Southwest Gas Holdings outlook revised to stable by Fitch

Investing.com -- Fitch Ratings has affirmed Southwest Gas Holdings, Inc.’s (NYSE:SWX) Long-Term Issuer Default Rating (IDR) at ’BBB’ and revised the Rating Outlook to Stable from Negative, the rating agency announced Wednesday.

The improved outlook reflects significant progress in completing the Centuri Holdings Inc. separation and strengthening leverage metrics. Southwest Gas used $472 million from Centuri common stock sales to reduce holding company debt while maintaining a 52% stake in Centuri.

Fitch also affirmed the Long- and Short-Term IDRs of Southwest Gas Corporation (SWG), the company’s core utility subsidiary, at ’BBB+’ and ’F2’ with a Stable Outlook.

The rating agency projects Southwest Gas Holdings’ funds from operations (FFO) leverage will improve to 5.0x in 2025 and 4.7x in 2026, with the Centuri separation expected to conclude in 2026.

"Fitch believes Centuri’s separation will significantly enhance SWX’s business risk profile, positioning it as a pure regulated utility holding company," the rating agency stated. Future Centuri equity sales are expected to further reduce holding company debt.

After the separation, Southwest Gas Holdings will operate exclusively through SWG, a natural gas local distribution and transmission company serving high-growth regions across Arizona, Nevada, and California.

SWG’s ratings reflect its low-risk profile as a regulated gas utility, constructive rate case outcomes, and supportive regulatory environments. The utility recently received favorable rate case decisions in Arizona, Nevada, and from federal regulators.

In March 2025, the Arizona Corporation Commission approved an $80.2 million rate increase based on a 9.84% return on equity. Nevada regulators authorized a $59 million revenue increase in April 2024, while the Federal Energy Regulatory Commission approved a $9.6 million rate increase for SWG’s Great Basin Gas Transmission Company.

SWG’s capital investment program is projected at $4.3 billion for 2025-2029, supporting rate base growth of 6%-8% over the next five years. The company is also planning a $1.2 billion Great Basin pipeline expansion project expected to be in service by November 2028.

Fitch noted that progress on the planned separation and continued improvement in FFO leverage consistent with projections would likely lead to future positive rating actions.

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