Page 27 - SWGas Annual Report 2015

In March 2015, the Company amended its $300 million credit and commercial paper facility. The facility was
previously scheduled to expire in March 2019 and was extended to March 2020. Southwest has designated
$150 million of the $300 million facility for long-term borrowing needs and the remaining $150 million for working
capital purposes. The maximum amount outstanding during 2015 occurred during the fourth quarter and was
$180 million ($150 million outstanding on the long-term portion of the credit facility (including $50 million on the
commercial paper program), in addition to $30 million outstanding on the short-term portion). At December 31,
2015, $150 million was outstanding on the long-term portion of the credit facility (including $50 million under the
commercial paper program), and $18 million was outstanding on the short-term portion. The maximum amount
outstanding on the credit facility (including the commercial paper program) during each of the first, second, and
third quarters was $160 million, $56 million, and $97 million, respectively. The credit facility can be used as
necessary to meet liquidity requirements, including temporarily financing under-collected PGA balances, meeting
the refund needs of over-collected balances, or temporarily funding capital expenditures. This credit facility has
been, and is expected to continue to be, adequate for Southwest’s working capital needs outside of funds raised
through operations and other types of external financing.

The Company has a $50 million commercial paper program as noted above. Any issuance under the commercial
paper program is supported by the Company’s current revolving credit facility and, therefore, does not represent
additional borrowing capacity. Any borrowing under the commercial paper program will be designated as long-term
debt. Interest rates for the commercial paper program are calculated at the then current commercial paper rate. At
December 31, 2015, $50 million was outstanding on the commercial paper program, which is the maximum amount
outstanding at any time during the year.

Centuri has a $300 million secured revolving credit and term loan facility that is scheduled to expire in October
2019. The term loan facility portion had an initial limit of approximately $150 million, which was reached in 2014 and
is in the process of being repaid. No further borrowing is permitted under this portion of the facility. The secured
revolving credit facility portion also has a limit of $150 million; amounts borrowed and repaid under this portion of
the facility are available to be re-borrowed. The maximum amount outstanding on the Centuri secured revolving
credit facility during 2015 was $104.3 million, which occurred in the second quarter. At December 31, 2015,
$60.6 million was outstanding on the Centuri secured revolving credit facility. At December 31, 2015, there was
approximately $77.4 million, net of letters of credit, available under the line of credit.

Credit Ratings
The Company’s borrowing costs and ability to raise funds are directly impacted by its credit ratings. Securities
ratings issued by nationally recognized ratings agencies provide a method for determining the credit worthiness of
an issuer. Company debt ratings are important because long-term debt constitutes a significant portion of total
capitalization. These debt ratings are a factor considered by lenders when determining the cost of debt for the
Company (i.e., generally the better the rating, the lower the cost to borrow funds). The Company’s current
unsecured long-term debt ratings are all considered investment grade.

The Company’s unsecured long-term debt rating from Standard & Poor’s Ratings Services (“S&P”) is BBB+ with a
stable outlook as reaffirmed in January 2016. S&P debt ratings range from AAA (highest rating possible) to D
(obligation is in default). The S&P rating of BBB+ indicates the issuer of the debt is regarded as having an adequate
capacity to pay interest and repay principal. The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a
plus “+” or minus “-” sign to show relative standing within the major rating categories.

Southwest Gas Corporation