Fitch Ratings gave an investment-grade mark to Southwest Gas Holdings Inc., a new entity containing Southwest's regulated gas utility, Southwest Gas Corp., and unregulated construction services unit, Centuri Construction Group.
Fitch assigned a BBB+ rating to the new parent holding company's long-term debt and affirmed the A- rating on the Southwest Gas Corp. utility's long-term debt, citing a favorable regulatory environment, strong balance sheet and low risk profile.
The parent holding company's rating was slightly weakened by the riskier Centuri unit, Fitch said. "Fixed-price contracts and unit-price contracts with revenue caps expose Centuri to the possibility of losses, particularly for longer-term projects, due to the necessity of estimating costs far in advance."
Centuri contributed about 20% to the new holding company's EBITDA for the year ended Sept. 30, Fitch said.
The restructuring is being carried out to delineate Southwest Gas' regulated and unregulated businesses and is expected to result in increased financial flexibility, the company said in a Dec. 28 news release. The reorganization takes effect Jan. 1, 2017.
Southwest Gas shareholders will become shareholders of Southwest Gas Holdings, retaining their shares and ownership percentage before the reorganization. The holding company will trade on the NYSE under Southwest Gas' ticker symbol, SWX.
Southwest Gas serves more than 1.9 million customers in Arizona, California and Nevada.