DISCONTINUED OPERATIONS

NW Holdings

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 provides 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. PG&E owns the remaining 25% interest in the Gill Ranch Gas Storage Facility. The CPUC regulates Gill Ranch under a market-based rate model which allows for the price of storage services to be set by the marketplace. The CPUC also regulates the issuance of securities, system of accounts, and regulates intrastate storage services.

The Agreement provides for an initial cash purchase price of $25.0 million (subject to a working capital adjustment), plus potential additional payments to NWN Gas Storage of up to $26.5 million in the aggregate if Gill Ranch achieves certain economic performance levels for the first three full gas storage years (April 1 of one year through March 31 of the following year) occurring after the closing and the remaining portion of the gas storage year during which the closing occurs.

We expect the transaction to close in 2019. The closing of the transaction is subject to approval by the CPUC, satisfaction of representations, warranties and covenants of the Agreement, and other customary closing conditions. In July 2018, Gill Ranch filed an application with the CPUC for approval of this transaction. On February 14, 2019, the active parties to the CPUC proceeding filed a settlement agreement with the CPUC. The CPUC is expected to rule on the settlement agreement within 90 days of its filing, but may grant further time for public comment. We expect an order on this matter by the end of June.

As a result of the strategic shift away from the California gas storage market and the significance of Gill Ranch's financial results in 2017, we concluded that the pending sale of Gill Ranch qualified it as assets and liabilities held for sale and discontinued operations. As such, the assets and liabilities associated with Gill Ranch have been classified as discontinued operations assets and discontinued operations liabilities, respectively, and, the results of Gill Ranch are presented, net of tax, as discontinued operations separate from the results of continuing operations for all periods presented. The expenses included in the results of discontinued operations are the direct operating expenses incurred by Gill Ranch that may be reasonably segregated from the costs of our continuing operations.

The following table presents the carrying amounts of the major components of Gill Ranch that are classified as discontinued operations assets and liabilities on NW Holdings' consolidated balance sheets:



	NW Holdings Discontinued Operations
In thousands	2018		2017
Assets:
Accounts receivable	$	390	$	2,126
Inventories	685		396
Other current assets	333		535
Property, plant, and equipment	11,621		10,816
Less: Accumulated depreciation	7		—
Other non-current assets	247		1
Discontinued operations - current assets	13,269		3,057
Discontinued operations - non-current assets	—		10,817
Total discontinued operations assets	$	13,269	$	13,874

Liabilities:
Accounts payable	$	873	$	1,287
Other current liabilities	307		306
Other non-current liabilities	11,779		12,043
Discontinued operations - current liabilities	12,959		1,593
Discontinued operations - non-current liabilities	—		12,043
Total discontinued operations liabilities	$	12,959	$	13,636


⁽¹⁾	The total assets and liabilities of Gill Ranch are classified as current as of December 31, 2018 because it is probable that the sale will be completed within one year.

The following table presents the operating results of Gill Ranch, which was historically reported within the gas storage segment, and is presented net of tax on NW Holdings' consolidated statements of comprehensive income:



	NW Holdings Discontinued Operations
In thousands, except per share data	2018			2017			2016
Revenues	$	3,579		$	7,135		$	7,794
Expenses
Operations and maintenance	5,771			7,245			6,643
General taxes	479			1,373			1,295
Depreciation and amortization	430			4,525			4,685
Other expenses and interest	609			975			992
Impairment expense	—			192,478			—
Total expenses	7,289			206,596			13,615
Loss from discontinued operations before income tax	(3,710		)	(199,461		)	(5,821		)
Income tax benefit⁽¹⁾	(968		)	(71,765		)	(2,297		)
Loss from discontinued operations, net of tax	$	(2,742	)	$	(127,696	)	$	(3,524	)

Loss from discontinued operations per share of common stock:
Basic	$	(0.10	)	$	(4.45	)	$	(0.13	)
Diluted	$	(0.09	)	$	(4.44	)	$	(0.13	)


⁽¹⁾	2017 income tax benefit includes approximately $18 million of tax benefit from the enactment of the TCJA. The TCJA was enacted December 22, 2017 and resulted in the federal tax rate changing from 35% to 21%.

NW Natural

As part of the holding company reorganization in October 2018, NWN Energy, NWN Gas Storage, Gill Ranch, NNG Financial, NWN Water, and NW Holdings, which were direct and indirect subsidiaries of NW Natural prior to the reorganization, are no longer subsidiaries of NW Natural. See Note 1 for additional information. As a result, NW Natural's financial statements reflect amounts related to these entities as discontinued operations for all periods presented. The expenses included in the results of discontinued operations are the direct operating expenses incurred by the entities that may be reasonably segregated from the costs of NW Natural's continuing operations.

The following table presents the carrying amounts of the major components of NWN Energy, NWN Gas Storage, Gill Ranch, NNG Financial, NWN Water, and NW Holdings that are classified as discontinued operations assets and liabilities on NW Natural's consolidated balance sheets:



	NW Natural Discontinued Operations
In thousands	2017
Assets:
Cash	$	362
Accounts receivable	2,126
Intercompany receivables	3,664
Inventories	396
Other current assets	622
Property, plant, and equipment	11,191
Less: Accumulated depreciation	192
Other investments	13,710
Other non-current assets	—
Discontinued operations - current assets	7,170
Discontinued operations - non-current assets	24,709
Total discontinued operations assets	$	31,879

Liabilities:
Accounts payable	$	1,954
Intercompany payables	266
Other current liabilities	345
Deferred tax liabilities	(16,862		)
Other non-current liabilities	12,130
Discontinued operations - current liabilities	2,565
Discontinued operations - non-current liabilities	(4,732		)
Total discontinued operations liabilities	$	(2,167	)

The following table presents the operating results prior to the holding company reorganization effective October 1, 2018 of NWN Energy, NWN Gas Storage, Gill Ranch, NNG Financial, NWN Water, and NW Holdings, which were historically reported within the gas storage segment and other, and is presented net of tax on NW Natural's consolidated statements of comprehensive income:



	NW Natural Discontinued Operations
In thousands, except per share data	2018			2017			2016
Revenues	$	3,016		$	7,360		$	8,018
Expenses
Operations and maintenance	4,151			7,423			7,387
General taxes	448			1,410			1,317
Depreciation and amortization	420			4,555			4,714
Other expenses and interest	342			650			1,097
Impairment expense	—			192,478			—
Total expenses	5,361			206,516			14,515
Loss from discontinued operations before income tax	(2,345		)	(199,156		)	(6,497		)
Income tax benefit⁽¹⁾	(622		)	(71,813		)	(2,557		)
Loss from discontinued operations, net of tax	$	(1,723	)	$	(127,343	)	$	(3,940	)


⁽¹⁾	2017 income tax benefit includes approximately $18 million of tax benefit from the enactment of the TCJA. The TCJA was enacted December 22, 2017 and resulted in the federal tax rate changing from 35% to 21%.