Good day, ladies and gentlemen. Thank you for your patience. You've joined the Southwest Gas Holdings 2017 Year-End Earnings Conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to turn the call over to your host, Vice President of Finance and Treasurer, Mr. Ken Kenny. Sir, you may begin.

Thank you, Latif. Welcome to the Southwest Gas Holdings, Inc. 2017 earnings conference call. As Latif stated, my name is Ken Kenny, and I am the Vice President of 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.swgasholdings.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. John P. Hester, President and Chief Executive Officer; Mr. Roy R. Centrella, Senior Vice President and Chief Financial Officer; and Mr. Justin L. Brown, Vice President, Regulation and Public Affairs and other members of senior management to provide a brief overview of 2017 earnings and an outlook for 2018. Our general practice is not to provide earnings projections, therefore, no attempt will be made to project earnings for 2018. 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 three of the presentation today for a description of 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 John.

Thanks, Ken. Turning to slide number four, I'd like to briefly overview some of our 2017 highlights. From a consolidated results perspective we achieved record earnings of $4.04 per share. And while those results were certainly helped by the tailwind of tax reform as we will talk about later in the call, even absent the positive impacts of tax reform, our consolidated earnings per share represented a new record. We also increased our dividend for the 12 straight year with the 5% increase that our Board approved just this past week, shares of Southwest Gas Holdings will now provide an annualized dividend of $2.08 per share. Also at a special Shareholder Meeting that was convened in October of last year, our shareholders approved the proposal to eliminate cumulative voting and adopt the majority voting policy. We were also able to acquire the 3.4% non-controlling interest previously held by the owners of the Link-Line Groups the predecessor of our NPL Canada construction unit. Focusing on the natural gas segment. Our 2017 operating margin increased by $23 million over the prior year. We added 31,000 net new customers. The total number of utility customers we serve across our three service territories, reached the 2 million mark in November and we invested $560 million in capital to serve new customers and increase the safety and reliability of our gas distribution system. At our Centuri Construction unit, our revenues exceeded $1.2 billion, a new record. We amended our credit and term loan facility to increase our borrowing capabilities to $450 million. We completed our acquisition of New England Utility Constructors Incorporated, expanding our footprint into the northeastern United States. And NPL, the business unit under which most of our U.S. construction operations are conducted, celebrated its 50th anniversary. Moving to slide five. A few…

Thank you, John. Certainly appreciate the kind words and happy to finish my career with the strong earnings year. So, today, I will provide a high level review of our 2017 consolidated and business segment operating results including explanations of significant changes between years. I’m going to spend a few minutes reviving the impacts of tax reform on our 2017 results, as well as expectations for 2018. Let’s start with slide seven. In 2017, we earned $4.04 per basic share, improvement of $0.84 over $3.20 earned in 2016. Net income grew to a $194 million from a $152 million. Strong operating results were enhanced by $20 million of tax benefits, resulting from tax reform as well as strong returns on our investments underlying company-owned life insurance or COLI policies. Moving to slide 8. You can see that net income increased $41.8 million between periods with $37.4 million of the improvement coming from our natural gas operations segment and $5.7 million from construction services. Before getting into the results by business segment, let’s review tax reform impacts beginning on slide nine. The Tax Cuts and Jobs Act was signed into the law in late December. The Act reduces the federal income tax rate from 35% to 21% and for utilities, eliminates bonus depreciation and provides an exemption from limits on interest deductions. For Centuri, it we will have an immediate and ongoing beneficial impact on financial results. For Southwest Gas, we will experience reduced cash flows once lower tax rates are reflected in customer bills, but will experience higher rate base growth on future capital expenditures due to lower deferred tax growth. Slide 10 summarizes specific non-recurring income statement impacts from 2017 due to the revaluation of net deferred tax liabilities. At Southwest Gas, we recognized an $8 million benefit from…

Thanks, Roy. As highlighted on slide 14, I will be providing an overview of our various regulatory initiatives including an update on rate case activity, tax reform proceedings, infrastructure tracker program, and several expansion projects. Let’s start with an update on rate case proceeding and planning activities on slide 15. With the Arizona Corporation Commission’s decision last April, our operating income was positively impacted by approximately $45 million in 2017 and we still have one quarter rate relief remaining before we will have realized the full 12-month benefit of our Arizona rate case. As such, following the conclusion of the first quarter of 2018, we should have a better picture of the contributions the rate Arizona rate cases had on closing the gap between our authorized and earned rates of return. Turning to Nevada, we are currently preparing our Nevada rate case and plan to make a filing before June of 2018 with new rates expected to become effective by January of 2019. With respect to California, we are on a five-year rate case cycle, which means we were scheduled to file a rate case this past year since our last rate case was filed in 2012. However, the commission granted a two-year extension, so that we are now targeting September 2019. In the meantime, we will continue to make our annual adjustments to margins through 2020 as part of our annual 2.75% attrition filings. In fact, for 2018, we were authorized to increase revenue by $2.7 million beginning January of this year. Turning to slide 16, we want to provide an overview where we stand in terms of working with our regulators to ensure a fair and balanced approach to passing tax reform savings back to our customers in a timely manner. With respect to Arizona, the Commission issued…

Thanks, Justin. Turning to slide 21, you see a table detailing our customer growth over the past few years as well as our expectations for the next several years. As I mentioned at the outset of the call, we added 31,000 net new customers this past year and anticipate continued customer growth in the next few years of approximately 1.6%. On slide 22 we see a variety of metrics illustrating robust economic conditions throughout our service territories. Unemployment rates declined across the board year-on-year while job growth continued at an accelerated pace. Moving to slide 23. We see that our continued investments in our gas distributions systems to serve growth and increase safety and reliability have resulted in our gas utility plant growing at a 6% compounded annual growth rate over the past several years. Gas utility plant totaled $6.6 billion at year-end. Turning to slide 24, we provide a breakdown of our capital expenditures for the next few years. As you can see from the graph, a significant and growing portion of our capital investment is receiving support of regulatory treatment from our state regulatory bodies though the provision of the infrastructure tracking mechanisms detailed earlier in our call by Justin. Over the coming three-year period, we expect to invest upwards of $2 billion in our gas distribution business to improve safety, serve growing markets and raise the high bar we have for customer service. On slide 25, we show a detailed illustration of how our ongoing capital expenditures impact rate base. Roughly speaking, anticipate our rate base to grow by over 12% over the next three years, reaching $4.5 billion at the end of 2020. On slide 26, we provide a graph illustrating the growth in our dividend. Southwest Gas Holdings realized a 9.5% compounded annual growth rate…

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

[Operator Instructions] Our first question comes from the line of [Indiscernible] of UBS.

Hello. I just would like to ask what return on equity do you expect to be in 2018?

We don’t predict that. There is a slide in the back of -- in our appendix, which is slide 45, it kind of shows what the historical ROE has been over the last few years. I think what the information that we’ve provided including equity information, that’s something that could be computed, once you calculate out your forecast of our net income.

And so, your utility guidance was flat on operating income basis but you didn’t give the impact of the net income from the lower tax rate. Can you just tell us what do you expect of the net income? Do you expect it to be higher -- I know you highlighted, you don’t expect to provide like the exact number but can you directionally help us understand how you think that utility’s business would move?

You’re deciding about the utility income tax rate?

Yes.

So, because we have these ongoing discussions with our regulators -- I think if you were to use the historical average rate of about 36%, you would get the appropriate net income projection for the utility business, given that other line item projections that we provided and that would only change if we move -- if we got some different outcomes in those regulatory discussions. So, I think the -- I guess, the way I would view it is that perhaps there is upside potential, for the worst case scenario is that we would have an effective tax rate equal to last year’s.

[Operator Instructions] Our next question comes from the line of Paul Ridzon of KeyBanc. Your line is open.

Just to clarify that last question. It sounds like any benefit from lower tax rate you book as a reserve until you get direction otherwise from commission?

That’s correct. So, I think the effective rate, again at least with regard to the bottom line projection we use the 36%, that would be consistent with the other line items projections that we give.

And cash flow might move around within that. Okay. And then any contracts that you signed at Centuri since implementation of tax reform, have you seen any margin pressure with customers looking to try to get some of the benefit of tax reform?

At this point, we haven’t signed any new contracts since the tax reform has been implemented. Every year, we have a master service agreement that on average about four to five years in duration. So, each year, we probably have 20% to 25% of our contracts come up for renewal. At this point, we have not negotiated any renewal contract.

And I assume the legacy contracts have reopeners around tax changes or anything?

That’s correct.

One last question, when do you expect kind of more clarity on the negotiations you’re having with the overages on pipe contract?

We really are hoping that in the next month or two that that will happen. There is -- provisions within the contract that state certain time frames that should occur, if you have a contract dispute and those time tables would point toward something in the late first quarter really second quarter.

Are these just related to work stoppage or is this weather-related, I’m just trying to remember that the history here.

No, the work stoppage was with a different customer early, early in the year just with the water replacement work that we have going on.

Thank you. Our next question comes from the line of Jesse Chai of Macquarie. Your line is open.

This is actually, Barry [ph]. Hey, guys. Thanks for taking my call. Can you just -- I just wanted a clarification on a couple of things. The last question with regard to negotiations on the contracts with the construction business, what’s this assumption that’s put into your guidance directionally for the thing on slide 29 with regard to the revenues and operating income. Is there an assumption that anything is done with those contracts or that is -- you don’t want to take a position at this point?

No, we’ve just kind of assumed that things would continue the way they have been. I mean, we would certainly try not to accept anymore work or very little work until we have resolution. But we didn’t try to project in there any kind of recovery level. So again, I guess I will review that as maybe modestly conservative until we have some -- we don’t want to try to predict.

Got you. And then on the gas operations, I’m still a little confused because there is a -- it’s just a lot going on. And I mean, we are trying to get to sort of the bottom line here. So, if I just walk through all the components, everything in operating margin could be up or down based on how tax reform is reflective, I assume, because the pass-through of taxes, is that how I should I think about it in the future?

Yes. I guess, we recognize that it’s very difficult to predict how each of the line items are going to come out over the course of the year. And so, what we try to do is say let’s look at the each of the line items sort of under 2017 type parameters. And then if you assume the old effective tax rate of 36%, then you will get the appropriate bottom line, even though over the course of the year those line items may differ as we start to get regulatory treatment on the taxes. So, I think you can use the historical income statement to get a very good estimate of net income from the gas segment. Does that make sense?

Yes. Can I just -- if I think about it, so, when I look at -- so when I guess the top until operating income could be plus or minus, but the operating income you are saying is flat. So, if I look in the appendix section, that’s flat. The COLI is the 3 to 5, I add that, I subtract the net interest deductions of the 9 to 11 and then that brings me to the pretax amount. And then on that pretax amount you are saying I tax effect that ex at the 36% and then I get to net income or should it be a number an effective rate below 36% that’s closer to the tax reform number?

Let me clarify two things, one is that COLI does not have a tax impact because it’s reported without taxes as an insurance item. But other than that, you would compute the pretax income and use the 36% effective tax rate.

So, what you’re guiding to this year is do that math tax effected at 36% and that’s your net income essentially.

Yes, for the gas segment. That’s correct. We had a little bit lower tax rate, if you recall, on the Centuri side.

On the Centuri side. Okay.

On the Centuri, I don’t think -- we may not have made that clear. I think, I just mentioned it, but we’re estimating a 27% and 28% effective rate over there. So, they would benefit immediately from the 21% plus state income taxes brings it about 27 or 28.

Okay. Because I mean then the return -- then your return -- it looks like is your return on equity -- then your return on equity is not going up, is that effectively what you’re saying, the return on equity is not going up in 2018 for the construction business? I’m just trying to get a guide. You’re trying to give us all the inputs and the output, it’s not clear what the output is supposed to be, I guess is what I’m getting at. So, I just want to make sure that I’m hearing exactly what you’re trying to say.

I don’t think we’ve said anything about return on equity for starters. But, particularly, essentially we don’t really calculate a return on equity there. We calculate a total company return on equity and we calculate segment only return on equity.

Got you. Okay. I got it then.

All right. Happy to have a call directly with you, if we have...

I might have to -- I might follow up on the detail. But thanks for taking my question.

Thank you. At this time I’d like to turn the call back over to Mr. Kenny for any closing remarks. Sir?

Thank you, Latif. This concludes our conference call and we appreciate your participation and the interest in Southwest Gas Holdings. Have a good day now. Thanks.