Northwest Natural pany(NWN) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Forward-Looking Statements Cautionary statements outline factors that could cause actual results to differ from expectations, emphasizing inherent uncertainties and risks - Forward-looking statements are identified by words such as 'anticipates,' 'assumes,' 'intends,' 'expects,' and similar references to future periods[8] - Key areas covered by forward-looking statements include plans, projections, objectives, economic conditions (inflation, interest rates, recession), earnings and dividends, capital expenditures, climate change initiatives, renewable natural gas, growth, customer rates, and regulatory outcomes[8][11] - Actual results may differ materially due to inherent uncertainties, risks, and changes in circumstances, as discussed in the 2024 Annual Report on Form 10-K and this report[9] Item 1. Unaudited Financial Statements Unaudited consolidated financial statements for NW Holdings and NW Natural are presented, covering comprehensive income, balance sheets, shareholders' equity, and cash flows Consolidated Statements of Comprehensive Income (NW Holdings) This section presents NW Holdings' unaudited consolidated statements of comprehensive income for the three and six months ended June 30 | In thousands, except per share data | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating revenues | $236,194 | $211,714 | $730,478 | $645,184 | | Total operating expenses | $208,983 | $196,008 | $548,913 | $519,651 | | Income from operations | $27,211 | $15,706 | $181,565 | $125,533 | | Net income (loss) | $(2,500) | $(2,787) | $85,416 | $61,036 | | Comprehensive income (loss) | $(2,327) | $(2,462) | $85,634 | $61,585 | | Basic EPS | $(0.06) | $(0.07) | $2.12 | $1.61 | | Diluted EPS | $(0.06) | $(0.07) | $2.11 | $1.60 | - NW Holdings' operating revenues increased by $24.48 million (11.56%) for the three months ended June 30, 2025, and by $85.29 million (13.22%) for the six months ended June 30, 2025, compared to the same periods in 2024[12] - Net loss for NW Holdings decreased from $(2.787) million in Q2 2024 to $(2.500) million in Q2 2025, while net income for the six months ended June 30, 2025, increased by $24.38 million (39.94%) to $85.416 million[12] Consolidated Balance Sheets (NW Holdings) This section presents NW Holdings' unaudited consolidated balance sheets as of June 30, 2025, June 30, 2024, and December 31, 2024 | In thousands | June 30, 2025 | June 30, 2024 | December 31, 2024 | | :---------------------------- | :------------ | :------------ | :---------------- | | Total current assets | $466,116 | $423,120 | $557,774 | | Total non-current assets | $5,320,447 | $4,399,246 | $4,676,542 | | Total assets | $5,786,563 | $4,822,366 | $5,234,316 | | Total current liabilities | $683,867 | $435,540 | $649,017 | | Long-term debt | $2,086,650 | $1,574,751 | $1,679,355 | | Total deferred credits and other non-current liabilities | $1,556,808 | $1,465,359 | $1,520,573 | | Total equity | $1,459,238 | $1,346,716 | $1,385,371 | | Total liabilities and equity | $5,786,563 | $4,822,366 | $5,234,316 | - NW Holdings' total assets increased by $964.197 million (19.99%) from June 30, 2024, to June 30, 2025, primarily driven by increases in property, plant, and equipment, and goodwill[14] - Total liabilities for NW Holdings increased by $851.155 million (25.99%) from June 30, 2024, to June 30, 2025, largely due to higher long-term debt and current liabilities[16] Consolidated Statements of Shareholders' Equity (NW Holdings) This section presents NW Holdings' unaudited consolidated statements of shareholders' equity for the three and six months ended June 30 | In thousands, except per share amounts | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total shareholders' equity, beginning balances | $1,456,218 | $1,343,386 | $1,385,371 | $1,283,838 | | Net income (loss) | $(2,500) | $(2,787) | $85,416 | $61,036 | | Dividends on common stock | $(19,778) | $(18,553) | $(39,824) | $(37,229) | | Total shareholders' equity, ending balances | $1,459,238 | $1,346,716 | $1,459,238 | $1,346,716 | | Dividends per share of common stock | $0.4900 | $0.4875 | $0.9800 | $0.9750 | - NW Holdings' total shareholders' equity increased by $112.522 million (8.36%) from June 30, 2024, to June 30, 2025[17] - Dividends per share of common stock increased from $0.4875 in Q2 2024 to $0.4900 in Q2 2025, and from $0.9750 to $0.9800 for the six months ended June 30, 2025[17] Consolidated Statements of Cash Flows (NW Holdings) This section presents NW Holdings' unaudited consolidated statements of cash flows for the six months ended June 30 | In thousands | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :----------------------------- | :----------------------------- | | Cash provided by operating activities | $281,770 | $246,076 | | Cash used in investing activities | $(555,887) | $(200,441) | | Cash provided (used) by financing activities | $332,799 | $(14,220) | | Increase in cash, cash equivalents and restricted cash | $58,682 | $31,415 | | Cash, cash equivalents and restricted cash, end of period | $106,664 | $81,039 | - Cash provided by operating activities for NW Holdings increased by $35.694 million (14.50%) for the six months ended June 30, 2025, compared to the same period in 2024[18] - Cash used in investing activities significantly increased by $355.446 million (177.33%) for the six months ended June 30, 2025, primarily due to acquisitions[18] - Cash provided by financing activities saw a substantial increase of $347.019 million, shifting from a net use of cash in 2024 to a net provision of cash in 2025, driven by long-term debt issuances[18] Consolidated Statements of Comprehensive Income (NW Natural) This section presents NW Natural's unaudited consolidated statements of comprehensive income for the three and six months ended June 30 | In thousands | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating revenues | $200,807 | $200,188 | $649,620 | $622,963 | | Total operating expenses | $178,419 | $184,802 | $482,200 | $496,946 | | Income from operations | $22,388 | $15,386 | $167,420 | $126,017 | | Net income (loss) | $4,924 | $(424) | $95,963 | $67,134 | | Comprehensive income (loss) | $5,098 | $(157) | $96,312 | $67,279 | - NW Natural's operating revenues increased slightly by $0.619 million (0.31%) in Q2 2025 and by $26.657 million (4.28%) for the six months ended June 30, 2025, compared to the same periods in 2024[19] - NW Natural reported a net income of $4.924 million in Q2 2025, a significant improvement from a net loss of $(0.424) million in Q2 2024. For the six months ended June 30, 2025, net income increased by $28.829 million (42.94%) to $95.963 million[19] Consolidated Balance Sheets (NW Natural) This section presents NW Natural's unaudited consolidated balance sheets as of June 30, 2025, June 30, 2024, and December 31, 2024 | In thousands | June 30, 2025 | June 30, 2024 | December 31, 2024 | | :---------------------------- | :------------ | :------------ | :---------------- | | Total current assets | $407,248 | $367,891 | $524,714 | | Total non-current assets | $4,350,433 | $4,050,822 | $4,231,581 | | Total assets | $4,757,681 | $4,418,713 | $4,756,295 | | Total current liabilities | $380,097 | $347,807 | $604,820 | | Long-term debt | $1,335,736 | $1,365,066 | $1,335,407 | | Total deferred credits and other non-current liabilities | $1,524,646 | $1,441,506 | $1,492,018 | | Total equity | $1,517,202 | $1,264,334 | $1,324,050 | | Total liabilities and equity | $4,757,681 | $4,418,713 | $4,756,295 | - NW Natural's total assets increased by $338.968 million (7.67%) from June 30, 2024, to June 30, 2025, primarily due to growth in property, plant, and equipment[21] - Total liabilities for NW Natural increased by $86.134 million (3.01%) from June 30, 2024, to June 30, 2025, with current liabilities increasing while long-term debt slightly decreased[23] Consolidated Statements of Shareholder's Equity (NW Natural) This section presents NW Natural's unaudited consolidated statements of shareholder's equity for the three and six months ended June 30 | In thousands | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total shareholder's equity, beginning balances | $1,516,205 | $1,282,362 | $1,324,050 | $1,232,620 | | Net income (loss) | $4,924 | $(424) | $95,963 | $67,134 | | Dividends on common stock | $(19,101) | $(17,871) | $(38,160) | $(35,565) | | Total shareholder's equity, ending balances | $1,517,202 | $1,264,334 | $1,517,202 | $1,264,334 | - NW Natural's total shareholder's equity increased by $252.868 million (20.00%) from June 30, 2024, to June 30, 2025[24] - Capital contributions from parent company significantly increased NW Natural's common stock by $135.0 million for the six months ended June 30, 2025[24] Consolidated Statements of Cash Flows (NW Natural) This section presents NW Natural's unaudited consolidated statements of cash flows for the six months ended June 30 | In thousands | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :----------------------------- | :----------------------------- | | Cash provided by operating activities | $277,011 | $232,199 | | Cash used in investing activities | $(178,069) | $(179,772) | | Cash used by financing activities | $(41,443) | $(53,936) | | Increase in cash, cash equivalents and restricted cash | $57,499 | $(1,509) | | Cash, cash equivalents and restricted cash, end of period | $86,927 | $35,011 | - Cash provided by operating activities for NW Natural increased by $44.812 million (19.30%) for the six months ended June 30, 2025, compared to the same period in 2024[25] - Cash used in investing activities slightly decreased by $1.703 million (0.95%) for the six months ended June 30, 2025[25] - Cash used by financing activities decreased by $12.493 million (23.16%) for the six months ended June 30, 2025, primarily due to cash contributions from the parent company[25] Notes to Unaudited Consolidated Financial Statements This section provides detailed notes explaining the accounting policies, segment information, and other financial disclosures for the unaudited consolidated statements 1. Organization and Principles of Consolidation This note details the organizational structure, consolidated financial reporting, reportable segments, and principles of consolidation for NW Holdings and NW Natural - NW Holdings and NW Natural consolidate all entities where they have a controlling financial interest[28] - SiEnergy Operating, LLC (SiEnergy Gas Utility), a regulated natural gas distribution utility in Texas, was acquired on January 7, 2025, and its activities are reported in the new SiEnergy Gas Utility segment[27] - NWN Gas Utility segment was previously known as the natural gas distribution (NGD) segment prior to 2025[27] - The business is seasonal, meaning interim results are not necessarily indicative of full-year results[29] 2. Significant Accounting Policies This note updates significant accounting policies, including industry regulation, cash flow, accounts receivable, greenhouse gas allowances, and recent accounting pronouncements - NW Holdings' principal business is a holding company for regulated natural gas and water/wastewater utilities, subject to various state and federal regulatory commissions[32] Regulatory Assets (NW Holdings) | In thousands | June 30, 2025 | June 30, 2024 | December 31, 2024 | | :----------- | :------------ | :------------ | :---------------- | | Total current regulatory assets | $103,914 | $124,102 | $130,116 | | Total non-current regulatory assets | $372,668 | $308,521 | $382,499 | Regulatory Liabilities (NW Holdings) | In thousands | June 30, 2025 | June 30, 2024 | December 31, 2024 | | :----------- | :------------ | :------------ | :---------------- | | Total current regulatory liabilities | $130,944 | $99,663 | $116,180 | | Total non-current regulatory liabilities | $737,194 | $705,929 | $730,117 | - NW Natural's emissions allowances for Washington CCA compliance were $54.5 million as of June 30, 2025, up from $39.8 million in 2024[45] - The SEC's climate-related disclosure rule (March 2024) was voluntarily stayed in April 2024 and the SEC announced it would not defend the rule in March 2025[55] 3. Earnings Per Share This note details the calculation of basic and diluted earnings per share for NW Holdings, including the impact of stock options and anti-dilutive shares NW Holdings Diluted Earnings Per Share Calculation | In thousands, except per share data | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(2,500) | $(2,787) | $85,416 | $61,036 | | Average common shares outstanding - basic | 40,482 | 38,260 | 40,364 | 38,013 | | Average common shares outstanding - diluted | 40,482 | 38,260 | 40,429 | 38,059 | | Basic EPS | $(0.06) | $(0.07) | $2.12 | $1.61 | | Diluted EPS | $(0.06) | $(0.07) | $2.11 | $1.60 | | Anti-dilutive shares | 55 | 36 | 3 | 9 | - Diluted EPS for NW Holdings improved from $(0.07) in Q2 2024 to $(0.06) in Q2 2025, and increased from $1.60 to $2.11 for the six months ended June 30, 2025[57] 4. Segment Information This note details the re-evaluated reportable business segments for NW Holdings and NW Natural, providing summary financial information and key performance measures - NW Holdings now operates in three reportable segments: NWN Gas Utility, SiEnergy Gas Utility (acquired January 7, 2025), and NWN Water Utility[60] - NWN Gas Utility margin is a key financial measure, calculated as operating revenues less cost of gas, environmental remediation expense, and revenue taxes[68] NW Holdings Segment Financial Information (Three Months Ended June 30) | In thousands | NWN Gas Utility 2025 | SiEnergy Gas Utility 2025 | NWN Water Utility 2025 | NW Holdings Other 2025 | NW Holdings Total 2025 | | :----------------------- | :------------------- | :------------------------ | :--------------------- | :--------------------- | :--------------------- | | Operating revenues | $194,289 | $11,502 | $16,294 | $14,109 | $236,194 | | Depreciation | $36,252 | $2,396 | $2,575 | $312 | $41,535 | | Income from operations | $17,667 | $3,589 | $4,296 | $1,659 | $27,211 | | Interest expense, net | $15,009 | $2,321 | $744 | $12,417 | $30,491 | | Income tax expense (benefit) | $385 | $360 | $1,053 | $(2,738) | $(940) | | Capital expenditures | $92,826 | $15,920 | $10,939 | $795 | $120,480 | | In thousands | NWN Gas Utility 2024 | SiEnergy Gas Utility 2024 | NWN Water Utility 2024 | NW Holdings Other 2024 | NW Holdings Total 2024 | | :----------------------- | :------------------- | :------------------------ | :--------------------- | :--------------------- | :--------------------- | | Operating revenues | $194,862 | $0 | $11,526 | $5,326 | $211,714 | | Depreciation | $31,418 | $0 | $2,104 | $240 | $33,762 | | Income from operations | $11,788 | $0 | $1,798 | $2,120 | $15,706 | | Interest expense, net | $15,252 | $0 | $755 | $3,304 | $19,311 | | Income tax expense (benefit) | $(929) | $0 | $379 | $(262) | $(812) | | Capital expenditures | $107,473 | $0 | $9,683 | $(444) | $116,712 | NW Holdings Segment Financial Information (Six Months Ended June 30) | In thousands | NWN Gas Utility 2025 | SiEnergy Gas Utility 2025 | NWN Water Utility 2025 | NW Holdings Other 2025 | NW Holdings Total 2025 | | :----------------------- | :------------------- | :------------------------ | :--------------------- | :--------------------- | :--------------------- | | Operating revenues | $635,365 | $34,168 | $30,203 | $30,742 | $730,478 | | Depreciation | $71,975 | $4,466 | $4,969 | $625 | $82,035 | | Income from operations | $157,299 | $13,202 | $7,339 | $3,725 | $181,565 | | Interest expense, net | $30,486 | $4,578 | $1,536 | $23,286 | $59,886 | | Income tax expense (benefit) | $34,569 | $2,304 | $1,684 | $(4,970) | $33,587 | | Capital expenditures | $171,622 | $26,445 | $18,990 | $5,607 | $222,664 | | In thousands | NWN Gas Utility 2024 | SiEnergy Gas Utility 2024 | NWN Water Utility 2024 | NW Holdings Other 2024 | NW Holdings Total 2024 | | :----------------------- | :------------------- | :------------------------ | :--------------------- | :--------------------- | :--------------------- | | Operating revenues | $612,726 | $0 | $22,221 | $10,237 | $645,184 | | Depreciation | $62,248 | $0 | $4,095 | $517 | $66,860 | | Income from operations | $119,761 | $0 | $2,252 | $3,520 | $125,533 | | Interest expense, net | $31,220 | $0 | $2,235 | $6,387 | $39,842 | | Income tax expense (benefit) | $23,991 | $0 | $120 | $(584) | $23,527 | | Capital expenditures | $178,967 | $0 | $19,770 | $192 | $198,929 | 5. Common Stock This note details NW Holdings' At-The-Market (ATM) equity program, including authorized amount, shares issued, cash proceeds, and remaining equity available - NW Holdings' ATM equity program was authorized for a total of $400 million in aggregate gross sales price, extended through August 2027[74] ATM Equity Program Issuance (2025) | Period | Shares Issued | Cash Proceeds (net of fees) in millions | | :------------------------- | :------------ | :-------------------------------------- | | Three months ended June 30, 2025 | 580,670 | $23.1 | | Six months ended June 30, 2025 | 603,624 | $24.1 | - As of June 30, 2025, NW Holdings had $126.8 million of equity available for issuance under the ATM equity program[75] 6. Revenues This note provides disaggregated revenue information for NW Holdings and NW Natural across segments, detailing sources and revenue recognition accounting policies NW Holdings Disaggregated Revenue (Three Months Ended June 30) | In thousands | NWN Gas Utility 2025 | SiEnergy Gas Utility 2025 | NWN Water Utility 2025 | NW Holdings Other 2025 | NW Holdings Total 2025 | | :------------------------ | :------------------- | :------------------------ | :--------------------- | :--------------------- | :--------------------- | | Natural gas sales | $166,923 | $11,502 | $0 | $701 | $179,126 | | Water and wastewater revenue | $0 | $0 | $16,294 | $0 | $16,294 | | Renewable natural gas sales | $0 | $0 | $0 | $6,890 | $6,890 | | Total operating revenues | $194,289 | $11,502 | $16,294 | $14,109 | $236,194 | | In thousands | NWN Gas Utility 2024 | SiEnergy Gas Utility 2024 | NWN Water Utility 2024 | NW Holdings Other 2024 | NW Holdings Total 2024 | | :------------------------ | :------------------- | :------------------------ | :--------------------- | :--------------------- | :--------------------- | | Natural gas sales | $183,876 | $0 | $0 | $0 | $183,876 | | Water and wastewater revenue | $0 | $0 | $11,526 | $0 | $11,526 | | Renewable natural gas sales | $0 | $0 | $0 | $0 | $0 | | Total operating revenues | $194,861 | $0 | $11,526 | $5,327 | $211,714 | NW Holdings Disaggregated Revenue (Six Months Ended June 30) | In thousands | NWN Gas Utility 2025 | SiEnergy Gas Utility 2025 | NWN Water Utility 2025 | NW Holdings Other 2025 | NW Holdings Total 2025 | | :------------------------ | :------------------- | :------------------------ | :--------------------- | :--------------------- | :--------------------- | | Natural gas sales | $597,172 | $34,168 | $0 | $1,871 | $633,211 | | Water and wastewater revenue | $0 | $0 | $30,203 | $0 | $30,203 | | Renewable natural gas sales | $0 | $0 | $0 | $14,616 | $14,616 | | Total operating revenues | $635,365 | $34,168 | $30,203 | $30,742 | $730,478 | | In thousands | NWN Gas Utility 2024 | SiEnergy Gas Utility 2024 | NWN Water Utility 2024 | NW Holdings Other 2024 | NW Holdings Total 2024 | | :------------------------ | :------------------- | :------------------------ | :--------------------- | :--------------------- | :--------------------- | | Natural gas sales | $594,715 | $0 | $0 | $0 | $594,715 | | Water and wastewater revenue | $0 | $0 | $22,221 | $0 | $22,221 | | Renewable natural gas sales | $0 | $0 | $0 | $0 | $0 | | Total operating revenues | $612,725 | $0 | $22,221 | $10,238 | $645,184 | - NW Holdings' renewable natural gas sales generated $6.890 million in Q2 2025 and $14.616 million for the six months ended June 30, 2025, with no comparable revenue in 2024[76][77] - Unrecognized revenue for fixed components of gas storage and asset management was approximately $126.9 million as of June 30, 2025, with $13.7 million expected to be recognized in the remainder of 2025[95] 7. Leases This note details NW Holdings' and NW Natural's lease activities, including lease revenue, lease expense, future minimum lease payments, and related cash flow information - Leasing revenue primarily comes from NW Natural's North Mist Storage contract with PGE, classified as a sales-type lease with regulatory accounting deferral[98] Total Lease Revenue (NW Natural) | In thousands | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating leases | $21 | $20 | $42 | $42 | | Sales-type leases | $4,282 | $4,103 | $8,567 | $8,207 | | Total lease revenue | $4,303 | $4,123 | $8,609 | $8,249 | Future Minimum Lease Payments (NW Holdings) as of June 30, 2025 | In thousands | Operating | Sales-Type | Total | | :------------------ | :-------- | :--------- | :------ | | Remainder of 2025 | $243 | $7,605 | $7,848 | | 2026 | $99 | $14,901 | $15,000 | | 2027 | $84 | $14,500 | $14,584 | | 2028 | $58 | $14,004 | $14,062 | | 2029 | $59 | $13,594 | $13,653 | | Thereafter | $741 | $194,722 | $195,463| | Total minimum lease payments | $1,284 | $259,326 | $260,610| - NW Holdings assumed eight operating leases with the SiEnergy acquisition, increasing operating lease right-of-use assets and liabilities by $2.3 million[105] 8. Stock-Based Compensation This note describes NW Holdings' stock-based compensation plans, including LTIP and ESPP, detailing performance share awards, RSUs, and unrecognized compensation costs - For the 2023-2025 LTIP, 43,978 performance-based shares were granted, and compensation expense recognition began[112][113] - No expense was recognized for the 2024-2026 and 2025-2027 LTIP awards as of June 30, 2025, due to variable performance factors not yet approved[114][115] - 67,149 RSUs were granted during the six months ended June 30, 2025, with a weighted-average grant date fair value of $41.63 per share[119] - As of June 30, 2025, there was $0.5 million of unrecognized compensation for performance shares (expected through 2027) and $4.7 million for RSUs (expected through 2028)[118][120] 9. Debt This note provides a comprehensive overview of NW Holdings' and NW Natural's short-term and long-term debt, including recent issuances, credit facilities, and fair value estimates Short-Term Debt Outstanding (in millions) | In millions | June 30, 2025 | June 30, 2024 | December 31, 2024 | | :-------------------------- | :------------ | :------------ | :---------------- | | NW Holdings commercial paper | $157.4 | $0 | $0 | | NW Holdings credit agreement | $0 | $79.0 | $33.6 | | NW Natural commercial paper | $0 | $0 | $136.5 | | Total short-term debt | $157.4 | $79.0 | $170.1 | - NW Holdings initiated a commercial paper program on March 21, 2025, with $157.4 million outstanding at June 30, 2025[122] - The $273.0 million Acquisition Bridge Facility, used to finance the SiEnergy acquisition, was repaid in full in March 2025[124] Long-Term Debt Outstanding (in millions) | In millions | June 30, 2025 | June 30, 2024 | December 31, 2024 | | :-------------------------- | :------------ | :------------ | :---------------- | | NW Natural first mortgage bonds | $1,374.7 | $1,374.7 | $1,374.7 | | SiEnergy term loan | $148.1 | $0 | $0 | | NW Holdings unsecured senior bonds | $285.0 | $150.0 | $285.0 | | NW Holdings junior subordinated debentures | $325.0 | $0 | $0 | | Total long-term debt (gross) | $2,242.3 | $1,586.0 | $1,720.8 | - NW Holdings issued $325.0 million in Junior Subordinated Debentures in March 2025, due September 15, 2055, with an initial annual interest rate of 7.0%[132] 10. Pension and Other Postretirement Benefit Costs This note details NW Natural's net periodic benefit cost for pension and postretirement plans, including components, AOCL changes, and employer contributions Net Periodic Benefit Cost (Credit) for Pension and Other Postretirement Benefit Plans (in thousands) | In thousands | Three Months Ended June 30, 2025 (Pension) | Three Months Ended June 30, 2024 (Pension) | Three Months Ended June 30, 2025 (Other Postretirement) | Three Months Ended June 30, 2024 (Other Postretirement) | | :------------------------ | :--------------------------------------- | :--------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Service cost | $886 | $979 | $28 | $24 | | Interest cost | $5,410 | $5,159 | $289 | $247 | | Expected return on plan assets | $(5,433) | $(5,936) | $0 | $0 | | Amortization of net actuarial loss | $2,445 | $1,496 | $21 | $0 | | Net periodic benefit cost (credit) | $3,308 | $1,698 | $338 | $271 | | In thousands | Six Months Ended June 30, 2025 (Pension) | Six Months Ended June 30, 2024 (Pension) | Six Months Ended June 30, 2025 (Other Postretirement) | Six Months Ended June 30, 2024 (Other Postretirement) | | :------------------------ | :--------------------------------------- | :--------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Service cost | $1,771 | $1,959 | $55 | $49 | | Interest cost | $10,820 | $10,319 | $577 | $495 | | Expected return on plan assets | $(10,866) | $(11,871) | $0 | $0 | | Amortization of net actuarial loss | $4,889 | $2,991 | $41 | $0 | | Net periodic benefit cost (credit) | $6,614 | $3,398 | $673 | $544 | - NW Natural made $5.5 million in cash contributions to its qualified defined benefit pension plans during the six months ended June 30, 2025, and expects to make an additional $5.8 million in 2025[140] - Contributions to NW Natural's Retirement K Savings Plan (defined contribution) totaled $6.9 million for the six months ended June 30, 2025, up from $5.8 million in the prior year[141] 11. Income Tax This note explains interim income tax expense calculation, variations from the federal statutory rate, and confirms the completion of the 2023 IRS CAP examination Effective Income Tax Rate Reconciliation (Three Months Ended June 30) | In thousands | NW Holdings 2025 | NW Holdings 2024 | NW Natural 2025 | NW Natural 2024 | | :---------------------------- | :--------------- | :--------------- | :-------------- | :-------------- | | Income tax at statutory rate (federal) | $(722) | $(756) | $1,378 | $(80) | | State income tax | $(210) | $(345) | $306 | $(167) | | Differences required to be flowed-through by regulatory commissions | $8 | $107 | $9 | $108 | | Other, net | $(16) | $182 | $(55) | $183 | | Total (benefit) expense for income taxes | $(940) | $(812) | $1,638 | $44 | | Effective income tax rate | 27.3% | 22.6% | 25.0% | (11.6)% | Effective Income Tax Rate Reconciliation (Six Months Ended June 30) | In thousands | NW Holdings 2025 | NW Holdings 2024 | NW Natural 2025 | NW Natural 2024 | | :---------------------------- | :--------------- | :--------------- | :-------------- | :-------------- | | Income tax at statutory rate (federal) | $24,991 | $17,758 | $27,986 | $19,499 | | State income tax | $9,770 | $7,232 | $10,508 | $7,682 | | Differences required to be flowed-through by regulatory commissions | $(1,660) | $(1,472) | $(1,659) | $(1,472) | | Other, net | $486 | $9 | $467 | $8 | | Total provision for income taxes | $33,587 | $23,527 | $37,302 | $25,717 | | Effective income tax rate | 28.2% | 27.8% | 28.0% | 27.7% | - The IRS CAP examination for the 2023 tax year was completed in Q1 2025 with no material changes, and the 2024 and 2025 tax years are currently subject to examination[146] 12. Property, Plant, and Equipment This note presents major classifications of property, plant, and equipment (PP&E) and accumulated depreciation for both NW Holdings and NW Natural Property, Plant, and Equipment (NW Holdings, in thousands) | In thousands | June 30, 2025 | June 30, 2024 | December 31, 2024 | | :-------------------------------- | :------------ | :------------ | :---------------- | | Plant in service | $5,204,265 | $4,568,912 | $4,769,565 | | Construction work in progress | $211,432 | $195,681 | $149,354 | | Less: Accumulated depreciation | $1,269,274 | $1,234,148 | $1,246,592 | | Total property, plant, and equipment, net | $4,146,423 | $3,530,445 | $3,672,327 | | Capital expenditures in accrued liabilities | $40,588 | $28,370 | $26,610 | Property, Plant, and Equipment (NW Natural, in thousands) | In thousands | June 30, 2025 | June 30, 2024 | December 31, 2024 | | :-------------------------------- | :------------ | :------------ | :---------------- | | Plant in service | $4,677,407 | $4,399,127 | $4,577,955 | | Construction work in progress | $183,257 | $181,876 | $128,764 | | Less: Accumulated depreciation | $1,236,148 | $1,213,169 | $1,222,413 | | Total property, plant, and equipment, net | $3,624,516 | $3,367,834 | $3,484,306 | | Capital expenditures in accrued liabilities | $28,586 | $24,586 | $24,625 | 13. Investments This note summarizes NW Holdings' and NW Natural's investments, including life insurance policies, gas reserves, and equity method investments in affiliates Other Investments (NW Holdings, in thousands) | In thousands | June 30, 2025 | June 30, 2024 | December 31, 2024 | | :---------------------------- | :------------ | :------------ | :---------------- | | Investments in life insurance policies | $46,221 | $46,295 | $45,772 | | Investments in gas reserves, non-current | $16,803 | $19,570 | $18,166 | | Investment in unconsolidated affiliates | $19,199 | $17,930 | $18,298 | | Total other investments | $82,223 | $83,795 | $82,236 | - NW Natural has invested $188 million in the Jonah Field gas reserves program as of June 30, 2025[150] - NWN Water increased its ownership stake in Avion Water Company, Inc. to 47.9% as of February 2025, with a carrying value of the equity method investment $10.1 million higher than the underlying equity in net assets[151] 14. Business Combinations This note details NW Holdings' business combinations in 2025 and 2024, including acquisitions of SiEnergy and Pines Holdings, recognized goodwill, and pro forma financial results - On January 7, 2025, NW Holdings acquired SiEnergy Operating, LLC for $271.1 million in cash and assumed $156.1 million in debt, recognizing $171.0 million in preliminary goodwill[152][154][155] - On June 2, 2025, SiEnergy acquired Hughes Gas Resources, Inc. (Pines Holdings, Inc.) for $60.8 million in cash, recognizing $16.2 million in preliminary goodwill[156][158][159] - Unaudited pro forma operating revenues for NW Holdings, as if SiEnergy and Pines acquisitions occurred on January 1, 2024, would have been $222.308 million for Q2 2024 and $677.609 million for YTD June 30, 2024[159] - Total goodwill from all acquisitions amounted to $370.9 million as of June 30, 2025, allocated to gas utility ($187.2 million for SiEnergy) and water/wastewater ($183.7 million for NWN Water) segments[169] 15. Derivative Instruments This note details NW Natural's use of financial derivative contracts to hedge natural gas, interest rates, and foreign currency, including notional amounts, gains/losses, and credit risk management - NW Natural uses financial derivatives (swaps and forward contracts) to manage price variability of natural gas, interest rates, and foreign currency[171] Notional Amounts of Open Derivative Positions (NW Natural, in thousands) | In thousands | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Natural gas (therms) - Financial | 807,000 | 771,110 | | Natural gas (therms) - Physical | 811,360 | 560,900 | | Foreign exchange (dollars) | $10,155 | $10,332 | - NW Natural realized net losses of $11.6 million in Q2 2025 and $57.8 million for the six months ended June 30, 2025, from natural gas financial derivative settlements[178] - NWN Water's interest rate swap agreement effectively converted $55.0 million of variable-rate debt to a fixed rate of 3.8%, expiring in June 2026[184] 16. Commitments and Contingencies This note outlines NWN Renewables' commitments for renewable natural gas (RNG) supply agreements with EDL, including payment milestones, purchase estimates, and NW Holdings' guarantees - Ohio Renewables (a subsidiary of NWN Renewables) secured RNG supply from two EDL production facilities, with payments of $26.0 million and $25.4 million made upon facility completion in September and December 2024, respectively[186][187] - Estimated RNG purchases from EDL facilities are approximately $18.9 million in 2025 and 2026, increasing to $532.6 million thereafter over a 20-year period[188] - NW Holdings unconditionally guarantees Ohio Renewables' obligations under purchase and sale agreements, with a cap of $44.226 million for 2025 and $21.113 million for 2026 for certain sale agreements[189][191][192] 17. Environmental Matters This note details NW Natural's environmental remediation liabilities for various sites, recovery mechanisms, and updates on related legal proceedings - NW Natural has recovery mechanisms in Oregon (SRRM) and Washington (ECRM) to collect 96.7% and 3.3% respectively of prudently incurred environmental remediation costs[193] Environmental Site Liabilities (NW Natural, in thousands) | In thousands | Current Liabilities June 30, 2025 | Non-Current Liabilities June 30, 2025 | | :------------------------ | :-------------------------------- | :------------------------------------ | | Portland Harbor site: | | | | Gasco/Siltronic Sediments | $10,034 | $43,776 | | Other Portland Harbor | $3,327 | $11,043 | | Gasco/Siltronic Upland site | $18,390 | $62,666 | | Front Street site | $831 | $279 | | Oregon Steel Mills | $0 | $179 | | Total | $32,582 | $117,943 | - NW Natural has recorded a liability of $53.8 million for the Gasco sediment clean-up, representing the low end of the estimated range of $53.8 million to $350 million[204] - NW Natural is a defendant in a climate change lawsuit filed by Multnomah County (October 2024) and a class-action lawsuit regarding its Smart Energy program (October 2024)[221][222] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management assesses NW Holdings' and NW Natural's financial condition and results, covering key highlights, segment performance, economic impacts, regulatory matters, cash flows, capital structure, and liquidity NW Holdings Key Financial Highlights (QTD and YTD June 30) | In thousands, except per share data | QTD 2025 Amount | QTD 2024 Amount | QTD Change | YTD 2025 Amount | YTD 2024 Amount | YTD Change | | :---------------------------------- | :-------------- | :-------------- | :--------- | :-------------- | :-------------- | :--------- | | Operating income | $27,211 | $15,706 | $11,505 | $181,565 | $125,533 | $56,032 | | Net income (loss) | $(2,500) | $(2,787) | $287 | $85,416 | $61,036 | $24,380 | | Diluted EPS | $(0.06) | $(0.07) | $0.01 | $2.11 | $1.60 | $0.51 | - NW Holdings' QTD operating income increased by $11.5 million, and net loss decreased by $0.3 million, primarily due to a $16.9 million increase in NWN Gas Utility margin and an $8.2 million increase from SiEnergy acquisition, partially offset by higher O&M, interest, and depreciation expenses[235][237] - NW Holdings' YTD operating income increased by $56.0 million, and net income increased by $24.4 million, driven by a $55.6 million increase in NWN Gas Utility margin and a $21.7 million increase from SiEnergy, partially offset by higher O&M, interest, and depreciation expenses[237][238] NWN Gas Utility Segment Results (QTD and YTD June 30) | In thousands, except per share data | QTD 2025 | QTD 2024 | QTD Change | YTD 2025 | YTD 2024 | YTD Change | | :---------------------------------- | :------- | :------- | :--------- | :------- | :------- | :--------- | | Margin | $127,222 | $110,309 | $16,913 | $384,044 | $328,459 | $55,585 | | Net income (loss) | $1,529 | $(2,987) | $4,516 | $88,695 | $62,728 | $25,967 | | EPS | $0.04 | $(0.08) | $0.12 | $2.19 | $1.65 | $0.54 | - SiEnergy Gas Utility, acquired January 7, 2025, generated $8.161 million in margin and $1.014 million in net income for Q2 2025, and $21.745 million in margin and $6.519 million in net income for YTD June 30, 2025[244] - NWN Water Utility's QTD operating revenues increased by $4.8 million, and net income increased by $1.8 million, driven by new rates in Arizona, acquisitions, and organic customer growth[247][248] - NW Holdings Other segment reported a net loss of $(7.876) million in Q2 2025, an increase of $7.0 million from Q2 2024, primarily due to higher interest expense from new debt issuances and increased cost of gas from RNG purchases[249][252] - The 2025 Oregon Rate Case filing requested a $59.4 million annual revenue requirement increase, with a stipulation providing for a $21.3 million increase based on a 9.5% ROE and 7.12% cost of capital, expected to be effective October 31, 2025[264][266][267][271] - Washington's I-2066 ballot initiative, prohibiting restrictions on natural gas access, was passed but recently declared invalid by a King County court, with an appeal pending[305] - NW Holdings' consolidated capital structure (excluding short-term debt) as of June 30, 2025, was 39.6% common equity and 60.4% long-term debt, compared to 46.1% and 53.9% respectively at June 30, 2024[330] - NW Holdings believes its liquidity is sufficient for at least the next 12 months, supported by cash reserves, dividends from subsidiaries, credit facilities, and access to capital markets[339] Item 3. Quantitative and Qualitative Disclosures About Market Risk NW Holdings and NW Natural are exposed to various market risks, including commodity, interest rate, foreign currency, credit, and weather risks, with no material changes reported - NW Holdings and NW Natural are exposed to commodity supply risk, commodity price risk, interest rate risk, foreign currency risk, credit risk, and weather risk[392] - No material changes have occurred related to disclosures about market risk for the six months ended June 30, 2025[392] Item 4. Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2025, with SiEnergy's integration potentially leading to control changes and its exclusion from the 2025 annual assessment - Disclosure controls and procedures were effective as of June 30, 2025[393] - The acquisition of SiEnergy on January 7, 2025, is in the process of integrating internal controls, which may result in additions or changes[396] - SiEnergy's operations will be excluded from the scope of the annual assessment of internal control over financial reporting for the year ended December 31, 2025[397] PART II. OTHER INFORMATION Item 1. Legal Proceedings Legal proceedings are primarily disclosed in Note 17 and the 2024 Form 10-K, with other litigation deemed nonmaterial or ordinary course - Legal proceedings are primarily disclosed in Note 17 to the financial statements and Part I, Item 3 of the 2024 Form 10-K[399] - Other litigation is considered nonmaterial or occurs in the ordinary course of business[399] Item 1A. Risk Factors Readers are directed to the 2024 Form 10-K for a comprehensive discussion of risk factors that could materially affect the company's business and financial results - Readers should refer to Part I, Item 1A, 'Risk Factors' in the 2024 Form 10-K for a detailed discussion of factors that could materially affect the business[400] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on issuer purchases of NW Holdings' equity securities, noting no open market purchases in Q2 2025 and a new share repurchase program authorization Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share in dollars | | :---------------- | :------------------------------- | :-------------------------------------- | | 04/01/25-04/30/25 | — | — | | 05/01/25-05/31/25 | — | — | | 06/01/25-06/30/25 | — | — | | Total | — | — | - No shares of common stock were purchased on the open market during Q2 2025 for the Dividend Reinvestment and Direct Stock Purchase Plan or share-based compensation programs[403] - A new share repurchase program was authorized on May 23, 2024, allowing for the repurchase of up to 5 million shares or an amount not to exceed $150 million[403] Item 5. Other Information No officers or directors of NW Holdings adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - No officers or directors adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[404] Item 6. Exhibits This section provides an index of exhibits filed with the Quarterly Report on Form 10-Q, including bylaws, compensation plans, certifications, and Inline XBRL financial data - The exhibit index includes Amended and Restated Bylaws for both Northwest Natural Holding Company and Northwest Natural Gas Company[407] - Certifications from Principal Executive and Financial Officers pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 are included[407] - Financial statements and related notes are provided in Inline Extensible Business Reporting Language (Inline XBRL) format[407] Signatures This section contains the official signatures of the Principal Accounting Officer for NW Natural Gas Company and NW Natural Holding Company, certifying the report filing - The report is signed by Brody J. Wilson, Principal Accounting Officer, Vice President, Treasurer, Chief Accounting Officer and Controller for both Northwest Natural Gas Company and Northwest Natural Holding Company[411] - The filing date for the report is August 5, 2025[411]