Page 25 - SWGas Annual Report 2015

Investing Cash Flows. Cash used in consolidated investing activities decreased $85.8 million in 2015 as
compared to 2014. The decline was primarily due to the acquisition of the construction services businesses in 2014.
Construction expenditures, including scheduled and accelerated pipe replacement, and to a lesser extent,
equipment purchases by Centuri due to the increased replacement construction work of its customers were higher
in 2015. In association with the acquisition of construction services businesses, a $9 million working capital
adjustment related to a contractual true-up period was paid in the first quarter of 2015.

Financing Cash Flows. The change in financing cash flows was primarily due to net borrowings in 2014 to finance
the construction services acquisition compared to net debt repayments and redemptions in 2015. Repayment of
long-term debt in 2015 included $51.2 million of IDRBs, while the prior year included the repayment of $65 million
of IDRBs. The long-term debt issuance amounts and the remaining retirements of long-term debt primarily relate to
borrowings and repayments under the secured revolving credit facility portion of Centuri’s secured revolving credit
and term loan facility. The majority of Centuri’s borrowings in the prior year were associated with the acquisition of
construction services businesses. Southwest also issued approximately $35 million in stock under its Equity Shelf
Program. See also Note 6 – Common Stock, and the discussion below. Dividends paid increased in 2015 as compared
to 2014 as a result of an increase in the quarterly dividend rate and an increase in the number of shares
outstanding. While Centuri paid dividends during 2015, the only impact to consolidated cash flows overall was due
to the amount paid to the holders of the redeemable noncontrolling interest.

The capital requirements and resources of the Company generally are determined independently for the natural
gas operations and construction services segments. Each business activity is generally responsible for securing its
own financing sources.

2015 Construction Expenditures
During the three-year period ended December 31, 2015, total gas plant increased from $5 billion to $5.9 billion, or
at an average annual rate of 5%. Replacement, reinforcement, and franchise work was a substantial portion of the
plant increase. To a lesser extent, customer growth impacted expenditures as the Company set approximately
64,000 meters during the three-year period.

During 2015, construction expenditures for the natural gas operations segment were $438 million. The majority of
these expenditures represented costs associated with scheduled and accelerated replacement of existing
transmission, distribution, and general plant to fortify system integrity and reliability. Cash flows from operating
activities of Southwest were $498 million and provided approximately 97% of construction expenditures and
dividend requirements of the natural gas operations segment. Other necessary funding was provided by cash on
hand, external financing activities, and, as needed, existing credit facilities.

2015 Financing Activity
In May 2015, the Company redeemed at par its $31.2 million 2004 5.00% Series B IDRBs originally due in 2033. In
September 2015, the Company redeemed at par the $20 million 5.25% 2003 Series D IDRBs originally due in
2038. The Company facilitated the redemptions primarily from cash on hand and borrowings under its $300 million
credit facility.

In March 2015, the Company filed with the SEC a shelf registration statement which included a prospectus detailing
the Company’s plans to sell up to $100 million of the Company’s common stock over a period of time. In March
2015, the Company entered into a Sales Agency Agreement with BNY Mellon Capital Markets, LLC relating to this

Southwest Gas Corporation