Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Q1 2023 Earnings Presentation
39 slides from Northwestern Energy's earnings presentation, Apr 28, 2023
Slide 1: 2023 First Quarter Earnings Webcast
Overlooking Billings, Montana 2023 First Quarter Earnings Webcast April 28, 2023
Slide 2: Presenting Today / Forward Looking Statements
Presenting Today Brian Bird Crystal Lail President & CEO Vice President & CFO Forward Looking Statements During the course of this presentation, there will be forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forwar
Slide 3: First Quarter
First Quarter Regulatory execution • Reached constructive multi-party settlement in Montana rate review (currently pending commission approval) • Received final approval necessary for holding company formation Safely executed on capital plan • Nearly $150 million invested during the first quarte
Slide 4: First Quarter 2023 Financial Results
First Quarter 2023 Financial Results First Quarter Net Income vs Prior Period • GAAP: ↑ $3.4 Million (or 5.8%) • Non-GAAP*: ↑ $3.5 Million (or 5.9%) First Quarter EPS vs Prior Period • GAAP: ↓ $0.03 (or 2.8%) • Non-GAAP*: ↓ $0.04 (or 2.9%) 4 *See slide 7 and “Non-GAAP Financial Measures” slide in th
Slide 5: First Quarter Financial Results
First Quarter Financial Results (1) ( ) 5 (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure.
Slide 6: First Quarter EPS Bridge
First Quarter EPS Bridge After-tax Earnings Per Share See slide 7 and “Non-GAAP Solid improvement in first quarter net income but offset by Financial Measures” slide in dilution from higher outstanding share count. the appendix for additional detail on this measure. 6
Slide 7: First Quarter Non-GAAP Earnings
First Quarter Non-GAAP Earnings The adjusted non- GAAP measures presented in the table are being shown to reflect significant items that are non-recurring or a variance from normal weather, however they should not be considered a substitute for financial results and measures determined or calculated
Slide 8: First Quarter Utility Margin Bridge
First Quarter Utility Margin Bridge Pre-tax Millions PCCAM Impact $0.8M expense in 2022 vs. $0.5M benefit in 2023 NOTE: Utility Margin is a non-GAAP Measure $25.7 Million or 9.9% increase in Utility Margin See appendix slide titled “Explaining Utility due to items that impact Net Income. Margin” for
Slide 9: Cash Flow
Cash Flow Cash from Operating Activities increased by $18.0 million primarily due to $25.8 million increase in collection of energy supply costs from customers. Funds from Operations increased by $3.0 million over prior period. Net Under-Collected Supply Costs (in millions) Beginning Ending Inflow (
Slide 10: Montana Rate Review
Montana Rate Review Interim Rates Settlement Reached Anticipated Next Steps The MPSC approved the On April 3rd, NWE and the primary intervenors • April 18, 2023 Hearing concluded recommendations of the staff for reached a settlement agreement for electric and • May – June post-hearing briefs interim
Slide 11: Financial Outlook
Financial Outlook 2023 earnings guidance is expected to Rowe Dam at Mystic Lake, Montana be provided following an outcome in our pending Montana rate review Anticipate requesting general rate review in South Dakota (2022 Test Year) $510 million capital plan for 2023 (inclusive of $80 million of i
Slide 12: Capital Investment
Capital Investment ($millions, unless stated otherwise) 5 Year History of Capital Investment 5 Year Forecast of Capital Investment Yellowstone County Generating Station Over $2.1 Billion investment* over last 5 years $2.4 billion of forecasted low-risk capital investment opportunity… • Capital inves
Slide 13: Supply Update
Supply Update Electric Supply Resource Additions South Dakota: 58 megawatt Bob Glanzer Generating Station place in service in May 2022 completed under budget with a total cost of $83.1 million Montana: 175 megawatt Yellowstone County Generating Station • Construction began in April 2022 with total
Slide 14: Conclusion
Conclusion Best Attractive Pure Strong Solid Utility Practices Future Electric & Earnings & Foundation Corporate Growth Gas Utility Cash Flows Governance Prospects 14
Slide 15: Appendix
CT Appendix 15
Slide 16: Regulated Utility Five-Year Capital Forecast
Appendix Regulated Utility Five-Year Capital Forecast Electric Supply Resource Plans - Our energy resource plans identify portfolio resource requirements including potential investments. Included within our projections is approximately $120.0 million (in 2023 and 2024) of capital to complete constru
Slide 17: Montana Rate Review
Appendix Montana Rate Review Approximately 42% of the requested total electric and natural gas revenue increase is driven by flow-through costs including market power purchases and property taxes. 49% is driven by 17 capital investment to ensure the safety and reliability of the energy system.
Slide 18: Rate Base & Authorized Return Summary
Appendix Rate Base & Authorized Return Summary (1) The revenue requirement associated with the FERC regulated portion of Montana electric transmission and ancillary services are included as revenue credits to our MPSC jurisdictional customers. Therefore, we do not separately reflect FERC authorized
Slide 19: Colstrip Transaction Overview
Appendix Colstrip Transaction Overview NorthWestern Energy executed an agreement with Avista Corporation (Exit Agreement) for the transfer of Avista’s ownership interests in Colstrip Units 3 and 4. • Effective date of transfer: December 31, 2025 • Generating capacity: 222 MW (bringing our total owne
Slide 20: Facility Ownership Overview
Appendix Facility Ownership Overview NorthWestern is actively working with the other owners to resolve outstanding issues, including the associated pending legal proceedings. Additionally, the owners intend to pursue a mutually beneficial reallocation (swap) of megawatts between the two units that w
Slide 21: Why Colstrip?
Appendix Why Colstrip? Reliable Existing resource, ready to serve our Montana customers. Avoids NorthWestern Energy executed lengthy planning, permitting and construction of a new facility that would an agreement with Avista stretch in-service beyond 2026. Corporation for the transfer of Reduces
Slide 22: Why Colstrip?
Appendix Why Colstrip? Reduces Risk We are in a supply capacity crisis due to lack of resource adequacy, with approx. 40% of our customers’ peak needs on the market. This transaction will reduce our need to import expensive capacity during critical times. Establishes clarity regarding operations
Slide 23: December 2022 Polar Vortex
Appendix December 2022 Polar Vortex The chart illustrates the actual resource specific contribution of energy, the capacity deficit we faced, and the market price of power during the late December 2022 multi-day cold weather event in Montana. As a result of our capacity deficit, we were reliant upon
Slide 24: Our Net-Zero Vision
Appendix Our Net-Zero Vision Over the past 100 years, NorthWestern Energy has maintained our commitment to provide customers with reliable and affordable electric and natural gas service while also being good stewards of the environment. We have responded to climate change, its implications and risk
Slide 25: Utility Margin
Appendix Utility Margin (1st Quarter) (dollars in millions) Three Months Ended March 31, 2023 2022 Variance Electric $ 217.2 $ 194.1 $ 23.1 11.9% Natural Gas 71.8 65.3 6.5 10.0% (1) Total Utility Margin $ 289.0 $ 259.4 $ 29.6 11.4% Increase in utility margin due to the following factors: $ 9.8 Elect
Slide 26: Operating Expenses
Appendix Operating Expenses (1st Quarter) (dollars in millions) (1) In order to present Three Months Ended March 31, the total change in labor and benefits, we 2023 2022 Variance have included the change in the non- service cost component Operating & maintenance $ 55.9 $ 52.8 $ 3.1 5.9% of our pensi
Slide 27: Operating to Net Income
Appendix Operating to Net Income (1st Quarter) (dollars in millions) Three Months Ended March 31, 2023 2022 Variance Operating Income $ 96.0 $ 79.2 $ 16.8 21.2% Interest expense (28.0) (23.7) (4.3) (18.1%) Other income, net 4.7 4.7 0.0 0.0% Income Before Taxes 72.7 60.2 12.5 20.8% Income tax expense
Slide 28: Tax Reconciliation
Appendix Tax Reconciliation (1st Quarter) 28
Slide 29: Segment Results
Appendix Segment Results (1st Quarter) (1) (1) 29 (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure.
Slide 30: Weather / Hydro Conditions
Appendix Weather / Hydro Conditions (1st Quarter) We estimated a $3.6 million pre-tax benefit as compared to normal and a $4.1 million benefit as compared to Q1 2022. Snow Water Equivalent Percent to 30-Year Normal Snow water equivalents generally in line with or above the 30-year medians. (Missouri
Slide 31: Electric Segment
Appendix Electric Segment (1st Quarter) (1) 31 (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure.
Slide 32: Natural Gas Segment
Appendix Natural Gas Segment (1st Quarter) (1) 32 (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure.
Slide 33: Quarterly PCCAM Impacts
Appendix Quarterly PCCAM Impacts Pre-tax Millions In 2017, the Montana legislature revised the statute regarding our recovery of electric supply costs. In response, the MPSC approved a new design for our electric tracker in 2018, effective July 1, 2017. The revised electric tracker, or PCCAM establi
Slide 34: Qualified Facility Earnings Adjustment
Appendix Qualified Facility Earnings Adjustment Our electric QF liability consists of unrecoverable costs associated with contracts covered under PURPA that are part of a 2002 stipulation with the MPSC and other parties. Risks / losses associated with these contracts are born by shareholders, not cu
Slide 35: Balance Sheet
Appendix Balance Sheet Debt to Total Capitalization down from last year and slightly below our targeted 50% - 55% range. 35
Slide 36: Explaining Utility Margin
Appendix Explaining Utility Margin Management believes that Utility Margin provides a useful measure for investors and other financial statement users to analyze our financial performance in that it excludes the effect on total revenues caused by volatility in energy costs and associated regulatory
Slide 37: Non-GAAP Financial Measures
Appendix Non-GAAP Financial Measures 37
Slide 38: Non-GAAP Financial Measures
Appendix Non-GAAP Financial Measures This presentation includes financial information prepared in accordance with GAAP, as well as other financial measures, such as Utility Margin, Adjusted Non-GAAP pretax income, Adjusted Non-GAAP net income and Adjusted Non-GAAP Diluted EPS that are considered “no
Slide 39: Upetivering a
Upetivering a bright future
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