| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 42.90 | 3 |
| Intrinsic value (DCF) | 0.00 | -100 |
| Graham-Dodd Method | 12.97 | -69 |
| Graham Formula | 9.14 | -78 |
Northwest Natural Holding Company (NYSE: NWN) is a leading regulated natural gas utility serving residential, commercial, industrial, and transportation customers in Oregon and Southwest Washington. Founded in 1859 and headquartered in Portland, Oregon, the company operates through its subsidiary, Northwest Natural Gas Company, delivering reliable energy solutions to approximately 786,000 meters. Beyond core gas distribution, NWN manages the 5.7 billion cubic foot Mist gas storage facility, provides asset management services, and operates an appliance retail center. The company has expanded into water utility services, serving around 80,000 people through 33,000 connections in the Pacific Northwest and Texas, as well as non-regulated renewable natural gas initiatives. As a stable, dividend-paying utility, NWN plays a critical role in regional energy infrastructure while pursuing strategic investments in sustainability and diversification. Its long operating history, regulated revenue model, and growing water segment position it as a resilient player in the utilities sector.
Northwest Natural offers investors a defensive equity with stable cash flows from its regulated gas and water utilities, underscored by a 4.7% dividend yield (based on current $1.9575 annual payout). The company benefits from constructive regulatory frameworks in Oregon and Washington, with allowed ROEs typically in the 9-10% range. However, high leverage (debt-to-capital ~60%) and significant capex requirements ($394M in FY2023) pressure financial flexibility. While the water business provides growth potential, it remains small (<10% of operations). The stock's low beta (0.56) suggests relative insulation from market volatility, but regulatory lag and decarbonization pressures create long-term uncertainty for gas-focused utilities. Attractive for income-oriented investors seeking utility exposure with some growth optionality through water/RNG investments.
Northwest Natural maintains a monopolistic position in its Oregon/SW Washington service territory as the sole regulated gas distributor, with revenue stability ensured through cost-of-service ratemaking. Its competitive advantages include: 1) High barriers to entry in regulated utility markets, 2) Strategic ownership of the Mist storage facility which provides operational flexibility and contracted third-party revenue, and 3) Early-mover positioning in renewable natural gas (RNG) through partnerships with landfills/dairies. However, the company faces intensifying competition in non-regulated segments - its water utility business competes with both municipal systems and private operators like American Water Works, while RNG ventures face rivalry from specialized developers. Regulatory risk represents the primary competitive vulnerability, as decarbonization policies could constrain gas infrastructure investments. NWN mitigates this through proactive clean energy initiatives like its RNG programs and methane emission reductions. The company's small scale (~$1.6B market cap) limits capital access compared to larger multi-state utilities, but its focused regional presence enables strong regulatory relationships. Customer growth remains modest (~1% annually), keeping the investment case dependent on rate base expansion and operational efficiency.