ORGANIZATION AND PRINCIPLES OF CONSOLIDATION

On October 1, 2018, we completed a reorganization into a holding company structure. In this reorganization, shareholders of NW Natural (the predecessor publicly held parent company) became shareholders of NW Holdings on a one-for-one basis; maintaining the same number of shares and ownership percentage as held in NW Natural immediately prior to the reorganization. NW Natural became a wholly-owned subsidiary of NW Holdings. Additionally, certain subsidiaries of NW Natural were transferred to NW Holdings. This reorganization was accounted for as a transaction among entities under common control. As required under accounting guidance, these subsidiaries are presented in this report as discontinued operations in the consolidated results of NW Natural. See Note 18 for additional information.

The accompanying consolidated financial statements represent the respective, consolidated results and financial results of NW Holdings and NW Natural and all respective companies that each registrant directly or indirectly controls, either through majority ownership or otherwise. This is a combined report of NW Holdings and NW Natural, which includes separate consolidated financial statements for each registrant.

NW Natural's natural gas distribution activities are reported in the natural gas distribution (NGD) segment, formerly titled and reported as the utility segment. The NGD segment is NW Natural's core operating business and serves residential, commercial, and industrial customers in Oregon and southwest Washington. The NGD segment is the only reportable segment for NW Holdings and NW Natural. All other business activities, including certain gas storage activities, water businesses, and other investments and activities are aggregated and reported as other at their respective registrant.

In addition, NW Holdings has reported discontinued operations results related to the pending sale of Gill Ranch Storage, LLC (Gill Ranch).

NW Holdings' direct and indirect wholly-owned subsidiaries include:


•	Northwest Natural Gas Company (NW Natural);


◦	Northwest Energy Corporation (Energy Corp);


▪	NWN Gas Reserves LLC (NWN Gas Reserves);


•	NW Natural Energy, LLC (NWN Energy);


◦	NW Natural Gas Storage, LLC (NWN Gas Storage);


▪	Gill Ranch Storage, LLC (Gill Ranch), which is presented as a discontinued operation;


•	NNG Financial Corporation (NNG Financial);


◦	KB Pipeline Company (KB);


•	NW Natural Water Company, LLC (NWN Water);


◦	Falls Water Co., Inc. (Falls Water);


◦	Salmon Valley Water Company;


◦	Cascadia Water, LLC (Cascadia);


◦	NW Natural Water of Oregon, LLC (NWN Water of Oregon);


◦	NW Natural Water of Washington, LLC (NWN Water of Washington); and


◦	NW Natural Water of Idaho, LLC (NWN Water of Idaho); and


▪	Gem State Water Company, LLC (Gem State)

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 NWN Financial's investment in Kelso-Beaver Pipeline and NWN Energy's investment in Trail West Holdings, LLC (TWH), which is accounted for under the equity method. NW Holdings and its direct and indirect subsidiaries are collectively referred to herein as NW Holdings, and NW Natural and its direct and indirect subsidiaries are collectively referred to herein as NW Natural. The consolidated financial statements of NW Holdings and NW Natural are presented after elimination of all intercompany balances and transactions.

During the second quarter of 2018, we moved forward with our long-term strategic plans, which include a shift away from the California gas storage business. 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 provides for the sale of all of the membership interests in its wholly-owned subsidiary, Gill Ranch, subject to various regulatory approvals and closing conditions. We have concluded that the pending sale of Gill Ranch qualifies as assets and liabilities held for sale and discontinued operations. As such, the results of Gill Ranch have been presented as a discontinued operation for NW Holdings for all periods presented and for NW Natural up until the holding company reorganization was effective on October 1, 2018 on the consolidated statements of comprehensive income and cash flows, and the assets and liabilities associated with Gill Ranch have been classified as discontinued operations assets and liabilities on the NW Holdings consolidated balance sheet. See Note 18 for additional information. Additionally, we reevaluated reportable segments and concluded that the remaining gas storage activities no longer meet the requirements to be separately reported as a segment. Interstate Storage Services is now reported in Other under NW Natural and all prior periods reflect this change. See Note 4, which provides segment 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. Note 4 and Note 18 provide information regarding reportable segments and discontinued operations, respectively.

All prior period amounts have been retrospectively adjusted to reflect the change in reportable segments and the designation of Gill Ranch as a discontinued operation for NW Holdings, and the designation of subsidiaries previously owned by NW Natural that are now owned by NW Holdings as discontinued operations for NW Natural. These reclassifications and the reorganization activities described above had no effect on the prior year’s consolidated results of operations, financial condition, or cash flows.