Good day and welcome to the NW Natural Holding Company First Quarter 2021 Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Ms. Nikki Sparley, IR Director. Please go ahead.

Thanks Nick. Good morning and welcome to our first quarter 2021 earnings call. As a reminder, some things that will be said this morning contain forward-looking statements. They are based on management's for complete list of our cautionary statement please refer to the language at the end of our press release. We expect to file our 10-Q later today.

Well thanks, Nikki, and good morning everybody. Thanks for joining us. Well, our year is off to a great start. Our financial results are solid and we continue to make progress on all key objectives. We report net income of $1.94 per share in the first quarter, that compares to net income from continuing operations of $1.58 per share for the same period last year. New rates in Oregon drove result of the gas utility along with continued healthy customer growth and improved results from our interstate storage business. I'm pleased with all -- with how all of our of our systems operated over the winter and specifically during the wide spread cold snap in February. Our extensive resource planning and the value of gas storage assets were proven once again. Our team successfully managed gas supplies to mitigate the impact of the event on customer and additional through a third-party we were able to optimize our gas supply portfolio capturing asset management revenues, which aided results but also offset higher gas costs for our customers. While many areas of the country will experience significantly elevated bills, our customers are going to clear quite well. Our commitment to safety and reliability serve Northwest Natural Water customers well in February. Also, our water utilities operating the Pacific Northwest serves customers through the February event without disruption. In Texas power outages resulted in freezing reversing heights on roughly half of our systems. But we were able to restore water service within 24 to 48 hours to all customers. Now, a few notes on the economy. The COVID vaccine has been rolled out in all states that we operate. Economic reports for our region continued to show good recovery and growth in several important areas.

Thank you, David, and good morning, everyone. I will begin today by discussing the highlights of first quarter 2021 results and conclude with guidance for the year. I'll describe earnings drivers on an after tax basis using the statutory tax rate of 26.5%. As a reminder, Northwest Natural's earnings are seasonal, with the majority of revenues and earnings generated in the first and fourth quarters during the winter heating months. For the quarter, we reported net income of $59.5 million or $1.94 per share, compared to net $48.3 million, or $1.58 per share of net income from continuing operations for the same period in 2020. The gas utility posted an increase of $0.19 per share and our other activities contributed an additional $0.17 per share compared to last year. Higher earnings at the gas utility were primarily related to new rates set in Oregon in November of 2020 offset in part by higher depreciation and general tax expense. Utility margin in the gas distribution segment increased $13.6 million as a result of the new rates and customer growth, which were partly offset by the $1.8 million greater loss from the gas cost incentive sharing mechanism as we purchased higher gas -- priced gas during the February cold weather event than was forecasted for the year. Utility O&M increased $2.1 million in the quarter reflecting higher compensation and on payroll expenses. Depreciation expense in general taxes increased $3.3 million. In addition to the impact of a higher pre tax income tax expense increased $1.7 million due to the net effect of the Oregon corporate activity tax and the ongoing amortization of tax benefits from the Tax Cuts and JOBS Act.

Thanks, Frank. Well, our business model allows us to adapt to unforeseen challenges such as the coronavirus pandemic and the most recent weather event, while also delivering on our commitments to all of our stakeholders. Our decisions are guided by our long standing core values and those values inform our environmental, social and governance goals and actions. Today, I'll walk you through just a few of our priorities and progress. First is safety. It's our greatest responsibility to our customers, our employees and the communities we serve. In the 1980s Northwest Natural proactively created a pipeline replacement program with our Public Utility Commission's and by 2015, we had replaced all of our cast iron and bare steel pipe. .: Now a few items on our water utilities. As part of our focus to build a healthy growing water business, we regularly invest in infrastructure improvements such as pipe replacements, new wells and execute on multi-year plans for larger upgrades. In 2020, we work to upgrade technology across our water platform, making it possible to proactively detect and fix issues that cause service interruptions. To build a culture of safety, we began implementing consistent safety standards and trainings across all locations. All of this preparation came into play with good results. In 2020 our water systems experienced no COVID related service interruption. And as I mentioned, our employees in Texas were able to quickly get systems back up and running during the February 2021 winter event. We're also staying focused on supporting our water utilities with a comprehensive analysis and assistance during rate cases. 2020 we filed three rate cases and have already concluded one of those in Idaho. At the same time, we continue acquiring water utilities and expanding our water family. I continue to remain very excited about the investment potential and the growth opportunities in this business. Thanks for joining us this morning. And with that, Nick, I think we're ready to open up for anybody that has any questions.

Thank you. We'll now begin the question and answer session.

Hey, good morning, everyone. Thanks for taking my question.

Good morning.

So first on RNG. I'm wondering if you've identified any additional investments under SB 98 at this point. You include a small placeholder in your CapEx plan. But how are you thinking about the upside here, given some of the market trends that we're seeing? And how does this play into your long term rate base and earnings growth? Any color here would be super helpful?

Yes. We've already made good progress already with the Tyson opportunity that we announced a couple months ago. But Justin Palfreyman, you are on the phone. Why don't you take this one?

Yes. Happy to take the question. And it's a very good question. There's a lot of activity going on in the RNG space. And we have a lot of discussions that our team is engaged in around both investment and procurement opportunities for RNG. And we expect that we'll continue to make both investments and sign off take agreements as we decarbonize our product. We don't have anything that we can specifically announce today. But we do expect that activity here will continue.

Got it. Okay. And just on the Washington regulatory front, the governor recently signed multiyear rate plan legislation. So I'm wondering how you're thinking about your ongoing rate case and future rate cases there?

Yes. We are right in the middle of a rate case, as you just as you just indicated, and in the multiplayer aspect is an important piece of that. Mardi, do you want to -- I think you're on the line. Do you want to say anything about the multiyear aspects of the plans?

Sure. Our filing did included multiyear plan. It was made transparent to the commission before we filed. They were encouraged by our approach. And I would say that right now, we as noted from filing yesterday, we are in negotiations for settlement. The dockets been amended to allow for finalization of that settlement, and we're hopeful that we can reach settlement and then with all the parties.

Understood. Great. That's all I had. Thanks so much for the time.

Thank you. Next question comes from Selman Akyol with Stifel. Please go ahead.

Thank you. Good morning.

Good Morning.

In your press release, you referenced sort of $1 million of non recoverable COVID costs. So it's kind of a two part. Number one is with things opening back up, when do you think you get beyond those costs? And then number two, should we kind of expect that to then eventually just get eaten up by inflation pressures you're seeing? And if you could maybe discuss where you are seeing inflation pressures?

Frank, do you want to cover some of the numbers?

You bet. Yes, Selman, the main effects that we've seen in the first quarter is really more the opportunity. We have commercial customers. We continue to add commercial customers, but we continued during last year, we lost some commercial customers who were a couple 1000 down from where we would expect to be. So the primary impact in the first quarter was really the margin that we don't get because we don't have those customers now at the beginning of the year. So that's the majority of that. We also have the impact of late fees that we are able to defer, these missing late fees, but we're not able to recognize them yet because we don't yet have a recovery mechanism. So they'll show up in revenues in the future when we have that mechanism, but right now, there's revenue associated with that, that we just can't recognize. So those are the real opportunities that were missing in the first quarter, I would say as opposed to any particular expense. There is a little small amount of increase in bad debt. But that's all deferred. We have a very solid deferral mechanism for almost all of the costs. So it's really the margin that's missing, and then this inability to recognize late fees until we have a recovery mechanism. As regards inflation, I would just comment that, you see inflation in your capital costs. They do have an impact there. And to some extent, salaries and benefits too, the economy's, it's not necessarily so evident at the moment. But over the last few years, of course, Oregon and Washington have been desirable places, job growth was strong. So you definitely saw that impact there and as well as your regular benefits, healthcare, those sorts of things.

Alright. And then, you also -- just in terms of industrial customers, you gave a number that was current. Can you also give that same number for the residential?

I should be able to Selman. I don't have that number at my fingertips, Nikki might be able to pull that number on the residential customer count. I Apologize. I just don't have that at hand.

No worries. That's all I had. Thanks.

Thank you. This concludes our question and answer session. I'll now turn the conference back over to Mr. David Anderson for closing remarks.

All right, Nick. Thank you. Thank you again, everybody, for taking time this morning to be with us. We look forward as Nikki said, a meeting with many of you at the American Gas Association Financial Conference in a few weeks. If you have any questions, Nikki is the person, you need to get a hold of. So again, thank you and this concludes the conference.

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