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NW Natural Holdings Reports First Quarter 2022 Results

PORTLAND, Ore., May 04, 2022--(BUSINESS WIRE)--Northwest Natural Holding Company, (NYSE: NWN) (NW Natural Holdings), reported financial results and highlights including:

  • Earned net income of $1.80 per share for the first quarter of 2022, compared to net income of $1.94 per share for the same period in 2021. The first quarter of 2021 results included a $2.8 million after-tax (or $0.09 per share) benefit primarily related to asset management revenues from a February 2021 cold weather event.

  • Added more than 10,800 natural gas meters in the last 12 months for a growth rate of 1.4% as of March 31, 2022

  • Commenced operations at the first renewable natural gas (RNG) facility under the landmark Oregon legislation Senate Bill 98, which is producing RNG on behalf of our gas utility customers

  • Continued executing our water and wastewater investment strategy, announcing acquisitions near our existing service territory in Texas

  • Construction began on the first RNG facilities that we're investing in through our competitive renewables business

  • Honored as one of the 2022 World's Most Ethical Companies® by Ethisphere

  • Reaffirmed 2022 earnings guidance in the range of $2.45 to $2.65 per share and our long-term earnings per share growth rate target of 4% to 6%

"This quarter we reached an important milestone in our decarbonization efforts with the commencement of operations at our first RNG facility under Oregon Senate Bill 98," said David H. Anderson, president and CEO of NW Natural Holdings. "NW Natural is the first local gas distribution utility in the continental United States to invest in and own an RNG facility on behalf of all its sales customers. We're continuing to work on behalf of our customers, executing on the decarbonization and growth opportunities in front of us. In addition, I'm proud of NW Natural Holdings being named one of the 2022 World's Most Ethical Companies® by Ethisphere. This reflects our long-standing commitment to leadership in business integrity through best-in-class ethics, compliance and governance practices."

Year-to-date net income decreased $3.3 million to $56.2 million (or $1.80 per share), compared to $59.5 million (or $1.94 per share) for the same period in 2021. Results reflected customer growth and new rates in Washington for our natural gas utility, offset by higher operations and maintenance expenses and depreciation and general taxes as we continue investing in our gas utility system. In addition, net income from our other activities decreased primarily due to lower asset management revenues related to a severe winter storm in February 2021.

KEY EVENTS AND INITIATIVES

Ongoing Oregon General Rate Case for NW Natural

On Dec. 17, 2021, NW Natural filed a request for a general rate increase with the Oregon Public Utility Commission (OPUC). The filing included a requested $73.5 million annual revenue requirement increase and an increase in average rate base of $294 million to support long-planned investments related to safety, reliability, and information technology upgrades. NW Natural's filing will be reviewed by the OPUC and other stakeholders. The process is anticipated to take up to 10 months with new rates expected to take effect Nov. 1, 2022.

Utility Renewable Natural Gas (RNG)

Operations commenced at our first investment in a RNG facility under Oregon Senate Bill 98 with BioCarbN and Tyson Foods in January 2022. Construction of the second RNG facility began in late 2021 with completion and commissioning expected in early 2023. NW Natural has options to invest up to a total estimated $38 million in four separate RNG development projects using biogas derived from Tyson Foods’ processing plants.

NW Natural continues to pursue RNG supply for customers under the landmark Oregon Senate Bill 98, which supports renewable energy procurement and investment by natural gas utilities. To date, NW Natural has signed agreements with options to purchase or develop RNG on behalf of utility customers totaling about 3% of NW Natural’s current annual sales volume in Oregon.

NW Natural Renewables Competitive RNG Strategy

NW Natural Renewables is an unregulated subsidiary of NW Natural Holdings committed to leading in the energy transition by providing cost-effective solutions to decarbonize the utility, commercial, industrial and transportation sectors.

In January 2022, NW Natural Renewables named Michael Kotyk, an industry leader, as president of the new business line and since then has made additional key hires, equipping the business to be ready and resourced to pursue further RNG opportunities.

NW Natural Renewables' first project is with EDL, a leading global producer of sustainable distributed energy. NW Natural Renewables has contracted to provide a combined $50 million investment in two production facilities in Ohio that are designed to convert landfill waste gases to RNG and connect that production to existing regional pipeline networks. Construction began in January 2022 with substantial completion and commissioning of the first facility anticipated in early 2023 and the second facility in spring 2023. In addition, the agreements with EDL provide for a 20-year supply of RNG that NW Natural Renewables intends to market and sell primarily under long-term contracts.

Water Utilities

During the first quarter of 2022, NW Natural Water signed two purchase agreements for water utilities in Texas, representing approximately 900 connections. The acquisitions are subject to customary closing conditions, including approval by the Public Utility Commission of Texas, and are expected to close in 2022. In December 2021, NWN Water agreed to purchase the water and wastewater utilities of Far West Water & Sewer, Inc. located in Yuma, Arizona. In March 2022, we filed our acquisition application with the Arizona Corporation Commission. With all pending acquisitions closed, NW Natural Water will serve over 145,000 people through approximately 60,000 connections in five states.

For our acquired water utilities, we have been executing general rate cases. In February 2022, the OPUC adopted a comprehensive stipulation in Sunriver Water's rate case with new rates effective May 2022. In January 2022, we filed a general rate case for Suncadia Water and last week the Washington Commission approved new rates effective May 1, 2022.

FIRST QUARTER RESULTS

The following financial comparisons are for the first quarter of 2022 and 2021 with individual year-over-year drivers below presented on an after-tax basis using a statutory tax rate of 26.5% unless otherwise noted.

NW Natural Holdings' first quarter results are summarized by business segment in the table below:

Three Months Ended March 31,

2022

2021

Change

In thousands, except per share data

Amount

Per Share

Amount

Per Share

Amount

Per Share

Net income:

Natural Gas Distribution segment

$

55,390

$

1.77

$

53,925

$

1.76

$

1,465

$

0.01

Other

849

0.03

5,592

0.18

(4,743

)

(0.15

)

Consolidated

$

56,239

$

1.80

$

59,517

$

1.94

$

(3,278

)

$

(0.14

)

Diluted Shares

31,212

30,633

579

Natural Gas Distribution Segment

Natural Gas Distribution segment net income increased $1.5 million (or $0.01 per share) primarily reflecting new rates in Washington as a result of a general rate case, which was effective beginning Nov. 1, 2021.

Margin increased $3.7 million reflecting new rates in Washington and customer growth, which collectively contributed $2.7 million. In addition, there was a $1.7 million improvement from the gas cost incentive sharing mechanism as the prior year included the effect of purchasing higher priced gas for a February 2021 cold weather event. This was offset by decline in margin of $0.7 million due to 8% warmer than average weather for the first quarter of 2022, compared to 5% warmer than average weather for the same period in 2021.

Operations and maintenance expense increased $3.5 million as a result of higher contractor labor for safety and reliability projects, compensation costs due to higher headcount and wage increases, expenses related to information technology maintenance and support, and amortization expense related to cloud-computing arrangements.

Depreciation and general taxes increased $0.9 million as we continue to invest in our natural gas utility system.

Other income, net increased $1.9 million driven by lower pension costs primarily related to higher returns and lower interest costs.

Other

Other net income decreased $4.7 million (or $0.15 per share) reflecting $4.2 million of lower net income from NW Natural's other activities driven by asset management revenues from a February 2021 cold weather event. In addition, NW Natural Holding's other businesses reported a higher net loss of $0.6 million primarily related to increased water and wastewater utility business development costs.

BALANCE SHEET AND CASH FLOWS

During the first three months of 2022, the Company generated $141.0 million in operating cash flows or an increase of $4.0 million compared to the same period in 2021. The Company used $69.8 million in investing activities during the first three months of 2022 primarily for natural gas utility capital expenditures, compared to $63.9 million used in investing activities during the same period in 2021. Net cash used in financing activities was $62.8 million for the first three months of 2022, compared to $83.1 million used in financing activities during the same period in 2021. As of March 31, 2022, NW Natural Holdings held cash of $24.3 million.

2022 GUIDANCE AND LONG-TERM TARGETS

NW Natural Holdings reaffirmed 2022 earnings guidance in the range of $2.45 to $2.65 per share. This guidance assumes continued customer growth, average weather conditions, and no significant changes in prevailing regulatory policies, mechanisms, or outcomes, or significant local, state or federal laws, legislation or regulations. NW Natural Holdings reaffirmed its long-term earnings per share growth rate target of 4% to 6% compounded annually from 2022 through 2027.

DIVIDEND DECLARED

The board of directors of NW Natural Holdings declared a quarterly dividend of 48.25 cents per share on the Company’s common stock. The dividend is payable on May 13, 2022 to shareholders of record on April 29, 2022. The Company's current indicated annual dividend rate is $1.93 per share. Future dividends are subject to board of director discretion and approval.

CONFERENCE CALL AND WEBCAST

As previously announced, NW Natural Holdings will host a conference call and webcast today to discuss its first quarter 2022 financial and operating results.

Date and Time:

Wednesday, May 4, 2022

8 a.m. PT (11 a.m. ET)

Phone Numbers:

United States 1-844-200-6205

Canada 1-833-950-0062

International 1-929-526-1599

Passcode 884524

The call will also be webcast in a listen-only format for the media and general public and can be accessed at ir.nwnaturalholdings.com. A replay of the conference call will be available on our website and by dialing 1-866-813-9403 (U.S.), 1-226-828-7578 (Canada), and +44-204-525-0658 (international). The replay access code is 448759.

ABOUT NW NATURAL HOLDINGS

Northwest Natural Holding Company, (NYSE: NWN) (NW Natural Holdings), is headquartered in Portland, Oregon and has been doing business for over 160 years in the Pacific Northwest. It owns NW Natural Gas Company (NW Natural), NW Natural Water Company (NW Natural Water), NW Natural Renewables Holdings (NW Natural Renewables), and other business interests. We have a longstanding commitment to safety, environmental stewardship and the energy transition, and taking care of our employees and communities.

NW Natural is a local distribution company that currently provides natural gas service to approximately 2.5 million people in more than 140 communities through more than 785,000 meters in Oregon and Southwest Washington with one of the most modern pipeline systems in the nation. NW Natural consistently leads the industry with high J.D. Power & Associates customer satisfaction scores. NW Natural owns and operates 21 Bcf of underground gas storage capacity in Oregon.

NW Natural Water provides water distribution and wastewater services to communities throughout the Pacific Northwest and Texas. With all pending acquisitions closed, NW Natural Water will serve over 145,000 people through approximately 60,000 connections in five states. Learn more about our water business at nwnaturalwater.com.

Additional information is available at nwnaturalholdings.com.

Forward-Looking Statements

This press release, and other presentations made by NW Holdings from time to time, may contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "anticipates," "assumes," "intends," "plans," "seeks," "believes," "estimates," "expects" and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements regarding the following: plans, objectives, assumptions, estimates, expectations, timing, goals, strategies, commitments, future events, investments, timing and amount of capital expenditures, targeted capital structure, risks, risk profile, stability, acquisitions and timing, completion and integration thereof, the likelihood and success associated with any transaction, utility system and infrastructure investments, system modernization, reliability and resiliency, global, national and local economies, customer and business growth, customer satisfaction ratings, weather, performance and service during weather events, customer rates or rate recovery and the timing and magnitude of potential rate changes and the potential outcome of rate cases, environmental remediation cost recoveries, environmental initiatives, decarbonization and the role of natural gas and the gas delivery system, including decarbonization goals and timelines, energy efficiency measures, use of renewable sources, renewable natural gas purchases, projects, investments and other renewable initiatives and timing, magnitude and completion thereof, unregulated renewable natural gas strategy and initiatives, renewable hydrogen projects or investments and timing, magnitude and completion thereof, procurement of renewable natural gas or hydrogen for customers, technology and policy innovations, strategic goals and visions, the water and wastewater acquisition and investment strategy and financial effects of water and wastewater acquisitions, diversity, equity and inclusion initiatives, operating plans of third parties, financial results, including estimated income, availability and sources of liquidity, expenses, positions, revenues, returns, cost of capital, timing, and earnings, earnings guidance and estimated future growth rates, dividends, commodity costs and sourcing asset management activities, performance, timing, outcome, or effects of regulatory proceedings or mechanisms or approvals, regulatory prudence reviews, anticipated regulatory actions or filings, accounting treatment of future events, effects of legislation or changes in laws or regulations, effects, extent, severity and duration of COVID-19 and resulting economic disruption, the impact of mitigating factors and other efforts to mitigate risks posed by its spread, ability of our workforce, customers or suppliers to operate or conduct business, COVID-19 financial impact, expenses, cost savings measures and cost recovery including through regulatory deferrals and the timing and magnitude thereof, impact on capital projects, governmental actions and timing thereof, and other statements that are other than statements of historical facts.

Forward-looking statements are based on current expectations and assumptions regarding its business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual results may differ materially from those contemplated by the forward-looking statements. You are therefore cautioned against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future operational, economic or financial performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed by reference to the factors described in Part I, Item 1A "Risk Factors", and Part II, Item 7 and Item 7A "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosure about Market Risk" in the most recent Annual Report on Form 10-K and in Part I, Items 2 and 3 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosures About Market Risk", and Part II, Item 1A, "Risk Factors", in the quarterly reports filed thereafter.

All forward-looking statements made in this report and all subsequent forward-looking statements, whether written or oral and whether made by or on behalf of NW Holdings or NW Natural, are expressly qualified by these cautionary statements. Any forward-looking statement speaks only as of the date on which such statement is made, and NW Holdings and NW Natural undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. New factors emerge from time to time and it is not possible to predict all such factors, nor can it assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements.

NORTHWEST NATURAL HOLDINGS

Consolidated Income Statement and Financial Highlights (Unaudited)

First Quarter 2022

Three Months
Ended

Twelve Months
Ended

In thousands, except per share amounts, customer, and degree day data

March 31,

March 31,

2022

2021

Change

2022

2021

Change

Operating revenues

$

350,301

$

315,946

11

%

$

894,755

$

804,474

11

%

Operating expenses:

Cost of gas

145,588

112,210

30

325,692

266,427

22

Operations and maintenance

57,485

52,191

10

209,521

183,399

14

Environmental remediation

4,703

3,777

25

10,864

9,463

15

General taxes

12,104

11,369

6

39,368

36,552

8

Revenue taxes

13,360

12,664

5

35,436

31,212

14

Depreciation

28,429

28,097

1

113,866

107,105

6

Other operating expenses

994

932

7

3,959

3,705

7

Total operating expenses

262,663

221,240

19

738,706

637,863

16

Income from operations

87,638

94,706

(7

)

156,049

166,611

(6

)

Other income (expense), net

(954

)

(3,542

)

(73

)

(9,971

)

(13,911

)

(28

)

Interest expense, net

11,522

11,126

4

44,882

43,710

3

Income before income taxes

75,162

80,038

(6

)

101,196

108,990

(7

)

Income tax expense

18,923

20,521

(8

)

25,808

27,476

(6

)

Net income from continuing operations

56,239

59,517

(6

)

75,388

81,514

(8

)

Income from discontinued operations, net of tax

7,286

(100

)

Net income

$

56,239

$

59,517

(6

)

$

75,388

$

88,800

(15

)

Common shares outstanding:

Average diluted for period

31,212

30,633

30,868

30,598

End of period

31,380

30,655

31,380

30,655

Per share of common stock information:

Diluted earnings from continuing operations

$

1.80

$

1.94

$

2.44

$

2.66

Diluted earnings from discontinued operations, net of tax

0.24

Diluted earnings

1.80

1.94

2.44

2.90

Dividends paid per share

0.4825

0.4800

1.9250

1.9150

Book value, end of period

31.48

30.54

31.48

30.54

Market closing price, end of period

51.72

53.95

51.72

53.95

Capital structure, end of period:

Common stock equity

41.8

%

44.0

%

41.8

%

44.0

%

Long-term debt

44.1

%

40.4

%

44.1

%

40.4

%

Short-term debt (including current maturities of long-term debt)

14.1

%

15.6

%

14.1

%

15.6

%

Total

100.0

%

100.0

%

100.0

%

100.0

%

Natural Gas Distribution segment operating statistics:

Meters - end of period

788,772

777,966

1.4

%

788,772

777,966

1.4

%

Volumes in therms:

Residential and commercial sales

293,927

297,822

699,159

688,221

Industrial sales and transportation

134,459

133,298

482,882

464,879

Total volumes sold and delivered

428,386

431,120

1,182,041

1,153,100

Operating revenues:

Residential and commercial sales

$

314,607

$

278,584

$

766,817

$

684,526

Industrial sales and transportation

21,273

17,379

69,193

58,863

Other distribution revenues

607

590

1,724

1,553

Other regulated services

4,911

4,785

19,213

18,981

Total operating revenues

341,398

301,338

856,947

763,923

Less: Cost of gas

145,644

112,266

325,916

266,651

Less: Environmental remediation expense

4,698

3,777

10,859

9,463

Less: Revenue taxes

13,324

12,655

35,269

31,203

Margin, net

$

177,732

$

172,640

$

484,903

$

456,606

Degree days:

Average (25-year average)

1,326

1,326

2,692

2,690

Actual

1,217

1,261

(3

)%

2,334

2,430

(4

)%

Percent colder (warmer) than average weather

(8

) %

(5

) %

(13

) %

(10

) %

NORTHWEST NATURAL HOLDINGS

Consolidated Balance Sheets (Unaudited)

March 31,

In thousands

2022

2021

Assets:

Current assets:

Cash and cash equivalents

$

24,325

$

17,907

Accounts receivable

103,131

105,226

Accrued unbilled revenue

41,772

41,907

Allowance for uncollectible accounts

(2,488

)

(3,503

)

Regulatory assets

64,481

47,789

Derivative instruments

84,438

19,914

Inventories

33,377

26,237

Income taxes receivable

6,000

Other current assets

42,329

41,315

Total current assets

391,365

302,792

Non-current assets:

Property, plant, and equipment

4,041,894

3,788,283

Less: Accumulated depreciation

1,137,138

1,091,903

Total property, plant, and equipment, net

2,904,756

2,696,380

Regulatory assets

297,546

338,692

Derivative instruments

6,955

3,087

Other investments

96,266

79,034

Operating lease right of use asset, net

74,416

76,957

Assets under sales-type leases

137,837

142,586

Goodwill

70,570

69,330

Other non-current assets

74,923

49,767

Total non-current assets

3,663,269

3,455,833

Total assets

$

4,054,634

$

3,758,625

Liabilities and equity:

Current liabilities:

Short-term debt

$

332,500

$

236,225

Current maturities of long-term debt

339

95,265

Accounts payable

130,557

88,591

Taxes accrued

14,258

23,550

Interest accrued

10,886

9,491

Regulatory liabilities

111,791

81,314

Derivative instruments

3,855

1,038

Operating lease liabilities

1,303

1,213

Other current liabilities

52,778

48,978

Total current liabilities

658,267

585,665

Long-term debt

1,044,667

860,654

Deferred credits and other non-current liabilities:

Deferred tax liabilities

353,746

328,112

Regulatory liabilities

652,977

636,384

Pension and other postretirement benefit liabilities

164,530

210,811

Derivative instruments

592

1,272

Operating lease liabilities

79,162

80,414

Other non-current liabilities

112,749

118,989

Total deferred credits and other non-current liabilities

1,363,756

1,375,982

Equity:

Common stock

602,382

568,066

Retained earnings

396,769

380,939

Accumulated other comprehensive loss

(11,207

)

(12,681

)

Total equity

987,944

936,324

Total liabilities and equity

$

4,054,634

$

3,758,625

NORTHWEST NATURAL HOLDINGS

Consolidated Statements of Cash Flows (Unaudited)

Three Months Ended March 31,

In thousands

2022

2021

Operating activities:

Net income

$

56,239

$

59,517

Adjustments to reconcile net income to cash provided by operations:

Depreciation

28,429

28,097

Regulatory amortization of gas reserves

1,481

3,634

Deferred income taxes

8,780

3,145

Qualified defined benefit pension plan expense

1,441

3,937

Contributions to qualified defined benefit pension plans

(4,540

)

Deferred environmental expenditures, net

(4,345

)

(4,270

)

Environmental remediation expense

4,703

3,777

Asset optimization revenue sharing bill credits

(41,102

)

(9,053

)

Other

6,325

6,134

Changes in assets and liabilities:

Receivables, net

38,664

1,044

Inventories

23,885

16,454

Income and other taxes

14,436

22,975

Accounts payable

(16,487

)

(2,329

)

Deferred gas costs

11,728

(28,912

)

Asset optimization revenue sharing

(646

)

34,633

Decoupling mechanism

4,434

656

Other, net

3,072

2,166

Cash provided by operating activities

141,037

137,065

Investing activities:

Capital expenditures

(68,514

)

(65,702

)

Acquisitions, net of cash acquired

(42

)

Proceeds from the sale of assets

195

1,960

Other

(1,431

)

(91

)

Cash used in investing activities

(69,750

)

(63,875

)

Financing activities:

Proceeds from common stock issued, net

9,938

Repayment of commercial paper, maturities greater than three months

(100,000

)

Changes in other short-term debt, net

(57,000

)

31,700

Cash dividend payments on common stock

(14,452

)

(13,858

)

Other

(1,250

)

(974

)

Cash used in financing activities

(62,764

)

(83,132

)

Increase (decrease) in cash, cash equivalents and restricted cash

8,523

(9,942

)

Cash, cash equivalents and restricted cash, beginning of period

27,120

35,454

Cash, cash equivalents and restricted cash, end of period

$

35,643

$

25,512

Supplemental disclosure of cash flow information:

Interest paid, net of capitalization

$

7,977

$

8,976

Income taxes paid, net of refunds

773

800

Reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents

$

24,325

$

17,907

Restricted cash included in other current assets

11,318

7,605

Cash, cash equivalents and restricted cash

$

35,643

$

25,512

View source version on businesswire.com: https://www.businesswire.com/news/home/20220504005273/en/

Contacts

Investor Contact:
Nikki Sparley
Phone: 503-721-2530
Email: nikki.sparley@nwnatural.com

Media Contact:
David Roy
Phone: 503-610-7157
Email: david.roy@nwnatural.com