Southwest Gas’s (SWX) Pipeline Bet Just Got $600M Bigger

On August 5, Southwest Gas Holdings (NYSE: SWX ) reported second quarter results for the period ended June 30 and reaffirmed its full year 2026 guidance. Net income attributable to the company reached $42.1 million, a sharp turnaround from a $40.2 million loss in the same quarter of 2025. But the number that stood out was the Great Basin 2028 Expansion Project, where contracted demand has grown enough that management now expects capital costs of $2.3 billion instead of the $1.7 billion baked into current five year guidance.

Southwest Gas's growth story increasingly runs through Nevada. Binding precedent agreements for the Great Basin 2028 Expansion Project have grown to roughly 1 billion cubic feet per day of contracted demand, and the company has fielded another 1.8 billion cubic feet of expressions of interest for phases running from 2029 through 2035. Based on that demand, management now projects an annual margin of $270 million to $300 million once the pipeline is in service, on capital investment of about $2.3 billion.

Regulators have been cooperating too. California's Public Utilities Commission approved the non-cost-of-capital pieces of Southwest Gas's rate case, adding roughly $40 million of incremental annual revenue and triggering recognition of $9.7 million of previously deferred first-quarter income. Nevada regulators approved a Triennial Resource Plan with prudency pre-determinations for about $186 million of capital spending, and the company filed for a general rate case increase of roughly $74 million.

Arizona's new System Integrity Mechanism, effective April 1 this year, lets Southwest Gas recover safety and reliability spending faster, up to a $50 million annual cap. The company put $520 million into its network in the first six months of 2026, including $115 million toward Great Basin, and closed the quarter with $270.5 million in cash and nearly $1 billion in available liquidity.

Look past the headline swing to profit, and the picture gets murkier. The core natural gas distribution segment actually earned less this quarter, with its contribution to net income falling from $45.6 million a year earlier to $40.8 million, and its adjusted net income slipping from $33.7 million to $31 million. Depreciation and amortization rose $8.7 million, or 13%, as gas plant in service grew 7% year over year, a reminder that heavy pipeline spending shows up in expenses well before it shows up in rates.

Income tax expense climbed $16.2 million in the quarter, largely because a $12 million state tax benefit from the prior year did not repeat. Other income fell $9.4 million on lower interest income, smaller gains on company-owned life insurance policies, and higher charitable contributions.