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Welcome to Southwest Gas Holdings Third Quarter 2023 Earnings Conference Call. Today's call is being recorded and our webcast is live. A replay will be available later today for the next 12 months on the Southwest Gas Holdings website. [Operator Instructions] I will now turn the call over to Justin Forsberg, Vice President of Investor Relations of Southwest Gas Holdings.

Thank you, MJ and hello, everyone. We appreciate you joining our call. This morning, we issued and posted a Southwest Gas Holdings website, our third quarter 2023 earnings release and the associated Form 10-Q. The slides accompanying today's call are also available on Southwest Gas Holdings' website. We'll refer to those slides by number throughout the call today. Please note that on today's call, we will address certain factors that may impact this year's earnings and provide some longer-term guidance. Some of the information that will be discussed today contains forward-looking statements. These statements are based on management's assumptions on what the future holds, but are subject to several risks and uncertainties, including uncertainties surrounding the impacts of future economic conditions and regulatory approvals. This cautionary note as well as a note regarding non-GAAP measures is included on Slides two and three of this presentation. Today's press release and our filings with the Securities and Exchange Commission, which we encourage you to review. These risks and uncertainties may cause actual results to differ materially from statements made today. We caution against placing undue reliance on any forward-looking statements, and we assume no obligation to update any such statement. As shown on Slide 4, on today's call, we have Karen Haller, President and CEO of Southwest Gas Holdings; Rob Stefani, Chief Financial Officer of Southwest Gas Holdings; Justin Brown, President of Southwest Gas Corporation; and Paul Daily, President and CEO of Centuri Group, along with other members of the management team available to answer your questions during the Q&A portion of the call today. I'll now turn the call over to Karen.

Thanks, Justin. Thank you for joining us today to discuss the Southwest Gas Holdings third quarter results. Turning to Slide 5. We are happy with our progress on our transformational strategy of returning Southwest Gas to its core foundation as a premier fully regulated natural gas utility. We achieved significant milestones this quarter, building on our progress in the first half of the year, which continues to position the utility for strength and success while also advancing the separation of Centuri into a stand-alone infrastructure services leader. Notably, we made progress on the regulatory strategy at the utility during the quarter and delivered improved third quarter results. Customer growth and demand remains strong, and the Southwest Gas team is acutely focused on safely addressing the needs of our customers, investing in the communities we serve and delivering value for our shareholders. We are strategically deploying capital and investing in our operations so that we can meet the demand for safe, reliable and affordable energy solutions, while also working constructively with our regulators and legislators to complement our strong organic rate base growth. We are confident in our momentum. We remain on track to deliver 5% to 7% CAGR in rate base growth over the next three years and to maintain a strong investment-grade balance sheet and a competitive dividend. Additionally, Centuri has continued to see improved margins during the first nine months of the year as they execute on their core utility infrastructure services and overcome much of the previous cost and supply chain headwinds that have been faced during 2022. Turning to Slide 6, I'll touch on a couple of important points related to our strategic priorities. At Centuri, the separation remains well on track. We confidentially submitted a draft Form S-1 with the SEC on September 22 to facilitate a potential IPO. The ultimate timing of the separation will be affected by the form of transaction structure. As you can appreciate, we are in a quiet period with respect to a potential IPO. And we are not in a position to provide specific details on our process. However, we are continuing to make progress. If we execute an IPO, Southwest Gas Holdings may ultimately separate the business through a series of sell-down, share exchanges or distribute the balance of Centuri shares to Southwest Gas Holdings shareholders through a spin following any required lockup period associated with an IPO. As we disclosed in our press release from November 6, we announced that our Board adopted a tax-free spin protection plan to help preserve the company's ability to effectuate a tax-free spin. We continue to consider additional taxable separation alternatives to form a new independent publicly traded utility infrastructure services company. We remain committed to separating Centuri, and we believe we have taken the appropriate steps and actions that will benefit all shareholders. We announced in that same press release that the IRS has decided to exercise its discretion not to rule on certain tax questions relating to the proposed Centuri separation based on the fact, intensive nature of the questions presented. Again, we are committed to separating Centuri and continue to assess the value of a potential tax-free spin-off of Centuri either following or in lieu of a potential initial public offering by Centuri as well as other transaction alternatives. As you can see on Slide 7, we are making excellent progress on our 2023 strategic priorities, completing some more key strategic milestones during the third quarter. At the utility, we continue to execute on our business plan. We filed our Nevada rate case mid-September with the expectation of a resulting rate increase in April 2024. And as previously announced, we received ACC approval of the PGA surcharge in Arizona and remain on track with our expected Arizona rate case filing in the first quarter of 2024. Additionally, we are focused on completing the utility optimization review and prioritizing our identified initiatives, as I will cover in more detail in a moment. We are very pleased with our continued progress and our strategic plan is on track. On Slide 8, we highlight a strong third quarter performance at Southwest and at Centuri. We are proud to announce that at the utility, we delivered the best third quarter performance on record. We experienced another quarter of strong customer growth, adding more than 41,000 new meter sets over the last 12 months, while continuing to make additional investments to ensure our system remains safe and reliable for the benefit of our customers. We also benefited from several constructive regulatory outcomes that have occurred during the year. At Centuri, we announced record-setting third quarter revenue and EBITDA, which resulted in last 12-month adjusted EBITDA of approximately $299 million. This strong third quarter performance was driven by an increase in electric infrastructure services revenues and sustainable energy projects. As Paul will discuss, Centuri continues to win new business, based on the strength of its relationships and capabilities and is well positioned to play a critical role in the continuing energy transition. Turning to Slide 9. We are laser-focused on evaluating and prioritizing a cross-functional collection of suggested initiatives that were identified by our employees this year. Our employees have been highly engaged in the process alongside our consultants and have provided productive feedback to help us to prioritize our optimization efforts. Our leadership team is developing specific initiatives that we believe will help us accomplish our goals of optimizing utility performance and accelerating our pursuit of operational excellence. Identifying cost savings and efficiency opportunities for us to execute over the next couple of years. Further, these initiatives will help support the tremendous growth we have across our service territory, helped pass on realized savings to our customers, improve ROEs and result in positive returns for our stockholders. We are excited to share our expected returns and provide you our plans in the near future. But what I can say now is we are well positioned to begin execution of our plans in 2024 to drive long-term positive change across the organization, and we are delighted with our employees' response to this collective effort. I will now turn the call over to Rob, who will review our financial performance for the quarter.

Thanks, Karen. On Slide 11, we outlined our earnings per share performance for the third quarter. The company's consolidated GAAP and adjusted EPS are shown by each operating company. As Karen mentioned earlier, the utility in Centuri each had a record-setting third quarter. The utility recorded its lowest seasonal third quarter net loss on record. The business is seasonal and the spring summer months are the low points. Centuri recorded its highest ever third quarter revenue and EBITDA on record. On an adjusted basis, Southwest Gas Holdings finished the third quarter of 2023 with EPS of $0.10, a $0.15 per share improvement when compared to the same period of the year prior, which had included a full three months of Mountain West. The utility's performance during the quarter is a product of our disciplined O&M management, regular pursuit of constructive regulatory outcomes and an increase in interest income from the PGS. At Centuri, we continue to see significant quarter-over-quarter improvement in GAAP and adjusted earnings. . Centuri increased its core electric infrastructure services revenues and continued its work on in construction offshore wind projects. In the appendix, we provide a reconciliation of adjustments by operating company. The vast majority of the second quarter adjustments relate to Centuri separation costs and consulting fees related to utility optimization. Now I'll provide a walk-through on the performance of each operating company. Moving on to Slide 12, you will see the year-over-year performance drivers for our utility, Southwest Gas Corporation. In the third quarter of 2023, utility operating margin increased by approximately $21 million compared to the same time last year. This improvement was driven primarily by the increased recovery on prior investments in our Arizona utility infrastructure and other associated regulatory account balances as well as continued customer growth throughout our service areas. Items offsetting these increases include comparably lower Arizona vintage steel pipe and customer-owned yard line revenue, miscellaneous revenue and revenue from customers outside of the decoupling mechanism. O&M remained relatively flat between quarters despite an increase in external contractor and professional services costs that was primarily related to utility optimization. The approximate $5 million increase in depreciation and amortization between quarters was primarily due to the corresponding 6% increase in average gas plant in service compared to 2022. Other income increased $13 million compared with last year. This was driven by increased interest income related to carrying costs associated with regulatory account balances, largely related to the purchased gas cost recovery mechanisms. This higher interest income earned on the elevated PGA balances offset the $10 million of higher third quarter interest expense at Southwest Gas Holdings. In addition, favorable quarter-over-quarter changes in non-service-related components of employee post-retirement benefits benefit other income. Interest expense increased by approximately $6 million from the prior year, primarily due to interest associated with senior notes issued since the third quarter of 2022 as well as $450 million Southwest Gas Corporation PGA related term loan issued in January of this year to support gas purchases, which was repaid in March of 2023. Overall, this was significantly improved quarter for the utility. Moving on to Centuri's results this past quarter. Slide 13 reviews the drivers behind Centuri's third quarter GAAP net income results. Centuri's third quarter revenues increased by approximately $16 million compared with the prior year. This increase was driven by an increase in core electric infrastructure services work and progress on offshore wind projects. Centuri's revenues were partially offset by corresponding increases in operating expenses driven by the higher volume and infrastructure services provided to customers, higher incentive compensation and increased subcontractor costs on offshore wind projects. Additionally, Centuri saw increased interest expense primarily due to higher interest rates on approximately $1.2 billion of outstanding variable rate borrowings largely associated with the Riggs Distler acquisition. Overall, we continue to be encouraged by improved EBITDA margins at Centuri over the first nine months of this year, as Paul will touch on later. On Slide 14, we again highlight our 2023 financing plan for Southwest Gas Holdings and Southwest Gas Corporation, which has been completed. Because of our strength in balance sheet and successful regulatory and financing efforts earlier this year, we continue to not anticipate meaningful additional near-term equity needs. Through 2025, we expect that any potential equity needs to be addressed under our ATM program. At Holdings, we reiterate that we plan to target a solid investment-grade balance sheet. It's important to note that in addition to our limited equity needs, we have very limited refinancing needs at the utility through the end of 2026 outside of our $550 million Southwest Holdings term loan. Moving to Slide 15, we take a look at our balance sheet strength and our commitment to investment-grade profile. On the left-hand side, we walked through net debt by operating company. When looking at the utility debt levels, we continue to highlight the PGA balance, which represents working capital at Southwest is spent for prior commodity purchases and which is owed by customers to Southwest. We expect a timely recovery of this PGA balance and earn a carrying cost on these balances as reflected in the chart in the appendix on Slide 27, which provides additional detail. Earlier in the third quarter, in Arizona, we announced the Arizona Corporation Commission approval of a surcharge that will continue to reduce the time to recovery of the remaining balance in that jurisdiction. On the right-hand side of Slide 15, we note that we had no changes to our credit ratings or outlook from the three rating agencies with the exception of the downgrade by Fitch at Southwest Gas Corporation's long-term issuer rating to BBB+ from A- in which they also removed the negative watch, reflecting leverage at the utility in excess of Fitch's downgrade threshold throughout the forecast period. The updated rating did not come a surprise to us as it was aligned with the rating at Moody's. I'll now turn the call over to Justin Brown and Slide 17 to discuss the utility.

Thanks, Rob. New customer growth and pipeline replacement activities associated with our Safety and integrity management programs are the cornerstones of our $2 billion three-year capital expenditure program. The investments we've made to ensure safe and reliable energy service to our customers has translated to double-digit rate base growth since 2017. With our current capital investment plan, we expect to continue to grow our rate base at a compound annual growth rate of 5% to 7% through 2025. We continue to see strong growth across our service areas as we added more than 41,000 first-time meter sets during the past 12 months was approximately 34,000 year-to-date. . We expect to continue to benefit from a strong demographic and economic growth in the southwest part of the United States as Phoenix and Las Vegas continue to be among the top destinations for relocation. S&P Global projects population growth in Arizona and Nevada to be nearly 4% over the next five years. There are several exciting things happening in Las Vegas, Phoenix and other parts of our service area, which are driving expansion in both core and new business sectors. We've likely seen the excitement that the new entertainment venue, the Sphere Las Vegas as well as the upcoming Formula One Las Vegas Grand Prix event are causing in Las Vegas. Not to mention the city will also be playing host to Super Bowl 58 in early 2024. Also, earlier this year, the Oakland Days announced their plans to relocate and build a new stadium in Las Vegas that is projected to open in 2028. These and other expansions continue to strengthen the core of the Las Vegas sports, entertainment and hospitality industries and drive job growth in the area. In Arizona, particularly in Phoenix, jobs are back to pre-pandemic trends. And according to the Arizona Commerce Authority expansions are occurring throughout the state. We are proud to partner with several of these large new customers, including TSMC and other semiconductor manufacturers that continue to make significant investments in Arizona. We are also supporting economic growth in new business sectors like battery and electric vehicle manufacturing. We've also seen expansions among several core businesses like agriculture and farming. We're committed to working collaboratively with our regulators and our customers to safely meet these growing demands and to continue to support the economic development to which we're responding. This includes prioritizing constructive dialogues with our regulators around the importance of capital tracker programs and timeliness of recovery of investments. We look forward to continuing these dialogues and working with all stake over-loaders to develop mutually acceptable outcomes to support the timely recovery of the investments that we make to ensure the safety of our gas delivery system for the benefit of all our customers and the communities we serve. On Slide 18, we provide an overview of our Nevada rate case filing, which was filed in September. Our nearly $70 million request is primarily driven by the need to update rates to reflect the recent impact inflation has had on our cost to provide safe and reliable service. Two of the largest components of the case are comprised of $27 million for changes in O&M since our last case and $20 million for changes in the cost of capital to fund our infrastructure investments. We also need to start recovering the more than $250 million of capital investments we've made in Nevada since our last rate case. Our filing also includes the recovery of $4 million for the annual leak survey program we partnered on with the Public Utilities Commission of Nevada. The Commission Safety division expressed the desire to move towards an annual league survey, and we work collaboratively on developing an approach to accomplish this objective, including the ability to track and recover the incremental costs so we could help enhance safety and reduce fugitive emissions across the state. We're proposing to recover this $4 million over a 2-year period. We are confident in our request, and we believe we've made prudent investments in the system in response to growth as well as important investments to enhance safety and integrity of the system throughout the Nevada service areas. We anticipate a 210-day procedural schedule for the case. We're currently scheduled to receive testimony from the interveners on February 2, and the hearing begins February 26, with new rates expected to be in place in April. We're also well underway in preparing for several other upcoming rate case filings, we anticipate early 2024 rate case filings for both Arizona and at FERC for our interstate pipeline affiliate, -- great Basin gas transmission company. We also anticipate a California rate case in the third quarter of 2024. You'll also see on this slide, we've highlighted a metric we're proud of. Our O&M per customer in Nevada is well below our peer group. We believe this is another metric that demonstrates we work hard to ensure we're delivering affordable service to our customers while maintaining a safe and reliable system. I'll now turn the call over to Paul Daily, President and CEO of Centuri Group for an update on the Infrastructure Services business.

Thanks, Justin. Turning to Slide 19. I'm very proud of the performance delivered by the Centuri team in the quarter. With more than 12,000 employees in 43 states and provinces, operating in 82 locations across the United States and Canada, Centuri has a broad geographic reach and works with the most of the largest blue-chip investor-owned utilities and their 100-plus million customers across the U.S. and Canada. These strengths means Centuri is well positioned to be a stand-alone strategic utility infrastructure services leader with the scale and capabilities to meet the evolving needs of utilities and utility holding companies. As Karen mentioned, we filed a draft S-1 with the SEC on September 22 to facilitate a potential IPO, and we continue to make progress towards Centuri separation. . Importantly, as we work towards our pending separation, we have the resources, capabilities and business structure to continue to deliver on our growth opportunities. On Slide 20, we've detailed Centuri's proven track record of strong financial performance. As Karen and Rob both mentioned, Centuri had record-setting third quarter revenue and EBITDA driven by strong continued execution and project wins from our long-tenured client engagements. We have successfully managed through the inflationary pressures that we faced at this time last year, and we believe we are in a much better position as evidenced by our last 12 months adjusted EBITDA of $299 million, representing $82 million year-over-year growth in LTM adjusted EBITDA. While certain of our costs remain at or above the elevated levels experienced during 2022. As we noted during previous earnings calls, we took proactive measures to negotiate more than $24 million of annualized incremental revenue increases on customer contracts and implemented $21 million of annualized cost savings to offset certain of these inflationary cost increases. We are continuing to deliver growth across our operations both through expanding our core electric and gas operations while realizing more utility focused work and the support of system modernization and energy transition. We have performed a limited amount of offshore wind work in the last two years, which accounts for approximately 7% of our revenues. We recently completed component assembly for the South Fork Wind project and we have three other projects in backlog. Ocean Wind 1, Sunrise Wind and Revolution Wind. Last week, our client announced the cancellation of Ocean Wind One, where we currently have work underway. As a result of the Ocean Wind One cancellation, we are in discussions with our client about impacts to our 2023 budget and 2024 forecast and are proceeding prudently with additional cost commitments until a path is determined. As you can see on the right-hand side, we have remained committed to our core portfolio of small scale, recurring work tied to long-standing utility customer MSAs and we continue to diversify our portfolio to have a balance between electric and gas. We also remain diversified geographically with no one geography representing more than 11% on of revenues. With that, I'll turn it back to Karen.

Thanks, Paul. Our year-to-date results are evidence of our ongoing efforts, and we look to finishing the year strong. On Slide 22, we are increasing our 2023 utility net income guidance to now be in the range of $215 million to $225 million. and we are reaffirming our 2023 Centuri revenue and adjusted EBITDA margin guidance. We are confident that each business has strong performance to date will drive full year results within these updated and reaffirmed guidance ranges. Additionally, we are again making an upward revision to 2023 utility CapEx guidance now $720 million to $740 million. This update is the result of the responsibility we have to invest in our infrastructure, to meet the better-than-expected customer growth and favorable new business trends across our service territories and of course, all of this while ensuring we maintain a safe and reliable distribution system for the benefit of all of our customers. At Centuri, based on the first 9-month performance of 2023, we continue to expect revenue to fall towards the higher end of the range, where the final adjusted EBITDA margin at Centuri ends up will depend on the mix of work and the level of storm activity for the remainder of the year, but we feel heartened that we continue to see improved margins over the last 12 months at our utility services business. A brief note on the long-term guidance at Centuri, due to pending S-1 restrictions related to providing forward-looking guidance, we have removed for now our long-term guidance at Centuri. Before we open the call up to Q&A, I want to point to Slide 23 and emphasize that our teams are focused on executing our strategic priorities, delivering strong financial results and providing exceptional service to our customers. At Southwest Gas Holdings, we are confident in our path forward as a premier pure-play natural gas utility. We plan to continue delivering steady organic rate base growth through strong regional demand dynamics as well as earnings growth through financial discipline, operational excellence and constructive regulatory relationships. We're advancing towards the planned separation of Centuri, putting the company in a better position to align with stockholders and to delever the business organically with healthy cash flow generation. With that, I'd like to open the call for questions.

[Operator Instructions] We'll take our first question from Richard Sunderland with JPMorgan.

I appreciate that you can't speak to the IPO, but are you able to outline when the market should expect a definitive path on separation announcement or at least what the next hurdles are in the process now that you have the PLR?

Rich, it's Rob Stefani. So as you highlighted, we are no longer waiting on the private letter ruling given the IRS' decision not to rule. We continue to monitor the markets and any decision on timing will be subject to, among other things, Board approval of the form of the transaction as well as any type of regulatory approval of filings. I think to the extent that we proceed on a path to do something like a straight spend than the prior guidance that we highlighted would remain intact.

Understood. And when you're saying prior guidance, you're saying 1Q '24?

That's correct.

Great. Very helpful. Turning to the Centuri side with this offshore wind update, can you speak more to the potential '23, '24 impacts, particularly given Centuri's overall revenue guidance was reiterated with that high-end language as well? And then what is the backlog impact overall of these cancellations?

Rich, I'm going to turn the question -- your question over to Chad Van Sweden, our CFO at Centuri to respond to that.

Yes, Rich, we have not received formal cancellation from our customer on Ocean Wind One. As of yet, we do expect that, that will likely be forthcoming. Our offshore wind revenue is a relatively modest part of our overall revenue, representing less than 7%. As we indicated in the earnings slides, our total offshore wind revenue for this year is expected to be approximately $200 million. That's down from approximately $220 million previously, reflecting a reduction as a result of the cancellation.

Great. And maybe one final one for me, just sticking with the Centuri side. Could you speak to the trends on the gas infrastructure revenues in terms of the downward trajectory in 3Q and the overall outlook in the '24. Any color on MSA work overall would be helpful. .

Sure. So we had record revenues in Canada in 2022. Those have normalized this year, which is really the decline that you're seeing in the numbers. Overall, the business continues to sort of track the market and grow. We just had an extraordinary year in 2022 in Canada, where our revenues in Canadian dollars were up almost $100 million. So they've normalized a bit this year, masking the growth in the overall sort of gas business, which continues to track the growth in the market.

The next question is from Christopher Ellinghaus with Siebert Williams Shank.

Maybe for Justin or Karen, the better-than-expected customer growth and the increase in the CapEx -- is this something that you expect to continue on trend? And does this change your expected rate base growth at all?

Chris, it's Justin. Yes. I mean I think it's more just reflective of this last year. We'll look at guidance in February for the future. But right now, we're kind of just focused on this year and it's -- from where we started at the year, it's better this year than what we had originally anticipated.

Okay. And Rob, given your guidance and the really phenomenal quarter in the third quarter for the LDC sort of suggests a lower fourth quarter year-over-year. Can you talk about what might be some of the headwinds there?

Yes. I think, Chris, as you know, within our guidance, we have a COLI forecast of $3 million to $5 million. Obviously, that's always less predictable as well as there are several timing-related items that we would expect to come through. And so we've updated guidance, we're confident in that new guidance range, but continue to monitor only performance and whatnot.

The next question is from Ryan Levine with Citi.

I got just clarify a couple of things on offshore wind. To the extent, I think you highlighted it less than 7% from a top line standpoint. Is there any color you could share around the margin profile of those projects relative to the rest of the Centuri business. And to the extent that Sunrise or something else were to be canceled, is there a certain cost that would be borne by the company on a go-forward basis?

Yes. Sure. Ryan, this is Chad Van Sweden. Our offshore wind revenue, the margins are roughly in line with the margins we see on our electric segment. So there's nothing particularly extraordinary about those margins. There isn't a lot of overhead that goes along with that offshore wind work, and it's generally we're building units or components. So whether we do 10 or 100, it doesn't significantly change the margins that much. There are some wind down costs if we mobilize a project and then have to demobilize on a project, but we do have the ability to seek recovery of those costs from our customer. Our overhead is relatively modest in the sense that all this work is performed by union labor. So if a project does not continue forward, we send the labor back to the hall. We do not own or rent any facilities. Those are provided to us by the customer, and we generally don't have much equipment cost for this type of work. So relatively modest overhead costs, whatever cost we do incur to demo, we are able to recover those from our customers. .

Okay and then a financing question in terms of the PGA proceeds expected to come to the holding company in the next -- or the company within the next few months. What's the use of that cash?

Yes. So that -- the cash is obviously will be redeployed back into the utility in large part. I think that return of the cash and -- and obviously, a lot depends on where commodity costs end up in the fourth quarter. But we continue to anticipate that as the PGA unwinds, that will help limit our financing costs at the utility, which is reflected in the fact that we're putting out there that we have very limited equity needs through 2025 to the return of that PGA and then we have very limited debt financing through 2026.

And then last question for me. In terms of the potential separation time-line, in your slide deck, you have a check mark or a box to be checked around Q1, '24. Are you reaffirming that date? Or is that much more uncertain given potential path that the company could go down?

Yes, Ryan, the way I think we can answer that is, obviously, the former transaction will, to a certain extent, dictate timing. So to the extent that the timing of an IPO occurs, then we would be subject to lockup periods, which are typically 4 to 6 months. So any transaction following an IPO would be subject to potential restrictions under lockups. To the extent that we proceed with a different form of transaction, which we continue to evaluate alternatives like a tax-free spin, then we remain on track for the first quarter.

Thank you. The next question is from Tanner James with Bank of America.

Just coming back to kind of higher level comments on the balance sheet here. You -- you said '25 just with the ATM. What does that position you on an FFO to debt basis through your period through the forecast period here. If we could be a little bit more granular and specific. And then if you can update us in tandem on your financing plan as it pertains to the spinout and just how you think about that impacting the consolidated FFO to debt metrics on a pro forma basis?

Yes, James, I think clearly, the form of the transaction, again, will, to a large extent, dictate the FFO to debt type metrics. Certainly, at the utility, which it remains strong. We expect FFO to debt above the S&P FFO to debt kind of target metrics for our credit rating. I think the -- at the holding company level, as you can imagine, if we were to consider transactional alternatives like an IPO with sell-down that has different leverage impacts than an IPO with -- followed by a tax-free or other spin. And so I think for now, kind of as far as pro forma leverage metrics at the holding company, we'll have to defer commenting on that until the form of the transaction is decided.

Got it. And just to clarify here, I think you guys have talked about this 14% FFO to debt through 25 or by 25 before I mean can you elaborate where you stand kind of status quo? I mean, is there any way to kind of frame the puts and takes around potentially raising proceeds whatever you can do? I know I know it's complicated. .

Yes. The guidance on the FFO to debt, again, like as we look at those metrics at the holding company level, it depends we plan to separate Centuri. And so the timing of the Centuri separation will obviously impact those credit metrics and especially the forum. And so as far as if it's status quo, and you were running forward with Centuri continuing to be in our financials, then we do recover, obviously, centuries recovered, their EBITDA has recovered. The utility continues to have success on rate case outcomes and with customer growth. And so our credit metrics continue to improve through that '24, '25 period.

Got it. Excellent. And then just -- sorry, just pivoting back to the Centuri side real quickly. Obviously, a lot of comments here on offshore here, but just separately, even independent of offshore, just can you comment a little bit on what's going on the core business ex OSW and what's driving some of the declines there? And how are you seeing that outlook here? I know that you can't comment too much on forward-looking guidance at this point. But -- any commentary around on the ex-offshore business and prospects would be appreciated here, just given previous commentary about forward-looking. .

I don't think we commented only in the slide deck about projects in the backlog and total in the backlog. And what we've provided here today as far as revenues realized against that backlog. But I don't think we've provided other guidance there.

Maybe to make us a little bit more possible to answer. Just it seems like it was like down year-over-year ex offshore wind. Maybe you could speak to what drove that, for instance, and how you think about that fitting into the plan?

Yes. We talked a little bit about that the gas business was down a small amount and that was driven by an extraordinary year in Canada, which is -- we're seeing a more normalized year in Canada this year. So -- the decline in Canada is masking the growth in the overall business. On the gas side, the electric business is growing. And so I guess I'm having a little bit of hard time tracking your comments around the business decline.

No. Got it. Yes. It's clearly the gas piece there. I appreciate it. I know it's difficult to comment too much on this point. Best the block speak to you guys soon.

No, we're continuing. We have started and we continue to perform work for Sunrise, and there's no indication from our customer that we should expect any delays or slowdown in that work. Their re-bidding the PPA, at least as far as I understand, doesn't have any impact on the overall timing of that project.

This concludes the Q&A portion of today's conference. I would now like to turn the call back over to Justin Forberg for closing remarks.

Thanks, MJ, and thank you all for joining us today and for your questions. This concludes our conference call, and we look forward to seeing many of you as we participate in the Utility Week activities in New York in early December, such as the Wells Fargo and Wolf Utility Conferences, along with Bank of America's upcoming natural gas conference, among other events. You will see on slide 24 my updated contact information now as a member of the Southwest Gas Holdings team. Feel free to reach out at any time, and thank you for your interest in Southwest Gas Holdings. Have a good day.