Southwest Gas (NYSE:SWX) used its fourth-quarter and full-year 2025 earnings call to outline its first set of strategic priorities and long-term financial targets as a pure-play, fully regulated natural gas utility following the September sale of Centuri. Management said the Centuri disposition completed a “transformational” shift in the company’s business model, enabled the repayment of remaining holding company debt, strengthened the balance sheet, and freed capital for reinvestment in regulated operations.
Leadership transition and business simplification
President and CEO Karen Haller said that, following the full separation of Centuri and the termination of the Icahn cooperation agreement, she decided to retire after nearly three decades with the company. The board appointed Justin Brown, currently president of Southwest Gas Corporation, as the next CEO effective May 8. Haller said she will remain involved as an advisor through the end of the year to support the transition.
2025 results and Centuri’s impact on GAAP earnings
CFO Jay Foer said consolidated 2025 GAAP earnings per diluted share were $6.08, which included discontinued operations related to Centuri. The company sold its remaining Centuri shares on Sept. 5, 2025, generating an approximate $260 million net gain. Management said the combination of Centuri’s performance during the ownership period and the net gain contributed $2.83 per diluted share to consolidated GAAP results.
Focusing on continuing operations, adjusted earnings per diluted share increased nearly 19% to $3.65 in 2025 from $3.07 in 2024. Foer attributed the improvement to execution in the natural gas distribution business and significantly lower financing costs at the holding company after prior holdco debt was repaid using proceeds from the Centuri transactions.
For the utility, adjusted net income rose 8.7% to $283.9 million from $261.2 million, coming in nearly $9 million above the high end of guidance. Management cited higher-than-forecast company-owned life insurance (COLI) results, higher interest income from elevated cash balances, and some delayed in-service dates that modestly reduced depreciation and amortization versus expectations.
Foer described the year-over-year change as “a clean, regulated utility story,” with operating margin up nearly $120 million driven by:
- $95.2 million of combined rate relief (primarily from Arizona)
- $11.5 million from customer growth
- Additional items tied to recovery/return mechanisms and a Nevada interest adjustment mechanism (offset within operating income through depreciation/amortization and interest expense)
He also noted higher O&M expense year over year, higher depreciation and amortization tied to capital investment, higher interest expense primarily associated with regulatory account balances from over-collected purchase gas costs, and higher taxes due to increased pre-tax income. Management adjusted for a $16.4 million state income tax apportionment benefit described as tied to one-time events to present a run-rate view of earnings.
Rate cases and regulatory initiatives in Arizona and Nevada
Brown said the company expects to file an Arizona rate case “this week,” with rates anticipated to become effective in April next year. Key elements of the filing include a revenue increase of over $100 million, a proposed rate base of $3.9 billion, and a requested return on equity of 10.25%, plus a 20 basis point fair value return on rate base relative to an equity ratio of about 50%.
Brown said the Arizona case is driven by the need to begin recovering on nearly $900 million of capital investments made to support safety and reliability. He said the filing reflects a proposed rate base increase of roughly $700 million, including post-test-year adjustments of about $360 million through November 2026. The company also plans to include a formula rate adjustment proposal, which Brown said aligns with Arizona Corporation Commission policy direction and recent utility proposals, including a formula rate plan approved by the commission “last week.”
Management estimated the proposed Arizona revenue increase would translate to an average residential bill impact of about $5 per month, while emphasizing that outcomes remain subject to commission review and approval.
In Nevada, Brown said the company plans to file a rate case “next month,” and under the statutory 210-day process, new rates would become effective in Q4 of this year. He also discussed Senate Bill 417, signed in June 2025, which authorizes alternative ratemaking plans. Brown said the Public Utilities Commission of Nevada has continued rulemaking workshops, with the company expecting the process to conclude in the coming months and potentially allow alternative ratemaking adjustments to begin as early as 2028 (subject to approval).
In Q&A, management said it is aiming to reduce what it described as a historical earned ROE gap of roughly 160 basis points by about 100 basis points through regulatory improvements in Arizona and Nevada, while acknowledging the mechanisms remain subject to regulatory outcomes.
Great Basin expansion, capital plan, financing, and guidance
Management introduced 2026 and long-term guidance alongside a capital plan that, for the first time, includes the planned 2028 Great Basin Expansion Project in Northern Nevada. Over the next five years, the company expects to invest about $6.3 billion, with roughly 73% directed to Southwest Gas and 27% to Great Basin. Brown said 2026 spending for Great Basin would be early-stage work such as engineering, environmental reviews, permitting, and other pre-construction activities.
On the project itself, Brown said the company executed binding precedent agreements following an open season, securing nearly 800 million cubic feet per day of incremental capacity commitments. Management said this supports an estimated $1.7 billion capital investment opportunity, with expected incremental annual margin of about $215 million to $245 million once placed in service. The company expects to file a formal CPCN application before the end of 2026, with FERC and NEPA review processes expected during 2027 and an anticipated in-service date near the end of 2028. Brown noted a pre-filing approval milestone from FERC and said the agency encouraged evaluation of possible Title 41 FAST Act eligibility to streamline permitting, which the company is assessing.
On financing, management said it is targeting a balanced 50/50 debt-to-equity structure for Great Basin. Debt is expected to be funded through Southwest Gas bond issuances, while equity needs would be met through a combination of holding company leverage capacity and modest equity issuance, including the existing ATM program.
Foer outlined a 2026 financing plan that assumes:
- Using holding company cash to fully fund 2026 dividends
- Infusing nearly the same amount of equity into Southwest Gas to support the 2026 capital plan
- Approximately $325 million of net Southwest Gas bond issuances and modest revolver usage at the operating company
- No anticipated equity issuance in 2026 under the existing ATM
The company’s $1.25 billion 2026 capital plan includes about $925 million for natural gas distribution infrastructure, with the remainder tied to Great Basin expansion preparations.
For guidance, Haller and Foer said the company is initiating 2026 adjusted EPS guidance from continuing operations of $4.17 to $4.32. They also introduced a long-term target of 12% to 14% adjusted EPS CAGR through 2030 from a 2025 base, citing expected regulatory improvements in Arizona and Nevada, continued customer growth, disciplined cost management, and incremental earnings from Great Basin assumed to enter service late 2028. Foer added the company expects growth to be “front-end loaded,” with modeling suggesting roughly 15% to 17% EPS growth over 2028-2029 depending on construction timing, AFUDC, and earned ROE improvement.
Management also announced the board approved a 4% dividend increase beginning with the second-quarter 2026 payout, raising the annualized dividend to $2.58 per share from $2.48. Executives said they intend to pursue responsible annual dividend growth while funding more than $6 billion of planned capital investment through 2030, and suggested larger dividend increases could become possible as cash earnings grow, particularly after Great Basin is in service.
About Southwest Gas (NYSE:SWX)
Southwest Gas Corporation (NYSE: SWX) is a publicly traded natural gas utility that provides regulated gas distribution services to residential, commercial, industrial and electric generation customers. The company’s core activities include the transportation, distribution and sale of natural gas through an extensive network of pipelines, service lines and metering facilities. Southwest Gas also offers related services such as system maintenance, pipeline safety inspections, emergency response and line extensions to support customer growth and ensure reliable gas delivery.
Founded in 1931 in southern Nevada, Southwest Gas has grown through strategic acquisitions and organic expansion to become one of the nation’s larger natural gas utilities by customer count.
