Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Q3 2020 Earnings Presentation
39 slides from Northwestern Energy's earnings presentation, Oct 22, 2020
Slide 1: 2020 Third Quarter Earnings Webcast
Fort Benton, Montana 2020 Third Quarter Earnings Webcast October 22, 2020
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 Bob Rowe, Litigation Reform Act of 1995. Forward-looking statements often address our expected fut
Slide 3: Third Quarter Highlights
Third Quarter Highlights • Net income for the third quarter increased $7.8 million as compared to the same period in 2019. This increase was primarily due to higher gross margin, lower OG&A expense and favorable income tax expense. This is offset in part by higher depreciation and property tax expen
Slide 4: Summary Financial Results
Summary Financial Results (Third Quarter) (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
Gross Margin (Third Quarter) (dollars in millions) Three Months Ended September 30, 2020 2019 Variance Electric $ 183.0 $ 182.5 $ 0.5 0.3% Natural Gas 29.6 28.1 1.5 5.3% (1) Total Gross Margin $ 212.6 $ 210.6 $ 2.0 0.9% Increase in gross margin due to the following factors: Covid-19 $2.4 Electric re
Slide 6: Weather
Weather (Third Quarter) We estimate unfavorable weather in Q3 2020 resulted in a $0.6M pretax detriment as compared to normal and $5.1M pretax benefit as compared to Q3 2019. 6
Slide 7: Operating Expenses
Operating Expenses (Third Quarter) (dollars in millions) Three Months Ended September 30, 2020 2019 Variance Operating, general & admin. $ 73.3 $ 77.0 ($ 3.7) (4.8%) Property and other taxes 45.3 44.1 1.2 2.7% Depreciation and depletion 44.3 43.2 1.1 2.5% Operating Expenses $ 162.9 $ 164.3 ($ 1.4) (
Slide 8: Operating to Net Income
Operating to Net Income (Third Quarter) (dollars in millions) Three Months Ended September 30, 2020 2019 Variance Operating Income $ 49.7 $ 46.4 $ 3.3 7.1% Interest Expense (23.7) (23.7) - 0.0% Other Income (Expense) 0.8 (0.4) 1.2 300.0% Income Before Taxes 26.8 22.2 4.6 20.7% Income Tax Benefit (Ex
Slide 9: Income Tax Reconciliation
Income Tax Reconciliation (Third Quarter) 9
Slide 10: Balance Sheet
Balance Sheet (dollars in millions) Cash and cash equivalents Restricted cash Accounts receivable, net Inventories Other current assets Goodwill PP&E and other non-current assets Total Assets Payables Current Maturities - debt and leases Other current liabilities Long-term debt & capital leases Othe
Slide 11: Cash Flow
Cash Flow Cash from operating activities increased by $68.6M primarily due to the improved collections of energy supply costs in the current period, as compared with higher procured supply costs, and payments reducing cash flows in 2019 including credits to Montana customers of approximately $20.5 m
Slide 12: Adjusted Non-GAAP Earnings
Adjusted Non-GAAP Earnings (Third Quarter) The adjusted non-GAAP measures presented in the table are being shown to reflect significant items that are non- recurring or variance from normal weather, however they should not be considered a substitute for financial results and measures determined or c
Slide 13: Diluted Earnings Per Share
Diluted Earnings Per Share Previously Updated 2020 Guidance Range Non-GAAP Adjusted EPS Growth Averaged 5.4% from 2013 - 2019 NorthWestern is affirms its 2020 previously revised earnings guidance range of $3.30 to $3.45 per diluted share based upon, but not limited to, the following major assumption
Slide 14: 2019 Non-GAAP to 2020 Revised EPS Bridge
2019 Non-GAAP to 2020 Revised EPS Bridge Since second quarter earnings, the primary change reflected in the earnings bridge above is due to prolonged Covid-19 related impacts; including lower See appendix for additional disclosures regarding “Non-GAAP Financial Measures” gross margin offset by lower
Slide 15: COVID-19: Margin Expectations
COVID-19: Margin Expectations Covid-19 impacts on gross margin continued into the third quarter with all three customer classes impacted more than forecasted - residential up and commercial and industrial down. Industrial load was incrementally impacted by non-COVID related closures of a few industr
Slide 16: COVID-19: Expense Expectations
COVID-19: Expense Expectations Expenses we expect to increase: • Bad debt expense • We assume significant recovery through a regulatory mechanism • COVID related charitable contributions Expenses we expect to decrease: • Distribution customer work • Contract services and material costs • Fleet fuel
Slide 17: Maintaining Capital Investment Forecast
Maintaining Capital Investment Forecast $1.8 billion of total capital investment over five years We anticipate financing this capital with a combination of cash flow from operations (aided by NOLs available into 2021), first mortgage bonds and equity issuances. We expect to issue equity in 2021 to m
Slide 18: Looking Forward (Regulatory)
Looking Forward (Regulatory) • We submitted accounting order requests in Montana and South Dakota to allow for the deferral of uncollectible accounts expense in excess of amounts currently recovered. The SDPUC issued an order in August 2020 authorizing deferral of costs for possible recovery through
Slide 19: Looking Forward (other)
Looking Forward (other) Electric Resource Planning • South Dakota: Construction is underway for a 60MW flexible reciprocating internal combustion engines in Huron, SD to be Western Energy Imbalance Market (EIM) online in late 2021 with a construction cost of approximately $80 million. • Montana: Ini
Slide 20: Conclusion
Conclusion Best Attractive Pure Strong Solid Utility Practices Future Electric & Earnings & Foundation Corporate Growth Gas Utility Cash Flows Governance Prospects 20
Slide 21: Appendix
CT Appendix 21
Slide 22: Segment Results
Appendix Segment Results (Third Quarter) (1) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. See appendix for additional disclosure. 22
Slide 23: Electric Segment
Appendix Electric Segment (Third Quarter) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 23 See appendix for additional disclosure.
Slide 24: Natural Gas Segment
Appendix Natural Gas Segment (Third 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: Summary Financial Results
Appendix Summary Financial Results (Nine Months Ended September 30) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 25 See appendix for additional disclosure.
Slide 26: Gross Margin
Appendix Gross Margin (Nine Months Ended September 30) (dollars in millions) Nine Months Ended September 30, 2020 2019 Variance(1) Electric $ 533.4 $ 555.5 ($ 22.1) (4.0%) Natural Gas 131.4 138.6 (7.2) (5.2%) Total Gross Margin $ 664.8 $ 694.1 ($ 29.3) (4.2%) Decrease in gross margin due to the foll
Slide 27: Weather
Appendix Weather (Nine Months Ended September 30) We estimate unfavorable weather through the first 9 months of 2020 has contributed approximately $4.1M pretax detriment as compared to normal and $12.1M pretax detriment as compared to the same period in 2019. 27
Slide 28: Operating Expenses
Appendix Operating Expenses (Nine Months Ended September 30) (dollars in millions) Nine Months Ended September 30, 2020 2019 Variance Operating, general & admin. $ 224.0 $ 238.9 ($ 14.9) (6.2%) Property and other taxes 136.8 133.2 3.6 2.7% Depreciation and depletion 134.3 129.8 4.5 3.5% Operating Ex
Slide 29: Operating to Net Income
Appendix Operating to Net Income (Nine Months Ended September 30) (dollars in millions) Nine Months Ended September 30, 2020 2019 Variance Operating Income $ 169.7 $ 192.2 ($ 22.5) (11.7%) Interest Expense (72.3) (71.0) (1.3) (1.8%) Other (Expense) / Income (1.0) 0.9 (1.9) 211.1% Income Before Taxes
Slide 30: Income Tax Reconciliation
Appendix Income Tax Reconciliation (Nine Months Ended September 30) 30
Slide 31: Adjusted Non-GAAP Earnings
Appendix Adjusted Non-GAAP Earnings (Nine Months Ended September 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 a
Slide 32: Segment Results
Appendix Segment Results (Nine Months Ended September 30) (1) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 32 See appendix for additional disclosure.
Slide 33: Electric Segment
Appendix Electric Segment (Nine Months Ended September 30) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 33 See appendix for additional disclosure.
Slide 34: Natural Gas Segment
Appendix Natural Gas Segment (Nine Months Ended September 30) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 34 See appendix for additional disclosure.
Slide 35: 25% of Colstrip Unit 4 Acquisition
Appendix 25% of Colstrip Unit 4 Acquisition On December 9, 2019 NorthWestern (NWE) executed a Purchase and Sale Agreement for the acquisition of Puget Sound Energy’s (PSE) 25% ownership interests in Colstrip Unit 4 (CU4). • Generating Capacity: 185 MW (bringing our total ownership to 407 MW, or 55%
Slide 36: Quarterly PCCAM Impacts
Appendix 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 baseline o
Slide 37: Qualified Facility Earnings Adjustment
Appendix Qualified Facility Earnings Adjustment The gain in 2020 for our QF liability was $3.1 million in total, it was comprised of $2.2 million adjustment to the liability and $0.9 million lower actual costs over last 12 months (QF contract year). This $3.1 million benefit is $3.3 million less tha
Slide 38: 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 nu
Slide 39: Upetivering a
Upetivering a bright future
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