Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — FY2018 Earnings Presentation
37 slides from Northwestern Energy's earnings presentation, Feb 12, 2019
Slide 1: 2018 Earnings Webcast
Madison Dam near Ennis, MT 2018 Earnings Webcast February 12, 2019
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 Litigation Reform Act of 1995. Forward-looking Bob Rowe, statements often address our expected fut
Slide 3: 2018 Highlights
2018 Highlights • Net income for the year increased $34.3 million, or 21.1%, as compared to the same period in 2017. This increase was primarily due to a gain related to the adjustment of our electric Qualifying Facilities (QF) liability, demand for electric transmission, customer growth and favorab
Slide 4: Summary Financial Results (Full Year)
Summary Financial Results (Full Year) (1) 4 (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure See appendix for additional disclosure.
Slide 5: Gross Margin (Full Year)
Gross Margin (Full Year) (dollars in millions) Twelve Months Ended December 31, 2018 2017 Variance(1) Electric $ 726.5 $ 703.1 $ 23.4 3.3% Natural Gas 192.6 192.3 0.3 0.2% Total Gross Margin (1) $ 919.1 $ 895.4 $ 23.7 2.6% Increase in gross margin due to the following factors: $ 25.1 Electric QF lia
Slide 6: Weather (Full Year)
Weather (Full Year) We estimate favorable weather in 2018 has contributed approximately $1.3M pretax benefit as compared to normal and $2.1M pretax detriment as compared to 2017. 6
Slide 7: Operating Expenses (Full Year)
Operating Expenses (Full Year) (dollars in millions) Twelve Months Ended December 31, 2018 2017 Variance Operating, general & admin. $ 307.1 $ 294.8 $ 12.3 4.2% Property and other taxes 171.3 162.6 8.7 5.4% Depreciation and depletion 174.5 166.1 8.4 5.1% Operating Expenses $ 652.9 $ 623.5 $ 29.4 4.7
Slide 8: Operating to Net Income (Full Year)
Operating to Net Income (Full Year) (dollars in millions) Twelve Months Ended December 31, 2018 2017 Variance Operating Income $ 266.3 $ 271.8 ($ 5.5) (2.0%) Interest Expense (92.0) (92.3) 0.3 0.3% Other Income / (Expense) 4.0 (3.4) 7.4 217.6% Income Before Taxes 178.3 176.1 2.2 1.2% Income Tax Bene
Slide 9: Income Tax Reconciliation (Full Year)
Income Tax Reconciliation (Full Year) 9
Slide 10: Balance Sheet
Balance Sheet Improvement in debt to capitalization ratio; which is now closer to bottom end of 50%-55% targeted range. 10
Slide 11: Cash Flow
Cash Flow Cash from operating activities improved by $59.3 million primarily due to higher net income, improved customer receipts, the receipt of insurance proceeds during the current period. 11
Slide 12: Adjusted Non-GAAP Earnings (Full Year)
Adjusted Non-GAAP Earnings (Full Year) 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 ca
Slide 13: Looking Forward
Looking Forward Regulatory • MPSC to review Montana general electric rate review, filed in September 2018. $3.30$3.30-$3.45-$3.50 • We expect to file an associated FERC rate case for $3.10 - $3.30 our Montana transmission assets in the first quarter 2019. $2.60$3.20 - $2.75-$3.40 Continue to Invest
Slide 14: Montana Electric Tracker Update
Montana Electric Tracker Update The MPSC issued a final order in January 2019 approving a Power Cost & Credit Adjustment Mechanism (PCCAM) with the following provisions: • A baseline of power supply costs; • Symmetrical deadband of +/- $4.1 million from the established baseline. Supply cost variance
Slide 15: Estimated Impacts of the Tax Cuts & Jobs Act
Estimated Impacts of the Tax Cuts & Jobs Act Montana: In December 2018, the MPSC approved a settlement agreement providing a $20.5 million one-time customer credit to electric and natural gas customers. In addition, the settlement provides: • A $1.3 million annual reduction in natural gas rates begi
Slide 16: NWE Energy Supply Resource Plans
NWE Energy Supply Resource Plans South Dakota Electricity Supply Resource Plan Ryan Dam Upgrade • Published fall of 2018, the plan focuses on modernization of our fleet to improve reliability and flexibility, maintain compliance in Southwest Power Pool, and lowering operating costs. Check The plan i
Slide 17: Montana Electric Rate Case Background
Montana Electric Rate Case Background • First general electric rate case in Montana since 2009. Two Dot Wind Farm - MT • While we have efficiently managed operating and administrative costs, increased Montana property taxes and significant investment in the system have compelled the request for rate
Slide 18: Capital Investment Forecast
Capital Investment Forecast $1.6 billion of total capital investment over five years. Increased investment in first three years primarily as a result of advanced metering infrastructure (AMI). We anticipate funding the expenditures with a combination of cash flows (aided by NOLs available into 2020)
Slide 19: Conclusion
Conclusion Best Attractive Pure Strong Solid Utility Practices Future Electric & Earnings & Foundation Corporate Growth Gas Utility Cash Flows Governance Prospects 19
Slide 20: Appendix
Cr Appendix 20
Slide 21: Segment Results (Full Year)
Appendix Segment Results (Full Year) (1) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 21 See appendix for additional disclosure.
Slide 22: Electric Segment (Full Year)
Appendix Electric Segment (Full Year) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 22 See appendix for additional disclosure.
Slide 23: Natural Gas Segment (Full Year)
Appendix Natural Gas Segment (Full Year) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 23 See appendix for additional disclosure.
Slide 24: Summary Financial Results (Fourth Quarter)
Appendix Summary Financial Results (Fourth Quarter) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 24 See appendix for additional disclosure.
Slide 25: Gross Margin (Fourth Quarter)
Appendix Gross Margin (Fourth Quarter) (dollars in millions) Three Months Ended December 31, 2018 2017 Variance(1) Electric $ 176.6 $ 175.0 $ 1.6 0.9% Natural Gas 59.8 60.5 (0.7) (1.2%) Total Gross Margin $ 236.4 $ 235.5 $ 0.9 0.4% Increase in gross margin due to the following factors: $ (6.1) Impac
Slide 26: Weather (Fourth Quarter)
Appendix Weather (Fourth Quarter) We estimate unfavorable weather in fourth quarter 2018 resulted in a $1.0M pretax detriment as compared to normal and $2.8M pretax detriment as compared to period in 2017. 26
Slide 27: Operating Expenses (Fourth Quarter)
Appendix Operating Expenses (Fourth Quarter) (dollars in millions) Three Months Ended December 31, 2018 2017 Variance Operating, general & admin. $ 85.2 $ 76.2 $ 9.0 11.8% Property and other taxes 43.0 44.1 (1.1) (2.5%) Depreciation and depletion 43.6 41.7 1.9 4.6% Operating Expenses $ 171.8 $ 162.0
Slide 28: Operating to Net Income (Fourth Quarter)
Appendix Operating to Net Income (Fourth Quarter) (dollars in millions) Three Months Ended December 31, 2018 2017 Variance Operating Income $ 64.6 $ 73.5 $ (8.9) (12.1%) Interest Expense (23.8) (22.3) (1.5) (6.7%) Other Income / (Expense) 2.2 - 2.2 - Income Before Taxes 43.0 51.2 (8.2) (16.0%) Incom
Slide 29: Income Tax Reconciliation (Fourth Quarter)
Appendix Income Tax Reconciliation (Fourth Quarter) 29
Slide 30: Adjusted Non-GAAP Earnings (Fourth Quarter)
Appendix Adjusted Non-GAAP Earnings (Fourth 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 de
Slide 31: Segment Results (Fourth Quarter)
Appendix Segment Results (Fourth Quarter) (1) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 31 See appendix for additional disclosure.
Slide 32: Electric Segment (Fourth Quarter)
Appendix Electric Segment (Fourth Quarter) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 32 See appendix for additional disclosure.
Slide 33: Natural Gas Segment (Fourth Quarter)
Appendix Natural Gas Segment (Fourth Quarter) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 33 See appendix for additional disclosure.
Slide 34: Qualified Facility Earnings Benefit
Appendix Qualified Facility Earnings Benefit The $25.1 million earnings improvement, recorded in the 2nd quarter of 2018, related to certain Qualified Facilities (QF) contracts is a result of: • A $17.5 million benefit resulting from the reduction of the estimated future liability of unrecoverable Q
Slide 35: 2018 Non-GAAP Adjustment for TCJA
Appendix 2018 Non-GAAP Adjustment for TCJA Non GAAP (1) (2) (3) Revenue Deferred for Impact of Tax Cuts & Jobs (in millions) Settlements in excess of Expense for Hazard Tree Final Adjustment of Excess Act Jurisdictional Tax Benefit Program Deferred Taxes Settlements Revenues $6.1 - - $6.1 Cost of sa
Slide 36: 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 num
Slide 37: Delivering a bright future - NorthWestern Energy
Upelivering a bright future NorthWestern Energy