Southwest Gas Q4 2024: Navigating Contradictions on Centuri Separation and Arizona Regulations

These are the key contradictions discussed in Southwest Gas's latest 2024Q4 earnings call, specifically including: Centuri separation update and timing, Arizona regulatory environment, and Centuri separation strategy:



Financial Performance and Growth:
- Southwest Gas Holdings reported a record annual operating margin performance and the second straight year of a return on equity over 8%.
- This growth was primarily driven by successful regulatory strategies and cost management efforts to enhance safety, reliability, and customer service.

Capital Investment and Infrastructure:
- The company plans to invest approximately $4.3 billion over the next 5 years to support safety, reliability, and economic development across its service territories.
- This significant investment is supported by strong regional economic activity and population growth projections, expecting a compound annual growth rate in rate base between 6% and 8% from 2025 to 2029.

Regulatory and Operational Progress:
- The utility successfully completed a general rate case in Nevada with a $59 million revenue increase, representing 98% of its request.
- The Arizona rate case is progressing with a scheduled commission vote in March 2027, and the utility is exploring a System Integrity Mechanism to reduce regulatory lag.

Centuri Separation Strategy:
- Southwest Gas Holdings is focused on completing the separation of Centuri in a beneficial manner, with options including taxable sell-downs or share exchanges.
- The significant $1.5 billion net operating loss balance could serve as an offset to any taxable transactions, and a tax-free spin remains an option if taxable transactions are not executed.