate base growth of 7% over the next five years.

A critical part to sustain this growth is our focus on maintaining strong collaborative relationships with our state regulatory commissions. We are steadfast in our approach to ensuring we have a continuous open transparent and collaborative dialogue with all stakeholders to help ensure we worked together on outcomes that are in everyone's best interest.

Our most recent rate case cycle outcomes contributed to approvals of approximately $66 million for 2000 2021.

We also received approval last quarter to recover $74 million associated with previously approved capital tracker programs in Arizona.

We currently have rate cases, pending in Nevada, and Arizona as shown on slide 15.

We're excited to announce that we work collaboratively with all stakeholders in our Nevada rate case to develop a constructive settlement that proposes to increase statewide revenues by $14 million as well as potentially recover the COVID-19 regulatory asset amounts are requested certification was for approximately $28 million.

This included approximately $7 million reduction in operating expenses since our last rate case. The request also included several non traditional adjustments to our proposed revenues, which totaled just under $5 million. In addition, we requested to utilize the target capital structure.

The proposed agreement is still subject to commission review and approval, but we expect that review on our final decision later this month.

With respect to our Arizona rate case, we recently finalized the procedural schedule and anticipate receiving staff and intervenor testimony this summer and to conduct hearings in late September early October this keeps us on track for a final decision by possibly year end, if not early part of 2023.

Turning to slide 16, the primary driver for our recent increases in revenues has been changes in authorized rate base in each of our jurisdictions.

Each of those rate case decisions saw record or near record increases in commission authorized rate base.

Great base growth is driven by the targeted investments we've made constructive rate case outcomes and supportive regulatory mechanisms, which together have delivered growth of one 6 billion or 69% increase in rate base between 2017 and 2021.

Spending on the ultimate outcome of our two pending rate cases, we could see our rate base potentially increase to nearly $5 billion on.

On the right hand on the right hand side of the slide we've called out some of the key regulatory mechanisms that have positively contributed to our ability to deliver on the mutual goals, we share with our regulators are making investments to provide safe reliable service and responding to the strong demand for natural gas service that we continue to see across our service territories.

We also continue to work on developing constructive frameworks in each jurisdiction to support future investments in sustainability initiatives as well as developing solutions to ensure our customers have tools and options to help them achieve their environmental goals now I'll turn it back to Karen to close out our discussion of our regulated business.

Thanks, Jeff I'm going to pick up on slide 17 for some comments on how we're positioned.

The investment in the energy transition.

Our business is benefiting from sign up to the industry trends, such as gas infrastructure replacement and safety and reliability investments.

That translates into tangible stockholder value together now lapsed in our utility system provide extremely attractive energy transition opportunities in renewable natural gas.

Natural gas.

We sourced gas hydrogen and CMT transportation, we're advancing the clean energy transition and establishing the regulatory frameworks to advance sustainability across our business, including connecting sources and users and investing in infrastructure to help make R&D available to the market.

<unk> unique partnerships to study and develop standards for hydrogen creation and blending exploring opportunities for <unk> transportation and sequestration.

Continuing to work with transportation partners to reduce greenhouse gas emissions with compressed natural gas and renewable natural gas and implementing emissions reductions technology as part of our operations procedures.

Before I hand over to Paul to talk more about century I'd like to make some remarks on the benefits for our natural gas business operating as a pure play fully regulated company on slide 18 from.

From a financial perspective, we will be able to deliver the stable low risk route which is characteristic to utility earnings.

And in our case is supported by population and economic growth in our service areas.

When you combine this with the geographic diversification and strong consistent cash flow protection from a pipeline asset we will have a highly predictable financial outlook, we will be able to optimize our capital plans and in turn our returns to stockholders.

Looking to the future, we will have really exciting opportunities in the energy transition.

With that let me turn the call over to Paul to talk about century.

Thanks, Kevin turning to slide century presents a compelling value proposition as a stand alone company.

John mentioned earlier, we have built century into an incredible utility infrastructure services leader dedicated to delivering a diverse array of solutions to utilities across North America.

We have succeeded in growing the business because we haven't still did client century centric focus and our commitment to quality safety and efficiency.

The business grew initially as the need for utility infrastructure repair and replacement crude.

And as construction outsourcing became more common we have taken strategic opportunities to add scale through organic growth and acquisitions.

The past five years, we've added three platform companies to provide strategically targeted markets and services and.

In 2017, we acquired Newco for non Union gas distribution services throughout the northeast.

<unk>, we acquired in late 2018 for non Union electric transmission and distribution throughout the Gulf Southeast and mid Atlantic States and most recently rigs discipline or is there a union platform for providing electric T&D renewables and <unk> services throughout the United States.

Well strategically, adding significant scale through organic and M&A growth, we've maintained our disciplined staying within our low risk recurring MSA driven utility distribution services profile.

We have approximately 10500 incredibly talented employees within our eight operating companies throughout the U S and Canada.

Their hard work dedication and support of our businesses each and every day.

Helped build the safety focus high performance company culture.

Serving a highly regulated blue chip customer basis, there is a table in the appendix that depicts that we have and we have over 23 years.

Tenuous contractual service to our top 20 customers in fact, we've been working for Npls first customer for <unk>.

55 years now and there is four three clients that were in our four decades of service to.

Most importantly, as a Standalone company century has decades of outsized growth prospects given the continued significant investment in utility infrastructure with opportunities is diverse.

Gas pipeline replacement hardening of electric distribution assets and supporting onshore infrastructure for offshore wind development.

Moving to slide 21.

You can see on the left side.

<unk> delivered $2 5 billion of pro forma revenues in 2021.

And we have significantly grown adjusted EBITDA from $65 million in 2000 $12 million to $252 million in 2021 on a pro forma basis, representing a compound annual growth rate of 14, 1%, serving both gas and electric utilities.

During the last four years, we've transformed century from a low growth infrastructure services company focused primarily on the gas utility customers to our high growth.

<unk> services company, providing services to both gas and electric customers.

With the addition of line Tech and the recent transformational acquisition of reach discipline.

We accelerated centuries expansion into Union electric services have added five <unk> build out and renewables infrastructure capabilities and we've put the combined century business on a trajectory to generate revenues of nearly $2 7 million to $2 8 billion in 2022.

All without exposure to high risk cross country pipeline or electric transmission projects.

As a standalone company, we are targeting normalized EBITDA margin of 11% to 12% excluding nonrecurring separation costs.

Centered all around low risk recurring and predictable MSA driven utility projects.

Turning to slide 22.

With the continued national focus on infrastructure investment in our long term multi decade relationships with blue chip utility customers.

Very well positioned to deliver strong earnings and cash flow.

Over time, we have continued to diversify our revenues and enhance our service offerings. As you can see on the right side. We are also highly diversified across geographies with the largest percentage of sales from one state at 15%.

Along the law.

And you can see that we have an attractive and low risk contract mix, approximately 64% of our contracts, our unit price and 24% or by.

Time and materials.

Just 12% of our contracts are fixed price and many of those are bid to our existing utility MSA customers.

With our highly recurring predictable revenue underpinned by long term master services agreements and stable contracts.

Century generate strong cash flows that we can allocate towards investing in our continued growth and returning capital to stockholders.

The revenues and gross profit by segment as depicted in the top left for 2021 include rigs just lift from the period last year.

For the full year 2022 gas electric segments are anticipated to be more balanced.

Moving to slide 23.

As this slide makes clear there are decades of long term growth opportunities on our electric and gas distribution <unk> datacom in energy transition markets.

Geographic breadth across United States, and Canada integrated offerings, as well as our union and nonunion workforce.

The scale and Optionality to meet these evolving needs of utilities and utility holding companies.

We are poised.

Tinea decades long growth in electric utility distribution and.

<unk> infrastructure will demand significant replacements and upgrades.

Maintaining system performance as well as upgrades increased grid resiliency and reliability.

Note on the top left you'll see the 45% of electric utility distribution is accurate near its end of useful life.

That represents a very sizable opportunity for century.

Likewise gas utility distribution aging infrastructure has led to a regulatory driven multi decade replacement cycle.

<unk> electric 45% of gas distribution infrastructures near or at the end of its useful life and we see continued strong growth and thats construction spend.

As I mentioned earlier the acquisition of Rich. This work has positioned us to support the rollout of <unk> Datacom.

Small cell wireless density required a significant build out an existing utility infrastructure will be a key component to that.

Suffocation, providing a major growth opportunity for <unk>.

Century across our foot print.

We're already cross selling this service two lines at customers in the southeast.

Finally, as I noted earlier, we are incredibly well positioned to benefit from the energy transition.

We support our utility clients across North America.

We expect the investment in renewable energy will continue to accelerate rapidly renewable energy accounts for approximately 18% of U S energy mix and is projected to reach 31% by 2050 as utilities move towards renewables.

Gardening renewable energy and specifically offshore wind rich <unk> has already signed a supply agreement for advanced foundations.

With the <unk> joint venture with work beginning.

Expected to begin later this year.

The energy transition is a very strong tailwind that will drive our growth for years to come.

Before I turn the call over to Greg I'd like to briefly summarize on slide 24, what I've covered today.

Century is strategically focused with high quality businesses throughout North America.

And we are positioned for continued growth across our industry as we expand into new high growth markets, particularly those associated with the energy transition.

We have a long tenured blue chip utility customer base with highly recurring revenue underpinned by long term master services agreements and long low risk contracts.

With our strong relationships differentiated capabilities and a world class management team.

Like all of whom have served in similar management roles and private are publicly held stand alone companies.

Well positioned to deliver strong growth earnings and cash flow as an independent company.

Together with this management team I am very excited to be able to elite century into its bright future and is a high growth independent company that will be playing an important role in meeting the energy and infrastructure needs of tomorrow.

Looking ahead, we will continue pursuing pursuing exciting new electric and gas infrastructure opportunities.

Focusing on operational excellence cross selling our growing service offerings to.

Asian utility customers, and increasing profitability and growth, while maintaining our lower risk business profile.

Hope you share our excitement for the future of century with that I'll turn the call over to Greg Peters.

Thanks, Paul Yes.

Yesterday afternoon, we announced our 2021 earnings and provided some additional statistical information.

We also filed our 2021 annual report on Form 10-K with the SEC.

Please refer to these documents for a comprehensive analysis of our operations for 2021.

As shown on slide 26, adjusted EPS was $4 17 per diluted share for 2021 versus $4 14 per diluted share for 2020.

This tops the full year adjusted guidance that we provided in November on our previous conference call let.

Let me touch on some of the highlights.

Record net income was posted the utility as operating margin increased $83 million or 8% between years, driven by $61 million of incremental rate relief in Arizona, Nevada and California.

37000, new customers, who provided $13 million of operating margin.

During 2021, we invested over $600 million in the expansion safety and reliability of our natural gas distribution system to better serve our customers. This included a new customer information system implemented in May 2021.

As was previously mentioned century had record revenues of $2 $2 billion to $5 billion on a pro forma basis.

And total revenues were emergency restoration services revenues of $65 million in 2021 compared to $82 million recorded in 2020.

Adjusted for the tax effected 21, 5 million of acquisition related or partial year results associated with rigs disorder.

<unk> net income was $61 9 million in 2021, our second best year ever versus the record $74 9 million recorded in 2020.

The corporate and administrative net expense of $26 8 million in 2021 reflects the net of tax acquisition and related costs of mountain West, which we acquired on December 31, 2021 and.

And approximately $3 4 million of net of tax costs associated with stockholder activism responds.

As a reminder, the operating results of mountain West are not included in our 2021 results. So it will be.

Reflected in our 2022 operations.

With that let's move to the next slide and talk about our outlook for 2022.

Slide 27 depicts important metrics of our 2022 guidance.

With the announced plant separation of century, we are replacing previous EPS and other guidance with component company guidance to assist investors and analysts and seeing our vision for 2022 and beyond.

And century, we expect 2022 revenues to be $2 65 to $2 $8 billion driven by growth in all facets of the business and especially our recently acquired rigs disorder.

While we expect some incremental cost during this separation transition period normalized EBITDA margins are expected to be 11% to 12%.

For our utility operations at southwest gas, we estimate net income will be $200 million to $210 million.

Operating margin will continue to benefit from ongoing customer growth recoveries of previously deferred amounts in Arizona and refreshed rates in Nevada.

We continue to estimate coli income of $3 million to $5 million in 2022.

Investments in our natural gas distribution system will be $650 to $700 million through 2022 and are expected to continue through 2026, resulting in rate base, increasing at a compound annual growth rate of about 7%.

And our newest subsidiary Mountain West, we anticipate revenues will be $240 million to $245 million in 2022.

The run rate EBITDA margin of 68% to 72%.

We are on track in our integration plan of mountain West and are already benefiting from strong operating cash flows from this acquisition.

Adjusting for onetime integration costs, we reiterate the mountain west will be accretive to EPS in 2022 and beyond.

At the holding company, we will strengthen our balance sheet as we refinanced the $1 $6 billion term loan associated with the mountain West acquisition.

As we move through the century separation process, the remaining regulated natural gas business focus at SWM.

Is designed to improve our business risk profile with the credit rating agencies and provide flexibility in the timing and amount of future equity issuances.

With the recent announcement of an annualized dividend increase of <unk> 10 per share. We continue our targeted dividend payout range of 55% to 65% of consolidated earnings.

After the century separation, we plan to increase the payout ratio to levels competitive with pure play utility.

As separate companies southwest gas holdings, and century will have capital structures and financial policies appropriate for each business.

I'll now turn the call back over to John for some concluding remarks.

Thanks, Greg before we move to Q&A.

A few thoughts referencing slide 28.

Really excited that the separation we've discussed today will unlock increased value for our shareholders inherent in both companies that is not currently reflected in our stock price. We are enthusiastic about the important role of these entities will play prospectively with major sector themes of infrastructure modernize.

<unk> and the energy transition for southwest gas, including Mountain West we will have compelling growth avenues as a pure play fully regulated natural gas business with promising opportunities in favorable jurisdictions from natural gas century will continue with this.

Establishing a track record of significant revenue and EBIT growth and will be essential to the construction of infrastructure across the United States and Canada that is necessary for the energy transition as you can say, we're incredibly excited about the benefits of this planned separation and the value it will do.

<unk> for customers employees, and our shareholders before we open it up for questions I would like to note that today's call is focused on separation of century outlook and fourth quarter and full year financial results today, we do not plan on answering any questions regarding.

The tender offer or our engagement with Mr. Icahn, which we have covered in prior calls with that I'll turn it over to the moderator to explain the process for asking questions.

As a reminder, if you'd like to ask a question. Please press Star then one if your question has the answer then you'd like to remove yourself.

Our first question comes from Richard Sunderland with Jpmorgan. Your line is open.

Okay.

Good morning, Thanks for taking my questions today, maybe starting with the separation I'm just curious what potential structures are under evaluation here.

Something from types of experience through an outright sale in terms of possibilities and when do you expect to communicate the final plant.

Okay.

Thanks, Richard This is John I think that certainly both of those options that you mentioned are things that we will be considering.

There are other options as well, we're going to be evaluating that over the next month or two one of the issues that we're going to be sensitive to as tax efficiency. So I don't think we're eliminating anything from being an option to consider we're really going to try to identify the option that serves the best interest.

Our shareholders and take that course of action I think that you can expect more transparency, but ultimately the route that we're going to take probably in the next.

<unk> 45 to 60 days.

Got it that's very helpful. And then turning to the credit side Im thinking about your equity needs going forward what are the <unk> to debt kind of upgrading downgrade thresholds currently for southwest gas holdings, and how do you think about the potential moves or changes.

And those in consideration of the separation going forward.

Yes, Richard this is Greg certainly as we move forward and work with our credit rating agencies, we believe as we announced today and talked on the call.

Our financial position our.

Our risk ratings will improve at the credit rating agencies of course, thats ultimately up to them, but.

We will utilize the information as we move forward to make sure that we have a strong balance sheet and it will facilitate our ability and the timing and amount of equity that's issues, but a lot of that has to come and dependent upon the separation that we do and the timing of that with century.

Understood, maybe if I could slip in one final question.

Mountain West equity, what's your latest timing on completing guidance.

Pushed out versus the May timeframe, you discussed before maybe how does the separation factor in there.

Yes.

The separation was certainly a consideration a key component of all of the things that we're doing at southwest gas holdings, and we will take that information into play with everything else that we're doing to make sure that as John mentioned that we are efficient.

Issuing capital to maximize shareholder value so more to come on that.

Sure.

Got it thank you for the time today.

Thanks Richard.

Our next question comes from Madhu Liberty with Hudson Bay Capital. Your line is open.

Good morning.

Good morning, gentlemen.

Good morning.

Hi, I'm wondering in terms of you alluded to.

<unk> on your credit metrics.

The holding company.

To elaborate a little bit in terms of how much room, you think would.

It would be available to you and then I think the original clean number you've had.

$102 million, that's implied that Dennis whom debt.

Equity number would be able to.

So is this.

<unk> talked about.

Please.

Yeah.

Has there been discussions with the agencies.

Performance at about the same.

Not yet.

Thank you Gabe.

Putting yourself.

Yes. This is Greg I think the first thing is that we have engaged and talked with our credit rating agencies, we think that's appropriate to do especially with the significant.

Yes.

Development as it relates to the separation of <unk> century. So we are working with them as we mentioned earlier as we proceed down the path and have a more definite plan of the type of way that we will effectuate the century separation.

That will have important aspects in the amount and timing of equity.

We do we will have and certainly anticipate that we will have a stronger and better risk profile.

Few from all three of the rating agencies, and we think that that will help us on a go forward basis to have flexibility to issue less equity going forward, while maintaining those credit rating agency metrics. However, a lot of that is yet to be determined as we get to the details of the separation.

Hello <unk>.

So you should hear something more.

Hmm.

The separation will work.

Our decision.

A few days.

At this point given the options you have there what do you think.

Timeline or.

Execution of course of business.

Sure.

We'll decide on here.

So all of that.

That's great.

So this is John I think that the.

In terms of executing the separation of century.

Expect that that will take nine to 12 months.

Yes.

Okay.

Yes.

With that in mind.

Yes.

Okay.

The agencies want to see it.

Yeah.

Prior to ultra.

Various metrics.

Thanks.

Yes.

About.

But the term loan in terms of quota financing or whether you intend to perhaps extend.

The term loan and from past.

This is John again, as Greg mentioned, we have had some initial conversations with the rating agencies. We will continue to do that but we are not expecting that.

We're going to hold off on doing any financings until we get to the end of the century separation.

And I think that we're going to continue to move forward and we're going to continue to have those discussions with the agencies, but I don't think that you can necessarily assume.

Since we have indicated that it's going to take nine to 12 months to do the separation that we're going to need or desire.

An extension to that 364 day loan.

And in terms of the equity financing.

Can you split that that will be done.

Physical person or you.

Something.

Something more normal.

What's the private placement or something like that.

This is John again, we're looking at a number of different options on that again, we want to make sure that we do it in the most efficient manner possible that we'd do it in a manner, that's going to maximize the value for our shareholders.

Okay. Thank you.

Our next question comes from Ryan Levine with Citi. Your line is open.

Hi, everybody.

Is this announcement or.

Is this announcement of our planned contingent on the valuation that southwest gas would receive for their stake or it's taken century.

Brian This is John no we don't have any.

Any kind of contingency like that on those were pretty excited about it.

And we're going to be moving forward with us again under a timeframe that probably is going to take nine to 12 months. So there's there's no contingent factor.

Moving forward like this along the lines of what you referenced.

Okay.

And then do you have a current estimate of or any way of framing the dis synergy.

Associated with century for the Holdings company.

This is John again, no. We don't think that there really aren't going to be in particular dis synergies because century has.

Really operated somewhat independently from south will discuss the utility and certainly mountain west.

As we mentioned previously we don't see any.

Southwest gas holdings folks moving over the centuries century has its own management team.

We don't really think that there are going to be any notable dis synergies.

Okay and then last question for me the line Tech Nanking.

Noncontrolling interest you are anticipating the next two.

2022.

Component will be evacuated before any <unk>.

Action.

Regarding the broader century platform would be enough.

Yes. This is Greg Ryan we are certainly looking at that as you are aware. This is the first year that we can.

Make the acquisition of 5% of that 20% that we have and that is certainly something that we're in discussions with internally as a management group and.

We will let the outside as we move forward on that.

Appreciate the color. Thank you.

Our next question is a follow up from Madhu <unk> with Hudson Bay Capital. Your line is open.

Yes, I'm wondering to annuity options.

With shareholder approval.

No we're not anticipating that any of the options that we're going to pursue all require that those John .

And are there any regulatory approvals.

And then for the actions Youre taking pool.

Either for century offered within the utility mountain West.

No, we don't anticipate any regulatory approvals being needed either.

Okay.

Hi, Thank you.

Our next question comes from Stephen <unk> with.

With Glenn as Lee Your line is open.

Hi, guys congratulations on the announcement and thanks very much for taking my question.

Just on the dividend comment can you just highlight what you think comparable with pure play utilities means in terms of like relative to the 55% to 60% of earnings and then also just to the construction periods typically pay a dividend.

Thanks.

Yes, Stephen this is Greg I'll start by saying that we are a growth utilities. So I think that that's important even as we've talked about the 55% to 65% we've been at the lower level of that because we are growing much more rapidly than many of our utility peers.

As we move forward.

Without putting a number next to that I would say that that number will move up as far as our payout ratio. We have strong cash flows that will be coming from mountain west to us and already are and so I think that will facilitate us moving up higher in that scale, but don't want to provide an exact number at this time, but we will be much.

More competitive in the upper half of that range than we had previously.

As it relates to centuries construction Pearson.

These have to start off by saying I don't know that they have a peer group because they are head and shoulders above many of the companies that operate in that market.

But there are some as you are aware that do pay dividends and some that don't and as I mentioned in my remarks, each company is going to look at their respective balance sheets and their peer groups to determine the way this new structure capital and the type of dividends.

<unk>.

Okay. That's helpful. Thanks, again and congratulations guys.

Thanks Steven.

And next question comes from Tim Winter with Gabelli Your line is open.

Congratulations guys on the announcement.

I appreciate it.

We got 45 to 60 days, maybe the way for more details, but I was wondering if you could maybe just talk a little bit or provide some color on.

Your perspective of the pros and cons, including tax considerations of.

Rail versus spin versus an IPO.

Yes, Tim This is John I think that we're going to be considering all of those I think that the spec.

Option is the one that potentially has the most adverse tax consequences.

If we were to pursue an option like that it would have to be a pretty stout valuation.

The.

Spin options, including having some kind of sponsored spin.

We might have an investor.

Takes 19, 9% of the entity.

The option one of the advantages of that option is that it would help provide a marker on the valuation of the business.

The downside of that is versus let's say, an IPO or spin where all the shares issued would be that if you are bullish on this business and we are and if you think that there is further execution that we would like to demonstrate to the market related to rigs.

We think that certainly that would be some significant upside that would be able to be captured in terms of issuance of shares but all of those options are ones that we're going to be considering and looking out over the next couple of months.

Okay, Great that's very very helpful.

Also.

You provided a little bit of.

Our growth targets for two of the businesses can you talk a little bit about the.

The growth potential of the pipeline business.

Yeah. This is Rick certainly we know that there is.

Assume.

Tim that you are talking about mountain west.

Yes, yes, yes.

Yes.

We've talked about how strong and stable Matt.

That business is I think in Karen's remarks, he talked about some of the opportunities that we're seeing now in that business that can provide future growth. So those are things that.

We've done them for two months now and those things are already coming to our attention and we.

As we evaluate those we will probably have more information to provide in the future, but we are certainly very bullish on mountain west not only there are strong stable cash flows, but the growth prospects that are there.

Tim This is Karen I guess I would just add to that.

Mountain West some of the opportunities because they are highly contracted arris team.

Operability is our connection to the.

Pipelines to need bulk coal to gas conversions, they're working with oil producers to identify opportunities.

Increase associated natural gas transportation.

They've been fully contracted on all of our gas storage facilities and have a high demand for increased storage facilities. So we can evaluate additional services there.

Yeah.

The expansion.

And that is fully contracted already overstressed and so we're looking not ready at ways to do expansions there as well.

We see a number of opportunities.

And are continuing to identify growth opportunities and mountain west.

Okay, great. Thank you.

Our next question comes from Andrew <unk> with Hudson Bay Capital. Your line is open.

I wanted to follow up on the dividend.

And then.

We've seen separations here fairly recently.

The dividend rate.

Utility company.

Company.

Doug.

What kind of end up having to reduce their dividend rate.

To fall within the longer term.

Gold.

The.

And.

Sure.

Are you expecting that.

Dividend rate.

Going forward.

Holdings with needed perhaps it downward.

Adjustments.

Part of it.

But its plan.

Obviously cadence with the benefit of it.

Volume from the separation.

Yes.

This is Greg.

Our dividend rate, we actually think we'll move upward as a regulated.

<unk> strategic company going forward in our financial statements. There are separate stand alone financial statements of southwest gas Corp, and you can see that that dividend rate on the cash flows.

59% is what the southwest gas Corp pay to its parent SWM as a relationship of its earnings.

No reason to think that the dividend rate on earnings will go down post separation actually it should go up.

Alright, thank you.

Our next question comes from Richard Sunderland with Jpmorgan. Your line is open.

Hey, just one more for me you referenced consolidation trends, just curious where you see southwest gas sitting amid kind of public to private transactions and with industry consolidation overall.

Chris This is John I think that we've got a really good game plan for moving forward. So I think our expectations are that we're going to continue to exist as a publicly traded company. We've got a big capital expenditures, we've got significant customer growth.

And we've got great opportunities in the energy transition. So we're not we're not ready to pull the plug on being a publicly traded company.

But just to be clear do you see yourself as a consolidator in kind of a transaction similar to the <unk> side, just curious on that angle.

We will continue to look at those opportunities I think that.

We've looked at some of the properties that have come up in the past couple of years.

And frankly.

<unk> had discussions with some of those parties. So thats something that definitely we will continue to look out we continue to be really bullish on the natural gas business and if there's something that makes sense and can be done on an accretive basis to enhance the value for our shareholders. We would definitely take a look at that.

I appreciate the color. Thanks.

There are no further questions I'd like to turn the call back over to Blake Nelson for any closing remarks.

Thank you Michelle and thank you all for joining US today. This concludes our conference call. Thank you for your interest in southwest gas holdings and century have a good day.

This concludes the program and you may now disconnect.