PART I. FINANCIAL INFORMATION [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section outlines forward-looking statements, emphasizing their basis in current expectations and inherent uncertainties - Forward-looking statements are based on current expectations and assumptions, subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict[10](index=10&type=chunk) - Examples of forward-looking statements include plans, projections, objectives, economic conditions (inflation, interest rates), earnings, dividends, capital expenditures, climate change matters, regulatory outcomes, and growth[9](index=9&type=chunk) - Actual results may differ materially from those contemplated by forward-looking statements, and the company undertakes no obligation to publicly update them, except as required by law[10](index=10&type=chunk)[11](index=11&type=chunk) [Item 1. Unaudited Financial Statements](index=5&type=section&id=Item%201.%20Unaudited%20Financial%20Statements) This section presents unaudited consolidated financial statements for NW Holdings and NW Natural, including income, balance sheets, equity, and cash flows [Consolidated Statements of Comprehensive Income (NW Holdings)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20of%20Northwest%20Natural%20Holding%20Company) Consolidated Statements of Comprehensive Income (NW Holdings, in thousands) | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :------------------------------------------------ | :------------------------------------------------ | :-------------------- | :--------- | | Operating revenues | $433,470 | $462,423 | $(28,953) | -6.26% | | Total operating expenses | $323,643 | $348,915 | $(25,272) | -7.24% | | Income from operations | $109,827 | $113,508 | $(3,681) | -3.24% | | Net income | $63,823 | $71,671 | $(7,848) | -10.95% | | Basic EPS | $1.69 | $2.01 | $(0.32) | -15.92% | | Diluted EPS | $1.69 | $2.01 | $(0.32) | -15.92% | - **NW Holdings' net income decreased by $7.85 million**, or 10.95%, for the three months ended March 31, 2024, compared to the same period in 2023, primarily due to lower operating revenues and higher interest expense[12](index=12&type=chunk) [Consolidated Balance Sheets (NW Holdings)](index=6&type=section&id=Consolidated%20Balance%20Sheets%20of%20Northwest%20Natural%20Holding%20Company) Consolidated Balance Sheets (NW Holdings, in thousands) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | March 31, 2023 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | :------------------------------ | | Total assets | $4,849,066 | $4,867,092 | $4,592,096 | | Total current assets | $537,714 | $601,440 | $576,173 | | Total non-current assets | $4,311,352 | $4,265,652 | $4,015,923 | | Total liabilities and equity | $4,849,066 | $4,867,092 | $4,592,096 | | Total current liabilities | $468,344 | $696,878 | $644,080 | | Long-term debt | $1,574,735 | $1,425,435 | $1,294,590 | | Total equity | $1,343,386 | $1,283,838 | $1,248,307 | - **NW Holdings' total assets increased by $256.97 million** (5.59%) from March 31, 2023, to March 31, 2024, primarily driven by an increase in property, plant, and equipment, net[14](index=14&type=chunk) - **Long-term debt for NW Holdings increased by $280.14 million** (21.64%) from March 31, 2023, to March 31, 2024[16](index=16&type=chunk) [Consolidated Statements of Shareholders' Equity (NW Holdings)](index=8&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity%20of%20Northwest%20Natural%20Holding%20Company) Consolidated Statements of Shareholders' Equity (NW Holdings, in thousands) | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | | :-------------------------------- | :------------------------------------------------ | :------------------------------------------------ | :-------------------- | | Total shareholders' equity, beginning balances | $1,283,838 | $1,175,441 | $108,397 | | Net income | $63,823 | $71,671 | $(7,848) | | Dividends on common stock | $(18,676) | $(17,547) | $(1,129) | | Total shareholders' equity, ending balances | $1,343,386 | $1,248,307 | $95,079 | | Dividends per share of common stock | $0.4875 | $0.4850 | $0.0025 | - **NW Holdings' total shareholders' equity increased by $95.08 million** year-over-year, reaching $1.34 billion, driven by common stock issuances and retained earnings, despite a decrease in net income[17](index=17&type=chunk) [Consolidated Statements of Cash Flows (NW Holdings)](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20of%20Northwest%20Natural%20Holding%20Company) Consolidated Statements of Cash Flows (NW Holdings, in thousands) | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | | :-------------------------------- | :------------------------------------------------ | :------------------------------------------------ | :-------------------- | | Cash provided by operating activities | $125,039 | $176,861 | $(51,822) | | Cash used in investing activities | $(82,488) | $(73,018) | $(9,470) | | Cash (used in) provided by financing activities | $(2,917) | $11,187 | $(14,104) | | Increase in cash, cash equivalents and restricted cash | $39,634 | $115,030 | $(75,396) | | Cash, cash equivalents and restricted cash, end of period | $89,258 | $155,994 | $(66,736) | - **Cash provided by operating activities for NW Holdings decreased by $51.82 million**, while **cash used in investing activities increased by $9.47 million**, and financing activities shifted from providing cash to using cash, resulting in a significant decrease in overall cash and cash equivalents[18](index=18&type=chunk) [Consolidated Statements of Comprehensive Income (NW Natural)](index=10&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20of%20Northwest%20Natural%20Gas%20Company) Consolidated Statements of Comprehensive Income (NW Natural, in thousands) | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :------------------------------------------------ | :------------------------------------------------ | :-------------------- | :--------- | | Operating revenues | $422,775 | $454,513 | $(31,738) | -6.98% | | Total operating expenses | $312,144 | $340,385 | $(28,241) | -8.30% | | Income from operations | $110,631 | $114,128 | $(3,497) | -3.06% | | Net income | $67,558 | $75,540 | $(7,982) | -10.57% | - **NW Natural's net income decreased by $7.98 million**, or 10.57%, for the three months ended March 31, 2024, compared to the same period in 2023, primarily due to lower operating revenues and higher interest expense[19](index=19&type=chunk) [Consolidated Balance Sheets (NW Natural)](index=11&type=section&id=Consolidated%20Balance%20Sheets%20of%20Northwest%20Natural%20Gas%20Company) Consolidated Balance Sheets (NW Natural, in thousands) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | March 31, 2023 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | :------------------------------ | | Total assets | $4,494,642 | $4,511,377 | $4,300,635 | | Total current assets | $521,218 | $576,624 |

Northwest Natural (NWN) came out with quarterly earnings of $1.69 per share, missing the Zacks Consensus Estimate of $1.82 per share. This compares to earnings of $2.01 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -7.14%. A quarter ago, it was expected that this natural gas distributor would post earnings of $1.30 per share when it actually produced earnings of $1.21, delivering a surprise of -6.92%.Over the last four quart ...

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) [First Quarter 2024 Overview](index=1&type=section&id=First%20Quarter%202024%20Overview) NW Natural Holdings reported Q1 2024 net income of $63.8 million ($1.69 per share), a decline from 2023, yet reaffirmed its 2024 earnings guidance and long-term growth targets Net Income and EPS Overview | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Net Income ($ millions) | $63.8 | $71.7 | -$7.9 | | Net Income Per Share ($) | $1.69 | $2.01 | -$0.32 | - CEO David H. Anderson stated that employees successfully maintained natural gas supply during January's winter weather events, ensuring safe and reliable energy for customers; the company was also recognized by Ethisphere as one of the "**World's Most Ethical Companies**" for the third consecutive year[1](index=1&type=chunk)[2](index=2&type=chunk) - The company reaffirmed its 2024 earnings per share guidance between **$2.20 and $2.40** and maintained its long-term earnings per share CAGR target of **4% to 6%** from 2022 to 2027[2](index=2&type=chunk) [Key Operational and Strategic Highlights](index=1&type=section&id=Key%20Operational%20and%20Strategic%20Highlights) The company added nearly 15,000 connections (1.7% growth), set a 9 million therms daily delivery record during winter, and earned Ethisphere recognition for ethical practices - As of March 31, 2024, nearly **15,000 new natural gas and water connections** were added over the past 12 months, representing a **1.7% growth rate**, primarily driven by strong water acquisitions[2](index=2&type=chunk) - In early 2024, Oregon natural gas customers received nearly **$30 million in bill credits**, with NW Natural customers cumulatively saving over **$250 million** in the past 20 years due to Mist storage assets and pipeline capacity management[2](index=2&type=chunk) - During the January 13 winter storm, the natural gas system delivered **9 million therms**, with **8 million therms** supplied to homes and businesses, setting a new daily peak record and breaking the Mist storage facility's withdrawal record[2](index=2&type=chunk) - The company was recognized by Ethisphere as one of the "**World's Most Ethical Companies**" for the **third consecutive year**[2](index=2&type=chunk) [Financial Results Analysis](index=2&type=section&id=Financial%20Results%20Analysis) [Consolidated Financial Performance](index=2&type=section&id=Consolidated%20Financial%20Performance) NW Natural Holdings' Q1 2024 consolidated net income decreased 11% to $63.8 million, primarily due to lower natural gas distribution and expanded 'other' business losses Consolidated Net Income by Segment | Metric (in thousands) | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Natural Gas Distribution Net Income | $65,715 | $71,951 | $(6,236) | | Other Business Net Income | $(1,892) | $(280) | $(1,612) | | Consolidated Net Income | $63,823 | $71,671 | $(7,848) | | Diluted Earnings Per Share ($) | $1.69 | $2.01 | $(0.32) | [Natural Gas Distribution Segment Performance](index=2&type=section&id=Natural%20Gas%20Distribution%20Segment%20Performance) Natural gas distribution net income declined by $6.2 million due to increased operating expenses, despite customer growth, with warmer weather and lower commodity price volatility impacting gross margin - Natural gas distribution net income decreased **$6.2 million** (**$0.28 per share**), primarily reflecting increased operating expenses[6](index=6&type=chunk) - Gross margin increased **$0.5 million**, mainly from deferred amortization and customer growth (contributing **$5.5 million**), partially offset by **$3.5 million** less gross margin due to warmer weather (Q1 2024 was 9% warmer than average, while Q1 2023 was 5% colder than average) and **$1.5 million** lower Oregon natural gas cost incentive sharing mechanism benefits[7](index=7&type=chunk) - Operating and maintenance expenses decreased **$0.3 million**, primarily due to lower benefit costs, partially offset by higher wages, cloud computing amortization, and deferred amortization approved in the rate case; depreciation increased **$1.0 million** from additional capital investments in the distribution system; general taxes increased **$1.1 million**, mainly due to higher regulatory commission fees[8](index=8&type=chunk) - Other net income decreased **$3.8 million**, primarily due to increased pension expense and lower interest income from reduced investment cash levels and decreased equity AFUDC; interest expense increased **$1.5 million** from higher long-term debt balances[9](index=9&type=chunk)[10](index=10&type=chunk) [Other Business Activities Performance](index=2&type=section&id=Other%20Business%20Activities%20Performance) 'Other' business net income decreased by $1.6 million, primarily due to reduced asset management income - 'Other' business net income decreased **$1.6 million** (**$0.04 per share**), primarily due to reduced asset management income[11](index=11&type=chunk) [Balance Sheet and Cash Flows](index=2&type=section&id=Balance%20Sheet%20and%20Cash%20Flows) [Balance Sheet Overview](index=9&type=section&id=Balance%20Sheet%20Overview) Total assets increased to $4.849 billion as of March 31, 2024, with the capital structure comprising 44.5% common equity, 52.3% long-term debt, and 3.2% short-term debt Total Assets and Liabilities | Metric (in thousands) | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Total Assets | $4,849,066 | $4,592,096 | | Total Liabilities and Equity | $4,849,066 | $4,592,096 | Capital Structure | Capital Structure (as of period end) | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Common Equity (%) | 44.5 | 43.7 | | Long-Term Debt (%) | 52.3 | 45.3 | | Short-Term Debt (%) | 3.2 | 11.0 | | Total (%) | 100.0 | 100.0 | [Cash Flow Statement Analysis](index=2&type=section&id=Cash%20Flow%20Statement%20Analysis) Q1 2024 operating cash flow was $125 million, a decrease from $176.9 million, with $82.5 million used in investing and a net $2.9 million used in financing activities Cash Flow Summary | Cash Flow (in thousands) | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Cash Flow from Operating Activities | $125,039 | $176,861 | $(51,822) | | Cash Flow from Investing Activities | $(82,488) | $(73,018) | $(9,470) | | Cash Flow from Financing Activities | $(2,917) | $11,187 | $(14,104) | | Cash and Cash Equivalents, End of Period | $72,375 | $140,821 | $(68,446) | - Investing activities primarily involved natural gas utility capital expenditures, totaling **$82.5 million** in Q1 2024, up from **$73.0 million** in the prior-year period[12](index=12&type=chunk) [Outlook and Guidance](index=4&type=section&id=Outlook%20and%20Guidance) [2024 Guidance and Long-Term Targets](index=4&type=section&id=2024%20Guidance%20and%20Long-Term%20Targets) The company reaffirmed 2024 EPS guidance of $2.20-$2.40 and a 4%-6% long-term CAGR target, with 2024 guidance below target due to regulatory lag, expecting new rates by November 1, 2024 2024 EPS Guidance and Long-Term Targets | Metric | Value | | :--- | :--- | | 2024 EPS Guidance ($) | $2.20 - $2.40 | | Long-Term EPS Growth Target (2022-2027 CAGR) | 4% - 6% | | 2022 EPS ($) | $2.54 | - The 2024 EPS guidance is below the long-term target primarily due to regulatory lag in the natural gas distribution business, driven by significant investments in the system for safe and reliable service, high technology investments leading to increased depreciation, and inflationary pressures on operating expenses, including multi-year O&M contract renewals, higher personnel costs, cloud computing technology amortization, and increased pension expense[13](index=13&type=chunk) - The company filed a general rate case application in Oregon at the end of 2023, with new rates anticipated to become effective on **November 1, 2024**, under Oregon statutes[13](index=13&type=chunk) Quarterly EPS Expectations for 2024 | 2024 Quarterly EPS Expectation | Range ($) | | :--- | :--- | | Q2 | -$0.08 to -$0.16 | | Q3 | -$0.74 to -$0.86 | | Q4 | $1.43 to $1.63 | [Dividend Declaration](index=4&type=section&id=Dividend%20Declaration) NW Natural Holdings' Board declared a quarterly dividend of 48.75 cents per common share, resulting in an annual dividend rate of $1.95 per share Quarterly Dividend Declaration | Metric | Value | | :--- | :--- | | Quarterly Dividend (cents/share) | 48.75 | | Annual Dividend Rate ($/share) | $1.95 | | Payment Date | May 15, 2024 | | Record Date | April 30, 2024 | [Company Overview](index=4&type=section&id=Company%20Overview) [About NW Natural Holdings](index=4&type=section&id=About%20NW%20Natural%20Holdings) Northwest Natural Holding Company, based in Portland, Oregon, has operated for over 165 years, focusing on safety, environmental management, and energy transition, earning Ethisphere's 'World's Most Ethical Companies' recognition - NW Natural Holdings is headquartered in Portland, Oregon, with over **165 years** of operating history in the Pacific Northwest[18](index=18&type=chunk) - The company is committed to safety, environmental stewardship, energy transition, and caring for its employees and communities, earning recognition from Ethisphere® as one of the "**World's Most Ethical Companies®**" for the **third consecutive year** in 2024[19](index=19&type=chunk) [Business Segments](index=4&type=section&id=Business%20Segments) NW Natural Holdings comprises NW Natural Gas, serving 2 million in Oregon/SW Washington; NW Natural Water, operating across the Pacific Northwest, Texas, and Arizona; and NW Natural Renewables, focused on decarbonization through renewable fuels - NW Natural Gas, a local distribution company, currently serves approximately **2 million people** in over 140 communities across Oregon and Southwest Washington through more than **800,000 meters**, boasting one of the nation's most modern pipeline systems and **21.6 Bcf** of underground storage capacity[20](index=20&type=chunk)[21](index=21&type=chunk) - NW Natural Water provides water and wastewater services to communities in the Pacific Northwest, Texas, and Arizona, currently serving over **180,000 people** through approximately **74,000 meters** and providing operations and maintenance services for an additional **20,000 connections**[21](index=21&type=chunk) - NW Natural Renewables is a competitive business leading the energy transition by providing renewable fuels to utility, commercial, industrial, and transportation sectors to support decarbonization[22](index=22&type=chunk) [Additional Information](index=4&type=section&id=Additional%20Information) [Conference Call and Webcast](index=4&type=section&id=Conference%20Call%20and%20Webcast) The company hosted a conference call and webcast on May 6, 2024, to discuss Q1 2024 financial and operational results, with detailed access information provided Conference Call and Webcast Details | Item | Details | | :--- | :--- | | Date and Time | May 6, 2024, 8:00 AM PT (11:00 AM ET) | | U.S. Dial-in | 1-833-470-1428 | | International Dial-in | 1-404-975-4839 | | Passcode | 701070 | | Webcast Address | ir.nwnaturalholdings.com | [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This press release includes forward-looking statements, based on current expectations and assumptions, which are subject to inherent uncertainties and risks, and actual results may differ materially, advising caution for investors - Forward-looking statements can be identified by words such as "anticipates," "assumes," "continues," "could," "intends," "plans," "seeks," "believes," "estimates," "expects," and similar references to future periods[24](index=24&type=chunk) - These statements are based on current expectations and assumptions about the business, economic, geopolitical factors, and other future conditions, but are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict, and actual results may differ materially from forward-looking statements[25](index=25&type=chunk) - Important factors that could cause actual results to differ materially from forward-looking statements are discussed in the "Risk Factors" section of the company's most recent annual report on Form 10-K and subsequent quarterly reports, including legal, regulatory, and legislative risks, public health risks, financial, macroeconomic, and geopolitical risks, growth and strategic risks, operational risks, business continuity and technology risks, environmental risks, and risks related to water and renewable natural gas businesses[26](index=26&type=chunk) [Non-GAAP Financial Measures](index=7&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP financial measures, such as EPS, for performance analysis, providing useful information for investors, but these are not GAAP substitutes and have limitations, potentially differing from other companies' calculations - Non-GAAP financial measures, such as earnings per share, are used to analyze financial performance as they provide useful information for investors and creditors in evaluating financial condition and operating results[28](index=28&type=chunk) - These non-GAAP financial measures should not be considered as alternatives to, or more meaningful than, GAAP measures and have limitations as they do not reflect all items of income and expense determined in accordance with GAAP; other companies may calculate similarly titled non-GAAP financial measures differently, limiting their comparative usefulness[28](index=28&type=chunk) [Financial Statements (Unaudited)](index=8&type=section&id=Financial%20Statements%20(Unaudited)) [Consolidated Income Statement and Financial Highlights](index=8&type=section&id=Consolidated%20Income%20Statement%20and%20Financial%20Highlights) This section provides NW Natural Holdings' unaudited consolidated income statement and financial highlights for Q1 2024 and 2023, and the twelve months ended March 31, 2024 and 2023, detailing key financial metrics Consolidated Income Statement and Financial Highlights | In thousands, except per share amounts, customer, and degree day data | March 31, 2024 (Three Months) | March 31, 2023 (Three Months) | Change (%) | March 31, 2024 (Twelve Months) | March 31, 2023 (Twelve Months) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Operating Revenues | $433,470 | $462,423 | (6) | $1,168,522 | $1,149,475 | 2 | | Total Operating Expenses | $323,643 | $348,915 | (7) | $987,262 | $956,128 | 3 | | Operating Income | $109,827 | $113,508 | (3) | $181,260 | $193,347 | (6) | | Net Income | $63,823 | $71,671 | (11) | $86,020 | $101,735 | (15) | | Diluted Earnings Per Share ($) | $1.69 | $2.01 | | $2.34 | $2.90 | | | Dividends Paid Per Share ($) | $0.4875 | $0.4850 | | $1.9450 | $1.9350 | | | Natural Gas Distribution Meters - End of Period | 800,978 | 796,848 | 0.5 | 800,978 | 796,848 | 0.5 | | Actual Degree Days | 1,216 | 1,385 | (12) | 2,311 | 2,880 | (20) | [Consolidated Balance Sheets](index=9&type=section&id=Consolidated%20Balance%20Sheets) This section presents NW Natural Holdings' unaudited consolidated balance sheets, detailing the composition of assets, liabilities, and stockholders' equity as of March 31, 2024, and December 31, 2023 Consolidated Balance Sheet Details | In thousands | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and Cash Equivalents | $72,375 | $140,821 | | Total Current Assets | $537,714 | $576,173 | | Plant, Property, and Equipment, Net | $3,441,524 | $3,155,978 | | Total Noncurrent Assets | $4,311,352 | $4,015,923 | | Total Assets | $4,849,066 | $4,592,096 | | Short-Term Debt | $94,700 | $72,500 | | Total Current Liabilities | $468,344 | $644,080 | | Long-Term Debt | $1,574,735 | $1,294,590 | | Total Deferred Credits and Other Noncurrent Liabilities | $1,462,601 | $1,405,119 | | Total Equity | $1,343,386 | $1,248,307 | | Total Liabilities and Equity | $4,849,066 | $4,592,096 | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section provides NW Natural Holdings' unaudited consolidated statements of cash flows, detailing cash flows from operating, investing, and financing activities for the three months ended March 31, 2024, and 2023 Consolidated Cash Flow Statement | In thousands | March 31, 2024 (Three Months) | March 31, 2023 (Three Months) | | :--- | :--- | :--- | | Cash Provided by Operating Activities | $125,039 | $176,861 | | Cash Used in Investing Activities | $(82,488) | $(73,018) | | Cash (Used in) Provided by Financing Activities | $(2,917) | $11,187 | | Increase in Cash, Cash Equivalents, and Restricted Cash | $39,634 | $115,030 | | Cash, Cash Equivalents, and Restricted Cash, End of Period | $89,258 | $155,994 |

Part I [Item 1. Business](index=8&type=section&id=Item%201.%20Business) Northwest Natural Holding Company operates primarily through its Natural Gas Distribution segment, serving 799,000 customers, alongside water utilities, renewable natural gas, and gas storage services [Natural Gas Distribution (NGD) Segment](index=8&type=section&id=Natural%20Gas%20Distribution%20(NGD)%20Segment) The NGD segment is NW Natural's core regulated business, serving customers in Oregon and Washington with diversified gas supply and a focus on environmental stewardship NGD Customer Mix (as of Dec 31, 2023) | Customer Type | Number of Meters | % of Volumes | % of Margin | | :--- | :--- | :--- | :--- | | Residential | 728,915 | 38% | 65% | | Commercial | 69,273 | 23% | 24% | | Industrial | 1,062 | 39% | 6% | | Other | N/A | N/A | 5% | | **Total** | **799,250** | **100%** | **100%** | - The NGD business is regulated by the Oregon Public Utility Commission (OPUC) and the Washington Utilities and Transportation Commission (WUTC), which authorize rates and recovery mechanisms[35](index=35&type=chunk) Projected Sources of Supply for Design Day (2023-24 Winter) | Source of NGD Supply | Therms (millions) | Percent | | :--- | :--- | :--- | | Firm supply purchases | 3.4 | 34% | | Mist underground storage (NGD only) | 3.1 | 30% | | Company-owned LNG storage | 1.9 | 19% | | Off-system storage contract | 0.5 | 5% | | Pipeline segmentation capacity | 0.6 | 6% | | Recall agreements | 0.4 | 4% | | Peak day citygate deliveries | 0.2 | 2% | | **Total** | **10.1** | **100%** | - In 2023, **59%** of the gas supply came from Canada, with the remainder primarily from the U.S. Rocky Mountain region[43](index=43&type=chunk) - The company is actively pursuing decarbonization through the purchase of Renewable Natural Gas (RNG) and its associated environmental attributes (Renewable Thermal Certificates), and is piloting a hydrogen blend of up to **20%** at its training facility[53](index=53&type=chunk)[54](index=54&type=chunk) [Other Businesses](index=14&type=section&id=Other) Other businesses include third-party gas storage, water and wastewater utilities serving 180,000 people, and unregulated renewable natural gas projects - NW Natural's 'Other' activities include contracting **5.8 Bcf** of the Mist gas storage facility to other utilities, third-party marketers, and electric generators[66](index=66&type=chunk) - NWN Water serves about **180,000 people** via **73,000 water and wastewater connections** and recently launched a services business providing operations and maintenance to nearly **20,000 additional connections**[70](index=70&type=chunk)[71](index=71&type=chunk) - NW Natural Renewables has an agreement to partially fund two landfill gas-to-RNG facilities with EDL and purchase the RNG produced over a **20-year period**[72](index=72&type=chunk) The facilities are constructed but commissioning has been delayed[72](index=72&type=chunk) [Human Capital](index=15&type=section&id=Human%20Capital) The company employed 1,380 people as of December 31, 2023, focusing on safety, talent development, and DEI, with a significant portion of the workforce nearing retirement Employee Count as of December 31, 2023 | Entity | Employee Type | Count | | :--- | :--- | :--- | | **NW Natural** | Unionized | 614 | | | Non-unionized | 600 | | | **Total NW Natural** | **1,214** | | **Other Entities** | Water/Wastewater | 161 | | | Other | 5 | | | **Total Other** | **166** | | **Total Employees** | | **1,380** | - The collective bargaining agreement with the OPEIU union, covering **614 employees**, extends to May 31, 2024, and negotiations for a new agreement are underway[76](index=76&type=chunk) - A significant portion of the workforce is eligible for retirement within the next five years, making talent attraction, training, and retention a key focus[81](index=81&type=chunk) [Item 1A. Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse risks including regulatory challenges, legislative changes, public perception shifts, operational vulnerabilities, financial market access, and specific risks for new business segments - **Regulatory Risk:** The inability to get timely approval for rates that recover costs and provide an adequate return on capital from regulators (OPUC, WUTC, FERC) could adversely impact financial results[90](index=90&type=chunk)[92](index=92&type=chunk) - **Public Perception and Policy Risk:** Negative public sentiment and policies restricting or banning natural gas use in new construction, driven by climate change concerns, could reduce customer growth and demand[101](index=101&type=chunk)[103](index=103&type=chunk)[145](index=145&type=chunk) - **Operational Risk:** The NGD system relies on a single interstate pipeline (Northwest Pipeline), making it vulnerable to disruptions that could impact service delivery[131](index=131&type=chunk)[132](index=132&type=chunk) - **Financial Risk:** Inability to access capital markets at a reasonable cost, potentially exacerbated by a shift in investment sentiment away from natural gas businesses, could hinder financing for operations and growth[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk) - **Growth Risk:** New building codes in Washington and similar measures being considered in Oregon that favor electrification could reduce the natural gas customer growth rate, a key driver of earnings[115](index=115&type=chunk)[116](index=116&type=chunk) - **Non-Regulated RNG Risk:** The unregulated RNG business faces risks such as unpredictable production levels, construction delays, and market volatility for RNG and its associated attributes, which could lead to failures in achieving expected returns[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk) [Item 1C. Cybersecurity](index=34&type=section&id=Item%201C.%20Cybersecurity) The company maintains a comprehensive cybersecurity program, overseen by the Audit Committee and informed by NIST, with no material incidents reported to date - Cybersecurity oversight is delegated to the Audit Committee, which receives regular reports from management on risks and incidents[199](index=199&type=chunk)[200](index=200&type=chunk) - The company's cybersecurity program is informed by frameworks like NIST and involves collaboration with government agencies such as the FBI and CISA[192](index=192&type=chunk)[193](index=193&type=chunk) - Significant investments have been made to comply with Transportation Security Administration (TSA) directives for critical pipeline owners and operators[194](index=194&type=chunk) - As of the report date, the company has not identified any risks from previous cybersecurity incidents that have materially affected or are reasonably likely to materially affect its operations or financial condition[198](index=198&type=chunk) [Item 2. Properties](index=36&type=section&id=Item%202.%20Properties) The company's properties include an extensive natural gas pipeline system, underground and LNG storage facilities, and water/wastewater infrastructure across multiple states - The natural gas pipeline system includes approximately **14,300 miles** of distribution mains and **700 miles** of transmission mains[205](index=205&type=chunk) - The company owns underground natural gas storage facilities in Oregon (approx. **12,000 net acres**) and LNG storage facilities in Portland and Newport, Oregon[209](index=209&type=chunk)[210](index=210&type=chunk) - NWN Water owns water and wastewater infrastructure in Oregon, Washington, Idaho, Texas, and Arizona[212](index=212&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=37&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) NW Holdings' common stock trades on the NYSE, with no repurchases in Q4 2023, and NW Natural's stock is wholly owned by NW Holdings - NW Holdings' common stock trades on the NYSE under the symbol **NWN**[217](index=217&type=chunk) - No shares of NW Holdings common stock were repurchased during the quarter ended December 31, 2023[218](index=218&type=chunk) The remaining authorization under the repurchase program is **$16.7 million**[218](index=218&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) NW Holdings reported increased net income in 2023 driven by NGD margin growth, partially offset by higher expenses, while investing in utility systems and raising its dividend for the 68th consecutive year NW Holdings Key Financial Highlights | In millions (except per share) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Consolidated net income | $93.9 | $86.3 | $78.7 | | Diluted EPS | $2.59 | $2.54 | $2.56 | NW Natural Key Financial Highlights | In millions | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Consolidated net income | $104.7 | $91.6 | $81.2 | | Natural gas distribution margin | $575.0 | $505.9 | $479.8 | - The increase in 2023 consolidated net income was primarily due to a **$69.1 million** increase in NGD segment margin, driven by new rates and customer growth, partially offset by higher operating expenses and interest expense[226](index=226&type=chunk) - The company increased its dividend for the **68th consecutive year**, with an indicated annual rate of **$1.95 per share** for 2024[225](index=225&type=chunk)[230](index=230&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=76&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages market risks including commodity price, interest rate, credit, and weather through hedging, diversified counterparties, and regulatory mechanisms, though some exposures remain - **Commodity Price Risk:** Managed through financial swaps and physical hedges[459](index=459&type=chunk) The fair value of financial swaps at Dec 31, 2023, was an unrealized loss of **$115.5 million**[459](index=459&type=chunk) - **Interest Rate Risk:** Managed through fixed-rate debt and interest rate swaps[460](index=460&type=chunk) The company entered into swaps with a total notional amount of **$155 million** to manage variable rate risk[460](index=460&type=chunk) - **Credit Risk:** Managed by diversifying counterparties, most of whom are investment grade, and using master netting agreements[463](index=463&type=chunk)[464](index=464&type=chunk) At year-end 2023, the company had no credit exposure on commodity swap contracts as it was in a net loss position[463](index=463&type=chunk) - **Weather Risk:** Partially mitigated by the WARM mechanism in Oregon, but approximately **19%** of residential and commercial customers (all of Washington and **7%** of Oregon) are not covered[468](index=468&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=78&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents consolidated financial statements for NW Holdings and NW Natural, along with management's and auditors' unqualified opinions on financial reporting and internal controls - Management of both NW Holdings and NW Natural concluded that their internal controls over financial reporting were effective as of December 31, 2023[475](index=475&type=chunk)[479](index=479&type=chunk) - The independent auditor, PricewaterhouseCoopers LLP, issued unqualified opinions on the consolidated financial statements and the effectiveness of internal control over financial reporting for NW Holdings[481](index=481&type=chunk) - The independent auditor, PricewaterhouseCoopers LLP, issued an unqualified opinion on the consolidated financial statements for NW Natural[492](index=492&type=chunk) - A critical audit matter identified by the auditor for both entities was the accounting for the effects of regulatory matters, due to the high degree of judgment and effort required to evaluate the probability of recovering regulatory assets and settling regulatory liabilities[489](index=489&type=chunk)[498](index=498&type=chunk) [Item 9A. Controls and Procedures](index=145&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of December 31, 2023, with no material changes to internal control over financial reporting in Q4 2023 - Management concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[804](index=804&type=chunk) - No changes in internal control over financial reporting occurred during the fourth quarter of 2023 that materially affected, or are reasonably likely to materially affect, internal controls[805](index=805&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=145&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section lists executive officers, with detailed director and corporate governance information incorporated by reference from the 2024 Proxy Statement - The report lists the executive officers of both NW Holdings and NW Natural, their ages, and their business experience for the past five years[809](index=809&type=chunk) - Information concerning directors and corporate governance is incorporated by reference from the 2024 Annual Meeting of Shareholders Proxy Statement[808](index=808&type=chunk) [Item 11. Executive Compensation](index=147&type=section&id=Item%2011.%20Executive%20Compensation) All executive compensation information, including the committee report, is incorporated by reference from the 2024 Proxy Statement - Detailed information on executive compensation is incorporated by reference from the 2024 Proxy Statement[812](index=812&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=148&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) NW Holdings owns 100% of NW Natural's common stock, with equity compensation plan details provided and further ownership information incorporated from the 2024 Proxy Statement Equity Compensation Plan Information (as of Dec 31, 2023) | Plan Category | Securities to be Issued Upon Exercise | Weighted-Average Exercise Price | Securities Remaining for Future Issuance | | :--- | :--- | :--- | :--- | | **Approved by Security Holders** | | | | | Long Term Incentive Plan (LTIP) | 247,186 | n/a | 180,755 | | Employee Stock Purchase Plan | 50,120 | $32.06 | 256,637 | | **Not Approved by Security Holders** | | | | | Deferred Compensation Plans | 239,562 | n/a | n/a | | **Total** | **537,568** | | **437,392** | [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=149&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the 2024 Proxy Statement - Information on related party transactions and director independence is incorporated by reference from the 2024 Proxy Statement[816](index=816&type=chunk) [Item 14. Principal Accountant Fees and Services](index=149&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) This section details fees paid to PricewaterhouseCoopers LLP for 2023 and 2022, with all services pre-approved by the Audit Committee, and NW Holdings' information incorporated by reference NW Natural Principal Accountant Fees (in thousands) | Fee Category | 2023 | 2022 | | :--- | :--- | :--- | | Audit Fees | $1,540 | $1,518 | | Audit-Related Fees | $37 | $477 | | Tax Fees | $22 | $23 | | All Other Fees | $2 | $4 | | **Total** | **$1,601** | **$2,022** | - **100%** of the services provided by the principal accountant in 2023 and 2022 were pre-approved by the Audit Committee of NW Natural[821](index=821&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=149&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section refers to the Exhibit Index for a complete list of all exhibits and financial statement schedules filed as part of the Form 10-K - This item refers to the Exhibit Index for a list of all filed documents[822](index=822&type=chunk)

Financial Data and Key Metrics Changes - For 2023, the company reported net income of $93.9 million, or $2.59 per share, an increase of $7.6 million compared to net income of $86.3 million, or $2.54 per share in 2022 [13][18] - Cash provided by operating activities reached a record $280 million, with capital expenditures of $327 million primarily for safety, reliability, and technology [39][68] - The company anticipates 2024 earnings guidance in the range of $2.20 to $2.40 per share, reflecting a decrease of approximately $0.30 per share from 2023 earnings [43][70] Business Line Data and Key Metrics Changes - The gas utility segment saw a net income increase of $14.4 million due to new rates in Oregon and Washington, despite higher depreciation and operating expenses [18][63] - The water services business was launched with two acquisitions, supporting nearly 20,000 connections, and Northwest Natural Water added 10,400 customers in 2023, achieving an average growth rate of 12.7% [14][32] - The renewables segment faced delays in full commissioning of two facilities designed to convert landfill waste gases to renewable natural gas, with investments of $25 million per facility contingent on achieving commercial operations [10][30] Market Data and Key Metrics Changes - Oregon residential customers experienced a 9% drop in their rates last November, and customers are currently paying 7% less for their total natural gas bill than they did 15 years ago [8] - The company added approximately 4,800 new gas utility customers in the last 12 months, achieving a growth rate of 0.6% [58] Company Strategy and Development Direction - The company aims for long-term earnings growth of 4% to 6%, reaffirming this target based on a 2022 earnings per share of $2.54 [33][70] - A focus on capital investments in safety, reliability, and technology is emphasized, with a projected capital expenditure range of $350 million to $400 million for the gas utility in 2024 [41][71] - The company is committed to decarbonization efforts and has signed agreements for renewable natural gas facilities, indicating a strategic shift towards sustainable energy solutions [74] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in 2024 due to regulatory lag and inflationary pressures but expressed confidence in the long-term growth potential of the business [4][22] - The company is optimistic about resolving technical issues with renewable projects and expects both facilities to be operational later in 2024 [29][30] - Management highlighted the importance of disciplined investments in the energy system to ensure reliability and affordability amid climate change [72][74] Other Important Information - The company was recognized as one of the world's most ethical companies for the second consecutive year and increased dividends for the 68th year [13] - The company maintains strong credit ratings, with S&P initiating an A-plus rating for the holding company in October 2023 [40] Q&A Session Summary Question: How is the rate case being received? - Management indicated that it is early in the process, with ongoing negotiations and no significant feedback from the other side yet [80] Question: What impact will the delays in the renewable facilities have on earnings? - Management expects some earnings from the facilities in late 2024 but does not view it as material, with full-year earnings anticipated starting in 2025 [81] Question: What is the primary driver for the decrease in guidance from 2023 to 2024? - The primary driver is the regulatory lag in the gas utility, which has significantly impacted earnings expectations [82]

[Financial and Operational Highlights](index=1&type=section&id=NW%20Natural%20Holdings%20Reports%20Fourth%20Quarter%20and%20Full%20Year%202023%20Results) NW Natural Holdings reported increased net income for 2023, driven by new rates and customer growth, while providing 2024 earnings guidance and reaffirming long-term growth targets [Full Year 2023 Performance Summary](index=1&type=section&id=Full%20Year%202023%20Performance%20Summary) NW Natural Holdings reported a net income of $93.9 million ($2.59 per share) for 2023, an increase from $86.3 million ($2.54 per share) in 2022, driven by new rates and customer growth, partially offset by higher operating and interest expenses Full Year 2023 vs 2022 Financial Results | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net Income | $93.9 million | $86.3 million | | Diluted EPS | $2.59 | $2.54 | - Invested **$327.3 million** in utility systems to enhance reliability and resiliency[1](index=1&type=chunk) - Added over **15,000 gas and water utility connections**, achieving a combined growth rate of **1.8%** as of Dec. 31, 2023, largely driven by water acquisitions[1](index=1&type=chunk) - Increased the dividend for the **68th consecutive year**, reaching an annual indicated rate of **$1.95 per share**[1](index=1&type=chunk) [2024 Guidance and Long-Term Outlook](index=1&type=section&id=2024%20Guidance%20and%20Long-Term%20Outlook) The company initiated its 2024 earnings guidance in the range of $2.20 to $2.40 per share, which is below its long-term target due to regulatory lag and inflationary cost pressures, but reaffirmed its long-term EPS growth target of 4% to 6% compounded annually 2024 Guidance and Long-Term Targets | Metric | Value/Range | | :--- | :--- | | 2024 EPS Guidance | $2.20 to $2.40 | | Long-Term EPS Growth (2022-2027) | 4% to 6% annually | | 2022 Base Year EPS | $2.54 | - The 2024 guidance is impacted by regulatory lag from increased capital investments and inflationary effects on operating costs, which are being addressed in the Oregon general rate case[1](index=1&type=chunk)[26](index=26&type=chunk) Projected Capital Expenditures | Entity | 2024 Projection | 5-Year Projection (2024-2028) | | :--- | :--- | :--- | | NW Natural (Gas) | $350M - $400M | $1.4B - $1.6B | | NW Natural Water | ~$40M | $120M - $140M | [Key Initiatives and Events](index=2&type=section&id=KEY%20INITIATIVES%20AND%20EVENTS) The company initiated a general rate case in Oregon, expanded its renewable natural gas efforts, and continued growth in its water and wastewater utility business [Oregon General Rate Case](index=2&type=section&id=NW%20Natural%20Files%20an%20Oregon%20General%20Rate%20Case) NW Natural filed a general rate case with the Oregon Public Utility Commission (OPUC) on December 29, 2023, requesting a $154.9 million annual revenue increase to cover costs from a $381 million increase in the average rate base - Filed a request for a **$154.9 million** annual revenue requirement increase with the OPUC on Dec. 29, 2023[3](index=3&type=chunk) - The request is driven by a **$381 million** increase in average rate base from investments in safety, reliability, and IT upgrades[3](index=3&type=chunk) - The review process is expected to take up to **10 months**, with new rates anticipated to take effect on November 1, 2024[3](index=3&type=chunk) [Renewable Natural Gas (RNG) Initiatives](index=2&type=section&id=NW%20Natural%20Signs%20Agreement%20for%20RNG%20Facility%20in%20Washington%20State) NW Natural secured exclusive rights to build and operate a Renewable Natural Gas (RNG) facility at a WM landfill in East Wenatchee, Washington, including a 20-year RNG supply contract once operational in late 2025 - Signed an agreement with WM for exclusive rights to construct and operate an RNG facility at a landfill in East Wenatchee, WA[4](index=4&type=chunk) - The agreement includes a **20-year** RNG supply for NW Natural from the facility[4](index=4&type=chunk) - The new facility is anticipated to begin generating RNG in late 2025[4](index=4&type=chunk) [Water and Wastewater Business Expansion](index=2&type=section&id=NW%20Natural%20Water%20Continues%20Expansion%20of%20Water%20and%20Wastewater%20Utility%20Business) In 2023, NW Natural Water expanded its footprint by closing four acquisitions in three states, adding approximately 6,200 customers, increasing its ownership stake in Avion Water Company, and launching a new operations and maintenance services business - Closed **four water utility acquisitions** in 2023, adding approximately **6,200 customers**[5](index=5&type=chunk) - Increased ownership in Avion Water Company to **45.6%**[5](index=5&type=chunk) - Launched a water operations and maintenance services business in April 2023, which now serves nearly **20,000 connections**[6](index=6&type=chunk) [Financial Results Analysis](index=2&type=section&id=ANNUAL%20RESULTS) Consolidated net income increased for the full year 2023, primarily driven by the Natural Gas Distribution segment, despite a decline in the 'Other' segment and a slight decrease in the fourth quarter [Full Year 2023 Results](index=2&type=section&id=Full%20Year%202023%20Results) For the full year 2023, consolidated net income rose to $93.9 million from $86.3 million in 2022, with the Natural Gas Distribution segment's net income increasing by $14.4 million, while the 'Other' segment saw a net income decrease of $6.8 million [Consolidated Annual Results](index=2&type=section&id=Consolidated%20Annual%20Results) Consolidated net income for 2023 was $93.9 million, or $2.59 per share, compared to $86.3 million, or $2.54 per share, in 2022, primarily driven by the Natural Gas Distribution segment Consolidated Net Income by Segment - Full Year (in thousands) | Segment | 2023 Net Income | 2022 Net Income | Change | | :--- | :--- | :--- | :--- | | Natural Gas Distribution | $94,042 | $79,690 | $14,352 | | Other | ($174) | $6,613 | ($6,787) | | **Consolidated** | **$93,868** | **$86,303** | **$7,565** | [Natural Gas Distribution (NGD) Segment - Annual](index=3&type=section&id=Natural%20Gas%20Distribution%20Segment%20-%20Annual) The NGD segment's net income increased by $14.4 million in 2023, driven by a $69.1 million margin growth from new rates and customer growth, partially offset by higher operating and interest expenses - Net income increased by **$14.4 million**, reflecting new rates in Oregon and Washington[10](index=10&type=chunk) - Margin increased by **$69.1 million**, driven by new rates (**$56.7M**), a gas cost incentive sharing gain (**$9.4M**), and customer growth (**$4.6M**)[11](index=11&type=chunk) - Operations and maintenance expense rose by **$40.0 million** due to higher payroll, IT, contractor, and bad debt costs[12](index=12&type=chunk) [Other Segments - Annual](index=3&type=section&id=Other%20Segments%20-%20Annual) Net income from 'Other' activities decreased by $6.8 million in 2023, primarily due to $9.1 million in higher interest expense related to increased debt balances at the holding company and NW Natural Water - Net income decreased by **$6.8 million** (or **$0.20 per share**)[16](index=16&type=chunk) - The decrease was driven by **$9.1 million** of higher interest expense from increased debt at NW Natural Holdings and NW Natural Water[16](index=16&type=chunk) [Fourth Quarter 2023 Results](index=3&type=section&id=FOURTH%20QUARTER%20RESULTS) For the fourth quarter of 2023, consolidated net income was $44.6 million ($1.21 per share), a decrease from $47.9 million ($1.36 per share) in Q4 2022, driven by higher operating and interest expenses not fully offset by new rates [Consolidated Fourth Quarter Results](index=3&type=section&id=Consolidated%20Fourth%20Quarter%20Results) Consolidated net income for Q4 2023 decreased by $3.3 million to $44.6 million compared to Q4 2022, with diluted EPS falling to $1.21 from $1.36, also impacted by a higher number of diluted shares outstanding Consolidated Net Income by Segment - Q4 (in thousands) | Segment | Q4 2023 Net Income | Q4 2022 Net Income | Change | | :--- | :--- | :--- | :--- | | Natural Gas Distribution | $46,522 | $47,159 | ($637) | | Other | ($1,882) | $777 | ($2,659) | | **Consolidated** | **$44,640** | **$47,936** | **($3,296)** | [Natural Gas Distribution (NGD) Segment - Q4](index=3&type=section&id=Natural%20Gas%20Distribution%20Segment%20-%20Q4) The NGD segment's net income saw a slight decrease of $0.6 million in Q4 2023, as a $6.5 million margin increase from new rates was more than offset by a $9.2 million rise in operations and maintenance expenses and higher interest expense, compounded by warmer weather - Net income decreased slightly by **$0.6 million**, primarily due to higher operating and interest expenses[18](index=18&type=chunk) - Margin increased by **$6.5 million**, but was negatively impacted by **$4.9 million** due to warmer weather (**22% warmer than average**)[19](index=19&type=chunk) - Operations and maintenance expense increased by **$9.2 million** due to higher payroll, IT, and contractor costs[20](index=20&type=chunk) [Other Segments - Q4](index=5&type=section&id=Other%20Segments%20-%20Q4) Net income from 'Other' activities decreased by $2.7 million in Q4 2023, resulting from $1.2 million in higher interest expense for NW Natural Water and the holding company, and $1.0 million in additional operating expenses for water utilities - Net income decreased by **$2.7 million** (or **$0.07 per share**)[24](index=24&type=chunk) - The decrease was caused by **$1.2 million** in higher interest expense and **$1.0 million** in additional operating expenses for water utilities[24](index=24&type=chunk) [Financial Position and Cash Flow](index=5&type=section&id=BALANCE%20SHEET%20AND%20CASH%20FLOWS) The company generated strong operating cash flow in 2023, funding significant utility system investments and water utility acquisitions, while maintaining a healthy cash balance [Balance Sheet and Cash Flows Summary](index=5&type=section&id=Balance%20Sheet%20and%20Cash%20Flows%20Summary) For the full year 2023, the company generated $279.9 million in operating cash flow, invested $327.3 million in utility capital expenditures and $7.5 million in water and wastewater acquisitions, and ended the year with $32.9 million in cash 2023 Cash Flow and Investment Summary | Item | Amount (in millions) | | :--- | :--- | | Cash from Operating Activities | $279.9 | | Natural Gas Utility Capex | $327.3 | | Water & Wastewater Acquisitions | $7.5 | | Net Cash from Financing | $64.2 | | Cash at Year-End | $32.9 | [Shareholder Information](index=5&type=section&id=Shareholder%20Information) NW Natural Holdings continued its long history of increasing dividends and provided details for its upcoming financial results conference call [Dividend Information](index=5&type=section&id=68%20YEARS%20OF%20INCREASING%20DIVIDENDS) NW Natural Holdings marked its 68th consecutive year of annual dividend increases, declaring a quarterly dividend of 48.75 cents per share, bringing the current indicated annual dividend rate to $1.95 per share - The company paid its **68th consecutive annual dividend increase**[30](index=30&type=chunk) - The current indicated annual dividend rate is **$1.95 per share**, with a quarterly dividend of **48.75 cents per share**[30](index=30&type=chunk) [Conference Call and Webcast](index=5&type=section&id=CONFERENCE%20CALL%20AND%20WEBCAST) The company announced it would host a conference call and webcast on Friday, February 23, at 8 a.m. PT (11 a.m. ET) to discuss its fourth quarter and annual 2023 financial and operating results - A conference call to discuss Q4 and full-year 2023 results was scheduled for Feb. 23, 2024, at **8 a.m. PT**[31](index=31&type=chunk)[32](index=32&type=chunk) [Company Overview](index=6&type=section&id=ABOUT%20NW%20NATURAL%20HOLDINGS) NW Natural Holdings is a long-standing utility company operating natural gas, water, and renewable energy businesses across multiple states [Company Profile](index=6&type=section&id=Company%20Profile) NW Natural Holdings is a 165-year-old company based in Portland, Oregon, operating through its subsidiaries: NW Natural Gas Company, NW Natural Water Company, and NW Natural Renewables, serving millions of people across multiple states - Owns NW Natural Gas Company, NW Natural Water Company, and NW Natural Renewables Holdings[33](index=33&type=chunk) - NW Natural Gas serves **~2 million people** through over **795,000 meters** in Oregon and SW Washington[35](index=35&type=chunk) - NW Natural Water serves over **180,000 people** through **~73,000 meters** in the Pacific Northwest, Texas, and Arizona[36](index=36&type=chunk) [Appendix: Consolidated Financial Statements](index=9&type=section&id=Appendix%3A%20Consolidated%20Financial%20Statements) This appendix provides detailed consolidated financial statements, including the income statement, balance sheets, and cash flow statements for 2023 and 2022 [Consolidated Income Statement](index=9&type=section&id=Consolidated%20Income%20Statement) This statement details the company's revenues, expenses, and profits for the fourth quarter and full year of 2023 compared to 2022, showing total operating revenues of $1.20 billion and net income of $93.9 million for the full year 2023 Full Year 2023 vs 2022 Income Statement Highlights (in thousands) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Operating Revenues | $1,197,475 | $1,037,353 | | Income from Operations | $184,941 | $167,477 | | Net Income | $93,868 | $86,303 | [Consolidated Balance Sheets](index=10&type=section&id=Consolidated%20Balance%20Sheets) This statement presents the company's financial position as of December 31, 2023, compared to year-end 2022, with total assets increasing to $4.87 billion and total equity growing to $1.28 billion Balance Sheet Highlights (as of Dec 31, in thousands) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Total Assets | $4,867,092 | $4,748,326 | | Total Liabilities | $3,583,254 | $3,572,885 | | Total Equity | $1,283,838 | $1,175,441 | [Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement shows the cash inflows and outflows from operating, investing, and financing activities for the full year 2023 compared to 2022, with cash from operating activities significantly increasing to $279.9 million in 2023 Cash Flow Highlights (Year Ended Dec 31, in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Cash from Operating Activities | $279,949 | $147,672 | | Cash used in Investing Activities | ($335,497) | ($435,460) | | Cash from Financing Activities | $64,208 | $301,632 |

Financial Data and Key Metrics Changes - The company reported net income of $1.37 per share for the first nine months of 2023, a 20% increase compared to $1.14 per share for the same period last year [7] - For the third quarter, the company reported a net loss of $23.7 million or $0.65 per share compared to a net loss of $19.6 million or $0.56 per share for the same period in 2022 [35] - Cash provided by operating activities was over $300 million, with $243 million invested in systems related to safety, reliability, and technology [13][14] Business Line Data and Key Metrics Changes - Utility margin in the gas distribution segment increased by $46.1 million, primarily due to new rates in Oregon and Washington, which contributed $36.2 million [12] - Utility operating and maintenance (O&M) expenses increased by $22.6 million, reflecting higher payroll, IT, and contract labor costs [12] - Net income from other businesses decreased by $4.1 million due to higher interest expenses [13] Market Data and Key Metrics Changes - The gas and water utility customer base grew by 4%, adding approximately 33,000 meters over the last 12 months ending September 2023 [5] - The average Oregon residential customer will see a 9% drop in rates, while Washington customers will see a 14% drop due to lower natural gas prices [8] Company Strategy and Development Direction - The company is focused on decarbonization activities, including renewable natural gas and hydrogen blending as part of its long-term energy strategy [15][18] - The company continues to pursue renewable natural gas investments and has begun recovering costs through purchase gas adjustments for Oregon customers [42] - The company is actively expanding its water services business, having closed an acquisition that added 2,400 connections in a high-growth region [47] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining a strong financial position and reaffirmed 2023 earnings guidance in the range of $2.55 to $2.75 per share [14] - The company noted positive momentum in local job markets, with Oregon's unemployment rate at 3.5%, below the national average [33] - Management highlighted the importance of innovation in addressing climate change while ensuring energy system reliability [15] Other Important Information - The company approved a dividend increase, marking the 68th consecutive year of annual dividend increases [9] - The company is managing higher financing costs through various measures, including prioritizing work and managing costs diligently [38] Q&A Session Summary Question: Can you talk about the acquisition pipeline on the water side? - Management indicated a robust pipeline of acquisition opportunities, executing between five and eight acquisitions per year, primarily small to mid-sized [70] Question: Could you provide some color on the other income line with respect to the pension? - Management explained that lower pension expenses and actuarial calculations have resulted in a benefit this year, with no significant gains or losses being amortized [28][71] Question: How long before hydrogen is introduced into the system? - Management stated that blending testing is ongoing, with a goal to reach 20% blending by early next year, and they are excited about methane pyrolysis technology [74][75] Question: Is Nevada a viable state for expansion? - Management acknowledged that they have looked at Nevada in the past but have not found opportunities that meet their investment criteria [82]

PART I. FINANCIAL INFORMATION [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements regarding earnings, dividends, and regulatory outcomes, subject to risks and uncertainties - The report contains forward-looking statements concerning a wide range of topics, including **earnings, dividends, capital expenditures, climate change strategy, renewable natural gas, regulatory outcomes, and economic conditions** like inflation and interest rates[8](index=8&type=chunk) - The company cautions readers not to rely on these forward-looking statements as they are not guarantees of future performance and are subject to risks and uncertainties[9](index=9&type=chunk) [Item 1. Unaudited Financial Statements](index=6&type=section&id=Item%201.%20Unaudited%20Financial%20Statements) This section presents unaudited consolidated financial statements for NW Holdings and its subsidiary NW Natural for the periods ended September 30, 2023 [Financial Statements of Northwest Natural Holding Company](index=6&type=section&id=Financial%20Statements%20of%20Northwest%20Natural%20Holding%20Company) NW Holdings reported a Q3 net loss of $23.7 million but a year-to-date net income increase to $49.2 million NW Holdings - Consolidated Statements of Comprehensive Income (Unaudited) | In thousands, except per share data | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | **Operating revenues** | $141,479 | $116,839 | $841,761 | $662,100 | | **Net income (loss)** | $(23,687) | $(19,587) | $49,228 | $38,367 | | **Diluted earnings (loss) per share** | $(0.65) | $(0.56) | $1.37 | $1.14 | NW Holdings - Consolidated Balance Sheet Highlights (Unaudited) | In thousands | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total current assets** | $507,440 | $744,213 | | **Total assets** | $4,665,118 | $4,748,326 | | **Total current liabilities** | $590,057 | $898,734 | | **Total liabilities and equity** | $4,665,118 | $4,748,326 | NW Holdings - Consolidated Cash Flow Highlights (Unaudited, Nine Months Ended) | In thousands | Sep 30, 2023 | Sep 30, 2022 | | :--- | :--- | :--- | | **Cash provided by operating activities** | $301,503 | $165,961 | | **Cash used in investing activities** | $(250,520) | $(257,004) | | **Cash provided by financing activities** | $79,533 | $184,193 | [Financial Statements of Northwest Natural Gas Company](index=11&type=section&id=Financial%20Statements%20of%20Northwest%20Natural%20Gas%20Company) NW Natural reported a Q3 net loss of $21.5 million while year-to-date net income rose to $55.8 million NW Natural - Consolidated Statements of Comprehensive Income (Unaudited) | In thousands | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | **Operating revenues** | $129,942 | $110,426 | $812,803 | $647,301 | | **Net income (loss)** | $(21,487) | $(18,806) | $55,837 | $41,343 | NW Natural - Consolidated Balance Sheet Highlights (Unaudited) | In thousands | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total current assets** | $478,251 | $718,824 | | **Total assets** | $4,338,203 | $4,452,718 | | **Total current liabilities** | $361,452 | $811,896 | | **Total liabilities and equity** | $4,338,203 | $4,452,718 | NW Natural - Consolidated Cash Flow Highlights (Unaudited, Nine Months Ended) | In thousands | Sep 30, 2023 | Sep 30, 2022 | | :--- | :--- | :--- | | **Cash provided by operating activities** | $294,168 | $162,593 | | **Cash used in investing activities** | $(219,892) | $(239,277) | | **Cash provided by financing activities** | $60,964 | $78,952 | [Notes to Unaudited Consolidated Financial Statements](index=16&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) The notes detail accounting policies, segment reporting, debt, derivatives, and environmental liabilities - The **Natural Gas Distribution (NGD) segment** is the core operating business and the only reportable segment for both NW Holdings and NW Natural[27](index=27&type=chunk) - During the nine months ended September 30, 2023, NW Holdings issued and sold 955,325 shares of common stock under its at-the-market (ATM) equity program, resulting in **net cash proceeds of $40.9 million**[68](index=68&type=chunk) - In 2023, NW Natural issued a total of **$330 million in long-term debt** through three separate offerings of First Mortgage Bonds and Secured Medium-Term Notes with interest rates ranging from 5.18% to 5.75%[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) NGD Margin Reconciliation (in thousands) | | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | **Total NGD operating revenues** | $124,624 | $103,295 | $796,108 | $629,327 | | Less: NGD cost of gas | $49,235 | $36,258 | $357,530 | $261,678 | | Less: Environmental remediation | $1,032 | $975 | $8,547 | $7,945 | | Less: Revenue taxes | $5,425 | $4,375 | $33,559 | $25,907 | | **NGD margin** | **$68,932** | **$61,687** | **$396,472** | **$333,797** | Environmental Liabilities (in thousands) | Site | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Portland Harbor site (Total)** | $73,175 | $81,764 | | Gasco/Siltronic Upland site | $41,420 | $51,524 | | Front Street site | $1,751 | $1,336 | | Oregon Steel Mills | $179 | $179 | | **Total Liability** | **$116,525** | **$134,803** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=44&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial results, driven by higher NGD margin from new rates, offset by increased operating and interest expenses [Executive Summary](index=45&type=section&id=Executive%20Summary) NW Holdings' Q3 net loss widened, but year-to-date net income increased, driven by operational growth and a 68th consecutive dividend increase - Key drivers for the increased Q3 net loss at NW Holdings were a **$7.6 million rise in O&M expenses** and a **$4.5 million increase in interest expense**, partially offset by a $7.2 million increase in NGD segment margin from new rates[189](index=189&type=chunk) - Key drivers for the increased YTD net income at NW Holdings included a **$62.7 million increase in NGD margin** from new rates and customer growth, partially offset by a $30.5 million rise in O&M expenses and a $12.7 million increase in interest expense[195](index=195&type=chunk) - The company increased its dividend for the **68th consecutive year** to an annual rate of $1.95 per share[188](index=188&type=chunk) NW Holdings Financial Highlights (Q3 and YTD) | In thousands, except per share data | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | **Consolidated net income (loss)** | $(23,687) | $(19,587) | $49,228 | $38,367 | | **Diluted EPS** | $(0.65) | $(0.56) | $1.37 | $1.14 | [Results of Operations](index=47&type=section&id=Results%20of%20Operations) The NGD segment's net income increased year-to-date, driven by higher margin from new rates and customer growth - For the nine months ended Sep 30, 2023, residential and commercial margin increased by **$53.1 million**, primarily due to new customer rates in Oregon and Washington and a **0.7% growth in residential meters**[203](index=203&type=chunk) - Year-to-date, the **average cost of gas increased by 33%** from $0.46 to $0.61 per therm compared to the prior year period, contributing to a $95.9 million increase in total cost of gas[206](index=206&type=chunk)[207](index=207&type=chunk) - Operations and maintenance expense for NW Holdings increased by **$38.8 million year-to-date**, driven by amortization of deferred balances, higher contract labor, compensation, and IT costs[214](index=214&type=chunk) NGD Segment Financials (in thousands) | | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | YTD Change | | :--- | :--- | :--- | :--- | | **NGD net income** | $47,520 | $32,531 | $14,989 | | **NGD margin** | $396,472 | $333,797 | $62,675 | [Regulatory Matters](index=57&type=section&id=Regulatory%20Matters) The company is managing new climate regulations and procuring Renewable Natural Gas while benefiting from recent rate case approvals - New rates became effective November 1, 2022, in both Oregon and Washington, authorizing **significant revenue requirement increases** which are a primary driver of improved financial performance in 2023[232](index=232&type=chunk)[233](index=233&type=chunk) - The company is subject to new climate regulations: Washington's **Climate Commitment Act (CCA)** and Oregon's **Climate Protection Program (CPP)**, and intends to seek recovery of compliance costs in customer rates[285](index=285&type=chunk)[287](index=287&type=chunk) - The company estimates the CCA could increase non-low income residential bills by **1.5% to 6%** in the first year, and the CPP could increase them by **1% to 11%** in the first compliance period[291](index=291&type=chunk)[292](index=292&type=chunk) - Under Oregon's SB 98, the company is actively procuring Renewable Natural Gas (RNG), with signed agreements totaling about **3% of its annual sales volume** in Oregon[298](index=298&type=chunk) [Financial Condition](index=66&type=section&id=Financial%20Condition) The company maintains a balanced capital structure and sufficient liquidity, though S&P revised its ratings outlook to negative - NW Holdings utilized its at-the-market (ATM) equity program to raise **$40.9 million in net proceeds** during the first nine months of 2023[304](index=304&type=chunk) - In October 2023, **S&P revised NW Natural's ratings outlook from 'stable' to 'negative'** and initiated a rating on NW Holdings of A+ with a negative outlook[333](index=333&type=chunk) - For the five-year period from 2023 to 2027, NW Natural expects capital expenditures to range from **$1.3 billion to $1.5 billion**[348](index=348&type=chunk) Consolidated Capital Structure (excluding short-term debt) | | NW Holdings (Sep 30, 2023) | NW Natural (Sep 30, 2023) | | :--- | :--- | :--- | | **Common equity** | 43.0% | 46.1% | | **Long-term debt** | 57.0% | 53.9% | [Quantitative and Qualitative Disclosures About Market Risk](index=73&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There have been no material changes in the company's exposure to market risks since its 2022 Form 10-K - **No material changes** have occurred related to disclosures about market risk for the nine months ended September 30, 2023[356](index=356&type=chunk) [Controls and Procedures](index=73&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - The CEO and CFO concluded that as of the end of the reporting period, the company's **disclosure controls and procedures were effective**[357](index=357&type=chunk) - There were **no changes in internal control over financial reporting** during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[360](index=360&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=74&type=section&id=Item%201.%20Legal%20Proceedings) No new material litigation has been reported beyond ordinary course proceedings or prior disclosures - The company states it has only **nonmaterial litigation** or litigation that occurs in the ordinary course of business, aside from previously disclosed proceedings[361](index=361&type=chunk) [Risk Factors](index=74&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes from the risk factors disclosed in the 2022 Annual Report - There were **no material changes** from the risk factors discussed in the 2022 Form 10-K[362](index=362&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=74&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No shares of common stock were repurchased during the quarter ended September 30, 2023 - **No shares** of NW Holdings' common stock were purchased during the quarter ended September 30, 2023[363](index=363&type=chunk) [Other Information](index=74&type=section&id=Item%205.%20Other%20Information) The Board of Directors approved and adopted revised indemnity agreements for directors and executive officers - On November 1, 2023, the Board approved **revised indemnity agreements** for directors and executive officers to align with current market practices and legal updates[365](index=365&type=chunk) - Key features of the revised agreements include **prompt advancement of litigation expenses**, explicit indemnity for derivative actions, and the ability for the director or officer to enforce the indemnity obligation in court[365](index=365&type=chunk) [Exhibits](index=75&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including indentures and officer certifications - The report includes several exhibits, such as a supplemental indenture for new First Mortgage Bonds, revised forms of indemnity agreements, and required **CEO/CFO certifications under Sarbanes-Oxley**[370](index=370&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to____________ NORTHWEST NATURAL HOLDING COMPANY NORTHWEST NATURAL GAS COMPANY (Exact name of registrant as specified in its charter) (Exact name of registran ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to____________ NORTHWEST NATURAL HOLDING COMPANY NORTHWEST NATURAL GAS COMPANY (Exact name of registrant as specified in its charter) (Exact name of registra ...