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Natural Gas Segment:

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Operating margin for 2016 is anticipated to benefit from customer growth (similar to 2015), infrastructure tracker mechanisms, expansion projects, and California attrition.  Combined, these items are expected to produce approximately 3% in incremental margin.  Additionally, new rates established to recover Nevada CEE program costs are expected to increase margin by approximately $11 million, but will be offset by a similar increase in amortization expense.

·

Operations and maintenance expense is expected to increase modestly as compared to 2015 due to increased general costs, pipeline integrity management and damage prevention programs, and costs associated with customer growth.  These increases will be mitigated by a decrease in pension costs.  Depreciation and general taxes should increase consistent with the growth in gas plant in service (approximately 5% to 6%) plus the amortization of Nevada CEE program costs noted above.

·	Operating income is expected to increase by 2% to 3% between years.

·	Net interest deductions for 2016 are expected to be approximately $2 million to $3 million higher than 2015, including the impact of $300 million of senior notes issued in September 2016.

·	Changes in cash surrender values of COLI policies will continue to be subject to volatility.  Management generally anticipates longer term normal increases in COLI cash surrender values to range from $3 million to $5 million on an annual basis.

·	Capital expenditures in 2016 are estimated at $470 million, in support of customer growth, system improvements, and accelerated pipe replacement programs.

Construction Services Segment:

·	Centuri revenues for 2016 are anticipated to approximate $1.1 billion.

·	Operating income is expected to be approximately 5% of revenues.

·	Based on the current interest rate environment, net interest deductions for 2016 are expected to be between $6.5 million and $7.5 million.

·	These collective expectations are before consideration of the portion of earnings attributable to the noncontrolling interests.  Additionally, changes in foreign exchange rates could influence results.

Southwest Gas Corporation provides natural gas service to 1,967,000 customers in Arizona, Nevada, and California.

This press release may contain statements which constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (Reform Act).  All such forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act.  A number of important factors affecting the business and financial results of the Company could cause actual results to differ materially from those stated in the forward-looking statements.  These factors include, but are not limited to, the timing and amount of rate relief, changes in rate design, customer growth rates, the effects of regulation/deregulation, the impacts of construction activity at Centuri, future earnings trends, seasonal patterns, and the impacts of stock market volatility.  In addition, the Company can provide no assurance that its discussions about future operating margin, operations and maintenance expenses, operating income, depreciation and general taxes, COLI cash surrender values, financing expenses, and capital expenditures of the natural gas segment will occur.  Likewise, the Company can provide no assurance that discussions regarding construction services segment revenues, operating income, and net interest deductions will transpire. The statements in this press release are made as of the date of this press release, even if subsequently made available by the Company on its Web site or otherwise.  The Company does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

 

SOUTHWEST GAS CONSOLIDATED EARNINGS DIGEST

(In thousands, except per share amounts)

 

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