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Northwest Natural managing pandemic, even as region's job loss 'weighs heavily' from SNL Daily Gas Report Northwest Natural managing pandemic, even as region's job loss 'weighs heavily'Byline: Corey Paul Northwest Natural Holding Co. is looking to work with its regulators to manage the coronavirus pandemic's financial impacts, although the company's executives said the utility's customer mix and business model should also mitigate expected costs. The Portland, Ore.-based owner of natural gas companies in western Oregon and southwest Washington has applied for regulatory help with uncollected payments, suspended late fees and other costs associated with stay-at-home orders imposed to halt the spread of the coronavirus. At this stage, however, bad debt levels and late fees are so far in-line with 2019 levels, which totaled about $2.5 million for the year, executives said. "We'll continue to watch collections closely and, of course, work with any customers having financial difficulties," President, CEO and Director David Anderson said during a May 8 earnings call. "The closure of small businesses and loss of jobs weighs heavily on our regions." Sector observers have warned that unpaid bills piling up could saddle gas distributors with debt, and Anderson told investors it was too early to understand the potential impact on earnings and when the company would recover coronavirus-related expenses. "We're really in the early stages of this," Anderson said. "But the way deferrals work out in general is you go back in at a later date and work with the regulator on some form or fashion of recovery or other methods." While analysts generally see gas utilities as resilient amid the crisis because their revenues are largely based on long-term investment in safety and reliability programs, a severe economic downturn could still hit the sector, and uncertainty stemming from the coronavirus remains. Market observers have raised concerns about issues including weak gas demand, difficulties in collecting bills and trouble staffing infrastructure projects. "While we can't predict the full economic effects of the pandemic, I see several mitigating factors for our business," Anderson said. Executives said the timing of the outbreak in the U.S. at the end of the winter heating season blunted the impact of stay-at-home orders on sales, with peak heating demand typically concentrated in the months of November through March. Northwest Natural also touted relatively little exposure to a slump in industrial gas demand with about 87% of Northwest Natural's customers in the residential and commercial sectors. Executives said they expected 2020 capital expenditures to remain in-line with the range of $240 million to $280 million. Most of that spending is devoted to maintenance but also includes some large projects that have already begun, executives said. Northwest Natural on May 8 reported net income from continuing operations of $48.3 million, or $1.58 per share, for the first quarter, up from $43.4 million, or $1.50 per share, in the prior-year period. The S&P Global Market Intelligence consensus normalized earnings estimate for the first quarter was $1.57 per share. |
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