# Southwest Gas Holdings, Inc.: Form 10-K for the period ended Dec 31, 2024 - Company: [Southwest Gas Holdings, Inc.](/companies/swx.md) (CIK 1692115) - Form: 10-K - Filed: 2025-02-26 - Accepted by EDGAR: Feb 26, 2025, 08:12 ET - Period: 2024-12-31 - Accession: 0001692115-25-000082 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/1692115/000169211525000082/swx-20241231.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1692115/000169211525000082/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2024-12-31. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Cost of revenue | 12 months, 2024-01-01 to 2024-12-31 | $2.42bn | us-gaap:CostOfGoodsAndServicesSold | | Operating income | 12 months, 2024-01-01 to 2024-12-31 | $483.8m | us-gaap:OperatingIncomeLoss | | Interest expense | 12 months, 2024-01-01 to 2024-12-31 | $297.0m | us-gaap:InterestExpenseNonoperating | | Income tax | 12 months, 2024-01-01 to 2024-12-31 | $36.5m | us-gaap:IncomeTaxExpenseBenefit | | Net income | 12 months, 2024-01-01 to 2024-12-31 | $198.8m | us-gaap:NetIncomeLoss | | Diluted EPS | 12 months, 2024-01-01 to 2024-12-31 | $2.76 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 12 months, 2024-01-01 to 2024-12-31 | $2.77 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 12 months, 2024-01-01 to 2024-12-31 | 72,032,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 12 months, 2024-01-01 to 2024-12-31 | $1.36bn | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 12 months, 2024-01-01 to 2024-12-31 | $945.9m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment | | Dividends paid | 12 months, 2024-01-01 to 2024-12-31 | $177.8m | us-gaap:PaymentsOfDividendsCommonStock | | Cash and equivalents | at 2024-12-31 | $363.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2024-12-31 | $1.46bn | us-gaap:AssetsCurrent | | Total assets | at 2024-12-31 | $12.02bn | us-gaap:Assets | | Current liabilities | at 2024-12-31 | $1.83bn | us-gaap:LiabilitiesCurrent | | Long-term debt | at 2024-12-31 | $4.35bn | us-gaap:LongTermDebtNoncurrent | | Current portion of debt | at 2024-12-31 | $30.0m | us-gaap:LongTermDebtCurrent | | Short-term borrowings | at 2024-12-31 | $680.0m | us-gaap:ShortTermBorrowings | | Shareholders' equity | at 2024-12-31 | $3.50bn | us-gaap:StockholdersEquity | ## Business As filed, 48,670 characters. The Company, a Delaware corporation, is a holding company headquartered in Las Vegas, Nevada, owning all of the shares of common stock of Southwest Gas; until April 22, 2024, all of the shares of common stock of Centuri; and until February 14, 2023, all of the shares of common stock of MountainWest. References throughout this document to Centuri relate to Centuri Group, Inc. for periods prior to April 22, 2024, or subsequently, to Centuri Holdings, Inc. Following the sale of MountainWest, the Company operates two business segments, Natural Gas Distribution and Utility Infrastructure Services. The Company is incorporated in Delaware and Southwest Gas is incorporated in California. The Company, through its primary operating wholly-owned subsidiary Southwest Gas, engages in the business of purchasing, distributing, and transporting natural gas for its customers. Southwest Gas is a dynamic energy company committed to exceeding the expectations of its more than two million customers throughout Arizona, Nevada, and California by providing safe and reliable service while innovating sustainable energy solutions to fuel the growth in its communities. In addition, the Company is the majority owner of Centuri, which provides comprehensive utility infrastructure services across North America. In December 2022, the Company announced that its Board unanimously determined to take strategic actions to simplify the Company’s portfolio of businesses. These actions included entering into a definitive agreement to sell 100% of MountainWest to Williams. The MountainWest sale closed on February 14, 2023. As such, limited information with respect to MountainWest is included in this Annual Report on Form 10-K. 7 Also as part of this simplification strategy, the Company previously communicated that it would pursue a separation of Centuri from the Company. In April 2024, the Company and Centuri announced the completion of the Centuri IPO. Following the Centuri IPO, the Company owns approximately 81% of Centuri’s common stock. Through the first quarter of 2024 and leading up to the Centuri IPO, Centuri was a wholly owned subsidiary of the Company. Centuri continues to be consolidated as an operating segment of the Company and under the Internal Revenue Code, and will continue to be consolidated until such time as the conditions for consolidation are no longer met. Centuri now makes separate filings with the SEC as a public company. The Company’s common stock continues to trade under the ticker symbol “SWX,” while Centuri’s common stock trades under the ticker symbol “CTRI.” See **Note 15 - Dispositions** in the Notes to the Consolidated Financial Statements in Item 8. Southwest Gas and its subsidiaries provide regulated natural gas delivery services to customers in portions of Arizona, Nevada, and California to meet heating, cooking, and other household needs in residential communities across these territories, as well as to facilitate the ongoing business operations of commercial and industrial customers. Southwest Gas makes investments in infrastructure to support customer demand associated with population growth and economic development activity, and the safe and reliable operation of its system through adherence to integrity management programs. Public utility rates, practices, facilities, and service territories of Southwest Gas are subject to regulatory oversight. The timing and amount of rate relief can materially impact results of operations. Natural gas purchases and the timing of related recoveries can materially impact liquidity. Results for the natural gas distribution segment are higher during winter periods due to the seasonality incorporated in its regulatory rate structures. Centuri is a strategic utility infrastructure services company dedicated to partnering with North America’s electric and gas providers to build and maintain the energy network that powers millions of homes across the U.S. and Canada. Centuri’s skilled workforce delivers a comprehensive and integrated array of solutions through its primary operating companies: NPL, NPL Canada, Neuco, Linetec, Riggs Distler, and National. Centuri has strategically expanded its geographic reach and service offerings through organic and inorganic growth to better meet diverse customer needs across both electric and gas infrastructure, including growing customer attention to achieving environmental objectives. Utility infrastructure services activity is seasonal in most of Centuri’s operating areas. Peak periods are the summer and fall months in colder climate areas, such as the northeastern and midwestern U.S. and in Canada. In warmer climate areas, such as the southwestern and southeastern U.S., utility infrastructure services activity continues year round. The availability of customer-provided materials, input costs, nature of specific customer contracts, and timing of incorporation of costs in change orders, if at all, can materially impact results. Financial information concerning the Company’s business segments is included in **Note 13 - Segment Information** of the Notes to the Consolidated Financial Statements in Item 8. The Company maintains a website (www.swgasholdings.com) for the benefit of stockholders, investors, customers, and other interested parties. Similarly, Southwest Gas maintains a website (www.swgas.com) mainly focused on utility operations. The annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available, free of charge, through the SEC’s website at www.sec.gov and the www.swgasholdings.com website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. All Company SEC filings are also available on the www.swgasholdings.com website. Nothing included on our website shall be deemed to be a part of this Annual Report on Form 10-K. The Corporate Governance Guidelines, Code of Business Conduct and Ethics, and charters of the Nominating and Corporate Governance, Audit, and Compensation Committees of the Board are also available on the www.swgasholdings.com website. Print versions of these documents are available to stockholders upon request directed to the Corporate Secretary, Southwest Gas Holdings, Inc., 8360 S. Durango Drive, Las Vegas, NV 89113. 8 ### NATURAL GAS DISTRIBUTION ### General Description Southwest Gas is subject to regulation by the ACC, the PUCN, and the CPUC. These commissions regulate public utility rates, practices, facilities, and service territories in their respective states. The CPUC also regulates the issuance of all debt securities by Southwest Gas, with the exception of short-term borrowings. Certain accounting practices, transmission facilities, and rates are subject to regulation by the FERC. Centuri, by contrast, is not rate regulated by the state utilities commissions or by the FERC in any of its operating areas. As of December 31, 2024, Southwest Gas purchased and distributed or transported natural gas to approximately 2,258,000 residential, commercial, and industrial customers in geographically diverse portions of Arizona, Nevada, and California. Southwest Gas added 41,000 first-time meter sets during 2024. The table below lists the percentage of operating margin (operating revenues less net cost of gas) by major customer class for the years indicated: | For the Year Ended December 31, | Distribution Residential and Small Commercial | Other Sales Customers | Transportation | | --- | ---: | ---: | ---: | | 2024 | 85% | 4% | 11% | | 2023 | 85% | 4% | 11% | | 2022 | 85% | 4% | 11% | Southwest Gas is not dependent on any one or a few customers such that the loss of any one or several would have a significant adverse impact on earnings or cash flows. Transportation of customer-secured gas to end-users accounted for 42% of total system throughput in 2024, but represents only 11% of operating margin as shown in the table above. Customers who utilized this service transported 93 million dekatherms in 2024, 86 million dekatherms in 2023, and 93 million dekatherms in 2022. The demand for natural gas is seasonal, with greater demand in the colder winter months and decreased demand in the warmer summer months. It is the opinion of management that comparisons of earnings for interim periods do not reliably reflect overall trends and changes in operations due to this seasonality. The decoupled rate mechanisms in place in the three state service territories, as described below, are structured with seasonal variations. Also, earnings for interim, or any, periods can be significantly affected by the timing of general rate relief. ### Rates and Regulation Rates that Southwest Gas is authorized to charge its distribution system customers are determined by the ACC, PUCN, and CPUC, primarily in general rate cases, and are notably derived using rate base, cost of service, and cost of capital experienced in an historical test year, as adjusted in Arizona and Nevada, and projected for a future test year in California. The FERC regulates the northern Nevada transmission and LNG storage facilities of Great Basin, a wholly owned subsidiary, and the rates it charges for transportation of gas directly to certain end-users and to various LDCs. The LDCs transporting on the Great Basin system are NV Energy (serving Reno and Sparks, Nevada) and Southwest Gas (serving Truckee, South and North Lake Tahoe in California, and various locations throughout northern Nevada). Rates charged to customers vary according to customer class and rate jurisdiction and are set at levels that are intended to allow for the recovery of all commission-approved costs, including a return on rate base sufficient to pay interest on debt as well as a reasonable return on common equity in financing rate base investments. Rate base consists generally of the original cost of utility plant in service, net of amounts associated with costs borne by third parties, plus certain other assets such as working capital and inventories, less accumulated depreciation on utility plant in service, net deferred income tax liabilities, and certain other deductions. Southwest Gas files rate cases frequently, as necessary or required, to reduce the effect regulatory lag may have on revenue levels necessary to support its cost to serve customers, and in turn, to better align actual returns with allowable returns designed/authorized in rate proceedings. Rate structures in all service territories allow Southwest Gas to separate or “decouple” the recovery of operating margin from natural gas consumption, though decoupled structures (alternative revenue programs) vary by state. In California, authorized operating margin levels vary by month. In Nevada and Arizona, the decoupled rate structures apply to most customer classes on the basis of margin per customer, which varies by month. Collectively, these mechanisms provide stability in annual operating margin. Nearly all of our customers, and resulting revenue and margin, are included as part of mechanisms that reduce the impact of weather and volume variability on our earnings. 9 Rate schedules in all service areas contain deferred energy or purchased gas adjustment provisions, which allow Southwest Gas to file for rate adjustments as the cost of purchased gas changes. Deferred energy and PGA rate changes affect cash flows, but have no direct impact on profit margin. Filings to change rates in accordance with PGA clauses are subject to audit by the appropriate state regulatory commission staff. Information with respect to recent general rate cases, PGA filings, and other regulatory proceedings can be found in the Rates and Regulatory Proceedings section of Management’s Discussion and Analysis included in Item 7. The table below lists recent docketed general rate filings and the status of such filing within each ratemaking area: | Ratemaking Area | Type of Filing | Month Filed | Month Final Rates Effective | | --- | --- | --- | --- | | Arizona\* | General rate case | December 2021 | February 2023 | | California: | | | | | Northern, Southern, and South Lake Tahoe\*\* | General rate case | August 2019 | January 2021 | | Nevada: | | | | | Northern and Southern | General rate case | September 2023 | April 2024 | | FERC: | | | | | Great Basin\*\*\* | General rate case | March 2024 | November 2024 | \*Southwest Gas filed a general rate case in Arizona in February 2024, with rates expected to be effective in April 2025. \*\*Southwest Gas filed a general rate case in California in September 2024, with rates expected to be effective in January 2026. \*\*\*Great Basin filed notice of a change in rates in March 2024. Motion rates, subject to refund, became effective September 2024 with a final decision expected in the second quarter of 2025. ### Demand for Natural Gas Deliveries of natural gas by Southwest Gas are made under a priority system established by state regulatory commissions. The priority system is intended to ensure that the gas requirements of higher-priority customers, primarily residential customers and other customers who use 500 therms or less of gas per day, are fully satisfied on a daily basis before lower-priority customers, primarily electric utility and large industrial customers able to use alternative fuels, are provided any quantity of gas or capacity. Demand for natural gas is greatly affected by temperature. On cold days, use of gas by residential and commercial customers can be as much as seven times greater than on warm days because of increased use of gas for space heating. To fully satisfy this increased high-priority demand, gas is withdrawn from storage in certain service areas, or peaking supplies are purchased from suppliers. If necessary, service to interruptible lower-priority customers may be curtailed to provide the needed delivery system capacity. Southwest Gas maintains no significant backlog on its orders for gas service. ### Natural Gas Supply Southwest Gas is responsible for acquiring and arranging delivery of natural gas to its system in sufficient quantities to meet its customers’ needs. Southwest Gas’ primary natural gas procurement objective is to ensure that adequate supplies of natural gas are available at a reasonable cost. Southwest Gas acquires natural gas from a wide variety of sources with a mix of purchase provisions, which includes spot market and firm supplies. The purchases may have terms from one day to several years and utilize both fixed and indexed pricing. During 2024, Southwest Gas acquired natural gas from 44 suppliers. Southwest Gas regularly monitors the number of suppliers, their performance, and their relative contribution to the overall customer supply portfolio. New suppliers are contracted when possible, and solicitations for supplies are extended to the largest practicable list of suppliers, taking into account each supplier’s creditworthiness. Competitive pricing, flexibility in meeting Southwest Gas’ requirements, and demonstrated reliability of service are instrumental to any one supplier’s inclusion in Southwest Gas’ portfolio. The goal of this practice is to mitigate the risk of nonperformance by any one supplier and ensure competitive prices in the portfolio. Balancing reliability with supply cost results in a continually changing mix of purchase provisions within the supply portfolios. To address the unique requirements of its various market areas, Southwest Gas assembles and administers a separate natural gas supply portfolio for each of its jurisdictional areas. Southwest Gas facilitates most natural gas purchases through competitive bid processes. To mitigate customer exposure to short-term market price volatility, during 2024 Southwest Gas sought to fix the price on a portion of its forecasted annual normal-weather volume requirement (up to 25% in the California jurisdiction and to a limited extent, in the Arizona jurisdiction), primarily using firm, fixed-price purchasing arrangements that are secured periodically throughout the year. Southwest Gas does not currently plan to make fixed-price term purchases broadly other than in California (as set forth above), nor engage in financial swap transactions for any of its territories. However, plans could change as Southwest Gas monitors conditions and collaborates with regulatory commissions over time. 10 For the 2024/2025 heating season, firm fixed-price physical commodity purchases ranged from approximately $4.18 to approximately $6.53 per dekatherm. Southwest Gas makes natural gas purchases, not covered by firm fixed-price contracts, under variable-price contracts with firm quantities or on the spot market. Prices for these contracts are determined at the beginning of each month to reflect that month’s published first-of-month index price or based on a published daily price index. These monthly or daily index prices are not published or known until the purchase period begins. The baseload firm natural gas supply arrangements are structured such that Southwest Gas must nominate a stated volume of natural gas and the supplier must confirm that nomination. Contracts provide for fixed or market-based penalties to be paid by the non-performing party. Storage availability may influence the average annual price of natural gas, as storage may allow a company to purchase natural gas quantities during the off-peak season and store it for use in high demand periods when prices may be greater or supplies/capacity, tighter. Dependent upon the rate jurisdiction, Southwest Gas has some access to storage services, but overall there are small quantities of storage services available for Southwest Gas’ use. For available storage services, Southwest Gas purchases natural gas for injection during the off-peak period for use in the high demand months; however, since storage is limited, its impact is also limited in regard to Southwest Gas’ annual average price of natural gas. Additionally, Southwest Gas utilizes most available storage services for operational purposes to meet customer demand and not for economic purposes. This also limits the influence the available storage services have on Southwest Gas’ average annual price of natural gas. Southwest Gas receives supply area storage services from Spire Storage West that is used for the southern Nevada rate jurisdiction, but could also be used to service the northern Nevada or northern California rate jurisdictions. Southwest Gas generally has limited market area storage services availability for the southern and northern California, northern Nevada, and Arizona rate jurisdictions. The following summarizes Southwest Gas’ access to storage services for those rate jurisdictions. Southwest Gas has a storage services contract with Southern California Gas Company for use only within Southwest Gas’ southern California rate jurisdiction. Southwest Gas contracts for storage services from Great Basin’s above-ground LNG facility. This storage service generally provides vaporization and injection, as well as peaking capability only for the northern Nevada and northern California rate jurisdictions. Southwest Gas also has interruptible storage contracts with NWPL for the northern Nevada and northern California rate jurisdictions. NWPL has the discretion to limit Southwest Gas’ ability to inject or withdraw from this interruptible storage, which consequently limits Southwest Gas’ use of this interruptible storage capacity. As such, this storage provides limited operational flexibility to adjust daily flowing supplies to meet demand. For the Arizona rate jurisdiction, Southwest Gas operates a 233,000 dekatherm above-ground LNG facility in southern Arizona. This facility is intended to enhance service reliability and flexibility in natural gas deliveries in the area by providing a local storage option that is operated by Southwest Gas and connected directly to its distribution system. Natural gas supplies for Southwest Gas’ southern system (Arizona, southern Nevada, and southern California jurisdictions) are primarily obtained from producing regions in Colorado and New Mexico (San Juan basin), Texas (Permian basin), and Rocky Mountain areas. For its northern system (northern Nevada and northern California properties), Southwest Gas primarily obtains natural gas from Rocky Mountain producing areas and from Canada. The landscape for national natural gas supply is continuously changing, including impacts related to governmental policies. Advanced drilling techniques continue to provide access to abundant and sustainable natural gas supplies. The natural gas market has responded to the abundant supply of natural gas at prices that are competitive with other forms of energy. Natural gas prices were relatively stable in 2024 when compared to the latter part of 2022 and early 2023 as upstream maintenance events have been resolved and storage inventory impacting the southwest region has replenished to above 5-year average levels. Current forecasts show that an ample and diverse natural gas supply continues to be available to Southwest Gas’ customers at a competitive price when compared to competing energy forms. Southwest Gas arranges for transportation of natural gas to its Arizona, Nevada, and California service territories through the pipeline systems of El Paso, Kern River, Transwestern, NWPL, Tuscarora, Southern California Gas Company, Great Basin, and Ruby, costs for which are recovered from Southwest Gas’ customers through each states’ respective PGA mechanism. Southwest Gas regularly monitors short- and long-term supply and pipeline capacity availability to ensure the reliability of service to its customers. Southwest Gas currently receives firm transportation service, both on a short- and long-term basis, for all its service territories on the pipeline systems noted above. Southwest Gas also contracts for firm natural gas supplies that are delivered to its city gates to supplement its firm capacity on the interstate pipelines and to meet projected peak-day demands. Southwest Gas could also utilize its interruptible contracts on the interstate pipelines for the transportation of additional natural gas supplies. 11 Southwest Gas believes that the current levels of contracted firm interstate capacity and delivered purchases are sufficient to serve each of its service territories’ forecasted peak-day requirements. As the need arises to acquire additional capacity on one of the interstate pipeline transmission systems and to secure additional supply, primarily due to customer growth, Southwest Gas will continue to consider available options to obtain that capacity (either through the use of firm contracts with a pipeline company or by purchasing capacity on the open market), and will also consider options for the purchase of additional firm delivered natural gas supplies. ### Competition Electric utilities are the principal competitors of Southwest Gas for the residential and small commercial markets throughout its service areas. Competition for space heating, general household, and small commercial energy needs generally occurs at the initial installation phase when the customer/builder typically makes the decision as to which type of equipment to install and operate. The customer will generally continue to use the chosen energy source for the life of the equipment, meaning that notwithstanding a premise vacancy, customers will continue their service each month and on an ongoing basis. Southwest Gas interfaces with regulators and directly with the various home builders and commercial property developers in its service territories to ensure that natural gas appliances are considered in new developments and commercial centers. As a result of these efforts, Southwest Gas has continued to experience growth in the new construction market among residential and small commercial customer classes. In 2024, Southwest Gas provided natural gas to a large majority of the new homes constructed during the year in the major metropolitan markets composing our service territories. Certain large commercial, industrial, and electric generation customers have the capability to switch to alternative energy sources. To date, Southwest Gas has been successful in retaining most of these customers by setting rates (subject to conditions of the respective state tariffs) at levels competitive with commercially available alternative energy sources such as electricity and fuel oils. To address potential state policies surrounding electrification and reducing fossil fuels, Southwest Gas has taken steps to align with these efforts by supporting energy efficiency in our jurisdictions, being part of GHG protocols and initiatives in California, partnering on hydrogen blending innovation, and creating new biogas and RNG tariff schedules in Arizona, California, and Nevada. In 2023, the legislature in Nevada passed SB 281 that establishes a long-term planning process for gas utilities before the PUCN. Under SB 281, natural gas utilities are required to file a three-year plan to include current and projected demands, significant projects and investments, energy efficiency and load management programs, and renewable energy and low carbon fuel initiatives. The bill creates an opportunity to seek regulatory pre-approval for certain investments and reinforces natural gas’ role in providing safe, reliable, and affordable energy. Proposed draft regulations are pending final adoption. The first plan under the new law is required to be filed by October 1, 2025. Additionally, Arizona has in place certain protections prohibiting municipalities and counties from banning or restricting natural gas use. Specifically, it prevents municipalities and counties from adopting a code, ordinance, land use regulation, or general or specific plan that would prohibit or have the effect of restricting a person’s or entity’s ability to use the services of a utility provider that is capable and authorized to provide service, and also prevents municipalities and counties from denying a building permit or imposing discriminatory fees or requirements on a building permit based on the utility provider proposed to serve a project. While certain forms of renewable energy initiatives compete with natural gas, the abundance, low cost, resiliency, and reliability of natural gas, as well as the convenience and comfort it provides to our customers, result in competitive advantages across our portfolio of customers. Overall, management does not anticipate any material adverse impact on operating margin from fuel switching or alternative energy initiatives over the near term. See also “Environmental Matters” below. Southwest Gas competes with interstate transmission pipeline companies, such as El Paso, Kern River, Transwestern, Tuscarora, and Ruby to provide service to certain large end-users. End-use customers located in proximity to these interstate pipelines pose a potential bypass threat. Southwest Gas closely monitors each customer situation and provides competitive service in order to retain the customer. Southwest Gas has remained competitive through the use of negotiated transportation contract rates (subject to conditions of the respective state tariffs), special long-term contracts with electric generation and cogeneration customers, and other tariff programs. These competitive response initiatives have mitigated the loss of operating margin earned from large customers. ### Environmental Matters Federal, state, and local laws and regulations governing the discharge of materials into the environment have a direct impact upon Southwest Gas. Environmental efforts, with respect to matters such as storm water management, emissions of air pollutants, hazardous material management, and protection of endangered species and archaeological resources, directly impact the complexity and time required to obtain pipeline rights-of-way and construction permits. There have also been several federal and state legislative and regulatory initiatives proposed and implemented in recent years attempting to control or limit the effects of global warming and overall climate change, including those focused on GHGs, such as carbon dioxide or methane. The adoption of this type of legislation by Congress or similar legislation by state governments mandating a substantial reduction in GHGs, reduction in pipeline or project permitting, or decarbonization generally, could have significant impacts on the energy industry. Such new legislation or regulations could result in increased energy costs overall, increased 12 compliance costs or additional operating restrictions on our business, affect the demand for natural gas, or impact the supply costs we incur and prices we charge our customers. Additionally, it is not uncommon for outgoing or incoming U.S. administrations to vary energy policy and to take certain executive actions related thereto, from limiting or expanding federal land leases and permits for the extractive or mid-stream industries, to limiting offshore energy activities, or others. At this time, we cannot predict the potential impact of such actions, laws or regulations, if adopted or upheld, on our future business, financial condition, or results. However, increased environmental legislation and regulation can be beneficial to the natural gas industry. Natural gas can be more environmentally friendly than many other fuels currently available and its use can help energy users comply with stricter environmental air quality standards. While motor vehicle transportation is typically cited as the leading source of carbon dioxide emissions in the U.S., natural gas for residential consumption/use is cited as accounting for approximately 6% of total U.S. GHG emissions (U.S. EPA, 2024). Southwest Gas remains committed to providing customers with safe, reliable, sustainable, and affordable natural gas service and continues to work with policy makers and regulators to support and adopt renewable initiatives and expanded use of RNG and CNG as a transportation fuel. Additionally, Southwest Gas is investigating blending hydrogen into its gas supply. Southwest Gas serves multiple companies with CNG across Arizona and Nevada, in addition to supporting a regional transportation customer in Nevada with its fleet’s RNG and CNG needs. Southwest Gas has converted part of its own vehicle fleet to CNG. These steps demonstrate part of our response to support state GHG emission reduction goals where they exist. In recent years, regulatory activity in Arizona, California, and Nevada led to provisions allowing for the development of RNG projects. In addition, proposals were previously made in all three states to allow Southwest Gas to purchase RNG as part of its gas supply portfolio; in the California and Nevada jurisdictions, those proposals have been accepted by regulators or legislative bodies. The U.S. and State of California EPA regulations require the reporting of GHG emissions from large sources and suppliers in order to facilitate the development of policies and programs to reduce GHG emissions. Southwest Gas reports required information to the U.S. and State of California EPA under respective rules, including the volumes of natural gas that it receives for distribution to LDC customers, and the GHG emissions that result from the operation of its LDC pipelines. California legislation and regulations promulgated by the CARB require Southwest Gas to comply with the California GHG Emissions Reporting Program and the California Cap and Trade Program, which is intended to help the state reach its goal of reducing GHG emissions to 40% below 1990 levels by 2030. Southwest Gas must report annual GHG emissions each year. The CARB annually allocates to Southwest Gas a certain number of allowances based on Southwest Gas’ reported 2011 GHG emissions. Of those allocated allowances, Southwest Gas must consign a certain percentage to the CARB for auction. Southwest Gas can use any allocated allowances that remain after consignment, along with allowances it can purchase through CARB auctions or reserve sales, or through over-the-counter purchases with other market participants, to meet its compliance obligations. As part of this program, there are ongoing annual and three-year compliance periods. Southwest Gas successfully met its earlier compliance obligations by surrendering a sufficient number of allowances prior to the required date. Most recently, Southwest Gas met the 2024, as well as its three-year compliance obligation ending in 2023, by surrendering a sufficient number of allowances and carbon offsets prior to November 1, 2024. In 2022, Southwest Gas purchased carbon offsets that were used to meet its compliance obligation. Carbon offsets can only be used to satisfy a portion of the compliance obligations, and those combined with ongoing allowance purchases supported compliance years through 2024. The CPUC previously issued a decision that provides for the regulatory treatment of the program costs. The decision also implemented the California Climate Credit in October 2018, representing a return of auction proceeds, which is updated annually and normally distributed each April. There is no expected direct impact on earnings. California legislation and regulations require Southwest Gas to incorporate RNG produced from diverted waste into its California gas supply portfolios. Southwest Gas representatives have been actively working with the other major California natural gas distribution companies and the state’s regulatory bodies on the processes, procedures, and plans needed to meet this requirement. During the fourth quarter of 2023, Southwest Gas issued a request for proposal seeking RNG supplies compatible with the requirements and received responses in early 2024. Southwest Gas is in the process of completing the purchase of selected RNG supplies. Southwest Gas will need to file with the CPUC for approval of the RNG purchase agreements and to receive regulatory treatment for any above-market costs. There is no expected direct impact on earnings. In October 2023, California Governor Gavin Newsom signed into law two state senate bills and one state assembly bill that collectively require certain public and private U.S. companies that perform certain business activities in California to provide disclosures about their GHG emissions, climate-related financial risks, VCOs, and certain climate-related emission claims. The two senate bills, SB 253, Climate Corporate Data Accountability Act, and SB 261, Greenhouse Gases: Climate-Related Financial Risks, establishing the first U.S. regulations that mandate the corporate reporting of GHG emissions and climate risks in the U.S. The assembly bill, AB 1305, Voluntary Carbon Market Disclosures, is intended to combat companies’ “greenwashing” of climate-related emission claims and establishes requirements for both U.S. and international entities that 13 market or sell VCOs within California as well as entities that operate in California and make certain climate-related emission claims (whether or not they purchase or use VCOs). In 2024, a follow up bill, SB 219, was passed modifying some of the reporting requirements under SB 253 and SB 261 by delegating implementation authority to CARB and extending the timeline the agency has to adopt implementation regulations to July 1, 2025. Reporting under SB 253 is required starting in 2026, reporting under SB 261 is required on or before January 1, 2026, and AB 1305 was effective January 1, 2024; however, the reporting obligations of the earliest compliance date do not apply, as Southwest Gas does not currently have a voluntary carbon offset program in California. ### UTILITY INFRASTRUCTURE SERVICES Centuri is a strategic utility infrastructure services company dedicated to partnering with North America’s gas and electric providers to build and maintain the energy network that powers millions of homes across the U.S. and Canada. Centuri’s skilled workforce delivers a comprehensive and integrated array of solutions through its operating companies. Centuri derives revenue primarily from installation, replacement, repair, and maintenance of energy networks. The primary focus of Centuri operations is the replacement of natural gas distribution pipelines and electric service lines, as well as new infrastructure installations. Centuri has formalized a service offering for emergency utility system restoration services to bring customers’ above-ground utility infrastructure back online following regional storms and other extreme weather events. Utility infrastructure services work varies from relatively small projects to the installation of infrastructure for entire residential communities or business parks. Centuri seeks to build long-term relationships with customers to meet their needs across geographies and across both gas and electric infrastructure. Utility infrastructure services activity is seasonal in many of Centuri’s operating areas. Peak periods are the summer and fall months in colder climate areas, such as the northeastern and midwestern U.S. and Canada. In warmer climate areas, such as the southwestern and southeastern U.S., utility infrastructure services activity typically continues year round. During recent years, various factors resulted in an increase in large multi-year utility system replacement programs and expanded protocols. The U.S. Department of Transportation’s PHMSA instituted DIMP, which required operators of gas distribution pipelines to develop and implement integrity management programs to enhance safety by identifying and reducing pipeline integrity risks as well as the establishment of transmission planning requirements to encourage development of electric transmission infrastructure projects. In 2020, PHMSA issued its final “Mega Rule,” including requirements for reconfirming transmission pipeline maximum allowable operating pressure and verification of pipeline materials, in addition to expanding assessments and requirements for work in moderate consequence areas, among other things. Then, in March 2022, and August 2022, PHMSA issued rules amending federal pipeline safety regulations applicable to valve installation and minimum rupture detection standards for transmission pipelines, and amendments applicable to transmission pipeline integrity management, effective in October 2022 and May 2023, respectively. Even with the regulations in place having spurred significant investment in recent years, substantial opportunity is believed to continue to exist, given multi-decade infrastructure modernization demand expected across North America due to PHMSA-related reports on early vintage systems in operation and in need of upgrade. Likewise, there has been significant attention placed on electric grid modernization through national infrastructure legislation and related initiatives such as the U.S. Energy Policy Act of 2005, which established mandatory electric grid reliability standards and incentivized investments in transmission and distribution systems. The Inflation Reduction Act also included a number of provisions to accelerate the deployment of clean energy technologies, including incentives for the buildout of necessary electric infrastructure. According to the Department of Energy, almost 70% of electric infrastructure in North America is over 25 years old. Recent legislation and the result of aging electric utility infrastructure creates a growing need for investment in the electrical grid as well as related delivery system hardening, which will also help withstand more frequent adverse weather events and support renewable energy innovation. Given the expected demand for replacements and upgrades, Centuri is well positioned to support continued growth in the industries it serves. Centuri’s contract terms with utility customers generally specify unit-price or T&M terms under MSAs, and occasionally, fixed-price arrangements for bid work. Unit-price contracts establish prices for all of the various services to be performed during the contract period. These contracts often have annual pricing reviews that provide an opportunity for Centuri to reflect anticipated increases in labor costs. Centuri customers supply materials required for building and maintenance services under the majority of Centuri’s contracts, and thus, increased costs of materials generally do not present a direct material risk to Centuri. During 2024, approximately 80% of revenue was earned under unit-price and T&M contracts. Storm restoration services are often contracted under T&M rates and generally involve a higher number of hours worked per day given the emergency response nature of the work performed. Centuri maintains an average customer relationship tenure of more than 20 years, supported by its commitments to safety, quality, community engagement, and workforce development. Materials used by Centuri in its utility infrastructure service activities are typically specified, purchased, and supplied by Centuri’s customers. Contracts with customers also contain provisions which make customers generally liable for remediating environmental hazards encountered during the construction process. Such hazards might include digging in an area that was 14 contaminated prior to construction, finding endangered animals, digging in historically significant sites, etc. Otherwise, Centuri’s operations have limited environmental impact (dust control, normal waste disposal, handling harmful materials, etc.). Competition within the industry has traditionally been limited to several regional and numerous local competitors in what has been a largely fragmented industry. Some national competitors also exist within the industry. Centuri operates in 87 primary locations across 45 U.S. states and two Canadian provinces, with its corporate headquarters located in Phoenix, Arizona. During 2024, Centuri served over 400 customers. Southwest Gas accounted for approximately 4% of total revenue. Three additional customers accounted for approximately 18% of total revenue. No other customers individually accounted for 5% or more of total revenue. Centuri is not directly affected by regulations promulgated by the ACC, PUCN, CPUC, or FERC. Centuri is an unregulated subsidiary of the Company. However, because Centuri performs work for Southwest Gas, its associated costs are subject indirectly to “prudency reviews” like any other capital work performed by third parties or directly by Southwest Gas. However, these reviews do not bring Centuri under the regulatory jurisdiction of any of the commissions noted above. ### HUMAN CAPITAL Throughout our collective operations, employees are critical to our success. Their talent and dedication are what allow us to provide safe and reliable service to customers and explore new opportunities that align with our strategies, while carrying out organizational core values related to safety, quality, stewardship, integrity, relationships, and sustainability, among others. The Board oversees matters relating to our vision, values, and culture where employee health and safety; diversity, equity, and inclusion; and human and workplace rights are priorities. The Board receives regular reports from management and subject matter experts in these areas, and in turn provides guidance on current and future initiatives. The Board also assists management in integrating responsibility and sustainability into strategic activities to create long-term customer and shareholder value. The Company and the Board are committed to a culture of continuous improvement in operations and efficiency, and with respect to the safety of our employees and the communities we serve every day. Employees and contract workers receive initial safety orientation training to learn practices, procedures, and policies established by our businesses. New and recurring safety training occurs at regular intervals thereafter. Frontline safety strategies, developed with executive leadership, contribute to the improvement of our safety management systems. Safety metrics also form part of incentive compensation programs for leaders of the Company’s business segments, reinforcing our top priority to safeguard our communities, our employees, and our assets. At Southwest Gas, such metrics include Damages per 1,000 Tickets and Incident Response Time; at Centuri, they include Total Recordable Incident Rate and DART. In each case, the measures are widely used in the respective industries comprising our businesses. All segments maintain additional behavioral-based programs and extensive employee training initiatives to promote safe work. At December 31, 2024, Southwest Gas had 2,435 regular full-time equivalent employees. Southwest Gas believes that a skilled, highly trained workforce is a key to success in the utility industry, and a driver of Southwest Gas’ safety performance and high customer satisfaction ratings. Southwest Gas has a positive reputation as an employer and strong relationships with its employees. The compensation, benefits, and working conditions of Southwest Gas’ employees are comparable to those generally found in the utility industry. Employee engagement surveys are periodically deployed to gauge the extent to which employees feel connected and valued. Flexible working arrangements are available to employees, which support work-life balance. In April 2024, 69 employees from our southern California division voted in the United Steelworkers Union to represent them. Initial contract negotiations are underway. We are not aware of any organizing activities in our other locations. A stable workforce has been important to knowledge transfer and succession processes, with the average tenure of Southwest Gas employees being approximately 10 years. Germane to attracting and retaining employees are our compensation and benefits programs, which are regularly reviewed. For employees hired on or before December 31, 2021, Southwest Gas offers an employee pension and employer matching contributions to the employee defined contribution plan. Employees hired on or after January 1, 2022 do not participate in the employee pension plan, but receive non-elective employer contributions and increased employer matching contributions to the employee defined contribution plan. The health and wellness of our workforce are supported by group insurance programs, incentive programs in support of total health, and related employee programs. In 2024, Southwest Gas added a preferred provider organization option to our health care coverage, providing more choices for our employees. Southwest Gas also offers a tuition assistance program and encourages employees to leverage this program to remain current in their role or to acquire new skills for career advancement. Regular succession planning helps ensure that talent is identified and prospective leaders are developed in order to build their skills and be prepared for future roles. At December 31, 2024, Centuri had 8,687 regular full-time equivalent employees working across 45 U.S. states and two Canadian provinces. Employee counts fluctuate between seasonal periods, normally heaviest in the summer and fall. Typical of the segment’s industry, a majority of Centuri employees are represented by unions and covered by collective bargaining agreements. Centuri maintains a market-based total rewards strategy to attract, retain, motivate, and develop employees. 15 Additionally, Centuri has a scholarship program, which awards more than half of the grants to minority students who are dependents of Centuri employees. Similar employee engagement and succession planning protocols to those existing at Southwest Gas are deployed at Centuri. We commit to creating a safe and respectful workplace and strive to have a workforce that reflects the communities we serve and that benefits from diverse backgrounds, cultures, and perspectives. Our belief is that adherence to these principles forms the genesis of a workforce that is capable and inclusive. Southwest Gas and Centuri have several programs, including employee resource groups, educational outreach programs, and other initiatives designed to attract and retain a qualified and engaged workforce. Through these and other efforts, we are committed to the success of our employees and their development while ensuring equitable opportunity for everyone. ## Risk factors As filed, 69,486 characters. *Described below (and in* ***Item 7A. Quantitative and Qualitative Disclosures about Market Risk*** *of this report) are risk factors that we have identified that may have a material negative impact on our future financial performance or affect whether we achieve the goals or expectations expressed or implied in any forward-looking statements contained herein. References below to “we,” “us,” and “our” should be read to refer to Southwest Gas Holdings, Inc. and any combination of its subsidiaries, including Southwest Gas Corporation and Centuri Holdings, Inc.* ### Operational Risks **Southwest Gas relies on having access to interstate pipelines’ transportation capacity. If these pipelines and related transportation capacity were not available, it could impact Southwest Gas’ ability to meet customers’ full requirements.** Southwest Gas must acquire both sufficient natural gas supplies and interstate pipeline capacity to meet customer requirements. We must contract for reliable and adequate delivery capacity for our distribution system, while considering the dynamics of the interstate pipeline capacity market, our own on-system resources, as well as the characteristics of our customer base. Interruptions to or reductions of interstate pipeline service caused by physical constraints, other restrictions, excessive customer usage, cyber attacks, or other force majeure could reduce our normal supply of gas. Restrictions placed on pipelines or the extractive and mid-stream industries could disrupt our business and reduce cash flows and earnings. A prolonged interruption or reduction of interstate pipeline service or availability of natural gas in any of our jurisdictions, particularly during the winter heating season, would reduce cash flow and earnings. **Failure to attract and retain an appropriately qualified employee workforce, including executives and other management, could adversely affect our collective operations and ability to timely deploy on our plans.** Our ability to implement our business strategy and serve our customers is dependent upon our continuing ability to attract and retain talented professionals, including executives and other management, and a technically skilled workforce overall, and impacts our ability to transfer the knowledge and expertise of our workforce to new employees as our aging employees retire. It also impacts our ability to timely deploy on strategic initiatives we plan. Failure to attract, hire, onboard, and adequately train replacement employees, including strategic leaders, and to transfer significant internal historical knowledge and expertise to the new employees and management, or the future availability and cost of contract labor could adversely affect our ability to manage and operate our business, and to execute on our strategic plans, or to do so within the timeframes we plan. In particular, the productivity of Centuri’s labor force and its ongoing relationship with clients is largely dependent on those serving in foreman, general foreman, regional, and executive level management positions. The ability to retain these individuals, due in large part to the competitive nature of the utility infrastructure service business, is necessary for the ongoing success and growth of Centuri. Further, the competitive environment within which Centuri performs work creates pricing pressures, specifically when its unionized business segment is bidding against non-union competitors. This workforce competition, including that which exists for resources across our businesses, could adversely impact our business, financial condition, results of operations, and cash flows. Our collective businesses have recently experienced turnover, including at the executive ranks at Centuri in 2024. Turnover at these ranks can limit or delay our ability to deploy on plans, including strategic plans, which could adversely impact our business, stock price, financial condition, results of operations, and cash flows. In addition, executive leadership transition periods can often be difficult and may result in changes in leadership strategy and style. We can provide no assurances that any associated organizational change, or changes in business strategy, will be beneficial or have the desired impact on the Company. **Loss of, or a reduction in business from, one or more significant customers at Centuri could adversely affect results.** During 2024, over half of our utility infrastructure services revenues were generated from thirteen customers. This concentration of risk could impact operating results if construction work slowed or halted with one or more of these customers, if competition for work increased, or if existing contracts were not renewed or extended. 16 **Certain of our costs, such as operating expenses (including labor, fuel, and materials) at Southwest Gas and Centuri, and interest and general and administrative expenses at both segments and the Company could be adversely impacted by periods of heightened inflation, which could have an adverse impact on our results of operations.** In recent years, the consumer price index has increased substantially and may continue to remain at elevated levels for an extended period of time. Federal policies and global events, such as the volatility in prices of oil and natural gas, the recent implementation of, and potential increase in, tariffs by the current U.S. administration, retaliatory tariffs as a results thereof, or the failure of current energy policy intended to combat inflation, as well as the conflicts between Russia and Ukraine and in the Middle East, may continue to exacerbate increases in the consumer price index. In addition, during periods of rising inflation, variable interest rates and the interest rates of any newly issued debt securities will likely be higher than those incurred in connection with previous debt issuances, which will further tend to reduce returns to our stockholders. A sustained or further increase in inflation could have a material adverse impact on our operating expenses incurred in connection with, among others, the cost of fuel, labor, equipment/equipment-related, and materials costs, as well as general administrative expenses, operating supplies and expenses, and maintenance of our system, as well as increasing outlays for gas supply passed on to customers and the cost of capital improvements at Southwest Gas, in addition to requiring us to borrow amounts to fund the incremental outlays. With regard to Southwest Gas, rate schedules in each of its service territories contain purchased gas adjustment clauses which permit Southwest Gas to file for rate adjustments to recover increases in the cost of purchased gas. Increases in the cost of purchased gas have no direct impact on our profit margins, but do affect cash flows and can therefore impact the amount of our capital resources. In order to help cope with the effects of inflation on its operations, Southwest Gas has filed and may file requests for rate increases to cover the increased cost of purchased gas included in a regulatory asset when applicable or expense items noted above. However, there can be no assurance that Southwest Gas will be able to obtain timely rate relief to offset the effects of inflation or to timely or adequately cover borrowing costs to fund the increased cost of purchased gas and capital expenditures; and any non-recovery of costs or regulatory lag will reduce our cash flows and earnings. As a result, during periods in which the inflation rate exceeds customer rate increases, we may not adequately mitigate the impact of inflation, which may adversely affect our business, financial condition, results of operations, and cash flows. Additionally, inflationary pricing has had and may continue to have a negative effect on the construction costs necessary for us to complete projects at Centuri, particularly with respect to fuel, labor, and subcontractor costs discussed above. Centuri has and continues to experience pressures on fuel, materials, and certain labor costs as a result of the inflationary environment and current general labor shortage, which has resulted in increased competition for skilled labor and wage inflation. The cost of fuel is an appreciable operating expense of Centuri’s business, and significant increases in fuel prices for extended periods of time has caused, and could continue to cause, Centuri’s operating expenses to fluctuate. Centuri has not been able to (except in limited circumstances), and may not be able to, fully adjust its contract pricing to compensate for these cost increases, which has adversely affected, and may continue to adversely affect, Centuri’s profitability and cash flows. Inflationary pressures and any related recessionary concerns in light of governmental and central bank efforts to mitigate inflation could also cause uncertainty for our customers and affect the level of their project activity, which could also adversely affect our profitability and cash flows. Inflationary pressures, including any related impacts of increased indebtedness, on customers of both Southwest Gas and Centuri may influence the timely remittance (or any remittance) of customer payments for services, which may adversely affect our cash flows and associated reserves for uncollectible accounts and earnings. As a result of the inflationary factors discussed above affecting the Company, Southwest Gas, and Centuri, our business, financial condition, results of operations, cash flows, and liquidity could be adversely affected over time. **Fixed-price and unit-price contracts are subject to potential losses that could adversely affect our results of operations.** Centuri enters into a variety of types of contracts customary in the utility infrastructure services industry. These contracts include unit-priced contracts (including unit-priced contracts with revenue caps), T&M contracts, cost plus contracts, and fixed-price (lump sum) contracts. Contracts with revenue caps and fixed-price arrangements can be susceptible to constrained profits, or even losses, especially those contracts that cover an extended-duration performance period. This is due, in part, to the necessity of estimating costs at the inception of a bid process, which is far in advance of the completion date (at bid inception) of a particular project. Unforeseen inflation, operating inefficiencies due to weather-related or workmanship issues or other costs unanticipated at inception, can detrimentally impact profitability for these types of contracts, which could have an adverse impact on our financial condition, results of operations, and cash flows. Under Centuri's customer T&M contracts, Centuri is paid for labor at negotiated hourly billing rates and for certain other allowable expenses, subject to, in most cases, a specified maximum contract value. Profitability on these contracts is driven by billable headcount and cost control. Some of Centuri's T&M contracts are subject to contract ceiling amounts, and are reimbursed for allowable costs and fees, which may be fixed or performance based. If Centuri’s costs exceed the contract 17 ceiling or are not allowable under the provisions of the contract or any applicable regulations, Centuri may not be able to obtain reimbursement for all of the costs Centuri incurs, which could have an adverse impact on our financial condition, results of operations, and cash flows. Further, in Centuri’s fixed- and unit-price contracts, Centuri may provide a project completion date, and in some of its projects Centuri may commit that the project will achieve specific performance standards. Failure to complete the project as scheduled or at the contracted performance standards could result in additional costs or penalties, including liquidated damages, and such amounts could exceed expected project profit, which could have a material adverse impact on our financial condition, results of operations, and cash flows. **Centuri derives a significant portion of its revenues from long-term MSAs that may be cancelled by customers on short notice, or which Centuri may be unable to renew on favorable terms or at all.** During 2024, approximately 80% of Centuri’s total revenue was generated from long-term MSAs. Generally, Centuri’s MSAs do not require its customers to commit to a minimum amount of services. The majority of these contracts may be cancelled by Centuri’s customers for convenience upon minimal notice (typically 30 days), regardless of whether Centuri is in default. In situations where a customer determines it has cause to terminate a contract, even shorter notice is generally required (48 hours to 10 days). In addition, many of these contracts permit cancellation of particular purchase orders or statements of work without any notice or limited notice (anywhere from 48 hours to 30 days). These agreements typically do not require Centuri’s customers to assign a specific amount of work to Centuri until a purchase order or statement of work is signed. Consequently, projected expenditures by customers are not assured to generate revenue until a definitive purchase order or statement of work is placed with Centuri and the work is completed. Furthermore, Centuri’s customers generally require competitive bidding of these contracts. As a result, Centuri could be underbid by its competitors or be required to lower the prices charged under a contract being rebid. The loss of work obtained through MSAs and long-term contracts or the reduced profitability of such work, could materially and adversely affect Centuri’s business or results of operations. **The nature of our operations presents inherent risks of loss that could adversely affect our results of operations.** Our natural gas distribution operations are subject to inherent hazards and risks such as gas leaks, fires, natural disasters, catastrophic accidents, explosions, pipeline ruptures, and other hazards and risks that may cause unforeseen interruptions, personal injury, or property damage. Our utility infrastructure services operations are reliant on skilled personnel who are trained and qualified to install utility infrastructure under established safety protocols and operator qualification programs, and in conformance with mandated engineering design specifications. Lapses in judgment or failure to follow protocol could lead to warranty and indemnification liabilities or catastrophic accidents, causing property damage or personal injury. Additionally, our facilities, machinery, and equipment, including our pipelines, are subject to third-party damage from construction activities, vandalism, or acts of terrorism. Such incidents could result in severe business disruptions, significant decreases in revenues, and/or significant additional costs to us. Any such incident could have an adverse effect on our financial condition, earnings, and cash flows. In addition, any of these or similar events could result in legal claims against us, cause environmental pollution, personal injury or death claims, damage to our properties or the properties of others, or loss of revenue by us or others. The Company maintains liability insurance that covers Southwest Gas for some, but not all, risks associated with the operation of our natural gas pipelines and facilities. In connection with these liability insurance policies, each entity is responsible for an initial deductible or self-insured retention amount per incident, after which the insurance carriers would be responsible for amounts up to the policy limits. Liability insurance policies at Southwest Gas require us to be responsible for the first $1 million (self-insured retention) of each incident plus the first $4 million in total claims above our self-insured retention in the policy year; while Centuri’s self-insured retention amount is $750,000 per occurrence. We cannot predict the likelihood that any future event will occur which will result in a claim exceeding these amounts; however, a large claim for which we were deemed liable would reduce our earnings up to and including these self-insurance maximums, and uninsured claims for which we were deemed liable would reduce our earnings in the amount of the claim. **Weather conditions in our operating areas can adversely affect operations, financial position, and cash flows.** Centuri’s results of operations, financial position, and cash flows can be significantly impacted by changes in weather that affect the ability of Centuri to provide utility companies with contracted-for trenching, installation, and replacement of underground pipes, as well as maintenance services for energy distribution systems. Generally, Centuri’s revenues are lowest during the first quarter of the year due to less favorable winter weather conditions in colder areas such as the northeastern and midwestern U.S. and Canada. These conditions also require certain areas to scale back their workforce at times during the winter season, presenting challenges associated with maintaining an adequately skilled labor force when it comes time to re-staff its work crews following the winter layoffs. 18 Southwest Gas’ revenues are highest during the first and fourth quarters of the year as customer consumption increases during the winter months. While Southwest Gas has decoupling mechanisms in place in all three states in which it operates, warmer than normal weather can reduce the amount of billed revenue, as well as amounts collected or returned related to regulatory tracking mechanisms under various programs, thereby impacting cash flows. Deviations from normal weather conditions, as well as the seasonal nature of our businesses, can create fluctuations in short-term cash requirements of both Southwest Gas and Centuri, and earnings, primarily related to Centuri. **Regulatory and legislative developments related to climate change, or renewable portfolio standards or costs for renewables, may adversely affect our operations and financial results.** While natural gas can be more environmentally friendly than many other fuels currently available, and its use has assisted energy users to comply with stricter environmental air quality standards, there have been several federal and state legislative and regulatory initiatives proposed, some of which have been implemented in recent years, attempting to control or limit the effects of global warming and overall climate change, including focus on GHG emissions, such as carbon dioxide or methane. The adoption of this type of legislation by Congress or similar legislation by state governments mandating a substantial reduction in GHG emissions, or decarbonization generally, could have significant impacts on the utility industry. Any resulting legislation or regulations could result in increased compliance costs or additional operating restrictions on our business, affect the demand for natural gas and utility infrastructure services, or impact the prices we charge our customers. Furthermore, changes in renewable portfolio standards or costs related to renewable initiatives may result in decreased demand for renewable energy projects related to Centuri or Southwest Gas. Offshore wind energy and other renewable energy facilities and investments are dependent on the existence of related standards and requirements, and in some cases, government incentives. At this time, we cannot predict the likelihood of the adoption or elimination of such laws or regulations, or U.S. energy policies overall; nor can we predict potential impacts, related thereto, on our future businesses, financial condition, or results. **Southwest Gas and Centuri may be impacted by the effects of weather and climate change, including physical and transition risks.** Extreme weather events and climate change could adversely impact our businesses. To the extent climate change or extreme weather events materially increase temperatures, financial results or our financial position could be adversely affected through lower gas volumes and revenues. While Southwest Gas has in place decoupling mechanisms to guard against weather and volume variability in all three states, lower volumes could protract the period of recovery of certain regulatory mechanisms, and, for jurisdictions in which decoupling benchmarks are designed on a per-customer basis, earnings may deteriorate if these factors cause shifts in population, notably, customers moving away from our service territories. While Centuri is at times able to benefit by providing storm-restoration services in regard to its customers’ above-ground utility infrastructure, and this type of work generates a higher profit margin than core infrastructure services (due to improved operating efficiencies related to equipment utilization and absorption of fixed costs), climate change could detrimentally result in more frequent and more severe weather events, such as hurricanes, tornadoes, extreme precipitation/flooding, and extreme snow events, increasing the cost of supporting restoration or limiting access to perform the necessary work efficiently or at all. Drought and high temperature variations are common occurrences in the southwestern U.S. and could impact Southwest Gas’ growth and results of operations. In addition, if we were unable to obtain a sufficient supply of natural gas as a result of extreme weather events impacting our suppliers, or if extreme weather events impact our ability to deliver natural gas to our customers, our reputation may suffer, and financial results could be impacted by insufficient cash flows from lower billed revenues and higher borrowing costs, even if decoupling mechanisms permit recognition of revenues for later cash collection under the mechanisms. Additionally, if the Company does not evolve its business practices to participate in a lower-carbon economy, its business and reputation may be negatively impacted. Although the number of renewable energy sources is growing, it will take time for North America to transition to a lower-carbon economy and will require innovation, technological advancements, and substantial investments that result in new low- and no-carbon energy options. As a builder of both energy and renewable energy infrastructure, and as a natural gas service provider, the Company plays a vital role. Transition activities, such as reducing GHG emissions; investing in RNG, hydrogen, and other sustainable sources of energy; increasing customer participation in energy efficiency programs; displacing higher carbon intensive fuels with natural gas and reducing carbon intensity of fuels we deliver; working with upstream suppliers on certified or responsibly sourced gas; and taking additional measures by offering and using carbon offset purchases, could result in significant capital outlays and increased expenses. 19 **A cybersecurity incident has the potential to disrupt normal business operations, expose sensitive information, and/or lead to physical damages, and may result in legal claims or damage to our reputation.** As a utility provider and infrastructure services provider, maintaining business operations is critical for our customers, business partners, suppliers, and employees. Our operations and information technology systems may be vulnerable to an attack by individuals or organizations intending to disrupt our business operations and information technology systems, even though the Company has implemented policies, procedures, and controls to prevent and detect these activities. Third-party service providers, including those in our supply chain or who have access to customer and employee data or our systems, can also be the target of cyber attacks. We use our information technology systems to manage our intrastate and interstate pipeline and storage operations and other business processes. Disruption of those systems could adversely impact our ability to safely deliver natural gas to our customers and operate our pipeline and storage systems, result in harm to our reputation, and result in adverse financial impacts, including possible legal claims. We process and store sensitive information, including certain PII, intellectual property, and business proprietary information as part of normal business operations. A cybersecurity breach of this information could expose us to monetary and other damages from customers, suppliers, business partners, government agencies, and others. The federal and state legislative and regulatory environment surrounding PII, information security, and data privacy is evolving and is likely to become increasingly demanding. Should the Company experience a material breach and/or become subject to additional regulation, it could face substantial compliance costs, reputational damage, and uncertain litigation risks. Physical damage due to a cybersecurity incident or acts of cyber terrorism could impact our utility sales, transportation, storage, and related services provided to customers and could lead to material liabilities. The Company has taken the initiative in fortifying the core infrastructure that supports the provision of these services. While these measures provide layers of defense to mitigate these risks, there can be no assurance that the measures will be effective against any particular cyber attack. Even though we have insurance coverage in place for cyber-related risks, if such an attack or act of terrorism were to occur, the Company’s operations and financial results could be adversely affected to the extent not fully covered by such insurance. ### Reliance on third-party suppliers and subcontractors. While Centuri maintains oversight of third-party suppliers, subcontractors, and equipment manufacturers, it utilizes to assist with certain aspects of the work it performs for clients, any delay or failure by these parties in the completion of their portion of a given project may result in delays in the overall progress of the project or cause us to incur additional costs, thereby potentially impacting Centuri’s overall profitability. Furthermore, if Centuri’s relationship with its third-party suppliers and subcontractors were to be damaged, it may be difficult to replace them in a cost-effective manner. Reliance on similar services, and their availability, may also impact the ability of Southwest Gas to execute on its objectives for projects undertaken. **Challenges related to supply chain constraints have negatively affected, and may in the future negatively affect, Centuri’s work mix and volumes and could adversely impact our results of operations overall.** Due to increased demand across a range of industries, the global supply market for certain customer-provided components, including, but not limited to, electric transformers and gas risers needed to complete our customer projects at Centuri, has experienced isolated performance constraint and disruption in recent periods in support of a few customers. This constrained supply environment has adversely affected, and could further affect, customer-provided component availability, lead times and cost, and could increase the likelihood of unexpected cancellations or delays of supply of key components to customers, thereby leading to delays in Centuri’s ability to timely deliver projects to customers. In an effort to mitigate these risks, Centuri has redirected efforts to projects whereby the customer has provided necessary materials, but delays in materials and the costs associated with mobilizing/demobilizing workforces can lead to inefficiencies in absorption of fixed costs, higher labor costs for teams waiting to be deployed, and delays in pivoting to projects where necessary materials are available. Centuri’s efforts to adapt quickly or redeploy to other projects may fail to reduce the effects of these adverse supply chain conditions on Centuri’s business. Despite these mitigation efforts, any constrained supply conditions and future tariffs imposed on goods/supplies in addition to those pre-existing, may materially and adversely impact Centuri’s business, financial conditions, results of operations, and cash flows. Weather-related events, inflationary pressure, a fluctuating labor market, and geopolitical instability, among others, have also contributed to and exacerbated this strain within and outside the U.S., and there can be no assurance that these impacts on the supply chain will not continue, or worsen, in the future, negatively impacting any of Centuri’s operating business lines and their results. The current supply chain challenges could also result in increased use of cash, engineering design changes, and delays in the completion of projects, each of which could adversely impact our business and results of operations. In the event these supply chain challenges persist for the foreseeable future, these conditions could materially and adversely impact our results of operations and financial condition over an extended period. 20 **Disruptions in labor relations with Centuri’s employees could adversely affect results of operations.** The majority of Centuri’s labor force is covered by collective bargaining agreements with labor unions, which is typical of the utility infrastructure services industry. Labor disruptions, boycotts, strikes, or significant negotiated wage and benefit increases at Centuri, whether due to employee turnover or otherwise, could have a material adverse effect on Centuri’s business and results of operations and cash flows. **Changing and uncertain work environment and conditions at Centuri could result in delays relating to billing and payment.** Centuri performs work in a variety of geographic locations, each presenting unique environmental, surface, and subsurface conditions. As a consequence of work being performed under change orders when unexpected conditions are encountered, Centuri periodically experiences delays relating to billing and payment under these altered conditions. ### Risks Related to Previously Announced Strategic Transactions **Our options for disposing of our remaining ownership interest in Centuri may be limited by market conditions and tax considerations. Any disposition transaction of Centuri common stock may not occur on the anticipated timeline and may not have the anticipated benefits.** On December 15, 2022, we announced our intention to pursue a separation of Centuri into an independent publicly-traded company, subject to the satisfaction of certain conditions, including receipt of favorable rulings from the IRS and receipt of other regulatory approvals. On November 6, 2023, we announced that the IRS had advised us that it had exercised its discretion not to rule on certain tax questions related to a potential separation of Centuri due to the fact-intensive nature of the questions presented. On April 22, 2024, the Centuri IPO was completed. We remain committed to disposing of our remaining ownership interest in Centuri and continue to assess the value of a potential tax-free disposition of Centuri common stock. Following the Centuri IPO, we intend to fully dispose of our ownership in Centuri in one or more disposition transactions, including by way of sales of our shares of Centuri common stock, one or more exchange offers for Company shares, or distributions, or any combination thereof. While we currently intend any spin-off transaction, if effected, to qualify as a tax-free transaction to our stockholders and the Company, the availability of a tax-free spin-off will depend on the continuing satisfaction of a number of requirements, including a requirement that we own, and distribute in the spin-off, at least 80% of the outstanding voting stock of Centuri and at least 80% of any non-voting stock of Centuri. Although the agreements implementing the spin-off contain a number of provisions intended to ensure this “control” requirement and other tax-free spin-off requirements will be met, we cannot provide assurances that ultimately will be the case. For example, an issuance of additional equity by Centuri prior to a spin-off or any transaction we undertake that results in us owning less than 80% of the outstanding voting stock or less than 80% of any non-voting stock of Centuri could mean that a tax-free disposition would no longer be possible. In addition, the ability to effect a tax-free disposition for the Company (as opposed to our stockholders) could be lost if certain stock purchases (including by existing or new holders in the open market) are treated as part of a plan pursuant to which one or more persons directly or indirectly acquire a 50% or greater interest in the Company (a “355 Ownership Change”) occurs within applicable time periods for purposes of Section 355(e) of the Internal Revenue Code. We have taken certain actions, including the adoption of a plan to help preserve the tax-free nature of any disposition transaction. However, we can provide no assurance that such actions will ultimately permit us to complete a disposition transaction that is tax-free to us or our shareholders or that our existing net operating losses will fully offset the impact of any disposition transaction that is taxable to us. In addition, a disposition transaction other than a spin-off, such as a sell-down, would be taxable, causing substantial taxes to be paid or exhaust other tax net operating loss benefits otherwise available to us. Disposing of our remaining ownership interest in Centuri will also require significant time and attention from management, which could distract them from other tasks in operating our business and disrupt our operations. We cannot provide assurances that the transactions described above, if consummated, will yield greater net benefits to us and our stockholders than if the transactions described above do not occur. Further, as of the date of this Annual Report on Form 10-K, we currently hold an approximately 81% ownership interest in Centuri. We cannot predict the trading price of shares of Centuri’s common stock and the market value of the Centuri shares are subject to market volatility and other factors outside of our control. While we currently intend to divest our remaining ownership interest in Centuri over time, as described above, there can be no assurance regarding the ultimate timing of such divestiture or as to the pricing or specific terms thereof. Unanticipated developments could delay, prevent or otherwise adversely affect the divestiture, including but not limited to financial market conditions. If we fail to achieve some or all of the benefits expected to result from the Centuri IPO and/or other potential disposition transactions described above, or if such benefits are delayed, our business, operating results and financial condition could be materially and adversely affected. 21 **If we dispose of our remaining equity ownership in Centuri, our and Centuri’s operational and financial profiles will change and each will be a less diversified company than each exists today.** The disposition of our remaining ownership interest in Centuri, if effected, will result in us and Centuri being less diversified companies with more limited businesses concentrated in our respective industries. As a result, each company may be more vulnerable to changing market conditions, which could have a material adverse effect on our business, financial condition, and results of operations. In addition, the diversification of revenues, costs, and cash flows will diminish, such that each company’s results of operations, cash flows, working capital, effective tax rate, and financing requirements may be subject to increased volatility and its ability to fund capital expenditures and investments, pay dividends, and service debt may be diminished. Once we own stock representing less than 80% of the total value of all outstanding Centuri capital stock or less than 80% of the total voting power of all outstanding Centuri voting stock, Centuri will cease to be a member of the U.S. federal consolidated income tax group, of which Southwest Gas Holdings is the common parent, and the effective tax rate for each separate company will differ from our consolidated effective tax rate. **If the disposition of our remaining equity ownership in Centuri is completed, there may be changes in our stockholder base, which may cause the price of our common stock to fluctuate.** Investors holding our common stock may hold our common stock because of a decision to invest in a company that operates in multiple markets with a diversified portfolio. If we dispose of the remainder of our ownership interest in Centuri, shares of our common stock will represent an investment in a business concentrated in the natural gas distribution industry, and shares of the common stock of Centuri will represent an investment in the utility infrastructure services business. This change may not align with some stockholders’ investment strategies, which could cause them to sell their shares of our common stock or the common stock of Centuri, and excessive selling pressure could cause the market price to decrease following such disposition. Additionally, we cannot predict whether the market value of our common stock and the common stock of Centuri after we dispose of our remaining ownership interest in Centuri will be, in the aggregate, less than, equal to, or greater than the market value of our common stock prior to such disposition. **In connection with the Centuri IPO, Centuri agreed to indemnify us for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure us against the full amount of such liabilities, or that Centuri’s ability to satisfy its indemnification obligations will not be impaired in the future.** Pursuant to the separation agreement and certain other agreements with Centuri, Centuri has agreed to indemnify us for certain liabilities. However, third parties could also seek to hold us responsible for any of the liabilities that Centuri has agreed to retain, and there can be no assurance that the indemnity from Centuri will be sufficient to protect us against the full amount of such liabilities, or that Centuri will be able to fully satisfy its indemnification obligations. In addition, our and/or Centuri’s insurance coverage may not be available or sufficient to cover certain occurrences of indemnified liabilities, and in any event insurers may deny coverage for liabilities associated with certain occurrences of indemnified liabilities. Moreover, even if we ultimately succeed in recovering from Centuri or such insurance providers any amounts for which we are held liable, we may be temporarily required to bear these losses. Each of these risks could have a material adverse effect on our businesses, financial condition, and results of operations. **We or Centuri may fail to perform under various transaction agreements that were executed in connection with the Centuri IPO.** The separation agreement, the tax matters agreement, and other agreements that were entered into in connection with or as part of the Centuri IPO determine, among other matters, the allocation of assets and liabilities between the companies following the Centuri IPO for those respective areas and include related indemnifications related to liabilities and obligations. We have relied and will continue to rely on Centuri to satisfy its performance and payment obligations in good faith under these agreements. If Centuri is unable or unwilling to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties or losses. In addition, from time to time, claims, suits, or legal proceedings may arise in connection with the Centuri IPO and subsequent disposition transactions and the agreements that were entered into in connection with or as part of the Centuri IPO and subsequent disposition transactions. If we receive an adverse judgment in any such matter, we could be required to pay damages or cease certain practices or activities. Regardless of the merits of the claims, suits or other legal proceedings may be both time-consuming and disruptive to our business. The defense and ultimate outcome of any claims, suits or other legal proceedings could have a material adverse effect on our businesses, financial condition, and results of operations. **We have overlapping directors with Centuri, which may lead to conflicting interests or the appearance of conflicting interests.** Several of our directors and our CEO also serve as directors of Centuri. Our officers and members of our Board have fiduciary duties to our stockholders. Likewise, any such persons who serve as directors of Centuri have fiduciary duties to Centuri’s 22 stockholders. Therefore, such persons may have conflicts of interest or the appearance of conflicts of interest with respect to matters involving or affecting us and Centuri. The appearance of conflicts of interest created by such overlapping relationships also could impair the confidence of our investors. ### Financial, Economic, and Market Risks **As a holding company, the Company depends on operating subsidiaries to meet financial obligations.** The Company has no significant assets other than the stock of operating subsidiaries and is not expected to have significant operations on its own. The Company’s ability to pay dividends to stockholders is dependent on the ability of its subsidiaries to generate sufficient net income and cash flows to service debt and pay upstream dividends. Because of the relative size of subsidiary operations, and their relative impacts to net income and cash flows, substantial dependency on the utility operations of Southwest Gas exists. The ability of the Company to pay upstream dividends and make other distributions are subject to relevant debt covenant restrictions of subsidiaries and applicable state law. **Centuri’s clients’ budgetary constraints, regulatory support or decisions, and financial condition could adversely impact work awarded.** The majority of Centuri’s clients are regulated utilities, whose capital budgets are influenced significantly by the various public utility commissions. As a result, the timing and volume of work performed by Centuri is largely dependent on the regulatory environment in its operating areas and related client capital constraints. If budgets of Centuri’s clients are reduced, or regulatory support for capital projects and programs is diminished, it could have a material adverse effect on Centuri’s business, results of operations, and cash flows. Additionally, the impact of new regulatory and compliance requirements could result in productivity inefficiencies and adversely impact Centuri’s results of operations and cash flows, or timing delays in their realization. **Southwest Gas’ liquidity, and in certain circumstances, its earnings, may be reduced from historical amounts or expectations during periods in which natural gas prices are rising significantly or are more volatile.** Increases in the cost of natural gas may arise from a variety of factors, including weather, changes in demand, the level of production and availability of natural gas, transportation constraints, transportation capacity cost increases, federal and state energy and environmental regulation and legislation, the degree of market liquidity, natural disasters, wars and other catastrophic events, national and worldwide economic and political conditions, the price and availability of alternative fuels, and the success of our strategies in managing price risk. Rate schedules in each of Southwest Gas’ service territories contain purchased gas adjustment clauses which permit Southwest Gas to file for rate adjustments to recover increases in the cost of purchased gas. Increases in the cost of purchased gas have no direct impact on our profit margins, but do affect cash flows and can therefore impact the amount of our capital resources. Southwest Gas has used short-term borrowings in the past to temporarily finance increases in purchased gas costs, and would expect to do so again if the need arises. Southwest Gas may file requests for rate increases to cover the rise in the cost of purchased gas. Due to the nature of the regulatory process, there is a risk of disallowance of full recovery of these costs during any period in which there has been a substantial run-up of these costs or our costs are more volatile. Any disallowance of purchased gas costs would reduce cash flows and earnings. **Southwest Gas’ earnings may be materially impacted due to volatility in the cash surrender value of our COLI policies during periods in which stock market changes are significant.** Southwest Gas has life insurance policies on members of management and other key employees to indemnify against the loss of talent, expertise, and knowledge, as well as to provide indirect funding for certain nonqualified benefit plans. Cash surrender values are directly influenced by the investment portfolio underlying the insurance policies. This portfolio includes both equity and fixed income (mutual fund) investments. As a result, the cash surrender value (but not the net death benefits) moves up and down consistent with the movements in the broader stock and bond markets. Current tax regulations provide for tax-free treatment of life insurance (death benefit) proceeds. Therefore, changes in the cash surrender value components of COLI policies, as they progress towards the ultimate death benefits, are also recorded without tax consequences. Currently, we intend to hold the COLI policies for their duration. Changes in the cash surrender value of COLI policies, except as related to the purchase of additional policies, affect our earnings but not our cash flows. **The cost of providing pension and postretirement benefits is subject to changes in pension asset values, changing demographics, and actuarial assumptions which may have an adverse effect on our financial results.** Southwest Gas provides pension and postretirement benefits to eligible employees. The costs of providing such benefits are subject to changes in the market value of our pension fund assets, discount rate changes, changing demographics, life 23 expectancies of beneficiaries, current and future legislative changes, and various actuarial calculations and assumptions. The actuarial assumptions used may differ materially from actual results due to changing market and economic conditions, withdrawal rates, interest rates, and other factors. These differences may result in a significant impact on the amount of pension expense or other postretirement benefit costs recorded in future periods. For example, lower than assumed returns on investments and/or reductions in bond yields could result in increased contributions and higher pension expense which would have a negative impact on our cash flows and reduce net income. While a treasury futures overlay is part of the pension plan investment strategy starting in 2024, intending to reduce funded ratio volatility and cost volatility by increasing protection with regard to changes in discount rates, there is no assurance that intended results will sufficiently materialize. **Uncertain economic conditions may affect Southwest Gas’ ability to finance capital expenditures and could reduce capital expenditures in the industries Centuri serves.** Southwest Gas’ business is capital intensive. Our ability to finance capital expenditures and other matters will depend upon general economic conditions in the capital markets. Declining interest rates are generally believed to be favorable to utilities while rising interest rates are believed to be unfavorable because of the high capital costs of utilities. In addition, our authorized rate of return is based upon certain assumptions regarding interest rates. If interest rates are lower than assumed rates, our authorized rate of return in the future could be reduced. If interest rates are higher than assumed rates, it will be more difficult for us to earn our currently authorized rate of return. Furthermore, declines in our stock price resulting from economic downturns or otherwise could impact our ability to finance our operations as planned. Historically, we have frequently used an ATM Program to fund certain liquidity requirements. During 2024, we established a new ATM Program, but did not issue any equity through the ATM Program. If the ATM Program is insufficient to meet all of or our capital needs, we may have to explore alternative financing sources, which may not be available to us on attractive terms or at all. Future issuances of securities could be more expensive than ATM Program issuances and may dilute our existing stockholders’ percentage of ownership. Further, demand for Centuri’s services has been, and likely will continue to be, seasonal in nature and vulnerable to general downturns in the U.S. and Canadian economies in which Centuri operates. Uncertain or unfavorable market conditions could have a negative effect on demand for, or the profitability of, the services of Centuri’s customers. Centuri’s customers may not have the ability to fund capital expenditures for infrastructure or may have difficulty obtaining financing for planned projects during economic downturns. Uncertain or adverse economic or political conditions, the lack of availability of debt or equity financing and/or higher interest rates could reduce the capital spending of Centuri’s customers or cause project cancellations or deferrals. **Our business could be negatively affected as a result of actions of activist shareholders.** We have in the past, and may again in the future, be the subject of actions by activist stockholders. Following the initiation of a tender offer to purchase shares of our common stock and the initiation of a proxy contest, we entered into a cooperation agreement with Icahn Partners LP and Icahn Partners Master Fund LP, investment entities affiliated with Carl C. Icahn, which cooperation agreement has been subsequently amended and restated (the “Amended and Restated Cooperation Agreement”). As of December 31, 2024, the Icahn Group beneficially owned approximately 13.4% of the outstanding shares of our common stock. There can be no assurances that the Icahn Group, if the Amended and Restated Cooperation Agreement expires, or other activist stockholders will not pursue similar actions with respect to us in the future. Responding to actions by activist shareholders can be costly and time-consuming, disrupt our operations, and divert the attention of management and our employees. Perceived uncertainties among current and potential customers, employees, and other parties as to our future direction may result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified personnel and business partners. These actions could also cause our stock price to experience periods of volatility, which could disrupt our plans to access the capital markets for financing purposes. **Increases in market interest rates may have an adverse effect on the market price of our common stock.** One of the factors that investors may consider in deciding whether to buy or sell our common stock is our dividend yield, which is our dividend rate as a percentage of the share price of our common stock, relative to market interest rates. If market interest rates increase, prospective investors may desire a higher dividend yield on our common stock or may seek securities paying higher dividends or interest. As a result, interest rate fluctuations and capital market conditions may affect the market price of our common stock and such effects could be significant. For instance, if interest rates, including those on interest-bearing securities, such as bonds, rise without an increase in our dividend rate, the market price of our common stock could decrease because potential investors may require a higher dividend yield on our common stock. 24 ### Regulatory, Legislative, and Legal Risks **The Company is currently subject to, and may in the future be subject to, litigation or threatened litigation, which may result in liability exposure that could have a material adverse effect on its business and results of operations.** We are currently subject, and may be subject in the future, to litigation or threatened litigation, including claims brought by stockholders and otherwise in the ordinary course of business. Although we believe that adequate insurance coverage is maintained to protect against risk exposure, it is difficult to predict with absolute certainty the costs associated with litigation, indemnity obligations, or other claims asserted in any given year. Moreover, it is possible that not all liabilities and costs experienced will be covered by third-party insurance, and potential further claims against us may result in significant additional defense costs and potentially significant judgments against us, some of which may not be, or cannot be, insured against. Additionally, whether or not any dispute actually proceeds to litigation, we may be required to pay damages or expenses, which may be significant, or involve our agreement with terms that restrict the operation of our business. Resolution of these types of matters against us may result in our having to pay significant fines, judgments, or settlements, which, if in excess of insured levels, could have an adverse effect on our financial condition, results of operations, cash flows, the per share trading price of our common stock, and our ability to pay dividends to our stockholders. As a consequence, liability exposure could materially and adversely affect our business and results of operations to the extent it is not fully mitigated by such insurance coverage. **Governmental policies and regulatory actions can reduce Southwest Gas’ earnings or cash flows and impact demand for Centuri’s services.** Regulatory commissions set our utility customer rates and determine what we can charge for our rate-regulated services. Our ability to obtain timely future rate increases depends on regulatory discretion. Governmental policies and regulatory actions, including those of the ACC, CPUC, PUCN, and FERC relating to allowed rates of return, allowable rate base, rate structure, purchased gas and investment recovery, operation and construction of facilities, present or prospective wholesale and retail competition including electrification or decarbonization policies or proposed policies by governmental entities or other parties, changes in tax laws and policies (including regulatory recovery or refunds thereof), and changes in and compliance with environmental and safety laws, including state or federal EPA or PHMSA regulations, and regulations placed on us or our customers, regarding the product we deliver in meeting customer energy needs, could reduce our earnings. Risks and uncertainties relating to delays in obtaining, or failure to obtain, regulatory approvals, conditions imposed in regulatory approvals, and determinations in regulatory investigations can also impact financial performance. The timing and amount of rate relief can materially impact results of operations. The timing and amount associated with the recovery of regulatory assets and associated with the return of regulatory liabilities can materially impact cash flows. In general, we are unable to predict what types of conditions might be imposed on Southwest Gas or what types of determinations might be made in pending or future regulatory proceedings or investigations. We nevertheless believe that it is not uncommon for conditions to be imposed in regulatory proceedings, for our regulated operations to agree to conditions as part of a settlement of a regulatory proceeding, or for determinations to be made in regulatory investigations that reduce our earnings and liquidity. For example, we may request recovery of a particular operating expense in a general rate case filing that a regulator disallows, negatively impacting our earnings if the expense continues to be incurred. Southwest Gas records regulatory assets in the consolidated financial statements to reflect the ratemaking and regulatory decision-making authority of the regulators, or expected ratemaking treatment to be upheld, as allowed by U.S. GAAP. The creation of a regulatory asset allows for the deferral of costs which, absent a mechanism to recover such costs from customers in rates approved by regulators, would be charged to expense in the consolidated income statement in the period incurred. If there was a change in regulatory positions surrounding the collection of these deferred costs, there could be a material impact on financial position, results of operations, and cash flows. Further, current and potential legislative or regulatory actions may impact demand for Centuri’s services, require utilities to meet reliability standards, and encourage installation of new electric transmission and distribution and renewable energy generation facilities. However, it is unclear whether these initiatives will create sufficient incentives for projects or result in increased demand for Centuri’s services, or if these incentives will continue to exist under President Trump’s administration. Because most of Centuri’s transmission and distribution revenue is derived from natural gas and electric transmission and distribution industries, regulatory and environmental requirements affecting those industries could adversely affect Centuri’s business, financial condition, results of operations, and cash flows. Customers in the industries Centuri serves overall face stringent regulatory and environmental requirements, as well as permitting processes, as they implement plans for their projects, which may result in delays, reductions and cancellations of some of their projects. These regulatory factors have resulted in decreased demand for Centuri’s services in the past, and they may do so in the future, potentially impacting Centuri’s operations and our ability to grow at historical levels, or at all. 25 **Southwest Gas may not be able to rely on rate decoupling to maintain a stable financial position, results of operations, and cash flows.** Management has worked with regulatory commissions in designing rate structures that strive to provide affordable and reliable service to our customers while mitigating the volatility in prices to customers and stabilizing returns to investors. Rate structures in all service territories allow Southwest Gas to separate or “decouple” the recovery of operating margin from natural gas consumption, though decoupled structures vary by state. In California, authorized operating margin levels vary by month. In Nevada and Arizona, the decoupled rate structures apply to most customer classes on the basis of margin per customer, which varies by month. Collectively, these mechanisms provide stability in annual operating margin. Significantly warmer-than-normal weather conditions in our service territories and other factors, such as climate change and alternative energy sources, may result in decreased cash flows attributable to lower natural gas sales and delays in recovering regulatory asset balances. Furthermore, continuation of the decoupled rate designs currently in place is subject to regulatory discretion, and if unfavorably modified or discontinued, could adversely impact Southwest Gas’ financial position and results of operations. **Southwest Gas may be subject to increased costs related to the operation of natural gas pipelines under regulations concerning natural gas pipeline safety, which could have an adverse effect on our results of operations, financial condition, and/or cash flows.** We are committed to consistently monitoring and maintaining our distribution and transmission systems and storage operations to ensure that natural gas is acquired, stored, and/or delivered safely, reliably, and efficiently. Due to the combustible nature of our (or our customer-procured) product, we anticipate that the natural gas industry could be the subject of increased federal, state, and local regulatory oversight over time. We continue to work diligently with industry associations and federal, state, and local regulators to ensure compliance with any applicable laws. We expect there to be increased costs associated with compliance (and potential penalties for any non-compliance) with applicable laws over time. If these costs are not recoverable in our customer rates, or if there are delays in recoverability due to regulatory lag, they could have a negative impact on our operating costs and financial results. **Southwest Gas’ delivery and related systems require numerous permits and other approvals from various federal, state, and local governmental agencies, and others, including for pipeline expansion or infrastructure development; any failure to obtain or maintain required permits or approvals, or other factors that could prevent or delay planned development, could negatively affect our business and results of operations.** Southwest Gas’ existing and planned development projects require multiple permits and approvals. More broadly, the acquisition, ownership and operation of natural gas pipelines and storage facilities require numerous permits, rights-of-way, approvals and certificates from federal, state, and local governmental agencies or others. Various factors may prevent or delay us from completing such projects or may make completion more costly, including the inability to obtain approvals, public opposition to one or more projects, regulatory opposition to one or more projects or related programs or their delayed recovery and returns thereon, inability to obtain adequate financing, competition for labor and materials, construction delays, cost overruns, and inability to negotiate acceptable agreements relating to rights-of-way, construction, or other material development components. Once received, approvals may be subject to litigation, and projects may be delayed or approvals reversed. Furthermore, areas in which we operate may include concentrations of federal lands that may limit or increase the cost for economic development, which could impact the amount or timing of growth in our areas. If there is a delay in obtaining any required approvals by us or others, or if we or others fail to obtain or maintain any required approvals, easements or rights of way or to comply with any applicable laws or regulations, we may not be able to construct or operate our facilities, may not be able to adequately service existing customers or support or realize customer growth, or such conditions could cause us to incur additional costs. These circumstances could negatively impact our earnings. ### General Risks **The Company’s operating results may be adversely impacted by an economic downturn.** If an economic slowdown occurs, our financial condition, results of operations, and cash flows could be adversely affected. Fluctuations and uncertainties in the economy make it challenging for us to accurately forecast and plan future business activities and to identify risks that may affect our business, financial condition, and operating results. However, current global economic events such as the war in Ukraine and the ongoing conflicts in the Middle East, rising inflation, tariffs, and elevated interest rates may cause the global economy to enter a period of economic slowdown or recession. We cannot predict the timing, strength, or duration of any future economic slowdown or recession. If the economy or the markets in which we operate decline from present levels, it may have an adverse effect on our business, financial condition, and results of operations. 26 **A significant reduction in the Company’s, Centuri’s, and Southwest Gas’ credit ratings could materially and adversely affect our business, financial condition, and results of operations.** We cannot be certain that any of our current credit ratings will remain in effect for any given period of time or that a credit rating will not be lowered or withdrawn entirely by a rating agency if, in its judgment, circumstances in the future so warrant. Our credit ratings are subject to change at any time at the discretion of the applicable ratings agencies. Numerous factors, including many which are not within our control, are considered by the ratings agencies in connection with assigning credit ratings. Any downgrade could increase our future borrowing costs, which would diminish our financial results. We would likely be required to pay a higher interest rate in certain current, as well as future, financings, and our potential pool of investors and funding sources could decrease. A downgrade could require additional support in the form of letters of credit or cash or other collateral and could otherwise adversely affect our business, financial condition, and results of operations. **We may be unable to successfully integrate business acquisitions into our business and realize the anticipated benefits of such acquisitions.** Business acquisitions are expected to result in various benefits, including, among other things, being accretive to earnings in future periods. The achievement of the anticipated benefits of such acquisitions is subject to a number of uncertainties, including whether the businesses are integrated efficiently and effectively. Failure to achieve the anticipated benefits of acquisitions could result in increased costs, decreases in the amount of expected revenues generated, and the potential diversion of management’s time and energy, all of which could have an adverse effect on the consolidated financial position, results of operations, cash flows, credit ratings, or market price of our common stock. Acquisitions may also cause us to issue debt which would increase our liabilities and borrowing cost, or to issue equity securities, which would dilute our existing stockholders’ percentage of ownership. **Natural disasters, public health crises and epidemic or pandemic related illness, war, or terrorist activities and other extreme events could adversely affect the Company’s business, results of operations, financial condition, liquidity and/or cash flows.** Local or national natural disasters, pandemic, or epidemic illness, actual or threatened acts of war or terrorist activities, including the political and economic disruption and uncertainty related to Russia's military invasion of Ukraine and the conflicts or any resurgence in the Middle East, catastrophic failure of pipeline systems and other extreme events may cause a threat to our assets and operations. Our service territories may face a heightened risk due to exposure to acts of terrorism that could target or impact our natural gas distribution, transmission, and storage facilities and disrupt our operations and ability to meet customer requirements. In addition, the threat of terrorist activities could lead to increased economic instability and volatility in the price of natural gas that could affect our operations. Natural disasters, political unrest or actual or threatened terrorist activities may also disrupt capital markets and our ability to raise capital or may impact our suppliers or our customers directly. A local disaster, pandemic, or epidemic illness could result in part of our workforce being unable to operate or maintain our infrastructure or perform other tasks necessary to conduct our business. In addition, these risks could result in loss of human life, significant damage to property, environmental damage, impairment of our operations and substantial loss to the Company. Our regulators may not allow us to recover from our customers part or all of the increased costs related to the foregoing events, which could negatively affect our financial condition, results of operations, and cash flows. A slow or inadequate response to events that could cause business interruption may have an adverse impact on operations and earnings. We may be unable to obtain sufficient insurance to cover all risks associated with local and national disasters, pandemic or epidemic illness, terrorist activities, catastrophic failure of the pipeline system and other events, which could increase the risk that an event adversely affects our financial condition, results of operations, and cash flows. **Our goodwill and other assets have been subject to impairment and may be subject to further impairment in the future.** We assess long-lived assets, including intangible assets associated with acquisitions, for impairment whenever events or circumstances indicate that an asset’s carrying amount may not be recoverable. To the extent that circumstances change, there may be additional goodwill impairment that could have a material impact on our results of operations. We cannot predict the amount and timing of any future impairments, if any. Any future impairment of our goodwill or intangible assets could have an adverse effect on results of operations, as well as the trading price of our common stock. ## Cybersecurity As filed, 11,734 characters. 27 ### Risk Management and Strategy We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats. These risks include, among other things: operational risks; intellectual property and proprietary business information theft; fraud; extortion; harm to employees or customers; violation of privacy or security laws and other litigation and legal risk; physical damage to utility and transmission infrastructure; and reputational harm. We have implemented cybersecurity processes, technologies, and controls to aid in our efforts to assess, identify, and manage these risks. As part of our enterprise risk management program, we consider cybersecurity risks alongside other risks in our overall risk assessment process. Our enterprise risk professionals collaborate with subject matter specialists, as necessary, to gather insights for identifying material cybersecurity threats, assessing their severity, and deploying potential mitigations. Southwest Gas’ cybersecurity program focuses on people, processes, and technology, and takes a defense-in-depth approach by seeking to align with industry best practices. We invest in annual cybersecurity awareness training and testing for employees, by means of which we teach employees about remaining vigilant in daily work activities and practicing good security awareness. Specialized cybersecurity training is provided to those in specific job functions particularly susceptible to cyber incidents and phishing simulations are conducted monthly. Annually, a cybersecurity fair is held, and every employee is encouraged to participate. During this fair, outside experts present current and relevant information in an engaging and educational atmosphere. Tabletop exercises are periodically conducted to evaluate controls, processes, and procedures within Southwest Gas and with our partners in the handling of a cybersecurity incident. Southwest Gas maintains partnerships with law enforcement and other participants within the natural gas and electric utility industries. We also participate in the Information Sharing and Analysis Center to share threat intelligence and collaborate on cybersecurity issues affecting our industry. As a natural gas LDC, Southwest Gas’ objective is to comply with the TSA security directives for our gas monitoring and control systems. Pursuant to these directives, Southwest Gas engages outside consultants to regularly review our technical architecture and alignment with the TSA security directives. In addition to complying with these regulations, Southwest Gas takes a quantitative approach to cybersecurity risk to identify areas for future cybersecurity investment and periodically engages experts to attempt to infiltrate our information systems to further strengthen our security posture. We invest in a range of cybersecurity technologies within the perimeter, network, and endpoints, creating a defense-in-depth architecture designed for prevention and response to cybersecurity events and to help minimize risk exposure. To provide for the availability of critical data and systems, maintain regulatory compliance, manage our risks from cybersecurity threats, and to protect against, detect, and respond to cybersecurity incidents, Southwest Gas undertakes the following activities: - deploys a defense-in-depth approach with security measures in place at multiple layers; - closely monitors information systems using a suite of technologies and a specialized cybersecurity team; - reviews emerging data protection laws and implements changes to our processes designed for compliance; - trains each new employee who handles individual customer data on handling and use requirements for such data; - avoids, where possible, storing sensitive customer information like social security numbers or banking information for individual customers on our information systems; - conducts regular phishing email simulations for employees and contractors with access to corporate email systems to enhance awareness and responsiveness to possible threats; - through policy, practice, and contracts (as applicable), encourages employees, as well as third parties who provide services on our behalf, to treat customer information and data with care; - runs tabletop exercises to simulate response activities to a cybersecurity incident and use the findings to improve our processes and technologies; - leverages the NIST Computer Security Incident Handling Process as a guideline to help identify, protect, detect, respond, and recover when there is an actual or potential cybersecurity incident; and - conducts vulnerability and penetration assessments, with associated remediation activities. Southwest Gas’ incident response plan is designed to coordinate the activities we take to prepare for, detect, respond to, and recover from cybersecurity incidents. These activities include processes to triage, assess severity, communicate, contain, investigate, and remediate the incident, as well as to comply with applicable legal obligations and mitigate reputational damage. Southwest Gas’ processes also address cybersecurity threat risks associated with our use of third-party service providers, including those in our supply chain or those who have access to customer and employee data or our systems. Third-party risks are included within our cybersecurity-specific risk identification program. In addition, cybersecurity considerations affect the selection and oversight of our third-party service providers. We perform diligence on third parties that have access to our systems, data, or facilities that house such systems or data, and monitor cybersecurity threat risks identified through our diligence review. Our due diligence process involves the use of questionnaires that are completed by third-party service 28 providers and reviewed by business representatives and cybersecurity specialists to identify risks associated with third-party service providers. We use the responses provided to assist in finding ways to mitigate risks presented by a particular third-party service provider, consistent with the services provided. Additionally, contracts with third parties that could introduce significant cybersecurity risk to Southwest Gas include terms to assist in the mitigation of cybersecurity risks, including but not limited to, requiring counterparties to report data privacy or cybersecurity incidents to us and to agree to be subject to periodic cybersecurity audits as appropriate. We describe whether and how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition, under the heading “Operational Risks” as part of our risk factor disclosures in Item 1A of this Annual Report on Form 10-K, which are incorporated by reference herein. In the last three fiscal years, we have not experienced any material cybersecurity incidents and the expenses we have incurred from cybersecurity incidents were immaterial. However, because Southwest Gas’ operations involve critical infrastructure, as defined under federal law and by the TSA, we have been and will continue to be the target of cybersecurity attacks from time to time. ### Governance Cybersecurity is an important part of our risk management processes and an area of increasing focus for our Board and management. The responsibility for oversight of risks from cybersecurity threats rests with our entire Board, but the Audit Committee oversees certain cybersecurity related items as described below. At least twice per year the entire Board receives an overview from management on our cybersecurity threat risk management and strategy processes covering topics such as data security posture, results from third-party assessments, and cybersecurity threat risks or incidents and developments, as well as the steps management took to respond to such risks. Additionally, our Chief Information Officer attends Audit Committee meetings to present cybersecurity information for consideration in financial reporting, as necessary, and attends private Executive Sessions with the Audit Committee. Our Director of Internal Audit reports to the Audit Committee regarding attack and penetration exercise results and remediation. Members of the Board are also encouraged to regularly engage in ad hoc conversations with management on cybersecurity-related news or events and discuss any significant updates to our cybersecurity risk management and strategy programs. Material cybersecurity threat risks are also considered during separate Board meeting discussions of matters such as enterprise risk management, operational budgeting, mergers and acquisitions, and other relevant matters. In 2023, the Board participated in a tabletop exercise associated with cyber threats and in 2024 the Board received a presentation from the former Chief of Staff of the Cybersecurity and Infrastructure Security Agency. At the management level for Southwest Gas, our cybersecurity risk management and strategy processes, which are discussed in greater detail above, are led by Southwest Gas’ President and the Vice President/Information Services/Chief Information Officer, along with the Director of Information Security. A Cybersecurity Executive Committee, consisting of officer-level management appointees representing key areas of our business, exists to maintain situational awareness of cybersecurity risks, support methods of addressing cybersecurity risks, and support the Chief Information Officer’s efforts to help Southwest Gas follow natural gas sector-specific regulations and reporting. The Cybersecurity Executive Committee meets regularly with legal advisors and cybersecurity professionals. In our Information Services department, the cybersecurity management team members hold degrees in information technology or cybersecurity and industry-recognized certifications in cybersecurity, and each has many years of relevant work experience in various roles involving managing information security, developing cybersecurity strategy, and implementing effective information and cybersecurity programs. Cybersecurity team members are expected to keep their knowledge, skills, and training current by participating in industry events and continuing education programs as applicable. These members of management and the Cybersecurity Executive Committee are informed about, and monitor the prevention, mitigation, detection, and remediation of, cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan. Our cybersecurity playbooks and incident response plan outline our procedures, communication protocols, and information escalation processes applicable throughout the lifecycle of a cybersecurity incident. The playbooks and plans cover information flow from discovery of a possible issue through the reporting of it to Information Services management, the Cybersecurity Executive Committee, and Board as necessary. As discussed above, members of management (our President, Chief Information Officer, and Director of Information Security) report to the entire Board about cybersecurity threat risks, among other cybersecurity related matters, at least twice per year, with the Audit Committee receiving more frequent updates as needed to assist in maintaining or enhancing cybersecurity posture in financial reporting, and monitoring attack and penetration testing results. ## Properties As filed, 3,566 characters. The plant investment of Southwest Gas consists primarily of transmission and distribution mains, compressor stations, peak shaving/storage facilities, service lines, meters, and regulators, which comprise the pipeline systems and facilities located in and 29 around the communities served. Southwest Gas also includes other properties such as land, buildings, furnishings, work equipment, vehicles, and software systems in utility plant. The northern Nevada and northern California properties of Southwest Gas are referred to as the northern system; the Arizona, southern Nevada, and southern California properties are referred to as the southern system. Total gas plant at December 31, 2024 was $11 billion at Southwest Gas, including construction work in progress. It is the opinion of management that the properties of Southwest Gas are suitable and adequate for its purposes. Substantially all gas main and service lines are constructed across property owned by others under right-of-way grants obtained from the record owners thereof, under the streets and on the grounds of municipalities under authority conferred by franchises or otherwise, or beneath public highways or public lands under authority of various federal and state statutes. None of the numerous county and municipal franchises are exclusive, and some are of limited duration. These franchises are renewed regularly as they expire, and Southwest Gas anticipates no serious difficulties in obtaining future renewals. With respect to the right-of-way grants, Southwest Gas generally has had continuous and uninterrupted possession and use of such rights-of-way, and the associated gas mains and service lines, commencing with the initial stages of construction of such facilities. Permits have been obtained from public authorities and other governmental entities in certain instances to cross or to lay facilities along roads and highways. These permits typically are revocable at the election of the grantor, and Southwest Gas occasionally must relocate its facilities when requested to do so by the grantor. Permits have also been obtained from railroad companies to cross over or under railroad lands or rights-of-way, which in some instances require annual or other periodic payments and are revocable at the election of the grantors. Southwest Gas, through two subsidiaries, operates two primary pipeline transmission systems: - a system (including an LNG storage facility) owned by Great Basin extending from the Idaho-Nevada border to the Reno, Sparks, and Carson City areas and communities in the Lake Tahoe area in both California and Nevada and other communities in northern and western Nevada; and - a system extending from the Colorado River at the southern tip of Nevada to the Las Vegas distribution area. Southwest Gas provides natural gas service in parts of Arizona, Nevada, and California. Service areas in Arizona include most of the central and southern areas of the state, including Phoenix, Tucson, Yuma, and surrounding communities. Service areas in northern Nevada include Carson City, Yerington, Fallon, Lovelock, Winnemucca, Elko, and Spring Creek. Service areas in southern Nevada include the Las Vegas valley (including Henderson and Boulder City), Laughlin, and Mesquite. Service areas in southern California include Barstow, Big Bear, Needles, and Victorville. Service areas in northern California include the Lake Tahoe area and Truckee. Information on properties of Centuri can be found in this Form 10-K under Utility Infrastructure Services under Part I. ## Legal proceedings As filed, 382 characters. The Company and Southwest Gas are named as a defendant in various legal proceedings. The ultimate dispositions of these proceedings are not presently determinable; however, it is the opinion of management that none of this litigation individually or in the aggregate will have a material adverse impact on the Company’s or Southwest Gas’ financial position or results of operations. ## Management's discussion and analysis As filed, 81,229 characters. Southwest Gas Holdings is a holding company that owns all of the shares of common stock of Southwest Gas; until April 22, 2024, all of the shares of common stock of Centuri; and until February 14, 2023, all of the shares of common stock of MountainWest (February 14, 2023 is the date on which the MountainWest sale closed). Our business includes Southwest Gas, which is engaged in the business of purchasing, distributing, and transporting natural gas for customers in portions of Arizona, Nevada, and California. Southwest Gas is the largest regulated distributor of natural gas in Arizona and Nevada, and also distributes and transports natural gas for customers in portions of California. Additionally, through its subsidiaries, Southwest Gas operates two regulated interstate pipelines serving portions of Nevada and California. Southwest Gas makes investments in infrastructure to support customer demand associated with population growth and economic development activity and the safe and reliable operation of its system through adherence to integrity management programs. As of December 31, 2024, Southwest Gas had approximately 2,258,000 residential, commercial, industrial, and other natural gas customers, of which 1,210,000 customers were located in Arizona, 841,000 in Nevada, and 207,000 in California. First-time meter sets were approximately 41,000 in 2024 of which 23,000 were located in Arizona, 17,000 in Nevada, and 1,000 in California; compared to 40,000 in 2023 of which 24,000 were located in Arizona, 15,000 in Nevada, and 1,000 in California. Residential and commercial customers represented over 99% of the total customer base. During 2024, 53% of operating margin (gas operating revenues less the net cost of gas sold) was earned in Arizona, 35% in Nevada, and 12% in California. During this same period, Southwest Gas earned 85% of its operating margin from residential and small commercial customers, 4% from other sales customers, and 11% from transportation customers. These general patterns are expected to remain materially consistent for the foreseeable future. Southwest Gas 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 Regulated operations revenues less the net cost of gas sold. However, operating margin is not specifically defined in U.S. GAAP. Thus, operating margin is considered a non-GAAP measure. Management uses this financial measure because Regulated operations revenues include the net cost of gas sold, which is a tracked cost that is passed through to customers without markup under 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 Gas’ financial performance in a rate-regulated environment. The principal factors affecting changes in operating margin are general rate relief (including impacts of infrastructure program recoveries) and customer growth. Public utility commission decisions on the amount and timing of relief may impact our earnings. Refer to the Summary Operating Results table below for a reconciliation of gross margin to operating margin, and refer to *Rates and Regulatory Proceedings* in this Management’s Discussion and Analysis for details of various rate proceedings. 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 Gas’ 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 weather variability and conservation on operating margin, allowing Southwest Gas to pursue energy efficiency initiatives. Nearly all of our customers, and resulting revenue and margin, are included as part of mechanisms that reduce the impact of weather and volume variability on our earnings. Consistent with the Company’s earlier determination to simplify the Company’s portfolio of businesses, the Company determined it would pursue a separation of Centuri, including forming a new independent publicly traded utility infrastructure services company. In April 2024, the Company and Centuri announced the completion of an IPO of Centuri’s common stock, with the issuance of 14,260,000 shares ($0.01 par value) at a price of $21.00 per share, along with a concurrent private placement of 2,591,929 shares, at a price equal to the IPO price, with Icahn Partners LP and Icahn Partners Master Fund LP, investment entities associated with Carl C. Icahn. The Company owns approximately 81% of Centuri following these events. Through the first quarter of 2024 and leading up to the Centuri IPO, it was a wholly owned subsidiary of the Company. The net proceeds to Centuri from the IPO and the concurrent private placement totaled approximately $328 million, including optional purchase of IPO shares from underwriters. The Company intends to fully dispose of its ownership in Centuri in one or more disposition transactions, including by way of sales of our shares of Centuri common stock, one or more exchange offers for Company shares, or distributions, or any combination thereof. Centuri is a strategic infrastructure services company that partners with regulated utilities to build and maintain the energy network that fuels millions of homes and businesses across the U.S. and Canada. With a commitment to serve as long-term 31 partners to customers and communities, Centuri’s employees enable regulated utilities to safely and reliably deliver natural gas and electricity, as well as achieve their goals for environmental sustainability. Centuri operates in 87 primary locations across 45 U.S. states and two Canadian provinces. Centuri operates in the U.S., primarily as NPL, Neuco, Linetec, and Riggs Distler, and in Canada, primarily as NPL Canada. Utility infrastructure services activity can be impacted by changes in infrastructure replacement programs and capital budgets 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 programs throughout the U.S. Likewise, there has been similar attention placed on electric grid modernization through national infrastructure legislation and related initiatives. Generally, Centuri revenues are lowest during the first quarter of the year due to less favorable winter weather working 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, and related results impacts are not solely within the control of management. In addition, 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 impact operating results. All of our businesses may be impacted by economic conditions that impact businesses generally, such as inflationary impacts on goods and services consumed in the business, rising or sustained high interest rates, labor markets and other costs (including in regard to contracted or professional services), and the availability of those resources. Certain of these impacts may be more predominant in certain of our operations, such as with regard to fuel costs for work equipment and skilled/trade labor costs at Centuri. 32 Executive Summary **The items discussed in this Executive Summary are intended to provide an overview of the results of the Company’s, Southwest Gas’, and Centuri’s operations and are covered in greater detail in later sections of management’s discussion and analysis.** Summary Operating Results *(In thousands, except per share amounts)* | Contribution to net income (loss) | Year ended December 31, 2024 | 2023 | 2022 | | --- | ---: | ---: | ---: | | Natural gas distribution | $261,176 | $242,226 | $154,380 | | Utility infrastructure services | (13,086) | 19,652 | 2,065 | | Pipeline and storage | — | (16,288) | (283,733) | | Corporate and administrative | (49,275) | (94,701) | (76,002) | | Net income (loss) | $198,815 | $150,889 | $(203,290) | | Weighted average common shares | 71,841 | 70,787 | 65,558 | | Basic earnings (loss) per share | | | | | Consolidated | $2.77 | $2.13 | $(3.10) | | Natural Gas Distribution | | | | | Reconciliation of Gross Margin to Operating Margin (Non-GAAP measure) | | | | | Utility Gross Margin | $696,964 | $640,955 | $574,534 | | Plus: | | | | | Operations and maintenance (excluding Admin. & General) expense | 325,152 | 316,246 | 308,276 | | Depreciation and amortization expense | 303,095 | 295,462 | 263,043 | | Operating margin | $1,325,211 | $1,252,663 | $1,145,853 | Overview Southwest Gas Holdings: - Completed the Centuri IPO with net proceeds of $328 million used primarily to repay amounts under Centuri’s term loan and revolving credit facility - Finished the year with more than $360 million of cash on a consolidated basis given recovery of earlier under-recovered PGA balances; the Company continues to expect limited capital markets needs through the end of 2025 - Extended the $550 million term loan credit agreement, which now matures on July 31, 2025, with a 17.5 basis point reduction in the applicable spread - Corporate and administrative expenses include $44 million in interest expense related to borrowings and $8.2 million in Centuri separation costs, offset by certain tax benefits Natural gas distribution: - 41,000 first-time meters sets (1.8% growth rate) added over the past 12 months - Operating margin increased $73 million, or 6%, between 2024 and 2023, including Arizona and Nevada rate relief, California attrition adjustments, and Great Basin rates effective September 2024 (subject to refund) - Operations and Maintenance expenses were relatively flat between periods, reflecting cost discipline - Replaced the existing $400 million revolving credit facility, extending the maturity from 2025 to 2029 - Finished the year with over $300 million of cash, following the collection of previously deferred purchased gas costs - $847 million capital investment in 2024 Utility infrastructure services: - Revenues of $2.6 billion in 2024, a decrease of $262 million, or 9%, compared to 2023 - Operating income of $86.8 million in 2024, a decrease of $49.6 million, compared to 2023 - Paid down $316 million of debt from proceeds of the Centuri IPO - Acquired the remaining interest in Linetec previously held by noncontrolling parties - Entered into an accounts receivable securitization facility - Capital allocation discipline and efficient asset utilization resulted in reductions in depreciation expense 33 This section of Form 10-K provides comparisons of 2024, 2023, and 2022 results and pertinent components indicated by segment. Also provided is a discussion of 2024 and 2023, including comparisons between those years. Discussion of 2022 items and year-to-year comparisons between 2023 and 2022, which are not included in this Form 10-K, can be found in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Results of Natural Gas Distribution | (Thousands of dollars) | Year Ended December 31, 2024 | 2023 | 2022 | | --- | ---: | ---: | ---: | | Regulated operations revenues | $2,475,216 | $2,499,564 | $1,935,069 | | Net cost of gas sold | 1,150,005 | 1,246,901 | 789,216 | | Operating margin | 1,325,211 | 1,252,663 | 1,145,853 | | Operations and maintenance expense | 520,820 | 511,646 | 491,928 | | Depreciation and amortization | 303,095 | 295,462 | 263,043 | | Taxes other than income taxes | 88,965 | 87,261 | 83,197 | | Operating income | 412,331 | 358,294 | 307,685 | | Other income (deductions) | 54,276 | 70,661 | (6,884) | | Net interest deductions | 162,257 | 149,830 | 115,880 | | Income before income taxes | 304,350 | 279,125 | 184,921 | | Income tax expense | 43,174 | 36,899 | 30,541 | | Contribution to consolidated results | $261,176 | $242,226 | $154,380 | #### 2024 vs. 2023 Contribution to consolidated net income from natural gas distribution operations increased $19 million between 2024 and 2023. The increase was primarily due to an increase in Operating margin, offset by increases in Operations and maintenance expense, Net interest deductions, and Depreciation and amortization. Operating margin increased $73 million between years. Customer growth provided approximately $12 million as 41,000 first-time meter sets were added in 2024, and combined rate relief across all our service territories added approximately $66 million of incremental margin. Favorable impacts ($9.2 million, combined) were also realized in connection with certain rate components of infrastructure trackers and the Nevada variable interest rate expense mechanism. Furthermore, late fee assessments on customer account balances provided approximately $3 million in incremental margin. Offsetting these increases was a decrease in recoveries associated with regulatory programs, totaling $6.8 million for which an associated comparable decrease is also reflected in amortization expense (discussed below). In addition, certain immaterial out-of-period corrections occurred in both 2023 and 2024 resulting in an unfavorable variance between comparative periods, primarily driven by an $8 million favorable adjustment in 2023. Customary gas used in operations (the effects of which are offset in Operations and Maintenance expense) also reduced operating margin ($4 million). Operations and maintenance expense increased $9 million, or 2%, between 2024 and 2023. The increase was primarily driven by general cost increases in benefit, incentive, and pension related costs, and leak survey and line locating costs, partially offset by contractor and professional services costs (the majority of which related to utility optimization consulting fees in 2023). Both periods exclude costs attributable to construction that are part of Net regulated operations plant, and costs that would otherwise be expensed but are instead permissible to be deferred into regulatory assets (e.g., incremental leak survey costs in Nevada). Depreciation and amortization expense increased $8 million, or 3%, between years including due to a $720 million, or 7%, increase in average gas plant in service in the current year. The increase in gas plant was attributable to pipeline capacity reinforcement work, franchise requirements, scheduled pipe replacement activities, and new infrastructure. This increase was offset by a decrease in amortization of regulatory account balances of $6.8 million as noted above. Other income decreased $16 million between 2024 and 2023, primarily due to a decline of $17.2 million in interest income compared to the prior year, related to a reduction in carrying charges associated with regulatory account balances, notably, PGA balances, which decreased from an asset balance of $553 million as of December 31, 2023 to a net liability balance of $228 million as of December 31, 2024. Interest income is earned when these balances are in asset positions and interest expense is incurred when balances are in liability positions. Net interest deductions increased $12 million between 2024 and 2023 primarily due to the impacts of surcharges/surcredits and deferral activity related to a regulatory mechanism associated with interest on Southwest Gas’ industrial development revenue 34 bonds. Interest also increased due to amounts incurred on the over-collected PGA balance. Additionally contributing to the increase was a lower level of debt-related AFUDC, which had the impact of increasing interest expense on a relative basis in 2024. Results of Utility Infrastructure Services | (Thousands of dollars) | Year Ended December 31, 2024 | 2023 | 2022 | | --- | ---: | ---: | ---: | | Utility infrastructure services revenues | $2,637,229 | $2,899,276 | $2,760,327 | | Operating expenses: | | | | | Utility infrastructure services expenses | 2,415,101 | 2,617,402 | 2,529,318 | | Depreciation and amortization | 135,345 | 145,446 | 155,353 | | Operating income | 86,783 | 136,428 | 75,656 | | Other income (deductions) | 376 | 64 | (887) | | Net interest deductions | 90,515 | 97,476 | 61,371 | | Income (loss) before income taxes | (3,356) | 39,016 | 13,398 | | Income tax expense | 3,709 | 14,736 | 5,727 | | Net income (loss) | (7,065) | 24,280 | 7,671 | | Net income attributable to noncontrolling interests | 6,021 | 4,628 | 5,606 | | Contribution to consolidated results | $(13,086) | $19,652 | $2,065 | #### 2024 vs. 2023 Consolidated results from utility infrastructure services decreased $32.7 million in 2024 compared to 2023. Results in the current year were negatively impacted by lower MSA volumes driven in large part by budgetary challenges faced by key customers, a decline in offshore wind work due to the conclusion of several projects during the current year, and timing of bid projects. Utility infrastructure services revenue decreased $262 million, or 9%, in 2024 when compared to the prior-year, driven primarily by decreased gas utility infrastructure services revenues of $133.8 million and decreased electric utility infrastructure services revenues of $128.3 million. The decrease in gas utility infrastructure services revenues was primarily due to a reduction in net volumes under existing customer MSAs stemming primarily from delayed or unfavorable regulatory decisions faced by key customers and timing of bid projects, and the prior year benefited from the commencement of a large project that was substantially complete in 2023. The decrease in electric utility infrastructure services revenues was primarily due to a decrease in offshore wind revenues of $114.4 million due to project conclusion, as well as a reduction in net volumes under existing customer MSAs, partially offset by an increase in emergency restoration services revenue of approximately $50.3 million. Centuri revenues from contracts with Southwest Gas totaled $106.8 million in 2024 and $116.4 million in 2023. Centuri accounts for services provided to Southwest Gas at contractual prices. Utility infrastructure services expenses decreased $202.3 million, or 8%, in 2024 due primarily to lower volume of infrastructure services provided. Subcontractor costs decreased during 2024 compared to the prior-year primarily due to decreased work under offshore wind projects and changes in mix of work. Project margin in 2024 decreased primarily due to lower margins on bid work (the prior year benefited from a highly profitable bid that did not recur in the current year); decreased volumes on MSAs leading to underutilization of fixed costs; and unfavorable changes in the mix of work. Included in total Utility infrastructure services expenses were general and administrative costs, which decreased approximately $1.1 million between years. Gains on sale of equipment in 2024 and 2023 (reflected as an offset to Utility infrastructure services expenses) were approximately $3.6 million and $4.5 million, respectively. Depreciation and amortization expense decreased $10.1 million between periods, primarily due to a number of small tools within electric utility infrastructure services operations becoming fully depreciated in 2023 and not requiring replacement based on project needs. Additionally, more efficient utilization of existing fixed assets in recent periods has slowed the growth of the depreciable asset base, with capital expenditures of $99.3 million, $106.6 million, and $130.2 million in 2024, 2023 and 2022, respectively. The decrease in net interest deductions of $7 million was primarily due to activity with regard to Centuri’s debt balance. This activity included repayment, in concert with proceeds received from the Centuri IPO and private placement, of $156 million under Centuri’s revolving credit facility and $160 million under its term loan facility. Centuri also paid down an additional $100 million in debt under its term loan facility with proceeds from its accounts receivable securitization facility. Amounts 35 under the revolving portion of the credit facility are available to be re-borrowed, with such activity partially offsetting the impacts. Income tax expense decreased $11 million between years, primarily due to a decrease in pre-tax income in 2024, and also reflects other impacts, including expenditures that are not deductible for tax purposes. Rates and Regulatory Proceedings Southwest Gas is subject to the regulation of the ACC, the PUCN, the CPUC, and two of Southwest Gas’ subsidiaries are subject to regulation by 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 Gas’ service territories. Southwest Gas 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. On their own, 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 Gas. Management has worked with its regulatory commissions in designing rate structures that support the timely recovery of our costs, including returns to investors, in providing safe, 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 Gas’ operating areas during all periods for which results of natural gas distribution operations are disclosed above. #### Arizona Jurisdiction *Arizona General Rate Case.* Southwest Gas filed its 2024 Arizona rate case application in February 2024, proposing an increase in revenue of approximately $126 million to reflect the continued significant capital investments in the state and to update rates to more closely align with Southwest Gas’ current level of operations and maintenance expense. The request includes a return on common equity of 10.15% and a 0.81% fair value increment, relative to a 50% target equity ratio and a proposed twelve-month post-test year plant adjustment for otherwise non-revenue producing plant. In addition to proposing the continuation of full revenue decoupling under the DCA mechanism, Southwest Gas also proposed to set the carrying cost for the interest component of the DCA and GCBA rate adjustment mechanisms to equal the Commission-authorized Weighted Average Cost of Capital, and to establish a UGCE, which represents the gas cost-related portion of net write-offs of uncollectible customer accounts. The UGCE would allow Southwest Gas timelier recovery of the portion of net write-off accounts that relate to purchased gas cost. Hearings were held in November 2024 and a final ACC decision is anticipated with rates to become effective early in the second quarter 2025. Initially included as part of the rate case application, Southwest Gas proposed the establishment of the SIM mechanism, a capital tracker designed to support required code and regulatory-related infrastructure replacements in Arizona, which was subsequently bifurcated from the rate case application. A hearing on this issue is expected in May 2025 with a final decision anticipated in the fourth quarter 2025. *Delivery Charge Adjustment.* The DCA, or Arizona decoupling mechanism, as noted above, includes a filing each April, which along with other reporting requirements, contemplates a rate to return/recover the over- or under-collected margin tracker (decoupling mechanism) balance. The most recent filing was made in April 2024 to request a rate to address the over-collected balance of $17.5 million existing as of March 31, 2024. The requested rate to return the over-collected balance was approved and new rates became effective August 1, 2024. The next filing is anticipated to be made no later than April 30, 2025, and will address the balance at the end of the first quarter 2025. *Tax Reform.* A TEAM was approved in Southwest Gas’ 2019 general rate case to timely recognize tax rate changes resulting from federal or state tax legislation following the TEAM implementation. In addition, the TEAM tracks and returns/recovers the revenue requirement impact of changes in amortization of EADIT, including that which resulted from 2017 U.S. federal tax reform, compared to the amount authorized in the most recently concluded rate case. Following the inaugural surcredit rate establishment under the TEAM mechanism in December 2022, Southwest Gas filed subsequent TEAM rate applications, including a recent filing, which proposes to update the TEAM surcharge to recover approximately $5.2 million resulting from changes related to the amortization of EADIT. The existing surcredit rate became effective June 1, 2024, and the proposed surcharge rate is anticipated to become effective June 1, 2025. *PGA Modification*. On March 1, 2023, Southwest Gas filed a request to adjust the interest rate applicable to the outstanding PGA balance to more closely match the interest expense incurred to finance the balance. In the alternative, the filing requested an expansion of the current GCBA adjustment to clear the balance then existing. In July 2023, the ACC approved an increase to the GCBA rate (over a two-year period) effective August 1, 2023, to support the timely recovery of the approximately 36 $358 million balance as of May 31, 2023. The increased GCBA rate was authorized to remain in place for up to two years or until the balance dropped below $10 million. The GCBA rate was set to $0.00 per therm, effective October 1, 2024, and has since transitioned to a credit rate consistent with the current over-collected balance. Ongoing deferred energy rates, separate from the GCBA rate, continue to be updated monthly. #### Nevada Jurisdiction *Nevada General Rate Case.* Southwest Gas filed its most recent general rate case in September 2023 based on the test year ended May 2023. The initial request was updated with a certification filing primarily for plant placed in service and incremental annual leak survey costs through November 2023. Those updates resulted in an updated overall request of approximately $74 million, an increase over the initial request of $69.8 million. A stipulation was reached with Regulatory Operations Staff and the Bureau of Consumer Protection, settling certain issues and agreeing to a black box settlement with a statewide increase of $65.6 million, prior to any adjustments related to the cost of capital. Following a hearing on cost of capital issues, the PUCN issued a decision approving an annual increase in revenues of $59 million, approving the proposed settlement, and authorizing a return on common equity of 9.5%, including the use of a hypothetical capital structure of 50% debt and 50% equity. Included in the settled items were: a continuation of full revenue decoupling; authority to continue tracking incremental annual leak survey costs in a regulatory asset; and refreshed depreciation rates somewhat lower than those proposed. New rates became effective in April 2024. *General Revenues Adjustment*. The GRA, or Nevada decoupling mechanism, was affirmed as part of Southwest Gas’ most recently concluded general rate case and adjustments are included in the ARA filings intended to update rates to recover/return amounts associated with various regulatory mechanisms, including the GRA. Recovery of rates and adjustments thereto as part of the ARA primarily impact cash flows, but not net income overall. Rates for the GRA and other regulatory mechanisms relating to the November 2023 ARA filing became effective May 1, 2024, earlier than the typical July 1 effective date. The most recent ARA filing was made in November 2024, considering balances as of September 30, 2024. Updated rates are anticipated July 1, 2025. *Line Locate Activity Expenses Application.* Southwest Gas filed an application with the PUCN for authority to establish regulatory accounting treatment for Line Locate Activity Expenses and to establish the Damage Prevention Cost Mechanism. This would allow Southwest Gas to track the actual level of line locate operation and maintenance expenses and record in a regulatory asset or liability the difference when compared to the operation and maintenance expenses established in the most recent general rate case. Approval to establish the Damage Prevention Cost Mechanism will provide the means to recover or return the accumulated balance of the line locate expenses tracked in the proposed regulatory account. This proposal is made without carrying charges, focusing solely on stemming the financial attrition suffered in between rate cases related to this work. Resolution of this application is anticipated in the third quarter 2025. #### California Jurisdiction *California General Rate Case.* Southwest Gas filed its most recent general rate case in September 2024 related to a future test year (2026), proposing a statewide revenue increase of approximately $49 million, consisting of a revenue increase of $38.5 million for the southern California rate jurisdiction, an increase of $63,000 for the northern California rate jurisdiction, and an increase of $10.2 million for the South Lake Tahoe rate jurisdiction. The request is based on a capital structure consisting of 50% long-term debt and 50% common equity with a requested return on common equity of 11.35%, a modest increase compared to the 11.16% currently authorized. A continuation of Southwest Gas’ PTY margin attrition adjustment for attrition years 2027 – 2030 is included, as well as continued use of the Automatic Trigger Mechanism in lieu of annual cost of capital filings. Southwest Gas’ filing also includes a risk-based decision-making framework, proposing the continuation of the Targeted Pipe Replacement Program, the Meter Protection Program, and COYL Program, along with the addition of a new Annual Leak Survey Program, collectively under the Infrastructure Reliability and Replacement Adjustment Mechanism umbrella. Authority to establish a Damage Prevention Cost Balancing Account to record and recover (or return) certain costs associated with damage prevention expenses, specifically those related to line locating activities, was also requested. Consolidation of Southwest Gas’ northern California and South Lake Tahoe rate jurisdictions into a single rate-making jurisdiction is also proposed. The rate case will be processed during 2025 with a final decision expected in the fourth quarter of 2025, and new rates expected to be effective in January 2026. *Attrition Filing.* Following the 2021 implementation of rates approved as part of the previous general rate case, the continuation of annual PTY margin attrition increases of 2.75% began in January 2022. The most recent annual margin attrition increase was also inclusive of adjustments related to the amortization of EADIT. The cumulative impact resulted in an annual increase of $7.3 million effective January 2025 for Southwest Gas’ combined southern California, northern California, and South Lake Tahoe rate jurisdictions. The PTY increase of $3.6 million associated with the North Lake Tahoe Lateral revenue requirement became effective February 1, 2025. 37 *Service Area Extension.* Southwest Gas filed a request to expand its southern California certificated service area, a CPCN, to include the Army’s National Training Center at Fort Irwin, located northeast of Barstow, California. The CPCN was approved by the CPUC in April 2024 and authorizes Southwest Gas to construct approximately 21 miles of distribution main pipeline to deliver natural gas service to the newly certificated area of Fort Irwin, which at the time of filing was estimated to cost approximately $38.7 million. #### FERC Jurisdiction *General Rate Case.* Great Basin, a wholly owned subsidiary of Southwest Gas, filed a notice of a change in rates (pursuant to applicable regulations) on March 6, 2024, requesting that rates for natural gas service subject to the filing be made effective April 6, 2024. The FERC, however, suspended the case for a five-month period, which allowed rates to go into effect, subject to refund, on September 6, 2024. The filing included a request to continue a term-differentiated rate structure which was adopted as part of Great Basin’s previous general rate case, to provide an overall annual revenue increase of approximately $16 million (subsequently updated to $13 million), and a return on equity of 14.05% and 13.05% applicable to each category of shippers, as applicable, and a capital structure of 44% long-term debt and 56% common equity. A primary driver of the proposed increase was approximately $99 million of capital investments, much of which was placed in service by the end of the August 31, 2024 test year. An all-party settlement was reached and filed with the FERC for final consideration in December 2024 and is pending a decision, which is anticipated during the second quarter of 2025. Motion rates, subject to refund, became effective in September 2024, followed by interim rates, which became effective November 1, 2024. The interim rates are the same as the filed settlement rates and will remain in place until a final FERC decision is received. A portion of the rates implemented subject to refund have been appropriately reserved and will be refunded, as necessary, pending the final outcome in the case. PGA Filings The rate schedules in all of Southwest Gas’ service territories contain provisions that permit adjustments 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 Gas result in over- or under-collections. Balances are recovered from, or refunded to, customers on an ongoing basis with interest. As of December 31, 2024, over-collections in both the Arizona and Nevada service territories resulted in a liability of approximately $242.3 million and under-collections in California resulted in an asset of approximately $13.9 million on the Company’s and Southwest Gas’ Consolidated Balance Sheets. The substantial reduction in balances between periods in the table below reflects a combination of specific recovery rates in place to collect the build-up of earlier balances as a result of the cost paid for gas in those earlier periods, and recent conditions whereby base rates under the mechanisms have exceeded the cost of recent gas supply purchases by Southwest Gas. See also *Deferred Purchased Gas Costs* in **Note 1 - Background, Organization, and Summary of Significant Accounting Policies.** 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 operating margin. However, gas cost deferrals and recoveries can impact comparisons between periods of individual consolidated income statement components. These include Regulated operations revenues, Net cost of gas sold, Net interest deductions, and Other income (deductions). The following table presents Southwest Gas’ outstanding PGA balances receivable/(payable) at the end of its two most recent fiscal years: | (Thousands of dollars) | December 31, 2024 | 2023 | | --- | ---: | ---: | | Arizona | $(46,980) | $251,416 | | Northern Nevada | (31,212) | 45,757 | | Southern Nevada | (164,067) | 218,761 | | California | 13,937 | 36,951 | | | $(228,322) | $552,885 | *Arizona PGA Filings.* In Arizona, Southwest Gas calculates the change in the gas cost component of customer rates monthly (to allow for timely refunds to/recoveries from customers), utilizing a rolling twelve-month average. During 2024, the GCBA continued with a surcharge through September in order to recover the then under-collected balance through the increased rate mechanism. With the recovery of the outstanding under-collected balance, the GCBA transitioned to a small surcredit rate consistent with the over-collected balance at December 31, 2024. *California Gas Cost Filings.* In California, a monthly gas cost adjustment, based on forecasted monthly prices, is utilized. Monthly adjustments modeled in this fashion provide the timeliest recovery of gas costs in any Southwest Gas jurisdiction. 38 *Nevada Gas Cost Filings.* In November 2024, Southwest Gas filed to adjust its gas cost rates, which consist of two components, the Base Tariff Energy Rate and the Deferred Energy Account Adjustment rate. The new rates associated with the November 2024 filing became effective January 2025 and are intended to address the outstanding balances over a twelve-month period. Gas cost rates otherwise are updated on an ongoing basis quarterly, with changes effective each January, April, July, and October. #### Gas Price Volatility and Mitigation To mitigate price volatility to its customers, Southwest Gas periodically enters into fixed-price term contracts under its volatility mitigation programs for up to 25% of the California jurisdictions’ annual normal weather supply needs and to a limited extent, in the Arizona jurisdiction. For the 2024/2025 heating season, contracts contained in the fixed-price portion of the supply portfolio ranged from approximately $4.18 to approximately $6.53 per dekatherm. In consultation with its regulators, Southwest Gas does not currently plan to make any fixed-price term purchases other than in California, nor to enter into financial swap agreements. Southwest Gas’ natural gas purchases, not covered by fixed-price contracts, are under variable-price contracts with firm quantities, or on the spot market. The contract price for these contracts is either determined at the beginning of each month to reflect the published first-of-month index price, or at market prices based on a published daily price index. In each case, the index price is not published or known until the purchase period begins. Plans with regard to fixed-price portfolios or other hedging programs could change as Southwest Gas monitors conditions and collaborates with regulatory commissions over time. Pipeline Safety Regulations Effective January 1, 2023, the PUCN issued an order revising its regulations to require annual leak surveys (previously every three years) of all distribution pipelines transporting natural gas and/or liquefied petroleum in Nevada. In conjunction with this change, the PUCN authorized the establishment of a regulatory asset account to track the incremental cost of compliance related to the new regulation, for consideration in a future general rate case filing. Effective October 2022, the PHMSA issued final rules that amended the federal pipeline safety regulations applicable to the valve installation and minimum rupture detection standards for gas transmission pipelines. Southwest Gas has integrated the requirements of this new rule into its operating procedures. In addition, in August 2022, PHMSA issued final rules that amended the federal pipeline safety regulations applicable to the integrity management of gas transmission pipelines, effective May 2023. Southwest Gas also integrated the requirements of this new rule into its operating procedures related to repair criteria, integrity management improvements, cathodic protection, management of change, and other gas transmission integrity related amendments. PHMSA published two significant NPRMs in 2023. The first is the Pipeline Leak Detection and Repair NPRM, which aims to mandate methane emissions reductions through the revision of operations and maintenance procedures for natural gas operators, the promulgation of Advanced Leak Detection equipment, and accelerated leak repair criteria. The final rule was expected to be published in mid-2024; however, this has been delayed to early 2025. Southwest Gas continues to evaluate potential impacts from this NPRM. The second item, the Safety of Gas Distribution NPRM, resulted from congressional mandates and National Transportation Safety Board recommendations stemming from a 2018 incident in the Merrimack Valley, in Massachusetts. This NPRM was expected to be finalized in late 2024; however, it is uncertain as to when a final rule will be published. The final rule is expected to include provisions that are primarily aimed at mitigating over pressurization incidents, particularly on utilization pressure systems. Southwest Gas does not own or operate any utilization pressure systems, but is monitoring the progress and potential impacts, if any, of this NPRM. Southwest Gas continues to monitor changing pipeline safety legislation and participates, to the extent possible, in providing public comments and works with industry associations, such as the American Gas Association, in shaping regulatory language associated with these new mandates and reporting requirements. Additionally, management works with state and federal commissions to which Southwest Gas, including its subsidiaries, are subject, to develop customer rates that are responsive to incremental costs of compliance. However, due to the timing of when rates are implemented in response to new requirements, and as additional rules are developed, compliance requirements could impact expenses and the timing and amount of capital expenditures for Southwest Gas. 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 construction expenditures and property additions). In recent years, Southwest Gas has undertaken substantial pipe replacement activities to fortify system integrity and reliability, including on an accelerated basis in association with certain gas infrastructure replacement programs. In addition, certain national events, including several major storms in recent years affecting central portions of the U.S., contributed to the periodic run-up in gas supply costs, before commodity 39 costs significantly dropped following the events. This collective activity necessitated the issuance of both debt and equity securities to supplement cash flows from operations, before cash reserves were replenished at the utility in more recent periods, including from collections under the PGA mechanisms. Southwest Gas Holdings and Southwest Gas’ capitalization strategy is to maintain an appropriate balance of equity and debt to preserve investment-grade credit ratings, which helps minimize interest costs. Investment-grade credit ratings have been maintained by Southwest Gas Holdings and Southwest Gas. #### Cash Flows Southwest Gas Holdings, Inc.: *Operating Cash Flows.* Cash flows provided by consolidated operating activities increased $847 million between 2024 and 2023. The increase was primarily driven by the collection of previously deferred purchased gas costs for Southwest Gas. As noted above, in previous periods rates billed to customers for gas supply costs were lower than actual expenditures. These differences were deferred and have since been collected, providing a significant source of available funds in the current period. The PGA balances overall are subject to rate establishment across the year, as discussed earlier, and are now in an overcollected status. The improvement in cash flows between periods also reflects the impacts of other changes, notably in other components of working capital overall, including the timing and amount of accounts receivable/payable and other current asset and liability balances. The increase additionally includes the $125 million proceeds related to Centuri’s Securitization Facility, which was net of an increase in certain receivable balances at Centuri due to the timing of billings and payments (see **Note 3 - Revenue).** *Investing Cash Flows.* Cash flows from investing activities decreased $1.07 billion in 2024 as compared to 2023. The overall change was driven by $1.05 billion in proceeds received in connection with the MountainWest sale (net of cash sold) in 2023, partially offset by proceeds from the sale of other property in 2024. Furthermore, outflows for construction expenditures and property additions were higher in 2024 compared to 2023. *Financing Cash Flows.* Cash flows from financing activities increased $524 million in 2024 as compared to 2023. The overall increase was primarily due to activity in 2023, including the repayment ($1.1 billion) in that year of the then remaining balance of the term loan, entered into by Southwest Gas Holdings in connection with the 2021 acquisition of MountainWest and the $225 million Southwest Gas term loan that originated in March 2021, offset by Southwest Gas’ issuance of $300 million in 5.45% senior notes in March 2023 that will mature in 2028, as well as Southwest Gas Holdings proceeds received in April 2023 from a $550 million term loan now maturing in July 2025, in addition to various other borrowing and repayment activity. Net financing activities in 2024 include net proceeds received from Centuri’s April 2024 IPO and private placement ($328 million), with the majority of the proceeds used by Centuri at that time to pay down portions of its revolving credit and term loan facility. Financing cash flows also include Centuri’s redemption of the previously remaining redeemable noncontrolling interest in Linetec for $92 million in 2024 (compared to $40 million of partial redemption in 2023), $125 million payment on Centuri’s term loan with proceeds from the Securitization Facility, in addition to utilization of its credit facility for this and other purposes. The prior year period also included proceeds received from the issuance of Company common stock in an underwritten public offering in March 2023, with no comparable issuance in the current year. Those proceeds were used at that time to pay down Company indebtedness. Other financing cash flows include other borrowings and repayments under the companies’ credit facilities, and an increase in dividends paid between periods due to an increase in the number of outstanding shares. Corporate and administrative expenses/outflows for Southwest Gas Holdings in 2024 overall primarily include interest paid on outstanding borrowings and costs associated with the Centuri separation. The capital requirements and resources of the Company generally are determined independently for the individual business segments. Each business segment is generally responsible for securing its own financing sources. However, the holding company may raise funds through stock issuances or other external financing sources in support of each business segment. Southwest Gas Corporation: *Operating Cash Flows.* Cash flows provided by operating activities increased $861 million between 2024 and 2023 primarily attributable to the collection of deferred purchased gas costs (as discussed above), as well as cash flows from other working capital changes overall. *Investing Cash Flows.* Cash used in investing activities increased $61 million in 2024 as compared to 2023. While outflows for capital expenditures increased by $85 million in 2024, the increase was partially offset by proceeds from the sale of property for $21.4 million, as well as reduced outflows related to customer advances for construction. See also *2024 Construction Expenditures* below. *Financing Cash Flows.* Net cash from financing activities decreased $580 million in 2024 as compared to 2023. The decline was primarily due to parent contributions in 2023, with no comparable inflow in 2024. Separately, proceeds were received from $300 million of 5.45% senior notes in 2023, offset by the repayment of a March 2021 term loan that same year. A separate term 40 loan was both borrowed and repaid during 2023. Outflows for dividend payments increased in 2024 compared to 2023. Other impacts primarily relate to activity under Southwest Gas’ credit facility in 2023. See **Note 8 - Debt.** #### 2024 Construction Expenditures During the three-year period ended December 31, 2024, total gas plant in service increased from $8.9 billion to $10.8 billion, or at an average annual rate of 7%. Replacement, new business, and reinforcement work was a substantial portion of the plant increase during the three-year period. Customer growth also impacted expenditures as Southwest Gas set approximately 122,000 meters during this time, which is reflected in new business. During 2024, construction expenditures (through cash outlays) for Southwest Gas were $847 million. The majority of these expenditures represented costs associated with replacement of existing transmission and distribution plant to fortify system integrity and reliability, as well as general plant additions. Cash flows from operating activities of Southwest Gas were $1.25 billion, exceeding 2024 construction expenditures and dividend requirements of the natural gas operations segment. #### 2024 Financing Activity As of December 31, 2024, the Company had up to $340 million of common stock available for sale under its ATM Program. No issuances have occurred under the ATM Program in 2024. Net proceeds received under the Dividend Reinvestment and Stock Purchase Plan during 2024 were approximately $9 million, from the issuance of approximately 127,000 shares of Company common stock. #### Natural Gas Distribution Segment Construction Expenditures, Debt Maturities, and Financing Management estimates natural gas distribution segment construction expenditures during the three-year period ending December 31, 2027 will be approximately $2.6 billion. Of this amount, approximately $880 million is expected to be incurred in 2025. Southwest Gas plans to continue to request regulatory support to undertake projects, or to accelerate projects as necessary, for the improvement of system flexibility and reliability, or to expand, where relevant, to unserved or underserved areas. Southwest Gas may expand existing, or initiate new, programs. Significant replacement activities are expected to continue well beyond the next few years. During the three-year period ending December 31, 2027, cash flows from operating activities of Southwest Gas are expected to provide approximately 74% of the funding for gas operations of Southwest Gas and total construction expenditures and dividend requirements. Any additional cash requirements, including construction-related, and any paydown or refinancing of debt, are expected to be provided by credit facilities, equity contributions from the Company, and/or other external financing sources. During the three-year period, Southwest Gas will have $407.5 million of long-term debt maturing. The timing, types, and amounts of any 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 and amounts of surcharge collections from or amounts returned to customers related to regulatory mechanisms including the PGA, maturities of long-term debt instruments, as well as growth levels in Southwest Gas’ service areas and earnings. External financings could include the issuance of debt securities, bank and other short-term borrowings, and other forms of financing. #### Liquidity Several factors (some of which are out of the control of the Company) that could significantly affect liquidity in future years include: activities from the planned separation of Centuri, variability of natural gas prices, changes in ratemaking policies of regulatory commissions, regulatory lag, customer growth in the natural gas distribution segment, the ability to access and obtain capital from external sources, the level of interest rates, changes in income tax laws, pension funding requirements, inflation, and the level of earnings. Natural gas prices and related gas cost recovery rates, as well as plant investment and ratemaking activities, have historically had the most significant impact on liquidity, aside from the Company’s recent strategic undertakings, including acquisition and disposition activity. On an interim basis, Southwest Gas defers over- or under-collections of gas costs to PGA balancing accounts. In addition, Southwest Gas 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 December 31, 2024, the balance in the PGA accounts included an under-collection of approximately $13.9 million pertaining to the California jurisdiction and an over-collection of $242.3 million pertaining to Arizona and Nevada. The substantial reduction from the receivable PGA balance existing as of the comparable period in 2023 is also highlighted by the substantial cash balance of $311 million existing as December 31, 2024, which reflects, among other things, customer collections related to the PGA. See **PGA Filings** for more information. In April 2023, Southwest Gas Holdings entered into a $550 million Term Loan Credit Agreement that was set to mature in October 2024. The Company utilized a majority of the proceeds to make an equity contribution to Southwest Gas. In August 2024, Southwest Gas Holdings amended its Term Loan agreement, extending the maturity date to July 31, 2025 and changing the interest with reference to SOFR from an applicable margin of 1.300% to 1.125%, among other miscellaneous changes. 41 Southwest Gas Holdings has a credit facility with a borrowing capacity of $300 million that expires in December 2026. This facility is intended for short-term financing needs. At December 31, 2024, $130 million was outstanding under this facility. The maximum amount outstanding during 2024 occurred during the fourth quarter and was $130 million. Southwest Gas has a credit facility with a borrowing capacity of $400 million, which was set to expire in April 2025, before it was replaced in August 2024, extending the maturity date to August 2029. Southwest Gas designates $150 million of the facility for long-term borrowing needs and the remaining $250 million for working capital purposes. There was no activity on either the long-term or short-term portions of the existing facility during 2024. As of December 31, 2024, no borrowings were outstanding on the long-term portion of the credit facility (including no borrowings outstanding under the commercial paper program), and no borrowings were outstanding on the short-term portion. The credit facility has been used as necessary to meet liquidity requirements, including temporarily financing under-collected PGA balances, meeting the refund needs of over-collected balances, or temporarily funding capital expenditures. The credit facility has generally been adequate for Southwest Gas’ needs outside of funds raised through operations and other types of external financing. Southwest Gas has a $50 million commercial paper program. Any issuance under the commercial paper program is supported by the revolving credit facility and, therefore, does not represent additional borrowing capacity. Any borrowing under the commercial paper program is designated as long-term debt. Interest rates for the commercial paper program are calculated at the then current commercial paper rate. At December 31, 2024, there were no borrowings outstanding under this program. Centuri has a $1.545 billion secured revolving credit and term loan multi-currency facility. The capacity of the line of credit is $400 million with related amounts borrowed and repaid available to be re-borrowed; the term loan portion of the facility has a limit of $1.145 billion. The term loan facility expires on August 27, 2028 and the revolving credit facility expires on August 27, 2026. This multi-currency facility allows the borrower to request loan advances in either Canadian dollars or U.S. dollars. The obligations under the credit agreement are secured by present and future ownership interests in substantially all direct and indirect subsidiaries of Centuri, substantially all of the tangible and intangible personal property of each borrower, certain of their direct and indirect subsidiaries, and all products, profits, and proceeds of the foregoing. Centuri assets securing the facility at December 31, 2024 totaled $2.4 billion. The maximum amount outstanding on the combined facility during 2024 was $1.117 billion, which occurred in the first quarter, at which point $1 billion was outstanding on the term loan facility. As of December 31, 2024, $113.5 million was outstanding on the revolving credit facility, in addition to $706.4 million outstanding on the term loan portion of the facility. Also at December 31, 2024, there was approximately $226 million, net of letters of credit, available for borrowing under the line of credit. In April 2024, Centuri successfully completed an IPO of 14,260,000 shares of Centuri common stock at a price of $21.00 per share, in addition to a concurrent private placement of 2,591,929 shares at a price equal to the IPO price. The collective net proceeds to Centuri approximated $328 million. Centuri used $316 million of the proceeds to repay amounts outstanding under its revolving credit and term loan facility, with the remainder intended for general corporate purposes. Following the IPO, the Company owns approximately 81% of the outstanding shares of Centuri common stock. The Company intends to fully dispose of its ownership in Centuri in one or more disposition transactions, including by way of sales of the Company’s shares of Centuri common stock, one or more exchange offers for Company shares, or distributions, or any combination thereof. #### Credit Ratings Credit ratings apply to debt securities, which constitute a significant portion of total capitalization, such as bonds, notes, and other debt instruments and do not apply to equity securities such as common stock. Borrowing costs and the ability to raise funds are directly impacted by the credit ratings of the Company. Credit ratings issued by nationally recognized ratings agencies (Moody’s, S&P, and Fitch) provide a method for determining the creditworthiness of an issuer. These credit ratings are a factor considered by lenders when determining the cost of current and future debt for each debt obligor (i.e., generally the better the rating, the lower the cost to borrow funds). The current unsecured long-term debt ratings of the Company and Southwest Gas are considered investment grade, and Centuri’s ratings are considered non-investment grade. A credit rating, including the foregoing, is not a recommendation to buy, sell, or hold a debt security, but is intended to provide an estimation of the relative level of credit risk of debt securities, and is subject to change or withdrawal at any time by the rating agency. Numerous factors, including many that are not within management’s control, are considered by the ratings agencies in connection with the assigning of credit ratings. 42 | | | | | | --- | --- | --- | --- | | | Moody's (1) | Standard & Poor's (2) | Fitch (3) | | Southwest Gas Holdings, Inc.: | | | | | Issuer rating | Baa2 | BBB- | BBB | | Outlook | Stable | Positive Outlook | Negative | | Last reaffirmed | May 2024 | December 2024 | August 2024 | | Southwest Gas Corporation: | | | | | Senior unsecured long-term debt | Baa1 | BBB | A- | | Outlook | Stable | Positive Outlook | Stable | | Last reaffirmed | May 2024 | September 2024 | August 2024 | | Centuri Group, Inc.: | | | | | Issuer rating | Ba3 | B+ | N/A | | Outlook | Stable | CreditWatch Developing | N/A | | Last reaffirmed | May 2024 | October 2024 | N/A | (1) Moody’s debt ratings range from Aaa (highest rating possible) to C (lowest quality, usually in default). A numerical modifier of 1 (high end of the category) through 3 (low end of the category) is included with the rating to indicate the approximate rank of a company within the range. (2) S&P debt ratings range from AAA (highest rating possible) to D (obligation is in default). The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus “+” or minus “-” sign to show relative standing within the major rating categories. (3) Fitch debt ratings range from AAA (highest credit quality) to D (defaulted debt obligation). The modifiers “+” or “-” may be appended to a rating to denote relative status within major rating categories. None of Southwest Gas’ debt instruments have credit triggers or other clauses that result in default if these bond ratings are lowered by rating agencies. Interest and fees on certain debt instruments are subject to adjustment depending on Southwest Gas’ bond ratings. Certain debt instruments are subject to a leverage ratio cap, and the 6.1% Notes due 2041 are also subject to a minimum net worth requirement. At December 31, 2024, Southwest Gas was in compliance with all of its covenants. Under the most restrictive of the financial covenants, approximately $4.1 billion in additional debt could be issued and the leverage ratio requirement would still be met. At least $2.7 billion of cushion in equity relating to the minimum net worth requirement exists at December 31, 2024. No specific limitations as to dividends exist under the collective covenants. None of the debt instruments contain material adverse change clauses. At December 31, 2024, Southwest Gas Holdings was also in compliance with all of the covenants of its credit facility and Term Loan Credit Agreement. Interest and fees on its credit facility and term loan due July 31, 2025 are subject to adjustment depending on its senior debt ratings. The credit facility and term loan are subject to a leverage ratio cap. Under the most restrictive of the financial covenants, approximately $3.5 billion in additional debt could be issued while still meeting the leverage ratio requirement. No specific limitations as to dividends exist under the collective covenants. The credit facility and term loan agreements do not contain material adverse change clauses. Certain Centuri debt instruments have leverage ratio caps and interest coverage ratio requirements. At December 31, 2024, Centuri was in compliance with all of its covenants. Under the most restrictive of the covenants, Centuri could issue approximately $151 million in additional debt and meet the leverage ratio requirement. Centuri has approximately $28 million of cushion relating to the minimum interest coverage ratio requirement. Centuri’s revolving credit and term loan facility is secured by underlying assets of the utility infrastructure services segment. Centuri also has restrictions on how much it could give to the Company in cash dividends, which is limited to a calculated available amount, generally defined as 50% of its rolling twelve-month consolidated net income adjusted for certain items, such as parent contributions inflows, Linetec redeemable noncontrolling interest payments, or dividend payments, among other adjustments, as applicable. Under these restrictions and the financial covenants of the amended revolving credit facility, however, Centuri’s ability to pay dividends to the Company is limited. Dividends from Centuri are not customarily relied upon in order for the Company to satisfy dividends declared for its stockholders. #### Inflation Inflation can impact results of operations for each of the Company’s business segments, and while the level of increase has waned over the past year, the level of improvement is only in relation to the multi-decade high inflation in 2022. Labor, employee benefits, fuel, natural gas, professional services, and construction costs are the categories most significantly impacted by inflation. Changes to the cost of gas are generally recovered through PGA mechanisms and do not directly impact earnings overall; indirect impacts primarily result from interest carrying charges on accumulated PGA balances, or through borrowing costs incurred to fund purchases or to repay overcollected PGA balances. Labor, employee benefits, and professional services are components of the cost of service, and gas infrastructure costs are the primary component of utility rate base. In order to 43 recover increased costs, and earn a fair return on rate base, general rate cases or other procedural filings are made by our regulated operations, when deemed necessary, for review and approval by regulatory authorities. Regulatory lag, that is, the time between the date increased costs are incurred and the time such increases are recovered through the ratemaking process, can negatively impact earnings. See **Rates and Regulatory Proceedings** for a discussion of recent rate case proceedings. #### Contractual Obligations Our largest contractual obligations as of December 31, 2024 consisted of: - Debt-related obligations for scheduled principal payments, other borrowings, and interest payments over the life of the debt. Debt obligations are included in our consolidated balance sheets. See **Note 8 - Debt** for additional information. - Centuri operating and finance leases are included in our consolidated balance sheets and represent multi-year obligations for buildings, land, equipment, and vehicles. See **Note 2 - Regulated Operations Plant and Leases** for additional information. - Southwest Gas has gas purchase obligations that include fixed-price and variable-rate gas purchase contracts. Variable-rate contracts reflect minimum contractual obligations with estimation in pricing based on market information. Actual future variable-rate purchase commitments may vary depending on market prices at the time of delivery and values may change significantly from their estimated amounts. Certain other variable-rate contracts allow for variability in quantities for which associated demand charges are included in the gas purchase obligations based on the maximum daily quantities available under the contracts. As of December 31, 2024, gas purchase obligations of $178 million are payable within the next 12 months. - Southwest Gas has pipeline capacity and storage contracts for firm transportation service, both on a short- and long-term basis with several companies in all of its service territories, some with terms extending to 2049. Southwest Gas also has interruptible contracts in place that allow additional capacity to be acquired should an unforeseen need arise. Costs associated with these pipeline capacity contracts, similar to gas purchase/supply arrangements, are a component of the cost of gas sold and are recovered from customers primarily through the PGA mechanisms. As of December 31, 2024 pipeline capacity and storage obligations of $88 million are payable within 12 months. - Other commitments associated with noncancellable obligations consist primarily of software licensing, equipment, outsourced processing subscriptions, and operating and/or maintenance agreements, as applicable. - Estimated funding for pension and other postretirement benefits during calendar year 2025 is $29 million. Funding amounts for years beyond 2025 are not currently known. Recently Issued Accounting Standards Updates The FASB routinely issues ASUs. See **Note 1 - Background, Organization, and Summary of Significant Accounting Policies** for more information regarding these ASUs and their potential impact on the Company’s and Southwest Gas’ financial position, results of operations, and disclosures. Application of Critical Accounting Policies and Estimates A critical accounting policy is one that is very important to the portrayal of the financial condition and results of a company, and requires the most difficult, subjective, or complex judgments of management. The need to make estimates about the effect of items that are uncertain is what makes these judgments difficult, subjective, and/or complex. Management makes subjective judgments about the accounting and regulatory treatment of many items and bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments. These estimates may change as new events occur, as more experience is acquired, as additional information is obtained, and as the operating environment changes. While management may make many estimates and judgments, many would not be materially altered, or provide a material impact to the financial statements taken as a whole, if different estimates, or means of estimation were employed. The following are accounting policies that are deemed critical to the financial statements. For more information regarding significant accounting policies, see notes to the consolidated financial statements. #### Regulatory Accounting Natural gas distribution operations are subject to the specific regulation of the ACC, PUCN, CPUC, or the FERC, as applicable. The accounting policies of the Company and Southwest Gas conform to U.S. GAAP applicable to rate-regulated entities and reflect the effects of the ratemaking process. As such, the Company and Southwest Gas are allowed to defer, as regulatory assets, costs that otherwise would be expensed, if it is probable that future recovery from customers (subject to our rate-regulated operations) will occur. Companies are also permitted to recognize, as regulatory assets, amounts associated with various revenue decoupling mechanisms, as long as the conditions for recognition of alternative revenue programs permitted under U.S. GAAP continue to be met. Management reviews the regulatory assets to assess their ultimate recoverability within the approved regulatory guidelines. If rate recovery is no longer probable, due to competition or the actions of regulators, write-off of the related regulatory asset (which would be recognized as current-period expense) is required. Regulatory liabilities are 44 recorded if it is probable that revenues will be reduced for amounts that will be refunded to customers through the ratemaking process. The timing and inclusion of costs in rates is often delayed (regulatory lag) and results in a reduction of current-period earnings. Discontinuing the application of this method of accounting for regulatory assets and liabilities or changes in the accounting for our various regulatory mechanisms could significantly increase our operating expenses as fewer costs would likely be capitalized or deferred on the balance sheet, which could reduce our net income. Factors influencing application of this policy include decisions of regulatory authorities, implementation of new regulations or regulatory mechanisms, assessing the probability of the recoverability of deferred costs, and continuing to meet the criteria of a rate regulated entity for accounting purposes. Refer also to **Note 5 - Regulatory Assets and Liabilities.** #### Revenue Recognition - Utility Infrastructure Services Centuri generally has two types of agreements with its customers: MSAs and bid contracts. Our MSAs and bid contracts are characterized as either fixed-price, unit-price, or T&M-based for revenue recognition purposes. Most of our contracts are considered to have a single performance obligation. Performance obligations related to fixed-price contracts are satisfied over time because our performance typically creates or enhances an asset that the customer controls. For fixed-price contracts, we recognize revenue as performance obligations are satisfied and control of the promised good and/or service is transferred to the customer by measuring the progress toward complete satisfaction of the performance obligation(s) using an input method. Input methods result in the recognition of revenue based on the entity’s effort to satisfy the performance obligation relative to the total expected effort to satisfy the performance obligation. Under the cost-to-cost method, costs incurred to-date are generally the best depiction of the transfer of control. For unit-price and T&M contracts, an output method is used to measure progress towards satisfaction of a performance obligation. Actual revenue and project costs can vary, sometimes substantially, from previous estimates due to changes in a variety of factors, including unforeseen circumstances not originally contemplated. These factors, along with other risks inherent in performing fixed-price contracts, may cause actual revenue and gross profit for a project to differ from previous estimates and could result in reduced profitability or losses on projects. Changes in these factors may result in revisions to estimates of costs and earnings. Revisions to estimates of costs and earnings during the course of work are reflected in the accounting period in which the facts requiring revision become known. At the time a loss on a contract becomes known or is anticipated, the entire amount of the estimated ultimate loss is recognized in the financial statements. Once identified, these types of conditions continue to be evaluated for each project throughout the project term and ongoing revisions in management’s estimates of contract value, contract cost and contract profit are recognized as necessary in the period determined. #### Accrued Utility Revenues Revenues related to the sale and/or delivery of natural gas are generally recorded when natural gas is delivered to customers. However, the determination of natural gas sales to individual customers is based on the reading of their meters, which is performed on a systematic basis throughout the month. At the end of each month, operating margin associated with natural gas service that has been provided but not yet billed is accrued. This accrued utility revenue is estimated each month based primarily on applicable rates, number of customers, rate structure, analyses reflecting significant historical trends, seasonality, and experience. The interplay of these assumptions can impact the variability of the accrued utility revenue estimates. Additionally, all Southwest Gas rate jurisdictions have decoupled rate structures, limiting variability due to extreme weather conditions. #### Accounting for Income Taxes The Company is subject to income taxes in the U.S. and Canada. Income tax calculations require estimates due to known future tax rate changes, book to tax differences, and uncertainty with respect to regulatory treatment of certain property items. The asset and liability method of accounting is utilized for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Regulatory tax assets and liabilities are recorded to the extent management believes they will be recoverable from, or refunded to, customers in future rates. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Management regularly assesses financial statement tax provisions to identify any change in the regulatory treatment or tax-related estimates, assumptions, or enacted tax rates that could have a material impact on cash flows, financial position, and/or results of operations. #### Accounting for Pensions and Other Postretirement Benefits Southwest Gas has a noncontributory QRP with defined benefits covering substantially all employees hired on or before December 31, 2021. In addition, there is a separate unfunded supplemental retirement plan which is limited to officers hired on or before December 31, 2021. Pension obligations and costs for these plans are affected by the amount and timing of cash contributions to the plans, the return on plan assets, discount rates, and by employee demographics, including age, 45 compensation, and length of service. Changes made to the provisions of the plans may also impact current and future pension costs. Actuarial formulas are used in the determination of pension obligations and costs and are affected by actual plan experience and assumptions about future experience. Key actuarial assumptions include the expected return on plan assets, the discount rate used in determining the projected benefit obligation and pension costs, and the assumed rate of increase in employee compensation. Relatively small changes in these assumptions (particularly the discount rate) may significantly affect pension obligations and costs for these plans. For example, a change of 0.25% in the discount rate assumption would change the pension plan projected benefit obligation by approximately $35 million and pension expense by $3 million. A change of 0.25% in the employee compensation assumption would change the pension obligation by approximately $10 million and pension expense by $2 million. A 0.25% change in the expected asset return assumption would change the pension expense by approximately $3 million (but would have no impact on the pension obligation). Beginning in 2024, a treasury futures hedging overlay was implemented, intending to dampen the impact of changing discount rates over time, reduce the interest rate sensitivity of the pension plan, and reduce funded ratio volatility. However, there is no guarantee that the mechanism implemented will achieve these intentions. Given the recent interest rate environment applicable to long-term high-quality corporate bonds, which are utilized by Southwest Gas in selecting a discount rate based on relevant provisions in U.S. GAAP, the discount rate applicable to the pension plan increased from 5.00% (at the end of 2023) to 5.75% as of December 31, 2024. The methodology utilized to determine the discount rate was consistent with prior years. An increase in the discount rate decreases the pension obligation in the current year and expense in the year ahead; funding levels, among other items, are also impactful. During the fourth quarter of 2023, the asset mix was adapted to a balanced portfolio between debt and equity securities. Southwest Gas modestly increased the return on assets expected over the long term to 7.00%, which was supported by available data. The salary escalation assumption was left unchanged at 3.50% given recent and expected salary changes and market conditions over a longer-term horizon. Southwest Gas plans to slightly increase its funding in 2025 compared to 2024, with the intention to provide a strong funded ratio overall for participants, while also striving to avoid a significantly overfunded position in the future. The pension is approximately 95% funded as of December 31, 2024, and due to the foregoing updated conditions, including amortization of actuarial gains/losses, pension expense is expected to be lower in 2025 (by approximately $4.5 million). The funded status improved in 2024 compared to 2023, including impacts from the change in the discount rate, and is forecasted to improve further in the future, using the current assumptions outlined above and management’s funding expectations. However, the funded status and expense levels in the future will continue to be influenced by, as applicable, long-term discount rates, the treasury futures hedging overlay, asset returns, and plan funding by Southwest Gas. Certifications The SEC requires the filing of certifications of the CEO and CFO of registrants regarding reporting accuracy, disclosure controls and procedures, and internal control over financial reporting as exhibits to periodic filings. The CEO and CFO certifications for the period ended December 31, 2024 are included as exhibits to this Annual Report on Form 10-K filed with the SEC. ## Market risk As filed, 6,036 characters. We are exposed to various forms of market risk, including commodity price risk, rate design risk, interest rate risk, and foreign currency exchange rate risk. The following describes our exposure to these risks. #### Commodity Price Risk In managing its natural gas supply portfolios, Southwest Gas has historically entered into short duration (generally one year or less) fixed-price contracts for its California rate jurisdictions, as well as variable-price contracts (firm and spot) for all its rate jurisdictions. Southwest Gas has experienced price volatility over the past several years and such volatility could continue into 2025 and beyond. Southwest Gas is protected financially from commodity price risk by deferred energy or PGA mechanisms in each of its jurisdictions. These mechanisms generally allow Southwest Gas to defer over- or under-collections of gas costs to PGA balancing accounts. With regulatory approval, Southwest Gas can either refund amounts over-collected, or recoup amounts under-collected in future periods. In addition to the PGA mechanism, Southwest Gas has historically utilized a Volatility Mitigation Program attempting to further reduce price volatility for its California rate jurisdiction customers. During 2024, Southwest Gas continued to fix the price on a portion of its California natural gas portfolios using fixed-price contracts. Southwest Gas does not currently plan to make fixed-price term or financial swap purchases broadly for the Arizona or Nevada jurisdictions; however, it will continue to make fixed-price purchases for the California jurisdictions, and will monitor conditions and otherwise work collaboratively with regulators to address any changes to these plans. 46 Southwest Gas’ natural gas purchasing practices are subject to prudence reviews by the various regulatory bodies in each jurisdiction. PGA changes affect cash flows and potentially short-term borrowing requirements, but do not directly impact profit margin. #### Rate Design Risk Rate design is the primary mechanism available to Southwest Gas to mitigate weather risk. All of Southwest Gas’ service territories have decoupled rate structures which mitigate weather risk. In California, CPUC regulations allow Southwest Gas to decouple operating margin from usage and offset weather risk based on monthly margin levels. In Arizona and Nevada, a decoupled rate structure applies to most customer classes based on monthly margin per customer benchmarks. All such mechanisms provide stability in annual operating margin by insulating Southwest Gas from variations in customer usage associated with abnormal weather conditions (including margin protection during warm weather and limits on margin during cold weather). Southwest Gas is not assured that decoupled rate structures will continue to be supported in future rate cases. Similarly, Southwest Gas has in place ongoing infrastructure replacement protocols for certain pipe replacement activity. These programs are designed to mitigate the financial attrition associated with pipe replacement activity between rate cases by providing for the recovery of and return on expenditures. The programs have historically included the replacement of Early Vintage Plastic Pipe, Vintage Steel Pipe, and COYL, in addition to programs for the conversion of master-metered mobile home parks to individually metered mobile homes. More recently, Southwest Gas has proposed the SIM mechanism in the pending Arizona general rate case. It is not assured that currently approved programs will continue to be supported in future regulatory proceedings, nor that requested programs will be approved. #### Interest Rate Risk Changes in interest rates could adversely affect earnings or cash flows. The primary interest rate risks for the Company are the risk of increasing interest rates on variable-rate obligations and the risk of increasing interest rates between the time of an anticipated debt offering and the time of actual issuance. Interest rate risk sensitivity analysis is used to measure this risk by computing estimated changes in cash flows as a result of assumed changes in market interest rates. In Nevada, fluctuations in interest rates on $150 million of variable-rate tax-exempt IDRBs are tracked and recovered from customers through a variable interest rate expense recovery mechanism, which mitigates risk to earnings and cash flows from interest rate fluctuations on these IDRBs. The following table represents the variable rate debt as of December 31, 2024 and 2023 and interest rate sensitivity analysis for a hypothetical 1% change in interest rates, assuming a constant outstanding balance in such debt over the next twelve months: | (Millions of dollars) Variable Rate Debt: | 2024 (1) | Increase/Decrease in Interest Expense from 1% Rate Change | 2023 (1) | Increase/Decrease in Interest Expense from 1% Rate Change | | --- | ---: | ---: | ---: | ---: | | Southwest Gas | $50.0 | $0.50 | $50.0 | $0.50 | | Centuri | 819.9 | 8.20 | 1,071.4 | 10.71 | | Corporate | 680.0 | 6.80 | 628.5 | 6.29 | | Total Southwest Gas Holdings, Inc. | $1,549.9 | $15.50 | $1,749.9 | $17.50 | (1) Excludes the IDRBs noted above. #### Foreign Currency Exchange Rate Risk Centuri owns infrastructure services businesses that operate in Canada. Due to these operations, the Company is exposed to market risk associated with currency exchange rate fluctuations between the Canadian dollar and the U.S. dollar. Foreign currency translation risk is the risk that exchange rate gains or losses arise from translating foreign entities’ statements of income and balance sheets from their functional currency (the Canadian dollar) to our reporting currency (the U.S. dollar) for consolidation purposes. During 2024, translation adjustments due to fluctuations in exchange rates were not significant. We do not have significant exposure to other foreign currency exchange rate fluctuations. Other risk information is included in **Item 1A. Risk Factors** of this report. 47 ## Controls and procedures As filed, 4,944 characters. #### Disclosure Controls and Procedures Management of the Southwest Gas Holdings, Inc. and Southwest Gas has established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in their respective reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to management of each company, including each respective Chief Executive Officer and Chief Financial Officer, as appropriate, 102 to allow timely decisions regarding required disclosures. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and benefits of controls must be considered relative to their costs. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or management override of the control. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. Based on the most recent evaluation, as of December 31, 2024, management of Southwest Gas Holdings, Inc., including the Chief Executive Officer and Chief Financial Officer, believes the Company’s disclosure controls and procedures are effective at attaining the level of reasonable assurance noted above. Based on the most recent evaluation, as of December 31, 2024, management of Southwest Gas including the Chief Executive Officer and Chief Financial Officer, believes Southwest Gas’ disclosure controls and procedures are effective at attaining the level of reasonable assurance noted above. #### Management’s Reports on Internal Control Over Financial Reporting Management of Southwest Gas Holdings, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined by Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Under the supervision and with the participation of Southwest Gas Holdings, Inc. management, including the principal executive officer and principal financial officer, an evaluation was conducted of the effectiveness of internal control over financial reporting based on the “*Internal Control – Integrated Framework”* (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon management’s evaluation under such framework, management concluded that internal control over financial reporting was effective as of December 31, 2024. The effectiveness of internal control over financial reporting as of December 31, 2024 has been audited by PricewaterhouseCoopers, LLP, an independent registered public accounting firm, as stated in their report which is included herein. Management of Southwest Gas is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Under the supervision and with the participation of Southwest Gas management, including the principal executive officer and principal financial officer, an evaluation was conducted of the effectiveness of internal control over financial reporting based on the “*Internal Control – Integrated Framework”* (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon management’s evaluation under such framework, management concluded that Southwest Gas’ internal control over financial reporting was effective as of December 31, 2024. This annual report does not include a report of Southwest Gas’ registered public accounting firm regarding internal control over financial reporting pursuant to rules of the Securities and Exchange Commission that permit Southwest Gas to provide only this management’s report in this annual report. #### Changes in Internal Control Over Financial Reporting There have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fourth quarter of 2024 that have materially affected, or are likely to materially affect, the Company’s internal control over financial reporting. There have been no changes in Southwest Gas’ internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fourth quarter of 2024 that have materially affected, or are likely to materially affect Southwest Gas’ internal control over financial reporting. Filed Feb 26, 2025. Source: SEC EDGAR, the filing index for accession 0001692115-25-000082. Last ingested by Listed: Nov 4, 2026, 08:38 ET. No prices; not investment advice.