Northwest Natural Holding Company

Thank you all for standing by for the Northwest Natural Holdings Companies first quarter 2025 earnings call. Today's call will be starting in around four minutes time. Thank you for standing by and just a quick reminder if you wish to ask a question to please press star one and if you do wish to remove it you can press star two. Thank you. Thank you all for attending. I would like to welcome you all to today's call the Northwest Natural Holdings Companies Q1 2025 earnings call. My name is Breaker and I will be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass you over to our host Nikki Sparley, head of investor relations to begin. Thank you. You may proceed.

Thank you. Good morning and welcome to our first quarter 2025 earnings call. A presentation for today's call is available on our investor relations website at IRNWNaturalHoldings.com and following this call a recording will be available on our website. Turning to slide two 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. Additionally our risk factors are provided in our 10Q and 10K filings. We will also refer to certain non-GAAP financial measures. For additional disclosures about these non-GAAP measures including reconciliations to comparable GAAP measures please see the slides that accompany today's call which are available on the investor relations page of our website. Please note our guidance assumes continued customer growth, average weather conditions, and no significant changes in prevailing regulatory policies mechanisms or outcomes or significant changes in laws legislation or regulations. For context our segment reporting includes our Northwest Natural Gas Utility which was previously referred to as the Northwest Natural Gas Distribution or NGD segment. Beginning with first quarter 2025 results we are providing information on two additional segments our Sea Energy Gas Utility segment and our Northwest Natural Water Utility segment. Finally the other category includes our Interstate Storage Services and Asset Management Services, Northwest Natural Renewables, and Holding Company Expenses. We expect to file our 10Q later today. 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 -721-2530. News media may contact David Roy at -610-7157. Moving to slide three. With us today are Justin Pelferman, President and Chief Executive Officer, and Ray Kusuba, Senior Vice President and Chief Financial Officer. Justin will provide an update on each of our businesses and Ray will walk through financial results, liquidity and financing, and guidance. After Justin and Ray's prepared remarks they will be available along with other members of our executive team to answer your questions. With that I will turn it over to Justin on slide four.

Thanks Nikki. Good morning and welcome everyone. It is an honor to be speaking to you this morning and I am pleased to report that Northwest Natural Holdings had a solid first quarter. Before getting into the business highlights I'd like to take a moment to thank David Anderson for his over 20 years of service at Northwest Natural. Our employees, customers, and communities have benefited greatly from David's dedication. Under his leadership our company has expanded into new areas and evolved significantly. David led initiatives that improved employee and customer safety, maintained low customer rates, and extended our tradition of excellent customer service and community engagement. We wish David all the best in retirement. He has left the company well positioned for future growth and importantly with an excellent team that is focused on delivering long-term value to our shareholders. Part of David's legacy is the company's long-standing commitment to leadership and business integrity. I am proud to say that Northwest Natural Holdings was named one of the 2025 world's most ethical companies by Ethisphere for the fourth year running. Turning now to Q1 results. We have executed well across all of our businesses. Our financial results are on track for the year and in line with our full year guidance issued in February. We reported adjusted net income of $2.28 per share in the first quarter of 2025 compared to net income of $1.69 per share for the same period last year. Our combined utility customer growth rate was 9.6 percent for the 12 months ended March 31st, 2025. The main driver was the acquisition of Sea Energy which added about 73,000 gas meters in Texas. Northwest Natural Water is contributing strong incremental meter growth as well posting a 5.9 percent increase. Our financial results reflect the strength of our business plan and collective utilities. Moving to slide five. Our key initiatives for 2025 are underway and we are well positioned to meet our annual goals. Let me provide an update on each of our businesses. Turning to our Northwest Natural Gas Utility. Our overall earnings per share improvement year over year is predominantly driven by the Northwest Natural Gas Utility which benefited from new rates that went into effect on November 1st, 2024. After careful consideration at the end of December 2024, Northwest Natural filed an Oregon general rate case to recover our critical investments in gas infrastructure and expenses related to providing safe and reliable service to customers. The request included a revenue increase of $59.4 million or 5.8 percent over current rates. The case is made up of a few key components. First, it includes an increase in average rate base of $204 million since the last rate case. This is mainly related to investments in our critical infrastructure including capital expenditures to ensure reliability during the coldest winter days at our missed storage facility. Second, the case includes a capital structure of 52 percent equity and 48 percent long-term debt, a return on equity of 10.4 percent and a cost of capital of approximately 7.7 percent. Finally, it includes an updated depreciation study. Oregon rate cases are adjudicated over a 10-month period so we are still in the early months of the process. Right now we are working through the process of applying testimony to staff and interveners with settlement conferences scheduled in June. We look forward to continued collaboration with parties and expect new rates to be effective starting November 1st. I want to emphasize that we carefully consider this rate case filing and the effect on customer bills and broader affordability concerns. It is important to note that today our Northwest Natural gas customers are paying less for their natural service than they did 20 years ago. This past winter I'm pleased to report that once again we were able to provide credits on our Oregon customers bills as a result of savings we generated from efficient gas supply management. Over the last 20 years we have been able to provide more than $280 million in bill credits to Northwest Natural gas customers. Moving to our sea energy gas utility in Texas, we were thrilled to close the sea energy acquisition on January 7th and add this rapidly growing business to our portfolio. Out of the gate, sea energy has produced strong customer growth in line with our expectations and is hitting its meter set targets. We believe sea energy is on track to meet its operational and financial targets for the year. Further supporting sea energy, we recently signed an agreement to purchase Hughes gas resources from EPCOR for $60 million. Hughes is expected to have approximately $46 million of rate base at the end of 2025 and is a logical bolt-on acquisition for us in Texas. With a similar business model as Sea Energy, Hughes has grown organically by providing infrastructure to residential and commercial developments in the high growth areas surrounding Houston. Sea Energy's overlapping footprint with Hughes allows for operational synergies in addition to incremental future customer growth. I am excited about our continued expansion in the Texas market. We expect the transaction to close in the second quarter of this year and expect that it will be accretive in 2026. On a combined basis, Sea Energy and Hughes served approximately 80,000 customers at March 31st, 2025 with an impressive contracted customer backlog of over 200,000. Turning now to Northwest Natural Water. Collectively, our water and utility customer base grew .9% over the last 12 months, including three acquisitions. While we continue to manage a robust acquisition pipeline, we are staying focused and disciplined as we seek the right opportunities to create value. In 2025, we expect to refresh rates at multiple water utilities, including in Idaho, Washington, and Oregon. These requests are primarily related to recovery of critical infrastructure investments as we continue to see the impact of the pandemic on our water and utility systems. We expect to invest approximately $60 million in our water utilities to replace end of life infrastructure, improve our water and wastewater treatment facilities, and support continued growth in our communities. We are enthusiastic about the long-term earnings power of Northwest Natural Water and believe they are on track for the year. Now a brief update on Northwest Natural Renewables. Both of our renewable natural gas projects with EDL began operations last year. Production levels have been meeting our expectations and operations are running smoothly. These facilities and our related offtake contracts provided a full quarter of steady cash flows and earnings during the first quarter of 2025, and we expect this to continue going forward. I'd like to turn to slide six and Northwest Natural's gas system today is perhaps more essential to the region than ever, and we expect that to continue given the heightened focus on reliability and affordability. Our system delivers about 50% more energy than any other Oregon utility, gas or electric, over the course of a year and reliably serves peak heating loads throughout the winter. The fact that we are delivering more energy than any other utility is even more remarkable when you consider that electric utilities in Oregon consume more natural gas for power generation than all the state's gas utilities combined. And as you can see from this chart of IEA data, natural gas usage for power production has been increasing significantly in recent years as they shift away from coal and bring on more intermittent renewables. With these grid dynamics as a backdrop, recent analysis shows under a variety of operating conditions, gas furnaces are not only more cost effective for customers, but they are also resulting in lower emissions over electric heat pumps for most of the people we serve. These findings are consistent with analysis recently conducted for other regions, which evaluated marginal emissions for the grid and the massive electric buildout that would be required to serve gas heating loads. This clearly highlights the value and efficiency of our gas distribution and storage infrastructure in the Northwest. And this is why we will continue to work closely with other utilities, with policymakers and with stakeholders to emphasize these important facts in support of energy policy that is focused on the most reliable and cost effective ways to meet our climate goals. In conclusion, I am happy to report that all of our businesses are in a strong financial position and we are well poised for future growth. With that, let me turn it over to Ray to cover the financials in more detail.