NorthWestern Energy Group, Inc. · NASDAQ:NWE
NorthWestern Energy — 46th EEI Financial Conference (November 2011)
45 slides from NorthWestern Energy's conference presentation, Nov 8, 2011
Slide 1: 46th EEI Financial Conference
46th EEI Financial Conference November 8 8, 2011 Presented by: Bob Rowe, President & CEO Brian Bird, Vice President, CFO & Treasurer
Slide 2: Outline
Outline Who we are Financial update Investment opportunity outlook Concl sion Conclusion Appendix ‐ Financial statements ‐ Regulatory update ‐ Additional investment opportunity detail 2
Slide 3: Forward looking statements
Forward looking statements During the course of this presentation, there will be forward‐looking statements within the meaningg of the “safe harbor” provisions p of the Private Securities Litigation Reform Act of 1995. Forward‐looking statements often address our expected future business and financi
Slide 4: Who we are
Who we are Our Vision: Enriching lives through a safe, sustainable energy future Our Mission: Working together to deliver safe, safe reliable and innovative energy solutions Our Values: Safety Excellence Respect Value Integrity Community Environment 4
Slide 5: Geographically positioned for success
Geographically positioned for success A fully‐regulated utility located in states with relatively stable economies with pp opportunity y for system y investment and grid expansion Low unemployment rates Great wind profile Our service territory covers some of the best wind regimes in the nation
Slide 6: We are a fully-regulated utility
We are a fully‐regulated utility Energy Supply Transmission Distribution (1) Electric (MW) MT SD Total 2010 Tx for Others MT SD Total Demand MT SD / NE Total Base load coal 222 210 432 Electric (GWh) 9,600 100 9,700 Daily MWs 730 171 901 Other resources 150 106 256 Natural Gas (Bcf) 18.3 ‐ 18.3 Peak
Slide 7: A multi-state electric & natural gas utility
A multi‐state electric & natural gas utility Note: Data above reflects full year 2010 results . The “80 / 20” rules of NorthWestern. We are approximately 80% electric / 20% natural gas and 80% Montana and 20% South Dakota and Nebraska. 7
Slide 8: A diverse distribution customer base
A diverse distribution customer base Note: Data above reflects full year 2010 results . Approximately 80% of our customers are residential and 20% commercial and industrial. 8
Slide 9: With competitive customer rates
With competitive customer rates Typical Customer bills Electric source: Edison Electric Institute Typical Bills and Average Rates Report, January 1, 2011. Monthly "bundled" costs for supply & delivery Natural gas source: www.eia.doe.gov. ‐ US Natural Gas Sector Report for average cost of gas sold as
Slide 10: Outline
Outline Who we are Financial update Investment opportunity outlook Concl sion Conclusion Appendix ‐ Financial statements ‐ Regulatory update ‐ Additional investment opportunity detail 10
Slide 11: A history of strong cash flows
A history of strong cash flows Compounded Annual Growth Rate (CAGR) 8.3% Cash From Operations 7.6% Maintenance Capex (2) 6.6% Dividend Growth (1) 2009 CCash h Fl Flow ffrom Operations O ti iis adjusted dj t d tto add dd b backk pension i ffunding di iin excess off expense and dAAmmondson d settlemen
Slide 12: Solid pension funding
Solid pension funding NorthWestern Energy’s Pension Assumptions Target allocation 50% equity and 50% fixed income Expected long‐term rate of return of 7.25% Discount rate of 5.00 – 5.25% As a result of significant pension contributions over the past several years and solid market returns in 20
Slide 13: A strong credit profile
A strong credit profile Long‐term targeted total debt to capitalization of 50‐55% with a current capitalization of 54.9%(1) Total liquidity of $210 million as of Oct 2121, ’11 11 Refinanced nearly all debt in the last 2 years – Lowered average coupon on long‐term debt by 1.2% and extended matu
Slide 14: A history of earnings and dividend growth
A history of earnings and dividend growth 2005 ‐ 2011E* Compounded Annual Growth Rate (CAGR) DIVIDEND 6.3% EPS (Diluted) 5.4% A history of steady earnings and dividend growth. Targeted dividend payout ratio 60 – 70% and currently a dividend yield of 4‐5% 14
Slide 15: Reaffirming 2011 earning guidance
Reaffirming 2011 earning guidance Compounded Annual Growth Rate (CAGR) 6 Year ('05 - '11E*): 5.4% 4 Year ('07 - '11E*) : 13.0% * CAGR is based on the midpoint of 2011 revised guidance range of $2.30‐$2.40 per diluted share Reaffirming ff g 2011 guidance g range g off $2.30‐$2.40, $ $ , which would r
Slide 16: Near-term earnings drivers
Near‐term earnings drivers 2012 expectations/assumptions: Additional gross margin adding between $.20/share to $.25/share from 2011 – Relates primarily to property tax tracker timing differences, SD rate increase, and non‐ weather customer growth – Also, Al assumes some increase i in i wholesale h
Slide 17: Well-positioned for future investment
Well‐positioned for future investment Solid fully‐regulated Continued investment operations in our system y to serve our customers and Strong cash flows to fund future “100 Most Trustworthy communities is Companies” by Forbes investment expected to provide average earnings i per share growth and div
Slide 18: Outline
Outline Who we are Financial update Investment opportunity outlook Concl sion Conclusion Appendix ‐ Financial statements ‐ Regulatory update ‐ Additional investment opportunity detail 18
Slide 19: Investment opportunity outlook
Investment opportunity outlook Energy Supply – Big Stone/Neal pollution control – South Dakota natural gas peaking generation – Montana Spion Kop Wind facility – South Dakota Titan Wind facility buyout – Other vertical integration opportunities in Montana Transmission – Network upgrades and larg
Slide 20: Montana base load opportunity
Montana base load opportunity Our post PPL supply opportunity is approximately 200 GWh / month or about 280 MWs of capacity We are currently evaluating build, acquisition, or other market alternatives to meet forecasted supply gap after PPL contracts expire (75MW in June of 2012 and 200 MWs in June
Slide 21: Hard assets providing value
Hard assets providing value 2005‐07 valuation affected by pending and ultimately terminated acquisition We believe our continued investment in our system to provide an even more safe and reliable service to our customers also provides additional value for our shareholders. 21
Slide 22: Growing investment in our existing system
Growing investment in our existing system Over the O h llast six i years we h have iinvested d approximately i l $610 million illi in maintenance capex, or $110 million in excess of depreciation. 22
Slide 23: Great investment growth opportunities
Great investment growth opportunities Significant Si ifi reinvestment i into i our existing i i system and d investment i growth h opportunities, which improve reliability and stabilize rates for our customers, are estimated to nearly double our 2005 rate base. 23
Slide 24: Investment project summary
Investment project summary Capital Opportunity ($millions) Low High Jurisdiction $130 to $150 SDPUC $15 $ to $25 $ SDPUC $65 to $75 SDPUC $86 to $86 MPSC $30 to $50 SDPUC $100 to $200 MPSC $40 to $75 FERC $450 to $550 FERC $200 to $250 FERC $150 to $250 FERC $250 to $300 MPSC $1,516 to $2,011 Note:
Slide 25: Another way to slice the pie
Another way to slice the pie 2010 business mix 2010 pro forma for investment opportunities (at midpoint of range) Percent of spend @ Capital opportunity ($millions) midpoint Low High High 29% $460 $550 High to Medium 19% $256 $411 Medium to Low 52% $800 $1,050 Total 100% $1,516 $2,011 Current invest
Slide 26: Outline
Outline Who we are Financial update Investment opportunity outlook Concl sion Conclusion Appendix ‐ Financial statements ‐ Regulatory update ‐ Additional investment opportunity detail 26
Slide 27: Conclusion
Conclusion Realistic li i Fully‐ investment Financially Strong cash Attractive regulated opportunities sound flows dividend utility to invest Free Cash Flow 27
Slide 28: NorthWestern, the 2nd happiest place on Earth
NorthWestern, the 2nd happiest place on Earth 28
Slide 29: Questions
NorthWestern Energy Delivering a Bright Future QUESTIONS Thank You
Slide 30: Outline
Outline Who we are Financial update Investment opportunity outlook Concl sion Conclusion Appendix ‐ Financial statements ‐ Regulatory update ‐ Additional investment opportunity detail 30
Slide 31: Consolidated statement of income
Consolidated statement of income (in thousands) Nine Months Ended September 30, 2011 2010 Variance Operating O i Revenues R $ 834 107 834,107 $ 819,050 819 050 $ 15 057 15,057 Cost of Sales 370,523 390,685 (20,162) Gross Margin 463,584 428,365 35,219 Operating Expenses Operating, general & administr
Slide 32: Consolidated statement of cash flows
Consolidated statement of cash flows Nine Months Ended September 30, (in thousands) 2011 2010 Net Income $ 58 440 58,440 $ 54 788 54,788 Depreciation 75,562 68,697 Amort. of debt issue costs, discount, deferred hedge gain and restricted stock 2,563 2,692 Equity portion of allowance for funds used du
Slide 33: Consolidated balance sheet
Consolidated balance sheet (in thousands) September 30, December 31, 2011 2010 Cash 5,994 6,234 Restricted cash 11,674 11 674 12,862 12 862 Accounts receivable, net 107,112 143,304 Inventories 72,047 50,701 Other current assets 72,187 89,953 Goodwill 355,128 355,128 PP&E and ther non‐current assets
Slide 34: Earnings reconciliation
Earnings reconciliation Three Months Ended Nine Months Ended Pre-tax Net EPS Pre-tax Net EPS ($millions, except EPS) Incom e Incom e 1 Diluted Incom e Incom e 1 Diluted 2010 reported $19.1 $14.4 $0.40 $72.8 $54.8 $1.51 DGGS interim rates 6.8 4.2 0.12 20.8 12.8 0.35 Electric retail volumes 2.9 1.8 0.
Slide 35: Other miscellaneous earnings items
Other miscellaneous earnings items Three Months Ended Nine Months Ended September 30, September 30, 2011 2010 2011 2010 (in thousands) Income Before Income Taxes $ 15,530 $ 19,108 $ 67,737 $ 72,818 Income tax calculated at 35% Federal statutory rate (5,435) (6,687) (23,707) (25,485) Permanent or flo
Slide 36: Energy supply regulatory update
Energy supply regulatory update Dave Gates Generating Station at Mill Creek MPSC (D2008.8.95) FERC (ER10‐1138) ‐ Compliance li fili filing requesting: i ‐ Supplemental S l l filing fili requesting: i Revenue : $34M 1st year ($38.5M 2nd) rev. requirement $9.9 million first year revenue requirement In
Slide 37: Energy supply regulatory update (cont.)
Energy supply regulatory update (cont.) Battle Creek natural gas reserves ( MPSC docket# TBD ) ‐ Anticipate filing to include approximately 8.4 Bcf of proven reserves into regulated rate base requesting: Revenue : To Be Determined S Structure: To Be Determined Rate Base: $12.4 million ($11.4 million
Slide 38: Transmission regulatory update
Transmission regulatory update Mountain States Transmission Intertie, or MSTI (FERC EL09‐30) ‐ January 2009, NorthWestern filed a petition for negotiated rate authority. June 2009 FERC denied the request instead suggesting a cost‐of‐service rate design would be more appropriate for the project. Reve
Slide 39: Delivery services regulatory update
Delivery services regulatory update Montana electric l i and d naturall gas generall rate fili filing (MPSC ( D2009.9.129)) ‐ June 2011 received approval through settlement for: Revenue : $6.0 million annual net increase. ($7.0 million electric increase less $1.0 million natural gas decrease). Struc
Slide 40: Our Commissioners
Our Commissioners Montana Public Service Commission Commissioners i i are elected l d iin statewide id elections l i from f each h off five districts. Chairperson is elected by fellow Commissioners. Commissioner term is 4 years, Chairperson term is 2 years. Began Term Name Party Serving Ends Bill Ga
Slide 41: Energy supply investment outlook
Energy supply investment outlook South Dakota pollution control equipment • Big Stone: 23.4% joint owner in an estimated $500 million project to install SOx (scrubbers), NOx (SCR) and particulate matter (bag house) emission control technology on a jointly owned 454 MW power plant. We have 5 years fr
Slide 42: Environmental compliance impact
Environmental compliance impact T AR es e /B in ul el xR ze id T Ha /T Gu AC r M al Ai nt S S S s ) on (b AQ AQ AQ AQ ty ue n CE gi ea ili R 6 fl NA NA NA NA CC 31 Re Ut RI Ef Cl Capacity Ownership Plant / Unit Fuel (MWs) Share (MW) PM 2.5 Ozone S02 NOx (1) Joint Owned Facilities Colstrip 3 & 4 Coal
Slide 43: Transmission investment outlook
Transmission Colstrip 500kV Upgrade investment outlook • A proposed $125 million project to add 500‐700 MW’s of capacity to our existing 500 kV lines running from Colstrip generation facility to Mid‐Columbia area in Oregon by adding series compensation and a new substation near Townsend, Montana. It
Slide 44: Transmission investment outlook (cont)
Transmission investment outlook (cont) South Dakota Transmission Opportunities • Potential opportunities exist to partner with wind developers and transmission providers in other states to add capacity, improve reliability and move energy to eastern markets from wind zones in South Dakota. Recent au
Slide 45: Distribution investment outlook
Distribution investment outlook Distribution System Integrity Program (DSIP) The Project will address the emerging issue of our aging infrastructure and prepare our natural gas and electric distribution systems for the next generation of technology. For the electric distribution system, system the P
NorthWestern Energy Group — 46th EEI Financial Conference (November 2011) on 6ix