Q2 2024 Southwest Gas Holdings Inc Earnings Call

Speaker Change: Welcome to Southwest Gas Holdings second quarter 2024 earnings conference call. Today's call is being recorded and our webcast is live. A replay will be available later today and for the next 12 months on the Southwest Gas Holdings website.

Unknown Executive: Conference call. Today's call is being recorded, and our webcast is live. A replay will be available later today and for the next 12 months on the Southwest Gas Holdings website.

Unknown Executive: Today's call is being recorded, and our webcast is live. A replay will be available later today and for the next 12 months on the Southwest Gas Holdings website.

Unknown Executive: At the ceremony, participants are in a listen-only mode. A question and answer session will follow the prepared remarks. If you would like to ask a question at that time, please press store one on your phone.

Unknown Executive: At this time, all participants are in a listen-only mode. A question and answer session will follow the prepared remarks. If you would like to ask a question at that time, please press star 1 on your phone. I will now turn the call over to Justin Forsberg, Vice President of Investor Relations.

Speaker Change: At this time, all participants are in a listen-only mode. A question and answer session will follow the prepared remarks. If you would like to ask a question at that time, please press star 1 on your phone.

Justin Forsberg: I will now turn the call over to Justin Forsberg, Vice President of Investor Relations and Treasurer of Southwest Gas Holdings. Please go ahead.

Justin Forsberg: I will now turn the call over to Justin Forsberg, Vice President of Investor Relations and Treasurer of Southwest Gas Holdings. Please go ahead.

Justin Forsberg: Thanks, Duanna, and hello everyone. Thanks for your interest in Southwest Gas. This morning, we issued and posted on the Southwest Gas Holdings website our second quarter 2024 earnings release and the associated Form 10-Q. The slides and company in today's call are also available on Southwest Gas Holdings' website. We'll refer to those slides by number throughout the call today.

Justin Forsberg: Thanks to Anna, and hello everyone. Thanks for your interest in Southwest Gas. This morning we issued and posted on the Southwest Gas Holdings website our second quarter 2024 earnings release and the associated Form 10-Q. The slides accompanying today's call are also available on the Southwest Gas Holdings website. We'll refer to those slides by number throughout the call today.

Justin Forsberg: Thanks to Anna, and hello everyone. Thanks for your interest in Southwest Gas.

Speaker Change: This morning we issued and posted to Southwest Gas Holdings website our second quarter 2024 earnings release and the associated Form 10-Q.

Speaker Change: The slides accompanying today's call are also available on Southwest Gas Holdings' website. We'll refer to those slides by number throughout the call today.

Justin Forsberg: Please note that on today's call we will address certain factors that may impact this year's earnings and provide some longer-term guidance. Some of the information that we'll be discussed today contains forward-looking statements. These statements are based on management's assumptions on what the future holds, but are subject to several risks and uncertainties, including uncertainties surrounding the impacts of future economic conditions and regulatory approvals. This cautionary note, as well as a note regarding non-GAAP measures, is included on slides two and three of this presentation.

Unknown Executive: Please note that on today's call, we will address certain factors that may impact this year's earnings and provide some longer-term guidance. Therefore, some of the information that will be discussed today contains forward-looking statements. These statements are based on management's assumptions about what the future holds but are subject to several risks and uncertainties, including uncertainties surrounding the impacts of future economic conditions and regulatory approval. This cautionary note, as well as a note regarding non-gap measures, is included on slides 2 and 3 of this presentation.

Speaker Change: Please note that on today's call, we will address certain factors that may impact this year's earnings and provide some longer term guidance.

Speaker Change: Some of the information that will be discussed today contains forward-looking statements.

Speaker Change: These statements are based on management's assumptions on what the future holds, but are subject to several risks and uncertainties, including uncertainties surrounding the impacts of future economic conditions and regulatory approvals.

Speaker Change: This cautionary note, as well as a note regarding non-GAAP measures, is included on Slides 2 and 3 of this presentation, today's press release, and our filings with the Securities and Exchange Commission, which we encourage you to review.

Justin Forsberg: Today's press release and our filings with the Securities and Exchange Commission, which we encourage you to review. These risks and uncertainties may cause actual results to differ materially from statements made today. We caution against placing undue reliance on any forward-looking statements, and we assume no obligation to update any such statement.

Unknown Executive: Today's press release and our filings with the Securities and Exchange Commission, which we encourage you to review. These risks and uncertainties may cause actual results to differ materially from statements made today. We caution against placing undue reliance on any forward-looking statements, and we assume no obligation to update any such statements. As shown on slide 4, on today's call, we have Karen Haller, President and CEO of Southwest Gas Holdings, and Rob Stefani, Chief Financial Officer of Southwest Gas Holdings, as well as Justin Brown, President of Southwest Gas Corporation, and other members of the management team.

Speaker Change: These risks and uncertainties may cause actual results to differ materially from statements made today. We caution against placing undue reliance on any forward-looking statements, and we assume no obligation to update any such statement.

Justin Forsberg: As shown on slide four on today's call, we have Karen Haller, President and CEO of Southwest Gas Holdings, and Rob Stefani, Chief Financial Officer of Southwest Gas Holdings. As well as Justin Brown, President of Southwest Gas Corporation, and other members of the management team available to answer your questions during the Q&A portion of the call today.

Speaker Change: As shown on slide 4, on today's call we have Karen Haller, President and CEO of Southwest Gas Holdings.

Speaker Change: and Rob Stefani, Chief Financial Officer of Southwest Gas Holdings, as well as Justin Brown, President of Southwest Gas Corporation and other members of the management team available to answer your questions during the Q&A portion of the call today.

Karen Haller: I'll now turn the call over to Karen. Thanks, Justin. Thank you for joining us today to discuss the Southwest Gas Holdings second quarter results. Starting with slide five, the successful closing of the Century IPO in April marked a significant milestone in our transformational strategy of returning Southwest Gas to its core foundation as a premier fully regulated natural gas utility. We are pleased with the market's reception of the offering, and we look forward to completing the separation of Century in a timely manner. During the quarter, we continue to make progress positioning the utility for long-term success and growth.

Unknown Executive: and other members of the management team.

Karen Haller: I'll now turn the call over to Karen.

Speaker Change: I'll now turn the call over to Karen.

Karen Haller: Thanks Justin. Thank you for joining us today to discuss the Southwest Gas Holdings second quarter results.

Karen Haller: Thanks, Justin. Thank you for joining us today to discuss the Southwest Gas Holdings second quarter results. Starting with slide 5, the successful closing of the Century IPO in April marked a significant milestone in our transformational strategy of returning Southwest Gas to its core foundation as a premier fully regulated natural gas utility. We are pleased with the market's reception of the offering, and we look forward to completing the separation of Century in a timely manner.

Karen Haller: Starting with slide 5, the successful closing of the Century IPO in April marked a significant milestone in our transformational strategy of returning Southwest Gas to its core foundation as a premier fully regulated natural gas utility.

Karen Haller: We are pleased with the market's reception of the offering, and we look forward to completing the separation of Century in a timely manner.

Karen Haller: During the quarter, we continued to make progress positioning the utility for long-term success and growth. Following the completion of our general rate case in Nevada, we are seeing a positive impact associated with the recovery of our investments to enhance safety and reliability and meet the needs of our growing customer base. We are looking forward to filing our general rate case in California later this month and continuing to work collaboratively with our stakeholders in Arizona as we look forward to receiving their testimony next month on our pending rate case. Additionally, we finished the second quarter with the extension of record operating margin performance on a trailing 12-month basis.

Karen Haller: During the quarter, we continued to make progress positioning the utility for long-term success and growth.

Karen Haller: Following the completion of our general rate case and the data we are seeing, the positive impact associated with the recovery of our investments to enhance safety and reliability and meet the needs of our growing customer base. We are looking forward to filing our general rate case in California later this month and continue to work collaboratively with our stakeholders in Arizona as we look forward to receiving their testimony next month on our pending rate. Additionally, we finished the second quarter with the extension of record operating margin performance on a trailing 12 month base. Customer growth and demand remained strong, and the entire Southwest Gas team is intensely focused on safely addressing the needs of our customers, investing in the communities we serve, and delivering value for our shareholders.

Karen Haller: Following the completion of our general rate case in Nevada, we are seeing the positive impact associated with the recovery of our investments to enhance safety and reliability and meet the needs of our growing customer base.

Karen Haller: We are looking forward to filing our general rate case in California later this month and continue to work collaboratively with our stakeholders in Arizona as we look forward to receiving their testimony next month on our pending rate case.

Karen Haller: Additionally, we finished the second quarter with the extension of record operating margin performance on a trailing 12-month basis.

Karen Haller: Customer growth and demand remain strong, and the entire Southwest Gas team is intensely focused on safely addressing the needs of our customers, investing in the communities we serve, and delivering value for our shareholders. We are strategically deploying capital and investing in our operations so that we can meet the demand for safe, reliable, and affordable energy solutions, while also working constructively with our regulators and legislators to complement our strong, organic, rate-based growth.

Karen Haller: Customer growth and demand remain strong and the entire Southwest Gas team is intensely focused on safely addressing the needs of our customers, investing in the communities we serve, and delivering value for our shareholders.

Karen Haller: We are strategically deploying capital and investing in our operations so that we can meet the demand for safe, reliable, and affordable energy solutions while also working constructively with our regulators and legislators to complement our strong organic rate-based growth. We are encouraged by the strong momentum underway, and we are raising utility 2024 net income guidance by $5 million to now be in the range of $233 to $243 million. We are also adjusting our long-term utility net income growth compound annual growth rate to reflect the now higher 2024 base-year expectation, and we are reaffirming our other guidance estimates.

Karen Haller: We are strategically deploying capital and investing in our operations so that we can meet the demand for safe, reliable, and affordable energy solutions, while also working constructively with our regulators and legislators to complement our strong, organic, rate-based growth.

Karen Haller: We are encouraged by the strong momentum underway, and we are raising our Utility 2024 Net Income Guidance by $5 million, to now be in the range of $233 to $243 million. We are also adjusting our long-term utility net income growth compound annual growth rate to reflect the now higher 2024 base year expectation, and we're reaffirming our other guidance as, as demonstrated with the constructive Nevada regulatory outcome, the nature of expected revenue increases from rate cases will provide net income growth, which as a result of rate case timing will continue to be non-linear over the forecast period.

Karen Haller: We are encouraged by the strong momentum underway, and we are raising Utility 2024 Net Income Guidance by $5 million.

Karen Haller: to now be in the range of $233 million to $243 million. We are also adjusting our long-term utility net income growth compound annual growth rate to reflect the now higher 2024 base year expectation.

Karen Haller: As demonstrated with the constructive Nevada regulatory outcome, the nature of expected revenue increases from rate cases will provide net income growth, which as a result of rate case timing will continue to be non-linear. We expect benefit from our refreshed rate structures to catch up with the historic inflationary environment we experienced and the significant system investments we have made for the benefit of our customers over the past few years. Our confidence in our future is further demonstrated by a reaffirmed expected rate-based compound annual growth rate over the same period in the range of 6.5 to 7.5 percent and our commitment to maintaining a strong investment-grade balance sheet and competitive dividend.

Karen Haller: and we're reaffirming our other guidance estimates.

Karen Haller: as demonstrated with the Constructed Nevada Regulatory Outcome.

Karen Haller: The Nature of Expected Revenue Increase.

Karen Haller: [inaudible]

Karen Haller: which as a result of rate case timing will continue to be non-linear over the forecast period.

Karen Haller: We expect to benefit from our refreshed rate structures to catch up with the historic inflationary environment we experienced and the significant system investments we have made for the benefit of our customers over the past few years.

Karen Haller: We expect to benefit from our refreshed rate structures to catch up with the historic inflationary environment we experienced and the significant system investments we have made for the benefit of our customers over the past few years.

Karen Haller: Our confidence in our future is further demonstrated by a reaffirmed expected rate base compound annual growth rate over the same period in the range of 6.5% to 7.5% and our commitment to maintaining a strong investment grade balance sheet and competitive dividends. As you can see on slide six, we have already made excellent progress on our 2024 strategic priorities, and we're on track to achieve them all. Following the successful execution of Century's IPO, Southwest Gas Holdings continues to evaluate its strategic separation options during the current lockup period that was required in the IPO. We may ultimately separate the business through a series of sell-downs or share exchanges. Because the successful execution of a sell-down or share exchange is contingent on market and other conditions.

Karen Haller: Our confidence in our future is further demonstrated by a reaffirmed expected rate base compound annual growth rate over the same period in the range of six and a half to seven and a half percent and our commitment to maintaining a strong investment grade balance sheet and competitive dividend.

Karen Haller: As you can see on slide 6, we have already made excellent progress on our 2024 strategic priority, and we are on track to achieve them all. Following the successful execution of Centuries IPO, Southwest Gas Holdings continue to elevate, evaluate its strategic separation options during the current lock-up period that was required in the IPO. We may ultimately separate the business through a series of sell-downs or share exchanges. Because the successful execution of a sell-down or share exchange is contingent on market and other conditions, we continue to preserve the potential for a tax-free spin. But we expect our significant net operating loss balance could serve as an offset to a taxable transaction.

Karen Haller: As you can see on slide 6, we have already made excellent progress on our 2024 strategic priorities, and we are on track to achieve them all.

Karen Haller: following the successful execution of Sentry's IPO.

Karen Haller: Southwest Gas Holdings continues to elevate.

Karen Haller: evaluate its strategic separation options during the current lock-up period that was required in the IPO. We may ultimately separate the business through a series of sell-downs or share exchanges.

Karen Haller: Because the successful execution of a sell-down or share exchange is contingent on market and other conditions, we continue to preserve the potential for a tax-free spin, but we expect our significant net operating loss balance could serve as an offset to a taxable transaction.

Karen Haller: We continue to preserve the potential for a tax-free spin, but we expect our significant net operating loss balance could serve as an offset to a taxable transaction. We remain committed to separating Sentry, and we are confident that we have taken the appropriate steps and actions to preserve flexibility, thereby allowing us to separate in an efficient manner for shareholders in any scenario. As of the end of June, we have nearly $600 million in cash, and our financing plan continues to show very limited financing needs over the next couple of years.

Karen Haller: We remain committed to separating centuries, and we are confident that we have taken the appropriate steps and actions to preserve flexibility, thereby allowing us to separate in an efficient manner for shareholders in any scenario. As of the end of June, we have nearly 600 million of cash, and our financing plan continues to show very limited financing needs over the next couple of years. We all discuss our regulatory progress in more detail in a moment, and we would like to know that we are pleased with our progress so far this year and are on track to achieve all of our regulatory priorities.

Karen Haller: We remain committed to separating Sentry, and we are confident that we have taken the appropriate steps and actions to preserve flexibility, thereby allowing us to separate in an efficient manner for shareholders in any scenario.

Karen Haller: As of the end of June, we have nearly $600 million of cash, and our financing plan continues to show very limited financing needs over the next couple of years.

Karen Haller: I'll discuss our regulatory progress in more detail in a moment, but I would like to note we are pleased with our progress so far this year and are on track to achieve all of our regulatory priorities. Additionally, we are executing on our planned utility optimization initiative. Our rate case progress and our cost discipline efforts also reinforce our confidence in our increased net income guidance for 2024. In terms of our utility and regulatory strategy for 2024, you will see on slide 7 that we have made notable strides.

Karen Haller: I'll discuss our regulatory progress in more detail in a moment, and would like to note we are pleased with our progress so far this year and are on track to achieve all of our regulatory priorities.

Karen Haller: Additionally, we are executing on our planned utility optimization initiatives. Our rate case progress and our cost-discipline efforts also reinforce our confidence in our increased net income guidance for 2024. In terms of our utility and regulatory strategy for 2024, you will see on slide 7 that we have made notable strides. Earlier this year, we completed the general rate case in the data with a positive outcome. Having received an authorized increase of nearly 300 million in rate base and a revenue increase of about $50 million dollars compared with our original proposal of nearly 74 million. This revenue outcome represents 98% of our request after the depreciation adjustment and before adjustments to cost of capital.

Karen Haller: Additionally, we are executing on our planned utility optimization initiative.

Karen Haller: Our rate case progress and our cost discipline efforts also reinforce our confidence in our increased net income guidance for 2024.

Karen Haller: In terms of our utility and regulatory strategy for 2024, you will see on slide 7 that we have made notable strides.

Karen Haller: Earlier this year, we completed the general rate case in Nevada with a positive outcome, having received an authorized increase of nearly $300 million in rate base and a revenue increase of about $59 million compared with our original proposal of nearly $74 million. This revenue outcome represents 98% of our requests after the depreciation adjustment and before adjustments to cost of capital. Our Arizona rate case of $126 million represents a requested return on nearly $650 million, or 24% of additional rate base in that state, a collection of higher overall costs since our last case, along with the requested system improvement benefit capital tracker that would represent about 40% of the company's required safety-related infrastructure investments dedicated to Arizona.

Karen Haller: Earlier this year, we completed the General Wray case in Nevada with a positive outcome.

Karen Haller: Having received an authorized increase of nearly $300 million in rate base, and a revenue increase of about $59 million, compared with our original proposal of nearly $74 million.

Karen Haller: This revenue outcome represents 98% of our request after the depreciation adjustment and before adjustments to cost of capital.

Karen Haller: Our represents a requested return on nearly 650 million or 24% of additional rate base in that state. The collection of higher overall costs since our last case, along with the requested system improvement benefit capital tracker that would represent about 40% of the company's required safety-related infrastructure investments dedicated to Arizona. Of note, the Arizona Corporation Commission recently highlighted a similar tracker as an important 2024 achievement in its own annual report. At Great Basin, we are expecting refreshed rates to go into effect in September 2024. And we are on track to file a general rate case in California during the third quarter of 2024 that is anticipated to propose an increase in rate base of 60 to 70%.

Karen Haller: Our Arizona rate case of $126 million represents a requested return on nearly $650 million or 24% of additional rate base in that state.

Karen Haller: The collection of higher overall costs since our last case, along with the requested system improvement benefit capital tracker that would represent about 40% of the company's required safety-related infrastructure investments dedicated to Arizona.

Karen Haller: Of note, the Arizona Corporation Commission recently highlighted a similar tracker as an important 2024 achievement in its own annual report. At Great Basin, we are expecting refreshed rates to go into effect in September 2024, and we're on track to file a general rate case in California during the third quarter of 2024 that is anticipated to propose an increase in the rate base of 60 to 70 percent.

Karen Haller: Of note, the Arizona Corporation Commission recently highlighted a similar tracker as an important 2024 achievement in its own annual report.

Karen Haller: At Great Basin, we are expecting refreshed rates to go into effect in September 2024.

Karen Haller: And we're on track to file a general rate case in California during the third quarter of 2024 that is anticipated to propose an increase in rate base of 60 to 70 percent.

Karen Haller: On 5A, we highlight our strong second quarter 2024 performance across our company. The utility has continued its good start to the year with an 8 million dollar increase in net income over the second quarter of last year. We continued to experience strong customer growth, adding approximately 40,000 new meter sets over the past 12 months, while continuing to make additional investments to ensure our system remains safe and reliable for the benefit of our customers. We expect to continue to benefit from a strong demographic and economic growth as Phoenix and Las Vegas continue to be among the top destinations for relocation and economic development, including semi-conductor, battery, and electric vehicle manufacturers.

Karen Haller: On slide eight, we highlight our strong second quarter 2024 performance across our company. Utility has continued its good start to the year with an $8 million increase in net income over the second quarter of last year, and continues to experience strong customer growth, adding approximately 40,000 new meter sets over the past 12 months, while continuing to make additional investments to ensure our system remains safe and reliable for the benefit of our customers. We expect to continue to benefit from strong demographic and economic growth in Phoenix and Las Vegas, which continue to be among the top destinations for relocation and economic development. Semiconductor, Battery, and Electric Vehicle Manufacturers

Karen Haller: On slide 8, we highlight our strong second quarter 2024 performance across our company.

Karen Haller: The utility has continued its good start to the year with an $8 million increase in net income over the second quarter of last year.

Karen Haller: We continue to experience strong customer growth, adding approximately 40,000 new meter sets over the past 12 months, while continuing to make additional investments to ensure our system remains safe and reliable for the benefit of our customers.

Karen Haller: We expect to continue to benefit from a strong demographic and economic growth as Phoenix and Las Vegas continue to be among the top destinations for relocation and economic development.

Karen Haller: including semiconductor, battery, and electric vehicle manufacturers.

Karen Haller: And as I noted, we also have advanced our regulatory strategy in each of our jurisdictions. Our operations and maintenance expenses were less than 2% higher than in first six months of 2024. There's a first six months of 2023. And our balance sheet is strong. Having now collected substantially all of the deferred purchase gas costs balance from customers. This has reflected in a nearly $600 million cash balance across the enterprise as of the end of June 2024.

Karen Haller: And as I noted, we also have advanced our regulatory strategy in each of our jurisdictions. Our operations and maintenance expenses were less than 2% higher in the first six months of 2024 compared to the first six months of 2023. And our balance sheet is strong, having now collected substantially all of the deferred purchase gas cost balance from customers. This is reflected in the nearly $600 million cash balance across the enterprise as of the end of June 2024. With that, I'll turn the call over to Rob, who will review our financial performance for the year. Thanks, Karen.

Karen Haller: And as I noted, we also have advanced our regulatory strategy in each of our jurisdictions.

Karen Haller: Our operations and maintenance expenses were less than 2% higher than in the first six months of 2024 compared to the first six months of 2023.

Karen Haller: and our balance sheet is strong, having now collected substantially all of the deferred purchase gas cost balance from customers.

Karen Haller: This is reflected in the nearly $600 million cash balance across the enterprise as of the end of June 2024.

Rob Stefani: With that, I'll turn the call over to Rob, who will review our financial performance for the year. Thanks, Karen. On slide 10, we outline our earnings per share performance. The company's consolidated gap and adjusted EPS are shown by each consolidated entity. As Karen mentioned earlier, utility finished the first half of 2024 with a very strong balance sheet and record net income. Southwood's gas holdings finished the second quarter of 2024 with nearly 600 million of cash on hand following the full collection from utility customers of the previously deferred natural gas costs from the 2022-2023 heating. Consolidated Justin EPS at Holdings was 31 cents per share during the second quarter, which reflects a decrease of 23 cents per share when compared to the second quarter of 2023, reduced by the impacts of lower volumes, of master service agreement work, and did work at Century, and the higher interest expense at the whole co, partially offset by the strong utility performance.

Karen Haller: With that, I'll turn the call over to Rob, who will review our financial performance for the year.

Rob Stefani: Thanks, Karen. On slide 10, we outline our earnings per share performance. The company's consolidated gap and adjusted EPS are shown by each consolidated entity. As Karen mentioned earlier, the utility finished the first half of 2024 with a very strong balance sheet and record net income. Southwest Gas Holdings finished the second quarter of 2024 with nearly $600 million of cash on hand, following the full collection from utility customers of the previously deferred natural gas costs from the 2022-2023 heating season.

Rob: Thanks Karen. On slide 10 we outline our earnings per share performance.

Rob: The company's Consolidated Gap and Adjusted EPS are shown by each consolidated entity.

Rob: As Karen mentioned earlier, the utility finished the first half of 2024 with a very strong balance sheet and record net income.

Speaker Change: Southwest Gas Holdings finished the second quarter of 2024 with nearly $600 million of cash on hand following the full collection from utility customers of the previously deferred natural gas costs from the 2022-2023 heating season.

Rob Stefani: Consolidated adjusted EPS at holdings was 31 cents per share during the second quarter, which reflects a decrease of 23 cents per share when compared to the second quarter of 2023, reduced by the impacts of lower volumes of master service agreement work and bid work at Century and the higher interest expense at Holco, partially offset by the strong utility performance. In the appendix, we provide a reconciliation of adjustments by operating company.

Speaker Change: Consolidated adjusted EPS at holdings was $0.31 per share during the second quarter, which reflects a decrease of $0.23 per share when compared to the second quarter of 2023, reduced by the impacts of lower volumes.

Speaker Change: of Master Service Agreement work and bid work at Century and the higher interest expense at the Holco, partially offset by the strong utility performance.

Rob Stefani: In the appendix, we provide a reconciliation of adjustments by operating company. The vast majority of the second quarter of 2024 adjustments relate to the amortization of intangible assets at Century and separation-related transactions adjustments, while the second quarter of 2023 adjustments also include the impacts from the consulting fees related to the utility optimization program.

Speaker Change: In the appendix, we provide a reconciliation of adjustments by operating company. The vast majority of the second quarter 2024 adjustments relate to the amortization of intangible assets at Century and separation-related transactions adjustments.

Rob Stefani: The vast majority of the second quarter 2024 adjustments relate to the amortization of intangible assets at Century and separation-related transactions adjustments, while the second quarter 2023 adjustments also include the impacts of the consulting fees related to the Utility Optimization Program. Now, I'll provide a walkthrough of the performance of Southwest Gas Holdings and the utility.

Speaker Change: while the second quarter 2023 adjustments also include the impacts from the consulting fees related to the Utility Optimization Program.

Rob Stefani: Now I'll provide a walkthrough on the performance of Southwest Gas Holdings and the utility. Turning to slide 11, we depict a consolidated earnings walk on an adjusted basis. During the second quarter, the utility benefited from continued customer growth and rate relief, partially offset by modest O&M increases, as well as reductions in interest income, all of which are discussed in detail on the next slide. Centuries consolidated results were lower for the quarter, as the second quarter of 2023 benefited from higher volumes of work under MSAs, as well as higher offshore wind work and above-average natural gas bid work that did not reoccur in this year's second quarter.

Speaker Change: Now, I'll provide a walkthrough on the performance of Southwest Gas Holdings and the utility.

Rob Stefani: Turning to slide 11, we depict a consolidated earnings walk on an adjusted basis. During the second quarter, the utility benefited from continued customer growth and rate relief, partially offset by modest O&M, as well as reductions in interest income, all of which are discussed in detail on the next slide. Century's consolidated results were lower for the quarter as the second quarter of 2023 benefited from higher volumes of work under MSAs, as well as higher offshore wind work and above average natural gas bid work that did not reoccur in this year's second quarter.

Speaker Change: Turning to slide 11, we depict a consolidated earnings walk on an adjusted basis.

Speaker Change: During the second quarter, the utility benefited from continued customer growth and rate relief, partially offset by modest O&M increases, as well as reductions in interest income, all of which are discussed in detail on the next slide.

Speaker Change: Century's consolidated results were lower for the quarter, as the second quarter of 2023 benefited from higher volumes of work under MSAs, as well as higher offshore wind work and above-average natural gas bid work that did not reoccur in this year's second quarter.

Rob Stefani: Overall, while centuries revenues and operating margins decreased, centuries saw lower depreciation amortization expense due to lower capital expenditures, as well as lower interest expense over the period due to IPO-related debt reduction. Of note, centuries' net income results at the consolidated Southwest Gas level differ from centuries' reported standalone net income results on an interim basis due to differing income tax accounting methodologies, as well as the impacts of non-controlling interest. The tax methodology differences should unwind in full year results. The full code was impacted by higher expenses compared to Q2 2023, primarily related to interest expense associated with higher variable interest rate impacts associated with the term loan, and to a lesser extent amounts outstanding on the revolving credit facility.

Rob Stefani: Overall, while Century's revenues and operating margins decreased, Century saw lower depreciation and amortization expense due to lower capital expenditures, as well as lower interest expense over the period due to IPO-related debt reduction. Of note, Century's net income results at the Consolidated Southwest Gas level differ from its reported stand-alone net income results on an interim basis due to differing income tax accounting methodologies as well as the impacts of non-controlling interest The tax methodology differences should unwind in full-year results.

Speaker Change: Overall, while Sentry's revenues and operating margins decreased, Sentry's saw lower depreciation and amortization expense due to lower capital expenditures, as well as lower interest expense over the period due to IPO-related debt reduction.

Speaker Change: Of note, Century's net income results at the Consolidated Southwest CAST level differ from Century's reported stand-alone net income results on an interim basis due to differing income tax accounting methodologies as well as the impacts of non-controlling interest.

Speaker Change: The tax methodology differences should unwind in full year results.

Rob Stefani: The whole code was impacted by higher expenses compared to Q2 2023, primarily related to interest expense associated with higher variable interest rate impacts associated with the term loan, and to a lesser extent, amounts outstanding on the revolving credit. Moving on to slide 12, you will see the quarter over quarter performance drivers for our utility, Southwest Gas Corporation. In the second quarter of 2024, the utility operating margin increased by nearly 11 million compared to the same period last year.

Speaker Change: The whole code was impacted by higher expenses compared to Q2 2023, primarily related to interest expense associated with higher variable interest rate impacts associated with the term loan, and to a lesser extent, amounts outstanding on the revolving credit facility.

Rob Stefani: Moving on to slide 12, you will see the quarter-over-quarter performance drivers for our utility, Southwest Gas Corporation. In the second quarter of 2024, utility operating margin increased by nearly 11 million compared to the same period last year. The improvement was driven primarily by an 18 million of increased recovery on prior investments in Nevada, as well as the modest increase in recovering in California. We also saw 2 million of improved margin as a result of continued customer growth throughout our service areas, where we continue to see strong customer growth. Offsetting these increases in operating margin is a roughly $60 million reduction in regulatory account amortization, which was elevated during last year's second quarter and did not recur in this year's second quarter.

Speaker Change: Moving on to slide 12, you will see the quarter-over-quarter performance drivers for our utility Southwest Gas Corporation.

Speaker Change: In the second quarter of 2024, utility operating margin increased by nearly $11 million compared to the same period last year. The improvement was driven primarily by an $18 million of increased recovery on prior investments in Nevada, as well as a modest increase in recovery in California.

Rob Stefani: The improvement was driven primarily by 18 million of increased recovery on prior investments in Nevada, as well as a modest increase in recovery in California. We also saw 2 million of improved margin as a result of continued customer growth throughout our service areas, where we continue to see strong customer growth. Offsetting these increases in operating margin is a roughly $16 million reduction in regulatory account amortization, which was elevated during last year's second quarter and did not recur in this year's second quarter.

Speaker Change: We also saw $2 million of improved margin as a result of continued customer growth throughout our service areas, where we continue to see strong customer growth.

Speaker Change: Offsetting these increases in operating margin is a roughly $16 million reduction in regulatory account amortization, which was elevated during last year's second quarter and did not recur in this year's second quarter.

Rob Stefani: Note that this regulatory amortization reduction is equally offset by a reduction in amortization expense, as I will discuss shortly. The remaining increase largely relates to the combined impacts of certain infrastructure and similar tracking mechanism surcharge components, which combined with the variable interest expense adjustment mechanism in Nevada resulted in a $2 million higher operating margin this quarter. In addition, customer late fee assessments were $1.2 million higher, with the remaining balance driven by miscellaneous revenues and charges and impacts to margin from non-decoupled customers.

Rob Stefani: Note that this regulatory amortization reduction is equally offset by a reduction in amortization expense, as I will discuss shortly. The remaining increase largely relates to the combined impacts of certain infrastructure and similar tracking mechanism surcharge components, which, combined with the variable interest expense adjustment mechanism in Nevada, resulted in $2 million higher operating margin this quarter. In addition, customer-related assessments were 1.2 million higher, with the remaining balance driven by miscellaneous revenues and charges, and impacts to margin from non-decoupled customers. O&M increased 4.9 million, primarily related to general labor costs increases across the business, leak survey and line locating activities, and insurance costs.

Speaker Change: Note that this regulatory amortization reduction is equally offset by a reduction in amortization expense, as I will discuss shortly.

Speaker Change: The remaining increase largely relates to the combined impacts of certain infrastructure and similar tracking mechanisms surcharge components Which combined with the variable interest expense adjustment mechanism in Nevada resulted in two million dollar higher operating margin this quarter

Speaker Change: In addition, customer late fee assessments were $1.2 million higher, with the remaining balance driven by miscellaneous revenues and charges and impacts to margin from non-decoupled customers.

Rob Stefani: O&M costs increased $4.9 million, primarily related to general labor cost increases across the business, leak survey and line locating activities, and insurance costs. However, these increases were partially offset by a reduction in external contractor and professional services costs. We remain confident that we will be able to achieve our stated goal of continuing to keep O&M costs flat on a per customer basis through 2026. And year to date, O&M is up less than 2%, which is less than the inflation observed in broader macroeconomic measures.

Speaker Change: O&M increased $4.9 million, primarily related to general labor cost increases across the business, leak survey and line locating activities, and insurance costs. These increases were partially offset by a reduction in external contractor and professional services costs.

Rob Stefani: These increases were partially offset by a reduction in external contractor and professional services costs. We remain confident that we will be able to achieve our stated goal of continuing to keep O&M costs flat on a per-customer basis through 2026. And year to date, O&M is less than 2%, which is less than the inflation observed in broader macroeconomic measures. The approximate $14 million decrease in depreciation, amortization, and general taxes was largely related to $16.1 million in lower regulatory account amortization associated with elevated prior year recovery of regulatory program balances that is offset by a corresponding amount in margin that I discussed a moment ago.

Speaker Change: We remain confident that we will be able to achieve our stated goal of continuing to keep O&M costs flat on a per-customer basis through 2026. And year-to-date, O&M is up less than 2%, which is less than the inflation observed in broader macroeconomic measures.

Rob Stefani: The approximate $14 million decrease in depreciation, amortization, and general taxes was largely related to $16.1 million in lower regulatory account amortization associated with the elevated prior year recovery of regulatory program balances. That amount is offset by a corresponding amount in margin that I discussed a moment ago. Further, partially offset by higher depreciation expense associated with the 7% increase in average gas plant and service compared to the second quarter of 2023. Other income decreased approximately $5 million, the net result of mostly expected drivers.

Speaker Change: The approximate $14 million decrease in depreciation, amortization, and general taxes was largely related to $16.1 million in lower regulatory account amortization associated with elevated prior year recovery of regulatory program balances.

Rob Stefani: Further, a partially offset by higher depreciation expense associated with the 7% increase in average gas plant and service compared to the second quarter of 2023. Other income decreased approximately 5 million, the net result of mostly expected drivers. We saw a $5 million decline in interest income related to the carrying charges associated with lower regulatory account balances, notably in the deferred purchase gas cost balances, which flipped from a receivable balance from customers of over $780 million in June of 2023 to a net liability balance of $82 million at the end of this quarter. Coolly results were nearly $3 million lower than Q2 of 2023.

Speaker Change: That is offset by a corresponding amount and margin that I discussed a moment ago. Further, partially offset by higher depreciation expense associated with the 7% increase in average gas plant and service compared to the second quarter of 2023.

Speaker Change: Other income decreased approximately $5 million, the net result of mostly expected drivers. We saw a $5 million decline in interest income related to the carrying charges associated with lower regulatory account balances, notably the deferred purchase gas cost balances.

Rob Stefani: We saw a $5 million decline in interest income related to the carrying charges associated with lower regulatory account balances, notably the deferred purchase gas cost balances, which flipped from a receivable balance from customers of over $780 million in June of 2023 to a net liability balance of $82 million at the end of this quarter. COLE results were nearly $3 million lower than Q2 of 2023. Also included were the impacts of an increase in the non-service-related components of employee pension and post-retirement benefit costs.

Speaker Change: which flipped from a receivable balance from customers of over $780 million in June of 2023 to a net liability balance of $82 million at the end of this quarter.

Speaker Change: Coley results were nearly $3 million lower than Q2 of 2023. Also included were the impacts of an increase in the non-service related components of employee pension and post-retirement benefit costs.

Rob Stefani: Also included were the impacts of an increase in the non-service-related components of employee pension and post-retirement benefit costs. These declines were partially offset by an increase in the equity portion of the allowance for funds used during construction or AFUDC, and in approximately $3 million in software write-offs that occurred in the prior year quarter, which did not recur in 2024. Interest expense that utility increased by nearly $3 million from the prior year's second quarter, primarily due to regulatory treatment time in relating to the utilities industrial development revenue bonds, including the impacts of deferrals and return and recoveries included in revenue and operating margin that are amortized through interest expense, the impact of which was offset in margin that I mentioned earlier.

Rob Stefani: These declines were partially offset by an increase in the equity portion of the allowance for funds used during construction, or AFUDC, and approximately $3 million in software write-offs that occurred in the prior year quarter, which did not recur in 2024. Interest expense at the utility increased by nearly $3 million from the prior year's second quarter, primarily due to regulatory treatment timing related to the utility's industrial development revenue bonds, including the impacts of deferrals and return, and recoveries included in revenue and operating margin that are amortized through interest expense, the impact of which was offset by the margin that I mentioned earlier.

Speaker Change: These declines were partially offset by an increase in the equity portion of the Allowance for Funds Used During Construction, or AFUDC, and an approximately $3 million in software write-offs that occurred in the prior year quarter, which did not recur in 2024.

Speaker Change: Interest expense at the utility increased by nearly $3 million from the prior year's second quarter, primarily due to regulatory treatment timing relating to the utility's industrial development revenue bonds.

Speaker Change: including the impacts of deferrals and return and recoveries included in revenue and operating margin that are amortized through interest expense, the impact of which was offset in margin that I mentioned earlier.

Rob Stefani: Overall, second quarter and year-to-date performance of the utility has been strong, resulting in an increase to our 2024 net income guidance range, which Karen will discuss. On slide 13, we have provided our 2024 financing plan for both Southwest Gas Holdings and the Southwest Gas Corporation that has been updated to reflect the IPO outcome in Century, which still assumes the consolidation of Century. To the extent century ceases to be consolidated in 2024, we will adjust our guidance accordingly. We continue to expect cash flow from operations to more than fund the entire capital expenditure program and the utility forecast of 2024.

Rob Stefani: Overall, second quarter and year-to-date performance at the utility has been strong, resulting in an increase to our 2024 net income guidance range, which Karen will discuss. On slide 13, we have provided our 2024 financing plan for both Southwest Gas Holdings and Southwest Gas Corporation that has been updated to reflect the IPO outcome at Century, which still assumes the consolidation of Century. To the extent Century ceases to be consolidated in 2024, we will adjust our guidance accordingly.

Speaker Change: Overall, second quarter and year-to-date performance at the utility has been strong, resulting in an increase to our 2024 net income guidance range, which Karen will discuss.

Karen Haller: On slide 13, we have provided our 2024 financing plan for both Southwest Gas Holdings and Southwest Gas Corporation that has been updated to reflect the IPO outcome in Century.

Karen Haller: which still assumes a consolidation of century. To the extent century ceases to be consolidated in 2024, we will adjust our guidance accordingly.

Rob Stefani: We continue to expect cash flow from operations to more than fund the entire capital expenditure program and the utility forecasted in 2024. In addition, based on the strength of our balance sheet and successful recent refinancing efforts, we continue to anticipate very modest additional near-term equity needs of approximately $75 million during 2024. However, that depends on the post-IPO separation execution form.

Karen Haller: We continue to expect cash flow from operations to more than fund the entire capital expenditure program at the utility forecasted in 2024.

Rob Stefani: In addition, based on the strength of our balance sheet and successful recent refinancing efforts, we continue to anticipate very modest additional near-term equity needs of approximately $75 million during 2024. Again, that depends on post-IPOs separation execution form. And we have no significant capital markets needs over the next 12 months. It is important to note that, in addition to our limited equity needs of approximately $150 million in total in the next two years, inclusive of the $75 million this year, which is expected through the ATM. In the third quarter, we extended our $550 million Southwest Holdings term loan to July 31, 2025, as well as the $400 million revolver at the utility, which now expires in August 2029.

Karen Haller: In addition, based on the strength of our balance sheet...

Karen Haller: successful recent refinancing efforts. We continue to anticipate very modest additional near-term equity needs of approximately $75 million during 2024. Again, that depends on post-IPO separation execution form. And we have no significant capital markets needs over the next 12 months.

Rob Stefani: And we have no significant capital markets needs over the next 12 months. It is important to note that in addition to our limited equity needs of approximately $150 million in total over the next two years, inclusive of the $75 million this year, which is expected through the ATM. In the third quarter, we extended our $550 million Southwest Holdings Term Loan to July 31, 2025, as well as the $400 million revolver at the utility, which now expires in August 2029.

Karen Haller: It is important to note that in addition to our limited equity needs of approximately $150 million in total in the next two years, inclusive of the $75 million this year, which is expected through the ATM.

Karen Haller: In the third quarter, we extended our $550 million Southwest Holdings term loan to July 31, 2025, as well as the $400 million revolver at the utility, which now expires in August 2029.

Rob Stefani: The Holdings term loan extension included a 17 and a half basis point reduction in applicable spread from SOFR plus 130 down to SOFR plus 112.5 basis points. We continued to expect limited debt financing and refinancing needs at the utility through the end of 2026. At Holdings, we reiterated our plan to target solid investment-grade balance sheet metrics.

Rob Stefani: The Holdings Term Loan extension included a 17.5 basis point reduction in the applicable spread from SOFR plus 130 down to SOFR plus 112.5 basis points. We continue to expect limited debt financing and refinancing needs at the utility through the end of 2026.

Karen Haller: The holdings term loan extension included a 17.5 basis point reduction in applicable spread from SOFR plus 130 down to SOFR plus 112.5 basis points.

Karen Haller: We continue to expect limited debt financing and refinancing needs at the utility through the end of 2026. At Holdings, we reiterate our plan to target solid investment grade balance sheet metrics.

Rob Stefani: At Holdings, we reiterate our plan to target solid investment grade balance sheet metrics. Moving on to slide 14, we take a look at our balance sheet strength and our commitment to maintaining an investment grade profile. On the left-hand side, we walk through net debt by operating company. We finished the quarter with nearly $600 million in cash, largely due to the full collection of the previously deferred purchase gas costs. As a result, at the utility, the PGA balance is now flipped to the liability side.

Rob Stefani: Moving on to slide 14, we take a look at our balance sheet strength and our commitment to maintaining the investment-grade profile. On the left-hand side, we walked through net debt-by-operating company. We finished the quarter with nearly 600 million of cash, largely due to the full collection of the previously deferred purchase gas costs. As a result, at the utility, the PGA balance is now flipped to the liability. This is down from an asset balance of approximately 200 million at the end of the first quarter of 2024. On slide 22, additional details are provided on the PGA balance.

Karen Haller: Moving on to slide 14, we take a look at our balance sheet strength and our commitment to maintaining the investment grade profile. On the left-hand side, we walk through net debt by operating company. We finished the quarter with nearly $600 million of cash, largely due to the full collection of the previously deferred purchase gas costs.

Karen Haller: As a result, at the utility, the PGA balance is now flipped to the liability.

Rob Stefani: This is down from an asset balance of approximately $200 million at the end of the first quarter of 2024. On slide 22, additional details are provided on the PGA balance. As mentioned on the previous slide, we continue to expect the large utility cash balance to significantly obviate the need to pursue additional financing in the near term. On the right-hand side of slide 14, we note that we had no changes to our credit ratings or outlook from the agencies with the exception of Fitch, which has moved us from a watch negative to negative. I'll now turn the call over to Karen Haller and Slide 16 to discuss our guides.

Karen Haller: This is down from an asset balance of approximately $200 million at the end of the first quarter of 2024.

Rob Stefani: As mentioned on the previous slide, we continue to expect the large utility cash balance to significantly obviate the need to pursue additional financing in the year term. On the right-hand side of slide 14, we note that we had no changes to our credit ratings or outlook from the agencies, with the exception of Fitch, which has moved us from watch negative to negative.

Karen Haller: On slide 22, additional details are provided on the PGA balance.

Karen Haller: As mentioned on the previous slide, we continue to expect a large utility cash balance to significantly obviate the need to pursue additional financing in the near term.

Karen Haller: On the right-hand side of slide 14, we note that we had no changes to our credit ratings or outlook from the agencies with the exception of Fitch, which has moved us from watch negative to negative.

Karen Haller: I'll now turn the call over to Karen Howler in slide 16 to discuss our guides. Thanks, Rob. Our certain quarter results are evidence of the progress we continue to make executing our strategy. And we're enthusiastic about the rest of 2024. On slide 16, we are raising our 2024 utility net income guidance by $5 million, as mentioned earlier. This reflects performance thus far, as well as expectations over the balance of the year. We believe that strong regional economic outlook in our service territories, the completion of our Nevada Readcase outcome, as well as expected results that our cost management efforts will drive 2024 results higher than our original net income guidance range, and our team remains focused on optimizing utility operations.

Karen Haller: Our second quarter results are evidence of the progress we continue to make executing our strategy, and we're enthusiastic about the rest of 2024. On slide 16, we are raising our 2024 utility net income guidance by $5 million, as mentioned earlier. This reflects performance thus far, as well as expectations over the balance of the year.

Karen Haller: We believe that the strong regional economic outlook in our service territories, the completion of our Nevada rate case outcome, as well as expected results of our cost management efforts, will drive 2024 results higher than our original net income guidance range, and our team remains focused on optimizing utility operations. We reaffirm our 2024 utility CapEx at approximately $830 million, while nearly 50% of our forecasted capital spending relates to maintaining a safe and reliable system for the benefit of all of our customers.

Karen Haller: We reaffirm our 2024 utility capex at approximately $830 million, while nearly 50% of our forecasted capital spending relates to maintaining a safe and reliable system for the benefit of all of our customers. The balance is to serve the needs of our growing customer base and our continuous improvement initiatives, which we expect to lead to future cost savings at the utility. Looking further out, we have adjusted our expected compounded annual growth rate for net income at the utility to fall within the range of 9.25 to 11.25% from 2024 to 2026, which maintains our outlook through 2026 and reflects the now higher expectations for the 2024 base year.

Karen Haller: The balance is to serve the needs of our growing customer base and our continuous improvement initiatives, which we expect to lead to future cost savings at the utility. Looking further out, we have adjusted our expected compounded annual growth rate for net income at the utility to fall within the range of 9.25 to 11.25% from 2024 to 2026, which maintains our outlook through 2026 and reflects the now higher expectations for the 2024 base year.

Karen Haller: which maintains our outlook through 2026 and reflects the now higher expectations for the 2024 base year.

Karen Haller: While the impact of the regulatory cycle is expected to result in some lumpy net income growth over the forecasted period, our regulatory strategy and our plan to achieve a flat and women per customer trend over that same period are expected to be important components of our growth story. Additionally, you can find the 2024 to 2026 drivers in the appendix of our presentation on slide 23. We also reaffirm our rate-based caker to be in the range of 6.5 to 7.5% over the same 2024 to 2026 period, and we continue to expect to invest about $24 billion in total of capex over the next three years.

Karen Haller: While the impact of the regulatory cycle is expected to result in somewhat lumpy net income growth over the forecasted period, our regulatory strategy and our plan to achieve a flat O&M per customer trend over that same period are expected to be important components of our growth story. Additionally, you can find the 2024 to 2026 drivers in the appendix of our presentation on slide 23. We also reaffirm our rate-based CAGR to be in the range of 6.5% to 7.5% over the same 2024 to 2026 period, and we continue to expect to invest about $2.4 billion in total in CapEx over the next three years.

Karen Haller: We also reaffirm our rate base CAGR to be in the range of 6.5% to 7.5%.

Karen Haller: Before we open the call up to Q&A, I want to point to 517 and emphasize that our teams are focused on executing our strategic priorities, delivering strong financial results, and providing exceptional service to our customers. This is an early growth through financial discipline, operational excellence, and constructive regulatory relationships. We'll continue to execute toward a plan full separation of Sentry to create a more attractive value proposition for stockholders.

Karen Haller: Before we open the call up to Q&A, I want to point to slide 7 and emphasize that our teams are focused on executing our strategic priorities, delivering strong financial results, and providing exceptional service to our customers. At Southwest Gas Holdings, we are confident in our path forward as a premier pure-play natural gas utility. We plan to continue delivering steady organic rate-based growth through strong regional demand dynamics, as well as earnings growth through financial discipline, operational excellence, and constructive regulatory relationships. We will continue to execute toward the planned full separation of Century to create a more attractive value proposition for stockholders.

Speaker Change: We'll continue to execute toward the planned full separation of Century to create a more attractive value proposition for stockholders. With that, I'd like to open the call for questions.

Unknown Executive: With that, I'd like to open the call for questions. Thank you. At this time, if you wish to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue by pressing star two.

Unknown Executive: Thank you. At this time, if you wish to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue by pressing star 2. We'll take our first question from Richard Sunderland at J.B. Morgan. Please go ahead.

Speaker Change: Thank you. At this time, if you wish to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue by pressing star 2.

Richard Sunderland: We'll take our first question from Richard Sunderland at J.B. Morgan. Please go ahead.

Richard Sunderland: Hi, good morning. Thanks for the time today.

Richard Sunderland: Hi, good morning. Thank you for your time today. Morning, Rich. For the century separation, can you run through your current thoughts on the relative attractiveness of a tax-free scenario versus generating proceeds to pay down debt? I guess I'm also curious here if you're focused on the absolute price of CTRI or the relative price between CTRI and SWF? Hey Rich, it's Rob.

Rob Stefani: Morning, Rich. For the sentry separation, can you run through your current thoughts on the relative attractiveness of a tax-free scenario versus generating proceeds that pay down debt? I guess I'm also curious here if you're focused on the absolute price of CTI or that relative price between CTI and SWX.

Speaker Change: Hi, good morning. Thank you for the time today.

Rich: Morning, Rich.

Rich: For the century separation, can you run through your current thoughts on the relative attractiveness of a tax-free scenario versus generating proceeds to pay down debt?

Speaker Change: I guess I'm also curious here if you're focused on the absolute price of CTRI or that relative price between CTRI and SWX.

Rob Stefani: Hey, Rich. It's Rob. We continue to evaluate the separation options. Obviously, we're looking at relative value between the two stocks.

Rob Stefani: Hey, Rich, it's Rob. You know, we continue to evaluate the separation options. Obviously, we're looking at the relative value between the two stocks. We're very focused at this point in time on the process of placing a permanent CEO at Century. And so as we look out at kind of separation alternatives, we're, you know, focused on the placement of that permanent CEO. And we'll continue to monitor market conditions.

Speaker Change: Hey Rich, it's Rob. You know, look, we continue to evaluate the separation options. Obviously, you know, we're looking at relative value between the two stocks.

Rob Stefani: We're very focused at this point in time in the process to place a permanent CEO at Center. As we look out to separation alternatives, we're focused on the placement of that permanent CEO, and we'll continue to monitor market conditions. I think when you look at our net operating loss balance, as Karen had highlighted, it obviously makes a sell-down or a taxable exchange potentially attractive option. We really reserve the spend scenario in the event of adverse market conditions or other conditions, but are obviously looking hard at the sell-down and exchange.

Speaker Change: We're very focused at this point in time in the process to place a permanent CEO at Century. And so as we look out to kind of separation alternatives,

Rob Stefani: I think when you look at our net operating loss balance, as Karen highlighted, it obviously makes a sell-down or a taxable exchange potentially an attractive option. We really reserve the spin scenario in the event of adverse market conditions.

Speaker Change: We're focused on the placement of that permanent CEO, and we'll continue to monitor market conditions. I think when you look at our net operating loss balance, as Karen had highlighted, it obviously makes...

Speaker Change: a sell-down or a taxable exchange, potentially attractive option. We really reserve the spin scenario.

Speaker Change: in the event of adverse kind of market conditions or other conditions, but are obviously looking hard at the sell-down and exchange.

Richard Sunderland: Got it. That's very helpful.

Rob Stefani: Got it. That's very helpful. Thank you. And then, just on timing here, is there a scenario where you could do something before the lockup expiry? I guess just overall, how do you think about balancing speed to separation against all the factors you just ran through?

Unknown Executive: Thank you.

Ryan Levine: And then just on timing here, is there a scenario where you could do something before the lock-up expiry?

Speaker Change: and Bill Fehrman.

Bill Fehrman: Got it. That's very helpful. Thank you. And then just on timing here, is there a scenario where you could do something before the lockup expiry? I guess just overall, how do you think about balancing speed to separation against all the factors you just ran through?

Rob Stefani: I guess just overall, how do you think about balancing speed to separation against all the factors you just ran through? I think, like I said, we're focused on the process to put a permanent CEO in place. Paul Cadel is serving as the interim CEO and has a long track record both in the EPC service as well as his time at CEO and the energy and his time within Berkshire. We have a lot of confidence in him as an interim CEO, but we are looking through that process. of placing a permanent CEO from a timing perspective and lock-up period expires here in September would be an early look.

Rob Stefani: I think the, you know, like I said, we're focused on the process to put a permanent CEO in place. You know, Paul Cadell is serving as the interim CEO and has a long track record, both in the EPC services as well as his time as CEO of Envy Energy and his time within Berkshire. So we have a lot of confidence in him as an interim CEO, but we are looking through that process, of placing a permanent CEO from a from a timing perspective and lockup, you know, the lockup period expires. Here in September would be an early look, I think just given where markets are, we're focused on that CEO placement in the near term. Great.

Unknown Executive: Great. This is all very helpful. Thank you very much for your time.

Speaker Change: I think, like I said, we're focused on the process to put a permanent CEO in place.

Ryan Levine: Thank you. The next question comes from Ryan Levine at Citi. Please go ahead.

Speaker Change: You know, Paul Cadell is serving as the interim CEO and has a long track record both in

Speaker Change: the EPC services as well as his time as CEO of Envy Energy and his time within Berkshire. So we have a lot of confidence in him as an interim CEO, but we are looking through that process of

Speaker Change: of Placing a Permanent CEO. From a timing perspective, the lock-up period expires.

Speaker Change: here in September would be an early look. I think just given where markets are, we're focused on that CEO placement in the near term.

Rob Stefani: I think just given where markets are, we're focused on that CEO placement in the near term.

Unknown Executive: Great. This is all very helpful.

Unknown Executive: Thank you very much for the time.

Speaker Change: Great, this is all very helpful. Thank you very much for the time.

Unknown Executive: Thanks, Ricken. Thank you.

Ryan Levine: Next question comes from Ryan Levine at City. Please go ahead.

Reggie: Thanks, Reggie.

Speaker Change: Thank you. Next question comes from Ryan Levine at Citi. Please go ahead.

Ryan Levine: Hi everybody. I saw the ATM news this morning. Any color you could share on the reason for that filing and the size of the $340 million amount in that filing?

Ryan Levine: Hi, everybody. I saw the ATM news this morning.

Ryan Levine: Hi everybody. I saw the ATM news this morning. Any color you could share around the reason for that filing and the size of the $340 million amount in that filing? Any color you could share?

Rob Stefani: Any call you could share around the reason for that filing and the size of the $340 million in that filing? Any call you could share?

Rob Stefani: Yeah, good question, Ryan. First I'd highlight the $340 million is the exact amount that was outstanding under the prior shelf. We have a change the size from several years ago when that was issued. We didn't utilize the ATM in prior periods, and so it's really just an extension so that we have the ability to execute the ATM if we need it. As we said on the call, we have less than 75 million of equity needs this year, and there's a chance that we may not choose to go to market. Obviously, if we were to embark on a strategy to sell down Century shares, then that could obviously need to raise 75 million.

Rob Stefani: Yeah, good question, Ryan. First, I'd highlight that $340 million is the exact amount that was outstanding on the prior shelf. We haven't changed the size from several years ago when that was issued. We didn't utilize the ATM in previous periods, and so it's really just an extension so that we have the ability to use the ATM if we need it. As we said on the call, we have less than $75 million in equity needs this year, and there's a chance that we may not choose to go to market.

Speaker Change: Yeah, good question, Ryan. First, I'd highlight that $340 million is the exact amount that was outstanding under the prior shelf.

Speaker Change: We haven't changed the size from several years ago when that was issued. We didn't utilize the ATM in prior periods, and so it's really just an extension so that we have the ability to execute the ATM if we need it. As we said on the call, we have less than 75 million of equity needs this year, and there's a chance that we may not choose to go to market, obviously, if we were to embark

Rob Stefani: Obviously, if we were to embark on a strategy to sell down century shares, then that could obviate the need to raise $75 million. We also continue to look at our cash flow generation from the utility and continue to look at whether we need to do all $75 million this year or not. The ATM was effectively just refreshed in order that we could do the $75 million this year if we needed it.

Rob Stefani: And we also continue to look at our cash flow generation from the utility and continue to look at, do we need to do all 75 million this year or not?

Speaker Change: then that could obviate the need to raise $75 million. We also continue to look at our cash flow generation from the utility and continue to look at do we need to do all $75 million this year or not. But the ATM was effectively just refreshed.

Rob Stefani: But the ATM was effectively just refreshed in order that we could do the 75 million this year if we needed it. Similarly, next year, our equity needs, as we've stated before, we've set up 150 million in total over the next couple of years. We have about 75 million of equity needs in each year, 24 and 25, so very limited equity needs; really no debt refinancing needs. We did that term loan at Holdings like we talked about. So all in all, very strong balance. You would 600 million of cash access to our credit facilities, and we'll continue to evaluate even the need for the 75 million.

Rob Stefani: Similarly, next year, our equity needs, as we've stated before, we've set $150 million in total over the next couple years. We have about $75 million of equity needs in each year, 24 and 25, so very limited equity needs, really no debt refinancing needs. We redid that term loan at holdings, like we talked about. All in all, a very strong balance sheet with $600 million of cash, and access to our credit facilities. We'll continue to evaluate even the need for the $75 million.

Speaker Change: in order that we could do the $75 million this year if we needed it. Similarly, next year, our equity needs, as we've stated before, we've set $150 million in total over the next couple years.

Speaker Change: You know, we have about 75 million of equity needs in each year, 24 and 25, so very limited equity needs, really no debt refinancing needs.

Speaker Change: We redid that term loan at Holdings, like we talked about, so all in all, very strong balance sheet with $600 million of cash, access to our credit facilities.

Speaker Change: You know, we'll continue to evaluate even the need for the $75 million.

Unknown Executive: Thank you.

Unknown Executive: Thank you. Yeah, I appreciate all the color.

Unknown Executive: Yeah, appreciate all the color.

Ryan Levine: And then in terms of the nine cent poll code drag or parent drag.

Speaker Change: Thank you. Yeah, I appreciate all the color. And then in terms of the nine-cent poll code drag or parent drag, can you delineate what that is in terms of how much is interest expense versus

Rob Stefani: You need to eliminate what that is in terms of how much is interest expense first, maybe one time in nature cause, first amortization or other items that may be embedded in that nine cent change. Yeah, so, you know, as you think about it, we put the term loan, the $550 million term loan, in place early in the second quarter of 2023. Or kind of in the April timeframe. And so we've in that as far as the first half of the year-to-date over year-to-date in 2024, the term loan was obviously on a year-to-date basis outstanding for a longer period of time than it was year-to-date in 2023.

Speaker Change: Maybe one time in nature cause or amortization or other items that may be embedded in that nine-cent change

Unknown Executive: And then in terms of the nine cent whole code drag or parent drag, can you delineate what that is in terms of how much is interest expense versus maybe one-time in nature cause versus amortization or other items that may be embedded in that nine cent chain?

Speaker Change: Yeah, so, you know, as you think about it, we put the term loan, the $550 million term loan in place early in the second quarter of 2023.

Unknown Executive: Yeah, so, you know, we put the term loan, the $550 million term loan in place early in the second quarter of 2023, which is kind of in the April timeframe. And so, as far as the first half of the year, the year to date over the year to date, we see that in 2024, the term loan was obviously outstanding for a longer period of time than it was outstanding year to date in 2023. You know, when we refinance that term loan, we did compress the spread from 130 basis points down to 112.5. We just closed on the extension of the term loan earlier this week.

Speaker Change: are kind of in the April time frame. And so we've, as far as the...

Speaker Change: first half of the year, the year-to-date over year-to-date, that in 2024 the term loan was obviously on a year-to-date basis outstanding for a longer period of time than it was year-to-date in 2023.

Rob Stefani: When we refinanced that term loan, we did compress the spread from 130 basis points down to 112.5. We just closed on the extension of the term loan earlier this week. And so, from an adjustment basis, obviously, at the holdings level, there is some noise in there just around. Our costs associated with the Century Separation IPA, which we've adjusted out, so the vast majority of the cost at the holdings, though, is the interest expense. There's very much to most of the nine cents you're saying is the financing year-to-year comparison. Yes, that's right.

Speaker Change: When we refinanced that term loan, we did compress the spread from 130 basis points down to 112.5. We just closed on the extension of the term loan earlier this week.

Unknown Executive: And so, you know, the from a from an adjustment basis. Obviously, at the holdings level, there is some noise in there just around our and Costs Associated with Century's Separation and IPO, which we've adjusted out. So the vast majority of the cost of the holdings, though, is the interest exposed.

Speaker Change: You know the

Speaker Change: From an adjustment basis, obviously, at the holdings level, there is some noise in there just around our...

Speaker Change: You know costs associated with the century separation and IPO which we've adjusted out

Speaker Change: So the vast majority of the cost of the whole thing, though, is the interest expense.

Unknown Executive: There's a very limited number of heads of government in NOAA. So most of the nonsense you're saying is the financing year-over-year comparison.

Speaker Change: There's very limited number of head of government in the world.

Speaker Change: So most of the nonsense you're saying is the financing year-over-year comparison?

Unknown Executive: Yes, that's right.

Unknown Executive: Okay, thanks for the clarification. Thank you.

Ryan Levine: Okay, thanks for the clarification. Thank you.

Speaker Change: Yes, that's right.

Speaker Change: Okay. Thanks for the clarification. Thank you.

Unknown Executive: Ladies and gentlemen, as a reminder, should you have any questions, please press star one.

Unknown Executive: Ladies and gentlemen, as a reminder, should you have any questions, please press star 1. This concludes the Q&A portion of today's conference. I would now like to turn the call back over to Justin Forsberg for closing remarks.

Speaker Change: Ladies and gentlemen, as a reminder, should you have any questions, please press star 1.

Unknown Executive: This concludes the Q&A portion of today's conference.

Justin Forsberg: I would now like to turn the call back over to Justin Forsberg for closing remarks. Thanks, and thank you all for joining us today and for your questions. This concludes our conference call.

Speaker Change: This concludes the Q&A portion of today's conference. I would now like to turn the call back over to Justin Forsberg for closing remarks.

Justin Forsberg: Thanks, and thank you all for joining us today and for your questions. This concludes our conference call. Slide 18 of today's presentation includes my content information, and as always, feel free to reach out at any time. We appreciate you joining us today. Talk soon.

Justin Forsberg: Thanks and thank you all for joining us today and for your questions. This concludes our conference call. Slide 18 of today's presentation includes my content information, and as always, feel free to reach out at any time. We appreciate you joining us today. Talk soon.

Justin Forsberg: Slide 18 of today's presentation includes my contact information, and as always, feel free to reach out at any time. We appreciate you joining us today. Talk soon.

Unknown Executive: This concludes today's Southwest Gas Holdings.

Unknown Executive: This concludes today's Southwest Gas Holding second quarter time for earnings pull and left rest. You may disconnect your line at this time. Have a wonderful day.