Release Date: May 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Northwest Natural Holding Co (NWN, Financial) reported financial results in line with full year guidance issued in February.
- The company achieved a new peak day record for natural gas delivery, demonstrating strong operational capacity and reliability.
- Northwest Natural Holding Co (NWN) is actively engaged in decarbonization efforts, including initiatives for renewable natural gas and hydrogen blending.
- The company has maintained strong credit ratings and a solid balance sheet, supporting its long-term earnings growth outlook.
- Northwest Natural Holding Co (NWN) was named one of the 2024 World's Most Ethical Companies by Ethisphere for the third consecutive year.
Negative Points
- First quarter 2024 results showed a decrease in net income per share compared to the same period last year, primarily due to regulatory lag and inflationary pressures.
- The company is experiencing challenges with the technical equipment in its renewable energy projects, specifically in the conditioning equipment for converting landfill gas to renewable natural gas.
- Northwest Natural Holding Co (NWN) is facing increased pension costs and interest expenses, impacting financial performance.
- There are ongoing inflationary pressures on operating expenses, including higher personnel costs and the renewal of multi-year O&M contracts.
- The company's other businesses reported a net loss, driven by lower asset management revenues and increased costs.
Q & A Highlights
Q: Can you discuss the impact of other income or expense, which showed a loss of $1.1 million?
A: Brody Wilson, CFO, explained that the loss was influenced by several factors, including pension costs and water operating costs that don't fall into O&M. He highlighted that pension costs were a significant driver of the loss for this quarter and would continue to impact earnings in 2024.
Q: How will the pension costs trend in the upcoming quarters, particularly Q2 and Q3, before rate relief in Q4?
A: Brody Wilson, CFO, confirmed that the trend of increased pension costs would continue similarly into Q2 and Q3, aligning with the expectations set before the rate relief anticipated in Q4.
Q: Could you elaborate on the discussions with S&P regarding the downgrade of the outlook?
A: David Anderson, CEO, deferred to Brody Wilson, who detailed that the downgrade at the holding company level was due to pressures on the financial metric of FFO-to-debt ratio, which slightly fell below the threshold. However, the gas utility's rating remained stable with an A-plus rating, reflecting a strong outlook on that part of the business.
Q: What are the main drivers behind the year-over-year decline in net income for Q1 2024?
A: Brody Wilson, CFO, attributed the decline primarily to regulatory lag on investments and inflationary pressures. He noted that while utility margin saw a slight increase due to customer growth, it was offset by warmer weather and lower gains on gas costs.
Q: Can you provide insights into the company's decarbonization initiatives and how they are progressing?
A: David Anderson, CEO, discussed several ongoing projects, including a request for proposals for renewable natural gas and hydrogen blending projects. He highlighted the successful commissioning of a project with Modern Hydrogen and ongoing pilots that are showing promising results for broader system blending.
Q: What is the company's strategy for managing the regulatory lag and inflationary pressures mentioned?
A: Brody Wilson, CFO, mentioned that Northwest Natural has filed a gas utility Oregon rate case to address regulatory lag and expects new rates to take effect by November 1. The company has also implemented cost-saving measures to mitigate the impact of inflationary pressures on operating expenses.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
