Northwest Natural pany(NWN) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For the full year 2025, the company reported record-adjusted earnings per share of $2.93, compared to $2.33 per share for 2024, reflecting significant earnings growth driven by new rates in Oregon and strong organic customer growth [19][20] - The company generated approximately $270 million in cash provided by operating activities, about 35% above 2024 [20] - The company invested a record $467 million in systems related to safety, reliability, and technology, with 75% allocated to Northwest Natural Gas [21] Business Line Data and Key Metrics Changes - The Northwest Natural Gas utility segment saw adjusted earnings per share improve by $0.45, primarily due to new rates in Oregon [19] - SiEnergy contributed $0.33 per share for 2025, exceeding expectations, with an 18% organic customer growth rate [19][12] - The water segment contributed $0.35 per share, driven by new rates and additional revenues from an acquisition, marking a significant increase in earnings [20][15] Market Data and Key Metrics Changes - The company expects to achieve consolidated organic customer growth of 2%-3% and rate-based growth of 6%-8% through 2030, supported by a planned capital expenditure of $2.6 billion-$2.9 billion [16][23] - SiEnergy is projected to generate between 10%-15% of consolidated earnings per share in 2026, with expectations of 15%-20% customer growth each year through 2030 [14][22] Company Strategy and Development Direction - The company is focused on disciplined execution and delivering consistent, growing earnings and returns for shareholders, with a long-term EPS growth target of 4%-6% [7][22] - The MX3 Gas Storage Expansion project is expected to enhance regional reliability and capacity, potentially increasing long-term earnings growth targets to 5%-7% once approved [6][12] - The company is diversifying into the water utility business and expanding into multiple jurisdictions, including Texas, to enhance long-term growth prospects [4][5] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning for future growth, emphasizing the importance of natural gas in meeting energy demand [5][10] - The company anticipates another record year for capital investment and earnings in 2026, with a focus on returning capital to shareholders [17][24] - Management noted that the transition to multi-year rate cases will provide greater clarity and predictability for customers and utilities [8][9] Other Important Information - The company has a strong balance sheet with significant liquidity of approximately $590 million as of December 31, 2025 [21] - The dividend payout ratio is expected to moderate to 55%-65% over the next several years, with a commitment to returning capital to shareholders [24] Q&A Session Summary Question: Where does the company see itself within the existing growth range, and how does the MX3 project impact this? - Management is comfortable with the 4%-6% long-term EPS growth guidance without MX3, expecting to increase it to 5%-7% once the project achieves notice to proceed [27] Question: When is the expected notice to proceed for the MX3 project, and are there any potential delays? - The company expects notice to proceed by the end of next year, with several milestones already achieved [28] Question: How is SiEnergy performing relative to expectations, and is a rate case being considered? - SiEnergy has exceeded expectations with strong growth and record additions to its backlog, and a rate case is being contemplated [29][30] Question: What are the next steps for the water segment in terms of expansion and acquisitions? - The company is focused on both organic growth and opportunistic acquisitions, particularly in Texas, where growth has been strong [34][35] Question: Have recent changes in mortgage rates affected housing development and customer growth in Texas? - Management noted a recent uptick in housing activity due to lower mortgage rates, which is seen as a positive for long-term growth in Texas [36][37]