Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Investor Presentation (March 2015)
45 slides from Northwestern Energy's investor presentation, Mar 17, 2015
Slide 1: Investor Update | March 18-19, 2015
Investor Update | March 18-19, 2015 Thompson Falls
Slide 2: Forward Looking Statements
2 Forward Looking Statements 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
Slide 3: About NorthWestern
About NorthWestern 3 Montana Operations Electric 353,600 customers 24,300 miles – transmission & distribution lines 895 MW of baseload power generation 105 MW of regulating services generation Natural Gas 189,000 customers 7,200 miles of transmission and distribution pipeline 18 Bcf of gas storage c
Slide 4: 2014 Highlights
• In November 2014, we completed the purchase of eleven hydroelectric generating facilities in Montana with 633 megawatts of generation capacity and one storage reservoir, for an adjusted purchase price of $904 million. To help finance the transaction we accessed the capital markets and issued: • $4
Slide 5: Other Significant Achievements in 2014
Other Significant Achievements in 2014 5 • Best ever year for safety at NorthWestern • Fewest lost time incidents and OSHA recordable events of any year on record. • Record best customer satisfaction scores • Received our best JD Powers overall satisfaction survey score in 2014. • Cost effectively b
Slide 6: NWE: An Investment for the Long Term
NWE: An Investment for the Long Term 6 • 100% Regulated electric & natural gas utility business • 100 year history of competitive customer rates, system reliability and customer satisfaction • Solid economic indicators in service territory • Constructive regulatory relationship • Customer service sa
Slide 7: A Diversified Electric and Gas Utility
84% Montana 14% South Dakota 2% NebraskaA Diversified Electric and Gas Utility 7 Gross Margin in 2014: Electric: $529M Natural Gas: $193M Gross Margin in 2014: Montana: $609M South Dakota: $102M Nebraska: $ 11M Average Customers in 2014: Residential: 572k Commercial: 110k Industrial: 7k 83% Resident
Slide 8: NorthWestern Energy Profile
NorthWestern Energy Profile 8 Financial and Company Statistics See “Non-GAAP Financial Measure” slide in appendix for Net Debt and EBITDA reconciliation (1) The FERC regulated portion of Montana electric transmission and DGGS are included as revenue credits to our MPSC jurisdiction customers. Theref
Slide 9: Solid Economic Indicators
Solid Economic Indicators 9 • Unemployment rates in all three of our states are meaningfully below National Average. • Customer growth rates historically exceed National Average by a good margin. Source: NorthWestern 2008-2014 Forms 10-K and Unemployment Rate: US Department of Labor via SNL Database
Slide 10: Strong Utility Foundation
0 2 4 6 8 10 5.30 6.80 Leaks per 100 Miles of Pipe Excluding Excavation Damages - 2013 NWE - 2013 AGA 1st Quartile Average - 2013 $- $20 $40 $60 $80 $100 $120 $140 MT SD MT SD NE Electric (750 kwh) Natural Gas (100 therms) National Average Nati nal Average "Typical Bill" Residential Rate Comparison
Slide 11: 2015 Earnings Guidance
2015 Earnings Guidance 11 Our 2015 guidance range of $3.10-$3.30 based upon, but not limited to, the following major assumptions and expectations: • Normal weather in our electric and natural gas service territories; • Successful integration and a full year earnings contribution from the recently ac
Slide 12: Track Record of Delivering Results
Track Record of Delivering Results 12 Notes: - ROE in 2010, 2011, 2012 , 2013 & 2014, on a Non-GAAP Adjusted basis, would be 9.2%, 10.5%, 9.8%, 9.6% & 9.4% respectively. - 2015 ROAE and 2015 Dividend payout ratio estimate based on midpoint of guidance range of $3.10-$3.30. - Details regarding Non-GA
Slide 13: Investment for Our Customers' Benefit
Investment for Our Customers’ Benefit Over the past 6 years we have been reintegrating our Montana energy supply portfolio and making additional investments across our entire service territory to enhance system safety, reliability and capacity. 2014 includes hydro assets in rate base but only 1.5 mo
Slide 14: Total Shareholder Return
Total Shareholder Return 14 * Peer Group: ALE, AVA, BKH, CNL, EDE, EE, GXP, IDA, MGEE, PNM, POR, UIL, VVC, WR
Slide 15: Strong Cash Flows
While maintenance capex and total dividend payments have continued to grow since 2010 (8.2% and 7.3% CAGR respectively), Cash Flow from Operations has continued to outpace maintenance capex and averaged approximately $42 million of positive Free Cash Flow per year. Even with the additional income ge
Slide 16: Balance Sheet Strength and Liquidity
Balance Sheet Strength and Liquidity 16 Annual ratio is average of each quarter end debt/cap ratio Excludes Basin Creek capital leases Goal: 50% - 55% Senior Secured Rating Senior Unsecured Rating Commercial Paper Outlook Fitch A A- F2 Stable Moody's A1 A3 Prime-2 Stable S&P A- BBB A-2 Stable A secu
Slide 17: The Hydro Facilities
The Hydro Facilities 17 (1) Hebgen facility (0 MW net capacity) excluded from figures. All facilities are “run-of-river” dams except for Kerr and Mystic, which are “storage generation”. (2) As of June 2013. (3) The Confederated Salish and Kootenai Tribes have an option to purchase the Kerr facility
Slide 18: Hydro – Owned and Contracted Resources
Coal (Colstrip 4) 29% Hydro 42% Hydro (QF / contracted) 1% Wind (Spion Kop) 2% Wind (QF / contracted) 11% Natural Gas 1% Thermal (QF / contracted) 13% 18 Hydro – Owned and Contracted Resources MONTANA Yellowstone River ll t r Yellowstone River ll t r ll t r Ye lowstone River l t r Ye lowstone River
Slide 19: Meeting Montana Customer Demands
- 100,000 200,000 300,000 400,000 Hydro Contracted Owned Generation Light Load Demand Light Load Hours (MWh's) MW h's - 100,000 200,000 300,000 4 , 500,000 Hydro Contracted Owned Generation Heavy Load Demand Heavy Load Hours (MWh's) MW h's Meeting Montana Customer Demands 19 We expect to be able to
Slide 20: Big Stone and Neal Air Quality Projects
Big Stone and Neal Air Quality Projects 20 Big Stone Power Plant Neal Power Plant Big Stone Neal Location Northeast South Dakota Northwest Iowa Ownership 23.4% of 475 MW coal plant 8.7% of 644 MW coal plant Project Subject to Best Available Retrofit Technology (BART) requirements of the Regional Haz
Slide 21: South Dakota Rate Filing
South Dakota Rate Filing 21 34 Years of Declining ‘Real’ Rates Docket EL14-106 The requested $26.5 million revenue increase is primarily due to investments made to meet federal environmental mandates and to maintain our high-level of system reliability in South Dakota. We anticipate implementing int
Slide 22: Natural Gas Reserves Opportunity
Owned Owned Target Total Annual Need Natural Gas Reserves Opportunity 22 As we continue to add to our natural gas reserves portfolio, we anticipate a reduction in supply cost volatility for our customers. First ~6 Bcf annual production acquired for ~$100M Remaining 6-7 Bcf annual production needed t
Slide 23: Infrastructure Projects
Infrastructure Projects 23 • In Montana, our Distribution System Infrastructure Project (DSIP) and Transmission System Infrastructure Project (TSIP), both of which are currently in process, are to maintain a safe and reliable electric and natural gas distribution and transmission system. – The prima
Slide 24: DGGS Update – Still waiting on FERC
DGGS Update – Still waiting on FERC 24 See slide 43 in appendix for additional background information
Slide 25: Capital Spending Forecast
Capital Spending Forecast 25 Current estimated cumulative capital spending for 2015 through 2019 is $1.45 billion. We anticipate funding the capital projects with a combination of cash flows (aided by NOLs) and long-term debt. If other opportunities arise that are not in the above projections (natur
Slide 26: Conclusion
Conclusion 26 Pure Electric and Gas Utility Solid Utility Foundation Strong Earnings and Cash Flows Attractive Future Growth Prospects Best Practices Corporate Governance Hydro Transaction Announced 9/26/2013 Transaction Closed 11/18/2014 Thompson Falls Hauser Rainbow Ryan Morony Kerr Madison Holter
Slide 27: Appendix
Appendix 27
Slide 28: Non-GAAP Adjusted EPS
Non-GAAP Adjusted EPS 28 2014 Non-GAAP Adjusted EPS of $2.68. This reflects an $0.18, or 7%, improvement over 2013 non-GAAP earnings.
Slide 29: 2013 to 2014 Full Year - Reconciliation
29 2013 to 2014 Full Year - Reconciliation ($millions, except EPS) Tw el ve M on th s En de d, De ce m be r 3 1, 2 01 3 Na tu ra l g as p ro du ct ion Hy dr o op er at ion s El ec tri c tra ns m iss ion M on ta na n at ur al ga s ra te in cr ea se El ec tri c re ta il v olu m es Na tu ra l g as re t
Slide 30: Income Statement
Income Statement 30 (in millions, except per share items) 2014 2013 2014 2013 Operating Revenues 312.9$ 319.1$ 1,204.9$ 1,154.5$ Cost of Sales 108.1 136.1 482.6 479.6 Gross Margin 204.8 183.0 722.3 674.9 Operating Expenses Operating, general & administrative 91.3 76.8 305.9 285.6 Property and other
Slide 31: (in millions) Twelve Months Ended December 30, 2014 Hy dr o Eq ui ty
(in millions) Twelve Months Ended December 30, 2014 Hy dr o Eq ui ty D ilu tio n (1 ) Hy dr o Tr an sa ct io n Ex pe ns e Hy dr o Op er at io ns (N ov . 1 8 - D ec . 3 1) Fa vo ra bl e W ea th er No n- em pl oy ee D ef er re d Co m pe ns at io n In co m e Ta x Ad ju st m en t ( 2) Twelve Months Ende
Slide 32: Non-GAAP Effective Tax Rate
Non-GAAP Effective Tax Rate 32 Non-GAAP effective tax rate of 8.9% lower than 12%-14% as previously included in guidance. This difference is due primarily to slightly lower pretax income and higher than anticipated ongoing repairs / meters flow through tax benefits. We anticipate flow through tax be
Slide 33: Balance Sheet
Balance Sheet 33 34% increase in total assets in 2014 due to hydro transaction and continued investment to improve system safety, reliability and capacity. 56% Debt to capitalization slightly above our targeted 50-55% due to seasonality of cash flows. Average debt to capitalization in 2014 was 54.6%
Slide 34: Cash Flow
Cash Flow 34 $56.3 million improvement in cash flow provided by operating activities driven by higher net income and improved collections of customer receivables*. * Cash flow in 2013 was affected by billing delays resulting from the implementation of our new customer information system in September
Slide 35: Income Tax Reconciliation
(in millions) Variance Income Before Income Taxes $110.4 $108.3 $2.1 Income tax calculated at 35% federal statutory rate 38.6 35.0% 37.9 35.0% 0.7 Permanent or flow through adjustments: State income, net of federal provisions (2.0) -1.8% (3.1) -2.8% 1.1 Flow through repairs deduction (25.3) -22.9% (
Slide 36: 2014 to 2015 EPS & Dividend Bridge
2014 to 2015 EPS & Dividend Bridge 2015 ESTIMATES Basic assumptions include, but are not limited to: • Normal weather in our electric and natural gas service territories; • Successful integration and a full year earnings contribution from the recently acquired hydro assets; • Excludes any potential
Slide 37: Montana Hydro Acquisition - Update
Montana Hydro Acquisition - Update 37 • On September 26, 2014, after a yearlong process, the Montana Public Service Commission issued a final order approving our application to purchase eleven hydroelectric generating facilities (633 MW) from PPL Montana, subject to certain conditions, including the
Slide 38: Forbes America's Most Trustworthy Companies 2013
Forbes America's Most Trustworthy Companies 2013 For the 3rd consecutive time, NorthWestern Corporation was recognized by Forbes as one of "America's Most Trustworthy Companies," which identifies the most transparent and trustworthy businesses that trade on the American exchanges. In the past, Forbe
Slide 39: 2014 System Statistics
2014 System Statistics 39 Note: Statistics above are as of 12/31/2014 (1) Nebraska is a natural gas only jurisdiction (1)
Slide 40: Experienced & Engaged Rounded Board of Directors
Experienced & Engaged Rounded Board of Directors 40 Members of the Board of Directors tour the Madison Dam power house in Ennis, Montana. From the left are Dana J. Dykhouse, Dorothy M. Bradley, Philip L. Maslowe, E. Linn Draper Jr., Julia L. Johnson, Robert C. Rowe, Denton Louis Peoples, and Stephan
Slide 41: Strong Executive Team
Strong Executive Team 41 NorthWestern Energy’s executive officers at the Madison Dam in Ennis, Montana From the left: Patrick R. Corcoran - VP of Government and Regulatory Affairs. 35 years utility industry experience; current position since 2001 John D. Hines - VP of Supply. 25 years utility indust
Slide 42: Our Commissioners
Our Commissioners 42 Name Party Began Serving Term Ends Kirk Bushman R Jan-13 Jan-17 Travis Kavulla R Jan-11 Jan-19 Roger Koopman R Jan-13 Jan-17 Brad Johnson (Chairman) R Jan-15 Jan-19 Bob Lake R Jan-13 Jan-17 Commissioners are elected in statewide elections from each of five districts. Chairperson
Slide 43: Dave Gates Generating Station Update (DGGS)
Dave Gates Generating Station Update (DGGS) 43 • We operate a transmission system and balancing authority within Montana and are responsible for providing safe and reliable electric services to both retail and wholesale customers, or face stiff penalties for non-compliance. • DGGS was designed and c
Slide 44: Non-GAAP Financial Measures
Non-GAAP Financial Measures 44 The data presented above includes financial information prepared in accordance with GAAP, as well as another financial measure, Gross Margin, Free Cash Flows, Net Debt and EBITDA, but is considered a “Non-GAAP financial measure.” Generally, a Non-GAAP financial measure
Slide 45: Delivering a bright future
Upelivering a bright future