SWX: Initiating at Overweight, $105PT

Research evidence excerpt

SWX: Initiating at Overweight, $105PT

n season attracted bids

totaling approximately 2.5 Bcf/d, compared to roughly 0.3 Bcf/d of capacity marketed, implying

nearly 8x oversubscription and underscoring robust long-term load growth dynamics in Northern

Nevada. Demand interest spans multiple in-service windows, from the initial 2028–29 timeframe

through phased capacity extending into the early 2030s, reinforcing the project’s role as a scalable

growth platform rather than a single-vintage opportunity.

Arizona represents SWX’s highest political sensitivity jurisdiction in 2026, as all five Arizona

Corporation Commission members are elected and regulatory outcomes can be exposed to voter

sentiment and affordability narratives in a gubernatorial election year. That said, recent outcomes

point to a more constructive trajectory. The UNS Gas rate case approved approximately 86% of

the revenue request and incorporated formula-type mechanisms, which we view as a positive read-

through for Southwest Gas despite the unusually long gap between UNS rate cases. Against this

backdrop, SWX filed a new Arizona General Rate Case on February 27, 2026, seeking a roughly

$101mm revenue increase and an allowed ROE of 10.25%, compared with a current authorized ROE of

9.84%, with rates proposed to be effective in April 2027. Importantly, the filing includes a formula-rate

adjustment construct aimed at reducing bill volatility and enabling more timely capital recovery, which

we see as a meaningful step toward narrowing historical regulatory lag. In Nevada, election-year risk is

mitigated by an incumbent governor and stable commission composition.

There is a gubernatorial election in AZ, and two commissioner seats are up (Nick Myers and Kevin