Southwest Gas Holdings Inc. Q1 2023 Earnings Call
Good morning, and welcome to the southwest gas Holdings first quarter earnings Conference call.
Expenses will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then CEO . After today's presentation. There will be an opportunity to ask question to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please note. This event is.
Being recorded I would now like to turn the conference over to Tom O'brien General Counsel Southwest Gas Holdings. Please go ahead.
Thank you rationale.
Hello, everyone and welcome to the southwest gas Holdings first quarter 2023 earnings call for <unk>.
At the call, we won't be referencing the presentation slides, which we have posted on our Investor Relations website.
I'm joined on today's call by Karen Howard President and CEO of southwest gas Holdings.
Senior Vice President and Chief Financial Officer, Justin Brown, President of Southwest Gas Corporation, Paul Daly, President and CEO of century Park.
And she had been Sweden, the CFO of century.
Please note that on today's call. The company will address certain factors that may impact this years earnings and provide some longer term guidance. Some of the information that we'll be discussing today contains forward looking statements.
Payments 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 and in the press release as well as our SEC filings for a description of the factors that may cause actual results to differ from our forward looking statement.
All forward looking statements are made as of today and we assume no obligation to update any such statements.
Now I will turn the call over to Karen.
Thanks, Tom I'm pleased you're joining us today to discuss the southwest gas holdings first quarter results.
Turning to slide five.
We are making significant process on our transformational strategy of returning southwest gas with core foundation as a premier fully.
Regulated natural gas utility, we are enhancing the efficiency and productivity across our operations and pursuing constructive rate case outcomes at the utility while also preparing the country for its future as a strong standalone infrastructure services leader.
Customer growth and demand remains strong and we continue to benefit from population growth across our service territory.
As a result, we believe southwest gas is uniquely positioned for continued growth and success as we safely addressed the needs of our customers.
First in the communities, we serve and deliver value for our shareholders.
We are strategically deploying capital investing in our operations. So that we can meet the demand for safe reliable and affordable energy solutions.
We're working constructively with our regulators and legislators to complement our strong organic rate base approach.
We are confident in our momentum and remain on track to deliver 5% to 7% CAGR and rate base growth over the next three years.
I'll also maintaining strong investment grade balance sheet and delivering how do these dividends to our stockholders.
As you can see on slide six we are making excellent progress on our 2023 strategic priorities.
We completed several key strategic milestones during the first quarter, including the $1 5 billion sale of mountain West and the Raspberry process earlier this year to confirm our financing plan for 2023.
Under the financing plan during the first quarter, we issued $247 million of equity at southwest Holdings, and 300 million of debt at southwest gas in.
In mid April we issued a $550 million term loan at southwest Holdings.
We continue to see limited near term equity needs for 2024, and 2025 and anticipate equity needs at less than 100 million in total through the end of 2025.
We remain on track with century spend with <unk>.
Got it and the IRS private letter ruling request request during the first quarter and filed a notice of intent with the ACC in April .
Our team is now focused on the SEC form 10 submission.
As previously stated we expect to complete the spent a century during the fourth quarter of 2023 or the first quarter of 2024.
At <unk>, we are focused on the utility optimization with you and won't begin prioritizing initiatives later this year as I will cover in more detail.
Of note on the regulatory side in the quarter, we finalized our Arizona General rate case, which led to the agency's approval and authorization of the largest revenue.
Got it.
$54 million with rates effective February one 2023.
We also filed a proposed change to the Arizona P. G. A recovery mechanism in late February .
And lastly, we expect to file our Nevada rate case in the third quarter this year.
We are pleased with our continued progress and our strategic plan is on track.
On slide seven we walk through our strong first quarter performance at southwest and century.
We are proud to announce that after utility we delivered the highest quarterly net income on record.
We experienced another quarter of strong customer growth, adding 42000, new meter sets over the last 12 months.
While continuing to make investments to ensure our system remains safe and reliable for the benefit of our customers.
At Centuri, we announced record setting first quarter revenue and the strong first quarter performance reduce fisheries last 12 months net debt to EBITDA multiple half a turn or two five times from the prior quarter.
Century also grew its offshore wind portfolio and showcase continued growth and a strong base of gas and electric utility customers.
Paul will discuss interest continues to win new business based on the strength of its relationships and capabilities and is well positioned to play a critical role in the continuing energy transition.
As shown on slide eight we've been active really advancing in multi step evaluation process to optimize the performance of the utility.
For a comprehensive review and identification of potential optimization opportunities.
We recently hired consultants, including a top business and management firm to complement the work we've been doing internally to assist us in our deep dive review into the current cost structure of the utility.
This review is about ensuring the investments we are making are efficient targeted positively contributing to building a solid foundation for future success.
We anticipate this identification process will continue through the second quarter, and then we will refine and develop prioritize action plans.
By identifying cost savings and efficiency opportunities.
Extra costs execute on over the next couple of years.
Process will help support the tremendous growth we have across our service territory.
On savings.
Customers.
Proof of our ROE.
And result in positive returns for our stockholders.
We also believe these efforts will complement our commitment to delivering excellent customer service and operational efficiency.
As I mentioned previously we added 42000, new utility customers during the past 12 months and expect to continue to benefit from strong demographic and economic growth in the southwest.
Between 2023, and 2028 population growth is projected to be $3 76 per section in Arizona and three 9%.
In Nevada.
New customer growth combined with our pipeline replacement activities associated with our safety and integrity management programs are the cornerstones of our $2 billion three year capital expenditure program.
We are committed to working collaboratively with our regulators to ensure these investments get moved into rate base in a timely manner either through rate cases for a tracker program.
These commitments.
<unk> delivered approximately 10% authorized rate base CAGR over the past five years.
And we expect to continue to grow our rate base at a compound annual growth rate of 5% to 7% over the next three years.
I will now turn the call over to Rob.
Our financial performance for the quarter.
Thanks, Karen on.
On slide 11, we outline our earnings per share performance for the first quarter, the company's consolidated GAAP and adjusted EPS are Sean by each operating company.
As Karan mentioned earlier, the utility and century, each had a record setting first quarter utility recorded its highest quarterly net income on record century recorded its highest ever first quarter revenue and EBITDA on an adjusted basis. We finished the first quarter of 2023 with EPS of $1 <unk>.
69 cents per share versus an adjusted EPS of $1 74 per share from your prior which included a full three months of mountain West. The company concluded the sale of mountain West in February 2023 <unk>.
Excluding mountain west from each corner, the first quarter adjusted EPS increased approximately 11% from the prior year first quarter.
In the appendix, we provide a reconciliation of adjustments by operating company. The vast majority of the first quarter adjustments related to the sale of mountain west about $73 million pretax, including expenses associated with the deaths integration with a small incremental amount related to the century.
An incremental mountain west cost prior to the sale now I'd like to provide a walk through the performance of each operating company.
Moving on to Slide 12, you will see the year over year performance drivers for our utility southwest gas Corporation in the first quarter of 2023 utility gross margin increased by 34 million compared to last year. This improvement was primarily driven by the combination of customer growth and rate relief new rates wanted to.
In fact for the full corner in Nevada in 2023, and since February one 2023 in Arizona, including our pre regulatory trackers also included as revenue from the Arizona vintage steel pipe and customer owned yard line program and other increases we described in our form 10.
You filed earlier this morning.
Increased $12 million between quarters, approximately 4 million of which was due to increased cost of fuel used in a great basin operation, which was recorded in O&M, but which is offset in margin so as net neutral to earnings.
Their drivers contributing to the cost increases include outside services combined leak survey and line locating as well as insurance related claims.
Other income increased $17 million compared to last year. This was driven by increased interest income related to the carrying cost associated with regulatory account balances largely related to the purchase gas cost recovery mechanisms and favorable quarter over quarter changes in non service related components of employee post retirement.
Benefits as well as improvement in investment returns underlying the company on life insurance policy values.
Interest expense increased by $12 million from the prior year, primarily due to interest associated with senior notes issued in 2022, and 2023 as well as the $450 million term loan issued in January of this year, just support gas purposes, depreciation and amortization increased marginally including off.
Setting reduction in amortization related to certain regulatory account balances move.
Moving onto centuries results this past quarter, our slide 13 reviews, the drivers behind centuries record first quarter adjusted EBITDA results century's first quarter revenues increased by $129 million compared to the prior year. This increase was driven by offshore wind projects that rigs just for emergency response.
And a large gas project delivering natural gas to a battery factory in the Midwest.
Centuries revenues were partially offset by corresponding increases in operating expenses driven by higher volume of infrastructure services provided an increased subcontractor costs on offshore wind projects.
Additionally century saw increased interest expense because of higher sofa or interest rates on outstanding variable rate borrowings quarter over quarter.
<unk> is well positioned to continue serving its long term customers, while leveraging our geographic reach and expertise to serve new customers and markets. We are very excited about the opportunities we see in 2023 and beyond for century century has strong momentum heading into the rest of the year.
On slide 14, we outlined our recently completed 2023 financing planned for southwest gas Holdings in Southwest Gas Corporation as Karen noted, we do not anticipate meaningful equity needs in 2024 through 2025 in total for the 2024 through 2025 period, we currently expect less than $100 million in.
Equity issuance at southwest Gas Holdings, Inc.
Happens at the PGA is expected to unwind generating significant cash flows as Justin will discuss later in the call.
At Holdings, we plan to target an episode debt ratio of approximately 14% by 2025, and our recently executed financing plan puts us on a path toward that now I will turn it over to Justin Brown President of the utility to review southwest gas corporations operational highlights.
Thank you Rob starting on slide 16, we provide an overview of our most recent Arizona rate case with new rates became effective February one.
In addition to being the single largest increase we've ever experienced in a rate case. There are several other key aspects of the case that are important to highlight.
First reach an agreement prior to hearing to use a target equity layer of 50% and unimproved authorized ROE of nine 3%.
Second authorization to use a post test year plant adjustment consisting of 12 months.
Finding that all our gas purchases were prudently incurred and lastly, the continuation of key regulatory mechanisms like our full revenue decoupling, our customer owned yard line program, a property tax tracker and our income tax tracker, we believe that each of these items and this outcome helps demonstrate our collaborative approach and constructive.
Relationships with the ACC ACC staff and other stakeholders.
We're also actively preparing for and evaluating other future rate case filings across our various jurisdictions.
We remain on schedule to file a Nevada rate case later this year.
To target a third quarter filing.
We are currently evaluating our needs in Arizona and determining the appropriate time for filing our next Arizona rate case.
Given our existing five year rate case schedule in California, We plan to file our next rate case in the third quarter of 2024 and lastly, we're also evaluating the timing of our next great based on rate case and due to a prior settlement commitment we know that that filing will occur prior to June of 2025.
Turning to slide 17, we highlight other recent regulatory filings that are currently pending before commissions as well as some other recent constructive outcomes.
First in Arizona, we have three filings currently pending.
A request to modify our existing PGA mechanism or annual coil surcharge filing requesting $4 3 million in surcharge revenue.
And our recently filed notice of reorganization to separate century from southwest Holdings.
We expect each of these to be resolved this calendar year and since the ACC staff have already issued a report supporting the coil. Finally, we expect that matter to appear on an ACC open meeting agenda in the near future.
In Nevada, We recently received approval of an all party settlement for our annual rate adjustment filing as part of this proceeding the parties and the Commission also review our guests' purchases during the test period and found them to be reasonable and prudent.
As we mentioned on the last call. We also have two filings pending in California. If the filings are approved we believe both projects will be instrumental in clean energy technology development and demonstrating the role natural gas plays in a sustainable energy future by providing energy reliability, resiliency and security to customers well Alt.
So lowering GHT emissions and helping support on site combined heat and power in solar generation development.
Great Basin has also made a couple of recent filings with the FERC for various replacement and expansion work to meet the needs of our great based on customers and the increasing demand for natural gas across northern Nevada, Northern California.
The FERC already issued a certificate of public convenience and necessity for our proposed mainline replacement project.
And we anticipate construction to start later this summer completion of this project will coincide with the timing of our next rate case to minimize any regulatory lag associated with the project.
We just filed a request for the proposed expansion project, but upon FERC approval new rates will become effective immediately upon completion of the project since it is a fully contracted expansion. We currently anticipate approval and completion of that project prior to the end of next year.
Yeah.
Turning to slide 18 earlier this year Governor Lombardo issued an executive order in Nevada, highlighting as energy priorities and policy objectives for the next decade.
Executive order articulate support for all of the above approach to energy, placing an emphasis on affordability and reliability as well as the important role energy plays in economic development as well as his commitment to ensure safe reliable and affordable energy remains available to all nevadans, including ensuring that.
Nevada homes and businesses have access to natural gas for use in their homes and businesses.
Consistent with things exactly consistent with this executive order, we've been working with various stakeholders, including the public utilities Commission of Nevada on legislation that would establish a robust and thoughtful approach to natural gas planning. The proposed legislation will require gas utilities to make filings every three years identifying custom.
[noise] demands resource plans for meeting those demands, including creating pathways for free for pursuing clean fuel technologies like hydrogen and renewable natural gas.
As well as expanded opportunities for energy efficiency programs for our customers.
The legislation will also ensure alignment among all stakeholders by providing gas utilities the opportunity to see preapproval of these investments before investments are actually made.
The legislation was voted out of committee unanimously and is currently working its way through the legislative process.
Turning to slide 19, this past winter, we experienced colder than forecasted weather Interstate pipeline outages and lower storage inventories in the western half of the United States, the constrained supplies, resulting in higher gas costs.
The colder than normal weather necessitated a greater quantity of purchase gas to meet customer demand across our service territory, resulting in a significant increase in our PGA balances during the quarter slide.
Slide 19 provides an update of our PGA balances at the end of the quarter and an overview of each of the gas cost recovery mechanisms. We continue to main can maintain constructive gas cost recovery mechanisms in each of our jurisdictions that allow us to timely recover these costs with monthly or quarterly rate changes.
As shown on the graph, we anticipate significant recoveries over the next couple of years as we recover these gas costs and starting to see our PGA balances come down. This will also provide enhanced cash flows to help cover financing needs over the next couple of years.
I'll now turn the call over to Paul Daly, President and CEO of century group.
Thanks, Justin turning to slide 20, we are excited about our continued progress towards our future as a standalone strategic utility infrastructure services. Later, we continue to benefit from strong tailwind across utility end markets as support centuries long term growth and we expect this growth will accelerate.
As we deliver on opportunities in the electric T&D hardening and expansion <unk> Datacom Buildout offshore wind and other renewable and energy transition programs importantly, as we work towards our pending spin we have the resources capabilities and business structure to continue to do.
A lever on our growth opportunities.
On slide 21, I will dive deeper into our customer and project expansion efforts.
Our customer relationships are built on a strong foundation of partnerships and collaborations and we are trusted to support their long term capital spending programs. We are also building new relationships and expanding our work across North America.
During the quarter, we signed and began work on $125 million gas pipeline construction contract in Indiana to an electric vehicle battery plant.
We expect to continue to benefit from the strong sector tail wins across our gas and electric T&D markets.
Well, a significant multi year opportunities in <unk> and offshore wind related infrastructure.
We are making particularly strong progress in expanding our clean energy projects.
To date, we have secured wind contracts worth more than $525 million for the supply and fabrication of wind towers secondary steel assemblies capable of generating $2 nine gigawatts of clean energy.
We recorded $47 5 million of revenue during the first quarter for our sustainable wind energy projects and we're projecting to deliver approximately $250 million of wind energy revenues for the full year.
To date, our startup productivity fabricating the first 5% of the tire assemblies as close to achieving budgeted full production performance metrics with our scale and expertise our operating companies were called upon for support.
Along a number of tornadoes and other storms that left countless communities in the southeast and northeast without however, during the first quarter.
Our approach to serving those in need is differentiated through a consolidated offering which is delivered through multiple operating companies during.
During the quarter, we deployed nearly 1200 employees across 22 states for this restoration work.
Slide 22 highlights centuries strong financial performance over the past year.
Well, we continue to face some of the headwinds that we experienced in 2022. Our performance has continued to improve and we delivered an increase of $49 million of EBITDA year over year.
Additionally, revenue growth remained strong as both Karen and Rob mentioned earlier, we delivered both record revenue first quarter revenues and EBITDA.
Of note the strong growth trajectory can be seen in our legacy century business as well as the more recently added rigs just their operations.
And then as you can see on the charts on the right our portfolio has become much more balanced most notably in the gross profit area at the same time, we remain diversified geographically with no one geography, representing more than 11% of revenues.
We look forward to sharing our progress in the coming year as we work towards completing century spin.
With that I'll turn it back to Karen.
Thanks, Paul on Slide 24, we cover our outlook and guidance for the remainder of the year, we are reaffirming guidance.
Guidance at both utility and country, we are confident that each business a strong first quarter performance will help drive full year results in line with guidance, we initiated last quarter. As you know century's business is seasonal with most of that activity occurring in the second and third quarters.
On slide 25, we would like to reiterate that southwest gas holdings remains committed to paying a competitive dividend to our stockholders.
We are holding the dividend flat in 2023, and we'll revisit our pro forma dividend policy closer to the execution of the century spend in the fourth quarter of 2023, our first quarter of 2024.
Looking ahead, we expect to maintain a payout ratio of competitive with utility peers and expect to consider run rate level of earnings.
Fully regulated business, considering expected rate case outcome in California, Arizona and Nevada.
Before we open the call up to Q&A I want to emphasize that our teams are focused on executing our 2023 strategic priorities.
Delivering strong financial results and providing exceptional service to our customers.
Southwest gas holdings, we are confident in our path forward as a premier pure play natural gas utility, we will continue delivering steady organic rate base growth with strong regional demand dynamics as well as earnings growth through financial discipline operational excellence and constructive regulatory relationships.
We're advancing towards the planned tax free spin a century, putting the company in a better position to outline the stockholders and deleverage the business organically with healthy cash flow generation.
With that I'd like to open the call for questions.
Thank you we will now begin the question and answer session to ask a question in the Pittsburgh then one on your Touchtone phone.
From a speakerphone, please pick up your handset before pressing issues.
Dan Your question has been addressed and you would like to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our yeah.
[noise]. Our first question comes from Chris Allen Gosh, let's see Sidebar William Sharpe. Please go ahead.
Everybody.
Hey, Chris on century growths are the 9% to 11% EBITDA or are you.
It just does that suggest that you anticipate more offshore wind contracts.
Contracts that will help to fill in the gap for you now that you're contracted EBITDA over the next couple of years.
Okay.
It does not assume any additional contracts from what we have.
Currently contracted for which is about 525 million, we do anticipate that there'll be additional.
Uh huh.
Offshore wind revenues.
But it's not dependent on there being additional offshore wind revenue.
So are you anticipating any sort of ongoing maintenance value in the offshore business.
We are not we're not expecting to have MSA contracts like we do for our gas and electric utility services on the offshore wind side.
Oh sure.
Also given the sort of population growth that you talked about which is really quite quite strong.
Is there you know anticipated upside to the three year rate base CAGR for the gas utility.
Yeah.
Hey, Chris It's Justin at this point in time, you know we're.
Continuing to monitor you know, we saw a little bit of a downturn, but last fall right. But then we've noticed this first quarter things continue to go pretty well and so I think it's something we're monitoring closely but at this time, we're still kind of in line with what our expectations are on Capex growth for the with the guidance we've given.
Okay. Justin can you also sort of address you know what you're seeing in sort of in migration and in your housing markets. Given you know what's up with the economy and in interest rates of late.
Yeah, I mean, I think I actually saw something recently, where like Penske had you know some survey where they do on trucks moving in its like Arizona, and Nevada, and the path forward and they have been the last two years. So I think to your point I think our service territory continues to remain at a very attractive.
They are a part of the country, where people are relocating to end and I think that's why you know when we look over the last couple of years and the fact that we added 42001st time meter sets over the last 12 months. It's just something we continue to see growth and we're excited about.
Okay great.
One last thing you know the PGA balances, where do you see the.
The ending up at the end of 'twenty four so what what is sort of that draw down from the 900 and plus million that you expect.
Yeah.
Yeah. So I think it's a lot of it is heavily dependent on gas prices right because as you draw down you backfill with with gas prices, but I think if you look at that chart I think that kind of gives you a ballpark idea of kind of what we expect to come in assuming you know kind of a stabilized level of <unk>.
Gas prices.
Okay, great. Thanks, a bunch I appreciate the color.
You bet.
Again as a reminder, if you have a question. Please press star then one to be joined into the queue. Our next question comes from Julien Dumoulin Smith with Bank of America. Please go ahead.
Hey, good morning team. Thank you all very much for the commentary.
Hum.
Good morning, Karen if I can just to jump in I heard your commentary about pursuing a deep dive into the current cost structure obviously.
Expecting to effectuate a spin hopefully later this year if not early next what's the timeline for kind of a fully revamped view inclusive of some of these latest.
Cost efforts at the on the utility side <unk> across both right I mean, what when do you think you'll come back with kind of an updated view on on your overall earnings profile. If you will.
Is that something prior to the spin.
Yeah, well, we're currently working with our consultants and looking at all of the deep dive right. Now. So we're continuing to go through that process and we will do so through the second quarter I believe by the third quarter, we should be able to start looking at identifying what some of those initiatives are going to be and then looking at prioritizing.
Those in the third and fourth quarter them as we move forward to execute all of that so it's a process that you know where we are in process I believe that for the spend depending upon the timing of the spend you may be able to execute or start executing on some of those those optimization.
Initiatives, but a lot of that will depend on that answer depends upon the timing of spend which we've identified as the fourth quarter or first quarter of next year.
Got it so it sounds like it aligns really well.
And then just on the credit side I heard the commentary today and nicely done on the latest efforts here, but can you elaborate a little bit more about the target leverage metrics at the spin co just to kind of think through what that looks like in tandem with your expectations on achieving the 14%.
At call it parent co by 'twenty, five just I want to make sure I understand where the delta that allocation is traveling and just what your expectations are on on what that might cost et cetera on the spin co.
Hey, Julien it's Rob Thanks for the question I.
I think as was.
Exhibited in the first quarter centuries, able to organically delever and they de Levered about a half a turn from from the prior quarter well look for them to continue that progress throughout the year.
The.
We went through the <unk> process and as indicated in our year end call. We targeted approximately a $300 billion deleveraging effort at century will continue to evaluate.
The amount, but we expect that that would put them kind of in line with with the current comp universe.
Who has also done acquisitions recently.
The sensory grip continues to.
Integrate the rigs acquisition.
And I think as Youre seeing from this quarter's financial results are starting to get an uptick in EBITDA from that acquisition.
So so net net I think if you look at the comps.
Use the guidance that we provided with respect to that $300 million pushed down.
You know that that's effectively what we're targeting.
Got it Okay fair enough.
Some of that may not the form of that it's probably important to highlight the former that may not be a push down it could be.
The IPO markets reopen that that could provide a structure to.
To provide the deleveraging as well as a sponsored spin transaction.
You know or as stated we could we could push it down and also look to do a retained stake or just do a straight spin with the with the debt raise up top at holdings.
Right, Yes, indeed, thank you and by the way what was that the pure metric that you were talking about like are they supposed to debt to EBITDA.
So sorry to clarify that just what are you seeing amongst peers.
Yeah, I mean, I think if you if you take a look at the comps and you also need a fast forward right.
And.
EBITDA kind of growth that.
Chatted highlighted earlier in the Q&A.
But it isn't that kind of a three three to three and a half times range seems to be where the where the comps are sitting today.
Yes that makes sense.
Some are obviously lower but if think if you look at the comps that have done acquisitions, it's in that range.
Yeah, Lindsay and sorry to clarify this earlier the commentary Gerry how lumpy is is the wind is supposed to be I mean, obviously nice success. This year at about a quarter billion, but in future periods. Obviously this offshore stuff was fairly lumpy just what I want to make sure I heard your commentary right there.
Yeah.
Yes, excuse me.
Our wind business is more project driven than our traditional utility services work. So it will be.
A bit lumpier.
We have 525 million under contract currently.
We expect to do about $250 million in.
Offshore wind revenue this year.
We have a nice pipeline of.
Uh huh.
Of opportunities that are building is that.
The market in the U S. Further develops.
We currently have visibility on about $2 5 billion of future projects with similar scope of services to what we're currently performing at about $2 6 billion of related future work to connect the offshore wind projects to existing electric power grid.
So they'll certainly be competition for those future opportunities, but we're pleased with the competitive position that rigs disorders established with a first mover advantage for park.
This patient in a significant number of the initial projects currently under development.
Julian This is Rob just to build on what Chad just you know that the the growth in that business.
As has been significant I think the century groups signing contracts almost almost every month on on these wind projects and you know.
While well you know it it may be lumpy, it's obviously extremely positive for the rigs business it demonstrates their ability to execute.
And it's a different business that we're not doing it's important to clarify we're not doing a work out in the water, we're pouring foundations and doing that work onshore.
Hey, Julien This is Paul one thing Thats note, although we don't have an MSA like our traditional TMT Msas, we do have a framework agreement with our client that is long term in fact, there's no end date to it that is as they get additional contracts or additional work.
Work.
We will get additional work too so.
Excellent glad to hear it. Thank you guys for clarifying that I really appreciate all the detail and take care of good luck, we'll speak soon.
Thanks Julie.
We have no further questions.
Two quick questions and answer session I would like to turn the conference back over to Tom O'brien for any closing remarks.
Thank you Avi.
Thank you all for joining US today. This concludes our conference call. Thank you for your interest in southwest gas holdings and have a good day.
Yeah.
Okay.
Yeah.
This concludes today's southwest gas holdings first quarter 2022 earnings call and webcast. You may disconnect. Your line at this time have.
Have a wonderful day.
[music].