Northwest Natural Holding Company

Hello and welcome to the NW Natural Holdings Company fourth quarter 2021 earnings call. My name is Lauren and I will be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing star followed by one on your telephone keypad. I will now hand you over to your host, Nikki Sparley, to begin. Nikki, please go ahead.

Thank you, Lauren. Good morning and welcome to our fourth quarter 2021 earnings call. As a reminder, some things that will be said this morning contain forward-looking statements. They are based on management's assumptions, which may or may not occur. For a complete list of cautionary statements, refer to the language at the end of our press release. We expect to file our 10-K later today. This teleconference will be recorded and will be available on our website following the call. Please note these calls are designed for the financial community. If you are an investor and have additional questions after the call, please contact me directly at 503-721-2530. News media may contact David Roy at 503-610-7157. Speaking this morning are David Anderson, President and Chief Executive Officer, Frank Burkhartsmeyer, Senior Vice President and Chief Financial Officer, and Kim Heiding, Senior Vice President, Operations, and Chief Marketing Officer. David, Frank, and Kim have prepared remarks and then will be available along with other members of our executive team to answer your questions. With that, I will turn it over to David.

Well, thanks, Nikki, and good morning, everybody, and welcome. 2021 was a year of success for our company, and we continue to build on our fundamental strengths as our gas and water utilities grew, and we launched a competitive renewable natural gas business. For 2021, we reported net income of $2.56 per share, which is an 11% increase compared to net income from continuing operations of $2.30 per share in 2020. New rates in Oregon drove results at the natural gas utility along with solid customer growth, and we saw higher revenues at our interstate stores business. This financial growth is a product of multi-year efforts, a keen focus on our long-term plan, and proof that consistent progress yields positive results. We also see positive momentum in our local Portland metro area economy. Unemployment rates in this area declined to 3.9% in December 2021 compared to 7.3% a year ago. And single-family housing activity remains very strong. Home sales were up 10% during 2021 compared to 2020, with the average sales price up 16%. and new single-family permits issued were up 12% with multifamily permits up 37% in Oregon this past year compared to the prior period. Construction and development remain robust in our region. This translated into over 11,000 new customers connecting to our gas system during 2021 for a growth rate of 1.5%. Our water and wastewater utilities also continue to grow. Strong residential housing construction primarily in Idaho and Texas, translated into a 3% organic customer growth rate. We also closed four acquisitions in 2021. Most notably, we acquired a stake in the largest privately held water company here in Oregon. The combination of organic growth and acquisitions increased our water utility connections by nearly 30% last year. Now a few comments on the gas utility. On November 1st, new rates for gas utility customers went into effect for the current heating season. That included the impact of the general rate case we concluded in the state of Washington. Despite these increases, our customers continue to pay nearly 30% less for their natural gas today than they did 15 years ago. And this reflects a decline in commodity costs, energy efficiency efforts, and prudent expense management, along with smart investments in gas storage assets, that continue to reap benefits for customers. The result, natural gas continues to maintain its competitive position as a fuel of choice. Adding to its performance benefits, natural gas enjoys up to a 60% price advantage over an electric or oil furnace for the typical home we serve. And our customers are central to our success at Northwest Natural. That's why I'm thrilled Northwest Natural ranks second in the West among large natural gas utilities in the J.D. Powers Residential Customer Satisfaction Study. This continues a nearly 20-year legacy of outstanding results. I'm proud of all of our employees who make this exceptional service happen every day. And as you know, growth is not always linear, and in certain years, the focus will be on initiatives that set stage for future growth. 2022 for us is such a year. To that end, 2021 and 2022 include robust CapEx plans related to crucial spend for safety and reliability, technology system upgrades, and cybersecurity investments. To recover these long-planned project costs, we took the necessary step at the end of 2021 and filed an Oregon general rate case. The request includes a revenue requirement increase of $73.5 million based on a 50-50 cap structure an ROE of 9.5% and a cost of capital of about 6.7%. We filed an increase in average rate base of $294 million since the last rate case. The Oregon Commission and stakeholders have 10 months to review the case, and we expect new rates to be effective November the 1st. At the same time, we continue to make progress under the landmark Oregon Senate Bill 98 legislation, which supports renewable energy procurement, and investment by natural gas utilities. I'm happy to report we signed an agreement with Arkea to procure RNG on behalf of our customers in the fourth quarter of 2021. Northwest Natural also recently completed commissioning the first of four RNG projects with Tyson Foods in Biocarbin. Construction on our second facility began this month with commissioning slated for early 2023. To date, we've signed agreements with options to purchase or develop the RNG on behalf of our customers, totaling about 3% of Northwest Natural's current annual sales volume in Oregon. I am very proud of the progress we've made in less than two years. To put it in perspective, today, wind and solar account for about 11% of our total nation's electricity supply after decades of investment. We intend to continue to take these critical steps to source more and more of our supply for renewables, knowing that our customers want a decarbonized system and a clean energy future. A new survey conducted by an independent leading opinion research firm showed that 77% of Oregon and Southwest Washington voters want access to all forms of energy, renewable energy, hydro, wind, solar, and renewable natural gas, for a balanced low-carbon future. In fact, 78% of voters value the natural gas system for its critical role in lowering emissions with both affordability and reliability and, of course, resiliency as top priorities. And nearly 80% of voters support local government's efforts to encourage the use of natural gas. Creating value across all of our businesses allowed our board of directors to increase our dividend for the 66th consecutive year. Our annual indicated dividend rate is now $1.93 per share. We are very proud to provide a return to our shareholders and be one of only three companies on the NYSE with this record. So with that, let me turn it over to Frank to give a little bit more details on the quarter and the year results.