Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Investor Day (December 2008)
28 slides from Northwestern Energy's investor day presentation, Dec 2, 2008
Slide 1: Analyst Day
Analyst Day December 3, 2008 Westin New York at Times Square Palace Room, Ninth Floor
Slide 2: forward-looking statement
forward-looking statement… 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. Forward-looking statements often address our expected future business and financial
Slide 3: who we are
who we are… 650,000 customers 388,000 electric 262,000 natural gas Approximately 123,000 square miles of service territory in Montana, Nebraska and South Dakota Total generation (mostly base load coal) MT – 222 MW – regulated as of 1/1/09 SD – 312 MW – regulated Total Assets: $2,593 MM (2) Total Cap
Slide 4: Colstrip Unit 4 update
Colstrip Unit 4 update… Our 222 MW interest in Colstrip Unit 4 to go into rate base MPSC issued a finalorder on November 13, 2008 – Rates To rate base CU4 at $407 million related to Recognize that $161 million NOL balance belongs to the Company CU4 go into The MCC has filed a request for reconsidera
Slide 5: regulatory update
regulatory update… Rate case to be filed in Montana in 2009 Filing will include both electric and natural gas distribution businesses Expect to file in 2Q 2009 on 2008 test year Expect decision by April 1, 2010 In 2007 rate cases, we agreed to defer rate cases in South Dakota for 3 years Mill Creek
Slide 6: NorthWestern's future
NorthWestern’s future… Operationally strong Cost competitive Above-average reliability Award-winning customer service Financially strong Steady earnings growth and strong cash flow Sufficient liquidity with no significant maturities within next 12 months Rate case to be filed in Montana on electric
Slide 7: Brian Bird
Brian Bird Chief Financial Officer
Slide 8: 2008 third quarter year-to-date results
2008 third quarter year-to-date results… Nine Months Ended September 30, Unaudited (dollars in 000's) 2008 2007 B(W) Operating Revenues 934,725 892,036 42,689 Cost of Sales 508,941 499,555 (9,386) Gross Margin 425,784 392,481 33,303 Operating Expenses Operating, general & administrative 177,348 173,
Slide 9: 2008 guidance
2008 guidance… $1.65 to $1.80 per fully diluted share Increased guidance after third quarter results Increased from $1.60 to $1.75 per fully diluted share Includes an increase in pension expense Increase due to – Share buyback Lower legal costs (insurance recoveries) Better pricing at Colstrip Unit
Slide 10: base earnings of company since '05
base earnings of company since ’05… $2.00 $1.80 CAGR = 5.44% Earnings $1.60 profile is $1.40 improving. $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 2005 2006 2007 2008 P 2005 2006 2007 2008 P GAAP earnings per share $ 1.73 $ 1.06 $ 1.45 $1.65 - $1.80 Adjustments: Weather $ (0.01) $ (0.05) $ 0.01 $ (0.
Slide 11: potential impact of CU4 in rate base in '09
potential impact of CU4 in rate base in ‘09… Colstrip Unit 4 Rate Base Approved ** $407.0 million Equity ratio 50% Authorized ROE 10% Potential annual earnings of our interest of CU4 $20.4 million Earnings of unregulated electric in '07 $10.3 * Potential accretive annual earnings of rate basing CU4
Slide 12: impact of accounting order on pension expense
impact of accounting order on pension expense… 2005 2006 2006 2008 2009 2010 2011 2012 Original MPSC Accounting Order: Expected pension expense Original MT estimate before market decrease $ 18.84 $ 21.95 $ 21.95 $ 22.30 $ 22.30 The projections for the accounting order are Change in MT due to decreas
Slide 13: free cash flow
free cash flow… (in millions) Projected 2008 Cash flow from operations 245,000 Maintenance Cap Ex (105,000) Growth Cap Ex (20,000) Dividends (50,000) Free Cash Flow 70,000 Free cash flow in 2008 was used to buy back $78 million in company stock The 2009 increase in pension funding expense will be of
Slide 14: strong balance sheet
strong balance sheet… Unaudited (Dollars in 000's) September 30 2008 2007 Cash 8,575 12,773 Restricted Cash 16,166 14,482 Accounts Receivable, Net 108,540 143,482 Inventories 90,896 63,586 Other Current Assets 54,077 44,031 Goodwill 355,128 355,128 PP&E and Other Non-current Assets 1,960,432 1,913,8
Slide 15: liquidity highlights
liquidity highlights… Liquidity position remains strong Total liquidity currently in the $120 million range No collateral currently posted to commodity suppliers Commodity supplier open credit lines of $311 million or 362% of 60-day commodity cost Debt maturities in late 2009 Unsecured revolver matu
Slide 16: credit ratings
credit ratings… Fitch S&P Moody’s Senior Secured Rating BBB A- (MT) Baa2 BBB+ (SD) Senior Unsecured BBB- BBB Baa3 Corporate Rating BBB- BBB N/A Outlook Positive Stable Positive Colstrip Unit 4 regulatory ruling is expected to be ratings positive. 16
Slide 17: Dave Gates
Dave Gates Vice President – Wholesale Operations
Slide 18: generation growth highlights
generation growth highlights… Mill Creek Generating Unit in Montana 120-150 MW plant near Anaconda, MT Built for regulation services to balance supply and load for NWE’s Balancing Area Rate-based cost of service investment Estimated to cost approximately $200 million Existing services are becoming m
Slide 19: Mill Creek timeline
Mill Creek timeline… MGST has been filed for pre-approval, with the MPSC w/decision expected in 2Q ’09. 19
Slide 20: update on generation queue in MT
update on generation queue in MT… Potential Generation Development in Montana 7000 6000 5000 4000 3000 2000 1000 0 Coal Gas Hydro Wind MATL In-Service Signed Total MT LGIA Existing Generation Feb 08 Oct 08 Nov 08 New generation in Montana will need to find an end user. 20
Slide 21: transmission project developments
transmission project developments… Colstrip 500 kV Upgrade Line already exists – represents an upgrade Upgrades substation capacity Increases load capacity of existing line NorthWestern announced partnership with others Portland General Puget Sound Energy Pacificorp Avista Needed to relieve congesti
Slide 22: transmission project developments
transmission project developments… 230 kV “Collector System” Our project with no partners Open Season early ‘09 to determine configuration Needed to collect the potential renewables in Montana Cost estimate of “collector” project = $200M In service date of January 1, 2014. 22
Slide 23: transmission project developments cont'd… MSTI
transmission project developments cont’d… MSTI Developing a request for FERC declaratory order on incentive rate principles Beginning an updated Open Season for long term contracts to be completed by early 2009 Continuing the public outreach process Expect to complete the WECC path rating process Q1
Slide 24: Bob Rowe
Bob Rowe President and CEO NorthWestern Delivering o Bright Future
Slide 25: cap ex spending – next few years
cap ex spending – next few years… Includes more than $1 billion of potential generation and transmission growth projects. $700 Non-discretionary cap $600 ex is funded 100% by free cash flow. $500 $400 Don’t anticipate needing equity unless we proceed with MSTI. $300 $200 We will move forward $100 wi
Slide 26: growth project potential
growth project potential… Annual Earnings (in millions) Opportunity * Cost of Project Timing Mill Creek Generator $ 10.0 to $ 11.3 $ 200 to $ 225 Jan 2011 Colstrip 500 kV transmission upgrade** $ 2.5 to $ 3.0 $ 50 to $ 60 Jan 2012 South Dakota Peaking generation $ 3.8 to $ 4.5 $ 75 to $ 90 Jan 2013
Slide 27: NorthWestern = value
NorthWestern = value… Value Dividend yield of 6.5% Currently trading at just below 1.0 x book value Opportunity for growth January 1, 2009 rate basing our 222 MW interest in CU4 Possibility of increasing rate base on growth projects with investment in excess of $1 billion Potential additional annual
Slide 28: summary
summary… 2009 earnings will be entirely from regulated business Objectives achieved Recent rate relief received in all jurisdictions related to focus on Outstanding bankruptcy litigation nearly completed core business Strong balance sheet No equity required for existing core business Solid foundatio