SWX

• Overall Financial & Balance Sheet Performance

  • The company maintained strong momentum in Q2 2026, with 45 cents adjusted EPS from continuing operations, reflecting successful execution of its regulatory strategy and materially lower interest expense after paying off all outstanding Holdco debt in summer 2025.
  • Ended the quarter with ~$270 million in cash and nearly $1 billion in available liquidity, with no outstanding Holdco debt and strong investment-grade credit ratings from all three agencies with stable outlooks.
  • 12-month trailing return on equity for the utility was 8.1% (8% adjusted), progressing toward the weighted average authorized ROE of 9.89% while key rate cases remain pending.

• Regulatory Strategy & Rate Case Progress

  • Received California Public Utilities Commission approval for all rate case items except cost of capital, unlocking ~$40 million in incremental annual revenue and $9.7 million in incremental net income recognized in Q2; a final decision on cost of capital is expected by the end of the month.
  • In Nevada, the general rate case certification was filed in Q2, bringing requested annual revenue increase to ~$74 million. Intervener testimony has been received, with a proposed average annual revenue increase of ~$40 million (52% of the company's request) and converged support for 9.3% ROE. A hearing is scheduled for late 2026, with a target effective date of October 2026, and constructive settlement discussions are ongoing.
  • In Arizona, the general rate case is on track for an April 2027 effective date, with intervener testimony expected in late September; the company implemented a surcharge for $50 million in system integrity capital to enable timely investment recovery, and received approval for its Triennial Resource Plan including prudency predeterminations for $186 million in capital investment.

• Great Basin 2028 Expansion Project Update

  • Executed additional binding precedent agreements after the latest open season, bringing total contracted demand to 1 BCF per day. There are additional expressions of interest for 1.8 BCF per day of capacity between 2029 and 2035.
  • Updated the project design to a 48-inch pipeline (from the originally planned smaller diameter) that can support up to 1 BCF per day of additional future capacity, accommodated via future compression additions rather than new pipeline construction. Total estimated capital investment for the 2028 expansion is now ~$2.3 billion, with expected annual incremental margin of $270 million to $300 million upon completion.
  • Preparations for the FERC CPCN approval filing remain on track, with the filing targeted before the end of 2026, CPCN approval expected in late 2027, and in-service targeted for Q4 2028; the increased contracted demand will not delay the project schedule.

• 2026 full-year guidance is fully reaffirmed by management, with no material impact expected from the updated Great Basin 2028 expansion project scope.
• 2026 full-year capital expenditure is on track to hit ~$1.25 billion, with investments focused on utility system safety, reliability, and customer growth.
• Current long-term guidance (through 2030) projects rate base compound annual growth of 9.5% to 11.5% from a 2025 year-end rate base of $6.7 billion, with the successful capital program expected to nearly double system-wide rate base by the end of 2030. The additional $600 million in Great Basin 2028 expansion CapEx and any future expansion phases are not yet included in current long-term guidance.
• Updated capital expenditure, rate base, and margin assumptions for the expanded Great Basin project will be incorporated into long-term guidance when the annual five-year planning refresh concludes in February 2027.
• No equity issuances are expected in 2026 outside of the routine dividend reinvestment plan. The only planned financing for the remainder of 2026 is a $400 million utility-level debt issuance, plus a routine extension of the company's at-the-market equity program tied to a shelf registration extension, which is not a signal of imminent equity issuance. Management expects only modest external equity needs for the expanded Great Basin project through 2030, with sufficient holding company leverage capacity to avoid meaningful equity draws.

Southwest Gas Holdings operates two primary reporting segments: the regulated utility business and the Great Basin pipeline business, plus a holding company (Holdco) segment. For Q2 2026: adjusted earnings per share from continuing operations was 45 cents, up from 37 cents in Q2 2025; reported EPS from continuing operations was 58 cents. Holdco earnings improved significantly year-over-year, driven by full repayment of outstanding parent-level debt which reduced interest expense by $8.6 million, plus higher interest income on elevated cash balances. The regulated utility segment saw a slight year-over-year decline in adjusted earnings, driven by a planned $9.4 million drop in other income that was fully expected, partially offset by: a $12.7 million increase in operating margin (including $6.7 million from incremental rate relief, $1.4 million from ongoing customer growth, and $4.9 million from debt recovery-related items); a $3.7 million (nearly 3%) decline in operations and maintenance expense from disciplined cost management. Depreciation and amortization increased $8.7 million year-over-year, reflecting a 7% increase in gas plant and service from ongoing capital investment. The Great Basin segment is progressing its 2028 expansion project, which now has 1 BCF per day of contracted demand and is expected to deliver 270 million to 300 million in annual incremental margin once completed. No separate revenue contribution percentages for each segment were provided in the call.

• All forward-looking statements, including guidance for the Great Basin expansion project and rate case outcomes, are subject to material risks and uncertainties that could cause actual results to differ materially, including risks related to future economic conditions, regulatory approval outcomes, and capital project execution.
  • Individual rate case outcomes are uncertain, even with constructive proceedings and settlement discussions. Final allowed returns and revenue increases may differ from the company's requests or current intervening party proposals.
  • The Great Basin 2028 expansion project depends on successful FERC CPCN approval, maintaining stable supply chains for the revised 48-inch pipeline design, and converting outstanding expressions of interest for future capacity into binding contracts to realize projected margin.
  • Changes to California regulatory rules (including the ongoing SB 417 rulemaking process) could create unanticipated operational or financial impacts, and the outcome of the rulemaking is still uncertain as of the call.
  • While management believes the company has sufficient balance sheet capacity to fund the expanded Great Basin project without meaningful external equity issuance, unexpected changes to credit ratings or leverage thresholds could impact financing plans.

Q: For the Great Basin expansion, can incremental post-2030 demand of 1.8 BCF per day be accommodated via compression only with the new 48-inch design, with no further pipeline changes? What is the capital intensity scale for this future incremental capacity? / A: Management confirms the 48-inch pipeline design allows all projected additional future demand through 2035 to be accommodated via compression additions alone, no further pipeline construction would be needed for incremental capacity. The exact capital intensity and scale of future expansions will depend on how many of the current non-binding expressions of interest are converted to binding precedent agreements, so it remains to be determined at this stage.

Q: How should investors calculate future equity needs for the $600 million of incremental Great Basin CapEx, and how much external equity will the company need to issue? / A: Management states the holding company has significant existing leverage capacity above credit rating downgrade thresholds, so the company can use holding company debt to fund most of the incremental CapEx rather than drawing heavily on external equity. Capital spending for the project is spread over the next two years, and the project will generate significant incremental margin after completion that can be used to pay down holding company debt, so balance sheet stress is expected to be minimal even with the expanded scope.

Q: Where is the additional demand for Great Basin expansion capacity coming from, and is there potential for even more demand than the current 1.8 BCF of interest? / A: Additional demand comes from a mix of industries, led by data center development and power generation, with additional demand from mining and manufacturing in northern Nevada. Regional economic growth continues to drive more interest than management initially expected, with new demand consistently emerging in each open season, and management sees continued robust long-term growth opportunities for additional pipeline capacity in the region.

Q: Will switching to the 48-inch pipeline create supply chain issues or change the project's cost estimate stability? Where does the SB 417 California regulatory rulemaking process stand right now? / A: Management worked with suppliers early on to plan for the potential switch from 42-inch to 48-inch pipe, so no supply chain disruptions are expected, and the current $2.3 billion capital cost estimate remains disciplined and reliable. For SB 417, the California commission issued a draft rule in May, parties submitted comments, and the commission has not taken further action, so the process remains in a wait-and-see status with no clear timeline for a final rule.