Southwest Gas Holdings Inc. said a favorable business climate in the Las Vegas area and a proposed service territory expansion in northeastern Nevada are two drivers that will help the natural gas utility achieve ambitious customer growth targets in the coming years.
The company reaffirmed its view that population growth in the three states where it provides natural gas distribution — Arizona, California and Nevada — will outpace the national average in the coming years. Southwest Gas also restated its expectation to add another 35,000 customers this year and 37,000 customers during the following two years.
Executives expect to generate part of that growth on the back of service expansion in existing territories bolstered by robust business activity. Southwest Gas CEO John Hester said several big projects in Las Vegas — including a $935 million convention center expansion, a new football stadium for the Raiders and Genting's $4 billion Resorts World development — have driven economic growth in the city and southern Nevada.
"We think we're going to continue to see more of the same," Hester said during an Aug. 8 conference call.
"The city, the county, the state are very interested in continuing to facilitate that economic development, and so we expect that type of trend to continue as Las Vegas and the region continue to be a desirable place to do business," Hester said.
Southwest Gas is targeting an additional 5,000 potential customers in Spring Creek in northwestern Nevada. The company made a request to the Public Utilities Commission of Nevada in June to build a distribution system in Spring Creek, a bedroom community south of the city of Elko, where Southwest Gas has provided gas service for more than 50 years.
Southwest completed the 35-mile Adobe Lateral pipeline in northern Nevada in 2016, increasing gas transmission capacity to the Elko metropolitan area by connecting the Ruby Pipeline LLC system to Southwest affiliate Paiute Pipeline Co. at the Elko City Gate. The company requested approval from the Nevada PUC to invest about $62 million to extend service to Spring Creek and expects a final decision on its proposal by early 2020.
The request is the second application Southwest Gas has made through 2015 state legislation that promoted the expansion of gas infrastructure to support economic development.
Southwest Gas is building another distribution system and hooking up customers in Mesquite, Nev., following its first successful application to the PUC, according to Justin Brown, the company's vice president of regulation and public affairs. The company is servicing the area with a temporary virtual pipeline and compressed natural gas but expects a permanent approach main to be in service by the first quarter of 2021.
Asked about other expansion opportunities, Brown declined to name specific communities but said the company is still considering a couple of areas.
"When we originally had the legislation passed, I think there were kind of probably four, maybe five areas that were on our radar, and so we have Mesquite, now we have Spring Creek," Brown said. "So I would say there's probably a couple left that we would look at, and we'll just kind of look at them on a case-by-case basis, and we will always keep our eye open to whether there is more beyond that, as well."
Southwest Gas reported second-quarter net income of $22.1 million, or 41 cents per share, down from $21.6 million in the year-ago period. The S&P Global Market Intelligence consensus normalized earnings estimate was 50 cents per share.
Southwest Gas stock was trading about 2% higher around $90.50 per share after the conference call.