What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-02-25 compared with 2021-02-26 · 125 added, 109 removed, 358 unchanged (40% of the section changed)

21 unchanged sentences

Expansion of our businesses could result in regulation by other regulatory authorities.

For example, in 2020, NW Holdings’ acquired a water sector business in Texas that is subject to the regulatory authority of the Public Utility Commission of Texas.

For example, a subsidiary of NW Holdings has contracted to acquire a water and wastewater sector business in Arizona that is subject to the regulatory authority of the Arizona Corporation Commission.

The prices regulators allow us to charge for regulated utility service, and the maximum FERC-approved rates FERC authorizes us to charge for interstate storage and related transportation services, are the most significant factors affecting both NW Natural’s and NW Holdings’ financial position, results of operations and liquidity.

State utility regulators have the authority to disallow recovery of costs they find imprudently incurred or otherwise disallowed, and rates that regulators allow may be insufficient for recovery of costs we incur.

We expect to continue to make expenditures to expand, improve and safely operate our gas and water utility distribution and gas storage systems.

We expect to continue to make expenditures to expand, improve and safely operate our gas and water utility distribution and gas storage systems, and to decarbonize our gas systems.

Regulators can deny recovery of those costs.

2 unchanged sentences

The failure of any regulatory commission to approve requested rate increases on a timely basis to recover costs or to allow an adequate return could adversely impact NW Holdings’ or NW Natural’s financial condition, results of operations and liquidity.

As companies with regulated utility businesses, we frequently have dockets open with our regulators, including a general rate case filed with the WUTC in December 2020.

The regulatory proceedings for these dockets typically involve multiple parties, including governmental agencies, consumer advocacy groups, and other third parties.

Each party has differing concerns, but all generally have the common objective of limiting amounts included in rates.

We cannot predict the timing or outcome of these proceedings or our pending Washington general rate case, or the effects of those outcomes on NW Holdings’ and NW Natural’s results of operations and financial condition.

As companies with regulated utility businesses, we frequently have dockets open with our regulators, including a general rate case filed with the OPUC in December 2021.

The regulatory proceedings for these dockets typically involve multiple parties, including governmental agencies, consumer and other advocacy groups, and other third parties.

Each party advocates for the interests that they represent, which may include lower rates, additional regulatory oversight over the company or advancing other interests.

We cannot predict the timing or outcome of these proceedings or our pending Oregon general rate case, or the effects of those outcomes on NW Holdings’ and NW Natural’s results of operations and financial condition.

LEGISLATIVE, COMPLIANCE AND TAXING AUTHORITY RISK.

3 unchanged sentences

Significant changes in federal, state, or local governmental leadership can accelerate or amplify changes in existing laws or regulations, or the manner in which they are interpreted or enforced.

For example, the result of the 2020 United States Presidential election is expected to result in leadership changes in many federal administrative agencies.

For example, the 2020 United States Presidential election resulted in leadership changes in many federal administrative agencies.

Moreover, the 2020 election resulted in Democratic control of the presidency and both houses of Congress, and as a result, the U.S.

Congress and the U.S.

presidential administration may make substantial changes to fiscal, tax, regulation, environmental, climate and other federal policies.

Similarly, local elections during 2021 may lead to significant policy changes at the state or municipal levels in our service areas that may affect us.

In addition, foreign governments may

implement changes to their policies, in response to changes to U.S.

presidential administration has made and is expected to continue to make changes to fiscal, tax, regulation, environmental, climate and other federal policies.

For example, the United States has rejoined the Paris Agreement on Climate Change, a global framework to reduce GHG emissions and limit global warming, and the presidential administration

has issued executive orders aimed at reducing GHG emissions and has declared climate change a national security priority.

Similarly, federal, state and local elections during 2022 may lead to significant policy changes that may affect us.

In addition, foreign governments may implement changes to their policies, in response to changes to U.S.

policy or otherwise.

Although we cannot predict the impact, if any, of these changes to our businesses, they could adversely affect NW Holdings’ or NW Natural’s financial condition and results of operations.

Until we know what policy changes are made and how those changes impact our businesses and the business of our competitors over the long term, we will not know if, overall, we will benefit from them or be negatively affected by them.

We cannot predict changes in laws, regulations, interpretations or enforcement or the impact of such changes.

Additionally, any failure to comply with existing or new laws and regulations could result in fines, penalties or injunctive measures.

For example, under the Energy Policy Act of 2005, the FERC has civil authority under the Natural Gas Act to impose penalties for current violations of in excess of $1.3 million per day for each violation.

For example, under the Energy Policy Act of 2005, the FERC has civil authority under the Natural Gas Act to impose penalties for current violations of nearly $1.4 million per day for each violation.

In addition, as the regulatory environment for our businesses increases in complexity, the risk of inadvertent noncompliance may also increase.

12 unchanged sentences

To the extent that customers, legislators, or regulators have or develop a negative opinion of our businesses, NW Holdings’ and NW Natural’s financial position, results of operations and cash flows could be adversely affected.

A number of factors can affect customer’s perception of us including:

A number of factors can affect customers’, legislators’ and regulators’ perception of us or our business including:

service interruptions or safety concerns due to failures of equipment or facilities or from other causes, and our ability to promptly respond to such failures;

3 unchanged sentences

Customers', legislators', and regulators' opinions of us can also be affected by media coverage, including the proliferation of social media, which may include information, whether factual or not, that could damage the perception of natural gas, our brand, or our reputation.

Other concerns that have been raised about the use of natural gas include the potential for natural gas explosions and the effect of natural gas on indoor air quality.

For example, NW Natural’s gas distribution system was struck by a third party resulting in a gas explosion in 2016, and while NW Natural was determined not to be at fault, the perception of natural gas as an energy source could have been affected.

In addition, studies and claims by advocacy groups from time to time question the indoor health and general climate effects from burning natural gas, which may also impact public perception.

These shifts in public sentiment may not only impact further legislative initiatives, but behaviors and perceptions of customers, investors and regulators.

If customers, legislators, or regulators have or develop a negative opinion of us and our services, or of natural gas as an energy source generally, this could make it more difficult for us to achieve favorable legislative or regulatory outcomes.

Negative opinions could also result in sales volumes reductions or increased use of other sources of energy, or additional difficulties in accessing capital markets.

Although we believe that natural gas serves an important role in helping our region reduce GHG emissions and move to a low-carbon future, certain advocacy groups have opposed use of natural gas as a fuel source altogether and have pursued policies that place limitations or moratoriums or impose additional costs on the use of natural gas in a variety of contexts.

Concerns raised about the use of natural gas include the potential for natural gas explosions or delivery disruptions, methane leakage along transportation and delivery systems and end-use equipment, and contribution of natural gas energy use to GHG emission levels and global warming.

Concerns have also been raised regarding the use of RNG in place of natural gas.

In addition, studies and claims by advocacy groups from time to time question the indoor public health effects of burning natural gas, which may also impact public perception.

Shifts in public sentiment due to these concerns or others that may be raised may impact further legislative initiatives, litigation, as well as behaviors and perceptions of customers, investors and regulators.

Negative opinions could also result in reduced customer growth, sales volumes reductions, increased use of other sources of energy, or difficulties in accessing capital markets.

Any of these consequences could adversely affect NW Holdings’ or NW Natural’s financial position, results of operations and cash flows.

4 unchanged sentences

PUBLIC HEALTH RISK .

The recent novel coronavirus (COVID-19) pandemic is widespread, severe and unpredictable.

The novel coronavirus (COVID-19) pandemic is widespread, severe and unpredictable.

The continuation of this outbreak and the resulting economic conditions, or the emergence of other epidemic or pandemic crises, could materially and adversely affect NW Holdings’ and NW Natural’s business, results of operations, or financial condition.

1 unchanged sentence

In late March 2020, the Governors of Oregon and Washington issued “stay at home” executive orders requiring the closure of “non-essential” business and modifications to certain “essential” businesses.

While most of NW Natural’s services were, and continue to be, considered “essential” under existing executive orders, there is no guarantee they will continue to be classified as such.

While the states that we operate in have reopened with many businesses beginning to return to normal operating practices, the timing for recovery of businesses and local economies remains difficult to predict and dependent on the future impacts of the COVID-19 pandemic, resurgences or mutations of the virus, including the Delta and Omicron variants, any potential future shutdowns, efficacy and acceptance of vaccines, or any requirements related to vaccines or testing.

Additionally, while we have undertaken emergency response command structures and protocols that have operated well, they may not be sufficient to adequately mitigate the effects of COVID-19 on our operations, particularly in the event the pandemic worsens.

1 unchanged sentence

• disrupting our access to capital markets or increasing costs of capital affecting our liquidity in the future;

• reducing demand for natural gas, particularly from commercial and industrial customers that may be considered “non-essential” businesses under current or future executive orders or other governmental action, or that are suffering slow-downs or ultimately close completely due to COVID-19 effects;

• reducing demand for natural gas, particularly from commercial and industrial customers that may be considered “non-essential” businesses under current or future governmental action, or that are suffering slow-downs or ultimately close completely due to pandemic effects;

• reducing customer growth and new meter additions due to less economic, construction or conversion activity;

• subjecting us to legislative or prolonged administrative action that limits our ability to collect on overdue accounts or disconnect gas service for nonpayment, beyond a period of time acceptable to us;

• increasing our operating costs for emergency supplies, personal protective equipment, cleaning services and supplies, remote technology and other specific needs during this crisis;

• subjecting us to legislative or prolonged administrative action that limits our ability to collect on overdue accounts or disconnect gas service for nonpayment, beyond an amount or period of time acceptable to us;

• increasing our operating costs for emergency supplies, personal protective equipment, cleaning services and supplies, remote technology and other specific needs;

• impacting our capital expenditures if construction activities are suspended or delayed;

• sickening or causing a mandatory quarantine of a large percentage of our workforce, or key workgroups with specialized skill sets, impairing our ability to perform key business functions or execute our business continuity plans;

• impacting our or our suppliers’ ability to recruit and retain qualified personnel as a result of vaccine mandates or other pandemic regulations or protocols impacting employees;

• adversely affecting the asset values of NW Natural’s defined benefit pension plan or causing a failure to maintain sustained growth in pension investments over time, increasing our contribution requirements;

3 unchanged sentences

• creating additional cybersecurity vulnerabilities due to heavy reliance on remote working in our business continuity model.

Additionally, the effects of COVID-19 could create prolonged unfavorable economic conditions, slowed economic growth, or an economic recession that may result in or be accompanied by unprecedented unemployment rates and declines in the value of homes and investment assets, adversely affecting the income and financial resources of many domestic households and businesses.

It is unclear whether governmental responses to these conditions will lessen the severity or duration of any economic downturn.

Additionally, the effects of COVID-19 or other pandemics could create prolonged unfavorable economic conditions, slowed economic growth, inflation, which is currently on the rise, or an economic recession that may result in or be accompanied by unprecedented unemployment rates and declines in the value of certain assets, adversely affecting the income and financial resources of many domestic households and businesses.

It is unclear whether governmental responses to these conditions will lessen the severity or duration of any economic effects.

Our operational and financial results would likely be affected by such economic conditions.

Less new housing construction, fewer conversions to natural gas, higher levels of residential foreclosures and vacancies, and personal and business bankruptcies or reduced spending could all negatively affect our financial condition and results of operations.

The ultimate impact of COVID-19 on our business cannot be predicted and will depend on factors beyond our knowledge or control, including the duration and severity of the outbreak and resulting economic downturn, actions taken to contain the outbreak and mitigate its public health effects, and the extent to which normal economic and operating conditions can resume and when they might do so.

The ultimate impact of COVID-19 on our business cannot be predicted and will depend on factors beyond our knowledge or control, including the duration and severity of the pandemic and resulting economic effects, actions taken to contain the pandemic and mitigate its effects, and the extent to which normal economic and operating conditions can continue.

Any of these factors could have an adverse effect on our business, outlook, financial condition, and results of operations and cash flows, which could be significant.

2 unchanged sentences

NW Holdings’ and NW Natural’s ability to successfully complete strategic transactions, including merger, acquisition, divestiture, joint venture, business development projects or other strategic transactions is subject to significant risks, including the risk that required regulatory or governmental approvals may not be obtained, risks relating to unknown problems or liabilities or problems or liabilities undisclosed to us, and the risk that for these or other reasons, we may be unable to achieve some or all of the benefits that we anticipate from such transactions, which could adversely affect NW Holdings’ or NW Natural’s financial condition, results of operations, and cash flows.

From time to time, NW Holdings and NW Natural have pursued and may continue to pursue strategic transactions including merger, acquisition, divestiture, joint venture, business development projects or other strategic transactions, including RNG projects and acquisitions by NW Holdings in the water sector of a number of water utilities, wastewater entities and a water services company, with NW Holdings’ continuing to seek other such water sector related opportunities.

From time to time, NW Holdings and NW Natural have pursued and may continue to pursue strategic transactions including mergers, acquisitions, divestitures, joint ventures, business development projects or other strategic transactions, including, but not limited to, investments in RNG projects on a regulated basis by NW Natural and on a non-regulated basis by NW Holdings, as well as acquisitions by NW Holdings in the water and wastewater sectors.

Any such transactions involve substantial risks, including the following:

• purchase or sale transactions that are contracted for may fail to close for a variety of reasons;

• acquired businesses or assets may not produce revenues, earnings or cash flow at anticipated levels, which could, among other things, result in the impairment of any goodwill associated with such acquisitions;

• acquired businesses or assets may not produce revenues, earnings or cash flow at anticipated levels, which could, among other things, result in the impairment of any investments or goodwill associated with such acquisitions;

• acquired businesses or assets could have environmental, permitting, or other problems for which contractual protections prove inadequate;

6 unchanged sentences

BUSINESS DEVELOPMENT RISK.

NW Holdings’ and NW Natural’s business development projects may encounter unanticipated obstacles, costs, changes or delays that could result in a project becoming impaired, which could negatively impact NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows.

NW Holdings’ and NW Natural’s business development projects may not be successful or may encounter unanticipated obstacles, costs, changes or delays that could result in a project becoming impaired, which could negatively impact NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows.

Business development projects involve many risks.

We are currently engaged in several business development projects, including, but not limited to, several water, wastewater and RNG projects.

We may also engage in other business development projects such as investments in additional long-term gas reserves, CNG refueling stations, power to gas or hydrogen projects or other projects intended to reduce carbon emissions.

These projects may not be successful.

We may also engage in other business development projects such as investments in additional long-term gas reserves, non-regulated investments in RNG projects, and purchasing, marketing and reselling of RNG and its associated attributes, CNG refueling stations, power to gas or hydrogen projects or other similar projects.

Our business development activities are subject to uncertainties and changed circumstances and may not reach the scale expected, be successful or perform as anticipated.

Additionally, we may not be able to obtain required governmental permits and approvals to complete our projects in a cost-efficient or timely manner, potentially resulting in delays or abandonment of the projects.

2 unchanged sentences

ineffective scalability;

unsuccessful business models;

startup and construction delays;

4 unchanged sentences

public opposition to projects;

changes in market prices;

marketing risk and changes in market regulation, behavior or prices (including markets for RNG and its associated attributes);

the inability to receive expected tax or regulatory treatment;

and operating cost increases.

Additionally, we may be unable to finance our business development projects at acceptable costs or within a scheduled time frame necessary for completing the project.

Any of the foregoing risks, if realized, could result in the project becoming impaired, and such impairment could have an adverse effect on NW Holdings’ or NW Natural’s financial condition and results of operations.

Any of the foregoing risks, if realized, could result in business development efforts failing to produce expected financial results and the project investment becoming impaired, and such impairment could have an adverse effect on NW Holdings’ or NW Natural’s financial condition and results of operations.

JOINT PARTNER RISK.

Investing in business development projects through partnerships, joint ventures or other business arrangements affects our ability to manage certain risks and could adversely impact NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows.

We use joint ventures and other business arrangements to manage and diversify the risks of certain development projects, including NW Natural’s gas reserves agreements and RNG projects.

NW Holdings or NW Natural may acquire or develop part-ownership interests in other projects in the future, including but not limited to, water, wastewater, RNG or hydrogen projects.

Under these arrangements, we may not be able to fully direct the management and policies of the business relationships, and other participants in those relationships may take action contrary to our interests, including making operational decisions that could negatively affect our costs and liabilities.

We use joint ventures and other business arrangements to manage and diversify the risks of certain development projects, including NW Natural’s gas reserves agreements and certain RNG projects.

NW Holdings or NW Natural currently has and may further acquire or develop part-ownership interests in other projects in the future, including but not limited to, natural gas, water, wastewater, RNG, or hydrogen projects.

Under these arrangements, we may not be able to fully direct the management and policies of the business relationships, and other participants in those relationships may act contrary to our interests, including making operational decisions that could negatively affect our costs and liabilities.

In addition, other participants may withdraw from the project, divest important assets, become financially distressed or bankrupt, or have economic or other business interests or goals that are inconsistent with ours.

4 unchanged sentences

and one or more participants in one of these gas reserves arrangements becoming financially insolvent or acting contrary to NW Natural’s interests.

For example, Jonah Energy, the counterparty in NW Natural’s gas reserves arrangement, has experienced recent credit rating downgrades.

For example, Jonah Energy, the counterparty in NW Natural’s gas reserves arrangement, is no longer rated by credit agencies.

While NW Natural intends to continue monitoring Jonah Energy’s financial condition and take appropriate actions to preserve NW Natural’s interests, it does not control Jonah Energy’s financial condition or continued performance under the gas reserves arrangement.

The cost of the original gas reserves venture is currently included in customer rates and additional wells under that arrangement are recovered at specific costs, the occurrence of one or more of these risks could affect NW Natural’s ability to recover this hedge in rates.

The cost of the original gas reserves venture is currently included in customer rates and additional wells

under that arrangement are recovered at specific costs, the occurrence of one or more of these risks could affect NW Natural’s ability to recover this hedge in rates.

Further, new gas reserves arrangements have not been approved for inclusion in rates, and regulators may ultimately determine to not include all or a portion of future transactions in rates.

The realization of any of the above mentioned situations could adversely impact NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows.

The realization of any of these situations could adversely impact NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows.

CUSTOMER GROWTH RISK.

1 unchanged sentence

NW Natural’s NGD margins and earnings growth have largely depended upon the sustained growth of its residential and commercial customer base due, in part, to the new construction housing market, conversions of customers to natural gas from other energy sources and growing commercial use of natural gas.

The last recession slowed new construction.

While new home construction has resumed and the multi-family composition has been higher than its pre-recession pace, overall construction has not returned to the pre-recession pace, and there are predictions of an impending new recessionary cycle.

Insufficient growth in

these markets, for economic, political or other reasons could adversely affect NW Holdings’ or NW Natural’s utility margin, earnings and cash flows.

Insufficient growth in these markets, for economic, political, public perception, or other reasons could adversely affect NW Holdings’ or NW Natural’s utility margin, earnings and cash flows.

RISK OF COMPETITION.

2 unchanged sentences

In the industrial market, NW Natural competes with suppliers of all forms of energy.

Competition among these forms of energy is based on price, efficiency, reliability, performance, market conditions, technology, environmental impacts and public perception.

Technological improvements in other energy sources such as heat pumps, batteries or other alternative technologies could erode NW Natural’s competitive advantage.

Competition among these forms of energy is based on price, efficiency, reliability, performance, market conditions, technology, federal, state and local governmental regulation, environmental impacts, and public perception.

Technological improvements such as heat pumps, batteries or other alternative technologies could erode NW Natural’s competitive advantage.

If natural gas prices rise relative to other energy sources, or if the cost, environmental impact or public perception of such other energy sources improves relative to natural gas, it may negatively affect NW Natural’s ability to attract new customers or retain our existing residential, commercial and industrial customers, which could have a negative impact on our customer growth rate and NW Holdings’ and NW Natural’s results of operations.

Our natural gas storage operations compete primarily with other storage facilities and pipelines.

Natural gas storage is an increasingly competitive business, with the ability to expand or build new storage capacity in California, the U.S.

Rocky Mountains and elsewhere in the U.S.

Increased competition in the natural gas storage business could reduce the demand for our natural gas storage services, drive prices down for our storage business, and adversely affect our ability to renew or replace existing contracts at rates sufficient to maintain current revenues and cash flows, which could adversely affect NW Holdings’ and NW Natural’s financial condition, results of operations and cash flows.

2 unchanged sentences

Transporting and storing natural gas and distributing natural gas and water involves numerous risks that may result in accidents and other operating risks and costs, some or all of which may not be fully covered by insurance, and which could adversely affect NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows.

NW Holdings and NW Natural are subject to all of the risks and hazards inherent in the businesses of gas distribution and storage, and water distribution, including:

NW Holdings and NW Natural are subject to all of the risks and hazards inherent in the businesses of gas distribution and storage, water distribution, and wastewater services including:

• earthquakes, wildfires, floods, storms, landslides and other severe weather incidents and natural hazards;

3 unchanged sentences

• negative performance by our storage reservoirs, facilities, or wells that could cause us to fail to meet expected or forecasted operational levels or contractual commitments to our customers;

• problems maintaining, or the malfunction of, pipelines, wellbores and related equipment and facilities that form a part of the infrastructure that is critical to the operation of our gas and water distribution and gas storage facilities;

• presence of chemicals or other compounds in natural gas that could adversely affect the performance of the system or end-use equipment;

• collapse of underground storage reservoirs;

• inadequate supplies of natural gas or water;

• inadequate supplies of natural gas or water or contamination of water supplies;

• operating costs that are substantially higher than expected;

5 unchanged sentences

TC Pipelines reports that dithiazine can drop out of gas streams in a powdery form at some points of pressure reduction (for example, at a regulator), and that in incidents where a sufficient quantity of the material accumulates in certain places, improper functioning of equipment can occur, which can result in increased preventative and corrective action costs.

While NW Natural has not detected significant quantities of dithiazine on its system to date, we continue to monitor and could discover increased levels of dithiazine or other compounds on NW Natural’s system that could affect the performance of the system or end-use equipment.

While NW Natural has not detected significant

quantities of dithiazine on its system to date, we continue to monitor and could discover increased levels of dithiazine or other compounds on NW Natural’s system that could affect the performance of the system or end-use equipment.

These risks could result in disruption of service, personal injury or loss of human life, damage to and destruction of property and equipment, pollution or other environmental damage, breaches of our contractual commitments, and may result in curtailment or suspension of operations, which in turn could lead to significant costs and lost revenues.

8 unchanged sentences

Given recent high-profile natural gas explosions, leaks and accidents in other parts of the country involving both distribution systems and storage facilities, we anticipate that the natural gas industry may be the subject of even greater federal, state and local regulatory oversight.

For example, in 2020, the Protecting our Infrastructure of Pipelines and Enhancing Safety Act (PIPES Act) reauthorization was signed into law increasing regulations for natural gas transmission and distribution pipelines.

Among other things, the PIPES Act includes new mandates for the Pipeline and Hazardous Materials Safety Administration (PHMSA) to require operators to update and implement various pipeline safety plans and processes.

In addition, our workplaces are subject to the requirements of the Department of Transportation, through the Federal Motor Carrier Safety Administration, and the Occupational Safety and Health Administration, as well as state statutes and regulations that regulate the protection of the health and safety of workers.

For example, in 2020, the Protecting our Infrastructure of Pipelines and Enhancing Safety Act (PIPES Act) reauthorization was signed into law expanding regulations for natural gas transmission and distribution pipelines.

Among other things, the Pipeline and Hazardous Materials Safety Administration (PHMSA) is implementing the requirements of the PIPES Act, including regulations related to the detection and repair of leaks and valve automation.

In addition, our workplaces are subject to the requirements of the Department of Transportation, through the Federal Motor Carrier Safety Administration, and the Occupational Safety and Health Administration, as well as state and local statutes and regulations that regulate the protection of the health and safety of workers.

The failure to comply with these requirements or general industry standards, including keeping adequate records or preventing occupational injuries or exposure, could expose us to civil or criminal liability, enforcement actions, and regulatory fines and penalties that may not be recoverable through our rates and could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We intend to work diligently with industry associations and federal and state regulators to seek to ensure compliance with these and other new laws.

We intend to work diligently with industry associations and federal and state regulators to seek to ensure compliance with these regulations and other new laws.

We expect there to be increased costs associated with compliance, and those costs could be significant.

16 unchanged sentences

Rocky Mountain supply basins.

If there is a rupture or inadequate capacity in, or supplies to maintain adequate pressures in, the pipeline, NW Natural may not be able to meet its customers’ gas requirements and we would likely incur costs associated with actions necessary to mitigate service disruptions, both of which could significantly and negatively impact NW Holdings’ and NW Natural’s results of operations.

If there is a rupture or inadequate capacity in, or supplies to maintain adequate pressures in, the pipeline, NW Natural may not be able to meet its customers’ gas requirements and we

would likely incur costs associated with actions necessary to mitigate service disruptions, both of which could significantly and negatively impact NW Holdings’ and NW Natural’s results of operations.

THIRD PARTY PIPELINE RISK.

NW Holdings’ and NW Natural’s gas storage businesses depend on third-party pipelines that connect our storage facilities to interstate pipelines, the failure or unavailability of which could adversely affect NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows.

NW Natural’s gas storage business depends on third-party pipelines that connect our storage facilities to interstate pipelines, the failure or unavailability of which could adversely affect NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows.

Our gas storage facilities are reliant on the continued operation of a third-party pipeline and other facilities that provide delivery options to and from our storage facilities.

Because we do not own all of these pipelines, their operations are not within our control.

efficiently and satisfy our customers’ needs could be compromised, thereby potentially having an adverse impact on NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows.

If the third-party pipeline to which we are connected were to become unavailable for current or future withdrawals or injections of natural gas due to repairs, damage to the infrastructure, lack of capacity or other reasons, our ability to operate efficiently and satisfy our customers’ needs could be compromised, thereby potentially having an adverse impact on NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows.

WORKFORCE RISK .

2 unchanged sentences

A significant portion of our workforce is currently eligible or will reach retirement eligibility within the next five years, which will require that we attract, train and retain skilled workers to prevent loss of institutional knowledge or skills gaps.

We face competition for qualified personnel with specific skillsets.

This competition is elevated by the record low unemployment in Oregon and may result in increased pressure on wages or other challenges in recruiting or retaining personnel.

Without an appropriately skilled workforce, our ability to provide quality service and meet our regulatory requirements will be challenged and this could negatively impact NW Holdings' and NW Natural’s earnings.

19 unchanged sentences

Moreover, we may have disputes with regulators and other parties as to the severity of particular environmental matters, what remediation efforts are appropriate, whether natural resources were damaged, and the portion of the costs or claims NW Natural or NW Holdings should bear.

We cannot predict with certainty the amount or timing of future expenditures related to environmental investigations, remediation or other action, the portions of these costs allocable to NW Natural or NW Holdings, or disputes or litigation arising in relation thereto.

We cannot predict with certainty the amount or timing of future expenditures related to

environmental investigations, remediation or other action, the portions of these costs allocable to NW Natural or NW Holdings, or disputes or litigation arising in relation thereto.

Environmental liability estimates are based on current remediation technology, industry experience gained at similar sites, an assessment of probable level of responsibility, and the financial condition of other potentially responsible parties.

7 unchanged sentences

If these costs are not recoverable, or if these regulations reduce the desirability or cost-competitiveness of natural gas, they could have an adverse effect on NW Holdings’ or NW Natural’s operations or financial condition.

Furthermore, failure to comply with such laws or regulations could subject us to possible enforcement actions, financial liability or litigation, any of which could adversely affect NW Holdings’ or NW Natural’s financial condition and results of operations.

GLOBAL CLIMATE CHANGE RISK.

Our businesses may be subject to physical risks associated with climate change, all of which could adversely affect NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows.

Climate change may cause physical risks, including an increase in sea level, intensified storms, water scarcity, wildfire susceptibility and changes in weather conditions, such as changes in precipitation, average temperatures and extreme wind or other extreme weather events or climate conditions.

A significant portion of the nation’s gas infrastructure is located in areas susceptible to storm damage that could be aggravated by wetland and barrier island erosion, which could give rise to gas supply interruptions and price spikes.

Climate change may cause physical risks, including an increase in sea level, intensified storms, water scarcity, wildfire susceptibility and intensity and changes in weather conditions, such as changes in precipitation, average temperatures and extreme wind or other extreme weather events or climate conditions.

Moreover, a significant portion of the nation’s gas infrastructure is located in areas susceptible to storm damage that could be aggravated by wetland and barrier island erosion, which could give rise to gas supply interruptions and price spikes.

These and other physical changes could result in disruptions to natural gas production and transportation systems potentially increasing the cost of gas and affecting our natural gas businesses’ ability to procure or transport gas to meet customer demand.

4 unchanged sentences

PUBLIC PERCEPTION AND POLICY RISK.

Changes in public sentiment or public policy with respect to natural gas, including through local, state or federal laws or legislation or other regulation (including ballot initiatives or executive orders), could adversely affect NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows.

Changes in public sentiment or public policy with respect to natural gas, including through local, state or federal laws or legislation or other regulation (including ballot initiatives, executive orders or regulatory codes) or litigation, could adversely affect NW Holdings’ or NW Natural’s financial condition, results of operations and cash flows.

There are a number of international, federal, state, and local legislative, legal, regulatory and other initiatives being proposed and adopted in an attempt to measure, control or limit the effects of global warming and climate change, including greenhouse gas (GHG) emissions such as carbon dioxide and methane.

For example, cap and trade bills were considered in the 2019 and 2020 Oregon legislative sessions, and failed each time due to a lack of quorum for a vote.

In Washington, similar legislation seeking to reduce GHG emissions in a variety of ways have been unsuccessfully pursued.

It is expected that there will be continued efforts to address climate change in the 2021 legislative sessions through legislation that seeks to limit GHG emissions, disadvantages direct natural gas usage, or promotes electrification, in both Oregon and Washington.

The Washington State Building Code Council adopted a statewide residential building code that incorporates carbon reduction measures.

In Oregon, largely as a result of the inability of the Oregon legislature to pass GHG legislation, in March, 2020, the Oregon Governor issued an executive order establishing GHG emissions reduction goals of at least 45% below 1990 emission levels by 2035 and at least 80% below 1990 emission levels by 2050 and directing state agencies and commissions to facilitate such GHG emission goals.

Although the order does not specifically direct actions of natural gas distribution businesses, the OPUC is directed to prioritize proceedings and activities that advance decarbonization in the utility sector, mitigate energy burden experienced by utility customers and ensure system reliability and resource adequacy.

The executive order also directs other agencies to cap and reduce GHG emissions from transportation fuels and all other liquid and gaseous fuels, including natural gas, adopt building energy efficiency goals for new building construction, reduce methane gas emissions from landfills and food waste, and submit a proposal for adoption of state goals for carbon sequestration and storage by Oregon’s forest, wetlands and agricultural lands.

At this time, we are unable to predict the impact of the executive order on NW Natural.

As an executive order, any implementation is reliant on state agency rule-making.

The scope and content of any state commission or agency rules, as well as the time to propose, adopt and implement any such rules, has not been fully determined, but is expected to be substantially complete in the next 12 to 24 months.

A number of local jurisdictions are also reviewing their own GHG regulations.

For example, one small jurisdiction in NW Natural’s service territory, Eugene, Oregon, is seeking to pursue reductions in GHG emissions by negotiating for GHG targets, carbon offsets and increased use of RNG in their system.

Legislation or other forms of public policy or regulation that aim to reduce GHG emissions at the federal, state, or local level could take a variety of forms including, but not limited to, GHG emissions limits, reporting requirements, carbon taxes, requirements to purchase carbon credits, building codes, increased efficiency standards, additional charges to fund energy efficiency activities or other regulatory actions, and incentives or mandates to conserve energy, or use renewable energy sources.

Federal, state, or local governments may provide tax advantages and other subsidies to support alternative energy sources, withdraw funding from fossil fuel sources, mandate the use of specific fuels or technologies, or promote research into new technologies to reduce the cost and increase the scalability of alternative energy sources.

For example, the State of Washington has enacted the Climate Commitment Act (CCA), which establishes a comprehensive program that provides an overall limit for GHG emissions from major sources in the state that begins on January 1, 2023 and declines yearly to 95% below 1990 levels by 2050.

Similarly, in Oregon, largely as a result of the inability of the Oregon legislature to pass GHG legislation, in March 2020, the Oregon Governor issued an executive order establishing GHG emissions reduction goals and directing state agencies and commissions (including the ODEQ and the OPUC) to facilitate such GHG emission goals.

In December 2021, the ODEQ concluded its process and issued final cap and reduce rules for the Climate Protection Program (CPP), which became effective January 1, 2022.

The CPP outlines GHG emissions

reduction goals of 50% by 2035 and 90% by 2050 from a 1990 baseline.

NW Natural is subject to both the CCA and CPP.

We expect that there will be additional efforts to address climate change in the 2022 legislative sessions in both Oregon and Washington.

Additionally, the Washington State Building Code Council adopted a statewide residential building code in February 2021 that requires new residential construction to achieve higher levels of energy efficiency based on specified carbon emissions assumptions, which calculate on-site electric appliances to have lower GHG emissions than comparable gas appliances.

The same agency is considering changes to its commercial building code that could restrict or eliminate the use of gas space and water heating in new commercial construction beginning in July 2023.

A number of local and county jurisdictions are also proposing or passing renewable energy resolutions or other measures in an effort to accelerate renewable energy goals.

A number of cities across the country, and several in our service territory are currently considering actions aimed at formalizing climate action goals and driving down GHG emissions.

Such current or future legislation, regulation or other initiatives (including ballot initiatives or ordinances) could impose on our natural gas businesses operational requirements or restrictions, additional charges to fund energy efficiency initiatives, or levy a tax based on carbon content.

In addition, while no such bans currently exist in NW Natural’s operating territories, certain municipalities, such as Berkeley, California, are moving to restrict new natural gas hookups in residential and other buildings.

Other jurisdictions have considered requiring the conversion of buildings to electric heat, or otherwise adopting policies or incentives to encourage the use of electricity in lieu of natural gas.

Such restrictions could

adversely impact customer growth or usage, and could adversely impact our ability to recover costs and maintain reasonable customer rates.

In addition, while no such bans currently exist in NW Natural’s operating territories, certain jurisdictions, including San Francisco, Seattle, and New York have enacted measures to ban or discourage the use of new natural gas hookups in residential or other buildings.

Other jurisdictions, including several in our service territory, have considered similar restrictions or other measures discouraging the use of natural gas, such as requiring the conversion of buildings to electric heat, or adopting policies or incentives to encourage the use of electricity in lieu of natural gas.

Such restrictions could adversely impact customer growth or usage and could adversely impact our ability to recover costs and maintain reasonable customer rates.

In addition, certain cities, local jurisdictions and private parties have initiated lawsuits against companies related to climate change impacts, GHG emissions or climate-related disclosures.

While NW Natural has not been subject to such litigation to date, such climate-related claims or actions could be costly to defend and could negatively impact our business, reputation, financial condition, and results of operations.

NW Natural believes natural gas has an important role in moving the Pacific Northwest to a low carbon future, and to that end is developing programs and measures to reduce carbon emissions.

However, NW Natural’s efforts may not happen quickly enough to keep pace with legislation or other regulation, legal changes or public sentiment, or may not be as effective as expected.

Any of these initiatives, or our unsuccessful response to them, could result in us incurring additional costs to comply with the imposed restrictions, provide a cost or other competitive advantage to energy sources other than natural gas, reduce demand for natural gas, restrict our ability to add new construction meters, impose costs or restrictions on end users of natural gas, impact the prices we charge our customers, impose increased costs on us associated with the adoption of new infrastructure and technology to respond to such requirements, and could negatively impact public perception of our services or products that negatively diminishes the value of our brand, all of which could adversely affect NW Holdings’ or NW Natural’s business operations, financial condition and results of operations.

Any of these initiatives, or our unsuccessful response to them, could result in us incurring additional costs to comply with the imposed restrictions or programs, provide a cost or other competitive advantage to energy sources other than natural gas, reduce demand for natural gas, restrict our ability to add new meters, impose costs or restrictions on end users of natural gas, impact the prices we charge our customers, increase the likelihood of litigation, impose increased costs on us associated with the adoption of new infrastructure and technology to respond to such requirements which may or may not be recoverable in customer rates, and could negatively impact public perception of our services or products that negatively diminishes the value of our brand, all of which could adversely affect NW Holdings’ or NW Natural’s business operations, financial condition and results of operations.

Business Continuity and Technology Risks

BUSINESS CONTINUITY RISK.

NW Holdings and NW Natural may be adversely impacted by local or national disasters, pandemic illness, political unrest, terrorist activities, cyber-attacks or data breaches, and other extreme events to which we may not be able to promptly respond, which could adversely affect NW Holdings’ or NW Natural’s operations or financial condition.

Local or national disasters, pandemic illness (including COVID-19), political unrest, terrorist activities, cyber-attacks and data breaches, and other extreme events are a threat to our assets and operations.

Companies in critical infrastructure industries may face a heightened risk due to being the target of, and having heightened exposure to, acts of terrorism or sabotage, including physical and security breaches of our physical infrastructure and information technology systems in the form of cyber-attacks.

NW Holdings and NW Natural may be adversely impacted by local or national disasters, political unrest, terrorist activities, cyber-attacks or data breaches, and other extreme events to which we may not be able to promptly respond, which could adversely affect NW Holdings’ or NW Natural’s operations or financial condition.

Local or national disasters, political unrest, terrorist activities, cyber-attacks and data breaches, and other extreme events are a threat to our assets and operations.

These attacks could, among other things, target or impact our technology or mechanical systems that operate our distribution, transmission or storage facilities and result in a disruption in our operations, damage to our system and inability to meet customer requirements.

1 unchanged sentence

Threatened or actual national disasters or terrorist activities may also disrupt capital or bank markets and our ability to raise capital or obtain debt financing, or impact our suppliers or our customers directly.

Local disaster, protests or pandemic illness could result in disruption of our infrastructure or part of our workforce being unable to operate or maintain our infrastructure or perform other tasks necessary to conduct our business.

Local disaster or civil unrest could result in disruption of our infrastructure or part of our workforce being unable to operate or maintain our infrastructure or perform other tasks necessary to conduct our business.

A slow or inadequate response to events may have an adverse impact on our operations and earnings.

We may not be able to maintain sufficient insurance to cover all risks associated with local and national disasters, pandemic illness, terrorist activities, cyber-attacks and other events.

We may not be able to maintain sufficient insurance to cover all risks associated with local and national disasters, terrorist activities, cyber-attacks and other attacks or events.

Additionally, large scale natural disasters or terrorist attacks could destabilize the insurance industry making the insurance we do have unavailable, which could increase the risk that an event could adversely affect NW Holdings’ or NW Natural’s operations or financial results.

8 unchanged sentences

In addition, our various existing information technology systems require periodic modifications, upgrades and/or replacement.

For example, NW Natural intends to upgrade its SAP system and replace its customer information system in the near future.

For example, NW Natural is working to upgrade its SAP system and intends to replace its customer information system in the near future.

There are various risks associated with these systems in addition to upgrades and replacements, including hardware and software failure, communications failure, data distortion or destruction, unauthorized access to data, misuse of proprietary or confidential data, unauthorized control through electronic means, programming mistakes and other inadvertent errors or deliberate human acts.

In addition, we are dependent on a continuing flow of important components to maintain and upgrade our information technology systems.

Our suppliers may face production or import delays due to natural disasters, strikes, lock-outs, political unrest or other such circumstances.

Our suppliers may face production or import delays due to natural disasters, strikes, lock-outs, political unrest, pandemics (including COVID-19) or other such circumstances.

Technology services provided by third-parties also could be disrupted due to events and circumstances beyond our control which could adversely impact our business, financial condition and results of operations.

Any modifications, upgrades, system maintenance or replacements subject us to inherent costs and risks, including potential disruption of our internal control structure, substantial capital expenditures, additional administrative and operating expenses, retention of sufficiently skilled personnel to implement and operate the new systems, and other risks and costs of delays or difficulties in transitioning to new systems or of integrating new systems into our current systems.

In addition, the difficulties with implementing new technology systems may cause disruptions in our business operations and have an adverse effect on our

business and operations, if not anticipated and appropriately mitigated.

In addition, the difficulties with implementing new technology systems may cause disruptions in our business operations and have an adverse effect on our business and operations, if not anticipated and appropriately mitigated.

There is also risk that we may not be able to recover all costs associated with projects to improve our technological capabilities, which may adversely affect NW Holdings’ or NW Natural’s financial condition and results of operations.

1 unchanged sentence

NW Holdings’ and NW Natural’s status as an infrastructure services provider coupled with its reliance on technology could result in a security breach which could adversely affect NW Holdings’ or NW Natural’s financial condition and results of operations.

Although we take precautions to protect our technology systems and are not aware of any material security breaches to date, there is no guarantee that the procedures we have implemented to protect against unauthorized access to secured data and systems, including our industrial controls and other information technology systems, are adequate to safeguard against all security breaches or other cyber attacks.

Additionally, the facilities and systems of clients, suppliers and third party service providers could be vulnerable to the same cyber risks as our facilities and systems, and such third party systems may be interconnected to our systems both physically and technologically.

1 unchanged sentence

As these potential cyber security attacks become more common and sophisticated, we could be required to incur costs to strengthen our systems or obtain specific insurance coverage against potential losses.

Our businesses could experience breaches of security pertaining to sensitive customer, employee, and vendor information maintained by us in the normal course of business, which could adversely affect our reputation, diminish customer confidence, disrupt operations, materially increase the costs we incur to protect against these risks, and subject us to possible financial liability or increased regulation or litigation, any of which could adversely affect NW Holdings’ or NW Natural’s financial condition and results of operations.

Moreover, a variety of regulatory agencies are increasingly focused on cybersecurity risks, and specifically in critical infrastructure sectors.

For example, the Transportation Security Administration (TSA) has published two security directives mandating cybersecurity actions for critical pipeline owners and operators.

Failure to timely and effectively meet the requirements of these directives or other cybersecurity regulations could result in fines or other penalties.

While we are unable to estimate a range of possible costs at this time, we could also incur significant costs in complying with regulatory directives, and there is no assurance that we will be able to recover those costs in rates.

In addition, our businesses could experience breaches of security pertaining to sensitive customer, employee, and vendor information maintained by us in the normal course of business, which could adversely affect our reputation, diminish customer confidence, disrupt operations, materially increase the costs we incur to protect against these risks, and subject us to possible financial liability or increased regulation or litigation, any of which could adversely affect NW Holdings’ or NW Natural’s financial condition and results of operations.

Financial and Economic Risks

2 unchanged sentences

As a holding company, NW Holdings’ only significant assets are the stock and membership interests of its operating subsidiaries, which at this time is primarily NW Natural.

NW Holdings’ direct and indirect subsidiaries are separate and distinct legal entities, managed by their own boards of directors, and have no obligation to pay any amounts to their respective shareholders, whether through dividends, loans or other payments.

NW Holdings’ direct and indirect subsidiaries are separate and distinct legal entities,

managed by their own boards of directors, and have no obligation to pay any amounts to their respective shareholders, whether through dividends, loans or other payments.

The ability of these companies to pay dividends or make other distributions on their common stock is subject to, among other things:

18 unchanged sentences

Sustained declines in equity markets and reductions in bond rates may have a material adverse effect on the value of the pension fund assets and liabilities.

In these circumstances, NW Natural may be required to recognize increased contributions and pension

expense earlier than it had planned to the extent that the value of pension assets is less than the total anticipated liability under the plans, which could have a negative impact on NW Holdings’ and NW Natural’s financial condition, results of operations and cash flows.

In these circumstances, NW Natural may be required to recognize increased contributions and pension expense earlier than it had planned to the extent that the value of pension assets is less than the total anticipated liability under the plans, which could have a negative impact on NW Holdings’ and NW Natural’s financial condition, results of operations and cash flows.

HEDGING RISK.

12 unchanged sentences

Counterparties owing NW Natural or its subsidiaries money or physical natural gas commodities could breach their obligations.

Should the counterparties to these arrangements fail to perform, NW Natural may be forced to enter into alternative arrangements to meet its normal business requirements.

Should the counterparties to these arrangements fail

to perform, NW Natural may be forced to enter into alternative arrangements to meet its normal business requirements.

In that event, NW Holdings’ or NW Natural’s financial results could be adversely affected.

3 unchanged sentences

GAS PRICE RISK.

Higher natural gas commodity prices and volatility in the price of gas may adversely affect NW Natural’s NGD business, whereas lower gas price volatility may adversely affect NW Natural’s and NW Holdings’ gas storage business, in each case negatively affecting NW Holdings’ and NW Natural’s results of operations and cash flows.

Higher natural gas commodity prices and volatility in the price of gas may adversely affect NW Natural’s NGD business, whereas lower gas price volatility may adversely affect NW Natural’s gas storage business, negatively affecting NW Holdings’ and NW Natural’s results of operations and cash flows.

The cost of natural gas is affected by a variety of factors, including weather, changes in demand, the level of production and availability of natural gas supplies, transportation constraints, availability and cost of pipeline capacity, federal and state energy and environmental regulation and legislation, natural disasters and other catastrophic events, national and worldwide economic and political conditions, and the price and availability of alternative fuels.

At NW Natural, the cost we pay for natural gas is generally passed through to customers through an annual PGA rate adjustment.

If gas prices were to increase significantly, it would raise the cost of energy to NW Natural’s customers, potentially causing those customers to conserve or switch to alternate sources of energy.

Significant price increases could also cause new home builders and commercial developers to select alternative energy sources.

If gas prices were to increase significantly and remain higher, it could raise the cost of energy to NW Natural’s customers, potentially causing those customers to conserve or switch to alternate sources of energy.

Sustained significant price increases could also cause new home builders and commercial developers to select alternative energy sources.

Decreases in the volume of gas NW Natural sells could reduce NW Holdings or NW Natural’s earnings, and a decline in customers could slow growth in future earnings.

Additionally, because a portion (10% or 20%) of any difference between the estimated average PGA gas cost in rates and the actual average gas cost incurred is recognized as current income or expense, higher average gas costs than those assumed in setting rates can adversely affect NW Holdings’ and NW Natural’s operating cash flows, liquidity and results of operations.

Additionally, notwithstanding NW Natural’s current rate structure, higher gas costs could result in increased pressure on the OPUC or the WUTC to seek other means to reduce NW Natural’s rates, which also could adversely affect NW Holdings’ and NW Natural’s results of operations and cash flows.

Higher gas prices may also cause NW Natural to experience an increase in short-term debt and temporarily reduce liquidity because it pays suppliers for gas when it is purchased, which can be in advance of when these costs are recovered through rates.

Temporary gas price increases can also adversely affect NW Holdings’ and NW Natural’s operating cash flows, liquidity and results of operations because a portion (10% or 20%) of any difference between the estimated average PGA gas cost in rate and the actual average gas cost incurred is recognized as current income or expense.

Temporary or sustained higher gas prices may also cause NW Natural to experience an increase in short-term debt and temporarily reduce liquidity because it pays suppliers for gas when it is purchased, which can be in advance of when these costs are recovered through rates.

Significant increases in the price of gas can also slow collection efforts as customers experience increased difficulty in paying their higher energy bills, leading to higher than normal delinquent accounts receivable resulting in greater expense associated with collection efforts and increased bad debt expense.

1 unchanged sentence

NW Holdings’ or NW Natural’s inability to access capital, or significant increases in the cost of capital, could adversely affect NW Holdings’ or NW Natural’s financial condition and results of operations.

NW Holdings’ and NW Natural’s ability to obtain adequate and cost effective short-term and long-term financing depends on maintaining investment grade credit profiles as well as the existence of liquid and stable financial markets.

NW Holdings’ and NW Natural’s ability to obtain adequate and cost effective short-term and long-term financing depends on maintaining investment grade credit profiles, perceptions of our business in capital markets, and the existence of liquid and stable financial markets.

NW Holdings relies on access to equity and bank markets to finance equity contributions to subsidiaries and other business requirements.

NW Natural relies on access to capital and bank markets, including commercial paper and bond markets, to finance its operations, construction expenditures and other business requirements, and to refund maturing debt that cannot be funded entirely by internal cash flows.

Disruptions in capital markets, including but not limited to, the ongoing COVID-19 pandemic or political unrest, could adversely affect our ability to access short-term and long-term financing.

Disruptions in capital markets, including but not limited to, the ongoing COVID-19 pandemic, political unrest, inflationary pressures, or rising interest rates could adversely affect our ability to access short-term and long-term financing.

Our access to funds under committed credit facilities, which are currently provided by a number of banks, is dependent on the ability of the participating banks to meet their funding commitments.

1 unchanged sentence

Disruptions in the bank or capital financing markets as a result of economic uncertainty, changing or increased regulation of the financial sector, or failure of major financial institutions, or disruptions in credit markets, could adversely affect NW Holdings’ and NW Natural’s access to capital and negatively impact our ability to run our businesses and make strategic investments.

Furthermore, recent trends toward investments that are perceived to be “green” or “sustainable” could shift capital away from, or increase the cost of capital for, our natural gas business.

We believe our business is an important component of a low carbon future and are striving to decarbonize our systems.

Nevertheless, perceptions in the financial markets could differ or outpace our decarbonization progress and result in a shift funding away from, or limit or restrict certain forms of funding for, natural gas businesses.

NW Natural is currently rated by S&P and Moody’s and a negative change in its credit ratings, particularly below investment grade, could adversely affect its cost of borrowing and access to sources of liquidity and capital.

1 unchanged sentence

Additionally, downgrades in its current credit ratings below investment grade could cause additional delays in NW Natural's ability to access the capital markets while it seeks supplemental state regulatory approval, which could hamper its ability to access credit markets on a timely basis.

NW Holdings' credit profile is largely supported by NW Natural’s credit ratings and any negative change in NW Natural’s credit ratings would likely negatively impact NW Holdings’ access to sources of liquidity and capital and cost of borrowing.

NW Holdings' credit profile is

largely supported by NW Natural’s credit ratings and any negative change in NW Natural’s credit ratings would likely negatively impact NW Holdings’ access to sources of liquidity and capital and cost of borrowing.

A credit downgrade to NW Natural, or resulting negative impact on NW Holdings, could also require additional support in the form of letters of credit, cash or other forms of collateral and otherwise adversely affect NW Holdings' or NW Natural’s financial condition and results of operations.

8 unchanged sentences

NW Holdings' total goodwill was $70.6 million as of December 31, 2021 and $69.2 million as of December 31, 2020.

The increase in the goodwill balance was due to additions associated with acquisitions in the water sector.

All of our goodwill is related to water and wastewater acquisitions.

16 unchanged sentences

Colder weather typically results in higher gas sales.

Although the effects of warmer or colder weather on utility margin in Oregon

are expected to be mitigated through the operation of NW Natural’s weather normalization mechanism, weather variations from normal could adversely affect utility margin because NW Natural may be required to purchase more or less gas at spot rates, which may be higher or lower than the rates assumed in its PGA.

Although the effects of warmer or colder weather on utility margin in Oregon are expected to be mitigated through the operation of NW Natural’s weather normalization mechanism, weather variations from normal could adversely affect utility margin because NW Natural may be required to purchase more or less gas at spot rates, which may be higher or lower than the rates assumed in its PGA.

Also, a portion of NW Natural’s Oregon residential and commercial customers (usually less than 10%) have opted out of the weather normalization mechanism, and approximately 12% of its customers are located in Washington where it does not have a weather normalization mechanism.

7 unchanged sentences

• interruptions in water supplies and service, natural disasters and droughts;

• disruptions to the wastewater collection and treatment process;

• conservation efforts by customers;

• regulatory requirements and proceedings;

• regulatory and legal requirements, including environmental, health and safety laws and regulations;

• the outcome of rate cases and other regulatory proceedings;

• weather conditions.

12 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors