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June 2015 Investor Presentation – Southwest Gas Co

Southwest Gas Co · Jun 10, 2015 · 46 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. June 2015 Investor Presentation – Southwest Gas Co – slide 1
    Midwest Investor Meetings June 10-12, 2015 1
  2. June 2015 Investor Presentation – Southwest Gas Co – slide 2
    Presented by: John P. Hester President and Chief Executive Officer John.Hesterswgas.com Roy R. Centrella Senior Vice President/Chief Financial Officer Roy.Centrellaswgas.com Justin Lee Brown Vice President/Regulation and Public Affairs…
  3. June 2015 Investor Presentation – Southwest Gas Co – slide 3
    Presentation Agenda Overview Summary financial results Our focus 2015 expectations & going forward 4
  4. June 2015 Investor Presentation – Southwest Gas Co – slide 4
    Two Business Segments Southwest Gas consists of two business segments Natural gas operations Construction services (Centuri) TMTD 3/31/15 Net Income 142MM 13% Natural gas operations 123MM net income Construction services 19MM…
  5. June 2015 Investor Presentation – Southwest Gas Co – slide 5
    Southwest Gas is a Regional Leader in Natural Gas Distribution Headquartered in Las Vegas Largest distributor of natural gas in Arizona Carson City and Nevada Distributes and Las Vegas transports natural gas in parts of…
  6. June 2015 Investor Presentation – Southwest Gas Co – slide 6
    Stable Customer Base Natural Gas Operations TMTD March 31, 2015 Customer & Operating Margin Distribution Margin by Customer By State Class Customers 4% Margin 11% Transportation Other Sales Arizona 10% 10% Nevada 37% 53%…
  7. June 2015 Investor Presentation – Southwest Gas Co – slide 7
    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…
  8. June 2015 Investor Presentation – Southwest Gas Co – slide 8
    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…
  9. June 2015 Investor Presentation – Southwest Gas Co – slide 9
    Centuri Construction Group Construction Services Markets Link-Line / W.S. Nicholls Market NPL Markets (NPL and its affiliates) W.S. Nicholls Markets NPL / Brigadier Market 10
  10. June 2015 Investor Presentation – Southwest Gas Co – slide 10
    Centuri Construction Group Construction Services - High Quality Customers 11
  11. June 2015 Investor Presentation – Southwest Gas Co – slide 11
    Company Highlights Achieved second highest EPS in 2014 Highest earnings year for construction services in 2014 Dividend increase for ninth consecutive year Successfully concluded two general rate cases Received approval in Arizona to…
  12. June 2015 Investor Presentation – Southwest Gas Co – slide 12
    Twelve Months Ended March 31, (In thousands except per share amounts) Over/(Under) Contribution to net income 2015 2014 Prior Year Natural gas operations 123,194 117,476 5,718 Construction services 19,132 17,854 1,278…
  13. June 2015 Investor Presentation – Southwest Gas Co – slide 13
    Summary Operating Results Natural Gas Operations (In thousands) TWELVE MONTHS ENDED MARCH 31, 2015 2014 Results of Natural Gas Operations Gas operating revenues 1,448,709 1,293,047 Net cost of gas sold 567,741 426,770 Operating…
  14. June 2015 Investor Presentation – Southwest Gas Co – slide 14
    Twelve Months Ended March 31, 2015 Natural Gas Operations Operating income increased 15.2 million between periods due to growth in operating margin and flat operating costs Operating margin increased 15 million including combined rate…
  15. June 2015 Investor Presentation – Southwest Gas Co – slide 15
    Summary Operating Results Construction Services (In thousands) TWELVE MONTHS ENDED MARCH 31, 2015 2014 Construction revenues 798,822 652,626 Construction expenses 709,586 579,795 Depreciation and amortization 51,267 43,763…
  16. June 2015 Investor Presentation – Southwest Gas Co – slide 16
    Twelve Months Ended March 31, 2015 Construction Services Revenues increased 146 million Additional pipe replacement work Inclusion of the acquired companies beginning fourth quarter 2014 (96.5 million) Construction expenses increased…
  17. June 2015 Investor Presentation – Southwest Gas Co – slide 17
    Twelve Months Ended March 31, 2015 Construction Services Loss reserve of 5.6 million: Short duration fixed-price contract started earlier this year and is over 90% complete Delays resulting in production inefficiencies increasing…
  18. June 2015 Investor Presentation – Southwest Gas Co – slide 18
    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 safety, service and reliability Regulatory initiatives…
  19. June 2015 Investor Presentation – Southwest Gas Co – slide 19
    Core Fundamentals Growth Regulation Cost controls Safety Capital expenditures and credit ratings Dividends 20
  20. June 2015 Investor Presentation – Southwest Gas Co – slide 20
    Economic Overview Service Area Natural Gas Operations 14% Unemployment Rates 12% Seasonally Adjusted Data 10% 8% 6% 4% U.S. Arizona Nevada California 21
  21. June 2015 Investor Presentation – Southwest Gas Co – slide 21
    Economic Overview Service Area Natural Gas Operations Employment Growth As of March 2014 2015 Southern California 2.7% 4.2% Nevada 3.8% 2.8% Arizona 1.9% 2.6% 22
  22. June 2015 Investor Presentation – Southwest Gas Co – slide 22
    Customer Growth Breakdown Natural Gas Operations (In thousands) Twelve Months Ended March 31, 2013 2014 2015 Beginning period 1,866 1,886 1,912 New meter sets 19 21 21 Meter turn-on/turn-offs 1 5 5 Ending period 1,886 1,912…
  23. June 2015 Investor Presentation – Southwest Gas Co – slide 23
    Focused on Growth Multi Family Market Single Family Market Capitalize on bullish Continue to capture growth in the multi new construction family building sector market share by to capture new leveraging upswing construction market…
  24. June 2015 Investor Presentation – Southwest Gas Co – slide 24
    Regulation - Regulatory Focus Natural Gas Operations Revenue Capital Investment Mitigate Strategic Focus Stability Opportunities Regulatory Lag Full Revenue Decoupling Enhanced Safety/Reliability Cost Recovery Mechanisms…
  25. June 2015 Investor Presentation – Southwest Gas Co – slide 25
    Regulation Annual Attrition Natural Gas Operations As part of the 2014 general rate case decision by the California Public Utility Commission, Post-Test Year (PTY) attrition increases were authorized for the years 2015 2018 2015 PTY…
  26. June 2015 Investor Presentation – Southwest Gas Co – slide 26
    Regulation - Infrastructure Mechanisms Natural Gas Operations Arizona customer-owned yard line (COYL) program Initial program (Phase I) approved in December 2011 In January 2014, the ACC approved Southwests request to modify the COYL…
  27. June 2015 Investor Presentation – Southwest Gas Co – slide 27
    Regulation - Infrastructure Mechanisms Natural Gas Operations Nevada gas infrastructure recovery (GIR) mechanism January 2014 PUCN approves GIR regulations 2014 GIR advance application authorized 14.4 million replacement work for…
  28. June 2015 Investor Presentation – Southwest Gas Co – slide 28
    Regulation LNG Facility Natural Gas Operations Arizona LNG Storage Facility ACC pre-approval granted December 2014 Authorizes deferrals up to 50 million Authorization to defer costs through November 1, 2017 Gas costs recovered…
  29. June 2015 Investor Presentation – Southwest Gas Co – slide 29
    Regulation Elko Expansion Project Natural Gas Operations Paiute Elko Lateral Certificate application filed with FERC June 2014 FERC approval received May 14, 2015 Estimated cost of the project is 35 million Targeted in-service…
  30. June 2015 Investor Presentation – Southwest Gas Co – slide 30
    Regulation Next Arizona GRC 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 effective no…
  31. June 2015 Investor Presentation – Southwest Gas Co – slide 31
    Cost Controls Natural Gas Operations Company expects to experience operating cost increase pressures Heightened pipeline safety and system reliability mandates Will not trade-off higher risk for lower costs We will look to mitigate…
  32. June 2015 Investor Presentation – Southwest Gas Co – slide 32
    Customer to Employee Ratio Natural Gas Operations As of March 31, 900 892 875 882 850 859 825 800 775 750 725 700 2013 2014 2015 33
  33. June 2015 Investor Presentation – Southwest Gas Co – slide 33
    Safety - Metrics Natural Gas Operations Key metrics Pipeline damages per 1,000 line locates A 5.8% improvement over two years One of the lowest rates in the industry Emergency response times improved 6.1% over two years 34
  34. June 2015 Investor Presentation – Southwest Gas Co – slide 34
    Safety - Recognition Natural Gas Operations Recognition 2014 AGA Industry Leader Employee Accident Prevention Certificate 2014 AGA Best Practice for Public Awareness 35
  35. June 2015 Investor Presentation – Southwest Gas Co – slide 35
    Capital Expenditures Natural Gas Operations (In millions) 36
  36. June 2015 Investor Presentation – Southwest Gas Co – slide 36
    Capital Expenditures Natural Gas Operations (In millions) Replacements General Plant under 2015 total estimate 63 trackers Growth 445 million 23 136 Other 45 2015-2017 estimate 178 1.3 billion Franchise & other…
  37. June 2015 Investor Presentation – Southwest Gas Co – slide 37
    Credit Ratings - Investment Grade Moodys Rating Senior Unsecured Debt: A3 (January 2014) Outlook: Stable Standard & Poors Senior Unsecured Debt: BBB+ (October 2014) Outlook: Stable Fitch Senior Unsecured Debt: A (May 2013)…
  38. June 2015 Investor Presentation – Southwest Gas Co – slide 38
    Annualized Dividend Growth 1.80 10.13% Dividend CAGR 1.60 1.62 1.40 1.46 1.20 1.32 1.18 1.00 1.06 1.00 0.80 0.60 2010 2011 2012 2013 2014 2015 CAGR = compound annual growth rate February 2015, Board increased annual…
  39. June 2015 Investor Presentation – Southwest Gas Co – slide 39
    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…
  40. June 2015 Investor Presentation – Southwest Gas Co – slide 40
    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…
  41. June 2015 Investor Presentation – Southwest Gas Co – slide 41
    Going Forward 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…
  42. June 2015 Investor Presentation – Southwest Gas Co – slide 42
    Appendix 43
  43. June 2015 Investor Presentation – Southwest Gas Co – slide 43
    Consolidated Capital Structure (In millions) Capitalization at March 31, 2011 2012 2013 2014 2015 Common Equity 1 1,231 1,295 1,379 1,470 1,571 Long-Term Debt 2 1,123 1,393 1,256 1,380 1,525 Total Permanent Capital 2,354 2,688 2,635…
  44. June 2015 Investor Presentation – Southwest Gas Co – slide 44
    Authorized Rate Base and Rates of Return Natural Gas Operations Authorized Authorized Authorized Return on Rate Base Rate of Common Rate Jurisdiction (In thousands) Return Equity Arizona 1,070,117 8.95 % 9.50 % Southern Nevada…
  45. June 2015 Investor Presentation – Southwest Gas Co – slide 45
    Return on Common Equity Twelve months ended March 31, 46
  46. June 2015 Investor Presentation – Southwest Gas Co – slide 46
    Comparative Total Returns Total Returns for Periods Ended March 31, 2015 1-Year 3-Year 5-Year 10-Year Southwest Gas 11.76% 13.81% 17.38% 12.42% S&P 600 Small Gas Index 12.51% 11.14% 11.61% 10.19% Dow Jones Utilities 14.25% 12.81%…

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