What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-23 compared with 2023-02-24 · 261 added, 292 removed, 2027 unchanged (21% of the section changed)

32 unchanged sentences

The effectiveness of internal control over financial reporting as of December 31, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in this annual report.

President and Chief Executive Officer

Burkhartsmeyer

Senior Vice President and Chief Financial Officer

Chief Executive Officer

Chief Financial Officer, Chief Accounting Officer, Vice President, Treasurer

February 23, 2024

12 unchanged sentences

Based on NW Natural management's assessment and those criteria, NW Natural management has concluded that it maintained effective internal control over financial reporting as of December 31, 2023.

President and Chief Executive Officer

Burkhartsmeyer

Senior Vice President and Chief Financial Officer

Chief Executive Officer

Chief Financial Officer, Chief Accounting Officer, Vice President, Treasurer

February 23, 2024

31 unchanged sentences

As described in Note 2 to the consolidated financial statements, there were $511.7 million of regulatory assets and $780.9 million of regulatory liabilities as of December 31, 2023.

As disclosed by management, the Company has operations that are subject to the actions of regulators which establish rates in general rate cases and other proceedings which are designed to recover specific costs of providing regulatory services for which management records regulatory assets and liabilities.

Regulatory accounting requires management to account for deferred expenses (or deferred revenues) as regulatory assets (or regulatory liabilities) on the balance sheet.

The Company’s principal business is to operate as a holding company for Northwest Natural Gas Company (“NW Natural”) and its other subsidiaries.

NW Natural's principal business is the distribution of natural gas, which is regulated;

the accounting records and practices of the regulated businesses conform to the requirements and uniform system of accounts prescribed by regulatory authorities.

Customer rates are regulated and have approved cost-based rates which are intended to allow the Company to earn a return on invested capital.

As disclosed by management, regulatory accounting requires management to account for deferred expenses (or deferred revenues) as regulatory assets (or regulatory liabilities) on the balance sheet.

When the recovery of these regulatory assets from, or refund of regulatory liabilities to, customers is approved, management recognizes the expense or revenue on the income statement at the same time the adjustment to amounts is included in rates charged to customers.

The principal considerations for our determination that performing procedures relating to the Company’s accounting for the effects of regulatory matters is a critical audit matter are the significant judgment by management in assessing the potential outcomes and related accounting impacts of rate cases and other proceedings.

This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence obtained related to the recovery of regulatory assets and the settlement of regulatory liabilities.

The principal considerations for our determination that performing procedures relating to the Company’s accounting for the effects of regulatory matters is a critical audit matter are the high degree of auditor effort in performing procedures and evaluating audit evidence related to the recovery of regulatory assets and the settlement of regulatory liabilities.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s assessment of rates cases and other proceedings, including the probability of recovery of regulatory assets and the settlement of regulatory liabilities and related accounting and disclosure impacts.

These procedures also included, among others (i) evaluating the reasonableness of management’s assessment regarding the probability of recovery of regulatory assets and settlement of regulatory liabilities, (ii) evaluating the sufficiency of the disclosures in the consolidated financial statements, and (iii) testing the regulatory assets and liabilities, including those subject to regulatory proceedings, also involved considering the provisions and formulas outlined in rate orders, other regulatory correspondence, and the application of relevant regulatory precedents.

These procedures also included, among others (i) evaluating the reasonableness of management’s assessment regarding the probability of recovery of regulatory assets and settlement of regulatory liabilities, (ii) evaluating the sufficiency of the disclosures in the consolidated financial statements, and (iii) testing, on a sample basis, the regulatory assets and liabilities, including those subject to rate cases and other proceedings, by considering the provisions and formulas outlined in rate orders, other regulatory correspondence, and the application of relevant regulatory precedents.

/s/ PricewaterhouseCoopers LLP

13 unchanged sentences

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

10 unchanged sentences

As described in Note 2 to the consolidated financial statements, there were $511.7 million of regulatory assets and $779.9 million of regulatory liabilities as of December 31, 2 023.

As disclo sed by management, the Company has operations that are subject to the actions of regulators which establish rates in general rate cases and other proceedings which are designed to recover specific costs of providing regulatory services for which management records regulatory assets and liabilities.

Regulatory accounting requires management to account for deferred expenses (or deferred revenues) as regulatory assets (or regulatory liabilities) on the balance sheet.

The Company’s principal business is the distribution of natural gas, which is regulated;

the accounting records and practices of the regulated businesses conform to the requirements and uniform system of accounts prescribed by regulatory authorities.

Customer rates are regulated and have approved cost-based rates which are intended to allow the Company to earn a return on invested capital.As disclosed by management, regulatory accounting requires management to account for deferred expenses (or deferred revenues) as regulatory assets (or regulatory liabilities) on the balance sheet.

The principal considerations for our determination that performing procedures relating to the Company’s accounting for the effects of regulatory matters is a critical audit matter are the high degree of auditor effort in performing audit procedures and evaluating audit evidence obtained related to the recovery of regulatory assets and the settlement of regulatory liabilities.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures also included, among others (i) evaluating the reasonableness of management’s assessment regarding the probability of recovery of regulatory assets

and settlement of regulatory liabilities, (ii) evaluating the sufficiency of the disclosures in the consolidated financial statements, and (iii) testing the regulatory assets and liabilities, including those subject to regulatory proceedings, also involved considering the provisions and formulas outlined in rate orders, other regulatory correspondence, and the application of relevant regulatory precedents.

and (iii) testing, on a sample basis, the regulatory assets and liabilities, including those subject to rate cases and other proceedings, by considering the provisions and formulas outlined in rate orders, other regulatory correspondence, and the application of relevant regulatory precedents.

/s/ PricewaterhouseCoopers LLP

21 unchanged sentences

Income tax expense 32,362 29,130 27,406

Net income from continuing operations 86,303 78,666 70,273

Income from discontinued operations, net of tax — — 6,508

Net income 93,868 86,303 78,666

3 unchanged sentences

Amortization of non-qualified employee benefit plan liability, net of taxes of $( 148 ) for 2023, $( 286 ) for 2022, and $( 320 ) for 2021

Unrealized gain on interest rate swaps, net of taxes of $( 47 ) for 2022

Unrealized gain on interest rate swaps, net of taxes of $( 21 ) for 2023 and $( 47 ) for 2022

Comprehensive income $ 93,104 $ 91,422 $ 80,164

2 unchanged sentences

Diluted 36,265 33,984 30,752

Earnings from continuing operations per share of common stock:

Basic $ 2.54 $ 2.56 $ 2.30

Diluted 2.54 2.56 2.30

Earnings from discontinued operations per share of common stock:

Basic $ — $ — $ 0.21

Diluted — — 0.21

Earnings per share of common stock:

33 unchanged sentences

As of December 31,

In thousands 2022 2021

In thousands, except share information 2023 2022

Liabilities and equity:

38 unchanged sentences

Shares issued pursuant to equity based plans 4,543 — — 4,543

Issuance of common stock, net of issuance costs 17,501 — — 17,501

Balance at December 31, 2021 590,771 355,779 ( 11,404 ) 935,146

9 unchanged sentences

— ( 70,430 ) — ( 70,430 )

Shares issued in connection with business combinations 12,884 — — 12,884

Stock-based compensation 3,598 — — 3,598

13 unchanged sentences

Deferred income taxes 8,966 17,410 14,617

Qualified defined benefit pension plan expense 5,351 16,556 18,370

Qualified defined benefit pension plan (benefit) expense ( 2,430 ) 5,351 16,556

Contributions to qualified defined benefit pension plans — — ( 9,590 )

1 unchanged sentence

Environmental remediation expense 12,899 12,389 9,938

Gain on sale of discontinued operations, net of tax — — ( 5,902 )

Asset optimization revenue sharing bill credits ( 10,471 ) ( 41,102 ) ( 9,053 )

10 unchanged sentences

Other, net 18,445 ( 12,351 ) ( 18,662 )

Discontinued operations — — 1,894

Cash provided by operating activities 279,949 147,672 160,353

2 unchanged sentences

Acquisitions, net of cash acquired ( 7,533 ) ( 94,279 ) ( 1,289 )

Leasehold improvement expenditures ( 761 ) ( 1,364 ) ( 7,878 )

Proceeds from the sale of assets 870 3,926 8,149

Purchase of equity method investment ( 1,000 ) ( 1,000 ) ( 14,450 )

Proceeds from sale of equity method investment — — 7,000

Proceeds from sale of discontinued operations — — 12,500

Other 383 ( 1,579 ) 2,508

Discontinued operations — — ( 4,423 )

Cash used in investing activities ( 335,497 ) ( 435,460 ) ( 300,123 )

7 unchanged sentences

Repayment of term loan — — ( 100,000 )

Proceeds from commercial paper, maturities greater than three months — — 195,025

Repayments of commercial paper, maturities greater than three months — — ( 195,025 )

1 unchanged sentence

Cash dividend payments on common stock ( 67,340 ) ( 62,771 ) ( 55,919 )

Payment of financing fees ( 2,200 ) ( 912 ) ( 3,899 )

Other ( 4,207 ) ( 1,946 ) ( 1,222 )

6 unchanged sentences

Income taxes paid, net of refunds 24,263 2,779 10,555

Non-cash activities:

Shares issued in connection with business combinations $ 12,884 $ — $ —

Debt assumed in connection with business combinations 3,131 — —

See Notes to Consolidated Financial Statements

92 unchanged sentences

Dividends on common stock — ( 56,056 ) — ( 56,056 )

Other ( 51 ) — — ( 51 )

Capital contribution from parent 116,009 — — 116,009

Balance at December 31, 2021 435,515 553,696 ( 11,404 ) 977,807

18 unchanged sentences

Deferred income taxes 2,855 16,288 13,223

Qualified defined benefit pension plan expense 5,351 16,556 18,370

Qualified defined benefit pension plan (benefit) expense ( 2,430 ) 5,351 16,556

Contributions to qualified defined benefit pension plans — — ( 9,590 )

16 unchanged sentences

Capital expenditures ( 290,845 ) ( 318,686 ) ( 278,237 )

Leasehold improvement expenditures ( 761 ) ( 1,364 ) ( 7,878 )

Proceeds from the sale of assets 870 3,926 8,149

Other 384 ( 1,579 ) 2,508

5 unchanged sentences

Repayment of term loan — — ( 100,000 )

Proceeds from commercial paper, maturities greater than three months — — 195,025

Repayment of commercial paper, maturities greater than three months — — ( 195,025 )

2 unchanged sentences

Cash dividend payments on common stock ( 92,376 ) ( 62,667 ) ( 56,056 )

Payment of financing fees ( 2,080 ) ( 843 ) ( 2,818 )

Other ( 1,682 ) ( 1,665 ) ( 1,782 )

14 unchanged sentences

The NGD segment is the only reportable segment for NW Holdings and NW Natural.

All other activities, water and wastewater businesses, and other investments are aggregated and reported as other at their respective registrant.

All other activities, water, wastewater and water services businesses, and other investments are aggregated and reported as other at their respective registrant.

NW Holdings and NW Natural consolidate all entities in which they have a controlling financial interest.

Investments in corporate joint ventures and partnerships that NW Holdings does not directly or indirectly control, and for which it is not the primary beneficiary, include NNG Financial's investment in Kelso-Beaver Pipeline and NWN Water's investment in Avion Water Company, Inc., which are accounted for under the equity method.

NW Natural RNG Holding Company, LLC holds an investment in Lexington Renewable Energy, LLC, which is also accounted for under the equity method.

NW Natural RNG Holding Company, LLC holds investments in Lexington Renewable Energy, LLC and Dakota City Renewable Energy LLC, which are also accounted for under the equity method.

See Note 13 for activity related to equity method investments.

1 unchanged sentence

The consolidated financial statements of NW Holdings and NW Natural are presented after elimination of all intercompany balances and transactions.

In June 2018, NWN Gas Storage, a wholly-owned subsidiary of NW Natural at the time and now a wholly-owned subsidiary of NW Holdings, entered into a Purchase and Sale Agreement that provided for the sale of all of the membership interests in its wholly-owned subsidiary, Gill Ranch Storage, LLC (Gill Ranch).

We concluded that the sale of Gill Ranch qualified as assets and liabilities held for sale and discontinued operations.

As such, the results of Gill Ranch were presented as a discontinued operation for NW Holdings for all periods presented on the consolidated statements of comprehensive income and cash flows, and the assets and liabilities associated with Gill Ranch were classified as discontinued operations assets and liabilities on the NW Holdings consolidated balance sheet.

The sale closed on December 4, 2020.

See Note 18 for additional information.

Notes to the consolidated financial statements reflect the activity of continuing operations for both NW Holdings and NW Natural for all periods presented, unless otherwise noted.

14 unchanged sentences

Accounting records and practices of the regulated businesses conform to the requirements and uniform system of accounts prescribed by these regulatory authorities in accordance with U.S.

The businesses in which customer rates are regulated by the OPUC, WUTC, IPUC, PUTC, ACC and FERC have approved cost-based rates which are intended to allow such businesses to earn a reasonable return on invested capital.

The businesses in which customer rates are regulated have approved cost-based rates which are intended to allow such businesses to earn a reasonable return on invested capital.

In applying regulatory accounting principles, NW Holdings and NW Natural capitalize or defer certain costs and revenues as regulatory assets and liabilities pursuant to orders of the applicable state public utility commission, which provide for the recovery of revenues or expenses from, or refunds to, utility customers in future periods, including a return or a carrying charge in certain cases.

9 unchanged sentences

Income taxes 2,208 2,208

Washington Climate Commitment Act compliance 20,537 —

COVID-19 deferrals and expenses, net 9,685 789

18,509 10,020

Total current $ 178,270 $ 117,491

8 unchanged sentences

Gas costs 1,917 22,355

Decoupling (3)

COVID-19 deferrals and expenses, net 1,080 14,555

30,529 33,053

10 unchanged sentences

Asset optimization revenue sharing 31,583 26,368

Washington Climate Commitment Act proceeds 17,199 —

Total current - NW Natural 84,912 248,553

17 unchanged sentences

(3) This deferral represents the margin adjustment resulting from differences between actual and expected volumes.

(4) Refer to Note 10 for information regarding the deferral of pension expenses.

(4) Balance represents deferred net periodic benefit costs as approved by the OPUC.

(5) Balances consist of deferrals and amortizations under approved regulatory mechanisms and typically earn a rate of return or carrying charge.

(6) This balance represents estimated amounts associated with the Tax Cuts and Jobs Act.

(6) Balance represents excess deferred income tax benefits subject to regulatory flow-through.

(7) Estimated costs of removal on certain regulated properties are collected through rates.

6 unchanged sentences

All regulatory assets are reviewed annually for recoverability, or more often if circumstances warrant.

If we should determine that all or a portion of these regulatory assets no longer meet the criteria for continued application of regulatory accounting, then NW Natural would be required to write-off the net unrecoverable balances in the period such determination is made.

Regulatory interest income of $ 7.0 million and $ 6.1 million and regulatory interest expense of $ 2.0 million and $ 1.3 million was recognized within other income (expense), net for the years ended December 31, 2022 and 2021, respectively.

If we should determine that all or a portion of these regulatory assets no longer meet the criteria for continued application of regulatory accounting, then NW Holdings and NW Natural would be required to write-off the net unrecoverable balances in the period such determination is made.

Regulatory interest income o f $ 6.5 million and $ 7.0 million and regulatory interest expense of $ 2.9 million and $ 2.0 million was recognized within other income (expense), net for the years ended December 31, 2023 and 2022, respectively.

Environmental Regulatory Accounting

See Note 17 for information about the SRRM and OPUC orders regarding implementation.

COVID-19 Impact

During 2020, our regulated utilities received approval in their respective jurisdictions to defer certain financial impacts associated with COVID-19 such as bad debt expense, financing costs to secure liquidity, lost revenues related to late fees and reconnection fees, and other COVID-19 related costs, net of offsetting direct expense reductions associated with COVID-19.

As of December 31, 2022, we believe that approximately $ 18.7 million of the financial effects related to COVID-19 are recoverable.

As part of the 2022 Oregon general rate case, NW Natural received approval from the OPUC to recover the 2020 and 2021 COVID-19 deferral beginning November 1, 2022.

Approximately $ 10.9 million will be amortized over a two -year period and NW Natural may request recovery of the remaining amount in the third year.

Included in the total balance is approximately $ 3.4 million of forgone late fee revenue that will be recognized in future periods as billed.

Beginning January 2023, NW Natural will no longer defer any COVID-19 related costs in Oregon.

NW Natural expects to recover its COVID-19 deferrals in Washington in a future proceeding.

New Accounting Standards

1 unchanged sentence

ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on consolidated financial position or results of operations.

Recently Adopted Accounting Pronouncements

REFERENCE RATE REFORM.

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The purpose of the amendment is to provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference London Inter-Bank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform.

In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848):

Scope." The purpose of the amendment is to clarify guidance on reference rate reform activities, specifically related to accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting, margining, and contract price alignment (the "discounting transition").

The amendments in ASUs 2020-04 and 2021-01 are effective for all entities as of March 12, 2020 through December 31, 2022.

In December 2022, the FASB issued ASU 2022-06, "Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848." The purpose of the amendment is to defer the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

The objective of the guidance in Topic 848 is to provide temporary relief during the transition period.

The Board included a sunset provision within Topic 848 based on expectations of when the London Interbank Offered Rate (LIBOR) would cease being published.

We do not expect the ASUs to materially affect the financial statements and disclosures of NW Holdings or NW Natural.

In July 2021, the FASB issued ASU 2021-05, "Leases (Topic 842), Lessors - Certain Leases with Variable Lease Payments." The purpose of the amendment is to require lessors to account for certain lease transactions that contain variable lease payments as operating leases.

The amendments in this ASU are intended to eliminate the recognition of any day-one loss

associated with certain sales-type and direct-financing lease transactions.

The changes do not impact lessee accounting.

The new guidance was effective on January 1, 2022 and adopted using a prospective approach.

The adoption did not materially affect the financial statements and disclosures of NW Holdings or NW Natural.

Recently Issued Accounting Pronouncements

JOINT VENTURE FORMATIONS.

In August 2023, the FASB issued ASU 2023-05, which requires a joint venture to initially measure all contributions received upon its formation at fair value.

The standard is effective for all joint venture entities with a formation date on or after January 1, 2025, with early adoption permitted.

The adoption of this standard is not anticipated to have a material impact on our results of operations, liquidity or capital resources.

SEGMENT REPORTING.

In November 2023, the FASB issued ASU 2023-07, which requires additional disclosures about significant segment expenses.

The disclosures are required beginning with our annual report for the year ending December 31, 2024.

The adoption of this standard is not anticipated to have a material impact on our results of operations, liquidity or capital resources.

IMPROVEMENTS TO INCOME TAX DISCLOSURES.

In December 2023, the FASB issued ASU 2023-09, which requires additional disclosures about income taxes.

The disclosures are required beginning with our annual report for the year ending December 31, 2025.

The adoption of this standard is not anticipated to have a material impact on our results of operations, liquidity or capital resources.

Recent Securities and Exchange Commission (SEC) Final Rules

RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION.

In October 2022, the SEC adopted the final rule under SEC Release No.

33-11126, Listing Standards for Recovery of Erroneously Awarded Compensation, which directs the national securities exchanges and associations that list securities to establish listing standards requiring each issuer to develop and implement a clawback policy to recoup incentive-based compensation erroneously awarded to executive officers.

The policy is included as an exhibit to our annual report for the year ending December 31, 2023.

INSIDER TRADING ARRANGEMENTS.

In December 2022, the SEC adopted the final rule under SEC Release No.

33-11138, Insider Trading Arrangements and Related Disclosures, which requires new disclosures regarding insider trading policies and procedures, the use of certain insider trading plans and director and executive compensation regarding equity compensation awards made close in time to disclosure of material nonpublic information.

The policy will be included as an exhibit to our annual report for the year ending December 31, 2024.

CYBERSECURITY DISCLOSURES.

In July 2023, the SEC issued a final rule under SEC Release No.

33-11216, Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure, which requires new disclosures regarding material cybersecurity incidents and require periodic disclosures about registrant's processes to assess, identify, and manage material cybersecurity risks, management's role in assessing and managing material cybersecurity risks, and the board of directors' oversight of cybersecurity risks.

The disclosures were required beginning with our annual report for the year ending December 31, 2023.

Accounting Policies

32 unchanged sentences

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash on hand plus highly liquid investment accounts with original maturity dates of three months or less.

At December 31, 2022, NW Holdings had outstanding checks of $ 5.8 million, substantially all of which is recorded at NW Natural, and at December 31, 2021, NW Holdings had no outstanding checks.

Cash and cash equivalents include cash on hand plus highly liquid investment accounts with original maturity dates of three months or less.

These investments are readily convertible to cash with fair value approximating cost.

At December 31, 2023, NW Holdings had outstanding checks of $ 7.5 million, substantially all of which is recorded at NW Natural, and at December 31, 2022, NW Holdings had $ 5.8 million outstanding checks.

These balances are included in accounts payable in the NW Holdings and NW Natural balance sheets.

Restricted Cash

Restricted cash is primarily comprised of funds from public purpose charges for programs that assist low-income customers with bill payments or energy efficiency.

1 unchanged sentence

There were no transfers between restricted cash and cash and cash equivalents during the years ended December 31, 2023 and 2022.

Prior period amounts have been reclassified to conform prior period information to the current presentation.

The following table provides a reconciliation of the cash, cash equivalents and restricted cash balances at NW Holdings as of December 31, 2023 and 2022:

37 unchanged sentences

This included enhanced protections for low-income customers, a return to pre-pandemic time payment arrangements terms, revised disconnection rules during the heating season, and other items.

As a result of these Oregon rule changes and our recent collection process experience, we augmented our

provision review in the third and fourth quarter for Oregon accounts in the following categories:

As a result of these Oregon rule changes and our recent collection process experience, we augmented our provision review for accounts in the following categories:

closed or inactive accounts aged less than 120 days, accounts on payment plans, and all other open accounts not on payment plans.

10 unchanged sentences

Accrued unbilled and other 336 47 ( 118 ) 265

Total $ 2,018 $ 2,891 $ ( 1,613 ) $ 3,296

Total NW Natural 3,079 3,122 ( 2,973 ) 3,228

Other - NW Holdings 217 10 — 227

Total NW Holdings $ 3,296 $ 3,132 $ ( 2,973 ) $ 3,455

ALLOWANCE FOR NET INVESTMENTS IN SALES-TYPE LEASES.

16 unchanged sentences

RTCs are initially recorded at cost and subsequently assessed for impairment based on the lower-of-cost or market model.

NW Natural's RTCs inventory totaled $ 1.7 million at December 31, 2022, and all RTCs purchased during 2021 were retired or used on customers behalf prior to December 31, 2021.

NW Natural's RTCs inventory totaled $ 0.5 million and $ 1.7 million at December 31, 2023 and 2022, respectively.

Greenhouse Gas Allowances

NW Natural is subject to greenhouse gas (GHG) emission reduction requirements under the Washington Climate Commitment Act (CCA) regulations and is likely to be subject to GHG emission reductions under a separate program in Oregon upon conclusion of the new ODEQ rulemaking.

The new rulemaking was commenced upon the judicial invalidation of the prior rules promulgated by the ODEQ and is expected to take approximately 12 months.

Under Washington's CCA, emission reduction compliance mechanisms include:

1) allowances distributed at no cost by the state, 2) purchasing allowances at state-run auctions or secondary markets, 3) purchasing carbon offsets, and 4) supplying alternative gaseous fuels, such as renewable natural gas and hydrogen.

NW Natural will account for all purchased Washington allowances as inventory at the lower of cost or market.

Any compliance instruments or allowances that are acquired through government allocations at no cost will be accounted for as inventory at no cost.

As of December 31, 2023, NW Natural had $ 39.3 million of emissions allowances for compliance in Washington recorded as inventory.

The CCA allows for the sale of compliance instruments or allowances, and as a result, should NW Natural sell these it will recognize revenue when title to the instrument or allowance is transferred to a counterparty, and NW Natural will recognize expense at the time of recognition of the related sale.

In September and December 2023, NW Natural consigned no-cost allowances to Washington auctions and received $ 10.0 million and $ 7.1 million, respectively, in cash, which proceeds were recorded as a regulatory liability for the benefit of customers.

We measure the compliance obligation, which is based on emissions, at the carrying value of inventory held plus the fair value of any additional emission allowances NW Natural would need to purchase to satisfy the obligations.

Under the Washington program, NW Natural has recognized a $ 19.9 million liability as of December 31, 2023.

We expect that the costs to comply with the Washington program will be recovered from utility customers through rates.

As a result, NW Natural recognized $ 20.5 million of deferred costs as of December 31, 2023.

Gas reserves are payments to acquire and produce natural gas reserves.

7 unchanged sentences

In addition, certain derivative contracts are approved by regulatory authorities for recovery or refund through customer rates.

Accordingly, the changes in fair value of these approved contracts are deferred as regulatory

assets or liabilities pursuant to regulatory accounting principles.

Accordingly, the changes in fair value of these approved contracts are deferred as regulatory assets or liabilities pursuant to regulatory accounting principles.

NW Natural's financial derivatives generally qualify for deferral under regulatory accounting.

5 unchanged sentences

NW Holdings and NW Natural have financial derivative policies that set forth guidelines for using selected derivative products to support prudent risk management strategies within designated parameters.

NW Natural's objective for using derivatives is to decrease the volatility of gas prices and cash flows without speculative risk.

NW Natural's objective for using derivatives is to decrease the volatility of gas prices, interest rates, and cash flows without speculative risk.

The use of derivatives is permitted only after the risk exposures have been identified, are determined to exceed acceptable tolerance levels, and are determined necessary to support normal business activities.

35 unchanged sentences

When NW Natural acquires a business, it assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as of the acquisition date.

When there is substantial judgment or

uncertainty around the fair value of acquired assets, we may engage a third party expert to assist in determining the fair values of certain assets or liabilities.

When there is substantial judgment or uncertainty around the fair value of acquired assets, we may engage a third party expert to assist in determining the fair values of certain assets or liabilities.

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.

20 unchanged sentences

NW Holdings, NW Natural and NWN Water have equity interests in businesses which we account for under the equity method as we do not exercise control of the major operating and financial policies.

The carrying value of these investments was $ 23.4 million and $ 14.5 million as of December 31, 2022 and 2021, respectively.

The business transactions with our equity method investments are not significant.

We regularly assesses the profitability and valuation of our investments for any potential impairment.

We regularly assess the profitability and valuation of our investments for any potential impairment.

See Note 13 .

13 unchanged sentences

In thousands, except per share data 2023 2022 2021

Net income from continuing operations $ 86,303 $ 78,666 $ 70,273

Income from discontinued operations, net of tax — — 6,508

Net income $ 93,868 $ 86,303 $ 78,666

2 unchanged sentences

Average common shares outstanding - diluted 36,265 33,984 30,752

Earnings from continuing operations per share of common stock:

Basic $ 2.54 $ 2.56 $ 2.30

Diluted 2.54 2.56 2.30

Earnings from discontinued operations per share of common stock:

Basic $ — $ — $ 0.21

Diluted — — 0.21

Earnings per share of common stock:

25 unchanged sentences

and government and educational institutions.

In addition to NW Natural's local gas distribution business, the NGD segment also includes the portion of the Mist underground storage facility used to serve NGD customers, the North Mist gas storage expansion in Oregon, NWN Gas Reserves, which is a wholly-owned subsidiary of Energy Corp, and NW Natural RNG Holding Company, LLC, a holding company established to invest in the development and procurement of regulated renewable natural gas for NW Natural.

In addition to NW Natural's local gas distribution business, the NGD segment also includes the portion of the Mist underground storage facility used to serve NGD customers, North Mist gas storage, NWN Gas Reserves, which is a wholly-owned subsidiary of Energy Corp, and NW Natural RNG Holding Company, LLC, a holding company established to invest in the development and procurement of regulated renewable natural gas for NW Natural.

NW Natural's activities in Other include Interstate Storage Services and third-party asset management services for the Mist facility in Oregon, appliance retail center operations, and corporate operating and non-operating revenues and expenses that cannot be allocated to NGD operations.

3 unchanged sentences

The remaining 20 % and 90 %, respectively, are recorded to a deferred regulatory account for crediting back to NGD customers.

NW Holdings' activities in Other include all remaining activities not associated with NW Natural, specifically NWN Water, which consolidates the water and wastewater utility operations and is pursuing other investments in the water and wastewater sector through itself and wholly-owned subsidiaries;

NWN Water's equity investment in Avion Water Company, Inc.;

NWN Gas Storage, a wholly-owned subsidiary of NWN Energy;

NWN Energy's equity investment in Trail West Holdings, LLC (TWH) through August 6, 2020;

other pipeline assets in NNG Financial;

and NW Natural Renewables Holdings, LLC and its non-regulated renewable natural gas activities.

For more information on the sale of TWH, see Note 13.

Other also includes corporate revenues and expenses that cannot be allocated to other operations, including certain business development activities.

1 unchanged sentence

Inter-segment transactions were immaterial for the periods presented.

The following table presents summary financial information concerning the reportable segment and other for continuing operations.

See Note 18 for information regarding discontinued operations for NW Holdings.

The following table presents summary financial information concerning the reportable segment and other operations.

In thousands NGD Other

4 unchanged sentences

Income (loss) from operations 170,591 15,054 185,645 ( 704 ) 184,941

Net income (loss) from continuing operations 79,690 11,874 91,564 ( 5,261 ) 86,303

Net income (loss) 94,042 10,695 104,737 ( 10,869 ) 93,868

Capital expenditures 285,998 4,847 290,845 36,502 327,347

3 unchanged sentences

Income (loss) from operations 152,839 16,535 169,374 ( 1,897 ) 167,477

Net income (loss) from continuing operations 68,988 12,184 81,172 ( 2,506 ) 78,666

Net income (loss) 79,690 11,874 91,564 ( 5,261 ) 86,303

Capital expenditures 315,979 2,707 318,686 19,916 338,602

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Income (loss) from operations 147,902 17,331 165,233 ( 2,116 ) 163,117

Net income (loss) from continuing operations 63,555 7,008 70,563 ( 290 ) 70,273

Net income (loss) 68,988 12,184 81,172 ( 2,506 ) 78,666

Capital expenditures 275,267 2,970 278,237 15,655 293,892

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NW Holdings is under no obligation to offer and sell common stock under the ATM equity program, which expires in August 2024.

Any shares of common stock offered under the ATM equity program are registered on NW Holdings’ universal shelf registration statement filed with the SEC.

Any shares of common stock offered under the ATM equity program are registered on

NW Holdings’ universal shelf registration statement filed with the SEC.

During the year ended December 31, 2023, NW Holdings issued and sold 1,646,325 shares of common stock pursuant to the ATM equity program resulting in cash proceeds of $ 66.4 million, net of fees and commissions paid to agents of $ 1.2 million.

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Contributions to NW Natural and NW Natural Water will be used for general corporate purposes.

On April 1, 2022, NW Holdings issued and sold 2,875,000 shares of its common stock pursuant to a registration statement on Form S-3 and related prospectus settlement.

NW Holdings received net offering proceeds, after deducting the underwriter's discounts and commissions and estimated expenses payable by NW Holdings, of approximately $ 138.6 million.

The proceeds are to be used for general corporate purposes, including repayment of its short-term indebtedness and/or making equity contributions to NW Holdings' subsidiaries, NW Natural, NW Natural Water and NW Natural Renewables.

Contributions to NW Natural, NW Natural Water and NW Natural Renewables are to be used for general corporate purposes.

Of the contributions received by NW Natural, $ 130.0 million was used to repay its short-term indebtedness.

Stock Repurchase Program

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Stock-based compensation 49

Equity issuance 376

Sales to shareholders under DRPP 67

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Sales to shareholders under DRPP 69

Shares issued in connection with business combinations 327

Balance, December 31, 2023 37,631

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Our leases have remaining lease terms of nine months to 16 years.

Many of our lease agreements include options to

extend the lease, which we do not include in our minimum lease terms unless they are reasonably certain to be exercised.

Many of our lease agreements include options to extend the lease, which we do not include in our minimum lease terms unless they are reasonably certain to be exercised.

Short-term leases with a term of 12 months or less are not recorded on the balance sheet.

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OPUC issued an order allowing us to align our expense recognition with cash payments for ratemaking purposes.

We recorded the difference between the minimum lease payments and the aggregate of the imputed interest on the finance lease

obligation and amortization of the right-of-use asset as a regulatory asset on our balance sheet.

We recorded the difference between the minimum lease payments and the aggregate of the imputed interest on the finance lease obligation and amortization of the right-of-use asset as a regulatory asset on our balance sheet.

The balance of the regulatory asset was $ 8.0 million and $ 6.9 million as of December 31, 2023 and 2022, respectively.

84 unchanged sentences

Total 48,030 96,060 $ 1,581

Performance share awards are based on the achievement of a three -year ROIC threshold that must be met and a cumulative EPS factor, which can be modified by a TSR factor relative to the performance of the Russell 2500 Utilities Index (2020-2022 performance share awards) or a specified peer group (2021-2023 and 2022-2024 performance share awards) over the three-year performance period.

Performance share awards are based on the achievement of a three -year ROIC threshold that must be met and a cumulative EPS factor, which can be modified by a TSR factor relative to a specified peer group (2021-2023, 2022-2024, and 2023-2025 performance share awards) over the three -year performance period.

The performance period allows for one of the performance factors to remain variable until the first quarter of the third year of the award period.

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Rather, interest rates on any loans outstanding under the credit agreements are tied to debt ratings and therefore, a change in the debt rating would increase or decrease the cost of any loans under the credit agreements when ratings are changed.

NW Holdings does not currently maintain ratings with S&P or Moody's.

NW Holdings maintains a credit rating with S&P of A+ and does not currently maintain ratings with Moody's.

There was $ 73.0 million and $ 88.0 million of outstanding balances under the NW Holdings agreement at December 31, 2023 and 2022, respectively.

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Rather, interest rates on any loans outstanding under the credit agreement are tied to debt ratings and therefore, a change in the debt rating would increase or decrease the cost of any loans under the credit agreement when ratings are changed.

There were no outstanding balances under NW Natural's credit agreement and no letters of credit issued or outstanding at December 31, 2022 and 2021.

In February 2023, NW Natural issued a $ 14 million letter of credit through its existing credit agreement.

There were no other letters of credit outstanding under the credit agreement.

There was one letter of credit outstanding at December 31, 2023 under NW Natural's credit agreement and no letters of credit outstanding at December 31, 2022.

In December 2023, NW Natural issued a $ 15 million letter of credit through its existing credit agreement, which expired January 5, 2024.

Letters of Credit Facility

In January 2024, NW Natural entered into an Uncommitted Letter of Credit and Reimbursement Agreement (LC Reimbursement Agreement), pursuant to which NW Natural agreed to reimburse each Lender acting as an issuing bank (Issuing Bank) thereunder for disbursements in respect of letters of credit (Letters of Credit) issued pursuant to the LC Reimbursement Agreement from time to time.

The Company expects to use Letters of Credit issued under the facility created by the LC Reimbursement Agreement (LC Facility) primarily to support its participation in Washington Climate Commitment Act cap-and-invest program auctions.

Although there is no expressly stated maximum amount of Letters of Credit that can be issued or outstanding under the LC Facility, under current regulatory authority from the OPUC, the aggregate sum of Letters of Credit outstanding and available to be drawn under the LC Reimbursement Agreement may not exceed $ 100 million at any one time.

The Issuing Banks have no commitment to issue Letters of Credit under the LC Facility and will have the discretion to limit and condition the terms for the issuance of Letters of Credit (including maximum face amounts) in their sole discretion.

The LC Reimbursement Agreement requires NW Natural to maintain certain ratings with S&P and Moody’s.

NW Natural must also notify the Administrative Agent and Lenders of any change in the S&P or Moody’s Ratings, although any such change is not an event of default.

The LC Reimbursement Agreement prohibits NW Natural from permitting Consolidated Indebtedness to be greater than 70 % of Total Capitalization, each as defined therein and calculated as of the end of each fiscal quarter of NW Natural.

Failure to comply with this financial covenant would constitute an Event of Default under the LC Reimbursement Agreement.

The occurrence of this or any other Event of Default would entitle the Administrative Agent to require cash collateral for the LC Exposure, as defined in the LC Reimbursement Agreement, and to exercise all other rights and remedies available to it and the Lenders under the Credit Documents, as defined in the LC Reimbursement Agreement, and under applicable law.

Long-Term Debt

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(1) Weighted average interest rate for the years ended December 31, 2023 and 2022.

Long-term debt at NWN Water is primarily comprised of a five -year term loan agreement for $ 55.0 million, due in 2026.

NWN Water entered into this agreement in June 2021 and the interest rate is based upon the one -month SOFR rate.

The loan is guaranteed by NW Holdings and requires NW Holdings to maintain a consolidated indebtedness to total capitalization ratio of 70 % or less.

Failure to comply with this covenant would entitle the lenders to terminate their lending commitments and accelerate the maturity of all amounts outstanding.

NW Holdings was in compliance with this covenant at December 31, 2022 and 2021, with a consolidated indebtedness to total capitalization ratio of 57.6 % and 60.5 %, respectively.

In December 2022, NW Holdings entered into a swap to fix the interest rate on this debt beginning in January 2023 through the loan's maturity.

See "Interest Rate Swap Agreements" below for more detail.

In September 2022, NW Holdings entered into an 18 -month credit agreement for $ 100.0 million and borrowed the full amount.

The interest rate is based on the SOFR.

The loan is due and payable on March 15, 2024.

The credit agreement prohibits NW Holdings from permitting consolidated indebtedness to be greater than 70 % of total capitalization, each as defined therein and calculated as of the end of each fiscal quarter.

Failure to comply with this financial covenant would entitle the lenders to accelerate the maturity of the amounts outstanding under the credit agreement.

NW Holdings was in compliance with this financial covenant as of December 31, 2022.

In December 2022, NW Holdings entered into a swap to fix the interest rate on this debt beginning in January 2023 through the loan's maturity.

See "Interest Rate Swap Agreements" below for more detail.

In September 2022, NWN Water entered into an 18 -month credit agreement for $ 50.0 million and borrowed the full amount.

The interest rate is based on the SOFR.

The loan is due and payable on March 15, 2024.

The credit agreement prohibits NWN Water and NW Holdings from permitting consolidated indebtedness to be greater than 70 % of total capitalization, each as defined therein and calculated as of the end of each fiscal quarter.

Failure to comply with this financial covenant would entitle the lenders to accelerate the maturity of the amounts outstanding under the credit agreement.

NWN Water and NW Holdings were in compliance with this financial covenant as of December 31, 2022.

NW Natural Long-Term Debt

NW Natural's issuance of First Mortgage Bonds (FMBs), which includes NW Natural's medium-term notes, under the Mortgage and Deed of Trust (Mortgage) is limited by eligible property, adjusted net earnings, and other provisions of the Mortgage.

The Mortgage constitutes a first mortgage lien on certain gas properties owned from time to time by NW Natural, including substantially all of NW Natural's NGD property.

In August 2023, NW Natural issued and sold $ 80.0 million aggregate principal amount of its FMBs, 5.18 % Series and $ 50.0 million aggregate principal amount of its FMBs, 5.23 % Series.

The 5.18 % Bonds bear interest at the rate of 5.18 % per annum, payable semi-annually on February 4 and August 4 of each year, commencing February 4, 2024, and will mature on August 4, 2034.

The 5.23 % Bonds bear interest at the rate of 5.23 % per annum, payable semi-annually on February 4 and August 4 of each year, commencing February 4, 2024, and will mature on August 4, 2038.

In March 2023, NW Natural issued and sold $ 100.0 million aggregate principal amount of 5.75 % Secured Medium-Term Notes, Series B due 2033 (the Notes).

The Notes bear interest at the rate of 5.75 % per annum, payable semi-annually on March 15 and September 15 of each year.

In January 2023, NW Natural issued and sold $ 100.0 million aggregate principal amount of its FMBs, 5.43 % Series due January 2053.

The 5.43 % Bonds bear interest at the rate of 5.43 % per annum, payable semi-annually on January 6 and July 6 of each year, commencing July 6, 2023, and will mature on January 6, 2053.

NW Holdings Note Purchase Agreement

In December 2023, NW Holdings entered into a Note Purchase Agreement between NW Holdings and the institutional investors named as purchasers therein.

The Note Purchase Agreement provides for the issuance of (i) $ 100.0 million aggregate principal amount of NW Holdings’ 5.78 % Senior Notes, Series A, due March 7, 2028 ( 5.78 % Notes) and (ii) $ 50.0 million aggregate principal amount of NW Holdings’ 5.84 % Senior Notes, Series B, due March 7, 2029 ( 5.84 % Notes) in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.

The 5.78 % Notes and the 5.84 % Notes are expected to be issued on or about March 7, 2024, pursuant to the Note Purchase Agreement.

The proceeds from the Note Purchase Agreement are expected to be used to refinance $ 150.0 million of existing term loans at NW Holdings and NWN Water.

The 5.78 % Notes will bear interest at the rate of 5.78 % per annum, payable semi-annually on March 7 and September 7 of each year, commencing September 9, 2024, and will mature on March 7, 2028.

NW Holdings may, at its option, prepay at any time all, or from time to time any part of, the outstanding 5.78 % Notes at a price equal to 100 % of the principal amount thereof, plus a “make-whole” premium and accrued and unpaid interest thereon to the date of prepayment;

provided, however, in the case of a partial prepayment, NW Holdings must prepay at least 5 % of the aggregate principal amount of the 5.78 % Notes outstanding.

At any time on or after February 7, 2028, NW Holdings may, at its option, prepay all or any part of the 5.78 % Notes at 100 % of the principal amount thereof, plus accrued and unpaid interest thereon to the date of prepayment, but without the payment of a “make-whole” premium, so long as there is no Default or Event of Default under the Note Purchase Agreement.

The 5.84 % Bonds will bear interest at the rate of 5.84 % per annum, payable semi-annually on March 7 and September 7 of each year, commencing September 9, 2024, and will mature on March 7, 2029.

NW Holdings may, at its option, prepay at any time all, or from time to time any part of, the outstanding 5.84 % Notes at a price equal to 100 % of the principal amount thereof, plus a “make-whole” premium and accrued and unpaid interest thereon to the date of prepayment;

provided, however, in the case of a partial prepayment, NW Holdings must prepay at least 5 % of the aggregate principal amount of the 5.84 % Notes outstanding.

At any time on or after February 7, 2029, NW Holdings may, at its option, prepay all or any part of the 5.84 % Notes at 100 % of the principal amount thereof, plus accrued and unpaid interest thereon to the date of prepayment, but without the payment of a “make-whole” premium, so long as there is no Default or Event of Default under the Note Purchase Agreement.

Interest Rate Swap Agreements

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Interest payments made between the effective date and expiration date are hedged by the swap agreements.

The notional amount, effective date, expiration date and rate of the swap agreements are shown in the table below:

The notional amount, effective date, expiration date and benchmark rate of the swap agreements are shown in the table below:

In millions Notional Amount Effective Date Expiration Date Fixed Rate

1 unchanged sentence

NWN Water $ 55.0 1/19/2023 6/10/2026 3.8 %

The Mortgage constitutes a first mortgage lien on certain gas properties owned from time to time by NW Natural, including substantially all of NW Natural's NGD property.

In July 2022, NW Natural entered into a Bond Purchase Agreement between NW Natural and the institutional investors named as purchasers therein (the Bond Purchase Agreement).

The Bond Purchase Agreement provides for the issuance of $ 140.0 million aggregate principal amount of NW Natural's FMBs due in 2052 (the Bonds).

The Bonds were issued on September 30, 2022.

The Bonds bear interest at the rate of 4.78 % per annum, payable semi-annually on March 30 and September 30 of each year, commencing March 30, 2023, and will mature on September 30, 2052.

The Bonds are subject to redemption prior to maturity at the option of NW Natural, in whole or in part, (i) at any time prior to March 30, 2052, at a redemption price equal to 100 % of the principal amount thereof plus a “make-whole” premium and accrued and unpaid interest thereon to the date of redemption, and (ii) at any time on and after March 30, 2052, at 100 % of the principal amount thereof plus accrued and unpaid interest thereon to the date of redemption.

Maturities and Outstanding Long-Term Debt

Retirement of long-term debt for each of the annual periods through December 31, 2028 and thereafter are as follows:

In thousands Long-term debt maturities

In thousands NW Natural Other (NW Holdings) NW Holdings

2024 $ — $ 150,868 $ 150,868

2025 30,000 824 30,824

2026 55,000 55,852 110,852

2027 64,700 881 65,581

2028 10,000 866 10,866

Thereafter 1,215,000 2,353 1,217,353

Total $ 1,374,700 $ 211,644 $ 1,586,344

The following table presents debt outstanding as of December 31:

The following table presents debt outstanding at NW Natural as of December 31:

In thousands 2023 2022

1 unchanged sentence

3.542 % Series due 2023

50,000 50,000

5.620 % Series due 2023

7.720 % Series due 2025

20,000 20,000

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5.750 % Series due 2033

5.180 % Series due 2034

5.250 % Series due 2035

10,000 10,000

5.230 % Series due 2038

4.000 % Series due 2042

50,000 50,000

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Interest cost 21,019 14,593 1,067 724

Net actuarial gain ( 122,168 ) ( 18,587 ) ( 6,234 ) ( 688 )

Net actuarial gain (loss) 15,066 ( 122,168 ) 2,208 ( 6,234 )

Benefits paid ( 27,970 ) ( 27,563 ) ( 1,793 ) ( 2,026 )

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Funded status at December 31 $ ( 142,006 ) $ ( 133,109 ) $ ( 21,467 ) $ ( 19,880 )

At December 31, 2022, the net liability (benefit obligations less market value of plan assets) for the Pension Plan decreased $ 3.3 million compared to 2021.

The decrease in the net pension liability is primarily due to the $ 118.9 million decrease in plan assets and the $ 122.3 million decrease to the pension benefit obligation.

The liability for non-qualified plans decreased $ 6.9 million, and the liability for other postretirement benefits decreased $ 7.3 million in 2022.

At December 31, 2023, the net liability (benefit obligations less market value of plan assets) for the Pension Plan increased $ 7.9 million compared to 2022.

The increase in the net pension liability is primarily due to the $ 11.0 million increase to the pension benefit obligation, partially offset by the $ 3.1 million increase in plan assets.

The liability for non-qualified plans increased $ 1.0 million, and the liability for other postretirement benefits increased $ 1.6 million in 2023.

NW Natural's Pension Plan had a projected benefit obligation of $ 392.6 million and $ 381.6 million at December 31, 2023 and 2022, respectively, and fair values of plan assets of $ 283.4 million and $ 280.3 million, respectively.

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Total reclassifications before tax ( 1,118 ) 6,787

Tax benefit ( 1,797 ) ( 539 )

Tax benefit (expense) 295 ( 1,797 )

Total reclassifications for the period ( 823 ) 4,990

Ending balance $ ( 7,237 ) $ ( 6,414 )

In 2023, NW Natural will not amortize any estimated costs from regulatory assets to net periodic benefit costs.

In 2024, NW Natural will amortize $ 5.2 million in estimated costs from regulatory assets to net periodic benefit costs.

The assumed discount rates for NW Natural's Pension Plan and other postretirement benefit plans were determined independently based on the FTSE Above Median Curve (discount rate curve), which uses high quality corporate bonds rated AA- or higher by S&P or Aa3 or higher by Moody’s.

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Plan assets may be invested in separately managed accounts or in commingled or mutual funds.

Investment re-balancing takes place periodically as needed, or when significant cash flows occur, in order to maintain the allocation of assets within the stated target ranges.

Investment re-balancing takes place periodically as needed, or when significant cash flows occur, in order to maintain the allocation of assets

within the stated target ranges.

The retirement trust fund for the Pension Plan is not currently invested in NW Holdings or NW Natural securities.

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Weighted-average discount rate 5.14 % 2.71 % 2.40 % 5.19 % 2.72 % 2.34 %

Rate of increase in compensation 3.50 % 3.50 % 3.50 % n/a n/a n/a

Rate of increase in compensation 4.00 - 5.00 %

3.50 % 3.50 % n/a n/a n/a

Expected long-term rate of return 7.50 % 7.00 % 7.25 % n/a n/a n/a

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4.00 - 6.00 %

3.50 % n/a n/a n/a

Expected long-term rate of return 7.50 % 7.50 % 7.00 % n/a n/a n/a

(1) Rate assumption ranges from 4.5 % to 5.0 % in 2023, 4.0 % to 6.0 % in 2024 and 4.0 % thereafter.

(1) Rate assumption ranges fr om 3.2 % to 4.6 % in 2024, 4.7 % to 5.8 % in 2025 and 4.0 % to 4.7 % thereafter.

The assumed annual increase in health care cost trend rates used in measuring other postretirement benefits as of December 31, 2023 was 6.50 % .

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NW Natural makes contributions to its Pension Plan based on actuarial assumptions and estimates, tax regulations, and funding requirements under federal law.

The Pension Plan was underfunded by $ 101.3 million at December 31, 2022.

NW Natural made no cash contributions to its Pension Plan for 2022.

The American Rescue Plan, which was signed into law on March 11, 2021, includes a provision for pension relief that extends the amortization period for required contributions from 7 to 15 years and provides for the stabilization of interest rates used to calculate future required contributions.

As a result, NW Natural does not expect to make any plan contributions during 2023.

As a result, NW Natural made no cash contributions to its Pension Plan for 2023.

The Pension Plan was underfunded by $ 109.2 million at December 31, 2023.

During 2024, NW Natural expects to make cash contributions of approximately $ 20.6 million to the Pension Plan.

Multiemployer Pension Plan

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Effective December 22, 2013, NW Natural withdrew from the plan, which was a noncash transaction.

Vested participants will receive all benefits accrued through the date of withdrawal.

Vested participants will receive all benefits accrued

through the date of withdrawal.

As the plan was underfunded at the time of withdrawal, NW Natural was assessed a withdrawal liability of $ 8.3 million, plus interest, which requires NW Natural to pay $ 0.6 million each year to the plan for 20 years beginning in July 2014.

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The Level 1 asset is a mutual fund, and the non-published NAV assets consist of commingled trusts where the NAV/unit price is not published, but the investment can be readily disposed of at the NAV/unit price.

The mutual funds has a readily determinable fair value, including a published NAV, and the commingled trusts are valued at unit price.

The mutual fund has a readily determinable fair value, including a published NAV, and the commingled trusts are valued at unit price.

This asset class includes investments primarily in foreign equity common stocks.

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CASH AND CASH EQUIVALENTS.

These are Level 1 and non-published NAV assets.

The Level 1 assets consist of cash in U.S.

dollars, which can be readily disposed of at face value.

These are non-published NAV assets.

The non-published NAV assets represent mutual funds without published NAV's but the investment can be readily disposed of at the NAV.

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Although we believe these valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain investments could result in a different fair value measurement at the reporting date.

Commingled trust investments are subject to a redemption notice period of five business days.

There were no unfunded commitments for Plan investments as of December 31, 2023 and 2022.

Investment securities are exposed to various financial risks including interest rate, market, and credit risks.

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Effective tax rate 25.6 % 25.2 % 25.8 % 25.4 % 25.3 % 25.9 %

The NW Holdings and NW Natural effective income tax rates for 2023 compared to 2022 changed primarily as a result of pre-tax income.

The NW Holdings and NW Natural effective income tax rates for 2022 compared to 2021 changed primarily due to lower income tax amortization in 2022 of the 2020 Oregon Corporate Activity Tax (CAT), which was subject to regulatory deferral when it became effective on January 1, 2020 and then amortized in income tax expense as recovery began in late 2020, 2021, and 2022.

The NW Holdings and NW Natural effective income tax rates for 2021 compared to 2020 changed primarily due to Oregon CAT, the majority of which is incurred because of Oregon regulated operations and for which rate recovery began on November 1, 2020.

The provision for current and deferred income taxes consists of the following at December 31:

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Lease right of use assets 21,002 21,272 20,849 21,084

Other Intangibles 528 — — —

Other 4,432 17,050 4,620 17,314

11 unchanged sentences

At December 31, 2023 and 2022, regulatory income tax assets of $ 4.9 million and $ 2.9 million, respectively, were recorded by NW Natural, representing future recovery of deferred tax liabilities resulting from the equity portion of AFUDC.

At December 31, 2021, a regulatory income tax asset of $ 0.4 million was recorded by NW Natural, representing future recovery of Oregon CAT that was deferred between January 1, 2020 and October 31,2020.

In October 2020, the OPUC issued an order providing for recovery of deferred Oregon CAT as well as CAT incurred prospectively beginning November 1, 2020.

This asset was fully recovered as of December 31, 2022.

At December 31, 2023 and 2022, deferred tax assets of $ 46.1 million and $ 48.0 million, respectively, were recorded by NW Natural representing the future income tax benefit associated with the excess deferred income tax regulatory liability recorded as a result of the lower federal corporate income tax rate provided for by the TCJA.

2 unchanged sentences

Based upon this assessment, NW Holdings and NW Natural determined that it is more likely than not that all of their respective deferred tax assets recorded as of December 31, 2023 will be realized.

The Company estimates it has net operating loss (NOL) carryforwards of $ 0.1 million for federal taxes and $ 0.1 million for state taxes at December 31, 2022.

The federal NOLs do not expire and we anticipate fully utilizing the state NOL carryforward

balances before they begin to expire in 2040.

The Company estimates it has net operating loss (NOL) carryforwards of $ 29 thousand for federal taxes and $ 29 thousand for state taxes at December 31, 2023.

The federal NOLs do not expire and we anticipate fully utilizing the state NOL carryforward balances before they begin to expire in 2040.

California alternative minimum tax (AMT) credits of $ 56 thousand are also available.

9 unchanged sentences

Under the CAP program, NW Holdings and NW Natural work with the IRS to identify and resolve material tax matters before the tax return is filed each year.

As of December 31, 2022, income tax years 2018 through 2021 remain open for examination by the State of California.

Income tax years 2019 through 2021 are open for examination by the States of Oregon, Idaho, and Texas.

As of December 31, 2023, income tax years 2019 through 2022 remain open for examination by the States of California and Texas.

Income tax years 2020 through 2022 are open for examination by the States of Arizona, Idaho, Nebraska, and Oregon .

PROPERTY, PLANT, AND EQUIPMENT

23 unchanged sentences

The weighted average depreciation rate for NGD assets was 3.0 % in 2023, 2022, and 2021.

The weighted average depreciation rate for assets not related to NGD was 1.8 % in 2022, 2021, and 2020.

The weighted average depreciation rate for assets not related to NGD was 1.7 % in 2023 and 1.8 % in 2022 and 2021.

Investments include gas reserves, financial investments in life insurance policies, and equity method investments.

16 unchanged sentences

Investments in Unconsolidated Affiliates

In December 2021, NW Natural Water purchased a 37.3 % ownership stake in Avion Water Company, Inc.

In December 2021, NWN Water purchased a 37.3 % ownership stake in Avion Water Company, Inc.

(Avion Water), an investor-owned water utility for $ 14.5 million.

In July 2022, NW Natural Water increased its ownership stake in Avion Water to 40.3 % for an additional $ 1.0 million.

In July 2022 and June 2023, NWN Water increased its ownership stake in Avion Water to 43.1 % for an additional $ 1.0 million in each period.

In January 2024, NWN Water increased its ownership stake in Avion Water to 45.6 % for an additional $ 1.0 million.

Avion Water operates in Bend, Oregon and the surrounding communities, serving approximately 15,000 customer connections and employing 35 people.

1 unchanged sentence

Equity in earnings (loss) of Avion Water is included in other income (expense), net.

On August 6, 2020, NWN Energy completed the sale of 100 % of its interest in Trail West Holdings, LLC (TWH) to an unrelated third party for a purchase price of $ 14.0 million, $ 7.0 million of which was paid upon closing the transaction, and $ 7.0 million of which was paid upon the one-year anniversary of the close date.

The completion of the sale resulted in an after-tax gain of approximately $ 0.5 million for the year ended December 31, 2020.

TWH was a variable interest entity reported under equity method accounting through its sale.

The investment in TWH did not meet the criteria to be classified as held for sale or discontinued operations.

In 2020, NW Natural began a partnership with BioCarbN to invest in up to four separate RNG development projects that are designed to access biogas derived from water treatment at Tyson Foods’ processing plants, subject to approval by all parties.

In 2020, NW Natural began a partnership with BioCarbN to invest in up to four separate renewable natural gas (RNG) development projects that are designed to access biogas derived from water treatment at Tyson Foods’ processing plants, subject to approval by all parties.

During the construction phase of the projects, NW Natural determined it is the primary beneficiary and fully consolidates each entity.

In 2022, commissioning of the first project, Lexington Renewable Energy LLC (Lexington), was completed and NW Natural determined it was no longer the primary beneficiary and deconsolidated the variable interest entity and recorded the investment in Lexington as an equity method investment.

NW Natural accounts for its interest in Lexington using the equity method of accounting because NW Natural does not control but has the ability to exercise significant influence over Lexington's operations after commissioning.

In January 2022, commissioning of the first project, Lexington Renewable Energy LLC (Lexington), was completed.

NW Natural determined it was no longer the primary beneficiary, deconsolidated the variable interest entity and recorded the investment in Lexington as an equity method investment.

As of December 31, 2023, NW Natural had an investment balance in Lexington of $ 7.6 million.

NW Natural's share in the earnings (loss) of Lexington is included in cost of gas.

In April 2023, commissioning of the second project, Dakota City Renewable Energy LLC (Dakota City), was completed.

NW Natural determined it was no longer the primary beneficiary of Dakota City once the project was commissioned.

The investment in the variable interest entity was deconsolidated and recorded as an equity method investment.

NW Natural accounts for its interest in Dakota City using the equity method of accounting because NW Natural does not control but has the ability to exercise significant influence over Dakota City's operations after commissioning.

There was no gain or loss recognized upon deconsolidation.

NW Natural determined the fair value of the investment approximated the carrying value which was primarily comprised of cash and property, plant and equipment.

As of December 31, 2022, NW Natural had an investment balance in Lexington of $ 7.8 million.

Equity in earnings (loss) of Lexington is included in cost of gas.

As of December 31, 2023, NW Natural had an investment balance in Dakota City of $ 11.9 million.

NW Natural's share in the earnings (loss) of Dakota City is included in cost of gas.

In January 2024, NW Natural replaced BioCarbN as manager of the Lexington and Dakota City projects.

BUSINESS COMBINATIONS

2023 Business Combinations

During the year ended December 31, 2023, NWN Water and its subsidiaries acquired the assets of five businesses qualifying as business combinations.

The aggregate fair value of the preliminary total consideration transferred for these acquisitions was $ 22.8 million, most of which was preliminarily allocated to property, plant, and equipment, and goodwill.

These transactions align with NW Holdings' water and wastewater sector strategy as it continues to expand its water and wastewater service territories and included:

• Pedersen Family, LLC in Washington

• King Water Corporation in Washington

• Rose Valley Water Company in Arizona

• Hiland Water in Oregon

• Truxton and Cerbat in Arizona

Intangible Assets

In connection with the acquisition of King Water Corporation, NWN Water recorded long-term customer relationship intangible assets totaling $ 2.6 million, which will be amortized over 24 years.

There was no amortization expense recognized in 2023.

Projected amortization expense at NW Holdings for customer relationship intangible assets for each of the next five years is $ 0.1 million in each period.

The amortization will change in future periods if other intangible assets are acquired, impairments are recognized or the preliminary valuations as part of our purchase price allocation is refined.

2022 Business Combinations

Far West Water & Sewer, Inc.

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The fair value measurement is based on significant inputs that are not observable in the market and thus represents a fair value measurement categorized within Level 3 of the fair value hierarchy per ASC Topic 820.

The Far West acquisition met the criteria of a business combination, and as such a preliminary allocation of the consideration to the acquired net assets based on their estimated fair value as of the acquisition date was performed.

The Far West acquisition met the criteria of a business combination, and as such an allocation of the consideration to the acquired net assets based on their estimated fair value as of the acquisition date was performed.

In accordance with U.S.

GAAP, the fair value determination involves management judgment in determining the significant estimates and assumptions used and was made using existing regulatory conditions for net assets associated with Far West.

This allocation is considered preliminary as of December 31, 2022, as facts and circumstances that existed as of the acquisition date may be discovered as we continue to integrate Far West.

As a result, subsequent adjustments to the preliminary valuation of tangible assets, contract assets and liabilities, tax positions, and goodwill may be required.

Subsequent adjustments are not expected to be significant, and any such adjustments are expected to be completed within the one-year measurement period.

The acquisition costs were expensed as incurred.

Preliminary goodwill of $ 70.8 million was recognized from this acquisition.

Goodwill of $ 69.9 million was recognized from this acquisition.

The goodwill recognized is attributable to Far West's regulated water utility service territory, experienced workforce, and the strategic benefits for both the water utility and wastewater services expected from growth in its service territory.

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The amount of goodwill that is expected to be deductible for income tax purposes is approximately $ 63.3 million.

The preliminary purchase price for the acquisition has been allocated to the net assets acquired as of the acquisition date and is as follows:

The purchase price for the acquisition has been allocated to the net assets acquired as of the acquisition date and is as follows:

In thousands December 31, 2023

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During the year ended December 31, 2022, NWN Water and its subsidiaries acquired the assets of six additional businesses qualifying as business combinations.

The aggregate fair value of the preliminary consideration transferred for these acquisitions was $ 8.7 million, most of which was preliminarily allocated to property, plant and equipment and goodwill.

The aggregate fair value of the consideration transferred for these acquisitions was $ 8.7 million, most of which was allocated to property, plant and equipment and goodwill.

These transactions align with NW Holdings' water and wastewater sector strategy as it continues to expand its water and wastewater service territories and included:

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The aggregate fair value of the consideration transferred for these acquisitions were not material and are not significant to NW Holdings' results of operations.

2020 Business Combinations

During the year ended December 31, 2020, NWN Water and its subsidiaries completed two significant acquisitions qualifying as business combinations.

The aggregate fair value of the total cash consideration transferred for these acquisitions was $ 38.1 million, most of which was allocated to property, plant and equipment and goodwill.

These transactions align with NW Holdings' water sector strategy as it continues to expand its water services territories in the Pacific Northwest and beyond and included:

• Suncadia Water Company, LLC and Suncadia Environmental Company, LLC which were acquired by NWN Water of Washington on January 31, 2020, and

• T&W Water Service Company which was acquired by NWN Water of Texas on March 2, 2020.

T&W Water Service Company is referred to as Blue Topaz Utilities following the closure of the acquisition.

Other 2020 Business Combinations

During the year ended December 31, 2020, NWN Water completed three additional acquisitions, comprised of four water systems and one wastewater system, which qualified as business combinations.

The aggregate fair value of the consideration transferred for these acquisitions was approximately $ 1.5 million.

These business combinations were not significant to NW Holdings' results of operations.

NW Holdings allocates goodwill to reporting units based on the expected benefit from the business combination.

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NW Natural enters into financial derivative contracts to hedge a portion of the NGD segment’s natural gas sales requirements.

These contracts include swaps, options, and combinations of option contracts.

These contracts include swaps, options, and option combinations.

These derivative financial instruments are primarily used to manage commodity price variability.

A small portion of NW Natural's derivative hedging strategy involves foreign currency forward contracts.

NW Natural enters into these financial derivatives, up to prescribed limits, primarily to hedge price variability related to term physical gas supply contracts as well as to hedge spot purchases of natural gas.

NW Natural enters into these financial derivatives, up to prescribed limits, primarily to hedge price variability related to term physical gas supply contracts.

The foreign currency forward contracts are used to hedge the fluctuation in foreign currency exchange rates for pipeline demand charges paid in Canadian dollars.

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These contracts qualify for regulatory deferral accounting treatment.

NW Natural also enters into exchange contracts related to the third-party asset management of its gas portfolio, some of which are derivatives that do not qualify for hedge accounting or only partial regulatory deferral, but are subject to NW Natural's regulatory sharing agreement.

These derivatives are recognized in operating revenues, net of amounts shared with NGD customers.

Notional Amounts

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Purchased Gas Adjustment (PGA)

Rates and hedging approaches may vary between states due to different rate structures and mechanisms.

Under the PGA mechanism in Oregon, derivatives entered into by NW Natural for the procurement or hedging of natural gas for future gas years generally receive regulatory deferral accounting treatment.

In general, commodity hedging for the current gas year is completed prior to the start of the gas year, and hedge prices are reflected in the weighted-average cost of gas in the PGA filing.

Rates and hedging approaches may vary between states due to different rate structures and mechanisms.

In addition, as required with the Washington PGA filing, NW Natural incorporated and began implementing risk-responsive hedging strategies for its Washington gas supplies.

Hedge contracts entered into after the start of the PGA period are subject to the PGA incentive sharing mechanism in Oregon.

NW Natural entered the 2022-23 and 2021-22 gas years with forecasted sales volumes hedged at 67 % and 60 % in financial swap and option contracts, and 17 % and 19 % in physical gas supplies, respectively.

Hedge contracts entered into prior to the PGA filing, in September 2022, were included in the PGA for the 2022-23 gas year.

Hedge contracts entered into after the PGA filing, and related to subsequent gas years, may be included in future PGA filings and qualify for regulatory deferral.

Under the PGA mechanism in Washington, NW Natural incorporates a risk-responsive hedging strategy, and receives regulatory deferral accounting treatment for its Washington gas supplies.

NW Natural entered the 2022-23 gas year with total forecasted sales volumes hedged at approximately 84 %, including 67 % in financial hedges and 17 % in physical gas supplies.

The total hedged was approximately 85 % in Oregon and 79 % in Washington.

NW Natural entered the 2023-24 gas year with total forecasted sales volume hedged at approxima tely 82 %, including 66 % in financial hedges and 16 % in physical gas supplies.

The total hedged was approximately 85 % in Oregon and 55 % in Washington.

Unrealized and Realized Gain/Loss

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Realized Gain/Loss

NW Natural realized net gains of $ 107.8 million and $ 50.9 million for the years ended December 31, 2022 and 2021, respectively, from the settlement of natural gas financial derivative contracts.

NW Natural realized a net gain of $ 125.5 million and $ 107.8 million for the years ended December 31, 2023 and 2022, respectively, from the settlement of natural gas financial derivative contracts.

Realized gains and losses offset the higher or lower cost of gas purchased, resulting in no incremental amounts to collect or refund to customers.

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If netted by counterparty, NW Natural's physical and financial derivative position would result in an asset of $ 9.0 million and a liability of $ 124.2 million as of December 31, 2023, and an asset of $ 153.3 million and a liability of $ 3.6 million as of December 31, 2022.

NW Natural is exposed to derivative credit and liquidity risk primarily through securing fixed price natural gas commodity swaps with financial counterparties.

NW Natural utilizes master netting arrangements through International Swaps and Derivatives Association contracts to minimize this risk along with collateral support agreements with counterparties based on their credit ratings.

NW Natural is exposed to derivative credit and liquidity risk primarily through securing fixed-price natural gas commodity swaps and interest rate swaps with financial counterparties.

NW Natural utilizes master netting arrangements with International Swaps and Derivatives Association (ISDA) contracts to minimize these risks including ISDA Credit Support Agreements with counterparties based on their credit ratings.

Additionally, NW Natural uses counterparty, industry, sector and country diversification to minimize credit risk.

In certain cases, NW Natural may require counterparties to post collateral, guarantees, or letters of credit to maintain its minimum credit requirement standards.

In certain cases, NW Natural may require counterparties to post collateral, guarantees, or letters of credit to maintain its minimum credit requirement standards or for liquidity management purposes.

NW Natural's financial derivatives policy requires counterparties to have an investment-grade credit rating at the time the derivative instrument is entered into, and specifies limits on the contract amount and duration based on each counterparty’s credit rating.

NW Natural does not speculate in derivatives.

Derivatives are used to reduce NW Natural's net market risk and hedge exposure above risk tolerance limits.

Derivatives are used to manage NW Natural's market risk and we hedge exposure above risk tolerance limits.

It is required that increases in market risk created by the use of derivatives is offset by the exposures they modify.

We actively monitor NW Natural's derivative credit exposure and place counterparties on hold for trading purposes or require other forms of credit assurance, such as letters of credit, cash collateral, or guarantees as circumstances warrant.

The ongoing assessment of counterparty credit risk includes consideration of credit ratings, credit default swap spreads, bond market credit spreads, financial condition, government actions, and market news.

A Monte Carlo simulation model is used to estimate the change in credit and liquidity risk from the volatility of natural gas prices.

The ongoing assessment of counterparty credit risk includes consideration of credit ratings, credit default swap spreads, bond market credit spreads, financial conditions, government actions, and market news.

A Monte Carlo simulation model is used to estimate the

change in credit and liquidity risk from the volatility of natural gas prices.

The results of the model are used to establish trading limits.

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Additionally, the assessment of non-performance risk is generally derived from the credit default swap market and from bond market credit spreads.

The impact of the credit risk adjustments for all financial derivatives outstanding was immaterial to the fair value calculation at December 31, 2022.

As of December 31, 2022 and 2021, the net fair value was an asset of $ 149.7 million and $ 48.0 million, respectively, using significant other observable, or Level 2, inputs.

The impact of the credit risk adjustments for all financial derivatives outstanding to the fair value calculation was $ 0.7 million at December 31, 2023.

As of December 31, 2023 and 2022, the net fair value was a liability of $ 115.2 million and an asset of $ 149.7 million, respectively, using significant other observable, or Level 2, inputs.

No Level 3 inputs were used in our derivative valuations during the years ended December 31, 2023 and 2022.

NW Holdings and NWN Water entered into interest rate swap agreements with major financial institutions that effectively convert variable-rate debt to a fixed rate.

NW Holdings and NWN Water entered into interest rate swap agreements with major financial institutions that effectively converted variable-rate debt to a fixed rate.

Interest payments made between the effective date and expiration date are hedged by the swap agreements.

The notional amount, effective date, expiration date and rate of the swap agreements are shown in the table below:

The notional amount, effective date, expiration date and benchmark rate of the swap agreements are shown in the table below:

In millions Notional Amount Effective Date Expiration Date Fixed Rate

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NWN Water $ 55.0 1/19/2023 6/10/2026 3.8 %

Unrealized gains and losses related to these interest rate swap agreements are recorded in AOCI on the consolidated balance sheet and totaled $ 129 thousand, net of tax, as of December 31, 2022.

There were no amounts reclassified from AOCI to net income during the year ended December 31, 2022.

Unrealized gains and losses related to these interest rate swap agreements are recorded in AOCI on the consolidated balance sheet and totaled $ 0.2 million and $ 0.1 million, net of tax, as of December 31, 2023 and 2022, respectively.

There were no amounts reclassified from AOCI to net income during the year ended December 31, 2023 and 2022.

COMMITMENTS AND CONTINGENCIES

Gas Purchase and Pipeline Capacity Purchase and Release Commitments

NW Natural has signed agreements providing for the reservation of firm pipeline capacity under which it is required to make fixed monthly payments for contracted capacity.

Gas Purchase Agreements

NW Natural enters into short-term and long-term physical baseload gas purchase agreements.

The majority of our gas purchase agreements include year-round, winter-only, summer-only, and monthly purchases.

Pipeline Capacity Purchase and Release Commitments

NW Natural has signed agreements providing for the reservation of firm pipeline capacity under which it is required to make monthly payments for contracted capacity.

The pricing component of the monthly payment is established, subject to change, by U.S.

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In addition, NW Natural has entered into long-term agreements to release firm pipeline capacity.

NW Natural also enters into short-term and long-term gas purchase agreements.

In November 2021, NW Natural and a subsidiary of Archaea Energy entered into a long-term RNG purchase and sale agreement.

Under the agreement, NW Natural committed to purchase the environmental attributes generated by Archaea related to up to ten million therms of RNG annually from its portfolio of RNG production facilities for a fixed fee for a period of 21 years.

The agreement commenced in 2022, with the full annual quantity beginning in 2025.

The parties that we release this capacity to make payments directly to the related pipelines.

The aggregate amounts of these agreements at NW Natural were as follows at December 31, 2023:

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(1) Gas purchase agreements include environmental attributes of RNG.

Total fixed charges under capacity purchase agreements were $ 90.2 million for 2022, $ 82.9 million for 2021, and $ 81.8 million for 2020, of which $ 8.3 million, $ 7.7 million, and $ 4.8 million, respectively, related to capacity releases.

Total fixed charges under capacity purchase agreements were $ 87.0 million for 2023, $ 90.2 million for 2022, and $ 82.9 million for 2021, of which $ 8.2 million, $ 8.3 million, and $ 7.7 million, respectively, related to capacity releases which third parties paid directly to the related pipelines.

In addition, per-unit charges are required to be paid based on the actual quantities shipped under the agreements.

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After a ROD is issued, NW Natural would seek to negotiate a consent decree or consent judgment for designing and implementing the remedy.

NW Natural would have the ability to further refine estimates of remediation liabilities at that time.

NW Natural would have the ability to further refine estimates of remediation liabilities based upon an approved remedial design.

Remediation may include treatment of contaminated media such as sediment, soil and groundwater, removal and disposal of media, institutional controls such as legal restrictions on future property use, or natural recovery.

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Siltronic Corporation is not a party to the amended order.

In the second quarter of 2021, NW Natural began preliminary design discussions with the EPA for the Gasco sediments site.

These preliminary design discussions did not include a cost estimate for cleanup.

No design alternatives are more likely than the EE/CA alternatives at this time, and NW Natural expects further design discussion and iteration with the EPA.

NW Natural is completing pre-design studies and has submitted a draft Basis of Design Report.

These preliminary design steps do not include a cost estimate for cleanup.

No remedial design is more likely than the EE/CA alternatives at this time, and NW Natural expects further design discussion and iteration with the EPA.

The estimated costs for the various sediment remedy alternatives in the draft EE/CA for the additional studies and design work needed before the cleanup can occur, and for regulatory oversight throughout the cleanup range from $ 55.0 million to $ 350 million.

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At this time, we believe sediments at the Gasco sediments site represent the largest portion of NW Natural's liability related to the Portland Harbor site discussed above.

In September 2023, the EPA approved the In Situ Stabilization and Solidification (ISS) Work Plan for the ISS field pilot study, which was successfully completed during the fall of 2023.

Information obtained from the pilot study will be used to support remedial design of the Gasco sediments project.

OTHER PORTLAND HARBOR.

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One member of this Trustee council, the Yakama Nation, withdrew from the council in 2009, and in 2017, filed suit against NW Natural and 29 other parties seeking remedial costs and NRD assessment costs associated with the Portland Harbor site, set forth in the complaint.

The complaint seeks recovery of alleged costs totaling $ 0.3 million in connection with the selection of a remedial action for the Portland Harbor site as well as declaratory judgment for unspecified future remedial action costs and for costs to assess the injury, loss or destruction of natural resources resulting from the release of hazardous substances at and from the Portland Harbor site.

The Yakama Nation has filed two amended complaints addressing certain pleading defects and

dismissing the State of Oregon.

The complaint seeks recovery of alleged costs totaling $ 0.3 million in connection with the selection of a

remedial action for the Portland Harbor site as well as declaratory judgment for unspecified future remedial action costs and for costs to assess the injury, loss or destruction of natural resources resulting from the release of hazardous substances at and from the Portland Harbor site.

The Yakama Nation has filed two amended complaints addressing certain pleading defects and dismissing the State of Oregon.

On the motion of NW Natural and certain other defendants the federal court has stayed the case pending the outcome of the non-binding allocation proceeding discussed above.

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In March 2015, ODEQ approved the Risk Assessment (RA) for this site, enabling commencement of work on the FS in 2016.

A draft FS is currently anticipated to be submitted in 2024.

NW Natural has recognized a liability for the remediation of the uplands portion of the site which is at the low end of the range of potential liability;

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Current regulatory assets (3)

$ 7,392 $ 6,694

Long-term regulatory assets (3)

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Although the final outcome of this proceeding cannot be predicted with certainty, NW Natural and NW Holdings do not expect the ultimate disposition of this matter will have a material effect on NW Natural's or NW Holdings' financial condition, results of operations, or cash flows.

For additional information regarding other commitments and contingencies, see Note 16.

DISCONTINUED OPERATIONS

On June 20, 2018, NWN Gas Storage, then a wholly-owned subsidiary of NW Natural, entered into a Purchase and Sale Agreement (the Agreement) that provided for the sale by NWN Gas Storage of all of the membership interests in Gill Ranch.

Gill Ranch owns a 75 % interest in the natural gas storage facility located near Fresno, California known as the Gill Ranch Gas Storage Facility.

On December 4, 2020, NWN Gas Storage closed the sale of all of the membership interests in Gill Ranch and received payment of the initial cash purchase price of $ 13.5 million less the $ 1.0 million deposit previously paid.

Furthermore, additional payments to NWN Gas Storage may be made subject to a maximum amount of $ 15.0 million in the aggregate (subject to a working capital adjustment) based on the economic performance of Gill Ranch for each full gas storage year (April 1 of one year through March 31 of the following year) occurring after the closing and the remaining portion of the 2020-2021 gas storage year and will continue until such time as the maximum amount has been paid.

The fair value of this arrangement at the closing date was zero based on a discounted cash flow forecast.

Subsequent changes in the fair value will be recorded in earnings.

The completion of the sale resulted in an after-tax gain of $ 5.9 million for the year ended December 31, 2020.

The following table presents the operating results of Gill Ranch and is presented net of tax on NW Holdings' consolidated statements of comprehensive income:

NW Holdings Discontinued Operations

In thousands 2020

Revenues $ 10,193

Operations and maintenance 7,931

General taxes 198

Depreciation 391

Other expenses and interest 848

Total expenses 9,368

Income from discontinued operations 825

Gain on sale of discontinued operations 8,027

Income from discontinued operations before income tax 8,852

Income tax expense (1)

Income from discontinued operations, net of tax $ 6,508

(1) Includes income tax expense of $ 2.1 million related to the sale of Gill Ranch for the year ended December 31, 2020.

As a result of the disposition of the membership interests of Gill Ranch, there were no assets or liabilities classified as held for sale at December 31, 2020.

SUBSEQUENT EVENT

On January 6, 2023, NW Natural issued and sold $ 100.0 million aggregate principal amount of its FMBs, 5.43 % Series due January 6, 2053 (the Bonds), to certain institutional investors pursuant to a Bond Purchase Agreement dated December 13, 2022.

The Bonds bear interest at the rate of 5.43 % per annum, payable semi-annually on January 6 and July 6 of each year, commencing July 6, 2023, and will mature on January 6, 2053.

The Bonds will be subject to redemption prior to maturity at the option of NW Natural, in whole or in part, (i) at any time prior to July 6, 2052, at a redemption price equal to 100 % of the principal amount thereof plus a “make-whole” premium and accrued and unpaid interest thereon to the date of redemption, and (ii) at any time on and after July 6, 2052, at 100 % of the principal amount thereof plus accrued and unpaid interest thereon to the date of redemption.

The Bond Purchase Agreement also provides for the issuance of $ 80.0 million aggregate principal amount of NW Natural’s FMBs, 5.18 % Series due 2034 ( 5.18 % Bonds) and $ 50.0 million aggregate principal amount of NW Natural’s FMBs, 5.23 % Series due 2038 ( 5.23 % Bonds).

The 5.18 % Bonds and the 5.23 % Bonds are expected to be issued on or about August 4, 2023.

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF NORTHWEST NATURAL HOLDING COMPANY

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Short-term debt $ 73,000 $ 88,000

Current maturities of long-term debt 99,992 —

Accounts payable 968 402

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Other 2,510 4,615 4,320

Cash provided by (used in) financing activities 194,405 36,902 ( 2,744 )

Increase (decrease) in cash and cash equivalents 7,015 ( 11,002 ) 11,148

Cash (used in) provided by financing activities ( 13,335 ) 194,405 36,902

(Decrease) increase in cash and cash equivalents ( 6,269 ) 7,015 ( 11,002 )

Cash, cash equivalents and restricted cash, beginning of period 7,280 265 11,267

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These condensed financial statements and related footnotes have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X.

These financial statements, in which NW Holdings' subsidiaries have been included using the equity method, should be read in conjunction with the consolidated financial statements and notes thereto of NW Holdings included in Item 8 of this Form 10-K.

These financial statements should be read in conjunction with the consolidated financial statements and notes thereto of NW Holdings included in Item 8 of this Form 10-K.

NW Holdings' wholly-owned subsidiaries are recorded based upon its proportionate share of the subsidiaries' net assets (similar to presenting them on the equity method).

Equity earnings of subsidiaries including earnings from NW Natural were $ 106.3 million, $ 92.7 million, and $ 83.1 million for the years ended December 31, 2023, 2022, and 2021 respectively.

There were $ 95.7 million , $ 62.7 million and $ 82.1 million of cash dividends paid to NW Holdings from wholly-owned subsidiaries for the years ended December 31, 2023, 2022 and 2021, respectively.

Other Comprehensive Income (Loss) from Subsidiaries Correction

During 2021, NW Holdings identified that activities related to other comprehensive income (loss) from subsidiaries had been excluded from the condensed statements of comprehensive income and condensed balance sheets.

NW Holdings corrected the previously presented condensed balance sheet for the year ended December 31, 2020, and in doing so, decreased total equity by $ 3.6 million with a corresponding decrease in investment in subsidiaries.

In addition, the condensed statement of comprehensive income for the year ended December 31, 2020 was corrected to include other comprehensive loss of $ 2.2 million.

NW Holdings has evaluated the effect of the misstatement, both qualitatively and quantitatively, and concluded that it did not have a material impact on, nor require amendment of, any previously filed condensed financial statements.

For information concerning NW Holdings' debt obligations, see Note 9 to the consolidated financial statements included in Item 8 of this report.

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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 8. Financial Statements and Supplementary Data