Northwest Natural’s MX3 Project Delays, Oregon Rate Mechanism Doubts, and Hydrogen Funding Shifts Spark Contradictions

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Date of Call: Aug 5, 2026

Financials Results

• EPS: $0.09 for Northwest Natural Gas, down from $0.12 prior year period; Q2 EPS flat to prior year but above seasonal, with year-to-date EPS $2.33 vs $2.28 in 2025

Guidance:

• Full-year 2026 EPS expected to be in the top half of guidance range of $2.09 to $2.28.
• Long-term earnings growth target reaffirmed at 4% to 6% through 2030, with MX3 project opportunity expected to increase it to 5% to 7%.
• Expect stronger performance in the back half of 2026 compared to last year.
• Capital expenditure plan for 2026 remains $500 to $550 million.
• Expect equity needs through 2030 to be met through disciplined use of ATM program.
• Expect to increase dividend over time consistent with earnings growth and cash flow.

Business Commentary:

Strong Financial Performance and Earnings Expectations:

• Northwest Natural Holdings reported second quarter earnings per share that exceeded expectations, with a year-to-date EPS of $2.33 for 2026 compared to adjusted EPS of $2.28 in 2025.
• The company now expects 2026 EPS to be in the top half of their guidance range of $2.95 to $3.15.
• This performance was driven by strong operational execution, disciplined cost management, and improved visibility from regulatory initiatives.

Customer Growth and Infrastructure Investment:

• In Texas, C-Energy reported organic customer growth of over 15%, contributing to a backlog expected to fuel growth for years.
• Northwest Natural Gas invested over $165 million in infrastructure to support modern, resilient natural gas networks.
• Growth was supported by continued customer acquisition and strategic investments in system reliability and expansion.

Regulatory and Strategic Progress:

• Northwest Natural Gas filed a multi-party settlement in Oregon, achieving a $13 million revenue requirement, and made progress in Washington with a multi-year rate case.
• The company received over 80% of its requested revenue requirement in Washington, with new rates effective August 1st.
• Regulatory progress was focused on implementing new mechanisms for rate plans and capital funding, ensuring continued investment and growth opportunities.

Water Utility Growth and Consolidation:

• Northwest Natural Water saw 3.4% overall customer growth, with modestly below plan results in the first half of 2026.
• The company advanced formula rates and consolidation efforts in Arizona, aligning with their strategy for a scaled, efficient water utility platform.
• Growth initiatives are supported by ongoing regulatory proceedings and strategic positioning for long-term opportunities.

MX3 Storage Expansion Project:

• The MX3 project, a $300 million FERC-regulated gas storage expansion, received conditional use permit approval, with a timeline for completion by the end of 2027.
• The project is expected to add 4 to 5 Bcf of working capacity and enhance regional energy reliability.
• Project progress is anticipated to support an increase in the company's long-term earnings growth target to 5% to 7% upon receiving notice to proceed.

Sentiment Analysis:

Overall Tone: Positive

• Management stated 'quarter represented another solid quarter of performance' and 'earnings per share... surpassed our expectations.' They are 'very encouraged by the momentum' and 'confident in our ability to deliver on our objectives.' The tone highlights 'strong operational and financial execution,' 'disciplined execution across the company,' and 'very pleased with a strong start to the year.'

Q&A:

• Question from Constantine Lednev (Wells Fargo): I understand there have been some technical difficulties. We will make sure that get your questions answered...
  Response: Management did not receive the specific question and stated they would follow up post-call, but the prepared remarks indicate confidence in the rest of the year and executing the growth strategy.

Contradiction Point 1

Economic Conditions Assessment in Oregon

Contradiction on the state of Oregon's economy and its impact on customer growth, impacting the company's operational outlook.

Constantine Lednev (Wells Fargo) - Constantine Lednev (Wells Fargo)

2026Q2: [The question is not clearly legible in the provided transcript... session concluded without the question being formally asked or answered.] - N/A

[The question is not clearly legible...] - Christopher Ellinghaus (Siebert Williams Shank & Co., L.L.C.)

2026Q1: Economic conditions in Oregon have been challenging, with a slowdown in housing starts and other macro indicators over the past few years. - Justin Palfreyman(CEO)

Contradiction Point 2

Growth Outlook and Guidance for SiEnergy

Contradiction on the growth trajectory and potential catch-up for SiEnergy's utility business, affecting long-term financial planning.

What are Wells Fargo's key financial highlights? - Constantine Lednev (Wells Fargo)

2026Q2: [The question is not clearly legible in the provided transcript... session concluded without the question being formally asked or answered.] - N/A

[The question is not clearly legible...] - Christopher Ellinghaus (Siebert Williams Shank & Co., L.L.C.)

2026Q1: The difference between the current rate base growth and the net income growth guidance is primarily due to the expected timing of rate case cadence and regulatory lag under the FAIR Act. The specific timing of regulatory approvals and rate case filings will influence the alignment of net income with rate base growth over the 5-year planning horizon. - Raymond Kaszuba(CFO)

Contradiction Point 3

MX3 Project Timeline and EPS Growth Guidance Trigger

Inconsistent timeline for MX3 project trigger and EPS growth guidance increase, creating uncertainty around future earnings potential.

Constantine Lednev (Wells Fargo) - Constantine Lednev (Wells Fargo)

2026Q2: [The question is not clearly legible... session concluded without the question being formally asked or answered.] - N/A(N/A)

The question is not clearly legible in the provided transcript. The system attempted to reconnect the participant but ultimately the session concluded without the question being formally asked or answered. - Christopher Ellinghaus (Siebert Williams Shank)

2025Q4: Without MX3, the company is comfortable with its 4% to 6% long-term EPS growth guidance. With the MX3 project, once notice to proceed is achieved, the guidance would increase to 5% to 7%. - Justin Palfreyman(CFO)

Contradiction Point 4

2026 Oregon Rate Mechanism and Growth Expectations

Contradiction on the expected 2026 Oregon rate mechanism and its impact on near-term growth, affecting the company's revenue and investment recovery strategy.

Constantine Lednev (Wells Fargo) - Constantine Lednev (Wells Fargo)

2026Q2: [The question is not clearly legible... session concluded without the question being formally asked or answered.] - N/A(N/A)

The question is not clearly legible in the provided transcript. The system attempted to reconnect the participant but ultimately the session concluded without the question being formally asked or answered. - Christopher Ellinghaus (Siebert Williams Shank)

2025Q4: Yes, the company expects to receive the modest 1.5% rate increase mechanism in Oregon as part of its 2026 guidance. This helps recover capital investments and avoids a larger future rate shock. - Justin Palfreyman(CFO)

Contradiction Point 5

Status and Future Preparedness of Hydrogen Projects

Contradiction on the current status of hydrogen projects and the company's readiness for future deployment, impacting strategic positioning in emerging markets.

What were the key financial results and outlook for the quarter? - Constantine Lednev (Wells Fargo)

2026Q2: The question is not clearly legible in the provided transcript. The system attempted to reconnect the participant but ultimately the session concluded without the question being formally asked or answered. - N/A(N/A)

Was the participant's question addressed in the earnings call? - Tyler Rakers (Stifel, Nicolaus & Company, Incorporated) (on behalf of Selman Akyol)

2025Q3: The company has completed hydrogen blending tests and a pilot for methane pyrolysis technology. Broader federal hydrogen hub projects (not directly involving the company) have had funding reallocated. The company would be prepared to blend affordable, clean hydrogen into its systems if it becomes economically viable in the future. - Justin Palfreyman(CEO)

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