Southwest Gas (SWX) 10 Aug 222022 Q2 Earnings call transcript

Ladies and gentlemen, good day, and welcome to the Southwest Gas Holdings Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the prepared remarks. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the call over to Boyd Nelson, Vice President of Strategy and Investor Relations for Southwest Gas. ahead. go Please

are and some press today discussed not on assumptions, will also well which of may are the today's posted Vice this call, as the Hello President Holdings Gas earnings President presentation, XX contains [indiscernible]. our as of of and guidance. company call, welcome this the forward-looking Brown, true, should that Holdings; the may based Southwest that These call statements Corporation; we to will am note asked language on website. and have Thank our on SEC management's you in be or slide CEO that Peterson, joined quarter everyone impact of XXXX release, statements. Please President Gas refer today's to cause actual information have to which over our statements. Further, Karen. slides, second referencing certain on such Karen the statement. from come that Chief our earnings now Southwest the IR be I filings Haller, and All and you, address by remind I'll Senior of the turn Financial may assume a will to today. longer-term call may factors presentation differ and to you Officer. Justin on forward-looking to for factors results Greg And and of update any description attorneys me the made statements we provide obligation that as forward-looking no With call. we some year's Gas that, Throughout Southwest coming

results. us pleased second you discuss are Boyd. to Gas today I'm Thanks, joining Southwest quarter

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to gas is fuel affordable made service safety clean, safety to natural attribute Our creation prosperous ensuring life customer provide performance our to number system. satisfaction the essentials focus count leading on We our operational and of stockholders. key of safely customers customers needs our improve receiving accelerate and to our to our leadership and team top financial a distribution our pursuing reliability value their enhance and can for priority. is to of and actively areas meet start strategic the we've scores To investments and businesses reliably

we make investments regulator continue our leading capital continue regulators to outcomes attractive and that our rate will on to disciplined with to prioritize our As benefit customers, we our constructive relationships to base build territories, growth. existing service

of improvement. a near publicly we incremental are improving costs review our we status. O&M and bottom are operating maintaining our leadership discipline, our our cost expect While By doing up per by for less peers, customer among traded further top extend than average re-examining we spending our the the peers,

results. working our which is capital to are already expenditure yield program, to beginning We optimize also

capital returns This XXXX we we where optimize of by focus same expenditures part growth quarter, customer to the for still there system is we've This our to strategy million. enhance improvements service investments timing improve provide have. to are stockholder capital for supporting guidance our and program change reduced $XX expenditure can rated our on the disciplined of returns, highly customer stockholders, our while always

our dividends, base, of natural in grow needs transition plays future. we our concentrating by all with with gives guidelines key improve on renewable The the goal these performance territories bringing strong while gas, energy a testing while reinforces fastest slide, continues drivers, solutions outlined in the of against and establish service us confidence compressed markets ROE, the on and Beyond to the This focus vital natural meet backdrop rate company that developing continuing also country. dynamic our blending the are like the our we and and will standards important operational a our of innovative great operating areas role a and customers. tailwind financial in one gas, earnings energy hydrogen to the into growing

economy-wide delivering customers to to energy We the serve emissions communities modules reductions. are and we committed to clean drive

on strategy as produce communities the creation our strong deliver serve value to positioned our customers outcomes we for we for well our are We accelerate and and stockholders.

Moving on slide to eight.

strong for and to long-term can see, value meet we energy of needs continue you is as our creation As fundamentally our the poised business customers.

that line continue and expectations, the remainder infrastructure Our excluding global the expenses supply impact headwinds our utility year across believe second our will results event-driven quarter in do through inflationary the chain of with certain at we not were services of the and portfolio.

after a one-time Southwest reported expenses. Gas of $X.XX Holdings EPS share for $X.XX per accounting diluted of

claims XXXX. of period over term. as and litigation in in same be longer non-recurring added to $XX.X quarter Gas new driven do expect second XX% review earnings management first expenses, relative XX,XXX and to It a as contractor certain to continue was O&M adjustments well which was XXXX. $X.X and in transitory strategic delivered settlement, of include increased approvals. and Specifically, decline million Not note technology temporary score non-recurring EPS Southwest to services we cash $X.X support, surrender satisfaction is quarter factors: maintained our for and value two shareholder a maintenance, MountainWest included second not integrity of second the customers by adjusted impact the quarter utility to the by that primarily the billion legal or expense the and of operating customer high important customer is collective COLI share a or event-driven XX-month this The in record the due pipeline stockholder related expected costs expenses, million activism, from quarter $X.XX margin mark-to-market Utility to of per

The second the returned to of factor activity costs was following and the employee as economic normalization pre-pandemic levels employee-related pandemic.

quarter prior in I to advantage are ensure of its indicated, $XX our unique integration we costs. results previously we costs the all transition were with MountainWest non-recurring million schedule generally this revenue line operating by are impacted structurally event-driven second bringing critical And Excluding process The evaluating post associated EBITDA with are costs, delivered as in these of quarter, our an the with in with pre-tax, in line on primarily infrastructure achieved acquisition guidance. expenses, efficiently. expectations results integration MountainWest’s work. remained adjusted with and

of majority XXXX. quarter of MountainWest integration concluded We XXXX, expect expect be to by service complete although of we the first the by to the TSA

to first expenses We be complete process. lower as XXXX expect the we integration to for of quarter

growth in We also MountainWest continue incremental over the investment million next three to years. opportunities target approximately $XXX at

Centuri of mix to Lastly, related second of work increased of quarterly Riggs to Centuri’s increase inflation, of an record the and $XXX and XX%, by quarter delivered compared was amortization dollars, performance interest impacted revenue XXXX. Distler.

that the prospects Centuri’s confident strong business are by headwinds. We near-term are unchanged and

have $XXX and pending for will million be last we fourth and exceeding which during the wind for million multi-year In quarters. performance, we third project additional quarter fact, executed awards offshore contracted anticipate $XXX

years. million rate more customer multi-year turn now I'll our also large $XXX the our over electric Justin a We five utility renewed activity. in over to contract generate a to case and next revenue business with utility anticipated discuss the to call than

secure Karen. working nine, on our you, stakeholders to outcomes. regulatory Thank focused remain slide constructively we Starting on with positive

total our rates rate increase of The that in approval see resulted rate During rate an base April also by to over $X.X of settlement were $XXX Xst, increase XXXX. relief was approved settlement we in the XX% a utilize from with Nevada commission the We for started revenues target an quarter, million ratio. ROE in base in X.X% and just we in an our authorized to to million billion. of rate authorized effective equity nearly $XX received of Nevada case relative improved

Arizona is case is currently of and due in This our early Corporation pending rate XXXX case. have XXXX. Arizona Commission rate was design The us $XX to with XX, the of this our Intervenor’s also August million coming of decision and We round in currently XXth. from was in Xth testimony filed rate expect August requirement we that that first the revenue slide which Friday last Friday, a due provides December testimony leads an testimony overview

have million million As to we and shown close a is included $XX proposing million increase we base rather in base through and important An slide, property that that to staff is recover adjustment close existing case tax between tracker our program $XX but the as request property million and that the proposal RUCO amount in distinction rates, this not million. recover to $XX for our $XX proposing is staff to taxes. on staff's $XX an

is proposing a request. comparison our be staff from million X.X%, to adjust $XX proposal is plan and of RUCO would proposing are to increase RUCO of supportive exclude rates to test to Both whereas XX-month ROE our Staff authorized position a to currently Staff X.XX%. RUCO So an ROE six post better adjustment, our adjustment. also year X.X% month and the is million a of supporting $XX Staff reflect

mentioned, design currently XX, September testimony are begin Friday, scheduled and is due I As August XX. rate hearings this to

demonstrated rate as continue significant Arizona Turning pending general illustrated experience our by and by to XX, growth Nevada to as Slide the base we chart. rate cases, recent

territory pipeline by driven well reliable replacement with Our as we investment opportunities, safe in as been and investments programs different has on tremendous efforts a capital where robust tracker to expansions. system a variety customer and our help partnered have system regulators distribution growth, service ensure of our

well to needs While we are grow our service energy customers our positioned meet believe of territories. we the throughout and

the are proactive optimize on planning commitments optimizing and rate deliver making CapEx sure also through financial our ensure results. We case optimization execution our O&M in to utility our enhanced are discipline, on we more processes to we focused being and to deliver

to of additional We to and over this ensure reliable, framework we execute identify necessary our exceed delivering regulators expectations service. and stakeholders working have meet of to summary make enhance record service of continue when strong operating focused attractive to legislative with safe, we to our regulatory to be serve. on on territories continuing capital Greg turn by call will that affordable will and investments provide second a and sustainable results. work jurisdictions the now our that the our the with quarter in As our I stateholders committed and remain and presented our opportunities to it comes a to to customers we track slide, shown to

Thanks, Justin.

second Our analysis results. earnings our comprehensive second were for refer quarter documents to press of release filed yesterday. quarter Please XX-Q a and these

the results EPS diluted the results. quarter. each year operating of the start per will MountainWest. corporate consolidated million an incremental reflects and for to and six adjustments between an consolidated of associated company on administrative with the segments costs. on These components the strategic slides, line tax adjusted basis, litigation I'll Slide shown the corporate the overview page. quarter versus of increased the the for settlement share expense operating and related the $X.XX second item and $XX.X proxy prior XX-months each with associated are was administrative XX Let's contest slide. for for in Corporate million review million $XX.X three, this of for the $XX.X of due segments acquisition the On overall depicts also of quarters, period. operating The $X.XX and and with items XXXX with process, upcoming administrative items primarily interest begin net discuss of line line consolidated but of and

the to a million GAAP a operating of current the in quarter, and Temporary due of in in most margin some to starting utility million, slide of second results COLI $XX let's affected company-owned second XXXX XX,XXX On and Operating the and addition headwinds relief the changes results Nevada quarter. that quarter utility basis, Next, by transitory on values declined of decline. results customers. XX. policies accounted the cash XXXX million segments loss grew costs surrender with rate Life from in $X or the move primarily Insurance $XX to in of for

improvement a comparison this items transitory O&M expense the on by million overshadowed and quarters. including of costs I of will provides was backdrop next XX However, interest higher operations discuss expense slide. that the $XX between impacting Slide

stuffs waterfall chart higher the by on An of not indicative legal integrity overall in costs include customer. O&M reduced for residential for in QX collectibles disputes was left $X customers. temporarily COVID-related of challenges incurred XXXX the facilities XXXX quarter. million $X components. other of an items. trading ongoing restrictions of O&M in with per and an Approximately accruals per incremental for point be [indiscernible] $XXX incident more These and expectations. approximately [indiscernible] in a M in and reviewing XXXX updating to customer due or eliminating contact, on contractual to million Normalizing was experienced we million of a would The million legal of transitory or XXXX with the shows and O& are experienced associated temporary shown growth pre-COVID the disconnects year. of the bottom management and O&M of claims. associated In $XXX many expenses level customer our quarter million As slide, last the million incremental active $XX year, starting on $XX QX X% per were due inflationary pipeline and based being the of about quarter comparable our in about customer on were XXXX, per $XX that for $X second travel

and million is growth incurred QX. of due contractor increase in consistent We last stabilization items inflation the other also the target per information about system Other and of transitory $X and for temporary of million that our costs, for customer $X O&M is X%. and between in customer technology to went the O&M customer support quarters year remaining live with than about services

XXXX. second adjusted expenses in income income with million after acquired results of were EBITDA our the in see for Turning $XX net adjusted income the net adjusted we and since integration can and December to we quarter them with expectations. on $XX non-recurring second MountainWest, consultant XX, slide net line internal Both fees, XX, benefits. associated employee of MountainWest costs accounting one-time million and quarter

provided highly The contracted benefit in see for parent business storage and cash bid, for We interest expenditures. debt Since put gas strong MountainWest operate Mount to operating capital attractive services region. and support we is the capacity related demand out have on transportation regulated strong oversubscribed flows continue to is from resulting company released the capacity from operation demand recontracting natural rates. whenever Rocky and -- and and at acquisition acquisition in

and to turn XX results. let's Centuri slide discuss Now

bottom between As quarter Distler of right this second results. shown tax the to increased incremental revenue million X% well Despite the year. acquisition, as million, line the change market this due of after slide, results $XX in $XX was versus rate revenues The side organic of EBITDA in consisting as from on Riggs components about items depicts million operations. the growth the the to growth in Centuri Interest million the of major The in revenue of last adjusted $X growth from the of approximately $XX quarter benefits debt waterfall rigs expense pre-tax and chart million impacted increases. several interest incremental quarters. acquisition $X Centuri’s includes

the remaining second in of Distler attributable million included Riggs intangibles. acquisition results, quarters XXXX million a increased and to non-cash earlier Higher August non-rigs and the from with is year Riggs pretax increase operations. Our between this of continued $X in resulted Distler is has of XXXX. $X costs million XXXX $XX in of About associated $X amortization in their while fuel million

toward customers this to While more fuel with normal obtain prices are cycle. work to additional cost starting continue from levels, relief to unforeseen back ease we our

were the operations. $X incurred Distler noted. holding previous million of approximately costs includes most these Riggs While company of the contribution were costs impacts Centuri's reflected at fuel The the strategic level, review in

headwinds. customer has specifications. been The work the changes is are but ongoing chain temporarily that in of and higher delayed growth sizable the cost $XXX caption wind will about other benefit anticipating the prospects mix impacts net excited other million awards. in offshore Distler, are subcontractor the customer second support multi-year and has all work to due issues and some commenced and supply note We of year of of in half contracted Over we accelerate this work Riggs

$X.X from Investments testing spending and our the billion resulting estimated optimize driven pipe the our plan $XXX our XXXX, through our a This $XXX to improvements. Higher X% while and during X% $XXX move I same CAGR returns, costs slide million end guidance event to XX $XX be discussed reflects and million of a to continuing period. now is $XXX XXXX gas We million. of or system expenses me during customer rate from also beyond. in of to billion programs our reiterate million planned distribution quarterly guidance $X.X that $XXX X% million of to of as top previous $XXX bolster support factor. XXXX to Let of growth, base transitory previous to estimated to income Utility net The due reduction million for natural to increased capital the to analysis. is part company and are million interest our investments guidance. expected primarily reduction five-year CapEx that if replacement

the to include cash million stock to wholly in $X XXXX. market by COLI note the for I $X continue million recurring We surrender month $X of of values July. that income million should increased

continues range revenue $XXX to of re-contracting to we've increased is primarily and X%-plus. revenue. compound expected range due our customer from some XXXX forward per million million and MountainWest, less growth O&M rate be $XXX TSA five-year $XXX million the At return to to on to estimated to be incremental million, previous utility equity X% for Our revenue our the at reverse annual than target $XXX

to and period. of EBITDA transition incremental XX% the reflects XX% margin XX% IT XXXX expense to TSA, our range lowered during labor of range XX%, from primarily Our previous

that from on acquisition strong beyond. and We to flows accretive cash integration have $XX of our $XX this million are be at plan for March Adjusting and overlapping in EPS operating integration MountainWest, increased MountainWest XX will MountainWest's XXXX at in costs, to XX. one-time balance June we from track reiterate cash million

billion headwinds, we million $XXX our next business, including guide MountainWest growth in reaffirm identified especially XX%. previous pressures, EBITDA the at guide of XXXX $X.XX supply inflationary Due have margins billion, in we revenue Distler. down At Centuri, investment XX% by from growth issue to over in of of years. some to expect customer we facets mentioned, incremental XX% fuel, to driven our to previously all Riggs current XX% three CapEx XXXX, As chain $X.XX of on and the

are However, we XX% these to EBITDA XX% to return and impacts temporary believe expect to margins in XXXX.

we are closing I'll XXXX, rate back some Karen call remarks. EBITDA adjusted X% four the XXXX annual For over an of for casting to now XX%. to growth turn to compound

Thank you, Greg.

for points Before all and make. key we I'm to on I that stakeholders emphasize plan we've going value open our strategic maximizing what the today. couple questions, the to the want a call touch is made of decisions guide we for

the are excited Southwest future in confident for We Gas. and

us things Our stockholders. in focused operational past processes, against our of leadership improved of great we value the the and optimizing backdrop team and the finding in territories. and by new have is returns And the to we're opportunities the way performance challenging service utility and energized on front improve financial done growing committed to we've to ways all

ROE energy transformation ahead and focused our improvement, growth While forward you across our landscape. the for exceed our base, all remain to expectations. strong the of prioritize for we on earnings enterprise, advance delivering rate customers' will open stakeholders followed we of we continuing energy units as or Franklin, into to meet our a look today's delivering dividends leading while can MountainWest to and evolving We business these now forge questions. outcomes company's performance continue call the processes, growth and Centuri continuing as

from America. [Operator Instructions] Julien question our of We'll take first from Dumoulin-Smith Bank

elaborate? it. about think want here? ending If pending the bids we review the the you that how Just to know outset. exactly go call. What think you the timeline back with at et where for already may, rather cetera? started what than here appreciate the to about I necessarily you think caused Hey, you do if time. good respect qualified I timing for Thanks from the that afternoon. I could you items about you've And here, I to to articulated

utility and respect for long-term ending The great unanimously with to and the the across the that and question. process and the considering the improving option. strategic we the Corporation's to carefully on evaluating after I just favorable And rate determines Board and the opportunity really across to efficiency yes. thanks Hi, to stockholders indications ROEs utility. a plan. moving process, best of grow the and the we and alternative MountainWest demographics. is value utility forward we there execute Southwest to Board have for for unanimously enhance base discipline optimize Gas recognize the And growth maximize Welcome unlock then business, the the guess to of with while strong interest also was plans working value Centuri the processes cost

obviously been gyrating have do little and Fair enough. you bit some just will? remarks here about Centuri here right. talk the of more the prepared and I and I about basis a Obviously, opportunity can the how then mean, All on the But on you margins points et and core pressure just if it. outlook think costs And you here. brief in Got may, the normalized things if pivoting to operations cetera? there a you back commented there?

Greg. is Yes, Julien, this

of about going hurt early we what's Distler fuel in my that on, in fuel really these if the mentioned at another and know costs as Riggs about you $X.X up and the have. fact really on wind us tap QX. projects QX in on We We right, I $X.XX talk think to has that the that I is Karen kind impact that bullish what offshore as we're alluded coming. well, and Centuri remarks

as hurt are and really get that So seeing those. recoveries we're But some moderate on fuel we're customers I candidly mentioned, and our prices thing. try to that with from us working

Centuri model the So strong and base we're it. about excited really for is

Got it. All right, excellent.

to more may, I over and on just you if when a think you coming pricing ability and that do back normalized Like, time. to environment dynamics Centuri get more there here? recruit can about the power here, those just Sorry, discrete as

Yes.

some our to the Again, service moving about those with also recouping agreements customers had think try and mitigate we putting future. amounts, get I the we've of master working renewed in we're into already in talking you're normalized and If that timeframe to those that such in direction. operations, we're have either to items success some

I'm prices were not a fuel headed the of progress the they direction. ago, get back will when in good prognosticator a hater So that right now. place levels but year is to taking are they

All right. guys. you, Excellent. Thank

question next Our comes Sunderland Richard from from JPMorgan.

as the being least $XX larger How you in the for does do that that benefit but the in when offer you was over then of that [indiscernible] utility that utility path that Maybe significantly basis, how a Arizona at versus how starting longer icon today. next with out the Thank than Hi. And the quoted review, thinking the term performance? review sustain maybe had did a frame does operations? there? you just time factor review share about You're rates initial in the year, outcome? the

we opportunities believe have for Yes, I think so. really We the utility. some great

looking about and We it. that, look how we at ROE. a or technology that's improve doing O&M our our of earlier at and at dive efficiencies, We're We're deep all costs. any manner improving can all talked are on those that of we focused looking improve had other our related, on of whether

O&M, cases that our of the optimizing all think rate and we and expenditure how in our of our capital program of timing rate best cases, those to capital there's we’re expenditures room results So stockholders. with bring the the those we optimize timing on concentrating our to

review we was a of forward how and come decision the the at about best we of their moving felt the initial different the you those that we look our with to offer Board to offer carefully mentioned really and that parties the can all all the that at we move demographics utility bullish the the opportunities company. execute with offer to and areas assistance interested when standpoint, of go. So the the we that, favorable that on, feel obviously really utility committee on legal of with of from an engaged that was alternatives jurisdictions with interest and a important that indication of evaluated for part advisers, was commence great radient option -- improved The and or to that indications financial forward way our that, growth conclusion all time right

you there Understood, O&M. opportunity your space on slatter up quickly X% The dive growth basis, deep even per declining? a analysis potential around meaning L&M following potentially customer to point on either a on incremental the give

Yes.

Richard, numbers is I XXXX can we is. And And out this items the to were that to trajectory. customer Greg, with place $XX,XXX kind of think pull million trajectory indicated growth, of what normal when you that and growth. still transitory continue again, overall, X.X%, that of, is customer $XX,XXX expect of those level see out, the really X.X% you this network from $XX we

if we goes front. trajectory up per on how O&M keep growth in O&M of and the X.X% that's So X.X% customer X.X% is or customer that X%

increase me. it. the one one start stake does from cooperation The all with Icahn, agreement you quick it? at That's last or it. ability Got referenced updated And reduce to the or Got just at impact helpful. that

the couldn't last I catch I sorry, question. the -- part I'm didn't of

it? agreement cooperation reduce stake If to or an any impacted increase ability it way in this

it No, change the does Does all. agreement cooperation that not of not. portion at

Great. time. Thank for the you

Shank. comes question Ellinghaus Chris next from Siebert Our from Williams

How are you? everybody. Hey,

Chris. Hey,

Thanks.

year? was $X legal temporary of much you $XX stuff, of sort half that the million, that how of into continues remaining the that $X that Greg, the of second million cost transitory talked about, The million,

There's there was much not of million $X Yes. really that uncollectibles. was again,

the an annual $X million If you in period, million historically, look back for uncollectibles $X to we're neighborhood.

substantially that economy. information stuff work uncollectibles really that mentioned normal cost QX really in with out have on We beyond. system will with bring the And concluded. spike experienced a The again, stabilization and for our with folks, did that our some and work this we now had think place that's been of about mapping associated down and go also just place. those and worked to but we their in doing incremental to in levels well. some some incremental a really the staffing back We some in good we're finding and challenges So year is system customer some then for costs

really I items these of going QX. in you're and a QX to see So don't think continuation

great. Okay,

have staff what pretty on Difficulty] Arizona Are denoting Justin, thoughts you color Arizona? in or your you good any the on is are [Technical to ask. maybe relative opinion got the

always we've a albeit around been treated It's I a than ago. good relationships Yes, of we've maintaining and like fared when think always most. Chris. lot from history how commissioners jurisdiction that perspective, people I the I of you and had a the from of challenging mean, the good at better year felt in I think mean, lot with case the we've look really we've state, a the staff question. on I always think focused a our APS angst

was situation. that kind a think really I one-off of

the kind so of And think where implied with in efforts your presented the a with through kind would thought and is line that clean case, I think, we of, relatively their question, positions I working made we then on this the discovery. in with the staff respect to how our make case kind in to, of, RUCO from perspective, be we we we different file sure

I working improvement process can't if positions them see of working with some look with where to opportunity, the the to the on make issues they've taken. and forward there's we pleased came to think on that of but that then extent the they out through some stipulating potentially we're remainder also

about guidance, of sort will little Can to a net be Centuri of, Centuri Okay, bit and maybe I level, look in great. revenue it higher. Greg, similar, when the margin you suggests a kind guidance at the see sort talk income the What you behind half? second considerably there do that half? really than earnings basis. better of on of year's sort about Can the you a is last your level year-to-date talk first

Yes.

one starting was think our Riggs up of the that things last acquisition year, while just get it in I will be of to Again, we August to Distler. moving. made ramp big really

doing we're offshore on mentioned, As wind. work we the $XXX We've million got right? that contracted had of

work onshore to then $XXX we again, our get. So million multi expect of wind. that that is work offshore for And

COVID that predict So that in But come certainly of up QX QX. back but months. I that's to the ramp can't item from potential QX it's going is kind a I really we're see think impact and strong have things revenue variable are previously especially well front another really the storm there. you're storm work, the there, performance QX, on

QX will performing working really our that we're year we this so And think solid be with and customers and QX quarters.

You also give supply us delays. a on customer chain little color

own Yes, of we does and right? customers, procure just one customers, Centuri's as Southwest Centuri then our like we're you're on -- customer installation. and I the think of you're referring Centuri's to Centuri's materials the Gas Most discussion

challenges, can't either to for types. provide work front certain And customers it's been interim, do So utility delay supply getting profitable procure to and the materials. necessitated their less issues the on chain Centuri's transformers, those Centuri customers pipe while the in the some the continues have work, whether or customer getting where it's That's maybe to the materials switch some it's because whether have them.

I really a chain, that they're a So of the customer-by-customer on it incurring. to starting is bit it's stabilize in supply think that's little some and but basis, issues

for lot it. a color. Thanks Okay. Appreciate the

The last from Citi. question comes from Levine Ryan

Hi, afternoon. good

Ryan. Hi,

everybody. Hi,

In terms relative reduction, absolute O&M to that be on X% basis? an Or is inflation nominal of is expectation? to due cost that really an the

Ryan, Yes. Greg. this is

sub-X% over -- about think customer cost per over talking reduction, increase long-term, increase term. I X% the the a we're of customer a O&M but an per longer not on it's

relative Phenomenal to this index? and time any inflation

No.

we going the that And inflationary longer the cost also We certainly customer nominal, into will manage to in but on come customer be the X% growth in, the costs much the over inflationary lower to we expect it, expect and but we're we there'll forward, term, inflationary be will we growth. those continue per as expect be environment increase is impact. regular the think current than play

potential part at months your is continue of decision spin? what timeline make have this Okay. have when this as Or on the the And of through in highlight Centuri and you to to a mind review. been you've last in slides, would point? spin a there a Is few you post that you strategic ended the more open

maximize we've both spend was we're the pleased we just option they spin as transaction process. from MountainWest, the simply was process more that interest spin to received really will very MountainWest to the on to strategic part value of both of spin keeping believe indications and decision because the to we table Board that the ended. was continue to the move overall and MountainWest option by on Centuri for into open as part -- remains efforts felt with that maximize Centuri It's the of it its next additive The round the leave to and value and decision the the

Okay. Thank you. Appreciate color. the

the to to This the portion over of for call Mr. remarks. closing concludes today's Q&A turn Boyd now back would conference. Nelson I like

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