Skip to content
    SWX
    Earnings call· Dec 2025(Q4 FY25)

    Southwest Gas Holdings Q4 FY25 earnings call SWX

    Feb 25, 2026 Source

    Executive summary

    Southwest Gas Holdings Q4 FY25 — Strong Performance and Strategic Re-focus on Regulated Business

    Southwest Gas Holdings delivered strong Q4 FY25 results, marking a successful strategic transformation to a pure-play regulated natural gas business following the Centuri disposition. The company reported adjusted net income above guidance and announced a 4% dividend increase, supported by robust regulatory outcomes and cost management. With a strengthened balance sheet and positive credit rating upgrades, the company is well-positioned for significant earnings and rate base growth, driven by its multi-year capital plan and the Great Basin expansion project, while actively pursuing regulatory improvements in Arizona and Nevada.

    Highlights

    5

    • Successfully completed the disposition of Centuri in September 2025, transitioning to a fully regulated natural gas business.

    • Achieved 2025 adjusted net income above the top end of guidance, driving adjusted return on equity to 8.3%.

    • Board approved a 4% increase in the annual dividend, bringing it to an annualized $2.58 per share for 2026.

    • S&P upgraded Southwest Gas Holdings and Southwest Gas Corporation senior unsecured long-term debt credit ratings to BBB+ with stable outlooks.

    • Initiated 2026 adjusted EPS guidance of $4.17 to $4.32 per share and a long-term EPS CAGR of 12% to 14% through 2030.

    Concerns

    3

    • Regulatory approvals, permitting outcomes, and supply chain dynamics for Great Basin project

    • Exogenous events (volatility in weather, commodity prices, interest rates, timing of regulatory outcomes)

    • RUCO challenge to Arizona policy statement

    Guidance & targets

    10
    CategoryTargetConfidence
    Adjusted EPS from continuing operations
    $4.17 to $4.32 per share
    high materiality
    High
    Adjusted EPS Compound Annual Growth Rate
    12% to 14%
    high materiality
    High
    EPS Growth Rate (front-end loaded)
    15% to 17%
    high materiality
    Medium
    Annual Dividend Increase
    4%
    medium materiality
    High
    Annualized Dividend per Share
    $2.58 per share
    medium materiality
    High
    Total Capital Expenditures
    $1.25 billion
    high materiality
    High
    Total Capital Expenditures
    $6.3 billion
    high materiality
    High
    Rate Base CAGR
    9.5% to 11.5%
    high materiality
    High
    Utility Rate Base Growth (excluding Great Basin)
    about 7% annually
    medium materiality
    High
    Great Basin Incremental Annual Margin
    $215 million to $245 million
    high materiality
    High

    Operational metrics

    22
    Adjusted net income
    $283.9 millionup $23 million YoY from $261.2 million in 2024
    2025

    Above the high end of net income guidance, driven by higher COLI results, interest income, and delayed in-service dates.

    Operating margin improvement
    $120 millionYoY
    2025

    Primary driver of year-over-year increase in adjusted net income.

    Rate relief contribution to operating margin
    $95.2 million
    2025

    Primarily from Arizona rate case outcome.

    Customer growth contribution to operating margin
    $11.5 million
    2025

    Contribution from continued customer growth.

    Recovery and return mechanisms contribution to operating margin
    $8 million
    2025

    Wholly offset within operating income through D&A.

    Variable interest expense adjustment mechanism contribution to operating margin
    $5.9 million
    2025

    Associated with IDRBs, wholly offset within operating income through interest expense.

    O&M increase
    $16.8 millionYoY
    2025

    Driven by higher employee-related labor costs, cloud computing, and outside services, partially offset by reductions in leak survey and line locating expenses.

    Depreciation and amortization increase
    $27.6 millionYoY
    2025

    Driven by a 7% increase in average gas plant in service and $8 million higher amortization related to regulatory account balances.

    Other income decline (net)
    $1.9 millionYoY
    2025

    Offsetting items, with interest income decline being the largest contributor.

    Interest income decline (PGA balances)
    $12.6 million
    2025

    Related to carrying charges on deferred PGA balances.

    Net interest deductions increase
    $19.4 millionYoY
    2025

    Driven by anticipated interest incurred on overcollected PGA balances and higher variable interest expense adjustment mechanism amounts in Nevada.

    Property taxes increase
    $5.1 millionYoY
    2025

    Largest component of taxes other than income taxes.

    State income tax apportionment benefit
    $16.4 million
    2025

    Associated with certain one-time events, adjusted for non-GAAP presentation.

    Cash balance
    $600 million
    end of 2025

    Largely representing remaining proceeds from Centuri separation.

    Liquidity
    $1.3 billion
    end of 2025

    Enabled strategic investments expected to generate stable long-term returns.

    Total net debt
    $3.2 billion
    year-end 2025

    After adjusting for cash on hand and PGA balances; all outstanding debt held by the utility.

    Customer growth
    1.4%
    annually

    Expected steady customer growth supporting margin expansion.

    O&M per customer
    flat
    annually

    Targeted, excluding the non-service component of pension costs.

    Company-owned life insurance (COLI) annual contribution
    $6 million to $7 million
    annually

    Assumed in financial plan.

    Effective tax rate
    high teens
    future

    Expected due to utilizing existing net operating losses, minimizing cash tax payments.

    Arizona capital investments for recovery
    $900 million
    past

    Capital investments made for the benefit of Arizona customers, driving the need for rate case recovery.

    EPS contribution from rate relief and customer growth
    $0.30
    2025

    Contribution to EPS from rate relief and continued customer growth.

    Industry KPIs

    7
    MetricValueDetails
    Ffo to debt19.7%%
    Adjusted operating EPS$3.65per diluted share
    Dividend per share growth$2.58per share
    Regulatory rate base growth9.5% to 11.5%%
    Equity hybrid financing atm issuanceNot anticipated
    Large load data center demand pipeline800 millioncubic feet per day
    CAPEX multi year capital investment plan$6.3 billionUSD

    Deals & partnerships

    2
    CenturiSale of remaining shares, completing full exit from non-regulated business.$260 million net gain

    Completed on September 5, 2025, qualifying Centuri for discontinued operations reporting. Enabled full repayment of holding company debt and strengthened the balance sheet.

    Multiple shippersBinding precedent agreements for incremental natural gas transmission capacity.minimum 20-year (expected for transportation service agreements)

    Executed following a successful open season for the 2028 Great Basin expansion project. These agreements are expected to translate into 20-year transportation service agreements prior to in-service.

    Capital programs

    2
    Great Basin Expansion Projectunderway$1.7 billion
    Period spend: Early-stage spending
    Funding: Balanced 50-50 debt-to-equity structure (debt via SWG bond issuances, equity via holdco leverage capacity and modest ATM issuances)

    Benefit: 800 million cubic feet per day incremental capacity; $215 million to $245 million incremental annual margin

    Supports an estimated $1.7 billion capital investment opportunity. Early-stage spending in 2026 includes engineering, environmental reviews, permitting, and other preconstruction activities. Formal CPCN application expected before end of 2026, with FERC and NEPA review in 2027, and construction beginning late 2027.

    Multi-year Capital Investment Planunderway$6.3 billion
    Period spend: $1.25 billion (2026)
    Start: 2026

    Benefit: Supports 5-year rate base CAGR of 9.5% to 11.5%; 73% directed towards Southwest Gas, 27% toward Great Basin.

    Focused on safety, system integrity, reliability, and new business distribution system growth at the utility, along with incremental investment for the growing transmission business.

    Risks & headwinds

    3
    Regulatory approvals, permitting outcomes, and supply chain dynamics for Great Basin project2027-2028

    Timing remains subject to these factors.

    Mitigation: Proactively managing contractor engagement and procurement planning to mitigate execution risk and preserve schedule integrity.

    Exogenous events (volatility in weather, commodity prices, interest rates, timing of regulatory outcomes)Ongoing

    Potential impact on financial performance.

    Mitigation: Maintaining a credit metric cushion of more than 300 basis points above the downgrade trigger to absorb potential impacts.

    RUCO challenge to Arizona policy statementOngoing

    Legal challenge to the commission's policy statement on formula rate plans.

    Mitigation: Management views this as part of the normal process and is not overly concerned, citing long precedent of commission's exclusive jurisdiction over ratemaking.

    What to watch in Q1 FY26

    5

    Nevada alternative ratemaking rulemaking conclusion

    coming months
    CurrentOngoing workshops
    TargetConclusion of rulemaking

    Why it matters

    Will enable alternative ratemaking adjustments, reducing regulatory lag and improving capital recovery.

    We currently expect the rulemaking to conclude in the coming months⏳, which could allow alternative rate-making adjustments to begin as early as 2028.

    Q&A highlights

    6

    How will the company manage equity needs for the large capital plan, especially beyond 2026, and what is the engagement with rating agencies regarding FFO metrics through the construction cycle?

    Management plans to utilize significant leverage capacity at the holding company to offset equity needs, expecting minimal equity issuances. They do not anticipate upsizing the existing $340 million ATM program, signaling confidence in managing total equity needs through the plan while maintaining credit metrics.

    “We think we can utilize some pretty significant leverage capacity at the holding company first to sort of offset those with really minimal equity needs. I think the way I would put it is when you think about -- we have a shelf that expires at the end of 2026. We'll be renewing and extending that shelf, but we don't anticipate upsizing our existing $340 million ATM.”

    asked by Julien Dumoulin-Smith · answered by Justin Forsberg

    3 min read6 chapters

    Detailed Narrative

    01

    Strategic Transformation & Leadership Transition

    Southwest Gas Holdings completed its transformational strategy in September 2025 with the successful disposition of Centuri, fully transitioning to a regulated natural gas business. This strategic move enabled the company to pay down remaining holding company debt, strengthen its balance sheet, and reinvest in core operations. Karen Haller announced her retirement after nearly three decades, with Justin Brown appointed as the next CEO effective May 8, 2026, ensuring a smooth leadership transition for the company's next phase.

    02

    Regulatory Progress & Rate Cases

    The company is actively pursuing regulatory advancements in both Nevada and Arizona. An Arizona rate case filing is anticipated this week, seeking a revenue increase of over $100 million, a proposed rate base of $3.9 billion, and a requested ROE of 10.25%. This case aims to recover nearly $900 million in capital investments and includes a formula rate adjustment proposal. In Nevada, rulemaking workshops for alternative ratemaking plans are nearing conclusion, with adjustments potentially beginning as early as 2028, aiming to reduce regulatory lag and improve capital recovery alignment.

    03

    Great Basin Expansion Project

    The 2028 Great Basin expansion project is advancing on schedule, with binding precedent agreements executed in December for nearly 800 million cubic feet per day of incremental capacity commitments. This supports an estimated $1.7 billion capital investment opportunity. The formal CPCN application is expected to be filed before year-end 2026, with FERC and NEPA reviews in 2027, and construction commencing in late 2027 for an anticipated in-service date near the end of 2028. The project is expected to generate $215 million to $245 million in incremental annual margin.

    04

    Financial Strength & Credit Profile

    Following the Centuri disposition, S&P upgraded Southwest Gas Holdings' and Southwest Gas Corporation's credit ratings to BBB+ with stable outlooks. The company ended 2025 with nearly $600 million in cash and over $1.3 billion in liquidity. Management is committed to maintaining a solid BBB+ profile, targeting FFO to debt greater than 17% and a cushion of over 300 basis points above the 13% downgrade threshold. This disciplined approach supports efficient capital access and long-term financial flexibility.

    05

    Capital Investment Plan

    Southwest Gas is initiating a $1.25 billion capital plan for 2026, part of a larger $6.3 billion multi-year investment through 2030. Approximately 73% of this capital is directed towards Southwest Gas utility operations, and 27% towards Great Basin. This plan is expected to drive a 5-year rate base CAGR of 9.5% to 11.5% from a 2025 base of $6.7 billion, with the underlying utility rate base growing at about 7% annually, excluding Great Basin. The investments prioritize safety, reliability, system modernization, and customer growth.

    06

    Dividend Policy

    The Board of Directors approved a 4% increase in the annual dividend, raising it to an annualized $2.58 per share for 2026, effective with the second quarter payout. The company intends to recommend future annual dividend increases while maintaining a disciplined strategy focused on funding its capital plans. As earnings and cash flows strengthen, particularly with the Great Basin project coming into service and improved regulatory outcomes, there is meaningful upside potential for larger dividend increases over time⏳.

    AI-generated summary of the company’s earnings call. Not investment advice.