Organization and Principles of Consolidation

9 Months Ended

Sep. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Principles of Consolidation

ORGANIZATION AND PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements represent the respective, consolidated 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 regulated natural gas distribution activities are reported in the natural gas distribution (NGD) 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 activities, water businesses, and other investments 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). See Note 17 for additional information.

NW Holdings' direct and indirect wholly-owned subsidiaries as of the filing date of this report include:

•Northwest Natural Gas Company (NW Natural);

▪Northwest Energy Corporation (Energy Corp);

•NWN Gas Reserves LLC (NWN Gas Reserves);

▪NW Natural RNG Holding Company, LLC;

•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);

▪Salmon Valley Water Company;

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

•Sunstone Water, LLC;

•Sunstone Infrastructure, LLC;

•Sunriver Water LLC (Sunriver Water);

•Sunriver Environmental LLC (Sunriver Environmental);

▪NW Natural Water of Washington, LLC (NWN Water of Washington);

•Cascadia Infrastructure, LLC;

•Cascadia Water, LLC (Cascadia);

•Suncadia Water Company, LLC (Suncadia Water);

•Suncadia Environmental Company, LLC (Suncadia Environmental);

▪NW Natural Water of Idaho, LLC (NWN Water of Idaho);

•Falls Water Co., Inc. (Falls Water);

•Gem State Water Company, LLC (Gem State):

•Gem State Infrastructure, LLC; and

▪NW Natural Water of Texas, LLC (NWN Water of Texas);

•Blue Topaz Water, LLC;

•Blue Topaz Infrastructure, LLC; and

•T&W Water Service Company.

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, which is accounted for under the equity method, and NWN Energy's investment in Trail West Holdings, LLC (TWH), which was accounted for under the equity method through August 6, 2020. See Note 13 for activity related to TWH. 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.

Information presented in these interim consolidated financial statements is unaudited, but includes all material adjustments management considers necessary for a fair statement of the results for each period reported including normal recurring accruals. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in NW Holdings' and NW Natural's combined 2019 Annual Report on Form 10-K (2019 Form 10-K). A significant part of NW Holdings' and NW Natural's business is of a seasonal nature; therefore, NW Holdings and NW Natural results of operations for interim periods are not necessarily indicative of full year results. Seasonality affects the comparability of the results of other operations across quarters but not across years.

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 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 17 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.