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. Pacific Gas and Electric Company (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 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 2019.

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 separately 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 NW Holdings' 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 the consolidated balance sheets:



	NW Holdings Discontinued Operations
	March 31,				December 31,
In thousands	2019		2018		2018
Assets:
Accounts receivable	$	1,277	$	193	$	390
Inventories	627		736		685
Other current assets	337		583		333
Property, plant, and equipment	12,033		10,812		11,621
Less: Accumulated depreciation	7		4		7
Operating lease right of use asset	118		—		—
Other non-current assets	247		51		247
Discontinued operations - current assets ⁽¹⁾	14,632		1,512		13,269
Discontinued operations - non-current assets ⁽¹⁾	—		10,859		—
Total discontinued operations assets	$	14,632	$	12,371	$	13,269

Liabilities:
Accounts payable	$	1,102	$	462	$	873
Taxes accrued	59		334		—
Other current liabilities	300		413		307
Operating lease liabilities	111		—		—
Other non-current liabilities	11,710		11,979		11,779
Discontinued operations - current liabilities ⁽¹⁾	13,282		1,209		12,959
Discontinued operations - non-current liabilities ⁽¹⁾	—		11,979		—
Total discontinued operations liabilities	$	13,282	$	13,188	$	12,959


⁽¹⁾	The total assets and liabilities of Gill Ranch are classified as current as of March 31, 2019 and 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 reported within the gas storage segment historically, and is presented net of tax on the consolidated statements of comprehensive income:



	NW Holdings Discontinued Operations
	Three Months Ended March 31,
In thousands, except per share data	2019			2018
Revenues	$	1,721		$	1,077
Expenses:
Operations and maintenance	1,613			1,036
General taxes	59			334
Depreciation and amortization	106			110
Other expenses and interest	237			241
Total expenses	2,015			1,721
Loss from discontinued operations before income taxes	(294		)	(644		)
Income tax benefit	(77		)	(170		)
Loss from discontinued operations, net of tax	$	(217	)	$	(474	)

Loss from discontinued operations per share of common stock:
Basic	$	(0.01	)	$	(0.02	)
Diluted	(0.01		)	(0.02		)

NW Natural

As a result 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. 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	March 31, 2018
Assets:
Cash	$	311
Accounts receivable	193
Receivables from affiliates	3,852
Inventories	736
Other current assets	639
Property, plant, and equipment	11,186
Less: Accumulated depreciation	203
Other investments	13,691
Other non-current assets	64
Discontinued operations - current assets	5,731
Discontinued operations - non-current assets	24,738
Total discontinued operations assets	$	30,469

Liabilities:
Accounts payable	$	731
Taxes accrued	368
Payables to affiliates	660
Other current liabilities	401
Deferred tax liabilities	(16,397		)
Other non-current liabilities	12,067
Discontinued operations - current liabilities	2,160
Discontinued operations - non-current liabilities	(4,330		)
Total discontinued operations liabilities	$	(2,170	)

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
	Three Months Ended March 31,
In thousands, except per share data	2018
Revenues	$	1,133
Expenses:
Operations and maintenance	1,059
General taxes	347
Depreciation and amortization	117
Other expenses and interest	260
Total expenses	1,783
Loss from discontinued operations before income taxes	(650		)
Income tax benefit	(173		)
Loss from discontinued operations, net of tax	$	(477	)