Good day, ladies and gentlemen, and welcome to the Southwest Gas 2014 Year-end Earnings Call. My name is Mark, and I'll be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the conference over to Ken Kenny, Vice President of Finance and Treasurer. Please proceed, sir.

Thank you, Mark. Welcome to Southwest Gas Corporation 2014 Earnings Conference Call. As Mark stated, my name is Ken Kenny, and I am Vice President, Finance and Treasurer. Our conference call is being broadcast live over the Internet. For those of you who would like to access the webcast, please visit our website at www.swgas.com, and click on the conference call link. We will have slides on the Internet, which can be accessed to follow our presentation. Today, we have Mr. Jeffrey W. Shaw, Southwest Chief Executive Officer; Mr. John P. Hester, President; and Mr. Roy R. Centrella, Senior Vice President and Chief Financial Officer; and other members of senior management to provide a brief overview of 2014 earnings and an outlook for 2015. Our general practice is not to provide earnings projections. Therefore, no attempt will be made to project earnings for 2015. Rather, the company will address those factors that may impact this coming year's earnings. Further, our lawyers have asked me to remind you that some of the information that will be discussed contains forward-looking statements. These statements are based on management's assumptions, which may or may not come true, and you should refer to the language in the press release, our SEC filings and also Slide #2 presented today for a description of the factors that may cause actual results to differ from our forward-looking statements. All forward-looking statements are made as of today, and we assume no obligation to update any such statement. With that said, I'd like to turn the time over to Jeff.

Hello, and welcome to our 2014 year-end earnings call. Appreciate your participation. I'd like to just, on Slide 3, touch upon some 2014 highlights. First of all, from a consolidated results standpoint, we achieved our second-highest earnings per share number, $3.04 per share, and we increased the dividend for the ninth straight year by 11%. With respect to the natural gas segment, we realized almost $117 million of net income. We added approximately 26,000 customers. We successfully concluded 2 general rate cases. We invested $350 million in our distribution system, and we received approval in Arizona to construct an LNG facility for purposes of reliability. In our Construction Services segment, we contributed a record $24.3 million of net income. We've completed a successful acquisition of the Link-Line Group of Companies, and we're continuing successfully to integrate the Link-Line Group of Companies with NBL -- NPL and have now combined them under the holding company, Centuri Construction Group. Slide 4, please. A few comments about CEO succession. As you know from public disclosures, I will be stepping down effective Monday. John Hester was voted by the board in a board meeting this week to be the President and CEO on Monday, March 1. We have a very robust succession plan, not only at the CEO level, but we also have it for all significant positions of the company. I think we are very proud of the way that we have proceeded in making this transition. And I think the table is set for John and the team, and most the team, by the way, are the same team I've had the good fortune of having surrounding me. Most of that team is in place, and they will continue to go forward, I think, with a real opportunity to continue to bring shareholder value, both in the gas segment of the business and also in the Construction Services segment of the business. So with that, I'd like to turn the balance of the call, at least for directing the call, over to John. And then we would be pleased to field any questions that you may have at the end of the call. John?

Thank you, Jeff. We all appreciate working with you as a team to advance the collective interest of our shareholders, our customers, and our employees over the past 20 years plus. You, as CEO, have overseen and orchestrated an unprecedented decade of rewarding returns for our shareholders, and we are enthusiastic about continuing that trend in the years to come. On behalf of Roy, Ken, me and the rest of the team, we wish you and Cynthia all the best in the years to come. Turning to the detail of our call outlined on Page 5. Roy will provide an update on our 2014 consolidated earnings, Natural Gas Operations and Centuri Construction Group, after which I will provide an update on regulation, customer growth and economic conditions in our service territories, our plan for capital expenditures, our dividend growth and our 2015 expectations and focus. As Jeff mentioned, our prepared comments will be followed by an opportunity to ask questions. With that, I will turn the call over to Roy.

Thank you, John, and let me also offer my congratulations, Jeff, on a highly successful career. So I'll provide a summary of the 2014 operating results, recapping the primary factors that impacted the change from 2013, and I'll give some commentary along the way around the 2015 expectation. So let's move to the slides, Slide 6. Consolidated net income decreased from $145 million in 2013 to $141 million in 2014. As a result, basic earnings per share decreased from $3.14 to $3.04, which is our second-highest earnings year in history. Our Construction Services segment showed strong improvement between years, while gas segment results declined. Lower but solid returns on our investments underlying company-owned life insurance or COLI policies was the primary reason for the gas segment decline. Let's move to Slide 7 and natural gas segment highlights. Jeff touched on most of these items earlier. So I'll just comment that operating margin increased 1.5% as a result of customer growth and rate relief, and also, we had a number of successes on the regulatory front, which John will highlight later on. Slide 8. This slide summarizes the gas segment income statement. Operating margin increased by $13 million between 2014 and 2013, while operating expenses increased just $11 million or 1.7%. As a result, we saw slight operating income improvement of $1.8 million between years. Other income, which includes COLI, decreased $5.1 million between years, and net interest deductions grew by $5.7 million due to a financing we did in late 2013. Net result was a $7 million decrease in the gas segment contribution to net income from $124 million in 2013 to $117 million in 2014. Moving to Slide 9. This slide summarizes the change in operating margin between years. Rate relief contributed $8 million in incremental operating margin, most…

Thanks, Roy. Moving to Slide 18 and regulation. I'd like to provide an update on our general rate case activity in our California, Paiute Pipeline and Arizona jurisdictions, followed by an update on our Arizona and Nevada infrastructure mechanisms and finally, a report on our Arizona LNG and Paiute, Elko lateral projects. Turning to Slide 19. We received a decision on our most recent California general rate case application in June of last year. The decision provided for an increase in 2014 future test year margin of $7.1 million, along with a decrease in depreciation expense of $3.1 million. We are on a 5-year rate case cycle in California, and the general rate case decision further provided for annual post-test year attrition margin increases of 2.75% per year for years 2015 through 2018. Southwest Gas made a filing in November of last year requesting a $2.5 million margin increase for 2015 under the annual attrition provision. The request was approved by the California Public Utilities Commission in December of 2014, and new rates became effective at the beginning of this year. On Slide 20, we provide some detail on our most recent Paiute Pipeline general rate case resolution. Recall that this case was originally filed in February of last year under a filing requirement included in Paiute's prior rate case settlement. While Paiute originally requested a $9 million revenue increase in its application, a settlement was reached this past September which will provide a $2.4 million revenue increase, along with a $1.3 million reduction in depreciation expense. The new rates were effective this past September. Also noteworthy in the latest settlement was an agreement for Paiute's largest customers to extend their transportation contracts by an additional 5 years. The Federal Energy Regulatory Commission officially approved the rate case settlement earlier…

Thanks, John. That concludes our prepared presentation. For those of you who have accessed our slides, we have also provided an appendix to the slides, which includes other pertinent information about Southwest Gas and can be reviewed at your convenience. Our operator, Mark, will now explain the process for asking questions. Mark?

[Operator Instructions] Your first question comes from the line of Matt Tucker from KeyBanc Capital Markets.

Congratulations on a great 2014 and to Jeff and John. By the way, it's actually Grier Buchanan on for Matt. First, I wanted to ask about the construction business. We saw that Enbridge's LDC has a roughly $700 million expansion project. I think it's currently underway in the greater Toronto area. Is Link-Line -- or should I say, Centuri getting any of that contracting work?

They're not directly involved in that. I mean, Enbridge is their largest customer, but their -- they have a set contract with them for -- in a certain -- in their -- within their certificated area that they've been assigned value to, but not necessarily on that expansion project.

Okay. And could you give a little color on, historically, maybe the proportion of distribution work they've -- of Enbridge's distribution work they've gotten, I guess, as a percent of total contracting spend?

Given that we only have a quarter's worth of data, I don't want to really go back into the prior period where we just -- even though we have some history, it's probably less reliable than what we would see going forward. And so I think we'll just have to kick that can down the road a little bit and give you some more...

Fair enough. And I was a little confused about the language on Slide 16. Is that $34.6 million reflecting -- sorry, $34.7 million reflecting work done for Southwest as well as legacy NPL?

No, that was more the legacy NPL. So they're all their other customers. So the acquired companies kicked in $54 million of revenue, and then NPL's preexisting customers increased their -- or we increased our revenue from them by $35 million.

Great, that's helpful. Shifting to natural gas. Could you talk about the expected operating margin expansion in 2015? I didn't know if that was reflecting customer growth or change in mix. Any color you could provide will be helpful.

Yes. Really, the -- we talked about, from a customer growth perspective, we were expecting maybe a similar level of operating margin increase as we got in 2014. And then we have some California rate relief, some Paiute rate relief, impact of our various trackers that would provide a similar level of the customer growth. And so when you combine all that, we're saying overall operating margin should increase right around 2%.

Great, very helpful. And just one more. Sorry if you provided this, but when do you expect construction to begin on the LNG facility? And will your LDC file for a recovery mechanism?

We expect that construction to take place later this year. Right now, we're in the process of identifying which parcel of land we want to construct the facility on. We've got several available to us. Depending on what piece of land we pick, that impacts the type of facilities that get constructed. We'll then go to a bid to get some quotes on engineering, design and construction, and that process will take most of this year.

Okay. And do you anticipate filing for a recovery mechanism on construction costs?

Well, we have a -- we do. We have a deferral mechanism that they authorized, and then our tentative plan is that when we file our next Arizona rate case that we would have a proposal embedded in that to address the recovery of those costs.

Your next question comes from the line of Chris Sighinolfi from Jefferies.

Congratulations, Jeff and John, on the new role. I just want to follow up on 1 thing to start, and I don't know if this is for John or for Roy. At the time that you guys had announced the Link-Line acquisition, I believe the sellers maintained roughly like a 10% indirect equity position in the Canadian assets that was -- at some later date, could be converted into a smaller equity stake in the consolidated. Do I take the rebranding to Centuri and then the minority interest listed on Slide 32 of 3.4% to mean that, that happened -- that conversion happened?

Not that it happened, Chris, but that -- the 10% of Link-Line, yes, is convertible into 3.4% of Centuri, and our expectation is that they will eventually exercise that option. And so we're recording then our results as if it had been exercised, essentially. That's why we're assigning the 3.4%.

Okay. That's helpful, Roy. Dovetailing on the previous question about the LNG facility, and I'm sorry if I've either forgotten the details or if you stated it and I didn't hear it. But with regard to the pursuit of liquefaction on site, I know that, that wasn't approved initially. Is there an opportunity to go back, John, at some later date and reexplore that opportunity?

Yes. That's a good question, Chris, and there definitely is. The facility is going to be designed so that, that liquefaction facilities, should we and the commission desire to have it added in the future, can be done without any disruption to the existing facility. So I think the plan is that we'll initially start it up using trucked-in LNG. We'll see how it works. We'll evaluate how easily that commodity is available and what the cost of it is and then take a wait-and-see look if we want to move to the liquefaction facility addition.

Okay. And I guess a final -- kind of maybe a more philosophical question for you, John. Given that the LNG facility sort of owes its roots to the outage that we saw on EPNG a couple of years ago and sort of a local source of reliable supply. There was one of your peer companies that recently had been talking about trying to develop longer-term reserves on behalf of utilities kind of to provide, if you will, a long-term physical gas hedge on the price as well as security of supply of the product. I was just -- and they had discussed recently the fact that they were seeing interest and actually signed some utility counterparts for such arrangements. I was just wondering your appetite, the company's appetite, the board's appetite to pursue something like that on behalf of Southwest Gas customers as well as if you've had any discussions with your regulators about something akin to that type of framework.

Another good question, Chris, and I would say that, personally, I'm very interested in that. That's something that we have been looking at internally. We have had some preliminary discussions with our Arizona regulators philosophically, is that something that they would be interested in. And I think, as you indicated, there are a couple of different positive angles on that for customers, not just the reliability of supply, but also the built-in pricing hedge that, that type of asset would provide for customers. One of the things that we're looking at internally now is, if we can find an appropriate property, preferably in the San Juan or Permian Basin, that would allow those supplies to be delivered out over El Paso to our Arizona customers and if we're able to find a property that's a good fit and that we think is priced at a level that would benefit our customers, that's something that we would look to continue to discuss with the Arizona commission. And it may be even something that we could formulate a preapproval type of filing around to ensure that we're all on the same page with respect to the benefits and the cost recovery of that type of asset.

[Operator Instructions] Your next question comes from the line of Derek Walker from Bank of America.

Just a quick one on Construction Services. Do you have a sense on what the impact of FX is in that segment? Obviously, we've seen a pretty drastic change between the Canadian and U.S. dollar since you've acquired the assets. And what are you assuming in that -- I think it was the $950 million to $1 billion in revenue. What sort of FX rate are you assuming there? And then last one there is just, what is sort of the net tax assumption that you're using for that segment?

Yes. This is Roy. A couple of things. Well, first of all, yes, the U.S. dollar has strengthened quite a bit from the time we announced the acquisition, and today -- it was on the low $1.10, $1.12 range at the time we announced, and today, it's more on the $1.24, $1.25 range. So there's been about a 10%-or-so change. When we did that forecast, $950 million to $1 billion, we were using today's rates, the current rates. So that does include where we are -- where that exchange rate stands today. In terms of the tax rate, the Canadian tax rate all in is roughly 27% on that portion of the business. That would leave NPL's combined tax rate in the 36%, 37% range.

I would now like to turn it over to Ken Kenny for closing remarks.

Thank you, Mark. This concludes our conference call, and we appreciate your participation and interest in Southwest Gas Corporation. Have a good day.