XML 26 R12.htm IDEA: XBRL DOCUMENT v3.23.2
Leases
 6 Months Ended
Jun. 30, 2023
Leases [Abstract]  
Lessee, Operating Leases LEASES
Lease Revenue
Leasing revenue primarily consists of NW Natural's North Mist natural gas storage agreement with PGE, which is billed under an OPUC-approved rate schedule and includes an initial 30-year term beginning May 2019 with options to extend, totaling up to an additional 50 years upon mutual agreement of the parties. Under U.S. GAAP, this agreement is classified as a sales-type lease and qualifies for regulatory accounting deferral treatment. The investment in the storage facility is included in rate base under a separately established cost-of-service tariff, with revenues recognized according to the tariff schedule. As such, the selling profit that was calculated upon commencement as part of the sale-type lease recognition was deferred and will be amortized over the lease term. Billing rates under the cost-of-service tariff will be updated annually to reflect current information including depreciable asset levels, forecasted operating expenses, and the results of regulatory proceedings, as applicable, and revenue received under this agreement is recognized as operating revenue on the consolidated statements of comprehensive income. There are no variable payments or residual value guarantees. The lease does not contain an option to purchase the underlying assets.

NW Natural also maintains a sales-type lease for specialized compressor facilities to provide high pressure compressed natural gas (CNG) services. Lease payments are outlined in an OPUC-approved rate schedule over a 10-year term. There are no variable payments or residual value guarantees. The selling profit computed upon lease commencement was not significant.

Our lessor portfolio also contains small leases of property owned by NW Natural and NW Holdings to third parties. These transactions are accounted for as operating leases and the revenue is recognized over the term of the lease agreement.

The components of lease revenue at NW Natural were as follows:
Three Months Ended June 30,Six Months Ended June 30,
In thousands2023202220232022
Lease revenue
Operating leases$19 $19 $38 $37 
Sales-type leases3,993 4,279 7,972 8,560 
Total lease revenue$4,012 $4,298 $8,010 $8,597 

Additionally, lease revenue of $0.2 million and $0.1 million was recognized for the three months ended June 30, 2023 and 2022, respectively, and lease revenue of $0.3 million was recognized for each of the six months ended June 30, 2023 and 2022 related to operating leases associated with non-utility property rentals. Lease revenue related to these leases was presented in other income (expense), net on the consolidated statements of comprehensive income as it is non-operating income.
Total future minimum lease payments to be received under non-cancelable leases at June 30, 2023 are as follows:
In thousandsOperatingSales-TypeTotal
NW Natural:
Remainder of 2023$311 $8,225 $8,536 
2024613 15,867 16,480 
2025604 15,306 15,910 
202636 14,901 14,937 
202722 14,521 14,543 
Thereafter— 222,299 222,299 
Total minimum lease payments$1,586 $291,119 $292,705 
Less: imputed interest159,445 
Total leases receivable$131,674 
Other (NW Holdings):
Remainder of 2023$26 $— $26 
202452 — 52 
202553 — 53 
202656 — 56 
202757 — 57 
Thereafter857 — 857 
Total minimum lease payments$1,101 $— $1,101 
NW Holdings:
Remainder of 2023$337 $8,225 $8,562 
2024665 15,867 16,532 
2025657 15,306 15,963 
202692 14,901 14,993 
202779 14,521 14,600 
Thereafter857 222,299 223,156 
Total minimum lease payments$2,687 $291,119 $293,806 
Less: imputed interest159,445 
Total leases receivable$131,674 

The total leases receivable above is reported under the NGD segment and the short- and long-term portions are included within other current assets and assets under sales-type leases on the consolidated balance sheets, respectively. The total amount of unguaranteed residual assets was $5.3 million, $4.9 million and $5.1 million at June 30, 2023 and 2022 and December 31, 2022, respectively, and is included in assets under sales-type leases on the consolidated balance sheets. Additionally, under regulatory accounting, the revenues and expenses associated with these agreements are presented on the consolidated statements of comprehensive income such that their presentation aligns with similar regulated activities at NW Natural.

Lease Expense
Operating Leases
We have operating leases for land, buildings and equipment. Our primary lease is for NW Natural's headquarters and operations center. Our leases have remaining lease terms of 3 months to 17 years. Many of our lease agreements include options to extend the lease, which we do not include in our minimum lease terms unless they are reasonably certain to be exercised. Short-term leases with a term of 12 months or less are not recorded on the balance sheet. As most of our leases do not provide an implicit rate and are entered into by NW Natural, we use an estimated discount rate representing the rate we would have incurred to finance the funds necessary to purchase the leased asset and is based on information available at the lease commencement date in determining the present value of lease payments.
The components of lease expense, a portion of which is capitalized, were as follows:
Three Months Ended June 30,Six Months Ended June 30,
In thousands2023202220232022
NW Natural:
Operating lease expense$1,790 $1,741 $3,565 $3,468 
Short-term lease expense278 416 358 579 
Other (NW Holdings):
Operating lease expense$40 $8 $80 $15 
NW Holdings:
Operating lease expense$1,830 $1,749 $3,645 $3,483 
Short-term lease expense278 416 358 579 

Supplemental balance sheet information related to operating leases as of June 30, 2023 and 2022 and December 31, 2022 is as follows:
In thousandsJune 30,December 31,
202320222022
NW Natural:
Operating lease right of use asset$71,508 $73,706 $72,720 
Operating lease liabilities - current liabilities$1,598 $1,298 $1,363 
Operating lease liabilities - non-current liabilities77,490 78,789 78,345 
Total operating lease liabilities$79,088 $80,087 $79,708 
Other (NW Holdings):
Operating lease right of use asset$588 $48 $709 
Operating lease liabilities - current liabilities$134 $17 $151 
Operating lease liabilities - non-current liabilities461 37 620 
Total operating lease liabilities$595 $54 $771 
NW Holdings:
Operating lease right of use asset$72,096 $73,754 $73,429 
Operating lease liabilities - current liabilities$1,732 $1,315 $1,514 
Operating lease liabilities - non-current liabilities77,951 78,826 78,965 
Total operating lease liabilities$79,683 $80,141 $80,479 

The weighted-average remaining lease terms and weighted-average discount rates for the operating leases at NW Natural were as follows:
In thousandsJune 30,December 31,
202320222022
Weighted-average remaining lease term (years)16.817.717.2
Weighted-average discount rate7.3 %7.2 %7.3 %

Headquarters and Operations Center Lease
NW Natural commenced a 20-year operating lease agreement in March 2020 for a new headquarters and operations center in Portland, Oregon. There is an option to extend the term of the lease for two additional periods of seven years. There is a material timing difference between the minimum lease payments and expense recognition as calculated under operating lease accounting rules. OPUC issued an order allowing us to align our expense recognition with cash payments for ratemaking purposes. We recorded the difference between the minimum lease payments and the aggregate of the imputed interest on the finance lease obligation and amortization of the right-of-use asset as a deferred regulatory asset on our balance sheet. The balance of the regulatory asset was $7.5 million, $6.3 million and $6.9 million as of June 30, 2023 and 2022 and December 31, 2022, respectively.
Maturities of operating lease liabilities at June 30, 2023 were as follows:
In thousandsNW NaturalOther
(NW Holdings)		NW Holdings
Remainder of 2023$3,610 $83 $3,693 
20247,307 162 7,469 
20257,193 155 7,348 
20267,361 140 7,501 
20277,538 107 7,645 
Thereafter108,991 12 109,003 
Total lease payments142,000 659 142,659 
Less: imputed interest62,912 64 62,976 
Total lease obligations79,088 595 79,683 
Less: current obligations1,598 134 1,732 
Long-term lease obligations$77,490 $461 $77,951 

Supplemental cash flow information related to leases was as follows:
Three Months Ended June 30,Six Months Ended June 30,
In thousands2023202220232022
NW Natural:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$1,798 $1,733 $3,565 $3,466 
Finance cash flows from finance leases— 307 173 382 
Right of use assets obtained in exchange for lease obligations
Operating leases$81 $(14)$81 $— 
Finance leases— 120 173 220 
Other (NW Holdings):
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$39 $6 $78 $12 
Right of use assets obtained in exchange for lease obligations
Finance leases$— $— $90 $— 
NW Holdings:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$1,837 $1,739 $3,643 $3,478 
Finance cash flows from finance leases— 307 173 382 
Right of use assets obtained in exchange for lease obligations
Operating leases$81 $(14)$81 $— 
Finance leases— 120 263 220 
Finance Leases
NW Natural also leases building storage spaces for use as a gas meter room in order to provide natural gas to multifamily or mixed use developments. These contracts are accounted for as finance leases and typically involve a one-time upfront payment with no remaining liability. The right of use assets for finance leases were $2.4 million, $2.3 million and $2.3 million at June 30, 2023 and 2022 and at December 31, 2022, respectively. As of June 30, 2023 and December 31, 2022, there were no finance lease liabilities and as of June 30, 2022, finance lease liabilities were $0.1 million at NW Natural.