Southwest Gas Holdings Inc Annual Report 2022

FY2022 Annual Report · Southwest Gas Holdings Inc

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Simply
Delivering
Value

2022 ANNUAL REPORT

COMPANY PROFILE Southwest Gas Holdings, Inc. (NYSE: SWX), based
in Las Vegas, Nevada, is an energy infrastructure holding company that
conducts operations in both regulated and unregulated businesses.
Regulated operations include Southwest Gas Corporation (“Southwest Gas”),
a natural gas utility serving more than two million residential, commercial,
and industrial customers in portions of Arizona, California, and Nevada.
Unregulated operations consist of Centuri Group, Inc. (“Centuri”), a
strategic infrastructure services company that partners with regulated
utilities to build and maintain the energy network that powers millions
of homes and businesses across the United States and Canada.

Although Southwest Gas Holdings closed on the sale of MountainWest
Pipelines Holdings, Inc. (“MountainWest”) on February 14, 2023, we included
MountainWest data and commentary where relevant.

References to “Company,” “SWX,” “we,” and “our” refer to Southwest Gas
Holdings, Inc. All ﬁnancial ﬁgures are in U.S. dollars unless otherwise noted.

Southwest Gas Holdings, Inc.

Table of Contents

CEO LETTER

A RESILIENT FINANCIAL JOURNEY

EFFECTIVE GOVERNANCE

EXCEPTIONAL GROWTH
Regional Growth & Economic
Development
Continued Expansion
Fort Irwin National Training Center

CENTURI POISED FOR
CONTINUED GROWTH
Realizing the Promise of Oﬀshore Wind

OPERATIONAL EXCELLENCE
Commitment to Safety

THE REGULATORY LANDSCAPE

COMMITMENT TO SERVICE

A SUSTAINABLE FUTURE

LEADING INNOVATION
Imagining Energy Diﬀerently

UPLIFTING OUR COMMUNITIES
Energy-Eﬃciency Programs
Diversity, Equity & Inclusion
Employee Giving
Sustainability, Environment
& Beautiﬁcation

UNLOCKING FUTURE VALUE

FINANCIALS

10
12
12

15
15

16
16

26
26

28
28
28
29

“Southwest Gas will continue

to pursue balanced and
equitable solutions to exceed
our customers’ expectations
and build on the signiﬁcant
growth potential we have
already started to realize.”

Karen S. Haller
President and Chief Executive Oﬃcer

Southwest Gas Holdings, Inc.

To all of our stockholders,

Natural gas has long played a role in our region’s dynamic energy industry, serving as a core
energy source that fuels our lives, homes, and businesses; contributes to reducing greenhouse
gas emissions; and provides the foundation for strong economic growth.

For over 25 years, I have had the honor to be part of a company
that serves with excellence and supports its communities.
It is a privilege for me now to address our stockholders
as President and Chief Executive Oﬃcer of Southwest
Gas Holdings, Inc., and lead a company focused on safely
delivering aﬀordable, reliable, and sustainable energy to
customers and long-term value to all our stakeholders.

Being at the helm of a Company whose employees are
among the best and brightest innovators, safety-focused,
committed to exceeding our customers’ expectations, and
who are strengthening our communities is a rare honor. Every
day I am heartened to work alongside our diverse teams
as they provide safe and reliable energy for life’s essentials
and pave the way for a balanced and resilient energy future
that upli(cid:4)s our communities while fueling economic growth.
Our employees’ commitment to community extends beyond
providing an essential service — they generously give their
time and ﬁnancial support to local nonproﬁts, enriching the
places we call home.

We are more resilient because of our employees’ dedication,
spirit, and ability to adapt. In 2022, our Company underwent
signiﬁcant structural and leadership changes —
and our communities faced the worst economy-wide
inﬂation in more than 40 years. (cid:6)roughout the year, our
Company concentrated on optimizing the utility to deliver
value through ﬁnancial discipline, operational excellence,
and constructive regulatory relationships while continuing
to provide excellent service to our communities. We also
implemented a capital expenditure plan supported by
increased economic development and customer growth
throughout our service territory. (cid:6)is work has positioned us
well to continue delivering sustainable energy options for
our customers and communities.

Our Board of Directors also navigated current challenges,
and, a(cid:4)er a diligent strategic review, announced its
decision to simplify our Company’s structure. (cid:6)is strategic
shi(cid:4) included the sale of MountainWest and a decision to
pursue a spin-oﬀ of our wholly owned subsidiary, Centuri,
enhancing our credit proﬁle and strategic ﬂexibility.

Transitioning Centuri to a standalone utility infrastructure
services platform with strong leadership and a foothold in
infrastructure modernization and the energy transition is an
exciting opportunity. (cid:6)e decision to separate Centuri from
Southwest Gas Holdings positions each organization for a
bright, proﬁtable, and innovative future as independent,
publicly traded companies. Both Centuri and Southwest Gas
are taking the necessary steps to optimize organizational
and operational eﬃciencies. Each stands ready to build on
its proven track record of consistent, exceptional growth
while continuing to deliver dependable long-term value.

Overseeing our Company’s strategy and performance
is a diverse board of 11 forward-thinking directors. By
leveraging our unique backgrounds, experiences, and
viewpoints, we are stronger and better equipped to
continue serving the public interest as an essential energy
and infrastructure services provider.

Moving forward, we will continue striving to improve
the quality of life of our employees, customers, and
communities in everything we do. We will also strive to
fuel community growth and be good corporate citizens,
accountable for our environmental impact and pursuing
innovation for the energy future.

Over the next year, as Centuri prepares to be a standalone
company, the world-class utility infrastructure services
platform will continue leading in areas of infrastructure
modernization and energy transition. Centuri’s proven
performance record is fueled by continued growth among
its long-term relationships with blue-chip North American
utilities and strategic measures to de-lever the business
organically with healthy cash ﬂow generation.

Southwest Gas remains committed to providing energy that
brings comfort to our neighbors’ homes, fuels their businesses,
and supports economic development. Small and large
businesses across our service territory rely on natural gas,
and we have witnessed our cities’ growth and development
into vibrant communities due in part to our ability to safely
deliver this aﬀordable, reliable, and sustainable fuel.

Natural gas remains an integral part of the solution to
achieving economy-wide emissions reductions. (cid:6)rough
innovative technology and creative partnerships, we
continue to support our region’s climate goals by powering
vehicles with cleaner fuels, enabling the delivery of
renewable natural gas from organic waste, and exploring
the potential of hydrogen. Southwest Gas will continue to
pursue balanced and equitable solutions to exceed our
customers’ expectations and build on the signiﬁcant growth
potential we have already started to realize.

We recognize our important role in fostering a sustainable
future for those we serve while delivering value to our
stockholders. As our Company looks toward the future,
we will continue striving to enhance customer service
through integrity and transparency and remain steadfast in
delivering growth through perseverance and work ethic —
priceless values that have guided me throughout my career.
I look forward to updating you as we focus our eﬀorts on
Simply Delivering Value.

Karen S. Haller
President and Chief Executive Oﬃcer

A Resilient
Financial Journey

2022 marked a year of resilience and a signiﬁcant inﬂection point for our Company as we
charted our path forward to becoming a leading fully regulated natural gas utility with an
optimized balance sheet that will enable continued investment in safety, customer service
and infrastructure, and a competitive dividend policy.

Underscoring our conﬁdence in our transformation, the
Board of Directors approved a dividend of $0.62 per share
($2.48 per share on an annualized basis) in February 2022,
and again in February 2023, continuing the Company’s
66-year history of competitive quarterly dividend payouts
at ratios that are equal to or better than our peers.

While our portfolio is continuing to evolve and we are
still working through the macroeconomic headwinds
that impacted our businesses, we remain focused on
delivering solid ﬁnancial performance and creating
value for our stockholders. Our low-risk business model
continued to provide dependable, steady results despite
continued inﬂation. Regional population increases bolster
Southwest Gas’ customer growth, and the utility added
over 41,000 new customers in 2022 — an annual growth
rate of 1.9% — supporting an increased operating margin
of $55 million. While Centuri experienced pressure from
increased fuel costs, its record revenues highlight its strong
customer relationships and business opportunities.

While macroeconomic pressures and stockholder activism
inﬂuenced results in 2022 — in addition to a recognized
loss related to the sale of MountainWest and higher costs
from the strategic review — we delivered strong revenue
growth overall, worked to position the Company as a
premier utility, and recently ﬁnalized our Arizona rate case
with a record result. As we look to 2023 and beyond, we
advance toward a new chapter for Southwest Gas and
Centuri with sustained proﬁtable growth as two focused,
independent industry leaders.

Following a thorough review, our Board made the
strategic decision to simplify the Company’s portfolio
of businesses through the sale of MountainWest and
the spin-oﬀ of Centuri.

In December 2022, the Company entered into an agreement
to sell 100% of MountainWest in a transaction delivering
$1.5 billion in enterprise value, subject to certain adjustments.

(cid:6)e transaction closed in February 2023, and proceeds from
the sale were used to repay a substantial portion of the
Company’s approximately $1.1 billion term loan.

We are continuing to make steady progress on the
spin-oﬀ of Centuri, which is expected to be completed
during the fourth quarter of 2023 or ﬁrst quarter of 2024
and we expect it to be tax-free to the Company and its
stockholders for U.S. federal income tax purposes.

(cid:6)e separation of Southwest Gas and Centuri is expected to
drive value for our stockholders, who will retain an ownership
stake in two independently traded public companies with
compelling ﬁnancial proﬁles. (cid:6)e separation will highlight
the unique strengths and opportunities of each business,
enhancing value transparency through more direct
comparability to pure-play industry peers and creating
stronger stockholder alignment.

(cid:6)is is a signiﬁcant step toward returning Southwest Gas
to its core regulated utility business of providing safe,
reliable, aﬀordable, and sustainable energy to meet the
expectations of customers and communities — while
continuing to maximize its growth potential and unlocking
stronger, long-term ﬁnancial ﬂexibility. We believe the
utility is positioned for continued success as we pursue
stable rate base growth driven by strong regional demand
dynamics and our optimization plan. With a de-risked
business mix and asset portfolio, Southwest Gas is
positioned for stable cash ﬂows and the ability to eﬃciently
deploy capital with our investment-grade balance sheet.

Southwest Gas is currently undergoing a multi-step utility
evaluation process focused on optimizing its performance.
(cid:6)e review is expected to result in a utility optimization
plan aimed at creating a more streamlined organization,
more eﬃcient allocation of capital, and enhanced
customer aﬀordability and stockholder value.

Southwest Gas Holdings, Inc.

Net Income by Segment
(in thousands)

Natural Gas Distribution
Margin by customer class

Segment

Natural gas
operations

Net Income

154,380

Utility infrastructure
services

2,065

Pipeline and storage

(283,733)

Corporate and other

(76,002)

Total

(203,290)

Dividend History

8
4
.
2
$

8
3
.
2
$

$2.48

8
2
.
2
$

8
1
.
2
$

8
0
.
2
$

14%

Small commercial

11%

Transportation

55%

Gas infrastructure
services

Industrial and
other

Large
commercial

71%

Residential

Utility Infrastructure Services
Revenues

28%

Electric power
infrastructure
services

17%

Other infrastructure
services

$2.76B
Total revenues

Comparison of Five-Year Cumulative Total Returns

$225

$150

$75

SWX

S&P 500

S&P COMPOSITE UTILITIES INDEX

S&P 1500 GAS UTILITIES INDEX

PERFORMANCE GRAPH

(cid:6)e performance graph compares
the ﬁve-year cumulative total
shareholder return on Company
common stock, assuming
reinvestment of dividends, with
the total returns on the Standard &
Poor’s (“S&P”) 500 Stock Composite
Index (“S&P 500”), the S&P Composite
Utilities Index, and the S&P 1500 Gas
Utilities Index. (cid:6)e total stockholder
return (annualized) over the ﬁve-year
period for Southwest Gas Holdings,
Inc. (“SWX”) was -2.17%, compared
to the S&P 1500 Gas Utilities Index
(“S15GASU”) return of 3.85%, the S&P
Composite Utilities Index (“S15UTIL”)
return of 9.13%, and the S&P 500
Index (“SPX”) return of 9.40%.

Southwest Gas Holdings, Inc.

Effective
Governance

Our Company’s commitment to strong and eﬀective governance has long been built on a
foundation of integrity and transparency. It is a legacy we continue to build, and with 55%
of directors being women and 27% minority group members, we are proud to have the
most diverse Board of Directors in the Company’s history.

In 2022, our Board underwent considerable change,
with six new members joining to replace retiring veteran
directors. (cid:6)e new directors include E. Renae Conley, the
ﬁrst woman to serve as Board Chair, who was elected
to the role in May, and Karen S. Haller, the Company’s
ﬁrst female President and CEO. (cid:6)e new directors bring
knowledge and speciﬁc core competencies — both
in terms of the industry and public companies —
which complement our existing members, making
them well qualiﬁed to serve the long-term interests of
the business and stockholders. Our Company values
diverse perspectives, backgrounds, and a broad
range of experiences, and we look forward to the
opportunities that may arise from the new ideas and
practices these six new members bring at this pivotal
moment in our history.

Our Board provides diligent oversight of the Company’s
strategy, decision-making, and risk management — a
service essential to creating long-term, sustainable value
for our stockholders. Ten of the 11 Board members — the
one exception being our CEO — meet the New York Stock
Exchange’s standard for director independence.

(cid:6)e Board fulﬁlls its responsibilities directly and through
three standing committees — Audit, Compensation, and
Nominating and Corporate Governance — two of which
are women-led. Additionally, in 2022, the Board created
the ad hoc Strategic Transactions Committee to oversee
the sale of MountainWest and the spin-oﬀ of Centuri.

We believe diverse leadership results in enhanced
decision-making, increased opportunities for innovation
and higher employee satisfaction, all of which help drive
the Company’s long-term success and maximize value for
our stockholders.

Southwest Gas takes pride in its
critical role supporting the region’s
growing economy by safely
delivering reliable, sustainable, and
aﬀordable energy to more than
two million homes and businesses.

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9

Exceptional
Growth

For decades, the Southwest’s robust job market, available land, and mild winters have
drawn increasing numbers of residents to our region, and over the years, natural gas has
helped to fuel our region’s economic development.

In 2021, over 62% of Nevada’s and 44% of Arizona’s
electricity was generated by natural gas, providing a
source of aﬀordable, reliable, and sustainable energy on
which small and large businesses across Southwest Gas’
service territory rely.

In 2022, Arizona saw tremendous growth in industry,
heavily supported by natural gas infrastructure. A variety
of multinational corporations — producing products
from semiconductors to consumer goods — have built
manufacturing plants in Arizona in recent years, including
Taiwan Semiconductor, Intel, Gold Bond, and Air Liquide.

Similarly, natural gas remains the foundational energy
that fuels much of Nevada’s economy, from its world-
famous Las Vegas Strip to its mining operations in the
north. Natural gas provides an aﬀordable and reliable
energy source that supports facilities and functions for
experiences such as the MSG Sphere and developments
like Fontainebleau Las Vegas.

Southwest Gas continues to deliver sustainable energy
solutions across its service territory that promote a
diversiﬁed economy, contribute to workforce development
and environmental and economic justice eﬀorts, and
support community prosperity and growth.

As the largest natural gas distributor in Arizona and
Nevada, Southwest Gas takes pride in its critical role
in supporting the region’s growing economy by safely
delivering reliable, sustainable, and aﬀordable energy
to more than two million homes and businesses across
those states and parts of California. Moreover, as an
independent entity, the utility will be able to focus
exclusively on its commitment to the communities it serves
while continuing to exceed customer expectations and
build on its signiﬁcant customer and rate base growth.

Regional Growth
& Economic
Development

(cid:6)e utility will continue to support the growing Southwest
region, providing safe and reliable service to customers
and a long-term source of stable revenue for the Company.
In 2022, Southwest Gas welcomed over 41,000 new
customers across its service territory, nearly 5,000 more
than the previous two years.

(cid:6)e two largest cities in the utility’s service area remain
among the fastest growing in the country. (cid:6)e population
of greater Phoenix continues to surge — and is projected
to grow 67.3% by 2060, according to the 2020 U.S. Census
report. At the same time, the Census Bureau expects an
even more staggering population boom in the Las Vegas
metro area, with the number of residents projected to
skyrocket by 90.5% over the same period. Demand for
natural gas service is high in these areas, and builders
continue to include natural gas infrastructure in new
housing developments. We anticipate closings from new
construction single-family homes to remain steady.

Customer Growth
(in thousands)

Southwest Gas Holdings, Inc.

Projected Population
Cumulative % Change 2023–2028

Arizona

California

Nevada

1.08%

United States

2.14%

3.76%

3.95%

Source: S&P Global Market Intelligence

Closings and Permits, New Construction Single-Family Market

CLOSINGS

PERMITS

1
2
2

3
2

1
8
2

2
2

0
0
0
3
2

0
0
6
1
2

0
0
3

3
2

0
0
0

2
2

6
5
7
,
1
1

2
4
6
,
0
1

0
0
4
,
1
1

0
0
5
,
0
1

0
0
5
,
1
1

0
0
0
,
1
1

9
6
6
,
3

2
6
5
,
3

0
0
6
,
3

0
0
3
,
3

0
0
7
,
3

0
0
5
,
3

23*

24*

23*

24*

23*

24*

Central Arizona

Southern Arizona

Southern Nevada

* Projected
Sources: Arizona data from RL Brown Housing Reports.
Nevada data from Las Vegas Housing Market Letter.

Continued Expansion
Southwest Gas works closely with its customers to provide
solutions that meet their energy, sustainability, and
resiliency needs. (cid:6)rough various expansion projects, the
utility has extended natural gas service to unserved or
underserved communities and established partnerships
to provide innovative energy solutions, to drive economy-
wide emissions reductions.

Southwest Gas continued to expand service in two of
its most rural communities in 2022, connecting more
than 700 customers in Mesquite and Spring Creek,
Nevada. Legislation in Nevada allows utilities such as
Southwest Gas to expand natural gas service to unserved
and underserved communities to promote economic
development. (cid:6)e utility’s expansion into these areas
has attracted businesses and enabled growth in these
communities that previously would have been unable
to meet increasing energy needs. Southwest Gas
continues to meet this demand with ongoing
expansion in rural Nevada.

Fort Irwin National
Training Center
In September 2022, Southwest Gas signed an agreement
with the U.S. Army to construct a pipeline that will deliver
natural gas to the Fort Irwin National Training Center
(“Ft. Irwin”) in Southern California for the ﬁrst time in its
existence. As part of a Utility Energy Services Contract
(“UESC”), natural gas will serve several buildings and uses
including a combined heat and power (“CHP”) plant that
will deliver 16 megawatts of electricity to the base. (cid:6)is
project, which will include companion renewable energy
sources, aims to provide the community of 20,000 service
members with a more reliable and resilient energy system.

Southwest Gas Holdings, Inc.

Southwest Gas added over

41,000

customers in 2022

1414

Southwest Gas Holdings, Inc.

Centuri
Poised for
Continued
Growth

With a diversiﬁed utility services platform operating across the U.S. and
Canada, Centuri is positioned to pursue signiﬁcant opportunities across utility
end markets and build on its expansion into high-growth and renewable
energy markets.

In 2022, Centuri achieved record revenues for
the thirteenth consecutive year and record
adjusted EBITDA for the ﬁ(cid:4)h consecutive
year. Growth in revenues was oﬀset by a rise
in operating expenses driven by continuing
inﬂationary pressures in fuel and subcontractor
costs and higher interest expense on
outstanding debt, among other factors.

Centuri has taken strategic eﬃciency and
cost-saving measures to maintain proﬁtability
and continue delivering maximum value for
stockholders. (cid:6)rough relationships that date
back decades, Centuri has long-term contracts
with an attractive blue-chip customer base
comprised of a diverse range of utilities,
enabling predictable revenues and resiliency
over time. Centuri’s relationships with its top
20 customers, representing the bulk of its
revenues, have endured for nearly 25 years on
average. (cid:6)is strong foundation will enable
Centuri to build on its proven track record of
signiﬁcant, long-term growth and deliver value
to stockholders well into the future.

Realizing the
Promise of
Offshore Wind
Centuri is at the forefront of America’s
burgeoning oﬀshore wind industry, serving
as general contractor for several current wind
projects in the Mid-Atlantic and Northeastern
regions. Riggs Distler, a subsidiary of Centuri,
is contracted to provide onshore assembly,
fabrication, and port logistics for two active
projects in Rhode Island and recently signed
two additional contracts for work in Maryland
and New York.

Centuri recorded $94 million in revenue for
sustainable wind energy projects during
2022 and projects to achieve approximately
$250 million in 2023. (cid:6)e value of all wind
contracts signed to date is nearly $525 million.

Operational
Excellence

We have taken a proactive approach to achieving our strategic goals of operational
excellence, safety, exceptional customer satisfaction, and continued growth.

In 2022, Southwest Gas launched a comprehensive
optimization plan, focusing on several key business
areas such as capitalization policy, new business policy,
and regulatory approvals. To ensure maximum results,
the utility partnered with a leading third-party business
consultant to review and optimize its operational
eﬃciencies and cost structures.

Commitment
to Safety

Southwest Gas prioritizes employee and public safety
above all else and has ﬁrmly embedded this value
deep in its culture. (cid:6)e Company invests heavily in the
maintenance and monitoring of its utility infrastructure
to ensure the highest standards of quality and integrity.
Eﬀective leak detection, damage prevention programs,
employee training, and public awareness initiatives are
just a few of the many tools Southwest Gas employs to
keep the public safe and ensure its employees return
home to their families.

(cid:6)is unwavering commitment to safety was
acknowledged in 2022, as Southwest Gas employees
voted it as the company’s top strength in the annual
employee engagement survey. Additionally, the utility
company was recognized by Forbes as one of the top
two Best-in-State Employers in Nevada for its safe
working environment, competitive compensation,
career advancement opportunities, and ﬂexible
telecommuting options.

At Centuri, our (cid:6)ink SAFE safety observation program
engages everyone from executive leaders to frontline
teams. (cid:6)rough safety observations, Centuri reinforces
positive actions, identiﬁes corrective actions, and
encourages open and honest communications to
promote safety awareness. In 2022, (cid:6)ink SAFE frontline
observations increased 45% over the prior year. Safety
and quality ﬁeld assessments also increased in 2022.
Since 2017, TRIR and DART performance has decreased
signiﬁcantly, while work hours have increased 58% over
the same period. (cid:6)ese strong safety results are indicative
of a culture of safety throughout the Centuri organization.

Further, Centuri’s 2022 employee safety culture survey
garnered a record-setting participation rate, resulting in a
score of 4.12 out of 5, depicting a positive culture.

(cid:6)roughout the years, Engineering News-Record (“d ENR”)
has consistently ranked Centuri as a Top Specialty
Contractor. In 2021 and 2022, Centuri held No. 4 on ENR’s
annual Top 600 Specialty Contractors list in the Utility
category and moved from No. 12 to No. 8 in ENR’s overall
specialty contractor rankings for 2022.

Exemplifying safety commitments to the community,
Southwest Gas’ pipeline management and infrastructure
system represents one of the newest and tightest systems
in the country. (cid:6)e utility has further invested in GoVAC™
and ZEVAC systems, state-of-the-art technologies
designed to mitigate the release of natural gas from
maintenance and repair activities. (cid:6)e utility’s monitoring
eﬀorts are among the most rigorous, exceeding what
regulators and law require. (cid:6)e U.S. federal government
requires leak surveys to be performed on all natural gas
distribution systems every ﬁve years. Southwest Gas
has exceeded these national standards by surveying
its territories every three years. Furthermore, in 2022,
Southwest Gas supported the Public Utilities Commission
of Nevada (“PUCN”) in implementing an annual leak
survey, a ﬁrst-of-its-kind program.

Southwest Gas’ unwavering commitment to safety has
resulted in a consistent decrease in pipeline leaks, even
as the company expands its reach to accommodate the
region’s rapid growth. Despite more than doubling the size
of our utility’s distribution system over the last 30 years,
Southwest Gas reduced the total system leak rate by 89%
over that same period.

In addition to reducing leaks in utility-owned pipelines,
Southwest Gas continues to work with state regulators to
develop Customer-Owned Yard Line (“COYL”) programs
across its service territory. A COYL, the primary underground
gas line that extends from the meter to the customer’s
home or business, is the property owner’s responsibility to
maintain. COYL programs provide customers with leak
inspections and the option to relocate or replace meters and
lines with infrastructure owned and maintained by the utility.
Doing so removes the burden of line maintenance from
the customer, mitigates the risk of unintentional emissions,

Southwest Gas Holdings, Inc.

Southwest Gas Capital Expenditures
(in millions)

9
7
7
$

2
9
6
$

3
8
6
$

$683

3
0
6
$

Southwest Gas Emergency
Response Time
Arrival on scene within 30 minutes

%
6
4
7

%
8
5
7

%
1
5
7

%
8
6
7

%
1
0
7

100%

75%

50%

Southwest Gas Damages
per 1,000 Tickets

3
4
1

1
1
1

4
1
1

1
9
0

0.92

and enhances public safety. From the inception of
the ﬁrst COYL program in 2012 through 2022, SWG
has replaced over 32,000 COYLs throughout Arizona,
California, and Nevada.

Southwest Gas is actively working to reduce the need
for repairs through its pipeline damage prevention
initiatives. (cid:6)e Company is deeply committed to
engaging with the community and educating the public
and contractors on how to recognize and respond
to natural gas emergencies and prevent damage to
pipelines. By taking a proactive approach, Southwest
Gas is not only reducing the need for repairs, but also
fostering a safer and more informed community.

Southwest Gas ﬁrmly believes that its employees are
the cornerstone of its success, and thus places service
and safety at the forefront of its priorities. (cid:6)e Company
invests in comprehensive safety training and provides
employees with the necessary tools to perform their
jobs safely. Moreover, Southwest Gas empowers its
employees to drive its safety culture forward through
programs such as the Achieving Continuous Excellence
(“ACE”) Program, where they can share improvement
opportunities, report concerns, and participate in
resolution eﬀorts, and the Safety Recognition Program,
where they can be recognized and rewarded for their
contributions. (cid:6)ese initiatives demonstrate Southwest
Gas’ commitment to ensuring the safety and well-being
of its employees, customers, and the community.

Despite more than doubling
the size of our utility’s
distribution system over the
last 30 years, Southwest Gas
reduced the total system
leak rate by 89% over that
same period.

The
Regulatory
Landscape

We recognize the importance of our contribution to shaping our region’s
economic and energy future. As a company, we are committed to ensuring
our customers continue to have access to reliable, aﬀordable, and
sustainable energy while addressing impactful economic development
policy issues.

As such, we value our collaboration with state
and federal regulators to deliver outcomes
that beneﬁt our customers while allowing for
timely cost recovery to support the Company’s
operations and infrastructure investments
across our service territory. Two such outcomes
include newly established base rates in Nevada
and Arizona.

In March 2022, the Public Utilities Commission of
Nevada approved an all-party settlement in the
Company’s most recent Nevada general rate
case, which established new rates eﬀective in
April predicated on an approximate $14 million
revenue increase, and the continuation of full
revenue decoupling.

(cid:6)e result of the Arizona rate case was
signiﬁcant for Southwest Gas. In January 2023,
the Arizona Corporation Commission authorized
a base rate adjustment of approximately
$54 million, the largest general rate case
revenue increase in the utility’s history. (cid:6)e
decision also allows for the continuation of
all of the utility’s rate adjustment mechanisms,
including full revenue decoupling. Notably,
the decision rejected proposals to eliminate
construction allowances and establish a
planning process that would have reduced
energy choice and established barriers to
continued investment in the Company’s
natural gas infrastructure in the state.

(cid:6)ese general rate case decisions represent
constructive regulatory outcomes that allow
the Company to update rates to reﬂect
its signiﬁcant investments in natural gas
infrastructure critical to serving its Nevada
and Arizona customers.

During 2022, the Company continued to see
an increase in the cost of natural gas, which
Southwest Gas procures on behalf of its
customers without markup. Our cost recovery
mechanisms for gas purchases are designed
to help protect customers from large
ﬂuctuations in gas cost rates. Southwest Gas
remains committed to helping its customers
manage their energy usage and bills whenever
possible through ﬁnancial assistance programs,
energy-eﬃciency programs, and energy
conservation education.

Working alongside regulators, we continue to
pursue opportunities to achieve a balanced and
equitable energy future for the communities we
serve. We believe these collaborative eﬀorts will
not only beneﬁt our customers and help achieve
our communities’ environmental goals but will
also create stockholder value.

Southwest Gas Holdings, Inc.

95%

customer satisfaction
rating in 2022

Southwest Gas Holdings, Inc.

Commitment
to Service

We continue to work diligently to deliver exceptional service and value every
day. A cornerstone to elevating customer satisfaction is through eﬀective
communications. Serving our customers is a privilege we take seriously —
and we seek to continue to earn their business and trust through actively
listening to feedback and providing consistent communication.

Southwest Gas takes its responsibility as a vital
service provider seriously, consistently striving to
exceed customers’ expectations. (cid:6)is dedication
is evidenced by our 2022 customer survey results,
in which the utility earned a 95% customer
satisfaction rating. We are proud that the families
and businesses the utility serves continue to
recognize its commitment to service and ongoing
eﬀorts to improve its customers’ experience.

For the third consecutive year, Southwest Gas
ranked #1 in the West by J.D. Power in
Customer Satisfaction with Business and
Large Residential Natural Gas Utilities.

(cid:6)e J.D. Power 2022 U.S. Gas Utility Residential
Customer Satisfaction Study measures
residential customer satisfaction across six
study factors: price, safety and reliability,
billing and payment, corporate citizenship,
communications, and customer care. Southwest
Gas ranked highest across all six factors.

Southwest Gas also ranked highly for its
business customer satisfaction. (cid:6)e utility was
recognized for delivering the best in price, safety
and reliability, billing and payment, corporate
citizenship, and communications in the West
Region of the J.D. Power 2022 U.S. Gas Utility
Business Customer Satisfaction Study.

Southwest Gas received the highest score in the West Region of the J.D. Power 2020–2022 U.S. Gas Utility Business Customer
Satisfaction Studies and the West Large Segment of the J.D. Power 2020–2022 U.S. Gas Utility Residential Customer Satisfaction
Studies of customers’ satisfaction nationally among gas business and residential customers. Visit jdpower.com/awards for more details.

Southwest Gas Holdings, Inc.

We are committed to exceeding our
customers’ expectations and meeting their
energy needs well into the future. We are
honored to be ranked #1 by J.D. Power and
humbled by our customers’ recognition of our
eﬀorts to serve them with excellence.

Read our 2022
Sustainability Report
at swgasholdings.com

Read Centuri’s
2022 Sustainability Report
at nextcenturi.com

Southwest Gas Holdings, Inc.

A Sustainable
Future

As an energy company committed to sustainable solutions, we continue
to help build pathways to achieve greenhouse gas (“GHG”) emissions
reduction and climate goals in our service areas.

Natural gas already supports these eﬀorts
as a low-carbon fuel source, displacing
other carbon-intensive energy sources for
power generation, transportation, and other
downstream applications. It continues to play
an integral role in driving down economy-wide
emissions, improving air quality, supporting
energy grid and system resilience, and providing
for long-term energy sustainability.

Our current natural gas infrastructure serves
as the ideal companion to renewable energy
technology, and our continued investments in
pipeline infrastructure provide the ability to
deliver lower-carbon fuels. Compressed natural
gas (“CNG”) is a safer and more eco-friendly
alternative to gasoline and diesel that helps
power vehicles. Renewable natural gas (“RNG”)
and hydrogen oﬀer powerful, sustainable
solutions for fueling our homes and businesses
without the major infrastructure or appliance
upgrades other solutions require.

In addition to supporting an increasingly
lower-carbon energy system, Southwest Gas is
committed to reducing its GHG emissions from the
Company’s ﬂeet and buildings by 20% by 2025.

To achieve this target, the utility is converting
ﬂeet vehicles to alternative fuels, reducing
unnecessary driving and idling times, and
improving building energy eﬃciency. At the end
of 2022, approximately 17% of the utility’s ﬂeet was
fueled by CNG, with another 9% of CNG-capable
vehicles on order.

At Centuri, the nature of our work supports our
commitment to environmental stewardship.
By improving the resiliency and eﬃciency
of energy distribution systems, reducing the
environmental impact of aging systems, and
enabling infrastructure for clean energy, Centuri
plays a signiﬁcant role in building a sustainable
energy future for everyone.

Not only is the environment at the forefront of
what we do at Centuri — it’s at the forefront of how
we do it. We are dedicated to setting the standard
for environmental stewardship in the ﬁeld, our
ﬂeet, and our facilities. In 2021, we established
a company goal to reduce Centuri’s GHG by
25% by 2030. We are tracking and reporting
companywide Scope 1 and Scope 2 emissions
data and are executing a decarbonization
strategy to reach our goal by 2030.

Leading
Innovation

Imagining Energy Differently
(cid:6)e use of hydrogen presents an exciting
opportunity to harness existing natural gas
resources and infrastructure to help customers
and communities reach their climate goals. In
2022, Southwest Gas partnered with 40 member
organizations representing education, industry,
and government in Arizona, Nevada, and the
Navajo Nation to form (cid:6)e Southwest Clean
Hydrogen Innovation Network (“SHINe”). (cid:6)is
regional hub aims to create an ecosystem to
economically produce, store, transport, and use
clean hydrogen (“c-H2”) powered by renewable
energy sources.

To scale and commercialize RNG, Southwest
Gas continues to build partnerships with
the agriculture industry and municipalities
across the utility’s service territory. In 2022, the
SoCal Biomethane Victor Valley Wastewater
Reclamation Authority Project in Victorville,
California, and the Great Basin Transmission
Company interconnect in northern Nevada
came online. We expect two new projects
in Arizona to begin service in 2023 — the
Butterﬁeld Dairy Project in Buckeye and the
Milky Way Dairy Project in Maricopa.

(cid:6)rough our work at Centuri, we have built an
innovative, high-growth utility infrastructure
services leader that operates throughout the U.S.
and Canada. With a vast geographic footprint
and comprehensive capabilities spanning the
utility value chain, we will continue to enhance
critical energy infrastructure systems through
5G datacom build-out, oﬀshore wind, and other
renewable energy transition programs.

In September 2022, Southwest Gas ﬁled an
application with the California Public Utilities
Commission (“CPUC”), alongside other
California gas utilities, for a hydrogen-blending
demonstration project in the town of Truckee,
which aims to explore hydrogen-blending
scenarios under cold weather and high-
altitude conditions.

(cid:6)e utility also partnered with the University
of Nevada, Las Vegas (“UNLV”), Arizona
State University (“ASU”), and GTI Energy in
collaboration with 19 other utilities on hydrogen
pilot programs to study the safety and reliability
of natural gas-hydrogen blends and their
compatibility with natural gas appliances.

Transportation is the leading
contributor of emissions, and using
compressed natural gas (“CNG”)
for ﬂeets — a cleaner, cost-effective
alternative to diesel — is helping
achieve emission-reduction goals
while maintaining equipment
integrity for operators.

Southwest Gas Holdings, Inc.

In 2022, Southwest Gas delivered

37,061,996 therms

of natural gas for vehicles in place of diesel

Equal to eliminating

79,012 metric tons

of GHG emissions

or removing

17,022

gasoline-powered passenger vehicles
from the road for a year

Southwest Gas has partnered with U.S. Gain to provide the Regional
Transportation Commission (“RTC”) of Southern Nevada with RNG.

Uplifting Our
Communities

Energy-Efficiency
Programs
To help customers manage their gas bills and usage,
Southwest Gas oﬀers ﬁnancial assistance and ﬂexible
payment plans for those in need. (cid:6)e utility also provides
helpful tips and tools that residential and business
customers can use to conserve resources, achieve
greater energy eﬃciency, and reach their emission-
reduction goals.

Southwest Gas encourages customers to take advantage
of available state and federal programs — such as the
Low-Income Home Energy Assistance Program (“LIHEAP”),
the utility’s Arizona Low-Income Ratepayer Assistance
(“LIRA”) Program, California’s Energy Savings Assistance
(“ESA”), or the California Alternate Rates for Energy
(“CARE”) program for assistance on monthly bills.

Diversity, Equity
& Inclusion
We are committed to building a workplace culture that
gives all our employees a sense of belonging, celebrates
diﬀerences, and demonstrates our commitment to
diversity, equity, and inclusion (“DE&I”) through action.
(cid:6)e Company has made notable progress on four DE&I
commitments — transparency, evolving the talent
pipeline, cultural training, and partnership development.
In 2022, Plumaje, an LGBTQ+ media nonproﬁt based
in Arizona, praised Southwest Gas as a long-time ally,
presenting the utility with its Equity Leadership award
in September.

For more than 30 years, Southwest Gas has been proud
to partner with diverse businesses through its supplier
diversity program, contributing to our local economies
and enriching our communities.

Southwest Gas Holdings, Inc.

At Centuri, we pledge to pursue the continuous
improvement of safety practices and cultivate a world-
class culture where safety, health, and mental well-being
are fundamental values throughout our business areas.
In 2022, Centuri’s DEI Council continued advancing an
inclusive and welcoming culture through Employee
Resource Groups and training programs that inspire
meaningful action and demonstrate a commitment to
these values.

Centuri’s DE&I commitment also promotes the economic
inclusivity of local and diverse suppliers throughout
its supply chain. Centuri subsidiary NPL consistently
demonstrates this commitment through its Partner
Alliance program, which brings NPL team members and
suppliers together to advance supplier diversity initiatives.
In early 2022, these eﬀorts were further exempliﬁed when
the Federation of Women Contractors named NPL its
“Outstanding Corporate Partner of the Year.”

Employee Giving
We live and work in the communities we serve and
are committed to making the places our customers,
business partners, and employees call home stronger and
sustainable. Strengthening our communities is more than
a philanthropic commitment, it is part of our culture.

(cid:6)rough Southwest Gas’ FUEL for LIFE employee giving
program, our employees have opened their hearts and
pledged more than $19.7 million to over 2,000 local charities
over the last 11 years. (cid:6)ese eﬀorts were recognized by the
Association of Fundraising Professionals as “Outstanding
Corporate Philanthropist” in Phoenix and Tucson, Arizona.

Sustainability,
Environment &
Beautiﬁcation
(cid:6)rough Southwest Gas’ Building Lives Up Everywhere
(“BLUE”) volunteer program, our utility employees give
their time to our communities and customers and make
a meaningful impact.

For 2023, our eﬀorts will center around our vision for
a sustainable future “Sustainability, Environment &
Beautiﬁcation” which creates events that beneﬁt our
environment and strengthen our communities.

By focusing on schools, parks, and other areas of our
communities and in partnerships with our local non-
proﬁt partners, our events will center on planting trees in
underserved neighborhoods, expanding our tree canopy.

BY THE NUMBERS

2,303

Volunteer hours

$2.3M

Total employee giving

$1,250

Average employee donation

$1.5M

Southwest Gas Foundation donation

80%

Overall employee participation

Unlocking
Future
Value

We continue to demonstrate our commitment to building
a sustainable and balanced energy future through action.
By maximizing opportunities that support the emission-
reduction goals of communities across our service territory,
we remain committed to playing a critical role in the
region’s climate solutions and energy transition.

For more than 90 years, Southwest
Gas has provided safe and reliable
energy services, and delivered
dependable value to stockholders.
As an independent utility, Southwest
Gas is poised to unlock additional
long-term strategic ﬂexibility while
enhancing its pursuit of innovative
energy solutions. (cid:6)rough these
innovations, we continue to pursue
robust and sustainable solutions like
renewable natural gas (“RNG”) and
hydrogen, oﬀering our communities
a collaborative pathway to achieving
our collective goals. Future investment
in the natural gas delivery system will
allow for the distribution of these low-
carbon fuels. In these ways and more,
natural gas is key to building a resilient
energy future for our region — a future
that strengthens our communities and
fuels economic growth while protecting
the environment and generating
ﬁnancial value for stockholders.

As an innovative utility infrastructure
services company, Centuri stands
to reach its signiﬁcant growth
potential by leveraging its size,
scale, and comprehensive platform
to meet diverse customer needs
across geographic and utility end
markets. Centuri’s longstanding
customer relationships provide a
solid foundation to build lasting
and resilient success. Today, Centuri
is uniquely positioned to beneﬁt
from the tremendous demand for
energy infrastructure across the
industry, including the burgeoning
renewables sector.

Our commitment to our stockholders
and all stakeholders remains
steadfast — Southwest Gas and
Centuri will continue to deliver
dependable, long-term value while
bringing the balanced and clean
energy future we all imagine to reality.

Southwest Gas Holdings, Inc.

Financials

SOUTHWEST GAS HOLDINGS, INC. | 33

Management’s Discussion and Analysis of Financial Condition
and Results of Operations

About Southwest Gas Holdings, Inc.

Southwest Gas Holdings, Inc. is a holding company that owns all of the shares of common stock of Southwest Gas Corporation
(“Southwest” or the “natural gas distribution” segment), all of the shares of common stock of Centuri Group, Inc. (“Centuri” or the “utility
infrastructure services” segment), and as of December 31, 2022, all of the shares of common stock of MountainWest Pipelines Holding
Company (“MountainWest” or “pipeline and storage” segment). Southwest Gas Holdings, Inc. and its subsidiaries are collectively
referred to as the “Company.”

In December 2022, the Company announced that its Board of Directors (the “Board”) unanimously determined to take strategic actions
to simplify the Company’s portfolio of businesses. These actions included entering into a definitive agreement (the “MountainWest
Purchase Agreement”) to sell 100% of MountainWest in an all-cash transaction to Williams Partners Operating LLC (“Williams”) for
$1.5 billion in total enterprise value, subject to certain adjustments. Additionally, the Company determined it will pursue a spin-off of
Centuri (the “Centuri spin-off”), to form a new independent publicly traded utility infrastructure services company. The MountainWest
transaction closed on February 14, 2023. The Company is to provide certain services to Williams under a transition services agreement
for a brief period, generally not beyond six months. As a result of entry into the agreement, the Company recorded a loss, composed of a
goodwill impairment of $449.6 million plus $5.8 million in estimated selling costs. A customary post-closing true-up will occur but is not
currently expected to be material to the financial statements as a whole. The Centuri spin-off is expected to be completed in the fourth
quarter of 2023 or the first quarter of 2024 and to be tax free to the Company and its stockholders for U.S. federal income tax purposes.
The Centuri spin-off will be subject to, among other things, finalizing the transaction structure, final approval by the Board, approval by
the Arizona Corporation Commission, the receipt of a favorable Internal Revenue Service private letter ruling relating to the tax-free
nature of the transaction, and the effectiveness of a registration statement that will be filed with the U.S. Securities and Exchange
Commission. See Note 15 – Acquisitions and Dispositions for additional information.

As described in Note 1 – Background, Organization, and Summary of Significant Accounting Policies, on May 6, 2022, the Company
entered into a Cooperation Agreement (“Cooperation Agreement”) with Carl C. Icahn and the persons and entities named therein (the
“Icahn Group”). Pursuant to the Initial Cooperation Agreement, the Company, among other things, made certain previously disclosed
changes to the Board and management team. On October 24, 2022, the Company and the Icahn Group entered into the Amended
Cooperation Agreement, which amended, restated, superseded, and replaced in its entirety the Initial Cooperation Agreement. Under
the Amended Cooperation Agreement, certain of the standstill provisions in the Initial Cooperation Agreement were extended, the Icahn
Group’s governance rights were amended, and the Company agreed to certain actions in connection with the 2023 Annual Meeting.
Additional information about the Amended Cooperation Agreement can be found in the Company’s Current Report on Form 8-K, filed
with the SEC on October 26, 2022.

Our business includes Southwest, which is engaged in the business of purchasing, distributing, and transporting natural gas for
customers in portions of Arizona, Nevada, and California. Southwest is the largest distributor of natural gas in Arizona and Nevada, and
distributes and transports natural gas for customers in portions of California. Additionally, through its subsidiaries, Southwest operates
two regulated interstate pipelines serving portions of the northern territories of Nevada and California.

As of December 31, 2022, Southwest had 2,197,000 residential, commercial, industrial, and other natural gas customers, of which
1,176,000 customers were located in Arizona, 816,000 in Nevada, and 205,000 in California. In January 2022, approximately 5,300
customers became part of Southwest’s gas distribution operations that were formerly served by Graham County Utilities. First-time
meter sets were approximately 41,000 in 2022, compared to 37,000 in 2021. Residential and commercial customers represented over
99% of the total customer base. During 2022, 54% of operating margin (gas operating revenues less the net cost of gas sold) was earned
in Arizona, 34% in Nevada, and 12% in California. During this same period, Southwest earned 85% of its operating margin from
residential and small commercial customers, 4% from other sales customers, and 11% from transportation customers. These general
patterns are expected to remain materially consistent for the foreseeable future.

Southwest recognizes operating revenues from the distribution and transportation of natural gas (and related services) to customers.
Operating margin is a financial measure defined by management as Regulated operations revenues less the net cost of gas sold.
However, operating margin is not specifically defined in accounting principles generally accepted in the United States (“U.S. GAAP”).
Thus, operating margin is considered a non-GAAP measure. Management uses this financial measure because Regulated operations
revenues include the net cost of gas sold, which is a tracked cost that is passed through to customers without markup under purchased
gas adjustment (“PGA”) mechanisms. Fluctuations in the net cost of gas sold impact revenues on a dollar-for-dollar basis, but do not
impact operating margin or operating income. Therefore, management believes operating margin provides investors and other
interested parties with useful and relevant information to analyze Southwest’s financial performance in a rate-regulated environment.
The principal factors affecting changes in operating margin are general rate relief (including impacts of infrastructure program
recoveries) and customer growth. Commission decisions on the amount and timing of relief may impact our earnings. Refer to the
Summary Operating Results table below for a reconciliation of gross margin to operating margin, and refer to Rates and Regulatory
Proceedings in this Management’s Discussion and Analysis for details of various rate proceedings.

34 | SOUTHWEST GAS HOLDINGS, INC.

The demand for natural gas is seasonal, with greater demand in the colder winter months and decreased demand in the warmer summer
months. All of Southwest’s service territories have decoupled rate structures (alternative revenue programs), which are designed to
eliminate the direct link between volumetric sales and revenue, thereby mitigating the impacts of weather variability and conservation
on operating margin, allowing Southwest to pursue energy efficiency initiatives.

Centuri is a strategic infrastructure services company that partners with regulated utilities to build and maintain the energy network
that powers millions of homes and businesses across the United States (“U.S.”) and Canada. With an unwavering commitment to serve as
long-term partners to customers and communities, Centuri’s employees enable regulated utilities to safely and reliably deliver natural
gas and electricity, as well as achieve their goals for environmental sustainability. Centuri operates in 73 primary locations across
45 states and provinces in the U.S. and Canada. Centuri operates in the U.S., primarily as NPL, Neuco, Linetec, and Riggs Distler, and in
Canada, primarily as NPL Canada.

Utility infrastructure services activity can be impacted by changes in infrastructure replacement programs of utilities, weather, and local
and federal regulation (including tax rates and incentives). Utilities continue to implement or modify system integrity management
programs to enhance safety pursuant to federal and state mandates. These programs have resulted in multi-year utility system
replacement programs throughout the U.S. Generally, Centuri revenues are lowest during the first quarter of the year due to less
favorable winter weather working conditions. Revenues typically improve as more favorable weather conditions occur during the
summer and fall months. In cases of severe weather, such as following a regional storm, Centuri may be engaged to perform restoration
activities related to above-ground utility infrastructure, and related results impacts are not solely within the control of management. In
addition, in certain circumstances, such as with large bid contracts (especially those of a longer duration), or unit-price contracts with
revenue caps, results may be impacted by differences between costs incurred and those anticipated when the work was originally bid.
Work awarded, or failing to be awarded, by individual large customers can impact operating results.

MountainWest is an interstate natural gas transmission pipeline company that provides transportation and underground storage
services to customers in Utah, Wyoming, and Colorado. A substantial portion of its revenue results from reservation charges, but
variable rates are also included as part of its primarily rate-regulated rate structures.

All of our businesses may be impacted by economic conditions that impact businesses generally, such as inflationary impacts on goods
and services consumed in the business, rising interest rates, labor markets and costs (including in regard to contracted or professional
services), and the availability of those resources. Certain of these impacts may be more predominant in certain of our operations, such as
with regard to fuel costs for work equipment and skilled/trade labor costs at Centuri.

Executive Summary

The items discussed in this Executive Summary are intended to provide an overview of the results of the Company’s and Southwest’s
operations and are covered in greater detail in later sections of management’s discussion and analysis.

Summary Operating Results

(In thousands, except per share amounts)

Contribution to net income (loss)

Natural gas distribution
Utility infrastructure services
Pipeline and storage
Corporate and administrative

Net income (loss)

Weighted average common shares

Basic earnings (loss) per share
Consolidated

Natural Gas Distribution
Reconciliation of Gross Margin to Operating Margin (Non-GAAP measure)
Utility Gross Margin

Plus:

Operations and maintenance (excluding Admin. & General) expense
Depreciation and amortization expense

Operating margin

Year ended December 31,

2022

2021

2020

$ 154,380 $ 187,135 $ 159,118
74,862
—
(1,656)

2,065
(283,733)
(76,002)

40,420
—
(26,776)

$ (203,290) $ 200,779 $ 232,324

65,558

59,145

55,998

(3.10) $

3.39 $

4.15

$ 574,534 $ 570,325 $ 528,730

308,276
263,043

267,160
253,398

243,723
235,295

$1,145,853 $1,090,883 $1,007,748

SOUTHWEST GAS HOLDINGS, INC. | 35

Overview
Southwest Gas Holdings:
‰ MountainWest sale completed in February 2023 and Centuri spin-off plans are ongoing
‰

Issued 6,325,000 shares of common stock, raising $452 million in net proceeds

‰ Corporate and administrative expenses include impact of interest on remaining $1.15 billion term loan, as well as stockholder

activism/settlement and strategic review costs

‰

In February 2023, paid down $1.075 billion of the Term Loan Facility upon close of the sale of MountainWest, leaving approximately
$72 million in aggregate principal amount outstanding under such loan

Natural gas distribution:

‰

41,000 first-time meters sets (1.9% growth rate) occurred over the past 12 months

‰ Operating margin increased $55 million, or 5%, between 2022 and 2021
‰

Issued $600 million in 4.05% 10-year Notes and $300 million in 5.80% 5-year Notes

‰

$683 million capital investment in 2022

‰ COLI results declined $14 million compared to the prior year
‰ Nevada general rate case finalized with rate relief effective April 2022
‰ Arizona general rate case finalized with revenue increase of $54.3 million and new rates effective February 1, 2023

Utility infrastructure services:
‰ Record revenues of $2.8 billion in 2022, an increase of $602 million, or 28%, compared to 2021
‰

$94 million in Clean Energy Offshore Wind Projects for 2022

‰ Costs impacted by inflation, including higher fuel, subcontractor, interest, and equipment rental costs
‰ Negative impact on work mix and volume due to certain customers’ supply chain challenges in procuring necessary materials

Pipeline and storage:
‰ Recognized revenue of $265 million in 2022
‰ Recognized goodwill impairment loss of $449.6 million as a result of the MountainWest sale

This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2021 and 2020.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found
in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2021, which incorporates by reference the Company’s annual report to
stockholders filed as Exhibit 13 to the Annual Report on Form 10-K.

Results of Natural Gas Distribution

(Thousands of dollars)

Regulated operations revenues
Net cost of gas sold

Operating margin

Operations and maintenance expense
Depreciation and amortization
Taxes other than income taxes

Operating income

Other income (deductions)
Net interest deductions

Income before income taxes

Income tax expense

Contribution to consolidated results

2022 vs. 2021

Year Ended December 31,

2022

2021

2020

$1,935,069 $1,521,790 $1,350,585
342,837

789,216

430,907

1,145,853
491,928
263,043
83,197

1,090,883
438,550
253,398
80,343

1,007,748
406,382
235,295
63,460

307,685
(6,884)
115,880

184,921
30,541

318,592
(4,559)
97,560

216,473
29,338

302,611
(6,590)
101,148

194,873
35,755

$ 154,380 $ 187,135 $ 159,118

Contribution to consolidated net income from natural gas distribution operations decreased $33 million between 2022 and 2021. The
decline was primarily due to increases in Operations and maintenance expense, Depreciation and amortization, and Net interest
deductions, offset by an increase in Operating margin and Other income.

36 | SOUTHWEST GAS HOLDINGS, INC.

Operating margin increased $55 million between years. Customer growth provided approximately $17 million as 41,000 first-time
meter sets were added in 2022, and combined rate relief provided approximately $14 million of incremental operating margin during the
current year. Also contributing to the increase were customer late fees that were $4.4 million greater in the current year due to the
lifting, in 2021, of a moratorium on such fees. Approved revenue in Arizona related to recoveries associated with Vintage Steel Pipe and
Customer-Owned Yard Line programs also contributed to the improvements between periods ($22 million). Offsetting these increases
were lower recoveries associated with other regulatory programs ($4 million), for which the effects are mitigated by a comparable
decrease in amortization expense between periods (discussed below).

Operations and maintenance expense increased $53 million, or 12%, between 2022 and 2021. While management worked to mitigate
the impacts of historic inflation and labor market challenges, specific increases in costs were nonetheless experienced, including, among
others, pipeline integrity, reliability, line location and engineering services costs ($8 million), an increase in the reserve for customer
accounts deemed uncollectible following the 2021 lifting of the moratorium on disconnections and inflation/economic conditions on our
customers ($7 million), employee labor (including incremental overtime pay) ($7 million), travel, training, recruitment, and medical
screening costs ($6 million), legal and claim-related costs ($5 million), temporary/contractor services for customer support ($4 million)
and division operations ($2 million), increased cost of fuel used in our operations ($4 million), and pension-related service cost
($3 million), as well as higher allocated corporate/Board costs ($1 million).

Depreciation and amortization expense increased $10 million, or 4%, between years primarily due to a $537 million, or 6%, increase in
average gas plant in service for the current year, offset by a reduction ($4 million) in amortization of regulatory account balances, as
discussed in regard to Operating margin above. The increase in gas plant was attributable to pipeline capacity reinforcement work,
franchise requirements, scheduled pipe replacement activities, and new infrastructure.

Taxes other than income taxes increased $2.9 million, or 4%, between 2022 and 2021 primarily due to an increase in property taxes in
Arizona, and to a lesser extent, in Nevada.

Other income decreased $2 million between 2022 and 2021. Non-service-related components of employee pension and postretirement
benefit cost in this category decreased $13 million between years. The current year also includes an $11 million increase in interest
income compared to the prior year, including related to carrying charges associated with regulatory account balances, including the
Purchased Gas Adjustment (“PGA”) mechanisms. Interest income is earned when these balances are in asset positions and interest
expense is incurred when balances are in liability positions. Offsetting these impacts was a $14 million decline in COLI results between
years, a $9 million reserve for a software project deemed non-recoverable from utility operations, and a $3 million market adjustment on
other property in 2022.

Net interest deductions increased $18.3 million between 2022 and 2021, primarily due to increased interest associated with
$300 million of Senior Notes issued in August 2021 and $600 million of Senior Notes issued in March 2022. Other impacts include
increased interest associated with a higher amount of short-term debt in 2022 compared to 2021. Equity financing from Southwest’s
parent entity, which often occurs, did not occur during 2022.

Tax amounts include the amortization of Excess Accumulated Deferred Income Taxes (“EADIT”), which following 2017 U.S. tax reform,
reduces income tax expense as amounts are returned to customers.

Results of Utility Infrastructure Services

(Thousands of dollars)

Utility infrastructure services revenues
Operating expenses:

Utility infrastructure services expenses
Depreciation and amortization

Operating income
Other income (deductions)
Net interest deductions

Income before income taxes

Income tax expense

Net income

Net income attributable to noncontrolling interests

Contribution to consolidated results

2022 vs. 2021

Year Ended December 31,

2022

2021

2020

$2,760,327 $2,158,661 $1,948,288

2,529,318
155,353

1,955,467
117,643

1,729,429
96,732

75,656
(887)
61,371

13,398
5,727

7,671
5,606

85,551
1,067
20,999

65,619
18,776

46,843
6,423

122,127
(207)
9,269

112,651
31,128

81,523
6,661

2,065 $

40,420 $

74,862

Contribution to consolidated net income from utility infrastructure services decreased $38.4 million in 2022 compared to 2021. While
top-line revenues increased substantially in 2022 compared to 2021, Centuri’s performance overall was impacted by inflation, customer
supply chain challenges affecting mix of work, and increased amortization and interest related to Riggs Distler, which was acquired in
August 2021.

SOUTHWEST GAS HOLDINGS, INC. | 37

Utility infrastructure services revenues increased $601.7 million, or 28%, including $440.2 million related to Riggs Distler, which was
acquired by Centuri on August 30, 2021. Revenues from electric infrastructure services increased $252.9 million in 2022 when
compared to the prior year, of which $172.4 million was associated with Riggs Distler. Included in electric infrastructure services
revenues overall during 2022 was $69.7 million from emergency restoration services performed by Linetec, Riggs Distler, and National
Powerline following storm damage to customers’ above-ground utility infrastructure in and around the Gulf Coast and eastern regions of
the U.S. and Canada, compared to $65.3 million in the prior year. Centuri’s revenues derived from storm-related services vary from
period to period due to the unpredictable nature of weather-related events, and when this type of work is performed, it typically
generates a higher profit margin than core infrastructure services, due to improved operating efficiencies related to equipment
utilization and absorption of fixed costs. The current year also includes approximately $229.5 million in incremental revenues, including
$47.6 million from Riggs Distler, and from continued growth with gas infrastructure services customers under master service and bid
agreements. Other revenues increased $119.3 million, primarily due to $94.2 million of offshore wind revenue at Riggs Distler. This is
stemming from two multi-year jobs that began in 2022 whereby Riggs Distler provides materials, subcontracted manufacturing,
fabrication, and assembly of secondary steel components on shore, with delivery at a port facility for the offshore projects. Centuri
revenues from contracts with Southwest totaled $134.7 million in 2022 and $102.3 million in 2021. Centuri accounts for services
provided to Southwest at contractual prices.

Utility infrastructure services expenses increased $573.9 million, or 29%, between 2022 and 2021. The overall increase includes
$405.1 million from Riggs Distler, and incremental costs related to the higher volume of work otherwise. Changes in mix of work caused
in part by customers’ supply chain challenges, as well as inflation, led to higher input costs including fuel and subcontractor expenses, as
well as increased project-related travel and equipment rental costs incurred to fulfill electric infrastructure services. Fuel costs alone
increased $32.7 million, including $7.3 million related to Riggs Distler, and project-related travel expenses increased $12.7 million in
2022. A loss of $7.5 million was incurred on a gas infrastructure bid project during the year due to higher costs than anticipated and
scheduling delays. This project is anticipated to reach substantial completion in the first quarter of 2023. Also included in total Utility
infrastructure services expenses were general and administrative costs, which increased approximately $4 million between years,
primarily attributable to higher costs incurred by Riggs Distler of $7 million, in addition to strategic review and severance costs of
$6.1 million (combined), as well as other administrative costs due to the continued growth in the business. These were partially offset by
lower incentive compensation costs in 2022 and $14 million in professional fees in connection with the acquisition of Riggs Distler in
2021, which did not recur. Gains on sale of equipment (reflected as an offset to Utility infrastructure services expenses) were
approximately $6.4 million and $6.9 million in 2022 and 2021, respectively.

Depreciation and amortization expense increased $37.7 million between 2022 and 2021, of which $34.9 million relates to Riggs Distler.
The remaining increase was attributable to equipment and computer systems purchased to support the growing volume of
infrastructure work overall. Depreciation expense, relative to the revenues recorded, was generally consistent during 2022 compared to
2021.

The increase in net interest deductions of $40.4 million was primarily due to incremental outstanding borrowings in connection with the
2021 acquisition of Riggs Distler under Centuri’s $1.445 billion amended and restated secured revolving credit and term loan facility, in
addition to higher interest rates on outstanding variable-rate borrowings.

Income tax expense decreased $13 million between 2022 and 2021, primarily due to reduced profitability in 2022.

Results of Pipeline and Storage

(Thousands of dollars)

Regulated operations revenues
Operating expenses:
Net cost of gas sold
Operations and maintenance expense
Depreciation and amortization
Taxes other than income taxes
Goodwill impairment

Operating loss

Other income
Net interest deductions

Loss before income taxes

Income tax benefit

Contribution to consolidated results

Year Ended
December 31,

2022

$ 264,613

9,843
100,263
52,059
10,186
449,606

(357,344)
2,128
18,185

(373,401)
(89,668)

$(283,733)

The pipeline and storage entities of MountainWest were part of an acquisition on December 31, 2021, which have since been sold to
Williams (closed on February 14, 2023). Operating results for the Pipeline and Storage segment during 2022 included rate-regulated
transmission and subscription storage revenues of $248.3 million. Results include a goodwill impairment loss of $449.6 million as a
result of the sale of MountainWest at a price less than the equity interests in MountainWest. Operating expenses also include

38 | SOUTHWEST GAS HOLDINGS, INC.

approximately $26 million related to the stand-up of processes and systems which, following the earlier acquisition, were under a
Transition Services Agreement with the previous seller, in addition to certain employee retention payments.

Rates and Regulatory Proceedings

Southwest is subject to the regulation of the Arizona Corporation Commission (the “ACC”), the Public Utilities Commission of Nevada
(the “PUCN”), the California Public Utilities Commission (the “CPUC”), and the Federal Energy Regulatory Commission (the “FERC”). Due
to the size of Southwest’s regulated operations and the frequency of rate cases and other procedural activities with its commissions, the
following discussion focuses primarily on the proceedings within its natural gas distribution operations.

General Rate Relief and Rate Design

Rates charged to customers vary according to customer class and rate jurisdiction and are set by the individual state and federal
regulatory commissions that govern Southwest’s service territories. Southwest makes periodic filings for rate adjustments as the cost of
providing service (including the cost of natural gas purchased) changes, and as additional investments in new or replacement pipeline and
related facilities are made. Rates are intended to provide for recovery of all commission-approved costs and a reasonable return on
investment. The mix of fixed and variable components in rates assigned to various customer classes (rate design) can significantly impact
the operating margin actually realized by Southwest. Management has worked with its regulatory commissions in designing rate
structures that strive to provide affordable and reliable service to its customers while mitigating volatility in prices to customers and
stabilizing returns to investors. Such rate structures were in place in all of Southwest’s operating areas during all periods for which
results of natural gas distribution operations are disclosed above.

Arizona Jurisdiction

Arizona General Rate Case. In December 2021, Southwest filed a general rate case application proposing a revenue increase of
approximately $90.7 million. Although updated rates related to the previous rate case became effective in January 2021, the most
significant driver for the December 2021 request was the necessity to reflect in rates the substantial capital investments that have been
made since the end of the test year in the previous case, including the customer information system implemented in May 2021. The filing
was based on a test year ended August 31, 2021 and proposed a return on common equity of 9.90% relative to a target equity ratio of
51%. Southwest also proposed a twelve-month post-test year adjustment to reflect otherwise non-revenue producing plant in service as
of August 31, 2022 and certain expense adjustments. Recovery (over three years) of the approximately $12 million related to the
outstanding deferral balance associated with the LNG facility (see below) was included in the request, along with the approximate
$2.1 million (also over three years) in late payment charges that were suppressed from customer accounts during the COVID-19
pandemic. A request to continue the Delivery Charge Adjustment (“DCA”), Southwest’s full-revenue decoupling mechanism, was also
included, while the only proposed change to Southwest’s existing rate design contemplated the year-round offering of the Low Income
Ratepayer Assistance program.

At a hearing held in September 2022, Southwest, the Utilities Division Staff (the “Staff”), and the Residential Utility Consumer Office
jointly stipulated to several issues, including a target capital structure consisting of 50% equity and 50% debt; a 9.30% return on equity;
and foregoing recovery of the requested COVID-19 moratorium waived late fees, as well as an acquisition premium related to the recent
Graham County acquisition. Among the uncontested issues identified prior to the hearing were the continuation of the DCA mechanism,
the continuation of the existing rate design, and Southwest’s alternate property tax expense calculation, reflecting actual incurred
property tax expense in 2021, instead of a pro forma adjustment reflecting forecasted property tax expense. The Administrative Law
Judge issued the Recommended Opinion and Order in mid-December 2022, and the ACC approved a modified final order at their
January 10, 2023 open meeting, authorizing a $54.3 million increase. New rates were effective February 1, 2023.

Delivery Charge Adjustment. The DCA is filed each April, which along with other reporting requirements, contemplates a rate to recover
the over- or under-collected margin tracker (decoupling mechanism) balance. An April 2022 request proposed a rate to return
$10.5 million, the over-collected balance existing at the end of the first quarter 2022, which was approved effective July 1, 2022. A filing
will be made prior to the end of April 2023 to request a rate to address the outstanding balance at March 31, 2023.

Tax Reform. A Tax Expense Adjustor Mechanism (“TEAM”) was approved in Southwest’s 2019 general rate case to timely recognize tax
rate changes resulting from federal or state tax legislation following the TEAM implementation. In addition, the TEAM tracks and
returns/recovers the revenue requirement impact of changes in amortization of EADIT (including that which resulted from 2017 U.S.
federal tax reform) compared to the amount authorized in the most recently concluded rate case. In December 2021, Southwest filed its
inaugural TEAM rate application, which proposed a $4.7 million refund, comprised of an approximate $9 million decrease in revenue
requirement offset by an under-collected balance of $4.3 million. Staff issued a proposed order supporting the TEAM credit, which was
approved by the ACC with rates effective November 1, 2022. In December 2022, Southwest filed its second TEAM rate application,
which proposes to update the TEAM surcredit effective April 2023 to incorporate a base revenue reduction of $6.6 million. A decision is
anticipated in the second quarter of 2023.

Liquefied Natural Gas (“LNG”) Facility. In 2014, Southwest sought ACC preapproval to construct, operate, and maintain a 233,000
dekatherm LNG facility in southern Arizona. This facility is intended to enhance service reliability and flexibility related to natural gas

SOUTHWEST GAS HOLDINGS, INC. | 39

deliveries in the southern Arizona area by providing a local storage option, connecting directly to Southwest’s distribution system.
Southwest was ultimately granted approval for construction and deferral of costs. The facility was placed in service in December 2019.
The capital costs and operating expenses associated with plant operation were approved and considered as part of Southwest’s 2019
general rate case. Approximately $12 million in costs, incurred following the in-service date of the facility and after the period
considered as part of the 2019 general rate case, were deferred in the authorized regulatory asset. These costs will be amortized over
four years consistent with the ACC’s decision in the most recent general rate case.

Customer-Owned Yard Line (“COYL”) Program. Southwest originally received approval, in connection with its 2010 Arizona general rate
case, to implement a program to conduct leak surveys, and if leaks were present, to replace and relocate service lines and meters for
Arizona customers whose meters were set off from the customer’s home, representing a non-traditional configuration. A filing in May
2021 proposed the recovery of previously unrecovered surcharge revenue from 2019 and 2020 (collectively, $13.7 million) over a
one-year period. Such amounts related to plant investments that were made in advance of those periods. In November 2021, the ACC
approved full recovery within the proposed timeline, the rate for which was implemented the same month. In a February 2022 filing,
Southwest requested and received approval to increase its surcharge revenue by $3.4 million to recover the revenue requirement
associated with investments made since August 2020 and through calendar year 2021. The rate was implemented in June 2022. A
decrease in the COYL rate became effective in November 2022 to reflect the expiration of the collection period associated with the
2019 and 2020 COYL program revenue referred to above. Recovery of the remaining investments is ongoing.

Vintage Steel Pipe Program (“VSP”). Southwest received approval, in connection with its 2016 Arizona general rate case, to implement a
VSP replacement program, due to having a substantial amount of pre-1970s vintage steel pipe in Arizona. However, as part of
Southwest’s 2020 rate case decision, the ACC ultimately decided to discontinue the accelerated VSP program. A filing in May 2021
proposed the recovery of previously unrecovered surcharge revenue relating to investments during 2019 and 2020, with approximately
$60 million to be recovered over a three-year period. In November 2021, the ACC approved full recovery over the proposed three-year
timeline with updated rates, which became effective in March 2022.

Graham County Utilities. In April 2021, Southwest and Graham County Utilities, Inc. (“GCU”) filed a joint application with the ACC for
approval to transfer assets of GCU to Southwest and extend Southwest’s Certificate of Public Convenience and Necessity to serve the
more than 5,000 associated customers, for a purchase price of $3.5 million. Approval of the application by the ACC was received in
December 2021, with final transfer in mid-January 2022. Former GCU customers retained their existing rates while Southwest’s most
recent rate case was processed; however, the customers will move to Southwest’s rates February 1, 2023, consistent with the effective
date of new rates associated with Southwest’s most recent general rate case.

California Jurisdiction

California General Rate Case. Southwest’s most recent general rate case concluded following an agreement in principle with the Public
Advocate’s Office, unanimously approved by the CPUC on March 25, 2021, including a $6.4 million total combined revenue increase
with a 10% return on common equity, relative to a 52% equity ratio. Approximately $4 million of the original proposed increase was
associated with a North Lake Tahoe project that would not ultimately be completed by the beginning of 2021; consequently, the parties
agreed to provide for recovery of the cost of service impacts of the project through the annual attrition filing. The rate case decision
maintains Southwest’s existing 2.75% annual attrition adjustments and the continuation of the pension balancing account. It also
includes cumulative expenditures totaling $119 million over the five-year rate cycle to implement risk-informed proposals, consisting of
a school COYL replacement, meter protection, and pipe replacement programs. New rates were ultimately implemented April 1, 2021,
with Southwest permitted to establish a general rate case memorandum account to track the impacts of a delay in the implementation of
new rates (between January 1, 2021 and the date rates were implementation) for purposes of later recovery.

Attrition Filing. Following the 2021 implementation of new rates approved as part of the recently concluded general rate case, Southwest
is also authorized to continue annual Post Test Year (“PTY”) attrition increases of 2.75%, the first of which began in January 2022, with
the latest such increase effective in January 2023.

Customer Data Modernization Initiative (“CDMI”). In April 2019, Southwest filed an application with the CPUC seeking authority to
establish a two-way, interest-bearing balancing account to record costs associated with the CDMI to mitigate adverse financial
implications related to the multi-year project (including a new customer information system, ultimately implemented in May 2021).
Effective October 2019, the CPUC granted a memorandum account, which allowed Southwest to track costs, including operations and
maintenance costs and capital-related costs, such as depreciation, taxes, and return associated with California’s portion of the CDMI
(initially estimated at $19 million). The balance tracked in the memorandum account was transferred to the two-way balancing account
in July 2020. A rate to begin recovering the balance accumulated through June 30, 2020 was established and made effective
September 1, 2020, and updated multiple times since, including in January 2023, with ongoing updates expected at least annually.

Carbon Offset Program. In March 2022, Southwest filed an application to seek approval to offer a voluntary program to California
customers to purchase carbon offsets in an effort to provide customers additional options to reduce their respective GHG emissions. A
request to establish a two-way balancing account to track program-related costs and revenues was included as part of the application.
The CPUC issued Decision 22-09-010 dismissing Southwest’s application without prejudice. Southwest intends to file a new application
in the second quarter 2023 addressing the concerns raised by third parties, which included a request to demonstrate that purchased
offsets would result in GHG emissions reductions.

40 | SOUTHWEST GAS HOLDINGS, INC.

Building Decarbonization. A CPUC decision was issued regarding the elimination of monetary allowances for gas line extensions, a 10-year
refundable payment option, and the 50% discount payment option for both residential and non-residential customers of all California gas
utilities. This applies to new applications for gas line extensions submitted on or after July 1, 2023. Although this decision eliminates the
various allowances related to line extensions, it does not preclude extending natural gas service to customers in California.

Residential Disconnection Protections. A decision was issued by the CPUC establishing disconnection protections for residential customers
of small and multi-jurisdictional utilities, including Southwest. A similar decision was adopted for four large California utilities in 2020.
This decision prohibits the utility from assessing credit deposits for residential customers in establishing or re-establishing service, and
prohibits the assessment of reconnection fees for residential customers, among other provisions. The decision, however, also provides
authorization to establish a two-way balancing account to track residential uncollectible charges for future recovery in a general rate
case, subject to a relevant cap.

Nevada Jurisdiction

Nevada General Rate Case. Southwest filed its most recently concluded Nevada general rate case in August 2021, which was further
updated by a certification filing in December 2021. The request proposed a combined revenue increase of approximately $28.7 million
(as of the certification date); the most significant driver for which was the substantial capital investments that were made since the end
of the test year in the previous case, including the customer information system implemented in May 2021. The filing included a
proposed return on common equity of 9.90% with a target equity ratio of 51%; recovery of previously deferred late payment charges
related to a regulatory asset associated with COVID-19; and continuation of full revenue decoupling under the General Revenues
Adjustment (“GRA”) mechanism. On February 7, 2022, the parties filed a stipulation with the PUCN, providing for a statewide revenue
increase of $14.05 million, a return on common equity of 9.40% relative to a 50% target equity ratio, and continuation of Southwest’s full
revenue decoupling mechanism. The stipulation was approved by the PUCN, and new rates became effective April 1, 2022. The PUCN’s
order did not include recovery of the approximate $6.6 million in deferred late payment charges related to a regulatory asset associated
with COVID-19, which had previously been reserved.

General Revenues Adjustment. As noted above, the continuation of the GRA was affirmed as part of Southwest’s most recent general rate
case with an expansion to include a large customer class (with average monthly throughput requirements greater than 15,000 therms),
effective April 2022. Southwest makes Annual Rate Adjustment (“ARA”) filings to update rates to recover or return amounts associated
with various regulatory mechanisms, including the GRA. Southwest made its most recent ARA filing in November 2022 related to
balances as of September 30, 2022, with new rates expected to become effective July 1, 2023. While there is no impact to net income
overall from adjustments to recovery rates associated with the related regulatory balances, operating cash flows are impacted by such
changes.

COYL Program. In August 2021, Southwest filed a joint petition with the Regulatory Operations Staff of the PUCN proposing a Nevada
COYL replacement program to include residential COYLs, public school COYLs, and any other COYLs that are identified to be a safety
concern. The petition was approved in January 2022 and provides for capital investments up to $5 million per year for five years and the
establishment of a regulatory asset to track the capital-related costs. After five years, the program will be reassessed to determine if it
should be continued.

Infrastructure Replacement Mechanism. In 2014, the PUCN approved final rules for the Gas Infrastructure Replacement (“GIR”)
mechanism, which provided for the deferral and recovery of certain costs associated with accelerated replacement of qualifying
infrastructure that would not otherwise provide incremental revenues between general rate cases. Associated with the replacement of
various types of pipe infrastructure under the mechanism (Early Vintage Plastic Pipe, COYL, and VSP), the related regulations provide
Southwest with the opportunity to file a GIR “Advance Application” annually to seek preapproval of qualifying replacement projects.

In cases where preapproval of projects is requested and granted, a GIR rate application is separately filed to reset the GIR recovery
surcharge rate related to previously approved and completed projects. On September 27, 2022, Southwest filed its latest rate
application to reset the recovery surcharge in January 2023 to include cumulative deferrals through August 31, 2022. However, in
November 2022, Southwest reached a settlement with parties to discontinue the GIR, and determined it would not plan to seek further
ratemaking recovery, related to which, it wrote off the immaterial remaining balance.

Conservation and Energy Efficiency. The PUCN allows deferral (and later recovery) of approved conservation and energy efficiency costs,
recovery rates for which are adjusted in association with ARA filings. In its November 2022 ARA filing, Southwest proposed an
annualized margin increase of $139,000 and a decrease of $290,000 for southern and northern Nevada, respectively. A PUCN decision
is anticipated in the second quarter 2023 with rates expected to become effective July 2023. Separately, in May 2022, Southwest filed
an application seeking approval of its annual Conservation and Energy Efficiency Plan Report for 2021, with no proposed modifications
to the previously approved $1.3 million annual budget for years 2022-2024. The parties reached a stipulation that was approved by the
PUCN in July 2022.

Expansion and Economic Development Legislation. In January 2016, final regulations were approved by the PUCN associated with
legislation (“SB 151”) previously introduced and signed into law in Nevada. The legislation authorized natural gas utilities to expand their
infrastructure to provide service to unserved and underserved areas in Nevada.

In November 2017, Southwest filed for preapproval of a project to extend service to Mesquite, Nevada, in accordance with the SB 151
regulations, which was ultimately approved. Southwest provides periodic updates, and requests adjustment of recovery rates (as part of

SOUTHWEST GAS HOLDINGS, INC. | 41

ARA filings and other rate proceedings) for the revenue requirement associated with the investments to serve customers. As of
December 2022, approximately 49 miles of natural gas infrastructure have been installed throughout the Mesquite expansion area.

In June 2019, Southwest filed for preapproval to construct the infrastructure necessary to expand natural gas service to Spring Creek,
near Elko, Nevada, and to implement a cost recovery methodology to recover the associated revenue requirement consistent with the
SB 151 regulations. The expansion facilities consist of a high-pressure approach main and associated regulator stations, an interior
backbone, and an extension of the distribution system from the interior backbone. The total capital investment was estimated to be
$61.9 million. A stipulation was reached with the parties and approved by the PUCN in December 2019, including a rate recovery
allocation amongst northern Nevada, Elko, and Spring Creek expansion customers. Construction began in the third quarter of 2020, with
service to customers starting in December 2020. As of December 2022, approximately 60 miles of natural gas infrastructure have been
installed throughout the Spring Creek expansion area, with completion anticipated in 2026.

Carbon Offset Program. In June 2021, Southwest filed an application to seek approval to offer a voluntary program to northern and
southern Nevada customers to purchase carbon offsets in an effort to provide customers additional options to reduce their GHG
emissions. A request to establish a regulatory asset to track program-related costs and revenues was included as part of the application.
The parties reached a stipulation that was approved by the PUCN in December 2021, approving Southwest’s proposal. The program
opened for participation in the fourth quarter of 2022.

FERC Jurisdiction

General Rate Case. Great Basin Gas Transmission Company (“Great Basin”), a wholly owned subsidiary of Southwest, reached an
agreement in principle with the FERC Staff providing that its three largest transportation customers and all storage customers would be
required to have primary service agreement terms of at least five years, that term-differentiated rates would continue generally, and
included a 9.90% pre-tax rate of return. Interim rates were made effective February 2020. As part of the settlement, Great Basin will not
file a rate case later than May 31, 2025.

MountainWest Overthrust Pipeline. On September 22, 2022, the FERC issued an order initiating an investigation, pursuant to section 5 of
the Natural Gas Act, to determine whether rates currently charged by MountainWest Overthrust Pipeline, LLC, a subsidiary of
MountainWest, are just and reasonable and setting the matter for hearing (the “Section 5 Rate Case”). Unless earlier settled by the
parties, a hearing on the matter is to commence on August 1, 2023 with an initial decision from the presiding administrative law judge
due by November 14, 2023. Under the terms of the MountainWest Purchase Agreement, the Company is obligated, for a period of four
years following the closing of the sale of MountainWest, to indemnify Williams and MountainWest for any damages and liabilities
resulting from the Section 5 Rate Case, including any reduction to the current applicable rate, up to a cap of $75 million. Williams has
agreed that it will not enter into any settlement of the Section 5 Rate Case that will result in any damages being paid by the Company
under such indemnity without the prior written consent of the Company (and such consent shall not be unreasonably withheld). The
range of loss, if any, that could result from this matter cannot currently be estimated.

PGA Filings

The rate schedules in all of Southwest’s service territories contain provisions that permit adjustments to rates as the cost of purchased
gas changes. These deferred energy provisions and purchased gas adjustment clauses are collectively referred to as “PGA” clauses.
Differences between gas costs recovered from customers and amounts paid for gas by Southwest result in over- or under-collections.
Balances are recovered from or refunded to customers on an ongoing basis with interest. As of December 31, 2022, under-collections in
each of Southwest’s service territories resulted in an asset of approximately $450.1 million on the Company’s and Southwest’s
Consolidated Balance Sheets. The market price of natural gas spiked due to numerous market forces including historically low storage
levels, unexpected upstream pipeline maintenance events, and cold weather conditions across the western region in the latter part of
2022 and continuing into January 2023. As a result of this increase in pricing, Southwest entered into a $450 million term loan in order
to fund the incremental cost. We may be required to incur additional indebtedness in connection with future spikes in natural gas prices
as a result of extreme weather events or otherwise. See also Deferred Purchased Gas Costs in Note 1 – Background, Organization, and
Summary of Significant Accounting Policies.

Filings to change rates in accordance with PGA clauses are subject to audit by state regulatory commission staffs. PGA changes impact
cash flows, but have no direct impact on operating margin. However, gas cost deferrals and recoveries can impact comparisons between
periods of individual consolidated income statement components. These include Regulated operations revenues, Net cost of gas sold,
Net interest deductions, and Other income (deductions).

The following table presents Southwest’s outstanding PGA balances receivable/(payable) at the end of its two most recent fiscal years:

(Thousands of dollars)

Arizona
Northern Nevada
Southern Nevada
California

December 31,

2022

2021

$292,472 $214,387
12,632
55,967
8,159

27,384
122,959
7,305

$450,120 $291,145

42 | SOUTHWEST GAS HOLDINGS, INC.

Arizona PGA Filings. In Arizona, Southwest calculates the change in the gas cost component of customer rates monthly (to allow for timely
refunds to/recoveries from customers), utilizing a rolling twelve-month average. During 2022, the Gas Cost Balancing Account
continued with a surcharge in order to recover the under-collected balance.

California Gas Cost Filings. In California, a monthly gas cost adjustment based on forecasted monthly prices is utilized. Monthly
adjustments modeled in this fashion provide the timeliest recovery of gas costs in any Southwest jurisdiction.

Nevada ARA Application. In November 2022, Southwest filed to adjust its quarterly Deferred Energy Account Adjustment rate, which is
based upon a twelve-month rolling average, in addition to requesting adjusted Base Tariff Energy rates, both of which were most
recently approved effective July 2022. These new rates are intended to address the outstanding balances over a twelve-month period.

Gas Price Volatility and Mitigation

To mitigate price volatility to its customers, Southwest periodically enters into fixed-price term contracts under its volatility mitigation
programs for up to 25% of the California jurisdictions’ annual normal weather supply needs and to a limited extent, in the Arizona
jurisdiction. For the 2022/2023 heating season, contracts contained in the fixed-price portion of the supply portfolio ranged from
approximately $4.59 to approximately $9.89 per dekatherm. In consultation with its regulators, for periods beyond October 2020,
Southwest currently does not plan to make any fixed-price term purchases in other than California (as set above), nor to enter into swap
agreements. Southwest’s natural gas purchases, not covered by fixed-price contracts, are under variable-price contracts with firm
quantities, or on the spot market. The contract price for these contracts is either determined at the beginning of each month to reflect
the published first-of-month index price, or at market prices based on a published daily price index. In each case, the index price is not
published or known until the purchase period begins.

Pipeline Safety Regulation

In July 2021, the PUCN issued an order revising its regulations to require annual leak surveys (previously every three years) of all
distribution pipelines transporting natural gas and/or liquefied petroleum, effective January 1, 2023. In conjunction with this change, the
PUCN authorized the establishment of a regulatory asset account to track the incremental cost of compliance related to the new
regulation, for consideration in a future general rate case filing.

In March 2022, the Pipeline and Hazardous Materials Safety Administration (“PHMSA”) issued final rules that amended the federal
pipeline safety regulations applicable to the valve installation and minimum rupture detection standards for gas transmission pipelines
(effective October 2022). Southwest has integrated the requirements of this new rule into its operating procedures. In addition, in
August 2022, PHMSA issued final rules that amended the federal pipeline safety regulations applicable to the integrity management of
gas transmission pipelines (effective May 2023). Southwest is integrating the requirements of this new rule into its operating procedures
related to repair criteria, integrity management improvements, cathodic protection, management of change, and other related gas
transmission integrity related amendments.

Southwest continues to monitor changing pipeline safety legislation and participates, to the extent possible, in providing public
comments and working with industry associations, such as the American Gas Association, in shaping regulatory language associated with
these new mandates and reporting requirements. Additionally, management works with its state and federal commissions to develop
customer rates that are responsive to incremental costs of compliance. However, due to the timing of when rates are implemented in
response to new requirements, and as additional rules are developed, compliance requirements could impact expenses and the timing
and amount of capital expenditures for Southwest.

Capital Resources and Liquidity

Historically, cash on hand and cash flows from operations have provided a substantial portion of cash used in investing activities
(primarily construction expenditures and property additions). In recent years, Southwest has accelerated pipe replacement activities to
fortify system integrity and reliability, including on an accelerated basis in association with certain gas infrastructure replacement
programs. This activity has necessitated the issuance of both debt and equity securities to supplement cash flows from operations. The
Company, in executing on its interim plans to fund the 2021 MountainWest acquisition, initially funded the transaction through short-
term borrowings, which were expected to be refinanced through a multi-pronged permanent financing plan, part of which was executed
during the first quarter of 2022 when the Company used $452 million in net proceeds from an underwritten offering of common stock to
repay a portion of the short-term borrowings. Also, in September 2022, the Company amended the short-term borrowing arrangement
related to the remaining acquisition indebtedness to extend the maturity date to December 2023 and replace the benchmark borrowing
rates. Upon the close of the MountainWest sale in February 2023, the Company paid down $1.075 billion of the term loan associated
with the earlier acquisition indebtedness. The Company’s capitalization strategy is to maintain an appropriate balance of equity and debt
to preserve investment-grade credit ratings, which help minimize interest costs. Investment-grade credit ratings have been maintained
by the Company.

SOUTHWEST GAS HOLDINGS, INC. | 43

Cash Flows

Southwest Gas Holdings, Inc.:

Operating Cash Flows. Cash flows provided by consolidated operating activities increased $296 million between 2022 and 2021. The
improvement in operating cash flows primarily resulted from the change in purchased gas costs in the PGA mechanism, including
amounts incurred and deferred, as well as impacts related to when amounts are incorporated in customer bills to recover or return
deferred balances. Amounts were greatly impacted due to the higher than expected natural gas costs during the winter period noted
above in PGA Filings. Other impacts include a decrease in net income, and the impact of changes in components of working capital overall.
Depreciation and amortization impact earnings, but not cash flows directly. As described above, an impairment was recognized related
to the negotiated sale price associated with MountainWest, also impacting earnings, but did not impact cash flows directly in 2022.

The corporate and administrative expenses/outflows for Southwest Gas Holdings, Inc. include outlays related to stockholder activism
and the strategic review, in addition to financing costs for debt used to fund the MountainWest acquisition.

Investing Cash Flows. Cash used in consolidated investing activities decreased $2.2 billion in 2022 as compared to 2021. The change was
primarily due to the acquisitions of Riggs Distler by Centuri and MountainWest by Southwest Gas Holdings, Inc., in 2021, including post-
closing true-up amounts under the agreements. The overall decrease was partly offset by an increase in capital expenditures in both the
natural gas distribution and utility infrastructure services segments.

Financing Cash Flows. Net cash provided by consolidated financing activities decreased $2.7 billion in 2022 as compared to 2021. The
change was primarily due to financing the acquisitions of MountainWest and Riggs Distler. The Company entered into a 364-day
$1.6 billion Term Loan Facility to temporarily fund the MountainWest acquisition in 2021, and Centuri entered into an amended and
restated credit agreement providing for a $1.145 billion secured term loan facility and a $400 million secured revolving credit facility,
which in addition to funding the Riggs Distler acquisition, refinanced its previous $590 million loan facility in 2021.

The Company reduced its 364-day Term Loan facility through net proceeds of $452 million from the issuance of common stock in an
underwritten public offering in 2022. Furthermore, debt proceeds were received by Southwest from a March 2022 issuance of
$600 million in notes and an additional December 2022 issuance of $300 million in notes, offset by a pay down in February 2022 of
$25 million in 7.78% series Medium-term notes then maturing, as well as $250 million in notes maturing in April 2022.

The capital requirements and resources of the Company generally are determined independently for the individual business segments.
Each business segment is generally responsible for securing its own financing sources. However, the holding company may raise funds
through stock issuances or other external financing sources in support of each business segment.

Southwest Gas Corporation:

Operating Cash Flows. Cash flows provided by operating activities increased $259 million between 2022 and 2021. The improvement in
operating cash flows was primarily attributable to the impacts related to deferred purchased gas costs and the related regulatory
mechanism (described above), as well as changes in other working capital components overall.

Investing Cash Flows. Cash used in investing activities increased $69 million in 2022 as compared to 2021, primarily due to the increase in
cash outlays for construction expenditures. See also 2022 Construction Expenditures below.

Financing Cash Flows. Net cash provided by financing activities decreased $175 million in 2022 as compared to 2021. During 2022 no
parent capital was contributed to Southwest, but in 2021, over $200 million was contributed to Southwest. Southwest issued
$600 million in notes in March 2022 used to pay down amounts then outstanding under its credit facility, paid down $25 million in
maturing notes in February 2022, redeemed $250 million in notes maturing in April 2022, and issued an additional $300 million in notes
in December 2022. In 2021, Southwest borrowed $250 million in a term loan for financing a gas cost run-up surrounding Winter Storm
Uri and issued $300 million in notes. Other financing activity related to borrowing and repayments under Southwest’s credit facility.

2022 Construction Expenditures

During the three-year period ended December 31, 2022, total gas plant in service increased from $7.8 billion to $9.5 billion, or at an
average annual rate of 7%. Replacement, new business, and reinforcement work was a substantial portion of the plant increase during
the three-year noted. Customer growth impacted expenditures as Southwest set approximately 116,000 meters during this time, which
is reflected in new business.

During 2022, construction expenditures (through cash outlays) for the natural gas distribution segment were $683 million. The majority
of these expenditures represented costs associated with replacement of existing transmission and distribution plant to fortify system
integrity and reliability, as well as general plant additions. Cash flows from operating activities of Southwest were $284 million,
providing approximately 35% of construction expenditures and dividend requirements of the natural gas operations segment. Other
funding was provided by cash on hand, external financing activities, and funds from the existing credit facility.

2022 Financing Activity

In March 2022, the Company sold, through a prospectus supplement under its Universal Shelf (as defined below), an aggregate of
6.325 million shares of common stock, with an underwritten public offering price of $74.00 per share, resulting in proceeds to the

44 | SOUTHWEST GAS HOLDINGS, INC.

Company of $452.3 million, net of the underwriters discount of $15.8 million. These net proceeds were used to repay a portion of the
outstanding borrowings under the 364-day term loan credit agreement to earlier fund the MountainWest acquisition.

As of December 31, 2022, the Company had up to $342 million of common stock available for sale under its Equity Shelf Program (as
defined below). See Note 7 – Common Stock for more information.

Net proceeds received under the Dividend Reinvestment and Stock Purchase Plan during 2022 was approximately $10.5 million, from
the issuance of approximately 142,000 shares of Southwest Gas Holdings, Inc. common stock.

Gas Segment Construction Expenditures, Debt Maturities, and Financing

Management estimates natural gas distribution segment construction expenditures during the three-year period ending December 31,
2025 will be approximately $2.0 billion. Of this amount, approximately $665 million to $685 million is expected to be incurred in 2023.
Southwest plans to continue to request regulatory support to undertake projects, or to accelerate projects as necessary, for the
improvement of system flexibility and reliability, or to expand, where relevant, to unserved or underserved areas. Southwest may
expand existing, or initiate new, programs. Significant replacement activities are expected to continue well beyond the next few years.
During the three-year period ending December 31, 2025, cash flows from operating activities of Southwest are expected to provide
approximately 77% of the funding for gas operations of Southwest and total construction expenditures and dividend requirements. From
a debt maturity standpoint, Southwest has a $225 million Term Loan due in March 2023. Any additional cash requirements, including
construction-related, and any paydown or refinancing of debt, are expected to be provided by existing credit facilities, equity
contributions from the Company, and/or other external financing sources. The timing, types, and amounts of any additional external
financings will be dependent on a number of factors, including the cost of gas purchases, conditions in the capital markets, timing and
amounts of rate relief, timing and amounts of surcharge collections from, or amounts returned to, customers related to other regulatory
mechanisms, as well as growth levels in Southwest’s service areas and earnings. External financings could include the issuance of debt
securities, bank and other short-term borrowings, and other forms of financing.

Liquidity

Several factors (some of which are out of the control of the Company) that could significantly affect liquidity in future years include:
variability of natural gas prices, changes in ratemaking policies of regulatory commissions, regulatory lag, customer growth in the natural
gas distribution segment, the ability to access and obtain capital from external sources, interest rates, changes in income tax laws,
pension funding requirements, inflation, and the level of earnings. Natural gas prices and related gas cost recovery rates, as well as plant
investment, have historically had the most significant impact on liquidity, aside from the Company’s recent strategic undertakings,
including acquisition and disposition undertakings.

On an interim basis, Southwest defers over- or under-collections of gas costs to PGA balancing accounts. In addition, Southwest uses this
mechanism to either refund amounts over-collected or recoup amounts under-collected as compared to the price paid for natural gas
during the period since the last PGA rate change went into effect. At December 31, 2022, the combined balance in the PGA accounts
totaled an under-collection of $450.1 million. As described earlier, the market price of natural gas spiked as a result of numerous market
forces including historically low storage levels, unexpected upstream pipeline maintenance events, and cold weather conditions across
the western region in the latter part of 2022 and continuing into January 2023. As a result of this increase in pricing, in January 2023,
Southwest entered into a 364-day $450 million term loan in order to fund the incremental cost. We may be required to incur additional
indebtedness in connection with future spikes in natural gas prices as a result of extreme weather events or otherwise. See PGA Filings
for more information.

In March 2022, Southwest amended its $250 million Term Loan (first borrowed in March 2021), extending the maturity date to
March 21, 2023. The proceeds were originally used to fund the increased cost of natural gas supply during the month of February 2021
caused by extreme weather conditions in the central U.S. during Winter Storm Uri. The March 2021 Term Loan was extended as a result
of the current gas cost environment and management’s funding plans for other gas purchases. At December 31, 2022, there was
$225 million outstanding under the amended March 2021 Term Loan.

In March 2022, Southwest issued $600 million aggregate principal amount of 4.05% Senior Notes. The notes will mature in March 2032.
Southwest used the net proceeds to redeem $250 million 3.875% notes due in April 2022 and to repay amounts then outstanding under
its credit facility, with the remaining net proceeds used for general corporate purposes.

In December 2022, Southwest issued $300 million aggregate principal amount of 5.80% Senior Notes. The notes will mature in
December 2027. Southwest used the net proceeds to repay amounts then outstanding under its credit facility, with the remaining net
proceeds used for general corporate purposes.

Southwest Gas Holdings, Inc. has a credit facility with a borrowing capacity of $300 million that expires in December 2026. The total
commitment amount available under the credit facility was increased by $100 million from $200 million to $300 million in December
2022. This facility is intended for short-term financing needs. At December 31, 2022, $173 million was outstanding under this facility,
which was also the maximum amount outstanding during 2022.

Southwest has a credit facility with a borrowing capacity of $400 million, which expires in April 2025. Southwest designates $150 million
of the facility for long-term borrowing needs and the remaining $250 million for working capital purposes. The maximum amount

SOUTHWEST GAS HOLDINGS, INC. | 45

outstanding during 2022 occurred during the fourth quarter and was $285 million ($150 million outstanding on the long-term portion of
the credit facility, none under the commercial paper program, in addition to $135 million outstanding on the short-term portion). As of
December 31, 2022, $50 million was outstanding on the long-term portion of the credit facility (no borrowings were outstanding under
the commercial paper program), and no borrowings were outstanding on the short-term portion. The credit facility has been used as
necessary to meet liquidity requirements, including temporarily financing under-collected PGA balances, meeting the refund needs of
over-collected balances, or temporarily funding capital expenditures. The credit facility has generally been adequate for Southwest’s
working capital needs outside of funds raised through operations and other types of external financing.

Southwest has a $50 million commercial paper program. Any issuance under the commercial paper program is supported by the
revolving credit facility and, therefore, does not represent additional borrowing capacity. Any borrowing under the commercial paper
program is designated as long-term debt. Interest rates for the commercial paper program are calculated at the then current commercial
paper rate. At December 31, 2022, there were no borrowings outstanding under this program.

Centuri has a senior secured revolving credit and term loan multi-currency facility. The line of credit portion comprises $400 million;
associated amounts borrowed and repaid are available to be re-borrowed. The term loan facility portion provided approximately
$1.145 billion in financing. The term loan facility expires on August 27, 2028 and the revolving credit facility expires on August 27, 2026.
This multi-currency facility allows the borrower to request loan advances in either Canadian dollars or U.S. dollars. The obligations under
the credit agreement are secured by present and future ownership interests in substantially all direct and indirect subsidiaries of
Centuri, substantially all of the tangible and intangible personal property of each borrower, certain of their direct and indirect
subsidiaries, and all products, profits, and proceeds of the foregoing. Centuri assets securing the facility at December 31, 2022 totaled
$2.5 billion. The maximum amount outstanding on the combined facility during 2022 was $1.221 billion, which occurred in the first
quarter, at which point $1.117 billion was outstanding on the term loan facility. As of December 31, 2022, $82 million was outstanding
on the revolving credit facility, in addition to $1.009 billion that was outstanding on the term loan portion of the facility. Also at
December 31, 2022, there was approximately $254 million, net of letters of credit, available for borrowing under the line of credit.

In November 2022, Centuri amended the financial covenants of the revolving credit facility (the “Centuri Credit Facility Amendment”) to
increase the maximum total net leverage ratio during the period from December 31, 2022 through December 31, 2023. The Credit
Facility Amendment also transitioned the interest rate benchmark for the revolving credit facility from LIBOR to SOFR. The applicable
margin for the revolving credit facility now ranges from 1.0% to 2.5% for SOFR loans and from 0.0% to 1.5% for CDOR and “base rate”
loans, depending on Centuri’s total net leverage ratio. Further, the Centuri Credit Facility Amendment increases a letter of credit
sub-facility from $100 million to $125 million. The Centuri Credit Facility Amendment did not modify any terms of the term loan facility.

In November 2021, the Company entered into a $1.6 billion delayed-draw Term Loan Facility that was funded on December 31, 2021 in
connection with the acquisition of MountainWest. In March 2022, the Company used net proceeds from the issuance of common stock
to repay a portion of borrowings under the Term Loan Facility. In September 2022, the Company entered into Amendment No. 1 to the
Term Loan Facility. The amendment, among other things, (1) extended the maturity date of the Term Loan to December 30, 2023, and
(2) replaced LIBOR interest rate benchmarks with SOFR interest rate benchmarks. There was $1.15 billion outstanding under this Term
Loan Facility as of December 31, 2022. Upon the close of the MountainWest sale (February 14, 2023), the Company paid down
$1.075 billion, resulting in an outstanding balance of $72 million as of the date of the date of closing the sale.

In April 2021, the Company entered into a Sales Agency Agreement between it and BNY Mellon Capital Markets, LLC and J.P. Morgan
Securities LLC (the “Equity Shelf Program”) for the offer and sale of up to $500 million of common stock from time to time in an
at-the-market offering program. There was no activity under this multi-year program in 2022. Net proceeds from the sales of shares of
common stock under the Equity Shelf Program are intended for general corporate purposes, including the acquisition of property for the
construction, completion, extension, or improvement of pipeline systems and facilities located in and around the communities served by
Southwest, as well as for repayment or repurchase of indebtedness (including amounts outstanding from time to time under the credit
facilities, senior notes, term loan or future credit facilities), and to provide for working capital. See Note 7 – Common Stock.

Interest rates for Centuri’s term loan contain LIBOR-based rates. Certain LIBOR-based rates were discontinued as a benchmark or
reference rate after 2021, while other LIBOR-based rates are scheduled to be discontinued after June 2023. As of December 31, 2022,
the Company had $1.009 billion in aggregate outstanding borrowings under Centuri’s term loan facility. The conversion to an alternate
rate is not expected to have a material impact on its financial condition or results of operations; however, the alternative rate may be less
predictable or less attractive than LIBOR.

Credit Ratings

Credit ratings apply to debt securities such as bonds, notes, and other debt instruments and do not apply to equity securities such as
common stock. Borrowing costs and the ability to raise funds are directly impacted by the credit ratings of the Company. Credit ratings
issued by nationally recognized ratings agencies (Moody’s Investors Service, Inc. (“Moody’s”), Standard & Poor’s Ratings Services
(“Standard & Poor’s”), and Fitch Ratings (“Fitch”)) provide a method for determining the creditworthiness of an issuer. Credit ratings are
important because long-term debt constitutes a significant portion of total capitalization. These credit ratings are a factor considered by

46 | SOUTHWEST GAS HOLDINGS, INC.

lenders when determining the cost of current and future debt for each debt obligor (i.e., generally the better the rating, the lower the
cost to borrow funds). The current unsecured long-term debt ratings of the companies are considered investment grade.

Southwest Gas Holdings, Inc.:

Issuer rating
Outlook

Last reaffirmed

Southwest Gas Corporation:

Senior unsecured long-term debt
Outlook

Last reaffirmed
Centuri Group, Inc.:

Issuer rating
Outlook

Last reaffirmed

Moody’s(1)

Standard & Poor’s(2)

Fitch(3)

Baa2

BBB-

Stable
October 2021

Positive Outlook
December 2022

Baa1

BBB

Stable
January 2021

Positive Outlook
December 2022

BBB
Rating Watch
Negative
December 2022

A
Rating Watch
Negative
December 2022

Ba2
Under Review
for Downgrade
December 2022

B+
CreditWatch
Developing
December 2022

N/A

N/A
N/A

(1) Moody’s debt ratings range from Aaa (highest rating possible) to C (lowest quality, usually in default). A numerical modifier of 1 (high end of the category) through 3 (low end of the

(2)

(3)

category) is included with the rating to indicate the approximate rank of a company within the range.
Standard & Poor’s (“S&P”) debt ratings range from AAA (highest rating possible) to D (obligation is in default). The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus “+” or
minus “-” sign to show relative standing within the major rating categories.
Fitch debt ratings range from AAA (highest credit quality) to D (defaulted debt obligation). The modifiers “+” or “-” may be appended to a rating to denote relative status within major rating
categories.

A credit rating, including the foregoing, is not a recommendation to buy, sell, or hold a debt security, but is intended to provide an
estimation of the relative level of credit risk of debt securities, and is subject to change or withdrawal at any time by the rating
agency. Numerous factors, including many that are not within management’s control, are considered by the ratings agencies in
connection with the assigning of credit ratings.

None of Southwest’s debt instruments have credit triggers or other clauses that result in default if these bond ratings are lowered by
rating agencies. Interest and fees on certain debt instruments are subject to adjustment depending on Southwest’s bond ratings. Certain
debt instruments are subject to a leverage ratio cap, and the 6.1% Notes due 2041 are also subject to a minimum net worth requirement.
At December 31, 2022, Southwest was in compliance with all of its covenants. Under the most restrictive of the financial covenants,
approximately $2.5 billion in additional debt could be issued and the leverage ratio requirement would still be met. At least $2 billion of
cushion in equity relating to the minimum net worth requirement exists at December 31, 2022. No specific limitations as to dividends
exist under the collective covenants. None of the debt instruments contain material adverse change clauses.

At December 31, 2022, Southwest Gas Holdings, Inc. was also in compliance with all of the covenants of its credit facility and 364-day
Term Loan. Interest and fees on its credit facility and 364-day Term Loan are subject to adjustment depending on its senior debt ratings.
The credit facility and 364-day Term Loan are subject to a leverage ratio cap. Under the most restrictive of the financial covenants,
approximately $1 billion in additional debt could be issued while still meeting the leverage ratio requirement. No specific limitations as to
dividends exist under the collective covenants. The credit facility and 364-day Term Loan do not contain material adverse change
clauses.

Certain Centuri debt instruments have leverage ratio caps and interest coverage ratio requirements. At December 31, 2022, Centuri
was in compliance with all of its covenants. Under the most restrictive of the covenants, Centuri could issue approximately $222 million
in additional debt and meet the leverage ratio requirement. Centuri has approximately $33 million of cushion relating to the minimum
interest coverage ratio requirement. Centuri’s revolving credit and term loan facility is secured by underlying assets of the utility
infrastructure services segment. Centuri also has restrictions on how much it could give to the Company in cash dividends, which is
limited to a calculated available amount, generally defined as 50% of its rolling twelve-month consolidated net income adjusted for
certain items, such as parent contributions inflows, Linetec redeemable noncontrolling interest payments, or dividend payments, among
other adjustments, as applicable.

Inflation

Inflation can impact results of operations for each of the Company’s business segments, and it has increased substantially over the past
year. Labor, employee benefits, fuel, natural gas, professional services, and construction costs are the categories most significantly
impacted by inflation. Changes to the cost of gas are generally recovered through PGA mechanisms and do not significantly impact net
earnings. Labor, employee benefits, and professional services are components of the cost of service, and gas infrastructure costs are the
primary component of utility rate base. In order to recover increased costs, and earn a fair return on rate base, general rate cases or
other procedural filings are made by our regulated operations, when deemed necessary, for review and approval by regulatory
authorities. Regulatory lag, that is, the time between the date increased costs are incurred and the time such increases are recovered
through the ratemaking process, can impact earnings. See Rates and Regulatory Proceedings for a discussion of recent rate case
proceedings.

SOUTHWEST GAS HOLDINGS, INC. | 47

Contractual Obligations

Our largest contractual obligations as of December 31, 2022 consisted of:

‰ Debt-related obligations for scheduled principal payments, other borrowings, and interest payments over the life of the debt. Debt

obligations are included in our consolidated balance sheets. See Note 8 – Debt for additional information.

‰ Centuri operating and finance leases are included in our consolidated balance sheets and represent multi-year obligations for

buildings, land, equipment, and vehicles. Southwest and MountainWest operating and finance leases are immaterial. See Note 2 –
Regulated Operations Plant and Leases for additional information.

‰

Southwest has gas purchase obligations that include fixed-price and variable-rate gas purchase contracts. Variable-rate contracts
reflect minimum contractual obligations with estimation in pricing based on market information. Actual future variable-rate purchase
commitments may vary depending on market prices at the time of delivery and values may change significantly from their estimated
amounts. Certain other variable-rate contracts allow for variability in quantities for which associated demand charges are included in
the gas purchase obligations based on the maximum daily quantities available under the contracts. Renewable natural gas purchase
obligations, in which the commencement dates are not specifically determinable and the volumes and contract prices are inestimable
until certain contract provisions are met, are excluded from gas purchase obligations. As of December 31, 2022, gas purchase
obligations of $907 million are payable within the next 12 months.

Southwest has pipeline capacity and storage contracts for firm transportation service, both on a short- and long-term basis with
several companies in all of its service territories, some with terms extending to 2044. Southwest also has interruptible contracts in
place that allow additional capacity to be acquired should an unforeseen need arise. Costs associated with these pipeline capacity
contracts are a component of the cost of gas sold and are recovered from customers primarily through the PGA mechanisms. As of
December 31, 2022 pipeline capacity and storage obligations of $89.8 million are payable within 12 months.

‰ Other commitments associated with noncancellable obligations consist primarily of software licensing, equipment, outsourced

processing subscriptions, and operating and/or maintenance agreements, as applicable.

‰

Estimated funding for pension and other postretirement benefits during calendar year 2023 is $59.3 million. Funding amounts for
years beyond 2023 are not currently known.

Recently Issued Accounting Standards Updates

The Financial Accounting Standards Board routinely issues Accounting Standards Updates. See Note 1 – Background, Organization, and
Summary of Significant Accounting Policies for more information regarding these Accounting Standards Updates and their potential
impact on the Company’s and Southwest’s financial position, results of operations, and disclosures.

Application of Critical Accounting Policies

A critical accounting policy is one that is very important to the portrayal of the financial condition and results of a company, and requires
the most difficult, subjective, or complex judgments of management. The need to make estimates about the effect of items that are
uncertain is what makes these judgments difficult, subjective, and/or complex. Management makes subjective judgments about the
accounting and regulatory treatment of many items and bases its estimates on historical experience and on various other assumptions
that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments. These estimates may
change as new events occur, as more experience is acquired, as additional information is obtained, and as the operating environment
changes. While management may make many estimates and judgments, many would not be materially altered, or provide a material
impact to the financial statements taken as a whole, if different estimates, or means of estimation were employed. The following are
accounting policies that are deemed critical to the financial statements. For more information regarding significant accounting policies,
see notes to the consolidated financial statements.

Regulatory Accounting

Natural gas distribution operations are subject to the specific regulation of the ACC, PUCN, CPUC, or the FERC, as applicable. The
accounting policies of the Company and Southwest conform to U.S. GAAP applicable to rate-regulated entities and reflect the effects of
the ratemaking process. As such, the Company and Southwest are allowed to defer, as regulatory assets, costs that otherwise would be
expensed, if it is probable that future recovery from customers (subject to our rate-regulated operations) will occur. Companies are also
permitted to recognize, as regulatory assets, amounts associated with various revenue decoupling mechanisms, as long as the
requirements of alternative revenue programs permitted under U.S. GAAP continue to be met. Management reviews the regulatory
assets to assess their ultimate recoverability within the approved regulatory guidelines. If rate recovery is no longer probable, due to
competition or the actions of regulators, write-off of the related regulatory asset (which would be recognized as current-period expense)
is required. Regulatory liabilities are recorded if it is probable that revenues will be reduced for amounts that will be refunded to
customers through the ratemaking process. The timing and inclusion of costs in rates is often delayed (regulatory lag) and results in a
reduction of current-period earnings. Refer to Note 5 – Regulatory Assets and Liabilities.

48 | SOUTHWEST GAS HOLDINGS, INC.

Accrued Utility Revenues

Revenues related to the sale and/or delivery of natural gas are generally recorded when natural gas is delivered to customers. However,
the determination of natural gas sales to individual customers is based on the reading of their meters, which is performed on a systematic
basis throughout the month. At the end of each month, operating margin associated with natural gas service that has been provided but
not yet billed is accrued. This accrued utility revenue is estimated each month based primarily on applicable rates, number of customers,
rate structure, analyses reflecting significant historical trends, seasonality, and experience. The interplay of these assumptions can
impact the variability of the accrued utility revenue estimates. All Southwest rate jurisdictions have decoupled rate structures, limiting
variability due to extreme weather conditions.

Accounting for Income Taxes

The Company is subject to income taxes in the U.S. and Canada. Income tax calculations require estimates due to known future tax rate
changes, book to tax differences, and uncertainty with respect to regulatory treatment of certain property items. The asset and liability
method of accounting is utilized for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Regulatory tax assets and liabilities are recorded to the extent management believes they will be
recoverable from, or refunded to, customers in future rates. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Management regularly assesses financial statement tax provisions to identify any change in the regulatory treatment or tax-related
estimates, assumptions, or enacted tax rates that could have a material impact on cash flows, financial position, and/or results of
operations.

Accounting for Pensions and Other Postretirement Benefits

Southwest has a noncontributory qualified retirement plan with defined benefits covering substantially all employees hired on or before
December 31, 2021. In addition, there is a separate unfunded supplemental retirement plan which is limited to officers hired on or
before December 31, 2021. Pension obligations and costs for these plans are affected by the amount and timing of cash contributions to
the plans, the return on plan assets, discount rates, and by employee demographics, including age, compensation, and length of service.
Changes made to the provisions of the plans may also impact current and future pension costs. Actuarial formulas are used in the
determination of pension obligations and costs and are affected by actual plan experience and assumptions about future experience. Key
actuarial assumptions include the expected return on plan assets, the discount rate used in determining the projected benefit obligation
and pension costs, and the assumed rate of increase in employee compensation. Relatively small changes in these assumptions
(particularly the discount rate) may significantly affect pension obligations and costs for these plans. For example, a change of 0.25% in
the discount rate assumption would change the pension plan projected benefit obligation by approximately $39 million and future
pension expense by $4 million. A change of 0.25% in the employee compensation assumption would change the pension obligation by
approximately $10 million and expense by $2 million. A 0.25% change in the expected asset return assumption would change pension
expense by approximately $3 million (but has no impact on the pension obligation).

At December 31, 2022, the discount rate was 5.25%, an increase from the 3.00% rate used at December 31, 2021. The methodology
utilized to determine the discount rate was consistent with prior years. The weighted-average rate of compensation escalation remained
at 3.25% at December 31, 2022, the same as the rate used at December 31, 2021. The asset return assumption is 6.75% to be used for
2023 expense, an increase from the 6.50% utilized for 2021. Pension costs for 2023 are estimated to decrease approximately
$40 million as compared to that experienced in 2022. Future years’ expense level movements (up or down) will continue to be greatly
influenced by long-term interest rates, asset returns, and funding levels.

Goodwill

Goodwill is assessed for impairment annually as of October, or more frequently, if events or changes in circumstances indicate an
impairment may have occurred before that time. As permitted under accounting guidance on testing goodwill for impairment, we
perform either a qualitative assessment or a quantitative assessment of each of our reporting units based on management’s judgment.
Adjustment of values would only occur if conditions of impairment were deemed to be permanent. With respect to our qualitative
assessments, we consider events and circumstances specific to us, such as macroeconomic conditions, industry and market
considerations, cost factors, and overall financial performance, when evaluating whether it is more likely than not that the fair values of
our reporting units are less than their respective carrying amounts. The assumptions we use in our analysis, including discount rates, are
subject to uncertainty, and declines in the future performance of our reporting units and changing business conditions could result in the
recognition of impairment charges, which could be significant. The Company’s reporting units are the same as its segments for purposes
of impairment evaluation. In December 2022, the Company announced the planned sale of MountainWest. The Board determined to sell
MountainWest in order to simplify the business. As the consideration to be received for the sale was below the equity interests in
MountainWest, the Company recorded held for sale losses, including a pre-tax goodwill impairment loss of $449.6 million in the fourth
quarter of 2022. Further adjustments to this estimate are likely, as a result of post-closing true-up and validation processes contained in
the sale agreement. See Note 15 – Acquisitions and Dispositions for additional information.

SOUTHWEST GAS HOLDINGS, INC. | 49

Held for Sale

The Company and Southwest recognize the assets and liabilities of a disposal group as held for sale in the period (i) they have approved
and committed to a plan to sell the disposal group, (ii) the disposal group is available for immediate sale in its present condition, (iii) an
active program to locate a buyer and other actions to sell the disposal group have been initiated, (iv) it is unlikely that significant changes
to the plan will be made or that the plan will be withdrawn. The disposal group that is classified as held for sale is initially measured at the
lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in
which the held for sale criteria are met. Upon designation as held for sale, the Company stops recording depreciation expense and
assesses the fair value of the disposal group less any costs to sell at each reporting period and until it is no longer classified as held for
sale.

In December 2022, the Company entered into a definitive agreement to sell 100% of MountainWest in an all-cash transaction to
Williams for $1.5 billion in total enterprise value, subject to certain adjustments, which closed on February 14, 2023. In addition to the
loss attributable to goodwill impairment, as noted above, the Company recognized an additional loss of $5.8 million related to estimated
costs to sell. We use judgment to estimate such costs to sell, including consulting with external advisors and attorneys and considering
the level of such costs in prior transactions. See Note 15 – Acquisitions and Dispositions for additional information.

Business Combinations

In accordance with U.S. GAAP, the assets acquired and liabilities assumed in an acquired business are recorded at their estimated fair
values on the date of acquisition. The amount of goodwill initially recognized in a business combination is based on the excess of the
purchase price of the acquired company over the fair value of the other assets acquired and liabilities assumed. The determination of
these fair values requires management to make significant estimates and assumptions. For example, assumptions with respect to the
timing and amount of future revenues and expenses associated with an asset are used to determine its fair value, but the actual timing
and amount may differ materially, resulting in impairment of the asset’s recorded value. In some cases, the Company engages
independent third-party valuation firms to assist in determining the fair values of acquired assets and liabilities assumed. Critical
assumptions used to value the trade name and customer relationship intangibles include, but are not limited to, future expected cash
flows of the acquired business, trademarks, trade names, customer relationships, technology obsolescence, attrition rates, royalty rates,
and discount rates. In addition, uncertain tax positions and tax-related valuation allowances assumed in connection with a business
combination are initially estimated at the acquisition date. These items are reevaluated quarterly, based upon facts and circumstances
that existed at the acquisition date with any adjustments to the preliminary estimates being recorded to goodwill, provided that the
Company is within the twelve-month measurement period allowed by authoritative guidance. Subsequent to the measurement period or
the final determination of the estimated value of the tax allowance or contingency, whichever comes first, changes to these uncertain tax
positions and tax-related valuation allowances will affect the provision for income taxes in the Consolidated Statements of Income, and
could have a material impact on the Company’s results of operations and financial position. Refer to Note 15 – Acquisitions and
Dispositions.

Certifications

The SEC requires the filing of certifications of the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of registrants
regarding reporting accuracy, disclosure controls and procedures, and internal control over financial reporting as exhibits to periodic
filings. The CEO and CFO certifications for the period ended December 31, 2022 are included as exhibits to the 2022 Annual Report on
Form 10-K filed with the SEC.

Forward-Looking Statements

This annual report contains contains statements which constitute “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995 (“Reform Act”). All statements other than statements of historical fact included or incorporated
by reference in this annual report are forward-looking statements, including, without limitation, statements regarding the Company’s
plans, objectives, goals, intentions, projections, strategies, future events or performance, negotiations, and underlying assumptions. The
words “may,” “if,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “continue,” “forecast,”
“intend,” “endeavor,” “promote,” “seek,” and similar words and expressions are generally used and intended to identify forward-looking
statements. For example, statements regarding plans to refinance near-term maturities, to spin-off Centuri from the Company, those
regarding operating margin patterns, customer growth, the composition of our customer base, price volatility, seasonal patterns, the
ability to pay debt, the Company’s COLI strategy, the magnitude of future acquisition or divestiture purchase price true-ups and related
impairments or losses related thereto, replacement market and new construction market, impacts from pandemics, including on our
employees, customers, business, financial position, earnings, bad debt expense, work deployment and related uncertainties, expected
impacts of valuation adjustments associated with any redeemable noncontrolling interests, the profitability of storm work, mix of work,
or absorption of fixed costs by larger infrastructure services customers including Southwest, the impacts of U.S. tax reform including
disposition in any regulatory proceeding and bonus depreciation tax deductions, the impact of recent PHMSA rulemaking, the amounts
and timing for completion of estimated future construction expenditures, plans to pursue infrastructure programs or programs under
SB151 legislation, forecasted operating cash flows and results of operations, net earnings impacts or recovery of costs from gas

50 | SOUTHWEST GAS HOLDINGS, INC.

infrastructure replacement and COYL programs and surcharges, funding sources of cash requirements, amounts generally expected to
be reflected in future period revenues from regulatory rate proceedings including amounts requested or settled from recent and ongoing
general rate cases or other regulatory proceedings, rates and surcharges, PGA administration, recovery and timing, and other rate
adjustments, sufficiency of working capital and current credit facilities or the ability to cure negative working capital balances, bank
lending practices, the Company’s views regarding its liquidity position, ability to raise funds and receive external financing capacity and
the intent and ability to issue various financing instruments and stock under the existing at-the-market equity program or otherwise, if
necessary, future dividends or increases and the Board’s current target dividend payout ratio, pension and postretirement benefits,
certain impacts of tax acts, the effect of any other rate changes or regulatory proceedings, contract or construction change order
negotiations, impacts of accounting standard updates, statements regarding future gas prices, gas purchase contracts and pipeline
imbalance charges or claims related thereto, recoverability of regulatory assets, the impact of certain legal proceedings or claims, and
the timing and results of future rate hearings, including any ongoing or future general rate cases and other proceedings, and statements
regarding pending approvals are forward-looking statements. All forward-looking statements are intended to be subject to the safe
harbor protection provided by the Reform Act.

A number of important factors affecting the business and financial results of the Company could cause actual results to differ materially
from those stated in the forward-looking statements. These factors include, but are not limited to, customer growth rates, conditions in
the housing market, inflation, interest rates and related government actions, sufficiency of labor markets and ability to timely hire
qualified employees or similar resources, acquisition and divestiture decisions including prices paid or received and their impacts to
impairments, write-downs, or losses generally, the impacts of pandemics including that which may result from a restriction by
government officials or otherwise, including impacts on employment in our territories, the health impacts to our customers and
employees, the ability to collect on customer accounts due to the suspension or lifted moratorium on late fees or service disconnection in
any or all jurisdictions, the ability to obtain regulatory recovery of related costs, the ability of the infrastructure services business to
conduct work and the impact of a delay or termination of work, and decisions of Centuri customers (including Southwest) as to whether
to pursue capital projects due to economic impacts resulting from a pandemic or otherwise, the ability to recover and timing thereof
related to costs associated with the PGA mechanisms or other regulatory assets or programs, the effects of regulation/deregulation,
governmental or regulatory policy regarding pipeline safety, greenhouse gas emissions, natural gas, including potential prohibitions on
the use of natural gas appliances, or alternative energy, the regulatory support for ongoing infrastructure programs or expansions, the
timing and amount of rate relief, the timing and methods determined by regulators to refund amounts to customers resulting from U.S.
tax reform, changes in rate design, variability in volume of gas or transportation and storage service sold to customers, changes in gas
procurement practices, changes in capital requirements and funding, the impact of credit rating actions and conditions in the capital
markets on financing costs, the impact of variable rate indebtedness associated with a discontinuance of LIBOR including in relation to
amounts of indebtedness then outstanding, changes in construction expenditures and financing, levels of or changes in operations and
maintenance expenses, effects of pension or other postretirement benefit expense forecasts or plan modifications, accounting changes
and regulatory treatment related thereto, currently unresolved and future liability claims and disputes, changes in pipeline capacity for
the transportation of gas and related costs, results of Centuri bid work, the impact of weather on Centuri’s operations, projections about
acquired business’ earnings, or those that may be planned, future acquisition-related costs, differences between actual experience and
projections in costs to integrate or stand up portions of newly acquired business operations, impacts of changes in the value of any
redeemable noncontrolling interests if at other than fair value, Centuri utility infrastructure expenses, differences between actual and
originally expected outcomes of Centuri bid or other fixed-price construction agreements, outcomes from contract and change order
negotiations, ability to successfully procure new work and impacts from work awarded or failing to be awarded from significant
customers (collectively, including from Southwest), the mix of work awarded, the amount of work awarded to Centuri following work
stoppages or reduction, the result of productivity inefficiencies from regulatory requirements, customer supply chain challenges, or
otherwise, delays in commissioning individual projects, acquisitions and management’s plans related thereto, the ability of management
to successfully finance, close, and assimilate any acquired businesses, the timing and ability of management to successfully separate
Centuri from the Company, the impact on our stock price or our credit ratings due to undertaking or failing to undertake acquisition or
divestiture activities or other strategic endeavors, the impact on our stock price, costs, actions or disruptions or continuation thereof
related to significant stockholders and their activism, competition, our ability to raise capital in external financings, our ability to
continue to remain within the ratios and other limits subject to our debt covenants, and ongoing evaluations in regard to goodwill and
other intangible assets. In addition, the Company can provide no assurance that its discussions regarding certain trends or plans relating
to its financing and operating expenses will continue, proceed as planned, cease to continue, or fail to be alleviated, in future periods. For
additional information on the risks associated with the Company’s business, see Item 1A. Risk Factors and Item 7A. Quantitative and
Qualitative Disclosures About Market Risk in this Annual Report on Form 10-K for the year ended December 31, 2022.

All forward-looking statements in this annual report are made as of the date hereof, based on information available to the Company and
Southwest as of the date hereof, and the Company and Southwest assume no obligation to update or revise any of their forward-looking
statements even if experience or future changes show that the indicated results or events will not be realized. We caution you to not
rely unduly on any forward-looking statement(s).

SOUTHWEST GAS HOLDINGS, INC. | 51

Common Stock Price and Dividend Information

The principal market on which the common stock of the Company is traded is the New York Stock Exchange and the ticker symbol of the
stock is “SWX.” At February 15, 2023, there were 10,711 holders of record of common stock, and the market price of the common stock
was $64.98.

Dividends are payable on the Company’s common stock at the discretion of the Board of Directors (the “Board”). In setting the dividend
rate, the Board considers, among other factors, current and expected future earnings levels, our ongoing capital expenditure plans and
expected external funding needs, our payout ratio, and our ability to maintain credit ratings and liquidity. The quarterly common stock
dividend declared was $0.57 per share throughout 2020, $0.60 per share throughout 2021, and $0.62 per share throughout 2022. The
Company has paid dividends on its common stock since 1956. In February 2023, the Board determined to keep the quarterly dividend at
$0.62, effective with the June 2023 payment.

52 | SOUTHWEST GAS HOLDINGS, INC.

Southwest Gas Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets

(Thousands of dollars, except par value)

ASSETS
Regulated operations plant:

Gas plant
Less: accumulated depreciation
Construction work in progress

Net regulated operations plant

Other property and investments, net

Current assets:

Cash and cash equivalents
Accounts receivable, net of allowances
Accrued utility revenue
Income taxes receivable, net
Deferred purchased gas costs
Prepaid and other current assets
Current assets held for sale

Total current assets

Noncurrent assets:

Goodwill
Deferred income taxes
Deferred charges and other assets

Total noncurrent assets

Total assets

December 31,

2022

2021

$ 9,453,907 $10,789,690
(3,397,736)
202,068

(2,674,157)
244,750

7,024,500

7,594,022

1,281,172

1,316,479

123,078
866,246
88,100
8,738
450,120
433,850
1,737,530

222,697
707,127
84,900
16,816
291,145
292,082
—

3,707,662

1,614,767

787,250
82
395,948

1,781,332
121
458,536

1,183,280

2,239,989

$13,196,614 $12,765,257

SOUTHWEST GAS HOLDINGS, INC. | 53

December 31,

2022

2021

68,749 $

2,287,183
(44,242)
747,069

62,052
1,824,216
(46,761)
1,114,313

3,058,759

2,953,820

159,349
4,403,299

196,717
4,115,684

7,621,407

7,266,221

44,557
1,542,806
662,090
51,182
2,690
67,094
38,556
—
369,743
644,245

297,324
1,909,000
353,365
59,327
6,734
53,473
30,964
5,736
396,126
—

3,422,963

3,112,049

682,067
445,000
1,025,177

768,868
480,583
1,137,536

2,152,244

2,386,987

$13,196,614 $12,765,257

(Thousands of dollars, except par value)

CAPITALIZATION AND LIABILITIES
Capitalization:

Common stock, $1 par (authorized – 120,000,000 shares; issued and outstanding – 67,119,143 and

60,422,081 shares)
Additional paid-in capital
Accumulated other comprehensive loss, net
Retained earnings

Total Southwest Gas Holdings, Inc. equity

Redeemable noncontrolling interests
Long-term debt, less current maturities

Total capitalization

Commitments and contingencies (Note 10)
Current liabilities:

Current maturities of long-term debt
Short-term debt
Accounts payable
Customer deposits
Income taxes payable, net
Accrued general taxes
Accrued interest
Deferred purchased gas costs
Other current liabilities
Current liabilities held for sale

Total current liabilities

Deferred income taxes and other credits:

Deferred income taxes and investment tax credits, net
Accumulated removal costs
Other deferred credits and other long-term liabilities

Total deferred income taxes and other credits

Total capitalization and liabilities

The accompanying notes are an integral part of these statements.

54 | SOUTHWEST GAS HOLDINGS, INC.

Southwest Gas Holdings, Inc. and Subsidiaries
Consolidated Statements of Income

(In thousands, except per share amounts)

Operating revenues:

Regulated operations revenues
Utility infrastructure services revenues

Total operating revenues

Operating expenses:
Net cost of gas sold
Operations and maintenance
Depreciation and amortization
Taxes other than income taxes
Utility infrastructure services expenses
Goodwill impairment and cost to sell

Total operating expenses

Operating income (loss)

Other income and (expenses):
Net interest deductions
Other income (deductions)

Total other income and (expenses)

Income (loss) before income taxes
Income tax expense (benefit)

Net income (loss)

Net income attributable to noncontrolling interests

Year Ended December 31,

2022

2021

2020

$2,199,682 $1,521,790 $1,350,585
1,948,288
2,158,661

2,760,327

4,960,009

3,680,451

3,298,873

799,060
636,766
470,455
93,383
2,529,318
455,425

430,907
473,146
371,041
80,343
1,955,467
—

342,837
408,116
332,027
63,460
1,729,429
—

4,984,407

3,310,904

2,875,869

(24,398)

369,547

423,004

(242,750)
(6,189)

(119,198)
(3,499)

(111,477)
(6,789)

(248,939)

(122,697)

(118,266)

(273,337)
(75,653)

(197,684)
5,606

246,850
39,648

207,202
6,423

304,738
65,753

238,985
6,661

Net income (loss) attributable to Southwest Gas Holdings, Inc.

$ (203,290) $ 200,779 $ 232,324

Earnings (loss) per share:

Basic

Diluted

Weighted average shares:

Basic
Diluted

(3.10) $

3.39 $

(3.10) $

3.39 $

4.15

4.14

65,558
65,558

59,145
59,259

55,998
56,076

The accompanying notes are an integral part of these statements.

SOUTHWEST GAS HOLDINGS, INC. | 55

Southwest Gas Holdings, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income

(Thousands of dollars)

Net income (loss)

Other comprehensive income (loss), net of tax

Defined benefit pension plans:

Net actuarial gain (loss)
Amortization of prior service cost
Amortization of net actuarial loss
Regulatory adjustment

Net defined benefit pension plans

Forward-starting interest rate swaps (“FSIRS”):

Amounts reclassified into net income

Net forward-starting interest rate swaps

Foreign currency translation adjustments

Total other comprehensive income (loss), net of tax

Comprehensive income (loss)

Comprehensive income attributable to noncontrolling interests

Comprehensive income (loss) attributable to Southwest Gas Holdings, Inc.

The accompanying notes are an integral part of these statements.

Year Ended December 31,

2022

2021

2020

$(197,684) $207,202 $238,985

3,099
133
26,461
(21,457)

44,974
729
33,894
(67,027)

(43,730)
878
28,751
5,650

8,236

12,570

(8,451)

416

(6,133)

1,652

2,467

1,713

2,519

14,242

(4,271)

(195,165)
5,606

221,444
6,423

234,714
6,661

$(200,771) $215,021 $228,053

56 | SOUTHWEST GAS HOLDINGS, INC.

Southwest Gas Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows

(Thousands of dollars)

CASH FLOW FROM OPERATING ACTIVITIES:

Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization
Impairment of assets and other charges
Deferred income taxes
Gains on sale of property and equipment
Changes in undistributed stock compensation
Equity AFUDC
Changes in current assets and liabilities:

Accounts receivable, net of allowances
Accrued utility revenue
Deferred purchased gas costs
Accounts payable
Accrued taxes
Other current assets and liabilities
Changes in deferred charges and other assets
Changes in other liabilities and deferred credits

Net cash provided by operating activities

CASH FLOW FROM INVESTING ACTIVITIES:

Construction expenditures and property additions
Acquisition of businesses, net of cash acquired
Changes in customer advances
Other

Net cash used in investing activities

CASH FLOW FROM FINANCING ACTIVITIES:

Issuance of common stock, net
Dividends paid
Centuri distribution to redeemable noncontrolling interest
Issuance of long-term debt, net
Retirement of long-term debt
Change in credit facility and commercial paper
Change in short-term debt
Issuance of short-term debt
Withholding remittance – share-based compensation
Other, including principal payments on finance leases

Net cash provided by financing activities

Effects of currency translation on cash and cash equivalents

Change in cash and cash equivalents
Change in cash and cash equivalents included in current assets held for sale
Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

SUPPLEMENTAL INFORMATION:

Interest paid, net of amounts capitalized

Income taxes paid (received), net

Year Ended December 31,

2022

2021

2020

$ (197,684) $ 207,202 $ 238,985

470,455
455,425
(72,048)
(7,865)
9,446
(465)

(193,775)
(3,200)
(147,215)
293,909
17,929
(207,853)
16,886
(26,485)

371,041
—
61,212
(6,906)
9,294
—

(51,554)
(2,500)
(343,728)
50,426
(6,725)
(89,209)
(13,541)
(73,629)

332,027
—
50,717
(1,848)
7,114
(4,724)

(48,772)
(3,300)
36,239
(7,694)
15,171
107,427
(32,591)
(62,671)

407,460

111,383

626,080

(859,421)
(18,809)
21,506
17,822

(715,626)
(2,354,260)
15,974
18,256

(825,105)
—
14,033
9,003

(838,902)

(3,035,656)

(802,069)

461,828
(160,563)
(39,649)
1,067,805
(499,914)
(80,000)
(366,193)
—
(2,662)
(24,172)

213,641
(138,222)
—
1,660,696
(452,664)
(20,000)
(48,000)
1,850,000
(1,264)
(729)

139,245
(125,504)
—
662,377
(356,406)
—
(104,000)
—
(2,736)
(3,402)

356,480

3,063,458

209,574

(854)

160

228

(75,816)
(23,803)
222,697

139,345
—
83,352

33,813
—
49,539

$ 123,078 $ 222,697 $ 83,352

$ 219,825 $ 104,352 $ 105,182

12,001 $

4,208 $ (10,951)

The accompanying notes are an integral part of these statements.

SOUTHWEST GAS HOLDINGS, INC. | 57

Southwest Gas Holdings, Inc. and Subsidiaries
Consolidated Statements of Equity

(In thousands, except per share amounts)

Common stock shares
Beginning balances

Common stock issuances

Ending balances

Common stock amount
Beginning balances

Common stock issuances

Ending balances

Additional paid-in capital
Beginning balances

Common stock issuances
Promissory notes in association with redeemable noncontrolling interest

Ending balances

Accumulated other comprehensive loss

Beginning balances

Foreign currency exchange translation adjustment
Net actuarial gain (loss) arising during period, less amortization of unamortized benefit plan cost, net of

tax

FSIRS amounts reclassified to net income, net of tax

Ending balances

Retained earnings

Beginning balances
Net income (loss)
Redemption value adjustments
Dividends declared

Ending balances

Total equity ending balances

Dividends declared per common share

Year Ended December 31,

2022

2021

2020

60,422
6,697

67,119

57,193
3,229

60,422

62,052 $

58,823 $

6,697

3,229

68,749

62,052

55,007
2,186

57,193

56,637
2,186

58,823

1,824,216
462,967
—

1,609,155
219,298
(4,237)

1,466,937
142,218
—

2,287,183

1,824,216

1,609,155

(46,761)
(6,133)

(61,003)
20

(56,732)
1,713

8,236
416

12,570
1,652

(8,451)
2,467

(44,242)

(46,761)

(61,003)

1,114,313
(203,290)
3,325
(167,279)

1,067,978
200,779
(12,016)
(142,428)

1,039,072
232,324
(74,513)
(128,905)

747,069

1,114,313

1,067,978

$3,058,759 $2,953,820 $2,674,953

2.48 $

2.38 $

2.28

The accompanying notes are an integral part of these statements.

58 | SOUTHWEST GAS HOLDINGS, INC.

Southwest Gas Corporation and Subsidiaries
Consolidated Balance Sheets

(Thousands of dollars)

ASSETS
Regulated operations plant:

Gas plant
Less: accumulated depreciation
Construction work in progress

Net regulated operations plant

Other property and investments, net

Current assets:

Cash and cash equivalents
Accounts receivable, net of allowance
Accrued utility revenue
Income taxes receivable, net
Deferred purchased gas costs
Receivable from parent
Prepaid and other current assets

Total current assets

Noncurrent assets:

Goodwill
Deferred charges and other assets

Total noncurrent assets

Total assets

December 31,

2022

2021

$ 9,453,907 $ 8,901,575
(2,538,508)
183,485

(2,674,157)
244,750

7,024,500

6,546,552

169,397

153,093

51,823
234,081
88,100
103
450,120
2,130
401,789

38,691
169,666
84,900
7,826
291,145
1,031
242,243

1,228,146

835,502

11,155
370,483

10,095
405,021

381,638

415,116

$ 8,803,681 $ 7,950,263

SOUTHWEST GAS HOLDINGS, INC. | 59

December 31,

2022

2021

49,112 $

1,622,969
(38,261)
935,355

49,112
1,618,911
(46,913)
906,827

2,569,175
3,251,296

2,527,937
2,440,603

5,820,471

4,968,540

—
225,000
497,046
51,182
67,094
29,569
150,817

275,000
250,000
234,070
56,127
53,064
22,926
146,422

1,020,708

1,037,609

683,948
445,000
833,554

638,828
424,000
881,286

1,962,502

1,944,114

$8,803,681 $7,950,263

(Thousands of dollars)

CAPITALIZATION AND LIABILITIES
Capitalization:

Common stock
Additional paid-in capital
Accumulated other comprehensive loss, net
Retained earnings

Total equity

Long-term debt, less current maturities

Total capitalization

Commitments and contingencies (Note 10)
Current liabilities:

Current maturities of long-term debt
Short-term debt
Accounts payable
Customer deposits
Accrued general taxes
Accrued interest
Other current liabilities

Total current liabilities

Deferred income taxes and other credits:

Deferred income taxes and investment tax credits, net
Accumulated removal costs
Other deferred credits and other long-term liabilities

Total deferred income taxes and other credits

Total capitalization and liabilities

The accompanying notes are an integral part of these statements.

60 | SOUTHWEST GAS HOLDINGS, INC.

Southwest Gas Corporation and Subsidiaries
Consolidated Statements of Income

(Thousands of dollars)

Regulated operations revenues

Operating expenses:
Net cost of gas sold
Operations and maintenance
Depreciation and amortization
Taxes other than income taxes

Total operating expenses

Operating income

Other income and (expenses):
Net interest deductions
Other income (deductions)

Total other income and (expenses)

Income before income taxes
Income tax expense

Net income

Year Ended December 31,

2022

2021

2020

$1,935,069 $1,521,790 $1,350,585

789,216
491,928
263,043
83,197

430,907
438,550
253,398
80,343

342,837
406,382
235,295
63,460

1,627,384

1,203,198

1,047,974

307,685

318,592

302,611

(115,880)
(6,884)

(97,560)
(4,559)

(101,148)
(6,590)

(122,764)

(102,119)

(107,738)

184,921
30,541

216,473
29,338

194,873
35,755

$ 154,380 $ 187,135 $ 159,118

The accompanying notes are an integral part of these statements.

SOUTHWEST GAS HOLDINGS, INC. | 61

Southwest Gas Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income

(Thousands of dollars)

Net income

Other comprehensive income (loss), net of tax

Defined benefit pension plans:

Net actuarial gain (loss)
Amortization of prior service cost
Amortization of net actuarial loss
Regulatory adjustment

Net defined benefit pension plans

Forward-starting interest rate swaps (“FSIRS”):

Amounts reclassified into net income

Net forward-starting interest rate swaps

Total other comprehensive income (loss), net of tax

Comprehensive income

Year Ended December 31,

2022

2021

2020

$154,380 $187,135 $159,118

3,099
133
26,461
(21,457)

44,974
729
33,894
(67,027)

(43,730)
878
28,751
5,650

8,236

12,570

(8,451)

416

1,652

2,467

8,652

14,222

(5,984)

$163,032 $201,357 $153,134

The accompanying notes are an integral part of these statements.

62 | SOUTHWEST GAS HOLDINGS, INC.

Southwest Gas Corporation and Subsidiaries
Consolidated Statements of Cash Flows

(Thousands of dollars)

CASH FLOW FROM OPERATING ACTIVITIES:

Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Deferred income taxes
Gain on sale of property
Changes in undistributed stock compensation
Equity AFUDC
Changes in current assets and liabilities:
Accounts receivable, net of allowances
Accrued utility revenue
Deferred purchased gas costs
Accounts payable
Accrued taxes
Other current assets and liabilities

Changes in deferred charges and other assets
Changes in other liabilities and deferred credits

Net cash provided by operating activities

CASH FLOW FROM INVESTING ACTIVITIES:

Construction expenditures and property additions
Changes in customer advances
Other

Net cash used in investing activities

CASH FLOW FROM FINANCING ACTIVITIES:

Contributions from parent
Dividends paid
Issuance of long-term debt, net
Retirement of long-term debt
Change in credit facility and commercial paper
Change in short-term debt
Withholding remittance – share-based compensation
Other

Net cash provided by financing activities

Change in cash and cash equivalents
Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

SUPPLEMENTAL INFORMATION:

Interest paid, net of amounts capitalized

Income taxes paid (received), net

The accompanying notes are an integral part of these statements.

Year Ended December 31,

2022

2021

2020

$ 154,380 $ 187,135 $ 159,118

263,043
42,387
(1,503)
5,776
—

(64,414)
(3,200)
(158,975)
243,276
21,754
(188,737)
(1,694)
(27,690)

253,398
53,237
—
6,392
—

(22,806)
(2,500)
(343,728)
57,764
7,753
(70,271)
(28,743)
(72,386)

235,295
44,997
—
5,294
(4,724)

3,933
(3,300)
36,239
9,618
(1,527)
48,545
(44,291)
(65,136)

284,403

25,245

424,061

(683,131)
21,506
6,917

(601,983)
15,973
(32)

(692,216)
14,033
771

(654,708)

(586,042)

(677,412)

—
(122,200)
891,663
(275,000)
(80,000)
(25,000)
(2,569)
(3,457)

202,583
(111,400)
297,318
—
(20,000)
193,000
(1,263)
(1,820)

177,922
(104,500)
446,508
(125,000)
—
(137,000)
(2,736)
(1,262)

383,437

558,418

253,932

13,132
38,691

(2,379)
41,070

581
40,489

$ 51,823 $ 38,691 $ 41,070

$ 107,980 $ 90,240 $ 96,726

5 $ (13,529) $ (19,603)

SOUTHWEST GAS HOLDINGS, INC. | 63

Southwest Gas Corporation and Subsidiaries
Consolidated Statements of Equity

(In thousands)

Common stock shares

Beginning and ending balances

Common stock amount

Beginning and ending balances

Additional paid-in capital
Beginning balances

Share-based compensation
Contributions from Southwest Gas Holdings, Inc.

Ending balances

Accumulated other comprehensive loss

Beginning balances

Net actuarial gain (loss) arising during period, less amortization of unamortized benefit plan cost, net of

tax

FSIRS amounts reclassified to net income, net of tax

Ending balances

Retained earnings

Beginning balances

Net income
Share-based compensation
Dividends declared to Southwest Gas Holdings, Inc.

Ending balances

Total Southwest Gas Corporation equity ending balances

Year Ended December 31,

2022

2021

2020

47,482

49,112 $

49,112

1,618,911
4,058
—

1,410,345
5,983
202,583

1,229,083
3,340
177,922

1,622,969

1,618,911

1,410,345

(46,913)

(61,135)

(55,151)

8,236
416

12,570
1,652

(8,451)
2,467

(38,261)

(46,913)

(61,135)

906,827
154,380
(852)
(125,000)

835,146
187,135
(854)
(114,600)

782,108
159,118
(780)
(105,300)

935,355

906,827

835,146

$2,569,175 $2,527,937 $2,233,468

The accompanying notes are an integral part of these statements.

64 | SOUTHWEST GAS HOLDINGS, INC.

Note 1 – Background, Organization, and Summary of Significant Accounting Policies

Nature of Operations. This is a combined annual report of Southwest Gas Holdings, Inc. and its subsidiaries (the “Company”) and
Southwest Gas Corporation and its subsidiaries (“Southwest” or the “natural gas distribution” segment). The notes to the consolidated
financial statements apply to both entities. Southwest Gas Holdings, Inc., a Delaware corporation, is a holding company, owning all of the
shares of common stock of Southwest, all of the shares of common stock of Centuri Group, Inc. (“Centuri” or the “utility infrastructure
services” segment), and until February 14, 2023, all of the shares of common stock of MountainWest Pipelines Holding Company
(“MountainWest” or the “pipeline and storage” segment).

In December 2022, the Company announced that its Board of Directors (the “Board”) unanimously determined to take strategic actions
to simplify the Company’s portfolio of businesses. These actions included entering into a definitive agreement to sell 100% of
MountainWest in an all-cash transaction to Williams Partners Operating LLC (“Williams”) for $1.5 billion in total enterprise value,
subject to certain adjustments. Additionally, the Company determined it will pursue a spin-off of Centuri (the “Centuri spin-off”), to form
a new independent publicly traded utility infrastructure services company. The MountainWest transaction closed on February 14, 2023,
following the expiration of an applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The Centuri
spin-off is expected to be completed in the fourth quarter of 2023 or the first quarter of 2024 and to be tax free to the Company and its
stockholders for U.S. federal income tax purposes. The Centuri spin-off will be subject to, among other things, finalizing the transaction
structure, final approval by the Board, approval by the Arizona Corporation Commission, the receipt of a favorable Internal Revenue
Service private letter ruling relating to the tax-free nature of the transaction, and the effectiveness of a registration statement that will
be filed with the U.S. Securities and Exchange Commission. Upon classifying the pipeline and storage segment disposal group as held for
sale, the Company recorded a loss, composed of a goodwill impairment loss of $449.6 million, plus an additional loss of approximately
$5.8 million for estimated costs to sell, in the fourth quarter of 2022. The Company elected to not reclassify MountainWest’s assets and
liabilities as held for sale as of December 31, 2021; therefore, balance sheet information as of December 31, 2021 in the accompanying
notes to financial statements has not been adjusted. See Note 15 – Acquisitions and Dispositions for additional information.

Southwest is engaged in the business of purchasing, distributing, and transporting natural gas for customers in portions of Arizona,
Nevada, and California. Public utility rates, practices, facilities, and service territories of Southwest are subject to regulatory oversight.
The timing and amount of rate relief can materially impact results of operations. Natural gas purchases and the timing of related
recoveries can materially impact liquidity. Results for the natural gas distribution segment are higher during winter periods due to the
seasonality incorporated in its regulatory rate structures.

Centuri is a strategic utility infrastructure services company dedicated to partnering with North America’s gas and electric providers to
build and maintain the energy network that powers millions of homes across the United States (“U.S.”) and Canada. Centuri derives
revenue primarily from installation, replacement, repair, and maintenance of energy networks. Centuri operates in the U.S. primarily as
NPL Construction Co. (“NPL”), New England Utility Constructors, Inc. (“Neuco”), Linetec Services, LLC (“Linetec”), and Riggs Distler &
Company, Inc. (“Riggs Distler”), and in Canada, primarily as NPL Canada Ltd. (“NPL Canada”). Utility infrastructure services activity is
seasonal in many of Centuri’s operating areas. Peak periods are the summer and fall months in colder climate areas, such as the
northeastern and midwestern U.S. and in Canada. In warmer climate areas, such as the southwestern and southeastern U.S., utility
infrastructure services activity continues year round.

MountainWest includes MountainWest Pipeline, LLC, along with its subsidiary, MountainWest Overthrust Pipeline, LLC, and an equity
interest in White River Hub, LLC, which is not consolidated, along with non-regulated businesses providing analytical and measurement
services, and natural gas gathering.

On May 6, 2022, the Company entered into a Cooperation Agreement (the “Cooperation Agreement”) with Carl C. Icahn and the persons
and entities referenced therein (collectively, the “Icahn Group”). In accordance with the Cooperation Agreement, among other things,
John P. Hester, then President and Chief Executive Officer of the Company and Southwest, retired from his positions with the Company
and Southwest and resigned from the Board. Karen S. Haller, the Company’s former Executive Vice President/Chief Legal and
Administrative Officer, was appointed President and Chief Executive Officer of the Company and Chief Executive Officer of Southwest,
and was appointed as a member of the Board effective immediately following the completion of the Company’s 2022 annual meeting of
stockholders. Justin L. Brown, formerly Southwest’s Senior Vice President/General Counsel, was appointed as President of Southwest.

In addition, pursuant to the Cooperation Agreement, as modified by a letter agreement, dated as of August 3, 2022 (the “Letter
Agreement” and together with the Cooperation Agreement, the “Initial Cooperation Agreement”) by and between the Company and the
Icahn Group, the Icahn Group has the ability to designate up to four directors to the Board (collectively, the “Icahn Designees”), subject
to certain ownership thresholds. As of the date of this Annual Report on 10-K, the Icahn Designees are Andrew W. Evans, Henry P.
Linginfelter, Ruby Sharma, and Andrew J. Teno.

The Initial Cooperation Agreement required the Board to expand the Strategic Transactions Committee from three directors to
six directors, comprised of the existing members of the Strategic Transactions Committee in addition to the three Initial Icahn Designees.
As long as the Icahn Group has the ability to designate at least three members of the Board, three of such individuals are to be included
on the Strategic Transactions Committee. If the Icahn Group may only designate two members of the Board, then both would serve on
the Strategic Transactions Committee.

SOUTHWEST GAS HOLDINGS, INC. | 65

On May 9, 2022, the Company also entered into Amendment No. 1 to the Rights Agreement dated October 10, 2021 (the “Original
Rights Agreement” and as amended, the “Amended Rights Agreement”), to increase the triggering percentage from 10% to 24.9%
pursuant to the terms of the Initial Cooperation Agreement and permit the subsequent consummation of the Offer. The Amended Rights
Agreement expired on October 9, 2022. The Company filed a Certificate of Elimination with the Secretary of State of the State of
Delaware on January 13, 2023, eliminating from the Company’s Certificate of Incorporation the Certificate of Designation of Series A
Junior Participating Preferred Stock filed on October 10, 2022, and the associated Preferred Stock Purchase Rights were deregistered
by the SEC and delisted by the New York Stock Exchange on the same day.

An earlier civil suit (initiated in November 2021) by Icahn entities against the Company and certain directors and officers of the
Company was subject to a stipulation of dismissal as part of the Initial Cooperation Agreement, which also provided for the
reimbursement by the Company of certain out-of-pocket third-party expenses, including certain legal fees, incurred by the Icahn Group.

On October 24, 2022, the Company and the Icahn Group entered into an Amended and Restated Cooperation Agreement (the
“Amended Cooperation Agreement”), which amended, restated, superseded, and replaced in its entirety the Initial Cooperation
Agreement. Among other things, the Amended Cooperation Agreement provides for the nomination of the Icahn Designees for election
at the Company’s 2023 annual meeting of stockholders (the “2023 Annual Meeting”), the extension of the standstill restrictions on the
Icahn Group through the 2023 Annual Meeting or the Company’s 2024 annual meeting of stockholders, subject to certain restrictions
and exceptions, and subject to certain ownership thresholds by the Icahn Group and the approval by the Strategic Transactions
Committee, certain aspects of the corporate structure and conduct of the first annual meeting of any independent, publicly traded
company resulting from a separation of the Company’s businesses.

Basis of Presentation. The Company follows accounting principles generally accepted in the United States (“U.S. GAAP”) in accounting for
all of its businesses. Unless specified otherwise, all amounts are in U.S. dollars. Accounting for regulated operations conforms with U.S.
GAAP as applied to rate-regulated companies and as prescribed by federal agencies and commissions of the various states in which the
rate-regulated companies operate. The preparation of financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

Consolidation. The accompanying financial statements (as of and for the periods presented) are presented on a consolidated basis for
Southwest Gas Holdings, Inc. and all subsidiaries and Southwest Gas Corporation and all subsidiaries (except those accounted for using
the equity method as discussed below). All significant intercompany balances and transactions have been eliminated with the exception
of transactions between Southwest and Centuri in accordance with accounting treatment for rate-regulated entities.

Centuri, through its subsidiaries, holds a 50% interest in W.S. Nicholls Western Construction Ltd. (“Western”), a Canadian infrastructure
services company that is a variable interest entity. Centuri determined that it is not the primary beneficiary of the entity due to a shared-
power structure; therefore, Centuri does not consolidate the entity and has recorded its investment, and results related thereto, using
the equity method. The investment in Western, related earnings, and dividends received from Western in 2022 and 2021 were not
significant. Centuri’s maximum exposure to loss as a result of its involvement with Western was estimated at $11.4 million as of
December 31, 2022.

MountainWest, through its subsidiaries, holds a 50% noncontrolling interest in MountainWest White River Hub, LLC, a FERC-regulated
transporter of natural gas with facilities that connect with six interstate pipeline systems and a major processing plant in Colorado. As
noted above, MountainWest does not consolidate the entity and has recorded its investment using the equity method. The investment in
White River Hub is approximately $25 million as of December 31, 2022 and the related proportional earnings and dividends in 2022
were not significant to the Company.

Fair Value Measurements. Certain assets and liabilities are reported at fair value, which is defined as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

U.S. GAAP states that a fair value measurement should be based on the assumptions that market participants would use in pricing the
asset or liability and establishes a fair value hierarchy that ranks the inputs used to measure fair value by their reliability. The hierarchy
gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to fair values derived from unobservable inputs (Level 3 measurements). Financial assets and liabilities are categorized in
their entirety based on the lowest level of input that is significant to the fair value measurement. The three levels of the fair value
hierarchy are as follows:

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities that a company has the ability to access at the
measurement date.

Level 2 – inputs other than quoted prices included within Level 1 that are observable for similar assets or liabilities, either directly or
indirectly.

Level 3 – unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable
inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the
measurement date.

66 | SOUTHWEST GAS HOLDINGS, INC.

The Company primarily used quoted market prices and other observable market pricing information (exclusive of any purchase
accounting adjustments) in valuing cash and cash equivalents, long-term debt outstanding, and assets of the qualified pension plan and
the postretirement benefits other than pensions required to be recorded and/or disclosed at fair value. The Company uses prices and
inputs that are current as of the measurement date, and recognizes transfers between levels at either the actual date of an event or a
change in circumstance that caused the transfer.

Net Regulated Operations Plant. Net regulated operations plant includes gas plant at original cost, less the accumulated provision for
depreciation and amortization, plus any unamortized balance of acquisition adjustments. Original cost generally includes contracted
services, material, payroll, and related costs such as taxes and certain benefits, general and administrative expenses, and an allowance
for funds used during construction, less contributions in aid of construction. Aligned with regulatory treatment, when plant is retired, the
cost of such plant, net of any salvage value, is charged to accumulated depreciation. See also Depreciation and Amortization below.

Other Property and Investments. Other property and investments on Southwest’s and the Company’s Consolidated Balance Sheets
includes:

(Thousands of dollars)

Net cash surrender value of COLI policies
Other property

Total Southwest Gas Corporation

Non-regulated property, equipment, and intangibles
Non-regulated accumulated provision for depreciation and amortization
Other property and investments

Total Southwest Gas Holdings, Inc.

December 31,

2022

2021

$ 136,245 $ 149,947
3,146

33,152

169,397
1,677,218
(596,518)
31,075

153,093
1,616,392
(512,343)
59,337

$1,281,172 $1,316,479

Included in the table above are the net cash surrender values of company-owned life insurance (“COLI”) policies. These life insurance
policies on members of management and other key employees are used by Southwest to indemnify itself against the loss of talent,
expertise, and knowledge, as well as to provide indirect funding for certain nonqualified benefit plans. The term non-regulated in regard
to assets and related balances in the table above is in reference to the non-rate regulated operations of Centuri, and to a more limited
extent, MountainWest as of year-end 2021. MountainWest is not reflected in the table above as of December 31, 2022, since the
balance has been reclassified as held for sale on the Company’s Consolidated Balance sheet as of that date. See Note 15 – Acquisitions
and Dispositions for additional information.

Intangible Assets. Intangible assets (other than goodwill) are amortized using the straight-line method to reflect the pattern of economic
benefits consumed over the estimated periods benefited. The recoverability of intangible assets is evaluated when events or
circumstances indicate that a revision of estimated useful lives is warranted or that an intangible asset may be impaired. These intangible
assets are included in Other property and investments on the Company’s Consolidated Balance Sheets. Centuri’s intangible assets (other
than goodwill) have finite lives and are associated with businesses previously acquired. The balances at December 31, 2022 and 2021,
respectively, were as follows:

(Thousands of dollars)

Customer relationships
Trade names and trademarks

Total

Customer relationships
Trade names and trademarks
Customer contracts backlog

Total

December 31, 2022

Gross Carrying
Amount

Accumulated
Amortization

Net Carrying
Amount

$391,758
79,277

$(63,509)
(12,278)

$328,249
66,999

$471,035

$(75,787)

$395,248

December 31, 2021

$393,834
79,650
4,500

$(42,886)
(7,093)
(1,500)

$350,948
72,557
3,000

$477,984

$(51,479)

$426,505

Amortization expense for the acquired intangible assets listed above for the years ended December 31, 2022, 2021, and 2020 was
$29.8 million, $17.3 million, and $10.8 million, respectively. The weighted-average amortization periods for customer relationships,
trade names and trademarks, and customer contracts backlog are 19 years, 15 years, and 1 year, respectively.

The estimated future amortization of the intangible assets for the next five years and thereafter is as follows:

SOUTHWEST GAS HOLDINGS, INC. | 67

(Thousands of dollars)

2023
2024
2025
2026
2027
Thereafter

Total

$ 26,690
26,690
26,678
26,455
26,088
262,647

$395,248

See Note 2 – Regulated Operations Plant and Leases for additional information regarding natural gas distribution intangible assets.

Cash and Cash Equivalents. For purposes of reporting consolidated cash flows, cash and cash equivalents include cash on hand and
financial instruments with original maturities of three months or less. Such investments are carried at cost, which approximates market
value. Cash and cash equivalents of the Company include $30 million of money market fund investments at December 31, 2022, and
$20 million at December 31, 2021. The money market fund investments for Southwest were $17.6 million at December 31, 2022 and
insignificant at December 31, 2021. These investments fall within Level 2 of the fair value hierarchy, due to the asset valuation methods
used by money market funds.

Noncash investing activities for the Company and Southwest include capital expenditures that were not yet paid as of year end, thereby
remaining in accounts payable, the amounts related to which increased by approximately $23.4 million and $19.7 million, for the
Company and Southwest, respectively during the year ended December 31, 2022, and $15.5 million and $13.9 million, for the Company
and Southwest, respectively, during the year ended December 31, 2021. Additionally for Southwest, noncash investing activities include
customer advances applied as contributions toward utility construction activity, such amounts were not significant for the periods
presented herein. Also, see Note 2 – Regulated Operations Plant and Leases for information related to right-of-use (“ROU”) assets
obtained in exchange for lease liabilities, which are noncash investing and financing activities. ROU assets and lease liabilities are also
subject to noncash impacts as a result of other factors, such as lease terminations and modifications.

Income Taxes. The asset and liability method of accounting is utilized for the recognition of income taxes. Under the asset and liability
method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
anticipated to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period
that includes the enactment date. For regulatory and financial reporting purposes, investment tax credits (“ITC”) related to gas utility
operations are deferred and amortized over the life of related fixed assets. As of December 31, 2022, the Company had cumulative book
earnings of approximately $79 million in its foreign jurisdiction. Management previously asserted and continues to assert that all the
earnings of Centuri’s Canadian subsidiaries will be permanently reinvested in Canada. As a result, no U.S. deferred income taxes have
been recorded related to cumulative foreign earnings.

The Financial Accounting Standards Board (the “FASB”) issued guidance to allow an accounting policy election of either (i) treating taxes
attributable to future taxable income related to Global Intangible Low-Taxed Income (“GILTI”) as a current period expense when
incurred or (ii) recognizing deferred taxes for temporary differences expected to reverse as GILTI in future years. The Company has
elected to treat GILTI as a current period cost when incurred and has considered the estimated 2022 GILTI impact to its 2022 tax
expense, which was immaterial.

Deferred Purchased Gas Costs. The various regulatory commissions have established procedures to enable the rate-regulated companies
to adjust billing rates for changes in the cost of natural gas purchased. The difference between the current cost of gas purchased and the
cost of gas recovered in billed rates is deferred. Generally, these deferred amounts are recovered or refunded within one year.

Prepaid and other current assets. Prepaid and other current assets for Southwest and the Company include, among other things, accrued
purchased gas costs of $207 million in 2022 and $52 million in 2021. Additionally, Southwest had gas pipe materials and operating
supplies of $77.3 million in 2022 and $62.9 million in 2021 (carried at weighted average cost). MountainWest’s materials and supplies
were immaterial in the 2021 period in which they were included in the balance of Prepaid and other current assets in regard to the
Company.

Held for sale. The Company and Southwest recognize the assets and liabilities of a disposal group as held for sale in the period (i) it has
approved and committed to a plan to sell the disposal group, (ii) the disposal group is available for immediate sale in its present condition,
(iii) an active program to locate a buyer and other actions to sell the disposal group have been initiated, (iv) it is unlikely that significant
changes to the plan will be made or that the plan will be withdrawn. The Company and Southwest initially measure a disposal group that
is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement
is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale of a disposal group
until closing. Upon designation as held for sale, the Company and Southwest stop recording depreciation expense and assess the fair
value of the disposal group less any costs to sell at each reporting period, until it is no longer classified as held for sale. See Note 15 –
Acquisitions and Dispositions for information related to the MountainWest assets and liabilities held for sale.

68 | SOUTHWEST GAS HOLDINGS, INC.

The Company and Southwest had earlier classified certain assets associated with its previous corporate headquarters as held for sale.
The sale was not completed and management determined that the assets no longer meet the criteria to be classified as held for sale. As a
result, the Company and Southwest reclassified approximately $27 million from Prepaid and other current assets to Other property and
investments on their respective Consolidated Balance Sheets during the fourth quarter of 2022. Southwest also received an updated
appraisal on these assets, and as a result, recorded a loss of $2.9 million in the fourth quarter of 2022.

Goodwill. As required by U.S. GAAP, goodwill is assessed for impairment annually, or more frequently, if circumstances indicate
impairment to the carrying value of goodwill may have occurred. The goodwill impairment analysis was conducted as of October 1st
using a qualitative assessment, as permitted by U.S. GAAP. Management of the Company and Southwest considered its reporting units
and segments, determining that they remained consistent between periods presented below, and that no change was necessary with
regard to the level at which goodwill is assessed for impairment. The acquisition of MountainWest resulted in a new reportable segment,
which was assessed for impairment beginning in 2022, and upon being classified as held for sale, an impairment was recognized, as
outlined below. The Company and Southwest determined that it is not more likely than not that the fair values of the Centuri and
Southwest reporting units were less than their carrying amounts in either 2022 or 2021, and therefore, no impairment was recorded in
either year in regard to these entities.

In regard to MountainWest, and the agreement to sell the equity interests to Williams, which was undertaken to simplify the Company’s
business overall and ultimately position it as a pure-play local distribution company, management considered the expected proceeds,
which were below the carrying value of the equity interests at that time; as such, a loss was recognized, recorded primarily as a goodwill
impairment of $449.6 million in the fourth quarter of 2022. See Note 15 – Acquisitions and Dispositions for additional information.
Additional losses are possible through the post-closing process for MountainWest, as customary final adjustments are made. There can
also be no assurances that future assessments of remaining goodwill on the Company’s and Southwest’s balance sheets will not result in
an impairment; various factors, including the planned spin-off of Centuri, or changes in economic conditions, governmental monetary
policies, interest rates, or others, on their own or in combination, could result in the fair value of the related reporting units being lower
than their carrying value.

Goodwill in the Natural Gas Distribution and Utility Infrastructure Services segments is included in their respective Consolidated
Balance Sheets as follows:

(Thousands of dollars)

Balance, December 31, 2020

Additional goodwill from Riggs Distler acquisition
Foreign currency translation adjustment

Balance, December 31, 2021

Additional goodwill from Graham County acquisition
Measurement-period adjustments from Riggs Distler acquisition
Foreign currency translation adjustment

Balance, December 31, 2022

Natural Gas
Distribution

Utility
Infrastructure
Services

$10,095
—
—

10,095
1,060
—
—

$335,089
449,501
468

785,058
—
(1,924)
(7,039)

Total
Company

$345,184
449,501
468

$795,153
1,060
(1,924)
(7,039)

$11,155

$776,095

$787,250

Goodwill related to the pipeline and storage segment, which as of December 31, 2021 was $986.2 million, is not reflected in the above
table as the balance has been reclassified as held for sale on the Company’s Consolidated Balance sheet as of December 31, 2022. See
Note 15 – Acquisitions and Dispositions for additional information.

Other Current Liabilities. Management recognizes in its balance sheets various liabilities that are expected to be settled through future
cash payment within the next twelve months, including certain regulatory mechanisms (refer to Note 5 – Regulatory Assets and
Liabilities), customary accrued expenses for employee compensation and benefits, declared but unpaid dividends, and miscellaneous
other accrued liabilities. Other current liabilities for the Company include $41.6 million and $36 million of dividends declared as of
December 31, 2022 and 2021, respectively.

Accumulated Removal Costs. Approved regulatory practices allow Southwest to include in depreciation expense a component intended to
recover removal costs associated with regulated operations plant retirements. In accordance with the Securities and Exchange
Commission (“SEC”) position on presentation of these amounts, management reclassifies estimated removal costs from Accumulated
depreciation to Accumulated removal costs within the liabilities section of the Consolidated Balance Sheets. Management regularly
updates the estimated accumulated removal costs as amounts fluctuate between periods depending on the level of replacement work
performed (and actual cost experience) compared to the estimated cost of removal in rates.

Gas Operating Revenues. Southwest recognizes revenue when it satisfies its performance by transferring gas to the customer. Natural gas
is delivered and “consumed” by the customer simultaneously. Revenues are recorded when customers are billed. Customer billings are
substantially based on monthly meter reads and include certain other charges assessed monthly, and are calculated in accordance with
applicable tariffs and state and local laws, regulations, and related agreements. An estimate of the margin associated with natural gas
service provided, but not yet billed, to residential and commercial customers from the latest meter read date to the end of the reporting
period is also recognized as accrued utility revenue. Revenues also include the net impacts of margin tracker/decoupling accruals based
on criteria in U.S. GAAP for rate-regulated entities associated with alternative revenue programs. All of Southwest’s service territories

SOUTHWEST GAS HOLDINGS, INC. | 69

have decoupled rate structures, which are designed to eliminate the direct link between volumetric sales and revenue, thereby
mitigating the impacts of unusual weather variability and conservation on margin. See Note 3 – Revenue for additional information and
also a description of MountainWest’s revenues.

Utility Infrastructure Services Revenues. The majority of Centuri contracts are performed under unit-price contracts. Generally, these
contracts state prices per unit of installation. Typical installations are accomplished in a few weeks or less. Revenues are recorded as
installations are completed. Revenues are recorded for long-term fixed-price contracts in a pattern that reflects the transfer of control of
promised goods and services to the customer over time. The amount of revenue recognized on fixed-price contracts is based on costs
expended to date relative to anticipated final contract costs. Changes in job performance, job conditions, and final contract settlements
are factors that influence management’s assessment of total contract value and the total estimated costs to complete those contracts.
Revisions in estimates of costs and earnings during the course of work are reflected in the accounting period in which the facts requiring
revision become known. If a loss on a contract becomes known or is anticipated, the entire amount of the estimated ultimate loss is
recognized at that time in the financial statements. Some unit-price contracts contain caps that if encroached, trigger revenue and loss
recognition similar to a fixed-price contract model. See Note 3 – Revenue.

Intercompany Transactions. Centuri recognizes revenues generated from contracts with Southwest (see Note 13 – Segment Information).
The accounts receivable balance, revenues, and associated profits are included in the consolidated financial statements of the Company
and Southwest and are not eliminated during consolidation in accordance with accounting treatment for rate-regulated entities.

Utility Infrastructure Services Expenses. Centuri’s utility infrastructure services expenses in the Consolidated Statements of Income
includes payroll expenses, office and equipment rental costs, subcontractor expenses, training, job-related materials, gains and losses on
equipment sales, and professional fees.

Net Cost of Gas Sold. Components of net cost of gas sold include natural gas commodity costs (fixed-price and variable-rate), pipeline
capacity/transportation costs, and any actual settled costs of natural gas derivative instruments, where relevant. Also included are the
net impacts of PGA deferrals and recoveries, which by their inclusion, result in net cost of gas sold overall that is comparable to amounts
included in billed gas operating revenues. Differences between amounts incurred with suppliers, transmission pipelines, etc. and
amounts already included in customer rates, are temporarily deferred in PGA accounts pending inclusion in customer rates.

Operations and Maintenance Expense. Operations and maintenance expense includes Southwest’s operating and maintenance costs
associated with serving utility customers and maintaining its distribution and transmission systems, uncollectible customer accounts
expense, administrative and general salaries and expense, employee benefits expense excluding relevant non-service cost components,
legal expense (including injuries and damages), professional and other external contracted services, and other business expenses. Also
included are similar costs for MountainWest.

Depreciation and Amortization. Regulated operations plant depreciation is computed on the straight-line remaining life method at
composite rates considered sufficient to amortize costs over estimated service lives, including components which compensate for
removal costs (net of salvage value), and retirements, as approved by the appropriate regulatory agency. When plant is retired from
service, the original cost of plant, including cost of removal, less salvage, is charged to the accumulated provision for depreciation. See
also discussion regarding Accumulated Removal Costs above. Other regulatory assets, including acquisition adjustments, are amortized
when appropriate, over time periods authorized by regulators. Non-regulated operations, including utility infrastructure services-
related property and equipment, are depreciated on a straight-line method based on the estimated useful lives of the related assets.
Costs and gains related to refunding regulated operations debt and debt issuance expenses are deferred and amortized over the
weighted-average lives of the new issues and become a component of interest expense.

Allowance for Funds Used During Construction (“AFUDC”). AFUDC represents the cost of both debt and equity funds used to finance
regulated operations plant construction. AFUDC is capitalized as part of the cost of regulated operations plant. The debt portion of
AFUDC is reported in the Company’s and Southwest’s Consolidated Statements of Income as an offset to Net interest deductions and
the equity portion is reported as Other income. Regulated operations plant construction costs, including AFUDC, are recoverable as part
of authorized rates through depreciation when completed projects are placed into operation, and general rate relief is requested and
granted. AFUDC, disaggregated by type, included in the Company’s and Southwest’s Consolidated Statements of Income are presented
in the table below:

(Thousands of dollars)

AFUDC:

Debt portion
Equity portion

2022

2021

2020

$3,535 $1,046 $3,202
4,724

—

AFUDC capitalized as part of regulated operations plant

AFUDC rate

$3,535 $1,046 $7,926

2.64%

0.96%

5.51%

AFUDC related to MountainWest includes $86,000 of debt and $465,000 of equity during the year ended December 31, 2022, which is
not reflected in the table above. Debt and equity AFUDC at Southwest were impacted in 2022 and 2021 by the amount of short-term
debt outstanding based on the regulatory formula for each component.

70 | SOUTHWEST GAS HOLDINGS, INC.

Other Income (Deductions). The following table provides the composition of significant items included in Other income (deductions) on the
Consolidated Statements of Income:

(Thousands of dollars)

Southwest Gas Corporation:
Change in COLI policies
Interest income
Equity AFUDC
Other components of net periodic benefit cost
Miscellaneous income and (expense)

Southwest Gas Corporation – total other income (deductions)

Centuri, MountainWest, and Southwest Gas Holdings, Inc.:

Foreign transaction gain (loss)
Equity AFUDC
Equity in earnings of unconsolidated investments
Miscellaneous income and (expense)

Corporate and administrative

Southwest Gas Holdings, Inc. – total other income (deductions)

2022

2021

2020

$ (5,400) $ 8,800 $ 9,200
4,015
4,724
(20,022)
(4,507)

16,183
—
(751)
(16,916)

5,113
—
(14,021)
(4,451)

(6,884)

(4,559)

(6,590)

977
465
2,629
(3,113)

(22)
—
226
863

(263) $

(7) $

(16)
—
80
(271)
8

$ (6,189) $ (3,499) $ (6,789)

Included in the table above is the change in COLI policies (including net death benefits recognized, where relevant). Current tax
regulations provide for tax-free treatment of life insurance (death benefit) proceeds. Therefore, changes in the cash surrender value
components of COLI policies, as they progress towards the ultimate death benefits, are also recorded without tax consequences.
Miscellaneous income and (expense) in 2022 includes the reduction in value of Southwest’s previous corporate campus property.

Derivatives. In managing its natural gas supply portfolios, Southwest has historically entered into fixed- and variable-price contracts,
which qualify as derivatives. The fixed-price contracts, firm commitments to purchase a fixed amount of gas in the future at a fixed price,
qualify for the normal purchases and normal sales exception that is allowed for contracts that are probable of delivery in the normal
course of business, and are exempt from fair value reporting. The variable-price contracts qualify as derivative instruments; however,
because the contract price is the prevailing price at the future transaction date, no fair value adjustment is required. Southwest does not
utilize derivative financial instruments for speculative purposes, nor does it have trading operations.

Foreign Currency Translation and Transactions. Foreign currency-denominated assets and liabilities of consolidated subsidiaries are
translated into U.S. dollars at exchange rates existing at the respective balance sheet dates. Translation adjustments resulting from
fluctuations in exchange rates are recorded as a separate component of accumulated other comprehensive income within stockholders’
equity. Results of operations of foreign subsidiaries are translated using the monthly weighted-average exchange rates during the
respective periods. Gains and losses resulting from foreign currency transactions are included in Other income and (expenses) of the
Company. Gains and losses resulting from intercompany foreign currency transactions that are of a long-term investment nature are
reported in Other comprehensive income, if applicable.

Earnings (Loss) Per Share. Basic earnings (loss) per share (“EPS”) in each period of this report were calculated by dividing net income (loss)
attributable to Southwest Gas Holdings, Inc. by the weighted-average number of shares during those periods. Diluted EPS includes
additional weighted-average common stock equivalents (performance shares and restricted stock units), if dilutive. Unless otherwise
noted, the term “Earnings Per Share” refers to Basic EPS. A reconciliation of the denominator used in Basic and Diluted EPS calculations
is shown in the following table:

(In thousands)

Weighted average basic shares
Effect of dilutive securities:
Restricted stock units(1)(2)

Weighted average diluted shares

2022

2021

2020

65,558 59,145 55,998

—

114

65,558 59,259 56,076

(1) The number of anti-dilutive restricted stock units for 2022 excluded from the calculation of diluted shares is 157,000.
(2) The number of securities granted for 2022, 2021, and 2020 includes 144,000, 104,000, and 69,000 performance shares, respectively, the total of which was derived by assuming that

target performance will be achieved during the relevant performance period.

Recent Accounting Standards Updates.

Accounting pronouncements effective or adopted in 2022:

In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the
Effects of Reference Rate Reform on Financial Reporting.” The update provides optional guidance for a limited time to ease the potential
burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting, including when modifying a contract
(during the eligibility period covered by the update to the topic) to replace a reference rate affected by reference rate reform. The
update applies only to contracts and hedging relationships that reference the London Interbank Offered Rate (“LIBOR”) or another
reference rate expected to be discontinued due to reference rate reform. The guidance was eligible to be applied upon issuance on

SOUTHWEST GAS HOLDINGS, INC. | 71

March 12, 2020, and can generally be applied through December 31, 2022. In December 2022, the FASB issued ASU 2022-06
“Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848.” The update provides deferral of the sunset date of
Topic 848 from December 31, 2022 to December 31, 2024. Management will continue to monitor the impacts this update might have on
the Company’s and Southwest’s consolidated financial statements and disclosures, and will reflect such appropriately, in the event that
the optional guidance is elected. See also LIBOR discussion in Note 8 – Debt.

In August 2020, the FASB issued ASU 2020-06 “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and
Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity.” The update, amongst other amendments, improves the guidance related to the disclosures and earnings per share for
convertible instruments and contracts in an entity’s own equity. The Company and Southwest adopted the update in the first quarter of
2022, the impact of which was not material to the consolidated financial statements of the Company or Southwest.

There are no other recently issued accounting standards updates that are expected to be adopted or material to Southwest or the
Company effective in 2023 or thereafter.

Subsequent Events. Management monitors events occurring after the balance sheet date and prior to the issuance of the financial
statements to determine the impacts, if any, of events on the financial statements to be issued or disclosures to be made, and has
reflected them where appropriate. See Note 1 – Background, Organization, and Summary of Significant Accounting Policies, Note 8 –
Debt, and Note 15 – Acquisitions and Dispositions.

Note 2 – Regulated Operations Plant and Leases

Net Regulated Operations Plant

Major classes of regulated operations plant and their respective balances as of December 31, 2022 and 2021 were as follows:

(Thousands of dollars)

Gas plant:
Storage
Transmission
Distribution
General
Software and software-related intangibles
Other

Less: accumulated depreciation and amortization
Construction work in progress

Net regulated operations plant

December 31,

2022

2021

Southwest Gas
Holdings Inc.*

Southwest Gas
Corporation

$ 104,218 $
399,357
8,039,793
505,109
389,496
15,934

437,793
1,917,529
7,506,489
530,346
380,372
17,161

$ 103,874
397,590
7,506,489
496,643
380,372
16,607

9,453,907
(2,674,157)
244,750

10,789,690
(3,397,736)
202,068

8,901,575
(2,538,508)
183,485

$ 7,024,500 $ 7,594,022

$ 6,546,552

Southwest Gas Holdings, Inc. included the regulated operations plant associated with MountainWest only as of December 31, 2021, given that the MountainWest disposal group was
deemed held for sale as of December 31, 2022. Therefore, the balances in the table above for Southwest Gas Holdings, Inc. are the same as for Southwest Gas Corporation as of
December 31, 2022.

Regulated operations plant depreciation is computed on the straight-line remaining life method at composite rates considered sufficient
to amortize costs over estimated service lives, including components which are intended to compensate for removal costs (net of salvage
value), and retirements, based on the processes of regulatory proceedings and related regulatory commission approvals and/or
mandates. In 2022, 2021, and 2020, annual regulated operations depreciation and amortization expense in regard to Southwest
averaged 2.7% of the original cost of depreciable and amortizable property. Transmission and distribution plant are associated with the
core natural gas delivery infrastructure, and combined, constitute the majority of gas plant. Annual regulated operations depreciation
expense for Southwest averaged approximately 2.2% of the original cost of depreciable transmission and distribution plant during the
period 2020 through 2022.

Depreciation and amortization expense on gas plant, including intangibles, was as follows:

(Thousands of dollars)

Depreciation and amortization expense

2022

2021

2020

$243,857 $230,245 $215,636

Included in the figures above is amortization of regulated operations intangibles of $21 million, $17.7 million, and $13.7 million for the
years ended December 31, 2022, 2021, and 2020, respectively. The amounts above exclude regulatory asset and liability amortization.

Leases

Determinations are made as to whether an arrangement is a lease at inception. ROU assets represent the right to use an underlying asset
for the lease term; lease liabilities represent obligations to make lease payments arising from the lease. Operating lease ROU assets and

72 | SOUTHWEST GAS HOLDINGS, INC.

lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. When
leases do not provide an implicit interest rate, an incremental borrowing rate based on information available at commencement is used in
determining the present value of lease payments; an implicit rate, if readily determinable, is used. Lease terms utilized in the
computations may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. When
lease agreements include non-lease components, they are included with the lease component and accounted for as a single component,
for all asset classes. Southwest and MountainWest have no significant operating, finance, or short-term leases.

Centuri has operating and finance leases for corporate and field offices, construction equipment, and transportation vehicles. Centuri is
currently not a lessor in any significant lease arrangements. Centuri’s leases have remaining lease terms of up to 16 years. Some of these
include options to extend the leases, generally for optional terms of up to 5 years, and some include options to terminate the leases within
1 year. Centuri’s equipment leases may include variable payment terms in addition to the fixed lease payments if machinery is used in
excess of the standard work periods. These variable payments are not probable of occurring under the current operating environment and
have not been included in consideration of lease payments. During 2021, the presentation of short-term lease cost changed to include all
short-term costs associated with leases with a term of less than one month as compared to the historical presentation of only including
short-term lease costs for leases with a duration of over one month and less than one year. The lease costs associated with leases with
terms of less than one month were $66.4 million for the year ended December 31, 2020. Due to the seasonality of Centuri’s business,
expense for short-term leases will fluctuate throughout the year with higher expense incurred during the warmer months. Short-term
leases were not recorded on the balance sheet as permitted under the provisions of Accounting Standards Codification (“ASC”) Topic 842.
As of December 31, 2022, Centuri had no executed lease agreements that had not yet commenced.

The components of lease expense for Centuri were as follows:

(Thousands of dollars)

Operating lease cost

Finance lease cost:

Amortization of ROU assets
Interest on lease liabilities

Total finance lease cost

Short-term lease cost

Total lease cost

2022

2021

2020

$ 17,881 $ 15,279 $14,294

7,702
1,520

9,222

2,138
278

2,416

140
37

177

120,339

103,800

19,806

$147,442 $121,495 $34,277

Supplemental cash flow information related to Centuri leases for the years ended December 31, 2022, 2021, and 2020 was as follows:

(Thousands of dollars)

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases

ROU assets obtained in exchange for lease obligations:

Operating leases
Finance leases

2022

2021

2020

$16,725 $14,669 $12,889
36
199

1,520
11,985

278
3,547

$22,653 $11,597 $19,372
361

28,861

3,332

Supplemental information related to Centuri leases, including location in the Consolidated Balance Sheets, is as follows:

(Thousands of dollars)

Operating leases:

Other property and investments

Other current liabilities
Other deferred credits and other long-term liabilities

Total operating lease liabilities

Finance leases:

Other property and investments

Other current liabilities
Other deferred credits and other long-term liabilities

Total finance lease liabilities

Weighted average remaining lease term (in years)

Operating leases
Finance leases

Weighted average discount rate

Operating leases
Finance leases

December 31,

2022

2021

$85,270 $80,638

$13,863 $12,185
72,930

77,119

$90,982 $85,115

$51,313 $30,705

$12,028 $ 8,858
20,585

34,238

$46,266 $29,443

6.66
4.33

7.57
3.92

4.06%
3.95%

3.95%
2.58%

The following is a schedule of maturities of Centuri lease liabilities as of December 31, 2022:

(Thousands of dollars)

2023
2024
2025
2026
2027
Thereafter

Total lease payments

Less imputed interest

Total

Note 3 – Revenue

SOUTHWEST GAS HOLDINGS, INC. | 73

Operating Leases

Finance Leases

$ 17,392
15,267
12,595
10,646
10,146
43,078

109,124
18,142

$13,657
12,225
9,852
7,263
5,311
2,374

50,682
4,416

$ 90,982

$46,266

The following information about the Company’s revenues is presented by segment. Southwest encompasses the natural gas distribution
segment, Centuri encompasses the utility infrastructure services segment, and MountainWest, prior to its sale in February 2023,
encompassed the pipeline and storage segment.

Natural Gas Distribution Segment:

Southwest recognizes revenue when it satisfies its performance by transferring gas to the customer. Revenues also include the net
impacts of margin tracker/decoupling accruals based on criteria in U.S. GAAP for rate-regulated entities associated with alternative
revenue programs. Revenues from customer arrangements and from alternative revenue programs are described below.

Southwest acts as an agent for state and local taxing authorities in the collection and remittance of a variety of taxes, including sales and
use taxes and surcharges. These taxes are not included in Regulated operations revenues. Management uses the net classification
method to report taxes collected from customers to be remitted to governmental authorities.

Southwest generally offers two types of services to its customers: tariff sales and transportation–only service. Tariff sales encompass
sales to many types of customers (primarily residential) under various rate schedules, subject to cost-of-service ratemaking, which is
based on the rate-regulation of state commissions and the FERC. Southwest provides both the commodity and the related distribution
service to nearly all of its approximate 2.2 million customers, and only several hundred customers (who are eligible to secure their own
gas) subscribe to transportation-only service. Natural gas is delivered and consumed by the customer simultaneously. The provision of
service is represented by the turn of the meter dial and is the primary representation of the satisfaction of performance obligations of
Southwest. The amount billable via regulated rates (both volumetric and fixed monthly rates as part of rate design) corresponds to the
value to the customer, and management believes that the amount billable (amount Southwest has the right to invoice) is appropriate to
utilize for purposes of recognizing revenue. Estimated amounts remaining unbilled since the last meter read date are restricted from
being billed due only to the passage of time and therefore are also recognized for service provided through the balance sheet date. While
natural gas service is typically recurring, there is generally not a contract term for utility service. Therefore, the contract term is not
generally viewed to extend beyond the service provided to date, and customers can generally terminate service at will.

Transportation-only service is also governed by tariff rate provisions. Transportation-only service is generally only available to very
large customers under requirements of Southwest’s various tariffs. With this service, customers secure their own gas supply and
Southwest provides transportation services to move the customer-supplied gas to the intended location. Southwest concluded that
transportation/transmission service is suitable to an “over time” recognition model. Rate structures under Southwest’s regulation for
transportation customers include a combination of volumetric charges and monthly “fixed” charges (including charges commonly
referred to as capacity charges, demand charges, or reservation charges) as part of the rate design of regulated jurisdictions. These types
of fixed charges represent a separate performance obligation associated with standing ready over the period of the month to deliver
quantities of gas, regardless of whether the customer takes delivery of any quantity of gas. The performance obligations under these
circumstances are satisfied over the course of the month under an output measure of progress based on time, which correlates to the
period for which the charges are eligible to be invoiced.

Under its regulation, Southwest enters into negotiated rate contracts for those customers located in proximity to another pipeline,
which pose a threat of bypassing its distribution system. Southwest may also enter into similar contracts for customers otherwise able to
satisfy their energy needs by means of alternative fuel to natural gas. Less than two dozen customers are party to contracts with rate
components subject to negotiation. Many rate provisions and terms of service for these less common types of contracts are also subject
to regulatory oversight and tariff provisions. The performance obligations for these customers are satisfied similarly to those for other
customers by means of transporting/delivering natural gas to the customer. Many or most of the rate components, and structures, for
these types of customers are the same as those for similar customers without negotiated rate components; and the negotiated rates are
within the parameters of the tariff guidelines. Furthermore, while some of these contracts include contract periods extending over time,
including multiple years, as amounts billable under the contract are based on rates in effect for the customer for service provided to date,
no significant financing component is deemed to exist.

74 | SOUTHWEST GAS HOLDINGS, INC.

As indicated above, revenues also include the net impacts of margin tracker/decoupling accruals. All of Southwest’s service territories
have decoupled rate structures (also referred to as alternative revenue programs) that are designed to eliminate the direct link between
volumetric sales and revenue, thereby mitigating the impacts of unusual weather variability and conservation on margin. The primary
alternative revenue programs involve permissible adjustments for differences between stated tariff benchmarks and amounts billed
through revenue from contracts with customers via existing rates. Such adjustments are recognized monthly in revenue and in the
associated regulatory asset/liability accounts in advance of rate adjustments intended to collect or return amounts recognized.
Revenues recognized for the adjustment to the benchmarks noted are required to be presented separately from revenues from
contracts with customers, and as such, are provided below and identified as related to alternative revenue programs (which excludes
recoveries from customers).

Southwest’s operating revenues included on the Consolidated Statements of Income of both the Company and Southwest include
revenue from contracts with customers, which is shown below disaggregated by customer type, in addition to other categories of
revenue:

(Thousands of dollars)

Residential
Small commercial
Large commercial
Industrial/other
Transportation

Revenue from contracts with customers

Alternative revenue program revenues (deferrals)
Other revenues(a)

Total Regulated operations revenues

December 31,

2022

2021

2020

$1,324,794 $1,035,612 $ 958,520
221,541
44,633
26,242
88,215

378,520
85,234
50,894
100,642

270,214
57,371
42,313
92,240

1,940,084
(18,478)
13,463

1,497,750
13,181
10,859

1,339,151
12,140
(706)

$1,935,069 $1,521,790 $1,350,585

(a) Amounts include late fees and other miscellaneous revenues, and may also include the impact of certain regulatory mechanisms, such as cost-of-service components in current customer

rates that are expected to be returned to customers in future periods. Also includes the impacts of a temporary pandemic-period moratorium on late fees and disconnection for nonpayment
during the majority of 2020 and part of 2021; 2020 also includes amounts related to tax reform savings reserves/adjustments.

Utility Infrastructure Services Segment:

The majority of Centuri contracts are performed under unit-price contracts. Generally, these contracts state prices per unit of
installation. Typical installations are accomplished in a few weeks or less. Revenues are recorded as installations are completed.
Revenues are recorded for long-term fixed-price contracts in a pattern that reflects the transfer of control of promised goods and
services to the customer over time. The amount of revenue recognized on fixed-price contracts is based on costs expended to date
relative to anticipated final contract costs (a method of recognition based on inputs). Some unit-price contracts contain caps that if
encroached, trigger revenue and loss recognition similar to a fixed-price contract model.

Centuri is required to collect taxes imposed by various governmental agencies on the work performed for its customers. These taxes are
not included in Utility infrastructure services revenues. Management uses the net classification method to report taxes collected from
customers to be remitted to governmental authorities.

Centuri derives revenue from the installation, replacement, repair, and maintenance of energy distribution systems. Centuri has
operations in the U.S. and Canada. The primary focus of Centuri operations is replacement of natural gas distribution pipe and electric
service lines, as well as new infrastructure installations. In addition, Centuri performs certain industrial construction activities for
various customers and industries. Centuri has two types of agreements with its customers: master services agreements (“MSAs”) and bid
contracts. Most of Centuri’s customers supply many of their own materials in order for Centuri to complete its work under the contracts.

An MSA identifies most of the terms describing each party’s rights and obligations that will govern future work authorizations. An MSA is
often effective for multiple years. A work authorization is issued by the customer to describe the location, timing, and any additional
information necessary to complete the work for the customer. The combination of the MSA and the work authorization determines
when a contract exists and revenue recognition may begin. Each work authorization is generally a single performance obligation as
Centuri is performing a significant integration service.

A bid contract is typically a one-time agreement for a specific project that has all necessary terms defining each party’s rights and
obligations. Each bid contract is evaluated for revenue recognition individually. Control of assets created under bid contracts generally
passes to the customer over time. Bid contracts often have a single performance obligation as Centuri is providing a significant
integration service.

Centuri’s MSA and bid contracts are characterized as either fixed-price contracts or unit-price contracts for revenue recognition
purposes. The cost-to-cost input method is used to measure progress towards the satisfaction of a performance obligation for fixed-price
contracts. Input methods result in the recognition of revenue based on the entity’s expended effort toward satisfaction of the
performance obligation relative to the total expected effort to satisfy it in full. For unit-price contracts, an output method is used to
measure progress towards satisfaction of a performance obligation (based on the completion of each unit that is required under the
contract).

SOUTHWEST GAS HOLDINGS, INC. | 75

Actual revenues and project costs can vary, sometimes substantially, from previous estimates due to changes in a variety of factors,
including unforeseen circumstances. These factors, along with other risks inherent in performing fixed-price contracts may cause actual
revenues and gross profit for a project to differ from previous estimates, and could result in reduced profitability or losses on projects.
Changes in these factors may result in revisions to costs and earnings, the impacts for which are recognized in the period in which the
changes are identified. Once identified, these types of conditions continue to be evaluated for each project throughout the project term,
and ongoing revisions in management’s estimates of contract value, cost, and profit are recognized as necessary in the period
determined.

Centuri categorizes work performed under MSAs and bid contracts into three primary service types: gas construction, electrical
construction, and other construction. Gas construction includes work involving previously existing gas pipelines and the installation of
new pipelines or service lines. Electrical construction includes work involving installation and maintenance of transmission and
distribution lines, including storm restoration services. Other construction includes all other work and can include industrial and water
utility services.

Contracts can have compensation/consideration that is variable. For MSAs, variable consideration is evaluated at the customer level as
the terms creating variability in pricing are included within the MSA and are not specific to a work authorization. For multi-year MSAs,
variable consideration items are typically determined for each year of the contract and not for the full contract term. For bid contracts,
variable consideration is evaluated at the individual contract level. The expected value method or most likely amount method is used
based on the nature of the variable consideration. Types of variable consideration include liquidated damages, delay penalties,
performance incentives, safety bonuses, payment discounts, and volume rebates. Centuri will typically estimate variable consideration
and adjust financial information, as necessary.

Change orders involve the modification in scope, price, or both to the current contract, requiring approval by both parties. The existing
terms of the contract continue to be accounted for under the current contract until such time as a change order is approved. Once
approved, the change order is either treated as a separate contract or as part of the existing contract, as appropriate under the
circumstances. When the scope is agreed upon in the change order but not the price, Centuri estimates the change to the transaction
price.

The following tables display Centuri’s revenue from contracts with customers disaggregated by service type and contract type:

(Thousands of dollars)

Service Types:
Gas infrastructure services
Electric power infrastructure services
Other

December 31,

2022

2021

2020

$1,531,818 $1,302,340 $1,261,160
411,826
275,302

778,124
450,385

525,202
331,119

Total Utility infrastructure services revenues

$2,760,327 $2,158,661 $1,948,288

(Thousands of dollars)

Contract Types:
Master services agreement
Bid contract

December 31,

2022

2021

2020

$2,342,220 $1,652,978 $1,490,009
458,279

418,107

505,683

Total Utility infrastructure services revenues

$2,760,327 $2,158,661 $1,948,288

Unit-price contracts
Fixed-price contracts
Time and materials contracts

$1,608,131 $1,369,082 $1,356,640
157,701
433,947

498,039
654,157

267,742
521,837

Total Utility infrastructure services revenues

$2,760,327 $2,158,661 $1,948,288

The following table provides information about contracts receivable and revenue earned on contracts in progress in excess of billings
(contract assets), both of which are included within Accounts receivable, net of allowances, and provides information about amounts
billed in excess of revenue earned on contracts (contract liabilities), which are included in Other current liabilities as of December 31,
2022 and 2021 on the Company’s Consolidated Balance Sheets:

(Thousands of dollars)

Contracts receivable, net
Revenue earned on contracts in progress in excess of billings
Amounts billed in excess of revenue earned on contracts

December 31,

2022

2021

$394,022 $296,005
214,774
11,860

238,059
35,769

The revenue earned on contracts in progress in excess of billings (contract asset) primarily relates to Centuri’s rights to consideration for
work completed but not billed and/or approved at the reporting date. These contract assets are transferred to contracts receivable when

76 | SOUTHWEST GAS HOLDINGS, INC.

the rights become unconditional. These contract assets are recoverable from Centuri’s customers based upon various measures of
performance, including achievement of certain milestones, completion of specified units or completion of a contract. In addition, many of
Centuri’s time and materials arrangements are billed in arrears pursuant to contract terms that are standard within the industry,
resulting in contract assets and/or unbilled receivables being recorded, as revenue is recognized in advance of billings. Due to the lag in
invoicing associated with contractual provisions (or other economic or market conditions that may impact a customer’s business),
Centuri’s ability to bill and subsequently collect amounts due may be impacted. These changes may result in the need to record an
estimated valuation allowance to adjust contract asset balances to their net realizable value.

The amounts billed in excess of revenue earned (contract liability) primarily relate to the advance consideration received from customers
for which work has not yet been completed. The change in this contract liability balance from December 31, 2021 to December 31, 2022
was due to revenue recognized of approximately $11.9 million that was included in this balance as of January 1, 2022, after which time it
became earned and the balance was reduced, in addition to increases due to amounts received, net of revenue recognized during the
period related to contracts that commenced during the period.

For contracts that have an original duration of one year or less, Centuri does not consider/compute an interest component based on the
time value of money. Further, because of the short duration of these contracts, the Company has not disclosed the transaction price for
the remaining performance obligations as of the end of each reporting period or when the Company expects to recognize the revenue.

As of December 31, 2022, Centuri has 57 contracts with an original duration of more than one year. The aggregate amount of the
transaction price allocated to the unsatisfied performance obligations of these contracts as of December 31, 2022 was $440.8 million.
Centuri expects to recognize the remaining performance obligations over approximately the next two years; however, the timing of that
recognition is largely within the control of the customer, including when the necessary equipment and materials required to complete
the work will be provided by the customer.

Utility infrastructure services contracts receivable consists of the following:

(Thousands of dollars)

Billed on completed contracts and contracts in progress
Other receivables

Contracts receivable, gross
Allowance for doubtful accounts

Contracts receivable, net

Pipeline and Storage Segment:

December 31,

2022

2021

$395,771 $292,770
3,492

2,569

398,340
(4,318)

296,262
(257)

$394,022 $296,005

MountainWest derives revenue on the basis of services rendered, commodities delivered, or contracts settled and includes amounts yet
to be billed to customers. MountainWest generates revenue and earnings from annual reservation payments under firm peaking storage
and firm transportation contracts. Straight-fixed-variable rate designs are used to allow for recovery of substantially all fixed costs in
demand or reservation charges, thereby reducing the earnings impact of volume changes on gas transportation and storage operations.

MountainWest receives upfront payment for certain storage services it provides to customers, which are considered to be contract
liabilities. These payments are amortized to revenue over the term of the contract.

The primary types of sales and service activities reported as revenue from contracts with customers are FERC-regulated gas
transportation and storage services, and to a lesser extent, natural gas liquid (“NGL”) revenues consisting primarily of NGL processing
services, and other revenue (consisting of natural gas sales, as well as services related to gathering and processing activities and
miscellaneous service revenue).

Transportation and storage contracts are primarily stand-ready service contracts that include fixed reservation and variable usage fees.
Fixed fees are recognized ratably over the life of the contract as the stand-ready performance obligations are satisfied, while variable
usage fees are recognized when MountainWest has a right to consideration from a customer in an amount that corresponds directly with
the value to the customer of the performance obligation completed to date. Substantially all of MountainWest’s revenues are derived
from performance obligations satisfied over time, rather than recognized at a single point in time. Payment for most sales and services
varies by contract type, but is typically due within a month of billing.

MountainWest typically receives or retains NGLs and natural gas from customers when providing natural gas processing, transportation,
or storage services. MountainWest records the fair value of NGLs received as service revenue recognized over time and recognizes
revenue from the subsequent sale of the NGLs to customers upon delivery. MountainWest typically retains some natural gas under
certain transportation service arrangements, intended to facilitate performance of the service and allow for natural losses that occur. As
the intent of the retention amount is to enable fulfillment of the contract rather than to provide compensation for services, the fuel
allowance is not included in revenue.

SOUTHWEST GAS HOLDINGS, INC. | 77

MountainWest Regulated operations revenues on the Consolidated Statements of Income of the Company include revenue from
contracts with customers, which is shown below, disaggregated by categories of sales and service activities.

(Thousands of dollars)

Regulated gas transportation and storage revenues
NGL revenues
Other revenues

Revenue from contracts with customers

Other revenues

Total Regulated operations revenues

December 31,

2022

$248,304
5,983
10,152

264,439
174

$264,613

MountainWest has certain multi-year contracts with fixed-price performance obligations that were unsatisfied (or partially unsatisfied)
at the end of the reporting period, whereby revenue will be earned over time as MountainWest stands ready to provide service. These
amounts are not material to the Company’s financial statements overall. MountainWest also has certain contract liabilities related to
consideration received from customers with an obligation to transfer goods or services subsequent to the balance sheet date, amounts
for which are not material.

Note 4 – Receivables and Related Allowances

Business activity with respect to natural gas utility operations is conducted with customers located within the three-state region of
Arizona, Nevada, and California. Southwest’s accounts receivable are short-term in nature, with billing due dates customarily not
extending beyond one month, with customers’ credit worthiness assessed upon account creation by evaluation of other utility service or
their credit file, and related payment history. Although Southwest seeks generally to minimize its credit risk related to utility operations
by requiring security deposits from new customers, imposing late fees, and actively pursuing collection on overdue accounts, some
accounts are ultimately not collected. Customer accounts are subject to collection procedures that vary by jurisdiction (late fee
assessment, notice requirements for disconnection of service, and procedures for actual disconnection and/or reestablishment of
service). After disconnection of service, accounts are customarily written off approximately two months after disconnection if the
account remains inactive. Dependent upon the jurisdiction, reestablishment of service requires both payment of previously unpaid
balances and additional deposit requirements. Provisions for uncollectible accounts are recorded monthly based on experience,
consideration of current and expected future conditions, customer and rate composition, and write-off processes. They are included in
the ratemaking process as a cost of service. The Nevada jurisdictions have a regulatory mechanism associated with the gas-cost-related
portion of uncollectible accounts. Such amounts are deferred and collected through a surcharge in the ratemaking process. Southwest
lifted the moratorium on disconnection of natural gas service for non-payment in Arizona and Nevada in September 2021, which was
initiated (at the same time as a moratorium on late fees) in March 2020 in response to the COVID-19 pandemic. The moratorium on
disconnection in California ended in November 2021. Southwest recommenced assessing late fees on past-due balances in Arizona and
Nevada in April 2021, and in California in August 2021. After these moratoriums were lifted, Southwest resumed collection efforts.
These moratoriums have influenced our bad debt expense and write-offs through 2022. Southwest continues to actively work with
customers experiencing financial hardship by means of flexible payment options and partnering with assistance agencies. Management
continues to monitor expected credit losses in light of the impacts of events/conditions such as COVID-19, local/regional inflation, and
others. In addition, management is monitoring the impact of certain residential disconnection protections recently established in
Southwest’s California jurisdictions, such as prohibiting credit deposits and fees for reconnection, among other things. While a two-way
balancing account was permitted to track residential uncollectible accounts for future recovery, the mechanism is subject to a cap, above
which uncollectible expense would nonetheless be incurred and recognized. The allowance as of December 31, 2022 reflects the
expected impact from the pandemic on balances as of that date, including consideration of customers’ current and future ability to pay
those amounts that are due.

Utility infrastructure services accounts receivable are recorded at face amounts less an allowance for doubtful accounts. Centuri’s
customers are generally investment-grade gas and electric utility companies for which Centuri has historically recognized an
insignificant amount of write-offs. Centuri’s accounts receivable balances carry standard payment terms of up to 60 days. Centuri
maintains an allowance that is estimated based on historical collection experience, current and estimated future economic and market
conditions, and a review of the current status of each customer’s accounts receivable balance. Account balances are monitored at least
monthly, and are charged off against the allowance when management determines it is probable the balance will not be recovered.
Centuri has not been significantly impacted, nor does it anticipate it will experience significant difficulty in collecting amounts due, given
the nature of its customers, as a result of the COVID-19 environment, historically high inflation, or other conditions.

The table below contains information about Southwest’s gas utility customer accounts receivable balance (net of allowance) at
December 31, 2022 and 2021:

(Thousands of dollars)

Gas utility customer accounts receivable balance

December 31,

2022

2021

$225,317 $169,114

78 | SOUTHWEST GAS HOLDINGS, INC.

The following table represents the percentage of customers in each of Southwest’s three states at December 31, 2022, which was
consistent with the prior year:

Percent of customers by state:

Arizona
Nevada
California

Southwest activity in the allowance account for uncollectibles is summarized as follows:

(Thousands of dollars)

Balance, December 31, 2019

Additions charged to expense
Accounts written off, less recoveries

Balance, December 31, 2020

Additions charged to expense
Accounts written off, less recoveries

Balance, December 31, 2021

Additions charged to expense
Accounts written off, less recoveries

Balance, December 31, 2022

54%
37%
9%

Allowance for
Uncollectibles

$ 2,095
4,693
(2,454)

4,334
5,415
(6,490)

3,259
12,707
(11,136)

$ 4,830

At December 31, 2022, the utility infrastructure services segment (Centuri) had $632.1 million in combined customer accounts and
contracts receivable. The allowance for doubtful accounts at Centuri as of December 31, 2022 was $4.3 million. The allowance for
uncollectibles and write-offs related to Centuri customers were insignificant for all periods prior to December 31, 2022 and not
reflected in the table above.

Note 5 – Regulatory Assets and Liabilities

Southwest is subject to the regulation of the Arizona Corporation Commission (“ACC”), the Public Utilities Commission of Nevada
(“PUCN”), the California Public Utilities Commission (“CPUC”), and the FERC. Accounting policies for Southwest conform to U.S. GAAP
applicable to rate-regulated entities and reflect the effects of the ratemaking process. Accounting treatment for rate-regulated entities
allows for deferral as regulatory assets, costs that otherwise would be expensed, if it is probable that future recovery from customers
will occur. If rate recovery is no longer probable, due to competition or the actions of regulators, the related regulatory asset is required
to be written off. Regulatory liabilities are recorded if it is probable that revenues will be reduced for amounts that will be refunded to
customers through the ratemaking process. Management records regulatory assets and liabilities based on decisions of the commissions
noted above, including the issuance of regulatory orders and precedents established by these commissions. The regulated operations
have generally been successful in seeking recovery of regulatory assets, and regularly file rate cases or other administrative filings in the
various jurisdictions, in some cases, to establish the basis for recovering regulatory assets reflected in accounting records.

The following table represents existing regulatory assets and liabilities:

(Thousands of dollars)

Regulatory assets:

Accrued pension and other postretirement benefit costs(1)
Deferred purchased gas costs(2)
Settled interest rate hedges(3)
Accrued purchased gas costs(4)
Unamortized premium on reacquired debt(5)
Accrued absence time(9)
Margin, interest- and tax-tracking(10)
Other(12)

December 31,

2022

2021

Southwest Gas
Holdings Inc.*

Southwest Gas
Corporation

$ 311,124 $ 339,356
291,145
31,278
51,631
16,283
16,975
22,709
62,233

450,120
—
207,368
14,707
17,854
21,024
65,981

$ 339,356
291,145
—
51,631
16,283
16,975
22,709
60,798

$1,088,178 $ 831,610

798,897

(Thousands of dollars)

Regulatory liabilities:

Deferred purchased gas costs(2)
Accumulated removal costs(6)
Unamortized gain on reacquired debt(7)
Regulatory excess deferred/other taxes and gross-up(8)
Margin, interest- and property tax-tracking(10)
Unrecognized other postretirement benefit costs(11)
Other(12)

Net regulatory assets (liabilities)

SOUTHWEST GAS HOLDINGS, INC. | 79

December 31,

2022

2021

Southwest Gas
Holdings Inc.*

Southwest Gas
Corporation

—
(445,000)
(6,572)
(424,921)
(10,920)
—
(5,393)

(5,736)
(482,558)
(7,108)
(511,567)
(8,523)
(17,815)
(10,321)

—
(424,000)
(7,108)
(446,333)
(8,523)
—
(8,573)

$ 195,372 $(212,018)

$ (95,640)

Southwest Gas Holdings, Inc. includes the regulatory assets and liabilities associated with MountainWest only as of December 31, 2021, due to the held-for-sale classification of the disposal
group as of December 31, 2022. As of that date, the regulatory assets and liabilities for Southwest Gas Corporation are the same, including in amount, as those reflected for the Company.
Included in Deferred charges and other assets on the Consolidated Balance Sheets. Recovery period is greater than five years. (See Note 11 – Pension and Other Postretirement Benefits).

(1)
(2) Balance recovered or refunded on an ongoing basis with interest.
(3) Reflects MountainWest interest rate cash flow hedges entered into in association with the issuance of $180 million principal balance 4.875% unsecured senior notes due in 2041 that are

(4)
(5)
(6)

(7)
(8)

amortized to interest expense over the life of the debt instrument. The current portion at December 31, 2021 was included in Prepaid and other current assets and the long-term portion
was included in Deferred charges and other assets on the Company’s 2021 Consolidated Balance Sheet.
Included in Prepaid and other current assets on the Consolidated Balance Sheets. Balance recovered or refunded on an ongoing basis.
Included in Deferred charges and other assets on the Consolidated Balance Sheets. Recovered over life of debt instruments.
Included in Other deferred credits and other long-term liabilities on the Consolidated Balance Sheets. In 2021, substantially all amounts related to MountainWest were also included in
Other deferred credits and other long-term liabilities, except $2 million which was included in Other current liabilities on the Company’s Consolidated Balance Sheet.
Included in Other deferred credits and other long-term liabilities on the Consolidated Balance Sheets. Amortized over life of debt instruments.
Includes remeasurement/reduction of the net accumulated deferred income tax liability from U.S. tax reform. The reduction (excess accumulated deferred taxes, or “EADIT”) became a
regulatory liability with tax gross-up. EADIT reduces rate base, and is expected to be returned to utility customers in accordance with IRS and regulatory requirements. Included generally in
Other deferred credits and other long-term liabilities on the Consolidated Balance Sheets, except for $30.3 million in 2022 which is in Other current liabilities. Amount also includes
difference in current taxes required to be returned to customers and a separate $2.7 million gross-up related to contributions in aid of construction.

(9) Regulatory recovery occurs on a one-year lag basis through the labor loading process. Included in Prepaid and other current assets on the Consolidated Balance Sheets.
(10) Margin tracking/decoupling mechanisms are alternative revenue programs; revenue associated with under-collections (for the difference between authorized margin levels and amounts billed
to customers through rates currently) is recognized as revenue so long as recovery is expected to take place within 24 months. Total category asset balances are included in Prepaid and other
current assets on the Consolidated Balance Sheets. Total category liability balances are included in Other current liabilities and Other deferred credits and other long-term liabilities.
(11) Reflected a regulatory liability at MountainWest for the collection of postretirement benefit costs allowed in rates in excess of expenses incurred, included in Other deferred credits and
other long-term liabilities on the Company’s Consolidated Balance Sheet as of December 31, 2021, before MountainWest balances were included as Current liabilities held for sale.

(12) The following tables detail the components of Other regulatory assets and liabilities. Other regulatory assets are included in either Prepaid and other current assets or Deferred charges and
other assets on the Consolidated Balance Sheets (as indicated). Recovery periods vary. Other regulatory liabilities are included in either Other current liabilities or Other deferred credits
and other long-term liabilities on the Consolidated Balance Sheets (as indicated).

(Thousands of dollars)

Other Regulatory Assets:

State mandated public purpose programs (including low income and conservation programs)(a)(e)
Infrastructure replacement programs and similar(b)(e)
Environmental compliance programs(c)(e)
Pension tracking mechanism(b)
Other(d)

December 31,

2022

2021

Southwest Gas
Holdings Inc.

Southwest Gas
Corporation

$18,693 $15,239
6,545
6,807
10,281
23,361

8,533
5,803
13,098
19,854

$15,239
6,545
6,807
10,281
21,926

$65,981 $62,233

$60,798

Included in Prepaid and other current assets on the Consolidated Balance Sheets.
Included in Deferred charges and other assets on the Consolidated Balance Sheets, except $930,000 which is included in Prepaid and other current assets in 2022.
In 2022, approximately $5 million of these balances included in Prepaid and other current assets and $825,000 in Deferred charges and other assets on the Consolidated Balance Sheets.
In 2021, approximately $5.8 million included in Prepaid and other current assets and $1 million included in Deferred charges and other assets on the Consolidated Balance Sheets.
In 2022, approximately $6.4 million included in Prepaid and other current assets and $13.4 million included in Deferred charges and other assets on the Consolidated Balance Sheets. In
2021, for Southwest Gas Corporation, $6.7 million included in Prepaid and other current assets and $15.2 million included in Deferred charges and other assets on the Consolidated
Balance Sheets. For the Company in 2021, $7.7 million included in Prepaid and other current assets and $15.6 million included in Deferred charges and other assets on the Consolidated
Balance Sheets.
Balance recovered or refunded on an ongoing basis, generally with interest.

(Thousands of dollars)

Other Regulatory Liabilities:

State mandated public purpose programs (including low income and conservation programs)(a)(c)
Environmental compliance programs(c)(d)
Other(b)(c)

Included in Other current liabilities on the Consolidated Balance Sheets.

December 31,

2022

2021

Southwest Gas
Holdings Inc.

Southwest Gas
Corporation

$(1,567) $ (1,886)
(4,182)
(4,253)

—
(3,826)

$(1,886)
(4,182)
(2,505)

$(5,393) $(10,321)

$(8,573)

80 | SOUTHWEST GAS HOLDINGS, INC.

b)
c)
d)

Included in Other current liabilities, except $823,000, in 2022, which is included in Other deferred credits and other long-term liabilities on the Consolidated Balance Sheets.
Balance typically recovered or refunded on an ongoing basis, generally with interest.
In 2021, included in Other current liabilities on the Consolidated Balance Sheets.

Note 6 – Other Comprehensive Income and Accumulated Other Comprehensive Income
(“AOCI”)

The following information provides insight into amounts impacting the Company’s and Southwest’s Other comprehensive income (loss),
both before and after-tax impacts, within the Consolidated Statements of Comprehensive Income, which also impact Accumulated other
comprehensive income (“AOCI”) in the Consolidated Balance Sheets and the Consolidated Statements of Equity.

Related Tax Effects Allocated to Each Component of Other Comprehensive Income (Loss):

(Thousands of dollars)

Defined benefit pension plans:
Net actuarial gain/(loss)
Amortization of prior service cost
Amortization of net actuarial (gain)/loss
Regulatory adjustment

Year Ended December 31,

2022

Tax
(Expense)
or
Benefit(1)

Before-
Tax
Amount

Net-of-
Tax
Amount

Before-
Tax
Amount

2021

Tax
(Expense)
or
Benefit(1)

Net-of-
Tax
Amount

Before-
Tax
Amount

2020

Tax
(Expense)
or
Benefit(1)

Net-of-
Tax
Amount

$ 4,079 $ (980) $ 3,099 $ 59,176 $(14,202) $ 44,974 $(57,539) $13,809 $(43,730)
878
(9,079) 28,751
5,650
(1,785)

959
26,461 44,597
(21,457) (88,194) 21,167

1,155
(10,703) 33,894 37,830
7,435
(67,027)

175
34,818
(28,232)

(42)
(8,357)
6,775

(230)

(277)

729

133

Pension plans other comprehensive income (loss)

10,840

(2,604)

8,236 16,538

(3,968) 12,570

(11,119)

2,668

(8,451)

FSIRS (designated hedging activities):

Amounts reclassified into net income

FSIRS other comprehensive income (loss)

Total other comprehensive income (loss) – Southwest Gas

545

(129)

416

2,174

(522)

1,652

3,247

(780)

2,467

(522)

1,652

3,247

(780)

2,467

Corporation

11,385

(2,733)

8,652 18,712

(4,490) 14,222

(7,872)

1,888

(5,984)

Foreign currency translation adjustments:

Translation adjustments

(6,133)

Foreign currency other comprehensive income (loss)

(6,133)

Total other comprehensive income (loss) – Southwest Gas

—

(6,133)

—

1,713

—

1,713

Holdings, Inc.

$ 5,252 $(2,733) $ 2,519 $ 18,732 $ (4,490) $ 14,242 $ (6,159) $ 1,888 $ (4,271)

(1) Tax amounts are calculated using a 24% rate. With regard to foreign currency translation adjustments, the Company has elected to indefinitely reinvest the earnings of Centuri’s Canadian
subsidiaries in Canada, thus preventing deferred taxes on such earnings. As a result of this assertion, and no repatriation of earnings anticipated, the Company is not recognizing a tax
effect or presenting a tax expense or benefit for currency translation adjustments in Other comprehensive income (loss).

The following table represents a rollforward of AOCI, presented on the Company’s Consolidated Balance Sheets and its Consolidated
Statements of Equity:

(Thousands of dollars)

Defined Benefit Plans

Before-
Tax

Tax
(Expense)
Benefit(4)

After-
Tax

Before-
Tax

FSIRS

Tax
(Expense)
Benefit(4)

Foreign Currency Items

After-
Tax

Before-
Tax

Tax
(Expense)
Benefit

After-
Tax

AOCI

Beginning Balance AOCI December 31, 2021

$(61,182) $14,685 $(46,497) $(545) $ 129 $(416) $ 152

$—

$ 152 $(46,761)

Net actuarial gain/(loss)
Translation adjustments

4,079
—

(980)
—

3,099
—

Other comprehensive income before reclassifications
FSIRS amount reclassified from AOCI(1)
Amortization of prior service cost(2)
Amortization of net actuarial loss(2)
Regulatory adjustment(3)

4,079
—
175
34,818
(28,232)

(980)
—
(42)

3,099
—
133
(8,357) 26,461
(21,457)
6,775

—
—

—
545
—
—
—

—
—

—
(129)
—
—
—

—
—

—
(6,133)

(6,133)
—
—
—

—
416
—
—
—

—
—

—
—
—
—
—

—
(6,133)

(6,133)
—
—
—
—

3,099
(6,133)

(3,034)
416
133
26,461
(21,457)

Net current period other comprehensive income (loss)

attributable to Southwest Gas Holdings, Inc.

10,840

(2,604)

8,236

545

(129)

416

(6,133)

—

(6,133)

2,519

Ending Balance AOCI December 31, 2022

$(50,342) $12,081 $(38,261) $ —

$ — $ — $(5,981)

$—

$(5,981) $(44,242)

(1) The FSIRS reclassification amount is included in Net interest deductions on the Company’s Consolidated Statements of Income.
(2) These AOCI components are included in the computation of net periodic benefit cost (see Note 11 – Pension and Other Postretirement Benefits for additional details).
(3) The regulatory adjustment represents the portion of the activity above that is expected to be recovered through rates in the future (the related regulatory asset is included in Deferred

charges and other assets on the Company’s Consolidated Balance Sheets).

(4) Tax amounts are calculated using a 24% rate.

SOUTHWEST GAS HOLDINGS, INC. | 81

The following table represents a rollforward of AOCI, presented on Southwest’s Consolidated Balance Sheets:

(Thousands of dollars)

Defined Benefit Plans

Before-
Tax

Tax
(Expense)
Benefit(9)

After-
Tax

Before-
Tax

FSIRS

Tax
(Expense)
Benefit(9)

After-
Tax

AOCI

Beginning Balance AOCI December 31, 2021

$(61,182) $14,685

$(46,497)

$(545)

$ 129

$(416) $(46,913)

Net actuarial gain/(loss)

Other comprehensive loss before reclassifications
FSIRS amount reclassified from AOCI(6)
Amortization of prior service cost(7)
Amortization of net actuarial loss(7)
Regulatory adjustment(8)

4,079

(980)

3,099

4,079
—
175
34,818
(28,232)

(980)
—
(42)
(8,357)
6,775

3,099
—
133
26,461
(21,457)

—

—
545
—
—
—

—

—
(129)
—
—
—

—

—
416
—
—
—

3,099

3,099
416
133
26,461
(21,457)

Net current period other comprehensive income (loss) attributable to

Southwest Gas Corporation

10,840

(2,604)

8,236

545

(129)

416

8,652

Ending Balance AOCI December 31, 2022

$(50,342) $12,081

$(38,261)

$ —

$ — $(38,261)

(6) The FSIRS reclassification amount is included in Net interest deductions on Southwest’s Consolidated Statements of Income.
(7) These AOCI components are included in the computation of net periodic benefit cost (see Note 11 – Pension and Other Postretirement Benefits for additional details).
(8) The regulatory adjustment represents the portion of the activity above that is expected to be recovered through rates in the future (the related regulatory asset is included Deferred charges

and other assets on Southwest’s Consolidated Balance Sheets).

(9) Tax amounts are calculated using a 24% rate.

The following table represents amounts (before income tax impacts) included in AOCI (in the tables above), that have not yet been
recognized in net periodic benefit cost:

(Thousands of dollars)

Net actuarial loss
Prior service cost
Less: amount recognized in regulatory assets

Recognized in AOCI

Year Ended December 31,

2022

2021

$(360,113) $(399,010)
(1,528)
339,356

(1,353)
311,124

$ (50,342) $ (61,182)

See Note 11 – Pension and Other Postretirement Benefits for more information on the defined benefit pension plans.

Note 7 – Common Stock
Shares of the Company’s common stock are publicly traded on the New York Stock Exchange, under the ticker symbol “SWX.” Share-
based compensation related to Southwest and Centuri is based on awards to be issued in shares of Southwest Gas Holdings, Inc.

In December 2020, the Company and Southwest jointly filed with the SEC an automatic shelf registration statement (File
No. 333-251074), or a “Universal Shelf,” which became effective upon filing and includes a prospectus detailing the Company’s ability to
offer and sell, from time to time in amounts at prices and on terms that will be determined at the time of such offering, any combination
of common stock, preferred stock, debt securities (which may or may not be guaranteed by one or more of its directly or indirectly wholly
owned subsidiaries if indicated in the relevant prospectus supplement), guarantees of debt securities issued by Southwest, depository
shares, warrants to purchase common stock, preferred stock or depository shares issued by the Company or debt securities issued by
the Company or Southwest, units and rights. Additionally as part of the Universal Shelf, Southwest may offer and sell, from time to time
in amounts at prices and on terms that will be determined at the time of such offering, any combination of debt securities (which may or
may not be guaranteed by one or more of its directly or indirectly wholly owned subsidiaries if indicated in the relevant prospectus
supplement) and guarantees of debt securities issued by the Company or by one or more of its directly or indirectly wholly owned
subsidiaries if indicated in the relevant prospectus supplement.

On April 8, 2021, the Company entered into a Sales Agency Agreement between the Company and BNY Mellon Capital Markets, LLC and
J.P. Morgan Securities LLC (the “Equity Shelf Program”) for the offer and sale of up to $500 million of common stock from time to time in
an at-the-market offering program. The shares are issued pursuant to the Company’s Universal Shelf. There was no activity under the
Equity Shelf Program during the year ended December 31, 2022. The following table provides the life-to-date activity under that
program through December 31, 2022:

Gross proceeds
Less: agent commissions

Net proceeds

Number of shares sold
Weighted average price per share

$158,180,343
(1,581,803)

$156,598,540

2,302,407
68.70

As of December 31, 2022, the Company had approximately $342 million of common stock available for future issuance under the
program. Net proceeds from the sale of shares of common stock under the Equity Shelf Program are intended for general corporate

82 | SOUTHWEST GAS HOLDINGS, INC.

purposes, including the acquisition of property for the construction, completion, extension, or improvement of pipeline systems and
facilities located in and around the communities served by Southwest.

In March 2022, the Company issued, through a separate prospectus supplement under the Universal Shelf, an aggregate of 6.325 million
shares of common stock, in an underwritten public offering price of $74.00 per share, resulting in proceeds to the Company of
$452.3 million, net of an underwriters’ discount of $15.8 million. The Company used the net proceeds to repay a portion of the
outstanding borrowings under the 364-day term loan credit agreement that was used to initially fund the MountainWest acquisition.

During 2022, the Company issued approximately 230,000 shares of common stock through the Restricted Stock/Unit Plan and Omnibus
Incentive Plan.

Additionally during 2022, the Company issued 142,000 shares of common stock through the Dividend Reinvestment and Stock Purchase
Plan, raising proceeds of approximately $10.5 million.

As of December 31, 2022, there were 3.3 million shares of common stock registered and available for issuance under the provisions of
the various stock issuance plans, which does not include the amount of common stock available that is separately disclosed with respect
to the Equity Shelf Program above.

Note 8 – Debt

Long-Term Debt

Long-term debt is recognized in the Company’s and Southwest’s Consolidated Balance Sheets generally at the carrying value of the obligations
outstanding. Details surrounding the fair value and individual carrying values of instruments are provided in the table that follows.

(Thousands of dollars)

Southwest Gas Corporation:
Debentures:

Notes, 6.1%, due 2041
Notes, 4.05%, due 2032
Notes, 3.875%, due 2022
Notes, 4.875%, due 2043
Notes, 3.8%, due 2046
Notes, 3.7%, due 2028
Notes, 4.15%, due 2049
Notes, 2.2%, due 2030
Notes, 3.18%, due 2051
Notes, 5.8%, due 2027
8% Series, due 2026
Medium-term notes, 7.78% series, due 2022
Medium-term notes, 7.92% series, due 2027
Medium-term notes, 6.76% series, due 2027
Unamortized discount and debt issuance costs

Revolving credit facility and commercial paper

Industrial development revenue bonds:

Tax-exempt Series A, due 2028
2003 Series A, due 2038
2008 Series A, due 2038
2009 Series A, due 2039
Unamortized discount and debt issuance costs

Less: current maturities

December 31,

2022

2021

Carrying
Amount

Fair
Value

Carrying
Amount

Fair
Value

$ 125,000 $113,184 $ 125,000 $ 166,380
—
250,603
307,538
329,055
325,191
342,030
440,838
292,116
—
92,623
25,122
31,555
8,949

527,052
—
195,703
209,169
275,043
218,712
353,763
185,523
305,913
80,027
—
26,840
7,662

600,000
—
250,000
300,000
300,000
300,000
450,000
300,000
300,000
75,000
—
25,000
7,500
(29,471)

—
250,000
250,000
300,000
300,000
300,000
450,000
300,000
—
75,000
25,000
25,000
7,500
(19,959)

3,003,029

2,387,541

50,000

130,000

50,000
50,000
50,000
50,000

50,000
50,000
50,000
50,000
(1,733)

198,267

—

50,000
50,000
50,000
50,000
(1,938)

198,062

(275,000)

50,000
50,000
50,000
50,000

Southwest Gas Corporation total long-term debt, less current maturities

$3,251,296

$2,440,603

Southwest Gas Holdings, Inc.:
Centuri secured term loan facility
Centuri secured revolving credit facility
MountainWest unsecured senior notes, 3.53%, due in 2028*
MountainWest unsecured senior notes, 4.875%, due in 2041*
MountainWest unsecured senior notes, 3.91%, due in 2038*
Other debt obligations
Unamortized discount and debt issuance costs
Less: current maturities

$1,008,550 $995,852 $1,117,138 $1,117,841
103,749
102,078
199,926
147,735
50,003

82,315
—
—
—
118,314

81,955
—
—
—
126,844
(20,789)
(44,557)

103,329
102,078
199,926
147,735
51,665
(24,466)
(22,324)

Southwest Gas Holdings, Inc. total long-term debt, less current maturities

$4,403,299

$4,115,684

* MountainWest amounts are not reflected in the above table as of December 31, 2022 as the balance has been reclassified as held for sale on the Company’s Consolidated Balance Sheet as

of December 31, 2022. See Note 15 – Acquisitions and Dispositions for additional information.

SOUTHWEST GAS HOLDINGS, INC. | 83

The fair values of Southwest’s and the Company’s revolving credit facilities and Southwest’s Industrial Development Revenue Bonds
(“IDRBs”) are categorized as Level 1 based on the FASB’s fair value hierarchy, due to the ability to access similar debt arrangements at
measurement dates with comparable terms, including variable/market rates. Additionally, Southwest’s revolving credit facility and
IDRBs have interest rates that reset frequently. The fair values of Southwest’s debentures (which include senior and medium-term
notes) and the Company’s term loan facility and unsecured senior notes were determined utilizing a market-based valuation approach,
where fair values are determined based on evaluated pricing data, and as such are categorized as Level 2 in the hierarchy.

Southwest has a $400 million credit facility that is scheduled to expire in April 2025. Southwest designates $150 million of associated
capacity as long-term debt and the remaining $250 million for working capital purposes. Interest rates for the credit facility are
calculated at either the Secured Overnight Financing Rate (“SOFR”) or an “alternate base rate,” plus in each case an applicable margin
that is determined based on Southwest’s senior unsecured debt rating. At December 31, 2022, the applicable margin ranges from
0.750% to 1.500% for loans bearing interest with reference to SOFR and from 0.000% to 0.500% for loans bearing interest with
reference to the alternative base rate. At December 31, 2022, the applicable margin is 1.125% for loans with reference to SOFR and
0.125% for loans bearing interest with reference to the alternative base rate. Southwest is also required to pay a commitment fee,
ranging from 0.075% to 0.200% per annum, on the unfunded portion of the commitments, which was not significant for the year ended
December 31, 2022. The credit facility contains a financial covenant requiring Southwest to maintain a ratio of funded debt to total
capitalization not to exceed 0.70 to 1.00 as of the end of any quarter of any fiscal year. At December 31, 2022, $50 million was
outstanding on the long-term portion (no borrowings were outstanding under the commercial paper program discussed below). The
effective interest rate on the long-term portion of the credit facility was 5.88% at December 31, 2022.

Southwest has a $50 million commercial paper program. Issuances under the commercial paper program are supported by Southwest’s
current revolving credit facility and, therefore, do not represent additional borrowing capacity. Borrowings under the commercial paper
program, if any, are designated as long-term debt. Interest rates for the program are calculated at the then current commercial paper
rate. At December 31, 2022, as noted above, no borrowings were outstanding under the commercial paper program.

In March 2022, Southwest issued $600 million aggregate principal amount of 4.05% Senior Notes at a discount of 0.65%. The notes will
mature in March 2032. Southwest used the net proceeds to redeem the $250 million 3.875% notes due in April 2022 and to repay
outstanding amounts under its credit facility, with the remaining net proceeds used for general corporate purposes.

Centuri has a $1.545 billion secured revolving credit and term loan multi-currency facility. Amounts can be borrowed in either Canadian
or U.S. dollars. On November 4, 2022, Centuri amended the financial covenants of its revolving credit facility to increase the maximum
total net leverage ratio during the period from December 31, 2022 through December 31, 2023 (the “Centuri Credit Facility
Amendment”). The Centuri Credit Facility Amendment also transitioned the interest rate benchmark for the revolving credit facility
from LIBOR to SOFR. The applicable margin for the revolving credit facility now ranges from 1.0% to 2.5% for SOFR loans and from 0.0%
to 1.5% for Canadian Dealer Offered Rate (“CDOR”) and “base rate” loans, depending on Centuri’s total net leverage ratio. Further, the
Centuri Credit Facility Amendment increases a letter of credit sub-facility from $100 million to $125 million. The Centuri Credit Facility
Amendment did not modify any terms of the term loan facility. The revolving credit facility matures on August 27, 2026 and the term
loan facility matures on August 27, 2028. The capacity of the line of credit portion of the facility is $400 million; related amounts
borrowed and repaid are available to be re-borrowed. The term loan portion of the facility has a limit of $1.145 billion. The obligations
under the credit agreement are secured by present and future ownership interests in substantially all direct and indirect subsidiaries of
Centuri, substantially all of the tangible and intangible personal property of each borrower, certain of their direct and indirect
subsidiaries, and all products, profits, and proceeds of the foregoing.

The term loan facility is subject to a LIBOR floor of 0.50%. Furthermore, Centuri Canada Division Inc. may borrow under the revolving
credit facility with interest rates based on terms referred to above. The margin for the term loan facility is 1.50% for base rate loans and
2.50% for LIBOR loans. Centuri is also required to pay a commitment fee on the unused portion of the commitments. The commitment
fee ranges from 0.15% to 0.35% per annum. The credit agreement contains certain customary representations and warranties,
affirmative and negative covenants, and events of default. There are no financial covenants related to the term loan facility. The
revolving credit facility requires Centuri to maintain a maximum total net leverage ratio of 6.00 to 1.00 from December 31, 2022
through June 30, 2023, 5.50 to 1.00 from July 1, 2023 through September 30, 2023, 4.50 to 1.00 from October 1, 2023 through
December 31, 2023, and 4.00 to 1.00 from January 1, 2024 and thereafter. The agreement also requires Centuri to maintain a minimum
interest coverage ratio of 2.50 to 1.00. Centuri’s assets securing the facility at December 31, 2022 totaled $2.5 billion. At December 31,
2022, $1.091 billion in borrowings were outstanding under Centuri’s combined secured revolving credit and term loan facility.

All amounts outstanding are considered long-term borrowings. The effective interest rate on the secured revolving credit and term loan
facility was 7.2% at December 31, 2022.

The effective interest rates on Southwest’s variable-rate IDRBs are included in the table below:

2003 Series A
2008 Series A
2009 Series A
Tax-exempt Series A

December 31,

2022

2021

4.68%
4.84%
4.67%
4.30%

0.91%
0.90%
0.88%
0.92%

84 | SOUTHWEST GAS HOLDINGS, INC.

In Nevada, interest fluctuations due to changing interest rates on Southwest’s 2003 Series A, 2008 Series A, and 2009 Series A variable-
rate IDRBs are tracked and recovered from customers through a variable interest expense recovery mechanism.

None of Southwest’s debt instruments have credit triggers or other clauses that result in default if bond ratings are lowered by rating
agencies. Interest and fees on certain debt instruments are subject to adjustment depending on Southwest’s bond ratings. Certain debt
instruments are subject to a leverage ratio cap and the 6.1% Notes due 2041 are also subject to a minimum net worth requirement. At
December 31, 2022, Southwest was in compliance with all of its covenants. Under the most restrictive of the financial covenants,
approximately $2.5 billion in additional debt could be issued while still meeting the leverage ratio requirement. Relating to the minimum
net worth requirement, as of December 31, 2022, there is at least $2 billion of cushion in equity. No specific dividend restrictions exist
under the collective covenants. None of the debt instruments contain material adverse change clauses.

Certain Centuri debt instruments have leverage ratio caps and fixed charge ratio coverage requirements. At December 31, 2022,
Centuri was in compliance with all of its covenants. Under the most restrictive of the covenants, Centuri could issue over $222 million in
additional debt and meet the leverage ratio requirement. Centuri has at least $33 million of cushion relating to the minimum fixed charge
ratio coverage requirement. Centuri’s covenants limit its ability to provide cash dividends to Southwest Gas Holdings, Inc., its parent. The
dividend restriction is equal to a calculated available amount generally defined as 50% of its rolling twelve-month consolidated net
income adjusted for certain items, such as parent contribution inflows, Linetec redeemable noncontrolling interest payments, or
dividend payments, among other adjustments, as applicable.

Estimated maturities of long-term debt for the next five years are:

(Thousands of dollars)

Southwest Gas Corporation:

Debentures
Revolving credit facility and commercial paper

Total

Southwest Gas Holdings, Inc.:

Centuri secured term loan facility
Centuri secured revolving credit facility
Other debt obligations

Total

Short-Term Debt

2023

2024

2025

2026

2027

Total

— $
—

— $ 75,000 $332,500 $407,500
50,000

—

50,000

—

50,000

75,000

332,500

457,500

14,313
—
30,245

11,450
—
31,102

11,450
—
29,554

11,450
81,955
28,651

11,450
—
7,292

60,113
81,955
126,844

$44,558 $42,552 $91,004 $197,056 $351,242 $726,412

Southwest Gas Holdings, Inc. has a $300 million credit facility that is primarily used for short-term financing needs. Interest rates for this
facility are calculated at either SOFR or the “alternate base rate,” plus in each case an applicable margin that is determined based on the
Company’s senior unsecured debt rating. There was $173 million and $59 million outstanding under this facility with a weighted average
interest rate of 5.588% and 1.323% at December 31, 2022 and 2021, respectively.

On December 30, 2022, in connection with that certain Amended and Restated Revolving Credit Agreement, dated as of April 10, 2020
(as amended by Amendment No. 1 thereto, dated as of December 28, 2021), by and between Southwest Gas Holdings, Inc., the lenders
party thereto, and The Bank of New York Mellon, as Administrative Agent, and pursuant to an Increase Request delivered by the
Company to the Administrative Agent, the total commitment amount available under the credit facility was increased, from $200 million
to $300 million. Interest rate benchmarks (SOFR or an alternative) as well as related ranges, including with regard to the applicable
margin, largely mirror those included in Southwest’s amended facility agreement noted above, determined in this case based on
Southwest Gas Holdings, Inc.’s senior unsecured long-term debt rating. At December 31, 2022, the applicable margin is 1.250% for loans
bearing interest with reference to SOFR and 0.250% for loans bearing interest with reference to the alternative base rate. The
commitment fee rates, terms, and covenants, noted above for Southwest, are also applicable to Southwest Gas Holdings, Inc. in its
amended credit facility, including the noted ratio of funded debt to total capitalization as of the end of any quarter of any fiscal year. The
commitment fee under this credit facility was not significant for the year ended December 31, 2022.

In March 2022, Southwest amended its $250 million Term Loan (the “March 2021 Term Loan”) extending the maturity date to March 21,
2023 and replacing LIBOR interest rate benchmarks with SOFR interest rate benchmarks. The proceeds were originally used to fund the
increased cost of natural gas supply during the month of February 2021, caused by extreme weather conditions in the central U.S. There
was $225 million outstanding under the March 2021 Term Loan as of December 31, 2022. Interest rates for the amended term loan are
calculated at either SOFR or an “alternate base rate,” plus in each case an applicable margin that is determined based on Southwest’s
senior unsecured long-term debt rating. The applicable margin ranges from 0.550% to 1.000% for loans bearing interest with reference
to SOFR and 0.000% for loans bearing interest with reference to an alternate base rate. The amended agreement contains a financial
covenant requiring Southwest to maintain a ratio of funded debt to total capitalization not to exceed 0.70 to 1.00 as of the end of any
quarter of any fiscal year. The weighted average interest rate at December 31, 2022 was 5.173%.

SOUTHWEST GAS HOLDINGS, INC. | 85

On September 26, 2022, Southwest Gas Holdings, Inc. entered into Amendment No. 1 to the 364-day Term Loan Credit Agreement. The
Credit Agreement provided for a $1.6 billion delayed-draw term loan (the “Term Loan Facility”) to primarily fund the acquisition of the
equity interests in MountainWest. The amended Credit Agreement, among other things, (1) extended the maturity date of the Term
Loan to December 30, 2023 and (2) replaced LIBOR benchmarks with SOFR interest rate benchmarks. The Company agreed to pay the
Lenders fees equal to 0.10% of the aggregate principal amount outstanding under the Term Loan on March 31, 2023, 0.15% of the
aggregate principal amount outstanding under the Term Loan on June 30, 2023, and 0.20% of the aggregate principal amount
outstanding under the Term Loan on September 30, 2023. There was $1.15 billion outstanding under the Term Loan Facility as of
December 31, 2022. Upon the close of the MountainWest sale, the Company paid down $1.075 billion of the Term Loan Facility, leaving
approximately $72 million in aggregate principal amount outstanding. The applicable margin for the Term Loan Facility is 0.500% to
1.250% for base rate loans and 1.500% to 2.250% for SOFR loans, depending on the applicable pricing level in effect. Each of the interest
rate spreads will increase by 0.25% at certain time intervals beginning June 30, 2023. The commitment fee ranges from 0.060% to
0.175% per calendar quarter commencing January 3, 2022, depending on the applicable pricing level in effect. The pricing levels are
based on the Company’s senior debt ratings. The interest rate is subject to customary benchmark replacement provisions. The weighted
average interest rate at December 31, 2022 was 6.423%.

The Credit Agreement contains representations and warranties, affirmative, negative, and financial covenants and events of default
substantially similar to the Company’s existing credit facility. Subject to certain exceptions, after the funding date, the Company must
make a mandatory prepayment from 100% of the net cash proceeds received by the Company or any of its subsidiaries from any debt
offerings or equity issuances and/or 100% of the committed amount under any specified acquisition financings.

At December 31, 2022, Southwest Gas Holdings, Inc. was in compliance with all of its credit facility and 364-day Term Loan covenants.
Interest and fees on the credit facility and 364-day Term Loan are subject to adjustment depending on its senior debt ratings. The credit
facility and 364-day Term Loan are subject to a leverage ratio cap. Under the most restrictive of the financial covenants, approximately
$1.2 billion in additional debt could be issued while still meeting the leverage ratio requirement. No specific dividend restrictions exist
under the collective covenants. The credit facility and 364-day Term Loan do not contain material adverse change clauses.

As indicated above, under Southwest’s $400 million credit facility, $250 million has been designated by management for working capital
purposes. Southwest had no short-term borrowings outstanding at December 31, 2022 and 2021.

In January 2023, Southwest entered into a 364-day $450 million term loan agreement that matures on January 19, 2024. The Company
used the proceeds to fund higher than expected natural gas costs for the November 2022 through March 2023 winter period, caused by
numerous market forces including historically low storage levels, unexpected upstream pipeline maintenance events, and cold weather
conditions across the western region. Interest rates for this term loan are calculated at either SOFR plus an adjustment of 0.100% or an
“alternate base rate,” plus in each case an applicable margin that is determined based on Southwest’s senior unsecured long-term debt
rating. The applicable margin is 0.950% with reference to SOFR and 0.000% with reference to the alternate base rate. The term loan
agreement contains a financial covenant requiring Southwest to maintain a ratio of funded debt to total capitalization not to exceed
0.70 to 1.00 as of the end of any quarter of any fiscal year.

LIBOR

Certain rates established at LIBOR were scheduled to be discontinued as a benchmark or reference rate after 2021, while other LIBOR-
based rates are scheduled to be discontinued after June 2023. As of December 31, 2022, the Company had $1.009 billion in aggregate
outstanding borrowings under Centuri’s Term Loan Facility. Southwest and Southwest Gas Holdings, Inc. had no outstanding borrowings
or variable rate debt agreements with reference to LIBOR as of December 31, 2022.

Note 9 – Share-Based Compensation

At December 31, 2022, the following share-based compensation plans existed at the Company: an omnibus incentive plan and a
restricted stock/unit plan. The fair value of share grants is primarily based on the closing price of the Company’s stock on the date of
grant. All share grants in 2022, including time-lapse restricted stock units and performance shares, occurred under the omnibus
incentive plan. The table below shows total share-based plan compensation expense which was recognized in the Consolidated
Statements of Income:

(Thousands of dollars)

Share-based compensation plan expense, net of related tax benefits
Share-based compensation plan related tax benefits

Omnibus Incentive Plan

Year Ended December 31,

2022

2021

2020

$6,225 $5,747 $4,816
1,521
1,815

1,966

The omnibus incentive plan is used to promote the long-term growth and profitability of the Company, including its subsidiaries, by
providing directors, employees, and certain other individuals with incentives to increase stockholder value and otherwise contribute to
the success of the Company. In addition, the plan enables the Company to attract, retain, and reward the best available persons for

86 | SOUTHWEST GAS HOLDINGS, INC.

positions of responsibility. The omnibus incentive plan provides for the grant of stock options, stock appreciation rights, restricted stock,
restricted stock units, performance shares, and other equity-based and cash awards. Employees, directors, and consultants who provide
services to the Company or any subsidiary may be eligible under this plan. For grants under the omnibus incentive plan, directors
continue to immediately vest in the shares upon grant but are provided the option to defer receipt of equity compensation until they
leave the Board of Directors.

Performance-based incentive opportunities under the omnibus plan were granted to all officers of Southwest in the form of performance
shares and are based, depending on the officer, on consolidated earnings per share, utility net income, and utility return on equity, with
an adjustment based on relative total shareholder return, in each case, measured over a three-year performance period. Like other
restricted stock/unit programs, shares are restricted based on vesting, and in this case, further subject to future performance
determinations against relevant benchmarks. Southwest recorded $2.1 million, $3.4 million, and $2.8 million of estimated compensation
expense associated with these shares during 2022, 2021, and 2020, respectively.

Restricted Stock/Units

Restricted stock/units under the restricted stock/unit plan were previously granted to attract, motivate, retain, and reward key
employees of the Company with an incentive to attain high levels of individual performance and improved financial performance. The
legacy plan was also established to attract, motivate, and retain experienced and knowledgeable directors. As noted above, grants of
restricted stock during 2022, were granted under the omnibus incentive plan. All remaining shares under the legacy restricted stock/unit
plan (in regard to employees) were issued during 2021; remaining unissued legacy program shares relate solely to directors, and such
shares were immediately vested at the time of grant, with distribution to occur when service on the Board ends. No new grants are made
under the legacy plan, as all future stock-based incentive compensation, including with regard to restricted stock, is granted under
programs of the omnibus incentive plan, which for directors, with advance election, issuance may occur upon grant. Conversely, with
regard to management, grants under the omnibus plan are of time-lapse character, with graded vesting (and issuance in the form of
common stock) occurring, 40% at the end of year one and 30% at the end of years two and three.

The following table summarizes the activity of the restricted stock/units programs as of December 31, 2022:

(Thousands of shares)

Nonvested/unissued at December 31, 2021

Granted
Dividends
Forfeited or expired
Vested and issued(2)

Nonvested/unissued at December 31, 2022

Restricted
Stock/
Units(1)

Weighted-
average grant
date fair value

520
279
10
(85)
(264)

460

$61.01
66.11
—
66.62
56.43

$64.34

(1) The number of performance shares includes 167,200 granted and 41,100 vested and issued, which was derived by assuming that target performance will be achieved during the relevant

performance period.
Includes shares for retiree payouts and those converted for taxes.

(2)

The weighted average grant date fair value of all restricted stock/units granted in 2021 and 2020 was $65.38 and $76.85, respectively.

As of December 31, 2022, total compensation cost related to all nonvested omnibus shares not yet recognized is $5.3 million, which is
expected to be recognized over a weighted average period of 2.4 years.

Note 10 – Commitments and Contingencies

The Company and Southwest are defendants in miscellaneous legal proceedings. They are also parties to various regulatory proceedings.
The ultimate dispositions of these proceedings are not presently determinable; however, it is the opinion of management that no
litigation or regulatory proceeding to which the Company and Southwest are currently subject will have a material adverse impact on
their financial position, results of operations, or cash flows.

The Company maintains liability insurance that covers both Southwest and through the sale date, MountainWest, for various risks
associated with the operation of the natural gas pipelines and facilities. In connection with these liability insurance policies, each entity is
responsible for an initial deductible or self-insured retention amount per incident, after which the insurance carriers would be
responsible for amounts up to the policy limits. For the policy year August 2022 to July 2023, these liability insurance policies require
Southwest or MountainWest, as applicable, to be responsible for the first $1 million (self-insured retention) of each incident plus the first
$4 million in aggregate claims above its self-insured retention in the policy year. When amounts are expected to be incurred above these
amounts, subject to insurance carrier indemnity, a liability is recognized for the additional amount, in addition to a receivable from the
insurance carrier amounts, without impact to earnings.

Centuri maintains liability insurance for various risks associated with its operations. In connection with these liability insurance policies,
Centuri is responsible for an initial deductible or self-insured retention amount per occurrence, after which the insurance carriers would
be responsible for amounts up to the policy limits. For the policy year May 2022 to April 2023, Centuri is responsible for the first
$750,000 (self-insured retention) per occurrence under these liability insurance policies.

SOUTHWEST GAS HOLDINGS, INC. | 87

In August 2021, a natural gas pipe operated by Southwest was involved in an explosion that injured four individuals and damaged
property. The explosion was caused by a leak in the pipe, and is under investigation. Individuals that were injured have each brought legal
claims against Southwest and other parties. If Southwest is deemed fully or partially responsible, Southwest estimates its net exposure
could be equal to the self-insured retention of $5 million (the maximum noted above). In 2021, pursuant to ASC 450 – Contingencies,
Southwest recorded a $5 million liability related to this incident reflecting its best estimate of the probable loss at that time. Additional
amounts, subject to insurance indemnity, have been recognized on the consolidated balance sheets, in accordance with the above-noted
accounting for amounts above the self-insurance retention provisions, which were not material to our financial position. Any amounts
above that which has already been recognized (to be covered by insurance) cannot be estimated as of the date these financial statements
are issued.

Other contingencies are also recognized where appropriate, if claims are brought, or expected to be brought, against the Company or
Southwest, where management expects it may settle (or be required to settle) claims in cash, or in some cases, by means of insurance
indemnification. The balance of such reserves was updated for additional accruals, including in regard to a contract dispute. For that
item, $6.2 million was recorded during the second quarter of 2022, based on management’s estimate of Southwest’s exposure. The
amount was paid in the fourth quarter of 2022 and the matter is closed.

As described in Note 1 – Background, Organization, and Summary of Significant Accounting Policies, the November 2021 civil suit filed
by the Icahn Group, against the Company and certain officers and directors, was subject to a stipulation of dismissal with prejudice in
May 2022, pursuant to the terms of the Cooperation Agreement.

On November 18, 2021, the City Pension Fund for Firefighters and Police Officers in the City of Miami Beach commenced a putative
class action lawsuit in the Court of Chancery for the State of Delaware on behalf of a putative class of persons who purchased the
Company’s stock. The action is captioned City Pension Fund for Firefighters and Police Officers in the City of Miami Beach v. Robert L.
Boughner, et al., C.A. No. 2021-0990-KSJM (Del. Ch.). The complaint was later amended on November 30, 2021. The amended complaint
named the Company and the individual members of the Board as defendants. The complaint sought to assert breach of fiduciary duty
claims, alleging that the Board’s recommendation that stockholders reject Icahn’s offer to purchase shares of the Company’s common
stock omitted material information about the Company’s financial analysis; and sought to have the Board approve Icahn’s slate of
nominees as “continuing directors” under certain of the Company’s debt instruments. In March 2022, the City Pension Fund filed a
motion for summary judgment on its claim; however, in April 2022, the City Pension Fund filed a notice of withdrawal of its motion for
summary judgment. The Company believes that the claims lack merit and intends to vigorously defend against them.

Through an assessment process of commitments and contingencies of any kind, the Company and Southwest may determine that certain
costs are likely to be incurred in the future related to specific legal matters. In these circumstances and in accordance with accounting
policies, the Company and Southwest will make an accrual, as necessary.

Note 11 – Pension and Other Postretirement Benefits

Southwest Gas Corporation

Employees’ Investment Plan

An Employees’ Investment Plan (“EIP”) is offered to eligible employees of Southwest through deduction of a percentage of base
compensation, subject to Internal Revenue Service (“IRS”) limitations. The EIP provides for purchases of various mutual fund
investments and Company common stock. For employees hired on or before December 31, 2021, one-half of amounts deferred are
matched, up to a maximum matching contribution of 3.5% of an employee’s annual compensation. Employees hired on or after January 1,
2022 are eligible for non-elective employer contributions of 3% plus a matching contribution (dollar-for-dollar) up to 7% of eligible
compensation. Officers hired after January 1, 2022 are eligible for non-elective and matching contributions. Contributions to the plan by
Southwest were $6.9 million, $6.1 million, and $5.9 million for 2022, 2021, and 2020, respectively.

Deferred Compensation Plan

A deferred compensation plan is offered to all officers of Southwest and a separate deferred compensation plan is offered to members of
the Company’s Board of Directors. The plans provide the opportunity to defer up to 100% of annual cash compensation. One-half of
amounts deferred by officers are matched, up to a maximum matching contribution of 3.5% of an officer’s annual base salary. Upon
retirement, payments of compensation deferred, plus interest, are made in equal monthly installments over 10, 15, or 20 years, as
elected by the participant. Directors have an additional option to receive such payments over a five-year period. Deferred compensation
earns interest at a rate determined each January. The interest rate equals 150% of Moody’s Seasoned Corporate Bond Rate Index.

Pension and Postretirement Plans

A noncontributory qualified retirement plan with defined benefits covering substantially all Southwest employees hired on or before
December 31, 2021 is available, in addition to a separate unfunded supplemental executive retirement plan (“SERP”), which is limited to
Southwest’s officers. Postretirement benefits other than pensions (“PBOP”) are provided to qualified retirees for health care, dental,
vision and life insurance benefits. The defined benefit qualified retirement plan, SERP, and PBOP are not available to Southwest
employees hired on or after January 1, 2022. As noted above, employees hired on or after that date, are eligible for enhanced
contributions to the EIP.

88 | SOUTHWEST GAS HOLDINGS, INC.

The overfunded or underfunded positions of defined benefit postretirement plans, including pension plans, are recognized in the
Consolidated Balance Sheets. Any actuarial gains and losses, prior service costs, and transition assets or obligations are recognized in
Accumulated other comprehensive income under Stockholders’ equity, net of tax, until they are amortized as a component of net
periodic benefit cost.

A regulatory asset has been established for the portion of the total amounts otherwise chargeable to Accumulated other comprehensive
income that are expected to be recovered through rates in future periods. Changes in actuarial gains and losses and prior service costs
pertaining to the regulatory asset will be recognized as an adjustment to the regulatory asset account as these amounts are amortized
and recognized as components of net periodic pension costs each year.

The qualified retirement plan invests the majority of its plan assets in common collective trusts, which include a well-diversified portfolio
of domestic and international equity securities and fixed income securities, and are managed by a professional investment manager
appointed by Southwest. The investment manager has full discretionary authority to direct the investment of plan assets held in trust
within the specific guidelines prescribed by Southwest through the plan’s investment policy statement. In 2016, Southwest adopted a
liability driven investment (“LDI”) strategy for part of the portfolio, a form of investing designed to better match the movement in
pension plan assets with the impact of interest rate changes and inflation assumption changes on the pension plan liability. The
implementation of the LDI strategy will be phased in over time by using a glide path. The glide path is designed to increase the allocation
of the plan’s assets to fixed income securities, as the funded status of the plan increases, in order to more closely match the duration of
the plan assets to that of the plan liability. Pension plan assets are held in a Master Trust. The pension plan funding policy is in compliance
with the federal government’s funding requirements.

Pension costs for these plans are affected by the amount and timing of cash contributions to the plans, the return on plan assets, discount
rates, and by employee demographics, including age, compensation, and length of service. Changes made to the provisions of the plans
may also impact current and future pension costs. Actuarial formulas are used in the determination of pension costs and are affected by
actual plan experience and assumptions about future experience. Key actuarial assumptions include the expected return on plan assets,
the discount rate used in determining the projected benefit obligation and pension costs, and the assumed rate of increase in employee
compensation. Relatively small changes in these assumptions, particularly the discount rate, may significantly affect pension costs and
plan obligations for the qualified retirement plan. In determining the discount rate, management matches the plan’s projected cash flows
to a spot-rate yield curve based on highly rated corporate bonds. Changes to the discount rate from year-to-year, if any, are generally
made in increments of 25 basis points.

There was a 225 basis point increase in the discount rate between years, as reflected below. The methodology utilized to determine the
discount rate was consistent with prior years. The weighted-average rate of compensation increase remained the same (consistent with
management’s expectations overall). The asset return assumption (which impacts the following year’s expense) increased by 25 basis
points. The rates are presented in the table below:

Discount rate
Weighted-average rate of compensation increase
Asset return assumption

December 31,

2022

2021

5.25%
3.25%
6.75%

3.00%
3.25%
6.50%

Future years’ expense level movements (up or down) will continue to be greatly influenced by long-term interest rates, asset returns, and
funding levels.

SOUTHWEST GAS HOLDINGS, INC. | 89

The following table sets forth the retirement plan, SERP, and PBOP funded statuses and amounts recognized on the Consolidated
Balance Sheets and Consolidated Statements of Income.

(Thousands of dollars)

2022

2021

Year Ended December 31,

Qualified
Retirement Plan

SERP

PBOP

Qualified
Retirement Plan

SERP

PBOP

Change in benefit obligations:

Benefit obligation for service rendered to date at beginning

of year (PBO/PBO/APBO)

Service cost
Interest cost
Actuarial loss (gain)
Benefits paid

$1,531,197
44,110
45,006
(399,066)
(61,796)

$ 49,530 $ 84,226
1,941
2,452
(18,260)
(4,922)

424
1,441
(6,134)
(3,164)

$1,499,239
41,159
40,432
8,908
(58,541)

$ 53,631 $ 82,205
1,691
2,193
3,438
(5,301)

526
1,431
(3,244)
(2,814)

Benefit obligation at end of year (PBO/PBO/APBO)

1,159,451

42,097

65,437

1,531,197

49,530

84,226

Change in plan assets:

Market value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Benefits paid

Market value of plan assets at end of year

1,366,043
(330,203)
56,000
(61,796)

1,030,044

—
—
3,164
(3,164)

52,168
(6,036)
—
(7,673)

1,186,433
136,151
102,000
(58,541)

—
—
2,814
(2,814)

52,286
7,717
—
(7,835)

—

38,459

1,366,043

—

52,168

Funded status at year end

$ (129,407)

$(42,097) $(26,978)

$ (165,154)

$(49,530) $(32,058)

Weighted-average assumptions (benefit obligation):

Discount rate
Weighted-average rate of compensation increase

5.25%
3.25%

5.25%
N/A

3.00%
3.25%

3.00%
N/A

Estimated funding for the plans above during calendar year 2023 is expected to be approximately $59 million, of which $56 million
pertains to the retirement plan. Management monitors plan assets and liabilities and may, at its discretion, increase plan funding levels
above the minimum in order to achieve a desired funded status and avoid or minimize potential benefit restrictions.

The accumulated benefit obligation for the retirement plan and the SERP is presented below:

(Thousands of dollars)

Retirement plan
SERP

Benefits expected to be paid for pension, SERP, and PBOP over the next 10 years are as follows:

December 31,

2022

2021

$1,074,493 $1,395,773
46,885

39,263

(Millions of dollars)

Pension
SERP
PBOP

2023

2024

2025

2026

2027

2028-2032

$65.0 $67.0 $68.0 $69.0 $71.0
3.1
5.2

3.3
5.2

3.3
5.1

3.2
5.2

3.1
5.1

$377.0
14.6
25.6

No assurance can be made that actual funding and benefits paid will match these estimates.

For PBOP measurement purposes, the per capita cost of the covered health care benefits medical rate trend assumption is 6.0%,
declining to 4.5%. Specific contributions are made for health care benefits of employees who retire after 1988, but Southwest pays all
covered health care costs for employees who retired prior to 1989. The medical trend rate assumption noted above applies to the
benefit obligations of pre-1989 retirees only.

The service cost component of net periodic benefit costs included in the table below is part of an overhead loading process associated
with the cost of labor. The overhead process ultimately results in allocation of that portion of overall net periodic benefit costs to the
same accounts to which productive labor is charged. As a result, service costs become components of various accounts, primarily
Operations and maintenance expense, Net regulated operations plant, and Deferred charges and other assets for both the Company and
Southwest. The non-service cost components of net periodic benefit cost are reflected in Other income (deductions) on the Consolidated
Statements of Income of each entity, based on accounting guidance for the presentation of such costs.

90 | SOUTHWEST GAS HOLDINGS, INC.

Components of net periodic benefit cost:

(Thousands of dollars)

2022

2021

2020

2022

Qualified Retirement Plan

SERP

2021

2020

2022

PBOP

2021

2020

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of net actuarial loss

$ 44,110 $ 41,159 $ 34,299 $ 424 $ 526 $ 389 $ 1,941 $ 1,691 $ 1,581
2,582
(3,408)
1,155
—

45,006
(79,913)
—
32,468

45,555
(65,296)
—
36,025

40,432
(72,352)
—
41,955

2,452
(3,228)
175
—

2,193
(3,239)
959
—

1,441
—
—
2,350

1,431
—
—
2,642

1,604
—
—
1,805

Net periodic benefit cost

$ 41,671 $ 51,194 $ 50,583 $4,215 $4,599 $3,798 $ 1,340 $ 1,604 $ 1,910

Weighted-average assumptions (net benefit cost)

Discount rate
Expected return on plan assets
Weighted-average rate of compensation

increase

3.00%
6.50%

2.75%
6.50%

3.50%
6.75%

3.00%
N/A

2.75%
N/A

3.50%
N/A

3.00%
6.50%

2.75%
6.50%

3.50%
6.75%

3.25%

3.00%

3.25%

3.00%

3.25%

N/A

Other Changes in Plan Assets and Benefit Obligations Recognized in Net Periodic Benefit Cost and Other Comprehensive Income

(Thousands of dollars)

Net actuarial loss (gain)(a)
Amortization of prior service

cost(b)

Amortization of net
actuarial loss(b)
Prior service cost
Regulatory adjustment

Recognized in other

Year Ended December 31,

2022

Qualified
Retirement
Plan

Total

SERP PBOP

Total

2021

Qualified
Retirement
Plan

SERP PBOP

Total

2020

Qualified
Retirement
Plan

SERP PBOP

$ (4,079) $ 11,049 $(6,133) $(8,995) $(59,176) $(54,892) $(3,245) $(1,039) $ 57,539

$ 45,665 $ 7,240 $ 4,634

(175)

—

(175)

(959)

—

(959)

(1,155)

—

(1,155)

(34,818)
—
28,232

(32,468) (2,350)
—
(44,597)
—
—
—
— 9,170 88,194

—
19,062

(41,955) (2,642)
—
—
—
— 1,998

—
86,196

(37,830)
—
(7,435)

(36,025) (1,805)
—
—

—
(3,956)

—
—
(3,479)

comprehensive (income) loss

(10,840)

(2,357) (8,483)

—

(16,538)

(10,651) (5,887)

— 11,119

5,684 5,435

—

Net periodic benefit costs

recognized in net income

47,226

41,671 4,215 1,340 57,397

51,194 4,599 1,604 56,291

50,583 3,798 1,910

Total of amount recognized in
net periodic benefit cost and
other comprehensive
(income) loss

$ 36,386

$ 39,314 $(4,268) $ 1,340 $ 40,859

$ 40,543 $(1,288) $ 1,604 $ 67,410

$ 56,267 $ 9,233 $ 1,910

The table above discloses the net gain or loss and prior service cost recognized in Other comprehensive income, separated into
(a) amounts initially recognized in Other comprehensive income, and (b) amounts subsequently recognized as adjustments to Other
comprehensive income as those amounts are amortized as components of net periodic benefit cost. See also Note 6 – Other
Comprehensive Income and Accumulated Other Comprehensive Income (“AOCI”).

SOUTHWEST GAS HOLDINGS, INC. | 91

The following table sets forth, by level within the three-level fair value hierarchy, the fair values of the assets of the qualified pension
plan and the PBOP as of December 31, 2022 and 2021. The SERP has no assets.

(Thousands of dollars)

2022

2021

December 31,

Assets at fair value:
Level 1 – Quoted prices in active markets for identical financial assets

Mutual funds

Total Level 1 Assets(1)

Level 2 – Significant other observable inputs

Commingled trust equity funds(2)

Global
International
U.S. equity securities
Emerging markets

Commingled trust fixed income funds(3)
Pooled funds and mutual funds
Government fixed income and mortgage backed securities

Total Level 2 assets(4)

Total Plan assets at fair value

Insurance company general account contracts(5)

Qualified
Retirement
Plan

PBOP

Total

Qualified
Retirement
Plan

PBOP

Total

— $31,631 $

31,631 $

— $35,194 $

35,194

—

31,631

—

35,194

266,368
117,976
184,300
62,436
390,070
6,359
159

1,673
741
1,159
392
2,450
412
1

268,041
118,717
185,459
62,828
392,520
6,771
160

373,936
158,461
279,062
82,004
463,942
5,979
196

4,538
1,923
3,386
995
5,630
500
2

378,474
160,384
282,448
82,999
469,572
6,479
198

1,027,668

6,828

1,034,496

1,363,580

16,974

1,380,554

1,027,668
2,376

38,459
—

1,066,127
2,376

1,363,580
2,463

52,168
—

1,415,748
2,463

Total Plan assets

$1,030,044 $38,459 $1,068,503 $1,366,043 $52,168 $1,418,211

(1) The Mutual funds category above is a balanced fund that invests in a diversified portfolio of common stocks, preferred stocks, and fixed-income securities. Under normal circumstances the
balanced fund will hold no more than 75%, and no less than 25%, of its total assets in equity securities. The fund seeks regular income, conservation of principal, and an opportunity for
long-term growth of principal and income.

(2) The commingled trust equity funds include common collective trusts that invest in a diversified portfolio of securities regularly traded on securities exchanges. These funds are shown in the
above table at net asset value (“NAV”), which is the value of securities in the fund less the amount of any liabilities outstanding. Strategies employed by the funds include investment in:

‰ Global equities, including domestic equities

‰

International developed countries equities

‰ Domestic equities

‰

Emerging markets equities

Shares in the commingled trust equity funds may be redeemed given one business day notice. While they are trust equity funds and reported at NAV, due to the short redemption notice

period, the lack of redemption fees, the fact that the underlying investments are exchange-traded, and that substantial liabilities do not exist subject to the NAV calculation, these
investments are viewed as indirectly observable (Level 2) in the fair value hierarchy and are therefore not excluded from the body of the fair value table as a reconciling item.

The global fund provides diversified exposure to global equity markets. The fund seeks to provide long-term capital growth by investing primarily in securities listed on the major developed

equity markets of the U.S., Europe, and Asia, as well as within those listed on emerging country equity markets on a tactical basis.

The international fund invests in international financial markets, primarily those of developed economies in Europe and the Pacific Basin. The fund invests primarily in equity securities

issued by foreign corporations, but may invest in other securities perceived as offering attractive investment return opportunities.

The domestic equities securities funds include a large and medium capitalization fund and a small capitalization fund. The large and medium capitalization fund is designed to track the
performance of the large and medium capitalization companies contained in the index, which represents approximately 90% of the market capitalization of the U.S. stock market. The
small capitalization fund is designed to provide maximum long-term appreciation through investments that are well diversified by industry.

The emerging markets fund invests in countries defined as an emerging market country. Fund investments are made directly in each country or, where direct investment is inefficient or
prohibited, through appropriate financial instruments or participation in commingled funds. Major emerging markets include Brazil, India, China, and other developing countries around
the world.

(3) The commingled trust fixed income funds consist primarily of fixed income debt securities issued by the U.S. Treasury, government agencies, and fixed income debt securities issued by
corporations. The fixed income fund investments may include the use of high yield, international fixed income securities and other instruments, including derivatives, to ensure prudent
diversification over a broad spectrum of investments. The changes in the value of the fixed income funds are intended to offset the changes in the pension plan liabilities due to changes in
the discount rate.

These funds are shown in the above table at NAV. Investments in the commingled trust fixed equity funds may be redeemed given one business day notice. While they are fixed income
funds and reported at NAV, due to the short redemption notice period, the lack of redemption fees, the fact that the underlying investments are exchange-traded, and that substantial
liabilities do not exist subject to the NAV calculation, these investments are viewed as indirectly observable (Level 2), and are also not excluded from the body of the fair value table as a
reconciling item.

(4) With the exception of items (2) and (3), which are discussed above, the Level 2 assets consist mainly of pooled funds and mutual funds. These funds are collective short-term funds that

invest in Treasury bills and money market funds and are used as a temporary cash repository.

(5) The insurance company general account contracts are annuity insurance contracts used to pay the pensions of employees who retired prior to 1989. The balance of the account disclosed

in the above table is the contract value, which is the result of deposits, withdrawals, and interest credits.

92 | SOUTHWEST GAS HOLDINGS, INC.

Centuri

Defined Contribution Plans

Centuri offers defined contribution plans under Section 401(k) of the Internal Revenue Code to its eligible employees, regardless of
whether they are covered under collective-bargaining agreements. Eligibility requirements vary, as does timing of participation,
matching, vesting, and profit-sharing features of the plans. Contributions by Centuri to these plans for the years ended December 31,
2022, 2021, and 2020 were $13 million, $9 million, and $9 million, respectively.

Deferred Compensation Plan

Centuri sponsors a nonqualified deferred compensation plan that is offered to a select group of management and highly-compensated
employees. The plan allows participants to defer up to 80% of base salary and provides a match of 100% of contributions up to 5% of a
participant’s salary. The plan also allows Centuri, at its election, to credit participant accounts with discretionary contributions.
Participants are 100% vested in salary deferrals, contributions, and all earnings. Participant accounts include a return based on the
performance of the underlying investment options selected. Payments from the plan are designated at each annual enrollment period
based on specified triggering events and are payable by lump sum or on an annual installment basis.

Multiemployer Pension Plans

Centuri makes defined contributions to several multiemployer defined benefit pension plans under the terms of collective bargaining
agreements (“CBAs”) with various unions representing certain employees. Contribution rates are generally specified in the CBAs and are
made to the plans on a “pay-as-you-go” basis. Such contributions correspond to the number of union employees and the particular plans
in which they participate, and vary depending upon the location, number of ongoing projects, and the need for union resources in
connection with those projects.

The risks of participating in multiemployer plans are different from single-employer plans, including: (i) assets contributed to the
multiemployer plan by one employer may be used to provide benefits to employees of other participating employers; (ii) if a participating
employer stops contributing to the multiemployer plan, the unfunded obligations of the plan may become the obligation of the remaining
participating employers; and (iii) if a participating employer chooses to stop participating in these multiemployer plans, the employer
may be required to pay those plans an amount based on the underfunded status of the plan.

The Pension Protection Act of 2006 requires special funding and operational rules for multiemployer plans in the U.S., including
classification of the plans (based on multiple factors, including the funded status of the plan), the most severe of which is “critical.”
Depending upon the classification, plans may be required to adopt measures to improve their funded status through a funding
improvement or rehabilitation plan, which may require additional contributions from employers (in the form of a surcharge on benefit
contributions) and/or modification of retiree benefits. The amount of additional funds, if any, that Centuri may be obligated to contribute
to these plans in the future cannot be estimated due to the uncertainty regarding future levels of work that may require the utilization of
union employees covered by these plans, as well as uncertainty as to the future contribution levels and possible surcharges on
contributions that may apply to these plans at that time.

Centuri contributed $71 million, $57.4 million, and $44.3 million collectively to the plans for the years ended December 31, 2022, 2021,
and 2020, respectively. Substantially all of the contributions made by Centuri during these years were to U.S. plans that were not
classified as critical, and for which no special surcharges were assessed. Eight plans were classified as critical and required special
surcharges; the aggregate contributions to these plans were $3.8 million for the year ended December 31, 2022 and were insignificant
during the periods ending December 31, 2021 and 2020.

Note 12 – Income Taxes

Southwest Gas Holdings, Inc.:

The following is a summary of income (loss) before taxes and noncontrolling interests for domestic and foreign operations:

(Thousands of dollars)

U.S.
Foreign

Year ended December 31,

2022

2021

2020

$(302,581) $221,507 $282,489
22,249

29,244

25,343

Total income (loss) before income taxes

$(273,337) $246,850 $304,738

Income tax expense (benefit) consists of the following:

(Thousands of dollars)

Current:

Federal
State
Foreign

Deferred:
Federal
State
Foreign

Total income tax expense (benefit)

Deferred income tax expense (benefit) consists of the following significant components:

(Thousands of dollars)

Deferred federal and state:
Property-related items
Purchased gas cost adjustments
Employee benefits
Regulatory adjustments
Deferred payroll taxes
Deferred revenue
Net operating loss
Goodwill impairment
Alternative minimum tax
All other deferred

Total deferred federal and state
Deferred ITC, net

Total deferred income tax expense (benefit)

SOUTHWEST GAS HOLDINGS, INC. | 93

Year Ended December 31,

2022

2021

2020

(949) $ (2,872) $ 6,287
8,617
(11,516)
4,666
6,524

7,123
9,089

15,263

(7,864)

19,570

(76,984)
(12,828)
(1,104)

39,117
8,239
156

44,547
414
1,222

(90,916)

47,512

46,183

$(75,653) $ 39,648 $65,753

Year Ended December 31,

2022

2021

2020

$ 41,191 $ 35,072 $50,504
(5,726)
459
(9,885)
(9,055)
588
2,331
—
4,409
12,610

76,306
12,223
(15,482)
(6,344)
5,751
(120,704)
(105,507)
—
21,669

73,613
(1,484)
(10,101)
(6,344)
6,021
(64,981)
—
—
15,768

(90,897)
(19)

47,564
(52)

46,235
(52)

$ (90,916) $ 47,512 $46,183

References above and below to Deferred payroll taxes relate to the employer portion of Social Security tax, for which deferment of
remittance was permissible under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

A reconciliation of the U.S. federal statutory rate to the consolidated effective tax rate (and the sources of these differences and the
effect of each) are summarized as follows:

U.S. federal statutory income tax rate

Net state taxes
Tax credits
Company-owned life insurance
Amortization of excess deferred taxes
All other differences

Consolidated effective income tax rate

Year Ended December 31,

2022

2021

2020

21.0%
3.2
0.2
(0.8)
5.2
(1.1)

21.0%
1.0
(0.5)
(1.1)
(4.3)
—

21.0%
3.0
(0.5)
(0.8)
(0.8)
(0.3)

27.7%

16.1%

21.6%

94 | SOUTHWEST GAS HOLDINGS, INC.

Deferred tax assets and liabilities consist of the following:

(Thousands of dollars)

Deferred tax assets:

Deferred income taxes for future amortization of ITC and excess deferred taxes
Employee benefits
Net operating losses
Deferred payroll taxes
Lease-related item
Goodwill impairment
Other
Valuation allowance

Deferred tax liabilities:

Property-related items, including accelerated depreciation
Regulatory balancing accounts
Debt-related costs
Intangibles
Lease-related item
Other

Net noncurrent deferred tax liabilities

December 31,

2022

2021

$ 109,093 $ 116,496
39,181
102,853
6,344
18,462
—
12,149
(4,902)

29,307
223,557
—
19,745
105,507
13,197
(2,197)

498,209

290,583

873,328
154,124
(2,365)
105,668
21,164
28,275

843,559
77,818
2,277
97,860
17,254
20,562

1,180,194

1,059,330

$ 681,985 $ 768,747

Net noncurrent deferred tax liabilities above at December 31, 2022 and 2021 are reflected net of $82,000 and $121,000 of noncurrent
deferred tax assets associated with the Company’s Canadian operations, which are shown separately on the Company’s Consolidated
Balance Sheets.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(Thousands of dollars)

Unrecognized tax benefits at beginning of year

Gross increases – tax positions in prior period
Gross increases – current period tax positions
Gross decreases – current period tax positions
Settlements
Lapse in statute of limitations

Unrecognized tax benefits at end of year

Southwest Gas Corporation:

The following is a summary of income before taxes:

(Thousands of dollars)

Total income before income taxes

Income tax expense (benefit) consists of the following:

(Thousands of dollars)

Current:

Federal
State

Deferred:
Federal
State

Total income tax expense

December 31,

2022

2021

$2,629 $1,928
442
259
—
—
—

389
54
—
—
—

$3,072 $2,629

Year ended December 31,

2022

2021

2020

$184,921 $216,473 $194,873

Year Ended December 31,

2022

2021

2020

(78) $ (3,643) $ (4,678)
(179)

(6,556)

7,805

7,727

(10,199)

(4,857)

23,710
(896)

36,842
2,695

38,561
2,051

22,814

39,537

40,612

$30,541 $ 29,338 $35,755

Deferred income tax expense (benefit) consists of the following significant components:

(Thousands of dollars)

Deferred federal and state:
Property-related items
Purchased gas cost adjustments
Employee benefits
Regulatory adjustments
Deferred payroll taxes
Alternative minimum tax
Net operating loss
All other deferred

Total deferred federal and state
Deferred ITC, net

Total deferred income tax expense

SOUTHWEST GAS HOLDINGS, INC. | 95

Year Ended December 31,

2022

2021

2020

$ 29,633 $ 23,077 $36,029
(5,726)
11,437
(9,885)
(1,810)
4,409
—
6,210

76,306
5,332
(15,482)
(892)
—
(76,080)
4,016

73,613
5,508
(10,101)
(892)
—
(59,119)
7,503

22,833
(19)

39,589
(52)

40,664
(52)

$ 22,814 $ 39,537 $40,612

A reconciliation of the U.S. federal statutory rate to the consolidated effective tax rate (and the sources of these differences and the
effect of each) are summarized as follows:

U.S. federal statutory income tax rate

Net state taxes
Tax credits
Company-owned life insurance
Amortization of excess deferred taxes
All other differences

Effective income tax rate

Deferred tax assets and liabilities consist of the following:

(Thousands of dollars)

Deferred tax assets:

Deferred income taxes for future amortization of ITC and excess deferred taxes
Employee benefits
Net operating losses
Deferred payroll taxes
Other
Valuation allowance

Deferred tax liabilities:

Property-related items, including accelerated depreciation
Regulatory balancing accounts
Debt-related costs
Other

Net deferred tax liabilities

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(Thousands of dollars)

Unrecognized tax benefits at beginning of year

Gross increases – tax positions in prior period
Gross decreases – tax positions in prior period
Gross increases – current period tax positions
Gross decreases – current period tax positions
Settlements
Lapse in statute of limitations

Unrecognized tax benefits at end of year

Year Ended December 31,

2022

2021

2020

21.0%
1.6
(0.3)
0.6
(6.9)
0.5

21.0%
0.3
(0.6)
(0.9)
(4.9)
(1.3)

21.0%
1.7
(0.7)
(1.0)
(1.3)
(1.4)

16.5%

13.6%

18.3%

December 31,

2022

2021

$ 94,273 $101,133
(4,671)
59,119
892
6,777
(22)

(12,604)
135,200
—
2,512
—

219,381

163,228

733,011
154,124
2,062
14,132

703,374
77,818
2,277
18,587

903,329

802,056

$683,948 $638,828

December 31,

2022

2021

$2,362 $1,793
310
—
259
—
—
—

259
—
23
—
—
—

$2,644 $2,362

96 | SOUTHWEST GAS HOLDINGS, INC.

In assessing whether uncertain tax positions should be recognized in its financial statements, management first determines whether it is
more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation
processes, based on the technical merits of the position. In evaluations of whether a tax position has met the more-likely-than-not
recognition threshold, management presumes that the position will be examined by the appropriate taxing authority that would have full
knowledge of all relevant information. For tax positions that meet the more-likely-than-not recognition threshold, management
measures the amount of benefit recognized in the financial statements at the largest amount of benefit that is greater than 50% likely of
being realized upon ultimate settlement. Unrecognized tax benefits are recognized in the first financial reporting period in which
information becomes available indicating that such benefits will more-likely-than-not be realized. For each reporting period,
management applies a consistent methodology to measure unrecognized tax benefits, and all unrecognized tax benefits are reviewed
periodically and adjusted as circumstances warrant. Measurement of unrecognized tax benefits is based on management’s assessment of
all relevant information, including prior audit experience, the status of audits, conclusions of tax audits, lapsing of applicable statutes of
limitation, identification of new issues, and any administrative guidance or developments.

At December 31, 2022, the total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was
$3.1 million for the Company and $2.6 million for Southwest. No significant increases or decreases in unrecognized tax benefits are
expected within the next 12 months.

The Company and Southwest recognize interest expense and income and penalties related to income tax matters in income tax expense.
There was $0, $21,000, and $523,000 of tax-related interest income for 2022, 2021, and 2020, respectively.

The Company’s regulated operations accounting for income taxes is impacted by the FASB’s ASC Topic 980 – Regulated Operations.
Reductions in accumulated deferred income tax balances due to the reduction in the corporate income tax rates to 21% under the
provisions of the Tax Cuts and Jobs Act (the “TCJA”), enacted in December 2017, may continue to result in a refund of excess deferred
taxes to customers, generally through reductions in future rates. The TCJA included provisions that stipulate how these excess deferred
taxes may be passed back to customers for certain accelerated tax depreciation benefits. The December 31, 2022 Consolidated Balance
Sheets of Southwest and the Company reflect the impact of the TCJA and the remaining unamortized balance of the regulatory liability
(including a gross-up), barring further changes to income tax rates. See also Note 5 – Regulatory Assets and Liabilities.

The Company and its subsidiaries file a consolidated federal income tax return in the U.S. and in various states, as well as separate
returns in Canada. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or Canadian income tax
examinations for years before 2018.

The Company and each of its subsidiaries, including Southwest, participate in a tax sharing agreement to establish the method for
allocating tax benefits and losses among members of the consolidated group. The consolidated federal income tax is apportioned among
the subsidiaries using a separate return method.

The acquisition of MountainWest by the Company was a taxable transaction for U.S. federal and state income tax purposes. As a result,
the Company obtained a step-up in the basis of the assets acquired (as determined for income tax purposes), without succeeding to the
holding period, accounting methods, or historical income tax liabilities associated with MountainWest. Accordingly, the deferred income
taxes were redetermined on the date of acquisition, December 31, 2021.

At December 31, 2022, the Company has a U.S. federal net operating loss carryforward of $932.8 million. The Company also has general
business credits of $4 million, which begin to expire in 2041. The Company has no capital loss carryforwards. At December 31, 2022, the
Company has an income tax net operating loss carryforward related to Canadian operations of $21.2 million, which begins to expire in
2034. As of the same date, the Company has $519 million of state net operating loss carryforwards. Depending on the jurisdiction in
which the state net operating loss was generated, the carryforwards will begin to expire in 2031.

Management intends to continue to permanently reinvest any future foreign earnings in Canada.

Note 13 – Segment Information

The Company’s operating segments are determined based on the nature of their activities. The natural gas distribution segment is
engaged in the business of purchasing, distributing, and transporting natural gas. The utility infrastructure services segment is primarily
engaged in the business of providing gas and electric providers installation, replacement, repair, and maintenance of energy networks.
Although the utility infrastructure services operations are geographically dispersed, they are aggregated and reported as a single
segment as each reporting unit has similar economic characteristics. Over 99% of the total Company’s long-lived assets are in the U.S.
The pipeline and storage segment (sold in 2023) is primarily engaged in the business of providing interstate transportation and
underground storage services, primarily composed of regulated operations under the jurisdiction of the FERC.

The accounting policies of the reported segments are the same as those described within Note 1 – Background, Organization, and
Summary of Significant Accounting Policies. Centuri accounts for the services provided to Southwest at contractual prices at contract
inception. Accounts receivable for these services, which are not eliminated during consolidation, are presented in the table below:

(Thousands of dollars)

Accounts receivable for Centuri services

December 31,

2022

2021

$18,067 $15,166

The following table presents the amount of revenues by geographic area:

(Thousands of dollars)

Revenues(a)

United States
Canada

Total

SOUTHWEST GAS HOLDINGS, INC. | 97

December 31,

2022

2021

2020

$4,637,557 $3,411,018 $3,057,041
241,832

322,452

269,433

$4,960,009 $3,680,451 $3,298,873

(a) Revenues are attributed to countries based on the location of customers.

The Company has three reportable segments beginning in 2021: natural gas distribution, utility infrastructure services, and pipeline and
storage. In order to reconcile to net income as disclosed in the Consolidated Statements of Income, an Other column is included
associated with impacts of corporate and administrative activities related to Southwest Gas Holdings, Inc. The financial information
pertaining to each segment as of and for the three years ended December 31, 2022, 2021, and 2020 are as follows:

Year Ended December 31, 2022

(Thousands of dollars)

Revenues from external customers
Intersegment sales

Total

Interest income

Interest expense

Depreciation and amortization

Income tax expense (benefit)

Segment net income (loss)

Segment assets*

Capital expenditures

Natural Gas
Distribution

Utility
Infrastructure
Services

Pipeline and
Storage

$1,935,069
—

$2,625,669
134,658

$ 264,613
—

$1,935,069

$2,760,327

$ 264,613

16,183

$ 115,880

—

61,371

$ 263,043

$ 155,353

Other

Total

— $ 4,825,351
134,658
—

— $ 4,960,009

— $

16,183

—

18,185

$ 47,314 $

242,750

52,059

— $

470,455

30,541

$ 154,380

5,727

$ (89,668) $(22,253) $

(75,653)

2,065

$ (283,733) $(76,002) $ (203,290)

$8,803,681

$2,642,272

$1,743,349

$ 7,312 $13,196,614

$ 683,131

$ 130,166

46,124

— $

859,421

The segment assets of the Pipeline and Storage segment represented by MountainWest have been reclassified, as of December 31, 2022, as current assets held for sale on the Company’s
Consolidated Balance Sheet. See Note 15 – Acquisitions and Dispositions for additional information.

(Thousands of dollars)

Revenues from external customers
Intersegment sales

Total

Interest income

Interest expense

Depreciation and amortization

Income tax expense

Segment net income (loss)

Segment assets

Capital expenditures

Year Ended December 31, 2021

Natural Gas
Distribution

Utility
Infrastructure
Services

Pipeline and
Storage

$1,521,790
—

$2,056,315
102,346

$1,521,790

$2,158,661

5,113

97,560

—

20,999

$ 253,398

$ 117,643

29,338

$ 187,135

18,776

40,420

—
—

—

Other

Total

— $ 3,578,105
102,346
—

— $ 3,680,451

— $

5,113

639 $

119,198

— $

371,041

$ (8,466) $

39,648

$(26,776) $

200,779

$7,950,263

$2,579,748

$2,187,582

$ 47,664 $12,765,257

$ 601,983

$ 113,643

—

— $

715,626

98 | SOUTHWEST GAS HOLDINGS, INC.

(Thousands of dollars)

Revenues from external customers
Intersegment sales

Total

Interest income

Interest expense

Depreciation and amortization

Income tax expense

Segment net income (loss)

Segment assets

Capital expenditures

Year Ended December 31, 2020

Natural Gas
Distribution

Utility
Infrastructure
Services

$1,350,585
—

$1,813,429
134,859

$1,350,585

$1,948,288

Other

Total

— $3,164,014
134,859
—

— $3,298,873

— $

4,015

—

9,269

$ 1,060 $ 111,477

96,732

— $ 332,027

31,128

$(1,130) $

65,753

74,862

$(1,656) $ 232,324

4,015

$ 101,148

$ 235,295

35,755

$ 159,118

$7,256,636

$1,475,237

$ 3,980 $8,735,853

$ 692,216

$ 132,889

— $ 825,105

The corporate and administrative activities for Southwest Gas Holdings, Inc. in 2022 and 2021 include expenses incurred to acquire
MountainWest (2021 only), as well as shareholder activism costs, costs related to the strategic review, the settlement agreement with
the Icahn Group, and the most significant individual amount being the financing costs for the MountainWest acquisition in 2022,
collectively net of tax impacts.

Note 14 – Redeemable Noncontrolling Interests

In connection with the acquisition of Linetec in November 2018, the previous owner retained a 20% equity interest in Linetec, the
reduction of which is subject to certain rights based on the passage of time or upon the occurrence of certain triggering events. Effective
January 2022, the Company, by means of Centuri, has the right, but not the obligation, to purchase at fair value (subject to a floor) a
portion of the interest held by the noncontrolling party, and in incremental amounts each year thereafter. In March 2022, the parties
agreed to a partial redemption based on these provisions, and as a result, Centuri paid $39.6 million to the previous owner of Linetec for
a 5% equity interest in Linetec, thereby reducing the balance continuing to be redeemable to 15% under the terms of the original
agreement. In order to fund the redemption, Southwest Gas Holdings, Inc. contributed capital to Centuri. The shares subject to the
election accumulate (if earlier elections are not made) such that 100% of the interest retained by the noncontrolling party is subject to
the election beginning in 2024. If the Company does not exercise its rights at each or any of the specified intervals, the noncontrolling
party has the ability, but not the obligation, to exit their investment retained, by requiring Centuri to purchase a similar portion of their
interest up to the maximum cumulative amounts specified at each interval discussed above. The outstanding noncontrolling interest is
not subject to minimum purchase provisions and, following the eligibility dates for the elections, they do not expire. The redemption
price represents the greater of fair value of the ownership interest to be redeemed on the redemption date or a floor amount under the
terms of the agreement. The Company has determined that this noncontrolling interest is a redeemable noncontrolling interest and, in
accordance with SEC guidance, is classified as mezzanine equity (temporary equity) in the Company’s Consolidated Balance Sheets.

In November 2021, certain members of Riggs Distler management acquired a 1.42% interest in Drum Parent LLC (“Drum”), which is
subject to certain rights based on the passage of time or upon the occurrence of certain triggering events. Effective January 2027 and
each calendar year thereafter or upon the occurrence of certain triggering events, the Company, through Centuri, has the right, but not
the obligation, to purchase all of the interest held by the noncontrolling party at fair value. If the Company does not exercise its rights in
accordance with the timeline noted, or upon the occurrence of certain other triggering events, the noncontrolling party has the ability,
but not the obligation, to exit their investment retained by requiring Centuri to purchase all of their outstanding interest. The
outstanding noncontrolling interest is not subject to minimum purchase provisions and, following the eligibility date for the election,
they do not expire. The redemption price represents the fair value of the ownership interest to be redeemed on the redemption date
under the terms of the agreement. A portion of the redeemable noncontrolling interest acquired was funded through promissory notes
made to noncontrolling interest holders bearing interest at the prime rate plus 2%. The promissory notes are payable by the
noncontrolling interest holders upon certain triggering events including, but not limited to, termination of employment or the
redemption of any interest under the agreement. The promissory notes are recognized as a reduction to the Company’s stockholders’
equity. Additionally, the Company has determined that this noncontrolling interest is a redeemable noncontrolling interest and, in
accordance with SEC guidance, is classified as mezzanine equity (temporary equity) in the Company’s Consolidated Balance Sheets.

Significant changes in the value of the total redeemable noncontrolling interests, above a floor determined at the establishment date, are
recognized as they occur, and the carrying value is adjusted as necessary at each reporting date. The fair value is estimated using a
market approach that utilizes certain financial metrics from guideline public companies of similar industry and operating characteristics.
Based on the fair value model employed, the estimated redemption value of the Linetec redeemable noncontrolling interest decreased
by approximately $3.3 million during the year ended December 31, 2022. Adjustment to the redemption value also impacted retained
earnings, as reflected in the Company’s Consolidated Statement of Equity, but did not impact net income.

The following depicts changes to the balances of the redeemable noncontrolling interests:

(Thousands of dollars)

Balance, December 31, 2020
Redeemable noncontrolling interest acquired
Net income attributable to redeemable noncontrolling interests
Redemption value adjustments

Balance, December 31, 2021
Net income attributable to redeemable noncontrolling interests
Redemption value adjustments
Redemption of equity interest from noncontrolling party

Balance, December 31, 2022

Note 15 – Acquisitions and Dispositions

Acquisitions

SOUTHWEST GAS HOLDINGS, INC. | 99

Linetec

Drum

Total

$165,716 $

—
6,416
12,016

184,148
5,591
(3,325)
(39,649)

— $165,716
12,562
6,423
12,016

12,562
7
—

12,569
15
—
—

196,717
5,606
(3,325)
(39,649)

$146,765 $12,584 $159,349

In August 2021, the Company, through its subsidiaries, led principally by Centuri, completed the acquisition of Drum, including its
primary subsidiary, Riggs Distler. Additionally, in December 2021, the Company completed the acquisition of the MountainWest
entities. During the year ended December 31, 2022, MountainWest recorded measurement period adjustments of $28.2 million,
primarily due to a final post-closing payment; as a result, goodwill was reduced by that amount. The purchase accounting for both
acquisitions was finalized in 2022. The following unaudited pro forma financial information reflects the consolidated results of
operations of the Company assuming the Riggs Distler and MountainWest acquisitions had taken place on January 1, 2020. The most
significant pro forma adjustments relate to: (i) reflecting approximately $48.7 million in transaction costs in the year ended
December 31, 2020, and excluding such costs from the year ended December 31, 2021, and (ii) reflecting incremental interest expense
of $48.4 million in 2021, and approximately $52.1 million in the comparable 2020 period. The pro forma financial information has been
prepared for comparative purposes only, and is not intended to be indicative of what the Company’s results would have been had the
acquisition occurred at the beginning of the periods presented or of what results may be in the future, for a number of reasons. The
reasons include, but are not limited to, differences between the assumptions used to prepare the pro forma information, potential cost
savings from operating efficiencies, nor the impact of incremental costs incurred in integrating the businesses.

Amounts below are in millions of dollars, except per share amounts.

Total operating revenues
Net income attributable to Southwest Gas Holdings, Inc.

Basic earnings per share
Diluted earnings per share

Dispositions

Unaudited
Year Ended December 31,

2021

2020

$4,236
$ 278
$ 4.70
$ 4.69

$3,980
$ 276
$ 4.93
$ 4.93

In December 2022, the Company announced that the Board unanimously determined to take strategic actions to simplify the Company’s
portfolio of businesses. These actions included entering into a definitive agreement to sell 100% of MountainWest in an all-cash
transaction to Williams for $1.5 billion in total enterprise value, subject to certain adjustments. Additionally, the Company determined it
will pursue a spin-off of Centuri to form a new independent publicly traded utility infrastructure services company. The MountainWest
transaction closed on February 14, 2023. Upon close, the Company is expected to provide certain services to Williams under a transition
services agreement for a brief period, generally not beyond six months. The Centuri spin-off is expected to be completed in the fourth
quarter of 2023 or the first quarter of 2024 and to be tax free to the Company and its stockholders for U.S. federal income tax purposes.
The separation will be subject to, among other things, finalizing the transaction structure, final approval by the Board, approval by the
ACC, the receipt of a favorable IRS private letter ruling relating to the tax-free nature of the transaction, and the effectiveness of a
registration statement that will be filed with the SEC.

As a result of entering into a definitive agreement to sell MountainWest and considering other factors, the Company determined that
MountainWest met criteria to be characterized as held for sale as of December 31, 2022, and as a result, MountainWest’s assets and
liabilities, excluding income tax related balances, have been presented as held for sale on the Company’s consolidated balance sheet. The
MountainWest sale did not meet the criteria for reporting discontinued operations as the sale did not represent a strategic shift that
would have a major effect on the Company’s operations or financial results. Company management considered the estimated proceeds,
which were below the carrying value of the disposal group, and determined that the loss on disposal was attributable to goodwill,
resulting in an impairment loss of $449.6 million. The goodwill impairment loss is reported in Goodwill impairment and cost to sell on the
Company’s Consolidated Statement of Income for the year ended December 31, 2022. The Company believes that the sale price of

100 | SOUTHWEST GAS HOLDINGS, INC.

$1.5 billion, as adjusted for indebtedness and other estimated adjustments per the purchase and sale agreement, provided a reasonable
indication of the fair value of MountainWest as it represents an exit price in an orderly transaction between market participants. While
the fair value was estimated based on the closing statement from the sale of MountainWest, it is subject to certain adjustments, including
a post-closing payment related to final working capital balances. The amount of such post-closing payment is not determinable at this
time. The Company estimated the working capital balances as of February 14, 2023; however, these amounts are subject to change and
could result in additional losses in the second quarter of 2023 when working capital is finalized. The Company recorded an additional
loss of approximately $5.8 million, attributable to estimated selling costs, which is also included in Goodwill impairment and cost to sell
on the Company’s Consolidated Statement of Income for the year ended December 31, 2022.

The carrying amounts of major classes of assets and liabilities relating to MountainWest, all of which are classified as current and
reported as held for sale in the Company’s Consolidated Balance Sheets, are as follows:

(Thousands of dollars)

Regulated operations plant, net of accumulated depreciation of $907 million
Other property and investments
Other current assets(1)
Goodwill, net of accumulated impairment of $449.6 million
Deferred charges and other assets(2)

Total assets
Less: cost to sell

Total current assets, held for sale

Other current liabilities(3)
Long-term debt
Other deferred credits and liabilities(3)

Total current liabilities, held for sale

$ 957,729
49,546
188,629
508,395
39,050

1,743,349
5,819

$1,737,530

55,188
448,862
140,195

$ 644,245

(1)

(2)
(3)

Includes cash and cash equivalents of $23.8 million, regulatory assets of $2.2 million, and “in-kind” system gas imbalance of $116.6 million due to a significant increase in natural gas
prices in December 2022.
Includes regulatory assets of $30.1 million.
Includes $18.9 million of regulatory liabilities included in Other current liabilities, and $139 million of regulatory liabilities included in Other deferred credits and liabilities (including
$60.2 million related to regulatory excess deferred/other taxes and gross-up and $58.8 million of accumulated removal costs).

The pretax loss for MountainWest for the year ended December 31, 2022 was $373 million, due to the goodwill impairment recognized.

On September 22, 2022, the FERC issued an order initiating an investigation, pursuant to section 5 of the Natural Gas Act, to determine
whether rates currently charged by MountainWest Overthrust Pipeline, LLC, a subsidiary of MountainWest, are just and reasonable and
setting the matter for hearing (the “Section 5 Rate Case”). Unless earlier settled by the parties, a hearing on the matter is to commence
on August 1, 2023 with an initial decision from the presiding administrative law judge due by November 14, 2023. Under the terms of the
MountainWest Purchase Agreement, the Company is obligated, for a period of four years following the closing of the sale of
MountainWest, to indemnify Williams and MountainWest for any damages and liabilities resulting from the Section 5 Rate Case,
including any reduction to the current applicable rate, up to a cap of $75 million. Williams has agreed that it will not enter into any
settlement of the Section 5 Rate Case that will result in any damages being paid by the Company under such indemnity without the prior
written consent of the Company (which consent shall not be unreasonably withheld). The range of loss, if any, that could result from this
matter cannot currently be estimated.

SOUTHWEST GAS HOLDINGS, INC. | 101

MANAGEMENT’S REPORTS ON INTERNAL CONTROL OVER
FINANCIAL REPORTING

Management of Southwest Gas Holdings, Inc. is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined by Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Under the supervision and
with the participation of Southwest Gas Holdings, Inc. management, including the principal executive officer and principal financial
officer, an evaluation was conducted of the effectiveness of internal control over financial reporting based on the “Internal Control –
Integrated Framework” (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon
management’s evaluation under such framework, management concluded that internal control over financial reporting was effective as
of December 31, 2022. The effectiveness of internal control over financial reporting as of December 31, 2022 has been audited by
PricewaterhouseCoopers, LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Management of Southwest Gas Corporation is responsible for establishing and maintaining adequate internal control over financial
reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Under the supervision and with the
participation of Southwest Gas Corporation management, including the principal executive officer and principal financial officer, an
evaluation was conducted of the effectiveness of internal control over financial reporting based on the “Internal Control – Integrated
Framework” (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon management’s
evaluation under such framework, management concluded that Southwest Gas Corporation’s internal control over financial reporting
was effective as of December 31, 2022. This annual report does not include a report of Southwest Gas Corporation’s registered public
accounting firm regarding internal control over financial reporting pursuant to rules of the Securities and Exchange Commission that
permit Southwest Gas Corporation to provide only this management’s report in this annual report.

February 28, 2023

102 | SOUTHWEST GAS HOLDINGS, INC.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Southwest Gas Holdings, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Southwest Gas Holdings, Inc. and its subsidiaries (the “Company”) as
of December 31, 2022 and 2021, and the related consolidated statements of income, of comprehensive income, of equity and of cash
flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the
“consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31,
2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our
opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022,
based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Reports on Internal Control Over Financial Reporting. Our responsibility is to express opinions on the Company’s
consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.

SOUTHWEST GAS HOLDINGS, INC. | 103

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are
material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.

Regulatory Assets and Liabilities

As described in Note 5 to the consolidated financial statements, the Company’s net regulatory assets were $195 million as of
December 31, 2022. The Company is subject to the regulation of the Arizona Corporation Commission, the Public Utilities Commission
of Nevada, the California Public Utilities Commission and the Federal Energy Regulatory Commission. Accounting treatment for rate-
regulated entities allows for deferral as regulatory assets, costs that otherwise would be expensed, if it is probable that future recovery
from customers will occur. As disclosed by management, they review the regulatory assets to assess their recoverability. If rate recovery
is no longer probable, due to competition or the actions of regulators, management is required to write-off the related regulatory asset.
Regulatory liabilities are recorded if it is probable that revenues will be reduced for amounts that will be refunded to customers through
the ratemaking process.

The principal considerations for our determination that performing procedures relating to regulatory assets and liabilities is a critical
audit matter are (i) the significant judgment by management in the ongoing evaluation of regulatory assets and liabilities and in applying
guidance contained in regulatory proceedings and other relevant evidence, including the timing of recognition of regulatory assets and
liabilities; and (ii) the significant auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence
relating to management’s judgments about the probability of recovery of regulatory assets and refund of regulatory liabilities.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on
the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s
assessment of regulatory proceedings, including the probability of recovery of regulatory assets, refund of regulatory liabilities, and
disclosure impacts. These procedures also included, among others (i) obtaining the Company’s correspondence with regulators;
(ii) evaluating the reasonableness of management’s assessment regarding the probability of recovery of regulatory assets and refund of
regulatory liabilities based on the status of regulatory proceedings; and (iii) evaluating the related accounting and disclosure
implications.

/s/ PricewaterhouseCoopers LLP
Las Vegas, Nevada
February 28, 2023

We have served as the Company’s or its predecessor’s auditor since 2002.

104 | SOUTHWEST GAS HOLDINGS, INC.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholder of Southwest Gas Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Southwest Gas Corporation and its subsidiaries (the “Company”) as
of December 31, 2022 and 2021, and the related consolidated statements of income, of comprehensive income, of equity and of cash
flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of
America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards
require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are
free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

Regulatory Assets and Liabilities

SOUTHWEST GAS HOLDINGS, INC. | 105

/s/ PricewaterhouseCoopers LLP
Las Vegas, Nevada
February 28, 2023

We have served as the Company’s auditor since 2002.

[THIS PAGE INTENTIONALLY LEFT BLANK]

Board of Directors and Officers

DIRECTORS

E. Renae Conley
Chicago, Illinois
Chair of the Board
Southwest Gas Holdings, Inc.
Chief Executive Oﬃcer
ER Solutions, LLC
Former Utility Company Executive

Andrew W. Evans
Chatham, Massachusetts
Retired Utility Company Executive
Southern Company

Karen S. Haller
Las Vegas, Nevada
President and Chief Executive Oﬃcer
Southwest Gas Holdings, Inc.
Chief Executive Oﬃcer
Southwest Gas Corporation

Jane Lewis-Raymond
Moultonborough, New Hampshire
Principal
Hilltop Strategies
Retired Executive
Piedmont Natural Gas Company, Inc.

Henry P. Linginfelter
St. Simons Island, Georgia
Retired Executive
Southern Company Gas

Anne L. Mariucci
Scottsdale, Arizona
Private Investor
Retired Real Estate Development
and Homebuilding Executive

Carlos A. Ruisanchez
Las Vegas, Nevada
Co-founder
Sorelle Capital

Ruby Sharma
Princeton Junction, New Jersey
Former Partner
EY LLP

Andrew J. Teno
Coral Gables, Florida
Portfolio Manager
Icahn Capital

A. Randall (cid:2)oman
Las Vegas, Nevada
Principal
(cid:6)oman International, LLC
Retired Partner
Deloitte & Touche LLP

Leslie T. (cid:2)ornton
Alexandria, Virginia
Retired Executive
WGL Holdings, Inc. &
Washington Gas Light Company

EXECUTIVE OFFICERS

Karen S. Haller
President and
Chief Executive Oﬃcer
Southwest Gas Holdings, Inc.
Chief Executive Oﬃcer
Southwest Gas Corporation
Chair of the Board
Centuri Group, Inc.

Robert J. Stefani
Senior Vice President/
Chief Financial Oﬃcer
Southwest Gas Holdings, Inc.
Southwest Gas Corporation

Justin L. Brown
President
Southwest Gas Corporation

Randall P. Gabe*
Senior Vice President/
Chief Administrative Oﬃcer
Southwest Gas Corporation

Amy L. Timperley*
Senior Vice President/
Chief Regulatory and
Financial Planning Oﬃcer
Southwest Gas Corporation

Julie M. Williams
Senior Vice President/
Chief Operating Oﬃcer
Southwest Gas Corporation

Paul M. Daily
President and
Chief Executive Oﬃcer
Centuri Group, Inc.

*As of March 1, 2023

Stockholder Information

Additional Company information is available at:
www.swgasholdings.com
For non-ﬁnancial information
call 702-876-7011.

Transfer Agent and Registrar
EQ Shareowner Services
P.O. Box 64874
St. Paul, MN 55164-9942

Auditors
PricewaterhouseCoopers LLP
3800 Howard Hughes Parkway
Suite 650
Las Vegas, NV 89169-5906

Forward-looking Statements
(cid:6)is Annual Report contains forward-looking
statements within the meaning of the safe
harbor provisions of the U.S. Private Securities
Litigation Reform Act of 1995 regarding the
Company’s current expectations. Forward-
looking statements can be identiﬁed by words
such as “intend,” “plan,” “goal,” “will,” “expect,”
“seek,” “believe,” “project,” “estimate,” “strategy,”
“future,” “likely,” “may,” “should,” and similar
references to future periods. (cid:6)ese statements
are subject to a variety of risks that could
cause actual results to diﬀer materially from
expectations. (cid:6)ese risks and uncertainties
include, in addition to those discussed herein,
all factors discussed in the Company’s Annual
Report on Form 10-K for the year 2022.

Stock Listing Information
Southwest Gas Holdings, Inc. common stock
is listed on the New York Stock Exchange
under the ticker symbol “SWX.” Quotes may
be obtained in daily ﬁnancial newspapers or
some local newspapers where it is sometimes
listed under “SoWestGas,” or on our website
at www.swgasholdings.com.

Dividend Reinvestment and Stock Purchase Plan
Our Dividend Reinvestment and Stock
Purchase Plan provides investors with a simple
and convenient method of purchasing the
Company’s common stock and investing cash
dividends in additional shares without payment
of brokerage commissions.

For more information contact:
EQ Shareowner Services
www.shareowneronline.com
or call 1-800-331-1119.

Dividends
Dividends on common stock are typically
declared quarterly by the Board of Directors and
are generally payable on the ﬁrst day of March,
June, September, and December.

Investor Relations
(cid:6)e Company is committed to providing
relevant and complete investment information
to stockholders, individual investors, and
members of the investment community. Copies
of the 2022 Annual Report on Form 10-K, without
exhibits, as ﬁled with the Securities and Exchange
Commission may be obtained from our Corporate
Secretary at the address below, upon request
free of charge. Additional requests of a ﬁnancial
nature should be directed to:

Rob Stefani
Investor Relations
Southwest Gas Holdings, Inc.
P.O. Box 98510
Las Vegas, NV 89193-8510
or call 702-876-7237.

(cid:6)is document is printed on paper certiﬁed to the environmental
and social standards of the Forest Stewardship Council® (FSC®).

SWGASHOLDINGS.COM