Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Q2 2024 Earnings Presentation
56 slides from Northwestern Energy's earnings presentation, Jul 31, 2024
Slide 1: 2024 Second Quarter Earnings Webcast
2024 Second Quarter Earnings Webcast July 31, 2024 18-K July 31, 2024
Slide 2: Forward Looking Statements
NorthWestern Energy 2 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. Forward-looking statements often address our expected future
Slide 3: Recent Highlights
Recent Highlights • Reported GAAP diluted EPS of $0.52 o Non-GAAP diluted EPS of $0.531 • Affirming 2024 diluted EPS guidance of $3.42 - $3.62 • Affirming long-term (5 year) rate base and earnings per share growth rates targets of 4% - 6%2 • Dividend Declared: $0.65 per share payable September 30, 2
Slide 4: The NorthWestern Value Proposition
9%-11% Total Growth 11%+ Total Growth Incremental Opportunities: 6% + EPS Growth ~5% Dividend Yield Base Capital Plan: 4%-6% EPS Growth FERC Transmission Incremental generating capacity (subject to successful resource procurement bids) Qualifying Facility and / or Power Purchase Agreement buyo
Slide 5: Q2 Financial Results
Q2 Financial Results 5
Slide 6: Second Quarter Financial Results
Second Quarter Financial Results 6 1.) Utility Margin is a non- GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. (in millions except per share amounts) 2024 2023 Variance % Variance Operating Revenues 319.9$ 290.5$ 29.4$ 10.1% 76.5 67.6
Slide 7: Second Quarter 2024 Financial Results
Second Quarter 2024 Financial Results 7 1.) See “Second Quarter 2024 Non-GAAP Earnings” below and “Non-GAAP Financial Measures” in appendix. Second Quarter Net Income vs Prior Period •GAAP: 12.6 million or 66.0% •Non-GAAP1: 11.8 million or 57.8% Second Quarter EPS vs Prior Period •GAAP: $0.20 or 62.
Slide 8: Year-to-Date 2024 Financial Results
Year-to-Date 2024 Financial Results 8 Year-to-Date Net Income vs Prior Period •GAAP: 15.0 million or 18.4% •Non-GAAP1: 15.9 million or 19.1% Year-to-Date EPS vs Prior Period •GAAP: $0.21 or 15.4% •Non-GAAP1: $0.22 or 15.7% 1.) See “Second Quarter 2024 Non-GAAP Earnings” below and “Non-GAAP Financial
Slide 9: Second Quarter Earnings Drivers
After-tax EPS vs Prior Year Second Quarter Earnings Drivers 9 1 2 Improvement in Utility Margin offset mild weather, higher OA&G expense, depreciation, interest expense, and slight dilution from higher share count. 1.) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gros
Slide 10: Second Quarter Utility Margin Bridge
Second Quarter Utility Margin Bridge Pre-tax Millions vs. Prior Year $24.1 million or 10.8% increase in Utility Margin items that impact Net Income NOTE: Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. 10
Slide 11: Second Quarter 2024 Non-GAAP Earnings
We estimate weather to be a $0.7 million pre-tax detriment as compared to normal and a $1.1 million benefit as compared to second quarter 2023. (1) As a result of the adoption of Accounting Standard Update 2017-07 in March 2018, pension and other employee benefit expense is now disaggregated on the
Slide 12: Credit, Cash Flow, and Financing Plans
Credit, Cash Flow, and Financing Plans 12 Credit Ratings 2024 Financing Plan No equity expected to fund the current 5-year | $2.5 billion capital plan Financing plans (targeting a FFO to Debt ratio > 14%) are expected to maintain our current credit ratings. We expect to pay minimal cash taxes into 2
Slide 13: Strong Growth Outlook
Strong Growth Outlook This guidance range is based upon, but not limited to, the following major assumptions: • Normal weather in our service territories; • Interim rates in Montana in the fourth quarter; • An effective income tax rate of approximately 12%-14%; and • Diluted average shares outstandi
Slide 14: Rate Reviews
Rate Reviews 14
Slide 15: Rate Review Summary
15 MT Electric MT Natural Ga E Natural Gas July 10, 2024 July 10, 2024 June 21, 2024 June 6, 2024 2023 with 2024 Known & 2023 with 2024 Known & 2023 with 2024 Known & 2023 with 2024 Known & Test Year End Measurables Measurables Measurables Measurables $156.5 Million 6.0 Million $3.6 Million Revenue
Slide 16: Strategic Update
Strategic Update 16
Slide 17: Energy West/Cut Bank Natural Gas Transaction Highlights
Energy West/Cut Bank Natural Gas 17 Transaction Highlights Purchase Price Approvals and Timing • Two natural gas LDC’s in Montana: Energy West Montana (“EWM”) and Cut Bank Gas Co. (“CBGC”) from Hope Utilities • 33,000 customers in Great Falls area, West Yellowstone and Cut Bank communities • EWM’s a
Slide 18: Colstrip Transaction Overview
Colstrip Transaction Overview 18 NorthWestern Energy entered into an agreement to acquire Puget Sound Energy’s ownership interests in Colstrip Units 3 and 4. This transaction is in addition to our previously disclosed agreement with Avista to acquire their ownership interest in Colstrip. Similar to
Slide 19: Colstrip Facility Ownership Overview
Colstrip Facility Ownership Overview 19 In January 2026, we will own 55% of Colstrip Units 3 &4. This allows us to guide investments in operation and maintenance in providing on- demand, 24/7 cost-effective generation for our Montana customers until a viable equivalent, carbon-free energy resource i
Slide 20: Montana Wildfire Mitigation Plan
Montana Wildfire Mitigation Plan 20 Reduction of Ignition Potential System and Environmental Monitoring Enhanced Vegetation Maintenance Enriched Public Communication and Outreach Comprehensive summary of wildfire mitigation activities Expect to update plan with each electric rate review filing
Slide 21: Conclusion
Conclusion Pure Electric & Gas Utility Solid Utility Foundation Best Practices Corporate Governance Attractive Future Growth Prospects Strong Earnings & Cash Flows 21 NorthWestern Energy Group, Inc. dba: NorthWestern Energy Ticker: NWE (Nasdaq) www.northwesternenergy.com Corporate Support Office 301
Slide 22: Appendix
Appendix: 22
Slide 23: 2024 Earnings Bridge
2024 Earnings Bridge This guidance range is based upon, but not limited to, the following major assumptions: • Normal weather in our service territories; • Interim rates in Montana in the fourth quarter; • An effective income tax rate of approximately 12%- 14%; and • Diluted average shares outstandi
Slide 24: Regulated Utility Five-Year Capital Forecast
$2.5 billion of highly-executable and low-risk capital investment Regulated Utility Five-Year Capital Forecast 24 Appendix
Slide 25: Rate Base and Authorized Returns
(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 rate base or authorized returns. (2) The Montan
Slide 26: Our Net-Zero Vision
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 risks, by inc
Slide 27: Rate Review Appendix
Rate Review Appendix 27
Slide 28: Montana Electric Rate Review
Montana Electric Rate Review Montana Electric: • 69.4 Million Total Request • $874 Million Plant-in-Service additions (’23-’24F) • Operating Costs increase 1.1% CAGR (’21-’23) • Typical Residential Bill increase 8.3% at full request 28 $156.5 Million Base Rate Increase Requested & $69.4 Million Tota
Slide 29: Montana Gas Rate Review
Montana Gas Rate Review 29 $28.6 Million Base Rate Increase Requested Montana Natural Gas: • $28.6 Million Total Request • $174 Million Plant-in-Service additions (’23-’24F) • Operating Costs increase 3.3% CAGR (’21-’23) • Typical Residential Bill increase 17.0% at full request Typical 65 Therm Resi
Slide 30: South Dakota Natural Gas Rate Review
South Dakota Natural Gas Rate Review 30 South Dakota Natural Gas: • $6.0 Million Total Request • $80 Million Plant-in-Service additions (’10-’23) • Operating Costs increase 1.9% CAGR (’10-’23) • Typical Residential Bill increase 7.9% at full request $6.0 Million Rate Increase Requested Typical 100 T
Slide 31: Nebraska Natural Gas Rate Review
Nebraska Natural Gas Rate Review 31 $3.6 Million Rate Increase Requested Typical 100 Therm Residential Natural Gas Bill Nebraska Natural Gas: • $3.6 Million Total Request • $42 Million Plant-in-Service additions (’07-’23) • Operating Costs increase 1.3% CAGR (’07-’23) • Typical Residential Bill incr
Slide 32: Second Quarter Appendix
Second Quarter Appendix 32
Slide 33: Utility Margin (Q2)
Utility Margin (Q2) (dollars in millions) Three Months Ended June 30, 2024 2023 Variance Electric $ 199.2 $ 186.9 $ 12.3 6.6% Natural Gas 44.2 36.0 8.2 22.8% Total Utility Margin1 $ 243.4 $ 222.9 $ 20.5 9.2% (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margi
Slide 34: Operating Expenses (Q2)
Operating Expenses (Q2) Increase in operating expenses due to the following factors: $ 4.5 Depreciation expense due to plant additions and higher depreciation rates 2.0 Electric generation maintenance 1.8 Labor and benefits(1) 0.5 Insurance expense 0.4 Technology implementation and maintenance expen
Slide 35: Operating to Net Income (Q2)
Operating to Net Income (Q2) (dollars in millions) Three Months Ended June 30, 2024 2023 Variance Operating Income $ 61.6 $ 45.6 $ 16.0 35.1% Interest expense (31.9) (28.4) (3.5) (12.3)% Other income, net 6.2 4.1 2.1 51.2% Income Before Taxes 35.9 21.3 14.6 68.5% Income tax expense (4.2) (2.2) (2.0)
Slide 36: Tax Reconciliation (Q2)
Tax Reconciliation (Q2) 36 Appendix (in millions) Variance Income Before Income Taxes $35.9 $21.3 14.6 Income tax calculated at federal statutory rate 7.5 21.0% 4.5 21.0% 3.0 Permanent or flow through adjustments: State income tax, net of federal provisions - 0.1% 0.3 1.3% (0.3) Flow-through repairs
Slide 37: Segment Results (Q2)
Segment Results (Q2) (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. 37 Appendix Three Months Ended June 30, 2024 Electric Gas Other Total Operating revenues 260,134$ 59,795$ -$ 319,929$ Fuel, purchased suppl
Slide 38: Electric Segment (Q2)
2024 2023 $ % 2024 2023 2024 2023 Montana 86,028$ 83,840$ 2,188$ 2.6 % 582 568 327,655 321,820 South Dakota 15,392 15,686 (294) (1.9) % 117 135 51,340 51,162 Residential 101,420 99,526 1,894 1.9 % 699 703 378,995 372,982 Montana 99,655 101,919 (2,264) (2.2) % 756 759 75,602 74,234 South Dakota 26,35
Slide 39: Natural Gas Segment (Q2)
2024 2023 $ % 2024 2023 2024 2023 Montana 18,921$ 17,589$ 1,332$ 7.6 % 2,224 1,864 185,449 183,669 South Dakota 5,894 8,375 (2,481) (29.6) % 568 703 42,440 41,914 Nebraska 3,798 7,457 (3,659) (49.1) % 438 508 37,889 37,711 Residential 28,613 33,421 (4,808) (14.4) % 3,230 3,075 265,778 263,294 Montan
Slide 40: 2024 Year-to-Date Appendix
2024 Year-to-Date Appendix 40
Slide 41: Year-to-Date 2024 Non-GAAP Earnings
(1) As a result of the adoption of Accounting Standard Update 2017-07 in March 2018, pension and other employee benefit expense is now disaggregated on the GAAP income statement with portions now recorded in both OG&A expense and Other (Expense) Income lines. To facilitate better understanding of tr
Slide 42: Year-to-Date Financial Results
(in millions except per share amounts) 2024 2023 Variance % Variance Operating Revenues 795.3$ 745.1$ 50.2$ 6.7% 251.2 233.1 18.1 7.8% Utility Margin 544.1 512.0 32.1 6.3% Operating Expenses Operating and maintenance 111.5 110.7 0.8 0.7% Administrative and general 71.7 64.7 7.0 10.8% Property and ot
Slide 43: Utility Margin (YTD)
Utility Margin (YTD) (dollars in millions) Six Months Ended June 30, 2024 2023 Variance Electric $ 427.1 $ 404.1 $ 23.0 5.7% Natural Gas 117.0 107.9 9.1 8.4% Total Utility Margin $ 544.1 $ 512.0 $ 32.1 6.3% (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin
Slide 44: Operating Expenses (YTD)
(dollars in millions) Six Months Ended June 30, 2024 2023 Variance Operating & maintenance $ 111.5 $ 110.7 $ 0.8 0.7% Administrative & general 71.7 64.7 7.0 10.8% Property and other taxes 83.4 89.3 (5.9) (6.6)% Depreciation and depletion 113.7 105.6 8.1 7.7% Operating Expenses $ 380.3 $ 370.3 $ 10.0
Slide 45: Operating to Net Income (YTD)
Operating to Net Income (YTD) (dollars in millions) Six Months Ended June 30, 2024 2023 Variance Operating Income $ 163.7 $ 141.7 $ 22.0 15.5% Interest expense (62.9) (56.4) (6.5) (11.5)% Other income, net 10.5 8.8 1.7 19.3% Income Before Taxes 111.3 94.0 17.2 18.3% Income tax expense (14.6) (12.4)
Slide 46: Tax Reconciliation (YTD)
Tax Reconciliation (YTD) 46 Appendix Variance Income Before Income Taxes $111.3 $94.0 $17.3 Income tax calculated at federal statutory rate 23.4 21.0% 19.7 21.0% 3.7 Permanent or flow through adjustments: State income taxes, net of federal provisions 0.7 0.6% 1.2 1.3% (0.5) Flow-through repairs dedu
Slide 47: Segment Results (YTD)
Segment Results (YTD) (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. 47 Appendix Six Months Ended June 30, 2024 Electric Gas Other Total Operating revenues 603,320$ 191,951$ -$ 795,271$ Fuel, purchased suppl
Slide 48: Electric Segment (YTD)
Electric Segment (YTD) (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. 48 Appendix 2024 2023 $ % 2024 2023 2024 2023 Montana 203,391$ 209,302$ (5,911)$ (2.8) % 1,429 1,439 326,986 321,278 South Dakota 34,702
Slide 49: Natural Gas Segment (YTD)
Natural Gas Segment (YTD) 49 Appendix (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. 2024 2023 $ % 2024 2023 2024 2023 Montana 67,511$ 84,471$ (16,960)$ (20.1) % 8,482 8,381 185,332 183,583 South Dakota 19,4
Slide 50: PCCAM Impact by Quarter
PCCAM Impact by Quarter 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 share
Slide 51: Balance Sheet
(dollars in millions) As of June 30, As of December 31, 2024 2023 Cash and cash equivalents 6.4$ 9.2$ Restricted cash 24.6 16.0$ Accounts receivable, net 149.5 212.3$ Inventories 115.0 114.5$ Other current assets 68.6 55.0$ Goodwill 357.6 357.6$ PP&E and other non-current assets 6,992.2 6,836.1$ Tot
Slide 52: Year-to-Date Cash Flow
Cash from Operating Activities decreased by $70.2 million due primarily to significant net cash inflows from recovery of previously under-collected energy supply cost in the prior period, and net cash outflows in 2024 from our January 2024 cold weather event. Funds from Operations increased by $53.1
Slide 53: Reconciling Gross Margin to Utility Margin
Reconciling Gross Margin to 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 reg
Slide 54: Non-GAAP Financial Measures
Non-GAAP Financial Measures 54 Appendix
Slide 55: Non-GAAP Financial Measures
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 “non-GAAP fi
Slide 56: Delivering a bright future
Delivering a bright future 56
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