Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Q1 2020 Earnings Presentation
31 slides from Northwestern Energy's earnings presentation, Apr 23, 2020
Slide 1: 2020 First Quarter Earnings Webcast
Two Dot Wind – Montana 2020 First Quarter Earnings Webcast April 23, 2020
Slide 2: Presenting Today / Forward Looking Statements
Presenting Today 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 Bob Rowe, Litigation Reform Act of 1995. Forward-looking statements often address our expected fut
Slide 3: Significant Events
Significant Events • Net income for the first quarter of 2020 decreased $22.1 million, or 30%, as compared to the same period in 2019. – Diluted earnings per share decreased $0.44, or 31%, as compared to the same period in 2019. – After adjusting for weather difference, Non-GAAP* adjusted earnings p
Slide 4: NorthWestern Energy
NorthWestern Energy A pure electric and natural gas utility; serving as stewards of critical energy infrastructure; providing essential services - in times of trial and triumph; to our resilient customer base spanning a vast footprint over Montana, South Dakota, Nebraska & Yellowstone Nat’l Park. A
Slide 5: COVID-19…Our Response
COVID-19…Our Response COVID-19 has consumed our everyday life. This rapidly evolving pandemic has affected all aspects of our operations. We implemented a comprehensive set of actions to help our customers, communities and employees, all while maintaining our commitment to provide safe and reliable
Slide 6: Summary Financial Results
Summary Financial Results (First Quarter) (1) 6 (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure See appendix for additional disclosure.
Slide 7: Gross Margin
Gross Margin (First Quarter) (dollars in millions) Three Months Ended March 31, 2020 2019 Variance Electric $ 180.8 $ 196.0 $ (15.2) (7.8%) Natural Gas 63.2 72.5 (9.3) (12.8%) Total Gross Margin (1) $ 244.0 $ 268.5 $ (24.5) (9.1%) Decrease in gross margin due to the following factors: $ (8.7) Electr
Slide 8: Weather
Weather (First Quarter) A warm first quarter contributed approximately $4.0M pretax gross margin detriment as compared to normal and $18.0M pretax detriment as compared to first quarter 2019. 8
Slide 9: Operating Expenses
Operating Expenses (First Quarter) (dollars in millions) Three Months Ended March 31, 2020 2019 Variance Operating, general & admin. $ 79.0 $ 81.1 $ (2.1) (2.6%) Property and other taxes 44.5 44.8 (0.3) (0.7%) Depreciation and depletion 45.3 45.6 (0.3) (0.7%) Operating Expenses $ 168.8 $ 171.5 $ (2.
Slide 10: Operating to Net Income
Operating to Net Income (First Quarter) (dollars in millions) Three Months Ended March 31, 2020 2019 Variance Operating Income $ 75.2 $ 97.0 $ (21.8) (22.5%) Interest Expense (24.3) (23.8) (0.5) (2.1%) Other (Expense) / Income (2.0) 1.1 (3.1) (281.8%) Income Before Taxes 48.9 74.4 (25.5) (34.3%) Inc
Slide 11: Income Tax Reconciliation
Income Tax Reconciliation (First Quarter) We expect NOLs to be available into 2021 with alternative minimum tax credits and production tax credits to be available into 2023 to reduce cash taxes. Additionally, we anticipate our effective tax rate to reach approximately 10% by 2023. 11
Slide 12: Balance Sheet
Balance Sheet Improvement in debt to capitalization ratio; which is now closer to bottom end of 50%-55% targeted range. 50.8% Debt to Capitalization at March 31, 2019 12
Slide 13: Cash Flow
Cash Flow Cash from operating activities increased by nearly $47 million primarily due to improved collections of energy supply costs in 2020 and TCJA credits to Montana customers of approximately $20.5 million in the first quarter of 2019. These improvements were offset in part by reduced net incom
Slide 14: Adjusted Non-GAAP Earnings
Adjusted Non-GAAP Earnings (First Quarter) The adjusted non-GAAP measures presented in the table above are being shown to reflect significant items that were not contemplated in our original guidance, however they should not be considered a substitute for financial results and measures determined or
Slide 15: COVID-19 Forecast…Liquidity
COVID-19 Forecast…Liquidity Temporarily Increasing Liquidity Normal liquidity • April 3, 2020: Issued $100M 364 day Term Loan at Eurodollar rate plus 1.5%. minimum target is • April 14, 2020: Priced $150 million First Mortgage Bonds at 3.21% to be > $100 million issued in May 2020. • As previously d
Slide 16: Diluted Earnings Per Share
Diluted Earnings Per Share Updated 2020 Guidance Range Non-GAAP Adjusted EPS Growth Averaged 5.4% from 2013 - 2019 NorthWestern is lowering its 2020 earnings guidance range to $3.30 to $3.45 per diluted share (from $3.45 to $3.60) based upon, but not limited to, the following major assumptions and e
Slide 17: 2019 Non-GAAP to 2020 Revised EPS Bridge
2019 Non-GAAP to 2020 Revised EPS Bridge Gross Margin $0.27 reduction which approximately 1/3 is due to first quarter and the remainder due to expected COVID related impacts on loads and volumes. OG&A $0.08 improvement due to incremental cost controls to help offset gross margin detriment. Depreciat
Slide 18: COVID-19: Margin Expectations
COVID-19: Margin Expectations Applying our high-level estimated impacts above to customer loads results in the following overall impact to load by class: Updated gross margin guidance for Q2-Q4 2020: We anticipated ($0.03) to $0.03* of EPS impact as compared to the same period 2019. Based upon our a
Slide 19: COVID-19: Expense Expectations
COVID-19: Expense Expectations Expenses we expect to increase: • Bad debt expense • We assume significant recovery through a regulatory mechanism • COVID related charitable contributions Expenses we expect to decrease: • Distribution customer work • Contract services and material costs • Fleet fuel
Slide 20: Maintaining Capital Investment Forecast
Maintaining Capital Investment Forecast $1.8 billion of total capital investment over five years We anticipate financing this capital with a combination of cash flow from operations (aided by NOLs available into 2021), first mortgage bonds and equity issuances. Based on current expectations, any equ
Slide 21: Looking Forward
Looking Forward Regulatory • In December 2019, the MPSC issued a final order approving our Montana electric rate case settlement, effective April 1, 2019, that results in an annual increase to electric revenue of approximately $6.5 million (based upon a 9.65% return on equity) and a $9.3 million dec
Slide 22: 25% of Colstrip Unit 4 Acquisition
25% of Colstrip Unit 4 Acquisition On December 9, 2019 NorthWestern (NWE) executed a Purchase and Sale Agreement for the acquisition of Puget Sound Energy’s (PSE) 25% ownership interests in Colstrip Unit 4 (CU4). • Generating Capacity: 185 MW (bringing our total ownership to 407 MW, or 55% of CU4) •
Slide 23: Conclusion
Conclusion Best Attractive Pure Strong Solid Utility Practices Future Electric & Earnings & Foundation Corporate Growth Gas Utility Cash Flows Governance Prospects 23
Slide 24: Appendix
Cr Appendix 24
Slide 25: Appendix Segment Results
Appendix Segment Results (First Quarter) (1) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. See appendix for additional disclosure. 25
Slide 26: Appendix Electric Segment
Appendix Electric Segment (First Quarter) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 26 See appendix for additional disclosure.
Slide 27: Appendix Natural Gas Segment
Appendix Natural Gas Segment (First Quarter) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 27 See appendix for additional disclosure.
Slide 28: Appendix Quarterly PCCAM Impacts
Appendix Quarterly PCCAM Impacts 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 established a baseline o
Slide 29: Appendix Qualified Facility Earnings Adjustment
Appendix Qualified Facility Earnings Adjustment The gain in 2019 for our QF liability was $6.3 million in total, it was comprised of $3.3 million adjustment to the liability and $3.0 million lower actual costs over last 12 months (QF contract year). This $6.6 million benefit is $20.9 million less th
Slide 30: Appendix Non-GAAP Financial Measures
Appendix Non-GAAP Financial Measures These materials include financial information prepared in accordance with GAAP, as well as other financial measures, such as Gross Margin and Adjusted Diluted EPS, that are considered “non- GAAP financial measures.” Generally, a non-GAAP financial measure is a nu
Slide 31: Upetivering a bright future
Upetivering a bright future NorthWestern Energy