Northwest Natural Holding Company · NYSE:NWN
Northwest Natural — NW Natural Holdings — Investor Presentation (June 2024)
55 slides from Northwest Natural's investor presentation, June 2024
Slide 1: Investor Presentation
Investor Presentation June 2024
Slide 2: Investor Information
Investor Information Company Information Forward Looking Statements This and other presentations made by NW Natural Holdings from time to time, may contain forward-looking statements within the meaning of the U.S. Private Securities Litigation NW Natural Holdings Reform Act of 1995, which are subjec
Slide 3: Leadership Presenting
Leadership Presenting DAVID H. ANDERSON • Chief Executive Officer Mr. Anderson is currently NW Natural Holding’s CEO effective May 2023. Previously Anderson was NW Natural Holding’s President and CEO effective October 2018 and Northwest Natural Gas Company’s (“NW Natural”) President and CEO effectiv
Slide 4: Introduction
Introduction 4
Slide 5: NWN At A Glance
NWN At A Glance • Serving 2.0 million people and 800,000 gas utility connections • 14,000 miles of modern pipeline • $4.5 billion in assets • Growing service territory in Oregon & Southwest Washington • Serving 180,000 people through 74,000 owned connections • Supporting 20,000 O&M service connectio
Slide 6: Corporate Strategy
Corporate Strategy 6 6
Slide 7: Conservative Strategy
Conservative Strategy Stable gas and water utility margins through progressive regulation • Gas utility: weather, decoupling and environmental cost recovery mechanisms as well as a renewable natural gas automatic adjustment clause in Oregon • Constructive relationships with regulators and customer g
Slide 8: Highly Regulated
HIGHLY REGULATED Majority Revenues from Utilities Favorable Customer Mix 2023 Operating Revenues 2023 Natural Gas Utility Margin Other1 Interstate 5% Storage, Water & Other Industrial 5% 6% Commercial 24% Residential Natural 65% Gas Utility 95% 1 Other is primarily margin from North Mist regulated g
Slide 9: Community & Sustainability Achievements
Community & Sustainability Achievements Published ESG Report with disclosures in alignment with SASB and including components of TCFD Governance Environmental ◼ Maintained well-qualified, diverse, independent and active Board with appropriate business & risk oversight ◼ On track to meet or exceed ca
Slide 10: Long-Term Investment Targets
INVESTMENT Long-Term Investment TARGETSTargets Growth targets over the next five years include: Consolidated Holding Natural Gas Utility Water & Wastewater Utilities Company • Customer growth averaging • Long-term strategy, incremental • EPS growth of 4% - 6%1 0.8% per year earnings growth and diver
Slide 11: Investing in Our Systems
Investing INVESTING in our INSystems OUR SYSTEMS Gas & Water Capital Expenditures1 (In millions) ~$415 $359 $356 ~$335 Avg/Yr $319 2021 2022 2023 2024 2024F - 2028F New Meters (Gas Ute) Safety and Reliability (Gas Ute) IT (Gas Ute) Facilities (Gas Ute) Regulated RNG (Gas Ute) Water Utility Consolida
Slide 12: Liquidity and Financing
Liquidity LIQUIDITY and Financing AND FINANCING Available Liquidity Strong Credit Ratings1 As of March 31, 2024 (In millions) S&P Moody’s NW Natural Holdings: Cash, $72 Issuer Credit Rating A N/A Holdings Line of Credit Outlook Negative N/A $137 NW Natural Gas: NW Natural Senior Secured Debt AA- A2
Slide 13: Natural Gas Utility
Natural Gas Utility 13
Slide 14: Gas Utility Overview
Gas Utility Overview • Over 165 years of service in our communities • Largest stand-alone local distribution company in the Pacific Northwest • Serve 2.0 million people in more than 140 communities through 800,000 meters in Oregon and southwest Washington • Consistently recognized for high-quality c
Slide 15: Resilient Business Model
Resilient Business Model Nearly 80% of Natural Gas Utility Margin is Decoupled % of Margin % of Volumes % of Margin Decoupled Residential 38% 65% 90% Commercial 23% 24% 76% Industrial 39% 6% 0% Other N/A 5% N/A Total 100% 100% 77% For year ended December 31, 2023 For year ended December 31, 2023 ~70
Slide 16: Customer Growth
Customer Growth Customer growth • Headwinds from interest rates Net Customer Growth Rate • Single-family permitting in Oregon and 3.0% Portland metro picked up Q1 2024 vs. Q1 2.5% 2023 • Projecting 0.8% customer growth for 2024 2.0% 1.8% 1.7% 1.7% Conversions 1.4% 1.4% 1.5% 1.5% 1.5% • Serve 63% of
Slide 17: Investing in the Gas System
Investing in the Gas System System Capital Expenditures1 New Meters/Customer Growth (In millions) ~$375 • Meter modernization/replacement program 15 • New construction & conversions $338 ~$310 • Main extensions 8 $317 40 Avg/Yr $304 24 3 10 9 17 10 Safety & Reliability $278 40 15 • Recurring replace
Slide 18: Progressive Regulation
Progressive Regulation OREGON WASHINGTON KEY DEFERRALS RECOVERING: COVID 1 Enterprise Resource Planning (ERP) System Upgrade TSA Cybersecurity 1 KEY MECHANISMS: Decoupling/Weather Normalization (WARM) Purchased Gas Adjustment (PGA) Environmental Cost 1 Recovery is expected to be determined through a
Slide 19: Supportive Mechanisms
Supportive Mechanisms OREGON • Intended to break the link between earnings and consumption by removing incentive to increase usage Decoupling • Employs use-per-customer decoupling calculation, which adjusts margin revenues to account for the difference between actual and expected customer volumes OR
Slide 20: Washington 2021 Rate Case
Washington 2021 Rate Case • Order received October 21, 2021 – Multi- party settlement approved by the WUTC. 2021 - 2022 New rates were effective Nov. 1, 2021 with RATE CASE the second year effective Nov. 1, 2022 Year 1 Year 2 • Request Based on System Investments – Request Order Request Order Multiy
Slide 21: 2024 Oregon General Rate Case
2024 Oregon General Rate Case 2024 Revenue Requirement Components 2018-2019 2020 2022 Total Ask $154.9 Million RATE CASE RATE CASE RATE CASE RATE CASE REQUEST Taxes & Filed Dec. Other Settled Settled Settled $33.7 ‘23 ROE 9.4% 9.4% 9.4% 10.1% O&M ROR 7.317% 6.965% 6.836% 7.406% $54.1 Equity/LT Debt
Slide 22: Environmental Stewardship
Environmental Stewardship 22
Slide 23: Role of Our Gas System Today
Role of Our Gas System Today NW Natural’s System • Delivers 50% more energy than any other utility in Oregon • During winter peak-demand periods, the natural gas system in Portland, Oregon, delivers about twice as much energy as the electric system to residential customers • One of the tightest, mos
Slide 24: Our Low-Carbon Pathway
Our Low-Carbon Pathway VOLUNTARY GOAL: 30% CARBON SAVINGS BY 2035 Goal established in 2016 Baseline: 2015 emissions associated with customer use & company operations 24
Slide 25: On Track to Meet or Exceed Goal
On Track to Meet or Exceed Goal Our voluntary carbon savings goal of 30% by 2035 includes emissions from our own operations and the gas use by our sales customers 2022: Ahead of Target Savings Rate 535,881 metric tons of carbon dioxide equivalent saved. This marks 42% of savings toward goal, ahead o
Slide 26: Destination Zero
Destination Zero: Our vision of carbon neutrality Carbon Neutral A decarbonizing network: ME Renewable Natural Gas = Hydrogen Waste CO, -—--—- Renewable Electricity dustry by Commercial and Waste Residential Heating So by if =__ Verified Offsets Commercial Transport Efficiency Storage agit - bi RENE
Slide 27: Destination Zero Analysis
Destination Zero Analysis 2050 POSSIBLE SCENARIOS • The next evolution in our thinking is an in-depth Percentage of GHG savings by source analysis, using a variety of assumptions, to illustrate Balanced Moderate Offset possible scenarios to achieve carbon neutrality for Balanced mix of renewable sup
Slide 28: RNG Projects Across North America
RNG Projects Across North America As of April 28, 2024 28
Slide 29: Groundbreaking RNG Legislation
Groundbreaking RNG Legislation • Oregon and Washington laws support gas utilities purchasing renewable natural gas (RNG) - Oregon Senate Bill 98 passed in 2019 and rulemaking completed in July 2020 - Washington law (House Bill 1257: Clean Buildings Bill) passed in 2019 • Creates another path for RNG
Slide 30: Gas Utility RNG Contracts to Date
Gas Utility RNG Contracts to Date Procurement Investments (Pass-through Cost) (Rate Base) • Anew LLC (formerly Element Partnership with Tyson Markets) – 0.7 million MMBtu from 2021 - 2023 • Lexington Facility – $8M facility that commenced operation in Jan. 2022 • Archaea – up to 1 million MMBtu • Da
Slide 31: Hydrogen & Research Projects
Hydrogen & Research Projects NW Natural Initiatives Hydrogen Blend Testing – successfully blended 20% hydrogen at NW Natural’s state-of-the-art training facility Turquoise Hydrogen Pilot Project – partnering with Modern Hydrogen in an effort to turn methane into clean hydrogen and solid carbon. Proj
Slide 32: NW Natural Water
NW Natural Water 32
Slide 33: Water Investment Approach
Water Investment Approach The water and wastewater sector aligns well with NWN’s conservative risk profile and offers diversification, stable cash flows, and substantial long-term investment opportunities • Federal and state agencies driving upgrades to water and wastewater infrastructure Acquire •
Slide 34: NW Natural Water Owned Connections At A Glance
NW Natural Water Owned Connections At A Glance CASCADIA KINGMAN SUNCADIA GEM STATE WASHINGTON ARIZONA ROSE VALLEY HILAND SALMON TEXAS BLUE FOOTHILLS VALLEY TOPAZ AVION Pending SUNRIVER OREGON Closed Pending2 Total IDAHO FALLS WATER People served1 181,200 183,000 2,700 184,000 185,700 Connections 73,
Slide 35: Water & Wastewater Acquisition Opportunities
Water & Wastewater Acquisition Opportunities All Water and Privately Owned Wastewater Systems Systems Systems Connections Systems Connections Pacific 4,700 5.6M 2,760 511,000 Northwest Texas 5,739 17.3M 2,400 400,000 Arizona 1,100 3.0M 500 530,000 West of 36,500 77.3M 16,700 9.1M Mississippi United
Slide 36: Growing Water Systems
Growing Water Systems Investing in Safety, Reliability Strong Customer Growth • Five-year cap-ex expected to be ~$120 • Acquired utilities in fast-growing areas million (2024-2028) • Additional opportunities near existing • Investments in system reliability footprint • Focus on information technolog
Slide 37: Water Regulation
Water Regulation • Collaborative, transparent, and productive relationships with regulators • Strong track record of approvals for acquisitions and constructive general rate cases OREGON WASHINGTON IDAHO TEXAS ARIZONA KEY MECHANISMS: COVID Deferral Fair Market Value Legislation RATE CASE TEST Forwar
Slide 38: O&M Services Business
O&M Services Business Our Investment Goals • A natural extension of its utility ownership business, NW Estimated Size of O&M Market Natural Water launched a water and wastewater services $2.6B O&M contract services market today with business in April 2023. Today we’re serving nearly 20,000 growth ex
Slide 39: NW Natural Renewables
NW Natural Renewables 39
Slide 40: Competitive RNG Growth
Competitive RNG Growth The competitive RNG business represents a significant opportunity to add earnings and cash flows in a rapidly-growing market segment Market Opportunity Strategic Fit & Competitive Advantage • Achieve attractive returns as demand • Building on expertise and market knowledge exc
Slide 41: Primary Expected RNG Markets
Primary Expected RNG Markets Commercial, Industrial, and Gas Utilities Natural Gas Vehicles Institutional Customers Meet voluntary emissions/renewable goals, Meet obligations for low- Corporate sustainability goals including demand for RNG PRIMARY DRIVERS emissions fuel in state and including emissi
Slide 42: NW Natural Renewables: EDL Project Update
NW Natural Renewables: EDL Project Update • NW Natural Renewables’ first projects are with EDL, a leading global producer of sustainable distributed energy • Committed $25 million per facility toward the development of two production facilities ($50 million total) designed to convert landfill waste
Slide 43: Conclusion
Conclusion 43
Slide 44: 68 Years of Growing Dividends
$1.95 $1.93 $1.94 $1.92 $1.91 $1.89 $1.90 $1.88 68 YEARS $1.83 $1.85 $1.86 $1.87 OF $1.75 $1.79 GROWING $1.68 1 DIVIDENDS 1 of only 3 Companies on NYSE with this Legacy Future dividends are subject to Board of Director discretion and approval 44
Slide 45: Investment Thesis
Investment Thesis Stable and growing utility margins driven by the following targets over the next five years including: • EPS growth of 4% – 6%1 • Gas utility customer growth averaging 0.8% • Gas utility cap-ex $1.4 – $1.6 billion with rate base growth of 5% – 7%2 Excellent operations and efficient
Slide 46: Appendix
Appendix 46
Slide 47: Driving a Clean Energy Future
Driving a Clean Energy Future • NW Natural is a member of Our Nation's Energy Future (ONE Future), a coalition representing more than 20% of the U.S. natural gas value chain and committed to reducing methane emissions through adopting science-based standards and best practices. ONE Future has exceed
Slide 48: Current Utility Commissioners
Current Utility Commissioners OREGON WASHINGTON IDAHO TEXAS ARIZONA COMMISSION COMMISSION COMMISSION COMMISSION COMMISSION (OPUC) (WUTC) (IUTC) (PUCT) (ACC) Megan Decker (D) David Danner (D) Eric Anderson (R) Thomas Gleeson (NA) James O’Connor (R) Chair • Appointed April 2017 • Appointed chair Feb •
Slide 49: NW Natural Holdings Debt Maturity Profile
NW Natural Holdings Debt Maturity Profile Debt Maturity Profile $160 $50 $150 $140 $140 $140 $130 $120 $55 $100 $50 $100 $100 $90 $80 $80 $75 $100 $65 $60 $50 $50 $50 $55 $50 $30 $40 $40 $30 $30 $20 $10 $10 $0 NW Natural NW Natural Holdings NW Natural Water • Interest rate volatility impact mitigate
Slide 50: Diverse Resource Portfolio
Diverse Resource Portfolio Gas Supply • 60% supply from Canada • 40% supply from the Rockies • Natural gas serves territory through one bi-directional pipeline LNG Peaking Facilities • Portland LNG – 0.6 Bcf • Newport LNG – 1.0 Bcf Mist Gas Storage Facility • Valuable asset – limited storage in the
Slide 51: Mist Storage Facility
Mist Storage Facility Mist Storage Capacity Overview BCF 18 • In operation since 1989 15 • Storage capacity at Mist 17.5 Bcf 12 9 ─ 11.7 Bcf Core Utility 6 ─ 5.8 Bcf Interstate Storage Services 3 0 Unique, Valuable Asset • Limited storage options in Pacific Northwest BCF / Day Mist Storage Deliverab
Slide 52: North Mist Facility
North Mist Facility • Unique no-notice 24/7 storage service supporting gas-fired electric generating facilities that are integrating wind into energy generation mix • $149 million investment was immediately included in rate base once placed into service in May 2019 • Contracted under 30-year agreeme
Slide 53: Water & Wastewater Utility Transactions
Water & Wastewater Utility Transactions Company People Served Connections Location Date Signed Date Closed Transaction Details Salmon Valley Water Company 1,928 964 Welches, OR 12/18/2017 11/1/2018 12/19/2017 9/13/2018 Falls Water Falls Water Company 20,272 7,138 Idaho Falls, ID 6/28/2019 8/3/2020 T
Slide 54: Water and Wastewater O&M Service Transactions
Water and Wastewater O&M Service Transactions Company Connections Region Served Date Signed Date Closed King Water Company 11,676 Washington 4/30/2023 4/30/2023 Hiland 6,594 Oregon 5/8/2023 10/31/2023 Gem State 1,320 Idaho 12/18/2018 7/31/2019 Total Closed 19,590 54
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