Northwest Natural Holding (NWN)

Nikki Sparley Director of Investor Relations
David Anderson President and Chief Executive Officer
Frank Burkhartsmeyer Senior Vice President and Chief Financial Officer
Aga Zmigrodzka UBS
Dennis Coleman Bank of America Merrill Lynch
Call transcript
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Good day, and welcome to the Northwest Natural Holding Company Third Quarter 2018 Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instruction] Please note this event is being recorded. I would now like to turn the conference over to Nikki Sparley, Director of Investor Relations. ahead. go Please

Nikki Sparley

Good XXXX Brandon. welcome our to Thank call. morning, quarter earnings third you, and

As of are reminder, occur. morning assumptions, a some may contain said will which forward-looking this be statements. may They or based management's the on not things that

a filings statements, to for at of additional the release and cautionary our end information. of press list also complete language For refer the our SEC

to later file expect We today. our XX-Q

Please website note, recorded being conference and be following is the for teleconference our call. designed this mentioned, are As community. these available calls will financial on the

are If after at contact investor XXX-XXX-XXXX. you call, directly an questions and have me the additional please

News Media XXXX. may extension contact Week XXX-XXX-XXXX, at Stefanie

morning then of our Frank With it Frank along David this Executive and that, members David Vice will Chief with some turn David. other Financial and Officer; Burkhartsmeyer, remarks prepared your be Officer. Speaking have and answer questions. I'll available to and Anderson, President are executive President Senior and to team over Chief

David Anderson

as cold to was hard ensured business with corporate structure our here, lot investments and good continue continue a be This our extremely seamless Frank which utility diversifying our for results and XXXX will Thanks, agile that a discussing our in gas water the then and higher today operations I'll opportunities costs. X. on and for. by strategic Also, for us financial a details, our well we very update significant XXXX, and year from pursue strategy. the maintenance wrap key all and known financial work growing quarter October and in of compared execute morning, stable in growth some then more reorganization driven long. warm to to in water on highlights A Maximizing been weather on and begin and the I'm company structure us Nikki, initiatives to new with business. we to period a completed long-term cover efficient platform strong transition thankful from returns regulated sector. holding gives an natural This weather the the everybody. we've I'll up year with Overall, won they

translated gas X.X% and period Metro permits X.X%. in the in X.X% low the the These grow that housing utility two year. were rate wages record continues in and the rate natural a over up factors job connecting year last our The last resulted Our more area than market new to with system XX,XXX last statewide versus slightly year. into the last the median over Oregonian's a momentum months coincides grew of local sector. for and the growth Housing Portland us maintained to same unemployment for in September customers

rate capital also expected includes After return XX-XX after to general the million, rate an a requirement regulatory X.X%, Natural's the report increase since on items, includes case Northwest front, base rate equity and the base tax last reform, in billion. overall On Natural an federal benefit issued the pleased year. review resolve of revenue provides million per an XX a $XXX of rates. Oregon XXXX, rate cost the This conservation total a $X.XXX The a $XX.X from majority considering structure. It represents about Oregon cap of $XX to months to in million with in was order net case of of X.X%, case Northwest an bringing increase of addressed. in and the previous of order stakeholders, I'm order general tariff

revenues will and asset optimizing utility revenues be sharing know, marketer we from share XX%. assets optimize may engaged with a our these from allocations on management storage the activities commission Under management the these to asset was the revenues, order of now third-party XX% assets. that you with Finally, related earned previously shared ruled to as customers. We utility customers,

decision a The this commission on significant from item, review. revenues the While annual we're two two results. not the case of are will optimization portion disappointed indicated or additional rate require with additional commission's items that

a both than customers PGA. years are will did First, due needed pension service winter. Xst. later are rates they reduction and In combined the account. date the the these of Xst, that reduction see intend impact, also paying a conclude PGA rate customers of conclusion utilities see and gas items tax two November to XX our the the the competitive We position. row will less quickly, as which method the indicated, of is provide timing balancing customers commission effects order is The effective continued ago, gas rate recovery result natural X% is no in customers their this want prices. or cost federal in boost to see expedite they lower a residential and Washington And PGA, where drop customers; territories, case but rate for in than these no a to amazing, information to second, returning a lower February of there to purchase fourth X% savings to case two rates will whatever prices of additional mean natural gas for The utilities -- was is on year effective that these items. Oregon adjustment The our in the in in

in electric pumps. Adding the advantage in In the for typical price row, the Northwest Customer up or over we a customers XX% good the six advantage posted West scored to this to oil highest in to customer consecutive on and Natural the also fourth a approved culture, enjoys furnace advantage centric increases. gas who fact, the dividend Study. third we make rank years very in of for I'm quarter, all marking and score a news first top Residential the heat our of serve, And the that -- home dividend five proud year happen annual natural These Natural XX% are to XXrd the around country. that I'm the finally, XX an in in making the this a employees every Power in the nation our the Board J.D. increase Northwest morning, day. testament this of in time report year results Satisfaction the pleased price XXth

three New this are companies one to of proud with Stock only the record. York We Exchange on be

Frank? to me over Let Frank to turn the it detail. more financials in cover

Frank Burkhartsmeyer

morning, Thank you, and everyone. good David,

year. the From I company results. of reorganization, Xst, from holding is which a reflect provide Company last will Natural turning Gas will statement for Natural first numbers, impact our Before with parent to period, Company on the financial an our October detailed case statements their occurred resulting Beginning will consolidated will reform, to reporting rate Northwest on this and tax the in the third and the results the results. reflect financial guidance and be highlight which Holding I perspective, financials update quarter, financial turn then changes the Northwest our the is of a quarter quarter transitional will fourth consolidated

reform, differences between Regarding XXXX benefit the expense have reflected federal tax from and tax rate. customer the the associated our with tax lower reform, results tax timing deferral revenue quarterly

deferral. and the difference neutral than bringing the year. anticipated the First tax savings the a in benefit as third were to quarter, fully quarter from second This greater timing us for quarter the revenue reversed results benefited partially in reversed as position this

recorded the and rate able complete our utility We the to With interim deferral after-tax an customers $X.X reset we margin. order case, and going rates anticipate of from significant variances consequently We million finalized do estimate Oregon. not benefit the were timing period for Oregon forward. in deferral

earnings due and higher seasonal the earnings rate positive the to tax affected permanently the quarters quarters, fourth be the distribution earnings third across profile, of and our quarters. versa reform. the when is second in will first lower the However, vice in of impact are and tax With

on statutory Turning individual earnings I'll XX.X%. using note after-tax of results. rate basis that describe now to our an financial drivers Please tax the

Results of net $XX.X million for the or $X.XX of loss reported XXXX, of $X.XX related deferral. higher million a quarter by partially costs loss the offset utility O&M lower benefit, interim and per For XXXX. to per $X.X for compared reflect the share margin previously same of tax an the share, the quarter in mentioned net higher $X.X third tax period a in increase a million changes to or we

million XXXX, or for declined million months margin $X.X or nine partially revenue per year, of and XXXX, higher of to a first share of reflecting $X.XX we reform, a weather the the expense. by driven the $XX.X to $X income, the offset For related compared net tax net per Utility customer to $XX.X period $X.X decrease of from Results share benefit the decrease million. were margins $X.X lower utilities last income in compensation same the reported $X.X O&M and a million, million to cooler in by weather effects and growth. costs due related deferral million

million than typical impact provides a the taxes. affecting first negligible revenue benefit the colder While have cumulative aggregate mechanism experienced roughly winter O&M, as million of in margin stability, in not degree do we property and weather In of earnings year-to-date weather estimated our XX% or contrast, customers and on income large XXXX reform average. nine out. expense The mechanism very and $X.X Oregon depreciation opted offsets increase XXXX, normalization of net average. a increase months warmer a in a and cold more a very territory tax of warm with spring deferral. normalization the the Washington was than weather $X.X have we and By summer $X.X a estimated in tax portion service experienced million Oregon XX% Also is about a in

to flow. cash Turning

nine in XXXX, costs due flows, and from to a million paid months the lower gas XXXX, income deferred primarily $XXX the first warmer the of down weather. million company operating taxes from generated $XX higher During cash

back growth, reinvest in into We expenditures a capital and customer with reinforcement, Mist systems expansion the project. to continue North to the $XXX related business million

with sheet remains balance Our strong ample liquidity.

overall Oregon $XX an annual The of next flows. an Turning the Northwest million $XX.X case. provides estimated a basis, general to to additional on and cash benefit Natural rate in earnings pre-tax order million

cash proceedings mentioned, specific to recovery As ordered reform the two related. account, of these commission the balancing further primarily and tax pension items are flow David

the XX, increase by rates on pension commission the conclude FAS and it authorized million freeze to to to of pension While method customers account Natural tax on expense did Northwest our federal us pension $X.X balancing in included and the recovery the account. and returning timing XX balancing ordered not savings of the October

actual the rates. included the was XXXX pension background, in expense account and difference between defer in established pension For to the amount balancing

solutions resolution account the approximately of balancing account information pension asked Meanwhile, with XXXX, and to the the under X, not did rejected to reach on expense by instead cash from balance commission November initial XX, September settlement is the our further on and but base Northwest The Natural beginning February of through tax full us these was As parties, million. Xst XXXX. beneficial case $XX rates, which provide expressly pension order, flows. rate collecting matters began

Moving Northwest over share. regulatory or back or earnings Natural Holdings and we no guidance. change of to on investment assumes regulations. per XXXX the the to average $X.XX our to conditions range to With I'll in to from David. a utility laws capital $XXX continued affirm the Guidance With XXXX prevailing continue outcomes today expenditures, significant or in that, million. weather customer respect the segment, in growth guidance million range mechanisms turn call to policies, of $X.XX forecast $XXX significant

David Anderson

Frank. Thanks,

First, let an you on the update North expansion project. me give Mist

in our Mist, situated may uniquely properties local in major storage Mist essential as Mist and facility been The and again As in our for is single when storage customers natural a was our value marketers. pipeline well a is incident to reliable Pacific remember, resource service the operating support Mist once October, the that as the Canada of that facility was with valuable. Oregon XX disrupt gas storage extremely pipeline supported Northwest. you The utilities service serving crucial region, proven is years. just to nearly a we've

storage Natural recall, billion balance Westward compressor a service developing may station Electric's and that Northwest is General X.X you power the XX-mile renewable feet on they Portland non-notice Plant, a pipeline, to so grid. Port reservoir, As Power can cubic supply which a new will

injections, are have the station, contractor now gas and completed compressor experienced base the currently We unfortunately has constructing delays.

the contractor with of to service an now are working and closely the of We March project, a the finish expansion by in the around be XXXX, million. to end estimated expect $XXX with cost

contracted beyond be immediately initial expansion approved up has The Utility with based Portland Commission. tariff period rate placed initial, to the years investment schedule an XX the by reminder, XX-year service, Oregon is that. a facility when into As General and will the for options an already to Public renewal established

and helping sales focus than Another communities natural carbon an any year, XX% emissions for modern, gas deep in reduce that XXXX. EX, But an Oregon gas Natural of to Northwest reduction carbon an area XX% accounts can to our and that we've X% why to the firm effort Oregon us pipeline we businesses emissions using nation. the in decarbonization in serve. new opportunities by initiative by reduce different our called initiative, pathway, achieve an evaluates year, homes other infrastructure, energy is do gas Through is most tightest delivers voluntary about goal to XXXX. our strategies we Yet of This better, emissions. emissions the for for are of launched customer's includes consulting commissioned in savings systems utility. one existing we proactively Washington know Each we do the low we this greenhouse more study the economywide of that greenhouse which identifying

may at meeting California firm In closer consulting a how peak that study, the US. originated decarbonization look a deep achieve work, now winter takes the the to EX know, environmental throughout premier needs. also EX started goal, in this As energy while you is and

regions energy in hydro today Northwest system example, Pacific than the For the delivers gas natural system. the more entire

the clean coldest days the winter be energy is possible. show the Northwest question to achieve results in three study over carbon three driving also while deep do have on on to that point, believe used been reliable, how this as agree We dramatically natural and reliably emissions continues done months, we decades. ensure our XXXX, as affordably studies next key decarbonization the All goals down of with gas EX So, supply exploring mix. that energy power Northwest working on of Natural's showed our in to billion to the renewable technical customers Energy by natural of Department gas on state, Oregon gas by equivalent renewable by just and right all a natural Oregon's that's our that gas, like XX feet report residential working technologies potential efficiency, throughput. include nearly released path, is cubic gas to in The cutting-edge and

reduce will intensity help going are in the do pipes, of of problems a end great three next we end, To but have their on year. our and local only opportunity So not RNG flow to the by solve the process. waste can community into pleased working what's our that projects carbon our interconnect through we that we to be system

beginning, our new regulators forward work innovative climate other this that our While look solutions cost. with reasonable the finding at and to is just benefits continuing to stakeholders customers on provide I

Commission. we target allow summer receive California. that would Public continue approval Now, a year, us Utilities Gill Ranch transaction in in quick early California for hope announced We update approval on sale quarter XXXX. with next to business process. the this which sale the In to closing we Last the of have filed of July, the the to

several communities water important run safety Finally to gas with and and standing today, agreement we've Pacific update Northwest, and in our flow in systems and earning are let as utility wastewater track largest adding natural we Water acquisition cash both longest is reliability. Through made utility. record Central October, stream Sunriver is advancements our its you progress and me Natural of located excellent strategy, a made We that risk water water In strategy. or has regulated the similar the Sunriver. on profile wastewater signed well Northwest an water here. connections are for have water one acquisition the our and to-date Oregon, our acquire in X,XXX resort an

I'm Overtime, this be has sector workforce as over also We for This also a water will yet company the earnings to acquisitions investments Northwest. our In are this today announced, water closing, this that our four endeavors. over as up share thank tremendous think I'd $XX believe us. of I another several coming the These we operations. their acquisition adding to-date. to it previously step technical into to adds opportunities again At total, talented the all to excited opportunities I excited ready continue to across aggregate more to the and be these weeks, us all and we infrastructure in Brandon, earnings last portfolio. about these are million to for us the taking accretive have meaningful for that committed expertise. front believe wastewater remains not deep time we that I accomplished create gain aging juncture, growing this are join XX,XXX year business X,XXX full people could executing approximately with I connections first that the With sector acquisitions in to water mention proud to years, water like material. on morning. investment we've in need of for small investment want closed serve replaced. of Pacific per potential in the and projected In that we questions. you we're open year is


Thank you.

Zmigrodzka session. Please question will first comes Aga go [Operator Instructions] now the begin from with We Our question-and-answer UBS. ahead.

Aga Zmigrodzka

of your on and comment returns I would your the from investments. going and business How should water like about think on part of $XX to roughly the strategy forward? growth follow-up we million this

David Anderson

early news water mean, is, there. I a private -- out are good -- in I it's we're think lot there know companies of stages You the the what of this,

connections side the XXX,XXX about are states, Northwest that you private fact, if equation. probably the In of look the at three there's in

a guidance the Frankly, future provide in up. we roll good a juncture. to difficult for opportunity us as these can this juncture, achieve achieved us on period, I'm look year to it At there's level very to what this it's we've target that provide the of with. materiality little So at for pleased

this, etching greater of acquisitions So, at the segment could we're the to providing we front. juncture, hopefully get we'll in it investments At and once not in this portfolio, just this of large this provides each into continue us at so and keep to how opportunity think course, these away believe in it's really those, continue I of stages terms one though, see acquisitions, add you'll the become, early because for the guidance grow.

Aga Zmigrodzka

is revision to Mist that My to cost, North any be expansion related there in further delay is could the project? and second risk there question that

David Anderson

developed it's done a Ranch, it's we've there. The Yes. When It's materials, I question. gas And job think they we overtime ground whether plant, expansion mother the it's We've are underneath the or mean, very Mist one, as nature result, have you a way -- ground. Gill a develop properties, way good delays our difficult very happen. with storage a that that best you're complications assets complicated you to dealing reservoir and good it's and sometimes the this. even about very to at proven just the above construct. do

compressor other are is the to end, pipeline the the start, now, is about this done, coming gas We building once out ground though, the station right and I now the mean, components. the in is you

you that, this is of March is rained, to in that I the end, are country, snows the which at So, to have it we're stuff could, coming Could the it part delayed, if in a it very date. in achievable very other can close mean this delays you have weather period does further delays. happen think even March affects But the I terms delays? XXXX schedule if of Well, believe juncture. we and and you like so close we that


Coleman from Bank comes Dennis Merrill Please go question ahead. Lynch. America next of Our with

Dennis Coleman

on happened, just be little Mist, I you the more what North can wonder what you the can caused -- specific? delays, a

Frank Burkhartsmeyer

of materials, kind to normal to It's little little to combination It's guidance, a bit do but construction I above about it's of give this? Dave activities, turn want additional bit a Dennis. you ground the of things. Dave, Weber a talk might

David Weber

when have restrictions forest you and in The and or the can the in created hot forest. constructing that summer by dry work we are forest was the service, up

to So and their through. how with, soil proceed the and in be just anticipated to conditions have than they're affect project dealt can conditions that work taking environmental longer we're that contractor the

Dennis Coleman

in case maybe So, this rain? more needed you

David Anderson

I as needs to during parts asset period little interesting, in getting moving mean, what's want here, need flows obviously, accrue, Yes. get soon begins when that it to going there's winter ATDC PGE, comes through operation. the possible, and specifically start important so Well. because many that it's continues -- of again, the for process, start online it fully time a again to to also this operational but and be so would so we company. testing into it's months, the cash we the -- that we We as as

that So, when don't to damage as getting but do online get where very a it's we're as you're it soon a starting major to want find to that up. it you it yourself anxious just you asset in right, possible, so you're complicated make you sure situation

Dennis Coleman

might water the doubling the and growth the you've say completed go on the there one help even you've is regulatory points four? back closed of to first the where first the any small you deals that assets, pinch process through you you here the learning's of clearly as accelerate Also have business for four now strategy,

David Anderson

in quick. when actually We've you from Yes. the will my holding went Washington it and is they company, I parent helps right. And Number perspective, Idaho, three Oregon. one, filings jurisdictions, pretty a company tell made all

because that But doesn't really another this these they're hurt like they the utility a is results the for acquiring believe quicker. of someone acquisitions. in So, the I They good supportive I have thing, even good we're providing buying roll-up there's not you up operate that's going they a old worried pop this is companies. processes we'll in so we're customer when Dennis, it water their and long that long-term as the about jurisdiction, ultimately mom also, the not XXX-year like what general go for speed company are holding we in a from facility, will found versus period commission encouraged service with satisfaction of that a believe forward, time structure Northwest standard been differently for fact, through company small it the utility, think each this asking that's entity Natural to be

in So, I in of definition. very very, would gone process it's have four quicker by think Sunriver middle process. will I we part learned to a pretty the lessons usually things general, and I'm be hopefully quick, go regulatory closed, done don't that the and these is of learned, any suggest the consider But next quick regulatory you sure point. all year, really at when not say there lessons that's And this

process the of operational through, think are have understand dynamics the operate we I how then going we're these standard plan of the them to that before understanding going they transaction, making terms and in sure it's assets.

Dennis Coleman

but largely on finally, there there, rate any Washington items are forward? the update to big then some I case address through realize now case, And the rate Oregon looking

David Anderson

been have to the Yes. case Washington rate we'll either file need point, but year. couple year a that through, open this to high probability continue or we with early I'd that to rate work Dennis, there's we love Oregon got so we believe, a case done our of items late at next this


questions, further over to time David the conference remarks. there [Operator I Anderson back turn to Mr. like no Instructions] for any would are this closing At

David Anderson

that, us. doing everybody, thank for you you and joining Brandon, for Great, thank

Nikki. your through to usual, out Have we a various As you be further support. questions walk reach things, to happy you She'll day. great do have appreciate if and


presentation. is The conference concluded. now for attending you today's Thank

You may disconnect. now