Southwest Gas Holdings, Inc. (NYSE:SWX) Q4 2022 Earnings Call Transcript

Robert Stefani: So post-spin, Tim, this is Rob. I would think about it in terms of it should largely be driven by the interest expense associated with the holdings debt that will be issued in conjunction with the 2023 financing plan. That will be post separation. Obviously, over the course of 2023, we’re going to incur transaction costs associated with prepping Centuri for the spend. But following that, we expect a much more normalized run rate where the majority of the expenses — interest expense associated with the financing to support this plan to push capital down the utility and repay existing debt of top at holdings near term.

Tim Winter: Okay. Thank you. And then if you could just talk a little bit more about the consulting firm that’s going to help with efficiency. I believe prior presentations you discussed an 8%-plus ROE. How are you guys thinking about that currently?

Karen Haller: Tim, this is Karen. With respect to the consultant, we have initiated that process. As Justin said, we’ve identified a number of initiatives ourselves that we’re focused on in terms of improved — that will help improve that ROE but we also anticipate that there will be some additional initiatives that come out of the consultant process as we move through that. We’re still focused on reaching an 8% ROE. I think it’s going to take us a little longer than what we had indicated earlier, and there’s a couple of reasons for that. First of all, you’ll recall, as you know, we’re in historical test years. We did two recent rate cases in Arizona and Nevada. But both of those cases were test years in 2020 and 2021, right, during COVID.

So, the O&M that’s reflected in those most recent rate cases is lower than what our normal O&M would run. So that’s putting some pressure on the ROE. As Justin indicated, we have plans to go in on new rate cases later this year, even with Nevada, which will reset that O&M. And then secondly, I think there’s been some pressure, obviously, following the decisions on the transactions and we went through the redress process establishing what our capital structure will be and the equity level and things that play into a little pressure, I think, on the ROE in the near future. But I think we believe we’re optimizing our structure and setting the company up really to obtain that 8% ROE.

Tim Winter: Okay. Thank you.

Operator: . There are no more questions in the queue. This concludes our question-and-answer session. I would like to turn the conference back over to Thomas Moran for any closing remarks.

Thomas Moran: Okay. Thank you all for joining us today. This concludes our conference call. Thank you for your interest in Southwest Gas Holdings, and have a good day.

Operator: Conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.