Southwest Gas Holdings (SWX) Q2 FY26 earnings call: guidance and Q&A

Does the company still see incremental capacity bids post-2030, and will the 1.5 Bcf highlighted before be handled through compression, or are other changes expected?

Management confirmed expressions of interest for up to 1.8 Bcf additional capacity through 2029-2035. They are comfortable accommodating future demand through compression, given the underlying design of the pipe, as binding agreements materialize.

“Yes. So as we mentioned, we've had expressions of interest up to 1.8 additional Bcf through that time period 2029 through 2035. And so we'll continue to work with those expressions of interest. And as those become binding agreements, that will help us get greater clarity around kind of what potential cost there might be, what compression needs there are. But we feel comfortable given the underlying design of the pipe that we can accommodate that future demand through compression.”

asked by Constantine Lednev · answered by Justin Brown

How would the capital intensity for Great Basin scale beyond 2030 compared to the current 2 Bcf design?

The capital intensity beyond 2030 will depend on future binding precedent agreements for the incremental interest received, making it a 'to-be-determined' situation.

“Yes. It really will just depend on what binding precedent agreements are -- get associated with that incremental interest that we've been receiving. So it's really kind of a to-be-determined.”

asked by Constantine Lednev · answered by Justin Brown

Are there any anticipated pressure points in the Arizona rate case, and is a partial settlement feasible?

Management aims to work collaboratively with staff and stakeholders to streamline the case and find common ground for potential settlement. They expect more clarity in the next 30 to 60 days after receiving intervenor testimony.

“I think we always -- every time in each of our cases, we really focus on working collaboratively with the staff and the stakeholders to try to find opportunities to streamline the case where we can reach agreement. And so while it's still a little bit early in Arizona, I mean, that's the same approach we're going to take as we start to see and as the parties start to refine their positions.”

asked by Constantine Lednev · answered by Justin Brown

How should investors think about equity needs given the increased CapEx for Great Basin, considering a basic 12% ROE and 50% equity layer?

The company feels confident in its significant holding company leverage capacity to absorb much of the anticipated equity needs, reducing reliance on external shareholders. The project's significant margin upon completion will also help reduce leverage.

“So from an equity perspective, we're really feeling pretty confident in spite of the additional CapEx pressure that we have pretty significant capacity at the holding company, given just where we're at above our downgrade cushions, et cetera. And as you think about even the time line, right, we're spending that money really over the next couple of years.”

asked by Elias Jossen · answered by Justin Forsberg

Can management elaborate on the demand environment for the Great Basin pipeline, including customer types and potential for further interest beyond the 1.8 Bcf?

Demand is driven by data center development, power generation, mining, and manufacturing. The company continues to see robust opportunities and additional demand showing up in open seasons, feeling good about regional economics and the potential for future binding agreements.

“I would say it's very similar to the demand that we've been describing along the way in terms of a variety of different industries, primarily driven by data center development, power gen, but there's also different industries in the area, mining, manufacturing. And so we feel good about it. Every time we've posted an open season, we continue to be surprised with how much additional demand continues to show up.”

asked by Elias Jossen · answered by Justin Brown

How has the 48-inch pipe decision impacted supply chain, and is the cost structure set, excluding compression?

No anticipated supply chain issues as they worked closely with suppliers for flexibility. Cost estimates are considered good, with discipline exercised. Future scalability and compression needs will depend on binding precedent agreements.

“I think when we think about the pipe, it's something we've talked about previously where we were working very closely with the supplier early on, on the ability to pivot from the 42 to 48. And so we don't anticipate any supply chain issues there. It's something we always felt comfortable early on with the ability to kind of flex on that depending on the market demand that shows up.”

asked by Ryan Levine · answered by Justin Brown

Can management share any color on the SB 417 rulemaking conversations and current process status?

The Commission issued a draft in May, and parties filed comments. The Commission has not taken further action, so it's currently in a 'wait-and-see' mode regarding updates to regulations and approval.

“Yes. So the Commission back in May had issued a draft. Parties have filed comments in response to that, and the Commission has not yet taken any further action on it. So it's still kind of on a wait-and-see mode in terms of where we are on the rulemaking and any updates to kind of the draft regulations and ultimately Commission approval.”

asked by Ryan Levine · answered by Justin Brown