UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to___________ Commission file number 1-38681 Commission file number 1-15973 NORTHWEST NATURAL HOLDING COMPANY NORTHWEST NATURAL GAS COMPANY (Exact name of registr ...

Financial Data and Key Metrics Changes - The company reported a net income of $1.24 per share for the first nine months of 2021, a 55% increase compared to $0.80 per share for the same period last year [8] - For Q3 2021, the company reported a net loss of $20.7 million or $0.67 per share, compared to a net loss of $18.7 million or $0.61 per share for the same period in 2020 [20] - Cash provided by operating activities was $182 million, an increase of $31 million compared to last year [26] Business Line Data and Key Metrics Changes - Utility margin in the Gas Distribution segment increased by $26.2 million, driven by higher customer rates and customer growth [24] - Utility O&M expenses increased by $8.5 million, primarily due to higher employee compensation and IT system upgrades [25] - Net income from other businesses increased by $3.9 million, largely due to higher asset management revenues from the cold weather event in February [25] Market Data and Key Metrics Changes - Employment growth in the Portland Metro area has outpaced the national average, with unemployment rates declining to 4.9% compared to the national rate of 5.2% [9] - Home sales in Portland were up 15% for the first nine months of 2021 compared to 2020, with the average sale price increasing by 18% [10] - New single-family permits issued in Oregon were up 29% through September 2021 compared to last year [10] Company Strategy and Development Direction - The company launched a competitive renewable natural gas (RNG) strategy and formed a new nonregulated subsidiary, Northwest Natural Renewables, to lead in the energy transition [29] - The company aims to become a carbon-neutral utility and sees a significant long-term need for renewable natural gas [32] - The company is focused on diversifying its energy system to enhance affordability, reliability, and resilience [32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth potential of the RNG market, anticipating that demand will exceed supply in the near term [34] - The company reaffirmed its 2021 earnings guidance for net income in the range of $2.40 to $2.60 per share [27] - Management highlighted the importance of resilience in energy systems, especially in light of recent severe weather events [32] Other Important Information - The company approved a dividend increase, marking the 66th consecutive year of annual dividend increases [19] - The company is actively pursuing acquisitions in its water business and has closed three tuck-in acquisitions this year [17] Q&A Session Summary Question: Discussion on returns and long-term earnings growth trajectory - Management indicated that the RNG strategy is expected to be additive to the earnings profile and will provide updates in the coming months [41][42] Question: Opportunities from Senate Bill 98 in Oregon - Management confirmed that they are focused on both regulated and unregulated RNG opportunities and are making progress on projects related to SB98 [45][47] Question: Update on hydrogen projects - Management provided an update on a hydrogen project in Eugene, Oregon, and mentioned ongoing efforts to secure funding for low-emission technology [60][62]

[Form 10-Q Filing Information](index=1&type=section&id=Form%2010-Q%20Filing%20Information) This section provides essential filing details for Northwest Natural Holding Company and Northwest Natural Gas Company's quarterly report [Registrant Details](index=1&type=section&id=Registrant%20Details) This section details the registrant status for Northwest Natural Holding Company and Northwest Natural Gas Company, including filer classifications and outstanding common stock - Northwest Natural Holding Company is a **large accelerated filer**, and Northwest Natural Gas Company is a **non-accelerated filer**[3](index=3&type=chunk) Registrant Filer Status | Registrant | Filer Status | | :----------------------------- | :------------- | | NORTHWEST NATURAL HOLDING COMPANY | Large Accelerated Filer | | NORTHWEST NATURAL GAS COMPANY | Non-accelerated Filer | - As of October 27, 2021, **30,730,274 shares** of Northwest Natural Holding Company's Common Stock were outstanding[4](index=4&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the unaudited consolidated financial statements, management's discussion, and market risk disclosures [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section outlines the company's forward-looking statements, which are subject to inherent uncertainties and risks across financial, operational, and regulatory areas - Forward-looking statements are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict, and actual results may differ materially from those contemplated[11](index=11&type=chunk) - Examples of forward-looking statements include plans, projections, objectives, future events, economic conditions, earnings, dividends, capital expenditures, climate change initiatives, growth, customer rates, and regulatory outcomes[9](index=9&type=chunk) [ITEM 1. Unaudited Financial Statements](index=6&type=section&id=ITEM%201.%20Unaudited%20Financial%20Statements) This section presents the unaudited consolidated financial statements for NW Holdings and NW Natural, including comprehensive income, balance sheets, equity, and cash flows [Consolidated Statements of Comprehensive Income of Northwest Natural Holding Company](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20of%20Northwest%20Natural%20Holding%20Company) This section presents NW Holdings' unaudited consolidated statements of comprehensive income, detailing revenues, expenses, and net income NW Holdings: Consolidated Statements of Comprehensive Income (Unaudited) | In thousands, except per share data | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :---------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating revenues | $101,447 | $93,284 | $566,310 | $513,406 | | Total operating expenses | $115,838 | $104,872 | $473,371 | $439,606 | | Income (loss) from operations | $(14,391) | $(11,588) | $92,939 | $73,800 | | Net income (loss) | $(20,655) | $(17,912) | $38,138 | $24,734 | | Basic EPS from continuing operations | $(0.67) | $(0.61) | $1.24 | $0.80 | | Diluted EPS from continuing operations | $(0.67) | $(0.61) | $1.24 | $0.80 | | Basic EPS | $(0.67) | $(0.59) | $1.24 | $0.81 | | Diluted EPS | $(0.67) | $(0.59) | $1.24 | $0.81 | - NW Holdings reported a net loss of **$(20,655) thousand** for the three months ended September 30, 2021, compared to a net loss of $(17,912) thousand in the prior year, indicating an increased loss[14](index=14&type=chunk) - For the nine months, net income increased to **$38,138 thousand** from $24,734 thousand[14](index=14&type=chunk) [Consolidated Balance Sheets of Northwest Natural Holding Company](index=7&type=section&id=Consolidated%20Balance%20Sheets%20of%20Northwest%20Natural%20Holding%20Company) This section presents NW Holdings' unaudited consolidated balance sheets, detailing assets, liabilities, and equity at period-end NW Holdings: Consolidated Balance Sheets (Unaudited) | In thousands | Sep 30, 2021 | Sep 30, 2020 | Dec 31, 2020 | | :-------------------------------- | :----------- | :----------- | :----------- | | Total current assets | $358,179 | $242,848 | $323,245 | | Total non-current assets | $3,571,046 | $3,375,249 | $3,433,134 | | Total assets | $3,929,225 | $3,618,097 | $3,756,379 | | Total current liabilities | $734,965 | $551,296 | $627,083 | | Long-term debt | $916,026 | $860,235 | $860,081 | | Total deferred credits and other non-current liabilities | $1,386,773 | $1,353,791 | $1,380,482 | | Total equity | $891,461 | $852,775 | $888,733 | | Total liabilities and equity | $3,929,225 | $3,618,097 | $3,756,379 | - NW Holdings' total assets increased to **$3,929,225 thousand** at September 30, 2021, from $3,756,379 thousand at December 31, 2020[16](index=16&type=chunk) - Total current assets saw a significant increase from $323,245 thousand to **$358,179 thousand**[16](index=16&type=chunk) - Total current liabilities for NW Holdings increased to **$734,965 thousand** at September 30, 2021, from $627,083 thousand at December 31, 2020, primarily driven by an increase in short-term debt and regulatory liabilities[18](index=18&type=chunk) [Consolidated Statements of Shareholders' Equity of Northwest Natural Holding Company](index=9&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity%20of%20Northwest%20Natural%20Holding%20Company) This section presents NW Holdings' unaudited consolidated statements of shareholders' equity, detailing changes in equity balances NW Holdings: Consolidated Statements of Shareholders' Equity (Unaudited) | In thousands, except per share amounts | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total shareholders' equity, beginning balances | $922,826 | $884,001 | $888,733 | $865,999 | | Net income (loss) | $(20,655) | $(17,912) | $38,138 | $24,734 | | Dividends on common stock | $(14,737) | $(14,586) | $(44,552) | $(44,034) | | Total shareholders' equity, ending balances | $891,461 | $852,775 | $891,461 | $852,775 | | Dividends per share of common stock | $0.4800 | $0.4775 | $1.4400 | $1.4325 | - NW Holdings' total shareholders' equity increased from $888,733 thousand at the beginning of the nine-month period to **$891,461 thousand** at September 30, 2021, driven by net income of $38,138 thousand, partially offset by dividends of $44,552 thousand[19](index=19&type=chunk) [Consolidated Statements of Cash Flows of Northwest Natural Holding Company](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20of%20Northwest%20Natural%20Holding%20Company) This section presents NW Holdings' unaudited consolidated statements of cash flows, detailing cash from operating, investing, and financing activities NW Holdings: Consolidated Statements of Cash Flows (Unaudited) | In thousands | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Cash provided by operating activities | $181,724 | $150,797 | | Cash used in investing activities | $(203,521) | $(226,765) | | Cash provided by financing activities | $14,015 | $104,503 | | Increase (decrease) in cash, cash equivalents and restricted cash | $(7,782) | $28,535 | | Cash, cash equivalents and restricted cash, end of period | $27,672 | $41,171 | - NW Holdings' cash provided by operating activities increased by **$30,927 thousand** to $181,724 thousand for the nine months ended September 30, 2021, compared to $150,797 thousand in the prior year[20](index=20&type=chunk)[327](index=327&type=chunk) - Cash used in investing activities decreased by **$23,244 thousand**[20](index=20&type=chunk)[329](index=329&type=chunk) - Cash provided by financing activities decreased significantly by **$90,488 thousand**[20](index=20&type=chunk)[331](index=331&type=chunk) [Consolidated Statements of Comprehensive Income of Northwest Natural Gas Company](index=11&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20of%20Northwest%20Natural%20Gas%20Company) This section presents NW Natural Gas Company's unaudited consolidated statements of comprehensive income, detailing revenues, expenses, and net income NW Natural Gas Company: Consolidated Statements of Comprehensive Income (Unaudited) | In thousands | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating revenues | $96,036 | $88,367 | $552,965 | $502,053 | | Total operating expenses | $111,121 | $101,836 | $458,793 | $429,602 | | Income (loss) from operations | $(15,085) | $(13,469) | $94,172 | $72,451 | | Net income (loss) | $(21,018) | $(20,220) | $39,682 | $24,247 | | Comprehensive income (loss) | $(20,784) | $(20,034) | $40,358 | $24,753 | - NW Natural Gas Company reported an increased net loss of **$(21,018) thousand** for the three months ended September 30, 2021, compared to $(20,220) thousand in the prior year[21](index=21&type=chunk) - For the nine months, net income significantly increased to **$39,682 thousand** from $24,247 thousand[21](index=21&type=chunk) [Consolidated Balance Sheets of Northwest Natural Gas Company](index=12&type=section&id=Consolidated%20Balance%20Sheets%20of%20Northwest%20Natural%20Gas%20Company) This section presents NW Natural Gas Company's unaudited consolidated balance sheets, detailing assets, liabilities, and equity at period-end NW Natural Gas Company: Consolidated Balance Sheets (Unaudited) | In thousands | Sep 30, 2021 | Sep 30, 2020 | Dec 31, 2020 | | :-------------------------------- | :----------- | :----------- | :----------- | | Total current assets | $336,226 | $203,402 | $282,997 | | Total non-current assets | $3,444,735 | $3,259,965 | $3,316,339 | | Total assets | $3,780,961 | $3,463,367 | $3,599,336 | | Total current liabilities | $704,557 | $437,407 | $529,053 | | Long-term debt | $857,760 | $857,174 | $857,265 | | Total deferred credits and other non-current liabilities | $1,382,902 | $1,363,281 | $1,377,834 | | Total equity | $835,742 | $805,505 | $835,184 | | Total liabilities and equity | $3,780,961 | $3,463,367 | $3,599,336 | - NW Natural Gas Company's total assets increased to **$3,780,961 thousand** at September 30, 2021, from $3,599,336 thousand at December 31, 2020[23](index=23&type=chunk) - Current assets saw a substantial increase from $282,997 thousand to **$336,226 thousand**[23](index=23&type=chunk) - Total current liabilities for NW Natural Gas Company significantly increased to **$704,557 thousand** at September 30, 2021, from $529,053 thousand at December 31, 2020, primarily due to higher short-term debt and regulatory liabilities[25](index=25&type=chunk) [Consolidated Statements of Shareholder's Equity of Northwest Natural Gas Company](index=14&type=section&id=Consolidated%20Statements%20of%20Shareholder's%20Equity%20of%20Northwest%20Natural%20Gas%20Company) This section presents NW Natural Gas Company's unaudited consolidated statements of shareholder's equity, detailing changes in equity balances NW Natural Gas Company: Consolidated Statements of Shareholder's Equity (Unaudited) | In thousands | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total shareholder's equity, beginning balances | $868,391 | $839,369 | $835,184 | $822,196 | | Net income (loss) | $(21,018) | $(20,220) | $39,682 | $24,247 | | Dividends on common stock | $(14,000) | $(13,830) | $(41,935) | $(41,444) | | Total shareholder's equity, ending balances | $835,742 | $805,505 | $835,742 | $805,505 | - NW Natural Gas Company's total shareholder's equity increased from $835,184 thousand at the beginning of the nine-month period to **$835,742 thousand** at September 30, 2021, driven by net income of $39,682 thousand, partially offset by dividends of $41,935 thousand[26](index=26&type=chunk) [Consolidated Statements of Cash Flows of Northwest Natural Gas Company](index=15&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20of%20Northwest%20Natural%20Gas%20Company) This section presents NW Natural Gas Company's unaudited consolidated statements of cash flows, detailing cash from operating, investing, and financing activities NW Natural Gas Company: Consolidated Statements of Cash Flows (Unaudited) | In thousands | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Cash provided by operating activities | $161,828 | $156,970 | | Cash used in investing activities | $(197,169) | $(188,611) | | Cash provided by financing activities | $37,469 | $55,112 | | Increase in cash, cash equivalents and restricted cash | $2,128 | $23,471 | | Cash, cash equivalents and restricted cash, end of period | $17,867 | $32,378 | - NW Natural Gas Company's cash provided by operating activities increased by **$4,858 thousand** to $161,828 thousand for the nine months ended September 30, 2021[27](index=27&type=chunk)[327](index=327&type=chunk) - Cash used in investing activities increased by **$8,558 thousand**[27](index=27&type=chunk)[329](index=329&type=chunk) - Cash provided by financing activities decreased by **$17,643 thousand**[27](index=27&type=chunk)[331](index=331&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=16&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed notes to the unaudited consolidated financial statements, explaining accounting policies and specific financial items [1. Organization and Principles of Consolidation](index=17&type=section&id=1.%20ORGANIZATION%20AND%20PRINCIPLES%20OF%20CONSOLIDATION) This note describes the organizational structure, consolidation principles, primary business segments, and treatment of investments for NW Holdings and NW Natural - NW Natural's core operating business is the regulated natural gas distribution (NGD) segment, serving residential, commercial, and industrial customers in Oregon and southwest Washington[29](index=29&type=chunk) - The report is a combined filing for NW Holdings and NW Natural, with separate consolidated financial statements for each registrant[28](index=28&type=chunk) - The sale of Gill Ranch qualified as assets and liabilities held for sale and discontinued operations, with the sale closing on **December 4, 2020**[32](index=32&type=chunk) [2. Significant Accounting Policies](index=17&type=section&id=2.%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note details significant accounting policies, including regulatory accounting, cash flow, accounts receivable, COVID-19 impacts, and recently adopted pronouncements - NW Holdings and NW Natural defer certain costs and revenues as regulatory assets and liabilities, as approved by various public utility commissions, for future recovery from or refunds to utility customers[35](index=35&type=chunk) NW Natural: Regulatory Assets (in thousands) | Category | Sep 30, 2021 | Dec 31, 2020 | | :-------------------------------- | :----------- | :----------- | | Total current regulatory assets | $80,638 | $31,745 | | Total non-current regulatory assets | $325,031 | $348,887 | NW Natural: Regulatory Liabilities (in thousands) | Category | Sep 30, 2021 | Dec 31, 2020 | | :-------------------------------- | :----------- | :----------- | | Total current regulatory liabilities | $164,168 | $50,362 | | Total non-current regulatory liabilities | $664,521 | $638,793 | - As of September 30, 2021, approximately **$7.4 million** in COVID-19 related costs were deferred to a regulatory asset, believed to be recoverable[44](index=44&type=chunk) - The adoption of ASU 2019-12 (Income Taxes) and ASUs 2020-04 and 2021-01 (Reference Rate Reform) did not materially affect the financial statements or disclosures[46](index=46&type=chunk)[48](index=48&type=chunk) [3. Earnings Per Share](index=21&type=section&id=3.%20EARNINGS%20PER%20SHARE) This note outlines the calculation of basic and diluted earnings per share for NW Holdings, including income from continuing and discontinued operations NW Holdings: Earnings Per Share (Unaudited) | In thousands, except per share data | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :---------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) from continuing operations | $(20,655) | $(18,677) | $38,138 | $24,467 | | Net income (loss) | $(20,655) | $(17,912) | $38,138 | $24,734 | | Basic EPS from continuing operations | $(0.67) | $(0.61) | $1.24 | $0.80 | | Diluted EPS from continuing operations | $(0.67) | $(0.61) | $1.24 | $0.80 | | Basic EPS | $(0.67) | $(0.59) | $1.24 | $0.81 | | Diluted EPS | $(0.67) | $(0.59) | $1.24 | $0.81 | - For the nine months ended September 30, 2021, diluted EPS from continuing operations for NW Holdings was **$1.24**, an increase from $0.80 in the prior year[51](index=51&type=chunk) [4. Segment Information](index=21&type=section&id=4.%20SEGMENT%20INFORMATION) This note summarizes financial information for NW Holdings' and NW Natural's reportable segments, Natural Gas Distribution (NGD) and 'Other' activities - The primary reportable segment is NW Natural's local gas distribution business (NGD), which includes natural gas sales and delivery, Mist storage, gas reserves, and renewable natural gas investments[52](index=52&type=chunk)[53](index=53&type=chunk) - NW Holdings' 'Other' activities include NWN Water (water and wastewater utilities), NWN Gas Storage, and other pipeline assets[56](index=56&type=chunk) NW Holdings: Segment Operating Revenues (in thousands) | Segment | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | NGD | $91,042 | $83,761 | $531,994 | $489,240 | | Other (NW Natural) | $4,994 | $4,606 | $20,971 | $12,813 | | Other (NW Holdings) | $5,411 | $4,917 | $13,345 | $11,353 | | Total | $101,447 | $93,284 | $566,310 | $513,406 | NGD Margin Calculation (in thousands) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total NGD operating revenues | $91,042 | $83,761 | $531,994 | $489,240 | | Less: NGD cost of gas | $25,322 | $23,797 | $178,837 | $173,657 | | Less: Environmental remediation | $806 | $867 | $6,092 | $6,494 | | Less: Revenue taxes | $3,838 | $3,555 | $22,143 | $19,752 | | NGD margin | $61,076 | $55,542 | $324,922 | $289,337 | [5. Common Stock](index=23&type=section&id=5.%20COMMON%20STOCK) This note details NW Holdings' August 2021 initiation of an at-the-market (ATM) equity program to issue up to $200 million in common stock - In August 2021, NW Holdings initiated an ATM equity program to issue and sell up to **$200 million** in common stock, expiring in August 2024[61](index=61&type=chunk) - During the quarter ended September 30, 2021, NW Holdings issued **41,421 shares** of common stock through the ATM program, generating **$2.1 million** in cash proceeds, net of fees[61](index=61&type=chunk) [6. Revenue](index=23&type=section&id=6.%20REVENUE) This note disaggregates revenue from continuing operations for NW Holdings and NW Natural by source, detailing recognition policies for each category NW Holdings: Disaggregated Revenue from Continuing Operations (in thousands) | Revenue Source | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Natural gas sales | $83,947 | $78,427 | $503,769 | $469,113 | | Gas storage revenue, net | $2,794 | $2,482 | $8,094 | $7,267 | | Asset management revenue, net | $1,012 | $939 | $8,757 | $1,999 | | Appliance retail center revenue | $1,188 | $1,185 | $4,120 | $3,547 | | Other revenue | $5,814 | $5,250 | $14,562 | $12,355 | | Alternative revenue | $2,307 | $395 | $13,843 | $5,288 | | Leasing revenue | $4,385 | $4,606 | $13,165 | $13,837 | | Total operating revenues | $101,447 | $93,284 | $566,310 | $513,406 | - For the nine months ended September 30, 2021, NW Holdings' total operating revenues increased to **$566,310 thousand** from $513,406 thousand in the prior year, with natural gas sales being the primary contributor[63](index=63&type=chunk) - Asset management revenue for NW Holdings significantly increased from $1,999 thousand in the nine months ended September 30, 2020, to **$8,757 thousand** in the same period of 2021[63](index=63&type=chunk) [7. Leases](index=25&type=section&id=7.%20LEASES) This note details NW Natural's lease activities, including revenue from sales-type and operating leases, expenses, and related balance sheet information - Leasing revenue primarily consists of NW Natural's North Mist Storage contract with Portland General Electric (PGE), classified as a sales-type lease with regulatory accounting deferral treatment[76](index=76&type=chunk) NW Natural: Lease Revenue (in thousands) | Lease Type | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :---------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating leases | $18 | $18 | $61 | $71 | | Sales-type leases | $4,367 | $4,588 | $13,104 | $13,766 | | Total lease revenue | $4,385 | $4,606 | $13,165 | $13,837 | NW Holdings: Operating Lease Expense (in thousands) | Expense Type | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :---------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating lease expense | $1,749 | $763 | $5,173 | $2,971 | | Short-term lease expense | $499 | $300 | $1,068 | $783 | - NW Natural commenced a 20-year operating lease agreement in March 2020 for a new corporate operations center, with total estimated base rent payments of **$159.4 million** over the lease life[86](index=86&type=chunk) [8. Stock-Based Compensation](index=29&type=section&id=8.%20STOCK-BASED%20COMPENSATION) This note describes NW Holdings' stock-based compensation plans, including LTIP performance shares and RSUs, and the recognition of associated expenses - During the nine months ended September 30, 2021, **29,492 performance-based shares** were granted under the 2019 LTIP, and **37,576 RSUs** were granted with a weighted-average grant date fair value of **$49.16 per share**[93](index=93&type=chunk)[96](index=96&type=chunk) - As of September 30, 2021, there was **$3.8 million** of unrecognized compensation cost from RSU grants, expected to be recognized through 2025[96](index=96&type=chunk) - The Restated Stock Option Plan was terminated in 2012 for new grants, and as of September 30, 2021, no options were exercisable or outstanding[97](index=97&type=chunk) [9. Debt](index=30&type=section&id=9.%20DEBT) This note provides an overview of NW Holdings' and NW Natural's short-term and long-term debt, including new loans, bond retirements, and fair value estimates - In June 2021, NW Natural entered into a **$100.0 million** 364-Day Term Loan Credit Agreement, due in June 2022, and was in compliance with its **70% indebtedness to total capitalization ratio covenant**[98](index=98&type=chunk) Short-Term Debt Outstanding (in thousands) | Registrant | Sep 30, 2021 | Sep 30, 2020 | | :-------------------------- | :----------- | :----------- | | NW Holdings | $399,500 | $223,000 | | NW Natural | $370,500 | $150,000 | - NW Natural retired **$10.0 million** of FMBs with a **9.1% interest rate** in August 2021 and **$50.0 million** of FMBs with a **3.2% interest rate** in September 2021[101](index=101&type=chunk) Estimated Fair Value of Long-Term Debt (in thousands) | Registrant | Sep 30, 2021 (Carrying Amount) | Sep 30, 2021 (Estimated Fair Value) | Dec 31, 2020 (Carrying Amount) | Dec 31, 2020 (Estimated Fair Value) | | :-------------------------- | :----------------------------- | :---------------------------------- | :----------------------------- | :---------------------------------- | | NW Natural | $857,760 | $978,613 | $917,220 | $1,097,348 | | NW Holdings | $916,304 | $1,042,705 | $955,425 | $1,136,311 | [10. Pension and Other Postretirement Benefit Costs](index=31&type=section&id=10.%20PENSION%20AND%20OTHER%20POSTRETIREMENT%20BENEFIT%20COSTS) This note details NW Natural's net periodic benefit cost for pension and postretirement plans, including contributions and the impact of the American Rescue Plan NW Natural: Net Periodic Benefit Cost (in thousands) | Component | Nine Months Ended Sep 30, 2021 (Pension) | Nine Months Ended Sep 30, 2020 (Pension) | Nine Months Ended Sep 30, 2021 (Other Postretirement) | Nine Months Ended Sep 30, 2020 (Other Postretirement) | | :-------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------ | :------------------------------------ | | Service cost | $5,145 | $4,988 | $180 | $195 | | Interest cost | $10,001 | $12,093 | $510 | $675 | | Expected return on plan assets | $(18,000) | $(16,350) | — | — | | Amortization of net actuarial loss | $16,516 | $14,638 | $488 | $458 | | Net periodic benefit cost | $13,662 | $15,369 | $825 | $975 | - For the nine months ended September 30, 2021, NW Natural made cash contributions of **$9.6 million** to qualified defined benefit pension plans, a decrease from $23.7 million in the prior year[109](index=109&type=chunk) - The American Rescue Plan, enacted in March 2021, extends the amortization period for required pension contributions from 7 to 15 years, leading NW Natural to not expect further plan contributions in 2021[109](index=109&type=chunk) [11. Income Tax](index=32&type=section&id=11.%20INCOME%20TAX) This note analyzes NW Holdings' and NW Natural's effective income tax rates, explaining variations and status of IRS examinations NW Holdings: Effective Income Tax Rate for Continuing Operations | Period | Effective Income Tax Rate | | :------------------------------ | :------------------------ | | Three Months Ended Sep 30, 2021 | 25.7% | | Three Months Ended Sep 30, 2020 | 22.3% | | Nine Months Ended Sep 30, 2021 | 25.6% | | Nine Months Ended Sep 30, 2020 | 22.5% | - The effective income tax rates for NW Holdings and NW Natural increased for the nine months ended September 30, 2021, compared to 2020, primarily due to changes in pre-tax income, Oregon's Corporate Activity Tax (CAT), and regulatory amortization of deferred Tax Cuts and Jobs Act (TCJA) benefits[114](index=114&type=chunk) - The IRS CAP examination for the 2019 tax year was completed in Q1 2021 with no material changes, and the 2020 and 2021 tax years are currently subject to examination[115](index=115&type=chunk) [12. Property, Plant, and Equipment](index=33&type=section&id=12.%20PROPERTY,%20PLANT,%20AND%20EQUIPMENT) This note presents major classifications of property, plant, and equipment and accumulated depreciation for NW Natural and NW Holdings NW Natural: Property, Plant, and Equipment, Net (in thousands) | Category | Sep 30, 2021 | Dec 31, 2020 | | :-------------------------------- | :----------- | :----------- | | NGD plant, net | $2,697,601 | $2,556,635 | | Other plant, net | $53,150 | $51,695 | | Total property, plant, and equipment, net | $2,750,751 | $2,608,330 | NW Holdings: Total Property, Plant, and Equipment, Net (in thousands) | Category | Sep 30, 2021 | Dec 31, 2020 | | :-------------------------------- | :----------- | :----------- | | Total property, plant, and equipment, net | $2,806,362 | $2,654,770 | - NW Holdings' other plant balances include long-lived assets associated with water and wastewater utility operations and non-regulated activities[117](index=117&type=chunk) [13. Gas Reserves](index=34&type=section&id=13.%20GAS%20RESERVES) This note details NW Natural's investment in the Jonah Field gas reserves program, outlining its purpose and recovery mechanism - NW Natural has invested **$188 million** in the Jonah Field gas reserves program in Wyoming as of September 30, 2021, to provide long-term price protection for NGD customers[119](index=119&type=chunk) - Costs, including a carrying cost for the rate base investment, are recovered through NW Natural's annual Oregon PGA filing[120](index=120&type=chunk) NW Natural: Net Gas Reserves Investment (in thousands) | Category | Sep 30, 2021 | Dec 31, 2020 | | :-------------------------- | :----------- | :----------- | | Total gas reserves | $34,287 | $45,893 | | Less: Deferred taxes on gas reserves | $7,768 | $10,572 | | Net investment in gas reserves | $26,519 | $35,321 | [14. Investments](index=34&type=section&id=14.%20INVESTMENTS) This note covers NW Holdings' other investments, including financial policies and the sale of Trail West Holdings, LLC - On August 6, 2020, NWN Energy completed the sale of its 100% interest in Trail West Holdings, LLC (TWH) for **$14.0 million**, resulting in an after-tax gain of approximately **$0.5 million** for the year ended December 31, 2020[124](index=124&type=chunk) [15. Business Combinations](index=34&type=section&id=15.%20BUSINESS%20COMBINATIONS) This note details NWN Water's acquisitions of water and wastewater utilities, including recognized goodwill and impairment assessments - During the nine months ended September 30, 2021, NWN Water completed three business acquisitions, which were not material to NW Holdings' results[126](index=126&type=chunk) - In 2020, NWN Water completed two significant acquisitions (Suncadia Water/Environmental and T&W Water Service) for an aggregate cash consideration of **$38.1 million**, recognizing **$18.2 million** in goodwill[127](index=127&type=chunk)[129](index=129&type=chunk) Goodwill Balance (in thousands) | Date | Goodwill | | :---------------- | :--------- | | Sep 30, 2021 | $69,800 | | Sep 30, 2020 | $70,300 | | Dec 31, 2020 | $69,200 | - All goodwill is related to water and wastewater acquisitions and is included in the 'other' category for segment reporting purposes, with no impairments recognized to date[132](index=132&type=chunk) [16. Derivative Instruments](index=36&type=section&id=16.%20DERIVATIVE%20INSTRUMENTS) This note describes NW Natural's use of financial derivative contracts to hedge natural gas and foreign currency risks, detailing notional amounts and gains/losses - NW Natural uses financial derivative contracts to hedge natural gas sales requirements and foreign currency exchange rates, primarily for commodity price variability management[133](index=133&type=chunk)[134](index=134&type=chunk) NW Natural: Notional Amounts of Open Derivative Positions (in thousands) | Category | Sep 30, 2021 | Dec 31, 2020 | | :---------------- | :----------- | :----------- | | Natural gas (therms) | 749,595 | 784,400 | | Foreign exchange | $6,299 | $5,896 | - NW Natural realized net gains of **$6.1 million** and **$15.4 million** for the three and nine months ended September 30, 2021, respectively, from the settlement of natural gas financial derivative contracts[141](index=141&type=chunk) - As of September 30, 2021, NW Natural's outstanding commodity financial swap and option contracts reflected unrealized gains of **$132.2 million**[146](index=146&type=chunk) [17. Environmental Matters](index=39&type=section&id=17.%20ENVIRONMENTAL%20MATTERS) This note outlines NW Natural's environmental remediation liabilities for various sites, detailing estimation, regulatory recovery mechanisms, and earnings tests - NW Natural owns or previously owned properties that may require environmental remediation, with a total estimated liability of **$105.7 million** at September 30, 2021[149](index=149&type=chunk)[333](index=333&type=chunk) - NW Natural has recovery mechanisms in Oregon (SRRM) and Washington (ECRM) to collect **96.7%** and **3.3%** of prudently incurred remediation costs, respectively[149](index=149&type=chunk)[169](index=169&type=chunk) Environmental Liabilities (in thousands) | Site | Sep 30, 2021 (Current) | Sep 30, 2021 (Non-Current) | Dec 31, 2020 (Current) | Dec 31, 2020 (Non-Current) | | :-------------------------- | :--------------------- | :------------------------- | :--------------------- | :------------------------- | | Portland Harbor site | $9,317 | $47,151 | $9,538 | $50,745 | | Gasco/Siltronic Upland site | $9,720 | $37,408 | $14,887 | $40,250 | | Front Street site | $1,002 | $893 | $3,816 | $1,107 | | Total | $20,039 | $85,631 | $28,241 | $92,281 | - NW Natural has recorded a liability of **$47.9 million** for the Gasco sediment clean-up, reflecting the low end of the estimated range of $47.9 million to $350 million[158](index=158&type=chunk) [18. Discontinued Operations](index=42&type=section&id=18.%20DISCONTINUED%20OPERATIONS) This note details NW Holdings' discontinued operations, specifically the sale of Gill Ranch Storage, LLC, including its financial impact and prior operating results - NW Holdings completed the sale of Gill Ranch Storage, LLC on **December 4, 2020**, for an initial cash purchase price of **$13.5 million** (less a $1.0 million deposit), resulting in an after-tax gain of **$5.9 million** for the year ended December 31, 2020[177](index=177&type=chunk) - Additional payments up to **$15.0 million** may be made based on Gill Ranch's economic performance post-closing[177](index=177&type=chunk) NW Holdings: Operating Results of Discontinued Operations (Gill Ranch) (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2020 | | :----------------------------------- | :------------------------------ | :----------------------------- | | Revenues | $3,584 | $7,866 | | Total expenses | $2,543 | $7,498 | | Income from discontinued operations, net of tax | $765 | $267 | | Basic EPS from discontinued operations | $0.02 | $0.01 | | Diluted EPS from discontinued operations | $0.02 | $0.01 | [19. Subsequent Events](index=44&type=section&id=19.%20SUBSEQUENT%20EVENTS) This note reports on subsequent events, specifically the November 2021 amendment and restatement of credit agreements for NW Holdings and NW Natural - On November 3, 2021, NW Holdings entered into an amended and restated **$200 million** credit agreement, maturing November 3, 2026, with an option for two additional one-year extensions[179](index=179&type=chunk) - On November 3, 2021, NW Natural entered into an amended and restated **$400 million** credit agreement, also maturing November 3, 2026, with similar extension options[180](index=180&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=45&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's assessment of NW Holdings' and NW Natural's financial condition, operating results, regulatory matters, and liquidity [Executive Summary](index=46&type=section&id=EXECUTIVE%20SUMMARY) This executive summary highlights NW Holdings' and NW Natural's financial performance, customer growth, capital investments, and impacts of external events NW Holdings: Key Financial Highlights (in thousands, except per share data) | Metric | Q3 2021 Amount | Q3 2021 Per Share | Q3 2020 Amount | Q3 2020 Per Share | Q3 Change | | :---------------------------------- | :------------- | :---------------- | :------------- | :---------------- | :-------- | | Net loss from continuing operations | $(20,655) | $(0.67) | $(18,677) | $(0.61) | $(1,978) | | Consolidated net loss | $(20,655) | $(0.67) | $(17,912) | $(0.59) | $(2,743) | | Net income from continuing operations (YTD) | $38,138 | $1.24 | $24,467 | $0.80 | $13,671 | | Consolidated net income (YTD) | $38,138 | $1.24 | $24,734 | $0.81 | $13,404 | - NW Holdings reported a consolidated net income of **$1.24 per share (diluted)** for the first nine months of 2021, an increase from $0.81 per share in the prior year[187](index=187&type=chunk) - The company added nearly **12,000 meters** over the past twelve months, achieving a **1.5% growth rate** at September 30, 2021, and invested over **$200 million** in utility systems in the first nine months of 2021[187](index=187&type=chunk) - The 2021 cold weather event resulted in approximately **$29 million** of higher commodity costs, with **$27 million** deferred to a regulatory asset, and **$39 million** of asset management revenue, with **$33 million** deferred to a regulatory liability for customers[191](index=191&type=chunk) [Regulatory Matters](index=48&type=section&id=Regulatory%20Matters) This section details NW Natural's regulatory environment, including rate cases, recovery mechanisms, and updates on proceedings related to COVID-19, RNG, and GHG emissions [Regulation and Rates](index=48&type=section&id=Regulation%20and%20Rates) NW Natural's gas distribution and water businesses are regulated by various utility commissions, impacting rates and terms of service - NW Natural's natural gas distribution business is regulated by the OPUC and WUTC, with approximately **88%** of NGD customers in Oregon and **12%** in Washington[199](index=199&type=chunk) - NWN Water's regulated water businesses are subject to regulation by utility commissions in Oregon, Washington, Idaho, and Texas[201](index=201&type=chunk) [Most Recent Completed General Rate Cases](index=48&type=section&id=Most%20Recent%20Completed%20General%20Rate%20Cases) This section summarizes the outcomes of NW Natural's recent general rate cases in Oregon and Washington, detailing approved revenue increases - The OPUC's October 2020 order for NW Natural's Oregon general rate case provided a total revenue requirement increase of approximately **$45 million**, based on a **9.4% ROE** and **6.965% cost of capital**[202](index=202&type=chunk)[203](index=203&type=chunk) - The WUTC approved a Comprehensive Settlement in October 2021 for NW Natural's Washington rate case, providing an annual revenue requirement increase of **$5.0 million** in Year One (effective Nov 1, 2021) and up to **$3.0 million** in Year Two (effective Nov 1, 2022)[211](index=211&type=chunk)[212](index=212&type=chunk) - The Washington rate increase is based on a cost of capital of **6.814%** and an average rate base of **$194.7 million**, with additional increases for expected capital expenditures[214](index=214&type=chunk) [Regulatory Proceeding Updates](index=49&type=section&id=Regulatory%20Proceeding%20Updates) This section provides updates on ongoing regulatory proceedings, including the 2021 Washington Rate Case approval and its two-year rate plan - The WUTC approved a Comprehensive Settlement for the 2021 Washington Rate Case on **October 21, 2021**, providing an annual revenue requirement increase over two years[211](index=211&type=chunk) - The settlement includes a **6.4% ($5.0 million)** increase in the first year and up to a **3.5% ($3.0 million)** increase in the second year, with an estimated **$2.3 million** offset to rates over two years[212](index=212&type=chunk) [Rate Mechanisms](index=50&type=section&id=Rate%20Mechanisms) This section details NW Natural's key approved rate and recovery mechanisms, including PGA, decoupling, WARM, and environmental cost recovery Key Regulatory Mechanisms and Authorized Rate Structure | Feature | Oregon (2020 Rate Case) | Washington (2021 Rate Case) | | :---------------------------------- | :---------------------- | :-------------------------- | | Return on Equity | 9.4% | ** | | Rate of Return | 7.0% | 6.8% | | Debt/Equity Ratio | 50%/50% | ** | | Purchased Gas Adjustment (PGA) | X | X | | Gas Cost Incentive Sharing | X | | | Decoupling | X | | | Weather Normalization (WARM) | X | | | Environmental Cost Recovery | X | X | | Interstate Storage and Asset Management Sharing | X | X | - NW Natural hedges **53%** of its forecasted sales volumes in financial swap and option contracts for the 2021-22 gas year (**55%** in Oregon, **31%** in Washington), with total hedged volumes at **74%** for Oregon and **44%** for Washington[217](index=217&type=chunk) - Under the Oregon PGA, NW Natural selected the **90% deferral option** for the 2021-22 and 2020-21 gas years, meaning 90% of gas cost differences are deferred, and 10% impact current earnings[220](index=220&type=chunk) - NW Natural has a decoupling mechanism in Oregon to break the link between earnings and gas consumption, and a Weather Normalization Mechanism (WARM) to stabilize fixed cost collection based on temperature variances[225](index=225&type=chunk)[226](index=226&type=chunk) - The Oregon Site Remediation and Recovery Mechanism (SRRM) and Washington Environmental Cost Recovery Mechanism (ECRM) allow NW Natural to defer and recover prudently incurred environmental remediation costs[228](index=228&type=chunk)[229](index=229&type=chunk)[233](index=233&type=chunk) [Regulatory Proceeding Updates (Continued)](index=54&type=section&id=Regulatory%20Proceeding%20Updates%20(Continued)) This section provides further updates on regulatory proceedings, including COVID-19 cost deferrals, RNG programs, Oregon's CAT, GHG emissions, and pipeline security - Oregon and Washington approved applications to defer certain COVID-19 related costs, with approximately **$7.4 million** deferred to a regulatory asset for incurred costs and **$2.4 million** expected for forgone late fee revenue as of September 30, 2021[239](index=239&type=chunk) - Oregon Senate Bill 98 (SB98) enables natural gas utilities to procure or develop RNG, setting voluntary goals for up to **30% RNG** in the pipeline system by 2050, and allowing investment in conditioning equipment[242](index=242&type=chunk)[243](index=243&type=chunk) - NW Natural began its first RNG facility construction with BioCarbN and Tyson Foods in 2021, with completion planned for early 2022, and has the ability to invest up to **$38 million** in four projects[245](index=245&type=chunk) - Oregon's Corporate Activity Tax (CAT), effective January 1, 2020, imposes a **0.57% tax** on certain Oregon gross receipts, and NW Natural is authorized to recover this expense through base rates[246](index=246&type=chunk)[247](index=247&type=chunk) - Oregon's Executive Order (EO) establishes GHG emissions reduction goals of **45% below 1990 levels by 2035** and **80% by 2050**, directing state agencies to facilitate these goals and impacting natural gas utilities[250](index=250&type=chunk) - The TSA released two security directives in May and July 2021 for natural gas pipeline facilities, requiring cybersecurity incident reporting, coordinator designation, gap assessments, and implementation of specified controls[255](index=255&type=chunk) [Business Segment - Natural Gas Distribution (NGD)](index=56&type=section&id=Business%20Segment%20-%20Natural%20Gas%20Distribution%20(NGD)) This section analyzes the Natural Gas Distribution (NGD) segment's performance, highlighting changes in net income, volumes, and NGD margin drivers NGD Segment Highlights (in thousands, except EPS data) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | Q3 Change | YTD Change | | :-------------------------- | :------ | :------ | :------- | :------- | :-------- | :--------- | | NGD net income (loss) | $(23,297) | $(22,120) | $29,247 | $19,476 | $(1,177) | $9,771 | | Diluted EPS - NGD segment | $(0.76) | $(0.72) | $0.95 | $0.64 | $(0.04) | $0.31 | | Gas sold and delivered (therms) | 161,229 | 154,436 | 806,063 | 782,566 | 6,793 | 23,497 | | NGD margin | $61,076 | $55,542 | $324,922 | $289,337 | $5,534 | $35,585 | - For the nine months ended September 30, 2021, NGD net income increased by **$9.8 million**, or **$0.31 per share**, primarily due to a **$35.6 million** increase in NGD margin driven by new customer rates from the 2020 Oregon rate case and customer growth[260](index=260&type=chunk) - Total NGD volumes sold and delivered increased **3%** for the nine months ended September 30, 2021, compared to the prior period, primarily due to **12% warmer** than average weather in 2021 compared to **15% warmer** in 2020[261](index=261&type=chunk) NGD Meters - End of Period | Meter Type | Sep 30, 2021 | Sep 30, 2020 | Change | Growth | | :---------------- | :----------- | :----------- | :----- | :----- | | Residential meters | 712,335 | 700,062 | 12,273 | 1.8% | | Commercial meters | 68,414 | 68,767 | (353) | (0.5)% | | Industrial meters | 978 | 988 | (10) | (1.0)% | | Total number of meters | 781,727 | 769,817 | 11,910 | 1.5% | [Residential and Commercial Sales](index=59&type=section&id=Residential%20and%20Commercial%20Sales) Residential and commercial NGD margin increased due to new Oregon rates, residential meter growth, and higher commercial volumes post-COVID-19 restrictions Residential and Commercial NGD Margin (in thousands) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | Q3 Change | YTD Change | | :-------------------------- | :------ | :------ | :------- | :------- | :-------- | :--------- | | Total residential NGD margin | $34,292 | $30,765 | $209,101 | $182,053 | $3,527 | $27,048 | | Total commercial NGD margin | $15,010 | $12,986 | $79,873 | $68,697 | $2,024 | $11,176 | | Total NGD margin | $49,302 | $43,751 | $288,974 | $250,750 | $5,551 | $38,224 | - Residential and commercial margin increased **$38.2 million** year-to-date, driven by new Oregon rates (effective Nov 1, 2020), **1.8% residential meter growth**, and higher commercial volumes due to lifted COVID-19 restrictions[265](index=265&type=chunk) [Industrial Sales and Transportation](index=59&type=section&id=Industrial%20Sales%20and%20Transportation) Industrial sales and transportation margin increased due to new Oregon rates and higher usage from industrial customers, particularly in pulp and paper Industrial Sales and Transportation NGD Margin (in thousands) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | Q3 Change | YTD Change | | :-------------------------------- | :------ | :------ | :------- | :------- | :-------- | :--------- | | Firm and interruptible sales margin | $2,735 | $2,456 | $9,033 | $8,279 | $279 | $754 | | Firm and interruptible transportation margin | $4,560 | $4,351 | $14,423 | $14,131 | $209 | $292 | | Total margin - sales and transportation | $7,295 | $6,807 | $23,456 | $22,410 | $488 | $1,046 | - Industrial sales and transportation margin increased by **$1.0 million** year-to-date, driven by new Oregon rates and a **2% increase in volumes (8.4 million therms)** from higher usage in pulp and paper and forest products industries[267](index=267&type=chunk) [Cost of Gas](index=60&type=section&id=Cost%20of%20Gas) Cost of gas increased due to higher loss from gas cost incentive sharing related to the 2021 cold weather event and increased volumes sold Cost of Gas Highlights (in thousands, except per therm) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | Q3 Change | YTD Change | | :-------------------------- | :------ | :------ | :------- | :------- | :-------- | :--------- | | Cost of gas | $25,322 | $23,797 | $178,837 | $173,657 | $1,525 | $5,180 | | Volumes sold (therms) | 73,950 | 70,629 | 520,486 | 499,756 | 3,321 | 20,730 | | Average cost of gas (cents per therm) | $0.34 | $0.34 | $0.34 | $0.35 | — | $(0.01) | | Gain (loss) from gas cost incentive sharing | $(546) | $(33) | $(3,032) | $310 | $(513) | $(3,342) | - Cost of gas increased **$5.2 million** year-to-date, primarily due to a **$3.3 million** higher loss from gas cost incentive sharing related to the 2021 cold weather event and a **4% increase** in volumes sold[269](index=269&type=chunk) [Other Regulated Services Margin](index=60&type=section&id=Other%20Regulated%20Services%20Margin) Other regulated services margin remained relatively flat, with no significant fluctuations in North Mist storage service revenue Other Regulated Services Margin (in thousands) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | Q3 Change | YTD Change | | :-------------------------- | :------ | :------ | :------- | :------- | :-------- | :--------- | | North Mist storage services | $4,716 | $4,866 | $14,147 | $14,599 | $(150) | $(452) | | Other services | $53 | $(463) | $169 | $(352) | $516 | $521 | | Total other regulated services | $4,769 | $4,403 | $14,316 | $14,247 | $366 | $69 | - Other regulated services margin was relatively flat year-to-date, with North Mist expansion facility storage service revenue showing no significant fluctuations[271](index=271&type=chunk) [Other](index=60&type=section&id=Other) This section reviews the financial results of 'Other' activities for NW Holdings and NW Natural, detailing changes in net income and contributing factors Results of 'Other' Activities (in thousands, except EPS data) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | Q3 Change | YTD Change | | :-------------------------- | :------ | :------ | :------- | :------- | :-------- | :--------- | | NW Natural other - net income | $2,279 | $1,900 | $10,435 | $4,771 | $379 | $5,664 | | Other NW Holdings activity | $363 | $1,543 | $(1,544) | $220 | $(1,180) | $(1,764) | | NW Holdings other - net income | $2,642 | $3,443 | $8,891 | $4,991 | $(801) | $3,900 | | Diluted EPS - NW Holdings - other | $0.09 | $0.11 | $0.29 | $0.16 | $(0.02) | $0.13 | - NW Holdings' 'Other' net income decreased by **$0.8 million** for Q3 2021, primarily due to higher holding company expenses and a prior-period gain from the sale of Trail West, partially offset by increased interstate storage net income at NW Natural[274](index=274&type=chunk) - For the nine months ended September 30, 2021, NW Natural's 'Other' net income increased by **$5.7 million**, mainly due to **$7.6 million** higher asset management revenue from the 2021 cold weather event[275](index=275&type=chunk) [Consolidated Operations](index=62&type=section&id=Consolidated%20Operations) This section provides a consolidated analysis of key operating expenses and other financial items for NW Holdings and NW Natural [Operations and Maintenance](index=62&type=section&id=Operations%20and%20Maintenance) Operations and maintenance expense increased for NW Holdings and NW Natural, driven by higher lease, professional service, IT, and compensation costs Operations and Maintenance Expense (in thousands) | Registrant | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | Q3 Change | YTD Change | | :-------------------------- | :------ | :------ | :------- | :------- | :-------- | :--------- | | NW Natural | $43,768 | $38,657 | $137,894 | $126,111 | $5,111 | $11,783 | | Other NW Holdings operations and maintenance | $3,561 | $2,695 | $11,673 | $8,145 | $866 | $3,528 | | NW Holdings | $47,329 | $41,352 | $149,567 | $134,256 | $5,977 | $15,311 | - NW Natural's operations and maintenance expense increased by **$11.8 million** year-to-date, primarily due to higher lease, professional service, information technology, and compensation and benefits costs[277](index=277&type=chunk) [Depreciation and Amortization](index=62&type=section&id=Depreciation%20and%20Amortization) Depreciation and amortization expense increased for NW Holdings and NW Natural due to capital investments in distribution, storage, and IT systems Depreciation and Amortization Expense (in thousands) | Registrant | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | Q3 Change | YTD Change | | :-------------------------- | :------ | :------ | :------- | :------- | :-------- | :--------- | | NW Natural | $27,719 | $25,681 | $82,418 | $74,857 | $2,038 | $7,561 | | Other NW Holdings depreciation and amortization | $719 | $253 | $2,261 | $1,588 | $466 | $673 | | NW Holdings | $28,438 | $25,934 | $84,679 | $76,445 | $2,504 | $8,234 | - NW Holdings' depreciation and amortization expense increased by **$8.2 million** year-to-date, primarily due to capital investments in the distribution system, Mist storage, and information technology systems[279](index=279&type=chunk) [Other Income (Expense), Net](index=63&type=section&id=Other%20Income%20(Expense),%20Net) Other income (expense), net, improved for NW Holdings and NW Natural due to higher interest income and lower pension costs, offset by a prior-period gain Other Income (Expense), Net (in thousands) | Registrant | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | Q3 Change | YTD Change | | :-------------------------- | :------ | :------ | :------- | :------- | :-------- | :--------- | | NW Natural other income (expense), net | $(2,295) | $(4,002) | $(8,526) | $(10,744) | $1,707 | $2,218 | | Other NW Holdings activity | $79 | $715 | $171 | $842 | $(636) | $(671) | | NW Holdings other income (expense), net | $(2,216) | $(3,287) | $(8,355) | $(9,902) | $1,071 | $1,547 | - NW Holdings' other income (expense), net, improved by **$1.5 million** year-to-date, primarily due to higher interest income on regulatory assets and lower pension non-service costs[281](index=281&type=chunk) [Interest Expense, Net](index=63&type=section&id=Interest%20Expense,%20Net) Interest expense, net, increased for NW Holdings and NW Natural due to lower AFUDC debt income and higher long-term debt interest, partially offset by credit agreement changes Interest Expense, Net (in thousands) | Registrant | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | Q3 Change | YTD Change | | :-------------------------- | :------ | :------ | :------- | :------- | :-------- | :--------- | | NW Natural | $10,850 | $8,806 | $32,336 | $30,518 | $2,044 | $1,818 | | Other NW Holdings interest expense, net | $325 | $359 | $993 | $1,821 | $(34) | $(828) | | NW Holdings | $11,175 | $9,165 | $33,329 | $32,339 | $2,010 | $990 | - NW Holdings' interest expense, net, increased by **$1.0 million** year-to-date, driven by lower AFUDC debt interest income and higher long-term debt interest at NW Natural, partially offset by lower interest on NW Holdings' credit agreement[283](index=283&type=chunk) [Income Tax Expense](index=63&type=section&id=Income%20Tax%20Expense) Income tax expense increased for NW Holdings and NW Natural due to higher pre-tax income and Oregon's Corporate Activity Tax, partially offset by TCJA benefits Income Tax Expense (Benefit) (in thousands) | Registrant | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | Q3 Change | YTD Change | | :-------------------------- | :------ | :------ | :------- | :------- | :-------- | :--------- | | NW Natural income tax expense (benefit) | $(7,212) | $(6,057) | $13,628 | $6,942 | $(1,155) | $6,686 | | NW Holdings income tax expense (benefit) | $(7,127) | $(5,363) | $13,117 | $7,092 | $(1,764) | $6,025 | - NW Holdings' income tax expense increased by **$6.0 million** year-to-date, primarily due to increased pre-tax income and Oregon's Corporate Activity Tax, partially offset by TCJA benefits amortization[285](index=285&type=chunk) [Discontinued Operations](index=64&type=section&id=Discontinued%20Operations) This section reiterates details on the sale of Gill Ranch Storage, LLC by NW Holdings, including the after-tax gain and separate presentation of results - The sale of Gill Ranch Storage, LLC was completed on **December 4, 2020**, resulting in an after-tax gain of **$5.9 million** for the year ended December 31, 2020[287](index=287&type=chunk) - Additional payments up to **$15.0 million** may be received based on Gill Ranch's economic performance post-closing[287](index=287&type=chunk) [Financial Condition](index=64&type=section&id=Financial%20Condition) This section discusses NW Holdings' and NW Natural's financial condition, focusing on capital structure, liquidity, debt management, and cash flows [Capital Structure](index=64&type=section&id=Capital%20Structure) NW Holdings and NW Natural aim to maintain a strong and balanced consolidated capital structure, targeting specific equity and debt ratios - NW Natural targets a regulatory capital structure of **50% common equity** and **50% long-term debt** in Oregon, and **49% common equity, 1% short-term debt, and 50% long-term debt** in Washington[289](index=289&type=chunk) NW Holdings: Consolidated Capital Structure | Component | Sep 30, 2021 | Dec 31, 2020 | | :-------------------------- | :----------- | :----------- | | Common equity | 49.3% | 48.2% | | Long-term debt (incl. current maturities) | 50.7% | 51.8% | | Total | 100.0% | 100.0% | NW Natural: Consolidated Capital Structure | Component | Sep 30, 2021 | Dec 31, 2020 | | :-------------------------- | :----------- | :----------- | | Common equity | 49.3% | 47.7% | | Long-term debt (incl. current maturities) | 50.7% | 52.3% | | Total | 100.0% | 100.0% | [Liquidity and Capital Resources](index=64&type=section&id=Liquidity%20and%20Capital%20Resources) NW Holdings and NW Natural maintain ample liquidity through cash, dividends, and credit facilities, with an ATM program and future capital needs Cash and Cash Equivalents (in thousands) | Registrant | Sep 30, 2021 | Sep 30, 2020 | | :-------------------------- | :----------- | :----------- | | NW Holdings | $19,502 | $35,926 | | NW Natural | $9,697 | $27,133 | - NW Holdings initiated an ATM equity program in August 2021 to issue up to **$200 million** in common stock, with **$2.1 million** in cash proceeds from **41,421 shares** sold by September 30, 2021[294](index=294&type=chunk) - NW Holdings estimates incremental capital needs of **$400 million to $500 million** over the next three years to support NW Natural and NW Natural Water's programs[295](index=295&type=chunk) - NW Natural's ability to pay dividends to NW Holdings is subject to regulatory ring-fencing provisions based on credit ratings and common equity ratio[296](index=296&type=chunk) [Contractual Obligations](index=67&type=section&id=Contractual%20Obligations) NW Natural Renewables committed to invest $50.1 million in RNG production facilities and secured a 20-year supply with significant purchase commitments - NW Natural Renewables is committed to make cash payments totaling **$50.1 million** to partially fund infrastructure for two RNG production facilities, expected to be completed in 2023[305](index=305&type=chunk) - A subsidiary of NW Natural Renewables secured a 20-year supply of RNG, with purchase commitments estimated at **$9.2 million in 2023**, **$10.5 million in 2024**, **$21.0 million in 2025**, and **$605.0 million thereafter**[306](index=306&type=chunk) [Short-Term Debt](index=67&type=section&id=Short-Term%20Debt) NW Holdings and NW Natural rely on cash, credit facilities, and commercial paper for short-term liquidity, maintaining debt covenant compliance - NW Natural entered into a **$100.0 million** 364-Day Term Loan Credit Agreement in June 2021, due in June 2022, and maintained a consolidated indebtedness to total capitalization ratio of **59.5%** at September 30, 2021, well within the **70% covenant**[310](index=310&type=chunk) Short-Term Debt Outstanding (in thousands) | Registrant | Sep 30, 2021 | Sep 30, 2020 | | :-------------------------- | :----------- | :----------- | | NW Holdings | $399,500 | $223,000 | | NW Natural | $370,500 | $150,000 | - NW Holdings' short-term debt at September 30, 2021, included **$29.0 million** in revolving credit loans, **$270.5 million** of commercial paper at NW Natural, and the **$100.0 million** Term Loan[311](index=311&type=chunk) [Credit Agreements](index=68&type=section&id=Credit%20Agreements) NW Holdings and NW Natural amended credit agreements, increasing commitments and extending maturities, while maintaining compliance with financial covenants - On November 3, 2021, NW Holdings amended its credit agreement, increasing the commitment to **$200 million** (with an accordion feature up to **$300 million**) and extending the maturity to November 3, 2026[312](index=312&type=chunk) - NW Holdings was in compliance with its **70% consolidated indebtedness to total capitalization ratio covenant** at September 30, 2021 (**59.6%**)[314](index=314&type=chunk) - On November 3, 2021, NW Natural amended its credit agreement, increasing the commitment to **$400 million** (with an accordion feature up to **$600 million**) and extending the maturity to November 3, 2026[316](index=316&type=chunk) - NW Natural was in compliance with its **70% consolidated indebtedness to total capitalization ratio covenant** at September 30, 2021 (**59.5%**)[318](index=318&type=chunk) [Credit Ratings](index=69&type=section&id=Credit%20Ratings) This section summarizes NW Natural's current credit ratings from S&P and Moody's, with a stable outlook, while NW Holdings does not maintain separate ratings NW Natural's Current Credit Ratings | Category | S&P | Moody's | | :-------------------------- | :-- | :------ | | Commercial paper (short-term debt) | A-1 | P-2 | | Senior secured (long-term debt) | AA- | A2 | | Senior unsecured (long-term debt) | n/a | Baa1 | | Corporate credit rating | A+ | n/a | | Ratings outlook | Stable | Stable | - NW Holdings does not currently maintain credit ratings with S&P or Moody's[320](index=320&type=chunk) [Long-Term Debt](index=69&type=section&id=Long-Term%20Debt) NW Holdings and NW Natural had significant long-term debt outstanding, with new loans secured and bonds retired during the period - At September 30, 2021, NW Holdings had **$916.3 million** and NW Natural had **$857.8 million** in long-term debt outstanding[323](index=323&type=chunk) - In June 2021, NW Natural Water entered into a **$55.0 million** five-year term loan credit agreement at **0.9% interest**, guaranteed by NW Holdings[322](index=322&type=chunk) - NW Natural retired **$10.0 million** of FMBs (**9.1% interest**) in August 2021 and **$50.0 million** of FMBs (**3.2% interest**) in September 2021[324](index=324&type=chunk) [Bankruptcy Ring-fencing Restrictions](index=69&type=section&id=Bankruptcy%20Ring-fencing%20Restrictions) NW Natural is subject to ring-fencing conditions, requiring an independent director and preferred share for unanimous board approval on bankruptcy petitions - NW Natural is required to have one independent director and issue one share of preferred stock to an independent third party as part of ring-fencing conditions[325](index=325&type=chunk) - A voluntary bankruptcy petition by NW Natural requires unanimous approval from its Board of Directors, including the independent director, and the holder of the preferred share[325](index=325&type=chunk) [Cash Flows](index=70&type=section&id=Cash%20Flows) This section analyzes changes in cash flows from operating, investing, and financing activities for NW Holdings and NW Natural [Operating Activities](index=70&type=section&id=Operating%20Activities) This section analyzes cash flows from operating activities for NW Holdings and NW Natural, highlighting changes and key drivers Cash Provided by Operating Activities (in thousands) | Registrant | YTD 2021 | YTD 2020 | YTD Change | | :-------------------------- | :------- | :------- | :--------- | | NW Natural | $161,828 |

Financial Data and Key Metrics Changes - The company reported net income of $1.92 per share for the first six months of 2021, compared to $1.41 per share for the same period in 2020, reflecting a significant increase driven by new rates and customer growth [6][12] - For Q2 2021, the company reported a net loss of $700,000 or $0.02 per share, an improvement from a net loss of $5.1 million or $0.17 per share in Q2 2020 [10] - Cash provided by operating activities was $193 million for the first half of 2021, an increase of $31 million compared to the previous year [14] Business Line Data and Key Metrics Changes - The Gas Distribution segment saw utility margin increase by $22.1 million, primarily due to higher customer rates and growth [13] - Customer growth in the Gas Distribution segment was 1.6%, with over 12,000 new meters connected in the past year [8] - The water and wastewater utilities experienced a 4% customer growth rate, driven by strong residential housing construction [8] Market Data and Key Metrics Changes - Unemployment rates in the Portland Metro area decreased to 5.3%, lower than the national rate of 5.9% [6] - Home sales in the Portland Metro region increased by 39% in the first five months of 2021 compared to the same period in 2020, with median sales prices rising over 20% [7] Company Strategy and Development Direction - The company is committed to environmental stewardship and aims for a 30% carbon savings goal by 2035, which includes the use of natural gas by customers [16][17] - The company is actively pursuing renewable natural gas (RNG) procurement and has signed agreements that could supply enough RNG to heat 36,000 homes [18][19] - The water utility business is seeing increased development activity and a robust acquisition pipeline, with plans to close several pending sales [20] Management's Comments on Operating Environment and Future Outlook - Management noted a steady recovery in several sectors affected by COVID-19, particularly in food service and lodging [6][7] - The company reaffirmed its 2021 earnings guidance, expecting net income in the range of $2.40 to $2.60 per share, assuming continued customer growth and stable regulatory conditions [14] Other Important Information - The company filed a multiparty settlement for its general rate case in Washington, which will increase revenue requirements by $5 million starting November 1, 2021 [9] - The company is investing in a new wastewater facility in Sunriver, Oregon, equipped with advanced technologies to meet environmental guidelines [21] Q&A Session Summary Question: Can you expand on the higher O&M this quarter? - The increase in O&M was expected, with about one-third attributed to payroll and benefits, another third to a new lease for headquarters, and the remaining third to cloud-based IT solutions and other minor expenses [24][25][26] Question: What is the vetting process for RNG procurement? - The company aims to procure cost-effective RNG and has a rigorous methodology for evaluating costs, including avoided costs and transportation [27][28][29] Question: Any updates on hydrogen experimentation? - The company is working with EWEB on land acquisition for hydrogen projects and is exploring various technologies, with interest from industrial customers in blending hydrogen [31][32][33][34]

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, 2021 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 ...

INVESTOR PRESENTATION AMERICAN GAS ASSOCIATION FINANCIAL FORUM MAY19-20, 2021 INVESTOR INFORMATION NW Natural Holdings 250 SW Taylor Street Portland, OR 97204 nwnaturalholdings.com Nikki Sparley Director, Investor Relations (503) 721-2530 nikki.sparley@nwnatural.com COMPANY INFORMATION FORWARD LOOKING STATEMENTS This and other presentations made by NW Natural Holdings from time to time, may contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, wh ...

Financial Data and Key Metrics Changes - The company reported net income of $59.5 million or $1.94 per share for Q1 2021, compared to $48.3 million or $1.58 per share for the same period in 2020, reflecting a solid financial performance [16][8] - Utility margin in the gas distribution segment increased by $13.6 million due to new rates and customer growth, partially offset by a $1.8 million loss from the gas cost incentive sharing mechanism [18][16] - Cash provided by operating activities was $137 million, an increase of $32 million compared to the previous year [21] Business Line Data and Key Metrics Changes - The gas utility's earnings increased by $0.19 per share, while other activities contributed an additional $0.17 per share compared to last year [17] - The company connected over 11,000 meters during the 12 months ended March 31, resulting in a customer growth rate of 1.4% [13] - Water and wastewater utilities experienced a strong growth rate of 3% due to residential housing construction in Idaho, Texas, and Washington [13] Market Data and Key Metrics Changes - Oregon's unemployment rate was reported at 6.1% in February, comparable to the national rate, with strong housing activity in the Portland metro region [12] - Home sales in the Portland metro area increased by 7.4% from 2020, with average price growth of about 12% [12] Company Strategy and Development Direction - The company aims to be a carbon-neutral energy provider by 2050, with a commitment to a 30% carbon savings goal by 2035 [36][31] - The company is actively pursuing renewable natural gas (RNG) opportunities and has made progress with investments under Oregon Senate Bill 98 [48][47] - The company is focused on infrastructure improvements and technology upgrades in its water utilities to enhance service reliability [40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to adapt to challenges such as the COVID-19 pandemic and recent weather events while maintaining commitments to stakeholders [27] - The company reaffirmed its 2021 earnings guidance for net income in the range of $2.40 to $2.60 per share, assuming continued customer growth and average weather conditions [24] Other Important Information - The company has a strong balance sheet with ample liquidity, allowing for continued investment in capital expenditures [21] - The company has been recognized for its customer satisfaction, ranking second among large utilities in the J.D. Power gas utility residential customer satisfaction study [38] Q&A Session Summary Question: Additional investments under SB 98 and long-term growth - Management indicated ongoing discussions around investment and procurement opportunities for RNG, with expectations for continued activity in this area [48] Question: Washington regulatory front and rate cases - Management confirmed they are in the middle of a rate case and are hopeful for a settlement with all parties involved [50] Question: Non-recoverable COVID costs and inflation pressures - Management noted that the primary impact from COVID was the margin loss due to fewer commercial customers, with some inflation pressures observed in capital costs and salaries [56]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited financial information, management's discussion, market risk disclosures, and controls and procedures for the reporting period [FORWARD-LOOKING STATEMENTS](index=4&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section identifies forward-looking statements, highlighting their inherent uncertainties and risks, and cautions against undue reliance as actual results may differ materially - Forward-looking statements are identified by words such as 'anticipates,' 'assumes,' 'intends,' 'plans,' 'seeks,' 'believes,' 'estimates,' 'expects,' and similar references to future periods[6](index=6&type=chunk) - Examples of forward-looking statements include plans, projections, objectives, strategies, future events, economic conditions, earnings, dividends, capital expenditures, climate change initiatives, renewable natural gas, growth, customer rates, commodity costs, operational performance, energy policy, liquidity, acquisitions, and impacts of COVID-19[7](index=7&type=chunk) - Actual results may differ materially from forward-looking statements due to inherent uncertainties, risks, and changes in circumstances, as discussed in the 2020 Annual Report on Form 10-K and this report[8](index=8&type=chunk) [UNAUDITED FINANCIAL STATEMENTS](index=6&type=section&id=ITEM%201.%20UNAUDITED%20FINANCIAL%20STATEMENTS) This section presents unaudited consolidated financial statements for NW Holdings and NW Natural, including comprehensive income, balance sheets, equity, and cash flows, with detailed explanatory notes [NW Holdings: Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20of%20Northwest%20Natural%20Holding%20Company) This section provides NW Holdings' consolidated statements of comprehensive income for the three months ended March 31, 2021 and 2020 NW Holdings: Consolidated Statements of Comprehensive Income (Three Months Ended March 31, in thousands, except per share data) | In thousands, except per share data | 2021 | 2020 | | :---------------------------------- | :----- | :----- | | Operating revenues | $315,946 | $285,151 | | Total operating expenses | $221,240 | $208,705 | | Income from operations | $94,706 | $76,446 | | Income before income taxes | $80,038 | $62,403 | | Income tax expense | $20,521 | $14,127 | | Net income from continuing operations | $59,517 | $48,276 | | Loss from discontinued operations, net of tax | — | $(778) | | Net income | $59,517 | $47,498 | | Comprehensive income | $59,738 | $47,658 | | Basic EPS from continuing operations | $1.94 | $1.58 | | Diluted EPS from continuing operations | $1.94 | $1.58 | | Basic EPS | $1.94 | $1.56 | | Diluted EPS | $1.94 | $1.56 | [NW Holdings: Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets%20of%20Northwest%20Natural%20Holding%20Company) This section presents NW Holdings' consolidated balance sheets as of March 31, 2021, March 31, 2020, and December 31, 2020 NW Holdings: Consolidated Balance Sheets (As of March 31, 2021, March 31, 2020, and December 31, 2020, in thousands) | In thousands | March 31, 2021 | March 31, 2020 | December 31, 2020 | | :-------------------------------- | :------------- | :------------- | :---------------- | | **Assets:** | | | | | Total current assets | $302,792 | $720,267 | $323,245 | | Total property, plant, and equipment, net | $2,696,380 | $2,500,215 | $2,654,770 | | Total non-current assets | $3,455,833 | $3,281,260 | $3,433,134 | | Total assets | $3,758,625 | $4,001,527 | $3,756,379 | | **Liabilities and Equity:** | | | | | Total current liabilities | $585,665 | $798,870 | $627,083 | | Long-term debt | $860,654 | $953,962 | $860,081 | | Total deferred credits and other non-current liabilities | $1,375,982 | $1,346,954 | $1,380,482 | | Total equity | $936,324 | $901,741 | $888,733 | | Total liabilities and equity | $3,758,625 | $4,001,527 | $3,756,379 | [NW Holdings: Consolidated Statements of Shareholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity%20of%20Northwest%20Natural%20Holding%20Company) This section details NW Holdings' consolidated statements of shareholders' equity for the three months ended March 31, 2021 and 2020 NW Holdings: Consolidated Statements of Shareholders' Equity (Three Months Ended March 31, in thousands, except per share amounts) | In thousands, except per share amounts | 2021 | 2020 | | :------------------------------------- | :----- | :----- | | Total shareholders' equity, beginning balances | $888,733 | $865,999 | | Common stock, ending balances | $568,066 | $561,264 | | Retained earnings, ending balances | $380,939 | $351,050 | | Accumulated other comprehensive income (loss), ending balances | $(12,681) | $(10,573) | | Total shareholders' equity, ending balances | $936,324 | $901,741 | | Dividends per share of common stock | $0.4800 | $0.4775 | [NW Holdings: Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20of%20Northwest%20Natural%20Holding%20Company) This section outlines NW Holdings' consolidated statements of cash flows for the three months ended March 31, 2021 and 2020 NW Holdings: Consolidated Statements of Cash Flows (Three Months Ended March 31, in thousands) | In thousands | 2021 | 2020 | | :------------------------------------------ | :----- | :----- | | Cash provided by operating activities | $137,065 | $104,660 | | Cash used in investing activities | $(63,875) | $(101,429) | | Cash (used in) provided by financing activities | $(83,132) | $459,997 | | Increase (decrease) in cash, cash equivalents and restricted cash | $(9,942) | $463,228 | | Cash, cash equivalents and restricted cash, end of period | $25,512 | $475,864 | | Interest paid, net of capitalization | $8,976 | $8,368 | | Income taxes paid (refunded), net | $800 | $(256) | [NW Natural: Consolidated Statements of Comprehensive Income](index=11&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20of%20Northwest%20Natural%20Gas%20Company) This section provides NW Natural's consolidated statements of comprehensive income for the three months ended March 31, 2021 and 2020 NW Natural: Consolidated Statements of Comprehensive Income (Three Months Ended March 31, in thousands) | In thousands | 2021 | 2020 | | :-------------------------------- | :----- | :----- | | Operating revenues | $312,350 | $282,529 | | Total operating expenses | $217,232 | $205,508 | | Income from operations | $95,118 | $77,021 | | Income before income taxes | $80,663 | $63,597 | | Income tax expense | $20,552 | $14,418 | | Net income | $60,111 | $49,179 | | Comprehensive income | $60,332 | $49,339 | [NW Natural: Consolidated Balance Sheets](index=12&type=section&id=Consolidated%20Balance%20Sheets%20of%20Northwest%20Natural%20Gas%20Company) This section presents NW Natural's consolidated balance sheets as of March 31, 2021, March 31, 2020, and December 31, 2020 NW Natural: Consolidated Balance Sheets (As of March 31, 2021, March 31, 2020, and December 31, 2020, in thousands) | In thousands | March 31, 2021 | March 31, 2020 | December 31, 2020 | | :-------------------------------- | :------------- | :------------- | :---------------- | | **Assets:** | | | | | Total current assets | $281,507 | $667,780 | $282,997 | | Total property, plant, and equipment, net | $2,649,040 | $2,459,914 | $2,608,330 | | Total non-current assets | $3,338,061 | $3,157,616 | $3,316,339 | | Total assets | $3,619,568 | $3,825,396 | $3,599,336 | | **Liabilities and Equity:** | | | | | Total current liabilities | $508,095 | $692,321 | $529,053 | | Long-term debt | $857,365 | $917,146 | $857,265 | | Total deferred credits and other non-current liabilities | $1,372,543 | $1,358,190 | $1,377,834 | | Total equity | $881,565 | $857,739 | $835,184 | | Total liabilities and equity | $3,619,568 | $3,825,396 | $3,599,336 | [NW Natural: Consolidated Statements of Shareholder's Equity](index=14&type=section&id=Consolidated%20Statements%20of%20Shareholder's%20Equity%20of%20Northwest%20Natural%20Gas%20Company) This section details NW Natural's consolidated statements of shareholder's equity for the three months ended March 31, 2021 and 2020 NW Natural: Consolidated Statements of Shareholder's Equity (Three Months Ended March 31, in thousands) | In thousands | 2021 | 2020 | | :------------------------------------------ | :----- | :----- | | Total shareholder's equity, beginning balances | $835,184 | $822,196 | | Common stock | $319,506 | $319,557 | | Retained earnings, ending balances | $574,740 | $548,755 | | Accumulated other comprehensive income (loss), ending balances | $(12,681) | $(10,573) | | Total shareholder's equity, ending balances | $881,565 | $857,739 | [NW Natural: Consolidated Statements of Cash Flows](index=15&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20of%20Northwest%20Natural%20Gas%20Company) This section outlines NW Natural's consolidated statements of cash flows for the three months ended March 31, 2021 and 2020 NW Natural: Consolidated Statements of Cash Flows (Three Months Ended March 31, in thousands) | In thousands | 2021 | 2020 | | :------------------------------------------ | :----- | :----- | | Cash provided by operating activities | $136,273 | $105,859 | | Cash used in investing activities | $(62,229) | $(61,640) | | Cash (used in) provided by financing activities | $(71,760) | $383,914 | | Increase in cash, cash equivalents and restricted cash | $2,284 | $428,133 | | Cash, cash equivalents and restricted cash, end of period | $18,023 | $437,040 | | Interest paid, net of capitalization | $8,585 | $7,795 | | Income taxes paid (refunded), net | $2,880 | $950 | [NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS](index=16&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) This section provides detailed notes explaining significant accounting policies, segment information, revenue, leases, debt, and other financial details for the unaudited consolidated financial statements [1. ORGANIZATION AND PRINCIPLES OF CONSOLIDATION](index=16&type=section&id=1.%20ORGANIZATION%20AND%20PRINCIPLES%20OF%20CONSOLIDATION) This section describes the organizational structure and consolidation principles for NW Holdings and NW Natural, including their primary business segments and discontinued operations - The report is a combined filing for Northwest Natural Holding Company (NW Holdings) and Northwest Natural Gas Company (NW Natural), presenting separate consolidated financial statements for each registrant[25](index=25&type=chunk) - NW Natural's core business is the regulated natural gas distribution (NGD) segment, serving customers in Oregon and southwest Washington. All other activities, including water businesses and other investments, are aggregated as 'other' for each registrant[26](index=26&type=chunk) - The results of Gill Ranch were presented as a discontinued operation for NW Holdings for all periods shown on the consolidated statements of comprehensive income and cash flows, with the sale closing on **December 4, 2020**[29](index=29&type=chunk) [2. SIGNIFICANT ACCOUNTING POLICIES](index=16&type=section&id=2.%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section details the significant accounting policies applied by NW Holdings and NW Natural, including regulatory accounting, cash and cash equivalents, uncollectible accounts, and recent accounting pronouncements - NW Holdings and NW Natural apply regulatory accounting principles, capitalizing or deferring certain costs and revenues as regulatory assets and liabilities based on orders from various Public Utilities Commissions (OPUC, WUTC, IPUC, PUCT)[32](index=32&type=chunk) NW Natural: Regulatory Assets (In thousands) | Category | March 31, 2021 | March 31, 2020 | December 31, 2020 | | :--------- | :------------- | :------------- | :---------------- | | Current | $47,789 | $37,815 | $31,745 | | Non-current | $338,652 | $328,024 | $348,887 | | Total NW Natural | $386,441 | $365,839 | $380,632 | NW Natural: Regulatory Liabilities (In thousands) | Category | March 31, 2021 | March 31, 2020 | December 31, 2020 | | :--------- | :------------- | :------------- | :---------------- | | Current | $81,314 | $47,137 | $50,362 | | Non-current | $635,515 | $622,375 | $638,793 | | Total NW Natural | $716,829 | $669,512 | $689,155 | - Cash and cash equivalents for NW Holdings decreased significantly from **$471.1 million** at March 31, 2020, to **$17.9 million** at March 31, 2021, while NW Natural's decreased from **$432.3 million** to **$10.4 million** over the same period[13](index=13&type=chunk)[20](index=20&type=chunk)[36](index=36&type=chunk) - The allowance for uncollectible accounts for NW Holdings increased from **$3.2 million** at December 31, 2020, to **$3.5 million** at March 31, 2021, with **$2.6 million** deferred to a regulatory asset for COVID-19 costs[41](index=41&type=chunk) - As of March 31, 2021, approximately **$5.0 million** in COVID-19 related costs were deferred to a regulatory asset, believed to be recoverable[43](index=43&type=chunk) - The adoption of ASU 2019-12 (Income Taxes) on January 1, 2021, did not materially affect the financial statements. ASUs 2020-04 and 2021-01 (Reference Rate Reform) are not expected to materially affect financial statements[45](index=45&type=chunk)[48](index=48&type=chunk) [3. EARNINGS PER SHARE](index=20&type=section&id=3.%20EARNINGS%20PER%20SHARE) This section presents the calculation of basic and diluted earnings per share for NW Holdings, including net income from continuing and discontinued operations NW Holdings: Earnings Per Share (Three Months Ended March 31, in thousands, except per share data) | In thousands, except per share data | 2021 | 2020 | | :---------------------------------- | :----- | :----- | | Net income from continuing operations | $59,517 | $48,276 | | Loss from discontinued operations, net of tax | — | $(778) | | Net income | $59,517 | $47,498 | | Average common shares outstanding - basic | 30,614 | 30,491 | | Average common shares outstanding - diluted | 30,633 | 30,535 | | Basic EPS from continuing operations | $1.94 | $1.58 | | Diluted EPS from continuing operations | $1.94 | $1.58 | | Basic EPS | $1.94 | $1.56 | | Diluted EPS | $1.94 | $1.56 | | Anti-dilutive shares | 12 | 3 | [4. SEGMENT INFORMATION](index=20&type=section&id=4.%20SEGMENT%20INFORMATION) This section provides disaggregated financial information by business segment for NW Holdings and NW Natural, including operating revenues, income from operations, and capital expenditures - The primary reportable segment is NW Natural's local gas distribution business (NGD), which includes the Mist underground storage facility, NWN Gas Reserves, and NW Natural RNG Holding Company, LLC[51](index=51&type=chunk)[52](index=52&type=chunk) - NW Natural's 'Other' activities include Interstate Storage Services, third-party asset management, and appliance retail center operations. NW Holdings' 'Other' activities include NWN Water (water and wastewater utilities), NWN Gas Storage, and other pipeline assets[53](index=53&type=chunk)[55](index=55&type=chunk) NW Holdings: Segment Information Summary (Three Months Ended March 31, in thousands) | In thousands | NGD (NW Natural) 2021 | Other (NW Natural) 2021 | NW Natural Total 2021 | Other (NW Holdings) 2021 | NW Holdings Total 2021 | | :----------- | :-------------------- | :---------------------- | :-------------------- | :----------------------- | :--------------------- | | Operating revenues | $301,338 | $11,012 | $312,350 | $3,596 | $315,946 | | Income (loss) from operations | $86,487 | $8,631 | $95,118 | $(412) | $94,706 | | Net income (loss) from continuing operations | $53,925 | $6,186 | $60,111 | $(594) | $59,517 | | Capital expenditures | $63,992 | $106 | $64,098 | $1,604 | $65,702 | | Total assets at March 31, 2021 | $3,570,153 | $49,415 | $3,619,568 | $139,057 | $3,758,625 | | | NGD (NW Natural) 2020 | Other (NW Natural) 2020 | NW Natural Total 2020 | Other (NW Holdings) 2020 | NW Holdings Total 2020 | | Operating revenues | $278,487 | $4,042 | $282,529 | $2,622 | $285,151 | | Income (loss) from operations | $75,258 | $1,763 | $77,021 | $(575) | $76,446 | | Net income (loss) from continuing operations | $47,943 | $1,236 | $49,179 | $(903) | $48,276 | | Capital expenditures | $56,157 | $77 | $56,234 | $1,212 | $57,446 | | Total assets at March 31, 2020 | $3,776,650 | $48,746 | $3,825,396 | $160,835 | $3,986,231 | NGD Margin Calculation (Three Months Ended March 31, in thousands) | In thousands | 2021 | 2020 | | :-------------------------- | :----- | :----- | | Total NGD operating revenues | $301,338 | $278,487 | | Less: NGD cost of gas | $112,266 | $108,595 | | Environmental remediation | $3,777 | $4,005 | | Revenue taxes | $12,655 | $11,743 | | NGD margin | $172,640 | $154,144 | [5. REVENUE](index=22&type=section&id=5.%20REVENUE) This section disaggregates revenue from continuing operations for NW Holdings and NW Natural, detailing sources such as natural gas sales, gas storage, asset management, and leasing Disaggregated Revenue from Continuing Operations (Three Months Ended March 31, in thousands) | In thousands | NGD 2021 | Other (NW Natural) 2021 | NW Natural Total 2021 | Other (NW Holdings) 2021 | NW Holdings Total 2021 | | :----------- | :------- | :---------------------- | :-------------------- | :----------------------- | :--------------------- | | Natural gas sales | $296,083 | — | $296,083 | — | $296,083 | | Gas storage revenue, net | — | $2,495 | $2,495 | — | $2,495 | | Asset management revenue, net | — | $6,928 | $6,928 | — | $6,928 | | Appliance retail center revenue | — | $1,589 | $1,589 | — | $1,589 | | Other revenue | $415 | — | $415 | $3,596 | $4,011 | | Revenue from contracts with customers | $296,498 | $11,012 | $307,510 | $3,596 | $311,106 | | Alternative revenue | $453 | — | $453 | — | $453 | | Leasing revenue | $4,387 | — | $4,387 | — | $4,387 | | Total operating revenues | $301,338 | $11,012 | $312,350 | $3,596 | $315,946 | | | NGD 2020 | Other (NW Natural) 2020 | NW Natural Total 2020 | Other (NW Holdings) 2020 | NW Holdings Total 2020 | | Natural gas sales | $274,004 | — | $274,004 | — | $274,004 | | Gas storage revenue, net | — | $2,336 | $2,336 | — | $2,336 | | Asset management revenue, net | — | $150 | $150 | — | $150 | | Appliance retail center revenue | — | $1,556 | $1,556 | — | $1,556 | | Other revenue | $337 | — | $337 | $2,622 | $2,959 | | Revenue from contracts with customers | $274,341 | $4,042 | $278,383 | $2,622 | $281,005 | | Alternative revenue | $(472) | — | $(472) | — | $(472) | | Leasing revenue | $4,618 | — | $4,618 | — | $4,618 | | Total operating revenues | $278,487 | $4,042 | $282,529 | $2,622 | $285,151 | - NW Natural's primary revenue source is natural gas sales to NGD customers, recognized over time upon delivery. Alternative revenue programs like Weather Normalization (WARM) and decoupling mechanisms are considered contracts with the regulator and excluded from revenue from contracts with customers[63](index=63&type=chunk)[65](index=65&type=chunk) - Unrecognized revenue for fixed components of gas storage and asset management contracts was approximately **$83.8 million** as of March 31, 2021, with **$14.3 million** expected in the remainder of 2021[69](index=69&type=chunk) [6. LEASES](index=24&type=section&id=6.%20LEASES) This section outlines lease arrangements for NW Holdings and NW Natural, including leasing revenue, future minimum lease payments, and lease expenses - Leasing revenue primarily comes from NW Natural's North Mist natural gas storage agreement with PGE, classified as a sales-type lease with regulatory accounting deferral. Total lease revenue for NW Natural was **$4.387 million** for the three months ended March 31, 2021, down from **$4.618 million** in 2020[73](index=73&type=chunk)[76](index=76&type=chunk) NW Natural: Total Future Minimum Lease Payments to be Received (As of March 31, 2021, in thousands) | In thousands | Operating | Sales-Type | Total | | :---------------- | :-------- | :--------- | :---- | | Remainder of 2021 | $55 | $13,090 | $13,145 | | 2022 | $72 | $17,026 | $17,098 | | 2023 | $64 | $16,557 | $16,621 | | 2024 | $65 | $15,867 | $15,932 | | 2025 | $60 | $15,306 | $15,366 | | Thereafter | $229 | $251,724 | $251,953 | | Total lease revenue | $545 | $329,570 | $330,115 | | Less: imputed interest | | $186,352 | | | Total leases receivable | | $143,218 | | NW Holdings: Lease Expense (Three Months Ended March 31, in thousands) | In thousands | 2021 | 2020 | | :-------------------- | :----- | :----- | | Operating lease expense | $1,696 | $1,254 | | Short-term lease expense | $220 | $198 | - NW Natural commenced a 20-year operating lease for a new corporate operations center in March 2020, with total estimated base rent payments of **$159.4 million**. A regulatory asset of **$4.6 million** was recorded for the timing difference between minimum lease payments and expense recognition[80](index=80&type=chunk)[81](index=81&type=chunk) NW Holdings: Maturities of Operating Lease Liabilities (As of March 31, 2021, in thousands) | In thousands | NW Natural | Other (NW Holdings) | NW Holdings | | :---------------- | :--------- | :------------------ | :---------- | | Remainder of 2021 | $5,161 | $41 | $5,202 | | 2022 | $6,933 | $24 | $6,957 | | 2023 | $6,986 | $6 | $6,992 | | 2024 | $7,150 | $6 | $7,156 | | 2025 | $7,185 | $6 | $7,191 | | Thereafter | $123,784 | $24 | $123,808 | | Total lease payments | $157,199 | $107 | $157,306 | | Less: imputed interest | $75,674 | $5 | $75,679 | | Total lease obligations | $81,525 | $102 | $81,627 | | Less: current obligations | $1,167 | $46 | $1,213 | | Long-term lease obligations | $80,358 | $56 | $80,414 | [7. STOCK-BASED COMPENSATION](index=27&type=section&id=7.%20STOCK-BASED%20COMPENSATION) This section describes the stock-based compensation plans for NW Holdings, including the Long Term Incentive Plan and Employee Stock Purchase Plan, and associated compensation costs - Stock-based compensation plans include a Long Term Incentive Plan (LTIP), an Employee Stock Purchase Plan (ESPP), and a Restated Stock Option Plan (terminated for new grants in 2012)[85](index=85&type=chunk)[90](index=90&type=chunk) - For the 2019 LTIP, **31,986 performance-based shares** were granted, with **$0.4 million** of unrecognized compensation cost expected to be recognized through 2021[86](index=86&type=chunk)[88](index=88&type=chunk) - **38,160 Restricted Stock Units (RSUs)** were granted under the LTIP during Q1 2021, with a weighted-average grant date fair value of **$49.16 per share**. Unrecognized compensation cost from RSUs was **$4.5 million**, expected to be recognized through 2025[89](index=89&type=chunk) [8. DEBT](index=28&type=section&id=8.%20DEBT) This section details the short-term and long-term debt outstanding for NW Holdings and NW Natural, including interest rates, maturity dates, and fair value estimates Short-Term Debt Outstanding (As of March 31, 2021, in millions) | Registrant | Amount (in millions) | | :--------- | :------------------- | | NW Holdings | $236.2 | | NW Natural | $175.2 | - NW Holdings' short-term debt included **$61.0 million** in revolving credit agreement loans and **$175.2 million** of commercial paper outstanding at NW Natural. The weighted average interest rate on the revolving credit agreement was **1.19%** for NW Holdings, and **0.43%** for NW Natural's commercial paper[91](index=91&type=chunk) Long-Term Debt Outstanding (As of March 31, 2021, in millions) | Registrant | Amount (in millions) | | :--------- | :------------------- | | NW Holdings | $955.9 | | NW Natural | $917.3 | - NW Natural's long-term debt consists of first mortgage bonds with maturity dates from 2021 to 2050, interest rates from **2.82% to 9.05%**, and a weighted average interest rate of **4.60%**[92](index=92&type=chunk) - NW Natural Water, a subsidiary of NW Holdings, has a **$35.0 million** term loan due in 2021, with an interest rate of **0.66%** at March 31, 2021. NW Holdings was in compliance with its consolidated indebtedness to total capitalization ratio covenant of **56.0%** (limit **70%**)[93](index=93&type=chunk) Estimated Fair Value of Long-Term Debt (In thousands) | Registrant | March 31, 2021 (Carrying Amount, in thousands) | March 31, 2021 (Estimated Fair Value, in thousands) | December 31, 2020 (Carrying Amount, in thousands) | December 31, 2020 (Estimated Fair Value, in thousands) | | :--------- | :------------------------------- | :------------------------------------ | :---------------------------------- | :----------------------------------- | | NW Holdings | $955,919 | $1,053,036 | $955,425 | $1,136,311 | | NW Natural | $917,336 | $1,014,527 | $917,220 | $1,097,348 | [9. PENSION AND OTHER POSTRETIREMENT BENEFIT COSTS](index=29&type=section&id=9.%20PENSION%20AND%20OTHER%20POSTRETIREMENT%20BENEFIT%20COSTS) This section outlines the pension and other postretirement benefit plans for NW Natural, including net periodic benefit costs and employer contributions - NW Natural maintains a qualified non-contributory defined benefit pension plan, non-qualified supplemental pension plans, and other postretirement employee benefit plans. Service costs are recognized in operations and maintenance, while other non-service costs are in other income (expense), net[97](index=97&type=chunk)[98](index=98&type=chunk) Net Periodic Benefit Cost (Three Months Ended March 31, in thousands) | Component | Pension Benefits 2021 (in thousands) | Pension Benefits 2020 (in thousands) | Other Postretirement Benefits 2021 (in thousands) | Other Postretirement Benefits 2020 (in thousands) | | :------------------------ | :-------------------- | :-------------------- | :--------------------------------- | :--------------------------------- | | Service cost | $1,714 | $1,657 | $55 | $64 | | Interest cost | $3,343 | $4,011 | $165 | $223 | | Expected return on plan assets | $(6,099) | $(5,496) | — | — | | Amortization of prior service credit | — | — | $(117) | $(117) | | Amortization of net actuarial loss | $5,501 | $4,778 | $131 | $143 | | Net periodic benefit cost | $4,459 | $4,950 | $234 | $313 | | Net amount charged to expense | $6,534 | $7,083 | $213 | $290 | - NW Natural made cash contributions of **$4.5 million** to qualified defined benefit pension plans for the three months ended March 31, 2021, and expects further contributions of **$15.6 million** during the remainder of 2021[101](index=101&type=chunk) - Employer contributions to the Retirement K Savings Plan (defined contribution) totaled **$2.6 million** for the three months ended March 31, 2021, up from **$2.5 million** in 2020[103](index=103&type=chunk) [10. INCOME TAX](index=30&type=section&id=10.%20INCOME%20TAX) This section provides a reconciliation of the effective income tax rate for NW Holdings and NW Natural, detailing components and the impact of regulatory adjustments Effective Income Tax Rate Reconciliation (Three Months Ended March 31, in thousands) | Component | NW Holdings 2021 (in thousands) | NW Holdings 2020 (in thousands) | NW Natural 2021 (in thousands) | NW Natural 2020 (in thousands) | | :------------------------ | :--------------- | :--------------- | :-------------- | :-------------- | | Income tax at statutory rate (federal) | $16,808 | $13,105 | $16,939 | $13,355 | | State income tax | $7,308 | $3,677 | $7,325 | $3,737 | | Differences required to be flowed-through by regulatory commissions | $(3,605) | $(2,525) | $(3,605) | $(2,525) | | Other, net | $10 | $(130) | $(107) | $(149) | | Total provision for income taxes on continuing operations | $20,521 | $14,127 | $20,552 | $14,418 | | Effective income tax rate for continuing operations | 25.6% | 22.8% | 25.5% | 22.8% | - The effective income tax rate for NW Holdings and NW Natural increased primarily due to the Oregon Corporate Activity Tax (CAT), changes in pre-tax income, and regulatory amortization of deferred Tax Cuts and Jobs Act benefits[106](index=106&type=chunk) - The IRS Compliance Assurance Process (CAP) examination for the 2019 tax year was completed in Q1 2021 with no material changes. The 2020 and 2021 tax years are subject to CAP examination[107](index=107&type=chunk) [11. PROPERTY, PLANT, AND EQUIPMENT](index=31&type=section&id=11.%20PROPERTY,%20PLANT,%20AND%20EQUIPMENT) This section presents the net property, plant, and equipment for NW Holdings and NW Natural, categorized by registrant and type of asset Property, Plant, and Equipment, Net (In thousands) | Registrant | March 31, 2021 | March 31, 2020 | December 31, 2020 | | :--------- | :------------- | :------------- | :---------------- | | NW Natural | $2,649,040 | $2,459,914 | $2,608,330 | | Other (NW Holdings) | $47,340 | $40,301 | $46,440 | | NW Holdings Total | $2,696,380 | $2,500,215 | $2,654,770 | - NW Holdings' 'Other plant' includes long-lived assets from water and wastewater utility operations and non-regulated activities. NW Natural's 'Other plant' primarily includes non-utility gas storage assets at the Mist facility[110](index=110&type=chunk)[111](index=111&type=chunk) [12. GAS RESERVES](index=31&type=section&id=12.%20GAS%20RESERVES) This section details NW Natural's investment in gas reserves, including the Jonah Field program, and its recovery mechanisms for NGD customers - NW Natural has invested **$188 million** in the Jonah Field gas reserves program in Wyoming as of March 31, 2021, providing long-term price protection for NGD customers[112](index=112&type=chunk) - The cost of gas, including a carrying cost for the rate base investment, is recovered through the annual Oregon PGA filing. Gas produced from additional wells is included in the Oregon PGA at a fixed rate of **$0.4725 per therm**[113](index=113&type=chunk)[114](index=114&type=chunk) NW Natural's Net Gas Reserves Investment (In thousands) | Component | March 31, 2021 | March 31, 2020 | December 31, 2020 | | :------------------------ | :------------- | :------------- | :---------------- | | Gas reserves, current | $10,659 | $14,351 | $11,409 | | Gas reserves, non-current | $176,648 | $172,956 | $175,898 | | Less: Accumulated amortization | $145,048 | $127,722 | $141,414 | | Total gas reserves | $42,259 | $59,585 | $45,893 | | Less: Deferred taxes on gas reserves | $9,831 | $14,522 | $10,572 | | Net investment in gas reserves | $32,428 | $45,063 | $35,321 | [13. INVESTMENTS](index=32&type=section&id=13.%20INVESTMENTS) This section describes other investments held by NW Holdings, including financial investments in life insurance policies and the sale of an interest in Trail West Holdings, LLC - Other investments include financial investments in life insurance policies, accounted for at cash surrender value, net of policy loans[116](index=116&type=chunk) - NWN Energy completed the sale of its interest in Trail West Holdings, LLC (TWH) on August 6, 2020, for **$14.0 million**, resulting in an after-tax gain of approximately **$0.5 million**[117](index=117&type=chunk) [14. BUSINESS COMBINATIONS](index=32&type=section&id=14.%20BUSINESS%20COMBINATIONS) This section outlines recent business acquisitions by NWN Water, a subsidiary of NW Holdings, and the resulting goodwill recognized - During Q1 2021, NWN Water completed one immaterial acquisition of a water system. In 2020, NWN Water completed two significant acquisitions (Suncadia Water Company, LLC and T&W Water Service Company) for **$38.1 million**, aligning with its water sector strategy[119](index=119&type=chunk)[120](index=120&type=chunk) - Final goodwill of **$18.2 million** was recognized from 2020 acquisitions, attributable to regulated water utility service territories, experienced workforces, and strategic growth benefits. Total goodwill was **$69.3 million** as of March 31, 2021[121](index=121&type=chunk)[124](index=124&type=chunk) - The annual impairment assessment of goodwill occurs in the fourth quarter of each year, with no impairments recognized to date[124](index=124&type=chunk) [15. DERIVATIVE INSTRUMENTS](index=33&type=section&id=15.%20DERIVATIVE%20INSTRUMENTS) This section details NW Natural's use of derivative instruments to hedge natural gas and foreign currency risks, including notional amounts and realized/unrealized gains/losses - NW Natural uses financial derivative contracts (swaps, options) to hedge natural gas sales requirements and foreign currency exchange contracts for pipeline demand charges paid in Canadian dollars[125](index=125&type=chunk)[126](index=126&type=chunk) Notional Amounts of Open Derivative Positions (In thousands) | Instrument | March 31, 2021 | December 31, 2020 | | :--------- | :------------- | :---------------- | | Natural gas (financial, in therms) | 597,495 | 784,400 | | Natural gas (physical, in therms) | 187,595 | 457,593 | | Foreign exchange | $5,954 | $5,896 | Unrealized and Realized Gain/Loss from Derivative Instruments (Three Months Ended March 31, in thousands) | Category | Natural gas commodity 2021 (in thousands) | Foreign exchange 2021 (in thousands) | Natural gas commodity 2020 (in thousands) | Foreign exchange 2020 (in thousands) | | :------- | :------------------------- | :-------------------- | :------------------------- | :-------------------- | | Benefit (expense) to cost of gas | $20,482 | $77 | $(5,343) | $(466) | | Operating expense | $(27) | — | $(2,433) | — | | Amounts deferred to regulatory accounts on balance sheet | $(20,459) | $(77) | $7,405 | $466 | | Total loss in pre-tax earnings | $(4) | — | $(371) | — | - NW Natural realized net gains of **$5.1 million** from natural gas financial derivative contract settlements for the three months ended March 31, 2021, compared to net losses of **$2.1 million** in the prior year[133](index=133&type=chunk) - NW Natural's net fair value of derivatives was an asset of **$20.7 million** at March 31, 2021, compared to a liability of **$1.3 million** at March 31, 2020, and an asset of **$12.8 million** at December 31, 2020[140](index=140&type=chunk) [16. ENVIRONMENTAL MATTERS](index=35&type=section&id=16.%20ENVIRONMENTAL%20MATTERS) This section addresses NW Natural's environmental remediation liabilities, including specific site costs and the regulatory asset deferred for these expenses - NW Natural owns or previously owned properties requiring environmental remediation. Recovery mechanisms are in place to collect **96.7%** of allocable costs from Oregon customers and **3.3%** from Washington customers[141](index=141&type=chunk) Environmental Liabilities (In thousands) | Site Category | Current Liabilities (March 31, 2021, in thousands) | Non-Current Liabilities (March 31, 2021, in thousands) | | :------------ | :----------------------------------- | :--------------------------------------- | | Portland Harbor site: | | | | Gasco/Siltronic Sediments | $7,026 | $42,374 | | Other Portland Harbor | $2,175 | $6,954 | | Gasco/Siltronic Upland site | $13,135 | $39,302 | | Front Street site | $1,258 | $1,132 | | Oregon Steel Mills | — | $179 | | Total | $23,594 | $89,941 | - NW Natural has recorded a liability of **$49.4 million** for the Gasco sediment clean-up, representing the low end of the estimated range of **$49.4 million to $350 million**[150](index=150&type=chunk) Total Regulatory Asset Deferred for Environmental Costs (In thousands) | Component | March 31, 2021 | March 31, 2020 | December 31, 2020 | | :------------------------ | :------------- | :------------- | :---------------- | | Deferred costs and interest | $46,409 | $37,586 | $44,516 | | Accrued site liabilities | $113,456 | $129,977 | $120,352 | | Insurance proceeds and interest | $(69,492) | $(80,613) | $(69,253) | | Total regulatory asset deferral | $90,373 | $86,950 | $95,615 | | Current regulatory assets | $5,396 | $4,459 | $4,992 | | Long-term regulatory assets | $84,977 | $82,491 | $90,623 | - NW Natural concluded there was no earnings test adjustment for 2020 based on the environmental earnings test submitted in April 2021[213](index=213&type=chunk) [17. DISCONTINUED OPERATIONS](index=38&type=section&id=17.%20DISCONTINUED%20OPERATIONS) This section reports on NW Holdings' sale of its interest in Gill Ranch Gas Storage Facility, presenting its financial results as discontinued operations - NW Holdings completed the sale of its **75% interest** in Gill Ranch Gas Storage Facility on December 4, 2020, for an initial cash purchase price of **$13.5 million** (less **$1.0 million** deposit), resulting in an after-tax gain of **$5.9 million** for 2020[168](index=168&type=chunk) - As of March 31, 2021, there were no assets or liabilities classified as held for sale, and no activity in the consolidated statement of comprehensive income for discontinued operations[169](index=169&type=chunk) NW Holdings Discontinued Operations (Three Months Ended March 31, 2020, in thousands) | Category | Amount | | :-------------------------------------- | :----- | | Revenues | $908 | | Total expenses | $1,964 | | Loss from discontinued operations before income taxes | $(1,056) | | Income tax benefit | $(278) | | Loss from discontinued operations, net of tax | $(778) | | Loss from discontinued operations per share of common stock: Basic | $(0.02) | | Loss from discontinued operations per share of common stock: Diluted | $(0.02) | [MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=40&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's analysis of NW Holdings' and NW Natural's financial condition and results, covering key highlights, regulatory matters, segment performance, capital structure, liquidity, and cash flows [EXECUTIVE SUMMARY](index=41&type=section&id=EXECUTIVE%20SUMMARY) This section provides an overview of NW Holdings' and NW Natural's financial performance, including diluted EPS, net income, customer growth, and the impact of a cold weather event and COVID-19 - NW Holdings reported diluted EPS of **$1.94** for Q1 2021, up from **$1.56** in Q1 2020, with consolidated net income increasing by **$12.0 million**[177](index=177&type=chunk) - NW Natural's consolidated net income increased by **$10.9 million**, driven by an **$18.5 million** increase in NGD segment margin due to the 2020 Oregon rate case and residential customer growth, and a **$6.9 million** increase in asset management revenue[178](index=178&type=chunk) - A February 2021 cold weather event led to approximately **$29 million** in higher commodity costs, with **$27 million** deferred for future recovery, resulting in a **$2 million** lower natural gas utility margin. This was offset by **$39 million** in asset management revenue, with **$33 million** deferred for customer benefit[178](index=178&type=chunk) - NW Natural added over **11,000 meters** in the past twelve months, achieving a **1.4% growth rate** by March 31, 2021. The company continues to focus on its water utility strategy with new acquisitions[177](index=177&type=chunk) - The COVID-19 pandemic has led to deferred financial impacts (bad debt, financing costs, lost revenues) and potential delays in late and disconnection fee revenue recognition. Approximately **$5.0 million** in incurred COVID-19 costs were deferred to a regulatory asset, with an additional **$1.8 million** in forgone late fee revenue expected to be recognized later[183](index=183&type=chunk)[220](index=220&type=chunk) [DIVIDENDS](index=42&type=section&id=DIVIDENDS) This section reports on dividends paid per common share by NW Holdings, including the declared quarterly dividend and historical dividend growth Dividends Paid Per Common Share (Three Months Ended March 31) | Per common share | 2021 | 2020 | YTD Change | | :--------------- | :--- | :--- | :--------- | | Dividends paid | $0.4800 | $0.4775 | $0.0025 | - In April 2021, NW Holdings declared a quarterly dividend of **$0.4800 per share**, reflecting an annual indicated dividend rate of **$1.92 per share**[185](index=185&type=chunk) - Annual common stock dividend payments per share have increased each year since **1956**[262](index=262&type=chunk) [RESULTS OF OPERATIONS](index=43&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the results of operations for NW Holdings and NW Natural, covering regulatory matters, business segment performance, and consolidated operational expenses [Regulatory Matters](index=43&type=section&id=Regulatory%20Matters) This section details the regulatory environment for NW Natural's NGD business, including rate cases, authorized rate structures, and initiatives related to renewable natural gas and climate change - NW Natural's NGD business is regulated by the OPUC (**88% of customers**) and WUTC (**12% of customers**) regarding rates and terms of service[186](index=186&type=chunk) - The 2020 Oregon rate case, effective October 16, 2020, provided a **$45 million** revenue requirement increase, based on a **9.4% ROE**, **6.965% cost of capital**, and **$1.44 billion** average rate base[189](index=189&type=chunk)[195](index=195&type=chunk) - NW Natural filed a request for a general rate increase with the WUTC on December 18, 2020, seeking an **8.0% ($6.3 million)** increase in Year One (Nov 1, 2021) and **3.7% ($3.2 million)** in Year Two (Nov 1, 2022)[196](index=196&type=chunk) Key Regulatory Mechanisms and Authorized Rate Structure | Mechanism/Rate | Oregon (2018 Rate Case) | Oregon (2020 Rate Case, effective 11/1/2020) | Washington (2019 Rate Case, effective 11/1/2019) | | :------------- | :---------------------- | :------------------------------------------- | :--------------------------------------------- | | ROE | 9.4% | 9.4% | 9.4% | | ROR | 7.3% | 7.0% | 7.2% | | Debt/Equity Ratio | 50%/50% | 50%/50% | 51%/49% | | PGA | X | X | X | | Gas Cost Incentive Sharing | X | X | | | Decoupling | X | X | | | WARM | X | X | | | Environmental Cost Recovery | X | X | X | | Interstate Storage and Asset Management Sharing | X | X | X | - NW Natural entered the 2020-21 gas year with **40%** of forecasted sales volumes hedged in financial swap and option contracts (**38% in Oregon**, **58% in Washington**)[199](index=199&type=chunk) - The Oregon decoupling mechanism was reset in the 2020 rate case and extended to include April, adjusting margin revenues for differences between actual and expected customer volumes[207](index=207&type=chunk) - In Q1 2021, NW Natural refunded approximately **$9.1 million** in interstate storage and asset management sharing credit to Oregon customers[217](index=217&type=chunk) - Oregon's Senate Bill 98 (SB98) sets voluntary goals for adding up to **30% renewable natural gas (RNG)** into the state's pipeline system by **2050** and allows utilities to invest in RNG infrastructure[222](index=222&type=chunk)[223](index=223&type=chunk) - NW Natural exercised its option for the first RNG development project in Nebraska in December 2020, initiating an estimated **$8 million** investment expected to produce RNG in late 2021[225](index=225&type=chunk) - The Oregon Corporate Activity Tax (CAT), effective January 1, 2020, imposes a **0.57% tax** on certain Oregon gross receipts. NW Natural is authorized to recover this expense through base rates and annual PGA adjustments[226](index=226&type=chunk) - Oregon's Executive Order (EO) establishes GHG emissions reduction goals of **45% below 1990 levels by 2035** and **80% by 2050**, directing state agencies to advance decarbonization in the utility sector[229](index=229&type=chunk) [Business Segment - Natural Gas Distribution (NGD)](index=49&type=section&id=Business%20Segment%20-%20Natural%20Gas%20Distribution%20(NGD)) This section highlights the financial performance of NW Natural's NGD segment, including net income, diluted EPS, gas volumes, and margin composition NGD Segment Highlights (Three Months Ended March 31, in thousands, except EPS data) | In thousands, except EPS data | 2021 | 2020 | YTD Change | | :---------------------------- | :----- | :----- | :--------- | | NGD net income | $53,925 | $47,943 | $5,982 | | Diluted EPS - NGD segment | $1.76 | $1.57 | $0.19 | | Gas sold and delivered (in therms) | 431,120 | 420,917 | 10,203 | | NGD margin | $172,640 | $154,144 | $18,496 | - NGD net income increased by **$6.0 million**, or **$0.19 per share**, primarily due to an **$18.5 million** increase in NGD margin from new customer rates (2020 Oregon rate case) and customer growth[234](index=234&type=chunk) - NGD margin was negatively impacted by a **$2.7 million** decrease due to additional market gas purchases and other expenses during the 2021 cold weather event, with **$27 million** of **$29 million** higher commodity costs deferred[234](index=234&type=chunk) NGD Margin Composition (Three Months Ended March 31, in thousands, except degree day and customer data) | In thousands, except degree day and customer data | 2021 | 2020 | Favorable/ (Unfavorable) YTD Change | | :------------------------------------------------ | :----- | :----- | :---------------------------------- | | Residential and commercial sales (margin) | $160,772 | $139,144 | $21,628 | | Industrial sales and transportation (margin) | $8,754 | $8,582 | $172 | | Gain (loss) from gas cost incentive sharing | $(2,263) | $448 | $(2,711) | | Other margin | $595 | $1,044 | $(449) | | Other regulated services | $4,782 | $4,926 | $(144) | | Total NGD Margin | $172,640 | $154,144 | $18,496 | | Total number of meters (end of period) | 777,966 | 766,863 | 11,103 (1.4% growth) | - Residential and commercial margin increased **$21.6 million**, driven by new Oregon rates and **1.8% growth** in residential meters. Industrial sales and transportation margin increased **$0.2 million**[237](index=237&type=chunk)[238](index=238&type=chunk) - Cost of gas increased **$3.7 million**, primarily due to a **$2.7 million** higher loss from gas cost incentive sharing related to the 2021 cold weather event, and a **4% increase** in volumes sold[240](index=240&type=chunk) [Other (NW Natural & NW Holdings)](index=52&type=section&id=Other) This section reports on the net income from 'Other' activities for both NW Natural and NW Holdings, detailing the drivers of changes in performance Other Net Income (Three Months Ended March 31, in thousands) | Registrant | 2021 | 2020 | YTD Change | | :--------- | :----- | :----- | :--------- | | NW Natural other - net income | $6,186 | $1,236 | $4,950 | | Other NW Holdings activity | $(594) | $(903) | $309 | | NW Holdings other - net income | $5,592 | $333 | $5,259 | | Diluted EPS - NW Holdings - other | $0.18 | $0.01 | $0.17 | - NW Holdings' 'Other' net income increased **$5.3 million**, primarily driven by NW Natural's **$5.0 million** increase due to **$6.9 million** higher asset management revenue from the 2021 cold weather event, partially offset by **$1.7 million** in income tax expense[243](index=243&type=chunk) [Consolidated Operations](index=52&type=section&id=Consolidated%20Operations) This section analyzes consolidated operational expenses for NW Holdings and NW Natural, including operations and maintenance, depreciation, interest, and income tax expenses Operations and Maintenance Expense (Three Months Ended March 31, in thousands) | Registrant | 2021 | 2020 | YTD Change | | :--------- | :----- | :----- | :--------- | | NW Natural | $49,187 | $46,256 | $2,931 | | Other NW Holdings operations and maintenance | $3,004 | $2,665 | $339 | | NW Holdings | $52,191 | $48,921 | $3,270 | - NW Holdings' operations and maintenance expense increased **$3.3 million**, with NW Natural's increase of **$2.9 million** driven by higher compensation costs (**$1.9 million**), lease expense (**$0.9 million**), and professional service expenses (**$0.8 million**)[244](index=244&type=chunk) Depreciation and Amortization Expense (Three Months Ended March 31, in thousands) | Registrant | 2021 | 2020 | YTD Change | | :--------- | :----- | :----- | :--------- | | NW Natural | $27,169 | $24,190 | $2,979 | | Other NW Holdings depreciation and amortization | $928 | $485 | $443 | | NW Holdings | $28,097 | $24,675 | $3,422 | - Depreciation and amortization expense increased **$3.4 million** at NW Holdings and **$3.0 million** at NW Natural, primarily due to property, plant, and equipment additions[246](index=246&type=chunk) Interest Expense, Net (Three Months Ended March 31, in thousands) | Registrant | 2021 | 2020 | YTD Change | | :--------- | :----- | :----- | :--------- | | NW Natural | $10,790 | $9,861 | $929 | | Other NW Holdings interest expense, net | $336 | $607 | $(271) | | NW Holdings | $11,126 | $10,468 | $658 | - Interest expense, net, increased **$0.7 million** at NW Holdings and **$0.9 million** at NW Natural, mainly due to a **$1.0 million** increase in long-term debt interest and **$0.6 million** lower AFUDC debt interest income, partially offset by lower commercial paper interest[248](index=248&type=chunk) Income Tax Expense (Three Months Ended March 31, in thousands) | Registrant | 2021 | 2020 | YTD Change | | :--------- | :----- | :----- | :--------- | | NW Natural income tax expense | $20,552 | $14,418 | $6,134 | | NW Holdings income tax expense | $20,521 | $14,127 | $6,394 | - Income tax expense increased **$6.1 million** at NW Natural and **$6.4 million** at NW Holdings, primarily due to higher pre-tax income and the Oregon Corporate Activity Tax, partially offset by TCJA benefits amortization[249](index=249&type=chunk) [Discontinued Operations](index=54&type=section&id=Discontinued%20Operations) This section provides an update on the sale of Gill Ranch Gas Storage Facility and its presentation as discontinued operations for NW Holdings - The sale of Gill Ranch Gas Storage Facility by NW Holdings closed on **December 4, 2020**, resulting in an after-tax gain of **$5.9 million** for the year ended December 31, 2020[251](index=251&type=chunk) - The results of Gill Ranch Storage are presented separately as discontinued operations, net of tax, from NW Holdings' continuing operations for all periods presented[252](index=252&type=chunk) [FINANCIAL CONDITION](index=54&type=section&id=FINANCIAL%20CONDITION) This section assesses the financial condition of NW Holdings and NW Natural, focusing on capital structure, liquidity, cash flows, and contingent liabilities [Capital Structure](index=54&type=section&id=Capital%20Structure) This section details the consolidated capital structure for NW Holdings and NW Natural, including common equity and long-term debt ratios - NW Holdings aims to maintain a strong and balanced consolidated capital structure, with NW Natural targeting a regulatory capital structure of **50% common equity** and **50% long-term debt**[253](index=253&type=chunk) Consolidated Capital Structure (As of March 31, 2021 and December 31, 2020) | Registrant | Component | March 31, 2021 | December 31, 2020 | | :--------- | :-------- | :------------- | :---------------- | | NW Holdings | Common equity | 49.5% | 48.2% | | | Long-term debt (including current maturities) | 50.5% | 51.8% | | | Total | 100.0% | 100.0% | | NW Natural | Common equity | 49.0% | 47.7% | | | Long-term debt (including current maturities) | 51.0% | 52.3% | | | Total | 100.0% | 100.0% | - Including short-term debt, NW Holdings' capital structure at March 31, 2021, was **44.0% common equity**, **40.4% long-term debt**, and **15.6% short-term debt**. NW Natural's was **44.7% common equity**, **43.4% long-term debt**, and **11.9% short-term debt**[255](index=255&type=chunk) [Liquidity and Capital Resources](index=55&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the liquidity and capital resources of NW Holdings and NW Natural, including cash and cash equivalents, short-term debt, credit agreements, and credit ratings Cash and Cash Equivalents (In millions) | Registrant | March 31, 2021 (in millions) | March 31, 2020 (in millions) | | :--------- | :------------- | :------------- | | NW Holdings | $17.9 | $471.1 | | NW Natural | $10.4 | $432.3 | - NW Holdings and NW Natural increased cash on hand in March 2020 due to market volatility from the COVID-19 pandemic to ensure ample liquidity[256](index=256&type=chunk) - NW Natural must comply with ring-fencing provisions, including credit ratings and common equity ratio requirements, to pay dividends to NW Holdings. NW Natural was in compliance at March 31, 2021[258](index=258&type=chunk)[261](index=261&type=chunk) Short-Term Debt Outstanding (In millions) | Registrant | March 31, 2021 (in millions) | March 31, 2020 (in millions) | | :--------- | :------------- | :------------- | | NW Holdings | $236.2 | $550.0 | | NW Natural | $175.2 | $450.0 | - NW Holdings has a **$100 million** credit agreement (expandable to **$150 million**) maturing October 2, 2023, with **$61.0 million** drawn at March 31, 2021. NW Natural has a **$300 million** credit agreement (expandable to **$450 million**) maturing October 2, 2023, with no outstanding balances drawn at March 31, 2021[271](index=271&type=chunk)[274](index=274&type=chunk) - Both NW Holdings and NW Natural were in compliance with their credit agreement covenant requiring a consolidated indebtedness to total capitalization ratio of **70% or less** (NW Holdings: **56.0%**; NW Natural: **55.3%** at March 31, 2021)[272](index=272&type=chunk)[275](index=275&type=chunk) NW Natural's Credit Ratings (As of March 31, 2021) | Rating Type | S&P | Moody's | | :---------- | :-- | :------ | | Commercial paper (short-term debt) | A-1 | P-2 | | Senior secured (long-term debt) | AA- | A2 | | Senior unsecured (long-term debt) | n/a | Baa1 | | Corporate credit rating | A+ | n/a | | Ratings outlook | Stable | Stable | - NW Natural Water's **$35.0 million** term loan matures in June 2021. NW Natural has **$10.0 million** of FMBs maturing in August 2021 and **$50.0 million** in September 2021[279](index=279&type=chunk)[281](index=281&type=chunk) [Cash Flows](index=58&type=section&id=Cash%20Flows) This section analyzes the cash flows from operating, investing, and financing activities for NW Holdings and NW Natural, highlighting key drivers of changes Cash Provided by Operating Activities (Three Months Ended March 31, in thousands) | Registrant | 2021 | 2020 | YTD Change | | :--------- | :----- | :----- | :--------- | | NW Natural | $136,273 | $105,859 | $30,414 | | NW Holdings | $137,065 | $104,660 | $32,405 | - NW Holdings' operating cash flows increased **$32.4 million**, driven by a **$36.2 million** increase in regulatory incentive sharing from asset management activities (cold weather event) and a **$12.0 million** increase in net income, partially offset by a **$37.2 million** net increase in deferred gas costs[284](index=284&type=chunk)[286](index=286&type=chunk) Cash Used in Investing Activities (Three Months Ended March 31, in thousands) | Registrant | 2021 | 2020 | YTD Change | | :--------- | :----- | :----- | :--------- | | NW Natural | $(62,229) | $(61,640) | $(589) | | NW Holdings | $(63,875) | $(101,429) | $37,554 | - NW Holdings' cash used in investing activities decreased **$37.6 million**, primarily due to **$37.9 million** less cash used for water and wastewater acquisitions in Q1 2020. NW Natural's cash used increased **$0.6 million** due to higher capital expenditures[287](index=287&type=chunk) - NW Natural's capital expenditures are anticipated to be **$280-$320 million** in 2021 and **$1.0-$1.2 billion** for 2021-2025. NW Natural Water expects to invest **$15 million** in 2021 and **$40-$50 million** for 2021-2025[288](index=288&type=chunk) Cash (Used in) Provided by Financing Activities (Three Months Ended March 31, in thousands) | Registrant | 2021 | 2020 | YTD Change | | :--------- | :----- | :----- | :--------- | | NW Natural | $(71,760) | $383,914 | $(455,674) | | NW Holdings | $(83,132) | $459,997 | $(543,129) | | Repayments of commercial paper, maturities greater than 90 days | $(100,000)

Financial Data and Key Metrics Changes - The company reported net income from continuing operations of $2.30 per share for 2020, an increase from $2.19 per share in 2019, reflecting solid performance in gas utility and contributions from water utilities [6][22]. - For Q4 2020, net income from continuing operations was $45.8 million or $1.50 per share, compared to $38.3 million or $1.26 per share for the same period in 2019 [19]. - Utility margin in the gas distribution segment increased by $11.5 million due to new rates in Oregon and customer growth, partially offset by COVID-19 impacts [21]. Business Line Data and Key Metrics Changes - The gas utility segment saw an increase in utility marketing by $11.3 million due to higher customer rates and growth, alongside revenues from the Northwest expansion project [23]. - The water and wastewater utilities experienced organic customer growth of 2.8% over the 12 months ended December 31, 2020 [33]. Market Data and Key Metrics Changes - Portland's unemployment rate was reported at 6.1% in December 2020, down from a high of 14.9% in April 2020, indicating economic recovery [8]. - Single-family housing activity in the Portland metro region showed home sales up 8.3% from 2019, with price growth of about 12% [8]. Company Strategy and Development Direction - The company aims to diversify its business by investing in the water sector and has made progress by selling non-core investments to reinvest in gas and water businesses [32]. - A key pillar of the company's strategy is pursuing a renewable future and decarbonizing the gas utility system, with plans to integrate renewable natural gas and hydrogen into their operations [35][39]. Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by the pandemic but emphasized the company's resilience and ability to achieve financial and operational goals [6]. - The company expects continued customer growth and has provided 2021 earnings guidance in the range of $2.40 to $2.60 per share, assuming average weather conditions and no significant regulatory changes [29][30]. Other Important Information - The company invested over $270 million in natural gas infrastructure in 2020, part of one of the largest capital programs in its history [8]. - The Board approved a dividend increase in Q4 2020, marking the 65th consecutive year of annual dividend increases [14]. Q&A Session Summary Question: Can you talk about the Texas crisis and its implications for electrification and decarbonization? - Management highlighted the importance of system resiliency and redundancy, noting that natural gas infrastructure is critical during extreme weather events [49][50]. Question: How did the water assets perform in Texas? - The Texas water operations were impacted by power outages and freezing conditions, but service was restored within 24 to 48 hours [63]. Question: What is the status of hydrogen blending testing? - The company is pleased with the initial results of 5% hydrogen blend testing, focusing on leakage detection and performance of end-use equipment [66][68].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 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 registrant as ...