Southwest Gas Holdings (SWX) Q1 FY26 earnings call: guidance and Q&A

Can you elaborate on the potential to ramp the Great Basin project beyond 0.6 Bcf/d, the process for converting open season interest, and the impact on margin versus CapEx, especially for the longer-term demand (2030-2035)?

The oversubscription of the open season reflects significant potential demand. The company will now negotiate binding precedent agreements requiring surety. If contracted demand settles at the current 1 Bcf/d design, existing CapEx and margin guidance holds. If demand materially exceeds 1 Bcf/d, design changes (pipe sizes, compression) would be needed, impacting capital investment and margin. It is too early to quantify, but updates will be provided as commercial milestones are achieved.

“If ultimately that settled demand comes in at the 1 bcf level, well, then I think the guidance that we've given around margin and CapEx are going to hold. If for some reason, that additional capacity comes in materially more than that, we're going to need to think about our design, think about pipe sizes, think about compressor assumptions that we've made, and that's ultimately going to have an impact on the capital investment and ultimately the margin.”

asked by Julien Dumoulin-Smith · answered by Justin Brown

Can you provide more detail on the types of customers driving the strong Great Basin open season interest, specifically the mix from power generation, data centers, or industrial users, and how this informs contract durability?

Due to confidentiality, specific customer types cannot be disclosed. However, the demand is driven by the Tahoe-Reno Industrial Center region, which is known to include a variety of customers such as data center hyperscalers, mining, and power generation. Publicly available information about the region's growth can provide context.

“I think what we've disclosed in the past is when you read different information around kind of the Tahoe-Reno Industrial Center, where a lot of this is driven kind of just that region. I think you see a lot of different customers from data center hyperscalers to mining to power gen.”

asked by Dan Dolev · answered by Justin Brown

Given the potential for Great Basin to scale up to 2.5 Bcf/d, how is your strategy around long lead time items (e.g., pipe, compression) evolving?

The company has proactively engaged with suppliers to reserve positions in the queue for long lead time items like pipe and compression. It is early enough in the process to pivot on design elements, such as upsizing pipe diameter or using more powerful compressors, without having procured irrelevant equipment, depending on the final contracted demand.

“we're working very closely with our supply chain folks and with our potential suppliers to make sure that we manage those in terms of those longer lead time items.”

asked by Ryan Levine · answered by Justin Brown

How does the recent Sempra (SoCalGas) decision impact your thinking or outlook for your California gas business, especially with the cost of capital remaining outstanding in your own rate case?

Southwest Gas is aware of decisions made for larger investor-owned utilities but historically, there hasn't been a strong connection between those outcomes and Southwest Gas's. The commission typically addresses each case on its own merits, so the Sempra decision is not seen as directly impacting their specific California proceedings.

“Being a small multi-jurisdictional utility, there's not necessarily a pattern of the decisions, the outcomes that the large investors have versus what we have.”

asked by Ryan Levine · answered by Justin Brown

Can you provide a sense of the upside capital requirements if the Great Basin project were to scale up to, say, 2.5 Bcf/d, beyond the current 1 Bcf/d design at $1.7 billion?

It is too early to speculate on specific capital requirements for scaling beyond the 1 Bcf/d design. The immediate focus is on finalizing contracts and securing surety for the current open season interest. The company will evaluate options and potential impacts on capital based on what ultimately gets put under contract.

“We don't have anything in terms of being able to kind of share around kind of proportionately what that is. We're -- like I said, this really came in at the end of last week. We're really focused on working with the different shippers on finding out what is actually going to be contracted and secured with surety.”

asked by Vedula Murti · answered by Justin Forsberg

What is the timeline for communicating the new scope and capital for the Great Basin project, especially for the 2028 to 2035 period?

Based on last year's process, the company expects to finalize contracts and secure surety within the next 60 to 90 days. An update on the project's scope and capital, including for the longer-term demand, is hoped to be provided by the Q2 earnings call, or earlier via a press release if information becomes available sooner.

“I would say normally over the next 60 to 90 days is the process by which we would be finalizing contracts and requesting surety. And so I think our hope is over that time period, most likely by the time we get to the second quarter call, if not earlier.”

asked by Vedula Murti · answered by Justin Forsberg