Northwest Natural Gas Co. received approval to convert into a holding company structure from state regulators in its service territories of Oregon and Washington, a move that would protect its regulated utility from risks posed by its non-regulated businesses.
The Public Utility Commission of Oregon and the Washington Utilities and Transportation Commission approved a Feb. 10, 2017, application from NW Natural to reorganize as a holding company, according to a March 13 SEC filing. NW Natural also expects to receive an approval from the California Public Utilities Commission within the year.
A holding company structure would provide a greater legal and financial separation between NW Natural's regulated utility operations and its non-regulated subsidiaries to "help ensure that the financial results of the other affiliates will not harm the utility's capital structure, credit ratings, or cost of capital," the company said in its application to the Oregon PUC.
Under the proposal, NW Natural would form two new entities: a holding company, Northwest Natural Holding Co., to become a subsidiary of NW Natural; and a merger subsidiary, NWN Merger Sub Inc., to become a subsidiary of NW Natural Holding. NW Natural would then contribute all its stock and interests in current subsidiaries to the holding company. The merger subsidiary would merge into NW Natural, with the latter to become the surviving company. The process would end with NW Natural becoming a subsidiary of NW Natural Holding after converting all NW Natural shares to NW Natural Holding shares.
The corporate governance of NW Natural would remain the same after the reorganization. Members of the company's board would also serve on the board of NW Natural Holding, but both would exercise independent functions and duties. None of NW Natural's utility assets would be transferred to the holding company.
The board of NW Natural plans to recommend the restructuring to its shareholders for vote during its 2018 annual shareholders meeting. The board also approved a plan of merger entered into on March 7 between NW Natural and the two newly formed entities.
The merger is expected to become effective between July 1 and Jan. 1, 2019, subject to shareholder approval and other conditions.
