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Northwest Natural pany(NWN) - 2023 Q3 - Earnings Call Transcript

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