Investor Meetings Dallas and San Antonio, TX April 9, 2015
Strategic Focus Long-term view with proven track record of execution Commitment to integrity has created value for investors, customers, employees and regulators Investment in rate base (safety & reliability) Regulatory mechanisms…
Presentation Outline I. Company overview and financial highlights II. Earnings III. Regulation IV. Economic overview and customer growth V. Capital expenditures VI. Dividends VII. 2015 expectations 4
Two Business Segments Southwest Gas consists of two business segments Natural gas operations Construction services (Centuri) 5
Southwest Gas is a Regional Leader in Natural Gas Distribution Headquartered in Las Vegas Largest distributor of natural gas in Arizona Carson and Nevada City Distributes and transports natural gas in Las Vegas parts of…
Stable Customer Base TMTD December 31, 2014 Customer & Operating Margin Distribution Margin by By State Customer Class Customers Margin 11% 4% Transportation Other Sales Arizona 10% 11% Nevada 37% 55% 53% California 34% 85%…
Centuri Construction Group Construction Services NPL Construction Company Full-service underground piping contractor Operates in 20 major markets in the U.S. Link-Line Contractors Largest natural gas distribution contractor in…
Centuri Construction Group Construction Services W.S. Nicholls Construction Provides fabrication and multi-trade operations for industrial projects Operations in Ontario province and western Canada Founded in 1996 Brigadier…
Locations Link-Line / W.S. Nicholls Market NPL Markets (NPL and its affiliates) W.S. Nicholls Markets NPL / Brigadier Market 10
High Quality Customer Base
Consolidated Financial Highlights Achieved second highest EPS Dividend increase for ninth consecutive year Successfully concluded two general rate cases Received approval in Arizona to construct an LNG facility Highest earnings year for…
Summary Operating Results (In thousands, except per share amounts) TWELVE MONTHS ENDED DECEMBER 31, 2012 2013 2014 Results of Consolidated Operations Contribution to net income - natural gas operations 116,619 124,169 116,872…
Construction Services Highlights Completed acquisition of Link-Line Group of Companies Newlyformed Centuri Construction Group now comprises construction services segment Revenues increased 14% compared to 2013 Construction…
Summary Operating Results Construction Services (In thousands) 15
Natural Gas Operations Highlights Operating margin increased 1.5% compared to prior year 26,000 net new customers (1.4% growth rate) Netfinancing costs increased 6 million between 2014 and 2013 Decision approved in California…
Summary Operating Results Natural Gas Operations (In thousands) 17
2014 Increase in Operating Margin Natural Gas Operations (In millions) 18
Operating Expense Natural Gas Operations Operating expenses increased 10.8 million or 1.7% O&M expense decreased nearly 1% Pension and employer-sponsored medical costs resulted in a 9.5 million decrease Reductions offset by higher…
Customer to Employee Ratio Natural Gas Operations 20
Other Income and Deductions Natural Gas Operations (In thousands) * The Arizona replacement program work subject to non-recoverability was substantially completed in 2012 21
Net Financing Costs Natural Gas Operations Increased by 5.7 million from 62.6 million in 2013 to 68.3 million in 2014 Primarilydue to October 2013 issuance of 250 million of 4.875% senior notes Increase mitigated by lower interest…
Regulation Key Highlights Natural Gas Operations General rate cases California general rate case decision California 2015 post-test year attrition filing Paiute Pipeline Company general rate case settlement Next Arizona general rate…
Regulation - California General Rate Case & Annual Attrition Natural Gas Operations In June 2014, the California Public Utilities Commission (CPUC) issued a final decision in Southwests general rate case based on a 2014 future test…
Regulation Paiute Pipeline Company General Rate Case Natural Gas Operations Filed a rate case with FERC on February 28, 2014 Requested a 9 million increase in operating revenues Settlement agreement in principle reached in September…
Regulation Arizona Next General Rate Case Natural Gas Operations Rate case moratorium: Next earliest general rate case application April 30, 2016 Next earliest test year November 30, 2015 Required depreciation study New rates…
Regulation - Infrastructure Mechanisms Natural Gas Operations Arizona customer-owned yard line (COYL) program Initial program (Phase I) completed in 2014 In January 2014, the ACC approved Southwests request to modify the COYL program…
Regulation - Infrastructure/Expansion Projects Proposed LNG Facility - Arizona Natural Gas Operations Southwest filed an application with the ACC seeking pre-approval of LNG facility in southern Arizona January 2014 filing seeks…
Regulation -Infrastructure/Expansion Projects Elko County Expansion - Paiute Natural Gas Operations Project to provide additional firm transportation-service capacity in Elko County Nevada Open season conducted in 2013 indicated…
Economic Overview Service Area Natural Gas Operations 30
Economic Overview Service Area Natural Gas Operations 31
Customer Growth Breakdown Service Area Natural Gas Operations For 2015, Company is projecting net customer growth of about 1.5% 32
Gas Utility Plant - Growth Natural Gas Operations (In billions) 5.2% Gas Utility Plant CAGR CAGR = compound annual growth rate 33
Capital Expenditures Natural Gas Operations (In millions) 34
Capital Expenditures Natural Gas Operations (In millions) 2015 total estimate 445 million Replacements General Plant under 63 trackers Growth 23 136 Other 45 Franchise & other replacements 178 2015-2017 estimate 1.3…
Dividend Growth 36
2015 Expectations Construction Services Strong emphasis on integration efforts Revenues expected to range between 950 million and 1 billion Operating income to approximate 6% of revenues Net interest deductions to be between 6.5…
2015 Expectations Natural Gas Operations Net customer growth of 1.5% Operating margin is estimated to increase nearly 2% Operating costs increase assumption of 3% 4% Includes net pension expense increase of 8 million reflecting…
Longer-Term Value Drivers Location, location, location Rate base growth opportunities 1.3 billion capital expenditures over the next three years (700 million net) is significant compared to current authorized rate base of…
APPENDIX 40
Customers by State Natural Gas Operations (In thousands) As of December 31, 2012 2013 2014 Arizona 1,010 1,022 1,033 Nevada 681 695 708 California 185 187 189 Total 1,876 1,904 1,930 1,100 825 550 275 - 2012 2013…
Customers by Class Natural Gas Operations (In thousands) CUSTOMER COUNTS BY CLASS AT DECEMBER 31, 2012 2013 2014 Residential 1,797 1,824 1,850 Commercial 78 79 79 Other 1 1 1 Total 1,876 1,904 1,930 42
Purchased Gas Adjustment (PGA) Balances Natural Gas Operations (In millions) 43
Liquidity Natural Gas Operations 300 million revolving credit facility which expires in March 2019 150 million of the facility designated long-term debt and remaining 150 million as working capital 50 million commercial paper program…
Long-Term Debt Maturity Schedule[1] at December 31, 2014 300 250 200 in Millions 150 100 50 - Debentures/Notes Medium-term Notes Industrial Development Revenue Bonds (IDRBs) [1] Does not include the long-term portion…
Authorized Rate Base and Rates of Return 46
Consolidated Capital Structure (In millions) Capitalization at December 31, 2010 2011 2012 2013 2014 1 Equity 1,167 1,225 1,308 1,412 1,506 2 Long-Term Debt 1,200 1,254 1,319 1,393 1,657 Total Permanent Capital 2,367 2,479 2,627…
Dividend Growth Policy Over time, the Board intends to increase the dividend such that our payout ratio approaches our local distribution company peer group average while maintaining our strong credit ratings and our ability to…
Return on Common Equity 50
Stock Price Graph Southwest Gas Corporation Common Stock Closing Price December 31, 2004 December 31, 2014 Price per share 51
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