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Southwest Gas to restructure to better separate utility, nonregulated segments

The Arizona Corporation Commission has approved 'sapplication to reorganize into a holding company structure.

Aiming to better separate the utility and nonregulatedconstruction services businesses, the company in October 2015 asked forpermission to pursue the corporate shuffle.

"Although Southwest Gas already maintains substantialseparation between its two lines of business, the proposed holding companystructure will increase the degree of financial separation such that thefinancial results of the construction services affiliates should not impairSouthwest Gas' capital structure, credit ratings, or cost of capital," thecompany said in its application. "The proposed structure will also work tobetter insulate utility assets and reduce the risk that such assets could bereached by creditors of the construction services affiliates."

Commission staff supported Southwest Gas' proposal, notingthat the holding company structure would not only increase the separationbetween the regulated and nonregulated segments but also give the overallcompany more flexibility in financing.

To carry out its plan, Southwest Gas intends to form apublicly traded holding company, which could then form a merger subsidiary.That subsidiary's whole purpose would be to merge with Southwest Gas, allowingSouthwest Gas shareholders to exchange their investment for holding companyshares. At that point, the holding company could contribute Southwest Gas commonstock to an intermediate holding company, which would be the owner of theregulated entities.

Arizona Commissioner Tom Forese expressed concerns during aMay 3 meeting that the restructuring would create more distance between thecompany's operations and the commission's oversight range. He voted against thecorporate reorganization, but the remaining four commissioners voted in favorof the proposal.