SOUTHWEST GAS : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

Southwest Gas Holdings, Inc. is a holding company that owns all of the shares of
common stock of Southwest Gas Corporation ("Southwest" or the "natural gas
operations" segment) and all of the shares of common stock of Centuri Group,
Inc. ("Centuri," or the "utility infrastructure services" segment). Southwest
Gas Holdings, Inc. and its subsidiaries are collectively referred to as the
"Company."
Southwest is engaged in the business of purchasing, distributing, and
transporting natural gas for customers in portions of Arizona, Nevada, and
California. Southwest is the largest distributor of natural gas in Arizona,
selling and transporting natural gas in most of central and southern Arizona,
including the Phoenix and Tucson metropolitan areas. Southwest is also the
largest distributor of natural gas in Nevada, serving the majority of southern
Nevada, including the Las Vegas metropolitan area, and portions of northern
Nevada. In addition, Southwest distributes and transports natural gas for
customers in portions of California, including the Lake Tahoe area and the high
desert and mountain areas in San Bernardino County.
As of September 30, 2020, Southwest had 2,112,000 residential, commercial,
industrial, and other natural gas customers, of which 1,126,000 customers were
located in Arizona, 786,000 in Nevada, and 200,000 in California. Over the past
twelve months, first time meter sets were approximately 37,000, compared to
34,000 for the twelve months ending September 2019. The remaining increase in
active customer accounts compared to the September 30, 2019 total of 2,066,000
was primarily due to a management-initiated moratorium on disconnections as a
result of the COVID-19 pandemic. As utility service is an essential service to
the residents in the states in which Southwest operates, it implemented the
moratorium in March 2020 and also ceased charging late fees until further
notice. The duration of our moratorium is currently uncertain. Residential and
small commercial customers represented over 99% of the total customer base.
During the twelve months ended September 30, 2020, 53% of operating margin (gas
operating revenues less the net cost of gas sold) was earned in Arizona, 36% in
Nevada, and 11% in California. During this same period, Southwest earned 85% of
its operating margin from residential and small commercial customers, 3% from
other sales customers, and 12% from transportation customers. While these
general patterns are expected to remain materially consistent for the
foreseeable future, the global COVID-19 pandemic, as discussed further below,
could impact these statistics and associated patterns in the short term.
Southwest recognizes operating revenues from the distribution and transportation
of natural gas (and related services) to customers. Operating margin is a
financial measure defined by management as gas operating revenues less the net
cost of gas sold. However, operating margin is not specifically defined in
accounting principles generally accepted in the United States ("U.S. GAAP").
Thus, operating margin is considered a non-GAAP measure. Management uses this
financial measure because natural gas operating revenues include the net cost of
gas sold, which is a tracked cost that is passed through to customers without
markup under purchased gas adjustment ("PGA") mechanisms. Fluctuations in the
net cost of gas sold impact revenues on a dollar-for-dollar basis, but do not
impact operating margin or operating income. Therefore, management believes
operating margin provides investors and other interested parties with useful and
relevant information to analyze Southwest's financial performance in a
rate-regulated environment. The principal factors affecting changes in operating
margin are general rate relief (including impacts of infrastructure trackers)
and customer growth. Commission decisions on the amount and timing of such
relief may impact our earnings, such as with the current Arizona general rate
case, whereby hearings were deferred amidst the current pandemic, resulting in
both a decision and new rate establishment occurring later than originally
expected. Refer to the Summary Operating Results table for a reconciliation of
revenues to operating margin, and refer to Rates and Regulatory Proceedings in
this Management's Discussion and Analysis.
The demand for natural gas is seasonal, with greater demand in the colder winter
months and decreased demand in the warmer summer months. All of Southwest's
service territories have decoupled rate structures (alternative revenue
programs), which are designed to eliminate the direct link between volumetric
sales and revenue, thereby mitigating the impacts of unusual weather variability
and conservation on operating margin, allowing Southwest to pursue energy
efficiency initiatives.
Centuri is a comprehensive utility infrastructure services enterprise dedicated
to delivering a diverse array of solutions to North America's gas and electric
providers. Centuri derives revenue primarily from installation, replacement,
repair, and maintenance of energy distribution systems. Centuri operates in 54
primary locations across 40 states and provinces in the United States ("U.S.")
and Canada. Centuri operates in the U.S. primarily as NPL, Neuco, and Linetec,
and in Canada primarily as NPL Canada.
                                           32


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SOUTHWEST GAS HOLDINGS, INC.                    Form 10-Q
               SOUTHWEST GAS CORPORATION              September 30, 2020



Utility infrastructure services activity can be impacted by changes in
infrastructure replacement programs of utilities, weather, and local and federal
regulation (including tax rates and incentives). Utilities continue to implement
or modify system integrity management programs to enhance safety pursuant to
federal and state mandates. These programs have resulted in multi-year utility
system replacement projects throughout the U.S. Generally, Centuri revenues are
lowest during the first quarter of the year due to less favorable winter weather
conditions. Revenues typically improve as more favorable weather conditions
occur during the summer and fall months. In cases of severe weather, such as
following a regional storm, Centuri may be engaged to perform restoration
activities related to above-ground utility infrastructure. In certain
circumstances, such as with large bid contracts (especially those of a longer
duration), or unit-price contracts with revenue caps, results may be impacted by
differences between costs incurred and those anticipated when the work was
originally bid. Work awarded, or failing to be awarded, by individual large
customers can significantly impact operating results.
COVID-19 Pandemic
In March 2020, the World Health Organization categorized the novel coronavirus
("COVID-19") as a pandemic, and President Donald Trump declared the COVID-19
outbreak a national emergency. The outbreak resulted in government officials
implementing stringent measures to help control the spread of the virus,
including quarantines, "shelter in place" and "stay at home" orders, travel
restrictions, business curtailments, school closures, and other measures. In
addition, governments and central banks in several parts of the world enacted
fiscal and monetary stimulus measures to mitigate financial impacts of COVID-19
on individuals and businesses.
Our utility operations, as essential services, have been ongoing during this
time and Southwest has continued to provide services to meet the demand of its
customers. Consistent with federal and state guidelines and protocols, Southwest
has continued to operate across its territories. Similarly, the majority of
Centuri's largest clients issued essential service letters to Centuri businesses
in keeping with the federal definition of "essential" set out by the Department
of Homeland Security. This allowed Centuri to similarly continue nearly all
operations from the outset of the pandemic in the U.S., and demand has not
significantly diminished. The ability to work may be impacted by individuals
contracting or being exposed to COVID-19, governmental requirements to postpone
certain non-essential services in some of the Company's jurisdictions, or by
management imposed restrictions for safety precautions; to date, these factors
have not had a significant impact on the Company's ability to maintain
operations. The Company has instructed employees at many offices (including
corporate headquarters) to work from home on a temporary basis and implemented
travel restrictions. Both segments implemented business continuity plans,
including the deployment of technology to conduct administrative and critical
functions remotely, where possible, and employees and management teams have been
in place to communicate and respond to changes quickly and effectively. To date,
there has not been a significant disruption in the Company's supply chains,
transportation network, or ability to serve customers.
As an essential service provider, Southwest implemented several important
measures with regard to its customers. As noted above, it initiated a moratorium
on natural gas disconnections for non-payment; it is working with customers who
are experiencing financial hardship through flexible payment arrangements; it is
coordinating with certain governmental and nonprofit entities for customer
payment assistance; and it also ceased charging late fees until further notice.
Management has increased the allowance for uncollectibles; however, neither this
nor other measures associated with the moratorium have had a material impact on
our financial position overall. As the pandemic continues into the winter season
when monthly utility bills are typically higher, we expect the seasonal pattern
of change in the allowance to be generally in line with historical patterns;
however, the potential impact could be more significant given the pandemic. See
Accounts receivable, net of allowances in Note 1 - Background, Organization, and
Summary of Significant Accounting Policies. In the utility infrastructure
services segment, a limited number of Centuri customers delayed some projects,
notably during the second quarter, and primarily in response to local
governmental restrictions. Project delays, whether due to governmental
restrictions or reassessments of timing by Centuri's customers, resulted in
temporary reductions of workforce crews; such impacts were primarily limited to
the second quarter of 2020. Some crew reductions are ongoing in specific areas
and the associated revenue impacts have not been significant. Management is
monitoring the dynamic nature of these circumstances, the full future impacts of
which are not currently known, including the impact from business curtailments,
weak market conditions, or governmental restrictions, including any restrictions
which could limit the fulfillment by Centuri of its contractual obligations.
The Company has incurred additional expenses in connection with its response to
these conditions, including costs of disinfecting work locations and equipment,
costs related to enabling employees to support customers while working remotely,
and impacts on earnings and cash flows from the moratorium on customer
disconnection and late fee assessment. These additional costs were not material
to the Company's fiscal 2020 results to date, and were mitigated by reduced
training and travel costs, as important training and business meetings were held
virtually, rather than in person. Appropriate access to cash exists and certain
of Southwest's regulatory commissions have implemented measures to further
mitigate impacts of these conditions on Southwest. See Rates and Regulatory
Proceedings below for additional detail.
                                           33


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SOUTHWEST GAS HOLDINGS, INC.                    Form 10-Q
               SOUTHWEST GAS CORPORATION              September 30, 2020



On March 27, 2020, the Coronavirus Aid, Relief and Economic Security ("CARES")
Act was enacted, as discussed in Note 1 - Background, Organization, and Summary
of Significant Accounting Policies. The CARES Act to date has not, and
management anticipates that it will not, have a material effect on the Company's
or Southwest's results of operations, financial position, or liquidity. In
Canada, Centuri received $4.1 million of wage subsidies (through September 30,
2020) from the Canadian government as part of a COVID-19 relief program.
Management does not expect these subsidies, if any, to be significant in future
periods.
The extent to which COVID-19 may adversely impact the Company's business depends
on future developments, including the timing of the resumption of commerce
across our service territories, the magnitude of further spread of the virus,
impacts of these conditions on our customers, the state of the North American
economy, and possibly other unmitigated effects related to the virus. Management
does not currently expect the impact of these conditions to be material to the
Company's liquidity and financial position; however, the continued level of
uncertainty over the economic and operational impacts of COVID-19 means
management cannot predict whether the related financial impact in future periods
will be any different from the impacts reflected for the nine months ended
September 30, 2020. In anticipation of a redeployment of employees to their
normal work locations, management has created a multi-phase reintegration plan
to safeguard the well-being of our teams, including hygiene, sanitization, and
social distancing practices, as well as the use of personal protective equipment
for employees and visitors. Management will continue to monitor developments
affecting the Company's employees, customers, and operations, and take
additional steps to address the COVID-19 pandemic and its impacts, as necessary.
Events and changes in circumstances arising after September 30, 2020, including
those resulting from the impacts of COVID-19, will be reflected in management's
estimates for future periods.
This Management's Discussion and Analysis ("MD&A") of Financial Condition and
Results of Operations should be read in conjunction with the unaudited condensed
consolidated financial statements and the notes thereto included in this
Quarterly Report on Form 10-Q and the audited financial statements and the notes
thereto, as well as MD&A, included in the 2019 Annual Report to Shareholders,
which is incorporated by reference into the 2019 Form 10-K.

                                           34


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               SOUTHWEST GAS HOLDINGS, INC.                    Form 10-Q
               SOUTHWEST GAS CORPORATION              September 30, 2020



Executive Summary
The items discussed in this Executive Summary are intended to provide an
overview of the results of the Company's and Southwest's operations. As needed,
certain items are covered in greater detail in later sections of MD&A. As
reflected in the table below, the natural gas operations segment accounted for
an average of 73% of twelve-month-to-date consolidated net income over the past
two years. As such, MD&A is primarily focused on that segment. Natural gas sales
are seasonal, peaking during the winter months; therefore, results of operations
for interim periods are not necessarily indicative of results for a full year.
Summary Operating Results
                                                                                       Period Ended September 30,
                                                      Three Months                           Nine Months                            Twelve Months
(In thousands, except per share
amounts)                                         2020               2019               2020               2019                2020                 2019
Contribution to net income
Natural gas operations                       $ (15,973)         $ (20,012)

$ 79,568 $ 86,746 $ 155,993 $ 146,287 Utility infrastructure services

                 34,873             25,838             50,936             36,725               66,615              

46,668

Corporate and administrative                      (627)              (473)            (1,724)            (1,253)              (2,110)              (1,433)
Net income                                   $  18,273          $   5,353          $ 128,780          $ 122,218          $   220,498          $   191,522

Weighted average common shares                  56,271             54,670             55,683             53,996               55,508              

53,219
Basic earnings per share
Consolidated                                 $    0.32          $    0.10          $    2.31          $    2.26          $      3.97          $      3.60
Natural Gas Operations
Reconciliation of Revenue to Operating
Margin (Non-GAAP measure)
Gas operating revenues                       $ 210,834          $ 209,980

$ 976,095 $ 989,368 $ 1,355,666 $ 1,359,581 Less: Net cost of gas sold

                      36,321             35,068            264,615            292,854              356,925              393,141
Operating margin                             $ 174,513          $ 174,912          $ 711,480          $ 696,514          $   998,741          $   966,440



3rd Quarter 2020 Overview
Natural gas operations highlights include the following:

•37,000 first-time meters sets (1.8% growth rate) occurred over the past 12
months
•Operations and maintenance expense decreased $7.9 million
•Company-Owned Life Insurance ("COLI") income increased $4.3 million between
quarters
•Nevada general rate case finalized with rate relief effective October 2020

Utility infrastructure services highlights include the following:

•Record third quarter revenues of $580.4 million and net income of $34.9 million
•Emergency restoration services provided following Hurricanes Hanna, Isaias, and
Laura
•Approximately 90% of trailing twelve-month revenues were from regulated
utilities

Southwest Gas Holdings highlights include the following: •In September, S&P upgraded the outlook for Southwest Gas Holdings, Inc. and Southwest Gas Corporation from negative to stable (credit ratings unchanged)

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               SOUTHWEST GAS HOLDINGS, INC.                    Form 10-Q
               SOUTHWEST GAS CORPORATION              September 30, 2020



Results of Natural Gas Operations
Quarterly Analysis
                                                 Three Months Ended
                                                   September 30,
(Thousands of dollars)                          2020           2019
Gas operating revenues                       $ 210,834      $ 209,980
Net cost of gas sold                            36,321         35,068
Operating margin                               174,513        174,912
Operations and maintenance expense             101,159        109,039
Depreciation and amortization                   55,942         52,372
Taxes other than income taxes                   15,787         15,308
Operating income (loss)                          1,625         (1,807)
Other income (deductions)                        1,751         (1,353)
Net interest deductions                         26,103         23,619
Loss before income taxes                       (22,727)       (26,779)
Income tax benefit                              (6,754)        (6,767)

Contribution to consolidated net income $ (15,973) $ (20,012)

Improvements from natural gas operations to consolidated net income of
$4 million occurred between the third quarters of 2020 and 2019. The improvement
was primarily due to lower Operations and maintenance expense and an increase in
Other income, offset by increases in Depreciation and amortization and Net
interest deductions.
Operating margin was slightly below the same quarter in the previous year.
Customer growth provided approximately $2.6 million of incremental margin from
37,000 first-time meter sets during the last twelve months, while rate relief
added $400,000 of margin. Offsetting these increases were other items, including
impacts from a temporary moratorium on late fees and lower
connection/re-connection charges during the COVID-19 pandemic. A reduction in
amounts associated with regulatory account balances also impacted operating
margin; however, effects of program recoveries are primarily offset in
amortization expense (below).
Operations and maintenance expense decreased $7.9 million between quarters
primarily due to the impacts of COVID-19 on training and travel costs and
reductions in other service and maintenance costs. Additionally, lower legal
claims-related costs contributed to the decrease between quarters. Overall,
operations and maintenance expenses are expected to increase in the fourth
quarter of 2020.
Depreciation and amortization expense increased $3.6 million, or 7%, between
quarters, primarily due to a $678 million, or 9%, increase in average gas plant
in service compared to the corresponding quarter a year ago, offset by a
decrease of $1.1 million associated with regulatory program balances. The
increase in gas plant was attributable to pipeline capacity reinforcement work,
franchise requirements, scheduled pipe replacement activities, and new
infrastructure.
Other income improved $3.1 million between quarters primarily due to an increase
in income from COLI policies. The current quarter reflects $4.5 million in
income from increases in COLI policy cash surrender values, while the prior-year
quarter reflected $200,000 in related income. These values are significantly
impacted by fluctuations in the values of equity securities associated with the
cash surrender values, and values in both quarters were impacted consistent with
the broader securities markets. Offsetting these impacts were higher
non-service-related costs associated with employee pension and other
postretirement benefits.
Net interest deductions increased $2.5 million in the third quarter of 2020, as
compared to the prior-year quarter, primarily due to the issuance of
$450 million of Senior Notes in June 2020, offset by lower borrowings under
Southwest's credit facility. Refer to Note 5 - Debt in Notes to Financial
Statements in this Form 10-Q for the use of proceeds, including the ultimate
redemption of maturing debt in September 2020. Increased carrying costs on PGA
balances, primarily in Nevada, also contributed to the increase.

                                           36


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               SOUTHWEST GAS HOLDINGS, INC.                    Form 10-Q
               SOUTHWEST GAS CORPORATION              September 30, 2020



Results of Natural Gas Operations
Nine-Months Analysis

                                                 Nine Months Ended
                                                   September 30,
(Thousands of dollars)                          2020           2019
Gas operating revenues                       $ 976,095      $ 989,368
Net cost of gas sold                           264,615        292,854
Operating margin                               711,480        696,514
Operations and maintenance expense             303,567        319,572
Depreciation and amortization                  173,865        159,327
Taxes other than income taxes                   47,507         46,640
Operating income                               186,541        170,975
Other income (deductions)                      (10,947)         6,185
Net interest deductions                         75,152         70,063
Income before income taxes                     100,442        107,097
Income tax expense                              20,874         20,351

Contribution to consolidated net income $ 79,568 $ 86,746

Contribution from natural gas operations to consolidated net income decreased
$7.2 million between the first nine months of 2020 and 2019. The decline was
primarily due to a decrease in Other income and increases in Depreciation and
amortization and Net interest deductions, partially offset by an increase in
Operating margin and lower Operations and maintenance expense.
Operating margin increased $15 million, including $11 million attributable to
customer growth. Rate relief, primarily in California, contributed an additional
$2 million in operating margin. The prior-year period included an approximate
$5 million reduction in margin resulting from a one-time adjustment by the
Arizona Corporation Commission to reflect the impacts of U.S. tax reform on the
Arizona decoupling mechanism. Offsetting these impacts are lower late fees and
connect/re-connect charges during the current moratorium discussed earlier.
Residual impacts include those related to regulatory mechanisms, including
recovery/return of regulatory program balances (primarily offset in amortization
expense), in addition to margin from customers outside the decoupling
mechanisms.
Operations and maintenance expense decreased $16 million, or 5%, between
periods. Reductions in training and travel costs due to the COVID-19
environment, as well as lower legal claims-related costs, and decreases in other
service and maintenance costs contributed to the decline between periods.
Depreciation and amortization expense increased $15 million, or 9%, between
periods primarily due to a $682 million, or 9%, increase in average gas plant in
service between periods. The increase in gas plant was attributable to pipeline
capacity reinforcement work, franchise requirements, scheduled pipe replacement
activities, and new infrastructure. Amortization associated with regulatory
account balances, as noted above, also resulted in increases in expense in the
current period.
Other income decreased $17.1 million overall between periods. The current period
reflects $1 million of COLI-related income, while the prior-year period
reflected $11.2 million of COLI-related income. The non-service cost components
of employee pension and other postretirement benefits were $3.7 million higher
between periods. Lower interest income on regulatory account balances also
contributed to the decrease between periods.
Net interest deductions increased $5.1 million between periods, primarily due to
interest associated with the issuance of $300 million of Senior Notes in May
2019 and $450 million of Senior Notes in June 2020, partially offset by reduced
interest rates and lower outstanding balances under Southwest's credit facility.




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               SOUTHWEST GAS HOLDINGS, INC.                    Form 10-Q
               SOUTHWEST GAS CORPORATION              September 30, 2020



Results of Natural Gas Operations
Twelve-Month Analysis
                                                    Twelve Months Ended September 30,
(Thousands of dollars)                                    2020                     2019
Gas operating revenues                       $       1,355,666                 $ 1,359,581
Net cost of gas sold                                   356,925                     393,141
Operating margin                                       998,741                     966,440
Operations and maintenance expense                     406,169                     412,330
Depreciation and amortization                          230,158                     205,594
Taxes other than income taxes                           63,195                      61,579
Operating income                                       299,219                     286,937
Other income (deductions)                               (7,615)                     (5,194)
Net interest deductions                                100,115                      92,000
Income before income taxes                             191,489                     189,743
Income tax expense                                      35,496                      43,456
Contribution to consolidated net income      $         155,993              

$ 146,287

Contribution to consolidated net income from natural gas operations increased
$10 million between the twelve-month periods ended September 2020 and 2019. The
increase was primarily due to an increase in Operating margin and lower
Operations and maintenance expense and Income tax expense, partially offset by
higher Depreciation and amortization expense, Net interest deductions, and lower
Other income.
Operating margin increased $32 million between periods. Customer growth provided
$14 million, and combined rate relief, primarily in Nevada and California,
provided $5 million of incremental operating margin. The prior-year period
included an approximate $5 million reduction in margin resulting from a one-time
adjustment to reflect the impacts of U.S. tax reform on the Arizona decoupling
mechanism. The remaining net increase primarily resulted from regulatory
mechanisms, notably an increase in regulatory asset recoveries (see discussion
of amortization expense below).
Operations and maintenance expense decreased $6.2 million (or 1%) between
periods primarily due to lower training and travel costs due to the current
COVID-19 environment, as well as decreases in other service and maintenance
costs, offset by incremental expenditures for pipeline damage prevention
programs and increases in employee pension and other postretirement benefits.
Depreciation and amortization expense increased $24.6 million, or 12%, between
periods primarily due to a $670 million, or 9%, increase in average gas plant in
service since the corresponding period in the prior year. Amounts associated
with regulatory program balances increased approximately $8 million between
periods.
Other income decreased $2.4 million between the twelve-month periods of 2020 and
2019 primarily due to lower interest on regulatory account balances, a decrease
in amounts associated with the allowance for equity funds applied to projects
during construction, and higher non-service cost components of employee pension
and other postretirement benefits. Offsetting these impacts was an increase
between periods in COLI policy cash surrender values. The current twelve-month
period reflects a $7.2 million increase in COLI cash surrender values, while the
prior-year period reflected a $2 million increase.
Net interest deductions increased $8.1 million between periods primarily due to
interest associated with the issuance of $300 million of Senior Notes in May
2019 and $450 million of Senior Notes in June 2020, offset by a reduction in
outstanding borrowings under the credit facility.
The reduction in income taxes between periods reflects lower state income taxes
(due to apportionment changes) and an additional $1.2 million in amortization of
excess accumulated deferred income taxes following U.S. tax reform, which
reduces tax expense.
                                           38


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               SOUTHWEST GAS HOLDINGS, INC.                    Form 10-Q
               SOUTHWEST GAS CORPORATION              September 30, 2020



Results of Utility Infrastructure Services
Quarterly Analysis
                                                                          Three Months Ended
                                                                             September 30,
(Thousands of dollars)                                                2020                  2019
Utility infrastructure services revenues                         $    580,392          $    515,250
Operating expenses:
Utility infrastructure services expenses                              502,951               451,574
Depreciation and amortization                                          24,197                22,998
Operating income                                                       53,244                40,678
Other income (deductions)                                                  48                   171
Net interest deductions                                                 2,000                 3,788
Income before income taxes                                             51,292                37,061
Income tax expense                                                     13,629                10,051
Net income                                                             37,663                27,010
Net income attributable to noncontrolling interest                      2,790                 1,172

Contribution to consolidated net income attributable to Centuri

                                                          $     

34,873 $ 25,838

Utility infrastructure services revenues increased $65.1 million in the third
quarter of 2020 when compared to the prior-year quarter. Approximately $48.7
million in revenue was recognized during the third quarter from emergency
restoration services related to hurricane damage in the Gulf Coast and eastern
regions of the U.S. Storm restoration revenues during the same quarter in 2019
totaled $6.3 million. Restoration revenues are contracted under
time-and-material rates and generally involve a higher number of hours worked
per day given the emergency response nature of the work performed. Centuri's
revenues derived from these services vary from period to period due to the
unpredictable nature of weather-related events, and can also vary greatly
depending on the geographic area, customer mix, and rate of compensation under
the contract. Higher volumes of gas and electric infrastructure work under
blanket and bid contracts were also realized during the third quarter of 2020.
Utility infrastructure services expenses increased $51.4 million in the third
quarter of 2020 when compared to the prior-year quarter, due primarily to
increased costs associated with storm restoration services, as well as costs to
complete additional gas and electric infrastructure work. Existing crews are
diverted from other work to perform storm restoration work, which typically
generates a higher profit margin than other core infrastructure services due to
improved operating efficiencies related to equipment utilization and absorption
of fixed costs. Such profit margins can vary greatly depending on the geographic
area, customer mix, and contract terms as noted above. Also included in total
Utility infrastructure services expenses were general and administrative costs,
which increased $6.7 million in the current quarter when compared to the
corresponding quarter in 2019 due to higher payroll and operating costs
associated with continued growth of the business and higher profit-based
incentive compensation costs.
Depreciation and amortization expense increased $1.2 million between quarters
attributable to additional equipment purchased to support the growing volume of
work being performed.
Net interest deductions decreased $1.8 million between periods due primarily to
lower rates associated with outstanding borrowings under Centuri's $590 million
secured revolving credit and term loan facility.








                                           39

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               SOUTHWEST GAS HOLDINGS, INC.                    Form 10-Q
               SOUTHWEST GAS CORPORATION              September 30, 2020




Results of Utility Infrastructure Services
Nine-Month Analysis

                                                                           Nine Months Ended
                                                                             September 30,
(Thousands of dollars)                                                2020                  2019
Utility infrastructure services revenues                         $  1,408,698          $  1,282,412
Operating expenses:
Utility infrastructure services expenses                            1,252,489             1,154,238
Depreciation and amortization                                          71,144                63,924
Operating income                                                       85,065                64,250
Other income (deductions)                                                (107)                  569
Net interest deductions                                                 7,138                10,514
Income before income taxes                                             77,820                54,305
Income tax expense                                                     21,715                15,057
Net income                                                             56,105                39,248
Net income attributable to noncontrolling interest                      5,169                 2,523

Contribution to consolidated net income attributable to Centuri

                                                          $     

50,936 $ 36,725

Utility infrastructure services revenues increased $126.3 million during the
first nine months of 2020 when compared to the same period in the prior year,
primarily due to a higher volume of gas and electric infrastructure work under
blanket and bid contracts. For the first nine months of 2020, $56 million of
revenues were from emergency restoration services related to hurricane and
tornado damage in the Gulf Coast and eastern regions of the U.S. as compared to
$13.2 million during the same period in 2019. As noted earlier, Centuri's
revenues derived from storm restoration services vary from period to period due
to the unpredictable nature of weather-related events, and the contract terms
for the emergency response, as discussed earlier. Also, during the first nine
months of 2020, Centuri earned incremental revenues of approximately $25 million
related to a new bid job with an existing gas infrastructure customer in Canada
that commenced during the current year. Centuri achieved these increases despite
a temporary shut-down of certain crews, primarily in the second quarter of 2020,
in response to local government requirements to postpone non-essential business
services and precautions to ensure employee safety during the COVID-19 outbreak.
Utility infrastructure services expenses increased $98.3 million during the
first nine months of 2020 when compared to the same period in the prior year,
due primarily to costs to complete additional gas and electric infrastructure
work as well as increased costs associated with storm restoration revenues,
partially offset by increased productivity and efficiencies on electrical
infrastructure projects and lower fuel costs as a percentage of revenues. Storm
restoration work typically generates a higher profit margin than core
infrastructure services due to improved operating efficiencies related to
equipment utilization and absorption of fixed costs. Offsetting these favorable
impacts were certain increased costs and workforce inefficiencies, primarily in
the second quarter of 2020, associated with the impact of the COVID-19 pandemic.
During the first nine months of 2020, Centuri received $4.1 million in wage
subsidies from the Canadian government associated with COVID-19. These funds
were recorded as a reduction to wage expense. Also included in total Utility
infrastructure services expenses were general and administrative costs, which
increased $15.8 million in the first nine months of 2020 when compared to the
corresponding period during 2019 due to higher payroll and operating costs
associated with continued growth of the business and higher profit-based
incentive compensation costs.
Depreciation and amortization expense increased approximately $7 million between
periods, attributable to additional equipment purchased to support the growing
volume of work being performed.
Net interest deductions decreased $3.4 million during the first nine months of
2020 due primarily to lower rates associated with outstanding borrowings under
Centuri's $590 million secured revolving credit and term loan facility.
                                           40


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               SOUTHWEST GAS HOLDINGS, INC.                    Form 10-Q
               SOUTHWEST GAS CORPORATION              September 30, 2020



Results of Utility Infrastructure Services
Twelve-Month Analysis
                                                                     Twelve Months Ended September 30,
(Thousands of dollars)                                                   2020                    2019
Utility infrastructure services revenues                         $       1,877,264          $  1,698,853
Operating expenses:
Utility infrastructure services expenses                                 1,671,478             1,534,442
Depreciation and amortization                                               94,837                80,928
Operating income                                                           110,949                83,483
Other income (deductions)                                                     (210)                  662
Net interest deductions                                                        10,710             14,256
Income before income taxes                                                 100,029                69,889
Income tax expense                                                             28,057             20,526
Net income                                                                  71,972                49,363
Net income attributable to noncontrolling interest                              5,357              2,695

Contribution to consolidated net income attributable to Centuri

                                                          $          

66,615 $ 46,668

Utility infrastructure services revenues increased $178.4 million overall in the
current twelve-month period compared to the corresponding period of 2019,
primarily due to incremental electric infrastructure revenues from Linetec
(acquired in November 2018) of $132.5 million, as well as continued growth with
existing gas infrastructure customers under master service and bid agreements.
Of the incremental Linetec revenues, $56 million was from emergency restoration
services related to hurricane and tornado damage in the Gulf Coast and eastern
regions of the U.S. as compared to $13.2 million during the same period in 2019.
Centuri achieved increases in revenues despite the temporary shut-down of
certain crews and postponement of certain work (due to COVID-19) noted earlier
as occurring primarily in the second quarter of 2020. Results during the
twelve-month period of 2019 reflected revenues and incremental profits from
customer-requested strike support that did not recur in 2020.
Utility infrastructure services expenses increased $137 million between periods,
primarily due to incremental expenses related to Linetec's electric
infrastructure work of $102.1 million (including increased costs associated with
storm restoration work) and additional gas infrastructure work, and due to
higher labor-related operating expenses to support growth in operations. Also
included in total Utility infrastructure services expenses were general and
administrative costs, which increased $11.4 million in the twelve-month period
ended September 2020 when compared to the corresponding period ended September
2019, resulting from higher payroll and operating costs associated with
continued growth of the business and higher profit-based incentive compensation
costs. Net gains on sale of equipment (reflected as an offset to Utility
infrastructure services expenses) were $2.9 million and $3.9 million for the
twelve-month periods of 2020 and 2019, respectively.
Depreciation and amortization expense increased $13.9 million between the
current and prior-year period. The increase was primarily attributable to the
incremental costs related to Linetec depreciation of $10.4 million, and to
additional property and equipment purchased to support the growing volume of
work being performed.
Net interest deductions decreased $3.5 million between periods due primarily to
lower rates associated with outstanding borrowings under Centuri's $590 million
secured revolving credit and term loan facility.

                                           41


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SOUTHWEST GAS HOLDINGS, INC.                    Form 10-Q
               SOUTHWEST GAS CORPORATION              September 30, 2020



Rates and Regulatory Proceedings
Southwest is subject to the regulation of the Arizona Corporation Commission
(the "ACC"), the Public Utilities Commission of Nevada (the "PUCN"), the
California Public Utilities Commission (the "CPUC"), and the Federal Energy
Regulatory Commission (the "FERC").
General Rate Relief and Rate Design
Rates charged to customers vary according to customer class and rate
jurisdiction and are set by the individual state and federal regulatory
commissions that govern Southwest's service territories. Southwest makes
periodic filings for rate adjustments as the cost of providing service
(including the cost of natural gas purchased) changes, and as additional
investments in new or replacement pipeline and related facilities are made.
Rates are intended to provide for recovery of all commission-approved costs and
a reasonable return on investment. The mix of fixed and variable components in
rates assigned to various customer classes (rate design) can significantly
impact the operating margin actually realized by Southwest. Management has
worked with its regulatory commissions in designing rate structures that strive
to provide affordable and reliable service to its customers while mitigating
volatility in prices to customers and stabilizing returns to investors. Such
rate structures were in place in all of Southwest's operating areas during all
periods for which results of natural gas operations are disclosed above.
Arizona Jurisdiction
Arizona General Rate Case. On May 1, 2019, Southwest filed a general rate case
application requesting to increase revenue by approximately $57 million to
update the cost of service to reflect recent U.S. tax reform changes, including
the return of excess deferred income taxes to customers, and to reflect capital
investments of approximately $670 million, including certain post-test year
additions, including the southern Arizona LNG facility discussed below. The
application also included a proposed 10.3% return on equity ("ROE") relative to
a capital structure of 51.1% equity. At the time of the original filing, the
Company estimated the return of approximately $20.6 million of excess
accumulated deferred income taxes ("EADIT"), which was updated through an
amended filing in October 2019 to $5.7 million in actual amortization of EADIT,
known after the Company's 2018 federal income tax return was filed in 2019. The
actual amount, determined based on a prescribed methodology, is the amount that
may be returned to customers. The difference of $14.9 million would result in an
increase in revenue and income tax expense, thereby having no impact on earnings
overall. In association with the amendment, Southwest also included additional
post-test year plant in the amount of $124.5 million associated with its COYL
and VSP programs, discussed further below. The amendment overall increased the
deficiency by $36 million, to $93 million. Through the discovery and testimony
exchanges, Southwest updated certain aspects of its cost of service, including a
revised proposed ROE of 10.15%, resulting in an updated proposed increase of
$90.6 million. The updated request includes the retention of a fully decoupled
rate design, other previously approved regulatory mechanisms, and a new
infrastructure tracking mechanism for specific plastic pipe. It also includes a
proposal for a renewable natural gas program that authorizes Southwest to
purchase renewable natural gas for its customers and to recover the cost as part
of its purchased gas adjustment mechanism. The original hearing date was
postponed due to the COVID-19 pandemic and was convened in June and July. Prior
to the start of the hearing, Southwest entered into a stipulation with the
parties to the case on a number of issues. As part of the stipulation, the
parties agreed to continue the COYL program; to establish a Tax Expense Adjustor
Mechanism to track annual changes in the amortization of EADIT, as well as any
future changes in the federal tax rate; to incorporate various tariff proposals;
and to include a resolution for a 10-year amortization period for EADIT
associated with deemed "unprotected" plant. EADIT associated with "protected"
plant relates to timing differences from using accelerated depreciation for tax
purposes and another method for book purposes, and "unprotected" amounts relate
to all other timing differences. The legal briefing was completed in
mid-September, with a Commission decision expected during the fourth quarter.
Delivery Charge Adjustment. The annual Delivery Charge Adjustment ("DCA") is
filed each April, which along with other reporting requirements, contemplates a
rate to recover the over- or under-collected margin tracker amounts based on the
balance at the end of the preceding calendar year. In the process to address the
2019 activity, in April 2020, Southwest filed a request to adjust the existing
rate to consider the 14-month period of January 1, 2019 through February 29,
2020, proposing a rate of $0.00655 per therm based on an ending balance of
approximately $3.5 million. Although Commission Staff concurred with Southwest's
proposed rate, the ACC ultimately elected to reduce the rate to zero in an
effort to provide some measure of customer relief in light of current issues
related to the COVID-19 pandemic, and at the time of both the April filing and
the ACC decision, the balance was a liability (in an over-recovered status). Any
over-or under-collection will be addressed in Southwest's next annual filing.
Tax Reform. In February 2018, the ACC directed all Arizona utilities to address
tax savings from the enactment of U.S. tax reform beginning January 1, 2018,
through one of various means. In April 2018, Southwest filed an application with
the ACC, requesting approval for a tax refund process or, in the alternative,
the authority to file a general rate case to reflect the impacts of tax reform.
Ultimately, Southwest was instructed to refund customers $20 million annually,
as compared to rate levels
                                           42

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SOUTHWEST GAS HOLDINGS, INC.                    Form 10-Q
               SOUTHWEST GAS CORPORATION              September 30, 2020



established in the previously concluded general rate case, until cost-of-service
rates are updated in association with the pending general rate case. The current
method to return this amount (in advance of the conclusion of the current
general rate proceeding) is through a per-therm surcredit. Southwest has been
tracking monthly differences between amounts expected to be returned and amounts
actually returned to customers during 2018 and 2019, and continuing in 2020,
which has resulted in an asset balance of $2 million as of September 30, 2020.
Liquefied Natural Gas ("LNG") Facility. In 2014, Southwest sought ACC
preapproval to construct, operate, and maintain a 233,000 dekatherm LNG facility
in southern Arizona. This facility is intended to enhance service reliability
and flexibility related to natural gas deliveries in the southern Arizona area
by providing a local storage option, to be operated by Southwest, and connected
directly to its distribution system. Southwest was ultimately granted approval
for construction and deferral of costs not to exceed $80 million. The facility
was placed in service in December 2019 at a capital expenditure cost of
approximately $75.3 million (including land acquisition costs), considered as
part of Southwest's pending rate case. In addition to tracking the revenue
requirement associated with the capital investment in a regulatory asset,
operating expenses associated with the plant are also authorized to be included
in a regulatory asset, which is also being addressed as part of the pending
general rate case.
Customer-Owned Yard Line ("COYL") Program. Southwest received approval, in
connection with its 2010 Arizona general rate case, to implement a program to
conduct leak surveys, and if leaks were present, to replace and relocate service
lines and meters for Arizona customers whose meters were set off from the
customer's home, representing a non-traditional configuration. In 2014, the ACC
approved a "Phase II" of the COYL program, which included the replacement of
non-leaking COYLs. The surcharge is designed to collect the annual revenue
requirement as the program progresses. In the filing made in February 2019,
Southwest requested to increase its surcharge to recover a revenue requirement
of $6.7 million (an increase of $3.2 million) associated with $26.6 million in
capital projects completed in 2018. The ACC ultimately issued an Order in
October 2019 authorizing Southwest to retain the existing annual surcharge of
$3.5 million, indicating it would review the program as part of the pending
general rate case. As discussed above, the parties to the pending rate case
stipulated to continue the COYL program. Southwest also proposed to have the ACC
review an estimated $21.1 million of 2019 COYL capital projects, and if
authorized, to also render a decision regarding cost recovery as part of the
pending rate case. As part of their filed testimony in the current case, the ACC
Staff and the consumer advocate recommended recovery of this plant as part of
Southwest's filed post-test year plant adjustment, with inclusion of related
amounts in base rates, and also expressed support for the continuation of the
COYL program.
Vintage Steel Pipe ("VSP") Program. Southwest received approval, in connection
with its 2016 Arizona general rate case, to implement a VSP replacement
program. Southwest currently has a substantial amount of pre-1970s vintage steel
pipe in Arizona. As part of the program, Southwest proposed to start replacing
the pipe on an accelerated basis and to recover the costs through an annual
surcharge filing. A surcharge related thereto has been customarily designed to
be revised annually as the program progresses to collect the annual revenue
requirement associated with the related capital expenditures. In the most recent
VSP filing, in February 2019, Southwest requested to increase its surcharge
revenue by $9.5 million (to $11.9 million) associated with the replacement of
approximately $100 million in 2018 VSP capital projects. The ACC issued an Order
in October 2019 authorizing Southwest to retain the current annual surcharge of
$2.4 million and indicated it would review the program as part of the pending
rate general case. Southwest also proposed to have the ACC review an estimated
$103.4 million of 2019 VSP capital projects, and if authorized, to also render a
decision regarding cost recovery as part of the pending rate case. As part of
their filed testimony in the current case, the ACC Staff and the consumer
advocate recommended recovery of this plant as part of Southwest's filed
post-test year plan adjustment, with inclusion of related amounts in base rates.
The further continuation of the VSP is pending a decision in the current general
rate proceeding.
Customer Data Modernization Initiative. Southwest has embarked on an initiative
to replace its customer service system and gas transaction systems, each of
which is utilized to support all Southwest service territories. Combined, these
undertakings are referred to as the Customer Data Modernization Initiative (the
"CDMI"). In March 2019, Southwest filed an application with the ACC seeking an
accounting order which, if approved, would authorize Southwest to track and
defer all costs associated with the CDMI to mitigate adverse financial
implications associated with this multi-year initiative. The total cost for the
CDMI is estimated at $174 million, approximately $96 million of which would be
allocable to the Arizona rate jurisdiction. The initiative is currently expected
to be completed in the first half of 2021. A hearing in this matter was held in
June 2020. The legal briefing was completed in mid-September, with a Commission
decision expected in the fourth quarter.
California Jurisdiction
California General Rate Case. Southwest's existing rates became effective June
2014, and included a Post-Test Year ("PTY") Ratemaking Mechanism, which allowed
for attrition increases of 2.75% annually for 2015 through 2018, after which
time new rates from a subsequent rate case cycle would have been expected to be
in effect. In December 2016, Southwest filed to modify
                                           43


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SOUTHWEST GAS HOLDINGS, INC.                    Form 10-Q
               SOUTHWEST GAS CORPORATION              September 30, 2020



the earlier (2014) general rate case decision to extend the rate case cycle by
two years, and received CPUC approval in June 2017, including extension of the
annual 2.75% PTY attrition adjustments for 2019 and 2020.
On August 30, 2019, Southwest filed the previously deferred general rate case,
based on a test year of 2021, seeking authority to increase rates in its
California rate jurisdictions. The proposed combined revenue increase of $12.8
million was net of a $10.9 million revenue reduction associated with changes
from U.S. tax reform, which included the amortization of $9.8 million
(approximately $2 million annually over five years) associated with the
difference in authorized income tax expense and actual incurred income tax
expense for years 2019 and 2020, which when returned will impact cash flows, but
would not be expected to have an impact on earnings. Southwest has been tracking
those amounts, as directed, and reserving them for return to customers. The
overall revenue request also included $1.6 million of EADIT proposed to be
returned to customers each year until the amount is reset as part of a future
rate case. Southwest's proposal included an ROE of 10.5%, relative to a 53%
equity ratio; continuation of annual post-test year margin adjustments of 2.75%;
implementation of various safety-related programs, including a targeted pipe
replacement program and a meter protection program (with a combination of
measures, such as snow sheds, excess flow valves, upgraded meter set piping and
upgraded Encoder Receiver Transmitter protocol); as well as an expansion of the
school COYL replacement program. Ahead of hearings scheduled to begin in late
June, Southwest reached an agreement in principle with the Public Advocate's
Office for settlement of the pending general rate case.
The agreement in principle includes a $6.4 million total combined revenue
increase with a 10% ROE, relative to a 52% equity ratio. Approximately
$4 million of the original proposed increase of $12.8 million is associated with
a North Lake Tahoe project that will not be completed by the beginning of 2021;
consequently, the parties agreed to remove it from the base rate increase and
instead Southwest will recover the cost of the project through a surcharge as
described below. The agreement also maintains Southwest's existing 2.75% annual
attrition adjustments, the continuation of the pension balancing account, and
approves the proposed increase in the residential basic service charge from the
existing $5.00 to $5.75 per month. The parties also agreed to a cumulative total
of $119 million over the five-year rate cycle to implement proposed
risk-informed decision making proposals, consisting of the school COYL
replacement, meter protection, and pipe replacement programs. Southwest is also
authorized to implement a surcharge annually to recover the cost of these
programs. The agreement in principle was filed in early August 2020, and if
approved, new rates would be expected to become effective in January 2021.
Attrition Filing. In November 2019, Southwest made its latest annual PTY
attrition filing, requesting annual revenue increases of $2.06 million in
southern California, $556,000 in northern California, and $278,000 for South
Lake Tahoe. This filing was approved in December 2019 and rates were made
effective in January 2020. At the same time, rates were also updated to recover
the regulatory asset associated with the revenue decoupling mechanism, or margin
tracker.
Greenhouse Gas ("GHG") Compliance. California Assembly Bill Number 32 and
regulations promulgated by the California Air Resources Board, require
Southwest, as a covered entity, to comply with applicable requirements
associated with California GHG emissions reporting and the California Cap and
Trade Program. The CPUC issued a decision in 2018 adopting an allocation
methodology to distribute the net revenues or costs. Southwest began amortizing
its then existing net cost balance over a 12-month period with recovery rates
effective July 2018 for all applicable rate schedules. In addition, for years
2019-2020, the decision adopted an allocation methodology to distribute the
revenue proceeds through a California Climate Credit to active residential
customers in April of each year, following initial required credits in October
2018. Amounts distributed in April 2019 and 2020 were comparable. GHG compliance
costs recovered through rates have no impact on earnings.
Renewable Natural Gas. In February 2019, Southwest filed an application that,
among other things, sought to formally allow the inclusion of renewable natural
gas (or biomethane) as a potential component of Southwest's gas supply portfolio
through the Biomethane Gas Program ("BGP"). This proposal is designed to further
the goals of the California Global Warming Solutions Act of 2006, the California
Low Carbon Fuel Standard, Senate Bills 1383 and 1440, as well as current or
future legislative or regulatory efforts to reduce greenhouse gas emissions.
Implementation of the BGP addresses cost recovery as part of Southwest's
existing Gas Cost Incentive Mechanism related to the purchase or sale of
biomethane. The CPUC issued a final decision approving the proposal in March
2020.
Customer Data Modernization Initiative. On April 26, 2019, Southwest filed an
application with the CPUC seeking authority to establish a two-way, interest
bearing balancing account to record costs associated with the CDMI to mitigate
adverse financial implications associated with this multi-year project.
Approximately $19 million of the estimated $174 million total for the CDMI would
be allocable to the California rate jurisdiction. Southwest filed a separate
request to establish a memorandum account while the CPUC considered its
application request to establish the two-way balancing account. Effective
October 2019, the CPUC granted Southwest's memorandum account request, which
would allow Southwest to track costs, including operations and maintenance costs
and capital-related costs, such as depreciation, taxes, and return associated
with California's portion of the CDMI. The balance tracked in the memorandum
account would be transferred to the two-way balancing account, if approved. In
January 2020, Southwest and the Public Advocates Office reached a settlement
agreement to adopt Southwest's
                                           44


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SOUTHWEST GAS HOLDINGS, INC.                    Form 10-Q
               SOUTHWEST GAS CORPORATION              September 30, 2020



Application for Authority to Implement the CDMI. The CPUC issued a final
decision approving the settlement agreement as filed in July 2020. A rate to
begin recovering the balance accumulated through June 30 was established and
made effective September 1, 2020. This rate will be updated annually thereafter
each January, beginning January 2021.
Emergency Relief Program Related to COVID-19. On March 25, 2020, Southwest filed
an Advice Letter to establish a memorandum account to track costs related to
customer protections under Emergency Relief regulations implemented in 2019 in
the event of a state or federal declared emergency or disaster. The CPUC passed
an emergency resolution on April 16, 2020 authorizing and directing utilities to
implement customer protections and to establish memorandum accounts to track the
financial impacts of complying with the resolution. On May 1, 2020, Southwest
filed an Advice Letter to establish a COVID-19 Pandemic Protections Memorandum
Account ("CPPMA") to record all incremental costs and lost revenues incurred by
Southwest associated with its implementation of the COVID-19 customer
protections as outlined in the CPUC resolution. The customer protections were
retroactively applied to March 4, 2020, the date Governor Gavin Newsom declared
a state of emergency related to COVID-19. The CPPMA is effective March 4, 2020
through April 16, 2021. These customer protections focus on flexible payment
plan options, additional protections for income-qualified customers, as well as
the suspension of disconnections for non-payment and the waiver of deposit and
late fee requirements. Tracked amounts will be considered by the CPUC for future
recovery.
Nevada Jurisdiction
Nevada General Rate Case. Southwest filed a general rate case application with
the PUCN in February 2020, which requested a statewide overall general rate
increase of approximately $38.3 million. The request sought an ROE of 10%
relative to a proposed capital structure of 50% equity and continuation of the
General Revenues Adjustment ("GRA") mechanism (full revenue decoupling). The
request also proposed the recovery of previously excluded costs attributable to
several software applications. In June 2020, Southwest submitted its
certification filing to update certain balances through May 31, 2020, which
increased its overall proposed rate increase to $38.5 million. Commission Staff
and the Bureau of Consumer Protection filed testimony in July, recommending an
overall increase of approximately $21.6 million and approximately $20 million,
respectively. A hearing in this matter was held in August 2020, with the
Commission issuing its final order on September 25, 2020. The final order
provides for an authorized combined revenue increase of approximately
$23 million for northern and southern Nevada and continuation of the currently
authorized 9.25% ROE with a capital structure of 49.26% equity and 50.74% debt.
Southwest's existing GRA was authorized to continue without modification. Full
cost recovery of the unamortized balance of previously excluded software
projects was authorized, along with the inclusion of all proposed Gas
Infrastructure Replacement ("GIR") and Mesquite Expansion projects in rate base,
and full recovery of test year and certification operations and maintenance
expenses associated with the CDMI project. Rates became effective in October
2020.
The previous general rate case decision, in December 2018, authorized an ROE of
9.25% relative to Southwest's proposed capital structure of 49.66% equity
applicable to both southern and northern Nevada. Rates from this earlier
proceeding originally became effective in January 2019. As part of that
proceeding, management filed a request for reconsideration of several rate case
issues during the same month of effective rates; however, the PUCN ultimately
granted no further rate relief. A modified final decision, following certain
technical clarifications to calculations of the decision, resulted in a final
revenue increase of $9.2 million in southern Nevada and a revenue decrease in
northern Nevada of $2.1 million. The modified rates became effective in March
2019. Management decided to seek judicial review of the PUCN's rate order, which
was considered in January 2020. The District Court Judge deferred to the PUCN's
original findings. In March 2020, Southwest filed an appeal with the Nevada
Supreme Court, which remains active; the resolution will likely take 12-24
months.
General Revenues Adjustment. The continuation of the GRA was affirmed as part of
Southwest's recently concluded general rate case, effective October 2020.
Southwest makes Annual Rate Adjustment ("ARA") filings to update rates to
recover or return amounts associated with various regulatory mechanism,
including the GRA. In June 2019, Southwest made its annual filing, requesting to
update the GRA to reflect then existing balances in both southern and northern
Nevada. This filing provided for a decrease of approximately $8 million for an
over-collected balance in southern Nevada and an increase of approximately
$2 million in northern Nevada. The proposed changes were approved, with rates
effective January 2020. In May 2020, Southwest made its latest ARA filing, which
proposes annualized margin decreases of $5.3 million in southern Nevada and an
increase of $1.6 million in northern Nevada. While there is no impact to net
income overall from adjustments to recovery rates associated with the related
regulatory balances, operating cash flows are impacted by such changes.
Infrastructure Replacement Mechanism. In 2014, the PUCN approved final rules for
the GIR mechanism, which defers and recovers certain costs associated with
accelerated replacement of qualifying infrastructure that would not otherwise
currently provide incremental revenues. Associated with the replacement of
various types of pipe infrastructure under the mechanism (Early Vintage Plastic
Pipe, COYL, and VSP), the related regulations provide Southwest with the
opportunity to file a GIR "Advance Application" annually, generally in May, to
seek preapproval of qualifying replacement projects.
                                           45


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SOUTHWEST GAS HOLDINGS, INC.                    Form 10-Q
               SOUTHWEST GAS CORPORATION              September 30, 2020



Furthermore, a GIR rate application is generally filed each October to reset the
GIR recovery surcharge rate related to previously approved and completed
projects, with new rates typically becoming effective each January. On October
1, 2019, Southwest filed a rate application to reset the recovery surcharge to
include cumulative deferrals through August 31, 2019. This surcharge rate became
effective February 1, 2020 and is expected to result in a reduction in annual
revenue of approximately $5.3 million in southern Nevada and no incremental
revenue in northern Nevada. On September 30, 2020, Southwest filed its latest
rate application to reset the recovery surcharge to include cumulative deferrals
through August 31, 2020. The surcharge rate is expected to result in a reduction
in annual revenue of approximately $11.8 million effective January 1, 2021.
Conservation and Energy Efficiency. The PUCN allows deferral (and later
recovery) of approved conservation and energy efficiency costs, recovery rates
for which are adjusted in association with ARA filings. In its June 2019 ARA
filing, Southwest proposed annualized margin increases of $3.2 million and
$880,000 in southern and northern Nevada, respectively. However, Southwest
entered into a stipulation and agreement to modify these amounts to $6.2 million
and $1.1 million in southern and northern Nevada, respectively, which reflected
the recovery of a related but separate program balance to be rolled into
customer rates with the same effective date. The modification was approved, and
rates became effective January 2020. In its May 2020 ARA filing, Southwest
proposed annualized margin decreases of $313,000 and $55,000 for southern and
northern Nevada, respectively.
Expansion and Economic Development Legislation. In January 2016, final
regulations were approved by the PUCN associated with legislation ("SB 151")
previously introduced and signed into law in Nevada. The legislation authorized
natural gas utilities to expand their infrastructure to provide service to
unserved and underserved areas in Nevada.
In November 2017, Southwest filed for preapproval of a project to extend service
to Mesquite, Nevada, in accordance with the SB 151 regulations. Ultimately, the
PUCN issued an order approving Southwest's proposal for the expansion. The order
approved a capital investment of approximately $28 million and the construction
of approximately 37 miles of distribution pipeline (including the approach
main). The annual revenue requirement associated with the project is
$2.8 million. A volumetric rate, applicable to all southern Nevada customers
(including new customers in Mesquite), was implemented in October 2019 to
recover the cost. Southwest's May 2020 ARA filing, which proposes an annualized
margin increase of $185,000, reflects the cumulative deferred revenue
requirement associated with the Mesquite facilities that have been placed in
service through April 30, 2020. During 2020, Southwest continued serving certain
customers in Mesquite from an approved virtual pipeline network, providing
temporary natural gas supply using portions of the approved distribution system
and compressed natural gas. Construction of the remaining approved distribution
system to bring the permanent natural gas supply to Mesquite has continued
throughout 2020 and is planned to be placed in service in the fourth quarter of
2020.
In June 2019, Southwest filed for preapproval to construct the infrastructure
necessary to expand natural gas service to Spring Creek, Nevada, and to
implement a cost recovery methodology to timely recover the associated revenue
requirement consistent with the SB 151 regulations. Expansion to the Spring
Creek area near Elko, Nevada consists of a high-pressure approach main and
associated regulator stations, an interior backbone, and the extension of the
distribution system from the interior backbone system. The total capital
investment is estimated to be $61.9 million. A stipulation in this matter was
reached with the parties and approved by the PUCN in December 2019, which
largely accepted Southwest's proposal with modifications reflected in the rate
recovery allocations split amongst northern Nevada, Elko, and Spring Creek
expansion customers. Construction of the initial phase of the expansion began in
the third quarter of 2020, with certain customers expected to be served by the
end of the fourth quarter of 2020.
Customer Data Modernization Initiative. In March 2019, Southwest filed a request
seeking authority to establish a regulatory asset to defer the revenue
requirement related to the CDMI to mitigate the financial attrition associated
with this multi-year project. Approximately $59 million of the estimated $174
million cost of the CDMI would be allocable to the Nevada rate jurisdictions. A
hearing on this matter was held in August 2019 and the PUCN issued its decision
in September 2019, denying Southwest's request for regulatory asset treatment,
finding that a general rate case is the most appropriate venue to address such
costs. In response to the PUCN's decision, Southwest filed a Petition for
Reconsideration in October 2019, which was denied. As part of Southwest's
recently approved general rate case filing, Southwest was authorized to include
CDMI costs since the beginning of the test year as part of its revenue
requirement in the case. The project is expected to be moved to production in
2021.
Regulatory Asset Related to COVID-19. The PUCN issued an order directing
utilities within the state to establish regulatory asset accounts to track the
financial impacts associated with maintaining service for customers affected by
COVID-19, including those whose service would have been otherwise
terminated/disconnected, effective March 12, 2020, the date that Governor Steve
Sisolak declared a state of emergency related to COVID-19. These costs will be
considered by the PUCN for future recovery.

                                           46


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               SOUTHWEST GAS HOLDINGS, INC.                    Form 10-Q
               SOUTHWEST GAS CORPORATION              September 30, 2020



FERC Jurisdiction
General Rate Case. Paiute Pipeline Company ("Paiute"), a wholly owned subsidiary
of Southwest, filed a general rate case with the FERC in May 2019. The filing
fulfilled an obligation from the settlement agreement reached in the 2014 Paiute
general rate case. In January 2020, Paiute reached an agreement in principle
with the FERC Staff and intervenors to settle its general rate case. In addition
to continuing the term-differentiated rate structures with its shippers, the
agreement requires Paiute's three largest transportation customers and all of
its storage customers to extend their service agreements to have primary terms
of at least five years. The settlement resulted in a revenue reduction of
approximately $700,000 and is based on a 9.90% pre-tax rate of return. Also, as
part of this agreement, Paiute agreed not to file a rate case prior to January
1, 2022, but no later than May 31, 2025.
In January 2020, Paiute requested, and was granted, the authority to place the
settlement rates into effect on an interim basis, effective February 2020. On
March 30, 2020, Paiute filed the proposed settlement agreement with the FERC for
review and approval. On July 6, 2020, the FERC issued a letter order approving
the settlement, and the order became final on August 5, 2020.
PGA Filings
The rate schedules in all of Southwest's service territories contain provisions
that permit adjustment to rates as the cost of purchased gas changes. These
deferred energy provisions and purchased gas adjustment clauses are collectively
referred to as "PGA" clauses. Differences between gas costs recovered from
customers and amounts paid for gas by Southwest result in over- or
under-collections. As of September 30, 2020, over-collections in each of
Southwest's service territories resulted in a liability of $76.2 million on the
Company's and Southwest's Condensed Consolidated Balance Sheets.
Filings to change rates in accordance with PGA clauses are subject to audit by
state regulatory commission staffs. PGA changes impact cash flows but have no
direct impact on profit margin. However, gas cost deferrals and recoveries can
impact comparisons between periods of individual consolidated income statement
components. These include Gas operating revenues, Net cost of gas sold, Net
interest deductions, and Other income (deductions).
The following table presents Southwest's outstanding PGA balances
receivable/(payable):
(Thousands of dollars)         September 30, 2020      December 31, 2019       September 30, 2019
Arizona                       $          (14,674)     $          (59,259)     $          (84,438)
Northern Nevada                          (12,724)                 11,894                  11,909
Southern Nevada                          (45,506)                 32,518                  37,895
California                                (3,338)                 (1,496)                 (3,592)
                              $          (76,242)     $          (16,343)     $          (38,226)


Capital Resources and Liquidity
Historically, cash on hand and cash flows from operations have provided a
substantial portion of cash used in investing activities (primarily for
construction expenditures and property additions). In recent years, Southwest
has accelerated pipe replacement activities to fortify system integrity and
reliability, notably in association with gas infrastructure replacement programs
as discussed previously. This accelerated activity has necessitated the issuance
of both debt and equity securities to supplement cash flows from operations. The
Company endeavors to maintain an appropriate balance of equity and debt to
preserve investment-grade credit ratings, which should minimize interest costs.

                                           47

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SOUTHWEST GAS HOLDINGS, INC.                    Form 10-Q
               SOUTHWEST GAS CORPORATION              September 30, 2020



Cash Flows
Southwest Gas Holdings, Inc.:
Operating Cash Flows. Cash flows provided by consolidated operating activities
increased $109 million in the first nine months of 2020 as compared to the same
period of 2019. The improvement in cash flows primarily resulted from
collections of amounts under purchased gas adjustment mechanisms (compared to
amounts refunded in the prior year), an increase in recoveries ($45 million)
related to the Arizona decoupling mechanism balance between nine-month periods,
as well as an increase in net income (including giving effect to depreciation
and amortization). These impacts were partially offset by a $50 million
supplemental contribution for pension funding made in January 2020 (included in
Changes in other liabilities and deferred credits in the Condensed Consolidated
Statements of Cash Flows of both the Company and Southwest). Utility accounts
receivable collections generally are lower in the current year in light of
Southwest's temporary moratorium on disconnection of service amidst the COVID-19
environment, while improvement in cash flows resulted from changes in other
working capital components. Customarily, differences between amounts Southwest
pays to gas suppliers and amounts included in customer rates to recover the cost
of purchased gas under the purchased gas cost mechanisms have provided
significant variability in operating cash flows between periods.
Investing Cash Flows. Cash used in consolidated investing activities decreased
$92 million in the first nine months of 2020 as compared to the same period of
2019. The change was primarily due to a decrease in capital expenditures in both
reportable segments partly offset by a decrease in customer advances for
Southwest in the first nine months of 2020. See also Gas Segment Construction
Expenditures and Financing below. Additionally, the prior-year period included
$19.5 million for the remittance of purchase consideration previously held back
in association with the 2018 Linetec acquisition.
Financing Cash Flows. Net cash provided by consolidated financing activities
decreased $170 million in the first nine months of 2020 as compared to the same
period of 2019. The change was primarily due to a reduction in borrowings, and
outstanding amounts, under the Company's credit facility and Southwest's
long-term portion of the credit facility. Part of the net proceeds from the
issuance of $450 million in Senior Notes in June 2020 by Southwest were used to
pay down its credit facility and redeem $125 million of 4.45% Notes in September
2020. In the prior year, Southwest used a portion of the net proceeds from the
$300 million Senior Notes issued in May 2019 to reduce amounts then outstanding
under its credit facility and commercial paper program. Additionally, the
Company issued $39 million more in common stock under the its Equity Shelf
Program in the first nine months of 2019 compared to the current period;
however, dividends were higher in the current period. See Note 4 - Common Stock
and Note 5 - Debt. Other outflows include the combined impacts of repayment and
borrowings by Centuri under its secured credit and revolving credit facility,
offset by $70 million in equipment loan proceeds.
During the nine months ended September 30, 2020, the Company issued 130,000
shares of common stock through the Dividend Reinvestment and Stock Purchase
Plan, raising approximately $9 million, similar to amounts raised in the prior
year period.
The capital requirements and resources of the Company generally are determined
independently for the natural gas operations and utility infrastructure services
segments. Each business activity is generally responsible for securing its own
external debt financing sources. However, the holding company may raise funds
through stock issuances or other external financing sources. See Note 4 - Common
Stock.
Southwest Gas Corporation:
Operating Cash Flows. Cash flows provided by operating activities increased
$84 million in the first nine months of 2020 as compared to the same period of
2019. The improvement in operating cash flows was attributable to collections of
deferred purchased gas costs and recoveries related to the Arizona decoupling
mechanism noted above, as well as other working capital components overall,
partially offset by the supplemental contribution for pension funding described
earlier.
Investing Cash Flows. Cash used in investing activities decreased $55 million in
the first nine months of 2020 as compared to the same period of 2019. The change
was primarily due to a decrease in capital expenditures in 2020 offset by a
decrease in utility customer advances toward capital projects. See also Gas
Segment Construction Expenditures and Financing below.
Financing Cash Flows. Net cash provided by financing activities decreased
$142 million in the first nine months of 2020 as compared to the same period of
2019. The decline was primarily due to the combined effects of the repayment of
previously accumulated outstanding balances under Southwest's credit facility
and the redemption of the $125 million in maturing Notes; and proceeds received
from the issuance of $450 million Senior Notes in the current period, compared
to the prior year issuance of $300 million in Senior Notes and repayment
activity associated with the credit facility and commercial paper program. See
Note 5 - Debt.


                                           48

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SOUTHWEST GAS HOLDINGS, INC.                    Form 10-Q
               SOUTHWEST GAS CORPORATION              September 30, 2020



Gas Segment Construction Expenditures and Financing
During the twelve-month period ended September 30, 2020, construction
expenditures for the natural gas operations segment were $717 million. The
majority of these expenditures represented costs associated with scheduled and
accelerated replacement of existing transmission, distribution, and general
plant. Cash flows from operating activities of Southwest were $451 million
during this time, and provided approximately 55% of construction expenditures
and dividend requirements.
Management estimates natural gas segment construction expenditures during the
three-year period ending December 31, 2022 will be approximately $2.1 billion.
Of this amount, approximately $700 million is scheduled to be incurred in 2020.
Southwest plans to continue to request regulatory support as necessary and
appropriate to accelerate projects that improve system flexibility and
reliability. Southwest may expand existing, or initiate new, programs.
Significant replacement activities are currently expected to continue well
beyond the next few years. See also Rates and Regulatory Proceedings for
discussion of Nevada infrastructure, Arizona COYL and VSP programs, and Spring
Creek in Nevada. During the three-year period, cash flows from operating
activities of Southwest are expected to provide approximately 50% of its total
construction expenditure funding and dividend requirements. Any additional cash
requirements are expected to be provided by existing credit facilities, equity
contributions from the Company, and/or other external financing sources. The
timing, types, and amounts of additional external financings will be dependent
on a number of factors, including the cost of gas purchases, conditions in the
capital markets, timing and amounts of rate relief, timing differences between
U.S. federal taxes embedded in customer rates and amounts implemented under tax
reform, as well as growth levels in Southwest's service areas and earnings.
External financings may include the issuance of debt securities, bank and other
short-term borrowings, and other forms of financing.
As noted earlier, in June 2020, Southwest issued $450 million aggregate
principal amount of 2.20% Senior Notes at a discount of 0.126%. The notes will
mature in June 2030. A portion of the net proceeds was used to reduce borrowings
under Southwest's credit facility and to redeem the 4.45% $125 million Notes
that were maturing.
In May 2019, the Company filed with the SEC an automatic shelf registration
statement for the offer and sale of up to $300 million of common stock from time
to time in at-the-market offerings under the prospectus included therein in
accordance with the Sales Agency Agreement, dated May 8, 2019, between the
Company and BNY Mellon Capital Markets, LLC (the "Equity Shelf Program"). The
Company issued $33 million under this multi-year program during the third
quarter of 2020; approximately $93 million remains available for issuance under
the program as of September 30, 2020. Net proceeds from the sales of common
stock under the Equity Shelf Program are intended for general corporate
purposes, including the acquisition of property for the construction,
completion, extension or improvement of pipeline systems and facilities located
in and around the communities served by Southwest.
During the twelve months ended September 30, 2020, 1,558,421 shares were issued
in at-the-market offerings at an average price of $69.17 per share with gross
proceeds of $107.8 million, agent commissions of $1.1 million, and net proceeds
of $106.7 million under the Company's Equity Shelf Program.
Bonus Depreciation
In 2017, with the enactment of U.S. tax reform, the bonus depreciation deduction
percentage changed from 50% to 100% for "qualified property" placed in service
after September 27, 2017 and before 2023. The bonus depreciation tax deduction
phases out starting in 2023, by 20% for each of the five following
years. Qualified property excludes most public utility property. The Company
estimates bonus depreciation will defer the payment of approximately $10 million
of federal income taxes for 2020, none of which relates to natural gas
operations.
Dividend Policy
Dividends are payable on the Company's common stock at the discretion of the
Board of Directors (the "Board"). In setting the dividend rate, the Board
currently targets a payout ratio of 55% to 65% of consolidated earnings per
share and considers, among other factors, current and expected future earnings
levels, our ongoing capital expenditure plans and expected external funding
needs, in addition to our ability to maintain strong credit ratings and
liquidity. The Company has paid dividends on its common stock since 1956 and has
increased that dividend each year since 2007. In February 2020, the Board
elected to increase the quarterly dividend from $0.545 to $0.570 per share,
representing a 4.6% increase, effective with the June 2020 payment.
Liquidity
Liquidity refers to the ability of an enterprise to generate sufficient amounts
of cash through its operating activities and external financing to meet its cash
requirements. Several factors (some of which are out of the control of the
Company) that could significantly affect liquidity in the future include:
variability of natural gas prices, changes in ratemaking policies of regulatory
commissions, regulatory lag, customer growth in the natural gas segment, the
ability to access and obtain capital from external sources, interest rates,
changes in income tax laws, pension funding requirements, inflation, and the
level of earnings. Natural
                                           49

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SOUTHWEST GAS HOLDINGS, INC.                    Form 10-Q
               SOUTHWEST GAS CORPORATION              September 30, 2020



gas prices and related gas cost recovery rates, as well as plant investment,
have historically had the most significant impact on liquidity.
The Company remains focused on the safety and well-being of our employees and on
service to our customers. The Company continues to review and assess the ongoing
impacts of the COVID-19 pandemic, including those on our customers, suppliers,
and business. As of September 30, 2020, the Company's Cash and cash equivalents
were $24 million, and the Company had access to $628 million of borrowing
capacity under the Company's various credit facilities, which management
believes will help manage the impacts of the COVID-19 pandemic on its business
and address related liquidity needs if they should arise.
On an interim basis, Southwest defers over- or under-collections of gas costs to
PGA balancing accounts. In addition, Southwest uses this mechanism to either
refund amounts over-collected or recoup amounts under-collected as compared to
the price paid for natural gas during the period since the last PGA rate change
went into effect. At September 30, 2020, the combined balance in the PGA
accounts totaled an over-collection of $76 million. See PGA Filings for more
information.
Southwest Gas Holdings, Inc. has a credit facility with a borrowing capacity of
$100 million; in April 2020, the existing credit facility was amended to extend
the maturity date to April 2025, while maintaining the borrowing capacity at
$100 million. This facility is intended for short-term financing needs. At
September 30, 2020, $54 million was outstanding under this facility.
Southwest has a credit facility with a borrowing capacity of $400 million; in
April 2020, Southwest amended the credit facility agreement which extended the
maturity date to April 2025. The revolving borrowing capacity under the amended
credit facility agreement remains at $400 million following that amendment.
Southwest designated $150 million of the facility for long-term borrowing needs
and the remaining $250 million for working capital purposes. The maximum amount
outstanding on the long-term portion of the credit facility (including a
commercial paper program, as noted below) during the first nine months of 2020
was $150 million. As of September 30, 2020, $58 million was outstanding under
the long-term portion of the facility. The maximum amount outstanding on the
short-term portion of the credit facility during the first nine months of 2020
was $194 million. As of September 30, 2020, no amount was outstanding on the
short-term portion of this credit facility. The credit facility can be used as
necessary to meet liquidity requirements, including temporarily financing
under-collected PGA balances, if any, or meeting the refund needs of
over-collected balances. It has been adequate for Southwest's working capital
needs outside of funds raised through operations and other types of external
financing. As indicated, any additional cash requirements would include the
existing credit facility, equity contributions from the Company, and/or other
external financing sources.
Southwest has a $50 million commercial paper program. Any issuance under the
commercial paper program is supported by Southwest's current revolving credit
facility and, therefore, does not represent additional borrowing capacity. Any
borrowing under the commercial paper program during 2020 will be designated as
long-term debt. Interest rates for the commercial paper program are calculated
at the current commercial paper rate during the borrowing term. At
September 30, 2020, there was $50 million outstanding under this program.
Centuri has a senior secured revolving credit and term loan facility with
borrowing capacity of $590 million (refer to Note 5 - Debt). The line of credit
portion comprises $325 million; associated amounts borrowed and repaid are
available to be re-borrowed. The term loan facility portion has a limit of
approximately $265 million. The $590 million credit and term loan facility
expires in November 2023. It is secured by substantially all of Centuri's assets
except those explicitly excluded under the terms of the agreement (including
owned real estate and certain certificated vehicles). Centuri assets securing
the facility at September 30, 2020 totaled $1.4 billion. The maximum amount
outstanding on the facility during the first nine months of 2020 was $312
million, at which point $235 million was outstanding on the term portion. As of
September 30, 2020, $60 million was outstanding on the revolving credit facility
and $231 million was outstanding on the term loan portion of the facility. Also
at September 30, 2020, there was approximately $240 million, net of letters of
credit, available under the line of credit.
Interest rates for the amended credit facilities of the holding company and
Southwest are calculated at either LIBOR or an "alternate base rate," plus in
each case an applicable margin determined based on each entities' respective
senior unsecured long-term debt rating. Upon the occurrence of certain events
providing for a transition away from LIBOR, or if LIBOR is no longer a widely
recognized benchmark rate, each entity may amend their respective credit
facility with a replacement rate as set forth in the amended credit facility
agreement. It is currently anticipated that LIBOR may be discontinued as a
benchmark or reference rate after 2021. As of September 30, 2020, $54 million,
$8 million, and $172 million, respectively, for the holding company, Southwest,
and Centuri were outstanding under credit facility arrangements with interest
rates in reference to LIBOR and maturity dates extending beyond 2021. Combined,
these reflect approximately 0.3% of Southwest's total debt, and 8% of total
Company debt overall. In order to mitigate the impact of the discontinuation on
the Company's financial condition and results of operations, management will
continue to monitor developments with respect to alternative rates and work with
lenders to determine the appropriate alternative reference rate for variable
rate indebtedness. However, at this time the Company and Southwest can provide
no assurances as to the impact a LIBOR discontinuation will have on their
financial condition or results of operations. Any alternative rate may be less
predictable or less attractive than LIBOR.
                                           50


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SOUTHWEST GAS HOLDINGS, INC.                    Form 10-Q
               SOUTHWEST GAS CORPORATION              September 30, 2020



Forward-Looking Statements
This quarterly report contains statements which constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 ("Reform Act"). All statements other than statements of historical fact
included or incorporated by reference in this quarterly report are
forward-looking statements, including, without limitation, statements regarding
the Company's plans, objectives, goals, intentions, projections, strategies,
future events or performance, negotiations, and underlying assumptions. The
words "may," "if," "will," "should," "could," "expect," "plan," "anticipate,"
"believe," "estimate," "predict," "project," "continue," "forecast," "intend,"
"endeavor," "promote," "seek," and similar words and expressions are generally
used and intended to identify forward-looking statements. For example,
statements regarding operating margin patterns, customer growth, the composition
of our customer base, price volatility, seasonal patterns, payment of debt, the
Company's COLI strategy, replacement market and new construction market, impacts
from the novel Coronavirus (COVID-19), including on our employees, customers,
supply chain, transportation network, our financial position, revenue, earnings,
cash flows, debt covenants, operations, regulatory recovery, work deployment or
resumption and related uncertainties stemming from this pandemic, expected
impacts of valuation adjustments associated with any redeemable noncontrolling
interest, the impacts of U.S. tax reform including disposition in regulatory
proceedings and bonus depreciation tax deductions, the impact of recent PHMSA
rulemaking, the amounts and timing for completion of estimated future
construction expenditures, plans to pursue infrastructure programs or programs
under SB151 legislation, forecasted operating cash flows and results of
operations, net earnings impacts from gas infrastructure replacement surcharges,
funding sources of cash requirements, amounts generally expected to be reflected
in 2020 or future period revenues from regulatory rate proceedings including
amounts requested or preliminarily settled from recent and ongoing general rate
cases, the outcome of judicial review of the previous Nevada rate case, rates
and surcharges, PGA, and other rate adjustments, sufficiency of working capital
and current credit facilities, bank lending practices, the Company's views
regarding its liquidity position, ability to raise funds and receive external
financing capacity and the intent and ability to issue various financing
instruments and stock under the Equity Shelf Program or otherwise, future
dividend increases and the Board's current target dividend payout ratio, pension
and postretirement benefits, certain impacts of tax acts, the effect of any
other rate changes or regulatory proceedings, contract or construction change
order negotiations, impacts of accounting standard updates, infrastructure
replacement mechanisms and COYL programs, statements regarding future gas
prices, gas purchase contracts and derivative financial instruments,
recoverability of regulatory assets, the impact of certain legal proceedings,
and the timing and results of future rate hearings, including any ongoing
general rate cases and the final resolution for recovery of the CDMI in all
jurisdictions, and statements regarding pending approvals are forward-looking
statements. All forward-looking statements are intended to be subject to the
safe harbor protection provided by the Reform Act.
A number of important factors affecting the business and financial results of
the Company could cause actual results to differ materially from those stated in
the forward-looking statements. These factors include, but are not limited to,
customer growth rates, conditions in the housing market, the impacts of COVID-19
including that which may result from a sustained restriction on commerce by
government officials or otherwise, including impacts on employment in our
territories, the health impacts to our customers and employees due to the
persistence of the virus, the ability to collect on customer accounts due to the
current or an extended moratorium on late fees or service disconnection, the
ability to obtain regulatory recovery of all costs and financial impacts
resulting from this pandemic, the ability of the infrastructure services
business to resume work with all customers and the impact of a delay or
termination of work as a result thereof, the impacts of future restrictions
placed on our business by government regulation or otherwise (such as
self-imposed restrictions for the safety of employees and customers), including
related to personal distancing, investment in personal protective equipment and
other protocols, the impact of a resurgence of the virus following the
resumption of commerce in our territories, and decisions of Centuri customers as
to whether to pursue capital projects due to economic impacts resulting from the
pandemic or otherwise, the ability to recover costs through the PGA mechanisms
or other regulatory assets, the effects of regulation/deregulation, governmental
or regulatory policy regarding pipeline safety, natural gas or alternative
energy, the regulatory support for ongoing infrastructure programs, the timing
and amount of rate relief, the timing and methods determined by regulators to
refund amounts to customers resulting from U.S. tax reform, changes in rate
design, variability in volume of gas or transportation service sold to
customers, changes in gas procurement practices, changes in capital requirements
and funding, the impact of conditions in the capital markets on financing costs,
the impact of variable rate indebtedness associated with a discontinuance of
LIBOR including in relation to amounts of indebtedness then outstanding, changes
in construction expenditures and financing, changes in operations and
maintenance expenses, effects of pension expense forecasts, accounting changes
and regulatory treatment related thereto, currently unresolved and future
liability claims, changes in pipeline capacity for the transportation of gas and
related costs, results of Centuri bid work, the impact of weather on Centuri's
operations, future acquisition-related costs, impacts of changes in value of any
redeemable noncontrolling interest if at other than fair value, Centuri utility
infrastructure expenses, differences between actual and originally expected
outcomes of Centuri bid or other fixed-price construction agreements, outcomes
from contract and change order negotiations, ability to successfully procure new
work, impacts from work awarded or failing to be awarded from significant
customers, the mix of work awarded, the amount of work awarded to Centuri
following the lifting of work
                                           51


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SOUTHWEST GAS HOLDINGS, INC.                    Form 10-Q
               SOUTHWEST GAS CORPORATION              September 30, 2020



stoppages or reduction, the result of productivity inefficiencies from
regulatory requirements or otherwise, delays in commissioning individual
projects, acquisitions, and management's plans related thereto, competition, our
ability to raise capital in external financings, our ability to continue to
remain within the ratios and other limits subject to our debt covenants, and
ongoing evaluations in regard to goodwill and other intangible assets. In
addition, the Company can provide no assurance that its discussions regarding
certain trends relating to its financing and operating expenses will continue or
cease to continue in future periods. For additional information on the risks
associated with the Company's business, see Item 1A. Risk Factors and Item 7A.
Quantitative and Qualitative Disclosures About Market Risk in the Annual Report
on Form 10-K for the year ended December 31, 2019, and Item 1A. Risk Factors, as
updated in association with the Quarterly Report on Form 10-Q for the quarter
ended March 31, 2020.
All forward-looking statements in this quarterly report are made as of the date
hereof, based on information available to the Company as of the date hereof, and
the Company assumes no obligation to update or revise any of its forward-looking
statements, even if experience or future changes show that the indicated results
or events will not be realized. We caution you not to unduly rely on any
forward-looking statement(s).

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