Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Barclays Energy-Power Conference 2021
58 slides from Northwestern Energy's conference presentation, Sep 9, 2021
Slide 1: Barclays Energy-Power Conference
Fort Benton, MT Barclays Energy-Power Conference September 9, 2021 8-K’ed on September 9, 2021
Slide 2: Forward Looking Statements
2 Forward Looking Statements Forward Looking Statements Boulder RiverO’Dell Creek - in Montana Madison River Valley - Montana 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 Refor
Slide 3: NorthWestern Energy Value Proposition
3 NorthWestern Energy Value Proposition A pure electric and natural gas utility serving as stewards of critical energy infrastructure that provides essential services to a broad service territory spanning across Montana, South Dakota, Nebraska and Yellowstone National Park. A Strong Financial Founda
Slide 4: NWE - An Investment for the Long Term
4 NWE - An Investment for the Long Term • 100% pure electric & natural gas utility business Black Eagle dam Pure Electric & with over 100 years of operating history Gas Utility • Solid economic indicators in service territory • Diverse electric supply portfolio ~65% hydro, wind & solar • Residential
Slide 5: About NorthWestern
5 About NorthWestern South Dakota Operations Electric 63,900 customers 3,622 miles – transmission & distribution lines 411 MW nameplate owned power generation Natural Gas 48,000 customers 1,766 miles of transmission and distribution pipeline Montana Operations Electric 384,700 customers 24,877 miles
Slide 6: A Diversified Electric and Gas Utility
6 A Diversified Electric and Gas Utility (1) (1) (1) NorthWestern’s ‘80/20’ rules: Approximately 80% Electric and 80% Montana. Over $4.0 billion of rate base investment to serve our customers Data as reported in our 2020 10-K (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Me
Slide 7: Highly Carbon-Free Supply Portfolio
7 Highly Carbon-Free Supply Portfolio MT NWE Contracted energy from Colstrip Energy Limited Partners (CELP), Yellowstone Energy Limited Partners (YELP) as well as a majority of the contracted wind, hydro and solar are federally mandated Qualifying Facilities, as defined under the Public Utility Regu
Slide 8: Strong Utility Foundation
8 Strong Utility Foundation Solid and improving JD Power Overall Customer Satisfaction Scores Residential electric and natural gas rates below national average Solid electric system reliability Low gas leaks per mile – just outside 1st quartile
Slide 9: Solid Economic Indicators
9 Solid Economic Indicators Source: NorthWestern customer growth - 2008-2016 Forms 10-K Unemployment Rate: US Department of Labor via SNL Database 2/21/17 Electric: EEI Statistical Yearbook (published December 2015, table 7.2) Natural Gas: EIA.gov (Data table "Number of Natural Gas Consumers") Sourc
Slide 10: A History of Growth
10 A History of Growth $3.30-$3.50 $3.10 - $3.30 $2.60$3.20-$3.40 - $2.75 2011-2020 CAGR’s: GAAP EPS: 2.1% - Non-GAAP EPS: 3.7% - Dividend: 5.8% See appendix for “Non-GAAP Financial Measures”
Slide 11: Track Record of Delivering Results
11 Track Record of Delivering Results * Peer Group: ALE, AVA, BKH, IDA, MGEE, NWN, OGE, OGS, OTTR, PNM, POR & SR Return on Equity on Non- GAAP Earnings within 8.3% - 10.5% band over the last 10 years with average of 9.4%. Total Shareholder Return is in line or better than our 12 peer average for the
Slide 12: Investment for Our Customers' Benefit
12 Investment for Our Customers’ Benefit Over the past decade 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. We have made these enhancements with minimal impact t
Slide 13: Net Operating Losses & Effective Tax Rate
13 Net Operating Losses & Effective Tax Rate Cash Taxes: We anticipate NOLs to be available into 2021 with production tax and other credits to largely offset federal cash tax obligations into 2023. Effective Tax Rate: We anticipate the effective tax rate (ETR) for 2021 to be approximately (2.5%) to
Slide 14: Balance Sheet Strength and Liquidity
14 Balance Sheet Strength and Liquidity Investment grade credit ratings (placed on negative outlook by Moody’s on March 12, 2021), liquidity in excess of $100 million target, debt to cap within our targeted 50%-55% range and no long-term debt maturities until 2023. *Liquidity target temporarily incr
Slide 15: Earnings Growth
15 Earnings Growth $3.30-$3.45 $2.60 - $2.75 Non-GAAP Adjusted EPS Growth Averaged 4.3% from 2013 - 2020 NorthWestern affirms its previously revised 2021 earnings guidance range of $3.43 to $3.58 per diluted share based upon, but not limited to, the following major assumptions and expectations: • CO
Slide 16: Maintaining Capital Investment Forecast
16 Maintaining Capital Investment Forecast • $2.1 billion of total capital investment over the five year period. We expect to finance this capital with a combination of cash flows from operations, first mortgage bonds and equity issuances. • During the second quarter of 2021 we initiated a $200 mill
Slide 17: Looking Forward (Regulatory)
17 Looking Forward (Regulatory) • We do not expect to make general rate case filings in any of our regulatory jurisdictions during 2021. We have made several other regulatory filings, primarily in our Montana jurisdiction, including: • An April 15, 2021 filing requesting to delay the implementation
Slide 18: Generation Portfolio Update
18 Generation Portfolio Update Montana • A May 19, 2021 filing requesting approval to acquire electric capacity 60 MW of flexible capacity addition in Huron, SD resources identified through our January 2020 RFP, including: • Laurel Generation Station - Construction of 175 MW of flexible reciprocatin
Slide 19: Transmission System Update
19 Transmission System Update Electric Transmission: • In June 2021, we joined the Western Energy Imbalance Market (WEIM). WEIM active & Pending Participants This real-time, within-hour energy market will provide the company’s Montana customers with economically efficient energy to resolve imbalance
Slide 20: Distribution Grid Update
20 Distribution Grid Update Accomplishments 5 Year Projects Grid of the Future •Emergency System Management System Efficiencies New Technology (EMS) •ADMS Enhancements •EV Charging •Mobile Work Force •Fault Location, •Micro Management Management (MWM) Isolation and Service System (MGMS) •Advanced Di
Slide 21: February Cold Weather Event
21 February Cold Weather Event • In February 2021, a prolonged cold spell resulted in record winter peak demand for electricity and natural gas. In our SD & NE service territories, natural gas costs for the month of February 2021 exceeded the total cost for all of 2020. • We recorded a regulatory as
Slide 22: February Cold Weather Event (Montana)
22 February Cold Weather Event (Montana) Portfolio Resource Portfolio Resource Production (Megawatts) (Megawatt Hours) Resource Adequacy Requirement Wind (455MW) Purchase Price NWE Load Solar (17MW) Accredited Capacity of current portfolio Coal and Natural Gas (511MW) Hydro (484MW) The chart illustr
Slide 23: MegaWatts (MW)
• • • MegaWatts (MW) 0 -900 -800 -700 -600 -500 -400 -300 -200 -100 2/10/21 0:00 2/10/21 3:00 2/10/21 6:00 2/10/21 9:00 2/10/21 12:00 2/10/21 15:00 2/10/21 18:00 2/10/21 21:00 2/11/21 0:00 2/11/21 3:00 2/11/21 6:00 2/11/21 9:00 2/11/21 12:00 2/11/21 15:00 2/11/21 18:00 2/11/21 21:00 2/12/21 0:00 2/1
Slide 24: ESG Advances
24 ESG Advances NorthWestern recently launched a new website with increased focus on communicating our stewardship and ESG efforts including: • SASB Framework Report (new) • TCFD Framework Report (new) • AGA ESG Methane reporting template (new) • EEI ESG Carbon reporting template (updated) • Key Sus
Slide 25: ESG Publications
25 ESG Publications Environmental Social Governance BRIGHT magazine https://www.northwesternenergy.com/docs/default- Environmental Report source/brightmagazine/bright_magazine_vol1_community_final.pdf Annual Report http://www.northwesternenergy.com/our- http://www.northwesternenergy.com Code of Cond
Slide 26: ESG - Environmental
26 ESG - Environmental NWE Montana & South Dakota combined Based upon 2020 MWH’s of owned and long-term contracted resources. 65% of NorthWestern Energy’s 2020 Electric Generation Portfolio Delivered was Carbon-Free (based on megawatt hours) Mystic Dam Beethoven Wind Farm 57% Carbon Free Nameplate P
Slide 27: ESG - Social
27 ESG - Social Community Customers Employees $2.3 Billion Economic Output in Typical Residential Bills Lower than Safety Culture Transformation 2020 ($2.013B in Montana & National Average $249M in SD/NE) Over $5 million Donations, Sponsorships, Economic Development, Scholarship Funding, Public Recr
Slide 28: ESG - Governance
28 ESG - Governance 5 th Best Score Among 50 Publicly Traded North American Diverse Leadership Board of Directors Executive Team Utility and Power Companies by Moody’s Investment Services on Best Governance Practices Corporate Governance What We Do: • Annual election of all directors. • Majority vot
Slide 29: Our Carbon Reduction Vision for NorthWestern Energy in Montana
29 Our Carbon Reduction Vision for NorthWestern Energy in Montana 90% carbon reduction by 2045 NorthWestern Energy commits to reduce the carbon intensity of our electric energy portfolio for Montana 90% by 2045.* * As compared with our 2010 carbon intensity as a baseline Already over 60% carbon free
Slide 30: Conclusion
30 Conclusion Best Attractive Pure Strong Solid Utility Practices Future Electric & Earnings & Foundation Corporate Growth Gas Utility Cash Flows Governance Prospects
Slide 31: Upetivering a bright future
Upetivering a bright future
Slide 32: NWE Capacity as compared to Regional Peers
Appendix 32 NWE Capacity as compared to Regional Peers NWE’s capacity deficit exposes our customers to greater market exposure (price and availability) than any of our regional peers.
Slide 33: Significant Capacity Deficit in Montana
Appendix 33 Significant Capacity Deficit in Montana NorthWestern Energy’s current resources provide about 755 MW of peaking capacity, which is the energy available during periods of our customers’ highest demand. An additional 645 MW of peaking capacity must currently be purchased from the market to
Slide 34: Accredited Capacity Contribution in Montana
Appendix 34 Accredited Capacity Contribution in Montana On a megawatt basis, wind generation Accredited Capacity Contribution is the ability of each resource fuel-type to contribute to meet demand during peak energy usage by customers. comprises a very significant portion of Accredited Capacity Cont
Slide 35: Significant Capacity Retirements in the Pacific NW
Appendix 35 Significant Capacity Retirements in the Pacific NW Retired ahead of schedule (Jan ‘20) Planned retirements in the Pacific Northwest region exceed 3,600 MW and the Northwest Power and Conservation Council forecasts regional capacity shortfalls as early as 2021. NorthWestern’s continued re
Slide 36: Existing Colstrip Ownership
Appendix 36 Existing Colstrip Ownership Colstrip Power Plant Colstrip Transmission System Facility Owner (%) Unit 1 Unit 2 Unit 3 Unit 4 AVISTA Corporation - - 15% 15% NorthWestern Energy - - - 30% PacifiCorp - - 10% 10% Portland General - - 20% 20% Puget Sound Energy 50% 50% 25% 25% Talen Energy 50
Slide 37: Timeline of Montana Generation Portfolio
Appendix 37 Timeline of Montana Generation Portfolio Owned and Long-Term Resource Portfolio Timeline Since 2011, we have added over 775 MW of generation, both owned and long- term contract, to our generation portfolio, all of which is from carbon-free resources.
Slide 38: Comparison of Installed Capacity
Appendix 38 Comparison of Installed Capacity Comparison of Installed Capacity (MW) - Dispatchability and Carbon Emitting California NorthWestern Energy (Montana) MW Percent MW Percent 2019 of Total Dispatchable Non-Carbon 2019 QF Adds Proforma 2021 of Total Dispatchable Non-Carbon Coal / Coke 91 0.1
Slide 39: Summary Financial Results
Appendix 39 Summary Financial Results (Six Months Ended June 30) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. See appendix for additional disclosure.
Slide 40: Gross Margin
Appendix 40 Gross Margin (Six Months Ended June 30) (dollars in millions) Six Months Ended June 30, 2021 2020 Variance(1) Electric $ 382.1 $ 350.4 $ 31.7 9.0% Natural Gas 104.4 101.9 2.5 2.5% Total Gross Margin $ 486.5 $ 452.3 $ 34.2 7.6% Increase in gross margin due to the following factors: (1) Gr
Slide 41: Weather
Appendix 41 Weather (Six Months Ended June 30) We estimate favorable weather through the first 6 months of 2021 has contributed approximately $0.7M pretax benefit as compared to normal and $4.2M pretax benefit as compared to the same period in 2020.
Slide 42: Operating Expenses
Appendix 42 Operating Expenses (Six Months Ended June 30) (dollars in millions) Six Months Ended June 30, 2021 2020 Variance Operating, general & admin. $ 158.0 $ 150.7 $ 7.3 4.8% Property and other taxes 94.8 91.5 3.3 3.6% Depreciation and depletion 93.8 90.0 3.8 4.2% Operating Expenses $ 346.6 $ 3
Slide 43: Operating to Net Income
Appendix 43 Operating to Net Income (Six Months Ended June 30) (dollars in millions) Six Months Ended June 30, 2021 2020 Variance Operating Income $ 140.0 $ 120.1 $ 19.9 16.6% Interest Expense (47.0) (48.6) 1.6 3.3% Other Income / (Expense) 8.6 (1.8) 10.4 577.8% Income Before Taxes 101.7 69.7 32.0 4
Slide 44: Income Tax Reconciliation
Appendix 44 Income Tax Reconciliation (Six Months Ended June 30)
Slide 45: Adjusted Non-GAAP Earnings
Appendix 45 Adjusted Non-GAAP Earnings (Six Months Ended June 30) The adjusted non-GAAP measures presented in the table are being shown to reflect significant items that were non- recurring or variance from normal weather, however they should not be considered a substitute for financial results and
Slide 46: Balance Sheet
Appendix 46 Balance Sheet Targeted debt to capitalization ratio of 50%-55% 53.6% Debt to Capitalization at March 31, 2021
Slide 47: Cash Flow
Appendix 47 Cash Flow Cash from operating activities decreased by $114.7 million primarily due to an $82.8 million increase in market purchases of supply during the February 2021 cold weather event resulting in an undercollection of supply costs from customers in the current period, and a refund of
Slide 48: Income Tax Reconciliation
Appendix 48 Income Tax Reconciliation (Six Months Ended June 30)
Slide 49: Qualified Facility Earnings Adjustment
Appendix 49 Qualified Facility Earnings Adjustment The $6.1 million improvement in 2021 is the result of a favorable adjustment of our electric QF liability (unrecoverable costs associated with the Public Utility Regulatory Policies Act of 1978 (PURPA) contracts as part of a 2002 stipulation with th
Slide 50: Quarterly PCCAM Impacts
Appendix 50 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 baselin
Slide 51: NWE Rate Base and Earnings Profile
Appendix 51 NWE Rate Base and Earnings Profile Data as reported in our 2020 10-K (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 s
Slide 52: 2020 System Statistics
Appendix 52 2020 System Statistics (1) (2) Note: Statistics above are as of 12/31/2020 except for electric transmission for others which is 2019 data (1) Nebraska is a natural gas only jurisdiction (2) Dave Gates Generating Station (DGGS) in Montana is a 150 MW nameplate facility but consider it a 1
Slide 53: Experienced & Engaged Board of Directors
Appendix 53 Experienced & Engaged Board of Directors Dana J. Dykhouse Anthony T. Clark Jan R. Horsfall Britt E. Ide • Chairman of the Board • Committees: Nominating and • Committees: Safety, • Committees: Safety, • Independent Governance, Human Resources Environmental, Technology Environmental, Tech
Slide 54: Strong Executive Team
Appendix 54 Strong Executive Team Robert C. Rowe Brian B. Bird Crystal D. Lail • Chief Executive Officer • President and • Vice President and Chief • Current position since Chief Operating Officer Financial Officer 2008 • Current position since • Current position since 2021 (formerly Chief 2021 (for
Slide 55: Our Commissioners
Appendix 55 Our Commissioners
Slide 56: Non-GAAP Financial Measures (1 of 2)
Appendix 56 Non-GAAP Financial Measures (1 of 2) 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 meas
Slide 57: Non-GAAP Financial Measures (2 of 2)
Appendix 57 Non-GAAP Financial Measures (2 of 2) Net Operating Losses (NOL’s): The expected tax rate and the expected availability of NOLs are subject to significant business, economic, regulatory and competitive uncertainties and contingencies, many of which are beyond the control of the Company an
Slide 58: Upetivering a bright future
Upetivering a bright future
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