Northwest Natural Holding Company

Hello and welcome to the Northwest Natural Holding Company Q4 2025 earnings call. My name is Harry and I'll be your operator. All lines will be in listen-only mode during management's prepared remarks, after which we will open the call for Q&A. During the presentation, you can enter the queue for questions by pressing star followed by one on your telephone keypad. If you change your mind and would like to exit the queue, please press star followed by two. I will now hand over to Nikki Spiley, Director of Investor Relations. Please go ahead.

Thank you. Good morning and welcome to our fourth quarter and full year 2025 earnings call. In addition to the press release, a supplemental presentation is available on our investor relations website at irnorthwestnaturalholdings.com. And following this call, a recording will also be available on our website. 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 measures, including reconciliations to comparable gap 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 assumed outcomes or significant changes in local, state, or federal laws, legislation, or regulations. We expect to file our 10-K later today. With us today are Justin Palfreyman, President and Chief Executive Officer. Kasuba, Senior Vice President and Chief Financial Officer. Justin will provide highlights from 2025 and a look forward, and Ray will walk through our financial results and guidance. After Justin and Ray's prepared remarks, we will host a question and answer session. With that, I will turn the call over to Justin.

Thanks, Nikki. Good morning and welcome, everyone. We are excited to share our results for the year and our expectations for the future. Northwest natural holdings began a new chapter in 2025 we delivered record adjusted earnings per share at the top of our guidance range. deployed a record amount of capital to support our customers and reported our strongest organic customer growth in nearly two decades. Those results aren't an accident, they were driven by deliberate strategic decisions we have made as a company. reflect our management team's focus on execution, and foreshadow the strength of our platform going forward. Over the last few years, we have taken steps to diversify into the water utility business, expand into multiple jurisdictions, and add Texas gas utilities to further enhance our long-term growth prospects. What began as a single utility in the Pacific Northwest has evolved into three thriving businesses serving customers across six states. Our 2025 performance is a result of these strategic decisions. We've set the stage for growth while fulfilling our mission of delivering safe, reliable, and affordable service to our growing customer base. And we're still in the early chapters of our success story. As you know, we are in an age of tremendous energy demand. Natural gas plays a critical role in meeting that need, and we're uniquely positioned to address it. That's why we are excited to announce our new MX3 storage expansion project in the Pacific Northwest, a project that will enhance regional reliability and capacity, and one that has the potential to drive our long-term earnings growth target to 5% to 7% once we receive notice to proceed. As our story progresses, we remain focused on disciplined execution and delivering consistent, growing earnings and returns for our shareholders. The momentum we've built positions us for even greater success in the future. Moving to our Northwest Natural Gas Utility, which, now more than ever, plays a critical role in energy affordability and reliability across Oregon and Washington. As we noted on our last call, we successfully settled our Oregon rate case in 2025 with new rates effective October 31st. In Washington, I'm pleased to report that we've been working collaboratively and productively with parties and have reached settlement in principle, resolving their revenue requirement in the case. We expect to file the multi-party settlement in the coming month. Both cases set Northwest Natural up to recover significant safety and reliability investments in 2026 with a focus on maintaining customer affordability. In fact, on average, Northwest Natural residential customers are paying about the same today for their natural gas service as they did 20 years ago. We are also diligently working on dockets with the Oregon Public Utility Commission to complete rulemaking for multi-year rate cases. We believe moving to multi-year rate cases will ultimately provide greater clarity and certainty for both customers and utilities. While the rulemaking process is taking shape, we filed an alternative rate mechanism to recover certain capital investments made in the interim period. The proposal results in a modest 1.5% increase to customer rates with an effective date of October 31, 2026. Stepping back, We feel very good about our positioning over the next several years. Historically, our earnings trajectory relied on a single large Oregon rate case every few years, which created uneven growth and limited predictability for customers and shareholders. The transition to multi-year rate cases in both Oregon and Washington, combined with the growing earnings profile of our sea energy and water businesses, should create a more balanced and linear consolidated earnings profile year to year while maintaining rate affordability and predictability. As I mentioned, we are excited to announce that Northwest Nashville intends to expand its gas storage facility at MIST. This project, which we call MX3, is the third major gas storage expansion we've undertaken at MIST since its initial construction in 1989. MX3 will add four to five BCF of storage capacity and serve customers across the region. Northwest Naturals gas system is more essential to the region than ever, especially given the heightened focus on reliability and affordability. Our system delivers about 45% more energy than any other Oregon utility, gas or electric, over the course of a year. Today, the region's energy system is struggling to reliably meet demand during peak events, and the Pacific Northwest electric grid faces a potential 9 gigawatt capacity shortfall by 2030. That's why our storage capabilities are so important. They are uniquely positioned, expandable even beyond MX3, and offer a cost-effective solution to our region's growing energy challenges. Our customers for the MX3 storage expansion see this clearly. they consist of large investment grade regional utilities and midstream providers once we receive notice to proceed these customers have agreed to 25-year contracts underscoring the demand for long-term affordable energy solutions we are in the development phase of the project with signed customer agreements the energy facility siting council permits secured FERC approval received and Engineering, Procurement, and Construction, or EPC, providers identified. These new storage services will be regulated by FERC and are expected to provide stable returns with customer agreements that specify a fixed 12.5% return on equity and a 50% equity layer. Our Northwest Natural team has deep experience with the geography of the missed storage field and its depleted gas reservoirs. We expect to work with major EPC contractors who know our operations well. We are working to obtain the remaining permits and early stage engineering and design work is already authorized and underway. The project is estimated to cost approximately 300 million dollars and we expect the facility to be in service by the end of 2029. I am very excited about this project and the value it provides to the region. MX3 is not included in our long-term guidance today, which we are reaffirming at 4% to 6%. However, we do expect the project to have a meaningful positive impact on earnings growth and plan to include the project in our guidance when we achieve notice to proceed, which would raise our long-term EPS outlook from 4% to 6% to 5% to 7%. Another important growth engine for Northwest Natural Holdings is Sea Energy, our Texas gas utility. We closed the C-Energy acquisition in January 2025, and in June we supplemented our Texas expansion with the acquisition of Pines. Both utilities have been successfully integrated into our business. Texas is one of the most exciting growth drivers in our portfolio. C-Energy provided 18% organic customer growth in 2025 and contribute 11% of our consolidated adjusted earnings per share. At the same time, Sea Energy posted a sizable increase to its customer backlog, nearing 250,000 future meters. That's more than a 30% increase in customer backlog in a year, a testament to Sea Energy's strong relationships with developers and the expected growth in the Texas housing market for years to come. I'm very pleased with Sea Energy's performance in our first year of ownership. We expect our LDC in Texas to continue to scale rapidly and produce 15 to 20% customer growth each year through 2030. For 2026, we expect Sea Energy to generate between 10 to 15% of our consolidated earnings per share. We are strongly considering filing a general rate case for Sea Energy sometime this year. We will carefully weigh several factors, including customer affordability, in our decision. Sea Energy has been supported by exceptionally strong customer growth and today their rates are among the lowest of our Texas LDC peers. In 2025, our water and wastewater utility platform achieved a scale that allowed us to drive business efficiencies through standardized processes and centralization and is well positioned for continued growth. The water segment outperformed our expectations, contributing 35 cents per share or 12% of our consolidated adjusted earnings per share in 2025. Last year, we completed seven rate cases for our water and wastewater utilities and expect to process another five in 2026. We continue to follow a steady regulatory cadence to recover key safety and infrastructure investments while maintaining affordable and predictable customer rates. The water business has a clear runway for growth, supported by organic customer additions, significant greenfield opportunities, and a healthy acquisition pipeline. Looking ahead, we expect water to produce between 2% to 3% organic customer growth through 2030 and provide 10% to 15% of consolidated earnings per share in 2026. We expect both sea energy and water to outpace the overall consolidated growth rates of the company in the next five years, further diversifying our customer base and footprint. Confidence in our outlook is driven by strong organic opportunities across all three of our utilities, including 2-3% consolidated organic customer growth and rate-based growth of 6-8%. These fundamentals are supported by a record $2.6 to $2.9 billion of planned capital expenditures through 2030 and underpinned by healthy customer growth and critical safety and reliability spent. Importantly, we believe we can achieve our growth targets while keeping our services affordable for customers and maintaining a strong balance sheet with solid investment grade ratings. For 2026 specifically, we expect another record year for both capital investment and earnings. At the same time, we are focused on returning capital to shareholders. 2025 was the 70th year in a row of dividend growth for Northwest Natural Holdings. We are one of only three companies on the New York Stock Exchange with this impressive record. In 2025, our dividend payout ratio moderated, supported by strong earnings growth across the business. As earnings continue to grow, we expect to deliver steady dividend increases, outpacing our trend in recent years, as we target a long-term dividend payout ratio of 55 to 65%. In summary, we have built a powerful platform, a strong set of businesses positioned for long-term growth. This marks the start of an important new chapter, and I have never been more confident in our strategy, our team, and our future. With that, I will pass it off to Ray for a more detailed update on our financial performance.