S&P: Rate hikes help to improve Southwest Gas credit rating

By Steve Green

Tuesday, April 28, 2009 | 1:50 a.m.

Standard & Poor's Ratings Services has raised its corporate credit rating on Southwest Gas Corp. of Las Vegas, saying the natural gas company's financial profile is improving -- partly thanks to rate hikes that have been granted or proposed.

Prior to Friday, S&P's debt rating on Southwest Gas was "BBB-," a level just above speculative grade. On Friday the company was upgraded to "BBB" -- meaning S&P views the debt as having "adequate protection" but vulnerable to adverse economic conditions or changing circumstances.

Standard & Poor's said the outlook is stable for Southwest Gas, which has about $1.5 billion of outstanding debt.

"Despite a slowdown in customer and new housing growth, the company is expected to maintain solid cash flow measures and reduced debt leverage," S&P said.

The ratings agency said that at year-end 2008, Southwest was generating profit in relation to debt at a level better than in early 2007.

In the fourth quarter, Southwest Gas earned $31.2 million, or 71 cents per share, on revenue of $509 million vs. the same quarter in 2007 when it earned $43.1 million or $1 per share on revenue of $560.3 million. The company said warmer weather, foreclosures and one-time items affected the 2008 results.

The company serves 1.8 million customers in Nevada, Arizona and California.

"With its recent rate decision in Arizona, which increased revenues by $33.5 million and granted an allowed ROE (return on equity) of 10 percent compared with the previous 9.5 percent, and the request for rate increases of about $30 million in Nevada, we expect Southwest Gas to maintain its improved financial risk profile,'' S&P said.

Earlier this month, Southwest said it’s seeking a rate hike of 5.9 percent effective Nov. 1 for its Southern Nevada customers.

In Northern Nevada the company is requesting to increase its authorized operating revenue by $1.7 million or 1.4 percent. In Southern Nevada, the request is for $28.8 million and would increase an average monthly bill of $53.97 by $3.78 to $57.75.

In February, the company’s board of directors increased the company’s quarterly dividend to shareholders by 6 percent from 22.5 cents per share to 23.75 cents per share.