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Southwest Gas (SWX) Expands Customer Base in Graham County

Southwest GasHoldings, Inc. SWX expands its operations in Graham County, with an approval from the Arizona Corporation Commission. The transition will begin on Jan 18 with an addition of 5,300 customers. SWX currently provides services to more than one million customers in Arizona.

At present, the customers can make payment at the Graham County Electric Cooperative office but SWX plans to establish a local operation facility at the similar location to make it easy for customers. SWX filed the current general rate case with the Arizona Corporation Commission. Until Southwest Gas gets the required approval, the customers will continue to pay their current rates. Per the plan, the customers will access Southwest Gas’ assistance programs.

SWX’s natural gas operations have a diversified and growing customer base in the three states, namely Arizona, Nevada and California. As of Sep 30, 2021, Southwest Gas had 2.1 million residential, commercial, industrial and other natural gas customers.

Other Capex Plans

SWX invested $825.1 million in 2020. For the 2021-2023 period, it expects to make investments worth $2.1 billion. Of the planned capital budget, 45% will be used in increasing the safety and reliability of its existing operations while 36% will be allotted to new businesses and 19% to the general plant. The CAPEX plans are likely to improve the rate base 7.5% during the 2021-2025 time period.

Prior to this, in October 2021, Southwest Gas entered into a definitive agreement to acquire Dominion Energy’s Questar Pipelines and certain associated affiliates for a deal value of $1.545 billion in cash. This acquisition will act as a tailwind to SWX’ energy transition strategy and expand its natural gas pipeline operation. In August, its subsidiary Centuri Group, Inc. acquired full ownership of Riggs Distler & Company, Inc. and its affiliates for a cash deal of $855 million. The deal strengthened Centuri's electric services platform including 5G telecom and renewables services. Centuri’s buyout expanded SWX’s operating footprint into new markets in the Northeast and the Mid-Atlantic regions.

Peer Moves

Other gas distribution utilities, including Chesapeake Utilities Corporation CPK, UGI Corporation UGI and MDU Resources Group, Inc. MDU are also expanding businesses on the back of their strategic capital investment plans.

Chesapeake Utilities’ propane subsidiary Sharp Energy acquired Diversified Energy Company’s propane operating assets in December 2021, thereby expanding its footprint in North and South Carolinas. The same is likely to be accretive to CPK's 2022 earnings, boosting gross margins by $11.3 million.

Chesapeake Utilities is also making strategic acquisitions to expand operations. CPK has invested $1.2 billion since 2015 to strengthen operations and anticipates investing in the range of $750 million to $1 billion in the 2021-2025 time frame.

UGI Corp. spent $674 million in fiscal 2021, marginally up from $665 million in the last fiscal year. It expects the same to amount to $990 million in fiscal 2022.These investments will assist it to achieve the long-term annual earnings per share growth target in the range of 6-10%.

UGI’s acquisition of Columbia Midstream Group, LLC from TC Energy Corporation, now known as UGI Appalachia, has continuously recorded a strong performance. Midstream & Marketing reported a net income of $107 million for fiscal 2021, up 16.3% year over year. UGI completed the purchase of Mountaineer for $540 million in September 2021. UGI’s buyout of GHI Energy, LLC, a renewable natural gas company operating in California, is helping it expand its renewable product offerings and supporting its aim togrow in an environmentally-friendly way.

MDU Resources’ unit Knife River Corporation completed the acquisition of two construction-related companies, concurrently in November 2021. Those are Baker Rock Resources and Oregon Mainline Paving, marking MDU’s expanding operations in the Pacific Northwest.

MDU spent $648 million in 2020 and planned to invest $775 million in 2021. These investments will increase the reliability of its services, enabling it to serve an increasing customer base, effectively.

Zacks Rank & Price Performance

SWX currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past year, shares of SWX have gained 9.3%, underperforming the industry’s 19.6% growth.

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